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
Victory Portfolios III
(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: February 28
Date of reporting period: February 28, 2023
Item 1. Reports to Stockholders.
February 28, 2023
Annual Report
USAA California Bond Fund
(Also Known as Victory California Bond Fund*)
* Effective at the start of business on April 24, 2023, the Fund name will change to Victory California Bond Fund. Please see Notes to the Financial Statements for subsequent event information.
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 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.
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, 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 | ||||||
Statements of Operations | 17 | ||||||
Statements of Changes in Net Assets | 18 | ||||||
Financial Highlights | 20 | ||||||
Notes to Financial Statements | 23 | ||||||
| Report of Independent Registered Public Accounting Firm | 33 | ||||||
Supplemental Information (Unaudited) | 34 | ||||||
Trustee and Officer Information | 34 | ||||||
Proxy Voting and Portfolio Holdings Information | 40 | ||||||
Expense Examples | 40 | ||||||
Additional Federal Income Tax Information | 41 | ||||||
Advisory Contract Renewal | 42 | ||||||
Liquidity Risk Management Program | 45 | ||||||
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,
If you are reading this letter but double-checking your calendar, be assured there's no mistake. The annual reporting period for your USAA Mutual Fund has shifted from a fiscal year ended March 31st to a fiscal year ended February 28th/the last day of February. This change has no material impact on any of your investments. This change aims to help us improve efficiencies and reduce operational costs. Therefore, this letter covers an abbreviated "annual" period from April 1, 2022, through February 28, 2023. Future annual reports will cover the 12-month period ended February 28th/the last day of February going forward.
Our most recent annual reporting period has been a challenging period for investors. Consider some of the headwinds: heightened geopolitical tensions, a terrible war in Eastern Europe, elevated energy and food costs, high inflation, and rising interest rates. All this has dampened global growth and created a difficult backdrop for both bond and stock investors.
The inflation data was particularly troublesome and surprised many with some of the highest readings since the 1970s. In response, the U.S. Federal Reserve (the "Fed") shifted to a more restrictive monetary policy than most anticipated. The Fed has been boosting the Fed funds interest rate repeatedly and aggressively, including a series of 75 basis point raises. (A basis point is 1/100th of a percentage point.) And if that wasn't enough, zero-COVID-19 policies in China (which fortunately have been recently lifted) further exacerbated supply chain issues and raised questions about global trade. As one might expect, all of these obstacles ratcheted up volatility across financial markets. Broad market stock indices pulled back substantially around the world.
The S&P 500® Index, the bell-weather proxy for our domestic stock market, delivered a negative total return of almost 11% during our abbreviated annual reporting period. But perhaps what was even more difficult was the performance of fixed income markets, which normally are considered a safe haven in times of equity turmoil. But not during this past year when interest rates were rising sharply. In fact, the Bloomberg US Aggregate Bond Index—a proxy for a diversified fixed income portfolio and one that many investors and institutions follow closely—delivered a negative total return of approximately 7.0%. That's not exactly the offset to equity performance that many investors have come to expect from bonds.
It's been difficult, and we fully acknowledge that the steady drumbeat of bad news and bouts of stomach-churning volatility can take a toll on investors' psyche. Nobody likes opening their account statements during declining markets, and even when markets often snap back sharply (as happened this past July, October, and earlier this calendar year), investors often wonder if they have missed an opportunity.
Through all the turmoil and challenges in our most recent annual reporting period, we are reminded of two enduring realities: 1) financial markets are dynamic and apt to change abruptly; 2) it's vital to remain calm and rational whenever faced with those inevitable bouts of turmoil.
2
Fortunately, we think that investors can take comfort knowing that all our independent investment franchises have experience managing portfolios through a wide variety of market environments. Our investment professionals remain calm during turbulent financial markets, and we think it's imperative that investors do the same.
We still believe that a long-term plan, a well-diversified portfolio across asset classes and investment types, and a clear understanding of individual risk tolerances are the key ingredients for staying the course and progressing on investment goals. Moreover, all our investment professionals continually monitor the environment and work hard to position portfolios opportunistically no matter what the markets bring. Remember, turmoil can also create opportunity.
On the following pages, you will find information relating to your USAA Mutual Fund, brought to you by Victory Capital. If you have any questions, we encourage you to contact our Member Service Representatives. Call 800-235-8396, or visit our website at vcm.com.
From all of us here at Victory Capital, thank you for your ongoing confidence and for letting us help you work toward your investment goals.
Christopher K. Dyer, CFA
President,
USAA Mutual Funds Trust
3
USAA California Bond Fund
Manager's 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 overall during the 11-month reporting period ended February 28, 2023. [The Fund's fiscal year-end changed this year to February 28 from March 31, resulting in a shorter reporting period for fiscal year ended 2023.] Negative returns for the reporting period were attributable to a combination of factors, including the U.S. Federal Reserve's (the "Fed") prolonged fight to reduce inflation through interest rate increases and significant investor outflows from municipal bond funds. The reporting period was also highlighted by material volatility in the municipal market, as market participants often strongly reacted to Fed actions and comments, as well as economic data release, in an attempt to determine the future path of interest rates. The overall returns on the Bloomberg Municipal Bond Index for the reporting period was -1.92%, with significant ups and downs throughout the period.
While there might be some volatility in the municipal market in the short term, we remain confident that the right approach is to focus on what matters in the long term. We believe municipal bonds continue to represent an attractive investment opportunity on a relative basis. At the end of February 2023, the yield on the Bloomberg Municipal Bond Index was 3.62%, which is a taxable-equivalent yield of 6.12% (in the highest tax bracket). After factoring in the benefit of the tax exemption, municipal bonds look attractive vs. the (taxable) Bloomberg U.S. Aggregate Bond Index, which yielded 4.81% at the end of February 2023.
• How did the USAA California Bond Fund (the "Fund") perform during the reporting period?
The Fund has three share classes: Fund Shares, Institutional Shares, and Class A. For the 11-month reporting period ended February 28, 2023, the Fund Shares, Institutional Shares, and Class A had a total return (at net asset value) of -3.43%, -3.36%, and -3.69%, respectively, versus an average return of -3.95% for the funds in the Lipper California Municipal Debt Funds category. This compares to returns of -3.59% for the Lipper California Municipal Debt Funds Index, and -1.92% for the Bloomberg Municipal Bond Index.
• What are the conditions in the state of California?
California has the largest economy in the United States with nearly 40 million people. Its economy is vast, broad, and diverse and continues to recover from the economic and fiscal impact of the recent pandemic. The December 2022 seasonally adjusted unemployment rate for California was 4.1% (versus 3.5% for the U.S.), which ranked 40th among the states, but it is a marked improvement from the high in May of 2020 and back to pre-COVID levels.
4
USAA California Bond Fund
Manager's Commentary (continued)
In the latter half of 2022 California saw a reversal of the economic slowdown of the first half of the year. During the third quarter of 2022, California's gross domestic product ("GDP") grew by an annual rate of 3.8% versus the U.S. GDP growth of 3.2%. California's fiscal outlook remains somewhat vulnerable to economic performance. A recession and weak capital markets could undermine projected revenues due to a reliance on personal income taxes which include capital gains. The most recent outlook from the Legislative Analyst's Office suggests revenue softening; however, there are still several months left in the 2022-2023 fiscal year. Also, California's robust reserves and strong liquidity can help absorb moderate unforeseen challenges to the budget.
The state currently maintains strong ratings of Aa2 with stable outlook by Moody's, AA- with positive outlook by S&P, and AA with stable outlook by Fitch Ratings.
• What strategies did you employ during the reporting period?
In keeping with our investment approach, we continued to focus on income generation. The Fund's long-term income distribution, not its price appreciation, accounts for most of its total return.
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.
Thank you for allowing us to assist you with your investment needs.
5
USAA California Bond Fund
Investment Overview
(Unaudited)
Average Annual Total Return
Year Ended February 28, 2023
Fund Shares | Institutional Shares | Class A | |||||||||||||||||||||||||
INCEPTION DATE | 10/10/90 | 6/29/20 | 8/1/10 | ||||||||||||||||||||||||
| Net Asset Value | Net Asset Value | Net Asset Value | Maximum Offering Price | Bloomberg Municipal Bond Index1 | Lipper California Municipal Debt Funds Index2 | ||||||||||||||||||||||
One Year | –6.66 | % | –6.51 | % | –6.86 | % | –8.97 | % | –5.10 | % | –6.74 | % | |||||||||||||||
Five Year | 1.32 | % | NA | 1.06 | % | 0.60 | % | 1.66 | % | 1.18 | % | ||||||||||||||||
Ten Year | 2.23 | % | NA | 1.98 | % | 1.74 | % | 2.11 | % | 2.12 | % | ||||||||||||||||
Since Inception | NA | –1.49 | % | 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 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 California Bond Fund — Growth of $10,000
1The 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 is not possible to invest directly in an index.
2The unmanaged Lipper California Municipal Debt Funds Index measures the Fund's performance to that of the Lipper California Municipal Debt Funds category that limit their assets to those securities exempt from taxation in the state of California. 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 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 California Bond Fund | February 28, 2023 | ||||||
(Unaudited)
Investment Objective and Portfolio Holdings:
The Fund provides California investors with a high level of current interest income that is exempt from federal and California state income taxes.
Top 10 Industries
February 28, 2023
(% of Net Assets)
School District | 18.5 | % | |||||
General | 16.8 | % | |||||
Medical | 15.2 | % | |||||
General Obligation | 8.2 | % | |||||
Education | 8.0 | % | |||||
Water | 7.7 | % | |||||
Transportation | 7.2 | % | |||||
Nursing Homes | 4.4 | % | |||||
Higher Education | 2.9 | % | |||||
Mello-Roos | 2.7 | % | |||||
* 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 California Bond Fund | Schedule of Portfolio Investments February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Municipal Bonds (99.0%) | |||||||||||
California (95.2%): | |||||||||||
| Adelanto Public Utility Authority Revenue (INS — Assured Guaranty Municipal Corp.), Series A, 5.00%, 7/1/39, Continuously Callable @100 | $ | 2,000 | $ | 2,105 | |||||||
| Alameda Corridor Transportation Authority Revenue, 10/1/50, Continuously Callable @100 (h) | 1,250 | 585 | |||||||||
| Albany Unified School District, GO Series B, 5.00%, 8/1/43, Continuously Callable @100 | 2,000 | 2,087 | |||||||||
Series B, 4.00%, 8/1/46, Continuously Callable @100 | 1,500 | 1,439 | |||||||||
| Anaheim Public Financing Authority Revenue, Series A, 5.00%, 5/1/46, Pre-refunded 5/1/24 @ 100 | 1,500 | 1,533 | |||||||||
| Bay Area Toll Authority Revenue, 4.05% (MUNIPSA+125bps), 4/1/36, (Put Date 4/1/27), Callable 10/1/26 @ 100 (b) (c) | 15,000 | 15,144 | |||||||||
| Burbank Unified School District, GO 8/1/33, Continuously Callable @100 (d) | 3,085 | 3,229 | |||||||||
8/1/34, Continuously Callable @100 (e) | 3,000 | 3,128 | |||||||||
| California Community Housing Agency Revenue, Series A, 5.00%, 8/1/50, Continuously Callable @100 (f) | 2,000 | 1,869 | |||||||||
| California County Tobacco Securitization Agency Revenue 4.00%, 6/1/49, Continuously Callable @100 | 500 | 438 | |||||||||
Series A, 4.00%, 6/1/49, Continuously Callable @100 | 500 | 430 | |||||||||
Series A, 4.00%, 6/1/49, Continuously Callable @100 | 1,000 | 872 | |||||||||
| California Educational Facilities Authority Revenue 5.00%, 10/1/43, Continuously Callable @100 | 2,000 | 2,084 | |||||||||
5.00%, 10/1/48, Continuously Callable @100 | 2,000 | 2,061 | |||||||||
5.00%, 10/1/52, Continuously Callable @100 | 5,500 | 5,323 | |||||||||
Series A, 5.00%, 10/1/37, Continuously Callable @100 | 1,000 | 1,009 | |||||||||
| California Enterprise Development Authority Revenue 4.00%, 11/1/49, Continuously Callable @100 | 1,900 | 1,763 | |||||||||
4.00%, 11/1/50, Continuously Callable @100 | 680 | 626 | |||||||||
| California Health Facilities Financing Authority Revenue Series A, 5.00%, 7/1/33, Pre-refunded 7/1/23 @ 100 | 5,000 | 5,027 | |||||||||
Series A, 4.00%, 3/1/39, Continuously Callable @100 | 7,375 | 7,002 | |||||||||
Series A, 5.00%, 11/15/39, Continuously Callable @100 | 2,100 | 2,103 | |||||||||
Series A, 4.00%, 4/1/45, Continuously Callable @100 | 1,800 | 1,604 | |||||||||
Series A, 5.00%, 8/15/47, Continuously Callable @100 | 2,900 | 2,927 | |||||||||
Series A, 4.00%, 10/1/47, Continuously Callable @100 | 10,000 | 9,312 | |||||||||
Series A, 4.00%, 4/1/49, Continuously Callable @100 | 1,700 | 1,480 | |||||||||
Series A, 4.00%, 8/15/50, Continuously Callable @100 | 2,000 | 1,907 | |||||||||
Series B, 4.00%, 11/15/41, Continuously Callable @100 | 14,000 | 13,287 | |||||||||
| California Health Facilities Financing Authority Revenue (NBGA — California Health Insurance Construction Loan Insurance Program) 5.00%, 7/1/39, Continuously Callable @100 | 1,050 | 1,077 | |||||||||
5.00%, 7/1/44, Continuously Callable @100 | 2,300 | 2,349 | |||||||||
| California Infrastructure & Economic Development Bank Revenue 3.15% (MUNIPSA+35bps), 8/1/47, (Put Date 8/1/24), Callable 8/1/23 @ 100 (b) (c) | 2,250 | 2,230 | |||||||||
4.00%, 7/1/50, Continuously Callable @100 | 4,000 | 3,512 | |||||||||
Series B, 5.00%, 11/1/57, Continuously Callable @100 | 1,300 | 1,309 | |||||||||
See notes to financial statements.
8
| USAA Mutual Funds Trust USAA California Bond Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
| California Municipal Finance Authority Certificate of Participation (INS — Assured Guaranty Corp.) Series A, 5.25%, 11/1/36, Continuously Callable @100 | $ | 1,000 | $ | 1,077 | |||||||
Series A, 5.25%, 11/1/52, Continuously Callable @100 | 500 | 511 | |||||||||
| California Municipal Finance Authority Revenue 5.00%, 6/1/43, Continuously Callable @100 | 2,500 | 2,645 | |||||||||
4.00%, 10/1/46, Continuously Callable @100 | 6,500 | 6,023 | |||||||||
4.00%, 10/1/46, Continuously Callable @100 | 965 | 798 | |||||||||
Series A, 5.00%, 2/1/37, Continuously Callable @100 | 750 | 771 | |||||||||
Series A, 4.00%, 10/1/44, Continuously Callable @100 | 2,000 | 1,886 | |||||||||
Series A, 5.00%, 2/1/47, Continuously Callable @100 | 2,000 | 2,038 | |||||||||
Series A, 5.00%, 7/1/47, Continuously Callable @100 | 1,000 | 1,009 | |||||||||
Series A, 5.00%, 6/1/50, Continuously Callable @100 | 1,000 | 974 | |||||||||
Series A, 4.00%, 11/15/52, Continuously Callable @103 | 750 | 517 | |||||||||
Series A, 4.00%, 11/15/56, Continuously Callable @103 | 1,100 | 744 | |||||||||
| California Municipal Finance Authority Revenue (NBGA — California Health Insurance Construction Loan Insurance Program) 4.13%, 5/15/39, Continuously Callable @100 | 1,900 | 1,907 | |||||||||
4.13%, 5/15/46, Continuously Callable @100 | 2,100 | 2,048 | |||||||||
Series B, 5.00%, 5/15/47, Continuously Callable @102 | 2,500 | 2,584 | |||||||||
| California Pollution Control Financing Authority Revenue 5.00%, 7/1/39, Continuously Callable @100 (f) | 6,000 | 6,244 | |||||||||
5.00%, 11/21/45, Continuously Callable @100 (f) | 2,000 | 2,044 | |||||||||
| California Public Finance Authority Revenue 5.00%, 10/15/37, Continuously Callable @100 | 1,000 | 1,012 | |||||||||
5.00%, 10/15/47, Continuously Callable @100 | 3,000 | 3,001 | |||||||||
| California Public Finance Authority Revenue (LOC — Barclays Bank PLC), Series B, 1.15%, 8/1/52, Continuously Callable @100 (g) | 5,690 | 5,690 | |||||||||
| California School Finance Authority Revenue 5.00%, 8/1/41, Continuously Callable @100 (f) | 1,600 | 1,607 | |||||||||
5.00%, 8/1/41, Pre-refunded 8/1/25 @ 100 (f) | 150 | 157 | |||||||||
5.00%, 8/1/42, Continuously Callable @100 (f) | 1,000 | 1,008 | |||||||||
5.00%, 8/1/46, Continuously Callable @100 (f) | 2,050 | 2,051 | |||||||||
5.00%, 8/1/46, Pre-refunded 8/1/25 @ 100 (f) | 200 | 210 | |||||||||
5.00%, 8/1/52, Continuously Callable @100 (f) | 1,000 | 987 | |||||||||
Series A, 5.00%, 7/1/47, Continuously Callable @100 (f) | 1,370 | 1,371 | |||||||||
Series A, 5.00%, 7/1/49, Continuously Callable @100 (f) | 1,000 | 997 | |||||||||
Series A, 5.00%, 7/1/54, Continuously Callable @100 (f) | 2,150 | 2,128 | |||||||||
| California Statewide Communities Development Authority Revenue 5.00%, 5/15/40, Continuously Callable @100 | 2,750 | 2,774 | |||||||||
5.00%, 10/1/46, Continuously Callable @100 | 2,750 | 2,771 | |||||||||
5.00%, 1/1/48, Continuously Callable @100 | 1,995 | 2,011 | |||||||||
5.00%, 7/1/48, Continuously Callable @100 | 4,000 | 4,184 | |||||||||
Series A, 5.00%, 5/15/25 | 2,180 | 2,212 | |||||||||
Series A, 4.00%, 4/1/45, Continuously Callable @100 | 1,500 | 1,400 | |||||||||
Series A, 5.00%, 5/15/47, Continuously Callable @100 | 2,000 | 2,003 | |||||||||
Series A, 4.00%, 8/15/51, Continuously Callable @100 | 3,000 | 2,782 | |||||||||
Series A, 5.00%, 12/1/53, Continuously Callable @100 | 1,000 | 1,026 | |||||||||
Series A, 5.00%, 12/1/57, Continuously Callable @100 | 2,500 | 2,548 | |||||||||
See notes to financial statements.
9
| USAA Mutual Funds Trust USAA California Bond Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
| California Statewide Communities Development Authority Revenue (INS — Assured Guaranty Corp.), Series A, 5.25%, 8/15/52, Continuously Callable @100 | $ | 1,000 | $ | 1,023 | |||||||
| California Statewide Communities Development Authority Revenue (NBGA — California Health Insurance Construction Loan Insurance Program), 4.00%, 11/1/46, Continuously Callable @100 | 4,000 | 3,742 | |||||||||
| Centinela Valley Union High School District, GO, Series B, 4.00%, 8/1/50, Continuously Callable @100 | 9,500 | 8,792 | |||||||||
| Chino Valley Unified School District, GO, Series B, 4.00%, 8/1/45, Continuously Callable @100 | 1,000 | 982 | |||||||||
| City & County of San Francisco CA Community Facilities District No 2014-1 Special Tax, Series A, 5.00%, 9/1/52, Continuously Callable @100 | 750 | 787 | |||||||||
| City & County of San Francisco CA Community Facilities District Special Tax, 4.00%, 9/1/52, Callable 9/1/28 @ 103 (f) | 1,750 | 1,431 | |||||||||
| City & County of San Francisco CA Infrastructure & Revitalization Fing Dist No 1 Tax Allocation Series A, 5.00%, 9/1/52, Continuously Callable @100 (f) | 1,250 | 1,173 | |||||||||
Series B, 5.00%, 9/1/52, Continuously Callable @100 (f) | 640 | 601 | |||||||||
| City of Atwater Wastewater Revenue (INS — Assured Guaranty Municipal Corp.), Series A, 5.00%, 5/1/43, Continuously Callable @100 | 1,300 | 1,360 | |||||||||
City of Fillmore Wastewater Revenue, 5.00%, 5/1/47, Continuously Callable @100 | 2,000 | 2,097 | |||||||||
City of Sacramento CA Special Tax, 5.38%, 9/1/52, Continuously Callable @103 (f) | 2,000 | 2,004 | |||||||||
| City of San Mateo CA Special Tax (INS — Build America Mutual Assurance Co.), 5.25%, 9/1/44, Continuously Callable @100 | 4,000 | 4,249 | |||||||||
| City of Tulare Sewer Revenue (INS — Assured Guaranty Municipal Corp.) 4.00%, 11/15/41, Continuously Callable @100 | 5,710 | 5,730 | |||||||||
4.00%, 11/15/44, Continuously Callable @100 | 5,000 | 5,001 | |||||||||
| City of Upland Certificate of Participation 4.00%, 1/1/42, Continuously Callable @100 | 3,000 | 2,734 | |||||||||
5.00%, 1/1/47, Continuously Callable @100 | 2,000 | 2,019 | |||||||||
| Corona-Norco Unified School District Special Tax, 5.00%, 9/1/32, Pre-refunded 9/1/23 @ 100 | 1,350 | 1,363 | |||||||||
| County of Sacramento Airport System Revenue, Series B, 5.00%, 7/1/41, Continuously Callable @100 | 1,100 | 1,137 | |||||||||
| East Bay Municipal Utility District Wastewater System Revenue, Series A-2, 5.00%, 6/1/38 | 9,000 | 10,416 | |||||||||
| Elk Grove Finance Authority Special Tax (INS — Build America Mutual Assurance Co.), 5.00%, 9/1/38, Continuously Callable @100 | 1,500 | 1,542 | |||||||||
| Foothill-Eastern Transportation Corridor Agency Revenue, Series B-2, 3.50%, 1/15/53, Continuously Callable @100 | 1,500 | 1,199 | |||||||||
| Foothill-Eastern Transportation Corridor Agency Revenue (INS — Assured Guaranty Municipal Corp.) 1/15/34 (a) | 15,000 | 9,894 | |||||||||
1/15/35 (a) | 7,500 | 4,695 | |||||||||
| Fresno Joint Powers Financing Authority Revenue (INS — Assured Guaranty Municipal Corp.), Series A, 4.00%, 4/1/46, Continuously Callable @100 | 1,225 | 1,139 | |||||||||
| Golden State Tobacco Securitization Corp. Revenue, 5.00%, 6/1/51, Continuously Callable @100 | 1,000 | 1,026 | |||||||||
| Grass Valley School District, GO (INS — Build America Mutual Assurance Co.), 5.00%, 8/1/45, Continuously Callable @100 | 2,400 | 2,484 | |||||||||
See notes to financial statements.
10
| USAA Mutual Funds Trust USAA California Bond Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
| Hayward Unified School District, GO (INS — Build America Mutual Assurance Co.), Series A, 5.00%, 8/1/44, Continuously Callable @100 | $ | 3,000 | $ | 3,162 | |||||||
| Indio Redevelopment Agency Successor Agency Tax Allocation, Series A, 5.25%, 8/15/31, Continuously Callable @100 | 2,940 | 2,944 | |||||||||
| Inglewood Unified School District, GO (INS — Build America Mutual Assurance Co.) Series B, 5.00%, 8/1/38, Continuously Callable @100 | 750 | 782 | |||||||||
Series C, 4.00%, 8/1/37, Continuously Callable @100 | 450 | 451 | |||||||||
Series C, 4.00%, 8/1/39, Continuously Callable @100 | 450 | 443 | |||||||||
| Inglewood Unified School District, GO (INS — Assured Guaranty Municipal Corp.), Series A, 4.00%, 8/1/46, Continuously Callable @100 | 3,550 | 3,339 | |||||||||
| Irvine Unified School District Special Tax 5.00%, 9/1/45, Continuously Callable @100 | 3,000 | 3,026 | |||||||||
Series A, 4.00%, 9/1/39, Continuously Callable @100 | 1,020 | 922 | |||||||||
Series B, 5.00%, 9/1/42, Continuously Callable @100 | 1,000 | 1,015 | |||||||||
Series B, 5.00%, 9/1/47, Continuously Callable @100 | 1,000 | 1,005 | |||||||||
Series C, 5.00%, 9/1/42, Continuously Callable @100 | 1,000 | 1,015 | |||||||||
Series C, 5.00%, 9/1/47, Continuously Callable @100 | 525 | 528 | |||||||||
Series D, 5.00%, 9/1/49, Continuously Callable @100 | 1,000 | 1,003 | |||||||||
| Irvine Unified School District Special Tax (INS — Build America Mutual Assurance Co.), 5.00%, 9/1/56, Continuously Callable @100 | 6,000 | 6,224 | |||||||||
| Irvine Unified School District Special Tax (INS — Build America Mutual Assurance Co.), Series A, 4.00%, 9/1/50, Continuously Callable @100 | 1,800 | 1,694 | |||||||||
| Jurupa Public Financing Authority Special Tax, Series A, 5.00%, 9/1/42, Continuously Callable @100 | 1,000 | 1,012 | |||||||||
| Local Public Schools Funding Authority School Improvement District No. 2016-1, GO (INS — Build America Mutual Assurance Co.), Series A, 4.00%, 8/1/52, Continuously Callable @100 | 1,500 | 1,371 | |||||||||
Long Beach Bond Finance Authority Revenue, Series A, 5.00%, 11/15/35 | 3,875 | 4,019 | |||||||||
| Los Angeles County Facilities, Inc. Revenue Series A, 5.00%, 12/1/51, Pre-refunded 12/1/28 @ 100 | 1,560 | 1,756 | |||||||||
Series A, 5.00%, 12/1/51, Continuously Callable @100 | 2,440 | 2,571 | |||||||||
| Los Angeles County Public Works Financing Authority Revenue Series A, 5.00%, 12/1/44, Continuously Callable @100 | 2,000 | 2,053 | |||||||||
Series D, 5.00%, 12/1/45, Continuously Callable @100 | 6,000 | 6,193 | |||||||||
| March Joint Powers Redevelopment Agency Successor Agency Tax Allocation (INS — Build America Mutual Assurance Co.), Series A, 4.00%, 8/1/41, Continuously Callable @100 | 5,790 | 5,797 | |||||||||
| Middle Fork Project Finance Authority Revenue, 5.00%, 4/1/33, Continuously Callable @100 | 2,205 | 2,346 | |||||||||
Monrovia Financing Authority Revenue, 5.00%, 12/1/45, Continuously Callable @100 | 3,435 | 3,533 | |||||||||
| Monrovia Financing Authority Revenue (INS — Assured Guaranty Municipal Corp.), 5.00%, 12/1/45, Continuously Callable @100 | 2,345 | 2,406 | |||||||||
| Moreno Valley Unified School District, GO (INS — Assured Guaranty Municipal Corp.), Series B, 5.00%, 8/1/47, Continuously Callable @100 | 6,500 | 6,826 | |||||||||
| Mountain View School District/Los Angeles County, GO (INS — Build America Mutual Assurance Co.), Series B, 5.00%, 8/1/48, Continuously Callable @100 | 3,315 | 3,413 | |||||||||
| Norwalk Redevelopment Agency Tax Allocation (INS — National Public Finance Guarantee Corp.) Series A, 5.00%, 10/1/30, Continuously Callable @100 | 5,000 | 5,006 | |||||||||
Series A, 5.00%, 10/1/35, Continuously Callable @100 | 3,500 | 3,504 | |||||||||
See notes to financial statements.
11
| USAA Mutual Funds Trust USAA California Bond Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
| Norwalk-La Mirada Unified School District, GO (INS — Assured Guaranty Municipal Corp.), Series C, 8/1/30 (a) | $ | 7,500 | $ | 5,876 | |||||||
| Palomar Health, GO (INS — Assured Guaranty Municipal Corp.), Series A, 8/1/31 (a) | 12,230 | 8,605 | |||||||||
| Palomar Health, GO (INS — National Public Finance Guarantee Corp.), Series A, 8/1/26 (a) | 5,500 | 4,860 | |||||||||
| Perris Union High School District, GO (INS — Assured Guaranty Corp.), Series A, 4.00%, 9/1/48, Continuously Callable @100 | 5,000 | 4,690 | |||||||||
| Pittsburg Successor Agency Redevelopment Agency Tax Allocation (INS — Assured Guaranty Municipal Corp.), Series A, 5.00%, 9/1/29, Continuously Callable @100 | 2,000 | 2,128 | |||||||||
| Pomona Unified School District, GO (INS — Build America Mutual Assurance Co.), Series F, 5.00%, 8/1/39, Continuously Callable @100 | 1,500 | 1,541 | |||||||||
| Poway Unified School District Special Tax (INS — Assured Guaranty Municipal Corp.), 4.00%, 9/1/50, Continuously Callable @100 | 4,750 | 4,375 | |||||||||
| Rio Elementary School District, GO (INS — Assured Guaranty Municipal Corp.), Series B, 4.00%, 8/1/45, Continuously Callable @100 | 2,800 | 2,689 | |||||||||
| River Islands Public Financing Authority (INS — Assured Guaranty Corp.), Series A-1, 5.25%, 9/1/52, Continuously Callable @103 | 1,500 | 1,683 | |||||||||
| River Islands Public Financing Authority Special Tax, Series 2016-1, 5.25%, 9/1/52, Continuously Callable @103 | 2,000 | 2,146 | |||||||||
| Riverside County Public Financing Authority Tax Allocation (INS — Build America Mutual Assurance Co.) Series A, 4.00%, 10/1/36, Continuously Callable @100 | 1,250 | 1,257 | |||||||||
Series A, 4.00%, 10/1/37, Continuously Callable @100 | 1,625 | 1,628 | |||||||||
| Riverside County Redevelopment Successor Agency Tax Allocation (INS — Build America Mutual Assurance Co.), Series B, 4.00%, 10/1/37, Continuously Callable @100 | 2,000 | 2,011 | |||||||||
| Riverside County Transportation Commission Revenue Series A, 5.25%, 6/1/39, Pre-refunded 6/1/23 @ 100 | 2,000 | 2,011 | |||||||||
Series B1, 4.00%, 6/1/46, Continuously Callable @100 | 3,000 | 2,755 | |||||||||
| RNR School Financing Authority Special Tax (INS — Build America Mutual Assurance Co.), Series A, 5.00%, 9/1/41, Continuously Callable @100 | 2,000 | 2,066 | |||||||||
| Sacramento Area Flood Control Agency Special Assessment, 5.00%, 10/1/44, Continuously Callable @100 | 2,000 | 2,034 | |||||||||
| Sacramento City Unified School District CA, GO (INS — Build America Mutual Assurance Co.), Series A, 5.50%, 8/1/52, Continuously Callable @100 | 1,500 | 1,639 | |||||||||
| Sacramento City Unified School District, GO (INS — Build America Mutual Assurance Co.), Series S, 5.00%, 7/1/38, Continuously Callable @100 | 1,020 | 1,028 | |||||||||
| San Bruno Park Elementary School District, GO, Series A, 5.00%, 8/1/48, Continuously Callable @100 | 3,000 | 3,107 | |||||||||
| San Diego County Regional Airport Authority Revenue Series A, 5.00%, 7/1/47, Continuously Callable @100 | 1,500 | 1,546 | |||||||||
Series A, 5.00%, 7/1/49, Continuously Callable @100 | 2,000 | 2,083 | |||||||||
| San Diego Public Facilities Financing Authority Revenue, Series A, 5.00%, 10/15/44, Continuously Callable @100 | 2,500 | 2,576 | |||||||||
| San Leandro Unified School District, GO (INS — Build America Mutual Assurance Co.), Series B, 5.00%, 8/1/43, Continuously Callable @100 | 2,750 | 2,905 | |||||||||
See notes to financial statements.
12
| USAA Mutual Funds Trust USAA California Bond Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
| San Luis & Delta Mendota Water Authority Revenue (INS — Build America Mutual Assurance Co.), Series A, 5.00%, 3/1/38, Pre-refunded 3/1/23 @ 100 | $ | 1,500 | $ | 1,500 | |||||||
| San Ramon Redevelopment Agency Successor Agency Tax Allocation (INS — Build America Mutual Assurance Co.), Series A, 5.00%, 2/1/38, Continuously Callable @100 | 5,000 | 5,134 | |||||||||
| Santa Clarita Community College District, GO, 4.00%, 8/1/46, Continuously Callable @100 | 5,250 | 5,139 | |||||||||
| Santa Cruz County Redevelopment Agency Tax Allocation (INS — Assured Guaranty Municipal Corp.), Series A, 5.00%, 9/1/35, Continuously Callable @100 | 6,000 | 6,288 | |||||||||
| Santa Rosa High School District, GO (INS — Assured Guaranty Municipal Corp.), Series C, 5.00%, 8/1/43, Continuously Callable @100 | 1,000 | 1,038 | |||||||||
| State of California, GO 5.00%, 10/1/47, Continuously Callable @100 | 19,000 | 19,657 | |||||||||
5.00%, 9/1/52, Continuously Callable @100 | 1,000 | 1,089 | |||||||||
| Stockton Public Financing Authority Revenue 4.00%, 3/1/40, Continuously Callable @100 | 920 | 758 | |||||||||
5.00%, 3/1/47, Continuously Callable @100 | 2,760 | 2,576 | |||||||||
| Sweetwater Union High School District, GO, Series A1, 5.00%, 8/1/52, Continuously Callable @100 | 1,000 | 1,071 | |||||||||
| Tahoe-Truckee Unified School District Certificate of Participation (INS — Build America Mutual Assurance Co.), 4.00%, 6/1/43, Continuously Callable @100 | 1,000 | 992 | |||||||||
| Temecula Valley Unified School District Financing Authority Special Tax (INS — Build America Mutual Assurance Co.), 5.00%, 9/1/40, Continuously Callable @100 | 1,575 | 1,607 | |||||||||
| Temecula Valley Unified School District, GO (INS — Assured Guaranty Municipal Corp.), Series B, 4.00%, 8/1/45, Continuously Callable @100 | 7,500 | 7,096 | |||||||||
| Tobacco Securitization Authority of Southern California Revenue 5.00%, 6/1/48, Continuously Callable @100 | 880 | 889 | |||||||||
5.00%, 6/1/48, Continuously Callable @100 | 2,175 | 2,223 | |||||||||
| Transbay Joint Powers Authority Tax Allocation Series A, 5.00%, 10/1/49, Continuously Callable @100 | 800 | 810 | |||||||||
Series B, 2.40%, 10/1/49, Continuously Callable @100 | 160 | 149 | |||||||||
| University of California Revenue 1.15%, 5/15/48, Callable 4/3/23 @ 100 (g) | 1,000 | 1,000 | |||||||||
5.00%, 5/15/52, Continuously Callable @100 | 2,500 | 2,711 | |||||||||
| Vacaville Unified School District, GO, Series D, 4.00%, 8/1/45, Continuously Callable @100 | 1,850 | 1,777 | |||||||||
| Val Verde Unified School District Certificate of Participation (INS — Build America Mutual Assurance Co.) Series A, 5.00%, 8/1/34, Continuously Callable @100 | 1,105 | 1,153 | |||||||||
Series A, 5.00%, 8/1/35, Continuously Callable @100 | 1,530 | 1,594 | |||||||||
| Val Verde Unified School District, GO (INS — Assured Guaranty Municipal Corp.), Series C, 4.00%, 8/1/45, Continuously Callable @100 | 4,475 | 4,289 | |||||||||
| 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 | 4,000 | 4,192 | |||||||||
| Victor Valley Union High School District, GO (INS — Assured Guaranty Municipal Corp.), Series B, 4.00%, 8/1/37, Continuously Callable @100 | 5,000 | 5,017 | |||||||||
| Washington Township Health Care District Revenue Series A, 5.00%, 7/1/42, Continuously Callable @100 | 1,000 | 1,014 | |||||||||
Series A, 4.00%, 8/1/51, Continuously Callable @100 | 3,280 | 2,969 | |||||||||
See notes to financial statements.
13
| USAA Mutual Funds Trust USAA California Bond Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
| Western Placer Unified School District Certificate of Participation (INS — Assured Guaranty Municipal Corp.), 4.00%, 8/1/41, Continuously Callable @100 | $ | 6,000 | $ | 5,735 | |||||||
493,286 | |||||||||||
Guam (3.2%): | |||||||||||
| Guam Government Waterworks Authority Revenue 5.50%, 7/1/43, Pre-refunded 7/1/23 @ 100 | 4,000 | 4,028 | |||||||||
5.00%, 1/1/46, Continuously Callable @100 | 7,000 | 7,033 | |||||||||
| Guam Power Authority Revenue Series A, 5.00%, 10/1/40, Continuously Callable @100 | 2,800 | 2,853 | |||||||||
Series A, 5.00%, 10/1/41, Continuously Callable @100 | 2,635 | 2,721 | |||||||||
16,635 | |||||||||||
Virgin Islands (0.6%): | |||||||||||
| Virgin Islands Public Finance Authority Revenue, 5.00%, 9/1/33, Continuously Callable @100 (f) | 3,000 | 3,150 | |||||||||
Total Municipal Bonds (Cost $530,568) | 513,071 | ||||||||||
Total Investments (Cost $530,568) — 99.0% | 513,071 | ||||||||||
Other assets in excess of liabilities — 1.0% | 5,023 | ||||||||||
NET ASSETS — 100.00% | $ | 518,094 | |||||||||
(a) Zero-coupon bond.
(b) Variable or Floating-Rate Security. Rate disclosed is as of February 28, 2023.
(c) Put Bond.
(d) Stepped-coupon security converts to coupon form on 8/1/23 with a rate of 4.30%
(e) Stepped-coupon security converts to coupon form on 8/1/23 with a rate of 4.35%
(f) Rule 144A security or other security that is restricted as to resale to institutional investors. As of February 28, 2023, the fair value of these securities was $29,032 thousands and amounted to 5.6% of net assets.
(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) Stepped-coupon security converts to coupon form on 10/1/37 with a rate of 5.40%.
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
LOC — Letter of Credit
MUNIPSA — Municipal Swap Index
See notes to financial statements.
14
| USAA Mutual Funds Trust USAA California Bond Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
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.
LOC Principal and interest payments are guaranteed by a bank letter of credit or other bank credit agreement.
NBGA Principal and interest payments or, under certain circumstances, underlying mortgages are guaranteed by a nonbank guaranteed agreement from the name listed.
See notes to financial statements.
15
USAA Mutual Funds Trust | Statement of Assets and Liabilities February 28, 2023 | ||||||
(Amounts in Thousands, Except Per Share Amounts)
| USAA California Bond Fund | |||||||
Assets: | |||||||
Investments, at value (Cost $530,568) | $ | 513,071 | |||||
Cash | 136 | ||||||
Receivables: | |||||||
Interest | 5,698 | ||||||
Capital shares issued | 12 | ||||||
Prepaid expenses | — | (a) | |||||
Total Assets | 518,917 | ||||||
Liabilities: | |||||||
Payables: | |||||||
Distributions | 201 | ||||||
Capital shares redeemed | 331 | ||||||
Accrued expenses and other payables: | |||||||
Investment advisory fees | 155 | ||||||
Administration fees | 60 | ||||||
Custodian fees | — | (a) | |||||
Transfer agent fees | 11 | ||||||
Compliance fees | — | (a) | |||||
Trustees' fees | — | (a) | |||||
| 12b-1 fees | — | (a) | |||||
Other accrued expenses | 65 | ||||||
Total Liabilities | 823 | ||||||
Net Assets: | |||||||
Capital | 550,922 | ||||||
Total accumulated earnings/(loss) | (32,828 | ) | |||||
Net Assets | $ | 518,094 | |||||
Net Assets | |||||||
Fund Shares | $ | 516,046 | |||||
Institutional Shares | 1,515 | ||||||
Class A | 533 | ||||||
Total | $ | 518,094 | |||||
Shares (unlimited number of shares authorized with no par value): | |||||||
Fund Shares | 50,803 | ||||||
Institutional Shares | 149 | ||||||
Class A | 53 | ||||||
Total | 51,005 | ||||||
Net asset value, offering and redemption price per share: (b) | |||||||
Fund Shares | $ | 10.16 | |||||
Institutional Shares | 10.16 | ||||||
Class A | 10.15 | ||||||
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 | $ | 10.38 | |||||
(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.
16
USAA Mutual Funds Trust | Statements of Operations | ||||||
(Amounts in Thousands)
USAA California Bond Fund | |||||||||||
| 11 Months Ended February 28, 2023(a) | Year Ended March 31, 2022 | ||||||||||
Investment Income: | |||||||||||
Interest | $ | 18,190 | $ | 19,388 | |||||||
Total Income | 18,190 | 19,388 | |||||||||
Expenses: | |||||||||||
Investment advisory fees | 1,885 | 2,287 | |||||||||
Administration fees — Fund Shares | 749 | 986 | |||||||||
Administration fees — Institutional Shares | 1 | 1 | |||||||||
Administration fees — Class A | 1 | 3 | |||||||||
Sub-Administration fees | 22 | 23 | |||||||||
| 12b-1 fees — Class A | 1 | 4 | |||||||||
Custodian fees | 7 | 25 | |||||||||
Transfer agent fees — Fund Shares | 111 | 127 | |||||||||
Transfer agent fees — Institutional Shares | 1 | 1 | |||||||||
Transfer agent fees — Class A | 1 | 2 | |||||||||
Trustees' fees | 46 | 49 | |||||||||
Compliance fees | 5 | 4 | |||||||||
Legal and audit fees | 66 | 51 | |||||||||
State registration and filing fees | — | (b) | 1 | ||||||||
Other expenses | 70 | 93 | |||||||||
Recoupment of prior expenses waived/reimbursed by Adviser | 5 | — | |||||||||
Total Expenses | 2,971 | 3,657 | |||||||||
Expenses waived/reimbursed by Adviser | (20 | ) | (2 | ) | |||||||
Net Expenses | 2,951 | 3,655 | |||||||||
Net Investment Income (Loss) | 15,239 | 15,733 | |||||||||
Realized/Unrealized Gains (Losses) from Investments: | |||||||||||
Net realized gains (losses) from investment securities | (10,836 | ) | (469 | ) | |||||||
| Net change in unrealized appreciation/depreciation on investment securities | (25,775 | ) | (37,878 | ) | |||||||
Net realized/unrealized gains (losses) on investments | (36,611 | ) | (38,347 | ) | |||||||
Change in net assets resulting from operations | $ | (21,372 | ) | $ | (22,614 | ) | |||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from March 31 to February 28.
(b) 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 California Bond Fund | |||||||||||||||
| 11 Months Ended February 28, 2023(a) | Year Ended March 31, 2022 | Year Ended March 31, 2021 | |||||||||||||
From Investments: | |||||||||||||||
Operations: | |||||||||||||||
Net Investment Income (Loss) | $ | 15,239 | $ | 15,733 | $ | 16,045 | |||||||||
Net realized gains (losses) | (10,836 | ) | (469 | ) | (447 | ) | |||||||||
| Net change in unrealized appreciation/ depreciation | (25,775 | ) | (37,878 | ) | 19,043 | ||||||||||
Change in net assets resulting from operations | (21,372 | ) | (22,614 | ) | 34,641 | ||||||||||
Distributions to Shareholders: | |||||||||||||||
Fund Shares | (14,742 | ) | (15,686 | ) | (15,912 | ) | |||||||||
Institutional Shares | (34 | ) | (16 | ) | (13 | )(b) | |||||||||
Class A | (14 | ) | (36 | ) | (142 | ) | |||||||||
| Change in net assets resulting from distributions to shareholders | (14,790 | ) | (15,738 | ) | (16,067 | ) | |||||||||
| Change in net assets resulting from capital transactions | (53,908 | ) | (17,126 | ) | (39,098 | ) | |||||||||
Change in net assets | (90,070 | ) | (55,478 | ) | (20,524 | ) | |||||||||
Net Assets: | |||||||||||||||
Beginning of period | 608,164 | 663,642 | 684,166 | ||||||||||||
End of period | $ | 518,094 | $ | 608,164 | $ | 663,642 | |||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from March 31 to February 28.
(b) Institutional Shares activity is for the period June 29, 2020 (commencement of operations) to March 31, 2021.
(continues on next page)
See notes to financial statements.
18
USAA Mutual Funds Trust | Statements of Changes in Net Assets | ||||||
(Amounts in Thousands) (continued)
USAA California Bond Fund | |||||||||||||||
| 11 Months Ended February 28, 2023(a) | Year Ended March 31, 2022 | Year Ended March 31, 2021 | |||||||||||||
Capital Transactions: | |||||||||||||||
Fund Shares | |||||||||||||||
Proceeds from shares issued | $ | 25,920 | $ | 32,637 | $ | 45,712 | |||||||||
Distributions reinvested | 12,676 | 13,547 | 13,309 | ||||||||||||
Cost of shares redeemed | (92,965 | ) | (57,349 | ) | (99,256 | ) | |||||||||
Total Fund Shares | $ | (54,369 | ) | $ | (11,165 | ) | $ | (40,235 | ) | ||||||
Institutional Shares | |||||||||||||||
Proceeds from shares issued | $ | 1,097 | $ | 58 | $ | 1,751 | (b) | ||||||||
Distributions reinvested | 31 | 15 | 11 | (b) | |||||||||||
Cost of shares redeemed | (158 | ) | (358 | ) | (847 | )(b) | |||||||||
Total Institutional Shares | $ | 970 | $ | (285 | ) | $ | 915 | ||||||||
Class A | |||||||||||||||
Proceeds from shares issued | $ | 73 | $ | 25 | $ | 6,931 | |||||||||
Distributions reinvested | 9 | 28 | 17 | ||||||||||||
Cost of shares redeemed | (591 | ) | (5,729 | ) | (6,726 | ) | |||||||||
Total Class A | $ | (509 | ) | $ | (5,676 | ) | $ | 222 | |||||||
| Change in net assets resulting from capital transactions | $ | (53,908 | ) | $ | (17,126 | ) | $ | (39,098 | ) | ||||||
Share Transactions: | |||||||||||||||
Fund Shares | |||||||||||||||
Issued | 2,534 | 2,826 | 3,996 | ||||||||||||
Reinvested | 1,241 | 1,180 | 1,164 | ||||||||||||
Redeemed | (9,076 | ) | (5,011 | ) | (8,723 | ) | |||||||||
Total Fund Shares | (5,301 | ) | (1,005 | ) | (3,563 | ) | |||||||||
Institutional Shares | |||||||||||||||
Issued | 106 | 5 | 152 | (b) | |||||||||||
Reinvested | 3 | 1 | 1 | (b) | |||||||||||
Redeemed | (15 | ) | (30 | ) | (74 | )(b) | |||||||||
Total Institutional Shares | 94 | (24 | ) | 79 | |||||||||||
Class A | |||||||||||||||
Issued | 7 | 2 | 610 | ||||||||||||
Reinvested | 1 | 2 | 2 | ||||||||||||
Redeemed | (57 | ) | (493 | ) | (593 | ) | |||||||||
Total Class A | (49 | ) | (489 | ) | 19 | ||||||||||
Change in Shares | (5,256 | ) | (1,518 | ) | (3,465 | ) | |||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from March 31 to February 28.
(b) Institutional Shares activity is for the period June 29, 2020 (commencement of operations) to March 31, 2021.
See notes to financial statements.
19
USAA Mutual Funds Trust | Financial Highlights | ||||||
For a Share Outstanding Throughout Each Period
USAA California Bond Fund | |||||||||||||||||||||||||||
Fund Shares | |||||||||||||||||||||||||||
| 11 Months Ended February 28, 2023(a) | Year Ended March 31, 2022 | Year Ended March 31, 2021 | Year Ended March 31, 2020 | Year Ended March 31, 2019 | Year Ended March 31, 2018 | ||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 10.81 | $ | 11.49 | $ | 11.17 | $ | 11.07 | $ | 10.92 | $ | 10.92 | |||||||||||||||
Investment Activities: | |||||||||||||||||||||||||||
Net investment income (loss) | 0.29 | (b) | 0.27 | (b) | 0.27 | (b) | 0.30 | (b) | 0.34 | 0.37 | |||||||||||||||||
| Net realized and unrealized gains (losses) | (0.66 | ) | (0.68 | ) | 0.32 | 0.10 | 0.15 | — | (c) | ||||||||||||||||||
| Total from Investment Activities | (0.37 | ) | (0.41 | ) | 0.59 | 0.40 | 0.49 | 0.37 | |||||||||||||||||||
Distributions to Shareholders from: | |||||||||||||||||||||||||||
Net investment income | (0.28 | ) | (0.27 | ) | (0.27 | ) | (0.30 | ) | (0.34 | ) | (0.37 | ) | |||||||||||||||
Total Distributions | (0.28 | ) | (0.27 | ) | (0.27 | ) | (0.30 | ) | (0.34 | ) | (0.37 | ) | |||||||||||||||
Net Asset Value, End of Period | $ | 10.16 | $ | 10.81 | $ | 11.49 | $ | 11.17 | $ | 11.07 | $ | 10.92 | |||||||||||||||
Total Return (d) (e) | (3.43 | )% | (3.64 | )% | 5.36 | % | 3.62 | % | 4.61 | % | 3.37 | % | |||||||||||||||
Ratios to Average Net Assets: | |||||||||||||||||||||||||||
Net Expenses (f) (g) (h) (i) | 0.59 | % | 0.55 | % | 0.56 | % | 0.53 | % | 0.52 | % | 0.51 | % | |||||||||||||||
Net Investment Income (Loss) (f) | 3.04 | % | 2.39 | % | 2.40 | % | 2.66 | % | 3.15 | % | 3.32 | % | |||||||||||||||
Gross Expenses (f) (g) | 0.59 | % | 0.55 | % | 0.56 | % | 0.53 | % | 0.52 | % | 0.51 | % | |||||||||||||||
Supplemental Data: | |||||||||||||||||||||||||||
Net Assets at end of period (000's) | $ | 516,046 | $ | 606,474 | $ | 655,948 | $ | 677,785 | $ | 691,391 | $ | 674,498 | |||||||||||||||
Portfolio Turnover (d) (j) | 19 | % | 11 | % | 32 | % | 33 | % | 18 | % | 6 | % | |||||||||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from March 31 to February 28.
(b) Per share net investment income (loss) has been calculated using the average daily shares method.
(c) Amount is less than $0.005 per share.
(d) Not annualized for periods less than one year.
(e) Assumes reinvestment of all net investment income and realized capital gain distributions, if any, during the period. Includes adjustments in accordance with U.S. Generally Accepted Accounting Principles and could differ from the Lipper reported return.
(f) Annualized for periods less than one year.
(g) Does not include acquired fund fees and expenses, if any.
(h) 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 July 31, 2023, instead of coinciding with the Fund's fiscal year end.
(i) 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.
(j) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares.
See notes to financial statements.
20
USAA Mutual Funds Trust | Financial Highlights — continued | ||||||
For a Share Outstanding Throughout Each Period
USAA California Bond Fund | |||||||||||||||
Institutional Shares | |||||||||||||||
| 11 Months Ended February 28, 2023(a) | Year Ended March 31, 2022 | June 29, 2020(b) through March 31, 2021 | |||||||||||||
Net Asset Value, Beginning of Period | $ | 10.81 | $ | 11.48 | $ | 11.35 | |||||||||
Investment Activities: | |||||||||||||||
Net investment income (loss) (c) | 0.30 | 0.28 | 0.21 | ||||||||||||
Net realized and unrealized gains (losses) | (0.67 | ) | (0.67 | ) | 0.13 | ||||||||||
Total from Investment Activities | (0.37 | ) | (0.39 | ) | 0.34 | ||||||||||
Distributions to Shareholders from: | |||||||||||||||
Net investment income | (0.28 | ) | (0.28 | ) | (0.21 | ) | |||||||||
Total Distributions | (0.28 | ) | (0.28 | ) | (0.21 | ) | |||||||||
Net Asset Value, End of Period | $ | 10.16 | $ | 10.81 | $ | 11.48 | |||||||||
Total Return (d) (e) | (3.36 | )% | (3.50 | )% | 3.01 | % | |||||||||
Ratios to Average Net Assets: | |||||||||||||||
Net Expenses (f) (g) (h) (i) | 0.51 | % | 0.51 | % | 0.50 | % | |||||||||
Net Investment Income (Loss) (f) | 3.17 | % | 2.43 | % | 2.44 | % | |||||||||
Gross Expenses (f) (g) | 0.59 | % | 0.58 | % | 0.94 | % | |||||||||
Supplemental Data: | |||||||||||||||
Net Assets at end of period (000's) | $ | 1,515 | $ | 592 | $ | 911 | |||||||||
Portfolio Turnover (d) (j) | 19 | % | 11 | % | 32 | % | |||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from March 31 to February 28.
(b) Commencement of operations.
(c) Per share net investment income (loss) has been calculated using the average daily shares method.
(d) Not annualized for periods less than one year.
(e) Assumes reinvestment of all net investment income and realized capital gain distributions, if any, during the period. Includes adjustments in accordance with U.S. Generally Accepted Accounting Principles and could differ from the Lipper reported return.
(f) Annualized for periods less than one year.
(g) Does not include acquired fund fees and expenses, if any.
(h) 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 June 29, 2020, and in effect through July 31, 2023, instead of coinciding with the Fund's fiscal year end.
(i) 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.
(j) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares.
See notes to financial statements.
21
USAA Mutual Funds Trust | Financial Highlights — continued | ||||||
For a Share Outstanding Throughout Each Period
USAA California Bond Fund | |||||||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||
| 11 Months Ended February 28, 2023(a) | Year Ended March 31, 2022 | Year Ended March 31, 2021 | Year Ended March 31, 2020 | Year Ended March 31, 2019 | Year Ended March 31, 2018 | ||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 10.80 | $ | 11.47 | $ | 11.16 | $ | 11.06 | $ | 10.91 | $ | 10.91 | |||||||||||||||
Investment Activities: | |||||||||||||||||||||||||||
Net investment income (loss) | 0.26 | (b) | 0.25 | (b) | 0.25 | (b) | 0.27 | (b) | 0.32 | 0.34 | |||||||||||||||||
| Net realized and unrealized gains (losses) | (0.66 | ) | (0.67 | ) | 0.31 | 0.10 | 0.15 | — | (c) | ||||||||||||||||||
| Total from Investment Activities | (0.40 | ) | (0.42 | ) | 0.56 | 0.37 | 0.47 | 0.34 | |||||||||||||||||||
Distributions to Shareholders from: | |||||||||||||||||||||||||||
Net investment income | (0.25 | ) | (0.25 | ) | (0.25 | ) | (0.27 | ) | (0.32 | ) | (0.34 | ) | |||||||||||||||
Total Distributions | (0.25 | ) | (0.25 | ) | (0.25 | ) | (0.27 | ) | (0.32 | ) | (0.34 | ) | |||||||||||||||
Net Asset Value, End of Period | $ | 10.15 | $ | 10.80 | $ | 11.47 | $ | 11.16 | $ | 11.06 | $ | 10.91 | |||||||||||||||
| Total Return (excludes sales charges) (d) (e) | (3.69 | )% | (3.78 | )% | 5.01 | % | 3.36 | % | 4.37 | % | 3.12 | % | |||||||||||||||
Ratios to Average Net Assets: | |||||||||||||||||||||||||||
Net Expenses (f) (g) (h) (i) | 0.89 | % | 0.79 | % | 0.81 | % | 0.78 | % | 0.76 | % | 0.75 | % | |||||||||||||||
Net Investment Income (Loss) (f) | 2.73 | % | 2.15 | % | 2.15 | % | 2.41 | % | 2.92 | % | 3.08 | % | |||||||||||||||
Gross Expenses (f) (g) | 0.97 | % | 0.85 | % | 0.88 | % | 0.78 | % | 0.76 | % | 0.75 | % | |||||||||||||||
Supplemental Data: | |||||||||||||||||||||||||||
Net Assets at end of period (000's) | $ | 533 | $ | 1,098 | $ | 6,783 | $ | 6,381 | $ | 7,005 | $ | 6,985 | |||||||||||||||
Portfolio Turnover (d) (j) | 19 | % | 11 | % | 32 | % | 33 | % | 18 | % | 6 | % | |||||||||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from March 31 to February 28.
(b) Per share net investment income (loss) has been calculated using the average daily shares method.
(c) Amount is less than $0.005 per share.
(d) Not annualized for periods less than one year.
(e) Assumes reinvestment of all net investment income and realized capital gain distributions, if any, during the period. Includes adjustments in accordance with U.S. Generally Accepted Accounting Principles and could differ from the Lipper reported return.
(f) Annualized for periods less than one year.
(g) Does not include acquired fund fees and expenses, if any.
(h) 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 July 31, 2023, instead of coinciding with the Fund's fiscal year end.
(i) 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.
(j) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares.
See notes to financial statements.
22
USAA Mutual Funds Trust | Notes to Financial Statements February 28, 2023 | ||||||
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 California Bond 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.
On June 29, 2022, the Board of Trustees (the "Board") approved the fiscal year-end change for the Fund from March 31 to February 28. The first full cycle of the new fiscal year-end reporting will begin March 1, 2023. As a result of the change, the Fund has a February 28, 2023 fiscal 11-month transition period, the results of which are reported in this Annual Report for the period ended February 28, 2023.
Victory Capital Management ("VCM" or 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 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 (unadjusted) in active markets for identical securities
• Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, or credit spreads, applicable to those securities, etc.)
• Level 3 — significant unobservable inputs (including the Adviser's assumptions in determining the fair value of investments)
23
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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, appointed as the valuation designee by the Board, has established the Pricing and Liquidity Committee (the "Committee"), and subject to Board oversight, the Committee administers and oversees the Fund's valuation policies and procedures, which are approved by the Board.
Debt securities are valued each business day by a pricing service approved by the valuation designee and subject to the oversight of the Board. The 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.
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 net asset value ("NAV") to be more reliable than it otherwise would be.
A summary of the valuations as of February 28, 2023, 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 | ||||||||||||||||
Municipal Bonds | $ | — | $ | 513,071 | $ | — | $ | 513,071 | |||||||||||
Total | $ | — | $ | 513,071 | $ | — | $ | 513,071 | |||||||||||
As of February 28, 2023, there were no transfers into/out of Level 3.
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 generally take place within 35 days a month or more after the trade date. Securities that require more than 35 days to settle are considered a senior security and subject to Rule 18f-4. 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. 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.
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.
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
24
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
of coupon interest accrued and recorded daily using the effective interest method which adjusts, where applicable, the amortization of premiums or accretion of discounts. Interest income is recorded daily on the accrual basis. 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 had a tax year end of March 31, and effective February 28, 2023, the Fund changed its tax year end to February 28.
For the 11 months ended February 28, 2023, 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 under specified conditions outlined in the valuation policies and procedures adopted by the Board. In addition, as defined under the valuation policies and procedures, each transaction must be effected at the independent current market price. For the 11 months ended February 28, 2023, 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) | |||||||||
| $ | 37,600 | $ | 41,600 | $ | — | ||||||
For the year ended March 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) | |||||||||
| $ | 23,800 | $ | 50,000 | $ | — | ||||||
Fees Paid Indirectly:
Expense offsets to custody fees that arise from credits on cash balances maintained on deposit are reflected on the Statements of Operations, as applicable, as Custodian fees.
25
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
3. Purchases and Sales:
Purchases and sales of securities (excluding securities maturing less than one year from acquisition) for the 11 months ended February 28, 2023, were as follows for the Fund (amounts in thousands):
| Excluding U.S. Government Securities | |||||||
| Purchases | Sales | ||||||
| $ | 100,995 | $ | 160,542 | ||||
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 Securities and Exchange Commission ("SEC").
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 0.50% of the first $50 million of the Fund's average daily net assets, 0.40% of that portion of the Fund's average daily net assets over $50 million but not over $100 million, and 0.30% of that portion of the Fund's average daily net assets over $100 million. Amounts incurred and paid to VCM for the 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements of Operations as Investment advisory fees.
The performance adjustment for each share class is accrued daily and calculated monthly by comparing the respective class' performance to that of the Lipper California Municipal Debt Funds Index. The Lipper California Municipal Debt Funds Index tracks the total return performance of the largest funds within the Lipper California Municipal Debt Funds category.
The performance period for each share class consists of the current month plus the previous 35 months. The following table is utilized to determine the extent of the performance adjustment:
| Over/Under Performance Relative to Index (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 California Municipal Debt Funds Index over that period, even if the class has overall negative returns during the performance period.
For the period April 1, 2022, to February 28, 2023, performance adjustments were $243, less than $1, and less than $1 for Fund Shares, Institutional Shares, and Class A, in thousands, respectively. Performance adjustments were 0.05%, 0.01%, and 0.09% for Fund Shares, Institutional Shares, and Class A, respectively. For the period April 1, 2021, to March 31, 2022, performance adjustments were $157, less than $1, and less than $(1) for Fund Shares, Institutional Shares, and Class A, in thousands, respectively. Performance adjustments were 0.02%, 0.01%, and (0.01)% 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.
26
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 11 months ended February 28, 2023, and the year ended March 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, Institutional Shares, and Class A, respectively. Amounts incurred for the 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements 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 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements 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 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements 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 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 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements 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.
27
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
Amounts incurred and paid to the Distributor for the 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements of Operations as 12b-1 fees.
In addition, the Distributor is entitled to receive commissions in connection with sales of Class A. For the 11 months ended February 28, 2023, the Distributor received less than $1 thousand from commissions earned in connection with sales of Class A. For the year ended March 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 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements 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 July 31, 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 February 28, 2023, the expense limits (excluding voluntary waivers) were 0.54%, 0.50%, and 0.80% for Fund Shares, Institutional Shares, and Class A, respectively.
Under the terms of the expense limitation agreement, 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.
As of February 28, 2023, 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 February 28, 2023.
| Expires 2024 | Expires 2025 | Expires 2026 | Total | ||||||||||||
| $ | 7 | $ | 2 | $ | 15 | $ | 24 | ||||||||
As of March 31, 2022, the following amounts were available to be repaid to the Adviser (amounts in thousands).
| Expires 2024 | Expires 2025 | Total | |||||||||
| $ | 7 | $ | 2 | $ | 9 | ||||||
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 11 months ended February 28, 2023, and the year ended March 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.
State-Specific Risk — Because the Fund invests in California tax-exempt securities, the Fund is more susceptible to adverse economic, political, and regulatory changes affecting tax-exempt securities issuers in California, such as changes to state laws and policies, economic issues that affect critical industries, large employers, or weakened real estate prices, and existing debt levels and state budget
28
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
priorities. In addition, the economic affects regarding COVID-19 and elevated global inflation may exacerbate some or all of these risks. The Fund's performance will be affected by the fiscal and economic health of California and its municipalities and their ability to issue and repay debt. The Fund is more vulnerable to unfavorable developments in California than are funds that invest in municipal securities of multiple states.
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.
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 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 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.
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 27, 2022, with a termination date of June 26, 2023. 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.
29
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
The purpose of the Line of Credit is to meet temporary or emergency cash needs. For the 11 months ended February 28, 2023, 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 paid a pro-rata portion of the commitment fees plus any interest on amounts borrowed. For the year ended March 31, 2022, and the period from April 1, 2022, through June 27, 2022, interest was based on the one-month London Interbank Offered Rate ("LIBOR") plus one percent. Effective with the renewal, for the period June 28, 2022, through February 28, 2023, interest was based on the one-month Secured Overnight Financing Rate ("SOFR") plus 1.10 percent. The Fund did not experience a material financial impact transitioning from LIBOR to SOFR. Interest charged to the 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 11 months ended February 28, 2023, and the year ended March 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 Statements of Operations under Interfund lending fees. As a Lender, interest earned by the Fund, if any, during the period, is reflected on the Statements of Operations under Interfund lending.
The Fund did not utilize or participate in the Facility during the 11 months ended February 28, 2023, and the year ended March 31, 2022.
7. 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. 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 February 28, 2023, on the Statement of Assets and Liabilities, there were no permanent book-to-tax difference reclassification adjustments.
30
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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):
11 Months Ended February 28, 2023 | |||||||
| Distributions Paid From | |||||||
| Tax-Exempt Income | Total Distributions Paid | ||||||
$ | 14,790 | $ | 14,790 | ||||
Year Ended March 31, 2022 | Year Ended March 31, 2021 | ||||||||||||||
| Distributions Paid From | Distributions Paid From | ||||||||||||||
| Tax-Exempt Income | Total Distributions Paid | Tax-Exempt Income | Total Distributions Paid | ||||||||||||
| $ | 15,738 | $ | 15,738 | $ | 16,067 | $ | 16,067 | ||||||||
As of February 28, 2023, the components of accumulated earnings (loss) on a tax basis were as follows (amounts in thousands):
| Undistributed Tax-Exempt Income | Accumulated Earnings | Distributions Payable | Accumulated Capital and Other Losses | Unrealized Appreciation (Depreciation) | Total Accumulated Earnings (Loss) | ||||||||||||||||||
| $ | 1,797 | $ | 1,797 | $ | (1,390 | ) | $ | (15,738 | ) | $ | (17,497 | ) | $ | (32,828 | ) | ||||||||
As of February 28, 2023, 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 | |||||||||
| $ | 4,868 | $ | 10,870 | $ | 15,738 | ||||||
As of February 28, 2023, 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) | ||||||||||||
| $ | 530,568 | $ | 4,545 | $ | (22,042 | ) | $ | (17,497 | ) | ||||||
8. Subsequent Events:
The Board, upon recommendation of the Adviser, has approved a change in the name of the Trust and each individual fund within the Trust. On February 23, 2023, an initial filing was made with the SEC to commence the process to effectuate the following changes.
Effective at the start of business on April 24, 2023 (the "Effective Date"), the name of the Trust changed from USAA Mutual Funds Trust to Victory Portfolios III, and all references to USAA Mutual Funds Trust in the summary prospectus, statutory prospectus, and statement of additional Information ("SAI") will be replaced by the new name.
31
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
Also on the Effective Date, references to the current name of the Fund in the summary prospectus, statutory prospectus, and SAI will be replaced with the new name as follows:
Current Name | New Name | ||||||
USAA California Bond Fund | Victory California Bond Fund | ||||||
In addition, on the Effective Date, USAA Investments, a Victory Capital Management Inc. investment franchise, that currently manages the USAA Fixed Income Funds, will change its name to Victory Income Investors, and all references to USAA Investments in the summary prospectus, statutory prospectus, and SAI, will be replaced.
Please note that there will be no changes in the management of the Fund or to the Fund's ticker symbols.
32
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of USAA California Bond Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of USAA California Bond Fund (the "Fund") (one of the funds constituting USAA Mutual Funds Trust (the "Trust")), including the schedule of portfolio investments as of February 28, 2023, and the related statements of operations for the period from April 1, 2022 through February 28, 2023 and the year ended March 31, 2022, the statements of changes in net assets for the period from April 1, 2022 through February 28, 2023 and each of the two years in the period ended March 31, 2022, the financial highlights for the period from April 1, 2022 through February 28, 2023 and each of the five years in the period ended March 31, 2022, 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 February 28, 2023, the results of its operations for the period from April 1, 2022 through February 28, 2023 and the year ended March 31, 2022, the statements of changes in net assets for the period from April 1, 2022 through February 28, 2023 and each of the two years in the period ended March 31, 2022, and its financial highlights for the period from April 1, 2022 through February 28, 2023 and each of the five years in the period ended March 31, 2022, 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 February 28, 2023, 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
April 28, 2023
33
USAA Mutual Funds Trust | Supplemental Information February 28, 2023 | ||||||
(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 date 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 | ||||||||||||||||||
34
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 (06/17-06/19); 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 (03/15-03/21). | 45 | None | ||||||||||||||||||
| Paul L. McNamara (July 1948) | Trustee | Trustee since January 2012 | Retired. | 45 | None | ||||||||||||||||||
35
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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) | ||||||||||||||||||
36
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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.
37
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
Officers:
The officers of the Trust, their date 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. (since 2022); 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. (07/01/19-present); Executive Director, Investment and Financial Administration, USAA (2012-06/30/19); 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. (07/01/19-present); Accounting/ Financial Director, USAA (12/13-06/30/19). | ||||||||||||
| 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). | ||||||||||||
38
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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). | ||||||||||||
39
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 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 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 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 September 1, 2022, through February 28, 2023.
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 9/1/22 | Actual Ending Account Value 2/28/23 | Hypothetical Ending Account Value 2/28/23 | Actual Expenses Paid During Period 9/1/22- 2/28/23* | Hypothetical Expenses Paid During Period 9/1/22- 2/28/23* | Annualized Expense Ratio During Period 9/1/22- 2/28/23 | ||||||||||||||||||||||
Fund Shares | $ | 1,000.00 | $ | 1,002.90 | $ | 1,021.87 | $ | 2.93 | $ | 2.96 | 0.59 | % | |||||||||||||||
Institutional Shares | 1,000.00 | 1,004.20 | 1,022.27 | 2.53 | 2.56 | 0.51 | % | ||||||||||||||||||||
Class A | 1,000.00 | 1,002.20 | 1,020.18 | 4.62 | 4.66 | 0.93 | % | ||||||||||||||||||||
* Expenses are equal to the average account value multiplied by the Fund's annualized expense ratio multiplied by 181/365 (the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year).
40
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
Additional Federal Income Tax Information
The following federal tax information related to the Fund's fiscal 11 months ended February 28, 2023, 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 2024.
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 11 months ended February 28, 2023 (amounts in thousands):
| Tax | ||||||
$ | 14,790 | ||||||
41
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
Considerations of the Board in Continuing the Investment Advisory Agreement
USAA California Bond Fund (the "Fund")
At a meeting of the Board of Trustees (the "Board") of USAA Mutual Funds Trust (the "Trust") held on December 8-9, 2022, 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 8-9, 2022, 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 21, 2022.
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.
42
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 program, (iv) derivatives risk management program, and (v) 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 adjustment, 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 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 June 30, 2022.
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 reimbursed or waived a portion of its management fees to the Fund. The Trustees reviewed
43
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
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 noted that the Fund has advisory fee breakpoints that allow the Fund to participate in economies of scale and that such economies of scale were currently reflected in the advisory fee. 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.
44
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 10, 2023, 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-RN (prior to August 2022, Form N-LIQUID) and recommended no material changes to the LRMP.
45
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 | ||||||
vcm.com | (800) 235-8396 | ||||||
40860-0423
February 28, 2023
Annual Report
USAA Global Equity Income Fund
(Also Known as Victory Global Equity Income Fund*)
* Effective at the start of business on April 24, 2023, the Fund name will change to Victory Global Equity Income Fund. Please see Notes to the Financial Statements for subsequent event information.
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 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.
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, 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 | ||||||
Statements of Operations | 17 | ||||||
Statements of Changes in Net Assets | 18 | ||||||
Financial Highlights | 19 | ||||||
Notes to Financial Statements | 20 | ||||||
| Report of Independent Registered Public Accounting Firm | 30 | ||||||
Supplemental Information (Unaudited) | 31 | ||||||
Trustee and Officer Information | 31 | ||||||
Proxy Voting and Portfolio Holdings Information | 37 | ||||||
Expense Example | 37 | ||||||
Additional Federal Income Tax Information | 38 | ||||||
Advisory Contract Renewal | 39 | ||||||
Liquidity Risk Management Program | 42 | ||||||
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,
If you are reading this letter but double-checking your calendar, be assured there's no mistake. The annual reporting period for your USAA Mutual Fund has shifted from a fiscal year ended March 31st to a fiscal year ended February 28th/the last day of February. This change has no material impact on any of your investments. This change aims to help us improve efficiencies and reduce operational costs. Therefore, this letter covers an abbreviated "annual" period from April 1, 2022, through February 28, 2023. Future annual reports will cover the 12-month period ended February 28th/the last day of February going forward.
Our most recent annual reporting period has been a challenging period for investors. Consider some of the headwinds: heightened geopolitical tensions, a terrible war in Eastern Europe, elevated energy and food costs, high inflation, and rising interest rates. All this has dampened global growth and created a difficult backdrop for both bond and stock investors.
The inflation data was particularly troublesome and surprised many with some of the highest readings since the 1970s. In response, the U.S. Federal Reserve (the "Fed") shifted to a more restrictive monetary policy than most anticipated. The Fed has been boosting the Fed funds interest rate repeatedly and aggressively, including a series of 75 basis point raises. (A basis point is 1/100th of a percentage point.) And if that wasn't enough, zero-COVID-19 policies in China (which fortunately have been recently lifted) further exacerbated supply chain issues and raised questions about global trade. As one might expect, all of these obstacles ratcheted up volatility across financial markets. Broad market stock indices pulled back substantially around the world.
The S&P 500® Index, the bell-weather proxy for our domestic stock market, delivered a negative total return of almost 11% during our abbreviated annual reporting period. But perhaps what was even more difficult was the performance of fixed income markets, which normally are considered a safe haven in times of equity turmoil. But not during this past year when interest rates were rising sharply. In fact, the Bloomberg US Aggregate Bond Index—a proxy for a diversified fixed income portfolio and one that many investors and institutions follow closely—delivered a negative total return of approximately 7.0%. That's not exactly the offset to equity performance that many investors have come to expect from bonds.
It's been difficult, and we fully acknowledge that the steady drumbeat of bad news and bouts of stomach-churning volatility can take a toll on investors' psyche. Nobody likes opening their account statements during declining markets, and even when markets often snap back sharply (as happened this past July, October, and earlier this calendar year), investors often wonder if they have missed an opportunity.
Through all the turmoil and challenges in our most recent annual reporting period, we are reminded of two enduring realities: 1) financial markets are dynamic and apt to change abruptly; 2) it's vital to remain calm and rational whenever faced with those inevitable bouts of turmoil.
Fortunately, we think that investors can take comfort knowing that all our independent investment franchises have experience managing portfolios through a
2
wide variety of market environments. Our investment professionals remain calm during turbulent financial markets, and we think it's imperative that investors do the same.
We still believe that a long-term plan, a well-diversified portfolio across asset classes and investment types, and a clear understanding of individual risk tolerances are the key ingredients for staying the course and progressing on investment goals. Moreover, all our investment professionals continually monitor the environment and work hard to position portfolios opportunistically no matter what the markets bring. Remember, turmoil can also create opportunity.
On the following pages, you will find information relating to your USAA Mutual Fund, brought to you by Victory Capital. If you have any questions, we encourage you to contact our Member Service Representatives. Call 800-235-8396, or visit our website at vcm.com.
From all of us here at Victory Capital, thank you for your ongoing confidence and for letting us help you work toward your investment goals.
Christopher K. Dyer, CFA
President,
USAA Mutual Funds Trust
3
USAA Global Equity Income Fund
Manager's Commentary
(Unaudited)
• What were the market conditions during the reporting period?
The second quarter of 2022 saw continued pressure on stocks and bonds. The U.S. Federal Reserve's (the "Fed") 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-19 related lockdowns in China, rising oil prices, and the ongoing conflict between Russia and the Ukraine.
In the third quarter, global equities declined, continuing the downward trend from the first half of 2022. The quarter began with a rally that continued into mid-August, on hopes that the Fed would pivot toward a more accommodative policy. However, messaging from Fed Chairman, Jerome Powell, and a stronger-than-expected inflation report in early September dampened investor optimism over the central bank's trajectory and the odds of avoiding recession. The Fed went on to hike rates aggressively by 75 basis points ("bps") twice during the quarter, bringing the benchmark Fed funds rate target to a range of 3.0% to 3.25%, as compared to 0% to 0.25% at the beginning of the year. (A basis point is 1/100th of a percentage point.) For its part, the European Central Bank raised its reference rate by 50 bps in July, followed by another 75 bps in September. Other factors that weighed on sentiment during the quarter included the ongoing Russia-Ukraine war, an energy crisis in Europe, and the resumption of COVID-19 lockdowns in China.
Global equities rebounded in the fourth quarter trimming full year losses. Gains in October and November were sparked by signs of peaking inflation alongside less hawkish commentary from Fed Chairman Powell raising hope that the central bank would end its interest rate hiking cycle sometime in early 2023. Indeed, both the Fed and the European Central Bank raised their benchmark overnight lending rates by a more modest 50 bps in mid-December. Also supporting sentiment, the Chinese government began to ease their zero-COVID-19 policy that had weighed on global economic growth for much of 2022. However, stocks retreated into year-end as investors shifted their focus to the potential impact higher rates might have on economic growth and corporate earnings in the coming year.
As the reporting period crossed into 2023, global equities started off the year logging positive returns in the month of January. Bonds also rallied at the start of the year on hopes that the Fed's hawkish pivot would come to an end in 2023. As the calendar moved to February, stronger than expected employment and inflation reports caused investors to reevaluate interest rate expectations for 2023 and consider that rates could stay higher for longer. The result was a reversal in global equities and bonds which ended the month lower.
4
USAA Global Equity Income Fund
Manager's Commentary (continued)
• How did the USAA Global Equity Income Fund (the "Fund") perform during the reporting period?
The Fund's fiscal year-end changed this year to February 28 from March 31, resulting in a shorter reporting period for fiscal year ended 2023. For the 11-month reporting period ended February 28, 2023, the Fund had a total return (at net asset value) of -6.86%. This compares to returns of -5.55% for the MSCI World High Dividend Yield Index, and -4.49% for the Lipper Global Equity Income Funds Index.
• What strategies did you employ during the reporting period?
The Fund focuses on income-oriented global equities and normally will have roughly equal weights in U.S. and international stocks, although this will vary to some degree depending on where we see the better value. In selecting stocks, we emphasize not only the current dividend but also a company's likely ability to grow its dividend. As a result, the average current dividend of companies held by the fund generally will be somewhat lower than the benchmark. However, our view is that a focus on dividend growers should provide an improved total return profile as we invest within the global dividend stock universe.
For the period ended February 28, 2023, stock selection drove relative performance while sector allocation detracted. A 10% overweight to information technology contributed to the lion share of relative underperformance. The underperformance was offset by an overweight to energy as well as strong stock selection within health care and financials.
From a country perspective, strong overall stock selection in Japan and Netherlands positively contributed to relative performance against the benchmark. An overweight to Switzerland relative to the benchmark added to performance, while an underweight to Sweden and an overweight to Netherlands detracted from performance relative to the benchmark.
On a long-term basis, we believe that focusing on quality companies with attractive valuations and dividend income is a sound strategy from a total return perspective.
Thank you for allowing us to assist you with your investment needs.
5
USAA Global Equity Income Fund
Investment Overview
(Unaudited)
Average Annual Total Return
Year Ended February 28, 2023
Fund Shares | |||||||||||||||
INCEPTION DATE | 8/7/15 | ||||||||||||||
Net Asset Value | MSCI World High | Lipper Global | |||||||||||||
One Year | –4.82 | % | –3.38 | % | –3.81 | % | |||||||||
Five Year | 5.88 | % | 4.83 | % | 4.59 | % | |||||||||
Since Inception | 6.02 | % | 6.02 | % | 5.53 | % | |||||||||
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 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 Global Equity Income Fund — Growth of $10,000
*Inception Date for the Global Equity Income Fund is 8/7/15.
1The unmanaged MSCI World High Dividend Yield 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 unmanaged Lipper Global Equity Income Funds Index measures the Fund's performance to that of the Lipper Global Equity Income Funds 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 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 Global Equity Income Fund | February 28, 2023 | ||||||
(Unaudited)
Investment Objective and Portfolio Holdings:
The Fund seeks total return with an emphasis on current income.
Sector Allocation*:
February 28, 2023
(% 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 Global Equity Income Fund | Schedule of Portfolio Investments February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Common Stocks (99.5%) | |||||||||||
Australia (0.3%): | |||||||||||
Consumer Staples (0.3%): | |||||||||||
Coles Group Ltd. | 13,421 | $ | 164 | ||||||||
Austria (0.5%): | |||||||||||
Energy (0.3%): | |||||||||||
OMV AG | 3,562 | 173 | |||||||||
Utilities (0.2%): | |||||||||||
Verbund AG | 1,433 | 124 | |||||||||
297 | |||||||||||
Belgium (0.1%): | |||||||||||
Communication Services (0.1%): | |||||||||||
Telenet Group Holding NV | 4,803 | 74 | |||||||||
Canada (5.8%): | |||||||||||
Consumer Discretionary (0.4%): | |||||||||||
Dollarama, Inc. | 3,899 | 225 | |||||||||
Consumer Staples (0.1%): | |||||||||||
Metro, Inc. | 1,399 | 73 | |||||||||
Energy (0.7%): | |||||||||||
Canadian Natural Resources Ltd. (a) | 5,789 | 327 | |||||||||
Tourmaline Oil Corp. | 1,811 | 80 | |||||||||
407 | |||||||||||
Financials (3.9%): | |||||||||||
Bank of Montreal | 5,065 | 480 | |||||||||
Great-West Lifeco, Inc. | 12,484 | 341 | |||||||||
IGM Financial, Inc. | 10,340 | 315 | |||||||||
Manulife Financial Corp. | 13,254 | 262 | |||||||||
Royal Bank of Canada | 771 | 78 | |||||||||
Sun Life Financial, Inc. | 6,426 | 310 | |||||||||
The Toronto-Dominion Bank | 5,611 | 374 | |||||||||
2,160 | |||||||||||
Materials (0.4%): | |||||||||||
West Fraser Timber Co. Ltd. | 3,194 | 240 | |||||||||
Utilities (0.3%): | |||||||||||
Canadian Utilities Ltd. Class A (a) | 6,500 | 170 | |||||||||
3,275 | |||||||||||
Denmark (1.6%): | |||||||||||
Consumer Staples (0.3%): | |||||||||||
Carlsberg AS Class B | 1,028 | 145 | |||||||||
Health Care (1.1%): | |||||||||||
Coloplast A/S Class B | 1,119 | 129 | |||||||||
Novo Nordisk A/S Class B | 3,439 | 486 | |||||||||
615 | |||||||||||
See notes to financial statements.
8
| USAA Mutual Funds Trust USAA Global Equity Income Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Materials (0.2%): | |||||||||||
Novozymes A/S B Shares | 2,896 | $ | 140 | ||||||||
900 | |||||||||||
Finland (0.1%): | |||||||||||
Communication Services (0.1%): | |||||||||||
Elisa Oyj | 1,132 | 64 | |||||||||
France (1.7%): | |||||||||||
Consumer Discretionary (0.4%): | |||||||||||
Hermes International | 123 | 222 | |||||||||
Consumer Staples (0.4%): | |||||||||||
L'Oreal SA | 604 | 239 | |||||||||
Health Care (0.4%): | |||||||||||
Sanofi | 2,432 | 227 | |||||||||
Industrials (0.5%): | |||||||||||
Bouygues SA | 8,738 | 296 | |||||||||
984 | |||||||||||
Germany (2.3%): | |||||||||||
Consumer Discretionary (0.2%): | |||||||||||
Volkswagen AG Preference Shares | 947 | 129 | |||||||||
Financials (1.0%): | |||||||||||
Allianz SE Registered Shares | 2,330 | 547 | |||||||||
Industrials (0.3%): | |||||||||||
Deutsche Post AG Registered Shares | 4,390 | 185 | |||||||||
Utilities (0.8%): | |||||||||||
E.ON SE | 22,291 | 243 | |||||||||
RWE AG | 5,078 | 216 | |||||||||
459 | |||||||||||
1,320 | |||||||||||
Hong Kong (0.3%): | |||||||||||
Utilities (0.3%): | |||||||||||
Power Assets Holdings Ltd. | 26,500 | 142 | |||||||||
Ireland (0.2%): | |||||||||||
Health Care (0.2%): | |||||||||||
Medtronic PLC | 1,251 | 104 | |||||||||
Italy (0.5%): | |||||||||||
Utilities (0.5%): | |||||||||||
Snam SpA | 28,565 | 140 | |||||||||
Terna — Rete Elettrica Nazionale | 19,120 | 144 | |||||||||
284 | |||||||||||
Japan (8.5%): | |||||||||||
Communication Services (1.3%): | |||||||||||
KDDI Corp. | 11,200 | 328 | |||||||||
See notes to financial statements.
9
| USAA Mutual Funds Trust USAA Global Equity Income Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Nippon Telegraph & Telephone Corp. | 14,000 | $ | 406 | ||||||||
734 | |||||||||||
Consumer Discretionary (0.6%): | |||||||||||
Iida Group Holdings Co. Ltd. | 10,900 | 181 | |||||||||
ZOZO, Inc. | 6,800 | 151 | |||||||||
332 | |||||||||||
Consumer Staples (0.2%): | |||||||||||
Seven & i Holdings Co. Ltd. | 3,400 | 152 | |||||||||
Financials (2.3%): | |||||||||||
Japan Post Holdings Co. Ltd. | 24,600 | 219 | |||||||||
ORIX Corp. | 9,100 | 163 | |||||||||
Resona Holdings, Inc. | 29,800 | 164 | |||||||||
Sumitomo Mitsui Financial Group, Inc. | 10,000 | 437 | |||||||||
Tokio Marine Holdings, Inc. | 14,200 | 301 | |||||||||
1,284 | |||||||||||
Health Care (0.2%): | |||||||||||
Hoya Corp. | 1,100 | 109 | |||||||||
Industrials (2.1%): | |||||||||||
ITOCHU Corp. (a) | 8,200 | 245 | |||||||||
Kajima Corp. | 13,900 | 166 | |||||||||
Mitsubishi Corp. | 7,200 | 245 | |||||||||
Mitsui & Co. Ltd. | 6,700 | 188 | |||||||||
Mitsui Osk Lines Ltd. (a) | 12,900 | 337 | |||||||||
1,181 | |||||||||||
Information Technology (1.3%): | |||||||||||
FUJIFILM Holdings Corp. | 2,200 | 103 | |||||||||
Fujitsu Ltd. | 1,100 | 141 | |||||||||
Nomura Research Institute Ltd. | 9,300 | 208 | |||||||||
Oracle Corp. | 2,100 | 143 | |||||||||
Seiko Epson Corp. | 10,800 | 149 | |||||||||
744 | |||||||||||
Materials (0.5%): | |||||||||||
Nissan Chemical Corp. | 1,300 | 57 | |||||||||
Sumitomo Metal Mining Co. Ltd. | 5,700 | 212 | |||||||||
269 | |||||||||||
4,805 | |||||||||||
Netherlands (2.7%): | |||||||||||
Communication Services (0.3%): | |||||||||||
Koninklijke KPN NV | 56,389 | 193 | |||||||||
Consumer Staples (0.5%): | |||||||||||
Koninklijke Ahold Delhaize NV | 9,229 | 293 | |||||||||
Industrials (0.6%): | |||||||||||
Wolters Kluwer NV | 3,057 | 354 | |||||||||
See notes to financial statements.
10
| USAA Mutual Funds Trust USAA Global Equity Income Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Information Technology (0.4%): | |||||||||||
| ASML Holding NV | 338 | $ | 208 | ||||||||
Materials (0.9%): | |||||||||||
LyondellBasell Industries NV Class A | 4,968 | 477 | |||||||||
1,525 | |||||||||||
Norway (0.7%): | |||||||||||
Materials (0.7%): | |||||||||||
Yara International ASA | 8,152 | 388 | |||||||||
Singapore (0.3%): | |||||||||||
Financials (0.3%): | |||||||||||
Singapore Exchange Ltd. | 26,400 | 171 | |||||||||
Spain (0.2%): | |||||||||||
Utilities (0.2%): | |||||||||||
Enagas SA | 6,585 | 118 | |||||||||
Switzerland (5.2%): | |||||||||||
Communication Services (0.3%): | |||||||||||
Swisscom AG Registered Shares | 281 | 173 | |||||||||
Consumer Discretionary (0.3%): | |||||||||||
Garmin Ltd. | 1,881 | 185 | |||||||||
Consumer Staples (0.8%): | |||||||||||
Nestle SA Registered Shares | 4,121 | 464 | |||||||||
Financials (1.1%): | |||||||||||
Partners Group Holding AG | 207 | 196 | |||||||||
Zurich Insurance Group AG | 843 | 400 | |||||||||
596 | |||||||||||
Health Care (1.8%): | |||||||||||
Novartis AG Registered Shares | 8,016 | 675 | |||||||||
Roche Holding AG | 1,109 | 320 | |||||||||
995 | |||||||||||
Industrials (0.6%): | |||||||||||
Geberit AG Registered Shares | 391 | 211 | |||||||||
SGS SA Registered Shares | 58 | 133 | |||||||||
344 | |||||||||||
Materials (0.3%): | |||||||||||
Holcim AG | 2,542 | 157 | |||||||||
2,914 | |||||||||||
United Kingdom (1.4%): | |||||||||||
Consumer Staples (0.5%): | |||||||||||
British American Tobacco PLC | 6,605 | 250 | |||||||||
Health Care (0.2%): | |||||||||||
GSK PLC | 7,672 | 131 | |||||||||
See notes to financial statements.
11
| USAA Mutual Funds Trust USAA Global Equity Income Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Industrials (0.5%): | |||||||||||
RELX PLC | 8,774 | $ | 265 | ||||||||
Information Technology (0.2%): | |||||||||||
The Sage Group PLC | 13,234 | 119 | |||||||||
765 | |||||||||||
United States (67.1%): | |||||||||||
Communication Services (2.7%): | |||||||||||
AT&T, Inc. | 17,682 | 334 | |||||||||
Omnicom Group, Inc. | 2,898 | 263 | |||||||||
Sirius XM Holdings, Inc. (a) | 52,800 | 232 | |||||||||
The Interpublic Group of Cos., Inc. | 6,559 | 233 | |||||||||
Verizon Communications, Inc. | 12,118 | 470 | |||||||||
1,532 | |||||||||||
Consumer Discretionary (6.3%): | |||||||||||
Best Buy Co., Inc. | 6,512 | 541 | |||||||||
Genuine Parts Co. | 3,134 | 554 | |||||||||
Lowe's Cos., Inc. | 2,334 | 480 | |||||||||
McDonald's Corp. | 1,375 | 363 | |||||||||
Starbucks Corp. | 1,909 | 195 | |||||||||
Target Corp. | 2,559 | 431 | |||||||||
The Home Depot, Inc. | 2,478 | 735 | |||||||||
Tractor Supply Co. | 607 | 142 | |||||||||
Whirlpool Corp. | 913 | 126 | |||||||||
3,567 | |||||||||||
Consumer Staples (5.9%): | |||||||||||
Campbell Soup Co. | 4,710 | 247 | |||||||||
Colgate-Palmolive Co. | 3,883 | 285 | |||||||||
Conagra Brands, Inc. | 4,889 | 178 | |||||||||
General Mills, Inc. | 5,218 | 415 | |||||||||
Kellogg Co. | 2,072 | 137 | |||||||||
Kimberly-Clark Corp. | 745 | 93 | |||||||||
Philip Morris International, Inc. | 5,392 | 525 | |||||||||
The Coca-Cola Co. | 4,366 | 260 | |||||||||
The Hershey Co. | 921 | 219 | |||||||||
The Kroger Co. | 4,347 | 188 | |||||||||
The Procter & Gamble Co. | 3,817 | 525 | |||||||||
Tyson Foods, Inc. Class A | 3,145 | 186 | |||||||||
Walgreens Boots Alliance, Inc. | 2,368 | 84 | |||||||||
3,342 | |||||||||||
Energy (4.9%): | |||||||||||
ConocoPhillips | 3,019 | 312 | |||||||||
Coterra Energy, Inc. | 9,749 | 244 | |||||||||
Devon Energy Corp. | 7,268 | 392 | |||||||||
EOG Resources, Inc. | 3,250 | 367 | |||||||||
Exxon Mobil Corp. | 6,545 | 719 | |||||||||
Marathon Petroleum Corp. | 2,539 | 314 | |||||||||
See notes to financial statements.
12
| USAA Mutual Funds Trust USAA Global Equity Income Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Valero Energy Corp. | 2,855 | $ | 376 | ||||||||
2,724 | |||||||||||
Financials (8.2%): | |||||||||||
Aflac, Inc. | 3,700 | 252 | |||||||||
Ameriprise Financial, Inc. | 1,027 | 352 | |||||||||
Aon PLC Class A | 528 | 161 | |||||||||
Erie Indemnity Co. Class A | 1,217 | 286 | |||||||||
Fifth Third Bancorp | 3,438 | 125 | |||||||||
Huntington Bancshares, Inc. | 8,192 | 125 | |||||||||
JPMorgan Chase & Co. | 5,886 | 844 | |||||||||
M&T Bank Corp. | 1,009 | 157 | |||||||||
MetLife, Inc. | 4,221 | 303 | |||||||||
Morgan Stanley | 3,816 | 368 | |||||||||
MSCI, Inc. | 554 | 289 | |||||||||
Regions Financial Corp. | 21,174 | 494 | |||||||||
T. Rowe Price Group, Inc. | 1,677 | 188 | |||||||||
The Allstate Corp. | 2,096 | 270 | |||||||||
The Goldman Sachs Group, Inc. | 866 | 305 | |||||||||
The PNC Financial Services Group, Inc. | 579 | 91 | |||||||||
4,610 | |||||||||||
Health Care (9.3%): | |||||||||||
Abbott Laboratories | 1,054 | 107 | |||||||||
AbbVie, Inc. | 2,831 | 436 | |||||||||
AmerisourceBergen Corp. | 550 | 86 | |||||||||
Amgen, Inc. | 1,014 | 235 | |||||||||
Bristol-Myers Squibb Co. | 3,256 | 225 | |||||||||
Cardinal Health, Inc. | 6,211 | 470 | |||||||||
Cigna Corp. | 918 | 268 | |||||||||
CVS Health Corp. | 2,028 | 169 | |||||||||
Danaher Corp. | 534 | 132 | |||||||||
Elevance Health, Inc. | 784 | 368 | |||||||||
Eli Lilly & Co. | 1,775 | 552 | |||||||||
Johnson & Johnson | 4,762 | 730 | |||||||||
Pfizer, Inc. | 7,704 | 313 | |||||||||
Quest Diagnostics, Inc. | 1,116 | 154 | |||||||||
Stryker Corp. | 460 | 121 | |||||||||
Thermo Fisher Scientific, Inc. | 258 | 140 | |||||||||
UnitedHealth Group, Inc. | 1,573 | 749 | |||||||||
5,255 | |||||||||||
Industrials (7.5%): | |||||||||||
3M Co. | 3,247 | 350 | |||||||||
C.H. Robinson Worldwide, Inc. | 1,412 | 141 | |||||||||
Cummins, Inc. | 1,636 | 398 | |||||||||
Fastenal Co. | 5,169 | 267 | |||||||||
Honeywell International, Inc. | 956 | 183 | |||||||||
Illinois Tool Works, Inc. | 1,208 | 282 | |||||||||
Lockheed Martin Corp. | 1,620 | 768 | |||||||||
PACCAR, Inc. | 4,305 | 311 | |||||||||
See notes to financial statements.
13
| USAA Mutual Funds Trust USAA Global Equity Income Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Republic Services, Inc. | 668 | $ | 86 | ||||||||
Rockwell Automation, Inc. | 522 | 154 | |||||||||
Snap-on, Inc. | 700 | 174 | |||||||||
Union Pacific Corp. | 547 | 113 | |||||||||
United Parcel Service, Inc. Class B | 2,937 | 536 | |||||||||
W.W. Grainger, Inc. | 566 | 378 | |||||||||
Waste Management, Inc. | 482 | 72 | |||||||||
4,213 | |||||||||||
Information Technology (16.4%): | |||||||||||
Apple, Inc. | 13,006 | 1,917 | |||||||||
Automatic Data Processing, Inc. | 638 | 140 | |||||||||
Broadcom, Inc. | 1,010 | 600 | |||||||||
Cisco Systems, Inc. | 15,213 | 737 | |||||||||
Hewlett Packard Enterprise Co. | 18,838 | 294 | |||||||||
HP, Inc. | 19,588 | 578 | |||||||||
Intel Corp. | 4,699 | 117 | |||||||||
Juniper Networks, Inc. | 4,700 | 145 | |||||||||
Mastercard, Inc. Class A | 1,954 | 694 | |||||||||
Microsoft Corp. | 6,384 | 1,592 | |||||||||
Motorola Solutions, Inc. | 534 | 141 | |||||||||
NetApp, Inc. | 3,825 | 247 | |||||||||
Oracle Corp. | 2,079 | 182 | |||||||||
Paychex, Inc. | 3,287 | 363 | |||||||||
QUALCOMM, Inc. | 1,417 | 175 | |||||||||
Texas Instruments, Inc. | 4,024 | 690 | |||||||||
The Western Union Co. | 36,359 | 471 | |||||||||
Visa, Inc. Class A | 758 | 167 | |||||||||
9,250 | |||||||||||
Materials (2.5%): | |||||||||||
Air Products and Chemicals, Inc. | 307 | 88 | |||||||||
CF Industries Holdings, Inc. | 5,454 | 468 | |||||||||
Nucor Corp. | 2,201 | 369 | |||||||||
Packaging Corp. of America | 1,672 | 229 | |||||||||
RPM International, Inc. | 1,083 | 96 | |||||||||
The Sherwin-Williams Co. | 747 | 165 | |||||||||
1,415 | |||||||||||
Utilities (3.4%): | |||||||||||
American Electric Power Co., Inc. | 3,126 | 275 | |||||||||
Duke Energy Corp. | 4,672 | 440 | |||||||||
OGE Energy Corp. | 6,617 | 236 | |||||||||
Sempra Energy | 885 | 133 | |||||||||
The Southern Co. | 6,817 | 430 | |||||||||
UGI Corp. | 10,472 | 390 | |||||||||
1,904 | |||||||||||
37,812 | |||||||||||
Total Common Stocks (Cost $46,953) | 56,106 | ||||||||||
See notes to financial statements.
14
| USAA Mutual Funds Trust USAA Global Equity Income Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Collateral for Securities Loaned (0.4%)^ | |||||||||||
United States (0.4%): | |||||||||||
| Goldman Sachs Financial Square Government Fund, Institutional Shares, 4.47% (b) | 61,563 | $ | 61 | ||||||||
HSBC U.S. Government Money Market Fund, Institutional Shares, 4.45% (b) | 61,563 | 61 | |||||||||
Invesco Government & Agency Portfolio, Institutional Shares, 4.52% (b) | 61,563 | 62 | |||||||||
| Morgan Stanley Institutional Liquidity Government Portfolio, Institutional Class 4.41% (b) | 61,563 | 62 | |||||||||
Total Collateral for Securities Loaned (Cost $246) | 246 | ||||||||||
Total Investments (Cost $47,199) — 99.9% | 56,352 | ||||||||||
Other assets in excess of liabilities — 0.1% | 39 | ||||||||||
NET ASSETS — 100.00% | $ | 56,391 | |||||||||
^ 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 February 28, 2023.
PLC — Public Limited Company
See notes to financial statements.
15
USAA Mutual Funds Trust | Statement of Assets and Liabilities February 28, 2023 | ||||||
(Amounts in Thousands, Except Per Share Amounts)
| USAA Global Equity Income Fund | |||||||
Assets: | |||||||
Investments, at value (Cost $47,199) | $ | 56,352 | (a) | ||||
Foreign currency, at value (Cost $5) | 5 | ||||||
Cash | 115 | ||||||
Receivables: | |||||||
Interest and dividends | 99 | ||||||
Capital shares issued | 16 | ||||||
Reclaims | 135 | ||||||
From Adviser | 16 | ||||||
Prepaid expenses | 2 | ||||||
Total Assets | 56,740 | ||||||
Liabilities: | |||||||
Payables: | |||||||
Collateral received on loaned securities | 246 | ||||||
Capital shares redeemed | 2 | ||||||
Accrued expenses and other payables: | |||||||
Investment advisory fees | 23 | ||||||
Administration fees | 6 | ||||||
Custodian fees | 2 | ||||||
Transfer agent fees | 7 | ||||||
Compliance fees | — | (b) | |||||
Trustees' fees | 2 | ||||||
Other accrued expenses | 61 | ||||||
Total Liabilities | 349 | ||||||
Net Assets: | |||||||
Capital | 46,933 | ||||||
Total accumulated earnings/(loss) | 9,458 | ||||||
Net Assets | $ | 56,391 | |||||
Net Assets | |||||||
Fund Shares | $ | 56,391 | |||||
Total | $ | 56,391 | |||||
Shares (unlimited number of shares authorized with no par value): | |||||||
Fund Shares | 5,323 | ||||||
Total | 5,323 | ||||||
Net asset value, offering and redemption price per share: (c) | |||||||
Fund Shares | $ | 10.59 | |||||
(a) Includes $1,198 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 | Statements of Operations | ||||||
(Amounts in Thousands)
| USAA Global Equity Income Fund | |||||||||||
| 11 Months Ended February 28, 2023(a) | Year Ended March 31, 2022 | ||||||||||
Investment Income: | |||||||||||
Dividends | $ | 1,569 | $ | 1,836 | |||||||
Interest | 1 | — | |||||||||
Securities lending (net of fees) | 20 | 3 | |||||||||
Foreign tax withholding | (71 | ) | (87 | ) | |||||||
Total Income | 1,519 | 1,752 | |||||||||
Expenses: | |||||||||||
Investment advisory fees | 288 | 357 | |||||||||
Administration fees — Fund Shares | 79 | 97 | |||||||||
Administration fees — Institutional Shares | — | (b)(c) | — | (b) | |||||||
Sub-Administration fees | 21 | 23 | |||||||||
Custodian fees | 11 | 23 | |||||||||
Transfer agent fees — Fund Shares | 80 | 91 | |||||||||
Transfer agent fees — Institutional Shares | — | (b)(c) | — | (b) | |||||||
Trustees' fees | 48 | 48 | |||||||||
Compliance fees | — | (b) | — | (b) | |||||||
Legal and audit fees | 78 | 52 | |||||||||
State registration and filing fees | 36 | 25 | |||||||||
Interfund lending fees | — | — | (b) | ||||||||
Interest fees | — | 1 | |||||||||
Other expenses | 39 | 50 | |||||||||
Total Expenses | 680 | 767 | |||||||||
Expenses waived/reimbursed by Adviser | (129 | ) | (81 | ) | |||||||
Net Expenses | 551 | 686 | |||||||||
Net Investment Income (Loss) | 968 | 1,066 | |||||||||
Realized/Unrealized Gains (Losses) from Investments: | |||||||||||
| Net realized gains (losses) from investment securities and foreign currency transactions | 511 | 9,064 | |||||||||
| Net change in unrealized appreciation/depreciation on investment securities and foreign currency translations | (5,908 | ) | (2,170 | ) | |||||||
Net realized/unrealized gains (losses) on investments | (5,397 | ) | 6,894 | ||||||||
Change in net assets resulting from operations | $ | (4,429 | ) | $ | 7,960 | ||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from March 31 to February 28.
(b) Rounds to less than $1 thousand.
(c) Institutional Shares activity is for the period April 1, 2022 to November 29, 2022 (date of termination).
See notes to financial statements.
17
USAA Mutual Funds Trust | Statements of Changes in Net Assets | ||||||
(Amounts in Thousands)
USAA Global Equity Income Fund | |||||||||||||||
| 11 Months Ended February 28, 2023(a) | Year Ended March 31, 2022 | Year Ended March 31, 2021 | |||||||||||||
From Investments: | |||||||||||||||
Operations: | |||||||||||||||
Net Investment Income (Loss) | $ | 968 | $ | 1,066 | $ | 1,215 | |||||||||
Net realized gains (losses) | 511 | 9,064 | (359 | ) | |||||||||||
| Net change in unrealized appreciation/depreciation | (5,908 | ) | (2,170 | ) | 25,890 | ||||||||||
| Change in net assets resulting from operations | (4,429 | ) | 7,960 | 26,746 | |||||||||||
Distributions to Shareholders: | |||||||||||||||
Fund Shares | (4,646 | ) | (5,752 | ) | (1,102 | ) | |||||||||
Institutional Shares | (1 | )(b) | (2 | ) | (89 | ) | |||||||||
| Change in net assets resulting from distributions to shareholders | (4,647 | ) | (5,754 | ) | (1,191 | ) | |||||||||
| Change in net assets resulting from capital transactions | 1,037 | (13,488 | ) | (14,549 | ) | ||||||||||
Change in net assets | (8,039 | ) | (11,282 | ) | 11,006 | ||||||||||
Net Assets: | |||||||||||||||
Beginning of period | 64,430 | 75,712 | 64,706 | ||||||||||||
End of period | $ | 56,391 | $ | 64,430 | $ | 75,712 | |||||||||
Capital Transactions: | |||||||||||||||
Fund Shares | |||||||||||||||
Proceeds from shares issued | $ | 3,496 | $ | 5,342 | $ | 5,174 | |||||||||
Distributions reinvested | 4,613 | 5,728 | 921 | ||||||||||||
Cost of shares redeemed | (7,021 | ) | (18,352 | ) | (20,644 | ) | |||||||||
Total Fund Shares | $ | 1,088 | $ | (7,282 | ) | $ | (14,549 | ) | |||||||
Institutional Shares | |||||||||||||||
Proceeds from shares issued | $ | 20 | (b) | $ | 60 | $ | — | ||||||||
Distributions reinvested | 1 | (b) | 2 | — | |||||||||||
Cost of shares redeemed | (72 | )(b) | (6,268 | ) | — | ||||||||||
Total Institutional Shares | $ | (51 | ) | $ | (6,206 | ) | $ | — | |||||||
| Change in net assets resulting from capital transactions | $ | 1,037 | $ | (13,488 | ) | $ | (14,549 | ) | |||||||
Share Transactions: | |||||||||||||||
Fund Shares | |||||||||||||||
Issued | 314 | 422 | 499 | ||||||||||||
Reinvested | 428 | 455 | 90 | ||||||||||||
Redeemed | (631 | ) | (1,457 | ) | (1,981 | ) | |||||||||
Total Fund Shares | 111 | (580 | ) | (1,392 | ) | ||||||||||
Institutional Shares | |||||||||||||||
Issued | 2 | (b) | 5 | — | |||||||||||
Reinvested | — | (b)(c) | — | (c) | — | ||||||||||
Redeemed | (7 | )(b) | (500 | ) | — | ||||||||||
Total Institutional Shares | (5 | ) | (495 | ) | — | ||||||||||
Change in Shares | 106 | (1,075 | ) | (1,392 | ) | ||||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from March 31 to February 28.
(b) Institutional Shares activity is for the period April 1, 2022 to November 29, 2022 (date of termination).
(c) Rounds to less than 1 thousand shares.
See notes to financial statements.
18
USAA Mutual Funds Trust | Financial Highlights | ||||||
For a Share Outstanding Throughout Each Period
USAA Global Equity Income Fund | |||||||||||||||||||||||||||
Fund Shares | |||||||||||||||||||||||||||
| 11 Months Ended February 28, 2023(a) | Year Ended March 31, 2022 | Year Ended March 31, 2021 | Year Ended March 31, 2020 | Year Ended March 31, 2019 | Year Ended March 31, 2018 | ||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 12.35 | $ | 12.03 | $ | 8.42 | $ | 10.51 | $ | 10.88 | $ | 10.42 | |||||||||||||||
Investment Activities: | |||||||||||||||||||||||||||
Net investment income (loss) | 0.19 | (b) | 0.21 | (b) | 0.17 | (b) | 0.24 | (b) | 0.27 | 0.23 | |||||||||||||||||
| Net realized and unrealized gains (losses) | (1.04 | ) | 1.27 | 3.61 | (1.57 | ) | 0.06 | 0.54 | |||||||||||||||||||
| Total from Investment Activities | (0.85 | ) | 1.48 | 3.78 | (1.33 | ) | 0.33 | 0.77 | |||||||||||||||||||
Distributions to Shareholders from: | |||||||||||||||||||||||||||
Net investment income | (0.19 | ) | (0.23 | ) | (0.17 | ) | (0.22 | ) | (0.27 | ) | (0.23 | ) | |||||||||||||||
Net realized gains | (0.72 | ) | (0.93 | ) | — | (0.54 | ) | (0.43 | ) | (0.08 | ) | ||||||||||||||||
Total Distributions | (0.91 | ) | (1.16 | ) | (0.17 | ) | (0.76 | ) | (0.70 | ) | (0.31 | ) | |||||||||||||||
Net Asset Value, End of Period | $ | 10.59 | $ | 12.35 | $ | 12.03 | $ | 8.42 | $ | 10.51 | $ | 10.88 | |||||||||||||||
Total Return (c) (d) | (6.86 | )% | 12.28 | % | 45.23 | % | (14.02 | )% | 3.43 | % | 7.41 | % | |||||||||||||||
Ratios to Average Net Assets: | |||||||||||||||||||||||||||
Net Expenses (e) (f) (g) (h) | 1.05 | % | 1.04 | % | 1.03 | % | 1.00 | % | 1.03 | %(i) | 1.05 | % | |||||||||||||||
Net Investment Income (Loss) (e) | 1.84 | % | 1.63 | % | 1.65 | % | 2.30 | % | 2.56 | % | 2.17 | % | |||||||||||||||
Gross Expenses (e) (f) | 1.26 | % | 1.15 | % | 1.18 | % | 1.14 | % | 1.10 | % | 1.05 | % | |||||||||||||||
Supplemental Data: | |||||||||||||||||||||||||||
Net Assets at end of period (000's) | $ | 56,391 | $ | 64,374 | $ | 69,690 | $ | 60,491 | $ | 75,086 | $ | 96,101 | |||||||||||||||
Portfolio Turnover (c) | 28 | % | 31 | % | 46 | %(j) | 109 | %(k) | 15 | % | 22 | % | |||||||||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from March 31 to February 28.
(b) Per share net investment income (loss) has been calculated using the average daily shares method.
(c) Not annualized for periods less than one year.
(d) 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.
(e) Annualized for periods less than one year.
(f) Does not include acquired fund fees and expenses, if any.
(g) 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 July 31, 2023, instead of coinciding with the Fund's fiscal year end.
(h) 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.
(i) Prior to August 1, 2018, USAA Asset Management Company (previous investment Adviser) voluntarily agreed to limit the annual expenses of the Fund Shares to 1.20% of the Fund Shares' average daily net assets.
(j) Reflects a return to normal trading levels after a prior year transition or asset allocation shift.
(k) Reflects increased trading activity due to transition or asset allocation shift.
See notes to financial statements.
19
USAA Mutual Funds Trust | Notes to Financial Statements February 28, 2023 | ||||||
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 Global Equity Income Fund (the "Fund"). The Fund offers one class of shares: Fund Shares. Effective November 29, 2022, the Institutional Shares were liquidated. 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 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.
On June 29, 2022, the Board of Trustees (the "Board") approved the fiscal year-end change for the Fund from March 31 to February 28. The first full cycle of the new fiscal year-end reporting will begin March 1, 2023. As a result of the change, the Fund has a February 28, 2023 fiscal 11-month transition period, the results of which are reported in this Annual Report for the period ended February 28, 2023.
Victory Capital Management ("VCM" or 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 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 (unadjusted) in active markets for identical securities
• Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, or credit spreads, applicable to those securities, etc.)
• Level 3 — significant unobservable inputs (including the Adviser's assumptions in determining the fair value of investments)
20
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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, appointed as the valuation designee by the Board, has established the Pricing and Liquidity Committee (the "Committee"), and subject to Board oversight, the Committee administers and oversees the Fund's valuation policies and procedures, which are approved by the Board.
Portfolio securities listed or traded on securities exchanges, including Exchange-Traded Funds ("ETFs"), and American Depositary Receipts, 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 February 28, 2023, 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 | $ | 41,851 | $ | 14,255 | $ | — | $ | 56,106 | |||||||||||
Collateral for Securities Loaned | 246 | — | — | 246 | |||||||||||||||
Total | $ | 42,097 | $ | 14,255 | $ | — | $ | 56,352 | |||||||||||
As of February 28, 2023, there were no transfers into/out of Level 3.
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:
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.
21
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
Derivative Instruments:
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 February 28, 2023, 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 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 Statements 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
22
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 February 28, 2023.
| Value of Securities on Loan | Non-Cash Collateral | Cash Collateral | |||||||||
| $ | 1,198 | $ | 1,330 | $ | 246 | ||||||
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 Statements 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 Statements 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 had a tax year end of March 31, and effective February 28, 2023, the Fund changed its tax year end to February 28.
For the 11 months ended February 28, 2023, 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, and printing 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.
23
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
3. Purchases and Sales:
Purchases and sales of securities (excluding securities maturing less than one year from acquisition) for the 11 months ended February 28, 2023, were as follows for the Fund (amounts in thousands):
Excluding | |||||||
Purchases | Sales | ||||||
$ | 15,992 | $ | 18,222 | ||||
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.
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 0.50% of the Fund's average daily net assets. Amounts incurred and paid to VCM for the 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements of Operations as Investment advisory fees.
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 Equity Income Funds Index. The Lipper Global Equity Income Funds Index tracks the total return performance of the largest funds within the Lipper Global Equity Income Funds category.
The performance period for each share class consists of the current month plus the previous 35 months. The following table is utilized to determine the extent of the performance adjustment:
| Over/Under Performance Relative to Index (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 Equity Income Funds Index over that period, even if the class has overall negative returns during the performance period.
For the period April 1, 2022, to February 28, 2023, performance adjustments were $24 thousand for Fund Shares. Performance adjustments were 0.05% for Fund Shares. For the period April 1, 2022, to November 29, 2022, performance adjustments were less than $1 thousand for Institutional Shares. Performance adjustments were 0.04% for Institutional Shares. For the period April 1, 2021, to March 31, 2022, performance adjustments were $28 and $1 for Fund Shares and Institutional Shares, in thousands, respectively. Performance adjustments were 0.04% and 0.22% for Fund Shares and Institutional Shares, 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.
24
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 11 months ended February 28, 2023, and the year ended March 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% and 0.10%, which is based on the Fund's average daily net assets of the Fund Shares and Institutional Shares, respectively. Amounts incurred for the 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements 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 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements 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 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements 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 the Institutional Shares 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. Amounts incurred and paid to VCTA for the 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements 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.
25
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
Other Fees:
Citibank serves as the Fund's custodian. The Fund pays Citibank a fee for providing these services. Amounts incurred for the 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements 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 July 31, 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 limit for 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 limit. As of February 28, 2023, the expense limit (excluding voluntary waivers) was 1.00%.
Under the terms of the expense limitation agreement, 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 limit in effect at the time of: (a) the original waiver or expense reimbursement; or (b) the recoupment, after giving effect to the recoupment amount.
As of February 28, 2023, 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 February 28, 2023.
| Expires 2023* | Expires 2024 | Expires 2025 | Expires 2026 | Total | |||||||||||||||
| $ | 15 | $ | 100 | $ | 67 | $ | 110 | $ | 292 | ||||||||||
* Amount expired on March 31, 2023.
As of March 31, 2022, the following amounts were available to be repaid to the Adviser (amounts in thousands).
| Expires 2023 | Expires 2024 | Expires 2025 | Total | ||||||||||||
| $ | 93 | $ | 117 | $ | 81 | $ | 291 | ||||||||
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 11 months ended February 28, 2023, and the year ended March 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
26
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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. Global markets, or those in a particular region, may all react in similar fashion to important political, economic, or other developments. Events and evolving conditions in certain economies or markets may alter the risks associated with investments tied to countries or regions that historically were perceived as comparatively stable and make such investments riskier and more volatile.
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 27, 2022, with a termination date of June 26, 2023. 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 11 months ended February 28, 2023, 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 paid a pro-rata portion of the commitment fees plus any interest on amounts borrowed. For the year ended March 31, 2022, and the period from April 1, 2022, through June 27, 2022, interest was based on the one-month London Interbank Offered Rate ("LIBOR") plus one percent. Effective with the renewal, for the period June 28, 2022, through February 28, 2023, interest was based on the one-month Secured Overnight Financing Rate ("SOFR") plus 1.10 percent. The Fund did not experience a material financial impact transitioning from LIBOR to SOFR. Interest charged to the 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 11 months ended February 28, 2023, and the year ended March 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 Statements of Operations under Interfund lending fees. As a Lender, interest earned by the Fund, if any, during the period, is reflected on the Statements of Operations under Interfund lending.
27
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
The Fund did not utilize or participate in the Facility during the 11 months ended February 28, 2023.
The average borrowing or lending for the days outstanding and average interest rate for the Fund during the year ended March 31, 2022, were as follows (amounts in thousands):
| Borrower or Lender | Amount Outstanding at March 31, 2022 | Average Borrowing* | Days Borrowing Outstanding | Average Interest Rate* | Maximum Borrowing During the Period | ||||||||||||||||||
Borrower | $ | — | $ | 3,888 | 1 | 0.57 | % | $ | 3,888 | ||||||||||||||
* Based on the number of days borrowings were outstanding for the year ended March 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 February 28, 2023, on the Statement 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):
11 Months Ended February 28, 2023 | |||||||||||||||
Distributions Paid From | |||||||||||||||
Ordinary | Net | Total | Total | ||||||||||||
$ | 1,409 | $ | 3,238 | $ | 4,647 |
| $ | 4,647 |
| ||||||
Year Ended March 31, 2022 | Year Ended March 31, 2021 | ||||||||||||||||||||||
Distributions Paid From | Distributions Paid From | ||||||||||||||||||||||
| Ordinary Income | Net Long-Term Capital Gains | Total Taxable Distributions | Total Distributions Paid | Ordinary Income | Total Distributions Paid | ||||||||||||||||||
| $ | 1,240 | $ | 4,514 | $ | 5,724 | $ | 5,754 | $ | 1,191 | $ | 1,191 | ||||||||||||
28
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
As of February 28, 2023, the components of accumulated earnings (loss) on a tax basis were as follows (amounts in thousands):
| Undistributed Ordinary Income | Other Earnings (Loss) | Undistributed Long-Term Capital Gains | Accumulated Earnings | Unrealized Appreciation (Depreciation)* | Total Accumulated Earnings (Loss) | ||||||||||||||||||
| $ | 171 | $ | (7 | ) | $ | 215 | $ | 379 | $ | 9,079 | $ | 9,458 | |||||||||||
* The difference between the book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to tax deferral of losses on wash sales and passive foreign investment company.
As of February 28, 2023, the Fund had no capital loss carryforwards for federal income tax purposes.
As of February 28, 2023, 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) | ||||||||||||
| $ | 47,273 | $ | 11,319 | $ | (2,240 | ) | $ | 9,079 | |||||||
8. Subsequent Events:
The Board, upon recommendation of the Adviser, has approved a change in the name of the Trust and each individual fund within the Trust. On February 23, 2023, an initial filing was made with the SEC to commence the process to effectuate the following changes.
Effective at the start of business on April 24, 2023 (the "Effective Date"), the name of the Trust changed from USAA Mutual Funds Trust to Victory Portfolios III, and all references to USAA Mutual Funds Trust in the summary prospectus, statutory prospectus, and statement of additional information ("SAI") will be replaced by the new name.
Also on the Effective Date, references to the current name of the Fund in the summary prospectus, statutory prospectus, and SAI will be replaced with the new name as follows:
Current Name | New Name | ||||||
USAA Global Equity Income Fund | Victory Global Equity Income Fund | ||||||
In addition, on the Effective Date, USAA Investments, a Victory Capital Management Inc. investment franchise, that currently manages the USAA Fixed Income Funds, will change its name to Victory Income Investors, and all references to USAA Investments in the summary prospectus, statutory prospectus, and SAI, will be replaced.
Please note that there will be no changes in the management of the Fund or to the Fund's ticker symbols.
29
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of USAA Global Equity Income Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of USAA Global Equity Income Fund (the "Fund") (one of the funds constituting USAA Mutual Funds Trust (the "Trust")), including the schedule of portfolio investments as of February 28, 2023, and the related statements of operations for the period from April 1, 2022 through February 28, 2023 and the year ended March 31, 2022, the statements of changes in net assets for the period from April 1, 2022 through February 28, 2023 and each of the two years in the period ended March 31, 2022, the financial highlights for the period from April 1, 2022 through February 28, 2023 and each of the five years in the period ended March 31, 2022, 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 February 28, 2023, the results of its operations for the period from April 1, 2022 through February 28, 2023 and the year ended March 31, 2022, the statements of changes in net assets for the period from April 1, 2022 through February 28, 2023 and each of the two years in the period ended March 31, 2022, and its financial highlights for the period from April 1, 2022 through February 28, 2023 and each of the five years in the period ended March 31, 2022, 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 February 28, 2023, 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
April 28, 2023
30
USAA Mutual Funds Trust | Supplemental Information February 28, 2023 | ||||||
(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 date 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 February 28, 2023 | ||||||
(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 (06/17-06/19); 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 (03/15-03/21). | 45 | None | ||||||||||||||||||
| Paul L. McNamara (July 1948) | Trustee | Trustee since January 2012 | Retired. | 45 | None | ||||||||||||||||||
32
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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) | ||||||||||||||||||
33
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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.
34
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
Officers:
The officers of the Trust, their date 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. (since 2022); 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. (07/01/19-present); Executive Director, Investment and Financial Administration, USAA (2012-06/30/19); 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. (07/01/19-present); Accounting/ Financial Director, USAA (12/13-06/30/19). | ||||||||||||
| 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). | ||||||||||||
35
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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). | ||||||||||||
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USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 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 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 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 September 1, 2022, through February 28, 2023.
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 9/1/22 | Actual Ending Account Value 2/28/23 | Hypothetical Ending Account Value 2/28/23 | Actual Expenses Paid During Period 9/1/22- 2/28/23* | Hypothetical Expenses Paid During Period 9/1/22- 2/28/23* | Annualized Expense Ratio During Period 9/1/22- 2/28/23 | ||||||||||||||||||||||
Fund Shares | $ | 1,000.00 | $ | 1,040.20 | $ | 1,019.59 | $ | 5.31 | $ | 5.26 | 1.05 | % | |||||||||||||||
* Expenses are equal to the average account value multiplied by the Fund's annualized expense ratio multiplied by 181/365 (the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year).
37
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
Additional Federal Income Tax Information
The following federal tax information related to the Fund's fiscal 11 months ended February 28, 2023, 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 2024.
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 11 months ended February 28, 2023 (amounts in thousands):
| Dividend Received Deduction (corporate shareholders) | Qualified Dividend Income (non-corporate shareholders) | Short-Term Capital Gain Distributions | Long-Term Capital Gain Distributions | ||||||||||||
| 82 | % | 100 | % | $ | 415 | $ | 3,239 | ||||||||
38
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
Considerations of the Board in Continuing the Investment Advisory Agreement
USAA Global Equity Income Fund (the "Fund")
At a meeting of the Board of Trustees (the "Board") of USAA Mutual Funds Trust (the "Trust") held on December 8-9, 2022, 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 8-9, 2022, 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 21, 2022.
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.
39
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 program, (iv) derivatives risk management program, and (v) 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 adjustment, 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 median of its expense group and above the median of 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- and five-year periods ended June 30, 2022.
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
40
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
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 took into account management's discussion of the Fund's current advisory fee structure. 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.
41
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 10, 2023, 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-RN (prior to August 2022, Form N-LIQUID) and recommended no material changes to the LRMP.
42
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 | ||||||
vcm.com | (800) 235-8396 | ||||||
98354-0423
February 28, 2023
Annual Report
USAA New York Bond Fund
(Also Known as Victory New York Bond Fund*)
* Effective at the start of business on April 24, 2023, the Fund name will change to Victory New York Bond Fund. Please see Notes to the Financial Statements for subsequent event information.
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 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.
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, 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 | ||||||
Statements of Operations | 14 | ||||||
Statements of Changes in Net Assets | 15 | ||||||
Financial Highlights | 17 | ||||||
Notes to Financial Statements | 20 | ||||||
| Report of Independent Registered Public Accounting Firm | 30 | ||||||
Supplemental Information (Unaudited) | 31 | ||||||
Trustee and Officer Information | 31 | ||||||
Proxy Voting and Portfolio Holdings Information | 37 | ||||||
Expense Examples | 37 | ||||||
Additional Federal Income Tax Information | 38 | ||||||
Advisory Contract Renewal | 39 | ||||||
Liquidity Risk Management Program | 42 | ||||||
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,
If you are reading this letter but double-checking your calendar, be assured there's no mistake. The annual reporting period for your USAA Mutual Fund has shifted from a fiscal year ended March 31st to a fiscal year ended February 28th/the last day of February. This change has no material impact on any of your investments. This change aims to help us improve efficiencies and reduce operational costs. Therefore, this letter covers an abbreviated "annual" period from April 1, 2022, through February 28, 2023. Future annual reports will cover the 12-month period ended February 28th/the last day of February going forward.
Our most recent annual reporting period has been a challenging period for investors. Consider some of the headwinds: heightened geopolitical tensions, a terrible war in Eastern Europe, elevated energy and food costs, high inflation, and rising interest rates. All this has dampened global growth and created a difficult backdrop for both bond and stock investors.
The inflation data was particularly troublesome and surprised many with some of the highest readings since the 1970s. In response, the U.S. Federal Reserve (the "Fed") shifted to a more restrictive monetary policy than most anticipated. The Fed has been boosting the Fed funds interest rate repeatedly and aggressively, including a series of 75 basis point raises. (A basis point is 1/100th of a percentage point.) And if that wasn't enough, zero-COVID-19 policies in China (which fortunately have been recently lifted) further exacerbated supply chain issues and raised questions about global trade. As one might expect, all of these obstacles ratcheted up volatility across financial markets. Broad market stock indices pulled back substantially around the world.
The S&P 500® Index, the bell-weather proxy for our domestic stock market, delivered a negative total return of almost 11% during our abbreviated annual reporting period. But perhaps what was even more difficult was the performance of fixed income markets, which normally are considered a safe haven in times of equity turmoil. But not during this past year when interest rates were rising sharply. In fact, the Bloomberg US Aggregate Bond Index—a proxy for a diversified fixed income portfolio and one that many investors and institutions follow closely—delivered a negative total return of approximately 7.0%. That's not exactly the offset to equity performance that many investors have come to expect from bonds.
It's been difficult, and we fully acknowledge that the steady drumbeat of bad news and bouts of stomach-churning volatility can take a toll on investors' psyche. Nobody likes opening their account statements during declining markets, and even when markets often snap back sharply (as happened this past July, October, and earlier this calendar year), investors often wonder if they have missed an opportunity.
Through all the turmoil and challenges in our most recent annual reporting period, we are reminded of two enduring realities: 1) financial markets are dynamic and apt to change abruptly; 2) it's vital to remain calm and rational whenever faced with those inevitable bouts of turmoil.
2
Fortunately, we think that investors can take comfort knowing that all our independent investment franchises have experience managing portfolios through a wide variety of market environments. Our investment professionals remain calm during turbulent financial markets, and we think it's imperative that investors do the same.
We still believe that a long-term plan, a well-diversified portfolio across asset classes and investment types, and a clear understanding of individual risk tolerances are the key ingredients for staying the course and progressing on investment goals. Moreover, all our investment professionals continually monitor the environment and work hard to position portfolios opportunistically no matter what the markets bring. Remember, turmoil can also create opportunity.
On the following pages, you will find information relating to your USAA Mutual Fund, brought to you by Victory Capital. If you have any questions, we encourage you to contact our Member Service Representatives. Call 800-235-8396, or visit our website at vcm.com.
From all of us here at Victory Capital, thank you for your ongoing confidence and for letting us help you work toward your investment goals.
Christopher K. Dyer, CFA
President,
USAA Mutual Funds Trust
3
USAA New York Bond Fund
Manager's 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 overall during the 11-month reporting period ended February 28, 2023. [The Fund's fiscal year-end changed this year to February 28 from March 31, resulting in a shorter reporting period for fiscal year ended 2023.] Negative returns for the reporting period were attributable to a combination of factors, including the U.S. Federal Reserve's (the "Fed") prolonged fight to reduce inflation through interest rate increases and significant investor outflows from municipal bond funds. The reporting period was also highlighted by material volatility in the municipal market, as market participants often strongly reacted to Fed actions and comments, as well as economic data release, in an attempt to determine the future path of interest rates. The overall returns on the Bloomberg Municipal Bond Index for the reporting period was -1.92%, with significant ups and downs throughout the period.
While there might be some volatility in the municipal market in the short term, we remain confident that the right approach is to focus on what matters in the long term. We believe municipal bonds continue to represent an attractive investment opportunity on a relative basis. At the end of February 2023, the yield on the Bloomberg Municipal Bond Index was 3.62%, which is a taxable-equivalent yield of 6.12% (in the highest tax bracket). After factoring in the benefit of the tax exemption, municipal bonds look attractive vs. the (taxable) Bloomberg U.S. Aggregate Bond Index, which yielded 4.81% at the end of February 2023.
• How did the USAA New York Bond Fund (the "Fund") perform during the reporting period?
The Fund has three share classes: Fund Shares, Institutional Shares, and Class A. For the 11-month reporting period ended February 28, 2023, the Fund Shares, Institutional Shares, and Class A had a total return (at net asset value) of -4.38%, -4.34%, and -4.56%, respectively, versus an average return of -4.04% for the funds in the Lipper New York Municipal Debt Funds category. This compares to returns of -3.74% for the Lipper New York Municipal Debt Funds Index, and -1.92% for the Bloomberg Municipal Bond Index.
• What are the conditions in the state of New York?
New York State boasts a diverse and substantial economic base including a sizable population of just under 20 million. Economic growth continues, albeit slower than the national norm. Employment numbers have steadily increased while remaining below pre-pandemic levels. New York City anchors the state's economic base serving as a center for world trade and culture. Uncertainty, however, is noted as workers have been reticent post-pandemic in returning to offices causing a headwind for economic activity.
The state's financial performance has generally been balanced in large part due to sound financial practices including multi-year budgeting coupled with quarterly adjustments. Based on mid-year data, budgetary performance remains satisfactory, but less than stellar capital markets could possibly create a drag on capital gains causing personal income tax receipts to lag. Nevertheless, robust reserves are available to offset unforeseen
4
USAA New York Bond Fund
Manager's Commentary (continued)
challenges to the financial plan. Vital agencies, such as the Metropolitan Transportation Authority, may require additional state support until operations fully recover from the pandemic. The state's economic and financial resources continue to be more than sufficient
General obligation bonds issued by the state of New York carry strong ratings of Aa1 (stable outlook) by Moody's, AA+ (stable outlook) by Standard & Poor's, and AA+ (stable outlook) by Fitch.
• What strategies did you employ during the reporting period?
In keeping with our investment approach, we continued to focus on income generation. The Fund's long-term income distribution, not its price appreciation, accounts for most of its total return.
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.
Thank you for allowing us to assist you with your investment needs.
5
USAA New York Bond Fund
Investment Overview
(Unaudited)
Average Annual Total Return
Year Ended February 28, 2023
Fund Shares | Institutional Shares | Class A | |||||||||||||||||||||||||
INCEPTION DATE | 10/10/90 | 6/29/20 | 8/1/10 | ||||||||||||||||||||||||
Net Asset | Net Asset | Net Asset | Maximum | Bloomberg | Lipper | ||||||||||||||||||||||
One Year | –7.72 | % | –7.67 | % | –7.91 | % | –9.97 | % | –5.10 | % | –7.12 | % | |||||||||||||||
Five Year | 0.96 | % | NA | 0.74 | % | 0.29 | % | 1.66 | % | 1.34 | % | ||||||||||||||||
Ten Year | 1.59 | % | NA | 1.35 | % | 1.12 | % | 2.11 | % | 1.75 | % | ||||||||||||||||
Since Inception | NA | –1.63 | % | 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 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 New York Bond Fund — Growth of $10,000
1The 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 is not possible to invest directly in an index.
2The unmanaged Lipper New York Municipal Debt Funds Index measures the Fund's performance to that of the Lipper New York Municipal Debt Funds 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 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 New York Bond Fund | February 28, 2023 | ||||||
(Unaudited)
Investment Objective and Portfolio Holdings:
The Fund provides New York investors with a high level of current interest income that is exempt from federal income tax and New York State and New York City personal income taxes.
Top 10 Industries:
February 28, 2023
(% of Net Assets)
Medical | 15.5 | % | |||||
General | 14.9 | % | |||||
Higher Education | 14.9 | % | |||||
General Obligation | 10.3 | % | |||||
Education | 9.4 | % | |||||
Transportation | 7.4 | % | |||||
Development | 4.7 | % | |||||
Water | 3.9 | % | |||||
Nursing Homes | 3.9 | % | |||||
Utilities | 2.5 | % | |||||
* 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 New York Bond Fund | Schedule of Portfolio Investments February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares or Principal Amount | Value | |||||||||
Common Stocks (0.0%) (a) | |||||||||||
Utilities (0.0%): | |||||||||||
CMS Liquidating Trust (b) (c) | 200 | $ | 10 | ||||||||
Total Common Stocks (Cost $64) | 10 | ||||||||||
Municipal Bonds (98.9%) | |||||||||||
New York (93.9%): | |||||||||||
| Albany Capital Resource Corp. Revenue, 5.00%, 6/1/49, Continuously Callable @100 | $ | 1,500 | 1,315 | ||||||||
| Albany County Airport Authority Revenue, Series A, 5.00%, 12/15/48, Continuously Callable @100 | 1,000 | 1,031 | |||||||||
| Allegany County Capital Resource Corp. Revenue, Series A, 5.00%, 12/1/52, Continuously Callable @100 | 1,000 | 937 | |||||||||
Brookhaven Local Development Corp. Revenue | |||||||||||
5.25%, 11/1/36, Continuously Callable @100 | 1,500 | 1,503 | |||||||||
4.00%, 10/1/45, Continuously Callable @100 | 1,000 | 913 | |||||||||
Series B, 4.00%, 11/1/55, Continuously Callable @102 | 1,000 | 754 | |||||||||
| Broome County Local Development Corp. Revenue, 4.00%, 1/1/47, Continuously Callable @103 | 500 | 376 | |||||||||
Buffalo & Erie County Industrial Land Development Corp. Revenue | |||||||||||
5.00%, 7/1/40, Continuously Callable @100 | 2,000 | 1,595 | |||||||||
5.00%, 8/1/52, Continuously Callable @100 | 1,000 | 883 | |||||||||
Series A, 5.00%, 6/1/35, Continuously Callable @103 | 1,000 | 1,019 | |||||||||
Build NYC Resource Corp. Revenue | |||||||||||
5.00%, 6/1/40, Continuously Callable @100 | 700 | 711 | |||||||||
5.00%, 7/1/41, Continuously Callable @100 | 500 | 491 | |||||||||
4.00%, 8/1/42, Continuously Callable @100 | 1,000 | 915 | |||||||||
5.50%, 4/1/43, Continuously Callable @100 | 1,000 | 1,000 | |||||||||
5.00%, 7/1/45, Continuously Callable @100 | 2,000 | 2,022 | |||||||||
5.00%, 11/1/47 | 2,000 | 2,182 | |||||||||
5.00%, 6/1/48, Continuously Callable @102 | 2,000 | 1,982 | |||||||||
4.00%, 7/1/49, Continuously Callable @100 | 500 | 452 | |||||||||
5.75%, 6/1/52, Continuously Callable @100 (d) | 750 | 750 | |||||||||
5.00%, 7/1/56, Continuously Callable @100 | 500 | 480 | |||||||||
5.75%, 6/1/62, Continuously Callable @100 (d) | 250 | 249 | |||||||||
Bushnell's Basin Fire Association, Inc. Revenue, 3.00%, 11/1/30 | 2,220 | 2,084 | |||||||||
City of Elmira, GO, 5.00%, 7/1/35, Continuously Callable @100 | 1,575 | 1,700 | |||||||||
| City of Long Beach NY, GO (INS — Build America Mutual Assurance Co.), Series B, 4.63%, 7/15/52, Continuously Callable @100 | 2,000 | 1,940 | |||||||||
City of New York, GO | |||||||||||
Series B-1, 5.25%, 10/1/42, Continuously Callable @100 | 1,000 | 1,121 | |||||||||
Series B-1, 5.25%, 10/1/47, Continuously Callable @100 | 500 | 555 | |||||||||
Series B-3, 3.08%, 10/1/46, Continuously Callable @100 (e) | 3,300 | 3,300 | |||||||||
Series D-1, 4.00%, 12/1/43, Continuously Callable @100 | 4,000 | 3,840 | |||||||||
City of Newburgh, GO, Series A, 5.00%, 6/15/23, Continuously Callable @100 | 825 | 826 | |||||||||
See notes to financial statements.
8
| USAA Mutual Funds Trust USAA New York Bond Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
City of Poughkeepsie, GO | |||||||||||
4.00%, 4/15/27 | $ | 235 | $ | 237 | |||||||
4.00%, 4/15/28 | 125 | 126 | |||||||||
4.00%, 4/15/29 | 125 | 125 | |||||||||
4.00%, 4/15/30 | 135 | 135 | |||||||||
| City of Yonkers, GO (INS — Assured Guaranty Municipal Corp.), Series A, 3.00%, 7/1/25, Continuously Callable @100 | 665 | 659 | |||||||||
County of Nassau, GO, Series A, 5.00%, 1/1/38, Continuously Callable @100 | 1,000 | 1,044 | |||||||||
| County of Nassau, GO (INS — Assured Guaranty Municipal Corp.), Series C, 5.00%, 4/1/38, Continuously Callable @100 | 1,000 | 1,002 | |||||||||
Dutchess County Local Development Corp. Revenue | |||||||||||
5.00%, 7/1/46, Continuously Callable @100 | 600 | 602 | |||||||||
Series A, 5.00%, 7/1/45, Continuously Callable @100 | 2,000 | 2,030 | |||||||||
Series B, 4.00%, 7/1/41, Continuously Callable @100 | 2,000 | 1,755 | |||||||||
Series B, 4.00%, 7/1/49, Continuously Callable @100 | 1,750 | 1,448 | |||||||||
| Genesee County Funding Corp. Revenue, Series A, 5.25%, 12/1/52, Continuously Callable @100 | 750 | 756 | |||||||||
Hempstead Town Local Development Corp. Revenue | |||||||||||
5.00%, 7/1/47, Continuously Callable @100 | 600 | 614 | |||||||||
5.00%, 7/1/48, Continuously Callable @100 | 300 | 300 | |||||||||
| Hudson Yards Infrastructure Corp. Revenue, Series A, 4.00%, 2/15/44, Continuously Callable @100 | 2,000 | 1,933 | |||||||||
| Jefferson County Civic Facility Development Corp. Revenue, 4.00%, 11/1/47, Continuously Callable @100 | 1,000 | 760 | |||||||||
Long Island Power Authority Revenue | |||||||||||
Series A, 5.00%, 9/1/44, Continuously Callable @100 | 2,000 | 2,024 | |||||||||
Series B, 5.00%, 9/1/41, Continuously Callable @100 | 1,000 | 1,035 | |||||||||
Metropolitan Transportation Authority Revenue | |||||||||||
Series A-1, 5.25%, 11/15/56, Continuously Callable @100 | 1,000 | 1,004 | |||||||||
Series B, 4.00%, 11/15/50, Continuously Callable @100 | 1,000 | 824 | |||||||||
Series D-1, 5.00%, 11/15/34, Continuously Callable @100 | 3,000 | 3,060 | |||||||||
Series D-3, 4.00%, 11/15/49, Continuously Callable @100 | 2,000 | 1,662 | |||||||||
Monroe County Industrial Development Corp. Revenue | |||||||||||
5.00%, 12/1/46, Continuously Callable @100 | 1,500 | 1,466 | |||||||||
4.00%, 12/1/46, Continuously Callable @100 | 2,000 | 1,680 | |||||||||
4.00%, 10/1/47, Continuously Callable @100 | 1,000 | 856 | |||||||||
5.00%, 6/1/59, Continuously Callable @100 (d) | 1,000 | 943 | |||||||||
Series A, 5.00%, 12/1/37, Continuously Callable @100 | 1,000 | 1,000 | |||||||||
Series A, 5.00%, 12/1/42, Continuously Callable @100 | 2,000 | 2,000 | |||||||||
Series C, 4.00%, 7/1/43, Continuously Callable @100 | 1,000 | 951 | |||||||||
| Monroe County Industrial Development Corp. Revenue (INS — Assured Guaranty Municipal Corp.), 5.00%, 1/15/38, Continuously Callable @100 | 500 | 505 | |||||||||
| New York City Housing Development Corp. Revenue, Series K, 4.20%, 11/1/58, Continuously Callable @100 | 2,990 | 2,595 | |||||||||
| New York City Industrial Development Agency Revenue, 4.00%, 3/1/45, Continuously Callable @100 | 1,005 | 915 | |||||||||
| New York City Industrial Development Agency Revenue (INS — Assured Guaranty Municipal Corp.), 2.25%, 10/1/29 | 1,025 | 969 | |||||||||
See notes to financial statements.
9
| USAA Mutual Funds Trust USAA New York Bond Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
| New York City Municipal Water Finance Authority Revenue, Series DD, 3.08%, 6/15/33, Continuously Callable @100 (e) | $ | 4,800 | $ | 4,800 | |||||||
| New York City Transitional Finance Authority Building Aid Revenue, Series S, 4.00%, 7/15/45, Continuously Callable @100 | 2,000 | 1,916 | |||||||||
New York City Transitional Finance Authority Future Tax Secured Revenue | |||||||||||
4.00%, 8/1/41, Continuously Callable @100 | 1,000 | 973 | |||||||||
4.00%, 11/1/42, Continuously Callable @100 | 2,000 | 1,932 | |||||||||
Series B, 4.00%, 8/1/41, Continuously Callable @100 | 1,000 | 973 | |||||||||
Series D-1, 5.00%, 11/1/46, Continuously Callable @100 | 2,000 | 2,160 | |||||||||
Series D3, 2.15%, 2/1/44, Continuously Callable @100 (e) | 300 | 300 | |||||||||
| New York City Trust for Cultural Resources Revenue, 4.00%, 7/1/46, Continuously Callable @100 | 1,000 | 929 | |||||||||
New York Convention Center Development Corp. Revenue | |||||||||||
5.00%, 11/15/45, Continuously Callable @100 | 500 | 506 | |||||||||
Series S, 11/15/37 (f) | 1,000 | 503 | |||||||||
| New York Convention Center Development Corp. Revenue (INS — Assured Guaranty Municipal Corp.), Series B, 11/15/48 (f) | 2,000 | 503 | |||||||||
New York Liberty Development Corp. Revenue | |||||||||||
5.25%, 10/1/35 | 2,500 | 2,796 | |||||||||
5.50%, 10/1/37 | 560 | 630 | |||||||||
5.00%, 11/15/44, Continuously Callable @100 (d) | 1,000 | 959 | |||||||||
2.80%, 9/15/69, Continuously Callable @100 | 1,500 | 1,346 | |||||||||
New York State Dormitory Authority Revenue | |||||||||||
5.00%, 7/1/34, Continuously Callable @100 | 500 | 512 | |||||||||
5.00%, 12/1/37, Continuously Callable @100 (d) | 1,300 | 1,257 | |||||||||
4.00%, 8/1/38, Continuously Callable @100 | 2,000 | 1,752 | |||||||||
6.00%, 7/1/40, Continuously Callable @100 (d) | 2,900 | 2,592 | |||||||||
5.00%, 5/1/43, Continuously Callable @100 | 1,000 | 1,011 | |||||||||
5.75%, 7/1/43, Continuously Callable @100 | 1,000 | 1,005 | |||||||||
3.50%, 7/1/44, Continuously Callable @100 | 1,000 | 842 | |||||||||
5.00%, 7/1/48, Pre-refunded 7/1/28 @ 100 | 430 | 475 | |||||||||
5.00%, 7/1/48, Continuously Callable @100 | 570 | 596 | |||||||||
4.00%, 3/15/49, Continuously Callable @100 | 750 | 702 | |||||||||
5.00%, 7/1/51, Continuously Callable @100 | 725 | 718 | |||||||||
5.00%, 7/1/57, Continuously Callable @100 | 1,000 | 952 | |||||||||
Series A, 5.00%, 5/1/38, Continuously Callable @100 | 500 | 500 | |||||||||
Series A, 4.00%, 7/1/43, Continuously Callable @100 | 2,000 | 1,800 | |||||||||
Series A, 5.00%, 7/1/44, Continuously Callable @100 | 1,500 | 1,503 | |||||||||
Series A, 4.00%, 7/1/45, Continuously Callable @100 | 2,250 | 2,121 | |||||||||
Series A, 4.00%, 3/15/48, Continuously Callable @100 | 3,000 | 2,786 | |||||||||
Series A, 4.00%, 3/15/49, Continuously Callable @100 | 1,500 | 1,415 | |||||||||
Series A, 4.00%, 9/1/50, Continuously Callable @100 | 500 | 406 | |||||||||
Series A-1, 4.00%, 7/1/45, Continuously Callable @100 | 3,000 | 2,792 | |||||||||
Series C, 4.00%, 7/1/47, Continuously Callable @100 | 1,000 | 937 | |||||||||
New York State Dormitory Authority Revenue (INS — AMBAC Assurance Corp.) | |||||||||||
Series 1, 5.50%, 7/1/40 | 2,000 | 2,411 | |||||||||
Series A, 5.50%, 5/15/30 | 3,275 | 3,848 | |||||||||
| New York State Dormitory Authority Revenue (NBGA — State of New York Mortgage Agency), 5.00%, 6/1/33, Continuously Callable @100 | 1,990 | 1,993 | |||||||||
See notes to financial statements.
10
| USAA Mutual Funds Trust USAA New York Bond Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
New York State Thruway Authority Revenue | |||||||||||
Series A, 4.00%, 1/1/56, Continuously Callable @100 | $ | 1,000 | $ | 899 | |||||||
Series B, 4.00%, 1/1/50, Continuously Callable @100 | 1,000 | 906 | |||||||||
| Oneida County Local Development Corp. Revenue, 4.00%, 7/1/39, Continuously Callable @100 | 750 | 652 | |||||||||
Onondaga Civic Development Corp. Revenue | |||||||||||
5.00%, 10/1/40, Continuously Callable @100 | 1,000 | 926 | |||||||||
5.00%, 1/1/43, Continuously Callable @100 | 740 | 753 | |||||||||
| Onondaga County Trust for Cultural Resources Revenue, 5.00%, 5/1/40, Continuously Callable @100 | 800 | 808 | |||||||||
| Southold Local Development Corp. Revenue, 5.00%, 12/1/45, Continuously Callable @100 | 1,000 | 917 | |||||||||
St. Lawrence County Industrial Development Agency Revenue | |||||||||||
4.00%, 7/1/43, Continuously Callable @100 | 500 | 466 | |||||||||
5.00%, 9/1/47, Continuously Callable @100 | 1,770 | 1,760 | |||||||||
5.25%, 7/1/52, Continuously Callable @100 | 1,000 | 1,057 | |||||||||
| State of New York Mortgage Agency Revenue, Series 211, 3.80%, 10/1/48, Continuously Callable @100 | 1,370 | 1,309 | |||||||||
| Suffolk County Economic Development Corp. Revenue, Series C, 5.00%, 7/1/33, Continuously Callable @100 | 250 | 255 | |||||||||
| Tompkins County Development Corp. Revenue, 5.00%, 7/1/44, Continuously Callable @100 | 1,375 | 1,328 | |||||||||
Triborough Bridge & Tunnel Authority Revenue | |||||||||||
Series A, 4.00%, 11/15/52, Continuously Callable @100 | 3,000 | 2,802 | |||||||||
Series B, 11/15/32 (f) | 1,000 | 724 | |||||||||
TSASC, Inc. Revenue, Series A, 5.00%, 6/1/41, Continuously Callable @100 | 1,000 | 1,013 | |||||||||
| Westchester County Healthcare Corp. Revenue, Series B, 6.00%, 11/1/30, Continuously Callable @100 | 125 | 125 | |||||||||
Westchester County Local Development Corp. Revenue | |||||||||||
5.00%, 7/1/42, Continuously Callable @104 | 450 | 458 | |||||||||
5.00%, 11/1/46, Continuously Callable @100 | 1,000 | 959 | |||||||||
5.00%, 6/1/47, Continuously Callable @100 | 1,000 | 1,002 | |||||||||
5.00%, 1/1/51, Continuously Callable @103 | 1,000 | 944 | |||||||||
| Westchester Tobacco Asset Securitization Revenue, Series B, 5.00%, 6/1/41, Continuously Callable @100 | 500 | 509 | |||||||||
150,665 | |||||||||||
Guam (5.0%): | |||||||||||
| Antonio B. Won Pat International Airport Authority Revenue (INS — Assured Guaranty Municipal Corp.), Series B, 5.75%, 10/1/43, Pre-refunded 10/1/23 @ 100 | 1,000 | 1,014 | |||||||||
Guam Government Waterworks Authority Revenue | |||||||||||
5.50%, 7/1/43, Pre-refunded 7/1/23 @ 100 | 1,000 | 1,007 | |||||||||
Series A, 5.00%, 7/1/29, Continuously Callable @100 | 1,000 | 1,009 | |||||||||
Series A, 5.00%, 7/1/35, Continuously Callable @100 | 500 | 503 | |||||||||
Guam Power Authority Revenue | |||||||||||
Series A, 5.00%, 10/1/37, Continuously Callable @100 | 1,165 | 1,190 | |||||||||
Series A, 5.00%, 10/1/41, Continuously Callable @100 | 1,250 | 1,291 | |||||||||
| Guam Power Authority Revenue (INS — Assured Guaranty Municipal Corp.), Series A, 5.00%, 10/1/39, Continuously Callable @100 | 500 | 511 | |||||||||
See notes to financial statements.
11
| USAA Mutual Funds Trust USAA New York Bond Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Territory of Guam Revenue | |||||||||||
Series A, 5.00%, 12/1/46, Continuously Callable @100 | $ | 500 | $ | 494 | |||||||
Series D, 5.00%, 11/15/39, Continuously Callable @100 | 1,000 | 1,006 | |||||||||
8,025 | |||||||||||
Total Municipal Bonds (Cost $168,669) | 158,690 | ||||||||||
Total Investments (Cost $168,733) — 98.9% | 158,700 | ||||||||||
Other assets in excess of liabilities — 1.1% | 1,801 | ||||||||||
NET ASSETS — 100.00% | $ | 160,501 | |||||||||
(a) Amount represents less than 0.05% of net assets.
(b) Non-income producing security.
(c) This security is classified as Level 3 within the fair value hierarchy. (See Note 2 in the Notes to Financial Statements).
(d) Rule 144A security or other security that is restricted as to resale to institutional investors. As of February 28, 2023, the fair value of these securities was $6,750 thousands and amounted to 4.2% of net assets.
(e) 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.
(f) Zero-coupon bond.
AMBAC — American Municipal Bond Assurance Corporation
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
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 guaranteed agreement from the name listed.
See notes to financial statements.
12
USAA Mutual Funds Trust | Statement of Assets and Liabilities February 28, 2023 | ||||||
(Amounts in Thousands, Except Per Share Amounts)
| USAA New York Bond Fund | |||||||
Assets: | |||||||
Investments, at value (Cost $168,733) | $ | 158,700 | |||||
Cash | 141 | ||||||
Receivables: | |||||||
Interest | 1,888 | ||||||
Capital shares issued | 14 | ||||||
From Adviser | 9 | ||||||
Prepaid expenses | — | (a) | |||||
Total Assets | 160,752 | ||||||
Liabilities: | |||||||
Payables: | |||||||
Distributions | 69 | ||||||
Capital shares redeemed | 57 | ||||||
Accrued expenses and other payables: | |||||||
Investment advisory fees | 49 | ||||||
Administration fees | 18 | ||||||
Custodian fees | — | (a) | |||||
Transfer agent fees | 6 | ||||||
Compliance fees | — | (a) | |||||
Trustees' fees | — | (a) | |||||
| 12b-1 fees | — | (a) | |||||
Other accrued expenses | 52 | ||||||
Total Liabilities | 251 | ||||||
Net Assets: | |||||||
Capital | 176,329 | ||||||
Total accumulated earnings/(loss) | (15,828 | ) | |||||
Net Assets | $ | 160,501 | |||||
Net Assets | |||||||
Fund Shares | $ | 139,084 | |||||
Institutional Shares | 20,352 | ||||||
Class A | 1,065 | ||||||
Total | $ | 160,501 | |||||
Shares (unlimited number of shares authorized with no par value): | |||||||
Fund Shares | 13,157 | ||||||
Institutional Shares | 1,927 | ||||||
Class A | 101 | ||||||
Total | 15,185 | ||||||
Net asset value, offering and redemption price per share: (b) | |||||||
Fund Shares | $ | 10.57 | |||||
Institutional Shares | 10.56 | ||||||
Class A | 10.55 | ||||||
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 | $ | 10.79 | |||||
(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 | Statements of Operations | ||||||
(Amounts in Thousands)
USAA New York Bond Fund | |||||||||||
| 11 Months Ended February 28, 2023(a) | Year Ended March 31, 2022 | ||||||||||
Investment Income: | |||||||||||
Interest | $ | 6,073 | $ | 7,067 | |||||||
Total Income | 6,073 | 7,067 | |||||||||
Expenses: | |||||||||||
Investment advisory fees | 630 | 808 | |||||||||
Administration fees — Fund Shares | 202 | 307 | |||||||||
Administration fees — Institutional Shares | 20 | 8 | |||||||||
Administration fees — Class A | 2 | 3 | |||||||||
Sub-Administration fees | 22 | 23 | |||||||||
| 12b-1 fees — Class A | 3 | 5 | |||||||||
Custodian fees | 2 | 10 | |||||||||
Transfer agent fees — Fund Shares | 46 | 53 | |||||||||
Transfer agent fees — Institutional Shares | 20 | 8 | |||||||||
Transfer agent fees — Class A | 1 | 2 | |||||||||
Trustees' fees | 46 | 48 | |||||||||
Compliance fees | 1 | 1 | |||||||||
Legal and audit fees | 66 | 50 | |||||||||
State registration and filing fees | 1 | 1 | |||||||||
Other expenses | 35 | 57 | |||||||||
Recoupment of prior expenses waived/reimbursed by Adviser | — | (b) | — | ||||||||
Total Expenses | 1,097 | 1,384 | |||||||||
Expenses waived/reimbursed by Adviser | (67 | ) | (5 | ) | |||||||
Net Expenses | 1,030 | 1,379 | |||||||||
Net Investment Income (Loss) | 5,043 | 5,688 | |||||||||
Realized/Unrealized Gains (Losses) from Investments: | |||||||||||
Net realized gains (losses) from investment securities | (2,411 | ) | (316 | ) | |||||||
| Net change in unrealized appreciation/depreciation on investment securities | (11,285 | ) | (12,062 | ) | |||||||
Net realized/unrealized gains (losses) on investments | (13,696 | ) | (12,378 | ) | |||||||
Change in net assets resulting from operations | $ | (8,653 | ) | $ | (6,690 | ) | |||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from March 31 to February 28.
(b) 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 New York Bond Fund | |||||||||||||||
| 11 Months Ended February 28, 2023(a) | Year Ended March 31, 2022 | Year Ended March 31, 2021 | |||||||||||||
From Investments: | |||||||||||||||
Operations: | |||||||||||||||
Net Investment Income (Loss) | $ | 5,043 | $ | 5,688 | $ | 6,228 | |||||||||
Net realized gains (losses) | (2,411 | ) | (316 | ) | (460 | ) | |||||||||
| Net change in unrealized appreciation/ depreciation | (11,285 | ) | (12,062 | ) | 5,952 | ||||||||||
Change in net assets resulting from operations | (8,653 | ) | (6,690 | ) | 11,720 | ||||||||||
Distributions to Shareholders: | |||||||||||||||
Fund Shares | (4,360 | ) | (5,434 | ) | (5,993 | ) | |||||||||
Institutional Shares | (648 | ) | (228 | ) | (55 | )(b) | |||||||||
Class A | (34 | ) | (48 | ) | (172 | ) | |||||||||
| Change in net assets resulting from distributions to shareholders | (5,042 | ) | (5,710 | ) | (6,220 | ) | |||||||||
| Change in net assets resulting from capital transactions | (19,260 | ) | (10,562 | ) | (13,646 | ) | |||||||||
Change in net assets | (32,955 | ) | (22,962 | ) | (8,146 | ) | |||||||||
Net Assets: | |||||||||||||||
Beginning of period | 193,456 | 216,418 | 224,564 | ||||||||||||
End of period | $ | 160,501 | $ | 193,456 | $ | 216,418 | |||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from March 31 to February 28.
(b) Institutional Shares activity is for the period June 29, 2020 (commencement of operations) to March 31, 2021.
(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 New York Bond Fund | |||||||||||||||
| 11 Months Ended February 28, 2023(a) | Year Ended March 31, 2022 | Year Ended March 31, 2021 | |||||||||||||
Capital Transactions: | |||||||||||||||
Fund Shares | |||||||||||||||
Proceeds from shares issued | $ | 8,630 | $ | 12,790 | $ | 20,168 | |||||||||
Distributions reinvested | 3,554 | 4,576 | 4,938 | ||||||||||||
Cost of shares redeemed | (31,474 | ) | (43,318 | ) | (41,447 | ) | |||||||||
Total Fund Shares | $ | (19,290 | ) | $ | (25,952 | ) | $ | (16,341 | ) | ||||||
Institutional Shares | |||||||||||||||
Proceeds from shares issued | $ | 8,388 | $ | 20,383 | $ | 3,777 | (b) | ||||||||
Distributions reinvested | 644 | 227 | 55 | (b) | |||||||||||
Cost of shares redeemed | (8,459 | ) | (601 | ) | (874 | )(b) | |||||||||
Total Institutional Shares | $ | 573 | $ | 20,009 | $ | 2,958 | |||||||||
Class A | |||||||||||||||
Proceeds from shares issued | $ | 55 | $ | 543 | $ | 6,686 | |||||||||
Distributions reinvested | 31 | 45 | 46 | ||||||||||||
Cost of shares redeemed | (629 | ) | (5,207 | ) | (6,995 | ) | |||||||||
Total Class A | $ | (543 | ) | $ | (4,619 | ) | $ | (263 | ) | ||||||
| Change in net assets resulting from capital transactions | $ | (19,260 | ) | $ | (10,562 | ) | $ | (13,646 | ) | ||||||
Share Transactions: | |||||||||||||||
Fund Shares | |||||||||||||||
Issued | 802 | 1,044 | 1,681 | ||||||||||||
Reinvested | 334 | 377 | 412 | ||||||||||||
Redeemed | (2,930 | ) | (3,573 | ) | (3,474 | ) | |||||||||
Total Fund Shares | (1,794 | ) | (2,152 | ) | (1,381 | ) | |||||||||
Institutional Shares | |||||||||||||||
Issued | 778 | 1,667 | 312 | (b) | |||||||||||
Reinvested | 61 | 19 | 5 | (b) | |||||||||||
Redeemed | (793 | ) | (49 | ) | (73 | )(b) | |||||||||
Total Institutional Shares | 46 | 1,637 | 244 | ||||||||||||
Class A | |||||||||||||||
Issued | 5 | 44 | 561 | ||||||||||||
Reinvested | 3 | 4 | 4 | ||||||||||||
Redeemed | (57 | ) | (426 | ) | (587 | ) | |||||||||
Total Class A | (49 | ) | (378 | ) | (22 | ) | |||||||||
Change in Shares | (1,797 | ) | (893 | ) | (1,159 | ) | |||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from March 31 to February 28.
(b) Institutional Shares activity is for the period June 29, 2020 (commencement of operations) to March 31, 2021.
See notes to financial statements.
16
USAA Mutual Funds Trust | Financial Highlights | ||||||
For a Share Outstanding Throughout Each Period
USAA New York Bond Fund | |||||||||||||||||||||||||||
Fund Shares | |||||||||||||||||||||||||||
| 11 Months Ended February 28, 2023(a) | Year Ended March 31, 2022 | Year Ended March 31, 2021 | Year Ended March 31, 2020 | Year Ended March 31, 2019 | Year Ended March 31, 2018 | ||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 11.39 | $ | 12.11 | $ | 11.80 | $ | 11.87 | $ | 11.76 | $ | 11.88 | |||||||||||||||
Investment Activities: | |||||||||||||||||||||||||||
Net investment income (loss) | 0.32 | (b) | 0.32 | (b) | 0.34 | (b) | 0.38 | (b) | 0.40 | 0.41 | |||||||||||||||||
| Net realized and unrealized gains (losses) | (0.82 | ) | (0.72 | ) | 0.31 | (0.07 | ) | 0.11 | (0.12 | ) | |||||||||||||||||
| Total from Investment Activities | (0.50 | ) | (0.40 | ) | 0.65 | 0.31 | 0.51 | 0.29 | |||||||||||||||||||
Distributions to Shareholders from: | |||||||||||||||||||||||||||
Net investment income | (0.32 | ) | (0.32 | ) | (0.34 | ) | (0.38 | ) | (0.40 | ) | (0.41 | ) | |||||||||||||||
Total Distributions | (0.32 | ) | (0.32 | ) | (0.34 | ) | (0.38 | ) | (0.40 | ) | (0.41 | ) | |||||||||||||||
Net Asset Value, End of Period | $ | 10.57 | $ | 11.39 | $ | 12.11 | $ | 11.80 | $ | 11.87 | $ | 11.76 | |||||||||||||||
Total Return (c) (d) | (4.38 | )% | (3.40 | )% | 5.61 | % | 2.60 | % | 4.41 | % | 2.45 | % | |||||||||||||||
Ratios to Average Net Assets: | |||||||||||||||||||||||||||
Net Expenses (e) (f) (g) (h) | 0.67 | % | 0.64 | % | 0.66 | % | 0.61 | % | 0.60 | % | 0.59 | % | |||||||||||||||
Net Investment Income (Loss) (e) | 3.25 | % | 2.65 | % | 2.87 | % | 3.17 | % | 3.39 | % | 3.43 | % | |||||||||||||||
Gross Expenses (e) (f) | 0.71 | % | 0.64 | % | 0.66 | % | 0.61 | % | 0.60 | % | 0.59 | % | |||||||||||||||
Supplemental Data: | |||||||||||||||||||||||||||
Net Assets at end of period (000's) | $ | 139,084 | $ | 170,335 | $ | 207,085 | $ | 218,096 | $ | 226,973 | $ | 216,090 | |||||||||||||||
Portfolio Turnover (c) (i) | 15 | % | 10 | % | 19 | % | 18 | % | 15 | % | 6 | % | |||||||||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from March 31 to February 28.
(b) Per share net investment income (loss) has been calculated using the average daily shares method.
(c) Not annualized for periods less than one year.
(d) 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.
(e) Annualized for periods less than one year.
(f) Does not include acquired fund fees and expenses, if any.
(g) 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 July 31, 2023 instead of coinciding with the Fund's fiscal year end.
(h) 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.
(i) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares.
See notes to financial statements.
17
USAA Mutual Funds Trust | Financial Highlights — continued | ||||||
For a Share Outstanding Throughout Each Period
USAA New York Bond Fund | |||||||||||||||
Institutional Shares | |||||||||||||||
| 11 Months Ended February 28, 2023(a) | Year Ended March 31, 2022 | June 29, 2020(b) through March 31, 2021 | |||||||||||||
Net Asset Value, Beginning of Period | $ | 11.38 | $ | 12.10 | $ | 11.94 | |||||||||
Investment Activities: | |||||||||||||||
Net investment income (loss) (c) | 0.32 | 0.33 | 0.26 | ||||||||||||
Net realized and unrealized gains (losses) | (0.82 | ) | (0.72 | ) | 0.16 | ||||||||||
Total from Investment Activities | (0.50 | ) | (0.39 | ) | 0.42 | ||||||||||
Distributions to Shareholders from: | |||||||||||||||
Net investment income | (0.32 | ) | (0.33 | ) | (0.26 | ) | |||||||||
Total Distributions | (0.32 | ) | (0.33 | ) | (0.26 | ) | |||||||||
Net Asset Value, End of Period | $ | 10.56 | $ | 11.38 | $ | 12.10 | |||||||||
Total Return (d) (e) | (4.34 | )% | (3.39 | )% | 3.55 | % | |||||||||
Ratios to Average Net Assets: | |||||||||||||||
Net Expenses (f) (g) (h) (i) | 0.61 | % | 0.61 | % | 0.61 | % | |||||||||
Net Investment Income (Loss) (f) | 3.31 | % | 2.72 | % | 2.86 | % | |||||||||
Gross Expenses (f) (g) | 0.70 | % | 0.65 | % | 0.77 | % | |||||||||
Supplemental Data: | |||||||||||||||
Net Assets at end of period (000's) | $ | 20,352 | $ | 21,414 | $ | 2,958 | |||||||||
Portfolio Turnover (d) (j) | 15 | % | 10 | % | 19 | % | |||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from March 31 to February 28.
(b) Commencement of operations.
(c) Per share net investment income (loss) has been calculated using the average daily shares method.
(d) Not annualized for periods less than one year.
(e) Assumes reinvestment of all net investment income and realized capital gain distributions, if any, during the period. Includes adjustments in accordance with U.S. Generally Accepted Accounting Principles and could differ from the Lipper reported return.
(f) Annualized for periods less than one year.
(g) Does not include acquired fund fees and expenses, if any.
(h) 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 June 29, 2020, and in effect through July 31, 2023 instead of coinciding with the Fund's fiscal year end.
(i) 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.
(j) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares.
See notes to financial statements.
18
USAA Mutual Funds Trust | Financial Highlights — continued | ||||||
For a Share Outstanding Throughout Each Period
USAA New York Bond Fund | |||||||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||
| 11 Months Ended February 28, 2023(a) | Year Ended March 31, 2022 | Year Ended March 31, 2021 | Year Ended March 31, 2020 | Year Ended March 31, 2019 | Year Ended March 31, 2018 | ||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 11.37 | $ | 12.08 | $ | 11.77 | $ | 11.84 | $ | 11.73 | $ | 11.85 | |||||||||||||||
Investment Activities: | |||||||||||||||||||||||||||
Net investment income (loss) | 0.30 | (b) | 0.30 | (b) | 0.32 | (b) | 0.35 | (b) | 0.37 | 0.38 | |||||||||||||||||
| Net realized and unrealized gains (losses) | (0.82 | ) | (0.72 | ) | 0.31 | (0.07 | ) | 0.11 | (0.12 | ) | |||||||||||||||||
| Total from Investment Activities | (0.52 | ) | (0.42 | ) | 0.63 | 0.28 | 0.48 | 0.26 | |||||||||||||||||||
Distributions to Shareholders from: | |||||||||||||||||||||||||||
Net investment income | (0.30 | ) | (0.29 | ) | (0.32 | ) | (0.35 | ) | (0.37 | ) | (0.38 | ) | |||||||||||||||
Total Distributions | (0.30 | ) | (0.29 | ) | (0.32 | ) | (0.35 | ) | (0.37 | ) | (0.38 | ) | |||||||||||||||
Net Asset Value, End of Period | $ | 10.55 | $ | 11.37 | $ | 12.08 | $ | 11.77 | $ | 11.84 | $ | 11.73 | |||||||||||||||
| Total Return (excludes sales charges) (c) (d) | (4.56 | )% | (3.56 | )% | 5.38 | % | 2.36 | % | 4.16 | % | 2.19 | % | |||||||||||||||
Ratios to Average Net Assets: | |||||||||||||||||||||||||||
Net Expenses (e) (f) (g) (h) | 0.86 | % | 0.85 | % | 0.89 | % | 0.85 | % | 0.85 | % | 0.84 | % | |||||||||||||||
Net Investment Income (Loss) (e) | 3.06 | % | 2.46 | % | 2.65 | % | 2.93 | % | 3.15 | % | 3.18 | % | |||||||||||||||
Gross Expenses (e) (f) | 0.99 | % | 0.92 | % | 0.96 | % | 0.85 | % | 0.85 | % | 0.84 | % | |||||||||||||||
Supplemental Data: | |||||||||||||||||||||||||||
Net Assets at end of period (000's) | $ | 1,065 | $ | 1,707 | $ | 6,375 | $ | 6,468 | $ | 6,295 | $ | 5,971 | |||||||||||||||
Portfolio Turnover (c) (i) | 15 | % | 10 | % | 19 | % | 18 | % | 15 | % | 6 | % | |||||||||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from March 31 to February 28.
(b) Per share net investment income (loss) has been calculated using the average daily shares method.
(c) Not annualized for periods less than one year.
(d) 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.
(e) Annualized for periods less than one year.
(f) Does not include acquired fund fees and expenses, if any.
(g) 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 July 31, 2023 instead of coinciding with the Fund's fiscal year end.
(h) 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.
(i) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares.
See notes to financial statements.
19
USAA Mutual Funds Trust | Notes to Financial Statements February 28, 2023 | ||||||
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 New York Bond 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.
On June 29, 2022, the Board of Trustees (the "Board") approved the fiscal year-end change for the Fund from March 31 to February 28. The first full cycle of the new fiscal year-end reporting will begin March 1, 2023. As a result of the change, the Fund has a February 28, 2023 fiscal 11-month transition period, the results of which are reported in this Annual Report for the period ended February 28, 2023.
Victory Capital Management ("VCM" or 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 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 (unadjusted) in active markets for identical securities
• Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, or credit spreads, applicable to those securities, etc.)
• Level 3 — significant unobservable inputs (including the Adviser's assumptions in determining the fair value of investments)
20
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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, appointed as the valuation designee by the Board, has established the Pricing and Liquidity Committee (the "Committee"), and subject to Board oversight, the Committee administers and oversees the Fund's valuation policies and procedures, which are approved by the Board.
Debt securities are valued each business day by a pricing service approved by the valuation designee and subject to the oversight of the Board. The 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.
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 net asset value ("NAV") to be more reliable than it otherwise would be.
A summary of the valuations as of February 28, 2023, 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 | $ | — | $ | — | $ | 10 | $ | 10 | |||||||||||
Municipal Bonds | — | 158,690 | — | 158,690 | |||||||||||||||
Total | $ | — | $ | 158,690 | $ | 10 | $ | 158,700 | |||||||||||
As of February 28, 2023, there were no transfers into/out of Level 3.
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 generally take place within 35 days a month or more after the trade date. Securities that require more than 35 days to settle are considered a senior security and subject to Rule 18f-4. 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. 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.
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.
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
21
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
coupon interest accrued and recorded daily using the effective interest method which adjusts, where applicable, the amortization of premiums or accretion of discounts. Interest income is recorded daily on the accrual basis. 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 had a tax year end of March 31, and effective February 28, 2023, the Fund changed its tax year end to February 28.
For the 11 months ended February 28, 2023, 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 under specified conditions outlined in the valuation policies and procedures adopted by the Board. In addition, as defined under the valuation policies and procedures, each transaction must be effected at the independent current market price. For the 11 months ended February 28, 2023, 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) | |||||||||
| $ | 12,800 | $ | 16,629 | $ | — | ||||||
For the year ended March 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) | |||||||||
| $ | 10,355 | $ | 10,900 | $ | — | ||||||
Fees Paid Indirectly:
Expense offsets to custody fees that arise from credits on cash balances maintained on deposit are reflected on the Statements of Operations, as applicable, as Custodian fees.
22
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
3. Purchases and Sales:
Purchases and sales of securities (excluding securities maturing less than one year from acquisition) for the 11 months ended February 28, 2023, were as follows for the Fund (amounts in thousands):
Excluding | |||||||
Purchases | Sales | ||||||
$ | 24,922 | $ | 49,711 | ||||
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 Securities and Exchange Commission ("SEC").
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 0.50% of the first $50 million of the Fund's average daily net assets, 0.40% of that portion of the Fund's average daily net assets over $50 million but not over $100 million, and 0.30% of that portion of the Fund's average daily net assets over $100 million. Amounts incurred and paid to VCM for the 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements of Operations as Investment advisory fees.
The performance adjustment for each share class is accrued daily and calculated monthly by comparing the respective class' performance to that of the Lipper New York Municipal Debt Funds Index. The Lipper New York Municipal Debt Funds Index tracks the total return performance of the largest funds within the Lipper New York Municipal Debt Funds category.
The performance period for each share class consists of the current month plus the previous 35 months. The following table is utilized to determine the extent of the performance adjustment:
| Over/Under Performance Relative to Index (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 New York Municipal Debt Funds Index over that period, even if the class has overall negative returns during the performance period.
For the period April 1, 2022, to February 28, 2023, performance adjustments were $28, less than $1, and less than $(1) for Fund Shares, Institutional Shares, and Class A, in thousands, respectively. Performance adjustments were 0.02%, less than 0.01%, and (0.04)% for Fund Shares, Institutional Shares, and Class A, respectively. For the period April 1, 2021, to March 31, 2022, performance adjustments were $14, less than $1, and $(1) for Fund Shares, Institutional Shares, and Class A, in thousands, respectively. Performance adjustments were 0.01%, less than 0.01%, and (0.05)% for Fund Shares, Institutional Shares, and Class A, respectively. The performance adjustment rate included in
23
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 11 months ended February 28, 2023, and the year ended March 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, Institutional Shares, and Class A, respectively. Amounts incurred for the 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements 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 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements 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 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements 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, 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 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements 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.
24
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements of Operations as 12b-1 fees.
In addition, the Distributor is entitled to receive commissions in connection with sales of Class A. For the 11 months ended February 28, 2023, and the year ended March 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 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements 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 July 31, 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 February 28, 2023, the expense limits (excluding voluntary waivers) were 0.65%, 0.61%, and 0.90% for Fund Shares, Institutional Shares, and Class A, respectively.
Under the terms of the expense limitation agreement, 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.
As of February 28, 2023, 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 February 28, 2023.
| Expires 2024 | Expires 2025 | Expires 2026 | Total | ||||||||||||
| $ | 7 | $ | 5 | $ | 67 | $ | 79 | ||||||||
As of March 31, 2022, the following amounts were available to be repaid to the Adviser (amounts in thousands).
| Expires 2024 | Expires 2025 | Total | |||||||||
| $ | 7 | $ | 5 | $ | 12 | ||||||
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 11 months ended February 28, 2023, and the year ended March 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.
25
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
5. Risks:
The Fund may be subject to other risks in addition to these identified risks.
State-Specific Risk — Because the Fund invests primarily in New York tax-exempt securities, the Fund is more susceptible to adverse economic, political, and regulatory changes affecting tax-exempt securities issuers in New York to pay interest or repay principal, which may impact the Fund's performance. The Fund is more vulnerable to unfavorable developments in New York than are funds that invest in municipal securities of many states. While New York State's economy is broad, it does have concentrations in the financial services industry and may be sensitive to economic problems affecting that industry. Certain issuers of New York municipal bonds have experienced serious financial difficulties in the past, and reoccurrence of these difficulties may impair the ability of certain New York issuers to pay principal or interest on their obligations. The financial health of New York City affects that of New York State; and when New York City experiences financial difficulty, it may have an adverse affect on New York municipal bonds held by the Fund. The growth rate of New York State has at times been somewhat slower than the nation overall. The economic and financial condition of New York State also may be affected by various financial, social, economic, and political factors. In addition, the economic affects regarding COVID-19 and elevated global inflation may exacerbate some or all of these 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.
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 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 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.
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
26
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 27, 2022, with a termination date of June 26, 2023. 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 11 months ended February 28, 2023, 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 paid a pro-rata portion of the commitment fees plus any interest on amounts borrowed. For the year ended March 31, 2022, and the period from April 1, 2022, through June 27, 2022, interest was based on the one-month London Interbank Offered Rate ("LIBOR") plus one percent. Effective with the renewal, for the period June 28, 2022, through February 28, 2023, interest was based on the one-month Secured Overnight Financing Rate ("SOFR") plus 1.10 percent. The Fund did not experience a material financial impact transitioning from LIBOR to SOFR. Interest charged to the 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 11 months ended February 28, 2023, and the year ended March 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 Statements of Operations under Interfund lending fees. As a Lender, interest earned by the Fund, if any, during the period, is reflected on the Statements of Operations under Interfund lending.
The Fund did not utilize or participate in the Facility during the 11 months ended February 28, 2023, and the year ended March 31, 2022.
7. 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
27
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 February 28, 2023, on the Statement 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 | ||||||
| $ | 475 | $ | (475 | ) | |||
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):
11 Months Ended February 28, 2023 | |||||||
| Distributions Paid From | |||||||
| Tax-Exempt Income | Total Distributions Paid | ||||||
$ | 5,042 | $ | 5,042 | ||||
Year Ended March 31, 2022 | Year Ended March 31, 2021 | ||||||||||||||||||
| Distributions Paid From | Distributions Paid From | ||||||||||||||||||
Tax-Exempt Income | Total Distributions Paid | Ordinary Income | Tax-Exempt Income | Total Distributions Paid | |||||||||||||||
| $ | 5,710 | $ | 5,710 | $ | 1 | $ | 6,219 | $ | 6.220 | ||||||||||
As of February 28, 2023, the components of accumulated earnings (loss) on a tax basis were as follows (amounts in thousands):
| Undistributed Tax-Exempt Income | Accumulated Earnings | Distributions Payable | Accumulated Capital and Other Losses | Unrealized Appreciation (Depreciation)* | Total Accumulated Earnings (Loss) | ||||||||||||||||||
| $ | 481 | $ | 481 | $ | (427 | ) | $ | (6,257 | ) | $ | (9,625 | ) | $ | (15,828 | ) | ||||||||
* The difference between the book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to partnership adjustments.
As of February 28, 2023, 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 | |||||||||
| $ | 2,560 | $ | 3,697 | $ | 6,257 | ||||||
28
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
As of February 28, 2023, 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) | ||||||||||||
| $ | 168,325 | $ | 1,114 | $ | (10,739 | ) | $ | (9,625 | ) | ||||||
8. Subsequent Events:
The Board, upon recommendation of the Adviser, has approved a change in the name of the Trust and each individual fund within the Trust. On February 23, 2023, an initial filing was made with the SEC to commence the process to effectuate the following changes.
Effective at the start of business on April 24, 2023 (the "Effective Date"), the name of the Trust changed from USAA Mutual Funds Trust to Victory Portfolios III, and all references to USAA Mutual Funds Trust in the summary prospectus, statutory prospectus, and statement of additional information ("SAI") will be replaced by the new name.
Also on the Effective Date, references to the current name of the Fund in the summary prospectus, statutory prospectus, and SAI will be replaced with the new name as follows:
Current Name | New Name | ||||||
USAA New York Bond Fund | Victory New York Bond Fund | ||||||
In addition, on the Effective Date, USAA Investments, a Victory Capital Management Inc. investment franchise, that currently manages the USAA Fixed Income Funds, will change its name to Victory Income Investors, and all references to USAA Investments in the summary prospectus, statutory prospectus, and SAI, will be replaced.
Please note that there will be no changes in the management of the Fund or to the Fund's ticker symbols.
29
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of USAA New York Bond Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of USAA New York Bond Fund (the "Fund") (one of the funds constituting USAA Mutual Funds Trust (the "Trust")), including the schedule of portfolio investments as of February 28, 2023, and the related statements of operations for the period from April 1, 2022 through February 28, 2023 and the year ended March 31, 2022, the statements of changes in net assets for the period from April 1, 2022 through February 28, 2023 and each of the two years in the period ended March 31, 2022, the financial highlights for the period from April 1, 2022 through February 28, 2023 and each of the five years in the period ended March 31, 2022, 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 February 28, 2023, the results of its operations for the period from April 1, 2022 through February 28, 2023 and the year ended March 31, 2022, the statements of changes in net assets for the period from April 1, 2022 through February 28, 2023 and each of the two years in the period ended March 31, 2022, and its financial highlights for the period from April 1, 2022 through February 28, 2023 and each of the five years in the period ended March 31, 2022, 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 February 28, 2023, 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
April 28, 2023
30
USAA Mutual Funds Trust | Supplemental Information February 28, 2023 | ||||||
(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 date 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 February 28, 2023 | ||||||
(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 (06/17-06/19); 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 (03/15-03/21). | 45 | None | ||||||||||||||||||
| Paul L. McNamara (July 1948) | Trustee | Trustee since January 2012 | Retired. | 45 | None | ||||||||||||||||||
32
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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) | ||||||||||||||||||
33
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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.
34
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
Officers:
The officers of the Trust, their date 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. (since 2022); 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. (07/01/19-present); Executive Director, Investment and Financial Administration, USAA (2012-06/30/19); 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. (07/01/19-present); Accounting/ Financial Director, USAA (12/13-06/30/19). | ||||||||||||
| 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). | ||||||||||||
35
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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). | ||||||||||||
36
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 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 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 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 September 1, 2022, through February 28, 2023.
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 9/1/22 | Actual Ending Account Value 2/28/23 | Hypothetical Ending Account Value 2/28/23 | Actual Expenses Paid During Period 9/1/22- 2/28/23* | Hypothetical Expenses Paid During Period 9/1/22- 2/28/23* | Annualized Expense Ratio During Period 9/1/22- 2/28/23 | ||||||||||||||||||||||
Fund Shares | $ | 1,000.00 | $ | 1,003.00 | $ | 1,021.62 | $ | 3.18 | $ | 3.21 | 0.64 | % | |||||||||||||||
Institutional Shares | 1,000.00 | 1,003.20 | 1,021.77 | 3.03 | 3.06 | 0.61 | % | ||||||||||||||||||||
Class A | 1,000.00 | 1,002.10 | 1,020.73 | 4.07 | 4.11 | 0.82 | % | ||||||||||||||||||||
* Expenses are equal to the average account value multiplied by the Fund's annualized expense ratio multiplied by 181/365 (the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year).
37
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
Additional Federal Income Tax Information
The following federal tax information related to the Fund's fiscal 11 months ended February 28, 2023, 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 2024.
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 11 months ended February 28, 2023 (amounts in thousands):
| Tax Exempt Distributions | |||||||
$ | 5,042 | ||||||
38
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
Considerations of the Board in Continuing the Investment Advisory Agreement
USAA New York Bond Fund (the "Fund")
At a meeting of the Board of Trustees (the "Board") of USAA Mutual Funds Trust (the "Trust") held on December 8-9, 2022, 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 8-9, 2022, 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 21, 2022.
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.
39
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 program, (iv) derivatives risk management program, and (v) 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 adjustment, as well as any fee waivers and reimbursements — was above 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 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-, three-, five- and ten-year periods ended June 30, 2022, and was above its Lipper index for the one- and three-year periods ended June 30, 2022, and was below its Lipper index for the five- and ten-year periods ended June 30, 2022. The Board took into account management's discussion of the Fund's performance, including the reasons for the Fund's underperformance for certain periods.
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
40
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
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 noted that the Fund has advisory fee breakpoints that allow the Fund to participate in economies of scale and that such economies of scale were currently reflected in the advisory fee. 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.
41
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 10, 2023, 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-RN (prior to August 2022, Form N-LIQUID) and recommended no material changes to the LRMP.
42
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 | ||||||
vcm.com | (800) 235-8396 | ||||||
40864-0423
February 28, 2023
Annual Report
USAA Target Managed Allocation Fund
(Also Known as Victory Target Managed Allocation Fund*)
* Effective at the start of business on April 24, 2023, the Fund name will change to Victory Target Managed Allocation Fund. Please see Notes to the Financial Statements for subsequent event information.
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 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.
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, 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 | 15 | ||||||
Statements of Operations | 16 | ||||||
Statements of Changes in Net Assets | 17 | ||||||
Financial Highlights | 18 | ||||||
Notes to Financial Statements | 19 | ||||||
| Report of Independent Registered Public Accounting Firm | 30 | ||||||
Supplemental Information (Unaudited) | 31 | ||||||
Trustee and Officer Information | 31 | ||||||
Proxy Voting and Portfolio Holdings Information | 37 | ||||||
Expense Example | 37 | ||||||
Additional Federal Income Tax Information | 38 | ||||||
Advisory Contract Renewal | 39 | ||||||
Liquidity Risk Management Program | 42 | ||||||
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,
If you are reading this letter but double-checking your calendar, be assured there's no mistake. The annual reporting period for your USAA Mutual Fund has shifted from a fiscal year ended March 31st to a fiscal year ended February 28th/the last day of February. This change has no material impact on any of your investments. This change aims to help us improve efficiencies and reduce operational costs. Therefore, this letter covers an abbreviated "annual" period from April 1, 2022, through February 28, 2023. Future annual reports will cover the 12-month period ended February 28th/the last day of February going forward.
Our most recent annual reporting period has been a challenging period for investors. Consider some of the headwinds: heightened geopolitical tensions, a terrible war in Eastern Europe, elevated energy and food costs, high inflation, and rising interest rates. All this has dampened global growth and created a difficult backdrop for both bond and stock investors.
The inflation data was particularly troublesome and surprised many with some of the highest readings since the 1970s. In response, the U.S. Federal Reserve (the "Fed") shifted to a more restrictive monetary policy than most anticipated. The Fed has been boosting the Fed funds interest rate repeatedly and aggressively, including a series of 75 basis point raises. (A basis point is 1/100th of a percentage point.) And if that wasn't enough, zero-COVID-19 policies in China (which fortunately have been recently lifted) further exacerbated supply chain issues and raised questions about global trade. As one might expect, all of these obstacles ratcheted up volatility across financial markets. Broad market stock indices pulled back substantially around the world.
The S&P 500® Index, the bell-weather proxy for our domestic stock market, delivered a negative total return of almost 11% during our abbreviated annual reporting period. But perhaps what was even more difficult was the performance of fixed income markets, which normally are considered a safe haven in times of equity turmoil. But not during this past year when interest rates were rising sharply. In fact, the Bloomberg US Aggregate Bond Index—a proxy for a diversified fixed income portfolio and one that many investors and institutions follow closely—delivered a negative total return of approximately 7.0%. That's not exactly the offset to equity performance that many investors have come to expect from bonds.
It's been difficult, and we fully acknowledge that the steady drumbeat of bad news and bouts of stomach-churning volatility can take a toll on investors' psyche. Nobody likes opening their account statements during declining markets, and even when markets often snap back sharply (as happened this past July, October, and earlier this calendar year), investors often wonder if they have missed an opportunity.
Through all the turmoil and challenges in our most recent annual reporting period, we are reminded of two enduring realities: 1) financial markets are dynamic and apt to change abruptly; 2) it's vital to remain calm and rational whenever faced with those inevitable bouts of turmoil.
Fortunately, we think that investors can take comfort knowing that all our independent investment franchises have experience managing portfolios through a
2
wide variety of market environments. Our investment professionals remain calm during turbulent financial markets, and we think it's imperative that investors do the same.
We still believe that a long-term plan, a well-diversified portfolio across asset classes and investment types, and a clear understanding of individual risk tolerances are the key ingredients for staying the course and progressing on investment goals. Moreover, all our investment professionals continually monitor the environment and work hard to position portfolios opportunistically no matter what the markets bring. Remember, turmoil can also create opportunity.
On the following pages, you will find information relating to your USAA Mutual Fund, brought to you by Victory Capital. If you have any questions, we encourage you to contact our Member Service Representatives. Call 800-235-8396, or visit our website at vcm.com.
From all of us here at Victory Capital, thank you for your ongoing confidence and for letting us help you work toward your investment goals.
Christopher K. Dyer, CFA
President,
USAA Mutual Funds Trust
3
USAA Target Managed Allocation Fund
Manager's Commentary
(Unaudited)
• What were the market conditions during the reporting period?
The second quarter of 2022 saw continued pressure on stocks and bonds. The U.S. Federal Reserve's (the "Fed") 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.
In the third quarter, global equities declined, continuing the downward trend from the first half of 2022. The quarter began with a rally that continued into mid-August, on hopes that the Fed would pivot toward a more accommodative policy. However, messaging from Fed Chairman, Jerome Powell, and a stronger-than-expected inflation report in early September dampened investor optimism over the central bank's trajectory and the odds of avoiding recession. The Fed went on to hike rates aggressively by 75 basis points ("bps") twice during the quarter, bringing the benchmark Fed funds rate target to a range of 3.0% to 3.25%, as compared to 0% to 0.25% at the beginning of the year. (A basis point is 1/100th of a percentage point.) For its part, the European Central Bank raised its reference rate by 50 bps in July, followed by another 75 bps in September. Other factors that weighed on sentiment during the quarter included the ongoing Russia-Ukraine war, an energy crisis in Europe, and the resumption of COVID-19 lockdowns in China.
Global equities rebounded in the fourth quarter trimming full year losses. Gains in October and November were sparked by signs of peaking inflation alongside less hawkish commentary from Fed Chairman Powell raising hope that the central bank would end its interest rate hiking cycle sometime in early 2023. Indeed, both the Fed and the European Central Bank raised their benchmark overnight lending rates by a more modest 50 bps in mid-December. Also supporting sentiment, the Chinese government began to ease their zero-COVID-19 policy that had weighed on global economic growth for much of 2022. However, stocks retreated into year-end as investors shifted their focus to the potential impact higher rates might have on economic growth and corporate earnings in the coming year.
As the reporting period crossed into 2023, global equities started off the year logging positive returns in the month of January. Bonds also rallied at the start of the year on hopes that the Fed's hawkish pivot would come to an end in 2023. As the calendar moved to February, stronger than expected employment and inflation reports caused investors to reevaluate interest rate expectations for 2023 and consider that rates could stay higher for longer. The result was a reversal in global equities and bonds which ended the month lower.
4
USAA Target Managed Allocation Fund
Manager's Commentary (continued)
• How did the USAA Target Managed Allocation Fund (the "Fund") perform during the reporting period?
The Fund's fiscal year-end changed this year to February 28 from March 31, resulting in a shorter reporting period for fiscal year ended 2023. For the 11-month reporting period ended February 28, 2023, the Fund had a total return (at net asset value) of -16.21%. This compares to total returns of -10.21% for the MSCI All-Country World Index, and -6.80% for the Bloomberg U.S. Universal Index.
• What strategies did you employ during the reporting period?
USAA Mutual Funds Trust offers five funds in the Target Retirement Series, each of which has a different strategic asset allocation based on investors' risk tolerance and time horizon. Depending on our continuous assessment of market opportunities and risks, we apply tactical asset allocation decisions by overweighting or underweighting the various asset classes in each fund versus our respective strategic allocations. The Target Managed Allocation Fund allows us to make allocation changes to the Target Retirement Series more quickly and with less disruption to the underlying funds in the portfolios.
The Fund held higher than average positions in commodities which had mixed results. Holdings in oil and gold contributed positively but later in the period exposure to natural resources and gold mining equities detracted. Early in the period exposure to real estate investment trusts weighted on returns as inflation plagued the asset class. Broad exposure to international and emerging markets equities added value while tactical holdings in Canadian equities detracted. During risk-off periods the fund took smaller positions in fixed income which detracted from performance. Rapidly changing market dynamics during the period provided a difficult environment for the strategy.
The Fund also employs a tactically oriented equity futures strategy designed to provide incremental return on top of the underlying exchange-traded funds positions. This strategy contributed negatively over the time period. Long positions in futures tracking U.S. small cap and the U.K equity markets added value while the Canadian market detracted. Short positions in futures tracking the Japanese equity market detracted from performance.
Thank you for allowing us to assist you with your investment needs.
5
USAA Target Managed Allocation Fund
Investment Overview
(Unaudited)
Average Annual Total Return
Year Ended February 28, 2023
Fund Shares | |||||||||||||||
INCEPTION DATE | 8/7/15 | ||||||||||||||
Net Asset Value | MSCI All-Country | Bloomberg U.S. | |||||||||||||
One Year | –12.81 | % | –8.26 | % | –9.30 | % | |||||||||
Five Year | 5.01 | % | 5.82 | % | 0.68 | % | |||||||||
Since Inception | 5.31 | % | 7.36 | % | 1.18 | % | |||||||||
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 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 Target Managed Allocation Fund — Growth of $10,000
*Inception Date for the Target Managed Allocation Fund is 8/7/15.
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 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.
The graph reflects investment 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 Target Managed Allocation Fund | February 28, 2023 | ||||||
(Unaudited)
Investment Objective and Portfolio Holdings:
The Fund seeks to maximize total return primarily through capital appreciation.
Sector Allocation*:
February 28, 2023
(% 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 Target Managed Allocation Fund | Schedule of Portfolio Investments February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Common Stocks (86.5%) | |||||||||||
Communication Services (5.4%): | |||||||||||
Alphabet, Inc. Class A (a) | 73,269 | $ | 6,599 | ||||||||
AT&T, Inc. | 60,908 | 1,152 | |||||||||
Comcast Corp. Class A | 45,028 | 1,674 | |||||||||
Deutsche Telekom AG, ADR | 62,343 | 1,404 | |||||||||
Meta Platforms, Inc. Class A (a) | 13,893 | 2,430 | |||||||||
Netflix, Inc. (a) | 3,608 | 1,162 | |||||||||
News Corp. Class A | 61,622 | 1,057 | |||||||||
Shaw Communications, Inc. Class B | 35,537 | 1,029 | |||||||||
SoftBank Group Corp., ADR | 29,089 | 589 | |||||||||
The Walt Disney Co. (a) | 29,061 | 2,895 | |||||||||
Verizon Communications, Inc. | 37,635 | 1,461 | |||||||||
WPP PLC, ADR | 32,078 | 1,979 | |||||||||
23,431 | |||||||||||
Consumer Discretionary (8.4%): | |||||||||||
adidas AG, ADR | 10,442 | 782 | |||||||||
Amazon.com, Inc. (a) | 48,094 | 4,532 | |||||||||
Booking Holdings, Inc. (a) | 462 | 1,166 | |||||||||
Cie Financiere Richemont SA, ADR | 80,124 | 1,199 | |||||||||
Compass Group PLC, ADR | 44,366 | 1,022 | |||||||||
General Motors Co. | 22,421 | 869 | |||||||||
Hermes International, ADR | 6,109 | 1,110 | |||||||||
Hilton Worldwide Holdings, Inc. | 8,403 | 1,214 | |||||||||
Honda Motor Co. Ltd., ADR | 50,045 | 1,300 | |||||||||
InterContinental Hotels Group PLC, ADR | 19,844 | 1,367 | |||||||||
Kering SA, ADR | 18,017 | 1,059 | |||||||||
Lowe's Cos., Inc. | 5,556 | 1,143 | |||||||||
LVMH Moet Hennessy Louis Vuitton SE, ADR | 17,239 | 2,873 | |||||||||
McDonald's Corp. | 6,904 | 1,822 | |||||||||
MDC Holdings, Inc. | 22,836 | 845 | |||||||||
Mercedes-Benz Group AG, ADR | 72,005 | 1,382 | |||||||||
Meritage Homes Corp. | 8,381 | 915 | |||||||||
NIKE, Inc. Class B | 10,835 | 1,287 | |||||||||
Pearson PLC, ADR | 67,782 | 744 | |||||||||
Prosus NV, ADR | 64,981 | 931 | |||||||||
Sony Group Corp., ADR | 13,053 | 1,091 | |||||||||
Starbucks Corp. | 12,963 | 1,323 | |||||||||
Steven Madden Ltd. | 22,143 | 804 | |||||||||
Tesla, Inc. (a) | 14,433 | 2,969 | |||||||||
The Home Depot, Inc. | 5,802 | 1,721 | |||||||||
Toyota Motor Corp., ADR | 9,733 | 1,323 | |||||||||
36,793 | |||||||||||
Consumer Staples (5.1%): | |||||||||||
Archer-Daniels-Midland Co. | 18,448 | 1,468 | |||||||||
British American Tobacco PLC, ADR | 38,079 | 1,449 | |||||||||
Church & Dwight Co., Inc. | 13,379 | 1,121 | |||||||||
Costco Wholesale Corp. | 2,347 | 1,136 | |||||||||
See notes to financial statements.
8
| USAA Mutual Funds Trust USAA Target Managed Allocation Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Diageo PLC, ADR | 7,155 | $ | 1,238 | ||||||||
Hostess Brands, Inc. | 29,142 | 720 | |||||||||
L'Oreal SA, ADR | 14,208 | 1,126 | |||||||||
Mondelez International, Inc. Class A | 27,132 | 1,768 | |||||||||
Nestle SA, ADR | 28,140 | 3,166 | |||||||||
PepsiCo, Inc. | 11,247 | 1,952 | |||||||||
Philip Morris International, Inc. | 15,693 | 1,527 | |||||||||
The Coca-Cola Co. | 30,675 | 1,826 | |||||||||
The Procter & Gamble Co. | 17,350 | 2,387 | |||||||||
Unilever PLC, ADR | 30,411 | 1,518 | |||||||||
22,402 | |||||||||||
Energy (6.0%): | |||||||||||
| BP PLC, ADR | 44,238 | 1,752 | |||||||||
Canadian Natural Resources Ltd. | 24,314 | 1,374 | |||||||||
Chevron Corp. | 12,327 | 1,982 | |||||||||
ConocoPhillips | 11,599 | 1,199 | |||||||||
Enbridge, Inc. | 36,842 | 1,382 | |||||||||
EOG Resources, Inc. | 7,507 | 848 | |||||||||
Equinor ASA, ADR | 34,551 | 1,054 | |||||||||
Exxon Mobil Corp. | 33,742 | 3,708 | |||||||||
Schlumberger NV | 19,035 | 1,013 | |||||||||
Shell PLC | 135,450 | 4,102 | |||||||||
Shell PLC, ADR | 41,367 | 2,514 | |||||||||
Suncor Energy, Inc. | 32,670 | 1,098 | |||||||||
Targa Resources Corp. | 12,896 | 955 | |||||||||
TotalEnergies SE, ADR | 35,697 | 2,210 | |||||||||
Woodside Energy Group Ltd., ADR | 33,527 | 816 | |||||||||
26,007 | |||||||||||
Financials (13.7%): | |||||||||||
AIA Group Ltd., ADR | 32,085 | 1,364 | |||||||||
Allianz SE, ADR | 90,211 | 2,113 | |||||||||
American Express Co. | 9,959 | 1,733 | |||||||||
ARMOUR Residential REIT, Inc. | 203,968 | 1,107 | |||||||||
AXA SA, ADR | 64,194 | 2,025 | |||||||||
Banco Santander SA, ADR | 363,201 | 1,420 | |||||||||
Bank of America Corp. | 54,038 | 1,853 | |||||||||
Bank of Montreal | 14,040 | 1,330 | |||||||||
BankUnited, Inc. | 23,987 | 850 | |||||||||
Berkshire Hathaway, Inc. Class B (a) | 12,211 | 3,727 | |||||||||
BlackRock, Inc. | 1,738 | 1,198 | |||||||||
BNP Paribas SA, ADR | 38,579 | 1,321 | |||||||||
Brookfield Corp. | 34,540 | 1,148 | |||||||||
Columbia Banking System, Inc. | 35,970 | 1,069 | |||||||||
CVB Financial Corp. | 38,235 | 915 | |||||||||
Fifth Third Bancorp | 29,526 | 1,072 | |||||||||
First Bancorp | 68,721 | 997 | |||||||||
Hong Kong Exchanges & Clearing Ltd., ADR | 21,374 | 854 | |||||||||
HSBC Holdings PLC, ADR | 47,095 | 1,804 | |||||||||
Huntington Bancshares, Inc. | 71,363 | 1,093 | |||||||||
See notes to financial statements.
