UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: | 811-07852 |
USAA Mutual Funds Trust
(Exact name of registrant as specified in charter)
15935 La Cantera Pkwy, Building Two, San Antonio, Texas | 78256 |
(Address of principal executive offices) | (Zip code) |
Citi Fund Services Ohio, Inc., 4400 Easton Commons, Suite 200, Columbus, Ohio 43219
(Name and address of agent for service)
Registrant’s telephone number, including area code: 800-235-8396
Date of fiscal year end: May 31
Date of reporting period: May 31, 2020
Item 1. Reports to Stockholders.
MAY 31, 2020
Annual Report
USAA Cornerstone Aggressive Fund
Beginning January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Fund's shareholder reports like this one will no longer be sent by mail, unless you specifically request paper copies of the reports from the Fund or from your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on VictoryFunds.com, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund or your financial intermediary electronically by notifying your financial intermediary directly, or if you are a direct investor, by calling (800) 235-8396 or logging on to usaa.com. Effective on or about September 8, 2020, a shareholder who has an account directly with the Fund will need to submit their request via email to TA.Processing@FISGlobal.com.
You may elect to receive all future reports in paper free of charge. You can inform the Fund or your financial intermediary that you wish to continue receiving paper copies of your shareholder reports by notifying your financial intermediary directly, or if you are a direct investor, by calling (800) 235-8396 or logging on to usaa.com. Effective on or about September 8, 2020, a shareholder who has an account directly with the Fund will need to submit their request via email to TA.Processing@FISGlobal.com. Your election to receive reports in paper will apply to all funds held with the USAA Mutual Funds or your financial intermediary.
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 logo 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.
USAA Mutual Funds Trust
TABLE OF CONTENTS
Shareholder Letter (Unaudited) | 2 | ||||||
Managers' Commentary (Unaudited) | 4 | ||||||
Investment Overview (Unaudited) | 6 | ||||||
Investment Objective & Portfolio Holdings (Unaudited) | 7 | ||||||
Financial Statements | |||||||
Schedule of Portfolio Investments | 9 | ||||||
Statement of Assets and Liabilities | 28 | ||||||
Statement of Operations | 29 | ||||||
Statements of Changes in Net Assets | 30 | ||||||
Financial Highlights | 32 | ||||||
Notes to Financial Statements | 34 | ||||||
Report of Independent Registered Public Accounting Firm | 47 | ||||||
Supplemental Information (Unaudited) | 48 | ||||||
Proxy Voting and Portfolio Holdings Information | 48 | ||||||
Trustees' and Officers' Information | 49 | ||||||
Expense Examples | 55 | ||||||
Additional Federal Income Tax Information | 56 | ||||||
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.
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.
1
(Unaudited)
Dear Shareholder,
The previous decade ended with the longest-ever bull market in U.S. equities still intact, even as investors wrestled with issues like softening global economic data, Brexit, and U.S.-China trade relations. In retrospect, those worries seem so pedestrian given what we would soon experience.
A new and unexpected threat—a global pandemic, the novel coronavirus ("COVID-19")—first emerged in Asia and then began spreading globally and throughout the United States during the first quarter of 2020. This unprecedented and unanticipated event not only rendered all existing economic and earnings forecasts moot, but it also roiled stock and bond markets everywhere. Efforts to slow the spread of the virus, though successful to date, also brought the economy to a halt. The historic bull market in stocks ended virtually overnight.
After an initial severe sell-off in March, equity markets recovered sharply. As our annual reporting period drew to a close on May 31, 2020, many of the broad market indexes had recovered and volatility had returned to more palatable levels. In fact, despite all the chaos, the S&P 500® Index, one of the most popular measures of large U.S. stocks, finished the fiscal year (May 31, 2020) at approximately 3,044, which was up more than 10.6% from one year ago.
The market turmoil of early 2020 was not limited to equities. Fixed income volatility spiked when liquidity evaporated in late March as investors struggled to understand the ramifications of stay-at-home orders. Fortunately, the U.S. Federal Reserve (the "Fed") (as well as other global central banks) leapt into action—cutting interest rates, (re)starting quantitative easing and, in the case of the Fed, launching an array of programs to stabilize markets.
The new lending facilities and programs had their intended effect of improving liquidity and trading. Credit spreads across corporate, high-yield, structured, and municipal markets were coaxed down from their highs. In addition, Congress came through with substantial fiscal stimulus that also was applauded by investors and markets. Although fixed income markets regained their footing, the yield on 10-Year Treasurys, a benchmark for low-risk investments, declined steadily during our fiscal year—from 2.14% at the beginning of our reporting period to approximately 0.65% as of May 31, 2020. This suggests that investors remain a little wary.
While the past year has been unprecedented for all of us, both personally and professionally, our portfolio managers continue to scrutinize the financial markets, economic conditions, and the trajectory of the pandemic, which will likely be the guiding factor on Fed policy and the markets.
No matter what happens in the near term, we believe that the massive monetary and fiscal policies introduced earlier this year will have longer-term ramifications. Despite this uncertainty, it's important to remain focused on your long-term investment goals and avoid making emotional decisions. If you invest with us directly, our Member Service Representatives are available to help. Call us at (800) 539-3863 or visit our website at vcm.com.
2
From all of us here at USAA Mutual Funds, thank you for letting us help you work toward your investment goals.
Christopher K. Dyer, CFA
President,
USAA Mutual Funds
3
USAA Mutual Funds Trust
USAA Cornerstone Aggressive Fund
Managers' Commentary
(Unaudited)
Victory Solutions
Mannik S. Dhillon, CFA, CAIA
Wasif A. Latif
Lance Humphrey, CFA
James F. Jackson, Jr., CFA
R. Neal Graves, CFA, CPA
• What were the market conditions during the reporting period?
Global financial market performance varied widely over the period driven by uncertainty related to the duration and economic impact of the novel coronavirus ("COVID-19") pandemic. This generally led to a risk-off environment as investors flocked to safe haven assets such as U.S. Treasurys and gold. Global equities turned mostly lower with the exception of a small breadth of mega-cap securities well-positioned for an extended economic slowdown and the new stay-at-home paradigm. The final month and a half of the reporting period saw a rebound in risky assets as economies began a phased reopening.
Within the United States, the S&P 500® Index dropped nearly 34% from its 2020 high, before beginning to recoup losses with the support of comprehensive monetary and fiscal stimulus, along with encouraging results in COVID-19 vaccine trials. Over the reporting period, the S&P 500® Index returned 12.84%, with large-cap growth stocks leading the way, up to a return of 26.25% as represented by the Russell 1000 Growth Index. Value stocks and small-cap stocks underperformed growth stocks over the period, but more recently have seen a pickup in momentum. U.S. large-cap value stocks were down to a return of -1.64% over the reporting period as gauged by the Russell 1000 Value Index, while U.S. small-cap stocks, were down to a return of -3.44% as represented by the Russell 2000 Index.
Developed market international and emerging market equities followed a path similar to U.S. equities. Markets led investors on a rollercoaster ride that saw both the MSCI EAFE Index and MSCI Emerging Markets Index drop approximately 34% from their highs in the year. The market drawdown hit bottom on March 23rd and then started a steady ascent, erasing most of the losses as European Central Bank quantitative easing and talks of a 750-billion euros fiscal stimulus helped bolster momentum in the market's recovery. Over the reporting period, developed international equities, represented by the MSCI EAFE Index, were down to a return of -2.81%, while the MSCI Emerging Markets Index returned -4.39%.
Within fixed-income, interest rate-sensitive treasury bonds outperformed credit-sensitive investment-grade and high-yield corporate bonds. Investor demand for U.S. Treasurys drove yields to new lows, while credit spreads reached unprecedented levels as liquidity issues began to seize up parts of credit and municipal markets. The U.S. Federal Reserve (the "Fed") intervened, providing liquidity by expanding open market purchases to include municipal and corporate bonds. Bloomberg Barclays US Treasury 20+ Year Index returned
4
USAA Mutual Funds Trust
USAA Cornerstone Aggressive Fund (continued)
27.46% over the reporting period, while the Bloomberg Barclays U.S. Aggregate Bond Index returned 9.42%. High-yield bonds finished the period slightly positive, up 1.32% as gauged by the Bloomberg Barclays US Corporate High Yield Index.
• How did the USAA Cornerstone Aggressive Fund (the "Fund") perform during the reporting period?
For the reporting period ended May 31, 2020, the Fund had a total return of 1.78%. This compares to returns of 5.43% for the MSCI All Country World Index and 5.51% for the Cornerstone Aggressive Composite Index.
• What strategies did you employ during the reporting period?
The equity portfolio's overall tilt toward value stocks, especially within U.S. large-cap stocks, was a key factor in underperformance relative to the benchmark over the reporting period. An underweight to U.S. equities along with negative stock selection effects within emerging market and developed international equities weighed on relative performance.
Within the fixed income portion of the portfolio, a slight overweight to treasurys contributed to relative performance, while allocations to corporate bonds detracted from performance.
Commodities as an asset class were down over the period with the Bloomberg Commodity Index returning -17.06%; however, gold outperformed. Gold's overweight within the portfolio contributed positively to relative performance over the period. A slight overweight to REITs relative to the benchmark detracted from performance.
Thank you for allowing us to assist you with your investment needs.
5
USAA Mutual Funds Trust
USAA Cornerstone Aggressive Fund
Investment Overview
(Unaudited)
Average Annual Total Return
Year Ended May 31, 2020
INCEPTION DATE | 6/8/12 | ||||||||||||||
Net Asset Value | MSCI All-Country World Index1 | Cornerstone Aggressive Composite Index2 | |||||||||||||
One Year | 1.78 | % | 5.43 | % | 5.51 | % | |||||||||
Five Year | 2.54 | % | 5.28 | % | 5.33 | % | |||||||||
Since Inception | 5.39 | % | NA | NA |
Past performance is not indicative of future results. 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 for various periods since inception. Without such fee waivers, the total returns would have been lower.
USAA Cornerstone Aggressive Fund — Growth of $10,000
* The performance of the MSCI All-Country World Index and Cornerstone Aggressive Composite Index is calculated from the end of the month, May 31, 2012, while the inception date of the Cornerstone Aggressive Fund is June 8, 2012. There might be a slight variation of performance numbers because of the difference.
1 The 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.
2 The 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 Barclays 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 Barclays U.S. Treasury — Bills (1-3M) (2%).
The graph reflects investment of growth of a hypothetical $10,000 investment in the Fund. Past performance is no guarantee of future results.
The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
6
USAA Mutual Funds Trust USAA Cornerstone Aggressive Fund | May 31, 2020 |
(Unaudited)
Investment Objective & Portfolio Holdings:
The Fund's investment objective is to seek capital appreciation over the long term and also considers the potential for current income.
Top 10 Holdings*
May 31, 2020
(% of Net Assets)
iShares Core S&P 500 ETF | 9.0 | % | |||||
Vanguard FTSE Developed Markets ETF | 6.2 | % | |||||
iShares Core MSCI EAFE ETF | 5.7 | % | |||||
Schwab Fundamental International Large Co. Index ETF | 5.6 | % | |||||
Vanguard FTSE Europe ETF | 3.5 | % | |||||
iShares Core MSCI Emerging Markets ETF | 3.5 | % | |||||
Vanguard S&P 500 ETF | 2.9 | % | |||||
Schwab Fundamental Emerging Markets Large Co. Index ETF | 2.8 | % | |||||
Vanguard FTSE All-World ex-US ETF | 2.0 | % | |||||
Apple, Inc. | 1.7 | % |
* Does not include short-term investments purchased with cash collateral from securities loaned.
Refer to the Schedule of Portfolio Investments for a complete list of securities.
7
USAA Mutual Funds Trust USAA Cornerstone Aggressive Fund | May 31, 2020 |
Asset Allocation*:
May 31, 2020
(% of Net Assets)
* Does not include short-term investments purchased with cash collateral from securities loaned.
Percentages are of the net assets of the Fund and may not equal 100%.
8
USAA Mutual Funds Trust USAA Cornerstone Aggressive Fund | Schedule of Portfolio Investments May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Asset Backed Securities (1.1%) | |||||||||||
American Express Credit Account Master Trust, Series 2019-2, Class B, 2.86%, 11/15/24 | $ | 187 | $ | 189 | |||||||
Americredit Automobile Receivables Trust, Series 2018-2, Class A3, 3.15%, 3/20/23, Callable 3/18/23 @ 100 | 81 | 82 | |||||||||
Americredit Automobile Receivables Trust, Series 2018-1, Class C, 3.50%, 1/18/24, Callable 10/18/22 @ 100 | 240 | 247 | |||||||||
ARI Fleet Lease Trust, Series 2020-A, Class A3, 1.80%, 8/15/28, Callable 5/15/23 @ 100 (a) | 50 | 50 | |||||||||
Canadian Pacer Auto Receivables Trust, Series 2018-1A, Class C, 3.82%, 4/19/24, Callable 5/19/21 @ 100 (a) | 137 | 139 | |||||||||
CarMax Auto Owner Trust, Series 2020-1, Class B, 2.21%, 9/15/25, Callable 12/15/23 @ 100 | 71 | 70 | |||||||||
Credit Acceptance Auto Loan Trust, Series 2018-3A, Class A, 3.55%, 8/15/27, Callable 10/15/21 @ 100 (a) | 165 | 166 | |||||||||
Dell Equipment Finance Trust, Series 2020-1, Class A3, 2.24%, 2/22/23, Callable 10/22/22 @ 100 (a) | 35 | 35 | |||||||||
Drive Auto Receivables Trust, Series 2019-1, Class C, 3.78%, 4/15/25, Callable 6/15/22 @ 100 | 82 | 83 | |||||||||
Element Rail Leasing I LLC, Series 2014-1A, Class A2, 3.67%, 4/19/44 (a) | 120 | 120 | |||||||||
Enterprise Fleet Financing LLC, Series 2020-1, Class A3, 1.86%, 12/22/25 (a) | 46 | 45 | |||||||||
Evergreen Credit Card Trust, Series 2019-2, Class A, 1.90%, 9/15/24 (a) | 127 | 127 | |||||||||
Exeter Automobile Receivables Trust, Series 2020-1A, Class B, 2.26%, 4/15/24, Callable 5/15/24 @ 100 (a) | 57 | 57 | |||||||||
Exeter Automobile Receivables Trust, Series 2017-3A, Class D, 5.28%, 10/15/24, Callable 3/15/22 @ 100 (a) | 50 | 48 | |||||||||
Exeter Automobile Receivables Trust, Series 2019-2A, Class C, 3.30%, 3/15/24, Callable 12/15/22 @ 100 (a) | 110 | 111 | |||||||||
Ford Credit Auto Owner Trust, Series 2020-1, Class B, 2.29%, 8/15/31, Callable 2/15/25 @ 100 (a) | 75 | 66 | |||||||||
Ford Credit Auto Owner Trust, Series 2019-A, Class A3, 2.78%, 9/15/23, Callable 3/15/23 @ 100 | 40 | 41 | |||||||||
GM Financial Consumer Automobile Receivables Trust, Series 2020-1, Class A4, 1.90%, 3/17/25, Callable 2/16/23 @ 100 | 75 | 77 | |||||||||
GM Financial Consumer Automobile Receivables Trust, Series 2020-2, Class A4, 1.74%, 8/18/25, Callable 12/16/23 @ 100 | 90 | 92 | |||||||||
Goal Capital Funding Trust, Series 2005-2, Class A4, 0.56% (LIBOR03M+20bps), 8/25/44, Callable 8/25/20 @ 100 (b) | 226 | 211 | |||||||||
Great American Auto Leasing, Inc., Series 2019-1, Class A3, 3.05%, 9/15/22, Callable 12/15/22 @ 100 (a) | 51 | 52 | |||||||||
Hertz Vehicle Financing II LP, Series 2019-3A, Class A, 2.67%, 12/26/25 (a) | 84 | 87 | |||||||||
HPEFS Equipment Trust, Series 2020-1A, Class B, 1.89%, 2/20/30, Callable 2/20/23 @ 100 (a) | 29 | 29 | |||||||||
HPEFS Equipment Trust, Series 2019-1A, Class C, 2.49%, 9/20/29, Callable 7/20/22 @ 100 (a) | 50 | 49 | |||||||||
John Deere Owner Trust, Series 2020-A, Class A4, 1.21%, 11/16/26, Callable 4/15/23 @ 100 | 112 | 111 | |||||||||
Kubota Credit Owner Trust, Series 2020-1A, Class A4, 2.26%, 7/15/26, Callable 10/15/23 @ 100 (a) | 45 | 45 |
See notes to financial statements.
9
USAA Mutual Funds Trust USAA Cornerstone Aggressive Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
MMAF Equipment Finance LLC, Series 2017-B, Class A4, 2.41%, 11/15/24, Callable 2/15/28 @ 100 (a) | $ | 112 | $ | 114 | |||||||
Navient Student Loan Trust, Series 2015-2, Class B, 1.67% (LIBOR01M+150bps), 8/25/50, Callable 10/25/28 @ 100 (b) | 50 | 43 | |||||||||
NP SPE II LLC, Series 2017-1A, Class A1, 3.37%, 10/21/47, Callable 10/20/27 @ 100 (a) | 33 | 32 | |||||||||
OSCAR US Funding Trust IX LLC, Series 2018-2A, Class A4, 3.63%, 9/10/25 (a) | 280 | 287 | |||||||||
SCF Equipment Leasing LLC, Series 2017-2A, Class A, 3.41%, 12/20/23, Callable 6/20/20 @ 100 (a) | 51 | 51 | |||||||||
Synchrony Credit Card Master Note Trust, Series 2018-2, Class A, 3.47%, 5/15/26 | 199 | 209 | |||||||||
Synchrony Credit Card Master Note Trust, Series 2016-2, Class C, 2.95%, 5/15/24 | 137 | 137 | |||||||||
Transportation Finance Equipment Trust, Series 2019-1, Class A4, 1.88%, 3/25/24, Callable 9/23/23 @ 100 (a) | 112 | 110 | |||||||||
Westlake Automobile Receivables Trust, Series 2018-2A, Class D, 4.00%, 1/16/24, Callable 10/15/21 @ 100 (a) | 150 | 151 | |||||||||
Westlake Automobile Receivables Trust, Series 2020-1A, Class B, 1.94%, 4/15/25, Callable 6/15/24 @ 100 (a) | 188 | 188 | |||||||||
Total Asset Backed Securities (Cost $3,762) | 3,751 | ||||||||||
Collateralized Mortgage Obligations (0.3%) | |||||||||||
Banc of America Commercial Mortgage Trust, Series 2006-3, Class AM, 5.66%, 7/10/44 (c) | 39 | 8 | |||||||||
Banc of America Commercial Mortgage Trust, Series 2008-1, Class AJ, 6.57%, 2/10/51 (c) | 7 | 7 | |||||||||
Barclays Commercial Mortgage Trust, Series 2019-C5, Class ASB, 2.99%, 11/15/52 | 87 | 92 | |||||||||
Benchmark Mortgage Trust, Series 2020-B17, Class ASB, 2.18%, 3/15/53 | 75 | 75 | |||||||||
Benchmark Mortgage Trust, Series 2019-B14, Class A5, 3.05%, 12/15/61 | 150 | 162 | |||||||||
BTH Mortgage-Backed Securities Trust, Series 2018-21, Class A, 2.87% (LIBOR01M+250bps), 10/7/21 (a) (b) | 160 | 154 | |||||||||
BX Trust, Series 2019-OC11, Class A, 3.20%, 12/9/41 (a) | 69 | 70 | |||||||||
Citigroup Commercial Mortgage Trust, Series 2020-GC46, Class AAB, 2.61%, 1/15/53 | 75 | 77 | |||||||||
Citigroup Commercial Mortgage Trust, Series 2020-555, Class A, 2.65%, 12/10/41 (a) | 112 | 108 | |||||||||
COMM Mortgage Trust, Series 2019-GC44, Class ASB, 2.87%, 8/15/57 | 112 | 118 | |||||||||
Credit Suisse Commercial Mortgage Trust, Series 2007-C1, Class AMFL, 0.37% (LIBOR01M+19bps), 2/15/40 (b) | 1 | 1 | |||||||||
CSAIL Commercial Mortgage Trust, Series 2016-C6, Class XA, 1.90%, 1/15/49 (c) (d) | 616 | 48 | |||||||||
GE Commercial Mortgage Corp., Series 2007-C1, Class AM, 5.61%, 12/10/49 (c) | 13 | 9 | |||||||||
GS Mortgage Securities Trust, Series 2020-GC45, Class AAB, 2.84%, 2/13/53 | 40 | 42 | |||||||||
GS Mortgage Securities Trust, Series 2020-GC45, Class A5, 2.91%, 2/13/53 | 47 | 50 | |||||||||
UBS Commercial Mortgage Trust, Series 2012-C1, Class XA, 2.07%, 5/10/45 (a) (c) (d) | 774 | 22 | |||||||||
Total Collateralized Mortgage Obligations (Cost $1,066) | 1,043 |
See notes to financial statements.
10
USAA Mutual Funds Trust USAA Cornerstone Aggressive Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Common Stocks (30.8%) | |||||||||||
Communication Services (2.4%): | |||||||||||
Activision Blizzard, Inc. | 5,808 | $ | 418 | ||||||||
Alphabet, Inc. Class C (e) | 925 | 1,322 | |||||||||
AMC Networks, Inc. Class A (e) | 1,907 | 54 | |||||||||
AT&T, Inc. | 22,691 | 700 | |||||||||
Charter Communications, Inc. Class A (e) (f) | 883 | 480 | |||||||||
Comcast Corp. Class A | 17,006 | 673 | |||||||||
DISH Network Corp. Class A (e) | 18,736 | 593 | |||||||||
Electronic Arts, Inc. (e) | 3,458 | 425 | |||||||||
Entravision Communications Corp. Class A | 18,837 | 28 | |||||||||
Facebook, Inc. Class A (e) | 4,306 | 969 | |||||||||
Fox Corp. Class A | 17,613 | 514 | |||||||||
Gray Television, Inc. (e) | 7,257 | 101 | |||||||||
John Wiley & Sons, Inc. Class A | 1,265 | 51 | |||||||||
Match Group, Inc. (e) (f) | 4,040 | 360 | |||||||||
Meredith Corp. | 5,468 | 82 | |||||||||
Shenandoah Telecommunications Co. | 1,259 | 66 | |||||||||
Sinclair Broadcast Group, Inc. Class A | 1,964 | 37 | |||||||||
Sirius XM Holdings, Inc. | 63,099 | 367 | |||||||||
Take-Two Interactive Software, Inc. (e) | 2,957 | 403 | |||||||||
Verizon Communications, Inc. | 12,131 | 696 | |||||||||
8,339 | |||||||||||
Consumer Discretionary (2.5%): | |||||||||||
Asbury Automotive Group, Inc. (e) (f) | 547 | 40 | |||||||||
AutoZone, Inc. (e) | 363 | 417 | |||||||||
Big Lots, Inc. | 1,267 | 49 | |||||||||
Booking Holdings, Inc. (e) | 298 | 489 | |||||||||
Cracker Barrel Old Country Store, Inc. | 811 | 87 | |||||||||
Deckers Outdoor Corp. (e) | 401 | 73 | |||||||||
Dick's Sporting Goods, Inc. (f) | 1,641 | 59 | |||||||||
Dollar General Corp. | 2,362 | 452 | |||||||||
Domino's Pizza, Inc. | 976 | 377 | |||||||||
Foot Locker, Inc. | 3,087 | 85 | |||||||||
Gentex Corp. | 3,044 | 80 | |||||||||
G-III Apparel Group Ltd. (e) | 5,929 | 61 | |||||||||
Graham Holdings Co. Class B | 92 | 33 | |||||||||
Group 1 Automotive, Inc. (f) | 658 | 41 | |||||||||
H&R Block, Inc. | 3,851 | 65 | |||||||||
Helen of Troy Ltd. (e) | 209 | 38 | |||||||||
Kontoor Brands, Inc. (f) | 5,111 | 75 | |||||||||
La-Z-Boy, Inc. | 1,660 | 43 | |||||||||
Lowe's Cos., Inc. | 4,012 | 523 | |||||||||
Lululemon Athletica, Inc. (e) (f) | 1,743 | 523 | |||||||||
Macy's, Inc. | 7,488 | 48 | |||||||||
Nike, Inc. Class B | 10,753 | 1,060 | |||||||||
Office Depot, Inc. | 20,894 | 52 | |||||||||
O'Reilly Automotive, Inc. (e) | 957 | 399 | |||||||||
Penske Automotive Group, Inc. | 818 | 29 |
See notes to financial statements.
11
USAA Mutual Funds Trust USAA Cornerstone Aggressive Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Qurate Retail, Inc. Class A (e) | 9,063 | $ | 75 | ||||||||
Steven Madden Ltd. | 1,628 | 38 | |||||||||
Sturm Ruger & Co., Inc. (g) | 894 | 56 | |||||||||
Target Corp. (g) | 3,741 | 458 | |||||||||
Tesla, Inc. (e) | 611 | 510 | |||||||||
Texas Roadhouse, Inc. | 1,061 | 55 | |||||||||
The Buckle, Inc. | 6,746 | 95 | |||||||||
The Home Depot, Inc. | 5,560 | 1,382 | |||||||||
Toll Brothers, Inc. (f) | 3,412 | 110 | |||||||||
Williams-Sonoma, Inc. | 1,079 | 90 | |||||||||
Wingstop, Inc. | 454 | 55 | |||||||||
Yum! Brands, Inc. | 4,510 | 405 | |||||||||
8,527 | |||||||||||
Consumer Staples (2.2%): | |||||||||||
Cal-Maine Foods, Inc. (e) | 1,115 | 50 | |||||||||
Colgate-Palmolive Co. | 6,016 | 435 | |||||||||
Costco Wholesale Corp. | 1,656 | 511 | |||||||||
Edgewell Personal Care Co. (e) | 2,580 | 78 | |||||||||
Flowers Foods, Inc. | 3,848 | 91 | |||||||||
Hostess Brands, Inc. (e) | 4,319 | 52 | |||||||||
Ingles Markets, Inc. Class A | 1,235 | 53 | |||||||||
Kimberly-Clark Corp. | 2,955 | 418 | |||||||||
Philip Morris International, Inc. | 14,184 | 1,041 | |||||||||
Pilgrim's Pride Corp. (e) | 4,103 | 85 | |||||||||
Sanderson Farms, Inc. | 234 | 31 | |||||||||
Sprouts Farmers Market, Inc. (e) | 3,474 | 87 | |||||||||
Sysco Corp. | 7,230 | 399 | |||||||||
The Clorox Co. (f) | 3,826 | 789 | |||||||||
The Kroger Co. | 25,689 | 838 | |||||||||
The Procter & Gamble Co. | 11,741 | 1,361 | |||||||||
Tyson Foods, Inc. Class A | 8,039 | 494 | |||||||||
U.S. Foods Holding Corp. (e) | 3,578 | 68 | |||||||||
Walgreens Boots Alliance, Inc. | 11,091 | 476 | |||||||||
7,357 | |||||||||||
Energy (0.9%): | |||||||||||
Bonanza Creek Energy, Inc. (e) | 2,523 | 43 | |||||||||
Chevron Corp. | 6,767 | 620 | |||||||||
ConocoPhillips | 21,428 | 904 | |||||||||
Delek U.S. Holdings, Inc. | 2,559 | 50 | |||||||||
PBF Energy, Inc. Class A | 4,903 | 52 | |||||||||
Phillips 66 | 11,884 | 930 | |||||||||
Renewable Energy Group, Inc. (e) | 4,926 | 140 | |||||||||
Valero Energy Corp. | 6,390 | 426 | |||||||||
3,165 | |||||||||||
Financials (4.2%): | |||||||||||
Affiliated Managers Group, Inc. | 1,110 | 74 | |||||||||
AGNC Investment Corp. | 1,836 | 24 | |||||||||
American Equity Investment Life Holding Co. | 3,581 | 78 |
See notes to financial statements.
12
USAA Mutual Funds Trust USAA Cornerstone Aggressive Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Annaly Capital Management, Inc. | 4,855 | $ | 30 | ||||||||
Aon PLC Class A | 2,218 | 437 | |||||||||
BancFirst Corp. | 919 | 35 | |||||||||
Bank of Hawaii Corp. | 2,024 | 130 | |||||||||
BankUnited, Inc. | 4,522 | 84 | |||||||||
Brown & Brown, Inc. | 10,414 | 419 | |||||||||
Cadence Bancorp | 4,701 | 38 | |||||||||
Capital One Financial Corp. | 7,737 | 526 | |||||||||
Cathay General Bancorp | 3,537 | 96 | |||||||||
Chimera Investment Corp. | 7,299 | 61 | |||||||||
Cullen/Frost Bankers, Inc. (f) | 1,563 | 119 | |||||||||
Employers Holdings, Inc. | 2,178 | 65 | |||||||||
Essent Group Ltd. | 3,994 | 132 | |||||||||
Fifth Third Bancorp | 25,966 | 503 | |||||||||
First Bancorp, Inc. | 5,375 | 29 | |||||||||
First Republic Bank | 3,819 | 413 | |||||||||
Great Western Bancorp, Inc. | 4,002 | 57 | |||||||||
Intercontinental Exchange, Inc. | 4,555 | 443 | |||||||||
JPMorgan Chase & Co. | 7,447 | 725 | |||||||||
Ladder Capital Corp. | 5,606 | 45 | |||||||||
Legg Mason, Inc. | 738 | 37 | |||||||||
LPL Financial Holdings, Inc. | 938 | 67 | |||||||||
MarketAxess Holdings, Inc. | 809 | 411 | |||||||||
MetLife, Inc. | 13,677 | 492 | |||||||||
MGIC Investment Corp. | 5,266 | 43 | |||||||||
Morgan Stanley | 12,662 | 560 | |||||||||
Mr. Cooper Group, Inc. (e) | 7,521 | 84 | |||||||||
MSCI, Inc. | 2,334 | 767 | |||||||||
National General Holdings Corp. | 3,012 | 61 | |||||||||
Nelnet, Inc. Class A | 1,071 | 53 | |||||||||
New York Community Bancorp, Inc. | 6,455 | 65 | |||||||||
NMI Holdings, Inc. Class A (e) | 5,361 | 82 | |||||||||
Primerica, Inc. (f) | 753 | 86 | |||||||||
Radian Group, Inc. | 9,114 | 145 | |||||||||
Regions Financial Corp. | 44,856 | 507 | |||||||||
S&P Global, Inc. | 2,987 | 971 | |||||||||
State Street Corp. (f) | 7,902 | 482 | |||||||||
SVB Financial Group (e) | 1,987 | 427 | |||||||||
Synchrony Financial | 25,069 | 511 | |||||||||
Synovus Financial Corp. | 1,619 | 31 | |||||||||
T. Rowe Price Group, Inc. | 3,468 | 419 | |||||||||
The Allstate Corp. | 7,700 | 753 | |||||||||
The Goldman Sachs Group, Inc. | 2,738 | 538 | |||||||||
The PNC Financial Services Group, Inc. | 4,154 | 474 | |||||||||
The Progressive Corp. | 10,592 | 823 | |||||||||
U.S. Bancorp | 12,092 | 430 | |||||||||
Universal Insurance Holdings, Inc. | 3,217 | 57 | |||||||||
Waddell & Reed Financial, Inc. Class A (f) | 6,478 | 84 | |||||||||
Walker & Dunlop, Inc. | 3,253 | 132 | |||||||||
Webster Financial Corp. | 2,067 | 58 |
See notes to financial statements.
13
USAA Mutual Funds Trust USAA Cornerstone Aggressive Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Western Alliance Bancorp | 3,458 | $ | 132 | ||||||||
World Acceptance Corp. (e) | 1,354 | 90 | |||||||||
14,435 | |||||||||||
Health Care (5.2%): | |||||||||||
AbbVie, Inc. | 12,260 | 1,136 | |||||||||
Acadia Healthcare Co., Inc. (e) | 1,073 | 31 | |||||||||
Amedisys, Inc. (e) | 513 | 99 | |||||||||
Amgen, Inc. | 4,558 | 1,047 | |||||||||
AMN Healthcare Services, Inc. (e) | 2,438 | 108 | |||||||||
Anthem, Inc. | 1,840 | 541 | |||||||||
Biogen, Inc. (e) | 2,906 | 892 | |||||||||
Bristol-Myers Squibb Co. | 17,974 | 1,073 | |||||||||
Bruker Corp. | 2,165 | 94 | |||||||||
Cerner Corp. | 5,540 | 404 | |||||||||
Chemed Corp. | 299 | 143 | |||||||||
Cigna Corp. | 2,714 | 536 | |||||||||
Corcept Therapeutics, Inc. (e) | 9,160 | 139 | |||||||||
Covetrus, Inc. (e) (f) | 3,157 | 48 | |||||||||
CVS Health Corp. | 8,423 | 552 | |||||||||
DaVita, Inc. (e) | 4,493 | 364 | |||||||||
DexCom, Inc. (e) | 1,088 | 412 | |||||||||
Eli Lilly & Co. | 6,422 | 982 | |||||||||
Encompass Health Corp. | 1,406 | 103 | |||||||||
Halozyme Therapeutics, Inc. (e) | 2,076 | 50 | |||||||||
HCA Healthcare, Inc. | 4,546 | 486 | |||||||||
HealthEquity, Inc. (e) | 675 | 42 | |||||||||
Hill-Rom Holdings, Inc. | 1,246 | 127 | |||||||||
Horizon Therapeutics PLC (e) | 1,395 | 71 | |||||||||
IDEXX Laboratories, Inc. (e) | 1,320 | 408 | |||||||||
Innoviva, Inc. (e) | 5,697 | 80 | |||||||||
Johnson & Johnson (g) | 10,973 | 1,632 | |||||||||
Masimo Corp. (e) | 521 | 125 | |||||||||
Medpace Holdings, Inc. (e) | 648 | 60 | |||||||||
Merck & Co., Inc. | 7,298 | 589 | |||||||||
Meridian Bioscience, Inc. (e) (f) | 4,243 | 66 | |||||||||
Mettler-Toledo International, Inc. (e) | 512 | 407 | |||||||||
Molina Healthcare, Inc. (e) | 200 | 37 | |||||||||
Patterson Cos., Inc. (f) (g) | 3,105 | 61 | |||||||||
PerkinElmer, Inc. | 1,306 | 131 | |||||||||
Pfizer, Inc. | 17,044 | 651 | |||||||||
Phibro Animal Health Corp. Class A | 3,541 | 93 | |||||||||
PRA Health Sciences, Inc. (e) | 937 | 97 | |||||||||
Prestige Consumer Healthcare, Inc. (e) | 1,834 | 77 | |||||||||
Regeneron Pharmaceuticals, Inc. (e) | 742 | 455 | |||||||||
ResMed, Inc. | 2,420 | 389 | |||||||||
Select Medical Holdings Corp. (e) | 4,938 | 80 | |||||||||
Simulations Plus, Inc. | 1,177 | 60 | |||||||||
Supernus Pharmaceuticals, Inc. (e) | 2,225 | 54 | |||||||||
The Ensign Group, Inc. | 2,294 | 100 | |||||||||
United Therapeutics Corp. (e) | 1,094 | 129 |
See notes to financial statements.
14
USAA Mutual Funds Trust USAA Cornerstone Aggressive Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
UnitedHealth Group, Inc. | 4,745 | $ | 1,446 | ||||||||
Vertex Pharmaceuticals, Inc. (e) | 1,622 | 467 | |||||||||
Waters Corp. (e) (f) | 1,949 | 389 | |||||||||
West Pharmaceutical Services, Inc. | 1,918 | 414 | |||||||||
17,977 | |||||||||||
Industrials (3.1%): | |||||||||||
3M Co. | 3,008 | 471 | |||||||||
ACCO Brands Corp. | 5,848 | 36 | |||||||||
AECOM (e) | 2,726 | 106 | |||||||||
Allison Transmission Holdings, Inc. | 2,712 | 102 | |||||||||
Apogee Enterprises, Inc. | 2,338 | 48 | |||||||||
ArcBest Corp. | 1,683 | 38 | |||||||||
Atkore International Group, Inc. (e) | 2,975 | 80 | |||||||||
Carrier Global Corp. (e) | 49,955 | 1,023 | |||||||||
Cimpress PLC (e) (f) | 879 | 79 | |||||||||
Crane Co. | 1,421 | 79 | |||||||||
Cummins, Inc. | 2,910 | 494 | |||||||||
Deluxe Corp. | 1,370 | 32 | |||||||||
Eaton Corp. PLC | 5,742 | 488 | |||||||||
EnPro Industries, Inc. | 740 | 33 | |||||||||
FedEx Corp. | 3,943 | 515 | |||||||||
FTI Consulting, Inc. (e) | 334 | 40 | |||||||||
Generac Holdings, Inc. (e) | 632 | 70 | |||||||||
General Dynamics Corp. | 3,742 | 549 | |||||||||
GMS, Inc. (e) | 3,662 | 75 | |||||||||
Herman Miller, Inc. | 5,558 | 128 | |||||||||
Hillenbrand, Inc. | 2,504 | 65 | |||||||||
IHS Markit Ltd. | 5,966 | 414 | |||||||||
Illinois Tool Works, Inc. | 2,541 | 438 | |||||||||
KAR Auction Services, Inc. | 3,392 | 49 | |||||||||
Knoll, Inc. | 2,843 | 30 | |||||||||
Lockheed Martin Corp. (f) | 2,430 | 944 | |||||||||
Masonite International Corp. (e) | 823 | 55 | |||||||||
Meritor, Inc. (e) | 2,873 | 59 | |||||||||
MSC Industrial Direct Co., Inc. | 1,346 | 93 | |||||||||
Northrop Grumman Corp. | 1,296 | 434 | |||||||||
nVent Electric PLC | 2,579 | 47 | |||||||||
Old Dominion Freight Line, Inc. | 2,481 | 425 | |||||||||
Oshkosh Corp. | 1,328 | 95 | |||||||||
Otis Worldwide Corp. | 7,643 | 402 | |||||||||
Patrick Industries, Inc. | 2,796 | 145 | |||||||||
Regal Beloit Corp. | 1,572 | 125 | |||||||||
Resideo Technologies, Inc. (e) | 11,598 | 82 | |||||||||
Rockwell Automation, Inc. | 1,963 | 424 | |||||||||
Rush Enterprises, Inc. Class A | 2,091 | 87 | |||||||||
Steelcase, Inc. Class A | 10,917 | 126 | |||||||||
Teledyne Technologies, Inc. (e) | 1,182 | 442 | |||||||||
The Timken Co. | 1,802 | 77 | |||||||||
The Toro Co. | 640 | 46 | |||||||||
Trinity Industries, Inc. | 1,957 | 39 |
See notes to financial statements.
15
USAA Mutual Funds Trust USAA Cornerstone Aggressive Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Verisk Analytics, Inc. | 2,502 | $ | 432 | ||||||||
Wabash National Corp. | 6,427 | 61 | |||||||||
Werner Enterprises, Inc. (f) | 1,639 | 76 | |||||||||
WESCO International, Inc. (e) | 2,163 | 72 | |||||||||
WW Grainger, Inc. | 1,289 | 399 | |||||||||
10,669 | |||||||||||
Information Technology (7.1%): | |||||||||||
Accenture PLC Class A | 2,623 | 529 | |||||||||
Adobe, Inc. (e) | 3,018 | 1,167 | |||||||||
Apple, Inc. | 18,381 | 5,844 | |||||||||
Applied Materials, Inc. | 9,382 | 527 | |||||||||
Aspen Technology, Inc. (e) | 763 | 81 | |||||||||
Belden, Inc. | 947 | 32 | |||||||||
Broadcom, Inc. | 2,035 | 593 | |||||||||
CACI International, Inc. Class A (e) | 428 | 107 | |||||||||
Cardtronics PLC Class A (e) | 3,162 | 76 | |||||||||
CDW Corp. (f) | 3,413 | 378 | |||||||||
Ciena Corp. (e) | 1,244 | 69 | |||||||||
Cirrus Logic, Inc. (e) | 1,513 | 110 | |||||||||
Cisco Systems, Inc. | 14,923 | 714 | |||||||||
Citrix Systems, Inc. | 2,592 | 384 | |||||||||
Cognizant Technology Solutions Corp. Class A | 7,939 | 421 | |||||||||
Coherent, Inc. (e) | 539 | 78 | |||||||||
CoreLogic, Inc. | 1,134 | 56 | |||||||||
CSG Systems International, Inc. | 1,884 | 89 | |||||||||
DocuSign, Inc. (e) | 3,249 | 454 | |||||||||
Euronet Worldwide, Inc. (e) | 488 | 46 | |||||||||
Fair Isaac Corp. (e) | 250 | 101 | |||||||||
HP, Inc. | 55,787 | 845 | |||||||||
Insight Enterprises, Inc. (e) | 1,079 | 55 | |||||||||
Intel Corp. | 11,912 | 750 | |||||||||
InterDigital, Inc. | 1,012 | 56 | |||||||||
Intuit, Inc. | 1,545 | 448 | |||||||||
J2 Global, Inc. (e) | 1,572 | 123 | |||||||||
Jabil, Inc. | 2,859 | 85 | |||||||||
KBR, Inc. | 3,784 | 89 | |||||||||
KLA Corp. | 2,382 | 419 | |||||||||
Kulicke & Soffa Industries, Inc. | 2,463 | 55 | |||||||||
Lam Research Corp. | 5,106 | 1,397 | |||||||||
Leidos Holdings, Inc. | 3,871 | 408 | |||||||||
LogMeIn, Inc. | 565 | 48 | |||||||||
Manhattan Associates, Inc. (e) | 1,211 | 107 | |||||||||
Mastercard, Inc. Class A | 2,260 | 680 | |||||||||
MAXIMUS, Inc. | 1,976 | 142 | |||||||||
Methode Electronics, Inc. | 1,805 | 57 | |||||||||
Micron Technology, Inc. (e) | 10,386 | 498 | |||||||||
Microsoft Corp. (g) | 9,929 | 1,819 | |||||||||
NCR Corp. (e) | 4,212 | 76 | |||||||||
NIC, Inc. | 4,190 | 101 | |||||||||
NVIDIA Corp. | 3,657 | 1,298 |
See notes to financial statements.
16
USAA Mutual Funds Trust USAA Cornerstone Aggressive Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Oracle Corp. (f) | 10,670 | $ | 574 | ||||||||
Paylocity Holding Corp. (e) | 291 | 38 | |||||||||
Perspecta, Inc. | 2,895 | 64 | |||||||||
Proofpoint, Inc. (e) | 373 | 43 | |||||||||
Science Applications International Corp. | 493 | 43 | |||||||||
Seagate Technology PLC | 9,154 | 485 | |||||||||
SMART Global Holdings, Inc. (e) | 2,396 | 64 | |||||||||
SYNNEX Corp. | 542 | 58 | |||||||||
Teradyne, Inc. | 1,056 | 71 | |||||||||
Texas Instruments, Inc. | 4,116 | 489 | |||||||||
The Hackett Group, Inc. | 7,113 | 98 | |||||||||
Ultra Clean Holdings, Inc. (e) | 4,630 | 96 | |||||||||
VeriSign, Inc. (e) | 1,752 | 384 | |||||||||
VMware, Inc. Class A (e) (f) | 3,422 | 535 | |||||||||
24,454 | |||||||||||
Materials (1.0%): | |||||||||||
Air Products & Chemicals, Inc. | 1,861 | 450 | |||||||||
Berry Global Group, Inc. (e) | 1,371 | 62 | |||||||||
Domtar Corp. | 2,065 | 42 | |||||||||
Huntsman Corp. | 5,029 | 91 | |||||||||
Hycroft Mining Corp. (e) (h) (i) | 8,942 | 13 | |||||||||
Linde PLC | 2,611 | 528 | |||||||||
LyondellBasell Industries NV Class A | 15,365 | 980 | |||||||||
Newmont Corp. | 6,694 | 391 | |||||||||
Reliance Steel & Aluminum Co. | 1,422 | 138 | |||||||||
Resolute Forest Products, Inc. (e) | 11,561 | 21 | |||||||||
Schweitzer-Mauduit International, Inc. | 2,122 | 64 | |||||||||
Silgan Holdings, Inc. | 3,856 | 129 | |||||||||
The Sherwin-Williams Co. (f) | 754 | 448 | |||||||||
Trinseo SA | 1,513 | 31 | |||||||||
Warrior Met Coal, Inc. | 8,845 | 125 | |||||||||
3,513 | |||||||||||
Real Estate (1.2%): | |||||||||||
Alexandria Real Estate Equities, Inc. | 391 | 60 | |||||||||
American Tower Corp. | 1,504 | 388 | |||||||||
AvalonBay Communities, Inc. | 474 | 74 | |||||||||
Boston Properties, Inc. | 525 | 45 | |||||||||
Brixmor Property Group, Inc. | 5,329 | 60 | |||||||||
Camden Property Trust | 329 | 30 | |||||||||
CBRE Group, Inc. Class A (e) | 1,080 | 48 | |||||||||
City Office REIT, Inc. | 4,518 | 42 | |||||||||
CoreCivic, Inc. | 3,836 | 46 | |||||||||
Crown Castle International Corp. | 1,412 | 243 | |||||||||
Digital Realty Trust, Inc. | 892 | 128 | |||||||||
Diversified Healthcare Trust | 14,440 | 52 | |||||||||
Duke Realty Corp. | 1,248 | 43 | |||||||||
EPR Properties | 1,841 | 58 | |||||||||
Equinix, Inc. | 290 | 202 | |||||||||
Equity LifeStyle Properties, Inc. | 587 | 37 |
See notes to financial statements.
17
USAA Mutual Funds Trust USAA Cornerstone Aggressive Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Equity Residential | 1,261 | $ | 76 | ||||||||
Essex Property Trust, Inc. | 224 | 54 | |||||||||
Extra Space Storage, Inc. | 440 | 43 | |||||||||
Federal Realty Investment Trust (f) | 256 | 20 | |||||||||
Gaming and Leisure Properties, Inc. | 3,869 | 134 | |||||||||
Healthpeak Properties, Inc. | 1,680 | 41 | |||||||||
Host Hotels & Resorts, Inc. (f) | 2,435 | 29 | |||||||||
Invitation Homes, Inc. | 1,825 | 48 | |||||||||
Iron Mountain, Inc. (f) | 975 | 25 | |||||||||
iStar, Inc. | 4,110 | 45 | |||||||||
Jones Lang LaSalle, Inc. | 649 | 67 | |||||||||
Kimco Realty Corp. | 1,434 | 16 | |||||||||
Lamar Advertising Co. Class A | 1,517 | 101 | |||||||||
LTC Properties, Inc. (f) | 3,398 | 125 | |||||||||
Medical Properties Trust, Inc. | 7,171 | 130 | |||||||||
Mid-America Apartment Communities, Inc. | 387 | 45 | |||||||||
National Retail Properties, Inc. | 583 | 18 | |||||||||
Omega Healthcare Investors, Inc. | 3,052 | 95 | |||||||||
PotlatchDeltic Corp. | 2,823 | 96 | |||||||||
Preferred Apartment Communities, Inc. Class A | 4,514 | 32 | |||||||||
Prologis, Inc. | 2,503 | 229 | |||||||||
Public Storage (f) | 534 | 108 | |||||||||
Realty Income Corp. | 1,107 | 61 | |||||||||
Regency Centers Corp. | 569 | 24 | |||||||||
SBA Communications Corp. | 382 | 120 | |||||||||
Simon Property Group, Inc. | 1,042 | 60 | |||||||||
SL Green Realty Corp. | 272 | 11 | |||||||||
Summit Hotel Properties, Inc. | 8,178 | 51 | |||||||||
Sun Communities, Inc. | 315 | 43 | |||||||||
The GEO Group, Inc. | 3,746 | 45 | |||||||||
UDR, Inc. | 995 | 37 | |||||||||
Universal Health Realty Income Trust | 470 | 44 | |||||||||
Ventas, Inc. | 1,265 | 44 | |||||||||
VEREIT, Inc. | 3,625 | 20 | |||||||||
VICI Properties, Inc. | 1,565 | 31 | |||||||||
Vornado Realty Trust (f) | 583 | 21 | |||||||||
Welltower, Inc. | 1,378 | 70 | |||||||||
Weyerhaeuser Co. | 2,530 | 51 | |||||||||
WP Carey, Inc. | 585 | 35 | |||||||||
3,901 | |||||||||||
Utilities (1.0%): | |||||||||||
ALLETE, Inc. | 1,276 | 75 | |||||||||
Clearway Energy, Inc. Class C | 2,973 | 65 | |||||||||
Duke Energy Corp. (g) | 6,082 | 521 | |||||||||
Eversource Energy (g) | 5,099 | 427 | |||||||||
Exelon Corp. | 13,326 | 511 | |||||||||
IDACORP, Inc. | 1,260 | 117 | |||||||||
New Jersey Resources Corp. | 3,191 | 112 | |||||||||
NextEra Energy, Inc. (g) | 2,161 | 552 | |||||||||
NorthWestern Corp. | 1,082 | 65 |
See notes to financial statements.
18
USAA Mutual Funds Trust USAA Cornerstone Aggressive Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares or Principal Amount | Value | |||||||||
Southwest Gas Holdings, Inc. | 1,423 | $ | 108 | ||||||||
The Southern Co. (g) | 7,895 | 451 | |||||||||
WEC Energy Group, Inc. (f) (g) | 4,606 | 422 | |||||||||
3,426 | |||||||||||
Total Common Stocks (Cost $100,474) | 105,763 | ||||||||||
Preferred Stocks (0.3%) | |||||||||||
Communication Services (0.1%): | |||||||||||
Qwest Corp., 6.50%, 9/1/56 | 8,000 | 187 | |||||||||
Consumer Staples (0.1%): | |||||||||||
CHS, Inc., cumulative redeemable, Series 1, 7.88% (j) | 8,000 | 222 | |||||||||
Dairy Farmers of America, Inc., cumulative redeemable, 7.88% (a) (j) | 2,000 | 172 | |||||||||
394 | |||||||||||
Financials (0.1%): | |||||||||||
Delphi Financial Group, Inc., 3.58% (LIBOR03M+319bps), 5/15/37 (b) (h) | 12,000 | 264 | |||||||||
Total Preferred Stocks (Cost $915) | 845 | ||||||||||
Senior Secured Loans (0.1%) | |||||||||||
Academy Ltd., 1st Lien Term Loan B, 5.00% (LIBOR01M+400bps), 7/2/22 (b) | $ | 290 | 216 | ||||||||
Total Senior Secured Loans (Cost $255) | 216 | ||||||||||
Corporate Bonds (4.6%) | |||||||||||
Communication Services (0.2%): | |||||||||||
AT&T, Inc., 2.30%, 6/1/27, Callable 4/1/27 @ 100 | 95 | 97 | |||||||||
Fox Corp., 3.05%, 4/7/25, Callable 3/7/25 @ 100 | 53 | 57 | |||||||||
The Walt Disney Co., 2.20%, 1/13/28 | 45 | 47 | |||||||||
T-Mobile USA, Inc., 3.88%, 4/15/30, Callable 1/15/30 @ 100 (a) (g) | 133 | 144 | |||||||||
Verizon Communications, Inc., 4.50%, 8/10/33 | 224 | 277 | |||||||||
622 | |||||||||||
Consumer Discretionary (0.1%): | |||||||||||
AutoNation, Inc., 4.75%, 6/1/30, Callable 3/1/30 @ 100 | 38 | 40 | |||||||||
eBay, Inc., 1.90%, 3/11/25, Callable 2/11/25 @ 100 | 131 | 132 | |||||||||
General Motors Co., 6.80%, 10/1/27, Callable 8/1/27 @ 100 | 42 | 48 | |||||||||
Hasbro, Inc., 3.55%, 11/19/26, Callable 9/19/26 @ 100 | 90 | 93 | |||||||||
Nordstrom, Inc., 4.38%, 4/1/30, Callable 1/1/30 @ 100 | 75 | 55 | |||||||||
VF Corp., 2.95%, 4/23/30, Callable 1/23/30 @ 100 | 53 | 55 | |||||||||
423 | |||||||||||
Consumer Staples (0.4%): | |||||||||||
Altria Group, Inc., 3.40%, 5/6/30, Callable 2/6/30 @ 100 | 49 | 52 | |||||||||
Anheuser-Busch Cos. LLC/Anheuser-Busch InBev Worldwide, Inc., 4.70%, 2/1/36, Callable 8/1/35 @ 100 | 187 | 212 | |||||||||
BAT Capital Corp., 2.79%, 9/6/24, Callable 8/6/24 @ 100 | 200 | 208 | |||||||||
Kraft Heinz Foods Co., 3.75%, 4/1/30, Callable 1/1/30 @ 100 (a) | 84 | 87 | |||||||||
McCormick & Co., Inc., 2.50%, 4/15/30, Callable 1/15/30 @ 100 | 32 | 33 | |||||||||
PepsiCo, Inc., 2.25%, 3/19/25, Callable 2/19/25 @ 100 | 175 | 187 |
See notes to financial statements.
19
USAA Mutual Funds Trust USAA Cornerstone Aggressive Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Sysco Corp., 5.95%, 4/1/30, Callable 1/1/30 @ 100 | $ | 44 | $ | 53 | |||||||
The Coca-Cola Co., 3.45%, 3/25/30 | 250 | 291 | |||||||||
The Procter & Gamble Co., 3.00%, 3/25/30 | 74 | 85 | |||||||||
Unilever Capital Corp., 2.60%, 5/5/24, Callable 3/5/24 @ 100 | 150 | 160 | |||||||||
1,368 | |||||||||||
Energy (0.6%): | |||||||||||
Cameron LNG LLC, 3.30%, 1/15/35, Callable 9/15/34 @ 100 (a) | 143 | 153 | |||||||||
Cheniere Corpus Christi Holdings LLC, 3.70%, 11/15/29, Callable 5/18/29 @ 100 (a) | 187 | 186 | |||||||||
Diamondback Energy, Inc., 3.25%, 12/1/26, Callable 10/1/26 @ 100 | 112 | 109 | |||||||||
Enable Midstream Partners LP, 4.15%, 9/15/29, Callable 6/15/29 @ 100 | 150 | 122 | |||||||||
Enbridge Energy Partners LP, 7.38%, 10/15/45, Callable 4/15/45 @ 100 (g) | 100 | 137 | |||||||||
Energy Transfer Operating LP, 3.75%, 5/15/30, Callable 2/15/30 @ 100 | 112 | 110 | |||||||||
Enterprise Products Operating LLC, 2.80%, 1/31/30, Callable 10/31/29 @ 100 | 112 | 117 | |||||||||
EOG Resources, Inc., 4.38%, 4/15/30, Callable 1/15/30 @ 100 | 34 | 40 | |||||||||
EQM Midstream Partners LP, 4.75%, 7/15/23, Callable 6/15/23 @ 100 (g) | 400 | 395 | |||||||||
EQT Corp., 7.00%, 2/1/30, Callable 11/1/29 @ 100 | 77 | 82 | |||||||||
Exxon Mobil Corp., 2.99%, 3/19/25, Callable 2/19/25 @ 100 (g) | 188 | 206 | |||||||||
Marathon Petroleum Corp., 4.70%, 5/1/25, Callable 4/1/25 @ 100 | 49 | 54 | |||||||||
National Oilwell Varco, Inc., 3.60%, 12/1/29, Callable 9/1/29 @ 100 | 150 | 140 | |||||||||
Occidental Petroleum Corp., 4.40%, 8/15/49, Callable 2/15/49 @ 100 | 75 | 44 | |||||||||
ONEOK, Inc., 6.35%, 1/15/31, Callable 10/15/30 @ 100 | 85 | 96 | |||||||||
Rockies Express Pipeline LLC, 4.80%, 5/15/30, Callable 2/15/30 @ 100 (a) | 75 | 70 | |||||||||
Sabine Pass Liquefaction LLC, 4.50%, 5/15/30, Callable 11/15/29 @ 100 (a) | 11 | 12 | |||||||||
Targa Resources Partners LP/Targa Resources Partners Finance Corp., 5.50%, 3/1/30, Callable 3/1/25 @ 102.75 (a) | 75 | 75 | |||||||||
Western Midstream Operating LP, 3.10%, 2/1/25, Callable 1/1/25 @ 100 | 78 | 73 | |||||||||
2,221 | |||||||||||
Financials (1.3%): | |||||||||||
Amcor Finance USA, Inc., 3.63%, 4/28/26, Callable 1/28/26 @ 100 | 200 | 213 | |||||||||
Ares Capital Corp., 3.63%, 1/19/22, Callable 12/19/21 @ 100 (g) | 100 | 99 | |||||||||
BancorpSouth Bank, 4.13% (LIBOR03M+247bps), 11/20/29, Callable 11/20/24 @ 100 (b) | 96 | 94 | |||||||||
BBVA USA, 3.88%, 4/10/25, Callable 3/10/25 @ 100 | 200 | 204 | |||||||||
BMW U.S. Capital LLC, 3.25%, 8/14/20 (a) (g) | 400 | 401 | |||||||||
Capital One NA, 2.15%, 9/6/22, Callable 8/6/22 @ 100 | 150 | 152 | |||||||||
Citizens Financial Group, Inc., 2.50%, 2/6/30, Callable 11/6/29 @ 100 | 112 | 108 | |||||||||
Cullen/Frost Capital Trust II, 3.13% (LIBOR03M+155bps), 3/1/34, Callable 7/6/20 @ 100 (b) | 175 | 140 | |||||||||
First Horizon Bank, 5.75%, 5/1/30, Callable 2/1/30 @ 100 | 53 | 53 | |||||||||
First Maryland Capital I, 2.22% (LIBOR03M+100bps), 1/15/27, Callable 7/6/20 @ 100 (b) | 50 | 43 | |||||||||
Ford Motor Credit Co. LLC, 4.06%, 11/1/24, Callable 10/1/24 @ 100 | 250 | 236 | |||||||||
Global Atlantic Financial Co., 4.40%, 10/15/29, Callable 7/15/29 @ 100 (a) | 96 | 88 | |||||||||
HSB Group, Inc., 2.13% (LIBOR03M+91bps), 7/15/27, Callable 7/6/20 @ 100 (b) | 200 | 178 | |||||||||
Hyundai Capital America, 3.75%, 7/8/21 (a) (g) | 350 | 353 |
See notes to financial statements.
20
USAA Mutual Funds Trust USAA Cornerstone Aggressive Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
JPMorgan Chase & Co., 2.52% (SOFR+204bps), 4/22/31, Callable 4/22/30 @ 100 (b) | $ | 62 | $ | 63 | |||||||
KeyCorp, 2.25%, 4/6/27, MTN | 112 | 112 | |||||||||
Level 3 Financing, Inc., 3.88%, 11/15/29, Callable 8/15/29 @ 100 (a) | 150 | 153 | |||||||||
Loews Corp., 3.20%, 5/15/30, Callable 2/15/30 @ 100 | 68 | 72 | |||||||||
Nationwide Mutual Insurance Co., 3.03% (LIBOR03M+229bps), 12/15/24, Callable 7/6/20 @ 100 (a) (b) | 300 | 296 | |||||||||
PNC Bank NA, 2.70%, 10/22/29 | 250 | 263 | |||||||||
PPL Capital Funding, Inc., 4.13%, 4/15/30, Callable 1/15/30 @ 100 | 74 | 84 | |||||||||
Prudential Financial, Inc., 5.62% (LIBOR03M+392bps), 6/15/43, Callable 6/15/23 @ 100 (b) | 200 | 207 | |||||||||
Regions Financial Corp., 2.25%, 5/18/25, Callable 4/18/25 @ 100 | 74 | 75 | |||||||||
Santander Holdings USA, Inc., 3.45%, 6/2/25, Callable 5/2/25 @ 100 (k) | 39 | 39 | |||||||||
Signature Bank, 4.13% (LIBOR03M+256bps), 11/1/29, Callable 11/1/24 @ 100 (b) | 150 | 150 | |||||||||
SunTrust Capital, 1.06% (LIBOR03M+67bps), 5/15/27, Callable 7/6/20 @ 100 (b) | 200 | 166 | |||||||||
Texas Capital Bank NA, 5.25%, 1/31/26 | 75 | 81 | |||||||||
The Allstate Corp., 5.75% (LIBOR03M+294bps), 8/15/53, Callable 8/15/23 @ 100 (b) | 40 | 41 | |||||||||
The PNC Financial Services Group, Inc., 2.55%, 1/22/30, Callable 10/24/29 @ 100 | 131 | 140 | |||||||||
The Progressive Corp., 3.20%, 3/26/30, Callable 12/26/29 @ 100 | 23 | 26 | |||||||||
Wells Fargo & Co., 2.19% (SOFR+200bps), 4/30/26, Callable 4/30/25 @ 100 (b) | 79 | 80 | |||||||||
Zions Bancorp NA, 3.25%, 10/29/29, Callable 7/29/29 @ 100 | 150 | 141 | |||||||||
4,551 | |||||||||||
Health Care (0.3%): | |||||||||||
AbbVie, Inc., 3.20%, 11/21/29, Callable 8/21/29 @ 100 (a) (g) | 150 | 162 | |||||||||
Biogen, Inc., 2.25%, 5/1/30, Callable 2/1/30 @ 100 | 122 | 124 | |||||||||
CVS Health Corp., 3.25%, 8/15/29, Callable 5/15/29 @ 100 (g) | 290 | 313 | |||||||||
DENTSPLY SIRONA, Inc., 3.25%, 6/1/30, Callable 3/1/30 @ 100 | 72 | 74 | |||||||||
Duke University Health System, Inc., 2.60%, 6/1/30 | 60 | 65 | |||||||||
HCA, Inc., 5.13%, 6/15/39, Callable 12/15/38 @ 100 | 187 | 215 | |||||||||
Laboratory Corp. of America Holdings, 2.95%, 12/1/29, Callable 9/1/29 @ 100 | 112 | 118 | |||||||||
Thermo Fisher Scientific, Inc., 4.13%, 3/25/25, Callable 2/25/25 @ 100 | 74 | 84 | |||||||||
1,155 | |||||||||||
Industrials (0.6%): | |||||||||||
Ashtead Capital, Inc. 4.00%, 5/1/28, Callable 5/1/23 @ 102 (a) | 27 | 27 | |||||||||
4.25%, 11/1/29, Callable 11/1/24 @ 102.13 (a) | 20 | 19 | |||||||||
Carlisle Cos., Inc., 2.75%, 3/1/30, Callable 12/1/29 @ 100 | 112 | 110 | |||||||||
Carrier Global Corp., 3.38%, 4/5/40, Callable 10/5/39 @ 100 (a) | 56 | 50 | |||||||||
Caterpillar, Inc., 2.60%, 4/9/30, Callable 1/9/30 @ 100 | 55 | 59 | |||||||||
Dover Corp., 2.95%, 11/4/29, Callable 8/4/29 @ 100 | 112 | 118 | |||||||||
Ferguson Finance PLC, 3.25%, 6/2/30, Callable 3/2/30 @ 100 (a) | 42 | 43 | |||||||||
GATX Corp., 4.00%, 6/30/30, Callable 3/30/30 @ 100 | 32 | 33 | |||||||||
General Dynamics Corp., 3.50%, 4/1/27, Callable 2/1/27 @ 100 | 74 | 83 |
See notes to financial statements.
21
USAA Mutual Funds Trust USAA Cornerstone Aggressive Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Georgia-Pacific LLC, 2.10%, 4/30/27, Callable 2/28/27 @ 100 (a) | $ | 122 | $ | 124 | |||||||
IDEX Corp., 3.00%, 5/1/30, Callable 2/1/30 @ 100 | 122 | 125 | |||||||||
Otis Worldwide Corp., 3.11%, 2/15/40, Callable 8/15/39 @ 100 (a) | 75 | 74 | |||||||||
Penske Truck Leasing Co. LP/PTL Finance Corp., 4.00%, 7/15/25, Callable 6/15/25 @ 100 (a) | 74 | 79 | |||||||||
Ryder System, Inc. 3.50%, 6/1/21, MTN (g) | 350 | 354 | |||||||||
2.90%, 12/1/26, Callable 10/1/26 @ 100, MTN | 187 | 188 | |||||||||
The Boeing Co., 5.71%, 5/1/40, Callable 11/1/39 @ 100 | 103 | 113 | |||||||||
The Conservation Fund A Nonprofit Corp., 3.47%, 12/15/29, Callable 9/15/29 @ 100 | 175 | 186 | |||||||||
United Airlines Pass Through Trust, 2.90%, 11/1/29 | 200 | 138 | |||||||||
1,923 | |||||||||||
Information Technology (0.3%): | |||||||||||
Amphenol Corp., 2.80%, 2/15/30, Callable 11/15/29 @ 100 | 200 | 209 | |||||||||
Analog Devices, Inc., 2.95%, 4/1/25, Callable 3/1/25 @ 100 | 27 | 29 | |||||||||
Broadcom, Inc., 4.30%, 11/15/32, Callable 8/15/32 @ 100 (a) | 43 | 45 | |||||||||
Hewlett Packard Enterprise Co., 4.65%, 10/1/24, Callable 9/1/24 @ 100 | 73 | 80 | |||||||||
Intel Corp., 3.90%, 3/25/30, Callable 12/25/29 @ 100 | 250 | 300 | |||||||||
Microsoft Corp., 3.45%, 8/8/36, Callable 2/8/36 @ 100 | 243 | 287 | |||||||||
950 | |||||||||||
Materials (0.1%): | |||||||||||
Avery Dennison Corp., 2.65%, 4/30/30, Callable 2/1/30 @ 100 | 45 | 45 | |||||||||
Colonial Enterprises, Inc., 3.25%, 5/15/30, Callable 2/15/30 @ 100 (a) | 21 | 22 | |||||||||
Ecolab, Inc., 4.80%, 3/24/30, Callable 12/24/29 @ 100 | 42 | 53 | |||||||||
LYB International Finance III LLC, 3.38%, 5/1/30, Callable 2/1/30 @ 100 | 63 | 65 | |||||||||
Packaging Corp. of America, 3.00%, 12/15/29, Callable 9/15/29 @ 100 | 187 | 197 | |||||||||
Sonoco Products Co., 3.13%, 5/1/30, Callable 2/1/30 @ 100 | 82 | 83 | |||||||||
Vulcan Materials Co., 3.50%, 6/1/30, Callable 3/1/30 @ 100 | 68 | 71 | |||||||||
536 | |||||||||||
Real Estate (0.2%): | |||||||||||
AvalonBay Communities, Inc., 2.45%, 1/15/31, MTN, Callable 10/15/30 @ 100 | 101 | 104 | |||||||||
Boston Properties LP, 3.25%, 1/30/31, Callable 10/30/30 @ 100 | 45 | 47 | |||||||||
Essex Portfolio LP, 2.65%, 3/15/32, Callable 12/15/31 @ 100 | 131 | 130 | |||||||||
Mid-America Apartments LP, 2.75%, 3/15/30, Callable 12/15/29 @ 100 | 187 | 188 | |||||||||
SBA Tower Trust, 2.84%, 1/15/25 (a) | 87 | 88 | |||||||||
VICI Properties LP/VICI Note Co., Inc., 4.63%, 12/1/29, Callable 12/1/24 @ 102.31 (a) | 17 | 17 | |||||||||
574 | |||||||||||
Utilities (0.5%): | |||||||||||
AEP Texas, Inc., 3.45%, 1/15/50, Callable 7/15/49 @ 100 | 131 | 140 | |||||||||
Alabama Power Co., 3.85%, 12/1/42 | 112 | 127 | |||||||||
Ameren Corp., 3.50%, 1/15/31, Callable 10/15/30 @ 100 | 37 | 41 | |||||||||
Cleco Corporate Holdings LLC, 3.38%, 9/15/29, Callable 6/11/29 @ 100 (a) | 183 | 186 | |||||||||
DTE Electric Co., 2.25%, 3/1/30, Callable 12/1/29 @ 100 | 112 | 116 | |||||||||
Duke Energy Florida LLC, 3.85%, 11/15/42, Callable 5/15/42 @ 100 | 112 | 130 | |||||||||
Exelon Generation Co. LLC, 3.25%, 6/1/25, Callable 5/1/25 @ 100 | 74 | 77 |
See notes to financial statements.
22
USAA Mutual Funds Trust USAA Cornerstone Aggressive Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
IPALCO Enterprises, Inc., 4.25%, 5/1/30, Callable 2/1/30 @ 100 (a) | $ | 82 | $ | 86 | |||||||
ITC Holdings Corp., 2.95%, 5/14/30, Callable 2/14/30 @ 100 (a) | 76 | 80 | |||||||||
National Fuel Gas Co., 5.50%, 1/15/26, Callable 12/15/25 @ 100 (k) | 96 | 97 | |||||||||
NextEra Energy Capital Holdings, Inc., 3.34%, 9/1/20 | 267 | 269 | |||||||||
The Narragansett Electric Co., 3.40%, 4/9/30, Callable 1/9/30 @ 100 (a) | 55 | 61 | |||||||||
Union Electric Co., 2.95%, 3/15/30, Callable 12/15/29 @ 100 | 188 | 207 | |||||||||
1,617 | |||||||||||
Total Corporate Bonds (Cost $15,524) | 15,940 | ||||||||||
Yankee Dollar (0.7%) | |||||||||||
Consumer Staples (0.0%): (l) | |||||||||||
Alimentation Couche-Tard, Inc., 2.95%, 1/25/30, Callable 10/25/29 @ 100 (a) | 75 | 76 | |||||||||
Energy (0.0%): (l) | |||||||||||
Petroleos Mexicanos, 6.49%, 1/23/27, Callable 11/23/26 @ 100 (a) | 64 | 57 | |||||||||
Petronas Capital Ltd., 3.50%, 4/21/30, Callable 1/21/30 @ 100 (a) | 5 | 5 | |||||||||
62 | |||||||||||
Financials (0.5%): | |||||||||||
Athene Holding Ltd., 4.13%, 1/12/28, Callable 10/12/27 @ 100 | 350 | 343 | |||||||||
Banco Santander Mexico SA Institucion de Banca Multiple Grupo Financiero Santand, 5.38%, 4/17/25 (a) | 51 | 55 | |||||||||
Barclays PLC, 2.85% (LIBOR03M+245bps), 5/7/26, Callable 5/7/25 @ 100 (b) | 103 | 105 | |||||||||
Deutsche Bank AG, 3.96% (SOFR+258bps), 11/26/25, Callable 11/26/24 @ 100 (b) | 112 | 115 | |||||||||
Diageo Capital PLC, 2.13%, 4/29/32, Callable 1/29/32 @ 100 | 122 | 124 | |||||||||
QBE Capital Funding III Ltd., 7.25% (USSW10+405bps), 5/24/41, Callable 5/24/21 @ 100 (a) (b) | 200 | 207 | |||||||||
Royal Bank of Canada, 1.60%, 4/17/23, MTN | 125 | 128 | |||||||||
Sumitomo Mitsui Financial Group, Inc., 2.45%, 9/27/24 | 400 | 414 | |||||||||
1,491 | |||||||||||
Industrials (0.1%): | |||||||||||
CK Hutchison International 19 II Ltd., 2.75%, 9/6/29, Callable 6/6/29 @ 100 (a) | 200 | 208 | |||||||||
Heathrow Funding Ltd., 4.88%, 7/15/21 (a) | 71 | 73 | |||||||||
281 | |||||||||||
Materials (0.1%): | |||||||||||
Anglo American Capital PLC, 5.63%, 4/1/30, Callable 1/1/30 @ 100 (a) | 69 | 80 | |||||||||
Braskem Netherlands Finance BV, 4.50%, 1/31/30 (a) | 113 | 99 | |||||||||
CCL Industries, Inc., 3.05%, 6/1/30, Callable 3/1/30 @ 100 (a) (k) | 71 | 71 | |||||||||
Teck Resources Ltd., 6.13%, 10/1/35 | 120 | 125 | |||||||||
375 | |||||||||||
Total Yankee Dollar (Cost $2,240) | 2,285 |
See notes to financial statements.
23
USAA Mutual Funds Trust USAA Cornerstone Aggressive Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Municipal Bonds (0.5%) | |||||||||||
Florida (0.0%): (l) | |||||||||||
County of Broward Florida Airport System Revenue, Series C, 2.50%, 10/1/28 | $ | 75 | $ | 73 | |||||||
Hillsborough County School Board Certificate of Participation, Series B, 1.92%, 7/1/25 | 40 | 40 | |||||||||
113 | |||||||||||
Georgia (0.1%): | |||||||||||
Athens Housing Authority Revenue, 2.42%, 12/1/26 | 160 | 166 | |||||||||
Michigan (0.0%): (l) | |||||||||||
Michigan Finance Authority Revenue, 3.08%, 12/1/34 | 115 | 123 | |||||||||
New Jersey (0.0%): (l) | |||||||||||
New Jersey Economic Development Authority Revenue, Series NNN, 2.88%, 6/15/24 | 72 | 68 | |||||||||
New Jersey Transportation Trust Fund Authority Revenue, 4.08%, 6/15/39 | 30 | 25 | |||||||||
North Hudson Sewerage Authority Revenue, 2.88%, 6/1/28 | 37 | 39 | |||||||||
132 | |||||||||||
New York (0.1%): | |||||||||||
New York State Dormitory Authority Revenue, Series B, 2.83%, 7/1/31 | 185 | 187 | |||||||||
New York State Thruway Authority Revenue, Series M, 2.55%, 1/1/28 | 43 | 42 | |||||||||
229 | |||||||||||
Pennsylvania (0.2%): | |||||||||||
Scranton School District, GO (INS-Build America Mutual Assurance Co.), 3.10%, 4/1/30 | 371 | 379 | |||||||||
State Public School Building Authority Revenue, 3.05%, 4/1/28 | 75 | 75 | |||||||||
University of Pittsburgh-of The Commonwealth System of Higher Education Revenue Series C, 2.53%, 9/15/31 | 75 | 74 | |||||||||
Series C, 2.58%, 9/15/32 | 40 | 40 | |||||||||
Series C, 2.63%, 9/15/33 | 75 | 74 | |||||||||
642 | |||||||||||
Texas (0.1%): | |||||||||||
City of Houston Texas Combined Utility System Revenue, 3.72%, 11/15/28 | 95 | 107 | |||||||||
Harris County Cultural Education Facilities Finance Corp. Revenue, Series B, 2.81%, 5/15/29 | 75 | 76 | |||||||||
State of Texas, GO, 3.00%, 4/1/28 | 112 | 122 | |||||||||
305 | |||||||||||
Total Municipal Bonds (Cost $1,688) | 1,710 |
See notes to financial statements.
24
USAA Mutual Funds Trust USAA Cornerstone Aggressive Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares or Principal Amount | Value | |||||||||
U.S. Government Agency Mortgages (1.3%) | |||||||||||
Federal Home Loan Mortgage Corporation Series K047, Class A2, 3.33%, 5/25/25 (c) | $ | 300 | $ | 333 | |||||||
3.00%, 4/1/46 - 10/1/47 | 2,955 | 3,122 | |||||||||
3.50%, 4/1/46 - 4/1/48 | 360 | 379 | |||||||||
3,834 | |||||||||||
Federal National Mortgage Association Series 2016-M2, Class AV2, 2.15%, 1/25/23 | 154 | 157 | |||||||||
4.00%, 4/1/49 | 582 | 620 | |||||||||
777 | |||||||||||
Total U.S. Government Agency Mortgages (Cost $4,385) | 4,611 | ||||||||||
U.S. Treasury Obligations (2.8%) | |||||||||||
U.S. Treasury Bonds 3.00%, 8/15/48 (g) | 1,000 | 1,376 | |||||||||
3.38%, 11/15/48 (g) | 500 | 736 | |||||||||
U.S. Treasury Inflation Indexed Bonds, 0.13%, 7/15/26 | 1,000 | 1,122 | |||||||||
U.S. Treasury Notes 1.63%, 11/15/22 | 1,000 | 1,036 | |||||||||
1.63%, 4/30/23 | 800 | 833 | |||||||||
1.63%, 2/15/26 | 2,250 | 2,406 | |||||||||
2.25%, 2/15/27 | 2,000 | 2,235 | |||||||||
Total U.S. Treasury Obligations (Cost $8,583) | 9,744 | ||||||||||
Exchange-Traded Funds (55.3%) | |||||||||||
Invesco DB Commodity Index Tracking Fund (f) | 28,600 | 337 | |||||||||
Invesco FTSE RAFI Developed Markets ex-US ETF | 70,202 | 2,357 | |||||||||
Invesco FTSE RAFI Emerging Markets ETF | 269,013 | 4,536 | |||||||||
iShares 20+ Year Treasury Bond ETF | 8,879 | 1,452 | |||||||||
iShares Core MSCI EAFE ETF | 346,844 | 19,434 | |||||||||
iShares Core MSCI Emerging Markets ETF | 263,559 | 11,871 | |||||||||
iShares Core S&P 500 ETF | 100,807 | 30,764 | |||||||||
iShares Core S&P Small-Cap ETF (f) | 17,607 | 1,164 | |||||||||
iShares Core US Aggregate Bond ETF | 33,274 | 3,915 | |||||||||
iShares iBoxx $ Investment Grade Corporate Bond ETF | 22,656 | 2,991 | |||||||||
iShares iBoxx High Yield Corporate Bond ETF (f) | 36,650 | 3,021 | |||||||||
iShares MSCI Canada ETF (f) | 111,723 | 2,809 | |||||||||
iShares MSCI United Kingdom ETF (f) | 9,713 | 250 | |||||||||
Schwab Fundamental Emerging Markets Large Co. Index ETF | 430,014 | 9,718 | |||||||||
Schwab Fundamental International Large Co. Index ETF | 829,619 | 19,214 | |||||||||
Schwab Fundamental International Small Co. Index ETF | 91,800 | 2,508 | |||||||||
SPDR Bloomberg Barclays High Yield Bond ETF | 29,732 | 3,032 | |||||||||
SPDR Gold Shares | 19,366 | 3,155 | |||||||||
SPDR S&P Emerging Markets Smallcap ETF (f) | 14,790 | 562 | |||||||||
U.S. Commodity Index Fund | 48,800 | 1,300 | |||||||||
VanEck Vectors Gold Miners ETF | 34,968 | 1,200 | |||||||||
VanEck Vectors Junior Gold Miners ETF | 12,000 | 553 |
See notes to financial statements.
25
USAA Mutual Funds Trust USAA Cornerstone Aggressive Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Vanguard FTSE All-World ex-US ETF | 147,228 | $ | 6,752 | ||||||||
Vanguard FTSE Developed Markets ETF | 563,451 | 21,225 | |||||||||
Vanguard FTSE Emerging Markets ETF | 4,984 | 186 | |||||||||
Vanguard FTSE Europe ETF (f) | 244,008 | 11,898 | |||||||||
Vanguard Real Estate ETF (f) | 72,546 | 5,617 | |||||||||
Vanguard S&P 500 ETF (g) | 35,882 | 10,038 | |||||||||
Vanguard Short-Term Bond ETF | 53,031 | 4,402 | |||||||||
Vanguard Total Stock Market ETF (g) | 1,434 | 220 | |||||||||
WisdomTree Emerging Markets SmallCap Dividend Fund | 16,645 | 626 | |||||||||
Xtrackers USD High Yield Corporate Bond ETF (f) | 64,245 | 3,025 | |||||||||
Total Exchange-Traded Funds (Cost $193,848) | 190,132 | ||||||||||
Affiliated Exchange-Traded Funds (0.2%) | |||||||||||
VictoryShares USAA MSCI Emerging Markets Value Momentum ETF | 16,000 | 589 | |||||||||
Total Affiliated Exchange-Traded Funds (Cost $770) | 589 | ||||||||||
Collateral for Securities Loaned^ (3.7%) | |||||||||||
HSBC U.S. Government Money Market Fund I Shares, 0.13% (m) | 11,461,193 | 11,461 | |||||||||
Invesco Government & Agency Portfolio Institutional Shares, 0.12% (m) | 1,172,250 | 1,172 | |||||||||
Total Collateral for Securities Loaned (Cost $12,633) | 12,633 | ||||||||||
Total Investments (Cost $346,143) — 101.7% | 349,262 | ||||||||||
Liabilities in excess of other assets — (1.7)% | (5,702 | ) | |||||||||
NET ASSETS — 100.00% | $ | 343,560 |
At May 31, 2020, the Fund's investments in foreign securities were 25.5% of net assets.
^ Purchased with cash collateral from securities on loan.
(a) Rule 144A security or other security that is restricted as to resale to institutional investors. The Fund's Adviser has deemed this security to be liquid based upon procedures approved by the Board of Trustees. As of May 31, 2020, the fair value of these securities was $6,797 (thousands) and amounted to 2.0% of net assets.
(b) Variable or Floating-Rate Security. Rate disclosed is as of May 31, 2020.
(c) The rate for certain asset-backed and mortgage backed securities may vary based on factors relating to the pool of assets underlying the security. The rate disclosed is the rate in effect at May 31, 2020.
(d) Security is interest only.
(e) Non-income producing security.
(f) All or a portion of this security is on loan.
(g) All or a portion of this security has been designated as collateral for securities purchased on a when-issued basis.
(h) The Fund's Adviser has deemed this security to be illiquid based upon procedures approved by the Board of Trustees. As of May 31, 2020, illiquid securities were 0.1% of the Fund's net assets.
See notes to financial statements.
26
USAA Mutual Funds Trust USAA Cornerstone Aggressive Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(i) Security was fair valued based upon procedures approved by the Board of Trustees and represents 0.0% of the Fund's net assets as of May 31, 2020. (See Note 2)
(j) Security is perpetual and has no final maturity date but may be subject to calls at various dates in the future.
(k) Security purchased on a when-issued basis.
(l) Amount represents less than 0.05% of net assets.
(m) Rate disclosed is the daily yield on May 31, 2020.
bps — Basis points
ETF — Exchange-Traded Fund
GO — General Obligation
LIBOR — London InterBank Offered Rate
LIBOR01M — 1 Month US Dollar LIBOR, rate disclosed as of May 31, 2020, based on the last reset date of the security
LIBOR03M — 3 Month US Dollar LIBOR, rate disclosed as of May 31, 2020, based on the last reset date of the security
LLC — Limited Liability Company
LP — Limited Partnership
MTN — Medium Term Note
PLC — Public Limited Company
REIT — Real Estate Investment Trust
SOFR — Secured Overnight Financing Rate
USSW10 — USD 10 Year Swap Rate, rate disclosed as of May 31, 2020
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.
27
USAA Mutual Funds Trust | Statement of Assets and Liabilities May 31, 2020 |
(Amounts in Thousands, Except Per Share Amounts)
USAA Cornerstone Aggressive Fund | |||||||
Assets: | |||||||
Affiliated investments, at value (Cost $770) | $ | 589 | |||||
Unaffiliated investments, at value (Cost $345,373) | 348,673 | (a) | |||||
Cash and cash equivalents | 5,425 | ||||||
Receivables: | |||||||
Interest and dividends | 444 | ||||||
Capital shares issued | 97 | ||||||
Investments sold | 1,975 | ||||||
From Adviser | 103 | ||||||
Prepaid expenses | 16 | ||||||
Total assets | 357,322 | ||||||
Liabilities: | |||||||
Payables: | |||||||
Collateral received on loaned securities | 12,633 | ||||||
Investments purchased | 339 | ||||||
Capital shares redeemed | 501 | ||||||
Accrued expenses and other payables: | |||||||
Investment advisory fees | 169 | ||||||
Administration fees | 42 | ||||||
Transfer agent fees | 29 | ||||||
Compliance fees | — | (b) | |||||
Other accrued expenses | 49 | ||||||
Total liabilities | 13,762 | ||||||
Net Assets: | |||||||
Capital | 343,244 | ||||||
Total distributable earnings/(loss) | 316 | ||||||
Net assets | $ | 343,560 | |||||
Shares (unlimited number of shares authorized with no par value): | 29,274 | ||||||
Net asset value, offering and redemption price per share: (c) | $ | 11.74 |
(a) Includes $12,419 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.
28
USAA Mutual Funds Trust | Statement of Operations For the Year Ended May 31, 2020 |
(Amounts in Thousands)
USAA Cornerstone Aggressive Fund | |||||||
Investment Income: | |||||||
Income distributions from affiliated funds | $ | 20 | |||||
Dividends | 8,448 | ||||||
Interest | 1,539 | ||||||
Securities lending (net of fees) | 61 | ||||||
Foreign tax withholding | — | (a) | |||||
Total income | 10,068 | ||||||
Expenses: | |||||||
Investment advisory fees | 2,173 | ||||||
Administration fees | 543 | ||||||
Sub-Administration fees | 78 | ||||||
Custodian fees | 50 | ||||||
Transfer agent fees | 1,205 | ||||||
Trustees' fees | 49 | ||||||
Compliance fees | 2 | ||||||
Legal and audit fees | 80 | ||||||
State registration and filing fees | 16 | ||||||
Other expenses | 74 | ||||||
Total expenses | 4,270 | ||||||
Expenses waived/reimbursed by Adviser | (267 | ) | |||||
Expenses waived/reimbursed by AMCO | (25 | ) | |||||
Net expenses | 3,978 | ||||||
Net Investment Income (Loss) | 6,090 | ||||||
Realized/Unrealized Gains (Losses) from Investments: | |||||||
Net realized gains (losses) from unaffiliated investment securities and foreign currency translations | (3,721 | ) | |||||
Net realized gains (losses) from futures contracts | 137 | ||||||
Net change in unrealized appreciation/depreciation on affiliated funds | (91 | ) | |||||
Net change in unrealized appreciation/depreciation on unaffiliated investments securities and foreign currency translations | 3,292 | ||||||
Net change in unrealized appreciation/depreciation on futures contracts | 40 | ||||||
Net realized/unrealized gains (losses) on investments | (343 | ) | |||||
Change in net assets resulting from operations | $ | 5,747 |
(a) 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 Cornerstone Aggressive Fund | |||||||||||
Year Ended May 31, 2020 | Year Ended May 31, 2019 | ||||||||||
From Investments: | |||||||||||
Operations: | |||||||||||
Net investment income (loss) | $ | 6,090 | $ | 5,370 | |||||||
Net realized gains (losses) from investments | (3,584 | ) | 4,198 | ||||||||
Net change in unrealized appreciation/depreciation on investments | 3,241 | (20,470 | ) | ||||||||
Change in net assets resulting from operations | 5,747 | (10,902 | ) | ||||||||
Change in net assets resulting from distributions to shareholders | (6,470 | ) | (18,397 | ) | |||||||
Change in net assets resulting from capital transactions | (7,127 | ) | 35,941 | ||||||||
Change in net assets | (7,850 | ) | 6,642 | ||||||||
Net Assets: | |||||||||||
Beginning of period | 351,410 | 344,768 | |||||||||
End of period | $ | 343,560 | $ | 351,410 | |||||||
Capital Transactions: | |||||||||||
Proceeds from shares issued | $ | 54,179 | $ | 78,995 | |||||||
Distributions reinvested | 6,219 | 17,634 | |||||||||
Cost of shares redeemed | (67,525 | ) | (60,688 | ) | |||||||
Change in net assets resulting from capital transactions | $ | (7,127 | ) | $ | 35,941 | ||||||
Share Transactions: | |||||||||||
Issued | 4,491 | 6,440 | |||||||||
Reinvested | 480 | 1,557 | |||||||||
Redeemed | (5,660 | ) | (4,947 | ) | |||||||
Change in Shares | (689 | ) | 3,050 |
See notes to financial statements.
30
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31
USAA Mutual Funds Trust | Financial Highlights |
For a Share Outstanding Throughout Each Period
Investment Activities | Distributions to Shareholders From | ||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss) | Net Realized and Unrealized Gains (Losses) on Investments | Total from Investment Activities | Net Investment Income | Net Realized Gains from Investments | ||||||||||||||||||||||
USAA Cornerstone Aggressive Fund | |||||||||||||||||||||||||||
Year Ended May 31, 2020 | $ | 11.73 | 0.20 | (b) | 0.03 | (c) | 0.23 | (0.15 | ) | (0.07 | ) | ||||||||||||||||
Year Ended May 31, 2019 | $ | 12.81 | 0.15 | (0.57 | ) | (0.42 | ) | (0.18 | ) | (0.48 | ) | ||||||||||||||||
Year Ended May 31, 2018 | $ | 12.57 | 0.16 | 0.94 | 1.10 | (0.14 | ) | (0.72 | ) | ||||||||||||||||||
Year Ended May 31, 2017 | $ | 11.33 | 0.15 | 1.26 | 1.41 | (0.17 | ) | — | |||||||||||||||||||
Year Ended May 31, 2016 | $ | 12.35 | 0.17 | (0.95 | ) | (0.78 | ) | (0.16 | ) | (0.08 | ) |
* 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.
^ 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 two year period beginning July 1, 2019 and in effect through June 30, 2021, instead of coinciding with the Fund's fiscal year end. Details of the current contractual expense limitation in effect can be found in Note 4 of the accompanying Notes to Financial Statements.
(a) The expense ratios exclude the impact of expenses paid by each underlying fund.
(b) Per share net investment income (loss) has been calculated using the average daily shares method.
(c) The amount shown for a share outstanding throughout the period does not accord with the change in aggregate gains and losses in the portfolio of securities during the period because of timing of sales and purchases of fund shares in relation to fluctuating market values during the period.
(d) Reflects increased trading activity due to usage of quantitative investment strategies.
See notes to financial statements.
32
USAA Mutual Funds Trust | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Ratios to Average Net Assets | Supplemental Data | ||||||||||||||||||||||||||||||||||
Total Distributions | Net Asset Value, End of Period | Total Return* | Net Expenses^(a) | Net Investment Income (Loss) | Gross Expenses(a) | Net Assets, End of Period (000's) | Portfolio Turnover | ||||||||||||||||||||||||||||
USAA Cornerstone Aggressive Fund | |||||||||||||||||||||||||||||||||||
Year Ended May 31, 2020 | (0.22 | ) | $ | 11.74 | 1.78 | % | 1.10 | % | 1.68 | % | 1.18 | % | $ | 343,560 | 90 | % | |||||||||||||||||||
Year Ended May 31, 2019 | (0.66 | ) | $ | 11.73 | (3.04 | )% | 1.10 | % | 1.54 | % | 1.24 | % | $ | 351,410 | 95 | %(d) | |||||||||||||||||||
Year Ended May 31, 2018 | (0.86 | ) | $ | 12.81 | 8.85 | % | 1.10 | % | 1.18 | % | 1.25 | % | $ | 344,768 | 65 | % | |||||||||||||||||||
Year Ended May 31, 2017 | (0.17 | ) | $ | 12.57 | 12.59 | % | 1.10 | % | 1.32 | % | 1.36 | % | $ | 283,867 | 70 | % | |||||||||||||||||||
Year Ended May 31, 2016 | (0.24 | ) | $ | 11.33 | (6.26 | )% | 1.10 | % | 1.57 | % | 1.46 | % | $ | 222,224 | 81 | % |
See notes to financial statements.
33
USAA Mutual Funds Trust | Notes to Financial Statements May 31, 2020 |
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 47 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 November 6, 2018, United Services Automobile Association ("USAA"), the parent company of USAA Asset Management Company ("AMCO"), the investment adviser to the Fund, and USAA Transfer Agency Company, d/b/a USAA Shareholder Account Services ("SAS"), the transfer agent to the Fund, announced that AMCO and SAS would be acquired by Victory Capital Holdings Inc., a global investment management firm headquartered in Cleveland, Ohio (the "Transaction"). The Transaction closed on July 1, 2019. A special shareholder meeting was held on April 18, 2019, at which shareholders of the Fund approved a new investment advisory agreement between the Trust, on behalf of the Fund, and Victory Capital Management Inc. ("VCM" or "Adviser"). Effective July 1, 2019, VCM replaced AMCO as the investment adviser to the Fund and Victory Capital Transfer Agency Company replaced SAS as the Fund's transfer agent. In addition, effective on that same date, shareholders of the Fund also elected the following two new directors to the Board of the Trust to serve upon the closing of the Transaction: (1) David C. Brown, to serve as an Interested Trustee; and (2) John C. Walters, to serve as an Independent Trustee.
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 generally accepted accounting principles in the United States of America ("GAAP"). The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses for the period. Actual results could differ from those estimates. The Fund follows the specialized accounting and reporting requirements under GAAP that are applicable to investment companies under Accounting Standards Codification Topic 946.
Investment Valuation:
The Fund records investments at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The valuation techniques described below maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value. The inputs used for valuing the Fund's investments are summarized in the three broad levels listed below:
• Level 1 — quoted prices in active markets for identical securities
• Level 2 — other significant observable inputs (including quoted prices for similar securities or interest rates applicable to those securities, etc.)
• Level 3 — significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments)
34
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
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 risk associated with entering into those investments.
The Adviser has established the Pricing and Liquidity Committee (the "Committee"), and subject to Trust's Board of Trustees (the "Board") oversight, the Committee administers and oversees the Fund's valuation policies and procedures, which are approved by the Board.
Portfolio securities listed or traded on securities exchanges, including exchange-traded funds ("ETFs"), American Depositary Receipts ("ADRs") 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 are valued at 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.
Debt securities of United States ("U.S.") issuers, along with corporate and municipal securities, including short-term investments maturing in 60 days or less, may be valued using evaluated bid or the last sales price to price securities by dealers or an independent pricing service approved by the Board. These valuations are typically categorized as Level 2 in the fair value hierarchy.
Effective July 1, 2019, the valuation methodology applied to certain debt securities changed. Securities that were previously valued at an evaluated mean are now valued at the evaluated bid or the last sales price.
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, the securities are valued in good faith by the Committee in accordance with valuation procedures approved by 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. These valuations are considered as Level 2 in the fair value hierarchy.
A summary of the valuations as of May 31, 2020, based upon the three levels defined above, is included in the table below while the breakdown, by category, of investments is disclosed in the Schedule of Portfolio Investments (amounts in thousands):
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Asset Backed Securities | $ | — | $ | 3,751 | $ | — | $ | 3,751 | |||||||||||
Collateralized Mortgage Obligations | — | 1,043 | — | 1,043 | |||||||||||||||
Common Stocks | 105,750 | 13 | — | 105,763 | |||||||||||||||
Preferred Stocks | 409 | 436 | — | 845 | |||||||||||||||
Senior Secured Loans | — | 216 | — | 216 | |||||||||||||||
Corporate Bonds | — | 15,940 | — | 15,940 |
35
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Yankee Dollars | $ | — | $ | 2,285 | $ | — | $ | 2,285 | |||||||||||
Municipal Bonds | — | 1,710 | — | 1,710 | |||||||||||||||
U.S. Government Agency Mortgages | — | 4,611 | — | 4,611 | |||||||||||||||
U.S. Treasury Obligations | — | 9,744 | — | 9,744 | |||||||||||||||
Exchange-Traded Funds | 190,132 | — | — | 190,132 | |||||||||||||||
Affiliated Exchange-Traded Funds | 589 | — | — | 589 | |||||||||||||||
Collateral for Securities Loaned | 12,633 | — | — | 12,633 | |||||||||||||||
Total | $ | 309,513 | $ | 39,749 | $ | — | $ | 349,262 |
For the year ended May 31, 2020, the Fund had transfers into/out of Level 3 that were less than 0.50% of net assets.
Real Estate Investment Trusts ("REITs"):
The Fund may invest in REITs which report information on the source of their distributions annually. REITs are pooled investment vehicles that invest primarily in income producing real estate or real estate related loans or interests (such as mortgages). Certain distributions received from REITs during the year are recorded as realized gains or return of capital as estimated by the Fund or when such information becomes known.
Investment Companies:
Exchange-Traded Funds:
The Fund may invest in ETFs. ETFs are a type of index fund, 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 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 they are 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 take place a month or more after the trade date. At the time the Fund makes the commitment to purchase a security on a delayed-delivery or when-issued basis, the Fund records the transaction and reflects the value of the security in determining NAV. No interest accrues to the Fund until the transaction settles and payment takes place. A segregated account is established and the Fund maintains cash and/or marketable securities at least equal in value to commitments for delayed-delivery or when-issued securities. If the Fund owns delayed-delivery or when-issued securities, these values are included in Payable for investments purchased on the accompanying Statement of Assets and Liabilities and the segregated assets are identified in the Schedule of Portfolio Investments.
36
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
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"), 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.
Foreign Exchange Currency Contracts:
The Fund may enter into foreign exchange currency contracts to convert U.S. dollars to and from various foreign currencies. A foreign exchange currency contract is an obligation by the Fund to purchase or sell a specific currency at a future date at a price (in U.S. dollars) set at the time of the contract. The Fund does not engage in "cross-currency" foreign exchange contracts (i.e., contracts to purchase or sell one foreign currency in exchange for another foreign currency). The Fund's foreign exchange currency contracts might be considered spot contracts (typically a contract of one week or less) or forward contracts (typically a contract term over one week). A spot contract is entered into for purposes of hedging against foreign currency fluctuations relating to a specific portfolio transaction, such as the delay between a security transaction trade date and settlement date. Forward contracts are entered into for purposes of hedging portfolio holdings or concentrations of such holdings. Each foreign exchange currency contract is adjusted daily by the prevailing spot or forward rate of the underlying currency, and any appreciation or depreciation is recorded for financial statement purposes as unrealized until the contract settlement date, at which time the Fund records realized gains or losses equal to the difference between the value of a contract at the time it was opened and the value at the time it was closed. The Fund could be exposed to risk if a counterparty is unable to meet the terms of a foreign exchange currency contract or if the value of the foreign currency changes unfavorably. In addition, the use of foreign exchange currency contracts does not eliminate fluctuations in the underlying prices of the securities. As of May 31, 2020, the Fund had no open forward foreign exchange currency contracts.
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
37
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
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.
The Fund did not hold futures contracts as of May 31, 2020. During the year ended May 31, 2020, the Fund held futures contracts primarily for the strategy of gaining exposure to a particular asset class or securities market.
Summary of Derivative Instruments:
The following table presents the effect of derivative instruments on the Statement of Operations, categorized by risk exposure, for the year ended May 31, 2020 (amounts in thousands):
Net Realized Gains (Losses) on Derivatives Recognized as a Result from 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: | $ | 137 | $ | 40 |
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 on 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 discount. Gains or losses realized on sales of securities are determined by comparing the identified cost of the security lot sold with the net sales proceeds.
Withholding taxes on interest, dividends and gains as a result of certain investments in ADRs by the Fund has 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, to earn additional income, net of income retained by Citibank. Borrowers are required to 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 cured the next business day once the shortfall exceeds $100 thousand. Collateral may be cash, U.S. government securities, or other securities as permitted by SEC guidelines. Cash collateral may be invested in high-quality short-term investments, primarily open-end investment companies. 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
38
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
these fees) is disclosed on the Statement of Operations. Loans are terminable upon demand and the borrower must return the loaned securities within the lesser of one standard settlement period or five business days. Risks relating to securities-lending transactions include that the borrower may not provide additional collateral when required or return the securities when due, and 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 re-pledged except to satisfy borrower default. Cash collateral is listed in the Fund's Portfolio of Investments and Financial Statements while non-cash collateral is not included.
The following table (amounts in thousands) is a summary of the Fund's securities lending transactions as of May 31, 2020.
Value of Securities on Loan | Non-Cash Collateral | Cash Collateral | |||||||||
$ | 12,419 | $ | — | $ | 12,633 |
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 investments and foreign currency translations on the Statement of Operations. Any realized gains or losses from these fluctuations, including foreign currency arising from in-kind redemptions, are disclosed as net realized gains or losses from investment transactions and foreign currency translations on the Statement of Operations.
Federal Income Taxes:
It is the Fund's policy 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.
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., 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 affiliated trust based upon net assets or another appropriate basis.
39
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
3. Purchases and Sales:
Cost of purchases and proceeds from sales/maturities of securities (excluding securities maturing less than one year from acquisition) for the year ended May 31, 2020, were as follows for the Fund (amounts in thousands):
Excluding U.S. Government Securities | U.S. Government Securities | ||||||||||||||
Purchases | Sales | Purchases | Sales | ||||||||||||
$ | 301,726 | $ | 268,302 | $ | 15,812 | $ | 56,327 |
4. Fees and Transactions with Affiliates and Related Parties:
Investment Advisory and Management Fees:
Effective with the Transaction on July 1, 2019, investment advisory services are provided to the Fund by the Adviser, a New York corporation registered as an investment adviser with the Securities and Exchange Commission ("SEC"). The Adviser is a wholly-owned indirect subsidiary of Victory Capital Holdings, Inc., a publicly traded Delaware corporation, and a wholly-owned direct subsidiary of Victory Capital Operating, LLC. Under the terms of the Investment Advisory Agreement, the Adviser is entitled to receive fees accrued daily and paid monthly at an annualized rate of 0.60% of the Fund's average daily net assets. The amount incurred and paid to VCM from July 1, 2019 through May 31, 2020, was $1,995 thousand and is reflected on the Statement of Operations as Investment Advisory fees.
Prior to the Transaction on July 1, 2019, AMCO provided investment management services to the Fund pursuant to an Advisory Agreement. Under this agreement, AMCO was responsible for managing the business and affairs of the Fund, and for directly managing day-to-day investment of the Fund's assets, subject to the authority of and supervision by the Board. The investment management fee for the Fund was accrued daily and paid monthly at an annualized rate of 0.60% of the Fund's average daily net assets. The amount incurred and paid to AMCO from June 1, 2019 through June 30, 2019, was $178 thousand and reflected on the Statement of Operations as Investment Advisory fees.
In addition, the Fund invests in affiliated USAA exchange-traded fund(s) ("affiliated ETFs"). The Fund's Adviser fee is reimbursed by VCM (and previously AMCO) to the extent of the indirect Adviser fee incurred through the Fund's proportional investment in the affiliated ETF(s). For the period from July 1, 2019 through May 31, 2020, the Fund's Adviser fee was reimbursed by VCM in an amount of $2 thousand, of which less than $1 thousand is receivable from VCM. For the period from June 1, 2019 through June 30, 2019, the Fund's Adviser fee was reimbursed by AMCO in an amount of less than $1 thousand.
Effective with the Transaction on July 1, 2019, 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. Prior to that date, the Trust relied on a similar exemptive order granted by the SEC to the Trust and its affiliated persons. Under a manager-of-managers structure, the investment adviser may select (with approval of the Board and without shareholder approval) one or more subadvisers to manage the day-to-day investment of a fund's assets. For the year ended May 31, 2020, the Fund had no subadvisers.
Administration and Servicing Fees:
Effective with the Transaction on July 1, 2019, VCM serves as the Fund's administrator and fund accountant. Under the Fund Administration, Servicing and Accounting Agreement, VCM is paid for its services an annual fee at a rate of 0.15% of average daily net assets of the Fund. Amounts incurred from July 1, 2019 through May 31, 2020, are $498 thousand and reflected on the Statement of Operations as Administration fees.
Prior to the Transaction on July 1, 2019, AMCO provided certain administration and servicing functions for the Fund. For such services, AMCO received a fee accrued daily and paid monthly at an annualized
40
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
rate of 0.15% of average daily net assets of the Fund. Amounts incurred from June 1, 2019 through June 30, 2019, were $45 thousand and reflected on the Statement of Operations as Administration fees.
Effective with the Transaction on July 1, 2019, the Fund (as part of the Trust) has entered into an agreement to provide compliance services with the Adviser, 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. Funds in the Trust, Victory Variable Insurance Funds, Victory Portfolios and Victory Portfolios II (collectively, the "Victory Funds Complex") in the aggregate, compensates the Adviser for these services. The amount incurred during the period from July 1, 2019 to May 31, 2020, is reflected on the Statement of Operations as Compliance fees.
Effective with the Transaction on July 1, 2019, 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 Trust reimburses VCM and Citi for all of their reasonable out-of- pocket expenses incurred in providing these services and certain other expenses specifically allocated to the Funds, under the Fund Administration, Servicing, and Accounting Agreement. The amount incurred during the period from July 1, 2019 through May 31, 2020, is reflected on the Statement of Operations as Sub-Administration fees.
In addition to the services provided under its Administration and Servicing Agreement with the Fund, AMCO also provided certain compliance and legal services for the benefit of the Fund prior to the Transaction on July 1, 2019. The Board approved the reimbursement of a portion of these expenses incurred by AMCO. AMCO did not receive any fees from the Fund for these services.
Transfer Agency Fees:
Effective with the Transaction on July 1, 2019, Victory Capital Transfer Agency, Inc. ("VCTA"), (formerly, USAA Shareholder Account Services ("SAS")), provides transfer agency services to the Fund. VCTA, an affiliate of the Adviser, provides transfer agent services 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. The amount incurred and paid to VCTA from July 1, 2019 through May 31, 2020, was $1,108 thousand. The amount incurred and paid to SAS from June 1, 2019 through June 30, 2019 was $97 thousand. These amounts are reflected on the Statement of Operations as Transfer agent fees.
Effective with the Transaction on July 1, 2019, 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:
Effective with the Transaction on July 1, 2019, Victory Capital Advisers, 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. Effective on or about June 30, 2020, the Distributor's name will change to Victory Capital Services, Inc.
Prior to the Transaction on July 1, 2019, USAA Investment Management Company provided exclusive underwriting and distribution of the Fund's shares on a continuing best-efforts basis.
Other Fees:
Prior to the Transaction on July 1, 2019, State Street Bank and Trust Company served as the Fund's accounting agent and custodian.
41
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
Effective July 1, 2019, Citibank, N.A., serves as the Fund's custodian.
K&L Gates LLP provides legal services to the Trust.
Effective with the Transaction on July 1, 2019, the Adviser has entered into an expense limitation agreement with the Fund until at least June 30, 2021. 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 the Fund in any fiscal year exceed the expense limit for the Fund. Such excess amounts will be the liability of the Adviser. 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. Effective July 1, 2019 through May 31, 2020, the expense limit (excluding voluntary waivers) is 1.10%.
Under this expense limitation agreement, the Fund has agreed to repay fees and expenses that were waived or reimbursed by the Adviser for a period up to three years after the fiscal year in which 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 May 31, 2020, the following amounts are available to be repaid to the Adviser (amounts in thousands).
Expires 05/31/2023 | |||
$ | 267 |
The Adviser may voluntarily waive or reimburse additional fees to assist the Fund in maintaining competitive expense ratios. Voluntary waivers and reimbursements applicable to the Fund are not available to be recouped at a future time. There were no voluntary waivers or reimbursements for the year ended May 31, 2020.
Prior to the Transaction on July 1, 2019, AMCO agreed, through September 30, 2019, to limit the total annual operating expenses of 1.10% of average daily net assets of the Fund, excluding extraordinary expenses and before reductions of any expenses paid indirectly, and to reimburse all expenses in excess of those amounts. Effective with the Transaction on July 1, 2019, this expense limit is no longer in effect and is not available to be recouped by AMCO. For the period June 1, 2019 through June 30, 2019, amounts reimbursed by the Fund are reflected on the Statement of Operations as Expenses waived/reimbursed by AMCO.
Certain officers and/or interested trustees of the Fund are also officers and/or employees of the Adviser, Administrator, Sub-Administrator, Sub-Fund Accountant, and Legal.
5. Risks:
The Fund may be subject to other risks in addition to these identified risks.
Global economies and financial markets are increasingly interconnected, which increases the possibilities that conditions in one country or region might adversely affect issuers in another country or region. Geopolitical and other risks, including war, terrorism, trade disputes, political or economic dysfunction within some nations, public health crises and related geopolitical events, as well as environmental disasters such as earthquakes, fires, and floods, may add to instability in world economies and markets generally. Changes in trade policies and international trade agreements could affect the economies of many countries in unpredictable ways. Epidemics and/or pandemics, such as the coronavirus (or COVID-19), may result in, among other things, closing borders, disruptions to healthcare service preparation and delivery, quarantines, cancellations, disruptions to supply chains and consumer activity, as well as general concern and uncertainty. The impact may be short-term or may last for extended periods.
The COVID-19 pandemic, which has spread rapidly across the world, has led and will continue to lead for an unknown period of time to disruptions in local, regional, national and global markets and economies. Among other things, the outbreak has resulted in, and until fully resolved is likely to continue
42
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
to result in, among other things (1) government imposition of various forms of "stay at home" orders and the closing of "non-essential" businesses, resulting in significant disruption to the businesses of many issuers as well as lay-offs of employees; (2) increased requests by issuers of debt instruments for amendments and waivers of agreements to avoid default and increased defaults; (3) volatility and disruption of markets, including greater volatility in pricing and spreads; and (4) rapidly evolving proposals and/or actions by state and federal governments to address problems being experienced by the markets and by businesses and the economy in general.
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.
The equity securities in the Fund's portfolio are subject to stock market risk. A company's stock price in general may decline over short or even extended periods, regardless of the success or failure of the company's operations. Stock markets tend to run in cycles, with periods when stock prices generally go up and periods when stock prices generally go down. Equity securities tend to be more volatile than debt securities. In addition, to the degree the Fund invests in foreign securities, there is a possibility that the value of the Fund's investments in foreign securities will decrease because of unique risks, such as currency exchange-rate fluctuations; foreign market illiquidity; emerging market risk; increased price volatility; uncertain political conditions; exchange control regulations; foreign ownership limits; different accounting, reporting, and disclosure requirements; difficulties in obtaining legal judgments; and foreign withholding taxes. These risks are particularly heightened in this Fund because investments in emerging-market countries generally are more volatile than investments in developed markets. Emerging-market countries are less economically diverse and mature than more developed countries and tend to be politically less stable.
The Fund may invest in securities of companies of any market capitalization and is subject to mid- and small-cap company risk, which is the greater risk of investing in smaller, less well-known companies, as opposed to investing in established companies with proven track records. Mid- and small-cap companies also may have limited product lines, markets, or financial resources. Securities of such companies may be less liquid and more volatile than securities of larger companies or the market in general and, therefore, may involve greater risk than investing in the securities of larger companies.
Many debt securities, derivatives and other financial instruments, including some of the Fund's investments, use the London Interbank Offered Rate ("LIBOR") as the reference or benchmark rate for variable interest rate calculations. However, the use of LIBOR started to come under pressure following manipulation allegations in 2012. Despite increased regulation and other corrective actions since that time, concerns have arisen regarding its viability as a benchmark, due largely to reduced activity in the financial markets that it measures. In June 2017, the Alternative Reference Rates Committee, a group of large U.S. banks working with the Federal Reserve, announced its selection of a new Secured Overnight Funding Rate ("SOFR"), which is intended to be a broad measure of secured overnight U.S. Treasury repo rates, as an appropriate replacement for LIBOR. The Federal Reserve Bank of New York began publishing the SOFR in 2018, expecting that it could be used on a voluntary basis in new instruments and transactions. Bank working groups and regulators in other countries have suggested other alternatives for their markets, including the Sterling Overnight Interbank Average Rate ("SONIA") in England. In July 2017, the Financial Conduct Authority (the "FCA"), the United Kingdom financial regulatory body, announced that after 2021 it will cease its active encouragement of UK banks to provide the quotations needed to sustain LIBOR. That announcement suggests that LIBOR may cease to be published after that time. The roughly three-year period until the end of 2021 is expected to be enough time for market participants to transition to the use of a different benchmark for both new and existing securities and transactions. Various financial industry groups have begun planning for that transition, but there are obstacles to converting certain longer-term securities and transactions to a new benchmark. Transition planning is at an early stage, and neither the effect of the transition process nor its ultimate success can yet be known. The transition process might lead to increased volatility and illiquidity in markets that currently rely on the LIBOR to determine interest rates. It could also lead to
43
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
a reduction in the value of some LIBOR-based investments and reduce the effectiveness of new hedges placed against existing LIBOR-based instruments. Since the usefulness of LIBOR as a benchmark could deteriorate during the transition period, these effects could occur before the end of 2021.
6. Borrowing and Interfund Lending:
Line of Credit:
Effective with the Transaction on July 1, 2019, the Victory Funds Complex participates in a short-term, demand note "Line of Credit" agreement with Citibank. Under the agreement with Citibank, the Victory Funds Complex could 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 that Fund paying the related commitment fees for that amount. The purpose of the agreement is to meet temporary or emergency cash needs. Citibank receives an annual commitment fee of 0.15% on $300 million for providing the Line of Credit. Each fund in the Victory Funds Complex pays a pro-rata portion of the commitment fees plus any interest (one month LIBOR plus one percent) on amounts borrowed. Effective June 29, 2020, under an amended Line of Credit agreement, Citibank will also receive an annual upfront fee of 0.10% on the $300 million committed line of credit. Each fund in the Victory Funds Complex will pay a pro-rata portion of the upfront fee. Interest charged to the Fund, if any, during the period is reflected on the Statement of Operations under line of credit fees.
Prior to the Transaction on July 1, 2019, the line of credit among the Trust, with respect to its funds, and USAA Capital Corporation ("CAPCO") terminated. For the period from June 1, 2019 to June 30, 2019, the Fund paid CAPCO facility fees of $1 thousand.
The Fund had no borrowings under either agreement with Citibank or CAPCO during the year ended May 31, 2020.
Interfund Lending:
Effective with the Transaction on July 1, 2019, the Trust and 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 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. The interfund loan rate is determined, as specified in the Order, by averaging the current repurchase agreement rate and the current bank loan rate. As a Borrower, interest charged to the Fund, if any, during the period is reflected on the Statement of Operations under Interest expense on Interfund lending. As a Lender, interest earned by the Fund, if any, during the period is reflected on the Statement of Operations under Income on Interfund lending.
The Fund did not utilize or participate in the Facility during the period July 1, 2019 through May 31, 2020.
7. Federal Income Tax Information:
The Fund intends to declare daily and 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.
44
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
Net investment losses incurred by the Fund may be reclassified as an offset to capital on the accompanying Statement of Assets and Liabilities.
As of May 31, 2020, 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 Statement of Changes in Net Assets because, for tax purposes, dividends are recognized when actually paid) (amounts in thousands):
Year Ended May 31, 2020 | Year Ended May 31, 2019 | ||||||||||||||||||||||||||
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 | ||||||||||||||||||||||
$ | 4,500 | $ | 1,970 | $ | 6,470 | $ | 11,080 | $ | 7,317 | $ | 18,397 |
As of the May 31, 2020, the components of accumulated earnings (deficit) on a tax basis were as follows (amounts in thousands):
Undistributed Ordinary Income | Accumulated Capital and Other Losses | Unrealized Appreciation (Depreciation)* | Total Accumulated Earnings (Deficit) | ||||||||||||
$ | 1,608 | $ | (3,213 | ) | $ | 1,921 | $ | 316 |
* The difference between the book-basis and tax-basis of unrealized appreciation/depreciation is attributable to the tax deferral of losses on wash sales.
At May 31, 2020, 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 | |||||||||
$ | 3,213 | $ | — | $ | 3,213 |
As of May 31, 2020, 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) | ||||||||||||
$ | 347,341 | $ | 20,531 | $ | (18,610 | ) | $ | 1,921 |
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 or an investment company managed by VCM. The Fund does not invest in affiliated underlying funds for the purpose of exercising management or control. These underlying funds are noted as affiliated in the Fund's Schedule of Portfolio Investments. The affiliated underlying
45
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
funds' annual or semiannual reports may be viewed at usaa.com. Transactions in affiliated securities during the year ended May 31, 2020, were as follows (amount in thousands):
Fair Value 5/31/2019 | Purchases at Cost | Proceeds from Sales | Realized Gain (Loss) | Capital Gain Distribution | Net Change in Unrealized Appreciation/ Depreciation | Fair Value 5/31/2020 | Dividend Income | ||||||||||||||||||||||||||||
Affiliated Holdings | |||||||||||||||||||||||||||||||||||
VictoryShares USAA MSCI Emerging Markets Value Momentum ETF | $ | 680 | $ | — | $ | — | $ | — | $ | — | $ | (91 | ) | $ | 589 | $ | 20 |
9. 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 1940 Act. 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 Funds' Board of Trustees approved the appointment of the Fund's investment adviser, Victory Capital as the administrator of the LRMP. At an in-person meeting held on February 26, 2020, Victory Capital provided an oral and written report to the Trustees on the operation and effectiveness of the LRMP during the previous year.
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.
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 reasonably expected to be converted to cash in current market conditions in three business days or less without significantly changing the market value of the investment. Therefore, the Fund has not adopted a Highly Liquid Investment Minimum. The Fund's investments were below the limitation on illiquid investments during the review period. Additionally, Victory Capital indicated that no events occurred that would require the filing of Form N-LIQUID and recommended no material changes to the LRMP.
46
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of USAA Cornerstone Aggressive Fund:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of USAA Cornerstone Aggressive Fund (the "Fund") (one of the funds constituting USAA Mutual Funds Trust (the "Trust")), including the schedule of portfolio investments, as of May 31, 2020, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the funds constituting USAA Mutual Funds Trust) at May 31, 2020, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Trust's management. Our responsibility is to express an opinion on the Fund's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust's internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of May 31, 2020, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Victory Capital investment companies since 1995.
San Antonio, Texas
July 27, 2020
47
USAA Mutual Funds Trust | Supplemental Information May 31, 2020 |
(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) 539-3863. The information is also included in the Fund's Statement of Additional Information, which is available on the SEC's website at www.sec.gov.
Information relating to how the Fund voted proxies relating to portfolio securities held during the most recent 12 months ended June 30 is available on the SEC's website at www.sec.gov.
Availability of Schedules of Portfolio Investments:
The Trust files a complete list of Schedules of Portfolio Investments with the SEC for the first and third quarter of each fiscal year on Form N-PORT. Forms N-PORT are available on the SEC's website at www.sec.gov.
48
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(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 10 Trustees, eight of whom are not "interested persons" of the Trust within the meaning of that term under the 1940 Act ("Independent Trustees") and two 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 ages, position with the Trust, commencement of service, 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 47 portfolios in the Trust. Each Trustee's address is 15935 La Cantera Pkwy, Building Two, San Antonio, TX, 78256. Pursuant to a policy adopted by the Board, the term of office for each Trustee shall be until the Independent Trustee reaches age 75 or an Interested Trustee reaches age 75. The Board may change or grant exceptions from this policy at any time without shareholder approval. A Trustee may resign or be removed by a vote of the other Trustees or the holders of a majority of the outstanding shares of the Trust at any time. Vacancies on the Board can be filled by the action of a majority of the Trustees, provided that after filling such vacancy at least two-thirds of the Trustees have been elected by the shareholders.
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Independent Trustees. | |||||||||||||||||||
Jefferson C. Boyce, Born September 1957 | Lead Independent Trustee, and Vice Chairman | 2013 | Senior Managing Director, New York Life Investments, LLC (1992-2012) | Westhab, Inc. | |||||||||||||||
John C. Walters, Born February 1962 | Trustee | 2019 | Retired. Mr. Walters brings significant Board experience including active involvement with the board of a Fortune 500 company, and a proven record of leading large, complex financial organizations. He has a demonstrated record of success in distribution, manufacturing, investment brokerage, and investment management in both the retail and institutional investment businesses. He has substantial experience in the investment management business with a demonstrated ability to develop and drive strategy while managing operation, financial, and investment risk. | Guardian Variable Products Trust (16 series), Lead Independent Director; Amerilife Holdings LLC, Director; Stadion Money Management; Director; University of North Carolina (Chapel Hill), Member Board of Governors. |
49
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Robert L. Mason, Ph.D., Born July 1946 | Trustee | 1997 | Adjunct Professor in the Department of Management Science and Statistics in the College of Business at the University of Texas at San Antonio (since 2001); Institute Analyst, Southwest Research Institute (March 2002-January 2016) | None | |||||||||||||||
Dawn M. Hawley, Born February 1954 | Trustee | 2014 | Manager of Finance, Menil Foundation, Inc. (May 2007-June 2011), which is a private foundation that oversees the assemblage of sculptures, prints, drawings, photographs, and rare books. Director of Financial Planning and Analysis and Chief Financial Officer, AIM Management Group, Inc. (October 1987-January 2006) | None | |||||||||||||||
Paul L. McNamara, Born July 1948 | Trustee | 2012 | Director, Cantor Opportunistic Alternatives Fund, LLC (March 2010-February 2014) , which is a closed-end fund of funds by Cantor Fitzgerald Investment Advisors, LLC | None |
50
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Richard Y. Newton III, Born January 1956 | Trustee | 2017 | Director, Elta North America (01/18-present), 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 (December 2015-present)); Executive Director, The Union League Club of New York (June 2014-November 2015): Executive Vice President, Air Force Association (August 2012-May 2014); Lieutenant General, United States Air Force (January 2008-June 2012) | None | |||||||||||||||
Barbara B. Ostdiek, Ph.D., Born March 1964 | Trustee | 2008 | Senior Associate Dean of Degree Programs at Jesse H. Jones Graduate School of Business at Rice University (since 2013); Associate Professor of Finance at Jessie H. Jones Graduate School of Business at Rice University (since 2001) | None | |||||||||||||||
Michael F. Reimherr, Born August 1945 | Trustee | 2000 | President of Reimherr Business Consulting (May 1995-December 2017); St. Mary's University Investment Committee overseeing University Endowment (since 2014) | None |
51
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Interested Trustees. | |||||||||||||||||||
David C. Brown, ** Born May 1972 | Trustee | 2019 | Chairman and Chief Executive Officer (since 2013), Co-Chief Executive Officer (2011-2013), Victory Capital Management Inc.; Chairman and Chief Executive Officer, Victory Capital Holdings, Inc. (since 2013). Mr. Brown brings to the Board extensive business, finance and leadership skills gained and developed through years of experience in the financial services industry, including his tenure overseeing the strategic direction as CEO of Victory Capital. These skills, combined with Mr. Brown's extensive knowledge of the financial services industry and demonstrated success in the development and distribution of investment strategies and products, enable him to provide valuable insights to the Board and strategic direction for the Funds | Trustee, Victory Portfolios (42 series), Victory Portfolios II (26 series), Victory Variable Insurance Funds (9 series) |
52
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Daniel S. McNamara, ** Born June 1966 | Trustee and Chair of the Board of Trustees | 2012 | Trustee, President, and Vice Chairman of USAA ETF Trust (June 2017-June 2019); President of Financial Advice & Solutions Group (FASG), USAA (since 2013); Director, IMCO (September 2009-April 2014); President, AMCO (August, 2011-April 2013); Senior Vice President of USAA Financial Planning Services Insurance Agency, Inc. (FPS) (since 2011); Director of USAA Investment Management Company (IMCO) (since 2009); Chairman of Board of IMCO (since 2013); Director of USAA Asset Management Company (AMCO), (August 2011-June 2019); President and Director of USAA Shareholder Account Services (SAS)(October 2009-June 2019); Director and Vice Chairman of FPS (since 2013); President and Director of USAA Investment Corporation (ICORP) (since 2010); Chairman of Board of ICORP (since 2013); Director of USAA Financial Advisors, Inc. (FAI) (since 2013); Chairman of Board of FAI (since 2015). Mr. McNamara brings to the Board extensive experience in the financial services industry, including experience as an officer of the Trust. | None |
** Mr. McNamara and Mr. Brown are "Interested Persons" by reason of their relationships with the Adviser.
The Statement of Additional Information includes additional information about the Trustees of the Trust and is available, without charge, on the SEC's website at www.sec.gov and/or by calling (800)-539-3863.
53
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Officers:
The officers of the Trust, their ages, 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, Building Two, 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 with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | ||||||||||||
Interested Officers. | |||||||||||||||
Christopher K. Dyer, Born February 1962 | President | 2019 | Director of Fund Administration, Victory Capital (2004-present) | ||||||||||||
Scott A Stahorsky, Born July 1969 | Vice President | 2019 | Manager, Fund Administration, Victory Capital (since 2015); Senior Analyst, Fund Administration, Victory Capital (prior to 2015) | ||||||||||||
James K. De Vries, Born April 1969 | Treasurer, Principal Financial Officer | 2018 | Executive Director, Victory Capital Management Inc. (since 2019); Treasurer, USAA ETF Trust (September 2018-June 2019); Executive Director, Investment and Financial Administration, USAA (April 2012-June 2019); Assistant Treasurer, USAA ETF Trust (June 2017-September 2018); Assistant Treasurer, USAA Mutual Funds Trust (December 2013-February 2018) | ||||||||||||
Allan Shaer, Born March 1965 | Assistant Treasurer | 2019 | Senior Vice President, Financial Administration, Citi Fund Services Ohio, Inc. (since 2016); Vice President, Mutual Fund Administration, JP Morgan Chase (2011-2016) | ||||||||||||
Carol D. Trevino, Born October 1965 | Assistant Treasurer | 2018 | Director, Accounting and Finance, Victory Capital Management Inc. (since 2019); Accounting/Financial Director, USAA (December 2013-June 2019); Assistant Treasurer, USAA ETF Trust (September 2018-June 2019). | ||||||||||||
Erin G. Wagner, Born February 1974 | Secretary | 2019 | Deputy General Counsel, the Adviser (since 2013) | ||||||||||||
Charles Booth, Born April 1960 | Anti-Money Laundering Compliance Officer and Identity Theft Officer | 2019 | Director, Regulatory Administration and CCO Support Services, Citi Fund Services Ohio, Inc. (2007-present) | ||||||||||||
Amy Campos, Born July 1976 | Chief Compliance Officer | 2019 | Chief Compliance Officer, USAA Mutual Funds Trust (since 2019); Executive Director, Deputy Chief Compliance Officer, USAA Mutual Funds Trust and USAA ETF Trust (July 2017-June 2019); Compliance Director, USAA Mutual Funds Trust (2014-July 2017) |
54
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
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 December 1, 2019 through May 31, 2020.
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. If these transactional costs were included, your costs would have been higher.
Beginning Account Value 12/1/19 | Actual Ending Account Value 5/31/20 | Hypothetical Ending Account Value 5/31/20 | Actual Expenses Paid During Period 12/1/19- 5/31/20* | Hypothetical Expenses Paid During Period 12/1/19- 5/31/20* | Annualized Expense Ratio During Period 12/1/19- 5/31/20 | ||||||||||||||||||
$ | 1,000.00 | $ | 931.20 | $ | 1,019.60 | $ | 5.21 | $ | 5.45 | 1.08 | % |
* Expenses are equal to the average account value multiplied by the Fund's annualized expense ratio multiplied by 183/366 (the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year).