9
| USAA Mutual Funds Trust USAA Target Managed Allocation Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
ING Groep NV | 204,191 | $ | 2,857 | ||||||||
Intesa Sanpaolo SpA, ADR | 89,910 | 1,462 | |||||||||
JPMorgan Chase & Co. | 18,046 | 2,587 | |||||||||
KeyCorp | 63,181 | 1,156 | |||||||||
Loews Corp. | 31,016 | 1,895 | |||||||||
Mitsubishi UFJ Financial Group, Inc., ADR | 155,663 | 1,110 | |||||||||
National Bank Holdings Corp. Class A | 20,220 | 819 | |||||||||
Nomura Holdings, Inc., ADR | 467,981 | 1,928 | |||||||||
Prudential Financial, Inc. | 15,533 | 1,553 | |||||||||
Prudential PLC, ADR | 29,356 | 899 | |||||||||
Royal Bank of Canada | 22,409 | 2,274 | |||||||||
The Bank of Nova Scotia | 24,328 | 1,204 | |||||||||
The Charles Schwab Corp. | 12,469 | 972 | |||||||||
The Goldman Sachs Group, Inc. | 3,441 | 1,210 | |||||||||
The Hartford Financial Services Group, Inc. | 12,052 | 943 | |||||||||
The Toronto-Dominion Bank | 32,147 | 2,139 | |||||||||
UBS Group AG | 67,762 | 1,476 | |||||||||
United Community Banks, Inc. | 27,055 | 896 | |||||||||
Virtus Investment Partners, Inc. | 3,583 | 754 | |||||||||
W.R. Berkley Corp. | 6,283 | 416 | |||||||||
Wells Fargo & Co. | 29,181 | 1,365 | |||||||||
Zurich Insurance Group AG, ADR | 18,156 | 860 | |||||||||
59,768 | |||||||||||
Health Care (10.2%): | |||||||||||
Abbott Laboratories | 13,308 | 1,354 | |||||||||
AbbVie, Inc. | 10,787 | 1,660 | |||||||||
Amgen, Inc. | 4,401 | 1,020 | |||||||||
Argenx SE, ADR | 1,787 | 654 | |||||||||
AstraZeneca PLC, ADR | 36,476 | 2,378 | |||||||||
Bayer AG, ADR | 66,780 | 993 | |||||||||
Bristol-Myers Squibb Co. | 19,101 | 1,317 | |||||||||
Cigna Corp. | 3,830 | 1,119 | |||||||||
CSL Ltd., ADR | 12,704 | 1,266 | |||||||||
CVS Health Corp. | 12,872 | 1,075 | |||||||||
Danaher Corp. | 6,964 | 1,724 | |||||||||
Elevance Health, Inc. | 2,453 | 1,152 | |||||||||
Eli Lilly & Co. | 5,147 | 1,602 | |||||||||
EssilorLuxottica SA, ADR | 12,715 | 1,102 | |||||||||
Gilead Sciences, Inc. | 16,047 | 1,292 | |||||||||
GSK PLC, ADR | 27,739 | 951 | |||||||||
Intuitive Surgical, Inc. (a) | 4,078 | 935 | |||||||||
Johnson & Johnson | 14,874 | 2,280 | |||||||||
Lonza Group AG, ADR | 25,281 | 1,505 | |||||||||
Medtronic PLC | 13,852 | 1,147 | |||||||||
Merck & Co., Inc. | 16,276 | 1,729 | |||||||||
Novartis AG, ADR | 23,273 | 1,958 | |||||||||
Novo Nordisk A/S, ADR | 18,515 | 2,610 | |||||||||
Pfizer, Inc. | 33,284 | 1,350 | |||||||||
Roche Holdings Ltd., ADR | 64,609 | 2,329 | |||||||||
Sanofi, ADR | 27,460 | 1,287 | |||||||||
See notes to financial statements.
10
| USAA Mutual Funds Trust USAA Target Managed Allocation Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Stryker Corp. | 4,896 | $ | 1,287 | ||||||||
The Ensign Group, Inc. | 11,838 | 1,059 | |||||||||
Thermo Fisher Scientific, Inc. | 3,408 | 1,846 | |||||||||
UnitedHealth Group, Inc. | 5,435 | 2,587 | |||||||||
44,568 | |||||||||||
Industrials (9.2%): | |||||||||||
3M Co. | 11,250 | 1,212 | |||||||||
ABB Ltd., ADR | 45,063 | 1,501 | |||||||||
Aerojet Rocketdyne Holdings, Inc. | 17,920 | 1,010 | |||||||||
Airbus SE, ADR | 43,378 | 1,418 | |||||||||
AMETEK, Inc. | 11,785 | 1,668 | |||||||||
Applied Industrial Technologies, Inc. | 7,214 | 1,031 | |||||||||
Atlas Copco AB, ADR | 150,762 | 1,782 | |||||||||
Canadian National Railway Co. | 11,015 | 1,254 | |||||||||
Canadian Pacific Railway Ltd. | 17,335 | 1,316 | |||||||||
Caterpillar, Inc. | 4,580 | 1,097 | |||||||||
Comfort Systems USA, Inc. | 6,403 | 931 | |||||||||
Daikin Industries Ltd., ADR | 55,999 | 960 | |||||||||
Deere & Co. | 2,325 | 975 | |||||||||
Deutsche Post AG, ADR | 26,210 | 1,113 | |||||||||
Dover Corp. | 11,498 | 1,724 | |||||||||
DSV A/S, ADR | 7,933 | 721 | |||||||||
Experian PLC, ADR | 33,565 | 1,131 | |||||||||
Exponent, Inc. | 8,500 | 875 | |||||||||
Hitachi Ltd., ADR | 9,454 | 954 | |||||||||
Honeywell International, Inc. | 8,252 | 1,580 | |||||||||
Korn Ferry | 17,343 | 969 | |||||||||
Lockheed Martin Corp. | 2,867 | 1,360 | |||||||||
Parker-Hannifin Corp. | 5,366 | 1,888 | |||||||||
Raytheon Technologies Corp. | 18,254 | 1,790 | |||||||||
RELX PLC, ADR | 45,021 | 1,364 | |||||||||
Schneider Electric SE, ADR | 66,625 | 2,135 | |||||||||
Siemens AG, ADR | 27,222 | 2,081 | |||||||||
The Boeing Co. (a) | 6,971 | 1,405 | |||||||||
United Parcel Service, Inc. Class B | 6,456 | 1,178 | |||||||||
United Rentals, Inc. | 2,012 | 943 | |||||||||
Vestas Wind Systems A/S, ADR | 66,654 | 629 | |||||||||
39,995 | |||||||||||
Information Technology (15.2%): | |||||||||||
Accenture PLC Class A | 6,802 | 1,806 | |||||||||
Adobe, Inc. (a) | 4,133 | 1,339 | |||||||||
Advanced Energy Industries, Inc. | 9,481 | 882 | |||||||||
Advanced Micro Devices, Inc. (a) | 27,431 | 2,156 | |||||||||
Adyen NV, ADR | 50,136 | 711 | |||||||||
Amadeus IT Group SA, ADR | 16,090 | 1,011 | |||||||||
Amphenol Corp. Class A | 23,537 | 1,825 | |||||||||
Apple, Inc. | 77,747 | 11,461 | |||||||||
Applied Materials, Inc. | 10,406 | 1,209 | |||||||||
| ASML Holding NV | 4,490 | 2,774 | |||||||||
See notes to financial statements.
11
| USAA Mutual Funds Trust USAA Target Managed Allocation Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Broadcom, Inc. | 3,048 | $ | 1,811 | ||||||||
Cisco Systems, Inc. | 39,748 | 1,925 | |||||||||
Dassault Systemes SE, ADR | 26,482 | 1,023 | |||||||||
Diodes, Inc. (a) | 12,224 | 1,121 | |||||||||
Fabrinet | 6,685 | 815 | |||||||||
Infineon Technologies AG, ADR | 37,648 | 1,334 | |||||||||
Insight Enterprises, Inc. (a) | 10,486 | 1,404 | |||||||||
Intel Corp. | 40,755 | 1,016 | |||||||||
International Business Machines Corp. | 8,994 | 1,163 | |||||||||
Intuit, Inc. | 2,941 | 1,197 | |||||||||
Knowles Corp. (a) | 43,759 | 743 | |||||||||
Mastercard, Inc. Class A | 5,602 | 1,990 | |||||||||
Microsoft Corp. | 35,485 | 8,851 | |||||||||
Nokia Oyj, ADR | 184,648 | 849 | |||||||||
NVIDIA Corp. | 12,526 | 2,908 | |||||||||
Oracle Corp. | 12,930 | 1,130 | |||||||||
PayPal Holdings, Inc. (a) | 11,554 | 850 | |||||||||
QUALCOMM, Inc. | 9,508 | 1,175 | |||||||||
Salesforce, Inc. (a) | 8,390 | 1,373 | |||||||||
Sanmina Corp. (a) | 14,722 | 890 | |||||||||
SAP SE, ADR | 16,844 | 1,917 | |||||||||
ServiceNow, Inc. (a) | 2,390 | 1,033 | |||||||||
SPS Commerce, Inc. (a) | 5,261 | 792 | |||||||||
Texas Instruments, Inc. | 9,433 | 1,617 | |||||||||
Visa, Inc. Class A | 9,841 | 2,164 | |||||||||
66,265 | |||||||||||
Materials (8.1%): | |||||||||||
Agnico Eagle Mines Ltd. | 40,166 | 1,849 | |||||||||
Air Liquide SA, ADR | 64,311 | 2,043 | |||||||||
Amcor PLC | 63,872 | 711 | |||||||||
Anglo American PLC, ADR | 53,089 | 917 | |||||||||
Arcelormittal SA | 34,319 | 1,038 | |||||||||
Barrick Gold Corp. | 151,786 | 2,447 | |||||||||
BASF SE, ADR | 103,381 | 1,320 | |||||||||
BHP Group Ltd., ADR | 39,465 | 2,406 | |||||||||
Corteva, Inc. | 31,413 | 1,957 | |||||||||
DuPont de Nemours, Inc. | 14,616 | 1,067 | |||||||||
Eastman Chemical Co. | 10,376 | 884 | |||||||||
Franco-Nevada Corp. | 20,451 | 2,609 | |||||||||
Freeport-McMoRan, Inc. | 25,749 | 1,055 | |||||||||
Givaudan SA, ADR | 19,929 | 1,202 | |||||||||
Glencore PLC, ADR | 121,110 | 1,438 | |||||||||
H.B. Fuller Co. | 17,123 | 1,194 | |||||||||
Linde PLC | 5,425 | 1,890 | |||||||||
Newmont Corp. | 24,689 | 1,077 | |||||||||
Nutrien Ltd. | 14,427 | 1,122 | |||||||||
Rio Tinto PLC, ADR | 23,580 | 1,644 | |||||||||
Shin-Etsu Chemical Co. Ltd., ADR | 36,664 | 1,269 | |||||||||
Sika AG, ADR | 51,657 | 1,447 | |||||||||
Teck Resources Ltd. Class B | 20,215 | 807 | |||||||||
See notes to financial statements.
12
| USAA Mutual Funds Trust USAA Target Managed Allocation Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Wheaton Precious Metals Corp. | 51,756 | $ | 2,156 | ||||||||
35,549 | |||||||||||
Real Estate (2.1%): | |||||||||||
Agree Realty Corp. | 19,537 | 1,383 | |||||||||
Brandywine Realty Trust | 119,898 | 706 | |||||||||
Essential Properties Realty Trust, Inc. | 45,077 | 1,161 | |||||||||
LXP Industrial Trust | 112,309 | 1,172 | |||||||||
Mid-America Apartment Communities, Inc. | 8,830 | 1,414 | |||||||||
Prologis, Inc. | 10,269 | 1,267 | |||||||||
Retail Opportunity Investments Corp. | 50,622 | 720 | |||||||||
SITE Centers Corp. | 89,531 | 1,197 | |||||||||
9,020 | |||||||||||
Utilities (3.1%): | |||||||||||
American Electric Power Co., Inc. | 15,792 | 1,389 | |||||||||
Avista Corp. | 20,887 | 859 | |||||||||
Enel SpA, ADR | 218,911 | 1,215 | |||||||||
Eversource Energy | 17,870 | 1,347 | |||||||||
Iberdrola SA | 397,265 | 4,553 | |||||||||
National Grid PLC, ADR | 19,545 | 1,230 | |||||||||
NextEra Energy, Inc. | 23,946 | 1,701 | |||||||||
Xcel Energy, Inc. | 20,439 | 1,320 | |||||||||
13,614 | |||||||||||
Total Common Stocks (Cost $372,805) | 377,412 | ||||||||||
Exchange-Traded Funds (7.2%) | |||||||||||
Flexshares Morningstar Global Upstream Natural Resources Index Fund | 341,011 | 14,554 | |||||||||
SPDR Gold Shares (a) | 70,040 | 11,892 | |||||||||
VanEck Gold Miners ETF | 108,538 | 2,986 | |||||||||
Vanguard FTSE Emerging Markets ETF | 49,651 | 1,957 | |||||||||
Total Exchange-Traded Funds (Cost $31,835) | 31,389 | ||||||||||
Total Investments (Cost $404,640) — 93.7% | 408,801 | ||||||||||
Other assets in excess of liabilities — 6.3% | 27,411 | ||||||||||
NET ASSETS — 100.00% | $ | 436,212 | |||||||||
At February 28, 2023, the Fund's investments in foreign securities were 36.8% of net assets.
(a) Non-income producing security.
ADR — American Depositary Receipt
ETF — Exchange-Traded Fund
PLC — Public Limited Company
REIT — Real Estate Investment Trust
See notes to financial statements.
13
| USAA Mutual Funds Trust USAA Target Managed Allocation Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
Futures Contracts Purchased | |||||||||||||||||||||||
(Amounts not in thousands) | |||||||||||||||||||||||
| Number of Contracts | Expiration Date | Notional Amount | Value | Unrealized Appreciation (Depreciation) | |||||||||||||||||||
E-Mini Russell 2000 Index Futures | 404 | 3/17/23 | $ | 37,011,884 | $ | 38,361,820 | $ | 1,349,936 | |||||||||||||||
FTSE 100 Index Futures | 445 | 3/17/23 | 40,154,693 | 42,071,453 | 1,916,760 | ||||||||||||||||||
| S&P/Toronto Stock Exchange 60 Index Futures | 286 | 3/16/23 | 50,826,055 | 51,066,188 | 240,133 | ||||||||||||||||||
$ | 3,506,829 | ||||||||||||||||||||||
Futures Contracts Sold | |||||||||||||||||||||||
(Amounts not in thousands) | |||||||||||||||||||||||
| Number of Contracts | Expiration Date | Notional Amount | Value | Unrealized Appreciation (Depreciation) | |||||||||||||||||||
ASX SPI 200 Index Futures | 260 | 3/16/23 | $ | 31,417,016 | $ | 31,473,546 | $ | (56,530 | ) | ||||||||||||||
Hang Seng Index Futures | 81 | 3/30/23 | 10,298,316 | 10,186,401 | 111,915 | ||||||||||||||||||
Swiss Market Index Futures | 408 | 3/17/23 | 46,653,503 | 47,763,212 | (1,109,709 | ) | |||||||||||||||||
Tokyo Price Index Futures | 271 | 3/9/23 | 38,175,056 | 39,712,429 | (1,537,373 | ) | |||||||||||||||||
$ | (2,591,697 | ) | |||||||||||||||||||||
Total unrealized appreciation | $ | 3,618,744 | |||||||||||||||||||||
Total unrealized depreciation | (2,703,612 | ) | |||||||||||||||||||||
Total net unrealized appreciation (depreciation) | $ | 915,132 | |||||||||||||||||||||
See notes to financial statements.
14
USAA Mutual Funds Trust | Statement of Assets and Liabilities February 28, 2023 | ||||||
(Amounts in Thousands, Except Per Share Amounts)
| USAA Target Managed Allocation Fund | |||||||
Assets: | |||||||
Investments, at value (Cost $404,640) | $ | 408,801 | |||||
Cash | 2,734 | ||||||
Deposit with broker for futures contracts | 22,046 | ||||||
Receivables: | |||||||
Dividends | 530 | ||||||
Investments sold | 52,504 | ||||||
Variation margin on open futures contracts | 593 | ||||||
Total Assets | 487,208 | ||||||
Liabilities: | |||||||
Payables: | |||||||
Investments purchased | 50,117 | ||||||
Variation margin on open futures contracts | 625 | ||||||
Accrued expenses and other payables: | |||||||
Investment advisory fees | 171 | ||||||
Administration fees | 17 | ||||||
Custodian fees | 3 | ||||||
Transfer agent fees | 17 | ||||||
Compliance fees | — | (a) | |||||
Trustees' fees | 1 | ||||||
Other accrued expenses | 45 | ||||||
Total Liabilities | 50,996 | ||||||
Net Assets: | |||||||
Capital | 487,326 | ||||||
Total accumulated earnings/(loss) | (51,114 | ) | |||||
Net Assets | $ | 436,212 | |||||
Shares (unlimited number of shares authorized with no par value): | 50,503 | ||||||
Net asset value, offering and redemption price per share: (b) | $ | 8.64 | |||||
(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.
15
USAA Mutual Funds Trust | Statements of Operations | ||||||
(Amounts in Thousands)
| USAA Target Managed Allocation Fund | |||||||||||
| 11 Months Ended February 28, 2023(a) | Year Ended March 31, 2022 | ||||||||||
Investment Income: | |||||||||||
Dividends | $ | 9,146 | $ | 9,087 | |||||||
Interest | 5 | — | |||||||||
Securities lending (net of fees) | 318 | 208 | |||||||||
Foreign tax withholding | (17 | ) | — | ||||||||
Total Income | 9,452 | 9,295 | |||||||||
Expenses: | |||||||||||
Investment advisory fees | 2,044 | 2,721 | |||||||||
Administration fees | 204 | 272 | |||||||||
Sub-Administration fees | 19 | 21 | |||||||||
Custodian fees | 16 | 22 | |||||||||
Transfer agent fees | 204 | 272 | |||||||||
Trustees' fees | 48 | 49 | |||||||||
Compliance fees | 4 | 4 | |||||||||
Legal and audit fees | 61 | 39 | |||||||||
State registration and filing fees | — | (b) | 1 | ||||||||
Interfund lending fees | 1 | 2 | |||||||||
Interest fees | 194 | 69 | |||||||||
Other expenses | 39 | 56 | |||||||||
Total Expenses | 2,834 | 3,528 | |||||||||
Net Investment Income (Loss) | 6,618 | 5,767 | |||||||||
Realized/Unrealized Gains (Losses) from Investments: | |||||||||||
Net realized gains (losses) from investment securities | (34,406 | ) | 67,724 | ||||||||
Net realized gains (losses) from foreign currency transactions | 2 | 101 | |||||||||
Net realized gains (losses) from futures contracts | (15,184 | ) | 11,599 | ||||||||
| Net change in unrealized appreciation/depreciation on investment securities | (42,498 | ) | (15,867 | ) | |||||||
| Net change in unrealized appreciation/depreciation in foreign currency translations | 13 | (222 | ) | ||||||||
| Net change in unrealized appreciation/depreciation on futures contracts | 1,251 | (2,880 | ) | ||||||||
Net realized/unrealized gains (losses) on investments | (90,822 | ) | 60,455 | ||||||||
Change in net assets resulting from operations | $ | (84,204 | ) | $ | 66,222 | ||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from March 31 to February 28.
(b) Rounds to less than $1 thousand.
See notes to financial statements.
16
USAA Mutual Funds Trust | Statements of Changes in Net Assets | ||||||
(Amounts in Thousands)
USAA Target Managed Allocation Fund | |||||||||||||||
| 11 Months Ended February 28, 2023(a) | Year Ended March 31, 2022 | Year Ended March 31, 2021 | |||||||||||||
From Investments: | |||||||||||||||
Operations: | |||||||||||||||
Net Investment Income (Loss) | $ | 6,618 | $ | 5,767 | $ | 4,877 | |||||||||
Net realized gains (losses) | (49,588 | ) | 79,424 | 81,493 | |||||||||||
| Net change in unrealized appreciation/depreciation | (41,234 | ) | (18,969 | ) | 96,986 | ||||||||||
| Change in net assets resulting from operations | (84,204 | ) | 66,222 | 183,356 | |||||||||||
| Change in net assets resulting from distributions to shareholders | (18,440 | ) | (121,136 | ) | (30,747 | ) | |||||||||
| Change in net assets resulting from capital transactions | 18,495 | 45,662 | (69,612 | ) | |||||||||||
Change in net assets | (84,149 | ) | (9,252 | ) | 82,997 | ||||||||||
Net Assets: | |||||||||||||||
Beginning of period | 520,361 | 529,613 | 446,616 | ||||||||||||
End of period | $ | 436,212 | $ | 520,361 | $ | 529,613 | |||||||||
Capital Transactions: | |||||||||||||||
Proceeds from shares issued | $ | 3,200 | $ | — | $ | 1,065 | |||||||||
Distributions reinvested | 18,440 | 121,136 | 30,747 | ||||||||||||
Cost of shares redeemed | (3,145 | ) | (75,474 | ) | (101,424 | ) | |||||||||
| Change in net assets resulting from capital transactions | $ | 18,495 | $ | 45,662 | $ | (69,612 | ) | ||||||||
Share Transactions: | |||||||||||||||
Issued | 373 | — | 94 | ||||||||||||
Reinvested | 2,120 | 11,133 | 2,654 | ||||||||||||
Redeemed | (372 | ) | (6,061 | ) | (9,179 | ) | |||||||||
Change in Shares | 2,121 | 5,072 | (6,431 | ) | |||||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from March 31 to February 28.
See notes to financial statements.
17
USAA Mutual Funds Trust | Financial Highlights | ||||||
For a Share Outstanding Throughout Each Period
USAA Target Managed Allocation Fund | |||||||||||||||||||||||||||
| 11 Months Ended February 28, 2023(a) | Year Ended March 31, 2022 | Year Ended March 31, 2021 | Year Ended March 31, 2020 | Year Ended March 31, 2019 | Year Ended March 31, 2018 | ||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 10.76 | $ | 12.23 | $ | 8.98 | $ | 10.26 | $ | 11.22 | $ | 10.46 | |||||||||||||||
Investment Activities: | |||||||||||||||||||||||||||
Net investment income (loss) | 0.14 | (b) | 0.13 | (b) | 0.11 | (b) | 0.20 | (b) | 0.17 | 0.16 | |||||||||||||||||
| Net realized and unrealized gains (losses) | (1.88 | ) | 1.44 | 3.84 | (0.96 | ) | (0.10 | ) | 0.73 | ||||||||||||||||||
| Total from Investment Activities | (1.74 | ) | 1.57 | 3.95 | (0.76 | ) | 0.07 | 0.89 | |||||||||||||||||||
Distributions to Shareholders from: | |||||||||||||||||||||||||||
Net investment income | (0.01 | ) | (0.13 | ) | (0.09 | ) | (0.22 | ) | (0.15 | ) | (0.13 | ) | |||||||||||||||
Net realized gains | (0.37 | ) | (2.91 | ) | (0.61 | ) | (0.30 | ) | (0.88 | ) | — | (c) | |||||||||||||||
Total Distributions | (0.38 | ) | (3.04 | ) | (0.70 | ) | (0.52 | ) | (1.03 | ) | (0.13 | ) | |||||||||||||||
Net Asset Value, End of Period | $ | 8.64 | $ | 10.76 | $ | 12.23 | $ | 8.98 | $ | 10.26 | $ | 11.22 | |||||||||||||||
Total Return (d) (e) | (16.21 | )% | 12.85 | % | 44.39 | % | (8.20 | )% | 1.32 | % | 8.48 | % | |||||||||||||||
Ratios to Average Net Assets: | |||||||||||||||||||||||||||
Net Expenses (f) (g) (h) | 0.69 | % | 0.65 | % | 0.64 | % | 0.64 | % | 0.65 | % | 0.65 | % | |||||||||||||||
Net Investment Income (Loss) (f) | 1.62 | % | 1.06 | % | 0.96 | % | 1.88 | % | 1.83 | % | 1.50 | % | |||||||||||||||
Gross Expenses (f) (g) | 0.69 | % | 0.65 | % | 0.64 | % | 0.64 | % | 0.65 | % | 0.65 | % | |||||||||||||||
Supplemental Data: | |||||||||||||||||||||||||||
Net Assets at end of period (000's) | $ | 436,212 | $ | 520,361 | $ | 529,613 | $ | 446,616 | $ | 512,207 | $ | 487,599 | |||||||||||||||
Portfolio Turnover (d) | 314 | %(i) | 152 | %(j) | 202 | %(j) | 298 | %(k) | 195 | %(k) | 75 | % | |||||||||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from March 31 to February 28.
(b) Per share net investment income (loss) has been calculated using the average daily shares method.
(c) Amount is less than $0.005 per share.
(d) Not annualized for periods less than one year.
(e) Assumes reinvestment of all net investment income and realized capital gain distributions, if any, during the period. Includes adjustments in accordance with U.S. Generally Accepted Accounting Principles and could differ from the Lipper reported return.
(f) Annualized for periods less than one year.
(g) Does not include acquired fund fees and expenses, if any.
(h) 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 July 31, 2023, instead of coinciding with the Fund's fiscal year end.
(i) Reflects increased trading activity due to an investment strategy change that was effective December 23, 2022.
(j) Reflects overall decrease in purchases and sales of securities.
(k) Reflects overall increase in trading activity due to asset allocation shifts.
See notes to financial statements.
18
USAA Mutual Funds Trust | Notes to Financial Statements February 28, 2023 | ||||||
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 Target Managed Allocation Fund (the "Fund"). The Fund is classified as diversified under the 1940 Act.
The Fund is not offered for sale directly to the general public and is available currently for investment only to other USAA Mutual Funds participating in a fund-of-funds investment strategy, or to other persons or legal entities that the Fund may approve from time to time.
On June 29, 2022, the Board of Trustees ("the Board") approved the fiscal year-end change for the Fund from March 31 to February 28. The first full cycle of the new fiscal year-end reporting will begin March 1, 2023. As a result of the change, the Fund has a February 28, 2023 fiscal 11-month transition period, the results of which are reported in this Annual Report for the period ended February 28, 2023.
Victory Capital Management ("VCM" or 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 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 (unadjusted) in active markets for identical securities
• Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, or credit spreads, applicable to those securities, etc.)
• Level 3 — significant unobservable inputs (including the Adviser's assumptions in determining the fair value of investments)
19
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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, appointed as the valuation designee by the Board, has established the Pricing and Liquidity Committee (the "Committee"), and subject to Board oversight, the Committee administers and oversees the Fund's valuation policies and procedures, which are approved by the Board.
Portfolio securities listed or traded on securities exchanges, including Exchange-Traded Funds ("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.
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.
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.
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 February 28, 2023, 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 | $ | 365,899 | $ | 11,513 | $ | — | $ | 377,412 | |||||||||||
Exchange-Traded Funds | 31,389 | — | — | 31,389 | |||||||||||||||
Total | $ | 397,288 | $ | 11,513 | $ | — | $ | 408,801 | |||||||||||
Other Financial Investments* | |||||||||||||||||||
Assets: | |||||||||||||||||||
Futures Contracts | $ | 3,619 | $ | — | $ | — | $ | 3,619 | |||||||||||
Liabilities: | |||||||||||||||||||
Futures Contracts | $ | (2,704 | ) | $ | — | $ | — | $ | (2,704 | ) | |||||||||
Total | $ | 915 | $ | — | $ | — | $ | 915 | |||||||||||
* Futures contracts are valued at the unrealized appreciation (depreciation) on the investment.
As of February 28, 2023, there were no transfers into/out of Level 3.
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
20
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 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.
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 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 11 months ended February 28, 2023, 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.
21
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 February 28, 2023 (amounts in thousands):
Assets | Liabilities | ||||||||||
| Variation Margin Receivable on Open Futures Contracts* | Variation Margin Payable on Open Futures Contracts* | ||||||||||
Equity Risk Exposure | $ | 3,619 | $ | 2,704 | |||||||
* 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 Statements of Operations, categorized by risk exposure, for the 11 months ended February 28, 2023 (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 | $ | (15,184 | ) | $ | 1,251 | ||||||
The following table presents the effect of derivative instruments on the Statements of Operations, categorized by risk exposure, for the year ended March 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 | $ | 11,599 | $ | (2,880 | ) | ||||||
All open derivative positions at period 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 period end is generally representative of the notional amount of open positions to net assets throughout the period.
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 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
22
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 Statements 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 February 28, 2023, the Fund did not have any securities on loan.
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 foreign currency translations on the Statements of Operations. Any realized gains or losses from these fluctuations are disclosed as Net realized gains (losses) from foreign currency transactions on the Statements 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 had a tax year end of March 31, and effective February 28, 2023, the Fund changed its tax year end to February 28.
23
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
For the 11 months ended February 28, 2023, 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 11 months ended February 28, 2023, were as follows for the Fund (amounts in thousands):
Excluding | |||||||
Purchases | Sales | ||||||
$ | 1,375,703 | $ | 1,406,486 | ||||
4. Affiliated Fund Ownership:
The Fund offers 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 vcm.com. As of February 28, 2023, certain fund-of-funds owned a percentage of total outstanding shares of the Fund as follows:
Affiliated USAA Mutual Funds | Ownership % | ||||||
USAA Cornerstone Conservative Fund | 1.2 | ||||||
USAA Cornerstone Equity Fund | 2.9 | ||||||
USAA Target Retirement Income Fund | 7.6 | ||||||
USAA Target Retirement 2030 Fund | 23.7 | ||||||
USAA Target Retirement 2040 Fund | 36.3 | ||||||
USAA Target Retirement 2050 Fund | 24.7 | ||||||
USAA Target Retirement 2060 Fund | 3.6 | ||||||
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.
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 incurred and paid to VCM for the 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements 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
24
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
approval) one or more subadvisers to manage the day-to-day investment of a fund's assets. For the 11 months ended February 28, 2023, and the year ended March 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 0.05%, which is based on the Fund's average daily net assets of the Fund Shares. Amounts incurred for the 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements 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 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements 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 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements 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 fees for the Fund are paid monthly based on a fee accrued daily at an annualized rate of 0.05% of average daily net assets, plus out-of-pocket expenses. Amounts incurred and paid to VCTA for the 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements 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 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements 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 July 31, 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
25
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
limit 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 February 28, 2023, the expense limit (excluding voluntary waivers) was 0.65%.
Under the terms of the expense limitation agreement, 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 limit in effect at the time of: (a) the original waiver or expense reimbursement; or (b) the recoupment, after giving effect to the recoupment amount.
As February 28, 2023, and March 31, 2022, there were 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 11 months ended February 28, 2023, and the year ended March 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.
Portfolio Reallocation Risk — The frequent changes in the allocation of the Fund's portfolio holdings will result in higher portfolio turnover. In purchasing and selling securities in order to reallocate the portfolio, the Fund will pay more brokerage commissions than it would without a reallocation policy. In addition, the Fund may have a higher proportion of capital gains and a potentially lower return than a fund that does not reallocate from time to time.
ETF Risk — The Fund may invest in shares of 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.
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.
Derivatives Risk — The Fund may invest in futures, options, and other types of derivatives. Risks associated with derivatives include the risk that the derivative is not well-correlated with the security, index, ETFs, or currency to which it relates; the risk that the use of derivatives may not have the
26
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
intended effects and may result in losses, underperformance, or missed opportunities; the risk that the Fund will be unable to sell the derivative because of an illiquid secondary market; the risk that a counterparty is unwilling or unable to meet its obligation; the risk of interest rate movements; and the risk that the derivatives transaction could expose the Fund to the effects of leverage, which could increase the Fund's market exposure, magnify investment risks and losses, and cause losses to be realized more quickly. There is no guarantee that derivative techniques will be employed or that they will work as intended, and their use could lower returns or even result in losses to the Fund. In addition, proposed and current regulations may limit the Fund's ability to invest in derivatives.
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 27, 2022, with a termination date of June 26, 2023. 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 11 months ended February 28, 2023, 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 paid a pro-rata portion of the commitment fees plus any interest on amounts borrowed. For the year ended March 31, 2022, and the period from April 1, 2022, through June 27, 2022, interest was based on the one-month London Interbank Offered Rate ("LIBOR") plus one percent. Effective with the renewal, for the period June 28, 2022, through February 28, 2023, interest was based on the one-month Secured Overnight Financing Rate ("SOFR") plus 1.10 percent. The Fund did not experience a material financial impact transitioning from LIBOR to SOFR. Interest charged to the 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 11 months ended February 28, 2023, and the year ended March 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 Statements of Operations under Interfund lending fees. As a Lender, interest earned by the Fund, if any, during the period, is reflected on the Statements of Operations under Interfund lending.
The average borrowing or lending for the days outstanding and average interest rate for the Fund during the 11 months ended February 28, 2023, were as follows (amounts in thousands):
Borrower | Amount | Average | Days | Average | Maximum | ||||||||||||||||||
Borrower | $ | — | $ | 11,382 | 1 | 3.58 | % | $ | 11,382 | ||||||||||||||
* Based on the number of days borrowings were outstanding for the 11 months ended February 28, 2023.
27
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
The average borrowing or lending for the days outstanding and average interest rate for the Fund during the year ended March 31, 2022, were as follows (amounts in thousands):
Borrower | Amount | Average | Days | Average | Maximum | ||||||||||||||||||
Borrower | $ | — | $ | 23,411 | 6 | 0.56 | % | $ | 29,682 | ||||||||||||||
* Based on the number of days borrowings were outstanding for the year ended March 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 February 28, 2023, on the Statement 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):
11 Months Ended February 28, 2023 | |||||||||||||||
Distributions Paid From |
| ||||||||||||||
Ordinary | Net | Total Taxable | Total | ||||||||||||
$ | 15,811 | $ | 2,629 | $ | 18,440 |
| $ | 18,440 | |||||||
Year Ended March 31, 2022 | Year Ended March 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 | ||||||||||||||||||
$ | 63,650 | $ | 57,486 | $ | 121,136 | $ | 22,170 | $ | 8,577 | $ | 30,747 | ||||||||||||
As of February 28, 2023, 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 Losses | Unrealized Appreciation (Depreciation)* | Total Accumulated Earnings (Loss) | |||||||||||||||
| $ | 6,637 | $ | 6,637 | $ | (60,722 | ) | $ | 2,971 | $ | (51,114 | ) | ||||||||
* The difference between the book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to tax deferral of losses on wash sales.
28
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
As of February 28, 2023, 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 | |||||||||
| $ | 56,186 | $ | 4,536 | $ | 60,722 | ||||||
As of February 28, 2023, the cost basis for federal income tax purposes, gross unrealized appreciation, gross unrealized depreciation, and net unrealized appreciation (depreciation) for investments, including derivatives, were as follows (amounts in thousands):
| Cost of Investments for Federal Tax Purposes | Gross Unrealized Appreciation | Gross Unrealized Depreciation | Net Unrealized Appreciation (Depreciation) | ||||||||||||
| $ | 404,640 | $ | 16,267 | $ | (13,296 | ) | $ | 2,971 | |||||||
9. Subsequent Events:
The Board, upon recommendation of the Adviser, has approved a change in the name of the Trust and each individual fund within the Trust. On February 23, 2023, an initial filing was made with the SEC to commence the process to effectuate the following changes.
Effective at the start of business on April 24, 2023 (the "Effective Date"), the name of the Trust changed from USAA Mutual Funds Trust to Victory Portfolios III, and all references to USAA Mutual Funds Trust in the summary prospectus, statutory prospectus, and statement of additional information ("SAI") will be replaced by the new name.
Also on the Effective Date, references to the current name of the Fund in the summary prospectus, statutory prospectus, and SAI will be replaced with the new name as follows:
Current Name | New Name | ||||||
USAA Target Managed Allocation Fund | Victory Target Managed Allocation Fund | ||||||
In addition, on the Effective Date, USAA Investments, a Victory Capital Management Inc. investment franchise, that currently manages the USAA Fixed Income Funds, will change its name to Victory Income Investors, and all references to USAA Investments in the summary prospectus, statutory prospectus, and SAI, will be replaced.
Please note that there will be no changes in the management of the Fund or to the Fund's ticker symbols.
29
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of USAA Target Managed Allocation Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of USAA Target Managed Allocation Fund (the "Fund") (one of the funds constituting USAA Mutual Funds Trust (the "Trust")), including the schedule of portfolio investments as of February 28, 2023, and the related statements of operations for the period from April 1, 2022 through February 28, 2023 and the year ended March 31, 2022, the statements of changes in net assets for the period from April 1, 2022 through February 28, 2023 and each of the two years in the period ended March 31, 2022, the financial highlights for the period from April 1, 2022 through February 28, 2023 and each of the five years in the period ended March 31, 2022, 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 February 28, 2023, the results of its operations for the period from April 1, 2022 through February 28, 2023 and the year ended March 31, 2022, the statements of changes in net assets for the period from April 1, 2022 through February 28, 2023 and each of the two years in the period ended March 31, 2022, and its financial highlights for the period from April 1, 2022 through February 28, 2023 and each of the five years in the period ended March 31, 2022, 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 February 28, 2023, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. 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
April 28, 2023
30
USAA Mutual Funds Trust | Supplemental Information February 28, 2023 | ||||||
(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 date 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 | ||||||||||||||||||
31
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 (06/17-06/19); 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 (03/15-03/21). | 45 | None | ||||||||||||||||||
| Paul L. McNamara (July 1948) | Trustee | Trustee since January 2012 | Retired. | 45 | None | ||||||||||||||||||
32
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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) | ||||||||||||||||||
33
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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.
34
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
Officers:
The officers of the Trust, their date 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. (since 2022); 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. (07/01/19-present); Executive Director, Investment and Financial Administration, USAA (2012-06/30/19); 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. (07/01/19-present); Accounting/ Financial Director, USAA (12/13-06/30/19). | ||||||||||||
| 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). | ||||||||||||
35
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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). | ||||||||||||
36
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 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 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 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 September 1, 2022, through February 28, 2023.
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 9/1/22 | Actual Ending Account Value 2/28/23 | Hypothetical Ending Account Value 2/28/23 | Actual Expenses Paid During Period 9/1/22- 2/28/23* | Hypothetical Expenses Paid During Period 9/1/22- 2/28/23* | Annualized Expense Ratio During Period 9/1/22- 2/28/23 | ||||||||||||||||||
| $ | 1,000.00 | $ | 1,002.90 | $ | 1,021.57 | $ | 3.23 | $ | 3.26 | 0.65 | % | ||||||||||||
* Expenses are equal to the average account value multiplied by the Fund's annualized expense ratio multiplied by 181/365 (the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year).
37
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
Additional Federal Income Tax Information
The following federal tax information related to the Fund's fiscal 11 months ended February 28, 2023, 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 2024.
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 11 months ended February 28, 2023 (amounts in thousands):
| Short-Term Capital Gain Distributions | Long-Term Capital Gain Distributions | ||||||
| $ | 15,466 | $ | 2,629 | ||||
38
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
Considerations of the Board in Continuing the Investment Advisory Agreement
USAA Target Managed Allocation Fund (the "Fund")
At a meeting of the Board of Trustees (the "Board") of USAA Mutual Funds Trust (the "Trust") held on December 8-9, 2022, 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 8-9, 2022, 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 21, 2022.
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.
39
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 program, (iv) derivatives risk management program, and (v) 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 above the medians of its expense group and expense universe. The data indicated that the Fund's total expenses, which included underlying fund expenses and after any fee waivers and reimbursements, were above the median of its expense group and below the median of 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-year period ended June 30, 2022, and was above the average of its performance universe and its Lipper index for the three- and five-year periods ended June 30, 2022. The Board took into account management's discussion of the Fund's performance, including the reasons for the Fund's recent underperformance.
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
40
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
allocation of certain costs to the Fund. In considering the profitability data with respect to the Fund, the Trustees noted that the Adviser reimbursed or waived a portion of its management fees 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 took into account management's discussion of the Fund's current advisory fee structure. 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 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.
41
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 10, 2023, 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- RN (prior to August 2022, Form N-LIQUID) and recommended no material changes to the LRMP.
42
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 | ||||||
vcm.com | (800) 235-8396 | ||||||
98358-0423
February 28, 2023
Annual Report
USAA Tax Exempt Intermediate-Term Fund
(Also Known as Victory Tax Exempt Intermediate-Term Fund*)
* Effective at the start of business on April 24, 2023, the Fund name will change to Victory Tax Exempt Intermediate-Term Fund. Please see Notes to the Financial Statements for subsequent event information.
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 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.
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, 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 | 43 | ||||||
Statements of Operations | 44 | ||||||
Statements of Changes in Net Assets | 45 | ||||||
Financial Highlights | 47 | ||||||
Notes to Financial Statements | 50 | ||||||
| Report of Independent Registered Public Accounting Firm | 60 | ||||||
Supplemental Information (Unaudited) | 61 | ||||||
Trustee and Officer Information | 61 | ||||||
Proxy Voting and Portfolio Holdings Information | 67 | ||||||
Expense Examples | 67 | ||||||
Additional Federal Income Tax Information | 68 | ||||||
Advisory Contract Renewal | 69 | ||||||
Liquidity Risk Management Program | 72 | ||||||
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,
If you are reading this letter but double-checking your calendar, be assured there's no mistake. The annual reporting period for your USAA Mutual Fund has shifted from a fiscal year ended March 31st to a fiscal year ended February 28th/the last day of February. This change has no material impact on any of your investments. This change aims to help us improve efficiencies and reduce operational costs. Therefore, this letter covers an abbreviated "annual" period from April 1, 2022, through February 28, 2023. Future annual reports will cover the 12-month period ended February 28th/the last day of February going forward.
Our most recent annual reporting period has been a challenging period for investors. Consider some of the headwinds: heightened geopolitical tensions, a terrible war in Eastern Europe, elevated energy and food costs, high inflation, and rising interest rates. All this has dampened global growth and created a difficult backdrop for both bond and stock investors.
The inflation data was particularly troublesome and surprised many with some of the highest readings since the 1970s. In response, the U.S. Federal Reserve (the "Fed") shifted to a more restrictive monetary policy than most anticipated. The Fed has been boosting the Fed funds interest rate repeatedly and aggressively, including a series of 75 basis point raises. (A basis point is 1/100th of a percentage point.) And if that wasn't enough, zero-COVID-19 policies in China (which fortunately have been recently lifted) further exacerbated supply chain issues and raised questions about global trade. As one might expect, all of these obstacles ratcheted up volatility across financial markets. Broad market stock indices pulled back substantially around the world.
The S&P 500® Index, the bell-weather proxy for our domestic stock market, delivered a negative total return of almost 11% during our abbreviated annual reporting period. But perhaps what was even more difficult was the performance of fixed income markets, which normally are considered a safe haven in times of equity turmoil. But not during this past year when interest rates were rising sharply. In fact, the Bloomberg US Aggregate Bond Index—a proxy for a diversified fixed income portfolio and one that many investors and institutions follow closely—delivered a negative total return of approximately 7.0%. That's not exactly the offset to equity performance that many investors have come to expect from bonds.
It's been difficult, and we fully acknowledge that the steady drumbeat of bad news and bouts of stomach-churning volatility can take a toll on investors' psyche. Nobody likes opening their account statements during declining markets, and even when markets often snap back sharply (as happened this past July, October, and earlier this calendar year), investors often wonder if they have missed an opportunity.
Through all the turmoil and challenges in our most recent annual reporting period, we are reminded of two enduring realities: 1) financial markets are dynamic and apt to change abruptly; 2) it's vital to remain calm and rational whenever faced with those inevitable bouts of turmoil.
Fortunately, we think that investors can take comfort knowing that all our independent investment franchises have experience managing portfolios through a
2
wide variety of market environments. Our investment professionals remain calm during turbulent financial markets, and we think it's imperative that investors do the same.
We still believe that a long-term plan, a well-diversified portfolio across asset classes and investment types, and a clear understanding of individual risk tolerances are the key ingredients for staying the course and progressing on investment goals. Moreover, all our investment professionals continually monitor the environment and work hard to position portfolios opportunistically no matter what the markets bring. Remember, turmoil can also create opportunity.
On the following pages, you will find information relating to your USAA Mutual Fund, brought to you by Victory Capital. If you have any questions, we encourage you to contact our Member Service Representatives. Call 800-235-8396, or visit our website at vcm.com.
From all of us here at Victory Capital, thank you for your ongoing confidence and for letting us help you work toward your investment goals.
Christopher K. Dyer, CFA
President,
USAA Mutual Funds Trust
3
USAA Tax Exempt Intermediate-Term Fund
Manager's 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 overall during the 11-month reporting period ended February 28, 2023. [The Fund's fiscal year-end changed this year to February 28 from March 31, resulting in a shorter reporting period for fiscal year ended 2023.] Negative returns for the reporting period were attributable to a combination of factors, including the U.S. Federal Reserve's (the "Fed") prolonged fight to reduce inflation through interest rate increases and significant investor outflows from municipal bond funds. The reporting period was also highlighted by material volatility in the municipal market, as market participants often strongly reacted to Fed actions and comments, as well as economic data release, in an attempt to determine the future path of interest rates. The overall returns on the Bloomberg Municipal Bond Index for the reporting period was -1.92%, with significant ups and downs throughout the period.
While there might be some volatility in the municipal market in the short term, we remain confident that the right approach is to focus on what matters in the long term. We believe municipal bonds continue to represent an attractive investment opportunity on a relative basis. At the end of February 2023, the yield on the Bloomberg Municipal Bond Index was 3.62%, which is a taxable-equivalent yield of 6.12% (in the highest tax bracket). After factoring in the benefit of the tax exemption, municipal bonds look attractive vs. the (taxable) Bloomberg U.S. Aggregate Bond Index, which yielded 4.81% at the end of February 2023.
• How did the USAA Tax Exempt Intermediate-Term Fund (the "Fund") perform during the reporting period?
The Fund has three share classes: Fund Shares, Institutional Shares, and Class A. For the 11-month reporting period ended February 28, 2023, the Fund Shares, Institutional Shares, and Class A had a total return (at net asset value) of -2.19%, -2.24%, and -2.41%, respectively, versus an average return of -1.78% amongst the funds in the Lipper Intermediate Municipal Debt Funds category. This compares to returns of -1.52% for the Lipper Intermediate Municipal Debt Funds Index, and -0.33% for the Bloomberg Municipal 1-15 Years Blend Index.
• What strategies did you employ during the reporting period?
In keeping with our investment approach, we continued to focus on income generation. The Fund's long-term income distribution, not its price appreciation, accounts for most of its total return. Because of the Fund's income orientation, it has a higher allocation to BBB and A rated categories when compared to its peer group.
4
USAA Tax Exempt Intermediate-Term Fund
Manager's Commentary (continued)
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 intermediate-term, primarily investment-grade municipal bonds. To limit exposure to an unexpected event, the Fund is diversified by sector, issuer, and geography.
Thank you for allowing us to assist you with your investment needs.
5
USAA Tax Exempt Intermediate-Term Fund
Investment Overview
(Unaudited)
Average Annual Total Return
Year Ended February 28, 2023
Fund Shares | Institutional Shares | Class A | |||||||||||||||||||||||||
INCEPTION DATE | 3/19/82 | 6/29/20 | 8/1/10 | ||||||||||||||||||||||||
| Net Asset Value | Net Asset Value | Net Asset Value | Maximum Offering Price | Bloomberg Municipal 1-15 Years Blend Index1 | Lipper Intermediate Municipal Debt Funds Index2 | ||||||||||||||||||||||
One Year | –5.04 | % | –5.08 | % | –5.27 | % | –7.41 | % | –2.98 | % | –4.13 | % | |||||||||||||||
Five Year | 1.66 | % | NA | 1.41 | % | 0.95 | % | 1.74 | % | 1.42 | % | ||||||||||||||||
Ten Year | 1.97 | % | NA | 1.72 | % | 1.49 | % | 1.92 | % | 1.65 | % | ||||||||||||||||
Since Inception | NA | –0.77 | % | 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 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 Tax Exempt Intermediate-Term Fund — Growth of $10,000
1The unmanaged Bloomberg Municipal 1-15 Years Blend Index is a market value-weighted index which covers the short and intermediate components of the Bloomberg Barclays 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.
2The unmanaged Lipper Intermediate Municipal Debt Funds Index measures the Fund's performance to that of the Lipper Intermediate Municipal Debt Funds 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 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 Tax Exempt Intermediate-Term Fund | February 28, 2023 | ||||||
(Unaudited)
Investment Objective and Portfolio Holdings:
The Fund provides interest income that is exempt from federal income tax.
Top 10 Industries:
February 28, 2023
(% of Net Assets)
General | 20.7 | % | |||||
Medical | 20.2 | % | |||||
Transportation | 12.0 | % | |||||
General Obligation | 7.2 | % | |||||
Higher Education | 6.8 | % | |||||
Nursing Homes | 5.8 | % | |||||
Education | 4.5 | % | |||||
School District | 4.5 | % | |||||
Airport | 3.5 | % | |||||
Water | 3.4 | % | |||||
Refer to the Schedule of Portfolio Investments for a complete list of securities.
7
| USAA Mutual Funds Trust USAA Tax Exempt Intermediate-Term Fund | Schedule of Portfolio Investments February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Municipal Bonds (99.3%) | |||||||||||
Alabama (1.1%): | |||||||||||
| Black Belt Energy Gas District Revenue, Series C-1, 5.25%, 2/1/53, (Put Date 6/1/29) (a) | $ | 12,000 | $ | 12,589 | |||||||
| Columbia Industrial Development Board Revenue (NBGA — Southern Co.), Series A, 2.25%, 12/1/37, Continuously Callable @100 (b) | 500 | 500 | |||||||||
| Infirmary Health System Special Care Facilities Financing Authority of Mobile Revenue, 5.00%, 2/1/36, Continuously Callable @100 | 8,000 | 8,177 | |||||||||
Lower Alabama Gas District Revenue, Series A, 5.00%, 9/1/34 | 15,000 | 15,848 | |||||||||
| The Health Care Authority of the City of Huntsville Revenue Series B1, 4.00%, 6/1/39, Continuously Callable @100 | 2,000 | 1,901 | |||||||||
Series B1, 4.00%, 6/1/40, Continuously Callable @100 | 2,555 | 2,419 | |||||||||
41,434 | |||||||||||
Arizona (1.4%): | |||||||||||
Arizona IDA Revenue, 4.00%, 12/15/41, Continuously Callable @100 (c) | 955 | 775 | |||||||||
| City of Phoenix Civic Improvement Corp. Revenue (INS — National Public Finance Guarantee Corp.) 5.50%, 7/1/24 | 3,270 | 3,356 | |||||||||
5.50%, 7/1/25 | 2,115 | 2,220 | |||||||||
| Maricopa County IDA Revenue 5.00%, 7/1/39, Continuously Callable @100 (c) | 2,000 | 1,910 | |||||||||
4.00%, 7/1/41, Continuously Callable @100 (c) | 1,250 | 1,011 | |||||||||
Series C, 3.37% (MUNIPSA+57bps), 1/1/35, (Put Date 10/18/24) (a) (d) | 2,200 | 2,193 | |||||||||
Tempe IDA Revenue, Series A, 4.00%, 12/1/38, Continuously Callable @102 | 2,690 | 2,177 | |||||||||
| The City of Phoenix IDA Revenue 3.75%, 7/1/24 | 2,350 | 2,340 | |||||||||
5.00%, 7/1/34, Continuously Callable @100 | 11,100 | 11,288 | |||||||||
5.00%, 7/1/36, Continuously Callable @100 | 1,675 | 1,706 | |||||||||
5.00%, 10/1/36, Continuously Callable @100 | 4,250 | 4,381 | |||||||||
The County of Pima IDA Revenue | |||||||||||
4.00%, 4/1/41, Continuously Callable @100 | 1,690 | 1,564 | |||||||||
4.00%, 6/15/41, Continuously Callable @100 (c) | 3,500 | 2,870 | |||||||||
Series A, 6.75%, 11/15/42, Continuously Callable @103 (c) | 3,000 | 3,064 | |||||||||
Series B2, 5.63%, 11/15/30, Continuously Callable @100 (c) | 10,000 | 9,721 | |||||||||
The Yavapai County IDA Revenue, 4.00%, 8/1/38, Continuously Callable @100 | 1,000 | 951 | |||||||||
51,527 | |||||||||||
Arkansas (0.2%): | |||||||||||
| Arkansas Development Finance Authority Revenue 5.00%, 9/1/37, Continuously Callable @100 | 2,300 | 2,343 | |||||||||
5.00%, 9/1/38, Continuously Callable @100 | 2,000 | 2,027 | |||||||||
| University of Arkansas — Pulaski Technical College Revenue (INS — Build America Mutual Assurance Co.), 5.00%, 9/1/30, Continuously Callable @100 | 4,290 | 4,505 | |||||||||
8,875 | |||||||||||
California (3.4%): | |||||||||||
| Anaheim Public Financing Authority Revenue Series A, 5.00%, 5/1/28, Pre-refunded 5/1/24 @100 | 500 | 511 | |||||||||
Series A, 5.00%, 5/1/29, Pre-refunded 5/1/24 @100 | 500 | 511 | |||||||||
Series A, 5.00%, 5/1/30, Pre-refunded 5/1/24 @100 | 1,000 | 1,022 | |||||||||
See notes to financial statements.
8
| USAA Mutual Funds Trust USAA Tax Exempt Intermediate-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
| California School Finance Authority Revenue 5.00%, 8/1/31, Continuously Callable @100 (c) | $ | 450 | $ | 459 | |||||||
5.00%, 8/1/31, Pre-refunded 8/1/25 @100 (c) | 50 | 52 | |||||||||
5.00%, 8/1/36, Continuously Callable @100 (c) | 1,450 | 1,466 | |||||||||
5.00%, 8/1/36, Pre-refunded 8/1/25 @100 (c) | 150 | 157 | |||||||||
| California State Public Works Board Revenue, Series B, 5.00%, 10/1/31, Continuously Callable @100 | 11,465 | 11,828 | |||||||||
| California State University Revenue, 5.00%, 11/1/29, Pre-refunded 11/1/24 @100 | 165 | 170 | |||||||||
| California Statewide Communities Development Authority Revenue 5.00%, 5/15/32, Continuously Callable @100 | 1,250 | 1,287 | |||||||||
5.00%, 5/15/33, Continuously Callable @100 | 2,000 | 2,056 | |||||||||
5.00%, 5/15/34, Continuously Callable @100 | 1,250 | 1,282 | |||||||||
5.00%, 5/15/35, Continuously Callable @100 | 2,000 | 2,043 | |||||||||
| Cerritos Community College District, GO Series D, 8/1/25 (e) | 1,510 | 1,394 | |||||||||
Series D, 8/1/27 (e) | 1,000 | 867 | |||||||||
Series D, 8/1/28 (e) | 1,000 | 839 | |||||||||
| Chula Vista Municipal Financing Authority Special Tax Series B, 5.00%, 9/1/27, Continuously Callable @100 | 1,520 | 1,575 | |||||||||
Series B, 5.00%, 9/1/28, Continuously Callable @100 | 1,700 | 1,766 | |||||||||
Series B, 5.00%, 9/1/29, Continuously Callable @100 | 1,785 | 1,855 | |||||||||
Series B, 5.00%, 9/1/30, Continuously Callable @100 | 2,635 | 2,738 | |||||||||
Series B, 5.00%, 9/1/31, Continuously Callable @100 | 2,095 | 2,177 | |||||||||
City of Irvine Special Assessment, 5.00%, 9/2/29, Callable 9/2/23 @100 | 1,000 | 1,006 | |||||||||
| City of San Diego Tobacco Settlement Revenue Funding Corp. Revenue, Series C, 4.00%, 6/1/32, Continuously Callable @100 | 555 | 527 | |||||||||
| City of Tulare Sewer Revenue (INS — Assured Guaranty Municipal Corp.) 5.00%, 11/15/32, Continuously Callable @100 | 1,605 | 1,700 | |||||||||
5.00%, 11/15/33, Continuously Callable @100 | 1,570 | 1,663 | |||||||||
5.00%, 11/15/34, Continuously Callable @100 | 3,655 | 3,872 | |||||||||
5.00%, 11/15/35, Continuously Callable @100 | 2,340 | 2,478 | |||||||||
| El Camino Community College District, GO Series C, 8/1/26 (e) | 6,810 | 6,152 | |||||||||
Series C, 8/1/27 (e) | 7,665 | 6,717 | |||||||||
Series C, 8/1/28 (e) | 5,500 | 4,671 | |||||||||
| Foothill-Eastern Transportation Corridor Agency Revenue (INS — Assured Guaranty Municipal Corp.), 1/15/35 (e) | 5,500 | 3,443 | |||||||||
| Fresno Joint Powers Financing Authority Revenue (INS — Assured Guaranty Municipal Corp.) Series A, 5.00%, 4/1/32, Continuously Callable @100 | 1,000 | 1,073 | |||||||||
Series A, 5.00%, 4/1/35, Continuously Callable @100 | 1,000 | 1,063 | |||||||||
Series A, 5.00%, 4/1/36, Continuously Callable @100 | 420 | 442 | |||||||||
| Golden State Tobacco Securitization Corp. Revenue (INS — Assured Guaranty Municipal Corp.), Series A, 6/1/25 (e) | 46,605 | 43,426 | |||||||||
| Pittsburg Successor Agency Redevelopment Agency Tax Allocation (INS — Assured Guaranty Municipal Corp.) Series A, 5.00%, 9/1/27, Continuously Callable @100 | 3,500 | 3,718 | |||||||||
Series A, 5.00%, 9/1/28, Continuously Callable @100 | 2,640 | 2,807 | |||||||||
See notes to financial statements.
9
| USAA Mutual Funds Trust USAA Tax Exempt Intermediate-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
| San Diego Public Facilities Financing Authority Revenue Series A, 5.00%, 10/15/33, Continuously Callable @100 | $ | 1,635 | $ | 1,725 | |||||||
Series A, 5.00%, 10/15/34, Continuously Callable @100 | 1,000 | 1,055 | |||||||||
Series A, 5.00%, 10/15/35, Continuously Callable @100 | 1,250 | 1,319 | |||||||||
Series B, 5.00%, 10/15/30, Continuously Callable @100 | 775 | 818 | |||||||||
Series B, 5.00%, 10/15/31, Continuously Callable @100 | 1,000 | 1,055 | |||||||||
Series B, 5.00%, 10/15/32, Continuously Callable @100 | 1,000 | 1,055 | |||||||||
127,840 | |||||||||||
Colorado (2.2%): | |||||||||||
| Colorado Health Facilities Authority Revenue 5.00%, 6/1/28, Pre-refunded 6/1/23 @100 | 2,750 | 2,761 | |||||||||
5.00%, 12/1/28, Continuously Callable @100 | 1,000 | 1,015 | |||||||||
5.00%, 12/1/29, Continuously Callable @100 | 1,500 | 1,523 | |||||||||
5.00%, 6/1/31, Pre-refunded 6/1/25 @100 | 2,310 | 2,402 | |||||||||
5.00%, 6/1/32, Pre-refunded 6/1/25 @100 | 2,000 | 2,080 | |||||||||
5.00%, 6/1/33, Pre-refunded 6/1/25 @100 | 2,470 | 2,569 | |||||||||
5.00%, 6/1/34, Pre-refunded 6/1/27 @100 | 4,455 | 4,818 | |||||||||
5.00%, 6/1/34, Pre-refunded 6/1/25 @100 | 6,385 | 6,640 | |||||||||
5.00%, 6/1/35, Pre-refunded 6/1/27 @100 | 2,000 | 2,163 | |||||||||
5.00%, 6/1/35, Pre-refunded 6/1/25 @100 | 3,385 | 3,520 | |||||||||
5.00%, 12/1/35, Continuously Callable @100 | 4,000 | 4,031 | |||||||||
5.00%, 6/1/36, Pre-refunded 6/1/27 @100 | 4,000 | 4,326 | |||||||||
5.00%, 11/1/41, Continuously Callable @100 | 2,500 | 2,570 | |||||||||
Series A, 4.00%, 8/1/38, Continuously Callable @100 | 1,000 | 935 | |||||||||
Series A, 4.00%, 8/1/39, Continuously Callable @100 | 1,250 | 1,153 | |||||||||
Series A, 4.00%, 11/1/39, Continuously Callable @100 | 3,500 | 3,509 | |||||||||
Series A, 4.00%, 12/1/40, Continuously Callable @103 | 2,000 | 1,739 | |||||||||
| Denver Health & Hospital Authority Revenue Series A, 5.00%, 12/1/34, Continuously Callable @100 (c) | 7,355 | 7,556 | |||||||||
Series A, 4.00%, 12/1/37, Continuously Callable @100 | 1,250 | 1,126 | |||||||||
Series A, 4.00%, 12/1/38, Continuously Callable @100 | 1,250 | 1,119 | |||||||||
Series A, 4.00%, 12/1/39, Continuously Callable @100 | 1,000 | 891 | |||||||||
| Park Creek Metropolitan District Revenue 5.00%, 12/1/32, Continuously Callable @100 | 1,250 | 1,306 | |||||||||
5.00%, 12/1/34, Continuously Callable @100 | 1,000 | 1,045 | |||||||||
| Regional Transportation District Certificate of Participation Series A, 5.00%, 6/1/29, Pre-refunded 6/1/23 @100 | 7,585 | 7,617 | |||||||||
Series A, 5.00%, 6/1/30, Pre-refunded 6/1/23 @100 | 14,175 | 14,235 | |||||||||
82,649 | |||||||||||
Connecticut (4.5%): | |||||||||||
| City of Bridgeport, GO Series B, 5.00%, 8/15/27 | 335 | 364 | |||||||||
Series B, 5.00%, 8/15/27 | 4,485 | 4,840 | |||||||||
Series B, 5.00%, 8/15/27 | 180 | 198 | |||||||||
| City of New Haven, GO Series A, 5.00%, 8/1/28 | 1,000 | 1,071 | |||||||||
Series A, 5.50%, 8/1/30, Continuously Callable @100 | 1,000 | 1,093 | |||||||||
Series A, 5.50%, 8/1/32, Continuously Callable @100 | 1,200 | 1,312 | |||||||||
Series A, 5.50%, 8/1/36, Continuously Callable @100 | 1,810 | 1,952 | |||||||||
See notes to financial statements.
10
| USAA Mutual Funds Trust USAA Tax Exempt Intermediate-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
| City of New Haven, GO (INS — Assured Guaranty Municipal Corp.) Series A, 5.00%, 8/15/30, Continuously Callable @100 | $ | 1,000 | $ | 1,050 | |||||||
Series A, 5.00%, 8/15/32, Continuously Callable @100 | 1,000 | 1,050 | |||||||||
Series A, 5.00%, 8/15/33, Continuously Callable @100 | 1,000 | 1,050 | |||||||||
Series A, 5.00%, 8/15/34, Continuously Callable @100 | 1,350 | 1,414 | |||||||||
| City of West Haven, GO Series B, 5.00%, 11/1/32, Continuously Callable @100 | 400 | 416 | |||||||||
Series B, 5.00%, 11/1/37, Continuously Callable @100 | 350 | 359 | |||||||||
| Connecticut State Health & Educational Facilities Authority Revenue 5.00%, 7/1/32, Continuously Callable @100 | 1,950 | 2,010 | |||||||||
5.00%, 7/1/34, Continuously Callable @100 | 725 | 743 | |||||||||
5.00%, 7/1/35, Continuously Callable @100 | 1,170 | 1,193 | |||||||||
5.00%, 7/1/36, Continuously Callable @100 | 1,125 | 1,138 | |||||||||
5.00%, 7/1/37, Continuously Callable @100 | 1,275 | 1,282 | |||||||||
Series A, 5.00%, 7/1/33, Continuously Callable @100 | 2,000 | 2,102 | |||||||||
Series A, 4.00%, 7/1/38, Continuously Callable @100 | 7,000 | 6,306 | |||||||||
Series A, 4.00%, 7/1/38, Continuously Callable @100 | 2,000 | 1,910 | |||||||||
Series A, 4.00%, 7/1/39, Continuously Callable @100 | 2,000 | 1,895 | |||||||||
Series E, 5.00%, 7/1/34, Continuously Callable @100 | 10,000 | 10,206 | |||||||||
| Harbor Point Infrastructure Improvement District Tax Allocation, 5.00%, 4/1/30, Continuously Callable @100 (c) | 10,000 | 10,001 | |||||||||
| Metropolitan District, GO 5.00%, 7/15/33, Continuously Callable @100 | 750 | 827 | |||||||||
5.00%, 7/15/34, Continuously Callable @100 | 1,000 | 1,095 | |||||||||
5.00%, 7/15/35, Continuously Callable @100 | 750 | 814 | |||||||||
5.00%, 7/15/36, Continuously Callable @100 | 1,000 | 1,076 | |||||||||
4.00%, 7/15/37, Continuously Callable @100 | 1,000 | 1,004 | |||||||||
| State of Connecticut Special Tax Revenue 5.00%, 1/1/34, Continuously Callable @100 | 20,000 | 21,878 | |||||||||
5.00%, 1/1/35, Continuously Callable @100 | 20,000 | 21,803 | |||||||||
Series B, 5.00%, 10/1/37, Continuously Callable @100 | 6,000 | 6,475 | |||||||||
Series B, 5.00%, 10/1/38, Continuously Callable @100 | 4,000 | 4,303 | |||||||||
| State of Connecticut, GO Series A, 5.00%, 4/15/33, Continuously Callable @100 | 5,000 | 5,498 | |||||||||
Series A, 5.00%, 4/15/34, Continuously Callable @100 | 5,575 | 6,105 | |||||||||
Series A, 5.00%, 4/15/35, Continuously Callable @100 | 5,000 | 5,440 | |||||||||
Series A, 4.00%, 4/15/37, Continuously Callable @100 | 1,825 | 1,840 | |||||||||
Series C, 5.00%, 6/15/33, Continuously Callable @100 | 1,100 | 1,208 | |||||||||
Series C, 5.00%, 6/15/34, Continuously Callable @100 | 2,625 | 2,877 | |||||||||
Series C, 5.00%, 6/15/35, Continuously Callable @100 | 2,500 | 2,719 | |||||||||
Series E, 5.00%, 9/15/35, Continuously Callable @100 | 2,000 | 2,177 | |||||||||
Series E, 5.00%, 9/15/37, Continuously Callable @100 | 2,000 | 2,149 | |||||||||
| Town of Hamden, GO (INS — Build America Mutual Assurance Co.), Series A, 5.00%, 8/15/30, Continuously Callable @100 | 1,200 | 1,283 | |||||||||
| University of Connecticut Revenue Series A, 5.00%, 4/15/34, Continuously Callable @100 | 6,805 | 7,428 | |||||||||
Series A, 5.00%, 4/15/35, Continuously Callable @100 | 6,500 | 7,038 | |||||||||
Series A, 5.00%, 4/15/36, Continuously Callable @100 | 11,175 | 11,981 | |||||||||
171,973 | |||||||||||
See notes to financial statements.
11
| USAA Mutual Funds Trust USAA Tax Exempt Intermediate-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
District of Columbia (0.2%): | |||||||||||
| District of Columbia Revenue 5.00%, 7/1/23 | $ | 105 | $ | 105 | |||||||
6.00%, 7/1/33, Pre-refunded 7/1/23 @100 | 1,280 | 1,291 | |||||||||
5.00%, 7/1/39, Continuously Callable @100 | 800 | 806 | |||||||||
4.00%, 7/1/39, Continuously Callable @100 | 1,000 | 892 | |||||||||
| Metropolitan Washington Airports Authority Dulles Toll Road Revenue 4.00%, 10/1/35, Continuously Callable @100 | 1,000 | 1,000 | |||||||||
4.00%, 10/1/36, Continuously Callable @100 | 1,250 | 1,227 | |||||||||
4.00%, 10/1/38, Continuously Callable @100 | 1,000 | 956 | |||||||||
| Washington Convention & Sports Authority Revenue Series A, 4.00%, 10/1/38, Continuously Callable @100 | 1,250 | 1,228 | |||||||||
Series A, 4.00%, 10/1/39, Continuously Callable @100 | 500 | 491 | |||||||||
Series A, 4.00%, 10/1/40, Continuously Callable @100 | 750 | 729 | |||||||||
8,725 | |||||||||||
Florida (6.0%): | |||||||||||
| Alachua County Health Facilities Authority Revenue, 4.00%, 10/1/40, Continuously Callable @103 | 700 | 547 | |||||||||
| City of Cape Coral Water & Sewer Revenue 4.00%, 10/1/35, Continuously Callable @100 | 1,485 | 1,495 | |||||||||
4.00%, 10/1/36, Continuously Callable @100 | 1,400 | 1,389 | |||||||||
4.00%, 10/1/37, Continuously Callable @100 | 3,000 | 2,952 | |||||||||
| City of Pompano Beach Revenue 3.50%, 9/1/35, Continuously Callable @103 | 3,345 | 2,702 | |||||||||
4.00%, 9/1/40, Continuously Callable @103 | 2,500 | 1,992 | |||||||||
Series A, 4.00%, 9/1/36, Continuously Callable @103 | 1,050 | 893 | |||||||||
Series A, 4.00%, 9/1/41, Continuously Callable @103 | 1,215 | 957 | |||||||||
Series B-1, 2.00%, 1/1/29 | 3,300 | 2,736 | |||||||||
| City of Port St. Lucie Special Assessment 4.00%, 7/1/31, Continuously Callable @100 | 3,195 | 3,253 | |||||||||
4.00%, 7/1/32, Continuously Callable @100 | 2,000 | 2,032 | |||||||||
4.00%, 7/1/33, Continuously Callable @100 | 2,785 | 2,823 | |||||||||
| City of Port St. Lucie Utility System Revenue, 4.00%, 9/1/31, Continuously Callable @100 | 1,000 | 1,029 | |||||||||
| City of Tampa Revenue Series A, 9/1/36, Continuously Callable @80 (e) | 700 | 379 | |||||||||
Series A, 9/1/37, Continuously Callable @77 (e) | 700 | 357 | |||||||||
Series A, 9/1/38, Continuously Callable @74 (e) | 850 | 398 | |||||||||
Series A, 9/1/39, Continuously Callable @71 (e) | 700 | 320 | |||||||||
Series A, 9/1/40, Continuously Callable @67 (e) | 850 | 370 | |||||||||
Series B, 4.00%, 7/1/38, Continuously Callable @100 | 350 | 341 | |||||||||
Series B, 4.00%, 7/1/39, Continuously Callable @100 | 700 | 677 | |||||||||
| Cityplace Community Development District Special Assessment (INS — Assured Guaranty Municipal Corp.) 5/1/33 (f) | 3,470 | 3,335 | |||||||||
5/1/38, Continuously Callable @100 (g) | 7,900 | 7,386 | |||||||||
| County of Broward FL Tourist Development Tax Revenue 4.00%, 9/1/39, Continuously Callable @100 | 7,000 | 6,770 | |||||||||
4.00%, 9/1/40, Continuously Callable @100 | 9,300 | 8,945 | |||||||||
4.00%, 9/1/41, Continuously Callable @100 | 6,975 | 6,673 | |||||||||
See notes to financial statements.
12
| USAA Mutual Funds Trust USAA Tax Exempt Intermediate-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
| County of Escambia Revenue 2.08%, 4/1/39, Continuously Callable @100 (b) | $ | 600 | $ | 600 | |||||||
2.25%, 4/1/39, Continuously Callable @100 (b) | 5,900 | 5,900 | |||||||||
County of Lee Airport Revenue, 5.00%, 10/1/33, Continuously Callable @100 | 4,000 | 4,192 | |||||||||
| County of Lee Revenue 5.00%, 10/1/23 | 2,500 | 2,524 | |||||||||
5.00%, 10/1/24 | 2,700 | 2,776 | |||||||||
| County of Lee Tourist Development Tax Revenue Series B, 4.00%, 10/1/37, Continuously Callable @100 | 4,970 | 4,891 | |||||||||
Series B, 4.00%, 10/1/38, Continuously Callable @100 | 5,230 | 5,105 | |||||||||
| County of Miami-Dade Florida Water & Sewer System Revenue, 4.00%, 10/1/41, Continuously Callable @100 | 210 | 200 | |||||||||
| Escambia County Health Facilities Authority Revenue 5.00%, 8/15/33, Continuously Callable @100 | 1,400 | 1,481 | |||||||||
5.00%, 8/15/34, Continuously Callable @100 | 1,240 | 1,300 | |||||||||
5.00%, 8/15/40, Continuously Callable @100 | 2,900 | 2,963 | |||||||||
| Florida Development Finance Corp. Revenue 4.00%, 11/15/39, Continuously Callable @100 | 5,260 | 4,974 | |||||||||
Series A, 5.00%, 6/15/35, Continuously Callable @100 | 1,000 | 1,007 | |||||||||
Series A, 5.00%, 6/15/40, Continuously Callable @100 | 1,650 | 1,588 | |||||||||
Series A, 5.00%, 6/15/42, Continuously Callable @100 | 2,250 | 2,179 | |||||||||
| Florida Higher Educational Facilities Financial Authority Revenue 5.00%, 10/1/35, Continuously Callable @100 | 1,250 | 1,308 | |||||||||
5.00%, 10/1/36, Continuously Callable @100 | 1,000 | 1,037 | |||||||||
4.00%, 10/1/37, Continuously Callable @100 | 1,000 | 911 | |||||||||
4.00%, 10/1/38, Continuously Callable @100 | 750 | 679 | |||||||||
5.00%, 3/1/39, Continuously Callable @100 | 7,055 | 6,588 | |||||||||
4.00%, 10/1/39, Continuously Callable @100 | 800 | 721 | |||||||||
| Halifax Hospital Medical Center Revenue 5.00%, 6/1/35, Pre-refunded 6/1/25 @100 | 2,325 | 2,418 | |||||||||
5.00%, 6/1/36, Continuously Callable @100 | 2,750 | 2,824 | |||||||||
| Lake County School Board Certificate of Participation (INS — Assured Guaranty Municipal Corp.) Series A, 5.00%, 6/1/29, Pre-refunded 6/1/24 @100 | 1,250 | 1,276 | |||||||||
Series A, 5.00%, 6/1/30, Pre-refunded 6/1/24 @100 | 2,225 | 2,271 | |||||||||
Lee County IDA Revenue, 5.00%, 11/15/39, Continuously Callable @103 | 1,500 | 1,472 | |||||||||
| Lee County School Board Certificate of Participation, Series A, 5.00%, 8/1/28, Continuously Callable @100 | 3,750 | 3,851 | |||||||||
| Lee Memorial Health System Revenue, Series A-1, 4.00%, 4/1/37, Continuously Callable @100 | 5,000 | 4,928 | |||||||||
| Miami-Dade County Expressway Authority Revenue Series A, 5.00%, 7/1/28, Continuously Callable @100 | 10,000 | 10,009 | |||||||||
Series A, 5.00%, 7/1/29, Continuously Callable @100 | 7,000 | 7,006 | |||||||||
Series A, 5.00%, 7/1/29, Continuously Callable @100 | 1,000 | 1,020 | |||||||||
Series A, 5.00%, 7/1/30, Continuously Callable @100 | 1,610 | 1,642 | |||||||||
Series A, 5.00%, 7/1/31, Continuously Callable @100 | 1,255 | 1,280 | |||||||||
Series A, 5.00%, 7/1/32, Continuously Callable @100 | 2,000 | 2,039 | |||||||||
Series A, 5.00%, 7/1/33, Continuously Callable @100 | 2,000 | 2,039 | |||||||||
Series A, 5.00%, 7/1/34, Continuously Callable @100 | 2,000 | 2,039 | |||||||||
See notes to financial statements.
13
| USAA Mutual Funds Trust USAA Tax Exempt Intermediate-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Series B, 5.00%, 7/1/30, Continuously Callable @100 | $ | 2,000 | $ | 2,040 | |||||||
Series B, 5.00%, 7/1/31, Continuously Callable @100 | 2,000 | 2,040 | |||||||||
| Miami-Dade County Health Facilities Authority Revenue 5.00%, 8/1/27, Pre-refunded 8/1/23 @100 | 4,750 | 4,782 | |||||||||
5.00%, 8/1/28, Pre-refunded 8/1/23 @100 | 4,950 | 4,983 | |||||||||
5.00%, 8/1/29, Pre-refunded 8/1/23 @100 | 5,250 | 5,285 | |||||||||
5.00%, 8/1/30, Pre-refunded 8/1/23 @100 | 3,500 | 3,524 | |||||||||
5.00%, 8/1/31, Pre-refunded 8/1/23 @100 | 5,780 | 5,819 | |||||||||
| Orange County Health Facilities Authority Revenue, Series A, 5.00%, 10/1/35, Continuously Callable @100 | 4,000 | 4,166 | |||||||||
| Osceola County School Board Certificate of Participation, Series A, 5.00%, 6/1/28, Pre-refunded 6/1/23 @100 | 3,055 | 3,067 | |||||||||
| Palm Beach County Educational Facilities Authority Revenue, 4.00%, 10/1/41, Continuously Callable @100 | 3,695 | 3,327 | |||||||||
| Palm Beach County Health Facilities Authority Revenue 5.00%, 11/15/23, Continuously Callable @100 | 7,595 | 7,591 | |||||||||
5.00%, 11/1/39, Continuously Callable @100 | 1,150 | 1,156 | |||||||||
5.00%, 11/1/42, Continuously Callable @100 | 850 | 849 | |||||||||
Series B, 4.00%, 11/15/41, Continuously Callable @103 | 250 | 209 | |||||||||
Pinellas County IDA Revenue, 5.00%, 7/1/29 | 900 | 913 | |||||||||
| School District of Broward County Certificate of Participation Series A, 5.00%, 7/1/29, Continuously Callable @100 | 2,000 | 2,087 | |||||||||
Series A, 5.00%, 7/1/30, Continuously Callable @100 | 2,000 | 2,087 | |||||||||
| Southeast Overtown Park West Community Redevelopment Agency Tax Allocation, Series A-1, 5.00%, 3/1/30, Continuously Callable @100 (c) | 3,195 | 3,243 | |||||||||
| St. Lucie County School Board Certificate of Participation Series A, 5.00%, 7/1/25, Continuously Callable @100 | 2,045 | 2,056 | |||||||||
Series A, 5.00%, 7/1/26, Continuously Callable @100 | 1,500 | 1,508 | |||||||||
| Volusia County Educational Facility Authority Revenue Series B, 5.00%, 10/15/28, Continuously Callable @100 | 1,000 | 1,033 | |||||||||
Series B, 5.00%, 10/15/29, Continuously Callable @100 | 1,000 | 1,034 | |||||||||
Series B, 5.00%, 10/15/30, Continuously Callable @100 | 1,500 | 1,550 | |||||||||
Series B, 5.00%, 10/15/32, Continuously Callable @100 | 1,560 | 1,612 | |||||||||
225,750 | |||||||||||
Georgia (2.1%): | |||||||||||
| Cobb County Development Authority Revenue, Series A, 2.25%, 4/1/33, (Put Date 10/1/29) (a) | 4,975 | 4,437 | |||||||||
| George L Smith II Congress Center Authority Revenue, 4.00%, 1/1/36, Continuously Callable @100 | 1,000 | 917 | |||||||||
| Glynn-Brunswick Memorial Hospital Authority Revenue 4.00%, 8/1/36, Continuously Callable @100 | 1,840 | 1,711 | |||||||||
4.00%, 8/1/37, Continuously Callable @100 | 1,500 | 1,379 | |||||||||
| Main Street Natural Gas, Inc. Revenue 5.00%, 6/1/53, (Put Date 6/1/30) (a) | 7,500 | 7,789 | |||||||||
Series A, 5.00%, 5/15/36 | 2,000 | 2,045 | |||||||||
Series A, 5.00%, 5/15/37 | 1,500 | 1,518 | |||||||||
Series A, 5.00%, 5/15/38 | 2,500 | 2,515 | |||||||||
Series B, 5.00%, 12/1/52, (Put Date 6/1/29) (a) | 12,000 | 12,412 | |||||||||
Series B, 5.00%, 7/1/53, (Put Date 3/1/30) (a) | 5,000 | 5,271 | |||||||||
See notes to financial statements.
14
| USAA Mutual Funds Trust USAA Tax Exempt Intermediate-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Series C, 4.00%, 8/1/48, (Put Date 12/1/23) (a) | $ | 15,000 | $ | 14,994 | |||||||
Series C, 4.00%, 5/1/52, (Put Date 12/1/28) (a) | 12,750 | 12,513 | |||||||||
| Savannah Hospital Authority Revenue, 4.00%, 7/1/39, Continuously Callable @100 | 2,500 | 2,415 | |||||||||
| The Burke County Development Authority Revenue 2.20%, 10/1/32, Continuously Callable @100 | 1,850 | 1,525 | |||||||||
Series A, 1.50%, 1/1/40, (Put Date 2/3/25) (a) | 6,500 | 6,174 | |||||||||
77,615 | |||||||||||
Guam (0.6%): | |||||||||||
| Guam Government Waterworks Authority Revenue 5.00%, 7/1/28, Continuously Callable @100 | 1,000 | 1,001 | |||||||||
5.25%, 7/1/33, Pre-refunded 7/1/23 @100 | 3,000 | 3,019 | |||||||||
5.00%, 7/1/36, Continuously Callable @100 | 1,250 | 1,261 | |||||||||
5.00%, 7/1/36, Continuously Callable @100 | 1,000 | 1,011 | |||||||||
Series A, 5.00%, 7/1/23 | 750 | 751 | |||||||||
Series A, 5.00%, 7/1/24 | 600 | 603 | |||||||||
Series A, 5.00%, 7/1/25, Continuously Callable @100 | 750 | 755 | |||||||||
Series A, 5.00%, 7/1/29, Continuously Callable @100 | 1,000 | 1,009 | |||||||||
| Guam Power Authority Revenue Series A, 5.00%, 10/1/29, Continuously Callable @100 | 1,000 | 1,014 | |||||||||
Series A, 5.00%, 10/1/30, Continuously Callable @100 | 1,000 | 1,014 | |||||||||
Series A, 5.00%, 10/1/31, Continuously Callable @100 | 695 | 705 | |||||||||
Series A, 5.00%, 10/1/34, Continuously Callable @100 | 3,500 | 3,752 | |||||||||
Series A, 5.00%, 10/1/35, Continuously Callable @100 | 2,000 | 2,120 | |||||||||
| Guam Power Authority Revenue (INS — Assured Guaranty Municipal Corp.), Series A, 5.00%, 10/1/32, Continuously Callable @100 | 1,000 | 1,025 | |||||||||
| Territory of Guam Revenue Series A, 5.00%, 12/1/30, Continuously Callable @100 | 1,500 | 1,547 | |||||||||
Series A, 5.00%, 12/1/31, Continuously Callable @100 | 2,000 | 2,060 | |||||||||
22,647 | |||||||||||
Idaho (0.4%): | |||||||||||
| Idaho Health Facilities Authority Revenue 5.00%, 3/1/35, Continuously Callable @100 | 5,805 | 6,125 | |||||||||
5.00%, 3/1/36, Continuously Callable @100 | 7,520 | 7,865 | |||||||||
| Idaho Housing & Finance Association Revenue, Series A, 4.00%, 7/15/38, Continuously Callable @100 | 3,000 | 2,940 | |||||||||
16,930 | |||||||||||
Illinois (16.6%): | |||||||||||
| Champaign County Community Unit School District No. 4 Champaign, GO 4.00%, 6/1/34, Continuously Callable @100 | 1,000 | 1,021 | |||||||||
4.00%, 6/1/35, Continuously Callable @100 | 1,290 | 1,306 | |||||||||
4.00%, 6/1/36, Continuously Callable @100 | 1,575 | 1,578 | |||||||||
| Chicago Board of Education, GO 5.00%, 12/1/39, Continuously Callable @100 | 4,700 | 4,634 | |||||||||
Series A, 12/1/25 (e) | 1,600 | 1,422 | |||||||||
Series A, 12/1/26 (e) | 3,700 | 3,184 | |||||||||
Series A, 5.00%, 12/1/43, Continuously Callable @100 | 7,965 | 7,655 | |||||||||
See notes to financial statements.
15
| USAA Mutual Funds Trust USAA Tax Exempt Intermediate-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Series B, 4.00%, 12/1/40, Continuously Callable @100 | $ | 21,900 | $ | 18,945 | |||||||
Series B, 4.00%, 12/1/41, Continuously Callable @100 | 8,710 | 7,448 | |||||||||
| Chicago Midway International Airport Revenue Series B, 5.00%, 1/1/27, Continuously Callable @100 | 6,525 | 6,531 | |||||||||
Series B, 5.00%, 1/1/29, Continuously Callable @100 | 11,750 | 11,882 | |||||||||
Series B, 5.00%, 1/1/30, Continuously Callable @100 | 5,175 | 5,234 | |||||||||
Series B, 5.00%, 1/1/31, Continuously Callable @100 | 8,910 | 9,014 | |||||||||
Series B, 5.00%, 1/1/32, Continuously Callable @100 | 6,000 | 6,071 | |||||||||
Series B, 5.25%, 1/1/33, Continuously Callable @100 | 1,635 | 1,637 | |||||||||
Series B, 4.00%, 1/1/34, Continuously Callable @100 | 3,500 | 3,550 | |||||||||
Series B, 4.00%, 1/1/35, Continuously Callable @100 | 3,000 | 3,030 | |||||||||
| Chicago O'Hare International Airport Revenue 5.00%, 1/1/33, Continuously Callable @100 | 11,560 | 11,933 | |||||||||
5.00%, 1/1/34, Continuously Callable @100 | 5,675 | 5,857 | |||||||||
Series A, 4.00%, 1/1/36, Continuously Callable @100 | 2,000 | 2,022 | |||||||||
Series A, 4.00%, 1/1/38, Continuously Callable @100 | 1,000 | 984 | |||||||||
| Chicago O'Hare International Airport Revenue (INS — Assured Guaranty Municipal Corp.) 5.00%, 1/1/28, Continuously Callable @100 | 3,620 | 3,624 | |||||||||
5.00%, 1/1/29, Continuously Callable @100 | 1,500 | 1,502 | |||||||||
5.13%, 1/1/30, Continuously Callable @100 | 2,150 | 2,153 | |||||||||
| Chicago Park District, GO Series F-2, 4.00%, 1/1/34, Continuously Callable @100 | 1,200 | 1,194 | |||||||||
Series F-2, 4.00%, 1/1/36, Continuously Callable @100 | 1,300 | 1,255 | |||||||||
Series F-2, 5.00%, 1/1/37, Continuously Callable @100 | 2,000 | 2,104 | |||||||||
Series F-2, 4.00%, 1/1/38, Continuously Callable @100 | 1,750 | 1,663 | |||||||||
Series F-2, 5.00%, 1/1/39, Continuously Callable @100 | 1,500 | 1,563 | |||||||||
Series F-2, 5.00%, 1/1/40, Continuously Callable @100 | 1,125 | 1,172 | |||||||||
| City of Calumet City, GO (INS — Assured Guaranty Municipal Corp.), Series A, 4.50%, 3/1/43, Continuously Callable @100 | 1,000 | 973 | |||||||||
| City of Chicago Special Assessment 3.04%, 12/1/28 (c) | 270 | 252 | |||||||||
3.20%, 12/1/29 (c) | 325 | 302 | |||||||||
3.29%, 12/1/30 (c) | 350 | 324 | |||||||||
3.38%, 12/1/31 (c) | 375 | 346 | |||||||||
3.45%, 12/1/32 (c) | 300 | 276 | |||||||||
| City of Chicago Wastewater Transmission Revenue 5.00%, 1/1/31, Continuously Callable @100 | 1,000 | 1,007 | |||||||||
5.00%, 1/1/32, Continuously Callable @100 | 1,000 | 1,007 | |||||||||
Series B, 5.00%, 1/1/35, Continuously Callable @100 | 8,000 | 8,481 | |||||||||
Series C, 5.00%, 1/1/33, Continuously Callable @100 | 3,500 | 3,611 | |||||||||
Series C, 5.00%, 1/1/34, Continuously Callable @100 | 1,000 | 1,033 | |||||||||
Series C, 5.00%, 1/1/35, Continuously Callable @100 | 1,250 | 1,291 | |||||||||
| City of Chicago Waterworks Revenue 5.00%, 11/1/28, Continuously Callable @100 | 1,500 | 1,557 | |||||||||
5.00%, 11/1/29, Continuously Callable @100 | 725 | 753 | |||||||||
5.00%, 11/1/30, Continuously Callable @100 | 2,000 | 2,078 | |||||||||
5.00%, 11/1/31, Continuously Callable @100 | 2,000 | 2,037 | |||||||||
5.00%, 11/1/33, Continuously Callable @100 | 2,000 | 2,037 | |||||||||
5.00%, 11/1/36, Continuously Callable @100 | 2,665 | 2,738 | |||||||||
See notes to financial statements.
16
| USAA Mutual Funds Trust USAA Tax Exempt Intermediate-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Series A-1, 5.00%, 11/1/29, Continuously Callable @100 | $ | 1,000 | $ | 1,039 | |||||||
Series A-1, 5.00%, 11/1/31, Continuously Callable @100 | 1,000 | 1,039 | |||||||||
| City of Chicago Waterworks Revenue (INS — Assured Guaranty Municipal Corp.) 5.25%, 11/1/34, Continuously Callable @100 | 2,105 | 2,240 | |||||||||
5.25%, 11/1/35, Continuously Callable @100 | 1,635 | 1,730 | |||||||||
Series 2017-2, 5.00%, 11/1/36, Continuously Callable @100 | 3,145 | 3,268 | |||||||||
Series 2017-2, 5.00%, 11/1/37, Continuously Callable @100 | 2,500 | 2,587 | |||||||||
City of Chicago, GO, Series A, 5.50%, 1/1/41, Continuously Callable @100 | 1,500 | 1,551 | |||||||||
| City of Galesburg IL Revenue Series A, 4.00%, 10/1/36, Continuously Callable @100 | 1,125 | 1,072 | |||||||||
Series A, 4.00%, 10/1/41, Continuously Callable @100 | 1,475 | 1,315 | |||||||||
| City of Springfield Electric Revenue (INS — Assured Guaranty Municipal Corp.), 5.00%, 3/1/34, Continuously Callable @100 | 3,000 | 3,098 | |||||||||
City of Springfield, GO, 5.00%, 12/1/30, Continuously Callable @100 | 8,500 | 8,963 | |||||||||
| County of Cook Sales Tax Revenue 4.00%, 11/15/34, Continuously Callable @100 | 3,750 | 3,796 | |||||||||
5.00%, 11/15/35, Continuously Callable @100 | 7,000 | 7,354 | |||||||||
5.00%, 11/15/36, Continuously Callable @100 | 5,000 | 5,216 | |||||||||
| County of Cook, GO 5.00%, 11/15/34, Continuously Callable @100 | 2,000 | 2,107 | |||||||||
5.00%, 11/15/35, Continuously Callable @100 | 2,000 | 2,095 | |||||||||
Series A, 5.00%, 11/15/31, Continuously Callable @100 | 2,500 | 2,662 | |||||||||
| Illinois Educational Facilities Authority Revenue 4.00%, 11/1/36, Continuously Callable @102 | 9,750 | 9,623 | |||||||||
4.45%, 11/1/36, Continuously Callable @102 | 4,500 | 4,581 | |||||||||
3.90%, 11/1/36, Continuously Callable @102 | 2,220 | 2,206 | |||||||||
| Illinois Finance Authority Revenue 5.00%, 2/15/27 (h) | 7,650 | 3,421 | |||||||||
5.40%, 4/1/27, Continuously Callable @100 | 1,435 | 1,435 | |||||||||
4.00%, 5/15/27 | 3,065 | 3,006 | |||||||||
5.50%, 7/1/28, Continuously Callable @100 | 8,250 | 8,309 | |||||||||
3.90%, 3/1/30, Continuously Callable @100 | 20,000 | 20,180 | |||||||||
5.00%, 5/15/30, Continuously Callable @100 | 1,000 | 925 | |||||||||
5.00%, 5/15/31, Continuously Callable @100 | 1,875 | 1,714 | |||||||||
5.00%, 8/15/32, Pre-refunded 8/15/26 @100 | 1,500 | 1,576 | |||||||||
5.00%, 8/15/33, Pre-refunded 8/15/26 @100 | 1,155 | 1,213 | |||||||||
5.00%, 8/15/34, Pre-refunded 8/15/26 @100 | 1,000 | 1,051 | |||||||||
5.00%, 12/1/34, Continuously Callable @100 | 3,500 | 3,615 | |||||||||
5.00%, 5/15/35, Continuously Callable @100 | 1,100 | 961 | |||||||||
5.00%, 8/15/35, Continuously Callable @100 | 4,000 | 4,094 | |||||||||
5.00%, 10/1/35, Continuously Callable @100 | 600 | 649 | |||||||||
4.00%, 12/1/35, Continuously Callable @100 | 5,000 | 4,879 | |||||||||
5.00%, 5/15/36, Continuously Callable @100 | 1,400 | 1,211 | |||||||||
4.00%, 12/1/36, Continuously Callable @100 | 3,000 | 2,872 | |||||||||
5.00%, 2/15/37, Continuously Callable @100 | 1,000 | 1,001 | |||||||||
5.00%, 10/1/37, Continuously Callable @100 | 700 | 742 | |||||||||
5.00%, 10/1/39, Continuously Callable @100 | 700 | 735 | |||||||||
2.45%, 10/1/39, (Put Date 10/1/29) (a) | 14,000 | 12,515 | |||||||||
4.00%, 10/1/40, Continuously Callable @100 | 1,000 | 877 | |||||||||
Series A, 4.00%, 10/1/31, Continuously Callable @100 | 1,000 | 1,018 | |||||||||
See notes to financial statements.
17
| USAA Mutual Funds Trust USAA Tax Exempt Intermediate-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Series A, 4.00%, 10/1/32, Continuously Callable @100 | $ | 1,000 | $ | 1,017 | |||||||
Series A, 5.00%, 9/1/34, Pre-refunded 9/1/24 @100 | 3,385 | 3,474 | |||||||||
Series A, 4.00%, 10/1/34, Continuously Callable @100 | 1,000 | 1,013 | |||||||||
Series A, 5.00%, 11/15/34, Continuously Callable @100 | 3,700 | 3,816 | |||||||||
Series A, 5.00%, 11/15/35, Continuously Callable @100 | 3,000 | 3,079 | |||||||||
Series A, 4.00%, 8/1/39, Continuously Callable @100 | 1,850 | 1,586 | |||||||||
Series A, 4.00%, 8/1/40, Continuously Callable @100 | 3,780 | 3,203 | |||||||||
Series A, 4.00%, 8/1/41, Continuously Callable @100 | 1,935 | 1,618 | |||||||||
Series A, 4.00%, 8/1/43, Continuously Callable @100 | 2,105 | 1,792 | |||||||||
Series C, 4.00%, 2/15/36, Continuously Callable @100 | 18,000 | 18,118 | |||||||||
| Illinois Municipal Electric Agency Revenue, Series A, 4.00%, 2/1/33, Continuously Callable @100 | 14,650 | 14,926 | |||||||||
| Illinois Sports Facilities Authority Revenue, 5.00%, 6/15/30, Continuously Callable @100 | 1,025 | 1,048 | |||||||||
| Illinois Sports Facilities Authority Revenue (INS — Assured Guaranty Corp.) 5.25%, 6/15/30, Continuously Callable @100 | 3,000 | 3,051 | |||||||||
5.25%, 6/15/31, Continuously Callable @100 | 5,000 | 5,085 | |||||||||
5.25%, 6/15/32, Continuously Callable @100 | 5,000 | 5,085 | |||||||||
| Illinois State Toll Highway Authority Revenue Series A, 5.00%, 12/1/32, Continuously Callable @100 | 5,000 | 5,279 | |||||||||
Series A, 5.00%, 1/1/34, Continuously Callable @100 | 5,870 | 6,137 | |||||||||
Series A, 5.00%, 1/1/35, Continuously Callable @100 | 5,600 | 5,855 | |||||||||
Series A, 5.00%, 1/1/36, Continuously Callable @100 | 7,000 | 7,322 | |||||||||
| Kane Cook & DuPage Counties School District No. U-46 Elgin, GO Series D, 5.00%, 1/1/32, Continuously Callable @100 | 2,800 | 2,844 | |||||||||
Series D, 5.00%, 1/1/33, Continuously Callable @100 | 4,000 | 4,063 | |||||||||
| Kendall Kane & Will Counties Community Unit School District No. 308, GO 5.00%, 2/1/35, Continuously Callable @100 | 5,000 | 5,291 | |||||||||
5.00%, 2/1/36, Continuously Callable @100 | 6,000 | 6,337 | |||||||||
| Madison County Community Unit School District No. 7 Edwardsville, GO (INS — Build America Mutual Assurance Co.) 5.00%, 12/1/28, Continuously Callable @100 | 1,210 | 1,262 | |||||||||
5.00%, 12/1/29, Continuously Callable @100 | 1,250 | 1,304 | |||||||||
| Madison-Macoupin Etc Counties Community College District No. 536, GO (INS — Assured Guaranty Municipal Corp.) Series A, 5.00%, 11/1/31, Continuously Callable @100 | 1,000 | 1,071 | |||||||||
Series A, 5.00%, 11/1/32, Continuously Callable @100 | 2,000 | 2,143 | |||||||||
Series A, 5.00%, 11/1/33, Continuously Callable @100 | 750 | 804 | |||||||||
| Metropolitan Pier & Exposition Authority Revenue 5.00%, 6/15/42, Continuously Callable @100 | 2,000 | 2,019 | |||||||||
4.00%, 12/15/42, Continuously Callable @100 | 8,000 | 7,137 | |||||||||
| Metropolitan Pier & Exposition Authority Revenue (INS — Assured Guaranty Municipal Corp.), 6/15/26 (e) | 5,000 | 4,368 | |||||||||
| Northern Illinois Municipal Power Agency Revenue Series A, 4.00%, 12/1/31, Continuously Callable @100 | 1,800 | 1,826 | |||||||||
Series A, 4.00%, 12/1/32, Continuously Callable @100 | 2,100 | 2,128 | |||||||||
Series A, 4.00%, 12/1/33, Continuously Callable @100 | 4,000 | 4,021 | |||||||||
Series A, 4.00%, 12/1/35, Continuously Callable @100 | 5,000 | 4,939 | |||||||||
| Northern Illinois University Revenue (INS — Build America Mutual Assurance Co.) 4.00%, 10/1/43, Continuously Callable @100 | 1,300 | 1,186 | |||||||||
See notes to financial statements.
18
| USAA Mutual Funds Trust USAA Tax Exempt Intermediate-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Series B, 4.00%, 4/1/35, Continuously Callable @100 | $ | 1,200 | $ | 1,165 | |||||||
Series B, 4.00%, 4/1/39, Continuously Callable @100 | 1,375 | 1,300 | |||||||||
| Regional Transportation Authority Revenue Series A, 4.00%, 7/1/34, Continuously Callable @100 | 23,160 | 23,875 | |||||||||
Series A, 4.00%, 7/1/35, Continuously Callable @100 | 11,650 | 11,932 | |||||||||
| Sales Tax Securitization Corp. Revenue Series A, 4.00%, 1/1/38, Continuously Callable @100 | 5,060 | 4,838 | |||||||||
Series A, 4.00%, 1/1/39, Continuously Callable @100 | 1,750 | 1,668 | |||||||||
| Sangamon County School District No. 186 Springfield, GO Series B, 5.00%, 2/1/24 | 1,040 | 1,053 | |||||||||
Series B, 5.00%, 2/1/25, Pre-refunded 2/1/24 @100 | 1,435 | 1,457 | |||||||||
| Sangamon County School District No. 186 Springfield, GO (INS — Build America Mutual Assurance Co.) Series B, 5.00%, 2/1/24 | 2,660 | 2,684 | |||||||||
Series B, 5.00%, 2/1/25, Continuously Callable @100 | 5,765 | 5,818 | |||||||||
Series B, 5.00%, 2/1/26, Continuously Callable @100 | 4,215 | 4,255 | |||||||||
| State of Illinois, GO 5.25%, 2/1/31, Continuously Callable @100 | 9,000 | 9,071 | |||||||||
Series A, 5.00%, 11/1/25 | 11,000 | 11,191 | |||||||||
Series B, 5.00%, 10/1/28 | 3,000 | 3,153 | |||||||||
Series B, 5.00%, 11/1/32, Continuously Callable @100 | 10,000 | 10,536 | |||||||||
Series D, 5.00%, 11/1/27 | 6,705 | 6,975 | |||||||||
Series D, 5.00%, 11/1/28, Continuously Callable @100 | 5,795 | 6,033 | |||||||||
| State of Illinois, GO (INS — Assured Guaranty Municipal Corp.) 4.00%, 2/1/30, Continuously Callable @100 | 7,000 | 7,029 | |||||||||
Series A, 5.00%, 4/1/29, Continuously Callable @100 | 10,000 | 10,011 | |||||||||
| University of Illinois Revenue, Series A, 4.00%, 4/1/33, Continuously Callable @100 | 12,475 | 12,747 | |||||||||
| Village of Bolingbrook, GO (INS — Assured Guaranty Municipal Corp.) Series A, 5.00%, 1/1/29, Continuously Callable @100 | 1,750 | 1,869 | |||||||||
Series A, 5.00%, 1/1/30, Continuously Callable @100 | 1,500 | 1,599 | |||||||||
Series A, 5.00%, 1/1/31, Continuously Callable @100 | 2,400 | 2,551 | |||||||||
Series A, 5.00%, 1/1/32, Continuously Callable @100 | 2,350 | 2,497 | |||||||||
Series A, 5.00%, 1/1/33, Continuously Callable @100 | 1,450 | 1,541 | |||||||||
Series A, 5.00%, 1/1/38, Continuously Callable @100 | 1,500 | 1,557 | |||||||||
| Village of Gilberts Special Tax (INS — Build America Mutual Assurance Co.), 5.00%, 3/1/30, Continuously Callable @100 | 5,221 | 5,410 | |||||||||
| Village of Rosemont, GO (INS — Assured Guaranty Municipal Corp.) Series A, 5.00%, 12/1/25 | 2,010 | 2,106 | |||||||||
Series A, 5.00%, 12/1/26 | 2,110 | 2,251 | |||||||||
| Volo Village Special Service Area No. 3 & 6 Special Tax (INS — Assured Guaranty Municipal Corp.) 5.00%, 3/1/34, Continuously Callable @100 | 2,992 | 3,160 | |||||||||
4.00%, 3/1/36, Continuously Callable @100 | 1,250 | 1,257 | |||||||||
| Will County Community High School District No. 210 Lincoln-Way, GO, 4.00%, 1/1/34, Continuously Callable @100 | 650 | 659 | |||||||||
| Williamson Jackson Etc Counties Community Unit School District No. 4, GO (INS — Assured Guaranty Municipal Corp.) 5.00%, 12/1/28, Continuously Callable @100 | 1,835 | 1,914 | |||||||||
5.00%, 12/1/29, Continuously Callable @100 | 1,925 | 2,008 | |||||||||
See notes to financial statements.
19
| USAA Mutual Funds Trust USAA Tax Exempt Intermediate-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
5.00%, 12/1/30, Continuously Callable @100 | $ | 2,025 | $ | 2,113 | |||||||
5.00%, 12/1/34, Continuously Callable @100 | 6,000 | 6,259 | |||||||||
627,601 | |||||||||||
Indiana (2.3%): | |||||||||||
City of Rockport Revenue, Series A, 3.05%, 6/1/25 | 5,750 | 5,696 | |||||||||
| Hammond Multi-School Building Corp. Revenue 5.00%, 7/15/33, Continuously Callable @100 | 1,165 | 1,272 | |||||||||
5.00%, 7/15/34, Continuously Callable @100 | 1,000 | 1,086 | |||||||||
5.00%, 7/15/35, Continuously Callable @100 | 1,250 | 1,347 | |||||||||
5.00%, 7/15/38, Continuously Callable @100 | 3,000 | 3,166 | |||||||||
| Indiana Bond Bank Revenue 1/15/30, Continuously Callable @97 (e) | 740 | 572 | |||||||||
7/15/30, Continuously Callable @96 (e) | 750 | 568 | |||||||||
7/15/31, Continuously Callable @93 (e) | 1,490 | 1,085 | |||||||||
7/15/32, Continuously Callable @91 (e) | 1,400 | 977 | |||||||||
| Indiana Finance Authority Revenue 3.13%, 12/1/24 | 6,000 | 5,907 | |||||||||
1.40%, 8/1/29, Continuously Callable @100 | 7,000 | 6,080 | |||||||||
5.00%, 9/1/30, Continuously Callable @100 | 1,250 | 1,334 | |||||||||
5.00%, 9/1/31, Continuously Callable @100 | 1,500 | 1,601 | |||||||||
5.00%, 11/15/33, Continuously Callable @103 | 2,000 | 1,996 | |||||||||
4.00%, 4/1/35, Continuously Callable @100 | 1,210 | 1,111 | |||||||||
4.00%, 4/1/36, Continuously Callable @100 | 1,255 | 1,124 | |||||||||
4.00%, 7/1/36, Continuously Callable @100 | 3,660 | 3,393 | |||||||||
4.00%, 4/1/37, Continuously Callable @100 | 1,310 | 1,147 | |||||||||
4.00%, 4/1/38, Continuously Callable @100 | 2,045 | 1,759 | |||||||||
4.00%, 7/1/38, Continuously Callable @100 | 4,030 | 3,623 | |||||||||
5.00%, 11/15/38, Continuously Callable @103 | 3,000 | 2,842 | |||||||||
4.00%, 4/1/39, Continuously Callable @100 | 1,625 | 1,382 | |||||||||
4.00%, 7/1/39, Continuously Callable @100 | 3,605 | 3,229 | |||||||||
4.00%, 4/1/40, Continuously Callable @100 | 2,215 | 1,864 | |||||||||
4.00%, 4/1/41, Continuously Callable @100 | 2,305 | 1,917 | |||||||||
4.00%, 4/1/42, Continuously Callable @100 | 2,400 | 1,972 | |||||||||
4.00%, 11/15/43, Continuously Callable @100 | 1,505 | 1,144 | |||||||||
Series A, 5.00%, 7/1/40, Continuously Callable @100 | 6,240 | 6,373 | |||||||||
Series A, 4.00%, 11/15/41, Continuously Callable @103 | 8,400 | 6,724 | |||||||||
Series A, 5.00%, 7/1/42, Continuously Callable @100 | 7,240 | 7,341 | |||||||||
| Richmond Hospital Authority Revenue, 5.00%, 1/1/35, Continuously Callable @100 | 6,500 | 6,661 | |||||||||
86,293 | |||||||||||
Iowa (0.6%): | |||||||||||
| Iowa Finance Authority Revenue Series E, 4.00%, 8/15/35, Continuously Callable @100 | 5,425 | 5,379 | |||||||||
Series E, 4.00%, 8/15/36, Continuously Callable @100 | 15,105 | 14,696 | |||||||||
| Iowa Higher Education Loan Authority Revenue, 4.75%, 10/1/42, Continuously Callable @100 | 1,500 | 1,455 | |||||||||
See notes to financial statements.
20
| USAA Mutual Funds Trust USAA Tax Exempt Intermediate-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
| Iowa Tobacco Settlement Authority Revenue Series A-2, 4.00%, 6/1/38, Continuously Callable @100 | $ | 270 | $ | 249 | |||||||
Series A-2, 4.00%, 6/1/39, Continuously Callable @100 | 300 | 274 | |||||||||
Series A-2, 4.00%, 6/1/40, Continuously Callable @100 | 200 | 180 | |||||||||
22,233 | |||||||||||
Kansas (0.9%): | |||||||||||
City of Manhattan Revenue, Series A, 4.00%, 6/1/36, Continuously Callable @103 | 1,640 | 1,365 | |||||||||
| City of Wichita Revenue 4.20%, 9/1/27, Continuously Callable @100 | 125 | 125 | |||||||||
4.63%, 9/1/33, Continuously Callable @100 | 10,000 | 9,592 | |||||||||
| Wyandotte County-Kansas City Unified Government Tax Allocation 5.25%, 9/1/35, Continuously Callable @103 (c) | 15,000 | 13,989 | |||||||||
5.75%, 3/1/41, Continuously Callable @103 (c) | 10,000 | 9,560 | |||||||||
34,631 | |||||||||||
Kentucky (3.0%): | |||||||||||
| City of Ashland Revenue 4.00%, 2/1/35, Continuously Callable @100 | 470 | 453 | |||||||||
4.00%, 2/1/36, Continuously Callable @100 | 2,410 | 2,275 | |||||||||
4.00%, 2/1/37, Continuously Callable @100 | 1,115 | 1,032 | |||||||||
County of Trimble Revenue, 3.75%, 6/1/33, Continuously Callable @100 | 15,000 | 15,286 | |||||||||
| Kentucky Economic Development Finance Authority Revenue 5.00%, 5/15/26 | 5,530 | 5,384 | |||||||||
5.00%, 5/15/31, Continuously Callable @100 | 3,205 | 2,922 | |||||||||
Series B, 10/1/24 (e) | 6,130 | 5,814 | |||||||||
Series B-3, 4.20% (MUNIPSA+140bps), 2/1/46, (Put Date 2/1/25) (a) (d) | 20,000 | 20,311 | |||||||||
| Kentucky Municipal Power Agency Revenue, Series A, 3.45%, 9/1/42, (Put Date 3/1/26) (a) | 7,000 | 6,966 | |||||||||
| Kentucky Public Energy Authority Revenue Series A-2, 4.25% (SOFR+120bps), 8/1/52, (Put Date 8/1/30) (a) (d) | 7,500 | 6,959 | |||||||||
Series B, 4.00%, 1/1/49, (Put Date 1/1/25) (a) | 14,285 | 14,189 | |||||||||
Series C-3, 3.85% (MUNIPSA+105bps), 12/1/49, (Put Date 6/1/25) (a) (d) | 20,000 | 19,898 | |||||||||
| Kentucky State Property & Building Commission Revenue 5.00%, 5/1/35, Continuously Callable @100 | 1,000 | 1,072 | |||||||||
5.00%, 5/1/36, Continuously Callable @100 | 1,000 | 1,064 | |||||||||
5.00%, 5/1/37, Continuously Callable @100 | 3,000 | 3,171 | |||||||||
Series A, 5.00%, 2/1/32, Continuously Callable @100 | 2,000 | 2,106 | |||||||||
Series A, 5.00%, 2/1/33, Continuously Callable @100 | 2,250 | 2,369 | |||||||||
Series A, 4.00%, 11/1/36, Continuously Callable @100 | 2,000 | 1,989 | |||||||||
Series A, 4.00%, 11/1/38, Continuously Callable @100 | 500 | 485 | |||||||||
113,745 | |||||||||||
Louisiana (3.1%): | |||||||||||
| City of New Orleans Sewerage Service Revenue 5.00%, 6/1/31, Pre-refunded 6/1/25 @100 | 700 | 729 | |||||||||
5.00%, 6/1/32, Pre-refunded 6/1/25 @100 | 1,150 | 1,197 | |||||||||
5.00%, 6/1/34, Pre-refunded 6/1/25 @100 | 1,500 | 1,562 | |||||||||
| City of New Orleans Water System Revenue 5.00%, 12/1/33, Pre-refunded 12/1/25 @100 | 1,500 | 1,578 | |||||||||
5.00%, 12/1/35, Pre-refunded 12/1/25 @100 | 1,500 | 1,578 | |||||||||
See notes to financial statements.
21
| USAA Mutual Funds Trust USAA Tax Exempt Intermediate-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
| City of Shreveport Water & Sewer Revenue (INS — Assured Guaranty Municipal Corp.) 5.00%, 12/1/33, Continuously Callable @100 | $ | 1,515 | $ | 1,582 | |||||||
5.00%, 12/1/34, Continuously Callable @100 | 1,500 | 1,564 | |||||||||
5.00%, 12/1/35, Continuously Callable @100 | 1,510 | 1,566 | |||||||||
| City of Shreveport Water & Sewer Revenue (INS — Build America Mutual Assurance Co.) Series B, 5.00%, 12/1/31, Continuously Callable @100 | 5,330 | 5,467 | |||||||||
Series B, 5.00%, 12/1/32, Continuously Callable @100 | 5,125 | 5,256 | |||||||||
Series C, 5.00%, 12/1/30, Continuously Callable @100 | 1,000 | 1,077 | |||||||||
Series C, 5.00%, 12/1/31, Continuously Callable @100 | 2,000 | 2,154 | |||||||||
| Louisiana Local Government Environmental Facilities & Community Development Authority Revenue, 3.50%, 11/1/32, Continuously Callable @100 | 18,750 | 17,463 | |||||||||
| Louisiana Public Facilities Authority Revenue 4.00%, 12/15/32, Continuously Callable @100 | 2,430 | 2,506 | |||||||||
4.00%, 12/15/32, Pre-refunded 12/15/26 @100 | 305 | 317 | |||||||||
5.00%, 7/1/33, Pre-refunded 7/1/25 @100 | 55 | 57 | |||||||||
5.00%, 7/1/33, Continuously Callable @100 | 8,940 | 9,284 | |||||||||
5.00%, 5/15/34, Continuously Callable @100 | 2,975 | 3,126 | |||||||||
5.00%, 5/15/34, Pre-refunded 5/15/26 @100 | 25 | 27 | |||||||||
5.00%, 5/15/34, Continuously Callable @100 | 2,225 | 2,320 | |||||||||
5.00%, 7/1/34, Pre-refunded 7/1/25 @100 | 85 | 89 | |||||||||
5.00%, 7/1/34, Continuously Callable @100 | 13,465 | 13,973 | |||||||||
5.00%, 5/15/35, Continuously Callable @100 | 2,000 | 2,088 | |||||||||
4.00%, 5/15/35, Pre-refunded 5/15/26 @100 | 35 | 36 | |||||||||
4.00%, 5/15/35, Continuously Callable @100 | 3,465 | 3,462 | |||||||||
5.00%, 5/15/36, Continuously Callable @100 | 1,560 | 1,617 | |||||||||
4.00%, 5/15/36, Pre-refunded 5/15/26 @100 | 15 | 15 | |||||||||
4.00%, 5/15/36, Continuously Callable @100 | 1,485 | 1,456 | |||||||||
Series A, 4.00%, 12/15/33, Continuously Callable @100 | 3,095 | 3,166 | |||||||||
| Louisiana Public Facilities Authority Revenue (INS — Assured Guaranty Municipal Corp.), 5.00%, 6/1/36, Pre-refunded 6/1/25 @100 | 2,000 | 2,082 | |||||||||
| Louisiana State University & Agricultural & Mechanical College Revenue Series A, 4.00%, 7/1/31, Continuously Callable @100 | 1,000 | 1,013 | |||||||||
Series A, 4.00%, 7/1/32, Continuously Callable @100 | 1,000 | 1,012 | |||||||||
Series A, 4.00%, 7/1/33, Continuously Callable @100 | 1,000 | 1,010 | |||||||||
| New Orleans Aviation Board Revenue (INS — Assured Guaranty Municipal Corp.) 5.00%, 1/1/35, Continuously Callable @100 | 1,840 | 1,970 | |||||||||
5.00%, 1/1/36, Continuously Callable @100 | 1,250 | 1,328 | |||||||||
5.00%, 1/1/37, Continuously Callable @100 | 1,500 | 1,584 | |||||||||
5.00%, 10/1/37, Continuously Callable @100 | 2,000 | 2,087 | |||||||||
5.00%, 1/1/38, Continuously Callable @100 | 1,300 | 1,367 | |||||||||
Parish of St. John the Baptist Revenue, 2.20%, 6/1/37, (Put Date 7/1/26) (a) | 6,750 | 6,258 | |||||||||
| Tangipahoa Parish Hospital Service District No. 1 Revenue 4.00%, 2/1/38, Continuously Callable @100 | 2,375 | 2,168 | |||||||||
4.00%, 2/1/39, Continuously Callable @100 | 2,330 | 2,096 | |||||||||
4.00%, 2/1/41, Continuously Callable @100 | 1,500 | 1,335 | |||||||||
4.00%, 2/1/42, Continuously Callable @100 | 1,500 | 1,322 | |||||||||
Tobacco Settlement Financing Corp. Revenue, Series A, 5.00%, 5/15/23 | 5,000 | 5,017 | |||||||||
117,961 | |||||||||||
See notes to financial statements.
22
| USAA Mutual Funds Trust USAA Tax Exempt Intermediate-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Maine (0.1%): | |||||||||||
| Maine Health & Higher Educational Facilities Authority Revenue 5.00%, 7/1/24, Pre-refunded 7/1/23 @100 | $ | 1,635 | $ | 1,644 | |||||||
5.00%, 7/1/26, Pre-refunded 7/1/23 @100 | 1,000 | 1,005 | |||||||||
5.00%, 7/1/27, Pre-refunded 7/1/23 @100 | 1,000 | 1,006 | |||||||||
3,655 | |||||||||||
Maryland (1.4%): | |||||||||||
| City of Gaithersburg Revenue 5.00%, 1/1/33, Continuously Callable @104 | 3,000 | 3,002 | |||||||||
5.00%, 1/1/36, Continuously Callable @104 | 1,000 | 973 | |||||||||
| Howard County Housing Commission Revenue, Series A, 1.60%, 6/1/29, Continuously Callable @100 | 3,000 | 2,681 | |||||||||
| Maryland Economic Development Corp. Revenue Series A, 5.00%, 6/1/30, Continuously Callable @100 | 1,250 | 1,343 | |||||||||
Series A, 5.00%, 6/1/31, Continuously Callable @100 | 1,000 | 1,073 | |||||||||
Series A, 5.00%, 6/1/32, Continuously Callable @100 | 1,000 | 1,072 | |||||||||
Series A, 5.00%, 6/1/35, Continuously Callable @100 | 2,000 | 2,109 | |||||||||
| Maryland Health & Higher Educational Facilities Authority Revenue 5.50%, 1/1/29, Continuously Callable @100 | 1,415 | 1,484 | |||||||||
5.50%, 1/1/30, Continuously Callable @100 | 1,750 | 1,834 | |||||||||
5.50%, 1/1/31, Continuously Callable @100 | 1,585 | 1,659 | |||||||||
5.00%, 7/1/31, Continuously Callable @100 | 3,190 | 3,328 | |||||||||
5.00%, 7/1/32, Continuously Callable @100 | 6,505 | 6,767 | |||||||||
5.00%, 7/1/33, Continuously Callable @100 | 1,000 | 1,032 | |||||||||
5.00%, 7/1/33, Continuously Callable @100 | 3,600 | 3,730 | |||||||||
5.00%, 7/1/34, Continuously Callable @100 | 2,500 | 2,576 | |||||||||
5.00%, 7/1/34, Continuously Callable @100 | 2,200 | 2,263 | |||||||||
5.50%, 1/1/36, Continuously Callable @100 | 5,000 | 5,141 | |||||||||
4.00%, 1/1/38, Continuously Callable @100 | 865 | 761 | |||||||||
4.00%, 7/1/38, Continuously Callable @100 | 1,500 | 1,391 | |||||||||
4.00%, 7/1/39, Continuously Callable @100 | 1,585 | 1,465 | |||||||||
4.00%, 7/1/40, Continuously Callable @100 | 1,645 | 1,512 | |||||||||
Series A, 5.00%, 7/1/33, Continuously Callable @100 | 1,000 | 1,042 | |||||||||
Series A, 5.00%, 7/1/34, Continuously Callable @100 | 1,000 | 1,036 | |||||||||
Series A, 5.00%, 7/1/35, Continuously Callable @100 | 1,310 | 1,350 | |||||||||
Series A, 5.00%, 7/1/36, Continuously Callable @100 | 1,000 | 1,025 | |||||||||
51,649 | |||||||||||
Massachusetts (1.7%): | |||||||||||
| Massachusetts Clean Water Trust Revenue, Series 11, 4.75%, 8/1/25, Continuously Callable @100 | 110 | 110 | |||||||||
| Massachusetts Development Finance Agency Revenue 5.00%, 7/1/30, Continuously Callable @100 | 2,000 | 2,074 | |||||||||
5.00%, 7/1/31, Continuously Callable @100 | 1,675 | 1,733 | |||||||||
5.00%, 7/1/32, Continuously Callable @100 | 1,250 | 1,311 | |||||||||
4.00%, 10/1/32, Continuously Callable @105 (c) | 3,600 | 3,420 | |||||||||
5.00%, 4/15/33, Continuously Callable @100 | 2,155 | 2,184 | |||||||||
5.00%, 7/1/33, Continuously Callable @100 | 1,250 | 1,310 | |||||||||
5.00%, 7/1/34, Continuously Callable @100 | 1,000 | 1,042 | |||||||||
5.00%, 7/1/36, Continuously Callable @100 | 1,000 | 1,066 | |||||||||
See notes to financial statements.
23
| USAA Mutual Funds Trust USAA Tax Exempt Intermediate-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
5.00%, 7/1/36, Continuously Callable @100 | $ | 2,000 | $ | 2,032 | |||||||
5.00%, 7/1/36, Continuously Callable @100 | 895 | 930 | |||||||||
5.00%, 7/1/37, Continuously Callable @100 | 800 | 846 | |||||||||
5.00%, 7/1/37, Continuously Callable @100 | 1,215 | 1,253 | |||||||||
5.00%, 10/1/37, Continuously Callable @105 (c) | 1,000 | 1,008 | |||||||||
5.00%, 7/1/38, Continuously Callable @100 | 600 | 631 | |||||||||
5.00%, 7/1/38, Continuously Callable @100 | 335 | 344 | |||||||||
4.00%, 9/1/41, Continuously Callable @100 | 1,010 | 891 | |||||||||
5.00%, 10/1/42, Continuously Callable @100 | 3,500 | 3,828 | |||||||||
3.40% (MUNIPSA+60bps), 7/1/49, (Put Date 1/29/26) (a) (c) (d) | 2,500 | 2,492 | |||||||||
Series A, 5.00%, 1/1/31, Continuously Callable @100 | 450 | 473 | |||||||||
Series A, 5.00%, 1/1/32, Continuously Callable @100 | 645 | 678 | |||||||||
Series A, 5.00%, 1/1/33, Continuously Callable @100 | 535 | 561 | |||||||||
Series A, 5.00%, 1/1/34, Continuously Callable @100 | 700 | 731 | |||||||||
Series A, 5.00%, 1/1/35, Continuously Callable @100 | 735 | 763 | |||||||||
Series A, 5.00%, 1/1/36, Continuously Callable @100 | 1,000 | 1,031 | |||||||||
Series A, 5.00%, 7/1/36, Continuously Callable @100 | 2,000 | 2,010 | |||||||||
Series A, 5.00%, 7/1/38, Continuously Callable @100 | 1,000 | 985 | |||||||||
Series A, 5.00%, 7/1/39, Continuously Callable @100 | 2,250 | 2,198 | |||||||||
Series B, 4.00%, 6/1/35, Continuously Callable @100 | 2,300 | 2,221 | |||||||||
Series B, 4.00%, 6/1/41, Continuously Callable @100 | 2,750 | 2,415 | |||||||||
Series E, 5.00%, 7/1/36, Continuously Callable @100 | 2,105 | 2,154 | |||||||||
Series J2, 5.00%, 7/1/35, Continuously Callable @100 | 5,375 | 5,727 | |||||||||
Series J2, 5.00%, 7/1/36, Continuously Callable @100 | 4,415 | 4,665 | |||||||||
Series J2, 5.00%, 7/1/37, Continuously Callable @100 | 5,285 | 5,544 | |||||||||
Series J2, 5.00%, 7/1/38, Continuously Callable @100 | 5,000 | 5,221 | |||||||||
65,882 | |||||||||||
Michigan (1.7%): | |||||||||||
| Detroit Downtown Development Authority Tax Allocation (INS — Assured Guaranty Municipal Corp.) Series A, 5.00%, 7/1/36, Continuously Callable @100 | 1,000 | 1,009 | |||||||||
Series A, 5.00%, 7/1/37, Continuously Callable @100 | 2,000 | 2,016 | |||||||||
| Flint Hospital Building Authority Revenue 4.00%, 7/1/32, Continuously Callable @100 | 2,525 | 2,396 | |||||||||
4.00%, 7/1/33, Continuously Callable @100 | 2,620 | 2,470 | |||||||||
4.00%, 7/1/34, Continuously Callable @100 | 2,730 | 2,557 | |||||||||
4.00%, 7/1/35, Continuously Callable @100 | 1,635 | 1,520 | |||||||||
4.00%, 7/1/38, Continuously Callable @100 | 1,855 | 1,680 | |||||||||
| Great Lakes Water Authority Water Supply System Revenue, Series D, 4.00%, 7/1/32, Continuously Callable @100 | 13,560 | 13,851 | |||||||||
| Livonia Public Schools, GO (INS — Assured Guaranty Municipal Corp.) 5.00%, 5/1/32, Continuously Callable @100 | 2,775 | 2,918 | |||||||||
5.00%, 5/1/33, Continuously Callable @100 | 2,875 | 3,023 | |||||||||
5.00%, 5/1/34, Continuously Callable @100 | 2,965 | 3,116 | |||||||||
5.00%, 5/1/35, Continuously Callable @100 | 3,065 | 3,207 | |||||||||
5.00%, 5/1/36, Continuously Callable @100 | 2,770 | 2,871 | |||||||||
| Michigan Finance Authority Revenue 5.00%, 11/1/34, Continuously Callable @100 | 1,000 | 1,092 | |||||||||
5.00%, 11/1/35, Continuously Callable @100 | 1,000 | 1,084 | |||||||||
4.00%, 11/15/35, Continuously Callable @100 | 6,000 | 5,948 | |||||||||
See notes to financial statements.
24
| USAA Mutual Funds Trust USAA Tax Exempt Intermediate-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
5.00%, 11/1/36, Continuously Callable @100 | $ | 1,000 | $ | 1,075 | |||||||
4.00%, 11/15/36, Continuously Callable @100 | 1,000 | 974 | |||||||||
5.00%, 11/1/37, Continuously Callable @100 | 1,250 | 1,337 | |||||||||
4.00%, 12/1/41, Continuously Callable @100 | 2,375 | 2,032 | |||||||||
| Michigan Finance Authority Revenue (NBGA — Michigan School Bond Qualification and Loan Program) Series A, 5.00%, 5/1/24 | 2,000 | 2,036 | |||||||||
Series A, 5.00%, 5/1/25 | 1,700 | 1,762 | |||||||||
| Michigan State Building Authority Revenue, Series I-A, 5.00%, 10/15/29, Continuously Callable @100 | 3,000 | 3,034 | |||||||||
Summit Academy North Revenue, 4.00%, 11/1/41, Continuously Callable @103 | 2,870 | 2,384 | |||||||||
65,392 | |||||||||||
Minnesota (0.2%): | |||||||||||
| City of Minneapolis Revenue, Series A, 5.00%, 11/15/36, Continuously Callable @100 | 5,000 | 5,190 | |||||||||
| Housing & Redevelopment Authority of The City of St. Paul Minnesota Revenue 5.00%, 11/15/29, Pre-refunded 11/15/25 @100 | 1,750 | 1,836 | |||||||||
5.00%, 11/15/30, Pre-refunded 11/15/25 @100 | 1,275 | 1,338 | |||||||||
8,364 | |||||||||||
Mississippi (0.6%): | |||||||||||
| Mississippi Business Finance Corp. Revenue, 3.20%, 9/1/28, Continuously Callable @100 | 6,000 | 5,715 | |||||||||
| Mississippi Development Bank Revenue Series A, 5.00%, 4/1/28, Continuously Callable @100 | 390 | 391 | |||||||||
Series A, 5.00%, 4/1/28, Pre-refunded 4/1/23 @100 | 920 | 921 | |||||||||
| Mississippi Development Bank Revenue (INS — Assured Guaranty Municipal Corp.), 5.00%, 9/1/30, Continuously Callable @100 | 5,860 | 5,864 | |||||||||
| Mississippi Hospital Equipment & Facilities Authority Revenue 4.00%, 1/1/36, Continuously Callable @100 | 2,240 | 2,194 | |||||||||
4.00%, 1/1/37, Continuously Callable @100 | 2,260 | 2,173 | |||||||||
4.00%, 1/1/39, Continuously Callable @100 | 1,850 | 1,741 | |||||||||
4.00%, 1/1/40, Continuously Callable @100 | 2,675 | 2,512 | |||||||||
21,511 | |||||||||||
Missouri (1.3%): | |||||||||||
| Cape Girardeau County IDA Revenue 5.00%, 3/1/32, Continuously Callable @100 | 500 | 506 | |||||||||
5.00%, 3/1/36, Continuously Callable @100 | 750 | 755 | |||||||||
4.00%, 3/1/41, Continuously Callable @100 | 750 | 656 | |||||||||
Series A, 6.00%, 3/1/33, Continuously Callable @103 | 2,075 | 2,139 | |||||||||
| Health & Educational Facilities Authority of the State of Missouri Revenue 5.00%, 2/1/29, Continuously Callable @104 | 1,000 | 1,001 | |||||||||
5.00%, 5/1/30, Continuously Callable @100 | 2,310 | 2,310 | |||||||||
5.00%, 5/15/32, Continuously Callable @103 | 1,555 | 1,438 | |||||||||
5.25%, 5/1/33, Continuously Callable @100 | 2,350 | 2,351 | |||||||||
5.00%, 2/1/34, Continuously Callable @104 | 2,000 | 1,990 | |||||||||
5.00%, 5/15/36, Continuously Callable @103 | 4,565 | 4,068 | |||||||||
See notes to financial statements.
25
| USAA Mutual Funds Trust USAA Tax Exempt Intermediate-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
| Missouri Development Finance Board Revenue Series A, 5.00%, 6/1/30, Continuously Callable @100 | $ | 1,000 | $ | 1,003 | |||||||
Series A, 5.00%, 6/1/31, Continuously Callable @100 | 4,215 | 4,229 | |||||||||
| Missouri State Environmental Improvement & Energy Resources Authority Revenue, Series A-R, 2.90%, 9/1/33, Continuously Callable @102 | 25,000 | 22,537 | |||||||||
| St. Louis County IDA Revenue 5.00%, 9/1/23 | 305 | 305 | |||||||||
5.50%, 9/1/33, Continuously Callable @100 | 2,750 | 2,752 | |||||||||
| Stoddard County IDA Revenue, Series B, 6.00%, 3/1/37, Continuously Callable @103 | 1,865 | 1,922 | |||||||||
49,962 | |||||||||||
Montana (0.2%): | |||||||||||
City of Forsyth Revenue, 3.90%, 3/1/31, Callable 4/13/23 @100 | 8,500 | 8,501 | |||||||||
Nebraska (0.9%): | |||||||||||
| Central Plains Energy Project Revenue 5.00%, 5/1/53, (Put Date 10/1/29) (a) | 17,000 | 17,504 | |||||||||
Series A, 5.00%, 9/1/36 | 3,550 | 3,645 | |||||||||
| Douglas County Hospital Authority No. 3 Revenue 5.00%, 11/1/28, Continuously Callable @100 | 1,250 | 1,305 | |||||||||
5.00%, 11/1/30, Continuously Callable @100 | 1,600 | 1,671 | |||||||||
| Nebraska Educational Health Cultural & Social Services Finance Authority Revenue 4.00%, 1/1/35, Continuously Callable @102 | 795 | 803 | |||||||||
4.00%, 1/1/36, Continuously Callable @102 | 1,240 | 1,241 | |||||||||
4.00%, 1/1/37, Continuously Callable @102 | 1,000 | 986 | |||||||||
4.00%, 1/1/38, Continuously Callable @102 | 1,295 | 1,261 | |||||||||
4.00%, 1/1/39, Continuously Callable @102 | 1,800 | 1,742 | |||||||||
| Public Power Generation Agency Revenue, 5.00%, 1/1/37, Continuously Callable @100 | 2,400 | 2,487 | |||||||||
32,645 | |||||||||||
Nevada (1.8%): | |||||||||||
| City of Carson City Revenue 5.00%, 9/1/29, Continuously Callable @100 | 620 | 652 | |||||||||
5.00%, 9/1/31, Continuously Callable @100 | 1,000 | 1,046 | |||||||||
5.00%, 9/1/33, Continuously Callable @100 | 1,000 | 1,039 | |||||||||
5.00%, 9/1/37, Continuously Callable @100 | 1,950 | 1,977 | |||||||||
| City of North Las Vegas, GO (INS — Assured Guaranty Municipal Corp.) 4.00%, 6/1/35, Continuously Callable @100 | 1,870 | 1,905 | |||||||||
4.00%, 6/1/37, Continuously Callable @100 | 7,345 | 7,363 | |||||||||
4.00%, 6/1/38, Continuously Callable @100 | 6,135 | 6,101 | |||||||||
| City of Sparks Revenue Series A, 2.50%, 6/15/24 (c) | 300 | 293 | |||||||||
Series A, 2.75%, 6/15/28 (c) | 1,500 | 1,350 | |||||||||
| County of Clark Department of Aviation Revenue 5.00%, 7/1/26 | 3,660 | 3,878 | |||||||||
5.00%, 7/1/27 | 2,220 | 2,396 | |||||||||
Series A-2, 5.00%, 7/1/32, Continuously Callable @100 | 20,470 | 20,969 | |||||||||
Series A-2, 5.00%, 7/1/33, Continuously Callable @100 | 10,845 | 11,113 | |||||||||
See notes to financial statements.
26
| USAA Mutual Funds Trust USAA Tax Exempt Intermediate-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
| Las Vegas Convention & Visitors Authority Revenue Series C, 4.00%, 7/1/33, Continuously Callable @100 | $ | 2,000 | $ | 2,036 | |||||||
Series C, 4.00%, 7/1/34, Continuously Callable @100 | 4,560 | 4,624 | |||||||||
66,742 | |||||||||||
New Hampshire (0.4%): | |||||||||||
| New Hampshire Business Finance Authority Revenue, 4.00%, 1/1/41, Continuously Callable @103 | 5,100 | 4,128 | |||||||||
| New Hampshire Health and Education Facilities Authority Act Revenue 5.00%, 8/1/34, Continuously Callable @100 | 2,880 | 3,087 | |||||||||
5.00%, 8/1/35, Continuously Callable @100 | 2,700 | 2,871 | |||||||||
5.00%, 8/1/36, Continuously Callable @100 | 2,000 | 2,111 | |||||||||
5.00%, 8/1/37, Continuously Callable @100 | 1,500 | 1,573 | |||||||||
13,770 | |||||||||||
New Jersey (6.7%): | |||||||||||
| Casino Reinvestment Development Authority Revenue (INS — Assured Guaranty Municipal Corp.) 5.00%, 11/1/29, Continuously Callable @100 | 1,000 | 1,028 | |||||||||
5.00%, 11/1/30, Continuously Callable @100 | 1,000 | 1,029 | |||||||||
| City of Atlantic City, GO (INS — Assured Guaranty Municipal Corp.) Series B, 5.00%, 3/1/32, Continuously Callable @100 | 1,660 | 1,778 | |||||||||
Series B, 5.00%, 3/1/37, Continuously Callable @100 | 1,250 | 1,308 | |||||||||
| City of Atlantic City, GO (INS — Build America Mutual Assurance Co.) Series A, 5.00%, 3/1/32, Continuously Callable @100 | 630 | 675 | |||||||||
Series A, 5.00%, 3/1/37, Continuously Callable @100 | 750 | 785 | |||||||||
| City of Bayonne, GO (INS — Build America Mutual Assurance Co.) 5.00%, 7/1/34, Pre-refunded 7/1/26 @100 | 1,135 | 1,208 | |||||||||
5.00%, 7/1/35, Pre-refunded 7/1/26 @100 | 1,000 | 1,065 | |||||||||
| City of Newark Mass Transit Access Tax Revenue (INS — Assured Guaranty Corp.), 5.00%, 11/15/42, Continuously Callable @100 | 1,000 | 1,070 | |||||||||
| Essex County Improvement Authority Revenue, 4.00%, 6/15/38, Continuously Callable @100 | 550 | 500 | |||||||||
| New Brunswick Parking Authority Revenue (INS — Build America Mutual Assurance Co.) Series A, 5.00%, 9/1/35, Continuously Callable @100 | 1,455 | 1,539 | |||||||||
Series A, 5.00%, 9/1/36, Continuously Callable @100 | 2,000 | 2,102 | |||||||||
| New Jersey Building Authority Revenue Series A, 4.00%, 6/15/30, Pre-refunded 6/15/26 @100 | 400 | 413 | |||||||||
Series A, 4.00%, 6/15/30, Pre-refunded 6/15/26 @100 | 600 | 620 | |||||||||
| New Jersey Economic Development Authority Revenue 4.35% (MUNIPSA+155bps), 9/1/27, Callable 4/3/23 @100 (d) | 10,000 | 10,000 | |||||||||
4.40% (MUNIPSA+160bps), 3/1/28, Callable 4/3/23 @100 (d) | 10,000 | 10,131 | |||||||||
5.00%, 11/1/36, Continuously Callable @100 | 2,000 | 2,117 | |||||||||
4.00%, 11/1/38, Continuously Callable @100 | 1,500 | 1,458 | |||||||||
4.00%, 11/1/39, Continuously Callable @100 | 2,000 | 1,924 | |||||||||
Series A, 5.00%, 6/15/25 | 5,125 | 5,298 | |||||||||
Series A, 3.13%, 7/1/29, Continuously Callable @100 | 665 | 635 | |||||||||
Series A, 3.38%, 7/1/30, Continuously Callable @100 | 1,000 | 964 | |||||||||
Series B, 5.00%, 6/15/36, Continuously Callable @100 | 16,455 | 17,351 | |||||||||
See notes to financial statements.
27
| USAA Mutual Funds Trust USAA Tax Exempt Intermediate-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Series B, 5.00%, 6/15/37, Continuously Callable @100 | $ | 16,280 | $ | 17,067 | |||||||
Series WW, 5.25%, 6/15/33, Pre-refunded 6/15/25 @100 | 9,000 | 9,425 | |||||||||
| New Jersey Economic Development Authority Revenue (INS — Assured Guaranty Municipal Corp.), 5.00%, 6/15/25, Continuously Callable @100 | 10,000 | 10,121 | |||||||||
| New Jersey Educational Facilities Authority Revenue Series B, 5.50%, 9/1/28, Continuously Callable @100 | 5,740 | 6,149 | |||||||||
Series B, 5.50%, 9/1/29, Continuously Callable @100 | 4,000 | 4,285 | |||||||||
Series B, 5.50%, 9/1/30, Continuously Callable @100 | 3,000 | 3,214 | |||||||||
Series B, 5.50%, 9/1/31, Continuously Callable @100 | 4,590 | 4,919 | |||||||||
Series B, 5.50%, 9/1/32, Continuously Callable @100 | 8,075 | 8,655 | |||||||||
Series F, 4.00%, 7/1/33, Continuously Callable @100 | 150 | 151 | |||||||||
Series F, 4.00%, 7/1/33, Pre-refunded 7/1/26 @100 | 350 | 362 | |||||||||
Series F, 4.00%, 7/1/34, Continuously Callable @100 | 260 | 262 | |||||||||
Series F, 4.00%, 7/1/34, Pre-refunded 7/1/26 @100 | 490 | 506 | |||||||||
Series F, 4.00%, 7/1/35, Continuously Callable @100 | 975 | 976 | |||||||||
Series F, 4.00%, 7/1/35, Pre-refunded 7/1/26 @100 | 275 | 284 | |||||||||
| New Jersey Educational Facilities Authority Revenue (INS — Assured Guaranty Municipal Corp.) Series A, 5.00%, 7/1/34, Continuously Callable @100 | 3,000 | 3,229 | |||||||||
Series A, 5.00%, 7/1/35, Continuously Callable @100 | 3,350 | 3,582 | |||||||||
Series A, 4.00%, 7/1/36, Continuously Callable @100 | 1,800 | 1,756 | |||||||||
| New Jersey Health Care Facilities Financing Authority Revenue 5.00%, 10/1/33, Continuously Callable @100 | 2,000 | 2,131 | |||||||||
5.00%, 10/1/34, Continuously Callable @100 | 2,000 | 2,120 | |||||||||
5.00%, 10/1/35, Continuously Callable @100 | 2,620 | 2,759 | |||||||||
| New Jersey Health Care Facilities Financing Authority Revenue (INS — Assured Guaranty Municipal Corp.) | |||||||||||
Series A, 5.00%, 7/1/27, Continuously Callable @100 | 2,000 | 2,063 | |||||||||
Series A, 5.00%, 7/1/30, Continuously Callable @100 | 1,500 | 1,539 | |||||||||
| New Jersey Transportation Trust Fund Authority Revenue 5.00%, 6/15/30, Continuously Callable @100 | 3,000 | 3,164 | |||||||||
5.00%, 6/15/31, Continuously Callable @100 | 3,000 | 3,162 | |||||||||
5.00%, 6/15/42, Continuously Callable @100 | 9,195 | 9,643 | |||||||||
Series A, 12/15/25 (e) | 20,000 | 18,075 | |||||||||
Series A, 5.00%, 12/15/33, Continuously Callable @100 | 2,000 | 2,145 | |||||||||
Series A, 5.00%, 12/15/35, Continuously Callable @100 | 1,050 | 1,111 | |||||||||
Series A, 12/15/38 (e) | 11,405 | 5,396 | |||||||||
Series AA, 5.25%, 6/15/33, Continuously Callable @100 | 2,000 | 2,084 | |||||||||
Series AA, 5.25%, 6/15/34, Continuously Callable @100 | 3,000 | 3,127 | |||||||||
Series AA, 4.00%, 6/15/36, Continuously Callable @100 | 2,500 | 2,496 | |||||||||
Series AA, 4.00%, 6/15/37, Continuously Callable @100 | 2,250 | 2,213 | |||||||||
Series BB, 5.00%, 6/15/31, Continuously Callable @100 | 2,500 | 2,712 | |||||||||
Series BB, 5.00%, 6/15/34, Continuously Callable @100 | 10,000 | 10,692 | |||||||||
| New Jersey Turnpike Authority Revenue Series A, 5.00%, 1/1/34, Continuously Callable @100 | 10,000 | 10,251 | |||||||||
Series A, 5.00%, 1/1/35, Continuously Callable @100 | 4,725 | 4,975 | |||||||||
Series B, 4.00%, 1/1/35, Continuously Callable @100 | 3,500 | 3,564 | |||||||||
| Newark Housing Authority Revenue (INS — Assured Guaranty Municipal Corp.) 4.00%, 12/1/29, Continuously Callable @100 | 500 | 511 | |||||||||
See notes to financial statements.
28
| USAA Mutual Funds Trust USAA Tax Exempt Intermediate-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
4.00%, 12/1/30, Continuously Callable @100 | $ | 750 | $ | 764 | |||||||
4.00%, 12/1/31, Continuously Callable @100 | 500 | 510 | |||||||||
| South Jersey Transportation Authority Revenue 4.50%, 11/1/42, Continuously Callable @100 | 1,000 | 963 | |||||||||
Series A, 5.00%, 11/1/30, Continuously Callable @100 | 500 | 512 | |||||||||
Series A, 5.00%, 11/1/31, Continuously Callable @100 | 750 | 768 | |||||||||
Series A, 5.00%, 11/1/34, Continuously Callable @100 | 1,085 | 1,110 | |||||||||
Series A, 4.00%, 11/1/40, Continuously Callable @100 | 4,300 | 3,907 | |||||||||
State of New Jersey, GO, Series A, 4.00%, 6/1/31 | 3,570 | 3,866 | |||||||||
| The Passaic County Improvement Authority Revenue, 5.25%, 7/1/43, Continuously Callable @100 | 665 | 660 | |||||||||
| Tobacco Settlement Financing Corp. Revenue, Series A, 5.00%, 6/1/36, Continuously Callable @100 | 5,000 | 5,172 | |||||||||
254,106 | |||||||||||
New Mexico (0.3%): | |||||||||||
City of Farmington Revenue, Series B, 2.15%, 4/1/33, Continuously Callable @101 | 10,000 | 8,087 | |||||||||
| City of Santa Fe Revenue 5.00%, 5/15/34, Continuously Callable @103 | 625 | 591 | |||||||||
5.00%, 5/15/39, Continuously Callable @103 | 480 | 435 | |||||||||
| New Mexico Hospital Equipment Loan Council Revenue, 5.00%, 7/1/39, Continuously Callable @102 | 1,075 | 924 | |||||||||
| Village of Los Ranchos de Albuquerque Revenue 4.00%, 9/1/35, Continuously Callable @100 | 300 | 301 | |||||||||
4.00%, 9/1/40, Continuously Callable @100 | 1,200 | 1,150 | |||||||||
| Winrock Town Center Tax Increment Development District No. 1 Tax Allocation, 4.00%, 5/1/33, Continuously Callable @103 (c) | 600 | 520 | |||||||||
| Winrock Town Center Tax Increment Development District Tax Allocation, 4.25%, 5/1/40, Continuously Callable @103 (c) | 1,000 | 823 | |||||||||
12,831 | |||||||||||
New York (5.5%): | |||||||||||
| Allegany County Capital Resource Corp. Revenue Series A, 5.00%, 12/1/32, Continuously Callable @100 | 1,390 | 1,443 | |||||||||
Series A, 5.00%, 12/1/37, Continuously Callable @100 | 1,500 | 1,506 | |||||||||
Series A, 5.00%, 12/1/42, Continuously Callable @100 | 1,925 | 1,889 | |||||||||
| Build NYC Resource Corp. Revenue, Series A, 5.00%, 7/1/42, Continuously Callable @100 | 500 | 501 | |||||||||
City of Amsterdam, GO, 5.00%, 3/6/24, Continuously Callable @100 | 7,503 | 7,520 | |||||||||
City of Long Beach, GO, 4.00%, 2/16/24 | 10,000 | 9,972 | |||||||||
City of New York, GO, Series B-3, 3.08%, 10/1/46, Continuously Callable @100 (b) | 10,320 | 10,320 | |||||||||
City of Newburgh, GO, Series B, 5.00%, 6/15/23, Continuously Callable @100 | 575 | 576 | |||||||||
County of Nassau, GO, Series A, 5.00%, 1/1/36, Continuously Callable @100 | 1,150 | 1,215 | |||||||||
| Erie County Industrial Development Agency Revenue, 5.00%, 5/1/28, Continuously Callable @100 | 2,000 | 2,006 | |||||||||
| Hudson Yards Infrastructure Corp. Revenue, Series A, 5.00%, 2/15/38, Continuously Callable @100 | 2,500 | 2,619 | |||||||||
| Metropolitan Transportation Authority Revenue 4.00%, 11/15/35, Continuously Callable @100 | 9,040 | 8,621 | |||||||||
Series 2, 3.85% (SOFR+80bps), 11/1/32, (Put Date 4/1/26) (a) (d) | 3,000 | 2,893 | |||||||||
Series A-2, 5.00%, 11/15/45, (Put Date 5/15/30) (a) | 7,315 | 7,806 | |||||||||
See notes to financial statements.
29
| USAA Mutual Funds Trust USAA Tax Exempt Intermediate-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Series C-1, 5.00%, 11/15/29, Continuously Callable @100 | $ | 7,030 | $ | 7,394 | |||||||
Series C-1, 4.00%, 11/15/32, Continuously Callable @100 | 9,300 | 9,234 | |||||||||
Series C-1, 5.00%, 11/15/34, Continuously Callable @100 | 6,295 | 6,421 | |||||||||
Series C-1, 5.00%, 11/15/36, Continuously Callable @100 | 3,705 | 3,762 | |||||||||
Series D-1, 5.00%, 11/15/34, Continuously Callable @100 | 2,000 | 2,040 | |||||||||
Series F, 5.00%, 11/15/34, Continuously Callable @100 | 2,000 | 2,040 | |||||||||
Series F, 5.00%, 11/15/35, Continuously Callable @100 | 3,000 | 3,046 | |||||||||
| Metropolitan Transportation Authority Revenue (INS — Assured Guaranty Municipal Corp.), Series A-1, 4.00%, 11/15/41, Continuously Callable @100 | 9,820 | 9,279 | |||||||||
| Monroe County Industrial Development Corp. Revenue 4.00%, 12/1/38, Continuously Callable @100 | 1,200 | 1,084 | |||||||||
4.00%, 12/1/39, Continuously Callable @100 | 1,200 | 1,079 | |||||||||
| New York City Municipal Water Finance Authority Revenue, Series DD, 3.08%, 6/15/33, Continuously Callable @100 (b) | 1,590 | 1,590 | |||||||||
| New York City Transitional Finance Authority Future Tax Secured Revenue, 4.00%, 11/1/38, Continuously Callable @100 | 1,250 | 1,236 | |||||||||
| New York Liberty Development Corp. Revenue 2.63%, 9/15/69, Continuously Callable @100 | 3,350 | 2,920 | |||||||||
Series A, 2.10%, 11/15/32, Continuously Callable @100 | 6,730 | 5,659 | |||||||||
Series A, 2.20%, 11/15/33, Continuously Callable @100 | 9,000 | 7,486 | |||||||||
| New York State Dormitory Authority Revenue 5.00%, 12/1/35, Continuously Callable @100 (c) | 600 | 592 | |||||||||
6.00%, 7/1/40, Continuously Callable @100 (c) | 3,480 | 3,110 | |||||||||
Series A, 5.00%, 5/1/23 | 15 | 15 | |||||||||
Series A, 5.00%, 5/1/23 | 735 | 734 | |||||||||
Series A, 5.00%, 5/1/24, Continuously Callable @100 | 735 | 733 | |||||||||
Series A, 5.00%, 5/1/24, Pre-refunded 5/1/23 @100 | 15 | 15 | |||||||||
Series A, 5.00%, 5/1/25, Continuously Callable @100 | 1,175 | 1,174 | |||||||||
Series A, 5.00%, 5/1/25, Pre-refunded 5/1/23 @100 | 25 | 25 | |||||||||
Series A, 5.00%, 5/1/26, Pre-refunded 5/1/23 @100 | 20 | 20 | |||||||||
Series A, 5.00%, 5/1/26, Continuously Callable @100 | 980 | 971 | |||||||||
Series A, 4.00%, 9/1/36, Continuously Callable @100 | 500 | 449 | |||||||||
Series A, 4.00%, 9/1/37, Continuously Callable @100 | 350 | 309 | |||||||||
Series A, 4.00%, 9/1/38, Continuously Callable @100 | 1,250 | 1,095 | |||||||||
Series A, 4.00%, 9/1/40, Continuously Callable @100 | 750 | 651 | |||||||||
Series A, 4.00%, 3/15/41, Continuously Callable @100 | 21,605 | 21,297 | |||||||||
Series A, 4.00%, 3/15/42, Continuously Callable @100 | 9,250 | 9,000 | |||||||||
Series A-1, 4.00%, 7/1/40, Continuously Callable @100 | 4,535 | 4,379 | |||||||||
Series B, 5.00%, 2/15/32, Pre-refunded 2/15/25 @100 | 5 | 5 | |||||||||
| New York State Dormitory Authority Revenue (INS — Assured Guaranty Municipal Corp.) Series A, 5.00%, 10/1/27, Continuously Callable @100 | 1,000 | 1,030 | |||||||||
Series A, 5.00%, 10/1/28, Continuously Callable @100 | 1,000 | 1,031 | |||||||||
Series A, 5.00%, 10/1/29, Continuously Callable @100 | 1,300 | 1,341 | |||||||||
| New York State Urban Development Corp. Revenue Series A, 4.00%, 3/15/39, Continuously Callable @100 | 5,000 | 4,938 | |||||||||
Series E, 4.00%, 3/15/39, Continuously Callable @100 | 5,785 | 5,746 | |||||||||
| Niagara Falls City School District Certificate of Participation (INS — Assured Guaranty Municipal Corp.) 5.00%, 6/15/23 | 1,670 | 1,676 | |||||||||
See notes to financial statements.
30
| USAA Mutual Funds Trust USAA Tax Exempt Intermediate-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
5.00%, 6/15/24 | $ | 1,450 | $ | 1,476 | |||||||
5.00%, 6/15/25, Continuously Callable @100 | 1,670 | 1,700 | |||||||||
| Saratoga County Capital Resource Corp. Revenue, Series A, 5.00%, 12/1/28, Continuously Callable @100 | 790 | 799 | |||||||||
| Town of Oyster Bay, GO 4.00%, 2/15/24 | 5,415 | 5,440 | |||||||||
4.00%, 2/15/25 | 9,750 | 9,880 | |||||||||
4.00%, 2/15/26 | 3,000 | 3,074 | |||||||||
Village of Johnson City, GO, Series C, 5.25%, 9/29/23 | 1,550 | 1,553 | |||||||||
207,415 | |||||||||||
North Carolina (0.3%): | |||||||||||
| North Carolina Medical Care Commission Revenue 5.00%, 10/1/25 | 935 | 933 | |||||||||
5.00%, 10/1/30, Continuously Callable @100 | 1,850 | 1,851 | |||||||||
5.00%, 10/1/40, Continuously Callable @103 | 1,050 | 986 | |||||||||
5.00%, 10/1/45, Continuously Callable @103 | 1,000 | 916 | |||||||||
Series A, 4.00%, 9/1/40, Continuously Callable @100 | 3,050 | 2,470 | |||||||||
Series A, 4.00%, 10/1/40, Continuously Callable @103 | 600 | 512 | |||||||||
Series A, 5.00%, 10/1/40, Continuously Callable @103 | 1,800 | 1,774 | |||||||||
9,442 | |||||||||||
North Dakota (0.3%): | |||||||||||
| City of Grand Forks Revenue 4.00%, 12/1/36, Continuously Callable @100 | 2,475 | 2,215 | |||||||||
4.00%, 12/1/38, Continuously Callable @100 | 1,100 | 952 | |||||||||
4.00%, 12/1/40, Continuously Callable @100 | 1,700 | 1,455 | |||||||||
4.00%, 12/1/41, Continuously Callable @100 | 1,750 | 1,490 | |||||||||
County of Ward Revenue, Series C, 5.00%, 6/1/43, Continuously Callable @100 | 4,500 | 4,131 | |||||||||
10,243 | |||||||||||
Ohio (3.0%): | |||||||||||
| Akron Bath Copley Joint Township Hospital District Revenue 4.00%, 11/15/36, Continuously Callable @100 | 1,000 | 917 | |||||||||
4.00%, 11/15/37, Continuously Callable @100 | 800 | 722 | |||||||||
4.00%, 11/15/38, Continuously Callable @100 | 500 | 447 | |||||||||
City of Centerville Revenue, 5.25%, 11/1/37, Continuously Callable @100 | 2,250 | 2,178 | |||||||||
| County of Allen Hospital Facilities Revenue 4.00%, 12/1/40, Continuously Callable @100 | 7,500 | 7,237 | |||||||||
Series A, 4.00%, 8/1/36, Continuously Callable @100 | 5,000 | 5,006 | |||||||||
Series A, 4.00%, 8/1/37, Continuously Callable @100 | 10,800 | 10,665 | |||||||||
| County of Cuyahoga Revenue 4.00%, 2/15/29, Continuously Callable @100 | 7,430 | 7,454 | |||||||||
5.00%, 2/15/37, Continuously Callable @100 | 4,000 | 4,049 | |||||||||
| County of Hamilton Revenue 5.00%, 1/1/31, Continuously Callable @100 | 1,350 | 1,350 | |||||||||
5.00%, 1/1/36, Continuously Callable @100 | 1,400 | 1,363 | |||||||||
5.00%, 9/15/39, Continuously Callable @100 | 1,375 | 1,397 | |||||||||
5.00%, 9/15/40, Continuously Callable @100 | 1,100 | 1,117 | |||||||||
| County of Hamilton Sales Tax Revenue (INS — AMBAC Assurance Corp.), Series B, 12/1/25 (e) | 4,365 | 3,994 | |||||||||
See notes to financial statements.
31
| USAA Mutual Funds Trust USAA Tax Exempt Intermediate-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
County of Hardi Revenue, 5.25%, 5/1/40, Continuously Callable @103 | $ | 2,000 | $ | 1,807 | |||||||
| County of Montgomery Revenue 3.00%, 11/15/36, Continuously Callable @100 | 7,000 | 5,607 | |||||||||
5.00%, 11/15/37, Continuously Callable @100 | 2,200 | 2,248 | |||||||||
County of Ross Revenue, 5.00%, 12/1/39, Continuously Callable @100 | 2,405 | 2,480 | |||||||||
| Dayton City School District, GO 5.00%, 11/1/28 | 2,805 | 3,122 | |||||||||
5.00%, 11/1/29 | 3,655 | 4,135 | |||||||||
5.00%, 11/1/30 | 3,160 | 3,631 | |||||||||
5.00%, 11/1/31 | 2,000 | 2,333 | |||||||||
| Ohio Higher Educational Facility Commission Revenue 5.00%, 5/1/31, Continuously Callable @100 | 1,000 | 1,029 | |||||||||
5.00%, 5/1/33, Continuously Callable @100 | 500 | 514 | |||||||||
| Port of Greater Cincinnati Development Authority Revenue, Series A, 3.00%, 5/1/23, Continuously Callable @100 | 9,535 | 9,509 | |||||||||
| Southeastern Ohio Port Authority Revenue 5.50%, 12/1/29, Continuously Callable @100 | 750 | 750 | |||||||||
5.00%, 12/1/35, Continuously Callable @100 | 750 | 704 | |||||||||
| State of Ohio Revenue 5.00%, 1/15/34, Continuously Callable @100 | 7,210 | 7,453 | |||||||||
5.00%, 1/15/35, Continuously Callable @100 | 6,000 | 6,168 | |||||||||
5.00%, 1/15/36, Continuously Callable @100 | 3,070 | 3,142 | |||||||||
4.00%, 11/15/36, Continuously Callable @100 | 1,260 | 1,174 | |||||||||
4.00%, 11/15/38, Continuously Callable @100 | 1,270 | 1,160 | |||||||||
4.00%, 11/15/40, Continuously Callable @100 | 655 | 591 | |||||||||
Series A, 4.00%, 1/15/38, Continuously Callable @100 | 1,000 | 943 | |||||||||
Series A, 4.00%, 1/15/40, Continuously Callable @100 | 1,800 | 1,682 | |||||||||
| Village of Bluffton Revenue 5.00%, 12/1/31, Continuously Callable @100 | 1,500 | 1,585 | |||||||||
4.00%, 12/1/32, Continuously Callable @100 | 1,500 | 1,508 | |||||||||
4.00%, 12/1/33, Continuously Callable @100 | 1,600 | 1,603 | |||||||||
4.00%, 12/1/34, Continuously Callable @100 | 1,795 | 1,778 | |||||||||
114,552 | |||||||||||
Oklahoma (0.2%): | |||||||||||
| Oklahoma Development Finance Authority Revenue, Series B, 5.00%, 8/15/33, Continuously Callable @100 | 4,100 | 3,900 | |||||||||
| Pontotoc County Educational Facilities Authority Revenue, 4.00%, 9/1/40, Continuously Callable @100 | 2,000 | 1,845 | |||||||||
| Tulsa County Industrial Authority Revenue 5.00%, 11/15/28, Continuously Callable @102 | 940 | 944 | |||||||||
5.00%, 11/15/30, Continuously Callable @102 | 1,780 | 1,787 | |||||||||
8,476 | |||||||||||
Oregon (0.1%): | |||||||||||
| Clackamas County Hospital Facility Authority Revenue 5.00%, 11/15/32, Continuously Callable @102 | 500 | 505 | |||||||||
5.00%, 11/15/37, Continuously Callable @102 | 500 | 501 | |||||||||
| Oregon State Facilities Authority Revenue Series A, 5.00%, 10/1/35, Continuously Callable @100 | 275 | 287 | |||||||||
Series A, 5.00%, 10/1/40, Continuously Callable @100 | 1,750 | 1,770 | |||||||||
See notes to financial statements.
32
| USAA Mutual Funds Trust USAA Tax Exempt Intermediate-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
| Salem Hospital Facility Authority Revenue, 4.00%, 5/15/40, Continuously Callable @103 | $ | 800 | $ | 652 | |||||||
3,715 | |||||||||||
Pennsylvania (8.1%): | |||||||||||
| Allegheny County Hospital Development Authority Revenue 5.00%, 4/1/35, Continuously Callable @100 | 7,315 | 7,662 | |||||||||
5.00%, 4/1/36, Continuously Callable @100 | 8,000 | 8,313 | |||||||||
4.00%, 7/15/38, Continuously Callable @100 | 1,500 | 1,438 | |||||||||
4.00%, 7/15/39, Continuously Callable @100 | 3,495 | 3,336 | |||||||||
| Allegheny County Sanitary Authority Revenue (INS — Assured Guaranty Municipal Corp.) 4.00%, 12/1/33, Continuously Callable @100 | 1,500 | 1,541 | |||||||||
4.00%, 12/1/34, Continuously Callable @100 | 1,475 | 1,506 | |||||||||
| Berks County IDA Revenue 4.00%, 11/1/33, Continuously Callable @100 | 1,300 | 871 | |||||||||
5.00%, 11/1/34, Continuously Callable @100 | 2,000 | 1,548 | |||||||||
5.00%, 11/1/35, Continuously Callable @100 | 3,000 | 2,281 | |||||||||
| Bucks County IDA Revenue 5.00%, 10/1/30, Continuously Callable @103 | 325 | 330 | |||||||||
5.00%, 10/1/31, Continuously Callable @103 | 450 | 458 | |||||||||
5.00%, 10/1/37, Continuously Callable @103 | 2,260 | 2,235 | |||||||||
| Butler County Hospital Authority Revenue, 5.00%, 7/1/35, Continuously Callable @100 | 1,885 | 1,908 | |||||||||
| Chester County IDA Revenue 5.00%, 10/1/34, Continuously Callable @100 | 1,000 | 1,004 | |||||||||
5.63%, 10/15/42, Continuously Callable @100 (c) | 8,875 | 8,543 | |||||||||
Series A, 5.13%, 10/15/37, Continuously Callable @100 | 2,750 | 2,575 | |||||||||
| Commonwealth Financing Authority Revenue 5.00%, 6/1/33, Continuously Callable @100 | 1,250 | 1,334 | |||||||||
5.00%, 6/1/34, Continuously Callable @100 | 2,000 | 2,127 | |||||||||
Series A, 5.00%, 6/1/34, Continuously Callable @100 | 5,000 | 5,209 | |||||||||
| Commonwealth of Pennsylvania Certificate of Participation Series A, 5.00%, 7/1/34, Continuously Callable @100 | 1,350 | 1,459 | |||||||||
Series A, 5.00%, 7/1/35, Continuously Callable @100 | 750 | 803 | |||||||||
Series A, 5.00%, 7/1/37, Continuously Callable @100 | 800 | 846 | |||||||||
| County of Beaver, GO 4.00%, 4/15/28 | 695 | 740 | |||||||||
4.00%, 4/15/29, Pre-refunded 4/15/28 @100 | 600 | 635 | |||||||||
4.00%, 4/15/30, Pre-refunded 4/15/28 @100 | 510 | 539 | |||||||||
| County of Beaver, GO (INS — Build America Mutual Assurance Co.) 4.00%, 4/15/28 | 2,195 | 2,296 | |||||||||
4.00%, 4/15/29, Continuously Callable @100 | 1,900 | 1,978 | |||||||||
4.00%, 4/15/30, Continuously Callable @100 | 4,490 | 4,642 | |||||||||
| County of Lehigh Revenue 4.00%, 7/1/37, Continuously Callable @100 | 2,000 | 1,938 | |||||||||
4.00%, 7/1/38, Continuously Callable @100 | 2,000 | 1,918 | |||||||||
4.00%, 7/1/39, Continuously Callable @100 | 2,000 | 1,906 | |||||||||
| County of Luzerne, GO (INS — Assured Guaranty Municipal Corp.), Series A, 5.00%, 11/15/29, Continuously Callable @100 | 5,000 | 5,245 | |||||||||
See notes to financial statements.
33
| USAA Mutual Funds Trust USAA Tax Exempt Intermediate-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
| Cumberland County Municipal Authority Revenue 4.00%, 11/1/36, Continuously Callable @100 | $ | 1,250 | $ | 1,240 | |||||||
4.00%, 11/1/37, Continuously Callable @100 | 2,130 | 2,053 | |||||||||
| Dauphin County General Authority Revenue 4.00%, 6/1/30, Continuously Callable @100 | 2,000 | 2,036 | |||||||||
4.00%, 6/1/31, Continuously Callable @100 | 1,000 | 1,023 | |||||||||
| Delaware County Authority Revenue 5.00%, 10/1/30 | 1,200 | 1,242 | |||||||||
5.00%, 10/1/35, Continuously Callable @100 | 2,220 | 2,269 | |||||||||
5.00%, 10/1/39, Continuously Callable @100 | 2,250 | 2,233 | |||||||||
| Delaware River Joint Toll Bridge Commission Revenue, 5.00%, 7/1/34, Continuously Callable @100 | 3,000 | 3,252 | |||||||||
| Lancaster Higher Education Authority Revenue, 5.00%, 10/1/42, Continuously Callable @100 | 3,360 | 3,359 | |||||||||
| Latrobe IDA Revenue 4.00%, 3/1/40, Continuously Callable @100 | 250 | 217 | |||||||||
4.00%, 3/1/41, Continuously Callable @100 | 250 | 213 | |||||||||
4.00%, 3/1/46, Continuously Callable @100 | 750 | 601 | |||||||||
| Montgomery County Higher Education & Health Authority Revenue 5.00%, 9/1/34, Continuously Callable @100 | 1,750 | 1,860 | |||||||||
5.00%, 9/1/35, Continuously Callable @100 | 1,850 | 1,949 | |||||||||
4.00%, 9/1/36, Continuously Callable @100 | 1,100 | 1,072 | |||||||||
4.00%, 9/1/37, Continuously Callable @100 | 1,000 | 961 | |||||||||
5.00%, 9/1/37, Continuously Callable @100 | 1,750 | 1,815 | |||||||||
4.00%, 9/1/38, Continuously Callable @100 | 900 | 856 | |||||||||
4.00%, 9/1/39, Continuously Callable @100 | 1,000 | 944 | |||||||||
| Montour School District, GO (INS — Assured Guaranty Municipal Corp.) Series B, 5.00%, 4/1/33, Continuously Callable @100 | 1,000 | 1,047 | |||||||||
Series B, 5.00%, 4/1/34, Continuously Callable @100 | 1,500 | 1,571 | |||||||||
Series B, 5.00%, 4/1/35, Continuously Callable @100 | 1,500 | 1,574 | |||||||||
| Northampton County General Purpose Authority Revenue, 4.30% (LIBOR01M+104bps), 8/15/48, (Put Date 8/15/24) (a) (d) | 4,645 | 4,635 | |||||||||
| Northeastern Pennsylvania Hospital & Education Authority Revenue, Series A, 5.00%, 3/1/37, Continuously Callable @100 | 1,525 | 1,543 | |||||||||
| Pennsylvania Economic Development Financing Authority Revenue 4.00%, 7/1/33, Continuously Callable @103 | 1,750 | 1,647 | |||||||||
4.00%, 7/1/41, Continuously Callable @103 | 1,050 | 881 | |||||||||
| Pennsylvania Higher Educational Facilities Authority Revenue Series A, 5.25%, 7/15/25, Continuously Callable @100 | 1,730 | 1,733 | |||||||||
Series A, 5.25%, 7/15/26, Pre-refunded 7/15/23 @100 | 2,020 | 2,034 | |||||||||
Series A, 5.25%, 7/15/27, Pre-refunded 7/15/23 @100 | 2,125 | 2,140 | |||||||||
Series A, 5.25%, 7/15/28, Pre-refunded 7/15/23 @100 | 2,245 | 2,261 | |||||||||
Series A, 5.00%, 7/15/30, Pre-refunded 7/15/23 @100 | 2,415 | 2,429 | |||||||||
Series A, 5.25%, 7/15/33, Pre-refunded 7/15/23 @100 | 1,965 | 1,979 | |||||||||
| Pennsylvania Turnpike Commission Revenue 5.00%, 6/1/35, Continuously Callable @100 | 10,655 | 11,093 | |||||||||
5.00%, 6/1/36, Continuously Callable @100 | 8,255 | 8,502 | |||||||||
4.00%, 12/1/36, Continuously Callable @100 | 1,000 | 1,008 | |||||||||
4.00%, 12/1/37, Continuously Callable @100 | 1,500 | 1,496 | |||||||||
4.00%, 12/1/38, Continuously Callable @100 | 1,000 | 987 | |||||||||
See notes to financial statements.
34
| USAA Mutual Funds Trust USAA Tax Exempt Intermediate-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Series A-1, 5.00%, 12/1/32, Continuously Callable @100 | $ | 1,500 | $ | 1,545 | |||||||
Series A-1, 5.00%, 12/1/33, Continuously Callable @100 | 4,345 | 4,476 | |||||||||
Series A-1, 5.00%, 12/1/34, Continuously Callable @100 | 3,000 | 3,133 | |||||||||
Series A-1, 5.00%, 12/1/35, Continuously Callable @100 | 3,320 | 3,440 | |||||||||
Series A-1, 5.00%, 12/1/36, Continuously Callable @100 | 3,690 | 3,793 | |||||||||
Series B, 5.00%, 12/1/32, Continuously Callable @100 | 3,500 | 3,672 | |||||||||
Series B, 5.00%, 12/1/33, Continuously Callable @100 | 7,145 | 7,498 | |||||||||
Series B, 4.00%, 6/1/34, Continuously Callable @100 | 20,000 | 20,161 | |||||||||
Series B, 5.00%, 12/1/34, Continuously Callable @100 | 6,250 | 6,555 | |||||||||
Series B, 5.00%, 12/1/34, Continuously Callable @100 | 2,000 | 2,099 | |||||||||
Series B, 5.00%, 12/1/35, Continuously Callable @100 | 5,700 | 5,949 | |||||||||
Series B, 5.00%, 12/1/35, Continuously Callable @100 | 2,000 | 2,098 | |||||||||
| Philadelphia IDA Revenue 5.00%, 5/1/35, Continuously Callable @100 | 750 | 794 | |||||||||
5.00%, 5/1/36, Continuously Callable @100 | 1,500 | 1,575 | |||||||||
5.00%, 5/1/38, Continuously Callable @100 | 1,000 | 1,039 | |||||||||
5.00%, 6/15/40, Continuously Callable @100 (c) | 900 | 864 | |||||||||
| Pittsburgh Water & Sewer Authority Revenue (INS — Assured Guaranty Municipal Corp.) Series B, 4.00%, 9/1/34, Continuously Callable @100 | 1,750 | 1,799 | |||||||||
Series B, 4.00%, 9/1/35, Continuously Callable @100 | 300 | 304 | |||||||||
| Reading School District, GO (INS — Assured Guaranty Municipal Corp.) 5.00%, 3/1/36, Continuously Callable @100 | 2,000 | 2,120 | |||||||||
5.00%, 3/1/37, Continuously Callable @100 | 1,500 | 1,584 | |||||||||
| School District of Philadelphia, GO Series A, 5.00%, 9/1/34, Continuously Callable @100 | 1,000 | 1,076 | |||||||||
Series A, 5.00%, 9/1/35, Continuously Callable @100 | 1,000 | 1,067 | |||||||||
Series A, 5.00%, 9/1/36, Continuously Callable @100 | 1,000 | 1,059 | |||||||||
Series A, 5.00%, 9/1/37, Continuously Callable @100 | 1,000 | 1,052 | |||||||||
Series A, 4.00%, 9/1/38, Continuously Callable @100 | 1,700 | 1,631 | |||||||||
Series A, 4.00%, 9/1/39, Continuously Callable @100 | 1,600 | 1,513 | |||||||||
Series F, 5.00%, 9/1/31, Continuously Callable @100 | 9,895 | 10,468 | |||||||||
Series F, 5.00%, 9/1/32, Continuously Callable @100 | 5,000 | 5,288 | |||||||||
Series F, 5.00%, 9/1/33, Continuously Callable @100 | 4,000 | 4,230 | |||||||||
Series F, 5.00%, 9/1/34, Continuously Callable @100 | 5,100 | 5,372 | |||||||||
| School District of the City of Erie, GO (INS — Assured Guaranty Municipal Corp.), Series A, 4.00%, 4/1/33, Continuously Callable @100 | 1,150 | 1,175 | |||||||||
| Scranton School District, GO (INS — Build America Mutual Assurance Co.) Series E, 5.00%, 12/1/32, Continuously Callable @100 | 1,000 | 1,088 | |||||||||
Series E, 5.00%, 12/1/33, Continuously Callable @100 | 1,600 | 1,736 | |||||||||
Series E, 5.00%, 12/1/35, Continuously Callable @100 | 750 | 803 | |||||||||
| State Public School Building Authority Revenue, 5.00%, 6/1/29, Continuously Callable @100 | 10,000 | 10,424 | |||||||||
| State Public School Building Authority Revenue (INS — Assured Guaranty Municipal Corp.) 5.00%, 6/1/31, Continuously Callable @100 | 6,100 | 6,543 | |||||||||
4.00%, 12/1/31, Continuously Callable @100 | 13,085 | 13,428 | |||||||||
4.00%, 12/1/31, Pre-refunded 12/1/26 @100 | 2,295 | 2,385 | |||||||||
| The Berks County Municipal Authority Revenue, Series B, 5.00%, 2/1/40, (Put Date 2/1/30) (a) | 3,300 | 2,796 | |||||||||
See notes to financial statements.
35
| USAA Mutual Funds Trust USAA Tax Exempt Intermediate-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
| Westmoreland County IDA Revenue, Series A, 4.00%, 7/1/37, Continuously Callable @100 | $ | 1,400 | $ | 1,274 | |||||||
| Wilkes-Barre Finance Authority Revenue, 4.00%, 3/1/42, Continuously Callable @100 | 2,600 | 2,206 | |||||||||
308,031 | |||||||||||
Rhode Island (0.4%): | |||||||||||
| Rhode Island Health & Educational Building Corp. Revenue, 6.00%, 9/1/33, Pre-refunded 9/1/23 @100 | 2,000 | 2,027 | |||||||||
| Rhode Island Turnpike & Bridge Authority Revenue Series A, 5.00%, 10/1/33, Continuously Callable @100 | 1,350 | 1,431 | |||||||||
Series A, 5.00%, 10/1/35, Continuously Callable @100 | 4,345 | 4,581 | |||||||||
| Tobacco Settlement Financing Corp. Revenue Series A, 5.00%, 6/1/28, Continuously Callable @100 | 2,000 | 2,012 | |||||||||
Series A, 5.00%, 6/1/29, Continuously Callable @100 | 2,000 | 2,012 | |||||||||
Series A, 5.00%, 6/1/30, Continuously Callable @100 | 2,500 | 2,515 | |||||||||
14,578 | |||||||||||
South Carolina (1.0%): | |||||||||||
| Lexington County Health Services District, Inc. Revenue 4.00%, 11/1/31, Continuously Callable @100 | 1,000 | 1,028 | |||||||||
4.00%, 11/1/32, Continuously Callable @100 | 1,000 | 1,024 | |||||||||
| Patriots Energy Group Financing Agency Revenue, Series B, 3.98% (LIBOR01M+86bps), 10/1/48, (Put Date 2/1/24) (a) (d) | 20,000 | 19,937 | |||||||||
| South Carolina Public Service Authority Revenue Series A, 5.00%, 12/1/34, Continuously Callable @100 | 9,835 | 10,200 | |||||||||
Series A, 5.00%, 12/1/35, Continuously Callable @100 | 7,000 | 7,233 | |||||||||
39,422 | |||||||||||
Tennessee (1.4%): | |||||||||||
| Chattanooga Health Educational & Housing Facility Board Revenue, Series C, 3.08%, 5/1/39, Continuously Callable @100 (b) | 10,300 | 10,300 | |||||||||
| Greeneville Health & Educational Facilities Board Revenue 5.00%, 7/1/35, Continuously Callable @100 | 2,710 | 2,849 | |||||||||
5.00%, 7/1/36, Continuously Callable @100 | 3,000 | 3,128 | |||||||||
5.00%, 7/1/37, Continuously Callable @100 | 3,500 | 3,623 | |||||||||
| Metropolitan Government Nashville & Davidson County Health & Educational Facilities Board Revenue, 5.00%, 7/1/40, Continuously Callable @100 | 5,500 | 5,605 | |||||||||
| New Memphis Arena Public Building Authority Revenue 4/1/32, Continuously Callable @98 (e) | 875 | 610 | |||||||||
4/1/33, Continuously Callable @96 (e) | 625 | 417 | |||||||||
4/1/34, Continuously Callable @94 (e) | 875 | 553 | |||||||||
4/1/35, Continuously Callable @92 (e) | 875 | 522 | |||||||||
Tennergy Corp. Revenue, Series A, 5.50%, 10/1/53, (Put Date 12/1/30) (a) | 12,500 | 13,234 | |||||||||
| Tennessee Energy Acquisition Corp. Revenue, Series A, 5.00%, 5/1/53, (Put Date 5/1/28) (a) | 10,000 | 10,236 | |||||||||
51,077 | |||||||||||
Texas (9.7%): | |||||||||||
| Austin Convention Enterprises, Inc. Revenue, 5.00%, 1/1/34, Continuously Callable @100 | 1,105 | 1,118 | |||||||||
See notes to financial statements.
36
| USAA Mutual Funds Trust USAA Tax Exempt Intermediate-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
| Board of Managers Joint Guadalupe County-City of Seguin Hospital Revenue 5.00%, 12/1/25 | $ | 2,740 | $ | 2,751 | |||||||
5.00%, 12/1/27, Continuously Callable @100 | 2,990 | 2,989 | |||||||||
5.00%, 12/1/28, Continuously Callable @100 | 1,640 | 1,633 | |||||||||
5.00%, 12/1/29, Continuously Callable @100 | 1,600 | 1,585 | |||||||||
5.00%, 12/1/30, Continuously Callable @100 | 1,700 | 1,677 | |||||||||
5.25%, 12/1/35, Continuously Callable @100 | 5,150 | 5,089 | |||||||||
| Central Texas Regional Mobility Authority Revenue 1/1/24 (e) | 7,000 | 6,786 | |||||||||
1/1/26 (e) | 2,535 | 2,291 | |||||||||
Series A, 5.00%, 1/1/34, Pre-refunded 7/1/25 @100 | 1,250 | 1,302 | |||||||||
Series A, 5.00%, 1/1/35, Pre-refunded 7/1/25 @100 | 1,100 | 1,146 | |||||||||
| Central Texas Turnpike System Revenue Series C, 5.00%, 8/15/33, Continuously Callable @100 | 10,000 | 10,210 | |||||||||
Series C, 5.00%, 8/15/34, Continuously Callable @100 | 8,500 | 8,680 | |||||||||
| City of Arlington Special Tax (INS — Build America Mutual Assurance Co.) Series C, 5.00%, 2/15/34, Continuously Callable @100 | 1,500 | 1,617 | |||||||||
Series C, 5.00%, 2/15/35, Continuously Callable @100 | 1,500 | 1,606 | |||||||||
Series C, 5.00%, 2/15/36, Continuously Callable @100 | 3,100 | 3,293 | |||||||||
Series C, 5.00%, 2/15/37, Continuously Callable @100 | 3,305 | 3,488 | |||||||||
Series C, 5.00%, 2/15/38, Continuously Callable @100 | 4,380 | 4,603 | |||||||||
| City of Corpus Christi Utility System Revenue 4.00%, 7/15/32, Continuously Callable @100 | 1,800 | 1,848 | |||||||||
4.00%, 7/15/33, Continuously Callable @100 | 1,100 | 1,125 | |||||||||
4.00%, 7/15/34, Continuously Callable @100 | 1,050 | 1,070 | |||||||||
4.00%, 7/15/35, Continuously Callable @100 | 1,000 | 1,013 | |||||||||
| City of Houston Hotel Occupancy Tax & Special Revenue 5.00%, 9/1/29, Continuously Callable @100 | 2,300 | 2,346 | |||||||||
5.00%, 9/1/30, Continuously Callable @100 | 1,000 | 1,021 | |||||||||
5.00%, 9/1/32, Continuously Callable @100 | 5,615 | 5,733 | |||||||||
5.00%, 9/1/33, Continuously Callable @100 | 5,345 | 5,461 | |||||||||
5.00%, 9/1/34, Continuously Callable @100 | 2,150 | 2,197 | |||||||||
5.00%, 9/1/35, Continuously Callable @100 | 1,575 | 1,607 | |||||||||
| City of Laredo Waterworks & Sewer System Revenue 4.00%, 3/1/32, Continuously Callable @100 | 740 | 754 | |||||||||
4.00%, 3/1/33, Continuously Callable @100 | 1,000 | 1,016 | |||||||||
4.00%, 3/1/34, Continuously Callable @100 | 1,000 | 1,013 | |||||||||
4.00%, 3/1/36, Continuously Callable @100 | 1,500 | 1,503 | |||||||||
| Clifton Higher Education Finance Corp. Revenue Series A, 4.00%, 8/15/38, Continuously Callable @100 | 1,085 | 1,022 | |||||||||
Series A, 4.00%, 8/15/39, Continuously Callable @100 | 1,130 | 1,056 | |||||||||
Series A, 4.00%, 8/15/40, Continuously Callable @100 | 1,180 | 1,094 | |||||||||
Series A, 4.00%, 8/15/41, Continuously Callable @100 | 1,225 | 1,126 | |||||||||
Series A, 4.00%, 8/15/42, Continuously Callable @100 | 1,035 | 942 | |||||||||
| Clifton Higher Education Finance Corp. Revenue (NBGA — Texas Permanent School Fund) 4.00%, 8/15/33, Continuously Callable @100 | 2,130 | 2,185 | |||||||||
4.00%, 8/15/34, Continuously Callable @100 | 2,275 | 2,317 | |||||||||
4.00%, 8/15/35, Continuously Callable @100 | 2,375 | 2,393 | |||||||||
4.00%, 8/15/36, Continuously Callable @100 | 3,710 | 3,687 | |||||||||
See notes to financial statements.
37
| USAA Mutual Funds Trust USAA Tax Exempt Intermediate-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
4.00%, 8/15/37, Continuously Callable @100 | $ | 3,860 | $ | 3,802 | |||||||
4.00%, 8/15/38, Continuously Callable @100 | 4,015 | 3,918 | |||||||||
4.00%, 8/15/39, Continuously Callable @100 | 4,305 | 4,181 | |||||||||
Series A, 4.00%, 8/15/32, Continuously Callable @100 | 1,300 | 1,324 | |||||||||
| Dallas/Fort Worth International Airport Revenue Series D, 5.25%, 11/1/28, Continuously Callable @100 | 2,000 | 2,026 | |||||||||
Series D, 5.25%, 11/1/29, Continuously Callable @100 | 7,500 | 7,597 | |||||||||
| Harris County Cultural Education Facilities Finance Corp. Revenue 5.00%, 6/1/28, Continuously Callable @100 | 1,400 | 1,365 | |||||||||
Series C-2, 3.37% (MUNIPSA+57bps), 12/1/49, (Put Date 12/4/24) (a) (d) | 3,330 | 3,363 | |||||||||
| Harris County Municipal Utility District No. 165, GO (INS — Build America Mutual Assurance Co.) 5.00%, 3/1/30, Continuously Callable @100 | 750 | 773 | |||||||||
5.00%, 3/1/31, Continuously Callable @100 | 2,030 | 2,092 | |||||||||
5.00%, 3/1/32, Continuously Callable @100 | 2,500 | 2,576 | |||||||||
| Karnes County Hospital District Revenue 5.00%, 2/1/29, Continuously Callable @100 | 4,000 | 4,056 | |||||||||
5.00%, 2/1/34, Continuously Callable @100 | 4,000 | 4,057 | |||||||||
| Main Street Market Square Redevelopment Authority Tax Allocation (INS — Build America Mutual Assurance Co.) 5.00%, 9/1/29, Continuously Callable @100 | 1,215 | 1,270 | |||||||||
5.00%, 9/1/30, Continuously Callable @100 | 1,380 | 1,442 | |||||||||
5.00%, 9/1/31, Continuously Callable @100 | 2,000 | 2,090 | |||||||||
5.00%, 9/1/32, Continuously Callable @100 | 1,500 | 1,567 | |||||||||
5.00%, 9/1/33, Continuously Callable @100 | 2,680 | 2,801 | |||||||||
| Matagorda County Navigation District No. 1 Revenue, 4.00%, 6/1/30, Continuously Callable @100 | 5,405 | 5,356 | |||||||||
| Mesquite Health Facilities Development Corp. Revenue 5.00%, 2/15/26 (h) (i) | 3,100 | 2,263 | |||||||||
5.00%, 2/15/35, Continuously Callable @100 (h) (i) | 1,075 | 785 | |||||||||
| New Hope Cultural Education Facilities Finance Corp. Revenue 5.00%, 11/1/31, Continuously Callable @102 | 1,000 | 995 | |||||||||
4.00%, 11/1/36, Continuously Callable @102 | 1,475 | 1,245 | |||||||||
Series A, 5.00%, 7/1/30 (h) | 7,500 | 6,000 | |||||||||
Series A, 5.00%, 7/1/35 (h) | 9,000 | 7,200 | |||||||||
| Newark Higher Education Finance Corp. Revenue 4.00%, 4/1/32, Continuously Callable @100 | 1,635 | 1,643 | |||||||||
4.00%, 4/1/33, Continuously Callable @100 | 2,000 | 2,007 | |||||||||
4.00%, 4/1/34, Continuously Callable @100 | 4,470 | 4,473 | |||||||||
4.00%, 4/1/35, Continuously Callable @100 | 1,650 | 1,631 | |||||||||
4.00%, 4/1/36, Continuously Callable @100 | 2,150 | 2,090 | |||||||||
| North East Texas Regional Mobility Authority Revenue 5.00%, 1/1/36, Continuously Callable @100 | 7,000 | 7,078 | |||||||||
Series B, 5.00%, 1/1/36, Continuously Callable @100 | 5,485 | 5,588 | |||||||||
| North Texas Tollway Authority Revenue 4.00%, 1/1/44, Continuously Callable @100 | 1,085 | 1,035 | |||||||||
Series A, 5.00%, 1/1/32, Continuously Callable @100 | 8,000 | 8,272 | |||||||||
Series A, 5.00%, 1/1/34, Continuously Callable @100 | 1,515 | 1,591 | |||||||||
Series A, 4.00%, 1/1/43, Continuously Callable @100 | 14,120 | 13,591 | |||||||||
See notes to financial statements.
38
| USAA Mutual Funds Trust USAA Tax Exempt Intermediate-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Series B, 5.00%, 1/1/31, Continuously Callable @100 | $ | 1,500 | $ | 1,521 | |||||||
Series B, 5.00%, 1/1/34, Continuously Callable @100 | 7,500 | 7,744 | |||||||||
| North Texas Tollway Authority Revenue (INS — Assured Guaranty Corp.), 1/1/29 (e) | 20,000 | 16,388 | |||||||||
| North Texas Tollway Authority Revenue (INS — Assured Guaranty Municipal Corp.) Series B, 4.00%, 1/1/35, Continuously Callable @100 | 2,000 | 2,016 | |||||||||
Series B, 4.00%, 1/1/36, Continuously Callable @100 | 1,695 | 1,697 | |||||||||
| Permanent University Fund — University of Texas System Revenue 5.00%, 7/1/32, Continuously Callable @100 | 2,230 | 2,339 | |||||||||
5.00%, 7/1/33, Continuously Callable @100 | 3,250 | 3,400 | |||||||||
5.00%, 7/1/34, Continuously Callable @100 | 2,500 | 2,623 | |||||||||
| Port of Port Arthur Navigation District Revenue Series B, 2.90%, 4/1/40, Continuously Callable @100 (b) | 8,020 | 8,020 | |||||||||
Series C, 2.90%, 4/1/40, Continuously Callable @100 (b) | 1,010 | 1,010 | |||||||||
| San Antonio Education Facilities Corp. Revenue 4.00%, 4/1/39, Continuously Callable @100 | 700 | 622 | |||||||||
4.00%, 4/1/40, Continuously Callable @100 | 1,000 | 885 | |||||||||
4.00%, 4/1/41, Continuously Callable @100 | 895 | 755 | |||||||||
| San Antonio Housing Trust Finance Corp. Revenue (NBGA — Federal Home Loan Mortgage Corp.), 3.50%, 4/1/43, (Put Date 10/1/28), Pre-refunded 10/1/24 @100 (a) | 14,935 | 14,984 | |||||||||
| Tarrant County Cultural Education Facilities Finance Corp. Revenue 5.00%, 11/15/30, Continuously Callable @100 | 2,145 | 2,248 | |||||||||
5.00%, 11/15/31, Continuously Callable @100 | 2,250 | 2,358 | |||||||||
5.00%, 11/15/32, Continuously Callable @100 | 2,365 | 2,479 | |||||||||
5.00%, 11/15/37, Continuously Callable @100 | 2,175 | 2,235 | |||||||||
Series B, 5.00%, 7/1/37, Continuously Callable @100 | 18,225 | 18,891 | |||||||||
Series B, 5.00%, 7/1/38, Continuously Callable @100 | 19,115 | 19,722 | |||||||||
Texas Municipal Gas Acquisition & Supply Corp. III Revenue, 5.00%, 12/15/30 | 9,835 | 10,283 | |||||||||
| Texas Private Activity Bond Surface Transportation Corp. Revenue 4.00%, 6/30/38, Continuously Callable @100 | 3,300 | 2,959 | |||||||||
4.00%, 12/31/38, Continuously Callable @100 | 3,850 | 3,429 | |||||||||
4.00%, 6/30/39, Continuously Callable @100 | 2,150 | 1,904 | |||||||||
| Trophy Club Public Improvement District No. 1 Special Assessment (INS — Assured Guaranty Municipal Corp.), 5.00%, 6/1/33, Continuously Callable @100 | 6,960 | 7,194 | |||||||||
366,242 | |||||||||||
Utah (0.0%): (j) | |||||||||||
| Military Installation Development Authority Revenue Series A-1, 4.00%, 6/1/36, Continuously Callable @103 | 1,045 | 882 | |||||||||
Series A-1, 4.00%, 6/1/41, Continuously Callable @103 | 1,000 | 791 | |||||||||
1,673 | |||||||||||
Vermont (0.2%): | |||||||||||
| Vermont Economic Development Authority Revenue 4.00%, 5/1/33, Continuously Callable @103 | 3,950 | 3,379 | |||||||||
4.00%, 5/1/37, Continuously Callable @103 | 4,190 | 3,382 | |||||||||
| Vermont Educational & Health Buildings Financing Agency Revenue, Series A, 5.00%, 12/1/36, Continuously Callable @100 | 2,500 | 2,569 | |||||||||
9,330 | |||||||||||
See notes to financial statements.
39
| USAA Mutual Funds Trust USAA Tax Exempt Intermediate-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Virgin Islands (0.2%): | |||||||||||
| Virgin Islands Public Finance Authority Revenue, 5.00%, 9/1/30, Continuously Callable @100 (c) | $ | 6,500 | $ | 6,830 | |||||||
Virginia (0.6%): | |||||||||||
| Chesapeake Hospital Authority Revenue 4.00%, 7/1/36, Continuously Callable @100 | 1,175 | 1,168 | |||||||||
4.00%, 7/1/37, Continuously Callable @100 | 1,205 | 1,178 | |||||||||
| Stafford County Economic Development Authority Revenue 5.00%, 6/15/33, Continuously Callable @100 | 750 | 784 | |||||||||
5.00%, 6/15/34, Continuously Callable @100 | 2,620 | 2,723 | |||||||||
5.00%, 6/15/35, Continuously Callable @100 | 1,930 | 1,992 | |||||||||
| Virginia College Building Authority Revenue, 4.00%, 2/1/36, Continuously Callable @100 | 3,000 | 3,056 | |||||||||
| Virginia Small Business Financing Authority Revenue Series A, 4.00%, 1/1/37, Continuously Callable @103 | 500 | 472 | |||||||||
Series A, 4.00%, 1/1/38, Continuously Callable @103 | 6,000 | 5,600 | |||||||||
Series A, 4.00%, 1/1/39, Continuously Callable @103 | 7,000 | 6,466 | |||||||||
23,439 | |||||||||||
Washington (0.5%): | |||||||||||
| Washington Health Care Facilities Authority Revenue 5.00%, 7/1/35, Continuously Callable @100 | 2,355 | 2,466 | |||||||||
5.00%, 8/15/35, Continuously Callable @100 | 1,775 | 1,811 | |||||||||
5.00%, 7/1/36, Continuously Callable @100 | 2,250 | 2,338 | |||||||||
5.00%, 8/15/36, Continuously Callable @100 | 2,500 | 2,532 | |||||||||
4.00%, 7/1/37, Continuously Callable @100 | 3,125 | 2,998 | |||||||||
5.00%, 8/15/37, Continuously Callable @100 | 2,400 | 2,419 | |||||||||
| Washington State Housing Finance Commission Revenue, Series A-1, 3.50%, 12/20/35 | 2,632 | 2,385 | |||||||||
16,949 | |||||||||||
West Virginia (0.4%): | |||||||||||
| West Virginia Hospital Finance Authority Revenue 5.00%, 6/1/33, Continuously Callable @100 | 1,850 | 1,950 | |||||||||
5.00%, 6/1/34, Continuously Callable @100 | 2,970 | 3,115 | |||||||||
5.00%, 1/1/35, Continuously Callable @100 | 2,920 | 3,004 | |||||||||
5.00%, 6/1/35, Continuously Callable @100 | 2,405 | 2,507 | |||||||||
5.00%, 1/1/36, Continuously Callable @100 | 2,065 | 2,103 | |||||||||
5.00%, 9/1/38, Continuously Callable @100 | 1,000 | 999 | |||||||||
5.00%, 9/1/39, Continuously Callable @100 | 1,000 | 995 | |||||||||
14,673 | |||||||||||
Wisconsin (1.5%): | |||||||||||
| Public Finance Authority Revenue 3.00%, 4/1/25 (c) | 230 | 226 | |||||||||
4.00%, 3/1/29 (c) | 890 | 812 | |||||||||
4.00%, 6/15/29, Continuously Callable @100 (c) | 260 | 243 | |||||||||
4.00%, 9/1/29, Continuously Callable @103 (c) | 1,250 | 1,183 | |||||||||
4.00%, 3/1/30 (c) | 950 | 852 | |||||||||
4.00%, 3/1/34, Continuously Callable @100 (c) | 3,520 | 2,968 | |||||||||
5.25%, 5/15/37, Continuously Callable @102 (c) | 1,000 | 957 | |||||||||
See notes to financial statements.
40
| USAA Mutual Funds Trust USAA Tax Exempt Intermediate-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
5.00%, 6/15/39, Continuously Callable @100 (c) | $ | 410 | $ | 376 | |||||||
5.00%, 9/1/39, Continuously Callable @103 (c) | 2,230 | 2,106 | |||||||||
5.00%, 1/1/40, Continuously Callable @100 | 3,500 | 3,434 | |||||||||
5.00%, 4/1/40, Continuously Callable @100 (c) | 1,175 | 1,124 | |||||||||
4.00%, 7/1/41, Continuously Callable @100 (c) | 675 | 560 | |||||||||
4.00%, 1/1/42, Continuously Callable @103 | 1,150 | 1,018 | |||||||||
4.00%, 4/1/42, Continuously Callable @100 (c) | 900 | 732 | |||||||||
5.00%, 4/1/43, Continuously Callable @100 | 4,185 | 4,014 | |||||||||
5.00%, 1/1/45, Continuously Callable @100 | 3,275 | 3,154 | |||||||||
Series A, 5.25%, 10/1/38, Continuously Callable @100 | 3,250 | 3,295 | |||||||||
Series A, 4.00%, 7/1/41, Continuously Callable @100 | 770 | 649 | |||||||||
Series A, 5.00%, 11/15/41, Continuously Callable @103 | 4,480 | 4,372 | |||||||||
Series D, 4.05%, 11/1/30, Continuously Callable @100 | 1,500 | 1,484 | |||||||||
| Wisconsin Health & Educational Facilities Authority Revenue 4.00%, 1/1/27 | 360 | 347 | |||||||||
4.00%, 1/1/28, Continuously Callable @103 | 370 | 350 | |||||||||
4.00%, 1/1/29, Continuously Callable @103 | 390 | 362 | |||||||||
4.00%, 1/1/30, Continuously Callable @103 | 405 | 370 | |||||||||
5.00%, 8/15/34, Continuously Callable @100 | 1,000 | 1,021 | |||||||||
4.00%, 9/15/36, Continuously Callable @103 | 530 | 456 | |||||||||
4.00%, 11/15/36, Continuously Callable @100 | 9,830 | 9,774 | |||||||||
4.00%, 1/1/37, Continuously Callable @103 | 1,460 | 1,226 | |||||||||
4.00%, 3/15/40, Continuously Callable @100 | 750 | 656 | |||||||||
4.00%, 9/15/41, Continuously Callable @103 | 510 | 410 | |||||||||
4.00%, 12/1/41, Continuously Callable @100 | 850 | 649 | |||||||||
Series A, 5.13%, 4/15/31, Pre-refunded 4/15/23 @100 | 5,000 | 5,011 | |||||||||
| Wisconsin Health & Educational Facilities Authority Revenue (INS — Assured Guaranty Corp.) 4.00%, 2/15/35, Continuously Callable @100 | 500 | 505 | |||||||||
4.00%, 2/15/37, Continuously Callable @100 | 1,000 | 983 | |||||||||
55,679 | |||||||||||
Total Municipal Bonds (Cost $3,874,790) | 3,755,205 | ||||||||||
Total Investments (Cost $3,874,790) — 99.3% | 3,755,205 | ||||||||||
Other assets in excess of liabilities — 0.7% | 25,912 | ||||||||||
NET ASSETS — 100.00% | $ | 3,781,117 | |||||||||
(a) Put Bond.