55
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Additional Federal Income Tax Information
The following federal tax information related to the Fund's fiscal year ended May 31, 2020, 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 2021.
With respect to distributions paid, the Fund designates the following amounts (or, if subsequently determined to be different, the maximum amount allowable) for the fiscal year ended May 31, 2020 (amounts in thousands):
Dividend Received Deduction (corporate shareholders)* | Qualified Dividend Income (non-corporate shareholders)* | Long-Term Capital Gain Distributions(a) | |||||||||||||
34.63 | % | 36.98 | % | $ | 1,970 |
* Presented as a percentage of net investment income and excludes short-term capital gain distributions paid, if any. All or a portion of these amounts may be exempt from taxation at the state level.
(a) Pursuant to Section 852 of the Internal Revenue Code.
56
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 |
97448-0720
MAY 31, 2020
Annual Report
USAA Cornerstone Conservative Fund
Beginning January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Fund's shareholder reports like this one will no longer be sent by mail, unless you specifically request paper copies of the reports from the Fund or from your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on VictoryFunds.com, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund or your financial intermediary electronically by notifying your financial intermediary directly, or if you are a direct investor, by calling (800) 235-8396 or logging on to usaa.com. Effective on or about September 8, 2020, a shareholder who has an account directly with the Fund will need to submit their request via email to TA.Processing@FISGlobal.com.
You may elect to receive all future reports in paper free of charge. You can inform the Fund or your financial intermediary that you wish to continue receiving paper copies of your shareholder reports by notifying your financial intermediary directly, or if you are a direct investor, by calling (800) 235-8396 or logging on to usaa.com. Effective on or about September 8, 2020, a shareholder who has an account directly with the Fund will need to submit their request via email to TA.Processing@FISGlobal.com. Your election to receive reports in paper will apply to all funds held with the USAA Mutual Funds or your financial intermediary.
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 logo 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.
USAA Mutual Funds Trust
TABLE OF CONTENTS
Shareholder Letter (Unaudited) | 2 | ||||||
Managers' Commentary (Unaudited) | 4 | ||||||
Investment Overview (Unaudited) | 6 | ||||||
Investment Objective & Portfolio Holdings (Unaudited) | 7 | ||||||
Financial Statements | |||||||
Schedule of Portfolio Investments | 8 | ||||||
Statement of Assets and Liabilities | 9 | ||||||
Statement of Operations | 10 | ||||||
Statements of Changes in Net Assets | 11 | ||||||
Financial Highlights | 12 | ||||||
Notes to Financial Statements | 14 | ||||||
Report of Independent Registered Public Accounting Firm | 25 | ||||||
Supplemental Information (Unaudited) | 26 | ||||||
Proxy Voting and Portfolio Holdings Information | 26 | ||||||
Trustees' and Officers' Information | 27 | ||||||
Expense Examples | 33 | ||||||
Additional Federal Income Tax Information | 34 | ||||||
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.
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.
1
(Unaudited)
Dear Shareholder,
The previous decade ended with the longest-ever bull market in U.S. equities still intact, even as investors wrestled with issues like softening global economic data, Brexit, and U.S.-China trade relations. In retrospect, those worries seem so pedestrian given what we would soon experience.
A new and unexpected threat—a global pandemic, the novel coronavirus ("COVID-19")—first emerged in Asia and then began spreading globally and throughout the United States during the first quarter of 2020. This unprecedented and unanticipated event not only rendered all existing economic and earnings forecasts moot, but it also roiled stock and bond markets everywhere. Efforts to slow the spread of the virus, though successful to date, also brought the economy to a halt. The historic bull market in stocks ended virtually overnight.
After an initial severe sell-off in March, equity markets recovered sharply. As our annual reporting period drew to a close on May 31, 2020, many of the broad market indexes had recovered and volatility had returned to more palatable levels. In fact, despite all the chaos, the S&P 500® Index, one of the most popular measures of large U.S. stocks, finished the fiscal year (May 31, 2020) at approximately 3,044, which was up more than 10.6% from one year ago.
The market turmoil of early 2020 was not limited to equities. Fixed income volatility spiked when liquidity evaporated in late March as investors struggled to understand the ramifications of stay-at-home orders. Fortunately, the U.S. Federal Reserve (the "Fed") (as well as other global central banks) leapt into action—cutting interest rates, (re)starting quantitative easing and, in the case of the Fed, launching an array of programs to stabilize markets.
The new lending facilities and programs had their intended effect of improving liquidity and trading. Credit spreads across corporate, high-yield, structured, and municipal markets were coaxed down from their highs. In addition, Congress came through with substantial fiscal stimulus that also was applauded by investors and markets. Although fixed income markets regained their footing, the yield on 10-Year Treasurys, a benchmark for low-risk investments, declined steadily during our fiscal year—from 2.14% at the beginning of our reporting period to approximately 0.65% as of May 31, 2020. This suggests that investors remain a little wary.
While the past year has been unprecedented for all of us, both personally and professionally, our portfolio managers continue to scrutinize the financial markets, economic conditions, and the trajectory of the pandemic, which will likely be the guiding factor on Fed policy and the markets.
No matter what happens in the near term, we believe that the massive monetary and fiscal policies introduced earlier this year will have longer-term ramifications. Despite this uncertainty, it's important to remain focused on your long-term investment goals and avoid making emotional decisions. If you invest with us directly, our Member Service Representatives are available to help. Call us at (800) 539-3863 or visit our website at vcm.com.
2
From all of us here at USAA Mutual Funds, thank you for letting us help you work toward your investment goals.
Christopher K. Dyer, CFA
President,
USAA Mutual Funds
3
USAA Mutual Funds Trust
USAA Cornerstone Conservative Fund
Managers' Commentary
(Unaudited)
Victory Solutions
Mannik S. Dhillon, CFA, CAIA
Wasif A. Latif
Lance Humphrey, CFA
• What were the market conditions during the reporting period?
Global financial market performance varied widely over the period driven by uncertainty related to the duration and economic impact of the novel coronavirus ("COVID-19") pandemic. This generally led to a risk-off environment as investors flocked to safe haven assets such as U.S. Treasurys and gold. Global equities turned mostly lower with the exception of a small breadth of mega-cap securities well-positioned for an extended economic slowdown and the new stay-at-home paradigm. The final month and a half of the reporting period saw a rebound in risky assets as economies began a phased reopening.
Within the United States, the S&P 500® Index dropped nearly 34% from its 2020 high, before beginning to recoup losses with the support of comprehensive monetary and fiscal stimulus, along with encouraging results in COVID-19 vaccine trials. Over the reporting period, the S&P 500® Index returned 12.84%, with large-cap growth stocks leading the way, up to a return of 26.25% as represented by the Russell 1000 Growth Index. Value stocks and small-cap stocks underperformed growth stocks over the period, but more recently have seen a pickup in momentum. U.S. large-cap value stocks were down to a return of -1.64% over the reporting period as gauged by the Russell 1000 Value Index, while U.S. small-cap stocks, were down to a return of -3.44% as represented by the Russell 2000 Index.
Developed market international and emerging market equities followed a path similar to U.S. equities. Markets led investors on a rollercoaster ride that saw both the MSCI EAFE Index and MSCI Emerging Markets Index drop approximately 34% from their highs in the year. The market drawdown hit bottom on March 23rd and then started a steady ascent, erasing most of the losses as European Central Bank quantitative easing and talks of a 750-billion euros fiscal stimulus helped bolster momentum in the market's recovery. Over the reporting period, developed international equities, represented by the MSCI EAFE Index, were down to a return of -2.81%, while the MSCI Emerging Markets Index returned -4.39%.
Within fixed-income, interest rate-sensitive treasury bonds outperformed credit-sensitive investment-grade and high-yield corporate bonds. Investor demand for U.S. Treasurys drove yields to new lows, while credit spreads reached unprecedented levels as liquidity issues began to seize up parts of credit and municipal markets. The U.S. Federal Reserve (the "Fed") intervened, providing liquidity by expanding open market purchases to include municipal and corporate bonds. Bloomberg Barclays US Treasury 20+ Year Index returned 27.46% over the reporting period, while the Bloomberg Barclays U.S. Aggregate Bond
4
USAA Mutual Funds Trust
USAA Cornerstone Conservative Fund (continued)
Managers' Commentary (continued)
Index returned 9.42%. High-yield bonds finished the period slightly positive, up 1.32% as gauged by the Bloomberg Barclays US Corporate High Yield Index.
• How did the USAA Cornerstone Conservative Fund (the "Fund") perform during the reporting period?
For the reporting period ended May 31, 2020, the Fund had a total return of 5.45%. This compares to returns of 8.50% for the Bloomberg Barclays U.S. Universal Index and 7.85% for the Cornerstone Conservative Composite Index.
• What strategies did you employ during the reporting period?
The fixed income portion of the portfolio, which makes up the majority of the allocation, was the largest detractor in performance relative to the benchmark. An overweight to credit-sensitive corporates and an underweight to treasurys dragged on returns. The fixed income portfolio held an underweight to high yield which contributed positively to relative performance.
The equity portfolio's overall tilt toward value stocks, especially within U.S. large-cap stocks, detracted from relative performance. An overweight to U.S. equities, along with negative stock selection effects within developed international, weighed on relative performance.
Commodities as an asset class were down over the period with the Bloomberg Commodity Index returning -17.06%; however, gold outperformed. Gold's overweight within the portfolio contributed positively to relative performance over the period. The portfolio's underweight to REITs also slightly contributed to performance relative to the benchmark.
Thank you for allowing us to assist you with your investment needs.
5
USAA Mutual Funds Trust
USAA Cornerstone Conservative Fund
Investment Overview
(Unaudited)
Average Annual Total Return
Year Ended May 31, 2020
INCEPTION DATE | 6/8/12 | ||||||||||||||
Net Asset Value | Bloomberg Barclays U.S. Universal Index1 | Cornerstone Conservative Composite Index2 | |||||||||||||
One Year | 5.45 | % | 8.50 | % | 7.85 | % | |||||||||
Five Year | 3.75 | % | 4.01 | % | 4.38 | % | |||||||||
Since Inception | 4.28 | % | NA | NA |
Past performance is not indicative of future results. 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 for various periods since inception. Without such fee waivers, the total returns would have been lower.
USAA Cornerstone Conservative Fund — Growth of $10,000
* The performance of the Bloomberg Barclays U.S. Universal Index and Cornerstone Conservative Composite Index is calculated from the end of the month, May 31, 2012, while the inception date of the Cornerstone Conservative Fund is June 8, 2012. There might be a slight variation of performance numbers because of the difference.
1 The unmanaged Bloomberg Barclays 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.
2 The 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 Barclays 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 Barclays U.S. Treasury — Bills (1- 3M) (2%).
The graph reflects investment of growth of a hypothetical $10,000 investment in the Fund. Past performance is no guarantee of future results.
The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
6
USAA Mutual Funds Trust USAA Cornerstone Conservative Fund | May 31, 2020 |
(Unaudited)
Investment Objective & Portfolio Holdings:
The Fund's investment objective is to seek current income. The Fund also considers the potential for capital appreciation.
Top 10 Holdings*
May 31, 2020
(% of Net Assets)
USAA Income Fund Institutional Shares | 27.6 | % | |||||
USAA Government Securities Fund Institutional Shares | 20.2 | % | |||||
USAA Intermediate-Term Bond Fund Institutional Shares | 16.0 | % | |||||
VictoryShares USAA Core Intermediate-Term Bond ETF | 8.6 | % | |||||
USAA International Fund Institutional Shares | 3.3 | % | |||||
USAA 500 Index Fund Reward Shares | 3.2 | % | |||||
USAA High Income Fund Institutional Shares | 3.1 | % | |||||
USAA Short-Term Bond Fund Institutional Shares | 3.1 | % | |||||
VictoryShares USAA MSCI USA Value Momentum ETF | 2.4 | % | |||||
USAA Target Managed Allocation Fund | 2.0 | % |
* Does not include money market instruments and short-term investments purchased with cash collateral from securities loaned.
Refer to the Schedule of Portfolio Investments for a complete list of securities.
7
USAA Mutual Funds Trust USAA Cornerstone Conservative Fund | Schedule of Portfolio Investments May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Affiliated Exchange-Traded Funds (13.4%) | |||||||||||
VictoryShares USAA Core Intermediate-Term Bond ETF (a) | 334,133 | $ | 17,709 | ||||||||
VictoryShares USAA Core Short-Term Bond ETF | 4,500 | 229 | |||||||||
VictoryShares USAA MSCI Emerging Markets Value Momentum ETF | 23,867 | 879 | |||||||||
VictoryShares USAA MSCI International Value Momentum ETF | 71,559 | 2,694 | |||||||||
VictoryShares USAA MSCI USA Small Cap Value Momentum ETF | 23,660 | 1,049 | |||||||||
VictoryShares USAA MSCI USA Value Momentum ETF | 108,778 | 4,907 | |||||||||
Total Affiliated Exchange-Traded Funds (Cost $27,682) | 27,467 | ||||||||||
Affiliated Mutual Funds (86.4%) | |||||||||||
USAA 500 Index Fund Reward Shares | 155,124 | 6,523 | |||||||||
USAA Aggressive Growth Fund Institutional Shares | 33,519 | 1,406 | |||||||||
USAA Capital Growth Fund Institutional Shares | 188,030 | 1,858 | |||||||||
USAA Emerging Markets Fund Institutional Shares | 146,705 | 2,368 | |||||||||
USAA Government Securities Fund Institutional Shares | 4,062,998 | 41,565 | |||||||||
USAA Growth Fund Institutional Shares | 70,603 | 1,963 | |||||||||
USAA High Income Fund Institutional Shares | 904,766 | 6,397 | |||||||||
USAA Income Fund Institutional Shares | 4,229,487 | 56,887 | |||||||||
USAA Income Stock Fund Institutional Shares | 210,118 | 3,177 | |||||||||
USAA Intermediate-Term Bond Fund Institutional Shares | 3,053,647 | 33,040 | |||||||||
USAA International Fund Institutional Shares | 319,627 | 6,859 | |||||||||
USAA Precious Metals and Minerals Fund Institutional Shares (b) | 70,102 | 1,385 | |||||||||
USAA Short-Term Bond Fund Institutional Shares | 699,777 | 6,382 | |||||||||
USAA Small Cap Stock Fund Institutional Shares | 170,630 | 2,385 | |||||||||
USAA Target Managed Allocation Fund | 400,165 | 4,074 | |||||||||
USAA Value Fund Institutional Shares | 131,167 | 1,730 | |||||||||
Total Affiliated Mutual Funds (Cost $172,549) | 177,999 | ||||||||||
Collateral for Securities Loaned^ (0.3%) | |||||||||||
HSBC U.S. Government Money Market Fund I Shares, 0.13% (c) | 637,200 | 637 | |||||||||
Total Collateral for Securities Loaned (Cost $637) | 637 | ||||||||||
Total Investments (Cost $200,868) — 100.1% | 206,103 | ||||||||||
Liabilities in excess of other assets — (0.1)% | (153 | ) | |||||||||
NET ASSETS — 100.00% | $ | 205,950 |
At May 31, 2020, the Fund's investments in foreign securities were 6.2% of net assets.
^ Purchased with cash collateral from securities on loan.
(a) All or a portion of this security is on loan.
(b) Non-income producing
(c) Rate disclosed is the daily yield on May 31, 2020.
ETF — Exchange-Traded Fund
See notes to financial statements.
8
USAA Mutual Funds Trust | Statement of Assets and Liabilities May 31, 2020 |
(Amounts in Thousands, Except Per Share Amounts)
USAA Cornerstone Conservative Fund | |||||||
Assets: | |||||||
Affiliated investments, at value (Cost $200,231) | $ | 205,466 | (a) | ||||
Unaffiliated investments, at value (Cost $637) | 637 | ||||||
Cash and cash equivalents | 496 | ||||||
Receivables: | |||||||
Interest and dividends | — | (b) | |||||
Capital shares issued | 71 | ||||||
Prepaid expenses | 15 | ||||||
Total assets | 206,685 | ||||||
Liabilities: | |||||||
Payables: | |||||||
Collateral received on loaned securities | 637 | ||||||
Capital shares redeemed | 67 | ||||||
Accrued expenses and other payables: | |||||||
Custodian fees | 2 | ||||||
Compliance fees | — | (b) | |||||
Other accrued expenses | 29 | ||||||
Total liabilities | 735 | ||||||
Net Assets: | |||||||
Capital | 199,142 | ||||||
Total distributable earnings/(loss) | 6,808 | ||||||
Net assets | $ | 205,950 | |||||
Shares (unlimited number of shares authorized with no par value): | 18,783 | ||||||
Net asset value, offering and redemption price per share: (c) | $ | 10.96 |
(a) Includes $625 of securities on loan.
(b) Rounds to less than $1 thousand.
(c) Per share amount may not recalculate due to rounding of net assets and/or shares outstanding.
See notes to financial statements.
9
USAA Mutual Funds Trust | Statement of Operations For the Year Ended May 31, 2020 |
(Amounts in Thousands)
USAA Cornerstone Conservative Fund | |||||||
Investment Income: | |||||||
Income distributions from affiliated funds | $ | 6,200 | |||||
Interest | 39 | ||||||
Securities lending (net of fees) | 3 | ||||||
Total income | 6,242 | ||||||
Expenses: | |||||||
Sub-Administration fees | 15 | ||||||
Custodian fees | 12 | ||||||
Trustees' fees | 49 | ||||||
Compliance fees | 1 | ||||||
Printing fees | 35 | ||||||
Legal and audit fees | 61 | ||||||
State registration and filing fees | 16 | ||||||
Other expenses | 9 | ||||||
Total expenses | 198 | ||||||
Expenses waived/reimbursed by AMCO | (4 | ) | |||||
Net expenses | 194 | ||||||
Net investment income (Loss) | 6,048 | ||||||
Realized/Unrealized Gains (Losses) from Investments: | |||||||
Net realized gains (losses) from sales of affiliated funds | (386 | ) | |||||
Capital gain distributions received from affiliated funds | 3,812 | ||||||
Net change in unrealized appreciation/depreciation on affiliated funds | 564 | ||||||
Net realized/unrealized gains (losses) on investments | 3,990 | ||||||
Change in net assets resulting from operations | $ | 10,038 |
See notes to financial statements.
10
USAA Mutual Funds Trust | Statements of Changes in Net Assets |
(Amounts in Thousands)
USAA Cornerstone Conservative Fund | |||||||||||
Year Ended May 31, 2020 | Year Ended May 31, 2019 | ||||||||||
From Investments: | |||||||||||
Operations: | |||||||||||
Net investment income (loss) | $ | 6,048 | $ | 5,681 | |||||||
Net realized gains (losses) from investments | 3,426 | (1,042 | ) | ||||||||
Net change in unrealized appreciation/depreciation on investments | 564 | 2,580 | |||||||||
Change in net assets resulting from operations | 10,038 | 7,219 | |||||||||
Change in net assets resulting from distributions to shareholders | (6,280 | ) | (5,667 | ) | |||||||
Change in net assets resulting from capital transactions | 8,927 | (4,579 | ) | ||||||||
Change in net assets | 12,685 | (3,027 | ) | ||||||||
Net Assets: | |||||||||||
Beginning of period | 193,265 | 196,292 | |||||||||
End of period | $ | 205,950 | $ | 193,265 | |||||||
Capital Transactions: | |||||||||||
Proceeds from shares issued | $ | 58,872 | $ | 39,964 | |||||||
Distributions reinvested | 6,254 | 5,638 | |||||||||
Cost of shares redeemed | (56,199 | ) | (50,181 | ) | |||||||
Change in net assets resulting from capital transactions | $ | 8,927 | $ | (4,579 | ) | ||||||
Share Transactions: | |||||||||||
Issued | 5,373 | 3,799 | |||||||||
Reinvested | 581 | 542 | |||||||||
Redeemed | (5,191 | ) | (4,778 | ) | |||||||
Change in Shares | 763 | (437 | ) |
See notes to financial statements.
11
USAA Mutual Funds Trust | Financial Highlights |
For a Share Outstanding Throughout Each Period
Investment Activities | Distributions to Shareholders From | ||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss) | Net Realized and Unrealized Gains (Losses) on Investments | Total from Investment Activities | Net Investment Income | Net Realized Gains from Investments | ||||||||||||||||||||||
USAA Cornerstone Conservative Fund | |||||||||||||||||||||||||||
Year Ended May 31, 2020 | $ | 10.72 | 0.32 | (b) | 0.25 | 0.57 | (0.33 | ) | — | ||||||||||||||||||
Year Ended May 31, 2019 | $ | 10.64 | 0.32 | 0.08 | 0.40 | (0.32 | ) | — | |||||||||||||||||||
Year Ended May 31, 2018 | $ | 10.76 | 0.30 | (0.11 | ) | 0.19 | (0.31 | ) | — | ||||||||||||||||||
Year Ended May 31, 2017 | $ | 10.27 | 0.31 | 0.49 | 0.80 | (0.31 | ) | — | |||||||||||||||||||
Year Ended May 31, 2016 | $ | 10.68 | 0.35 | (0.37 | ) | (0.02 | ) | (0.34 | ) | (0.05 | ) |
* 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.
^ 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 two year period beginning July 1, 2019 and in effect through June 30, 2021, instead of coinciding with the Fund's fiscal year end. Details of the current contractual expense limitation in effect can be found in Note 4 of the accompanying Notes to Financial Statements.
(a) The expense ratios exclude the impact of expenses paid be each underlying fund.
(b) Per share net investment income (loss) has been calculated using the average daily shares method.
(c) Reflects a return to normal trading levels after a prior year transition or allocation shift.
See notes to financial statements.
12
USAA Mutual Funds Trust | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Ratios to Average Net Assets | Supplemental Data | ||||||||||||||||||||||||||||||||||
Total Distributions | Net Asset Value, End of Period | Total Return* | Net Expenses^(a) | Net Investment Income (Loss) | Gross Expenses(a) | Net Assets, End of Period (000's) | Portfolio Turnover | ||||||||||||||||||||||||||||
USAA Cornerstone Conservative Fund | |||||||||||||||||||||||||||||||||||
Year Ended May 31, 2020 | (0.33 | ) | $ | 10.96 | 5.45 | % | 0.09 | % | 2.92 | % | 0.10 | % | $ | 205,950 | 8 | % | |||||||||||||||||||
Year Ended May 31, 2019 | (0.32 | ) | $ | 10.72 | 3.84 | % | 0.10 | % | 2.99 | % | 0.12 | % | $ | 193,265 | 22 | % | |||||||||||||||||||
Year Ended May 31, 2018 | (0.31 | ) | $ | 10.64 | 1.79 | % | 0.10 | % | 2.87 | % | 0.12 | % | $ | 196,292 | 5 | % | |||||||||||||||||||
Year Ended May 31, 2017 | (0.31 | ) | $ | 10.76 | 7.93 | % | 0.10 | % | 3.02 | % | 0.15 | % | $ | 174,754 | 7 | %(c) | |||||||||||||||||||
Year Ended May 31, 2016 | (0.39 | ) | $ | 10.27 | (0.05 | )% | 0.10 | % | 3.38 | % | 0.15 | % | $ | 137,705 | 43 | % |
See notes to financial statements.
13
USAA Mutual Funds Trust | Notes to Financial Statements May 31, 2020 |
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 47 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 managed by the Fund's Adviser, Victory Capital Management Inc., an affiliate of the Fund.
On November 6, 2018, United Services Automobile Association ("USAA"), the parent company of USAA Asset Management Company ("AMCO"), the investment adviser to the Fund, and USAA Transfer Agency Company, d/b/a USAA Shareholder Account Services ("SAS"), the transfer agent to the Fund, announced that AMCO and SAS would be acquired by Victory Capital Holdings Inc., a global investment management firm headquartered in Cleveland, Ohio (the "Transaction"). The Transaction closed on July 1, 2019. A special shareholder meeting was held on April 18, 2019, at which shareholders of the Fund approved a new investment advisory agreement between the Trust, on behalf of the Fund, and Victory Capital Management Inc. ("VCM" or "Adviser"). Effective July 1, 2019, VCM replaced AMCO as the investment adviser to the Fund and Victory Capital Transfer Agency Company replaced SAS as the Fund's transfer agent. In addition, effective on that same date, shareholders of the Fund also elected the following two new directors to the Board of the Trust to serve upon the closing of the Transaction: (1) David C. Brown, to serve as an Interested Trustee; and (2) John C. Walters, to serve as an Independent Trustee.
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 generally accepted accounting principles in the United States of America ("GAAP"). The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses for the period. Actual results could differ from those estimates. The Fund follows the specialized accounting and reporting requirements under GAAP that are applicable to investment companies under Accounting Standards Codification Topic 946.
Investment Valuation:
The Fund records investments at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The valuation techniques described below maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value. The inputs used for valuing the Fund's investments are summarized in the three broad levels listed below:
• Level 1 — quoted prices in active markets for identical securities
• Level 2 — other significant observable inputs (including quoted prices for similar securities or interest rates applicable to those securities, etc.)
• Level 3 — significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments)
14
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
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 risk associated with entering into those investments.
The Adviser has established the Pricing and Liquidity Committee (the "Committee"), and subject to Trust's Board of Trustees (the "Board") oversight, the Committee administers and oversees the Fund's valuation policies and procedures, which are approved by the Board.
Portfolio securities listed or traded on securities exchanges, including exchange-traded funds ("ETFs"), 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 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, are not reflective of market value, or a significant event has been recognized in relation to a security or class of securities, the securities are valued in good faith by the Committee in accordance with valuation procedures approved by the Board. These valuations are typically categorized as Level 2 or Level 3 in the fair value hierarchy, based on the observability of inputs used to determine the fair value. The effect of fair value pricing is that securities may not be priced on the basis of quotations from the primary market in which they are traded and the actual price realized from the sale of a security may differ materially from the fair value price. Valuing these securities at fair value is intended to cause the Fund's NAV to be more reliable than it otherwise would be.
A summary of the valuations as of May 31, 2020, based upon the three levels defined above, is included in the table below while the breakdown, by category, of investments is disclosed in the Schedule of Portfolio Investments (amounts in thousands):
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Affiliated Exchange-Traded Funds | $ | 27,467 | $ | — | $ | — | $ | 27,467 | |||||||||||
Affiliated Mutual Funds | 177,999 | — | — | 177,999 | |||||||||||||||
Collateral for Securtites Loaned. | 637 | — | — | 637 | |||||||||||||||
Total | $ | 206,103 | $ | — | $ | — | $ | 206,103 |
For the year ended May 31, 2020, there were no transfers in or out of the Level 3 fair value hierarchy.
Investment Companies:
Exchange-Traded Funds:
The Fund may invest in ETFs. ETFs are a type of index fund, 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 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 they are 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.
15
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
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 on 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 discount. Gains or losses realized on sales of securities are determined by comparing the identified cost of the security lot sold with the net sales proceeds.
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, to earn additional income, net of income retained by Citibank. Borrowers are required to 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 cured the next business day once the shortfall exceeds $100 thousand. Collateral may be cash, U.S. government securities, or other securities as permitted by SEC guidelines. Cash collateral may be invested in high-quality short-term investments, primarily open-end investment companies. Collateral requirements are determined daily based on the value of the Fund's securities on loan as of the end of the prior business day. During the time portfolio securities are on loan, the borrower will pay the Fund any dividends or interest paid on such securities plus any fee negotiated between the parties to the lending agreement. The Fund also earns a return from the collateral. The Fund pays Citibank various fees in connection with the investment of cash collateral and fees based on the investment income received from securities lending activities. Securities lending income (net of these fees) is disclosed on the Statement of Operations. Loans are terminable upon demand and the borrower must return the loaned securities within the lesser of one standard settlement period or five business days. Risks relating to securities-lending transactions include that the borrower may not provide additional collateral when required or return the securities when due, and 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 re-pledged except to satisfy borrower default. Cash collateral is listed in the Fund's Portfolio of Investments and Financial Statements while non-cash collateral is not included.
The following table (amounts in thousands) is a summary of the Fund's securities lending transactions as of May 31, 2020.
Value of Securities on Loan | Non-Cash Collateral | Cash Collateral | |||||||||
$ | 625 | $ | — | $ | 637 |
Federal Income Taxes:
It is the Fund's policy 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.
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., 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 May 31, 2020 |
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 affiliated trust based upon net assets or another appropriate basis.
3. Purchases and Sales:
Cost of purchases and proceeds from sales/maturities of securities (excluding securities maturing less than one year from acquisition) for the year ended May 31, 2020, were as follows for the Fund (amounts in thousands):
Excluding U.S. Government Securities | |||||||
Purchases | Sales | ||||||
$ | 29,349 | $ | 15,711 |
There were no purchases and sales of U.S. government securities during the year ended May 31, 2020.
4. Fees and Transactions with Affiliates and Related Parties:
Investment Advisory and Management Fees:
Effective with the Transaction on July 1, 2019, investment advisory services are provided to the Fund by the Adviser, a New York corporation registered as an investment adviser with the Securities and Exchange Commission ("SEC"). The Adviser is a wholly-owned indirect subsidiary of Victory Capital Holdings, Inc., a publicly traded Delaware corporation, and a wholly-owned direct subsidiary of Victory Capital Operating, LLC. The Adviser does not receive any fees from the Fund for these services.
Prior to the Transaction on July 1, 2019, AMCO provided investment management services to the Fund pursuant to an Advisory Agreement. Under this agreement, AMCO was responsible for managing the business and affairs of the Fund, and for directly managing day-to-day investment of the Fund's assets, subject to the authority of and supervision by the Board. AMCO did not receive any fees from the Fund for these services.
Administration and Servicing Fees:
Effective with the Transaction on July 1, 2019, 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.
Prior to the Transaction on July 1, 2019, AMCO provided certain administration and servicing functions for the Fund. AMCO did not receive any fees from the Fund for these services.
Effective with the Transaction on July 1, 2019, the Fund (as part of the Trust) has entered into an agreement to provide compliance services with the Adviser, 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. Funds in the Trust, Victory Variable Insurance Funds, Victory Portfolios and Victory Portfolios II (collectively, the "Victory Funds Complex") in the aggregate, compensates the Adviser for these services. The amount incurred during the period from July 1, 2019 through May 31, 2020, is reflected on the Statement of Operations as Compliance fees.
Effective with the Transaction on July 1, 2019, 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
17
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
fee for providing these services. The Trust reimburses VCM and Citi for all of their reasonable out-of- pocket expenses incurred in providing these services and certain other expenses specifically allocated to the Funds, under the Fund Administration, Servicing, and Accounting Agreement. The amount incurred during the period from July 1, 2019 through May 31, 2020, is reflected on the Statement of Operations as Sub-Administration fees.
In addition to the services provided under its Administration and Servicing Agreement with the Fund, AMCO also provided certain compliance and legal services for the benefit of the Fund prior to the Transaction on July 1, 2019. The Board approved the reimbursement of a portion of these expenses incurred by AMCO. AMCO did not receive any fees from the Fund for these services.
Transfer Agency Fees:
Effective with the Transaction on July 1, 2019, Victory Capital Transfer Agency, Inc. ("VCTA"), (formerly, USAA Shareholder Account Services ("SAS")), provides transfer agency services to the Fund. Neither VCTA nor SAS received any fees from the Fund for these services.
Effective with the Transaction on July 1, 2019, 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:
Effective with the Transaction on July 1, 2019, Victory Capital Advisers, 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. Effective on or about June 30, 2020, the Distributor's name will change to Victory Capital Services, Inc.
Prior to the Transaction on July 1, 2019, USAA Investment Management Company provided exclusive underwriting and distribution of the Fund's shares on a continuing best-efforts basis.
Other Fees:
Prior to the Transaction on July 1, 2019, State Street Bank and Trust Company served as the Fund's accounting agent and custodian.
Effective July 1, 2019, Citibank, N.A., serves as the Fund's custodian.
K&L Gates LLP provides legal services to the Trust.
Effective with the Transaction on July 1, 2019, the Adviser has entered into an expense limitation agreement with the Fund until at least June 30, 2021. 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. 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. Effective July 1, 2019 through May 31, 2020, the expense limit (excluding voluntary waivers) is 0.10%.
Under this expense limitation agreement, the Fund has agreed to repay fees and expenses that were waived or reimbursed by the Adviser for a period up to three years after the fiscal year in which 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 May 31, 2020, there are no amounts available to be repaid to the Adviser.
The Adviser, may voluntarily waive or reimburse additional fees to assist the Fund in maintaining competitive expense ratios. Voluntary waivers and reimbursements applicable to the Fund are not available to be recouped at a future time. There were no voluntary waivers or reimbursements for the year ended May 31, 2020.
18
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
Prior to the Transaction on July 1, 2019, AMCO agreed, through September 30, 2019, to limit the total annual operating expenses to 0.10% of average daily net assets of the Fund, excluding extraordinary expenses and before reductions of any expenses paid indirectly, and to reimburse all expenses in excess of those amounts. Effective with the Transaction on July 1, 2019, this expense limit is no longer in effect and is not available to be recouped by AMCO. For the period June 1, 2019 through June 30, 2019, amounts reimbursed by the Fund are reflected on the Statement of Operations as Expenses waived/reimbursed by AMCO.
Certain officers and/or interested trustees of the Fund are also officers and/or employees of the Adviser, Administrator, Sub-Administrator, Sub-Fund Accountant, and Legal.
5. Risks:
The Fund may be subject to other risks in addition to these identified risks.
Global economies and financial markets are increasingly interconnected, which increases the possibilities that conditions in one country or region might adversely affect issuers in another country or region. Geopolitical and other risks, including war, terrorism, trade disputes, political or economic dysfunction within some nations, public health crises and related geopolitical events, as well as environmental disasters such as earthquakes, fires, and floods, may add to instability in world economies and markets generally. Changes in trade policies and international trade agreements could affect the economies of many countries in unpredictable ways. Epidemics and/or pandemics, such as the coronavirus (or COVID-19), may result in, among other things, closing borders, disruptions to healthcare service preparation and delivery, quarantines, cancellations, disruptions to supply chains and consumer activity, as well as general concern and uncertainty. The impact may be short-term or may last for extended periods.
The COVID-19 pandemic, which has spread rapidly across the world, has led and will continue to lead for an unknown period of time to disruptions in local, regional, national and global markets and economies. Among other things, the outbreak has resulted in, and until fully resolved is likely to continue to result in, among other things (1) government imposition of various forms of "stay at home" orders and the closing of "non-essential" businesses, resulting in significant disruption to the businesses of many issuers as well as lay-offs of employees; (2) increased requests by issuers of debt instruments for amendments and waivers of agreements to avoid default and increased defaults; (3) volatility and disruption of markets, including greater volatility in pricing and spreads; and (4) rapidly evolving proposals and/or actions by state and federal governments to address problems being experienced by the markets and by businesses and the economy in general.
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.
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).
In managing a Fund that invests in underlying affiliated funds, the Adviser may have conflicts of interest in allocating the Fund's assets among the various underlying affiliated funds. This is because the fees payable by some of the underlying affiliated funds to the Adviser and/or its affiliates are higher than the fees payable by other underlying affiliated funds, and because the Adviser also manages and administers the underlying affiliated funds.
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USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
6. Borrowing and Interfund Lending:
Line of Credit:
Effective with the Transaction on July 1, 2019, the Victory Funds Complex participates in a short-term, demand note "Line of Credit" agreement with Citibank. Under the agreement with Citibank, the Victory Funds Complex could 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 that Fund paying the related commitment fees for that amount. The purpose of the agreement is to meet temporary or emergency cash needs. Citibank receives an annual commitment fee of 0.15% on $300 million for providing the Line of Credit. Each fund in the Victory Funds Complex pays a pro-rata portion of the commitment fees plus any interest (one month LIBOR plus one percent) on amounts borrowed. Effective June 29, 2020, under an amended Line of Credit agreement, Citibank will also receive an annual upfront fee of 0.10% on the $300 million committed line of credit. Each fund in the Victory Funds Complex will pay a pro-rata portion of the upfront fee. Interest charged to the Fund, if any, during the period is reflected on the Statement of Operations under line of credit fees.
Prior to the Transaction on July 1, 2019, the line of credit among the Trust, with respect to its funds, and USAA Capital Corporation ("CAPCO") terminated. For the period from June 1, 2019 to June 30, 2019, the Fund paid CAPCO facility fees of less than $1 thousand.
The Fund had no borrowings under either agreement with Citibank or CAPCO during the year ended May 31, 2020.
Interfund Lending:
Effective with the Transaction on July 1, 2019, the Trust and 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 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. The interfund loan rate is determined, as specified in the Order, by averaging the current repurchase agreement rate and the current bank loan rate. As a Borrower, interest charged to the Fund, if any, during the period is reflected on the Statement of Operations under Interest expense on Interfund lending. As a Lender, interest earned by the Fund, if any, during the period is reflected on the Statement of Operations under Income on Interfund lending.
The Fund did not utilize or participate in the Facility during the period July 1, 2019 through May 31, 2020.
7. Federal Income Tax Information:
The Fund intends to declare daily and distribute any net investment income quarterly. Distributable net realized gains, if any, are declared and paid at least annually.
The amounts of dividends from net investment income and distributions from net realized gains (collectively distributions to shareholders) are determined in accordance with federal income tax regulations, which may differ from GAAP. To the extent these "book/tax" differences are permanent in nature (e.g., net operating loss and distribution reclassification), such amounts are reclassified within the components of net assets based on their federal tax-basis treatment; temporary differences (e.g., wash sales) do not require reclassification. To the extent dividends and distributions exceed net investment income and net realized gains for tax purposes, they are reported as distributions of capital. Net investment losses incurred by the Fund may be reclassified as an offset to capital on the accompanying Statement of Assets and Liabilities.
As of May 31, 2020, on the Statement of Assets and Liabilities, there were no permanent book-to-tax difference reclassification adjustments.
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USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
The tax character of distributions paid during the tax years ended as noted below, were as follows (total distributions paid may differ from the Statement of Changes in Net Assets because, for tax purposes, dividends are recognized when actually paid) (amounts in thousands):
Year Ended May 31, 2020 | Year Ended May 31, 2019 | ||||||||||||||
Distributions paid from | Distributions paid from | ||||||||||||||
Ordinary Income | Total Distributions Paid | Ordinary Income | Total Distributions Paid | ||||||||||||
$ | 6,280 | $ | 6,280 | $ | 5,667 | $ | 5,667 |
As of the tax year ended May 31, 2020, the components of accumulated earnings (deficit) on a tax basis were as follows (amounts in thousands):
Undistributed Ordinary Income | Undistributed Long-Term Capital Gains | Unrealized Appreciation (Depreciation)* | Total Accumulated Earnings (Deficit) | ||||||||||||
$ | 849 | $ | 1,350 | $ | 4,609 | $ | 6,808 |
* The difference between the book-basis and tax-basis of unrealized appreciation/depreciation is attributable to the tax deferral of losses on wash sales.
At May 31, 2020, the Fund utilized $2,145 capital loss carryforwards for federal income tax purposes.
As of May 31, 2020, 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) | ||||||||||||
$ | 201,494 | $ | 9,374 | $ | (4,765 | ) | $ | 4,609 |
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USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
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 or an investment company managed by VCM. The Fund does not invest in affiliated underlying funds for the purpose of exercising management or control. These underlying funds are noted as affiliated in the Fund's Schedule of Portfolio Investments. The affiliated underlying funds' annual or semiannual reports may be viewed at usaa.com. Transactions in affiliated securities during the year ended May 31, 2020, were as follows (amount in thousands):
Fair Value 5/31/2019 | Purchases at Cost | Proceeds from Sales | Realized Gain (Loss) | Capital Gain Distribution | Net Change in Unrealized Appreciation/ Depreciation | Fair Value 5/31/20 | Dividend Income | ||||||||||||||||||||||||||||
Affiliated Holdings | |||||||||||||||||||||||||||||||||||
USAA 500 Index Fund Reward Shares | $ | 5,716 | $ | 329 | $ | — | $ | — | $ | 202 | $ | 478 | $ | 6,523 | $ | 127 | |||||||||||||||||||
USAA Aggressive Growth Fund Institutional Shares | 1,160 | 213 | — | — | 206 | 33 | 1,406 | 8 | |||||||||||||||||||||||||||
USAA Capital Growth Fund Institutional Shares | 1,834 | 176 | — | — | 145 | (152 | ) | 1,858 | 31 | ||||||||||||||||||||||||||
USAA Emerging Markets Fund Institutional Shares | 2,497 | 12 | — | — | — | (141 | ) | 2,368 | 11 | ||||||||||||||||||||||||||
USAA Growth Fund Institutional Shares | 1,633 | 382 | — | — | 358 | (52 | ) | 1,963 | 23 | ||||||||||||||||||||||||||
USAA Government Securities Fund Institutional Shares | 39,258 | 5,564 | (4,908 | ) | (2 | ) | — | 1,653 | 41,565 | 1,040 | |||||||||||||||||||||||||
USAA High Income Fund Institutional Shares | 5,704 | 1,338 | — | — | — | (645 | ) | 6,397 | 358 | ||||||||||||||||||||||||||
USAA Income Fund Institutional Shares | 57,887 | 4,954 | (7,332 | ) | (162 | ) | 148 | 1,540 | 56,887 | 1,931 | |||||||||||||||||||||||||
USAA Income Stock Fund Institutional Shares | 2,572 | 1,093 | — | — | 444 | (488 | ) | 3,177 | 63 | ||||||||||||||||||||||||||
USAA Intermediate-Term Bond Fund Institutional Shares | 31,183 | 4,803 | (3,268 | ) | (215 | ) | 276 | 537 | 33,040 | 1,316 | |||||||||||||||||||||||||
USAA International Fund Institutional Shares | 6,841 | 1,980 | — | — | 1,377 | (1,962 | ) | 6,859 | 215 |
22
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
Fair Value 5/31/2019 | Purchases at Cost | Proceeds from Sales | Realized Gain (Loss) | Capital Gain Distribution | Net Change in Unrealized Appreciation/ Depreciation | Fair Value 5/31/20 | Dividend Income | ||||||||||||||||||||||||||||
USAA Precious Metals and Minerals Fund Institutional Shares | $ | 706 | $ | 195 | $ | — | $ | — | $ | — | $ | 484 | $ | 1,385 | $ | — | |||||||||||||||||||
USAA Short-Term Bond Fund Institutional Shares | 5,582 | 1,064 | (203 | ) | (7 | ) | — | (54 | ) | 6,382 | 171 | ||||||||||||||||||||||||
USAA Small Cap Stock Fund Institutional Shares | 1,949 | 596 | — | — | 198 | (160 | ) | 2,385 | 5 | ||||||||||||||||||||||||||
USAA Target Managed Allocation Fund | 3,838 | 204 | — | — | 14 | 32 | 4,074 | 190 | |||||||||||||||||||||||||||
USAA Value Fund Institutional Shares | 1,835 | 476 | — | — | 444 | (581 | ) | 1,730 | 33 | ||||||||||||||||||||||||||
VictoryShares USAA Core Intermediate-Term Bond ETF | 12,842 | 4,159 | — | — | — | 708 | 17,709 | 411 | |||||||||||||||||||||||||||
VictoryShares USAA Core Short-Term Bond ETF | 227 | — | — | — | — | 2 | 229 | 6 | |||||||||||||||||||||||||||
VictoryShares USAA MSCI Emerging Markets Value Momentum ETF | 803 | 203 | — | — | — | (127 | ) | 879 | 29 | ||||||||||||||||||||||||||
VictoryShares USAA MSCI International Value Momentum ETF | 2,410 | 603 | — | — | — | (319 | ) | 2,694 | 112 | ||||||||||||||||||||||||||
VictoryShares USAA MSCI USA Small Cap Value Momentum ETF | 620 | 401 | — | — | — | 28 | 1,049 | 14 | |||||||||||||||||||||||||||
VictoryShares USAA MSCI USA Value Momentum ETF | 4,553 | 604 | — | — | — | (250 | ) | 4,907 | 106 | ||||||||||||||||||||||||||
Total | $ | 191,650 | $ | 29,349 | $ | (15,711 | ) | $ | (386 | ) | $ | 3,812 | $ | 564 | $ | 205,466 | $ | 6,200 |
9. 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 1940 Act. 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
23
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
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 Fund's investment adviser, Victory Capital, as the administrator of the LRMP. At an in-person meeting held on February 26, 2020, Victory Capital provided an oral and written report to the Trustees on the operation and effectiveness of the LRMP during the previous year.
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.
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 reasonably expected to be converted to cash in current market conditions in three business days or less without significantly changing the market value of the investment. Therefore, the Fund has not adopted a Highly Liquid Investment Minimum. The Fund's investments were below the limitation on illiquid investments during the review period. Additionally, Victory Capital indicated that no events occurred that would require the filing of Form N-LIQUID and recommended no material changes to the LRMP.
24
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of USAA Cornerstone Conservative Fund:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of USAA Cornerstone Conservative Fund (the "Fund") (one of the funds constituting USAA Mutual Funds Trust (the "Trust")), including the schedule of portfolio investments, as of May 31, 2020, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the funds constituting USAA Mutual Funds Trust) at May 31, 2020, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Trust's management. Our responsibility is to express an opinion on the Fund's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust's internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of May 31, 2020, by correspondence with the custodian. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Victory Capital investment companies since 1995.
San Antonio, Texas
July 27, 2020
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USAA Mutual Funds Trust | Supplemental Information May 31, 2020 |
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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) 539-3863. The information is also included in the Fund's Statement of Additional Information, which is available on the SEC's website at www.sec.gov.
Information relating to how the Fund voted proxies relating to portfolio securities held during the most recent 12 months ended June 30 is available on the SEC's website at www.sec.gov.
Availability of Schedules of Portfolio Investments:
The Trust files a complete list of Schedules of Portfolio Investments with the SEC for the first and third quarter of each fiscal year on Form N-PORT. Forms N-PORT are available on the SEC's website at www.sec.gov.
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USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
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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 10 Trustees, eight of whom are not "interested persons" of the Trust within the meaning of that term under the 1940 Act ("Independent Trustees") and two 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 ages, position with the Trust, commencement of service, 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 47 portfolios in the Trust. Each Trustee's address is 15935 La Cantera Pkwy, Building Two, San Antonio, TX, 78256. Pursuant to a policy adopted by the Board, the term of office for each Trustee shall be until the Independent Trustee reaches age 75 or an Interested Trustee reaches age 75. The Board may change or grant exceptions from this policy at any time without shareholder approval. A Trustee may resign or be removed by a vote of the other Trustees or the holders of a majority of the outstanding shares of the Trust at any time. Vacancies on the Board can be filled by the action of a majority of the Trustees, provided that after filling such vacancy at least two-thirds of the Trustees have been elected by the shareholders.
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Independent Trustees. | |||||||||||||||||||
Jefferson C. Boyce, Born September 1957 | Lead Independent Trustee, and Vice Chairman | 2013 | Senior Managing Director, New York Life Investments, LLC (1992-2012) | Westhab, Inc. | |||||||||||||||
John C. Walters, Born February 1962 | Trustee | 2019 | Retired. Mr. Walters brings significant Board experience including active involvement with the board of a Fortune 500 company, and a proven record of leading large, complex financial organizations. He has a demonstrated record of success in distribution, manufacturing, investment brokerage, and investment management in both the retail and institutional investment businesses. He has substantial experience in the investment management business with a demonstrated ability to develop and drive strategy while managing operation, financial, and investment risk. | Guardian Variable Products Trust (16 series), Lead Independent Director; Amerilife Holdings LLC, Director; Stadion Money Management; Director; University of North Carolina (Chapel Hill), Member Board of Governors. |
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Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Robert L. Mason, Ph.D., Born July 1946 | Trustee | 1997 | Adjunct Professor in the Department of Management Science and Statistics in the College of Business at the University of Texas at San Antonio (since 2001); Institute Analyst, Southwest Research Institute (March 2002-January 2016) | None | |||||||||||||||
Dawn M. Hawley, Born February 1954 | Trustee | 2014 | Manager of Finance, Menil Foundation, Inc. (May 2007-June 2011), which is a private foundation that oversees the assemblage of sculptures, prints, drawings, photographs, and rare books. Director of Financial Planning and Analysis and Chief Financial Officer, AIM Management Group, Inc. (October 1987-January 2006) | None | |||||||||||||||
Paul L. McNamara, Born July 1948 | Trustee | 2012 | Director, Cantor Opportunistic Alternatives Fund, LLC (March 2010-February 2014) , which is a closed-end fund of funds by Cantor Fitzgerald Investment Advisors, LLC | None |
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Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Richard Y. Newton III, Born January 1956 | Trustee | 2017 | Director, Elta North America (01/18-present), 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 (December 2015-present)); Executive Director, The Union League Club of New York (June 2014-November 2015): Executive Vice President, Air Force Association (August 2012-May 2014); Lieutenant General, United States Air Force (January 2008-June 2012) | None | |||||||||||||||
Barbara B. Ostdiek, Ph.D., Born March 1964 | Trustee | 2008 | Senior Associate Dean of Degree Programs at Jesse H. Jones Graduate School of Business at Rice University (since 2013); Associate Professor of Finance at Jessie H. Jones Graduate School of Business at Rice University (since 2001) | None | |||||||||||||||
Michael F. Reimherr, Born August 1945 | Trustee | 2000 | President of Reimherr Business Consulting (May 1995-December 2017); St. Mary's University Investment Committee overseeing University Endowment (since 2014) | None |
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Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Interested Trustees. | |||||||||||||||||||
David C. Brown, ** Born May 1972 | Trustee | 2019 | Chairman and Chief Executive Officer (since 2013), Co-Chief Executive Officer (2011-2013), Victory Capital Management Inc.; Chairman and Chief Executive Officer, Victory Capital Holdings, Inc. (since 2013). Mr. Brown brings to the Board extensive business, finance and leadership skills gained and developed through years of experience in the financial services industry, including his tenure overseeing the strategic direction as CEO of Victory Capital. These skills, combined with Mr. Brown's extensive knowledge of the financial services industry and demonstrated success in the development and distribution of investment strategies and products, enable him to provide valuable insights to the Board and strategic direction for the Funds | Trustee, Victory Portfolios (42 series), Victory Portfolios II (26 series), Victory Variable Insurance Funds (9 series) |
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(Unaudited)
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Daniel S. McNamara, ** Born June 1966 | Trustee and Chair of the Board of Trustees | 2012 | Trustee, President, and Vice Chairman of USAA ETF Trust (June 2017-June 2019); President of Financial Advice & Solutions Group (FASG), USAA (since 2013); Director, IMCO (September 2009-April 2014); President, AMCO (August, 2011-April 2013); Senior Vice President of USAA Financial Planning Services Insurance Agency, Inc. (FPS) (since 2011); Director of USAA Investment Management Company (IMCO) (since 2009); Chairman of Board of IMCO (since 2013); Director of USAA Asset Management Company (AMCO), (August 2011-June 2019); President and Director of USAA Shareholder Account Services (SAS)(October 2009-June 2019); Director and Vice Chairman of FPS (since 2013); President and Director of USAA Investment Corporation (ICORP) (since 2010); Chairman of Board of ICORP (since 2013); Director of USAA Financial Advisors, Inc. (FAI) (since 2013); Chairman of Board of FAI (since 2015). Mr. McNamara brings to the Board extensive experience in the financial services industry, including experience as an officer of the Trust. | None |
** Mr. McNamara and Mr. Brown are "Interested Persons" by reason of their relationships with the Adviser.
The Statement of Additional Information includes additional information about the Trustees of the Trust and is available, without charge, on the SEC's website at www.sec.gov and/or by calling (800)-539-3863.
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Officers:
The officers of the Trust, their ages, 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, Building Two, 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 with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | ||||||||||||
Interested Officers. | |||||||||||||||
Christopher K. Dyer, Born February 1962 | President | 2019 | Director of Fund Administration, Victory Capital (2004-present) | ||||||||||||
Scott A Stahorsky, Born July 1969 | Vice President | 2019 | Manager, Fund Administration, Victory Capital (since 2015); Senior Analyst, Fund Administration, Victory Capital (prior to 2015) | ||||||||||||
James K. De Vries, Born April 1969 | Treasurer, Principal Financial Officer | 2018 | Executive Director, Victory Capital Management Inc. (since 2019); Treasurer, USAA ETF Trust (September 2018-June 2019); Executive Director, Investment and Financial Administration, USAA (April 2012-June 2019); Assistant Treasurer, USAA ETF Trust (June 2017-September 2018); Assistant Treasurer, USAA Mutual Funds Trust (December 2013-February 2018) | ||||||||||||
Allan Shaer, Born March 1965 | Assistant Treasurer | 2019 | Senior Vice President, Financial Administration, Citi Fund Services Ohio, Inc. (since 2016); Vice President, Mutual Fund Administration, JP Morgan Chase (2011-2016) | ||||||||||||
Carol D. Trevino, Born October 1965 | Assistant Treasurer | 2018 | Director, Accounting and Finance, Victory Capital Management Inc. (since 2019); Accounting/Financial Director, USAA (December 2013-June 2019); Assistant Treasurer, USAA ETF Trust (September 2018-June 2019). | ||||||||||||
Erin G. Wagner, Born February 1974 | Secretary | 2019 | Deputy General Counsel, the Adviser (since 2013) | ||||||||||||
Charles Booth, Born April 1960 | Anti-Money Laundering Compliance Officer and Identity Theft Officer | 2019 | Director, Regulatory Administration and CCO Support Services, Citi Fund Services Ohio, Inc. (2007-present) | ||||||||||||
Amy Campos, Born July 1976 | Chief Compliance Officer | 2019 | Chief Compliance Officer, USAA Mutual Funds Trust (since 2019); Executive Director, Deputy Chief Compliance Officer, USAA Mutual Funds Trust and USAA ETF Trust (July 2017-June 2019); Compliance Director, USAA Mutual Funds Trust (2014-July 2017) |
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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 December 1, 2019 through May 31, 2020.
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. If these transactional costs were included, your costs would have been higher.
Beginning Account Value 12/1/19 | Actual Ending Account Value 5/31/20 | Hypothetical Ending Account Value 5/31/20 | Actual Expenses Paid During Period 12/1/19- 5/31/20* | Hypothetical Expenses Paid During Period 12/1/19- 5/31/20* | Annualized Expense Ratio During Period 12/1/19- 5/31/20 | ||||||||||||||||||||||
$ | 1,000.00 | $ | 1,003.60 | $ | 1,024.55 | $ | 0.45 | $ | 0.46 | 0.09 | % |
* Expenses are equal to the average account value multiplied by the Fund's annualized expense ratio multiplied by 183/366 (the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year).
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Additional Federal Income Tax Information
The following federal tax information related to the Fund's fiscal year ended May 31, 2020, 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 2021.
With respect to distributions paid, the Fund designates the following amounts (or, if subsequently determined to be different, the maximum amount allowable) for the fiscal year ended May 31, 2020 (amounts in thousands):
Dividend Received Deduction (corporate shareholders)* | Qualified Dividend Income (non-corporate shareholders)* | Foreign Taxes Paid(a) | |||||||||||||
6.10 | % | 10.64 | % | $ | 41 |
* Presented as a percentage of net investment income and excludes short-term capital gain distributions paid, if any. All or a portion of these amounts may be exempt from taxation at the state level.
(a) The Fund has elected under Section 853 of the Internal Revenue Code to pass through the credit for taxes paid in foreign countries.
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 |
97446-0720
MAY 31, 2020
Annual Report
USAA Cornerstone Equity Fund
Beginning January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Fund's shareholder reports like this one will no longer be sent by mail, unless you specifically request paper copies of the reports from the Fund or from your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on VictoryFunds.com, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund or your financial intermediary electronically by notifying your financial intermediary directly, or if you are a direct investor, by calling (800) 235-8396 or logging on to usaa.com. Effective on or about September 8, 2020, a shareholder who has an account directly with the Fund will need to submit their request via email to TA.Processing@FISGlobal.com.
You may elect to receive all future reports in paper free of charge. You can inform the Fund or your financial intermediary that you wish to continue receiving paper copies of your shareholder reports by notifying your financial intermediary directly, or if you are a direct investor, by calling (800) 235-8396 or logging on to usaa.com. Effective on or about September 8, 2020, a shareholder who has an account directly with the Fund will need to submit their request via email to TA.Processing@FISGlobal.com. Your election to receive reports in paper will apply to all funds held with the USAA Mutual Funds or your financial intermediary.
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 logo 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.
TABLE OF CONTENTS
Shareholder Letter (Unaudited) | 2 | ||||||
Managers' Commentary (Unaudited) | 4 | ||||||
Investment Overview (Unaudited) | 6 | ||||||
Investment Objective & Portfolio Holdings (Unaudited) | 7 | ||||||
Financial Statements | |||||||
Schedule of Portfolio Investments | 8 | ||||||
Statement of Assets and Liabilities | 9 | ||||||
Statement of Operations | 10 | ||||||
Statements of Changes in Net Assets | 11 | ||||||
Financial Highlights | 12 | ||||||
Notes to Financial Statements | 14 | ||||||
Report of Independent Registered Public Accounting Firm | 24 | ||||||
Supplemental Information (Unaudited) | 25 | ||||||
Proxy Voting and Portfolio Holdings Information | 25 | ||||||
Trustees' and Officers' Information | 26 | ||||||
Expense Examples | 32 | ||||||
Additional Federal Income Tax Information | 33 | ||||||
Privacy Policy (inside back cover) |
This report is for the information of the shareholders and others who have received a copy of the currently effective prospectus of the Fund, managed by Victory Capital Management Inc. It may be used as sales literature only when preceded or accompanied by a current prospectus, which provides further details about the Fund.
IRA DISTRIBUTION WITHHOLDING DISCLOSURE
We generally must withhold federal income tax at a rate of 10% of the taxable portion of your distribution and, if you live in a state that requires state income tax withholding, at your state's tax rate. However, you may elect not to have withholding apply or to have income tax withheld at a higher rate. Any withholding election that you make will apply to any subsequent distribution unless and until you change or revoke the election. If you wish to make a withholding election, or change or revoke a prior withholding election, call (800) 235-8396.
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.
USAA Mutual Funds Trust
1
(Unaudited)
Dear Shareholder,
The previous decade ended with the longest-ever bull market in U.S. equities still intact, even as investors wrestled with issues like softening global economic data, Brexit, and U.S.-China trade relations. In retrospect, those worries seem so pedestrian given what we would soon experience.
A new and unexpected threat—a global pandemic, the novel coronavirus ("COVID-19")—first emerged in Asia and then began spreading globally and throughout the United States during the first quarter of 2020. This unprecedented and unanticipated event not only rendered all existing economic and earnings forecasts moot, but it also roiled stock and bond markets everywhere. Efforts to slow the spread of the virus, though successful to date, also brought the economy to a halt. The historic bull market in stocks ended virtually overnight.
After an initial severe sell-off in March, equity markets recovered sharply. As our annual reporting period drew to a close on May 31, 2020, many of the broad market indexes had recovered and volatility had returned to more palatable levels. In fact, despite all the chaos, the S&P 500® Index, one of the most popular measures of large U.S. stocks, finished the fiscal year (May 31, 2020) at approximately 3,044, which was up more than 10.6% from one year ago.
The market turmoil of early 2020 was not limited to equities. Fixed income volatility spiked when liquidity evaporated in late March as investors struggled to understand the ramifications of stay-at-home orders. Fortunately, the U.S. Federal Reserve (the "Fed") (as well as other global central banks) leapt into action—cutting interest rates, (re)starting quantitative easing and, in the case of the Fed, launching an array of programs to stabilize markets.
The new lending facilities and programs had their intended effect of improving liquidity and trading. Credit spreads across corporate, high-yield, structured, and municipal markets were coaxed down from their highs. In addition, Congress came through with substantial fiscal stimulus that also was applauded by investors and markets. Although fixed income markets regained their footing, the yield on 10-Year Treasurys, a benchmark for low-risk investments, declined steadily during our fiscal year—from 2.14% at the beginning of our reporting period to approximately 0.65% as of May 31, 2020. This suggests that investors remain a little wary.
While the past year has been unprecedented for all of us, both personally and professionally, our portfolio managers continue to scrutinize the financial markets, economic conditions, and the trajectory of the pandemic, which will likely be the guiding factor on Fed policy and the markets.
No matter what happens in the near term, we believe that the massive monetary and fiscal policies introduced earlier this year will have longer-term ramifications. Despite this uncertainty, it's important to remain focused on your long-term investment goals and avoid making emotional decisions. If you invest with us directly, our Member Service Representatives are available to help. Call us at (800) 539-3863 or visit our website at vcm.com.
2
From all of us here at USAA Mutual Funds, thank you for letting us help you work toward your investment goals.
Christopher K. Dyer, CFA
President,
USAA Mutual Funds
3
USAA Mutual Funds Trust
USAA Cornerstone Equity Fund
Managers' Commentary
(Unaudited)
Victory Solutions
Mannik S. Dhillon, CFA, CAIA
Wasif A. Latif
Lance Humphrey, CFA
• What were the market conditions during the reporting period?
Global financial market performance varied widely over the period driven by uncertainty related to the duration and economic impact of the novel coronavirus ("COVID-19") pandemic. This generally led to a risk-off environment as investors flocked to safe haven assets such as U.S. Treasurys and gold. Global equities turned mostly lower with the exception of a small breadth of mega-cap securities well-positioned for an extended economic slowdown and the new stay-at-home paradigm. The final month and a half of the reporting period saw a rebound in risky assets as economies began a phased reopening.
Within the United States, the S&P 500® Index dropped nearly 34% from its 2020 high, before beginning to recoup losses with the support of comprehensive monetary and fiscal stimulus, along with encouraging results in COVID-19 vaccine trials. Over the reporting period, the S&P 500® Index returned 12.84%, with large-cap growth stocks leading the way, up to a return of 26.25% as represented by the Russell 1000 Growth Index. Value stocks and small-cap stocks underperformed growth stocks over the period, but more recently have seen a pickup in momentum. U.S. large-cap value stocks were down to a return of -1.64% over the reporting period as gauged by the Russell 1000 Value Index, while U.S. small-cap stocks, were down to a return of -3.44% as represented by the Russell 2000 Index.
Developed market international and emerging market equities followed a path similar to U.S. equities. Markets led investors on a rollercoaster ride that saw both the MSCI EAFE Index and MSCI Emerging Markets Index drop approximately 34% from their highs in the year. The market drawdown hit bottom on March 23rd and then started a steady ascent, erasing most of the losses as European Central Bank quantitative easing and talks of a 750-billion euros fiscal stimulus helped bolster momentum in the market's recovery. Over the reporting period, developed international equities, represented by the MSCI EAFE Index, were down to a return of -2.81%, while the MSCI Emerging Markets Index returned -4.39%.
Within fixed-income, interest rate-sensitive treasury bonds outperformed credit-sensitive investment-grade and high-yield corporate bonds. Investor demand for U.S. Treasurys drove yields to new lows, while credit spreads reached unprecedented levels as liquidity issues began to seize up parts of credit and municipal markets. The U.S. Federal Reserve (the "Fed") intervened, providing liquidity by expanding open market purchases to include municipal and corporate bonds. Bloomberg Barclays US Treasury 20+ Year Index returned 27.46% over the reporting period, while the Bloomberg Barclays U.S. Aggregate Bond
4
USAA Mutual Funds Trust
USAA Cornerstone Equity Fund (continued)
Managers' Commentary (continued)
Index returned 9.42%. High-yield bonds finished the period slightly positive, up 1.32% as gauged by the Bloomberg Barclays US Corporate High Yield Index.