(b) 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.
(c) Rule 144A security or other security that is restricted as to resale to institutional investors. As of February 28, 2023, the fair value of these securities was $109,317 thousands and amounted to 2.9% of net assets.
(d) Variable or Floating-Rate Security. Rate disclosed is as of February 28, 2023.
(e) Zero-coupon bond.
See notes to financial statements.
41
| USAA Mutual Funds Trust USAA Tax Exempt Intermediate-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(f) Stepped-coupon security converts to coupon form on 11/1/25 with a rate of 4.00%
(g) Stepped-coupon security converts to coupon form on 11/1/25 with a rate of 4.35%
(h) Currently the issuer is in default with respect to interest and/or principal payments.
(i) Issuer filed for bankruptcy.
(j) Amount represents less than 0.05% of net assets.
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.
GO — General Obligation
IDA — Industrial Development Authority
LIBOR — London Interbank Offered Rate
LIBOR01M — 1 Month US Dollar LIBOR, rate disclosed as of February 28, 2023, based on the last reset date of the security
MUNIPSA — Municipal Swap Index
SOFR — Secured Overnight Financing Rate
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 guaranteed agreement from the name listed.
See notes to financial statements.
42
USAA Mutual Funds Trust | Statement of Assets and Liabilities February 28, 2023 | ||||||
(Amounts in Thousands, Except Per Share Amounts)
| USAA Tax Exempt Intermediate-Term Fund | |||||||
Assets: | |||||||
Investments, at value (Cost $3,874,790) | $ | 3,755,205 | |||||
Cash | 100 | ||||||
Receivables: | |||||||
Interest | 41,300 | ||||||
Capital shares issued | 1,715 | ||||||
From Adviser | 101 | ||||||
Prepaid expenses | 35 | ||||||
Total Assets | 3,798,456 | ||||||
Liabilities: | |||||||
Payables: | |||||||
Distributions | 948 | ||||||
Investments purchased | 9,167 | ||||||
Capital shares redeemed | 5,658 | ||||||
Accrued expenses and other payables: | |||||||
Investment advisory fees | 840 | ||||||
Administration fees | 411 | ||||||
Custodian fees | 12 | ||||||
Transfer agent fees | 154 | ||||||
Compliance fees | 3 | ||||||
Trustees' fees | 1 | ||||||
| 12b-1 fees | 2 | ||||||
Other accrued expenses | 143 | ||||||
Total Liabilities | 17,339 | ||||||
Net Assets: | |||||||
Capital | 4,070,795 | ||||||
Total accumulated earnings/(loss) | (289,678 | ) | |||||
Net Assets | $ | 3,781,117 | |||||
Net Assets | |||||||
Fund Shares | $ | 2,977,555 | |||||
Institutional Shares | 779,029 | ||||||
Class A | 24,533 | ||||||
Total | $ | 3,781,117 | |||||
Shares (unlimited number of shares authorized with no par value): | |||||||
Fund Shares | 240,957 | ||||||
Institutional Shares | 63,061 | ||||||
Class A | 1,985 | ||||||
Total | 306,003 | ||||||
Net asset value, offering and redemption price per share: (a) | |||||||
Fund Shares | $ | 12.36 | |||||
Institutional Shares | 12.35 | ||||||
Class A | 12.36 | ||||||
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 | $ | 12.64 | |||||
(a) Per share amount may not recalculate due to rounding of net assets and/or shares outstanding.
See notes to financial statements.
43
USAA Mutual Funds Trust | Statements of Operations | ||||||
(Amounts in Thousands)
| USAA Tax Exempt Intermediate-Term Fund | |||||||||||
| 11 Months Ended February 28, 2023(a) | Year Ended March 31, 2022 | ||||||||||
Investment Income: | |||||||||||
Interest | $ | 133,773 | $ | 149,942 | |||||||
Total Income | 133,773 | 149,942 | |||||||||
Expenses: | |||||||||||
Investment advisory fees | 10,862 | 16,596 | |||||||||
Administration fees — Fund Shares | 4,420 | 6,040 | |||||||||
Administration fees — Institutional Shares | 764 | 1,089 | |||||||||
Administration fees — Class A | 35 | 43 | |||||||||
Sub-Administration fees | 27 | 28 | |||||||||
| 12b-1 fees — Class A | 58 | 72 | |||||||||
Custodian fees | 106 | 210 | |||||||||
Transfer agent fees — Fund Shares | 966 | 1,072 | |||||||||
Transfer agent fees — Institutional Shares | 764 | 1,089 | |||||||||
Transfer agent fees — Class A | 23 | 29 | |||||||||
Trustees' fees | 49 | 51 | |||||||||
Compliance fees | 35 | 35 | |||||||||
Legal and audit fees | 76 | 59 | |||||||||
State registration and filing fees | 127 | 445 | |||||||||
Interfund lending fees | — | — | (b) | ||||||||
Other expenses | 383 | 500 | |||||||||
Recoupment of prior expenses waived/reimbursed by Adviser | 5 | — | |||||||||
Total Expenses | 18,700 | 27,358 | |||||||||
Expenses waived/reimbursed by Adviser | (625 | ) | (1,053 | ) | |||||||
Net Expenses | 18,075 | 26,305 | |||||||||
Net Investment Income (Loss) | 115,698 | 123,637 | |||||||||
Realized/Unrealized Gains (Losses) from Investments: | |||||||||||
Net realized gains (losses) from investment securities | (61,013 | ) | (15,775 | ) | |||||||
| Net change in unrealized appreciation/depreciation on investment securities | (166,932 | ) | (298,709 | ) | |||||||
Net realized/unrealized gains (losses) on investments | (227,945 | ) | (314,484 | ) | |||||||
Change in net assets resulting from operations | $ | (112,247 | ) | $ | (190,847 | ) | |||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from March 31 to February 28.
(b) Rounds to less than $1 thousand.
See notes to financial statements.
44
USAA Mutual Funds Trust | Statements of Changes in Net Assets | ||||||
(Amounts in Thousands)
USAA Tax Exempt Intermediate-Term Fund | |||||||||||||||
| 11 Months Ended February 28, 2023(a) | Year Ended March 31, 2022 | Year Ended March 31, 2021 | |||||||||||||
From Investments: | |||||||||||||||
Operations: | |||||||||||||||
Net Investment Income (Loss) | $ | 115,698 | $ | 123,637 | $ | 132,115 | |||||||||
Net realized gains (losses) | (61,013 | ) | (15,775 | ) | (6,469 | ) | |||||||||
| Net change in unrealized appreciation/depreciation | (166,932 | ) | (298,709 | ) | 191,773 | ||||||||||
Change in net assets resulting from operations | (112,247 | ) | (190,847 | ) | 317,419 | ||||||||||
Distributions to Shareholders: | |||||||||||||||
Fund Shares | (90,657 | ) | (96,083 | ) | (125,814 | ) | |||||||||
Institutional Shares | (23,746 | ) | (26,918 | ) | (5,737 | )(b) | |||||||||
Class A | (663 | ) | (612 | ) | (567 | ) | |||||||||
Class Z | — | (1 | )(c) | — | (d)(e) | ||||||||||
| Change in net assets resulting from distributions to shareholders | (115,066 | ) | (123,614 | ) | (132,118 | ) | |||||||||
| Change in net assets resulting from capital transactions | (711,203 | ) | (46,240 | ) | 81,708 | ||||||||||
Change in net assets | (938,516 | ) | (360,701 | ) | 267,009 | ||||||||||
Net Assets: | |||||||||||||||
Beginning of period | 4,719,633 | 5,080,334 | 4,813,325 | ||||||||||||
End of period | $ | 3,781,117 | $ | 4,719,633 | $ | 5,080,334 | |||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from March 31 to February 28.
(b) Institutional Shares activity is for the period June 29, 2020 (commencement of operations) to March 31, 2021.
(c) Class Z activity is for the period April 1, 2021 to March 18, 2022 (date of termination).
(d) Class Z activity is for the period March 4 , 2021 (commencement of operations) to March 31, 2021.
(e) Rounds to less than $1 thousand.
(continues on next page)
See notes to financial statements.
45
USAA Mutual Funds Trust | Statements of Changes in Net Assets | ||||||
(Amounts in Thousands) (continued)
USAA Tax Exempt Intermediate-Term Fund | |||||||||||||||
| 11 Months Ended February 28, 2023(a) | Year Ended March 31, 2022 | Year Ended March 31, 2021 | |||||||||||||
Capital Transactions: | |||||||||||||||
Fund Shares | |||||||||||||||
Proceeds from shares issued | $ | 402,180 | $ | 446,931 | $ | 696,196 | |||||||||
Distributions reinvested | 80,534 | 84,850 | 111,273 | ||||||||||||
Cost of shares redeemed | (997,180 | ) | (677,978 | ) | (1,722,488 | ) | |||||||||
Total Fund Shares | $ | (514,466 | ) | $ | (146,197 | ) | $ | (915,019 | ) | ||||||
Institutional Shares | |||||||||||||||
Proceeds from shares issued | $ | 453,593 | $ | 329,541 | $ | 1,027,555 | (b) | ||||||||
Distributions reinvested | 22,358 | 25,822 | 5,305 | (b) | |||||||||||
Cost of shares redeemed | (670,041 | ) | (262,003 | ) | (33,953 | )(b) | |||||||||
Total Institutional Shares | $ | (194,090 | ) | $ | 93,360 | $ | 998,907 | ||||||||
Class A | |||||||||||||||
Proceeds from shares issued | $ | 4,548 | $ | 11,889 | $ | 26,772 | |||||||||
Distributions reinvested | 597 | 547 | 498 | ||||||||||||
Cost of shares redeemed | (7,792 | ) | (5,821 | ) | (29,469 | ) | |||||||||
Total Class A | $ | (2,647 | ) | $ | 6,615 | $ | (2,199 | ) | |||||||
Class Z | |||||||||||||||
Proceeds from shares issued | $ | — | $ | — | (c) | $ | 19 | (d) | |||||||
Distributions reinvested | — | 1 | (c) | — | (d)(e) | ||||||||||
Cost of shares redeemed | — | (19 | )(c) | — | (d) | ||||||||||
Total Class Z | $ | — | $ | (18 | ) | $ | 19 | ||||||||
| Change in net assets resulting from capital transactions | $ | (711,203 | ) | $ | (46,240 | ) | $ | 81,708 | |||||||
Share Transactions: | |||||||||||||||
Fund Shares | |||||||||||||||
Issued | 32,132 | 32,329 | 50,950 | ||||||||||||
Reinvested | 6,479 | 6,168 | 8,143 | ||||||||||||
Redeemed | (79,889 | ) | (49,376 | ) | (125,198 | ) | |||||||||
Total Fund Shares | (41,278 | ) | (10,879 | ) | (66,105 | ) | |||||||||
Institutional Shares | |||||||||||||||
Issued | 36,464 | 23,925 | 74,035 | (b) | |||||||||||
Reinvested | 1,798 | 1,878 | 383 | (b) | |||||||||||
Redeemed | (53,723 | ) | (19,254 | ) | (2,445 | )(b) | |||||||||
Total Institutional Shares | (15,461 | ) | 6,549 | 71,973 | |||||||||||
Class A | |||||||||||||||
Issued | 365 | 857 | 1,969 | ||||||||||||
Reinvested | 48 | 40 | 36 | ||||||||||||
Redeemed | (626 | ) | (427 | ) | (2,173 | ) | |||||||||
Total Class A | (213 | ) | 470 | (168 | ) | ||||||||||
Class Z | |||||||||||||||
Issued | — | — | (c) | 1 | (d) | ||||||||||
Reinvested | — | — | (c)(f) | — | (d)(f) | ||||||||||
Redeemed | — | (1 | )(c) | — | (d) | ||||||||||
Total Class Z | — | (1 | ) | 1 | |||||||||||
Change in Shares | (56,952 | ) | (3,861 | ) | 5,701 | ||||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from March 31 to February 28.
(b) Institutional Shares activity is for the period June 29, 2020 (commencement of operations) to March 31, 2021.
(c) Class Z activity is for the period April 1, 2021 to March 18, 2022 (date of termination).
(d) Class Z activity is for the period March 4 , 2021 (commencement of operations) to March 31, 2021.
(e) Rounds to less than $1 thousand.
(f) Rounds to less than 1 thousand shares.
See notes to financial statements.
46
USAA Mutual Funds Trust | Financial Highlights | ||||||
For a Share Outstanding Throughout Each Period
USAA Tax Exempt Intermediate-Term Fund | |||||||||||||||||||||||||||
Fund Shares | |||||||||||||||||||||||||||
| 11 Months Ended February 28, 2023(a) | Year Ended March 31, 2022 | Year Ended March 31, 2021 | Year Ended March 31, 2020 | Year Ended March 31, 2019 | Year Ended March 31, 2018 | ||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 13.00 | $ | 13.85 | $ | 13.33 | $ | 13.37 | $ | 13.12 | $ | 13.08 | |||||||||||||||
Investment Activities: | |||||||||||||||||||||||||||
Net investment income (loss) | 0.35 | (b) | 0.33 | (b) | 0.37 | (b) | 0.38 | (b) | 0.41 | 0.41 | |||||||||||||||||
| Net realized and unrealized gains (losses) | (0.64 | ) | (0.85 | ) | 0.52 | (0.03 | ) | 0.24 | 0.04 | ||||||||||||||||||
| Total from Investment Activities | (0.29 | ) | (0.52 | ) | 0.89 | 0.35 | 0.65 | 0.45 | |||||||||||||||||||
Distributions to Shareholders from: | |||||||||||||||||||||||||||
Net investment income | (0.35 | ) | (0.33 | ) | (0.37 | ) | (0.39 | ) | (0.40 | ) | (0.41 | ) | |||||||||||||||
Total Distributions | (0.35 | ) | (0.33 | ) | (0.37 | ) | (0.39 | ) | (0.40 | ) | (0.41 | ) | |||||||||||||||
Net Asset Value, End of Period | $ | 12.36 | $ | 13.00 | $ | 13.85 | $ | 13.33 | $ | 13.37 | $ | 13.12 | |||||||||||||||
Total Return (c) (d) | (2.19 | )% | (3.86 | )% | 6.72 | % | 2.56 | % | 5.06 | % | 3.47 | % | |||||||||||||||
Ratios to Average Net Assets: | |||||||||||||||||||||||||||
Net Expenses (e) (f) (g) (h) | 0.49 | % | 0.53 | % | 0.50 | % | 0.49 | % | 0.52 | % | 0.51 | % | |||||||||||||||
Net Investment Income (Loss) (e) | 3.10 | % | 2.39 | % | 2.69 | % | 2.82 | % | 3.07 | % | 3.09 | % | |||||||||||||||
Gross Expenses (e) (f) | 0.49 | % | 0.53 | % | 0.50 | % | 0.49 | % | 0.52 | % | 0.51 | % | |||||||||||||||
Supplemental Data: | |||||||||||||||||||||||||||
Net Assets at end of period (000's) | $ | 2,977,555 | $ | 3,670,223 | $ | 4,059,780 | $ | 4,788,060 | $ | 4,754,320 | $ | 4,605,543 | |||||||||||||||
Portfolio Turnover (c) (i) | 11 | % | 13 | % | 23 | % | 26 | % | 8 | % | 11 | % | |||||||||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from March 31 to February 28.
(b) Per share net investment income (loss) has been calculated using the average daily shares method.
(c) Not annualized for periods less than one year.
(d) 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.
(e) Annualized for periods less than one year.
(f) Does not include acquired fund fees and expenses, if any.
(g) 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 July 31, 2023, instead of coinciding with the Fund's fiscal year end.
(h) 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.
(i) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares.
(continues on next page)
See notes to financial statements.
47
USAA Mutual Funds Trust | Financial Highlights — continued | ||||||
For a Share Outstanding Throughout Each Period
USAA Tax Exempt Intermediate-Term Fund | |||||||||||||||
Institutional Shares | |||||||||||||||
| 11 Months Ended February 28, 2023(a) | Year Ended March 31, 2022 | June 29, 2020(b) through March 31, 2021 | |||||||||||||
Net Asset Value, Beginning of Period | $ | 13.00 | $ | 13.85 | $ | 13.57 | |||||||||
Investment Activities: | |||||||||||||||
Net investment income (loss) (c) | 0.36 | 0.34 | 0.27 | ||||||||||||
Net realized and unrealized gains (losses) | (0.65 | ) | (0.85 | ) | 0.29 | ||||||||||
Total from Investment Activities | (0.29 | ) | (0.51 | ) | 0.56 | ||||||||||
Distributions to Shareholders from: | |||||||||||||||
Net investment income | (0.36 | ) | (0.34 | ) | (0.28 | ) | |||||||||
Total Distributions | (0.36 | ) | (0.34 | ) | (0.28 | ) | |||||||||
Net Asset Value, End of Period | $ | 12.35 | $ | 13.00 | $ | 13.85 | |||||||||
Total Return (d) (e) | (2.24 | )% | (3.78 | )% | 4.15 | % | |||||||||
Ratios to Average Net Assets: | |||||||||||||||
Net Expenses (f) (g) (h) (i) | 0.46 | % | 0.44 | % | 0.44 | % | |||||||||
Net Investment Income (Loss) (f) | 3.13 | % | 2.47 | % | 2.61 | % | |||||||||
Gross Expenses (f) (g) | 0.52 | % | 0.54 | % | 0.51 | % | |||||||||
Supplemental Data: | |||||||||||||||
Net Assets at end of period ('00's) | $ | 779,029 | $ | 1,020,822 | $ | 996,601 | |||||||||
Portfolio Turnover (d) (j) | 11 | % | 13 | % | 23 | % | |||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from March 31 to February 28.
(b) Commencement of operations.
(c) Per share net investment income (loss) has been calculated using the average daily shares method.
(d) Not annualized for periods less than one year.
(e) Assumes reinvestment of all net investment income and realized capital gain distributions, if any, during the period. Includes adjustments in accordance with U.S. Generally Accepted Accounting Principles and could differ from the Lipper reported return.
(f) Annualized for periods less than one year.
(g) Does not include acquired fund fees and expenses, if any.
(h) 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 June 29, 2020, and in effect through July 31, 2023, instead of coinciding with the Fund's fiscal year end.
(i) 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.
(j) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares.
(continues on next page)
See notes to financial statements.
48
USAA Mutual Funds Trust | Financial Highlights — continued | ||||||
For a Share Outstanding Throughout Each Period
USAA Tax Exempt Intermediate-Term Fund | |||||||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||
| 11 Months Ended February 28, 2023(a) | Year Ended March 31, 2022 | Year Ended March 31, 2021 | Year Ended March 31, 2020 | Year Ended March 31, 2019 | Year Ended March 31, 2018 | ||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 13.00 | $ | 13.85 | $ | 13.33 | $ | 13.36 | $ | 13.12 | $ | 13.07 | |||||||||||||||
Investment Activities: | |||||||||||||||||||||||||||
Net investment income (loss) | 0.33 | (b) | 0.30 | (b) | 0.33 | (b) | 0.35 | (b) | 0.38 | 0.38 | |||||||||||||||||
| Net realized and unrealized gains (losses) | (0.65 | ) | (0.86 | ) | 0.52 | (0.03 | ) | 0.23 | 0.05 | ||||||||||||||||||
| Total from Investment Activities | (0.32 | ) | (0.56 | ) | 0.85 | 0.32 | 0.61 | 0.43 | |||||||||||||||||||
Distributions to Shareholders from: | |||||||||||||||||||||||||||
Net investment income | (0.32 | ) | (0.29 | ) | (0.33 | ) | (0.35 | ) | (0.37 | ) | (0.38 | ) | |||||||||||||||
Total Distributions | (0.32 | ) | (0.29 | ) | (0.33 | ) | (0.35 | ) | (0.37 | ) | (0.38 | ) | |||||||||||||||
Net Asset Value, End of Period | $ | 12.36 | $ | 13.00 | $ | 13.85 | $ | 13.33 | $ | 13.36 | $ | 13.12 | |||||||||||||||
| Total Return (excludes sales charges) (c) (d) | (2.41 | )% | (4.10 | )% | 6.46 | % | 2.37 | % | 4.75 | % | 3.28 | % | |||||||||||||||
Ratios to Average Net Assets: | |||||||||||||||||||||||||||
Net Expenses (e) (f) (g) (h) | 0.74 | % | 0.78 | % | 0.75 | % | 0.75 | % | 0.75 | % | 0.77 | %(j) | |||||||||||||||
Net Investment Income (Loss) (e) | 2.85 | % | 2.14 | % | 2.43 | % | 2.57 | % | 2.85 | % | 2.83 | % | |||||||||||||||
Gross Expenses (e) (f) | 0.87 | % | 0.87 | % | 0.86 | % | 0.87 | % | 0.84 | % | 0.85 | % | |||||||||||||||
Supplemental Data: | |||||||||||||||||||||||||||
Net Assets at end of period (000's) | $ | 24,533 | $ | 28,588 | $ | 23,934 | $ | 25,265 | $ | 22,888 | $ | 26,397 | |||||||||||||||
Portfolio Turnover (c) (i) | 11 | % | 13 | % | 23 | % | 26 | % | 8 | % | 11 | % | |||||||||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from March 31 to February 28.
(b) Per share net investment income (loss) has been calculated using the average daily shares method.
(c) Not annualized for periods less than one year.
(d) 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.
(e) Annualized for periods less than one year.
(f) Does not include acquired fund fees and expenses, if any.
(g) 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 July 31, 2023, instead of coinciding with the Fund's fiscal year end.
(h) 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.
(i) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares.
(j) Effective August 1, 2017, USAA Asset Management Company (previous Investment Adviser) voluntarily agreed to limit the annual expenses of Class A to 0.75% of the Class A average daily net assets. Prior to this date, the voluntary expense limit was 0.80%.
See notes to financial statements.
49
USAA Mutual Funds Trust | Notes to Financial Statements February 28, 2023 | ||||||
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 Tax Exempt Intermediate-Term Fund (the "Fund"). The Fund offers three classes of shares: Fund Shares, Institutional Shares, and Class A. Class Z was liquidated on March 18, 2022. 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.
On June 29, 2022, the Board of Trustees ("the Board") approved the fiscal year-end change for the Fund from March 31 to February 28. The first full cycle of the new fiscal year-end reporting will begin March 1, 2023. As a result of the change, the Fund has a February 28, 2023 fiscal 11-month transition period, the results of which are reported in this Annual Report for the period ended February 28, 2023.
Victory Capital Management ("VCM" or 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 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 (unadjusted) in active markets for identical securities
• Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, or credit spreads, applicable to those securities, etc.)
• Level 3 — significant unobservable inputs (including the Adviser's assumptions in determining the fair value of investments)
50
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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, appointed as the valuation designee by the Board, has established the Pricing and Liquidity Committee (the "Committee"), and subject to Board oversight, the Committee administers and oversees the Fund's valuation policies and procedures, which are approved by the Board.
Debt securities are valued each business day by a pricing service approved by the valuation designee and subject to the oversight of the Board. The 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.
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 net asset value ("NAV") to be more reliable than it otherwise would be.
A summary of the valuations as of February 28, 2023, 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 | ||||||||||||||||
Municipal Bonds | $ | — | $ | 3,755,205 | $ | — | $ | 3,755,205 | |||||||||||
Total | $ | — | $ | 3,755,205 | $ | — | $ | 3,755,205 | |||||||||||
As of February 28, 2023, there were no transfers into/out of Level 3.
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.
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 and recorded daily using the effective interest method which adjusts, where applicable, the amortization of premiums or accretion of discounts. Interest income is recorded daily on the accrual basis. Gains or losses realized on sales of securities are recorded on the identified cost
51
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
basis. Paydown gains or losses on applicable securities, if any, are recorded as components of Interest income on the Statements of Operations.
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 had a tax year end of March 31, and effective February 28, 2023, the Fund changed its tax year end to February 28.
For the 11 months ended February 28, 2023, 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 under specified conditions outlined in the valuation policies and procedures adopted by the Board. In addition, as defined under the valuation policies and procedures, each transaction must be effected at the independent current market price. For the 11 months ended February 28, 2023, 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) | |||||||||
| $ | 91,765 | $ | 90,480 | $ | — | ||||||
For the year ended March 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) | |||||||||
| $ | 148,985 | $ | 116,055 | $ | — | ||||||
Fees Paid Indirectly:
Expense offsets to custody fees that arise from credits on cash balances maintained on deposit are reflected on the Statements of Operations, as applicable, as Custodian fees.
52
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
3. Purchases and Sales:
Purchases and sales of securities (excluding securities maturing less than one year from acquisition) for the 11 months ended February 28, 2023, were as follows for the Fund (amounts in thousands):
Excluding | |||||||
Purchases | Sales | ||||||
$ | 445,345 | $ | 958,664 | ||||
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 Securities and Exchange Commission ("SEC").
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 0.28% of the Fund's average daily net assets. Amounts incurred and paid to VCM for the 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements of Operations as Investment advisory fees.
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 Municipal Debt Funds Index. The Lipper Intermediate Municipal Debt Funds Index tracks the total return performance of the largest funds within the Lipper Intermediate Municipal Debt Funds category.
The performance period for each share class consists of the current month plus the previous 35 months. The following table is utilized to determine the extent of the performance adjustment:
| Over/Under Performance Relative to Index (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 Municipal Debt Funds Index over that period, even if the class has overall negative returns during the performance period.
For the period April 1, 2022, to February 28, 2023, performance adjustments were $294, $116, and $(3) for Fund Shares, Institutional Shares, and Class A, in thousands, respectively. Performance adjustments were 0.01%, 0.02%, and (0.01)% for Fund Shares, Institutional Shares, and Class A, respectively. For the period April 1, 2021, to March 31, 2022, performance adjustments were $2,134, $53, and $8 for Fund Shares, Institutional Shares, and Class A, in thousands, respectively. Performance adjustments were 0.05%, less than 0.01%, and 0.03% for Fund Shares, Institutional Shares, and Class A, respectively. For the period April 1, 2021 to March 18, 2022, performance fees were less than $1 thousand for Class Z. Performance adjustments were less than 0.01% for Class Z. 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.
53
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 11 months ended February 28, 2023, and the year ended March 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, Institutional Shares, and Class A, respectively. Amounts incurred for the 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements 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 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements 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 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements 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 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 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements 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
54
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements of Operations as 12b-1 fees.
In addition, the Distributor is entitled to receive commissions in connection with sales of Class A. For the 11 months ended February 28, 2023, the Distributor received less than $1 thousand from commissions earned in connection with sales of Class A. For the year ended March 31, 2022, the Distributor received $3 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 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements 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 July 31, 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 February 28, 2023, the expense limits (excluding voluntary waivers) were 0.48%, 0.44%, and 0.75% for Fund Shares, Institutional Shares, and Class A, respectively.
Under the terms of the expense limitation agreement, 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.
As of February 28, 2023, 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 February 28, 2023.
| Expires 2023* | Expires 2024 | Expires 2025 | Expires 2026 | Total | |||||||||||||||
| $ | 1 | $ | 172 | $ | 1,039 | $ | 620 | $ | 1,832 | ||||||||||
* Amount expired on March 31, 2023.
As of March 31, 2022, the following amounts were available to be repaid to the Adviser (amounts in thousands).
| Expires 2023 | Expires 2024 | Expires 2025 | Total | ||||||||||||
| $ | 16 | $ | 172 | $ | 1,053 | $ | 1,241 | ||||||||
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 11 months ended February 28, 2023, and the year ended March 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.
55
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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.
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 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 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.
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. 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),
56
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 27, 2022, with a termination date of June 26, 2023. 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 11 months ended February 28, 2023, 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 paid a pro-rata portion of the commitment fees plus any interest on amounts borrowed. For the year ended March 31, 2022, and the period from April 1, 2022, through June 27, 2022, interest was based on the one-month LIBOR plus one percent. Effective with the renewal, for the period June 28, 2022, through February 28, 2023, interest was based on the one-month SOFR plus 1.10 percent. The Fund did not experience a material financial impact transitioning from LIBOR to SOFR. Interest charged to the 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 11 months ended February 28, 2023, and the year ended March 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 Statements of Operations under Interfund lending fees. As a Lender, interest earned by the Fund, if any, during the period, is reflected on the Statements of Operations under Interfund lending.
57
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
The Fund did not utilize or participate in the Facility during the 11 months ended February 28, 2023.
The average borrowing or lending for the days outstanding and average interest rate for the Fund during the year ended March 31, 2022, were as follows (amounts in thousands):
Borrower | Amount | Average | Days | Average | Maximum | ||||||||||||||||||
Borrower | $ | — | $ | 4,281 | 2 | 0.72 | % | $ | 5,799 | ||||||||||||||
* Based on the number of days borrowings were outstanding for the year ended March 31, 2022.
7. 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. 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 February 28, 2023, on the Statement 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):
11 Months Ended February 28, 2023 | |||||||
Distributions Paid From | |||||||
Tax-Exempt | Total | ||||||
$ | 115,066 |
| $ | 115,066 | |||
Year Ended March 31, 2022 | Year Ended March 31, 2021 | ||||||||||||||
Distributions Paid From | Distributions Paid From | ||||||||||||||
| Tax-Exempt Income | Total Distributions Paid | Tax-Exempt Income | Total Distributions Paid | ||||||||||||
$ | 123,614 | $ | 123,614 | $ | 132,118 | $ | 132,118 | ||||||||
As of February 28, 2023, the components of accumulated earnings (loss) on a tax basis were as follows (amounts in thousands):
| Undistributed Tax-Exempt Income | Accumulated Earnings | Distributions Payable | Accumulated Capital and Other Losses | Unrealized Appreciation (Depreciation)* | Total Accumulated Earnings (Loss) | ||||||||||||||||||
| $ | 11,539 | $ | 11,539 | $ | (9,703 | ) | $ | (171,629 | ) | $ | (119,885 | ) | $ | (289,678 | ) | ||||||||
* The difference between the book-basis and tax-basis unrealized appreciation (depreciation) is attributable to defaulted bond adjustments.
58
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
As of February 28, 2023, 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 | |||||||||
| $ | 77,289 | $ | 94,340 | $ | 171,629 | ||||||
As of February 28, 2023, 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) | ||||||||||||
| $ | 3,875,090 | $ | 24,935 | $ | (144,820 | ) | $ | (119,885 | ) | ||||||
8. Subsequent Events:
The Board, upon recommendation of the Adviser, has approved a change in the name of the Trust and each individual fund within the Trust. On February 23, 2023, an initial filing was made with the SEC to commence the process to effectuate the following changes.
Effective at the start of business on April 24, 2023 (the "Effective Date"), the name of the Trust changed from USAA Mutual Funds Trust to Victory Portfolios III, and all references to USAA Mutual Funds Trust in the summary prospectus, statutory prospectus, and statement of additional information ("SAI") will be replaced by the new name.
Also on the Effective Date, references to the current name of the Fund in the summary prospectus, statutory prospectus, and SAI will be replaced with the new name as follows:
Current Name | New Name | ||||||
USAA Tax Exempt Intermediate-Term Fund | Victory Tax Exempt Intermediate-Term Fund | ||||||
In addition, on the Effective Date, USAA Investments, a Victory Capital Management Inc. investment franchise, that currently manages the USAA Fixed Income Funds, will change its name to Victory Income Investors, and all references to USAA Investments in the summary prospectus, statutory prospectus, and SAI, will be replaced.
Please note that there will be no changes in the management of the Fund or to the Fund's ticker symbols.
59
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of USAA Tax Exempt Intermediate-Term Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of USAA Tax Exempt Intermediate-Term Fund (the "Fund") (one of the funds constituting USAA Mutual Funds Trust (the "Trust")), including the schedule of portfolio investments as of February 28, 2023, and the related statements of operations for the period from April 1, 2022 through February 28, 2023 and the year ended March 31, 2022, the statements of changes in net assets for the period from April 1, 2022 through February 28, 2023 and each of the two years in the period ended March 31, 2022, the financial highlights for the period from April 1, 2022 through February 28, 2023 and each of the five years in the period ended March 31, 2022, 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 February 28, 2023, the results of its operations for the period from April 1, 2022 through February 28, 2023 and the year ended March 31, 2022, the statements of changes in net assets for the period from April 1, 2022 through February 28, 2023 and each of the two years in the period ended March 31, 2022, and its financial highlights for the period from April 1, 2022 through February 28, 2023 and each of the five years in the period ended March 31, 2022, 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 February 28, 2023, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. 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
April 28, 2023
60
USAA Mutual Funds Trust | Supplemental Information February 28, 2023 | ||||||
(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 date 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 | ||||||||||||||||||
61
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 (06/17-06/19); 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 (03/15-03/21). | 45 | None | ||||||||||||||||||
| Paul L. McNamara (July 1948) | Trustee | Trustee since January 2012 | Retired. | 45 | None | ||||||||||||||||||
62
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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) | ||||||||||||||||||
63
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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.
64
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
Officers:
The officers of the Trust, their date 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. (since 2022); 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. (07/01/19-present); Executive Director, Investment and Financial Administration, USAA (2012-06/30/19); 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. (07/01/19-present); Accounting/ Financial Director, USAA (12/13-06/30/19). | ||||||||||||
| 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). | ||||||||||||
65
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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). | ||||||||||||
66
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 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 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 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 September 1, 2022, through February 28, 2023.
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 9/1/22 | Actual Ending Account Value 2/28/23 | Hypothetical Ending Account Value 2/28/23 | Actual Expenses Paid During Period 9/1/22- 2/28/23* | Hypothetical Expenses Paid During Period 9/1/22- 2/28/23* | Annualized Expense Ratio During Period 9/1/22- 2/28/23 | ||||||||||||||||||||||
Fund Shares | $ | 1,000.00 | $ | 1,003.20 | $ | 1,022.41 | $ | 2.38 | $ | 2.41 | 0.48 | % | |||||||||||||||
Institutional Shares | 1,000.00 | 1,002.40 | 1,022.51 | 2.28 | 2.31 | 0.46 | % | ||||||||||||||||||||
Class A | 1,000.00 | 1,001.90 | 1,021.22 | 3.57 | 3.61 | 0.72 | % | ||||||||||||||||||||
* Expenses are equal to the average account value multiplied by the Fund's annualized expense ratio multiplied by 181/365 (the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year).
67
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
Additional Federal Income Tax Information
The following federal tax information related to the Fund's fiscal 11 months ended February 28, 2023, 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 2024.
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 11 months ended February 28, 2023 (amounts in thousands):
| Tax Exempt Distributions | ||||||
$ | 115,066 | ||||||
68
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
Considerations of the Board in Continuing the Investment Advisory Agreement
USAA Tax Exempt Intermediate-Term Fund (the "Fund")
At a meeting of the Board of Trustees (the "Board") of USAA Mutual Funds Trust (the "Trust") held on December 8-9, 2022, 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 8-9, 2022, 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 21, 2022.
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.
69
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 program, (iv) derivatives risk management program, and (v) 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 adjustment, 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 equal to the median of its expense group and below the median of 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-year period ended June 30, 2022, and was above the average of its performance universe and its Lipper index for the three-, five- and ten-year periods ended June 30, 2022. The Board took into account management's discussion of the Fund's performance, including the reasons for the Fund's recent underperformance.
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
70
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
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 took into account management's discussion of the Fund's current advisory fee structure. 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.
71
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 10, 2023, 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- RN (prior to August 2022, Form N-LIQUID) and recommended no material changes to the LRMP.
72
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 | ||||||
vcm.com | (800) 235-8396 | ||||||
40857-0423
February 28, 2023
Annual Report
USAA Tax Exempt Long-Term Fund
(Also Known as Victory Tax Exempt Long-Term Fund*)
* Effective at the start of business on April 24, 2023, the Fund name will change to Victory Tax Exempt Long-Term Fund. Please see Notes to the Financial Statements for subsequent event information.
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 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.
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, 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 | 28 | ||||||
Statements of Operations | 29 | ||||||
Statements of Changes in Net Assets | 30 | ||||||
Financial Highlights | 32 | ||||||
Notes to Financial Statements | 35 | ||||||
| Report of Independent Registered Public Accounting Firm | 45 | ||||||
Supplemental Information (Unaudited) | 46 | ||||||
Trustee and Officer Information | 46 | ||||||
Proxy Voting and Portfolio Holdings Information | 52 | ||||||
Expense Examples | 52 | ||||||
Additional Federal Income Tax Information | 53 | ||||||
Advisory Contract Renewal | 54 | ||||||
Liquidity Risk Management Program | 57 | ||||||
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,
If you are reading this letter but double-checking your calendar, be assured there's no mistake. The annual reporting period for your USAA Mutual Fund has shifted from a fiscal year ended March 31st to a fiscal year ended February 28th/the last day of February. This change has no material impact on any of your investments. This change aims to help us improve efficiencies and reduce operational costs. Therefore, this letter covers an abbreviated "annual" period from April 1, 2022, through February 28, 2023. Future annual reports will cover the 12-month period ended February 28th/the last day of February going forward.
Our most recent annual reporting period has been a challenging period for investors. Consider some of the headwinds: heightened geopolitical tensions, a terrible war in Eastern Europe, elevated energy and food costs, high inflation, and rising interest rates. All this has dampened global growth and created a difficult backdrop for both bond and stock investors.
The inflation data was particularly troublesome and surprised many with some of the highest readings since the 1970s. In response, the U.S. Federal Reserve (the "Fed") shifted to a more restrictive monetary policy than most anticipated. The Fed has been boosting the Fed funds interest rate repeatedly and aggressively, including a series of 75 basis point raises. (A basis point is 1/100th of a percentage point.) And if that wasn't enough, zero-COVID-19 policies in China (which fortunately have been recently lifted) further exacerbated supply chain issues and raised questions about global trade. As one might expect, all of these obstacles ratcheted up volatility across financial markets. Broad market stock indices pulled back substantially around the world.
The S&P 500® Index, the bell-weather proxy for our domestic stock market, delivered a negative total return of almost 11% during our abbreviated annual reporting period. But perhaps what was even more difficult was the performance of fixed income markets, which normally are considered a safe haven in times of equity turmoil. But not during this past year when interest rates were rising sharply. In fact, the Bloomberg US Aggregate Bond Index—a proxy for a diversified fixed income portfolio and one that many investors and institutions follow closely—delivered a negative total return of approximately 7.0%. That's not exactly the offset to equity performance that many investors have come to expect from bonds.
It's been difficult, and we fully acknowledge that the steady drumbeat of bad news and bouts of stomach-churning volatility can take a toll on investors' psyche. Nobody likes opening their account statements during declining markets, and even when markets often snap back sharply (as happened this past July, October, and earlier this calendar year), investors often wonder if they have missed an opportunity.
Through all the turmoil and challenges in our most recent annual reporting period, we are reminded of two enduring realities: 1) financial markets are dynamic and apt to change abruptly; 2) it's vital to remain calm and rational whenever faced with those inevitable bouts of turmoil.
2
Fortunately, we think that investors can take comfort knowing that all our independent investment franchises have experience managing portfolios through a wide variety of market environments. Our investment professionals remain calm during turbulent financial markets, and we think it's imperative that investors do the same.
We still believe that a long-term plan, a well-diversified portfolio across asset classes and investment types, and a clear understanding of individual risk tolerances are the key ingredients for staying the course and progressing on investment goals. Moreover, all our investment professionals continually monitor the environment and work hard to position portfolios opportunistically no matter what the markets bring. Remember, turmoil can also create opportunity.
On the following pages, you will find information relating to your USAA Mutual Fund, brought to you by Victory Capital. If you have any questions, we encourage you to contact our Member Service Representatives. Call 800-235-8396, or visit our website at vcm.com.
From all of us here at Victory Capital, thank you for your ongoing confidence and for letting us help you work toward your investment goals.
Christopher K. Dyer, CFA
President,
USAA Mutual Funds Trust
3
USAA Tax Exempt Long-Term Fund
Manager's 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 overall during the 11-month reporting period ended February 28, 2023. [The Fund's fiscal year-end changed this year to February 28 from March 31, resulting in a shorter reporting period for fiscal year ended 2023.] Negative returns for the reporting period were attributable to a combination of factors, including the U.S. Federal Reserve's (the "Fed") prolonged fight to reduce inflation through interest rate increases and significant investor outflows from municipal bond funds. The reporting period was also highlighted by material volatility in the municipal market, as market participants often strongly reacted to Fed actions and comments, as well as economic data release, in an attempt to determine the future path of interest rates. The overall returns on the Bloomberg Municipal Bond Index for the reporting period was -1.92%, with significant ups and downs throughout the period.
While there might be some volatility in the municipal market in the short term, we remain confident that the right approach is to focus on what matters in the long term. We believe municipal bonds continue to represent an attractive investment opportunity on a relative basis. At the end of February 2023, the yield on the Bloomberg Municipal Bond Index was 3.62%, which is a taxable-equivalent yield of 6.12% (in the highest tax bracket). After factoring in the benefit of the tax exemption, municipal bonds look attractive vs. the (taxable) Bloomberg U.S. Aggregate Bond Index, which yielded 4.81% the end of February 2023.
• How did the USAA Tax Exempt Long-Term Fund (the "Fund") perform during the reporting period?
The Fund has three share classes: Fund Shares, Institutional Shares, and Class A. For the 11-month reporting period ended February 28, 2023, the Fund Shares, Institutional Shares, and Class A had a total return (at net asset value) of -5.79%, -5.69%, and -5.97%, respectively, versus an average return of -3.89% amongst the funds in the Lipper General & Insured Municipal Debt Funds category. This compares to returns of -3.72% for the Lipper General & Insured Municipal Debt Funds Index, and -1.92% for the Bloomberg Municipal Bond Index.
• What strategies did you employ during the reporting period?
In keeping with our investment approach, we continued to focus on income generation. The Fund's long-term income distribution, not its price appreciation, accounts for most of its total return. Because of the Fund's income orientation, it has a higher allocation to BBB and A rated categories when compared to its peer group.
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
4
USAA Tax Exempt Long-Term Fund
Manager's Commentary (continued)
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.
Thank you for allowing us to assist you with your investment needs.
5
USAA Tax Exempt Long-Term Fund
Investment Overview
(Unaudited)
Average Annual Total Return
Year Ended February 28, 2023
Fund Shares | Institutional Shares | Class A | |||||||||||||||||||||||||
INCEPTION DATE | 3/19/82 | 6/29/20 | 8/1/10 | ||||||||||||||||||||||||
| Net Asset Value | Net Asset Value | Net Asset Value | Maximum Offering Price | Bloomberg Municipal Bond Index1 | Lipper General & Insured Municipal Debt Funds Index2 | ||||||||||||||||||||||
One Year | –9.00 | % | –8.97 | % | –9.19 | % | –11.25 | % | –5.10 | % | –6.86 | % | |||||||||||||||
Five Year | 1.05 | % | NA | 0.85 | % | 0.39 | % | 1.66 | % | 1.44 | % | ||||||||||||||||
Ten Year | 1.98 | % | NA | 1.71 | % | 1.48 | % | 2.11 | % | 2.09 | % | ||||||||||||||||
Since Inception | NA | –1.66 | % | 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 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 Tax Exempt Long-Term Fund — Growth of $10,000
1The 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 is not possible to invest directly in an index.
2The unmanaged Lipper General & Insured Municipal Debt Funds Index measures the Fund's performance to that of the Lipper General & Insured Municipal Debt Funds 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 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 Tax Exempt Long-Term Fund | February 28, 2023 | ||||||
(Unaudited)
Investment Objective and Portfolio Holdings:
The Fund provides investors with interest income that is exempt from federal income tax.
Top 10 Industries:
February 28, 2023
(% of Net Assets)
Medical | 20.1 | % | |||||
General | 16.9 | % | |||||
Nursing Homes | 10.0 | % | |||||
School District | 8.0 | % | |||||
Transportation | 8.0 | % | |||||
Higher Education | 8.0 | % | |||||
Education | 6.9 | % | |||||
General Obligation | 5.8 | % | |||||
Development | 3.6 | % | |||||
Water | 3.3 | % | |||||
Refer to the Schedule of Portfolio Investments for a complete list of securities.
7
| USAA Mutual Funds Trust USAA Tax Exempt Long-Term Fund | Schedule of Portfolio Investments February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Corporate Bonds (0.1%) | |||||||||||
Industrials (0.1%): | |||||||||||
| Northwest Senior Housing Corp. — Edgemere Project, Promissory Note, DIP Loan, 10.00%, 12/31/23 (a) | $ | 992 | $ | 992 | |||||||
| DIP Loan, 12.00%, 12/31/23 (a) | 714 | 714 | |||||||||
Total Corporate Bonds (Cost $1,706) | 1,706 | ||||||||||
Municipal Bonds (98.8%) | |||||||||||
Alabama (0.8%): | |||||||||||
| Columbia Industrial Development Board Revenue (NBGA — Southern Co.), Series A, 2.25%, 12/1/37, Continuously Callable @100 (b) | 3,700 | 3,700 | |||||||||
| DCH Healthcare Authority Revenue, Series A, 4.00%, 6/1/51, Continuously Callable @100 | 4,000 | 3,573 | |||||||||
| Homewood Educational Building Authority Revenue 5.00%, 12/1/47, Continuously Callable @100 | 4,500 | 4,590 | |||||||||
Series A, 4.00%, 12/1/51, Continuously Callable @100 | 3,000 | 2,603 | |||||||||
14,466 | |||||||||||
Alaska (0.0%): (c) | |||||||||||
| Northern Tobacco Securitization Corp. Revenue, Series A, 4.00%, 6/1/50, Continuously Callable @100 | 1,000 | 864 | |||||||||
Arizona (2.0%): | |||||||||||
| Arizona IDA Revenue 5.00%, 7/1/52, Continuously Callable @100 | 1,725 | 1,753 | |||||||||
Series A, 5.00%, 7/1/47, Continuously Callable @100 | 600 | 557 | |||||||||
| City of Phoenix Civic Improvement Corp. Revenue (INS — National Public Finance Guarantee Corp.) Series B, 5.50%, 7/1/29 | 1,000 | 1,139 | |||||||||
Series B, 5.50%, 7/1/30 | 1,500 | 1,735 | |||||||||
| Maricopa County IDA Revenue 5.00%, 7/1/47, Continuously Callable @100 | 1,600 | 1,606 | |||||||||
Series A, 4.00%, 7/1/56, Continuously Callable @100 | 1,000 | 889 | |||||||||
| Pinal County Electric District No. 3 Revenue, 4.00%, 7/1/41, Continuously Callable @100 | 10,000 | 9,619 | |||||||||
Tempe IDA Revenue, 4.00%, 12/1/46, Continuously Callable @102 | 2,500 | 1,806 | |||||||||
| The City of Phoenix IDA Revenue 5.00%, 7/1/41, Continuously Callable @100 | 1,200 | 1,211 | |||||||||
5.00%, 7/1/42, Continuously Callable @100 | 1,250 | 1,216 | |||||||||
5.00%, 7/1/44, Continuously Callable @100 | 6,000 | 6,018 | |||||||||
| The County of Pima IDA Revenue 4.00%, 9/1/29, Continuously Callable @100 | 3,000 | 3,000 | |||||||||
4.00%, 6/15/51, Continuously Callable @100 (d) | 2,500 | 1,874 | |||||||||
Series A, 6.88%, 11/15/52, Continuously Callable @103 (d) | 3,750 | 3,758 | |||||||||
The Yavapai County IDA Revenue, 4.00%, 8/1/43, Continuously Callable @100 | 1,725 | 1,564 | |||||||||
37,745 | |||||||||||
Arkansas (0.2%): | |||||||||||
| Arkansas Development Finance Authority Revenue (INS — AMBAC Assurance Corp.) 7/1/28 (e) | 1,000 | 817 | |||||||||
See notes to financial statements.
8
| USAA Mutual Funds Trust USAA Tax Exempt Long-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
7/1/29 (e) | $ | 1,165 | $ | 915 | |||||||
7/1/30 (e) | 1,150 | 868 | |||||||||
7/1/36 (e) | 2,500 | 1,410 | |||||||||
4,010 | |||||||||||
California (4.8%): | |||||||||||
| California Educational Facilities Authority Revenue, 5.00%, 10/1/52, Continuously Callable @100 | 3,000 | 2,903 | |||||||||
| California Health Facilities Financing Authority Revenue, 5.00%, 11/15/56, Continuously Callable @100 | 1,000 | 1,022 | |||||||||
| California State Public Works Board Revenue 5.00%, 6/1/31, Continuously Callable @100 | 2,950 | 2,963 | |||||||||
Series B, 5.00%, 10/1/39, Continuously Callable @100 | 3,500 | 3,619 | |||||||||
| Cerritos Community College District, GO Series D, 8/1/31 (e) | 1,000 | 758 | |||||||||
Series D, 8/1/32 (e) | 2,500 | 1,826 | |||||||||
Series D, 8/1/33 (e) | 2,175 | 1,520 | |||||||||
Series D, 8/1/34 (e) | 1,000 | 665 | |||||||||
Series D, 8/1/35 (e) | 1,500 | 939 | |||||||||
Series D, 8/1/36 (e) | 2,200 | 1,300 | |||||||||
| Coachella Valley Unified School District, GO (INS — Assured Guaranty Municipal Corp.), Series D, 8/1/41 (e) | 8,500 | 3,785 | |||||||||
| El Camino Community College District, GO Series C, 8/1/34 (e) | 3,000 | 2,047 | |||||||||
Series C, 8/1/38 (e) | 3,000 | 1,637 | |||||||||
| El Monte Union High School District, GO (INS — Assured Guaranty Municipal Corp.), 6/1/42 (e) | 10,000 | 4,209 | |||||||||
| Golden State Tobacco Securitization Corp. Revenue, Series A, 5.00%, 6/1/30, Pre-refunded 6/1/23 @100 | 2,000 | 2,009 | |||||||||
| Indio Redevelopment Agency Successor Agency Tax Allocation, Series A, 5.25%, 8/15/35, Continuously Callable @100 | 1,440 | 1,442 | |||||||||
| Los Alamitos Unified School District Certificate of Participation 8/1/34, Continuously Callable @100 (f) | 1,200 | 1,266 | |||||||||
8/1/42, Continuously Callable @100 (g) | 4,500 | 4,639 | |||||||||
| Paramount Unified School District, GO 8/1/34 (e) | 1,860 | 1,261 | |||||||||
8/1/35 (e) | 2,000 | 1,280 | |||||||||
8/1/36 (e) | 2,750 | 1,652 | |||||||||
8/1/37 (e) | 2,750 | 1,515 | |||||||||
| Sacramento City Schools Joint Powers Financing Authority Revenue (INS — Build America Mutual Assurance Co.) Series A, 5.00%, 3/1/36, Continuously Callable @100 | 2,560 | 2,614 | |||||||||
Series A, 5.00%, 3/1/40, Continuously Callable @100 | 2,000 | 2,042 | |||||||||
| San Diego Public Facilities Financing Authority Revenue, Series A, 5.00%, 10/15/44, Continuously Callable @100 | 2,500 | 2,576 | |||||||||
| San Ysidro School District, GO (INS — Assured Guaranty Municipal Corp.) Series G, 8/1/36 (e) | 13,605 | 7,927 | |||||||||
Series G, 8/1/37 (e) | 14,285 | 7,819 | |||||||||
| Santa Ana Unified School District Certificate of Participation (INS — Assured Guaranty Municipal Corp.), 4/1/29 (e) | 15,000 | 11,582 | |||||||||
State of California, GO, 5.00%, 10/1/47, Continuously Callable @100 | 5,000 | 5,173 | |||||||||
See notes to financial statements.
9
| USAA Mutual Funds Trust USAA Tax Exempt Long-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
| Stockton Unified School District, GO (INS — Assured Guaranty Municipal Corp.), Series D, 8/1/34 (e) | $ | 8,885 | $ | 5,850 | |||||||
89,840 | |||||||||||
Colorado (2.4%): | |||||||||||
| Colorado Educational & Cultural Facilities Authority Revenue 4.00%, 12/1/48, Continuously Callable @100 | 2,500 | 2,220 | |||||||||
4.00%, 1/1/52, Continuously Callable @100 | 675 | 518 | |||||||||
5.00%, 4/1/53, Continuously Callable @100 | 750 | 720 | |||||||||
4.00%, 1/1/62, Continuously Callable @100 | 795 | 581 | |||||||||
Series A, 5.25%, 4/1/43, Pre-refunded 4/1/23 @100 | 2,500 | 2,504 | |||||||||
| Colorado Health Facilities Authority Revenue 5.00%, 6/1/45, Pre-refunded 6/1/25 @100 | 6,000 | 6,239 | |||||||||
5.00%, 6/1/47, Pre-refunded 6/1/27 @100 | 1,250 | 1,352 | |||||||||
5.50%, 11/1/47, Continuously Callable @100 | 1,000 | 1,052 | |||||||||
Series A, 4.00%, 8/1/44, Continuously Callable @100 | 2,070 | 1,814 | |||||||||
Series A, 4.00%, 9/1/50, Continuously Callable @100 | 1,500 | 1,239 | |||||||||
Series A, 4.00%, 12/1/50, Continuously Callable @103 | 7,250 | 5,780 | |||||||||
| Denver Health & Hospital Authority Revenue, Series A, 4.00%, 12/1/40, Continuously Callable @100 | 750 | 663 | |||||||||
| E-470 Public Highway Authority Revenue (INS — National Public Finance Guarantee Corp.), Series B, 9/1/35, Continuously Callable @64 (e) | 10,000 | 5,529 | |||||||||
| Park Creek Metropolitan District Revenue 5.00%, 12/1/45, Continuously Callable @100 | 1,000 | 1,021 | |||||||||
5.00%, 12/1/46, Continuously Callable @100 | 2,500 | 2,551 | |||||||||
5.00%, 12/1/51, Continuously Callable @100 | 2,000 | 2,036 | |||||||||
| Rampart Range Metropolitan District No. 1 Revenue (INS — Assured Guaranty Municipal Corp.), 5.00%, 12/1/47, Continuously Callable @100 | 4,000 | 4,214 | |||||||||
| Regional Transportation District Certificate of Participation, Series A, 5.00%, 6/1/44, Pre-refunded 6/1/23 @100 | 5,000 | 5,021 | |||||||||
| Southlands Metropolitan District No. 1, GO, Series A-1, 5.00%, 12/1/47, Continuously Callable @100 | 1,000 | 903 | |||||||||
45,957 | |||||||||||
Connecticut (0.7%): | |||||||||||
| Connecticut State Health & Educational Facilities Authority Revenue Series A, 4.00%, 7/1/49, Continuously Callable @100 | 3,000 | 2,537 | |||||||||
Series U, 4.00%, 7/1/52, Continuously Callable @100 | 3,000 | 2,521 | |||||||||
| State of Connecticut, GO Series A, 5.00%, 4/15/38, Continuously Callable @100 | 5,500 | 5,866 | |||||||||
Series A, 5.00%, 4/15/39, Continuously Callable @100 | 1,550 | 1,667 | |||||||||
12,591 | |||||||||||
District of Columbia (0.3%): | |||||||||||
| District of Columbia Revenue 6.00%, 7/1/43, Pre-refunded 7/1/23 @100 | 1,700 | 1,715 | |||||||||
6.00%, 7/1/48, Pre-refunded 7/1/23 @100 | 1,450 | 1,463 | |||||||||
5.00%, 7/1/49, Continuously Callable @100 | 1,275 | 1,209 | |||||||||
5.00%, 7/1/54, Continuously Callable @100 | 1,140 | 1,067 | |||||||||
5,454 | |||||||||||
See notes to financial statements.
10
| USAA Mutual Funds Trust USAA Tax Exempt Long-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Florida (7.2%): | |||||||||||
| Alachua County Health Facilities Authority Revenue, 4.00%, 10/1/46, Continuously Callable @103 | $ | 700 | $ | 513 | |||||||
| City of Atlantic Beach Revenue Series A, 5.00%, 11/15/53, Continuously Callable @103 | 2,000 | 1,692 | |||||||||
Series B, 5.63%, 11/15/43, Continuously Callable @100 | 7,000 | 6,723 | |||||||||
City of Jacksonville Revenue, 4.00%, 11/1/45, Continuously Callable @100 | 2,500 | 2,208 | |||||||||
City of Pompano Beach Revenue | |||||||||||
4.00%, 9/1/50, Continuously Callable @103 | 8,000 | 5,823 | |||||||||
Series A, 4.00%, 9/1/51, Continuously Callable @103 | 2,895 | 2,093 | |||||||||
County of Escambia Revenue, 2.25%, 4/1/39, Continuously Callable @100 (b) | 5,000 | 5,000 | |||||||||
| County of Miami-Dade Florida Water & Sewer System Revenue 4.00%, 10/1/46, Continuously Callable @100 | 3,000 | 2,764 | |||||||||
Series B, 4.00%, 10/1/44, Continuously Callable @100 | 21,500 | 20,083 | |||||||||
| County of Miami-Dade Rickenbacker Causeway Revenue, 5.00%, 10/1/43, Continuously Callable @100 | 1,750 | 1,764 | |||||||||
| County of Miami-Dade Seaport Department Revenue, Series A-2, 4.00%, 10/1/49, Continuously Callable @100 | 4,000 | 3,642 | |||||||||
| County of Polk Florida Utility System Revenue, 4.00%, 10/1/43, Continuously Callable @100 | 2,000 | 1,871 | |||||||||
| Escambia County Health Facilities Authority Revenue 4.00%, 8/15/45, Continuously Callable @100 | 6,265 | 5,641 | |||||||||
4.00%, 8/15/50, Continuously Callable @100 | 5,050 | 4,443 | |||||||||
| Florida Development Finance Corp. Revenue 4.00%, 7/1/45, Continuously Callable @100 | 600 | 488 | |||||||||
4.00%, 2/1/52, Continuously Callable @100 | 4,000 | 3,048 | |||||||||
4.00%, 7/1/55, Continuously Callable @100 | 500 | 377 | |||||||||
Series A, 5.00%, 6/15/55, Continuously Callable @100 | 1,500 | 1,362 | |||||||||
| Florida Higher Educational Facilities Financial Authority Revenue 5.00%, 3/1/44, Continuously Callable @100 | 4,280 | 3,835 | |||||||||
4.00%, 10/1/44, Continuously Callable @100 | 1,400 | 1,179 | |||||||||
5.00%, 3/1/49, Continuously Callable @100 | 1,250 | 1,085 | |||||||||
4.00%, 10/1/49, Continuously Callable @100 | 1,150 | 910 | |||||||||
| Halifax Hospital Medical Center Revenue, 5.00%, 6/1/46, Pre-refunded 6/1/25 @100 | 3,000 | 3,120 | |||||||||
| Lee County IDA Revenue 5.00%, 11/15/49, Continuously Callable @103 | 12,350 | 11,680 | |||||||||
Series A, 5.25%, 10/1/52, Continuously Callable @103 | 1,000 | 861 | |||||||||
| Lee Memorial Health System Revenue, Series A-1, 4.00%, 4/1/49, Continuously Callable @100 | 4,500 | 3,949 | |||||||||
| Miami Beach Health Facilities Authority Revenue, 4.00%, 11/15/51, Continuously Callable @100 | 2,500 | 2,132 | |||||||||
| Miami-Dade County Expressway Authority Revenue Series A, 5.00%, 7/1/39, Continuously Callable @100 | 5,000 | 5,046 | |||||||||
Series A, 5.00%, 7/1/40, Continuously Callable @100 | 5,000 | 5,002 | |||||||||
| Miami-Dade County Health Facilities Authority Revenue, 4.00%, 8/1/47, Continuously Callable @100 | 2,000 | 1,796 | |||||||||
See notes to financial statements.
11
| USAA Mutual Funds Trust USAA Tax Exempt Long-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
| Orange County Health Facilities Authority Revenue, Series B, 4.00%, 10/1/45, Continuously Callable @100 | $ | 1,500 | $ | 1,384 | |||||||
| Palm Beach County Educational Facilities Authority Revenue, 4.00%, 10/1/51, Continuously Callable @100 | 2,070 | 1,713 | |||||||||
| Palm Beach County Health Facilities Authority Revenue 5.00%, 11/15/45, Continuously Callable @103 | 150 | 143 | |||||||||
5.00%, 5/15/47, Continuously Callable @100 | 5,000 | 3,887 | |||||||||
Series A, 5.00%, 11/1/52, Continuously Callable @100 | 250 | 243 | |||||||||
Series B, 5.00%, 11/15/42, Continuously Callable @103 | 1,000 | 972 | |||||||||
| Polk County IDA Revenue 5.00%, 1/1/49, Continuously Callable @103 | 1,000 | 867 | |||||||||
5.00%, 1/1/55, Continuously Callable @103 | 1,000 | 851 | |||||||||
| Sarasota County Health Facilities Authority Revenue, 5.00%, 5/15/48, Continuously Callable @103 | 1,835 | 1,678 | |||||||||
| Sarasota County Public Hospital District Revenue, 4.00%, 7/1/52, Continuously Callable @100 | 5,000 | 4,421 | |||||||||
St. Johns County IDA Revenue, 4.00%, 8/1/55, Continuously Callable @103 | 6,000 | 4,914 | |||||||||
Tampa Housing Authority Revenue, 4.85%, 7/1/36, Callable 4/1/23 @100 | 2,200 | 2,202 | |||||||||
| Volusia County Educational Facility Authority Revenue, Series B, 5.00%, 10/15/45, Pre-refunded 4/15/25 @100 | 2,000 | 2,075 | |||||||||
135,480 | |||||||||||
Georgia (1.2%): | |||||||||||
| Crisp County Hospital Authority Revenue, 4.00%, 7/1/51, Continuously Callable @100 | 3,000 | 2,666 | |||||||||
| Gainesville & Hall County Hospital Authority Revenue, 4.00%, 2/15/45, Continuously Callable @100 | 15,000 | 13,903 | |||||||||
| Glynn-Brunswick Memorial Hospital Authority Revenue, 5.00%, 8/1/43, Continuously Callable @100 | 1,500 | 1,510 | |||||||||
Main Street Natural Gas, Inc. Revenue, Series A, 5.00%, 5/15/49 | 3,000 | 2,962 | |||||||||
| Municipal Electric Authority of Georgia Revenue, 4.00%, 1/1/51, Continuously Callable @100 | 1,100 | 969 | |||||||||
| Private Colleges & Universities Authority Revenue, 4.00%, 6/1/45, Continuously Callable @100 | 1,700 | 1,516 | |||||||||
23,526 | |||||||||||
Illinois (14.8%): | |||||||||||
| 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 | 1,530 | 1,676 | |||||||||
Series A, 5.00%, 12/1/38, Pre-refunded 12/1/27 @100 | 1,555 | 1,703 | |||||||||
Series A, 5.00%, 12/1/39, Pre-refunded 12/1/27 @100 | 1,400 | 1,533 | |||||||||
| Chicago Board of Education, GO Series A, 4.00%, 12/1/47, Continuously Callable @100 | 8,220 | 6,650 | |||||||||
Series A, 5.00%, 12/1/47, Continuously Callable @100 | 1,800 | 1,708 | |||||||||
Series H, 5.00%, 12/1/36, Continuously Callable @100 | 5,000 | 5,009 | |||||||||
| Chicago Midway International Airport Revenue Series B, 5.00%, 1/1/41, Continuously Callable @100 | 2,500 | 2,567 | |||||||||
Series B, 5.00%, 1/1/46, Continuously Callable @100 | 3,500 | 3,573 | |||||||||
| Chicago O'Hare International Airport Revenue 5.75%, 1/1/43, Continuously Callable @100 | 5,000 | 5,008 | |||||||||
See notes to financial statements.
12
| USAA Mutual Funds Trust USAA Tax Exempt Long-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Series C, 4.00%, 1/1/38, Continuously Callable @100 | $ | 1,000 | $ | 984 | |||||||
Series C, 5.00%, 1/1/41, Continuously Callable @100 | 5,000 | 5,189 | |||||||||
| Chicago Park District, GO Series A, 5.00%, 1/1/40, Continuously Callable @100 | 3,000 | 3,054 | |||||||||
Series F-2, 5.00%, 1/1/40, Continuously Callable @100 | 1,125 | 1,172 | |||||||||
| City of Chicago Wastewater Transmission Revenue 5.00%, 1/1/44, Continuously Callable @100 | 4,000 | 4,006 | |||||||||
Series A, 5.00%, 1/1/47, Continuously Callable @100 | 3,000 | 3,054 | |||||||||
Series C, 5.00%, 1/1/39, Continuously Callable @100 | 3,000 | 3,054 | |||||||||
City of Chicago Waterworks Revenue, 5.00%, 11/1/44, Continuously Callable @100 | 3,000 | 3,012 | |||||||||
City of Galesburg Revenue, Series A, 4.00%, 10/1/46, Continuously Callable @100 | 4,000 | 3,398 | |||||||||
| City of Springfield Electric Revenue (INS — Assured Guaranty Municipal Corp.), 5.00%, 3/1/40, Continuously Callable @100 | 3,000 | 3,050 | |||||||||
| County of Cook Community College District No. 508, GO (INS — Build America Mutual Assurance Co.), 5.00%, 12/1/47, Continuously Callable @100 | 9,500 | 9,870 | |||||||||
County of Cook Sales Tax Revenue, 5.00%, 11/15/38, Continuously Callable @100 | 7,750 | 8,028 | |||||||||
County of Will, GO, 4.00%, 11/15/47, Continuously Callable @100 | 2,000 | 1,936 | |||||||||
| Illinois Finance Authority Revenue 3.90%, 3/1/30, Continuously Callable @100 | 14,000 | 14,126 | |||||||||
5.50%, 4/1/32, Continuously Callable @100 | 7,065 | 6,785 | |||||||||
4.00%, 2/1/33, Continuously Callable @100 | 6,000 | 5,957 | |||||||||
5.00%, 5/15/37, Continuously Callable @100 | 700 | 669 | |||||||||
4.00%, 3/1/38, Continuously Callable @100 | 2,000 | 1,948 | |||||||||
4.00%, 2/15/41, Pre-refunded 2/15/27 @100 | 20 | 21 | |||||||||
5.00%, 8/1/42, Continuously Callable @100 | 750 | 750 | |||||||||
5.00%, 1/1/44, Pre-refunded 1/1/28 @100 | 10,000 | 10,969 | |||||||||
5.00%, 8/15/44, Continuously Callable @100 | 2,000 | 2,020 | |||||||||
4.00%, 12/1/46, Continuously Callable @100 | 4,500 | 3,952 | |||||||||
5.00%, 2/15/47, Continuously Callable @100 | 1,000 | 945 | |||||||||
5.00%, 5/15/47, Continuously Callable @100 | 1,155 | 1,053 | |||||||||
5.00%, 8/1/47, Continuously Callable @100 | 750 | 731 | |||||||||
5.00%, 12/1/47, Continuously Callable @100 | 2,000 | 1,828 | |||||||||
5.00%, 10/1/49, Continuously Callable @100 | 1,250 | 1,270 | |||||||||
5.00%, 2/15/50, Continuously Callable @100 | 500 | 461 | |||||||||
5.00%, 10/1/51, Continuously Callable @100 | 1,000 | 1,013 | |||||||||
5.00%, 3/1/52, Continuously Callable @100 | 1,075 | 983 | |||||||||
4.00%, 10/1/55, Continuously Callable @100 | 2,000 | 1,577 | |||||||||
Series A, 4.00%, 7/1/38, Pre-refunded 7/1/26 @100 | 5,000 | 5,164 | |||||||||
Series A, 4.00%, 10/1/40, Continuously Callable @100 | 12,395 | 11,742 | |||||||||
Series A, 6.00%, 7/1/43, Continuously Callable @100 | 5,000 | 5,044 | |||||||||
Series A, 4.00%, 8/1/51, Continuously Callable @100 | 3,500 | 2,773 | |||||||||
Series C, 4.00%, 2/15/41, Pre-refunded 2/15/27 @100 | 485 | 505 | |||||||||
Series C, 4.00%, 2/15/41, Continuously Callable @100 | 10,495 | 10,182 | |||||||||
| Illinois State Toll Highway Authority Revenue, Series A, 4.00%, 1/1/46, Continuously Callable @100 | 4,000 | 3,728 | |||||||||
| Metropolitan Pier & Exposition Authority Revenue 5.00%, 6/15/42, Continuously Callable @100 | 2,000 | 2,019 | |||||||||
5.00%, 6/15/50, Continuously Callable @100 | 7,500 | 7,338 | |||||||||
| Northern Illinois Municipal Power Agency Revenue, Series A, 4.00%, 12/1/41, Continuously Callable @100 | 9,000 | 8,309 | |||||||||
See notes to financial statements.
13
| USAA Mutual Funds Trust USAA Tax Exempt Long-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
| Northern Illinois University Revenue (INS — Build America Mutual Assurance Co.), Series B, 4.00%, 4/1/41, Continuously Callable @100 | $ | 600 | $ | 559 | |||||||
| Regional Transportation Authority Revenue (INS — National Public Finance Guarantee Corp.), 6.50%, 7/1/30 | 37,550 | 44,122 | |||||||||
| Sangamon County Water Reclamation District, GO Series A, 4.00%, 1/1/49, Continuously Callable @100 | 15,000 | 13,416 | |||||||||
Series A, 5.75%, 1/1/53, Continuously Callable @100 | 2,000 | 2,075 | |||||||||
| State of Illinois, GO 5.50%, 5/1/39, Continuously Callable @100 | 2,275 | 2,417 | |||||||||
Series A, 5.00%, 10/1/33, Continuously Callable @100 | 2,000 | 2,087 | |||||||||
| State of Illinois, GO (INS — Assured Guaranty Municipal Corp.) 4.00%, 2/1/31, Continuously Callable @100 | 1,000 | 1,000 | |||||||||
4.00%, 2/1/32, Continuously Callable @100 | 1,000 | 998 | |||||||||
Series A, 5.00%, 4/1/29, Continuously Callable @100 | 8,000 | 8,009 | |||||||||
| Village of Rosemont, GO (INS — Assured Guaranty Municipal Corp.), Series A, 5.00%, 12/1/46, Continuously Callable @100 | 10,000 | 10,522 | |||||||||
278,301 | |||||||||||
Indiana (1.8%): | |||||||||||
| Evansville Redevelopment Authority Revenue (INS — Build America Mutual Assurance Co.) | |||||||||||
4.00%, 2/1/38, Continuously Callable @100 | 5,540 | 5,293 | |||||||||
4.00%, 2/1/39, Continuously Callable @100 | 3,605 | 3,419 | |||||||||
| Indiana Finance Authority Revenue 5.00%, 2/1/40, Continuously Callable @100 | 1,495 | 1,510 | |||||||||
5.00%, 11/15/43, Continuously Callable @103 | 1,970 | 1,829 | |||||||||
5.00%, 11/15/48, Continuously Callable @103 | 3,895 | 3,533 | |||||||||
4.00%, 11/15/51, Continuously Callable @100 | 1,030 | 726 | |||||||||
Series A, 5.50%, 4/1/46, Continuously Callable @100 | 5,000 | 5,045 | |||||||||
Series A, 5.50%, 7/1/52, Continuously Callable @100 | 4,500 | 4,636 | |||||||||
| Richmond Hospital Authority Revenue, Series A, 5.00%, 1/1/39, Continuously Callable @100 | 7,000 | 7,075 | |||||||||
33,066 | |||||||||||
Iowa (0.6%): | |||||||||||
| Iowa Finance Authority Revenue Series A, 5.00%, 5/15/43, Continuously Callable @100 | 6,235 | 4,964 | |||||||||
Series B, 5.00%, 2/15/48, Continuously Callable @100 | 4,000 | 4,059 | |||||||||
| Iowa Higher Education Loan Authority Revenue, 5.38%, 10/1/52, Continuously Callable @100 | 1,000 | 1,022 | |||||||||
| Iowa Tobacco Settlement Authority Revenue, Series A-2, 4.00%, 6/1/49, Continuously Callable @100 | 1,000 | 897 | |||||||||
10,942 | |||||||||||
Kansas (1.0%): | |||||||||||
| 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 (d) | 2,500 | 2,603 | |||||||||
City of Lawrence Revenue, Series A, 5.00%, 7/1/48, Continuously Callable @100 | 5,000 | 5,081 | |||||||||
| City of Manhattan Revenue Series A, 4.00%, 6/1/46, Continuously Callable @103 | 1,000 | 725 | |||||||||
Series A, 4.00%, 6/1/52, Continuously Callable @103 | 1,500 | 1,022 | |||||||||
See notes to financial statements.
14
| USAA Mutual Funds Trust USAA Tax Exempt Long-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
| Wyandotte County-Kansas City Unified Government Tax Allocation, 5.75%, 3/1/41, Continuously Callable @103 (d) | $ | 7,600 | $ | 7,266 | |||||||
| Wyandotte County-Kansas City Unified Government Utility System Revenue, Series A, 5.00%, 9/1/45, Continuously Callable @100 | 2,000 | 2,036 | |||||||||
18,733 | |||||||||||
Kentucky (1.1%): | |||||||||||
City of Ashland Revenue, 5.00%, 2/1/40, Continuously Callable @100 | 1,000 | 1,006 | |||||||||
City of Hazard Revenue, 4.00%, 7/1/51, Continuously Callable @100 | 3,000 | 2,587 | |||||||||
| Kentucky Bond Development Corp. Revenue, 4.00%, 6/1/51, Continuously Callable @100 | 1,070 | 907 | |||||||||
| Kentucky Economic Development Finance Authority Revenue 5.00%, 5/15/46, Continuously Callable @100 | 5,500 | 4,232 | |||||||||
Series B, 5.00%, 8/15/41, Continuously Callable @100 | 3,000 | 3,060 | |||||||||
| Kentucky Economic Development Finance Authority Revenue (INS — Assured Guaranty Municipal Corp.) 4.00%, 12/1/41, Continuously Callable @100 | 500 | 463 | |||||||||
Series A, 5.00%, 12/1/45, Continuously Callable @100 | 2,000 | 2,049 | |||||||||
| Louisville Jefferson County Metropolitan Government Revenue, Series A, 5.00%, 5/15/52, Continuously Callable @100 | 6,000 | 6,002 | |||||||||
20,306 | |||||||||||
Louisiana (3.9%): | |||||||||||
| City of Shreveport Water & Sewer Revenue 5.00%, 12/1/40, Continuously Callable @100 | 1,000 | 1,016 | |||||||||
Series B, 5.00%, 12/1/41, Continuously Callable @100 | 5,500 | 5,610 | |||||||||
| City of Shreveport Water & Sewer Revenue (INS — Assured Guaranty Corp.), Series B, 4.00%, 12/1/49, Continuously Callable @100 | 1,000 | 864 | |||||||||
| City of Shreveport Water & Sewer Revenue (INS — Assured Guaranty Municipal Corp.), Series B, 5.00%, 12/1/41, Continuously Callable @100 | 2,100 | 2,180 | |||||||||
| City of Shreveport Water & Sewer Revenue (INS — Build America Mutual Assurance Co.), Series B, 4.00%, 12/1/37, Continuously Callable @100 | 1,100 | 1,062 | |||||||||
| Jefferson Sales Tax District Revenue, Series B, 4.00%, 12/1/42, Continuously Callable @100 | 7,000 | 6,864 | |||||||||
| Louisiana Local Government Environmental Facilities & Community Development Authority Revenue, 3.50%, 11/1/32, Continuously Callable @100 | 6,250 | 5,821 | |||||||||
| Louisiana Local Government Environmental Facilities & Community Development Authority Revenue (INS — Assured Guaranty Municipal Corp.) 5.00%, 10/1/39, Continuously Callable @100 | 1,685 | 1,720 | |||||||||
4.00%, 10/1/46, Continuously Callable @100 | 8,210 | 7,469 | |||||||||
5.00%, 10/1/48, Continuously Callable @100 | 5,000 | 5,076 | |||||||||
| Louisiana Public Facilities Authority Revenue 4.00%, 5/15/41, Pre-refunded 5/15/26 @100 | 15 | 15 | |||||||||
4.00%, 5/15/41, Continuously Callable @100 | 1,235 | 1,165 | |||||||||
5.00%, 11/1/45, Pre-refunded 11/1/25 @100 | 6,000 | 6,300 | |||||||||
5.00%, 5/15/46, Continuously Callable @100 | 5,000 | 5,094 | |||||||||
5.00%, 7/1/52, Continuously Callable @100 | 400 | 406 | |||||||||
4.00%, 1/1/56, Continuously Callable @100 | 9,000 | 7,669 | |||||||||
5.00%, 7/1/57, Continuously Callable @100 | 2,000 | 2,027 | |||||||||
Series A, 4.00%, 12/15/50, Pre-refunded 12/15/27 @100 | 30 | 32 | |||||||||
Series A, 4.00%, 12/15/50, Continuously Callable @100 | 970 | 934 | |||||||||
See notes to financial statements.
15
| USAA Mutual Funds Trust USAA Tax Exempt Long-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
| Louisiana Public Facilities Authority Revenue (INS — Build America Mutual Assurance Co.), 5.25%, 6/1/51, Pre-refunded 6/1/25 @100 | $ | 5,000 | $ | 5,232 | |||||||
| State of Louisiana Gasoline & Fuels Tax Revenue, Series C, 5.00%, 5/1/45, Continuously Callable @100 | 6,000 | 6,239 | |||||||||
| Tobacco Settlement Financing Corp. Revenue, Series A, 5.25%, 5/15/35, Continuously Callable @100 | 1,500 | 1,505 | |||||||||
74,300 | |||||||||||
Maine (0.4%): | |||||||||||
| Maine Health & Higher Educational Facilities Authority Revenue, Series A, 4.00%, 7/1/46, Continuously Callable @100 | 9,000 | 7,413 | |||||||||
Massachusetts (1.8%): | |||||||||||
| Massachusetts Development Finance Agency Revenue 5.00%, 4/15/40, Continuously Callable @100 | 1,000 | 991 | |||||||||
5.00%, 7/1/46, Continuously Callable @100 | 4,000 | 4,008 | |||||||||
5.00%, 7/1/47, Continuously Callable @100 | 3,280 | 3,215 | |||||||||
4.00%, 7/1/51, Continuously Callable @100 | 1,000 | 839 | |||||||||
5.00%, 7/1/52, Continuously Callable @100 | 1,500 | 1,456 | |||||||||
Series A, 5.50%, 7/1/44, Continuously Callable @100 | 2,000 | 1,790 | |||||||||
Series A, 4.00%, 10/1/46, Continuously Callable @100 | 3,370 | 2,845 | |||||||||
Series A, 4.00%, 6/1/49, Pre-refunded 6/1/29 @100 | 1,000 | 1,076 | |||||||||
Series B, 4.00%, 6/1/50, Continuously Callable @100 | 1,700 | 1,362 | |||||||||
Series B, 4.00%, 7/1/50, Continuously Callable @100 | 975 | 776 | |||||||||
Series C, 4.00%, 10/1/45, Continuously Callable @100 | 1,250 | 1,155 | |||||||||
Series D, 5.00%, 7/1/44, Continuously Callable @100 | 3,000 | 3,028 | |||||||||
Series E, 4.00%, 7/1/38, Continuously Callable @100 | 1,000 | 935 | |||||||||
Series J2, 5.00%, 7/1/53, Continuously Callable @100 | 10,000 | 10,163 | |||||||||
33,639 | |||||||||||
Michigan (2.3%): | |||||||||||
County of Genesee, GO, Series B, 4.00%, 2/1/41, Continuously Callable @100 | 2,000 | 1,941 | |||||||||
| County of Genesee, GO (INS — Build America Mutual Assurance Co.), Series B, 5.00%, 2/1/46, Continuously Callable @100 | 2,900 | 2,969 | |||||||||
| Downriver Utility Wastewater Authority Revenue (INS — Assured Guaranty Municipal Corp.), 5.00%, 4/1/43, Continuously Callable @100 | 2,500 | 2,609 | |||||||||
| Flint Hospital Building Authority Revenue, 4.00%, 7/1/38, Continuously Callable @100 | 2,500 | 2,264 | |||||||||
| Jackson Public Schools, GO (NBGA — Michigan School Bond Qualification and Loan Program) 5.00%, 5/1/45, Continuously Callable @100 | 6,000 | 6,197 | |||||||||
5.00%, 5/1/48, Continuously Callable @100 | 3,000 | 3,081 | |||||||||
Karegnondi Water Authority Revenue, 5.00%, 11/1/45, Continuously Callable @100 | 2,750 | 2,806 | |||||||||
| Livonia Public Schools, GO (INS — Assured Guaranty Municipal Corp.), 5.00%, 5/1/45, Continuously Callable @100 | 4,000 | 4,086 | |||||||||
| Michigan Finance Authority Revenue 5.00%, 11/1/43, Continuously Callable @100 | 1,000 | 1,056 | |||||||||
4.00%, 2/15/44, Continuously Callable @100 | 5,000 | 4,614 | |||||||||
4.00%, 2/15/47, Continuously Callable @100 | 1,000 | 908 | |||||||||
4.00%, 2/15/50, Continuously Callable @100 | 2,000 | 1,781 | |||||||||
4.00%, 9/1/50, Continuously Callable @100 | 1,000 | 854 | |||||||||
4.00%, 11/1/55, Continuously Callable @100 | 4,000 | 3,555 | |||||||||
See notes to financial statements.
16
| USAA Mutual Funds Trust USAA Tax Exempt Long-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Series A, 4.00%, 11/15/50, Continuously Callable @100 | $ | 3,000 | $ | 2,660 | |||||||
| Michigan State Building Authority Revenue, 4.00%, 10/15/49, Continuously Callable @100 | 2,500 | 2,343 | |||||||||
43,724 | |||||||||||
Missouri (3.1%): | |||||||||||
| Cape Girardeau County IDA Revenue 5.00%, 3/1/36, Continuously Callable @100 | 750 | 756 | |||||||||
Series A, 6.00%, 3/1/33, Continuously Callable @103 | 2,080 | 2,144 | |||||||||
Hannibal IDA Revenue, 5.00%, 10/1/47, Continuously Callable @100 | 3,000 | 2,977 | |||||||||
| Health & Educational Facilities Authority of the State of Missouri Revenue 4.00%, 8/1/36, Continuously Callable @100 | 440 | 377 | |||||||||
5.00%, 5/15/40, Continuously Callable @103 | 5,510 | 4,724 | |||||||||
4.00%, 8/1/41, Continuously Callable @100 | 410 | 329 | |||||||||
4.00%, 2/1/48, Continuously Callable @100 | 10,000 | 7,541 | |||||||||
4.00%, 2/15/51, Continuously Callable @100 | 1,000 | 824 | |||||||||
Series A, 5.00%, 2/1/42, Continuously Callable @104 | 3,500 | 3,264 | |||||||||
Series A, 5.00%, 11/15/43, Continuously Callable @100 | 1,000 | 1,030 | |||||||||
Series A, 4.00%, 2/15/54, Continuously Callable @100 | 2,500 | 2,266 | |||||||||
| Missouri Development Finance Board Revenue 4.00%, 6/1/46, Continuously Callable @100 | 17,775 | 15,977 | |||||||||
4.00%, 3/1/51, Continuously Callable @100 | 2,000 | 1,663 | |||||||||
| St. Louis County IDA Revenue 5.88%, 9/1/43, Continuously Callable @100 | 5,000 | 5,001 | |||||||||
5.00%, 9/1/48, Continuously Callable @100 | 2,000 | 1,722 | |||||||||
| St. Louis Municipal Finance Corp. Revenue (INS — Assured Guaranty Corp.), 5.00%, 10/1/45, Continuously Callable @100 | 3,000 | 3,131 | |||||||||
| St. Louis Municipal Finance Corp. Revenue (INS — Assured Guaranty Municipal Corp.), 5.00%, 10/1/38, Continuously Callable @100 | 3,065 | 3,184 | |||||||||
| Stoddard County IDA Revenue, Series B, 6.00%, 3/1/37, Continuously Callable @103 | 1,875 | 1,932 | |||||||||
58,842 | |||||||||||
Montana (0.3%): | |||||||||||
City of Forsyth Revenue, 3.90%, 3/1/31, Callable 4/13/23 @100 | 4,000 | 4,000 | |||||||||
| Montana Facility Finance Authority Revenue, Series A, 4.00%, 6/1/45, Continuously Callable @100 | 1,000 | 925 | |||||||||
4,925 | |||||||||||
Nebraska (1.3%): | |||||||||||
Central Plains Energy Project Revenue, Series A, 5.00%, 9/1/42 | 13,665 | 13,629 | |||||||||
| Douglas County Hospital Authority No. 3 Revenue, 5.00%, 11/1/48, Continuously Callable @100 | 3,400 | 3,439 | |||||||||
| Nebraska Educational Health Cultural & Social Services Finance Authority Revenue, 4.00%, 1/1/49, Continuously Callable @102 | 7,500 | 6,833 | |||||||||
23,901 | |||||||||||
Nevada (1.0%): | |||||||||||
City of Carson City Revenue, 5.00%, 9/1/47, Continuously Callable @100 | 2,775 | 2,755 | |||||||||
| Las Vegas Convention & Visitors Authority Revenue Series C, 4.00%, 7/1/41, Continuously Callable @100 | 4,400 | 4,205 | |||||||||
See notes to financial statements.
17
| USAA Mutual Funds Trust USAA Tax Exempt Long-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Series C, 4.00%, 7/1/46, Continuously Callable @100 | $ | 12,140 | $ | 11,251 | |||||||
18,211 | |||||||||||
New Hampshire (0.1%): | |||||||||||
| New Hampshire Business Finance Authority Revenue, 4.00%, 1/1/51, Continuously Callable @103 | 3,000 | 2,235 | |||||||||
New Jersey (5.3%): | |||||||||||
| City of Newark Mass Transit Access Tax Revenue (INS — Assured Guaranty Corp.), 5.38%, 11/15/52, Continuously Callable @100 | 1,000 | 1,052 | |||||||||
| New Jersey Economic Development Authority Revenue 4.40% (MUNIPSA+160bps), 3/1/28, Callable 4/3/23 @100 (h) | 20,000 | 20,261 | |||||||||
5.00%, 6/15/40, Continuously Callable @100 | 8,125 | 8,191 | |||||||||
5.00%, 6/15/40, Pre-refunded 6/15/24 @100 | 1,875 | 1,916 | |||||||||
4.00%, 11/1/44, Continuously Callable @100 | 3,000 | 2,765 | |||||||||
4.00%, 6/15/49, Continuously Callable @100 | 4,000 | 3,584 | |||||||||
Series A, 5.00%, 6/15/47, Continuously Callable @100 | 3,000 | 3,058 | |||||||||
Series A, 5.00%, 11/1/52, Continuously Callable @100 | 5,000 | 5,156 | |||||||||
Series AAA, 5.00%, 6/15/41, Pre-refunded 12/15/26 @100 | 4,000 | 4,301 | |||||||||
Series B, 5.00%, 6/15/43, Continuously Callable @100 | 3,500 | 3,601 | |||||||||
Series WW, 5.25%, 6/15/40, Pre-refunded 6/15/25 @100 | 2,835 | 2,967 | |||||||||
Series WW, 5.25%, 6/15/40, Pre-refunded 6/15/25 @100 | 165 | 173 | |||||||||
| New Jersey Economic Development Authority Revenue (INS — Assured Guaranty Municipal Corp.), 5.00%, 6/1/42, Continuously Callable @100 | 1,200 | 1,236 | |||||||||
| New Jersey Educational Facilities Authority Revenue Series B, 5.00%, 9/1/36, Continuously Callable @100 | 5,000 | 5,167 | |||||||||
Series F, 5.00%, 7/1/47, Continuously Callable @100 | 3,000 | 2,577 | |||||||||
| New Jersey Health Care Facilities Financing Authority Revenue, 5.00%, 10/1/38, Continuously Callable @100 | 2,250 | 2,338 | |||||||||
| New Jersey Health Care Facilities Financing Authority Revenue (INS — Assured Guaranty Municipal Corp.), Series A, 5.00%, 7/1/46, Continuously Callable @100 | 1,250 | 1,267 | |||||||||
| New Jersey Transportation Trust Fund Authority Revenue 5.25%, 6/15/43, Continuously Callable @100 | 4,000 | 4,172 | |||||||||
5.00%, 6/15/48, Continuously Callable @100 | 4,000 | 4,136 | |||||||||
Series A, 5.00%, 12/15/36, Continuously Callable @100 | 2,125 | 2,233 | |||||||||
Series AA, 5.25%, 6/15/41, Continuously Callable @100 | 2,000 | 2,041 | |||||||||
Series BB, 4.00%, 6/15/50, Continuously Callable @100 | 15,000 | 13,502 | |||||||||
| The Camden County Improvement Authority Revenue, 6.00%, 6/15/52, Continuously Callable @100 | 1,325 | 1,366 | |||||||||
| The Passaic County Improvement Authority Revenue, 5.38%, 7/1/53, Continuously Callable @100 | 500 | 490 | |||||||||
| Tobacco Settlement Financing Corp. Revenue, Series A, 5.25%, 6/1/46, Continuously Callable @100 | 3,000 | 3,108 | |||||||||
100,658 | |||||||||||
New Mexico (0.4%): | |||||||||||
| New Mexico Hospital Equipment Loan Council Revenue, Series LA, 5.00%, 7/1/49, Continuously Callable @102 | 8,625 | 6,633 | |||||||||
| Winrock Town Center Tax Increment Development District Tax Allocation, 4.25%, 5/1/40, Continuously Callable @103 (d) | 670 | 551 | |||||||||
7,184 | |||||||||||
See notes to financial statements.
18
| USAA Mutual Funds Trust USAA Tax Exempt Long-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
New York (2.7%): | |||||||||||
| Allegany County Capital Resource Corp. Revenue, Series A, 5.00%, 12/1/52, Continuously Callable @100 | $ | 4,000 | $ | 3,747 | |||||||
Build NYC Resource Corp. Revenue, 5.00%, 7/1/52, Continuously Callable @100 | 700 | 678 | |||||||||
| Metropolitan Transportation Authority Revenue Series A, 11/15/32 (e) | 5,000 | 3,458 | |||||||||
Series A-2, 5.00%, 11/15/45, (Put Date 5/15/30) (i) | 5,490 | 5,859 | |||||||||
| New York Liberty Development Corp. Revenue 5.25%, 10/1/35 | 16,130 | 18,040 | |||||||||
2.80%, 9/15/69, Continuously Callable @100 | 1,500 | 1,346 | |||||||||
| New York State Dormitory Authority Revenue, Series A, 4.00%, 9/1/50, Continuously Callable @100 | 3,000 | 2,433 | |||||||||
| New York State Thruway Authority Revenue, Series A, 5.00%, 1/1/46, Continuously Callable @100 | 2,000 | 2,045 | |||||||||
| New York State Urban Development Corp. Revenue, Series A, 4.00%, 3/15/45, Continuously Callable @100 | 5,000 | 4,789 | |||||||||
| Triborough Bridge & Tunnel Authority Revenue Series A, 11/15/31 (e) | 5,000 | 3,580 | |||||||||
Series A, 11/15/32 (e) | 3,000 | 2,058 | |||||||||
Series B, 11/15/32 (e) | 2,500 | 1,811 | |||||||||
TSASC, Inc. Revenue, Series A, 5.00%, 6/1/41, Continuously Callable @100 | 1,000 | 1,014 | |||||||||
50,858 | |||||||||||
North Carolina (0.2%): | |||||||||||
| North Carolina Medical Care Commission Revenue 5.00%, 1/1/49, Continuously Callable @104 | 2,725 | 2,587 | |||||||||
Series A, 4.00%, 10/1/50, Continuously Callable @103 | 1,000 | 782 | |||||||||
3,369 | |||||||||||
North Dakota (0.5%): | |||||||||||
City of Grand Forks Revenue, 4.00%, 12/1/51, Continuously Callable @100 | 2,375 | 1,866 | |||||||||
County of Ward Revenue, Series C, 5.00%, 6/1/43, Continuously Callable @100 | 7,500 | 6,885 | |||||||||
| University of North Dakota Certificate of Participation (INS — Assured Guaranty Corp.), Series A, 4.00%, 6/1/51, Continuously Callable @100 | 1,500 | 1,317 | |||||||||
10,068 | |||||||||||
Ohio (2.6%): | |||||||||||
City of Centerville Revenue, 5.25%, 11/1/47, Continuously Callable @100 | 2,700 | 2,424 | |||||||||
| City of Middleburg Heights Revenue, Series A, 4.00%, 8/1/47, Continuously Callable @100 | 2,000 | 1,748 | |||||||||
County of Cuyahoga Revenue, 4.75%, 2/15/47, Continuously Callable @100 | 9,000 | 8,729 | |||||||||
County of Franklin Revenue, Series B, 5.00%, 7/1/45, Continuously Callable @103 | 5,000 | 4,609 | |||||||||
County of Hamilton Revenue, 5.00%, 1/1/51, Continuously Callable @100 | 2,500 | 2,234 | |||||||||
County of Lucas Revenue, 5.25%, 11/15/48, Continuously Callable @100 | 6,000 | 5,387 | |||||||||
| County of Montgomery Revenue 4.00%, 11/15/42, Continuously Callable @100 | 2,500 | 2,230 | |||||||||
4.00%, 11/15/45, Continuously Callable @100 | 2,000 | 1,742 | |||||||||
County of Ross Revenue, 5.00%, 12/1/49, Continuously Callable @100 | 9,100 | 9,199 | |||||||||
| Ohio Higher Educational Facility Commission Revenue, 6.00%, 9/1/47, Continuously Callable @100 | 4,475 | 4,700 | |||||||||
See notes to financial statements.
19
| USAA Mutual Funds Trust USAA Tax Exempt Long-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
State of Ohio Revenue | |||||||||||
4.00%, 11/15/40, Continuously Callable @100 | $ | 655 | $ | 591 | |||||||
Series A, 4.00%, 1/15/50, Continuously Callable @100 | 5,000 | 4,413 | |||||||||
48,006 | |||||||||||
Oklahoma (1.0%): | |||||||||||
| Norman Regional Hospital Authority Revenue, 4.00%, 9/1/45, Continuously Callable @100 | 4,250 | 3,468 | |||||||||
| Oklahoma Development Finance Authority Revenue, Series B, 5.50%, 8/15/57, Continuously Callable @100 | 4,250 | 3,725 | |||||||||
| Oklahoma Municipal Power Authority Revenue, Series A, 4.00%, 1/1/47, Continuously Callable @100 | 10,000 | 9,249 | |||||||||
| Tulsa County Industrial Authority Revenue, 5.25%, 11/15/45, Continuously Callable @102 | 2,000 | 1,913 | |||||||||
18,355 | |||||||||||
Oregon (0.6%): | |||||||||||
City of Keizer Special Assessment, 5.20%, 6/1/31, Continuously Callable @100 | 690 | 691 | |||||||||
| Deschutes County Hospital Facilities Authority Revenue, 4.00%, 1/1/46, Continuously Callable @100 | 2,000 | 1,840 | |||||||||
| Medford Hospital Facilities Authority Revenue, Series A, 4.00%, 8/15/50, Continuously Callable @100 | 3,800 | 3,451 | |||||||||
| Oregon State Facilities Authority Revenue, Series A, 4.00%, 10/1/51, Continuously Callable @100 | 1,000 | 838 | |||||||||
| Salem Hospital Facility Authority Revenue, 5.00%, 5/15/53, Continuously Callable @102 | 1,000 | 892 | |||||||||
| Union County Hospital Facility Authority Revenue 5.00%, 7/1/47, Continuously Callable @100 | 450 | 451 | |||||||||
5.00%, 7/1/52, Continuously Callable @100 | 1,325 | 1,320 | |||||||||
| Yamhill County Hospital Authority Revenue 5.00%, 11/15/51, Continuously Callable @102 | 1,180 | 866 | |||||||||
Series B-2, 2.13%, 11/15/27, Continuously Callable @100 | 1,000 | 883 | |||||||||
Series B-3, 1.75%, 11/15/26, Continuously Callable @100 | 680 | 613 | |||||||||
11,845 | |||||||||||
Pennsylvania (9.1%): | |||||||||||
| Adams County General Authority Revenue, 4.00%, 8/15/45, Continuously Callable @100 | 7,400 | 6,723 | |||||||||
| Allegheny County Hospital Development Authority Revenue, 5.00%, 4/1/47, Continuously Callable @100 | 6,500 | 6,586 | |||||||||
| Allegheny County Sanitary Authority Revenue, 5.00%, 6/1/43, Continuously Callable @100 | 3,170 | 3,333 | |||||||||
| Allentown Commercial & IDA Revenue, 6.25%, 7/1/47, Continuously Callable @100 (d) | 5,000 | 4,681 | |||||||||
| Altoona Area School District, GO (INS — Build America Mutual Assurance Co.) 5.00%, 12/1/45, Pre-refunded 12/1/25 @100 | 1,000 | 1,052 | |||||||||
5.00%, 12/1/48, Pre-refunded 12/1/25 @100 | 300 | 315 | |||||||||
| Armstrong School District, GO Series A, 4.00%, 3/15/38, Continuously Callable @100 | 1,000 | 994 | |||||||||
Series A, 4.00%, 3/15/41, Continuously Callable @100 | 2,250 | 2,198 | |||||||||
| Berks County IDA Revenue 5.00%, 5/15/48, Continuously Callable @102 | 1,000 | 907 | |||||||||
5.00%, 11/1/50, Continuously Callable @100 | 8,500 | 5,494 | |||||||||
See notes to financial statements.
20
| USAA Mutual Funds Trust USAA Tax Exempt Long-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Bucks County IDA Revenue, 4.00%, 8/15/50, Continuously Callable @100 | $ | 3,000 | $ | 2,618 | |||||||
| Canon-McMillan School District, GO 4.00%, 6/1/44, Continuously Callable @100 | 3,500 | 3,349 | |||||||||
4.00%, 6/1/48, Continuously Callable @100 | 1,105 | 1,034 | |||||||||
4.00%, 6/1/50, Continuously Callable @100 | 6,065 | 5,622 | |||||||||
| Chester County IDA Revenue 6.00%, 10/15/52, Continuously Callable @100 (d) | 1,775 | 1,729 | |||||||||
Series A, 5.25%, 10/15/47, Continuously Callable @100 | 3,250 | 2,899 | |||||||||
| Commonwealth Financing Authority Revenue, 5.00%, 6/1/35, Continuously Callable @100 | 500 | 527 | |||||||||
| Commonwealth of Pennsylvania Certificate of Participation, Series A, 5.00%, 7/1/43, Continuously Callable @100 | 1,000 | 1,041 | |||||||||
County of Lehigh Revenue, 4.00%, 7/1/49, Continuously Callable @100 | 11,000 | 9,955 | |||||||||
Delaware County Authority Revenue, 5.00%, 10/1/39, Continuously Callable @100 | 2,250 | 2,233 | |||||||||
| Delaware River Joint Toll Bridge Commission Revenue, 5.00%, 7/1/47, Continuously Callable @100 | 5,000 | 5,186 | |||||||||
Lancaster IDA Revenue, 4.00%, 7/1/51, Continuously Callable @103 | 1,000 | 727 | |||||||||
| Montgomery County Higher Education and Health Authority Revenue, Series B, 4.00%, 5/1/52, Continuously Callable @100 | 6,000 | 5,305 | |||||||||
| Montgomery County IDA Revenue 5.00%, 12/1/48, Continuously Callable @102 | 2,000 | 1,812 | |||||||||
5.00%, 12/1/49, Continuously Callable @103 | 2,000 | 1,931 | |||||||||
| Northampton County General Purpose Authority Revenue 4.00%, 8/15/40, Continuously Callable @100 | 4,000 | 3,708 | |||||||||
5.00%, 8/15/48, Continuously Callable @100 | 2,440 | 2,476 | |||||||||
| Northeastern Pennsylvania Hospital & Education Authority Revenue 5.00%, 5/1/44, Continuously Callable @100 | 1,000 | 1,005 | |||||||||
5.00%, 5/1/49, Continuously Callable @100 | 1,350 | 1,331 | |||||||||
| Pennsylvania Economic Development Financing Authority Revenue 4.00%, 7/1/46, Continuously Callable @103 | 1,000 | 800 | |||||||||
Series A, 4.00%, 10/15/51, Continuously Callable @100 | 2,320 | 2,072 | |||||||||
| Pennsylvania Higher Educational Facilities Authority Revenue Series A, 5.25%, 7/15/33, Pre-refunded 7/15/23 @100 | 1,970 | 1,984 | |||||||||
Series A, 5.50%, 7/15/38, Pre-refunded 7/15/23 @100 | 2,750 | 2,771 | |||||||||
Series A, 4.00%, 7/15/46, Continuously Callable @100 | 2,025 | 1,732 | |||||||||
| Pennsylvania Turnpike Commission Revenue 5.00%, 12/1/37, Continuously Callable @100 | 1,000 | 1,041 | |||||||||
Series A, 4.00%, 12/1/49, Continuously Callable @100 | 5,000 | 4,546 | |||||||||
Series A-1, 5.00%, 12/1/46, Continuously Callable @100 | 3,000 | 3,054 | |||||||||
Series A-1, 5.00%, 12/1/47, Continuously Callable @100 | 4,000 | 4,129 | |||||||||
Series A-2, 5.00%, 12/1/33, Continuously Callable @100 | 1,250 | 1,363 | |||||||||
Series B, 5.00%, 6/1/39, Continuously Callable @100 | 8,000 | 8,215 | |||||||||
Series B, 5.00%, 12/1/43, Continuously Callable @100 | 5,000 | 5,208 | |||||||||
Series B, 5.25%, 12/1/44, Continuously Callable @100 | 10,000 | 10,155 | |||||||||
Series B, 4.00%, 12/1/51, Continuously Callable @100 | 5,645 | 5,030 | |||||||||
Series B, 4.00%, 12/1/51, Continuously Callable @100 | 1,500 | 1,354 | |||||||||
Series B-1, 5.00%, 6/1/42, Continuously Callable @100 | 4,000 | 4,126 | |||||||||
| Pittsburgh Water & Sewer Authority Revenue (INS — Assured Guaranty Municipal Corp.), Series A, 5.00%, 9/1/44, Continuously Callable @100 | 5,000 | 5,265 | |||||||||
See notes to financial statements.
21
| USAA Mutual Funds Trust USAA Tax Exempt Long-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
| Reading School District, GO (INS — Build America Mutual Assurance Co.), Series A, 4.00%, 4/1/44, Continuously Callable @100 | $ | 1,055 | $ | 1,015 | |||||||
| School District of Philadelphia, GO Series A, 5.00%, 9/1/44, Continuously Callable @100 | 10,000 | 10,437 | |||||||||
Series B, 5.00%, 9/1/43, Continuously Callable @100 | 2,500 | 2,601 | |||||||||
Series F, 5.00%, 9/1/37, Continuously Callable @100 | 1,000 | 1,034 | |||||||||
Series F, 5.00%, 9/1/38, Pre-refunded 9/1/26 @100 | 10 | 11 | |||||||||
Series F, 5.00%, 9/1/38, Continuously Callable @100 | 1,990 | 2,055 | |||||||||
| Scranton School District, GO (INS — Build America Mutual Assurance Co.), Series E, 4.00%, 12/1/37, Continuously Callable @100 | 1,025 | 1,017 | |||||||||
| Wilkes-Barre Area School District, GO (INS — Build America Mutual Assurance Co.) 4.00%, 4/15/49, Continuously Callable @100 | 750 | 693 | |||||||||
5.00%, 4/15/59, Continuously Callable @100 | 3,000 | 3,133 | |||||||||
171,612 | |||||||||||
Rhode Island (0.1%): | |||||||||||
| Rhode Island Health & Educational Building Corp. Revenue, 6.00%, 9/1/33, Pre-refunded 9/1/23 @100 | 2,000 | 2,027 | |||||||||
| Rhode Island Housing & Mortgage Finance Corp. Revenue, Series 15-A, 6.85%, 10/1/24, Continuously Callable @100 | 180 | 180 | |||||||||
2,207 | |||||||||||
South Carolina (0.4%): | |||||||||||
| City of Rock Hill Combined Utility System Revenue, Series A, 4.00%, 1/1/49, Continuously Callable @100 | 2,500 | 2,196 | |||||||||
| Patriots Energy Group Revenue, Series A, 4.00%, 6/1/51, Continuously Callable @100 | 2,000 | 1,704 | |||||||||
| South Carolina Jobs-Economic Development Authority Revenue 5.00%, 11/15/47, Continuously Callable @103 | 1,850 | 1,745 | |||||||||
5.00%, 4/1/54, Continuously Callable @103 | 1,000 | 886 | |||||||||
4.00%, 4/1/54, Continuously Callable @103 | 1,165 | 833 | |||||||||
7,364 | |||||||||||
South Dakota (0.0%): (c) | |||||||||||
| Educational Enhancement Funding Corp. Revenue, Series B, 5.00%, 6/1/27, Pre-refunded 6/1/23 @100 | 500 | 502 | |||||||||
Tennessee (1.1%): | |||||||||||
| Chattanooga Health Educational & Housing Facility Board Revenue, Series C, 3.08%, 5/1/39, Continuously Callable @100 (b) | 5,000 | 5,000 | |||||||||
| Greeneville Health & Educational Facilities Board Revenue, 5.00%, 7/1/44, Continuously Callable @100 | 2,000 | 2,039 | |||||||||
| Metropolitan Government Nashville & Davidson County Health & Educational Facilities Board Revenue 5.00%, 10/1/45, Continuously Callable @100 | 1,500 | 1,408 | |||||||||
5.00%, 7/1/46, Continuously Callable @100 | 4,000 | 4,047 | |||||||||
4.00%, 10/1/51, Continuously Callable @100 | 1,000 | 796 | |||||||||
| Metropolitan Nashville Airport Authority Revenue, Series A, 4.00%, 7/1/54, Continuously Callable @100 | 2,000 | 1,799 | |||||||||
Tennergy Corp. Revenue, Series A, 5.50%, 10/1/53, (Put Date 12/1/30) (i) | 5,000 | 5,294 | |||||||||
20,383 | |||||||||||
See notes to financial statements.
22
| USAA Mutual Funds Trust USAA Tax Exempt Long-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Texas (16.2%): | |||||||||||
| Arlington Higher Education Finance Corp. Revenue (NBGA — Texas Permanent School Fund) 4.00%, 8/15/43, Continuously Callable @100 | $ | 10,000 | $ | 9,703 | |||||||
4.00%, 8/15/44, Continuously Callable @100 | 2,170 | 2,106 | |||||||||
Series A, 5.00%, 2/15/41, Continuously Callable @100 | 3,000 | 3,079 | |||||||||
Series A, 5.00%, 12/1/53, Continuously Callable @100 | 7,200 | 7,349 | |||||||||
| Bexar County Health Facilities Development Corp. Revenue 5.00%, 7/15/42, Continuously Callable @105 | 600 | 547 | |||||||||
4.00%, 7/15/45, Continuously Callable @100 | 8,450 | 6,434 | |||||||||
| Central Texas Regional Mobility Authority Revenue 4.00%, 1/1/41, Continuously Callable @100 | 5,000 | 4,649 | |||||||||
Series A, 5.00%, 1/1/45, Pre-refunded 7/1/25 @100 | 3,500 | 3,646 | |||||||||
| Central Texas Turnpike System Revenue, Series C, 5.00%, 8/15/42, Continuously Callable @100 | 6,500 | 6,570 | |||||||||
| Central Texas Turnpike System Revenue (INS — AMBAC Assurance Corp.), Series A, 8/15/30 (e) | 18,530 | 14,240 | |||||||||
| City of Arlington Special Tax (INS — Assured Guaranty Municipal Corp.), Series A, 5.00%, 2/15/48, Continuously Callable @100 | 7,500 | 7,796 | |||||||||
| City of Corpus Christi Utility System Revenue, 4.00%, 7/15/39, Continuously Callable @100 | 5,900 | 5,849 | |||||||||
| City of Garland Texas Electric Utility System Revenue, Series A, 4.00%, 3/1/51, Continuously Callable @100 | 1,000 | 848 | |||||||||
| City of Houston Hotel Occupancy Tax & Special Revenue, 5.00%, 9/1/40, Continuously Callable @100 | 3,715 | 3,752 | |||||||||
| City of Laredo Waterworks & Sewer System Revenue, 4.00%, 3/1/41, Continuously Callable @100 | 700 | 668 | |||||||||
| Clifton Higher Education Finance Corp. Revenue 6.00%, 8/15/33, Continuously Callable @100 | 1,000 | 1,010 | |||||||||
6.00%, 8/15/43, Continuously Callable @100 | 2,750 | 2,777 | |||||||||
4.25%, 8/15/52, Continuously Callable @100 | 1,500 | 1,367 | |||||||||
| Clifton Higher Education Finance Corp. Revenue (NBGA — Texas Permanent School Fund) 5.00%, 8/15/39, Continuously Callable @100 | 4,250 | 4,323 | |||||||||
4.00%, 8/15/44, Continuously Callable @100 | 11,000 | 10,323 | |||||||||
5.00%, 8/15/48, Continuously Callable @100 | 10,000 | 10,397 | |||||||||
| County of Bexar Revenue 4.00%, 8/15/44, Continuously Callable @100 | 500 | 442 | |||||||||
4.00%, 8/15/49, Continuously Callable @100 | 1,700 | 1,453 | |||||||||
Del Mar College District, GO, Series A, 5.00%, 8/15/48, Continuously Callable @100 | 6,500 | 6,641 | |||||||||
| Everman Independent School District, GO (NBGA — Texas Permanent School Fund), 4.00%, 2/15/50, Continuously Callable @100 | 4,500 | 4,267 | |||||||||
| Grand Parkway Transportation Corp. Revenue, 4.00%, 10/1/49, Continuously Callable @100 | 2,000 | 1,817 | |||||||||
| Greater Texas Cultural Education Facilities Finance Corp. Revenue, 4.00%, 3/1/50, Continuously Callable @100 | 2,000 | 1,749 | |||||||||
| Harris County Cultural Education Facilities Finance Corp. Revenue, Series A, 5.00%, 6/1/38, Continuously Callable @100 | 6,100 | 5,592 | |||||||||
| Harris County Hospital District Revenue, 4.00%, 2/15/42, Continuously Callable @100 | 15,000 | 14,117 | |||||||||
See notes to financial statements.
23
| USAA Mutual Funds Trust USAA Tax Exempt Long-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
| Karnes County Hospital District Revenue, 5.00%, 2/1/44, Continuously Callable @100 | $ | 6,000 | $ | 6,032 | |||||||
| Kerrville Health Facilities Development Corp. Revenue, 5.00%, 8/15/35, Continuously Callable @100 | 1,900 | 1,945 | |||||||||
| Manor Independent School District, GO (NBGA — Texas Permanent School Fund), 5.00%, 8/1/52, Continuously Callable @100 | 15,095 | 15,865 | |||||||||
| Matagorda County Navigation District No. 1 Revenue 4.00%, 6/1/30, Continuously Callable @100 | 6,000 | 5,946 | |||||||||
4.00%, 6/1/30, Continuously Callable @100 | 9,615 | 9,454 | |||||||||
| Midlothian Independent School District, GO (NBGA — Texas Permanent School Fund), 5.00%, 2/15/47, Continuously Callable @100 | 15,000 | 15,623 | |||||||||
| New Hope Cultural Education Facilities Finance Corp. Revenue 5.00%, 7/1/47 (j) | 6,000 | 4,800 | |||||||||
5.00%, 4/1/48, Pre-refunded 4/1/26 @100 | 1,250 | 1,324 | |||||||||
4.00%, 11/1/55, Continuously Callable @103 | 1,250 | 900 | |||||||||
Series A-1, 7.50%, 11/15/37 | 410 | 320 | |||||||||
Series A-2, 7.50%, 11/15/36 | 2,565 | 2,228 | |||||||||
| New Hope Cultural Education Facilities Finance Corp. Revenue (INS — Assured Guaranty Municipal Corp.), 5.00%, 7/1/48, Continuously Callable @100 | 1,000 | 1,015 | |||||||||
| New Hope Cultural Education Facilities Finance Corp. Revenue PIK, 2.00%, 11/15/61, Callable 11/15/26 @105, Continuously Callable @105 (k) | 10,514 | 2,168 | |||||||||
| North Texas Tollway Authority Revenue 5.00%, 1/1/48, Continuously Callable @100 | 3,750 | 3,879 | |||||||||
Series B, 9/1/37, Pre-refunded 9/1/31 @64.1040 (e) | 3,000 | 1,435 | |||||||||
Series B, 5.00%, 1/1/45, Continuously Callable @100 | 5,000 | 5,094 | |||||||||
| North Texas Tollway Authority Revenue (INS — National Public Finance Guarantee Corp.), Series B, 5.00%, 1/1/48, Continuously Callable @100 | 5,000 | 5,139 | |||||||||
| Port of Port Arthur Navigation District Revenue Series B, 2.90%, 4/1/40, Continuously Callable @100 (b) | 3,440 | 3,440 | |||||||||
Series C, 2.90%, 4/1/40, Continuously Callable @100 (b) | 12,170 | 12,170 | |||||||||
| Princeton Independent School District, GO (NBGA — Texas Permanent School Fund), 5.00%, 2/15/48, Continuously Callable @100 | 7,000 | 7,352 | |||||||||
| Red River Education Finance Corp. Revenue 4.00%, 6/1/41, Continuously Callable @100 | 2,000 | 1,827 | |||||||||
5.50%, 10/1/46, Continuously Callable @100 | 3,000 | 3,047 | |||||||||
| San Antonio Education Facilities Corp. Revenue, 4.00%, 4/1/54, Continuously Callable @100 | 1,000 | 798 | |||||||||
| Tarrant County Cultural Education Facilities Finance Corp. Revenue 5.00%, 11/15/46, Continuously Callable @100 | 1,000 | 1,012 | |||||||||
Series A, 11/15/45 (j) (l) | 4,500 | 1,800 | |||||||||
Series B, 11/15/36 (j) (l) | 3,600 | 1,440 | |||||||||
Series B, 5.00%, 11/15/46, Continuously Callable @100 | 7,000 | 7,068 | |||||||||
Series B, 5.00%, 7/1/48, Continuously Callable @100 | 10,000 | 10,195 | |||||||||
Texas Municipal Gas Acquisition & Supply Corp. III Revenue, 5.00%, 12/15/32 | 2,000 | 2,109 | |||||||||
| Texas Transportation Commission Revenue, 5.00%, 8/1/57, Continuously Callable @100 | 5,000 | 4,898 | |||||||||
| Uptown Development Authority Tax Allocation 5.00%, 9/1/37, Continuously Callable @100 | 4,365 | 4,275 | |||||||||
5.00%, 9/1/40, Continuously Callable @100 | 2,490 | 2,398 | |||||||||
Series A, 5.00%, 9/1/39, Continuously Callable @100 | 1,645 | 1,592 | |||||||||
See notes to financial statements.
24
| USAA Mutual Funds Trust USAA Tax Exempt Long-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
| Waco Educational Finance Corp. Revenue, 4.00%, 3/1/51, Continuously Callable @100 | $ | 4,000 | $ | 3,654 | |||||||
| West Harris County Regional Water Authority Revenue 4.00%, 12/15/45, Continuously Callable @100 | 1,600 | 1,447 | |||||||||
4.00%, 12/15/49, Continuously Callable @100 | 3,945 | 3,427 | |||||||||
| Ysleta Independent School District, GO (NBGA — Texas Permanent School Fund), 4.00%, 8/15/52, Continuously Callable @100 | 5,000 | 4,701 | |||||||||
305,328 | |||||||||||
Utah (0.2%): | |||||||||||
| Military Installation Development Authority Revenue Series A-1, 4.00%, 6/1/41, Continuously Callable @103 | 1,500 | 1,186 | |||||||||
Series A-1, 4.00%, 6/1/52, Continuously Callable @103 | 1,000 | 695 | |||||||||
| Utah Charter School Finance Authority Revenue Series A, 5.63%, 6/15/42, Continuously Callable @100 (d) | 500 | 497 | |||||||||
Series A, 4.00%, 10/15/51, Continuously Callable @100 | 1,550 | 1,392 | |||||||||
3,770 | |||||||||||
Vermont (0.4%): | |||||||||||
| Vermont Economic Development Authority Revenue, 4.00%, 5/1/45, Continuously Callable @103 | 1,350 | 969 | |||||||||
| Vermont Educational & Health Buildings Financing Agency Revenue, 5.00%, 10/15/46, Continuously Callable @100 | 7,000 | 6,869 | |||||||||
7,838 | |||||||||||
Virginia (0.5%): | |||||||||||
| Alexandria IDA Revenue 5.00%, 10/1/45, Pre-refunded 10/1/25 @100 | 2,600 | 2,732 | |||||||||
5.00%, 10/1/50, Pre-refunded 10/1/25 @100 | 2,400 | 2,521 | |||||||||
| Lewistown Commerce Center Community Development Authority Tax Allocation 6.05%, 3/1/44, Continuously Callable @103 (j) | 2,565 | 1,693 | |||||||||
6.05%, 3/1/44, Continuously Callable @103 | 1,623 | 1,351 | |||||||||
Series C, 0.50%, 3/1/54, Continuously Callable @100 (j) | 6,327 | 949 | |||||||||
9,246 | |||||||||||
Washington (1.2%): | |||||||||||
| King County Public Hospital District No. 1, GO, 5.00%, 12/1/43, Continuously Callable @100 | 9,000 | 9,363 | |||||||||
| King County Public Hospital District No. 2, GO, Series A, 4.00%, 12/1/45, Continuously Callable @100 | 4,000 | 3,841 | |||||||||
| Washington Health Care Facilities Authority Revenue, 4.00%, 7/1/42, Continuously Callable @100 | 5,500 | 5,117 | |||||||||
| Washington Higher Education Facilities Authority Revenue, 4.00%, 5/1/50, Continuously Callable @100 | 1,250 | 1,106 | |||||||||
| Washington State Housing Finance Commission Revenue 5.00%, 1/1/43, Continuously Callable @102 (d) | 3,055 | 2,583 | |||||||||
Series A-1, 3.50%, 12/20/35 | 975 | 883 | |||||||||
22,893 | |||||||||||
West Virginia (0.1%): | |||||||||||
| West Virginia Hospital Finance Authority Revenue, 5.00%, 1/1/43, Continuously Callable @100 | 2,000 | 1,955 | |||||||||
See notes to financial statements.
25
| USAA Mutual Funds Trust USAA Tax Exempt Long-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Wisconsin (3.1%): | |||||||||||
| Public Finance Authority Revenue 5.25%, 5/15/42, Continuously Callable @102 (d) | $ | 2,200 | $ | 2,027 | |||||||
5.00%, 7/1/44, Continuously Callable @100 | 6,000 | 6,186 | |||||||||
5.00%, 11/15/44, Continuously Callable @103 | 455 | 420 | |||||||||
4.00%, 1/1/45, Continuously Callable @100 | 1,500 | 1,330 | |||||||||
5.00%, 7/1/47, Continuously Callable @100 | 1,000 | 936 | |||||||||
5.00%, 6/15/49, Continuously Callable @100 (d) | 520 | 447 | |||||||||
5.00%, 6/15/49, Continuously Callable @100 | 1,480 | 1,398 | |||||||||
5.00%, 11/15/49, Continuously Callable @103 | 2,400 | 2,169 | |||||||||
4.00%, 2/1/51, Continuously Callable @100 | 1,500 | 1,236 | |||||||||
4.00%, 10/1/51, Continuously Callable @103 | 2,185 | 1,598 | |||||||||
4.00%, 1/1/52, Continuously Callable @103 | 2,350 | 1,920 | |||||||||
5.13%, 4/1/52, Continuously Callable @100 | 3,000 | 2,796 | |||||||||
5.00%, 7/1/52, Continuously Callable @100 | 1,000 | 913 | |||||||||
5.00%, 6/15/53, Continuously Callable @100 | 1,000 | 929 | |||||||||
5.00%, 6/15/54, Continuously Callable @100 (d) | 455 | 383 | |||||||||
Series A, 5.25%, 10/1/43, Continuously Callable @100 | 3,090 | 3,094 | |||||||||
Series A, 4.00%, 10/1/47, Continuously Callable @100 | 4,740 | 4,241 | |||||||||
Series A, 4.00%, 10/1/49, Continuously Callable @100 | 11,000 | 9,750 | |||||||||
Series A, 4.00%, 7/1/51, Continuously Callable @100 | 1,000 | 762 | |||||||||
Series A, 4.00%, 7/1/56, Continuously Callable @100 | 2,250 | 1,769 | |||||||||
Series A-1, 4.00%, 7/1/51, Continuously Callable @100 (d) | 2,870 | 2,144 | |||||||||
| Public Finance Authority Revenue (INS — Assured Guaranty Municipal Corp.) 5.00%, 7/1/54, Continuously Callable @100 | 1,285 | 1,304 | |||||||||
5.00%, 7/1/58, Continuously Callable @100 | 1,500 | 1,520 | |||||||||
| Wisconsin Health & Educational Facilities Authority Revenue 4.00%, 1/1/47, Continuously Callable @103 | 120 | 89 | |||||||||
5.00%, 3/15/50, Continuously Callable @100 | 1,175 | 1,085 | |||||||||
4.00%, 12/1/51, Continuously Callable @100 | 500 | 344 | |||||||||
4.00%, 1/1/57, Continuously Callable @103 | 3,000 | 2,051 | |||||||||
Series A, 5.00%, 9/15/50, Pre-refunded 9/15/23 @100 | 5,000 | 5,043 | |||||||||
Series B, 4.00%, 9/15/45, Continuously Callable @103 | 475 | 369 | |||||||||
58,253 | |||||||||||
Total Municipal Bonds (Cost $2,000,652) | 1,860,165 | ||||||||||
Total Investments (Cost $2,002,358) — 98.9% | 1,861,871 | ||||||||||
Other assets in excess of liabilities — 1.1% | 20,936 | ||||||||||
NET ASSETS — 100.00% | $ | 1,882,807 | |||||||||
(a) Security was fair valued based upon procedures approved by the Board of Trustees and represents 0.2% of net assets as of February 28, 2023. This security is classified as Level 3 within the fair value hierarchy. (See Note 2 in the Notes to Financial Statements)
(b) 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.
(c) Amount represents less than 0.05% of net assets.
See notes to financial statements.
26
| USAA Mutual Funds Trust USAA Tax Exempt Long-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(d) Rule 144A security or other security that is restricted as to resale to institutional investors. As of February 28, 2023, the fair value of these securities was $30,543 thousands and amounted to 1.6% of net assets.
(e) Zero-coupon bond.
(f) Stepped-coupon security converts to coupon form on 8/1/24 with a rate of 5.95%
(g) Stepped-coupon security converts to coupon form on 8/1/24 with a rate of 6.05%
(h) Variable or Floating-Rate Security. Rate disclosed is as of February 28, 2023.
(i) Put Bond.
(j) Currently the issuer is in default with respect to interest and/or principal payments.
(k) Stepped-coupon security converts to coupon from 2% to 5% on 11/15/26.
(l) Issuer filed for bankruptcy.
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
MUNIPSA — Municipal Swap Index
PIK — Payment-in-Kind
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 guaranteed agreement from the name listed.
See notes to financial statements.
27
USAA Mutual Funds Trust | Statement of Assets and Liabilities February 28, 2023 | ||||||
(Amounts in Thousands, Except Per Share Amounts)
| USAA Tax Exempt Long-Term Fund | |||||||
Assets: | |||||||
Investments, at value (Cost $2,002,358) | $ | 1,861,871 | |||||
Cash | 3,667 | ||||||
Receivables: | |||||||
Interest | 20,719 | ||||||
Capital shares issued | 80 | ||||||
From Adviser | 26 | ||||||
Prepaid expenses | 5 | ||||||
Total Assets | 1,886,368 | ||||||
Liabilities: | |||||||
Payables: | |||||||
Distributions | 843 | ||||||
Investments purchased | 491 | ||||||
Capital shares redeemed | 1,506 | ||||||
Accrued expenses and other payables: | |||||||
Investment advisory fees | 342 | ||||||
Administration fees | 218 | ||||||
Custodian fees | 3 | ||||||
Transfer agent fees | 55 | ||||||
Compliance fees | 2 | ||||||
Trustees' fees | 1 | ||||||
| 12b-1 fees | — | (a) | |||||
Other accrued expenses | 100 | ||||||
Total Liabilities | 3,561 | ||||||
Net Assets: | |||||||
Capital | 2,136,342 | ||||||
Total accumulated earnings/(loss) | (253,535 | ) | |||||
Net Assets | $ | 1,882,807 | |||||
Net Assets | |||||||
Fund Shares | $ | 1,825,576 | |||||
Institutional Shares | 52,513 | ||||||
Class A | 4,718 | ||||||
Total | $ | 1,882,807 | |||||
Shares (unlimited number of shares authorized with no par value): | |||||||
Fund Shares | 154,832 | ||||||
Institutional Shares | 4,455 | ||||||
Class A | 401 | ||||||
Total | 159,688 | ||||||
Net asset value, offering and redemption price per share: (b) | |||||||
Fund Shares | $ | 11.79 | |||||
Institutional Shares | 11.79 | ||||||
Class A | 11.77 | ||||||
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 | $ | 12.04 | |||||
(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.
28
USAA Mutual Funds Trust | Statements of Operations | ||||||
(Amounts in Thousands)
| USAA Tax Exempt Long-Term Fund | |||||||||||
| 11 Months Ended February 28, 2023(a) | Year Ended March 31, 2022 | ||||||||||
Investment Income: | |||||||||||
Interest | $ | 71,533 | $ | 77,738 | |||||||
Total Income | 71,533 | 77,738 | |||||||||
Expenses: | |||||||||||
Investment advisory fees | 4,743 | 7,223 | |||||||||
Administration fees — Fund Shares | 2,629 | 3,590 | |||||||||
Administration fees — Institutional Shares | 53 | 9 | |||||||||
Administration fees — Class A | 6 | 6 | |||||||||
Sub-Administration fees | 26 | 28 | |||||||||
| 12b-1 fees — Class A | 10 | 9 | |||||||||
Custodian fees | 42 | 98 | |||||||||
Transfer agent fees — Fund Shares | 543 | 625 | |||||||||
Transfer agent fees — Institutional Shares | 53 | 9 | |||||||||
Transfer agent fees — Class A | 4 | 4 | |||||||||
Trustees' fees | 48 | 50 | |||||||||
Compliance fees | 17 | 16 | |||||||||
Legal and audit fees | 73 | 56 | |||||||||
State registration and filing fees | 97 | 59 | |||||||||
Interfund lending fees | — | — | (b) | ||||||||
Other expenses | 196 | 269 | |||||||||
Recoupment of prior expenses waived/reimbursed by Adviser | 6 | 23 | |||||||||
Total Expenses | 8,546 | 12,074 | |||||||||
Expenses waived/reimbursed by Adviser | (201 | ) | (35 | ) | |||||||
Net Expenses | 8,345 | 12,039 | |||||||||
Net Investment Income (Loss) | 63,188 | 65,699 | |||||||||
Realized/Unrealized Gains (Losses) from Investments: | |||||||||||
Net realized gains (losses) from investment securities | (18,256 | ) | (33,056 | ) | |||||||
| Net change in unrealized appreciation/depreciation on investment securities | (170,845 | ) | (102,892 | ) | |||||||
Net realized/unrealized gains (losses) on investments | (189,101 | ) | (135,948 | ) | |||||||
Change in net assets resulting from operations | $ | (125,913 | ) | $ | (70,249 | ) | |||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from March 31 to February 28.
(b) Rounds to less than $1 thousand.
See notes to financial statements.
29
USAA Mutual Funds Trust | Statements of Changes in Net Assets | ||||||
(Amounts in Thousands)
USAA Tax Exempt Long-Term Fund | |||||||||||||||
| 11 Months Ended February 28, 2023(a) | Year Ended March 31, 2022 | Year Ended March 31, 2021 | |||||||||||||
From Investments: | |||||||||||||||
Operations: | |||||||||||||||
Net Investment Income (Loss) | $ | 63,188 | $ | 65,699 | $ | 75,115 | |||||||||
Net realized gains (losses) | (18,256 | ) | (33,056 | ) | (731 | ) | |||||||||
| Net change in unrealized appreciation/depreciation | (170,845 | ) | (102,892 | ) | 87,771 | ||||||||||
Change in net assets resulting from operations | (125,913 | ) | (70,249 | ) | 162,155 | ||||||||||
Distributions to Shareholders: | |||||||||||||||
Fund Shares | (60,672 | ) | (65,256 | ) | (74,812 | ) | |||||||||
Institutional Shares | (1,836 | ) | (271 | ) | (88 | )(b) | |||||||||
Class A | (136 | ) | (96 | ) | (232 | ) | |||||||||
| Change in net assets resulting from distributions to shareholders | (62,644 | ) | (65,623 | ) | (75,132 | ) | |||||||||
| Change in net assets resulting from capital transactions | (124,706 | ) | (86,235 | ) | (79,868 | ) | |||||||||
Change in net assets | (313,263 | ) | (222,107 | ) | 7,155 | ||||||||||
Net Assets: | |||||||||||||||
Beginning of period | 2,196,070 | 2,418,177 | 2,411,022 | ||||||||||||
End of period | $ | 1,882,807 | $ | 2,196,070 | $ | 2,418,177 | |||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from March 31 to February 28.
(b) Institutional Shares activity is for the period June 29, 2020 (commencement of operations) to March 31, 2021.
(continues on next page)
See notes to financial statements.
30
USAA Mutual Funds Trust | Statements of Changes in Net Assets | ||||||
(Amounts in Thousands) (continued)
USAA Tax Exempt Long-Term Fund | |||||||||||||||
| 11 Months Ended February 28, 2023(a) | Year Ended March 31, 2022 | Year Ended March 31, 2021 | |||||||||||||
Capital Transactions: | |||||||||||||||
Fund Shares | |||||||||||||||
Proceeds from shares issued | $ | 79,268 | $ | 139,630 | $ | 184,740 | |||||||||
Distributions reinvested | 50,833 | 55,245 | 62,179 | ||||||||||||
Cost of shares redeemed | (249,726 | ) | (337,291 | ) | (332,780 | ) | |||||||||
Total Fund Shares | $ | (119,625 | ) | $ | (142,416 | ) | $ | (85,861 | ) | ||||||
Institutional Shares | |||||||||||||||
Proceeds from shares issued | $ | 42,667 | $ | 65,362 | $ | 6,625 | (b) | ||||||||
Distributions reinvested | 1,779 | 242 | 75 | (b) | |||||||||||
Cost of shares redeemed | (50,846 | ) | (4,889 | ) | (1,210 | )(b) | |||||||||
Total Institutional Shares | $ | (6,400 | ) | $ | 60,715 | $ | 5,490 | ||||||||
Class A | |||||||||||||||
Proceeds from shares issued | $ | 1,634 | $ | 836 | $ | 8,389 | |||||||||
Distributions reinvested | 124 | 83 | 79 | ||||||||||||
Cost of shares redeemed | (439 | ) | (5,453 | ) | (7,965 | ) | |||||||||
Total Class A | $ | 1,319 | $ | (4,534 | ) | $ | 503 | ||||||||
| Change in net assets resulting from capital transactions | $ | (124,706 | ) | $ | (86,235 | ) | $ | (79,868 | ) | ||||||
Share Transactions: | |||||||||||||||
Fund Shares | |||||||||||||||
Issued | 6,561 | 10,107 | 13,640 | ||||||||||||
Reinvested | 4,246 | 4,019 | 4,599 | ||||||||||||
Redeemed | (20,706 | ) | (24,748 | ) | (24,772 | ) | |||||||||
Total Fund Shares | (9,899 | ) | (10,622 | ) | (6,533 | ) | |||||||||
Institutional Shares | |||||||||||||||
Issued | 3,529 | 4,939 | 487 | (b) | |||||||||||
Reinvested | 149 | 18 | 5 | (b) | |||||||||||
Redeemed | (4,218 | ) | (366 | ) | (88 | )(b) | |||||||||
Total Institutional Shares | (540 | ) | 4,591 | 404 | |||||||||||
Class A | |||||||||||||||
Issued | 133 | 63 | 625 | ||||||||||||
Reinvested | 10 | 6 | 6 | ||||||||||||
Redeemed | (36 | ) | (393 | ) | (595 | ) | |||||||||
Total Class A | 107 | (324 | ) | 36 | |||||||||||
Change in Shares | (10,332 | ) | (6,355 | ) | (6,093 | ) | |||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from March 31 to February 28.
(b) Institutional Shares activity is for the period June 29, 2020 (commencement of operations) to March 31, 2021.
See notes to financial statements.
31
USAA Mutual Funds Trust | Financial Highlights | ||||||
For a Share Outstanding Throughout Each Period
USAA Tax Exempt Long-Term Fund | |||||||||||||||||||||||||||
Fund Shares | |||||||||||||||||||||||||||
| 11 Months Ended February 28, 2023(a) | Year Ended March 31, 2022 | Year Ended March 31, 2021 | Year Ended March 31, 2020 | Year Ended March 31, 2019 | Year Ended March 31, 2018 | ||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 12.92 | $ | 13.71 | $ | 13.21 | $ | 13.28 | $ | 13.21 | $ | 13.25 | |||||||||||||||
Investment Activities: | |||||||||||||||||||||||||||
Net investment income (loss) | 0.39 | (b) | 0.38 | (b) | 0.42 | (b) | 0.45 | (b) | 0.49 | 0.51 | |||||||||||||||||
| Net realized and unrealized gains (losses) | (1.14 | ) | (0.79 | ) | 0.50 | (0.07 | ) | 0.07 | (0.03 | ) | |||||||||||||||||
| Total from Investment Activities | (0.75 | ) | (0.41 | ) | 0.92 | 0.38 | 0.56 | 0.48 | |||||||||||||||||||
Distributions to Shareholders from: | |||||||||||||||||||||||||||
Net investment income | (0.38 | ) | (0.38 | ) | (0.42 | ) | (0.45 | ) | (0.49 | ) | (0.52 | ) | |||||||||||||||
Total Distributions | (0.38 | ) | (0.38 | ) | (0.42 | ) | (0.45 | ) | (0.49 | ) | (0.52 | ) | |||||||||||||||
Net Asset Value, End of Period | $ | 11.79 | $ | 12.92 | $ | 13.71 | $ | 13.21 | $ | 13.28 | $ | 13.21 | |||||||||||||||
Total Return (c) (d) | (5.79 | )% | (3.15 | )% | 7.00 | % | 2.74 | % | 4.39 | % | 3.62 | % | |||||||||||||||
Ratios to Average Net Assets: | |||||||||||||||||||||||||||
Net Expenses (e) (f) (g) (h) | 0.46 | % | 0.50 | % | 0.47 | % | 0.48 | % | 0.48 | % | 0.47 | % | |||||||||||||||
Net Investment Income (Loss) (e) | 3.49 | % | 2.73 | % | 3.13 | % | 3.36 | % | 3.73 | % | 3.83 | % | |||||||||||||||
Gross Expenses (e) (f) | 0.47 | % | 0.50 | % | 0.48 | % | 0.48 | % | 0.48 | % | 0.47 | % | |||||||||||||||
Supplemental Data: | |||||||||||||||||||||||||||
Net Assets at end of period (000's) | $ | 1,825,576 | $ | 2,127,775 | $ | 2,404,178 | $ | 2,403,342 | $ | 2,362,819 | $ | 2,358,955 | |||||||||||||||
Portfolio Turnover (c) (i) | 10 | % | 10 | % | 21 | % | 24 | % | 13 | % | 14 | % | |||||||||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from March 31 to February 28.
(b) Per share net investment income (loss) has been calculated using the average daily shares method.
(c) Not annualized for periods less than one year.
(d) 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.
(e) Annualized for periods less than one year.
(f) Does not include acquired fund fees and expenses, if any.
(g) 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 July 31, 2023, instead of coinciding with the Fund's fiscal year end.
(h) 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.
(i) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares.
(continues on next page)
See notes to financial statements.
32
USAA Mutual Funds Trust | Financial Highlights — continued | ||||||
For a Share Outstanding Throughout Each Period
USAA Tax Exempt Long-Term Fund | |||||||||||||||
Institutional Shares | |||||||||||||||
| 11 Months Ended February 28, 2023(a) | Year Ended March 31, 2022 | June 29, 2020(b) through March 31, 2021 | |||||||||||||
Net Asset Value, Beginning of Period | $ | 12.91 | $ | 13.71 | $ | 13.40 | |||||||||
Investment Activities: | |||||||||||||||
Net investment income (loss) (c) | 0.39 | 0.39 | 0.31 | ||||||||||||
Net realized and unrealized gains (losses) | (1.12 | ) | (0.81 | ) | 0.32 | ||||||||||
Total from Investment Activities | (0.73 | ) | (0.42 | ) | 0.63 | ||||||||||
Distributions to Shareholders from: | |||||||||||||||
Net investment income | (0.39 | ) | (0.38 | ) | (0.32 | ) | |||||||||
Total Distributions | (0.39 | ) | (0.38 | ) | (0.32 | ) | |||||||||
Net Asset Value, End of Period | $ | 11.79 | $ | 12.91 | $ | 13.71 | |||||||||
Total Return (d) (e) | (5.69 | )% | (3.16 | )% | 4.71 | % | |||||||||
Ratios to Average Net Assets: | |||||||||||||||
Net Expenses (f) (g) (h) (i) | 0.44 | % | 0.44 | % | 0.44 | % | |||||||||
Net Investment Income (Loss) (f) | 3.52 | % | 2.92 | % | 3.03 | % | |||||||||
Gross Expenses (f) (g) | 0.59 | % | 0.65 | % | 0.98 | % | |||||||||
Supplemental Data: | |||||||||||||||
Net Assets at end of period (000's) | $ | 52,513 | $ | 64,506 | $ | 5,533 | |||||||||
Portfolio Turnover (d) (j) | 10 | % | 10 | % | 21 | % | |||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from March 31 to February 28.
(b) Commencement of operations.
(c) Per share net investment income (loss) has been calculated using the average daily shares method.
(d) Not annualized for periods less than one year.
(e) Assumes reinvestment of all net investment income and realized capital gain distributions, if any, during the period. Includes adjustments in accordance with U.S. Generally Accepted Accounting Principles and could differ from the Lipper reported return.
(f) Annualized for periods less than one year.
(g) Does not include acquired fund fees and expenses, if any.
(h) 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 June 29, 2020, and in effect through July 31, 2023, instead of coinciding with the Fund's fiscal year end.
(i) 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.
(j) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares.
(continues on next page)
See notes to financial statements.
33
USAA Mutual Funds Trust | Financial Highlights — continued | ||||||
For a Share Outstanding Throughout Each Period
USAA Tax Exempt Long-Term Fund | |||||||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||
| 11 Months Ended February 28, 2023(a) | Year Ended March 31, 2022 | Year Ended March 31, 2021 | Year Ended March 31, 2020 | Year Ended March 31, 2019 | Year Ended March 31, 2018 | ||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 12.90 | $ | 13.69 | $ | 13.19 | $ | 13.26 | $ | 13.19 | $ | 13.23 | |||||||||||||||
Investment Activities: | |||||||||||||||||||||||||||
Net investment income (loss) | 0.36 | (b) | 0.35 | (b) | 0.40 | (b) | 0.43 | (b) | 0.46 | 0.48 | |||||||||||||||||
| Net realized and unrealized gains (losses) | (1.13 | ) | (0.79 | ) | 0.50 | (0.08 | ) | 0.08 | (0.04 | ) | |||||||||||||||||
| Total from Investment Activities | (0.77 | ) | (0.44 | ) | 0.90 | 0.35 | 0.54 | 0.44 | |||||||||||||||||||
Distributions to Shareholders from: | |||||||||||||||||||||||||||
Net investment income | (0.36 | ) | (0.35 | ) | (0.40 | ) | (0.42 | ) | (0.47 | ) | (0.48 | ) | |||||||||||||||
Total Distributions | (0.36 | ) | (0.35 | ) | (0.40 | ) | (0.42 | ) | (0.47 | ) | (0.48 | ) | |||||||||||||||
Net Asset Value, End of Period | $ | 11.77 | $ | 12.90 | $ | 13.69 | $ | 13.19 | $ | 13.26 | $ | 13.19 | |||||||||||||||
| Total Return (excludes sales charges) (c) (d) | (5.97 | )% | (3.33 | )% | 6.80 | % | 2.53 | % | 4.16 | % | 3.36 | % | |||||||||||||||
Ratios to Average Net Assets: | |||||||||||||||||||||||||||
Net Expenses (e) (f) (g) (h) | 0.66 | % | 0.69 | % | 0.67 | % | 0.70 | % | 0.70 | % | 0.74 | %(j) | |||||||||||||||
Net Investment Income (Loss) (e) | 3.32 | % | 2.56 | % | 2.94 | % | 3.15 | % | 3.51 | % | 3.57 | % | |||||||||||||||
Gross Expenses (e) (f) | 1.18 | % | 1.11 | % | 1.08 | % | 1.01 | % | 0.94 | % | 0.92 | % | |||||||||||||||
Supplemental Data: | |||||||||||||||||||||||||||
Net Assets at end of period (000's) | $ | 4,718 | $ | 3,789 | $ | 8,466 | $ | 7,680 | $ | 7,745 | $ | 8,577 | |||||||||||||||
Portfolio Turnover (c) (i) | 10 | % | 10 | % | 21 | % | 24 | % | 13 | % | 14 | % | |||||||||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from March 31 to February 28.
(b) Per share net investment income (loss) has been calculated using the average daily shares method.
(c) Not annualized for periods less than one year.
(d) 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.
(e) Annualized for periods less than one year.
(f) Does not include acquired fund fees and expenses, if any.
(g) 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 July 31, 2023, instead of coinciding with the Fund's fiscal year end.
(h) 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.
(i) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares.
(j) Prior to August 1, 2017, USAA Asset Management Company (previous Investment Adviser) had voluntarily agreed to limit the annual expenses of Class A to 0.80% of Class A average daily net assets.
See notes to financial statements.
34
USAA Mutual Funds Trust | Notes to Financial Statements February 28, 2023 | ||||||
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 Tax Exempt Long-Term 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.
On June 29, 2022, the Board of Trustees ("the Board") approved the fiscal year-end change for the Fund from March 31 to February 28. The first full cycle of the new fiscal year-end reporting will begin March 1, 2023. As a result of the change, the Fund has a February 28, 2023 fiscal 11-month transition period, the results of which are reported in this Annual Report for the period ended February 28, 2023.
Victory Capital Management ("VCM" or 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 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 (unadjusted) in active markets for identical securities
• Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, or credit spreads, applicable to those securities, etc.)
• Level 3 — significant unobservable inputs (including the Adviser's assumptions in determining the fair value of investments)
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USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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, appointed as the valuation designee by the Board, has established the Pricing and Liquidity Committee (the "Committee"), and subject to Board oversight, the Committee administers and oversees the Fund's valuation policies and procedures, which are approved by the Board.
Debt securities are valued each business day by a pricing service approved by the valuation designee and subject to the oversight of the Board. The 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.
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 net asset value ("NAV") to be more reliable than it otherwise would be.
A summary of the valuations as of February 28, 2023, 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 | ||||||||||||||||
Corporate Bonds | $ | — | $ | — | $ | 1,706 | $ | 1,706 | |||||||||||
Municipal Bonds | — | 1,860,165 | — | 1,860,165 | |||||||||||||||
Total | $ | — | $ | 1,860,165 | $ | 1,706 | $ | 1,861,871 | |||||||||||
As of February 28, 2023, there were no transfers into/out of Level 3.
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.
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
36
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
of coupon interest accrued and recorded daily using the effective interest method which adjusts, where applicable, the amortization of premiums or accretion of discounts. Interest income is recorded daily on the accrual basis. 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 Statements of Operations.
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 had a tax year end of March 31, and effective February 28, 2023, the Fund changed its tax year end to February 28.
For the 11 months ended February 28, 2023, 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 under specified conditions outlined in the valuation policies and procedures adopted by the Board. In addition, as defined under the valuation policies and procedures, each transaction must be effected at the independent current market price. For the 11 months ended February 28, 2023, 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) | |||||||||
| $ | 52,800 | $ | 31,000 | $ | — | ||||||
For the year ended March 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) | |||||||||
| $ | 89,900 | $ | 103,725 | $ | — | ||||||
37
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
Fees Paid Indirectly:
Expense offsets to custody fees that arise from credits on cash balances maintained on deposit are reflected on the Statements 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 11 months ended February 28, 2023, were as follows for the Fund (amounts in thousands):
Excluding | |||||||
Purchases | Sales | ||||||
$ | 190,576 |
| $ | 285,512 | |||
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 Securities and Exchange Commission ("SEC").
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 0.28% of the Fund's average daily net assets. Amounts incurred and paid to VCM for the 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements of Operations as Investment advisory fees.
The performance adjustment for each share class is accrued daily and calculated monthly by comparing the respective class' performance to that of the Lipper General & Insured Municipal Debt Funds Index. The Lipper General & Insured Municipal Debt Funds Index tracks the total return performance of the largest funds within the Lipper General & Insured Municipal Debt Funds category.
The performance period for each share class consists of the current month plus the previous 35 months. The following table is utilized to determine the extent of the performance adjustment:
| Over/Under Performance Relative to Index (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 General & Insured Municipal Debt Funds Index over that period, even if the class has overall negative returns during the performance period.
For the period April 1, 2022, to February 28, 2023, performance adjustments were $(319), $(2), and $(2) for Fund Shares, Institutional Shares, and Class A, in thousands, respectively. Performance
38
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
adjustments were (0.02)%, less than (0.01)%, and (0.04)% for Fund Shares, Institutional Shares, and Class A, respectively. For the period April 1, 2021, to March 31, 2022, performance adjustments were $484, less than $1, and less than $(1) for Fund Shares, Institutional Shares, and Class A, in thousands, respectively. Performance adjustments were 0.02%, less than 0.01%, and (0.01)% 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 11 months ended February 28, 2023, and the year ended March 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, Institutional Shares, and Class A, respectively. Amounts incurred for the 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements 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 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements 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 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements 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 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 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements of Operations as Transfer agent fees.
39
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements of Operations as 12b-1 fees.
In addition, the Distributor is entitled to receive commissions in connection with sales of Class A. For the 11 months ended February 28, 2023, the Distributor received less than $1 thousand from commissions earned in connection with sales of Class A. For the year ended March 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 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements 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 July 31, 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 February 28, 2023, the expense limits (excluding voluntary waivers) were 0.48%, 0.44%, and 0.70% for Fund Shares, Institutional Shares, and Class A, respectively.
Under the terms of the expense limitation agreement, 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.
As of February 28, 2023, 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 February 28, 2023.
| Expires 2023* | Expires 2024 | Expires 2025 | Expires 2026 | Total | |||||||||||||||
| $ | 1 | $ | 56 | $ | 35 | $ | 201 | $ | 293 | ||||||||||
* Amount expired on March 31, 2023.
As of March 31, 2022, the following amounts were available to be repaid to the Adviser (amounts in thousands).
| Expires 2023 | Expires 2024 | Expires 2025 | Total | ||||||||||||
| $ | 14 | $ | 62 | $ | 35 | $ | 111 | ||||||||
40
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 11 months ended February 28, 2023, and the year ended March 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.
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 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 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.
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.
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USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 27, 2022, with a termination date of June 26, 2023. 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 11 months ended February 28, 2023, 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 paid a pro-rata portion of the commitment fees plus any interest on amounts borrowed. For the year ended March 31, 2022, and the period from April 1, 2022, through June 27, 2022, interest was based on the one-month London Interbank Offered Rate ("LIBOR") plus one percent. Effective with the renewal, for the period June 28, 2022, through February 28, 2023, interest was based on the one-month Secured Overnight Financing Rate ("SOFR") plus 1.10 percent. The Fund did not experience a material financial impact transitioning from LIBOR to SOFR. Interest charged to the 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 11 months ended February 28, 2023, and the year ended March 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 Statements of Operations under Interfund lending fees. As a Lender, interest earned by the Fund, if any, during the period, is reflected on the Statements of Operations under Interfund lending.
The Fund did not utilize or participate in the Facility during the 11 months ended February 28, 2023.
The average borrowing or lending for the days outstanding and average interest rate for the Fund during the year ended March 31, 2022, were as follows (amounts in thousands):
Borrower | Amount | Average | Days | Maximum | Borrowing | ||||||||||||||||||
Borrower | $ | — | $ | 3,998 | 1 | 0.57 | % | $ | 3,998 | ||||||||||||||
* Based on the number of days borrowings were outstanding for the year ended March 31, 2022.
7. 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.
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USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 February 28, 2023, on the Statement 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):
11 Months Ended February 28, 2023 | |||||||
| Distributions Paid From | |||||||
| Tax-Exempt Income | Total Distributions Paid | ||||||
$ | 62,644 | $ | 62,644 | ||||
Year Ended March 31, 2022 | Year Ended March 31, 2021 | ||||||||||||||
| Distributions Paid From | Distributions Paid From | ||||||||||||||
Tax-Exempt Income | Total Distributions Paid | Tax-Exempt Income | Total Distributions Paid | ||||||||||||
$ | 65,623 | $ | 65,623 | $ | 75,132 | $ | 75,132 | ||||||||
As of February 28, 2023, the components of accumulated earnings (loss) on a tax basis were as follows (amounts in thousands):
| Undistributed Tax-Exempt Income | Accumulated Earnings | Distributions Payable | Accumulated Capital and Other Losses | Unrealized Appreciation (Depreciation)* | Total Accumulated Earnings (Loss) | ||||||||||||||||||
| $ | 10,280 | $ | 10,280 | $ | (5,359 | ) | $ | (115,496 | ) | $ | (142,960 | ) | $ | (253,535 | ) | ||||||||
* The difference between the book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to defaulted bond adjustments.
As of February 28, 2023, 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 | |||||||||
| $ | 18,488 | $ | 97,008 | $ | 115,496 | ||||||
43
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
As of February 28, 2023, 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) | ||||||||||||
| $ | 2,004,831 | $ | 27,418 | $ | (170,378 | ) | $ | (142,960 | ) | ||||||
8. Subsequent Events:
The Board, upon recommendation of the Adviser, has approved a change in the name of the Trust and each individual fund within the Trust. On February 23, 2023, an initial filing was made with the SEC to commence the process to effectuate the following changes.
Effective at the start of business on April 24, 2023 (the "Effective Date"), the name of the Trust changed from USAA Mutual Funds Trust to Victory Portfolios III, and all references to USAA Mutual Funds Trust in the summary prospectus, statutory prospectus, and statement of additional information ("SAI") will be replaced by the new name.
Also on the Effective Date, references to the current name of the Fund in the summary prospectus, statutory prospectus, and SAI will be replaced with the new name as follows:
Current Name | New Name | ||||||
USAA Tax Exempt Long-Term Fund | Victory Tax Exempt Long-Term Fund | ||||||
In addition, on the Effective Date, USAA Investments, a Victory Capital Management Inc. investment franchise, that currently manages the USAA Fixed Income Funds, will change its name to Victory Income Investors, and all references to USAA Investments in the summary prospectus, statutory prospectus, and SAI, will be replaced.
Please note that there will be no changes in the management of the Fund or to the Fund's ticker symbols.
44
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of USAA Tax Exempt Long-Term Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of USAA Tax Exempt Long-Term Fund (the "Fund") (one of the funds constituting USAA Mutual Funds Trust (the "Trust")), including the schedule of portfolio investments as of February 28, 2023, and the related statements of operations for the period from April 1, 2022 through February 28, 2023 and the year ended March 31, 2022, the statements of changes in net assets for the period from April 1, 2022 through February 28, 2023 and each of the two years in the period ended March 31, 2022, the financial highlights for the period from April 1, 2022 through February 28, 2023 and each of the five years in the period ended March 31, 2022, 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 February 28, 2023, the results of its operations for the period from April 1, 2022 through February 28, 2023 and the year ended March 31, 2022, the statements of changes in net assets for the period from April 1, 2022 through February 28, 2023 and each of the two years in the period ended March 31, 2022, and its financial highlights for the period from April 1, 2022 through February 28, 2023 and each of the five years in the period ended March 31, 2022, 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 February 28, 2023, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. 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
April 28, 2023
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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 date 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 (06/17-06/19); 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 (03/15-03/21). | 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) | ||||||||||||||||||
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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 date 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. (since 2022); 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. (07/01/19-present); Executive Director, Investment and Financial Administration, USAA (2012-06/30/19); 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. (07/01/19-present); Accounting/ Financial Director, USAA (12/13-06/30/19). | ||||||||||||
| 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). | ||||||||||||
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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). | ||||||||||||
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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 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 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 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 September 1, 2022, through February 28, 2023.
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 9/1/22 | Actual Ending Account Value 2/28/23 | Hypothetical Ending Account Value 2/28/23 | Actual Expenses Paid During Period 9/1/22- 2/28/23* | Hypothetical Expenses Paid During Period 9/1/22- 2/28/23* | Annualized Expense Ratio During Period 9/1/22- 2/28/23 | ||||||||||||||||||||||
Fund Shares | $ | 1,000.00 | $ | 991.50 | $ | 1,022.61 | $ | 2.17 | $ | 2.21 | 0.44 | % | |||||||||||||||
Institutional Shares | 1,000.00 | 992.30 | 1,022.66 | 2.12 | 2.16 | 0.43 | % | ||||||||||||||||||||
Class A | 1,000.00 | 990.50 | 1,021.62 | 3.16 | 3.21 | 0.64 | % | ||||||||||||||||||||
* Expenses are equal to the average account value multiplied by the Fund's annualized expense ratio multiplied by 181/365 (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 11 months ended February 28, 2023, 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 2024.
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 11 months ended February 28, 2023 (amounts in thousands):
| Tax Exempt Distributions | ||||||
$ | 62,644 | ||||||
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Considerations of the Board in Continuing the Investment Advisory Agreement
USAA Tax Exempt Long-Term Fund (the "Fund")
At a meeting of the Board of Trustees (the "Board") of USAA Mutual Funds Trust (the "Trust") held on December 8-9, 2022, 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 8-9, 2022, 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 21, 2022.
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 program, (iv) derivatives risk management program, and (v) 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 adjustment, 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. 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 for the one-year period ended June 30, 2022, and was above the average of its performance universe for the three-, five- and ten-year periods ended June 30, 2022, and was below its Lipper index for the one-, three- and five-year periods ended June 30, 2022, and was above its Lipper index for the ten-year period ended June 30, 2022. The Board took into account management's discussion of the Fund's performance, including the reasons for the Fund's recent underperformance.
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 took into account management's discussion of the Fund's current advisory fee structure. 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 10, 2023, 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- RN (prior to August 2022, Form N-LIQUID) and recommended no material changes to the LRMP.
57
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 | ||||||
vcm.com | (800) 235-8396 | ||||||
40858-0423
February 28, 2023
Annual Report
USAA Tax Exempt Short-Term Fund
(Also Known as Victory Tax Exempt Short-Term Fund*)
* Effective at the start of business on April 24, 2023, the Fund name will change to Victory Tax Exempt Short-Term Fund. Please see Notes to the Financial Statements for subsequent event information.
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 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.
vcm.com
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• 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, 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 | ||||||
Statements of Operations | 23 | ||||||
Statements of Changes in Net Assets | 24 | ||||||
Financial Highlights | 26 | ||||||
Notes to Financial Statements | 29 | ||||||
| Report of Independent Registered Public Accounting Firm | 39 | ||||||
Supplemental Information (Unaudited) | 40 | ||||||
Trustee and Officer Information | 40 | ||||||
Proxy Voting and Portfolio Holdings Information | 46 | ||||||
Expense Examples | 46 | ||||||
Additional Federal Income Tax Information | 47 | ||||||
Advisory Contract Renewal | 48 | ||||||
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,
If you are reading this letter but double-checking your calendar, be assured there's no mistake. The annual reporting period for your USAA Mutual Fund has shifted from a fiscal year ended March 31st to a fiscal year ended February 28th/the last day of February. This change has no material impact on any of your investments. This change aims to help us improve efficiencies and reduce operational costs. Therefore, this letter covers an abbreviated "annual" period from April 1, 2022, through February 28, 2023. Future annual reports will cover the 12-month period ended February 28th/the last day of February going forward.
Our most recent annual reporting period has been a challenging period for investors. Consider some of the headwinds: heightened geopolitical tensions, a terrible war in Eastern Europe, elevated energy and food costs, high inflation, and rising interest rates. All this has dampened global growth and created a difficult backdrop for both bond and stock investors.
The inflation data was particularly troublesome and surprised many with some of the highest readings since the 1970s. In response, the U.S. Federal Reserve (the "Fed") shifted to a more restrictive monetary policy than most anticipated. The Fed has been boosting the Fed funds interest rate repeatedly and aggressively, including a series of 75 basis point raises. (A basis point is 1/100th of a percentage point.) And if that wasn't enough, zero-COVID-19 policies in China (which fortunately have been recently lifted) further exacerbated supply chain issues and raised questions about global trade. As one might expect, all of these obstacles ratcheted up volatility across financial markets. Broad market stock indices pulled back substantially around the world.
The S&P 500® Index, the bell-weather proxy for our domestic stock market, delivered a negative total return of almost 11% during our abbreviated annual reporting period. But perhaps what was even more difficult was the performance of fixed income markets, which normally are considered a safe haven in times of equity turmoil. But not during this past year when interest rates were rising sharply. In fact, the Bloomberg US Aggregate Bond Index—a proxy for a diversified fixed income portfolio and one that many investors and institutions follow closely—delivered a negative total return of approximately 7.0%. That's not exactly the offset to equity performance that many investors have come to expect from bonds.
It's been difficult, and we fully acknowledge that the steady drumbeat of bad news and bouts of stomach-churning volatility can take a toll on investors' psyche. Nobody likes opening their account statements during declining markets, and even when markets often snap back sharply (as happened this past July, October, and earlier this calendar year), investors often wonder if they have missed an opportunity.
Through all the turmoil and challenges in our most recent annual reporting period, we are reminded of two enduring realities: 1) financial markets are dynamic and apt to change abruptly; 2) it's vital to remain calm and rational whenever faced with those inevitable bouts of turmoil.
2
Fortunately, we think that investors can take comfort knowing that all our independent investment franchises have experience managing portfolios through a wide variety of market environments. Our investment professionals remain calm during turbulent financial markets, and we think it's imperative that investors do the same.
We still believe that a long-term plan, a well-diversified portfolio across asset classes and investment types, and a clear understanding of individual risk tolerances are the key ingredients for staying the course and progressing on investment goals. Moreover, all our investment professionals continually monitor the environment and work hard to position portfolios opportunistically no matter what the markets bring. Remember, turmoil can also create opportunity.
On the following pages, you will find information relating to your USAA Mutual Fund, brought to you by Victory Capital. If you have any questions, we encourage you to contact our Member Service Representatives. Call 800-235-8396, or visit our website at vcm.com.
From all of us here at Victory Capital, thank you for your ongoing confidence and for letting us help you work toward your investment goals.
Christopher K. Dyer, CFA
President,
USAA Mutual Funds Trust
3
USAA Tax Exempt Short-Term Fund
Manager's 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 overall during the 11-month reporting period ended February 28, 2023. [The Fund's fiscal year-end changed this year to February 28 from March 31, resulting in a shorter reporting period for fiscal year ended 2023.] Negative returns for the reporting period were attributable to a combination of factors, including the U.S. Federal Reserve's (the "Fed") prolonged fight to reduce inflation through interest rate increases and significant investor outflows from municipal bond funds. The reporting period was also highlighted by material volatility in the municipal market, as market participants often strongly reacted to Fed actions and comments, as well as economic data release, in an attempt to determine the future path of interest rates. The overall returns on the Bloomberg Municipal Bond Index for the reporting period was -1.92%, with significant ups and downs throughout the period.
While there might be some volatility in the municipal market in the short term, we remain confident that the right approach is to focus on what matters in the long term. We believe municipal bonds continue to represent an attractive investment opportunity on a relative basis. At the end of February 2023, the yield on the Bloomberg Municipal Bond Index was 3.62%, which is a taxable-equivalent yield of 6.12% (in the highest tax bracket). After factoring in the benefit of the tax exemption, municipal bonds look attractive vs. the (taxable) Bloomberg U.S. Aggregate Bond Index, which yielded 4.81% at the end of February 2023.
• How did the USAA Tax Exempt Short-Term Fund (the "Fund") perform during the reporting period?
The Fund has three share classes: Fund Shares, Institutional Shares, and Class A. For the 11-month reporting period ended February 28, 2023, the Fund Shares, Institutional Shares, and Class A had a total return (at net asset value) of -0.51%, -0.49%, and -0.76%, respectively, versus an average return of 0.22% amongst the funds in the Lipper Short Municipal Debt Funds category. This compares to returns of 0.33% for the Lipper Short Municipal Debt Funds Index, and 0.05% for the Bloomberg Municipal Bond Short (1-5 Years) Index.
• What strategies did you employ during the reporting period?
In keeping with our investment approach, we continued to focus on income generation. The Fund's long-term income distribution, not its price appreciation, accounts for most of its total return.
During the reporting period, we continued to invest a portion of the portfolio in variable rate demand notes ("VRDNs"). The VRDNs owned by the Fund have interest rates that adjust daily/weekly to the market. VRDNs also possess a "demand" feature that allows us to sell the bond at par value with notice of seven days or less, which helps us reduce share price volatility and gives us the flexibility to act when attractive opportunities arise.
4
USAA Tax Exempt Short-Term Fund
Manager's Commentary (continued)
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 shorter-term, primarily investment-grade municipal bonds. To limit exposure to an unexpected event, the Fund is diversified by sector, issuer, and geography.
Thank you for allowing us to assist you with your investment needs.
5
USAA Tax Exempt Short-Term Fund
Investment Overview
(Unaudited)
Average Annual Total Return
Year Ended February 28, 2023
Fund Shares | Institutional Shares | Class A | |||||||||||||||||||||||||
INCEPTION DATE | 3/19/82 | 6/29/20 | 8/1/10 | ||||||||||||||||||||||||
Net Asset | Net Asset | Net Asset | Maximum | Bloomberg | Lipper | ||||||||||||||||||||||
One Year | –2.11 | % | –2.08 | % | –2.28 | % | –4.48 | % | –1.51 | % | –0.57 | % | |||||||||||||||
Five Year | 0.81 | % | NA | 0.58 | % | 0.13 | % | 1.00 | % | 0.80 | % | ||||||||||||||||
Ten Year | 0.80 | % | NA | 0.56 | % | 0.33 | % | 1.00 | % | 0.71 | % | ||||||||||||||||
Since Inception | NA | –0.22 | % | 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 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 Tax Exempt Short-Term Fund — Growth of $10,000
1The unmanaged Bloomberg Municipal Bond Short (1-5 Years) Index is a market value-weighted index which covers the short components of the Bloomberg Barclays 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.
2The unmanaged Lipper Short Municipal Debt Funds Index measures the Fund's performance to that of the Lipper Short Municipal Debt Funds 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 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 Tax Exempt Short-Term Fund | February 28, 2023 | ||||||
(Unaudited)
Investment Objective and Portfolio Holdings:
The Fund seeks to provide interest income that is exempt from federal income tax.
Top 10 Industries:
February 28, 2023
(% of Net Assets)
Medical | 20.5 | % | |||||
General | 20.4 | % | |||||
General Obligation | 13.0 | % | |||||
Development | 8.9 | % | |||||
Nursing Homes | 5.5 | % | |||||
Power | 5.2 | % | |||||
Education | 4.7 | % | |||||
Transportation | 4.5 | % | |||||
Higher Education | 4.2 | % | |||||
Water | 3.9 | % | |||||
* 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 Tax Exempt Short-Term Fund | Schedule of Portfolio Investments February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Municipal Bonds (99.4%) | |||||||||||
Alabama (4.3%): | |||||||||||
Birmingham Airport Authority Revenue, 5.00%, 7/1/30 | $ | 1,200 | $ | 1,345 | |||||||
| Black Belt Energy Gas District Revenue 4.45% (SOFR+140bps), 7/1/52, (Put Date 6/1/27) (a) (b) | 3,300 | 3,190 | |||||||||
4.00%, 10/1/52, (Put Date 12/1/26) (b) | 3,000 | 2,944 | |||||||||
Series B-1, 4.02% (LIBOR01M+90bps), 12/1/48, (Put Date 12/1/23) (a) (b) | 10,000 | 10,039 | |||||||||
Series C-1, 5.25%, 6/1/25 | 600 | 609 | |||||||||
Chatom Industrial Development Board Revenue, 5.00%, 8/1/30 | 1,275 | 1,415 | |||||||||
| Columbia Industrial Development Board Revenue (NBGA — Southern Co.), Series A, 2.25%, 12/1/37, Continuously Callable @100 (c) | 3,900 | 3,900 | |||||||||
| Prattville Industrial Development Board Revenue 2.00%, 11/1/33, (Put Date 10/1/24) (b) | 450 | 433 | |||||||||
2.00%, 11/1/33, (Put Date 10/1/24) (b) | 425 | 409 | |||||||||
| Selma Industrial Development Board Revenue 2.00%, 11/1/33, (Put Date 10/1/24) (b) | 3,650 | 3,510 | |||||||||
1.37%, 5/1/34, (Put Date 6/16/25) (b) | 5,875 | 5,496 | |||||||||
33,290 | |||||||||||
Arizona (2.8%): | |||||||||||
| Arizona IDA Revenue Series A-3, 3.00%, 12/15/31, Continuously Callable @100 (d) | 525 | 457 | |||||||||
Series B, 4.00%, 7/1/31 | 315 | 319 | |||||||||
| Maricopa County IDA Revenue 4.00%, 7/1/29 (d) | 750 | 721 | |||||||||
3.00%, 7/1/31 (d) | 500 | 443 | |||||||||
Series C, 3.37% (MUNIPSA+57bps), 1/1/35, (Put Date 10/18/24) (a) (b) | 2,205 | 2,198 | |||||||||
Series C, 3.60% (MUNIPSA+80bps), 9/1/48, (Put Date 9/1/24) (a) (b) | 7,735 | 7,741 | |||||||||
| Tempe IDA Revenue Series A, 4.00%, 12/1/26 | 240 | 229 | |||||||||
Series A, 4.00%, 12/1/27 | 355 | 335 | |||||||||
Series A, 4.00%, 12/1/28 | 365 | 339 | |||||||||
Series A, 4.00%, 12/1/29 | 380 | 347 | |||||||||
Series A, 4.00%, 12/1/30, Continuously Callable @102 | 495 | 440 | |||||||||
Series A, 4.00%, 12/1/31, Continuously Callable @102 | 465 | 414 | |||||||||
Series C-1, 1.50%, 12/1/27, Continuously Callable @100 | 1,965 | 1,648 | |||||||||
| The County of Pima IDA Revenue Series A, 5.75%, 11/15/23 (d) | 180 | 180 | |||||||||
Series A, 5.75%, 11/15/24 (d) | 420 | 420 | |||||||||
Series A, 5.75%, 11/15/25 (d) | 660 | 659 | |||||||||
The Yavapai County IDA Revenue, 3.65%, 4/1/29, (Put Date 6/1/23) (b) | 5,000 | 5,000 | |||||||||
21,890 | |||||||||||
Arkansas (0.9%): | |||||||||||
| Arkansas Development Finance Authority Revenue 5.00%, 9/1/30 | 1,180 | 1,270 | |||||||||
5.00%, 9/1/31, Continuously Callable @100 | 1,200 | 1,290 | |||||||||
5.00%, 9/1/44, (Put Date 9/1/27) (b) | 4,000 | 4,190 | |||||||||
6,750 | |||||||||||
See notes to financial statements.
8
| USAA Mutual Funds Trust USAA Tax Exempt Short-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
California (1.4%): | |||||||||||
Anaheim Public Financing Authority Revenue, Series A, 5.00%, 5/1/24 | $ | 250 | $ | 255 | |||||||
| California County Tobacco Securitization Agency Revenue, Series A, 5.00%, 6/1/30 | 200 | 219 | |||||||||
| California Infrastructure & Economic Development Bank Revenue, 3.15% (MUNIPSA+35bps), 8/1/47, (Put Date 8/1/24) (a) (b) | 2,000 | 1,983 | |||||||||
| California Municipal Finance Authority Revenue 2.75%, 11/15/27, Continuously Callable @100 | 785 | 703 | |||||||||
Series B-2, 2.13%, 11/15/26, Continuously Callable @100 | 820 | 749 | |||||||||
Newman Crows Landing Unified School District, GO, 8/1/25 (e) | 1,000 | 930 | |||||||||
| Sierra View Local Health Care District Revenue 5.00%, 7/1/27 | 315 | 335 | |||||||||
5.00%, 7/1/28 | 330 | 357 | |||||||||
5.00%, 7/1/29 | 315 | 345 | |||||||||
5.00%, 7/1/30 | 310 | 343 | |||||||||
| Western Placer Unified School District Special Tax, 2.00%, 6/1/25, Continuously Callable @100 | 4,750 | 4,614 | |||||||||
10,833 | |||||||||||
Colorado (1.0%): | |||||||||||
Colorado Health Facilities Authority Revenue | |||||||||||
5.00%, 11/1/25 | 350 | 364 | |||||||||
5.00%, 11/1/32, Continuously Callable @100 | 1,950 | 2,158 | |||||||||
Series A, 5.00%, 8/1/29 | 500 | 543 | |||||||||
| E-470 Public Highway Authority Revenue, Series B, 3.40% (SOFR+35bps), 9/1/39, (Put Date 9/1/24) (a) (b) | 4,000 | 3,970 | |||||||||
Southlands Metropolitan District No. 1, GO, Series A-1, 3.50%, 12/1/27 | 1,000 | 959 | |||||||||
7,994 | |||||||||||
Connecticut (1.8%): | |||||||||||
City of Bridgeport, GO, Series B, 5.00%, 8/15/26 | 3,450 | 3,659 | |||||||||
| City of New Haven, GO Series A, 5.00%, 8/1/24 | 1,000 | 1,016 | |||||||||
Series A, 5.00%, 8/1/25 | 580 | 598 | |||||||||
Series A, 5.00%, 8/1/26 | 580 | 607 | |||||||||
Series A, 5.00%, 8/1/27 | 1,000 | 1,061 | |||||||||
| City of New Haven, GO (INS — Assured Guaranty Municipal Corp.) Series B, 5.00%, 2/1/27 | 600 | 633 | |||||||||
Series B, 5.00%, 2/1/28 | 525 | 561 | |||||||||
Series B, 5.00%, 2/1/29 | 550 | 595 | |||||||||
| City of West Haven, GO Series A, 5.00%, 11/1/23 | 800 | 803 | |||||||||
Series A, 5.00%, 11/1/24 | 815 | 826 | |||||||||
Series A, 5.00%, 11/1/27 | 650 | 681 | |||||||||
| Connecticut State Health & Educational Facilities Authority Revenue, Series B-2, 5.00%, 7/1/53, (Put Date 1/1/27) (b) | 3,000 | 3,177 | |||||||||
14,217 | |||||||||||
Florida (1.6%): | |||||||||||
| Alachua County Health Facilities Authority Revenue 4.00%, 12/1/23 | 1,100 | 1,102 | |||||||||
5.00%, 12/1/37, (Put Date 12/1/26) (b) | 3,000 | 3,153 | |||||||||
See notes to financial statements.
9
| USAA Mutual Funds Trust USAA Tax Exempt Short-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Capital Trust Agency, Inc. Revenue, 4.00%, 8/1/30 | $ | 200 | $ | 199 | |||||||
| City of Pompano Beach Revenue 3.50%, 9/1/30, Continuously Callable @103 | 3,590 | 3,197 | |||||||||
Series B-1, 2.00%, 1/1/29 | 1,000 | 829 | |||||||||
County of Escambia Revenue, 2.00%, 11/1/33, (Put Date 10/1/24) (b) | 775 | 745 | |||||||||
| Florida Development Finance Corp. Revenue Series A, 5.00%, 6/15/27 | 390 | 397 | |||||||||
Series A, 5.00%, 6/15/28, Continuously Callable @100 | 410 | 418 | |||||||||
Series A, 5.00%, 6/15/29, Continuously Callable @100 | 360 | 367 | |||||||||
Series A, 5.00%, 6/15/30, Continuously Callable @100 | 475 | 485 | |||||||||
| Florida Higher Educational Facilities Financial Authority Revenue 5.00%, 10/1/24 | 500 | 501 | |||||||||
5.00%, 10/1/25 | 445 | 449 | |||||||||
| Southeast Overtown Park West Community Redevelopment Agency Tax Allocation, Series A-1, 5.00%, 3/1/23 (d) | 1,000 | 1,000 | |||||||||
12,842 | |||||||||||
Georgia (7.9%): | |||||||||||
| Appling County Development Authority Revenue, Series A, 1.50%, 1/1/38, (Put Date 2/3/25) (b) | 2,000 | 1,906 | |||||||||
| Burke County Development Authority Revenue, 1.70%, 12/1/49, (Put Date 8/22/24) (b) | 7,500 | 7,218 | |||||||||
| Cobb County Development Authority Revenue, Series A, 2.25%, 4/1/33, (Put Date 10/1/29) (b) | 5,000 | 4,459 | |||||||||
| Development Authority of Appling County Revenue, 2.26%, 9/1/29, Continuously Callable @100 (c) | 2,000 | 2,000 | |||||||||
| Development Authority of Floyd County Revenue, 2.26%, 9/1/26, Continuously Callable @100 (c) | 6,380 | 6,380 | |||||||||
| Development Authority of Heard County Revenue, 2.35%, 9/1/29, Continuously Callable @100 (c) | 2,900 | 2,900 | |||||||||
George L Smith II Congress Center Authority Revenue, 2.38%, 1/1/31 | 1,000 | 878 | |||||||||
| Main Street Natural Gas, Inc. Revenue 5.00%, 6/1/24 | 500 | 502 | |||||||||
Series A, 5.00%, 5/15/28 | 1,000 | 1,030 | |||||||||
Series A, 5.00%, 5/15/29 | 1,775 | 1,836 | |||||||||
Series B, 5.00%, 3/1/24 | 250 | 252 | |||||||||
Series B, 5.00%, 9/1/24 | 285 | 288 | |||||||||
Series B, 5.00%, 12/1/52, (Put Date 6/1/29) (b) | 6,000 | 6,206 | |||||||||
Series C, 4.00%, 8/1/48, (Put Date 12/1/23) (b) | 5,000 | 4,998 | |||||||||
Series C, 4.00%, 5/1/52, (Put Date 12/1/28) (b) | 10,000 | 9,814 | |||||||||
| Savannah Economic Development Authority Revenue, 2.00%, 11/1/33, (Put Date 10/1/24) (b) | 815 | 783 | |||||||||
The Development Authority of Burke County Revenue | |||||||||||
2.26%, 11/1/48, Continuously Callable @100 (c) | 4,400 | 4,400 | |||||||||
2.87%, 12/1/49, (Put Date 8/19/25) (b) | 1,775 | 1,721 | |||||||||
Series 1, 2.25%, 7/1/49, Continuously Callable @100 (c) | 1,100 | 1,100 | |||||||||
| The Monroe County Development Authority Revenue, Series A, 1.50%, 1/1/39, (Put Date 2/3/25) (b) | 3,500 | 3,336 | |||||||||
62,007 | |||||||||||
See notes to financial statements.
10
| USAA Mutual Funds Trust USAA Tax Exempt Short-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Guam (0.5%): | |||||||||||
| Territory of Guam Revenue Series A, 5.00%, 12/1/23 | $ | 1,500 | $ | 1,515 | |||||||
Series A, 5.00%, 12/1/24 | 2,000 | 2,044 | |||||||||
3,559 | |||||||||||
Idaho (0.6%): | |||||||||||
County of Nez Perce Revenue, 2.75%, 10/1/24 | 5,000 | 4,884 | |||||||||
Illinois (9.2%): | |||||||||||
| Chicago Board of Education, GO Series A, 4.00%, 12/1/27 | 1,400 | 1,384 | |||||||||
Series B, 5.00%, 12/1/31, Continuously Callable @100 | 1,000 | 1,031 | |||||||||
| Chicago Park District, GO Series A, 4.00%, 1/1/31, Continuously Callable @100 | 750 | 768 | |||||||||
Series F-2, 5.00%, 1/1/27 | 600 | 630 | |||||||||
Series F-2, 5.00%, 1/1/28 | 1,000 | 1,061 | |||||||||
Series F-2, 5.00%, 1/1/29 | 1,000 | 1,072 | |||||||||
Series F-2, 5.00%, 1/1/30 | 1,305 | 1,412 | |||||||||
Series F-2, 5.00%, 1/1/31, Continuously Callable @100 | 2,115 | 2,291 | |||||||||
Series F-2, 5.00%, 1/1/32, Continuously Callable @100 | 1,750 | 1,893 | |||||||||
| Chicago Transit Authority Revenue 5.00%, 6/1/25 | 1,720 | 1,771 | |||||||||
5.00%, 6/1/26 | 1,000 | 1,044 | |||||||||
| City of Chicago Special Assessment Revenue 1.99%, 12/1/23 (d) | 274 | 268 | |||||||||
2.27%, 12/1/24 (d) | 315 | 302 | |||||||||
2.53%, 12/1/25 (d) | 335 | 318 | |||||||||
2.69%, 12/1/26 (d) | 305 | 287 | |||||||||
2.87%, 12/1/27 (d) | 255 | 239 | |||||||||
| City of Chicago Waterworks Revenue 5.00%, 11/1/25 | 4,000 | 4,097 | |||||||||
5.00%, 11/1/26 | 1,000 | 1,036 | |||||||||
Series A-1, 5.00%, 11/1/25 | 2,000 | 2,049 | |||||||||
Series A-1, 4.00%, 11/1/26 | 2,500 | 2,507 | |||||||||
| Illinois Finance Authority Revenue 5.00%, 10/1/29 | 500 | 528 | |||||||||
5.00%, 10/1/30 | 250 | 265 | |||||||||
Series B, 3.50% (MUNIPSA+70bps), 5/1/42, (Put Date 5/1/26) (a) (b) | 2,250 | 2,212 | |||||||||
Series C, 4.00%, 2/15/25 | 10,000 | 10,124 | |||||||||
| Northern Illinois University Revenue 5.00%, 10/1/30 | 325 | 347 | |||||||||
5.00%, 10/1/31, Continuously Callable @100 | 450 | 481 | |||||||||
| Northern Illinois University Revenue (INS — Build America Mutual Assurance Co.), Series B, 5.00%, 4/1/30 | 250 | 266 | |||||||||
| Sales Tax Securitization Corp. Revenue Series A, 5.00%, 1/1/28 | 1,000 | 1,078 | |||||||||
Series A, 5.00%, 1/1/29 | 2,500 | 2,731 | |||||||||
Series A, 5.00%, 1/1/30 | 2,000 | 2,211 | |||||||||
| State of Illinois, GO Series A, 5.00%, 10/1/23 | 3,000 | 3,007 | |||||||||
See notes to financial statements.
11
| USAA Mutual Funds Trust USAA Tax Exempt Short-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Series A, 5.00%, 11/1/25 | $ | 5,000 | $ | 5,087 | |||||||
Series C, 5.00%, 11/1/29, Continuously Callable @100 | 8,985 | 9,382 | |||||||||
| The Illinois Sports Facilities Authority Revenue 5.00%, 6/15/28 | 1,000 | 1,020 | |||||||||
5.00%, 6/15/30 | 1,500 | 1,538 | |||||||||
5.00%, 6/15/31 | 575 | 590 | |||||||||
5.00%, 6/15/32, Continuously Callable @100 | 480 | 492 | |||||||||
| Village of Rosemont, GO (INS — Assured Guaranty Municipal Corp.) Series A, 5.00%, 12/1/23 | 1,825 | 1,846 | |||||||||
Series A, 5.00%, 12/1/24 | 1,915 | 1,970 | |||||||||
| Western Illinois University Revenue (INS — Build America Mutual Assurance Co.) 4.00%, 4/1/29 | 750 | 769 | |||||||||
4.00%, 4/1/30 | 750 | 768 | |||||||||
72,172 | |||||||||||
Indiana (1.4%): | |||||||||||
City of Rockport Revenue, 3.13%, 7/1/25 | 1,500 | 1,465 | |||||||||
| Indiana Bond Bank Revenue 1/15/27 (e) | 1,280 | 1,135 | |||||||||
1/15/28 (e) | 1,100 | 945 | |||||||||
1/15/29 (e) | 565 | 470 | |||||||||
7/15/29, Continuously Callable @99 (e) | 730 | 575 | |||||||||
| Indiana Finance Authority Revenue 5.00%, 4/1/23 | 650 | 650 | |||||||||
5.00%, 4/1/24 | 715 | 719 | |||||||||
5.00%, 4/1/25 | 750 | 761 | |||||||||
5.00%, 4/1/26 | 790 | 811 | |||||||||
5.00%, 4/1/27 | 830 | 861 | |||||||||
5.00%, 4/1/28 | 870 | 908 | |||||||||
5.00%, 4/1/29 | 1,180 | 1,239 | |||||||||
10,539 | |||||||||||
Kansas (0.1%): | |||||||||||
| City of Manhattan Revenue Series B-1, 2.88%, 6/1/28, Continuously Callable @100 | 375 | 331 | |||||||||
Series B2, 2.38%, 6/1/27, Continuously Callable @100 | 430 | 381 | |||||||||
712 | |||||||||||
Kentucky (8.8%): | |||||||||||
| City of Ashland Revenue 5.00%, 2/1/28 | 1,775 | 1,874 | |||||||||
5.00%, 2/1/30 | 740 | 794 | |||||||||
County of Carroll Revenue, 1.55%, 9/1/42, (Put Date 9/1/26) (b) | 5,000 | 4,536 | |||||||||
| County of Owen Revenue Series A, 2.45%, 6/1/39, (Put Date 10/1/29) (b) | 10,000 | 8,813 | |||||||||
Series B, 2.45%, 9/1/39, (Put Date 10/1/29) (b) | 5,000 | 4,455 | |||||||||
| Kentucky Economic Development Finance Authority Revenue 4.50%, 10/1/27, Continuously Callable @100 | 5,000 | 4,994 | |||||||||
Series B-3, 4.20% (MUNIPSA+140bps), 2/1/46, (Put Date 2/1/25) (a) (b) | 10,000 | 10,156 | |||||||||
See notes to financial statements.
12
| USAA Mutual Funds Trust USAA Tax Exempt Short-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
| Kentucky Public Energy Authority Revenue 4.00%, 2/1/50, (Put Date 2/1/28) (b) | $ | 3,370 | $ | 3,331 | |||||||
Series B, 4.00%, 1/1/49, (Put Date 1/1/25) (b) | 5,715 | 5,677 | |||||||||
Series C-1, 4.00%, 12/1/49, (Put Date 6/1/25) (b) | 10,000 | 9,925 | |||||||||
Series C-3, 3.85% (MUNIPSA+105bps), 12/1/49, (Put Date 6/1/25) (a) (b) | 10,000 | 9,949 | |||||||||
| Louisville/Jefferson County Metropolitan Government Revenue, 5.00%, 10/1/47, (Put Date 10/1/29) (b) | 4,000 | 4,289 | |||||||||
68,793 | |||||||||||
Louisiana (2.8%): | |||||||||||
| Louisiana Local Government Environmental Facilities & Community Development Authority Revenue, Series A, 2.00%, 6/1/30, Continuously Callable @100 | 1,000 | 881 | |||||||||
| Louisiana Public Facilities Authority Revenue, 3.45% (MUNIPSA+65bps), 9/1/57, (Put Date 9/1/23) (a) (b) | 10,000 | 10,013 | |||||||||
| Louisiana Stadium & Exposition District Revenue, 4.00%, 7/3/23, Continuously Callable @100 | 3,325 | 3,325 | |||||||||
| Parish of St. John the Baptist Revenue 2.20%, 6/1/37, (Put Date 7/1/26) (b) | 1,750 | 1,622 | |||||||||
Series B1, 2.13%, 6/1/37, (Put Date 7/1/24) (b) | 2,000 | 1,944 | |||||||||
| Tangipahoa Parish Hospital Service District No. 1 Revenue, 5.00%, 2/1/32, Continuously Callable @100 | 3,470 | 3,743 | |||||||||
21,528 | |||||||||||
Maryland (1.6%): | |||||||||||
| Maryland Economic Development Corp. Revenue Series A, 5.00%, 6/1/25 | 1,500 | 1,541 | |||||||||
Series A, 5.00%, 6/1/26 | 2,000 | 2,088 | |||||||||
Series A, 5.00%, 6/1/27 | 1,340 | 1,421 | |||||||||
| Maryland Health & Higher Educational Facilities Authority Revenue 5.00%, 7/1/28 | 1,910 | 2,041 | |||||||||
5.00%, 7/1/29 | 1,130 | 1,219 | |||||||||
5.00%, 7/1/30 | 1,000 | 1,087 | |||||||||
| Town of Chestertown Revenue Series A, 5.00%, 3/1/31 | 1,475 | 1,593 | |||||||||
Series A, 5.00%, 3/1/32, Continuously Callable @100 | 1,550 | 1,680 | |||||||||
12,670 | |||||||||||
Massachusetts (1.2%): | |||||||||||
| Massachusetts Development Finance Agency Revenue 5.00%, 7/1/25 | 1,250 | 1,271 | |||||||||
5.00%, 7/1/26 | 1,500 | 1,547 | |||||||||
5.00%, 7/15/26 (d) | 310 | 309 | |||||||||
5.00%, 7/15/28 (d) | 340 | 336 | |||||||||
5.00%, 7/15/30 (d) | 640 | 624 | |||||||||
3.40% (MUNIPSA+60bps), 7/1/49, (Put Date 1/29/26) (a) (b) (d) | 2,500 | 2,492 | |||||||||
Series A, 5.00%, 7/1/29, Continuously Callable @100 | 1,425 | 1,475 | |||||||||
Series C, 5.00%, 10/1/30 | 975 | 1,077 | |||||||||
9,131 | |||||||||||
See notes to financial statements.
13
| USAA Mutual Funds Trust USAA Tax Exempt Short-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Michigan (0.9%): | |||||||||||
| Flint Hospital Building Authority Revenue 5.00%, 7/1/29 | $ | 1,995 | $ | 2,065 | |||||||
5.00%, 7/1/30 | 2,290 | 2,372 | |||||||||
| Michigan Finance Authority Revenue 4.00%, 2/1/27 | 185 | 181 | |||||||||
4.00%, 2/1/32 | 285 | 284 | |||||||||
| Summit Academy North Revenue 2.25%, 11/1/26 | 1,080 | 1,017 | |||||||||
4.00%, 11/1/31, Continuously Callable @103 | 1,565 | 1,473 | |||||||||
7,392 | |||||||||||
Minnesota (0.1%): | |||||||||||
| Sanford Canby Community Hospital District No. 1 Revenue, 3.30%, 11/1/26, Continuously Callable @100 (c) | 905 | 905 | |||||||||
Mississippi (2.0%): | |||||||||||
County of Warren Revenue, 2.90%, 9/1/32, (Put Date 9/1/23) (b) | 2,000 | 1,977 | |||||||||
| Mississippi Business Finance Corp. Revenue, 3.20%, 9/1/28, Continuously Callable @100 | 4,000 | 3,810 | |||||||||
| Mississippi Hospital Equipment & Facilities Authority Revenue, 5.00%, 9/1/24 | 10,000 | 10,129 | |||||||||
15,916 | |||||||||||
Missouri (0.2%): | |||||||||||
| Health & Educational Facilities Authority of the State of Missouri Revenue 4.00%, 8/1/24 | 155 | 153 | |||||||||
4.00%, 8/1/26 | 205 | 199 | |||||||||
4.00%, 8/1/28 | 415 | 396 | |||||||||
4.00%, 8/1/30 | 295 | 276 | |||||||||
| Missouri Development Finance Board Revenue 5.00%, 3/1/23 | 200 | 200 | |||||||||
5.00%, 3/1/24 | 300 | 303 | |||||||||
1,527 | |||||||||||
Montana (1.1%): | |||||||||||
City of Forsyth Revenue, 2.00%, 8/1/23 | 6,000 | 5,953 | |||||||||
| Montana State Board of Regents Revenue, Series F, 3.25% (MUNIPSA+45bps), 11/15/35, (Put Date 9/1/23) (a) (b) | 2,785 | 2,779 | |||||||||
8,732 | |||||||||||
Nebraska (1.8%): | |||||||||||
Central Plains Energy Project Revenue, 5.00%, 5/1/53, (Put Date 10/1/29) (b) | 6,000 | 6,178 | |||||||||
| County of Douglas Revenue, 3.33% (MUNIPSA+53bps), 7/1/35, (Put Date 9/1/26) (a) (b) | 7,925 | 7,808 | |||||||||
13,986 | |||||||||||
New Hampshire (0.1%): | |||||||||||
| New Hampshire Business Finance Authority Revenue 4.00%, 1/1/30, Continuously Callable @103 | 280 | 264 | |||||||||
4.00%, 1/1/31, Continuously Callable @103 | 295 | 277 | |||||||||
541 | |||||||||||
See notes to financial statements.
14
| USAA Mutual Funds Trust USAA Tax Exempt Short-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
New Jersey (4.0%): | |||||||||||
| Casino Reinvestment Development Authority Revenue (INS — Assured Guaranty Municipal Corp.), 5.00%, 11/1/24 | $ | 1,000 | $ | 1,023 | |||||||
| New Jersey Building Authority Revenue Series A, 3.00%, 6/15/23 | 400 | 400 | |||||||||
Series A, 3.00%, 6/15/23 | 600 | 599 | |||||||||
Series A, 5.00%, 6/15/24 | 1,595 | 1,628 | |||||||||
Series A, 5.00%, 6/15/24 | 2,405 | 2,444 | |||||||||
| New Jersey Economic Development Authority Revenue, Series BBB, 5.00%, 6/15/23 | 7,000 | 7,025 | |||||||||
| New Jersey Educational Facilities Authority Revenue Series B, 5.00%, 9/1/23 | 4,000 | 4,025 | |||||||||
Series B, 4.00%, 9/1/24 | 4,730 | 4,754 | |||||||||
| New Jersey Transportation Trust Fund Authority Revenue 5.00%, 6/15/24 | 5,095 | 5,191 | |||||||||
Series AA, 5.00%, 6/15/23 | 3,835 | 3,849 | |||||||||
Tobacco Settlement Financing Corp. Revenue, Series B, 3.20%, 6/1/27 | 5 | 5 | |||||||||
30,943 | |||||||||||
New Mexico (1.3%): | |||||||||||
City of Farmington Revenue, Series A, 2.15%, 4/1/33, Continuously Callable @101 | 5,000 | 4,043 | |||||||||
| New Mexico Hospital Equipment Loan Council Revenue 5.00%, 6/1/27 | 770 | 808 | |||||||||
5.00%, 6/1/28 | 780 | 826 | |||||||||
5.00%, 6/1/29 | 835 | 892 | |||||||||
5.00%, 6/1/30 | 525 | 564 | |||||||||
5.00%, 6/1/31, Continuously Callable @100 | 690 | 741 | |||||||||
| Village of Los Ranchos de Albuquerque Revenue 5.00%, 9/1/28 | 840 | 905 | |||||||||
5.00%, 9/1/31, Continuously Callable @100 | 300 | 331 | |||||||||
| Winrock Town Center Tax Increment Development District Tax Allocation, 3.75%, 5/1/28 (d) | 750 | 716 | |||||||||
9,826 | |||||||||||
New York (14.7%): | |||||||||||
Build NYC Resource Corp. Revenue, Series A, 3.40%, 7/1/27 | 300 | 292 | |||||||||
City of Amsterdam, GO, 5.00%, 3/6/24, Continuously Callable @100 | 5,000 | 5,011 | |||||||||
City of Long Beach, GO, 4.00%, 2/16/24 | 10,000 | 9,972 | |||||||||
City of New York, GO, Series B-3, 3.08%, 10/1/46, Continuously Callable @100 (c) | 6,725 | 6,725 | |||||||||
| City of Poughkeepsie, GO 4.00%, 4/15/23 | 135 | 135 | |||||||||
4.00%, 4/15/24 | 140 | 140 | |||||||||
4.00%, 4/15/25 | 215 | 217 | |||||||||
4.00%, 4/15/26 | 230 | 232 | |||||||||
| County of Rockland, GO (INS — Assured Guaranty Municipal Corp.) Series A, 5.00%, 3/1/23 | 2,500 | 2,500 | |||||||||
Series A, 5.00%, 3/1/24 | 1,600 | 1,625 | |||||||||
| Long Island Power Authority Revenue 4.01% (LIBOR01M+75bps), 5/1/33, (Put Date 10/1/23) (a) (b) | 1,100 | 1,107 | |||||||||
3.25% (MUNIPSA+45bps), 9/1/38, (Put Date 9/1/25) (a) (b) | 10,500 | 10,591 | |||||||||
Series B, 1.65%, 9/1/49, (Put Date 9/1/24) (b) | 4,500 | 4,383 | |||||||||
Series C, 4.01% (LIBOR01M+75bps), 5/1/33, (Put Date 10/1/23) (a) (b) | 5,000 | 4,997 | |||||||||
See notes to financial statements.
15
| USAA Mutual Funds Trust USAA Tax Exempt Short-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
| Metropolitan Transportation Authority Revenue Series 2, 3.85% (SOFR+80bps), 11/1/32, (Put Date 4/1/26) (a) (b) | $ | 2,000 | $ | 1,928 | |||||||
Series A-2, 5.00%, 11/15/45, (Put Date 5/15/30) (b) | 1,830 | 1,953 | |||||||||
Series A3, 3.70% (SOFR+65bps), 11/15/42, (Put Date 4/1/26) (a) (b) | 10,000 | 9,475 | |||||||||
| New York Liberty Development Corp. Revenue 2.80%, 9/15/69, Continuously Callable @100 | 14,950 | 13,418 | |||||||||
2.63%, 9/15/69, Continuously Callable @100 | 1,650 | 1,438 | |||||||||
Series A, 1.90%, 11/15/31, Continuously Callable @100 | 2,000 | 1,615 | |||||||||
| New York State Dormitory Authority Revenue 5.00%, 12/1/24 (d) | 1,200 | 1,199 | |||||||||
5.00%, 12/1/25 (d) | 1,200 | 1,204 | |||||||||
| Niagara Area Development Corp. Revenue, Series B, 3.50%, 11/1/24, Continuously Callable @100 (d) | 500 | 488 | |||||||||
| Troy Capital Resource Corp. Revenue 5.00%, 8/1/26, Continuously Callable @100 | 1,050 | 1,093 | |||||||||
5.00%, 9/1/27 | 1,250 | 1,332 | |||||||||
Village of Clayton, GO, 5.00%, 10/19/23, Continuously Callable @100 | 4,539 | 4,543 | |||||||||
| Village of Johnson City, GO Series BA, 4.00%, 9/29/23 | 12,559 | 12,541 | |||||||||
Series C, 5.25%, 9/29/23 | 3,000 | 3,007 | |||||||||
Village of Malone, GO, 1.75%, 3/10/23, Continuously Callable @100 | 4,210 | 4,208 | |||||||||
Village of Valley Stream NY, GO, Series A, 3.50%, 5/11/23 | 7,295 | 7,285 | |||||||||
114,654 | |||||||||||
North Carolina (0.9%): | |||||||||||
| Columbus County Industrial Facilities & Pollution Control Financing Authority Revenue 2.00%, 11/1/33, (Put Date 10/1/24) (b) | 825 | 797 | |||||||||
2.00%, 11/1/33, (Put Date 10/1/24) (b) | 825 | 797 | |||||||||
Series A, 1.37%, 5/1/34, (Put Date 6/16/25) (b) | 2,000 | 1,883 | |||||||||
| North Carolina Medical Care Commission Revenue 2.30%, 9/1/25, Continuously Callable @100 | 1,250 | 1,151 | |||||||||
2.88%, 10/1/26, Continuously Callable @100 | 615 | 568 | |||||||||
Series A, 4.00%, 10/1/27 | 600 | 588 | |||||||||
Series B-1, 2.55%, 9/1/26, Continuously Callable @100 | 1,575 | 1,497 | |||||||||
7,281 | |||||||||||
North Dakota (0.3%): | |||||||||||
| City of Grand Forks Revenue 5.00%, 12/1/31 | 1,200 | 1,276 | |||||||||
5.00%, 12/1/32, Continuously Callable @100 | 1,300 | 1,378 | |||||||||
2,654 | |||||||||||
Ohio (2.7%): | |||||||||||
| Akron Bath Copley Joint Township Hospital District Revenue 5.00%, 11/15/29 | 275 | 292 | |||||||||
5.00%, 11/15/30 | 350 | 373 | |||||||||
5.00%, 11/15/31, Continuously Callable @100 | 300 | 320 | |||||||||
| County of Allen Hospital Facilities Revenue, 5.00%, 12/1/30, Continuously Callable @100 | 2,000 | 2,245 | |||||||||
County of Hamilton Revenue, 5.00%, 9/15/29 | 1,345 | 1,447 | |||||||||
See notes to financial statements.