• How did the USAA Cornerstone Equity Fund (the "Fund") perform during the reporting period?
For the reporting period ended May 31, 2020, the Fund had a total return of 0.14%. This compares to a return of 5.43% for the MSCI All-Country World Index and 4.40% for the Cornerstone Equity Composite Index.
• What strategies did you employ during the reporting period?
The equity portfolio's overall tilt toward value stocks, especially within U.S. large-cap stocks, was a key factor in underperformance relative to the benchmark over the reporting period. An overweight to developed international equities, along with negative stock selection effects within developed international and emerging markets, weighed on relative performance.
Commodities as an asset class were down over the period with the Bloomberg Commodity Index returning -17.06%; however, gold outperformed. Gold's overweight within the portfolio contributed positively to relative performance over the period. The portfolio's underweight to REITs also contributed positively to performance relative to the benchmark.
Thank you for allowing us to assist you with your investment needs.
5
USAA Mutual Funds Trust
USAA Cornerstone Equity Fund
Investment Overview
(Unaudited)
Average Annual Total Return
Year Ended May 31, 2020
INCEPTION DATE | 6/8/12 | ||||||||||||||
Net Asset Value | MSCI All-Country World Index1 | Cornerstone Equity Composite Index2 | |||||||||||||
One Year | 0.14 | % | 5.43 | % | 4.40 | % | |||||||||
Five Year | 3.49 | % | 5.28 | % | 5.42 | % | |||||||||
Since Inception | 6.85 | % | NA | NA |
Past performance is not indicative of future results. 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 for various periods since inception. Without such fee waivers, the total returns would have been lower.
USAA Cornerstone Equity Fund — Growth of $10,000
* The performance of the MSCI All-Country World Index and Cornerstone Equity Composite Index is calculated from the end of the month, May 31, 2012, while the inception date of the Cornerstone Equity Fund is June 8, 2012. There might be a slight variation of performance numbers because of the difference.
1 The 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.
2 The 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 Barclays U.S. Treasury — Bills (1-3M) (2%).
The graph reflects investment of growth of a hypothetical $10,000 investment in the Fund. Past performance is no guarantee of future results.
The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
6
USAA Mutual Funds Trust USAA Cornerstone Equity Fund | May 31, 2020 |
(Unaudited)
Investment Objective & Portfolio Holdings:
The Fund's investment objective is to seek capital appreciation over the long term.
Top 10 Holdings*
May 31, 2020
(% of Net Assets)
VictoryShares USAA MSCI USA Value Momentum ETF | 15.4 | % | |||||
USAA International Fund Institutional Shares | 14.6 | % | |||||
USAA 500 Index Fund Reward Shares | 13.7 | % | |||||
VictoryShares USAA MSCI International Value Momentum ETF | 11.6 | % | |||||
USAA Target Managed Allocation Fund | 6.7 | % | |||||
VictoryShares USAA MSCI Emerging Markets Value Momentum ETF | 5.0 | % | |||||
USAA Growth Fund Institutional Shares | 5.0 | % | |||||
USAA Income Stock Fund Institutional Shares | 4.4 | % | |||||
USAA Emerging Markets Fund Institutional Shares | 4.3 | % | |||||
USAA Value Fund Institutional Shares | 4.3 | % |
* Does not include money market instruments and short-term investments purchased with cash collateral from securities loaned.
Refer to the Schedule of Portfolio Investments for a complete list of securities.
7
USAA Mutual Funds Trust USAA Cornerstone Equity Fund | Schedule of Portfolio Investments May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Affiliated Exchange-Traded Funds (35.6%) | |||||||||||
VictoryShares USAA MSCI Emerging Markets Value Momentum ETF | 261,099 | $ | 9,618 | ||||||||
VictoryShares USAA MSCI International Value Momentum ETF | 589,400 | 22,189 | |||||||||
VictoryShares USAA MSCI USA Small Cap Value Momentum ETF | 153,185 | 6,791 | |||||||||
VictoryShares USAA MSCI USA Value Momentum ETF | 651,057 | 29,369 | |||||||||
Total Affiliated Exchange-Traded Funds (Cost $83,430) | 67,967 | ||||||||||
Affiliated Mutual Funds (64.3%) | |||||||||||
USAA 500 Index Fund Reward Shares | 624,016 | 26,240 | |||||||||
USAA Aggressive Growth Fund Institutional Shares | 192,348 | 8,071 | |||||||||
USAA Capital Growth Fund Institutional Shares | 551,053 | 5,444 | |||||||||
USAA Emerging Markets Fund Institutional Shares | 510,068 | 8,232 | |||||||||
USAA Growth Fund Institutional Shares | 340,850 | 9,479 | |||||||||
USAA Income Stock Fund Institutional Shares | 561,855 | 8,495 | |||||||||
USAA International Fund Institutional Shares | 1,301,027 | 27,920 | |||||||||
USAA Precious Metals and Minerals Fund Institutional Shares (a) | 67,388 | 1,332 | |||||||||
USAA Small Cap Stock Fund Institutional Shares | 476,898 | 6,667 | |||||||||
USAA Target Managed Allocation Fund | 1,249,016 | 12,716 | |||||||||
USAA Value Fund Institutional Shares | 623,809 | 8,228 | |||||||||
Total Affiliated Mutual Funds (Cost $120,863) | 122,824 | ||||||||||
Total Investments (Cost $204,293) — 99.9% | 190,791 | ||||||||||
Other assets in excess of liabilities — 0.1% | 222 | ||||||||||
NET ASSETS — 100.00% | $ | 191,013 |
At May 31, 2020, the Fund's investments in foreign securities were 35.6% of net assets.
(a) Non-income producing security.
ETF — Exchange-Traded Fund
See notes to financial statements.
8
USAA Mutual Funds Trust | Statement of Assets and Liabilities May 31, 2020 |
(Amounts in Thousands, Except Per Share Amounts)
USAA Cornerstone Equity Fund | |||||||
Assets: | |||||||
Affiliated investments, at value (Cost $204,293) | $ | 190,791 | |||||
Cash | 117 | ||||||
Receivables: | |||||||
Interest | — | (a) | |||||
Capital shares issued | 63 | ||||||
Investments sold | 384 | ||||||
Prepaid expenses | 13 | ||||||
Total assets | 191,368 | ||||||
Liabilities: | |||||||
Payables: | |||||||
Capital shares redeemed | 312 | ||||||
Payable to Adviser | 5 | ||||||
Accrued expenses and other payables: | |||||||
Custodian fees | 3 | ||||||
Transfer agent fees | — | (a) | |||||
Compliance fees | — | (a) | |||||
Other accrued expenses | 35 | ||||||
Total liabilities | 355 | ||||||
Net Assets: | |||||||
Capital | 190,671 | ||||||
Total distributable earnings/(loss) | 342 | ||||||
Net assets | $ | 191,013 | |||||
Shares (unlimited number of shares authorized with no par value): | 14,385 | ||||||
Net asset value, offering and redemption price per share: (b) | $ | 13.28 |
(a) Rounds to less than $1 thousand.
(b) Per share amount may not recalculate due to rounding of net assets and/or shares outstanding.
See notes to financial statements.
9
USAA Mutual Funds Trust | Statement of Operations For the Year Ended May 31, 2020 |
(Amounts in Thousands)
USAA Cornerstone Equity Fund | |||||||
Investment Income: | |||||||
Income distribution from affiliated funds | $ | 5,092 | |||||
Interest income | 11 | ||||||
Securities lending (net of fees) | 3 | ||||||
Total income | 5,106 | ||||||
Expenses: | |||||||
Sub-Administration fees | 15 | ||||||
Custodian fees | 12 | ||||||
Printing Fees | 39 | ||||||
Trustees' fees | 49 | ||||||
Compliance fees | 1 | ||||||
Legal and audit fees | 60 | ||||||
State registration and filing fees | 14 | ||||||
Other expenses | 16 | ||||||
Total expenses | 206 | ||||||
Expenses waived/reimbursed by AMCO | (6 | ) | |||||
Net expenses | 200 | ||||||
Net Investment Income (Loss) | 4,906 | ||||||
Realized/Unrealized Gains (Losses) from Investments: | |||||||
Net realized gains (losses) from sales of affiliated funds | (1,268 | ) | |||||
Distributions of realized gains from affiliated funds | 15,109 | ||||||
Net change in unrealized appreciation/depreciation on affiliated funds | (18,537 | ) | |||||
Net realized/unrealized gains (losses) on investments | (4,696 | ) | |||||
Change in net assets resulting from operations | $ | 210 |
See notes to financial statements.
10
USAA Mutual Funds Trust | Statements of Changes in Net Assets |
(Amounts in Thousands)
USAA Cornerstone Equity Fund | |||||||||||
Year Ended May 31, 2020 | Year Ended May 31, 2019 | ||||||||||
From Investments: | |||||||||||
Operations: | |||||||||||
Net investment income (loss) | $ | 4,906 | $ | 3,596 | |||||||
Net realized gains (losses) from investments | 13,841 | 5,672 | |||||||||
Net change in unrealized appreciation/(depreciation) on investments | (18,537 | ) | (18,237 | ) | |||||||
Change in net assets resulting from operations | 210 | (8,969 | ) | ||||||||
Change in net assets resulting from distributions to shareholders | (10,384 | ) | (11,645 | ) | |||||||
Change in net assets resulting from capital transactions | (1,101 | ) | 22,715 | ||||||||
Capital Contribution from USAA Transfer Agency Company | — | 1 | |||||||||
Change in net assets | (11,275 | ) | 2,102 | ||||||||
Net Assets: | |||||||||||
Beginning of period | 202,288 | 200,186 | |||||||||
End of period | $ | 191,013 | $ | 202,288 | |||||||
Capital Transactions: | |||||||||||
Proceeds from shares issued | $ | 39,178 | $ | 54,835 | |||||||
Distributions reinvested | 10,364 | 11,622 | |||||||||
Cost of shares redeemed | (50,643 | ) | (43,742 | ) | |||||||
Change in net assets resulting from capital transactions | $ | (1,101 | ) | $ | 22,715 | ||||||
Share Transactions: | |||||||||||
Issued | 2,815 | 3,727 | |||||||||
Reinvested | 684 | 873 | |||||||||
Redeemed | (3,666 | ) | (2,970 | ) | |||||||
Change in Shares | (167 | ) | 1,630 |
See notes to financial statements.
11
USAA Mutual Funds Trust | Financial Highlights |
For a Share Outstanding Throughout Each Period
Investment Activities | Distributions to Shareholders From | ||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss) | Net Realized and Unrealized Gains (Losses) on Investments | Total from Investment Activities | Net Investment Income | Net Realized Gains from Investments | Total Distributions | |||||||||||||||||||||||||
USAA Cornerstone Equity Fund | |||||||||||||||||||||||||||||||
Year Ended May 31, 2020 | $ | 13.90 | 0.34 | (b) | (0.24 | ) | 0.10 | (0.32 | ) | (0.40 | ) | (0.72 | ) | ||||||||||||||||||
Year Ended May 31, 2019 | $ | 15.49 | 0.26 | (0.99 | ) | (0.73 | ) | (0.25 | ) | (0.61 | ) | (0.86 | ) | ||||||||||||||||||
Year Ended May 31, 2018 | $ | 14.31 | 0.22 | 1.26 | 1.48 | (0.22 | ) | (0.08 | ) | (0.30 | ) | ||||||||||||||||||||
Year Ended May 31, 2017 | $ | 12.51 | 0.19 | 2.02 | 2.21 | (0.19 | ) | (0.22 | ) | (0.41 | ) | ||||||||||||||||||||
Year Ended May 31, 2016 | $ | 13.61 | 0.16 | (0.82 | ) | (0.66 | ) | (0.15 | ) | (0.29 | ) | (0.44 | ) |
* 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.
^ 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 two year period beginning July 1, 2019 and in effect through June 30, 2021, instead of coinciding with the Fund's fiscal year end. Details of the current contractual expense limitation in effect can be found in Note 4 of the accompanying Notes to Financial Statements.
(a) The expense ratios exclude the impact of expenses paid by each underlying fund.
(b) Per share net investment income (loss) has been calculated using the average daily shares method.
(c) Reflects increased usage of quantitative investment strategies.
(d) Reflects an increase in trading activity due to asset allocation shifts.
See notes to financial statements.
12
USAA Mutual Funds Trust | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Ratios to Average Net Assets | Supplemental Data | ||||||||||||||||||||||||||||||
Net Asset Value, End of Period | Total Return* | Net Expenses^(a) | Net Investment Income (Loss) | Gross Expenses(a) | Net Assets, End of Period (000's) | Portfolio Turnover | |||||||||||||||||||||||||
USAA Cornerstone Equity Fund | |||||||||||||||||||||||||||||||
Year Ended May 31, 2020 | $ | 13.28 | 0.14 | % | 0.10 | % | 2.38 | % | 0.10 | % | $ | 191,013 | 6 | % | |||||||||||||||||
Year Ended May 31, 2019 | $ | 13.90 | (4.35 | )% | 0.10 | % | 1.79 | % | 0.13 | % | $ | 202,288 | 11 | %(c) | |||||||||||||||||
Year Ended May 31, 2018 | $ | 15.49 | 10.32 | % | 0.10 | % | 1.46 | % | 0.13 | % | $ | 200,186 | 38 | %(d) | |||||||||||||||||
Year Ended May 31, 2017 | $ | 14.31 | 17.99 | % | 0.10 | % | 1.39 | % | 0.20 | % | $ | 143,657 | 7 | % | |||||||||||||||||
Year Ended May 31, 2016 | $ | 12.51 | (4.77 | )% | 0.10 | % | 1.36 | % | 0.22 | % | $ | 99,974 | 15 | % |
See notes to financial statements.
13
USAA Mutual Funds Trust | Notes to Financial Statements May 31, 2020 |
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 47 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 managed by the Fund's Adviser, Victory Capital Management Inc., an affiliate of the Fund.
On November 6, 2018, United Services Automobile Association ("USAA"), the parent company of USAA Asset Management Company ("AMCO"), the investment adviser to the Fund, and USAA Transfer Agency Company, d/b/a USAA Shareholder Account Services ("SAS"), the transfer agent to the Fund, announced that AMCO and SAS would be acquired by Victory Capital Holdings Inc., a global investment management firm headquartered in Cleveland, Ohio (the "Transaction"). The Transaction closed on July 1, 2019. A special shareholder meeting was held on April 18, 2019, at which shareholders of the Fund approved a new investment advisory agreement between the Trust, on behalf of the Fund, and Victory Capital Management Inc. ("VCM" or "Adviser"). Effective July 1, 2019, VCM replaced AMCO as the investment adviser to the Fund and Victory Capital Transfer Agency Company replaced SAS as the Fund's transfer agent. In addition, effective on that same date, shareholders of the Fund also elected the following two new directors to the Board of the Trust to serve upon the closing of the Transaction: (1) David C. Brown, to serve as an Interested Trustee; and (2) John C. Walters, to serve as an Independent Trustee.
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 generally accepted accounting principles in the United States of America ("GAAP"). The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses for the period. Actual results could differ from those estimates. The Fund follows the specialized accounting and reporting requirements under GAAP that are applicable to investment companies under Accounting Standards Codification Topic 946.
Investment Valuation:
The Fund records investments at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The valuation techniques described below maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value. The inputs used for valuing the Fund's investments are summarized in the three broad levels listed below:
• Level 1 — quoted prices in active markets for identical securities
• Level 2 — other significant observable inputs (including quoted prices for similar securities or interest rates applicable to those securities, etc.)
• Level 3 — significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments)
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USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
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 risk associated with entering into those investments.
The Adviser has established the Pricing and Liquidity Committee (the "Committee"), and subject to Trust's Board of Trustees (the "Board") oversight, the Committee administers and oversees the Fund's valuation policies and procedures, which are approved by the Board.
Portfolio securities listed or traded on securities exchanges, including exchange-traded funds ("ETFs"), 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 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, are not reflective of market value, or a significant event has been recognized in relation to a security or class of securities, the securities are valued in good faith by the Committee in accordance with valuation procedures approved by the Board. These valuations are typically categorized as Level 2 or Level 3 in the fair value hierarchy, based on the observability of inputs used to determine the fair value. The effect of fair value pricing is that securities may not be priced on the basis of quotations from the primary market in which they are traded and the actual price realized from the sale of a security may differ materially from the fair value price. Valuing these securities at fair value is intended to cause the Fund's NAV to be more reliable than it otherwise would be.
A summary of the valuations as of May 31, 2020, based upon the three levels defined above, is included in the table below while the breakdown, by category, of investments is disclosed in the Schedule of Portfolio Investments (amounts in thousands):
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Affiliated Exchange-Traded Funds | $ | 67,967 | $ | — | $ | — | $ | 67,967 | |||||||||||
Affiliated Mutual Funds | 122,824 | — | — | 122,824 | |||||||||||||||
Total | $ | 190,791 | $ | — | $ | — | $ | 190,791 |
For the year ended May 31, 2020, there were no transfers in or out of the Level 3 fair value hierarchy.
Investment Companies:
Exchange-Traded Funds:
The Fund may invest in ETFs. ETFs are a type of index fund, 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 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 they are 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.
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USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
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 on 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 discount. Gains or losses realized on sales of securities are determined by comparing the identified cost of the security lot sold with the net sales proceeds.
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, to earn additional income, net of income retained by Citibank. Borrowers are required to 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 cured the next business day once the shortfall exceeds $100 thousand. Collateral may be cash, U.S. government securities, or other securities as permitted by SEC guidelines. Cash collateral may be invested in high-quality short-term investments, primarily open-end investment companies. Collateral requirements are determined daily based on the value of the Fund's securities on loan as of the end of the prior business day. During the time portfolio securities are on loan, the borrower will pay the Fund any dividends or interest paid on such securities plus any fee negotiated between the parties to the lending agreement. The Fund also earns a return from the collateral. The Fund pays Citibank various fees in connection with the investment of cash collateral and fees based on the investment income received from securities lending activities. Securities lending income (net of these fees) is disclosed on the Statement of Operations. Loans are terminable upon demand and the borrower must return the loaned securities within the lesser of one standard settlement period or five business days. Risks relating to securities-lending transactions include that the borrower may not provide additional collateral when required or return the securities when due, and 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. Noncash collateral received by the Fund may not be sold or re-pledged except to satisfy borrower default. Cash collateral is listed in the Fund's Portfolio of Investments and Financial Statements while non-cash collateral is not included.
As of May 31, 2020, the Fund did not have any securities on loan.
Federal Income Taxes:
It is the Fund's policy 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.
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., 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 affiliated trust based upon net assets or another appropriate basis.
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USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
3. Purchases and Sales:
Cost of purchases and proceeds from sales/maturities of securities (excluding securities maturing less than one year from acquisition) for the year ended May 31, 2020, were as follows for the Fund (amounts in thousands):
Excluding U.S. Government Securities | |||||||||||
Purchases | Sales | ||||||||||
$ | 22,089 | $ | 12,431 |
There were no purchases and sales of U.S. government securities during the year ended May 31, 2020.
4. Fees and Transactions with Affiliates and Related Parties:
Investment Advisory and Management Fees:
Effective with the Transaction on July 1, 2019, investment advisory services are provided to the Fund by the Adviser, a New York corporation registered as an investment adviser with the Securities and Exchange Commission ("SEC"). The Adviser is a wholly-owned indirect subsidiary of Victory Capital Holdings, Inc., a publicly traded Delaware corporation, and a wholly-owned direct subsidiary of Victory Capital Operating, LLC. The Adviser does not receive any fees from the Fund for these services.
Prior to the Transaction on July 1, 2019, AMCO provided investment management services to the Fund pursuant to an Advisory Agreement. Under this agreement, AMCO was responsible for managing the business and affairs of the Fund, and for directly managing day-to-day investment of the Fund's assets, subject to the authority of and supervision by the Board. AMCO did not receive any fees from the Fund for these services.
Administration and Servicing Fees:
Effective with the Transaction on July 1, 2019, 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.
Prior to the Transaction on July 1, 2019, AMCO provided certain administration and servicing functions for the Fund. AMCO did not receive any fees from the Fund for these services.
Effective with the Transaction on July 1, 2019, the Fund (as part of the Trust) has entered into an agreement to provide compliance services with the Adviser, 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. Funds in the Trust, Victory Variable Insurance Funds, Victory Portfolios and Victory Portfolios II (collectively, the "Victory Funds Complex") in the aggregate, compensates the Adviser for these services. Amounts incurred during the period from July 1, 2019 to May 31, 2020, are reflected on the Statement of Operations as Compliance fees.
Effective with the Transaction on July 1, 2019, 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 Trust reimburses VCM and Citi for all of their reasonable out-of- pocket expenses incurred in providing these services and certain other expenses specifically allocated to the Funds under the Fund Administration, Servicing, and Accounting Agreement. The amount incurred during the period from July 1, 2019 through May 31, 2020, is reflected on the Statement of Operations as Sub-Administration fees.
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USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
In addition to the services provided under its Administration and Servicing Agreement with the Fund, AMCO also provided certain compliance and legal services for the benefit of the Fund prior to the Transaction on July 1, 2019. The Board approved the reimbursement of a portion of these expenses incurred by AMCO. AMCO did not receive any fees from the Fund for these services.
Transfer Agency Fees:
Effective with the Transaction on July 1, 2019, Victory Capital Transfer Agency, Inc. ("VCTA"), (formerly, USAA Shareholder Account Services ("SAS")), provides transfer agency services to the Fund. Neither VCTA nor SAS received any fees from the Fund for these services.
Effective with the Transaction on July 1, 2019, 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:
Effective with the Transaction on July 1, 2019, Victory Capital Advisers, 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. Effective on or about June 30, 2020, the Distributor's name will change to Victory Capital Services, Inc.
Prior to the Transaction on July 1, 2019, USAA Investment Management Company provided exclusive underwriting and distribution of the Fund's shares on a continuing best-efforts basis.
Other Fees:
Prior to the Transaction on July 1, 2019, State Street Bank and Trust Company served as the Fund's accounting agent and custodian.
Effective July 1, 2019, Citibank, N.A., serves as the Fund's custodian.
K&L Gates LLP provides legal services to the Trust.
Effective with the Transaction on July 1, 2019, the Adviser has entered into an expense limitation agreement with the Fund until at least June 30, 2021. 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. 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. Effective July 1, 2019 through May 31, 2020, the expense limit (excluding voluntary waivers) is 0.10%.
Under this expense limitation agreement, the Fund has agreed to repay fees and expenses that were waived or reimbursed by the Adviser for a period up to three years after the fiscal year in which 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 May 31, 2020, there are no amounts available to be repaid to the Adviser.
The Adviser, may voluntarily waive or reimburse additional fees to assist the Fund in maintaining competitive expense ratios. Voluntary waivers and reimbursements applicable to the Fund are not available to be recouped at a future time. There were no voluntary waivers or reimbursements for the year ended May 31, 2020.
Prior to the Transaction on July 1, 2019, AMCO agreed, through September 30, 2019, to limit the total annual operating expenses to 0.10% of average daily net assets of the Fund, excluding extraordinary expenses and before reductions of any expenses paid indirectly, and to reimburse all expenses in excess
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USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
of those amounts. Effective with the Transaction on July 1, 2019, this expense limit is no longer in effect and is not available to be recouped by AMCO. For the period June 1, 2019 through June 30, 2019, amounts reimbursed by the Fund are reflected on the Statement of Operations as Expenses waived/reimbursed by AMCO.
Certain officers and/or interested trustees of the Fund are also officers and/or employees of the Adviser, Administrator, Sub-Administrator, Sub-Fund Accountant, and Legal.
5. Risks:
The Fund may be subject to other risks in addition to these identified risks.
Global economies and financial markets are increasingly interconnected, which increases the possibilities that conditions in one country or region might adversely affect issuers in another country or region. Geopolitical and other risks, including war, terrorism, trade disputes, political or economic dysfunction within some nations, public health crises and related geopolitical events, as well as environmental disasters such as earthquakes, fires, and floods, may add to instability in world economies and markets generally. Changes in trade policies and international trade agreements could affect the economies of many countries in unpredictable ways. Epidemics and/or pandemics, such as the coronavirus (or COVID-19), may result in, among other things, closing borders, disruptions to healthcare service preparation and delivery, quarantines, cancellations, disruptions to supply chains and consumer activity, as well as general concern and uncertainty. The impact may be short-term or may last for extended periods.
The COVID-19 pandemic, which has spread rapidly across the world, has led and will continue to lead for an unknown period of time to disruptions in local, regional, national and global markets and economies. Among other things, the outbreak has resulted in, and until fully resolved is likely to continue to result in, among other things (1) government imposition of various forms of "stay at home" orders and the closing of "non-essential" businesses, resulting in significant disruption to the businesses of many issuers as well as lay-offs of employees; (2) increased requests by issuers of debt instruments for amendments and waivers of agreements to avoid default and increased defaults; (3) volatility and disruption of markets, including greater volatility in pricing and spreads; and (4) rapidly evolving proposals and/or actions by state and federal governments to address problems being experienced by the markets and by businesses and the economy in general.
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).
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.
The Fund may invest in underlying affiliated funds that invest in equity securities, which are subject to stock market risk. Stock prices in general may decline over short or even extended periods, regardless of the success or failure of a company's operations. Equity securities tend to be more volatile than bonds. In addition, to the degree an underlying affiliated fund invests in foreign securities, there is a possibility that the value of the Fund's investments in foreign securities will decrease because of unique risks, such as currency exchange-rate fluctuations; foreign market illiquidity; emerging-market risk;
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USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
increased price volatility; uncertain political conditions; exchange control regulations; foreign ownership limits; different accounting, reporting, and disclosure requirements; difficulties in obtaining legal judgments; and foreign withholding taxes.
6. Borrowing and Interfund Lending:
Line of Credit:
Effective with the Transaction on July 1, 2019, the Victory Funds Complex participates in a short-term, demand note "Line of Credit" agreement with Citibank. Under the agreement with Citibank, the Victory Funds Complex could 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 that Fund paying the related commitment fees for that amount. The purpose of the agreement is to meet temporary or emergency cash needs. Citibank receives an annual commitment fee of 0.15% on $300 million for providing the Line of Credit. Each fund in the Victory Funds Complex pays a pro-rata portion of the commitment fees plus any interest (one month LIBOR plus one percent) on amounts borrowed. Effective June 29, 2020, under an amended Line of Credit agreement, Citibank will also receive an annual upfront fee of 0.10% on the $300 million committed line of credit. Each fund in the Victory Funds Complex will pay a pro-rata portion of the upfront fee. Interest charged to the Fund, if any, during the period is reflected on the Statement of Operations under line of credit fees.
Prior to the Transaction on July 1, 2019, the line of credit among the Trust, with respect to its funds, and USAA Capital Corporation ("CAPCO") terminated. For the period from June 1, 2019 to June 30, 2019, the Fund paid CAPCO facility fees of less than $1 thousand.
The Fund had no borrowings under either agreement with Citibank or CAPCO during the year ended May 31, 2020.
Interfund Lending:
Effective with the Transaction on July 1, 2019, the Trust and 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 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. The interfund loan rate is determined, as specified in the Order, by averaging the current repurchase agreement rate and the current bank loan rate. As a Borrower, interest charged to the Fund, if any, during the period is reflected on the Statement of Operations under Interest expense on Interfund lending. As a Lender, interest earned by the Fund, if any, during the period is reflected on the Statement of Operations under Income on Interfund lending.
The Fund did not utilize or participate in the Facility during the period July 1, 2019 through May 31, 2020.
7. Federal Income Tax Information:
The Fund intends to declare daily and 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
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USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
(e.g., wash sales) do not require reclassification. To the extent dividends and distributions exceed net investment income and net realized gains for tax purposes, they are reported as distributions of capital.
Net investment losses incurred by the Fund may be reclassified as an offset to capital on the accompanying Statement of Assets and Liabilities.
As of May 31, 2020, 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 Statement of Changes in Net Assets because, for tax purposes, dividends are recognized when actually paid) (amounts in thousands).
Year Ended May 31, 2020 | Year Ended May 31, 2019 | ||||||||||||||||||||||||||
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 | ||||||||||||||||||||||
$ | 4,702 | $ | 5,682 | $ | 10,384 | $ | 4,845 | $ | 6,800 | $ | 11,645 |
As of May 31, 2020, the components of accumulated earnings (deficit) on a tax basis were as follows (amounts in thousands):
Undistributed Ordinary Income | Undistributed Long-Term Capital Gains | Unrealized Appreciation (Depreciation)* | Total Accumulated Earnings (Deficit) | ||||||||||||
$ | 431 | $ | 13,736 | $ | (13,825 | ) | $ | 342 |
* The difference between the book-basis and tax-basis of unrealized appreciation/depreciation is attributable to the tax deferral of losses on wash sales.
As of the tax year ended May 31, 2020, the Fund had no capital loss carryforwards, for federal income tax purposes.
As of May 31, 2020, 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) | ||||||||||||
$ | 204,616 | $ | 12,398 | $ | (26,223 | ) | $ | (13,825 | ) |
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 or an investment company managed by VCM. The Fund does not invest in affiliated underlying funds for the purpose of exercising management or control. These underlying funds are noted as affiliated in the Fund's Schedule of Portfolio Investments. The affiliated underlying
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USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
funds' annual or semiannual reports may be viewed at usaa.com. Transactions in affiliated securities during the year ended May 31, 2020 were as follows (amount in thousands):
Fair Value 5/31/2019 | Purchases at Cost | Proceeds from Sales | Net Realized Gain (Loss) | Capital Gain Distribution | Net Change in Unrealized Appreciation/ Depreciation | Fair Value 5/31/2020 | Dividend Income | ||||||||||||||||||||||||||||
USAA 500 Index Fund Reward Shares | $ | 27,607 | $ | 1,503 | $ | (4,808 | ) | $ | (41 | ) | $ | 917 | $ | 1,979 | $ | 26,240 | $ | 587 | |||||||||||||||||
USAA Aggressive Growth Fund Institutional Shares | 9,083 | 1,674 | (2,363 | ) | (987 | ) | 1,613 | 664 | 8,071 | 60 | |||||||||||||||||||||||||
USAA Capital Growth Fund Institutional Shares | 5,754 | 553 | (371 | ) | (63 | ) | 456 | (429 | ) | 5,444 | 97 | ||||||||||||||||||||||||
USAA Emerging Markets Fund Institutional Shares | 8,072 | 548 | — | — | — | (388 | ) | 8,232 | 37 | ||||||||||||||||||||||||||
USAA Growth Fund Institutional Shares | 9,330 | 2,108 | (1,568 | ) | 35 | 1,980 | (426 | ) | 9,479 | 128 | |||||||||||||||||||||||||
USAA Income Stock Fund Institutional Shares | 8,972 | 1,711 | (345 | ) | 14 | 1,496 | (1,857 | ) | 8,495 | 216 | |||||||||||||||||||||||||
USAA International Fund Institutional Shares | 29,499 | 7,402 | (626 | ) | (1 | ) | 5,813 | (8,354 | ) | 27,920 | 907 | ||||||||||||||||||||||||
USAA Precious Metals and Minerals Fund Institutional Shares | 1,014 | — | (283 | ) | 121 | — | 480 | 1,332 | — | ||||||||||||||||||||||||||
USAA Small Cap Stock Fund Institutional Shares | 6,653 | 1,205 | (471 | ) | (163 | ) | 676 | (557 | ) | 6,667 | 17 | ||||||||||||||||||||||||
USAA Target Managed Allocation Fund | 13,419 | 711 | (1,380 | ) | (182 | ) | 48 | 148 | 12,716 | 663 | |||||||||||||||||||||||||
USAA Value Fund Institutional Shares | 8,926 | 2,266 | (216 | ) | (1 | ) | 2,110 | (2,747 | ) | 8,228 | 156 | ||||||||||||||||||||||||
VictoryShares USAA MSCI Emerging Markets Value Momentum ETF | 10,209 | 692 | — | — | — | (1,283 | ) | 9,618 | 301 | ||||||||||||||||||||||||||
VictoryShares USAA MSCI International Value Momentum ETF | 25,738 | — | — | — | — | (3,549 | ) | 22,189 | 1,107 | ||||||||||||||||||||||||||
VictoryShares USAA MSCI USA Small Cap Value Momentum ETF | 6,530 | 686 | — | — | — | (425 | ) | 6,791 | 139 | ||||||||||||||||||||||||||
VictoryShares USAA MSCI USA Value Momentum ETF | 30,132 | 1,030 | — | — | — | (1,793 | ) | 29,369 | 677 | ||||||||||||||||||||||||||
$ | 200,938 | $ | 22,089 | $ | (12,431 | ) | $ | (1,268 | ) | $ | 15,109 | $ | (18,537 | ) | $ | 190,791 | $ | 5,092 |
9. 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 1940 Act. The LRMP is reasonably designed to assess and manage the Fund's liquidity risk, taking into consideration the Fund's investment strategy and the
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USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
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 Fund's investment adviser, Victory Capital, as the administrator of the LRMP. At an in-person meeting held on February 26, 2020, Victory Capital provided an oral and written report to the Trustees on the operation and effectiveness of the LRMP during the previous year.
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.
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 reasonably expected to be converted to cash in current market conditions in three business days or less without significantly changing the market value of the investment. Therefore, the Fund has not adopted a Highly Liquid Investment Minimum. The Fund's investments were below the limitation on illiquid investments during the review period. Additionally, Victory Capital indicated that no events occurred that would require the filing of Form N-LIQUID and recommended no material changes to the LRMP.
23
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of USAA Cornerstone Equity Fund:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of USAA Cornerstone Equity Fund (the "Fund") (one of the funds constituting USAA Mutual Funds Trust (the "Trust")), including the schedule of portfolio investments, as of May 31, 2020, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the funds constituting USAA Mutual Funds Trust) at May 31, 2020, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Trust's management. Our responsibility is to express an opinion on the Fund's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust's internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of May 31, 2020, by correspondence with the custodian. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Victory Capital investment companies since 1995.
San Antonio, Texas
July 27, 2020
24
USAA Mutual Funds Trust | Supplemental Information May 31, 2020 |
(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) 539-3863. The information is also included in the Fund's Statement of Additional Information, which is available on the SEC's website at www.sec.gov.
Information relating to how the Fund voted proxies relating to portfolio securities held during the most recent 12 months ended June 30 is available on the SEC's website at www.sec.gov.
Availability of Schedules of Portfolio Investments:
The Trust files a complete list of Schedules of Portfolio Investments with the SEC for the first and third quarter of each fiscal year on Form N-PORT. Forms N-PORT available on the SEC's website at www.sec.gov.
25
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(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 10 Trustees, eight of whom are not "interested persons" of the Trust within the meaning of that term under the 1940 Act ("Independent Trustees") and two 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 ages, position with the Trust, commencement of service, 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 47 portfolios in the Trust. Each Trustee's address is 15935 La Cantera Pkwy, Building Two, San Antonio, TX, 78256. Pursuant to a policy adopted by the Board, the term of office for each Trustee shall be until the Independent Trustee reaches age 75 or an Interested Trustee reaches age 75. The Board may change or grant exceptions from this policy at any time without shareholder approval. A Trustee may resign or be removed by a vote of the other Trustees or the holders of a majority of the outstanding shares of the Trust at any time. Vacancies on the Board can be filled by the action of a majority of the Trustees, provided that after filling such vacancy at least two-thirds of the Trustees have been elected by the shareholders.
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Independent Trustees. | |||||||||||||||||||
Jefferson C. Boyce, Born September 1957 | Lead Independent Trustee, and Vice Chairman | 2013 | Senior Managing Director, New York Life Investments, LLC (1992-2012) | Westhab, Inc. | |||||||||||||||
John C. Walters, Born February 1962 | Trustee | 2019 | Retired. Mr. Walters brings significant Board experience including active involvement with the board of a Fortune 500 company, and a proven record of leading large, complex financial organizations. He has a demonstrated record of success in distribution, manufacturing, investment brokerage, and investment management in both the retail and institutional investment businesses. He has substantial experience in the investment management business with a demonstrated ability to develop and drive strategy while managing operation, financial, and investment risk. | Guardian Variable Products Trust (16 series), Lead Independent Director; Amerilife Holdings LLC, Director; Stadion Money Management; Director; University of North Carolina (Chapel Hill), Member Board of Governors. |
26
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Robert L. Mason, Ph.D., Born July 1946 | Trustee | 1997 | Adjunct Professor in the Department of Management Science and Statistics in the College of Business at the University of Texas at San Antonio (since 2001); Institute Analyst, Southwest Research Institute (March 2002-January 2016) | None | |||||||||||||||
Dawn M. Hawley, Born February 1954 | Trustee | 2014 | Manager of Finance, Menil Foundation, Inc. (May 2007-June 2011), which is a private foundation that oversees the assemblage of sculptures, prints, drawings, photographs, and rare books. Director of Financial Planning and Analysis and Chief Financial Officer, AIM Management Group, Inc. (October 1987-January 2006) | None | |||||||||||||||
Paul L. McNamara, Born July 1948 | Trustee | 2012 | Director, Cantor Opportunistic Alternatives Fund, LLC (March 2010-February 2014) , which is a closed-end fund of funds by Cantor Fitzgerald Investment Advisors, LLC | None |
27
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Richard Y. Newton III, Born January 1956 | Trustee | 2017 | Director, Elta North America (01/18-present), 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 (December 2015-present)); Executive Director, The Union League Club of New York (June 2014-November 2015): Executive Vice President, Air Force Association (August 2012-May 2014); Lieutenant General, United States Air Force (January 2008-June 2012) | None | |||||||||||||||
Barbara B. Ostdiek, Ph.D., Born March 1964 | Trustee | 2008 | Senior Associate Dean of Degree Programs at Jesse H. Jones Graduate School of Business at Rice University (since 2013); Associate Professor of Finance at Jessie H. Jones Graduate School of Business at Rice University (since 2001) | None | |||||||||||||||
Michael F. Reimherr, Born August 1945 | Trustee | 2000 | President of Reimherr Business Consulting (May 1995-December 2017); St. Mary's University Investment Committee overseeing University Endowment (since 2014) | None |
28
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Interested Trustees. | |||||||||||||||||||
David C. Brown, ** Born May 1972 | Trustee | 2019 | Chairman and Chief Executive Officer (since 2013), Co-Chief Executive Officer (2011-2013), Victory Capital Management Inc.; Chairman and Chief Executive Officer, Victory Capital Holdings, Inc. (since 2013). Mr. Brown brings to the Board extensive business, finance and leadership skills gained and developed through years of experience in the financial services industry, including his tenure overseeing the strategic direction as CEO of Victory Capital. These skills, combined with Mr. Brown's extensive knowledge of the financial services industry and demonstrated success in the development and distribution of investment strategies and products, enable him to provide valuable insights to the Board and strategic direction for the Funds | Trustee, Victory Portfolios (42 series), Victory Portfolios II (26 series), Victory Variable Insurance Funds (9 series) |
29
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Daniel S. McNamara, ** Born June 1966 | Trustee and Chair of the Board of Trustees | 2012 | Trustee, President, and Vice Chairman of USAA ETF Trust (June 2017-June 2019); President of Financial Advice & Solutions Group (FASG), USAA (since 2013); Director, IMCO (September 2009-April 2014); President, AMCO (August, 2011-April 2013); Senior Vice President of USAA Financial Planning Services Insurance Agency, Inc. (FPS) (since 2011); Director of USAA Investment Management Company (IMCO) (since 2009); Chairman of Board of IMCO (since 2013); Director of USAA Asset Management Company (AMCO), (August 2011-June 2019); President and Director of USAA Shareholder Account Services (SAS)(October 2009-June 2019); Director and Vice Chairman of FPS (since 2013); President and Director of USAA Investment Corporation (ICORP) (since 2010); Chairman of Board of ICORP (since 2013); Director of USAA Financial Advisors, Inc. (FAI) (since 2013); Chairman of Board of FAI (since 2015). Mr. McNamara brings to the Board extensive experience in the financial services industry, including experience as an officer of the Trust. | None |
** Mr. McNamara and Mr. Brown are "Interested Persons" by reason of their relationships with the Adviser.
The Statement of Additional Information includes additional information about the Trustees of the Trust and is available, without charge, on the SEC's website at www.sec.gov and/or by calling (800)-539-3863.
30
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Officers:
The officers of the Trust, their ages, 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, Building Two, 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 with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | ||||||||||||
Interested Officers. | |||||||||||||||
Christopher K. Dyer, Born February 1962 | President | 2019 | Director of Fund Administration, Victory Capital (2004-present) | ||||||||||||
Scott A Stahorsky, Born July 1969 | Vice President | 2019 | Manager, Fund Administration, Victory Capital (since 2015); Senior Analyst, Fund Administration, Victory Capital (prior to 2015) | ||||||||||||
James K. De Vries, Born April 1969 | Treasurer, Principal Financial Officer | 2018 | Executive Director, Victory Capital Management Inc. (since 2019); Treasurer, USAA ETF Trust (September 2018-June 2019); Executive Director, Investment and Financial Administration, USAA (April 2012-June 2019); Assistant Treasurer, USAA ETF Trust (June 2017-September 2018); Assistant Treasurer, USAA Mutual Funds Trust (December 2013-February 2018) | ||||||||||||
Allan Shaer, Born March 1965 | Assistant Treasurer | 2019 | Senior Vice President, Financial Administration, Citi Fund Services Ohio, Inc. (since 2016); Vice President, Mutual Fund Administration, JP Morgan Chase (2011-2016) | ||||||||||||
Carol D. Trevino, Born October 1965 | Assistant Treasurer | 2018 | Director, Accounting and Finance, Victory Capital Management Inc. (since 2019); Accounting/Financial Director, USAA (December 2013-June 2019); Assistant Treasurer, USAA ETF Trust (September 2018-June 2019). | ||||||||||||
Erin G. Wagner, Born February 1974 | Secretary | 2019 | Deputy General Counsel, the Adviser (since 2013) | ||||||||||||
Charles Booth, Born April 1960 | Anti-Money Laundering Compliance Officer and Identity Theft Officer | 2019 | Director, Regulatory Administration and CCO Support Services, Citi Fund Services Ohio, Inc. (2007-present) | ||||||||||||
Amy Campos, Born July 1976 | Chief Compliance Officer | 2019 | Chief Compliance Officer, USAA Mutual Funds Trust (since 2019); Executive Director, Deputy Chief Compliance Officer, USAA Mutual Funds Trust and USAA ETF Trust (July 2017-June 2019); Compliance Director, USAA Mutual Funds Trust (2014-July 2017) |
31
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
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 December 1, 2019 through May 31, 2020.
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. If these transactional costs were included, your costs would have been higher.
Beginning Account Value 12/1/19 | Actual Ending Account Value 5/31/20 | Hypothetical Ending Account Value 5/31/20 | Actual Expenses Paid During Period 12/1/19- 5/31/20* | Hypothetical Expenses Paid During Period 12/1/19- 5/31/20* | Annualized Expense Ratio During Period 12/1/19- 5/31/20 | ||||||||||||||||||
$ | 1,000.00 | $ | 909.80 | $ | 1,024.55 | $ | 0.43 | $ | 0.46 | 0.09 | % |
* Expenses are equal to the average account value multiplied by the Fund's annualized expense ratio multiplied by 183/366 (the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year).
32
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Additional Federal Income Tax Information
The following federal tax information related to the Fund's fiscal year ended May 31, 2020, 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 2021.
With respect to distributions paid, the Fund designates the following amounts (or, if subsequently determined to be different, the maximum amount allowable) for the fiscal year ended May 31, 2020 (amounts in thousands):
Dividend Received Deduction (corporate shareholders)* | Qualified Dividend Income (non-corporate shareholders)* | Long-Term Capital Gain Distributions(a) | Foreign Taxes Paid(b) | ||||||||||||||||
34.08 | % | 66.37 | % | $ | 5,682 | $ | 241 |
* Presented as a percentage of net investment income and excludes short-term capital gain distributions paid, if any. All or a portion of these amounts may be exempt from taxation at the state level.
(a) Pursuant to Section 852 of the Internal Revenue Code.
(b) The Fund has elected under Section 853 of the Internal Revenue Code to pass through the credit for taxes paid in foreign countries.
33
Privacy Policy
Protecting the Privacy of Information
The Trust respects your right to privacy. We also know that you expect us to conduct and process your business in an accurate and efficient manner. To do so, we must collect and maintain certain personal information about you. This is the information we collect from you on applications or other forms, and from the transactions you make with us or third parties. It may include your name, address, social security number, account transactions and balances, and information about investment goals and risk tolerance.
We do not disclose any information about you or about former customers to anyone except as permitted or required by law. Specifically, we may disclose the information we collect to companies that perform services on our behalf, such as the transfer agent that processes shareholder accounts and printers and mailers that assist us in the distribution of investor materials. We may also disclose this information to companies that perform marketing services on our behalf. This allows us to continue to offer you Victory investment products and services that meet your investing needs, and to effect transactions that you request or authorize. These companies will use this information only in connection with the services for which we hired them. They are not permitted to use or share this information for any other purpose.
To protect your personal information internally, we permit access only by authorized employees and maintain physical, electronic and procedural safeguards to guard your personal information.*
* | You may have received communications regarding information about privacy policies from other financial institutions which gave you the opportunity to “opt-out” of certain information sharing with companies which are not affiliated with that financial institution. The Trust does not share information with other companies for purposes of marketing solicitations for products other than the Trust. Therefore, the Trust does not provide opt-out options to their shareholders. |
P.O. Box 182593
Columbus, Ohio 43218-2593
Visit our website at: | Call | ||||||
vcm.com | (800) 235-8396 |
97449-0720
MAY 31, 2020
Annual Report
USAA Cornerstone Moderate Fund
Beginning January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Fund's shareholder reports like this one will no longer be sent by mail, unless you specifically request paper copies of the reports from the Fund or from your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on VictoryFunds.com, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund or your financial intermediary electronically by notifying your financial intermediary directly, or if you are a direct investor, by calling (800) 235-8396 or logging on to usaa.com. Effective on or about September 8, 2020, a shareholder who has an account directly with the Fund will need to submit their request via email to TA.Processing@FISGlobal.com.
You may elect to receive all future reports in paper free of charge. You can inform the Fund or your financial intermediary that you wish to continue receiving paper copies of your shareholder reports by notifying your financial intermediary directly, or if you are a direct investor, by calling (800) 235-8396 or logging on to usaa.com. Effective on or about September 8, 2020, a shareholder who has an account directly with the Fund will need to submit their request via email to TA.Processing@FISGlobal.com. Your election to receive reports in paper will apply to all funds held with the USAA Mutual Funds or your financial intermediary.
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 logo 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.
USAA Mutual Funds Trust
TABLE OF CONTENTS
Shareholder Letter (Unaudited) | 2 | ||||||
Managers' Commentary (Unaudited) | 4 | ||||||
Investment Overview (Unaudited) | 6 | ||||||
Investment Objective & Portfolio Holdings (Unaudited) | 7 | ||||||
Financial Statements | |||||||
Schedule of Portfolio Investments | 9 | ||||||
Statement of Assets and Liabilities | 28 | ||||||
Statement of Operations | 29 | ||||||
Statements of Changes in Net Assets | 30 | ||||||
Financial Highlights | 32 | ||||||
Notes to Financial Statements | 34 | ||||||
Report of Independent Registered Public Accounting Firm | 48 | ||||||
Supplemental Information (Unaudited) | 49 | ||||||
Proxy Voting and Portfolio Holdings Information | 49 | ||||||
Trustees' and Officers' Information | 50 | ||||||
Expense Examples | 56 | ||||||
Additional Federal Income Tax Information | 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.
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.
1
(Unaudited)
Dear Shareholder,
The previous decade ended with the longest-ever bull market in U.S. equities still intact, even as investors wrestled with issues like softening global economic data, Brexit, and U.S.-China trade relations. In retrospect, those worries seem so pedestrian given what we would soon experience.
A new and unexpected threat—a global pandemic, the novel coronavirus ("COVID-19")—first emerged in Asia and then began spreading globally and throughout the United States during the first quarter of 2020. This unprecedented and unanticipated event not only rendered all existing economic and earnings forecasts moot, but it also roiled stock and bond markets everywhere. Efforts to slow the spread of the virus, though successful to date, also brought the economy to a halt. The historic bull market in stocks ended virtually overnight.
After an initial severe sell-off in March, equity markets recovered sharply. As our annual reporting period drew to a close on May 31, 2020, many of the broad market indexes had recovered and volatility had returned to more palatable levels. In fact, despite all the chaos, the S&P 500® Index, one of the most popular measures of large U.S. stocks, finished the fiscal year (May 31, 2020) at approximately 3,044 which was up more than 10.6% from one year ago.
The market turmoil of early 2020 was not limited to equities. Fixed income volatility spiked when liquidity evaporated in late March as investors struggled to understand the ramifications of stay-at-home orders. Fortunately, the U.S. Federal Reserve (the "Fed") (as well as other global central banks) leapt into action—cutting interest rates, (re)starting quantitative easing and, in the case of the Fed, launching an array of programs to stabilize markets.
The new lending facilities and programs had their intended effect of improving liquidity and trading. Credit spreads across corporate, high-yield, structured, and municipal markets were coaxed down from their highs. In addition, Congress came through with substantial fiscal stimulus that also was applauded by investors and markets. Although fixed income markets regained their footing, the yield on 10-Year Treasurys, a benchmark for low-risk investments, declined steadily during our fiscal year—from 2.14% at the beginning of our reporting period to approximately 0.65% as of May 31, 2020. This suggests that investors remain a little wary.
While the past year has been unprecedented for all of us, both personally and professionally, our portfolio managers continue to scrutinize the financial markets, economic conditions, and the trajectory of the pandemic, which will likely be the guiding factor on Fed policy and the markets.
No matter what happens in the near term, we believe that the massive monetary and fiscal policies introduced earlier this year will have longer-term ramifications. Despite this uncertainty, it's important to remain focused on your long-term investment goals and avoid making emotional decisions. If you invest with us directly, our Member Service Representatives are available to help. Call us at (800) 539-3863 or visit our website at vcm.com.
2
From all of us here at USAA Mutual Funds, thank you for letting us help you work toward your investment goals.
Christopher K. Dyer, CFA
President,
USAA Mutual Funds
3
USAA Mutual Funds Trust
USAA Cornerstone Moderate Fund
Managers' Commentary
(Unaudited)
Victory Solutions
Mannik S. Dhillon, CFA, CAIA
Wasif A. Latif
Lance Humphrey, CFA
James F. Jackson, Jr., CFA
R. Neal Graves, CFA, CPA
• What were the market conditions during the reporting period?
Global financial market performance varied widely over the period driven by uncertainty related to the duration and economic impact of the novel coronavirus ("COVID-19") pandemic. This generally led to a risk-off environment as investors flocked to safe haven assets such as U.S. Treasurys and gold. Global equities turned mostly lower with the exception of a small breadth of mega-cap securities well-positioned for an extended economic slowdown and the new stay-at-home paradigm. The final month and a half of the reporting period saw a rebound in risky assets as economies began a phased reopening.
Within the United States, the S&P 500® Index dropped nearly 34% from its 2020 high, before beginning to recoup losses with the support of comprehensive monetary and fiscal stimulus, along with encouraging results in COVID-19 vaccine trials. Over the reporting period, the S&P 500® Index returned 12.84%, with large-cap growth stocks leading the way, up to a return of 26.25% as represented by the Russell 1000 Growth Index. Value stocks and small-cap stocks underperformed growth stocks over the period, but more recently have seen a pickup in momentum. U.S. large-cap value stocks were down to a return of -1.64% over the reporting period as gauged by the Russell 1000 Value Index, while U.S. small-cap stocks, were down to a return of -3.44% as represented by the Russell 2000 Index.
Developed market international and emerging market equities followed a path similar to U.S. equities. Markets led investors on a rollercoaster ride that saw both the MSCI EAFE Index and MSCI Emerging Markets Index drop approximately 34% from their highs in the year. The market drawdown hit bottom on March 23rd and then started a steady ascent, erasing most of the losses as European Central Bank quantitative easing and talks of a 750-billion euros fiscal stimulus helped bolster momentum in the market's recovery. Over the reporting period, developed international equities, represented by the MSCI EAFE Index, were down to a return of -2.81%, while the MSCI Emerging Markets Index returned -4.39%.
Within fixed-income, interest rate-sensitive treasury bonds outperformed credit-sensitive investment-grade and high-yield corporate bonds. Investor demand for U.S. Treasurys drove yields to new lows, while credit spreads reached unprecedented levels as liquidity issues began to seize up parts of credit and municipal markets. The U.S. Federal Reserve (the "Fed") intervened, providing liquidity by expanding open market purchases to include municipal and corporate bonds. Bloomberg Barclays US Treasury 20+ Year Index returned 27.46% over the reporting period, while the Bloomberg Barclays U.S. Aggregate Bond
4
USAA Mutual Funds Trust
USAA Cornerstone Moderate Fund (continued)
Managers' Commentary (continued)
Index returned 9.42%. High-yield bonds finished the period slightly positive, up 1.32% as gauged by the Bloomberg Barclays US Corporate High Yield Index.
• How did the USAA Cornerstone Moderate Fund (the "Fund") perform during the reporting period?
For the reporting period ended May 31, 2020, the Fund had a total return of 2.98%. This compares to returns of 5.43% for the MSCI All Country World Index and 7.03% for the Cornerstone Moderate Composite Index.
• What strategies did you employ during the reporting period?
The equity portfolio's overall tilt toward value stocks, especially within U.S. large-cap stocks, was a key factor in underperformance relative to the benchmark over the reporting period. An underweight to U.S. equities along with negative stock selection effects within emerging market and developed international equities weighed on relative performance.
Within the fixed income portion of the portfolio, a slight overweight to treasurys and an underweight to high yield contributed to relative performance, while allocations to corporate bonds detracted from performance.
Commodities as an asset class were down over the period with the Bloomberg Commodity Index returning -17.06%; however, gold outperformed. Gold's overweight within the portfolio contributed positively to relative performance over the period. A slight overweight to REITs relative to the benchmark detracted from performance.
Thank you for allowing us to assist you with your investment needs.
5
USAA Mutual Funds Trust
USAA Cornerstone Moderate Fund
Investment Overview
(Unaudited)
Average Annual Total Return
Year Ended May 31, 2020
INCEPTION DATE | 9/1/95 | ||||||||||||||
Net Asset Value | MSCI All-Country World Index1 | Cornerstone Moderate Composite Index2 | |||||||||||||
One Year | 2.98 | % | 5.43 | % | 7.03 | % | |||||||||
Five Year | 2.59 | % | 5.28 | % | 5.01 | % | |||||||||
Ten Year | 5.21 | % | 8.47 | % | 6.88 | % |
Past performance is not indicative of future results. 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 for various periods since inception. Without such fee waivers, the total returns would have been lower.
USAA Cornerstone Moderate Fund — Growth of $10,000
1 The 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.
2 The 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 Barclays 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 Barclays U.S. Treasury — Bills (1-3M) (2%).
The graph reflects investment of growth of a hypothetical $10,000 investment in the Fund. Past performance is no guarantee of future results.
The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
6
USAA Mutual Funds Trust USAA Cornerstone Moderate Fund | May 31, 2020 |
(Unaudited)
Investment Objective & Portfolio Holdings:
The Fund's investment objective is to seek a high total return.
Top 10 Holdings*
May 31, 2020
(% of Net Assets)
iShares Core S&P 500 ETF | 8.1 | % | |||||
Vanguard FTSE Developed Markets ETF | 4.8 | % | |||||
Schwab Fundamental International Large Co. Index ETF | 3.2 | % | |||||
iShares Core MSCI EAFE ETF | 2.9 | % | |||||
iShares Core US Aggregate Bond ETF | 2.2 | % | |||||
Vanguard FTSE Europe ETF | 1.9 | % | |||||
iShares Core MSCI Emerging Markets ETF | 1.9 | % | |||||
U.S. Treasury Notes, 1.63%, 2/15/2026 | 1.9 | % | |||||
Schwab Fundamental Emerging Markets Large Co. Index ETF | 1.8 | % | |||||
iShares iBoxx $ Investment Grade Corporate Bond ETF | 1.8 | % |
* Does not include short-term investments purchased with cash collateral from securities loaned.
Refer to the Schedule of Portfolio Investments for a complete list of securities.
7
USAA Mutual Funds Trust USAA Cornerstone Moderate Fund (continued) | May 31, 2020 |
Asset Allocation*:
May 31, 2020
(% of Net Assets)
* Does not include short-term investments purchased with cash collateral from securities loaned.
Percentages are of the net assets of the Fund and may not equal 100%.
8
USAA Mutual Funds Trust USAA Cornerstone Moderate Fund | Schedule of Portfolio Investments May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Asset Backed Securities (3.5%) | |||||||||||
American Express Credit Account Master Trust, Series 2019-2, Class B, 2.86%, 11/15/24 | $ | 1,619 | $ | 1,639 | |||||||
Americredit Automobile Receivables Trust, Series 2018-2, Class A3, 3.15%, 3/20/23, Callable 3/18/23 @ 100 | 323 | 327 | |||||||||
Americredit Automobile Receivables Trust, Series 2018-1, Class C, 3.50%, 1/18/24, Callable 10/18/22 @ 100 | 2,640 | 2,716 | |||||||||
ARI Fleet Lease Trust, Series 2020-A, Class A3, 1.80%, 8/15/28, Callable 5/15/23 @ 100 (a) | 438 | 436 | |||||||||
BCC Funding Corp. XVI LLC, Series 2019-1A, Class A2, 2.46%, 8/20/24, Callable 8/20/23 @ 100 (a) | 2,500 | 2,510 | |||||||||
Canadian Pacer Auto Receivables Trust, Series 2018-1A, Class C, 3.82%, 4/19/24, Callable 5/19/21 @ 100 (a) | 1,190 | 1,204 | |||||||||
CarMax Auto Owner Trust, Series 2020-1, Class B, 2.21%, 9/15/25, Callable 12/15/23 @ 100 | 620 | 608 | |||||||||
Credit Acceptance Auto Loan Trust, Series 2018-3A, Class A, 3.55%, 8/15/27, Callable 10/15/21 @ 100 (a) | 1,503 | 1,515 | |||||||||
Dell Equipment Finance Trust, Series 2020-1, Class A3, 2.24%, 2/22/23, Callable 10/22/22 @ 100 (a) | 325 | 325 | |||||||||
Drive Auto Receivables Trust, Series 2019-1, Class C, 3.78%, 4/15/25, Callable 6/15/22 @ 100 | 712 | 720 | |||||||||
Element Rail Leasing I LLC, Series 2014-1A, Class A2, 3.67%, 4/19/44 (a) | 1,320 | 1,321 | |||||||||
Enterprise Fleet Financing LLC, Series 2020-1, Class A3, 1.86%, 12/22/25 (a) | 399 | 392 | |||||||||
Evergreen Credit Card Trust, Series 2019-2, Class A, 1.90%, 9/15/24 (a) | 1,577 | 1,579 | |||||||||
Exeter Automobile Receivables Trust, Series 2020-1A, Class B, 2.26%, 4/15/24, Callable 5/15/24 @ 100 (a) | 499 | 498 | |||||||||
Exeter Automobile Receivables Trust, Series 2017-3A, Class D, 5.28%, 10/15/24, Callable 3/15/22 @ 100 (a) | 490 | 472 | |||||||||
Exeter Automobile Receivables Trust, Series 2019-2A, Class C, 3.30%, 3/15/24, Callable 12/15/22 @ 100 (a) | 970 | 975 | |||||||||
Ford Credit Auto Owner Trust, Series 2019-A, Class A3, 2.78%, 9/15/23, Callable 3/15/23 @ 100 | 350 | 359 | |||||||||
Ford Credit Auto Owner Trust, Series 2020-1, Class B, 2.29%, 8/15/31, Callable 2/15/25 @ 100 (a) | 648 | 568 | |||||||||
GM Financial Consumer Automobile Receivables Trust, Series 2020-1, Class A4, 1.90%, 3/17/25, Callable 2/16/23 @ 100 | 648 | 664 | |||||||||
GM Financial Consumer Automobile Receivables Trust, Series 2020-2, Class A4, 1.74%, 8/18/25, Callable 12/16/23 @ 100 | 812 | 833 | |||||||||
Goal Capital Funding Trust, Series 2005-2, Class A4, 0.56% (LIBOR03M+20bps), 8/25/44, Callable 8/25/20 @ 100 (b) | 678 | 633 | |||||||||
Great American Auto Leasing, Inc., Series 2019-1, Class A3, 3.05%, 9/15/22, Callable 12/15/22 @ 100 (a) | 444 | 449 | |||||||||
Hertz Vehicle Financing II LP, Series 2019-3A, Class A, 2.67%, 12/26/25 (a) | 793 | 752 | |||||||||
HPEFS Equipment Trust, Series 2020-1A, Class B, 1.89%, 2/20/30, Callable 2/20/23 @ 100 (a) | 249 | 247 | |||||||||
HPEFS Equipment Trust, Series 2019-1A, Class C, 2.49%, 9/20/29, Callable 7/20/22 @ 100 (a) | 437 | 428 | |||||||||
John Deere Owner Trust, Series 2020-A, Class A4, 1.21%, 11/16/26, Callable 4/15/23 @ 100 | 972 | 966 |
See notes to financial statements.