16
| USAA Mutual Funds Trust USAA Tax Exempt Short-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
| Ohio Air Quality Development Authority Revenue 2.40%, 12/1/38, (Put Date 10/1/29) (b) | $ | 3,250 | $ | 2,833 | |||||||
Series D, 1.90%, 5/1/26, (Put Date 10/1/24) (b) | 3,500 | 3,368 | |||||||||
| Ohio Higher Educational Facility Commission Revenue Series C, 5.00%, 5/1/23 | 550 | 551 | |||||||||
Series C, 5.00%, 5/1/24 | 1,000 | 1,011 | |||||||||
| Port of Greater Cincinnati Development Authority Revenue, Series A, 3.00%, 5/1/23, Continuously Callable @100 | 4,765 | 4,752 | |||||||||
| Southeastern Ohio Port Authority Revenue, 5.00%, 12/1/25, Continuously Callable @100 | 1,000 | 995 | |||||||||
| State of Ohio Revenue 5.00%, 11/15/27 | 425 | 448 | |||||||||
5.00%, 11/15/30 | 710 | 765 | |||||||||
5.00%, 11/15/31, Continuously Callable @100 | 465 | 500 | |||||||||
Series A, 5.00%, 1/15/30 | 1,000 | 1,082 | |||||||||
20,982 | |||||||||||
Oklahoma (0.9%): | |||||||||||
| Muskogee Industrial Trust Revenue 4.00%, 9/1/28 | 2,500 | 2,529 | |||||||||
4.00%, 9/1/29 | 3,010 | 3,051 | |||||||||
| Oklahoma Development Finance Authority Revenue Series B, 5.00%, 8/15/23 | 500 | 500 | |||||||||
Series B, 5.00%, 8/15/24 | 600 | 599 | |||||||||
Series B, 5.00%, 8/15/25 | 550 | 547 | |||||||||
7,226 | |||||||||||
Oregon (0.2%): | |||||||||||
| County of Yamhill Revenue Series A, 4.00%, 10/1/23 | 425 | 423 | |||||||||
Series A, 4.00%, 10/1/24 | 425 | 422 | |||||||||
| Oregon State Facilities Authority Revenue Series A, 5.00%, 10/1/28 | 150 | 159 | |||||||||
Series A, 5.00%, 10/1/29 | 300 | 321 | |||||||||
Series A, 5.00%, 10/1/30 | 300 | 323 | |||||||||
1,648 | |||||||||||
Pennsylvania (5.8%): | |||||||||||
| Bethlehem Area School District Authority Revenue, Series A, 3.40% (SOFR+35bps), 1/1/30, (Put Date 11/1/25) (a) (b) | 995 | 966 | |||||||||
Chester County IDA Revenue, 3.75%, 10/1/24 | 255 | 252 | |||||||||
Coatesville School District, GO, 5.00%, 6/30/23 | 4,250 | 4,244 | |||||||||
| Coatesville School District, GO (INS — Assured Guaranty Municipal Corp.) 5.00%, 8/1/24 | 1,000 | 1,024 | |||||||||
5.00%, 8/1/25 | 800 | 836 | |||||||||
Commonwealth Financing Authority Revenue, 5.00%, 6/1/26 | 2,000 | 2,103 | |||||||||
| County of Lehigh Revenue 5.00%, 7/1/28 | 1,750 | 1,891 | |||||||||
5.00%, 7/1/29 | 2,000 | 2,186 | |||||||||
See notes to financial statements.
17
| USAA Mutual Funds Trust USAA Tax Exempt Short-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
| Delaware County Authority Revenue 5.00%, 10/1/23 | $ | 235 | $ | 235 | |||||||
5.00%, 10/1/24 | 505 | 505 | |||||||||
5.00%, 10/1/25 | 525 | 528 | |||||||||
5.00%, 10/1/30 | 1,200 | 1,242 | |||||||||
| Geisinger Authority Revenue, 4.22% (LIBOR01M+107bps), 6/1/28, (Put Date 6/1/24) (a) (b) | 7,000 | 7,011 | |||||||||
| General Authority of Southcentral Pennsylvania Revenue, Series B, 3.40% (MUNIPSA+60bps), 6/1/49, (Put Date 6/1/24) (a) (b) | 6,000 | 6,007 | |||||||||
| Latrobe IDA Revenue 5.00%, 3/1/28 | 135 | 141 | |||||||||
5.00%, 3/1/29 | 175 | 183 | |||||||||
5.00%, 3/1/30 | 150 | 158 | |||||||||
5.00%, 3/1/31 | 175 | 185 | |||||||||
| Luzerne County IDA Revenue (INS — Assured Guaranty Municipal Corp.) 5.00%, 12/15/25 | 550 | 576 | |||||||||
5.00%, 12/15/26, Continuously Callable @100 | 500 | 524 | |||||||||
5.00%, 12/15/27, Continuously Callable @100 | 1,000 | 1,048 | |||||||||
| Northampton County General Purpose Authority Revenue, 4.30% (LIBOR01M+104bps), 8/15/48, (Put Date 8/15/24) (a) (b) | 1,855 | 1,851 | |||||||||
| Philadelphia IDA Revenue 5.00%, 6/15/28 (d) | 210 | 212 | |||||||||
5.00%, 6/15/29, Continuously Callable @100 (d) | 220 | 222 | |||||||||
5.00%, 6/15/30, Continuously Callable @100 (d) | 145 | 146 | |||||||||
| Pittsburgh Water & Sewer Authority Revenue, Series C, 3.45% (MUNIPSA+65bps), 9/1/40, (Put Date 12/1/23) (a) (b) | 7,500 | 7,463 | |||||||||
Scranton School District, GO, Series A, 5.00%, 6/1/23 | 2,435 | 2,442 | |||||||||
| The Berks County Municipal Authority Revenue, Series B, 5.00%, 2/1/40, (Put Date 2/1/30) (b) | 1,700 | 1,440 | |||||||||
45,621 | |||||||||||
South Carolina (1.6%): | |||||||||||
| Patriots Energy Group Financing Agency Revenue, Series B, 3.98% (LIBOR01M+86bps), 10/1/48, (Put Date 2/1/24) (a) (b) | 10,000 | 9,969 | |||||||||
| Piedmont Municipal Power Agency Revenue, Series D, 4.00%, 1/1/32, Continuously Callable @100 | 2,220 | 2,232 | |||||||||
12,201 | |||||||||||
South Dakota (0.3%): | |||||||||||
| South Dakota Health & Educational Facilities Authority Revenue 3.30%, 11/1/25, Continuously Callable @100 (c) | 945 | 945 | |||||||||
3.30%, 11/1/27, Continuously Callable @100 (c) | 1,745 | 1,745 | |||||||||
2,690 | |||||||||||
Tennessee (1.3%): | |||||||||||
| Tennergy Corp. Revenue Series A, 5.25%, 12/1/24 | 500 | 503 | |||||||||
Series A, 5.25%, 12/1/25 | 550 | 557 | |||||||||
Series A, 4.00%, 12/1/51, (Put Date 9/1/28) (b) | 4,130 | 4,095 | |||||||||
Series A, 5.50%, 10/1/53, (Put Date 12/1/30) (b) | 5,000 | 5,294 | |||||||||
10,449 | |||||||||||
See notes to financial statements.
18
| USAA Mutual Funds Trust USAA Tax Exempt Short-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Texas (3.4%): | |||||||||||
| City of San Antonio Electric & Gas Systems Revenue, 3.67% (MUNIPSA+87bps), 2/1/48, (Put Date 12/1/25) (a) (b) | $ | 5,000 | $ | 4,972 | |||||||
| County of Wise Revenue 5.00%, 8/15/23 | 500 | 502 | |||||||||
5.00%, 8/15/29 | 880 | 947 | |||||||||
5.00%, 8/15/31 | 680 | 743 | |||||||||
5.00%, 8/15/32, Continuously Callable @100 | 450 | 491 | |||||||||
5.00%, 8/15/33, Continuously Callable @100 | 930 | 1,006 | |||||||||
Decatur Hospital Authority Revenue, Series A, 5.00%, 9/1/24 | 780 | 785 | |||||||||
| Harris County Cultural Education Facilities Finance Corp. Revenue 5.00%, 7/1/49, (Put Date 12/1/26) (b) | 1,400 | 1,488 | |||||||||
Series C-2, 3.37% (MUNIPSA+57bps), 12/1/49, (Put Date 12/4/24) (a) (b) | 1,670 | 1,687 | |||||||||
| Harris County Municipal Utility District No. 165, GO (INS — Build America Mutual Assurance Co.), 3.00%, 3/1/23 | 520 | 520 | |||||||||
| Irving Hospital Authority Revenue, 3.90% (MUNIPSA+110bps), 10/15/44, (Put Date 10/15/23) (a) (b) | 1,485 | 1,485 | |||||||||
Karnes County Hospital District Revenue, 5.00%, 2/1/24 | 660 | 668 | |||||||||
| Martin County Hospital District, GO 4.00%, 4/1/23 | 250 | 250 | |||||||||
4.00%, 4/1/27 | 300 | 303 | |||||||||
4.00%, 4/1/29 | 405 | 410 | |||||||||
4.00%, 4/1/32, Continuously Callable @100 | 350 | 355 | |||||||||
| New Hope Cultural Education Facilities Finance Corp. Revenue Series A, 5.00%, 7/1/23 (f) | 1,250 | 1,000 | |||||||||
Series A, 5.00%, 7/1/24 (f) | 2,300 | 1,840 | |||||||||
Series A, 5.00%, 7/1/25 (f) | 2,135 | 1,708 | |||||||||
| Port of Port Arthur Navigation District Revenue Series A, 2.90%, 4/1/40, Continuously Callable @100 (c) | 215 | 215 | |||||||||
Series B, 2.90%, 4/1/40, Continuously Callable @100 (c) | 700 | 700 | |||||||||
Series C, 2.90%, 4/1/40, Continuously Callable @100 (c) | 155 | 155 | |||||||||
Texas Municipal Gas Acquisition & Supply Corp. III Revenue, 5.00%, 12/15/27 | 2,000 | 2,062 | |||||||||
| Texas Private Activity Bond Surface Transportation Corp. Revenue, 4.00%, 6/30/31, Continuously Callable @100 | 2,355 | 2,361 | |||||||||
26,653 | |||||||||||
Vermont (0.1%): | |||||||||||
| Vermont Economic Development Authority Revenue 4.00%, 5/1/29, Continuously Callable @103 | 445 | 405 | |||||||||
4.00%, 5/1/30, Continuously Callable @103 | 230 | 206 | |||||||||
611 | |||||||||||
Virginia (2.4%): | |||||||||||
Chesapeake Bay Bridge & Tunnel District Revenue, 5.00%, 11/1/23 | 10,140 | 10,197 | |||||||||
Halifax County IDA Revenue, 1.65%, 12/1/41, (Put Date 5/31/24) (b) | 1,500 | 1,462 | |||||||||
| James City County Economic Development Authority Revenue, 4.00%, 12/1/30, Continuously Callable @103 | 220 | 200 | |||||||||
Marquis Community Development Authority Revenue, 3.00%, 9/1/45 (d) (f) (g) | 1,074 | 517 | |||||||||
| Marquis Community Development Authority Tax Allocation Series A, 2.04%, 9/1/36 (f) (g) | 3,506 | 1,686 | |||||||||
Series C, 9/1/41 (e) (g) | 5,111 | 236 | |||||||||
See notes to financial statements.
19
| USAA Mutual Funds Trust USAA Tax Exempt Short-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Peninsula Ports Authority Revenue, 3.80%, 10/1/33, (Put Date 10/1/24) (b) | $ | 1,810 | $ | 1,789 | |||||||
Prince William County IDA Revenue, 5.00%, 1/1/31, Continuously Callable @102 | 1,700 | 1,599 | |||||||||
| Virginia Small Business Financing Authority Revenue, Series A, 5.00%, 1/1/31, Continuously Callable @103 | 1,250 | 1,337 | |||||||||
19,023 | |||||||||||
Washington (2.0%): | |||||||||||
| Washington Health Care Facilities Authority Revenue 5.00%, 8/15/26 | 2,000 | 2,079 | |||||||||
5.00%, 8/15/27 | 2,175 | 2,287 | |||||||||
Series B-2, 4.20% (MUNIPSA+140bps), 1/1/35, (Put Date 1/1/25) (a) (b) | 10,000 | 9,927 | |||||||||
Series B-3, 5.00%, 8/1/49, Callable 2/1/26 @ 100 | 1,000 | 1,043 | |||||||||
15,336 | |||||||||||
Wisconsin (3.4%): | |||||||||||
Fort Atkinson School District Revenue, 4.00%, 6/22/23, Continuously Callable @100 | 2,500 | 2,501 | |||||||||
Monroe School District Revenue, 4.00%, 6/14/23, Continuously Callable @100 | 5,000 | 5,000 | |||||||||
| Oconto Falls Public School District Revenue, 4.00%, 6/21/23, Continuously Callable @100 | 3,000 | 2,999 | |||||||||
| Public Finance Authority Revenue 4.00%, 3/1/23 (d) | 955 | 955 | |||||||||
4.00%, 3/1/24 (d) | 1,010 | 996 | |||||||||
4.00%, 9/1/24 (d) | 635 | 628 | |||||||||
4.00%, 3/1/25 (d) | 1,075 | 1,046 | |||||||||
4.00%, 3/1/26 (d) | 1,510 | 1,448 | |||||||||
4.00%, 3/1/27 (d) | 795 | 750 | |||||||||
4.00%, 3/1/28 (d) | 840 | 779 | |||||||||
3.25%, 1/1/30 | 1,795 | 1,657 | |||||||||
5.00%, 4/1/30 (d) | 500 | 504 | |||||||||
| Wisconsin Health & Educational Facilities Authority Revenue 4.00%, 1/1/24 | 160 | 159 | |||||||||
4.00%, 1/1/25 | 205 | 203 | |||||||||
4.00%, 1/1/26 | 345 | 337 | |||||||||
4.00%, 3/15/30 | 400 | 397 | |||||||||
3.45% (MUNIPSA+65bps), 8/15/54, (Put Date 7/31/24) (a) (b) | 1,700 | 1,709 | |||||||||
Series B, 3.00%, 9/15/23 | 160 | 158 | |||||||||
Series B, 4.00%, 9/15/24 | 100 | 98 | |||||||||
Series B, 4.00%, 9/15/26 | 110 | 107 | |||||||||
Series B, 4.00%, 9/15/27 | 140 | 135 | |||||||||
Series B, 4.00%, 9/15/28, Continuously Callable @103 | 200 | 191 | |||||||||
Series B, 4.00%, 9/15/29, Continuously Callable @103 | 305 | 289 | |||||||||
Series B, 4.00%, 9/15/30, Continuously Callable @103 | 320 | 299 | |||||||||
Series B, 4.00%, 9/15/31, Continuously Callable @103 | 315 | 292 | |||||||||
Series B-2, 2.55%, 11/1/27, Continuously Callable @100 | 1,130 | 1,023 | |||||||||
Series B-2, 5.00%, 2/15/51, (Put Date 2/15/27) (b) | 2,000 | 2,072 | |||||||||
26,732 | |||||||||||
Total Municipal Bonds (Cost $810,542) | 777,340 | ||||||||||
Total Investments (Cost $810,542) — 99.4% | 777,340 | ||||||||||
Other assets in excess of liabilities — 0.6% | 4,366 | ||||||||||
NET ASSETS — 100.00% | $ | 781,706 | |||||||||
See notes to financial statements.
20
| USAA Mutual Funds Trust USAA Tax Exempt Short-Term Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(a) Variable or Floating-Rate Security. Rate disclosed is as of February 28, 2023.
(b) Put Bond.
(c) 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.
(d) Rule 144A security or other security that is restricted as to resale to institutional investors. As of February 28, 2023, the fair value of these securities was $20,865 thousands and amounted to 2.7% of net assets.
(e) Zero-coupon bond.
(f) Currently the issuer is in default with respect to interest and/or principal payments.
(g) This security is classified as Level 3 within the fair value hierarchy. (See Note 2 in the Notes to Financial Statements).
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
IDA — Industrial Development Authority
LIBOR — London Interbank Offered Rate
LIBOR01M — 1 Month US Dollar LIBOR, rate disclosed as of February 28, 2023, based on the last reset date of the security
MUNIPSA — Municipal Swap Index
SOFR — Secured Overnight Financing Rate
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 guaranteed agreement from the name listed.
See notes to financial statements.
21
USAA Mutual Funds Trust | Statement of Assets and Liabilities February 28, 2023 | ||||||
(Amounts in Thousands, Except Per Share Amounts)
| USAA Tax Exempt Short-Term Fund | |||||||
Assets: | |||||||
Investments, at value (Cost $810,542) | $ | 777,340 | |||||
Cash | 3,470 | ||||||
Receivables: | |||||||
Interest | 7,351 | ||||||
Capital shares issued | 104 | ||||||
From Adviser | 26 | ||||||
Prepaid expenses | 11 | ||||||
Total Assets | 788,302 | ||||||
Liabilities: | |||||||
Payables: | |||||||
Distributions | 190 | ||||||
Investments purchased | 5,011 | ||||||
Capital shares redeemed | 1,058 | ||||||
Accrued expenses and other payables: | |||||||
Investment advisory fees | 137 | ||||||
Administration fees | 90 | ||||||
Custodian fees | 1 | ||||||
Transfer agent fees | 36 | ||||||
Compliance fees | 1 | ||||||
Trustees' fees | — | (a) | |||||
| 12b-1 fees | — | (a) | |||||
Other accrued expenses | 72 | ||||||
Total Liabilities | 6,596 | ||||||
Net Assets: | |||||||
Capital | 844,977 | ||||||
Total accumulated earnings/(loss) | (63,271 | ) | |||||
Net Assets | $ | 781,706 | |||||
Net Assets | |||||||
Fund Shares | $ | 750,619 | |||||
Institutional Shares | 26,983 | ||||||
Class A | 4,104 | ||||||
Total | $ | 781,706 | |||||
Shares (unlimited number of shares authorized with no par value): | |||||||
Fund Shares | 75,126 | ||||||
Institutional Shares | 2,699 | ||||||
Class A | 410 | ||||||
Total | 78,235 | ||||||
Net asset value, offering and redemption price per share: (b) | |||||||
Fund Shares | $ | 9.99 | |||||
Institutional Shares | 10.00 | ||||||
Class A | 10.00 | ||||||
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 | $ | 10.23 | |||||
(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.
22
USAA Mutual Funds Trust | Statements of Operations | ||||||
(Amounts in Thousands)
| USAA Tax Exempt Short-Term Fund | |||||||||||
| 11 Months Ended February 28, 2023(a) | Year Ended March 31, 2022 | ||||||||||
Investment Income: | |||||||||||
Interest | $ | 21,212 | $ | 19,989 | |||||||
Total Income | 21,212 | 19,989 | |||||||||
Expenses: | |||||||||||
Investment advisory fees | 2,081 | 3,773 | |||||||||
Administration fees — Fund Shares | 1,165 | 1,637 | |||||||||
Administration fees — Institutional Shares | 28 | 41 | |||||||||
Administration fees — Class A | 9 | 21 | |||||||||
Sub-Administration fees | 22 | 23 | |||||||||
| 12b-1 fees — Class A | 16 | 34 | |||||||||
Custodian fees | 13 | 48 | |||||||||
Transfer agent fees — Fund Shares | 386 | 444 | |||||||||
Transfer agent fees — Institutional Shares | 28 | 41 | |||||||||
Transfer agent fees — Class A | 6 | 14 | |||||||||
Trustees' fees | 46 | 49 | |||||||||
Compliance fees | 8 | 8 | |||||||||
Legal and audit fees | 66 | 50 | |||||||||
State registration and filing fees | 114 | 100 | |||||||||
Interfund lending fees | — | (b) | — | ||||||||
Other expenses | 117 | 151 | |||||||||
Recoupment of prior expenses waived/reimbursed by Adviser | — | 39 | |||||||||
Total Expenses | 4,105 | 6,473 | |||||||||
Expenses waived/reimbursed by Adviser | (158 | ) | (50 | ) | |||||||
Net Expenses | 3,947 | 6,423 | |||||||||
Net Investment Income (Loss) | 17,265 | 13,566 | |||||||||
Realized/Unrealized Gains (Losses) from Investments: | |||||||||||
Net realized gains (losses) from investment securities | (3,135 | ) | (628 | ) | |||||||
| Net change in unrealized appreciation/depreciation on investment securities | (21,762 | ) | (39,486 | ) | |||||||
Net realized/unrealized gains (losses) on investments | (24,897 | ) | (40,114 | ) | |||||||
Change in net assets resulting from operations | $ | (7,632 | ) | $ | (26,548 | ) | |||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from March 31 to February 28.
(b) 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 Tax Exempt Short-Term Fund | |||||||||||||||
| 11 Months Ended February 28, 2023(a) | Year Ended March 31, 2022 | Year Ended March 31, 2021 | |||||||||||||
From Investments: | |||||||||||||||
Operations: | |||||||||||||||
Net Investment Income (Loss) | $ | 17,265 | $ | 13,566 | $ | 16,879 | |||||||||
Net realized gains (losses) | (3,135 | ) | (628 | ) | (332 | ) | |||||||||
| Net change in unrealized appreciation/ depreciation | (21,762 | ) | (39,486 | ) | 36,891 | ||||||||||
Change in net assets resulting from operations | (7,632 | ) | (26,548 | ) | 53,438 | ||||||||||
Distributions to Shareholders: | |||||||||||||||
Fund Shares | (16,458 | ) | (12,863 | ) | (16,599 | ) | |||||||||
Institutional Shares | (592 | ) | (529 | ) | (106 | )(b) | |||||||||
Class A | (116 | ) | (132 | ) | (181 | ) | |||||||||
| Change in net assets resulting from distributions to shareholders | (17,166 | ) | (13,524 | ) | (16,886 | ) | |||||||||
| Change in net assets resulting from capital transactions | (231,710 | ) | (144,353 | ) | (95,956 | ) | |||||||||
Change in net assets | (256,508 | ) | (184,425 | ) | (59,404 | ) | |||||||||
Net Assets: | |||||||||||||||
Beginning of period | 1,038,214 | 1,222,639 | 1,282,043 | ||||||||||||
End of period | $ | 781,706 | $ | 1,038,214 | $ | 1,222,639 | |||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from March 31 to February 28.
(b) Institutional Shares activity is for the period June 29, 2020 (commencement of operations) to March 31, 2021.
(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 Tax Exempt Short-Term Fund | |||||||||||||||
| 11 Months Ended February 28, 2023(a) | Year Ended March 31, 2022 | Year Ended March 31, 2021 | |||||||||||||
Capital Transactions: | |||||||||||||||
Fund Shares | |||||||||||||||
Proceeds from shares issued | $ | 78,976 | $ | 139,075 | $ | 163,202 | |||||||||
Distributions reinvested | 14,583 | 11,199 | 13,673 | ||||||||||||
Cost of shares redeemed | (302,777 | ) | (310,220 | ) | (303,776 | ) | |||||||||
Total Fund Shares | $ | (209,218 | ) | $ | (159,946 | ) | $ | (126,901 | ) | ||||||
Institutional Shares | |||||||||||||||
Proceeds from shares issued | $ | 12,792 | $ | 49,482 | $ | 30,936 | (b) | ||||||||
Distributions reinvested | 407 | 350 | 52 | (b) | |||||||||||
Cost of shares redeemed | (27,299 | ) | (30,926 | ) | (6,031 | )(b) | |||||||||
Total Institutional Shares | $ | (14,100 | ) | $ | 18,906 | $ | 24,957 | ||||||||
Class A | |||||||||||||||
Proceeds from shares issued | $ | 1,836 | $ | 5,669 | $ | 31,132 | |||||||||
Distributions reinvested | 109 | 107 | 163 | ||||||||||||
Cost of shares redeemed | (10,337 | ) | (9,089 | ) | (25,307 | ) | |||||||||
Total Class A | $ | (8,392 | ) | $ | (3,313 | ) | $ | 5,988 | |||||||
| Change in net assets resulting from capital transactions | $ | (231,710 | ) | $ | (144,353 | ) | $ | (95,956 | ) | ||||||
Share Transactions: | |||||||||||||||
Fund Shares | |||||||||||||||
Issued | 7,817 | 13,117 | 15,479 | ||||||||||||
Reinvested | 1,455 | 1,058 | 1,298 | ||||||||||||
Redeemed | (30,149 | ) | (29,257 | ) | (28,894 | ) | |||||||||
Total Fund Shares | (20,877 | ) | (15,082 | ) | (12,117 | ) | |||||||||
Institutional Shares | |||||||||||||||
Issued | 1,273 | 4,646 | 2,918 | (b) | |||||||||||
Reinvested | 41 | 33 | 5 | (b) | |||||||||||
Redeemed | (2,709 | ) | (2,939 | ) | (569 | )(b) | |||||||||
Total Institutional Shares | (1,395 | ) | 1,740 | 2,354 | |||||||||||
Class A | |||||||||||||||
Issued | 182 | 532 | 2,966 | ||||||||||||
Reinvested | 11 | 10 | 15 | ||||||||||||
Redeemed | (1,030 | ) | (854 | ) | (2,403 | ) | |||||||||
Total Class A | (837 | ) | (312 | ) | 578 | ||||||||||
Change in Shares | (23,109 | ) | (13,654 | ) | (9,185 | ) | |||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from March 31 to February 28.
(b) Institutional Shares activity is for the period June 29, 2020 (commencement of operations) to March 31, 2021.
See notes to financial statements.
25
USAA Mutual Funds Trust | Financial Highlights | ||||||
For a Share Outstanding Throughout Each Period
USAA Tax Exempt Short-Term Fund | |||||||||||||||||||||||||||
Fund Shares | |||||||||||||||||||||||||||
| 11 Months Ended February 28, 2023(a) | Year Ended March 31, 2022 | Year Ended March 31, 2021 | Year Ended March 31, 2020 | Year Ended March 31, 2019 | Year Ended March 31, 2018 | ||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 10.24 | $ | 10.63 | $ | 10.32 | $ | 10.48 | $ | 10.41 | $ | 10.45 | |||||||||||||||
Investment Activities: | |||||||||||||||||||||||||||
Net investment income (loss) | 0.20 | (b) | 0.13 | (b) | 0.14 | (b) | 0.19 | (b) | 0.19 | 0.16 | |||||||||||||||||
| Net realized and unrealized gains (losses) | (0.25 | ) | (0.39 | ) | 0.31 | (0.16 | ) | (0.07 | ) | (0.03 | ) | ||||||||||||||||
| Total from Investment Activities | (0.05 | ) | (0.26 | ) | 0.45 | 0.03 | 0.26 | 0.13 | |||||||||||||||||||
Distributions to Shareholders from: | |||||||||||||||||||||||||||
Net investment income | (0.20 | ) | (0.13 | ) | (0.14 | ) | (0.19 | ) | (0.19 | ) | (0.17 | ) | |||||||||||||||
Total Distributions | (0.20 | ) | (0.13 | ) | (0.14 | ) | (0.19 | ) | (0.19 | ) | (0.17 | ) | |||||||||||||||
Net Asset Value, End of Period | $ | 9.99 | $ | 10.24 | $ | 10.63 | $ | 10.32 | $ | 10.48 | $ | 10.41 | |||||||||||||||
Total Return (c) (d) | (0.51 | )% | (2.52 | )% | 4.42 | % | 0.23 | % | 2.52 | % | 1.21 | % | |||||||||||||||
Ratios to Average Net Assets: | |||||||||||||||||||||||||||
Net Expenses (e) (f) (g) (h) | 0.49 | % | 0.56 | % | 0.53 | % | 0.51 | % | 0.52 | % | 0.51 | % | |||||||||||||||
Net Investment Income (Loss) (e) | 2.13 | % | 1.18 | % | 1.37 | % | 1.77 | % | 1.84 | % | 1.57 | % | |||||||||||||||
Gross Expenses (e) (f) | 0.50 | % | 0.56 | % | 0.54 | % | 0.51 | % | 0.52 | % | 0.51 | % | |||||||||||||||
Supplemental Data: | |||||||||||||||||||||||||||
Net Assets at end of period (000's) | $ | 750,619 | $ | 983,453 | $ | 1,181,011 | $ | 1,271,899 | $ | 1,489,789 | $ | 1,550,994 | |||||||||||||||
Portfolio Turnover (c) (i) | 17 | % | 16 | % | 66 | %(j) | 54 | % | 31 | % | 25 | % | |||||||||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from March 31 to February 28.
(b) Per share net investment income (loss) has been calculated using the average daily shares method.
(c) Not annualized for periods less than one year.
(d) 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.
(e) Annualized for periods less than one year.
(f) Does not include acquired fund fees and expenses, if any.
(g) 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 July 31, 2023, instead of coinciding with the Fund's fiscal year end.
(h) 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.
(i) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares.
(j) The portfolio turnover would be 32% of the average value of its portfolio with the exclusion of variable-rate demand notes with long-term maturities and one- or seven-day demand feature, or put options.
(continues on next page)
See notes to financial statements.
26
USAA Mutual Funds Trust | Financial Highlights — continued | ||||||
For a Share Outstanding Throughout Each Period
USAA Tax Exempt Short-Term Fund | |||||||||||||||
Institutional Shares | |||||||||||||||
| 11 Months Ended February 28, 2023(a) | Year Ended March 31, 2022 | June 29, 2020(b) through March 31, 2021 | |||||||||||||
Net Asset Value, Beginning of Period | $ | 10.25 | $ | 10.64 | $ | 10.50 | |||||||||
Investment Activities: | |||||||||||||||
Net investment income (loss) (c) | 0.20 | 0.14 | 0.11 | ||||||||||||
Net realized and unrealized gains (losses) | (0.25 | ) | (0.40 | ) | 0.14 | ||||||||||
Total from Investment Activities | (0.05 | ) | (0.26 | ) | 0.25 | ||||||||||
Distributions to Shareholders from: | |||||||||||||||
Net investment income | (0.20 | ) | (0.13 | ) | (0.11 | ) | |||||||||
Total Distributions | (0.20 | ) | (0.13 | ) | (0.11 | ) | |||||||||
Net Asset Value, End of Period | $ | 10.00 | $ | 10.25 | $ | 10.64 | |||||||||
Total Return (d) (e) | (0.49 | )% | (2.43 | )% | 2.39 | % | |||||||||
Ratios to Average Net Assets: | |||||||||||||||
Net Expenses (f) (g) (h) (i) | 0.46 | % | 0.48 | % | 0.47 | % | |||||||||
Net Investment Income (Loss) (f) | 2.15 | % | 1.28 | % | 1.33 | % | |||||||||
Gross Expenses (f) (g) | 0.59 | % | 0.55 | % | 0.69 | % | |||||||||
Supplemental Data: | |||||||||||||||
Net Assets at end of period (000's) | $ | 26,983 | $ | 41,969 | $ | 25,038 | |||||||||
Portfolio Turnover (d) (j) | 17 | % | 16 | % | 66 | %(k) | |||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from March 31 to February 28.
(b) Commencement of operations.
(c) Per share net investment income (loss) has been calculated using the average daily shares method.
(d) Not annualized for periods less than one year.
(e) Assumes reinvestment of all net investment income and realized capital gain distributions, if any, during the period. Includes adjustments in accordance with U.S. Generally Accepted Accounting Principles and could differ from the Lipper reported return.
(f) Annualized for periods less than one year.
(g) Does not include acquired fund fees and expenses, if any.
(h) 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 June 29, 2020 and in effect through July 31, 2023, instead of coinciding with the Fund's fiscal year end.
(i) 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.
(j) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares.
(k) The portfolio turnover would be 32% of the average value of its portfolio with the exclusion of variable-rate demand notes with long-term maturities and one- or seven-day demand feature, or put options.
(continues on next page)
See notes to financial statements.
27
USAA Mutual Funds Trust | Financial Highlights — continued | ||||||
For a Share Outstanding Throughout Each Period
USAA Tax Exempt Short-Term Fund | |||||||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||
| 11 Months Ended February 28, 2023(a) | Year Ended March 31, 2022 | Year Ended March 31, 2021 | Year Ended March 31, 2020 | Year Ended March 31, 2019 | Year Ended March 31, 2018 | ||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 10.26 | $ | 10.64 | $ | 10.34 | $ | 10.49 | $ | 10.42 | $ | 10.46 | |||||||||||||||
Investment Activities: | |||||||||||||||||||||||||||
Net investment income (loss) | 0.17 | (b) | 0.10 | (b) | 0.12 | (b) | 0.16 | (b) | 0.17 | 0.13 | |||||||||||||||||
| Net realized and unrealized gains (losses) | (0.25 | ) | (0.38 | ) | 0.30 | (0.15 | ) | 0.06 | (0.03 | ) | |||||||||||||||||
| Total from Investment Activities | (0.08 | ) | (0.28 | ) | 0.42 | 0.01 | 0.23 | 0.10 | |||||||||||||||||||
Distributions to Shareholders from: | |||||||||||||||||||||||||||
Net investment income | (0.18 | ) | (0.10 | ) | (0.12 | ) | (0.16 | ) | (0.16 | ) | (0.14 | ) | |||||||||||||||
Total Distributions | (0.18 | ) | (0.10 | ) | (0.12 | ) | (0.16 | ) | (0.16 | ) | (0.14 | ) | |||||||||||||||
Net Asset Value, End of Period | $ | 10.00 | $ | 10.26 | $ | 10.64 | $ | 10.34 | $ | 10.49 | $ | 10.42 | |||||||||||||||
| Total Return (excludes sales charges) (c) (d) | (0.76 | )% | (2.64 | )% | 4.07 | % | 0.09 | % | 2.27 | % | 0.91 | % | |||||||||||||||
Ratios to Average Net Assets: | |||||||||||||||||||||||||||
Net Expenses (e) (f) (g) (h) | 0.67 | % | 0.78 | % | 0.76 | % | 0.75 | % | 0.77 | %(i) | 0.80 | % | |||||||||||||||
Net Investment Income (Loss) (e) | 1.87 | % | 0.96 | % | 1.12 | % | 1.54 | % | 1.56 | % | 1.27 | % | |||||||||||||||
Gross Expenses (e) (f) | 0.98 | % | 0.93 | % | 0.88 | % | 0.93 | % | 0.92 | % | 0.83 | % | |||||||||||||||
Supplemental Data: | |||||||||||||||||||||||||||
Net Assets at end of period (000's) | $ | 4,104 | $ | 12,792 | $ | 16,590 | $ | 10,144 | $ | 10,707 | $ | 11,349 | |||||||||||||||
Portfolio Turnover (c) (j) | 17 | % | 16 | % | 66 | %(k) | 54 | % | 31 | % | 25 | % | |||||||||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from March 31 to February 28.
(b) Per share net investment income (loss) has been calculated using the average daily shares method.
(c) Not annualized for periods less than one year.
(d) 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.
(e) Annualized for periods less than one year.
(f) Does not include acquired fund fees and expenses, if any.
(g) 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 July 31, 2023, instead of coinciding with the Fund's fiscal year end.
(h) 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.
(i) Prior to August 1, 2018, USAA Asset Management Company (previous Investment Adviser) had voluntarily agreed to limit the annual expenses of Class A to 0.80% of the Class A average daily net assets.
(j) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares.
(k) The portfolio turnover would be 32% of the average value of its portfolio with the exclusion of variable-rate demand notes with long-term maturities and one- or seven-day demand feature, or put options.
See notes to financial statements.
28
USAA Mutual Funds Trust | Notes to Financial Statements February 28, 2023 | ||||||
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 Tax Exempt Short-Term 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.
On June 29, 2022, the Board of Trustees ("the Board") approved the fiscal year-end change for the Fund from March 31 to February 28. The first full cycle of the new fiscal year-end reporting will begin March 1, 2023. As a result of the change, the Fund has a February 28, 2023 fiscal 11-month transition period, the results of which are reported in this Annual Report for the period ended February 28, 2023.
Victory Capital Management ("VCM" or 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 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 (unadjusted) in active markets for identical securities
• Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, or credit spreads, applicable to those securities, etc.)
• Level 3 — significant unobservable inputs (including the Adviser's assumptions in determining the fair value of investments)
29
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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, appointed as the valuation designee by the Board, has established the Pricing and Liquidity Committee (the "Committee"), and subject to Board oversight, the Committee administers and oversees the Fund's valuation policies and procedures, which are approved by the Board.
Debt securities are valued each business day by a pricing service approved by the valuation designee and subject to the oversight of the Board. The 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.
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 net asset value ("NAV") to be more reliable than it otherwise would be.
A summary of the valuations as of February 28, 2023, 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 | ||||||||||||||||
Municipal Bonds | $ | — | $ | 774,901 | $ | 2,439 | $ | 777,340 | |||||||||||
Total | $ | — | $ | 774,901 | $ | 2,439 | $ | 777,340 | |||||||||||
As of February 28, 2023, there were no transfers into/out of Level 3.
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.
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 and recorded daily using the effective interest method which adjusts, where
30
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
applicable, the amortization of premiums or accretion of discounts. Interest income is recorded daily on the accrual basis. 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 had a tax year end of March 31, and effective February 28, 2023, the Fund changed its tax year end to February 28.
For the 11 months ended February 28, 2023, 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 under specified conditions outlined in the valuation policies and procedures adopted by the Board. In addition, as defined under the valuation policies and procedures, each transaction must be effected at the independent current market price. For the 11 months ended February 28, 2023, 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) | |||||||||
| $ | 80,724 | $ | 57,500 | $ | — | ||||||
For the year ended March 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) | |||||||||
| $ | 66,680 | $ | 67,770 | $ | — | ||||||
Fees Paid Indirectly:
Expense offsets to custody fees that arise from credits on cash balances maintained on deposit are reflected on the Statements of Operations, as applicable, as Custodian fees.
31
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
3. Purchases and Sales:
Purchases and sales of securities (excluding securities maturing less than one year from acquisition) for the 11 months ended February 28, 2023, were as follows for the Fund (amounts in thousands):
Excluding | |||||||
Purchases | Sales | ||||||
$ | 130,305 |
| $ | 264,840 | |||
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 Securities and Exchange Commission ("SEC").
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 0.28% of the Fund's average daily net assets. Amounts incurred and paid to VCM for the 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements of Operations as Investment advisory fees.
The performance adjustment for each share class is accrued daily and calculated monthly by comparing the respective class' performance to that of the Lipper Short Municipal Debt Funds Index. The Lipper Short Municipal Debt Funds Index tracks the total return performance of the largest funds within the Lipper Short Municipal Debt Funds category.
The performance period for each share class consists of the current month plus the previous 35 months. The following table is utilized to determine the extent of the performance adjustment:
| Over/Under Performance Relative to Index (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 Short Municipal Debt Funds Index over that period, even if the class has overall negative returns during the performance period.
For the period April 1, 2022, to February 28, 2023, performance adjustments were $(183), $(1), and $(5) for Fund Shares, Institutional Shares, and Class A, in thousands, respectively. Performance adjustments were (0.02)%, less than (0.01)%, and (0.08)% for Fund Shares, Institutional Shares and Class A, respectively. For the period April 1, 2021, to March 31, 2022, performance adjustments were $555, $4, and $4 for Fund Shares, Institutional Shares, and Class A, in thousands, respectively. Performance adjustments were 0.05%, 0.01%, 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.
32
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 11 months ended February 28, 2023, and the year ended March 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, Institutional Shares, and Class A, respectively. Amounts incurred for the 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements 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 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements 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 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements 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 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 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements 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.
33
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements of Operations as 12b-1 fees.
In addition, the Distributor is entitled to receive commissions in connection with sales of Class A. For the 11 months ended February 28, 2023, the Distributor did not receive any commissions. For the year ended March 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 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements 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 July 31, 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 February 28, 2023, the expense limits (excluding voluntary waivers) were 0.51%, 0.47%, and 0.75% for Fund Shares, Institutional Shares, and Class A, respectively.
Under the terms of the expense limitation agreement, 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.
As of February 28, 2023, 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 February 28, 2023.
| Expires 2023* | Expires 2024 | Expires 2025 | Expires 2026 | Total | |||||||||||||||
| $ | — | (a) | $ | 68 | $ | 50 | $ | 158 | $ | 276 | |||||||||
(a) Rounds to less than $1 thousand.
* Amount expired on March 31, 2023.
As of March 31, 2022, the following amounts were available to be repaid to the Adviser (amounts in thousands).
| Expires 2023 | Expires 2024 | Expires 2025 | Total | ||||||||||||
| $ | 10 | $ | 68 | $ | 50 | $ | 128 | ||||||||
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 11 months ended February 28, 2023, and the year ended March 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.
34
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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.
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 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 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.
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. 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
35
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 27, 2022, with a termination date of June 26, 2023. 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 11 months ended February 28, 2023, 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 paid a pro-rata portion of the commitment fees plus any interest on amounts borrowed. For the year ended March 31,2022, and the period from April 1, 2022, through June 27, 2022, interest was based on the one-month LIBOR plus one percent. Effective with the renewal, for the period June 28, 2022, through February 28, 2023, interest was based on the one-month SOFR plus 1.10 percent. The Fund did not experience a material financial impact transitioning from LIBOR to SOFR. Interest charged to the 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 11 months ended February 28, 2023, and the year ended March 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,
36
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
is reflected on the Statements of Operations under Interfund lending fees. As a Lender, interest earned by the Fund, if any, during the period, is reflected on the Statements of Operations under Interfund lending.
The average borrowing or lending for the days outstanding and average interest rate for the Fund during the 11 months ended February 28, 2023, were as follows (amounts in thousands):
Borrower | Amount | Average | Days | Average | Maximum | ||||||||||||||||||
Borrower | $ | — | $ | 1,961 | 1 | 5.09 | % | $ | 1,961 | ||||||||||||||
* Based on the number of days borrowings were outstanding for the 11 months ended February 28, 2023.
The Fund did not utilize or participate in the Facility during the year ended March 31, 2022.
7. 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. 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 February 28, 2023, on the Statement 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):
11 Months Ended February 28, 2023 | |||||||
| Distributions Paid From | |||||||
| Tax-Exempt Income | Total Distributions Paid | ||||||
$ | 17,166 | $ | 17,166 | ||||
Year Ended March 31, 2022 | Year Ended March 31, 2021 | ||||||||||||||
| Distributions Paid From | Distributions Paid From | ||||||||||||||
| Tax-Exempt Income | Total Distributions Paid | Tax-Exempt Income | Total Distributions Paid | ||||||||||||
| $ | 13,524 | $ | 13,524 | $ | 16,886 | $ | 16,886 | ||||||||
37
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
As of February 28, 2023, the components of accumulated earnings (loss) on a tax basis were as follows (amounts in thousands):
| Undistributed Tax-Exempt Income | Accumulated Earnings | Distributions Payable | Accumulated Capital and Other Losses | Unrealized Appreciation (Depreciation)* | Total Accumulated Earnings (Loss) | ||||||||||||||||||
| $ | 1,895 | $ | 1,895 | $ | (1,574 | ) | $ | (30,183 | ) | $ | (33,409 | ) | $ | (63,271 | ) | ||||||||
* The difference between the book-basis and tax-basis unrealized appreciation (depreciation) is attributable defaulted bond adjustments.
As of February 28, 2023, 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 | |||||||||
| $ | 2,587 | $ | 27,596 | $ | 30,183 | ||||||
As of February 28, 2023, 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) | ||||||||||||
| $ | 810,749 | $ | 1,295 | $ | (34,704 | ) | $ | (33,409 | ) | ||||||
8. Subsequent Events:
The Board, upon recommendation of the Adviser, has approved a change in the name of the Trust and each individual fund within the Trust. On February 23, 2023, an initial filing was made with the SEC to commence the process to effectuate the following changes.
Effective at the start of business on April 24, 2023 (the "Effective Date"), the name of the Trust changed from USAA Mutual Funds Trust to Victory Portfolios III, and all references to USAA Mutual Funds Trust in the summary prospectus, statutory prospectus, and statement of additional information ("SAI") will be replaced by the new name.
Also on the Effective Date, references to the current name of the Fund in the summary prospectus, statutory prospectus, and SAI will be replaced with the new name as follows:
Current Name | New Name | ||||||
USAA Tax Exempt Short-Term Fund | Victory Tax Exempt Short-Term Fund | ||||||
In addition, on the Effective Date, USAA Investments, a Victory Capital Management Inc. investment franchise, that currently manages the USAA Fixed Income Funds, will change its name to Victory Income Investors, and all references to USAA Investments in the summary prospectus, statutory prospectus, and SAI, will be replaced.
Please note that there will be no changes in the management of the Fund or to the Fund's ticker symbols.
38
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of USAA Tax Exempt Short-Term Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of USAA Tax Exempt Short-Term Fund (the "Fund") (one of the funds constituting USAA Mutual Funds Trust (the "Trust")), including the schedule of portfolio investments as of February 28, 2023, and the related statements of operations for the period from April 1, 2022 through February 28, 2023 and the year ended March 31, 2022, the statements of changes in net assets for the period from April 1, 2022 through February 28, 2023 and each of the two years in the period ended March 31, 2022, the financial highlights for the period from April 1, 2022 through February 28, 2023 and each of the five years in the period ended March 31, 2022, 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 February 28, 2023, the results of its operations for the period from April 1, 2022 through February 28, 2023 and the year ended March 31, 2022, the statements of changes in net assets for the period from April 1, 2022 through February 28, 2023 and each of the two years in the period ended March 31, 2022, and its financial highlights for the period from April 1, 2022 through February 28, 2023 and each of the five years in the period ended March 31, 2022, 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 February 28, 2023, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. 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
April 28, 2023
39
USAA Mutual Funds Trust | Supplemental Information February 28, 2023 | ||||||
(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 date 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 | ||||||||||||||||||
40
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 (06/17-06/19); 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 (03/15-03/21). | 45 | None | ||||||||||||||||||
| Paul L. McNamara (July 1948) | Trustee | Trustee since January 2012 | Retired. | 45 | None | ||||||||||||||||||
41
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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) | ||||||||||||||||||
42
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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.
43
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
Officers:
The officers of the Trust, their date 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. (since 2022); 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. (07/01/19-present); Executive Director, Investment and Financial Administration, USAA (2012-06/30/19); 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. (07/01/19-present); Accounting/ Financial Director, USAA (12/13-06/30/19). | ||||||||||||
| 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). | ||||||||||||
44
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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). | ||||||||||||
45
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 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 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 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 September 1, 2022, through February 28, 2023.
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 9/1/22 | Actual Ending Account Value 2/28/23 | Hypothetical Ending Account Value 2/28/23 | Actual Expenses Paid During Period 9/1/22- 2/28/23* | Hypothetical Expenses Paid During Period 9/1/22- 2/28/23* | Annualized Expense Ratio During Period 9/1/22- 2/28/23 | ||||||||||||||||||||||
Fund Shares | $ | 1,000.00 | $ | 1,005.10 | $ | 1,022.51 | $ | 2.29 | $ | 2.31 | 0.46 | % | |||||||||||||||
Institutional Shares | 1,000.00 | 1,006.20 | 1,022.51 | 2.29 | 2.31 | 0.46 | % | ||||||||||||||||||||
Class A | 1,000.00 | 1,004.30 | 1,021.62 | 3.18 | 3.21 | 0.64 | % | ||||||||||||||||||||
* Expenses are equal to the average account value multiplied by the Fund's annualized expense ratio multiplied by 181/365 (the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year).
46
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
Additional Federal Income Tax Information
The following federal tax information related to the Fund's fiscal 11 months ended February 28, 2023, 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 2024.
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 11 months ended February 28, 2023 (amounts in thousands):
Tax | |||||||
$ | 17,166 | ||||||
47
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
Considerations of the Board in Continuing the Investment Advisory Agreement
USAA Tax Exempt Short-Term Fund (the "Fund")
At a meeting of the Board of Trustees (the "Board") of USAA Mutual Funds Trust (the "Trust") held on December 8-9, 2022, 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 8-9, 2022, 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 21, 2022.
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.
48
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 program, (iv) derivatives risk management program, and (v) 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 adjustment, 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 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 three-year periods ended June 30, 2022, and was above the average of its performance universe and its Lipper index for the five- and ten-year periods ended June 30, 2022. The Board took into account management's discussion of the Fund's performance, including the reasons for the Fund's underperformance for certain periods.
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
49
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
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 took into account management's discussion of the Fund's current advisory fee structure. 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.
50
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 10, 2023, 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-RN (prior to August 2022, 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 | ||||||
vcm.com | (800) 235-8396 | ||||||
40856-0423
February 28, 2023
Annual Report
USAA Tax Exempt Money Market Fund
(Also Known as Victory Tax Exempt Money Market Fund*)
* Effective at the start of business on April 24, 2023, the Fund name will change to Victory Tax Exempt Money Market Fund. Please see Notes to the Financial Statements for subsequent event information.
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 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.
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, 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 | 11 | ||||||
Statements of Operations | 12 | ||||||
Statements of Changes in Net Assets | 13 | ||||||
Financial Highlights | 14 | ||||||
Notes to Financial Statements | 15 | ||||||
| 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 | ||||||
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,
If you are reading this letter but double-checking your calendar, be assured there's no mistake. The annual reporting period for your USAA Mutual Fund has shifted from a fiscal year ended March 31st to a fiscal year ended February 28th/the last day of February. This change has no material impact on any of your investments. This change aims to help us improve efficiencies and reduce operational costs. Therefore, this letter covers an abbreviated "annual" period from April 1, 2022, through February 28, 2023. Future annual reports will cover the 12-month period ended February 28th/the last day of February going forward.
Our most recent annual reporting period has been a challenging period for investors. Consider some of the headwinds: heightened geopolitical tensions, a terrible war in Eastern Europe, elevated energy and food costs, high inflation, and rising interest rates. All this has dampened global growth and created a difficult backdrop for both bond and stock investors.
The inflation data was particularly troublesome and surprised many with some of the highest readings since the 1970s. In response, the U.S. Federal Reserve (the "Fed") shifted to a more restrictive monetary policy than most anticipated. The Fed has been boosting the Fed funds interest rate repeatedly and aggressively, including a series of 75 basis point raises. (A basis point is 1/100th of a percentage point.) And if that wasn't enough, zero-COVID-19 policies in China (which fortunately have been recently lifted) further exacerbated supply chain issues and raised questions about global trade. As one might expect, all of these obstacles ratcheted up volatility across financial markets. Broad market stock indices pulled back substantially around the world.
The S&P 500® Index, the bell-weather proxy for our domestic stock market, delivered a negative total return of almost 11% during our abbreviated annual reporting period. But perhaps what was even more difficult was the performance of fixed income markets, which normally are considered a safe haven in times of equity turmoil. But not during this past year when interest rates were rising sharply. In fact, the Bloomberg US Aggregate Bond Index—a proxy for a diversified fixed income portfolio and one that many investors and institutions follow closely—delivered a negative total return of approximately 7.0%. That's not exactly the offset to equity performance that many investors have come to expect from bonds.
It's been difficult, and we fully acknowledge that the steady drumbeat of bad news and bouts of stomach-churning volatility can take a toll on investors' psyche. Nobody likes opening their account statements during declining markets, and even when markets often snap back sharply (as happened this past July, October, and earlier this calendar year), investors often wonder if they have missed an opportunity.
Through all the turmoil and challenges in our most recent annual reporting period, we are reminded of two enduring realities: 1) financial markets are dynamic and apt to change abruptly; 2) it's vital to remain calm and rational whenever faced with those inevitable bouts of turmoil.
2
Fortunately, we think that investors can take comfort knowing that all our independent investment franchises have experience managing portfolios through a wide variety of market environments. Our investment professionals remain calm during turbulent financial markets, and we think it's imperative that investors do the same.
We still believe that a long-term plan, a well-diversified portfolio across asset classes and investment types, and a clear understanding of individual risk tolerances are the key ingredients for staying the course and progressing on investment goals. Moreover, all our investment professionals continually monitor the environment and work hard to position portfolios opportunistically no matter what the markets bring. Remember, turmoil can also create opportunity.
On the following pages, you will find information relating to your USAA Mutual Fund, brought to you by Victory Capital. If you have any questions, we encourage you to contact our Member Service Representatives. Call 800-235-8396, or visit our website at vcm.com.
From all of us here at Victory Capital, thank you for your ongoing confidence and for letting us help you work toward your investment goals.
Christopher K. Dyer, CFA
President,
USAA Mutual Funds Trust
3
USAA Tax Exempt Money Market Fund
Manager's Commentary
(Unaudited)
• What were the market conditions during the reporting period?
During the 11-month reporting period ended February 28, 2023, market conditions changed dramatically. [The Fund's fiscal year-end changed this year to February 28 from March 31, resulting in a shorter reporting period for fiscal year ended 2023.] Beginning in March 2022, officials at the U.S. Federal Reserve (the "Fed") began raising their target range for federal funds in an effort to cool the economy and control inflation. With inflation firmly higher than the Fed's target level, they continued to raise rates aggressively during the entire reporting period. As of April 1, 2022, the target federal funds rate was a range of between 0.25% and 0.50%. By the end of the reporting period on February 28, 2023, that range had risen to between 4.50% and 4.75%. The Fed has indicated that, depending on incoming economic data, additional future rate increases may be required.
Interest rates on tax-exempt money market securities started the reporting period at very low levels but in response to Fed officials' actions, rates began to rise. At the beginning of the reporting period, the SIFMA Municipal Swap Index, the index of seven-day variable rate demand notes ("VRDNs"), was just 0.51%. By the close of the reporting period, the index had risen to 3.42%.
• How did the USAA Tax Exempt Money Market Fund (the "Fund") perform during the reporting period?
For the 11-month reporting period ended February 28, 2023, the Fund had a return of 1.15%, compared to an average return of 1.24% for the funds in the Lipper Tax-Exempt Money Market Funds category.
• What strategies did you employ during the reporting period?
We continued to focus on our two primary goals: preservation of capital and liquidity. The Fund invests the majority of its assets in VRDNs, which generally have interest rates that adjust either daily or weekly to the market. The VRDNs owned by the Fund continued to provide both flexibility and liquidity because they can be sold at par value (100% of face value) upon seven days or less notice. They also offer the Fund a degree of safety as many of these VRDNs are guaranteed by a bank letter of credit for the payment of both principal and interest. Because of their floating rate nature, as interest rates increase, so do the rates on VRDNs.
As always, we continued to work with our in-house team of analysts to help us identify attractive opportunities for the portfolio. They also continue to analyze and monitor every holding in the Fund.
Thank you for allowing us to assist you with your investment needs.
4
USAA Tax Exempt Money Market Fund
Investment Overview
(Unaudited)
Average Annual Total Return
Year Ended February 28, 2023
Fund Shares | |||||||
INCEPTION DATE | 2/6/84 | ||||||
Net Asset Value | |||||||
One Year | 1.15 | % | |||||
Five Year | 0.68 | % | |||||
Ten Year | 0.42 | % | |||||
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 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 Tax Exempt Money Market Fund — Growth of $10,000
The graph reflects investment 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 Tax Exempt Money Market Fund | February 28, 2023 | ||||||
(Unaudited)
Investment Objective and Portfolio Holdings:
The Fund provides investors with interest income that is exempt from federal income tax and has a further objective of preserving capital and maintaining liquidity.
Top 10 Industries:
February 28, 2023
(% of Net Assets)
Development | 30.9 | % | |||||
Medical | 15.7 | % | |||||
Pollution | 10.3 | % | |||||
Higher Education | 8.2 | % | |||||
Multifamily Housing | 6.6 | % | |||||
Power | 6.0 | % | |||||
Transportation | 4.4 | % | |||||
Nursing Homes | 4.2 | % | |||||
Facilities | 4.2 | % | |||||
Education | 2.7 | % | |||||
* 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.
6
| USAA Mutual Funds Trust USAA Tax Exempt Money Market Fund | Schedule of Portfolio Investments February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Municipal Bonds (95.3%) | |||||||||||
Alabama (3.9%): | |||||||||||
| Mobile County IDA Revenue (LOC — Swedbank AB), Series B, 2.85%, 7/1/40, Continuously Callable @100 (a) | $ | 15,000 | $ | 15,000 | |||||||
| West Jefferson Industrial Development Board Revenue, 2.57%, 6/1/28, Continuously Callable @100 (a) | 3,190 | 3,190 | |||||||||
18,190 | |||||||||||
Florida (1.7%): | |||||||||||
County of Escambia Revenue, 2.08%, 4/1/39, Continuously Callable @100 (a) | 6,500 | 6,500 | |||||||||
County of St. Lucie Revenue, 2.25%, 9/1/28, Continuously Callable @100 (a) | 1,400 | 1,400 | |||||||||
7,900 | |||||||||||
Georgia (3.4%): | |||||||||||
| Development Authority of Appling County Revenue, 2.55%, 9/1/29, Continuously Callable @100 (a) | 10,800 | 10,800 | |||||||||
| The Development Authority of Burke County Revenue, Series 1, 2.40%, 7/1/49, Continuously Callable @100 (a) | 5,775 | 5,775 | |||||||||
16,575 | |||||||||||
Illinois (7.3%): | |||||||||||
| Illinois Educational Facilities Authority Revenue (LOC — Huntington National Bank), Series A, 2.84%, 10/1/32, Continuously Callable @100 (a) | 12,880 | 12,880 | |||||||||
| Illinois Finance Authority Revenue (LOC — PNC Financial Services Group), 2.80%, 4/1/37, Continuously Callable @100 (a) | 13,000 | 13,000 | |||||||||
| Metropolitan Pier & Exposition Authority Revenue (LIQ — Barclays Bank PLC), Series 2015-XF1045, 2.49%, 6/15/53, Callable 4/13/23 @100 (a) (b) | 4,355 | 4,355 | |||||||||
| Village of Channahon Revenue (LOC — U.S. Bancorp), 2.75%, 12/1/34, Continuously Callable @100 (a) | 4,540 | 4,540 | |||||||||
34,775 | |||||||||||
Indiana (2.2%): | |||||||||||
| City of Berne Revenue (LOC — Federal Home Loan Bank of Indianapolis), 2.61%, 10/1/33, Continuously Callable @100 (a) | 3,965 | 3,965 | |||||||||
| City of Evansville Revenue (LOC — Fifth Third Bank), 2.90%, 1/1/25, Callable 3/17/23 @100 (a) | 995 | 995 | |||||||||
| Indiana Finance Authority Revenue (LOC — Federal Home Loan Bank of Indianapolis), 2.97%, 7/1/29, Continuously Callable @100 (a) | 5,550 | 5,550 | |||||||||
10,510 | |||||||||||
Iowa (4.3%): | |||||||||||
| Iowa Finance Authority Revenue 2.51%, 6/1/39, Continuously Callable @100 (a) | 13,600 | 13,600 | |||||||||
Series B, 2.50%, 9/1/36, Continuously Callable @100 (a) | 6,763 | 6,763 | |||||||||
20,363 | |||||||||||
Kansas (4.8%): | |||||||||||
| City of Burlington Revenue 3.06%, 9/1/35, Continuously Callable @100 (a) | 8,250 | 8,250 | |||||||||
Series B, 3.06%, 9/1/35, Continuously Callable @100 (a) | 4,200 | 4,200 | |||||||||
City of St Marys Revenue, 3.05%, 4/15/32, Continuously Callable @100 (a) | 10,500 | 10,500 | |||||||||
22,950 | |||||||||||
See notes to financial statements.
7
| USAA Mutual Funds Trust USAA Tax Exempt Money Market Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Kentucky (4.1%): | |||||||||||
| City of Georgetown Revenue (LOC — Fifth Third Bank), 2.90%, 11/15/29, Callable 3/15/23 @100 (a) | $ | 9,935 | $ | 9,935 | |||||||
| Kentucky Economic Development Finance Authority Revenue, Series C, 2.60%, 5/1/34, Continuously Callable @100 (a) | 8,200 | 8,200 | |||||||||
| Lexington-Fayette Urban County Government Revenue (LOC — Federal Home Loan Bank of Cincinnati), 3.17%, 12/1/27, Callable 3/16/23 @100 (a) | 1,245 | 1,245 | |||||||||
19,380 | |||||||||||
Louisiana (5.8%): | |||||||||||
| Parish of St. James Revenue, Series B-1, 2.85%, 11/1/40, Continuously Callable @100 (a) | 22,650 | 22,650 | |||||||||
| St. Tammany Corp. Revenue (LOC — Federal Home Loan Bank of Dallas), 2.60%, 3/1/33, Continuously Callable @100 (a) | 4,490 | 4,490 | |||||||||
27,140 | |||||||||||
Maryland (1.6%): | |||||||||||
| Town of Williamsport Revenue (LOC — Manufacturers & Traders Trust Co.), 2.52%, 11/1/37 (a) | 7,450 | 7,450 | |||||||||
Michigan (0.4%): | |||||||||||
| Michigan Strategic Fund Revenue (LOC — Fifth Third Bank), 2.92%, 3/1/37, Continuously Callable @100 (a) | 1,800 | 1,800 | |||||||||
Minnesota (3.0%): | |||||||||||
| City of Rochester Revenue (LOC — Federal Home Loan Bank of Indianapolis), Series A, 2.78%, 5/1/61, Continuously Callable @100 (a) | 14,000 | 14,000 | |||||||||
Mississippi (0.7%): | |||||||||||
| Mississippi Business Finance Corp. Revenue (LOC — Federal Home Loan Bank of Dallas), 2.60%, 3/1/33, Continuously Callable @100 (a) | 3,170 | 3,170 | |||||||||
Missouri (4.2%): | |||||||||||
| Jackson County IDA Revenue (LOC — Commerce Bank, N.A.), 2.80%, 7/1/25, Continuously Callable @100 (a) | 20,000 | 20,000 | |||||||||
New Hampshire (4.2%): | |||||||||||
| New Hampshire Business Finance Authority Revenue (LOC — Landesbank Hessen-Thuringen), 2.52%, 9/1/30, Continuously Callable @100 (a) | 19,990 | 19,990 | |||||||||
New Mexico (1.1%): | |||||||||||
| New Mexico Hospital Equipment Loan Council Revenue (LOC — Fifth Third Bank), 2.54%, 7/1/25, Continuously Callable @100 (a) | 5,000 | 5,000 | |||||||||
New York (11.8%): | |||||||||||
| Build NYC Resource Corp. Revenue (LOC — Toronto-Dominion Bank), 2.62%, 12/1/45, Continuously Callable @100 (a) | 5,010 | 5,010 | |||||||||
| Guilderland Industrial Development Agency Revenue (LOC — Key Bank, N.A.), Series A, 2.95%, 7/1/32, Continuously Callable @100 (a) | 2,480 | 2,480 | |||||||||
| Metropolitan Transportation Authority Revenue (LOC — Barclays Bank PLC), Series E-1, 2.47%, 11/1/35, Callable 4/3/23 @100 (a) | 20,900 | 20,900 | |||||||||
| New York City Capital Resources Corp. Revenue (LOC — Manufacturers & Traders Trust Co.), 2.67%, 12/1/40, Continuously Callable @100 (a) | 7,500 | 7,500 | |||||||||
| New York State Energy Research & Development Authority Revenue (LOC — Mizuho Corporate Bank Ltd.), Series A-3, 2.80%, 5/1/39, Continuously Callable @100 (a) | 5,600 | 5,600 | |||||||||
See notes to financial statements.
8
| USAA Mutual Funds Trust USAA Tax Exempt Money Market Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
| Onondaga County Industrial Development Agency Revenue (LOC — Manufacturers & Traders Trust Co.), 2.52%, 12/1/31, Continuously Callable @100 (a) | $ | 4,315 | $ | 4,315 | |||||||
| Ramapo Housing Authority Revenue (LOC — Manufacturers & Traders Trust Co.), 2.52%, 12/1/29, Continuously Callable @100 (a) | 8,285 | 8,285 | |||||||||
| St. Lawrence County Industrial Development Agency Revenue (LOC — Citizens Financial Group), 2.65%, 7/1/37 (a) | 1,720 | 1,720 | |||||||||
55,810 | |||||||||||
Ohio (0.2%): | |||||||||||
County of Hamilton Revenue (LOC — Fifth Third Bank), 2.90%, 12/1/24 (a) | 1,000 | 1,000 | |||||||||
Oklahoma (5.8%): | |||||||||||
| Edmond Economic Development Authority Revenue (LOC — Bank of Oklahoma, N.A.), Series A, 2.84%, 6/1/31, Callable 4/1/23 @100 (a) | 4,520 | 4,520 | |||||||||
| Garfield County Industrial Authority Revenue, Series A, 2.60%, 1/1/25, Callable 4/5/23 @100 (a) | 20,900 | 20,900 | |||||||||
| Muskogee Industrial Trust Revenue, Series A, 2.60%, 6/1/27, Continuously Callable @100 (a) | 2,000 | 2,000 | |||||||||
27,420 | |||||||||||
Rhode Island (1.4%): | |||||||||||
| Rhode Island Commerce Corp. Revenue (LOC — Citizens Financial Group), 2.48%, 3/1/38, Callable 4/1/23 @100 (a) | 3,210 | 3,210 | |||||||||
| Rhode Island Health and Educational Building Corp. Revenue (LOC — Citizens Financial Group), 2.32%, 6/1/35, Callable 4/1/23 @100 (a) | 3,500 | 3,500 | |||||||||
6,710 | |||||||||||
South Carolina (3.6%): | |||||||||||
| South Carolina Jobs-Economic Development Authority Revenue (LOC — Federal Home Loan Bank of Indianapolis), 2.48%, 5/1/61, Continuously Callable @100 (a) | 17,400 | 17,400 | |||||||||
Tennessee (3.9%): | |||||||||||
| Chattanooga Health Educational & Housing Facility Board Revenue, Series C, 3.08%, 5/1/39, Continuously Callable @100 (a) | 14,000 | 14,000 | |||||||||
| Metropolitan Government Nashville & Davidson County Health & Educational Facilities Board Revenue (LOC — Fifth Third Bank), 2.90%, 12/1/24, Callable 3/17/23 @100 (a) | 4,465 | 4,465 | |||||||||
18,465 | |||||||||||
Texas (8.2%): | |||||||||||
| Port of Arthur Navigation District Industrial Development Corp. Revenue, Series A, 2.52%, 12/1/40, Callable 4/3/23 @100 (a) | 16,000 | 16,000 | |||||||||
| Port of Port Arthur Navigation District Revenue 3.67%, 11/1/40, Continuously Callable @100 (a) | 4,000 | 4,000 | |||||||||
Series A, 3.00%, 4/1/40, Continuously Callable @100 (a) | 9,850 | 9,850 | |||||||||
Series B, 3.00%, 4/1/40, Continuously Callable @100 (a) | 9,000 | 9,000 | |||||||||
38,850 | |||||||||||
Virginia (4.2%): | |||||||||||
| Loudoun County Economic Development Authority Revenue Series A, 2.93%, 2/15/38, Callable 4/3/23 @100 (a) | 10,000 | 10,000 | |||||||||
Series E-1, 2.93%, 2/15/38, Callable 4/3/23 @100 (a) | 10,000 | 10,000 | |||||||||
20,000 | |||||||||||
See notes to financial statements.
9
| USAA Mutual Funds Trust USAA Tax Exempt Money Market Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Washington (1.5%): | |||||||||||
| Washington Higher Education Facilities Authority Revenue, 2.80%, 10/1/31, Callable 4/5/23 @100 (a) | $ | 6,915 | $ | 6,915 | |||||||
West Virginia (2.0%): | |||||||||||
| West Virginia Hospital Finance Authority Revenue (LOC — PNC Financial Services Group), Series D, 2.44%, 6/1/41, Continuously Callable @100 (a) | 9,700 | 9,700 | |||||||||
Total Municipal Bonds (Cost $451,463) | 451,463 | ||||||||||
Municipal Commercial Paper (3.9%) | |||||||||||
| Houston Texas 2.85%, 3/15/23 | 15,000 | 15,000 | |||||||||
2.45%, 3/22/23 | 3,700 | 3,700 | |||||||||
Total Municipal Commercial Paper (Cost $18,700) | 18,700 | ||||||||||
Total Investments (Cost $470,163) — 99.2% | 470,163 | ||||||||||
Other assets in excess of liabilities — 0.8% | 3,980 | ||||||||||
NET ASSETS — 100.00% | $ | 474,143 | |||||||||
(a) 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.
(b) Rule 144A security or other security that is restricted as to resale to institutional investors. As of February 28, 2023, the fair value of these securities was $4,355 thousands and amounted to 0.9% of net assets.
Continuously callable — Investment is continuously callable or will be continuously callable on any date after the first call date until its maturity.
LOC — Letter of Credit
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.
LIQ Liquidity enhancement that may, under certain circumstances, provide for repayment of principal and interest upon demand from the name listed.
LOC Principal and interest payments are guaranteed by a bank letter of credit or other bank credit agreement.
See notes to financial statements.
10
USAA Mutual Funds Trust | Statement of Assets and Liabilities February 28, 2023 | ||||||
(Amounts in Thousands, Except Per Share Amounts)
| USAA Tax Exempt Money Market Fund | |||||||
Assets: | |||||||
Investments, at value (Cost $470,163) | $ | 470,163 | |||||
Cash | 313 | ||||||
Receivables: | |||||||
Interest | 1,556 | ||||||
Capital shares issued | 913 | ||||||
Investments sold | 2,000 | ||||||
From Adviser | 18 | ||||||
Prepaid expenses | 11 | ||||||
Total Assets | 474,974 | ||||||
Liabilities: | |||||||
Payables: | |||||||
Distributions | 38 | ||||||
Capital shares redeemed | 543 | ||||||
Accrued expenses and other payables: | |||||||
Investment advisory fees | 102 | ||||||
Administration fees | 36 | ||||||
Custodian fees | 1 | ||||||
Transfer agent fees | 55 | ||||||
Compliance fees | — | (a) | |||||
Trustees' fees | — | (a) | |||||
Other accrued expenses | 56 | ||||||
Total Liabilities | 831 | ||||||
Net Assets: | |||||||
Capital | 474,142 | ||||||
Total accumulated earnings | 1 | ||||||
Net Assets | $ | 474,143 | |||||
Shares (unlimited number of shares authorized with no par value): | 474,134 | ||||||
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.
11
USAA Mutual Funds Trust | Statements of Operations | ||||||
(Amounts in Thousands)
| USAA Tax Exempt Money Market Fund | |||||||||||
| 11 Months Ended February 28, 2023(a) | Year Ended March 31, 2022 | ||||||||||
Investment Income: | |||||||||||
Interest | $ | 7,926 | $ | 876 | |||||||
Total Income | 7,926 | 876 | |||||||||
Expenses: | |||||||||||
Investment advisory fees | 1,244 | 1,465 | |||||||||
Administration fees | 444 | 523 | |||||||||
Sub-Administration fees | 18 | 5 | |||||||||
Custodian fees | 11 | 20 | |||||||||
Transfer agent fees | 666 | 785 | |||||||||
Trustees' fees | 46 | 49 | |||||||||
Compliance fees | 4 | 4 | |||||||||
Legal and audit fees | 65 | 45 | |||||||||
State registration and filing fees | 46 | 53 | |||||||||
Other expenses | 63 | 91 | |||||||||
Total Expenses | 2,607 | 3,040 | |||||||||
Expenses waived/reimbursed by Adviser | (147 | ) | (2,216 | ) | |||||||
Net Expenses | 2,460 | 824 | |||||||||
Net Investment Income | 5,466 | 52 | |||||||||
Realized Gains from Investments: | |||||||||||
Net realized gains from investment securities | — | 24 | |||||||||
Net realized gains on investments | — | 24 | |||||||||
Change in net assets resulting from operations | $ | 5,466 | $ | 76 | |||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from March 31 to February 28
See notes to financial statements.
12
USAA Mutual Funds Trust | Statements of Changes in Net Assets | ||||||
(Amounts in Thousands)
USAA Tax Exempt Money Market Fund | |||||||||||||||
| 11 Months Ended February 28, 2023(a) | Year Ended March 31, 2022 | Year Ended March 31, 2021 | |||||||||||||
From Investments: | |||||||||||||||
Operations: | |||||||||||||||
Net Investment Income | $ | 5,466 | $ | 52 | $ | 767 | |||||||||
Net realized gains | — | 24 | — | ||||||||||||
Change in net assets resulting from operations | 5,466 | 76 | 767 | ||||||||||||
| Change in net assets resulting from distributions to shareholders | (5,488 | ) | (52 | ) | (988 | ) | |||||||||
| Change in net assets resulting from capital transactions | (28,185 | ) | (59,689 | ) | (783,392 | ) | |||||||||
Change in net assets | (28,207 | ) | (59,665 | ) | (783,613 | ) | |||||||||
Net Assets: | |||||||||||||||
Beginning of period | 502,350 | 562,015 | 1,345,628 | ||||||||||||
End of period | $ | 474,143 | $ | 502,350 | $ | 562,015 | |||||||||
Capital Transactions: | |||||||||||||||
Proceeds from shares issued | $ | 109,821 | $ | 109,591 | $ | 268,164 | |||||||||
Distributions reinvested | 5,323 | 51 | 967 | ||||||||||||
Cost of shares redeemed | (143,329 | ) | (169,331 | ) | (1,052,523 | ) | |||||||||
| Change in net assets resulting from capital transactions | $ | (28,185 | ) | $ | (59,689 | ) | $ | (783,392 | ) | ||||||
Share Transactions: | |||||||||||||||
Issued | 109,821 | 109,591 | 268,164 | ||||||||||||
Reinvested | 5,323 | 51 | 967 | ||||||||||||
Redeemed | (143,329 | ) | (169,331 | ) | (1,052,523 | ) | |||||||||
Change in Shares | (28,185 | ) | (59,689 | ) | (783,392 | ) | |||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from March 31 to February 28.
See notes to financial statements.
13
USAA Mutual Funds Trust | Financial Highlights | ||||||
For a Share Outstanding Throughout Each Period
USAA Tax Exempt Money Market Fund | |||||||||||||||||||||||||||
| 11 Months Ended February 28, 2023(a) | Year Ended March 31, 2022 | Year Ended March 31, 2021 | Year Ended March 31, 2020 | Year Ended March 31, 2019 | Year Ended March 31, 2018 | ||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | |||||||||||||||
Investment Activities: | |||||||||||||||||||||||||||
Net investment income | 0.01 | (b) | — | (b)(c) | — | (b)(c) | 0.01 | (b) | 0.01 | 0.01 | |||||||||||||||||
| Net realized and unrealized gains | — | — | (c) | — | — | (c) | — | (c) | — | (c) | |||||||||||||||||
| Total from Investment Activities | 0.01 | — | (c) | — | (c) | 0.01 | 0.01 | 0.01 | |||||||||||||||||||
Distributions to Shareholders from: | |||||||||||||||||||||||||||
Net investment income | (0.01 | ) | — | (c) | — | (c) | (0.01 | ) | (0.01 | ) | (0.01 | ) | |||||||||||||||
Net realized gains | — | (c) | — | — | (c) | — | — | — | |||||||||||||||||||
Total Distributions | (0.01 | ) | — | (c) | — | (c) | (0.01 | ) | (0.01 | ) | (0.01 | ) | |||||||||||||||
Net Asset Value, End of Period | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | |||||||||||||||
Total Return (d) (e) | 1.15 | % | 0.01 | % | 0.10 | % | 1.05 | % | 1.05 | % | 0.51 | %(f) | |||||||||||||||
Ratios to Average Net Assets: | |||||||||||||||||||||||||||
Net Expenses (g) (h) (i) | 0.55 | %(j) | 0.16 | %(k) | 0.35 | % | 0.56 | % | 0.56 | % | 0.56 | %(f) | |||||||||||||||
Net Investment Income (g) | 1.23 | % | 0.01 | % | 0.11 | % | 1.04 | % | 1.04 | % | 0.50 | % | |||||||||||||||
Gross Expenses (g) (h) | 0.59 | % | 0.58 | % | 0.57 | % | 0.56 | % | 0.56 | % | 0.56 | % | |||||||||||||||
Supplemental Data: | |||||||||||||||||||||||||||
Net Assets at end of period (000's) | $ | 474,143 | $ | 502,350 | $ | 562,015 | $ | 1,345,628 | $ | 1,598,214 | $ | 1,761,649 | |||||||||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from March 31 to February 28.
(b) Per share net investment income has been calculated using the average daily shares method.
(c) Amount is less than $0.005 per share.
(d) Not annualized for periods less than one year.
(e) Assumes reinvestment of all net investment income and realized capital gain distributions, if any, during the period. Includes adjustments in accordance with U.S. Generally Accepted Accounting Principles and could differ from the Lipper reported return.
(f) Prior to August 1, 2017, USAA Asset Management Company (previous Investment Advisor) 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.
(g) Annualized for periods less than one year.
(h) Does not include acquired fund fees and expenses, if any.
(i) 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 July 31, 2023, instead of coinciding with the Fund's fiscal year end.
(j) Includes impact of voluntary waiver. Without this voluntary waiver, the net expense ratio would have been 0.01% higher.
(k) Includes impact of voluntary waiver. Without this voluntary waiver, the net expense ratio would have been 0.40% higher.
See notes to financial statements.
14
USAA Mutual Funds Trust | Notes to Financial Statements February 28, 2023 | ||||||
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 Tax Exempt Money Market Fund (the "Fund"). The Fund is classified as diversified under the 1940 Act.
The Fund operates as a retail money market fund in compliance with the requirements of Rule 2a-7 under the 1940 Act and as a retail 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.
On June 29, 2022, the Board of Trustees ("the Board") approved the fiscal year-end change for the Fund from March 31 to February 28. The first full cycle of the new fiscal year-end reporting will begin March 1, 2023. As a result of the change, the Fund has a February 28, 2023 fiscal 11-month transition period, the results of which are reported in this Annual Report for the period ended February 28, 2023.
Victory Capital Management ("VCM" or 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 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.
15
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 (unadjusted) in active markets for identical securities
• Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, or credit spreads, applicable to those securities, etc.)
• Level 3 — significant unobservable inputs (including the Adviser's assumptions in determining the fair value of investments)
The Adviser, appointed as the valuation designee by the Board, has established the Pricing and Liquidity Committee (the "Committee"), and subject to Board oversight, the Committee administers and oversees the Fund's valuation policies and procedures, which are approved by the Board.
All securities held in the Fund are short-term debt securities, which are valued pursuant to Rule 2a-7 under the 1940 Act and the Money Market Funds: Procedures to Stabilize Net Asset Value ("the Procedures"). 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 the Procedures to stabilize net assets and valuation procedures approved by the Board.
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.
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 and recorded daily using the effective interest method which adjusts, where applicable, the amortization of premiums or accretion of discounts. Interest income is recorded daily on the accrual basis. 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 had a tax year end of March 31, and effective February 28, 2023, the Fund changed its tax year end to February 28.
For the 11 months ended February 28, 2023, 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.
16
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 under specified conditions outlined in the valuation policies and procedures adopted by the Board. In addition, as defined under the valuation policies and procedures, each transaction must be effected at the independent current market price. For the 11 months ended February 28, 2023, 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) | |||||||||
| $ | 10,000 | $ | 10,500 | $ | — | ||||||
For the year ended March 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) | |||||||||
| $ | 69,615 | $ | 37,700 | $ | — | ||||||
Fees Paid Indirectly:
Expense offsets to custody fees that arise from credits on cash balances maintained on deposit are reflected on the Statements 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 Fund's Investment Adviser fee is accrued daily and paid monthly at an annualized rate of 0.28% of the Fund's average daily net assets. Amounts incurred and paid to VCM for the 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements 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 11 months ended February 28, 2023, and the year ended March 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 0.10%, which is based on the Fund's average daily net assets. Amounts incurred for the 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements of Operations as Administration fees.
17
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements 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 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements 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 fees for the Fund are paid monthly based on a fee accrued daily at an annualized rate of 0.15% 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 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements 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 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements 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 July 31, 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 limit 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 February 28, 2023, the expense limit (excluding voluntary waivers) was 0.56%.
Under the terms of the expense limitation agreement, 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 limit in effect at the time of: (a) the original waiver or expense reimbursement; or (b) the recoupment, after giving effect to the recoupment amount.
18
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
In addition, the Adviser agreed to further reimburse fees in excess of the Fund's expense limit of 0.56%. 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 February 28, 2023, 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 February 28, 2023.
| Expires 2023* | Expires 2024 | Expires 2025 | Expires 2026 | Total | |||||||||||||||
| $ | 9 | $ | 1,557 | $ | 2,216 | $ | 147 | $ | 3,929 | ||||||||||
* Amount expired on March 31, 2023.
As of March 31, 2022, the following amounts were available to be repaid to the Adviser (amounts in thousands).
| Expires 2023 | Expires 2024 | Expires 2025 | Total | ||||||||||||
| $ | 19 | $ | 1,557 | $ | 2,216 | $ | 3,792 | ||||||||
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 certain 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 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.
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.
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.
Decisions by the U.S. Federal Reserve 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
19
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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.
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 27, 2022, with a termination date of June 26, 2023. 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 11 months ended February 28, 2023, 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 paid a pro-rata portion of the commitment fees plus any interest on amounts borrowed. For the year ended March 31, 2022, and the period from April 1, 2022, through June 27, 2022, interest was based on the one-month London Interbank Offered Rate ("LIBOR") plus one percent. Effective with the renewal, for the period June 28, 2022, through February 28, 2023, interest was based on the one-month Secured Overnight Financing Rate ("SOFR") plus 1.10 percent. The Fund did not experience a material financial impact transitioning from LIBOR to SOFR. Interest charged to the 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 11 months ended February 28, 2023, and the year ended March 31, 2022.
6. 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. Net investment losses incurred by the Fund may be reclassified as an offset to capital on the accompanying Statement of Assets and Liabilities.
20
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
As of February 28, 2023, on the Statement 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):
11 Months Ended February 28, 2023 | |||||||||||||||||||
Distributions Paid From |
| ||||||||||||||||||
Ordinary Income | Net Long-Term Capital Gains | Total Taxable Distributions | Tax-Exempt | Total Distributions Paid | |||||||||||||||
$ | 2 | $ | 22 | $ | 24 | $ | 5,464 | $ | 5,488 | ||||||||||
Year Ended March 31, 2022 | Year Ended March 31, 2021 | ||||||||||||||||||||||
| Distributions Paid From | Distributions Paid From | ||||||||||||||||||||||
Tax-Exempt Income | Total Distributions Paid | Ordinary Income | Net Long-Term Capital Gains | Tax-Exempt Income | Total Distributions Paid | ||||||||||||||||||
| $ | 52 | $ | 52 | $ | 75 | $ | 101 | $ | 812 | $ | 988 | ||||||||||||
As of February 28, 2023, the components of accumulated earnings (loss) on a tax basis were as follows (amounts in thousands):
| Undistributed Tax-Exempt Income | Accumulated Earnings | Distributions Payable | Total Accumulated Earnings (Loss) | ||||||||||||
| $ | 999 | $ | 999 | $ | (998 | ) | $ | 1 | |||||||
As of February 28, 2023, the Fund had no capital loss carryforwards for federal income tax purposes.
As of February 28, 2023, 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) | ||||||||||||
| $ | 470,163 | $ | — | $ | — | $ | — | ||||||||
7. Subsequent Events:
The Board, upon recommendation of the Adviser, has approved a change in the name of the Trust and each individual fund within the Trust. On February 23, 2023, an initial filing was made with the SEC to commence the process to effectuate the following changes.
Effective at the start of business on April 24, 2023 (the "Effective Date"), the name of the Trust changed from USAA Mutual Funds Trust to Victory Portfolios III, and all references to USAA Mutual Funds Trust in the summary prospectus, statutory prospectus, and statement of additional information ("SAI") will be replaced by the new name.
Also on the Effective Date, references to the current name of the Fund in the summary prospectus, statutory prospectus, and SAI will be replaced with the new name as follows:
Current Name | New Name | ||||||
USAA Tax Exempt Money Market Fund | Victory Tax Exempt Money Market Fund | ||||||
21
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
In addition, on the Effective Date, USAA Investments, a Victory Capital Management Inc. investment franchise, that currently manages the USAA Fixed Income Funds, will change its name to Victory Income Investors, and all references to USAA Investments in the summary prospectus, statutory prospectus, and SAI, will be replaced.
Please note that there will be no changes in the management of the Fund or to the Fund's ticker symbols.
22
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of USAA Tax Exempt Money Market Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of USAA Tax Exempt Money Market Fund (the "Fund") (one of the funds constituting USAA Mutual Funds Trust (the "Trust")), including the schedule of portfolio investments as of February 28, 2023, and the related statements of operations for the period from April 1, 2022 through February 28, 2023 and the year ended March 31, 2022, the statements of changes in net assets for the period from April 1, 2022 through February 28, 2023 and each of the two years in the period ended March 31, 2022, the financial highlights for the period from April 1, 2022 through February 28, 2023 and each of the five years in the period ended March 31, 2022, 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 February 28, 2023, the results of its operations for the period from April 1, 2022 through February 28, 2023 and the year ended March 31, 2022, the statements of changes in net assets for the period from April 1, 2022 through February 28, 2023 and each of the two years in the period ended March 31, 2022, and its financial highlights for the period from April 1, 2022 through February 28, 2023 and each of the five years in the period ended March 31, 2022, 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 February 28, 2023, 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
April 28, 2023
23
USAA Mutual Funds Trust | Supplemental Information February 28, 2023 | ||||||
(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 date 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 | ||||||||||||||||||
24
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 (06/17-06/19); 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 (03/15-03/21). | 45 | None | ||||||||||||||||||
| Paul L. McNamara (July 1948) | Trustee | Trustee since January 2012 | Retired. | 45 | None | ||||||||||||||||||
25
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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) | ||||||||||||||||||
26
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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.
27
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
Officers:
The officers of the Trust, their date 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. (since 2022); 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. (07/01/19-present); Executive Director, Investment and Financial Administration, USAA (2012-06/30/19); 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. (07/01/19-present); Accounting/ Financial Director, USAA (12/13-06/30/19). | ||||||||||||
| 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). | ||||||||||||
28
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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). | ||||||||||||
29
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 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 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 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 September 1, 2022, through February 28, 2023.
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 9/1/22 | Actual Ending Account Value 2/28/23 | Hypothetical Ending Account Value 2/28/23 | Actual Expenses Paid During Period 9/1/22- 2/28/23* | Hypothetical Expenses Paid During Period 9/1/22- 2/28/23* | Annualized Expense Ratio During Period 9/1/22- 2/28/23 | ||||||||||||||||||
| $ | 1,000.00 | $ | 1,009.80 | $ | 1,022.02 | $ | 2.79 | $ | 2.81 | 0.56 | % | ||||||||||||
* Expenses are equal to the average account value multiplied by the Fund's annualized expense ratio multiplied by 181/365 (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 February 28, 2023 | ||||||
(Unaudited)
Additional Federal Income Tax Information
The following federal tax information related to the Fund's fiscal 11 months ended February 28, 2023, 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 2024.
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 11 months ended February 28, 2023 (amounts in thousands):
| Short-Term Capital Gain Distributions | Long-Term Capital Gain Distributions | Tax Exempt Distributions | |||||||||
| $ | 2 | $ | 22 | $ | 5,464 | ||||||
31
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
Considerations of the Board in Continuing the Investment Advisory Agreement
USAA Tax Exempt Money Market Fund (the "Fund")
At a meeting of the Board of Trustees (the "Board") of USAA Mutual Funds Trust (the "Trust") held on December 8-9, 2022, 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 8-9, 2022, 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 21, 2022.
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
32
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 program, (iv) derivatives risk management program, and (v) 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 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 June 30, 2022. The Board noted the relatively narrow range of returns of the funds in the Fund's peer group. The Board took into account management's discussion of the Fund's performance, including the reasons for the Fund's underperformance.
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
33
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
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 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 took into account management's discussion of the Fund's current advisory fee structure. 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 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.
34
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 | ||||||
vcm.com | (800) 235-8396 | ||||||
40859-0423
February 28, 2023
Annual Report
USAA Virginia Bond Fund
(Also Known as Victory Virginia Bond Fund*)
* Effective at the start of business on April 24, 2023, the Fund name will change to Victory Virginia Bond Fund. Please see Notes to the Financial Statements for subsequent event information.
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 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.
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, 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 | 15 | ||||||
Statements of Operations | 16 | ||||||
Statements of Changes in Net Assets | 17 | ||||||
Financial Highlights | 19 | ||||||
Notes to Financial Statements | 22 | ||||||
| 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 Examples | 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,
If you are reading this letter but double-checking your calendar, be assured there's no mistake. The annual reporting period for your USAA Mutual Fund has shifted from a fiscal year ended March 31st to a fiscal year ended February 28th/the last day of February. This change has no material impact on any of your investments. This change aims to help us improve efficiencies and reduce operational costs. Therefore, this letter covers an abbreviated "annual" period from April 1, 2022, through February 28, 2023. Future annual reports will cover the 12-month period ended February 28th/the last day of February going forward.
Our most recent annual reporting period has been a challenging period for investors. Consider some of the headwinds: heightened geopolitical tensions, a terrible war in Eastern Europe, elevated energy and food costs, high inflation, and rising interest rates. All this has dampened global growth and created a difficult backdrop for both bond and stock investors.
The inflation data was particularly troublesome and surprised many with some of the highest readings since the 1970s. In response, the U.S. Federal Reserve (the "Fed") shifted to a more restrictive monetary policy than most anticipated. The Fed has been boosting the Fed funds interest rate repeatedly and aggressively, including a series of 75 basis point raises. (A basis point is 1/100th of a percentage point.) And if that wasn't enough, zero-COVID-19 policies in China (which fortunately have been recently lifted) further exacerbated supply chain issues and raised questions about global trade. As one might expect, all of these obstacles ratcheted up volatility across financial markets. Broad market stock indices pulled back substantially around the world.
The S&P 500® Index, the bell-weather proxy for our domestic stock market, delivered a negative total return of almost 11% during our abbreviated annual reporting period. But perhaps what was even more difficult was the performance of fixed income markets, which normally are considered a safe haven in times of equity turmoil. But not during this past year when interest rates were rising sharply. In fact, the Bloomberg US Aggregate Bond Index—a proxy for a diversified fixed income portfolio and one that many investors and institutions follow closely—delivered a negative total return of approximately 7.0%. That's not exactly the offset to equity performance that many investors have come to expect from bonds.
It's been difficult, and we fully acknowledge that the steady drumbeat of bad news and bouts of stomach-churning volatility can take a toll on investors' psyche. Nobody likes opening their account statements during declining markets, and even when markets often snap back sharply (as happened this past July, October, and earlier this calendar year), investors often wonder if they have missed an opportunity.
Through all the turmoil and challenges in our most recent annual reporting period, we are reminded of two enduring realities: 1) financial markets are dynamic and apt to change abruptly; 2) it's vital to remain calm and rational whenever faced with those inevitable bouts of turmoil.
Fortunately, we think that investors can take comfort knowing that all our independent investment franchises have experience managing portfolios through a
2
wide variety of market environments. Our investment professionals remain calm during turbulent financial markets, and we think it's imperative that investors do the same.
We still believe that a long-term plan, a well-diversified portfolio across asset classes and investment types, and a clear understanding of individual risk tolerances are the key ingredients for staying the course and progressing on investment goals. Moreover, all our investment professionals continually monitor the environment and work hard to position portfolios opportunistically no matter what the markets bring. Remember, turmoil can also create opportunity.
On the following pages, you will find information relating to your USAA Mutual Fund, brought to you by Victory Capital. If you have any questions, we encourage you to contact our Member Service Representatives. Call 800-235-8396, or visit our website at vcm.com.
From all of us here at Victory Capital, thank you for your ongoing confidence and for letting us help you work toward your investment goals.
Christopher K. Dyer, CFA
President,
USAA Mutual Funds Trust
3
USAA Virginia Bond Fund
Manager's 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 overall during the 11-month reporting period ended February 28, 2023. [The Fund's fiscal year-end changed this year to February 28 from March 31, resulting in a shorter reporting period for fiscal year ended 2023.] Negative returns for the reporting period were attributable to a combination of factors, including the U.S. Federal Reserve's (the "Fed") prolonged fight to reduce inflation through interest rate increases and significant investor outflows from municipal bond funds. The reporting period was also highlighted by material volatility in the municipal market, as market participants often strongly reacted to Fed actions and comments, as well as economic data release, in an attempt to determine the future path of interest rates. The overall returns on the Bloomberg Municipal Bond Index for the reporting period was -1.92%, with significant ups and downs throughout the period.
While there might be some volatility in the municipal market in the short term, we remain confident that the right approach is to focus on what matters in the long term. We believe municipal bonds continue to represent an attractive investment opportunity on a relative basis. At the end of February 2023, the yield on the Bloomberg Municipal Bond Index was 3.62%, which is a taxable-equivalent yield of 6.12% (in the highest tax bracket). After factoring in the benefit of the tax exemption, municipal bonds look attractive vs. the (taxable) Bloomberg U.S. Aggregate Bond Index, which yielded 4.81% at the end of February 2023.
• How did the USAA Virginia Bond Fund (the "Fund") perform during the reporting period?
The Fund has three share classes: Fund Shares, Institutional Shares, and Class A. For the 11-month reporting period ended February 28, 2023, the Fund Shares, Institutional Shares, and Class A had a total return (at net asset value) of -3.90%, -3.86%, and -4.20% respectively, versus an average return of -3.93% for the funds in the Lipper Virginia Municipal Debt Funds category. This compares to returns of -3.64% for the Lipper Virginia Municipal Debt Funds Index, and -1.92% for the Bloomberg Municipal Bond Index.
• What are the conditions in the Commonwealth of Virginia?
The Commonwealth of Virginia continues to recover from the economic and fiscal impact felt at the peak of the COVID-19 pandemic. Unemployment in Virginia has steadily improved over the last year and is slowly approaching its pre-pandemic low. Presently, unemployment in Virginia is below the national rate.
Growth in the gross domestic product ("GDP") indicates an apparent reversal from the economic slowdown of the second quarter of 2022. During the third quarter of 2022, Virginia's GDP grew 2.2% (annualized) vs. the U.S. GDP growth of 3.2%, ranking Virginia 29th by state. The sectors that experienced the most GDP growth state-and nationwide during the quarter were the information and the professional, scientific, and
4
USAA Virginia Bond Fund
Manager's Commentary (continued)
technical services sectors. The largest contractions in GDP in Virginia during the quarter were in the construction and military spending sectors.
Based on mid-year data, the commonwealth's financial performance and liquidity position remain strong. In addition, Virginia's pension burden is one of the lowest in the nation in terms of state GDP. Moody's Investors Service (published October 2022) determined that Virginia has a low pension risk based on FY 2021 data.
We continue to view the underlying credit quality of Virginia as exceptionally strong. Presently Virginia remains rated AAA by Fitch, Moody's, and Standard & Poor's.
• What strategies did you employ during the reporting period?
In keeping with our investment approach, we continued to focus on income generation. The Fund's long-term income distribution, not its price appreciation, accounts for most of its total return. Because of the Fund's income orientation, it has a higher allocation to BBB and A rated categories when compared to its peer group.
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 we believe 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.
Thank you for allowing us to assist you with your investment needs.
5
USAA Virginia Bond Fund
Investment Overview
(Unaudited)
Average Annual Total Return
Year Ended February 28, 2023
Fund Shares | Institutional Shares | Class A | |||||||||||||||||||||||||
INCEPTION DATE | 10/10/90 | 6/29/20 | 8/1/10 | ||||||||||||||||||||||||
| Net Asset Value | Net Asset Value | Net Asset Value | Maximum Offering Price | Bloomberg Municipal Bond Index1 | Lipper Virginia Municipal Debt Funds Index2 | ||||||||||||||||||||||
One Year | –6.76 | % | –6.72 | % | –7.06 | % | –9.15 | % | –5.10 | % | –6.38 | % | |||||||||||||||
Five Year | 0.94 | % | NA | 0.68 | % | 0.22 | % | 1.66 | % | 0.92 | % | ||||||||||||||||
Ten Year | 1.77 | % | NA | 1.53 | % | 1.30 | % | 2.11 | % | 1.26 | % | ||||||||||||||||
Since Inception | NA | –1.72 | % | 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 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 Virginia Bond Fund — Growth of $10,000
1The 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 is not possible to invest directly in an index.
2The unmanaged Lipper Virginia Municipal Debt Funds Index measures the Fund's performance to that of the Lipper Virginia Municipal Debt Funds 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 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 Virginia Bond Fund | February 28, 2023 | ||||||
(Unaudited)
Investment Objective and Portfolio Holdings:
The Fund provides Virginia investors with a high level of current interest income that is exempt from federal and Virginia state income taxes.
Top 10 Industries:
February 28, 2023
(% of Net Assets)
General | 20.8 | % | |||||
Medical | 18.9 | % | |||||
Nursing Homes | 11.7 | % | |||||
Higher Education | 8.5 | % | |||||
Transportation | 7.7 | % | |||||
Water | 6.4 | % | |||||
Development | 5.0 | % | |||||
Facilities | 4.0 | % | |||||
Education | 3.7 | % | |||||
Multifamily Housing | 3.7 | % | |||||
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 Virginia Bond Fund | Schedule of Portfolio Investments February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Municipal Bonds (98.9%) | |||||||||||
Virginia (91.8%): | |||||||||||
| Albermarle County Economic Development Authority Revenue, Series B, 2.10%, 10/1/48, Continuously Callable @100 (a) | $ | 1,085 | $ | 1,085 | |||||||
Alexandria IDA Revenue, Series C, 4.00%, 1/1/46, Continuously Callable @100 | 2,400 | 2,280 | |||||||||
| Amherst IDA Revenue 5.00%, 9/1/26, Continuously Callable @100 | 1,105 | 1,089 | |||||||||
4.75%, 9/1/30, Continuously Callable @100 | 2,000 | 1,881 | |||||||||
| Arlington County IDA Revenue 5.00%, 2/15/43, Continuously Callable @100 | 1,775 | 1,871 | |||||||||
4.00%, 7/1/45, Continuously Callable @100 | 1,585 | 1,478 | |||||||||
Bristol IDA Revenue, 5.00%, 11/1/53, Continuously Callable @100 | 8,030 | 8,160 | |||||||||
Campbell County IDA Revenue, 4.00%, 6/1/44, Continuously Callable @100 | 4,600 | 4,275 | |||||||||
| Capital Region Airport Commission Revenue Series A, 4.00%, 7/1/36, Continuously Callable @100 | 700 | 702 | |||||||||
Series A, 4.00%, 7/1/38, Continuously Callable @100 | 750 | 736 | |||||||||
| Charles City County Economic Development Authority Revenue, Series A, 2.88%, 2/1/29, Continuously Callable @101 | 10,000 | 9,194 | |||||||||
| Chesapeake Bay Bridge & Tunnel District Revenue 5.50%, 7/1/25 | 5,000 | 5,133 | |||||||||
5.00%, 7/1/46, Continuously Callable @100 | 5,805 | 5,845 | |||||||||
5.00%, 7/1/51, Continuously Callable @100 | 3,435 | 3,451 | |||||||||
| Chesapeake Bay Bridge & Tunnel District Revenue (INS — Assured Guaranty Municipal Corp.), 5.00%, 7/1/41, Continuously Callable @100 | 5,000 | 5,089 | |||||||||
| Chesapeake Hospital Authority Revenue 4.00%, 7/1/39, Continuously Callable @100 | 1,000 | 960 | |||||||||
4.00%, 7/1/43, Continuously Callable @100 | 4,000 | 3,744 | |||||||||
| City of Chesapeake Expressway Toll Road Revenue 7/15/32, Continuously Callable @100 (b) | 6,520 | 6,714 | |||||||||
7/15/40, Continuously Callable @100 (d) | 3,000 | 3,022 | |||||||||
City of Lynchburg, GO, 4.00%, 6/1/44, Continuously Callable @100 | 5,000 | 4,939 | |||||||||
| City of Norfolk, GO Series A, 4.00%, 9/1/37, Continuously Callable @100 | 2,040 | 2,083 | |||||||||
Series A, 4.00%, 9/1/39, Continuously Callable @100 | 1,535 | 1,555 | |||||||||
City of Richmond Public Utility Revenue | |||||||||||
4.00%, 1/15/40, Continuously Callable @100 | 6,000 | 6,013 | |||||||||
Series A, 4.00%, 1/15/50, Continuously Callable @100 | 2,220 | 2,096 | |||||||||
| City of Richmond, GO Series D, 5.00%, 3/1/32 | 800 | 952 | |||||||||
Series D, 5.00%, 3/1/33 | 1,000 | 1,204 | |||||||||
| County of Fairfax VA Sewer Revenue Series A, 5.00%, 7/15/46, Continuously Callable @100 | 10,000 | 10,966 | |||||||||
Series A, 4.00%, 7/15/51, Continuously Callable @100 | 10,000 | 9,495 | |||||||||
| Fairfax County Economic Development Authority Revenue 5.00%, 4/1/47, Continuously Callable @100 | 4,000 | 4,151 | |||||||||
Series A, 5.00%, 10/1/29, Pre-refunded 10/1/24 @ 100 | 2,000 | 2,057 | |||||||||
Series A, 5.00%, 10/1/30, Pre-refunded 10/1/24 @ 100 | 2,000 | 2,058 | |||||||||
Series A, 5.00%, 10/1/31, Pre-refunded 10/1/24 @ 100 | 2,000 | 2,058 | |||||||||
Series A, 5.00%, 10/1/32, Pre-refunded 10/1/24 @ 100 | 1,500 | 1,544 | |||||||||
Series A, 5.00%, 12/1/32, Pre-refunded 12/1/23 @ 100 | 1,500 | 1,520 | |||||||||
See notes to financial statements.
8
| USAA Mutual Funds Trust USAA Virginia Bond Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Series A, 5.00%, 10/1/33, Pre-refunded 10/1/24 @ 100 | $ | 2,200 | $ | 2,264 | |||||||
Series A, 5.00%, 10/1/34, Pre-refunded 10/1/24 @ 100 | 2,000 | 2,059 | |||||||||
Series A, 5.00%, 10/1/42, Pre-refunded 10/1/24 @ 102 | 2,250 | 2,357 | |||||||||
Series A, 4.00%, 10/1/42, Pre-refunded 10/1/24 @ 102 | 2,750 | 2,840 | |||||||||
Series A, 5.00%, 12/1/42, Pre-refunded 12/1/23 @ 100 | 2,800 | 2,837 | |||||||||
Series B, 5.00%, 10/1/35, Pre-refunded 10/1/27 @ 100 | 2,620 | 2,873 | |||||||||
Series B, 5.00%, 10/1/36, Pre-refunded 10/1/27 @ 100 | 2,000 | 2,193 | |||||||||
| Fairfax County IDA Revenue Series A, 4.00%, 5/15/44, Continuously Callable @100 | 6,900 | 6,584 | |||||||||
Series A, 4.00%, 5/15/48, Continuously Callable @100 | 1,500 | 1,401 | |||||||||
| Farmville Industrial Development Authority Revenue, 5.38%, 7/1/53, (Put Date 7/1/43), (e) | 6,000 | 6,400 | |||||||||
| Front Royal & Warren County IDA Revenue, 4.00%, 1/1/50, Continuously Callable @103 | 7,000 | 6,294 | |||||||||
| Greater Richmond Convention Center Authority Revenue, 5.00%, 6/15/32, Pre-refunded 6/15/25 @ 100 | 1,500 | 1,566 | |||||||||
| Hampton Roads Sanitation District Revenue, Series A, 5.00%, 8/1/43, Pre-refunded 8/1/26 @ 100 | 4,700 | 5,027 | |||||||||
| Hampton Roads Transportation Accountability Commission Revenue, Series A, 4.00%, 7/1/52, Continuously Callable @100 | 5,000 | 4,695 | |||||||||
| Henrico County Economic Development Authority Revenue 5.00%, 6/1/24, Continuously Callable @100 | 1,200 | 1,197 | |||||||||
4.25%, 6/1/26, Continuously Callable @100 | 140 | 137 | |||||||||
5.00%, 10/1/37, Continuously Callable @103 | 2,500 | 2,593 | |||||||||
4.00%, 10/1/40, Continuously Callable @103 | 500 | 475 | |||||||||
4.00%, 10/1/45, Continuously Callable @103 | 725 | 663 | |||||||||
4.00%, 10/1/50, Continuously Callable @103 | 1,500 | 1,330 | |||||||||
5.00%, 10/1/52, Continuously Callable @103 | 2,200 | 2,271 | |||||||||
| James City County Economic Development Authority Revenue 4.00%, 6/1/47, Continuously Callable @103 | 1,000 | 743 | |||||||||
Series A, 4.00%, 12/1/50, Continuously Callable @103 | 9,905 | 7,123 | |||||||||
| Lewistown Commerce Center Community Development Authority Tax Allocation 6.05%, 3/1/44, Continuously Callable @103 (f) | 1,053 | 695 | |||||||||
6.05%, 3/1/44, Continuously Callable @103 | 665 | 554 | |||||||||
Series C, 0.50%, 3/1/54, Continuously Callable @100 (f) | 2,599 | 390 | |||||||||
| Lexington IDA Revenue 4.00%, 1/1/31, Continuously Callable @102 | 750 | 698 | |||||||||
4.00%, 1/1/37, Continuously Callable @102 | 1,000 | 852 | |||||||||
5.00%, 1/1/48, Continuously Callable @100 | 1,000 | 1,046 | |||||||||
| Loudoun County Economic Development Authority Revenue 5.00%, 12/1/31, Continuously Callable @100 | 1,135 | 1,175 | |||||||||
5.00%, 12/1/32, Continuously Callable @100 | 800 | 828 | |||||||||
5.00%, 12/1/33, Continuously Callable @100 | 775 | 803 | |||||||||
5.00%, 12/1/34, Continuously Callable @100 | 805 | 834 | |||||||||
Series A, 4.00%, 10/1/52, Continuously Callable @100 | 2,250 | 2,118 | |||||||||
| Lynchburg Economic Development Authority Revenue 4.00%, 1/1/39, Continuously Callable @100 | 1,320 | 1,242 | |||||||||
4.00%, 1/1/41, Continuously Callable @100 | 1,135 | 1,049 | |||||||||
5.00%, 9/1/43, Continuously Callable @100 | 3,000 | 3,001 | |||||||||
4.00%, 1/1/55, Continuously Callable @100 | 12,920 | 11,374 | |||||||||
Series A, 5.00%, 1/1/47, Continuously Callable @100 | 2,250 | 2,276 | |||||||||
See notes to financial statements.
9
| USAA Mutual Funds Trust USAA Virginia Bond Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
| Lynchburg Economic Development Authority Revenue (LIQ — JPMorgan Chase & Co.), Series 2018-XL0075, 3.05%, 1/1/47 (a) (g) | $ | 3,400 | $ | 3,400 | |||||||
| Lynchburg Economic Development Authority Revenue (LOC — Branch Banking & Trust Co.), Series A-3, 2.03%, 1/1/47, Continuously Callable @100 (a) | 2,740 | 2,740 | |||||||||
| Manassas Park Economic Development Authority Revenue, 4.00%, 12/15/52, Continuously Callable @100 | 4,500 | 4,200 | |||||||||
| Marquis Community Development Authority of York County Virginia Tax Allocation, Series B, 2.25%, 9/1/41 (f) (h) | 3,532 | 1,699 | |||||||||
Marquis Community Development Authority Revenue, 3.00%, 9/1/45 (f) (g) (h) | 1,093 | 526 | |||||||||
Marquis Community Development Authority Tax Allocation, Series C, 9/1/41 (c) (h) | 5,389 | 248 | |||||||||
| Montgomery County Economic Development Authority Revenue 4.00%, 6/1/38, Continuously Callable @100 | 1,750 | 1,741 | |||||||||
Series A, 4.00%, 6/1/36, Continuously Callable @100 | 1,125 | 1,141 | |||||||||
Norfolk Airport Authority Revenue, 5.00%, 7/1/43, Continuously Callable @100 | 2,800 | 2,920 | |||||||||
| Norfolk Economic Development Authority Revenue Series B, 5.00%, 11/1/48, (Put Date 11/1/28) (e) | 1,600 | 1,756 | |||||||||
Series B, 4.00%, 11/1/48, Continuously Callable @100 | 1,100 | 1,033 | |||||||||
| Prince Edward County IDA Revenue 4.00%, 9/1/43, Continuously Callable @100 | 2,250 | 2,062 | |||||||||
5.00%, 9/1/48, Continuously Callable @100 | 2,055 | 2,110 | |||||||||
| Prince Edward County Industrial Development Authority Revenue, 5.25%, 9/1/57, Continuously Callable @100 | 3,000 | 3,171 | |||||||||
| Prince William County IDA Revenue 5.00%, 1/1/37, Continuously Callable @102 | 1,000 | 892 | |||||||||
5.00%, 1/1/46, Continuously Callable @102 | 4,000 | 3,265 | |||||||||
| Radford IDA Revenue (NBGA — Fannie Mae), 3.50%, 9/15/29, Continuously Callable @100 | 4,000 | 3,985 | |||||||||
| Rappahannock Regional Jail Authority Revenue 5.00%, 10/1/34, Pre-refunded 10/1/25 @ 100 | 2,340 | 2,458 | |||||||||
5.00%, 10/1/35, Pre-refunded 10/1/25 @ 100 | 1,165 | 1,224 | |||||||||
| Roanoke Economic Development Authority Revenue 5.00%, 7/1/47 | 12,250 | 12,987 | |||||||||
4.00%, 7/1/51, Continuously Callable @100 | 5,000 | 4,531 | |||||||||
Series A, 5.00%, 9/1/36, Continuously Callable @100 | 1,640 | 1,677 | |||||||||
Series A, 5.00%, 9/1/43, Continuously Callable @100 | 4,060 | 4,080 | |||||||||
| Rockingham County Economic Development Authority Revenue 4.00%, 12/1/33, Continuously Callable @100 | 1,000 | 937 | |||||||||
5.00%, 12/1/39, Continuously Callable @100 | 4,180 | 4,103 | |||||||||
| Salem Economic Development Authority Revenue 4.00%, 4/1/38, Continuously Callable @100 | 250 | 230 | |||||||||
4.00%, 4/1/39, Continuously Callable @100 | 225 | 205 | |||||||||
4.00%, 4/1/40, Continuously Callable @100 | 250 | 223 | |||||||||
4.00%, 4/1/45, Continuously Callable @100 | 750 | 653 | |||||||||
5.00%, 4/1/49, Continuously Callable @100 | 910 | 904 | |||||||||
| Stafford County Economic Development Authority Revenue 5.00%, 6/15/36, Continuously Callable @100 | 5,900 | 6,055 | |||||||||
4.00%, 6/15/37, Continuously Callable @100 | 6,495 | 6,202 | |||||||||
| Tobacco Settlement Financing Corp. Revenue, Series B-1, 5.00%, 6/1/47, Continuously Callable @100 | 10,000 | 9,280 | |||||||||
See notes to financial statements.
10
| USAA Mutual Funds Trust USAA Virginia Bond Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
| University of Virginia Revenue Series A, 5.00%, 4/1/42, Continuously Callable @100 | $ | 4,000 | $ | 4,217 | |||||||
Series A, 5.00%, 4/1/47, Continuously Callable @100 | 5,000 | 5,234 | |||||||||
Series A-1, 4.00%, 4/1/45, Continuously Callable @100 | 5,000 | 4,913 | |||||||||
Series B, 5.00%, 9/1/49, Continuously Callable @100 | 5,000 | 5,341 | |||||||||
| Upper Occoquan Sewage Authority Revenue, 4.00%, 7/1/39, Pre-refunded 7/1/25 @ 100 | 2,000 | 2,045 | |||||||||
| Virginia Beach Development Authority Revenue 5.00%, 9/1/40, Continuously Callable @103 | 3,250 | 3,135 | |||||||||
5.00%, 9/1/44, Continuously Callable @103 | 4,865 | 4,540 | |||||||||
4.00%, 9/1/48, Continuously Callable @103 | 3,755 | 2,889 | |||||||||
Series A, 5.00%, 5/1/29, Continuously Callable @100 | 1,795 | 1,834 | |||||||||
| Virginia College Building Authority Revenue 5.00%, 6/1/23 | 125 | 125 | |||||||||
5.00%, 6/1/24 | 225 | 225 | |||||||||
5.00%, 6/1/25 | 250 | 250 | |||||||||
5.00%, 6/1/26 | 250 | 252 | |||||||||
5.00%, 6/1/27 | 275 | 281 | |||||||||
5.00%, 6/1/28 | 295 | 305 | |||||||||
5.00%, 6/1/29 | 300 | 312 | |||||||||
5.00%, 6/1/30 | 325 | 338 | |||||||||
5.00%, 2/1/31, Continuously Callable @100 | 10,000 | 11,016 | |||||||||
5.00%, 6/1/31 | 300 | 313 | |||||||||
5.00%, 2/1/32, Continuously Callable @100 | 4,000 | 4,408 | |||||||||
4.00%, 1/15/33, Continuously Callable @100 | 965 | 979 | |||||||||
4.00%, 1/15/35, Continuously Callable @100 | 545 | 547 | |||||||||
4.00%, 1/15/36, Continuously Callable @100 | 650 | 644 | |||||||||
4.00%, 6/1/36, Continuously Callable @100 | 925 | 836 | |||||||||
4.00%, 1/15/43, Continuously Callable @100 | 1,285 | 1,239 | |||||||||
4.00%, 6/1/46, Continuously Callable @100 | 1,000 | 805 | |||||||||
Series A, 4.00%, 2/1/35, Continuously Callable @100 | 8,000 | 8,110 | |||||||||
Series A, 3.00%, 1/15/46, Continuously Callable @100 | 1,000 | 734 | |||||||||
Series A, 3.00%, 1/15/51, Continuously Callable @100 | 1,175 | 800 | |||||||||
| Virginia College Building Authority Revenue (LIQ — Wells Fargo & Co.), 2.12%, 11/1/36, Continuously Callable @100 (a) | 4,000 | 4,000 | |||||||||
| Virginia Commonwealth Transportation Board Regional Fuels Tax Revenue, 4.00%, 5/15/46, Continuously Callable @100 | 5,195 | 5,058 | |||||||||
| Virginia Commonwealth Transportation Board Revenue 5.00%, 3/15/32, Continuously Callable @100 | 3,350 | 3,643 | |||||||||
5.00%, 9/15/32, Continuously Callable @100 | 9,190 | 9,994 | |||||||||
4.00%, 5/15/42, Continuously Callable @100 | 10,000 | 9,809 | |||||||||
Series A, 4.00%, 5/15/36, Continuously Callable @100 | 2,000 | 2,035 | |||||||||
| Virginia Commonwealth University Health System Authority Revenue, 5.00%, 7/1/46, Continuously Callable @100 | 5,500 | 5,636 | |||||||||
| Virginia Commonwealth University Revenue Series A, 4.00%, 11/1/37, Continuously Callable @100 | 750 | 758 | |||||||||
Series A, 5.00%, 11/1/38, Continuously Callable @100 | 350 | 377 | |||||||||
Series A, 4.00%, 5/1/48, Continuously Callable @100 | 2,475 | 2,398 | |||||||||
See notes to financial statements.
11
| USAA Mutual Funds Trust USAA Virginia Bond Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
| Virginia Housing Development Authority Revenue Series B, 3.60%, 5/1/46, Continuously Callable @100 | $ | 7,000 | $ | 5,869 | |||||||
Series E, 2.65%, 7/1/50, Continuously Callable @100 | 1,640 | 1,093 | |||||||||
Series F, 5.00%, 10/1/52, Continuously Callable @100 | 5,000 | 5,122 | |||||||||
Series G, 5.15%, 11/1/52, Continuously Callable @100 | 1,750 | 1,813 | |||||||||
Series I, 2.45%, 11/1/45, Continuously Callable @100 | 1,500 | 1,034 | |||||||||
Series K, 1.95%, 12/1/32, Continuously Callable @100 | 1,500 | 1,291 | |||||||||
Series K, 2.05%, 12/1/33, Continuously Callable @100 | 665 | 565 | |||||||||
| Virginia Public Building Authority Revenue, Series A, 4.00%, 8/1/30, Continuously Callable @100 | 4,000 | 4,182 | |||||||||
Virginia Public School Authority Revenue, 5.00%, 8/1/24 | 10,000 | 10,265 | |||||||||
| Virginia Resources Authority Revenue 5.00%, 11/1/32, Continuously Callable @100 | 15 | 15 | |||||||||
4.00%, 11/1/49, Continuously Callable @100 | 6,700 | 6,489 | |||||||||
Series A, 4.00%, 11/1/43, Continuously Callable @100 | 1,445 | 1,437 | |||||||||
Series A, 4.00%, 11/1/47, Continuously Callable @100 | 1,040 | 1,012 | |||||||||
Series B, 5.25%, 11/1/47, Continuously Callable @100 | 2,330 | 2,616 | |||||||||
Series B, 4.75%, 11/1/52, Continuously Callable @100 | 750 | 790 | |||||||||
| Virginia Small Business Financing Authority Revenue 5.00%, 10/1/42, Continuously Callable @100 | 5,000 | 5,298 | |||||||||
4.00%, 12/1/49, Continuously Callable @100 | 12,800 | 11,637 | |||||||||
4.00%, 12/1/51, Continuously Callable @103 | 4,000 | 2,965 | |||||||||
Series A, 4.00%, 1/1/45, Continuously Callable @103 | 2,800 | 2,461 | |||||||||
Series A, 4.00%, 1/1/51, Continuously Callable @103 | 16,265 | 13,731 | |||||||||
| Western Regional Jail Authority Revenue 5.00%, 12/1/35, Continuously Callable @100 | 1,540 | 1,647 | |||||||||
5.00%, 12/1/35, Pre-refunded 12/1/26 @ 100 | 1,545 | 1,652 | |||||||||
5.00%, 12/1/38, Continuously Callable @100 | 1,000 | 1,060 | |||||||||
5.00%, 12/1/38, Pre-refunded 12/1/26 @ 100 | 1,000 | 1,069 | |||||||||
| Winchester Economic Development Authority Revenue 5.00%, 1/1/44, Continuously Callable @100 | 3,250 | 3,311 | |||||||||
Series S, 5.00%, 1/1/44, Pre-refunded 1/1/24 @ 100 | 3,250 | 3,298 | |||||||||
Wise County IDA Revenue, Series A, 0.75%, 10/1/40, (Put Date 9/2/25) (e) | 2,500 | 2,296 | |||||||||
511,288 | |||||||||||
District of Columbia (2.6%): | |||||||||||
| Metropolitan Washington Airports Authority Dulles Toll Road Revenue 4.00%, 10/1/53, Continuously Callable @100 | 1,500 | 1,273 | |||||||||
Series A, 5.00%, 10/1/44, Continuously Callable @100 | 1,500 | 1,562 | |||||||||
| Metropolitan Washington Airports Authority Dulles Toll Road Revenue (INS — Assured Guaranty Municipal Corp.), Series B, 10/1/30 (c) | 5,500 | 4,124 | |||||||||
| Washington Metropolitan Area Transit Authority Revenue 5.00%, 7/1/43, Continuously Callable @100 | 5,000 | 5,219 | |||||||||
Series A, 4.00%, 7/15/45, Continuously Callable @100 | 2,500 | 2,399 | |||||||||
14,577 | |||||||||||
Guam (4.5%): | |||||||||||
| Guam Government Waterworks Authority Revenue 5.00%, 7/1/36, Continuously Callable @100 | 1,000 | 1,011 | |||||||||
5.00%, 7/1/40, Continuously Callable @100 | 3,250 | 3,276 | |||||||||
Series A, 5.00%, 7/1/35, Continuously Callable @100 | 2,850 | 2,866 | |||||||||
Series A, 5.00%, 1/1/50, Continuously Callable @100 | 1,000 | 1,004 | |||||||||
See notes to financial statements.
12
| USAA Mutual Funds Trust USAA Virginia Bond Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
| Guam Power Authority Revenue Series A, 5.00%, 10/1/31, Continuously Callable @100 | $ | 500 | $ | 507 | |||||||
Series A, 5.00%, 10/1/40, Continuously Callable @100 | 4,000 | 4,076 | |||||||||
Series A, 5.00%, 10/1/41, Continuously Callable @100 | 1,500 | 1,549 | |||||||||
| Guam Power Authority Revenue (INS — Assured Guaranty Municipal Corp.) Series A, 5.00%, 10/1/39, Continuously Callable @100 | 750 | 766 | |||||||||
Series A, 5.00%, 10/1/44, Continuously Callable @100 | 1,000 | 1,015 | |||||||||
| Port Authority of Guam Revenue, Series A, 5.00%, 7/1/48, Continuously Callable @100 | 1,500 | 1,502 | |||||||||
| Territory of Guam Revenue Series A, 5.00%, 11/1/27 | 200 | 210 | |||||||||
Series A, 5.00%, 11/1/28 | 250 | 265 | |||||||||
Series A, 5.00%, 11/1/29 | 250 | 266 | |||||||||
Series A, 5.00%, 11/1/30 | 250 | 267 | |||||||||
Series A, 5.00%, 11/1/35, Continuously Callable @100 | 2,000 | 2,115 | |||||||||
Series A, 5.00%, 12/1/46, Continuously Callable @100 | 1,250 | 1,235 | |||||||||
Series D, 5.00%, 11/15/39, Continuously Callable @100 | 2,000 | 2,012 | |||||||||
Series F, 5.00%, 1/1/31 | 500 | 531 | |||||||||
Series F, 4.00%, 1/1/42, Continuously Callable @100 | 1,000 | 891 | |||||||||
25,364 | |||||||||||
Total Municipal Bonds (Cost $600,098) | 551,229 | ||||||||||
Total Investments (Cost $600,098) — 98.9% | 551,229 | ||||||||||
Other assets in excess of liabilities — 1.1% | 5,912 | ||||||||||
NET ASSETS — 100.00% | $ | 557,141 | |||||||||
(a) 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.
(b) Stepped-coupon security converts to coupon form on 7/15/23 with a rate of 4.75%
(c) Zero-coupon bond.
(d) Stepped-coupon security converts to coupon form on 7/15/23 with a rate of 4.88%
(e) Put Bond.
(f) Currently the issuer is in default with respect to interest and/or principal payments.
(g) Rule 144A security or other security that is restricted as to resale to institutional investors. As of February 28, 2023, the fair value of these securities was $3,926 thousands and amounted to 0.7% of net assets.
(h) This security is classified as Level 3 within the fair value hierarchy. (See Note 2 in the Notes to Financial Statements).
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
IDA — Industrial Development Authority
See notes to financial statements.
13
| USAA Mutual Funds Trust USAA Virginia Bond Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
LOC — Letter of Credit
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.
LIQ Liquidity enhancement that may, under certain circumstances, provide for repayment of principal and interest upon demand from the name listed.
LOC Principal and interest payments are guaranteed by a bank letter of credit or other bank credit agreement.
NBGA Principal and interest payments or, under certain circumstances, underlying mortgages are guaranteed by a nonbank guaranteed agreement from the name listed.
See notes to financial statements.
14
USAA Mutual Funds Trust | Statement of Assets and Liabilities February 28, 2023 | ||||||
(Amounts in Thousands, Except Per Share Amounts)
| USAA Virginia Bond Fund | |||||||
Assets: | |||||||
Investments, at value (Cost $600,098) | $ | 551,229 | |||||
Cash | 173 | ||||||
Receivables: | |||||||
Interest | 6,447 | ||||||
Capital shares issued | 183 | ||||||
From Adviser | 6 | ||||||
Total Assets | 558,038 | ||||||
Liabilities: | |||||||
Payables: | |||||||
Distributions | 211 | ||||||
Capital shares redeemed | 396 | ||||||
Accrued expenses and other payables: | |||||||
Investment advisory fees | 142 | ||||||
Administration fees | 64 | ||||||
Custodian fees | — | (a) | |||||
Transfer agent fees | 18 | ||||||
Compliance fees | — | (a) | |||||
Trustees' fees | — | (a) | |||||
| 12b-1 fees | 1 | ||||||
Other accrued expenses | 65 | ||||||
Total Liabilities | 897 | ||||||
Net Assets: | |||||||
Capital | 616,477 | ||||||
Total accumulated earnings/(loss) | (59,336 | ) | |||||
Net Assets | $ | 557,141 | |||||
Net Assets | |||||||
Fund Shares | $ | 516,987 | |||||
Institutional Shares | 27,598 | ||||||
Class A | 12,556 | ||||||
Total | $ | 557,141 | |||||
Shares (unlimited number of shares authorized with no par value): | |||||||
Fund Shares | 50,492 | ||||||
Institutional Shares | 2,695 | ||||||
Class A | 1,227 | ||||||
Total | 54,414 | ||||||
Net asset value, offering and redemption price per share: (b) | |||||||
Fund Shares | $ | 10.24 | |||||
Institutional Shares | 10.24 | ||||||
Class A | 10.23 | ||||||
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 | $ | 10.47 | |||||
(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.
15
USAA Mutual Funds Trust | Statements of Operations | ||||||
(Amounts in Thousands)
USAA Virginia Bond Fund | |||||||||||
| 11 Months Ended February 28, 2023(a) | Year Ended March 31, 2022 | ||||||||||
Investment Income: | |||||||||||
Interest | $ | 19,480 | $ | 20,346 | |||||||
Total Income | 19,480 | 20,346 | |||||||||
Expenses: | |||||||||||
Investment advisory fees | 1,845 | 2,332 | |||||||||
Administration fees — Fund Shares | 776 | 1,058 | |||||||||
Administration fees — Institutional Shares | 16 | 13 | |||||||||
Administration fees — Class A | 20 | 28 | |||||||||
Sub-Administration fees | 22 | 23 | |||||||||
| 12b-1 fees — Class A | 33 | 47 | |||||||||
Custodian fees | 10 | 32 | |||||||||
Transfer agent fees — Fund Shares | 155 | 178 | |||||||||
Transfer agent fees — Institutional Shares | 16 | 13 | |||||||||
Transfer agent fees — Class A | 13 | 19 | |||||||||
Trustees' fees | 46 | 49 | |||||||||
Compliance fees | 5 | 5 | |||||||||
Legal and audit fees | 66 | 50 | |||||||||
State registration and filing fees | — | (b) | 1 | ||||||||
Other expenses | 75 | 100 | |||||||||
Recoupment of prior expenses waived/reimbursed by Adviser | 3 | — | |||||||||
Total Expenses | 3,101 | 3,948 | |||||||||
Expenses waived/reimbursed by Adviser | (56 | ) | (17 | ) | |||||||
Net Expenses | 3,045 | 3,931 | |||||||||
Net Investment Income (Loss) | 16,435 | 16,415 | |||||||||
Realized/Unrealized Gains (Losses) from Investments: | |||||||||||
Net realized gains (losses) from investment securities | (1,711 | ) | (241 | ) | |||||||
| Net change in unrealized appreciation/depreciation on investment securities | (41,327 | ) | (41,154 | ) | |||||||
Net realized/unrealized gains (losses) on investments | (43,038 | ) | (41,395 | ) | |||||||
Change in net assets resulting from operations | $ | (26,603 | ) | $ | (24,980 | ) | |||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from March 31 to February 28.
(b) Rounds to less than $1 thousand.
See notes to financial statements.
16
USAA Mutual Funds Trust | Statements of Changes in Net Assets | ||||||
(Amounts in Thousands)
USAA Virginia Bond Fund | |||||||||||||||
| 11 Months Ended February 28, 2023(a) | Year Ended March 31, 2022 | Year Ended March 31, 2021 | |||||||||||||
From Investments: | |||||||||||||||
Operations: | |||||||||||||||
Net Investment Income (Loss) | $ | 16,435 | $ | 16,415 | $ | 16,875 | |||||||||
Net realized gains (losses) | (1,711 | ) | (241 | ) | 137 | ||||||||||
| Net change in unrealized appreciation/ depreciation | (41,327 | ) | (41,154 | ) | 21,658 | ||||||||||
Change in net assets resulting from operations | (26,603 | ) | (24,980 | ) | 38,670 | ||||||||||
Distributions to Shareholders: | |||||||||||||||
Fund Shares | (14,763 | ) | (15,740 | ) | (16,365 | ) | |||||||||
Institutional Shares | (478 | ) | (288 | ) | (132 | )(b) | |||||||||
Class A | (343 | ) | (375 | ) | (388 | ) | |||||||||
| Change in net assets resulting from distributions to shareholders | (15,584 | ) | (16,403 | ) | (16,885 | ) | |||||||||
| Change in net assets resulting from capital transactions | (66,986 | ) | (36,515 | ) | 17,248 | ||||||||||
Change in net assets | (109,173 | ) | (77,898 | ) | 39,033 | ||||||||||
Net Assets: | |||||||||||||||
Beginning of period | 666,314 | 744,212 | 705,179 | ||||||||||||
End of period | $ | 557,141 | $ | 666,314 | $ | 744,212 | |||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from March 31 to February 28.
(b) Institutional Shares activity is for the period June 29, 2020 (commencement of operations) to March 31, 2021.
(continues on next page)
See notes to financial statements.
17
USAA Mutual Funds Trust | Statements of Changes in Net Assets | ||||||
(Amounts in Thousands) (continued)
USAA Virginia Bond Fund | |||||||||||||||
| 11 Months Ended February 28, 2023(a) | Year Ended March 31, 2022 | Year Ended March 31, 2021 | |||||||||||||
Capital Transactions: | |||||||||||||||
Fund Shares | |||||||||||||||
Proceeds from shares issued | $ | 55,269 | $ | 43,169 | $ | 90,498 | |||||||||
Distributions reinvested | 12,752 | 13,583 | 13,707 | ||||||||||||
Cost of shares redeemed | (149,330 | ) | (90,975 | ) | (97,801 | ) | |||||||||
Total Fund Shares | $ | (81,309 | ) | $ | (34,223 | ) | $ | 6,404 | |||||||
Institutional Shares | |||||||||||||||
Proceeds from shares issued | $ | 33,768 | $ | 2,693 | $ | 12,682 | (b) | ||||||||
Distributions reinvested | 357 | 102 | 53 | (b) | |||||||||||
Cost of shares redeemed | (16,794 | ) | (3,719 | ) | (697 | )(b) | |||||||||
Total Institutional Shares | $ | 17,331 | $ | (924 | ) | $ | 12,038 | ||||||||
Class A | |||||||||||||||
Proceeds from shares issued | $ | 1,106 | $ | 2,422 | $ | 22,363 | |||||||||
Distributions reinvested | 324 | 356 | 375 | ||||||||||||
Cost of shares redeemed | (4,438 | ) | (4,146 | ) | (23,932 | ) | |||||||||
Total Class A | $ | (3,008 | ) | $ | (1,368 | ) | $ | (1,194 | ) | ||||||
| Change in net assets resulting from capital transactions | $ | (66,986 | ) | $ | (36,515 | ) | $ | 17,248 | |||||||
Share Transactions: | |||||||||||||||
Fund Shares | |||||||||||||||
Issued | 5,328 | 3,716 | 7,843 | ||||||||||||
Reinvested | 1,233 | 1,175 | 1,189 | ||||||||||||
Redeemed | (14,483 | ) | (7,905 | ) | (8,490 | ) | |||||||||
Total Fund Shares | (7,922 | ) | (3,014 | ) | 542 | ||||||||||
Institutional Shares | |||||||||||||||
Issued | 3,333 | 231 | 1,098 | (b) | |||||||||||
Reinvested | 35 | 9 | 5 | (b) | |||||||||||
Redeemed | (1,630 | ) | (326 | ) | (60 | )(b) | |||||||||
Total Institutional Shares | 1,738 | (86 | ) | 1,043 | |||||||||||
Class A | |||||||||||||||
Issued | 106 | 209 | 1,949 | ||||||||||||
Reinvested | 31 | 31 | 33 | ||||||||||||
Redeemed | (429 | ) | (361 | ) | (2,090 | ) | |||||||||
Total Class A | (292 | ) | (121 | ) | (108 | ) | |||||||||
Change in Shares | (6,476 | ) | (3,221 | ) | 1,477 | ||||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from March 31 to February 28.
(b) Institutional Shares activity is for the period June 29, 2020 (commencement of operations) to March 31, 2021.
See notes to financial statements.
18
USAA Mutual Funds Trust | Financial Highlights | ||||||
For a Share Outstanding Throughout Each Period
USAA Virginia Bond Fund | |||||||||||||||||||||||||||
Fund Shares | |||||||||||||||||||||||||||
| 11 Months Ended February 28, 2023(a) | Year Ended March 31, 2022 | Year Ended March 31, 2021 | Year Ended March 31, 2020 | Year Ended March 31, 2019 | Year Ended March 31, 2018 | ||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 10.94 | $ | 11.61 | $ | 11.26 | $ | 11.30 | $ | 11.16 | $ | 11.21 | |||||||||||||||
Investment Activities: | |||||||||||||||||||||||||||
Net investment income (loss) | 0.29 | (b) | 0.26 | (b) | 0.27 | (b) | 0.31 | (b) | 0.34 | 0.34 | |||||||||||||||||
| Net realized and unrealized gains (losses) | (0.72 | ) | (0.67 | ) | 0.35 | (0.04 | ) | 0.14 | (0.05 | ) | |||||||||||||||||
| Total from Investment Activities | (0.43 | ) | (0.41 | ) | 0.62 | 0.27 | 0.48 | 0.29 | |||||||||||||||||||
Distributions to Shareholders from: | |||||||||||||||||||||||||||
Net investment income | (0.27 | ) | (0.26 | ) | (0.27 | ) | (0.31 | ) | (0.34 | ) | (0.34 | ) | |||||||||||||||
Total Distributions | (0.27 | ) | (0.26 | ) | (0.27 | ) | (0.31 | ) | (0.34 | ) | (0.34 | ) | |||||||||||||||
Net Asset Value, End of Period | $ | 10.24 | $ | 10.94 | $ | 11.61 | $ | 11.26 | $ | 11.30 | $ | 11.16 | |||||||||||||||
Total Return (c) (d) | (3.90 | )% | (3.64 | )% | 5.53 | % | 2.39 | % | 4.36 | % | 2.56 | % | |||||||||||||||
Ratios to Average Net Assets: | |||||||||||||||||||||||||||
Net Expenses (e) (f) (g) (h) | 0.55 | % | 0.53 | % | 0.50 | % | 0.55 | % | 0.59 | % | 0.56 | % | |||||||||||||||
Net Investment Income (Loss) (e) | 3.01 | % | 2.23 | % | 2.32 | % | 2.70 | % | 3.03 | % | 2.98 | % | |||||||||||||||
Gross Expenses (e) (f) | 0.56 | % | 0.53 | % | 0.50 | % | 0.55 | % | 0.59 | % | 0.56 | % | |||||||||||||||
Supplemental Data: | |||||||||||||||||||||||||||
Net Assets at end of period (000's) | $ | 516,987 | $ | 639,231 | $ | 713,075 | $ | 685,508 | $ | 672,191 | $ | 666,772 | |||||||||||||||
Portfolio Turnover (c) (i) | 14 | % | 8 | % | 28 | % | 24 | % | 9 | % | 11 | % | |||||||||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from March 31 to February 28.
(b) Per share net investment income (loss) has been calculated using the average daily shares method.
(c) Not annualized for periods less than one year.
(d) 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.
(e) Annualized for periods less than one year.
(f) Does not include acquired fund fees and expenses, if any.
(g) 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 July 31, 2023, instead of coinciding with the Fund's fiscal year end.
(h) 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.
(i) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares.
(continues on next page)
See notes to financial statements.
19
USAA Mutual Funds Trust | Financial Highlights — continued | ||||||
For a Share Outstanding Throughout Each Period
USAA Virginia Bond Fund | |||||||||||||||
Institutional Shares | |||||||||||||||
| 11 Months Ended February 28, 2023(a) | Year Ended March 31, 2022 | June 29, 2020(b) through March 31, 2021 | |||||||||||||
Net Asset Value, Beginning of Period | $ | 10.94 | $ | 11.61 | $ | 11.46 | |||||||||
Investment Activities: | |||||||||||||||
Net investment income (loss) (c) | 0.31 | 0.26 | 0.20 | ||||||||||||
Net realized and unrealized gains (losses) | (0.73 | ) | (0.67 | ) | 0.15 | ||||||||||
Total from Investment Activities | (0.42 | ) | (0.41 | ) | 0.35 | ||||||||||
Distributions to Shareholders from: | |||||||||||||||
Net investment income | (0.28 | ) | (0.26 | ) | (0.20 | ) | |||||||||
Total Distributions | (0.28 | ) | (0.26 | ) | (0.20 | ) | |||||||||
Net Asset Value, End of Period | $ | 10.24 | $ | 10.94 | $ | 11.61 | |||||||||
Total Return (d) (e) | (3.86 | )% | (3.61 | )% | 3.04 | % | |||||||||
Ratios to Average Net Assets: | |||||||||||||||
Net Expenses (f) (g) (h) (i) | 0.51 | % | 0.50 | % | 0.49 | % | |||||||||
Net Investment Income (Loss) (f) | 3.26 | % | 2.25 | % | 2.26 | % | |||||||||
Gross Expenses (f) (g) | 0.57 | % | 0.56 | % | 0.58 | % | |||||||||
Supplemental Data: | |||||||||||||||
Net Assets at end of period (000's) | $ | 27,598 | $ | 10,469 | $ | 12,105 | |||||||||
Portfolio Turnover (d) (j) | 14 | % | 8 | % | 28 | % | |||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from March 31 to February 28.
(b) Commencement of operations.
(c) Per share net investment income (loss) has been calculated using the average daily shares method.
(d) Not annualized for periods less than one year.
(e) Assumes reinvestment of all net investment income and realized capital gain distributions, if any, during the period. Includes adjustments in accordance with U.S. Generally Accepted Accounting Principles and could differ from the Lipper reported return.
(f) Annualized for periods less than one year.
(g) Does not include acquired fund fees and expenses, if any.
(h) 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 June 29, 2020 and in effect through July 31, 2023, instead of coinciding with the Fund's fiscal year end.
(i) 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.
(j) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares.
(continues on next page)
See notes to financial statements.
20
USAA Mutual Funds Trust | Financial Highlights — continued | ||||||
For a Share Outstanding Throughout Each Period
USAA Virginia Bond Fund | |||||||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||
| 11 Months Ended February 28, 2023(a) | Year Ended March 31, 2022 | Year Ended March 31, 2021 | Year Ended March 31, 2020 | Year Ended March 31, 2019 | Year Ended March 31, 2018 | ||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 10.94 | $ | 11.60 | $ | 11.25 | $ | 11.29 | $ | 11.16 | $ | 11.20 | |||||||||||||||
Investment Activities: | |||||||||||||||||||||||||||
Net investment income (loss) | 0.26 | (b) | 0.23 | (b) | 0.24 | (b) | 0.28 | (b) | 0.32 | 0.31 | |||||||||||||||||
| Net realized and unrealized gains (losses) | (0.72 | ) | (0.66 | ) | 0.35 | (0.04 | ) | 0.12 | (0.04 | ) | |||||||||||||||||
| Total from Investment Activities | (0.46 | ) | (0.43 | ) | 0.59 | 0.24 | 0.44 | 0.27 | |||||||||||||||||||
Distributions to Shareholders from: | |||||||||||||||||||||||||||
Net investment income | (0.25 | ) | (0.23 | ) | (0.24 | ) | (0.28 | ) | (0.31 | ) | (0.31 | ) | |||||||||||||||
Total Distributions | (0.25 | ) | (0.23 | ) | (0.24 | ) | (0.28 | ) | (0.31 | ) | (0.31 | ) | |||||||||||||||
| Redemption Fees added to Beneficial Interests | — | — | — | — | — | — | (c) | ||||||||||||||||||||
Net Asset Value, End of Period | $ | 10.23 | $ | 10.94 | $ | 11.60 | $ | 11.25 | $ | 11.29 | $ | 11.16 | |||||||||||||||
| Total Return (excludes sales charges) (d) (e) | (4.20 | )% | (3.78 | )% | 5.26 | % | 2.14 | % | 4.05 | % | 2.42 | % | |||||||||||||||
Ratios to Average Net Assets: | |||||||||||||||||||||||||||
Net Expenses (f) (g) (h) (i) | 0.79 | % | 0.77 | % | 0.76 | % | 0.80 | % | 0.80 | % | 0.79 | %(j) | |||||||||||||||
Net Investment Income (Loss) (f) | 2.77 | % | 1.99 | % | 2.06 | % | 2.46 | % | 2.82 | % | 2.76 | % | |||||||||||||||
Gross Expenses (f) (g) | 0.85 | % | 0.82 | % | 0.81 | % | 0.82 | % | 0.86 | % | 0.81 | % | |||||||||||||||
Supplemental Data: | |||||||||||||||||||||||||||
Net Assets at end of period (000's) | $ | 12,556 | $ | 16,614 | $ | 19,032 | $ | 19,671 | $ | 19,439 | $ | 19,894 | |||||||||||||||
Portfolio Turnover (d) (k) | 14 | % | 8 | % | 28 | % | 24 | % | 9 | % | 11 | % | |||||||||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from March 31 to February 28.
(b) Per share net investment income (loss) has been calculated using the average daily shares method.
(c) Amount is less than $0.005 per share.
(d) Not annualized for periods less than one year.
(e) Assumes reinvestment of all net investment income and realized capital gain distributions, if any, during the period. Includes adjustments in accordance with U.S. Generally Accepted Accounting Principles and could differ from the Lipper reported return.
(f) Annualized for periods less than one year.
(g) Does not include acquired fund fees and expenses, if any.
(h) 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 July 31, 2023, instead of coinciding with the Fund's fiscal year end.
(i) 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.
(j) Effective October 12, 2017, USAA Asset Management Company voluntarily agreed to limit the annual expenses of the Class A shares to 0.80% of Class A average daily net assets.
(k) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares.
See notes to financial statements.
21
USAA Mutual Funds Trust | Notes to Financial Statements February 28, 2023 | ||||||
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 Virginia Bond 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.
On June 29, 2022, the Board of Trustees (the "Board") approved the fiscal year-end change for the Fund from March 31 to February 28. The first full cycle of the new fiscal year-end reporting will begin March 1, 2023. As a result of the change, the Fund has a February 28, 2023 fiscal 11-month transition period, the results of which are reported in this Annual Report for the period ended February 28, 2023.
Victory Capital Management ("VCM" or 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 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 (unadjusted) in active markets for identical securities
• Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, or credit spreads, applicable to those securities, etc.)
• Level 3 — significant unobservable inputs (including the Adviser's assumptions in determining the fair value of investments)
22
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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, appointed as the valuation designee by the Board, has established the Pricing and Liquidity Committee (the "Committee"), and subject to Board oversight, the Committee administers and oversees the Fund's valuation policies and procedures, which are approved by the Board.
Debt securities are valued each business day by a pricing service approved by the valuation designee and subject to the oversight of the Board. The 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.
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 net asset value ("NAV") to be more reliable than it otherwise would be.
A summary of the valuations as of February 28, 2023, 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 | ||||||||||||||||
Municipal Bonds | $ | — | $ | 548,756 | $ | 2,473 | $ | 551,229 | |||||||||||
Total | $ | — | $ | 548,756 | $ | 2,473 | $ | 551,229 | |||||||||||
As of February 28, 2023, there were no transfers into/out of Level 3.
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.
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 and recorded daily using the effective interest method which adjusts, where applicable, the amortization of premiums or accretion of discounts. Interest income is recorded daily on the accrual basis. 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 Statements of Operations.
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 had a tax year end of March 31, and effective February 28, 2023, the Fund changed its tax year end to February 28.
23
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
For the 11 months ended February 28, 2023, 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 under specified conditions outlined in the valuation policies and procedures adopted by the Board. In addition, as defined under the valuation policies and procedures, each transaction must be effected at the independent current market price. For the 11 months ended February 28, 2023, 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) | |||||||||
| $ | 20,000 | $ | 27,500 | $ | — | ||||||
For the year ended March 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) | |||||||||
| $ | 7,400 | $ | 35,350 | $ | — | ||||||
Fees Paid Indirectly:
Expense offsets to custody fees that arise from credits on cash balances maintained on deposit are reflected on the Statements 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 11 months ended February 28, 2023, were as follows for the Fund (amounts in thousands):
Excluding | |||||||
Purchases | Sales | ||||||
$ | 82,673 | $ | 132,653 | ||||
24
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 Securities and Exchange Commission ("SEC").
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 0.50% of the first $50 million of the Fund's average daily net assets, 0.40% of that portion of the Fund's average daily net assets over $50 million but not over $100 million, and 0.30% of that portion of the Fund's average daily net assets over $100 million. Amounts incurred and paid to VCM for the 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements of Operations as Investment advisory fees.
The performance adjustment for each share class is accrued daily and calculated monthly by comparing the respective class' performance to that of the Lipper Virginia Municipal Debt Funds Index. The Lipper Virginia Municipal Debt Funds Index tracks the total return performance of the largest funds within the Lipper Virginia Municipal Debt Funds category.
The performance period for each share class consists of the current month plus the previous 35 months. The following table is utilized to determine the extent of the performance adjustment:
| Over/Under Performance Relative to Index (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 Virginia Municipal Debt Funds Index over that period, even if the class has overall negative returns during the performance period.
For the period April 1, 2022, to February 28, 2023, performance adjustments were $69, $1, and $(2) for Fund Shares, Institutional Shares, and Class A, in thousands, respectively. Performance adjustments were 0.01%, 0.01%, and (0.01)% for Fund Shares, Institutional Shares, and Class A, respectively. For the period April 1, 2021, to March 31, 2022, performance adjustments were $(24), less than $1, and $(6) for Fund Shares, Institutional Shares, and Class A, in thousands, respectively. Performance adjustments were less than (0.01)%, less than 0.01%, 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 11 months ended February 28, 2023, and the year ended March 31, 2022, the Fund had no subadvisers.
25
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements 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 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements 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 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements 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 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 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements 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 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements of Operations as 12b-1 fees.
In addition, the Distributor is entitled to receive commissions in connection with sales of Class A. For the 11 months ended February 28, 2023, the Distributor did not receive any commissions. For the year ended March 31, 2022, the Distributor received less than $1 thousand from commissions earned in connection with sales of Class A.
26
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
Other Fees:
Citibank serves as the Fund's custodian. The Fund pays Citibank a fee for providing these services. Amounts incurred for the 11 months ended February 28, 2023, and the year ended March 31, 2022, are reflected on the Statements 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 July 31, 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 February 28, 2023, the expense limits (excluding voluntary waivers) were 0.54%, 0.50%, and 0.80% for Fund Shares, Institutional Shares, and Class A, respectively.
Under the terms of the expense limitation agreement, 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.
As of February 28, 2023, 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 February 28, 2023.
| Expires 2023* | Expires 2024 | Expires 2025 | Expires 2026 | Total | |||||||||||||||
| $ | 1 | $ | 15 | $ | 17 | $ | 53 | $ | 86 | ||||||||||
* Amount expired on March 31, 2023.
As of March 31, 2022, the following amounts were available to be repaid to the Adviser (amounts in thousands).
| Expires 2023 | Expires 2024 | Expires 2025 | Total | ||||||||||||
| $ | 1 | $ | 15 | $ | 17 | $ | 33 | ||||||||
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 11 months ended February 28, 2023, and the year ended March 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.
State-Specific Risk — Because the Fund invests in Virginia tax-exempt securities, the Fund is more susceptible to adverse economic, political, and regulatory changes affecting tax-exempt securities issuers in Virginia, such as changes to state laws and policies, economic issues that affect critical industries, large employers, or weakened real estate prices, and existing debt levels and state budget priorities. In addition, the economic affects regarding COVID-19 and elevated global inflation may exacerbate some or all of these risks. The Fund's performance will be affected by the fiscal and economic health of Virginia and its municipalities and their ability to issue and repay debt. The Fund is more vulnerable to unfavorable developments in Virginia than are funds that invest in municipal securities of multiple states.
27
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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.
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 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 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.
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 27, 2022, with a termination date of June 26, 2023. 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 11 months ended February 28, 2023, Citibank received an annual commitment fee of 0.15% on $300 million for
28
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
providing the Line of Credit. Each fund in the Victory Funds Complex paid a pro-rata portion of the commitment fees plus any interest on amounts borrowed. For the year ended March 31,2022, and the period from April 1, 2022, through June 27, 2022, interest was based on the one-month London Interbank Offered Rate ("LIBOR") plus one percent. Effective with the renewal, for the period June 28, 2022, through February 28, 2023, interest was based on the one-month Secured Overnight Financing Rate ("SOFR") plus 1.10 percent. The Fund did not experience a material financial impact transitioning from LIBOR to SOFR. Interest charged to the 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 11 months ended February 28, 2023, and the year ended March 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 Statements of Operations under Interfund lending fees. As a Lender, interest earned by the Fund, if any, during the period, is reflected on the Statements of Operations under Interfund lending.
The Fund did not utilize or participate in the Facility during the 11 months ended February 28, 2023, and the year ended March 31, 2022.
7. 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. 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 February 28, 2023, on the Statement of Assets and Liabilities, there were no permanent book-to-tax difference reclassification adjustments.
The tax character of current year distributions paid and the tax basis of the current components of accumulated earnings (loss) will be determined at the end of the current tax year.
29
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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):
11 Months Ended February 28, 2023 | |||||||
| Distributions Paid From | |||||||
Tax-Exempt Income | Total Distributions Paid | ||||||
$ | 15,584 | $ | 15,584 | ||||
Year Ended March 31, 2022 | Year Ended March 31, 2021 | ||||||||||||||
| Distributions Paid From | Distributions Paid From | ||||||||||||||
| Tax-Exempt Income | Total Distributions Paid | Tax-Exempt Income | Total Distributions Paid | ||||||||||||
$ | 16,403 | $ | 16,403 | $ | 16,885 | $ | 16,885 | ||||||||
As of February 28, 2023, the components of accumulated earnings (loss) on a tax basis were as follows (amounts in thousands):
| Undistributed Tax-Exempt Income | Accumulated Earnings | Distributions Payable | Accumulated Capital and Other Losses | Unrealized Appreciation (Depreciation)* | Total Accumulated Earnings (Loss) | ||||||||||||||||||
| $ | 3,850 | $ | 3,850 | $ | (1,494 | ) | $ | (11,542 | ) | $ | (50,150 | ) | $ | (59,336 | ) | ||||||||
* The difference between the book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to defaulted bond adjustments.
As of February 28, 2023, 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 | |||||||||
| $ | 2,222 | $ | 9,320 | $ | 11,542 | ||||||
As of February 28, 2023, 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) | ||||||||||||
| $ | 601,379 | $ | 1,914 | $ | (52,064 | ) | $ | (50,150 | ) | ||||||
8. Subsequent Events:
The Board, upon recommendation of the Adviser, has approved a change in the name of the Trust and each individual fund within the Trust. On February 23, 2023, an initial filing was made with the SEC to commence the process to effectuate the following changes.
Effective at the start of business on April 24, 2023 (the "Effective Date"), the name of the Trust changed from USAA Mutual Funds Trust to Victory Portfolios III, and all references to USAA Mutual Funds Trust in the summary prospectus, statutory prospectus, and statement of additional information ("SAI") will be replaced by the new name.
30
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
Also on the Effective Date, references to the current name of the Fund in the summary prospectus, statutory prospectus, and SAI will be replaced with the new name as follows:
Current Name | New Name | ||||||
USAA Virginia Bond Fund | Victory Virginia Bond Fund | ||||||
In addition, on the Effective Date, USAA Investments, a Victory Capital Management Inc. investment franchise, that currently manages the USAA Fixed Income Funds, will change its name to Victory Income Investors, and all references to USAA Investments in the summary prospectus, statutory prospectus, and SAI, will be replaced.
Please note that there will be no changes in the management of the Fund or to the Fund's ticker symbols.
31
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of USAA Virginia Bond Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of USAA Virginia Bond Fund (the "Fund") (one of the funds constituting USAA Mutual Funds Trust (the "Trust")), including the schedule of portfolio investments as of February 28, 2023, and the related statements of operations for the period from April 1, 2022 through February 28, 2023 and the year ended March 31, 2022, the statements of changes in net assets for the period from April 1, 2022 through February 28, 2023 and each of the two years in the period ended March 31, 2022, the financial highlights for the period from April 1, 2022 through February 28, 2023 and each of the five years in the period ended March 31, 2022, 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 February 28, 2023, the results of its operations for the period from April 1, 2022 through February 28, 2023 and the year ended March 31, 2022, the statements of changes in net assets for the period from April 1, 2022 through February 28, 2023 and each of the two years in the period ended March 31, 2022, and its financial highlights for the period from April 1, 2022 through February 28, 2023 and each of the five years in the period ended March 31, 2022, 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 February 28, 2023, 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
April 28, 2023
32
USAA Mutual Funds Trust | Supplemental Information February 28, 2023 | ||||||
(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 date 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 February 28, 2023 | ||||||
(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 (06/17-06/19); 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 (03/15-03/21). | 45 | None | ||||||||||||||||||
| Paul L. McNamara (July 1948) | Trustee | Trustee since January 2012 | Retired. | 45 | None | ||||||||||||||||||
34
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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) | ||||||||||||||||||
35
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 February 28, 2023 | ||||||
(Unaudited)
Officers:
The officers of the Trust, their date 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. (since 2022); 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. (07/01/19-present); Executive Director, Investment and Financial Administration, USAA (2012-06/30/19); 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. (07/01/19-present); Accounting/ Financial Director, USAA (12/13-06/30/19). | ||||||||||||
| 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). | ||||||||||||
37
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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). | ||||||||||||
38
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 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 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 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 September 1, 2022, through February 28, 2023.
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 9/1/22 | Actual Ending Account Value 2/28/23 | Hypothetical Ending Account Value 2/28/23 | Actual Expenses Paid During Period 9/1/22- 2/28/23* | Hypothetical Expenses Paid During Period 9/1/22- 2/28/23* | Annualized Expense Ratio During Period 9/1/22- 2/28/23 | ||||||||||||||||||||||
Fund Shares | $ | 1,000.00 | $ | 997.60 | $ | 1,022.07 | $ | 2.72 | $ | 2.76 | 0.55 | % | |||||||||||||||
Institutional Shares | 1,000.00 | 997.90 | 1,022.27 | 2.53 | 2.56 | 0.51 | % | ||||||||||||||||||||
Class A | 1,000.00 | 996.60 | 1,020.98 | 3.81 | 3.86 | 0.77 | % | ||||||||||||||||||||
* Expenses are equal to the average account value multiplied by the Fund's annualized expense ratio multiplied by 181/365 (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 February 28, 2023 | ||||||
(Unaudited)
Additional Federal Income Tax Information
The following federal tax information related to the Fund's fiscal 11 months ended February 28, 2023, 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 2024.
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 11 months ended February 28, 2023 (amounts in thousands):
Tax | |||
$ | 15,584 | ||
40
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
Considerations of the Board in Continuing the Investment Advisory Agreement
USAA Virginia Bond Fund (the "Fund")
At a meeting of the Board of Trustees (the "Board") of USAA Mutual Funds Trust (the "Trust") held on December 8-9, 2022, 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 8-9, 2022, 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 21, 2022.
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 February 28, 2023 | ||||||
(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 program, (iv) derivatives risk management program, and (v) 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 adjustment, 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. 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 June 30, 2022.
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
42
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
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 noted that the Fund has advisory fee breakpoints that allow the Fund to participate in economies of scale and that such economies of scale were currently reflected in the advisory fee. 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.
43
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 10, 2023, 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-RN (prior to August 2022, 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 | ||||||
vcm.com | (800) 235-8396 | ||||||
40862-0423
February 28, 2023
Annual Report
USAA Cornerstone Aggressive Fund
(Also Known as Victory Cornerstone Aggressive Fund*)
* Effective at the start of business on April 24, 2023, the Fund name will change to Victory Cornerstone Aggressive Fund. Please see Notes to the Financial Statements for subsequent event information.
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 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.
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, 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 | 19 | ||||||
Statements of Operations | 20 | ||||||
Statements of Changes in Net Assets | 21 | ||||||
Financial Highlights | 22 | ||||||
Notes to Financial Statements | 23 | ||||||
| Report of Independent Registered Public Accounting Firm | 36 | ||||||
Supplemental Information (Unaudited) | 37 | ||||||
Trustee and Officer Information | 37 | ||||||
Proxy Voting and Portfolio Holdings Information | 43 | ||||||
Expense Example | 43 | ||||||
Additional Federal Income Tax Information | 44 | ||||||
Advisory Contract Renewal | 45 | ||||||
Liquidity Risk Management Program | 48 | ||||||
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,
If you are reading this letter but double-checking your calendar, be assured there's no mistake. The annual reporting period for your USAA Mutual Funds has shifted from a fiscal year ended May 31st to a fiscal year ended February 28th/the last day of February. This change has no material impact on any of your investments. This change aims to help us improve efficiencies and reduce operational costs. Therefore, this letter covers an abbreviated "annual" period from June 1, 2022, through February 28, 2023. Future annual reports will cover the 12-month period ended February 28th/the last day of February going forward.
Our most recent annual reporting period has been a challenging period for investors. Consider some of the headwinds: heightened geopolitical tensions, a terrible war in Eastern Europe, elevated energy and food costs, high inflation, and rising interest rates. All this has dampened global growth and created a difficult backdrop for both bond and stock investors.
The inflation data was particularly troublesome and surprised many throughout the past year with some of the highest readings since the 1970s. In response, the U.S. Federal Reserve (the "Fed") continued with its monetary tightening and boosted the Fed funds interest rate repeatedly throughout the annual reporting period. And if that wasn't enough, zero-COVID-19 policies in China (which fortunately have been recently lifted) further exacerbated supply chain issues. As one might expect, all these obstacles ratcheted up volatility across financial markets.
In terms of the numbers, the S&P 500® Index, the bell-weather proxy for our domestic stock market, delivered a negative total return of almost 3% for our abbreviated annual reporting period. But perhaps what made 2022 even more difficult was the performance of fixed income markets. The Bloomberg US Aggregate Bond Index—a proxy for a diversified fixed income portfolio and one that many investors and institutions follow closely—delivered a negative total return of approximately 4% during the same period. That's not exactly the offset to equity performance that many investors come to expect from bonds.
It's been difficult, and we fully acknowledge that the steady drumbeat of bad news and bouts of stomach-churning volatility can take a toll on investors' psyche. Even when markets often snap back sharply (as happened this past July, October and earlier this calendar year), investors often wonder if they have missed an opportunity.
Through all of the turmoil and challenges in our most recent annual reporting period, we are reminded of two enduring realities: 1) financial markets are dynamic and apt to change abruptly; 2) it's vital to remain calm and rational whenever faced with those inevitable bouts of turmoil.
Fortunately, we think that investors can take comfort knowing that all of our independent investment franchises have experience managing portfolios through a wide variety of market environments. Our investment professionals remain calm during turbulent financial markets, and we think it's imperative that investors do the same.
2
We still believe that a long-term plan, a well-diversified portfolio across asset classes and investment types, and a clear understanding of individual risk tolerances are the key ingredients for staying the course and progressing on investment goals. Moreover, all our investment professionals continually monitor the environment and work hard to position portfolios opportunistically no matter what the markets bring. Remember, turmoil can also create opportunity.
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, we encourage you to contact our Member Service Representatives. Call 800-235-8396, or visit our website at vcm.com.
From all of us here at Victory Capital, thank you for your ongoing confidence and 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?
The reporting period started in the month of June as pressure continued to mount for both stocks and bonds. The U.S. Federal Reserve's (the "Fed") hawkish pivot continued to put pressure on equity multiples. With stubbornly high inflation readings, 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.
In the third quarter, global equities declined, continuing the downward trend from the first half of 2022. The quarter began with a rally that continued into mid-August, on hopes that the Fed would pivot toward a more accommodative policy. However, messaging from Fed Chairman, Jerome Powell, and a stronger-than-expected inflation report in early September dampened investor optimism over the central bank's trajectory and the odds of avoiding recession. The Fed went on to hike rates aggressively by 75 basis points ("bps") twice during the quarter, bringing the benchmark Fed funds rate target to a range of 3.0% to 3.25%, as compared to 0% to 0.25% at the beginning of the year. (A basis point is 1/100th of a percentage point.) For its part, the European Central Bank raised its reference rate by 50 bps in July, followed by another 75 bps in September. Other factors that weighed on sentiment during the quarter included the ongoing Russia-Ukraine war, an energy crisis in Europe, and the resumption of COVID-19 lockdowns in China.
Global equities rebounded in the fourth quarter trimming full year losses. Gains in October and November were sparked by signs of peaking inflation alongside less hawkish commentary from Fed Chairman Powell raising hope that the central bank would end its interest rate hiking cycle sometime in early 2023. Indeed, both the Fed and the European Central Bank raised their benchmark overnight lending rates by a more modest 50 bps in mid-December. Also supporting sentiment, the Chinese government began to ease their zero-COVID-19 policy that had weighed on global economic growth for much of 2022. However, stocks retreated into year-end as investors shifted their focus to the potential impact higher rates might have on economic growth and corporate earnings in the coming year.
As the reporting period crossed into 2023, global equities started off the year logging positive returns in the month of January. Bonds also rallied at the start of the year on hopes that the Fed's hawkish pivot would come to an end in 2023. As the calendar moved to February, stronger than expected employment and inflation reports caused investors to reevaluate interest rate expectations for 2023 and consider that rates could stay higher for longer. The result was a reversal in global equities and bonds which ended the month lower.
• How did the USAA Cornerstone Aggressive Fund (the "Fund") perform during the reporting period?
The Fund's fiscal year-end changed this year to February 28 from May 31, resulting in a shorter reporting period for fiscal year ended 2023. For the nine-month reporting period ended February 28, 2023, the Fund had a total return (at net asset value) of -2.65%. This
4
USAA Cornerstone Aggressive Fund
Managers' Commentary (continued)
compares to returns of -2.51% for the MSCI All-Country World Index, and -2.40% for the Cornerstone Aggressive Composite Index.
• What strategies did you employ during the reporting period?
The Fund had a negative total return over the period, as global financial markets experienced weak performance and high volatility. Inflation concerns, rising interest rates and geopolitical issues continued to plague all major market segments for the majority of 2022 creating a volatile investment environment. The Fund slightly underperformed the Cornerstone Aggressive Composite Index.
Overall, the Fund benefited from a tilt to the value style over growth, and to higher-quality stocks over their lower-quality counterparts. Both categories outperformed as investors gravitated to companies seen as being in the best position to withstand a period of slow growth and higher interest rates. 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 2022. On the other hand, tactical positions in international equities — such as Canada — dampened results.
The Fund had a small allocation to derivatives during the period that did not have a material impact on performance.
Our approach is to hold a core, diversified portfolio, while accounting for both current risks and longer-term opportunities. We stay focused on fundamentals, valuations, and diversification. The Fund tilts to the value style over growth, and to higher-quality stocks over their lower-quality counterparts. We believe this approach is prudent for long-term investors and is particularly important now given the elevated uncertainty in the outlook for the economy and markets.
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 February 28, 2023
Fund Shares | |||||||||||||||
INCEPTION DATE | 6/8/12 | ||||||||||||||
Net Asset Value | MSCI All-Country | Cornerstone Aggressive | |||||||||||||
One Year | –6.39 | % | –8.26 | % | –7.59 | % | |||||||||
Five Year | 4.19 | % | 5.82 | % | 5.56 | % | |||||||||
Ten Year | 5.26 | % | 7.93 | % | 7.24 | % | |||||||||
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 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
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 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 | February 28, 2023 | ||||||
(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*:
February 28, 2023
(% 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 Aggressive Fund | Schedule of Portfolio Investments February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Common Stocks (35.2%) | |||||||||||
Communication Services (2.4%): | |||||||||||
Alphabet, Inc. Class C (a) | 15,187 | $ | 1,371 | ||||||||
AT&T, Inc. | 66,712 | 1,262 | |||||||||
Cargurus, Inc. (a) | 5,774 | 99 | |||||||||
Cogent Communications Holdings, Inc. | 2,406 | 156 | |||||||||
Comcast Corp. Class A | 17,086 | 635 | |||||||||
Gray Television, Inc. | 4,717 | 55 | |||||||||
IDT Corp. Class B (a) | 2,589 | 79 | |||||||||
Iridium Communications, Inc. (a) | 1,691 | 104 | |||||||||
Meta Platforms, Inc. Class A (a) | 9,946 | 1,740 | |||||||||
Netflix, Inc. (a) | 1,852 | 597 | |||||||||
Shutterstock, Inc. | 2,186 | 164 | |||||||||
Sirius XM Holdings, Inc. (b) | 96,624 | 424 | |||||||||
Thryv Holdings, Inc. (a) | 5,632 | 134 | |||||||||
T-Mobile U.S., Inc. (a) | 4,033 | 573 | |||||||||
United States Cellular Corp. (a) | 2,991 | 72 | |||||||||
Verizon Communications, Inc. | 16,563 | 643 | |||||||||
ZipRecruiter, Inc. (a) | 4,108 | 70 | |||||||||
8,178 | |||||||||||
Consumer Discretionary (3.0%): | |||||||||||
Asbury Automotive Group, Inc. (a) | 592 | 134 | |||||||||
AutoZone, Inc. (a) | 399 | 992 | |||||||||
Best Buy Co., Inc. | 5,132 | 427 | |||||||||
Big 5 Sporting Goods Corp. (b) | 8,754 | 77 | |||||||||
Dillard's, Inc. Class A | 214 | 76 | |||||||||
Foot Locker, Inc. | 2,837 | 124 | |||||||||
Ford Motor Co. | 42,900 | 518 | |||||||||
Frontdoor, Inc. (a) | 3,842 | 109 | |||||||||
General Motors Co. | 13,089 | 507 | |||||||||
Genuine Parts Co. | 2,892 | 511 | |||||||||
G-III Apparel Group Ltd. (a) | 5,883 | 98 | |||||||||
Group 1 Automotive, Inc. | 720 | 159 | |||||||||
Hibbett, Inc. | 1,392 | 100 | |||||||||
Installed Building Products, Inc. | 1,423 | 164 | |||||||||
Kontoor Brands, Inc. | 2,607 | 136 | |||||||||
Las Vegas Sands Corp. (a) | 9,565 | 550 | |||||||||
Lennar Corp. Class A | 5,388 | 521 | |||||||||
Lowe's Cos., Inc. | 2,540 | 523 | |||||||||
MarineMax, Inc. (a) | 3,675 | 123 | |||||||||
McDonald's Corp. | 2,596 | 685 | |||||||||
Murphy USA, Inc. | 523 | 133 | |||||||||
O'Reilly Automotive, Inc. (a) | 1,204 | 999 | |||||||||
Perdoceo Education Corp. (a) | 8,091 | 112 | |||||||||
Rent-A-Center, Inc. | 4,924 | 132 | |||||||||
Signet Jewelers Ltd. | 1,274 | 91 | |||||||||
Smith & Wesson Brands, Inc. | 10,862 | 119 | |||||||||
Sonic Automotive, Inc. Class A | 2,632 | 150 | |||||||||
Starbucks Corp. | 5,776 | 590 | |||||||||
See notes to financial statements.
8
| USAA Mutual Funds Trust USAA Cornerstone Aggressive Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Target Corp. | 2,923 | $ | 493 | ||||||||
Taylor Morrison Home Corp. (a) | 4,516 | 162 | |||||||||
The Home Depot, Inc. | 2,231 | 662 | |||||||||
Winnebago Industries, Inc. | 1,880 | 119 | |||||||||
10,296 | |||||||||||
Consumer Staples (1.8%): | |||||||||||
Altria Group, Inc. | 23,105 | 1,073 | |||||||||
Central Garden & Pet Co. Class A (a) | 2,727 | 105 | |||||||||
Colgate-Palmolive Co. | 6,703 | 491 | |||||||||
General Mills, Inc. | 7,185 | 571 | |||||||||
Herbalife Nutrition Ltd. (a) | 3,859 | 75 | |||||||||
Ingles Markets, Inc. Class A | 1,412 | 126 | |||||||||
Kimberly-Clark Corp. | 3,821 | 478 | |||||||||
Medifast, Inc. | 1,273 | 143 | |||||||||
National Beverage Corp. (a) | 1,008 | 47 | |||||||||
PepsiCo, Inc. | 4,142 | 719 | |||||||||
Philip Morris International, Inc. | 5,795 | 564 | |||||||||
Sprouts Farmers Market, Inc. (a) | 2,993 | 91 | |||||||||
The Kroger Co. | 12,320 | 531 | |||||||||
Tyson Foods, Inc. Class A | 8,486 | 503 | |||||||||
USANA Health Sciences, Inc. (a) | 1,945 | 118 | |||||||||
Vector Group Ltd. | 12,619 | 167 | |||||||||
Walgreens Boots Alliance, Inc. | 13,564 | 482 | |||||||||
6,284 | |||||||||||
Energy (2.0%): | |||||||||||
Arch Resources, Inc. (b) | 693 | 109 | |||||||||
Chevron Corp. | 4,876 | 784 | |||||||||
Civitas Resources, Inc. | 2,346 | 165 | |||||||||
ConocoPhillips | 6,173 | 638 | |||||||||
CONSOL Energy, Inc. | 2,671 | 146 | |||||||||
Crescent Energy Co. Class A (b) | 9,132 | 105 | |||||||||
CVR Energy, Inc. | 2,519 | 80 | |||||||||
Devon Energy Corp. | 8,965 | 483 | |||||||||
DHT Holdings, Inc. | 7,087 | 82 | |||||||||
Dorian LPG Ltd. | 4,724 | 104 | |||||||||
EOG Resources, Inc. | 4,306 | 487 | |||||||||
Exxon Mobil Corp. | 8,517 | 936 | |||||||||
Magnolia Oil & Gas Corp. Class A | 5,430 | 119 | |||||||||
Marathon Oil Corp. | 20,513 | 516 | |||||||||
Marathon Petroleum Corp. | 4,634 | 573 | |||||||||
Matador Resources Co. | 2,607 | 140 | |||||||||
Patterson-UTI Energy, Inc. | 3,784 | 52 | |||||||||
PBF Energy, Inc. Class A | 3,117 | 136 | |||||||||
Schlumberger NV | 11,086 | 590 | |||||||||
SM Energy Co. | 4,288 | 126 | |||||||||
Teekay Corp. (a) | 19,758 | 123 | |||||||||
Valero Energy Corp. | 4,408 | 581 | |||||||||
7,075 | |||||||||||
See notes to financial statements.
9
| USAA Mutual Funds Trust USAA Cornerstone Aggressive Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Financials (5.1%): | |||||||||||
Annaly Capital Management, Inc. | 943 | $ | 20 | ||||||||
Aon PLC Class A | 1,611 | 490 | |||||||||
Apollo Global Management, Inc. | 7,364 | 522 | |||||||||
Arbor Realty Trust, Inc. | 5,158 | 78 | |||||||||
Arch Capital Group Ltd. (a) | 7,892 | 552 | |||||||||
Ares Commercial Real Estate Corp. | 4,856 | 55 | |||||||||
Artisan Partners Asset Management, Inc. Class A | 3,252 | 107 | |||||||||
Bank of America Corp. | 21,028 | 721 | |||||||||
Berkshire Hathaway, Inc. Class B (a) | 2,860 | 873 | |||||||||
Bread Financial Holdings, Inc. | 2,758 | 113 | |||||||||
Capital One Financial Corp. | 4,914 | 536 | |||||||||
Cathay General Bancorp | 2,447 | 105 | |||||||||
Chimera Investment Corp. | 10,251 | 67 | |||||||||
Citigroup, Inc. | 12,305 | 624 | |||||||||
Donnelley Financial Solutions, Inc. (a) | 2,464 | 104 | |||||||||
Enova International, Inc. (a) | 3,277 | 160 | |||||||||
Essent Group Ltd. | 4,729 | 203 | |||||||||
FactSet Research Systems, Inc. | 1,097 | 455 | |||||||||
First Bancorp | 9,820 | 142 | |||||||||
Genworth Financial, Inc. (a) | 25,911 | 161 | |||||||||
Heartland Financial USA, Inc. | 2,545 | 126 | |||||||||
Houlihan Lokey, Inc. | 1,420 | 136 | |||||||||
International Bancshares Corp. | 3,711 | 180 | |||||||||
JPMorgan Chase & Co. | 18,367 | 2,633 | |||||||||
LPL Financial Holdings, Inc. | 2,073 | 517 | |||||||||
Marsh & McLennan Cos., Inc. | 3,115 | 505 | |||||||||
MetLife, Inc. | 7,685 | 551 | |||||||||
Moelis & Co. Class A | 2,377 | 102 | |||||||||
Morgan Stanley | 12,627 | 1,219 | |||||||||
Mr. Cooper Group, Inc. (a) | 3,396 | 158 | |||||||||
MSCI, Inc. | 874 | 456 | |||||||||
New York Mortgage Trust, Inc. | 20,947 | 56 | |||||||||
NMI Holdings, Inc. Class A (a) | 5,621 | 131 | |||||||||
OFG Bancorp | 4,442 | 135 | |||||||||
PennyMac Financial Services, Inc. | 2,520 | 152 | |||||||||
Prudential Financial, Inc. | 5,190 | 519 | |||||||||
Raymond James Financial, Inc. | 4,751 | 515 | |||||||||
Regions Financial Corp. | 19,202 | 448 | |||||||||
RLI Corp. | 1,358 | 187 | |||||||||
Selective Insurance Group, Inc. | 1,912 | 194 | |||||||||
ServisFirst Bancshares, Inc. | 2,256 | 167 | |||||||||
Stewart Information Services Corp. | 2,156 | 92 | |||||||||
T. Rowe Price Group, Inc. | 3,729 | 419 | |||||||||
The Bancorp, Inc. (a) | 3,125 | 108 | |||||||||
The Goldman Sachs Group, Inc. | 1,680 | 591 | |||||||||
The Progressive Corp. | 7,881 | 1,131 | |||||||||
UMB Financial Corp. | 2,020 | 183 | |||||||||
17,699 | |||||||||||
See notes to financial statements.
10
| USAA Mutual Funds Trust USAA Cornerstone Aggressive Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Health Care (6.0%): | |||||||||||
AbbVie, Inc. | 5,062 | $ | 779 | ||||||||
AbCellera Biologics, Inc. (a) | 13,244 | 111 | |||||||||
ACADIA Pharmaceuticals, Inc. (a) | 5,070 | 105 | |||||||||
Alector, Inc. (a) | 12,183 | 104 | |||||||||
Alkermes PLC (a) | 4,886 | 131 | |||||||||
AmerisourceBergen Corp. | 6,200 | 965 | |||||||||
Amgen, Inc. | 7,616 | 1,764 | |||||||||
AMN Healthcare Services, Inc. (a) | 1,366 | 123 | |||||||||
Amneal Pharmaceuticals, Inc. (a) | 24,940 | 51 | |||||||||
Arcus Biosciences, Inc. (a) | 6,104 | 111 | |||||||||
Arrowhead Pharmaceuticals, Inc. (a) | 2,270 | 73 | |||||||||
Avanos Medical, Inc. (a) | 4,730 | 133 | |||||||||
Beam Therapeutics, Inc. (a) | 1,253 | 50 | |||||||||
Biogen, Inc. (a) | 1,892 | 511 | |||||||||
Bristol-Myers Squibb Co. | 9,283 | 640 | |||||||||
CareDx, Inc. (a) | 4,147 | 70 | |||||||||
Catalyst Pharmaceuticals, Inc. (a) | 5,698 | 87 | |||||||||
Centene Corp. (a) | 7,556 | 517 | |||||||||
Cigna Corp. | 4,013 | 1,172 | |||||||||
Collegium Pharmaceutical, Inc. (a) | 4,105 | 109 | |||||||||
Corcept Therapeutics, Inc. (a) | 4,150 | 87 | |||||||||
CorVel Corp. (a) | 866 | 156 | |||||||||
Cross Country Healthcare, Inc. (a) | 3,587 | 95 | |||||||||
CVS Health Corp. | 6,987 | 584 | |||||||||
Dynavax Technologies Corp. (a) (b) | 7,002 | 72 | |||||||||
Eagle Pharmaceuticals, Inc. (a) | 2,405 | 67 | |||||||||
Elevance Health, Inc. | 1,255 | 590 | |||||||||
Eli Lilly & Co. | 4,362 | 1,358 | |||||||||
Emergent BioSolutions, Inc. (a) | 3,310 | 41 | |||||||||
Figs, Inc. Class A (a) | 10,449 | 96 | |||||||||
Fulgent Genetics, Inc. (a) | 3,330 | 109 | |||||||||
Gilead Sciences, Inc. | 14,520 | 1,169 | |||||||||
Haemonetics Corp. (a) | 1,342 | 104 | |||||||||
Halozyme Therapeutics, Inc. (a) | 2,426 | 116 | |||||||||
Harmony Biosciences Holdings, Inc. (a) | 1,418 | 62 | |||||||||
Humana, Inc. | 1,123 | 556 | |||||||||
IDEXX Laboratories, Inc. (a) | 959 | 454 | |||||||||
Integer Holdings Corp. (a) | 2,072 | 155 | |||||||||
Intellia Therapeutics, Inc. (a) | 1,487 | 60 | |||||||||
Ironwood Pharmaceuticals, Inc. (a) | 13,058 | 147 | |||||||||
iTeos Therapeutics, Inc. (a) | 5,654 | 100 | |||||||||
McKesson Corp. | 1,587 | 555 | |||||||||
Medpace Holdings, Inc. (a) | 406 | 79 | |||||||||
Medtronic PLC | 7,412 | 614 | |||||||||
Merck & Co., Inc. | 7,036 | 748 | |||||||||
Mettler-Toledo International, Inc. (a) | 309 | 443 | |||||||||
ModivCare, Inc. (a) | 908 | 89 | |||||||||
Myriad Genetics, Inc. (a) | 3,800 | 72 | |||||||||
Owens & Minor, Inc. (a) | 5,753 | 88 | |||||||||
See notes to financial statements.
11
| USAA Mutual Funds Trust USAA Cornerstone Aggressive Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Pfizer, Inc. | 17,020 | $ | 691 | ||||||||
Prestige Consumer Healthcare, Inc. (a) | 2,156 | 130 | |||||||||
Select Medical Holdings Corp. | 5,002 | 136 | |||||||||
SIGA Technologies, Inc. | 15,905 | 109 | |||||||||
Thermo Fisher Scientific, Inc. | 1,249 | 677 | |||||||||
U.S. Physical Therapy, Inc. | 1,137 | 115 | |||||||||
UnitedHealth Group, Inc. | 3,640 | 1,732 | |||||||||
Vanda Pharmaceuticals, Inc. (a) | 11,648 | 75 | |||||||||
Vir Biotechnology, Inc. (a) | 3,959 | 90 | |||||||||
Waters Corp. (a) | 1,492 | 464 | |||||||||
20,691 | |||||||||||
Industrials (3.9%): | |||||||||||
3M Co. | 5,003 | 539 | |||||||||
ACCO Brands Corp. | 15,689 | 89 | |||||||||
ArcBest Corp. | 1,794 | 173 | |||||||||
Atkore, Inc. (a) | 862 | 126 | |||||||||
BlueLinx Holdings, Inc. (a) | 651 | 55 | |||||||||
Boise Cascade Co. | 1,993 | 138 | |||||||||
Cadre Holdings, Inc. | 3,779 | 81 | |||||||||
Caterpillar, Inc. | 2,542 | 609 | |||||||||
Cintas Corp. | 2,290 | 1,004 | |||||||||
CoreCivic, Inc. (a) | 6,125 | 59 | |||||||||
CRA International, Inc. | 1,108 | 138 | |||||||||
Cummins, Inc. | 2,205 | 536 | |||||||||
Daseke, Inc. (a) | 7,499 | 61 | |||||||||
Deere & Co. | 1,446 | 606 | |||||||||
Deluxe Corp. | 4,754 | 88 | |||||||||
EMCOR Group, Inc. | 1,270 | 212 | |||||||||
Exponent, Inc. | 1,700 | 175 | |||||||||
Fastenal Co. | 8,737 | 450 | |||||||||
FedEx Corp. | 2,625 | 533 | |||||||||
Franklin Covey Co. (a) | 449 | 21 | |||||||||
General Dynamics Corp. | 2,414 | 550 | |||||||||
Golden Ocean Group Ltd. (b) | 10,705 | 111 | |||||||||
Illinois Tool Works, Inc. | 2,124 | 495 | |||||||||
JELD-WEN Holding, Inc. (a) | 8,295 | 109 | |||||||||
Kforce, Inc. | 1,263 | 79 | |||||||||
Korn Ferry | 1,907 | 107 | |||||||||
Lockheed Martin Corp. | 2,490 | 1,181 | |||||||||
Marten Transport Ltd. | 2,329 | 51 | |||||||||
Matson, Inc. | 1,964 | 131 | |||||||||
Mueller Industries, Inc. | 1,963 | 145 | |||||||||
MYR Group, Inc. (a) | 1,111 | 134 | |||||||||
Otis Worldwide Corp. | 5,607 | 474 | |||||||||
PACCAR, Inc. | 14,461 | 1,044 | |||||||||
Rush Enterprises, Inc. Class A | 2,660 | 151 | |||||||||
Saia, Inc. (a) | 401 | 109 | |||||||||
The GEO Group, Inc. (a) | 9,968 | 87 | |||||||||
Trane Technologies PLC | 2,961 | 548 | |||||||||
See notes to financial statements.
12
| USAA Mutual Funds Trust USAA Cornerstone Aggressive Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Triton International Ltd. | 2,376 | $ | 164 | ||||||||
UFP Industries, Inc. | 2,511 | 215 | |||||||||
United Parcel Service, Inc. Class B | 3,511 | 641 | |||||||||
Veritiv Corp. | 916 | 139 | |||||||||
W.W. Grainger, Inc. | 1,485 | 993 | |||||||||
Watts Water Technologies, Inc. Class A | 1,064 | 186 | |||||||||
Zurn Elkay Water Solutions Corp. | 4,421 | 102 | |||||||||
13,639 | |||||||||||
Information Technology (7.1%): | |||||||||||
A10 Networks, Inc. | 5,498 | 84 | |||||||||
Accenture PLC Class A | 2,206 | 586 | |||||||||
Adeia, Inc. | 9,470 | 93 | |||||||||
Adobe, Inc. (a) | 1,661 | 538 | |||||||||
Apple, Inc. | 17,653 | 2,602 | |||||||||
Automatic Data Processing, Inc. | 2,596 | 571 | |||||||||
Avid Technology, Inc. (a) | 2,695 | 78 | |||||||||
Badger Meter, Inc. | 1,295 | 158 | |||||||||
Broadcom, Inc. | 1,232 | 732 | |||||||||
Cadence Design Systems, Inc. (a) | 2,863 | 552 | |||||||||
Cisco Systems, Inc. | 26,547 | 1,285 | |||||||||
Cognizant Technology Solutions Corp. Class A | 8,283 | 519 | |||||||||
Conduent, Inc. (a) | 18,269 | 73 | |||||||||
Consensus Cloud Solutions, Inc. (a) | 1,299 | 53 | |||||||||
Diodes, Inc. (a) | 927 | 85 | |||||||||
Ebix, Inc. | 5,190 | 90 | |||||||||
Enphase Energy, Inc. (a) | 2,621 | 552 | |||||||||
EVERTEC, Inc. | 4,962 | 183 | |||||||||
ExlService Holdings, Inc. (a) | 770 | 127 | |||||||||
Fair Isaac Corp. (a) | 666 | 451 | |||||||||
Fortinet, Inc. (a) | 7,911 | 470 | |||||||||
HP, Inc. | 33,674 | 994 | |||||||||
Intel Corp. | 21,993 | 548 | |||||||||
International Business Machines Corp. | 8,739 | 1,130 | |||||||||
KLA Corp. | 1,275 | 484 | |||||||||
Knowles Corp. (a) | 6,364 | 108 | |||||||||
Mastercard, Inc. Class A | 4,254 | 1,511 | |||||||||
Methode Electronics, Inc. | 2,761 | 135 | |||||||||
Micron Technology, Inc. | 9,849 | 569 | |||||||||
Microsoft Corp. | 8,207 | 2,047 | |||||||||
Motorola Solutions, Inc. | 2,156 | 567 | |||||||||
NetScout Systems, Inc. (a) | 3,609 | 103 | |||||||||
ON Semiconductor Corp. (a) | 6,753 | 523 | |||||||||
Oracle Corp. | 14,654 | 1,281 | |||||||||
Paysafe Ltd. (a) (b) | 3,438 | 69 | |||||||||
Perficient, Inc. (a) | 1,602 | 113 | |||||||||
Photronics, Inc. (a) | 5,816 | 102 | |||||||||
Power Integrations, Inc. | 1,327 | 109 | |||||||||
QUALCOMM, Inc. | 4,972 | 614 | |||||||||
Qualys, Inc. (a) | 1,015 | 120 | |||||||||
See notes to financial statements.
13
| USAA Mutual Funds Trust USAA Cornerstone Aggressive Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Sanmina Corp. (a) | 2,288 | $ | 138 | ||||||||
SolarWinds Corp. (a) | 6,055 | 52 | |||||||||
SPS Commerce, Inc. (a) | 719 | 108 | |||||||||
Squarespace, Inc. Class A (a) | 2,943 | 69 | |||||||||
StoneCo Ltd. Class A (a) | 10,317 | 88 | |||||||||
Synaptics, Inc. (a) | 1,603 | 189 | |||||||||
Texas Instruments, Inc. | 7,206 | 1,235 | |||||||||
TTEC Holdings, Inc. | 2,333 | 94 | |||||||||
VeriSign, Inc. (a) | 2,260 | 445 | |||||||||
Visa, Inc. Class A | 3,788 | 833 | |||||||||
Vishay Intertechnology, Inc. | 7,077 | 150 | |||||||||
Xerox Holdings Corp. | 7,297 | 120 | |||||||||
24,530 | |||||||||||
Materials (1.6%): | |||||||||||
AdvanSix, Inc. | 1,017 | 42 | |||||||||
Albemarle Corp. | 2,033 | 517 | |||||||||
Alpha Metallurgical Resources, Inc. | 538 | 90 | |||||||||
CF Industries Holdings, Inc. | 5,569 | 478 | |||||||||
Corteva, Inc. | 8,878 | 553 | |||||||||
Greif, Inc. Class A | 2,283 | 162 | |||||||||
Linde PLC | 2,065 | 720 | |||||||||
LyondellBasell Industries NV Class A | 5,530 | 531 | |||||||||
Nucor Corp. | 6,261 | 1,048 | |||||||||
Steel Dynamics, Inc. | 4,277 | 540 | |||||||||
Sylvamo Corp. | 1,345 | 66 | |||||||||
The Sherwin-Williams Co. | 2,124 | 470 | |||||||||
TimkenSteel Corp. (a) | 5,247 | 96 | |||||||||
Tronox Holdings PLC | 6,823 | 107 | |||||||||
Warrior Met Coal, Inc. | 3,144 | 120 | |||||||||
5,540 | |||||||||||
Real Estate (1.2%): | |||||||||||
Alexander & Baldwin, Inc. | 3,104 | 58 | |||||||||
Alexandria Real Estate Equities, Inc. | 378 | 57 | |||||||||
American Homes 4 Rent Class A | 855 | 27 | |||||||||
American Tower Corp. | 1,251 | 248 | |||||||||
Apartment Investment and Management Co. | 7,336 | 55 | |||||||||
Armada Hoffler Properties, Inc. | 4,619 | 59 | |||||||||
AvalonBay Communities, Inc. | 376 | 65 | |||||||||
Boston Properties, Inc. | 400 | 26 | |||||||||
Brandywine Realty Trust | 9,567 | 56 | |||||||||
Camden Property Trust | 263 | 30 | |||||||||
CBRE Group, Inc. Class A (a) | 905 | 77 | |||||||||
Compass, Inc. Class A (a) | 14,633 | 53 | |||||||||
Crown Castle, Inc. | 1,183 | 155 | |||||||||
CTO Realty Growth, Inc. | 2,906 | 51 | |||||||||
Digital Realty Trust, Inc. | 759 | 79 | |||||||||
DigitalBridge Group, Inc. | 5,352 | 66 | |||||||||
Equinix, Inc. | 241 | 166 | |||||||||
Equity LifeStyle Properties, Inc. | 467 | 32 | |||||||||
See notes to financial statements.
14
| USAA Mutual Funds Trust USAA Cornerstone Aggressive Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Equity Residential | 958 | $ | 60 | ||||||||
Essex Property Trust, Inc. | 175 | 40 | |||||||||
Extra Space Storage, Inc. | 360 | 59 | |||||||||
Gaming and Leisure Properties, Inc. | 733 | 39 | |||||||||
Gladstone Commercial Corp. | 2,978 | 41 | |||||||||
Gladstone Land Corp. | 2,860 | 50 | |||||||||
Healthcare Realty Trust, Inc. | 1,047 | 20 | |||||||||
Healthpeak Properties, Inc. | 1,454 | 35 | |||||||||
Host Hotels & Resorts, Inc. | 1,905 | 32 | |||||||||
Independence Realty Trust, Inc. | 4,869 | 88 | |||||||||
Invitation Homes, Inc. | 1,531 | 48 | |||||||||
Iron Mountain, Inc. | 779 | 41 | |||||||||
Kimco Realty Corp. | 1,815 | 37 | |||||||||
Kite Realty Group Trust | 4,268 | 93 | |||||||||
Medical Properties Trust, Inc. (b) | 1,587 | 16 | |||||||||
Mid-America Apartment Communities, Inc. | 308 | 49 | |||||||||
National Health Investors, Inc. | 1,308 | 72 | |||||||||
Office Properties Income Trust | 3,978 | 65 | |||||||||
Outfront Media, Inc. | 4,167 | 73 | |||||||||
Pebblebrook Hotel Trust | 4,465 | 64 | |||||||||
Prologis, Inc. | 2,498 | 308 | |||||||||
Public Storage | 425 | 127 | |||||||||
Realty Income Corp. | 1,440 | 92 | |||||||||
Redfin Corp. (a) | 8,617 | 64 | |||||||||
Regency Centers Corp. | 412 | 26 | |||||||||
Ryman Hospitality Properties, Inc. | 1,060 | 98 | |||||||||
SBA Communications Corp. | 295 | 77 | |||||||||
Service Properties Trust | 8,082 | 89 | |||||||||
Simon Property Group, Inc. | 886 | 108 | |||||||||
STAG Industrial, Inc. | 3,138 | 106 | |||||||||
Sun Communities, Inc. | 301 | 43 | |||||||||
The Macerich Co. | 6,107 | 73 | |||||||||
UDR, Inc. | 801 | 34 | |||||||||
Ventas, Inc. | 1,061 | 52 | |||||||||
VICI Properties, Inc. | 2,835 | 95 | |||||||||
Vornado Realty Trust | 439 | 9 | |||||||||
Welltower, Inc. | 1,118 | 83 | |||||||||
Weyerhaeuser Co. | 2,021 | 63 | |||||||||
WP Carey, Inc. | 480 | 39 | |||||||||
Zillow Group, Inc. Class C (a) | 603 | 25 | |||||||||
3,993 | |||||||||||
Utilities (1.1%): | |||||||||||
Brookfield Infrastructure Corp. Class A | 2,985 | 129 | |||||||||
Clearway Energy, Inc. Class C | 4,028 | 127 | |||||||||
Consolidated Edison, Inc. | 6,047 | 540 | |||||||||
DTE Energy Co. | 4,019 | 441 | |||||||||
Exelon Corp. | 12,792 | 517 | |||||||||
Otter Tail Corp. | 2,546 | 180 | |||||||||
PG&E Corp. (a) | 34,148 | 533 | |||||||||
Sempra Energy | 3,555 | 533 | |||||||||
See notes to financial statements.
15
| USAA Mutual Funds Trust USAA Cornerstone Aggressive Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares or Principal Amount | Value | |||||||||
The AES Corp. | 17,822 | $ | 440 | ||||||||
UGI Corp. | 11,527 | 429 | |||||||||
3,869 | |||||||||||
Total Common Stocks (Cost $105,609) | 121,794 | ||||||||||
U.S. Treasury Obligations (0.4%) | |||||||||||
U.S. Treasury Notes, 1.63%, 4/30/23 (c) | $ | 1,567 | 1,558 | ||||||||
Total U.S. Treasury Obligations (Cost $1,569) | 1,558 | ||||||||||
Exchange-Traded Funds (50.4%) | |||||||||||
Invesco DB Commodity Index Tracking Fund | 28,600 | 680 | |||||||||
Invesco FTSE RAFI Developed Markets ex-US ETF | 43,991 | 1,948 | |||||||||
Invesco FTSE RAFI Emerging Markets ETF | 240,641 | 4,305 | |||||||||
iShares 0-5 Year TIPS Bond ETF | 15,737 | 1,531 | |||||||||
iShares 20+ Year Treasury Bond ETF | 5,505 | 560 | |||||||||
iShares 7-10 Year Treasury Bond ETF | 11,250 | 1,077 | |||||||||
iShares Core MSCI EAFE ETF | 103,179 | 6,710 | |||||||||
iShares Core MSCI Emerging Markets ETF | 73,363 | 3,474 | |||||||||
iShares Core S&P 500 ETF | 51,918 | 20,662 | |||||||||
iShares Core US Aggregate Bond ETF | 28,969 | 2,819 | |||||||||
iShares JP Morgan USD Emerging Markets Bond ETF (b) | 17,103 | 1,458 | |||||||||
iShares MSCI Canada ETF (b) | 71,557 | 2,436 | |||||||||
iShares MSCI International Momentum Factor ETF (b) | 146,564 | 4,636 | |||||||||
iShares MSCI International Quality Factor ETF | 165,207 | 5,584 | |||||||||
iShares MSCI Japan ETF | 121,436 | 6,793 | |||||||||
iShares Russell 2000 ETF (b) | 21,216 | 3,992 | |||||||||
Schwab Fundamental Emerging Markets Large Co. Index ETF | 430,014 | 10,858 | |||||||||
Schwab Fundamental International Large Co. Index ETF | 829,619 | 25,635 | |||||||||
Schwab Fundamental International Small Co. Index ETF | 91,800 | 2,996 | |||||||||
SPDR Gold Shares (a) | 20,527 | 3,485 | |||||||||
SPDR S&P Emerging Markets SmallCap ETF | 14,790 | 745 | |||||||||
Vanguard FTSE All-World ex-U.S. ETF | 85,911 | 4,477 | |||||||||
Vanguard FTSE Developed Markets ETF | 510,908 | 22,567 | |||||||||
Vanguard FTSE Emerging Markets ETF | 329,070 | 12,972 | |||||||||
Vanguard FTSE Europe ETF (b) | 118,253 | 7,060 | |||||||||
Vanguard Mortgage-Backed Securities ETF (b) | 37,883 | 1,734 | |||||||||
Vanguard Real Estate ETF | 19,078 | 1,635 | |||||||||
Vanguard S&P 500 ETF | 3,325 | 1,211 | |||||||||
Vanguard Short-Term Bond ETF (b) | 11,217 | 843 | |||||||||
Vanguard Short-Term Corporate Bond ETF | 23,551 | 1,773 | |||||||||
Vanguard Total Stock Market ETF | 28,192 | 5,625 | |||||||||
Wisdom Tree Trust — WisdomTree Emerging Markets SmallCap Dividend Fund | 16,645 | 752 | |||||||||
Xtrackers USD High Yield Corporate Bond ETF | 42,134 | 1,439 | |||||||||
Total Exchange-Traded Funds (Cost $158,196) | 174,472 | ||||||||||
See notes to financial statements.
16
| USAA Mutual Funds Trust USAA Cornerstone Aggressive Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Affiliated Exchange-Traded Funds (12.6%) | |||||||||||
VictoryShares Emerging Markets Value Momentum ETF | 16,000 | $ | 643 | ||||||||
VictoryShares ESG Core Plus Bond ETF | 302,044 | 6,467 | |||||||||
VictoryShares USAA Core Intermediate-Term Bond ETF | 690,066 | 31,488 | |||||||||
VictoryShares USAA Core Short-Term Bond ETF | 103,145 | 5,046 | |||||||||
Total Affiliated Exchange-Traded Funds (Cost $49,198) | 43,644 | ||||||||||
Collateral for Securities Loaned (4.0%)^ | |||||||||||
| Goldman Sachs Financial Square Government Fund, Institutional Shares, 4.47% (d) | 3,429,670 | 3,430 | |||||||||
HSBC U.S. Government Money Market Fund, Institutional Shares, 4.45% (d) | 3,429,670 | 3,429 | |||||||||
Invesco Government & Agency Portfolio, Institutional Shares, 4.52% (d) | 3,429,670 | 3,430 | |||||||||
| Morgan Stanley Institutional Liquidity Government Portfolio, Institutional Shares, 4.41% (d) | 3,429,670 | 3,430 | |||||||||
Total Collateral for Securities Loaned (Cost $13,719) | 13,719 | ||||||||||
Total Investments (Cost $328,291) — 102.6% | 355,187 | ||||||||||
Liabilities in excess of other assets — (2.6)% | (9,043 | ) | |||||||||
NET ASSETS — 100.00% | $ | 346,144 | |||||||||
At February 28, 2023, the Fund's investments in foreign securities were 34.7% of net assets.
^ Purchased with cash collateral from securities on loan.
(a) Non-income producing security.
(b) All or a portion of this security is on loan.
(c) All or a portion of this security has been segregated as collateral for derivative instruments.
(d) Rate disclosed is the daily yield on February 28, 2023.
ETF — Exchange-Traded Fund
PLC — Public Limited Company
Futures Contracts Purchased
(Amounts not in thousands)
| Number of Contracts | Expiration Date | Notional Amount | Value | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||
Euro Stoxx 50 Futures | 66 | 3/17/23 | $ | 2,768,760 | $ | 2,964,465 | $ | 195,705 | |||||||||||||||
FTSE 100 Index Futures | 60 | 3/17/23 | 5,396,103 | 5,672,555 | 276,452 | ||||||||||||||||||
| S&P/Toronto Stock Exchange 60 Index Futures | 25 | 3/16/23 | 4,425,452 | 4,463,828 | 38,376 | ||||||||||||||||||
$ | 510,533 | ||||||||||||||||||||||
See notes to financial statements.
17
| USAA Mutual Funds Trust USAA Cornerstone Aggressive Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
Futures Contracts Sold
(Amounts not in thousands)
| Number of Contracts | Expiration Date | Notional Amount | Value | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||
ASX SPI 200 Index Futures | 17 | 3/16/23 | $ | 2,044,797 | $ | 2,057,886 | $ | (13,089 | ) | ||||||||||||||
E-Mini Russell 2000 Index Futures | 23 | 3/17/23 | 2,108,406 | 2,183,965 | (75,559 | ) | |||||||||||||||||
Hang Seng Index Futures | 8 | 3/30/23 | 1,017,117 | 1,006,064 | 11,053 | ||||||||||||||||||
Swiss Market Index Futures | 31 | 3/17/23 | 3,609,171 | 3,629,068 | (19,897 | ) | |||||||||||||||||
Tokyo Price Index Futures | 26 | 3/9/23 | 3,671,001 | 3,810,048 | (139,047 | ) | |||||||||||||||||
$ | (236,539 | ) | |||||||||||||||||||||
Total unrealized appreciation | $ | 521,586 | |||||||||||||||||||||
Total unrealized depreciation | (247,592 | ) | |||||||||||||||||||||
Total net unrealized appreciation (depreciation) | $ | 273,994 | |||||||||||||||||||||
See notes to financial statements.