9
USAA Mutual Funds Trust USAA Cornerstone Moderate Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Kubota Credit Owner Trust, Series 2020-1A, Class A4, 2.26%, 7/15/26, Callable 10/15/23 @ 100 (a) | $ | 423 | $ | 427 | |||||||
MMAF Equipment Finance LLC, Series 2017-B, Class A4, 2.41%, 11/15/24, Callable 2/15/28 @ 100 (a) | 972 | 984 | |||||||||
Navient Student Loan Trust, Series 2015-2, Class B, 1.67% (LIBOR01M+150bps), 8/25/50, Callable 10/25/28 @ 100 (b) | 950 | 820 | |||||||||
NP SPE II LLC, Series 2017-1A, Class A1, 3.37%, 10/21/47, Callable 10/20/27 @ 100 (a) | 356 | 345 | |||||||||
OSCAR US Funding Trust IX LLC, Series 2018-2A, Class A4, 3.63%, 9/10/25 (a) | 2,560 | 2,626 | |||||||||
SCF Equipment Leasing LLC, Series 2017-2A, Class A, 3.41%, 12/20/23, Callable 6/20/20 @ 100 (a) | 563 | 561 | |||||||||
SLM Student Loan Trust, Series 2003-14, Class B, 1.54% (LIBOR03M+55bps), 10/25/65, Callable 10/25/28 @ 100 (b) | 337 | 301 | |||||||||
Synchrony Credit Card Master Note Trust, Series 2016-2, Class C, 2.95%, 5/15/24 | 1,461 | 1,461 | |||||||||
Synchrony Credit Card Master Note Trust, Series 2018-2, Class A, 3.47%, 5/15/26 | 1,721 | 1,809 | |||||||||
Transportation Finance Equipment Trust, Series 2019-1, Class A4, 1.88%, 3/25/24, Callable 9/23/23 @ 100 (a) | 972 | 950 | |||||||||
Transportation Finance Equipment Trust, Series 2019-1, Class B, 2.06%, 5/23/24, Callable 9/23/23 @ 100 (a) | 900 | 867 | |||||||||
Trinity Rail Leasing LLC, Series 2019-2A, Class A1, 2.39%, 10/18/49, Callable 10/17/20 @ 100 (a) | 464 | 445 | |||||||||
Trinity Rail Leasing LLC, Series 2019-2A, Class A2, 3.10%, 10/18/49, Callable 10/17/20 @ 100 (a) | 2,000 | 1,875 | |||||||||
Westlake Automobile Receivables Trust, Series 2018-2A, Class D, 4.00%, 1/16/24, Callable 10/15/21 @ 100 (a) | 1,000 | 1,008 | |||||||||
Westlake Automobile Receivables Trust, Series 2020-1A, Class B, 1.94%, 4/15/25, Callable 6/15/24 @ 100 (a) | 1,618 | 1,621 | |||||||||
Total Asset Backed Securities (Cost $39,489) | 39,236 | ||||||||||
Collateralized Mortgage Obligations (1.2%) | |||||||||||
Banc of America Commercial Mortgage Trust, Series 2006-3, Class AM, 5.66%, 7/10/44 (c) | 1,254 | 252 | |||||||||
Banc of America Commercial Mortgage Trust, Series 2008-1, Class AJ, 6.57%, 2/10/51 (c) | 130 | 132 | |||||||||
BANK, Series 2019-BNK20, Class A3, 3.01%, 9/15/61 | 1,000 | 1,083 | |||||||||
Barclays Commercial Mortgage Trust, Series 2019-C5, Class ASB, 2.99%, 11/15/52 | 754 | 798 | |||||||||
Benchmark Mortgage Trust, Series 2019-B14, Class A5, 3.05%, 12/15/61 | 1,295 | 1,400 | |||||||||
Benchmark Mortgage Trust, Series 2020-B17, Class ASB, 2.18%, 3/15/53 | 648 | 653 | |||||||||
BTH Mortgage-Backed Securities Trust, Series 2018-21, Class A, 2.87% (LIBOR01M+250bps), 10/7/21 (a) (b) | 1,200 | 1,154 | |||||||||
BX Trust, Series 2019-OC11, Class A, 3.20%, 12/9/41 (a) | 598 | 602 | |||||||||
Citigroup Commercial Mortgage Trust, Series 2019-PRM, Class A, 3.34%, 5/10/36 (a) | 1,000 | 1,029 | |||||||||
Citigroup Commercial Mortgage Trust, Series 2020-GC46, Class AAB, 2.61%, 1/15/53 | 648 | 670 | |||||||||
Citigroup Commercial Mortgage Trust, Series 2020-555, Class A, 2.65%, 12/10/41 (a) | 972 | 936 |
See notes to financial statements.
10
USAA Mutual Funds Trust USAA Cornerstone Moderate Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares or Principal Amount | Value | |||||||||
COMM Mortgage Trust, Series 2019-GC44, Class ASB, 2.87%, 8/15/57 | $ | 971 | $ | 1,021 | |||||||
Credit Suisse Commercial Mortgage Trust, Series 2007-C1, Class AMFL, 0.37% (LIBOR01M+19bps), 2/15/40 (b) | 25 | 23 | |||||||||
CSAIL Commercial Mortgage Trust, Series 2016-C6, Class XA, 1.90%, 1/15/49 (c) (d) | 11,595 | 911 | |||||||||
DBJPM Mortgage Trust, Series 2016-SFC, Class A, 2.83%, 8/10/36 (a) | 1,500 | 1,355 | |||||||||
GE Commercial Mortgage Corp., Series 2007-C1, Class AM, 5.61%, 12/10/49 (c) | 69 | 49 | |||||||||
GS Mortgage Securities Trust, Series 2020-GC45, Class AAB, 2.84%, 2/13/53 | 347 | 364 | |||||||||
GS Mortgage Securities Trust, Series 2020-GC45, Class A5, 2.91%, 2/13/53 | 411 | 440 | |||||||||
UBS Commercial Mortgage Trust, Series 2012-C1, Class XA, 2.07%, 5/10/45 (a) (c) (d) | 11,369 | 321 | |||||||||
Total Collateralized Mortgage Obligations (Cost $14,197) | 13,193 | ||||||||||
Common Stocks (14.8%) | |||||||||||
Communication Services (1.1%): | |||||||||||
Activision Blizzard, Inc. | 8,821 | 635 | |||||||||
Alphabet, Inc. Class C (e) | 1,405 | 2,008 | |||||||||
AMC Networks, Inc. Class A (e) | 3,684 | 104 | |||||||||
AT&T, Inc. | 34,463 | 1,064 | |||||||||
Charter Communications, Inc. Class A (e) (f) | 1,341 | 729 | |||||||||
Comcast Corp. Class A | 25,828 | 1,023 | |||||||||
DISH Network Corp. Class A (e) (f) | 28,456 | 901 | |||||||||
Electronic Arts, Inc. (e) | 5,251 | 645 | |||||||||
Entravision Communications Corp. Class A | 36,387 | 55 | |||||||||
Facebook, Inc. Class A (e) | 6,540 | 1,472 | |||||||||
Fox Corp. Class A | 26,750 | 780 | |||||||||
Gray Television, Inc. (e) | 14,017 | 195 | |||||||||
John Wiley & Sons, Inc. Class A | 2,443 | 98 | |||||||||
Match Group, Inc. (e) (f) | 6,136 | 546 | |||||||||
Meredith Corp. | 10,562 | 158 | |||||||||
Shenandoah Telecommunications Co. (f) | 2,432 | 128 | |||||||||
Sinclair Broadcast Group, Inc. Class A | 3,793 | 71 | |||||||||
Sirius XM Holdings, Inc. | 95,834 | 558 | |||||||||
Take-Two Interactive Software, Inc. (e) | 4,491 | 612 | |||||||||
Verizon Communications, Inc. | 18,425 | 1,057 | |||||||||
12,839 | |||||||||||
Consumer Discretionary (1.2%): | |||||||||||
Asbury Automotive Group, Inc. (e) (f) | 1,058 | 77 | |||||||||
AutoZone, Inc. (e) | 551 | 633 | |||||||||
Big Lots, Inc. | 2,447 | 95 | |||||||||
Booking Holdings, Inc. (e) | 452 | 741 | |||||||||
Cracker Barrel Old Country Store, Inc. | 1,566 | 168 | |||||||||
Deckers Outdoor Corp. (e) | 774 | 141 | |||||||||
Dick's Sporting Goods, Inc. (f) | 3,170 | 114 | |||||||||
Dollar General Corp. | 3,588 | 687 | |||||||||
Domino's Pizza, Inc. | 1,482 | 572 | |||||||||
Foot Locker, Inc. | 5,964 | 165 | |||||||||
Gentex Corp. | 5,880 | 156 | |||||||||
G-III Apparel Group Ltd. (e) | 11,453 | 118 |
See notes to financial statements.
11
USAA Mutual Funds Trust USAA Cornerstone Moderate Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Graham Holdings Co. Class B | 178 | $ | 64 | ||||||||
Group 1 Automotive, Inc. (f) | 1,272 | 80 | |||||||||
H&R Block, Inc. | 7,438 | 126 | |||||||||
Helen of Troy Ltd. (e) | 403 | 73 | |||||||||
Kontoor Brands, Inc. | 9,873 | 144 | |||||||||
La-Z-Boy, Inc. | 3,206 | 83 | |||||||||
Lowe's Cos., Inc. | 6,094 | 794 | |||||||||
Lululemon Athletica, Inc. (e) (f) | 2,647 | 794 | |||||||||
Macy's, Inc. (f) | 14,465 | 92 | |||||||||
Nike, Inc. Class B | 16,332 | 1,610 | |||||||||
Office Depot, Inc. | 40,359 | 100 | |||||||||
O'Reilly Automotive, Inc. (e) | 1,453 | 606 | |||||||||
Penske Automotive Group, Inc. | 1,580 | 57 | |||||||||
Qurate Retail, Inc. Class A (e) | 17,507 | 144 | |||||||||
Steven Madden Ltd. | 3,145 | 74 | |||||||||
Sturm Ruger & Co., Inc. (g) | 1,727 | 108 | |||||||||
Target Corp. (g) | 5,682 | 695 | |||||||||
Tesla, Inc. (e) | 927 | 774 | |||||||||
Texas Roadhouse, Inc. | 2,050 | 106 | |||||||||
The Buckle, Inc. | 13,031 | 184 | |||||||||
The Home Depot, Inc. | 8,445 | 2,098 | |||||||||
Toll Brothers, Inc. | 6,591 | 213 | |||||||||
Williams-Sonoma, Inc. | 2,084 | 173 | |||||||||
Wingstop, Inc. | 878 | 107 | |||||||||
Yum! Brands, Inc. | 6,850 | 615 | |||||||||
13,581 | |||||||||||
Consumer Staples (1.0%): | |||||||||||
Cal-Maine Foods, Inc. (e) (f) | 2,155 | 96 | |||||||||
Colgate-Palmolive Co. | 9,136 | 661 | |||||||||
Costco Wholesale Corp. | 2,515 | 776 | |||||||||
Edgewell Personal Care Co. (e) | 4,983 | 151 | |||||||||
Flowers Foods, Inc. | 7,434 | 175 | |||||||||
Hostess Brands, Inc. (e) | 8,342 | 101 | |||||||||
Ingles Markets, Inc. Class A | 2,386 | 102 | |||||||||
Kimberly-Clark Corp. | 4,487 | 635 | |||||||||
Philip Morris International, Inc. | 21,543 | 1,580 | |||||||||
Pilgrim's Pride Corp. (e) | 7,926 | 164 | |||||||||
Sanderson Farms, Inc. | 452 | 60 | |||||||||
Sprouts Farmers Market, Inc. (e) | 6,711 | 169 | |||||||||
Sysco Corp. | 10,981 | 606 | |||||||||
The Clorox Co. (f) | 5,810 | 1,198 | |||||||||
The Kroger Co. | 39,017 | 1,273 | |||||||||
The Procter & Gamble Co. | 17,832 | 2,067 | |||||||||
Tyson Foods, Inc. Class A | 12,210 | 750 | |||||||||
U.S. Foods Holding Corp. (e) | 6,912 | 132 | |||||||||
Walgreens Boots Alliance, Inc. | 16,844 | 723 | |||||||||
11,419 |
See notes to financial statements.
12
USAA Mutual Funds Trust USAA Cornerstone Moderate Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Energy (0.4%): | |||||||||||
Bonanza Creek Energy, Inc. (e) | 4,873 | $ | 82 | ||||||||
Chevron Corp. | 10,278 | 942 | |||||||||
ConocoPhillips | 32,545 | 1,373 | |||||||||
Delek U.S. Holdings, Inc. | 4,943 | 97 | |||||||||
PBF Energy, Inc. Class A | 9,470 | 101 | |||||||||
Phillips 66 | 18,049 | 1,412 | |||||||||
Renewable Energy Group, Inc. (e) | 9,516 | 271 | |||||||||
Valero Energy Corp. | 9,706 | 647 | |||||||||
4,925 | |||||||||||
Financials (2.0%): | |||||||||||
Affiliated Managers Group, Inc. | 2,143 | 143 | |||||||||
AGNC Investment Corp. | 2,789 | 36 | |||||||||
American Equity Investment Life Holding Co. | 6,917 | 150 | |||||||||
Annaly Capital Management, Inc. | 7,374 | 45 | |||||||||
Aon PLC Class A | 3,368 | 663 | |||||||||
BancFirst Corp. | 1,776 | 68 | |||||||||
Bank of Hawaii Corp. | 3,909 | 251 | |||||||||
BankUnited, Inc. | 8,735 | 161 | |||||||||
Brown & Brown, Inc. | 15,817 | 636 | |||||||||
Cadence Bancorp | 9,080 | 73 | |||||||||
Capital One Financial Corp. | 11,751 | 800 | |||||||||
Cathay General Bancorp | 6,833 | 186 | |||||||||
Chimera Investment Corp. (f) | 14,099 | 117 | |||||||||
Cullen/Frost Bankers, Inc. (f) | 3,019 | 229 | |||||||||
Employers Holdings, Inc. | 4,208 | 126 | |||||||||
Essent Group Ltd. | 7,716 | 255 | |||||||||
Fifth Third Bancorp | 39,437 | 765 | |||||||||
First Bancorp, Inc. | 10,384 | 57 | |||||||||
First Republic Bank | 5,800 | 627 | |||||||||
Great Western Bancorp, Inc. | 7,731 | 110 | |||||||||
Intercontinental Exchange, Inc. | 6,917 | 673 | |||||||||
JPMorgan Chase & Co. | 11,311 | 1,101 | |||||||||
Ladder Capital Corp. | 10,830 | 86 | |||||||||
Legg Mason, Inc. | 1,426 | 71 | |||||||||
LPL Financial Holdings, Inc. | 1,811 | 129 | |||||||||
MarketAxess Holdings, Inc. | 1,229 | 625 | |||||||||
MetLife, Inc. | 20,772 | 748 | |||||||||
MGIC Investment Corp. | 10,172 | 84 | |||||||||
Morgan Stanley | 19,232 | 850 | |||||||||
Mr. Cooper Group, Inc. (e) | 14,528 | 162 | |||||||||
MSCI, Inc. | 3,544 | 1,165 | |||||||||
National General Holdings Corp. | 5,817 | 118 | |||||||||
Nelnet, Inc. Class A | 2,069 | 102 | |||||||||
New York Community Bancorp, Inc. | 12,469 | 125 | |||||||||
NMI Holdings, Inc. Class A (e) | 10,355 | 159 | |||||||||
Primerica, Inc. | 1,455 | 165 | |||||||||
Radian Group, Inc. | 17,606 | 280 | |||||||||
Regions Financial Corp. | 68,127 | 771 | |||||||||
S&P Global, Inc. | 4,537 | 1,475 |
See notes to financial statements.
13
USAA Mutual Funds Trust USAA Cornerstone Moderate Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
State Street Corp. (f) | 12,001 | $ | 732 | ||||||||
SVB Financial Group (e) | 3,018 | 648 | |||||||||
Synchrony Financial | 38,074 | 776 | |||||||||
Synovus Financial Corp. | 3,127 | 60 | |||||||||
T. Rowe Price Group, Inc. | 5,267 | 637 | |||||||||
The Allstate Corp. | 11,695 | 1,144 | |||||||||
The Goldman Sachs Group, Inc. | 4,159 | 817 | |||||||||
The PNC Financial Services Group, Inc. | 6,309 | 719 | |||||||||
The Progressive Corp. | 16,088 | 1,250 | |||||||||
U.S. Bancorp | 18,365 | 653 | |||||||||
Universal Insurance Holdings, Inc. | 6,213 | 111 | |||||||||
Waddell & Reed Financial, Inc. Class A | 12,513 | 163 | |||||||||
Walker & Dunlop, Inc. | 6,283 | 254 | |||||||||
Webster Financial Corp. | 3,992 | 113 | |||||||||
Western Alliance Bancorp | 6,680 | 255 | |||||||||
World Acceptance Corp. (e) | 2,616 | 174 | |||||||||
22,893 | |||||||||||
Health Care (2.5%): | |||||||||||
AbbVie, Inc. | 18,620 | 1,726 | |||||||||
Acadia Healthcare Co., Inc. (e) | 2,072 | 59 | |||||||||
Amedisys, Inc. (e) | 991 | 190 | |||||||||
Amgen, Inc. | 6,923 | 1,590 | |||||||||
AMN Healthcare Services, Inc. (e) | 4,710 | 209 | |||||||||
Anthem, Inc. | 2,794 | 822 | |||||||||
Biogen, Inc. (e) | 4,414 | 1,355 | |||||||||
Bristol-Myers Squibb Co. | 27,298 | 1,630 | |||||||||
Bruker Corp. | 4,182 | 181 | |||||||||
Cerner Corp. | 8,414 | 613 | |||||||||
Chemed Corp. | 578 | 277 | |||||||||
Cigna Corp. | 4,121 | 813 | |||||||||
Corcept Therapeutics, Inc. (e) | 17,694 | 268 | |||||||||
Covetrus, Inc. (e) (f) | 6,099 | 93 | |||||||||
CVS Health Corp. | 12,793 | 839 | |||||||||
DaVita, Inc. (e) | 6,824 | 552 | |||||||||
DexCom, Inc. (e) | 1,652 | 625 | |||||||||
Eli Lilly & Co. | 9,754 | 1,492 | |||||||||
Encompass Health Corp. | 2,716 | 199 | |||||||||
Halozyme Therapeutics, Inc. (e) | 4,011 | 97 | |||||||||
HCA Healthcare, Inc. | 6,905 | 738 | |||||||||
HealthEquity, Inc. (e) (f) | 1,304 | 81 | |||||||||
Hill-Rom Holdings, Inc. | 2,406 | 245 | |||||||||
Horizon Therapeutics PLC (e) | 2,694 | 137 | |||||||||
IDEXX Laboratories, Inc. (e) | 2,004 | 619 | |||||||||
Innoviva, Inc. (e) | 11,005 | 154 | |||||||||
Johnson & Johnson (g) | 16,666 | 2,479 | |||||||||
Masimo Corp. (e) | 1,006 | 242 | |||||||||
Medpace Holdings, Inc. (e) | 1,252 | 116 | |||||||||
Merck & Co., Inc. | 11,084 | 895 | |||||||||
Meridian Bioscience, Inc. (e) (f) | 8,195 | 127 | |||||||||
Mettler-Toledo International, Inc. (e) | 778 | 618 |
See notes to financial statements.
14
USAA Mutual Funds Trust USAA Cornerstone Moderate Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Molina Healthcare, Inc. (e) | 385 | $ | 72 | ||||||||
Patterson Cos., Inc. (f) (g) | 5,998 | 118 | |||||||||
PerkinElmer, Inc. | 2,523 | 253 | |||||||||
Pfizer, Inc. | 25,886 | 989 | |||||||||
Phibro Animal Health Corp. Class A | 6,840 | 179 | |||||||||
PRA Health Sciences, Inc. (e) | 1,810 | 187 | |||||||||
Prestige Consumer Healthcare, Inc. (e) | 3,543 | 150 | |||||||||
Regeneron Pharmaceuticals, Inc. (e) | 1,128 | 691 | |||||||||
ResMed, Inc. | 3,675 | 591 | |||||||||
Select Medical Holdings Corp. (e) | 9,538 | 154 | |||||||||
Simulations Plus, Inc. | 2,274 | 115 | |||||||||
Supernus Pharmaceuticals, Inc. (e) | 4,299 | 104 | |||||||||
The Ensign Group, Inc. | 4,431 | 194 | |||||||||
United Therapeutics Corp. (e) | 2,114 | 249 | |||||||||
UnitedHealth Group, Inc. | 7,207 | 2,197 | |||||||||
Vertex Pharmaceuticals, Inc. (e) | 2,463 | 709 | |||||||||
Waters Corp. (e) (f) | 2,960 | 592 | |||||||||
West Pharmaceutical Services, Inc. | 2,912 | 629 | |||||||||
28,254 | |||||||||||
Industrials (1.5%): | |||||||||||
3M Co. | 4,568 | 715 | |||||||||
ACCO Brands Corp. | 11,297 | 70 | |||||||||
AECOM (e) | 5,266 | 204 | |||||||||
Allison Transmission Holdings, Inc. | 5,239 | 198 | |||||||||
Apogee Enterprises, Inc. | 4,516 | 93 | |||||||||
ArcBest Corp. | 3,252 | 73 | |||||||||
Atkore International Group, Inc. (e) | 5,747 | 154 | |||||||||
Carrier Global Corp. (e) | 75,870 | 1,553 | |||||||||
Cimpress PLC (e) | 1,697 | 153 | |||||||||
Crane Co. | 2,744 | 153 | |||||||||
Cummins, Inc. | 4,420 | 750 | |||||||||
Deluxe Corp. | 2,645 | 62 | |||||||||
Eaton Corp. PLC | 8,721 | 740 | |||||||||
EnPro Industries, Inc. | 1,430 | 64 | |||||||||
FedEx Corp. | 5,989 | 782 | |||||||||
FTI Consulting, Inc. (e) | 645 | 78 | |||||||||
Generac Holdings, Inc. (e) | 1,221 | 136 | |||||||||
General Dynamics Corp. | 5,683 | 834 | |||||||||
GMS, Inc. (e) | 7,074 | 145 | |||||||||
Herman Miller, Inc. | 10,735 | 247 | |||||||||
Hillenbrand, Inc. | 4,836 | 124 | |||||||||
IHS Markit Ltd. | 9,061 | 629 | |||||||||
Illinois Tool Works, Inc. | 3,860 | 666 | |||||||||
KAR Auction Services, Inc. | 6,553 | 94 | |||||||||
Knoll, Inc. | 5,492 | 58 | |||||||||
Lockheed Martin Corp. | 3,691 | 1,434 | |||||||||
Masonite International Corp. (e) | 1,591 | 106 | |||||||||
Meritor, Inc. (e) | 5,550 | 113 | |||||||||
MSC Industrial Direct Co., Inc. | 2,600 | 180 | |||||||||
Northrop Grumman Corp. | 1,968 | 660 |
See notes to financial statements.
15
USAA Mutual Funds Trust USAA Cornerstone Moderate Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
nVent Electric PLC | 4,982 | $ | 91 | ||||||||
Old Dominion Freight Line, Inc. | 3,768 | 645 | |||||||||
Oshkosh Corp. | 2,566 | 184 | |||||||||
Otis Worldwide Corp. | 11,609 | 611 | |||||||||
Patrick Industries, Inc. | 5,401 | 280 | |||||||||
Regal Beloit Corp. | 3,037 | 242 | |||||||||
Resideo Technologies, Inc. (e) | 22,404 | 158 | |||||||||
Rockwell Automation, Inc. | 2,982 | 645 | |||||||||
Rush Enterprises, Inc. Class A | 4,038 | 168 | |||||||||
Steelcase, Inc. Class A | 21,088 | 244 | |||||||||
Teledyne Technologies, Inc. (e) | 1,795 | 672 | |||||||||
The Timken Co. | 3,481 | 148 | |||||||||
The Toro Co. | 1,236 | 88 | |||||||||
Trinity Industries, Inc. | 3,780 | 75 | |||||||||
Verisk Analytics, Inc. | 3,800 | 656 | |||||||||
Wabash National Corp. | 12,414 | 119 | |||||||||
Werner Enterprises, Inc. | 3,165 | 146 | |||||||||
WESCO International, Inc. (e) | 4,178 | 139 | |||||||||
WW Grainger, Inc. | 1,958 | 606 | |||||||||
17,185 | |||||||||||
Information Technology (3.4%): | |||||||||||
Accenture PLC Class A | 3,984 | 803 | |||||||||
Adobe, Inc. (e) | 4,584 | 1,772 | |||||||||
Apple, Inc. | 27,919 | 8,877 | |||||||||
Applied Materials, Inc. | 14,250 | 801 | |||||||||
Aspen Technology, Inc. (e) | 1,474 | 156 | |||||||||
Belden, Inc. | 1,830 | 62 | |||||||||
Broadcom, Inc. | 3,091 | 900 | |||||||||
CACI International, Inc. Class A (e) | 827 | 207 | |||||||||
Cardtronics PLC Class A (e) | 6,107 | 148 | |||||||||
CDW Corp. | 5,183 | 575 | |||||||||
Ciena Corp. (e) | 2,404 | 133 | |||||||||
Cirrus Logic, Inc. (e) | 2,923 | 212 | |||||||||
Cisco Systems, Inc. | 22,665 | 1,084 | |||||||||
Citrix Systems, Inc. | 3,937 | 583 | |||||||||
Cognizant Technology Solutions Corp. Class A | 12,058 | 639 | |||||||||
Coherent, Inc. (e) | 1,041 | 151 | |||||||||
CoreLogic, Inc. | 2,191 | 109 | |||||||||
CSG Systems International, Inc. | 3,640 | 172 | |||||||||
DocuSign, Inc. (e) | 4,934 | 690 | |||||||||
Euronet Worldwide, Inc. (e) | 942 | 89 | |||||||||
Fair Isaac Corp. (e) | 483 | 195 | |||||||||
HP, Inc. | 84,728 | 1,283 | |||||||||
Insight Enterprises, Inc. (e) | 2,084 | 107 | |||||||||
Intel Corp. | 18,092 | 1,139 | |||||||||
InterDigital, Inc. | 1,955 | 107 | |||||||||
Intuit, Inc. | 2,347 | 681 | |||||||||
J2 Global, Inc. (e) | 3,037 | 238 | |||||||||
Jabil, Inc. | 5,522 | 165 | |||||||||
KBR, Inc. | 7,310 | 171 |
See notes to financial statements.
16
USAA Mutual Funds Trust USAA Cornerstone Moderate Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
KLA Corp. | 3,617 | $ | 636 | ||||||||
Kulicke & Soffa Industries, Inc. | 4,757 | 106 | |||||||||
Lam Research Corp. | 7,755 | 2,122 | |||||||||
Leidos Holdings, Inc. | 5,879 | 619 | |||||||||
LogMeIn, Inc. | 1,091 | 93 | |||||||||
Manhattan Associates, Inc. (e) | 2,338 | 207 | |||||||||
Mastercard, Inc. Class A | 3,432 | 1,033 | |||||||||
MAXIMUS, Inc. | 3,818 | 275 | |||||||||
Methode Electronics, Inc. | 3,486 | 109 | |||||||||
Micron Technology, Inc. (e) | 15,774 | 756 | |||||||||
Microsoft Corp. (g) | 15,080 | 2,763 | |||||||||
NCR Corp. (e) | 8,136 | 147 | |||||||||
NIC, Inc. | 8,094 | 195 | |||||||||
NVIDIA Corp. | 5,554 | 1,972 | |||||||||
Oracle Corp. | 16,205 | 871 | |||||||||
Paylocity Holding Corp. (e) | 561 | 73 | |||||||||
Perspecta, Inc. | 5,591 | 124 | |||||||||
Proofpoint, Inc. (e) | 720 | 84 | |||||||||
Science Applications International Corp. | 953 | 84 | |||||||||
Seagate Technology PLC | 13,902 | 737 | |||||||||
SMART Global Holdings, Inc. (e) | 4,629 | 124 | |||||||||
SYNNEX Corp. | 1,048 | 112 | |||||||||
Teradyne, Inc. | 2,041 | 137 | |||||||||
Texas Instruments, Inc. | 6,252 | 742 | |||||||||
The Hackett Group, Inc. | 13,739 | 189 | |||||||||
Ultra Clean Holdings, Inc. (e) | 8,944 | 185 | |||||||||
VeriSign, Inc. (e) | 2,661 | 583 | |||||||||
VMware, Inc. Class A (e) (f) | 5,197 | 812 | |||||||||
38,139 | |||||||||||
Materials (0.6%): | |||||||||||
Air Products & Chemicals, Inc. | 2,827 | 683 | |||||||||
Berry Global Group, Inc. (e) | 2,648 | 119 | |||||||||
Domtar Corp. | 3,988 | 81 | |||||||||
Huntsman Corp. | 9,714 | 176 | |||||||||
Hycroft Mining Corp. (e) (h) (i) | 401,639 | 567 | |||||||||
Linde PLC | 3,965 | 802 | |||||||||
LyondellBasell Industries NV Class A | 23,336 | 1,488 | |||||||||
Newmont Corp. | 10,168 | 594 | |||||||||
Reliance Steel & Aluminum Co. | 2,746 | 266 | |||||||||
Resolute Forest Products, Inc. (e) | 22,331 | 42 | |||||||||
Schweitzer-Mauduit International, Inc. | 4,099 | 125 | |||||||||
Silgan Holdings, Inc. | 7,449 | 249 | |||||||||
The Sherwin-Williams Co. | 1,146 | 681 | |||||||||
Trinseo SA | 2,923 | 60 | |||||||||
Warrior Met Coal, Inc. | 17,085 | 241 | |||||||||
6,174 | |||||||||||
Real Estate (0.6%): | |||||||||||
Alexandria Real Estate Equities, Inc. | 594 | 91 | |||||||||
American Tower Corp. | 2,284 | 590 |
See notes to financial statements.
17
USAA Mutual Funds Trust USAA Cornerstone Moderate Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
AvalonBay Communities, Inc. | 720 | $ | 112 | ||||||||
Boston Properties, Inc. | 797 | 69 | |||||||||
Brixmor Property Group, Inc. | 10,294 | 115 | |||||||||
Camden Property Trust | 499 | 46 | |||||||||
CBRE Group, Inc. Class A (e) | 1,640 | 72 | |||||||||
City Office REIT, Inc. | 8,727 | 81 | |||||||||
CoreCivic, Inc. | 7,410 | 89 | |||||||||
Crown Castle International Corp. | 2,144 | 369 | |||||||||
Digital Realty Trust, Inc. | 1,355 | 195 | |||||||||
Diversified Healthcare Trust | 27,893 | 100 | |||||||||
Duke Realty Corp. | 1,895 | 65 | |||||||||
EPR Properties | 3,555 | 112 | |||||||||
Equinix, Inc. | 440 | 307 | |||||||||
Equity LifeStyle Properties, Inc. | 892 | 56 | |||||||||
Equity Residential | 1,915 | 116 | |||||||||
Essex Property Trust, Inc. | 341 | 83 | |||||||||
Extra Space Storage, Inc. | 668 | 65 | |||||||||
Federal Realty Investment Trust (f) | 389 | 31 | |||||||||
Gaming and Leisure Properties, Inc. | 7,474 | 258 | |||||||||
Healthpeak Properties, Inc. | 2,552 | 63 | |||||||||
Host Hotels & Resorts, Inc. (f) | 3,698 | 44 | |||||||||
Invitation Homes, Inc. | 2,773 | 73 | |||||||||
Iron Mountain, Inc. (f) | 1,481 | 38 | |||||||||
iStar, Inc. | 7,940 | 87 | |||||||||
Jones Lang LaSalle, Inc. | 1,182 | 121 | |||||||||
Kimco Realty Corp. | 2,177 | 24 | |||||||||
Lamar Advertising Co. Class A | 2,931 | 194 | |||||||||
LTC Properties, Inc. (f) | 6,563 | 242 | |||||||||
Medical Properties Trust, Inc. | 13,126 | 237 | |||||||||
Mid-America Apartment Communities, Inc. | 588 | 68 | |||||||||
National Retail Properties, Inc. | 885 | 28 | |||||||||
Omega Healthcare Investors, Inc. | 5,590 | 174 | |||||||||
PotlatchDeltic Corp. | 5,452 | 185 | |||||||||
Preferred Apartment Communities, Inc. Class A | 8,719 | 61 | |||||||||
Prologis, Inc. | 3,802 | 348 | |||||||||
Public Storage | 811 | 164 | |||||||||
Realty Income Corp. | 1,681 | 93 | |||||||||
Regency Centers Corp. | 864 | 37 | |||||||||
SBA Communications Corp. | 581 | 182 | |||||||||
Simon Property Group, Inc. | 1,582 | 91 | |||||||||
SL Green Realty Corp. | 413 | 17 | |||||||||
Summit Hotel Properties, Inc. | 15,798 | 99 | |||||||||
Sun Communities, Inc. | 478 | 66 | |||||||||
The GEO Group, Inc. | 7,235 | 87 | |||||||||
UDR, Inc. | 1,511 | 56 | |||||||||
Universal Health Realty Income Trust | 908 | 85 | |||||||||
Ventas, Inc. | 1,922 | 67 | |||||||||
VEREIT, Inc. | 5,506 | 30 | |||||||||
VICI Properties, Inc. | 2,377 | 47 | |||||||||
Vornado Realty Trust (f) | 886 | 32 | |||||||||
Welltower, Inc. | 2,092 | 106 |
See notes to financial statements.
18
USAA Mutual Funds Trust USAA Cornerstone Moderate Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares or Principal Amount | Value | |||||||||
Weyerhaeuser Co. | 3,842 | $ | 78 | ||||||||
WP Carey, Inc. | 888 | 53 | |||||||||
6,399 | |||||||||||
Utilities (0.5%): | |||||||||||
ALLETE, Inc. | 2,464 | 145 | |||||||||
Clearway Energy, Inc. Class C | 5,743 | 126 | |||||||||
Duke Energy Corp. (g) | 9,237 | 791 | |||||||||
Eversource Energy (g) | 7,745 | 648 | |||||||||
Exelon Corp. | 20,239 | 775 | |||||||||
IDACORP, Inc. | 2,434 | 227 | |||||||||
New Jersey Resources Corp. | 6,164 | 216 | |||||||||
NextEra Energy, Inc. (g) | 3,282 | 839 | |||||||||
NorthWestern Corp. | 2,091 | 126 | |||||||||
Southwest Gas Holdings, Inc. | 2,748 | 209 | |||||||||
The Southern Co. (f) (g) | 11,991 | 684 | |||||||||
WEC Energy Group, Inc. (g) | 6,995 | 642 | |||||||||
5,428 | |||||||||||
Total Common Stocks (Cost $163,150) | 167,236 | ||||||||||
Preferred Stocks (1.2%) | |||||||||||
Communication Services (0.2%): | |||||||||||
Qwest Corp., 6.50%, 9/1/56 | 112,000 | 2,628 | |||||||||
Consumer Staples (0.6%): | |||||||||||
CHS, Inc., cumulative redeemable, Series 1, 7.88% (j) | 161,682 | 4,480 | |||||||||
Dairy Farmers of America, Inc., cumulative redeemable, 7.88% (a) (j) | 28,000 | 2,408 | |||||||||
6,888 | |||||||||||
Financials (0.4%): | |||||||||||
American Overseas Group Ltd., non-cumulative, Series A, 3.88% (LIBOR03M+356bps), 12/15/66 (b) (h) (k) | 1,500 | 375 | |||||||||
Delphi Financial Group, Inc., 3.58% (LIBOR03M+319bps), 5/15/37 (b) (h) | 167,198 | 3,678 | |||||||||
4,053 | |||||||||||
Total Preferred Stocks (Cost $14,545) | 13,569 | ||||||||||
Senior Secured Loans (0.2%) | |||||||||||
Academy Ltd., 1st Lien Term Loan B, 5.00% (LIBOR01M+400bps), 7/2/22 (b) | $ | 2,804 | 2,089 | ||||||||
Total Senior Secured Loans (Cost $2,461) | 2,089 | ||||||||||
Corporate Bonds (15.4%) | |||||||||||
Communication Services (0.5%): | |||||||||||
AT&T, Inc., 2.30%, 6/1/27, Callable 4/1/27 @ 100 | 985 | 1,000 | |||||||||
Fox Corp., 3.05%, 4/7/25, Callable 3/7/25 @ 100 | 462 | 493 | |||||||||
The Walt Disney Co., 2.20%, 1/13/28 | 437 | 456 | |||||||||
T-Mobile USA, Inc., 3.88%, 4/15/30, Callable 1/15/30 @ 100 (a) (g) | 1,174 | 1,274 | |||||||||
Verizon Communications, Inc., 4.50%, 8/10/33 | 1,943 | 2,405 | |||||||||
5,628 |
See notes to financial statements.
19
USAA Mutual Funds Trust USAA Cornerstone Moderate Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Consumer Discretionary (0.4%): | |||||||||||
AutoNation, Inc., 4.75%, 6/1/30, Callable 3/1/30 @ 100 | $ | 394 | $ | 411 | |||||||
eBay, Inc., 1.90%, 3/11/25, Callable 2/11/25 @ 100 | 1,134 | 1,146 | |||||||||
General Motors Co., 6.80%, 10/1/27, Callable 8/1/27 @ 100 (f) | 409 | 467 | |||||||||
Hasbro, Inc., 3.55%, 11/19/26, Callable 9/19/26 @ 100 | 777 | 800 | |||||||||
Nordstrom, Inc., 4.38%, 4/1/30, Callable 1/1/30 @ 100 | 648 | 478 | |||||||||
O'Reilly Automotive, Inc., 4.20%, 4/1/30, Callable 1/1/30 @ 100 | 500 | 567 | |||||||||
VF Corp., 2.95%, 4/23/30, Callable 1/23/30 @ 100 (f) | 488 | 509 | |||||||||
4,378 | |||||||||||
Consumer Staples (0.9%): | |||||||||||
Altria Group, Inc., 3.40%, 5/6/30, Callable 2/6/30 @ 100 (f) | 468 | 494 | |||||||||
Anheuser-Busch Cos. LLC/Anheuser-Busch InBev Worldwide, Inc., 4.70%, 2/1/36, Callable 8/1/35 @ 100 | 1,619 | 1,837 | |||||||||
BAT Capital Corp., 2.79%, 9/6/24, Callable 8/6/24 @ 100 | 1,500 | 1,562 | |||||||||
Kraft Heinz Foods Co., 3.75%, 4/1/30, Callable 1/1/30 @ 100 (a) | 728 | 753 | |||||||||
McCormick & Co., Inc., 2.50%, 4/15/30, Callable 1/15/30 @ 100 | 284 | 296 | |||||||||
Mondelez International, Inc., 2.75%, 4/13/30, Callable 1/13/30 @ 100 | 250 | 263 | |||||||||
PepsiCo, Inc., 2.25%, 3/19/25, Callable 2/19/25 @ 100 | 1,505 | 1,608 | |||||||||
Sysco Corp., 5.95%, 4/1/30, Callable 1/1/30 @ 100 | 379 | 455 | |||||||||
The Coca-Cola Co., 3.45%, 3/25/30 | 500 | 581 | |||||||||
The Procter & Gamble Co., 3.00%, 3/25/30 | 646 | 740 | |||||||||
Unilever Capital Corp., 2.60%, 5/5/24, Callable 3/5/24 @ 100 | 1,500 | 1,606 | |||||||||
10,195 | |||||||||||
Energy (2.2%): | |||||||||||
Cameron LNG LLC, 3.30%, 1/15/35, Callable 9/15/34 @ 100 (a) | 1,237 | 1,321 | |||||||||
Cheniere Corpus Christi Holdings LLC, 3.70%, 11/15/29, Callable 5/18/29 @ 100 (a) | 1,618 | 1,610 | |||||||||
Diamondback Energy, Inc., 3.25%, 12/1/26, Callable 10/1/26 @ 100 | 971 | 945 | |||||||||
Enable Midstream Partners LP, 4.15%, 9/15/29, Callable 6/15/29 @ 100 | 1,500 | 1,220 | |||||||||
Enbridge Energy Partners LP, 7.38%, 10/15/45, Callable 4/15/45 @ 100 (g) | 2,950 | 4,054 | |||||||||
Energy Transfer Operating LP, 3.75%, 5/15/30, Callable 2/15/30 @ 100 | 972 | 957 | |||||||||
Enterprise Products Operating LLC, 2.80%, 1/31/30, Callable 10/31/29 @ 100 | 972 | 1,014 | |||||||||
Enterprise TE Partners LP, 4.68% (LIBOR03M+278bps), 6/1/67, Callable 7/6/20 @ 100 (b) | 2,500 | 2,122 | |||||||||
EOG Resources, Inc., 4.38%, 4/15/30, Callable 1/15/30 @ 100 | 299 | 352 | |||||||||
EQM Midstream Partners LP, 4.75%, 7/15/23, Callable 6/15/23 @ 100 (g) | 3,300 | 3,262 | |||||||||
EQT Corp., 7.00%, 2/1/30, Callable 11/1/29 @ 100 | 655 | 695 | |||||||||
Exxon Mobil Corp., 2.99%, 3/19/25, Callable 2/19/25 @ 100 (g) | 1,618 | 1,769 | |||||||||
Marathon Petroleum Corp., 4.70%, 5/1/25, Callable 4/1/25 @ 100 | 458 | 506 | |||||||||
National Oilwell Varco, Inc., 3.60%, 12/1/29, Callable 9/1/29 @ 100 | 1,295 | 1,210 | |||||||||
Occidental Petroleum Corp. 3.50%, 8/15/29, Callable 5/15/29 @ 100 | 209 | 142 | |||||||||
4.40%, 8/15/49, Callable 2/15/49 @ 100 | 648 | 384 | |||||||||
ONEOK, Inc., 6.35%, 1/15/31, Callable 10/15/30 @ 100 | 817 | 922 | |||||||||
Rockies Express Pipeline LLC, 4.80%, 5/15/30, Callable 2/15/30 @ 100 (a) | 648 | 603 | |||||||||
Sabine Pass Liquefaction LLC, 4.50%, 5/15/30, Callable 11/15/29 @ 100 (a) | 102 | 112 | |||||||||
Targa Resources Partners LP/Targa Resources Partners Finance Corp., 5.50%, 3/1/30, Callable 3/1/25 @ 102.75 (a) | 648 | 650 | |||||||||
Western Midstream Operating LP, 3.10%, 2/1/25, Callable 1/1/25 @ 100 | 682 | 634 | |||||||||
24,484 |
See notes to financial statements.
20
USAA Mutual Funds Trust USAA Cornerstone Moderate Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Financials (5.3%): | |||||||||||
Amcor Finance USA, Inc., 3.63%, 4/28/26, Callable 1/28/26 @ 100 | $ | 250 | $ | 266 | |||||||
AmTrust Financial Services, Inc., 6.13%, 8/15/23 | 1,921 | 1,804 | |||||||||
Ares Capital Corp., 3.63%, 1/19/22, Callable 12/19/21 @ 100 (g) | 1,600 | 1,587 | |||||||||
Assurant, Inc., 3.70%, 2/22/30, Callable 11/22/29 @ 100 | 1,154 | 1,114 | |||||||||
BancorpSouth Bank, 4.13% (LIBOR03M+247bps), 11/20/29, Callable 11/20/24 @ 100 (b) (f) | 833 | 814 | |||||||||
BBVA USA, 3.88%, 4/10/25, Callable 3/10/25 @ 100 | 2,000 | 2,044 | |||||||||
BMW U.S. Capital LLC, 3.25%, 8/14/20 (a) (g) | 3,200 | 3,206 | |||||||||
Capital One NA, 2.15%, 9/6/22, Callable 8/6/22 @ 100 | 1,500 | 1,518 | |||||||||
Citizens Financial Group, Inc., 2.50%, 2/6/30, Callable 11/6/29 @ 100 | 972 | 939 | |||||||||
Cullen/Frost Capital Trust II, 3.13% (LIBOR03M+155bps), 3/1/34, Callable 7/6/20 @ 100 (b) | 4,000 | 3,196 | |||||||||
First Horizon Bank, 5.75%, 5/1/30, Callable 2/1/30 @ 100 | 488 | 491 | |||||||||
First Maryland Capital I, 2.22% (LIBOR03M+100bps), 1/15/27, Callable 7/6/20 @ 100 (b) | 2,850 | 2,430 | |||||||||
Ford Motor Credit Co. LLC, 4.06%, 11/1/24, Callable 10/1/24 @ 100 | 1,250 | 1,179 | |||||||||
Global Atlantic Financial Co., 4.40%, 10/15/29, Callable 7/15/29 @ 100 (a) | 832 | 760 | |||||||||
HSB Group, Inc., 2.13% (LIBOR03M+91bps), 7/15/27, Callable 7/6/20 @ 100 (b) | 2,575 | 2,293 | |||||||||
Hyundai Capital America, 3.75%, 7/8/21 (a) (g) | 3,250 | 3,279 | |||||||||
JPMorgan Chase & Co., 2.52% (SOFR+204bps), 4/22/31, Callable 4/22/30 @ 100 (b) | 569 | 582 | |||||||||
KeyCorp, 2.25%, 4/6/27, MTN | 972 | 974 | |||||||||
Level 3 Financing, Inc., 3.88%, 11/15/29, Callable 8/15/29 @ 100 (a) | 1,295 | 1,325 | |||||||||
Loews Corp., 3.20%, 5/15/30, Callable 2/15/30 @ 100 (f) | 654 | 692 | |||||||||
Manufactures & Traders Trust Co., 2.22% (LIBOR03M+64bps), 12/1/21, Callable 7/6/20 @ 100 (b) (g) | 2,000 | 1,982 | |||||||||
Nationwide Mutual Insurance Co., 3.03% (LIBOR03M+229bps), 12/15/24, Callable 7/6/20 @ 100 (a) (b) | 5,670 | 5,585 | |||||||||
Pinnacle Financial Partners, Inc., 4.13% (LIBOR03M+278bps), 9/15/29, Callable 9/15/24 @ 100 (b) | 1,000 | 983 | |||||||||
PNC Bank NA, 2.70%, 10/22/29 | 2,250 | 2,369 | |||||||||
PPL Capital Funding, Inc., 4.13%, 4/15/30, Callable 1/15/30 @ 100 | 647 | 730 | |||||||||
Prudential Financial, Inc., 5.62% (LIBOR03M+392bps), 6/15/43, Callable 6/15/23 @ 100 (b) | 2,800 | 2,904 | |||||||||
Regions Financial Corp., 2.25%, 5/18/25, Callable 4/18/25 @ 100 | 737 | 750 | |||||||||
Santander Holdings USA, Inc., 3.45%, 6/2/25, Callable 5/2/25 @ 100 (l) | 412 | 416 | |||||||||
Signature Bank, 4.13% (LIBOR03M+256bps), 11/1/29, Callable 11/1/24 @ 100 (b) | 2,600 | 2,594 | |||||||||
SunTrust Capital, 1.06% (LIBOR03M+67bps), 5/15/27, Callable 7/6/20 @ 100 (b) | 6,000 | 4,981 | |||||||||
Texas Capital Bank NA, 5.25%, 1/31/26 | 647 | 699 | |||||||||
The Allstate Corp., 5.75% (LIBOR03M+294bps), 8/15/53, Callable 8/15/23 @ 100 (b) | 640 | 652 | |||||||||
The PNC Financial Services Group, Inc., 2.55%, 1/22/30, Callable 10/24/29 @ 100 | 1,134 | 1,210 | |||||||||
The Progressive Corp., 3.20%, 3/26/30, Callable 12/26/29 @ 100 (f) | 194 | 217 | |||||||||
Toyota Motor Credit Corp., 3.38%, 4/1/30, MTN | 714 | 803 | |||||||||
Wells Fargo & Co., 2.19% (SOFR+200bps), 4/30/26, Callable 4/30/25 @ 100 (b) | 733 | 743 | |||||||||
Zions Bancorp NA, 3.25%, 10/29/29, Callable 7/29/29 @ 100 | 1,295 | 1,214 | |||||||||
59,325 | |||||||||||
Health Care (0.9%): | |||||||||||
AbbVie, Inc., 3.20%, 11/21/29, Callable 8/21/29 @ 100 (a) (g) | 1,295 | 1,399 | |||||||||
Biogen, Inc., 2.25%, 5/1/30, Callable 2/1/30 @ 100 | 1,140 | 1,157 |
See notes to financial statements.
21
USAA Mutual Funds Trust USAA Cornerstone Moderate Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Commonspirit Health, 3.35%, 10/1/29, Callable 4/1/29 @ 100 | $ | 1,000 | $ | 1,006 | |||||||
CVS Health Corp., 3.25%, 8/15/29, Callable 5/15/29 @ 100 (g) | 1,998 | 2,160 | |||||||||
DENTSPLY SIRONA, Inc., 3.25%, 6/1/30, Callable 3/1/30 @ 100 | 738 | 756 | |||||||||
Duke University Health System, Inc., 2.60%, 6/1/30 | 485 | 523 | |||||||||
HCA, Inc., 5.13%, 6/15/39, Callable 12/15/38 @ 100 | 1,619 | 1,859 | |||||||||
Laboratory Corp. of America Holdings, 2.95%, 12/1/29, Callable 9/1/29 @ 100 | 971 | 1,023 | |||||||||
Thermo Fisher Scientific, Inc., 4.13%, 3/25/25, Callable 2/25/25 @ 100 | 646 | 735 | |||||||||
10,618 | |||||||||||
Industrials (2.0%): | |||||||||||
Ashtead Capital, Inc. 4.00%, 5/1/28, Callable 5/1/23 @ 102 (a) | 1,017 | 1,006 | |||||||||
4.25%, 11/1/29, Callable 11/1/24 @ 102.13 (a) | 173 | 168 | |||||||||
BNSF Funding Trust, 6.61% (LIBOR03M+235bps), 12/15/55, Callable 1/15/26 @ 100 (b) | 3,000 | 3,112 | |||||||||
Carlisle Cos., Inc., 2.75%, 3/1/30, Callable 12/1/29 @ 100 | 972 | 957 | |||||||||
Carrier Global Corp., 3.38%, 4/5/40, Callable 10/5/39 @ 100 (a) | 486 | 433 | |||||||||
Caterpillar, Inc., 2.60%, 4/9/30, Callable 1/9/30 @ 100 | 486 | 525 | |||||||||
Dover Corp., 2.95%, 11/4/29, Callable 8/4/29 @ 100 | 971 | 1,021 | |||||||||
FedEx Corp., 4.25%, 5/15/30, Callable 2/15/30 @ 100 | 750 | 828 | |||||||||
Ferguson Finance PLC, 3.25%, 6/2/30, Callable 3/2/30 @ 100 (a) | 444 | 449 | |||||||||
GATX Corp., 4.00%, 6/30/30, Callable 3/30/30 @ 100 | 314 | 325 | |||||||||
General Dynamics Corp., 3.50%, 4/1/27, Callable 2/1/27 @ 100 | 646 | 728 | |||||||||
Georgia-Pacific LLC, 2.10%, 4/30/27, Callable 2/28/27 @ 100 (a) | 1,140 | 1,161 | |||||||||
Hillenbrand, Inc., 4.50%, 9/15/26, Callable 7/15/26 @ 100 (f) | 1,500 | 1,372 | |||||||||
IDEX Corp., 3.00%, 5/1/30, Callable 2/1/30 @ 100 | 1,140 | 1,170 | |||||||||
Otis Worldwide Corp., 3.11%, 2/15/40, Callable 8/15/39 @ 100 (a) | 648 | 636 | |||||||||
Penske Truck Leasing Co. LP/PTL Finance Corp., 4.00%, 7/15/25, Callable 6/15/25 @ 100 (a) | 647 | 693 | |||||||||
Ryder System, Inc. 3.50%, 6/1/21, MTN (g) | 3,200 | 3,240 | |||||||||
2.90%, 12/1/26, Callable 10/1/26 @ 100, MTN (f) | 1,618 | 1,623 | |||||||||
The Boeing Co., 5.71%, 5/1/40, Callable 11/1/39 @ 100 | 979 | 1,075 | |||||||||
The Conservation Fund A Nonprofit Corp., 3.47%, 12/15/29, Callable 9/15/29 @ 100 | 1,300 | 1,378 | |||||||||
United Airlines Pass Through Trust, 2.90%, 11/1/29 | 1,500 | 1,035 | |||||||||
22,935 | |||||||||||
Information Technology (0.7%): | |||||||||||
Amphenol Corp., 2.80%, 2/15/30, Callable 11/15/29 @ 100 | 1,500 | 1,570 | |||||||||
Analog Devices, Inc., 2.95%, 4/1/25, Callable 3/1/25 @ 100 (f) | 243 | 257 | |||||||||
Broadcom, Inc., 4.30%, 11/15/32, Callable 8/15/32 @ 100 (a) | 408 | 430 | |||||||||
Hewlett Packard Enterprise Co., 4.65%, 10/1/24, Callable 9/1/24 @ 100 | 648 | 713 | |||||||||
Intel Corp., 3.90%, 3/25/30, Callable 12/25/29 @ 100 (f) | 500 | 599 | |||||||||
Keysight Technologies, Inc., 3.00%, 10/30/29, Callable 7/30/29 @ 100 | 1,803 | 1,887 | |||||||||
Microsoft Corp., 3.45%, 8/8/36, Callable 2/8/36 @ 100 | 2,105 | 2,482 | |||||||||
7,938 | |||||||||||
Materials (0.4%): | |||||||||||
Avery Dennison Corp., 2.65%, 4/30/30, Callable 2/1/30 @ 100 | 389 | 387 | |||||||||
Colonial Enterprises, Inc., 3.25%, 5/15/30, Callable 2/15/30 @ 100 (a) | 204 | 216 |
See notes to financial statements.
22
USAA Mutual Funds Trust USAA Cornerstone Moderate Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Ecolab, Inc., 4.80%, 3/24/30, Callable 12/24/29 @ 100 | $ | 369 | $ | 461 | |||||||
LYB International Finance III LLC, 3.38%, 5/1/30, Callable 2/1/30 @ 100 | 569 | 590 | |||||||||
Packaging Corp. of America, 3.00%, 12/15/29, Callable 9/15/29 @ 100 | 1,619 | 1,704 | |||||||||
Sonoco Products Co., 3.13%, 5/1/30, Callable 2/1/30 @ 100 | 752 | 762 | |||||||||
Vulcan Materials Co., 3.50%, 6/1/30, Callable 3/1/30 @ 100 | 654 | 681 | |||||||||
4,801 | |||||||||||
Real Estate (0.7%): | |||||||||||
AvalonBay Communities, Inc., 2.45%, 1/15/31, MTN, Callable 10/15/30 @ 100 | 983 | 1,011 | |||||||||
Boston Properties LP, 3.25%, 1/30/31, Callable 10/30/30 @ 100 | 428 | 449 | |||||||||
Essex Portfolio LP, 2.65%, 3/15/32, Callable 12/15/31 @ 100 | 1,134 | 1,127 | |||||||||
Lexington Realty Trust, 4.25%, 6/15/23, Callable 3/15/23 @ 100 | 1,400 | 1,392 | |||||||||
Mid-America Apartments LP, 2.75%, 3/15/30, Callable 12/15/29 @ 100 | 1,619 | 1,628 | |||||||||
Sabra Health Care LP, 5.13%, 8/15/26, Callable 5/15/26 @ 100 | 1,000 | 970 | |||||||||
SBA Tower Trust, 2.84%, 1/15/25 (a) | 692 | 702 | |||||||||
VICI Properties LP/VICI Note Co., Inc., 4.63%, 12/1/29, Callable 12/1/24 @ 102.31 (a) | 149 | 148 | |||||||||
7,427 | |||||||||||
Utilities (1.4%): | |||||||||||
AEP Texas, Inc., 3.45%, 1/15/50, Callable 7/15/49 @ 100 | 1,133 | 1,210 | |||||||||
Alabama Power Co., 3.85%, 12/1/42 | 971 | 1,102 | |||||||||
Ameren Corp., 3.50%, 1/15/31, Callable 10/15/30 @ 100 | 323 | 359 | |||||||||
CenterPoint Energy, Inc., 2.50%, 9/1/24, Callable 8/1/24 @ 100 | 2,000 | 2,080 | |||||||||
Cleco Corporate Holdings LLC, 3.38%, 9/15/29, Callable 6/11/29 @ 100 (a) | 1,467 | 1,489 | |||||||||
DTE Electric Co., 2.25%, 3/1/30, Callable 12/1/29 @ 100 (f) | 972 | 1,006 | |||||||||
Duke Energy Florida LLC, 3.85%, 11/15/42, Callable 5/15/42 @ 100 | 971 | 1,124 | |||||||||
Exelon Generation Co. LLC, 3.25%, 6/1/25, Callable 5/1/25 @ 100 | 737 | 763 | |||||||||
IPALCO Enterprises, Inc., 4.25%, 5/1/30, Callable 2/1/30 @ 100 (a) | 738 | 779 | |||||||||
ITC Holdings Corp., 2.95%, 5/14/30, Callable 2/14/30 @ 100 (a) | 737 | 776 | |||||||||
National Fuel Gas Co., 5.50%, 1/15/26, Callable 12/15/25 @ 100 (l) | 984 | 997 | |||||||||
NextEra Energy Capital Holdings, Inc., 3.34%, 9/1/20 | 2,133 | 2,147 | |||||||||
The Narragansett Electric Co., 3.40%, 4/9/30, Callable 1/9/30 @ 100 (a) | 486 | 543 | |||||||||
Union Electric Co., 2.95%, 3/15/30, Callable 12/15/29 @ 100 | 1,618 | 1,779 | |||||||||
16,154 | |||||||||||
Total Corporate Bonds (Cost $170,705) | 173,883 | ||||||||||
Yankee Dollar (1.8%) | |||||||||||
Consumer Staples (0.1%): | |||||||||||
Alimentation Couche-Tard, Inc., 2.95%, 1/25/30, Callable 10/25/29 @ 100 (a) | 648 | 655 | |||||||||
Energy (0.0%): (m) | |||||||||||
Petroleos Mexicanos, 6.49%, 1/23/27, Callable 11/23/26 @ 100 (a) | 554 | 491 | |||||||||
Petronas Capital Ltd., 3.50%, 4/21/30, Callable 1/21/30 @ 100 (a) (f) | 49 | 54 | |||||||||
545 | |||||||||||
Financials (1.1%): | |||||||||||
Athene Holding Ltd., 4.13%, 1/12/28, Callable 10/12/27 @ 100 | 3,200 | 3,134 | |||||||||
Banco Santander Mexico SA Institucion de Banca Multiple Grupo Financiero Santand, 5.38%, 4/17/25 (a) | 464 | 497 | |||||||||
Barclays PLC, 2.85% (LIBOR03M+245bps), 5/7/26, Callable 5/7/25 @ 100 (b) | 979 | 1,002 |
See notes to financial statements.
23
USAA Mutual Funds Trust USAA Cornerstone Moderate Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Deutsche Bank AG, 3.96% (SOFR+258bps), 11/26/25, Callable 11/26/24 @ 100 (b) | $ | 972 | $ | 999 | |||||||
Diageo Capital PLC, 2.13%, 4/29/32, Callable 1/29/32 @ 100 | 1,140 | 1,158 | |||||||||
QBE Capital Funding III Ltd., 7.25% (USSW10+405bps), 5/24/41, Callable 5/24/21 @ 100 (a) (b) | 3,430 | 3,553 | |||||||||
Royal Bank of Canada, 1.60%, 4/17/23, MTN | 1,138 | 1,162 | |||||||||
Sumitomo Mitsui Financial Group, Inc., 2.45%, 9/27/24 | 1,000 | 1,036 | |||||||||
12,541 | |||||||||||
Industrials (0.3%): | |||||||||||
BAE Systems PLC, 3.40%, 4/15/30, Callable 1/15/30 @ 100 (a) | 750 | 814 | |||||||||
CK Hutchison International 19 II Ltd., 2.75%, 9/6/29, Callable 6/6/29 @ 100 (a) | 1,500 | 1,562 | |||||||||
Heathrow Funding Ltd., 4.88%, 7/15/21 (a) | 650 | 662 | |||||||||
3,038 | |||||||||||
Materials (0.3%): | |||||||||||
Anglo American Capital PLC, 5.63%, 4/1/30, Callable 1/1/30 @ 100 (a) | 606 | 698 | |||||||||
Braskem Netherlands Finance BV, 4.50%, 1/31/30 (a) | 971 | 853 | |||||||||
CCL Industries, Inc., 3.05%, 6/1/30, Callable 3/1/30 @ 100 (a) (l) | 739 | 743 | |||||||||
Teck Resources Ltd., 6.13%, 10/1/35 | 1,038 | 1,080 | |||||||||
3,374 | |||||||||||
Total Yankee Dollar (Cost $19,816) | 20,153 | ||||||||||
Municipal Bonds (1.0%) | |||||||||||
Florida (0.1%): | |||||||||||
County of Broward Florida Airport System Revenue, Series C, 2.50%, 10/1/28 | 648 | 630 | |||||||||
Hillsborough County School Board Certificate of Participation, Series B, 1.92%, 7/1/25 | 410 | 412 | |||||||||
1,042 | |||||||||||
Georgia (0.1%): | |||||||||||
Athens Housing Authority Revenue, 2.42%, 12/1/26 | 1,380 | 1,430 | |||||||||
Michigan (0.1%): | |||||||||||
Michigan Finance Authority Revenue, 3.08%, 12/1/34 | 970 | 1,037 | |||||||||
New Jersey (0.1%): | |||||||||||
New Jersey Economic Development Authority Revenue, Series NNN, 2.88%, 6/15/24 | 624 | 592 | |||||||||
New Jersey Transportation Trust Fund Authority Revenue, 4.08%, 6/15/39 | 250 | 207 | |||||||||
North Hudson Sewerage Authority Revenue, 2.88%, 6/1/28 | 324 | 336 | |||||||||
1,135 | |||||||||||
New York (0.2%): | |||||||||||
New York State Dormitory Authority Revenue, Series B, 2.83%, 7/1/31 | 1,620 | 1,633 | |||||||||
New York State Thruway Authority Revenue, Series M, 2.55%, 1/1/28 | 373 | 369 | |||||||||
2,002 | |||||||||||
Pennsylvania (0.2%): | |||||||||||
Scranton School District, GO (INS-Build America Mutual Assurance Co.), 3.15%, 4/1/31 | 250 | 256 | |||||||||
State Public School Building Authority Revenue, 3.05%, 4/1/28 | 647 | 646 |
See notes to financial statements.
24
USAA Mutual Funds Trust USAA Cornerstone Moderate Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares or Principal Amount | Value | |||||||||
University of Pittsburgh-of The Commonwealth System of Higher Education Revenue Series C, 2.53%, 9/15/31 | $ | 645 | $ | 640 | |||||||
Series C, 2.58%, 9/15/32 | 325 | 321 | |||||||||
Series C, 2.63%, 9/15/33 | 645 | 636 | |||||||||
2,499 | |||||||||||
Texas (0.2%): | |||||||||||
City of Houston Texas Combined Utility System Revenue, 3.72%, 11/15/28 | 810 | 910 | |||||||||
Harris County Cultural Education Facilities Finance Corp. Revenue, Series B, 2.81%, 5/15/29 | 645 | 655 | |||||||||
State of Texas, GO, 3.00%, 4/1/28 | 972 | 1,062 | |||||||||
2,627 | |||||||||||
Total Municipal Bonds (Cost $11,651) | 11,772 | ||||||||||
U.S. Government Agency Mortgages (7.0%) | |||||||||||
Federal Home Loan Mortgage Corporation Series K047, Class A2, 3.33%, 5/25/25 (c) | 5,200 | 5,774 | |||||||||
Series K151, Class A3, 3.51%, 4/25/30 | 5,000 | 5,854 | |||||||||
Series K156, Class A2, 3.70%, 1/25/33 (c) | 2,679 | 3,167 | |||||||||
3.00%, 4/1/46 - 8/1/47 | 48,399 | 51,173 | |||||||||
3.50%, 4/1/46 - 4/1/48 | 11,077 | 11,751 | |||||||||
77,719 | |||||||||||
Federal National Mortgage Association Series 2016-M2, Class AV2, 2.15%, 1/25/23 | 1,383 | 1,414 | |||||||||
Total U.S. Government Agency Mortgages (Cost $74,487) | 79,133 | ||||||||||
U.S. Treasury Obligations (10.3%) | |||||||||||
U.S. Treasury Bonds 3.13%, 8/15/44 | 8,600 | 11,734 | |||||||||
3.00%, 11/15/44 | 6,000 | 8,037 | |||||||||
2.38%, 11/15/49 | 5,000 | 6,183 | |||||||||
U.S. Treasury Notes 2.50%, 1/31/21 (g) | 2,000 | 2,031 | |||||||||
1.13%, 2/28/21 | 15,664 | 15,773 | |||||||||
1.63%, 11/15/22 | 18,000 | 18,637 | |||||||||
1.63%, 4/30/23 | 14,658 | 15,267 | |||||||||
2.25%, 11/15/25 | 5,000 | 5,509 | |||||||||
1.63%, 2/15/26 | 20,000 | 21,389 | |||||||||
2.25%, 2/15/27 | 3,500 | 3,911 | |||||||||
2.38%, 5/15/29 | 7,850 | 9,068 | |||||||||
Total U.S. Treasury Obligations (Cost $106,292) | 117,539 | ||||||||||
Exchange-Traded Funds (41.7%) | |||||||||||
Invesco DB Commodity Index Tracking Fund | 114,500 | 1,349 | |||||||||
Invesco FTSE RAFI Developed Markets ex-US ETF (f) | 335,920 | 11,277 | |||||||||
Invesco FTSE RAFI Emerging Markets ETF | 686,690 | 11,578 | |||||||||
iShares 20+ Year Treasury Bond ETF (f) | 42,055 | 6,880 |
See notes to financial statements.