18
USAA Mutual Funds Trust | Statement of Assets and Liabilities February 28, 2023 | ||||||
(Amounts in Thousands, Except Per Share Amounts)
| USAA Cornerstone Aggressive Fund | |||||||
Assets: | |||||||
Affiliated investments, at value (Cost $49,198) | $ | 43,644 | |||||
Unaffiliated investments, at value (Cost $279,093) | 311,543 | (a) | |||||
Cash | 903 | ||||||
Deposit with broker for futures contracts | 3,423 | ||||||
Receivables: | |||||||
Interest and dividends | 251 | ||||||
Capital shares issued | 227 | ||||||
Investments sold | 814 | ||||||
Variation margin on open futures contracts | 47 | ||||||
From Adviser for ETF reimbursements | 32 | ||||||
From Adviser for expense limitation agreement | 1 | ||||||
Prepaid expenses | 2 | ||||||
Total Assets | 360,887 | ||||||
Liabilities: | |||||||
Payables: | |||||||
Collateral received on loaned securities | 13,719 | ||||||
Collateral received from broker for futures contracts | 214 | ||||||
Investments purchased | 157 | ||||||
Capital shares redeemed | 221 | ||||||
Variation margin on open futures contracts | 73 | ||||||
Accrued expenses and other payables: | |||||||
Investment advisory fees | 163 | ||||||
Administration fees | 41 | ||||||
Custodian fees | 4 | ||||||
Transfer agent fees | 76 | ||||||
Compliance fees | — | (b) | |||||
Trustees' fees | 1 | ||||||
Other accrued expenses | 74 | ||||||
Total Liabilities | 14,743 | ||||||
Net Assets: | |||||||
Capital | 321,224 | ||||||
Total accumulated earnings/(loss) | 24,920 | ||||||
Net Assets | $ | 346,144 | |||||
Shares (unlimited number of shares authorized with no par value): | 27,473 | ||||||
Net asset value, offering and redemption price per share: (c) | $ | 12.60 | |||||
(a) Includes $13,345 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.
19
USAA Mutual Funds Trust | Statements of Operations | ||||||
(Amounts in Thousands)
| USAA Cornerstone Aggressive Fund | |||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | ||||||||||
Investment Income: | |||||||||||
Income distributions from affiliated funds | $ | 846 | $ | 549 | |||||||
Dividends from unaffiliated investments | 6,459 | 7,493 | |||||||||
Interest from unaffiliated investments | 65 | 393 | |||||||||
Securities lending (net of fees) | 175 | 101 | |||||||||
Foreign tax withholding | — | (b) | — | (b) | |||||||
Total Income | 7,545 | 8,536 | |||||||||
Expenses: | |||||||||||
Investment advisory fees | 1,530 | 2,314 | |||||||||
Administration fees | 383 | 579 | |||||||||
Sub-Administration fees | 67 | 91 | |||||||||
Custodian fees | 19 | 25 | |||||||||
Transfer agent fees | 754 | 1,040 | |||||||||
Trustees' fees | 36 | 48 | |||||||||
Compliance fees | 2 | 3 | |||||||||
Legal and audit fees | 50 | 54 | |||||||||
State registration and filing fees | 26 | 27 | |||||||||
Other expenses | 74 | 67 | |||||||||
Recoupment of prior expenses waived/reimbursed by Adviser | 2 | 78 | |||||||||
Total Expenses | 2,943 | 4,326 | |||||||||
Expenses waived/reimbursed by Adviser | (139 | ) | (91 | ) | |||||||
Net Expenses | 2,804 | 4,235 | |||||||||
Net Investment Income (Loss) | 4,741 | 4,301 | |||||||||
Realized/Unrealized Gains (Losses) from Investments: | |||||||||||
| Net realized gains (losses) from unaffiliated investment securities and foreign currency transactions | (3,364 | ) | 19,222 | ||||||||
Capital gain distributions received from affiliated funds | — | 65 | |||||||||
Net realized gains (losses) from futures contracts | 443 | 1,528 | |||||||||
Net change in unrealized appreciation/depreciation on affiliated funds | (1,817 | ) | (3,644 | ) | |||||||
| Net change in unrealized appreciation/depreciation on unaffiliated investment securities and foreign currency translations | (9,926 | ) | (35,714 | ) | |||||||
| Net change in unrealized appreciation/depreciation on futures contracts | 288 | (103 | ) | ||||||||
Net realized/unrealized gains (losses) on investments | (14,376 | ) | (18,646 | ) | |||||||
Change in net assets resulting from operations | $ | (9,635 | ) | $ | (14,345 | ) | |||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from May 31 to February 28.
(b) Rounds to less than $1 thousand.
See notes to financial statements.
20
USAA Mutual Funds Trust | Statements of Changes in Net Assets | ||||||
(Amounts in Thousands)
USAA Cornerstone Aggressive Fund | |||||||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | Year Ended May 31, 2021 | |||||||||||||
From Investments: | |||||||||||||||
Operations: | |||||||||||||||
Net Investment Income (Loss) | $ | 4,741 | $ | 4,301 | $ | 3,261 | |||||||||
Net realized gains (losses) | (2,921 | ) | 20,815 | 26,897 | |||||||||||
| Net change in unrealized appreciation/ depreciation | (11,455 | ) | (39,461 | ) | 74,955 | ||||||||||
Change in net assets resulting from operations | (9,635 | ) | (14,345 | ) | 105,113 | ||||||||||
| Change in net assets resulting from distributions to shareholders | (15,588 | ) | (31,884 | ) | (7,114 | ) | |||||||||
| Change in net assets resulting from capital transactions | 10,284 | 19,816 | (54,063 | ) | |||||||||||
Change in net assets | (14,939 | ) | (26,413 | ) | 43,936 | ||||||||||
Net Assets: | |||||||||||||||
Beginning of period | 361,083 | 387,496 | 343,560 | ||||||||||||
End of period | $ | 346,144 | $ | 361,083 | $ | 387,496 | |||||||||
Capital Transactions: | |||||||||||||||
Proceeds from shares issued | $ | 23,313 | $ | 46,933 | $ | 43,105 | |||||||||
Distributions reinvested | 15,553 | 31,825 | 6,811 | ||||||||||||
Cost of shares redeemed | (28,582 | ) | (58,942 | ) | (103,979 | ) | |||||||||
| Change in net assets resulting from capital transactions | $ | 10,284 | $ | 19,816 | $ | (54,063 | ) | ||||||||
Share Transactions: | |||||||||||||||
Issued | 1,831 | 3,145 | 3,112 | ||||||||||||
Reinvested | 1,231 | 2,151 | 494 | ||||||||||||
Redeemed | (2,242 | ) | (3,957 | ) | (7,566 | ) | |||||||||
Change in Shares | 820 | 1,339 | (3,960 | ) | |||||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from May 31 to February 28.
See notes to financial statements.
21
USAA Mutual Funds Trust | Financial Highlights | ||||||
For a Share Outstanding Throughout Each Period
USAA Cornerstone Aggressive Fund | |||||||||||||||||||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | Year Ended May 31, 2021 | Year Ended May 31, 2020 | Year Ended May 31, 2019 | Year Ended May 31, 2018 | ||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 13.55 | $ | 15.31 | $ | 11.74 | $ | 11.73 | $ | 12.81 | $ | 12.57 | |||||||||||||||
Investment Activities: | |||||||||||||||||||||||||||
Net investment income (loss) | 0.18 | (b) | 0.17 | (b) | 0.12 | (b) | 0.20 | (b) | 0.15 | 0.16 | |||||||||||||||||
| Net realized and unrealized gains (losses) | (0.54 | ) | (0.66 | ) | 3.71 | 0.03 | (0.57 | ) | 0.94 | ||||||||||||||||||
| Total from Investment Activities | (0.36 | ) | (0.49 | ) | 3.83 | 0.23 | (0.42 | ) | 1.10 | ||||||||||||||||||
Distributions to Shareholders from: | |||||||||||||||||||||||||||
Net investment income | (0.08 | ) | (0.17 | ) | (0.18 | ) | (0.15 | ) | (0.18 | ) | (0.14 | ) | |||||||||||||||
Net realized gains | (0.51 | ) | (1.10 | ) | (0.08 | ) | (0.07 | ) | (0.48 | ) | (0.72 | ) | |||||||||||||||
Total Distributions | (0.59 | ) | (1.27 | ) | (0.26 | ) | (0.22 | ) | (0.66 | ) | (0.86 | ) | |||||||||||||||
Net Asset Value, End of Period | $ | 12.60 | $ | 13.55 | $ | 15.31 | $ | 11.74 | $ | 11.73 | $ | 12.81 | |||||||||||||||
Total Return (c) (d) | (2.65 | )% | (3.84 | )% | 32.91 | % | 1.78 | % | (3.04 | )% | 8.85 | % | |||||||||||||||
Ratios to Average Net Assets: | |||||||||||||||||||||||||||
Net Expenses (e) (f) (g) | 1.10 | % | 1.10 | % | 1.10 | % | 1.10 | % | 1.10 | % | 1.10 | % | |||||||||||||||
Net Investment Income (Loss) (e) | 1.86 | % | 1.11 | % | 0.88 | % | 1.68 | % | 1.54 | % | 1.18 | % | |||||||||||||||
Gross Expenses (e) (f) | 1.15 | % | 1.12 | % | 1.17 | % | 1.18 | % | 1.24 | % | 1.25 | % | |||||||||||||||
Supplemental Data: | |||||||||||||||||||||||||||
Net Assets at end of period (000's) | $ | 346,144 | $ | 361,083 | $ | 387,496 | $ | 343,560 | $ | 351,410 | $ | 344,768 | |||||||||||||||
Portfolio Turnover (c) | 60 | % | 43 | % | 64 | % | 90 | % | 95 | %(h) | 65 | % | |||||||||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from May 31 to February 28.
(b) Per share net investment income (loss) has been calculated using the average daily shares method.
(c) Not annualized for periods less than one year.
(d) 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.
(e) Annualized for periods less than one year.
(f) Does not include acquired fund fees and expenses, if any.
(g) 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 September 30, 2023, instead of coinciding with the Fund's fiscal year end.
(h) Reflects increased trading activity due to usage of quantitative investment strategies.
See notes to financial statements.
22
USAA Mutual Funds Trust | Notes to Financial Statements February 28, 2023 | ||||||
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.
On June 29, 2022, the Board of Trustees (the "Board") approved the fiscal year-end change for the Fund from May 31 to February 28. The first full cycle of the new fiscal year-end reporting will begin March 1, 2023. As a result of the change, the Fund has a February 28, 2023 fiscal nine-month transition period, the results of which are reported in this Annual Report for the period ended February 28, 2023.
Victory Capital Management ("VCM" or 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 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 (unadjusted) in active markets for identical securities
• Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, or credit spreads, applicable to those securities, etc.)
• Level 3 — significant unobservable inputs (including the Adviser's 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.
23
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
The Adviser, appointed as the valuation designee by the Board, has established the Pricing and Liquidity Committee (the "Committee"), and subject to Board oversight, the Committee administers and oversees the Fund's valuation policies and procedures, which are approved by the Board.
Portfolio securities listed or traded on securities exchanges, including Exchange-Traded Funds ("ETFs"), and American Depositary Receipts, 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, 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 valuation designee and subject to the oversight of the Board. The 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 February 28, 2023, 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 | $ | 121,794 | $ | — | $ | — | $ | 121,794 | |||||||||||
U.S. Treasury Obligations | — | 1,558 | — | 1,558 | |||||||||||||||
Exchange-Traded Funds | 174,472 | — | — | 174,472 | |||||||||||||||
Affiliated Exchange-Traded Funds | 43,644 | — | — | 43,644 | |||||||||||||||
Collateral for Securities Loaned | 13,719 | — | — | 13,719 | |||||||||||||||
Total | $ | 353,629 | $ | 1,558 | $ | — | $ | 355,187 | |||||||||||
Other Financial Investments* | |||||||||||||||||||
Assets: | |||||||||||||||||||
Futures Contracts | $ | 522 | $ | — | $ | — | $ | 522 | |||||||||||
Liabilities: | |||||||||||||||||||
Futures Contracts | $ | (248 | ) | $ | — | $ | — | $ | (248 | ) | |||||||||
Total | $ | 274 | $ | — | $ | — | $ | 274 | |||||||||||
* Futures contracts are valued at the unrealized appreciation (depreciation) on the investment.
As of February 28, 2023, there were no transfers into/out of Level 3.
24
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 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.
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 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.
25
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 nine months ended February 28, 2023, 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 February 28, 2023 (amounts in thousands):
Assets | Liabilities | ||||||||||
| Variation Margin Receivable on Open Futures Contracts* | Variation Margin Payable on Open Futures Contracts* | ||||||||||
Equity Risk Exposure | $ | 522 | $ | 248 | |||||||
* 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 Statements of Operations, categorized by risk exposure, for the nine months ended February 28, 2023 (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 | $ | 443 | $ | 288 | |||||||
The following table presents the effect of derivative instruments on the Statements 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 period 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 period end is generally representative of the notional amount of open positions to net assets throughout the period.
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 Statements of Operations.
26
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
Withholding taxes on interest, dividends, and gains as a result of certain investments 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 Statements 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 February 28, 2023.
| Value of Securities on Loan | Non-Cash Collateral | Cash Collateral | |||||||||
| $ | 13,345 | $ | — | $ | 13,719 | ||||||
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 unaffiliated investment securities and foreign currency translations on the Statements of Operations. Any realized gains or losses from these fluctuations are disclosed as Net realized gains (losses) from unaffiliated investment securities and foreign currency transactions on the Statements 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.
27
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 had a tax year end of May 31, and effective February 28, 2023, the Fund changed its tax year end to February 28.
For the nine months ended February 28, 2023, 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 under specified conditions outlined in the valuation policies and procedures adopted by the Board. In addition, as defined under the valuation policies and procedures, each transaction must be effected at the independent current market price. For the nine months ended February 28, 2023, 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) | |||||||||
| $ | — | $ | 44 | $ | (3 | ) | |||||
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 nine months ended February 28, 2023, were as follows for the Fund (amounts in thousands):
| Excluding U.S. Government Securities | U.S. Government Securities | ||||||||||||||
Purchases | Sales | Purchases | Sales | ||||||||||||
$ | 203,718 | $ | 202,738 | $ | — | $ | 68 | ||||||||
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.
28
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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 nine months ended February 28, 2023, and 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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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.
29
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
Other Fees:
Citibank serves as the Fund's custodian. The Fund pays Citibank a fee for providing these services. Amounts incurred for the nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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 September 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 limit 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 February 28, 2023, 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 nine months ended February 28, 2023, the Fund incurred reimbursable expense of $139 thousand, of which $92 thousand consisted of affiliated ETF Adviser for reimbursement and is reflected on the Statements of Operations as Expenses waived/reimbursed by Adviser. For the year ended May 31, 2022, the Fund incurred reimbursable expense of $91 thousand, all of which was affiliated ETF Adviser for reimbursement and is reflected on the Statements of Operations as Expenses waived/reimbursed by Adviser. As of February 28, 2023, the Fund has a receivable related to these reimbursable expenses from the Adviser for $32 thousand, pursuant to the Fund's expense limitation agreement and is reflected on the Statement of Assets and Liabilities as Receivable from Adviser for ETF reimbursements.
Under the terms of the expense limitation agreement, 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. For the nine months ended February 28, 2023, the Fund incurred reimbursable expenses of $47 thousand under the terms of the expense limitation agreement and is reflected on the Statements of Operations as Expenses waived/reimbursed by Adviser. For the year ended May 31, 2022, the Fund did not incur reimbursements under the expense limitation agreement. As of February 28, 2023, the Fund has a receivable related to these reimbursable expenses from the Adviser for $1 thousand pursuant to the Fund's expense limitation agreement and is reflected on the Statement of Assets and Liabilities as Receivable from Adviser for expense limitation agreement.
As of February 28, 2023, 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 February 28, 2023.
| Expires 2023 | Expires 2024 | Expires 2026 | Total | ||||||||||||
| $ | 75 | $ | 236 | $ | 47 | $ | 358 | ||||||||
As of May 31, 2022, the following amounts are available to be repaid to the Adviser (amounts in thousands).
| Expires 2023 | Expires 2024 | Total | |||||||||
| $ | 187 | $ | 236 | $ | 423 | ||||||
30
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 nine months ended February 28, 2023, and 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.
ETF Risk — The Fund may invest in shares of ETFs, which generally are registered 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.
31
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 27, 2022, with a termination date of June 26, 2023. 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 nine months ended February 28, 2023, 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 paid a pro-rata portion of the commitment fees plus any interest on amounts borrowed. For the period from June 1, 2022, through June 27, 2022, interest was based on the one-month London Interbank Offered Rate ("LIBOR") plus one percent. Effective with the renewal, for the period June 28, 2022, through February 28, 2023, interest was based on the one-month Secured Overnight Financing Rate ("SOFR") plus 1.10 percent. The Fund did not experience a material financial impact transitioning from LIBOR to SOFR. Interest charged to the 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 nine months ended February 28, 2023, and 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 Statements of Operations under Interfund lending fees. As a Lender, interest earned by the Fund, if any, during the period, is reflected on the Statements of Operations under Interfund lending.
The Fund did not utilize or participate in the Facility during the nine months ended February 28, 2023, and 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.
32
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
As of February 28, 2023, on the Statement 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 | ||||||
| $ | (10 | ) | $ | 10 | |||
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):
Nine Months Ended February 28, 2023 | |||||||||||
Distributions Paid From | |||||||||||
| Net | Total | |||||||||
$ | 4,192 |
| $ | 11,396 |
| $ | 15,588 | ||||
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 | $ | 6,714 | $ | 940 | $ | 7,114 | ||||||||||||
As of February 28, 2023, 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 Losses | Unrealized Appreciation (Depreciation)* | Total Accumulated Earnings (Loss) | ||||||||||||||||||
| $ | 2,508 | $ | (67 | ) | $ | 2,441 | $ | (1,703 | ) | $ | 24,182 | $ | 24,920 | ||||||||||
* The difference between the book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to tax deferral of losses on wash sales, straddle, partnership adjustments, REIT adjustments and derivatives.
As of February 28, 2023, 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 | ||||||
| $ | 1,703 | $ | 1,703 | ||||
As of February 28, 2023, 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) | ||||||||||||
| $ | 330,902 | $ | 38,992 | $ | (14,810 | ) | $ | 24,182 | |||||||
33
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 nine months ended February 28, 2023, were as follows (amounts in thousands):
| Fair Value 5/31/2022 | Purchases at Cost | Proceeds from Sales | Net Realized Gains (Losses) | Capital Gain Distributions | Net Change in Unrealized Appreciation/ Depreciation | Fair Value 2/28/2023 | Dividend Income | ||||||||||||||||||||||||||||
| VictoryShares Emerging Markets Value Momentum ETF | $ | 714 | $ | — | $ | — | $ | — | $ | — | $ | (71 | ) | $ | 643 | $ | 20 | ||||||||||||||||||
| VictoryShares ESG Core Plus Bond ETF | 6,641 | 286 | (143 | ) | — | — | (317 | ) | 6,467 | 181 | |||||||||||||||||||||||||
| VictoryShares USAA Core Intermediate-Term Bond ETF | 26,922 | 6,384 | (458 | ) | — | — | (1,360 | ) | 31,488 | 532 | |||||||||||||||||||||||||
| VictoryShares USAA Core Short-Term Bond ETF | 5,115 | — | — | — | — | (69 | ) | 5,046 | 113 | ||||||||||||||||||||||||||
$ | 39,392 | $ | 6,670 | $ | (601 | ) | $ | — | $ | — | $ | (1,817 | ) | $ | 43,644 | $ | 846 | ||||||||||||||||||
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 | Net Realized Gains (Losses) | Capital Gain Distributions | Net Change in Unrealized Appreciation/ Depreciation | Fair Value 5/31/2022 | Dividend Income | ||||||||||||||||||||||||||||
| VictoryShares USAA MSCI Emerging Markets Value Momentum ETF* | $ | 824 | $ | — | $ | — | $ | — | $ | — | $ | (110 | ) | $ | 714 | $ | 34 | ||||||||||||||||||
| 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 | ||||||||||||||||||||||||||
$ | 17,971 | $ | 50,132 | $ | (25,067 | ) | $ | — | $ | 65 | $ | (3,644 | ) | $ | 39,392 | $ | 549 | ||||||||||||||||||
* During the reporting period the Fund name was changed to VictoryShares Emerging Markets Value Momentum ETF.
34
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
9. Subsequent Events:
The Board, upon recommendation of the Adviser, has approved a change in the name of the Trust and each individual fund within the Trust. On February 23, 2023, an initial filing was made with the SEC to commence the process to effectuate the following changes.
Effective at the start of business on April 24, 2023 (the "Effective Date"), the name of the Trust changed from USAA Mutual Funds Trust to Victory Portfolios III, and all references to USAA Mutual Funds Trust in the summary prospectus, statutory prospectus, and statement of additional information ("SAI") will be replaced by the new name.
Also on the Effective Date, references to the current name of the Fund in the summary prospectus, statutory prospectus, and SAI will be replaced with the new name as follows:
Current Name | New Name | ||||||
USAA Cornerstone Aggressive Fund | Victory Cornerstone Aggressive Fund | ||||||
In addition, on the Effective Date, USAA Investments, a Victory Capital Management Inc. investment franchise, that currently manages the USAA Fixed Income Funds, will change its name to Victory Income Investors, and all references to USAA Investments in the summary prospectus, statutory prospectus, and SAI, will be replaced.
Please note that there will be no changes in the management of the Fund or to the Fund's ticker symbols.
35
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 February 28, 2023, and the related statements of operations for the period from June 1, 2022 through February 28, 2023 and the year ended May 31, 2022, the statements of changes in net assets for the period from June 1, 2022 through February 28, 2023 and each of the two years in the period ended May 31, 2022, the financial highlights for the period from June 1, 2022 through February 28, 2023 and each of the five years in the period ended May 31, 2022, 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 February 28, 2023, the results of its operations for the period from June 1, 2022 through February 28, 2023 and the year ended May 31, 2022, the statements of changes in net assets for the period from June 1, 2022 through February 28, 2023 and each of the two years in the period ended May 31, 2022, and its financial highlights for the period from June 1, 2022 through February 28, 2023 and each of the five years in the period ended May 31, 2022, 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 February 28, 2023, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. 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
April 28, 2023
36
USAA Mutual Funds Trust | Supplemental Information February 28, 2023 | ||||||
(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 date 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 | ||||||||||||||||||
37
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 (06/17-06/19); 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 (03/15-03/21). | 45 | None | ||||||||||||||||||
| Paul L. McNamara (July 1948) | Trustee | Trustee since January 2012 | Retired. | 45 | None | ||||||||||||||||||
38
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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) | ||||||||||||||||||
39
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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.
40
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
Officers:
The officers of the Trust, their date 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. (since 2022); 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. (07/01/19-present); Executive Director, Investment and Financial Administration, USAA (2012-06/30/19); 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. (07/01/19-present); Accounting/ Financial Director, USAA (12/13-06/30/19). | ||||||||||||
| 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). | ||||||||||||
41
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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). | ||||||||||||
42
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 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 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 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 September 1, 2022, through February 28, 2023.
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 9/1/22 | Actual Ending Account Value 2/28/23 | Hypothetical Ending Account Value 2/28/23 | Actual Expenses Paid During Period 9/1/22- 2/28/23* | Hypothetical Expenses Paid During Period 9/1/22- 2/28/23* | Annualized Expense Ratio During Period 9/1/22- 2/28/23 | ||||||||||||||||||
| $ | 1,000.00 | $ | 1,033.70 | $ | 1,019.34 | $ | 5.55 | $ | 5.51 | 1.10 | % | ||||||||||||
* Expenses are equal to the average account value multiplied by the Fund's annualized expense ratio multiplied by 181/365 (the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year).
43
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
Additional Federal Income Tax Information
The following federal tax information related to the Fund's fiscal nine months ended February 28, 2023, 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 2024.
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 nine months ended February 28, 2023 (amounts in thousands):
| Dividend Received Deduction (corporate shareholders) | Qualified Dividend Income (non-corporate shareholders) | Short-Term Capital Gain Distributions | Long-Term Capital Gain Distributions | ||||||||||||
| 29 | % | 30 | % | $ | 1,942 | $ | 11,396 | ||||||||
44
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 8-9, 2022, 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 8-9, 2022, 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 21, 2022.
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.
45
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 program, (iv) derivatives risk management program, and (v) 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 above 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 and its Lipper index for the one-year period ended June 30, 2022, and was below the average of its performance universe and its Lipper index for the three- and five-year periods ended June 30, 2022. 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 certain periods and also noted the Fund's improved more recent performance.
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
46
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
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.
47
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 10, 2023, 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- RN (prior to August 2022, Form N-LIQUID) and recommended no material changes to the LRMP.
48
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 | ||||||
vcm.com | (800) 235-8396 | ||||||
97448-0423
February 28, 2023
Annual Report
USAA Cornerstone Conservative Fund
(Also Known as Victory Cornerstone Conservative Fund*)
* Effective at the start of business on April 24, 2023, the Fund name will change to Victory Cornerstone Conservative Fund. Please see Notes to the Financial Statements for subsequent event information.
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 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.
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, 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 | ||||||
Statements of Operations | 10 | ||||||
Statements of Changes in Net Assets | 11 | ||||||
Financial Highlights | 12 | ||||||
Notes to Financial Statements | 13 | ||||||
| Report of Independent Registered Public Accounting Firm | 24 | ||||||
Supplemental Information (Unaudited) | 25 | ||||||
Trustee and Officer Information | 25 | ||||||
Proxy Voting and Portfolio Holdings Information | 31 | ||||||
Expense Example | 31 | ||||||
Additional Federal Income Tax Information | 32 | ||||||
Advisory Contract Renewal | 33 | ||||||
Liquidity Risk Management Program | 36 | ||||||
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,
If you are reading this letter but double-checking your calendar, be assured there's no mistake. The annual reporting period for your USAA Mutual Fund has shifted from a fiscal year ended May 31st to a fiscal year ended February 28th/the last day of February. This change has no material impact on any of your investments. This change aims to help us improve efficiencies and reduce operational costs. Therefore, this letter covers an abbreviated "annual" period from June 1, 2022, through February 28, 2023. Future annual reports will cover the 12-month period ended February 28th/the last day of February going forward.
Our most recent annual reporting period has been a challenging period for investors. Consider some of the headwinds: heightened geopolitical tensions, a terrible war in Eastern Europe, elevated energy and food costs, high inflation, and rising interest rates. All this has dampened global growth and created a difficult backdrop for both bond and stock investors.
The inflation data was particularly troublesome and surprised many throughout the past year with some of the highest readings since the 1970s. In response, the U.S. Federal Reserve (the "Fed") continued with its monetary tightening and boosted the Fed funds interest rate repeatedly throughout the annual reporting period. And if that wasn't enough, zero-COVID-19 policies in China (which fortunately have been recently lifted) further exacerbated supply chain issues. As one might expect, all these obstacles ratcheted up volatility across financial markets.
In terms of the numbers, the S&P 500® Index, the bell-weather proxy for our domestic stock market, delivered a negative total return of almost 3% for our abbreviated annual reporting period. But perhaps what made 2022 even more difficult was the performance of fixed income markets. The Bloomberg US Aggregate Bond Index—a proxy for a diversified fixed income portfolio and one that many investors and institutions follow closely—delivered a negative total return of approximately 4% during the same period. That's not exactly the offset to equity performance that many investors come to expect from bonds.
It's been difficult, and we fully acknowledge that the steady drumbeat of bad news and bouts of stomach-churning volatility can take a toll on investors' psyche. Even when markets often snap back sharply (as happened this past July, October and earlier this calendar year), investors often wonder if they have missed an opportunity.
Through all of the turmoil and challenges in our most recent annual reporting period, we are reminded of two enduring realities: 1) financial markets are dynamic and apt to change abruptly; 2) it's vital to remain calm and rational whenever faced with those inevitable bouts of turmoil.
Fortunately, we think that investors can take comfort knowing that all of our independent investment franchises have experience managing portfolios through a wide variety of market environments. Our investment professionals remain calm during turbulent financial markets, and we think it's imperative that investors do the same.
2
We still believe that a long-term plan, a well-diversified portfolio across asset classes and investment types, and a clear understanding of individual risk tolerances are the key ingredients for staying the course and progressing on investment goals. Moreover, all our investment professionals continually monitor the environment and work hard to position portfolios opportunistically no matter what the markets bring. Remember, turmoil can also create opportunity.
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, we encourage you to contact our Member Service Representatives. Call 800-235-8396, or visit our website at vcm.com.
From all of us here at Victory Capital, thank you for your ongoing confidence and 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?
The reporting period started in the month of June as pressure continued to mount for both stocks and bonds. The U.S. Federal Reserve's (the "Fed") hawkish pivot continued to put pressure on equity multiples. With stubbornly high inflation readings, 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.
In the third quarter, global equities declined, continuing the downward trend from the first half of 2022. The quarter began with a rally that continued into mid-August, on hopes that the Fed would pivot toward a more accommodative policy. However, messaging from Fed Chairman, Jerome Powell, and a stronger-than-expected inflation report in early September dampened investor optimism over the central bank's trajectory and the odds of avoiding recession. The Fed went on to hike rates aggressively by 75 basis points ("bps") twice during the quarter, bringing the benchmark Fed funds rate target to a range of 3.0% to 3.25%, as compared to 0% to 0.25% at the beginning of the year. (A basis point is 1/100th of a percentage point.) For its part, the European Central Bank raised its reference rate by 50 bps in July, followed by another 75 bps in September. Other factors that weighed on sentiment during the quarter included the ongoing Russia-Ukraine war, an energy crisis in Europe, and the resumption of COVID-19 lockdowns in China.
Global equities rebounded in the fourth quarter trimming full year losses. Gains in October and November were sparked by signs of peaking inflation alongside less hawkish commentary from Fed Chairman Powell raising hope that the central bank would end its interest rate hiking cycle sometime in early 2023. Indeed, both the Fed and the European Central Bank raised their benchmark overnight lending rates by a more modest 50 bps in mid-December. Also supporting sentiment, the Chinese government began to ease their zero-COVID-19 policy that had weighed on global economic growth for much of 2022. However, stocks retreated into year-end as investors shifted their focus to the potential impact higher rates might have on economic growth and corporate earnings in the coming year.
As the reporting period crossed into 2023, global equities started off the year logging positive returns in the month of January. Bonds also rallied at the start of the year on hopes that the Fed's hawkish pivot would come to an end in 2023. As the calendar moved to February, stronger than expected employment and inflation reports caused investors to reevaluate interest rate expectations for 2023 and consider that rates could stay higher for longer. The result was a reversal in global equities and bonds which ended the month lower.
• How did the USAA Cornerstone Conservative Fund (the "Fund") perform during the reporting period?
The Fund's fiscal year-end changed this year to February 28 from May 31, resulting in a shorter reporting period for fiscal year ended 2023. For the nine-month reporting period ended February 28, 2023, the Fund had a total return (at net asset value) of -2.00%. This
4
USAA Cornerstone Conservative Fund
Managers' Commentary (continued)
compares to returns of -3.72% for the Bloomberg U.S. Universal Index, and -3.18% for the Cornerstone Conservative Composite Index.
• What strategies did you employ during the reporting period?
The Fund had a negative total return over the period, as global financial markets experienced weak performance and high volatility. Inflation concerns, rising interest rates and geopolitical issues continued to plague all major market segments for the majority of 2022 creating a volatile investment environment. The Fund outperformed the Cornerstone Conservative Composite Index.
Positive contributors to the relative performance included the underlying funds' security selection and allocations 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 2022. The Fund benefited from the rotation of growth stocks into value stocks over the period as well. On the other hand, tactical positions in international equities — such as Canada — dampened results.
Our approach is to hold a core, diversified portfolio, while accounting for both current risks and longer-term opportunities. We stay focused on fundamentals, valuations, and diversification. The Fund tilts to the value style over growth, and to higher-quality stocks over their lower-quality counterparts. We believe this approach, is prudent for long-term investors and is particularly important now given the elevated uncertainty in the outlook for the economy and markets.
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 February 28, 2023
Fund Shares | |||||||||||||||
INCEPTION DATE | 6/8/12 | ||||||||||||||
Net Asset Value | Bloomberg U.S. Universal Index1 | Cornerstone Conservative Composite Index2 | |||||||||||||
One Year | –6.34 | % | –9.30 | % | –8.57 | % | |||||||||
Five Year | 2.46 | % | 0.68 | % | 2.00 | % | |||||||||
Ten Year | 3.02 | % | 1.39 | % | 2.89 | % | |||||||||
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 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
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 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 | February 28, 2023 | ||||||
(Unaudited)
Investment Objective and Portfolio Holdings:
The Fund seeks current income and also considers the potential for capital appreciation.
Top 10 Holdings*:
February 28, 2023
(% of Net Assets)
USAA Intermediate-Term Bond Fund Institutional Shares | 19.7 | % | |||||
VictoryShares USAA Core Short-Term Bond ETF | 15.8 | % | |||||
USAA Government Securities Fund Institutional Shares | 15.3 | % | |||||
USAA Income Fund Institutional Shares | 8.6 | % | |||||
VictoryShares USAA Core Intermediate-Term Bond ETF | 7.3 | % | |||||
USAA High Income Fund Institutional Shares | 5.6 | % | |||||
USAA 500 Index Fund Reward Shares | 4.3 | % | |||||
USAA International Fund Institutional Shares | 3.5 | % | |||||
USAA Short-Term Bond Fund Institutional Shares | 3.2 | % | |||||
USAA Target Managed Allocation Fund | 2.5 | % | |||||
Asset Allocation*:
February 28, 2023
(% 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 February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Affiliated Exchange-Traded Funds (29.6%) | |||||||||||
| VictoryShares Emerging Markets Value Momentum ETF | 55,618 | $ | 2,236 | ||||||||
VictoryShares International Value Momentum ETF | 113,561 | 4,842 | |||||||||
VictoryShares US Small Mid Cap Value Momentum ETF | 18,550 | 1,237 | |||||||||
VictoryShares US Value Momentum ETF | 81,189 | 5,166 | |||||||||
VictoryShares USAA Core Intermediate-Term Bond ETF | 334,133 | 15,247 | |||||||||
VictoryShares USAA Core Short-Term Bond ETF | 669,201 | 32,737 | |||||||||
Total Affiliated Exchange-Traded Funds (Cost $63,391) | 61,465 | ||||||||||
Affiliated Mutual Funds (70.2%) | |||||||||||
USAA 500 Index Fund Reward Shares | 175,835 | 8,920 | |||||||||
USAA Emerging Markets Fund Institutional Shares | 122,411 | 2,175 | |||||||||
USAA Government Securities Fund Institutional Shares | 3,618,570 | 31,771 | |||||||||
USAA Growth Fund Institutional Shares | 62,895 | 1,585 | |||||||||
USAA High Income Fund Institutional Shares | 1,735,957 | 11,614 | |||||||||
USAA Income Fund Institutional Shares | 1,598,528 | 17,919 | |||||||||
USAA Income Stock Fund Institutional Shares | 98,871 | 1,723 | |||||||||
USAA Intermediate-Term Bond Fund Institutional Shares | 4,489,243 | 40,843 | |||||||||
USAA International Fund Institutional Shares | 303,402 | 7,163 | |||||||||
USAA Nasdaq-100 Index Fund Class R6 | 49,279 | 1,519 | |||||||||
USAA Precious Metals and Minerals Fund Institutional Shares | 62,365 | 996 | |||||||||
USAA Short-Term Bond Fund Institutional Shares | 755,464 | 6,635 | |||||||||
USAA Small Cap Stock Fund Institutional Shares | 107,363 | 1,354 | |||||||||
USAA Target Managed Allocation Fund | 607,015 | 5,245 | |||||||||
USAA Value Fund Institutional Shares | 91,756 | 1,525 | |||||||||
Victory Market Neutral Income Fund, Class I | 542,330 | 4,664 | |||||||||
Total Affiliated Mutual Funds (Cost $157,429) | 145,651 | ||||||||||
Total Investments (Cost $220,820) — 99.8% | 207,116 | ||||||||||
Other assets in excess of liabilities — 0.2% | 398 | ||||||||||
NET ASSETS — 100.00% | $ | 207,514 | |||||||||
At February 28, 2023, the foreign securities held by the underlying Funds were 7.9% of net assets.
ETF — Exchange-Traded Fund
See notes to financial statements.
8
USAA Mutual Funds Trust | Statement of Assets and Liabilities February 28, 2023 | ||||||
(Amounts in Thousands, Except Per Share Amounts)
| USAA Cornerstone Conservative Fund | |||||||
Assets: | |||||||
Affiliated investments, at value (Cost $220,820) | $ | 207,116 | |||||
Cash | 574 | ||||||
Receivables: | |||||||
Capital shares issued | 62 | ||||||
From Adviser | — | (a) | |||||
Prepaid expenses | 1 | ||||||
Total Assets | 207,753 | ||||||
Liabilities: | |||||||
Payables: | |||||||
Capital shares redeemed | 187 | ||||||
Accrued expenses and other payables: | |||||||
Custodian fees | 1 | ||||||
Compliance fees | — | (a) | |||||
Trustees' fees | 1 | ||||||
Other accrued expenses | 50 | ||||||
Total Liabilities | 239 | ||||||
Net Assets: | |||||||
Capital | 220,611 | ||||||
Total accumulated earnings/(loss) | (13,097 | ) | |||||
Net Assets | $ | 207,514 | |||||
Shares (unlimited number of shares authorized with no par value): | 20,535 | ||||||
Net asset value, offering and redemption price per share: (b) | $ | 10.11 | |||||
(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 | Statements of Operations | ||||||
(Amounts in Thousands)
| USAA Cornerstone Conservative Fund | |||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | ||||||||||
Investment Income: | |||||||||||
Income distributions from affiliated funds | $ | 5,058 | $ | 6,718 | |||||||
Interest from unaffiliated investments | 7 | — | (b) | ||||||||
Securities lending (net of fees) | 1 | 1 | |||||||||
Total Income | 5,066 | 6,719 | |||||||||
Expenses: | |||||||||||
Sub-Administration fees | 14 | 18 | |||||||||
Custodian fees | 4 | 7 | |||||||||
Trustees' fees | 36 | 48 | |||||||||
Compliance fees | 2 | 2 | |||||||||
Printing fees | 28 | 23 | |||||||||
Legal and audit fees | 45 | 50 | |||||||||
State registration and filing fees | 33 | 35 | |||||||||
Interfund lending fees | — | (b) | — | (b) | |||||||
Other expenses | 19 | 21 | |||||||||
Recoupment of prior expenses waived/reimbursed by Adviser | 1 | — | |||||||||
Total Expenses | 182 | 204 | |||||||||
Expenses waived/reimbursed by Adviser | (23 | ) | — | ||||||||
Net Expenses | 159 | 204 | |||||||||
Net Investment Income (Loss) | 4,907 | 6,515 | |||||||||
Realized/Unrealized Gains (Losses) from Investments: | |||||||||||
Net realized gains (losses) from sales of affiliated funds | (1,365 | ) | (339 | ) | |||||||
Capital gain distributions received from affiliated funds | 847 | 4,343 | |||||||||
Net change in unrealized appreciation/depreciation on affiliated funds | (9,153 | ) | (25,778 | ) | |||||||
Net realized/unrealized gains (losses) on investments | (9,671 | ) | (21,774 | ) | |||||||
Change in net assets resulting from operations | $ | (4,764 | ) | $ | (15,259 | ) | |||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from May 31 to February 28.
(b) 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 | |||||||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | Year Ended May 31, 2021 | |||||||||||||
From Investments: | |||||||||||||||
Operations: | |||||||||||||||
Net Investment Income (Loss) | $ | 4,907 | $ | 6,515 | $ | 5,871 | |||||||||
Net realized gains (losses) | (518 | ) | 4,004 | 3,646 | |||||||||||
| Net change in unrealized appreciation/depreciation | (9,153 | ) | (25,778 | ) | 15,992 | ||||||||||
Change in net assets resulting from operations | (4,764 | ) | (15,259 | ) | 25,509 | ||||||||||
| Change in net assets resulting from distributions to shareholders | (7,626 | ) | (9,581 | ) | (8,183 | ) | |||||||||
| Change in net assets resulting from capital transactions | (3,233 | ) | 4,027 | 20,674 | |||||||||||
Change in net assets | (15,623 | ) | (20,813 | ) | 38,000 | ||||||||||
Net Assets: | |||||||||||||||
Beginning of period | 223,137 | 243,950 | 205,950 | ||||||||||||
End of period | $ | 207,514 | $ | 223,137 | $ | 243,950 | |||||||||
Capital Transactions: | |||||||||||||||
Proceeds from shares issued | $ | 21,361 | $ | 60,512 | $ | 66,446 | |||||||||
Distributions reinvested | 7,574 | 9,518 | 8,144 | ||||||||||||
Cost of shares redeemed | (32,168 | ) | (66,003 | ) | (53,916 | ) | |||||||||
| Change in net assets resulting from capital transactions | $ | (3,233 | ) | $ | 4,027 | $ | 20,674 | ||||||||
Share Transactions: | |||||||||||||||
Issued | 2,088 | 5,222 | 5,750 | ||||||||||||
Reinvested | 751 | 819 | 711 | ||||||||||||
Redeemed | (3,156 | ) | (5,759 | ) | (4,674 | ) | |||||||||
Change in Shares | (317 | ) | 282 | 1,787 | |||||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from May 31 to February 28.
See notes to financial statements.
11
USAA Mutual Funds Trust | Financial Highlights | ||||||
For a Share Outstanding Throughout Each Period
USAA Cornerstone Conservative Fund | |||||||||||||||||||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | Year Ended May 31, 2021 | Year Ended May 31, 2020 | Year Ended May 31, 2019 | Year Ended May 31, 2018 | ||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 10.70 | $ | 11.86 | $ | 10.96 | $ | 10.72 | $ | 10.64 | $ | 10.76 | |||||||||||||||
Investment Activities: | |||||||||||||||||||||||||||
Net investment income (loss) | 0.24 | (b) | 0.31 | (b) | 0.30 | (b) | 0.32 | (b) | 0.32 | 0.30 | |||||||||||||||||
| Net realized and unrealized gains (losses) | (0.46 | ) | (1.01 | ) | 1.03 | 0.25 | 0.08 | (0.11 | ) | ||||||||||||||||||
| Total from Investment Activities | (0.22 | ) | (0.70 | ) | 1.33 | 0.57 | 0.40 | 0.19 | |||||||||||||||||||
Distributions to Shareholders from: | |||||||||||||||||||||||||||
Net investment income | (0.19 | ) | (0.31 | ) | (0.31 | ) | (0.33 | ) | (0.32 | ) | (0.31 | ) | |||||||||||||||
Net realized gains | (0.18 | ) | (0.15 | ) | (0.12 | ) | — | — | — | ||||||||||||||||||
Total Distributions | (0.37 | ) | (0.46 | ) | (0.43 | ) | (0.33 | ) | (0.32 | ) | (0.31 | ) | |||||||||||||||
Net Asset Value, End of Period | $ | 10.11 | $ | 10.70 | $ | 11.86 | $ | 10.96 | $ | 10.72 | $ | 10.64 | |||||||||||||||
Total Return (c) (d) | (2.00 | )% | (6.19 | )% | 12.28 | % | 5.45 | % | 3.84 | % | 1.79 | % | |||||||||||||||
Ratios to Average Net Assets: | |||||||||||||||||||||||||||
Net Expenses (e) (f) (g) | 0.10 | % | 0.08 | % | 0.10 | % | 0.09 | % | 0.10 | % | 0.10 | % | |||||||||||||||
Net Investment Income (Loss) (e) | 3.09 | % | 2.68 | % | 2.61 | % | 2.92 | % | 2.99 | % | 2.87 | % | |||||||||||||||
Gross Expenses (e) (f) | 0.12 | % | 0.08 | % | 0.10 | % | 0.10 | % | 0.12 | % | 0.12 | % | |||||||||||||||
Supplemental Data: | |||||||||||||||||||||||||||
Net Assets at end of period (000's) | $ | 207,514 | $ | 223,137 | $ | 243,950 | $ | 205,950 | $ | 193,265 | $ | 196,292 | |||||||||||||||
Portfolio Turnover (c) | 2 | % | 11 | % | 15 | % | 8 | % | 22 | % | 5 | % | |||||||||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from May 31 to February 28.
(b) Per share net investment income (loss) has been calculated using the average daily shares method.
(c) Not annualized for periods less than one year.
(d) 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.
(e) Annualized for periods less than one year.
(f) Does not include acquired fund fees and expenses, if any.
(g) 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 September 30, 2023, instead of coinciding with the Fund's fiscal year end.
See notes to financial statements.
12
USAA Mutual Funds Trust | Notes to Financial Statements February 28, 2023 | ||||||
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" or the "Adviser"), an affiliate of the Fund.
On June 29, 2022, the Board of Trustees (the "Board") approved the fiscal year-end change for the Fund from May 31 to February 28. The first full cycle of the new fiscal year-end reporting will begin March 1, 2023. As a result of the change, the Fund has a February 28, 2023 fiscal nine-month transition period, the results of which are reported in this Annual Report for the period ended February 28, 2023.
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 may rely on various exemptions contained in the 1940 Act and in exemptive rules or orders thereunder issued by the Securities and Exchange Commission ("SEC") that permit funds, subject to certain conditions, to invest in one or more ETFs and certain other types of investment companies in amounts that exceed limits set forth in the 1940 Act that would otherwise be applicable.
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 (unadjusted) in active markets for identical securities
• Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, or credit spreads, applicable to those securities, etc.)
• Level 3 — significant unobservable inputs (including the Adviser's assumptions in determining the fair value of investments)
13
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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, appointed as the valuation designee by the Board, has established the Pricing and Liquidity Committee (the "Committee"), and subject to Board oversight, the Committee administers and oversees the Fund's valuation policies and procedures, which are approved by the Board.
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.
Investments in the underlying affiliated Funds and other open-end investment companies, other than ETFs, are valued at their net asset value ("NAV") at the end of each business day. These valuations are typically categorized as Level 1 in the fair value hierarchy.
The underlying affiliated Funds have specific valuation procedures. In the event that price quotations or valuations are not readily available, are not reflective of market value, or a significant event has been recognized in relation to a security or class of securities, 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 February 28, 2023, 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 | $ | 61,465 | $ | — | $ | — | $ | 61,465 | |||||||||||
Affiliated Mutual Funds | 145,651 | — | — | 145,651 | |||||||||||||||
Total | $ | 207,116 | $ | — | $ | — | $ | 207,116 | |||||||||||
As of February 28, 2023, there were no transfers into/out of Level 3.
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.
14
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 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 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 Statements 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 February 28, 2023, 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 had a tax year end of May 31, and effective February 28, 2023, the Fund changed its tax year end to February 28.
For the nine months ended February 28, 2023, 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 February 28, 2023 | ||||||
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 nine months ended February 28, 2023, were as follows for the Fund (amounts in thousands):
Excluding | |||||||
Purchases | Sales | ||||||
$ | 5,244 | $ | 10,066 | ||||
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 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 nine months ended February 28, 2023, and 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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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.
16
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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 September 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 limit 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 February 28, 2023, the expense limit (excluding voluntary waivers) was 0.10%.
Under the terms of the expense limitation agreement, 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.
As of February 28, 2023, 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 February 28, 2023.
| Expires 2026 | Total | ||||||
| $ | 23 | $ | 23 | ||||
As of May 31, 2022, there were 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 nine months ended February 28, 2023, and 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.
17
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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.
ETF Risk — The Fund may invest in shares of ETFs, which generally are registered 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 27, 2022, with a termination date of June 26, 2023. 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 nine months ended February 28, 2023, 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 paid a pro-rata portion of the commitment fees plus any interest on amounts borrowed. For the period from June 1, 2022, through June 27, 2022, interest was based on the one-month London Interbank Offered Rate ("LIBOR") plus one percent. Effective with the renewal, for the period June 28, 2022, through February 28, 2023, interest was based on the one-month Secured Overnight Financing Rate ("SOFR") plus 1.10 percent. The Fund did not experience a material financial impact transitioning from LIBOR to SOFR. Interest charged to the 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 nine months ended February 28, 2023, and the year ended May 31, 2022.
18
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 Statements of Operations under Interfund lending fees. As a Lender, interest earned by the Fund, if any, during the period, is reflected on the Statements of Operations under Interfund lending.
The average borrowing or lending for the days outstanding and average interest rate for the Fund during the nine months ended February 28, 2023, were as follows (amounts in thousands):
| Borrower or Lender | Amount Outstanding at February 28, 2023 | Average Borrowing* | Days Borrowing Outstanding | Average Interest Rate* | Maximum Borrowing During the Period | ||||||||||||||||||
Borrower | $ | — | $ | 1,243 | 1 | 3.58 | % | $ | 1,243 | ||||||||||||||
* Based on the number of days borrowings were outstanding for the nine months ended February 28, 2023.
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 | $ | — | $ | 1,245 | 1 | 1.33 | % | $ | 1,245 | ||||||||||||||
* Based on the number of days borrowings were outstanding for 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. 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 February 28, 2023, on the Statement 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 | ) | $ | 1 | |||
19
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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):
Nine Months Ended February 28, 2023 | |||||||||||
Distributions Paid From | |||||||||||
Ordinary | Net | Total | |||||||||
$ | 3,942 |
| $ | 3,684 |
| $ | 7,626 | ||||
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 February 28, 2023, 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 Losses | Unrealized Appreciation (Depreciation)* | Total Accumulated Earnings (Loss) | |||||||||||||||
| $ | 1,712 | $ | 1,712 | $ | (421 | ) | $ | (14,388 | ) | $ | (13,097 | ) | |||||||
* The difference between the book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to tax deferral of losses on wash sales.
As of February 28, 2023, 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 | |||||||||
| $ | 22 | $ | 399 | $ | 421 | ||||||
As of February 28, 2023, 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) | ||||||||||||
| $ | 221,504 | $ | 6,233 | $ | (20,621 | ) | $ | (14,388 | ) | ||||||
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
20
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
affiliated securities during the nine months ended February 28, 2023, were as follows (amounts in thousands):
| Fair Value 5/31/2022 | Purchases at Cost | Proceeds from Sales | Net Realized Gains (Losses) | Capital Gain Distributions | Net Change in Unrealized Appreciation/ Depreciation | Fair Value 2/28/2023 | Dividend Income | ||||||||||||||||||||||||||||
| USAA 500 Index Fund Reward Shares | $ | 9,498 | $ | 883 | $ | (1,008 | ) | $ | (121 | ) | $ | 126 | $ | (332 | ) | $ | 8,920 | $ | 112 | ||||||||||||||||
| USAA Emerging Markets Fund Institutional Shares | 2,397 | 41 | — | — | — | (263 | ) | 2,175 | 41 | ||||||||||||||||||||||||||
| USAA Government Securities Fund Institutional Shares | 33,143 | 637 | (432 | ) | (40 | ) | — | (1,537 | ) | 31,771 | 583 | ||||||||||||||||||||||||
| USAA Growth Fund Institutional Shares | 1,584 | 94 | — | — | 95 | (93 | ) | 1,585 | — | ||||||||||||||||||||||||||
| USAA High Income Fund Institutional Shares | 11,702 | 539 | — | — | — | (627 | ) | 11,614 | 539 | ||||||||||||||||||||||||||
| USAA Income Fund Institutional Shares | 25,719 | 519 | (6,926 | ) | (1,119 | ) | — | (274 | ) | 17,919 | 519 | ||||||||||||||||||||||||
| USAA Income Stock Fund Institutional Shares | 1,942 | 157 | (203 | ) | 52 | 112 | (225 | ) | 1,723 | 44 | |||||||||||||||||||||||||
| USAA Intermediate-Term Bond Fund Institutional Shares | 41,913 | 1,038 | — | — | — | (2,108 | ) | 40,843 | 1,103 | ||||||||||||||||||||||||||
| USAA International Fund Institutional Shares | 7,592 | 216 | (499 | ) | (64 | ) | 101 | (82 | ) | 7,163 | 116 | ||||||||||||||||||||||||
| USAA NASDAQ-100 Index Fund Class R6 | 1,588 | 58 | — | — | 48 | (127 | ) | 1,519 | 10 | ||||||||||||||||||||||||||
| USAA Precious Metals and Minerals Fund Institutional Shares | 1,143 | 12 | — | — | — | (159 | ) | 996 | 12 | ||||||||||||||||||||||||||
| USAA Short-Term Bond Fund Institutional Shares | 6,564 | 152 | — | — | — | (81 | ) | 6,635 | 140 | ||||||||||||||||||||||||||
| USAA Small Cap Stock Fund Institutional Shares | 1,293 | 71 | — | — | 71 | (10 | ) | 1,354 | — | ||||||||||||||||||||||||||
| USAA Target Managed Allocation Fund | 5,689 | 221 | — | — | 31 | (665 | ) | 5,245 | 189 | ||||||||||||||||||||||||||
| USAA Value Fund Institutional Shares | 2,057 | 135 | (497 | ) | (20 | ) | 114 | (150 | ) | 1,525 | 21 | ||||||||||||||||||||||||
| Victory Market Neutral Income Fund Class I | 4,689 | 471 | — | — | 149 | (496 | ) | 4,664 | 323 | ||||||||||||||||||||||||||
| VictoryShares USAA Core Intermediate-Term Bond ETF | 16,072 | — | — | — | — | (825 | ) | 15,247 | 291 | ||||||||||||||||||||||||||
| VictoryShares USAA Core Short-Term Bond ETF | 33,186 | — | — | — | — | (449 | ) | 32,737 | 732 | ||||||||||||||||||||||||||
| VictoryShares Emerging Markets Value Momentum ETF | 3,030 | — | (501 | ) | (53 | ) | — | (240 | ) | 2,236 | 86 | ||||||||||||||||||||||||
| VictoryShares International Value Momentum ETF | 5,063 | — | — | — | — | (221 | ) | 4,842 | 107 | ||||||||||||||||||||||||||
| VictoryShares US Small Mid Cap Value Momentum ETF | 1,228 | — | — | — | — | 9 | 1,237 | 15 | |||||||||||||||||||||||||||
| VictoryShares US Value Momentum ETF | 5,364 | — | — | — | — | (198 | ) | 5,166 | 75 | ||||||||||||||||||||||||||
$ | 222,456 | $ | 5,244 | $ | (10,066 | ) | $ | (1,365 | ) | $ | 847 | $ | (9,153 | ) | $ | 207,116 | $ | 5,058 | |||||||||||||||||
21
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 | Net Realized Gains (Losses) | Capital Gain Distributions | 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 | |||||||||||||||||||||||||
| 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 | ||||||||||||||||||||||||||
22
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
| Fair Value 5/31/2021 | Purchases at Cost | Proceeds from Sales | Net Realized Gains (Losses) | Capital Gain Distributions | Net Change in Unrealized Appreciation/ Depreciation | Fair Value 5/31/2022 | Dividend Income | ||||||||||||||||||||||||||||
| 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 | |||||||||||||||||
* During the reporting period the Fund name was changed to VictoryShares Emerging Markets Value Momentum ETF.
** During the reporting period the Fund name was changed to VictoryShares International Value Momentum ETF.
*** During the reporting period the Fund name was changed to VictoryShares US Small Mid Cap Value Momentum ETF .
**** During the reporting period the Fund name was changed to VictoryShares US Value Momentum ETF.
9. Subsequent Events:
The Board, upon recommendation of the Adviser, has approved a change in the name of the Trust and each individual fund within the Trust. On February 23, 2023, an initial filing was made with the SEC to commence the process to effectuate the following changes.
Effective at the start of business on April 24, 2023 (the "Effective Date"), the name of the Trust changed from USAA Mutual Funds Trust to Victory Portfolios III, and all references to USAA Mutual Funds Trust in the summary prospectus, statutory prospectus, and statement of additional information ("SAI") will be replaced by the new name.
Also on the Effective Date, references to the current name of the Fund in the summary prospectus, statutory prospectus, and SAI will be replaced with the new name as follows:
Current Name | New Name | ||||||
USAA Cornerstone Conservative Fund | Victory Cornerstone Conservative Fund | ||||||
In addition, on the Effective Date, USAA Investments, a Victory Capital Management Inc. investment franchise, that currently manages the USAA Fixed Income Funds, will change its name to Victory Income Investors, and all references to USAA Investments in the summary prospectus, statutory prospectus, and SAI, will be replaced.
Please note that there will be no changes in the management of the Fund or to the Fund's ticker symbols.
23
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 February 28, 2023, and the related statements of operations for the period from June 1, 2022 through February 28, 2023 and the year ended May 31, 2022, the statements of changes in net assets for the period from June 1, 2022 through February 28, 2023 and each of the two years in the period ended May 31, 2022, the financial highlights for the period from June 1, 2022 through February 28, 2023 and each of the five years in the period ended May 31, 2022, 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 February 28, 2023, the results of its operations for the period from June 1, 2022 through February 28, 2023 and the year ended May 31, 2022, the statements of changes in net assets for the period from June 1, 2022 through February 28, 2023 and each of the two years in the period ended May 31, 2022, and its financial highlights for the period from June 1, 2022 through February 28, 2023 and each of the five years in the period ended May 31, 2022, 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 February 28, 2023, by correspondence with the custodian and transfer agent. 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
April 28, 2023
24
USAA Mutual Funds Trust | Supplemental Information February 28, 2023 | ||||||
(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 date 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 | ||||||||||||||||||
25
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 (06/17-06/19); 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 (03/15-03/21). | 45 | None | ||||||||||||||||||
| Paul L. McNamara (July 1948) | Trustee | Trustee since January 2012 | Retired. | 45 | None | ||||||||||||||||||
26
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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) | ||||||||||||||||||
27
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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.
28
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
Officers:
The officers of the Trust, their date 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. (since 2022); 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. (07/01/19-present); Executive Director, Investment and Financial Administration, USAA (2012-06/30/19); 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. (07/01/19-present); Accounting/ Financial Director, USAA (12/13-06/30/19). | ||||||||||||
| 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). | ||||||||||||
29
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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). | ||||||||||||
30
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 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 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 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 September 1, 2022, through February 28, 2023.
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 9/1/22 | Actual Ending Account Value 2/28/23 | Hypothetical Ending Account Value 2/28/23 | Actual Expenses Paid During Period 9/1/22- 2/28/23* | Hypothetical Expenses Paid During Period 9/1/22- 2/28/23* | Annualized Expense Ratio During Period 9/1/22- 2/28/23 | ||||||||||||||||||
| $ | 1,000.00 | $ | 1,009.70 | $ | 1,024.30 | $ | 0.50 | $ | 0.50 | 0.10 | % | ||||||||||||
* Expenses are equal to the average account value multiplied by the Fund's annualized expense ratio multiplied by 181/365 (the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year).
31
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
Additional Federal Income Tax Information
The following federal tax information related to the Fund's fiscal nine months ended February 28, 2023, 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 2024.
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 nine months ended February 28, 2023 (amounts in thousands):
| Dividend Received Deduction (corporate shareholders) | Qualified Dividend Income (non-corporate shareholders) | Long-Term Capital Gain Distributions | |||||||||
| 6 | % | 12 | % | $ | 3,684 | ||||||
The Fund intends to elect to pass through to shareholders the income tax credit for taxes paid to foreign countries. Foreign source income per outstanding share on February 28, 2023, was as follows:
| Foreign Source Income | ||||||
$ | 0.02 | ||||||
32
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 8-9, 2022, 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 8-9, 2022, 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 21, 2022.
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.
33
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 program, (iv) derivatives risk management program, and (v) 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 above the average of its performance universe for the one-, three- and five-year periods ended June 30, 2022, and was above its Lipper index for the one-year period ended June 30, 2022, and was below its Lipper index for the three- and five-year periods ended June 30, 2022. The Board took into account management's discussion of the Fund's performance, the reasons for the Fund's underperformance against the Lipper Index for certain periods, and the Fund's more recent improved performance.
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
34
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
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.
35
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 10, 2023, 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- RN (prior to August 2022, Form N-LIQUID) and recommended no material changes to the LRMP.
36
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 | ||||||
vcm.com | (800) 235-8396 | ||||||
97446-0423
February 28, 2023
Annual Report
USAA Cornerstone Equity Fund
(Also Known as Victory Cornerstone Equity Fund*)
* Effective at the start of business on April 24, 2023, the Fund name will change to Victory Cornerstone Equity Fund. Please see Notes to the Financial Statements for subsequent event information.
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 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.
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, 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 | ||||||
Statements of Operations | 10 | ||||||
Statements of Changes in Net Assets | 11 | ||||||
Financial Highlights | 12 | ||||||
Notes to Financial Statements | 13 | ||||||
| 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,
If you are reading this letter but double-checking your calendar, be assured there's no mistake. The annual reporting period for your USAA Mutual Fund has shifted from a fiscal year ended May 31st to a fiscal year ended February 28th/the last day of February. This change has no material impact on any of your investments. This change aims to help us improve efficiencies and reduce operational costs. Therefore, this letter covers an abbreviated "annual" period from June 1, 2022, through February 28, 2023. Future annual reports will cover the 12-month period ended February 28th/the last day of February going forward.
Our most recent annual reporting period has been a challenging period for investors. Consider some of the headwinds: heightened geopolitical tensions, a terrible war in Eastern Europe, elevated energy and food costs, high inflation, and rising interest rates. All this has dampened global growth and created a difficult backdrop for both bond and stock investors.
The inflation data was particularly troublesome and surprised many throughout the past year with some of the highest readings since the 1970s. In response, the U.S. Federal Reserve (the "Fed") continued with its monetary tightening and boosted the Fed funds interest rate repeatedly throughout the annual reporting period. And if that wasn't enough, zero-COVID-19 policies in China (which fortunately have been recently lifted) further exacerbated supply chain issues. As one might expect, all these obstacles ratcheted up volatility across financial markets.
In terms of the numbers, the S&P 500® Index, the bell-weather proxy for our domestic stock market, delivered a negative total return of almost 3% for our abbreviated annual reporting period. But perhaps what made 2022 even more difficult was the performance of fixed income markets. The Bloomberg US Aggregate Bond Index—a proxy for a diversified fixed income portfolio and one that many investors and institutions follow closely—delivered a negative total return of approximately 4% during the same period. That's not exactly the offset to equity performance that many investors come to expect from bonds.
It's been difficult, and we fully acknowledge that the steady drumbeat of bad news and bouts of stomach-churning volatility can take a toll on investors' psyche. Even when markets often snap back sharply (as happened this past July, October and earlier this calendar year), investors often wonder if they have missed an opportunity.
Through all of the turmoil and challenges in our most recent annual reporting period, we are reminded of two enduring realities: 1) financial markets are dynamic and apt to change abruptly; 2) it's vital to remain calm and rational whenever faced with those inevitable bouts of turmoil.
Fortunately, we think that investors can take comfort knowing that all of our independent investment franchises have experience managing portfolios through a wide variety of market environments. Our investment professionals remain calm during turbulent financial markets, and we think it's imperative that investors do the same.
2
We still believe that a long-term plan, a well-diversified portfolio across asset classes and investment types, and a clear understanding of individual risk tolerances are the key ingredients for staying the course and progressing on investment goals. Moreover, all our investment professionals continually monitor the environment and work hard to position portfolios opportunistically no matter what the markets bring. Remember, turmoil can also create opportunity.
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, we encourage you to contact our Member Service Representatives. Call 800-235-8396, or visit our website at vcm.com.
From all of us here at Victory Capital, thank you for your ongoing confidence and 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?
The reporting period started in the month of June as pressure continued to mount for both stocks and bonds. The U.S. Federal Reserve's (the "Fed") hawkish pivot continued to put pressure on equity multiples. With stubbornly high inflation readings, 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.
In the third quarter, global equities declined, continuing the downward trend from the first half of 2022. The quarter began with a rally that continued into mid-August, on hopes that the Fed would pivot toward a more accommodative policy. However, messaging from Fed Chairman, Jerome Powell, and a stronger-than-expected inflation report in early September dampened investor optimism over the central bank's trajectory and the odds of avoiding recession. The Fed went on to hike rates aggressively by 75 basis points ("bps") twice during the quarter, bringing the benchmark Fed funds rate target to a range of 3.0% to 3.25%, as compared to 0% to 0.25% at the beginning of the year. (A basis point is 1/100th of a percentage point.) For its part, the European Central Bank raised its reference rate by 50 bps in July, followed by another 75 bps in September. Other factors that weighed on sentiment during the quarter included the ongoing Russia-Ukraine war, an energy crisis in Europe, and the resumption of COVID-19 lockdowns in China.
Global equities rebounded in the fourth quarter trimming full year losses. Gains in October and November were sparked by signs of peaking inflation alongside less hawkish commentary from Fed Chairman Powell raising hope that the central bank would end its interest rate hiking cycle sometime in early 2023. Indeed, both the Fed and the European Central Bank raised their benchmark overnight lending rates by a more modest 50 bps in mid-December. Also supporting sentiment, the Chinese government began to ease their zero-COVID-19 policy that had weighed on global economic growth for much of 2022. However, stocks retreated into year-end as investors shifted their focus to the potential impact higher rates might have on economic growth and corporate earnings in the coming year.
As the reporting period crossed into 2023, global equities started off the year logging positive returns in the month of January. Bonds also rallied at the start of the year on hopes that the Fed's hawkish pivot would come to an end in 2023. As the calendar moved to February, stronger than expected employment and inflation reports caused investors to reevaluate interest rate expectations for 2023 and consider that rates could stay higher for longer. The result was a reversal in global equities and bonds which ended the month lower.
• How did the USAA Cornerstone Equity Fund (the "Fund") perform during the reporting period?
The Fund's fiscal year-end changed this year to February 28 from May 31, resulting in a shorter reporting period for fiscal year ended 2023. For the nine-month reporting period ended February 28, 2023, the Fund had a total return (at net asset value) of -2.66%. This
4
USAA Cornerstone Equity Fund
Managers' Commentary (continued)
compares to returns of -2.51% for the MSCI All-Country World Index, and -2.32% for the Cornerstone Equity Composite Index.
• What strategies did you employ during the reporting period?
The Fund had a negative total return over the period, as global financial markets experienced weak performance and high volatility. Inflation concerns, rising interest rates and geopolitical issues continued to plague all major market segments for the majority of 2022 creating a volatile investment environment. The Fund slightly underperformed the Cornerstone Equity Composite Index.
Overall, the Fund benefited from a tilt to the value style over growth, and to higher-quality stocks over their lower-quality counterparts. Both categories outperformed as investors gravitated to companies seen as being in the best position to withstand a period of slow growth and higher interest rates. The Fund was also helped by underweights to real estate investment trusts and commodities. On the other hand, tactical positions in international equities — such as Canada — dampened results.
Our approach is to hold a core, diversified portfolio, while accounting for both current risks and longer-term opportunities. We stay focused on fundamentals, valuations, and diversification. We believe this approach, is prudent for long-term investors and is particularly important now given the elevated uncertainty in the outlook for the economy and markets.
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 February 28, 2023
Fund Shares | |||||||||||||||
INCEPTION DATE | 6/8/12 | ||||||||||||||
Net Asset Value | MSCI All-Country World Index1 | Cornerstone Equity Composite Index2 | |||||||||||||
One Year | –7.58 | % | –8.26 | % | –7.45 | % | |||||||||
Five Year | 4.19 | % | 5.82 | % | 6.42 | % | |||||||||
Ten Year | 6.68 | % | 7.93 | % | 8.41 | % | |||||||||
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 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
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 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 | February 28, 2023 | ||||||
(Unaudited)
Investment Objective and Portfolio Holdings:
The Fund seeks capital appreciation over the long term.
Top 10 Holdings*:
February 28, 2023
(% of Net Assets)
USAA 500 Index Fund Reward Shares | 20.6 | % | |||||
USAA International Fund Institutional Shares | 15.2 | % | |||||
VictoryShares US Value Momentum ETF | 13.0 | % | |||||
VictoryShares International Value Momentum ETF | 11.9 | % | |||||
USAA Target Managed Allocation Fund | 6.5 | % | |||||
VictoryShares Emerging Markets Value Momentum ETF | 5.4 | % | |||||
USAA Emerging Markets Fund Institutional Shares | 4.8 | % | |||||
USAA Income Stock Fund Institutional Shares | 4.1 | % | |||||
USAA Nasdaq-100 Index Fund Class R6 | 4.0 | % | |||||
VictoryShares Westend US Sector ETF | 3.9 | % | |||||
Asset Allocation*:
February 28, 2023
(% 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 February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Affiliated Exchange-Traded Funds (37.6%) | |||||||||||
VictoryShares Emerging Markets Value Momentum ETF | $ | 266,858 | $ | 10,730 | |||||||
VictoryShares International Value Momentum ETF | 555,112 | 23,670 | |||||||||
VictoryShares US Small Mid Cap Value Momentum ETF | 100,558 | 6,705 | |||||||||
VictoryShares US Value Momentum ETF | 405,692 | 25,814 | |||||||||
VictoryShares Westend US Sector ETF | 285,542 | 7,721 | |||||||||
Total Affiliated Exchange-Traded Funds (Cost $73,224) | 74,640 | ||||||||||
Affiliated Mutual Funds (62.1%) | |||||||||||
USAA 500 Index Fund Reward Shares | 804,275 | 40,801 | |||||||||
USAA Emerging Markets Fund Institutional Shares | 537,747 | 9,556 | |||||||||
USAA Growth Fund Institutional Shares | 125,607 | 3,165 | |||||||||
USAA Income Stock Fund Institutional Shares | 465,390 | 8,112 | |||||||||
USAA International Fund Institutional Shares | 1,296,928 | 30,222 | |||||||||
USAA Nasdaq-100 Index Fund Class R6 | 259,266 | 7,991 | |||||||||
USAA Precious Metals and Minerals Fund Institutional Shares | 44,799 | 715 | |||||||||
USAA Small Cap Stock Fund Institutional Shares | 441,182 | 5,563 | |||||||||
USAA Target Managed Allocation Fund | 1,487,760 | 12,854 | |||||||||
USAA Value Fund Institutional Shares | 242,885 | 4,037 | |||||||||
Total Affiliated Mutual Funds (Cost $113,025) | 123,016 | ||||||||||
Total Investments (Cost $186,249) — 99.7% | 197,656 | ||||||||||
Other assets in excess of liabilities — 0.3% | 570 | ||||||||||
NET ASSETS — 100.00% | $ | 198,226 | |||||||||
At February 28, 2023, the foreign securities held by the underlying Funds were 37.4% of net assets.
ETF — Exchange-Traded Fund
See notes to financial statements.
8
USAA Mutual Funds Trust | Statement of Assets and Liabilities February 28, 2023 | ||||||
(Amounts in Thousands, Except Per Share Amounts)
| USAA Cornerstone Equity Fund | |||||||
Assets: | |||||||
Affiliated investments, at value (Cost $186,249) | $ | 197,656 | |||||
Cash | 162 | ||||||
Receivables: | |||||||
Interest | — | (a) | |||||
Capital shares issued | 136 | ||||||
Investments sold | 398 | ||||||
From Adviser | 4 | ||||||
Prepaid expenses | 2 | ||||||
Total Assets | 198,358 | ||||||
Liabilities: | |||||||
Payables: | |||||||
Capital shares redeemed | 74 | ||||||
Accrued expenses and other payables: | |||||||
Custodian fees | 1 | ||||||
Compliance fees | — | (a) | |||||
Trustees' fees | 1 | ||||||
Other accrued expenses | 56 | ||||||
Total Liabilities | 132 | ||||||
Net Assets: | |||||||
Capital | 184,791 | ||||||
Total accumulated earnings/(loss) | 13,435 | ||||||
Net Assets | $ | 198,226 | |||||
Shares (unlimited number of shares authorized with no par value): | 13,963 | ||||||
Net asset value, offering and redemption price per share: (b) | $ | 14.20 | |||||
(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 | Statements of Operations | ||||||
(Amounts in Thousands)
| USAA Cornerstone Equity Fund | |||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | ||||||||||
Investment Income: | |||||||||||
Income distributions from affiliated funds | $ | 3,246 | $ | 7,123 | |||||||
Interest from unaffiliated investments | 5 | — | |||||||||
Securities lending (net of fees) | 22 | 18 | |||||||||
Total Income | 3,273 | 7,141 | |||||||||
Expenses: | |||||||||||
Sub-Administration fees | 14 | 19 | |||||||||
Custodian fees | 4 | 7 | |||||||||
Trustees' fees | 36 | 48 | |||||||||
Compliance fees | 1 | 2 | |||||||||
Printing fees | 34 | 25 | |||||||||
Legal and audit fees | 45 | 50 | |||||||||
State registration and filing fees | 22 | 23 | |||||||||
Other expenses | 19 | 18 | |||||||||
Recoupment of prior expenses waived/reimbursed by Adviser | — | 19 | |||||||||
Total Expenses | 175 | 211 | |||||||||
Expenses waived/reimbursed by Adviser | (30 | ) | — | ||||||||
Net Expenses | 145 | 211 | |||||||||
Net Investment Income (Loss) | 3,128 | 6,930 | |||||||||
Realized/Unrealized Gains (Losses) from Investments: | |||||||||||
Net realized gains (losses) from sales of affiliated funds | (256 | ) | 1,258 | ||||||||
Capital gain distributions received from affiliated funds | 2,521 | 9,193 | |||||||||
| Net change in unrealized appreciation/depreciation on affiliated funds | (11,078 | ) | (31,549 | ) | |||||||
Net realized/unrealized gains (losses) on investments | (8,813 | ) | (21,098 | ) | |||||||
Change in net assets resulting from operations | $ | (5,685 | ) | $ | (14,168 | ) | |||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from May 31 to February 28.
See notes to financial statements.
10
USAA Mutual Funds Trust | Statements of Changes in Net Assets | ||||||
(Amounts in Thousands)
USAA Cornerstone Equity Fund | |||||||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | Year Ended May 31, 2021 | |||||||||||||
From Investments: | |||||||||||||||
Operations: | |||||||||||||||
Net Investment Income (Loss) | $ | 3,128 | $ | 6,930 | $ | 3,618 | |||||||||
Net realized gains (losses) | 2,265 | 10,451 | 1,909 | ||||||||||||
| Net change in unrealized appreciation/ depreciation | (11,078 | ) | (31,549 | ) | 67,536 | ||||||||||
Change in net assets resulting from operations | (5,685 | ) | (14,168 | ) | 73,063 | ||||||||||
| Change in net assets resulting from distributions to shareholders | (12,498 | ) | (10,625 | ) | (16,403 | ) | |||||||||
| Change in net assets resulting from capital transactions | 8,500 | 466 | (15,437 | ) | |||||||||||
Change in net assets | (9,683 | ) | (24,327 | ) | 41,223 | ||||||||||
Net Assets: | |||||||||||||||
Beginning of period | 207,909 | 232,236 | 191,013 | ||||||||||||
End of period | $ | 198,226 | $ | 207,909 | $ | 232,236 | |||||||||
Capital Transactions: | |||||||||||||||
Proceeds from shares issued | $ | 13,374 | $ | 27,268 | $ | 26,443 | |||||||||
Distributions reinvested | 12,470 | 10,602 | 16,362 | ||||||||||||
Cost of shares redeemed | (17,344 | ) | (37,404 | ) | (58,242 | ) | |||||||||
| Change in net assets resulting from capital transactions | $ | 8,500 | $ | 466 | $ | (15,437 | ) | ||||||||
Share Transactions: | |||||||||||||||
Issued | 929 | 1,585 | 1,681 | ||||||||||||
Reinvested | 902 | 608 | 1,061 | ||||||||||||
Redeemed | (1,205 | ) | (2,174 | ) | (3,809 | ) | |||||||||
Change in Shares | 626 | 19 | (1,067 | ) | |||||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from May 31 to February 28.
See notes to financial statements.
11
USAA Mutual Funds Trust | Financial Highlights | ||||||
For a Share Outstanding Throughout Each Period
USAA Cornerstone Equity Fund | |||||||||||||||||||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | Year Ended May 31, 2021 | Year Ended May 31, 2020 | Year Ended May 31, 2019 | Year Ended May 31, 2018 | ||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 15.59 | $ | 17.44 | $ | 13.28 | $ | 13.90 | $ | 15.49 | $ | 14.31 | |||||||||||||||
Investment Activities: | |||||||||||||||||||||||||||
Net investment income (loss) | 0.23 | (b) | 0.52 | (b) | 0.27 | (b) | 0.34 | (b) | 0.26 | 0.22 | |||||||||||||||||
| Net realized and unrealized gains (losses) | (0.68 | ) | (1.56 | ) | 5.16 | (0.24 | ) | (0.99 | ) | 1.26 | |||||||||||||||||
| Total from Investment Activities | (0.45 | ) | (1.04 | ) | 5.43 | 0.10 | (0.73 | ) | 1.48 | ||||||||||||||||||
Distributions to Shareholders from: | |||||||||||||||||||||||||||
Net investment income | (0.25 | ) | (0.59 | ) | (0.20 | ) | (0.32 | ) | (0.25 | ) | (0.22 | ) | |||||||||||||||
Net realized gains | (0.69 | ) | (0.22 | ) | (1.07 | ) | (0.40 | ) | (0.61 | ) | (0.08 | ) | |||||||||||||||
Total Distributions | (0.94 | ) | (0.81 | ) | (1.27 | ) | (0.72 | ) | (0.86 | ) | (0.30 | ) | |||||||||||||||
Net Asset Value, End of Period | $ | 14.20 | $ | 15.59 | $ | 17.44 | $ | 13.28 | $ | 13.90 | $ | 15.49 | |||||||||||||||
Total Return (c) (d) | (2.66 | )% | (6.41 | )% | 42.26 | % | 0.14 | % | (4.35 | )% | 10.32 | % | |||||||||||||||
Ratios to Average Net Assets: | |||||||||||||||||||||||||||
Net Expenses (e) (f) (g) | 0.10 | % | 0.09 | % | 0.10 | % | 0.10 | % | 0.10 | % | 0.10 | % | |||||||||||||||
Net Investment Income (Loss) (e) | 2.15 | % | 3.04 | % | 1.74 | % | 2.38 | % | 1.79 | % | 1.46 | % | |||||||||||||||
Gross Expenses (e) (f) | 0.12 | % | 0.09 | % | 0.11 | % | 0.10 | % | 0.13 | % | 0.13 | % | |||||||||||||||
Supplemental Data: | |||||||||||||||||||||||||||
Net Assets at end of period (000's) | $ | 198,226 | $ | 207,909 | $ | 232,236 | $ | 191,013 | $ | 202,288 | $ | 200,186 | |||||||||||||||
Portfolio Turnover (c) | 6 | % | 12 | % | 5 | % | 6 | % | 11 | %(h) | 38 | %(i) | |||||||||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from May 31 to February 28.
(b) Per share net investment income (loss) has been calculated using the average daily shares method.
(c) Not annualized for periods less than one year.
(d) 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.
(e) Annualized for periods less than one year.
(f) Does not include acquired fund fees and expenses, if any.
(g) 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 September 30, 2023, instead of coinciding with the Fund's fiscal year end.
(h) Reflects increased usage of quantitative investment strategies.
(i) Reflects an increase in trading activity due to asset allocation shifts.
See notes to financial statements.
12
USAA Mutual Funds Trust | Notes to Financial Statements February 28, 2023 | ||||||
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" or the "Adviser"), an affiliate of the Fund.
On June 29, 2022, the Board of Trustees (the "Board") approved the fiscal year-end change for the Fund from May 31 to February 28. The first full cycle of the new fiscal year-end reporting will begin March 1, 2023. As a result of the change, the Fund has a February 28, 2023 fiscal nine-month transition period, the results of which are reported in this Annual Report for the period ended February 28, 2023.
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 may rely on various exemptions contained in the 1940 Act and in exemptive rules or orders thereunder issued by the Securities and Exchange Commission ("SEC") that permit funds, subject to certain conditions, to invest in one or more ETFs and certain other types of investment companies in amounts that exceed limits set forth in the 1940 Act that would otherwise be applicable.
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 (unadjusted) in active markets for identical securities
• Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, or credit spreads, applicable to those securities, etc.)
• Level 3 — significant unobservable inputs (including the Adviser's assumptions in determining the fair value of investments)
13
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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, appointed as the valuation designee by the Board, has established the Pricing and Liquidity Committee (the "Committee"), and subject to Board oversight, the Committee administers and oversees the Fund's valuation policies and procedures, which are approved by the Board.
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.
Investments in the underlying affiliated Funds and other open-end investment companies, other than ETFs, are valued at their net asset value ("NAV") at the end of each business day. These valuations are typically categorized as Level 1 in the fair value hierarchy.
The underlying affiliated Funds have specific valuation procedures. In the event that price quotations or valuations are not readily available, are not reflective of market value, or a significant event has been recognized in relation to a security or class of securities, 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 February 28, 2023, 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 | $ | 74,640 | $ | — | $ | — | $ | 74,640 | |||||||||||
Affiliated Mutual Funds | 123,016 | — | — | 123,016 | |||||||||||||||
Total | $ | 197,656 | $ | — | $ | — | $ | 197,656 | |||||||||||
As of February 28, 2023, there were no transfers into/out of Level 3.
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.
14
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 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 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 Statements 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 February 28, 2023, 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 had a tax year end of May 31, and effective February 28, 2023, the Fund changed its tax year end to February 28.
For the nine months ended February 28, 2023, 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 February 28, 2023 | ||||||
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 nine months ended February 28, 2023, were as follows for the Fund (amounts in thousands):
Excluding | |||||||
Purchases | Sales | ||||||
$ | 14,205 | $ | 12,452 | ||||
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 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 nine months ended February 28, 2023, and 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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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.
16
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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 September 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 limit 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 February 28, 2023, the expense limit (excluding voluntary waivers) was 0.10%.
Under the terms of the expense limitation agreement, 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.
As of February 28, 2023, 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 February 28, 2023.
| Expires 2026 | Total | ||||||
| $ | 30 | $ | 30 | ||||
As of May 31, 2022, there were 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 nine months ended February 28, 2023, and 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).
17
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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.
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 registered 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 27, 2022, with a termination date of June 26, 2023. 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 nine months ended February 28, 2023, 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 paid a pro-rata portion of the commitment fees plus any interest on amounts borrowed. For the period from June 1, 2022, through June 27, 2022, interest was based on the one-month London Interbank Offered Rate ("LIBOR") plus one percent. Effective with the renewal, for the period June 28, 2022, through February 28, 2023, interest was based on the one-month Secured Overnight Financing Rate ("SOFR") plus 1.10 percent. The Fund did not experience a material financial impact transitioning from LIBOR to SOFR. Interest charged to the Fund during the period, if applicable, is reflected on the Statements of Operations under Line of credit fees.
18
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
The Fund had no borrowings under the Line of Credit agreement during the nine months ended February 28, 2023, and 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 Statements of Operations under Interfund lending fees. As a Lender, interest earned by the Fund, if any, during the period, is reflected on the Statements of Operations under Interfund lending.
The Fund did not utilize or participate in the Facility during the nine months ended February 28, 2023, and 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 February 28, 2023, on the Statement 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):
Nine Months Ended February 28, 2023 | |||||||||||
Distributions Paid From | |||||||||||
| Ordinary Income | Net Long-Term Capital Gains | Total Distributions Paid | |||||||||
$ | 3,407 | $ | 9,091 | $ | 12,498 | ||||||
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 | ||||||||||||
19
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
As of February 28, 2023, 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) | |||||||||||||||
| $ | 201 | $ | 2,421 | $ | 2,622 | $ | 10,813 | $ | 13,435 | ||||||||||
* The difference between the book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to tax deferral of losses on wash sales.
As of February 28, 2023, the Fund had no capital loss carryforwards for federal income tax purposes.
As of February 28, 2023, 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) | ||||||||||||
| $ | 186,843 | $ | 23,049 | $ | (12,236 | ) | $ | 10,813 | |||||||
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 nine months ended February 28, 2023, were as follows (amounts in thousands):
| Fair Value 5/31/2022 | Purchases at Cost | Proceeds from Sales | Net Realized Gains (Losses) | Capital Gain Distributions | Net Change in Unrealized Appreciation/ Depreciation | Fair Value 2/28/2023 | Dividend Income | ||||||||||||||||||||||||||||
| USAA 500 Index Fund Reward Shares | $ | 42,772 | $ | 995 | $ | (823 | ) | $ | (83 | ) | $ | 519 | $ | (2,060 | ) | $ | 40,801 | $ | 477 | ||||||||||||||||
| USAA NASDAQ-100 Index Fund Class R6 | 7,275 | 1,303 | — | — | 252 | (587 | ) | 7,991 | 50 | ||||||||||||||||||||||||||
| VictoryShares WestEnd US Sector ETF | — | 7,440 | — | — | — | 281 | 7,721 | 37 | |||||||||||||||||||||||||||
| USAA Emerging Markets Fund Institutional Shares | 10,418 | 699 | (380 | ) | (148 | ) | — | (1,033 | ) | 9,556 | 181 | ||||||||||||||||||||||||
| USAA Growth Fund Institutional Shares | 7,936 | 188 | (4,325 | ) | 249 | 189 | (883 | ) | 3,165 | — | |||||||||||||||||||||||||
| USAA Income Stock Fund Institutional Shares | 9,232 | 732 | (1,019 | ) | 62 | 529 | (895 | ) | 8,112 | 202 | |||||||||||||||||||||||||
| USAA International Fund Institutional Shares | 30,529 | 1,709 | (1,412 | ) | (278 | ) | 410 | (326 | ) | 30,222 | 470 | ||||||||||||||||||||||||
| USAA Precious Metals and Minerals Fund Institutional Shares | 821 | 8 | — | — | — | (114 | ) | 715 | 8 | ||||||||||||||||||||||||||
20
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
| Fair Value 5/31/2022 | Purchases at Cost | Proceeds from Sales | Net Realized Gains (Losses) | Capital Gain Distributions | Net Change in Unrealized Appreciation/ Depreciation | Fair Value 2/28/2023 | Dividend Income | ||||||||||||||||||||||||||||
| USAA Small Cap Stock Fund Institutional Shares | $ | 5,314 | $ | 292 | $ | — | $ | — | $ | 292 | $ | (43 | ) | $ | 5,563 | $ | — | ||||||||||||||||||
| USAA Target Managed Allocation Fund | 13,944 | 539 | — | — | 77 | (1,629 | ) | 12,854 | 462 | ||||||||||||||||||||||||||
| USAA Value Fund Institutional Shares | 8,882 | 300 | (4,493 | ) | (58 | ) | 253 | (594 | ) | 4,037 | 47 | ||||||||||||||||||||||||
| VictoryShares Emerging Markets Value Momentum ETF | 11,900 | — | — | — | — | (1,170 | ) | 10,730 | 336 | ||||||||||||||||||||||||||
| VictoryShares International Value Momentum ETF | 24,749 | — | — | — | — | (1,079 | ) | 23,670 | 523 | ||||||||||||||||||||||||||
| VictoryShares US Small Mid Cap Value Momentum ETF | 6,659 | — | — | — | — | 46 | 6,705 | 79 | |||||||||||||||||||||||||||
| VictoryShares US Value Momentum ETF | 26,806 | — | — | — | — | (992 | ) | 25,814 | 374 | ||||||||||||||||||||||||||
$ | 207,237 | $ | 14,205 | $ | (12,452 | ) | $ | (256 | ) | $ | 2,521 | $ | (11,078 | ) | $ | 197,656 | $ | 3,246 | |||||||||||||||||
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 | Net Realized Gains (Losses) | Capital Gain Distributions | 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 | ||||||||||||||||||||||||||
| USAA Target Managed Allocation Fund | 15,092 | 3,419 | (711 | ) | 139 | 1,622 | (3,995 | ) | 13,944 | 1,796 | |||||||||||||||||||||||||
21
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
| Fair Value 5/31/2021 | Purchases at Cost | Proceeds from Sales | Net Realized Gains (Losses) | Capital Gain Distributions | Net Change in Unrealized Appreciation/ Depreciation | Fair Value 5/31/2022 | Dividend Income | ||||||||||||||||||||||||||||
| 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 | ||||||||||||||||||
* During the reporting period the Fund name was changed to VictoryShares Emerging Markets Value Momentum ETF.
** During the reporting period the Fund name was changed to VictoryShares International Value Momentum ETF .
*** During the reporting period the Fund name was changed to VictoryShares US Small Mid Cap Value Momentum ETF .
**** During the reporting period the Fund name was changed to VictoryShares US Value Momentum ETF.
9. Subsequent Events:
The Board, upon recommendation of the Adviser, has approved a change in the name of the Trust and each individual fund within the Trust. On February 23, 2023, an initial filing was made with the SEC to commence the process to effectuate the following changes.
Effective at the start of business on April 24, 2023 (the "Effective Date"), the name of the Trust changed from USAA Mutual Funds Trust to Victory Portfolios III, and all references to USAA Mutual Funds Trust in the summary prospectus, statutory prospectus, and statement of additional information ("SAI") will be replaced by the new name.
Also on the Effective Date, references to the current name of the Fund in the summary prospectus, statutory prospectus, and SAI will be replaced with the new name as follows:
Current Name | New Name | ||||||
USAA Cornerstone Equity Fund | Victory Cornerstone Equity Fund | ||||||
In addition, on the Effective Date, USAA Investments, a Victory Capital Management Inc. investment franchise, that currently manages the USAA Fixed Income Funds, will change its name to Victory Income Investors, and all references to USAA Investments in the summary prospectus, statutory prospectus, and SAI, will be replaced.
Please note that there will be no changes in the management of the Fund or to the Fund's ticker symbols.
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 February 28, 2023, and the related statements of operations for the period from June 1, 2022 through February 28, 2023 and the year ended May 31, 2022, the statements of changes in net assets for the period from June 1, 2022 through February 28, 2023 and each of the two years in the period ended May 31, 2022, the financial highlights for the period from June 1, 2022 through February 28, 2023 and each of the five years in the period ended May 31, 2022, 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 February 28, 2023, the results of its operations for the period from June 1, 2022 through February 28, 2023 and the year ended May 31, 2022, the statements of changes in net assets for the period from June 1, 2022 through February 28, 2023 and each of the two years in the period ended May 31, 2022, and its financial highlights for the period from June 1, 2022 through February 28, 2023 and each of the five years in the period ended May 31, 2022, 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 February 28, 2023, by correspondence with the custodian and transfer agent. 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
April 28, 2023
23
USAA Mutual Funds Trust | Supplemental Information February 28, 2023 | ||||||
(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 date 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 | ||||||||||||||||||
24
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 (06/17-06/19); 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 (03/15-03/21). | 45 | None | ||||||||||||||||||
| Paul L. McNamara (July 1948) | Trustee | Trustee since January 2012 | Retired. | 45 | None | ||||||||||||||||||
25
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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) | ||||||||||||||||||
26
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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.
27
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
Officers:
The officers of the Trust, their date 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. (since 2022); 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. (07/01/19-present); Executive Director, Investment and Financial Administration, USAA (2012-06/30/19); 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. (07/01/19-present); Accounting/ Financial Director, USAA (12/13-06/30/19). | ||||||||||||
| 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). | ||||||||||||
28
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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). | ||||||||||||
29
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 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 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 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 September 1, 2022, through February 28, 2023.
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 9/1/22 | Actual Ending Account Value 2/28/23 | Hypothetical Ending Account Value 2/28/23 | Actual Expenses Paid During Period 9/1/22- 2/28/23* | Hypothetical Expenses Paid During Period 9/1/22- 2/28/23* | Annualized Expense Ratio During Period 9/1/22- 2/28/23 | ||||||||||||||||||
| $ | 1,000.00 | $ | 1,040.20 | $ | 1,024.30 | $ | 0.51 | $ | 0.50 | 0.10 | % | ||||||||||||
* Expenses are equal to the average account value multiplied by the Fund's annualized expense ratio multiplied by 181/365 (the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year).
30
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
Additional Federal Income Tax Information
The following federal tax information related to the Fund's fiscal nine months ended February 28, 2023, 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 2024.
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 nine months ended February 28, 2023 (amounts in thousands):
| Dividends Received Deduction (corporate shareholders) | Qualified Dividend Income (non-corporate shareholders) | Long-Term Capital Gain Distributions | |||||||||
| 37 | % | 66 | % | $ | 9,091 | ||||||
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 February 28, 2023, were as follows:
| Foreign Source Income | Foreign Tax Expense | ||||||
| $ | 0.12 | $ | 0.03 | ||||
31
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
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 8-9, 2022, 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 8-9, 2022, 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 21, 2022.
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.
32
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 program, (iv) derivatives risk management program, and (v) 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 above the average of its performance universe and its Lipper index for the one-year period ended June 30, 2022, and was below the average of its performance universe and its Lipper index for the three- and five-year periods ended June 30, 2022. 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 certain periods and also noted the Fund's improved more recent performance.
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
33
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
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 February 28, 2023 | ||||||
(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 10, 2023, 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- RN (prior to August 2022, 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 | ||||||
vcm.com | (800) 235-8396 | ||||||
97449-0423
February 28, 2023
Annual Report
USAA Cornerstone Moderate Fund
(Also Known as Victory Cornerstone Moderate Fund*)
* Effective at the start of business on April 24, 2023, the Fund name will change to Victory Cornerstone Moderate Fund. Please see Notes to the Financial Statements for subsequent event information.
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 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.
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, 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 | 15 | ||||||
Statements of Operations | 16 | ||||||
Statements of Changes in Net Assets | 17 | ||||||
Financial Highlights | 18 | ||||||
Notes to Financial Statements | 19 | ||||||
| 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,
If you are reading this letter but double-checking your calendar, be assured there's no mistake. The annual reporting period for your USAA Mutual Fund has shifted from a fiscal year ended May 31st to a fiscal year ended February 28th/the last day of February. This change has no material impact on any of your investments. This change aims to help us improve efficiencies and reduce operational costs. Therefore, this letter covers an abbreviated "annual" period from June 1, 2022, through February 28, 2023. Future annual reports will cover the 12-month period ended February 28th/the last day of February going forward.
Our most recent annual reporting period has been a challenging period for investors. Consider some of the headwinds: heightened geopolitical tensions, a terrible war in Eastern Europe, elevated energy and food costs, high inflation, and rising interest rates. All this has dampened global growth and created a difficult backdrop for both bond and stock investors.
The inflation data was particularly troublesome and surprised many throughout the past year with some of the highest readings since the 1970s. In response, the U.S. Federal Reserve (the "Fed") continued with its monetary tightening and boosted the Fed funds interest rate repeatedly throughout the annual reporting period. And if that wasn't enough, zero-COVID-19 policies in China (which fortunately have been recently lifted) further exacerbated supply chain issues. As one might expect, all these obstacles ratcheted up volatility across financial markets.
In terms of the numbers, the S&P 500® Index, the bell-weather proxy for our domestic stock market, delivered a negative total return of almost 3% for our abbreviated annual reporting period. But perhaps what made 2022 even more difficult was the performance of fixed income markets. The Bloomberg US Aggregate Bond Index—a proxy for a diversified fixed income portfolio and one that many investors and institutions follow closely—delivered a negative total return of approximately 4% during the same period. That's not exactly the offset to equity performance that many investors come to expect from bonds.
It's been difficult, and we fully acknowledge that the steady drumbeat of bad news and bouts of stomach-churning volatility can take a toll on investors' psyche. Even when markets often snap back sharply (as happened this past July, October and earlier this calendar year), investors often wonder if they have missed an opportunity.
Through all of the turmoil and challenges in our most recent annual reporting period, we are reminded of two enduring realities: 1) financial markets are dynamic and apt to change abruptly; 2) it's vital to remain calm and rational whenever faced with those inevitable bouts of turmoil.
Fortunately, we think that investors can take comfort knowing that all of our independent investment franchises have experience managing portfolios through a wide variety of market environments. Our investment professionals remain calm during turbulent financial markets, and we think it's imperative that investors do the same.
2
We still believe that a long-term plan, a well-diversified portfolio across asset classes and investment types, and a clear understanding of individual risk tolerances are the key ingredients for staying the course and progressing on investment goals. Moreover, all our investment professionals continually monitor the environment and work hard to position portfolios opportunistically no matter what the markets bring. Remember, turmoil can also create opportunity.
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, we encourage you to contact our Member Service Representatives. Call 800-235-8396, or visit our website at vcm.com.
From all of us here at Victory Capital, thank you for your ongoing confidence and 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?
The reporting period started in the month of June as pressure continued to mount for both stocks and bonds. The U.S. Federal Reserve's (the "Fed") hawkish pivot continued to put pressure on equity multiples. With stubbornly high inflation readings, 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.
In the third quarter, global equities declined, continuing the downward trend from the first half of 2022. The quarter began with a rally that continued into mid-August, on hopes that the Fed would pivot toward a more accommodative policy. However, messaging from Fed Chairman, Jerome Powell, and a stronger-than-expected inflation report in early September dampened investor optimism over the central bank's trajectory and the odds of avoiding recession. The Fed went on to hike rates aggressively by 75 basis points ("bps") twice during the quarter, bringing the benchmark Fed funds rate target to a range of 3.0% to 3.25%, as compared to 0% to 0.25% at the beginning of the year. (A basis point is 1/100th of a percentage point.) For its part, the European Central Bank raised its reference rate by 50 bps in July, followed by another 75 bps in September. Other factors that weighed on sentiment during the quarter included the ongoing Russia-Ukraine war, an energy crisis in Europe, and the resumption of COVID-19 lockdowns in China.
Global equities rebounded in the fourth quarter trimming full year losses. Gains in October and November were sparked by signs of peaking inflation alongside less hawkish commentary from Fed Chairman Powell raising hope that the central bank would end its interest rate hiking cycle sometime in early 2023. Indeed, both the Fed and the European Central Bank raised their benchmark overnight lending rates by a more modest 50 bps in mid-December. Also supporting sentiment, the Chinese government began to ease their zero-COVID-19 policy that had weighed on global economic growth for much of 2022. However, stocks retreated into year-end as investors shifted their focus to the potential impact higher rates might have on economic growth and corporate earnings in the coming year.
As the reporting period crossed into 2023, global equities started off the year logging positive returns in the month of January. Bonds also rallied at the start of the year on hopes that the Fed's hawkish pivot would come to an end in 2023. As the calendar moved to February, stronger than expected employment and inflation reports caused investors to reevaluate interest rate expectations for 2023 and consider that rates could stay higher for longer. The result was a reversal in global equities and bonds which ended the month lower.
• How did the USAA Cornerstone Moderate Fund (the "Fund") perform during the reporting period?
The Fund's fiscal year-end changed this year to February 28 from May 31, resulting in a shorter reporting period for fiscal year ended 2023. For the nine-month reporting period ended February 28, 2023, the Fund had a total return (at net asset value) of -3.01%. This
4
USAA Cornerstone Moderate Fund
Managers' Commentary (continued)
compares to returns of -2.51% for the MSCI All-Country World Index, and -2.65% for the Cornerstone Moderate Composite Index.
• What strategies did you employ during the reporting period?
The Fund had a negative total return over the period, as global financial markets experienced weak performance and high volatility. Inflation concerns, rising interest rates and geopolitical issues continued to plague all major market segments for the majority of 2022 creating a volatile investment environment. The Fund slightly underperformed the Cornerstone Moderate Composite Index.
Overall, the Fund benefited from a tilt to the value style over growth, and to higher-quality stocks over their lower-quality counterparts. Both categories outperformed as investors gravitated to companies seen as being in the best position to withstand a period of slow growth and higher interest rates. 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 2022. On the other hand, tactical positions in international equities — such as Canada — dampened results.
The Fund had a small allocation to derivatives during the period that did not have a material impact on performance.
Our approach is to hold a core, diversified portfolio, while accounting for both current risks and longer-term opportunities. We stay focused on fundamentals, valuations, and diversification. We believe this approach is prudent for long-term investors and is particularly important now given the elevated uncertainty in the outlook for the economy and markets.
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 February 28, 2023
Fund Shares | |||||||||||||||
INCEPTION DATE | 9/1/95 | ||||||||||||||
Net Asset Value | MSCI All-Country | Cornerstone Moderate | |||||||||||||
One Year | –7.59 | % | –8.26 | % | –7.98 | % | |||||||||
Five Year | 2.68 | % | 5.82 | % | 3.90 | % | |||||||||
Ten Year | 3.80 | % | 7.93 | % | 5.17 | % | |||||||||
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 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 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 | February 28, 2023 | ||||||
(Unaudited)
Investment Objective and Portfolio Holdings:
The Fund seeks high total return.
Asset Allocation*:
February 28, 2023
(% 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 Moderate Fund | Schedule of Portfolio Investments February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Common Stocks (17.1%) | |||||||||||
Communication Services (1.3%): | |||||||||||
Alphabet, Inc. Class C (a) | 28,787 | $ | 2,600 | ||||||||
AT&T, Inc. | 126,445 | 2,391 | |||||||||
Comcast Corp. Class A | 32,387 | 1,204 | |||||||||
Meta Platforms, Inc. Class A (a) | 18,137 | 3,173 | |||||||||
Netflix, Inc. (a) | 3,177 | 1,023 | |||||||||
Sirius XM Holdings, Inc. (b) | 183,147 | 804 | |||||||||
T-Mobile U.S., Inc. (a) | 7,645 | 1,087 | |||||||||
Verizon Communications, Inc. | 31,394 | 1,218 | |||||||||
13,500 | |||||||||||
Consumer Discretionary (1.4%): | |||||||||||
AutoZone, Inc. (a) | 756 | 1,880 | |||||||||
Best Buy Co., Inc. | 9,729 | 809 | |||||||||
Ford Motor Co. | 74,577 | 900 | |||||||||
General Motors Co. | 24,811 | 961 | |||||||||
Genuine Parts Co. | 5,481 | 969 | |||||||||
Las Vegas Sands Corp. (a) | 15,924 | 915 | |||||||||
Lennar Corp. Class A | 10,214 | 988 | |||||||||
Lowe's Cos., Inc. | 4,815 | 991 | |||||||||
McDonald's Corp. | 4,921 | 1,299 | |||||||||
O'Reilly Automotive, Inc. (a) | 2,282 | 1,894 | |||||||||
Starbucks Corp. | 9,906 | 1,011 | |||||||||
Target Corp. | 5,043 | 850 | |||||||||
The Home Depot, Inc. | 4,228 | 1,254 | |||||||||
14,721 | |||||||||||
Consumer Staples (0.9%): | |||||||||||
Altria Group, Inc. | 43,796 | 2,033 | |||||||||
Colgate-Palmolive Co. | 12,706 | 931 | |||||||||
General Mills, Inc. | 13,620 | 1,083 | |||||||||
Kimberly-Clark Corp. | 6,331 | 792 | |||||||||
PepsiCo, Inc. | 7,852 | 1,363 | |||||||||
Philip Morris International, Inc. | 10,985 | 1,069 | |||||||||
The Kroger Co. | 20,933 | 903 | |||||||||
Tyson Foods, Inc. Class A | 16,084 | 953 | |||||||||
Walgreens Boots Alliance, Inc. | 25,750 | 915 | |||||||||
10,042 | |||||||||||
Energy (0.9%): | |||||||||||
Chevron Corp. | 8,527 | 1,371 | |||||||||
ConocoPhillips | 10,634 | 1,099 | |||||||||
Devon Energy Corp. | 14,941 | 806 | |||||||||
EOG Resources, Inc. | 7,114 | 804 | |||||||||
Exxon Mobil Corp. | 16,144 | 1,774 | |||||||||
Marathon Oil Corp. | 34,339 | 864 | |||||||||
Marathon Petroleum Corp. | 8,797 | 1,087 | |||||||||
See notes to financial statements.
8
| USAA Mutual Funds Trust USAA Cornerstone Moderate Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Schlumberger NV | 18,962 | $ | 1,009 | ||||||||
Valero Energy Corp. | 7,609 | 1,002 | |||||||||
9,816 | |||||||||||
Financials (2.4%): | |||||||||||
Annaly Capital Management, Inc. | 1,754 | 36 | |||||||||
Aon PLC Class A | 3,055 | 929 | |||||||||
Apollo Global Management, Inc. | 12,233 | 867 | |||||||||
Arch Capital Group Ltd. (a) | 14,960 | 1,047 | |||||||||
Bank of America Corp. | 36,878 | 1,265 | |||||||||
Berkshire Hathaway, Inc. Class B (a) | 5,421 | 1,654 | |||||||||
Capital One Financial Corp. | 9,315 | 1,016 | |||||||||
Citigroup, Inc. | 23,324 | 1,182 | |||||||||
FactSet Research Systems, Inc. | 2,083 | 864 | |||||||||
JPMorgan Chase & Co. | 34,018 | 4,876 | |||||||||
LPL Financial Holdings, Inc. | 3,929 | 981 | |||||||||
Marsh & McLennan Cos., Inc. | 5,904 | 957 | |||||||||
MetLife, Inc. | 14,567 | 1,045 | |||||||||
Morgan Stanley | 22,745 | 2,195 | |||||||||
MSCI, Inc. | 1,657 | 865 | |||||||||
Prudential Financial, Inc. | 9,838 | 984 | |||||||||
Raymond James Financial, Inc. | 7,819 | 848 | |||||||||
Regions Financial Corp. | 36,397 | 849 | |||||||||
T. Rowe Price Group, Inc. | 6,989 | 785 | |||||||||
The Goldman Sachs Group, Inc. | 3,184 | 1,120 | |||||||||
The Progressive Corp. | 14,191 | 2,037 | |||||||||
26,402 | |||||||||||
Health Care (2.9%): | |||||||||||
AbbVie, Inc. | 9,595 | 1,477 | |||||||||
AmerisourceBergen Corp. | 11,017 | 1,714 | |||||||||
Amgen, Inc. | 13,930 | 3,227 | |||||||||
Biogen, Inc. (a) | 3,586 | 968 | |||||||||
Bristol-Myers Squibb Co. | 17,596 | 1,213 | |||||||||
Centene Corp. (a) | 12,708 | 869 | |||||||||
Cigna Corp. | 7,619 | 2,226 | |||||||||
CVS Health Corp. | 12,401 | 1,036 | |||||||||
Elevance Health, Inc. | 2,379 | 1,117 | |||||||||
Eli Lilly & Co. | 8,269 | 2,573 | |||||||||
Gilead Sciences, Inc. | 26,173 | 2,108 | |||||||||
Humana, Inc. | 1,899 | 940 | |||||||||
IDEXX Laboratories, Inc. (a) | 1,818 | 860 | |||||||||
McKesson Corp. | 3,008 | 1,052 | |||||||||
Medtronic PLC | 12,765 | 1,057 | |||||||||
Merck & Co., Inc. | 13,336 | 1,417 | |||||||||
Mettler-Toledo International, Inc. (a) | 587 | 842 | |||||||||
Pfizer, Inc. | 30,459 | 1,236 | |||||||||
Thermo Fisher Scientific, Inc. | 2,170 | 1,176 | |||||||||
UnitedHealth Group, Inc. | 6,900 | 3,284 | |||||||||
Waters Corp. (a) | 2,829 | 879 | |||||||||
31,271 | |||||||||||
See notes to financial statements.
9
| USAA Mutual Funds Trust USAA Cornerstone Moderate Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Industrials (1.7%): | |||||||||||
3M Co. | 8,461 | $ | 912 | ||||||||
Caterpillar, Inc. | 4,362 | 1,045 | |||||||||
Cintas Corp. | 4,069 | 1,784 | |||||||||
Cummins, Inc. | 4,179 | 1,016 | |||||||||
Deere & Co. | 2,470 | 1,035 | |||||||||
Fastenal Co. | 16,561 | 854 | |||||||||
FedEx Corp. | 4,976 | 1,011 | |||||||||
General Dynamics Corp. | 4,575 | 1,043 | |||||||||
Illinois Tool Works, Inc. | 4,026 | 939 | |||||||||
Lockheed Martin Corp. | 4,720 | 2,238 | |||||||||
Otis Worldwide Corp. | 10,628 | 899 | |||||||||
PACCAR, Inc. | 27,411 | 1,979 | |||||||||
Trane Technologies PLC | 4,940 | 914 | |||||||||
United Parcel Service, Inc. Class B | 6,655 | 1,214 | |||||||||
W.W. Grainger, Inc. | 2,815 | 1,882 | |||||||||
18,765 | |||||||||||
Information Technology (3.7%): | |||||||||||
Accenture PLC Class A | 4,183 | 1,111 | |||||||||
Adobe, Inc. (a) | 3,150 | 1,020 | |||||||||
Apple, Inc. | 33,461 | 4,932 | |||||||||
Automatic Data Processing, Inc. | 4,495 | 988 | |||||||||
Broadcom, Inc. | 2,335 | 1,388 | |||||||||
Cadence Design Systems, Inc. (a) | 4,826 | 931 | |||||||||
Cisco Systems, Inc. | 50,319 | 2,436 | |||||||||
Cognizant Technology Solutions Corp. Class A | 15,701 | 983 | |||||||||
Enphase Energy, Inc. (a) | 4,441 | 935 | |||||||||
Fair Isaac Corp. (a) | 1,263 | 856 | |||||||||
Fortinet, Inc. (a) | 13,000 | 773 | |||||||||
HP, Inc. | 63,826 | 1,884 | |||||||||
Intel Corp. | 38,408 | 958 | |||||||||
International Business Machines Corp. | 16,564 | 2,142 | |||||||||
KLA Corp. | 2,115 | 802 | |||||||||
Mastercard, Inc. Class A | 7,742 | 2,751 | |||||||||
Micron Technology, Inc. | 16,760 | 969 | |||||||||
Microsoft Corp. | 15,557 | 3,880 | |||||||||
Motorola Solutions, Inc. | 4,086 | 1,074 | |||||||||
ON Semiconductor Corp. (a) | 12,800 | 991 | |||||||||
Oracle Corp. | 26,459 | 2,313 | |||||||||
QUALCOMM, Inc. | 9,424 | 1,164 | |||||||||
Texas Instruments, Inc. | 13,659 | 2,342 | |||||||||
VeriSign, Inc. (a) | 4,285 | 843 | |||||||||
Visa, Inc. Class A | 6,635 | 1,459 | |||||||||
39,925 | |||||||||||
Materials (0.8%): | |||||||||||
Albemarle Corp. | 3,363 | 855 | |||||||||
CF Industries Holdings, Inc. | 9,057 | 778 | |||||||||
Corteva, Inc. | 14,563 | 907 | |||||||||
Linde PLC | 3,564 | 1,242 | |||||||||
See notes to financial statements.
10
| USAA Mutual Funds Trust USAA Cornerstone Moderate Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
LyondellBasell Industries NV Class A | 10,482 | $ | 1,006 | ||||||||
Nucor Corp. | 11,868 | 1,987 | |||||||||
Steel Dynamics, Inc. | 8,108 | 1,023 | |||||||||
The Sherwin-Williams Co. | 4,032 | 892 | |||||||||
8,690 | |||||||||||
Real Estate (0.5%): | |||||||||||
Alexandria Real Estate Equities, Inc. | 636 | 95 | |||||||||
American Homes 4 Rent Class A | 1,623 | 50 | |||||||||
American Tower Corp. | 2,376 | 470 | |||||||||
AvalonBay Communities, Inc. | 708 | 122 | |||||||||
Boston Properties, Inc. | 747 | 49 | |||||||||
Camden Property Trust | 487 | 56 | |||||||||
CBRE Group, Inc. Class A (a) | 1,679 | 143 | |||||||||
Crown Castle, Inc. | 2,209 | 289 | |||||||||
Digital Realty Trust, Inc. | 1,370 | 143 | |||||||||
Equinix, Inc. | 470 | 323 | |||||||||
Equity LifeStyle Properties, Inc. | 879 | 60 | |||||||||
Equity Residential | 1,868 | 117 | |||||||||
Essex Property Trust, Inc. | 327 | 75 | |||||||||
Extra Space Storage, Inc. | 661 | 109 | |||||||||
Gaming and Leisure Properties, Inc. | 1,390 | 75 | |||||||||
Healthcare Realty Trust, Inc. | 1,989 | 39 | |||||||||
Healthpeak Properties, Inc. | 2,671 | 64 | |||||||||
Host Hotels & Resorts, Inc. | 3,450 | 58 | |||||||||
Invitation Homes, Inc. | 2,844 | 89 | |||||||||
Iron Mountain, Inc. | 1,461 | 77 | |||||||||
Kimco Realty Corp. | 3,379 | 70 | |||||||||
Medical Properties Trust, Inc. (b) | 2,885 | 30 | |||||||||
Mid-America Apartment Communities, Inc. | 574 | 92 | |||||||||
Prologis, Inc. | 4,722 | 583 | |||||||||
Public Storage | 803 | 240 | |||||||||
Realty Income Corp. | 3,102 | 198 | |||||||||
Regency Centers Corp. | 861 | 54 | |||||||||
SBA Communications Corp. | 560 | 145 | |||||||||
Simon Property Group, Inc. | 1,694 | 207 | |||||||||
Sun Communities, Inc. | 501 | 72 | |||||||||
UDR, Inc. | 1,487 | 64 | |||||||||
Ventas, Inc. | 1,882 | 91 | |||||||||
VICI Properties, Inc. | 5,277 | 177 | |||||||||
Vornado Realty Trust | 808 | 16 | |||||||||
Welltower, Inc. | 2,095 | 155 | |||||||||
Weyerhaeuser Co. | 3,701 | 116 | |||||||||
WP Carey, Inc. | 880 | 71 | |||||||||
Zillow Group, Inc. Class C (a) | 1,120 | 47 | |||||||||
4,931 | |||||||||||
Utilities (0.6%): | |||||||||||
Consolidated Edison, Inc. | 11,463 | 1,024 | |||||||||
DTE Energy Co. | 7,618 | 836 | |||||||||
Exelon Corp. | 24,247 | 979 | |||||||||
See notes to financial statements.
11
| USAA Mutual Funds Trust USAA Cornerstone Moderate Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares or Principal Amount | Value | |||||||||
PG&E Corp. (a) | 57,423 | $ | 897 | ||||||||
Sempra Energy | 6,738 | 1,010 | |||||||||
The AES Corp. | 33,780 | 834 | |||||||||
UGI Corp. | 21,850 | 814 | |||||||||
6,394 | |||||||||||
Total Common Stocks (Cost $156,317) | 184,457 | ||||||||||
U.S. Treasury Obligations (1.4%) | |||||||||||
U.S. Treasury Notes, 1.63%, 4/30/23 (c) | $ | 14,658 | 14,580 | ||||||||
Total U.S. Treasury Obligations (Cost $14,655) | 14,580 | ||||||||||
Exchange-Traded Funds (46.4%) | |||||||||||
Invesco DB Commodity Index Tracking Fund | 114,500 | 2,721 | |||||||||
Invesco FTSE RAFI Developed Markets ex-US ETF | 335,920 | 14,878 | |||||||||
Invesco FTSE RAFI Emerging Markets ETF | 686,690 | 12,285 | |||||||||
iShares 0-5 Year TIPS Bond ETF (b) | 197,374 | 19,207 | |||||||||
iShares 20+ Year Treasury Bond ETF | 126,918 | 12,909 | |||||||||
iShares 7-10 Year Treasury Bond ETF | 157,989 | 15,129 | |||||||||
iShares Core MSCI EAFE ETF | 123,049 | 8,002 | |||||||||
iShares Core MSCI Emerging Markets ETF | 613,155 | 29,033 | |||||||||
iShares Core S&P 500 ETF | 90,229 | 35,908 | |||||||||
iShares Core S&P Small-Cap ETF | 393,587 | 40,299 | |||||||||
iShares Core US Aggregate Bond ETF | 292,807 | 28,493 | |||||||||
iShares JP Morgan USD Emerging Markets Bond ETF (b) | 86,421 | 7,367 | |||||||||
iShares MSCI Canada ETF (b) | 111,547 | 3,798 | |||||||||
iShares MSCI International Momentum Factor ETF (b) | 401,271 | 12,692 | |||||||||
iShares MSCI International Quality Factor ETF | 457,001 | 15,447 | |||||||||
iShares MSCI Japan ETF | 323,576 | 18,101 | |||||||||
iShares Russell 2000 ETF (b) | 36,073 | 6,788 | |||||||||
Schwab Fundamental Emerging Markets Large Co. Index ETF | 920,892 | 23,253 | |||||||||
Schwab Fundamental International Large Co. Index ETF | 1,549,839 | 47,890 | |||||||||
Schwab Fundamental International Small Co. Index ETF | 266,700 | 8,705 | |||||||||
SPDR Gold Shares (a) (b) | 69,201 | 11,749 | |||||||||
SPDR S&P Emerging Markets SmallCap ETF | 34,497 | 1,738 | |||||||||
Vanguard FTSE All-World ex-U.S. ETF | 217,060 | 11,311 | |||||||||
Vanguard FTSE Developed Markets ETF (b) | 728,719 | 32,187 | |||||||||
Vanguard FTSE Emerging Markets ETF | 109,700 | 4,324 | |||||||||
Vanguard FTSE Europe ETF (b) | 219,867 | 13,126 | |||||||||
Vanguard Mortgage-Backed Securities ETF | 279,324 | 12,785 | |||||||||
Vanguard Real Estate ETF | 55,850 | 4,787 | |||||||||
Vanguard S&P 500 ETF | 5,919 | 2,155 | |||||||||
Vanguard Short-Term Bond ETF (b) | 125,746 | 9,452 | |||||||||
Vanguard Short-Term Corporate Bond ETF | 44,267 | 3,332 | |||||||||
Vanguard Total Stock Market ETF | 75,102 | 14,984 | |||||||||
See notes to financial statements.
12
| USAA Mutual Funds Trust USAA Cornerstone Moderate Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
| Wisdom Tree Trust — WisdomTree Emerging Markets SmallCap Dividend Fund (b) | 59,797 | $ | 2,700 | ||||||||
Xtrackers USD High Yield Corporate Bond ETF | 332,534 | 11,356 | |||||||||
Total Exchange-Traded Funds (Cost $470,217) | 498,891 | ||||||||||
Affiliated Exchange-Traded Funds (34.0%) | |||||||||||
VictoryShares Emerging Markets Value Momentum ETF | 51,500 | 2,071 | |||||||||
VictoryShares ESG Core Plus Bond ETF | 3,286,188 | 70,358 | |||||||||
VictoryShares USAA Core Intermediate-Term Bond ETF (b) | 6,057,948 | 276,424 | |||||||||
VictoryShares USAA Core Short-Term Bond ETF | 341,251 | 16,694 | |||||||||
Total Affiliated Exchange-Traded Funds (Cost $422,755) | 365,547 | ||||||||||
Collateral for Securities Loaned (5.1%)^ | |||||||||||
| Goldman Sachs Financial Square Government Fund, Institutional Shares, 4.47% (d) | 13,764,742 | 13,765 | |||||||||
HSBC U.S. Government Money Market Fund, Institutional Shares, 4.45% (d) | 13,764,742 | 13,764 | |||||||||
Invesco Government & Agency Portfolio, Institutional Shares, 4.52% (d) | 13,764,742 | 13,765 | |||||||||
| Morgan Stanley Institutional Liquidity Government Portfolio, Institutional Shares, 4.41% (d) | 13,764,742 | 13,765 | |||||||||
Total Collateral for Securities Loaned (Cost $55,059) | 55,059 | ||||||||||
Total Investments (Cost $1,119,003) — 104.0% | 1,118,534 | ||||||||||
Liabilities in excess of other assets — (4.0)% | (43,207 | ) | |||||||||
NET ASSETS — 100.00% | $ | 1,075,327 | |||||||||
At February 28, 2023, the Fund's investments in foreign securities were 22.2% of net assets.
^ Purchased with cash collateral from securities on loan.
(a) Non-income producing security.
(b) All or a portion of this security is on loan.
(c) All or a portion of this security has been segregated as collateral for derivative instruments.
(d) Rate disclosed is the daily yield on February 28, 2023.
ETF — Exchange-Traded Fund
PLC — Public Limited Company
See notes to financial statements.
13
| USAA Mutual Funds Trust USAA Cornerstone Moderate Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
Futures Contracts Purchased | |||||||||||||||||||||||
(Amounts not in thousands) | |||||||||||||||||||||||
| Number of Contracts | Expiration Date | Notional Amount | Value | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||
Euro Stoxx 50 Futures | 185 | 3/17/23 | $ | 7,760,917 | $ | 8,309,484 | $ | 548,567 | |||||||||||||||
FTSE 100 Index Futures | 193 | 3/17/23 | 17,357,467 | 18,246,720 | 889,253 | ||||||||||||||||||
| S&P/Toronto Stock Exchange 60 Index Futures | 94 | 3/16/23 | 16,631,293 | 16,783,992 | 152,699 | ||||||||||||||||||
$ | 1,590,519 | ||||||||||||||||||||||
Futures Contracts Sold | |||||||||||||||||||||||
(Amounts not in thousands) | |||||||||||||||||||||||
| Number of Contracts | Expiration Date | Notional Amount | Value | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||
ASX SPI 200 Index Futures | 83 | 3/16/23 | $ | 9,983,420 | $ | 10,047,324 | $ | (63,904 | ) | ||||||||||||||
Hang Seng Index Futures | 35 | 3/30/23 | 4,449,889 | 4,401,531 | 48,358 | ||||||||||||||||||
Swiss Market Index Futures | 123 | 3/17/23 | 14,299,253 | 14,399,204 | (99,951 | ) | |||||||||||||||||
Tokyo Price Index Futures | 74 | 3/9/23 | 10,448,421 | 10,843,984 | (395,563 | ) | |||||||||||||||||
$ | (511,060 | ) | |||||||||||||||||||||
Total unrealized appreciation | $ | 1,638,877 | |||||||||||||||||||||
Total unrealized depreciation | (559,418 | ) | |||||||||||||||||||||
Total net unrealized appreciation (depreciation) | $ | 1,079,459 | |||||||||||||||||||||
See notes to financial statements.
14
USAA Mutual Funds Trust | Statement of Assets and Liabilities February 28, 2023 | ||||||
(Amounts in Thousands, Except Per Share Amounts)
| USAA Cornerstone Moderate Fund | |||||||
Assets: | |||||||
Affiliated investments, at value (Cost $422,755) | $ | 365,547 | (a) | ||||
Unaffiliated investments, at value (Cost $696,248) | 752,987 | (b) | |||||
Cash | 9,808 | ||||||
Deposit with broker for futures contracts | 5,168 | ||||||
Receivables: | |||||||
Interest and dividends | 503 | ||||||
Capital shares issued | 324 | ||||||
Investments sold | 2,992 | ||||||
Variation margin on open futures contracts | 192 | ||||||
From Adviser for ETF Reimbursements | 281 | ||||||
Prepaid expenses | 5 | ||||||
Total Assets | 1,137,807 | ||||||
Liabilities: | |||||||
Payables: | |||||||
Collateral received on loaned securities | 55,059 | ||||||
Collateral received from broker on futures contracts | 884 | ||||||
Investments purchased | 5,016 | ||||||
Capital shares redeemed | 367 | ||||||
Variation margin on open futures contracts | 247 | ||||||
Accrued expenses and other payables: | |||||||
Investment advisory fees | 496 | ||||||
Administration fees | 126 | ||||||
Custodian fees | 10 | ||||||
Transfer agent fees | 156 | ||||||
Compliance fees | 1 | ||||||
Trustees' fees | 1 | ||||||
Other accrued expenses | 117 | ||||||
Total Liabilities | 62,480 | ||||||
Net Assets: | |||||||
Capital | 1,089,149 | ||||||
Total accumulated earnings/(loss) | (13,822 | ) | |||||
Net Assets | $ | 1,075,327 | |||||
Shares (unlimited number of shares authorized with no par value): | 77,729 | ||||||
Net asset value, offering and redemption price per share: (c) | $ | 13.83 | |||||
(a) Includes $41 thousand of securities on loan.
(b) Includes $53,564 thousand of securities on loan.
(c) Per share amount may not recalculate due to rounding of net assets and/or shares outstanding.
See notes to financial statements.
15
USAA Mutual Funds Trust | Statements of Operations | ||||||
(Amounts in Thousands)
| USAA Cornerstone Moderate Fund | |||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | ||||||||||
Investment Income: | |||||||||||
Income distributions from affiliated funds | $ | 7,844 | $ | 5425 | |||||||
Dividends from unaffiliated investments | 14,859 | 16,711 | |||||||||
Interest from unaffiliated investments | 291 | 4,133 | |||||||||
Securities lending (net of fees) | 454 | 275 | |||||||||
Foreign tax withholding | — | — | (b) | ||||||||
Total Income | 23,448 | 26,544 | |||||||||
Expenses: | |||||||||||
Investment advisory fees | 4,752 | 7,286 | |||||||||
Administration fees | 1,208 | 1,852 | |||||||||
Sub-Administration fees | 55 | 73 | |||||||||
Custodian fees | 43 | 64 | |||||||||
Transfer agent fees | 1,532 | 2,147 | |||||||||
Trustees' fees | 36 | 48 | |||||||||
Compliance fees | 8 | 9 | |||||||||
Legal and audit fees | 64 | 68 | |||||||||
State registration and filing fees | 38 | 35 | |||||||||
Interfund lending fees | — | — | (b) | ||||||||
Other expenses | 152 | 129 | |||||||||
Total Expenses | 7,888 | 11,711 | |||||||||
Expenses waived/reimbursed by Adviser | (871 | ) | (940 | ) | |||||||
Net Expenses | 7,017 | 10,771 | |||||||||
Net Investment Income (Loss) | 16,431 | 15,773 | |||||||||
Realized/Unrealized Gains (Losses) from Investments: | |||||||||||
Net realized gains (losses) from affiliated funds | (4,060 | ) | — | ||||||||
| Net realized gains (losses) from unaffiliated investment securities and foreign currency transactions | (9,514 | ) | 57,072 | ||||||||
Capital gain distributions received from affiliated funds | — | 678 | |||||||||
Net realized gains (losses) from futures contracts | 436 | 1,833 | |||||||||
| Net change in unrealized appreciation/depreciation on affiliated funds | (16,108 | ) | (39,617 | ) | |||||||
| Net change in unrealized appreciation/depreciation on unaffiliated investment securities and foreign currency translations | (23,369 | ) | (105,352 | ) | |||||||
| Net change in unrealized appreciation/depreciation on futures contracts | 1,690 | (309 | ) | ||||||||
Net realized/unrealized gains (losses) on investments | (50,925 | ) | (85,695 | ) | |||||||
Change in net assets resulting from operations | $ | (34,494 | ) | $ | (69,922 | ) | |||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from May 31 to February 28.
(b) Rounds to less than $1 thousand.
See notes to financial statements.
16
USAA Mutual Funds Trust | Statements of Changes in Net Assets | ||||||
(Amounts in Thousands)
USAA Cornerstone Moderate Fund | |||||||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | Year Ended May 31, 2021 | |||||||||||||
From Investments: | |||||||||||||||
Operations: | |||||||||||||||
Net Investment Income (Loss) | $ | 16,431 | $ | 15,773 | $ | 15,524 | |||||||||
Net realized gains (losses) | (13,138 | ) | 59,583 | 48,393 | |||||||||||
| Net change in unrealized appreciation/ depreciation | (37,787 | ) | (145,278 | ) | 163,676 | ||||||||||
Change in net assets resulting from operations | (34,494 | ) | (69,922 | ) | 227,593 | ||||||||||
| Change in net assets resulting from distributions to shareholders | (46,967 | ) | (85,781 | ) | (18,770 | ) | |||||||||
| Change in net assets resulting from capital transactions | 16,880 | 30,079 | (74,749 | ) | |||||||||||
Change in net assets | (64,581 | ) | (125,624 | ) | 134,074 | ||||||||||
Net Assets: | |||||||||||||||
Beginning of period | 1,139,908 | 1,265,532 | 1,131,458 | ||||||||||||
End of period | $ | 1,075,327 | $ | 1,139,908 | $ | 1,265,532 | |||||||||
Capital Transactions: | |||||||||||||||
Proceeds from shares issued | $ | 49,727 | $ | 94,555 | $ | 92,413 | |||||||||
Distributions reinvested | 46,705 | 85,309 | 18,673 | ||||||||||||
Cost of shares redeemed | (79,552 | ) | (149,785 | ) | (185,835 | ) | |||||||||
| Change in net assets resulting from capital transactions | $ | 16,880 | $ | 30,079 | $ | (74,749 | ) | ||||||||
Share Transactions: | |||||||||||||||
Issued | 3,532 | 5,775 | 5,807 | ||||||||||||
Reinvested | 3,356 | 5,212 | 1,216 | ||||||||||||
Redeemed | (5,656 | ) | (9,130 | ) | (11,817 | ) | |||||||||
Change in Shares | 1,232 | 1,857 | (4,794 | ) | |||||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from May 31 to February 28.
See notes to financial statements.
17
USAA Mutual Funds Trust | Financial Highlights | ||||||
For a Share Outstanding Throughout Each Period
USAA Cornerstone Moderate Fund | |||||||||||||||||||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | Year Ended May 31, 2021 | Year Ended May 31, 2020 | Year Ended May 31, 2019 | Year Ended May 31, 2018 | ||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 14.90 | $ | 16.96 | $ | 14.24 | $ | 14.11 | $ | 14.83 | $ | 15.05 | |||||||||||||||
Investment Activities: | |||||||||||||||||||||||||||
Net investment income (loss) | 0.21 | (b) | 0.21 | (b) | 0.20 | (b) | 0.29 | (b) | 0.30 | 0.26 | |||||||||||||||||
| Net realized and unrealized gains (losses) | (0.66 | ) | (1.11 | ) | 2.76 | 0.13 | (0.31 | ) | 0.55 | ||||||||||||||||||
| Total from Investment Activities | (0.45 | ) | (0.90 | ) | 2.96 | 0.42 | (0.01 | ) | 0.81 | ||||||||||||||||||
Distributions to Shareholders from: | |||||||||||||||||||||||||||
Net investment income | (0.17 | ) | (0.23 | ) | (0.21 | ) | (0.29 | ) | (0.29 | ) | (0.26 | ) | |||||||||||||||
Net realized gains | (0.45 | ) | (0.93 | ) | (0.03 | ) | — | (0.42 | ) | (0.77 | ) | ||||||||||||||||
Total Distributions | (0.62 | ) | (1.16 | ) | (0.24 | ) | (0.29 | ) | (0.71 | ) | (1.03 | ) | |||||||||||||||
Net Asset Value, End of Period | $ | 13.83 | $ | 14.90 | $ | 16.96 | $ | 14.24 | $ | 14.11 | $ | 14.83 | |||||||||||||||
Total Return (c) (d) | (3.01 | )% | (5.82 | )% | 21.00 | % | 2.98 | % | 0.13 | % | 5.42 | % | |||||||||||||||
Ratios to Average Net Assets: | |||||||||||||||||||||||||||
Net Expenses (e) (f) (g) | 0.87 | % | 0.87 | % | 0.97 | % | 1.00 | % | 1.00 | % | 1.00 | % | |||||||||||||||
Net Investment Income (Loss) (e) | 2.04 | % | 1.28 | % | 1.29 | % | 2.01 | % | 2.10 | % | 1.73 | % | |||||||||||||||
Gross Expenses (e) (f) | 0.98 | % | 0.95 | % | 0.98 | % | 1.00 | % | 1.02 | % | 1.03 | % | |||||||||||||||
Supplemental Data: | |||||||||||||||||||||||||||
Net Assets at end of period (000's) | $ | 1,075,327 | $ | 1,139,908 | $ | 1,265,532 | $ | 1,131,458 | $ | 1,163,374 | $ | 1,184,032 | |||||||||||||||
Portfolio Turnover (c) | 47 | % | 47 | % | 53 | % | 87 | % | 81 | %(h) | 51 | % | |||||||||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from May 31 to February 28.
(b) Per share net investment income (loss) has been calculated using the average daily shares method.
(c) Not annualized for periods less than one year.
(d) 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.
(e) Annualized for periods less than one year.
(f) Does not include acquired fund fees and expenses, if any.
(g) 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 September 30, 2023, instead of coinciding with the Fund's fiscal year end.
(h) Reflects increased trading activity due to usage of quantitative investment strategies.
See notes to financial statements.
18
USAA Mutual Funds Trust | Notes to Financial Statements February 28, 2023 | ||||||
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.
On June 29, 2022, the Board of Trustees ("the Board") approved the fiscal year-end change for the Fund from May 31 to February 28. The first full cycle of the new fiscal year-end reporting will begin March 1, 2023. As a result of the change, the Fund has a February 28, 2023 fiscal nine-month transition period, the results of which are reported in this Annual Report for the period ended February 28, 2023.
Victory Capital Management ("VCM" or 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 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 (unadjusted) in active markets for identical securities
• Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, or credit spreads, applicable to those securities, etc.)
• Level 3 — significant unobservable inputs (including the Adviser's 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, appointed as the valuation designee by the Board, has established the Pricing and Liquidity Committee (the "Committee"), and subject to Board oversight, the Committee administers and oversees the Fund's valuation policies and procedures, which are approved by the Board.
19
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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, 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 valuation designee and subject to the oversight of the Board. The 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 February 28, 2023, 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 | $ | 184,457 | $ | — | $ | — | $ | 184,457 | |||||||||||
U.S. Treasury Obligations | — | 14,580 | — | 14,580 | |||||||||||||||
Exchange-Traded Funds | 498,891 | — | — | 498,891 | |||||||||||||||
Affiliated Exchange-Traded Funds | 365,547 | — | — | 365,547 | |||||||||||||||
Collateral for Securities Loaned | 55,059 | — | — | 55,059 | |||||||||||||||
Total | $ | 1,103,954 | $ | 14,580 | $ | — | $ | 1,118,534 | |||||||||||
Other Financial Investments* | |||||||||||||||||||
Assets: | |||||||||||||||||||
Futures Contracts | $ | 1,639 | $ | — | $ | — | $ | 1,639 | |||||||||||
Liabilities: | |||||||||||||||||||
Futures Contracts | $ | (560 | ) | $ | — | $ | — | $ | (560 | ) | |||||||||
Total | $ | 1,079 | $ | — | $ | — | $ | 1,079 | |||||||||||
* Futures contracts are valued at the unrealized appreciation (depreciation) on the investment.
As of February 28, 2023, there were no transfers into/out of Level 3.
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.
20
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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.
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 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 nine months ended February 28, 2023, the Fund entered into futures contracts primarily for the strategy of gaining exposure to a particular asset class or securities market.
21
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 February 28, 2023 (amounts in thousands):
Assets | Liabilities | ||||||||||
| Variation Margin Receivable on Open Futures Contracts* | Variation Margin Payable on Open Futures Contracts* | ||||||||||
Equity Risk Exposure | $ | 1,639 | $ | 560 | |||||||
* 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 Statements of Operations, categorized by risk exposure, for the nine months ended February 28, 2023 (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 | $ | 436 | $ | 1,690 | |||||||
The following table presents the effect of derivative instruments on the Statements 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 period 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 period end is generally representative of the notional amount of open positions to net assets throughout the period.
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 Statements of Operations.
Withholding taxes on interest, dividends, and gains as a result of certain investments by the Fund have been provided for in accordance with each investment's applicable country's tax rules and rates.
22
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 Statements 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 February 28, 2023.
| Value of Securities on Loan | Non-Cash Collateral | Cash Collateral | |||||||||
| $ | 53,605 | $ | — | $ | 55,059 | ||||||
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 unaffiliated investment securities and foreign currency translations on the Statements of Operations. Any realized gains or losses from these fluctuations are disclosed as Net realized gains (losses) from unaffiliated investment securities and foreign currency transactions on the Statements 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.
23
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 had a tax year end of May 31, and effective February 28, 2023, the Fund changed its tax year end to February 28.
For the nine months ended February 28, 2023, 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 under specified conditions outlined in the valuation policies and procedures adopted by the Board. In addition, as defined under the valuation policies and procedures, each transaction must be effected at the independent current market price. For the nine months ended February 28, 2023, 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) | |||||||||
| $ | — | $ | 1,779 | $ | (252 | ) | |||||
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 nine months ended February 28, 2023, were as follows for the Fund (amounts in thousands):
| Excluding U.S. Government Securities | U.S. Government Securities | ||||||||||||||
| Purchases | Sales | Purchases | Sales | ||||||||||||
| $ | 496,370 | $ | 499,447 | $ | — | $ | 609 | ||||||||
24
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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.
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 incurred and paid to VCM for the nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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 nine months ended February 28, 2023, and 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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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.
25
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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 September 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 limit 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 February 28, 2023, 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 nine months ended February 28, 2023, the Fund incurred reimbursable expense of $871 thousand, all of which was affiliated ETF Adviser for reimbursement and is reflected on the Statements of Operations as Expenses waived/reimbursed by Adviser. For the year ended May 31, 2022, the Fund incurred reimbursable expense of $940 thousand, all of which was affiliated ETF Adviser for reimbursement and is reflected on the Statements of Operations as Expenses waived/reimbursed by Adviser. As of February 28, 2023, the Fund has a receivable related to these reimbursable expenses from the Adviser for $281 thousand, pursuant to the Fund's expense limitation agreement and is reflected on the Statement of Assets and Liabilities as Receivable from Adviser for ETF reimbursements.
Under the terms of the expense limitation agreement, 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. As of February 28, 2023, and 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 nine months ended February 28, 2023, and 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
26
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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.
ETF Risk — The Fund may invest in shares of ETFs, which generally are registered 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.
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 27, 2022, with a termination date of June 26, 2023. 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 nine months ended February 28, 2023, 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 paid a pro-rata portion of the commitment fees plus any interest on amounts borrowed. For the period from June 1, 2022, through
27
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
June 27, 2022, interest was based on the one-month London Interbank Offered Rate ("LIBOR") plus one percent. Effective with the renewal, for the period June 28, 2022, through February 28, 2023, interest was based on the one-month Secured Overnight Financing Rate ("SOFR") plus 1.10 percent. The Fund did not experience a material financial impact transitioning from LIBOR to SOFR. Interest charged to the 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 nine months ended February 28, 2023, and 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 Statements of Operations under Interfund lending fees. As a Lender, interest earned by the Fund, if any, during the period, is reflected on the Statements of Operations under Interfund lending.
The Fund did not utilize or participate in the Facility during the nine months ended February 28, 2023.
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 | ||||||||||||||
* Based on the number of days borrowings were outstanding for 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. 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 February 28, 2023, on the Statement 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 | ||||||
| $ | (20 | ) | $ | 20 | |||
28
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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):
Nine Months Ended February 28, 2023 | |||||||||||
Distributions Paid From | |||||||||||
| Ordinary Income | Net Long-Term Capital Gains | Total Distributions Paid | |||||||||
$ | 14,217 | $ | 32,750 | $ | 46,967 | ||||||
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 February 28, 2023, 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 Losses | Unrealized Appreciation (Depreciation)* | Total Accumulated Earnings (Loss) | ||||||||||||||||||
| $ | 3,723 | $ | (646 | ) | $ | 3,077 | $ | (9,626 | ) | $ | (7,273 | ) | $ | (13,822 | ) | ||||||||
* The difference between the book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to tax deferral of losses on wash sales, straddle, partnership adjustments, REIT adjustments and derivatives.
As of February 28, 2023, 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 | |||||||||
| $ | 8,441 | $ | 1,185 | $ | 9,626 | ||||||
As of February 28, 2023, 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) | ||||||||||||
| $ | 1,125,549 | $ | 75,400 | $ | (82,673 | ) | $ | (7,273 | ) | ||||||
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
29
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
affiliated securities during the nine months ended February 28, 2023, were as follows (amounts in thousands):
| Fair Value 5/31/2022 | Purchases at Cost | Proceeds from Sales | Net Realized Gains (Losses) | Capital Gain Distributions | Net Change in Unrealized Appreciation/ Depreciation | Fair Value 2/28/2023 | Dividend Income | ||||||||||||||||||||||||||||
| VictoryShares Emerging Markets Value Momentum ETF | $ | 2,297 | $ | — | $ | — | $ | — | $ | — | $ | (226 | ) | $ | 2,071 | $ | 65 | ||||||||||||||||||
| VictoryShares ESG Core Plus Bond ETF | 72,447 | 2,734 | (1,367 | ) | — | — | (3,456 | ) | 70,358 | 1,973 | |||||||||||||||||||||||||
| VictoryShares USAA Core Intermediate-Term Bond ETF | 305,869 | 9,656 | (22,843 | ) | (4,060 | ) | — | (12,198 | ) | 276,424 | 5,432 | ||||||||||||||||||||||||
| VictoryShares USAA Core Short-Term Bond ETF | 16,922 | — | — | — | — | (228 | ) | 16,694 | 374 | ||||||||||||||||||||||||||
$ | 397,535 | $ | 12,390 | $ | (24,210 | ) | $ | (4,060 | ) | $ | — | $ | (16,108 | ) | $ | 365,547 | $ | 7,844 | |||||||||||||||||
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 | Net Realized Gains (Losses) | Capital Gain Distributions | 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 | ||||||||||||||||||
* During the reporting period the Fund name was changed to VictoryShares Emerging Markets Value Momentum ETF.
9. Subsequent Events:
The Board, upon recommendation of the Adviser, has approved a change in the name of the Trust and each individual fund within the Trust. On February 23, 2023, an initial filing was made with the SEC to commence the process to effectuate the following changes.
Effective at the start of business on April 24, 2023 (the "Effective Date"), the name of the Trust changed from USAA Mutual Funds Trust to Victory Portfolios III, and all references to USAA Mutual Funds Trust in the summary prospectus, statutory prospectus, and statement of additional information ("SAI") will be replaced by the new name.
Also on the Effective Date, references to the current name of the Fund in the summary prospectus, statutory prospectus, and SAI will be replaced with the new name as follows:
Current Name | New Name | ||||||
USAA Cornerstone Moderate Fund | Victory Cornerstone Moderate Fund | ||||||
30
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
In addition, on the Effective Date, USAA Investments, a Victory Capital Management Inc. investment franchise, that currently manages the USAA Fixed Income Funds, will change its name to Victory Income Investors, and all references to USAA Investments in the summary prospectus, statutory prospectus, and SAI, will be replaced.
Please note that there will be no changes in the management of the Fund or to the Fund's ticker symbols.
31
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 February 28, 2023, and the related statements of operations for the period from June 1, 2022 through February 28, 2023 and the year ended May 31, 2022, the statements of changes in net assets for the period from June 1, 2022 through February 28, 2023 and each of the two years in the period ended May 31, 2022, the financial highlights for the period from June 1, 2022 through February 28, 2023 and each of the five years in the period ended May 31, 2022, 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 February 28, 2023, the results of its operations for the period from June 1, 2022 through February 28, 2023 and the year ended May 31, 2022, the statements of changes in net assets for the period from June 1, 2022 through February 28, 2023 and each of the two years in the period ended May 31, 2022, and its financial highlights for the period from June 1, 2022 through February 28, 2023 and each of the five years in the period ended May 31, 2022, 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 February 28, 2023, by correspondence with the custodian and brokers. 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
April 28, 2023
32
USAA Mutual Funds Trust | Supplemental Information February 28, 2023 | ||||||
(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 date 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 February 28, 2023 | ||||||
(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 (06/17-06/19); 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 (03/15-03/21). | 45 | None | ||||||||||||||||||
| Paul L. McNamara (July 1948) | Trustee | Trustee since January 2012 | Retired. | 45 | None | ||||||||||||||||||
34
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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) | ||||||||||||||||||
35
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 February 28, 2023 | ||||||
(Unaudited)
Officers:
The officers of the Trust, their date 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. (since 2022); 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. (07/01/19-present); Executive Director, Investment and Financial Administration, USAA (2012-06/30/19); 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. (07/01/19-present); Accounting/ Financial Director, USAA (12/13-06/30/19). | ||||||||||||
| 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). | ||||||||||||
37
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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). | ||||||||||||
38
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 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 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 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 September 1, 2022, through February 28, 2023.
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 9/1/22 | Actual Ending Account Value 2/28/23 | Hypothetical Ending Account Value 2/28/23 | Actual Expenses Paid During Period 9/1/22- 2/28/23* | Hypothetical Expenses Paid During Period 9/1/22- 2/28/23* | Annualized Expense Ratio During Period 9/1/22- 2/28/23 | ||||||||||||||||||
| $ | 1,000.00 | $ | 1,016.80 | $ | 1,020.43 | $ | 4.40 | $ | 4.41 | 0.88 | % | ||||||||||||
* Expenses are equal to the average account value multiplied by the Fund's annualized expense ratio multiplied by 181/365 (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 February 28, 2023 | ||||||
(Unaudited)
Additional Federal Income Tax Information
The following federal tax information related to the Fund's fiscal nine months ended February 28, 2023, 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 2024.
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 nine months ended February 28, 2023 (amounts in thousands):
| Dividends Received Deduction (corporate shareholders) | Qualified Dividend Income (non-corporate shareholders) | Short-Term Capital Gain Distributions | Long-Term Capital Gain Distributions | ||||||||||||
| 17 | % | 18 | % | $ | 1,344 | $ | 32,750 | ||||||||
40
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 8-9, 2022, 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 8-9, 2022, 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 21, 2022.
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 February 28, 2023 | ||||||
(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 program, (iv) derivatives risk management program, and (v) 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 above the median of its expense universe. The data indicated that the Fund's total expenses, including after any reimbursements, were equal to the median of its expense group and above the median of 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-year period ended June 30, 2022, and was below the average of its performance universe and its Lipper index for the three-, five- and ten-year periods ended June 30, 2022. 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 certain periods and also noted the Fund's improved more recent performance.
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
42
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
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.
43
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 10, 2023, 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- RN (prior to August 2022, 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 | ||||||
vcm.com | (800) 235-8396 | ||||||
26889-0423
February 28, 2023
Annual Report
USAA Cornerstone Moderately
Aggressive Fund
(Also Known as Victory Cornerstone Moderately Aggressive Fund*)
* Effective at the start of business on April 24, 2023, the Fund name will change to Victory Cornerstone Moderately Aggressive Fund. Please see Notes to the Financial Statements for subsequent event information.
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 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.
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, 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 | 18 | ||||||
Statements of Operations | 19 | ||||||
Statements of Changes in Net Assets | 20 | ||||||
Financial Highlights | 21 | ||||||
Notes to Financial Statements | 22 | ||||||
| Report of Independent Registered Public Accounting Firm | 35 | ||||||
Supplemental Information (Unaudited) | 36 | ||||||
Trustee and Officer Information | 36 | ||||||
Proxy Voting and Portfolio Holdings Information | 42 | ||||||
Expense Example | 42 | ||||||
Additional Federal Income Tax Information | 43 | ||||||
Advisory Contract Renewal | 44 | ||||||
Liquidity Risk Management Program | 47 | ||||||
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,
If you are reading this letter but double-checking your calendar, be assured there's no mistake. The annual reporting period for your USAA Mutual Fund has shifted from a fiscal year ended May 31st to a fiscal year ended February 28th/the last day of February. This change has no material impact on any of your investments. This change aims to help us improve efficiencies and reduce operational costs. Therefore, this letter covers an abbreviated "annual" period from June 1, 2022, through February 28, 2023. Future annual reports will cover the 12-month period ended February 28th/the last day of February going forward.
Our most recent annual reporting period has been a challenging period for investors. Consider some of the headwinds: heightened geopolitical tensions, a terrible war in Eastern Europe, elevated energy and food costs, high inflation, and rising interest rates. All this has dampened global growth and created a difficult backdrop for both bond and stock investors.
The inflation data was particularly troublesome and surprised many throughout the past year with some of the highest readings since the 1970s. In response, the U.S. Federal Reserve (the "Fed") continued with its monetary tightening and boosted the Fed funds interest rate repeatedly throughout the annual reporting period. And if that wasn't enough, zero-COVID-19 policies in China (which fortunately have been recently lifted) further exacerbated supply chain issues. As one might expect, all these obstacles ratcheted up volatility across financial markets.
In terms of the numbers, the S&P 500® Index, the bell-weather proxy for our domestic stock market, delivered a negative total return of almost 3% for our abbreviated annual reporting period. But perhaps what made 2022 even more difficult was the performance of fixed income markets. The Bloomberg US Aggregate Bond Index—a proxy for a diversified fixed income portfolio and one that many investors and institutions follow closely—delivered a negative total return of approximately 4% during the same period. That's not exactly the offset to equity performance that many investors come to expect from bonds.
It's been difficult, and we fully acknowledge that the steady drumbeat of bad news and bouts of stomach-churning volatility can take a toll on investors' psyche. Even when markets often snap back sharply (as happened this past July, October and earlier this calendar year), investors often wonder if they have missed an opportunity.
Through all of the turmoil and challenges in our most recent annual reporting period, we are reminded of two enduring realities: 1) financial markets are dynamic and apt to change abruptly; 2) it's vital to remain calm and rational whenever faced with those inevitable bouts of turmoil.
Fortunately, we think that investors can take comfort knowing that all of our independent investment franchises have experience managing portfolios through a wide variety of market environments. Our investment professionals remain calm during turbulent financial markets, and we think it's imperative that investors do the same.
2
We still believe that a long-term plan, a well-diversified portfolio across asset classes and investment types, and a clear understanding of individual risk tolerances are the key ingredients for staying the course and progressing on investment goals. Moreover, all our investment professionals continually monitor the environment and work hard to position portfolios opportunistically no matter what the markets bring. Remember, turmoil can also create opportunity.
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, we encourage you to contact our Member Service Representatives. Call 800-235-8396, or visit our website at vcm.com.
From all of us here at Victory Capital, thank you for your ongoing confidence and 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?
The reporting period started in the month of June as pressure continued to mount for both stocks and bonds. The U.S. Federal Reserve's (the "Fed") hawkish pivot continued to put pressure on equity multiples. With stubbornly high inflation readings, 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.
In the third quarter, global equities declined, continuing the downward trend from the first half of 2022. The quarter began with a rally that continued into mid-August, on hopes that the Fed would pivot toward a more accommodative policy. However, messaging from Fed Chairman, Jerome Powell, and a stronger-than-expected inflation report in early September dampened investor optimism over the central bank's trajectory and the odds of avoiding recession. The Fed went on to hike rates aggressively by 75 basis points ("bps") twice during the quarter, bringing the benchmark Fed funds rate target to a range of 3.0% to 3.25%, as compared to 0% to 0.25% at the beginning of the year. (A basis point is 1/100th of a percentage point.) For its part, the European Central Bank raised its reference rate by 50 bps in July, followed by another 75 bps in September. Other factors that weighed on sentiment during the quarter included the ongoing Russia-Ukraine war, an energy crisis in Europe, and the resumption of COVID-19 lockdowns in China.
Global equities rebounded in the fourth quarter trimming full year losses. Gains in October and November were sparked by signs of peaking inflation alongside less hawkish commentary from Fed Chairman Powell raising hope that the central bank would end its interest rate hiking cycle sometime in early 2023. Indeed, both the Fed and the European Central Bank raised their benchmark overnight lending rates by a more modest 50 bps in mid-December. Also supporting sentiment, the Chinese government began to ease their zero-COVID-19 policy that had weighed on global economic growth for much of 2022. However, stocks retreated into year-end as investors shifted their focus to the potential impact higher rates might have on economic growth and corporate earnings in the coming year.
As the reporting period crossed into 2023, global equities started off the year logging positive returns in the month of January. Bonds also rallied at the start of the year on hopes that the Fed's hawkish pivot would come to an end in 2023. As the calendar moved to February, stronger than expected employment and inflation reports caused investors to reevaluate interest rate expectations for 2023 and consider that rates could stay higher for longer. The result was a reversal in global equities and bonds which ended the month lower.
• How did the USAA Cornerstone Moderately Aggressive Fund (the "Fund") perform during the reporting period?
The Fund's fiscal year-end changed this year to February 28 from May 31, resulting in a shorter reporting period for fiscal year ended 2023. For the nine-month reporting period ended February 28, 2023, the Fund had a total return (at net asset value) of -2.87%. This compares to returns of -2.51% for the MSCI All-Country World Index, and -2.58% for the Cornerstone Moderately Aggressive Composite Index.
4
USAA Cornerstone Moderately Aggressive Fund
Managers' Commentary (continued)
• What strategies did you employ during the reporting period?
The Fund had a negative total return over the period, as global financial markets experienced weak performance and high volatility. Inflation concerns, rising interest rates and geopolitical issues continued to plague all major market segments for the majority of 2022 creating a volatile investment environment. The Fund slightly underperformed the Cornerstone Moderately Aggressive Composite Index.
Overall, the Fund benefited from a tilt to the value style over growth, and to higher-quality stocks over their lower-quality counterparts. Both categories outperformed as investors gravitated to companies seen as being in the best position to withstand a period of slow growth and higher interest rates. 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 2022. On the other hand, tactical positions in international equities — such as Canada — dampened results.
The Fund had a small allocation to derivatives during the period that did not have a material impact on performance.
Our approach is to hold a core, diversified portfolio, while accounting for both current risks and longer-term opportunities. We stay focused on fundamentals, valuations, and diversification. The Fund tilts to the value style over growth, and to higher-quality stocks over their lower-quality counterparts. We believe this approach is prudent for long-term investors and is particularly important now given the elevated uncertainty in the outlook for the economy and markets.
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 February 28, 2023
Fund Shares | |||||||||||||||
INCEPTION DATE | 8/15/84 | ||||||||||||||
Net Asset Value | MSCI All-Country World Index1 | Cornerstone Moderately Aggressive Composite Index2 | |||||||||||||
One Year | –7.19 | % | –8.26 | % | –7.83 | % | |||||||||
Five Year | 3.03 | % | 5.82 | % | 4.44 | % | |||||||||
Ten Year | 4.16 | % | 7.93 | % | 5.82 | % | |||||||||
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 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 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 | February 28, 2023 | ||||||
(Unaudited)
Investment Objective and Portfolio Holdings:
The Fund seeks capital appreciation with a secondary focus on current income.
Asset Allocation*:
February 28, 2023
(% 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%.
Refer to the Schedule of Portfolio Investments for a complete list of securities.
7
| USAA Mutual Funds Trust USAA Cornerstone Moderately Aggressive Fund | Schedule of Portfolio Investments February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Common Stocks (23.0%) | |||||||||||
Communication Services (1.6%): | |||||||||||
Alphabet, Inc. Class C (a) | 85,022 | $ | 7,677 | ||||||||
AT&T, Inc. | 373,446 | 7,062 | |||||||||
Bumble, Inc. Class A (a) | 10,540 | 255 | |||||||||
Cogent Communications Holdings, Inc. | 4,708 | 305 | |||||||||
Comcast Corp. Class A | 95,652 | 3,555 | |||||||||
John Wiley & Sons, Inc. Class A | 7,251 | 323 | |||||||||
Meta Platforms, Inc. Class A (a) | 53,567 | 9,371 | |||||||||
Netflix, Inc. (a) | 9,385 | 3,023 | |||||||||
Sirius XM Holdings, Inc. (b) | 540,910 | 2,375 | |||||||||
T-Mobile U.S., Inc. (a) | 22,578 | 3,210 | |||||||||
Verizon Communications, Inc. | 92,721 | 3,598 | |||||||||
Yelp, Inc. (a) | 10,550 | 317 | |||||||||
Ziff Davis, Inc. (a) | 5,037 | 398 | |||||||||
41,469 | |||||||||||
Consumer Discretionary (1.9%): | |||||||||||
Academy Sports & Outdoors, Inc. | 1,841 | 109 | |||||||||
Asbury Automotive Group, Inc. (a) | 1,413 | 321 | |||||||||
AutoZone, Inc. (a) | 2,235 | 5,557 | |||||||||
Best Buy Co., Inc. | 28,734 | 2,388 | |||||||||
Dillard's, Inc. Class A | 408 | 145 | |||||||||
Ford Motor Co. | 220,259 | 2,658 | |||||||||
Frontdoor, Inc. (a) | 8,418 | 238 | |||||||||
General Motors Co. | 76,418 | 2,960 | |||||||||
Genuine Parts Co. | 16,189 | 2,863 | |||||||||
GoPro, Inc. Class A | 31,003 | 161 | |||||||||
Graham Holdings Co. Class B | 440 | 276 | |||||||||
Hibbett, Inc. | 3,652 | 263 | |||||||||
Las Vegas Sands Corp. (a) | 47,030 | 2,703 | |||||||||
La-Z-Boy, Inc. | 12,730 | 412 | |||||||||
Lennar Corp. Class A | 30,167 | 2,918 | |||||||||
Lowe's Cos., Inc. | 14,221 | 2,926 | |||||||||
MarineMax, Inc. (a) | 7,720 | 259 | |||||||||
McDonald's Corp. | 14,534 | 3,836 | |||||||||
Meritage Homes Corp. | 3,569 | 390 | |||||||||
O'Reilly Automotive, Inc. (a) | 6,741 | 5,596 | |||||||||
Perdoceo Education Corp. (a) | 21,890 | 302 | |||||||||
Rent-A-Center, Inc. | 9,373 | 252 | |||||||||
Shoe Carnival, Inc. | 9,891 | 261 | |||||||||
Signet Jewelers Ltd. | 4,356 | 312 | |||||||||
Smith & Wesson Brands, Inc. | 30,466 | 333 | |||||||||
Starbucks Corp. | 29,258 | 2,987 | |||||||||
Target Corp. | 14,895 | 2,510 | |||||||||
The Home Depot, Inc. | 12,489 | 3,703 | |||||||||
47,639 | |||||||||||
Consumer Staples (1.2%): | |||||||||||
Altria Group, Inc. | 129,348 | 6,006 | |||||||||
Colgate-Palmolive Co. | 37,526 | 2,751 | |||||||||
See notes to financial statements.
8
| USAA Mutual Funds Trust USAA Cornerstone Moderately Aggressive Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
General Mills, Inc. | 40,225 | $ | 3,198 | ||||||||
Herbalife Nutrition Ltd. (a) | 9,557 | 185 | |||||||||
Ingles Markets, Inc. Class A | 3,722 | 333 | |||||||||
Kimberly-Clark Corp. | 18,699 | 2,338 | |||||||||
Nu Skin Enterprises, Inc. Class A | 7,250 | 289 | |||||||||
PepsiCo, Inc. | 23,190 | 4,024 | |||||||||
Philip Morris International, Inc. | 32,444 | 3,157 | |||||||||
Sprouts Farmers Market, Inc. (a) | 7,655 | 232 | |||||||||
The Kroger Co. | 61,824 | 2,667 | |||||||||
Tyson Foods, Inc. Class A | 47,504 | 2,814 | |||||||||
United Natural Foods, Inc. (a) | 5,017 | 204 | |||||||||
Vector Group Ltd. | 30,912 | 410 | |||||||||
Walgreens Boots Alliance, Inc. | 75,978 | 2,700 | |||||||||
Weis Markets, Inc. | 3,205 | 245 | |||||||||
31,553 | |||||||||||
Energy (1.2%): | |||||||||||
Arch Resources, Inc. (b) | 739 | 116 | |||||||||
California Resources Corp. | 8,263 | 349 | |||||||||
Chevron Corp. | 24,481 | 3,936 | |||||||||
Civitas Resources, Inc. | 5,375 | 377 | |||||||||
ConocoPhillips | 31,409 | 3,246 | |||||||||
CONSOL Energy, Inc. | 3,009 | 165 | |||||||||
Devon Energy Corp. | 44,127 | 2,379 | |||||||||
EOG Resources, Inc. | 21,010 | 2,375 | |||||||||
Exxon Mobil Corp. | 47,681 | 5,241 | |||||||||
Magnolia Oil & Gas Corp. Class A | 15,301 | 334 | |||||||||
Marathon Oil Corp. | 101,419 | 2,551 | |||||||||
Marathon Petroleum Corp. | 25,957 | 3,208 | |||||||||
Matador Resources Co. | 5,319 | 286 | |||||||||
Murphy Oil Corp. | 10,714 | 418 | |||||||||
PBF Energy, Inc. Class A | 5,191 | 227 | |||||||||
Schlumberger NV | 56,002 | 2,980 | |||||||||
SM Energy Co. | 7,978 | 235 | |||||||||
Valero Energy Corp. | 22,474 | 2,961 | |||||||||
31,384 | |||||||||||
Financials (3.4%): | |||||||||||
Annaly Capital Management, Inc. | 5,534 | 114 | |||||||||
Aon PLC Class A | 9,023 | 2,743 | |||||||||
Apollo Global Management, Inc. | 36,130 | 2,562 | |||||||||
Arbor Realty Trust, Inc. | 19,783 | 298 | |||||||||
Arch Capital Group Ltd. (a) | 44,183 | 3,093 | |||||||||
Atlantic Union Bankshares Corp. | 6,504 | 244 | |||||||||
BancFirst Corp. | 1,207 | 109 | |||||||||
Bank of America Corp. | 107,267 | 3,679 | |||||||||
Berkshire Hathaway, Inc. Class B (a) | 16,012 | 4,887 | |||||||||
Blackstone Mortgage Trust, Inc. Class A | 15,614 | 331 | |||||||||
Capital One Financial Corp. | 27,513 | 3,001 | |||||||||
Cathay General Bancorp | 10,369 | 445 | |||||||||
Citigroup, Inc. | 68,885 | 3,492 | |||||||||
See notes to financial statements.
9
| USAA Mutual Funds Trust USAA Cornerstone Moderately Aggressive Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Eagle Bancorp, Inc. | 3,915 | $ | 172 | ||||||||
Enact Holdings, Inc. (b) | 11,798 | 286 | |||||||||
Essent Group Ltd. | 12,175 | 523 | |||||||||
FactSet Research Systems, Inc. | 6,147 | 2,548 | |||||||||
First Bancorp | 26,535 | 385 | |||||||||
Fulton Financial Corp. | 19,031 | 327 | |||||||||
Hancock Whitney Corp. | 8,990 | 442 | |||||||||
Hannon Armstrong Sustainable Infrastructure Capital, Inc. | 8,129 | 255 | |||||||||
Heartland Financial USA, Inc. | 5,723 | 283 | |||||||||
Hope Bancorp, Inc. | 22,287 | 286 | |||||||||
International Bancshares Corp. | 9,242 | 449 | |||||||||
JPMorgan Chase & Co. | 100,470 | 14,402 | |||||||||
LPL Financial Holdings, Inc. | 11,605 | 2,896 | |||||||||
Marsh & McLennan Cos., Inc. | 17,438 | 2,827 | |||||||||
MetLife, Inc. | 43,022 | 3,086 | |||||||||
Morgan Stanley | 67,116 | 6,477 | |||||||||
MSCI, Inc. | 4,894 | 2,555 | |||||||||
NMI Holdings, Inc. Class A (a) | 15,651 | 365 | |||||||||
OceanFirst Financial Corp. | 7,438 | 176 | |||||||||
OFG Bancorp | 11,110 | 338 | |||||||||
Pathward Financial, Inc. | 4,110 | 210 | |||||||||
PennyMac Financial Services, Inc. | 6,492 | 393 | |||||||||
Piper Sandler Cos. | 2,021 | 305 | |||||||||
Preferred Bank | 3,168 | 223 | |||||||||
PROG Holdings, Inc. (a) | 12,390 | 306 | |||||||||
Prudential Financial, Inc. | 29,057 | 2,906 | |||||||||
Radian Group, Inc. | 21,966 | 469 | |||||||||
Raymond James Financial, Inc. | 23,071 | 2,502 | |||||||||
Regions Financial Corp. | 107,498 | 2,507 | |||||||||
Selective Insurance Group, Inc. | 4,970 | 505 | |||||||||
ServisFirst Bancshares, Inc. | 1,434 | 106 | |||||||||
Southside Bancshares, Inc. | 7,369 | 281 | |||||||||
Stewart Information Services Corp. | 7,918 | 336 | |||||||||
T. Rowe Price Group, Inc. | 20,612 | 2,314 | |||||||||
The Bancorp, Inc. (a) | 5,117 | 177 | |||||||||
The Bank of NT Butterfield & Son Ltd. | 6,302 | 228 | |||||||||
The Goldman Sachs Group, Inc. | 9,405 | 3,307 | |||||||||
The Progressive Corp. | 41,875 | 6,010 | |||||||||
UMB Financial Corp. | 3,988 | 362 | |||||||||
Valley National Bancorp | 44,704 | 518 | |||||||||
Washington Federal, Inc. | 3,547 | 124 | |||||||||
88,165 | |||||||||||
Health Care (3.8%): | |||||||||||
AbbVie, Inc. | 28,340 | 4,362 | |||||||||
AbCellera Biologics, Inc. (a) (b) | 16,237 | 136 | |||||||||
Alector, Inc. (a) | 24,821 | 212 | |||||||||
AmerisourceBergen Corp. | 32,186 | 5,007 | |||||||||
Amgen, Inc. | 41,142 | 9,531 | |||||||||
Amphastar Pharmaceuticals, Inc. (a) | 3,934 | 125 | |||||||||
Arcus Biosciences, Inc. (a) | 10,030 | 183 | |||||||||
See notes to financial statements.
10
| USAA Mutual Funds Trust USAA Cornerstone Moderately Aggressive Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Arrowhead Pharmaceuticals, Inc. (a) | 4,464 | $ | 144 | ||||||||
Avid Bioservices, Inc. | 10,445 | 172 | |||||||||
Biogen, Inc. (a) | 10,593 | 2,859 | |||||||||
Bristol-Myers Squibb Co. | 51,969 | 3,584 | |||||||||
Catalyst Pharmaceuticals, Inc. (a) | 8,559 | 131 | |||||||||
Centene Corp. (a) | 37,534 | 2,567 | |||||||||
Cigna Corp. | 22,482 | 6,567 | |||||||||
CVS Health Corp. | 36,625 | 3,060 | |||||||||
Dynavax Technologies Corp. (a) | 9,234 | 95 | |||||||||
Elevance Health, Inc. | 7,028 | 3,301 | |||||||||
Eli Lilly & Co. | 24,422 | 7,601 | |||||||||
Emergent BioSolutions, Inc. (a) | 12,785 | 158 | |||||||||
Fulgent Genetics, Inc. (a) | 9,513 | 312 | |||||||||
Gilead Sciences, Inc. | 77,301 | 6,225 | |||||||||
Humana, Inc. | 5,610 | 2,777 | |||||||||
IDEXX Laboratories, Inc. (a) | 5,369 | 2,541 | |||||||||
iTeos Therapeutics, Inc. (a) | 7,980 | 141 | |||||||||
Lantheus Holdings, Inc. (a) | 4,049 | 299 | |||||||||
McKesson Corp. | 8,885 | 3,108 | |||||||||
Medpace Holdings, Inc. (a) | 326 | 63 | |||||||||
Medtronic PLC | 37,701 | 3,122 | |||||||||
Merck & Co., Inc. | 39,388 | 4,185 | |||||||||
Merit Medical Systems, Inc. (a) | 4,878 | 344 | |||||||||
Mettler-Toledo International, Inc. (a) | 1,735 | 2,487 | |||||||||
ModivCare, Inc. (a) | 2,998 | 294 | |||||||||
NextGen Healthcare, Inc. (a) | 18,013 | 326 | |||||||||
Owens & Minor, Inc. (a) | 15,386 | 236 | |||||||||
Pfizer, Inc. | 89,959 | 3,650 | |||||||||
Prestige Consumer Healthcare, Inc. (a) | 3,703 | 223 | |||||||||
Prothena Corp. PLC (a) | 3,643 | 203 | |||||||||
Sage Therapeutics, Inc. | 5,823 | 242 | |||||||||
Select Medical Holdings Corp. | 13,052 | 355 | |||||||||
SIGA Technologies, Inc. | 16,843 | 115 | |||||||||
Supernus Pharmaceuticals, Inc. (a) | 5,618 | 211 | |||||||||
Thermo Fisher Scientific, Inc. | 6,822 | 3,696 | |||||||||
UnitedHealth Group, Inc. | 20,380 | 9,700 | |||||||||
Veracyte, Inc. (a) | 9,607 | 236 | |||||||||
Vericel Corp. (a) | 5,755 | 175 | |||||||||
Vir Biotechnology, Inc. (a) | 6,449 | 147 | |||||||||
Waters Corp. (a) | 8,356 | 2,598 | |||||||||
Xencor, Inc. (a) | 6,961 | 224 | |||||||||
98,030 | |||||||||||
Industrials (2.4%): | |||||||||||
3M Co. | 24,989 | 2,692 | |||||||||
ABM Industries, Inc. | 6,475 | 313 | |||||||||
Albany International Corp. | 2,894 | 292 | |||||||||
ArcBest Corp. | 3,342 | 322 | |||||||||
Atkore, Inc. (a) | 1,375 | 201 | |||||||||
BlueLinx Holdings, Inc. (a) | 2,658 | 224 | |||||||||
Boise Cascade Co. | 4,321 | 299 | |||||||||
See notes to financial statements.
11
| USAA Mutual Funds Trust USAA Cornerstone Moderately Aggressive Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Caterpillar, Inc. | 12,883 | $ | 3,086 | ||||||||
Cintas Corp. | 12,019 | 5,270 | |||||||||
Cummins, Inc. | 12,345 | 3,001 | |||||||||
Deere & Co. | 7,297 | 3,059 | |||||||||
Fastenal Co. | 48,914 | 2,522 | |||||||||
FedEx Corp. | 14,696 | 2,987 | |||||||||
General Dynamics Corp. | 13,514 | 3,080 | |||||||||
HNI Corp. | 8,838 | 276 | |||||||||
Hub Group, Inc. Class A (a) | 4,343 | 398 | |||||||||
Illinois Tool Works, Inc. | 11,892 | 2,773 | |||||||||
Korn Ferry | 5,658 | 316 | |||||||||
Lockheed Martin Corp. | 13,942 | 6,612 | |||||||||
Matson, Inc. | 4,418 | 294 | |||||||||
Mueller Industries, Inc. | 5,237 | 387 | |||||||||
Otis Worldwide Corp. | 31,390 | 2,656 | |||||||||
PACCAR, Inc. | 80,956 | 5,845 | |||||||||
Resideo Technologies, Inc. (a) | 17,586 | 323 | |||||||||
Rush Enterprises, Inc. Class A | 7,128 | 404 | |||||||||
Sterling Infrastructure, Inc. (a) | 7,993 | 307 | |||||||||
Titan Machinery, Inc. (a) | 6,390 | 293 | |||||||||
Trane Technologies PLC | 14,592 | 2,699 | |||||||||
TriNet Group, Inc. (a) | 2,643 | 219 | |||||||||
UFP Industries, Inc. | 3,280 | 281 | |||||||||
United Parcel Service, Inc. Class B | 19,656 | 3,587 | |||||||||
W.W. Grainger, Inc. | 8,314 | 5,557 | |||||||||
60,575 | |||||||||||
Information Technology (4.8%): | |||||||||||
Accenture PLC Class A | 12,354 | 3,281 | |||||||||
Adobe, Inc. (a) | 9,303 | 3,014 | |||||||||
Apple, Inc. | 98,824 | 14,568 | |||||||||
Automatic Data Processing, Inc. | 13,275 | 2,918 | |||||||||
Broadcom, Inc. | 6,898 | 4,099 | |||||||||
Cadence Design Systems, Inc. (a) | 14,255 | 2,750 | |||||||||
Cisco Systems, Inc. | 148,615 | 7,196 | |||||||||
Cognizant Technology Solutions Corp. Class A | 46,372 | 2,904 | |||||||||
Consensus Cloud Solutions, Inc. (a) | 4,927 | 202 | |||||||||
Diodes, Inc. (a) | 3,691 | 339 | |||||||||
Enphase Energy, Inc. (a) | 13,121 | 2,762 | |||||||||
Fair Isaac Corp. (a) | 3,732 | 2,528 | |||||||||
FormFactor, Inc. | 7,051 | 212 | |||||||||
Fortinet, Inc. (a) | 38,396 | 2,282 | |||||||||
HP, Inc. | 188,504 | 5,565 | |||||||||
Intel Corp. | 113,434 | 2,828 | |||||||||
International Business Machines Corp. | 48,920 | 6,325 | |||||||||
KLA Corp. | 6,246 | 2,370 | |||||||||
Kulicke & Soffa Industries, Inc. | 6,116 | 326 | |||||||||
Mastercard, Inc. Class A | 22,866 | 8,124 | |||||||||
Micron Technology, Inc. | 49,453 | 2,859 | |||||||||
Microsoft Corp. | 45,947 | 11,460 | |||||||||
Motorola Solutions, Inc. | 12,068 | 3,172 | |||||||||
See notes to financial statements.
12
| USAA Mutual Funds Trust USAA Cornerstone Moderately Aggressive Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
ON Semiconductor Corp. (a) | 37,804 | $ | 2,926 | ||||||||
Oracle Corp. | 78,075 | 6,824 | |||||||||
OSI Systems, Inc. (a) | 3,321 | 307 | |||||||||
Power Integrations, Inc. | 3,757 | 309 | |||||||||
QUALCOMM, Inc. | 27,833 | 3,438 | |||||||||
Sanmina Corp. (a) | 6,655 | 402 | |||||||||
SolarWinds Corp. (a) | 20,019 | 171 | |||||||||
Synaptics, Inc. (a) | 2,912 | 343 | |||||||||
Texas Instruments, Inc. | 40,340 | 6,916 | |||||||||
TTEC Holdings, Inc. | 6,253 | 252 | |||||||||
VeriSign, Inc. (a) | 12,656 | 2,491 | |||||||||
Viavi Solutions, Inc. | 28,674 | 314 | |||||||||
Visa, Inc. Class A | 19,596 | 4,310 | |||||||||
Vishay Intertechnology, Inc. | 18,640 | 396 | |||||||||
121,483 | |||||||||||
Materials (1.1%): | |||||||||||
Albemarle Corp. | 9,932 | 2,526 | |||||||||
CF Industries Holdings, Inc. | 25,357 | 2,178 | |||||||||
Commercial Metals Co. | 8,975 | 464 | |||||||||
Corteva, Inc. | 42,971 | 2,677 | |||||||||
Greif, Inc. Class A | 5,330 | 379 | |||||||||
Linde PLC | 10,526 | 3,667 | |||||||||
LyondellBasell Industries NV Class A | 30,957 | 2,972 | |||||||||
Minerals Technologies, Inc. | 4,960 | 301 | |||||||||
Nucor Corp. | 35,051 | 5,869 | |||||||||
Ryerson Holding Corp. | 6,204 | 223 | |||||||||
Steel Dynamics, Inc. | 23,947 | 3,020 | |||||||||
Sylvamo Corp. | 4,077 | 201 | |||||||||
The Sherwin-Williams Co. | 11,897 | 2,633 | |||||||||
Warrior Met Coal, Inc. | 6,704 | 256 | |||||||||
27,366 | |||||||||||
Real Estate (0.8%): | |||||||||||
Agree Realty Corp. | 4,353 | 308 | |||||||||
Alexandria Real Estate Equities, Inc. | 2,007 | 301 | |||||||||
American Homes 4 Rent Class A | 4,789 | 149 | |||||||||
American Tower Corp. | 7,012 | 1,388 | |||||||||
Apple Hospitality REIT, Inc. | 20,344 | 336 | |||||||||
AvalonBay Communities, Inc. | 2,235 | 386 | |||||||||
Boston Properties, Inc. | 2,356 | 154 | |||||||||
Broadstone Net Lease, Inc. | 17,306 | 307 | |||||||||
Camden Property Trust | 1,537 | 176 | |||||||||
CBRE Group, Inc. Class A (a) | 5,297 | 451 | |||||||||
Corporate Office Properties Trust | 11,787 | 300 | |||||||||
Crown Castle, Inc. | 6,628 | 867 | |||||||||
Digital Realty Trust, Inc. | 4,323 | 451 | |||||||||
Equinix, Inc. | 1,388 | 955 | |||||||||
Equity LifeStyle Properties, Inc. | 2,774 | 190 | |||||||||
Equity Residential | 5,893 | 368 | |||||||||
Essential Properties Realty Trust, Inc. | 13,208 | 340 | |||||||||
See notes to financial statements.
13
| USAA Mutual Funds Trust USAA Cornerstone Moderately Aggressive Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Essex Property Trust, Inc. | 1,030 | $ | 235 | ||||||||
Extra Space Storage, Inc. | 2,085 | 343 | |||||||||
Gaming and Leisure Properties, Inc. | 4,107 | 221 | |||||||||
Healthpeak Properties, Inc. | 8,426 | 203 | |||||||||
Host Hotels & Resorts, Inc. | 10,884 | 183 | |||||||||
Independence Realty Trust, Inc. | 18,940 | 343 | |||||||||
Invitation Homes, Inc. | 8,971 | 280 | |||||||||
Iron Mountain, Inc. | 4,610 | 243 | |||||||||
Kimco Realty Corp. | 10,300 | 212 | |||||||||
Kite Realty Group Trust | 17,308 | 376 | |||||||||
Medical Properties Trust, Inc. (b) | 9,101 | 94 | |||||||||
Mid-America Apartment Communities, Inc. | 1,812 | 290 | |||||||||
Office Properties Income Trust | 15,447 | 254 | |||||||||
Physicians Realty Trust | 21,621 | 321 | |||||||||
PotlatchDeltic Corp. | 7,144 | 330 | |||||||||
Prologis, Inc. | 14,117 | 1,742 | |||||||||
Public Storage | 2,533 | 757 | |||||||||
Realty Income Corp. | 9,455 | 605 | |||||||||
Regency Centers Corp. | 2,715 | 171 | |||||||||
Ryman Hospitality Properties, Inc. | 3,676 | 341 | |||||||||
SBA Communications Corp. | 1,767 | 458 | |||||||||
Simon Property Group, Inc. | 5,343 | 652 | |||||||||
SITE Centers Corp. | 21,946 | 293 | |||||||||
STAG Industrial, Inc. | 12,235 | 412 | |||||||||
Sun Communities, Inc. | 1,582 | 226 | |||||||||
Terreno Realty Corp. | 6,169 | 384 | |||||||||
The Macerich Co. | 24,689 | 295 | |||||||||
UDR, Inc. | 4,691 | 201 | |||||||||
Ventas, Inc. | 5,937 | 289 | |||||||||
VICI Properties, Inc. | 16,083 | 539 | |||||||||
Vornado Realty Trust | 2,548 | 50 | |||||||||
Welltower, Inc. | 6,609 | 490 | |||||||||
Weyerhaeuser Co. | 11,676 | 365 | |||||||||
WP Carey, Inc. | 2,776 | 225 | |||||||||
Zillow Group, Inc. Class C (a) | 3,416 | 144 | |||||||||
19,994 | |||||||||||
Utilities (0.8%): | |||||||||||
American States Water Co. | 2,921 | 261 | |||||||||
Consolidated Edison, Inc. | 33,855 | 3,025 | |||||||||
DTE Energy Co. | 22,501 | 2,469 | |||||||||
Exelon Corp. | 71,612 | 2,892 | |||||||||
Otter Tail Corp. | 4,418 | 313 | |||||||||
PG&E Corp. (a) | 169,596 | 2,649 | |||||||||
Portland General Electric Co. | 6,495 | 311 | |||||||||
Sempra Energy | 19,901 | 2,984 | |||||||||
The AES Corp. | 99,768 | 2,462 | |||||||||
UGI Corp. | 64,532 | 2,403 | |||||||||
19,769 | |||||||||||
Total Common Stocks (Cost $497,818) | 587,427 | ||||||||||
See notes to financial statements.
14
| USAA Mutual Funds Trust USAA Cornerstone Moderately Aggressive Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares or Principal Amount | Value | |||||||||
U.S. Government Agency Mortgages (0.0%) (c) | |||||||||||
Government National Mortgage Association 6.50%, 4/15/24 | $ | 1 | $ | 1 | |||||||
Total U.S. Government Agency Mortgages (Cost $1) | 1 | ||||||||||
U.S. Treasury Obligations (1.1%) | |||||||||||
U.S. Treasury Notes, 1.63%, 4/30/23 (d) | 29,000 | 28,845 | |||||||||
Total U.S. Treasury Obligations (Cost $28,995) | 28,845 | ||||||||||
Exchange-Traded Funds (47.7%) | |||||||||||
Invesco DB Commodity Index Tracking Fund (b) | 256,100 | 6,085 | |||||||||
Invesco FTSE RAFI Developed Markets ex-US ETF | 653,206 | 28,931 | |||||||||
Invesco FTSE RAFI Emerging Markets ETF | 1,539,501 | 27,542 | |||||||||
iShares 0-5 Year TIPS Bond ETF | 227,974 | 22,184 | |||||||||
iShares 20+ Year Treasury Bond ETF | 143,081 | 14,553 | |||||||||
iShares 7-10 Year Treasury Bond ETF | 312,575 | 29,932 | |||||||||
iShares Core MSCI EAFE ETF | 32,626 | 2,122 | |||||||||
iShares Core MSCI Emerging Markets ETF | 2,071,821 | 98,101 | |||||||||
iShares Core S&P 500 ETF | 220,811 | 87,876 | |||||||||
iShares Core S&P Small-Cap ETF | 754,626 | 77,266 | |||||||||
iShares Core US Aggregate Bond ETF | 528,303 | 51,409 | |||||||||
iShares JP Morgan USD Emerging Markets Bond ETF (b) | 155,006 | 13,213 | |||||||||
iShares MSCI Canada ETF (b) | 275,420 | 9,378 | |||||||||
iShares MSCI International Momentum Factor ETF (b) | 1,164,448 | 36,831 | |||||||||
iShares MSCI International Quality Factor ETF (b) | 1,315,008 | 44,447 | |||||||||
iShares MSCI Japan ETF | 859,543 | 48,083 | |||||||||
iShares Russell 2000 ETF (b) | 107,726 | 20,272 | |||||||||
Schwab Fundamental Emerging Markets Large Co. Index ETF | 2,206,197 | 55,706 | |||||||||
Schwab Fundamental International Large Co. Index ETF (b) | 3,168,339 | 97,902 | |||||||||
Schwab Fundamental International Small Co. Index ETF (b) | 593,600 | 19,375 | |||||||||
SPDR Gold Shares (a) | 173,315 | 29,425 | |||||||||
SPDR S&P Emerging Markets SmallCap ETF | 107,983 | 5,439 | |||||||||
Vanguard FTSE All-World ex-U.S. ETF | 587,233 | 30,601 | |||||||||
Vanguard FTSE Developed Markets ETF | 3,765,596 | 166,326 | |||||||||
Vanguard FTSE Emerging Markets ETF | 176,219 | 6,947 | |||||||||
Vanguard FTSE Europe ETF (b) | 634,640 | 37,888 | |||||||||
Vanguard Mid-Capital ETF | 30,077 | 6,439 | |||||||||
Vanguard Mortgage-Backed Securities ETF | 408,949 | 18,718 | |||||||||
Vanguard Real Estate ETF | 130,232 | 11,163 | |||||||||
Vanguard S&P 500 ETF | 17,067 | 6,214 | |||||||||
Vanguard Short-Term Bond ETF (b) | 281,514 | 21,161 | |||||||||
Vanguard Short-Term Corporate Bond ETF | 107,729 | 8,110 | |||||||||
Vanguard Total Stock Market ETF | 202,168 | 40,337 | |||||||||
Wisdom Tree Trust — WisdomTree Emerging Markets SmallCap Dividend Fund | 202,622 | 9,150 | |||||||||
Xtrackers USD High Yield Corporate Bond ETF | 770,152 | 26,301 | |||||||||
Total Exchange-Traded Funds (Cost $1,138,610) | 1,215,427 | ||||||||||
See notes to financial statements.
15
| USAA Mutual Funds Trust USAA Cornerstone Moderately Aggressive Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Affiliated Exchange-Traded Funds (27.1%) | |||||||||||
VictoryShares Emerging Markets Value Momentum ETF | 68,000 | $ | 2,734 | ||||||||
VictoryShares ESG Core Plus Bond ETF (b) | 5,668,278 | 121,359 | |||||||||
VictoryShares USAA Core Intermediate-Term Bond ETF | 11,377,540 | 519,157 | |||||||||
VictoryShares USAA Core Short-Term Bond ETF | 969,310 | 47,418 | |||||||||
Total Affiliated Exchange-Traded Funds (Cost $796,944) | 690,668 | ||||||||||
Collateral for Securities Loaned (1.8%)^ | |||||||||||
| Goldman Sachs Financial Square Government Fund, Institutional Shares, 4.47% (e) | 11,378,313 | 11,378 | |||||||||
HSBC U.S. Government Money Market Fund, Institutional Shares, 4.45% (e) | 11,378,313 | 11,379 | |||||||||
Invesco Government & Agency Portfolio, Institutional Shares, 4.52% (e) | 11,378,313 | 11,378 | |||||||||
| Morgan Stanley Institutional Liquidity Government Portfolio, Institutional Shares, 4.41% (e) | 11,378,313 | 11,378 | |||||||||
Total Collateral for Securities Loaned (Cost $45,513) | 45,513 | ||||||||||
Total Investments (Cost $2,507,881) — 100.7% | 2,567,881 | ||||||||||
Liabilities in excess of other assets — (0.7)% | (18,041 | ) | |||||||||
NET ASSETS — 100.00% | $ | 2,549,840 | |||||||||
At February 28, 2023, the Fund's investments in foreign securities were 26.6% of net assets.
^ Purchased with cash collateral from securities on loan.
(a) Non-income producing security.
(b) All or a portion of this security is on loan.
(c) Amount represents less than 0.05% of net assets.
(d) All or a portion of this security has been segregated as collateral for derivative instruments.
(e) Rate disclosed is the daily yield on February 28, 2023.
ETF — Exchange-Traded Fund
PLC — Public Limited Company
REIT — Real Estate Investment Trust
See notes to financial statements.
16
| USAA Mutual Funds Trust USAA Cornerstone Moderately Aggressive Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
Futures Contracts Purchased
(Amounts not in thousands)
| Number of Contracts | Expiration Date | Notional Amount | Value | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||
Euro Stoxx 50 Futures | 368 | 3/17/23 | $ | 15,437,934 | $ | 16,529,137 | $ | 1,091,203 | |||||||||||||||
FTSE 100 Index Futures | 459 | 3/17/23 | 41,280,192 | 43,395,049 | 2,114,857 | ||||||||||||||||||
| S&P/Toronto Stock Exchange 60 Index Futures | 215 | 3/16/23 | 38,043,445 | 38,388,917 | 345,472 | ||||||||||||||||||
$ | 3,551,532 | ||||||||||||||||||||||
Futures Contracts Sold
(Amounts not in thousands)
| Number of Contracts | Expiration Date | Notional Amount | Value | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||
ASX SPI 200 Index Futures | 186 | 3/16/23 | $ | 22,372,484 | $ | 22,515,691 | $ | (143,207 | ) | ||||||||||||||
E-Mini Russell 2000 Index Futures | 112 | 3/17/23 | 10,267,021 | 10,634,960 | (367,939 | ) | |||||||||||||||||
Hang Seng Index Futures | 77 | 3/30/23 | 9,789,757 | 9,683,369 | 106,388 | ||||||||||||||||||
Swiss Market Index Futures | 260 | 3/17/23 | 30,223,953 | 30,437,341 | (213,388 | ) | |||||||||||||||||
Tokyo Price Index Futures | 157 | 3/9/23 | 22,167,759 | 23,006,831 | (839,072 | ) | |||||||||||||||||
$ | (1,457,218 | ) | |||||||||||||||||||||
Total unrealized appreciation | $ | 3,657,920 | |||||||||||||||||||||
Total unrealized depreciation | (1,563,606 | ) | |||||||||||||||||||||
Total net unrealized appreciation (depreciation) | $ | 2,094,314 | |||||||||||||||||||||
See notes to financial statements.
17
USAA Mutual Funds Trust | Statement of Assets and Liabilities February 28, 2023 | ||||||
(Amounts in Thousands, Except Per Share Amounts)
| USAA Cornerstone Moderately Aggressive Fund | |||||||
Assets: | |||||||
Affiliated investments, at value (Cost $796,944) | $ | 690,668 | (a) | ||||
Unaffiliated investments, at value (Cost $1,710,937) | 1,877,213 | (b) | |||||
Cash | 21,736 | ||||||
Deposit with broker for futures contracts | 11,684 | ||||||
Receivables: | |||||||
Interest and dividends | 1,470 | ||||||
Capital shares issued | 700 | ||||||
Investments sold | 7,978 | ||||||
Variation margin on open futures contracts | 410 | ||||||
From Adviser for ETF reimbursements | 525 | ||||||
Prepaid expenses | 14 | ||||||
Total Assets | 2,612,398 | ||||||
Liabilities: | |||||||
Payables: | |||||||
Collateral received on loaned securities | 45,513 | ||||||
Collateral received from broker for futures contracts | 3,724 | ||||||
Investments purchased | 10,032 | ||||||
Capital shares redeemed | 666 | ||||||
Variation margin on open futures contracts | 567 | ||||||
Accrued expenses and other payables: | |||||||
Investment advisory fees | 1,179 | ||||||
Administration fees | 292 | ||||||
Custodian fees | 19 | ||||||
Transfer agent fees | 383 | ||||||
Compliance fees | 2 | ||||||
Trustees' fees | 1 | ||||||
Other accrued expenses | 180 | ||||||
Total Liabilities | 62,558 | ||||||
Net Assets: | |||||||
Capital | 2,488,583 | ||||||
Total accumulated earnings/(loss) | 61,257 | ||||||
Net Assets | $ | 2,549,840 | |||||
Shares (unlimited number of shares authorized with no par value): | 106,221 | ||||||
Net asset value, offering and redemption price per share: (c) | $ | 24.00 | |||||
(a) Includes $2 thousand of securities on loan.
(b) Includes $44,104 thousand of securities on loan.
(c) Per share amount may not recalculate due to rounding of net assets and/or shares outstanding.
See notes to financial statements.
18
USAA Mutual Funds Trust | Statements of Operations | ||||||
(Amounts in Thousands)
| USAA Cornerstone Moderately Aggressive Fund | |||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | ||||||||||
Investment Income: | |||||||||||
Income distributions from affiliated funds | $ | 14,365 | $ | 9,773 | |||||||
Dividends from unaffiliated investments | 39,704 | 45,676 | |||||||||
Interest from unaffiliated investments | 491 | 7,056 | |||||||||
Securities lending (net of fees) | 1,202 | 713 | |||||||||
Foreign tax withholding | — | (5 | ) | ||||||||
Total Income | 55,762 | 63,213 | |||||||||
Expenses: | |||||||||||
Investment advisory fees | 11,282 | 17,408 | |||||||||
Administration fees | 2,868 | 4,426 | |||||||||
Sub-Administration fees | 59 | 76 | |||||||||
Custodian fees | 85 | 126 | |||||||||
Transfer agent fees | 3,646 | 5,116 | |||||||||
Trustees' fees | 37 | 50 | |||||||||
Compliance fees | 18 | 20 | |||||||||
Legal and audit fees | 75 | 68 | |||||||||
State registration and filing fees | 43 | 41 | |||||||||
Interfund lending fees | — | 1 | |||||||||
Line of credit fees | 1 | — | |||||||||
Other expenses | 319 | 274 | |||||||||
Total Expenses | 18,433 | 27,606 | |||||||||
Expenses waived/reimbursed by Adviser | (1,587 | ) | (1,689 | ) | |||||||
Net Expenses | 16,846 | 25,917 | |||||||||
Net Investment Income (Loss) | 38,916 | 37,296 | |||||||||
Realized/Unrealized Gains (Losses) from Investments: | |||||||||||
Net realized gains (losses) from affiliated funds | (678 | ) | — | ||||||||
| Net realized gains (losses) from unaffiliated investment securities and foreign currency transactions | (22,099 | ) | 126,892 | ||||||||
Capital gain distributions received from affiliated funds | — | 1,214 | |||||||||
Net realized gains (losses) from futures contracts | 1,313 | 2,816 | |||||||||
Net change in unrealized appreciation/depreciation on affiliated funds | (34,278 | ) | (69,445 | ) | |||||||
| Net change in unrealized appreciation/depreciation on unaffiliated investment securities and foreign currency translations | (65,434 | ) | (254,354 | ) | |||||||
Net change in unrealized appreciation/depreciation on futures contracts | 3,510 | 33 | |||||||||
Net realized/unrealized gains (losses) on investments | (117,666 | ) | (192,844 | ) | |||||||
Change in net assets resulting from operations | $ | (78,750 | ) | $ | (155,548 | ) | |||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from May 31 to February 28.
See notes to financial statements.
19
USAA Mutual Funds Trust | Statements of Changes in Net Assets | ||||||
(Amounts in Thousands)
USAA Cornerstone Moderately Aggressive Fund | |||||||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | Year Ended May 31, 2021 | |||||||||||||
From Investments: | |||||||||||||||
Operations: | |||||||||||||||
Net Investment Income (Loss) | $ | 38,916 | $ | 37,296 | $ | 33,724 | |||||||||
Net realized gains (losses) | (21,464 | ) | 130,922 | 176,187 | |||||||||||
| Net change in unrealized appreciation/ depreciation | (96,202 | ) | (323,766 | ) | 415,330 | ||||||||||
Change in net assets resulting from operations | (78,750 | ) | (155,548 | ) | 625,241 | ||||||||||
| Change in net assets resulting from distributions to shareholders | (105,901 | ) | (229,481 | ) | (55,505 | ) | |||||||||
| Change in net assets resulting from capital transactions | 14,426 | 78,119 | (205,115 | ) | |||||||||||
Change in net assets | (170,225 | ) | (306,910 | ) | 364,621 | ||||||||||
Net Assets: | |||||||||||||||
Beginning of period | 2,720,065 | 3,026,975 | 2,662,354 | ||||||||||||
End of period | $ | 2,549,840 | $ | 2,720,065 | $ | 3,026,975 | |||||||||
Capital Transactions: | |||||||||||||||
Proceeds from shares issued | $ | 101,783 | $ | 177,611 | $ | 174,743 | |||||||||
Distributions reinvested | 104,955 | 227,559 | 55,021 | ||||||||||||
Cost of shares redeemed | (192,312 | ) | (327,051 | ) | (434,879 | ) | |||||||||
| Change in net assets resulting from capital transactions | $ | 14,426 | $ | 78,119 | $ | (205,115 | ) | ||||||||
Share Transactions: | |||||||||||||||
Issued | 4,182 | 6,233 | 6,386 | ||||||||||||
Reinvested | 4,348 | 8,036 | 2,015 | ||||||||||||
Redeemed | (7,907 | ) | (11,454 | ) | (16,102 | ) | |||||||||
Change in Shares | 623 | 2,815 | (7,701 | ) | |||||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from May 31 to February 28.
See notes to financial statements.
20
USAA Mutual Funds Trust | Financial Highlights | ||||||
For a Share Outstanding Throughout Each Period
USAA Cornerstone Moderately Aggressive Fund | |||||||||||||||||||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | Year Ended May 31, 2021 | Year Ended May 31, 2020 | Year Ended May 31, 2019 | Year Ended May 31, 2018 | |||||||||||||||||||||
| Net Asset Value, Beginning of Period | $ | 25.76 | $ | 29.45 | $ | 24.10 | $ | 23.97 | $ | 25.78 | $ | 26.09 | |||||||||||||||
Investment Activities: | |||||||||||||||||||||||||||
| Net investment income (loss) | 0.37 | (b) | 0.36 | (b) | 0.32 | (b) | 0.48 | (b) | 0.46 | 0.42 | |||||||||||||||||
| Net realized and unrealized gains (losses) | (1.11 | ) | (1.77 | ) | 5.56 | 0.18 | (0.79 | ) | 1.28 | ||||||||||||||||||
| Total from Investment Activities | (0.74 | ) | (1.41 | ) | 5.88 | 0.66 | (0.33 | ) | 1.70 | ||||||||||||||||||
Distributions to Shareholders from: | |||||||||||||||||||||||||||
Net investment income | (0.23 | ) | (0.35 | ) | (0.37 | ) | (0.39 | ) | (0.39 | ) | (0.44 | ) | |||||||||||||||
Net realized gains | (0.79 | ) | (1.93 | ) | (0.16 | ) | (0.14 | ) | (1.09 | ) | (1.57 | ) | |||||||||||||||
Total Distributions | (1.02 | ) | (2.28 | ) | (0.53 | ) | (0.53 | ) | (1.48 | ) | (2.01 | ) | |||||||||||||||
Net Asset Value, End of Period | $ | 24.00 | $ | 25.76 | $ | 29.45 | $ | 24.10 | $ | 23.97 | $ | 25.78 | |||||||||||||||
Total Return (c) (d) | (2.87 | )% | (5.43 | )% | 24.58 | % | 2.59 | % | (1.20 | )% | 6.52 | % | |||||||||||||||
Ratios to Average Net Assets: | |||||||||||||||||||||||||||
Net Expenses (e) (f) (g) | 0.88 | % | 0.88 | % | 0.96 | % | 0.98 | % | 0.98 | %(h) | 0.97 | % | |||||||||||||||
Net Investment Income (Loss) (e) | 2.04 | % | 1.26 | % | 1.18 | % | 1.94 | % | 1.91 | % | 1.64 | % | |||||||||||||||
Gross Expenses (e) (f) | 0.96 | % | 0.93 | % | 0.97 | % | 0.99 | % | 1.01 | % | 0.97 | % | |||||||||||||||
Supplemental Data: | |||||||||||||||||||||||||||
Net Assets at end of period (000's) | $ | 2,549,840 | $ | 2,720,065 | $ | 3,026,975 | $ | 2,662,354 | $ | 2,777,038 | $ | 2,493,883 | |||||||||||||||
Portfolio Turnover (c) | 49 | % | 44 | % | 64 | % | 92 | % | 95 | %(i) | 56 | % | |||||||||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from May 31 to February 28.
(b) Per share net investment income (loss) has been calculated using the average daily shares method.