25
USAA Mutual Funds Trust USAA Cornerstone Moderate Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
iShares Core MSCI EAFE ETF | 584,518 | $ | 32,751 | ||||||||
iShares Core MSCI Emerging Markets ETF | 484,237 | 21,810 | |||||||||
iShares Core S&P 500 ETF | 300,379 | 91,670 | |||||||||
iShares Core S&P Small-Cap ETF (f) | 55,550 | 3,674 | |||||||||
iShares Core US Aggregate Bond ETF | 208,301 | 24,507 | |||||||||
iShares iBoxx $ Investment Grade Corporate Bond ETF | 143,403 | 18,932 | |||||||||
iShares iBoxx High Yield Corporate Bond ETF (f) | 121,375 | 10,004 | |||||||||
iShares MSCI Canada ETF | 300,292 | 7,549 | |||||||||
iShares MSCI United Kingdom ETF (f) | 71,734 | 1,846 | |||||||||
Schwab Fundamental Emerging Markets Large Co. Index ETF | 920,892 | 20,812 | |||||||||
Schwab Fundamental International Large Co. Index ETF | 1,549,839 | 35,894 | |||||||||
Schwab Fundamental International Small Co. Index ETF (f) | 266,700 | 7,286 | |||||||||
SPDR Bloomberg Barclays High Yield Bond ETF | 106,160 | 10,827 | |||||||||
SPDR Gold Shares | 76,134 | 12,403 | |||||||||
SPDR S&P Emerging Markets Smallcap ETF | 34,497 | 1,311 | |||||||||
U.S. Commodity Index Fund | 19,300 | 514 | |||||||||
VanEck Vectors Gold Miners ETF | 80,314 | 2,756 | |||||||||
VanEck Vectors Junior Gold Miners ETF | 24,379 | 1,123 | |||||||||
Vanguard FTSE All-World ex-US ETF (f) | 229,686 | 10,533 | |||||||||
Vanguard FTSE Developed Markets ETF | 1,435,078 | 54,059 | |||||||||
Vanguard FTSE Emerging Markets ETF | 47,000 | 1,756 | |||||||||
Vanguard FTSE Europe ETF (f) | 450,164 | 21,950 | |||||||||
Vanguard Real Estate ETF | 101,145 | 7,832 | |||||||||
Vanguard S&P 500 ETF (g) | 46,423 | 12,987 | |||||||||
Vanguard Short-Term Bond ETF | 125,732 | 10,437 | |||||||||
Vanguard Small-Cap Value ETF (f) | 2,376 | 250 | |||||||||
Vanguard Total Stock Market ETF (g) | 18,018 | 2,770 | |||||||||
WisdomTree Emerging Markets SmallCap Dividend Fund | 59,797 | 2,248 | |||||||||
Xtrackers USD High Yield Corporate Bond ETF (f) | 221,226 | 10,415 | |||||||||
Total Exchange-Traded Funds (Cost $472,280) | 471,990 | ||||||||||
Affiliated Exchange-Traded Funds (0.2%) | |||||||||||
VictoryShares USAA MSCI Emerging Markets Value Momentum ETF | 51,500 | 1,897 | |||||||||
Total Affiliated Exchange-Traded Funds (Cost $2,636) | 1,897 | ||||||||||
Collateral for Securities Loaned^ (3.2%) | |||||||||||
HSBC U.S. Government Money Market Fund I Shares, 0.13% (n) | 35,735,109 | 35,735 | |||||||||
Invesco Government & Agency Portfolio Institutional Shares, 0.12% (n) | 984,020 | 984 | |||||||||
Total Collateral for Securities Loaned (Cost $36,719) | 36,719 | ||||||||||
Total Investments (Cost $1,128,428) — 101.5% | 1,148,409 | ||||||||||
Liabilities in excess of other assets — (1.5)% | (16,951 | ) | |||||||||
NET ASSETS — 100.00% | $ | 1,131,458 |
At May 31, 2020, the Fund's investments in foreign securities were 17.5% of net assets.
^ Purchased with cash collateral from securities on loan.
(a) Rule 144A security or other security that is restricted as to resale to institutional investors. The Fund's Adviser has deemed this security to be liquid based upon procedures approved by the Board of Trustees.
See notes to financial statements.
26
USAA Mutual Funds Trust USAA Cornerstone Moderate Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
As of May 31, 2020, the fair value of these securities was $75,273 (thousands) and amounted to 6.6% of net assets.
(b) Variable or Floating-Rate Security. Rate disclosed is as of May 31, 2020.
(c) The rate for certain asset-backed and mortgage backed securities may vary based on factors relating to the pool of assets underlying the security. The rate disclosed is the rate in effect at May 31, 2020.
(d) Security is interest only.
(e) Non-income producing security.
(f) All or a portion of this security is on loan.
(g) All or a portion of this security has been designated as collateral for securities purchased on a when-issued basis.
(h) The Fund's Adviser has deemed this security to be illiquid based upon procedures approved by the Board of Trustees. As of May 31, 2020, illiquid securities were 0.5% of the Fund's net assets.
(i) Security was fair valued based upon procedures approved by the Board of Trustees and represents 0.1% of the Fund's net assets as of May 31, 2020. (See Note 2)
(j) Security is perpetual and has no final maturity date but may be subject to calls at various dates in the future.
(k) Security was fair valued based upon procedures approved by the Board of Trustees and represents 0.0% of the Fund's net assets as of May 31, 2020. This security is classified as Level 3 within the fair value hierarchy. (See Note 2)
(l) Security purchased on a when-issued basis.
(m) Amount represents less than 0.05% of net assets.
(n) Rate disclosed is the daily yield on May 31, 2020.
bps — Basis points
ETF — Exchange-Traded Fund
GO — General Obligation
LIBOR — London InterBank Offered Rate
LIBOR01M — 1 Month US Dollar LIBOR, rate disclosed as of May 31, 2020, based on the last reset date of the security
LIBOR03M — 3 Month US Dollar LIBOR, rate disclosed as of May 31, 2020, based on the last reset date of the security
LLC — Limited Liability Company
LP — Limited Partnership
MTN — Medium Term Note
PLC — Public Limited Company
REIT — Real Estate Investment Trust
SOFR — Secured Overnight Financing Rate
USSW10 — USD 10 Year Swap Rate, rate disclosed as of May 31, 2020
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.
27
USAA Mutual Funds Trust | Statement of Assets and Liabilities May 31, 2020 |
(Amounts in Thousands, Except Per Share Amounts)
USAA Cornerstone Moderate Fund | |||||||
Assets: | |||||||
Affiliated investments, at value (Cost $2,636) | $ | 1,897 | |||||
Unaffiliated investments, at value (Cost $1,125,792) | 1,146,512 | (a) | |||||
Cash and cash equivalents | 21,332 | ||||||
Receivables: | |||||||
Interest and dividends | 2,724 | ||||||
Capital shares issued | 198 | ||||||
Prepaid expenses | 6 | ||||||
Total Assets | 1,172,669 | ||||||
Liabilities: | |||||||
Payables: | |||||||
Collateral received on loaned securities | 36,719 | ||||||
Investments purchased | 2,716 | ||||||
Capital shares redeemed | 837 | ||||||
Payable to Adviser | 38 | ||||||
Accrued expenses and other payables: | |||||||
Investment advisory fees | 554 | ||||||
Administration fees | 141 | ||||||
Custodian fees | 4 | ||||||
Transfer agent fees | 127 | ||||||
Compliance fees | 1 | ||||||
Other accrued expenses | 74 | ||||||
Total Liabilities | 41,211 | ||||||
Net Assets: | |||||||
Capital | 1,115,285 | ||||||
Total distributable earnings/(loss) | 16,173 | ||||||
Net Assets | $ | 1,131,458 | |||||
Shares (unlimited number of shares authorized with no par value): | 79,433 | ||||||
Net asset value, offering and redemption price per share: (b) | $ | 14.24 |
(a) Includes $36,022 of securities on loan.
(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 | Statement of Operations For the Year Ended May 31, 2020 |
(Amounts in Thousands)
USAA Cornerstone Moderate Fund | |||||||
Investment Income: | |||||||
Income distributions from affiliated funds | $ | 64 | |||||
Dividends | 19,679 | ||||||
Interest | 15,528 | ||||||
Securities lending (net of fees) | 177 | ||||||
Foreign tax withholding | (1 | ) | |||||
Total Income | 35,447 | ||||||
Expenses: | |||||||
Investment advisory fees | 6,966 | ||||||
Administration fees | 1,771 | ||||||
Sub-Administration fees | 93 | ||||||
Custodian fees | 97 | ||||||
Transfer agent fees | 2,515 | ||||||
Trustees' fees | 49 | ||||||
Compliance fees | 7 | ||||||
Legal and audit fees | 92 | ||||||
State registration and filing fees | 28 | ||||||
Interest expense on interfund lending | 1 | ||||||
Line of credit fees | 3 | ||||||
Other expenses | 138 | ||||||
Total Expenses | 11,760 | ||||||
Expenses waived/reimbursed by Adviser | (5 | ) | |||||
Expenses waived/reimbursed by AMCO | (10 | ) | |||||
Net Expenses | 11,745 | ||||||
Net Investment Income (Loss) | 23,702 | ||||||
Realized/Unrealized Gains (Losses) from Investments: | |||||||
Net realized gains (losses) from unaffiliated investment securities and foreign currency translations | 2,490 | ||||||
Net realized gains (losses) from futures contracts | (634 | ) | |||||
Net change in unrealized appreciation/depreciation on affiliated funds | (290 | ) | |||||
Net change in unrealized appreciation/depreciation on unaffiliated investment securities and foreign currency translations | 8,172 | ||||||
Net change in unrealized appreciation/depreciation on futures contracts | 861 | ||||||
Net realized/unrealized gains (losses) on investments | 10,599 | ||||||
Change in net assets resulting from operations | $ | 34,301 |
See notes to financial statements.
29
USAA Mutual Funds Trust | Statements of Changes in Net Assets |
(Amounts in Thousands)
USAA Cornerstone Moderate Fund | |||||||||||
Year Ended May 31, 2020 | Year Ended May 31, 2019 | ||||||||||
From Investments: | |||||||||||
Operations: | |||||||||||
Net investment income (loss) | $ | 23,702 | $ | 24,429 | |||||||
Net realized gains (losses) from investments | 1,856 | 5,112 | |||||||||
Net change in unrealized appreciation/depreciation on investments | 8,743 | (28,770 | ) | ||||||||
Change in net assets resulting from operations | 34,301 | 771 | |||||||||
Change in net assets resulting from distributions to shareholders | (23,992 | ) | (57,045 | ) | |||||||
Change in net assets resulting from capital transactions | (42,225 | ) | 35,616 | ||||||||
Change in net assets | (31,916 | ) | (20,658 | ) | |||||||
Net Assets: | |||||||||||
Beginning of period | 1,163,374 | 1,184,032 | |||||||||
End of period | $ | 1,131,458 | $ | 1,163,374 | |||||||
Capital Transactions: | |||||||||||
Proceeds from shares issued | $ | 90,971 | $ | 126,718 | |||||||
Distributions reinvested | 23,878 | 56,759 | |||||||||
Cost of shares redeemed | (157,074 | ) | (147,861 | ) | |||||||
Change in net assets resulting from capital transactions | $ | (42,225 | ) | $ | 35,616 | ||||||
Share Transactions: | |||||||||||
Issued | 6,302 | 8,845 | |||||||||
Reinvested | 1,646 | 4,109 | |||||||||
Redeemed | (10,983 | ) | (10,306 | ) | |||||||
Change in Shares | (3,035 | ) | 2,648 |
See notes to financial statements.
30
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31
USAA Mutual Funds Trust | Financial Highlights |
For a Share Outstanding Throughout Each Period
Investment Activities | Distributions to Shareholders From | ||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss) | Net Realized and Unrealized Gains (Losses) on Investments | Total from Investment Activities | Net Investment Income | Net Realized Gains From Investments | ||||||||||||||||||||||
USAA Cornerstone Moderate Fund | |||||||||||||||||||||||||||
Year Ended May 31, 2020 | $ | 14.11 | 0.29 | (b) | 0.13 | 0.42 | (0.29 | ) | — | ||||||||||||||||||
Year Ended May 31, 2019 | $ | 14.83 | 0.30 | (0.31 | ) | (0.01 | ) | (0.29 | ) | (0.42 | ) | ||||||||||||||||
Year Ended May 31, 2018 | $ | 15.05 | 0.26 | 0.55 | 0.81 | (0.26 | ) | (0.77 | ) | ||||||||||||||||||
Year Ended May 31, 2017 | $ | 14.01 | 0.31 | 1.06 | 1.37 | (0.33 | ) | — | |||||||||||||||||||
Year Ended May 31, 2016 | $ | 15.43 | 0.39 | (1.15 | ) | (0.76 | ) | (0.38 | ) | (0.28 | ) |
* 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.
^ 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 two year period beginning July 1, 2019 and in effect through June 30, 2021, instead of coinciding with the Fund's fiscal year end. Details of the current contractual expense limitation in effect can be found in Note 4 of the accompanying Notes to Financial Statements.
(a) The expense ratios exclude the impact of expenses paid by each underlying fund.
(b) Per share net investment income (loss) has been calculated using the average daily shares method.
(c) Reflects increased trading activity due to usage of quantitative investment strategies.
See notes to financial statements.
32
USAA Mutual Funds Trust | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Ratios to Average Net Assets | Supplemental Data | ||||||||||||||||||||||||||||||||||
Total Distributions | Net Asset Value, End of Period | Total Return* | Net Expenses^(a) | Net Investment Income (Loss) | Gross Expenses(a) | Net Assets, End of Period (000's) | Portfolio Turnover | ||||||||||||||||||||||||||||
USAA Cornerstone Moderate Fund | |||||||||||||||||||||||||||||||||||
Year Ended May 31, 2020 | (0.29 | ) | $ | 14.24 | 2.98 | % | 1.00 | % | 2.01 | % | 1.00 | % | $ | 1,131,458 | 87 | % | |||||||||||||||||||
Year Ended May 31, 2019 | (0.71 | ) | $ | 14.11 | 0.13 | % | 1.00 | % | 2.10 | % | 1.02 | % | $ | 1,163,374 | 81 | %(c) | |||||||||||||||||||
Year Ended May 31, 2018 | (1.03 | ) | $ | 14.83 | 5.42 | % | 1.00 | % | 1.73 | % | 1.03 | % | $ | 1,184,032 | 51 | % | |||||||||||||||||||
Year Ended May 31, 2017 | (0.33 | ) | $ | 15.05 | 9.91 | % | 1.00 | % | 2.14 | % | 1.10 | % | $ | 1,119,494 | 66 | % | |||||||||||||||||||
Year Ended May 31, 2016 | (0.66 | ) | $ | 14.01 | (4.89 | )% | 1.00 | % | 2.72 | % | 1.16 | % | $ | 1,057,659 | 70 | % |
See notes to financial statements.
33
USAA Mutual Funds Trust | Notes to Financial Statements May 31, 2020 |
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 47 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 November 6, 2018, United Services Automobile Association ("USAA"), the parent company of USAA Asset Management Company ("AMCO"), the investment adviser to the Fund, and USAA Transfer Agency Company, d/b/a USAA Shareholder Account Services ("SAS"), the transfer agent to the Fund, announced that AMCO and SAS would be acquired by Victory Capital Holdings Inc., a global investment management firm headquartered in Cleveland, Ohio (the "Transaction"). The Transaction closed on July 1, 2019. A special shareholder meeting was held on April 18, 2019, at which shareholders of the Fund approved a new investment advisory agreement between the Trust, on behalf of the Fund, and Victory Capital Management Inc. ("VCM" or "Adviser"). Effective July 1, 2019, VCM replaced AMCO as the investment adviser to the Fund and Victory Capital Transfer Agency Company replaced SAS as the Fund's transfer agent. In addition, effective on that same date, shareholders of the Fund also elected the following two new directors to the Board of the Trust to serve upon the closing of the Transaction: (1) David C. Brown, to serve as an Interested Trustee; and (2) John C. Walters, to serve as an Independent Trustee.
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 generally accepted accounting principles in the United States of America ("GAAP"). The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses for the period. Actual results could differ from those estimates. The Fund follows the specialized accounting and reporting requirements under GAAP that are applicable to investment companies under Accounting Standards Codification Topic 946.
Investment Valuation:
The Fund records investments at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The valuation techniques described below maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value. The inputs used for valuing the Fund's investments are summarized in the three broad levels listed below:
• Level 1 — quoted prices in active markets for identical securities
• Level 2 — other significant observable inputs (including quoted prices for similar securities or interest rates applicable to those securities, etc.)
• Level 3 — significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments)
34
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
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 risk associated with entering into those investments.
The Adviser has established the Pricing and Liquidity Committee (the "Committee"), and subject to Trust's Board of Trustees (the "Board") oversight, the Committee administers and oversees the Fund's valuation policies and procedures, which are approved by the Board.
Portfolio securities listed or traded on securities exchanges, including exchange-traded funds ("ETFs"), American Depositary Receipts ("ADRs") 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 are valued at 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.
Debt securities of United States ("U.S.") issuers, along with corporate and municipal securities, including short-term investments maturing in 60 days or less, may be valued using evaluated bid or the last sales price to price securities by dealers or an independent pricing service approved by the Board. These valuations are typically categorized as Level 2 in the fair value hierarchy.
Effective July 1, 2019, the valuation methodology applied to certain debt securities changed. Securities that were previously valued at an evaluated mean are now valued at the evaluated bid or the last sales price.
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, the securities are valued in good faith by the Committee in accordance with valuation procedures approved by 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. These valuations are considered as Level 2 in the fair value hierarchy.
A summary of the valuations as of May 31, 2020, based upon the three levels defined above, is included in the table below while the breakdown, by category, of investments is disclosed in the Schedule of Portfolio Investments (amounts in thousands):
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Asset Backed Securities | $ | — | $ | 39,236 | $ | — | $ | 39,236 | |||||||||||
Collateralized Mortgage Obligations | — | 13,193 | — | 13,193 | |||||||||||||||
Common Stocks | 166,669 | 567 | — | 167,236 | |||||||||||||||
Preferred Stocks | 7,108 | 6,086 | 375 | 13,569 | |||||||||||||||
Senior Secured Loans | — | 2,089 | — | 2,089 | |||||||||||||||
Corporate Bonds | — | 173,883 | — | 173,883 | |||||||||||||||
Yankee Dollars | — | 20,153 | — | 20,153 |
35
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Municipal Bonds | $ | — | $ | 11,772 | $ | — | $ | 11,772 | |||||||||||
U.S. Government Agency Mortgages | — | 79,133 | — | 79,133 | |||||||||||||||
U.S. Treasury Obligations | — | 117,539 | — | 117,539 | |||||||||||||||
Exchange-Traded Funds | 471,990 | — | — | 471,990 | |||||||||||||||
Affiliated Exchange-Traded Funds | 1,897 | — | — | 1,897 | |||||||||||||||
Collateral for Securities Loaned | 36,719 | — | — | 36,719 | |||||||||||||||
Total | $ | 684,383 | $ | 463,651 | $ | 375 | $ | 1,148,409 |
For the year ended May 31, 2020, the Fund had transfers into/out of Level 3 that were less than 0.50% of net assets.
Real Estate Investment Trusts ("REITs"):
The Fund may invest in REITs which report information on the source of their distributions annually. REITs are pooled investment vehicles that invest primarily in income producing real estate or real estate related loans or interests (such as mortgages). Certain distributions received from REITs during the year are recorded as realized gains or return of capital as estimated by the Fund or when such information becomes known.
Investment Companies:
Exchange-Traded Funds:
The Fund may invest in ETFs. ETFs are a type of index fund, 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 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 they are 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 take place a month or more after the trade date. At the time the Fund makes the commitment to purchase a security on a delayed-delivery or when-issued basis, the Fund records the transaction and reflects the value of the security in determining NAV. No interest accrues to the Fund until the transaction settles and payment takes place. A segregated account is established and the Fund maintains cash and/or marketable securities at least equal in value to commitments for delayed-delivery or when-issued securities. If the Fund owns delayed-delivery or when-issued securities, these values are included in Payable for investments purchased on the accompanying Statement of Assets and Liabilities and the segregated assets are identified on the Schedule of Portfolio Investments.
36
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
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"), 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.
Foreign Exchange Currency Contracts:
The Fund may enter into foreign exchange currency contracts to convert U.S. dollars to and from various foreign currencies. A foreign exchange currency contract is an obligation by the Fund to purchase or sell a specific currency at a future date at a price (in U.S. dollars) set at the time of the contract. The Fund does not engage in "cross-currency" foreign exchange contracts (i.e., contracts to purchase or sell one foreign currency in exchange for another foreign currency). The Fund's foreign exchange currency contracts might be considered spot contracts (typically a contract of one week or less) or forward contracts (typically a contract term over one week). A spot contract is entered into for purposes of hedging against foreign currency fluctuations relating to a specific portfolio transaction, such as the delay between a security transaction trade date and settlement date. Forward contracts are entered into for purposes of hedging portfolio holdings or concentrations of such holdings. Each foreign exchange currency contract is adjusted daily by the prevailing spot or forward rate of the underlying currency, and any appreciation or depreciation is recorded for financial statement purposes as unrealized until the contract settlement date, at which time the Fund records realized gains or losses equal to the difference between the value of a contract at the time it was opened and the value at the time it was closed. The Fund could be exposed to risk if a counterparty is unable to meet the terms of a foreign exchange currency contract or if the value of the foreign currency changes unfavorably. In addition, the use of foreign exchange currency contracts does not eliminate fluctuations in the underlying prices of the securities. As of May 31, 2020, the Fund had no open forward foreign exchange currency contracts.
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
37
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
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.
During the period ended May 31, 2020, the Fund held futures contracts primarily for the strategy of hedging or other purposes, including but not limited to, providing liquidity and equitizing cash. The Fund held no futures contracts at May 31, 2020.
Summary of Derivative Instruments:
The following table presents the effect of derivative instruments on the Statement of Operations, categorized by risk exposure, for the year ended May 31, 2020 (amounts in thousands):
Net Realized Gains (Losses) on Derivatives Recognized as a Result from 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: | $ | (634 | ) | $ | 861 |
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 on 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 discount. Gains or losses realized on sales of securities are determined by comparing the identified cost of the security lot sold with the net sales proceeds.
Withholding taxes on interest, dividends and gains as a result of certain investments in ADRs by the Fund has 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, to earn additional income, net of income retained by Citibank. Borrowers are required to 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 cured the next business day once the shortfall exceeds $100 thousand. Collateral may be cash, U.S. government securities, or other securities as permitted by SEC guidelines. Cash collateral may be invested in high-quality short-term investments, primarily open-end investment companies. 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
38
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
these fees) is disclosed on the Statement of Operations. Loans are terminable upon demand and the borrower must return the loaned securities within the lesser of one standard settlement period or five business days. Risks relating to securities-lending transactions include that the borrower may not provide additional collateral when required or return the securities when due, and 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 re-pledged except to satisfy borrower default. Cash collateral is listed in the Fund's Portfolio of Investments and Financial Statements while non-cash collateral is not included.
The following table (amounts in thousands) is a summary of the Fund's securities lending transactions as of May 31, 2020.
Value of Securities on Loan | Non-Cash Collateral | Cash Collateral | |||||||||
$ | 36,022 | $ | — | $ | 36,719 |
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 investments and foreign currency translations on the Statement of Operations. Any realized gains or losses from these fluctuations, including foreign currency arising from in-kind redemptions, are disclosed as net realized gains or losses from investment transactions and foreign currency translations on the Statement of Operations.
Federal Income Taxes:
It is the Fund's policy 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.
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., 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 affiliated trust based upon net assets or another appropriate basis.
Cross-Trade Transactions:
Pursuant to Rule 17a-7 under the 1940 Act, the Fund may engage in cross-trades which are securities transactions with affiliated investment companies and advisory accounts managed by the Adviser and any applicable sub-adviser. Any such purchase or sale transaction must be effected without brokerage commission or other remuneration, except for customary transfer fees. The transaction must be effected at the current market price, which is either the security's last sale price on an exchange or, if there are no transactions in the security that day, at the average of the highest bid and lowest asked price. For
39
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
the year ended May 31, 2020, 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) | |||||||||
$ | 791 | $ | — | $ | — |
3. Purchases and Sales:
Cost of purchases and proceeds from sales/maturities of securities (excluding securities maturing less than one year from acquisition) for the year ended May 31, 2020, were as follows for the Fund (amounts in thousands):
Excluding U.S. Government Securities | U.S. Government Securities | ||||||||||||||
Purchases | Sales | Purchases | Sales | ||||||||||||
$ | 910,871 | $ | 745,718 | $ | 93,599 | $ | 279,809 |
4. Fees and Transactions with Affiliates and Related Parties:
Investment Advisory and Management Fees:
Effective with the Transaction on July 1, 2019, investment advisory services are provided to the Fund by the Adviser, a New York corporation registered as an investment adviser with the Securities and Exchange Commission ("SEC"). The Adviser is a wholly-owned indirect subsidiary of Victory Capital Holdings, Inc., a publicly traded Delaware corporation, and a wholly-owned direct subsidiary of Victory Capital Operating, LLC. Under the terms of the Investment Advisory Agreement, the Adviser is entitled to receive fees accrued daily and paid monthly at an annualized rate of 0.59% of the Fund's average daily net assets. The amount incurred and paid to VCM from July 1, 2019 through May 31, 2020, was $6,393 thousand and is reflected on the Statement of Operations as Investment Advisory fees.
Prior to the Transaction on July 1, 2019, AMCO provided investment management services to the Fund pursuant to an Advisory Agreement. Under this agreement, AMCO was responsible for managing the business and affairs of the Fund, and for directly managing day-to-day investment of the Fund's assets, subject to the authority of and supervision by the Board. The investment management fee for the Fund was accrued daily and paid monthly at an annualized rate of 0.59% of the Fund's average daily net assets. The amount incurred and paid to AMCO from June 1, 2019 through June 30, 2019, was $573 thousand and is reflected on the Statement of Operations as Investment Advisory fees.
In addition, the Fund invests in affiliated USAA exchange-traded fund(s) ("affiliated ETFs"). The Fund's Adviser fee is reimbursed by VCM (and previously AMCO) to the extent of the indirect Adviser fee incurred through the Fund's proportional investment in the affiliated ETF(s). For the period from July 1, 2019 through May 31, 2020, the Fund's Adviser fee was reimbursed by VCM in an amount of $5 thousand, of which $2 thousand is receivable from VCM. For the period from June 1, 2019 through June 30, 2019, the Fund's Adviser fee was reimbursed by AMCO in an amount of less than $1 thousand.
Effective with the Transaction on July 1, 2019, 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. Prior to that date, the Trust relied on a similar exemptive order granted by the SEC to the Trust and its affiliated persons. Under a manager of managers structure, the investment adviser may select (with approval of the Board and without shareholder approval) one or more subadvisers to manage the day-to-day investment of a fund's assets. For the year ended May 31, 2020, the Fund had no subadvisers.
40
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
Administration and Servicing Fees:
Effective with the Transaction on July 1, 2019, VCM serves as the Fund's administrator and fund accountant. Under the Fund Administration, Servicing and Accounting Agreement, VCM is paid for its services an annual fee at a rate of 0.15% of average daily net assets of the Fund. Amounts incurred from July 1, 2019 through May 31, 2020, are $1,625 thousand and are reflected on the Statement of Operations as Administration fees.
Prior to the Transaction on July 1, 2019, AMCO provided certain administration and servicing functions for the Fund. For such services, AMCO received a fee accrued daily and paid monthly at an annualized rate of 0.15% of average daily net assets of the Fund. Amounts incurred from June 1, 2019 through June 30, 2019, were $146 thousand and are reflected on the Statement of Operations as Administration fees.
Effective with the Transaction on July 1, 2019, the Fund (as part of the Trust) has entered into an agreement to provide compliance services with the Adviser, 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. Funds in the Trust, Victory Variable Insurance Funds, Victory Portfolios and Victory Portfolios II (collectively, the "Victory Funds Complex") in the aggregate, compensates the Adviser for these services. The amount incurred during the period from July 1, 2019 to May 31, 2020, is reflected on the Statement of Operations as Compliance fees.
Effective with the Transaction on July 1, 2019, 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 Trust reimburses VCM and Citi for all of their reasonable out-of- pocket expenses incurred in providing these services and certain other expenses specifically allocated to the Funds under the Fund Administration, Servicing, and Accounting Agreement. The amount incurred during the period from July 1, 2019 through May 31, 2020, is reflected on the Statement of Operations as Sub-Administration fees.
In addition to the services provided under its Administration and Servicing Agreement with the Fund, AMCO also provided certain compliance and legal services for the benefit of the Fund prior to the Transaction on July 1, 2019. The Board approved the reimbursement of a portion of these expenses incurred by AMCO. AMCO did not receive any fees from the Fund for these services.
Transfer Agency Fees:
Effective with the Transaction on July 1, 2019, Victory Capital Transfer Agency, Inc. ("VCTA"), (formerly, USAA Shareholder Account Services ("SAS")), provides transfer agency services to the Fund. VCTA, an affiliate of the Adviser, provides transfer agent services 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 from July 1, 2019 through May 31, 2020, was $2,306 thousand. Amounts incurred and paid to SAS from June 1, 2019 through June 30, 2019, was $209 thousand. These amounts are reflected on the Statement of Operations as Transfer Agent fees.
Effective with the Transaction on July 1, 2019, 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:
Effective with the Transaction on July 1, 2019, Victory Capital Advisers, Inc. (the "Distributor"), an affiliate of the Adviser, serves as distributor for the continuous offering of the shares of the Fund
41
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
pursuant to a Distribution Agreement between the Distributor and the Trust. Effective on or about June 30, 2020, the Distributor's name will change to Victory Capital Services, Inc.
Prior to the Transaction on July 1, 2019, USAA Investment Management Company provided exclusive underwriting and distribution of the Fund's shares on a continuing best-efforts basis.
Other Fees:
Prior to the Transaction on July 1, 2019, State Street Bank and Trust Company served as the Fund's accounting agent and custodian.
Effective July 1, 2019, Citibank, N.A., serves as the Fund's custodian.
K&L Gates LLP provides legal services to the Trust.
Effective with the Transaction on July 1, 2019, the Adviser has entered into an expense limitation agreement with the Fund until at least June 30, 2021. 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 the Fund in any fiscal year exceed the expense limit for the Fund. Such excess amounts will be the liability of the Adviser. 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. Effective July 1, 2019 through May 31, 2020, the expense limit (excluding voluntary waivers) is 1.00%.
Under this expense limitation agreement, the Fund has agreed to repay fees and expenses that were waived or reimbursed by the Adviser for a period up to three years after the fiscal year in which 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 May 31, 2020, the following amounts are available to be repaid to the Adviser (amounts in thousands).
Expires 05/31/2023 | |||
$ | 5 |
The Adviser, may voluntarily waive or reimburse additional fees to assist the Fund in maintaining competitive expense ratios. Voluntary waivers and reimbursements applicable to the Fund are not available to be recouped at a future time. There were no voluntary waivers or reimbursements for the year ended May 31, 2020.
Prior to the Transaction on July 1, 2019, AMCO agreed, through September 30, 2019, to limit the total annual operating expenses to 1.00% of average daily net assets of the Fund, excluding extraordinary expenses and before reductions of any expenses paid indirectly, and to reimburse all expenses in excess of those amounts. Effective with the Transaction on July 1, 2019, this expense limit is no longer in effect and is not available to be recouped by AMCO. For the period June 1, 2019 through June 30, 2019, amounts reimbursed by the Fund are reflected on the Statement of Operations as Expenses waived/reimbursed by AMCO.
Certain officers and/or interested trustees of the Fund are also officers and/or employees of the Adviser, Administrator, Sub-Administrator, Sub-Fund Accountant, and Legal.
5. Risks:
The Fund may be subject to other risks in addition to these identified risks.
Global economies and financial markets are increasingly interconnected, which increases the possibilities that conditions in one country or region might adversely affect issuers in another country or region. Geopolitical and other risks, including war, terrorism, trade disputes, political or economic dysfunction within some nations, public health crises and related geopolitical events, as well as environmental disasters such as earthquakes, fires, and floods, may add to instability in world economies and markets generally. Changes in trade policies and international trade agreements could affect the
42
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
economies of many countries in unpredictable ways. Epidemics and/or pandemics, such as the coronavirus (or COVID-19), may result in, among other things, closing borders, disruptions to healthcare service preparation and delivery, quarantines, cancellations, disruptions to supply chains and consumer activity, as well as general concern and uncertainty. The impact may be short-term or may last for extended periods.
The COVID-19 pandemic, which has spread rapidly across the world, has led and will continue to lead for an unknown period of time to disruptions in local, regional, national and global markets and economies. Among other things, the outbreak has resulted in, and until fully resolved is likely to continue to result in, among other things (1) government imposition of various forms of "stay at home" orders and the closing of "non-essential" businesses, resulting in significant disruption to the businesses of many issuers as well as lay-offs of employees: (2) increased requests by issuers of debt instruments for amendments and waivers of agreements to avoid default and increased defaults: (3) volatility and disruption of markets, including greater volatility in pricing and spreads; and (4) rapidly evolving proposals and/or actions by state and federal governments to address problems being experienced by the markets and by businesses and the economy in general.
The equity securities in the Fund's portfolio are subject to stock market risk. A company's stock price in general may decline over short or even extended periods, regardless of the success or failure of the company's operations. Stock markets tend to run in cycles, with periods when stock prices generally go up and periods when stock prices generally go down. Equity securities tend to be more volatile than debt securities. In addition, to the degree the Fund invests in foreign securities, there is a possibility that the value of the Fund's investments in foreign securities will decrease because of unique risks, such as currency exchange-rate fluctuations; foreign market illiquidity; emerging market risk; increased price volatility; uncertain political conditions; exchange control regulations; foreign ownership limits; different accounting, reporting, and disclosure requirements; difficulties in obtaining legal judgments; and foreign withholding taxes. These risks are particularly heightened in this Fund because investments in emerging-market countries generally are more volatile than investments in developed markets. Emerging-market countries are less economically diverse and mature than more developed countries and tend to be politically less stable.
The Fund may invest in securities of companies of any market capitalization and is subject to mid- and small-cap company risk, which is the greater risk of investing in smaller, less well-known companies, as opposed to investing in established companies with proven track records. Mid- and small-cap companies also may have limited product lines, markets, or financial resources. Securities of such companies may be less liquid and more volatile than securities of larger companies or the market in general and, therefore, may involve greater risk than investing in the securities of larger companies.
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.
Many debt securities, derivatives and other financial instruments, including some of the Fund's investments, use the London Interbank Offered Rate ("LIBOR") as the reference or benchmark rate for variable interest rate calculations. However, the use of LIBOR started to come under pressure following manipulation allegations in 2012. Despite increased regulation and other corrective actions since that time, concerns have arisen regarding its viability as a benchmark, due largely to reduced activity in the financial markets that it measures. In June 2017, the Alternative Reference Rates Committee, a group of large U.S. banks working with the Federal Reserve, announced its selection of a new Secured Overnight Funding Rate ("SOFR"), which is intended to be a broad measure of secured overnight U.S. Treasury repo rates, as an appropriate replacement for LIBOR. The Federal Reserve Bank of New York
43
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
began publishing the SOFR in 2018, expecting that it could be used on a voluntary basis in new instruments and transactions. Bank working groups and regulators in other countries have suggested other alternatives for their markets, including the Sterling Overnight Interbank Average Rate ("SONIA") in England. In July 2017, the Financial Conduct Authority (the "FCA"), the United Kingdom financial regulatory body, announced that after 2021 it will cease its active encouragement of UK banks to provide the quotations needed to sustain LIBOR. That announcement suggests that LIBOR may cease to be published after that time. The roughly three-year period until the end of 2021 is expected to be enough time for market participants to transition to the use of a different benchmark for both new and existing securities and transactions. Various financial industry groups have begun planning for that transition, but there are obstacles to converting certain longer-term securities and transactions to a new benchmark. Transition planning is at an early stage, and neither the effect of the transition process nor its ultimate success can yet be known. The transition process might lead to increased volatility and illiquidity in markets that currently rely on the LIBOR to determine interest rates. It could also lead to a reduction in the value of some LIBOR-based investments and reduce the effectiveness of new hedges placed against existing LIBOR-based instruments. Since the usefulness of LIBOR as a benchmark could deteriorate during the transition period, these effects could occur before the end of 2021.
6. Borrowing and Interfund Lending:
Line of Credit:
Effective with the Transaction on July 1, 2019, the Victory Funds Complex participates in a short-term, demand note "Line of Credit" agreement with Citibank. Under the agreement with Citibank, the Victory Funds Complex could 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 that Fund paying the related commitment fees for that amount. The purpose of the agreement is to meet temporary or emergency cash needs. Citibank receives an annual commitment fee of 0.15% on $300 million for providing the Line of Credit. Each fund in the Victory Funds Complex pays a pro-rata portion of the commitment fees plus any interest (one month LIBOR plus one percent) on amounts borrowed. Effective June 29, 2020, under an amended Line of Credit agreement, Citibank will also receive an annual upfront fee of 0.10% on the $300 million committed line of credit. Each fund in the Victory Funds Complex will pay a pro-rata portion of the upfront fee. Interest charged to the Fund, if any, during the period is reflected on the Statement of Operations under line of credit fees.
Prior to the Transaction on July 1, 2019, the line of credit among the Trust, with respect to its funds, and USAA Capital Corporation ("CAPCO") terminated. For the period from June 1, 2019 to June 30, 2019, the Fund paid CAPCO facility fees of $2 thousand.
The average borrowing for the days outstanding and average interest rate for the Fund during the year ended May 31, 2020 were as follows (amounts in thousands):
Amount Outstanding at May 31, 2020 | Average Borrowing* | Days Borrowings Outstanding | Average Interest Rate | Maximum Borrowing During the Period | |||||||||||||||
$ | — | $ | 2,933 | 12 | 3.19 | % | $ | 7,800 |
* For the year ended May 31,2020, based on the number of days borrowings were outstanding.
Interfund Lending:
Effective with the Transaction on July 1, 2019, the Trust and 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 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. 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
44
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
Fund, if any, during the period is reflected on the Statement of Operations under Interest expense on Interfund lending. As a Lender, interest earned by the Fund, if any, during the period is reflected on the Statement of Operations under Income on Interfund lending.
The average borrowing or lending for the days outstanding and average interest rate for the Fund during the year ended May 31, 2020 were as follows (amounts in thousands):
Borrower or Lender | Amount Outstanding at May 31, 2020 | Average Borrowing* | Days Borrowing Outstanding | Average Interest Rate* | Maximum Borrowing During the Period | ||||||||||||||||||
Borrower | $ | — | $ | 2,851 | 5 | 2.33 | % | $ | 3,322 |
* For the year ended May 31, 2020, based on the number of days borrowings were outstanding.
7. Federal Income Tax Information:
The Fund intends to declare daily and distribute any net investment income quarterly. Distributable net realized gains, if any, are declared and paid at least annually.
The amounts of dividends from net investment income and distributions from net realized gains (collectively distributions to shareholders) are determined in accordance with federal income tax regulations, which may differ from GAAP. To the extent these "book/tax" differences are permanent in nature (e.g., net operating loss and distribution reclassification), such amounts are reclassified within the components of net assets based on their federal tax-basis treatment; temporary differences (e.g., wash sales) do not require reclassification. To the extent dividends and distributions exceed net investment income and net realized gains for tax purposes, they are reported as distributions of capital. Net investment losses incurred by the Fund may be reclassified as an offset to capital on the accompanying Statement of Assets and Liabilities.
As of May 31, 2020, 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 Statement of Changes in Net Assets because, for tax purposes, dividends are recognized when actually paid) (amounts in thousands).
Year Ended May 31, 2020 | Year Ended May 31, 2019 | ||||||||||||||||||
Distributions paid from | Distributions paid from | ||||||||||||||||||
Ordinary Income | Total Distributions Paid | Ordinary Income | Net Long-Term Capital Gains | Total Distributions Paid | |||||||||||||||
$ | 23,992 | $ | 23,992 | $ | 34,450 | $ | 22,595 | $ | 57,045 |
As of May 31, 2020, the components of accumulated earnings (deficit) on a tax basis were as follows (amounts in thousands):
Undistributed Ordinary Income | Accumulated Capital and Other Losses | Other Earnings (Deficit) | Unrealized Appreciation (Depreciation)* | Total Accumulated Earnings (Deficit) | |||||||||||||||||||
$ | 2,544 | $ | (2,079 | ) | $ | (2,099 | ) | $ | 17,807 | $ | 16,173 |
* The difference between the book-basis and tax-basis of unrealized appreciation/depreciation is attributable to the tax deferral of losses on wash sales.
At May 31, 2020, 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.
45
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
Short-Term Amount | Long-Term Amount | Total | |||||||||
$ | 2,079 | $ | — | $ | 2,079 |
As of May 31, 2020, 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) | ||||||||||||
$ | 1,130,602 | $ | 64,916 | $ | (47,109 | ) | $ | 17,807 |
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 or an investment company managed by VCM. The Fund does not invest in affiliated underlying funds for the purpose of exercising management or control. These underlying funds are noted as affiliated in the Fund's Schedule of Portfolio Investments. The affiliated underlying funds' annual or semiannual reports may be viewed at usaa.com. Transactions in affiliated securities during the year ended May 31, 2020 were as follows (amount in thousands):
Fair Value 5/31/2019 | Purchases at Cost | Proceeds from Sales | Realized Gain (Loss) | Capital Gain Distribution | Net Change in Unrealized Appreciation/ Depreciation | Fair Value 5/31/2020 | Dividend Income | ||||||||||||||||||||||||||||
Affiliated Holdings | |||||||||||||||||||||||||||||||||||
VictoryShares USAA MSCI Emerging Markets Value Momentum ETF | $ | 2,187 | $ | — | $ | — | $ | — | $ | — | ($ | 290 | ) | $ | 1,897 | $ | 64 |
9. 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 1940 Act. 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 Funds' Board of Trustees approved the appointment of the Fund's investment adviser, Victory Capital, as the administrator of the LRMP. At an in-person meeting held on February 26, 2020, Victory Capital provided an oral and written report to the Trustees on the operation and effectiveness of the LRMP during the previous year.
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.
46
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
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 reasonably expected to be converted to cash in current market conditions in three business days or less without significantly changing the market value of the investment. Therefore, the Fund has not adopted a Highly Liquid Investment Minimum. The Fund's investments were below the limitation on illiquid investments during the review period. Additionally, Victory Capital indicated that no events occurred that would require the filing of Form N-LIQUID and recommended no material changes to the LRMP.
47
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of USAA Cornerstone Moderate Fund:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of USAA Cornerstone Moderate Fund (the "Fund") (one of the funds constituting USAA Mutual Funds Trust (the "Trust")), including the schedule of portfolio investments, as of May 31, 2020, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the funds constituting USAA Mutual Funds Trust) at May 31, 2020, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Trust's management. Our responsibility is to express an opinion on the Fund's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust's internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of May 31, 2020, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Victory Capital investment companies since 1995.
San Antonio, Texas
July 27, 2020
48
USAA Mutual Funds Trust | Supplemental Information May 31, 2020 |
(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) 539-3863. The information is also included in the Fund's Statement of Additional Information, which is available on the SEC's website at www.sec.gov.
Information relating to how the Fund voted proxies relating to portfolio securities held during the most recent 12 months ended June 30 is available on the SEC's website at www.sec.gov.
Availability of Schedules of Portfolio Investments:
The Trust files a complete list of Schedules of Portfolio Investments with the SEC for the first and third quarter of each fiscal year on Form N-PORT. Forms N-PORT available on the SEC's website at www.sec.gov.
49
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(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 10 Trustees, eight of whom are not "interested persons" of the Trust within the meaning of that term under the 1940 Act ("Independent Trustees") and two 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 ages, position with the Trust, commencement of service, 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 47 portfolios in the Trust. Each Trustee's address is 15935 La Cantera Pkwy, Building Two, San Antonio, TX, 78256. Pursuant to a policy adopted by the Board, the term of office for each Trustee shall be until the Independent Trustee reaches age 75 or an Interested Trustee reaches age 75. The Board may change or grant exceptions from this policy at any time without shareholder approval. A Trustee may resign or be removed by a vote of the other Trustees or the holders of a majority of the outstanding shares of the Trust at any time. Vacancies on the Board can be filled by the action of a majority of the Trustees, provided that after filling such vacancy at least two-thirds of the Trustees have been elected by the shareholders.
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Independent Trustees. | |||||||||||||||||||
Jefferson C. Boyce, Born September 1957 | Lead Independent Trustee, and Vice Chairman | 2013 | Senior Managing Director, New York Life Investments, LLC (1992-2012) | Westhab, Inc. | |||||||||||||||
John C. Walters, Born February 1962 | Trustee | 2019 | Retired. Mr. Walters brings significant Board experience including active involvement with the board of a Fortune 500 company, and a proven record of leading large, complex financial organizations. He has a demonstrated record of success in distribution, manufacturing, investment brokerage, and investment management in both the retail and institutional investment businesses. He has substantial experience in the investment management business with a demonstrated ability to develop and drive strategy while managing operation, financial, and investment risk. | Guardian Variable Products Trust (16 series), Lead Independent Director; Amerilife Holdings LLC, Director; Stadion Money Management; Director; University of North Carolina (Chapel Hill), Member Board of Governors. |
50
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Robert L. Mason, Ph.D., Born July 1946 | Trustee | 1997 | Adjunct Professor in the Department of Management Science and Statistics in the College of Business at the University of Texas at San Antonio (since 2001); Institute Analyst, Southwest Research Institute (March 2002-January 2016) | None | |||||||||||||||
Dawn M. Hawley, Born February 1954 | Trustee | 2014 | Manager of Finance, Menil Foundation, Inc. (May 2007-June 2011), which is a private foundation that oversees the assemblage of sculptures, prints, drawings, photographs, and rare books. Director of Financial Planning and Analysis and Chief Financial Officer, AIM Management Group, Inc. (October 1987-January 2006) | None | |||||||||||||||
Paul L. McNamara, Born July 1948 | Trustee | 2012 | Director, Cantor Opportunistic Alternatives Fund, LLC (March 2010-February 2014) , which is a closed-end fund of funds by Cantor Fitzgerald Investment Advisors, LLC | None |
51
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Richard Y. Newton III, Born January 1956 | Trustee | 2017 | Director, Elta North America (01/18-present), 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 (December 2015-present)); Executive Director, The Union League Club of New York (June 2014-November 2015): Executive Vice President, Air Force Association (August 2012-May 2014); Lieutenant General, United States Air Force (January 2008-June 2012) | None | |||||||||||||||
Barbara B. Ostdiek, Ph.D., Born March 1964 | Trustee | 2008 | Senior Associate Dean of Degree Programs at Jesse H. Jones Graduate School of Business at Rice University (since 2013); Associate Professor of Finance at Jessie H. Jones Graduate School of Business at Rice University (since 2001) | None | |||||||||||||||
Michael F. Reimherr, Born August 1945 | Trustee | 2000 | President of Reimherr Business Consulting (May 1995-December 2017); St. Mary's University Investment Committee overseeing University Endowment (since 2014) | None |
52
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Interested Trustees. | |||||||||||||||||||
David C. Brown, ** Born May 1972 | Trustee | 2019 | Chairman and Chief Executive Officer (since 2013), Co-Chief Executive Officer (2011-2013), Victory Capital Management Inc.; Chairman and Chief Executive Officer, Victory Capital Holdings, Inc. (since 2013). Mr. Brown brings to the Board extensive business, finance and leadership skills gained and developed through years of experience in the financial services industry, including his tenure overseeing the strategic direction as CEO of Victory Capital. These skills, combined with Mr. Brown's extensive knowledge of the financial services industry and demonstrated success in the development and distribution of investment strategies and products, enable him to provide valuable insights to the Board and strategic direction for the Funds | Trustee, Victory Portfolios (42 series), Victory Portfolios II (26 series), Victory Variable Insurance Funds (9 series) |
53
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Daniel S. McNamara, ** Born June 1966 | Trustee and Chair of the Board of Trustees | 2012 | Trustee, President, and Vice Chairman of USAA ETF Trust (June 2017-June 2019); President of Financial Advice & Solutions Group (FASG), USAA (since 2013); Director, IMCO (September 2009-April 2014); President, AMCO (August, 2011-April 2013); Senior Vice President of USAA Financial Planning Services Insurance Agency, Inc. (FPS) (since 2011); Director of USAA Investment Management Company (IMCO) (since 2009); Chairman of Board of IMCO (since 2013); Director of USAA Asset Management Company (AMCO), (August 2011-June 2019); President and Director of USAA Shareholder Account Services (SAS)(October 2009-June 2019); Director and Vice Chairman of FPS (since 2013); President and Director of USAA Investment Corporation (ICORP) (since 2010); Chairman of Board of ICORP (since 2013); Director of USAA Financial Advisors, Inc. (FAI) (since 2013); Chairman of Board of FAI (since 2015). Mr. McNamara brings to the Board extensive experience in the financial services industry, including experience as an officer of the Trust. | None |
** Mr. McNamara and Mr. Brown are "Interested Persons" by reason of their relationships with the Adviser.
The Statement of Additional Information includes additional information about the Trustees of the Trust and is available, without charge, on the SEC's website at www.sec.gov and/or by calling (800)-539-3863.
54
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Officers:
The officers of the Trust, their ages, 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, Building Two, 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 with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | ||||||||||||
Interested Officers. | |||||||||||||||
Christopher K. Dyer, Born February 1962 | President | 2019 | Director of Fund Administration, Victory Capital (2004-present) | ||||||||||||
Scott A Stahorsky, Born July 1969 | Vice President | 2019 | Manager, Fund Administration, Victory Capital (since 2015); Senior Analyst, Fund Administration, Victory Capital (prior to 2015) | ||||||||||||
James K. De Vries, Born April 1969 | Treasurer, Principal Financial Officer | 2018 | Executive Director, Victory Capital Management Inc. (since 2019); Treasurer, USAA ETF Trust (September 2018-June 2019); Executive Director, Investment and Financial Administration, USAA (April 2012-June 2019); Assistant Treasurer, USAA ETF Trust (June 2017-September 2018); Assistant Treasurer, USAA Mutual Funds Trust (December 2013-February 2018) | ||||||||||||
Allan Shaer, Born March 1965 | Assistant Treasurer | 2019 | Senior Vice President, Financial Administration, Citi Fund Services Ohio, Inc. (since 2016); Vice President, Mutual Fund Administration, JP Morgan Chase (2011-2016) | ||||||||||||
Carol D. Trevino, Born October 1965 | Assistant Treasurer | 2018 | Director, Accounting and Finance, Victory Capital Management Inc. (since 2019); Accounting/Financial Director, USAA (December 2013-June 2019); Assistant Treasurer, USAA ETF Trust (September 2018-June 2019). | ||||||||||||
Erin G. Wagner, Born February 1974 | Secretary | 2019 | Deputy General Counsel, the Adviser (since 2013) | ||||||||||||
Charles Booth, Born April 1960 | Anti-Money Laundering Compliance Officer and Identity Theft Officer | 2019 | Director, Regulatory Administration and CCO Support Services, Citi Fund Services Ohio, Inc. (2007-present) | ||||||||||||
Amy Campos, Born July 1976 | Chief Compliance Officer | 2019 | Chief Compliance Officer, USAA Mutual Funds Trust (since 2019); Executive Director, Deputy Chief Compliance Officer, USAA Mutual Funds Trust and USAA ETF Trust (July 2017-June 2019); Compliance Director, USAA Mutual Funds Trust (2014-July 2017) |
55
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
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 December 1, 2019 through May 31, 2020.
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. If these transactional costs were included, your costs would have been higher.
Beginning Account Value 12/1/19 | Actual Ending Account Value 5/31/20 | Hypothetical Ending Account Value 5/31/20 | Actual Expenses Paid During Period 12/1/19- 5/31/20 | Hypothetical Expenses Paid During Period 12/1/19- 5/31/20 | Annualized Expense Ratio During Period 12/1/19- 5/31/20 | ||||||||||||||||||
$ | 1,000.00 | $ | 965.70 | $ | 1,020.10 | $ | 4.82 | $ | 4.95 | 0.98 | % |
* Expenses are equal to the average account value multiplied by the Fund's annualized expense ratio multiplied by 183/366 (the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year).
56
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Additional Federal Income Tax Information
The following federal tax information related to the Fund's fiscal year ended May 31, 2020, 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 2021.
With respect to distributions paid, the Fund designates the following amounts (or, if subsequently determined to be different, the maximum amount allowable) for the fiscal year ended May 31, 2020:
Dividend Received Deduction (corporate shareholders)* | Qualified Dividend Income (non-corporate shareholders)* | ||||||||||
14.95 | % | 15.45 | % |
* Presented as a percentage of net investment income and excludes short-term capital gain distributions paid, if any. All or a portion of these amounts may be exempt from taxation at the state level.
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 |
26889-0720
MAY 31, 2020
Annual Report
USAA Cornerstone Moderately
Aggressive Fund
Beginning January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Fund's shareholder reports like this one will no longer be sent by mail, unless you specifically request paper copies of the reports from the Fund or from your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on VictoryFunds.com, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund or your financial intermediary electronically by notifying your financial intermediary directly, or if you are a direct investor, by calling (800) 235-8396 or logging on to usaa.com. Effective on or about September 8, 2020, a shareholder who has an account directly with the Fund will need to submit their request via email to TA.Processing@FISGlobal.com.
You may elect to receive all future reports in paper free of charge. You can inform the Fund or your financial intermediary that you wish to continue receiving paper copies of your shareholder reports by notifying your financial intermediary directly, or if you are a direct investor, by calling (800) 235-8396 or logging on to usaa.com. Effective on or about September 8, 2020, a shareholder who has an account directly with the Fund will need to submit their request via email to TA.Processing@FISGlobal.com. Your election to receive reports in paper will apply to all funds held with the USAA Mutual Funds or your financial intermediary.
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 logo 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.
USAA Mutual Funds Trust
TABLE OF CONTENTS
Shareholder Letter (Unaudited) | 2 | ||||||
Managers' Commentary (Unaudited) | 4 | ||||||
Investment Overview (Unaudited) | 6 | ||||||
Investment Objective & Portfolio Holdings (Unaudited) | 7 | ||||||
Financial Statements | |||||||
Schedule of Portfolio Investments | 9 | ||||||
Statement of Assets and Liabilities | 29 | ||||||
Statement of Operations | 30 | ||||||
Statements of Changes in Net Assets | 31 | ||||||
Financial Highlights | 32 | ||||||
Notes to Financial Statements | 34 | ||||||
Report of Independent Registered Public Accounting Firm | 48 | ||||||
Supplemental Information (Unaudited) | 49 | ||||||
Proxy Voting and Portfolio Holdings Information | 49 | ||||||
Trustees' and Officers' Information | 50 | ||||||
Expense Examples | 56 | ||||||
Additional Federal Income Tax Information | 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.
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.
1
(Unaudited)
Dear Shareholder,
The previous decade ended with the longest-ever bull market in U.S. equities still intact, even as investors wrestled with issues like softening global economic data, Brexit, and U.S.-China trade relations. In retrospect, those worries seem so pedestrian given what we would soon experience.
A new and unexpected threat—a global pandemic, the novel coronavirus ("COVID-19")—first emerged in Asia and then began spreading globally and throughout the United States during the first quarter of 2020. This unprecedented and unanticipated event not only rendered all existing economic and earnings forecasts moot, but it also roiled stock and bond markets everywhere. Efforts to slow the spread of the virus, though successful to date, also brought the economy to a halt. The historic bull market in stocks ended virtually overnight.
After an initial severe sell-off in March, equity markets recovered sharply. As our annual reporting period drew to a close on May 31, 2020, many of the broad market indexes had recovered and volatility had returned to more palatable levels. In fact, despite all the chaos, the S&P 500® Index, one of the most popular measures of large U.S. stocks, finished the fiscal year (May 31, 2020) at approximately 3,044, which was up more than 10.6% from one year ago.
The market turmoil of early 2020 was not limited to equities. Fixed income volatility spiked when liquidity evaporated in late March as investors struggled to understand the ramifications of stay-at-home orders. Fortunately, the U.S. Federal Reserve (the "Fed") (as well as other global central banks) leapt into action—cutting interest rates, (re)starting quantitative easing and, in the case of the Fed, launching an array of programs to stabilize markets.
The new lending facilities and programs had their intended effect of improving liquidity and trading. Credit spreads across corporate, high-yield, structured, and municipal markets were coaxed down from their highs. In addition, Congress came through with substantial fiscal stimulus that also was applauded by investors and markets. Although fixed income markets regained their footing, the yield on 10-Year Treasurys, a benchmark for low-risk investments, declined steadily during our fiscal year—from 2.14% at the beginning of our reporting period to approximately 0.65% as of May 31, 2020. This suggests that investors remain a little wary.
While the past year has been unprecedented for all of us, both personally and professionally, our portfolio managers continue to scrutinize the financial markets, economic conditions, and the trajectory of the pandemic, which will likely be the guiding factor on Fed policy and the markets.
No matter what happens in the near term, we believe that the massive monetary and fiscal policies introduced earlier this year will have longer-term ramifications. Despite this uncertainty, it's important to remain focused on your long-term investment goals and avoid making emotional decisions. If you invest with us directly, our Member Service Representatives are available to help. Call us at (800) 539-3863 or visit our website at vcm.com.
2
From all of us here at USAA Mutual Funds, thank you for letting us help you work toward your investment goals.
Christopher K. Dyer, CFA
President,
USAA Mutual Funds
3
USAA Mutual Funds Trust
USAA Cornerstone Moderately Aggressive Fund
Managers' Commentary
(Unaudited)
Victory Solutions
Mannik S. Dhillon, CFA, CAIA
Wasif A. Latif
Lance Humphrey, CFA
James F. Jackson, Jr., CFA
R. Neal Graves, CFA, CPA
• What were the market conditions during the reporting period?
Global financial market performance varied widely over the period driven by uncertainty related to the duration and economic impact of the novel coronavirus ("COVID-19") pandemic. This generally led to a risk-off environment as investors flocked to safe haven assets such as U.S. Treasurys and gold. Global equities turned mostly lower with the exception of a small breadth of mega-cap securities well-positioned for an extended economic slowdown and the new stay-at-home paradigm. The final month and a half of the reporting period saw a rebound in risky assets as economies began a phased reopening.
Within the United States, the S&P 500® Index dropped nearly 34% from its 2020 high, before beginning to recoup losses with the support of comprehensive monetary and fiscal stimulus, along with encouraging results in COVID-19 vaccine trials. Over the reporting period, the S&P 500® Index returned 12.84%, with large-cap growth stocks leading the way, up to a return of 26.25% as represented by the Russell 1000 Growth Index. Value stocks and small-cap stocks underperformed growth stocks over the period, but more recently have seen a pickup in momentum. U.S. large-cap value stocks were down to a return of -1.64% over the reporting period as gauged by the Russell 1000 Value Index, while U.S. small-cap stocks, were down to a return of -3.44% as represented by the Russell 2000 Index.
Developed market international and emerging market equities followed a path similar to U.S. equities. Markets led investors on a rollercoaster ride that saw both the MSCI EAFE Index and MSCI Emerging Markets Index drop approximately 34% from their highs in the year. The market drawdown hit bottom on March 23rd and then started a steady ascent, erasing most of the losses as European Central Bank quantitative easing and talks of a 750-billion euros fiscal stimulus helped bolster momentum in the market's recovery. Over the reporting period, developed international equities, represented by the MSCI EAFE Index, were down to a return of -2.81%, while the MSCI Emerging Markets Index returned -4.39%.
Within fixed-income, interest rate-sensitive treasury bonds outperformed credit-sensitive investment-grade and high-yield corporate bonds. Investor demand for U.S. Treasurys drove yields to new lows, while credit spreads reached unprecedented levels as liquidity issues began to seize up parts of credit and municipal markets. The U.S. Federal Reserve (the "Fed") intervened, providing liquidity by expanding open market purchases to include
4
USAA Mutual Funds Trust
USAA Cornerstone Moderately Aggressive Fund (continued)
Managers' Commentary (continued)
municipal and corporate bonds. Bloomberg Barclays US Treasury 20+ Year Total Return Index returned 27.46% over the reporting period, while the Bloomberg Barclays U.S. Aggregate Bond Index returned 9.42%. High-yield bonds finished the period slightly positive, up 1.32% as gauged by the Bloomberg Barclays US Corporate High Yield Index.
• How did the USAA Cornerstone Moderately Aggressive Fund (the "Fund") perform during the reporting period?
For the reporting period ended May 31, 2020, the Fund had a total return of 2.59%. This compares to returns of 5.43% for the MSCI All Country World Index and 6.42% for the Cornerstone Moderately Aggressive Composite Index.
• What strategies did you employ during the reporting period?
The equity portfolio's overall tilt toward value stocks, especially within U.S. large-cap stocks, was a key factor in underperformance relative to the benchmark over the reporting period. An underweight to U.S. equities along with negative stock selection effects within emerging market and developed international equities weighed on relative performance.
Within the fixed income portion of the portfolio, a slight overweight to treasurys and an underweight to high yield contributed to relative performance, while allocations to corporate bonds detracted from performance.
Commodities as an asset class were down over the period with the Bloomberg Commodity Index returning -17.06%; however, gold outperformed. Gold's overweight within the portfolio contributed positively to relative performance over the period. A slight overweight to REITs relative to the benchmark detracted from performance.
Thank you for allowing us to assist you with your investment needs.
5
USAA Mutual Funds Trust
USAA Cornerstone Moderately Aggressive Fund
Investment Overview
(Unaudited)
Average Annual Total Return
Year Ended May 31, 2020
INCEPTION DATE | 8/15/84 | ||||||||||||||
Net Asset Value | MSCI All-Country World Index1 | Cornerstone Moderately Aggressive Composite Index2 | |||||||||||||
One Year | 2.59 | % | 5.43 | % | 6.42 | % | |||||||||
Five Year | 2.40 | % | 5.28 | % | 5.07 | % | |||||||||
Ten Year | 5.14 | % | 8.47 | % | 7.29 | % |
Past performance is not indicative of future results. 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 for various periods since inception. Without such fee waivers, the total returns would have been lower.
USAA Cornerstone Moderately Aggressive Fund — Growth of $10,000
1 The 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.
2 The 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 Barclays 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 Barclays U.S. Treasury — Bills (1-3M) (2%).
The graph reflects investment of growth of a hypothetical $10,000 investment in the Fund. Past performance is no guarantee of future results.
The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
6
USAA Mutual Funds Trust USAA Cornerstone Moderately Aggressive Fund | May 31, 2020 |
(Unaudited)
Investment Objective & Portfolio Holdings:
The Fund's investment objective is to seek capital appreciation with a secondary focus on current income.
Top 10 Holdings*:
May 31, 2020
(% of Net Assets)
Vanguard FTSE Developed Markets ETF | 7.7 | % | |||||
iShares Core MSCI Emerging Markets ETF | 2.9 | % | |||||
iShares Core S&P 500 ETF | 2.9 | % | |||||
Vanguard FTSE Europe ETF | 2.8 | % | |||||
Schwab Fundamental International Large Co. Index ETF | 2.8 | % | |||||
iShares Core MSCI EAFE ETF | 2.6 | % | |||||
iShares Core US Aggregate Bond ETF | 2.1 | % | |||||
Vanguard S&P 500 ETF | 2.1 | % | |||||
Schwab Fundamental Emerging Markets Large Co. Index ETF | 1.9 | % | |||||
U.S. Treasury Notes, 1.63%, 2/15/2026 | 1.5 | % |
* Does not include futures, money market instruments, and short-term investments purchased with cash collateral from securities loaned.
Refer to the Schedule of Portfolio Investments for a complete list of securities.
7
USAA Mutual Funds Trust USAA Cornerstone Moderately Aggressive Fund (continued) | May 31, 2020 |
Asset Allocation*:
May 31, 2020
(% of Net Assets)
* Does not include futures, 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%.
8
USAA Mutual Funds Trust USAA Cornerstone Moderately Aggressive Fund | Schedule of Portfolio Investments May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Asset Backed Securities (2.3%) | |||||||||||
American Express Credit Account Master Trust, Series 2019-2, Class B, 2.86%, 11/15/24 | $ | 2,836 | $ | 2,870 | |||||||
Americredit Automobile Receivables Trust, Series 2018-1, Class C, 3.50%, 1/18/24, Callable 10/18/22 @ 100 | 4,640 | 4,773 | |||||||||
Americredit Automobile Receivables Trust, Series 2018-2, Class A3, 3.15%, 3/20/23, Callable 3/18/23 @ 100 | 537 | 544 | |||||||||
ARI Fleet Lease Trust, Series 2020-A, Class A3, 1.80%, 8/15/28, Callable 5/15/23 @ 100 (a) | 766 | 762 | |||||||||
Canadian Pacer Auto Receivables Trust, Series 2018-1A, Class C, 3.82%, 4/19/24, Callable 5/19/21 @ 100 (a) | 2,084 | 2,109 | |||||||||
CarMax Auto Owner Trust, Series 2020-1, Class B, 2.21%, 9/15/25, Callable 12/15/23 @ 100 | 1,084 | 1,063 | |||||||||
Credit Acceptance Auto Loan Trust, Series 2018-3A, Class A, 3.55%, 8/15/27, Callable 10/15/21 @ 100 (a) | 2,701 | 2,722 | |||||||||
Dell Equipment Finance Trust, Series 2020-1, Class A3, 2.24%, 2/22/23, Callable 10/22/22 @ 100 (a) | 569 | 568 | |||||||||
Drive Auto Receivables Trust, Series 2019-1, Class C, 3.78%, 4/15/25, Callable 6/15/22 @ 100 | 1,247 | 1,260 | |||||||||
Element Rail Leasing I LLC, Series 2014-1A, Class A2, 3.67%, 4/19/44 (a) | 2,320 | 2,323 | |||||||||
Enterprise Fleet Financing LLC, Series 2020-1, Class A3, 1.86%, 12/22/25 (a) | 697 | 685 | |||||||||
Evergreen Credit Card Trust, Series 2019-2, Class A, 1.90%, 9/15/24 (a) | 1,916 | 1,919 | |||||||||
Exeter Automobile Receivables Trust, Series 2017-3A, Class D, 5.28%, 10/15/24, Callable 3/15/22 @ 100 (a) | 850 | 820 | |||||||||
Exeter Automobile Receivables Trust, Series 2019-2A, Class C, 3.30%, 3/15/24, Callable 12/15/22 @ 100 (a) | 1,705 | 1,713 | |||||||||
Exeter Automobile Receivables Trust, Series 2020-1A, Class B, 2.26%, 4/15/24, Callable 5/15/24 @ 100 (a) | 873 | 872 | |||||||||
Ford Credit Auto Owner Trust, Series 2019-A, Class A3, 2.78%, 9/15/23, Callable 3/15/23 @ 100 | 612 | 629 | |||||||||
Ford Credit Auto Owner Trust, Series 2020-1, Class B, 2.29%, 8/15/31, Callable 2/15/25 @ 100 (a) | 1,134 | 993 | |||||||||
GM Financial Consumer Automobile Receivables Trust, Series 2020-2, Class A4, 1.74%, 8/18/25, Callable 12/16/23 @ 100 | 1,421 | 1,458 | |||||||||
GM Financial Consumer Automobile Receivables Trust, Series 2020-1, Class A4, 1.90%, 3/17/25, Callable 2/16/23 @ 100 | 1,134 | 1,162 | |||||||||
Goal Capital Funding Trust, Series 2005-2, Class A4, 0.56% (LIBOR03M+20bps), 8/25/44, Callable 8/25/20 @ 100 (b) | 1,356 | 1,267 | |||||||||
Great American Auto Leasing, Inc., Series 2019-1, Class A3, 3.05%, 9/15/22, Callable 12/15/22 @ 100 (a) | 777 | 786 | |||||||||
Hertz Vehicle Financing II LP, Series 2019-3A, Class A, 2.67%, 12/26/25 (a) | 1,390 | 1,318 | |||||||||
HPEFS Equipment Trust, Series 2020-1A, Class B, 1.89%, 2/20/30, Callable 2/20/23 @ 100 (a) | 436 | 432 | |||||||||
HPEFS Equipment Trust, Series 2019-1A, Class C, 2.49%, 9/20/29, Callable 7/20/22 @ 100 (a) | 766 | 751 | |||||||||
John Deere Owner Trust, Series 2020-A, Class A4, 1.21%, 11/16/26, Callable 4/15/23 @ 100 | 1,701 | 1,690 | |||||||||
Kubota Credit Owner Trust, Series 2020-1A, Class A4, 2.26%, 7/15/26, Callable 10/15/23 @ 100 (a) | 738 | 744 |
See notes to financial statements.
9
USAA Mutual Funds Trust USAA Cornerstone Moderately Aggressive Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
MMAF Equipment Finance LLC, Series 2017-B, Class A4, 2.41%, 11/15/24, Callable 2/15/28 @ 100 (a) | $ | 1,701 | $ | 1,723 | |||||||
Navient Student Loan Trust, Series 2015-2, Class B, 1.67% (LIBOR01M+150bps), 8/25/50, Callable 10/25/28 @ 100 (b) | 1,800 | 1,553 | |||||||||
NP SPE II LLC, Series 2017-1A, Class A1, 3.37%, 10/21/47, Callable 10/20/27 @ 100 (a) | 645 | 626 | |||||||||
OSCAR US Funding Trust IX LLC, Series 2018-2A, Class A4, 3.63%, 9/10/25 (a) | 4,600 | 4,718 | |||||||||
SCF Equipment Leasing LLC, Series 2017-2A, Class A, 3.41%, 12/20/23, Callable 6/20/20 @ 100 (a) | 998 | 995 | |||||||||
SLM Student Loan Trust, Series 2003-14, Class B, 1.54% (LIBOR03M+55bps), 10/25/65, Callable 10/25/28 @ 100 (b) | 675 | 603 | |||||||||
SLM Student Loan Trust, Series 2006-2, Class B, 1.21% (LIBOR03M+22bps), 1/25/41, Callable 4/25/32 @ 100 (b) | 1,893 | 1,634 | |||||||||
Synchrony Credit Card Master Note Trust, Series 2016-2, Class C, 2.95%, 5/15/24 | 2,648 | 2,648 | |||||||||
Synchrony Credit Card Master Note Trust, Series 2018-2, Class A, 3.47%, 5/15/26 | 3,015 | 3,169 | |||||||||
Transportation Finance Equipment Trust, Series 2019-1, Class B, 2.06%, 5/23/24, Callable 9/23/23 @ 100 (a) | 600 | 578 | |||||||||
Transportation Finance Equipment Trust, Series 2019-1, Class A4, 1.88%, 3/25/24, Callable 9/23/23 @ 100 (a) | 1,701 | 1,663 | |||||||||
Trinity Rail Leasing LLC, Series 2019-2A, Class A2, 3.10%, 10/18/49, Callable 10/17/20 @ 100 (a) | 1,000 | 937 | |||||||||
Westlake Automobile Receivables Trust, Series 2020-1A, Class B, 1.94%, 4/15/25, Callable 6/15/24 @ 100 (a) | 2,836 | 2,841 | |||||||||
Westlake Automobile Receivables Trust, Series 2018-2A, Class D, 4.00%, 1/16/24, Callable 10/15/21 @ 100 (a) | 1,500 | 1,513 | |||||||||
Total Asset Backed Securities (Cost $61,745) | 61,434 | ||||||||||
Collateralized Mortgage Obligations (0.8%) | |||||||||||
Banc of America Commercial Mortgage Trust, Series 2006-3, Class AM, 5.66%, 7/10/44 (c) | 3,874 | 779 | |||||||||
Banc of America Commercial Mortgage Trust, Series 2008-1, Class AJ, 6.57%, 2/10/51 (c) | 130 | 132 | |||||||||
BANK, Series 2019-BNK20, Class A3, 3.01%, 9/15/61 | 1,750 | 1,896 | |||||||||
Barclays Commercial Mortgage Trust, Series 2019-C5, Class ASB, 2.99%, 11/15/52 | 1,322 | 1,398 | |||||||||
Benchmark Mortgage Trust, Series 2020-B17, Class ASB, 2.18%, 3/15/53 | 1,134 | 1,144 | |||||||||
Benchmark Mortgage Trust, Series 2019-B14, Class A5, 3.05%, 12/15/61 | 2,269 | 2,454 | |||||||||
BTH Mortgage-Backed Securities Trust, Series 2018-21, Class A, 2.87% (LIBOR01M+250bps), 10/7/21 (a) (b) | 2,320 | 2,231 | |||||||||
BX Trust, Series 2019-OC11, Class A, 3.20%, 12/9/41 (a) | 1,047 | 1,055 | |||||||||
Citigroup Commercial Mortgage Trust, Series 2020-GC46, Class AAB, 2.61%, 1/15/53 | 1,134 | 1,172 | |||||||||
Citigroup Commercial Mortgage Trust, Series 2020-555, Class A, 2.65%, 12/10/41 (a) | 1,701 | 1,638 | |||||||||
COMM Mortgage Trust, Series 2019-GC44, Class ASB, 2.87%, 8/15/57 | 1,701 | 1,789 | |||||||||
Credit Suisse Commercial Mortgage Trust, Series 2007-C1, Class AMFL, 0.37% (LIBOR01M+19bps), 2/15/40 (b) | 55 | 51 | |||||||||
CSAIL Commercial Mortgage Trust, Series 2016-C6, Class XA, 1.90%, 1/15/49 (c) (d) | 21,947 | 1,724 | |||||||||
DBJPM Mortgage Trust, Series 2016-SFC, Class A, 2.83%, 8/10/36 (a) | 1,000 | 903 | |||||||||
GE Commercial Mortgage Corp., Series 2007-C1, Class AM, 5.61%, 12/10/49 (c) | 579 | 411 |
See notes to financial statements.
10
USAA Mutual Funds Trust USAA Cornerstone Moderately Aggressive Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares or Principal Amount | Value | |||||||||
GS Mortgage Securities Trust, Series 2020-GC45, Class AAB, 2.84%, 2/13/53 | $ | 608 | $ | 638 | |||||||
GS Mortgage Securities Trust, Series 2020-GC45, Class A5, 2.91%, 2/13/53 | 720 | 770 | |||||||||
UBS Commercial Mortgage Trust, Series 2012-C1, Class XA, 2.07%, 5/10/45 (a) (c) (d) | 20,964 | 591 | |||||||||
Total Collateralized Mortgage Obligations (Cost $23,730) | 20,776 | ||||||||||
Common Stocks (23.6%) | |||||||||||
Communication Services (1.9%): | |||||||||||
Activision Blizzard, Inc. | 36,804 | 2,649 | |||||||||
Alphabet, Inc. Class C (e) | 5,863 | 8,378 | |||||||||
AMC Networks, Inc. Class A (e) | 6,532 | 185 | |||||||||
AT&T, Inc. | 143,798 | 4,437 | |||||||||
Charter Communications, Inc. Class A (e) | 5,594 | 3,043 | |||||||||
Comcast Corp. Class A | 107,771 | 4,268 | |||||||||
DISH Network Corp. Class A (e) | 118,736 | 3,758 | |||||||||
Electronic Arts, Inc. (e) | 21,912 | 2,692 | |||||||||
Entravision Communications Corp. Class A | 64,505 | 97 | |||||||||
Facebook, Inc. Class A (e) | 27,287 | 6,142 | |||||||||
Fox Corp. Class A | 111,615 | 3,256 | |||||||||
Gray Television, Inc. (e) | 24,849 | 346 | |||||||||
John Wiley & Sons, Inc. Class A | 4,331 | 174 | |||||||||
Match Group, Inc. (e) (f) | 25,603 | 2,280 | |||||||||
Meredith Corp. | 18,723 | 280 | |||||||||
Shenandoah Telecommunications Co. (f) | 4,312 | 227 | |||||||||
Sinclair Broadcast Group, Inc. Class A | 6,725 | 126 | |||||||||
Sirius XM Holdings, Inc. (f) | 399,873 | 2,327 | |||||||||
Take-Two Interactive Software, Inc. (e) | 18,739 | 2,552 | |||||||||
Verizon Communications, Inc. | 76,879 | 4,411 | |||||||||
51,628 | |||||||||||
Consumer Discretionary (1.9%): | |||||||||||
Asbury Automotive Group, Inc. (e) (f) | 1,875 | 135 | |||||||||
AutoZone, Inc. (e) | 2,299 | 2,639 | |||||||||
Big Lots, Inc. | 4,338 | 168 | |||||||||
Booking Holdings, Inc. (e) | 1,888 | 3,095 | |||||||||
Cracker Barrel Old Country Store, Inc. | 2,776 | 297 | |||||||||
Deckers Outdoor Corp. (e) | 1,373 | 251 | |||||||||
Dick's Sporting Goods, Inc. | 5,620 | 203 | |||||||||
Dollar General Corp. | 14,971 | 2,867 | |||||||||
Domino's Pizza, Inc. | 6,186 | 2,387 | |||||||||
Foot Locker, Inc. | 10,573 | 293 | |||||||||
Gentex Corp. | 10,424 | 276 | |||||||||
G-III Apparel Group Ltd. (e) | 20,304 | 210 | |||||||||
Graham Holdings Co. Class B | 315 | 113 | |||||||||
Group 1 Automotive, Inc. | 2,255 | 142 | |||||||||
H&R Block, Inc. | 13,186 | 224 | |||||||||
Helen of Troy Ltd. (e) | 715 | 130 | |||||||||
Kontoor Brands, Inc. (f) | 17,502 | 256 | |||||||||
La-Z-Boy, Inc. | 5,684 | 146 | |||||||||
Lowe's Cos., Inc. | 25,428 | 3,314 | |||||||||
Lululemon Athletica, Inc. (e) | 11,043 | 3,314 |
See notes to financial statements.
11
USAA Mutual Funds Trust USAA Cornerstone Moderately Aggressive Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Macy's, Inc. (f) | 25,642 | $ | 163 | ||||||||
Nike, Inc. Class B | 68,146 | 6,718 | |||||||||
Office Depot, Inc. | 71,547 | 177 | |||||||||
O'Reilly Automotive, Inc. (e) | 6,063 | 2,530 | |||||||||
Penske Automotive Group, Inc. | 2,801 | 100 | |||||||||
Qurate Retail, Inc. Class A (e) | 31,036 | 256 | |||||||||
Steven Madden Ltd. | 5,575 | 131 | |||||||||
Sturm Ruger & Co., Inc. (f) (g) | 3,062 | 191 | |||||||||
Target Corp. (g) | 23,709 | 2,900 | |||||||||
Tesla, Inc. (e) | 3,869 | 3,231 | |||||||||
Texas Roadhouse, Inc. | 3,633 | 188 | |||||||||
The Buckle, Inc. | 23,101 | 325 | |||||||||
The Home Depot, Inc. | 35,236 | 8,755 | |||||||||
Toll Brothers, Inc. | 11,685 | 378 | |||||||||
Williams-Sonoma, Inc. | 3,695 | 307 | |||||||||
Wingstop, Inc. | 1,556 | 190 | |||||||||
Yum! Brands, Inc. | 28,582 | 2,565 | |||||||||
49,565 | |||||||||||
Consumer Staples (1.7%): | |||||||||||
Cal-Maine Foods, Inc. (e) | 3,820 | 170 | |||||||||
Colgate-Palmolive Co. | 38,122 | 2,757 | |||||||||
Costco Wholesale Corp. | 10,493 | 3,237 | |||||||||
Edgewell Personal Care Co. (e) | 8,834 | 269 | |||||||||
Flowers Foods, Inc. | 13,178 | 311 | |||||||||
Hostess Brands, Inc. (e) | 14,788 | 179 | |||||||||
Ingles Markets, Inc. Class A | 4,230 | 180 | |||||||||
Kimberly-Clark Corp. | 18,724 | 2,648 | |||||||||
Philip Morris International, Inc. | 89,888 | 6,594 | |||||||||
Pilgrim's Pride Corp. (e) | 14,051 | 290 | |||||||||
Sanderson Farms, Inc. | 801 | 106 | |||||||||
Sprouts Farmers Market, Inc. (e) | 11,897 | 299 | |||||||||
Sysco Corp. | 45,820 | 2,527 | |||||||||
The Clorox Co. (f) | 24,244 | 5,000 | |||||||||
The Kroger Co. | 162,799 | 5,311 | |||||||||
The Procter & Gamble Co. | 74,406 | 8,625 | |||||||||
Tyson Foods, Inc. Class A | 50,946 | 3,130 | |||||||||
U.S. Foods Holding Corp. (e) | 12,254 | 235 | |||||||||
Walgreens Boots Alliance, Inc. | 70,283 | 3,018 | |||||||||
44,886 | |||||||||||
Energy (0.7%): | |||||||||||
Bonanza Creek Energy, Inc. (e) | 8,639 | 146 | |||||||||
Chevron Corp. | 42,884 | 3,932 | |||||||||
ConocoPhillips | 135,795 | 5,728 | |||||||||
Delek U.S. Holdings, Inc. | 8,763 | 172 | |||||||||
PBF Energy, Inc. Class A | 16,788 | 178 | |||||||||
Phillips 66 | 75,309 | 5,894 | |||||||||
Renewable Energy Group, Inc. (e) (f) | 16,870 | 480 | |||||||||
Valero Energy Corp. | 40,498 | 2,699 | |||||||||
19,229 |
See notes to financial statements.
12
USAA Mutual Funds Trust USAA Cornerstone Moderately Aggressive Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Financials (3.2%): | |||||||||||
Affiliated Managers Group, Inc. | 3,800 | $ | 253 | ||||||||
AGNC Investment Corp. | 11,638 | 151 | |||||||||
American Equity Investment Life Holding Co. | 12,262 | 266 | |||||||||
Annaly Capital Management, Inc. | 30,770 | 190 | |||||||||
Aon PLC Class A | 14,053 | 2,768 | |||||||||
BancFirst Corp. | 3,148 | 120 | |||||||||
Bank of Hawaii Corp. | 6,930 | 446 | |||||||||
BankUnited, Inc. | 15,484 | 286 | |||||||||
Brown & Brown, Inc. | 65,999 | 2,653 | |||||||||
Cadence Bancorp | 16,097 | 130 | |||||||||
Capital One Financial Corp. | 49,030 | 3,336 | |||||||||
Cathay General Bancorp | 12,113 | 329 | |||||||||
Chimera Investment Corp. (f) | 24,995 | 208 | |||||||||
Cullen/Frost Bankers, Inc. | 5,353 | 407 | |||||||||
Employers Holdings, Inc. | 7,460 | 223 | |||||||||
Essent Group Ltd. | 13,678 | 452 | |||||||||
Fifth Third Bancorp | 164,554 | 3,191 | |||||||||
First Bancorp, Inc. | 18,407 | 101 | |||||||||
First Republic Bank | 24,199 | 2,618 | |||||||||
Great Western Bancorp, Inc. | 13,705 | 195 | |||||||||
Intercontinental Exchange, Inc. | 28,863 | 2,807 | |||||||||
JPMorgan Chase & Co. | 47,196 | 4,593 | |||||||||
Ladder Capital Corp. | 19,198 | 153 | |||||||||
Legg Mason, Inc. | 2,529 | 126 | |||||||||
LPL Financial Holdings, Inc. | 3,211 | 229 | |||||||||
MarketAxess Holdings, Inc. | 5,128 | 2,608 | |||||||||
MetLife, Inc. | 86,672 | 3,121 | |||||||||
MGIC Investment Corp. | 18,032 | 148 | |||||||||
Morgan Stanley | 80,245 | 3,547 | |||||||||
Mr. Cooper Group, Inc. (e) | 25,755 | 287 | |||||||||
MSCI, Inc. | 14,789 | 4,863 | |||||||||
National General Holdings Corp. | 10,312 | 209 | |||||||||
Nelnet, Inc. Class A | 3,668 | 181 | |||||||||
New York Community Bancorp, Inc. (f) | 22,104 | 222 | |||||||||
NMI Holdings, Inc. Class A (e) | 18,358 | 282 | |||||||||
Primerica, Inc. (f) | 2,579 | 293 | |||||||||
Radian Group, Inc. | 31,211 | 496 | |||||||||
Regions Financial Corp. | 284,265 | 3,215 | |||||||||
S&P Global, Inc. | 18,932 | 6,153 | |||||||||
State Street Corp. | 50,076 | 3,053 | |||||||||
SVB Financial Group (e) | 12,593 | 2,704 | |||||||||
Synchrony Financial | 158,866 | 3,236 | |||||||||
Synovus Financial Corp. | 5,543 | 106 | |||||||||
T. Rowe Price Group, Inc. | 21,979 | 2,657 | |||||||||
The Allstate Corp. | 48,800 | 4,773 | |||||||||
The Goldman Sachs Group, Inc. | 17,354 | 3,410 | |||||||||
The PNC Financial Services Group, Inc. | 26,323 | 3,002 | |||||||||
The Progressive Corp. | 67,126 | 5,214 | |||||||||
U.S. Bancorp | 76,628 | 2,725 |
See notes to financial statements.
13
USAA Mutual Funds Trust USAA Cornerstone Moderately Aggressive Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Universal Insurance Holdings, Inc. | 11,014 | $ | 197 | ||||||||
Waddell & Reed Financial, Inc. Class A (f) | 22,183 | 289 | |||||||||
Walker & Dunlop, Inc. | 11,138 | 451 | |||||||||
Webster Financial Corp. | 7,077 | 200 | |||||||||
Western Alliance Bancorp | 11,842 | 452 | |||||||||
World Acceptance Corp. (e) | 4,637 | 308 | |||||||||
84,633 | |||||||||||
Health Care (4.0%): | |||||||||||
AbbVie, Inc. | 77,692 | 7,200 | |||||||||
Acadia Healthcare Co., Inc. (e) | 3,673 | 105 | |||||||||
Amedisys, Inc. (e) | 1,756 | 337 | |||||||||
Amgen, Inc. | 28,888 | 6,636 | |||||||||
AMN Healthcare Services, Inc. (e) | 8,350 | 371 | |||||||||
Anthem, Inc. | 11,660 | 3,429 | |||||||||
Biogen, Inc. (e) | 18,418 | 5,656 | |||||||||
Bristol-Myers Squibb Co. | 113,904 | 6,802 | |||||||||
Bruker Corp. | 7,414 | 321 | |||||||||
Cerner Corp. | 35,108 | 2,560 | |||||||||
Chemed Corp. | 1,025 | 491 | |||||||||
Cigna Corp. | 17,197 | 3,393 | |||||||||
Corcept Therapeutics, Inc. (e) | 31,367 | 475 | |||||||||
Covetrus, Inc. (e) (f) | 10,811 | 165 | |||||||||
CVS Health Corp. | 53,379 | 3,500 | |||||||||
DaVita, Inc. (e) | 28,474 | 2,305 | |||||||||
DexCom, Inc. (e) | 6,892 | 2,607 | |||||||||
Eli Lilly & Co. | 40,701 | 6,225 | |||||||||
Encompass Health Corp. | 4,815 | 353 | |||||||||
Halozyme Therapeutics, Inc. (e) | 7,110 | 173 | |||||||||
HCA Healthcare, Inc. | 28,810 | 3,080 | |||||||||
HealthEquity, Inc. (e) | 2,311 | 143 | |||||||||
Hill-Rom Holdings, Inc. | 4,266 | 434 | |||||||||
Horizon Therapeutics PLC (e) | 4,776 | 242 | |||||||||
IDEXX Laboratories, Inc. (e) | 8,362 | 2,583 | |||||||||
Innoviva, Inc. (e) | 19,508 | 273 | |||||||||
Johnson & Johnson (g) | 69,539 | 10,344 | |||||||||
Masimo Corp. (e) | 1,783 | 428 | |||||||||
Medpace Holdings, Inc. (e) (f) | 2,219 | 206 | |||||||||
Merck & Co., Inc. | 46,250 | 3,733 | |||||||||
Meridian Bioscience, Inc. (e) | 14,528 | 225 | |||||||||
Mettler-Toledo International, Inc. (e) | 3,247 | 2,581 | |||||||||
Molina Healthcare, Inc. (e) | 683 | 127 | |||||||||
Patterson Cos., Inc. (g) | 10,633 | 209 | |||||||||
PerkinElmer, Inc. | 4,469 | 449 | |||||||||
Pfizer, Inc. | 108,010 | 4,125 | |||||||||
Phibro Animal Health Corp. Class A | 12,126 | 318 | |||||||||
PRA Health Sciences, Inc. (e) | 3,209 | 332 | |||||||||
Prestige Consumer Healthcare, Inc. (e) (f) | 6,280 | 265 | |||||||||
Regeneron Pharmaceuticals, Inc. (e) | 4,705 | 2,883 | |||||||||
ResMed, Inc. | 15,336 | 2,466 | |||||||||
Select Medical Holdings Corp. (e) | 16,909 | 273 |
See notes to financial statements.
14
USAA Mutual Funds Trust USAA Cornerstone Moderately Aggressive Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Simulations Plus, Inc. | 4,031 | $ | 204 | ||||||||
Supernus Pharmaceuticals, Inc. (e) | 7,621 | 184 | |||||||||
The Ensign Group, Inc. | 7,855 | 344 | |||||||||
United Therapeutics Corp. (e) | 3,747 | 442 | |||||||||
UnitedHealth Group, Inc. | 30,070 | 9,167 | |||||||||
Vertex Pharmaceuticals, Inc. (e) | 10,277 | 2,959 | |||||||||
Waters Corp. (e) | 12,351 | 2,468 | |||||||||
West Pharmaceutical Services, Inc. | 12,152 | 2,625 | |||||||||
107,216 | |||||||||||
Industrials (2.3%): | |||||||||||
3M Co. | 19,060 | 2,982 | |||||||||
ACCO Brands Corp. | 20,027 | 124 | |||||||||
AECOM (e) | 9,335 | 362 | |||||||||
Allison Transmission Holdings, Inc. | 9,287 | 350 | |||||||||
Apogee Enterprises, Inc. | 8,006 | 165 | |||||||||
ArcBest Corp. | 5,765 | 129 | |||||||||
Atkore International Group, Inc. (e) | 10,187 | 273 | |||||||||
Carrier Global Corp. (e) | 316,574 | 6,480 | |||||||||
Cimpress PLC (e) (f) | 3,009 | 271 | |||||||||
Crane Co. | 4,865 | 271 | |||||||||
Cummins, Inc. | 18,444 | 3,128 | |||||||||
Deluxe Corp. | 4,690 | 109 | |||||||||
Eaton Corp. PLC | 36,387 | 3,089 | |||||||||
EnPro Industries, Inc. | 2,535 | 114 | |||||||||
FedEx Corp. | 24,989 | 3,263 | |||||||||
FTI Consulting, Inc. (e) | 1,143 | 138 | |||||||||
Generac Holdings, Inc. (e) | 2,165 | 241 | |||||||||
General Dynamics Corp. | 23,712 | 3,482 | |||||||||
GMS, Inc. (e) | 12,540 | 257 | |||||||||
Herman Miller, Inc. | 19,031 | 438 | |||||||||
Hillenbrand, Inc. | 8,574 | 221 | |||||||||
IHS Markit Ltd. | 37,809 | 2,626 | |||||||||
Illinois Tool Works, Inc. | 16,104 | 2,777 | |||||||||
KAR Auction Services, Inc. | 11,616 | 167 | |||||||||
Knoll, Inc. | 9,735 | 103 | |||||||||
Lockheed Martin Corp. | 15,402 | 5,983 | |||||||||
Masonite International Corp. (e) | 2,820 | 187 | |||||||||
Meritor, Inc. (e) | 9,840 | 201 | |||||||||
MSC Industrial Direct Co., Inc. | 4,610 | 320 | |||||||||
Northrop Grumman Corp. | 8,211 | 2,752 | |||||||||
nVent Electric PLC | 8,832 | 162 | |||||||||
Old Dominion Freight Line, Inc. | 15,722 | 2,690 | |||||||||
Oshkosh Corp. | 4,549 | 327 | |||||||||
Otis Worldwide Corp. | 48,437 | 2,550 | |||||||||
Patrick Industries, Inc. | 9,574 | 497 | |||||||||
Regal Beloit Corp. | 5,384 | 428 | |||||||||
Resideo Technologies, Inc. (e) | 39,717 | 280 | |||||||||
Rockwell Automation, Inc. | 12,443 | 2,690 | |||||||||
Rush Enterprises, Inc. Class A | 7,159 | 298 | |||||||||
Steelcase, Inc. Class A | 37,383 | 433 |
See notes to financial statements.
15
USAA Mutual Funds Trust USAA Cornerstone Moderately Aggressive Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Teledyne Technologies, Inc. (e) | 7,489 | $ | 2,802 | ||||||||
The Timken Co. | 6,171 | 262 | |||||||||
The Toro Co. | 2,191 | 156 | |||||||||
Trinity Industries, Inc. | 6,701 | 134 | |||||||||
Verisk Analytics, Inc. | 15,858 | 2,738 | |||||||||
Wabash National Corp. | 22,007 | 210 | |||||||||
Werner Enterprises, Inc. (f) | 5,612 | 259 | |||||||||
WESCO International, Inc. (e) | 7,407 | 247 | |||||||||
WW Grainger, Inc. | 8,170 | 2,530 | |||||||||
60,696 | |||||||||||
Information Technology (5.6%): | |||||||||||
Accenture PLC Class A | 16,623 | 3,352 | |||||||||
Adobe, Inc. (e) | 19,128 | 7,395 | |||||||||
Apple, Inc. | 116,492 | 37,037 | |||||||||
Applied Materials, Inc. | 59,458 | 3,340 | |||||||||
Aspen Technology, Inc. (e) | 2,614 | 276 | |||||||||
Belden, Inc. | 3,244 | 110 | |||||||||
Broadcom, Inc. | 12,895 | 3,756 | |||||||||
CACI International, Inc. Class A (e) | 1,466 | 368 | |||||||||
Cardtronics PLC Class A (e) | 10,826 | 262 | |||||||||
CDW Corp. (f) | 21,626 | 2,399 | |||||||||
Ciena Corp. (e) | 4,262 | 236 | |||||||||
Cirrus Logic, Inc. (e) | 5,182 | 376 | |||||||||
Cisco Systems, Inc. | 94,570 | 4,522 | |||||||||
Citrix Systems, Inc. | 16,427 | 2,433 | |||||||||
Cognizant Technology Solutions Corp. Class A | 50,314 | 2,667 | |||||||||
Coherent, Inc. (e) | 1,845 | 268 | |||||||||
CoreLogic, Inc. | 3,884 | 192 | |||||||||
CSG Systems International, Inc. (f) | 6,452 | 306 | |||||||||
DocuSign, Inc. (e) | 20,587 | 2,877 | |||||||||
Euronet Worldwide, Inc. (e) | 1,670 | 158 | |||||||||
Fair Isaac Corp. (e) | 856 | 345 | |||||||||
HP, Inc. | 353,533 | 5,352 | |||||||||
Insight Enterprises, Inc. (e) | 3,695 | 189 | |||||||||
Intel Corp. | 75,488 | 4,750 | |||||||||
InterDigital, Inc. | 3,466 | 191 | |||||||||
Intuit, Inc. | 9,792 | 2,843 | |||||||||
J2 Global, Inc. (e) | 5,384 | 422 | |||||||||
Jabil, Inc. | 9,789 | 293 | |||||||||
KBR, Inc. | 12,958 | 304 | |||||||||
KLA Corp. | 15,094 | 2,656 | |||||||||
Kulicke & Soffa Industries, Inc. | 8,433 | 189 | |||||||||
Lam Research Corp. | 32,358 | 8,855 | |||||||||
Leidos Holdings, Inc. | 24,529 | 2,583 | |||||||||
LogMeIn, Inc. | 1,935 | 164 | |||||||||
Manhattan Associates, Inc. (e) (f) | 4,145 | 366 | |||||||||
Mastercard, Inc. Class A | 14,322 | 4,309 | |||||||||
MAXIMUS, Inc. | 6,768 | 487 | |||||||||
Methode Electronics, Inc. | 6,180 | 194 | |||||||||
Micron Technology, Inc. (e) | 65,820 | 3,153 |
See notes to financial statements.
16
USAA Mutual Funds Trust USAA Cornerstone Moderately Aggressive Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Microsoft Corp. (g) | 62,924 | $ | 11,531 | ||||||||
NCR Corp. (e) | 14,424 | 260 | |||||||||
NIC, Inc. | 14,348 | 345 | |||||||||
NVIDIA Corp. | 23,176 | 8,228 | |||||||||
Oracle Corp. | 67,615 | 3,636 | |||||||||
Paylocity Holding Corp. (e) | 995 | 129 | |||||||||
Perspecta, Inc. | 9,912 | 220 | |||||||||
Proofpoint, Inc. (e) | 1,277 | 148 | |||||||||
Science Applications International Corp. | 1,689 | 149 | |||||||||
Seagate Technology PLC | 58,008 | 3,077 | |||||||||
SMART Global Holdings, Inc. (e) | 8,206 | 220 | |||||||||
SYNNEX Corp. | 1,858 | 198 | |||||||||
Teradyne, Inc. | 3,618 | 242 | |||||||||
Texas Instruments, Inc. | 26,087 | 3,098 | |||||||||
The Hackett Group, Inc. | 24,356 | 336 | |||||||||
Ultra Clean Holdings, Inc. (e) | 15,856 | 329 | |||||||||
VeriSign, Inc. (e) | 11,102 | 2,431 | |||||||||
VMware, Inc. Class A (e) (f) | 21,683 | 3,388 | |||||||||
147,940 | |||||||||||
Materials (0.8%): | |||||||||||
Air Products & Chemicals, Inc. | 11,796 | 2,850 | |||||||||
Berry Global Group, Inc. (e) | 4,694 | 211 | |||||||||
Domtar Corp. | 7,070 | 144 | |||||||||
Huntsman Corp. | 17,220 | 312 | |||||||||
Hycroft Mining Corp. (e) (h) (n) | 1,040,251 | 1,469 | |||||||||
Linde PLC | 16,546 | 3,348 | |||||||||
LyondellBasell Industries NV Class A | 97,371 | 6,208 | |||||||||
Newmont Corp. | 42,425 | 2,481 | |||||||||
Reliance Steel & Aluminum Co. | 4,868 | 472 | |||||||||
Resolute Forest Products, Inc. (e) | 39,588 | 74 | |||||||||
Schweitzer-Mauduit International, Inc. | 7,267 | 221 | |||||||||
Silgan Holdings, Inc. | 13,205 | 442 | |||||||||
The Sherwin-Williams Co. | 4,780 | 2,839 | |||||||||
Trinseo SA | 5,182 | 107 | |||||||||
Warrior Met Coal, Inc. | 30,287 | 426 | |||||||||
21,604 | |||||||||||
Real Estate (0.8%): | |||||||||||
Alexandria Real Estate Equities, Inc. | 2,478 | 381 | |||||||||
American Tower Corp. | 9,530 | 2,460 | |||||||||
AvalonBay Communities, Inc. | 3,005 | 469 | |||||||||
Boston Properties, Inc. | 3,327 | 286 | |||||||||
Brixmor Property Group, Inc. | 18,249 | 204 | |||||||||
Camden Property Trust | 2,083 | 191 | |||||||||
CBRE Group, Inc. Class A (e) | 6,842 | 301 | |||||||||
City Office REIT, Inc. | 15,471 | 144 | |||||||||
CoreCivic, Inc. | 13,137 | 158 | |||||||||
Crown Castle International Corp. | 8,946 | 1,540 | |||||||||
Digital Realty Trust, Inc. | 5,656 | 812 | |||||||||
Diversified Healthcare Trust | 49,448 | 177 |
See notes to financial statements.
17
USAA Mutual Funds Trust USAA Cornerstone Moderately Aggressive Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Duke Realty Corp. | 7,909 | $ | 273 | ||||||||
EPR Properties (f) | 6,303 | 199 | |||||||||
Equinix, Inc. | 1,835 | 1,280 | |||||||||
Equity LifeStyle Properties, Inc. | 3,722 | 232 | |||||||||
Equity Residential | 7,990 | 484 | |||||||||
Essex Property Trust, Inc. | 1,422 | 345 | |||||||||
Extra Space Storage, Inc. | 2,786 | 269 | |||||||||
Federal Realty Investment Trust | 1,625 | 130 | |||||||||
Gaming and Leisure Properties, Inc. | 13,249 | 458 | |||||||||
Healthpeak Properties, Inc. | 10,649 | 262 | |||||||||
Host Hotels & Resorts, Inc. | 15,431 | 184 | |||||||||
Invitation Homes, Inc. | 11,569 | 304 | |||||||||
Iron Mountain, Inc. (f) | 6,178 | 159 | |||||||||
iStar, Inc. | 14,075 | 154 | |||||||||
Jones Lang LaSalle, Inc. | 2,733 | 280 | |||||||||
Kimco Realty Corp. | 9,085 | 101 | |||||||||
Lamar Advertising Co. Class A | 5,195 | 344 | |||||||||
LTC Properties, Inc. (f) | 11,635 | 428 | |||||||||
Medical Properties Trust, Inc. | 29,672 | 536 | |||||||||
Mid-America Apartment Communities, Inc. | 2,454 | 285 | |||||||||
National Retail Properties, Inc. | 3,693 | 116 | |||||||||
Omega Healthcare Investors, Inc. | 12,612 | 393 | |||||||||
PotlatchDeltic Corp. | 9,666 | 328 | |||||||||
Preferred Apartment Communities, Inc. Class A | 15,457 | 108 | |||||||||
Prologis, Inc. | 15,864 | 1,452 | |||||||||
Public Storage | 3,383 | 686 | |||||||||
Realty Income Corp. | 7,012 | 388 | |||||||||
Regency Centers Corp. | 3,605 | 154 | |||||||||
SBA Communications Corp. | 2,423 | 761 | |||||||||
Simon Property Group, Inc. | 6,602 | 381 | |||||||||
SL Green Realty Corp. | 1,724 | 73 | |||||||||
Summit Hotel Properties, Inc. | 28,006 | 175 | |||||||||
Sun Communities, Inc. | 1,994 | 274 | |||||||||
The GEO Group, Inc. | 12,826 | 154 | |||||||||
UDR, Inc. | 6,305 | 233 | |||||||||
Universal Health Realty Income Trust | 1,610 | 150 | |||||||||
Ventas, Inc. | 8,020 | 280 | |||||||||
VEREIT, Inc. | 22,972 | 126 | |||||||||
VICI Properties, Inc. | 9,919 | 195 | |||||||||
Vornado Realty Trust (f) | 3,696 | 134 | |||||||||
Welltower, Inc. | 8,730 | 442 | |||||||||
Weyerhaeuser Co. | 16,032 | 324 | |||||||||
WP Carey, Inc. | 3,707 | 222 | |||||||||
21,379 | |||||||||||
Utilities (0.7%): | |||||||||||
ALLETE, Inc. | 4,368 | 257 | |||||||||
Clearway Energy, Inc. Class C | 10,181 | 223 | |||||||||
Duke Energy Corp. (g) | 38,544 | 3,300 | |||||||||
Eversource Energy (g) | 32,317 | 2,705 | |||||||||
Exelon Corp. | 84,448 | 3,235 |
See notes to financial statements.
18
USAA Mutual Funds Trust USAA Cornerstone Moderately Aggressive Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares or Principal Amount | Value | |||||||||
IDACORP, Inc. | 4,315 | $ | 402 | ||||||||
New Jersey Resources Corp. | 10,927 | 384 | |||||||||
NextEra Energy, Inc. (g) | 13,694 | 3,500 | |||||||||
NorthWestern Corp. | 3,706 | 223 | |||||||||
Southwest Gas Holdings, Inc. | 4,872 | 370 | |||||||||
The Southern Co. (g) | 50,034 | 2,855 | |||||||||
WEC Energy Group, Inc. (g) | 29,186 | 2,677 | |||||||||
20,131 | |||||||||||
Total Common Stocks (Cost $594,434) | 628,907 | ||||||||||
Preferred Stocks (0.7%) | |||||||||||
Communication Services (0.2%): | |||||||||||
Qwest Corp., 6.50%, 9/1/56 | 220,000 | 5,161 | |||||||||
Consumer Staples (0.2%): | |||||||||||
CHS, Inc., cumulative redeemable, Series 1, 7.88% (i) | 30,000 | 831 | |||||||||
Dairy Farmers of America, Inc., cumulative redeemable, 7.88% (a) (i) | 45,000 | 3,870 | |||||||||
4,701 | |||||||||||
Financials (0.3%): | |||||||||||
American Overseas Group Ltd., non-cumulative, Series A 3.88% (LIBOR03M+356bps), 12/15/66 (b) (h) (j) | 3,500 | 875 | |||||||||
Delphi Financial Group, Inc., 3.58% (LIBOR03M+319bps), 5/15/37 (b) (h) | 309,253 | 6,804 | |||||||||
7,679 | |||||||||||
Total Preferred Stocks (Cost $20,110) | 17,541 | ||||||||||
Senior Secured Loans (0.1%) | |||||||||||
Academy Ltd., 1st Lien Term Loan B, 5.00% (LIBOR01M+400bps), 7/2/22 (b) | $ | 5,221 | 3,890 | ||||||||
Total Senior Secured Loans (Cost $4,611) | 3,890 | ||||||||||
Corporate Bonds (10.9%) | |||||||||||
Communication Services (0.4%): | |||||||||||
AT&T, Inc., 2.30%, 6/1/27, Callable 4/1/27 @ 100 | 1,709 | 1,736 | |||||||||
Fox Corp., 3.05%, 4/7/25, Callable 3/7/25 @ 100 | 812 | 866 | |||||||||
The Walt Disney Co., 2.20%, 1/13/28 | 758 | 791 | |||||||||
T-Mobile USA, Inc., 3.88%, 4/15/30, Callable 1/15/30 @ 100 (a) (g) | 2,064 | 2,239 | |||||||||
Verizon Communications, Inc., 4.50%, 8/10/33 | 3,403 | 4,212 | |||||||||
9,844 | |||||||||||
Consumer Discretionary (0.4%): | |||||||||||
AutoNation, Inc., 4.75%, 6/1/30, Callable 3/1/30 @ 100 | 683 | 713 | |||||||||
eBay, Inc., 1.90%, 3/11/25, Callable 2/11/25 @ 100 | 1,984 | 2,005 | |||||||||
General Motors Co., 6.80%, 10/1/27, Callable 8/1/27 @ 100 (f) | 711 | 812 | |||||||||
Hasbro, Inc., 3.55%, 11/19/26, Callable 9/19/26 @ 100 | 1,361 | 1,400 | |||||||||
Nordstrom, Inc., 4.38%, 4/1/30, Callable 1/1/30 @ 100 | 1,134 | 837 | |||||||||
O'Reilly Automotive, Inc., 4.20%, 4/1/30, Callable 1/1/30 @ 100 | 1,500 | 1,700 | |||||||||
VF Corp., 2.95%, 4/23/30, Callable 1/23/30 @ 100 | 853 | 890 | |||||||||
Volkswagen Group of America Finance LLC, 3.20%, 9/26/26, Callable 7/26/26 @ 100 (a) (f) | 711 | 730 | |||||||||
9,087 |
See notes to financial statements.
19
USAA Mutual Funds Trust USAA Cornerstone Moderately Aggressive Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Consumer Staples (0.7%): | |||||||||||
Altria Group, Inc., 3.40%, 5/6/30, Callable 2/6/30 @ 100 (f) | $ | 814 | $ | 859 | |||||||
Anheuser-Busch Cos. LLC/Anheuser-Busch InBev Worldwide, Inc., 4.70%, 2/1/36, Callable 8/1/35 @ 100 | 2,836 | 3,218 | |||||||||
BAT Capital Corp., 2.79%, 9/6/24, Callable 8/6/24 @ 100 | 3,000 | 3,124 | |||||||||
Kraft Heinz Foods Co., 3.75%, 4/1/30, Callable 1/1/30 @ 100 (a) | 1,277 | 1,321 | |||||||||
McCormick & Co., Inc., 2.50%, 4/15/30, Callable 1/15/30 @ 100 | 497 | 517 | |||||||||
Mondelez International, Inc., 2.75%, 4/13/30, Callable 1/13/30 @ 100 | 375 | 395 | |||||||||
PepsiCo, Inc., 2.25%, 3/19/25, Callable 2/19/25 @ 100 | 2,639 | 2,819 | |||||||||
Sysco Corp., 5.95%, 4/1/30, Callable 1/1/30 @ 100 | 668 | 802 | |||||||||
The Coca-Cola Co., 3.45%, 3/25/30 | 1,750 | 2,035 | |||||||||
The Procter & Gamble Co., 3.00%, 3/25/30 | 1,138 | 1,304 | |||||||||
Unilever Capital Corp., 2.60%, 5/5/24, Callable 3/5/24 @ 100 | 3,000 | 3,212 | |||||||||
19,606 | |||||||||||
Energy (1.3%): | |||||||||||
Cameron LNG LLC, 3.30%, 1/15/35, Callable 9/15/34 @ 100 (a) | 2,165 | 2,311 | |||||||||
Cheniere Corpus Christi Holdings LLC, 3.70%, 11/15/29, Callable 5/18/29 @ 100 (a) | 2,837 | 2,822 | |||||||||
Diamondback Energy, Inc., 3.25%, 12/1/26, Callable 10/1/26 @ 100 | 1,702 | 1,657 | |||||||||
Enable Midstream Partners LP, 4.15%, 9/15/29, Callable 6/15/29 @ 100 | 3,000 | 2,440 | |||||||||
Enbridge Energy Partners LP, 7.38%, 10/15/45, Callable 4/15/45 @ 100 (g) | 1,300 | 1,787 | |||||||||
Energy Transfer Operating LP, 3.75%, 5/15/30, Callable 2/15/30 @ 100 | 1,701 | 1,676 | |||||||||
Enterprise Products Operating LLC, 2.80%, 1/31/30, Callable 10/31/29 @ 100 | 1,701 | 1,774 | |||||||||
Enterprise TE Partners LP, 4.68% (LIBOR03M+278bps), 6/1/67, Callable 7/6/20 @ 100 (b) | 500 | 424 | |||||||||
EOG Resources, Inc., 4.38%, 4/15/30, Callable 1/15/30 @ 100 | 525 | 619 | |||||||||
EQM Midstream Partners LP, 4.75%, 7/15/23, Callable 6/15/23 @ 100 (g) | 5,600 | 5,536 | |||||||||
EQT Corp., 7.00%, 2/1/30, Callable 11/1/29 @ 100 | 1,148 | 1,218 | |||||||||
Exxon Mobil Corp., 2.99%, 3/19/25, Callable 2/19/25 @ 100 (g) | 2,837 | 3,102 | |||||||||
Marathon Petroleum Corp., 4.70%, 5/1/25, Callable 4/1/25 @ 100 | 800 | 884 | |||||||||
National Oilwell Varco, Inc., 3.60%, 12/1/29, Callable 9/1/29 @ 100 | 2,269 | 2,121 | |||||||||
Occidental Petroleum Corp. 3.50%, 8/15/29, Callable 5/15/29 @ 100 | 419 | 285 | |||||||||
4.40%, 8/15/49, Callable 2/15/49 @ 100 | 1,134 | 672 | |||||||||
ONEOK, Inc., 6.35%, 1/15/31, Callable 10/15/30 @ 100 | 1,422 | 1,604 | |||||||||
Rockies Express Pipeline LLC, 4.80%, 5/15/30, Callable 2/15/30 @ 100 (a) | 1,134 | 1,055 | |||||||||
Sabine Pass Liquefaction LLC, 4.50%, 5/15/30, Callable 11/15/29 @ 100 (a) | 178 | 195 | |||||||||
Targa Resources Partners LP/Targa Resources Partners Finance Corp., 5.50%, 3/1/30, Callable 3/1/25 @ 102.75 (a) | 1,134 | 1,137 | |||||||||
Western Midstream Operating LP, 3.10%, 2/1/25, Callable 1/1/25 @ 100 | 1,194 | 1,110 | |||||||||
34,429 | |||||||||||
Financials (3.7%): | |||||||||||
Amcor Finance USA, Inc., 3.63%, 4/28/26, Callable 1/28/26 @ 100 | 500 | 533 | |||||||||
AmTrust Financial Services, Inc., 6.13%, 8/15/23 (f) | 3,607 | 3,387 | |||||||||
Ares Capital Corp., 3.63%, 1/19/22, Callable 12/19/21 @ 100 (g) | 5,950 | 5,904 | |||||||||
Assurant, Inc., 3.70%, 2/22/30, Callable 11/22/29 @ 100 | 1,154 | 1,114 | |||||||||
BancorpSouth Bank, 4.13% (LIBOR03M+247bps), 11/20/29, Callable 11/20/24 @ 100 (b) | 1,458 | 1,424 | |||||||||
BBVA USA, 3.88%, 4/10/25, Callable 3/10/25 @ 100 | 2,700 | 2,760 | |||||||||
BMW U.S. Capital LLC, 3.25%, 8/14/20 (a) (g) | 5,700 | 5,712 |
See notes to financial statements.
20
USAA Mutual Funds Trust USAA Cornerstone Moderately Aggressive Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Capital One NA, 2.15%, 9/6/22, Callable 8/6/22 @ 100 | $ | 3,000 | $ | 3,036 | |||||||
Citizens Financial Group, Inc., 2.50%, 2/6/30, Callable 11/6/29 @ 100 | 1,701 | 1,643 | |||||||||
Cullen/Frost Capital Trust II, 3.13% (LIBOR03M+155bps), 3/1/34, Callable 7/6/20 @ 100 (b) | 9,000 | 7,192 | |||||||||
First Horizon Bank, 5.75%, 5/1/30, Callable 2/1/30 @ 100 | 853 | 858 | |||||||||
First Maryland Capital I, 2.22% (LIBOR03M+100bps), 1/15/27, Callable 7/6/20 @ 100 (b) | 4,000 | 3,410 | |||||||||
Ford Motor Credit Co. LLC, 4.06%, 11/1/24, Callable 10/1/24 @ 100 | 2,000 | 1,886 | |||||||||
Global Atlantic Financial Co., 4.40%, 10/15/29, Callable 7/15/29 @ 100 (a) | 1,459 | 1,333 | |||||||||
HSB Group, Inc., 2.13% (LIBOR03M+91bps), 7/15/27, Callable 7/6/20 @ 100 (b) | 4,550 | 4,051 | |||||||||
Hyundai Capital America, 3.75%, 7/8/21 (a) (g) | 5,700 | 5,752 | |||||||||
JPMorgan Chase & Co., 2.52% (SOFR+204bps), 4/22/31, Callable 4/22/30 @ 100 (b) | 995 | 1,018 | |||||||||
KeyCorp, 2.25%, 4/6/27, MTN | 1,701 | 1,704 | |||||||||
Level 3 Financing, Inc., 3.88%, 11/15/29, Callable 8/15/29 @ 100 (a) | 2,268 | 2,320 | |||||||||
Loews Corp., 3.20%, 5/15/30, Callable 2/15/30 @ 100 | 1,138 | 1,204 | |||||||||
Manufactures & Traders Trust Co., 2.22% (LIBOR03M+64bps), 12/1/21, Callable 7/6/20 @ 100 (b) (g) | 6,039 | 5,984 | |||||||||
Nationwide Mutual Insurance Co., 3.03% (LIBOR03M+229bps), 12/15/24, Callable 7/6/20 @ 100 (a) (b) | 11,510 | 11,337 | |||||||||
Pinnacle Financial Partners, Inc., 4.13% (LIBOR03M+278bps), 9/15/29, Callable 9/15/24 @ 100 (b) | 2,000 | 1,966 | |||||||||
PNC Bank NA, 2.70%, 10/22/29 | 1,500 | 1,579 | |||||||||
PPL Capital Funding, Inc., 4.13%, 4/15/30, Callable 1/15/30 @ 100 | 1,138 | 1,284 | |||||||||
Prudential Financial, Inc., 5.62% (LIBOR03M+392bps), 6/15/43, Callable 6/15/23 @ 100 (b) | 5,400 | 5,600 | |||||||||
Regions Financial Corp., 2.25%, 5/18/25, Callable 4/18/25 @ 100 | 1,281 | 1,304 | |||||||||
Santander Holdings USA, Inc., 3.45%, 6/2/25, Callable 5/2/25 @ 100 (k) | 714 | 721 | |||||||||
Signature Bank, 4.13% (LIBOR03M+256bps), 11/1/29, Callable 11/1/24 @ 100 (b) | 2,000 | 1,995 | |||||||||
State Street Corp., 2.90% (SOFR+260bps), 3/30/26, Callable 3/30/25 @ 100 (a) (b) | 450 | 483 | |||||||||
SunTrust Capital, 1.06% (LIBOR03M+67bps), 5/15/27, Callable 7/6/20 @ 100 (b) | 1,000 | 830 | |||||||||
Texas Capital Bank NA, 5.25%, 1/31/26 | 1,135 | 1,226 | |||||||||
The Allstate Corp., 5.75% (LIBOR03M+294bps), 8/15/53, Callable 8/15/23 @ 100 (b) | 1,180 | 1,202 | |||||||||
The PNC Financial Services Group, Inc., 2.55%, 1/22/30, Callable 10/24/29 @ 100 | 1,985 | 2,118 | |||||||||
The Progressive Corp., 3.20%, 3/26/30, Callable 12/26/29 @ 100 (f) | 340 | 380 | |||||||||
Toyota Motor Credit Corp., 3.38%, 4/1/30, MTN | 1,071 | 1,204 | |||||||||
Wells Fargo & Co., 2.19% (SOFR+200bps), 4/30/26, Callable 4/30/25 @ 100 (b) | 1,279 | 1,297 | |||||||||
Zions Bancorp NA, 3.25%, 10/29/29, Callable 7/29/29 @ 100 | 2,269 | 2,127 | |||||||||
98,878 | |||||||||||
Health Care (0.7%): | |||||||||||
AbbVie, Inc., 3.20%, 11/21/29, Callable 8/21/29 @ 100 (a) (g) | 2,268 | 2,451 | |||||||||
Biogen, Inc., 2.25%, 5/1/30, Callable 2/1/30 @ 100 | 1,990 | 2,020 | |||||||||
Commonspirit Health, 3.35%, 10/1/29, Callable 4/1/29 @ 100 | 1,500 | 1,509 | |||||||||
CVS Health Corp., 3.25%, 8/15/29, Callable 5/15/29 @ 100 (g) | 3,747 | 4,051 | |||||||||
DENTSPLY SIRONA, Inc., 3.25%, 6/1/30, Callable 3/1/30 @ 100 | 1,282 | 1,313 | |||||||||
Duke University Health System, Inc., 2.60%, 6/1/30 | 850 | 916 | |||||||||
HCA, Inc., 5.13%, 6/15/39, Callable 12/15/38 @ 100 | 2,836 | 3,256 | |||||||||
Laboratory Corp. of America Holdings, 2.95%, 12/1/29, Callable 9/1/29 @ 100 | 1,702 | �� | 1,793 | ||||||||
Thermo Fisher Scientific, Inc., 4.13%, 3/25/25, Callable 2/25/25 @ 100 | 1,138 | 1,294 | |||||||||
18,603 |
See notes to financial statements.
21
USAA Mutual Funds Trust USAA Cornerstone Moderately Aggressive Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Industrials (1.5%): | |||||||||||
Ashtead Capital, Inc. 4.00%, 5/1/28, Callable 5/1/23 @ 102 (a) | $ | 1,405 | $ | 1,390 | |||||||
4.25%, 11/1/29, Callable 11/1/24 @ 102.13 (a) | 304 | 296 | |||||||||
BNSF Funding Trust, 6.61% (LIBOR03M+235bps), 12/15/55, Callable 1/15/26 @ 100 (b) | 5,325 | 5,524 | |||||||||
Carlisle Cos., Inc., 2.75%, 3/1/30, Callable 12/1/29 @ 100 | 1,701 | 1,675 | |||||||||
Carrier Global Corp., 3.38%, 4/5/40, Callable 10/5/39 @ 100 (a) | 851 | 758 | |||||||||
Caterpillar, Inc., 2.60%, 4/9/30, Callable 1/9/30 @ 100 | 853 | 922 | |||||||||
Dover Corp., 2.95%, 11/4/29, Callable 8/4/29 @ 100 | 1,702 | 1,790 | |||||||||
FedEx Corp., 4.25%, 5/15/30, Callable 2/15/30 @ 100 | 1,250 | 1,379 | |||||||||
Ferguson Finance PLC, 3.25%, 6/2/30, Callable 3/2/30 @ 100 (a) | 769 | 778 | |||||||||
GATX Corp., 4.00%, 6/30/30, Callable 3/30/30 @ 100 | 547 | 566 | |||||||||
General Dynamics Corp., 3.50%, 4/1/27, Callable 2/1/27 @ 100 | 1,138 | 1,282 | |||||||||
Georgia-Pacific LLC, 2.10%, 4/30/27, Callable 2/28/27 @ 100 (a) | 1,990 | 2,026 | |||||||||
Hillenbrand, Inc., 4.50%, 9/15/26, Callable 7/15/26 @ 100 | 1,500 | 1,372 | |||||||||
IDEX Corp., 3.00%, 5/1/30, Callable 2/1/30 @ 100 | 1,990 | 2,043 | |||||||||
Otis Worldwide Corp., 3.11%, 2/15/40, Callable 8/15/39 @ 100 (a) | 1,134 | 1,112 | |||||||||
Penske Truck Leasing Co. LP/PTL Finance Corp., 4.00%, 7/15/25, Callable 6/15/25 @ 100 (a) | 1,138 | 1,219 | |||||||||
Ryder System, Inc. 3.50%, 6/1/21, MTN (g) | 5,750 | 5,821 | |||||||||
2.90%, 12/1/26, Callable 10/1/26 @ 100, MTN | 2,837 | 2,846 | |||||||||
The Boeing Co., 5.71%, 5/1/40, Callable 11/1/39 @ 100 | 1,706 | 1,874 | |||||||||
The Conservation Fund A Nonprofit Corp., 3.47%, 12/15/29, Callable 9/15/29 @ 100 | 2,300 | 2,439 | |||||||||
United Airlines Pass Through Trust, 2.90%, 11/1/29 | 3,000 | 2,070 | |||||||||
39,182 | |||||||||||
Information Technology (0.5%): | |||||||||||
Amphenol Corp., 2.80%, 2/15/30, Callable 11/15/29 @ 100 | 3,000 | 3,140 | |||||||||
Analog Devices, Inc., 2.95%, 4/1/25, Callable 3/1/25 @ 100 | 427 | 452 | |||||||||
Broadcom, Inc., 4.30%, 11/15/32, Callable 8/15/32 @ 100 (a) | 711 | 750 | |||||||||
Hewlett Packard Enterprise Co., 4.65%, 10/1/24, Callable 9/1/24 @ 100 | 1,138 | 1,252 | |||||||||
Intel Corp., 3.90%, 3/25/30, Callable 12/25/29 @ 100 | 1,750 | 2,098 | |||||||||
Keysight Technologies, Inc., 3.00%, 10/30/29, Callable 7/30/29 @ 100 | 2,039 | 2,133 | |||||||||
Microsoft Corp., 3.45%, 8/8/36, Callable 2/8/36 @ 100 | 3,686 | 4,346 | |||||||||
14,171 | |||||||||||
Materials (0.3%): | |||||||||||
Avery Dennison Corp., 2.65%, 4/30/30, Callable 2/1/30 @ 100 | 680 | 678 | |||||||||
Colonial Enterprises, Inc., 3.25%, 5/15/30, Callable 2/15/30 @ 100 (a) | 356 | 376 | |||||||||
Ecolab, Inc., 4.80%, 3/24/30, Callable 12/24/29 @ 100 | 720 | 899 | |||||||||
LYB International Finance III LLC, 3.38%, 5/1/30, Callable 2/1/30 @ 100 | 994 | 1,030 | |||||||||
Packaging Corp. of America, 3.00%, 12/15/29, Callable 9/15/29 @ 100 | 2,836 | 2,986 | |||||||||
Sonoco Products Co., 3.13%, 5/1/30, Callable 2/1/30 @ 100 | 1,316 | 1,333 | |||||||||
Vulcan Materials Co., 3.50%, 6/1/30, Callable 3/1/30 @ 100 | 1,137 | 1,184 | |||||||||
8,486 |
See notes to financial statements.