(c) Not annualized for periods less than one year.
(d) 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.
(e) Annualized for periods less than one year.
(f) Does not include acquired fund fees and expenses, if any.
(g) 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 September 30, 2023, instead of coinciding with the Fund's fiscal year end.
(h) 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.
(i) 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.
21
USAA Mutual Funds Trust | Notes to Financial Statements February 28, 2023 | ||||||
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.
On June 29, 2022, the Board of Trustees ("the Board") approved the fiscal year-end change for the Fund from May 31 to February 28. The first full cycle of the new fiscal year-end reporting will begin March 1, 2023. As a result of the change, the Fund has a February 28, 2023 fiscal nine-month transition period, the results of which are reported in this Annual Report for the period ended February 28, 2023.
Victory Capital Management ("VCM" or 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 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 (unadjusted) in active markets for identical securities
• Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, or credit spreads, applicable to those securities, etc.)
• Level 3 — significant unobservable inputs (including the Adviser's 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.
22
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
The Adviser, appointed as the valuation designee by the Board, has established the Pricing and Liquidity Committee (the "Committee"), and subject to Board oversight, the Committee administers and oversees the Fund's valuation policies and procedures, which are approved by the Board.
Portfolio securities listed or traded on securities exchanges, including Exchange-Traded Funds ("ETFs"), and American Depositary Receipts, 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, 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 valuation designee and subject to the oversight of the Board. The 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 February 28, 2023, 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 | $ | 587,427 | $ | — | $ | — | $ | 587,427 | |||||||||||
U.S. Government Agency Mortgages | — | 1 | — | 1 | |||||||||||||||
U.S. Treasury Obligations | — | 28,845 | — | 28,845 | |||||||||||||||
Exchange-Traded Funds | 1,215,427 | — | — | 1,215,427 | |||||||||||||||
Affiliated Exchange-Traded Funds | 690,668 | — | — | 690,668 | |||||||||||||||
Collateral for Securities Loaned | 45,513 | — | — | 45,513 | |||||||||||||||
Total | $ | 2,539,035 | $ | 28,846 | $ | — | $ | 2,567,881 | |||||||||||
Other Financial Investments* | |||||||||||||||||||
Assets: | |||||||||||||||||||
Futures Contracts | $ | 3,658 | $ | — | $ | — | $ | 3,658 | |||||||||||
Liabilities: | |||||||||||||||||||
Futures Contracts | $ | (1,564 | ) | $ | — | $ | — | $ | (1,564 | ) | |||||||||
Total | $ | 2,094 | $ | — | $ | — | $ | 2,094 | |||||||||||
* Futures contracts are valued at the unrealized appreciation (depreciation) on the investment.
As of February 28, 2023, there were no transfers into/out of Level 3.
23
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 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
24
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 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 nine months ended February 28, 2023, 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 February 28, 2023 (amounts in thousands):
Assets | Liabilities | ||||||||||
| Variation Margin Receivable on Open Futures Contracts* | Variation Margin Payable on Open Futures Contracts* | ||||||||||
Equity Risk Exposure | $ | 3,658 | $ | 1,564 | |||||||
* 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 Statements of Operations, categorized by risk exposure, for the nine months ended February 28, 2023 (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 | $ | 1,313 | $ | 3,510 | |||||||
The following table presents the effect of derivative instruments on the Statements 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 | |||||||
25
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
All open derivative positions at period 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 period end is generally representative of the notional amount of open positions to net assets throughout the period.
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 Statements of Operations.
Withholding taxes on interest, dividends, and gains as a result of certain investments 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 Statements 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 February 28, 2023.
| Value of Securities on Loan | Non-Cash Collateral | Cash Collateral | |||||||||
| $ | 44,106 | $ | — | $ | 45,513 | ||||||
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
26
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 unaffiliated investment securities and foreign currency translations on the Statements of Operations. Any realized gains or losses from these fluctuations are disclosed as Net realized gains (losses) from unaffiliated investment securities and foreign currency transactions on the Statements 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 had a tax year end of May 31, and effective February 28, 2023, the Fund changed its tax year end to February 28.
For the nine months ended February 28, 2023, 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 under specified conditions outlined in the valuation policies and procedures adopted by the Board. In addition, as defined under the valuation policies and procedures, each transaction must be effected at the independent current market price. For the nine months ended February 28, 2023, 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) | |||||||||
| $ | — | $ | 1,684 | $ | (202 | ) | |||||
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 | ||||||
27
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
3. Purchases and Sales:
Purchases and sales of securities (excluding securities maturing less than one year from acquisition) for the nine months ended February 28, 2023, were as follows for the Fund (amounts in thousands):
| Excluding U.S. Government Securities | U.S. Government Securities | ||||||||||||||
Purchases | Sales | Purchases | Sales | ||||||||||||
$ | 1,255,392 | $ | 1,289,948 | $ | — | $ | 1,016 | ||||||||
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.
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 incurred and paid to VCM for the nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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 nine months ended February 28, 2023, and 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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements of Operations as Compliance fees.
28
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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 September 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 limit 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 February 28, 2023, 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 nine months ended February 28, 2023, the Fund incurred reimbursable expense of $1,587 thousand, all of which was affiliated ETF Adviser for reimbursement and is reflected on the Statements of Operations as Expenses waived/reimbursed by Adviser. For year ended May 31, 2022, the Fund incurred reimbursable expense of $1,689 thousand, all of which was affiliated ETF Adviser for reimbursement and is reflected on the Statements of Operations as Expenses waived/reimbursed by Adviser. As of February 28, 2023, the Fund has a receivable related to these reimbursable expenses from the Adviser for $525 thousand, pursuant to the Fund's expense limitation agreement and is reflected on the Statement of Assets and Liabilities as Receivable from Adviser for ETF reimbursements.
Under the terms of the expense limitation agreement, 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.
As of February 28, 2023, and 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 nine months ended February 28, 2023, and the year ended May 31, 2022.
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USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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.
ETF Risk — The Fund may invest in shares of ETFs, which generally are registered 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.
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 27, 2022, with a termination date of June 26, 2023. Under the agreement with Citibank, the Victory Funds Complex may borrow up
30
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 nine months ended February 28, 2023, 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 paid a pro-rata portion of the commitment fees plus any interest on amounts borrowed. For the period from June 1, 2022, through June 27, 2022, interest was based on the one-month London Interbank Offered Rate ("LIBOR") plus one percent. Effective with the renewal, for the period June 28, 2022, through February 28, 2023, interest was based on the one-month Secured Overnight Financing Rate ("SOFR") plus 1.10 percent. The Fund did not experience a material financial impact transitioning from LIBOR to SOFR. Interest charged to the 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 nine months ended February 28, 2023.
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 | |||||||||||
* Based on the number of days borrowings were outstanding for 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 Statements of Operations under Interfund lending fees. As a Lender, interest earned by the Fund, if any, during the period, is reflected on the Statements of Operations under Interfund lending.
The Fund did not utilize or participate in the Facility during the nine months ended February 28, 2023.
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 | $ | — | $ | 7,552 | 12 | 0.59 | % | $ | 15,154 | ||||||||||||||
* Based on the number of days borrowings were outstanding for 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.
31
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 February 28, 2023, on the Statement 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 | ||||||
| $ | (57 | ) | $ | 57 | |||
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):
Nine Months Ended February 28, 2023 | |||||||||||
Distributions Paid From | |||||||||||
Ordinary | Net | Total | |||||||||
$ | 33,253 |
| $ | 72,648 |
| $ | 105,901 | ||||
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 February 28, 2023, 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 Losses | Unrealized Appreciation (Depreciation)* | Total Accumulated Earnings (Loss) | ||||||||||||||||||
| $ | 31,248 | $ | (458 | ) | $ | 30,790 | $ | (11,213 | ) | $ | 41,680 | $ | 61,257 | ||||||||||
* The difference between the book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to tax deferral of losses on wash sales, straddle, partnership adjustments, REIT adjustments and derivatives.
As of February 28, 2023, 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 | ||||||
| $ | 11,213 | $ | 11,213 | ||||
32
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
As of February 28, 2023, 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) | ||||||||||||
| $ | 2,525,672 | $ | 214,037 | $ | (172,357 | ) | $ | 41,680 | |||||||
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 nine months ended February 28, 2023, were as follows (amounts in thousands):
| Fair Value 5/31/2022 | Purchases at Cost | Proceeds from Sales | Net Realized Gains (Losses) | Capital Gain Distributions | Net Change in Unrealized Appreciation/ Depreciation | Fair Value 2/28/2023 | Dividend Income | ||||||||||||||||||||||||||||
| VictoryShares ESG Core Plus Bond ETF | $ | 124,777 | $ | 5,088 | $ | (2,544 | ) | $ | — | $ | — | $ | (5,962 | ) | $ | 121,359 | $ | 3,402 | |||||||||||||||||
| VictoryShares USAA Core Intermediate-Term Bond ETF | 536,226 | 22,954 | (11,977 | ) | (678 | ) | — | (27,368 | ) | 519,157 | 9,815 | ||||||||||||||||||||||||
| VictoryShares USAA Core Short-Term Bond ETF | 48,068 | — | — | — | — | (650 | ) | 47,418 | 1,062 | ||||||||||||||||||||||||||
| VictoryShares Emerging Markets Value Momentum ETF | 3,032 | — | — | — | — | (298 | ) | 2,734 | 86 | ||||||||||||||||||||||||||
$ | 712,103 | $ | 28,042 | $ | (14,521 | ) | $ | (678 | ) | $ | — | $ | (34,278 | ) | $ | 690,668 | $ | 14,365 | |||||||||||||||||
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 | Net Realized Gains (Losses) | Capital Gain Distributions | 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 | |||||||||||||||||||||||||
33
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
| Fair Value 5/31/2021 | Purchases at Cost | Proceeds from Sales | Net Realized Gains (Losses) | Capital Gain Distributions | Net Change in Unrealized Appreciation/ Depreciation | Fair Value 5/31/2022 | Dividend Income | ||||||||||||||||||||||||||||
| 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 | ||||||||||||||||||
* During the reporting period the Fund name was changed to VictoryShares Emerging Markets Value Momentum ETF.
9. Subsequent Events:
The Board, upon recommendation of the Adviser, has approved a change in the name of the Trust and each individual fund within the Trust. On February 23, 2023, an initial filing was made with the SEC to commence the process to effectuate the following changes.
Effective at the start of business on April 24, 2023 (the "Effective Date"), the name of the Trust changed from USAA Mutual Funds Trust to Victory Portfolios III, and all references to USAA Mutual Funds Trust in the summary prospectus, statutory prospectus, and statement of additional information ("SAI") will be replaced by the new name.
Also on the Effective Date, references to the current name of the Fund in the summary prospectus, statutory prospectus, and SAI will be replaced with the new name as follows:
Current Name | New Name | ||||||
USAA Cornerstone Moderately Aggressive Fund | Victory Cornerstone Moderately Aggressive Fund | ||||||
In addition, on the Effective Date, USAA Investments, a Victory Capital Management Inc. investment franchise, that currently manages the USAA Fixed Income Funds, will change its name to Victory Income Investors, and all references to USAA Investments in the summary prospectus, statutory prospectus, and SAI, will be replaced.
Please note that there will be no changes in the management of the Fund or to the Fund's ticker symbols.
34
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 February 28, 2023, and the related statements of operations for the period from June 1, 2022 through February 28, 2023 and the year ended May 31, 2022, the statements of changes in net assets for the period from June 1, 2022 through February 28, 2023 and each of the two years in the period ended May 31, 2022, the financial highlights for the period from June 1, 2022 through February 28, 2023 and each of the five years in the period ended May 31, 2022, 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 February 28, 2023, the results of its operations for the period from June 1, 2022 through February 28, 2023 and the year ended May 31, 2022, the statements of changes in net assets for the period from June 1, 2022 through February 28, 2023 and each of the two years in the period ended May 31, 2022, and its financial highlights for the period from June 1, 2022 through February 28, 2023 and each of the five years in the period ended May 31, 2022, 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 February 28, 2023, by correspondence with the custodian and brokers. 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
April 28, 2023
35
USAA Mutual Funds Trust | Supplemental Information February 28, 2023 | ||||||
(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 date 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 | ||||||||||||||||||
36
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 (06/17-06/19); 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 (03/15-03/21). | 45 | None | ||||||||||||||||||
| Paul L. McNamara (July 1948) | Trustee | Trustee since January 2012 | Retired. | 45 | None | ||||||||||||||||||
37
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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) | ||||||||||||||||||
38
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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.
39
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
Officers:
The officers of the Trust, their date 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. (since 2022); 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. (07/01/19-present); Executive Director, Investment and Financial Administration, USAA (2012-06/30/19); 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. (07/01/19-present); Accounting/ Financial Director, USAA (12/13-06/30/19). | ||||||||||||
| 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). | ||||||||||||
40
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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). | ||||||||||||
41
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 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 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 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 September 1, 2022, through February 28, 2023.
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 9/1/22 | Actual Ending Account Value 2/28/23 | Hypothetical Ending Account Value 2/28/23 | Actual Expenses Paid During Period 9/1/22- 2/28/23* | Hypothetical Expenses Paid During Period 9/1/22- 2/28/23* | Annualized Expense Ratio During Period 9/1/22- 2/28/23 | ||||||||||||||||||
| $ | 1,000.00 | $ | 1,022.10 | $ | 1,020.38 | $ | 4.46 | $ | 4.46 | 0.89 | % | ||||||||||||
* Expenses are equal to the average account value multiplied by the Fund's annualized expense ratio multiplied by 181/365 (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 February 28, 2023 | ||||||
(Unaudited)
Additional Federal Income Tax Information
The following federal tax information related to the Fund's fiscal nine months ended February 28, 2023, 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 2024.
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 nine months ended February 28, 2023 (amounts in thousands):
| Dividends Received Deduction (corporate shareholders) | Qualified Dividend Income (non-corporate shareholders) | Short-Term Capital Gain Distributions | Long-Term Capital Gain Distributions | ||||||||||||
| 15 | % | 16 | % | $ | 8,798 | $ | 72,648 | ||||||||
43
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 8-9, 2022, 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 8-9, 2022, 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 21, 2022.
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.
44
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 program, (iv) derivatives risk management program, and (v) 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 above the median of its expense universe. The data indicated that the Fund's total expenses, including after any reimbursements, were equal to the median of its expense group and above the median of 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-year period ended June 30, 2022, and was below the average of its performance universe and its Lipper index for the three-, five- and ten-year periods ended June 30, 2022. 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 certain periods and also noted the Fund's improved more recent performance.
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
45
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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.
46
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 10, 2023, 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-RN (prior to August 2022, Form N-LIQUID) and recommended no material changes to the LRMP.
47
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 | ||||||
vcm.com | (800) 235-8396 | ||||||
23405-0423
February 28, 2023
Annual Report
USAA Cornerstone Moderately
Conservative Fund
(Also Known as Victory Cornerstone Moderately Conservative Fund*)
* Effective at the start of business on April 24, 2023, the Fund name will change to Victory Cornerstone Moderately Conservative Fund. Please see Notes to the Financial Statements for subsequent event information.
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 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.
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, 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 | 13 | ||||||
Statements of Operations | 14 | ||||||
Statements of Changes in Net Assets | 15 | ||||||
Financial Highlights | 16 | ||||||
Notes to Financial Statements | 17 | ||||||
| Report of Independent Registered Public Accounting Firm | 30 | ||||||
Supplemental Information (Unaudited) | 31 | ||||||
Trustee and Officer Information | 31 | ||||||
Proxy Voting and Portfolio Holdings Information | 37 | ||||||
Expense Example | 37 | ||||||
Additional Federal Income Tax Information | 38 | ||||||
Advisory Contract Renewal | 39 | ||||||
Liquidity Risk Management Program | 42 | ||||||
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,
If you are reading this letter but double-checking your calendar, be assured there's no mistake. The annual reporting period for your USAA Mutual Fund has shifted from a fiscal year ended May 31st to a fiscal year ended February 28th/the last day of February. This change has no material impact on any of your investments. This change aims to help us improve efficiencies and reduce operational costs. Therefore, this letter covers an abbreviated "annual" period from June 1, 2022, through February 28, 2023. Future annual reports will cover the 12-month period ended February 28th/the last day of February going forward.
Our most recent annual reporting period has been a challenging period for investors. Consider some of the headwinds: heightened geopolitical tensions, a terrible war in Eastern Europe, elevated energy and food costs, high inflation, and rising interest rates. All this has dampened global growth and created a difficult backdrop for both bond and stock investors.
The inflation data was particularly troublesome and surprised many throughout the past year with some of the highest readings since the 1970s. In response, the U.S. Federal Reserve (the "Fed") continued with its monetary tightening and boosted the Fed funds interest rate repeatedly throughout the annual reporting period. And if that wasn't enough, zero-COVID-19 policies in China (which fortunately have been recently lifted) further exacerbated supply chain issues. As one might expect, all these obstacles ratcheted up volatility across financial markets.
In terms of the numbers, the S&P 500® Index, the bell-weather proxy for our domestic stock market, delivered a negative total return of almost 3% for our abbreviated annual reporting period. But perhaps what made 2022 even more difficult was the performance of fixed income markets. The Bloomberg US Aggregate Bond Index—a proxy for a diversified fixed income portfolio and one that many investors and institutions follow closely—delivered a negative total return of approximately 4% during the same period. That's not exactly the offset to equity performance that many investors come to expect from bonds.
It's been difficult, and we fully acknowledge that the steady drumbeat of bad news and bouts of stomach-churning volatility can take a toll on investors' psyche. Even when markets often snap back sharply (as happened this past July, October and earlier this calendar year), investors often wonder if they have missed an opportunity.
Through all of the turmoil and challenges in our most recent annual reporting period, we are reminded of two enduring realities: 1) financial markets are dynamic and apt to change abruptly; 2) it's vital to remain calm and rational whenever faced with those inevitable bouts of turmoil.
Fortunately, we think that investors can take comfort knowing that all of our independent investment franchises have experience managing portfolios through a wide variety of market environments. Our investment professionals remain calm during turbulent financial markets, and we think it's imperative that investors do the same.
2
We still believe that a long-term plan, a well-diversified portfolio across asset classes and investment types, and a clear understanding of individual risk tolerances are the key ingredients for staying the course and progressing on investment goals. Moreover, all our investment professionals continually monitor the environment and work hard to position portfolios opportunistically no matter what the markets bring. Remember, turmoil can also create opportunity.
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, we encourage you to contact our Member Service Representatives. Call 800-235-8396, or visit our website at vcm.com.
From all of us here at Victory Capital, thank you for your ongoing confidence and 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?
The reporting period started in the month of June as pressure continued to mount for both stocks and bonds. The U.S. Federal Reserve's (the "Fed") hawkish pivot continued to put pressure on equity multiples. With stubbornly high inflation readings, 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.
In the third quarter, global equities declined, continuing the downward trend from the first half of 2022. The quarter began with a rally that continued into mid-August, on hopes that the Fed would pivot toward a more accommodative policy. However, messaging from Fed Chairman, Jerome Powell, and a stronger-than-expected inflation report in early September dampened investor optimism over the central bank's trajectory and the odds of avoiding recession. The Fed went on to hike rates aggressively by 75 basis points ("bps") twice during the quarter, bringing the benchmark Fed funds rate target to a range of 3.0% to 3.25%, as compared to 0% to 0.25% at the beginning of the year. (A basis point is 1/100th of a percentage point.) For its part, the European Central Bank raised its reference rate by 50 bps in July, followed by another 75 bps in September. Other factors that weighed on sentiment during the quarter included the ongoing Russia-Ukraine war, an energy crisis in Europe, and the resumption of COVID-19 lockdowns in China.
Global equities rebounded in the fourth quarter trimming full year losses. Gains in October and November were sparked by signs of peaking inflation alongside less hawkish commentary from Fed Chairman Powell raising hope that the central bank would end its interest rate hiking cycle sometime in early 2023. Indeed, both the Fed and the European Central Bank raised their benchmark overnight lending rates by a more modest 50 bps in mid-December. Also supporting sentiment, the Chinese government began to ease their zero-COVID-19 policy that had weighed on global economic growth for much of 2022. However, stocks retreated into year-end as investors shifted their focus to the potential impact higher rates might have on economic growth and corporate earnings in the coming year.
As the reporting period crossed into 2023, global equities started off the year logging positive returns in the month of January. Bonds also rallied at the start of the year on hopes that the Fed's hawkish pivot would come to an end in 2023. As the calendar moved to February, stronger than expected employment and inflation reports caused investors to reevaluate interest rate expectations for 2023 and consider that rates could stay higher for longer. The result was a reversal in global equities and bonds which ended the month lower.
• How did the USAA Cornerstone Moderately Conservative Fund (the "Fund") perform during the reporting period?
The Fund's fiscal year-end changed this year to February 28 from May 31, resulting in a shorter reporting period for fiscal year ended 2023. For the nine-month reporting period ended February 28, 2023, the Fund had a total return (at net asset value) of -3.31%. This compares to returns of -3.72% for the Bloomberg U.S. Universal Index, and -2.84% for the Cornerstone Moderately Conservative Composite Index.
4
USAA Cornerstone Moderately Conservative Fund
Managers' Commentary (continued)
• What strategies did you employ during the reporting period?
The Fund had a negative total return over the period, as global financial markets experienced weak performance and high volatility. Inflation concerns, rising interest rates and geopolitical issues continued to plague all major market segments for the majority of 2022 creating a volatile investment environment. The Fund slightly underperformed the Cornerstone Moderately Conservative Composite Index.
Overall, the Fund benefited from a tilt to the value style over growth, and to higher-quality stocks over their lower-quality counterparts. Both categories outperformed as investors gravitated to companies seen as being in the best position to withstand a period of slow growth and higher interest rates. 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 2022. On the other hand, tactical positions in international equities — such as Canada — dampened results.
The Fund had a small allocation to derivatives during the period that did not have a material impact on performance.
Our approach is to hold a core, diversified portfolio, while accounting for both current risks and longer-term opportunities. We stay focused on fundamentals, valuations, and diversification. We believe this approach is prudent for long-term investors and is particularly important now given the elevated uncertainty in the outlook for the economy and markets.
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 February 28, 2023
Fund Shares | |||||||||||||||
INCEPTION DATE | 6/8/12 | ||||||||||||||
Net Asset Value | Bloomberg U.S. | Cornerstone Moderately | |||||||||||||
One Year | –7.75 | % | –9.30 | % | –8.16 | % | |||||||||
Five Year | 2.16 | % | 0.68 | % | 3.31 | % | |||||||||
Ten Year | 3.16 | % | 1.39 | % | 4.42 | % | |||||||||
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 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
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 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 | February 28, 2023 | ||||||
(Unaudited)
Investment Objective and Portfolio Holdings:
The Fund seeks current income with a secondary focus on capital appreciation.
Asset Allocation*:
February 28, 2023
(% 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 Moderately Conservative Fund | Schedule of Portfolio Investments February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Common Stocks (15.4%) | |||||||||||
Communication Services (1.1%): | |||||||||||
AT&T, Inc. | 30,371 | $ | 574 | ||||||||
Comcast Corp. Class A | 10,752 | 400 | |||||||||
Omnicom Group, Inc. | 2,554 | 231 | |||||||||
The Interpublic Group of Cos., Inc. | 4,826 | 172 | |||||||||
Verizon Communications, Inc. | 17,765 | 689 | |||||||||
2,066 | |||||||||||
Consumer Discretionary (0.9%): | |||||||||||
Best Buy Co., Inc. | 2,578 | 214 | |||||||||
eBay, Inc. | 5,443 | 250 | |||||||||
Garmin Ltd. | 1,971 | 193 | |||||||||
Lennar Corp. Class A | 3,280 | 317 | |||||||||
Target Corp. | 3,204 | 540 | |||||||||
Whirlpool Corp. | 699 | 97 | |||||||||
1,611 | |||||||||||
Consumer Staples (0.7%): | |||||||||||
Altria Group, Inc. | 13,458 | 625 | |||||||||
Philip Morris International, Inc. | 5,275 | 513 | |||||||||
Walgreens Boots Alliance, Inc. | 7,794 | 277 | |||||||||
1,415 | |||||||||||
Energy (0.6%): | |||||||||||
EOG Resources, Inc. | 3,258 | 368 | |||||||||
Exxon Mobil Corp. | 6,186 | 680 | |||||||||
1,048 | |||||||||||
Financials (1.6%): | |||||||||||
Ameriprise Financial, Inc. | 1,350 | 463 | |||||||||
Discover Financial Services | 3,048 | 341 | |||||||||
Huntington Bancshares, Inc. | 13,100 | 201 | |||||||||
JPMorgan Chase & Co. | 4,408 | 632 | |||||||||
Prudential Financial, Inc. | 2,198 | 220 | |||||||||
Regions Financial Corp. | 7,919 | 185 | |||||||||
Synchrony Financial | 5,612 | 200 | |||||||||
T. Rowe Price Group, Inc. | 2,064 | 232 | |||||||||
The Hartford Financial Services Group, Inc. | 4,008 | 314 | |||||||||
Truist Financial Corp. | 4,802 | 225 | |||||||||
3,013 | |||||||||||
Health Care (2.6%): | |||||||||||
Abbott Laboratories | 5,012 | 510 | |||||||||
AbbVie, Inc. | 3,595 | 553 | |||||||||
Amgen, Inc. | 1,684 | 390 | |||||||||
Bristol-Myers Squibb Co. | 4,706 | 325 | |||||||||
Cardinal Health, Inc. | 3,287 | 249 | |||||||||
Elevance Health, Inc. | 433 | 203 | |||||||||
Gilead Sciences, Inc. | 7,989 | 643 | |||||||||
Medtronic PLC | 4,254 | 352 | |||||||||
See notes to financial statements.
8
| USAA Mutual Funds Trust USAA Cornerstone Moderately Conservative Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Merck & Co., Inc. | 4,030 | $ | 428 | ||||||||
Pfizer, Inc. | 10,916 | 443 | |||||||||
UnitedHealth Group, Inc. | 868 | 413 | |||||||||
West Pharmaceutical Services, Inc. | 929 | 295 | |||||||||
4,804 | |||||||||||
Industrials (0.9%): | |||||||||||
3M Co. | 4,026 | 434 | |||||||||
Cintas Corp. | 266 | 117 | |||||||||
Lockheed Martin Corp. | 958 | 454 | |||||||||
Masco Corp. | 2,779 | 146 | |||||||||
United Parcel Service, Inc. Class B | 2,732 | 498 | |||||||||
1,649 | |||||||||||
Information Technology (5.8%): | |||||||||||
Accenture PLC Class A | 2,484 | 660 | |||||||||
Apple, Inc. | 14,650 | 2,160 | |||||||||
Applied Materials, Inc. | 2,836 | 329 | |||||||||
Automatic Data Processing, Inc. | 1,241 | 273 | |||||||||
Broadcom, Inc. | 1,313 | 780 | |||||||||
Cisco Systems, Inc. | 11,339 | 549 | |||||||||
Cognizant Technology Solutions Corp. Class A | 3,881 | 243 | |||||||||
HP, Inc. | 8,159 | 241 | |||||||||
International Business Machines Corp. | 3,584 | 463 | |||||||||
KLA Corp. | 1,576 | 598 | |||||||||
Lam Research Corp. | 501 | 243 | |||||||||
Mastercard, Inc. Class A | 477 | 169 | |||||||||
Microsoft Corp. | 8,543 | 2,131 | |||||||||
Motorola Solutions, Inc. | 760 | 200 | |||||||||
NetApp, Inc. | 1,703 | 110 | |||||||||
Paychex, Inc. | 3,715 | 410 | |||||||||
QUALCOMM, Inc. | 4,064 | 502 | |||||||||
Teradyne, Inc. | 1,936 | 196 | |||||||||
Visa, Inc. Class A | 1,795 | 395 | |||||||||
10,652 | |||||||||||
Materials (0.6%): | |||||||||||
CF Industries Holdings, Inc. | 1,988 | 171 | |||||||||
Dow, Inc. | 4,248 | 243 | |||||||||
LyondellBasell Industries NV Class A | 3,203 | 307 | |||||||||
Newmont Corp. | 2,094 | 91 | |||||||||
Nucor Corp. | 896 | 150 | |||||||||
The Mosaic Co. | 2,532 | 135 | |||||||||
1,097 | |||||||||||
Real Estate (0.3%): | |||||||||||
American Tower Corp. | 564 | 112 | |||||||||
Crown Castle, Inc. | 991 | 130 | |||||||||
Equinix, Inc. | 112 | 77 | |||||||||
Prologis, Inc. | 1,532 | 189 | |||||||||
508 | |||||||||||
See notes to financial statements.
9
| USAA Mutual Funds Trust USAA Cornerstone Moderately Conservative Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Utilities (0.3%): | |||||||||||
Evergy, Inc. | 2,851 | $ | 168 | ||||||||
Pinnacle West Capital Corp. | 1,378 | 101 | |||||||||
The Southern Co. | 5,155 | 325 | |||||||||
594 | |||||||||||
Total Common Stocks (Cost $27,628) | 28,457 | ||||||||||
U.S. Treasury Obligations (2.0%) | |||||||||||
U.S. Treasury Notes, 1.63%, 4/30/23 (a) | 3,800 | 3,780 | |||||||||
Total U.S. Treasury Obligations (Cost $3,799) | 3,780 | ||||||||||
Exchange-Traded Funds (41.7%) | |||||||||||
First Trust TCW Securitized Plus ETF | 113,685 | 2,418 | |||||||||
Invesco DB Commodity Index Tracking Fund (b) | 22,900 | 544 | |||||||||
Invesco FTSE RAFI Developed Markets ex-US ETF | 35,176 | 1,558 | |||||||||
Invesco FTSE RAFI Emerging Markets ETF | 86,305 | 1,544 | |||||||||
iShares 0-5 Year TIPS Bond ETF (b) | 36,290 | 3,531 | |||||||||
iShares 20+ Year Treasury Bond ETF | 23,312 | 2,371 | |||||||||
iShares 7-10 Year Treasury Bond ETF | 24,761 | 2,371 | |||||||||
iShares Core MSCI Emerging Markets ETF | 84,595 | 4,006 | |||||||||
iShares Core S&P 500 ETF | 2,493 | 992 | |||||||||
iShares Core S&P Small-Cap ETF | 39,211 | 4,015 | |||||||||
iShares Core US Aggregate Bond ETF | 68,395 | 6,656 | |||||||||
iShares JP Morgan USD Emerging Markets Bond ETF (b) | 14,224 | 1,212 | |||||||||
iShares MSCI Canada ETF | 19,158 | 652 | |||||||||
iShares MSCI International Momentum Factor ETF (b) | 71,831 | 2,272 | |||||||||
iShares MSCI International Quality Factor ETF | 81,444 | 2,753 | |||||||||
iShares MSCI Japan ETF | 52,800 | 2,954 | |||||||||
iShares Russell 2000 ETF (b) | 5,474 | 1,030 | |||||||||
Schwab Fundamental Emerging Markets Large Co. Index ETF | 170,705 | 4,310 | |||||||||
Schwab Fundamental International Large Co. Index ETF | 237,343 | 7,334 | |||||||||
Schwab Fundamental International Small Co. Index ETF | 50,100 | 1,635 | |||||||||
SPDR Gold Shares (c) | 12,368 | 2,100 | |||||||||
SPDR S&P Emerging Markets SmallCap ETF | 7,496 | 378 | |||||||||
Vanguard FTSE All-World ex-U.S. ETF | 33,797 | 1,761 | |||||||||
Vanguard FTSE Developed Markets ETF (b) | 104,858 | 4,632 | |||||||||
Vanguard FTSE Emerging Markets ETF | 9,987 | 394 | |||||||||
Vanguard FTSE Europe ETF | 34,276 | 2,046 | |||||||||
Vanguard Mortgage-Backed Securities ETF | 56,777 | 2,599 | |||||||||
Vanguard Real Estate ETF | 7,052 | 604 | |||||||||
Vanguard S&P 500 ETF | 1,122 | 409 | |||||||||
Vanguard Short-Term Bond ETF (b) | 15,433 | 1,160 | |||||||||
Vanguard Small-Cap Value ETF | 11,516 | 1,950 | |||||||||
Vanguard Total Stock Market ETF | 11,343 | 2,263 | |||||||||
Wisdom Tree Trust — WisdomTree Emerging Markets SmallCap Dividend Fund | 5,259 | 237 | |||||||||
Xtrackers USD High Yield Corporate Bond ETF | 69,791 | 2,383 | |||||||||
Total Exchange-Traded Funds (Cost $74,065) | 77,074 | ||||||||||
See notes to financial statements.
10
| USAA Mutual Funds Trust USAA Cornerstone Moderately Conservative Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Affiliated Exchange-Traded Funds (40.1%) | |||||||||||
VictoryShares Emerging Markets Value Momentum ETF | 9,770 | $ | 393 | ||||||||
VictoryShares ESG Core Plus Bond ETF | 686,365 | 14,695 | |||||||||
VictoryShares USAA Core Intermediate-Term Bond ETF | 1,217,107 | 55,536 | |||||||||
VictoryShares USAA Core Short-Term Bond ETF | 69,125 | 3,382 | |||||||||
Total Affiliated Exchange-Traded Funds (Cost $85,371) | 74,006 | ||||||||||
Collateral for Securities Loaned (6.9%)^ | |||||||||||
| Goldman Sachs Financial Square Government Fund, Institutional Shares, 4.47% (d) | 3,176,426 | 3,176 | |||||||||
HSBC U.S. Government Money Market Fund, Institutional Shares, 4.45% (d) | 3,176,426 | 3,177 | |||||||||
Invesco Government & Agency Portfolio, Institutional Shares, 4.52% (d) | 3,176,426 | 3,177 | |||||||||
| Morgan Stanley Institutional Liquidity Government Portfolio, Institutional Shares, 4.41% (d) | 3,176,426 | 3,176 | |||||||||
Total Collateral for Securities Loaned (Cost $12,706) | 12,706 | ||||||||||
Total Investments (Cost $203,569) — 106.1% | 196,023 | ||||||||||
Liabilities in excess of other assets — (6.1)% | (11,299 | ) | |||||||||
NET ASSETS — 100.00% | $ | 184,724 | |||||||||
At February 28, 2023, the Fund's investments in foreign securities were 19.9% of net assets.
^ Purchased with cash collateral from securities on loan.
(a) All or a portion of this security has been segregated as collateral for derivative instruments.
(b) All or a portion of this security is on loan.
(c) Non-income producing security.
(d) Rate disclosed is the daily yield on February 28, 2023.
ETF — Exchange-Traded Fund
PLC — Public Limited Company
Futures Contracts Purchased
(Amounts not in thousands)
| Number of Contracts | Expiration Date | Notional Amount | Value | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||
Euro Stoxx 50 Futures | 22 | 3/17/23 | $ | 922,920 | $ | 988,155 | $ | 65,235 | |||||||||||||||
FTSE 100 Index Futures | 29 | 3/17/23 | 2,608,117 | 2,741,735 | 133,618 | ||||||||||||||||||
| S&P/Toronto Stock Exchange 60 Index Futures | 18 | 3/16/23 | 3,185,811 | 3,213,956 | 28,145 | ||||||||||||||||||
$ | 226,998 | ||||||||||||||||||||||
See notes to financial statements.
11
| USAA Mutual Funds Trust USAA Cornerstone Moderately Conservative Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
Futures Contracts Sold
(Amounts not in thousands)
| Number of Contracts | Expiration Date | Notional Amount | Value | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||
ASX SPI 200 Index Futures | 14 | 3/16/23 | $ | 1,716,465 | $ | 1,694,729 | $ | 21,736 | |||||||||||||||
Hang Seng Index Futures | 6 | 3/30/23 | 762,838 | 754,548 | 8,290 | ||||||||||||||||||
Swiss Market Index Futures | 24 | 3/17/23 | 2,794,176 | 2,809,601 | (15,425 | ) | |||||||||||||||||
Tokyo Price Index Futures | 15 | 3/9/23 | 2,111,760 | 2,198,105 | (86,345 | ) | |||||||||||||||||
$ | (71,744 | ) | |||||||||||||||||||||
Total unrealized appreciation | $ | 257,024 | |||||||||||||||||||||
Total unrealized depreciation | (101,770 | ) | |||||||||||||||||||||
Total net unrealized appreciation (depreciation) | $ | 155,254 | |||||||||||||||||||||
See notes to financial statements.
12
USAA Mutual Funds Trust | Statement of Assets and Liabilities February 28, 2023 | ||||||
(Amounts in Thousands, Except Per Share Amounts)
| USAA Cornerstone Moderately Conservative Fund | |||||||
Assets: | |||||||
Affiliated investments, at value (Cost $85,371) | $ | 74,006 | |||||
Unaffiliated investments, at value (Cost $118,198) | 122,017 | (a) | |||||
Cash | 672 | ||||||
Deposit with broker for futures contracts | 867 | ||||||
Receivables: | |||||||
Interest and dividends | 81 | ||||||
Capital shares issued | 31 | ||||||
Investments sold | 4,299 | ||||||
Variation margin on open futures contracts | 36 | ||||||
From Adviser for ETF reimbursements | 57 | ||||||
From Adviser for expense limitation agreement | 4 | ||||||
Prepaid expenses | 2 | ||||||
Total Assets | 202,072 | ||||||
Liabilities: | |||||||
Payables: | |||||||
Collateral received on loaned securities | 12,706 | ||||||
Collateral received from broker for futures contracts | 265 | ||||||
Investments purchased | 3,983 | ||||||
Capital shares redeemed | 160 | ||||||
Variation margin on open futures contracts | 40 | ||||||
Accrued expenses and other payables: | |||||||
Investment advisory fees | 72 | ||||||
Administration fees | 22 | ||||||
Custodian fees | 3 | ||||||
Transfer agent fees | 33 | ||||||
Compliance fees | — | (b) | |||||
Trustees' fees | 2 | ||||||
Other accrued expenses | 62 | ||||||
Total Liabilities | 17,348 | ||||||
Net Assets: | |||||||
Capital | 196,861 | ||||||
Total accumulated earnings/(loss) | (12,137 | ) | |||||
Net Assets | $ | 184,724 | |||||
Shares (unlimited number of shares authorized with no par value): | 18,253 | ||||||
Net asset value, offering and redemption price per share: (c) | $ | 10.12 | |||||
(a) Includes $12,314 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.
13
USAA Mutual Funds Trust | Statements of Operations | ||||||
(Amounts in Thousands)
| USAA Cornerstone Moderately Conservative Fund | |||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | ||||||||||
Investment Income: | |||||||||||
Income distributions from affiliated funds | $ | 1,568 | $ | 1,004 | |||||||
Dividends from unaffiliated investments | 2,529 | 2,721 | |||||||||
Interest from unaffiliated investments | 72 | 849 | |||||||||
Securities lending (net of fees) | 68 | 54 | |||||||||
Foreign tax withholding | — | — | (b) | ||||||||
Total Income | 4,237 | 4,628 | |||||||||
Expenses: | |||||||||||
Investment advisory fees | 699 | 1,088 | |||||||||
Administration fees | 210 | 326 | |||||||||
Sub-Administration fees | 56 | 71 | |||||||||
Custodian fees | 14 | 20 | |||||||||
Transfer agent fees | 332 | 462 | |||||||||
Trustees' fees | 36 | 48 | |||||||||
Compliance fees | 1 | 2 | |||||||||
Legal and audit fees | 50 | 54 | |||||||||
State registration and filing fees | 21 | 23 | |||||||||
Interfund lending fees | — | (b) | — | ||||||||
Other expenses | 50 | 55 | |||||||||
Recoupment of prior expenses waived/reimbursed by Adviser | — | (b) | 32 | ||||||||
Total Expenses | 1,469 | 2,181 | |||||||||
Expenses waived/reimbursed by Adviser | (209 | ) | (222 | ) | |||||||
Net Expenses | 1,260 | 1,959 | |||||||||
Net Investment Income (Loss) | 2,977 | 2,669 | |||||||||
Realized/Unrealized Gains (Losses) from Investments: | |||||||||||
Net realized gains (losses) from affiliated funds | (467 | ) | — | ||||||||
| Net realized gains (losses) from unaffiliated investment securities and foreign currency transactions | �� | (4,345 | ) | 13,887 | |||||||
Capital gain distributions received from affiliated funds | — | 125 | |||||||||
Net realized gains (losses) from futures contracts | (46 | ) | 291 | ||||||||
Net change in unrealized appreciation/depreciation on affiliated funds | (3,462 | ) | (7,625 | ) | |||||||
| Net change in unrealized appreciation/depreciation on unaffiliated investment securities and foreign currency translations | (1,611 | ) | (22,136 | ) | |||||||
Net change in unrealized appreciation/depreciation on futures contracts | 324 | (46 | ) | ||||||||
Net realized/unrealized gains (losses) on investments | (9,607 | ) | (15,504 | ) | |||||||
Change in net assets resulting from operations | $ | (6,630 | ) | $ | (12,835 | ) | |||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from May 31 to February 28.
(b) 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 Cornerstone Moderately Conservative Fund | |||||||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | Year Ended May 31, 2021 | |||||||||||||
From Investments: | |||||||||||||||
Operations: | |||||||||||||||
Net Investment Income (Loss) | $ | 2,977 | $ | 2,669 | $ | 3,052 | |||||||||
Net realized gains (losses) | (4,858 | ) | 14,303 | 8,850 | |||||||||||
| Net change in unrealized appreciation/ depreciation | (4,749 | ) | (29,807 | ) | 22,233 | ||||||||||
Change in net assets resulting from operations | (6,630 | ) | (12,835 | ) | 34,135 | ||||||||||
| Change in net assets resulting from distributions to shareholders | (12,852 | ) | (14,110 | ) | (3,777 | ) | |||||||||
Change in net assets resulting from capital transactions | 3,862 | 5,397 | (29,253 | ) | |||||||||||
Change in net assets | (15,620 | ) | (21,548 | ) | 1,105 | ||||||||||
Net Assets: | |||||||||||||||
Beginning of period | 200,344 | 221,892 | 220,787 | ||||||||||||
End of period | $ | 184,724 | $ | 200,344 | $ | 221,892 | |||||||||
Capital Transactions: | |||||||||||||||
Proceeds from shares issued | $ | 10,924 | $ | 24,022 | $ | 24,253 | |||||||||
Distributions reinvested | 12,790 | 14,047 | 3,582 | ||||||||||||
Cost of shares redeemed | (19,852 | ) | (32,672 | ) | (57,088 | ) | |||||||||
| Change in net assets resulting from capital transactions | $ | 3,862 | $ | 5,397 | $ | (29,253 | ) | ||||||||
Share Transactions: | |||||||||||||||
Issued | 1,045 | 1,948 | 2,002 | ||||||||||||
Reinvested | 1,252 | 1,142 | 303 | ||||||||||||
Redeemed | (1,891 | ) | (2,665 | ) | (4,710 | ) | |||||||||
Change in Shares | 406 | 425 | (2,405 | ) | |||||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from May 31 to February 28.
See notes to financial statements.
15
USAA Mutual Funds Trust | Financial Highlights | ||||||
For a Share Outstanding Throughout Each Period
USAA Cornerstone Moderately Conservative Fund | |||||||||||||||||||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | Year Ended May 31, 2021 | Year Ended May 31, 2020 | Year Ended May 31, 2019 | Year Ended May 31, 2018 | ||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 11.23 | $ | 12.74 | $ | 11.14 | $ | 10.94 | $ | 11.29 | $ | 11.34 | |||||||||||||||
Investment Activities: | |||||||||||||||||||||||||||
Net investment income (loss) | 0.17 | (b) | 0.15 | (b) | 0.16 | (b) | 0.23 | (b) | 0.24 | 0.21 | |||||||||||||||||
| Net realized and unrealized gains (losses) | (0.54 | ) | (0.85 | ) | 1.64 | 0.22 | (0.14 | ) | 0.23 | ||||||||||||||||||
| Total from Investment Activities | (0.37 | ) | (0.70 | ) | 1.80 | 0.45 | 0.10 | 0.44 | |||||||||||||||||||
Distributions to Shareholders from: | |||||||||||||||||||||||||||
Net investment income | (0.13 | ) | (0.17 | ) | (0.17 | ) | (0.23 | ) | (0.24 | ) | (0.21 | ) | |||||||||||||||
Net realized gains | (0.61 | ) | (0.64 | ) | (0.03 | ) | (0.02 | ) | (0.21 | ) | (0.28 | ) | |||||||||||||||
Total Distributions | (0.74 | ) | (0.81 | ) | (0.20 | ) | (0.25 | ) | (0.45 | ) | (0.49 | ) | |||||||||||||||
Net Asset Value, End of Period | $ | 10.12 | $ | 11.23 | $ | 12.74 | $ | 11.14 | $ | 10.94 | $ | 11.29 | |||||||||||||||
Total Return (c) (d) | (3.31 | )% | (5.95 | )% | 16.30 | % | 4.09 | % | 0.99 | % | 3.89 | % | |||||||||||||||
Ratios to Average Net Assets: | |||||||||||||||||||||||||||
Net Expenses (e) (f) (g) | 0.90 | % | 0.90 | % | 0.90 | % | 0.90 | % | 0.90 | % | 0.90 | % | |||||||||||||||
Net Investment Income (Loss) (e) | 2.13 | % | 1.23 | % | 1.35 | % | 2.05 | % | 2.22 | % | 1.84 | % | |||||||||||||||
Gross Expenses (e) (f) | 1.05 | % | 1.00 | % | 1.02 | % | 1.02 | % | 1.08 | % | 1.07 | % | |||||||||||||||
Supplemental Data: | |||||||||||||||||||||||||||
Net Assets at end of period (000's) | $ | 184,724 | $ | 200,344 | $ | 221,892 | $ | 220,787 | $ | 226,484 | $ | 221,721 | |||||||||||||||
Portfolio Turnover (c) | 43 | % | 61 | % | 52 | % | 84 | % | 77 | %(h) | 45 | % | |||||||||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from May 31 to February 28.
(b) Per share net investment income (loss) has been calculated using the average daily shares method.
(c) Not annualized for periods less than one year.
(d) 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.
(e) Annualized for periods less than one year.
(f) Does not include acquired fund fees and expenses, if any.
(g) 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 September 30, 2023, instead of coinciding with the Fund's fiscal year end.
(h) Reflects increased usage of quantitative investment strategies.
See notes to financial statements.
16
USAA Mutual Funds Trust | Notes to Financial Statements February 28, 2023 | ||||||
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.
On June 29, 2022, the Board of Trustees (the "Board") approved the fiscal year-end change for the Fund from May 31 to February 28. The first full cycle of the new fiscal year-end reporting will begin March 1, 2023. As a result of the change, the Fund has a February 28, 2023 fiscal nine-month transition period, the results of which are reported in this Annual Report for the period ended February 28, 2023.
Victory Capital Management ("VCM" or 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 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 (unadjusted) in active markets for identical securities
• Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, or credit spreads, applicable to those securities, etc.)
• Level 3 — significant unobservable inputs (including the Adviser's 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, appointed as the valuation designee by the Board, has established the Pricing and Liquidity Committee (the "Committee"), and subject to Board oversight, the Committee administers and oversees the Fund's valuation policies and procedures, which are approved by the Board.
17
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
Portfolio securities listed or traded on securities exchanges, including Exchange-Traded Funds ("ETFs"), and American Depositary Receipts, 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, 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 valuation designee and subject to the oversight of the Board. The 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.
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 February 28, 2023, 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 | $ | 28,457 | $ | — | $ | — | $ | 28,457 | |||||||||||
U.S. Treasury Obligations | — | 3,780 | — | 3,780 | |||||||||||||||
Exchange-Traded Funds | 77,074 | — | — | 77,074 | |||||||||||||||
Affiliated Exchange-Traded Funds | 74,006 | — | — | 74,006 | |||||||||||||||
Collateral for Securities Loaned | 12,706 | — | — | 12,706 | |||||||||||||||
Total | $ | 192,243 | $ | 3,780 | $ | — | $ | 196,023 | |||||||||||
Other Financial Investments* | |||||||||||||||||||
Assets: | |||||||||||||||||||
Futures Contracts | $ | 257 | $ | — | $ | — | $ | 257 | |||||||||||
Liabilities: | |||||||||||||||||||
Futures Contracts | $ | (102 | ) | $ | — | $ | — | $ | (102 | ) | |||||||||
Total | $ | 155 | $ | — | $ | — | $ | 155 | |||||||||||
* Futures contracts are valued at the unrealized appreciation (depreciation) on the investment.
As of February 28, 2023, there were no transfers into/out of Level 3.
18
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 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.
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 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.
19
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 nine months ended February 28, 2023, 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 February 28, 2023 (amounts in thousands):
Assets | Liabilities | ||||||||||
| Variation Margin Receivable on Open Futures Contracts* | Variation Margin Payable on Open Futures Contracts* | ||||||||||
Equity Risk Exposure | $ | 257 | $ | 102 | |||||||
* 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 Statements of Operations, categorized by risk exposure, for the nine months ended February 28, 2023 (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 | $ | (46 | ) | $ | 324 | ||||||
The following table presents the effect of derivative instruments on the Statements 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 period 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 period end is generally representative of the notional amount of open positions to net assets throughout the period.
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 Statements of Operations.
20
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
Withholding taxes on interest, dividends, and gains as a result of certain investments 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 Statements 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 February 28, 2023.
| Value of Securities on Loan | Non-Cash Collateral | Cash Collateral | |||||||||
| $ | 12,314 | $ | — | $ | 12,706 | ||||||
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 unaffiliated investment securities and foreign currency translations on the Statements of Operations. Any realized gains or losses from these fluctuations are disclosed as Net realized gains (losses) from unaffiliated investment securities and foreign currency transactions on the Statements 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.
21
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 had a tax year end of May 31, and effective February 28, 2023, the Fund changed its tax year end to February 28.
For the nine months ended February 28, 2023, 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 under specified conditions outlined in the valuation policies and procedures adopted by the Board. In addition, as defined under the valuation policies and procedures, each transaction must be effected at the independent current market price. For the nine months ended February 28, 2023, 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) | |||||||||
| $ | — | $ | 535 | $ | (80 | ) | |||||
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 nine months ended February 28, 2023, were as follows for the Fund (amounts in thousands):
| Excluding U.S. Government Securities | U.S. Government Securities | ||||||||||||||
Purchases | Sales | Purchases | Sales | ||||||||||||
$ | 80,583 | $ | 85,069 | $ | — | $ | 135 | ||||||||
22
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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.
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 incurred and paid to VCM for the nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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 nine months ended February 28, 2023, and 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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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.
23
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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 September 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 limit 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 February 28, 2023, 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 nine months ended February 28, 2023, the Fund incurred reimbursable expenses of $209 thousand, of which $174 thousand consisted of affiliated ETF Adviser for reimbursement and is reflected on the Statements of Operations as Expenses waived/reimbursed by Adviser. For the year ended May 31, 2022, the Fund incurred reimbursable expense of $222 thousand, of which $175 thousand consisted of affiliated ETF Adviser for reimbursement and is reflected on the Statements of Operations as Expenses waived/reimbursed by Adviser. As of February 28, 2023, the Fund has a receivable related to these reimbursable expenses from the Adviser for $57 thousand, pursuant to the Fund's expense limitation agreement and is reflected on the Statement of Assets and Liabilities as Receivable from Adviser for ETF reimbursements.
Under the terms of the expense limitation agreement, 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. For the nine months ended February 28, 2023, the Fund incurred reimbursable expenses of $35 thousand under the terms of the expense limitation agreement and is reflected on the Statements of Operations as Expenses waived/reimbursed by Adviser. For the year ended May 31, 2022, the Fund incurred reimbursable expenses of $47 thousand under the terms of the expense limitation agreement and is reflected on the Statements of Operations as Expenses waived/reimbursed by Adviser. As of February 28, 2023, the Fund has a receivable related to these reimbursable expenses from the Adviser for $4 thousand pursuant to the Fund's expense limitation agreement and is reflected on the Statement of Assets and Liabilities as Receivable from Adviser for expense limitation agreement.
As of February 28, 2023, 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 February 28, 2023.
| Expires 2023* | Expires 2024 | Expires 2025 | Expires 2026 | Total | |||||||||||||||
| $ | 64 | $ | 246 | $ | 47 | $ | 35 | $ | 392 | ||||||||||
* Amount includes $32 thousand that expired on March 31, 2023.
24
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
As of May 31, 2022, the following amounts are available to be repaid to the Adviser (amounts in thousands).
| 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 nine months ended February 28, 2023, and 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.
ETF Risk — The Fund may invest in shares of ETFs, which generally are registered 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
25
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 27, 2022, with a termination date of June 26, 2023. 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 nine months ended February 28, 2023, 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 paid a pro-rata portion of the commitment fees plus any interest on amounts borrowed. For the period from June 1, 2022, through June 27, 2022, interest was based on the one-month London Interbank Offered Rate (" LIBOR") plus one percent. Effective with the renewal, for the period June 28, 2022, through February 28, 2023, interest was based on the one-month Secured Overnight Financing Rate ("SOFR") plus 1.10 percent. The Fund did not experience a material financial impact transitioning from LIBOR to SOFR. Interest charged to the 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 nine months ended February 28, 2023, and 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 Statements of Operations under Interfund lending fees. As a Lender, interest earned by the Fund, if any, during the period, is reflected on the Statements of Operations under Interfund lending.
The average borrowing or lending for the days outstanding and average interest rate for the Fund during the nine months ended February 28, 2023, were as follows (amounts in thousands):
| Borrower or Lender | Amount Outstanding at February 28, 2023 | Average Borrowing* | Days Borrowing Outstanding | Average Interest Rate* | Maximum Borrowing During the Period | ||||||||||||||||||
Borrower | $ | — | $ | 992 | 4 | 2.86 | % | $ | 992 | ||||||||||||||
* Based on the number of days borrowings were outstanding for the nine months ended February 28, 2023.
The Fund did not utilize or participate in the Facility during the year ended May 31, 2022.
26
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 February 28, 2023, on the Statement 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 | ||||||
| $ | (4 | ) | $ | 4 | |||
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):
Nine Months Ended February 28, 2023 | |||||||||||
Distributions Paid From | |||||||||||
Ordinary | Net | Total | |||||||||
$ | 3,133 |
| $ | 9,719 |
| $ | 12,852 | ||||
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 February 28, 2023, 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 Losses | Unrealized Appreciation (Depreciation)* | Total Accumulated Earnings (Loss) | ||||||||||||||||||
| $ | 768 | $ | (42 | ) | $ | 726 | $ | (4,356 | ) | $ | (8,507 | ) | $ | (12,137 | ) | ||||||||
* The difference between the book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to tax deferral of losses on wash sales, straddle, partnership adjustments, REIT adjustments and derivatives.
As of February 28, 2023, 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 | |||||||||
| $ | 2,144 | $ | 2,212 | $ | 4,356 | ||||||
27
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
As of February 28, 2023, 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) | ||||||||||||
| $ | 204,502 | $ | 7,701 | $ | (16,208 | ) | $ | (8,507 | ) | ||||||
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 nine months ended February 28, 2023, were as follows (amounts in thousands):
| Fair Value 5/31/2022 | Purchases at Cost | Proceeds from Sales | Net Realized Gains (Losses) | Capital Gain Distributions | Net Change in Unrealized Appreciation/ Depreciation | Fair Value 2/28/2023 | Dividend Income | ||||||||||||||||||||||||||||
| VictoryShares Emerging Markets Value Momentum ETF | $ | 436 | $ | — | $ | — | $ | — | $ | — | $ | (43 | ) | $ | 393 | $ | 12 | ||||||||||||||||||
| VictoryShares ESG Core Plus Bond ETF | 15,102 | 628 | (314 | ) | — | — | (721 | ) | 14,695 | 411 | |||||||||||||||||||||||||
| VictoryShares USAA Core Intermediate-Term Bond ETF | 59,452 | 2,441 | (3,223 | ) | (467 | ) | — | (2,667 | ) | 55,536 | 1,075 | ||||||||||||||||||||||||
| VictoryShares USAA Core Short-Term Bond ETF | 2,712 | 701 | — | — | — | (31 | ) | 3,382 | 70 | ||||||||||||||||||||||||||
$ | 77,702 | $ | 3,770 | $ | (3,537 | ) | $ | (467 | ) | $ | — | $ | (3,462 | ) | $ | 74,006 | $ | 1,568 | |||||||||||||||||
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 Distributions | Net Change in Unrealized Appreciation/ Depreciation | Fair Value 5/31/22 | Dividend Income | ||||||||||||||||||||||||||||
| VictoryShares USAA MSCI Emerging Markets Value Momentum ETF* | $ | 503 | $ | — | $ | — | $ | — | $ | — | $ | (67 | ) | $ | 436 | $ | 21 | ||||||||||||||||||
| VictoryShares ESG Core Plus Bond ETF | — | 33,279 | (16,640 | ) | — | — | (1,537 | ) | 15,102 | 142 | |||||||||||||||||||||||||
28
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
| Fair Value 5/31/2021 | Purchases at Cost | Proceeds from Sales | Realized Gains (Losses) | Capital Gain Distributions | Net Change in Unrealized Appreciation/ Depreciation | Fair Value 5/31/22 | Dividend Income | ||||||||||||||||||||||||||||
| 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 | ||||||||||||||||||||||||||
$ | 27,462 | $ | 115,730 | $ | (57,865 | ) | $ | — | $ | 125 | $ | (7,625 | ) | $ | 77,702 | $ | 1,004 | ||||||||||||||||||
* During the reporting period the Fund name was changed to VictoryShares Emerging Markets Value Momentum ETF.
9. Subsequent Events:
The Board, upon recommendation of the Adviser, has approved a change in the name of the Trust and each individual fund within the Trust. On February 23, 2023, an initial filing was made with the SEC to commence the process to effectuate the following changes.
Effective at the start of business on April 24, 2023 (the "Effective Date"), the name of the Trust changed from USAA Mutual Funds Trust to Victory Portfolios III, and all references to USAA Mutual Funds Trust in the summary prospectus, statutory prospectus, and statement of additional information ("SAI") will be replaced by the new name.
Also on the Effective Date, references to the current name of the Fund in the summary prospectus, statutory prospectus, and SAI will be replaced with the new name as follows:
Current Name | New Name | ||||||
USAA Cornerstone Moderately Conservative Fund | Victory Cornerstone Moderately Conservative Fund | ||||||
In addition, on the Effective Date, USAA Investments, a Victory Capital Management Inc. investment franchise, that currently manages the USAA Fixed Income Funds, will change its name to Victory Income Investors, and all references to USAA Investments in the summary prospectus, statutory prospectus, and SAI, will be replaced.
Please note that there will be no changes in the management of the Fund or to the Fund's ticker symbols.
29
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 February 28, 2023, and the related statements of operations for the period from June 1, 2022 through February 28, 2023 and the year ended May 31, 2022, the statements of changes in net assets for the period from June 1, 2022 through February 28, 2023 and each of the two years in the period ended May 31, 2022, the financial highlights for the period from June 1, 2022 through February 28, 2023 and each of the five years in the period ended May 31, 2022, 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 February 28, 2023, the results of its operations for the period from June 1, 2022 through February 28, 2023 and the year ended May 31, 2022, the statements of changes in net assets for the period from June 1, 2022 through February 28, 2023 and each of the two years in the period ended May 31, 2022, and its financial highlights for the period from June 1, 2022 through February 28, 2023 and each of the five years in the period ended May 31, 2022, 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 February 28, 2023, by correspondence with the custodian and brokers. 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
April 28, 2023
30
USAA Mutual Funds Trust | Supplemental Information February 28, 2023 | ||||||
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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 date 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 February 28, 2023 | ||||||
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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 (06/17-06/19); 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 (03/15-03/21). | 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 February 28, 2023 | ||||||
(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) | ||||||||||||||||||
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USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 February 28, 2023 | ||||||
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Officers:
The officers of the Trust, their date 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. (since 2022); 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. (07/01/19-present); Executive Director, Investment and Financial Administration, USAA (2012-06/30/19); 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. (07/01/19-present); Accounting/ Financial Director, USAA (12/13-06/30/19). | ||||||||||||
| 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). | ||||||||||||
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USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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). | ||||||||||||
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USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
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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 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 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 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 September 1, 2022, through February 28, 2023.
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 9/1/22 | Actual Ending Account Value 2/28/23 | Hypothetical Ending Account Value 2/28/23 | Actual Expenses Paid During Period 9/1/22- 2/28/23* | Hypothetical Expenses Paid During Period 9/1/22- 2/28/23* | Annualized Expense Ratio During Period 9/1/22- 2/28/23 | ||||||||||||||||||
| $ | 1,000.00 | $ | 1,014.40 | $ | 1,020.33 | $ | 4.50 | $ | 4.51 | 0.90 | % | ||||||||||||
* Expenses are equal to the average account value multiplied by the Fund's annualized expense ratio multiplied by 181/365 (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 February 28, 2023 | ||||||
(Unaudited)
Additional Federal Income Tax Information
The following federal tax information related to the Fund's fiscal nine months ended February 28, 2023, 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 2024.
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 nine months ended February 28, 2023 (amounts in thousands):
| Dividend Received Deduction (corporate shareholders) | Qualified Dividend Income (non-corporate shareholders) | Short-Term Capital Gain Distributions | Long-Term Capital Gain Distributions | ||||||||||||
| 16 | % | 18 | % | $ | 888 | $ | 9,719 | ||||||||
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USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 8-9, 2022, 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 8-9, 2022, 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 21, 2022.
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 February 28, 2023 | ||||||
(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 program, (iv) derivatives risk management program, and (v) 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 below its Lipper index for the one-, three- and five-year periods ended June 30, 2022. The Board took into account management's discussion of the Fund's performance, including the reasons for the Fund's underperformance relative to the Lipper index.
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
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USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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; (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.
41
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 10, 2023, 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-RN (prior to August 2022, Form N-LIQUID) and recommended no material changes to the LRMP.
42
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 | ||||||
vcm.com | (800) 235-8396 | ||||||
97447-0423
February 28, 2023
Annual Report
USAA Emerging Markets Fund
(Also Known as Victory Emerging Markets Fund*)
* Effective at the start of business on April 24, 2023, the Fund name will change to Victory Emerging Markets Fund. Please see Notes to the Financial Statements for subsequent event information.
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.
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, 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 | ||||||
Statements 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 | 39 | ||||||
Supplemental Information (Unaudited) | 40 | ||||||
Trustee and Officer Information | 40 | ||||||
Proxy Voting and Portfolio Holdings Information | 46 | ||||||
Expense Examples | 46 | ||||||
Additional Federal Income Tax Information | 47 | ||||||
Advisory Contract Renewal | 48 | ||||||
Liquidity Risk Management Program | 52 | ||||||
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,
If you are reading this letter but double-checking your calendar, be assured there's no mistake. The annual reporting period for your USAA Mutual Fund has shifted from a fiscal year ended May 31st to a fiscal year ended February 28th/the last day of February. This change has no material impact on any of your investments. This change aims to help us improve efficiencies and reduce operational costs. Therefore, this letter covers an abbreviated "annual" period from June 1, 2022, through February 28, 2023. Future annual reports will cover the 12-month period ended February 28th/the last day of February going forward.
Our most recent annual reporting period has been a challenging period for investors. Consider some of the headwinds: heightened geopolitical tensions, a terrible war in Eastern Europe, elevated energy and food costs, high inflation, and rising interest rates. All this has dampened global growth and created a difficult backdrop for both bond and stock investors.
The inflation data was particularly troublesome and surprised many throughout the past year with some of the highest readings since the 1970s. In response, the U.S. Federal Reserve (the "Fed") continued with its monetary tightening and boosted the Fed funds interest rate repeatedly throughout the annual reporting period. And if that wasn't enough, zero-COVID-19 policies in China (which fortunately have been recently lifted) further exacerbated supply chain issues. As one might expect, all these obstacles ratcheted up volatility across financial markets.
In terms of the numbers, the S&P 500® Index, the bell-weather proxy for our domestic stock market, delivered a negative total return of almost 3% for our abbreviated annual reporting period. But perhaps what made 2022 even more difficult was the performance of fixed income markets. The Bloomberg US Aggregate Bond Index—a proxy for a diversified fixed income portfolio and one that many investors and institutions follow closely—delivered a negative total return of approximately 4% during the same period. That's not exactly the offset to equity performance that many investors come to expect from bonds.
It's been difficult, and we fully acknowledge that the steady drumbeat of bad news and bouts of stomach-churning volatility can take a toll on investors' psyche. Even when markets often snap back sharply (as happened this past July, October and earlier this calendar year), investors often wonder if they have missed an opportunity.
Through all of the turmoil and challenges in our most recent annual reporting period, we are reminded of two enduring realities: 1) financial markets are dynamic and apt to change abruptly; 2) it's vital to remain calm and rational whenever faced with those inevitable bouts of turmoil.
Fortunately, we think that investors can take comfort knowing that all of our independent investment franchises have experience managing portfolios through a wide variety of market environments. Our investment professionals remain calm during turbulent financial markets, and we think it's imperative that investors do the same.
2
We still believe that a long-term plan, a well-diversified portfolio across asset classes and investment types, and a clear understanding of individual risk tolerances are the key ingredients for staying the course and progressing on investment goals. Moreover, all our investment professionals continually monitor the environment and work hard to position portfolios opportunistically no matter what the markets bring. Remember, turmoil can also create opportunity.
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, we encourage you to contact our Member Service Representatives. Call 800-235-8396, or visit our website at vcm.com.
From all of us here at Victory Capital, thank you for your ongoing confidence and 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?
The reporting period started in the month of June as pressure continued to mount for both stocks and bonds. The U.S. Federal Reserve's (the "Fed") hawkish pivot continued to put pressure on equity multiples. With stubbornly high inflation readings, 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.
In the third quarter, global equities declined, continuing the downward trend from the first half of 2022. The quarter began with a rally that continued into mid-August, on hopes that the Fed would pivot toward a more accommodative policy. However, messaging from Fed Chairman, Jerome Powell, and a stronger-than-expected inflation report in early September dampened investor optimism over the central bank's trajectory and the odds of avoiding recession. The Fed went on to hike rates aggressively by 75 basis points ("bps") twice during the quarter, bringing the benchmark Fed funds rate target to a range of 3.0% to 3.25%, as compared to 0% to 0.25% at the beginning of the year. (A basis point is 1/100th of a percentage point.) For its part, the European Central Bank raised its reference rate by 50 bps in July, followed by another 75 bps in September. Other factors that weighed on sentiment during the quarter included the ongoing Russia-Ukraine war, an energy crisis in Europe, and the resumption of COVID-19 lockdowns in China.
Global equities rebounded in the fourth quarter trimming full year losses. Gains in October and November were sparked by signs of peaking inflation alongside less hawkish commentary from Fed Chairman Powell raising hope that the central bank would end its interest rate hiking cycle sometime in early 2023. Indeed, both the Fed and the European Central Bank raised their benchmark overnight lending rates by a more modest 50 bps in mid-December. Also supporting sentiment, the Chinese government began to ease their zero-COVID-19 policy that had weighed on global economic growth for much of 2022. However, stocks retreated into year-end as investors shifted their focus to the potential impact higher rates might have on economic growth and corporate earnings in the coming year.
As the reporting period crossed into 2023, global equities started off the year logging positive returns in the month of January. Bonds also rallied at the start of the year on hopes that the Fed's hawkish pivot would come to an end in 2023. As the calendar moved to February, stronger than expected employment and inflation reports caused investors to reevaluate interest rate expectations for 2023 and consider that rates could stay higher for longer. The result was a reversal in global equities and bonds which ended the month lower.
• How did the USAA Emerging Markets Fund (the "Fund") perform during the reporting period?
The Fund has two share classes: Fund Shares and Institutional Shares. The Fund's fiscal year-end changed this year to February 28 from May 31, resulting in a shorter reporting period for fiscal year ended 2023. For the nine-month reporting period ended
4
USAA Emerging Markets Fund
Managers' Commentary (continued)
February 28, 2023, the Fund Shares and Institutional Shares had total returns (at net asset value) of -9.36% and -9.26%, respectively. This compares to returns of -8.62% for the MSCI Emerging Markets Index, and -5.95% 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, the investment franchises, and Victory Capital's Victory Solutions platform.
• What strategies did you employ during the reporting period?
During the reporting period ending on February 28, 2023, the Fund underperformed its benchmark MSCI Emerging Markets Index. On a country basis, an overweight and stock selection in Mexico were positive contributors to performance. On the negative side, an underweight and stock selection in China were detractors.
Reviewing performance from a sector standpoint, stock selection was a positive contributor in financials and energy. The materials sector had a negative stock selection effect. An underweight to the utilities 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 February 28, 2023
Fund Shares | Institutional Shares | ||||||||||||||||||
INCEPTION DATE | 11/7/94 | 8/1/08 | |||||||||||||||||
Net Asset Value | Net Asset Value | MSCI Emerging | Lipper Emerging | ||||||||||||||||
One Year | –14.65 | % | –14.52 | % | –15.28 | % | –13.85 | % | |||||||||||
Five Year | –1.81 | % | –1.61 | % | –1.87 | % | –1.13 | % | |||||||||||
Ten Year | 0.82 | % | 1.03 | % | 1.52 | % | 1.89 | % | |||||||||||
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 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 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 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 | February 28, 2023 | ||||||
(Unaudited)
Investment Objective and Portfolio Holdings:
The Fund seeks capital appreciation.
Top 10 Sectors*:
February 28, 2023
(% of Net Assets)
Information Technology | 23.9 | % | |||||
Financials | 19.9 | % | |||||
Consumer Discretionary | 13.5 | % | |||||
Materials | 8.1 | % | |||||
Industrials | 7.8 | % | |||||
Communication Services | 6.8 | % | |||||
Health Care | 5.1 | % | |||||
Consumer Staples | 4.8 | % | |||||
Energy | 4.6 | % | |||||
Real Estate | 2.6 | % | |||||
Country Allocation:
February 28, 2023
(% 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 February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares) (Unaudited)
Security Description | Shares | Value | |||||||||
Common Stocks (98.5%) | |||||||||||
Brazil (6.5%): | |||||||||||
Consumer Discretionary (0.8%): | |||||||||||
Lojas Renner SA | 507,700 | $ | 1,809 | ||||||||
Vibra Energia SA | 1,040,418 | 2,939 | |||||||||
4,748 | |||||||||||
Consumer Staples (0.4%): | |||||||||||
Sao Martinho SA | 298,800 | 1,552 | |||||||||
Sendas Distribuidora SA | 100,940 | 350 | |||||||||
SLC Agricola SA | 45,370 | 427 | |||||||||
2,329 | |||||||||||
Energy (1.1%): | |||||||||||
3R Petroleum Oleo e Gas SA (a) | 57,400 | 399 | |||||||||
Petro Rio SA (a) | 79,800 | 514 | |||||||||
Petroleo Brasileiro SA, ADR | 504,677 | 5,597 | |||||||||
6,510 | |||||||||||
Financials (1.1%): | |||||||||||
Banco do Brasil SA | 400,095 | 3,080 | |||||||||
Banco do Estado do Rio Grande do Sul SA Preference Shares | 219,400 | 419 | |||||||||
Itau Unibanco Holding SA, ADR | 693,306 | 3,335 | |||||||||
6,834 | |||||||||||
Health Care (0.3%): | |||||||||||
Hypera SA | 255,100 | 2,030 | |||||||||
Industrials (0.8%): | |||||||||||
CCR SA | 851,020 | 1,787 | |||||||||
Randon SA Implementos e Participacoes Preference Shares | 263,100 | 400 | |||||||||
Santos Brasil Participacoes SA | 1,183,600 | 1,811 | |||||||||
SIMPAR SA | 839,460 | 1,151 | |||||||||
5,149 | |||||||||||
Information Technology (0.3%): | |||||||||||
Cielo SA | 684,300 | 628 | |||||||||
Pagseguro Digital Ltd. Class A (a) | 151,141 | 1,310 | |||||||||
1,938 | |||||||||||
Materials (1.4%): | |||||||||||
Gerdau SA Preference Shares | 333,500 | 1,824 | |||||||||
Vale SA | 283,000 | 4,613 | |||||||||
Vale SA, ADR | 121,697 | 1,988 | |||||||||
8,425 | |||||||||||
Real Estate (0.1%): | |||||||||||
Aliansce Sonae Shopping Centers sa | 104,500 | 341 | |||||||||
Utilities (0.2%): | |||||||||||
Eneva SA (a) | 182,800 | 399 | |||||||||
Equatorial Energia SA | 77,700 | 378 | |||||||||
See notes to financial statements.
8
| USAA Mutual Funds Trust USAA Emerging Markets Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares) (Unaudited)
Security Description | Shares | Value | |||||||||
Omega Energia SA (a) | 174,650 | $ | 308 | ||||||||
1,085 | |||||||||||
39,389 | |||||||||||
Canada (1.2%): | |||||||||||
Energy (0.3%): | |||||||||||
Parex Resources, Inc. | 101,478 | 1,654 | |||||||||
Materials (0.9%): | |||||||||||
First Quantum Minerals Ltd. | 255,946 | 5,593 | |||||||||
7,247 | |||||||||||
Chile (0.1%): | |||||||||||
Consumer Staples (0.1%): | |||||||||||
Cencosud SA | 307,688 | 581 | |||||||||
Real Estate (0.0%): (b) | |||||||||||
Cencosud Shopping SA | 224,364 | 320 | |||||||||
901 | |||||||||||
China (26.7%): | |||||||||||
Communication Services (4.2%): | |||||||||||
Baidu, Inc. Class A (a) | 279,612 | 4,808 | |||||||||
Hello Group, Inc., ADR | 37,293 | 328 | |||||||||
Tencent Holdings Ltd. | 462,463 | 20,316 | |||||||||
25,452 | |||||||||||
Consumer Discretionary (6.8%): | |||||||||||
361 Degrees International Ltd. (a) | 1,014,000 | 486 | |||||||||
Alibaba Group Holding Ltd. (a) | 1,037,104 | 11,399 | |||||||||
Alibaba Group Holding Ltd., ADR (a) | 47,267 | 4,150 | |||||||||
BYD Co. Ltd. Class H | 136,000 | 3,656 | |||||||||
Fuyao Glass Industry Group Co. Ltd. Class A | 324,300 | 1,733 | |||||||||
Gree Electric Appliances, Inc. Class A | 453,300 | 2,317 | |||||||||
Hisense Home Appliances Group Co. Ltd. Class A | 927,500 | 2,551 | |||||||||
JD.com, Inc. Class A | 141,808 | 3,153 | |||||||||
Meituan Class B (a) (c) | 264,136 | 4,584 | |||||||||
MINISO Group Holding Ltd., ADR | 27,975 | 501 | |||||||||
Pinduoduo, Inc., ADR (a) | 56,912 | 4,993 | |||||||||
Yadea Group Holdings Ltd. (c) | 940,000 | 2,018 | |||||||||
41,541 | |||||||||||
Consumer Staples (2.0%): | |||||||||||
Chenguang Biotech Group Co. Ltd. Class A | 745,675 | 1,940 | |||||||||
Hengan International Group Co. Ltd. | 557,000 | 2,562 | |||||||||
Inner Mongolia Yili Industrial Group Co. Ltd. Class A | 393,800 | 1,730 | |||||||||
Wuliangye Yibin Co. Ltd. Class A | 209,000 | 6,143 | |||||||||
12,375 | |||||||||||
See notes to financial statements.
9
| USAA Mutual Funds Trust USAA Emerging Markets Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares) (Unaudited)
Security Description | Shares | Value | |||||||||
Energy (0.9%): | |||||||||||
China Shenhua Energy Co. Ltd. Class H | 392,500 | $ | 1,181 | ||||||||
PetroChina Co. Ltd. Class H | 8,304,000 | 4,236 | |||||||||
5,417 | |||||||||||
Financials (4.6%): | |||||||||||
China Construction Bank Corp. Class H | 7,273,000 | 4,446 | |||||||||
China Merchants Bank Co. Ltd. Class H | 1,372,500 | 7,448 | |||||||||
CITIC Securities Co. Ltd. Class A | 872,900 | 2,597 | |||||||||
Industrial & Commercial Bank of China Ltd. Class H | 5,196,000 | 2,593 | |||||||||
Ping An Insurance Group Co. of China Ltd. Class H | 1,582,500 | 10,803 | |||||||||
27,887 | |||||||||||
Health Care (2.6%): | |||||||||||
3SBio, Inc. (c) | 376,000 | 373 | |||||||||
China Animal Healthcare Ltd. (a) (d) | 1,673,000 | — | |||||||||
China Medical System Holdings Ltd. | 290,000 | 437 | |||||||||
CSPC Pharmaceutical Group Ltd. | 2,728,000 | 2,931 | |||||||||
Hygeia Healthcare Holdings Co. Ltd. (a) (c) (e) | 333,600 | 2,430 | |||||||||
Pharmaron Beijing Co. Ltd. Class H (c) | 215,900 | 1,211 | |||||||||
Shenzhen Mindray Bio-Medical Electronics Co. Ltd. Class A | 49,400 | 2,232 | |||||||||
Sinopharm Group Co. Ltd. Class H | 1,229,599 | 3,293 | |||||||||
Wuxi Biologics Cayman, Inc. (a) (c) | 416,000 | 2,912 | |||||||||
15,819 | |||||||||||
Industrials (1.8%): | |||||||||||
Airtac International Group | 90,344 | 3,155 | |||||||||
China Railway Group Ltd. Class H | 3,638,000 | 1,896 | |||||||||
Sany Heavy Equipment International Holdings Co. Ltd. | 374,000 | 373 | |||||||||
Xinte Energy Co. Ltd. Class H (e) | 264,000 | 582 | |||||||||
ZTO Express Cayman, Inc., ADR | 204,831 | 4,928 | |||||||||
10,934 | |||||||||||
Information Technology (1.1%): | |||||||||||
Glodon Co. Ltd. Class A | 257,300 | 2,225 | |||||||||
JinkoSolar Holding Co. Ltd., ADR (a) | 8,303 | 440 | |||||||||
Luxshare Precision Industry Co. Ltd. Class A | 515,100 | 2,217 | |||||||||
WUS Printed Circuit Kunshan Co. Ltd. Class A | 789,360 | 1,864 | |||||||||
6,746 | |||||||||||
Materials (1.3%): | |||||||||||
Anhui Conch Cement Co. Ltd. Class H | 620,000 | 2,276 | |||||||||
Shandong Nanshan Aluminum Co. Ltd. Class A | 4,042,508 | 2,103 | |||||||||
Tianqi Lithium Corp. Class A (a) | 146,800 | 1,731 | |||||||||
Wanhua Chemical Group Co. Ltd. Class A | 129,200 | 1,942 | |||||||||
8,052 | |||||||||||
Real Estate (1.1%): | |||||||||||
A-Living Smart City Services Co. Ltd. (c) | 830,000 | 851 | |||||||||
China Vanke Co. Ltd. Class H | 1,075,075 | 1,880 | |||||||||
Greentown China Holdings Ltd. | 333,500 | 456 | |||||||||
See notes to financial statements.
10
| USAA Mutual Funds Trust USAA Emerging Markets Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares) (Unaudited)
Security Description | Shares | Value | |||||||||
Longfor Group Holdings Ltd. (c) | 724,000 | $ | 2,073 | ||||||||
Seazen Group Ltd. (a) | 3,676,000 | 1,237 | |||||||||
6,497 | |||||||||||
Utilities (0.3%): | |||||||||||
China Longyuan Power Group Corp. Ltd. Class H | 1,624,000 | 1,992 | |||||||||
162,712 | |||||||||||
Egypt (0.3%): | |||||||||||
Communication Services (0.0%): (b) | |||||||||||
Telecom Egypt Co. | 436,359 | 372 | |||||||||
Financials (0.3%): | |||||||||||
Commercial International Bank Egypt SAE Registered Shares, GDR | 1,173,487 | 1,741 | |||||||||
2,113 | |||||||||||
Greece (1.8%): | |||||||||||
Consumer Discretionary (0.4%): | |||||||||||
OPAP SA | 149,599 | 2,322 | |||||||||
Energy (0.2%): | |||||||||||
Motor Oil Hellas Corinth Refineries SA | 42,606 | 1,128 | |||||||||
Financials (0.7%): | |||||||||||
National Bank of Greece SA (a) | 817,624 | 4,574 | |||||||||
Industrials (0.4%): | |||||||||||
Mytilineos SA | 96,882 | 2,614 | |||||||||
Utilities (0.1%): | |||||||||||
Terna Energy SA | 20,918 | 435 | |||||||||
11,073 | |||||||||||
Hong Kong (3.1%): | |||||||||||
Communication Services (0.1%): | |||||||||||
NetDragon Websoft Holdings Ltd. (e) | 173,500 | 395 | |||||||||
Consumer Discretionary (1.1%): | |||||||||||
Bosideng International Holdings Ltd. | 4,282,000 | 2,376 | |||||||||
JS Global Lifestyle Co. Ltd. (c) | 1,002,000 | 952 | |||||||||
Man Wah Holdings Ltd. | 1,463,200 | 1,498 | |||||||||
Samsonite International SA (a) (c) | 660,900 | 1,855 | |||||||||
| 6,681 | ||||||||||
Health Care (0.1%): | |||||||||||
The United Laboratories International Holdings Ltd. | 796,000 | 477 | |||||||||
Industrials (0.7%): | |||||||||||
Techtronic Industries Co. Ltd. | 445,000 | 4,432 | |||||||||
Information Technology (0.6%): | |||||||||||
Lenovo Group Ltd. | 3,734,000 | 3,360 | |||||||||
Real Estate (0.4%): | |||||||||||
China Resources Land Ltd. | 618,000 | 2,746 | |||||||||
See notes to financial statements.
11
| USAA Mutual Funds Trust USAA Emerging Markets Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares) (Unaudited)
Security Description | Shares | Value | |||||||||
Utilities (0.1%): | |||||||||||
Canvest Environmental Protection Group Co. Ltd. (e) | 578,000 | $ | 285 | ||||||||
China Water Affairs Group Ltd. | 478,000 | 425 | |||||||||
710 | |||||||||||
| 18,801 | ||||||||||
Hungary (0.5%): | |||||||||||
Financials (0.4%): | |||||||||||
OTP Bank Nyrt | 83,349 | 2,530 | |||||||||
Health Care (0.1%): | |||||||||||
Richter Gedeon Nyrt | 21,209 | 446 | |||||||||
2,976 | |||||||||||
India (13.1%): | |||||||||||
Communication Services (0.3%): | |||||||||||
Indus Towers Ltd. | 770,761 | 1,592 | |||||||||
Sun TV Network Ltd. | 59,727 | 310 | |||||||||
1,902 | |||||||||||
Consumer Discretionary (1.8%): | |||||||||||
Apollo Tyres Ltd. | 115,203 | 436 | |||||||||
Bajaj Auto Ltd. | 44,739 | 1,980 | |||||||||
Indian Hotels Co. Ltd. | 165,796 | 623 | |||||||||
Kalyan Jewellers India, Ltd. (a) | 365,087 | 501 | |||||||||
Mahindra & Mahindra Ltd. | 316,475 | 4,856 | |||||||||
Mahindra CIE Automotive Ltd. | 210,512 | 1,080 | |||||||||
Raymond Ltd. | 77,155 | 1,185 | |||||||||
10,661 | |||||||||||
Consumer Staples (0.4%): | |||||||||||
Varun Beverages Ltd. | 173,135 | 2,722 | |||||||||
Energy (0.7%): | |||||||||||
Aegis Logistics Ltd. | 116,644 | 514 | |||||||||
Reliance Industries Ltd. | 130,677 | 3,665 | |||||||||
4,179 | |||||||||||
Financials (4.7%): | |||||||||||
Angel One Ltd. | 29,633 | 365 | |||||||||
Axis Bank Ltd. | 496,961 | 5,069 | |||||||||
Cholamandalam Investment & Finance Co. Ltd. | 430,223 | 3,934 | |||||||||
ICICI Bank Ltd., ADR | 761,417 | 15,746 | |||||||||
IDFC First Bank, Ltd. (a) | 749,013 | 499 | |||||||||
Mahindra & Mahindra Financial Services Ltd. | 108,230 | 329 | |||||||||
Manappuram Finance Ltd. | 1,871,946 | 2,323 | |||||||||
Power Finance Corp. Ltd. | 254,211 | 447 | |||||||||
28,712 | |||||||||||
Health Care (0.5%): | |||||||||||
Apollo Hospitals Enterprise Ltd. | 40,175 | 2,137 | |||||||||
Aster DM Healthcare Ltd. (a) (c) | 161,775 | 436 | |||||||||
See notes to financial statements.
12
| USAA Mutual Funds Trust USAA Emerging Markets Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares) (Unaudited)
Security Description | Shares | Value | |||||||||
Granules India Ltd. | 111,374 | $ | 377 | ||||||||
2,950 | |||||||||||
Industrials (1.7%): | |||||||||||
AIA Engineering Ltd. | 13,036 | 418 | |||||||||
Allcargo Logistics Ltd. | 88,552 | 396 | |||||||||
Ashok Leyland Ltd. | 1,154,258 | 2,030 | |||||||||
CMS Info Systems Ltd. | 77,697 | 268 | |||||||||
HG Infra Engineering Ltd. | 87,108 | 753 | |||||||||
KEI Industries Ltd. | 25,794 | 507 | |||||||||
Larsen & Toubro Ltd. | 216,918 | 5,529 | |||||||||
NCC Ltd. | 515,525 | 555 | |||||||||
10,456 | |||||||||||
Information Technology (1.1%): | |||||||||||
eClerx Services Ltd. | 49,681 | 838 | |||||||||
Infosys Ltd., ADR | 225,520 | 4,046 | |||||||||
KPIT Technologies Ltd. | 46,779 | 469 | |||||||||
WNS Holdings Ltd., ADR (a) | 16,742 | 1,455 | |||||||||
6,808 | |||||||||||
Materials (1.3%): | |||||||||||
Gujarat Fluorochemicals Ltd. | 10,902 | 414 | |||||||||
Jindal Steel & Power Ltd. | 131,104 | 871 | |||||||||
JK Paper Ltd. | 357,042 | 1,673 | |||||||||
National Aluminium Co. Ltd. | 346,553 | 328 | |||||||||
Tata Chemicals Ltd. | 51,130 | 603 | |||||||||
Tata Steel Ltd. | 1,675,910 | 2,108 | |||||||||
UPL Ltd. | 208,560 | 1,750 | |||||||||
7,747 | |||||||||||
Real Estate (0.1%): | |||||||||||
Oberoi Realty Ltd. | 40,157 | 416 | |||||||||
Utilities (0.5%): | |||||||||||
CESC Ltd. | 448,756 | 376 | |||||||||
Power Grid Corp. of India Ltd. | 898,453 | 2,414 | |||||||||
VA Tech Wabag Ltd. (a) | 86,247 | 321 | |||||||||
3,111 | |||||||||||
79,664 | |||||||||||
Indonesia (3.1%): | |||||||||||
Communication Services (0.5%): | |||||||||||
PT Media Nusantara Citra Tbk (a) | 5,888,000 | 251 | |||||||||
PT Telekomunikasi Indonesia Persero Tbk, ADR | 111,197 | 2,864 | |||||||||
3,115 | |||||||||||
Consumer Discretionary (0.1%): | |||||||||||
PT Mitra Adiperkasa Tbk (a) | 7,096,600 | 703 | |||||||||
Energy (0.3%): | |||||||||||
PT Adaro Energy Indonesia Tbk | 8,674,500 | 1,700 | |||||||||
See notes to financial statements.
13
| USAA Mutual Funds Trust USAA Emerging Markets Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares) (Unaudited)
Security Description | Shares | Value | |||||||||
Financials (2.1%): | |||||||||||
PT Bank Mandiri Persero Tbk | 10,364,490 | $ | 6,797 | ||||||||
PT Bank Rakyat Indonesia Persero Tbk | 19,548,046 | 5,985 | |||||||||
12,782 | |||||||||||
Information Technology (0.1%): | |||||||||||
PT Erajaya Swasembada Tbk | 11,221,800 | 379 | |||||||||
18,679 | |||||||||||
Luxembourg (0.4%): | |||||||||||
Materials (0.4%): | |||||||||||
Ternium SA, ADR | 55,059 | 2,346 | |||||||||
Malaysia (0.9%): | |||||||||||
Consumer Staples (0.1%): | |||||||||||
Heineken Malaysia Bhd | 104,100 | 664 | |||||||||
Financials (0.5%): | |||||||||||
Alliance Bank Malaysia BHD | 684,400 | 531 | |||||||||
Public Bank Bhd | 2,830,200 | 2,606 | |||||||||
3,137 | |||||||||||
Industrials (0.1%): | |||||||||||
Gamuda Bhd | 748,200 | 701 | |||||||||
Materials (0.1%): | |||||||||||
Ta Ann Holdings Bhd | 560,500 | 417 | |||||||||
Real Estate (0.0%): (b) | |||||||||||
Eco World Development Group Bhd | 2,541,800 | 385 | |||||||||
Utilities (0.1%): | |||||||||||
Mega First Corp. Bhd | 578,700 | 476 | |||||||||
5,780 | |||||||||||
Mexico (5.1%): | |||||||||||
Communication Services (0.5%): | |||||||||||
America Movil SAB de CV, ADR | 144,900 | 2,982 | |||||||||
Consumer Discretionary (0.3%): | |||||||||||
Alsea SAB de CV (a) | 761,491 | 1,683 | |||||||||
Consumer Staples (0.9%): | |||||||||||
Fomento Economico Mexicano SAB de CV, ADR | 32,776 | 3,013 | |||||||||
Kimberly-Clark de Mexico SAB de CV Class A | 1,413,200 | 2,836 | |||||||||
5,849 | |||||||||||
Energy (0.1%): | |||||||||||
Vista Energy SAB de CV, ADR (a) | 36,995 | 667 | |||||||||
Financials (2.0%): | |||||||||||
Banco del Bajio SA (c) | 196,283 | 751 | |||||||||
Grupo Financiero Banorte SAB de CV Class O | 1,338,496 | 11,300 | |||||||||
12,051 | |||||||||||
Industrials (0.4%): | |||||||||||
Grupo Aeroportuario del Pacifico SAB de CV Class B | 143,502 | 2,730 | |||||||||
See notes to financial statements.
14
| USAA Mutual Funds Trust USAA Emerging Markets Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares) (Unaudited)
Security Description | Shares | Value | |||||||||
Materials (0.6%): | |||||||||||
Alpek SAB de CV | 391,498 | $ | 480 | ||||||||
GCC SAB de CV | 118,193 | 929 | |||||||||
Grupo Mexico SAB de CV Class B | 493,299 | 2,214 | |||||||||
3,623 | |||||||||||
Real Estate (0.3%): | |||||||||||
Corp Inmobiliaria Vesta SAB de CV | 390,063 | 1,133 | |||||||||
Macquarie Mexico Real Estate Management SA de CV (c) | 303,475 | 521 | |||||||||
1,654 | |||||||||||
31,239 | |||||||||||
Philippines (0.1%): | |||||||||||
Financials (0.1%): | |||||||||||
Security Bank Corp. | 338,280 | 628 | |||||||||
Poland (0.1%): | |||||||||||
Financials (0.1%): | |||||||||||
Kruk SA | 8,006 | 595 | |||||||||
Portugal (0.6%): | |||||||||||
Energy (0.6%): | |||||||||||
Galp Energia SGPS SA | 287,126 | 3,502 | |||||||||
Qatar (0.3%): | |||||||||||
Energy (0.0%): (b) | |||||||||||
Qatar Gas Transport Co. Ltd. | 412,964 | 414 | |||||||||
Industrials (0.3%): | |||||||||||
Industries Qatar QSC | 454,973 | 1,740 | |||||||||
2,154 | |||||||||||
Russian Federation (0.0%): (b) | |||||||||||
Communication Services (0.0%): | |||||||||||
Mobile TeleSystems PJSC, ADR (a) (d) (g) | 253,826 | 14 | |||||||||
Consumer Staples (0.0%): | |||||||||||
Magnit PJSC (a) (d) (g) | 29,318 | — | (f) | ||||||||
Energy (0.0%): | |||||||||||
Gazprom PJSC (d) (g) | 1,087,480 | 35 | |||||||||
Rosneft Oil Co. PJSC, GDR (a) (d) (g) | 457,159 | 21 | |||||||||
56 | |||||||||||
Financials (0.0%): | |||||||||||
Moscow Exchange MICEX-RTS PJSC (a) (d) (g) | 196,760 | 3 | |||||||||
Sberbank of Russia PJSC (d) (g) | 687,954 | 2 | |||||||||
Sberbank of Russia PJSC, ADR (a) (d) (g) | 329,652 | 2 | |||||||||
7 | |||||||||||
77 | |||||||||||
See notes to financial statements.
15
| USAA Mutual Funds Trust USAA Emerging Markets Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares) (Unaudited)
Security Description | Shares | Value | |||||||||
Saudi Arabia (1.5%): | |||||||||||
Energy (0.1%): | |||||||||||
Aldrees Petroleum and Transport Services Co. | 21,001 | $ | 471 | ||||||||
Financials (0.6%): | |||||||||||
The Saudi National Bank | 271,581 | 3,416 | |||||||||
Information Technology (0.3%): | |||||||||||
Arabian Internet Communications Services Co. | 27,297 | 1,799 | |||||||||
Materials (0.5%): | |||||||||||
SABIC Agri-Nutrients Co. | 89,503 | 3,184 | |||||||||
8,870 | |||||||||||
South Africa (1.6%): | |||||||||||
Consumer Discretionary (0.1%): | |||||||||||
Truworths International Ltd. | 138,333 | 446 | |||||||||
Energy (0.1%): | |||||||||||
Exxaro Resources Ltd. | 31,655 | 346 | |||||||||
Financials (0.8%): | |||||||||||
Absa Group Ltd. | 277,015 | 2,992 | |||||||||
Standard Bank Group Ltd. | 219,546 | 2,194 | |||||||||
5,186 | |||||||||||
Industrials (0.5%): | |||||||||||
The Bidvest Group Ltd. | 224,742 | 2,867 | |||||||||
Materials (0.1%): | |||||||||||
African Rainbow Minerals Ltd. | 44,624 | 618 | |||||||||
Real Estate (0.0%): (b) | |||||||||||
Resilient REIT Ltd. | 122,722 | 341 | |||||||||
9,804 | |||||||||||
South Korea(13.6%): | |||||||||||
Communication Services (1.2%): | |||||||||||
Cheil Worldwide, Inc. | 18,056 | 273 | |||||||||
JYP Entertainment Corp. | 82,917 | 4,926 | |||||||||
KT Corp. | 92,487 | 2,130 | |||||||||
7,329 | |||||||||||
Consumer Discretionary (1.3%): | |||||||||||
Coway Co. Ltd. | 5,390 | 218 | |||||||||
Hyundai Mobis Co. Ltd. | 28,658 | 4,604 | |||||||||
Kia Corp. | 50,729 | 2,883 | |||||||||
Youngone Corp. | 11,957 | 385 | |||||||||
8,090 | |||||||||||
Consumer Staples (0.4%): | |||||||||||
BGF retail Co. Ltd. | 6,290 | 860 | |||||||||
KT&G Corp. | 21,059 | 1,413 | |||||||||
Lotte Chilsung Beverage Co. Ltd. | 2,480 | 314 | |||||||||
2,587 | |||||||||||
See notes to financial statements.
16
| USAA Mutual Funds Trust USAA Emerging Markets Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares) (Unaudited)
Security Description | Shares | Value | |||||||||
Financials (1.9%): | |||||||||||
DB Insurance Co. Ltd. | 24,015 | $ | 1,398 | ||||||||
Hana Financial Group, Inc. | 97,073 | 3,330 | |||||||||
JB Financial Group Co. Ltd. | 68,858 | 481 | |||||||||
Samsung Securities Co. Ltd. | 88,757 | 2,247 | |||||||||
Shinhan Financial Group Co. Ltd. | 93,774 | 2,754 | |||||||||
Woori Financial Group, Inc. | 130,613 | 1,204 | |||||||||
11,414 | |||||||||||
Health Care (0.6%): | |||||||||||
Dentium Co. Ltd. | 6,227 | 569 | |||||||||
Hugel, Inc. (a) | 11,913 | 1,160 | |||||||||
Medytox, Inc. | 2,275 | 375 | |||||||||
Samsung Biologics Co. Ltd. (a) (c) | 2,711 | 1,584 | |||||||||
3,688 | |||||||||||
Industrials (0.6%): | |||||||||||
CJ Corp. | 23,092 | 1,516 | |||||||||
DL E&C Co. Ltd. | 12,045 | 300 | |||||||||
Hanwha Aerospace Co. Ltd. | 5,545 | 377 | |||||||||
Hyundai Glovis Co. Ltd. | 2,837 | 340 | |||||||||
LX International Corp. | 15,098 | 357 | |||||||||
Samsung Engineering Co. Ltd. (a) | 32,958 | 654 | |||||||||
3,544 | |||||||||||
Information Technology (7.3%): | |||||||||||
Daeduck Electronics Co. Ltd. | 36,989 | 586 | |||||||||
DB HiTek Co. Ltd. | 9,953 | 340 | |||||||||
Innox Advanced Materials Co. Ltd. | 65,146 | 1,916 | |||||||||
LEENO Industrial, Inc. | 4,555 | 558 | |||||||||
LG Innotek Co. Ltd. | 2,996 | 626 | |||||||||
Samsung Electro-Mechanics Co. Ltd. | 21,923 | 2,384 | |||||||||
Samsung Electronics Co. Ltd. | 538,422 | 24,640 | |||||||||
SK Hynix, Inc. | 202,114 | 13,663 | |||||||||
44,713 | |||||||||||
Materials (0.3%): | |||||||||||
KCC Corp. | 1,439 | 266 | |||||||||
LOTTE Fine Chemical Co. Ltd. | 7,105 | 312 | |||||||||
OCI Co. Ltd. | 4,422 | 303 | |||||||||
Poongsan Corp. | 21,445 | 582 | |||||||||
1,463 | |||||||||||
82,828 | |||||||||||
Taiwan (14.9%): | |||||||||||
Consumer Discretionary (0.5%): | |||||||||||
Fulgent Sun International Holding Co. Ltd. | 91,000 | 405 | |||||||||
Makalot Industrial Co. Ltd. | 49,000 | 343 | |||||||||
O-TA Precision Industry Co. Ltd. | 82,000 | 348 | |||||||||
Poya International Co. Ltd. | 73,000 | 1,412 | |||||||||
See notes to financial statements.
17
| USAA Mutual Funds Trust USAA Emerging Markets Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares) (Unaudited)
Security Description | Shares | Value | |||||||||
Tong Yang Industry Co. Ltd. | 256,000 | $ | 366 | ||||||||
2,874 | |||||||||||
Health Care (0.7%): | |||||||||||
Lotus Pharmaceutical Co. Ltd. | 296,000 | 2,725 | |||||||||
Universal Vision Biotechnology Co. Ltd. | 176,550 | 1,875 | |||||||||
4,600 | |||||||||||
Industrials (0.3%): | |||||||||||
Aerospace Industrial Development Corp. | 286,000 | 361 | |||||||||
Bizlink Holding, Inc. | 43,000 | 389 | |||||||||
Chung-Hsin Electric & Machinery Manufacturing Corp. | 162,000 | 504 | |||||||||
Sincere Navigation Corp. | 619,000 | 521 | |||||||||
| 1,775 | ||||||||||
Information Technology (13.1%): | |||||||||||
ASE Technology Holding Co. Ltd. | 776,000 | 2,673 | |||||||||
ASE Technology Holding Co. Ltd., ADR | 539,762 | 3,870 | |||||||||
Chipbond Technology Corp. | 229,000 | 504 | |||||||||
Compeq Manufacturing Co. Ltd. | 313,000 | 467 | |||||||||
E Ink Holdings, Inc. | 92,000 | 582 | |||||||||
Global Unichip Corp. | 27,000 | 1,016 | |||||||||
Gold Circuit Electronics Ltd. | 1,083,800 | 3,266 | |||||||||
Hon Hai Precision Industry Co. Ltd. | 962,000 | 3,183 | |||||||||
Hon Hai Precision Industry Co. Ltd., GDR | 266,786 | 1,757 | |||||||||
King Yuan Electronics Co. Ltd. | 335,000 | 458 | |||||||||
Kinsus Interconnect Technology Corp. | 127,000 | 445 | |||||||||
Lotes Co. Ltd. | 17,000 | 478 | |||||||||
Macronix International Co. Ltd. | 319,000 | 357 | |||||||||
MediaTek, Inc. | 293,000 | 6,882 | |||||||||
Quanta Computer, Inc. | 537,000 | 1,406 | |||||||||
Radiant Opto-Electronics Corp. | 138,000 | 477 | |||||||||
Sercomm Corp. | 150,000 | 413 | |||||||||
Silicon Motion Technology Corp., ADR | 80,053 | 5,381 | |||||||||
Simplo Technology Co. Ltd. | 46,000 | 445 | |||||||||
Taiwan Semiconductor Manufacturing Co. Ltd. | 2,046,000 | 33,859 | |||||||||
Taiwan Semiconductor Manufacturing Co. Ltd., ADR | 64,329 | 5,601 | |||||||||
Tong Hsing Electronic Industries Ltd. | 57,400 | 411 | |||||||||
Unimicron Technology Corp. | 402,000 | 1,661 | |||||||||
Wiwynn Corp. | 131,000 | 4,109 | |||||||||
Zhen Ding Technology Holding Ltd. | 153,000 | 560 | |||||||||
80,261 | |||||||||||
Materials (0.2%): | |||||||||||
Allied Supreme Corp. (a) | 55,000 | 630 | |||||||||
Taiwan Hon Chuan Enterprise Co. Ltd. | 162,000 | 512 | |||||||||
1,142 | |||||||||||
Real Estate (0.1%): | |||||||||||
Huaku Development Co. Ltd. | 116,000 | 350 | |||||||||
| 91,002 | ||||||||||
See notes to financial statements.
18
| USAA Mutual Funds Trust USAA Emerging Markets Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares) (Unaudited)
Security Description | Shares | Value | |||||||||
Thailand (1.2%): | |||||||||||
Consumer Discretionary (0.0%): (b) | |||||||||||
Sri Trang Agro-Industry PCL | 373,800 | $ | 267 | ||||||||
Energy (0.2%): | |||||||||||
PTT Exploration & Production PCL | 308,500 | 1,306 | |||||||||
Health Care (0.2%): | |||||||||||
Chularat Hospital PCL | 4,361,700 | 462 | |||||||||
Mega Lifesciences PCL | 387,900 | 505 | |||||||||
967 | |||||||||||
Materials (0.3%): | |||||||||||
Indorama Ventures PCL | 1,862,000 | 1,935 | |||||||||
The Siam Cement PCL | 21,500 | 197 | |||||||||
2,132 | |||||||||||
Real Estate (0.4%): | |||||||||||
AP Thailand PCL | 5,477,900 | 1,921 | |||||||||
Origin Property PCL | 1,137,500 | 383 | |||||||||
2,304 | |||||||||||
Utilities (0.1%): | |||||||||||
Ratch Group PCL | 327,200 | 377 | |||||||||
7,353 | |||||||||||
Turkey (0.2%): | |||||||||||
Consumer Staples (0.1%): | |||||||||||
Coca-Cola Icecek A/S | 82,674 | 837 | |||||||||
Industrials (0.1%): | |||||||||||
Tekfen Holding A/S | 197,679 | 377 | |||||||||
1,214 | |||||||||||
United Arab Emirates (0.5%): | |||||||||||
Consumer Discretionary (0.3%): | |||||||||||
Americana Restaurants International PLC (a) | 1,687,582 | 1,597 | |||||||||
Industrials (0.1%): | |||||||||||
Air Arabia PJSC | 1,110,667 | 680 | |||||||||
Real Estate (0.1%): | |||||||||||
Emaar Development PJSC (a) | 468,695 | 603 | |||||||||
2,880 | |||||||||||
United Kingdom (1.1%): | |||||||||||
Consumer Staples (0.4%): | |||||||||||
Unilever PLC | 52,639 | 2,626 | |||||||||
Materials (0.7%): | |||||||||||
Anglo American PLC | 73,418 | 2,536 | |||||||||
Mondi PLC | 106,893 | 1,796 | |||||||||
4,332 | |||||||||||
6,958 | |||||||||||
Total Common Stocks (Cost $561,395) | 600,785 | ||||||||||
See notes to financial statements.
19
| USAA Mutual Funds Trust USAA Emerging Markets Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares) (Unaudited)
Security Description | Shares | Value | |||||||||
Exchange-Traded Funds (0.1%) | |||||||||||
United States (0.1%): | |||||||||||
iShares MSCI Emerging Markets Small-Cap ETF | 14,926 | $ | 744 | ||||||||
Total Exchange-Traded Funds (Cost $758) | 744 | ||||||||||
Collateral for Securities Loaned (0.0%)^ | |||||||||||
United States (0.0%): | |||||||||||
| Goldman Sachs Financial Square Government Fund, Institutional Shares, 4.47% (h) | 24,750 | 24 | |||||||||
| HSBC U.S. Government Money Market Fund, Institutional Shares, 4.45% (h) | 24,750 | 25 | |||||||||
Invesco Government & Agency Portfolio, Institutional Shares, 4.52% (h) | 24,750 | 25 | |||||||||
| Morgan Stanley Institutional Liquidity Government Portfolio, Institutional Shares, 4.41% (h) | 24,750 | 25 | |||||||||
Total Collateral for Securities Loaned (Cost $99) | 99 | ||||||||||
Total Investments (Cost $562,252) — 98.6% | 601,628 | ||||||||||
Other assets in excess of liabilities — 1.4% | 8,670 | ||||||||||
NET ASSETS — 100.00% | $ | 610,298 | |||||||||
^ 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. As of February 28, 2023, the fair value of these securities was $22,551 thousands and amounted to 3.7% of net assets.
(d) Security was fair valued based upon procedures approved by the Board of Trustees and represents 0.01% of net assets as of February 28, 2023. This security is classified as Level 3 within the fair value hierarchy. (See Note 2 in the Notes to Financial Statements)
(e) All or a portion of this security is on loan.
(f) Rounds to less than $1 thousand.
See notes to financial statements.
20
| USAA Mutual Funds Trust USAA Emerging Markets Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Unaudited)
(g) The following table details the earliest acquisition date and cost of the Fund's Russian sanctioned restricted securities at February 28, 2023, (amount in thousand):
Security Name | Acquisition | Cost | |||||||||
Gazprom PJSC | 7/28/2021 | $ | 4,261 | ||||||||
Magnit PJSC | 9/16/2021 | 2,278 | |||||||||
Mobile TeleSystems PJSC, ADR | 4/4/2016 |
| 2,117 | ||||||||
Moscow Exchange MICEX-RTS PJSC | 5/4/2020 | 331 | |||||||||
Rosneft Oil Co. PJSC, GDR | 3/6/2020 | 2,920 | |||||||||
Sberbank of Russia PJSC | 3/2/2015 |
| 51,254 | ||||||||
Sberbank of Russia PJSC, ADR | 11/11/2020 | 4,362 | |||||||||
(h) Rate disclosed is the daily yield on February 28, 2023.
ADR — American Depositary Receipt
ETF — Exchange-Traded Fund
GDR — Global Depositary Receipt
PCL — Public Company Limited
PLC — Public Limited Company
REIT — Real Estate Investment Trust
See notes to financial statements.
21
USAA Mutual Funds Trust | Statement of Assets and Liabilities February 28, 2023 | ||||||
(Amounts in Thousands, Except Per Share Amounts)
| USAA Emerging Markets Fund | |||||||
Assets: | |||||||
Investments, at value (Cost $562,252) | $ | 601,628 | (a) | ||||
Foreign currency, at value (Cost $1,413) | 1,454 | ||||||
Cash | 9,006 | ||||||
Receivables: | |||||||
Interest and dividends | 1,736 | ||||||
Capital shares issued | 327 | ||||||
Investments sold | 1,021 | ||||||
Reclaims | 39 | ||||||
From Adviser | 50 | ||||||
Prepaid expenses | 18 | ||||||
Total Assets | 615,279 | ||||||
Liabilities: | |||||||
Payables: | |||||||
Collateral received on loaned securities | 99 | ||||||
Investments purchased | 2,681 | ||||||
Capital shares redeemed | 168 | ||||||
Accrued foreign capital gains taxes | 1,184 | ||||||
Accrued expenses and other payables: | |||||||
Investment advisory fees | 489 | ||||||
Administration fees | 58 | ||||||
Custodian fees | 62 | ||||||
Transfer agent fees | 79 | ||||||
Compliance fees | 1 | ||||||
Trustees' fees | 1 | ||||||
| 12b-1 fees | — | (b) | |||||
Other accrued expenses | 159 | ||||||
Total Liabilities | 4,981 | ||||||
Net Assets: | |||||||
Capital | 619,195 | ||||||
Total accumulated earnings/(loss) | (8,897 | ) | |||||
Net Assets | $ | 610,298 | |||||
Net Assets | |||||||
Fund Shares | $ | 234,472 | |||||
Institutional Shares | 375,826 | ||||||
Total | $ | 610,298 | |||||
Shares (unlimited number of shares authorized with no par value): | |||||||
Fund Shares | 13,158 | ||||||
Institutional Shares | 21,148 | ||||||
Total | 34,306 | ||||||
Net asset value, offering and redemption price per share: (c) | |||||||
Fund Shares | $ | 17.82 | |||||
Institutional Shares | 17.77 | ||||||
(a) Includes $2,691 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 | Statements of Operations | ||||||
(Amounts in Thousands)
| USAA Emerging Markets Fund | |||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | ||||||||||
Investment Income: | |||||||||||
Dividends | $ | 20,029 | $ | 21,957 | |||||||
Interest | 70 | 2 | |||||||||
Securities lending (net of fees) | 53 | 62 | |||||||||
Foreign tax withholding | (1,954 | ) | (2,046 | ) | |||||||
Total Income | 18,198 | 19,975 | |||||||||
Expenses: | |||||||||||
Investment advisory fees | 4,635 | 6,952 | |||||||||
Administration fees — Fund Shares | 269 | 485 | |||||||||
Administration fees — Institutional Shares | 283 | 379 | |||||||||
Administration fees — Class A | — | (b)(c) | — | (c) | |||||||
Sub-Administration fees | 42 | 55 | |||||||||
| 12b-1 fees — Class A | — | (b)(c) | — | (c) | |||||||
Custodian fees | 338 | 400 | |||||||||
Transfer agent fees — Fund Shares | 466 | 669 | |||||||||
Transfer agent fees — Institutional Shares | 283 | 379 | |||||||||
Transfer agent fees — Class A | — | (b)(c) | — | (c) | |||||||
Trustees' fees | 36 | 48 | |||||||||
Compliance fees | 4 | 5 | |||||||||
Legal and audit fees | 117 | 122 | |||||||||
State registration and filing fees | 53 | 46 | |||||||||
Interfund lending fees | 8 | — | (c) | ||||||||
Other expenses | 147 | 141 | |||||||||
Recoupment of prior expenses waived/reimbursed by Adviser | — | 29 | |||||||||
Total Expenses | 6,681 | 9,710 | |||||||||
Expenses waived/reimbursed by Adviser | (361 | ) | (111 | ) | |||||||
Net Expenses | 6,320 | 9,599 | |||||||||
Net Investment Income (Loss) | 11,878 | 10,376 | |||||||||
Realized/Unrealized Gains (Losses) from Investments: | |||||||||||
| Net realized gains (losses) from investment securities and foreign currency transactions | (35,073 | ) | 30,126 | ||||||||
Foreign taxes on realized gains | (129 | ) | (749 | ) | |||||||
| Net change in unrealized appreciation/depreciation on investment securities and foreign currency translations | (36,453 | ) | (182,925 | ) | |||||||
Net change in accrued foreign taxes on unrealized gains | (656 | ) | 1,385 | ||||||||
Net realized/unrealized gains (losses) on investments | (72,311 | ) | (152,163 | ) | |||||||
Change in net assets resulting from operations | $ | (60,433 | ) | $ | (141,787 | ) | |||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from May 31 to February 28.
(b) Class A activity is for the period June 1, 2022 to February 22, 2023 (date of termination).
(c) 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 | |||||||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | Year Ended May 31, 2021 | |||||||||||||
From Investments: | |||||||||||||||
Operations: | |||||||||||||||
Net Investment Income (Loss) | $ | 11,878 | $ | 10,376 | $ | 6,334 | |||||||||
Net realized gains (losses) | (35,202 | ) | 29,377 | 106,033 | |||||||||||
| Net change in unrealized appreciation/ depreciation | (37,109 | ) | (181,540 | ) | 195,626 | ||||||||||
Change in net assets resulting from operations | (60,433 | ) | (141,787 | ) | 307,993 | ||||||||||
Distributions to Shareholders: | |||||||||||||||
Fund Shares | (3,948 | ) | (2,223 | ) | (3,653 | ) | |||||||||
Institutional Shares | (7,622 | ) | (3,355 | ) | (4,890 | ) | |||||||||
Class A | (1 | )(b) | — | (53 | ) | ||||||||||
| Change in net assets resulting from distributions to shareholders | (11,571 | ) | (5,578 | ) | (8,596 | ) | |||||||||
| Change in net assets resulting from capital transactions | 6,874 | 49,614 | (139,789 | ) | |||||||||||
Change in net assets | (65,130 | ) | (97,751 | ) | 159,608 | ||||||||||
Net Assets: | |||||||||||||||
Beginning of period | 675,428 | 773,179 | 613,571 | ||||||||||||
End of period | $ | 610,298 | $ | 675,428 | $ | 773,179 | |||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from May 31 to February 28.
(b) Class A activity is for the period June 1, 2022 to February 22, 2023 (date of termination).
(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 | |||||||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | Year Ended May 31, 2021 | |||||||||||||
Capital Transactions: | |||||||||||||||
Fund Shares | |||||||||||||||
Proceeds from shares issued | $ | 8,152 | $ | 20,578 | $ | 26,675 | |||||||||
Distributions reinvested | 3,892 | 2,195 | 3,610 | ||||||||||||
Cost of shares redeemed | (23,929 | ) | (51,176 | ) | (77,583 | ) | |||||||||
Total Fund Shares | $ | (11,885 | ) | $ | (28,403 | ) | $ | (47,298 | ) | ||||||
Institutional Shares | |||||||||||||||
Proceeds from shares issued | $ | 74,640 | $ | 122,913 | $ | 11,577 | |||||||||
Distributions reinvested | 7,616 | 3,352 | 4,886 | ||||||||||||
Cost of shares redeemed | (63,439 | ) | (48,191 | ) | (102,386 | ) | |||||||||
Total Institutional Shares | $ | 18,817 | $ | 78,074 | $ | (85,923 | ) | ||||||||
Class A | |||||||||||||||
Proceeds from shares issued | $ | 20 | (b) | $ | — | (c) | $ | 4,791 | |||||||
Distributions reinvested | — | (b)(c) | — | 1 | |||||||||||
Cost of shares redeemed | (78 | )(b) | (57 | ) | (11,360 | ) | |||||||||
Total Class A | $ | (58 | )(b) | $ | (57 | ) | $ | (6,568 | ) | ||||||
| Change in net assets resulting from capital transactions | $ | 6,874 | $ | 49,614 | $ | (139,789 | ) | ||||||||
Share Transactions: | |||||||||||||||
Fund Shares | |||||||||||||||
Issued | 457 | 918 | 1,211 | ||||||||||||
Reinvested | 224 | 101 | 167 | ||||||||||||
Redeemed | (1,345 | ) | (2,309 | ) | (3,708 | ) | |||||||||
Total Fund Shares | (664 | ) | (1,290 | ) | (2,330 | ) | |||||||||
Institutional Shares | |||||||||||||||
Issued | 4,275 | 5,737 | 537 | ||||||||||||
Reinvested | 439 | 154 | 227 | ||||||||||||
Redeemed | (3,544 | ) | (2,177 | ) | (4,773 | ) | |||||||||
Total Institutional Shares | 1,170 | 3,714 | (4,009 | ) | |||||||||||
Class A | |||||||||||||||
Issued | 1 | (b) | — | (d) | 278 | ||||||||||
Reinvested | — | (b)(d) | — | — | (d) | ||||||||||
Redeemed | (4 | )(b) | (3 | ) | (551 | ) | |||||||||
Total Class A | (3 | )(b) | (3 | ) | (273 | ) | |||||||||
Change in Shares | 503 | 2,421 | (6,612 | ) | |||||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from May 31 to February 28.
(b) Class A activity is for the period June 1, 2022 to February 22, 2023 (date of termination).
(c) Rounds to less than $1 thousand.
(d) 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
USAA Emerging Markets Fund | |||||||||||||||||||||||||||
Fund Shares | |||||||||||||||||||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | Year Ended May 31, 2021 | Year Ended May 31, 2020 | Year Ended May 31, 2019 | Year Ended May 31, 2018 | ||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 20.00 | $ | 24.66 | $ | 16.16 | $ | 17.14 | $ | 18.84 | $ | 17.60 | |||||||||||||||
Investment Activities: | |||||||||||||||||||||||||||
Net investment income (loss) | 0.34 | (b) | 0.30 | (b) | 0.16 | (b) | 0.25 | (b) | 0.17 | 0.16 | |||||||||||||||||
| Net realized and unrealized gains (losses) | (2.22 | ) | (4.81 | ) | 8.57 | (1.17 | ) | (1.67 | ) | 1.15 | |||||||||||||||||
| Total from Investment Activities | (1.88 | ) | (4.51 | ) | 8.73 | (0.92 | ) | (1.50 | ) | 1.31 | |||||||||||||||||
Distributions to Shareholders from: | |||||||||||||||||||||||||||
Net investment income | (0.30 | ) | (0.15 | ) | (0.23 | ) | (0.06 | ) | (0.20 | ) | (0.07 | ) | |||||||||||||||
Total Distributions | (0.30 | ) | (0.15 | ) | (0.23 | ) | (0.06 | ) | (0.20 | ) | (0.07 | ) | |||||||||||||||
Net Asset Value, End of Period | $ | 17.82 | $ | 20.00 | $ | 24.66 | $ | 16.16 | $ | 17.14 | $ | 18.84 | |||||||||||||||
Total Return (c) (d) | (9.36 | )% | (18.33 | )% | 54.25 | % | (5.41 | )% | (7.86 | )% | 7.41 | % | |||||||||||||||
Ratios to Average Net Assets: | |||||||||||||||||||||||||||
Net Expenses (e) (f) (g) (h) | 1.48 | % | 1.47 | % | 1.45 | % | 1.48 | % | 1.48 | %(i) | 1.46 | %(i) | |||||||||||||||
Net Investment Income (Loss) (e) | 2.53 | % | 1.35 | % | 0.77 | % | 1.44 | % | 1.02 | % | 0.86 | % | |||||||||||||||
Gross Expenses (e) (f) | 1.57 | % | 1.47 | % | 1.47 | % | 1.54 | % | 1.48 | %(i) | 1.46 | %(i) | |||||||||||||||
Supplemental Data: | |||||||||||||||||||||||||||
Net Assets at end of period (000's) | $ | 234,472 | $ | 276,456 | $ | 372,624 | $ | 281,937 | $ | 340,465 | $ | 402,401 | |||||||||||||||
Portfolio Turnover (c) (j) | 45 | % | 54 | % | 73 | %(k) | 124 | %(l) | 68 | % | 59 | % | |||||||||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from May 31 to February 28.
(b) Per share net investment income (loss) has been calculated using the average daily shares method.
(c) Not annualized for periods less than one year.
(d) 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.
(e) Annualized for periods less than one year.
(f) Does not include acquired fund fees and expenses, if any.
(g) 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 September 30, 2023, instead of coinciding with the Fund's fiscal year end.
(h) 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.
(i) Reflects total annual operating expenses for reductions of expenses paid indirectly. Expenses paid indirectly decreased the expense ratio by less than 0.01%.
(j) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares.
(k) Reflects a return to normal trading levels after a prior year transition.
(l) Reflects increased trading activity due to transition or asset allocation shift.
(continues on next page)
See notes to financial statements.
26
USAA Mutual Funds Trust | Financial Highlights — continued | ||||||
For a Share Outstanding Throughout Each Period
USAA Emerging Markets Fund | |||||||||||||||||||||||||||
Institutional Shares | |||||||||||||||||||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | Year Ended May 31, 2021 | Year Ended May 31, 2020 | Year Ended May 31, 2019 | Year Ended May 31, 2018 | ||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 19.97 | $ | 24.62 | $ | 16.14 | $ | 17.10 | $ | 18.79 | $ | 17.55 | |||||||||||||||
Investment Activities: | |||||||||||||||||||||||||||
Net investment income (loss) | 0.35 | (b) | 0.35 | (b) | 0.20 | (b) | 0.29 | (b) | 0.18 | 0.20 | |||||||||||||||||
| Net realized and unrealized gains (losses) | (2.21 | ) | (4.80 | ) | 8.55 | (1.17 | ) | (1.62 | ) | 1.14 | |||||||||||||||||
| Total from Investment Activities | (1.86 | ) | (4.45 | ) | 8.75 | (0.88 | ) | (1.44 | ) | 1.34 | |||||||||||||||||
Distributions to Shareholders from: | |||||||||||||||||||||||||||
Net investment income | (0.34 | ) | (0.20 | ) | (0.27 | ) | (0.08 | ) | (0.25 | ) | (0.10 | ) | |||||||||||||||
Total Distributions | (0.34 | ) | (0.20 | ) | (0.27 | ) | (0.08 | ) | (0.25 | ) | (0.10 | ) | |||||||||||||||
Net Asset Value, End of Period | $ | 17.77 | $ | 19.97 | $ | 24.62 | $ | 16.14 | $ | 17.10 | $ | 18.79 | |||||||||||||||
Total Return (c) (d) | (9.26 | )% | (18.15 | )% | 54.46 | % | (5.17 | )% | (7.58 | )% | 7.62 | % | |||||||||||||||
Ratios to Average Net Assets: | |||||||||||||||||||||||||||
Net Expenses (e) (f) (g) (h) | 1.30 | % | 1.28 | % | 1.26 | % | 1.29 | % | 1.25 | %(i) | 1.28 | %(i) | |||||||||||||||
Net Investment Income (Loss) (e) | 2.60 | % | 1.59 | % | 0.96 | % | 1.67 | % | 1.24 | % | 1.09 | % | |||||||||||||||
Gross Expenses (e) (f) | 1.37 | % | 1.31 | % | 1.29 | % | 1.33 | % | 1.25 | %(i) | 1.28 | %(i) | |||||||||||||||
Supplemental Data: | |||||||||||||||||||||||||||
Net Assets at end of period (000's) | $ | 375,826 | $ | 398,909 | $ | 400,408 | $ | 327,156 | $ | 491,978 | $ | 596,185 | |||||||||||||||
Portfolio Turnover (c) (j) | 45 | % | 54 | % | 73 | %(k) | 124 | %(l) | 68 | % | 59 | % | |||||||||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from May 31 to February 28.
(b) Per share net investment income (loss) has been calculated using the average daily shares method.
(c) Not annualized for periods less than one year.
(d) 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.
(e) Annualized for periods less than one year.
(f) Does not include acquired fund fees and expenses, if any.
(g) 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 September 30, 2023, instead of coinciding with the Fund's fiscal year end.
(h) 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.
(i) Reflects total annual operating expenses for reductions of expenses paid indirectly. Expenses paid indirectly decreased the expense ratio by less than 0.01%.
(j) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares.
(k) Reflects a return to normal trading levels after a prior year transition.
(l) Reflects increased trading activity due to transition or asset allocation shift.
See notes to financial statements.
27
USAA Mutual Funds Trust | Notes to Financial Statements February 28, 2023 | ||||||
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 two classes of shares: Fund Shares and Institutional Shares. Effective February 22, 2023, Class A was liquidated. 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.
On June 29, 2022, the Board of Trustees ("the Board") approved the fiscal year-end change for the Fund from May 31 to February 28. The first full cycle of the new fiscal year-end reporting will begin March 1, 2023. As a result of the change, the Fund has a February 28, 2023 fiscal nine-month transition period, the results of which are reported in this Annual Report for the period ended February 28, 2023.
Victory Capital Management ("VCM" or 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 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 (unadjusted) in active markets for identical securities
• Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, or credit spreads, applicable to those securities, etc.)
• Level 3 — significant unobservable inputs (including the Adviser's assumptions in determining the fair value of investments)
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USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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, appointed as the valuation designee by the Board, has established the Pricing and Liquidity Committee (the "Committee"), and subject to Board oversight, the Committee administers and oversees the Fund's valuation policies and procedures, which are approved by the Board.
Portfolio securities listed or traded on securities exchanges, including Exchange-Traded Funds ("ETFs"), and American Depositary Receipts, 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 February 28, 2023, 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 | $ | 136,318 | $ | 464,390 | $ | 77 | $ | 600,785 | |||||||||||
Exchange-Traded Funds | 744 | — | — | 744 | |||||||||||||||
Collateral for Securities Loaned | 99 | — | — | 99 | |||||||||||||||
Total | $ | 137,161 | $ | 464,390 | $ | 77 | $ | 601,628 | |||||||||||
As of February 28, 2023, there were no transfers into/out of Level 3.
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
29
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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.
Derivative Instruments:
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 February 28, 2023, 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 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
30
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 Statements 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 February 28, 2023.
| Value of Securities on Loan | Non-Cash Collateral | Cash Collateral | |||||||||
| $ | 2,691 | $ | 2,753 | $ | 99 | ||||||
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 Statements 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 Statements 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 ("EU") reclaims related to prior years. In September 2022, the Poland Tax Authority issued favorable decisions relating to claims for Poland. These EU reclaims are recorded when the amount is known and there are no significant uncertainties on collectability. For the nine months ended February 28, 2023, the Fund recognized $19 thousand in EU reclaims. These EU reclaims are reflected on the Statements of Operations as Dividend Income.
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
31
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 had a tax year end of May 31, and effective February 28, 2023, the Fund changed its tax year end to February 28.
For the nine months ended February 28, 2023, 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 nine months ended February 28, 2023, were as follows for the Fund (amounts in thousands):
Excluding | |||||||
Purchases | Sales | ||||||
$ | 283,076 | $ | 272,542 | ||||
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 vcm.com. As of February 28, 2023, certain fund-of-funds owned a percentage of the total outstanding shares of the Fund as follows:
Affiliated USAA Mutual Funds | Ownership % | ||||||
USAA Cornerstone Conservative Fund | 0.4 | ||||||
USAA Cornerstone Equity Fund | 1.6 | ||||||
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.
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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements of Operations as Investment advisory fees.
32
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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. 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, 2022, to February 28, 2023, performance adjustments were $0, and $13 for Fund Shares and Institutional Shares, in thousands, respectively. Performance adjustments were 0.00%, and 0.01% for Fund Shares and Institutional Shares, respectively. For the period June 1, 2022 to February 22, 2023, there were no performance adjustments for Class A. 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, Institutional Shares and Class A, respectively. Amounts incurred for the nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements of Operations as Administration fees.
33
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements of Operations as 12b-1 fees.
In addition, the Distributor is entitled to receive commissions in connection with sales of Class A. For the nine months ended February 28, 2023, and 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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements of Operations as Custodian fees.
K&L Gates LLP provides legal services to the Trust.
34
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
The Adviser has entered into an expense limitation agreement with the Fund until at least September 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 February 28, 2023, the expense limits (excluding voluntary waivers) were 1.48% and 1.29% for Fund Shares and Institutional Shares, respectively.
Under the terms of the expense limitation agreement, 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.
As of February 28, 2023, 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 February 28, 2023.
| Expires 2023 | Expires 2024 | Expires 2025 | Expires 2026 | Total | |||||||||||||||
| $ | 117 | $ | 201 | $ | 99 | $ | 346 | $ | 763 | ||||||||||
As of May 31, 2022, the following amounts were available to be repaid to the Adviser (amounts in thousands).
| 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 nine months ended February 28, 2023, and 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
35
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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. Global markets, or those in a particular region, may all react in similar fashion to important political, economic, or other developments. Events and evolving conditions in certain economies or markets may alter the risks associated with investments tied to countries or regions that historically were perceived as comparatively stable and make such investments riskier and more volatile. Certain Russian securities held by the Fund had declared dividends, however there is no assurance these dividends can be collected by the Fund. As a result, all such dividend receivables related to these Russian securities are valued at zero as of the current fiscal year-end.
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 27, 2022, with a termination date of June 26, 2023. 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 nine months ended February 28, 2023, 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 paid a pro-rata portion of the commitment fees plus any interest on amounts borrowed. For the period from June 1, 2022, through June 27, 2022, interest was based on the one-month London Interbank Offered Rate ("LIBOR") plus one percent. Effective with the renewal, for the period June 28, 2022, through February 28, 2023, interest was based on the one-month Secured Overnight Financing Rate ("SOFR") plus 1.10 percent. The Fund did not experience a material financial impact transitioning from LIBOR to SOFR. Interest charged to the Fund during the period, if applicable, is reflected on the Statements of Operations under Line of credit fees.
The average borrowing or lending for the days outstanding and average interest rate for the Fund during the nine months ended February 28, 2023, were as follows (amounts in thousands):
| Amount Outstanding at February 28, 2023 | Average Borrowing* | Days Borrowing Outstanding | Average Interest Rate* | Maximum Borrowing During the Period | |||||||||||||||
| $ | — | $ | 1,788 | 1 | 3.88 | % | $ | 1,788 | |||||||||||
* Based on the number of days borrowings were outstanding for the nine months ended February 28, 2023.
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
36
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 Statements of Operations under Interfund lending fees. As a Lender, interest earned by the Fund, if any, during the period, is reflected on the Statements of Operations under Interfund lending.
The average borrowing or lending for the days outstanding and average interest rate for the Fund during the nine months ended February 28, 2023, were as follows (amounts in thousands):
| Borrower or Lender | Amount Outstanding at February 28, 2023 | Average Borrowing* | Days Borrowing Outstanding | Average Interest Rate* | Maximum Borrowing During the Period | ||||||||||||||||||
Borrower | $ | — | $ | 4,114 | 15 | 4.83 | % | $ | 7,919 | ||||||||||||||
* Based on the number of days borrowings were outstanding for the nine months ended February 28, 2023.
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 | $ | — | $ | 1,063 | 1 | 0.55 | % | $ | 1,063 | ||||||||||||||
* Based on the number of days borrowings were outstanding for 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 February 28, 2023, on the Statement 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):
Nine Months Ended February 28, 2023 | |||||||
| Distributions Paid From | |||||||
| Ordinary Income | Total Distributions Paid | ||||||
$ | 11,571 | $ | 11,571 | ||||
37
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 February 28, 2023, 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 Losses | Unrealized Appreciation (Depreciation)* | Total Accumulated Earnings (Loss) | ||||||||||||||||||
| $ | 11,292 | $ | (1,203 | ) | $ | 10,089 | $ | (45,503 | ) | $ | 26,517 | $ | (8,897 | ) | |||||||||
* The difference between the book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to tax deferral of losses on wash sales and passive foreign investment company adjustments.
As of February 28, 2023, 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 | |||||||||
| $ | 31,843 | $ | 13,660 | $ | 45,503 | ||||||
As of February 28, 2023, 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) | ||||||||||||
| $ | 575,111 | $ | 88,110 | $ | (61,593 | ) | $ | 26,517 | |||||||
9. Subsequent Events:
The Board, upon recommendation of the Adviser, has approved a change in the name of the Trust and each individual fund within the Trust. On February 23, 2023, an initial filing was made with the SEC to commence the process to effectuate the following changes.
Effective at the start of business on April 24, 2023 (the "Effective Date"), the name of the Trust changed from USAA Mutual Funds Trust to Victory Portfolios III, and all references to USAA Mutual Funds Trust in the summary prospectus, statutory prospectus, and statement of additional information ("SAI") will be replaced by the new name.
Also on the Effective Date, references to the current name of the Fund in the summary prospectus, statutory prospectus, and SAI will be replaced with the new name as follows:
Current Name | New Name | ||||||
USAA Emerging Markets Fund | Victory Emerging Markets Fund | ||||||
In addition, on the Effective Date, USAA Investments, a Victory Capital Management Inc. investment franchise, that currently manages the USAA Fixed Income Funds, will change its name to Victory Income Investors, and all references to USAA Investments in the summary prospectus, statutory prospectus, and SAI, will be replaced.
Please note that there will be no changes in the management of the Fund or to the Fund's ticker symbols.
38
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 February 28, 2023, and the related statements of operations for the period from June 1, 2022 through February 28, 2023 and the year ended May 31, 2022, the statements of changes in net assets for the period from June 1, 2022 through February 28, 2023 and each of the two years in the period ended May 31, 2022, the financial highlights for the period from June 1, 2022 through February 28, 2023 and each of the five years in the period ended May 31, 2022, 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 February 28, 2023, the results of its operations for the period from June 1, 2022 through February 28, 2023 and the year ended May 31, 2022, the statements of changes in net assets for the period from June 1, 2022 through February 28, 2023 and each of the two years in the period ended May 31, 2022, and its financial highlights for the period from June 1, 2022 through February 28, 2023 and each of the five years in the period ended May 31, 2022, 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 February 28, 2023, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. 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
April 28, 2023
39
USAA Mutual Funds Trust | Supplemental Information February 28, 2023 | ||||||
(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 date 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 | ||||||||||||||||||
40
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 (06/17-06/19); 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 (03/15-03/21). | 45 | None | ||||||||||||||||||
| Paul L. McNamara (July 1948) | Trustee | Trustee since January 2012 | Retired. | 45 | None | ||||||||||||||||||
41
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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) | ||||||||||||||||||
42
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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.
43
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
Officers:
The officers of the Trust, their date 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. (since 2022); 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. (07/01/19-present); Executive Director, Investment and Financial Administration, USAA (2012-06/30/19); 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. (07/01/19-present); Accounting/ Financial Director, USAA (12/13-06/30/19). | ||||||||||||
| 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). | ||||||||||||
44
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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). | ||||||||||||
45
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 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 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 sec.gov.
Expense Examples
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 September 1, 2022, through February 28, 2023.
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 9/1/22 | Actual Ending Account Value 2/28/23 | Hypothetical Ending Account Value 2/28/23 | Actual Expenses Paid During Period 9/1/22- 2/28/23* | Hypothetical Expenses Paid During Period 9/1/22- 2/28/23* | Annualized Expense Ratio During Period 9/1/22- 2/28/23 | ||||||||||||||||||||||
Fund Shares | $ | 1,000.00 | $ | 1,006.00 | $ | 1,017.46 | $ | 7.36 | $ | 7.40 | 1.48 | % | |||||||||||||||
Institutional Shares | 1,000.00 | 1,006.70 | 1,018.35 | 6.47 | 6.51 | 1.30 | % | ||||||||||||||||||||
* Expenses are equal to the average account value multiplied by the Fund's annualized expense ratio multiplied by 181/365 (the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year).
46
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
Additional Federal Income Tax Information
The following federal tax information related to the Fund's fiscal nine months ended February 28, 2023, 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 2024.
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 nine months ended February 28, 2023 (amounts in thousands):
Qualified | |||
| 85 | % | |
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 February 28, 2023, were as follows:
| Foreign Source Income | Foreign Tax Expense | ||||||
| $ | 0.57 | $ | 0.05 | ||||
47
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 8-9, 2022, 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 8-9, 2022, 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 21, 2022.
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
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USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
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 program, (iv) derivatives risk management program, and (v) 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 adjustment, 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 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
49
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
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-, three- and five-year periods ended June 30, 2022, and was below the average of its performance universe for the ten-year period ended June 30, 2022, and was above its Lipper index for the one- and three-year periods ended June 30, 2022, and was below its Lipper index for the five- and ten-year periods ended June 30, 2022. 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 certain periods.
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.
50
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 June 30, 2022, 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.
51
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 10, 2023, 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-RN (prior to August 2022, Form N-LIQUID) and recommended no material changes to the LRMP.
52
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 | ||||||
vcm.com | (800) 235-8396 | ||||||
25558-0423
February 28, 2023
Annual Report
USAA Government Securities Fund
(Also Known as Victory Government Securities Fund*)
* Effective at the start of business on April 24, 2023, the Fund name will change to Victory Government Securities Fund. Please see Notes to the Financial Statements for subsequent event information.
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.
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, 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 | ||||||
Statements of Operations | 15 | ||||||
Statements of Changes in Net Assets | 16 | ||||||
Financial Highlights | 18 | ||||||
Notes to Financial Statements | 21 | ||||||
| Report of Independent Registered Public Accounting Firm | 33 | ||||||
Supplemental Information (Unaudited) | 34 | ||||||
Trustee and Officer Information | 34 | ||||||
Proxy Voting and Portfolio Holdings Information | 40 | ||||||
Expense Examples | 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,
If you are reading this letter but double-checking your calendar, be assured there's no mistake. The annual reporting period for your USAA Mutual Fund has shifted from a fiscal year ended May 31st to a fiscal year ended February 28th/the last day of February. This change has no material impact on any of your investments. This change aims to help us improve efficiencies and reduce operational costs. Therefore, this letter covers an abbreviated "annual" period from June 1, 2022, through February 28, 2023. Future annual reports will cover the 12-month period ended February 28th/the last day of February going forward.
Our most recent annual reporting period has been a challenging period for investors. Consider some of the headwinds: heightened geopolitical tensions, a terrible war in Eastern Europe, elevated energy and food costs, high inflation, and rising interest rates. All this has dampened global growth and created a difficult backdrop for both bond and stock investors.
The inflation data was particularly troublesome and surprised many throughout the past year with some of the highest readings since the 1970s. In response, the U.S. Federal Reserve (the "Fed") continued with its monetary tightening and boosted the Fed funds interest rate repeatedly throughout the annual reporting period. And if that wasn't enough, zero-COVID-19 policies in China (which fortunately have been recently lifted) further exacerbated supply chain issues. As one might expect, all these obstacles ratcheted up volatility across financial markets.
In terms of the numbers, the S&P 500® Index, the bell-weather proxy for our domestic stock market, delivered a negative total return of almost 3% for our abbreviated annual reporting period. But perhaps what made 2022 even more difficult was the performance of fixed income markets. The Bloomberg US Aggregate Bond Index—a proxy for a diversified fixed income portfolio and one that many investors and institutions follow closely—delivered a negative total return of approximately 4% during the same period. That's not exactly the offset to equity performance that many investors come to expect from bonds.
It's been difficult, and we fully acknowledge that the steady drumbeat of bad news and bouts of stomach-churning volatility can take a toll on investors' psyche. Even when markets often snap back sharply (as happened this past July, October and earlier this calendar year), investors often wonder if they have missed an opportunity.
Through all of the turmoil and challenges in our most recent annual reporting period, we are reminded of two enduring realities: 1) financial markets are dynamic and apt to change abruptly; 2) it's vital to remain calm and rational whenever faced with those inevitable bouts of turmoil.
Fortunately, we think that investors can take comfort knowing that all of our independent investment franchises have experience managing portfolios through a wide variety of market environments. Our investment professionals remain calm during turbulent financial markets, and we think it's imperative that investors do the same.
2
We still believe that a long-term plan, a well-diversified portfolio across asset classes and investment types, and a clear understanding of individual risk tolerances are the key ingredients for staying the course and progressing on investment goals. Moreover, all our investment professionals continually monitor the environment and work hard to position portfolios opportunistically no matter what the markets bring. Remember, turmoil can also create opportunity.
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, we encourage you to contact our Member Service Representatives. Call 800-235-8396, or visit our website at vcm.com.
From all of us here at Victory Capital, thank you for your ongoing confidence and 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?
During 2022, the world was still wrestling with the after effects of COVID-19. Global supply chains that functioned so efficiently pre-COVID continued to be disrupted and did not fully normalize in 2022. Simultaneously, the continued rebound in demand for goods and services generally outpaced supply as consumers drew down excess savings while at the same time decreasing their savings rate, stoking inflation. To make matters worse, apart from the human tragedy itself, Russia's invasion of Ukraine added to the supply chain woes and caused a spike in the price of commodities like oil, natural gas, wheat and fertilizer, to name but a few. That put additional upward pressure on already high inflation and added uncertainty to the financial markets.
During 2022, inflation progressively increased throughout the first half of the year before moderating in the back half. As measured by the Consumer Price Index (CPI), a widely recognized inflation yardstick, inflation peaked in June 2022 at 9.1%. Strong demand that overwhelmed a strained global logistics supply chain, a very tight labor market, and higher commodity prices all contributed to the runup in prices. In response, the U.S. Federal Reserve (the "Fed") began hiking rates in 2022 including even extraordinary 75 basis points ("bps") hikes in each of June, July, September and November. (A basis point is 1/100th of a percentage point.) The hikes slowed to 50 bps in December and 25 bps in February 2023 and culminated in the Fed funds rate being up a total of 450 bps starting 2022 in a target range of 0 to 25 bps.
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 2.26% from the beginning of the reporting period, to end at 4.82%. The longer end of the curve rose as well, with the 10-year U.S. Treasury yield up 1.08%, to finish the period at 3.92%. 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 4.62% and ended the period at 6.31%. The interest rate on a 30-year residential mortgage increased from 5.35% at the beginning of the period and ended the period at 7.03%.
• How did the USAA Government Securities Fund (the "Fund") perform during the reporting period?
The Fund has three share classes: Fund Shares, Institutional Shares, and R6 Shares. The Fund's fiscal year-end changed this year to February 28 from May 31, resulting in a shorter reporting period for fiscal year ended 2023. For the nine-month reporting period ended February 28, 2023, the Fund Shares, Institutional Shares, and R6 Shares had a total return (at net asset value) of -3.00%, -3.03%, and -2.96%, respectively. This compares to a total return of -3.59% for the Bloomberg U.S. Aggregate Government Intermediate & Mortgage-Backed Securities Index (the "Index"), and -4.20% for the Lipper Intermediate U.S. Government Funds Index.
4
USAA Government Securities Fund
Managers' Commentary (continued)
• 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 period ended February 28, 2023. 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 nine-month 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 nine-month reporting period. An overweight to Agency Commercial Mortgage-Backed Securities and high-quality municipal securities relative to the benchmark detracted from overall performance.
During the reporting period, we increased the Fund's allocation to MBS as prices have fallen on these securities and return opportunities have increased in our view. We sold U.S. Treasuries to fund these purchases. We also purchased more floating rate Small Business Administration loan pools in anticipation of short-term rates increasing. 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 February 28, 2023
Fund Shares | Institutional Shares | Class R6 | |||||||||||||||||||||
INCEPTION DATE | 2/1/91 | 8/10/15 | 12/1/16 | ||||||||||||||||||||
Net Asset Value | Net Asset Value | Net Asset Value | Bloomberg U.S. | Lipper | |||||||||||||||||||
One Year | –6.36 | % | –6.27 | % | –6.19 | % | –7.57 | % | –9.21 | % | |||||||||||||
Five Year | 0.78 | % | 0.84 | % | 0.95 | % | 0.35 | % | 0.20 | % | |||||||||||||
Ten Year | 0.84 | % | NA | NA | 0.74 | % | 0.45 | % | |||||||||||||||
Since Inception | NA | 0.77 | % | 0.78 | % | 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 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 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.
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 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 | February 28, 2023 | ||||||
(Unaudited)
Investment Objective and Portfolio Holdings:
The Fund provides investors a high level of current income consistent with preservation of principal.
Asset Allocation:
February 28, 2023
(% 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 February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Asset-Backed Securities (2.4%) | |||||||||||
| CenterPoint Energy Transition Bond Co. IV LLC, Series 2012-1, Class A3, 3.03%, 10/15/25 | $ | 2,797 | $ | 2,738 | |||||||
| Navient Student Loan Trust, Series 2014-1, Class A3, 5.13% (LIBOR01M+51bps), 6/25/31, Callable 2/25/34 @100 (a) | 1,603 | 1,568 | |||||||||
| Nelnet Student Loan Trust, Series 2006-3, Class B, 4.97% (LIBOR03M+25bps), 6/25/41, Callable 9/25/24 @100 (a) | 1,808 | 1,550 | |||||||||
| Nelnet Student Loan Trust, Series 2015-3A, Class A2, 5.22% (LIBOR01M+60bps), 2/27/51, Callable 12/25/32 @100 (a) (b) | 2,118 | 2,087 | |||||||||
| Nelnet Student Loan Trust, Series 2019-5, Class A, 2.53%, 10/25/67, Callable 7/25/34 @100 (b) | 5,982 | 5,502 | |||||||||
| SLM Student Loan Trust, Series 2006-4, Class B, 5.02% (LIBOR03M+20bps), 1/25/70, Callable 7/25/32 @100 (a) | 2,789 | 2,619 | |||||||||
| SLM Student Loan Trust, Series 2013-6, Class A3, 5.27% (LIBOR01M+65bps), 6/26/28, Callable 11/25/30 @100 (a) | 2,264 | 2,209 | |||||||||
| SunTrust Student Loan Trust, Series 2006-1A, Class B, 5.07% (LIBOR03M+27bps), 10/28/37, Callable 10/28/23 @100 (a) (b) | 774 | 766 | |||||||||
| Wepco Environmental Trust Finance I LLC, Series 2021-1, Class A, 1.58%, 12/15/35 | 4,012 | 3,374 | |||||||||
Total Asset-Backed Securities (Cost $23,819) | 22,413 | ||||||||||
Collateralized Mortgage Obligations (1.0%) | |||||||||||
| Citigroup Commercial Mortgage Trust, Series 2019-PRM, Class A, 3.34%, 5/10/36 (b) | 9,700 | 9,523 | |||||||||
Total Collateralized Mortgage Obligations (Cost $9,496) | 9,523 | ||||||||||
Corporate Bonds (0.4%) | |||||||||||
Utilities (0.4%): | |||||||||||
Tennessee Valley Authority, 3.50%, 12/15/42 | 5,000 | 4,133 | |||||||||
Total Corporate Bonds (Cost $4,292) | 4,133 | ||||||||||
Municipal Bonds (3.9%) | |||||||||||
Hawaii (0.0%): (c) | |||||||||||
| State of Hawaii Department of Business Economic Development & Tourism Revenue, Series A-2, 3.24%, 1/1/31 | 154 | 143 | |||||||||
Kansas (0.3%): | |||||||||||
Kansas Development Finance Authority Revenue, Series H, 3.94%, 4/15/26 | 3,000 | 2,904 | |||||||||
Louisiana (0.5%): | |||||||||||
| Louisiana Local Government Environmental Facilities & Community Development Authority Revenue Series A, 4.15%, 2/1/33 | 3,000 | 2,870 | |||||||||
Series A, 4.28%, 2/1/36 | 2,000 | 1,881 | |||||||||
4,751 | |||||||||||
Ohio (0.2%): | |||||||||||
State of Ohio, GO, Series A, 1.78%, 8/1/32 | 3,000 | 2,346 | |||||||||
See notes to financial statements.
8
| USAA Mutual Funds Trust USAA Government Securities Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Tennessee (0.2%): | |||||||||||
| State of Tennessee, GO, Series B, 1.73%, 11/1/32, Continuously Callable @100 | $ | 2,400 | $ | 1,859 | |||||||
Texas (1.8%): | |||||||||||
Boerne School District, GO, 1.77%, 2/1/32, Continuously Callable @100 | 650 | 513 | |||||||||
| City of Abilene, GO 2.41%, 2/15/26 | 1,715 | 1,594 | |||||||||
2.54%, 2/15/27 | 1,195 | 1,092 | |||||||||
2.64%, 2/15/29 | 1,000 | 882 | |||||||||
| City of Houston Texas Combined Utility System Revenue 3.82%, 11/15/29, Continuously Callable @100 | 3,000 | 2,812 | |||||||||
Series E, 3.72%, 11/15/28 | 1,530 | 1,441 | |||||||||
State of Texas, GO, 2.53%, 10/1/31, Continuously Callable @100 | 3,500 | 2,983 | |||||||||
Texas Public Finance Authority Revenue, 0.93%, 2/1/26 | 2,000 | 1,788 | |||||||||
| Texas Public Finance Authority State of Texas, GO, Series C, 3.01%, 10/1/26, Continuously Callable @100 | 4,000 | 3,778 | |||||||||
16,883 | |||||||||||
Virginia (0.8%): | |||||||||||
| Virginia Public Building Authority Revenue Series C, 2.25%, 8/1/26 | 1,370 | 1,253 | |||||||||
Series C, 2.40%, 8/1/27 | 1,475 | 1,328 | |||||||||
Series C, 2.56%, 8/1/29 | 2,700 | 2,349 | |||||||||
Virginia Public School Authority Revenue, Series C, 0.55%, 8/1/23 | 3,000 | 2,939 | |||||||||
7,869 | |||||||||||
Wisconsin (0.1%): | |||||||||||
State of Wisconsin, GO, Series 4, 1.90%, 5/1/33, Continuously Callable @100 | 1,000 | 770 | |||||||||
Total Municipal Bonds (Cost $41,749) | 37,525 | ||||||||||
U.S. Government Agency Mortgages (53.5%) | |||||||||||
| Federal Farm Credit Banks 6.00%, 1/25/38 | 5,000 | 4,960 | |||||||||
| Federal Home Loan Mortgage Corporation Series K725, Class A2, 3.00%, 1/25/24 | 4,867 | 4,790 | |||||||||
Series K037, Class A2, 3.49%, 1/25/24 | 10,030 | 9,881 | |||||||||
Series K038, Class A2, 3.39%, 3/25/24 | 2,989 | 2,932 | |||||||||
Series K76, Class A2, 2.91%, 4/25/24 | 995 | 975 | |||||||||
Series K727, Class A2, 2.95%, 7/25/24 | 17,218 | 16,809 | |||||||||
Series K052, Class A1, 2.60%, 1/25/25 | 1,191 | 1,169 | |||||||||
Series K045, Class A2, 3.02%, 1/25/25 | 2,728 | 2,625 | |||||||||
Series K730, Class A2, 3.59%, 1/25/25 | 4,812 | 4,695 | |||||||||
Series K056, Class A1, 2.20%, 7/25/25 | 1,283 | 1,236 | |||||||||
Series K049, Class A2, 3.01%, 7/25/25 | 4,000 | 3,823 | |||||||||
Series K051, Class A2, 3.31%, 9/25/25 | 10,000 | 9,606 | |||||||||
Series K733, Class AM, 3.75%, 9/25/25 | 5,000 | 4,838 | |||||||||
Series K056, Class A2, 2.53%, 5/25/26 | 5,000 | 4,669 | |||||||||
Series K057, Class A2, 2.57%, 7/25/26 | 7,000 | 6,534 | |||||||||
Series K061, Class A1, 3.01%, 8/25/26 | 303 | 299 | |||||||||
Series 3987, Class A, 2.00%, 9/15/26 | 243 | 238 | |||||||||
See notes to financial statements.
9
| USAA Mutual Funds Trust USAA Government Securities Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Series K059, Class A2, 3.12%, 9/25/26 (d) | $ | 4,500 | $ | 4,261 | |||||||
Series K061, Class A2, 3.35%, 11/25/26 (d) | 4,000 | 3,813 | |||||||||
Series K066, Class A2, 3.12%, 6/25/27 | 3,000 | 2,823 | |||||||||
Series K067, Class A2, 3.19%, 7/25/27 | 9,274 | 8,747 | |||||||||
Series K069, Class A2, 3.19%, 9/25/27 (d) | 2,879 | 2,712 | |||||||||
Series K071, Class A2, 3.29%, 11/25/27 | 5,000 | 4,724 | |||||||||
Series K078, Class A2, 3.85%, 6/25/28 | 12,500 | 12,088 | |||||||||
Series K080, Class A2, 3.93%, 7/25/28 (d) | 15,000 | 14,538 | |||||||||
3.00%, 3/1/32 – 6/1/42 | 7,767 | 7,237 | |||||||||
3.50%, 10/1/33 – 8/1/48 | 13,823 | 12,934 | |||||||||
4.00%, 10/1/33 – 9/1/52 | 17,837 | 17,107 | |||||||||
5.50%, 12/1/35 | 188 | 194 | |||||||||
Series 3134, Class FA, 4.89% (LIBOR01M+30bps), 3/15/36 (a) | 381 | 376 | |||||||||
Series 4023, Class PF, 5.14% (LIBOR01M+55bps), 10/15/41 (a) | 326 | 324 | |||||||||
4.50%, 11/1/42 – 10/1/52 | 9,148 | 8,854 | |||||||||
Series 4623, Class H, 2.50%, 11/15/44 | 1,267 | 1,142 | |||||||||
4.03% (SOFR30A+227bps), 8/1/52 (a) | 7,413 | 7,102 | |||||||||
5.00%, 9/1/52 – 10/1/52 | 12,571 | 12,351 | |||||||||
6.50%, 2/1/53 | 4,000 | 4,104 | |||||||||
200,550 | |||||||||||
| Federal National Mortgage Association Series 2014-M1, Class A2, 3.13%, 7/25/23 (d) | 195 | 195 | |||||||||
Series M7, Class AV2, 2.16%, 10/25/23 | 580 | 576 | |||||||||
Series 2015-M13, Class A2, 2.70%, 6/25/25 (d) | 1,598 | 1,521 | |||||||||
3.00%, 2/1/27 – 2/1/52 | 13,625 | 12,315 | |||||||||
Series 2017-M8, Class A2, 3.06%, 5/25/27 (d) | 3,482 | 3,276 | |||||||||
Series 2017-M12, Class A2, 3.06%, 6/25/27 (d) | 4,305 | 4,052 | |||||||||
Series 73, Class DC, 1.50%, 7/25/27 – 10/25/27 | 1,808 | 1,697 | |||||||||
Series 102, Class GA, 1.38%, 9/25/27 | 441 | 408 | |||||||||
Series 2018-M4, Class A2, 3.06%, 3/25/28 (d) | 2,269 | 2,128 | |||||||||
Series 2018-M10, Class A2, 3.36%, 7/25/28 (d) | 8,049 | 7,624 | |||||||||
1.64%, 9/1/31 | 1,250 | 1,001 | |||||||||
Series 2022-M13, Class A2, 2.59%, 6/25/32 | 3,671 | 3,155 | |||||||||
Series 2005-29, Class FY, 4.92% (LIBOR01M+60bps), 4/25/35 – 8/25/37 (a) | 1,101 | 1,086 | |||||||||
5.00%, 12/1/35 – 6/1/52 | 11,569 | 11,372 | |||||||||
5.50%, 11/1/37 – 10/1/52 | 5,668 | 5,662 | |||||||||
6.00%, 5/1/38 | 136 | 143 | |||||||||
4.00%, 8/1/39 – 9/1/52 | 55,172 | 52,032 | |||||||||
2.50%, 6/1/41 – 11/1/50 | 12,661 | 10,875 | |||||||||
3.50%, 1/1/42 – 7/1/52 | 24,995 | 23,041 | |||||||||
2.00%, 11/1/51 – 12/1/51 | 27,171 | 22,199 | |||||||||
4.50%, 6/1/52 – 9/1/52 | 32,699 | 31,474 | |||||||||
195,832 | |||||||||||
| Government National Mortgage Association 8.00%, 6/15/23 – 9/15/30 | 171 | 179 | |||||||||
4.50%, 4/20/24 – 3/20/41 | 12,157 | 12,118 | |||||||||
7.00%, 5/15/27 – 7/15/32 | 563 | 585 | |||||||||
7.50%, 2/15/28 – 11/15/31 | 133 | 137 | |||||||||
6.00%, 4/15/28 – 12/15/38 | 4,983 | 5,188 | |||||||||
See notes to financial statements.
10
| USAA Mutual Funds Trust USAA Government Securities Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
6.50%, 5/15/28 – 8/20/34 | $ | 1,418 | $ | 1,480 | |||||||
6.75%, 5/15/28 | 5 | 5 | |||||||||
5.50%, 4/20/33 – 6/15/39 | 7,347 | 7,603 | |||||||||
5.00%, 5/20/33 – 2/15/39 | 2,106 | 2,139 | |||||||||
4.00%, 7/15/40 – 11/20/49 | 7,538 | 7,101 | |||||||||
2.50%, 2/20/50 – 12/20/51 | 25,906 | 22,486 | |||||||||
Series 2022-68, Class WQ, 3.55%, 5/20/50 (d) | 4,554 | 4,275 | |||||||||
3.00%, 8/20/51 – 10/20/51 | 19,348 | 17,335 | |||||||||
80,631 | |||||||||||
| Small Business Administration Pools 4.65% (PRIME-285bps), 9/25/31 (a) | 4,263 | 4,223 | |||||||||
7.13% (PRIME-38bps), 2/25/32 (a) | 4,420 | 4,619 | |||||||||
8.38% (PRIME+88bps), 2/25/32 (a) | 3,942 | 4,225 | |||||||||
9.08% (PRIME+158bps), 2/25/32 (a) | 3,533 | 3,878 | |||||||||
7.62% (PRIME+13bps), 6/25/32 (a) | 3,575 | 3,788 | |||||||||
5.00% (PRIME-250bps), 9/25/32 (a) | 3,813 | 3,806 | |||||||||
5.75% (PRIME-175bps), 10/25/34 (a) | 1,557 | 1,584 | |||||||||
26,123 | |||||||||||
508,096 | |||||||||||
Total U.S. Government Agency Mortgages (Cost $541,345) | 508,096 | ||||||||||
U.S. Treasury Obligations (37.3%) | |||||||||||
| U.S. Treasury Bonds 5.25%, 2/15/29 | 5,000 | 5,274 | |||||||||
2.00%, 11/15/41 | 5,000 | 3,612 | |||||||||
3.38%, 8/15/42 | 5,000 | 4,502 | |||||||||
| U.S. Treasury Notes 0.13%, 9/15/23 | 6,000 | 5,843 | |||||||||
0.25%, 11/15/23 | 5,000 | 4,832 | |||||||||
2.00%, 4/30/24 | 5,000 | 4,823 | |||||||||
0.38%, 8/15/24 | 5,000 | 4,673 | |||||||||
1.88%, 8/31/24 | 10,000 | 9,541 | |||||||||
2.13%, 11/30/24 | 4,000 | 3,814 | |||||||||
2.50%, 1/31/25 | 7,000 | 6,704 | |||||||||
2.00%, 2/15/25 | 4,000 | 3,791 | |||||||||
2.13%, 5/15/25 | 4,500 | 4,256 | |||||||||
0.25%, 7/31/25 | 6,000 | 5,405 | |||||||||
0.25%, 8/31/25 | 12,000 | 10,776 | |||||||||
0.25%, 10/31/25 | 13,000 | 11,609 | |||||||||
0.38%, 1/31/26 | 16,000 | 14,214 | |||||||||
1.38%, 8/31/26 | 7,000 | 6,320 | |||||||||
0.88%, 9/30/26 | 25,000 | 22,115 | |||||||||
1.63%, 10/31/26 | 7,000 | 6,355 | |||||||||
1.13%, 2/29/28 | 15,000 | 12,946 | |||||||||
1.25%, 4/30/28 | 5,000 | 4,325 | |||||||||
2.88%, 5/15/28 | 10,000 | 9,388 | |||||||||
1.25%, 5/31/28 | 5,000 | 4,318 | |||||||||
1.00%, 7/31/28 | 3,000 | 2,544 | |||||||||
1.13%, 8/31/28 | 5,000 | 4,262 | |||||||||
See notes to financial statements.
11
| USAA Mutual Funds Trust USAA Government Securities Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
1.38%, 10/31/28 | $ | 20,000 | $ | 17,222 | |||||||
2.63%, 2/15/29 | 7,000 | 6,443 | |||||||||
2.38%, 3/31/29 | 30,000 | 27,190 | |||||||||
2.38%, 5/15/29 | 10,000 | 9,048 | |||||||||
2.75%, 5/31/29 | 15,000 | 13,876 | |||||||||
3.88%, 11/30/29 | 9,000 | 8,885 | |||||||||
3.50%, 1/31/30 | 10,000 | 9,658 | |||||||||
0.88%, 11/15/30 | 7,000 | 5,594 | |||||||||
1.63%, 5/15/31 | 10,000 | 8,408 | |||||||||
1.25%, 8/15/31 | 40,000 | 32,431 | |||||||||
4.13%, 11/15/32 | 25,000 | 25,406 | |||||||||
3.50%, 2/15/33 | 15,000 | 14,508 | |||||||||
Total U.S. Treasury Obligations (Cost $387,649) | 354,911 | ||||||||||
Investment Companies (0.3%) | |||||||||||
Federated Treasury Obligations Fund Institutional Shares, 4.43% (e) | 2,499,244 | 2,499 | |||||||||
Total Investment Companies (Cost $2,499) | 2,499 | ||||||||||
Repurchase Agreements (1.5%) | |||||||||||
| Fixed Income Clearing Corporation-State Street Bank & Trust Co., 4.53%, 3/1/23, purchased on 2/28/23, with a maturity date of 3/1/23, with a value of $14,000 (collateralized by Federal National Mortgage Association, 3.88%, due 9/30/29, with a value of $14,280) | 14,000 | 14,000 | |||||||||
Total Repurchase Agreements (Cost $14,000) | 14,000 | ||||||||||
Total Investments (Cost $1,024,849) — 100.3% | 953,100 | ||||||||||
Liabilities in excess of other assets — (0.3)% | (2,843 | ) | |||||||||
NET ASSETS — 100.00% | $ | 950,257 | |||||||||
(a) Variable or Floating-Rate Security. Rate disclosed is as of February 28, 2023.
(b) Rule 144A security or other security that is restricted as to resale to institutional investors. As of February 28, 2023, the fair value of these securities was $17,878 thousands and amounted to 1.9% 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 February 28, 2023.
(e) Rate disclosed is the daily yield on February 28, 2023.
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
See notes to financial statements.
12
| USAA Mutual Funds Trust USAA Government Securities Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
LIBOR — London Interbank Offered Rate
LIBOR01M — 1 Month US Dollar LIBOR, rate disclosed as of February 28, 2023, based on the last reset date of the security
LIBOR03M — 3 Month US Dollar LIBOR, rate disclosed as of February 28, 2023, based on the last reset date of the security
LLC — Limited Liability Company
PRIME — US Prime rate, rate disclosed as of February 28, 2023.
SOFR — Secured Overnight Financing Rate
SOFR30A — 30-day average of SOFR, rate disclosed as of February 28, 2023.
See notes to financial statements.
13
USAA Mutual Funds Trust | Statement of Assets and Liabilities February 28, 2023 | ||||||
(Amounts in Thousands, Except Per Share Amounts)
| USAA Government Securities Fund | |||||||
Assets: | |||||||
Investments, at value (Cost $1,010,849) | $ | 939,100 | |||||
Repurchase agreements, at value (Cost $14,000) | 14,000 | ||||||
Receivables: | |||||||
Interest | 3,717 | ||||||
Capital shares issued | 5,068 | ||||||
Investments sold | 296 | ||||||
From Adviser | 7 | ||||||
Prepaid expenses | 27 | ||||||
Total Assets | 962,215 | ||||||
Liabilities: | |||||||
Payables: | |||||||
Distributions | 31 | ||||||
Investments purchased | 11,361 | ||||||
Capital shares redeemed | 167 | ||||||
Accrued expenses and other payables: | |||||||
Investment advisory fees | 136 | ||||||
Administration fees | 82 | ||||||
Custodian fees | 7 | ||||||
Transfer agent fees | 80 | ||||||
Compliance fees | 1 | ||||||
Trustees' fees | 1 | ||||||
| 12b-1 fees | — | (a) | |||||
Other accrued expenses | 92 | ||||||
Total Liabilities | 11,958 | ||||||
Net Assets: | |||||||
Capital | 1,039,728 | ||||||
Total accumulated earnings/(loss) | (89,471 | ) | |||||
Net Assets | $ | 950,257 | |||||
Net Assets | |||||||
Fund Shares | $ | 255,105 | |||||
Institutional Shares | 691,136 | ||||||
R6 Shares | 4,016 | ||||||
Total | $ | 950,257 | |||||
Shares (unlimited number of shares authorized with no par value): | |||||||
Fund Shares | 29,117 | ||||||
Institutional Shares | 78,854 | ||||||
R6 Shares | 458 | ||||||
Total | 108,429 | ||||||
Net asset value, offering and redemption price per share: (b) | |||||||
Fund Shares | $ | 8.76 | |||||
Institutional Shares | 8.76 | ||||||
R6 Shares | 8.76 | ||||||
(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.
14
USAA Mutual Funds Trust | Statements of Operations | ||||||
(Amounts in Thousands)
| USAA Government Securities Fund | |||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | ||||||||||
Investment Income: | |||||||||||
Dividends | $ | 32 | $ | 8 | |||||||
Interest | 19,613 | 19,682 | |||||||||
Securities lending (net of fees) | 6 | 6 | |||||||||
Total Income | 19,651 | 19,696 | |||||||||
Expenses: | |||||||||||
Investment advisory fees | 1,317 | 1,209 | |||||||||
Administration fees — Fund Shares | 290 | 451 | |||||||||
Administration fees — Institutional Shares | 527 | 697 | |||||||||
Administration fees — Class A | — | (b)(c) | 1 | ||||||||
Administration fees — R6 Shares | 1 | — | (c) | ||||||||
Sub-Administration fees | 18 | 23 | |||||||||
| 12b-1 fees — Class A | — | (b)(c) | 1 | ||||||||
Custodian fees | 34 | 41 | |||||||||
Transfer agent fees — Fund Shares | 253 | 360 | |||||||||
Transfer agent fees — Institutional Shares | 527 | 697 | |||||||||
Transfer agent fees — Class A | — | (b)(c) | — | (c) | |||||||
Transfer agent fees — R6 Shares | — | (c) | — | (c) | |||||||
Trustees' fees | 36 | 48 | |||||||||
Compliance fees | 7 | 7 | |||||||||
Legal and audit fees | 65 | 70 | |||||||||
State registration and filing fees | 69 | 49 | |||||||||
Other expenses | 118 | 106 | |||||||||
Recoupment of prior expenses waived/reimbursed by Adviser | — | — | (c) | ||||||||
Total Expenses | 3,262 | 3,760 | |||||||||
Expenses waived/reimbursed by Adviser | (30 | ) | (25 | ) | |||||||
Net Expenses | 3,232 | 3,735 | |||||||||
Net Investment Income (Loss) | 16,419 | 15,961 | |||||||||
Realized/Unrealized Gains (Losses) from Investments: | |||||||||||
Net realized gains (losses) from investment securities | (10,479 | ) | (3,196 | ) | |||||||
| Net change in unrealized appreciation/depreciation on investment securities | (34,929 | ) | (75,241 | ) | |||||||
Net realized/unrealized gains (losses) on investments | (45,408 | ) | (78,437 | ) | |||||||
Change in net assets resulting from operations | $ | (28,989 | ) | $ | (62,476 | ) | |||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from May 31 to February 28.
(b) Class A activity is for the period June 1, 2022 to February 22, 2023 (date of termination).
(c) 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 Government Securities Fund | |||||||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | Year Ended May 31, 2021 | |||||||||||||
From Investments: | |||||||||||||||
Operations: | |||||||||||||||
Net Investment Income (Loss) | $ | 16,419 | $ | 15,961 | $ | 19,586 | |||||||||
Net realized gains (losses) | (10,479 | ) | (3,196 | ) | 12,560 | ||||||||||
| Net change in unrealized appreciation/ depreciation | (34,929 | ) | (75,241 | ) | (25,484 | ) | |||||||||
Change in net assets resulting from operations | (28,989 | ) | (62,476 | ) | 6,662 | ||||||||||
Distributions to Shareholders: | |||||||||||||||
Fund Shares | (4,501 | ) | (8,608 | ) | (8,877 | ) | |||||||||
Institutional Shares | (12,790 | ) | (21,688 | ) | (15,022 | ) | |||||||||
Class A | (1 | )(b) | (11 | ) | (110 | ) | |||||||||
R6 Shares | (28 | ) | (13 | ) | (146 | ) | |||||||||
| Change in net assets resulting from distributions to shareholders | (17,320 | ) | (30,320 | ) | (24,155 | ) | |||||||||
| Change in net assets resulting from capital transactions | (47,342 | ) | 263,131 | (124,512 | ) | ||||||||||
Change in net assets | (93,651 | ) | 170,335 | (142,005 | ) | ||||||||||
Net Assets: | |||||||||||||||
Beginning of period | 1,043,908 | 873,573 | 1,015,578 | ||||||||||||
End of period | $ | 950,257 | $ | 1,043,908 | $ | 873,573 | |||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from May 31 to February 28.
(b) Class A activity is for the period June 1, 2022 to February 22, 2023 (date of termination).
(continues on next page)
See notes to financial statements.
16
USAA Mutual Funds Trust | Statements of Changes in Net Assets | ||||||
(Amounts in Thousands) (continued)
USAA Government Securities Fund | |||||||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | Year Ended May 31, 2021 | |||||||||||||
Capital Transactions: | |||||||||||||||
Fund Shares | |||||||||||||||
Proceeds from shares issued | $ | 25,995 | $ | 36,461 | $ | 56,454 | |||||||||
Distributions reinvested | 4,248 | 8,152 | 8,356 | ||||||||||||
Cost of shares redeemed | (34,781 | ) | (74,015 | ) | (95,166 | ) | |||||||||
Total Fund Shares | $ | (4,538 | ) | $ | (29,402 | ) | $ | (30,356 | ) | ||||||
Institutional Shares | |||||||||||||||
Proceeds from shares issued | $ | 44,121 | $ | 300,038 | $ | 7,535 | |||||||||
Distributions reinvested | 12,790 | 21,687 | 15,018 | ||||||||||||
Cost of shares redeemed | (103,205 | ) | (29,311 | ) | (104,247 | ) | |||||||||
Total Institutional Shares | $ | (46,294 | ) | $ | 292,414 | $ | (81,694 | ) | |||||||
Class A | |||||||||||||||
Proceeds from shares issued | $ | 25 | (b) | $ | 113 | $ | 5,434 | ||||||||
Distributions reinvested | — | (b)(c) | 11 | 20 | |||||||||||
Cost of shares redeemed | (63 | )(b) | (413 | ) | (10,287 | ) | |||||||||
Total Class A | $ | (38 | )(b) | $ | (289 | ) | $ | (4,833 | ) | ||||||
R6 Shares | |||||||||||||||
Proceeds from shares issued | $ | 4,256 | $ | 450 | $ | 186 | |||||||||
Distributions reinvested | 28 | 13 | 27 | ||||||||||||
Cost of shares redeemed | (756 | ) | (55 | ) | (7,842 | ) | |||||||||
Total R6 Shares | $ | 3,528 | $ | 408 | $ | (7,629 | ) | ||||||||
| Change in net assets resulting from capital transactions | $ | (47,342 | ) | $ | 263,131 | $ | (124,512 | ) | |||||||
Share Transactions: | |||||||||||||||
Fund Shares | |||||||||||||||
Issued | 2,929 | 3,749 | 5,550 | ||||||||||||
Reinvested | 478 | 837 | 824 | ||||||||||||
Redeemed | (3,899 | ) | (7,580 | ) | (9,376 | ) | |||||||||
Total Fund Shares | (492 | ) | (2,994 | ) | (3,002 | ) | |||||||||
Institutional Shares | |||||||||||||||
Issued | 5,011 | 30,328 | 739 | ||||||||||||
Reinvested | 1,439 | 2,234 | 1,480 | ||||||||||||
Redeemed | (11,435 | ) | (3,125 | ) | (10,224 | ) | |||||||||
Total Institutional Shares | (4,985 | ) | 29,437 | (8,005 | ) | ||||||||||
Class A | |||||||||||||||
Issued | 3 | (b) | 12 | 531 | |||||||||||
Reinvested | — | (b)(d) | 1 | 2 | |||||||||||
Redeemed | (7 | )(b) | (45 | ) | (1,015 | ) | |||||||||
Total Class A | (4 | )(b) | (32 | ) | (482 | ) | |||||||||
R6 Shares | |||||||||||||||
Issued | 482 | 46 | 18 | ||||||||||||
Reinvested | 3 | 1 | 3 | ||||||||||||
Redeemed | (85 | ) | (6 | ) | (777 | ) | |||||||||
Total R6 Shares | 400 | 41 | (756 | ) | |||||||||||
Change in Shares | (5,081 | ) | 26,452 | (12,245 | ) | ||||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from May 31 to February 28.
(b) Class A activity is for the period June 1, 2022 to February 22, 2023 (date of termination).
(c) Rounds to less than $1 thousand.
(d) Rounds to less than 1 thousand shares.
See notes to financial statements.
17
USAA Mutual Funds Trust | Financial Highlights | ||||||
For a Share Outstanding Throughout Each Period
USAA Government Securities Fund | |||||||||||||||||||||||||||
Fund Shares | |||||||||||||||||||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | Year Ended May 31, 2021 | Year Ended May 31, 2020 | Year Ended May 31, 2019 | Year Ended May 31, 2018 | ||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 9.19 | $ | 10.03 | $ | 10.23 | $ | 9.84 | $ | 9.55 | $ | 9.86 | |||||||||||||||
Investment Activities: | |||||||||||||||||||||||||||
Net investment income (loss) | 0.15 | (b) | 0.15 | (b) | 0.21 | (b) | 0.24 | (b) | 0.23 | 0.20 | |||||||||||||||||
| Net realized and unrealized gains (losses) | (0.42 | ) | (0.71 | ) | (0.15 | ) | 0.39 | 0.29 | (0.31 | ) | |||||||||||||||||
| Total from Investment Activities | (0.27 | ) | (0.56 | ) | 0.06 | 0.63 | 0.52 | (0.11 | ) | ||||||||||||||||||
Distributions to Shareholders from: | |||||||||||||||||||||||||||
Net investment income | (0.16 | ) | (0.17 | ) | (0.22 | ) | (0.24 | ) | (0.23 | ) | (0.20 | ) | |||||||||||||||
Net realized gains | — | (0.11 | ) | (0.04 | ) | — | — | — | |||||||||||||||||||
Total Distributions | (0.16 | ) | (0.28 | ) | (0.26 | ) | (0.24 | ) | (0.23 | ) | (0.20 | ) | |||||||||||||||
Net Asset Value, End of Period | $ | 8.76 | $ | 9.19 | $ | 10.03 | $ | 10.23 | $ | 9.84 | $ | 9.55 | |||||||||||||||
Total Return (c) (d) | (3.00 | )% | (5.71 | )% | 0.56 | % | 6.49 | % | 5.56 | % | (1.09 | )% | |||||||||||||||
Ratios to Average Net Assets: | |||||||||||||||||||||||||||
Net Expenses (e) (f) (g) (h) | 0.53 | % | 0.42 | % | 0.41 | % | 0.43 | % | 0.47 | % | 0.48 | % | |||||||||||||||
Net Investment Income (Loss) (e) | 2.20 | % | 1.56 | % | 2.04 | % | 2.36 | % | 2.42 | % | 2.09 | % | |||||||||||||||
Gross Expenses (e) (f) | 0.53 | % | 0.42 | % | 0.41 | % | 0.43 | % | 0.47 | % | 0.48 | % | |||||||||||||||
Supplemental Data: | |||||||||||||||||||||||||||
Net Assets at end of period (000's) | $ | 255,105 | $ | 272,233 | $ | 327,111 | $ | 364,077 | $ | 328,123 | $ | 333,464 | |||||||||||||||
Portfolio Turnover (c) (i) | 27 | % | 34 | % | 15 | % | 11 | % | 9 | % | 15 | % | |||||||||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from May 31 to February 28.
(b) Per share net investment income (loss) has been calculated using the average daily shares method.
(c) Not annualized for periods less than one year.
(d) 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.
(e) Annualized for periods less than one year.
(f) Does not include acquired fund fees and expenses, if any.
(g) 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 September 30, 2023, instead of coinciding with the Fund's fiscal year end.
(h) 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.
(i) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares.
(continues on next page)
See notes to financial statements.
18
USAA Mutual Funds Trust | Financial Highlights — continued | ||||||
For a Share Outstanding Throughout Each Period
USAA Government Securities Fund | |||||||||||||||||||||||||||
Institutional Shares | |||||||||||||||||||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | Year Ended May 31, 2021 | Year Ended May 31, 2020 | Year Ended May 31, 2019 | Year Ended May 31, 2018 | ||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 9.20 | $ | 10.04 | $ | 10.23 | $ | 9.85 | $ | 9.55 | $ | 9.86 | |||||||||||||||
Investment Activities: | |||||||||||||||||||||||||||
Net investment income (loss) | 0.15 | (b) | 0.16 | (b) | 0.22 | (b) | 0.24 | (b) | 0.24 | 0.21 | |||||||||||||||||
| Net realized and unrealized gains (losses) | (0.43 | ) | (0.71 | ) | (0.14 | ) | 0.39 | 0.30 | (0.31 | ) | |||||||||||||||||
| Total from Investment Activities | (0.28 | ) | (0.55 | ) | 0.08 | 0.63 | 0.54 | (0.10 | ) | ||||||||||||||||||
Distributions to Shareholders from: | |||||||||||||||||||||||||||
Net investment income | (0.16 | ) | (0.18 | ) | (0.23 | ) | (0.25 | ) | (0.24 | ) | (0.21 | ) | |||||||||||||||
Net realized gains | — | (0.11 | ) | (0.04 | ) | — | — | — | |||||||||||||||||||
Total Distributions | (0.16 | ) | (0.29 | ) | (0.27 | ) | (0.25 | ) | (0.24 | ) | (0.21 | ) | |||||||||||||||
Net Asset Value, End of Period | $ | 8.76 | $ | 9.20 | $ | 10.04 | $ | 10.23 | $ | 9.85 | $ | 9.55 | |||||||||||||||
Total Return (c) (d) | (3.03 | )% | (5.64 | )% | 0.75 | % | 6.45 | % | 5.76 | % | (1.01 | )% | |||||||||||||||
Ratios to Average Net Assets: | |||||||||||||||||||||||||||
Net Expenses (e) (f) (g) (h) | 0.42 | % | 0.35 | % | 0.32 | % | 0.36 | % | 0.38 | % | 0.39 | % | |||||||||||||||
Net Investment Income (Loss) (e) | 2.31 | % | 1.61 | % | 2.12 | % | 2.43 | % | 2.55 | % | 2.18 | % | |||||||||||||||
Gross Expenses (e) (f) | 0.42 | % | 0.35 | % | 0.32 | % | 0.36 | % | 0.38 | % | 0.39 | % | |||||||||||||||
Supplemental Data: | |||||||||||||||||||||||||||
Net Assets at end of period (000's) | $ | 691,136 | $ | 771,104 | $ | 545,930 | $ | 638,299 | $ | 742,233 | $ | 251,297 | |||||||||||||||
Portfolio Turnover (c) (i) | 27 | % | 34 | % | 15 | % | 11 | % | 9 | % | 15 | % | |||||||||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from May 31 to February 28.
(b) Per share net investment income (loss) has been calculated using the average daily shares method.
(c) Not annualized for periods less than one year.
(d) 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.
(e) Annualized for periods less than one year.
(f) Does not include acquired fund fees and expenses, if any.
(g) 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 September 30, 2023, instead of coinciding with the Fund's fiscal year end.
(h) 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.
(i) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares.
(continues on next page)
See notes to financial statements.
19
USAA Mutual Funds Trust | Financial Highlights — continued | ||||||
For a Share Outstanding Throughout Each Period
USAA Government Securities Fund | |||||||||||||||||||||||||||
R6 Shares | |||||||||||||||||||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | Year Ended May 31, 2021 | Year Ended May 31, 2020 | Year Ended May 31, 2019 | Year Ended May 31, 2018 | ||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 9.20 | $ | 10.01 | $ | 10.22 | $ | 9.84 | $ | 9.55 | $ | 9.85 | |||||||||||||||
Investment Activities: | |||||||||||||||||||||||||||
Net investment income (loss) | 0.17 | (b) | 0.16 | (b) | 0.23 | (b) | 0.24 | (b) | 0.24 | 0.22 | |||||||||||||||||
| Net realized and unrealized gains (losses) | (0.44 | ) | (0.67 | ) | (0.15 | ) | 0.39 | 0.29 | (0.30 | ) | |||||||||||||||||
| Total from Investment Activities | (0.27 | ) | (0.51 | ) | 0.08 | 0.63 | 0.53 | (0.08 | ) | ||||||||||||||||||
Distributions to Shareholders from: | |||||||||||||||||||||||||||
Net investment income | (0.17 | ) | (0.19 | ) | (0.25 | ) | (0.25 | ) | (0.24 | ) | (0.22 | ) | |||||||||||||||
Net realized gains | — | (0.11 | ) | (0.04 | ) | — | — | — | |||||||||||||||||||
Total Distributions | (0.17 | ) | (0.30 | ) | (0.29 | ) | (0.25 | ) | (0.24 | ) | (0.22 | ) | |||||||||||||||
Net Asset Value, End of Period | $ | 8.76 | $ | 9.20 | $ | 10.01 | $ | 10.22 | $ | 9.84 | $ | 9.55 | |||||||||||||||
Total Return (c) (d) | (2.96 | )% | (5.26 | )% | 0.75 | % | 6.46 | % | 5.68 | % | (0.87 | )% | |||||||||||||||
Ratios to Average Net Assets: | |||||||||||||||||||||||||||
Net Expenses (e) (f) (g) (h) | 0.34 | %(i) | 0.26 | %(i) | 0.31 | % | 0.35 | % | 0.35 | % | 0.35 | % | |||||||||||||||
Net Investment Income (Loss) (e) | 2.55 | % | 1.65 | % | 2.30 | % | 2.43 | % | 2.54 | % | 2.22 | % | |||||||||||||||
Gross Expenses (e) (f) | 1.81 | % | 3.55 | % | 0.46 | % | 0.39 | % | 0.51 | % | 0.64 | % | |||||||||||||||
Supplemental Data: | |||||||||||||||||||||||||||
Net Assets at end of period (000's) | $ | 4,016 | $ | 531 | $ | 167 | $ | 7,903 | $ | 6,425 | $ | 6,345 | |||||||||||||||
Portfolio Turnover (c) (j) | 27 | % | 34 | % | 15 | % | 11 | % | 9 | % | 15 | % | |||||||||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from May 31 to February 28.
(b) Per share net investment income (loss) has been calculated using the average daily shares method.
(c) Not annualized for periods less than one year.
(d) 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.
(e) Annualized for periods less than one year.
(f) Does not include acquired fund fees and expenses, if any.
(g) 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 September 30, 2023, instead of coinciding with the Fund's fiscal year end.
(h) 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.
(i) Includes impact of voluntary waiver. Without this voluntary waiver, the net expense ratio for the year ended May 31, 2022 and nine months ended February 28, 2023 would have been 0.22% and 0.15% higher, respectively.
(j) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares.
See notes to financial statements.
20
USAA Mutual Funds Trust | Notes to Financial Statements February 28, 2023 | ||||||
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 three classes of shares: Fund Shares, Institutional Shares, and R6 Shares. Effective February 22, 2023, Class A was liquidated. 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.
On June 29, 2022, the Board of Trustees (the "Board") approved the fiscal year-end change for the Fund from May 31 to February 28. The first full cycle of the new fiscal year-end reporting will begin March 1, 2023. As a result of the change, the Fund has a February 28, 2023 fiscal nine-month transition period, the results of which are reported in this Annual Report for the period ended February 28, 2023.
Victory Capital Management ("VCM" or 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 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 (unadjusted) in active markets for identical securities
• Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, or credit spreads, applicable to those securities, etc.)
• Level 3 — significant unobservable inputs (including the Adviser's assumptions in determining the fair value of investments)
21
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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, appointed as the valuation designee by the Board, has established the Pricing and Liquidity Committee (the "Committee"), and subject to Board oversight, the Committee administers and oversees the Fund's valuation policies and procedures, which are approved by the Board.
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.
Debt securities are valued each business day by a pricing service approved by the valuation designee and subject to the oversight of the Board. The 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 February 28, 2023, 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 | $ | — | $ | 22,413 | $ | — | $ | 22,413 | |||||||||||
Collateralized Mortgage Obligations | — | 9,523 | — | 9,523 | |||||||||||||||
Corporate Bonds | — | 4,133 | — | 4,133 | |||||||||||||||
Municipal Bonds | — | 37,525 | — | 37,525 | |||||||||||||||
U.S. Government Agency Mortgages | — | 508,096 | — | 508,096 | |||||||||||||||
U.S. Treasury Obligations | — | 354,911 | — | 354,911 | |||||||||||||||
Investment Companies | 2,499 | — | — | 2,499 | |||||||||||||||
Repurchase Agreements | — | 14,000 | — | 14,000 | |||||||||||||||
Total | $ | 2,499 | $ | 950,601 | $ | — | $ | 953,100 | |||||||||||
As of February 28, 2023, there were no transfers into/out of Level 3.
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 Adviser monitors the creditworthiness of sellers with which the Fund may enter into repurchase agreements.
22
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
Investments in repurchase agreements as presented on the Schedule of Portfolio Investments are not net settlement amounts but gross. At February 28, 2023, 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 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 generally take place within 35 days a month or more after the trade date. Securities that require more than 35 days to settle are considered a senior security and subject to Rule 18f-4. 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. 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.
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 and recorded daily using the effective interest method which adjusts, where applicable, the amortization of premiums or accretion of discounts. Interest income is recorded daily
23
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
on the accrual basis. 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 Statements 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 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 Statements 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 February 28, 2023, 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, and effective February 28, 2023, the Fund will change its tax year end to February 28.
For the nine months ended February 28, 2023, 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.
24
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 under specified conditions outlined in the valuation policies and procedures adopted by the Board. In addition, as defined under the valuation policies and procedures, each transaction must be effected at the independent current market price. For the nine months ended February 28, 2023, the Fund did not engage in cross-trades.
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 nine months ended February 28, 2023, were as follows for the Fund (amounts in thousands):
| Excluding U.S. Government Securities | U.S. Government Securities | ||||||||||||||
Purchases | Sales | Purchases | Sales | ||||||||||||
$ | 26,567 | $ | 29,567 | $ | 234,264 | $ | 268,769 | ||||||||
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 vcm.com. As of February 28, 2023, certain fund-of-funds owned a percentage of the total outstanding shares of the Fund as follows:
Affiliated USAA Mutual Funds | Ownership % | ||||||
USAA Cornerstone Conservative Fund | 3.3 | ||||||
USAA Target Retirement Income Fund | 15.8 | ||||||
USAA Target Retirement 2030 Fund | 19.1 | ||||||
USAA Target Retirement 2040 Fund | 10.1 | ||||||
USAA Target Retirement 2050 Fund | 2.3 | ||||||
USAA Target Retirement 2060 Fund | 0.5 | ||||||
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.
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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements of Operations as Investment advisory fees.
25
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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. 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, 2022, to February 28, 2023, performance adjustments were $132, $281, and $1 for Fund Shares, Institutional Shares, and R6 Shares, in thousands, respectively. Performance adjustments were 0.07%, 0.05%, and 0.14% for Fund Shares, Institutional Shares, and R6 Shares, respectively. For the period June 1, 2022 to February 22, 2023, performance adjustments were $1 thousand for Class A. Performance adjustments were 3.16% for Class A. 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 R6 Shares, 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 R6 Shares, 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 nine months ended February 28, 2023, and 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, Institutional Shares, Class A, and R6 Shares, respectively. Amounts incurred for the nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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
26
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
specifically allocated to the Fund. Amounts incurred for the nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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 R6 Shares 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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements of Operations as 12b-1 fees.
In addition, the Distributor is entitled to receive commissions in connection with sales of Class A. For the nine months ended February 28, 2023, and 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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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 September 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
27
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 February 28, 2023, the expense limits (excluding voluntary waivers) were 0.48%, 0.39%, and 0.35% for Fund Shares, Institutional Shares, and R6 Shares, respectively.
Under the terms of the expense limitation agreement, 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.
As of February 28, 2023, 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 February 28, 2023.
| Expires 2024 | Expires 2025 | Expires 2026 | Total | ||||||||||||
| $ | 8 | $ | 14 | $ | 14 | $ | 36 | ||||||||
As of May 31, 2022, the following amounts are available to be repaid to the Adviser (amounts in thousands).
| 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 nine months ended February 28, 2023, the Adviser voluntarily waived fees of $3 thousand. 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 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.
28
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 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 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. 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.
29
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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.
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 27, 2022, with a termination date of June 26, 2023. 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 nine months ended February 28, 2023, 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 paid a pro-rata portion of the commitment fees plus any interest on amounts borrowed. For the period from June 1, 2022, through June 27, 2022, interest was based on the one-month LIBOR plus one percent. Effective with the renewal, for the period June 28, 2022, through February 28, 2023, interest was based on the one-month SOFR plus 1.10 percent. The Fund did not experience a material financial impact transitioning from LIBOR to SOFR. Interest charged to the 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 nine months ended February 28, 2023, and 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 Statements of Operations under Interfund lending fees. As a Lender, interest earned by the Fund, if any, during the period, is reflected on the Statements of Operations under Interfund lending.
The Fund did not utilize or participate in the Facility during the nine months ended February 28, 2023, and 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.
30
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 February 28, 2023, on the Statement 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):
Nine Months Ended February 28, 2023 | |||||||
| Distributions Paid From | |||||||
| Ordinary Income | Total Distributions Paid | ||||||
$ | 17,320 | $ | 17,320 | ||||
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 February 28, 2023, 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 Losses | Unrealized Appreciation (Depreciation) | Total Accumulated Earnings (Loss) | ||||||||||||||||||
| $ | 811 | $ | (2,127 | ) | $ | (1,316 | ) | $ | (16,403 | ) | $ | (71,752 | ) | $ | (89,471 | ) | |||||||
As of February 28, 2023, 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 | |||||||||
| $ | 10,271 | $ | 6,132 | $ | 16,403 | ||||||
As of February 28, 2023, 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) | ||||||||||||
| $ | 1,024,852 | $ | 893 | $ | (72,645 | ) | $ | (71,752 | ) | ||||||
31
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
9. Subsequent Events:
The Board, upon recommendation of the Adviser, has approved a change in the name of the Trust and each individual fund within the Trust. On February 23, 2023, an initial filing was made with the SEC to commence the process to effectuate the following changes.
Effective at the start of business on April 24, 2023 (the "Effective Date"), the name of the Trust changed from USAA Mutual Funds Trust to Victory Portfolios III, and all references to USAA Mutual Funds Trust in the summary prospectus, statutory prospectus, and statement of additional information ("SAI") will be replaced by the new name.
Also on the Effective Date, references to the current name of the Fund in the summary prospectus, statutory prospectus, and SAI will be replaced with the new name as follows:
Current Name | New Name | ||||||
USAA Government Securities Fund | Victory Government Securities Fund | ||||||
In addition, on the Effective Date, USAA Investments, a Victory Capital Management Inc. investment franchise, that currently manages the USAA Fixed Income Funds, will change its name to Victory Income Investors, and all references to USAA Investments in the summary prospectus, statutory prospectus, and SAI, will be replaced.
Please note that there will be no changes in the management of the Fund or to the Fund's ticker symbols.
32
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 February 28, 2023, and the related statements of operations for the period from June 1, 2022 through February 28, 2023 and the year ended May 31, 2022, the statements of changes in net assets for the period from June 1, 2022 through February 28, 2023 and each of the two years in the period ended May 31, 2022, the financial highlights for the period from June 1, 2022 through February 28, 2023 and each of the five years in the period ended May 31, 2022, 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 February 28, 2023, the results of its operations for the period from June 1, 2022 through February 28, 2023 and the year ended May 31, 2022, the statements of changes in net assets for the period from June 1, 2022 through February 28, 2023 and each of the two years in the period ended May 31, 2022, and its financial highlights for the period from June 1, 2022 through February 28, 2023 and each of the five years in the period ended May 31, 2022, 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 February 28, 2023, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. 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
April 28, 2023
33
USAA Mutual Funds Trust | Supplemental Information February 28, 2023 | ||||||
(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 date 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 | ||||||||||||||||||
34
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 (06/17-06/19); 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 (03/15-03/21). | 45 | None | ||||||||||||||||||
| Paul L. McNamara (July 1948) | Trustee | Trustee since January 2012 | Retired. | 45 | None | ||||||||||||||||||
35
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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) | ||||||||||||||||||
36
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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.
37
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
Officers:
The officers of the Trust, their date 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. (since 2022); 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. (07/01/19-present); Executive Director, Investment and Financial Administration, USAA (2012-06/30/19); 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. (07/01/19-present); Accounting/ Financial Director, USAA (12/13-06/30/19). | ||||||||||||
| 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). | ||||||||||||
38
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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). | ||||||||||||
39
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 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 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 sec.gov.
Expense Examples
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 September 1, 2022, through February 28, 2023.
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 9/1/22 | Actual Ending Account Value 2/28/23 | Hypothetical Ending Account Value 2/28/23 | Actual Expenses Paid During Period 9/1/22- 2/28/23* | Hypothetical Expenses Paid During Period 9/1/22- 2/28/23* | Annualized Expense Ratio During Period 9/1/22- 2/28/23 | ||||||||||||||||||||||
Fund Shares | $ | 1,000.00 | $ | 983.30 | $ | 1,022.12 | $ | 2.66 | $ | 2.71 | 0.54 | % | |||||||||||||||
Institutional Shares | 1,000.00 | 983.80 | 1,022.66 | 2.12 | 2.16 | 0.43 | % | ||||||||||||||||||||
R6 Shares | 1,000.00 | 984.20 | 1,023.06 | 1.72 | 1.76 | 0.35 | % | ||||||||||||||||||||
* Expenses are equal to the average account value multiplied by the Fund's annualized expense ratio multiplied by 181/365 (the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year).
40
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 8-9, 2022, 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 8-9, 2022, 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 21, 2022.
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 February 28, 2023 | ||||||
(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 program, (iv) derivatives risk management program, and (v) 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 adjustment, 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. 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 June 30, 2022.
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
42
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
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.
43
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 10, 2023, 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-RN (prior to August 2022, 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 | ||||||
vcm.com | (800) 235-8396 | ||||||
23413-0423
February 28, 2023
Annual Report
USAA Growth and Tax Strategy Fund
(Also Known as Victory Growth and Tax Strategy Fund*)
* Effective at the start of business on April 24, 2023, the Fund name will change to Victory Growth and Tax Strategy Fund. Please see Notes to the Financial Statements for subsequent event information.
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.
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, 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 | 35 | ||||||
Statements of Operations | 36 | ||||||
Statements of Changes in Net Assets | 37 | ||||||
Financial Highlights | 39 | ||||||
Notes to Financial Statements | 43 | ||||||
| Report of Independent Registered Public Accounting Firm | 56 | ||||||
Supplemental Information (Unaudited) | 57 | ||||||
Trustee and Officer Information | 57 | ||||||
Proxy Voting and Portfolio Holdings Information | 63 | ||||||
Expense Examples | 63 | ||||||
Additional Federal Income Tax Information | 64 | ||||||
Advisory Contract Renewal | 65 | ||||||
Liquidity Risk Management Program | 68 | ||||||
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,
If you are reading this letter but double-checking your calendar, be assured there's no mistake. The annual reporting period for your USAA Mutual Fund has shifted from a fiscal year ended May 31st to a fiscal year ended February 28th/the last day of February. This change has no material impact on any of your investments. This change aims to help us improve efficiencies and reduce operational costs. Therefore, this letter covers an abbreviated "annual" period from June 1, 2022, through February 28, 2023. Future annual reports will cover the 12-month period ended February 28th/the last day of February going forward.
Our most recent annual reporting period has been a challenging period for investors. Consider some of the headwinds: heightened geopolitical tensions, a terrible war in Eastern Europe, elevated energy and food costs, high inflation, and rising interest rates. All this has dampened global growth and created a difficult backdrop for both bond and stock investors.
The inflation data was particularly troublesome and surprised many throughout the past year with some of the highest readings since the 1970s. In response, the U.S. Federal Reserve (the "Fed") continued with its monetary tightening and boosted the Fed funds interest rate repeatedly throughout the annual reporting period. And if that wasn't enough, zero-COVID-19 policies in China (which fortunately have been recently lifted) further exacerbated supply chain issues. As one might expect, all these obstacles ratcheted up volatility across financial markets.
In terms of the numbers, the S&P 500® Index, the bell-weather proxy for our domestic stock market, delivered a negative total return of almost 3% for our abbreviated annual reporting period. But perhaps what made 2022 even more difficult was the performance of fixed income markets. The Bloomberg US Aggregate Bond Index—a proxy for a diversified fixed income portfolio and one that many investors and institutions follow closely—delivered a negative total return of approximately 4% during the same period. That's not exactly the offset to equity performance that many investors come to expect from bonds.
It's been difficult, and we fully acknowledge that the steady drumbeat of bad news and bouts of stomach-churning volatility can take a toll on investors' psyche. Even when markets often snap back sharply (as happened this past July, October and earlier this calendar year), investors often wonder if they have missed an opportunity.
Through all of the turmoil and challenges in our most recent annual reporting period, we are reminded of two enduring realities: 1) financial markets are dynamic and apt to change abruptly; 2) it's vital to remain calm and rational whenever faced with those inevitable bouts of turmoil.
Fortunately, we think that investors can take comfort knowing that all of our independent investment franchises have experience managing portfolios through a wide variety of market environments. Our investment professionals remain calm during turbulent financial markets, and we think it's imperative that investors do the same.
2
We still believe that a long-term plan, a well-diversified portfolio across asset classes and investment types, and a clear understanding of individual risk tolerances are the key ingredients for staying the course and progressing on investment goals. Moreover, all our investment professionals continually monitor the environment and work hard to position portfolios opportunistically no matter what the markets bring. Remember, turmoil can also create opportunity.
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, we encourage you to contact our Member Service Representatives. Call 800-235-8396, or visit our website at vcm.com.
From all of us here at Victory Capital, thank you for your ongoing confidence and 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?
The reporting period started in the month of June as pressure continued to mount for both stocks and bonds. The U.S. Federal Reserve's (the "Fed") hawkish pivot continued to put pressure on equity multiples. With stubbornly high inflation readings, 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.
In the third quarter, global equities declined, continuing the downward trend from the first half of 2022. The quarter began with a rally that continued into mid-August, on hopes that the Fed would pivot toward a more accommodative policy. However, messaging from Fed Chairman, Jerome Powell, and a stronger-than-expected inflation report in early September dampened investor optimism over the central bank's trajectory and the odds of avoiding recession. The Fed went on to hike rates aggressively by 75 basis points ("bps") twice during the quarter, bringing the benchmark fed funds rate target to a range of 3.0% to 3.25%, as compared to 0% to 0.25% at the beginning of the year. (A basis point is 1/100th of a percentage point.) For its part, the European Central Bank raised its reference rate by 50 bps in July, followed by another 75 bps in September. Other factors that weighed on sentiment during the quarter included the ongoing Russia-Ukraine war, an energy crisis in Europe, and the resumption of COVID-19 lockdowns in China.
Global equities rebounded in the fourth quarter trimming full year losses. Gains in October and November were sparked by signs of peaking inflation alongside less hawkish commentary from Fed Chairman Powell raising hope that the central bank would end its interest rate hiking cycle sometime in early 2023. Indeed, both the Fed and the European Central Bank raised their benchmark overnight lending rates by a more modest 50 bps in mid-December. Also supporting sentiment, the Chinese government began to ease their zero-COVID-19 policy that had weighed on global economic growth for much of 2022. However, stocks retreated into year-end as investors shifted their focus to the potential impact higher rates might have on economic growth and corporate earnings in the coming year.
As the reporting period crossed into 2023, global equities started off the year logging positive returns in the month of January. Bonds also rallied at the start of the year on hopes that the Fed's hawkish pivot would come to an end in 2023. As the calendar moved to February, stronger than expected employment and inflation reports caused investors to reevaluate interest rate expectations for 2023 and consider that rates could stay higher for longer. The result was a reversal in global equities and bonds which ended the month lower.
Tax-exempt bonds, as measured by the Bloomberg Municipal Bond Index, generated negative returns overall during the nine-month reporting period ended February 28, 2023. [The Fund's fiscal year-end changed this year to February 28 from May 31, resulting in a shorter reporting period for fiscal year ended 2023.] Negative returns for the reporting period were attributable to a combination of factors, including the Federal Reserve's prolonged fight to reduce inflation through interest rate increases and
4
USAA Growth and Tax Strategy Fund
Managers' Commentary (continued)
significant investor outflows from municipal bond funds. The reporting period was also highlighted by material volatility in the municipal market, as market participants often strongly reacted to Fed actions and comments, as well as economic data releases, in an attempt to determine the future path of interest rates. The overall returns on the Bloomberg Municipal Bond Index for the reporting period was -0.60%, with significant ups and downs throughout the period.
While there might be some volatility in the municipal market in the short term, we remain confident that the right approach is to focus on what matters in the long term. We believe municipal bonds continue to represent an attractive investment opportunity on a relative basis. At the end of February 2023, the yield on the Bloomberg Municipal Bond Index was 3.62%, which is a taxable-equivalent yield of 6.12% (in the highest tax bracket). After factoring in the benefit of the tax exemption, municipals look attractive vs. the (taxable) Bloomberg U.S. Aggregate Bond Index, which yielded 4.81% at quarter-end.
• 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 nine-month reporting period ended February 28, 2023, the Fund Shares, Institutional Shares, Class A, and Class C had a total return (at net asset value) of -3.24%, -3.28%, -3.50%, and -3.99%, respectively. This compares to a total return of -2.67% for the S&P 500® Index (the "Index"), -0.60% for the Bloomberg Municipal Bond Index, -1.63% for the Composite Index (50% of the S&P 500 Index and 50% of the Bloomberg Municipal Bond Index), and -1.93% 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).
• What strategies did you employ during the reporting period?
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. 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.
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
5
USAA Growth and Tax Strategy Fund
Managers' Commentary (continued)
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.
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 February 28, 2023
| Fund Shares | Institutional Shares | Class A | Class C Shares | ||||||||||||||||||||||||||||||||||||||||
| 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 | –9.16 | % | –9.21 | % | –9.49 | % | –11.52 | % | –10.11 | % | –11.00 | % | –7.68 | % | –5.10 | % | –6.39 | % | –7.06 | % | |||||||||||||||||||||||
Five Year | 4.90 | % | NA | NA | NA | NA | NA | 9.82 | % | 1.66 | % | 5.74 | % | 4.91 | % | ||||||||||||||||||||||||||||
Ten Year | 6.46 | % | NA | NA | NA | NA | NA | 12.24 | % | 2.11 | % | 7.17 | % | 6.44 | % | ||||||||||||||||||||||||||||
| Since Inception | NA | 4.34 | % | 4.03 | % | 3.16 | % | 3.27 | % | 3.27 | % | 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 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.
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 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 | February 28, 2023 | ||||||
(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*:
February 28, 2023
(% of Net Assets)
Information Technology | 12.9 | % | |||||
Health Care | 6.5 | % | |||||
Financials | 5.7 | % | |||||
Consumer Discretionary | 4.9 | % | |||||
Industrials | 4.1 | % | |||||
Communication Services | 3.5 | % | |||||
Consumer Staples | 3.0 | % | |||||
Energy | 2.3 | % | |||||
Materials | 1.3 | % | |||||
Real Estate | 1.2 | % | |||||
Top 5 Tax-Exempt Bonds:
February 28, 2023
(% of Net Assets)
Massachusetts Development Finance Agency Revenue | 1.9 | % | |||||
Public Finance Authority Revenue | 1.6 | % | |||||
Illinois Finance Authority Revenue | 1.3 | % | |||||
New Jersey Economic Development Authority Revenue | 0.9 | % | |||||
Port of Port Arthur Navigation District Revenue | 0.9 | % | |||||
Top 5 Blue Chip Stocks:
February 28, 2023
(% of Net Assets)
Apple, Inc. | 3.2 | % | |||||
Microsoft Corp. | 2.7 | % | |||||
Amazon.com, Inc. | 1.2 | % | |||||
NVIDIA Corp. | 1.0 | % | |||||
Berkshire Hathaway, Inc. Class B | 0.8 | % | |||||
* 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.
8
| USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Common Stocks (46.6%) | |||||||||||
Blue Chip Stocks: | |||||||||||
Communication Services (3.5%): | |||||||||||
Activision Blizzard, Inc. | 6,138 | $ | 468 | ||||||||
Alphabet, Inc. Class A (a) | 56,780 | 5,113 | |||||||||
Alphabet, Inc. Class C (a) | 54,571 | 4,928 | |||||||||
AT&T, Inc. | 56,985 | 1,077 | |||||||||
Charter Communications, Inc. Class A (a) | 1,409 | 518 | |||||||||
Comcast Corp. Class A | 50,586 | 1,880 | |||||||||
Electronic Arts, Inc. | 2,332 | 259 | |||||||||
Fox Corp. Class A | 3,851 | 135 | |||||||||
Fox Corp. Class B | 335 | 11 | |||||||||
Live Nation Entertainment, Inc. (a) | 1,692 | 122 | |||||||||
Meta Platforms, Inc. Class A (a) | 22,559 | 3,946 | |||||||||
Netflix, Inc. (a) | 5,255 | 1,693 | |||||||||
News Corp. Class A | 2,721 | 47 | |||||||||
Omnicom Group, Inc. | 2,542 | 230 | |||||||||
Paramount Global Class B | 5,167 | 111 | |||||||||
The Interpublic Group of Cos., Inc. | 2,972 | 106 | |||||||||
The Walt Disney Co. (a) | 16,041 | 1,598 | |||||||||
T-Mobile U.S., Inc. (a) | 5,556 | 790 | |||||||||
Verizon Communications, Inc. | 20,185 | 783 | |||||||||
Warner Bros Discovery, Inc. (a) | 18,825 | 294 | |||||||||
24,109 | |||||||||||
Consumer Discretionary (4.9%): | |||||||||||
Advance Auto Parts, Inc. | 812 | 118 | |||||||||
Amazon.com, Inc. (a) | 87,904 | 8,283 | |||||||||
Aptiv PLC (a) | 2,354 | 274 | |||||||||
AutoZone, Inc. (a) | 241 | 599 | |||||||||
Bath & Body Works, Inc. | 2,727 | 111 | |||||||||
Best Buy Co., Inc. | 2,415 | 201 | |||||||||
Booking Holdings, Inc. (a) | 417 | 1,052 | |||||||||
BorgWarner, Inc. | 1 | — | (b) | ||||||||
CarMax, Inc. (a) | 1,983 | 137 | |||||||||
Carnival Corp. (a) | 9,584 | 102 | |||||||||
Chipotle Mexican Grill, Inc. (a) | 325 | 485 | |||||||||
D.R. Horton, Inc. | 3,030 | 280 | |||||||||
Darden Restaurants, Inc. | 1,518 | 217 | |||||||||
Dollar General Corp. | 2,461 | 532 | |||||||||
Dollar Tree, Inc. (a) | 1,591 | 231 | |||||||||
eBay, Inc. | 6,813 | 313 | |||||||||
Etsy, Inc. (a) | 1,299 | 158 | |||||||||
Expedia Group, Inc. (a) | 1,583 | 172 | |||||||||
Ford Motor Co. | 48,788 | 589 | |||||||||
Garmin Ltd. | 1,028 | 101 | |||||||||
General Motors Co. | 13,698 | 531 | |||||||||
Genuine Parts Co. | 1,110 | 196 | |||||||||
Hasbro, Inc. | 1,004 | 55 | |||||||||
Hilton Worldwide Holdings, Inc. | 3,015 | 436 | |||||||||
See notes to financial statements.
9
| USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Las Vegas Sands Corp. (a) | 4,067 | $ | 234 | ||||||||
Lennar Corp. Class A | 2,669 | 258 | |||||||||
Lennar Corp. Class B | 1 | — | (b) | ||||||||
LKQ Corp. | 3,215 | 184 | |||||||||
Lowe's Cos., Inc. | 7,437 | 1,530 | |||||||||
Marriott International, Inc. Class A | 2,953 | 500 | |||||||||
McDonald's Corp. | 7,151 | 1,887 | |||||||||
MGM Resorts International | 4,369 | 188 | |||||||||
Mohawk Industries, Inc. (a) | 618 | 64 | |||||||||
Newell Brands, Inc. | 2,180 | 32 | |||||||||
NIKE, Inc. Class B | 12,097 | 1,437 | |||||||||
Norwegian Cruise Line Holdings Ltd. (a) | 2,676 | 40 | |||||||||
O'Reilly Automotive, Inc. (a) | 788 | 654 | |||||||||
PulteGroup, Inc. | 2,360 | 129 | |||||||||
PVH Corp. | 928 | 74 | |||||||||
Ralph Lauren Corp. | 420 | 50 | |||||||||
Ross Stores, Inc. | 3,606 | 399 | |||||||||
Royal Caribbean Cruises Ltd. (a) | 2,197 | 155 | |||||||||
Starbucks Corp. | 11,086 | 1,132 | |||||||||
Tapestry, Inc. | 3,021 | 131 | |||||||||
Target Corp. | 5,209 | 878 | |||||||||
Tesla, Inc. (a) | 16,238 | 3,340 | |||||||||
The Home Depot, Inc. | 10,478 | 3,107 | |||||||||
The TJX Cos., Inc. | 12,221 | 936 | |||||||||
Tractor Supply Co. | 1,382 | 322 | |||||||||
Ulta Beauty, Inc. (a) | 550 | 285 | |||||||||
VF Corp. | 2,040 | 51 | |||||||||
Victoria's Secret & Co. (a) | 1 | — | (b) | ||||||||
Whirlpool Corp. | 694 | 96 | |||||||||
Wynn Resorts Ltd. (a) | 642 | 70 | |||||||||
Yum! Brands, Inc. | 3,523 | 448 | |||||||||
33,784 | |||||||||||
Consumer Staples (3.0%): | |||||||||||
Altria Group, Inc. | 20,264 | 941 | |||||||||
Archer-Daniels-Midland Co. | 6,080 | 484 | |||||||||
Brown-Forman Corp. Class B | 1,744 | 113 | |||||||||
Campbell Soup Co. | 640 | 34 | |||||||||
Church & Dwight Co., Inc. | 2,723 | 228 | |||||||||
Colgate-Palmolive Co. | 5,377 | 394 | |||||||||
Conagra Brands, Inc. | 3,475 | 127 | |||||||||
Constellation Brands, Inc. Class A | 1,408 | 315 | |||||||||
Costco Wholesale Corp. | 4,112 | 1,991 | |||||||||
General Mills, Inc. | 6,777 | 539 | |||||||||
Hormel Foods Corp. | 1,830 | 81 | |||||||||
Kellogg Co. | 1,080 | 71 | |||||||||
Kimberly-Clark Corp. | 2,120 | 265 | |||||||||
Lamb Weston Holdings, Inc. | 1,374 | 138 | |||||||||
McCormick & Co., Inc. | 2,942 | 219 | |||||||||
Molson Coors Beverage Co. Class B | 2,045 | 109 | |||||||||
Mondelez International, Inc. Class A | 12,769 | 832 | |||||||||
See notes to financial statements.
10
| USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Monster Beverage Corp. (a) | 3,965 | $ | 403 | ||||||||
PepsiCo, Inc. | 13,670 | 2,372 | |||||||||
Philip Morris International, Inc. | 16,649 | 1,620 | |||||||||
Sysco Corp. | 5,774 | 431 | |||||||||
The Clorox Co. | 690 | 107 | |||||||||
The Coca-Cola Co. | 27,653 | 1,646 | |||||||||
The Estee Lauder Cos., Inc. | 2,324 | 565 | |||||||||
The Hershey Co. | 1,804 | 430 | |||||||||
The J.M. Smucker Co. | 828 | 122 | |||||||||
The Kraft Heinz Co. | 6,993 | 272 | |||||||||
The Kroger Co. | 8,039 | 347 | |||||||||
The Procter & Gamble Co. | 22,787 | 3,135 | |||||||||
Tyson Foods, Inc. Class A | 2,142 | 127 | |||||||||
Walgreens Boots Alliance, Inc. | 5,210 | 185 | |||||||||
Walmart, Inc. | 14,494 | 2,060 | |||||||||
20,703 | |||||||||||
Energy (2.3%): | |||||||||||
APA Corp. | 1,896 | 73 | |||||||||
Baker Hughes Co. | 8,513 | 260 | |||||||||
Chevron Corp. | 21,425 | 3,444 | |||||||||
ConocoPhillips | 14,432 | 1,492 | |||||||||
Coterra Energy, Inc. | 2,120 | 53 | |||||||||
Devon Energy Corp. | 4,851 | 262 | |||||||||
Diamondback Energy, Inc. | 2,111 | 297 | |||||||||
EOG Resources, Inc. | 4,759 | 538 | |||||||||
Exxon Mobil Corp. | 39,044 | 4,291 | |||||||||
Halliburton Co. | 9,010 | 326 | |||||||||
Hess Corp. | 2,683 | 361 | |||||||||
Kinder Morgan, Inc. | 7,546 | 129 | |||||||||
Marathon Oil Corp. | 8,612 | 217 | |||||||||
Marathon Petroleum Corp. | 6,584 | 814 | |||||||||
Occidental Petroleum Corp. | 6,740 | 395 | |||||||||
ONEOK, Inc. | 5,513 | 361 | |||||||||
Phillips 66 | 2,813 | 288 | |||||||||
Pioneer Natural Resources Co. | 2,039 | 409 | |||||||||
Schlumberger NV | 17,463 | 929 | |||||||||
The Williams Cos., Inc. | 14,342 | 432 | |||||||||
Valero Energy Corp. | 4,779 | 629 | |||||||||
16,000 | |||||||||||
Financials (5.7%): | |||||||||||
Aflac, Inc. | 6,526 | 445 | |||||||||
American Express Co. | 6,409 | 1,115 | |||||||||
American International Group, Inc. | 9,640 | 589 | |||||||||
Ameriprise Financial, Inc. | 1,259 | 432 | |||||||||
Aon PLC Class A | 2,360 | 718 | |||||||||
Arthur J. Gallagher & Co. | 2,370 | 444 | |||||||||
Assurant, Inc. | 653 | 83 | |||||||||
Bank of America Corp. | 80,700 | 2,768 | |||||||||
Berkshire Hathaway, Inc. Class B (a) | 17,957 | 5,480 | |||||||||
See notes to financial statements.
11
| USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
BlackRock, Inc. | 1,540 | $ | 1,062 | ||||||||
Capital One Financial Corp. | 4,781 | 521 | |||||||||
Cboe Global Markets, Inc. | 1,027 | 130 | |||||||||
Chubb Ltd. | 3,972 | 838 | |||||||||
Cincinnati Financial Corp. | 1,898 | 229 | |||||||||
Citigroup, Inc. | 14,818 | 751 | |||||||||
Citizens Financial Group, Inc. | 5,249 | 219 | |||||||||
CME Group, Inc. | 3,122 | 579 | |||||||||
Comerica, Inc. | 1,616 | 113 | |||||||||
Discover Financial Services | 3,419 | 383 | |||||||||
FactSet Research Systems, Inc. | 388 | 161 | |||||||||
Fifth Third Bancorp | 8,477 | 308 | |||||||||
Huntington Bancshares, Inc. | 12,687 | 194 | |||||||||
Intercontinental Exchange, Inc. | 5,129 | 522 | |||||||||
Invesco Ltd. | 4,160 | 73 | |||||||||
JPMorgan Chase & Co. | 32,040 | 4,593 | |||||||||
KeyCorp | 11,521 | 211 | |||||||||
Lincoln National Corp. | 1,769 | 56 | |||||||||
Loews Corp. | 2,402 | 147 | |||||||||
M&T Bank Corp. | 2,181 | 339 | |||||||||
Marsh & McLennan Cos., Inc. | 5,030 | 816 | |||||||||
MetLife, Inc. | 7,410 | 532 | |||||||||
Moody's Corp. | 1,624 | 471 | |||||||||
Morgan Stanley | 14,869 | 1,435 | |||||||||
MSCI, Inc. | 992 | 518 | |||||||||
Nasdaq, Inc. | 3,477 | 195 | |||||||||
Northern Trust Corp. (c) | 1,649 | 157 | |||||||||
Principal Financial Group, Inc. | 2,476 | 222 | |||||||||
Prudential Financial, Inc. | 4,592 | 459 | |||||||||
Raymond James Financial, Inc. | 1,989 | 216 | |||||||||
Regions Financial Corp. | 9,790 | 228 | |||||||||
S&P Global, Inc. | 3,313 | 1,130 | |||||||||
State Street Corp. | 3,749 | 332 | |||||||||
SVB Financial Group (a) | 645 | 186 | |||||||||
Synchrony Financial | 6,103 | 218 | |||||||||
T. Rowe Price Group, Inc. | 2,189 | 246 | |||||||||
The Allstate Corp. | 3,040 | 391 | |||||||||
The Bank of New York Mellon Corp. | 5,526 | 281 | |||||||||
The Charles Schwab Corp. | 15,402 | 1,200 | |||||||||
The Goldman Sachs Group, Inc. | 3,096 | 1,089 | |||||||||
The Hartford Financial Services Group, Inc. | 2,900 | 227 | |||||||||
The PNC Financial Services Group, Inc. | 4,807 | 759 | |||||||||
The Progressive Corp. | 5,434 | 780 | |||||||||
The Travelers Cos., Inc. | 2,350 | 435 | |||||||||
Truist Financial Corp. | 9,641 | 453 | |||||||||
U.S. Bancorp | 11,380 | 543 | |||||||||
W.R. Berkley Corp. | 2,739 | 181 | |||||||||
Wells Fargo & Co. | 39,812 | 1,862 | |||||||||
Willis Towers Watson PLC | 1,136 | 266 | |||||||||
Zions Bancorp NA | 1,870 | 95 | |||||||||
39,426 | |||||||||||
See notes to financial statements.
12
| USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Health Care (6.5%): | |||||||||||
Abbott Laboratories | 17,003 | $ | 1,730 | ||||||||
AbbVie, Inc. | 16,903 | 2,601 | |||||||||
Agilent Technologies, Inc. | 3,708 | 526 | |||||||||
Align Technology, Inc. (a) | 809 | 250 | |||||||||
AmerisourceBergen Corp. | 1,410 | 219 | |||||||||
Amgen, Inc. | 5,669 | 1,313 | |||||||||
Baxter International, Inc. | 4,106 | 164 | |||||||||
Becton Dickinson and Co. | 2,074 | 487 | |||||||||
Biogen, Inc. (a) | 1,216 | 328 | |||||||||
Bio-Rad Laboratories, Inc. Class A (a) | 151 | 72 | |||||||||
Boston Scientific Corp. (a) | 16,790 | 784 | |||||||||
Bristol-Myers Squibb Co. | 17,034 | 1,175 | |||||||||
Cardinal Health, Inc. | 2,310 | 175 | |||||||||
Catalent, Inc. (a) | 1,400 | 96 | |||||||||
Centene Corp. (a) | 5,336 | 365 | |||||||||
Cigna Corp. | 3,445 | 1,006 | |||||||||
CVS Health Corp. | 13,059 | 1,091 | |||||||||
Danaher Corp. | 6,489 | 1,606 | |||||||||
DaVita, Inc. (a) | 748 | 62 | |||||||||
DENTSPLY SIRONA, Inc. | 1,150 | 44 | |||||||||
Dexcom, Inc. (a) | 3,032 | 337 | |||||||||
Edwards Lifesciences Corp. (a) | 6,150 | 495 | |||||||||
Elevance Health, Inc. | 2,398 | 1,126 | |||||||||
Eli Lilly & Co. | 8,712 | 2,711 | |||||||||
GE Healthcare Technologies, Inc. (a) | 3,779 | 287 | |||||||||
Gilead Sciences, Inc. | 8,764 | 706 | |||||||||
HCA Healthcare, Inc. | 2,625 | 639 | |||||||||
Henry Schein, Inc. (a) | 1,136 | 89 | |||||||||
Hologic, Inc. (a) | 2,461 | 196 | |||||||||
Humana, Inc. | 1,376 | 681 | |||||||||
IDEXX Laboratories, Inc. (a) | 1,028 | 487 | |||||||||
Illumina, Inc. (a) | 977 | 195 | |||||||||
Incyte Corp. (a) | 578 | 45 | |||||||||
Intuitive Surgical, Inc. (a) | 4,247 | 974 | |||||||||
IQVIA Holdings, Inc. (a) | 1,977 | 412 | |||||||||
Johnson & Johnson | 21,874 | 3,352 | |||||||||
Laboratory Corp. of America Holdings | 1,063 | 254 | |||||||||
McKesson Corp. | 1,450 | 507 | |||||||||
Medtronic PLC | 8,302 | 687 | |||||||||
Merck & Co., Inc. | 26,683 | 2,835 | |||||||||
Mettler-Toledo International, Inc. (a) | 250 | 358 | |||||||||
Moderna, Inc. (a) | 3,389 | 470 | |||||||||
Organon & Co. | 1,845 | 45 | |||||||||
PerkinElmer, Inc. | 1,164 | 145 | |||||||||
Pfizer, Inc. | 48,283 | 1,959 | |||||||||
Quest Diagnostics, Inc. | 1,126 | 156 | |||||||||
Regeneron Pharmaceuticals, Inc. (a) | 883 | 671 | |||||||||
ResMed, Inc. | 1,408 | 300 | |||||||||
STERIS PLC | 864 | 163 | |||||||||
See notes to financial statements.
13
| USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Stryker Corp. | 3,361 | $ | 884 | ||||||||
The Cooper Cos., Inc. | 445 | 146 | |||||||||
Thermo Fisher Scientific, Inc. | 3,958 | 2,144 | |||||||||
UnitedHealth Group, Inc. | 9,155 | 4,357 | |||||||||
Vertex Pharmaceuticals, Inc. (a) | 2,999 | 871 | |||||||||
Viatris, Inc. | 4,869 | 56 | |||||||||
Waters Corp. (a) | 690 | 215 | |||||||||
West Pharmaceutical Services, Inc. | 489 | 155 | |||||||||
Zimmer Biomet Holdings, Inc. | 1,229 | 152 | |||||||||
Zoetis, Inc. | 4,796 | 801 | |||||||||
45,157 | |||||||||||
Industrials (4.1%): | |||||||||||
3M Co. | 3,890 | 419 | |||||||||
A O Smith Corp. | 1,607 | 105 | |||||||||
Alaska Air Group, Inc. (a) | 1,550 | 74 | |||||||||
Allegion PLC | 880 | 99 | |||||||||
American Airlines Group, Inc. (a) | 6,217 | 99 | |||||||||
AMETEK, Inc. | 2,861 | 405 | |||||||||
C.H. Robinson Worldwide, Inc. | 779 | 78 | |||||||||
Carrier Global Corp. | 7,990 | 360 | |||||||||
Caterpillar, Inc. | 5,175 | 1,240 | |||||||||
Cintas Corp. | 1,066 | 467 | |||||||||
Copart, Inc. (a) | 4,572 | 322 | |||||||||
CSX Corp. | 24,039 | 733 | |||||||||
Cummins, Inc. | 1,577 | 383 | |||||||||
Deere & Co. | 3,434 | 1,440 | |||||||||
Delta Air Lines, Inc. (a) | 7,217 | 277 | |||||||||
Dover Corp. | 1,435 | 215 | |||||||||
Eaton Corp. PLC | 4,316 | 755 | |||||||||
Emerson Electric Co. | 4,743 | 392 | |||||||||
Equifax, Inc. | 1,334 | 270 | |||||||||
Expeditors International of Washington, Inc. | 1,610 | 168 | |||||||||
Fastenal Co. | 5,972 | 308 | |||||||||
FedEx Corp. | 2,126 | 432 | |||||||||
Fortive Corp. | 2,506 | 167 | |||||||||
Fortune Brands Innovations, Inc. | 1,596 | 99 | |||||||||
General Dynamics Corp. | 1,726 | 393 | |||||||||
General Electric Co. | 11,338 | 960 | |||||||||
Honeywell International, Inc. | 6,692 | 1,281 | |||||||||
Howmet Aerospace, Inc. | 3,713 | 157 | |||||||||
Huntington Ingalls Industries, Inc. | 470 | 101 | |||||||||
IDEX Corp. | 779 | 175 | |||||||||
Illinois Tool Works, Inc. | 2,480 | 578 | |||||||||
Ingersoll Rand, Inc. | 4,166 | 242 | |||||||||
J.B. Hunt Transport Services, Inc. | 714 | 129 | |||||||||
Jacobs Solutions, Inc. | 1,124 | 134 | |||||||||
Johnson Controls International PLC | 6,676 | 419 | |||||||||
L3Harris Technologies, Inc. | 2,025 | 428 | |||||||||
Lockheed Martin Corp. | 2,228 | 1,057 | |||||||||
Masco Corp. | 2,915 | 153 | |||||||||
See notes to financial statements.
14
| USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Masterbrand, Inc. (a) | 1,596 | $ | 16 | ||||||||
Nordson Corp. | 554 | 122 | |||||||||
Norfolk Southern Corp. | 2,582 | 580 | |||||||||
Northrop Grumman Corp. | 1,594 | 740 | |||||||||
Old Dominion Freight Line, Inc. | 882 | 299 | |||||||||
Otis Worldwide Corp. | 3,056 | 259 | |||||||||
PACCAR, Inc. | 3,846 | 278 | |||||||||
Parker-Hannifin Corp. | 1,216 | 428 | |||||||||
Pentair PLC | 869 | 49 | |||||||||
Quanta Services, Inc. | 1,444 | 233 | |||||||||
Raytheon Technologies Corp. | 14,809 | 1,453 | |||||||||
Republic Services, Inc. | 2,086 | 269 | |||||||||
Robert Half International, Inc. | 1,284 | 104 | |||||||||
Rockwell Automation, Inc. | 1,190 | 351 | |||||||||
Snap-on, Inc. | 594 | 148 | |||||||||
Southwest Airlines Co. | 4,959 | 167 | |||||||||
Stanley Black & Decker, Inc. | 983 | 84 | |||||||||
Textron, Inc. | 2,070 | 150 | |||||||||
The Boeing Co. (a) | 4,734 | 954 | |||||||||
Trane Technologies PLC | 2,861 | 529 | |||||||||
TransDigm Group, Inc. | 593 | 441 | |||||||||
Union Pacific Corp. | 7,288 | 1,511 | |||||||||
United Airlines Holdings, Inc. (a) | 3,649 | 190 | |||||||||
United Parcel Service, Inc. Class B | 6,904 | 1,260 | |||||||||
United Rentals, Inc. | 750 | 351 | |||||||||
Verisk Analytics, Inc. | 1,450 | 248 | |||||||||
W.W. Grainger, Inc. | 478 | 319 | |||||||||
Waste Management, Inc. | 3,869 | 579 | |||||||||
Westinghouse Air Brake Technologies Corp. | 1,745 | 182 | |||||||||
Xylem, Inc. | 1,548 | 159 | |||||||||
27,967 | |||||||||||
Information Technology (12.9%): | |||||||||||
Accenture PLC Class A | 6,227 | 1,654 | |||||||||
Adobe, Inc. (a) | 5,423 | 1,757 | |||||||||
Advanced Micro Devices, Inc. (a) | 16,362 | 1,286 | |||||||||
Akamai Technologies, Inc. (a) | 1,562 | 113 | |||||||||
Amphenol Corp. Class A | 5,634 | 437 | |||||||||
Analog Devices, Inc. | 5,096 | 935 | |||||||||
ANSYS, Inc. (a) | 796 | 242 | |||||||||
Apple, Inc. | 150,554 | 22,193 | |||||||||
Applied Materials, Inc. | 10,258 | 1,191 | |||||||||
Arista Networks, Inc. (a) | 2,364 | 328 | |||||||||
Autodesk, Inc. (a) | 2,574 | 511 | |||||||||
Automatic Data Processing, Inc. | 4,304 | 946 | |||||||||
Broadcom, Inc. | 4,130 | 2,454 | |||||||||
Cadence Design Systems, Inc. (a) | 2,583 | 498 | |||||||||
CDW Corp. | 1,428 | 289 | |||||||||
Ceridian HCM Holding, Inc. (a) | 1,295 | 94 | |||||||||
Cisco Systems, Inc. | 39,302 | 1,903 | |||||||||
Cognizant Technology Solutions Corp. Class A | 5,181 | 324 | |||||||||
See notes to financial statements.
15
| USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Corning, Inc. | 7,670 | $ | 260 | ||||||||
DXC Technology Co. (a) | 3,194 | 89 | |||||||||
Enphase Energy, Inc. (a) | 816 | 172 | |||||||||
EPAM Systems, Inc. (a) | 319 | 98 | |||||||||
F5, Inc. (a) | 421 | 60 | |||||||||
Fidelity National Information Services, Inc. | 1,247 | 79 | |||||||||
Fiserv, Inc. (a) | 6,882 | 792 | |||||||||
Fortinet, Inc. (a) | 7,295 | 434 | |||||||||
Gartner, Inc. (a) | 843 | 276 | |||||||||
Gen Digital, Inc. | 1,010 | 20 | |||||||||
Global Payments, Inc. | 2,592 | 291 | |||||||||
Hewlett Packard Enterprise Co. | 12,525 | 196 | |||||||||
HP, Inc. | 12,818 | 378 | |||||||||
Intel Corp. | 28,673 | 715 | |||||||||
International Business Machines Corp. | 5,693 | 736 | |||||||||
Intuit, Inc. | 2,659 | 1,083 | |||||||||
Juniper Networks, Inc. | 2,447 | 75 | |||||||||
Keysight Technologies, Inc. (a) | 1,866 | 298 | |||||||||
KLA Corp. | 1,555 | 590 | |||||||||
Lam Research Corp. | 1,595 | 775 | |||||||||
Mastercard, Inc. Class A | 8,421 | 2,992 | |||||||||
Microchip Technology, Inc. | 5,696 | 462 | |||||||||
Micron Technology, Inc. | 10,223 | 591 | |||||||||
Microsoft Corp. | 73,591 | 18,355 | |||||||||
Motorola Solutions, Inc. | 1,485 | 390 | |||||||||
NetApp, Inc. | 2,488 | 161 | |||||||||
NVIDIA Corp. | 28,628 | 6,646 | |||||||||
NXP Semiconductors NV | 2,048 | 366 | |||||||||
ON Semiconductor Corp. (a) | 5,140 | 398 | |||||||||
Oracle Corp. | 19,157 | 1,674 | |||||||||
Paychex, Inc. | 2,957 | 326 | |||||||||
Paycom Software, Inc. (a) | 608 | 176 | |||||||||
PayPal Holdings, Inc. (a) | 10,200 | 751 | |||||||||
Qorvo, Inc. (a) | 1,188 | 120 | |||||||||
QUALCOMM, Inc. | 12,055 | 1,489 | |||||||||
Roper Technologies, Inc. | 1,242 | 534 | |||||||||
Salesforce, Inc. (a) | 9,375 | 1,534 | |||||||||
Seagate Technology Holdings PLC | 2,345 | 151 | |||||||||
ServiceNow, Inc. (a) | 2,279 | 985 | |||||||||
Skyworks Solutions, Inc. | 708 | 79 | |||||||||
SolarEdge Technologies, Inc. (a) | 224 | 71 | |||||||||
Synopsys, Inc. (a) | 1,398 | 509 | |||||||||
TE Connectivity Ltd. | 3,470 | 442 | |||||||||
Teledyne Technologies, Inc. (a) | 69 | 30 | |||||||||
Texas Instruments, Inc. | 8,840 | 1,516 | |||||||||
VeriSign, Inc. (a) | 785 | 155 | |||||||||
Visa, Inc. Class A | 16,518 | 3,633 | |||||||||
Western Digital Corp. (a) | 1,369 | 53 | |||||||||
Xerox Holdings Corp. | 1 | — | (b) | ||||||||
Zebra Technologies Corp. (a) | 649 | 195 | |||||||||
89,356 | |||||||||||
See notes to financial statements.
16
| USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Materials (1.3%): | |||||||||||
Air Products and Chemicals, Inc. | 1,923 | $ | 550 | ||||||||
Albemarle Corp. | 1,201 | 305 | |||||||||
Avery Dennison Corp. | 906 | 165 | |||||||||
Ball Corp. | 3,726 | 209 | |||||||||
Celanese Corp. | 463 | 54 | |||||||||
CF Industries Holdings, Inc. | 2,538 | 218 | |||||||||
Corteva, Inc. | 8,159 | 508 | |||||||||
Dow, Inc. | 8,954 | 512 | |||||||||
DuPont de Nemours, Inc. | 3,671 | 268 | |||||||||
Eastman Chemical Co. | 1,432 | 122 | |||||||||
Ecolab, Inc. | 1,707 | 272 | |||||||||
FMC Corp. | 1,168 | 151 | |||||||||
Freeport-McMoRan, Inc. | 15,889 | 651 | |||||||||
International Flavors & Fragrances, Inc. | 1,485 | 138 | |||||||||
International Paper Co. | 3,667 | 134 | |||||||||
Linde PLC | 5,953 | 2,074 | |||||||||
LyondellBasell Industries NV Class A | 2,696 | 259 | |||||||||
Martin Marietta Materials, Inc. | 721 | 260 | |||||||||
Newmont Corp. | 8,551 | 373 | |||||||||
Nucor Corp. | 2,642 | 442 | |||||||||
PPG Industries, Inc. | 1,640 | 217 | |||||||||
Sealed Air Corp. | 1,340 | 65 | |||||||||
The Mosaic Co. | 4,511 | 240 | |||||||||
The Sherwin-Williams Co. | 2,304 | 510 | |||||||||
Vulcan Materials Co. | 1,110 | 201 | |||||||||
Westrock Co. | 828 | 26 | |||||||||
8,924 | |||||||||||
Real Estate (1.2%): | |||||||||||
Alexandria Real Estate Equities, Inc. | 1,101 | 165 | |||||||||
American Tower Corp. | 4,297 | 851 | |||||||||
AvalonBay Communities, Inc. | 740 | 128 | |||||||||
Boston Properties, Inc. | 814 | 53 | |||||||||
Camden Property Trust | 884 | 101 | |||||||||
CBRE Group, Inc. Class A (a) | 3,167 | 270 | |||||||||
Crown Castle, Inc. | 4,036 | 528 | |||||||||
Digital Realty Trust, Inc. | 1,465 | 153 | |||||||||
Equinix, Inc. | 852 | 586 | |||||||||
Equity Residential | 2,215 | 138 | |||||||||
Essex Property Trust, Inc. | 748 | 171 | |||||||||
Extra Space Storage, Inc. | 1,147 | 189 | |||||||||
Federal Realty Investment Trust | 884 | 94 | |||||||||
Healthpeak Properties, Inc. | 1,880 | 45 | |||||||||
Host Hotels & Resorts, Inc. | 8,818 | 148 | |||||||||
Invitation Homes, Inc. | 5,812 | 182 | |||||||||
Iron Mountain, Inc. | 3,600 | 190 | |||||||||
Kimco Realty Corp. | 5,368 | 111 | |||||||||
Mid-America Apartment Communities, Inc. | 1,273 | 204 | |||||||||
Prologis, Inc. | 8,574 | 1,058 | |||||||||
Public Storage | 1,221 | 365 | |||||||||
See notes to financial statements.
17
| USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Realty Income Corp. | 6,227 | $ | 398 | ||||||||
Regency Centers Corp. | 1,923 | 121 | |||||||||
SBA Communications Corp. | 1,109 | 288 | |||||||||
Simon Property Group, Inc. | 3,796 | 463 | |||||||||
UDR, Inc. | 3,662 | 157 | |||||||||
Ventas, Inc. | 4,666 | 227 | |||||||||
Welltower, Inc. | 4,568 | 338 | |||||||||
Weyerhaeuser Co. | 6,892 | 215 | |||||||||
7,937 | |||||||||||
Utilities (1.2%): | |||||||||||
Alliant Energy Corp. | 3,054 | 157 | |||||||||
Ameren Corp. | 2,468 | 204 | |||||||||
American Electric Power Co., Inc. | 4,277 | 376 | |||||||||
American Water Works Co., Inc. | 2,262 | 318 | |||||||||
CenterPoint Energy, Inc. | 6,318 | 176 | |||||||||
CMS Energy Corp. | 3,064 | 181 | |||||||||
Consolidated Edison, Inc. | 3,777 | 338 | |||||||||
Constellation Energy Corp. | 3,575 | 268 | |||||||||
Dominion Energy, Inc. | 3,566 | 198 | |||||||||
DTE Energy Co. | 1,653 | 181 | |||||||||
Duke Energy Corp. | 8,868 | 836 | |||||||||
Edison International | 1,730 | 115 | |||||||||
Entergy Corp. | 1,967 | 202 | |||||||||
Evergy, Inc. | 660 | 39 | |||||||||
Eversource Energy | 3,443 | 259 | |||||||||
Exelon Corp. | 10,726 | 433 | |||||||||
FirstEnergy Corp. | 3,717 | 147 | |||||||||
NextEra Energy, Inc. | 18,576 | 1,319 | |||||||||
NiSource, Inc. | 4,671 | 128 | |||||||||
NRG Energy, Inc. | 2,789 | 91 | |||||||||
PG&E Corp. (a) | 14,098 | 220 | |||||||||
PPL Corp. | 6,580 | 178 | |||||||||
Public Service Enterprise Group, Inc. | 6,188 | 374 | |||||||||
Sempra Energy | 1,884 | 283 | |||||||||
The AES Corp. | 7,856 | 194 | |||||||||
The Southern Co. | 9,551 | 602 | |||||||||
WEC Energy Group, Inc. | 2,943 | 261 | |||||||||
Xcel Energy, Inc. | 5,211 | 336 | |||||||||
8,414 | |||||||||||
Total Common Stocks (Cost $99,778) | 321,777 | ||||||||||
Rights (0.0%) (c) | |||||||||||
Health Care (0.0%): | |||||||||||
ABIOMED, Inc. (a) (d) | 568 | 1 | |||||||||
Total Rights (Cost $—) | 1 | ||||||||||
See notes to financial statements.
18
| USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Corporate Bonds (0.1%) | |||||||||||
Industrials (0.1%): | |||||||||||
| Northwest Senior Housing Corp. — Edgemere Project, Promissory Note, DIP Loan, 10.00%, 12/31/23 (d) | $ | 245 | $ | 245 | |||||||
| DIP Loan, 12.00%, 12/31/23 (d) | 176 | 176 | |||||||||
Total Corporate Bonds (Cost $421) | 421 | ||||||||||
Municipal Bonds (52.5%) | |||||||||||
Alabama (0.6%): | |||||||||||
| Columbia Industrial Development Board Revenue, Series B, 2.25%, 12/1/37, Continuously Callable @100 (e) | 950 | 950 | |||||||||
| Columbia Industrial Development Board Revenue (NBGA — Southern Co.), Series A, 2.25%, 12/1/37, Continuously Callable @100 (e) | 300 | 300 | |||||||||
| Cooper Green Mercy Health Services Authority Revenue, 5.25%, 9/1/52, Continuously Callable @100 | 2,000 | 2,060 | |||||||||
| DCH Healthcare Authority Revenue, Series A, 4.00%, 6/1/51, Continuously Callable @100 | 1,000 | 893 | |||||||||
4,203 | |||||||||||
Alaska (0.1%): | |||||||||||
| Northern Tobacco Securitization Corp. Revenue, Series A, 4.00%, 6/1/50, Continuously Callable @100 | 500 | 432 | |||||||||
Arizona (2.2%): | |||||||||||
| Arizona IDA Revenue 4.00%, 7/1/41, Continuously Callable @100 | 400 | 367 | |||||||||
5.00%, 7/1/47, Continuously Callable @100 | 1,000 | 1,016 | |||||||||
5.00%, 11/1/47, Continuously Callable @100 | 1,000 | 1,005 | |||||||||
4.00%, 7/1/52, Continuously Callable @100 | 840 | 692 | |||||||||
City of Phoenix IDA Revenue, 5.00%, 7/1/46, Continuously Callable @100 | 1,300 | 1,303 | |||||||||
| La Paz County IDA Revenue 4.00%, 2/15/41, Continuously Callable @100 | 425 | 361 | |||||||||
4.00%, 2/15/46, Continuously Callable @100 | 345 | 273 | |||||||||
4.00%, 2/15/51, Continuously Callable @100 | 300 | 225 | |||||||||
| Maricopa County IDA Revenue 4.00%, 7/1/51, Continuously Callable @100 (f) | 1,500 | 1,110 | |||||||||
Series A, 5.00%, 9/1/42, Continuously Callable @100 | 500 | 515 | |||||||||
Series A, 4.00%, 7/1/46, Continuously Callable @100 | 735 | 667 | |||||||||
Series A, 5.00%, 7/1/49, Continuously Callable @100 | 1,000 | 965 | |||||||||
Series A, 5.00%, 7/1/54, Continuously Callable @100 | 1,275 | 1,209 | |||||||||
Series A, 4.00%, 7/1/56, Continuously Callable @100 | 1,000 | 889 | |||||||||
| Student & Academic Services LLC Revenue, 5.00%, 6/1/44, Continuously Callable @100 | 1,000 | 1,012 | |||||||||
Tempe IDA Revenue, Series B, 4.00%, 12/1/46, Continuously Callable @102 | 1,185 | 856 | |||||||||
| The County of Pima IDA Revenue 4.00%, 4/1/46, Continuously Callable @100 | 2,000 | 1,772 | |||||||||
4.00%, 6/15/51, Continuously Callable @100 (f) | 1,000 | 749 | |||||||||
14,986 | |||||||||||
See notes to financial statements.
19
| USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Arkansas (0.1%): | |||||||||||
| Arkansas Development Finance Authority Revenue, 4.00%, 12/1/44, Continuously Callable @100 | $ | 1,000 | $ | 927 | |||||||
California (1.2%): | |||||||||||
| California Educational Facilities Authority Revenue, 5.00%, 10/1/52, Continuously Callable @100 | 2,000 | 1,936 | |||||||||
| Jurupa Public Financing Authority Special Tax, Series A, 5.00%, 9/1/42, Continuously Callable @100 | 1,200 | 1,214 | |||||||||
State of California, GO, 5.00%, 8/1/45, Continuously Callable @100 | 1,000 | 1,030 | |||||||||
| Sutter Butte Flood Agency Special Assessment (INS — Build America Mutual Assurance Co.), 5.00%, 10/1/40, Continuously Callable @100 | 1,000 | 1,031 | |||||||||
| West Contra Costa Unified School District, GO (INS — National Public Finance Guarantee Corp.), 8/1/34 (g) | 4,435 | 2,893 | |||||||||
8,104 | |||||||||||
Colorado (1.6%): | |||||||||||
| Colorado Educational & Cultural Facilities Authority Revenue 5.00%, 12/1/38, Continuously Callable @100 | 1,000 | 1,025 | |||||||||
5.00%, 4/1/48, Continuously Callable @100 | 710 | 685 | |||||||||
4.00%, 1/1/52, Continuously Callable @100 | 675 | 518 | |||||||||
5.00%, 9/1/52, Continuously Callable @100 | 730 | 665 | |||||||||
4.00%, 1/1/62, Continuously Callable @100 | 795 | 581 | |||||||||
| Colorado Health Facilities Authority Revenue 5.00%, 6/1/45, Pre-refunded 6/1/25 @ 100 | 1,000 | 1,040 | |||||||||
Series A, 4.00%, 9/1/50, Continuously Callable @100 | 1,000 | 826 | |||||||||
Series A, 4.00%, 12/1/50, Continuously Callable @103 | 1,000 | 797 | |||||||||
| Denver Convention Center Hotel Authority Revenue, 5.00%, 12/1/40, Continuously Callable @100 | 1,000 | 982 | |||||||||
| Denver Health & Hospital Authority Certificate of Participation, 5.00%, 12/1/48, Continuously Callable @100 | 1,900 | 1,826 | |||||||||
| Park Creek Metropolitan District Revenue 5.00%, 12/1/41, Continuously Callable @100 | 250 | 257 | |||||||||
5.00%, 12/1/45, Continuously Callable @100 | 1,000 | 1,021 | |||||||||
| Rampart Range Metropolitan District No. 1 Revenue (INS — Assured Guaranty Municipal Corp.), 5.00%, 12/1/47, Continuously Callable @100 | 1,000 | 1,053 | |||||||||
11,276 | |||||||||||
Connecticut (0.8%): | |||||||||||
| Connecticut State Health & Educational Facilities Authority Revenue Series T, 4.00%, 7/1/55, Continuously Callable @100 | 1,000 | 830 | |||||||||
Series U, 4.00%, 7/1/52, Continuously Callable @100 | 2,000 | 1,680 | |||||||||
| State of Connecticut, GO Series A, 5.00%, 4/15/36, Continuously Callable @100 | 1,500 | 1,637 | |||||||||
Series A, 5.00%, 4/15/37, Continuously Callable @100 | 1,000 | 1,072 | |||||||||
5,219 | |||||||||||
Florida (2.2%): | |||||||||||
| Brevard County Health Facilities Authority Revenue, Series A, 5.00%, 4/1/52, Continuously Callable @100 | 1,000 | 1,030 | |||||||||
See notes to financial statements.
20
| USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
| Capital Trust Agency, Inc. Revenue 5.00%, 8/1/40, Continuously Callable @100 | $ | 300 | $ | 303 | |||||||
5.00%, 8/1/55, Continuously Callable @100 | 400 | 387 | |||||||||
| City of Atlantic Beach Revenue, Series A, 5.00%, 11/15/53, Continuously Callable @103 | 1,000 | 846 | |||||||||
| City of Pompano Beach Revenue 4.00%, 9/1/50, Continuously Callable @103 | 1,500 | 1,092 | |||||||||
Series A, 4.00%, 9/1/51, Continuously Callable @103 | 500 | 361 | |||||||||
| Florida Development Finance Corp. Revenue 5.00%, 7/1/51, Continuously Callable @100 | 395 | 366 | |||||||||
Series A, 5.00%, 6/15/52, Continuously Callable @100 | 1,250 | 1,152 | |||||||||
| Lee County IDA Revenue, Series A, 5.25%, 10/1/52, Continuously Callable @103 | 850 | 732 | |||||||||
| Lee Memorial Health System Revenue, Series A-1, 5.00%, 4/1/44, Continuously Callable @100 | 1,450 | 1,482 | |||||||||
| Miami Beach Health Facilities Authority Revenue, 4.00%, 11/15/51, Continuously Callable @100 | 500 | 427 | |||||||||
| Miami-Dade County Health Facilities Authority Revenue, Series A, 4.00%, 8/1/51, Continuously Callable @100 | 1,000 | 884 | |||||||||
| Palm Beach County Educational Facilities Authority Revenue, 4.00%, 10/1/51, Continuously Callable @100 | 1,000 | 827 | |||||||||
| Sarasota County Health Facilities Authority Revenue, 5.00%, 5/15/38, Continuously Callable @103 | 700 | 668 | |||||||||
| Sarasota County Public Hospital District Revenue, 4.00%, 7/1/52, Continuously Callable @100 | 2,000 | 1,769 | |||||||||
| Seminole County IDA Revenue, 4.00%, 6/15/51, Continuously Callable @100 (f) | 830 | 613 | |||||||||
| Southeast Overtown Park West Community Redevelopment Agency Tax Allocation, Series A-1, 5.00%, 3/1/30, Continuously Callable @100 (f) | 1,000 | 1,015 | |||||||||
| Volusia County Educational Facility Authority Revenue, Series B, 5.00%, 10/15/45, Pre-refunded 4/15/25 @ 100 | 1,000 | 1,037 | |||||||||
14,991 | |||||||||||
Georgia (0.6%): | |||||||||||
| Crisp County Hospital Authority Revenue, 4.00%, 7/1/51, Continuously Callable @100 | 575 | 511 | |||||||||
| Glynn-Brunswick Memorial Hospital Authority Revenue, 5.00%, 8/1/43, Continuously Callable @100 | 1,000 | 1,007 | |||||||||
| Milledgeville & Baldwin County Development Authority Revenue, 4.00%, 6/15/37, Continuously Callable @100 | 1,300 | 1,295 | |||||||||
| Municipal Electric Authority of Georgia Revenue, 4.00%, 1/1/51, Continuously Callable @100 | 425 | 358 | |||||||||
| Private Colleges & Universities Authority Revenue, 4.00%, 6/1/45, Continuously Callable @100 | 750 | 669 | |||||||||
3,840 | |||||||||||
Guam (0.3%): | |||||||||||
| 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 | 760 | |||||||||
See notes to financial statements.
21
| USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
| Guam Government Waterworks Authority Revenue, 5.50%, 7/1/43, Pre-refunded 7/1/23 @ 100 | $ | 1,000 | $ | 1,007 | |||||||
1,767 | |||||||||||
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 | 1,095 | |||||||||
| Chicago Board of Education, GO, Series A, 5.00%, 12/1/47, Continuously Callable @100 | 3,200 | 3,035 | |||||||||
| Chicago Midway International Airport Revenue, Series B, 5.00%, 1/1/41, Continuously Callable @100 | 1,000 | 1,027 | |||||||||
| Chicago O'Hare International Airport Revenue, Series C, 5.00%, 1/1/41, Continuously Callable @100 | 1,000 | 1,038 | |||||||||
| Chicago O'Hare International Airport Revenue (INS — Assured Guaranty Municipal Corp.), 5.25%, 1/1/33, Continuously Callable @100 | 1,000 | 1,001 | |||||||||
Chicago Park District, GO, Series C, 4.00%, 1/1/42, Continuously Callable @100 | 1,250 | 1,175 | |||||||||
| Chicago Transit Authority Sales Tax Receipts Fund Revenue Series A, 5.00%, 12/1/52, Continuously Callable @100 | 685 | 702 | |||||||||
Series A, 4.00%, 12/1/55, Continuously Callable @100 | 2,000 | 1,705 | |||||||||
| City of Chicago Wastewater Transmission Revenue 5.00%, 1/1/44, Continuously Callable @100 | 1,000 | 1,002 | |||||||||
Series A, 5.00%, 1/1/47, Continuously Callable @100 | 1,000 | 1,018 | |||||||||
| City of Chicago Waterworks Revenue, 5.00%, 11/1/44, Continuously Callable @100 | 1,000 | 1,004 | |||||||||
| City of Galesburg Revenue, Series A, 4.00%, 10/1/46, Continuously Callable @100 | 1,000 | 849 | |||||||||
| County of Cook Community College District No. 508, GO (INS — Build America Mutual Assurance Co.), 5.00%, 12/1/47, Continuously Callable @100 | 1,000 | 1,039 | |||||||||
| County of Cook Sales Tax Revenue, 5.00%, 11/15/38, Continuously Callable @100 | 1,000 | 1,036 | |||||||||
| Illinois Educational Facilities Authority Revenue, 4.00%, 11/1/36, Continuously Callable @102 | 1,000 | 987 | |||||||||
| Illinois Finance Authority Revenue 3.90%, 3/1/30, Continuously Callable @100 | 1,000 | 1,009 | |||||||||
5.00%, 5/15/37, Continuously Callable @100 | 1,000 | 956 | |||||||||
5.00%, 5/15/40, Continuously Callable @100 | 1,275 | 1,056 | |||||||||
5.00%, 8/15/44, Continuously Callable @100 | 1,000 | 1,010 | |||||||||
5.00%, 10/1/44, Continuously Callable @100 | 1,000 | 1,026 | |||||||||
4.00%, 10/15/44, Continuously Callable @103 | 2,000 | 1,550 | |||||||||
5.00%, 5/15/45, Continuously Callable @100 | 1,000 | 786 | |||||||||
Series A, 4.00%, 8/1/51, Continuously Callable @100 | 1,000 | 792 | |||||||||
Series C, 4.00%, 2/15/41, Pre-refunded 2/15/27 @ 100 | 45 | 47 | |||||||||
Series C, 4.00%, 2/15/41, Continuously Callable @100 | 955 | 927 | |||||||||
| Metropolitan Pier & Exposition Authority Revenue, 5.00%, 6/15/50, Continuously Callable @100 | 2,500 | 2,446 | |||||||||
| Metropolitan Pier & Exposition Authority Revenue (LOC — Barclays Bank PLC), Series 2015-XF1045, 2.84%, 6/15/53, Callable 4/13/23 @ 200 (e) (f) | 1,165 | 1,165 | |||||||||
| Northern Illinois University Revenue (INS — Build America Mutual Assurance Co.), Series B, 4.00%, 4/1/40, Continuously Callable @100 | 600 | 563 | |||||||||
See notes to financial statements.
22
| USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
| Sangamon County Water Reclamation District, GO Series A, 4.00%, 1/1/49, Continuously Callable @100 | $ | 1,000 | $ | 895 | |||||||
Series A, 5.75%, 1/1/53, Continuously Callable @100 | 1,235 | 1,281 | |||||||||
| State of Illinois, GO 4.00%, 10/1/33, Continuously Callable @100 | 2,300 | 2,265 | |||||||||
5.50%, 5/1/39, Continuously Callable @100 | 225 | 239 | |||||||||
Series A, 5.50%, 3/1/47, Continuously Callable @100 | 1,000 | 1,048 | |||||||||
36,774 | |||||||||||
Indiana (0.5%): | |||||||||||
| Evansville Redevelopment Authority Revenue (INS — Build America Mutual Assurance Co.), 4.00%, 2/1/39, Continuously Callable @100 | 1,000 | 948 | |||||||||
Indiana Finance Authority Revenue, 5.00%, 2/1/40, Continuously Callable @100 | 1,000 | 1,010 | |||||||||
| Richmond Hospital Authority Revenue, Series A, 5.00%, 1/1/39, Continuously Callable @100 | 1,500 | 1,516 | |||||||||
3,474 | |||||||||||
Iowa (0.1%): | |||||||||||
| Iowa Tobacco Settlement Authority Revenue, Series A-2, 4.00%, 6/1/49, Continuously Callable @100 | 1,000 | 897 | |||||||||
Kansas (1.4%): | |||||||||||
| 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 (f) | 1,000 | 1,041 | |||||||||
| City of Lawrence Revenue 5.00%, 7/1/43, Continuously Callable @100 | 1,500 | 1,534 | |||||||||
Series A, 4.00%, 7/1/36, Continuously Callable @100 | 1,500 | 1,429 | |||||||||
City of Manhattan Revenue, Series A, 4.00%, 6/1/46, Continuously Callable @103 | 1,000 | 725 | |||||||||
City of Wichita Revenue, 4.63%, 9/1/33, Continuously Callable @100 | 1,000 | 959 | |||||||||
| Wyandotte County-Kansas City Unified Government Tax Allocation, 5.75%, 3/1/41, Continuously Callable @103 (f) | 2,000 | 1,912 | |||||||||
| Wyandotte County-Kansas City Unified Government Utility System Revenue Series A, 5.00%, 9/1/44, Continuously Callable @100 | 1,250 | 1,262 | |||||||||
Series A, 5.00%, 9/1/45, Continuously Callable @100 | 1,000 | 1,018 | |||||||||
9,880 | |||||||||||
Kentucky (0.8%): | |||||||||||
City of Ashland Revenue, 5.00%, 2/1/40, Continuously Callable @100 | 1,000 | 1,006 | |||||||||
| Kentucky Bond Development Corp. Revenue, 4.00%, 6/1/46, Continuously Callable @100 | 750 | 662 | |||||||||
| Kentucky Economic Development Finance Authority Revenue, 5.00%, 5/15/46, Continuously Callable @100 | 1,000 | 769 | |||||||||
| Kentucky Economic Development Finance Authority Revenue (INS — Assured Guaranty Municipal Corp.), Series A, 5.00%, 12/1/45, Continuously Callable @100 | 1,000 | 1,025 | |||||||||
| Louisville Jefferson County Metropolitan Government Revenue, Series A, 5.00%, 5/15/52, Continuously Callable @100 | 2,000 | 2,001 | |||||||||
5,463 | |||||||||||
Louisiana (2.0%): | |||||||||||
| City of Shreveport Water & Sewer Revenue, 5.00%, 12/1/40, Continuously Callable @100 | 1,000 | 1,016 | |||||||||
See notes to financial statements.
23
| USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
| City of Shreveport Water & Sewer Revenue (INS — Assured Guaranty Corp.), Series B, 4.00%, 12/1/44, Continuously Callable @100 | $ | 500 | $ | 459 | |||||||
| City of Shreveport Water & Sewer Revenue (INS — Build America Mutual Assurance Co.), Series C, 5.00%, 12/1/39, Continuously Callable @100 | 1,000 | 1,016 | |||||||||
| Jefferson Sales Tax District Revenue, Series B, 4.00%, 12/1/42, Continuously Callable @100 | 1,500 | 1,471 | |||||||||
| Louisiana Local Government Environmental Facilities & Community Development Authority Revenue (INS — Assured Guaranty Municipal Corp.) 5.00%, 10/1/39, Continuously Callable @100 | 1,000 | 1,021 | |||||||||
5.00%, 10/1/43, Continuously Callable @100 | 1,000 | 1,022 | |||||||||
4.00%, 10/1/46, Continuously Callable @100 | 1,000 | 910 | |||||||||
| Louisiana Public Facilities Authority Revenue 5.00%, 7/1/52, Continuously Callable @100 | 1,000 | 1,014 | |||||||||
4.00%, 1/1/56, Continuously Callable @100 | 1,000 | 852 | |||||||||
| Louisiana Public Facilities Authority Revenue (INS — Build America Mutual Assurance Co.), 5.25%, 6/1/51, Pre-refunded 6/1/25 @ 100 | 1,000 | 1,046 | |||||||||
| Parish of East Baton Rouge Capital Improvements District Revenue, 4.00%, 8/1/44, Continuously Callable @100 | 1,400 | 1,351 | |||||||||
| State of Louisiana Gasoline & Fuels Tax Revenue, Series C, 5.00%, 5/1/45, Continuously Callable @100 | 1,500 | 1,560 | |||||||||
| Tobacco Settlement Financing Corp. Revenue, Series A, 5.25%, 5/15/35, Continuously Callable @100 | 1,000 | 1,003 | |||||||||
13,741 | |||||||||||
Maine (0.3%): | |||||||||||
| Maine Health & Higher Educational Facilities Authority Revenue Series A, 4.00%, 7/1/46, Continuously Callable @100 | 1,000 | 823 | |||||||||
Series A, 4.00%, 7/1/50, Continuously Callable @100 | 1,175 | 1,072 | |||||||||
1,895 | |||||||||||
Maryland (0.3%): | |||||||||||
| City of Gaithersburg Maryland Revenue, 5.13%, 1/1/42, Continuously Callable @103 | 865 | 821 | |||||||||
| Maryland Health & Higher Educational Facilities Authority Revenue, 4.00%, 7/1/45, Continuously Callable @100 | 1,100 | 983 | |||||||||
1,804 | |||||||||||
Massachusetts (1.9%): | |||||||||||
| Massachusetts Development Finance Agency Revenue 5.00%, 4/15/40, Continuously Callable @100 | 1,000 | 991 | |||||||||
5.00%, 7/1/46, Continuously Callable @100 | 1,000 | 1,002 | |||||||||
4.00%, 9/1/48, Continuously Callable @100 | 1,380 | 1,144 | |||||||||
3.40% (MUNIPSA+60bps), 7/1/49 (f) (h) | 1,250 | 1,246 | |||||||||
4.00%, 7/1/51, Continuously Callable @100 | 1,500 | 1,258 | |||||||||
5.00%, 10/1/57, Continuously Callable @105 (f) | 1,000 | 924 | |||||||||
Series A, 5.00%, 6/1/39, Pre-refunded 6/1/29 @ 100 | 1,000 | 1,133 | |||||||||
Series A, 5.50%, 7/1/44, Continuously Callable @100 | 500 | 448 | |||||||||
Series A, 5.00%, 7/1/44, Continuously Callable @100 | 1,600 | 1,520 | |||||||||
Series B, 4.00%, 6/1/50, Continuously Callable @100 | 1,000 | 801 | |||||||||
Series B, 4.00%, 7/1/50, Continuously Callable @100 | 850 | 677 | |||||||||
See notes to financial statements.
24
| USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Series D, 5.00%, 7/1/44, Continuously Callable @100 | $ | 1,000 | $ | 1,010 | |||||||
Series F, 5.75%, 7/15/43, Continuously Callable @100 | 1,000 | 991 | |||||||||
13,145 | |||||||||||
Michigan (1.7%): | |||||||||||
| City of Wyandotte Electric System Revenue (INS — Build America Mutual Assurance Co.), Series A, 5.00%, 10/1/44, Continuously Callable @100 | 1,000 | 1,020 | |||||||||
| Detroit Downtown Development Authority Tax Allocation (INS — Assured Guaranty Municipal Corp.), 5.00%, 7/1/43, Continuously Callable @100 | 1,750 | 1,756 | |||||||||
| Jackson Public Schools, GO (NBGA — Michigan School Bond Qualification & Loan Program), 5.00%, 5/1/42, Continuously Callable @100 | 1,000 | 1,041 | |||||||||
| Karegnondi Water Authority Revenue, 5.00%, 11/1/41, Continuously Callable @100 | 1,000 | 1,027 | |||||||||
| Kentwood Economic Development Corp. Revenue, 4.00%, 11/15/45, Continuously Callable @103 | 500 | 392 | |||||||||
| Lincoln Consolidated School District, GO (INS — Assured Guaranty Municipal Corp.), Series A, 5.00%, 5/1/40, Continuously Callable @100 | 1,250 | 1,299 | |||||||||
| Livonia Public Schools, GO (INS — Assured Guaranty Municipal Corp.), 5.00%, 5/1/45, Continuously Callable @100 | 1,000 | 1,021 | |||||||||
| Michigan Finance Authority Revenue 4.00%, 2/1/42, Continuously Callable @100 | 745 | 626 | |||||||||
4.00%, 9/1/45, Continuously Callable @100 | 1,000 | 891 | |||||||||
4.00%, 12/1/51, Continuously Callable @100 | 1,665 | 1,353 | |||||||||
| Wayne County Airport Authority Revenue, 5.00%, 12/1/44, Continuously Callable @100 | 1,000 | 1,013 | |||||||||
11,439 | |||||||||||
Minnesota (0.3%): | |||||||||||
| Housing & Redevelopment Authority Revenue 5.00%, 11/15/44, Pre-refunded 11/15/25 @ 100 | 1,000 | 1,049 | |||||||||
5.00%, 11/15/47, Continuously Callable @100 | 1,000 | 1,017 | |||||||||
2,066 | |||||||||||
Mississippi (0.6%): | |||||||||||
| Mississippi Business Finance Corp. Revenue, Series B, 2.75%, 12/1/30, Callable 4/3/23 @ 100 (e) | 4,200 | 4,200 | |||||||||
Missouri (0.9%): | |||||||||||
| Cape Girardeau County IDA Revenue, 4.00%, 3/1/46, Continuously Callable @100 | 750 | 623 | |||||||||
| Health & Educational Facilities Authority of the State of Missouri Revenue 4.00%, 2/1/48, Continuously Callable @100 | 1,500 | 1,131 | |||||||||
4.00%, 2/15/51, Continuously Callable @100 | 480 | 395 | |||||||||
| Health & Educational Facilities Authority Revenue 5.00%, 8/1/45, Continuously Callable @100 | 1,270 | 1,167 | |||||||||
4.00%, 2/15/49, Continuously Callable @100 | 250 | 232 | |||||||||
| Missouri Development Finance Board Revenue, 4.00%, 3/1/51, Continuously Callable @100 | 1,000 | 831 | |||||||||
| St. Louis Municipal Finance Corp. Revenue (INS — Assured Guaranty Corp.), 5.00%, 10/1/45, Continuously Callable @100 | 1,000 | 1,044 | |||||||||
See notes to financial statements.
25
| USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
| St. Louis Municipal Finance Corp. Revenue (INS — Assured Guaranty Municipal Corp.), 5.00%, 10/1/38, Continuously Callable @100 | $ | 1,000 | $ | 1,039 | |||||||
6,462 | |||||||||||
Montana (0.1%): | |||||||||||
| Montana Facility Finance Authority Revenue, Series A, 4.00%, 6/1/45, Continuously Callable @100 | 485 | 448 | |||||||||
Nebraska (0.6%): | |||||||||||
| Central Plains Energy Project Revenue 5.00%, 5/1/53 | 2,000 | 2,059 | |||||||||
Series A, 5.00%, 9/1/42 | 1,000 | 998 | |||||||||
| Douglas County Hospital Authority No. 3 Revenue, 5.00%, 11/1/48, Continuously Callable @100 | 1,000 | 1,011 | |||||||||
4,068 | |||||||||||
Nevada (0.6%): | |||||||||||
City of Carson City Revenue, 5.00%, 9/1/42, Continuously Callable @100 | 1,000 | 1,004 | |||||||||
| Las Vegas Convention & Visitors Authority Revenue, Series C, 4.00%, 7/1/41, Continuously Callable @100 | 1,555 | 1,486 | |||||||||
| Las Vegas Redevelopment Agency Tax Allocation, 5.00%, 6/15/45, Continuously Callable @100 | 1,500 | 1,510 | |||||||||
4,000 | |||||||||||
New Hampshire (0.2%): | |||||||||||
| New Hampshire Business Finance Authority Revenue, 4.00%, 1/1/51, Continuously Callable @103 | 2,000 | 1,490 | |||||||||
New Jersey (2.7%): | |||||||||||
| Essex County Improvement Authority Revenue, 4.00%, 6/15/51, Continuously Callable @100 | 1,100 | 861 | |||||||||
| New Jersey Economic Development Authority Revenue 5.00%, 6/15/42, Pre-refunded 6/15/27 @ 100 | 2,000 | 2,173 | |||||||||
5.00%, 6/15/43, Pre-refunded 12/15/28 @ 100 | 370 | 414 | |||||||||
5.00%, 6/15/43, Continuously Callable @100 | 630 | 648 | |||||||||
Series A, 4.00%, 7/1/34, Continuously Callable @100 | 1,000 | 1,000 | |||||||||
Series A, 5.00%, 6/15/47, Continuously Callable @100 | 1,000 | 1,019 | |||||||||
Series B, 5.00%, 6/15/43, Continuously Callable @100 | 1,000 | 1,029 | |||||||||
| New Jersey Economic Development Authority Revenue (INS — Assured Guaranty Municipal Corp.), 5.00%, 6/1/37, Continuously Callable @100 | 500 | 520 | |||||||||
| New Jersey Educational Facilities Authority Revenue, Series B, 5.00%, 9/1/36, Continuously Callable @100 | 1,000 | 1,033 | |||||||||
| New Jersey Educational Facilities Authority Revenue (INS — Assured Guaranty Municipal Corp.), Series C, 4.00%, 7/1/50, Continuously Callable @100 | 1,000 | 879 | |||||||||
| New Jersey Health Care Facilities Financing Authority Revenue, 5.00%, 10/1/37, Continuously Callable @100 | 1,000 | 1,042 | |||||||||
| New Jersey Transportation Trust Fund Authority Revenue 5.00%, 6/15/48, Continuously Callable @100 | 1,000 | 1,034 | |||||||||
Series A, 5.00%, 12/15/35, Continuously Callable @100 | 1,000 | 1,058 | |||||||||
Series A, 12/15/38 (g) | 1,500 | 710 | |||||||||
Series AA, 5.00%, 6/15/44, Continuously Callable @100 | 1,000 | 1,006 | |||||||||
Series BB, 4.00%, 6/15/50, Continuously Callable @100 | 1,000 | 894 | |||||||||
See notes to financial statements.
26
| USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
| South Jersey Transportation Authority LLC Revenue, Series A, 5.00%, 11/1/39, Continuously Callable @100 | $ | 1,250 | $ | 1,263 | |||||||
| South Jersey Transportation Authority Revenue, 5.25%, 11/1/52, Continuously Callable @100 | 500 | 524 | |||||||||
| The Atlantic County Improvement Authority Revenue, 4.00%, 7/1/53, Continuously Callable @100 | 750 | 652 | |||||||||
| The Passaic County Improvement Authority Revenue, 5.38%, 7/1/53, Continuously Callable @100 | 500 | 490 | |||||||||
| Tobacco Settlement Financing Corp. Revenue, Series A, 5.25%, 6/1/46, Continuously Callable @100 | 500 | 518 | |||||||||
18,767 | |||||||||||
New Mexico (0.2%): | |||||||||||
| New Mexico Hospital Equipment Loan Council Revenue, Series LA, 5.00%, 7/1/49, Continuously Callable @102 | 1,500 | 1,154 | |||||||||
New York (2.6%): | |||||||||||
| Genesee County Funding Corp. Revenue, Series A, 5.25%, 12/1/52, Continuously Callable @100 | 500 | 504 | |||||||||
| Metropolitan Transportation Authority Revenue, Series C, 5.00%, 11/15/42, Continuously Callable @100 | 1,000 | 1,000 | |||||||||
| New York City Municipal Water Finance Authority Revenue, Series DD, 3.08%, 6/15/33, Continuously Callable @100 (e) | 5,860 | 5,860 | |||||||||
| New York Liberty Development Corp. Revenue 5.25%, 10/1/35 | 630 | 705 | |||||||||
5.50%, 10/1/37 | 1,500 | 1,687 | |||||||||
2.80%, 9/15/69, Continuously Callable @100 | 1,000 | 897 | |||||||||
| New York State Dormitory Authority Revenue 4.00%, 2/15/47, Continuously Callable @100 | 2,000 | 1,889 | |||||||||
4.00%, 3/15/49, Continuously Callable @100 | 750 | 703 | |||||||||
5.00%, 7/1/57, Continuously Callable @100 | 1,000 | 952 | |||||||||
Series A, 4.00%, 9/1/50, Continuously Callable @100 | 2,000 | 1,622 | |||||||||
Series A, 4.00%, 7/1/52, Continuously Callable @100 | 1,000 | 827 | |||||||||
| New York State Dormitory Authority Revenue (INS — AMBAC Assurance Corp.), Series 1, 5.50%, 7/1/40 | 1,205 | 1,453 | |||||||||
18,099 | |||||||||||
North Carolina (0.3%): | |||||||||||
| North Carolina Medical Care Commission Revenue 5.00%, 10/1/35, Continuously Callable @100 | 1,000 | 978 | |||||||||
5.00%, 1/1/49, Continuously Callable @104 | 1,500 | 1,424 | |||||||||
2,402 | |||||||||||
North Dakota (0.4%): | |||||||||||
City of Grand Forks Revenue, 4.00%, 12/1/51, Continuously Callable @100 | 1,450 | 1,139 | |||||||||
County of Ward Revenue, Series C, 5.00%, 6/1/43, Continuously Callable @100 | 1,000 | 918 | |||||||||
| University of North Dakota Certificate of Participation (INS — Assured Guaranty Corp.), Series A, 4.00%, 6/1/51, Continuously Callable @100 | 1,000 | 878 | |||||||||
2,935 | |||||||||||
See notes to financial statements.
27
| USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Ohio (0.8%): | |||||||||||
County of Warren Revenue, Series A, 4.00%, 7/1/45, Continuously Callable @100 | $ | 735 | $ | 648 | |||||||
| Northeast Ohio Medical University Revenue, 5.00%, 12/1/43, Continuously Callable @100 | 775 | 811 | |||||||||
| Ohio Higher Educational Facility Commission Revenue 4.00%, 12/1/46, Continuously Callable @100 | 750 | 615 | |||||||||
5.25%, 1/1/52, Continuously Callable @100 | 1,000 | 1,011 | |||||||||
4.00%, 10/1/52, Continuously Callable @100 | 2,000 | 1,595 | |||||||||
| Southeastern Ohio Port Authority Revenue, 5.00%, 12/1/43, Continuously Callable @100 | 750 | 664 | |||||||||
5,344 | |||||||||||
Oklahoma (0.4%): | |||||||||||
| Oklahoma Development Finance Authority Revenue, Series B, 5.50%, 8/15/57, Continuously Callable @100 | 1,000 | 877 | |||||||||
| Oklahoma Municipal Power Authority Revenue, Series A, 4.00%, 1/1/47, Continuously Callable @100 | 1,000 | 948 | |||||||||
| Pontotoc County Educational Facilities Authority Revenue, 4.00%, 9/1/40, Continuously Callable @100 | 500 | 461 | |||||||||
| Tulsa County Industrial Authority Revenue, 5.25%, 11/15/37, Continuously Callable @102 | 750 | 739 | |||||||||
3,025 | |||||||||||
Oregon (0.5%): | |||||||||||
| Medford Hospital Facilities Authority Revenue, Series A, 4.00%, 8/15/50, Continuously Callable @100 | 1,000 | 908 | |||||||||
| Oregon State Facilities Authority Revenue, Series A, 4.00%, 10/1/51, Continuously Callable @100 | 1,000 | 838 | |||||||||
| Salem Hospital Facility Authority Revenue 4.00%, 5/15/47, Continuously Callable @103 | 1,000 | 760 | |||||||||
5.00%, 5/15/53, Continuously Callable @102 | 1,250 | 1,115 | |||||||||
3,621 | |||||||||||
Pennsylvania (5.3%): | |||||||||||
| Adams County General Authority Revenue, 4.00%, 8/15/45, Continuously Callable @100 | 1,455 | 1,322 | |||||||||
| Allegheny County Hospital Development Authority Revenue 4.00%, 7/15/39, Continuously Callable @100 | 1,185 | 1,131 | |||||||||
5.00%, 4/1/47, Continuously Callable @100 | 1,000 | 1,013 | |||||||||
| Berks County IDA Revenue 5.00%, 5/15/43, Continuously Callable @102 | 350 | 325 | |||||||||
5.00%, 11/1/50, Continuously Callable @100 | 1,500 | 970 | |||||||||
Bucks County IDA Revenue, 4.00%, 8/15/44, Continuously Callable @100 | 1,000 | 906 | |||||||||
| Butler County Hospital Authority Revenue, 5.00%, 7/1/39, Continuously Callable @100 | 1,665 | 1,671 | |||||||||
Canon-McMillan School District, GO, 4.00%, 6/1/44, Continuously Callable @100 | 1,500 | 1,435 | |||||||||
| Central Bradford Progress Authority Revenue, Series B, 4.00%, 12/1/51, Continuously Callable @100 | 2,000 | 1,780 | |||||||||
Chester County IDA Revenue, 5.00%, 10/1/44, Continuously Callable @100 | 1,000 | 944 | |||||||||
| Commonwealth Financing Authority Revenue, 5.00%, 6/1/35, Continuously Callable @100 | 1,000 | 1,054 | |||||||||
See notes to financial statements.
28
| USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
| Commonwealth of Pennsylvania Certificate of Participation, Series A, 5.00%, 7/1/43, Continuously Callable @100 | $ | 1,000 | $ | 1,041 | |||||||
| Indiana County Hospital Authority Revenue, Series A, 6.00%, 6/1/39, Pre-refunded 6/1/23 @ 100 | 1,625 | 1,635 | |||||||||
| Lancaster County Hospital Authority Revenue, 5.00%, 11/1/35, Continuously Callable @100 | 1,000 | 1,016 | |||||||||
Lancaster IDA Revenue, 4.00%, 7/1/51, Continuously Callable @103 | 500 | 363 | |||||||||
Latrobe IDA Revenue, 4.00%, 3/1/51, Continuously Callable @100 | 800 | 610 | |||||||||
| Montgomery County IDA Revenue 5.25%, 1/15/45, Pre-refunded 1/15/25 @ 100 | 1,000 | 1,038 | |||||||||
4.00%, 10/1/46, Continuously Callable @100 | 625 | 498 | |||||||||
4.00%, 10/1/51, Continuously Callable @100 | 825 | 627 | |||||||||
Series C, 4.00%, 11/15/43, Continuously Callable @103 | 600 | 492 | |||||||||
| Northampton County General Purpose Authority Revenue 4.00%, 8/15/40, Continuously Callable @100 | 1,000 | 927 | |||||||||
5.00%, 8/15/43, Continuously Callable @100 | 1,000 | 1,020 | |||||||||
| Pennsylvania Economic Development Financing Authority Revenue 4.00%, 7/1/46, Continuously Callable @103 | 1,000 | 800 | |||||||||
Series A, 4.00%, 10/15/51, Continuously Callable @100 | 1,000 | 893 | |||||||||
| Pennsylvania Higher Educational Facilities Authority Revenue, Series A, 4.00%, 7/15/46, Continuously Callable @100 | 1,575 | 1,347 | |||||||||
| Pennsylvania Turnpike Commission Revenue Series A-1, 5.00%, 12/1/46, Continuously Callable @100 | 1,000 | 1,018 | |||||||||
Series A-1, 5.00%, 12/1/47, Continuously Callable @100 | 1,000 | 1,032 | |||||||||
Series B, 5.00%, 12/1/39, Continuously Callable @100 | 1,000 | 1,056 | |||||||||
Series B, 5.25%, 12/1/44, Continuously Callable @100 | 1,000 | 1,016 | |||||||||
Series B, 4.00%, 12/1/51, Continuously Callable @100 | 1,000 | 891 | |||||||||
Philadelphia IDA Revenue, 5.00%, 8/1/50, Continuously Callable @100 | 1,050 | 955 | |||||||||
| Reading School District, GO (INS — Assured Guaranty Municipal Corp.), 5.00%, 3/1/38, Continuously Callable @100 | 1,500 | 1,576 | |||||||||
| School District of Philadelphia, GO Series A, 5.00%, 9/1/38, Continuously Callable @100 | 1,000 | 1,049 | |||||||||
Series A, 4.00%, 9/1/46, Continuously Callable @100 | 1,000 | 893 | |||||||||
Series F, 5.00%, 9/1/37, Continuously Callable @100 | 1,000 | 1,035 | |||||||||
| Wilkes-Barre Area School District, GO (INS — Build America Mutual Assurance Co.), 4.00%, 4/15/49, Continuously Callable @100 | 1,500 | 1,385 | |||||||||
36,764 | |||||||||||
Rhode Island (0.2%): | |||||||||||
| 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 | 1,031 | |||||||||
1,071 | |||||||||||
South Carolina (0.3%): | |||||||||||
| Patriots Energy Group Revenue, Series A, 4.00%, 6/1/51, Continuously Callable @100 | 1,100 | 937 | |||||||||
See notes to financial statements.
29
| USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
| South Carolina Jobs-Economic Development Authority Revenue 5.00%, 11/15/47, Continuously Callable @103 | $ | 1,000 | $ | 943 | |||||||
4.00%, 4/1/49, Continuously Callable @103 | 620 | 460 | |||||||||
2,340 | |||||||||||
Tennessee (1.2%): | |||||||||||
| Greeneville Health & Educational Facilities Board Revenue, 5.00%, 7/1/37, Continuously Callable @100 | 1,500 | 1,552 | |||||||||
| Metropolitan Government Nashville & Davidson County Health & Educational Facilities Board Revenue 5.00%, 10/1/45, Continuously Callable @100 | 1,000 | 939 | |||||||||
5.00%, 7/1/46, Continuously Callable @100 | 1,000 | 1,012 | |||||||||
5.00%, 10/1/48, Continuously Callable @100 | 500 | 497 | |||||||||
4.00%, 10/1/51, Continuously Callable @100 | 1,000 | 796 | |||||||||
Tennergy Corp. Revenue, Series A, 5.50%, 10/1/53 | 2,500 | 2,647 | |||||||||
| The Metropolitan Nashville Airport Authority Revenue, Series A, 4.00%, 7/1/49, Continuously Callable @100 | 1,000 | 926 | |||||||||
8,369 | |||||||||||
Texas (6.5%): | |||||||||||
| Arlington Higher Education Finance Corp. Revenue (NBGA — Texas Permanent School Fund), 4.00%, 8/15/44, Continuously Callable @100 | 2,165 | 2,101 | |||||||||
| Bexar County Health Facilities Development Corp. Revenue, 5.00%, 7/15/37, Continuously Callable @105 | 1,000 | 949 | |||||||||
| Central Texas Regional Mobility Authority Revenue, 4.00%, 1/1/41, Continuously Callable @100 | 1,000 | 930 | |||||||||
| Central Texas Turnpike System Revenue, Series C, 5.00%, 8/15/42, Continuously Callable @100 | 1,000 | 1,011 | |||||||||
| City of Arlington Special Tax (INS — Assured Guaranty Municipal Corp.), Series A, 5.00%, 2/15/48, Continuously Callable @100 | 1,000 | 1,039 | |||||||||
City of Arlington Tax Allocation, 4.00%, 8/15/50, Continuously Callable @100 | 1,700 | 1,384 | |||||||||
| City of Houston Hotel Occupancy Tax & Special Revenue 5.00%, 9/1/39, Continuously Callable @100 | 1,000 | 1,010 | |||||||||
5.00%, 9/1/40, Continuously Callable @100 | 1,000 | 1,010 | |||||||||
City of Irving Texas Revenue, 5.00%, 8/15/43, Continuously Callable @100 | 1,000 | 997 | |||||||||
| City of Laredo Waterworks & Sewer System Revenue, 4.00%, 3/1/41, Continuously Callable @100 | 1,000 | 954 | |||||||||
| City of Lewisville Special Assessment (INS — ACA Financial Guaranty Corp.), 5.80%, 9/1/25 | 2,180 | 2,264 | |||||||||
| Clifton Higher Education Finance Corp. Revenue, 4.25%, 8/15/52, Continuously Callable @100 | 1,500 | 1,367 | |||||||||
| Clifton Higher Education Finance Corp. Revenue (NBGA — Texas Permanent School Fund) 5.00%, 8/15/39, Continuously Callable @100 | 1,000 | 1,017 | |||||||||
4.00%, 8/15/44, Continuously Callable @100 | 1,000 | 939 | |||||||||
County of Bexar Revenue, 4.00%, 8/15/44, Continuously Callable @100 | 1,500 | 1,326 | |||||||||
| Greater Texas Cultural Education Facilities Finance Corp. Revenue, 4.00%, 3/1/50, Continuously Callable @100 | 1,000 | 875 | |||||||||
| Harris County Cultural Education Facilities Finance Corp. Revenue, Series A, 5.00%, 6/1/38, Continuously Callable @100 | 1,000 | 917 | |||||||||
See notes to financial statements.
30
| USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
| Harris County Hospital District Revenue, 4.00%, 2/15/42, Continuously Callable @100 | $ | 1,000 | $ | 941 | |||||||
| Hidalgo County Regional Mobility Authority Revenue Series A, 4.00%, 12/1/41, Continuously Callable @100 | 735 | 640 | |||||||||
Series B, 4.00%, 12/1/41, Continuously Callable @100 | 700 | 621 | |||||||||
| Houston Higher Education Finance Corp. Revenue, 4.00%, 10/1/51, Continuously Callable @100 | 1,100 | 863 | |||||||||
| Karnes County Hospital District Revenue, 5.00%, 2/1/44, Continuously Callable @100 | 1,000 | 1,005 | |||||||||
Martin County Hospital District, GO, 4.00%, 4/1/36, Continuously Callable @100 | 350 | 343 | |||||||||
| Matagorda County Navigation District No. 1 Revenue, 4.00%, 6/1/30, Continuously Callable @100 | 1,000 | 991 | |||||||||
| Mesquite Health Facilities Development Corp. Revenue, 5.00%, 2/15/35, Continuously Callable @100 (i) (j) | 1,000 | 730 | |||||||||
| New Hope Cultural Education Facilities Finance Corp. Revenue 5.00%, 7/1/47 (i) | 1,000 | 800 | |||||||||
Series A, 5.00%, 4/1/47, Pre-refunded 4/1/25 @ 100 | 1,600 | 1,658 | |||||||||
| New Hope Cultural Education Facilities Finance Corp. Revenue (INS — Assured Guaranty Municipal Corp.), Series A1, 5.00%, 7/1/38, Continuously Callable @100 | 225 | 231 | |||||||||
| North Texas Tollway Authority Revenue Series B, 5.00%, 1/1/31, Continuously Callable @100 | 1,500 | 1,520 | |||||||||
Series B, 5.00%, 1/1/45, Continuously Callable @100 | 1,000 | 1,019 | |||||||||
| Port of Port Arthur Navigation District Revenue, Series C, 2.90%, 4/1/40, Continuously Callable @100 (e) | 6,100 | 6,100 | |||||||||
| Princeton Independent School District, GO (NBGA — Texas Permanent School Fund), 5.00%, 2/15/43, Continuously Callable @100 | 1,000 | 1,060 | |||||||||
| San Antonio Education Facilities Corp. Revenue, 4.00%, 4/1/54, Continuously Callable @100 | 1,000 | 798 | |||||||||
| Tarrant County Cultural Education Facilities Finance Corp. Revenue 5.00%, 11/15/46, Continuously Callable @100 | 1,000 | 1,012 | |||||||||
Series A, 5.00%, 11/15/45 (i) (j) | 1,000 | 400 | |||||||||
Series A, 5.00%, 7/1/53, Continuously Callable @100 | 750 | 767 | |||||||||
Series B, 5.00%, 11/15/36 (i) (j) | 1,000 | 400 | |||||||||
Series B, 5.00%, 7/1/48, Continuously Callable @100 | 1,500 | 1,529 | |||||||||
Texas Municipal Gas Acquisition & Supply Corp. III Revenue, 5.00%, 12/15/27 | 1,375 | 1,418 | |||||||||
44,936 | |||||||||||
Utah (0.7%): | |||||||||||
| Military Installation Development Authority Revenue, Series A-1, 4.00%, 6/1/41, Continuously Callable @103 | 500 | 395 | |||||||||
| Utah Charter School Finance Authority Revenue 4.50%, 10/15/52, Continuously Callable @100 | 1,000 | 907 | |||||||||
Series A, 4.00%, 10/15/46, Continuously Callable @100 | 860 | 781 | |||||||||
Series A, 4.00%, 4/15/52, Continuously Callable @100 | 3,000 | 2,552 | |||||||||
4,635 | |||||||||||
Vermont (0.2%): | |||||||||||
| Vermont Economic Development Authority Revenue, 4.00%, 5/1/45, Continuously Callable @103 | 1,000 | 718 | |||||||||
See notes to financial statements.
31
| USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
| Vermont Educational & Health Buildings Financing Agency Revenue, 5.00%, 10/15/46, Continuously Callable @100 | $ | 1,000 | $ | 981 | |||||||
1,699 | |||||||||||
Virginia (0.2%): | |||||||||||
Alexandria IDA Revenue, 5.00%, 10/1/45, Pre-refunded 10/1/25 @ 100 | 1,000 | 1,051 | |||||||||
Washington (0.7%): | |||||||||||
| King County Public Hospital District No 2, GO, Series A, 4.00%, 12/1/41, Continuously Callable @100 | 1,000 | 997 | |||||||||
| Washington Health Care Facilities Authority Revenue 4.00%, 7/1/42, Continuously Callable @100 | 1,000 | 931 | |||||||||
5.00%, 1/1/47, Pre-refunded 1/1/27 @ 100 | 1,000 | 1,077 | |||||||||
| Washington Higher Education Facilities Authority Revenue, 4.00%, 5/1/45, Continuously Callable @100 | 1,100 | 1,011 | |||||||||
| Washington State Housing Finance Commission Revenue 5.00%, 1/1/38, Continuously Callable @102 (f) | 1,000 | 876 | |||||||||
Series A-1, 3.50%, 12/20/35 | 292 | 265 | |||||||||
5,157 | |||||||||||
West Virginia (0.2%): | |||||||||||
| West Virginia Hospital Finance Authority Revenue, 4.00%, 1/1/38, Continuously Callable @100 | 1,500 | 1,335 | |||||||||
Wisconsin (1.8%): | |||||||||||
| Public Finance Authority Revenue 5.00%, 7/1/38, Continuously Callable @100 | 1,000 | 1,048 | |||||||||
5.00%, 1/1/42, Continuously Callable @103 (f) | 600 | 537 | |||||||||
4.00%, 1/1/45, Continuously Callable @100 | 1,440 | 1,277 | |||||||||
4.00%, 1/1/47, Continuously Callable @103 | 1,000 | 847 | |||||||||
4.00%, 2/1/51, Continuously Callable @100 | 1,000 | 824 | |||||||||
Series A, 5.25%, 3/1/47, Continuously Callable @100 | 2,000 | 1,986 | |||||||||
Series A, 4.00%, 10/1/47, Continuously Callable @100 | 1,000 | 895 | |||||||||
Series A, 5.25%, 10/1/48, Continuously Callable @100 | 1,500 | 1,447 | |||||||||
Series A, 4.00%, 10/1/49, Continuously Callable @100 | 1,500 | 1,330 | |||||||||
Series A, 4.00%, 7/1/51, Continuously Callable @100 | 880 | 671 | |||||||||
| Public Finance Authority Revenue (INS — Assured Guaranty Municipal Corp.), 5.00%, 7/1/44, Continuously Callable @100 | 600 | 616 | |||||||||
| Wisconsin Health & Educational Facilities Authority Revenue 4.00%, 1/1/47, Continuously Callable @103 | 600 | 443 | |||||||||
4.00%, 1/1/57, Continuously Callable @103 | 1,000 | 684 | |||||||||
12,605 | |||||||||||
Total Municipal Bonds (Cost $403,417) | 362,300 | ||||||||||
Exchange-Traded Funds (0.1%) | |||||||||||
iShares Russell 1000 ETF | 2,483 | 544 | |||||||||
Total Exchange-Traded Funds (Cost $489) | 544 | ||||||||||
Total Investments (Cost $504,105) — 99.3% | 685,043 | ||||||||||
Other assets in excess of liabilities — 0.7% | 4,959 | ||||||||||
NET ASSETS — 100.00% | $ | 690,002 | |||||||||
See notes to financial statements.
32
| USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(a) Non-income producing security.
(b) Rounds to less than $1 thousand.
(c) Amount represents less than 0.05% of net assets.
(d) Security was fair valued based upon procedures approved by the Board of Trustees and represents 0.1% of net assets as of February 28, 2023. This security is classified as Level 3 within the fair value hierarchy. (See Note 2 in the Notes to Financial Statements)
(e) 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.
(f) Rule 144A security or other security that is restricted as to resale to institutional investors. As of February 28, 2023, the fair value of these securities was $11,188 thousands and amounted to 1.6% of net assets.
(g) Zero-coupon bond.
(h) Variable or Floating-Rate Security. Rate disclosed is as of February 28, 2023.
(i) Currently the issuer is in default with respect to interest and/or principal payments.
(j) Issuer filed for bankruptcy.
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
ETF — Exchange-Traded Fund
GO — General Obligation
IDA — Industrial Development Authority
LLC — Limited Liability Company
LOC — Letter of Credit
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.
See notes to financial statements.
33
| USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
LOC Principal and interest payments are guaranteed by a bank letter of credit or other bank credit agreement.
NBGA Principal and interest payments or, under certain circumstances, underlying mortgages are guaranteed by a nonbank guaranteed agreement from the name listed.
See notes to financial statements.
34
USAA Mutual Funds Trust | Statement of Assets and Liabilities February 28, 2023 | ||||||
(Amounts in Thousands, Except Per Share Amounts)
| USAA Growth and Tax Strategy Fund | |||||||
Assets: | |||||||
Investments, at value (Cost $504,105) | $ | 685,043 | |||||
Cash | 677 | ||||||
Receivables: | |||||||
Interest and dividends | 5,060 | ||||||
Capital shares issued | 198 | ||||||
From Adviser | 9 | ||||||
Prepaid expenses | 17 | ||||||
Total Assets | 691,004 | ||||||
Liabilities: | |||||||
Payables: | |||||||
Investments purchased | 491 | ||||||
Capital shares redeemed | 147 | ||||||
Accrued expenses and other payables: | |||||||
Investment advisory fees | 136 | ||||||
Administration fees | 79 | ||||||
Custodian fees | 4 | ||||||
Transfer agent fees | 42 | ||||||
Compliance fees | 1 | ||||||
Trustees' fees | 1 | ||||||
| 12b-1 fees | 3 | ||||||
Other accrued expenses | 98 | ||||||
Total Liabilities | 1,002 | ||||||
Net Assets: | |||||||
Capital | 519,390 | ||||||
Total accumulated earnings/(loss) | 170,612 | ||||||
Net Assets | $ | 690,002 | |||||
Net Assets | |||||||
Fund Shares | $ | 620,529 | |||||
Institutional Shares | 52,018 | ||||||
Class A | 11,836 | ||||||
Class C | 5,619 | ||||||
Total | $ | 690,002 | |||||
Shares (unlimited number of shares authorized with no par value): | |||||||
Fund Shares | 27,446 | ||||||
Institutional Shares | 2,303 | ||||||
Class A | 525 | ||||||
Class C | 251 | ||||||
Total | 30,525 | ||||||
Net asset value, offering and redemption price per share: (a) | |||||||
Fund Shares | $ | 22.61 | |||||
Institutional Shares | 22.59 | ||||||
Class A | 22.54 | ||||||
Class C (b) | 22.40 | ||||||
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 | $ | 23.06 | |||||
(a) Per share amount may not recalculate due to rounding of net assets and/or shares outstanding.
(b) Redemption price per share varies by the length of time shares are held.
See notes to financial statements.
35
USAA Mutual Funds Trust | Statements of Operations | ||||||
(Amounts in Thousands)
| USAA Growth and Tax Strategy Fund | |||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | ||||||||||
Investment Income: | |||||||||||
Dividends | $ | 4,235 | $ | 5,204 | |||||||
Interest | 10,570 | 12,977 | |||||||||
Securities lending (net of fees) | 1 | — | (b) | ||||||||
Foreign tax withholding | (1 | ) | — | (b) | |||||||
Total Income | 14,805 | 18,181 | |||||||||
Expenses: | |||||||||||
Investment advisory fees | 1,440 | 2,655 | |||||||||
Administration fees — Fund Shares | 715 | 1,113 | |||||||||
Administration fees — Institutional Shares | 41 | 64 | |||||||||
Administration fees — Class A | 11 | 11 | |||||||||
Administration fees — Class C | 6 | 5 | |||||||||
Sub-Administration fees | 35 | 45 | |||||||||
| 12b-1 fees — Class A | 18 | 19 | |||||||||
| 12b-1 fees — Class C | 41 | 36 | |||||||||
Custodian fees | 18 | 43 | |||||||||
Transfer agent fees — Fund Shares | 305 | 417 | |||||||||
Transfer agent fees — Institutional Shares | 41 | 64 | |||||||||
Transfer agent fees — Class A | 7 | 7 | |||||||||
Transfer agent fees — Class C | 4 | 4 | |||||||||
Trustees' fees | 36 | 48 | |||||||||
Compliance fees | 5 | 6 | |||||||||
Legal and audit fees | 61 | 68 | |||||||||
State registration and filing fees | 66 | 73 | |||||||||
Interfund lending fees | — | — | (b) | ||||||||
Other expenses | 130 | 122 | |||||||||
Recoupment of prior expenses waived/reimbursed by Adviser | — | 5 | |||||||||
Total Expenses | 2,980 | 4,805 | |||||||||
Expenses waived/reimbursed by Adviser | (37 | ) | (14 | ) | |||||||
Net Expenses | 2,943 | 4,791 | |||||||||
Net Investment Income (Loss) | 11,862 | 13,390 | |||||||||
Realized/Unrealized Gains (Losses) from Investments: | |||||||||||
Net realized gains (losses) from investment securities | (11,599 | ) | 6,825 | ||||||||
Net realized gains (losses) from futures contracts | (159 | ) | 78 | ||||||||
| Net change in unrealized appreciation/depreciation on investment securities | (26,663 | ) | (63,258 | ) | |||||||
Net change in unrealized appreciation/depreciation on futures contracts | (203 | ) | 87 | ||||||||
Net realized/unrealized gains (losses) on investments | (38,624 | ) | (56,268 | ) | |||||||
Change in net assets resulting from operations | $ | (26,762 | ) | $ | (42,878 | ) | |||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from May 31 to February 28.
(b) Rounds to less than $1 thousand.
See notes to financial statements.
36
USAA Mutual Funds Trust | Statements of Changes in Net Assets | ||||||
(Amounts in Thousands)
USAA Growth and Tax Strategy Fund | |||||||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | Year Ended May 31, 2021 | |||||||||||||
From Investments: | |||||||||||||||
Operations: | |||||||||||||||
Net Investment Income (Loss) | $ | 11,862 | $ | 13,390 | $ | 12,399 | |||||||||
Net realized gains (losses) | (11,758 | ) | 6,903 | 6,824 | |||||||||||
| Net change in unrealized appreciation/ depreciation | (26,866 | ) | (63,171 | ) | 116,209 | ||||||||||
Change in net assets resulting from operations | (26,762 | ) | (42,878 | ) | 135,432 | ||||||||||
Distributions to Shareholders: | |||||||||||||||
Fund Shares | (7,923 | ) | (11,818 | ) | (11,933 | ) | |||||||||
Institutional Shares | (707 | ) | (1,016 | ) | (467 | ) | |||||||||
Class A | (85 | ) | (113 | ) | (1 | ) | |||||||||
Class C | (29 | ) | (32 | ) | (5 | ) | |||||||||
| Change in net assets resulting from distributions to shareholders | (8,744 | ) | (12,979 | ) | (12,406 | ) | |||||||||
| Change in net assets resulting from capital transactions | (48,469 | ) | 70,706 | 42,523 | |||||||||||
Change in net assets | (83,975 | ) | 14,849 | 165,549 | |||||||||||
Net Assets: | |||||||||||||||
Beginning of period | 773,977 | 759,128 | 593,579 | ||||||||||||
End of period | $ | 690,002 | $ | 773,977 | $ | 759,128 | |||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from May 31 to February 28.
(continues on next page)
See notes to financial statements.
37
USAA Mutual Funds Trust | Statements of Changes in Net Assets | ||||||
(Amounts in Thousands) (continued)
USAA Growth and Tax Strategy Fund | |||||||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | Year Ended May 31, 2021 | |||||||||||||
Capital Transactions: | |||||||||||||||
Fund Shares | |||||||||||||||
Proceeds from shares issued | $ | 34,967 | $ | 133,271 | $ | 128,688 | |||||||||
Distributions reinvested | 7,580 | 11,312 | 11,096 | ||||||||||||
Cost of shares redeemed | (84,580 | ) | (102,872 | ) | (149,077 | ) | |||||||||
Total Fund Shares | $ | (42,033 | ) | $ | 41,711 | $ | (9,293 | ) | |||||||
Institutional Shares | |||||||||||||||
Proceeds from shares issued | $ | 10,544 | $ | 28,783 | $ | 56,777 | |||||||||
Distributions reinvested | 238 | 281 | 130 | ||||||||||||
Cost of shares redeemed | (19,986 | ) | (15,453 | ) | (6,753 | ) | |||||||||
Total Institutional Shares | $ | (9,204 | ) | $ | 13,611 | $ | 50,154 | ||||||||
Class A | |||||||||||||||
Proceeds from shares issued | $ | 7,729 | $ | 19,318 | $ | 520 | |||||||||
Distributions reinvested | 62 | 42 | 1 | ||||||||||||
Cost of shares redeemed | (5,346 | ) | (8,755 | ) | (22 | ) | |||||||||
Total Class A | $ | 2,445 | $ | 10,605 | $ | 499 | |||||||||
Class C | |||||||||||||||
Proceeds from shares issued | $ | 1,089 | $ | 4,830 | $ | 1,181 | |||||||||
Distributions reinvested | 25 | 28 | 4 | ||||||||||||
Cost of shares redeemed | (791 | ) | (79 | ) | (22 | ) | |||||||||
Total Class C | $ | 323 | $ | 4,779 | $ | 1,163 | |||||||||
| Change in net assets resulting from capital transactions | $ | (48,469 | ) | $ | 70,706 | $ | 42,523 | ||||||||
Share Transactions: | |||||||||||||||
Fund Shares | |||||||||||||||
Issued | 1,551 | 5,188 | 5,514 | ||||||||||||
Reinvested | 343 | 440 | 491 | ||||||||||||
Redeemed | (3,785 | ) | (4,081 | ) | (6,530 | ) | |||||||||
Total Fund Shares | (1,891 | ) | 1,547 | (525 | ) | ||||||||||
Institutional Shares | |||||||||||||||
Issued | 468 | 1,128 | 2,477 | ||||||||||||
Reinvested | 11 | 11 | 6 | ||||||||||||
Redeemed | (901 | ) | (615 | ) | (282 | ) | |||||||||
Total Institutional Shares | (422 | ) | 524 | 2,201 | |||||||||||
Class A | |||||||||||||||
Issued | 347 | 753 | 22 | ||||||||||||
Reinvested | 3 | 2 | — | (b) | |||||||||||
Redeemed | (238 | ) | (363 | ) | (1 | ) | |||||||||
Total Class A | 112 | 392 | 21 | ||||||||||||
Class C | |||||||||||||||
Issued | 50 | 189 | 50 | ||||||||||||
Reinvested | 1 | 1 | — | (b) | |||||||||||
Redeemed | (36 | ) | (3 | ) | (1 | ) | |||||||||
Total Class C | 15 | 187 | 49 | ||||||||||||
Change in Shares | (2,186 | ) | 2,650 | 1,746 | |||||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from May 31 to February 28.
(b) Rounds to less than 1 thousand shares.
See notes to financial statements.
38
USAA Mutual Funds Trust | Financial Highlights | ||||||
For a Share Outstanding Throughout Each Period
USAA Growth and Tax Strategy Fund | |||||||||||||||||||||||||||
Fund Shares | |||||||||||||||||||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | Year Ended May 31, 2021 | Year Ended May 31, 2020 | Year Ended May 31, 2019 | Year Ended May 31, 2018 | ||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 23.66 | $ | 25.25 | $ | 20.96 | $ | 20.18 | $ | 19.77 | $ | 18.76 | |||||||||||||||
Investment Activities: | |||||||||||||||||||||||||||
Net investment income (loss) | 0.38 | (b) | 0.42 | (b) | 0.43 | (b) | 0.47 | (b) | 0.47 | 0.44 | |||||||||||||||||
| Net realized and unrealized gains (losses) | (1.15 | ) | (1.60 | ) | 4.29 | 0.77 | 0.47 | 1.01 | |||||||||||||||||||
| Total from Investment Activities | (0.77 | ) | (1.18 | ) | 4.72 | 1.24 | 0.94 | 1.45 | |||||||||||||||||||
Distributions to Shareholders from: | |||||||||||||||||||||||||||
Net investment income | (0.28 | ) | (0.41 | ) | (0.43 | ) | (0.46 | ) | (0.48 | ) | (0.44 | ) | |||||||||||||||
Net realized gains | — | — | — | — | (0.05 | ) | — | ||||||||||||||||||||
Total Distributions | (0.28 | ) | (0.41 | ) | (0.43 | ) | (0.46 | ) | (0.53 | ) | (0.44 | ) | |||||||||||||||
Net Asset Value, End of Period | $ | 22.61 | $ | 23.66 | $ | 25.25 | $ | 20.96 | $ | 20.18 | $ | 19.77 | |||||||||||||||
Total Return (c) (d) | (3.24 | )% | (4.80 | )% | 22.79 | % | 6.25 | % | 4.83 | % | 7.81 | % | |||||||||||||||
Ratios to Average Net Assets: | |||||||||||||||||||||||||||
Net Expenses (e) (f) (g) (h) | 0.54 | % | 0.58 | % | 0.59 | % | 0.57 | % | 0.60 | % | 0.68 | % | |||||||||||||||
Net Investment Income (Loss) (e) | 2.26 | % | 1.64 | % | 1.86 | % | 2.25 | % | 2.44 | % | 2.32 | % | |||||||||||||||
Gross Expenses (e) (f) | 0.54 | % | 0.58 | % | 0.59 | % | 0.57 | % | 0.60 | % | 0.68 | % | |||||||||||||||
Supplemental Data: | |||||||||||||||||||||||||||
Net Assets at end of period (000's) | $ | 620,529 | $ | 694,234 | $ | 701,841 | $ | 593,579 | $ | 526,320 | $ | 459,682 | |||||||||||||||
Portfolio Turnover (c) (i) | 15 | % | 14 | % | 11 | % | 34 | %(j) | 7 | % | 10 | % | |||||||||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from May 31 to February 28.
(b) Per share net investment income (loss) has been calculated using the average daily shares method.
(c) Not annualized for periods less than one year.
(d) 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.
(e) Annualized for periods less than one year.
(f) Does not include acquired fund fees and expenses, if any.
(g) 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 September 30, 2023, instead of coinciding with the Fund's fiscal year end.
(h) 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.
(i) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares.
(j) Reflects an overall increase in purchases and sales of securities.
(continues on next page)
See notes to financial statements.
39
USAA Mutual Funds Trust | Financial Highlights — continued | ||||||
For a Share Outstanding Throughout Each Period
USAA Growth and Tax Strategy Fund | |||||||||||||||
Institutional Shares | |||||||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | June 29, 2020(b) through May 31, 2021 | |||||||||||||
Net Asset Value, Beginning of Period | $ | 23.65 | $ | 25.24 | $ | 21.05 | |||||||||
Investment Activities: | |||||||||||||||
Net investment income (loss) (c) | 0.38 | 0.42 | 0.40 | ||||||||||||
Net realized and unrealized gains (losses) | (1.16 | ) | (1.60 | ) | 4.12 | ||||||||||
Total from Investment Activities | (0.78 | ) | (1.18 | ) | 4.52 | ||||||||||
Distributions to Shareholders from: | |||||||||||||||
Net investment income | (0.28 | ) | (0.41 | ) | (0.33 | ) | |||||||||
Total Distributions | (0.28 | ) | (0.41 | ) | (0.33 | ) | |||||||||
Net Asset Value, End of Period | $ | 22.59 | $ | 23.65 | $ | 25.24 | |||||||||
Total Return (d) (e) | (3.28 | )% | (4.79 | )% | 21.62 | % | |||||||||
Ratios to Average Net Assets: | |||||||||||||||
Net Expenses (f) (g) (h) (i) | 0.55 | % | 0.57 | % | 0.56 | % | |||||||||
Net Investment Income (Loss) (f) | 2.25 | % | 1.65 | % | 1.80 | % | |||||||||
Gross Expenses (f) (g) | 0.57 | % | 0.57 | % | 0.59 | % | |||||||||
Supplemental Data: | |||||||||||||||
Net Assets at end of period (000's) | $ | 52,018 | $ | 64,446 | $ | 55,541 | |||||||||
Portfolio Turnover (d) (j) | 15 | % | 14 | % | 11 | % | |||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from May 31 to February 28.
(b) Commencement of operations.
(c) Per share net investment income (loss) has been calculated using the average daily shares method.
(d) Not annualized for periods less than one year.
(e) Assumes reinvestment of all net investment income and realized capital gain distributions, if any, during the period. Includes adjustments in accordance with U.S. Generally Accepted Accounting Principles and could differ from the Lipper reported return.
(f) Annualized for periods less than one year.
(g) Does not include acquired fund fees and expenses, if any.
(h) 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 June 29, 2020, and in effect through September 30, 2023, instead of coinciding with the Fund's fiscal year end.
(i) 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.
(j) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares.
(continues on next page)
See notes to financial statements.
40
USAA Mutual Funds Trust | Financial Highlights — continued | ||||||
For a Share Outstanding Throughout Each Period
USAA Growth and Tax Strategy Fund | |||||||||||||||
Class A | |||||||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | June 29, 2020(b) through May 31, 2021 | |||||||||||||
Net Asset Value, Beginning of Period | $ | 23.59 | $ | 25.22 | $ | 21.05 | |||||||||
Investment Activities: | |||||||||||||||
Net investment income (loss) (c) | 0.33 | 0.36 | 0.31 | ||||||||||||
Net realized and unrealized gains (losses) | (1.16 | ) | (1.62 | ) | 4.16 | ||||||||||
Total from Investment Activities | (0.83 | ) | (1.26 | ) | 4.47 | ||||||||||
Distributions to Shareholders from: | |||||||||||||||
Net investment income | (0.22 | ) | (0.37 | ) | (0.30 | ) | |||||||||
Total Distributions | (0.22 | ) | (0.37 | ) | (0.30 | ) | |||||||||
Net Asset Value, End of Period | $ | 22.54 | $ | 23.59 | $ | 25.22 | |||||||||
Total Return (excludes sales charges) (d) (e) | (3.50 | )% | (5.10 | )% | 21.35 | % | |||||||||
Ratios to Average Net Assets: | |||||||||||||||
Net Expenses (f) (g) (h) (i) | 0.85 | % | 0.86 | % | 0.86 | % | |||||||||
Net Investment Income (Loss) (f) | 1.97 | % | 1.42 | % | 1.38 | % | |||||||||
Gross Expenses (f) (g) | 1.06 | % | 1.03 | % | 13.45 | % | |||||||||
Supplemental Data: | |||||||||||||||
Net Assets at end of period (000's) | $ | 11,836 | $ | 9,754 | $ | 525 | |||||||||
Portfolio Turnover (d) (j) | 15 | % | 14 | % | 11 | % | |||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from May 31 to February 28.
(b) Commencement of operations.
(c) Per share net investment income (loss) has been calculated using the average daily shares method.
(d) Not annualized for periods less than one year.
(e) Assumes reinvestment of all net investment income and realized capital gain distributions, if any, during the period. Includes adjustments in accordance with U.S. Generally Accepted Accounting Principles and could differ from the Lipper reported return.
(f) Annualized for periods less than one year.
(g) Does not include acquired fund fees and expenses, if any.
(h) 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 June 29, 2020, and in effect through September 30, 2023, instead of coinciding with the Fund's fiscal year end.
(i) 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.
(j) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares.
(continues on next page)
See notes to financial statements.
41
USAA Mutual Funds Trust | Financial Highlights — continued | ||||||
For a Share Outstanding Throughout Each Period
USAA Growth and Tax Strategy Fund | |||||||||||||||
Class C | |||||||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | June 29, 2020(b) through May 31, 2021 | |||||||||||||
Net Asset Value, Beginning of Period | $ | 23.46 | $ | 25.12 | $ | 21.05 | |||||||||
Investment Activities: | |||||||||||||||
Net investment income (loss) (c) | 0.20 | 0.17 | 0.16 | ||||||||||||
Net realized and unrealized gains (losses) | (1.14 | ) | (1.60 | ) | 4.13 | ||||||||||
Total from Investment Activities | (0.94 | ) | (1.43 | ) | 4.29 | ||||||||||
Distributions to Shareholders from: | |||||||||||||||
Net investment income | (0.12 | ) | (0.23 | ) | (0.22 | ) | |||||||||
Total Distributions | (0.12 | ) | (0.23 | ) | (0.22 | ) | |||||||||
Net Asset Value, End of Period | $ | 22.40 | $ | 23.46 | $ | 25.12 | |||||||||
| Total Return (excludes contingent deferred sales charges) (d) (e) | (3.99 | )% | (5.78 | )% | 20.47 | % | |||||||||
Ratios to Average Net Assets: | |||||||||||||||
Net Expenses (f) (g) (h) (i) | 1.59 | % | 1.61 | % | 1.60 | % | |||||||||
Net Investment Income (Loss) (f) | 1.21 | % | 0.66 | % | 0.70 | % | |||||||||
Gross Expenses (f) (g) | 1.89 | % | 1.67 | % | 5.63 | % | |||||||||
Supplemental Data: | |||||||||||||||
Net Assets at end of period (000's) | $ | 5,619 | $ | 5,543 | $ | 1,221 | |||||||||
Portfolio Turnover (d) (j) | 15 | % | 14 | % | 11 | % | |||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from May 31 to February 28.
(b) Commencement of operations.
(c) Per share net investment income (loss) has been calculated using the average daily shares method.
(d) Not annualized for periods less than one year.
(e) Assumes reinvestment of all net investment income and realized capital gain distributions, if any, during the period. Includes adjustments in accordance with U.S. Generally Accepted Accounting Principles and could differ from the Lipper reported return.
(f) Annualized for periods less than one year.
(g) Does not include acquired fund fees and expenses, if any.
(h) 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 June 29, 2020, and in effect through September 30, 2023, instead of coinciding with the Fund's fiscal year end.
(i) 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.
(j) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares.
See notes to financial statements.
42
USAA Mutual Funds Trust | Notes to Financial Statements February 28, 2023 | ||||||
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.
On June 29, 2022, the Board of Trustees ("the Board") approved the fiscal year-end change for the Fund from May 31 to February 28. The first full cycle of the new fiscal year-end reporting will begin March 1, 2023. As a result of the change, the Fund has a February 28, 2023 fiscal nine-month transition period, the results of which are reported in this Annual Report for the period ended February 28, 2023.
Victory Capital Management ("VCM" or 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 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 (unadjusted) in active markets for identical securities
• Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, or credit spreads, applicable to those securities, etc.)
• Level 3 — significant unobservable inputs (including the Adviser's assumptions in determining the fair value of investments)
43
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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, appointed as the valuation designee by the Board, has established the Pricing and Liquidity Committee (the "Committee"), and subject to Board oversight, the Committee administers and oversees the Fund's valuation policies and procedures, which are approved by the Board.
Portfolio securities listed or traded on securities exchanges, including Exchange-Traded Funds ("ETFs"), American Depositary Receipts, and Rights, 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.
Debt securities are valued each business day by a pricing service approved by the valuation designee and subject to the oversight of the Board. The 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 February 28, 2023, 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 | $ | 321,777 | $ | — | $ | — | $ | 321,777 | |||||||||||
Rights | — | — | 1 | 1 | |||||||||||||||
Corporate Bonds | — | — | 421 | 421 | |||||||||||||||
Municipal Bonds | — | 362,300 | — | 362,300 | |||||||||||||||
Exchange-Traded Funds | 544 | — | — | 544 | |||||||||||||||
Total | $ | 322,321 | $ | 362,300 | $ | 422 | $ | 685,043 | |||||||||||
As of February 28, 2023, there were no transfers into/out of Level 3.
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.
44
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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.
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 generally take place within 35 days a month or more after the trade date. Securities that require more than 35 days to settle are considered a senior security and subject to Rule 18f-4. 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. 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.
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
45
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 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. As of February 28, 2023, the Fund had no open 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 nine months ended February 28, 2023, 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 presents the effect of derivative instruments on the Statements of Operations, categorized by risk exposure, for the nine months ended February 28, 2023 (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 | $ | (159 | ) | $ | (203 | ) | |||||
The following table presents the effect of derivative instruments on the Statements 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 | |||||||
The volume associated with derivative positions in the Fund for futures contracts based on average monthly notional amounts in comparison to net assets during the nine months ended February 28, 2023, is less than 0.50%.
46
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 Statements of Operations.
Withholding taxes on interest, dividends, and gains as a result of certain investments 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 Statements 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 February 28, 2023, the Fund did not have any securities on loan.
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
47
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
taxes is required in the financial statements. The Fund had a tax year end of May 31, and effective February 28, 2023, the Fund changed its tax year end to February 28.
For the nine months ended February 28, 2023, 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 under specified conditions outlined in the valuation policies and procedures adopted by the Board. In addition, as defined under the valuation policies and procedures, each transaction must be effected at the independent current market price. For the nine months ended February 28, 2023, 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) | |||||||||
| $ | 14,800 | $ | 18,280 | $ | — | ||||||
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 Statements 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 nine months ended February 28, 2023, were as follows for the Fund (amounts in thousands):
Excluding | |||||||
Purchases | Sales | ||||||
$ | 104,465 | $ | 140,096 | ||||
48
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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.
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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements of Operations as Investment advisory fees.
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. 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, 2022, to February 28, 2023, performance adjustments were $(137), $(7), $(1), and $(1) for Fund Shares, Institutional Shares, Class A, and Class C, in thousands, respectively. Performance adjustments were (0.03)%, (0.02)%, (0.01)%, and (0.02)% for Fund Shares, Institutional Shares, Class A, and Class C, respectively. 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
49
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
and VCM. This arrangement provides for monthly fees that are paid by VCM. VCM (not the Fund) pays the subadviser fees. Effective October 1, 2022, NTI is no longer a subadviser to the Fund.
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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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 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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements of Operations as 12b-1 fees.
50
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
In addition, the Distributor is entitled to receive commissions in connection with sales of Class A. For the nine months ended February 28, 2023, the Distributor received less than $1 thousand from commissions earned in connection with sales of Class A. For the year ended May 31, 2022, the Distributor received $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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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 September 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 February 28, 2023, 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, 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.
As of February 28, 2023, 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 February 28, 2023.
| Expires 2024 | Expires 2025 | Expires 2026 | Total | ||||||||||||
| $ | 33 | $ | 14 | $ | 37 | $ | 84 | ||||||||
As of May 31, 2022, the following amounts were available to be repaid to the Adviser (amounts in thousands).
| 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 nine months ended February 28, 2023, and 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
51
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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. Fixed-income securities rated 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 — As a mutual fund that has the ability to invest in bonds, 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 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 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.
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 27, 2022, with a termination date of June 26, 2023. Under the agreement with Citibank, the Victory Funds Complex may borrow up
52
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 nine months ended February 28, 2023, 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 paid a pro-rata portion of the commitment fees plus any interest on amounts borrowed. For the period from June 1, 2022, through June 27, 2022, interest was based on the one-month London Interbank Offered Rate ("LIBOR") plus one percent. Effective with the renewal, for the period June 28, 2022, through February 28, 2023, interest was based on the one-month Secured Overnight Financing Rate ("SOFR") plus 1.10 percent. The Fund did not experience a material financial impact transitioning from LIBOR to SOFR. Interest charged to the 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 nine months ended February 28, 2023, and 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 Statements of Operations under Interfund lending fees. As a Lender, interest earned by the Fund, if any, during the period, is reflected on the Statements of Operations under Interfund lending.
The Fund did not utilize or participate in the Facility during the nine months ended February 28, 2023.
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 | $ | — | $ | 1,418 | 2 | 0.76 | % | $ | 1,794 | ||||||||||||||
* Based on the number of days borrowings were outstanding for 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. Net investment losses incurred by the Fund may be reclassified as an offset to capital on the accompanying Statement of Assets and Liabilities.
53
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
As of February 28, 2023, on the Statement 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):
Nine Months Ended February 28, 2023 | |||||||||||
Distributions Paid From | |||||||||||
Ordinary | Tax-Exempt | Total | |||||||||
$ | 2,951 |
| $ | 5,793 |
| $ | 8,744 | ||||
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 February 28, 2023, the components of accumulated earnings (loss) on a tax basis were as follows (amounts in thousands):
| Undistributed Ordinary Income | Undistributed Tax-Exempt Income | Accumulated Earnings | Accumulated Capital and Other Losses | Unrealized Appreciation (Depreciation)* | Total Accumulated Earnings (Loss) | ||||||||||||||||||
| $ | 3,675 | $ | 2,422 | $ | 6,097 | $ | (16,317 | ) | $ | 180,832 | $ | 170,612 | |||||||||||
* The difference between the book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to tax deferral of losses on wash sales, defaulted bond accruals, REIT adjustments and derivatives.
As of February 28, 2023, 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 | |||||||||
| $ | 12,611 | $ | 3,706 | $ | 16,317 | ||||||
As of February 28, 2023, 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) | ||||||||||||
| $ | 504,211 | $ | 223,236 | $ | (42,404 | ) | $ | 180,832 | |||||||
8. Subsequent Events:
The Board, upon recommendation of the Adviser, has approved a change in the name of the Trust and each individual fund within the Trust. On February 23, 2023, an initial filing was made with the SEC to commence the process to effectuate the following changes.
Effective at the start of business on April 24, 2023 (the "Effective Date"), the name of the Trust will change from USAA Mutual Funds Trust to Victory Portfolios III, and all references to USAA Mutual
54
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
Funds Trust in the summary prospectus, statutory prospectus, and statement of additional information ("SAI") will be replaced by the new name.
Also on the Effective Date, references to the current name of the Fund in the summary prospectus, statutory prospectus, and SAI will be replaced with the new name as follows:
Current Name | New Name | ||||||
USAA Growth and Tax Strategy Fund | Victory Growth and Tax Strategy Fund | ||||||
In addition, on the Effective Date, USAA Investments, a Victory Capital Management Inc. investment franchise, that currently manages the USAA Fixed Income Funds, will change its name to Victory Income Investors, and all references to USAA Investments in the summary prospectus, statutory prospectus, and SAI, will be replaced.
Please note that there will be no changes in the management of the Fund or to the Fund's ticker symbols.
55
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 February 28, 2023, and the related statements of operations for the period from June 1, 2022 through February 28, 2023 and the year ended May 31, 2022, the statements of changes in net assets for the period from June 1, 2022 through February 28, 2023 and each of the two years in the period ended May 31, 2022, the financial highlights for the period from June 1, 2022 through February 28, 2023 and each of the five years in the period ended May 31, 2022, 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 February 28, 2023, the results of its operations for the period from June 1, 2022 through February 28, 2023 and the year ended May 31, 2022, the statements of changes in net assets for the period from June 1, 2022 through February 28, 2023 and each of the two years in the period ended May 31, 2022, and its financial highlights for the period from June 1, 2022 through February 28, 2023 and each of the five years in the period ended May 31, 2022, 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 February 28, 2023, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. 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
April 28, 2023
56
USAA Mutual Funds Trust | Supplemental Information February 28, 2023 | ||||||
(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 date 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 February 28, 2023 | ||||||
(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 (06/17-06/19); 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 (03/15-03/21). | 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 February 28, 2023 | ||||||
(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) | ||||||||||||||||||
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USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 February 28, 2023 | ||||||
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Officers:
The officers of the Trust, their date 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. (since 2022); 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. (07/01/19-present); Executive Director, Investment and Financial Administration, USAA (2012-06/30/19); 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. (07/01/19-present); Accounting/ Financial Director, USAA (12/13-06/30/19). | ||||||||||||
| 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). | ||||||||||||
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USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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). | ||||||||||||
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USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 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 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 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 September 1, 2022, through February 28, 2023.
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 9/1/22 | Actual Ending Account Value 2/28/23 | Hypothetical Ending Account Value 2/28/23 | Actual Expenses Paid During Period 9/1/22- 2/28/23* | Hypothetical Expenses Paid During Period 9/1/22- 2/28/23* | Annualized Expense Ratio During Period 9/1/22- 2/28/23 | ||||||||||||||||||||||
Fund Shares | $ | 1,000.00 | $ | 1,000.20 | $ | 1,022.17 | $ | 2.63 | $ | 2.66 | 0.53 | % | |||||||||||||||
Institutional Shares | 1,000.00 | 1,000.10 | 1,022.12 | 2.68 | 2.71 | 0.54 | % | ||||||||||||||||||||
Class A | 1,000.00 | 998.50 | 1,020.63 | 4.16 | 4.21 | 0.84 | % | ||||||||||||||||||||
Class C | 1,000.00 | 995.30 | 1,016.91 | 7.87 | 7.95 | 1.59 | % | ||||||||||||||||||||
* Expenses are equal to the average account value multiplied by the Fund's annualized expense ratio multiplied by 181/365 (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 February 28, 2023 | ||||||
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Additional Federal Income Tax Information
The following federal tax information related to the Fund's fiscal nine months ended February 28, 2023, 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 2024.
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 nine months ended February 28, 2023 (amounts in thousands):
| Dividends Received Deduction (corporate shareholders) | Qualified Dividend Income (non-corporate shareholders) | Tax Exempt Distributions | |||||||||
| 100 | % | 100 | % | $ | 5,793 | ||||||
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USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
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 8-9, 2022, 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 8-9, 2022, 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 21, 2022.
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 February 28, 2023 | ||||||
(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 program, (iv) derivatives risk management program, and (v) 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 adjustment, 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.
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-, three-, five- and ten-year periods ended June 30, 2022, and was above its Lipper index for the one-, five- and ten-year periods ended June 30, 2022, and was below its Lipper index for the three-year period ended June 30, 2022.
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
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USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
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 10, 2023, 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-RN (prior to August 2022, 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 | ||||||
vcm.com | (800) 235-8396 | ||||||
23403-0423
February 28, 2023
Annual Report
USAA International Fund
(Also Known as Victory International Fund*)
* Effective at the start of business on April 24, 2023, the Fund name will change to Victory International Fund. Please see Notes to the Financial Statements for subsequent event information.
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.
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, 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 | ||||||
Statements of Operations | 31 | ||||||
Statements of Changes in Net Assets | 32 | ||||||
Financial Highlights | 34 | ||||||
Notes to Financial Statements | 38 | ||||||
| Report of Independent Registered Public Accounting Firm | 50 | ||||||
Supplemental Information (Unaudited) | 51 | ||||||
Trustee and Officer Information | 51 | ||||||
Proxy Voting and Portfolio Holdings Information | 57 | ||||||
Expense Examples | 57 | ||||||
Additional Federal Income Tax Information | 58 | ||||||
Advisory Contract Renewal | 59 | ||||||
Liquidity Risk Management Program | 63 | ||||||
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,
If you are reading this letter but double-checking your calendar, be assured there's no mistake. The annual reporting period for your USAA Mutual Fund has shifted from a fiscal year ended May 31st to a fiscal year ended February 28th/the last day of February. This change has no material impact on any of your investments. This change aims to help us improve efficiencies and reduce operational costs. Therefore, this letter covers an abbreviated "annual" period from June 1, 2022, through February 28, 2023. Future annual reports will cover the 12-month period ended February 28th/the last day of February going forward.
Our most recent annual reporting period has been a challenging period for investors. Consider some of the headwinds: heightened geopolitical tensions, a terrible war in Eastern Europe, elevated energy and food costs, high inflation, and rising interest rates. All this has dampened global growth and created a difficult backdrop for both bond and stock investors.
The inflation data was particularly troublesome and surprised many throughout the past year with some of the highest readings since the 1970s. In response, the U.S. Federal Reserve (the "Fed") continued with its monetary tightening and boosted the Fed funds interest rate repeatedly throughout the annual reporting period. And if that wasn't enough, zero-COVID-19 policies in China (which fortunately have been recently lifted) further exacerbated supply chain issues. As one might expect, all these obstacles ratcheted up volatility across financial markets.
In terms of the numbers, the S&P 500® Index, the bell-weather proxy for our domestic stock market, delivered a negative total return of almost 3% for our abbreviated annual reporting period. But perhaps what made 2022 even more difficult was the performance of fixed income markets. The Bloomberg US Aggregate Bond Index—a proxy for a diversified fixed income portfolio and one that many investors and institutions follow closely—delivered a negative total return of approximately 4% during the same period. That's not exactly the offset to equity performance that many investors come to expect from bonds.
It's been difficult, and we fully acknowledge that the steady drumbeat of bad news and bouts of stomach-churning volatility can take a toll on investors' psyche. Even when markets often snap back sharply (as happened this past July, October and earlier this calendar year), investors often wonder if they have missed an opportunity.
Through all of the turmoil and challenges in our most recent annual reporting period, we are reminded of two enduring realities: 1) financial markets are dynamic and apt to change abruptly; 2) it's vital to remain calm and rational whenever faced with those inevitable bouts of turmoil.
Fortunately, we think that investors can take comfort knowing that all of our independent investment franchises have experience managing portfolios through a wide variety of market environments. Our investment professionals remain calm during turbulent financial markets, and we think it's imperative that investors do the same.
2
We still believe that a long-term plan, a well-diversified portfolio across asset classes and investment types, and a clear understanding of individual risk tolerances are the key ingredients for staying the course and progressing on investment goals. Moreover, all our investment professionals continually monitor the environment and work hard to position portfolios opportunistically no matter what the markets bring. Remember, turmoil can also create opportunity.
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, we encourage you to contact our Member Service Representatives. Call 800-235-8396, or visit our website at vcm.com.
From all of us here at Victory Capital, thank you for your ongoing confidence and 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?
The reporting period started in the month of June as pressure continued to mount for both stocks and bonds. The U.S. Federal Reserve's (the "Fed") hawkish pivot continued to put pressure on equity multiples. With stubbornly high inflation readings, 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.
In the third quarter, global equities declined, continuing the downward trend from the first half of 2022. The quarter began with a rally that continued into mid-August, on hopes that the Fed would pivot toward a more accommodative policy. However, messaging from Fed Chairman, Jerome Powell, and a stronger-than-expected inflation report in early September dampened investor optimism over the central bank's trajectory and the odds of avoiding recession. The Fed went on to hike rates aggressively by 75 basis points ("bps") twice during the quarter, bringing the benchmark Fed funds rate target to a range of 3.0% to 3.25%, as compared to 0% to 0.25% at the beginning of the year. (A basis point is 1/100th of a percentage point.) For its part, the European Central Bank raised its reference rate by 50 bps in July, followed by another 75 bps in September. Other factors that weighed on sentiment during the quarter included the ongoing Russia-Ukraine war, an energy crisis in Europe, and the resumption of COVID-19 lockdowns in China.
Global equities rebounded in the fourth quarter trimming full year losses. Gains in October and November were sparked by signs of peaking inflation alongside less hawkish commentary from Fed Chairman Powell raising hope that the central bank would end its interest rate hiking cycle sometime in early 2023. Indeed, both the Fed and the European Central Bank raised their benchmark overnight lending rates by a more modest 50 bps in mid-December. Also supporting sentiment, the Chinese government began to ease their zero-COVID-19 policy that had weighed on global economic growth for much of 2022. However, stocks retreated into year-end as investors shifted their focus to the potential impact higher rates might have on economic growth and corporate earnings in the coming year.
As the reporting period crossed into 2023, global equities started off the year logging positive returns in the month of January. Bonds also rallied at the start of the year on hopes that the Fed's hawkish pivot would come to an end in 2023. As the calendar moved to February, stronger than expected employment and inflation reports caused investors to reevaluate interest rate expectations for 2023 and consider that rates could stay higher for longer. The result was a reversal in global equities and bonds which ended the month lower.
4
USAA International Fund
Managers' Commentary (continued)
• 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. The Fund's fiscal year-end changed this year to February 28 from May 31, resulting in a shorter reporting period for fiscal year ended 2023. For the nine-month reporting period ended February 28, 2023, the Fund Shares, Institutional Shares, Class A, and R6 Shares had a total return (at net asset value) of 0.73%, 0.78%, 0.62%, and 1.01%, respectively. This compares to returns of 0.12% for the Lipper International Funds Index, and 2.13% 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, the investment franchises, and Victory Capital's Victory Solutions platform.
• What strategies did you employ during the reporting period?
During the reporting period ending on February 28, 2023, the Fund underperformed the benchmark MSCI EAFE Index. On a country basis, an overweight to China and underweight to France were negative contributors. Stock selection in the United Kingdom and Spain were positive contributors.
Reviewing performance from a sector standpoint, stock selection was a positive contributor in financials and communication services. The consumer discretionary and information technology sectors had a negative stock selection effect.
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 February 28, 2023
Fund Shares | Institutional Shares | Class A | Class R6 | ||||||||||||||||||||||||||||
INCEPTION DATE | 2/1/91 | 8/1/08 | 8/1/10 | 12/1/16 | |||||||||||||||||||||||||||
| Net Asset Value | Net Asset Value | Net Asset Value | Maximum Offering Price | Net Asset Value | MSCI EAFE Index1 | Lipper International Funds Index2 | |||||||||||||||||||||||||
One Year | –4.81 | % | –4.74 | % | –4.94 | % | –10.42 | % | –4.41 | % | –3.14 | % | –5.21 | % | |||||||||||||||||
Five Year | 1.99 | % | 2.07 | % | 1.77 | % | 0.57 | % | NA | 2.64 | % | 2.79 | % | ||||||||||||||||||
Ten Year | 4.68 | % | 4.78 | % | 4.42 | % | 3.81 | % | NA | 4.83 | % | 5.13 | % | ||||||||||||||||||
Since Inception | NA | NA | NA | NA | 3.71 | % | 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 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 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 | February 28, 2023 | ||||||
(Unaudited)
Investment Objective and Portfolio Holdings:
The Fund seeks capital appreciation.
Top 10 Sectors*:
February 28, 2023
(% of Net Assets)
Financials | 19.1 | % | |||||
Industrials | 16.2 | % | |||||
Health Care | 11.9 | % | |||||
Consumer Discretionary | 11.4 | % | |||||
Information Technology | 9.7 | % | |||||
Consumer Staples | 7.4 | % | |||||
Materials | 6.7 | % | |||||
Energy | 6.0 | % | |||||
Communication Services | 4.8 | % | |||||
Utilities | 2.5 | % | |||||
Country Allocation:
February 28, 2023
(% 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 February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Common Stocks (97.8%) | |||||||||||
Australia (5.9%): | |||||||||||
Consumer Discretionary (0.9%): | |||||||||||
ARB Corp. Ltd. (a) | 86,002 | $ | 1,842 | ||||||||
Aristocrat Leisure Ltd. | 573,852 | 14,057 | |||||||||
Lovisa Holdings Ltd. | 214,175 | 3,457 | |||||||||
PWR Holdings Ltd. | 559,456 | 3,797 | |||||||||
23,153 | |||||||||||
Energy (0.2%): | |||||||||||
Santos Ltd. | 323,649 | 1,511 | |||||||||
Woodside Energy Group Ltd. | 96,569 | 2,339 | |||||||||
3,850 | |||||||||||
Financials (1.1%): | |||||||||||
Macquarie Group Ltd. | 176,385 | 22,391 | |||||||||
National Australia Bank Ltd. | 203,053 | 4,086 | |||||||||
QBE Insurance Group Ltd. | 182,019 | 1,841 | |||||||||
28,318 | |||||||||||
Health Care (1.0%): | |||||||||||
Cogstate, Ltd. (b) | 630,500 | 661 | |||||||||
CSL Ltd. | 115,147 | 22,904 | |||||||||
Nanosonics Ltd. (b) | 435,857 | 1,324 | |||||||||
24,889 | |||||||||||
Industrials (0.4%): | |||||||||||
Austal Ltd. | 1,436,152 | 1,745 | |||||||||
IPH Ltd. | 420,261 | 2,281 | |||||||||
Johns Lyng Group Ltd. | 790,724 | 3,302 | |||||||||
Qantas Airways Ltd. (b) | 447,183 | 1,923 | |||||||||
9,251 | |||||||||||
Information Technology (0.1%): | |||||||||||
Appen Ltd. | 805,839 | 1,253 | |||||||||
Materials (1.5%): | |||||||||||
BHP Group Ltd. | 949,054 | 28,714 | |||||||||
Imdex Ltd. | 1,419,819 | 2,239 | |||||||||
Mineral Resources Ltd. | 38,267 | 2,113 | |||||||||
Ramelius Resources Ltd. | 2,721,529 | 1,637 | |||||||||
Rio Tinto Ltd. | 36,488 | 2,851 | |||||||||
37,554 | |||||||||||
Real Estate (0.7%): | |||||||||||
Charter Hall Group | 188,350 | 1,677 | |||||||||
Goodman Group | 115,935 | 1,542 | |||||||||
Scentre Group | 7,403,665 | 14,783 | |||||||||
18,002 | |||||||||||
146,270 | |||||||||||
See notes to financial statements.
8
| USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Austria (0.4%): | |||||||||||
Financials (0.2%): | |||||||||||
Erste Group Bank AG | 117,616 | $ | 4,616 | ||||||||
Industrials (0.1%): | |||||||||||
ANDRITZ AG | 42,157 | 2,601 | |||||||||
Information Technology (0.1%): | |||||||||||
ams-OSRAM AG (b) | 199,718 | 1,549 | |||||||||
8,766 | |||||||||||
Belgium (0.7%): | |||||||||||
Communication Services (0.1%): | |||||||||||
Proximus SADP | 193,711 | 1,784 | |||||||||
Financials (0.1%): | |||||||||||
Ageas SA | 66,641 | 3,007 | |||||||||
Information Technology (0.5%): | |||||||||||
Melexis NV | 125,938 | 13,621 | |||||||||
18,412 | |||||||||||
Brazil (0.8%): | |||||||||||
Communication Services (0.1%): | |||||||||||
Telefonica Brasil SA | 399,800 | 2,974 | |||||||||
Consumer Staples (0.1%): | |||||||||||
Atacadao SA | 543,277 | 1,396 | |||||||||
Energy (0.2%): | |||||||||||
Petro Rio SA (b) | 373,000 | 2,401 | |||||||||
Ultrapar Participacoes SA | 687,532 | 1,731 | |||||||||
4,132 | |||||||||||
Financials (0.2%): | |||||||||||
Banco Bradesco SA, ADR | 1,341,443 | 3,394 | |||||||||
Banco do Brasil SA | 357,900 | 2,755 | |||||||||
6,149 | |||||||||||
Materials (0.1%): | |||||||||||
Gerdau SA Preference Shares | 420,100 | 2,298 | |||||||||
Utilities (0.1%): | |||||||||||
Cia de Saneamento Basico do Estado de Sao Paulo | 197,148 | 1,949 | |||||||||
Cia Energetica de Minas Gerais Preference Shares | 803,089 | 1,608 | |||||||||
3,557 | |||||||||||
20,506 | |||||||||||
Canada (2.0%): | |||||||||||
Consumer Discretionary (0.1%): | |||||||||||
BRP, Inc. | 26,459 | 2,293 | |||||||||
Energy (0.5%): | |||||||||||
ARC Resources Ltd. | 216,457 | 2,358 | |||||||||
Cameco Corp. | 65,582 | 1,793 | |||||||||
Headwater Exploration, Inc. | 300,438 | 1,319 | |||||||||
See notes to financial statements.
9
| USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Parex Resources, Inc. | 78,287 | $ | 1,276 | ||||||||
Pason Systems, Inc. (a) | 174,758 | 1,864 | |||||||||
Suncor Energy, Inc. | 46,326 | 1,557 | |||||||||
Trican Well Service Ltd. (b) | 708,675 | 1,782 | |||||||||
11,949 | |||||||||||
Financials (0.6%): | |||||||||||
Element Fleet Management Corp. | 215,058 | 3,072 | |||||||||
Fairfax Financial Holdings Ltd. | 5,024 | 3,513 | |||||||||
National Bank of Canada | 43,850 | 3,221 | |||||||||
Sun Life Financial, Inc. | 50,424 | 2,437 | |||||||||
The Toronto-Dominion Bank | 52,845 | 3,519 | |||||||||
15,762 | |||||||||||
Industrials (0.2%): | |||||||||||
Calian Group Ltd. | 44,138 | 1,954 | |||||||||
Finning International, Inc. | 66,023 | 1,675 | |||||||||
Savaria Corp. | 142,207 | 1,706 | |||||||||
5,335 | |||||||||||
Materials (0.6%): | |||||||||||
Barrick Gold Corp. | 200,186 | 3,235 | |||||||||
Dundee Precious Metals, Inc. | 229,372 | 1,473 | |||||||||
Karora Resources, Inc. (b) | 648,651 | 2,135 | |||||||||
Kinross Gold Corp. | 142,067 | 520 | |||||||||
Nutrien Ltd. | 19,094 | 1,488 | |||||||||
Stella-Jones, Inc. | 64,563 | 2,337 | |||||||||
Teck Resources Ltd. Class B | 60,686 | 2,423 | |||||||||
Wesdome Gold Mines Ltd. (b) | 288,239 | 1,375 | |||||||||
14,986 | |||||||||||
50,325 | |||||||||||
Chile (0.1%): | |||||||||||
Consumer Staples (0.1%): | |||||||||||
Cencosud SA | 957,774 | 1,811 | |||||||||
China (2.3%): | |||||||||||
Communication Services (1.0%): | |||||||||||
Baidu, Inc. Class A (b) | 254,568 | 4,377 | |||||||||
iQIYI, Inc., ADR (b) | 264,627 | 2,045 | |||||||||
Tencent Holdings Ltd. | 398,200 | 17,493 | |||||||||
23,915 | |||||||||||
Consumer Discretionary (0.6%): | |||||||||||
Alibaba Group Holding Ltd. (b) | 490,140 | 5,387 | |||||||||
BYD Co. Ltd. Class H | 71,000 | 1,909 | |||||||||
Dongfeng Motor Group Co. Ltd. Class H | 3,787,885 | 1,935 | |||||||||
Meituan Class B (b) (c) | 34,160 | 593 | |||||||||
New Oriental Education & Technology Group, Inc. (b) | 476,200 | 1,836 | |||||||||
Pinduoduo, Inc., ADR (b) | 14,391 | 1,263 | |||||||||
See notes to financial statements.
10
| USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Yadea Group Holdings Ltd. (c) | 814,000 | $ | 1,747 | ||||||||
14,670 | |||||||||||
Consumer Staples (0.1%): | |||||||||||
Tsingtao Brewery Co. Ltd. Class H | 152,000 | 1,500 | |||||||||
Financials (0.3%): | |||||||||||
Agricultural Bank of China Ltd. Class H | 3,904,000 | 1,354 | |||||||||
Bank of China Ltd. Class H | 5,513,000 | 2,022 | |||||||||
China Construction Bank Corp. Class H | 3,194,000 | 1,952 | |||||||||
PICC Property & Casualty Co. Ltd. Class H | 2,142,000 | 1,882 | |||||||||
7,210 | |||||||||||
Health Care (0.0%): (d) | |||||||||||
CSPC Pharmaceutical Group Ltd. | 1,244,000 | 1,337 | |||||||||
Industrials (0.1%): | |||||||||||
China Railway Group Ltd. Class H | 3,969,000 | 2,068 | |||||||||
COSCO SHIPPING Holdings Co. Ltd. Class H | 1,102,700 | 1,144 | |||||||||
3,212 | |||||||||||
Information Technology (0.1%): | |||||||||||
Xiaomi Corp. Class B (b) (c) | 1,002,400 | 1,519 | |||||||||
Materials (0.1%): | |||||||||||
Anhui Conch Cement Co. Ltd. Class H | 613,000 | 2,250 | |||||||||
Ganfeng Lithium Group Co. Ltd. Class H (c) | 188,800 | 1,319 | |||||||||
3,569 | |||||||||||
56,932 | |||||||||||
Denmark (3.1%): | |||||||||||
Consumer Discretionary (0.8%): | |||||||||||
Pandora A/S | 197,087 | 18,671 | |||||||||
Health Care (2.0%): | |||||||||||
Novo Nordisk A/S Class B | 357,081 | 50,446 | |||||||||
Industrials (0.3%): | |||||||||||
AP Moller — Maersk A/S Class B | 836 | 1,947 | |||||||||
INVISIO AB | 155,622 | 3,306 | |||||||||
Per Aarsleff Holding A/S | 44,295 | 1,921 | |||||||||
7,174 | |||||||||||
76,291 | |||||||||||
Finland (0.6%): | |||||||||||
Health Care (0.1%): | |||||||||||
Revenio Group Oyj | 55,069 | 2,029 | |||||||||
Industrials (0.1%): | |||||||||||
Wartsila Oyj Abp | 311,598 | 3,009 | |||||||||
Information Technology (0.3%): | |||||||||||
Admicom Oyj (a) (b) | 38,241 | 1,729 | |||||||||
Nokia Oyj | 1,232,960 | 5,704 | |||||||||
7,433 | |||||||||||
See notes to financial statements.
11
| USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Utilities (0.1%): | |||||||||||
Fortum Oyj | 123,764 | $ | 1,891 | ||||||||
14,362 | |||||||||||
France (9.1%): | |||||||||||
Communication Services (0.3%): | |||||||||||
Orange SA | 378,053 | 4,315 | |||||||||
Publicis Groupe SA | 40,939 | 3,250 | |||||||||
7,565 | |||||||||||
Consumer Discretionary (2.9%): | |||||||||||
La Francaise des Jeux SAEM (c) | 392,793 | 15,503 | |||||||||
LVMH Moet Hennessy Louis Vuitton SE | 62,287 | 51,776 | |||||||||
Renault SA (b) | 74,210 | 3,321 | |||||||||
70,600 | |||||||||||
Consumer Staples (0.3%): | |||||||||||
Carrefour SA | 204,733 | 4,047 | |||||||||
Pernod Ricard SA | 16,605 | 3,464 | |||||||||
7,511 | |||||||||||
Energy (0.7%): | |||||||||||
Gaztransport Et Technigaz SA | 67,239 | 7,022 | |||||||||
TotalEnergies SE | 151,008 | 9,317 | |||||||||
16,339 | |||||||||||
Financials (0.9%): | |||||||||||
AXA SA | 286,229 | 9,018 | |||||||||
BNP Paribas SA | 131,275 | 9,177 | |||||||||
Societe Generale SA | 156,539 | 4,511 | |||||||||
22,706 | |||||||||||
Health Care (0.2%): | |||||||||||
Equasens | 20,988 | 1,748 | |||||||||
EssilorLuxottica SA | 8,877 | 1,539 | |||||||||
Korian SA | 1 | — | (e) | ||||||||
Vetoquinol SA | 16,152 | 1,370 | |||||||||
4,657 | |||||||||||
Industrials (1.6%): | |||||||||||
Cie de Saint-Gobain | 135,694 | 8,063 | |||||||||
Dassault Aviation SA | 11,090 | 1,906 | |||||||||
Eiffage SA | 18,890 | 2,073 | |||||||||
Rexel SA | 89,068 | 2,214 | |||||||||
Safran SA | 155,656 | 21,977 | |||||||||
Teleperformance | 4,536 | 1,177 | |||||||||
Thermador Groupe | 28,432 | 2,908 | |||||||||
40,318 | |||||||||||
Information Technology (1.1%): | |||||||||||
Aubay | 36,883 | 1,896 | |||||||||
Capgemini SE | 84,670 | 15,877 | |||||||||
Edenred | 32,165 | 1,810 | |||||||||
See notes to financial statements.
12
| USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Esker SA | 11,966 | $ | 1,917 | ||||||||
Lectra | 68,312 | 2,547 | |||||||||
Wavestone | 39,949 | 2,074 | |||||||||
26,121 | |||||||||||
Materials (0.8%): | |||||||||||
Arkema SA | 203,757 | 20,655 | |||||||||
Real Estate (0.1%): | |||||||||||
Klepierre SA | 66,738 | 1,664 | |||||||||
Utilities (0.2%): | |||||||||||
Engie SA | 423,929 | 6,186 | |||||||||
224,322 | |||||||||||
Germany (7.3%): | |||||||||||
Communication Services (0.2%): | |||||||||||
Deutsche Telekom AG | 218,988 | 4,914 | |||||||||
Consumer Discretionary (0.9%): | |||||||||||
Ceconomy AG (b) | 210,198 | 551 | |||||||||
Continental AG | 34,166 | 2,453 | |||||||||
Mercedes-Benz Group AG | 77,227 | 5,918 | |||||||||
Volkswagen AG Preference Shares | 92,329 | 12,567 | |||||||||
21,489 | |||||||||||
Consumer Staples (0.1%): | |||||||||||
Henkel AG And Co. KGaA Preference Shares | 42,105 | 3,063 | |||||||||
Energy (0.1%): | |||||||||||
CropEnergies AG | 150,841 | 1,856 | |||||||||
VERBIO Vereinigte BioEnergie AG | 26,457 | 1,327 | |||||||||
3,183 | |||||||||||
Financials (1.2%): | |||||||||||
Allianz SE Registered Shares | 111,481 | 26,175 | |||||||||
Hannover Rueck SE | 12,713 | 2,468 | |||||||||
28,643 | |||||||||||
Health Care (0.7%): | |||||||||||
Bayer AG Registered Shares | 50,010 | 2,969 | |||||||||
Eckert & Ziegler Strahlen- und Medizintechnik AG | 43,282 | 2,460 | |||||||||
Fresenius SE & Co. KGaA | 141,089 | 3,882 | |||||||||
Merck KGaA | 18,685 | 3,540 | |||||||||
Nexus AG | 65,025 | 3,648 | |||||||||
16,499 | |||||||||||
Industrials (2.0%): | |||||||||||
| 2G Energy AG | 119,672 | 2,851 | |||||||||
Amadeus Fire AG | 21,626 | 2,809 | |||||||||
Brenntag SE | 25,792 | 1,943 | |||||||||
Cewe Stiftung & Co. KGaA | 18,176 | 1,817 | |||||||||
Daimler Truck Holding AG (b) | 201,033 | 6,367 | |||||||||
MTU Aero Engines AG | 7,352 | 1,774 | |||||||||
See notes to financial statements.
13
| USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
| SFC Energy AG (b) | 73,375 | $ | 1,688 | ||||||||
Siemens AG Registered Shares | 205,093 | 31,251 | |||||||||
50,500 | |||||||||||
Information Technology (1.2%): | |||||||||||
Basler AG | 81,828 | 2,474 | |||||||||
Infineon Technologies AG | 92,129 | 3,259 | |||||||||
PVA TePla AG (b) | 84,035 | 2,272 | |||||||||
SAP SE | 165,510 | 18,802 | |||||||||
Secunet Security Networks AG (a) | 7,862 | 1,912 | |||||||||
28,719 | |||||||||||
Materials (0.3%): | |||||||||||
Evonik Industries AG | 112,966 | 2,412 | |||||||||
HeidelbergCement AG | 72,529 | 4,979 | |||||||||
7,391 | |||||||||||
Utilities (0.6%): | |||||||||||
RWE AG | 370,029 | 15,705 | |||||||||
180,106 | |||||||||||
Hong Kong (1.9%): | |||||||||||
Consumer Staples (0.1%): | |||||||||||
WH Group Ltd. (c) | 6,549,828 | 3,812 | |||||||||
Financials (0.8%): | |||||||||||
AIA Group Ltd. | 1,759,800 | 18,704 | |||||||||
BOC Hong Kong Holdings Ltd. | 477,500 | 1,616 | |||||||||
20,320 | |||||||||||
Industrials (0.1%): | |||||||||||
CK Hutchison Holdings Ltd. | 277,000 | 1,654 | |||||||||
Information Technology (0.1%): | |||||||||||
Lenovo Group Ltd. | 2,124,000 | 1,911 | |||||||||
Real Estate (0.7%): | |||||||||||
CK Asset Holdings Ltd. | 2,674,027 | 16,772 | |||||||||
Utilities (0.1%): | |||||||||||
Kunlun Energy Co. Ltd. | 1,858,000 | 1,489 | |||||||||
45,958 | |||||||||||
India (0.7%): | |||||||||||
Consumer Discretionary (0.0%): (d) | |||||||||||
Mahindra & Mahindra Ltd. | 92,699 | 1,422 | |||||||||
Consumer Staples (0.1%): | |||||||||||
Varun Beverages Ltd. | 112,357 | 1,767 | |||||||||
Energy (0.1%): | |||||||||||
Oil & Natural Gas Corp. Ltd. | 657,554 | 1,206 | |||||||||
Reliance Industries Ltd. | 89,612 | 2,514 | |||||||||
3,720 | |||||||||||
See notes to financial statements.
14
| USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Financials (0.2%): | |||||||||||
Canara Bank | 586,951 | $ | 1,982 | ||||||||
ICICI Bank Ltd. | 185,879 | 1,923 | |||||||||
3,905 | |||||||||||
Information Technology (0.1%): | |||||||||||
HCL Technologies Ltd. | 109,829 | 1,430 | |||||||||
Tata Consultancy Services Ltd. | 41,441 | 1,660 | |||||||||
3,090 | |||||||||||
Materials (0.1%): | |||||||||||
UPL Ltd. | 255,025 | 2,140 | |||||||||
Utilities (0.1%): | |||||||||||
Power Grid Corp. of India Ltd. | 786,205 | 2,112 | |||||||||
18,156 | |||||||||||
Indonesia (0.1%): | |||||||||||
Financials (0.1%): | |||||||||||
PT Bank Mandiri Persero Tbk | 3,801,612 | 2,493 | |||||||||
Ireland (0.2%): | |||||||||||
Financials (0.2%): | |||||||||||
AIB Group PLC | 641,761 | 2,741 | |||||||||
Bank of Ireland Group PLC | 308,318 | 3,396 | |||||||||
6,137 | |||||||||||
Israel (0.3%): | |||||||||||
Consumer Discretionary (0.1%): | |||||||||||
Maytronics Ltd. (a) | 134,933 | 1,627 | |||||||||
Financials (0.0%): (d) | |||||||||||
Bank Leumi Le-Israel BM | 164,218 | 1,278 | |||||||||
Health Care (0.1%): | |||||||||||
Inmode Ltd. (b) | 44,479 | 1,571 | |||||||||
Information Technology (0.1%): | |||||||||||
Nice Ltd. (b) | 9,341 | 1,943 | |||||||||
6,419 | |||||||||||
Italy (2.2%): | |||||||||||
Consumer Staples (0.1%): | |||||||||||
Pharmanutra SpA | 29,541 | 1,873 | |||||||||
Energy (0.3%): | |||||||||||
Eni SpA | 475,174 | 6,711 | |||||||||
Financials (0.6%): | |||||||||||
Assicurazioni Generali SpA | 196,903 | 3,894 | |||||||||
| BPER Banca | 929,766 | 2,641 | |||||||||
UniCredit SpA | 450,406 | 9,214 | |||||||||
15,749 | |||||||||||
See notes to financial statements.
15
| USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Health Care (0.2%): | |||||||||||
El.En. SpA | 263,718 | $ | 4,356 | ||||||||
Industrials (0.2%): | |||||||||||
Leonardo SpA | 184,648 | 2,071 | |||||||||
Salcef Group SpA | 104,624 | 1,902 | |||||||||
3,973 | |||||||||||
Information Technology (0.1%): | |||||||||||
Sesa SpA | 25,730 | 3,318 | |||||||||
Utilities (0.7%): | |||||||||||
Enel SpA | 337,666 | 1,894 | |||||||||
Iren SpA | 562,058 | 973 | |||||||||
Snam SpA | 2,963,154 | 14,556 | |||||||||
17,423 | |||||||||||
53,403 | |||||||||||
Japan (21.5%): | |||||||||||
Communication Services (1.3%): | |||||||||||
Capcom Co. Ltd. | 344,200 | 10,833 | |||||||||
DeNA Co. Ltd. | 104,986 | 1,349 | |||||||||
Fuji Media Holdings, Inc. | 67,738 | 569 | |||||||||
Hakuhodo DY Holdings, Inc. | 126,850 | 1,414 | |||||||||
Intage Holdings, Inc. (a) | 196,700 | 2,113 | |||||||||
Kakaku.com, Inc. | 578,900 | 8,624 | |||||||||
MarkLines Co. Ltd. | 133,200 | 2,558 | |||||||||
Nippon Telegraph & Telephone Corp. | 101,900 | 2,953 | |||||||||
Nippon Television Holdings, Inc. | 129,665 | 1,067 | �� | ||||||||
ValueCommerce Co. Ltd. | 100,500 | 1,237 | |||||||||
32,717 | |||||||||||
Consumer Discretionary (3.2%): | |||||||||||
Arcland Service Holdings Co. Ltd. (a) | 120,000 | 1,943 | |||||||||
Benesse Holdings, Inc. | 9,002 | 133 | |||||||||
Honda Motor Co. Ltd. | 232,092 | 6,036 | |||||||||
Isuzu Motors Ltd. | 496,832 | 5,942 | |||||||||
Nikon Corp. | 167,380 | 1,658 | |||||||||
Nissan Motor Co. Ltd. | 956,582 | 3,714 | |||||||||
Rinnai Corp. | 9,900 | 695 | |||||||||
Shoei Co. Ltd. | 90,000 | 3,569 | |||||||||
Snow Peak, Inc. (a) | 117,800 | 1,908 | |||||||||
Sony Group Corp. | 10,000 | 836 | |||||||||
Stanley Electric Co. Ltd. | 114,261 | 2,383 | |||||||||
Subaru Corp. | 275,581 | 4,416 | |||||||||
Sumitomo Electric Industries Ltd. | 281,783 | 3,468 | |||||||||
Sumitomo Rubber Industries Ltd. | 163,651 | 1,474 | |||||||||
Suzuki Motor Corp. | 48,100 | 1,688 | |||||||||
The Furukawa Battery Co. Ltd. | 188,500 | 1,568 | |||||||||
Toyota Motor Corp. | 1,870,500 | 25,497 | |||||||||
ZOZO, Inc. | 504,000 | 11,203 | |||||||||
78,131 | |||||||||||
See notes to financial statements.
16
| USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Consumer Staples (1.3%): | |||||||||||
Ajinomoto Co., Inc. | 81,500 | $ | 2,405 | ||||||||
Create SD Holdings Co. Ltd. | 85,700 | 2,124 | |||||||||
Earth Corp. | 48,500 | 1,708 | |||||||||
Fancl Corp. | 47,100 | 874 | |||||||||
G-7 Holdings, Inc. | 131,200 | 1,384 | |||||||||
Kirin Holdings Co. Ltd. | 232,147 | 3,475 | |||||||||
Seven & i Holdings Co. Ltd. (a) | 47,300 | 2,115 | |||||||||
Toyo Suisan Kaisha Ltd. | 306,700 | 12,409 | |||||||||
Transaction Co. Ltd. | 274,300 | 2,960 | |||||||||
Tsuruha Holdings, Inc. | 30,831 | 2,172 | |||||||||
31,626 | |||||||||||
Energy (0.1%): | |||||||||||
Inpex Corp. | 255,793 | 2,682 | |||||||||
Financials (3.2%): | |||||||||||
Dai-ichi Life Holdings, Inc. | 200,174 | 4,271 | |||||||||
eGuarantee, Inc. | 146,200 | 2,441 | |||||||||
Mitsubishi UFJ Financial Group, Inc. | 3,672,700 | 26,040 | |||||||||
Mizuho Financial Group, Inc. | 176,550 | 2,752 | |||||||||
MS&AD Insurance Group Holdings, Inc. | 126,719 | 4,147 | |||||||||
Nomura Holdings, Inc. | 303,176 | 1,250 | |||||||||
ORIX Corp. | 106,100 | 1,902 | |||||||||
Resona Holdings, Inc. | 693,262 | 3,819 | |||||||||
Sumitomo Mitsui Financial Group, Inc. | 90,580 | 3,956 | |||||||||
Sumitomo Mitsui Trust Holdings, Inc. | 126,915 | 4,703 | |||||||||
T&D Holdings, Inc. | 411,755 | 6,236 | |||||||||
Tokio Marine Holdings, Inc. | 884,800 | 18,787 | |||||||||
80,304 | |||||||||||
Health Care (2.3%): | |||||||||||
Alfresa Holdings Corp. | 109,969 | 1,328 | |||||||||
As One Corp. | 46,200 | 1,926 | |||||||||
BML, Inc. | 55,200 | 1,283 | |||||||||
Carenet, Inc. (a) | 231,300 | 1,947 | |||||||||
Eisai Co. Ltd. | 22,277 | 1,203 | |||||||||
EM Systems Co. Ltd. | 268,700 | 1,686 | |||||||||
Hoya Corp. | 188,900 | 18,704 | |||||||||
Japan Lifeline Co. Ltd. | 180,000 | 1,222 | |||||||||
Medical Data Vision Co. Ltd. | 353,500 | 2,347 | |||||||||
Nakanishi, Inc. | 116,100 | 2,404 | |||||||||
Nippon Shinyaku Co. Ltd. | 27,000 | 1,209 | |||||||||
Olympus Corp. | 90,500 | 1,525 | |||||||||
Ono Pharmaceutical Co. Ltd. | 243,034 | 4,951 | |||||||||
Shionogi & Co. Ltd. | 257,982 | 11,430 | |||||||||
Takeda Pharmaceutical Co. Ltd. | 113,523 | 3,500 | |||||||||
56,665 | |||||||||||
Industrials (6.0%): | |||||||||||
Altech Corp. | 120,500 | 2,231 | |||||||||
Amada Co. Ltd. | 194,010 | 1,766 | |||||||||
See notes to financial statements.
17
| USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
BeNext-Yumeshin Group Co. | 127,718 | $ | 1,746 | ||||||||
Creek & River Co. Ltd. (a) | 114,600 | 1,855 | |||||||||
CTI Engineering Co. Ltd. | 97,100 | 2,482 | |||||||||
Dai-Dan Co. Ltd. | 64,700 | 1,131 | |||||||||
Fuji Corp. | 108,100 | 1,637 | |||||||||
Fuji Electric Co. Ltd. | 412,900 | 15,944 | |||||||||
gremz, Inc. | 151,400 | 2,730 | |||||||||
Hino Motors Ltd. | 392,943 | 1,598 | |||||||||
Hitachi Ltd. | 31,400 | 1,590 | |||||||||
ITOCHU Corp. | 120,000 | 3,587 | |||||||||
JAC Recruitment Co. Ltd. | 120,200 | 2,134 | |||||||||
Japan Airlines Co. Ltd. Class C (b) | 112,911 | 2,126 | |||||||||
Japan Elevator Service Holdings Co. Ltd. | 142,200 | 2,083 | |||||||||
JGC Holdings Corp. | 148,552 | 1,912 | |||||||||
Komatsu Ltd. | 111,900 | 2,678 | |||||||||
Makita Corp. | 131,048 | 3,205 | |||||||||
Management Solutions Co. Ltd. (a) | 95,000 | 2,326 | |||||||||
METAWATER Co. Ltd. | 102,100 | 1,250 | |||||||||
MIRAIT ONE Corp. | 140,300 | 1,570 | |||||||||
MISUMI Group, Inc. | 436,800 | 10,388 | |||||||||
Mitsubishi Heavy Industries Ltd. | 357,200 | 13,164 | |||||||||
Mitsui & Co. Ltd. | 103,000 | 2,891 | |||||||||
Nichireki Co. Ltd. | 177,800 | 1,934 | |||||||||
NIPPON EXPRESS HOLDINGS, Inc. | 32,600 | 1,819 | |||||||||
Nippon Yusen KK (a) | 460,200 | 11,963 | |||||||||
OKUMA Corp. | 189,600 | 7,634 | |||||||||
Organo Corp. | 185,600 | 4,631 | |||||||||
Sanwa Holdings Corp. | 1,368,700 | 14,429 | |||||||||
Shinwa Co. Ltd. (a) | 122,800 | 1,890 | |||||||||
SHO-BOND Holdings Co. Ltd. | 43,400 | 1,712 | |||||||||
Sinko Industries Ltd. | 125,400 | 1,452 | |||||||||
S-Pool, Inc. | 415,900 | 1,965 | |||||||||
Sumitomo Heavy Industries Ltd. | 85,662 | 2,017 | |||||||||
THK Co. Ltd. | 113,595 | 2,544 | |||||||||
Tocalo Co. Ltd. | 222,000 | 2,058 | |||||||||
Tsurumi Manufacturing Co. Ltd. | 111,400 | 1,717 | |||||||||
Weathernews, Inc. | 39,700 | 1,953 | |||||||||
Yamato Holdings Co. Ltd. | 210,050 | 3,548 | |||||||||
147,290 | |||||||||||
Information Technology (3.0%): | |||||||||||
Advantest Corp. | 26,100 | 2,069 | |||||||||
Alps Alpine Co. Ltd. | 138,861 | 1,319 | |||||||||
Comture Corp. | 113,400 | 1,855 | |||||||||
Cresco Ltd. | 110,100 | 1,390 | |||||||||
Cybozu, Inc. | 211,100 | 4,138 | |||||||||
Digital Arts, Inc. | 41,600 | 1,632 | |||||||||
Double Standard, Inc. | 53,100 | 796 | |||||||||
Fujitsu Ltd. | 106,200 | 13,641 | |||||||||
Fukui Computer Holdings, Inc. | 117,500 | 2,412 | |||||||||
Future Corp. | 241,200 | 3,111 | |||||||||
See notes to financial statements.
18
| USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Horiba Ltd. | 51,800 | $ | 2,762 | ||||||||
Justsystems Corp. | 74,168 | 1,810 | |||||||||
Kanematsu Electronics Ltd. | 56,700 | 2,577 | |||||||||
Keyence Corp. | 3,600 | 1,556 | |||||||||
m-up Holdings, Inc. | 185,000 | 1,437 | |||||||||
Oracle Corp. | 170,800 | 11,638 | |||||||||
SHIFT, Inc. (b) | 14,300 | 2,368 | |||||||||
Softcreate Holdings Corp. | 106,400 | 2,697 | |||||||||
TDK Corp. | 66,700 | 2,233 | |||||||||
TechMatrix Corp. | 128,000 | 1,389 | |||||||||
Ulvac, Inc. | 263,500 | 10,102 | |||||||||
72,932 | |||||||||||
Materials (0.5%): | |||||||||||
JCU Corp. | 106,300 | 2,496 | |||||||||
Maeda Kosen Co. Ltd. | 84,400 | 2,042 | |||||||||
Shin-Etsu Chemical Co. Ltd. | 15,500 | 2,149 | |||||||||
Taiheiyo Cement Corp. | 84,757 | 1,558 | |||||||||
Toagosei Co., Ltd. | 202,400 | 1,863 | |||||||||
Tosoh Corp. | 139,300 | 1,896 | |||||||||
12,004 | |||||||||||
Real Estate (0.4%): | |||||||||||
Mitsubishi Estate Co. Ltd. | 247,268 | 3,074 | |||||||||
Mitsui Fudosan Co. Ltd. | 92,600 | 1,765 | |||||||||
Sumitomo Realty & Development Co. Ltd. | 217,800 | 5,142 | |||||||||
9,981 | |||||||||||
Utilities (0.2%): | |||||||||||
Tokyo Gas Co. Ltd. | 325,500 | 6,279 | |||||||||
530,611 | |||||||||||
Luxembourg (0.2%): | |||||||||||
Communication Services (0.1%): | |||||||||||
RTL Group SA | 40,509 | 1,952 | |||||||||
Energy (0.1%): | |||||||||||
Tenaris SA | 134,868 | 2,219 | |||||||||
Health Care (0.0%): (d) | |||||||||||
Eurofins Scientific SE | 21,782 | 1,518 | |||||||||
5,689 | |||||||||||
Malaysia (0.2%): | |||||||||||
Financials (0.2%): | |||||||||||
CIMB Group Holdings Bhd | 1,647,725 | 2,061 | |||||||||
RHB Bank Bhd | 2,306,100 | 2,920 | |||||||||
4,981 | |||||||||||
Mexico (0.2%): | |||||||||||
Consumer Staples (0.1%): | |||||||||||
Arca Continental SAB de CV | 288,080 | 2,432 | |||||||||
See notes to financial statements.
19
| USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Financials (0.1%): | |||||||||||
Gentera SAB de CV | 1,759,706 | $ | 1,901 | ||||||||
4,333 | |||||||||||
Netherlands (4.2%): | |||||||||||
Communication Services (0.7%): | |||||||||||
Koninklijke KPN NV | 4,573,805 | 15,678 | |||||||||
VEON Ltd., ADR (b) | 825,596 | 582 | |||||||||
16,260 | |||||||||||
Consumer Staples (0.2%): | |||||||||||
Heineken NV | 16,333 | 1,664 | |||||||||
Koninklijke Ahold Delhaize NV | 122,515 | 3,890 | |||||||||
5,554 | |||||||||||
Financials (1.5%): | |||||||||||
ABN AMRO Bank NV (c) | 305,847 | 5,397 | |||||||||
ING Groep NV | 2,096,176 | 29,333 | |||||||||
NN Group NV | 45,195 | 1,829 | |||||||||
36,559 | |||||||||||
Health Care (0.2%): | |||||||||||
Koninklijke Philips NV | 243,100 | 3,969 | |||||||||
QIAGEN NV (b) | 41,813 | 1,924 | |||||||||
5,893 | |||||||||||
Industrials (0.7%): | |||||||||||
SIF Holding NV (a) | 135,447 | 1,747 | |||||||||
Wolters Kluwer NV | 130,380 | 15,092 | |||||||||
16,839 | |||||||||||
Information Technology (0.9%): | |||||||||||
ASM International NV | 52,528 | 17,903 | |||||||||
STMicroelectronics NV | 80,814 | 3,871 | |||||||||
21,774 | |||||||||||
102,879 | |||||||||||
New Zealand (0.4%): | |||||||||||
Consumer Staples (0.0%): (d) | |||||||||||
Scales Corp. Ltd. | 441,317 | 941 | |||||||||
Health Care (0.4%): | |||||||||||
Fisher & Paykel Healthcare Corp. Ltd. | 619,479 | 9,912 | |||||||||
10,853 | |||||||||||
Norway (1.1%): | |||||||||||
Consumer Staples (0.0%): (d) | |||||||||||
Mowi ASA (a) | 92,891 | 1,604 | |||||||||
Energy (0.4%): | |||||||||||
Aker BP ASA | 181,761 | 4,880 | |||||||||
Equinor ASA | 45,563 | 1,395 | |||||||||
See notes to financial statements.
20
| USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
TGS ASA | 215,719 | $ | 3,885 | ||||||||
10,160 | |||||||||||
Financials (0.4%): | |||||||||||
SpareBank 1 SMN | 693,318 | 9,148 | |||||||||
Health Care (0.1%): | |||||||||||
Medistim ASA | 80,939 | 1,707 | |||||||||
Information Technology (0.1%): | |||||||||||
Bouvet ASA | 339,486 | 1,977 | |||||||||
Materials (0.1%): | |||||||||||
Norsk Hydro ASA | 80,325 | 585 | |||||||||
Yara International ASA | 43,432 | 2,065 | |||||||||
2,650 | |||||||||||
27,246 | |||||||||||
Qatar (0.1%): | |||||||||||
Communication Services (0.1%): | |||||||||||
Ooredoo QPSC | 555,692 | 1,404 | |||||||||
Russian Federation (0.0%): (d) | |||||||||||
Communication Services (0.0%): | |||||||||||
Mobile TeleSystems PJSC, ADR (b) (f) (g) | 177,615 | 10 | |||||||||
Consumer Staples (0.0%): | |||||||||||
Magnit PJSC, GDR (b) (f) (g) | 94,274 | — | (e) | ||||||||
Energy (0.0%): | |||||||||||
Gazprom PJSC, ADR (b) (f) (g) | 153,287 | 8 | |||||||||
LUKOIL PJSC, ADR (b) (f) (g) | 34,917 | 4 | |||||||||
12 | |||||||||||
Financials (0.0%): | |||||||||||
Sberbank of Russia PJSC (f) (g) | 564,350 | 1 | |||||||||
Sberbank of Russia PJSC, ADR (b) (f) (g) | 505,824 | 50 | |||||||||
51 | |||||||||||
73 | |||||||||||
Saudi Arabia (0.1%): | |||||||||||
Energy (0.0%): (d) | |||||||||||
Saudi Arabian Oil Co. (c) | 137,958 | 1,165 | |||||||||
Financials (0.1%): | |||||||||||
Alinma Bank | 273,211 | 2,141 | |||||||||
3,306 | |||||||||||
Singapore (0.5%): | |||||||||||
Consumer Staples (0.2%): | |||||||||||
Sheng Siong Group Ltd. | 1,708,300 | 2,066 | |||||||||
Wilmar International Ltd. | 968,500 | 2,830 | |||||||||
4,896 | |||||||||||
See notes to financial statements.
21
| USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Financials (0.2%): | |||||||||||
DBS Group Holdings Ltd. | 95,600 | $ | 2,426 | ||||||||
iFAST Corp. Ltd. | 543,900 | 2,010 | |||||||||
4,436 | |||||||||||
Information Technology (0.0%): (d) | |||||||||||
AEM Holdings Ltd. | 606,600 | 1,296 | |||||||||
Utilities (0.1%): | |||||||||||
Sembcorp Industries Ltd. | 803,400 | 2,163 | |||||||||
12,791 | |||||||||||
South Africa (0.2%): | |||||||||||
Communication Services (0.0%): (d) | |||||||||||
MTN Group Ltd. | 72,064 | 568 | |||||||||
Energy (0.1%): | |||||||||||
Exxaro Resources Ltd. | 104,084 | 1,140 | |||||||||
Financials (0.1%): | |||||||||||
Absa Group Ltd. | 150,550 | 1,626 | |||||||||
Old Mutual Ltd. | 2,184,042 | 1,417 | |||||||||
3,043 | |||||||||||
4,751 | |||||||||||
South Korea (1.4%): | |||||||||||
Communication Services (0.3%): | |||||||||||
Cheil Worldwide, Inc. | 83,134 | 1,257 | |||||||||
JYP Entertainment Corp. | 44,418 | 2,639 | �� | ||||||||
KT Corp. | 140,473 | 3,235 | |||||||||
7,131 | |||||||||||
Consumer Discretionary (0.3%): | |||||||||||
Coway Co. Ltd. | 44,831 | 1,809 | |||||||||
Hankook Tire & Technology Co. Ltd. | 51,782 | 1,457 | |||||||||
Hyundai Mobis Co. Ltd. | 20,191 | 3,244 | |||||||||
Kia Corp. | 32,567 | 1,851 | |||||||||
8,361 | |||||||||||
Financials (0.5%): | |||||||||||
Hana Financial Group, Inc. | 52,473 | 1,800 | |||||||||
KB Financial Group, Inc. | 122,617 | 4,750 | |||||||||
Shinhan Financial Group Co. Ltd. | 154,436 | 4,536 | |||||||||
11,086 | |||||||||||
Industrials (0.1%): | |||||||||||
Samsung Engineering Co. Ltd. (b) | 93,305 | 1,850 | |||||||||
Information Technology (0.2%): | |||||||||||
LG Innotek Co. Ltd. | 11,277 | 2,357 | |||||||||
Samsung Electronics Co. Ltd. | 40,146 | 1,837 | |||||||||
Samsung SDI Co. Ltd. | 3,569 | 1,876 | |||||||||
6,070 | |||||||||||
34,498 | |||||||||||
See notes to financial statements.
22
| USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Spain (1.8%): | |||||||||||
Energy (0.1%): | |||||||||||
Repsol SA | 102,743 | $ | 1,625 | ||||||||
Financials (1.4%): | |||||||||||
Banco Bilbao Vizcaya Argentaria SA | 3,617,786 | 28,119 | |||||||||
Banco Santander SA | 755,373 | 2,974 | |||||||||
Bankinter SA | 244,027 | 1,716 | |||||||||
CaixaBank SA | 546,190 | 2,345 | |||||||||
35,154 | |||||||||||
Health Care (0.0%): (d) | |||||||||||
Faes Farma SA | 392,909 | 1,435 | |||||||||
Information Technology (0.1%): | |||||||||||
Global Dominion Access SA (c) | 484,335 | 1,806 | |||||||||
Utilities (0.2%): | |||||||||||
Corp. ACCIONA Energias Renovables SA | 59,713 | 2,315 | |||||||||
Iberdrola SA | 198,970 | 2,280 | |||||||||
4,595 | |||||||||||
44,615 | |||||||||||
Sweden (2.9%): | |||||||||||
Consumer Discretionary (0.1%): | |||||||||||
Evolution AB (c) | 24,521 | 2,959 | |||||||||
Health Care (0.5%): | |||||||||||
BioGaia AB B Shares | 227,115 | 2,159 | |||||||||
Biotage AB | 194,116 | 2,809 | |||||||||
Cellavision AB | 57,570 | 1,100 | |||||||||
Sectra AB Class B (b) | 147,792 | 2,020 | |||||||||
Xvivo Perfusion AB (b) | 109,195 | 2,379 | |||||||||
10,467 | |||||||||||
Industrials (2.0%): | |||||||||||
Atlas Copco AB Class B | 2,203,671 | 23,219 | |||||||||
BTS Group AB B Shares (a) | 95,190 | 2,802 | |||||||||
Eolus Vind AB Class B | 106,223 | 956 | |||||||||
GARO AB | 205,986 | 1,659 | |||||||||
Hexatronic Group AB | 302,949 | 3,529 | |||||||||
Nibe Industrier AB Class B | 1,038,765 | 10,742 | |||||||||
| SKF AB B Shares | 242,260 | 4,602 | |||||||||
Volvo AB Class B | 106,891 | 2,139 | |||||||||
49,648 | |||||||||||
Information Technology (0.2%): | |||||||||||
HMS Networks AB | 54,380 | 2,193 | |||||||||
Telefonaktiebolaget LM Ericsson Class B | 555,532 | 3,077 | |||||||||
5,270 | |||||||||||
See notes to financial statements.
23
| USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Materials (0.1%): | |||||||||||
Boliden AB | 68,892 | $ | 2,821 | ||||||||
71,165 | |||||||||||
Switzerland (9.5%): | |||||||||||
Consumer Discretionary (0.4%): | |||||||||||
Cie Financiere Richemont SA Registered Shares | 32,159 | 4,860 | |||||||||
The Swatch Group AG | 14,071 | 4,898 | |||||||||
9,758 | |||||||||||
Consumer Staples (2.5%): | |||||||||||
Coca-Cola HBC AG | 440,375 | 11,276 | |||||||||
Nestle SA Registered Shares | 449,412 | 50,649 | |||||||||
61,925 | |||||||||||
Financials (2.0%): | |||||||||||
Julius Baer Group Ltd. | 40,898 | 2,712 | |||||||||
Partners Group Holding AG | 15,639 | 14,813 | |||||||||
Swiss Life Holding AG | 3,165 | 1,905 | |||||||||
UBS Group AG | 1,436,223 | 31,225 | |||||||||
50,655 | |||||||||||
Health Care (3.1%): | |||||||||||
Coltene Holding AG Registered Shares | 19,989 | 1,522 | |||||||||
Novartis AG Registered Shares | 497,662 | 41,895 | |||||||||
Roche Holding AG | 114,426 | 33,002 | |||||||||
76,419 | |||||||||||
Industrials (0.5%): | |||||||||||
ABB Ltd. Registered Shares | 52,098 | 1,734 | |||||||||
Adecco Group AG | 110,619 | 3,945 | |||||||||
Burckhardt Compression Holding AG | 279 | 170 | |||||||||
Huber + Suhner AG Registered Shares | 2,601 | 238 | |||||||||
Kardex Holding AG Registered Shares | 18,083 | 3,364 | |||||||||
Schweiter Technologies AG Class BR | 1,498 | 1,266 | |||||||||
Zehnder Group AG Registered Shares | 26,839 | 2,082 | |||||||||
12,799 | |||||||||||
Information Technology (0.4%): | |||||||||||
Comet Holding AG Class R | 13,097 | 2,893 | |||||||||
Landis+Gyr Group AG | 37,431 | 2,815 | |||||||||
u-blox Holding AG | 28,392 | 3,048 | |||||||||
8,756 | |||||||||||
Materials (0.6%): | |||||||||||
Glencore PLC | 375,365 | 2,237 | |||||||||
Gurit Holding AG (a) | 23,237 | 2,418 | |||||||||
Holcim AG | 110,084 | 6,797 | |||||||||
Vetropack Holding AG | 50,122 | 2,344 | |||||||||
13,796 | |||||||||||
234,108 | |||||||||||
See notes to financial statements.
24
| USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Taiwan (1.0%): | |||||||||||
Financials (0.2%): | |||||||||||
Chailease Holding Co. Ltd. | 273,588 | $ | 2,006 | ||||||||
Fubon Financial Holding Co. Ltd. | 1,033,716 | 2,022 | |||||||||
4,028 | |||||||||||
Health Care (0.1%): | |||||||||||
Lotus Pharmaceutical Co. Ltd. | 384,000 | 3,536 | |||||||||
Information Technology (0.7%): | |||||||||||
Catcher Technology Co. Ltd. | 365,336 | 2,208 | |||||||||
Delta Electronics, Inc. | 211,000 | 1,975 | |||||||||
E Ink Holdings, Inc. | 219,000 | 1,386 | |||||||||
Hon Hai Precision Industry Co. Ltd. | 1,081,102 | 3,577 | |||||||||
Taiwan Semiconductor Manufacturing Co. Ltd. | 471,000 | 7,795 | |||||||||
16,941 | |||||||||||
24,505 | |||||||||||
Thailand (0.2%): | |||||||||||
Financials (0.1%): | |||||||||||
Kasikornbank PCL | 883,422 | 3,424 | |||||||||
Health Care (0.1%): | |||||||||||
Chularat Hospital PCL | 20,339,300 | 2,153 | |||||||||
5,577 | |||||||||||
United Arab Emirates (0.1%): | |||||||||||
Real Estate (0.1%): | |||||||||||
Emaar Development PJSC (b) | 1,598,528 | 2,057 | |||||||||
United Kingdom (14.5%): | |||||||||||
Communication Services (0.6%): | |||||||||||
| 4imprint Group PLC | 52,168 | 2,808 | |||||||||
BT Group PLC | 1,585,604 | 2,658 | |||||||||
Informa PLC | 231,347 | 1,858 | |||||||||
WPP PLC | 553,739 | 6,809 | |||||||||
14,133 | |||||||||||
Consumer Discretionary (1.1%): | |||||||||||
AB Dynamics PLC (a) | 124,343 | 2,691 | |||||||||
Focusrite PLC (a) | 262,754 | 2,338 | |||||||||
JD Sports Fashion PLC | 1,657,586 | 3,608 | |||||||||
Kingfisher PLC | 501,466 | 1,734 | |||||||||
Next PLC | 134,288 | 11,045 | |||||||||
Stellantis NV | 309,759 | 5,419 | |||||||||
26,835 | |||||||||||
Consumer Staples (2.1%): | |||||||||||
Diageo PLC | 553,845 | 23,498 | |||||||||
Imperial Brands PLC | 858,223 | 20,672 | |||||||||
J Sainsbury PLC | 689,412 | 2,223 | |||||||||
Marks & Spencer Group PLC (b) | 297,909 | 573 | |||||||||
See notes to financial statements.
25
| USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Reckitt Benckiser Group PLC | 23,775 | $ | 1,649 | ||||||||
Tesco PLC | 862,249 | 2,641 | |||||||||
51,256 | |||||||||||
Energy (3.1%): | |||||||||||
| BP PLC | 4,927,299 | 32,373 | |||||||||
Harbour Energy PLC | 348,796 | 1,217 | |||||||||
Shell PLC | 1,453,089 | 44,002 | |||||||||
77,592 | |||||||||||
Financials (2.5%): | |||||||||||
| 3i Group PLC | 208,799 | 4,084 | |||||||||
Barclays PLC | 8,278,537 | 17,370 | |||||||||
HSBC Holdings PLC | 3,095,401 | 23,706 | |||||||||
Legal & General Group PLC | 2,149,504 | 6,615 | |||||||||
Standard Chartered PLC | 1,175,346 | 11,119 | |||||||||
62,894 | |||||||||||
Health Care (0.8%): | |||||||||||
Advanced Medical Solutions Group PLC | 434,508 | 1,304 | |||||||||
AstraZeneca PLC | 53,142 | 6,922 | |||||||||
CVS Group PLC | 89,716 | 2,011 | |||||||||
Ergomed PLC (b) | 192,616 | 2,608 | |||||||||
GSK PLC | 390,852 | 6,694 | |||||||||
Verici Dx PLC (b) | 39,782 | 3 | |||||||||
19,542 | |||||||||||
Industrials (1.8%): | |||||||||||
Ashtead Group PLC | 297,101 | 19,655 | |||||||||
Babcock International Group PLC (b) | 392,704 | 1,550 | |||||||||
BAE Systems PLC | 160,468 | 1,733 | |||||||||
Clarkson PLC | 68,986 | 2,739 | |||||||||
Concentric AB | 121,948 | 2,547 | |||||||||
easyJet PLC (b) | 555,825 | 3,235 | |||||||||
Judges Scientific PLC | 36,898 | 4,216 | |||||||||
Renew Holdings PLC | 343,697 | 2,948 | |||||||||
Robert Walters PLC | 328,150 | 1,997 | |||||||||
SThree PLC | 605,867 | 3,322 | |||||||||
Volex PLC | 377,846 | 1,022 | |||||||||
44,964 | |||||||||||
Information Technology (0.3%): | |||||||||||
Aptitude Software Group PLC | 350,141 | 1,595 | |||||||||
GB Group PLC | — | — | |||||||||
Kainos Group PLC | 206,512 | 3,452 | |||||||||
The Sage Group PLC | 161,925 | 1,459 | |||||||||
6,506 | |||||||||||
Materials (1.9%): | |||||||||||
Anglo American PLC | 139,417 | 4,817 | |||||||||
Croda International PLC | 164,665 | 12,983 | |||||||||
Endeavour Mining PLC | 76,439 | 1,591 | |||||||||
See notes to financial statements.
26
| USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Fresnillo PLC | 130,084 | $ | 1,194 | ||||||||
Rio Tinto PLC | 353,812 | 24,275 | |||||||||
Treatt PLC | 267,404 | 1,781 | |||||||||
46,641 | |||||||||||
Real Estate (0.2%): | |||||||||||
Land Securities Group PLC | 227,460 | 1,878 | |||||||||
Safestore Holdings PLC | 148,414 | 1,802 | |||||||||
The British Land Co. PLC | 331,117 | 1,776 | |||||||||
5,456 | |||||||||||
Utilities (0.1%): | |||||||||||
Drax Group PLC | 227,946 | 1,743 | |||||||||
357,562 | |||||||||||
Total Common Stocks (Cost $2,084,426) | 2,413,673 | ||||||||||
Exchange-Traded Funds (0.5%) | |||||||||||
United States (0.5%): | |||||||||||
iShares Core MSCI EAFE ETF | 98,896 | 6,431 | |||||||||
iShares Core MSCI Emerging Markets ETF | 31,029 | 1,469 | |||||||||
iShares MSCI EAFE Small-Cap ETF | 75,499 | 4,471 | |||||||||
12,371 | |||||||||||
Total Exchange-Traded Funds (Cost $12,610) | 12,371 | ||||||||||
Collateral for Securities Loaned (1.2%)^ | |||||||||||
United States (1.2%): | |||||||||||
| Goldman Sachs Financial Square Government Fund, Institutional Shares, 4.47% (h) | 6,788,048 | 6,788 | |||||||||
HSBC U.S. Government Money Market Fund, Institutional Shares, 4.45% (h) | 6,788,048 | 6,788 | |||||||||
Invesco Government & Agency Portfolio, Institutional Shares, 4.52% (h) | 6,788,048 | 6,788 | |||||||||
| Morgan Stanley Institutional Liquidity Government Portfolio, Institutional Shares, 4.41% (h) | 6,788,048 | 6,788 | |||||||||
Total Collateral for Securities Loaned (Cost $27,152) | 27,152 | ||||||||||
Total Investments (Cost $2,124,188) — 99.5% | 2,453,196 | ||||||||||
Other assets in excess of liabilities — 0.5% | 13,334 | ||||||||||
NET ASSETS — 100.00% | $ | 2,466,530 | |||||||||
^ 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) Rule 144A security or other security that is restricted as to resale to institutional investors. As of February 28, 2023, the fair value of these securities was $35,820 thousands and amounted to 1.5% of net assets.
(d) Amount represents less than 0.05% of net assets.
See notes to financial statements.
27
| USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(e) Rounds to less than $1 thousand.
(f) Securities were fair valued based upon procedures approved by the Board of Trustees and represent less than 0.05% of net assets as of February 28, 2023. These securities are classified as Level 3 within the fair value hierarchy. (See Note 2 in the Notes to Financial Statements.)
(g) The following table details the earliest acquisition date and cost of the Fund's Russian sanctioned restricted securities at February 28, 2023, (amount in thousands):
Security Name | Acquisition Date | Cost | |||||||||
Gazprom PJSC, ADR | 2/19/2016 | $ | 486 | ||||||||
LUKOIL PJSC, ADR | 12/29/2015 |
| 2,087 | ||||||||
Magnit PJSC, GDR | 10/29/2021 | 1,744 | |||||||||
Mobile TeleSystems PJSC, ADR | 1/28/2022 |
| 1,372 | ||||||||
Sberbank of Russia PJSC | 7/15/2019 | 2,134 | |||||||||
Sberbank of Russia PJSC, ADR | 1/15/2016 |
| 556 | ||||||||
(h) Rate disclosed is the daily yield on February 28, 2023.
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 February 28, 2023 | ||||||
(Amounts in Thousands, Except Per Share Amounts)
| USAA International Fund | |||||||
Assets: | |||||||
Investments, at value (Cost $2,124,188) | $ | 2,453,196 | (a) | ||||
Foreign currency, at value (Cost $1,118) | 1,136 | ||||||
Cash | 26,787 | ||||||
Receivables: | |||||||
Interest and dividends | 5,066 | ||||||
Capital shares issued | 286 | ||||||
Investments sold | 4,053 | ||||||
Reclaims | 7,514 | ||||||
From Adviser | 63 | ||||||
Prepaid expenses | 26 | ||||||
Total Assets | 2,498,127 | ||||||
Liabilities: | |||||||
Payables: | |||||||
Collateral received on loaned securities | 27,152 | ||||||
Investments purchased | 775 | ||||||
Capital shares redeemed | 990 | ||||||
Accrued foreign capital gains taxes | 457 | ||||||
Accrued expenses and other payables: | |||||||
Investment advisory fees | 1,451 | ||||||
Administration fees | 241 | ||||||
Custodian fees | 81 | ||||||
Transfer agent fees | 217 | ||||||
Compliance fees | 2 | ||||||
Trustees' fees | 1 | ||||||
| 12b-1 fees | — | (b) | |||||
Other accrued expenses | 230 | ||||||
Total Liabilities | 31,597 | ||||||
Net Assets: | |||||||
Capital | 2,263,106 | ||||||
Total accumulated earnings/(loss) | 203,424 | ||||||
Net Assets | $ | 2,466,530 | |||||
Net Assets | |||||||
Fund Shares | $ | 1,205,144 | |||||
Institutional Shares | 1,260,267 | ||||||
Class A | 887 | ||||||
R6 Shares | 232 | ||||||
Total | $ | 2,466,530 | |||||
Shares (unlimited number of shares authorized with no par value): | |||||||
Fund Shares | 50,853 | ||||||
Institutional Shares | 53,389 | ||||||
Class A | 37 | ||||||
R6 Shares | 10 | ||||||
Total | 104,289 | ||||||
(continues on next page)
See notes to financial statements.
29
USAA Mutual Funds Trust | Statement of Assets and Liabilities February 28, 2023 | ||||||
(Amounts in Thousands, Except Per Share Amounts) (continued)
| USAA International Fund | |||||||
Net asset value, offering and redemption price per share: (c) | |||||||
Fund Shares | $ | 23.70 | |||||
Institutional Shares | 23.61 | ||||||
Class A | 23.75 | ||||||
R6 Shares | 23.95 | ||||||
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 | $ | 25.20 | |||||
(a) Includes $25,852 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 | Statements of Operations | ||||||
(Amounts in Thousands)
| USAA International Fund | |||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | ||||||||||
Investment Income: | |||||||||||
Dividends | $ | 47,730 | (b) | $ | 104,083 | ||||||
Interest | 1,553 | 5 | |||||||||
Securities lending (net of fees) | 436 | 706 | |||||||||
Foreign tax withholding | (4,344 | )(c) | (10,858 | ) | |||||||
Total Income | 45,375 | 93,936 | |||||||||
Expenses: | |||||||||||
Investment advisory fees | 12,624 | 21,078 | |||||||||
Administration fees — Fund Shares | 1,311 | 2,258 | |||||||||
Administration fees — Institutional Shares | 915 | 1,484 | |||||||||
Administration fees — Class A | 1 | 2 | |||||||||
Administration fees — R6 Shares | — | (d) | — | (d) | |||||||
Sub-Administration fees | 58 | 76 | |||||||||
| 12b-1 fees — Class A | 2 | 3 | |||||||||
Custodian fees | 393 | 593 | |||||||||
Transfer agent fees — Fund Shares | 1,116 | 1,603 | |||||||||
Transfer agent fees — Institutional Shares | 915 | 1,484 | |||||||||
Transfer agent fees — Class A | 1 | 1 | |||||||||
Transfer agent fees — R6 Shares | — | (d) | — | (d) | |||||||
Trustees' fees | 37 | 50 | |||||||||
Compliance fees | 17 | 21 | |||||||||
Legal and audit fees | 187 | 196 | |||||||||
State registration and filing fees | 75 | 57 | |||||||||
Interfund lending fees | 7 | — | (d) | ||||||||
Line of credit fees | — | (d) | 1 | ||||||||
Other expenses | 335 | 329 | |||||||||
Recoupment of prior expenses waived/reimbursed by Adviser | — | 148 | |||||||||
Total Expenses | 17,994 | 29,384 | |||||||||
Expenses waived/reimbursed by Adviser | (455 | ) | (85 | ) | |||||||
Net Expenses | 17,539 | 29,299 | |||||||||
Net Investment Income (Loss) | 27,836 | 64,637 | |||||||||
Realized/Unrealized Gains (Losses) from Investments: | |||||||||||
| Net realized gains (losses) from investment securities and foreign currency transactions | (87,040 | ) | 95,675 | ||||||||
Foreign taxes on realized gains | (191 | ) | (547 | ) | |||||||
| Net change in unrealized appreciation/depreciation on investment securities and foreign currency translations | 72,397 | (459,118 | ) | ||||||||
Net change in accrued foreign taxes on unrealized gains | (119 | ) | 195 | ||||||||
Net realized/unrealized gains (losses) on investments | (14,953 | ) | (363,795 | ) | |||||||
Change in net assets resulting from operations | $ | 12,883 | $ | (299,158 | ) | ||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from May 31 to February 28.
(b) Includes EU reclaims of $4,983 thousand. See Foreign Taxes in Item 2 of the accompanying Notes to Financial Statements.
(c) Includes EU reclaims of $1,108 thousand that were expensed in previous years. See Foreign Taxes in Item 2 of the accompanying Notes to Financial Statements.
(d) 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 | |||||||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | Year Ended May 31, 2021 | |||||||||||||
From Investments: | |||||||||||||||
Operations: | |||||||||||||||
Net Investment Income (Loss) | $ | 27,836 | $ | 64,637 | $ | 60,275 | |||||||||
Net realized gains (losses) | (87,231 | ) | 95,128 | 194,425 | |||||||||||
| Net change in unrealized appreciation/depreciation | 72,278 | (458,923 | ) | 764,549 | |||||||||||
Change in net assets resulting from operations | 12,883 | (299,158 | ) | 1,019,249 | |||||||||||
Distributions to Shareholders: | |||||||||||||||
Fund Shares | (33,775 | ) | (127,097 | ) | (28,796 | ) | |||||||||
Institutional Shares | (37,269 | ) | (122,526 | ) | (31,477 | ) | |||||||||
Class A | (24 | ) | (79 | ) | (127 | ) | |||||||||
R6 Shares | (7 | ) | (22 | ) | (87 | ) | |||||||||
| Change in net assets resulting from distributions to shareholders | (71,075 | ) | (249,724 | ) | (60,487 | ) | |||||||||
| Change in net assets resulting from capital transactions | (57,139 | ) | (123,154 | ) | (537,018 | ) | |||||||||
Change in net assets | (115,331 | ) | (672,036 | ) | 421,744 | ||||||||||
Net Assets: | |||||||||||||||
Beginning of period | 2,581,861 | 3,253,897 | 2,832,153 | ||||||||||||
End of period | $ | 2,466,530 | $ | 2,581,861 | $ | 3,253,897 | |||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from May 31 to February 28.
(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 | |||||||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | Year Ended May 31, 2021 | |||||||||||||
Capital Transactions: | |||||||||||||||
Fund Shares | |||||||||||||||
Proceeds from shares issued | $ | 29,491 | $ | 75,918 | $ | 80,765 | |||||||||
Distributions reinvested | 33,148 | 125,118 | 28,329 | ||||||||||||
Cost of shares redeemed | (127,168 | ) | (224,413 | ) | (359,583 | ) | |||||||||
Total Fund Shares | $ | (64,529 | ) | $ | (23,377 | ) | $ | (250,489 | ) | ||||||
Institutional Shares | |||||||||||||||
Proceeds from shares issued | $ | 202,897 | $ | 179,428 | $ | 78,811 | |||||||||
Distributions reinvested | 37,234 | 122,400 | 31,451 | ||||||||||||
Cost of shares redeemed | (232,728 | ) | (401,879 | ) | (384,872 | ) | |||||||||
Total Institutional Shares | $ | 7,403 | $ | (100,051 | ) | $ | (274,610 | ) | |||||||
Class A | |||||||||||||||
Proceeds from shares issued | $ | 21 | $ | 106 | $ | 6,788 | |||||||||
Distributions reinvested | 18 | 60 | 16 | ||||||||||||
Cost of shares redeemed | (61 | ) | (138 | ) | (14,243 | ) | |||||||||
Total Class A | $ | (22 | ) | $ | 28 | $ | (7,439 | ) | |||||||
R6 Shares | |||||||||||||||
Proceeds from shares issued | $ | 4 | $ | 262 | $ | 50 | |||||||||
Distributions reinvested | 7 | 22 | — | (b) | |||||||||||
Cost of shares redeemed | (2 | ) | (38 | ) | (4,530 | ) | |||||||||
Total R6 Shares | $ | 9 | $ | 246 | $ | (4,480 | ) | ||||||||
| Change in net assets resulting from capital transactions | $ | (57,139 | ) | $ | (123,154 | ) | $ | (537,018 | ) | ||||||
Share Transactions: | |||||||||||||||
Fund Shares | |||||||||||||||
Issued | 1,314 | 2,716 | 3,115 | ||||||||||||
Reinvested | 1,442 | 4,549 | 1,111 | ||||||||||||
Redeemed | (5,666 | ) | (8,108 | ) | (14,241 | ) | |||||||||
Total Fund Shares | (2,910 | ) | (843 | ) | (10,015 | ) | |||||||||
Institutional Shares | |||||||||||||||
Issued | 9,082 | 6,628 | 3,189 | ||||||||||||
Reinvested | 1,626 | 4,466 | 1,238 | ||||||||||||
Redeemed | (10,324 | ) | (14,102 | ) | (15,106 | ) | |||||||||
Total Institutional Shares | 384 | (3,008 | ) | (10,679 | ) | ||||||||||
Class A | |||||||||||||||
Issued | 1 | 4 | 305 | ||||||||||||
Reinvested | 1 | 2 | 1 | ||||||||||||
Redeemed | (3 | ) | (5 | ) | (568 | ) | |||||||||
Total Class A | (1 | ) | 1 | (262 | ) | ||||||||||
R6 Shares | |||||||||||||||
Issued | 1 | 8 | 2 | ||||||||||||
Reinvested | — | (c) | 1 | — | (c) | ||||||||||
Redeemed | — | (c) | (1 | ) | (157 | ) | |||||||||
Total R6 Shares | 1 | 8 | (155 | ) | |||||||||||
Change in Shares | (2,526 | ) | (3,842 | ) | (21,111 | ) | |||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from May 31 to February 28.
(b) Rounds to less than $1 thousand.
(c) 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
USAA International Fund | |||||||||||||||||||||||||||
Fund Shares | |||||||||||||||||||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | Year Ended May 31, 2021 | Year Ended May 31, 2020 | Year Ended May 31, 2019 | Year Ended May 31, 2018 | ||||||||||||||||||||||
| Net Asset Value, Beginning of Period | $ | 24.21 | $ | 29.46 | $ | 21.53 | $ | 28.70 | $ | 32.82 | $ | 31.16 | |||||||||||||||
Investment Activities: | |||||||||||||||||||||||||||
| Net investment income (loss) | 0.26 | (b)(c) | 0.59 | (b) | 0.49 | (b) | 0.44 | (b) | 0.53 | 0.60 | |||||||||||||||||
| Net realized and unrealized gains (losses) | (0.11 | ) | (3.43 | ) | 7.94 | (1.12 | ) | (2.41 | ) | 2.08 | |||||||||||||||||
| Total from Investment Activities | 0.15 | (2.84 | ) | 8.43 | (0.68 | ) | (1.88 | ) | 2.68 | ||||||||||||||||||
| Distributions to Shareholders from: | |||||||||||||||||||||||||||
Net investment income | (0.34 | ) | (0.51 | ) | (0.50 | ) | (0.73 | ) | (0.44 | ) | (0.63 | ) | |||||||||||||||
Net realized gains | (0.32 | ) | (1.90 | ) | — | (5.76 | ) | (1.80 | ) | (0.39 | ) | ||||||||||||||||
Total Distributions | (0.66 | ) | (2.41 | ) | (0.50 | ) | (6.49 | ) | (2.24 | ) | (1.02 | ) | |||||||||||||||
Net Asset Value, End of Period | $ | 23.70 | $ | 24.21 | $ | 29.46 | $ | 21.53 | $ | 28.70 | $ | 32.82 | |||||||||||||||
Total Return (d) (e) | 0.73 | %(c) | (10.51 | )% | 39.52 | % | (6.13 | )% | (5.14 | )% | 8.61 | % | |||||||||||||||
Ratios to Average Net Assets: | |||||||||||||||||||||||||||
Net Expenses (f) (g) (h) (i) (j) | 1.02 | % | 1.02 | % | 1.01 | % | 1.06 | % | 1.08 | % | 1.08 | % | |||||||||||||||
| Net Investment Income (Loss) (f) | 1.53 | %(c) | 2.12 | % | 1.94 | % | 1.68 | % | 1.76 | % | 1.58 | % | |||||||||||||||
Gross Expenses (f) (g) (j) | 1.04 | % | 1.02 | % | 1.03 | % | 1.07 | % | 1.08 | % | 1.08 | % | |||||||||||||||
Supplemental Data: | |||||||||||||||||||||||||||
| Net Assets at end of period (000's) | $ | 1,205,144 | $ | 1,301,727 | $ | 1,608,436 | $ | 1,391,279 | $ | 1,690,782 | $ | 1,876,020 | |||||||||||||||
Portfolio Turnover (d) (k) | 29 | % | 34 | % | 67 | %(l) | 119 | %(m) | 30 | % | 36 | % | |||||||||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from May 31 to February 28.
(b) Per share net investment income (loss) has been calculated using the average daily shares method.
(c) Includes net investment income received on EU Reclaims during the nine months ended February 28, 2023. Without these amounts the net investment income (loss) per share, net investment income (loss) ratio, and total return would have been less by 0.07, 0.42%, and 0.29%, respectively.
(d) Not annualized for periods less than one year.
(e) Assumes reinvestment of all net investment income and realized capital gain distributions, if any, during the period. Includes adjustments in accordance with U.S. Generally Accepted Accounting Principles and could differ from the Lipper reported return.
(f) Annualized for periods less than one year.
(g) Does not include acquired fund fees and expenses, if any.
(h) 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 at least September 30, 2023, instead of coinciding with the Fund's fiscal year end.
(i) 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.
(j) Reflects total annual operating expenses for reductions of expenses paid indirectly for the May 31 fiscal years ended 2020, 2019, and 2018. Expenses paid indirectly decreased the expense ratio for each of these respective years by less than 0.01%.
(k) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares.
(l) Reflects a return to normal trading levels after a prior year transition.
(m) Reflects increased trading activity due to transition or asset allocation shift.
(continues on next page)
See notes to financial statements.
34
USAA Mutual Funds Trust | Financial Highlights — continued | ||||||
For a Share Outstanding Throughout Each Period
USAA International Fund | |||||||||||||||||||||||||||
Institutional Shares | |||||||||||||||||||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | Year Ended May 31, 2021 | Year Ended May 31, 2020 | Year Ended May 31, 2019 | Year Ended May 31, 2018 | ||||||||||||||||||||||
| Net Asset Value, Beginning of Period | $ | 24.13 | $ | 29.36 | $ | 21.46 | $ | 28.61 | $ | 32.72 | $ | 31.07 | |||||||||||||||
Investment Activities: | |||||||||||||||||||||||||||
| Net investment income (loss) | 0.26 | (b)(c) | 0.61 | (b) | 0.51 | (b) | 0.47 | (b) | 0.56 | 0.64 | |||||||||||||||||
| Net realized and unrealized gains (losses) | (0.10 | ) | (3.41 | ) | 7.91 | (1.12 | ) | (2.41 | ) | 2.06 | |||||||||||||||||
| Total from Investment Activities | 0.16 | (2.80 | ) | 8.42 | (0.65 | ) | (1.85 | ) | 2.70 | ||||||||||||||||||
| Distributions to Shareholders from: | |||||||||||||||||||||||||||
Net investment income | (0.36 | ) | (0.53 | ) | (0.52 | ) | (0.74 | ) | (0.46 | ) | (0.66 | ) | |||||||||||||||
Net realized gains | (0.32 | ) | (1.90 | ) | — | (5.76 | ) | (1.80 | ) | (0.39 | ) | ||||||||||||||||
Total Distributions | (0.68 | ) | (2.43 | ) | (0.52 | ) | (6.50 | ) | (2.26 | ) | (1.05 | ) | |||||||||||||||
Net Asset Value, End of Period | $ | 23.61 | $ | 24.13 | $ | 29.36 | $ | 21.46 | $ | 28.61 | $ | 32.72 | |||||||||||||||
Total Return (d) (e) | 0.78 | %(c) | (10.43 | )% | 39.61 | % | (6.05 | )% | (5.06 | )% | 8.68 | % | |||||||||||||||
Ratios to Average Net Assets: | |||||||||||||||||||||||||||
Net Expenses (f) (g) (h) (i) (j) | 0.95 | % | 0.94 | % | 0.94 | % | 0.99 | % | 1.00 | % | 1.00 | % | |||||||||||||||
| Net Investment Income (Loss) (f) | 1.58 | %(c) | 2.20 | % | 2.00 | % | 1.77 | % | 1.81 | % | 1.62 | % | |||||||||||||||
Gross Expenses (f) (g) (j) | 0.97 | % | 0.95 | % | 0.95 | % | 0.99 | % | 1.00 | % | 1.00 | % | |||||||||||||||
Supplemental Data: | |||||||||||||||||||||||||||
| Net Assets at end of period (000's) | $ | 1,260,267 | $ | 1,278,976 | $ | 1,644,340 | $ | 1,431,107 | $ | 1,979,758 | $ | 2,349,281 | |||||||||||||||
Portfolio Turnover (d) (k) | 29 | % | 34 | % | 67 | %(l) | 119 | %(m) | 30 | % | 36 | % | |||||||||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from May 31 to February 28.
(b) Per share net investment income (loss) has been calculated using the average daily shares method.
(c) Includes net investment income received on EU Reclaims during the nine months ended February 28, 2023. Without these amounts the net investment income (loss) per share, net investment income (loss) ratio, and total return would have been less by 0.07, 0.42%, and 0.29%, respectively.
(d) Not annualized for periods less than one year.
(e) Assumes reinvestment of all net investment income and realized capital gain distributions, if any, during the period. Includes adjustments in accordance with U.S. Generally Accepted Accounting Principles and could differ from the Lipper reported return.
(f) Annualized for periods less than one year.
(g) Does not include acquired fund fees and expenses, if any.
(h) 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 at least September 30, 2023, instead of coinciding with the Fund's fiscal year end.
(i) 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.
(j) Reflects total annual operating expenses for reductions of expenses paid indirectly for the May 31 fiscal years ended 2020, 2019, and 2018. Expenses paid indirectly decreased the expense ratio for each of these respective years by less than 0.01%.
(k) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares.
(l) Reflects a return to normal trading levels after a prior year transition.
(m) Reflects increased trading activity due to transition or asset allocation shift.
(continues on next page)
See notes to financial statements.
35
USAA Mutual Funds Trust | Financial Highlights — continued | ||||||
For a Share Outstanding Throughout Each Period
USAA International Fund | |||||||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | Year Ended May 31, 2021 | Year Ended May 31, 2020 | Year Ended May 31, 2019 | Year Ended May 31, 2018 | ||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 24.27 | $ | 29.25 | $ | 21.39 | $ | 28.58 | $ | 32.67 | $ | 31.04 | |||||||||||||||
Investment Activities: | |||||||||||||||||||||||||||
Net investment income (loss) | 0.23 | (b)(c) | 0.57 | (b) | 0.37 | (b) | 0.36 | (b) | 0.47 | 0.53 | |||||||||||||||||
| Net realized and unrealized gains (losses) | (0.11 | ) | (3.44 | ) | 7.93 | (1.10 | ) | (2.41 | ) | 2.04 | |||||||||||||||||
| Total from Investment Activities | 0.12 | (2.87 | ) | 8.30 | (0.74 | ) | (1.94 | ) | 2.57 | ||||||||||||||||||
Distributions to Shareholders from: | |||||||||||||||||||||||||||
Net investment income | (0.32 | ) | (0.21 | ) | (0.44 | ) | (0.69 | ) | (0.35 | ) | (0.55 | ) | |||||||||||||||
Net realized gains | (0.32 | ) | (1.90 | ) | — | (5.76 | ) | (1.80 | ) | (0.39 | ) | ||||||||||||||||
Total Distributions | (0.64 | ) | (2.11 | ) | (0.44 | ) | (6.45 | ) | (2.15 | ) | (0.94 | ) | |||||||||||||||
Net Asset Value, End of Period | $ | 23.75 | $ | 24.27 | $ | 29.25 | $ | 21.39 | $ | 28.58 | $ | 32.67 | |||||||||||||||
| Total Return (excludes sales charges) (d) (e) | 0.58 | %(c) | (10.57 | )% | 39.11 | % | (6.37 | )% | (5.39 | )% | 8.29 | % | |||||||||||||||
Ratios to Average Net Assets: | |||||||||||||||||||||||||||
Net Expenses (f) (g) (h) (i) (j) | 1.17 | % | 1.11 | % | 1.30 | % | 1.35 | % | 1.35 | % | 1.35 | % | |||||||||||||||
Net Investment Income (Loss) (f) | 1.37 | %(c) | 2.07 | % | 1.47 | % | 1.37 | % | 1.52 | % | 1.29 | % | |||||||||||||||
Gross Expenses (f) (g) (j) | 3.38 | % | 2.17 | % | 1.56 | % | 1.39 | % | 1.41 | % | 1.42 | % | |||||||||||||||
Supplemental Data: | |||||||||||||||||||||||||||
Net Assets at end of period (000's) | $ | 887 | $ | 931 | $ | 1,093 | $ | 6,402 | $ | 7,715 | $ | 8,101 | |||||||||||||||
Portfolio Turnover (d) (k) | 29 | % | 34 | % | 67 | %(l) | 119 | %(m) | 30 | % | 36 | % | |||||||||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from May 31 to February 28.
(b) Per share net investment income (loss) has been calculated using the average daily shares method.
(c) Includes net investment income received on EU Reclaims during the nine months ended February 28, 2023. Without these amounts the net investment income (loss) per share, net investment income (loss) ratio, and total return would have been less by 0.07, 0.42%, and 0.29%, respectively.
(d) Not annualized for periods less than one year.
(e) Assumes reinvestment of all net investment income and realized capital gain distributions, if any, during the period. Includes adjustments in accordance with U.S. Generally Accepted Accounting Principles and could differ from the Lipper reported return.
(f) Annualized for periods less than one year.
(g) Does not include acquired fund fees and expenses, if any.
(h) 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 at least September 30, 2023, instead of coinciding with the Fund's fiscal year end.
(i) 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.
(j) Reflects total annual operating expenses for reductions of expenses paid indirectly for the May 31 fiscal years ended 2020, 2019, and 2018. Expenses paid indirectly decreased the expense ratio for each of these respective years by less than 0.01%.
(k) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares.
(l) Reflects a return to normal trading levels after a prior year transition.
(m) Reflects increased trading activity due to transition or asset allocation shift.
(continues on next page)
See notes to financial statements.
36
USAA Mutual Funds Trust | Financial Highlights — continued | ||||||
For a Share Outstanding Throughout Each Period
USAA International Fund | |||||||||||||||||||||||
R6 Shares | |||||||||||||||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | Year Ended May 31, 2021 | Year Ended May 31, 2020 | August 17, 2018(b) through May 31, 2019 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 24.53 | $ | 29.65 | $ | 21.52 | $ | 28.66 | $ | 32.01 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (c) | 0.33 | (d) | 0.80 | 0.49 | 0.49 | 0.52 | |||||||||||||||||
| Net realized and unrealized gains (losses) | (0.11 | ) | (3.36 | ) | 8.19 | (1.12 | ) | (1.54 | ) | ||||||||||||||
Total from Investment Activities | 0.22 | (2.56 | ) | 8.68 | (0.63 | ) | (1.02 | ) | |||||||||||||||
Distributions to Shareholders from: | |||||||||||||||||||||||
Net investment income | (0.48 | ) | (0.66 | ) | (0.55 | ) | (0.75 | ) | (0.53 | ) | |||||||||||||
Net realized gains | (0.32 | ) | (1.90 | ) | — | (5.76 | ) | (1.80 | ) | ||||||||||||||
Total Distributions | (0.80 | ) | (2.56 | ) | (0.55 | ) | (6.51 | ) | (2.33 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 23.95 | $ | 24.53 | $ | 29.65 | $ | 21.52 | $ | 28.66 | |||||||||||||
Total Return (e) (f) | 1.01 | %(d) | (9.53 | )% | 40.78 | % | (5.95 | )% | (2.55 | )% | |||||||||||||
Ratios to Average Net Assets: | |||||||||||||||||||||||
Net Expenses (g) (h) (i) (j) (k) | 0.61 | % | 0.31 | % | 0.80 | % | 0.85 | % | 0.85 | % | |||||||||||||
Net Investment Income (Loss) (g) | 1.92 | %(d) | 2.87 | % | 1.95 | % | 1.83 | % | 2.19 | % | |||||||||||||
Gross Expenses (g) (h) (k) | 9.88 | % | 3.83 | % | 1.22 | % | 1.18 | % | 2.03 | % | |||||||||||||
Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000's) | $ | 232 | $ | 227 | $ | 28 | $ | 3,365 | $ | 4,477 | |||||||||||||
Portfolio Turnover (e) (l) | 29 | % | 34 | % | 67 | %(m) | 119 | %(n) | 30 | % | |||||||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from May 31 to February 28.
(b) Commencement of operations.
(c) Per share net investment income (loss) has been calculated using the average daily shares method.
(d) Includes net investment income received on EU Reclaims during the nine months ended February 28, 2023. Without these amounts the net investment income (loss) per share, net investment income (loss) ratio, and total return would have been less by 0.07, 0.42%, and 0.29%, respectively.
(e) Not annualized for periods less than one year.
(f) 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.
(g) Annualized for periods less than one year.
(h) Does not include acquired fund fees and expenses, if any.
(i) 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 August 17, 2018, and in effect through at least September 30, 2023, instead of coinciding with the Fund's fiscal year end.
(j) 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.
(k) Reflects total annual operating expenses for reductions of expenses paid indirectly for the May 31 fiscal years ended 2020, 2019, and 2018. Expenses paid indirectly decreased the expense ratio for each of these respective years by less than 0.01%.
(l) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares.
(m) Reflects a return to normal trading levels after a prior year transition.
(n) Reflects increased trading activity due to transition or asset allocation shift.
See notes to financial statements.
37
USAA Mutual Funds Trust | Notes to Financial Statements February 28, 2023 | ||||||
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 R6 Shares. 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.
On June 29, 2022, the Board of Trustees ("the Board") approved the fiscal year-end change for the Fund from May 31 to February 28. The first full cycle of the new fiscal year-end reporting will begin March 1, 2023. As a result of the change, the Fund has a February 28, 2023 fiscal nine-month transition period, the results of which are reported in this Annual Report for the period ended February 28, 2023.
Victory Capital Management ("VCM" or 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 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 (unadjusted) in active markets for identical securities
• Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, or credit spreads, applicable to those securities, etc.)
• Level 3 — significant unobservable inputs (including the Adviser's assumptions in determining the fair value of investments)
38
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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, appointed as the valuation designee by the Board, has established the Pricing and Liquidity Committee (the "Committee"), and subject to Board oversight, the Committee administers and oversees the Fund's valuation policies and procedures, which are approved by the Board.
Portfolio securities listed or traded on securities exchanges, including Exchange-Traded Funds ("ETFs"), and American Depositary Receipts, 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 February 28, 2023, 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 | $ | 82,217 | $ | 2,331,383 | $ | 73 | $ | 2,413,673 | |||||||||||
Exchange-Traded Funds | 12,371 | — | — | 12,371 | |||||||||||||||
Collateral for Securities Loaned | 27,152 | — | — | 27,152 | |||||||||||||||
Total | $ | 121,740 | $ | 2,331,383 | $ | 73 | $ | 2,453,196 | |||||||||||
As of February 28, 2023, there were no transfers into/out of Level 3.
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
39
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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.
Derivative Instruments:
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 February 28, 2023, 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 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
40
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 Statements 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 February 28, 2023.
| Value of Securities on Loan | Non-Cash Collateral | Cash Collateral | |||||||||
| $ | 25,852 | $ | — | $ | 27,152 | ||||||
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 Statements 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 Statements 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 received European Union ("EU") reclaims related to prior years. For the nine months ended February 28, 2023, the Fund recognized $5,850 thousand related to EU reclaims and $1,577 thousand in interest and entitlements. For the year ended May 31, 2022, the Fund recognized $112 thousand in EU reclaims, of which $3 thousand of the amount is related to interest on the filed EU reclaims. These EU reclaims are reflected on the Statements of Operations as Dividend Income or as a reduction to Foreign tax withholding expense. The related interest entitlements are reflected on the Statements of Operations as Interest income or as a reduction to Foreign tax withholding expense.
41
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 had a tax year end of May 31, and effective February 28, 2023, the Fund changes its tax year end to February 28.
For the nine months ended February 28, 2023, 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 nine months ended February 28, 2023, were as follows for the Fund (amounts in thousands):
Excluding | |||||||
Purchases | Sales | ||||||
$ | 686,869 | $ | 782,258 | ||||
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 vcm.com. As of February 28, 2023, certain fund-of-funds owned a percentage of the 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 | ||||||
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.
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
42
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
rate of 0.75% of the Fund's average daily net assets. Amounts incurred and paid to VCM for the nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements of Operations as Investment advisory fees.
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. 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, 2022, to February 28, 2023, performance adjustments were $(394), $(400), $(1), and less than $(1) for Fund Shares, Institutional Shares, Class A, and R6 Shares, in thousands, respectively. Performance adjustments were (0.04)%, (0.04)%, (0.18)%, and (0.24)% for Fund Shares, Institutional Shares, Class A, and R6 Shares, respectively. 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 R6 Shares, 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 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
43
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
the Fund's average daily net assets of the Fund Shares, Institutional Shares, Class A, and R6 Shares, respectively. Amounts incurred for the nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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 R6 Shares 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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements of Operations as 12b-1 fees.
In addition, the Distributor is entitled to receive commissions in connection with sales of Class A. For the nine months ended February 28, 2023, and the year ended May 31, 2022, the Distributor did not receive any commissions.
44
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
Other Fees:
Citibank serves as the Fund's custodian. The Fund pays Citibank a fee for providing these services. Amounts incurred for the nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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 September 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 February 28, 2023, the expense limits (excluding voluntary waivers) were 1.06%, 0.99%, 1.35%, and 0.85% for Fund Shares, Institutional Shares, Class A, and R6 Shares, respectively.
Under the terms of the expense limitation agreement, 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.
As of February 28, 2023, 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 February 28, 2023.
| Expires 2023 | Expires 2024 | Expires 2025 | Expires 2026 | Total | |||||||||||||||
| $ | 5 | $ | 372 | $ | 85 | $ | 455 | $ | 917 | ||||||||||
As of May 31, 2022, the following amounts were available to be repaid to the Adviser (amounts in thousands).
| 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 nine months ended February 28, 2023, and 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
45
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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. Global markets, or those in a particular region, may all react in similar fashion to important political, economic, or other developments. Events and evolving conditions in certain economies or markets may alter the risks associated with investments tied to countries or regions that historically were perceived as comparatively stable and make such investments riskier and more volatile.
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 27, 2022, with a termination date of June 26, 2023. 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 nine months ended February 28, 2023, 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 paid a pro-rata portion of the commitment fees plus any interest on amounts borrowed. For the period from June 1, 2022, through June 27, 2022, interest was based on the one-month London Interbank Offered Rate ("LIBOR") plus one percent. Effective with the renewal, for the period June 28, 2022, through February 28, 2023, interest was based on the one-month Secured Overnight Financing Rate ("SOFR") plus 1.10 percent. The Fund did not experience a material financial impact transitioning from LIBOR to SOFR. Interest charged to the 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 nine months ended February 28, 2023.
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):
| 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.
46
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 Statements of Operations under Interfund lending fees. As a Lender, interest earned by the Fund, if any, during the period, is reflected on the Statements of Operations under Interfund lending.
The average borrowing or lending for the days outstanding and average interest rate for the Fund during the nine months ended February 28, 2023, were as follows (amounts in thousands):
| Borrower or Lender | Amount Outstanding at February 28, 2023 | Average Borrowing* | Days Borrowing Outstanding | Average Interest Rate* | Maximum Borrowing During the Period | ||||||||||||||||||
Borrower | $ | — | $ | 1,863 | 33 | 4.28 | % | $ | 3,437 | ||||||||||||||
* Based on the number of days borrowings were outstanding for the nine months ended February 28, 2023.
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.
47
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
As of February 28, 2023, on the Statement 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 | ||||||
| $ | (2 | ) | $ | 2 | |||
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):
Nine Months Ended February 28, 2023 | |||||||||||
Distributions Paid From | |||||||||||
| Ordinary Income | Net Long-Term Capital Gains | Total Distributions Paid | |||||||||
$ | 37,366 | $ | 33,709 | $ | 71,075 | ||||||
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 | ||||||||||
As of February 28, 2023, 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 Losses | Unrealized Appreciation (Depreciation)* | Total Accumulated Earnings (Loss) | ||||||||||||||||||
| $ | 27,614 | $ | 593 | $ | 28,207 | $ | (89,447 | ) | $ | 264,664 | $ | 203,424 | |||||||||||
* 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 February 28, 2023, 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 | |||||||||
| $ | 39,180 | $ | 50,267 | $ | 89,447 | ||||||
As of February 28, 2023, 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) | ||||||||||||
| $ | 2,188,532 | $ | 491,638 | $ | (226,974 | ) | $ | 264,664 | |||||||
48
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
9. Subsequent Events:
The Board, upon recommendation of the Adviser, has approved a change in the name of the Trust and each individual fund within the Trust. On February 23, 2023, an initial filing was made with the SEC to commence the process to effectuate the following changes.
Effective at the start of business on April 24, 2023 (the "Effective Date"), the name of the Trust changed from USAA Mutual Funds Trust to Victory Portfolios III, and all references to USAA Mutual Funds Trust in the summary prospectus, statutory prospectus, and statement of additional information ("SAI") will be replaced by the new name.
Also on the Effective Date, references to the current name of the Fund in the summary prospectus, statutory prospectus, and SAI will be replaced with the new name as follows:
Current Name | New Name | ||||||
USAA International Fund | Victory International Fund | ||||||
In addition, on the Effective Date, USAA Investments, a Victory Capital Management Inc. investment franchise, that currently manages the USAA Fixed Income Funds, will change its name to Victory Income Investors, and all references to USAA Investments in the summary prospectus, statutory prospectus, and SAI, will be replaced.
Please note that there will be no changes in the management of the Fund or to the Fund's ticker symbols.
49
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 February 28, 2023, and the related statements of operations for the period from June 1, 2022 through February 28, 2023 and the year ended May 31, 2022, the statements of changes in net assets for the period from June 1, 2022 through February 28, 2023 and each of the two years in the period ended May 31, 2022, the financial highlights for the period from June 1, 2022 through February 28, 2023 and each of the five years in the period ended May 31, 2022, 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 February 28, 2023, the results of its operations for the period from June 1, 2022 through February 28, 2023 and the year ended May 31, 2022, the statements of changes in net assets for the period from June 1, 2022 through February 28, 2023 and each of the two years in the period ended May 31, 2022, and its financial highlights for the period from June 1, 2022 through February 28, 2023 and each of the five years in the period ended May 31, 2022, 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 February 28, 2023, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. 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
April 28, 2023
50
USAA Mutual Funds Trust | Supplemental Information February 28, 2023 | ||||||
(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 date 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 | ||||||||||||||||||
51
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 (06/17-06/19); 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 (03/15-03/21). | 45 | None | ||||||||||||||||||
| Paul L. McNamara (July 1948) | Trustee | Trustee since January 2012 | Retired. | 45 | None | ||||||||||||||||||
52
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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) | ||||||||||||||||||
53
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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.
54
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
Officers:
The officers of the Trust, their date 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. (since 2022); 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. (07/01/19-present); Executive Director, Investment and Financial Administration, USAA (2012-06/30/19); 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. (07/01/19-present); Accounting/ Financial Director, USAA (12/13-06/30/19). | ||||||||||||
| 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). | ||||||||||||
55
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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). | ||||||||||||
56
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 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 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 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 September 1, 2022, through February 28, 2023.
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 9/1/22 | Actual Ending Account Value 2/28/23 | Hypothetical Ending Account Value 2/28/23 | Actual Expenses Paid During Period 9/1/22- 2/28/23* | Hypothetical Expenses Paid During Period 9/1/22- 2/28/23* | Annualized Expense Ratio During Period 9/1/22- 2/28/23 | ||||||||||||||||||||||
Fund Shares | $ | 1,000.00 | $ | 1,116.10 | $ | 1,019.74 | $ | 5.35 | $ | 5.11 | 1.02 | % | |||||||||||||||
Institutional Shares | 1,000.00 | 1,116.60 | 1,020.08 | 4.99 | 4.76 | 0.95 | % | ||||||||||||||||||||
Class A | 1,000.00 | 1,115.10 | 1,018.89 | 6.24 | 5.96 | 1.19 | % | ||||||||||||||||||||
R6 Shares | 1,000.00 | 1,117.60 | 1,021.22 | 3.78 | 3.61 | 0.72 | % | ||||||||||||||||||||
* Expenses are equal to the average account value multiplied by the Fund's annualized expense ratio multiplied by 181/365 (the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year).
57
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
Additional Federal Income Tax Information
The following federal tax information related to the Fund's fiscal nine months ended February 28, 2023, 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 2024.
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 nine months ended February 28, 2023 (amounts in thousands):
| Dividends Received Deduction (corporate shareholders) | Qualified Dividend Income (non-corporate shareholders) | Long-Term Capital Gain Distributions | |||||||||
| 0.05 | % | 83 | % | $ | 33,709 | ||||||
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 February 28, 2023, were as follows:
| Foreign Source Income | Foreign Tax Expense | ||||||
| $ | 0.36 | $ | 0.04 | ||||
58
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 8-9, 2022, 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 8-9, 2022, 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 21, 2022.
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
59
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 program, (iv) derivatives risk management program, and (v) 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 adjustment, 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 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 universe"). The Fund's performance universe consisted of the Fund and all retail and institutional open-end
60
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
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- and ten-year periods ended June 30, 2022, and was below the average of its performance universe for the three- and five-year periods ended June 30, 2022, and was below its Lipper index for the one-, three- and five-year periods ended June 30, 2022, and was above its Lipper index for the ten-year period ended June 30, 2022. 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 certain periods.
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. In considering the profitability data with respect to the Fund, the Trustees noted that the Adviser pays the Fund's subadvisory fees. 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 and the Adviser is reasonably 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.
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
61
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
weights to various factors. Throughout their deliberations, the Independent Trustees were represented and assisted by Independent Counsel.
Nature, Extent, and Quality of Services Provided; Investment Personnel — The Trustees considered information provided to them regarding the services provided by the Subadviser, including information presented periodically 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 June 30, 2022, 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 the Adviser is reasonably monitoring the Fund's performance; 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.
62
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 10, 2023, 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- RN (prior to August 2022, Form N-LIQUID) and recommended no material changes to the LRMP.
63
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 | ||||||
vcm.com | (800) 235-8396 | ||||||
23409-0423
February 28, 2023
Annual Report
USAA Precious Metals and Minerals Fund
(Also Known as Victory Precious Metals and Minerals Fund*)
* Effective at the start of business on April 24, 2023, the Fund name will change to Victory Precious Metals and Minerals Fund. Please see Notes to the Financial Statements for subsequent event information.
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.
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, 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 | 11 | ||||||
Statements of Operations | 12 | ||||||
Statements of Changes in Net Assets | 13 | ||||||
Financial Highlights | 15 | ||||||
Notes to Financial Statements | 18 | ||||||
| Report of Independent Registered Public Accounting Firm | 29 | ||||||
Supplemental Information (Unaudited) | 30 | ||||||
Trustee and Officer Information | 30 | ||||||
Proxy Voting and Portfolio Holdings Information | 36 | ||||||
Expense Examples | 36 | ||||||
Additional Federal Income Tax Information | 37 | ||||||
Advisory Contract Renewal | 38 | ||||||
Liquidity Risk Management Program | 41 | ||||||
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,
If you are reading this letter but double-checking your calendar, be assured there's no mistake. The annual reporting period for your USAA Mutual Fund has shifted from a fiscal year ended May 31st to a fiscal year ended February 28th/the last day of February. This change has no material impact on any of your investments. This change aims to help us improve efficiencies and reduce operational costs. Therefore, this letter covers an abbreviated "annual" period from June 1, 2022, through February 28, 2023. Future annual reports will cover the 12-month period ended February 28th/the last day of February going forward.
Our most recent annual reporting period has been a challenging period for investors. Consider some of the headwinds: heightened geopolitical tensions, a terrible war in Eastern Europe, elevated energy and food costs, high inflation, and rising interest rates. All this has dampened global growth and created a difficult backdrop for both bond and stock investors.
The inflation data was particularly troublesome and surprised many throughout the past year with some of the highest readings since the 1970s. In response, the U.S. Federal Reserve (the "Fed") continued with its monetary tightening and boosted the Fed funds interest rate repeatedly throughout the annual reporting period. And if that wasn't enough, zero-COVID-19 policies in China (which fortunately have been recently lifted) further exacerbated supply chain issues. As one might expect, all these obstacles ratcheted up volatility across financial markets.
In terms of the numbers, the S&P 500® Index, the bell-weather proxy for our domestic stock market, delivered a negative total return of almost 3% for our abbreviated annual reporting period. But perhaps what made 2022 even more difficult was the performance of fixed income markets. The Bloomberg US Aggregate Bond Index—a proxy for a diversified fixed income portfolio and one that many investors and institutions follow closely—delivered a negative total return of approximately 4% during the same period. That's not exactly the offset to equity performance that many investors come to expect from bonds.
It's been difficult, and we fully acknowledge that the steady drumbeat of bad news and bouts of stomach-churning volatility can take a toll on investors' psyche. Even when markets often snap back sharply (as happened this past July, October and earlier this calendar year), investors often wonder if they have missed an opportunity.
Through all of the turmoil and challenges in our most recent annual reporting period, we are reminded of two enduring realities: 1) financial markets are dynamic and apt to change abruptly; 2) it's vital to remain calm and rational whenever faced with those inevitable bouts of turmoil.
Fortunately, we think that investors can take comfort knowing that all of our independent investment franchises have experience managing portfolios through a wide variety of market environments. Our investment professionals remain calm during turbulent financial markets, and we think it's imperative that investors do the same.
2
We still believe that a long-term plan, a well-diversified portfolio across asset classes and investment types, and a clear understanding of individual risk tolerances are the key ingredients for staying the course and progressing on investment goals. Moreover, all our investment professionals continually monitor the environment and work hard to position portfolios opportunistically no matter what the markets bring. Remember, turmoil can also create opportunity.
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, we encourage you to contact our Member Service Representatives. Call 800-235-8396, or visit our website at vcm.com.
From all of us here at Victory Capital, thank you for your ongoing confidence and 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?
The reporting period started in the month of June as pressure continued to mount for both stocks and bonds. The U.S. Federal Reserve's (the "Fed") hawkish pivot continued to put pressure on equity multiples. With stubbornly high inflation readings, 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.
In the third quarter, global equities declined, continuing the downward trend from the first half of 2022. The quarter began with a rally that continued into mid-August, on hopes that the Fed would pivot toward a more accommodative policy. However, messaging from Fed Chairman, Jerome Powell, and a stronger-than-expected inflation report in early September dampened investor optimism over the central bank's trajectory and the odds of avoiding recession. The Fed went on to hike rates aggressively by 75 basis points ("bps") twice during the quarter, bringing the benchmark Fed funds rate target to a range of 3.0% to 3.25%, as compared to 0% to 0.25% at the beginning of the year. (A basis point is 1/100th of a percentage point.) For its part, the European Central Bank raised its reference rate by 50 bps in July, followed by another 75 bps in September. Other factors that weighed on sentiment during the quarter included the ongoing Russia-Ukraine war, an energy crisis in Europe, and the resumption of COVID-19 lockdowns in China.
Global equities rebounded in the fourth quarter trimming full year losses. Gains in October and November were sparked by signs of peaking inflation alongside less hawkish commentary from Fed Chairman Powell raising hope that the central bank would end its interest rate hiking cycle sometime in early 2023. Indeed, both the Fed and the European Central Bank raised their benchmark overnight lending rates by a more modest 50 bps in mid-December. Also supporting sentiment, the Chinese government began to ease their zero-COVID-19 policy that had weighed on global economic growth for much of 2022. However, stocks retreated into year-end as investors shifted their focus to the potential impact higher rates might have on economic growth and corporate earnings in the coming year.
As the reporting period crossed into 2023, global equities started off the year logging positive returns in the month of January. Bonds also rallied at the start of the year on hopes that the Fed's hawkish pivot would come to an end in 2023. As the calendar moved to February, stronger than expected employment and inflation reports caused investors to reevaluate interest rate expectations for 2023 and consider that rates could stay higher for longer. The result was a reversal in global equities and bonds which ended the month lower.
• 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. The Fund's fiscal year-end changed this year to February 28 from May 31, resulting in a shorter reporting period for fiscal year ended 2023. For the nine-month reporting period
4
USAA Precious Metals and Minerals Fund
Managers' Commentary (continued)
ended February 28, 2023, the Fund Shares, Institutional Shares, and Class A had a total return (at net asset value) of -12.97%, -12.85%, and -13.08%, respectively. This compares to a total return of -2.51% for the MSCI All-Country World Index, -15.04% for the MSCI ACWI Gold Miners IMI Index, and -12.50% for the Lipper Precious Metals Equity Funds Index.
• What strategies did you employ during the reporting period?
At the end of February 2023, 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 25% of the index. The underweight to Newmont Mining contributed to performance as the market reacted negatively to its attempt to acquire Australia's Newcrest Mining Ltd. Additionally, a large overweight in Koza Altin Isletmeleri A/S, which rallied approximately 150% over the period contributed to the Fund's relative performance. Lastly, strong performance was somewhat offset by an overweight in SSR Mining, Inc., which sold off post the fourth quarter earnings release.
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 February 28, 2023
| 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 | –19.33 | % | –19.22 | % | –19.47 | % | –24.10 | % | –8.26 | % | –22.45 | % | –20.01 | % | |||||||||||||||||
Five Year | 5.41 | % | 5.64 | % | 5.26 | % | 4.03 | % | 5.82 | % | 6.10 | % | 5.26 | % | |||||||||||||||||
Ten Year | –2.45 | % | –2.19 | % | –2.56 | % | –3.13 | % | 7.93 | % | –2.69 | % | –1.65 | % | |||||||||||||||||
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 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 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 unmanaged 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 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 | February 28, 2023 | ||||||
(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*:
February 28, 2023
(% of Net Assets)
Newmont Corp. | 11.3 | % | |||||
Barrick Gold Corp. | 9.6 | % | |||||
Aginco Eagle Mines Ltd. | 8.5 | % | |||||
Franco-Nevada Corp. | 7.2 | % | |||||
Wheaton Precious Metals Corp. | 5.8 | % | |||||
B2Gold Corp. | 4.3 | % | |||||
Yamana Gold, Inc. | 4.0 | % | |||||
Northern Star Resources Ltd. | 3.7 | % | |||||
Royal Gold, Inc. | 3.6 | % | |||||
Newcrest Mining Ltd. | 3.6 | % | |||||
Portfolio Composition*:
February 28, 2023
(% 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 Precious Metals and Minerals Fund | Schedule of Portfolio Investments February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Common Stocks (99.8%) | |||||||||||
Australia (12.5%): | |||||||||||
Materials (12.5%): | |||||||||||
De Grey Mining, Ltd. (a) | 1,165,515 | $ | 1,094 | ||||||||
Evolution Mining Ltd. | 4,391,696 | 8,036 | |||||||||
Gold Road Resources Ltd. | 1,928,577 | 1,907 | |||||||||
Newcrest Mining Ltd. | 1,133,091 | 17,180 | |||||||||
Northern Star Resources Ltd. | 2,567,657 | 17,912 | |||||||||
Perseus Mining Ltd. | 4,308,434 | 5,653 | |||||||||
Ramelius Resources Ltd. | 3,271,854 | 1,970 | |||||||||
Regis Resources Ltd. | 2,128,654 | 2,491 | |||||||||
Silver Lake Resources Ltd. (a) | 4,268,850 | 2,886 | |||||||||
West African Resources, Ltd. (a) | 1,930,796 | 1,201 | |||||||||
60,330 | |||||||||||
Canada (56.3%): | |||||||||||
Materials (56.3%): | |||||||||||
Aginco Eagle Mines Ltd. | 885,402 | 40,769 | |||||||||
Alamos Gold, Inc. | 1,223,003 | 12,469 | |||||||||
B2Gold Corp. | 5,999,753 | 20,493 | |||||||||
Barrick Gold Corp. | 2,880,649 | 46,436 | |||||||||
Centerra Gold, Inc. | 1,499,019 | 9,471 | |||||||||
Dundee Precious Metals, Inc. | 1,402,208 | 9,004 | |||||||||
Equinox Gold Corp. (a) | 68,782 | 250 | |||||||||
Franco-Nevada Corp. | 271,530 | 34,664 | |||||||||
Great Basin Gold Ltd. (a) (b) | 6,500,000 | — | |||||||||
K92 Mining, Inc. (a) | 483,061 | 2,634 | |||||||||
Karora Resources, Inc. (a) | 419,439 | 1,380 | |||||||||
Kinross Gold Corp. | 1,421,156 | 5,202 | |||||||||
Lundin Gold, Inc. | 238,247 | 2,462 | |||||||||
Nautilus Minerals, Inc. (a) (b) | 5,757,622 | — | |||||||||
New Gold, Inc. (a) | 1,183,000 | 1,084 | |||||||||
Northern Star Mining Corp. (a) (b) | 375,000 | — | |||||||||
OceanaGold Corp. (a) | 2,084,516 | 4,248 | |||||||||
Osisko Gold Royalties Ltd. | 303,400 | 3,976 | |||||||||
Sandstorm Gold Ltd. | 658,794 | 3,240 | |||||||||
SSR Mining, Inc. | 992,179 | 13,543 | |||||||||
Torex Gold Resources, Inc. (a) | 859,889 | 10,589 | |||||||||
Victoria Gold Corp. (a) | 112,390 | 698 | |||||||||
Wesdome Gold Mines Ltd. (a) | 340,146 | 1,623 | |||||||||
Wheaton Precious Metals Corp. | 674,637 | 28,112 | |||||||||
Yamana Gold, Inc. | 3,769,219 | 19,284 | |||||||||
271,631 | |||||||||||
See notes to financial statements.
8
| USAA Mutual Funds Trust USAA Precious Metals and Minerals Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
China (3.2%): | |||||||||||
Materials (3.2%): | |||||||||||
Shandong Gold Mining Co. Ltd. Class H (d) | 950,700 | $ | 1,628 | ||||||||
Zhaojin Mining Industry Co. Ltd. Class H (a) | 1,459,000 | 1,530 | |||||||||
Zijin Mining Group Co. Ltd. Class H | 8,206,000 | 12,378 | |||||||||
15,536 | |||||||||||
Indonesia (0.5%): | |||||||||||
Materials (0.5%): | |||||||||||
Aneka Tambang Tbk | 18,415,700 | 2,404 | |||||||||
Jersey (1.0%): | |||||||||||
Materials (1.0%): | |||||||||||
Centamin PLC | 3,704,746 | 4,562 | |||||||||
Peru (0.1%): | |||||||||||
Materials (0.1%): | |||||||||||
Cia de Minas Buenaventura SAA, ADR | 68,157 | 517 | |||||||||
Russian Federation (0.5%): | |||||||||||
Materials (0.5%): | |||||||||||
Polymetal International PLC (e) | 757,840 | 2,224 | |||||||||
Polyus PJSC (a) (b) (e) | 62,088 | 83 | |||||||||
2,307 | |||||||||||
South Africa (7.1%): | |||||||||||
Materials (7.1%): | |||||||||||
AngloGold Ashanti Ltd. | 786,708 | 13,289 | |||||||||
Gold Fields Ltd., ADR | 1,818,378 | 16,529 | |||||||||
Great Basin Gold Ltd. (a) (b) | 8,566,400 | — | |||||||||
Harmony Gold Mining Co. Ltd. | 1,463,504 | 4,449 | |||||||||
34,267 | |||||||||||
Turkey (1.0%): | |||||||||||
Materials (1.0%): | |||||||||||
Koza Altin Isletmeleri A/S (f) | 3,819,774 | 4,951 | |||||||||
United Kingdom (2.5%): | |||||||||||
Materials (2.5%): | |||||||||||
Endeavour Mining PLC | 570,692 | 11,880 | |||||||||
United States (15.1%): | |||||||||||
Materials (15.1%): | |||||||||||
Coeur Mining, Inc. (a) | 370,107 | 1,155 | |||||||||
Newmont Corp. | 1,244,861 | 54,288 | |||||||||
Royal Gold, Inc. | 146,359 | 17,386 | |||||||||
72,829 | |||||||||||
Total Common Stocks (Cost $414,477) | 481,214 | ||||||||||
See notes to financial statements.
9
| USAA Mutual Funds Trust USAA Precious Metals and Minerals Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Collateral for Securities Loaned (0.0%)^ (g) | |||||||||||
United States (0.0%): | |||||||||||
| Goldman Sachs Financial Square Government Fund, Institutional Shares, 4.47% (h) | 115 | $ | — | (c) | |||||||
HSBC U.S. Government Money Market Fund, Institutional Shares, 4.45% (h) | 115 | — | (c) | ||||||||
Invesco Government & Agency Portfolio, Institutional Shares, 4.52% (h) | 115 | — | (c) | ||||||||
| Morgan Stanley Institutional Liquidity Government Portfolio, Institutional Shares, 4.41% (h) | 115 | — | (c) | ||||||||
Total Collateral for Securities Loaned (Cost $—) (c) | — | (c) | |||||||||
Total Investments (Cost $414,477) — 99.8% | 481,214 | ||||||||||
Other assets in excess of liabilities — 0.2% | 921 | ||||||||||
NET ASSETS — 100.00% | $ | 482,135 | |||||||||
^ Purchased with cash collateral from securities on loan.
(a) Non-income producing security.
(b) Security was fair valued based upon procedures approved by the Board of Trustees and represents less than 0.05% of net assets as of February 28, 2023. This security is classified as Level 3 within the fair value hierarchy. (See Note 2 in the Notes to Financial Statements)
(c) Rounds to less than $1 thousand.
(d) Rule 144A security or other security that is restricted as to resale to institutional investors. As of February 28, 2023, the fair value of these securities was $1,628 thousands and amounted to 0.3% of net assets.
(e) The following table details the earliest acquisition date and cost of the Fund's Russian sanctioned restricted securities at February 28, 2023.(amount in thousand):
Security Name | Acquisition | Cost | |||||||||
Polymetal International PLC | 7/11/2019 | $ | 9,758 | ||||||||
Polyus PJSC | 7/11/2019 | 6,442 | |||||||||
(f) All or a portion of this security is on loan.
(g) Amount represents less than 0.05% of net assets.
(h) Rate disclosed is the daily yield on February 28, 2023.
ADR — American Depositary Receipt
PLC — Public Limited Company
See notes to financial statements.
10
USAA Mutual Funds Trust | Statement of Assets and Liabilities February 28, 2023 | ||||||
(Amounts in Thousands, Except Per Share Amounts)
| USAA Precious Metals and Minerals Fund | |||||||
Assets: | |||||||
Investments, at value (Cost $414,477) | $ | 481,214 | (a) | ||||
Cash | 997 | ||||||
Receivables: | |||||||
Interest and dividends | 1,368 | ||||||
Capital shares issued | 131 | ||||||
From Adviser | 7 | ||||||
Prepaid expenses | 23 | ||||||
Total Assets | 483,740 | ||||||
Liabilities: | |||||||
Payables: | |||||||
Collateral received on loaned securities | — | (b) | |||||
Capital shares redeemed | 167 | ||||||
Accrued foreign capital gains taxes | 877 | ||||||
Accrued expenses and other payables: | |||||||
Investment advisory fees | 298 | ||||||
Administration fees | 59 | ||||||
Custodian fees | 12 | ||||||
Transfer agent fees | 90 | ||||||
Compliance fees | — | (b) | |||||
Trustees' fees | 1 | ||||||
| 12b-1 fees | 2 | ||||||
Other accrued expenses | 99 | ||||||
Total Liabilities | 1,605 | ||||||
Net Assets: | |||||||
Capital | 1,197,999 | ||||||
Total accumulated earnings/(loss) | (715,864 | ) | |||||
Net Assets | $ | 482,135 | |||||
Net Assets | |||||||
Fund Shares | $ | 439,330 | |||||
Institutional Shares | 19,681 | ||||||
Class A | 23,124 | ||||||
Total | $ | 482,135 | |||||
Shares (unlimited number of shares authorized with no par value): | |||||||
Fund Shares | 28,091 | ||||||
Institutional Shares | 1,232 | ||||||
Class A | 1,497 | ||||||
Total | 30,820 | ||||||
Net asset value, offering and redemption price per share: (c) | |||||||
Fund Shares | $ | 15.64 | |||||
Institutional Shares | 15.97 | ||||||
Class A | 15.44 | ||||||
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 | $ | 16.38 | |||||
(a) Includes less than $1 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.
11
USAA Mutual Funds Trust | Statements of Operations | ||||||
(Amounts in Thousands)
| USAA Precious Metals and Minerals Fund | |||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | ||||||||||
Investment Income: | |||||||||||
Dividends | $ | 10,007 | $ | 14,526 | |||||||
Interest | 18 | — | |||||||||
Securities lending (net of fees) | 197 | 127 | |||||||||
Foreign tax withholding | (1,102 | ) | (1,531 | ) | |||||||
Total Income | 9,120 | 13,122 | |||||||||
Expenses: | |||||||||||
Investment advisory fees | 2,659 | 4,545 | |||||||||
Administration fees — Fund Shares | 502 | 871 | |||||||||
Administration fees — Institutional Shares | 14 | 22 | |||||||||
Administration fees — Class A | 26 | 38 | |||||||||
Sub-Administration fees | 18 | 23 | |||||||||
| 12b-1 fees — Class A | 43 | 63 | |||||||||
Custodian fees | 52 | 86 | |||||||||
Transfer agent fees — Fund Shares | 763 | 1,087 | |||||||||
Transfer agent fees — Institutional Shares | 14 | 22 | |||||||||
Transfer agent fees — Class A | 17 | 25 | |||||||||
Trustees' fees | 36 | 48 | |||||||||
Compliance fees | 4 | 4 | |||||||||
Legal and audit fees | 66 | 72 | |||||||||
State registration and filing fees | 55 | 50 | |||||||||
Interfund lending fees | — | (b) | — | ||||||||
Other expenses | 111 | 113 | |||||||||
Total Expenses | 4,380 | 7,069 | |||||||||
Expenses waived/reimbursed by Adviser | (34 | ) | (22 | ) | |||||||
Net Expenses | 4,346 | 7,047 | |||||||||
Net Investment Income (Loss) | 4,774 | 6,075 | |||||||||
Realized/Unrealized Gains (Losses) from Investments: | |||||||||||
| Net realized gains (losses) from investment securities and foreign currency transactions | (16,547 | ) | 6,161 | ||||||||
| Net change in unrealized appreciation/depreciation on investment securities and foreign currency translations | (64,012 | ) | (155,244 | ) | |||||||
Net realized/unrealized gains (losses) on investments | (80,559 | ) | (149,083 | ) | |||||||
Change in net assets resulting from operations | $ | (75,785 | ) | $ | (143,008 | ) | |||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from May 31 to February 28.
(b) Rounds to less than $1 thousand.
See notes to financial statements.
12
USAA Mutual Funds Trust | Statements of Changes in Net Assets | ||||||
(Amounts in Thousands)
USAA Precious Metals and Minerals Fund | |||||||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | Year Ended May 31, 2021 | |||||||||||||
From Investments: | |||||||||||||||
Operations: | |||||||||||||||
Net Investment Income (Loss) | $ | 4,774 | $ | 6,075 | $ | 3,056 | |||||||||
Net realized gains (losses) | (16,547 | ) | 6,161 | 54,050 | |||||||||||
| Net change in unrealized appreciation/ depreciation | (64,012 | ) | (155,244 | ) | 55,454 | ||||||||||
Change in net assets resulting from operations | (75,785 | ) | (143,008 | ) | 112,560 | ||||||||||
Distributions to Shareholders: | |||||||||||||||
Fund Shares | (4,367 | ) | (4,645 | ) | (302 | ) | |||||||||
Institutional Shares | (238 | ) | (198 | ) | (40 | ) | |||||||||
Class A | (197 | ) | (166 | ) | — | ||||||||||
| Change in net assets resulting from distributions to shareholders | (4,802 | ) | (5,009 | ) | (342 | ) | |||||||||
| Change in net assets resulting from capital transactions | (19,657 | ) | (20,193 | ) | (72,907 | ) | |||||||||
Change in net assets | (100,244 | ) | (168,210 | ) | 39,311 | ||||||||||
Net Assets: | |||||||||||||||
Beginning of period | 582,379 | 750,589 | 711,278 | ||||||||||||
End of period | $ | 482,135 | $ | 582,379 | $ | 750,589 | |||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from May 31 to February 28.
(continues on next page)
See notes to financial statements.
13
USAA Mutual Funds Trust | Statements of Changes in Net Assets | ||||||
(Amounts in Thousands) (continued)
USAA Precious Metals and Minerals Fund | |||||||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | Year Ended May 31, 2021 | |||||||||||||
Capital Transactions: | |||||||||||||||
Fund Shares | |||||||||||||||
Proceeds from shares issued | $ | 26,644 | $ | 71,209 | $ | 104,788 | |||||||||
Distributions reinvested | 4,254 | 4,526 | 294 | ||||||||||||
Cost of shares redeemed | (51,325 | ) | (103,473 | ) | (172,453 | ) | |||||||||
Total Fund Shares | $ | (20,427 | ) | $ | (27,738 | ) | $ | (67,371 | ) | ||||||
Institutional Shares | |||||||||||||||
Proceeds from shares issued | $ | 6,258 | $ | 1,422 | $ | 4,482 | |||||||||
Distributions reinvested | 238 | 198 | 37 | ||||||||||||
Cost of shares redeemed | (4,437 | ) | (2,089 | ) | (3,514 | ) | |||||||||
Total Institutional Shares | $ | 2,059 | $ | (469 | ) | $ | 1,005 | ||||||||
Class A | |||||||||||||||
Proceeds from shares issued | $ | 5,035 | $ | 18,346 | $ | 37,689 | |||||||||
Distributions reinvested | 197 | 166 | — | ||||||||||||
Cost of shares redeemed | (6,521 | ) | (10,498 | ) | (44,230 | ) | |||||||||
Total Class A | $ | (1,289 | ) | $ | 8,014 | $ | (6,541 | ) | |||||||
| Change in net assets resulting from capital transactions | $ | (19,657 | ) | $ | (20,193 | ) | $ | (72,907 | ) | ||||||
Share Transactions: | |||||||||||||||
Fund Shares | |||||||||||||||
Issued | 1,700 | 3,591 | 4,879 | ||||||||||||
Reinvested | 258 | 250 | 14 | ||||||||||||
Redeemed | (3,273 | ) | (5,358 | ) | (8,129 | ) | |||||||||
Total Fund Shares | (1,315 | ) | (1,517 | ) | (3,236 | ) | |||||||||
Institutional Shares | |||||||||||||||
Issued | 367 | 74 | 194 | ||||||||||||
Reinvested | 14 | 11 | 2 | ||||||||||||
Redeemed | (261 | ) | (115 | ) | (160 | ) | |||||||||
Total Institutional Shares | 120 | (30 | ) | 36 | |||||||||||
Class A | |||||||||||||||
Issued | 340 | 922 | 1,864 | ||||||||||||
Reinvested | 12 | 9 | — | ||||||||||||
Redeemed | (430 | ) | (535 | ) | (2,183 | ) | |||||||||
Total Class A | (78 | ) | 396 | (319 | ) | ||||||||||
Change in Shares | (1,273 | ) | (1,151 | ) | (3,519 | ) | |||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from May 31 to February 28.
See notes to financial statements.
14
USAA Mutual Funds Trust | Financial Highlights | ||||||
For a Share Outstanding Throughout Each Period
USAA Precious Metals and Minerals Fund | |||||||||||||||||||||||||||
Fund Shares | |||||||||||||||||||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | Year Ended May 31, 2021 | Year Ended May 31, 2020 | Year Ended May 31, 2019 | Year Ended May 31, 2018 | ||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 18.14 | $ | 22.57 | $ | 19.34 | $ | 12.16 | $ | 12.87 | $ | 12.93 | |||||||||||||||
Investment Activities: | |||||||||||||||||||||||||||
Net investment income (loss) (b) | 0.15 | 0.19 | 0.09 | (0.04 | ) | (0.03 | ) | (0.05 | ) | ||||||||||||||||||
| Net realized and unrealized gains (losses) | (2.50 | ) | (4.46 | ) | 3.15 | 7.22 | (0.68 | ) | (0.01 | ) | |||||||||||||||||
| Total from Investment Activities | (2.35 | ) | (4.27 | ) | 3.24 | 7.18 | (0.71 | ) | (0.06 | ) | |||||||||||||||||
Distributions to Shareholders from: | |||||||||||||||||||||||||||
Net investment income | (0.15 | ) | (0.16 | ) | (0.01 | ) | — | — | — | ||||||||||||||||||
Total Distributions | (0.15 | ) | (0.16 | ) | (0.01 | ) | — | — | — | ||||||||||||||||||
Net Asset Value, End of Period | $ | 15.64 | $ | 18.14 | $ | 22.57 | $ | 19.34 | $ | 12.16 | $ | 12.87 | |||||||||||||||
Total Return (c) (d) | (12.97 | )% | (18.93 | )% | 16.69 | % | 59.13 | % | (5.52 | )% | (0.46 | )% | |||||||||||||||
Ratios to Average Net Assets: | |||||||||||||||||||||||||||
Net Expenses (e) (f) (g) (h) | 1.19 | % | 1.12 | % | 1.12 | % | 1.19 | % | 1.31 | % | 1.23 | % | |||||||||||||||
Net Investment Income (Loss) (e) | 1.31 | % | 0.97 | % | 0.41 | % | (0.25 | )% | (0.22 | )% | (0.36 | )% | |||||||||||||||
Gross Expenses (e) (f) | 1.19 | % | 1.12 | % | 1.12 | % | 1.19 | % | 1.31 | % | 1.23 | % | |||||||||||||||
Supplemental Data: | |||||||||||||||||||||||||||
Net Assets at end of period (000's) | $ | 439,330 | $ | 533,574 | $ | 697,969 | $ | 660,770 | $ | 468,208 | $ | 540,952 | |||||||||||||||
Portfolio Turnover (c) (i) | 4 | % | 8 | % | 7 | % | 47 | %(j) | 7 | % | 13 | % | |||||||||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from May 31 to February 28.
(b) Per share net investment income (loss) has been calculated using the average daily shares method.
(c) Not annualized for periods less than one year.
(d) 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.
(e) Annualized for periods less than one year.
(f) Does not include acquired fund fees and expenses, if any.
(g) 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 September 30, 2023, instead of coinciding with the Fund's fiscal year end.
(h) 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.
(i) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares.
(j) Reflects increased trading activity due to transition or asset allocation shift.
(continues on next page)
See notes to financial statements.
15
USAA Mutual Funds Trust | Financial Highlights — continued | ||||||
For a Share Outstanding Throughout Each Period
USAA Precious Metals and Minerals Fund | |||||||||||||||||||||||||||
Institutional Shares | |||||||||||||||||||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | Year Ended May 31, 2021 | Year Ended May 31, 2020 | Year Ended May 31, 2019 | Year Ended May 31, 2018 | ||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 18.53 | $ | 23.06 | $ | 19.76 | $ | 12.40 | $ | 13.06 | $ | 13.07 | |||||||||||||||
Investment Activities: | |||||||||||||||||||||||||||
Net investment income (loss) (b) | 0.17 | 0.22 | 0.12 | (0.01 | ) | 0.01 | (0.01 | ) | |||||||||||||||||||
| Net realized and unrealized gains (losses) | (2.54 | ) | (4.56 | ) | 3.22 | 7.37 | (0.67 | ) | — | (c) | |||||||||||||||||
| Total from Investment Activities | (2.37 | ) | (4.34 | ) | 3.34 | 7.36 | (0.66 | ) | (0.01 | ) | |||||||||||||||||
Distributions to Shareholders from: | |||||||||||||||||||||||||||
Net investment income | (0.19 | ) | (0.19 | ) | (0.04 | ) | — | — | — | ||||||||||||||||||
Total Distributions | (0.19 | ) | (0.19 | ) | (0.04 | ) | — | — | — | ||||||||||||||||||
Net Asset Value, End of Period | $ | 15.97 | $ | 18.53 | $ | 23.06 | $ | 19.76 | $ | 12.40 | $ | 13.06 | |||||||||||||||
Total Return (d) (e) | (12.85 | )% | (18.84 | )% | 16.90 | % | 59.35 | % | (5.05 | )% | (0.08 | )% | |||||||||||||||
Ratios to Average Net Assets: | |||||||||||||||||||||||||||
Net Expenses (f) (g) (h) (i) | 0.98 | % | 0.98 | % | 0.99 | % | 1.00 | % | 1.00 | %(j) | 0.89 | % | |||||||||||||||
Net Investment Income (Loss) (f) | 1.44 | % | 1.13 | % | 0.55 | % | (0.05 | )% | 0.12 | % | (0.07 | )% | |||||||||||||||
Gross Expenses (f) (g) | 1.12 | % | 1.05 | % | 1.05 | % | 1.06 | % | 1.19 | % | 0.89 | % | |||||||||||||||
Supplemental Data: | |||||||||||||||||||||||||||
Net Assets at end of period (000's) | $ | 19,681 | $ | 20,602 | $ | 26,338 | $ | 21,855 | $ | 21,327 | $ | 3,632 | |||||||||||||||
Portfolio Turnover (d) (k) | 4 | % | 8 | % | 7 | % | 47 | %(l) | 7 | % | 13 | % | |||||||||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from May 31 to February 28.
(b) Per share net investment income (loss) has been calculated using the average daily share method.
(c) Amount is less than $0.005 per share.
(d) Not annualized for periods less than one year.
(e) Assumes reinvestment of all net investment income and realized capital gain distributions, if any, during the period. Includes adjustments in accordance with U.S. Generally Accepted Accounting Principles and could differ from the Lipper reported return.
(f) Annualized for periods less than one year.
(g) Does not include acquired fund fees and expenses, if any.
(h) 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 September 30, 2023, instead of coinciding with the Fund's fiscal year end.
(i) 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.
(j) Effective June 6, 2018, USAA Asset Management Company (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.
(k) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares.
(l) Reflects increased trading activity due to transition or asset allocation shift.
(continues on next page)
See notes to financial statements.
16
USAA Mutual Funds Trust | Financial Highlights — continued | ||||||
For a Share Outstanding Throughout Each Period
USAA Precious Metals and Minerals Fund | |||||||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | Year Ended May 31, 2021 | Year Ended May 31, 2020 | Year Ended May 31, 2019 | Year Ended May 31, 2018 | ||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 17.91 | $ | 22.29 | $ | 19.13 | $ | 12.04 | $ | 12.74 | $ | 12.82 | |||||||||||||||
Investment Activities: | |||||||||||||||||||||||||||
Net investment income (loss) | 0.13 | (b) | 0.14 | (b) | 0.04 | (b) | (0.05 | )(b) | (0.03 | )(b) | 0.16 | ||||||||||||||||
| Net realized and unrealized gains (losses) | (2.47 | ) | (4.39 | ) | 3.12 | 7.14 | (0.67 | ) | (0.24 | ) | |||||||||||||||||
| Total from Investment Activities | (2.34 | ) | (4.25 | ) | 3.16 | 7.09 | (0.70 | ) | (0.08 | ) | |||||||||||||||||
Distributions to Shareholders from: | |||||||||||||||||||||||||||
Net investment income | (0.13 | ) | (0.13 | ) | — | — | — | — | |||||||||||||||||||
Total Distributions | (0.13 | ) | (0.13 | ) | — | — | — | — | |||||||||||||||||||
| Redemption Fees added to Beneficial Interests | — | — | — | — | — | — | (c) | ||||||||||||||||||||
Net Asset Value, End of Period | $ | 15.44 | $ | 17.91 | $ | 22.29 | $ | 19.13 | $ | 12.04 | $ | 12.74 | |||||||||||||||
| Total Return (excludes sales charges) (d) (e) | (13.08 | )% | (19.08 | )% | 16.52 | % | 58.89 | % | (5.49 | )% | (0.62 | )% | |||||||||||||||
Ratios to Average Net Assets: | |||||||||||||||||||||||||||
Net Expenses (f) (g) (h) (i) | 1.31 | % | 1.31 | % | 1.31 | % | 1.27 | % | 1.38 | % | 1.30 | % | |||||||||||||||
Net Investment Income (Loss) (f) | 1.17 | % | 0.74 | % | 0.21 | % | (0.32 | )% | (0.27 | )% | (0.43 | )% | |||||||||||||||
Gross Expenses (f) (g) | 1.40 | % | 1.34 | % | 1.34 | % | 1.27 | % | 1.38 | % | 1.30 | % | |||||||||||||||
Supplemental Data: | |||||||||||||||||||||||||||
Net Assets at end of period (000's) | $ | 23,124 | $ | 28,203 | $ | 26,282 | $ | 28,653 | $ | 17,744 | $ | 16,881 | |||||||||||||||
Portfolio Turnover (d) (j) | 4 | % | 8 | % | 7 | % | 47 | %(k) | 7 | % | 13 | % | |||||||||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from May 31 to February 28.
(b) Per share net investment income (loss) has been calculated using the average daily shares method.
(c) Amount is less than $0.005 per share.
(d) Not annualized for periods less than one year.
(e) Assumes reinvestment of all net investment income and realized capital gain distributions, if any, during the period. Includes adjustments in accordance with U.S. Generally Accepted Accounting Principles and could differ from the Lipper reported return.
(f) Annualized for periods less than one year.
(g) Does not include acquired fund fees and expenses, if any.
(h) 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 September 30, 2023, instead of coinciding with the Fund's fiscal year end.
(i) 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.
(j) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares.
(k) Reflects increased trading activity due to transition or asset allocation shift.
See notes to financial statements.
17
USAA Mutual Funds Trust | Notes to Financial Statements February 28, 2023 | ||||||
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.
On June 29, 2022, the Board of Trustees (the "Board") approved the fiscal year-end change for the Fund from May 31 to February 28. The first full cycle of the new fiscal year-end reporting will begin March 1, 2023. As a result of the change, the Fund has a February 28, 2023 fiscal nine-month transition period, the results of which are reported in this Annual Report for the period ended February 28, 2023.
Victory Capital Management ("VCM" or 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 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 (unadjusted) in active markets for identical securities
• Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, or credit spreads, applicable to those securities, etc.)
• Level 3 — significant unobservable inputs (including the Adviser's assumptions in determining the fair value of investments)
18
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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, appointed as the valuation designee by the Board, has established the Pricing and Liquidity Committee (the "Committee"), and subject to Board oversight, the Committee administers and oversees the Fund's valuation policies and procedures, which are approved by the Board.
Portfolio securities listed or traded on securities exchanges, including Exchange-Traded Funds ("ETFs"), and American Depositary Receipts, 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 February 28, 2023, 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 | $ | 481,131 | $ | — | $ | 83 | $ | 481,214 | |||||||||||
Collateral for Securities Loaned | — | (a) | — | — | — | (a) | |||||||||||||
Total | $ | 481,131 | $ | — | $ | 83 | $ | 481,214 | |||||||||||
(a) Rounds to less than $1 thousand.
As of February 28, 2023, there were no transfers 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.
19
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
Derivative Instruments:
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 February 28, 2023, 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 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 Statements of Operations.
20
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 February 28, 2023.
| Value of Securities on Loan | Non-Cash Collateral | Cash Collateral | |||||||||
| $ | — | (a) | $ | — | $ | — | (a) | ||||
(a) Rounds to less than $1 thousand.
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 Statements 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 Statements 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 had a tax year end of May 31, and effective February 28, 2023, the Fund changed its tax year end to February 28.
For the nine months ended February 28, 2023, 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.
21
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 nine months ended February 28, 2023, were as follows for the Fund (amounts in thousands):
Excluding | |||||||
Purchases | Sales | ||||||
$ | 17,079 | $ | 35,815 | ||||
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 vcm.com. As of February 28, 2023, certain fund-of-funds owned a percentage of the 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 | 0.5 | ||||||
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.
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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements of Operations as Investment advisory fees.
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.
22
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
The performance period for each share class consists of the current month plus the previous 35 months. The following table is utilized to determine the extent of the performance adjustment:
| Over/Under Performance Relative to Index (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, 2022, to February 28, 2023, performance adjustments were $(81), $(2), and $(4) for Fund Shares, Institutional Shares, and Class A, in thousands, respectively. Performance adjustments were (0.02)%, (0.02)%, and (0.03)% for Fund Shares, Institutional Shares, and Class A, respectively. 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 nine months ended February 28, 2023, and 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, Institutional Shares, and Class A, respectively. Amounts incurred for the nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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
23
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements of Operations as 12b-1 fees.
In addition, the Distributor is entitled to receive commissions in connection with sales of Class A. For the nine months ended February 28, 2023, the Distributor received less than $1 thousand from commissions earned 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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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 September 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
24
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
the expense limits. As of February 28, 2023, 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, 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.
As of February 28, 2023, 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 February 28, 2023.
| Expires 2023 | Expires 2024 | Expires 2025 | Expires 2026 | Total | |||||||||||||||
| $ | 1 | $ | 23 | $ | 22 | $ | 34 | $ | 80 | ||||||||||
As of May 31, 2022, the following amounts were available to be repaid to the Adviser (amounts in thousands).
| 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 nine months ended February 28, 2023, and 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. Global markets, or those in a particular region, may all react in similar
25
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
fashion to important political, economic, or other developments. Events and evolving conditions in certain economies or markets may alter the risks associated with investments tied to countries or regions that historically were perceived as comparatively stable and make such investments riskier and more volatile.
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 27, 2022, with a termination date of June 26, 2023. 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 nine months ended February 28, 2023, 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 paid a pro-rata portion of the commitment fees plus any interest on amounts borrowed. For the period from June 1, 2022, through June 27, 2022, interest was based on the one-month London Interbank Offered Rate ("LIBOR") plus one percent. Effective with the renewal, for the period June 28, 2022, through February 28, 2023, interest was based on the one-month Secured Overnight Financing Rate ("SOFR") plus 1.10 percent. The Fund did not experience a material financial impact transitioning from LIBOR to SOFR. Interest charged to the 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 nine months ended February 28, 2023, and 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 Statements of Operations under Interfund lending fees. As a Lender, interest earned by the Fund, if any, during the period, is reflected on the Statements of Operations under Interfund lending.
The average borrowing or lending for the days outstanding and average interest rate for the Fund during the nine months ended February 28, 2023, were as follows (amounts in thousands):
| Borrower or Lender | Amount Outstanding at February 28, 2023 | Average Borrowing* | Days Borrowing Outstanding | Average Interest Rate* | Maximum Borrowing During the Period | ||||||||||||||||||
Borrower | $ | — | $ | 1,661 | 1 | 4.59 | % | $ | 1,661 | ||||||||||||||
* Based on the number of days borrowings were outstanding for the nine months ended February 28, 2023.
The Fund did not utilize or participate in the Facility during the year ended May 31, 2022.
26
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
8. 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 February 28, 2023, on the Statement 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):
Nine Months Ended February 28, 2023 | |||||||
| Distributions Paid From | |||||||
| Ordinary Income | Total Distributions Paid | ||||||
$ | 4,802 | $ | 4,802 | ||||
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 | ||||||||
As of February 28, 2023, 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 Losses | Unrealized Appreciation (Depreciation)* | Total Accumulated Earnings (Loss) | ||||||||||||||||||
| $ | 4,735 | $ | (879 | ) | $ | 3,856 | $ | (775,074 | ) | $ | 55,354 | $ | (715,864 | ) | |||||||||
* The difference between the book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to tax deferral of losses on wash sales and passive foreign investment company adjustments.
As of February 28, 2023, 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 | |||||||||
| $ | 13,804 | $ | 761,270 | $ | 775,074 | ||||||
27
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
As of February 28, 2023, 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) | ||||||||||||
| $ | 425,860 | $ | 122,338 | $ | (66,984 | ) | $ | 55,354 | |||||||
9. Subsequent Events:
The Board, upon recommendation of the Adviser, has approved a change in the name of the Trust and each individual fund within the Trust. On February 23, 2023, an initial filing was made with the SEC to commence the process to effectuate the following changes.
Effective at the start of business on April 24, 2023 (the "Effective Date"), the name of the Trust changed from USAA Mutual Funds Trust to Victory Portfolios III, and all references to USAA Mutual Funds Trust in the summary prospectus, statutory prospectus, and statement of additional information ("SAI") will be replaced by the new name.
Also on the Effective Date, references to the current name of the Fund in the summary prospectus, statutory prospectus, and SAI will be replaced with the new name as follows:
Current Name | New Name | ||||||
USAA Precious Metals and Minerals Fund | Victory Precious Metals and Minerals Fund | ||||||
In addition, on the Effective Date, USAA Investments, a Victory Capital Management Inc. investment franchise, that currently manages the USAA Fixed Income Funds, will change its name to Victory Income Investors, and all references to USAA Investments in the summary prospectus, statutory prospectus, and SAI, will be replaced.
Please note that there will be no changes in the management of the Fund or to the Fund's ticker symbols.
28
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 February 28, 2023, and the related statements of operations for the period from June 1, 2022 through February 28, 2023 and the year ended May 31, 2022, the statements of changes in net assets for the period from June 1, 2022 through February 28, 2023 and each of the two years in the period ended May 31, 2022, the financial highlights for the period from June 1, 2022 through February 28, 2023 and each of the five years in the period ended May 31, 2022, 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 February 28, 2023, the results of its operations for the period from June 1, 2022 through February 28, 2023 and the year ended May 31, 2022, the statements of changes in net assets for the period from June 1, 2022 through February 28, 2023 and each of the two years in the period ended May 31, 2022, and its financial highlights for the period from June 1, 2022 through February 28, 2023 and each of the five years in the period ended May 31, 2022, 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 February 28, 2023, 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
April 28, 2023
29
USAA Mutual Funds Trust | Supplemental Information February 28, 2023 | ||||||
(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 date 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 February 28, 2023 | ||||||
(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 (06/17-06/19); 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 (03/15-03/21). | 45 | None | ||||||||||||||||||
| Paul L. McNamara (July 1948) | Trustee | Trustee since January 2012 | Retired. | 45 | None | ||||||||||||||||||
31
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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) | ||||||||||||||||||
32
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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.
33
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
Officers:
The officers of the Trust, their date 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. (since 2022); 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. (07/01/19-present); Executive Director, Investment and Financial Administration, USAA (2012-06/30/19); 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. (07/01/19-present); Accounting/ Financial Director, USAA (12/13-06/30/19). | ||||||||||||
| 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). | ||||||||||||
34
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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). | ||||||||||||
35
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 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 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 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 September 1, 2022, through February 28, 2023.
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 9/1/22 | Actual Ending Account Value 2/28/23 | Hypothetical Ending Account Value 2/28/23 | Actual Expenses Paid During Period 9/1/22- 2/28/23* | Hypothetical Expenses Paid During Period 9/1/22- 2/28/23* | Annualized Expense Ratio During Period 9/1/22- 2/28/23 | ||||||||||||||||||||||
Fund Shares | $ | 1,000.00 | $ | 1,173.70 | $ | 1,018.84 | $ | 6.47 | $ | 6.01 | 1.20 | % | |||||||||||||||
Institutional Shares | 1,000.00 | 1,174.40 | 1,019.89 | 5.34 | 4.96 | 0.99 | % | ||||||||||||||||||||
Class A | 1,000.00 | 1,173.10 | 1,018.25 | 7.11 | 6.61 | 1.32 | % | ||||||||||||||||||||
* Expenses are equal to the average account value multiplied by the Fund's annualized expense ratio multiplied by 181/365 (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 February 28, 2023 | ||||||
(Unaudited)
Additional Federal Income Tax Information
The following federal tax information related to the Fund's fiscal nine months ended February 28, 2023, 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 2024.
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 nine months ended February 28, 2023 (amounts in thousands):
| Dividends Received Deduction (corporate shareholders) | Qualified Dividend Income (non-corporate shareholders) | ||||||
| 54 | % | 100 | % | ||||
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 February 28, 2023, were as follows:
| Foreign Source Income | Foreign Tax Expense | ||||||
| $ | 0.23 | $ | 0.03 | ||||
37
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 8-9, 2022, 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 8-9, 2022, 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 21, 2022.
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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USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 program, (iv) derivatives risk management program, and (v) 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 adjustment, 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. 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- and five-year periods ended June 30, 2022, and was below the average of its performance universe and its Lipper index for the three- and ten-year periods ended June 30, 2022. The Board took into account management discussion of the Fund's performance, including the Fund's more recent improved performance.
39
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 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.
40
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 10, 2023, 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- RN (prior to August 2022, Form N-LIQUID) and recommended no material changes to the LRMP.
41
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 | ||||||
vcm.com | (800) 235-8396 | ||||||
23407-0423
February 28, 2023
Annual Report
USAA Sustainable World Fund
(Also Known as Victory Sustainable World Fund*)
* Effective at the start of business on April 24, 2023, the Fund name will change to Victory Sustainable World Fund. Please see Notes to the Financial Statements for subsequent event information.
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.
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, 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 | 30 | ||||||
Statements of Operations | 31 | ||||||
Statements of Changes in Net Assets | 32 | ||||||
Financial Highlights | 34 | ||||||
Notes to Financial Statements | 37 | ||||||
| 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,
If you are reading this letter but double-checking your calendar, be assured there's no mistake. The annual reporting period for your USAA Mutual Fund has shifted from a fiscal year ended May 31st to a fiscal year ended February 28th/the last day of February. This change has no material impact on any of your investments. This change aims to help us improve efficiencies and reduce operational costs. Therefore, this letter covers an abbreviated "annual" period from June 1, 2022, through February 28, 2023. Future annual reports will cover the 12-month period ended February 28th/the last day of February going forward.
Our most recent annual reporting period has been a challenging period for investors. Consider some of the headwinds: heightened geopolitical tensions, a terrible war in Eastern Europe, elevated energy and food costs, high inflation, and rising interest rates. All this has dampened global growth and created a difficult backdrop for both bond and stock investors.
The inflation data was particularly troublesome and surprised many throughout the past year with some of the highest readings since the 1970s. In response, the U.S. Federal Reserve (the "Fed") continued with its monetary tightening and boosted the Fed funds interest rate repeatedly throughout the annual reporting period. And if that wasn't enough, zero-COVID-19 policies in China (which fortunately have been recently lifted) further exacerbated supply chain issues. As one might expect, all these obstacles ratcheted up volatility across financial markets.
In terms of the numbers, the S&P 500® Index, the bell-weather proxy for our domestic stock market, delivered a negative total return of almost 3% for our abbreviated annual reporting period. But perhaps what made 2022 even more difficult was the performance of fixed income markets. The Bloomberg US Aggregate Bond Index—a proxy for a diversified fixed income portfolio and one that many investors and institutions follow closely—delivered a negative total return of approximately 4% during the same period. That's not exactly the offset to equity performance that many investors come to expect from bonds.
It's been difficult, and we fully acknowledge that the steady drumbeat of bad news and bouts of stomach-churning volatility can take a toll on investors' psyche. Even when markets often snap back sharply (as happened this past July, October and earlier this calendar year), investors often wonder if they have missed an opportunity.
Through all of the turmoil and challenges in our most recent annual reporting period, we are reminded of two enduring realities: 1) financial markets are dynamic and apt to change abruptly; 2) it's vital to remain calm and rational whenever faced with those inevitable bouts of turmoil.
Fortunately, we think that investors can take comfort knowing that all of our independent investment franchises have experience managing portfolios through a wide variety of market environments. Our investment professionals remain calm during turbulent financial markets, and we think it's imperative that investors do the same.
2
We still believe that a long-term plan, a well-diversified portfolio across asset classes and investment types, and a clear understanding of individual risk tolerances are the key ingredients for staying the course and progressing on investment goals. Moreover, all our investment professionals continually monitor the environment and work hard to position portfolios opportunistically no matter what the markets bring. Remember, turmoil can also create opportunity.
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, we encourage you to contact our Member Service Representatives. Call 800-235-8396, or visit our website at vcm.com.
From all of us here at Victory Capital, thank you for your ongoing confidence and 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?
The reporting period started in the month of June as pressure continued to mount for both stocks and bonds. The U.S. Federal Reserve's (the "Fed") hawkish pivot continued to put pressure on equity multiples. With stubbornly high inflation readings, 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.
In the third quarter, global equities declined, continuing the downward trend from the first half of 2022. The quarter began with a rally that continued into mid-August, on hopes that the Fed would pivot toward a more accommodative policy. However, messaging from Fed Chairman, Jerome Powell, and a stronger-than-expected inflation report in early September dampened investor optimism over the central bank's trajectory and the odds of avoiding recession. The Fed went on to hike rates aggressively by 75 basis points ("bps") twice during the quarter, bringing the benchmark Fed funds rate target to a range of 3.0% to 3.25%, as compared to 0% to 0.25% at the beginning of the year. (A basis point is 1/100th of a percentage point.) For its part, the European Central Bank raised its reference rate by 50 bps in July, followed by another 75 bps in September. Other factors that weighed on sentiment during the quarter included the ongoing Russia-Ukraine war, an energy crisis in Europe, and the resumption of COVID-19 lockdowns in China.
Global equities rebounded in the fourth quarter trimming full year losses. Gains in October and November were sparked by signs of peaking inflation alongside less hawkish commentary from Fed Chairman Powell raising hope that the central bank would end its interest rate hiking cycle sometime in early 2023. Indeed, both the Fed and the European Central Bank raised their benchmark overnight lending rates by a more modest 50 bps in mid-December. Also supporting sentiment, the Chinese government began to ease their zero-COVID-19 policy that had weighed on global economic growth for much of 2022. However, stocks retreated into year-end as investors shifted their focus to the potential impact higher rates might have on economic growth and corporate earnings in the coming year.
As the reporting period crossed into 2023, global equities started off the year logging positive returns in the month of January. Bonds also rallied at the start of the year on hopes that the Fed's hawkish pivot would come to an end in 2023. As the calendar moved to February, stronger than expected employment and inflation reports caused investors to reevaluate interest rate expectations for 2023 and consider that rates could stay higher for longer. The result was a reversal in global equities and bonds which ended the month lower.
• 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. The Fund's fiscal year-end changed this year to February 28 from May 31, resulting in a
4
USAA Sustainable World Fund
Managers' Commentary (continued)
shorter reporting period for fiscal year ended 2023. For the nine-month reporting period ended February 28, 2023, the Fund Shares, Institutional Shares, and Class A had a total return (at net asset value) of -2.01%, -1.96%, and -2.19% respectively. This compares to returns of -2.51% for the MSCI All-Country World Index, and -1.31% 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 and Victory Capital's Victory Solutions platform.
• What strategies did you employ during the reporting period?
During the reporting period ending on February 28, 2023, the Fund outperformed the MSCI All-Country World Index.
On a country basis, stock selection in the United States was a large positive contributor. This was partially offset by negative stock selection in France.
Reviewing performance from a sector standpoint, stock selection was a positive contributor in information technology and financials. The energy and materials sectors had a negative stock selection effect.
In managing the Fund, the portfolio managers integrate sustainable investing, responsible investing, and/or environmental, social, and governance ("ESG") analysis (collectively referred to as "sustainable investing"), which generally is understood to entail incorporating financially material ESG considerations into the investment process in order to seek better risk-adjusted returns. Such considerations can include, for example, environmental implications, such as a company's commitment to reducing carbon emissions, adoption of corporate cultural policies that promote employee inclusion and diversity, fair labor practices, measures to protect privacy and data security, and responsible supply chain management. Sustainable investing principles and considerations are not an exclusive factor, but rather an additional inclusive consideration to an investment team's process. The sustainable investing factors considered, the types of information used, and the integration of those factors and information into the investment process varies by investment team.
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 February 28, 2023
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 | –8.57 | % | –8.50 | % | –8.83 | % | –14.09 | % | –8.26 | % | –8.25 | % | |||||||||||||||
Five Year | 6.34 | % | 6.40 | % | 6.06 | % | 4.81 | % | 5.82 | % | 4.85 | % | |||||||||||||||
Ten Year | 8.25 | % | NA | 7.98 | % | 7.34 | % | 7.93 | % | 7.58 | % | ||||||||||||||||
Since Inception | NA | 7.20 | % | 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 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 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 Lipper Global Funds Index tracks the total return performance of funds within the Lipper Global Funds category. This category includes funds that invest at least 25% of their portfolio in securities traded outside of the United States and that may own U.S. securities as well. 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 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 | February 28, 2023 | ||||||
(Unaudited)
Investment Objective and Portfolio Holdings:
The Fund seeks capital appreciation.
Top 10 Sectors*:
February 28, 2023
(% of Net Assets)
Information Technology | 20.1 | % | |||||
Financials | 16.9 | % | |||||
Consumer Discretionary | 12.2 | % | |||||
Health Care | 11.9 | % | |||||
Industrials | 9.7 | % | |||||
Consumer Staples | 7.7 | % | |||||
Communication Services | 6.5 | % | |||||
Energy | 4.4 | % | |||||
Materials | 4.1 | % | |||||
Utilities | 2.9 | % | |||||
Country Allocation:
February 28, 2023
(% 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 February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Common Stocks (98.4%) | |||||||||||
Australia (2.3%): | |||||||||||
Consumer Discretionary (0.6%): | |||||||||||
Aristocrat Leisure Ltd. | 266,181 | $ | 6,521 | ||||||||
Lovisa Holdings Ltd. | 29,307 | 473 | |||||||||
PWR Holdings Ltd. | 57,235 | 388 | |||||||||
7,382 | |||||||||||
Energy (0.1%): | |||||||||||
Santos Ltd. | 68,255 | 319 | |||||||||
Woodside Energy Group Ltd. | 18,737 | 454 | |||||||||
773 | |||||||||||
Financials (0.9%): | |||||||||||
Macquarie Group Ltd. | 67,977 | 8,629 | |||||||||
National Australia Bank Ltd. | 47,895 | 964 | |||||||||
QBE Insurance Group Ltd. | 37,378 | 378 | |||||||||
9,971 | |||||||||||
Health Care (0.4%): | |||||||||||
CSL Ltd. | 25,214 | 5,015 | |||||||||
Industrials (0.1%): | |||||||||||
Austal Ltd. | 248,175 | 302 | |||||||||
IPH Ltd. | 41,079 | 223 | |||||||||
Johns Lyng Group Ltd. | 97,070 | 405 | |||||||||
Qantas Airways Ltd. (a) | 89,812 | 386 | |||||||||
1,316 | |||||||||||
Information Technology (0.0%): (b) | |||||||||||
Appen Ltd. | 90,756 | 141 | |||||||||
Materials (0.1%): | |||||||||||
Imdex Ltd. | 177,379 | 280 | |||||||||
Mineral Resources Ltd. | 8,276 | 457 | |||||||||
Ramelius Resources Ltd. | 412,835 | 248 | |||||||||
Rio Tinto Ltd. | 7,856 | 614 | |||||||||
1,599 | |||||||||||
Real Estate (0.1%): | |||||||||||
Charter Hall Group | 37,890 | 337 | |||||||||
Goodman Group | 25,641 | 341 | |||||||||
678 | |||||||||||
26,875 | |||||||||||
Austria (0.0%): (b) | |||||||||||
Industrials (0.0%): | |||||||||||
ANDRITZ AG | 8,715 | 538 | |||||||||
Belgium (0.4%): | |||||||||||
Information Technology (0.4%): | |||||||||||
Melexis NV | 46,772 | 5,059 | |||||||||
See notes to financial statements.
8
| USAA Mutual Funds Trust USAA Sustainable World Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Bermuda (0.6%): | |||||||||||
Industrials (0.6%): | |||||||||||
Triton International Ltd. | 101,709 | $ | 7,012 | ||||||||
Brazil (0.4%): | |||||||||||
Consumer Discretionary (0.1%): | |||||||||||
Lojas Renner SA | 109,400 | 390 | |||||||||
Vibra Energia SA | 102,391 | 289 | |||||||||
679 | |||||||||||
Consumer Staples (0.0%): (b) | |||||||||||
Sao Martinho SA | 64,300 | 334 | |||||||||
Energy (0.0%): (b) | |||||||||||
Petroleo Brasileiro SA, ADR | 36,973 | 410 | |||||||||
Financials (0.1%): | |||||||||||
Itau Unibanco Holding SA, ADR | 156,269 | 751 | |||||||||
Health Care (0.0%): (b) | |||||||||||
Hypera SA | 53,400 | 425 | |||||||||
Industrials (0.1%): | |||||||||||
Santos Brasil Participacoes SA | 197,100 | 302 | |||||||||
SIMPAR SA | 180,900 | 248 | |||||||||
550 | |||||||||||
Materials (0.1%): | |||||||||||
Gerdau SA Preference Shares | 71,800 | 393 | |||||||||
Vale SA | 60,800 | 991 | |||||||||
1,384 | |||||||||||
4,533 | |||||||||||
Canada (3.9%): | |||||||||||
Consumer Discretionary (0.2%): | |||||||||||
Lululemon Athletica, Inc. (a) | 5,896 | 1,823 | |||||||||
Consumer Staples (0.7%): | |||||||||||
Alimentation Couche-Tard, Inc. | 166,487 | 7,811 | |||||||||
Energy (0.5%): | |||||||||||
Parex Resources, Inc. | 376,464 | 6,137 | |||||||||
Pason Systems, Inc. | 15,950 | 170 | |||||||||
Trican Well Service Ltd. (a) | 70,976 | 178 | |||||||||
6,485 | |||||||||||
Financials (0.5%): | |||||||||||
Fairfax Financial Holdings Ltd. | 8,400 | 5,874 | |||||||||
Industrials (0.7%): | |||||||||||
Canadian Pacific Railway Ltd. | 105,652 | 8,025 | |||||||||
Information Technology (0.9%): | |||||||||||
Constellation Software, Inc. | 6,198 | 10,659 | |||||||||
Lumine Group, Inc. (a) | 20,903 | 214 | |||||||||
10,873 | |||||||||||
See notes to financial statements.
9
| USAA Mutual Funds Trust USAA Sustainable World Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Materials (0.4%): | |||||||||||
Aginco Eagle Mines Ltd. | 100,133 | $ | 4,611 | ||||||||
Karora Resources, Inc. (a) | 63,952 | 210 | |||||||||
Wesdome Gold Mines Ltd. (a) | 60,276 | 288 | |||||||||
5,109 | |||||||||||
46,000 | |||||||||||
China (3.7%): | |||||||||||
Communication Services (1.2%): | |||||||||||
Baidu, Inc. Class A (a) | 37,802 | 650 | |||||||||
Tencent Holdings Ltd. | 317,200 | 13,934 | |||||||||
14,584 | |||||||||||
Consumer Discretionary (0.6%): | |||||||||||
Alibaba Group Holding Ltd. (a) | 222,376 | 2,444 | |||||||||
BYD Co. Ltd. Class H | 28,500 | 766 | |||||||||
Fuyao Glass Industry Group Co. Ltd. Class A | 73,200 | 391 | |||||||||
Hisense Home Appliances Group Co. Ltd. Class A | 193,400 | 532 | |||||||||
JD.com, Inc. Class A | 28,564 | 635 | |||||||||
Meituan Class B (a) (c) | 78,580 | 1,364 | |||||||||
Pinduoduo, Inc., ADR (a) | 12,215 | 1,072 | |||||||||
Yadea Group Holdings Ltd. (c) | 196,000 | 421 | |||||||||
7,625 | |||||||||||
Consumer Staples (0.5%): | |||||||||||
Chenguang Biotech Group Co. Ltd. Class A | 155,400 | 404 | |||||||||
Foshan Haitian Flavouring & Food Co. Ltd. Class A | 400,857 | 4,751 | |||||||||
Inner Mongolia Yili Industrial Group Co. Ltd. Class A | 90,400 | 397 | |||||||||
5,552 | |||||||||||
Energy (0.1%): | |||||||||||
PetroChina Co. Ltd. Class H | 1,824,000 | 931 | |||||||||
Financials (0.7%): | |||||||||||
China Merchants Bank Co. Ltd. Class H | 172,000 | 933 | |||||||||
CITIC Securities Co. Ltd. Class A | 187,300 | 557 | |||||||||
Industrial & Commercial Bank of China Ltd. Class H | 12,267,370 | 6,121 | |||||||||
Ping An Insurance Group Co. of China Ltd. Class H | 78,000 | 533 | |||||||||
8,144 | |||||||||||
Health Care (0.2%): | |||||||||||
CSPC Pharmaceutical Group Ltd. | 602,000 | 647 | |||||||||
Hygeia Healthcare Holdings Co. Ltd. (a) (c) | 69,400 | 506 | |||||||||
Pharmaron Beijing Co. Ltd. Class H (c) | 47,300 | 265 | |||||||||
Shenzhen Mindray Bio-Medical Electronics Co. Ltd. Class A | 11,700 | 529 | |||||||||
Wuxi Biologics Cayman, Inc. (a) (c) | 87,500 | 612 | |||||||||
2,559 | |||||||||||
Industrials (0.1%): | |||||||||||
China Railway Group Ltd. Class H | 865,000 | 451 | |||||||||
ZTO Express Cayman, Inc., ADR | 13,182 | 317 | |||||||||
768 | |||||||||||
See notes to financial statements.
10
| USAA Mutual Funds Trust USAA Sustainable World Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Information Technology (0.1%): | |||||||||||
Glodon Co. Ltd. Class A | 57,900 | $ | 501 | ||||||||
Luxshare Precision Industry Co. Ltd. Class A | 112,900 | 486 | |||||||||
WUS Printed Circuit Kunshan Co. Ltd. Class A | 181,730 | 429 | |||||||||
1,416 | |||||||||||
Materials (0.1%): | |||||||||||
Shandong Nanshan Aluminum Co. Ltd. Class A | 846,400 | 441 | |||||||||
Tianqi Lithium Corp. Class A (a) | 30,600 | 361 | |||||||||
Wanhua Chemical Group Co. Ltd. Class A | 27,300 | 410 | |||||||||
1,212 | |||||||||||
Real Estate (0.1%): | |||||||||||
Longfor Group Holdings Ltd. (c) | 151,000 | 432 | |||||||||
Seazen Group Ltd. (a) | 770,000 | 259 | |||||||||
691 | |||||||||||
Utilities (0.0%): (b) | |||||||||||
China Longyuan Power Group Corp. Ltd. Class H | 346,000 | 424 | |||||||||
43,906 | |||||||||||
Denmark (1.9%): | |||||||||||
Consumer Discretionary (0.6%): | |||||||||||
Pandora A/S | 74,859 | 7,092 | |||||||||
Health Care (1.3%): | |||||||||||
Novo Nordisk A/S Class B | 106,395 | 15,030 | |||||||||
Industrials (0.0%): (b) | |||||||||||
AP Moller — Maersk A/S Class B | 173 | 403 | |||||||||
INVISIO AB | 15,234 | 324 | |||||||||
727 | |||||||||||
22,849 | |||||||||||
Finland (0.1%): | |||||||||||
Health Care (0.0%): (b) | |||||||||||
Revenio Group Oyj | 5,527 | 203 | |||||||||
Information Technology (0.0%): (b) | |||||||||||
Nokia Oyj | 82,930 | 384 | |||||||||
Utilities (0.1%): | |||||||||||
Fortum Oyj | 25,569 | 391 | |||||||||
978 | |||||||||||
France (2.8%): | |||||||||||
Communication Services (0.0%): (b) | |||||||||||
Publicis Groupe SA | 8,227 | 653 | |||||||||
Consumer Discretionary (0.5%): | |||||||||||
La Francaise des Jeux SAEM (c) | 107,722 | 4,252 | |||||||||
LVMH Moet Hennessy Louis Vuitton SE | 2,014 | 1,674 | |||||||||
5,926 | |||||||||||
See notes to financial statements.
11
| USAA Mutual Funds Trust USAA Sustainable World Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Consumer Staples (0.1%): | |||||||||||
Pernod Ricard SA | 3,384 | $ | 706 | ||||||||
Energy (0.5%): | |||||||||||
Gaztransport Et Technigaz SA | 53,956 | 5,634 | |||||||||
Financials (0.1%): | |||||||||||
AXA SA | 22,087 | 696 | |||||||||
BNP Paribas SA | 9,718 | 679 | |||||||||
1,375 | |||||||||||
Health Care (0.1%): | |||||||||||
Equasens | 2,628 | 219 | |||||||||
EssilorLuxottica SA | 1,828 | 317 | |||||||||
Vetoquinol SA | 2,414 | 205 | |||||||||
741 | |||||||||||
Industrials (0.7%): | |||||||||||
Cie de Saint-Gobain | 10,119 | 601 | |||||||||
Eiffage SA | 4,031 | 442 | |||||||||
Rexel SA | 16,868 | 419 | |||||||||
Safran SA | 45,393 | 6,409 | |||||||||
Teleperformance | 1,084 | 282 | |||||||||
Thermador Groupe | 3,146 | 322 | |||||||||
8,475 | |||||||||||
Information Technology (0.1%): | |||||||||||
Capgemini SE | 3,233 | 606 | |||||||||
Edenred | 6,625 | 373 | |||||||||
Lectra | 7,367 | 275 | |||||||||
1,254 | |||||||||||
Materials (0.7%): | |||||||||||
Arkema SA | 78,333 | 7,940 | |||||||||
Real Estate (0.0%): (b) | |||||||||||
Klepierre SA | 11,935 | 298 | |||||||||
33,002 | |||||||||||
Germany (1.6%): | |||||||||||
Communication Services (0.1%): | |||||||||||
Deutsche Telekom AG | 48,174 | 1,081 | |||||||||
Consumer Discretionary (0.4%): | |||||||||||
Mercedes-Benz Group AG | 9,223 | 707 | |||||||||
Volkswagen AG Preference Shares | 31,712 | 4,316 | |||||||||
5,023 | |||||||||||
Energy (0.0%): (b) | |||||||||||
CropEnergies AG | 14,189 | 175 | |||||||||
VERBIO Vereinigte BioEnergie AG | 5,568 | 279 | |||||||||
454 | |||||||||||
Financials (0.0%): (b) | |||||||||||
Hannover Rueck SE | 2,476 | 481 | |||||||||
See notes to financial statements.
12
| USAA Mutual Funds Trust USAA Sustainable World Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Health Care (0.2%): | |||||||||||
Bayer AG Registered Shares | 10,081 | $ | 599 | ||||||||
Merck KGaA | 3,993 | 757 | |||||||||
Nexus AG | 5,426 | 304 | |||||||||
1,660 | |||||||||||
Industrials (0.2%): | |||||||||||
| 2G Energy AG | 11,912 | 284 | |||||||||
Amadeus Fire AG | 1,977 | 257 | |||||||||
Brenntag SE | 5,414 | 408 | |||||||||
Daimler Truck Holding AG (a) | 10,330 | 327 | |||||||||
MTU Aero Engines AG | 1,509 | 364 | |||||||||
Pfeiffer Vacuum Technology AG | 1,340 | 221 | |||||||||
| SFC Energy AG (a) | 6,098 | 140 | |||||||||
Siemens AG Registered Shares | 3,890 | 593 | |||||||||
2,594 | |||||||||||
Information Technology (0.2%): | |||||||||||
AIXTRON SE | 13,296 | 408 | |||||||||
Basler AG | 7,419 | 224 | |||||||||
Infineon Technologies AG | 18,779 | 664 | |||||||||
PVA TePla AG (a) | 12,535 | 339 | |||||||||
SAP SE | 2,696 | 306 | |||||||||
1,941 | |||||||||||
Utilities (0.5%): | |||||||||||
RWE AG | 127,191 | 5,398 | |||||||||
18,632 | |||||||||||
Greece (0.1%): | |||||||||||
Energy (0.0%): (b) | |||||||||||
Motor Oil Hellas Corinth Refineries SA | 9,124 | 242 | |||||||||
Financials (0.1%): | |||||||||||
National Bank of Greece SA (a) | 144,651 | 809 | |||||||||
Industrials (0.0%): (b) | |||||||||||
Mytilineos SA | 20,506 | 553 | |||||||||
1,604 | |||||||||||
Hong Kong (0.2%): | |||||||||||
Consumer Discretionary (0.1%): | |||||||||||
Bosideng International Holdings Ltd. | 938,000 | 520 | |||||||||
Man Wah Holdings Ltd. | 313,600 | 321 | |||||||||
841 | |||||||||||
Consumer Staples (0.0%): (b) | |||||||||||
WH Group Ltd. (c) | 413,500 | 241 | |||||||||
Financials (0.0%): (b) | |||||||||||
BOC Hong Kong Holdings Ltd. | 100,500 | 340 | |||||||||
Industrials (0.0%): (b) | |||||||||||
CK Hutchison Holdings Ltd. | 58,500 | 349 | |||||||||
See notes to financial statements.
13
| USAA Mutual Funds Trust USAA Sustainable World Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Real Estate (0.1%): | |||||||||||
China Resources Land Ltd. | 132,000 | $ | 587 | ||||||||
CK Asset Holdings Ltd. | 63,817 | 400 | |||||||||
987 | |||||||||||
2,758 | |||||||||||
India (0.9%): | |||||||||||
Consumer Discretionary (0.1%): | |||||||||||
Mahindra & Mahindra Ltd. | 65,941 | 1,012 | |||||||||
Raymond Ltd. | 16,241 | 249 | |||||||||
1,261 | |||||||||||
Consumer Staples (0.1%): | |||||||||||
Varun Beverages Ltd. | 37,681 | 592 | |||||||||
Financials (0.3%): | |||||||||||
Axis Bank Ltd. | 62,695 | 639 | |||||||||
Cholamandalam Investment & Finance Co. Ltd. | 92,254 | 844 | |||||||||
ICICI Bank Ltd., ADR | 88,866 | 1,838 | |||||||||
Manappuram Finance Ltd. | 390,039 | 484 | |||||||||
3,805 | |||||||||||
Health Care (0.0%): (b) | |||||||||||
Apollo Hospitals Enterprise Ltd. | 8,656 | 461 | |||||||||
Industrials (0.1%): | |||||||||||
Ashok Leyland Ltd. | 247,029 | 435 | |||||||||
Larsen & Toubro Ltd. | 46,151 | 1,176 | |||||||||
1,611 | |||||||||||
Information Technology (0.1%): | |||||||||||
Infosys Ltd., ADR | 44,068 | 791 | |||||||||
WNS Holdings Ltd., ADR (a) | 3,511 | 305 | |||||||||
1,096 | |||||||||||
Materials (0.1%): | |||||||||||
JK Paper Ltd. | 76,815 | 360 | |||||||||
Tata Steel Ltd. | 361,096 | 454 | |||||||||
814 | |||||||||||
Utilities (0.1%): | |||||||||||
Power Grid Corp. of India Ltd. | 190,786 | 512 | |||||||||
10,152 | |||||||||||
Indonesia (0.9%): | |||||||||||
Communication Services (0.8%): | |||||||||||
PT Telkom Indonesia Persero Tbk | 34,598,338 | 8,816 | |||||||||
Energy (0.0%): (b) | |||||||||||
PT Adaro Energy Indonesia Tbk | 1,688,400 | 331 | |||||||||
Financials (0.1%): | |||||||||||
PT Bank Mandiri Persero Tbk | 1,301,100 | 853 | |||||||||
10,000 | |||||||||||
See notes to financial statements.
14
| USAA Mutual Funds Trust USAA Sustainable World Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Ireland (1.6%): | |||||||||||
Health Care (0.3%): | |||||||||||
Medtronic PLC | 35,200 | $ | 2,914 | ||||||||
Industrials (1.3%): | |||||||||||
Eaton Corp. PLC | 78,318 | 13,700 | |||||||||
Johnson Controls International PLC | 32,500 | 2,039 | |||||||||
15,739 | |||||||||||
18,653 | |||||||||||
Israel (0.1%): | |||||||||||
Consumer Discretionary (0.0%): (b) | |||||||||||
Maytronics Ltd. (d) | 14,458 | 175 | |||||||||
Financials (0.0%): (b) | |||||||||||
Bank Leumi Le-Israel BM | 34,102 | 265 | |||||||||
Health Care (0.0%): (b) | |||||||||||
Inmode Ltd. (a) | 9,492 | 335 | |||||||||
Information Technology (0.1%): | |||||||||||
Nice Ltd. (a) | 1,809 | 376 | |||||||||
1,151 | |||||||||||
Italy (0.6%): | |||||||||||
Consumer Staples (0.0%): (b) | |||||||||||
Pharmanutra SpA | 3,161 | 200 | |||||||||
Health Care (0.1%): | |||||||||||
El.En. SpA | 39,613 | 654 | |||||||||
Industrials (0.0%): (b) | |||||||||||
Leonardo SpA | 36,432 | 409 | |||||||||
Information Technology (0.0%): (b) | |||||||||||
Sesa SpA | 3,615 | 466 | |||||||||
Utilities (0.5%): | |||||||||||
Enel SpA | 72,877 | 409 | |||||||||
Iren SpA | 117,901 | 204 | |||||||||
Snam SpA | 978,690 | 4,808 | |||||||||
5,421 | |||||||||||
7,150 | |||||||||||
Japan (5.7%): | |||||||||||
Communication Services (1.0%): | |||||||||||
Capcom Co. Ltd. | 206,208 | 6,490 | |||||||||
Intage Holdings, Inc. (d) | 19,700 | 212 | |||||||||
Kakaku.com, Inc. | 250,891 | 3,738 | |||||||||
MarkLines Co. Ltd. | 14,700 | 282 | |||||||||
Nippon Telegraph & Telephone Corp. | 26,334 | 763 | |||||||||
11,485 | |||||||||||
See notes to financial statements.
15
| USAA Mutual Funds Trust USAA Sustainable World Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Consumer Discretionary (0.7%): | |||||||||||
Isuzu Motors Ltd. | 49,000 | $ | 586 | ||||||||
Rinnai Corp. | 2,100 | 147 | |||||||||
Shoei Co. Ltd. | 10,500 | 416 | |||||||||
Snow Peak, Inc. (d) | 13,100 | 212 | |||||||||
Sony Group Corp. | 2,100 | 176 | |||||||||
Subaru Corp. | 21,400 | 343 | |||||||||
Suzuki Motor Corp. | 10,100 | 355 | |||||||||
ZOZO, Inc. | 282,800 | 6,286 | |||||||||
8,521 | |||||||||||
Consumer Staples (0.5%): | |||||||||||
Ajinomoto Co., Inc. | 17,900 | 528 | |||||||||
Create SD Holdings Co. Ltd. | 9,100 | 226 | |||||||||
Seven & i Holdings Co. Ltd. (d) | 10,916 | 488 | |||||||||
Toyo Suisan Kaisha Ltd. | 113,749 | 4,602 | |||||||||
5,844 | |||||||||||
Financials (0.9%): | |||||||||||
eGuarantee, Inc. | 14,100 | 235 | |||||||||
Mitsubishi UFJ Financial Group, Inc. | 1,072,012 | 7,601 | |||||||||
Mizuho Financial Group, Inc. | 37,911 | 591 | |||||||||
ORIX Corp. | 22,574 | 405 | |||||||||
Sumitomo Mitsui Financial Group, Inc. | 19,375 | 846 | |||||||||
Tokio Marine Holdings, Inc. | 21,800 | 463 | |||||||||
10,141 | |||||||||||
Health Care (0.5%): | |||||||||||
Carenet, Inc. (d) | 27,500 | 232 | |||||||||
Hoya Corp. | 45,502 | 4,505 | |||||||||
Medical Data Vision Co. Ltd. | 35,100 | 233 | |||||||||
Nakanishi, Inc. | 10,600 | 219 | |||||||||
Nippon Shinyaku Co. Ltd. | 5,200 | 233 | |||||||||
Olympus Corp. | 18,800 | 317 | |||||||||
Ono Pharmaceutical Co. Ltd. | 20,800 | 424 | |||||||||
Shionogi & Co. Ltd. | 7,500 | 332 | |||||||||
6,495 | |||||||||||
Industrials (1.3%): | |||||||||||
Altech Corp. | 14,900 | 276 | |||||||||
Fuji Electric Co. Ltd. | 89,000 | 3,437 | |||||||||
gremz, Inc. | 15,200 | 274 | |||||||||
Hitachi Ltd. | 6,745 | 341 | |||||||||
ITOCHU Corp. | 27,209 | 813 | |||||||||
JAC Recruitment Co. Ltd. | 15,100 | 268 | |||||||||
Japan Elevator Service Holdings Co. Ltd. | 18,200 | 267 | |||||||||
Komatsu Ltd. | 23,000 | 550 | |||||||||
Management Solutions Co. Ltd. (d) | 10,400 | 255 | |||||||||
Mitsui & Co. Ltd. | 24,120 | 677 | |||||||||
NIPPON EXPRESS HOLDINGS, Inc. | 7,100 | 396 | |||||||||
Nippon Yusen KK (d) | 236,962 | 6,160 | |||||||||
Organo Corp. | 16,400 | 409 | |||||||||
See notes to financial statements.
16
| USAA Mutual Funds Trust USAA Sustainable World Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
SHO-BOND Holdings Co. Ltd. | 5,400 | $ | 213 | ||||||||
S-Pool, Inc. | 46,800 | 221 | |||||||||
Weathernews, Inc. | 4,400 | 217 | |||||||||
14,774 | |||||||||||
Information Technology (0.6%): | |||||||||||
Advantest Corp. | 5,700 | 452 | |||||||||
Cybozu, Inc. | 24,200 | 475 | |||||||||
Digital Arts, Inc. | 3,700 | 145 | |||||||||
Fujitsu Ltd. | 3,659 | 470 | |||||||||
Fukui Computer Holdings, Inc. | 11,900 | 244 | |||||||||
Future Corp. | 23,900 | 308 | |||||||||
Keyence Corp. | 800 | 346 | |||||||||
m-up Holdings, Inc. | 22,500 | 175 | |||||||||
SHIFT, Inc. (a) | 1,500 | 248 | |||||||||
Softcreate Holdings Corp. | 11,200 | 284 | |||||||||
TDK Corp. | 14,100 | 472 | |||||||||
Ulvac, Inc. | 80,682 | 3,093 | |||||||||
6,712 | |||||||||||
Materials (0.1%): | |||||||||||
JCU Corp. | 9,300 | 218 | |||||||||
Maeda Kosen Co. Ltd. | 9,100 | 220 | |||||||||
Shin-Etsu Chemical Co. Ltd. | 3,043 | 422 | |||||||||
Tosoh Corp. | 27,682 | 377 | |||||||||
1,237 | |||||||||||
Real Estate (0.0%): (b) | |||||||||||
Mitsui Fudosan Co. Ltd. | 19,700 | 376 | |||||||||
Utilities (0.1%): | |||||||||||
Tokyo Gas Co. Ltd. | 41,600 | 802 | |||||||||
66,387 | |||||||||||
Luxembourg (0.1%): | |||||||||||
Energy (0.1%): | |||||||||||
Tenaris SA | 30,796 | 507 | |||||||||
Health Care (0.0%): (b) | |||||||||||
Eurofins Scientific SE | 4,482 | 312 | |||||||||
819 | |||||||||||
Malaysia (0.0%): (b) | |||||||||||
Financials (0.0%): | |||||||||||
Public Bank Bhd | 626,700 | 577 | |||||||||
Mexico (0.3%): | |||||||||||
Consumer Discretionary (0.0%): (b) | |||||||||||
Alsea SAB de CV (a) | 180,386 | 399 | |||||||||
Consumer Staples (0.1%): | |||||||||||
Fomento Economico Mexicano SAB de CV, ADR | 7,350 | 676 | |||||||||
See notes to financial statements.
17
| USAA Mutual Funds Trust USAA Sustainable World Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Financials (0.1%): | |||||||||||
Grupo Financiero Banorte SAB de CV Class O | 136,439 | $ | 1,152 | ||||||||
Industrials (0.1%): | |||||||||||
Grupo Aeroportuario del Pacifico SAB de CV Class B | 30,973 | 589 | |||||||||
Real Estate (0.0%): (b) | |||||||||||
Corp Inmobiliaria Vesta SAB de CV | 83,759 | 243 | |||||||||
3,059 | |||||||||||
Netherlands (0.8%): | |||||||||||
Consumer Staples (0.1%): | |||||||||||
Heineken NV | 3,645 | 371 | |||||||||
Koninklijke Ahold Delhaize NV | 25,214 | 801 | |||||||||
1,172 | |||||||||||
Financials (0.1%): | |||||||||||
ING Groep NV | 35,568 | 497 | |||||||||
NN Group NV | 8,988 | 364 | |||||||||
861 | |||||||||||
Health Care (0.0%): (b) | |||||||||||
QIAGEN NV (a) | 8,626 | 397 | |||||||||
Information Technology (0.6%): | |||||||||||
ASM International NV | 16,394 | 5,588 | |||||||||
STMicroelectronics NV | 17,167 | 822 | |||||||||
6,410 | |||||||||||
8,840 | |||||||||||
New Zealand (0.4%): | |||||||||||
Health Care (0.4%): | |||||||||||
Fisher & Paykel Healthcare Corp. Ltd. | 299,575 | 4,794 | |||||||||
Norway (0.7%): | |||||||||||
Consumer Staples (0.0%): (b) | |||||||||||
Mowi ASA (d) | 19,412 | 335 | |||||||||
Energy (0.4%): | |||||||||||
Aker BP ASA | 127,749 | 3,430 | |||||||||
Equinor ASA | 9,917 | 304 | |||||||||
TGS ASA | 24,718 | 445 | |||||||||
4,179 | |||||||||||
Financials (0.2%): | |||||||||||
SpareBank 1 SMN | 204,543 | 2,699 | |||||||||
Information Technology (0.0%): (b) | |||||||||||
Bouvet ASA | 31,371 | 183 | |||||||||
Materials (0.1%): | |||||||||||
Yara International ASA | 9,069 | 431 | |||||||||
7,827 | |||||||||||
See notes to financial statements.
18
| USAA Mutual Funds Trust USAA Sustainable World Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Puerto Rico (0.0%): (b) | |||||||||||
Information Technology (0.0%): | |||||||||||
EVERTEC, Inc. | 14,921 | $ | 549 | ||||||||
Qatar (0.0%): (b) | |||||||||||
Industrials (0.0%): | |||||||||||
Industries Qatar QSC | 96,302 | 368 | |||||||||
Russian Federation (0.0%): (b) | |||||||||||
Consumer Staples (0.0%): | |||||||||||
Magnit PJSC (a) (e) (f) | 7,278 | — | (g) | ||||||||
Energy (0.0%): | |||||||||||
Gazprom PJSC (e) (f) | 303,950 | 9 | |||||||||
Rosneft Oil Co. PJSC, GDR (a) (e) (f) | 124,892 | 6 | |||||||||
15 | |||||||||||
Financials (0.0%): | |||||||||||
Sberbank of Russia PJSC, ADR (a) (e) (f) | 91,313 | 1 | |||||||||
16 | |||||||||||
Saudi Arabia (0.2%): | |||||||||||
Financials (0.1%): | |||||||||||
The Saudi National Bank | 56,320 | 709 | |||||||||
Information Technology (0.0%): (b) | |||||||||||
Arabian Internet Communications Services Co. | 5,863 | 386 | |||||||||
Materials (0.1%): | |||||||||||
SABIC Agri-Nutrients Co. | 18,672 | 664 | |||||||||
1,759 | |||||||||||
Singapore (0.4%): | |||||||||||
Consumer Staples (0.1%): | |||||||||||
Sheng Siong Group Ltd. | 210,000 | 254 | |||||||||
Wilmar International Ltd. | 203,429 | 595 | |||||||||
849 | |||||||||||
Financials (0.3%): | |||||||||||
DBS Group Holdings Ltd. | 21,805 | 553 | |||||||||
Singapore Exchange Ltd. | 488,327 | 3,155 | |||||||||
3,708 | |||||||||||
Utilities (0.0%): (b) | |||||||||||
Sembcorp Industries Ltd. | 160,600 | 432 | |||||||||
4,989 | |||||||||||
South Africa (0.4%): | |||||||||||
Consumer Discretionary (0.3%): | |||||||||||
Mr Price Group Ltd. | 430,617 | 3,573 | |||||||||
Financials (0.1%): | |||||||||||
Absa Group Ltd. | 56,067 | 606 | |||||||||
See notes to financial statements.
19
| USAA Mutual Funds Trust USAA Sustainable World Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Industrials (0.0%): (b) | |||||||||||
The Bidvest Group Ltd. | 30,213 | $ | 385 | ||||||||
4,564 | |||||||||||
South Korea (1.2%): | |||||||||||
Communication Services (0.1%): | |||||||||||
JYP Entertainment Corp. | 15,232 | 905 | |||||||||
KT Corp. | 20,131 | 463 | |||||||||
| 1,368 | ||||||||||
Consumer Discretionary (0.1%): | |||||||||||
Hyundai Mobis Co. Ltd. | 2,610 | 419 | |||||||||
Kia Corp. | 10,884 | 619 | |||||||||
| 1,038 | ||||||||||
Consumer Staples (0.0%): (b) | |||||||||||
BGF retail Co. Ltd. | 1,356 | 185 | |||||||||
Financials (0.1%): | |||||||||||
DB Insurance Co. Ltd. | 2,947 | 172 | |||||||||
Hana Financial Group, Inc. | 20,405 | 700 | |||||||||
Samsung Securities Co. Ltd. | 18,493 | 468 | |||||||||
Woori Financial Group, Inc. | 31,155 | 287 | |||||||||
| 1,627 | ||||||||||
Health Care (0.1%): | |||||||||||
Hugel, Inc. (a) | 2,558 | 249 | |||||||||
Samsung Biologics Co. Ltd. (a) (c) | 584 | 341 | |||||||||
| 590 | ||||||||||
Industrials (0.0%): (b) | |||||||||||
CJ Corp. | 5,449 | 358 | |||||||||
Information Technology (0.8%): | |||||||||||
Innox Advanced Materials Co. Ltd. | 14,502 | 426 | |||||||||
Samsung Electro-Mechanics Co. Ltd. | 4,568 | 497 | |||||||||
Samsung Electronics Co. Ltd. | 164,140 | 7,512 | |||||||||
SK Hynix, Inc. | 11,209 | 758 | |||||||||
| 9,193 | ||||||||||
| 14,359 | ||||||||||
Spain (1.0%): | |||||||||||
Energy (0.0%): (b) | |||||||||||
Repsol SA | 21,241 | 336 | |||||||||
Financials (0.9%): | |||||||||||
Banco Bilbao Vizcaya Argentaria SA | 1,202,898 | 9,349 | |||||||||
Banco Santander SA | 156,436 | 616 | |||||||||
Bankinter SA | 51,512 | 362 | |||||||||
10,327 | |||||||||||
Information Technology (0.0%): (b) | |||||||||||
Global Dominion Access SA (c) | 57,640 | 215 | |||||||||
See notes to financial statements.
20
| USAA Mutual Funds Trust USAA Sustainable World Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Utilities (0.1%): | |||||||||||
Corp. ACCIONA Energias Renovables SA | 11,884 | $ | 461 | ||||||||
Iberdrola SA | 41,596 | 477 | |||||||||
938 | |||||||||||
11,816 | |||||||||||
Sweden (1.2%): | |||||||||||
Consumer Discretionary (0.1%): | |||||||||||
Evolution AB (c) | 4,991 | 602 | |||||||||
Health Care (0.0%): (b) | |||||||||||
Biotage AB | 15,338 | 222 | |||||||||
Industrials (1.0%): | |||||||||||
Atlas Copco AB Class B | 459,276 | 4,839 | |||||||||
BTS Group AB B Shares (d) | 7,904 | 232 | |||||||||
CTT Systems AB | 8,920 | 158 | |||||||||
GARO AB | 17,621 | 142 | |||||||||
Hexatronic Group AB | 32,310 | 376 | |||||||||
Nibe Industrier AB Class B | 584,238 | 6,042 | |||||||||
Volvo AB Class B | 21,623 | 433 | |||||||||
12,222 | |||||||||||
Materials (0.1%): | |||||||||||
Boliden AB | 14,788 | 606 | |||||||||
13,652 | |||||||||||
Switzerland (3.1%): | |||||||||||
Consumer Discretionary (0.1%): | |||||||||||
Cie Financiere Richemont SA Registered Shares | 6,780 | 1,025 | |||||||||
Consumer Staples (0.5%): | |||||||||||
Coca-Cola HBC AG | 17,924 | 459 | |||||||||
Nestle SA Registered Shares | 53,072 | 5,981 | |||||||||
6,440 | |||||||||||
Financials (1.2%): | |||||||||||
Chubb Ltd. | 36,517 | 7,706 | |||||||||
Julius Baer Group Ltd. | 8,275 | 549 | |||||||||
Partners Group Holding AG | 5,202 | 4,927 | |||||||||
Swiss Life Holding AG | 818 | 492 | |||||||||
UBS Group AG | 25,073 | 545 | |||||||||
14,219 | |||||||||||
Health Care (1.0%): | |||||||||||
Coltene Holding AG Registered Shares | 3,058 | 233 | |||||||||
Novartis AG Registered Shares | 16,531 | 1,392 | |||||||||
Roche Holding AG | 34,035 | 9,816 | |||||||||
11,441 | |||||||||||
See notes to financial statements.
21
| USAA Mutual Funds Trust USAA Sustainable World Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Industrials (0.1%): | |||||||||||
ABB Ltd. Registered Shares | 10,984 | $ | 365 | ||||||||
Kardex Holding AG Registered Shares | 1,944 | 362 | |||||||||
727 | |||||||||||
Information Technology (0.1%): | |||||||||||
Landis+Gyr Group AG | 5,534 | 416 | |||||||||
u-blox Holding AG | 3,050 | 328 | |||||||||
744 | |||||||||||
Materials (0.1%): | |||||||||||
Glencore PLC | 78,769 | 470 | |||||||||
Gurit Holding AG (d) | 2,330 | 242 | |||||||||
Holcim AG | 8,282 | 511 | |||||||||
1,223 | |||||||||||
35,819 | |||||||||||
Taiwan (1.9%): | |||||||||||
Consumer Discretionary (0.0%): (b) | |||||||||||
Poya International Co. Ltd. | 16,000 | 310 | |||||||||
Financials (0.6%): | |||||||||||
Cathay Financial Holding Co. Ltd. | 5,173,000 | 7,338 | |||||||||
Health Care (0.1%): | |||||||||||
Lotus Pharmaceutical Co. Ltd. | 44,000 | 405 | |||||||||
Universal Vision Biotechnology Co. Ltd. | 27,400 | 291 | |||||||||
696 | |||||||||||
Information Technology (1.2%): | |||||||||||
Gold Circuit Electronics Ltd. | 199,800 | 602 | |||||||||
Hon Hai Precision Industry Co. Ltd. | 212,000 | 702 | |||||||||
Lite-On Technology Corp. | 2,340,000 | 5,326 | |||||||||
Taiwan Semiconductor Manufacturing Co. Ltd. | 338,000 | 5,594 | |||||||||
Unimicron Technology Corp. | 64,000 | 264 | |||||||||
Wiwynn Corp. | 30,000 | 941 | |||||||||
13,429 | |||||||||||
21,773 | |||||||||||
Thailand (0.1%): | |||||||||||
Materials (0.0%): (b) | |||||||||||
Indorama Ventures PCL | 394,100 | 410 | |||||||||
Real Estate (0.1%): | |||||||||||
AP Thailand PCL | 1,174,600 | 412 | |||||||||
822 | |||||||||||
United Arab Emirates (0.0%): (b) | |||||||||||
Consumer Discretionary (0.0%): | |||||||||||
Americana Restaurants International PLC (a) | 361,170 | 342 | |||||||||
See notes to financial statements.
22
| USAA Mutual Funds Trust USAA Sustainable World Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
United Kingdom (4.8%): | |||||||||||
Communication Services (0.1%): | |||||||||||
| 4imprint Group PLC | 6,897 | $ | 371 | ||||||||
Informa PLC | 48,548 | 390 | |||||||||
WPP PLC | 24,468 | 301 | |||||||||
1,062 | |||||||||||
Consumer Discretionary (0.5%): | |||||||||||
JD Sports Fashion PLC | 369,753 | 805 | |||||||||
Next PLC | 40,999 | 3,372 | |||||||||
Stellantis NV | 64,825 | 1,134 | |||||||||
5,311 | |||||||||||
Consumer Staples (0.7%): | |||||||||||
Imperial Brands PLC | 286,003 | 6,889 | |||||||||
Reckitt Benckiser Group PLC | 4,978 | 345 | |||||||||
Tesco PLC | 175,813 | 539 | |||||||||
7,773 | |||||||||||
Energy (0.1%): | |||||||||||
| BP PLC | 159,799 | 1,050 | |||||||||
Harbour Energy PLC | 66,799 | 233 | |||||||||
1,283 | |||||||||||
Financials (1.0%): | |||||||||||
| 3i Group PLC | 42,975 | 841 | |||||||||
Barclays PLC | 1,976,625 | 4,147 | |||||||||
HSBC Holdings PLC | 778,316 | 5,961 | |||||||||
Legal & General Group PLC | 101,769 | 313 | |||||||||
Standard Chartered PLC | 90,422 | 855 | |||||||||
12,117 | |||||||||||
Health Care (0.1%): | |||||||||||
AstraZeneca PLC | 11,252 | 1,466 | |||||||||
Ergomed PLC (a) | 14,702 | 199 | |||||||||
1,665 | |||||||||||
Industrials (0.8%): | |||||||||||
Alpha Financial Markets Consulting PLC | 49,436 | 262 | |||||||||
Ashtead Group PLC | 73,135 | 4,838 | |||||||||
BAE Systems PLC | 33,557 | 362 | |||||||||
Concentric AB | 11,502 | 240 | |||||||||
Judges Scientific PLC | 3,624 | 414 | |||||||||
Mitie Group PLC | 227,910 | 221 | |||||||||
Renew Holdings PLC | 36,672 | 315 | |||||||||
Sensata Technologies Holding PLC | 47,200 | 2,388 | |||||||||
SThree PLC | 69,514 | 381 | |||||||||
9,421 | |||||||||||
See notes to financial statements.
23
| USAA Mutual Funds Trust USAA Sustainable World Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Information Technology (0.1%): | |||||||||||
Kainos Group PLC | 22,249 | $ | 372 | ||||||||
The Sage Group PLC | 35,141 | 316 | |||||||||
688 | |||||||||||
Materials (1.4%): | |||||||||||
Anglo American PLC | 25,432 | 879 | |||||||||
Croda International PLC | 64,042 | 5,050 | |||||||||
Mondi PLC | 22,626 | 380 | |||||||||
Rio Tinto PLC | 141,690 | 9,721 | |||||||||
Treatt PLC | 34,714 | 231 | |||||||||
16,261 | |||||||||||
Real Estate (0.0%): (b) | |||||||||||
Safestore Holdings PLC | 29,456 | 358 | |||||||||
Utilities (0.0%): (b) | |||||||||||
Drax Group PLC | 39,571 | 302 | |||||||||
56,241 | |||||||||||
United States (54.0%): | |||||||||||
Communication Services (3.0%): | |||||||||||
Alphabet, Inc. Class C (a) | 208,254 | 18,805 | |||||||||
Alphabet, Inc. Class A (a) | 26,700 | 2,405 | |||||||||
Meta Platforms, Inc. Class A (a) | 69,246 | 12,114 | |||||||||
The Trade Desk, Inc. Class A (a) | 24,017 | 1,344 | |||||||||
34,668 | |||||||||||
Consumer Discretionary (7.1%): | |||||||||||
Acushnet Holdings Corp. | 10,131 | 489 | |||||||||
Airbnb, Inc. Class A (a) | 10,181 | 1,255 | |||||||||
Amazon.com, Inc. (a) | 160,272 | 15,102 | |||||||||
BJ's Restaurants, Inc. (a) | 21,467 | 687 | |||||||||
Brunswick Corp. | 3,222 | 282 | |||||||||
Darden Restaurants, Inc. | 9,200 | 1,315 | |||||||||
Gentherm, Inc. (a) | 6,259 | 398 | |||||||||
Johnson Outdoors, Inc. Class A | 7,692 | 499 | |||||||||
LKQ Corp. | 33,400 | 1,913 | |||||||||
Mattel, Inc. (a) | 57,700 | 1,038 | |||||||||
McDonald's Corp. | 65,460 | 17,276 | |||||||||
Movado Group, Inc. | 12,422 | 430 | |||||||||
NIKE, Inc. Class B | 19,625 | 2,331 | |||||||||
O'Reilly Automotive, Inc. (a) | 3,695 | 3,067 | |||||||||
Overstock.com, Inc. (a) | 16,294 | 316 | |||||||||
PulteGroup, Inc. | 160,229 | 8,760 | |||||||||
Ross Stores, Inc. | 86,217 | 9,530 | |||||||||
Ruth's Hospitality Group, Inc. | 27,059 | 505 | |||||||||
Samsonite International SA (a) (c) | 142,500 | 400 | |||||||||
Sonos, Inc. (a) | 26,143 | 508 | |||||||||
Tesla, Inc. (a) | 30,994 | 6,376 | |||||||||
Thor Industries, Inc. | 5,714 | 520 | |||||||||
Topgolf Callaway Brands Corp. (a) | 20,156 | 467 | |||||||||
See notes to financial statements.
24
| USAA Mutual Funds Trust USAA Sustainable World Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Tractor Supply Co. | 10,161 | $ | 2,370 | ||||||||
Tri Pointe Homes, Inc. (a) | 21,663 | 516 | |||||||||
Ulta Beauty, Inc. (a) | 13,493 | 7,000 | |||||||||
83,350 | |||||||||||
Consumer Staples (4.2%): | |||||||||||
Colgate-Palmolive Co. | 173,721 | 12,734 | |||||||||
Keurig Dr Pepper, Inc. | 92,400 | 3,192 | |||||||||
Lamb Weston Holdings, Inc. | 5,400 | 544 | |||||||||
Mondelez International, Inc. Class A | 40,700 | 2,653 | |||||||||
PepsiCo, Inc. | 100,860 | 17,502 | |||||||||
The Estee Lauder Cos., Inc. | 41,100 | 9,989 | |||||||||
U.S. Foods Holding Corp. (a) | 60,600 | 2,274 | |||||||||
48,888 | |||||||||||
Energy (2.5%): | |||||||||||
APA Corp. | 173,529 | 6,660 | |||||||||
Cactus, Inc. Class A | 62,569 | 2,875 | |||||||||
Clean Energy Fuels Corp. (a) | 58,959 | 330 | |||||||||
ConocoPhillips | 84,734 | 8,757 | |||||||||
Enterprise Products Partners LP | 92,300 | 2,357 | |||||||||
Expro Group Holdings NV (a) | 20,477 | 466 | |||||||||
Hess Corp. | 15,300 | 2,061 | |||||||||
Marathon Oil Corp. | 97,100 | 2,442 | |||||||||
Ovintiv, Inc. | 40,700 | 1,741 | |||||||||
RPC, Inc. | 70,494 | 618 | |||||||||
Select Energy Services, Inc. Class A | 59,085 | 438 | |||||||||
Solaris Oilfield Infrastructure, Inc. Class A | 42,358 | 378 | |||||||||
TETRA Technologies, Inc. (a) | 173,193 | 617 | |||||||||
29,740 | |||||||||||
Financials (7.7%): | |||||||||||
Bank of America Corp. | 319,464 | 10,958 | |||||||||
Blackstone, Inc. | 17,788 | 1,615 | |||||||||
Brown & Brown, Inc. | 52,200 | 2,927 | |||||||||
Cboe Global Markets, Inc. | 22,600 | 2,851 | |||||||||
Employers Holdings, Inc. | 9,819 | 436 | |||||||||
First Busey Corp. | 17,718 | 428 | |||||||||
Interactive Brokers Group, Inc. | 37,100 | 3,195 | |||||||||
JPMorgan Chase & Co. | 105,241 | 15,086 | |||||||||
LPL Financial Holdings, Inc. | 39,607 | 9,884 | |||||||||
Markel Corp. (a) | 3,800 | 5,054 | |||||||||
MSCI, Inc. | 4,269 | 2,229 | |||||||||
OFG Bancorp | 18,215 | 554 | |||||||||
S&P Global, Inc. | 30,087 | 10,266 | |||||||||
State Street Corp. | 24,200 | 2,146 | |||||||||
Synchrony Financial | 141,805 | 5,064 | |||||||||
The PNC Financial Services Group, Inc. | 23,142 | 3,655 | |||||||||
The Progressive Corp. | 30,800 | 4,420 | |||||||||
Unum Group | 204,631 | 9,116 | |||||||||
89,884 | |||||||||||
See notes to financial statements.
25
| USAA Mutual Funds Trust USAA Sustainable World Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Health Care (7.5%): | |||||||||||
AbbVie, Inc. | 19,100 | $ | 2,939 | ||||||||
Addus HomeCare Corp. (a) | 3,623 | 394 | |||||||||
Amgen, Inc. | 41,816 | 9,687 | |||||||||
Apollo Medical Holdings, Inc. (a) | 11,487 | 401 | |||||||||
Artivion, Inc. (a) | 13,167 | 174 | |||||||||
Atrion Corp. | 633 | 360 | |||||||||
BioLife Solutions, Inc. (a) | 16,954 | 394 | |||||||||
Catalyst Pharmaceuticals, Inc. (a) | 36,429 | 556 | |||||||||
Cigna Corp. | 7,900 | 2,308 | |||||||||
CorVel Corp. (a) | 3,078 | 555 | |||||||||
CryoPort, Inc. (a) | 12,599 | 273 | |||||||||
CVS Health Corp. | 65,443 | 5,467 | |||||||||
Dexcom, Inc. (a) | 20,998 | 2,331 | |||||||||
Dynavax Technologies Corp. (a) | 28,302 | 291 | |||||||||
Eli Lilly & Co. | 38,770 | 12,066 | |||||||||
GE Healthcare Technologies, Inc. (a) | 16,200 | 1,231 | |||||||||
Humana, Inc. | 3,000 | 1,485 | |||||||||
IDEXX Laboratories, Inc. (a) | 22,518 | 10,656 | |||||||||
Intuitive Surgical, Inc. (a) | 3,081 | 707 | |||||||||
Johnson & Johnson | 83,978 | 12,870 | |||||||||
Lantheus Holdings, Inc. (a) | 5,183 | 383 | |||||||||
LeMaitre Vascular, Inc. | 12,852 | 644 | |||||||||
McKesson Corp. | 3,200 | 1,119 | |||||||||
Merck & Co., Inc. | 30,900 | 3,283 | |||||||||
Neogen Corp. (a) | 22,038 | 390 | |||||||||
STAAR Surgical Co. (a) | 4,606 | 255 | |||||||||
Tandem Diabetes Care, Inc. (a) | 7,550 | 271 | |||||||||
The Joint Corp. (a) | 12,112 | 190 | |||||||||
Thermo Fisher Scientific, Inc. | 5,032 | 2,726 | |||||||||
U.S. Physical Therapy, Inc. | 3,108 | 315 | |||||||||
UFP Technologies, Inc. (a) | 5,332 | 628 | |||||||||
UnitedHealth Group, Inc. | 19,071 | 9,077 | |||||||||
Veeva Systems, Inc. Class A (a) | 9,059 | 1,501 | |||||||||
Vericel Corp. (a) | 17,873 | 544 | |||||||||
Zoetis, Inc. | 10,234 | 1,709 | |||||||||
88,180 | |||||||||||
Industrials (3.0%): | |||||||||||
AAON, Inc. | 9,319 | 848 | |||||||||
Allied Motion Technologies, Inc. | 13,482 | 582 | |||||||||
CoStar Group, Inc. (a) | 34,289 | 2,423 | |||||||||
Delta Air Lines, Inc. (a) | 198,922 | 7,627 | |||||||||
Encore Wire Corp. | 2,022 | 390 | |||||||||
FedEx Corp. | 6,300 | 1,280 | |||||||||
Forward Air Corp. | 1,377 | 142 | |||||||||
Honeywell International, Inc. | 60,481 | 11,581 | |||||||||
Leidos Holdings, Inc. | 19,300 | 1,873 | |||||||||
NOW, Inc. (a) | 48,646 | 625 | |||||||||
PACCAR, Inc. | 12,000 | 866 | |||||||||
Parker-Hannifin Corp. | 5,500 | 1,935 | |||||||||
See notes to financial statements.
26
| USAA Mutual Funds Trust USAA Sustainable World Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Raytheon Technologies Corp. | 13,800 | $ | 1,354 | ||||||||
The Greenbrier Cos., Inc. | 14,792 | 475 | |||||||||
Transcat, Inc. (a) | 8,802 | 792 | |||||||||
Uber Technologies, Inc. (a) | 68,058 | 2,264 | |||||||||
35,057 | |||||||||||
Information Technology (14.9%): | |||||||||||
Adobe, Inc. (a) | 5,939 | 1,924 | |||||||||
Advanced Energy Industries, Inc. | 5,688 | 529 | |||||||||
Ambarella, Inc. (a) | 2,966 | 280 | |||||||||
Apple, Inc. | 273,391 | 40,301 | |||||||||
Arista Networks, Inc. (a) | 22,770 | 3,158 | |||||||||
Broadcom, Inc. | 3,043 | 1,808 | |||||||||
Cadence Design Systems, Inc. (a) | 16,490 | 3,182 | |||||||||
CDW Corp. | 12,144 | 2,458 | |||||||||
Cisco Systems, Inc. | 231,655 | 11,217 | |||||||||
ePlus, Inc. (a) | 13,976 | 757 | |||||||||
Fidelity National Information Services, Inc. | 43,600 | 2,763 | |||||||||
FleetCor Technologies, Inc. (a) | 6,700 | 1,439 | |||||||||
Fortinet, Inc. (a) | 157,535 | 9,364 | |||||||||
Global Payments, Inc. | 5,800 | 651 | |||||||||
Grid Dynamics Holdings, Inc. (a) | 40,021 | 466 | |||||||||
Insight Enterprises, Inc. (a) | 5,483 | 734 | |||||||||
Mastercard, Inc. Class A | 36,781 | 13,068 | |||||||||
Microsoft Corp. | 137,674 | 34,339 | |||||||||
Motorola Solutions, Inc. | 8,580 | 2,255 | |||||||||
Napco Security Technologies, Inc. (a) | 20,076 | 634 | |||||||||
NVIDIA Corp. | 96,303 | 22,358 | |||||||||
Palo Alto Networks, Inc. (a) | 13,537 | 2,550 | |||||||||
PayPal Holdings, Inc. (a) | 15,086 | 1,110 | |||||||||
Perficient, Inc. (a) | 7,487 | 530 | |||||||||
ServiceNow, Inc. (a) | 6,730 | 2,909 | |||||||||
Texas Instruments, Inc. | 58,153 | 9,970 | |||||||||
Visa, Inc. Class A | 19,395 | 4,266 | |||||||||
175,020 | |||||||||||
Materials (0.9%): | |||||||||||
Alcoa Corp. | 123,160 | 6,027 | |||||||||
Hawkins, Inc. | 9,005 | 366 | |||||||||
PPG Industries, Inc. | 14,900 | 1,968 | |||||||||
Sealed Air Corp. | 56,100 | 2,728 | |||||||||
11,089 | |||||||||||
Real Estate (1.5%): | |||||||||||
Alexandria Real Estate Equities, Inc. | 14,400 | 2,157 | |||||||||
Equity LifeStyle Properties, Inc. | 17,000 | 1,165 | |||||||||
Gladstone Land Corp. | 11,050 | 194 | |||||||||
Invitation Homes, Inc. | 53,300 | 1,666 | |||||||||
Prologis, Inc. | 98,711 | 12,181 | |||||||||
17,363 | |||||||||||
See notes to financial statements.
27
| USAA Mutual Funds Trust USAA Sustainable World Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Utilities (1.7%): | |||||||||||
Constellation Energy Corp. | 101,331 | $ | 7,589 | ||||||||
Exelon Corp. | 46,400 | 1,874 | |||||||||
MGE Energy, Inc. | 89,252 | 6,317 | |||||||||
The York Water Co. | 7,161 | 311 | |||||||||
Vistra Corp. | 171,700 | 3,776 | |||||||||
19,867 | |||||||||||
633,106 | |||||||||||
Total Common Stocks (Cost $958,749) | 1,153,330 | ||||||||||
Exchange-Traded Funds (0.0%) (b) | |||||||||||
United States (0.0%): | |||||||||||
iShares Core MSCI EAFE ETF | 2,889 | 188 | |||||||||
iShares MSCI EAFE Small-Cap ETF | 1,236 | 73 | |||||||||
261 | |||||||||||
Total Exchange-Traded Funds (Cost $264) | 261 | ||||||||||
Collateral for Securities Loaned (0.6%)^ | |||||||||||
United States (0.6%): | |||||||||||
| Goldman Sachs Financial Square Government Fund, Institutional Shares, 4.47% (h) | 1,656,972 | 1,657 | |||||||||
HSBC U.S. Government Money Market Fund, Institutional Shares, 4.45% (h) | 1,656,972 | 1,657 | |||||||||
Invesco Government & Agency Portfolio, Institutional Shares, 4.52% (h) | 1,656,972 | 1,657 | |||||||||
| Morgan Stanley Institutional Liquidity Government Portfolio, Institutional Shares, 4.41% (h) | 1,656,972 | 1,657 | |||||||||
Total Collateral for Securities Loaned (Cost $6,628) | 6,628 | ||||||||||
Total Investments (Cost $965,641) — 99.0% | 1,160,219 | ||||||||||
Other assets in excess of liabilities — 1.0% | 11,937 | ||||||||||
NET ASSETS — 100.00% | $ | 1,172,156 | |||||||||
^ 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. As of February 28, 2023, the fair value of these securities was $9,651 thousands and amounted to 0.8% of net assets.
(d) All or a portion of this security is on loan.
(e) Securities were fair valued based upon procedures approved by the Board of Trustees and represent less than 0.05% of net assets as of February 28, 2023. These securities are classified as Level 3 within the fair value hierarchy. (See Note 2 in the Notes to Financial Statements.)
See notes to financial statements.
28
| USAA Mutual Funds Trust USAA Sustainable World Fund | Schedule of Portfolio Investments — continued February 28, 2023 | ||||||
(f) The following table details the earliest acquisition date and cost of the Fund's Russian sanctioned restricted securities at February 28, 2023, (amount in thousands):
Security Name | Acquisition | Cost | |||||||||
Gazprom PJSC | 8/13/2021 | $ | 1,231 | ||||||||
Magnit PJSC | 9/16/2021 | 568 | |||||||||
Rosneft Oil Co. PJSC, GDR | 4/6/2021 | 964 | |||||||||
Sberbank of Russia PJSC, ADR | 3/26/2021 | 1,405 | |||||||||
(g) Rounds to less than $1 thousand.
(h) Rate disclosed is the daily yield on February 28, 2023.
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.
29
USAA Mutual Funds Trust | Statement of Assets and Liabilities February 28, 2023 | ||||||
(Amounts in Thousands, Except Per Share Amounts)
| USAA Sustainable World Fund | |||||||
Assets: | |||||||
Investments, at value (Cost $965,641) | $ | 1,160,219 | (a) | ||||
Foreign currency, at value (Cost $953) | 957 | ||||||
Cash | 15,328 | ||||||
Receivables: | |||||||
Interest and dividends | 1,474 | ||||||
Capital shares issued | 148 | ||||||
Investments sold | 2,420 | ||||||
Reclaims | 2,021 | ||||||
From Adviser | 3 | ||||||
Prepaid expenses | 20 | ||||||
Total Assets | 1,182,590 | ||||||
Liabilities: | |||||||
Payables: | |||||||
Collateral received on loaned securities | 6,628 | ||||||
Investments purchased | 2,268 | ||||||
Capital shares redeemed | 389 | ||||||
Accrued foreign capital gains taxes | 21 | ||||||
Accrued expenses and other payables: | |||||||
Investment advisory fees | 691 | ||||||
Administration fees | 138 | ||||||
Custodian fees | 38 | ||||||
Transfer agent fees | 106 | ||||||
Compliance fees | 1 | ||||||
Trustees' fees | 1 | ||||||
| 12b-1 fees | — | (b) | |||||
Other accrued expenses | 153 | ||||||
Total Liabilities | 10,434 | ||||||
Net Assets: | |||||||
Capital | 1,034,680 | ||||||
Total accumulated earnings/(loss) | 137,476 | ||||||
Net Assets | $ | 1,172,156 | |||||
Net Assets | |||||||
Fund Shares | $ | 1,163,680 | |||||
Institutional Shares | 4,140 | ||||||
Class A | 4,336 | ||||||
Total | $ | 1,172,156 | |||||
Shares (unlimited number of shares authorized with no par value): | |||||||
Fund Shares | 51,520 | ||||||
Institutional Shares | 183 | ||||||
Class A | 191 | ||||||
Total | 51,894 | ||||||
Net asset value, offering and redemption price per share: (c) | |||||||
Fund Shares | $ | 22.59 | |||||
Institutional Shares | 22.66 | ||||||
Class A | 22.66 | ||||||
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 | $ | 24.04 | |||||
(a) Includes $6,148 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 | Statements of Operations | ||||||
(Amounts in Thousands)
USAA Sustainable World Fund | |||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | ||||||||||
Investment Income: | |||||||||||
Dividends | $ | 19,137 | $ | 30,586 | |||||||
Interest | 122 | 5 | |||||||||
Securities lending (net of fees) | 51 | 109 | |||||||||
Foreign tax withholding | (1,396 | ) | (2,432 | ) | |||||||
Total Income | 17,914 | 28,268 | |||||||||
Expenses: | |||||||||||
Investment advisory fees | 6,592 | 11,033 | |||||||||
Administration fees — Fund Shares | 1,309 | 2,197 | |||||||||
Administration fees — Institutional Shares | 3 | 3 | |||||||||
Administration fees — Class A | 5 | 5 | |||||||||
Sub-Administration fees | 80 | 103 | |||||||||
| 12b-1 fees — Class A | 8 | 8 | |||||||||
Custodian fees | 179 | 320 | |||||||||
Transfer agent fees — Fund Shares | 987 | 1,396 | |||||||||
Transfer agent fees — Institutional Shares | 3 | 3 | |||||||||
Transfer agent fees — Class A | 3 | 3 | |||||||||
Trustees' fees | 36 | 49 | |||||||||
Compliance fees | 9 | 10 | |||||||||
Legal and audit fees | 149 | 135 | |||||||||
State registration and filing fees | 57 | 43 | |||||||||
Interfund lending fees | — | (b) | — | ||||||||
Other expenses | 181 | 179 | |||||||||
Recoupment of prior expenses waived/reimbursed by Adviser | 8 | — | |||||||||
Total Expenses | 9,609 | 15,487 | |||||||||
Expenses waived/reimbursed by Adviser | (40 | ) | (21 | ) | |||||||
Net Expenses | 9,569 | 15,466 | |||||||||
Net Investment Income (Loss) | 8,345 | 12,802 | |||||||||
Realized/Unrealized Gains (Losses) from Investments: | |||||||||||
| Net realized gains (losses) from investment securities and foreign currency transactions | (35,818 | ) | 48,933 | ||||||||
Foreign taxes on realized gains | 26 | (32 | ) | ||||||||
| Net change in unrealized appreciation/depreciation on investment securities and foreign currency translations | (1,082 | ) | (187,082 | ) | |||||||
Net change in accrued foreign taxes on unrealized gains | 22 | 94 | |||||||||
Net realized/unrealized gains (losses) on investments | (36,852 | ) | (138,087 | ) | |||||||
Change in net assets resulting from operations | $ | (28,507 | ) | $ | (125,285 | ) | |||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from May 31 to February 28.
(b) 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 Sustainable World Fund | |||||||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | Year Ended May 31, 2021 | |||||||||||||
From Investments: | |||||||||||||||
Operations: | |||||||||||||||
Net Investment Income (Loss) | $ | 8,345 | $ | 12,802 | $ | 11,845 | |||||||||
Net realized gains (losses) | (35,792 | ) | 48,901 | 265,661 | |||||||||||
| Net change in unrealized appreciation/ depreciation | (1,060 | ) | (186,988 | ) | 176,212 | ||||||||||
Change in net assets resulting from operations | (28,507 | ) | (125,285 | ) | 453,718 | ||||||||||
Distributions to Shareholders: | |||||||||||||||
Fund Shares | (32,058 | ) | (247,859 | ) | (64,664 | ) | |||||||||
Institutional Shares | (127 | ) | (505 | ) | (328 | ) | |||||||||
Class A | (106 | ) | (464 | ) | (321 | ) | |||||||||
| Change in net assets resulting from distributions to shareholders | (32,291 | ) | (248,828 | ) | (65,313 | ) | |||||||||
Change in net assets resulting from capital transactions | (49,516 | ) | 143,070 | (116,446 | ) | ||||||||||
Change in net assets | (110,314 | ) | (231,043 | ) | 271,959 | ||||||||||
Net Assets: | |||||||||||||||
Beginning of period | 1,282,470 | 1,513,513 | 1,241,554 | ||||||||||||
End of period | $ | 1,172,156 | $ | 1,282,470 | $ | 1,513,513 | |||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from May 31 to February 28.
(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 Sustainable World Fund | |||||||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | Year Ended May 31, 2021 | |||||||||||||
Capital Transactions: | |||||||||||||||
Fund Shares | |||||||||||||||
Proceeds from shares issued | $ | 29,270 | $ | 72,669 | $ | 72,139 | |||||||||
Distributions reinvested | 31,606 | 245,078 | 63,933 | ||||||||||||
Cost of shares redeemed | (109,763 | ) | (180,222 | ) | (241,694 | ) | |||||||||
Total Fund Shares | $ | (48,887 | ) | $ | 137,525 | $ | (105,622 | ) | |||||||
Institutional Shares | |||||||||||||||
Proceeds from shares issued | $ | 3,805 | $ | 4,067 | $ | 1,307 | |||||||||
Distributions reinvested | 125 | 496 | 96 | ||||||||||||
Cost of shares redeemed | (4,915 | ) | (1,169 | ) | (6,761 | ) | |||||||||
Total Institutional Shares | $ | (985 | ) | $ | 3,394 | $ | (5,358 | ) | |||||||
Class A | |||||||||||||||
Proceeds from shares issued | $ | 472 | $ | 2,341 | $ | 6,709 | |||||||||
Distributions reinvested | 83 | 253 | 61 | ||||||||||||
Cost of shares redeemed | (199 | ) | (443 | ) | (12,236 | ) | |||||||||
Total Class A | $ | 356 | $ | 2,151 | $ | (5,466 | ) | ||||||||
| Change in net assets resulting from capital transactions | $ | (49,516 | ) | $ | 143,070 | $ | (116,446 | ) | |||||||
Share Transactions: | |||||||||||||||
Fund Shares | |||||||||||||||
Issued | 1,319 | 2,521 | 2,582 | ||||||||||||
Reinvested | 1,420 | 8,958 | 2,305 | ||||||||||||
Redeemed | (4,937 | ) | (6,358 | ) | (8,859 | ) | |||||||||
Total Fund Shares | (2,198 | ) | 5,121 | (3,972 | ) | ||||||||||
Institutional Shares | |||||||||||||||
Issued | 169 | 161 | 48 | ||||||||||||
Reinvested | 6 | 18 | 3 | ||||||||||||
Redeemed | (215 | ) | (42 | ) | (227 | ) | |||||||||
Total Institutional Shares | (40 | ) | 137 | (176 | ) | ||||||||||
Class A | |||||||||||||||
Issued | 20 | 89 | 280 | ||||||||||||
Reinvested | 4 | 9 | 2 | ||||||||||||
Redeemed | (9 | ) | (15 | ) | (464 | ) | |||||||||
Total Class A | 15 | 83 | (182 | ) | |||||||||||
Change in Shares | (2,223 | ) | 5,341 | (4,330 | ) | ||||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from May 31 to February 28.
See notes to financial statements.
33
USAA Mutual Funds Trust | Financial Highlights | ||||||
For a Share Outstanding Throughout Each Period
USAA Sustainable World Fund | |||||||||||||||||||||||||||
Fund Shares | |||||||||||||||||||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | Year Ended May 31, 2021 | Year Ended May 31, 2020 | Year Ended May 31, 2019 | Year Ended May 31, 2018 | ||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 23.70 | $ | 31.03 | $ | 23.38 | $ | 30.71 | $ | 31.82 | $ | 31.16 | |||||||||||||||
Investment Activities: | |||||||||||||||||||||||||||
Net investment income (loss) | 0.16 | (b) | 0.25 | (b) | 0.23 | (b) | 0.27 | (b) | 0.33 | 0.30 | |||||||||||||||||
| Net realized and unrealized gains (losses) | (0.65 | ) | (2.36 | ) | 8.74 | 2.87 | 0.51 | 1.78 | |||||||||||||||||||
| Total from Investment Activities | (0.49 | ) | (2.11 | ) | 8.97 | 3.14 | 0.84 | 2.08 | |||||||||||||||||||
Distributions to Shareholders from: | |||||||||||||||||||||||||||
Net investment income | (0.09 | ) | (0.27 | ) | (0.18 | ) | (0.32 | ) | (0.28 | ) | (0.23 | ) | |||||||||||||||
Net realized gains | (0.53 | ) | (4.95 | ) | (1.14 | ) | (10.15 | ) | (1.67 | ) | (1.19 | ) | |||||||||||||||
Total Distributions | (0.62 | ) | (5.22 | ) | (1.32 | ) | (10.47 | ) | (1.95 | ) | (1.42 | ) | |||||||||||||||
Net Asset Value, End of Period | $ | 22.59 | $ | 23.70 | $ | 31.03 | $ | 23.38 | $ | 30.71 | $ | 31.82 | |||||||||||||||
Total Return (c) (d) | (2.01 | )% | (8.90 | )% | 39.07 | % | 7.81 | % | 3.23 | % | 6.68 | % | |||||||||||||||
Ratios to Average Net Assets: | |||||||||||||||||||||||||||
Net Expenses (e) (f) (g) (h) | 1.09 | % | 1.05 | % | 1.05 | % | 1.07 | % | 1.09 | % | 1.10 | % | |||||||||||||||
Net Investment Income (Loss) (e) | 0.95 | % | 0.87 | % | 0.86 | % | 0.98 | % | 1.09 | % | 0.98 | % | |||||||||||||||
Gross Expenses (e) (f) | 1.09 | % | 1.05 | % | 1.05 | % | 1.07 | % | 1.09 | % | 1.10 | % | |||||||||||||||
Supplemental Data: | |||||||||||||||||||||||||||
Net Assets at end of period (000's) | $ | 1,163,680 | $ | 1,272,993 | $ | 1,507,963 | $ | 1,228,986 | $ | 1,280,661 | $ | 1,353,880 | |||||||||||||||
Portfolio Turnover (c) (i) | 23 | % | 37 | %(j) | 88 | % | 103 | %(k) | 8 | % | 10 | % | |||||||||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from May 31 to February 28.
(b) Per share net investment income (loss) has been calculated using the average daily shares method.
(c) Not annualized for periods less than one year.
(d) 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.
(e) Annualized for periods less than one year.
(f) Does not include acquired fund fees and expenses, if any.
(g) 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 September 30, 2023, instead of coinciding with the Fund's fiscal year end.
(h) 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.
(i) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between classes of shares.
(j) Reflects a return to normal trading levels after a prior year subadvisor termination.
(k) Reflects increased trading activity due to transition or asset allocation shift.
(continues on next page)
See notes to financial statements.
34
USAA Mutual Funds Trust | Financial Highlights — continued | ||||||
For a Share Outstanding Throughout Each Period
USAA Sustainable World Fund | |||||||||||||||||||||||||||
Institutional Shares | |||||||||||||||||||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | Year Ended May 31, 2021 | Year Ended May 31, 2020 | Year Ended May 31, 2019 | Year Ended May 31, 2018 | ||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 23.78 | $ | 31.10 | $ | 23.42 | $ | 30.74 | $ | 31.75 | $ | 31.14 | |||||||||||||||
Investment Activities: | |||||||||||||||||||||||||||
Net investment income (loss) | 0.17 | (b) | 0.31 | (b) | 0.24 | (b) | 0.29 | (b) | 0.38 | 0.29 | |||||||||||||||||
| Net realized and unrealized gains (losses) | (0.65 | ) | (2.41 | ) | 8.77 | 2.86 | 0.48 | 1.80 | |||||||||||||||||||
| Total from Investment Activities | (0.48 | ) | (2.10 | ) | 9.01 | 3.15 | 0.86 | 2.09 | |||||||||||||||||||
Distributions to Shareholders from: | |||||||||||||||||||||||||||
Net investment income | (0.11 | ) | (0.27 | ) | (0.19 | ) | (0.32 | ) | (0.20 | ) | (0.29 | ) | |||||||||||||||
Net realized gains | (0.53 | ) | (4.95 | ) | (1.14 | ) | (10.15 | ) | (1.67 | ) | (1.19 | ) | |||||||||||||||
Total Distributions | (0.64 | ) | (5.22 | ) | (1.33 | ) | (10.47 | ) | (1.87 | ) | (1.48 | ) | |||||||||||||||
Net Asset Value, End of Period | $ | 22.66 | $ | 23.78 | $ | 31.10 | $ | 23.42 | $ | 30.74 | $ | 31.75 | |||||||||||||||
Total Return (c) (d) | (1.96 | )% | (8.87 | )% | 39.17 | % | 7.85 | % | 3.29 | % | 6.70 | % | |||||||||||||||
Ratios to Average Net Assets: | |||||||||||||||||||||||||||
Net Expenses (e) (f) (g) (h) | 1.00 | % | 1.00 | % | 0.99 | % | 1.00 | % | 1.05 | %(i) | 1.10 | % | |||||||||||||||
Net Investment Income (Loss) (e) | 1.01 | % | 1.10 | % | 0.87 | % | 1.00 | % | 1.13 | % | 1.19 | % | |||||||||||||||
Gross Expenses (e) (f) | 1.49 | % | 1.29 | % | 1.27 | % | 1.13 | % | 1.11 | % | 1.10 | % | |||||||||||||||
Supplemental Data: | |||||||||||||||||||||||||||
Net Assets at end of period (000's) | $ | 4,140 | $ | 5,301 | $ | 2,660 | $ | 6,143 | $ | 12,567 | $ | 30,127 | |||||||||||||||
Portfolio Turnover (c) (j) | 23 | % | 37 | %(k) | 88 | % | 103 | %(l) | 8 | % | 10 | % | |||||||||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from May 31 to February 28.
(b) Per share net investment income (loss) has been calculated using the average daily shares method.
(c) Not annualized for periods less than one year.
(d) 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.
(e) Annualized for periods less than one year.
(f) Does not include acquired fund fees and expenses, if any.
(g) 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 September 30, 2023, instead of coinciding with the Fund's fiscal year end.
(h) 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.
(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) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between classes of shares.
(k) Reflects a return to normal trading levels after a prior year subadvisor termination.
(l) Reflects increased trading activity due to transition or asset allocation shift.
(continues on next page)
See notes to financial statements.
35
USAA Mutual Funds Trust | Financial Highlights — continued | ||||||
For a Share Outstanding Throughout Each Period
USAA Sustainable World Fund | |||||||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | Year Ended May 31, 2021 | Year Ended May 31, 2020 | Year Ended May 31, 2019 | Year Ended May 31, 2018 | ||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 23.77 | $ | 31.06 | $ | 23.40 | $ | 30.77 | $ | 31.86 | $ | 31.07 | |||||||||||||||
Investment Activities: | |||||||||||||||||||||||||||
Net investment income (loss) (b) | 0.11 | 0.19 | 0.15 | 0.19 | 0.24 | 0.18 | |||||||||||||||||||||
| Net realized and unrealized gains (losses) | (0.65 | ) | (2.40 | ) | 8.76 | 2.86 | 0.53 | 1.80 | |||||||||||||||||||
Total from Investment Activities | (0.54 | ) | (2.21 | ) | 8.91 | 3.05 | 0.77 | 1.98 | |||||||||||||||||||
Distributions to Shareholders from: | |||||||||||||||||||||||||||
Net investment income | (0.04 | ) | (0.13 | ) | (0.11 | ) | (0.27 | ) | (0.19 | ) | — | (c) | |||||||||||||||
Net realized gains | (0.53 | ) | (4.95 | ) | (1.14 | ) | (10.15 | ) | (1.67 | ) | (1.19 | ) | |||||||||||||||
Total Distributions | (0.57 | ) | (5.08 | ) | (1.25 | ) | (10.42 | ) | (1.86 | ) | (1.19 | ) | |||||||||||||||
Redemption Fees Added to Beneficial Interests | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | (c) | ||||||||||||||
Net Asset Value, End of Period | $ | 22.66 | $ | 23.77 | $ | 31.06 | $ | 23.40 | $ | 30.77 | $ | 31.86 | |||||||||||||||
Total Return (excludes sales charges) (d) (e) | (2.19 | )% | (9.18 | )% | 38.73 | % | 7.49 | % | 2.98 | % | 6.36 | % | |||||||||||||||
Ratios to Average Net Assets: | |||||||||||||||||||||||||||
Net Expenses (f) (g) (h) (i) | 1.35 | % | 1.32 | % | 1.32 | % | 1.35 | % | 1.35 | % | 1.39 | %(j) | |||||||||||||||
Net Investment Income (Loss) (f) | 0.68 | % | 0.67 | % | 0.53 | % | 0.68 | % | 0.76 | % | 0.57 | % | |||||||||||||||
Gross Expenses (f) (g) | 1.83 | % | 1.68 | % | 1.62 | % | 1.43 | % | 1.46 | % | 1.43 | % | |||||||||||||||
Supplemental Data: | |||||||||||||||||||||||||||
Net Assets at end of period (000's) | $ | 4,336 | $ | 4,176 | $ | 2,890 | $ | 6,425 | $ | 8,133 | $ | 10,114 | |||||||||||||||
Portfolio Turnover (d) (k) | 23 | % | 37 | %(l) | 88 | % | 103 | %(m) | 8 | % | 10 | % | |||||||||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from May 31 to February 28.
(b) Per share net investment income (loss) has been calculated using the average daily shares method.
(c) Amount is less than $0.005 per share.
(d) Not annualized for periods less than one year.
(e) Assumes reinvestment of all net investment income and realized capital gain distributions, if any, during the period. Includes adjustments in accordance with U.S. Generally Accepted Accounting Principles and could differ from the Lipper reported return.
(f) Annualized for periods less than one year.
(g) Does not include acquired fund fees and expenses, if any.
(h) 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 September 30, 2023, instead of coinciding with the Fund's fiscal year end.
(i) 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.
(j) 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.
(k) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between classes of shares.
(l) Reflects a return to normal trading levels after a prior year subadvisor termination.
(m) Reflects increased trading activity due to transition or asset allocation shift.
See notes to financial statements.
36
USAA Mutual Funds Trust | Notes to Financial Statements February 28, 2023 | ||||||
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.
On June 29, 2022, the Board of Trustees ("the Board") approved the fiscal year-end change for the Fund from May 31 to February 28. The first full cycle of the new fiscal year-end reporting will begin March 1, 2023. As a result of the change, the Fund has a February 28, 2023 fiscal nine-month transition period, the results of which are reported in this Annual Report for the period ended February 28, 2023.
Victory Capital Management ("VCM" or 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 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 (unadjusted) in active markets for identical securities
• Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, or credit spreads, applicable to those securities, etc.)
• Level 3 — significant unobservable inputs (including the Adviser's 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.
37
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
The Adviser, appointed as the valuation designee by the Board, has established the Pricing and Liquidity Committee (the "Committee"), and subject to Board oversight, the Committee administers and oversees the Fund's valuation policies and procedures, which are approved by the Board.
Portfolio securities listed or traded on securities exchanges, including Exchange-Traded Funds ("ETFs"), and American Depositary Receipts, 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 February 28, 2023, 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 | $ | 727,391 | $ | 425,923 | $ | 16 | $ | 1,153,330 | |||||||||||
Exchange-Traded Funds | 261 | — | — | 261 | |||||||||||||||
Collateral for Securities Loaned | 6,628 | — | — | 6,628 | |||||||||||||||
Total | $ | 734,280 | $ | 425,923 | $ | 16 | $ | 1,160,219 | |||||||||||
As of February 28, 2023, there were no transfers into/out of Level 3.
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
38
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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.
Derivative Instruments:
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 February 28, 2023, 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 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
39
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 Statements 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 February 28, 2023.
| Value of Securities on Loan | Non-Cash Collateral | Cash Collateral | |||||||||
| $ | 6,237 | (a) | $ | — | $ | 6,628 | |||||
(a) Includes $89 thousand of securities on loan that were sold prior to February 28, 2023.
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 Statements 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 Statements 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 ("EU") reclaims related to prior years. In October 2022, the Sweden Tax Authority issued favorable decisions relating to claims for Sweden. These EU reclaims are recorded when the amount is known and there are no significant uncertainties on collectability. For the nine months ended February 28, 2023, the Fund recognized $46 thousand in EU reclaims and less than $1 thousand in related interest and entitlements. There were no EU reclaims recognized for the year ended May 31, 2022. These EU reclaims are reflected on the Statements of Operations as Dividend Income.
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 had a tax year end of May 31, and effective February 28, 2023, the Fund changed its tax year end to February 28.
40
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
For the nine months ended February 28, 2023, 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 nine months ended February 28, 2023, were as follows for the Fund (amounts in thousands):
Excluding | |||||||
Purchases | Sales | ||||||
$ | 268,433 | $ | 339,850 | ||||
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.
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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements of Operations as Investment advisory fees.
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.
The performance period for each share class consists of the current month plus the previous 35 months. The following table is utilized to determine the extent of the performance adjustment:
| Over/Under Performance Relative to Index (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.
41
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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, 2022, to February 28, 2023, there were no performance fee adjustments. For the year ended 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 nine months ended February 28, 2023, and 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, Institutional Shares, and Class A, respectively. Amounts incurred for the nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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
42
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements of Operations as 12b-1 fees.
In addition, the Distributor is entitled to receive commissions in connection with sales of Class A, For the nine months ended February 28, 2023, the Distributor received less than $1 thousand from commissions earned 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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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 September 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 February 28, 2023, 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, 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.
As of February 28, 2023, 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 February 28, 2023.
| Expires 2023 | Expires 2024 | Expires 2025 | Expires 2026 | Total | |||||||||||||||
| $ | 1 | $ | 37 | $ | 21 | $ | 32 | $ | 91 | ||||||||||
43
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
As of May 31, 2022, the following amounts were available to be repaid to the Adviser (amounts in thousands).
| 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 nine months ended February 28, 2023, and 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. Global markets, or those in a particular region, may all react in similar fashion to important political, economic, or other developments. Events and evolving conditions in certain economies or markets may alter the risks associated with investments tied to countries or regions that historically were perceived as comparatively stable and make such investments riskier and more volatile. Certain Russian securities held by the Fund had declared dividends, however there is no assurance these dividends can be collected by the Fund. As a result, all such dividend receivables related to these Russian securities are valued at zero as of the current fiscal year-end.
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 27, 2022, with a termination date of June 26, 2023. 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 nine months ended February 28, 2023, Citibank received an annual commitment fee of 0.15% on $300 million for
44
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
providing the Line of Credit. Each fund in the Victory Funds Complex paid a pro-rata portion of the commitment fees plus any interest on amounts borrowed. For the period from June 1, 2022, through June 27, 2022, interest was based on the one-month London Interbank Offered Rate ("LIBOR") plus one percent. Effective with the renewal, for the period June 28, 2022, through February 28, 2023, interest was based on the one-month Secured Overnight Financing Rate ("SOFR") plus 1.10 percent. The Fund did not experience a material financial impact transitioning from LIBOR to SOFR. Interest charged to the Fund during the period, if applicable, is reflected on the Statements of Operations under Line of credit fees.
The average borrowing or lending for the days outstanding and average interest rate for the Fund during the nine months ended February 28, 2023, were as follows (amounts in thousands):
| Amount Outstanding at February 28, 2023 | Average Borrowing* | Days Borrowing Outstanding | Maximum Average Interest Rate* | Borrowing During the Period | |||||||||||||||
$ | — | $ | 894 | 6 | 4.94 | % | $ | 1,363 | |||||||||||
* Based on the number of days borrowings were outstanding for the nine months ended February 28, 2023.
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 Statements of Operations under Interfund lending fees. As a Lender, interest earned by the Fund, if any, during the period, is reflected on the Statements of Operations under Interfund lending.
The average borrowing or lending for the days outstanding and average interest rate for the Fund during the nine months ended February 28, 2023, were as follows (amounts in thousands):
| Borrower or Lender | Amount Outstanding at February 28, 2023 | Average Borrowing* | Days Borrowing Outstanding | Average Interest Rate* | Maximum Borrowing During the Period | ||||||||||||||||||
Borrower | $ | — | $ | 593 | 1 | 2.86 | % | $ | 593 | ||||||||||||||
* Based on the number of days borrowings were outstanding for the nine months ended February 28, 2023.
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
45
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 February 28, 2023, on the Statement 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):
Nine Months Ended February 28, 2023 | |||||||||||
Distributions Paid From | |||||||||||
Ordinary | Net | Total | |||||||||
$ | 4,579 |
| $ | 27,712 |
| $ | 32,291 | ||||
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 February 28, 2023, 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 Losses | Unrealized Appreciation (Depreciation)* | Total Accumulated Earnings (Loss) | ||||||||||||||||||
| $ | 8,147 | $ | (67 | ) | $ | 8,080 | $ | (48,498 | ) | $ | 177,894 | $ | 137,476 | ||||||||||
* 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 REIT/Non REIT ROC adjustments.
As of February 28, 2023, 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 | |||||||||
| $ | 35,759 | $ | 12,739 | $ | 48,498 | ||||||
As of February 28, 2023, 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) | ||||||||||||
| $ | 982,325 | $ | 258,343 | $ | (80,449 | ) | $ | 177,894 | |||||||
46
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
8. Subsequent Events:
The Board, upon recommendation of the Adviser, has approved a change in the name of the Trust and each individual fund within the Trust. On February 23, 2023, an initial filing was made with the SEC to commence the process to effectuate the following changes.
Effective at the start of business on April 24, 2023 (the "Effective Date"), the name of the Trust changed from USAA Mutual Funds Trust to Victory Portfolios III, and all references to USAA Mutual Funds Trust in the summary prospectus, statutory prospectus, and statement of additional information ("SAI") will be replaced by the new name.
Also on the Effective Date, references to the current name of the Fund in the summary prospectus, statutory prospectus, and SAI will be replaced with the new name as follows:
Current Name | New Name | ||||||
USAA Sustainable World Fund | Victory Sustainable World Fund | ||||||
In addition, on the Effective Date, USAA Investments, a Victory Capital Management Inc. investment franchise, that currently manages the USAA Fixed Income Funds, will change its name to Victory Income Investors, and all references to USAA Investments in the summary prospectus, statutory prospectus, and SAI, will be replaced.
Please note that there will be no changes in the management of the Fund or to the Fund's ticker symbols.
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 February 28, 2023, and the related statements of operations for the period from June 1, 2022 through February 28, 2023 and the year ended May 31, 2022, the statements of changes in net assets for the period from June 1, 2022 through February 28, 2023 and each of the two years in the period ended May 31, 2022, the financial highlights for the period from June 1, 2022 through February 28, 2023 and each of the five years in the period ended May 31, 2022, 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 February 28, 2023, the results of its operations for the period from June 1, 2022 through February 28, 2023 and the year ended May 31, 2022, the statements of changes in net assets for the period from June 1, 2022 through February 28, 2023 and each of the two years in the period ended May 31, 2022, and its financial highlights for the period from June 1, 2022 through February 28, 2023 and each of the five years in the period ended May 31, 2022, 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 February 28, 2023, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. 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
April 28, 2023
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USAA Mutual Funds Trust | Supplemental Information February 28, 2023 | ||||||
(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 date 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 February 28, 2023 | ||||||
(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 (06/17-06/19); 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 (03/15-03/21). | 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) | ||||||||||||||||||
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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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USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
Officers:
The officers of the Trust, their date 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. (since 2022); 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. (07/01/19-present); Executive Director, Investment and Financial Administration, USAA (2012-06/30/19); 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. (07/01/19-present); Accounting/ Financial Director, USAA (12/13-06/30/19). | ||||||||||||
| 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). | ||||||||||||
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USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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). | ||||||||||||
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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 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 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 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 September 1, 2022, through February 28, 2023.
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 9/1/22 | Actual Ending Account Value 2/28/23 | Hypothetical Ending Account Value 2/28/23 | Actual Expenses Paid During Period 9/1/22- 2/28/23* | Hypothetical Expenses Paid During Period 9/1/22- 2/28/23* | Annualized Expense Ratio During Period 9/1/22- 2/28/23 | ||||||||||||||||||||||
Fund Shares | $ | 1,000.00 | $ | 1,045.10 | $ | 1,019.39 | $ | 5.53 | $ | 5.46 | 1.09 | % | |||||||||||||||
Institutional Shares | 1,000.00 | 1,045.50 | 1,019.84 | 5.07 | 5.01 | 1.00 | % | ||||||||||||||||||||
Class A | 1,000.00 | 1,043.50 | 1,018.10 | 6.84 | 6.76 | 1.35 | % | ||||||||||||||||||||
* Expenses are equal to the average account value multiplied by the Fund's annualized expense ratio multiplied by 181/365 (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 nine months ended February 28, 2023, 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 2024.
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 nine months ended February 28, 2023 (amounts in thousands):
| Dividends Received Deduction (corporate shareholders) | Qualified Dividend Income (non-corporate shareholders) | Long-Term Capital Gain Distributions | |||||||||
| 37 | % | 80 | % | $ | 27,712 | ||||||
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USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
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 8-9, 2022, 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 8-9, 2022, 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 21, 2022.
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 February 28, 2023 | ||||||
(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 program, (iv) derivatives risk management program, and (v) 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 adjustment, 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 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 for the one-, five- and ten-year periods ended June 30, 2022, and was below the average of its performance universe for the three-year period ended June 30, 2022, and was below its Lipper index for the one- and three-year periods ended June 30, 2022, and was above its Lipper index for the five- and ten-year periods ended June 30, 2022. The Board took into account management's discussion of the Fund's performance, including the reasons for the Fund's underperformance for certain periods.
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
58
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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.
59
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 10, 2023, 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- RN (prior to August 2022, 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 | ||||||
vcm.com | (800) 235-8396 | ||||||
23411-0423
February 28, 2023
Annual Report
USAA Treasury Money Market Trust®
(Also Known as Victory Treasury Money Market Trust*)
* Effective at the start of business on April 24, 2023, the Fund name will change to Victory Treasury Money Market Trust. Please see Notes to the Financial Statements for subsequent event information.
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.
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, 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 | ||||||
Statements of Operations | 9 | ||||||
Statements of Changes in Net Assets | 10 | ||||||
Financial Highlights | 11 | ||||||
Notes to Financial Statements | 12 | ||||||
| Report of Independent Registered Public Accounting Firm | 19 | ||||||
Supplemental Information (Unaudited) | 20 | ||||||
Trustee and Officer Information | 20 | ||||||
Proxy Voting and Portfolio Holdings Information | 26 | ||||||
Expense Example | 26 | ||||||
Advisory Contract Renewal | 27 | ||||||
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,
If you are reading this letter but double-checking your calendar, be assured there's no mistake. The annual reporting period for your USAA Mutual Fund has shifted from a fiscal year ended May 31st to a fiscal year ended February 28th/the last day of February. This change has no material impact on any of your investments. This change aims to help us improve efficiencies and reduce operational costs. Therefore, this letter covers an abbreviated "annual" period from June 1, 2022, through February 28, 2023. Future annual reports will cover the 12-month period ended February 28th/the last day of February going forward.
Our most recent annual reporting period has been a challenging period for investors. Consider some of the headwinds: heightened geopolitical tensions, a terrible war in Eastern Europe, elevated energy and food costs, high inflation, and rising interest rates. All this has dampened global growth and created a difficult backdrop for both bond and stock investors.
The inflation data was particularly troublesome and surprised many throughout the past year with some of the highest readings since the 1970s. In response, the U.S. Federal Reserve (the "Fed") continued with its monetary tightening and boosted the Fed funds interest rate repeatedly throughout the annual reporting period. And if that wasn't enough, zero-COVID-19 policies in China (which fortunately have been recently lifted) further exacerbated supply chain issues. As one might expect, all these obstacles ratcheted up volatility across financial markets.
In terms of the numbers, the S&P 500® Index, the bell-weather proxy for our domestic stock market, delivered a negative total return of almost 3% for our abbreviated annual reporting period. But perhaps what made 2022 even more difficult was the performance of fixed income markets. The Bloomberg US Aggregate Bond Index—a proxy for a diversified fixed income portfolio and one that many investors and institutions follow closely—delivered a negative total return of approximately 4% during the same period. That's not exactly the offset to equity performance that many investors come to expect from bonds.
It's been difficult, and we fully acknowledge that the steady drumbeat of bad news and bouts of stomach-churning volatility can take a toll on investors' psyche. Even when markets often snap back sharply (as happened this past July, October and earlier this calendar year), investors often wonder if they have missed an opportunity.
Through all of the turmoil and challenges in our most recent annual reporting period, we are reminded of two enduring realities: 1) financial markets are dynamic and apt to change abruptly; 2) it's vital to remain calm and rational whenever faced with those inevitable bouts of turmoil.
Fortunately, we think that investors can take comfort knowing that all of our independent investment franchises have experience managing portfolios through a wide variety of market environments. Our investment professionals remain calm during turbulent financial markets, and we think it's imperative that investors do the same.
2
We still believe that a long-term plan, a well-diversified portfolio across asset classes and investment types, and a clear understanding of individual risk tolerances are the key ingredients for staying the course and progressing on investment goals. Moreover, all our investment professionals continually monitor the environment and work hard to position portfolios opportunistically no matter what the markets bring. Remember, turmoil can also create opportunity.
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, we encourage you to contact our Member Service Representatives. Call 800-235-8396, or visit our website at vcm.com.
From all of us here at Victory Capital, thank you for your ongoing confidence and 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?
During the nine-month reporting period ended February 28, 2023, market conditions changed dramatically. [The Fund's fiscal year-end changed this year to February 28 from May 31, resulting in a shorter reporting period for fiscal year ended 2023.] Beginning in March 2022, officials at the U.S. Federal Reserve (the "Fed") began raising their target range for federal funds in an effort to cool the economy and control inflation. With inflation firmly higher than the Fed's target level, they continued to raise rates aggressively during the entire reporting period. As of June 1, 2022, the target federal funds rate was a range of between 0.75% and 1.00%. By the end of the reporting period on February 28, 2023, that range had risen to between 4.50% and 4.75%. The Fed has indicated that, depending on incoming economic data, additional future rate increases may be required.
As a result of the Fed's interest rate target increases during the reporting period, short-term interest rates rose significantly. This resulted in higher yields on U.S. Treasury bills, repurchase agreements, and short-term notes. 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 nine-month reporting period ended February 28, 2023, the Fund had a return of 2.06%, compared to an average of 1.91% 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 maintained a short weighted average maturity in order to take advantage of rising short-term yields. The Fund also maintained holdings 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 February 28, 2023
Fund Shares | |||||||
INCEPTION DATE | 2/1/91 | ||||||
Net Asset Value | |||||||
One Year | 2.09 | % | |||||
Five Year | 1.11 | % | |||||
Ten Year | 0.62 | % | |||||
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 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 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 | February 28, 2023 | ||||||
(Unaudited)
Investment Objective and Portfolio Holdings:
The Fund seeks maximum current income while maintaining the highest degree of safety and liquidity.
Portfolio Mix
February 28, 2023
(% 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 February 28, 2023 | ||||||
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
U.S. Treasury Obligations (33.5%) | |||||||||||
| U.S. Treasury Bills 4.41%, 3/14/23 (a) | $ | 50,000 | $ | 49,918 | |||||||
4.02%, 3/21/23 (a) | 25,000 | 24,937 | |||||||||
4.22%, 4/18/23 (a) | 25,000 | 24,846 | |||||||||
4.67%, 6/20/23 (a) | 25,000 | 24,633 | |||||||||
| U.S. Treasury Notes 4.84% (USBMMY3M+3bps), 4/30/23 (b) | 50,000 | 50,022 | |||||||||
4.84% (USBMMY3M+3bps), 7/31/23 (b) | 50,000 | 50,014 | |||||||||
Total U.S. Treasury Obligations (Cost $224,370) | 224,370 | ||||||||||
Repurchase Agreements (67.2%) | |||||||||||
| Bank of America Securities, Inc., 4.52%, 3/1/23, purchased on 2/28/23, with a maturity date of 3/1/23, with a value of $90,000 (collateralized by U.S. Treasury Notes, 1.88%, due 5/15/29, with a value of $91,800) | 90,000 | 90,000 | |||||||||
| Fixed Income Clearing Corporation-State Street Bank & Trust Co., 4.53%, 3/1/23, purchased on 2/28/23, with a maturity date of 3/1/23, with a value of $360,000 (collateralized by U.S. Treasury Inflation Note Index (c), 0.25% – 3.88%, due 7/15/29 – 9/30/29, with a value of $367,200) | 360,000 | 360,000 | |||||||||
Total Repurchase Agreements (Cost $450,000) | 450,000 | ||||||||||
Total Investments (Cost $674,370) — 100.7% | 674,370 | ||||||||||
Liabilities in excess of other assets — (0.7)% | (4,818 | ) | �� | ||||||||
NET ASSETS — 100.00% | $ | 669,552 | |||||||||
(a) Rate represents the effective yield at February 28, 2023.
(b) Variable or Floating-Rate Security. Rate disclosed is as of February 28, 2023.
(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 February 28, 2023 | ||||||
(Amounts in Thousands, Except Per Share Amounts)
| USAA Treasury Money Market Trust | |||||||
Assets: | |||||||
Investments, at value (Cost $224,370) | $ | 224,370 | |||||
Repurchase agreements, at value (Cost $450,000) | 450,000 | ||||||
Cash | 4,255 | ||||||
Receivables: | |||||||
Interest | 438 | ||||||
Capital shares issued | 732 | ||||||
From Adviser | 27 | ||||||
Prepaid expenses | 12 | ||||||
Total Assets | 679,834 | ||||||
Liabilities: | |||||||
Payables: | |||||||
Distributions | 4 | ||||||
Capital shares redeemed | 10,043 | ||||||
Accrued expenses and other payables: | |||||||
Investment advisory fees | 65 | ||||||
Administration fees | 52 | ||||||
Transfer agent fees | 53 | ||||||
Compliance fees | — | (a) | |||||
Trustees' fees | 1 | ||||||
Other accrued expenses | 64 | ||||||
Total Liabilities | 10,282 | ||||||
Net Assets: | |||||||
Capital | 669,552 | ||||||
Total accumulated earnings/(loss) | — | (a) | |||||
Net Assets | $ | 669,552 | |||||
Shares (unlimited number of shares authorized with no par value): | 669,553 | ||||||
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 | Statements of Operations | ||||||
(Amounts in Thousands)
| USAA Treasury Money Market Trust | |||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | ||||||||||
Investment Income: | |||||||||||
Interest | $ | 14,501 | $ | 716 | |||||||
Total Income | 14,501 | 716 | |||||||||
Expenses: | |||||||||||
Investment advisory fees | 571 | 614 | |||||||||
Administration fees | 457 | 491 | |||||||||
Sub-Administration fees | 17 | 5 | |||||||||
Custodian fees | 2 | 13 | |||||||||
Transfer agent fees | 457 | 491 | |||||||||
Trustees' fees | 36 | 48 | |||||||||
Compliance fees | 4 | 3 | |||||||||
Legal and audit fees | 47 | 55 | |||||||||
State registration and filing fees | 45 | 35 | |||||||||
Other expenses | 68 | 61 | |||||||||
Total Expenses | 1,704 | 1,816 | |||||||||
Expenses waived/reimbursed by Adviser | (106 | ) | (1,298 | ) | |||||||
Net Expenses | 1,598 | 518 | |||||||||
Net Investment Income | 12,903 | 198 | |||||||||
Change in net assets resulting from operations | $ | 12,903 | $ | 198 | |||||||
(a) Effective February 28, 2013, the Fund's fiscal year-end changed from May 31 to February 28.
See notes to financial statements.
9
USAA Mutual Funds Trust | Statements of Changes in Net Assets | ||||||
(Amounts in Thousands)
USAA Treasury Money Market Trust | |||||||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | Year Ended May 31, 2021 | |||||||||||||
From Investments: | |||||||||||||||
Operations: | |||||||||||||||
Net Investment Income | $ | 12,903 | $ | 198 | $ | 173 | |||||||||
Net realized gains (losses) | — | — | — | (b) | |||||||||||
Change in net assets resulting from operations | 12,903 | 198 | 173 | ||||||||||||
| Change in net assets resulting from distributions to shareholders | (12,903 | ) | (198 | ) | (173 | ) | |||||||||
| Change in net assets resulting from capital transactions | 149,571 | 23,204 | (47,136 | ) | |||||||||||
Change in net assets | 149,571 | 23,204 | (47,136 | ) | |||||||||||
Net Assets: | |||||||||||||||
Beginning of period | 519,981 | 496,777 | 543,913 | ||||||||||||
End of period | $ | 669,552 | $ | 519,981 | $ | 496,777 | |||||||||
Capital Transactions: | |||||||||||||||
Proceeds from shares issued | $ | 378,738 | $ | 145,813 | $ | 161,288 | |||||||||
Distributions reinvested | 12,875 | 197 | 171 | ||||||||||||
Cost of shares redeemed | (242,042 | ) | (122,806 | ) | (208,595 | ) | |||||||||
| Change in net assets resulting from capital transactions | $ | 149,571 | $ | 23,204 | $ | (47,136 | ) | ||||||||
Share Transactions: | |||||||||||||||
Issued | 378,738 | 145,813 | 161,289 | ||||||||||||
Reinvested | 12,875 | 197 | 171 | ||||||||||||
Redeemed | (242,042 | ) | (122,806 | ) | (208,595 | ) | |||||||||
Change in Shares | 149,571 | 23,204 | (47,135 | ) | |||||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from May 31 to February 28.
(b) Rounds to less than $1 thousand.
See notes to financial statements.
10
USAA Mutual Funds Trust | Financial Highlights | ||||||
For a Share Outstanding Throughout Each Period
USAA Treasury Money Market Trust | |||||||||||||||||||||||||||
| Nine Months Ended February 28, 2023(a) | Year Ended May 31, 2022 | Year Ended May 31, 2021 | Year Ended May 31, 2020 | Year Ended May 31, 2019 | Year Ended May 31, 2018 | ||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | |||||||||||||||
Investment Activities: | |||||||||||||||||||||||||||
Net investment income | 0.02 | (b) | — | (c)(b) | — | (c)(b) | 0.01 | (b) | 0.02 | 0.01 | |||||||||||||||||
| Net realized and unrealized gains (losses) | — | — | — | (c) | — | — | — | ||||||||||||||||||||
| Total from Investment Activities | 0.02 | — | (c) | — | (c) | 0.01 | 0.02 | 0.01 | |||||||||||||||||||
Distributions to Shareholders from: | |||||||||||||||||||||||||||
Net investment income | (0.02 | ) | — | (c) | — | (c) | (0.01 | ) | (0.02 | ) | (0.01 | ) | |||||||||||||||
Total Distributions | (0.02 | ) | — | (c) | — | (c) | (0.01 | ) | (0.02 | ) | (0.01 | ) | |||||||||||||||
Net Asset Value, End of Period | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | |||||||||||||||
Total Return (d) (e) | 2.06 | % | 0.04 | % | 0.03 | % | 1.23 | % | 1.88 | % | 0.89 | %(f) | |||||||||||||||
Ratios to Average Net Assets: | |||||||||||||||||||||||||||
Net Expenses (g) (h) (i) | 0.35 | % | 0.11 | % | 0.12 | % | 0.33 | % | 0.35 | % | 0.35 | %(f) | |||||||||||||||
Net Investment Income (g) | 2.82 | % | 0.04 | % | 0.03 | % | 1.21 | % | 1.88 | % | 0.91 | % | |||||||||||||||
Gross Expenses (g) (h) | 0.37 | % | 0.37 | % | 0.38 | % | 0.34 | % | 0.35 | % | 0.35 | % | |||||||||||||||
Supplemental Data: | |||||||||||||||||||||||||||
Net Assets at end of period (000's) | $ | 669,552 | $ | 519,981 | $ | 496,777 | $ | 543,913 | $ | 4,858,998 | $ | 3,732,359 | |||||||||||||||
(a) Effective February 28, 2023, the Fund's fiscal year-end changed from May 31 to February 28.
(b) Per share net investment income (loss) has been calculated using the average daily shares method.
(c) Amount is less than $0.005 per share.
(d) Not annualized for periods less than one year.
(e) Assumes reinvestment of all net investment income and realized capital gain distributions, if any, during the period. Includes adjustments in accordance with U.S. Generally Accepted Accounting Principles and could differ from the Lipper reported return.
(f) Prior to August 1, 2017, USAA Asset Management Company (previous Advisor) 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.
(g) Annualized for periods less than one year.
(h) Does not include acquired fund fees and expenses, if any.
(i) 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 September 30, 2023, instead of coinciding with the Fund's fiscal year end.
See notes to financial statements.
11
USAA Mutual Funds Trust | Notes to Financial Statements February 28, 2023 | ||||||
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.
On June 29, 2022, the Board approved the fiscal year-end change for the Fund from May 31 to February 28. The first full cycle of the new fiscal year-end reporting will begin March 1, 2023. As a result of the change, the Fund has a February 28, 2023 fiscal nine-month transition period, the results of which are reported in this Annual Report for the period ended February 28, 2023.
Victory Capital Management ("VCM" or 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 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.
12
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 (unadjusted) in active markets for identical securities
• Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, or credit spreads, applicable to those securities, etc.)
• Level 3 — significant unobservable inputs (including the Adviser's assumptions in determining the fair value of investments)
The Adviser, appointed as the valuation designee by the Board, has established the Pricing and Liquidity Committee (the "Committee"), and subject to Board oversight, the Committee administers and oversees the Fund's valuation policies and procedures, which are approved by the Board.
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 and the Money Market Funds: Procedures to Stabilize Net Asset Value (the "Procedures"). 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 the 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 Adviser 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 February 28, 2023, 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
13
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 had a tax year end of May 31, and effective February 28, 2023, the Fund changed its tax year end to February 28.
For the nine months ended February 28, 2023, 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.
Fees Paid Indirectly:
Expense offsets to custody fees that arise from credits on cash balances maintained on deposit are reflected on the Statements 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 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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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
14
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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 nine months ended February 28, 2023, and the year ended May 31, 2022, are reflected on the Statements 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 September 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 limit 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 February 28, 2023, the expense limit (excluding voluntary waivers) was 0.35%.
Under the terms of the expense limitation agreement, 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.
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.
15
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
As of February 28, 2023, 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 February 28, 2023.
| Expires 2023 | Expires 2024 | Expires 2025 | Expires 2026 | Total | |||||||||||||||
| $ | 745 | $ | 1,348 | $ | 1,298 | $ | 106 | $ | 3,497 | ||||||||||
As of May 31, 2022, the following amounts were available to be repaid to the Adviser (amounts in thousands).
| 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. 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 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 net asset value.
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.
16
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 27, 2022, with a termination date of June 26, 2023. 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 nine months ended February 28, 2023, 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 paid a pro-rata portion of the commitment fees plus any interest on amounts borrowed. For the period from June 1, 2022, through June 27, 2022, interest was based on the one-month London Interbank Offered Rate ("LIBOR") plus one percent. Effective with the renewal, for the period June 28, 2022, through February 28, 2023, interest was based on the one-month Secured Overnight Financing Rate ("SOFR") plus 1.10 percent. The Fund did not experience a material financial impact transitioning from LIBOR to SOFR. Interest charged to the 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 nine months ended February 28, 2023, and the year ended 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 February 28, 2023, on the Statement 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):
Nine Months Ended February 28, 2023 | |||||||
| Distributions Paid From | |||||||
| Ordinary Income | Total Distributions Paid | ||||||
$ | 12,903 | $ | 12,903 | ||||
17
USAA Mutual Funds Trust | Notes to Financial Statements — continued February 28, 2023 | ||||||
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 February 28, 2023, 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 Losses | Total Accumulated Earnings (Loss) | |||||||||||||||
| $ | 2,175 | $ | (2,174 | ) | $ | 1 | $ | (1 | ) | $ | — | * | |||||||
* Rounds to less than $1 thousand.
As of February 28, 2023, 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 | |||||||||
| $ | 1 | $ | — | $ | 1 | ||||||
As of February 28, 2023, 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) | ||||||||||||
| $ | 674,370 | $ | — | $ | — | $ | — | ||||||||
7. Subsequent Events:
The Board, upon recommendation of the Adviser, has approved a change in the name of the Trust and each individual fund within the Trust. On February 23, 2023, an initial filing was made with the SEC to commence the process to effectuate the following changes.
Effective at the start of business on April 24, 2023 (the "Effective Date"), the name of the Trust changed from USAA Mutual Funds Trust to Victory Portfolios III, and all references to USAA Mutual Funds Trust in the summary prospectus, statutory prospectus, and statement of additional information ("SAI") will be replaced by the new name.
Also on the Effective Date, references to the current name of the Fund in the summary prospectus, statutory prospectus, and SAI will be replaced with the new name as follows:
Current Name | New Name | ||||||
USAA Treasury Money Market Trust | Victory Treasury Money Market Trust | ||||||
In addition, on the Effective Date, USAA Investments, a Victory Capital Management Inc. investment franchise, that currently manages the USAA Fixed Income Funds, will change its name to Victory Income Investors, and all references to USAA Investments in the summary prospectus, statutory prospectus, and SAI, will be replaced.
Please note that there will be no changes in the management of the Fund or to the Fund's ticker symbols.
18
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 February 28, 2023, and the related statements of operations for the period from June 1, 2022 through February 28, 2023 and the year ended May 31, 2022, the statements of changes in net assets for the period from June 1, 2022 through February 28, 2023 and each of the two years in the period ended May 31, 2022, the financial highlights for the period from June 1, 2022 through February 28, 2023 and each of the five years in the period ended May 31, 2022, 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 February 28, 2023, the results of its operations for the period from June 1, 2022 through February 28, 2023 and the year ended May 31, 2022, the statements of changes in net assets for the period from June 1, 2022 through February 28, 2023 and each of the two years in the period ended May 31, 2022, and its financial highlights for the period from June 1, 2022 through February 28, 2023 and each of the five years in the period ended May 31, 2022, 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 February 28, 2023, by correspondence with the custodian and brokers. 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
April 28, 2023
19
USAA Mutual Funds Trust | Supplemental Information February 28, 2023 | ||||||
(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 date 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 | ||||||||||||||||||
20
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 (06/17-06/19); 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 (03/15-03/21). | 45 | None | ||||||||||||||||||
| Paul L. McNamara (July 1948) | Trustee | Trustee since January 2012 | Retired. | 45 | None | ||||||||||||||||||
21
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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) | ||||||||||||||||||
22
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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.
23
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
Officers:
The officers of the Trust, their date 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. (since 2022); 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. (07/01/19-present); Executive Director, Investment and Financial Administration, USAA (2012-06/30/19); 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. (07/01/19-present); Accounting/ Financial Director, USAA (12/13-06/30/19). | ||||||||||||
| 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). | ||||||||||||
24
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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). | ||||||||||||
25
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 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 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 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 September 1, 2022, through February 28, 2023.
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 9/1/22 | Actual Ending Account Value 2/28/23 | Hypothetical Ending Account Value 2/28/23 | Actual Expenses Paid During Period 9/1/22- 2/28/23* | Hypothetical Expenses Paid During Period 9/1/22- 2/28/23* | Annualized Expense Ratio During Period 9/1/22- 2/28/23 | ||||||||||||||||||
| $ | 1,000.00 | $ | 1,017.00 | $ | 1,023.06 | $ | 1.75 | $ | 1.76 | 0.35 | % | ||||||||||||
* Expenses are equal to the average account value multiplied by the Fund's annualized expense ratio multiplied by 181/365 (the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year).
26
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
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 8-9, 2022, 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 8-9, 2022, 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 21, 2022.
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.
27
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(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 program, (iv) derivatives risk management program, and (v) 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, 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 above the average of its performance universe for the one-, three-, five- and ten-year periods ended June 30, 2022, and was above its Lipper index for the one- and five-year periods ended June 30, 2022, and was below its Lipper index for the three- and ten-year periods ended June 30, 2022. 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
28
USAA Mutual Funds Trust | Supplemental Information — continued February 28, 2023 | ||||||
(Unaudited)
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; (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.
29
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 | ||||||
vcm.com | (800) 235-8396 | ||||||
23415-0423
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.
| 2023 | 2022 | |||||||
| (a) Audit Fees (1) | $ | 459,575 | $ | 532,675 | ||||
| (b) Audit-Related Fees (2) | - | - | ||||||
| (c) Tax Fees (3) | 62,706 | 31,534 | ||||||
| (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 period ended February 28, 2023, and the years ended May 31, 2022 and March 31, 2022, there were no audit-related fees billed by Ernst & Young LLP to the Registrant.
(3) Represents the aggregate tax fees billed for professional services rendered by Ernst & Young LLP for assistance with foreign tax compliance services and tax consulting services.
(4) For the fiscal period ended February 28, 2023, and the years ended May 31, 2022 and March 31, 2022, 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 | |||||||
| 2023 | $ | 62,706 | $ | 144,896 | ||||
| 2022 | $ | 31,534 | $ | 132,342 | ||||
(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 and evaluation of internal controls of the transfer agent for periods listed above. All services for the Registrant 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)(1) The code of ethics that is the subject of the disclosure required by Item 2 is attached hereto.
(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 K. De Vries | |
| James K. De Vries, Principal Financial Officer |
| Date | April 27, 2023 |
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 | April 27, 2023 |
| By (Signature and Title)* | /s/ James K. De Vries | |
| James K. De Vries, Principal Financial Officer |
| Date | April 27, 2023 |