22
USAA Mutual Funds Trust USAA Cornerstone Moderately Aggressive Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Real Estate (0.4%): | |||||||||||
AvalonBay Communities, Inc., 2.45%, 1/15/31, MTN, Callable 10/15/30 @ 100 | $ | 1,705 | $ | 1,753 | |||||||
Boston Properties LP, 3.25%, 1/30/31, Callable 10/30/30 @ 100 | 746 | 782 | |||||||||
Essex Portfolio LP, 2.65%, 3/15/32, Callable 12/15/31 @ 100 | 1,985 | 1,972 | |||||||||
Lexington Realty Trust, 4.25%, 6/15/23, Callable 3/15/23 @ 100 | 1,400 | 1,392 | |||||||||
Mid-America Apartments LP, 2.75%, 3/15/30, Callable 12/15/29 @ 100 | 2,836 | 2,852 | |||||||||
Sabra Health Care LP, 5.13%, 8/15/26, Callable 5/15/26 @ 100 | 1,000 | 970 | |||||||||
SBA Tower Trust, 2.84%, 1/15/25 (a) | 1,125 | 1,141 | |||||||||
VICI Properties LP/VICI Note Co., Inc., 4.63%, 12/1/29, Callable 12/1/24 @ 102.31 (a) | 262 | 261 | |||||||||
11,123 | |||||||||||
Utilities (1.0%): | |||||||||||
AEP Texas, Inc., 3.45%, 1/15/50, Callable 7/15/49 @ 100 | 1,985 | 2,120 | |||||||||
Alabama Power Co., 3.85%, 12/1/42 | 1,702 | 1,931 | |||||||||
Ameren Corp., 3.50%, 1/15/31, Callable 10/15/30 @ 100 | 569 | 632 | |||||||||
CenterPoint Energy, Inc., 2.50%, 9/1/24, Callable 8/1/24 @ 100 | 2,000 | 2,080 | |||||||||
Cleco Corporate Holdings LLC, 3.38%, 9/15/29, Callable 6/11/29 @ 100 (a) | 1,650 | 1,675 | |||||||||
DTE Electric Co., 2.25%, 3/1/30, Callable 12/1/29 @ 100 | 1,701 | 1,761 | |||||||||
Duke Energy Florida LLC, 3.85%, 11/15/42, Callable 5/15/42 @ 100 | 1,702 | 1,970 | |||||||||
Exelon Generation Co. LLC, 3.25%, 6/1/25, Callable 5/1/25 @ 100 | 1,281 | 1,326 | |||||||||
IPALCO Enterprises, Inc., 4.25%, 5/1/30, Callable 2/1/30 @ 100 (a) | 1,294 | 1,365 | |||||||||
ITC Holdings Corp., 2.95%, 5/14/30, Callable 2/14/30 @ 100 (a) | 1,279 | 1,346 | |||||||||
National Fuel Gas Co., 5.50%, 1/15/26, Callable 12/15/25 @ 100 (k) | 1,709 | 1,732 | |||||||||
NextEra Energy Capital Holdings, Inc., 3.34%, 9/1/20 | 3,800 | 3,825 | |||||||||
The Narragansett Electric Co., 3.40%, 4/9/30, Callable 1/9/30 @ 100 (a) | 853 | 953 | |||||||||
Union Electric Co., 2.95%, 3/15/30, Callable 12/15/29 @ 100 | 2,837 | 3,120 | |||||||||
25,836 | |||||||||||
Total Corporate Bonds (Cost $283,409) | 289,245 | ||||||||||
Yankee Dollar (1.4%) | |||||||||||
Consumer Staples (0.1%): | |||||||||||
Alimentation Couche-Tard, Inc., 2.95%, 1/25/30, Callable 10/25/29 @ 100 (a) | 1,134 | 1,146 | |||||||||
Energy (0.0% (l)): | |||||||||||
Petroleos Mexicanos, 6.49%, 1/23/27, Callable 11/23/26 @ 100 (a) | 973 | 861 | |||||||||
Petronas Capital Ltd., 3.50%, 4/21/30, Callable 1/21/30 @ 100 (a) (f) | 85 | 94 | |||||||||
955 | |||||||||||
Financials (0.8%): | |||||||||||
Athene Holding Ltd., 4.13%, 1/12/28, Callable 10/12/27 @ 100 | 5,750 | 5,631 | |||||||||
Banco Santander Mexico SA Institucion de Banca Multiple Grupo Financiero Santand, 5.38%, 4/17/25 (a) | 812 | 869 | |||||||||
Barclays PLC, 2.85% (LIBOR03M+245bps), 5/7/26, Callable 5/7/25 @ 100 (b) | 1,706 | 1,747 | |||||||||
Deutsche Bank AG, 3.96% (SOFR+258bps), 11/26/25, Callable 11/26/24 @ 100 (b) | 1,701 | 1,749 | |||||||||
Diageo Capital PLC, 2.13%, 4/29/32, Callable 1/29/32 @ 100 | 1,990 | 2,022 | |||||||||
QBE Capital Funding III Ltd., 7.25% (USSW10+405bps), 5/24/41, Callable 5/24/21 @ 100 (a) (b) | 5,900 | 6,111 | |||||||||
Royal Bank of Canada, 1.60%, 4/17/23, MTN | 1,989 | 2,031 | |||||||||
Sumitomo Mitsui Financial Group, Inc., 2.45%, 9/27/24 | 1,600 | 1,657 | |||||||||
21,817 |
See notes to financial statements.
23
USAA Mutual Funds Trust USAA Cornerstone Moderately Aggressive Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Industrials (0.2%): | |||||||||||
BAE Systems PLC, 3.40%, 4/15/30, Callable 1/15/30 @ 100 (a) | $ | 1,500 | $ | 1,628 | |||||||
CK Hutchison International 19 II Ltd., 2.75%, 9/6/29, Callable 6/6/29 @ 100 (a) | 3,000 | 3,124 | |||||||||
Heathrow Funding Ltd., 4.88%, 7/15/21 (a) | 1,137 | 1,159 | |||||||||
5,911 | |||||||||||
Materials (0.3%): | |||||||||||
Anglo American Capital PLC, 5.63%, 4/1/30, Callable 1/1/30 @ 100 (a) | 1,067 | 1,229 | |||||||||
Braskem Finance Ltd., 6.45%, 2/3/24 | 500 | 524 | |||||||||
Braskem Netherlands Finance BV, 4.50%, 1/31/30 (a) | 1,702 | 1,496 | |||||||||
CCL Industries, Inc., 3.05%, 6/1/30, Callable 3/1/30 @ 100 (a) (k) | 1,281 | 1,289 | |||||||||
Teck Resources Ltd., 6.13%, 10/1/35 | 1,818 | 1,891 | |||||||||
6,429 | |||||||||||
Total Yankee Dollar (Cost $35,608) | 36,258 | ||||||||||
Municipal Bonds (0.8%) | |||||||||||
Florida (0.1%): | |||||||||||
County of Broward Florida Airport System Revenue, Series C, 2.50%, 10/1/28 | 1,134 | 1,103 | |||||||||
Hillsborough County School Board Certificate of Participation, Series B, 1.92%, 7/1/25 | 710 | 714 | |||||||||
1,817 | |||||||||||
Georgia (0.1%): | |||||||||||
Athens Housing Authority Revenue, 2.42%, 12/1/26 | 2,420 | 2,507 | |||||||||
Michigan (0.1%): | |||||||||||
Michigan Finance Authority Revenue, 3.08%, 12/1/34 | 1,700 | 1,817 | |||||||||
New Jersey (0.1%): | |||||||||||
New Jersey Economic Development Authority Revenue, Series NNN, 2.88%, 6/15/24 | 1,094 | 1,037 | |||||||||
New Jersey Transportation Trust Fund Authority Revenue, 4.08%, 6/15/39 | 435 | 360 | |||||||||
North Hudson Sewerage Authority Revenue, 2.88%, 6/1/28 | 567 | 589 | |||||||||
1,986 | |||||||||||
New York (0.1%): | |||||||||||
New York State Dormitory Authority Revenue, Series B, 2.83%, 7/1/31 | 2,835 | 2,858 | |||||||||
New York State Thruway Authority Revenue, Series M, 2.55%, 1/1/28 | 655 | 647 | |||||||||
3,505 | |||||||||||
Pennsylvania (0.2%): | |||||||||||
Scranton School District, GO (INS-Build America Mutual Assurance Co.) 3.05%, 4/1/29 | 800 | 818 | |||||||||
3.10%, 4/1/30 | 579 | 592 | |||||||||
State Public School Building Authority Revenue, 3.05%, 4/1/28 | 1,135 | 1,133 | |||||||||
University of Pittsburgh-of The Commonwealth System of Higher Education Revenue Series C, 2.53%, 9/15/31 | 1,135 | 1,126 | |||||||||
Series C, 2.58%, 9/15/32 | 565 | 559 | |||||||||
Series C, 2.63%, 9/15/33 | 1,135 | 1,119 | |||||||||
5,347 |
See notes to financial statements.
24
USAA Mutual Funds Trust USAA Cornerstone Moderately Aggressive Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Texas (0.1%): | |||||||||||
City of Houston Texas Combined Utility System Revenue, 3.72%, 11/15/28 | $ | 1,415 | $ | 1,589 | |||||||
Ector County Hospital District Revenue, Build America Bond 6.80%, 9/15/25, Continuously Callable @100 | 150 | 151 | |||||||||
Series B, 7.18%, 9/15/35, Continuously Callable @100 | 300 | 303 | |||||||||
Harris County Cultural Education Facilities Finance Corp. Revenue, Series B, 2.81%, 5/15/29 | 1,135 | 1,152 | |||||||||
State of Texas, GO, 3.00%, 4/1/28 | 1,701 | 1,859 | |||||||||
5,054 | |||||||||||
Total Municipal Bonds (Cost $21,802) | 22,033 | ||||||||||
U.S. Government Agency Mortgages (6.0%) | |||||||||||
Federal Home Loan Mortgage Corporation Series K047, Class A2, 3.33%, 5/25/25 (c) | 8,400 | 9,328 | |||||||||
Series K053, Class A2, 3.00%, 12/25/25 | 14,000 | 15,402 | |||||||||
Series K151, Class A3, 3.51%, 4/25/30 | 9,000 | 10,537 | |||||||||
Series K156, Class A2, 3.70%, 1/25/33 (c) | 4,285 | 5,065 | |||||||||
3.00%, 4/1/46 - 6/1/47 | 86,381 | 91,336 | |||||||||
3.50%, 4/1/46 - 4/1/48 | 18,553 | 19,737 | |||||||||
4.00%, 7/1/48 | 5,446 | 5,785 | |||||||||
157,190 | |||||||||||
Federal National Mortgage Association Series 2016-M2, Class AV2, 2.15%, 1/25/23 | 2,305 | 2,358 | |||||||||
Government National Mortgage Association 6.50%, 4/15/24 | 3 | 3 | |||||||||
Total U.S. Government Agency Mortgages (Cost $150,120) | 159,551 | ||||||||||
U.S. Treasury Obligations (8.4%) | |||||||||||
U.S. Treasury Bonds 3.13%, 8/15/44 | 19,200 | 26,196 | |||||||||
2.38%, 11/15/49 | 10,000 | 12,367 | |||||||||
U.S. Treasury Notes 2.50%, 6/30/20 | 8,000 | 8,015 | |||||||||
1.13%, 2/28/21 | 36,125 | 36,376 | |||||||||
1.88%, 7/31/22 | 3,382 | 3,506 | |||||||||
1.63%, 8/15/22 | 26,970 | 27,832 | |||||||||
1.63%, 11/15/22 | 25,750 | 26,661 | |||||||||
1.63%, 4/30/23 | 29,000 | 30,205 | |||||||||
2.75%, 11/15/23 | 1,000 | 1,087 | |||||||||
2.25%, 11/15/25 | 5,000 | 5,509 | |||||||||
1.63%, 2/15/26 | 37,000 | 39,570 | |||||||||
2.38%, 5/15/27 (g) | 6,100 | 6,889 | |||||||||
Total U.S. Treasury Obligations (Cost $206,116) | 224,213 |
See notes to financial statements.
25
USAA Mutual Funds Trust USAA Cornerstone Moderately Aggressive Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Exchange-Traded Funds (43.6%) | |||||||||||
Invesco DB Commodity Index Tracking Fund (f) | 256,100 | $ | 3,017 | ||||||||
Invesco FTSE RAFI Developed Markets ex-US ETF | 653,206 | 21,928 | |||||||||
Invesco FTSE RAFI Emerging Markets ETF | 1,539,501 | 25,956 | |||||||||
iShares 20+ Year Treasury Bond ETF (f) | 92,896 | 15,197 | |||||||||
iShares Core MSCI EAFE ETF | 1,235,729 | 69,238 | |||||||||
iShares Core MSCI Emerging Markets ETF | 1,688,784 | 76,063 | |||||||||
iShares Core S&P 500 ETF | 248,851 | 75,944 | |||||||||
iShares Core S&P Small-Cap ETF | 246,306 | 16,291 | |||||||||
iShares Core US Aggregate Bond ETF | 486,071 | 57,186 | |||||||||
iShares iBoxx $ Investment Grade Corporate Bond ETF | 282,038 | 37,235 | |||||||||
iShares iBoxx High Yield Corporate Bond ETF (f) | 288,804 | 23,803 | |||||||||
iShares MSCI Canada ETF (f) | 710,921 | 17,872 | |||||||||
iShares MSCI United Kingdom ETF (f) | 165,055 | 4,247 | |||||||||
Schwab Fundamental Emerging Markets Large Co. Index ETF | 2,206,197 | 49,860 | |||||||||
Schwab Fundamental International Large Co. Index ETF | 3,168,339 | 73,379 | |||||||||
Schwab Fundamental International Small Co. Index ETF | 593,600 | 16,217 | |||||||||
SPDR Bloomberg Barclays High Yield Bond ETF | 248,571 | 25,352 | |||||||||
SPDR Gold Shares | 205,734 | 33,516 | |||||||||
SPDR S&P Emerging Markets Smallcap ETF | 107,983 | 4,104 | |||||||||
U.S. Commodity Index Fund | 110,980 | 2,956 | |||||||||
VanEck Vectors Gold Miners ETF | 443,051 | 15,205 | |||||||||
VanEck Vectors Junior Gold Miners ETF | 101,000 | 4,654 | |||||||||
Vanguard FTSE All-World ex-US ETF | 809,570 | 37,127 | |||||||||
Vanguard FTSE Developed Markets ETF (f) | 5,452,250 | 205,386 | |||||||||
Vanguard FTSE Europe ETF (f) | 1,549,703 | 75,563 | |||||||||
Vanguard Mid-Capital ETF (f) | 30,077 | 4,852 | |||||||||
Vanguard Mortgage-Backed Securities ETF | 104,857 | 5,719 | |||||||||
Vanguard Real Estate ETF (f) | 350,311 | 27,125 | |||||||||
Vanguard S&P 500 ETF (g) | 197,094 | 55,137 | |||||||||
Vanguard Short-Term Bond ETF | 395,228 | 32,808 | |||||||||
Vanguard Small-Cap Value ETF (f) | 140,914 | 14,833 | |||||||||
WisdomTree Emerging Markets SmallCap Dividend Fund | 202,622 | 7,617 | |||||||||
Xtrackers USD High Yield Corporate Bond ETF | 537,059 | 25,285 | |||||||||
Total Exchange-Traded Funds (Cost $1,155,183) | 1,160,672 | ||||||||||
Affiliated Exchange-Traded Funds (0.1%) | |||||||||||
VictoryShares USAA MSCI Emerging Markets Value Momentum ETF | 68,000 | 2,505 | |||||||||
Total Affiliated Exchange-Traded Funds (Cost $3,463) | 2,505 | ||||||||||
Collateral for Securities Loaned^ (3.6%) | |||||||||||
HSBC U.S. Government Money Market Fund I Shares, 0.13% (m) | 32,713,817 | 32,714 | |||||||||
Invesco Government & Agency Portfolio Institutional Shares, 0.12% (m) | 62,687,449 | 62,687 | |||||||||
Total Collateral for Securities Loaned (Cost $95,401) | 95,401 | ||||||||||
Total Investments (Cost $2,655,732) — 102.3% | 2,722,426 | ||||||||||
Liabilities in excess of other assets — (2.3)% | (60,072 | ) | |||||||||
NET ASSETS — 100.00% | $ | 2,662,354 |
See notes to financial statements.
26
USAA Mutual Funds Trust USAA Cornerstone Moderately Aggressive Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
At May 31, 2020, the Fund's investments in foreign securities were 21.4% of net assets.
^ Purchased with cash collateral from securities on loan.
(a) Rule 144A security or other security that is restricted as to resale to institutional investors. The Fund's Adviser has deemed this security to be liquid based upon procedures approved by the Board of Trustees. As of May 31, 2020, the fair value of these securities was $121,049 (thousands) and amounted to 4.6% of net assets.
(b) Variable or Floating-Rate Security. Rate disclosed is as of May 31, 2020.
(c) The rate for certain asset-backed and mortgage backed securities may vary based on factors relating to the pool of assets underlying the security. The rate disclosed is the rate in effect at May 31, 2020.
(d) Security is interest only.
(e) Non-income producing security.
(f) All or a portion of this security is on loan.
(g) All or a portion of this security has been designated as collateral for securities purchased on a when-issued basis.
(h) The Fund's Adviser has deemed this security to be illiquid based upon procedures approved by the Board of Trustees. As of May 31, 2020, illiquid securities were 0.4% of the Fund's net assets.
(i) Security is perpetual and has no final maturity date but may be subject to calls at various dates in the future.
(j) Security was fair valued based upon procedures approved by the Board of Trustees and represents 0.0% of the Fund's net assets as of May 31, 2020. This security is classified as Level 3 within the fair value hierarchy. (See Note 2)
(k) Security purchased on a when-issued basis.
(l) Amount represents less than 0.05% of net assets.
(m) Rate disclosed is the daily yield on May 31, 2020.
(n) Security was fair valued based upon procedures approved by the Board of Trustees and represents 0.1% of the Fund's net assets as of May 31, 2020. (See Note 2)
bps — Basis points
ETF — Exchange-Traded Fund
GO — General Obligation
LIBOR — London InterBank Offered Rate
LIBOR01M — 1 Month US Dollar LIBOR, rate disclosed as of May 31, 2020, based on the last reset date of the security
LIBOR03M — 3 Month US Dollar LIBOR, rate disclosed as of May 31, 2020, based on the last reset date of the security
LLC — Limited Liability Company
LP — Limited Partnership
MTN — Medium Term Note
PLC — Public Limited Company
See notes to financial statements.
27
USAA Mutual Funds Trust USAA Cornerstone Moderately Aggressive Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
REIT — Real Estate Investment Trust
SOFR — Secured Overnight Financing Rate
USSW10 — USD 10 Year Swap Rate, rate disclosed as of May 31, 2020
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.
28
USAA Mutual Funds Trust | Statement of Assets and Liabilities May 31, 2020 |
(Amounts in Thousands, Except Per Share Amounts)
USAA Cornerstone Moderately Aggressive Fund | |||||||
Assets: | |||||||
Affiliated investments, at value (Cost $3,463) | $ | 2,505 | |||||
Unaffiliated investments, at value (Cost $2,652,269) | 2,719,921 | (a) | |||||
Cash and cash equivalents | 37,614 | ||||||
Receivables: | |||||||
Interest and dividends | 5,754 | ||||||
Capital shares issued | 605 | ||||||
Reclaims | 24 | ||||||
Prepaid expenses | 15 | ||||||
Total assets | 2,766,438 | ||||||
Liabilities: | |||||||
Payables: | |||||||
Collateral received on loaned securities | 95,401 | ||||||
Investments purchased | 5,004 | ||||||
Capital shares redeemed | 1,520 | ||||||
Accrued expenses and other payables: | |||||||
Investment advisory fees | 1,402 | ||||||
Administration fees | 330 | ||||||
Custodian fees | 8 | ||||||
Transfer agent fees | 332 | ||||||
Compliance fees | 1 | ||||||
Other accrued expenses | 86 | ||||||
Total liabilities | 104,084 | ||||||
Net Assets: | |||||||
Capital | 2,594,650 | ||||||
Total distributable earnings/(loss) | 67,704 | ||||||
Net assets | $ | 2,662,354 | |||||
Shares (unlimited number of shares authorized with no par value): | 110,484 | ||||||
Net asset value, offering and redemption price per share: (b) | $ | 24.10 |
(a) Includes $93,184 of securities on loan.
(b) Per share amount may not recalculate due to rounding of net assets and/or shares outstanding.
See notes to financial statements.
29
USAA Mutual Funds Trust | Statement of Operations For the Year Ended May 31, 2020 |
(Amounts in Thousands)
USAA Cornerstone Moderately Aggressive Fund | |||||||
Investment Income: | |||||||
Income distributions from affiliated funds | $ | 85 | |||||
Dividend income | 53,520 | ||||||
Interest | 27,695 | ||||||
Securities lending (net of fees) | 451 | ||||||
Foreign tax withholding | (1 | ) | |||||
Total income | 81,750 | ||||||
Expenses: | |||||||
Investment advisory fees | 16,549 | ||||||
Administration fees | 4,207 | ||||||
Sub-Administration fees | 95 | ||||||
Custodian fees | 183 | ||||||
Transfer agent fees | 6,149 | ||||||
Trustees' fees | 49 | ||||||
Compliance fees | 17 | ||||||
Legal and audit fees | 91 | ||||||
State registration and filing fees | 32 | ||||||
Interest expense on interfund lending | 3 | ||||||
Other expenses | 238 | ||||||
Total expenses | 27,613 | ||||||
Expenses waived/reimbursed by Adviser | (127 | ) | |||||
Expenses waived/reimbursed by AMCO | (39 | ) | |||||
Net expenses | 27,447 | ||||||
Net Investment Income (Loss) | 54,303 | ||||||
Realized/Unrealized Gains (Losses) from Investments: | |||||||
Net realized gains (losses) from unaffiliated securities transactions | (14,397 | ) | |||||
Net realized gains (losses) from futures contracts | (2,060 | ) | |||||
Net change in unrealized appreciation/depreciation on affiliated funds | (383 | ) | |||||
Net change in unrealized appreciation/depreciation on unaffiliated investments | 32,485 | ||||||
Net change in unrealized appreciation/depreciation on futures contracts | 1,653 | ||||||
Net realized/unrealized gains (losses) on investments | 17,298 | ||||||
Change in net assets resulting from operations | $ | 71,601 |
See notes to financial statements.
30
USAA Mutual Funds Trust | Statements of Changes in Net Assets |
(Amounts in Thousands)
USAA Cornerstone Moderately Aggressive Fund | |||||||||||
Year Ended May 31, 2020 | Year Ended May 31, 2019 | ||||||||||
From Investments: | |||||||||||
Operations: | |||||||||||
Net investment income (loss) | $ | 54,303 | $ | 53,788 | |||||||
Net realized gains (losses) from investments | (16,457 | ) | 55,243 | ||||||||
Net change in unrealized appreciation/depreciation on investments | 33,755 | (85,067 | ) | ||||||||
Change in net assets resulting from operations | 71,601 | 23,964 | |||||||||
Change in net assets resulting from distributions to shareholders | (59,152 | ) | (156,279 | ) | |||||||
Change in net assets resulting from capital transactions | (127,133 | ) | 415,470 | ||||||||
Change in net assets | (114,684 | ) | 283,155 | ||||||||
Net Assets: | |||||||||||
Beginning of period | 2,777,038 | 2,493,883 | |||||||||
End of period | $ | 2,662,354 | $ | 2,777,038 | |||||||
Capital Transactions: | |||||||||||
Proceeds from shares issued | $ | 170,755 | $ | 223,097 | |||||||
Reorganization (Note 9) | — | 381,150 | |||||||||
Distributions reinvested | 58,672 | 155,094 | |||||||||
Cost of shares redeemed | (356,560 | ) | (343,871 | ) | |||||||
Change in net assets resulting from capital transactions | $ | (127,133 | ) | $ | 415,470 | ||||||
Share Transactions: | |||||||||||
Issued | 6,942 | 9,139 | |||||||||
Reorganization (Note 9) | — | 17,570 | |||||||||
Reinvested | 2,273 | 6,492 | |||||||||
Redeemed | (14,578 | ) | (14,084 | ) | |||||||
Change in Shares | (5,363 | ) | 19,117 |
See notes to financial statements.
31
USAA Mutual Funds Trust | Financial Highlights |
For a Share Outstanding Throughout Each Period
Investment Activities | Distributions to Shareholders From | ||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss) | Net Realized and Unrealized Gains (Losses) on Investments | Total from Investment Activities | Net Investment Income | Net Realized Gains From Investments | ||||||||||||||||||||||
USAA Cornerstone Moderately Aggressive Fund | |||||||||||||||||||||||||||
Year Ended May 31, 2020 | $ | 23.97 | 0.48 | (b) | 0.18 | 0.66 | (0.39 | ) | (0.14 | ) | |||||||||||||||||
Year Ended May 31, 2019 | $ | 25.78 | 0.46 | (0.79 | ) | (0.33 | ) | (0.39 | ) | (1.09 | ) | ||||||||||||||||
Year Ended May 31, 2018 | $ | 26.09 | 0.42 | 1.28 | 1.70 | (0.44 | ) | (1.57 | ) | ||||||||||||||||||
Year Ended May 31, 2017 | $ | 24.08 | 0.45 | 2.06 | 2.51 | (0.50 | ) | — | |||||||||||||||||||
Year Ended May 31, 2016 | $ | 26.27 | 0.55 | (2.06 | ) | (1.51 | ) | (0.56 | ) | (0.12 | ) |
* 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.
^ 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 two year period beginning July 1, 2019 and in effect through June 30, 2021, instead of coinciding with the Fund's fiscal year end. Details of the current contractual expense limitation in effect can be found in Note 4 of the accompanying Notes to Financial Statements.
(a) The expense ratios exclude the impact of expenses paid by each underlying fund.
(b) Per share net investment income (loss) has been calculated using the average daily shares method.
(c) Effective June 22, 2018 AMCO has voluntarily agreed to limit the annual expenses of the Fund to 0.98% of the Fund's average daily net assets.
(d) 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.
32
USAA Mutual Funds Trust | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Ratios to Average Net Assets | Supplemental Data | ||||||||||||||||||||||||||||||||||
Total Distributions | Net Asset Value, End of Period | Total Return* | Net Expenses^(a) | Net Investment Income (Loss) | Gross Expenses(a) | Net Assets, End of Period (000's) | Portfolio Turnover | ||||||||||||||||||||||||||||
USAA Cornerstone Moderately Aggressive Fund | |||||||||||||||||||||||||||||||||||
Year Ended May 31, 2020 | (0.53 | ) | $ | 24.10 | 2.59 | % | 0.98 | % | 1.94 | % | 0.99 | % | $ | 2,662,354 | 92 | % | |||||||||||||||||||
Year Ended May 31, 2019 | (1.48 | ) | $ | 23.97 | (1.20 | )% | 0.98 | %(c) | 1.91 | % | 1.01 | % | $ | 2,777,038 | 95 | %(d) | |||||||||||||||||||
Year Ended May 31, 2018 | (2.01 | ) | $ | 25.78 | 6.52 | % | 0.97 | % | 1.64 | % | 0.97 | % | $ | 2,493,883 | 56 | % | |||||||||||||||||||
Year Ended May 31, 2017 | (0.50 | ) | $ | 26.09 | 10.59 | % | 1.06 | % | 1.78 | % | 1.06 | % | $ | 2,398,407 | 69 | % | |||||||||||||||||||
Year Ended May 31, 2016 | (0.68 | ) | $ | 24.08 | (5.73 | )% | 1.13 | % | 2.18 | % | 1.13 | % | $ | 2,278,762 | 87 | % |
See notes to financial statements.
33
USAA Mutual Funds Trust | Notes to Financial Statements May 31, 2020 |
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 47 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 November 6, 2018, United Services Automobile Association ("USAA"), the parent company of USAA Asset Management Company ("AMCO"), the investment adviser to the Fund, and USAA Transfer Agency Company, d/b/a USAA Shareholder Account Services ("SAS"), the transfer agent to the Fund, announced that AMCO and SAS would be acquired by Victory Capital Holdings Inc., a global investment management firm headquartered in Cleveland, Ohio (the "Transaction"). The Transaction closed on July 1, 2019. A special shareholder meeting was held on April 18, 2019, at which shareholders of the Fund approved a new investment advisory agreement between the Trust, on behalf of the Fund, and Victory Capital Management Inc. ("VCM" or "Adviser"). Effective July 1, 2019, VCM replaced AMCO as the investment adviser to the Fund and Victory Capital Transfer Agency Company replaced SAS as the Fund's transfer agent. In addition, effective on that same date, shareholders of the Fund also elected the following two new directors to the Board of the Trust to serve upon the closing of the Transaction: (1) David C. Brown, to serve as an Interested Trustee; and (2) John C. Walters, to serve as an Independent Trustee.
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 generally accepted accounting principles in the United States of America ("GAAP"). The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses for the period. Actual results could differ from those estimates. The Fund follows the specialized accounting and reporting requirements under GAAP that are applicable to investment companies under Accounting Standards Codification Topic 946.
Investment Valuation:
The Fund records investments at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The valuation techniques described below maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value. The inputs used for valuing the Fund's investments are summarized in the three broad levels listed below:
• Level 1 — quoted prices in active markets for identical securities
• Level 2 — other significant observable inputs (including quoted prices for similar securities or interest rates applicable to those securities, etc.)
• Level 3 — significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments)
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The inputs or methodologies used for valuation techniques are not necessarily an indication of the risk associated with entering into those investments.
34
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
The Adviser has established the Pricing and Liquidity Committee (the "Committee"), and subject to Trust's Board of Trustees (the "Board")oversight, the Committee administers and oversees the Fund's valuation policies and procedures, which are approved by the Board.
Portfolio securities listed or traded on securities exchanges, including exchange-traded funds ("ETFs"), American Depositary Receipts ("ADRs") 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 are valued at 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.
Debt securities of United States ("U.S.") issuers, along with corporate and municipal securities, including short-term investments maturing in 60 days or less, may be valued using evaluated bid or the last sales price to price securities by dealers or an independent pricing service approved by the Board. These valuations are typically categorized as Level 2 in the fair value hierarchy.
Effective July 1, 2019, the valuation methodology applied to certain debt securities changed. Securities that were previously valued at an evaluated mean are now valued at the evaluated bid or the last sales price.
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, the securities are valued in good faith by the Committee in accordance with valuation procedures approved by 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. These valuations are considered as Level 2 in the fair value hierarchy.
A summary of the valuations as of May 31, 2020, based upon the three levels defined above, is included in the table below while the breakdown, by category, of investments is disclosed in the Schedule of Portfolio Investments (amounts in thousands):
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Asset Backed Securities | $ | — | $ | 61,434 | $ | — | $ | 61,434 | |||||||||||
Collateralized Mortgage Obligations | — | 20,776 | — | 20,776 | |||||||||||||||
Common Stocks | 627,438 | 1,469 | — | 628,907 | |||||||||||||||
Preferred Stocks | 5,992 | 10,674 | 875 | 17,541 | |||||||||||||||
Senior Secured Loans | — | 3,890 | — | 3,890 | |||||||||||||||
Corporate bonds | — | 289,245 | — | 289,245 | |||||||||||||||
Yankee dollar | — | 36,258 | — | 36,258 | |||||||||||||||
Municipal bonds | — | 22,033 | — | 22,033 | |||||||||||||||
U.S. Government Agency Mortgages | — | 159,551 | — | 159,551 | |||||||||||||||
U.S. Treasury Obligations | — | 224,213 | — | 224,213 | |||||||||||||||
Exchange-Traded funds | 1,160,672 | — | — | 1,160,672 | |||||||||||||||
Affiliated exchange-traded funds | 2,505 | — | — | 2,505 | |||||||||||||||
Collateral for securities loaned | 95,401 | — | — | 95,401 | |||||||||||||||
Total | $ | 1,892,008 | $ | 829,543 | $ | 875 | $ | 2,722,426 |
For the year ended May 31, 2020, the Fund had transfers into/out of Level 3 that were less than 0.50% of net assets.
35
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
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. ETFs are a type of index fund, 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 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 they are 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 take place a month or more after the trade date. At the time the Fund makes the commitment to purchase a security on a delayed-delivery or when-issued basis, the Fund records the transaction and reflects the value of the security in determining NAV. No interest accrues to the Fund until the transaction settles and payment takes place. A segregated account is established and the Fund maintains cash and/or marketable securities at least equal in value to commitments for delayed-delivery or when-issued securities. If the Fund owns delayed-delivery or when-issued securities, these values are included in Payable for investments purchased on the accompanying Statement of Assets and Liabilities and the segregated assets are identified on the Schedule of Portfolio Investments.
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"), 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.
36
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
Foreign Exchange Currency Contracts:
The Fund may enter into foreign exchange currency contracts to convert U.S. dollars to and from various foreign currencies. A foreign exchange currency contract is an obligation by the Fund to purchase or sell a specific currency at a future date at a price (in U.S. dollars) set at the time of the contract. The Fund does not engage in "cross-currency" foreign exchange contracts (i.e., contracts to purchase or sell one foreign currency in exchange for another foreign currency). The Fund's foreign exchange currency contracts might be considered spot contracts (typically a contract of one week or less) or forward contracts (typically a contract term over one week). A spot contract is entered into for purposes of hedging against foreign currency fluctuations relating to a specific portfolio transaction, such as the delay between a security transaction trade date and settlement date. Forward contracts are entered into for purposes of hedging portfolio holdings or concentrations of such holdings. Each foreign exchange currency contract is adjusted daily by the prevailing spot or forward rate of the underlying currency, and any appreciation or depreciation is recorded for financial statement purposes as unrealized until the contract settlement date, at which time the Fund records realized gains or losses equal to the difference between the value of a contract at the time it was opened and the value at the time it was closed. The Fund could be exposed to risk if a counterparty is unable to meet the terms of a foreign exchange currency contract or if the value of the foreign currency changes unfavorably. In addition, the use of foreign exchange currency contracts does not eliminate fluctuations in the underlying prices of the securities. As of May 31, 2020, the Fund had no open forward foreign exchange currency contracts.
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.
During the period ended May 31, 2020, the Fund held futures contracts primarily for gaining exposure to a particular asset class or securities market. The Fund held no futures contracts at May 31, 2020.
37
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
Summary of Derivative Instruments:
The following table presents the effect of derivative instruments on the Statement of Operations, categorized by risk exposure, for the year ended May 31, 2020 (amounts in thousands):
Net Realized Gains (Losses) on Derivatives Recognized as a Result from 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: | $ | (2,060 | ) | $ | 1,653 |
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 on 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 discount. Gains or losses realized on sales of securities are determined by comparing the identified cost of the security lot sold with the net sales proceeds.
Withholding taxes on interest, dividends and gains as a result of certain investments in ADRs by the Fund have been provided for in accordance with each investment's applicable country's tax rules and rates.
Securities Lending:
The Fund, through a securities lending agreement with Citibank, N.A. ("Citibank"), may lend its securities to qualified financial institutions, such as certain broker-dealers, to earn additional income, net of income retained by Citibank. Borrowers are required to 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 cured the next business day once the shortfall exceeds $100 thousand. Collateral may be cash, U.S. government securities, or other securities as permitted by SEC guidelines. Cash collateral may be invested in high-quality short-term investments, primarily open-end investment companies. Collateral requirements are determined daily based on the value of the Fund's securities on loan as of the end of the prior business day. During the time portfolio securities are on loan, the borrower will pay the Fund any dividends or interest paid on such securities plus any fee negotiated between the parties to the lending agreement. The Fund also earns a return from the collateral. The Fund pays Citibank various fees in connection with the investment of cash collateral and fees based on the investment income received from securities lending activities. Securities lending income (net of these fees) is disclosed on the Statement of Operations. Loans are terminable upon demand and the borrower must return the loaned securities within the lesser of one standard settlement period or five business days. Risks relating to securities-lending transactions include that the borrower may not provide additional collateral when required or return the securities when due, and 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 re-pledged except to satisfy borrower default. Cash collateral is listed in the Fund's Portfolio of Investments and Financial Statements while non-cash collateral is not included.
38
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
The following table (amounts in thousands) is a summary of the Fund's securities lending transactions as of May 31, 2020.
Value of Securities on Loan | Non-Cash Collateral | Cash Collateral | |||||||||
$ | 93,184 | $ | — | $ | 95,401 |
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 investments and foreign currency translations on the Statement of Operations. Any realized gains or losses from these fluctuations, including foreign currency arising from in-kind redemptions, are disclosed as net realized gains or losses from investment transactions and foreign currency translations on the Statement of Operations.
Federal Income Taxes:
It is the Fund's policy 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.
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., 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 affiliated trust based upon net assets or another appropriate basis.
Cross-Trade Transactions:
Pursuant to Rule 17a-7 under the 1940 Act, the Fund may engage in cross-trades which are securities transactions with affiliated investment companies and advisory accounts managed by the Adviser and any applicable sub-adviser. Any such purchase or sale transaction must be effected without brokerage commission or other remuneration, except for customary transfer fees. The transaction must be effected at the current market price, which is either the security's last sale price on an exchange or, if there are no transactions in the security that day, at the average of the highest bid and lowest asked price. For the year ended May 31, 2020, 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) | |||||||||
$ | 1,007 | $ | — | $ | — |
39
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
3. Purchases and Sales:
Cost of purchases and proceeds from sales/maturities of securities (excluding securities maturing less than one year from acquisition) for the year ended May 31, 2020, were as follows for the Fund (amounts in thousands):
Excluding U.S. Government Securities | U.S. Government Securities | ||||||||||||||
Purchases | Sales | Purchases | Sales | ||||||||||||
$ | 2,329,193 | $ | 2,086,505 | $ | 188,450 | $ | 523,958 |
4. Fees and Transactions with Affiliates and Related Parties:
Investment Advisory and Management Fees:
Effective with the Transaction on July 1, 2019, investment advisory services are provided to the Fund by the Adviser, a New York corporation registered as an investment adviser with the Securities and Exchange Commission ("SEC"). The Adviser is a wholly-owned indirect subsidiary of Victory Capital Holdings, Inc., a publicly traded Delaware corporation, and a wholly-owned direct subsidiary of Victory Capital Operating, LLC. Under the terms of the Investment Advisory Agreement, the Adviser is entitled to receive fees accrued daily and paid monthly at an annualized rate of 0.59% of the Fund's average daily net assets. The amount incurred and paid to VCM from July 1, 2019 through May 31, 2020, was $15,176 thousand and is reflected on the Statement of Operations as Investment Advisory fees.
Prior to the Transaction on July 1, 2019, AMCO provided investment management services to the Fund pursuant to an Advisory Agreement. Under this agreement, AMCO was responsible for managing the business and affairs of the Fund, and for directly managing day-to-day investment of the Fund's assets, subject to the authority of and supervision by the Board. The investment management fee for the Fund was accrued daily and paid monthly at an annualized rate of 0.59% of the Fund's average daily net assets. The amount incurred and paid to AMCO from June 1, 2019 through June 30, 2019, was $1,373 thousand and is reflected on the Statement of Operations as Investment Advisory fees.
In addition, the Fund invests in affiliated exchange-traded fund(s) ("affiliated ETFs"). The Fund's Adviser fee is reimbursed by VCM (and previously AMCO) to the extent of the indirect Adviser fee incurred through the Fund's proportional investment in the affiliated ETF(s). For the period from July 1, 2019 through May 31, 2020, the Fund's Adviser fee was reimbursed by VCM in an amount of $7 thousand, of which $3 thousand is receivable from VCM. For the period from June 1, 2019 through June 30, 2019, the Fund's Adviser fee was reimbursed by AMCO in an amount of less than $1 thousand.
Effective with the Transaction on July 1, 2019, 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. Prior to that date, the Trust relied on a similar exemptive order granted by the SEC to the Trust and its affiliated persons. Under a manager of managers' structure, the investment adviser may select (with approval of the Board and without shareholder approval) one or more subadvisers to manage the day-to-day investment of a fund's assets. For the year ended May 31, 2020, the Fund had no subadvisers.
Administration and Servicing Fees:
Effective with the Transaction on July 1, 2019, VCM serves as the Fund's administrator and fund accountant. Under the Fund Administration, Servicing and Accounting Agreement, VCM is paid for its services an annual fee at a rate of 0.15% of average daily net assets of the Fund. Amounts incurred from July 1, 2019 through May 31, 2020, are $3,858 thousand and are reflected on the Statement of Operations as Administration fees.
Prior to the Transaction on July 1, 2019, AMCO provided certain administration and servicing functions for the Fund. For such services, AMCO received a fee accrued daily and paid monthly at an annualized rate of 0.15% of average daily net assets of the Fund. Amounts incurred from June 1, 2019 through June 30, 2019, were $349 thousand and are reflected on the Statement of Operations as Administration fees.
40
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
Effective with the Transaction on July 1, 2019, the Fund (as part of the Trust) has entered into an agreement to provide compliance services with the Adviser, 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. Funds in the Trust, Victory Variable Insurance Funds, Victory Portfolios and Victory Portfolios II (collectively, the "Victory Funds Complex") in the aggregate, compensates the Adviser for these services. Amounts incurred during the period from July 1, 2019 to May 31, 2020, is reflected on the Statement of Operations as Compliance fees.
Effective with the Transaction on July 1, 2019, 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 Trust reimburses VCM and Citi for all of their reasonable out-of- pocket expenses incurred in providing these services and certain other expenses specifically allocated to the Funds under the Fund Administration, Servicing, and Accounting Agreement. The amount incurred during the period from July 1, 2019 through May 31, 2020, is reflected on the Statement of Operations as Sub-Administration fees.
In addition to the services provided under its Administration and Servicing Agreement with the Fund, AMCO also provided certain compliance and legal services for the benefit of the Fund prior to the Transaction on July 1, 2019. The Board approved the reimbursement of a portion of these expenses incurred by AMCO. AMCO did not receive any fees from the Fund for these services.
Transfer Agency Fees:
Effective with the Transaction on July 1, 2019, Victory Capital Transfer Agency, Inc. ("VCTA"), (formerly, USAA Shareholder Account Services ("SAS")), provides transfer agency services to the Fund. VCTA, an affiliate of the Adviser, provides transfer agent services 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 from July 1, 2019 through May 31, 2020, was $5,630 thousand. Amounts incurred and paid to SAS from June 1, 2019 through June 30, 2019 was $519 thousand. These amounts are reflected on the Statement of Operations as Transfer Agent fees.
Effective with the Transaction on July 1, 2019, 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:
Effective with the Transaction on July 1, 2019, Victory Capital Advisers, 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. Effective on or about June 30, 2020, the Distributor's name will change to Victory Capital Services, Inc.
Prior to the Transaction on July 1, 2019, USAA Investment Management Company provided exclusive underwriting and distribution of the Fund's shares on a continuing best-efforts basis.
Other Fees:
Prior to the Transaction on July 1, 2019, State Street Bank and Trust Company served as the Fund's accounting agent and custodian.
Effective July 1, 2019, Citibank, N.A., serves as the Fund's custodian.
K&L Gates LLP provides legal services to the Trust.
41
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
Effective with the Transaction on July 1, 2019, the Adviser has entered into an expense limitation agreement with the Fund until at least June 30, 2021. 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. 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. Effective July 1, 2019 through May 31, 2020, the expense limit (excluding voluntary waivers) is 0.98%.
Under this expense limitation agreement, the Fund has agreed to repay fees and expenses that were waived or reimbursed by the Adviser for a period up to three years after the fiscal year in which 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 May 31, 2020, the following amounts are available to be repaid to the Adviser (amounts in thousands).
Expires 05/31/2023 | |||
$ | 127 |
The Adviser, may voluntarily waive or reimburse additional fees to assist the Fund in maintaining competitive expense ratios. Voluntary waivers and reimbursements applicable to the Fund are not available to be recouped at a future time. There were no voluntary waivers or reimbursements for the year ended May 31, 2020.
Prior to the Transaction on July 1, 2019, AMCO agreed, through September 30, 2019, to limit the total annual operating expenses to 0.98% of average daily net assets of the Fund, excluding extraordinary expenses and before reductions of any expenses paid indirectly, and to reimburse all expenses in excess of those amounts. Effective with the Transaction on July 1, 2019, this expense limit is no longer in effect and is not available to be recouped by AMCO. For the period June 1, 2019 through June 30, 2019, amounts reimbursed by the Fund are reflected on the Statement of Operations as Expenses waived/reimbursed by AMCO.
Certain officers and/or interested trustees of the Fund are also officers and/or employees of the Adviser, Administrator, Sub-Administrator, Sub-Fund Accountant, and Legal.
5. Risks:
The Fund may be subject to other risks in addition to these identified risks.
Global economies and financial markets are increasingly interconnected, which increases the possibilities that conditions in one country or region might adversely affect issuers in another country or region. Geopolitical and other risks, including war, terrorism, trade disputes, political or economic dysfunction within some nations, public health crises and related geopolitical events, as well as environmental disasters such as earthquakes, fires, and floods, may add to instability in world economies and markets generally. Changes in trade policies and international trade agreements could affect the economies of many countries in unpredictable ways. Epidemics and/or pandemics, such as the coronavirus (or COVID-19), may result in, among other things, closing borders, disruptions to healthcare service preparation and delivery, quarantines, cancellations, disruptions to supply chains and consumer activity, as well as general concern and uncertainty. The impact may be short-term or may last for extended periods.
The COVID-19 pandemic, which has spread rapidly across the world, has led and will continue to lead for an unknown period of time to disruptions in local, regional, national and global markets and economies. Among other things, the outbreak has resulted in, and until fully resolved is likely to continue to result in, among other things (1) government imposition of various forms of "stay at home" orders and the closing of "non-essential" businesses, resulting in significant disruption to the businesses of many issuers as well as lay-offs of employees; (2) increased requests by issuers of debt instruments for
42
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
amendments and waivers of agreements to avoid default and increased defaults; (3) volatility and disruption of markets, including greater volatility in pricing and spreads; and (4) rapidly evolving proposals and/or actions by state and federal governments to address problems being experienced by the markets and by businesses and the economy in general.
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.
The equity securities in the Fund's portfolio are subject to stock market risk. A company's stock price in general may decline over short or even extended periods, regardless of the success or failure of the company's operations. Stock markets tend to run in cycles, with periods when stock prices generally go up and periods when stock prices generally go down. Equity securities tend to be more volatile than debt securities. In addition, to the degree the Fund invests in foreign securities, there is a possibility that the value of the Fund's investments in foreign securities will decrease because of unique risks, such as currency exchange-rate fluctuations; foreign market illiquidity; emerging market risk; increased price volatility; uncertain political conditions; exchange control regulations; foreign ownership limits; different accounting, reporting, and disclosure requirements; difficulties in obtaining legal judgments; and foreign withholding taxes. These risks are particularly heightened in this Fund because investments in emerging-market countries generally are more volatile than investments in developed markets. Emerging-market countries are less economically diverse and mature than more developed countries and tend to be politically less stable.
The Fund may invest in securities of companies of any market capitalization and is subject to mid- and small-cap company risk, which is the greater risk of investing in smaller, less well-known companies, as opposed to investing in established companies with proven track records. Mid- and small-cap companies also may have limited product lines, markets, or financial resources. Securities of such companies may be less liquid and more volatile than securities of larger companies or the market in general and, therefore, may involve greater risk than investing in the securities of larger companies.
Many debt securities, derivatives and other financial instruments, including some of the Fund's investments, use the London Interbank Offered Rate ("LIBOR") as the reference or benchmark rate for variable interest rate calculations. However, the use of LIBOR started to come under pressure following manipulation allegations in 2012. Despite increased regulation and other corrective actions since that time, concerns have arisen regarding its viability as a benchmark, due largely to reduced activity in the financial markets that it measures. In June 2017, the Alternative Reference Rates Committee, a group of large U.S. banks working with the Federal Reserve, announced its selection of a new Secured Overnight Funding Rate ("SOFR"), which is intended to be a broad measure of secured overnight U.S. Treasury repo rates, as an appropriate replacement for LIBOR. The Federal Reserve Bank of New York began publishing the SOFR in 2018, expecting that it could be used on a voluntary basis in new instruments and transactions. Bank working groups and regulators in other countries have suggested other alternatives for their markets, including the Sterling Overnight Interbank Average Rate ("SONIA") in England. In July 2017, the Financial Conduct Authority (the "FCA"), the United Kingdom financial regulatory body, announced that after 2021 it will cease its active encouragement of UK banks to provide the quotations needed to sustain LIBOR. That announcement suggests that LIBOR may cease to be published after that time. The roughly three-year period until the end of 2021 is expected to be enough time for market participants to transition to the use of a different benchmark for both new and existing securities and transactions. Various financial industry groups have begun planning for that transition, but there are obstacles to converting certain longer-term securities and transactions to a new benchmark. Transition planning is at an early stage, and neither the effect of the transition process nor its ultimate success can yet be known. The transition process might lead to increased volatility and illiquidity in markets that currently rely on the LIBOR to determine interest rates. It could also lead to a reduction in the value of some LIBOR-based investments and reduce the effectiveness of new hedges placed against existing LIBOR-based instruments. Since the usefulness of LIBOR as a benchmark could deteriorate during the transition period, these effects could occur before the end of 2021.
43
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
6. Borrowing and Interfund Lending:
Line of Credit:
Effective with the Transaction on July 1, 2019, the Victory Funds Complex participates in a short-term, demand note "Line of Credit" agreement with Citibank. Under the agreement with Citibank, the Victory Funds Complex could 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 that Fund paying the related commitment fees for that amount. The purpose of the agreement is to meet temporary or emergency cash needs. Citibank receives an annual commitment fee of 0.15% on $300 million for providing the Line of Credit. Each fund in the Victory Funds Complex pays a pro-rata portion of the commitment fees plus any interest (one month LIBOR plus one percent) on amounts borrowed. Effective June 29, 2020, under an amended Line of Credit agreement, Citibank will also receive an annual upfront fee of 0.10% on the $300 million committed line of credit. Each fund in the Victory Funds Complex will pay a pro-rata portion of the upfront fee. Interest charged to the Fund, if any, during the period is reflected on the Statement of Operations under line of credit fees.
Prior to the Transaction on July 1, 2019, the line of credit among the Trust, with respect to its funds, and USAA Capital Corporation ("CAPCO") terminated. For the period from June 1, 2019 to June 30, 2019, the Fund paid CAPCO facility fees of $6 thousand.
The Fund had no borrowings under either agreement with Citibank or CAPCO during the year ended May 31, 2020.
Interfund Lending:
Effective with the Transaction on July 1, 2019, the Trust and 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 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. The interfund loan rate is determined, as specified in the Order, by averaging the current repurchase agreement rate and the current bank loan rate. As a Borrower, interest charged to the Fund, if any, during the period is reflected on the Statement of Operations under Interest expense on Interfund lending. As a Lender, interest earned by the Fund, if any, during the period is reflected on the Statement of Operations under Income on Interfund lending.
The average borrowing for the days outstanding and average interest rate for the Fund during the year ended May 31, 2020, were as follows (amounts in thousands):
Borrower or Lender | Amount Outstanding at May 31, 2020 | Average Borrowing* | Days Borrowing Outstanding | Average Interest Rate* | Maximum Borrowing During the Period | ||||||||||||||||||
Borrower | $ | — | $ | 4,826 | 12 | 1.79 | % | $ | 9,719 |
* For the year ended May 31, 2020, based on the number of days borrowings were outstanding.
7. Federal Income Tax Information:
The Fund intends to declare daily and 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
44
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
the components of net assets based on their federal tax-basis treatment; temporary differences (e.g., wash sales) do not require reclassification. To the extent dividends and distributions exceed net investment income and net realized gains for tax purposes, they are reported as distributions of capital. Net investment losses incurred by the Fund may be reclassified as an offset to capital on the accompanying Statement of Assets and Liabilities.
As of May 31, 2020, 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 Statement of Changes in Net Assets because, for tax purposes, dividends are recognized when actually paid) (amounts in thousands).
Year Ended May 31, 2020 | Year Ended May 31, 2019 | ||||||||||||||||||||||
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 | ||||||||||||||||||
$ | 43,926 | $ | 15,226 | $ | 59,152 | $ | 69,554 | $ | 86,725 | $ | 156,279 |
As of May 31, 2020, the components of accumulated earnings (deficit) on a tax basis were as follows (amounts in thousands):
Undistributed Ordinary Income | Accumulated Capital and Other Losses | Other Earnings (Deficit) | Unrealized Appreciation (Depreciation)* | Total Accumulated Earnings (Deficit) | |||||||||||||||
$ | 21,760 | $ | (13,350 | ) | $ | (3,498 | ) | $ | 62,792 | $ | 67,704 |
* The difference between the book-basis and tax-basis of unrealized appreciation/depreciation is attributable to the tax deferral of losses on wash sales.
At May 31, 2020, 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 | |||||||||
$ | 13,350 | $ | — | $ | 13,350 |
As of May 31, 2020, 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) | ||||||||||||
$ | 2,659,634 | $ | 176,730 | $ | (113,938 | ) | $ | 62,792 |
45
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
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 or an investment company managed by VCM. The Fund does not invest in affiliated underlying funds for the purpose of exercising management or control. These underlying funds are noted as affiliated in the Fund's Schedule of Portfolio Investments. The affiliated underlying funds' annual or semiannual reports may be viewed at usaa.com. Transactions in affiliated securities during the year ended May 31, 2020, were as follows (amount in thousands):
Fair Value 5/31/2019 | Purchases at Cost | Proceeds from Sales | Realized Gain (Loss) | Capital Gain Distribution | Net Change in Unrealized Appreciation/ Depreciation | Fair Value 5/31/2020 | Dividend Income | ||||||||||||||||||||||||||||
Affiliated Holdings | |||||||||||||||||||||||||||||||||||
VictoryShares USAA MSCI Emerging Markets Value Momentum ETF | $ | 2,888 | $ | — | $ | — | $ | — | $ | — | $ | (383 | ) | $ | 2,505 | $ | 85 |
9. Acquisition of USAA First Start Growth Fund:
On June 22, 2018, the USAA First Start Growth Fund was acquired by the Fund pursuant to a Plan of Reorganization and Termination, which was approved by shareholders of the First Start Growth Fund on May 30, 2018. The reorganization was accomplished by a tax-free exchange of 17,570,000 shares of the Fund (valued at $440,752,000) for 32,676,000 shares of the USAA First Start Growth Fund (100% of the voting equity interests) outstanding on June 22, 2018. The reason for the transaction was to combine two funds with comparable investment objectives to create one larger fund with the potential for lower total operating expenses borne by shareholders. The tax-free exchange of shares by the Fund for the assets and liabilities of the USAA First Start Growth Fund on the date of the reorganization was as follows:
Shares Issued by USAA Cornerstone Moderately Aggressive Fund | Total Net Assets of the USAA First Start Growth Fund | Merger Ratio | Prior to Reorganization Total Net Assets of the Cornerstone Moderately Aggressive Fund | After Reorganization Total Net Assets of the Cornerstone Moderately Aggressive Fund | |||||||||||||||
17,570,000 | $ | 440,752,000 | (b) | .538 | $ | 2,490,669,000 | (a) | $ | 2,931,421,000 |
(a) Includes undistributed net investment income of $6,090,000 and unrealized appreciation on investments of $107,487,000 with a fair value of $2,486,634,000 and identified cost of $2,379,147,000.
(b) Includes $59,602,000 of unrealized appreciation on investments.
Assets received, and shares issued by the Fund were recorded at fair value; however, the cost basis of the investments received by the Fund was carried forward to align ongoing reporting of the portfolio's realized and unrealized gains and losses with amounts distributable for tax purposes.
The pro forma results of operations for the year ended May 31, 2019, assuming the reorganization had been completed on June 1, 2018 (the beginning of the annual period), are as follows:
Net investment income | $ | 55,441,000 | |||||
Net realized gain on investments | $ | 55,309,000 | |||||
Change in unrealized appreciation/(depreciation) on investments and foreign currency translations | $ | (86,226,000 | ) | ||||
Net increase in net assets resulting from operations | $ | 24,524,000 |
The combined investment portfolios have been managed as a single portfolio since the merger was completed on June 22, 2018. Thus, it is not practicable to separate the amounts of revenue and earnings
46
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
of the First Start Growth Fund that has been included in the Fund's Statement of Operations since June 22, 2018.
10. 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 1940 Act. 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 Funds' Board of Trustees approved the appointment of the Fund's investment adviser, Victory Capital, as the administrator of the LRMP. At an in-person meeting held on February 26, 2020, Victory Capital provided an oral and written report to the Trustees on the operation and effectiveness of the LRMP during the previous year.
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.
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 reasonably expected to be converted to cash in current market conditions in three business days or less without significantly changing the market value of the investment. Therefore, the Fund has not adopted a Highly Liquid Investment Minimum. The Fund's investments were below the limitation on illiquid investments during the review period. Additionally, Victory Capital indicated that no events occurred that would require the filing of Form N-LIQUID and recommended no material changes to the LRMP.
47
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of USAA Cornerstone Moderately Aggressive Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of USAA Cornerstone Moderately Aggressive Fund (the "Fund") (one of the funds constituting USAA Mutual Funds Trust (the "Trust")), including the schedule of portfolio investments, as of May 31, 2020, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the funds constituting USAA Mutual Funds Trust) at May 31, 2020, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Trust's management. Our responsibility is to express an opinion on the Fund's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust's internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of May 31, 2020, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Victory Capital investment companies since 1995.
San Antonio, Texas
July 27, 2020
48
USAA Mutual Funds Trust | Supplemental Information May 31, 2020 |
(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) 539-3863. The information is also included in the Fund's Statement of Additional Information, which is available on the SEC's website at www.sec.gov.
Information relating to how the Fund voted proxies relating to portfolio securities held during the most recent 12 months ended June 30 is available on the SEC's website at www.sec.gov.
Availability of Schedules of Portfolio Investments:
The Trust files a complete list of Schedules of Portfolio Investments with the SEC for the first and third quarter of each fiscal year on Form N-PORT. Forms N-PORT are available on the SEC's website at www.sec.gov.
49
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(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 10 Trustees, eight of whom are not "interested persons" of the Trust within the meaning of that term under the 1940 Act ("Independent Trustees") and two 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 ages, position with the Trust, commencement of service, 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 47 portfolios in the Trust. Each Trustee's address is 15935 La Cantera Pkwy, Building Two, San Antonio, TX, 78256. Pursuant to a policy adopted by the Board, the term of office for each Trustee shall be until the Independent Trustee reaches age 75 or an Interested Trustee reaches age 75. The Board may change or grant exceptions from this policy at any time without shareholder approval. A Trustee may resign or be removed by a vote of the other Trustees or the holders of a majority of the outstanding shares of the Trust at any time. Vacancies on the Board can be filled by the action of a majority of the Trustees, provided that after filling such vacancy at least two-thirds of the Trustees have been elected by the shareholders.
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Independent Trustees. | |||||||||||||||||||
Jefferson C. Boyce, Born September 1957 | Lead Independent Trustee, and Vice Chairman | 2013 | Senior Managing Director, New York Life Investments, LLC (1992-2012) | Westhab, Inc. | |||||||||||||||
John C. Walters, Born February 1962 | Trustee | 2019 | Retired. Mr. Walters brings significant Board experience including active involvement with the board of a Fortune 500 company, and a proven record of leading large, complex financial organizations. He has a demonstrated record of success in distribution, manufacturing, investment brokerage, and investment management in both the retail and institutional investment businesses. He has substantial experience in the investment management business with a demonstrated ability to develop and drive strategy while managing operation, financial, and investment risk. | Guardian Variable Products Trust (16 series), Lead Independent Director; Amerilife Holdings LLC, Director; Stadion Money Management; Director; University of North Carolina (Chapel Hill), Member Board of Governors. |
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USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Robert L. Mason, Ph.D., Born July 1946 | Trustee | 1997 | Adjunct Professor in the Department of Management Science and Statistics in the College of Business at the University of Texas at San Antonio (since 2001); Institute Analyst, Southwest Research Institute (March 2002-January 2016) | None | |||||||||||||||
Dawn M. Hawley, Born February 1954 | Trustee | 2014 | Manager of Finance, Menil Foundation, Inc. (May 2007-June 2011), which is a private foundation that oversees the assemblage of sculptures, prints, drawings, photographs, and rare books. Director of Financial Planning and Analysis and Chief Financial Officer, AIM Management Group, Inc. (October 1987-January 2006) | None | |||||||||||||||
Paul L. McNamara, Born July 1948 | Trustee | 2012 | Director, Cantor Opportunistic Alternatives Fund, LLC (March 2010-February 2014) , which is a closed-end fund of funds by Cantor Fitzgerald Investment Advisors, LLC | None |
51
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Richard Y. Newton III, Born January 1956 | Trustee | 2017 | Director, Elta North America (01/18-present), 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 (December 2015-present)); Executive Director, The Union League Club of New York (June 2014-November 2015): Executive Vice President, Air Force Association (August 2012-May 2014); Lieutenant General, United States Air Force (January 2008-June 2012) | None | |||||||||||||||
Barbara B. Ostdiek, Ph.D., Born March 1964 | Trustee | 2008 | Senior Associate Dean of Degree Programs at Jesse H. Jones Graduate School of Business at Rice University (since 2013); Associate Professor of Finance at Jessie H. Jones Graduate School of Business at Rice University (since 2001) | None | |||||||||||||||
Michael F. Reimherr, Born August 1945 | Trustee | 2000 | President of Reimherr Business Consulting (May 1995-December 2017); St. Mary's University Investment Committee overseeing University Endowment (since 2014) | None |
52
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Interested Trustees. | |||||||||||||||||||
David C. Brown, ** Born May 1972 | Trustee | 2019 | Chairman and Chief Executive Officer (since 2013), Co-Chief Executive Officer (2011-2013), Victory Capital Management Inc.; Chairman and Chief Executive Officer, Victory Capital Holdings, Inc. (since 2013). Mr. Brown brings to the Board extensive business, finance and leadership skills gained and developed through years of experience in the financial services industry, including his tenure overseeing the strategic direction as CEO of Victory Capital. These skills, combined with Mr. Brown's extensive knowledge of the financial services industry and demonstrated success in the development and distribution of investment strategies and products, enable him to provide valuable insights to the Board and strategic direction for the Funds | Trustee, Victory Portfolios (42 series), Victory Portfolios II (26 series), Victory Variable Insurance Funds (9 series) |
53
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Daniel S. McNamara, ** Born June 1966 | Trustee and Chair of the Board of Trustees | 2012 | Trustee, President, and Vice Chairman of USAA ETF Trust (June 2017-June 2019); President of Financial Advice & Solutions Group (FASG), USAA (since 2013); Director, IMCO (September 2009-April 2014); President, AMCO (August, 2011-April 2013); Senior Vice President of USAA Financial Planning Services Insurance Agency, Inc. (FPS) (since 2011); Director of USAA Investment Management Company (IMCO) (since 2009); Chairman of Board of IMCO (since 2013); Director of USAA Asset Management Company (AMCO), (August 2011-June 2019); President and Director of USAA Shareholder Account Services (SAS)(October 2009-June 2019); Director and Vice Chairman of FPS (since 2013); President and Director of USAA Investment Corporation (ICORP) (since 2010); Chairman of Board of ICORP (since 2013); Director of USAA Financial Advisors, Inc. (FAI) (since 2013); Chairman of Board of FAI (since 2015). Mr. McNamara brings to the Board extensive experience in the financial services industry, including experience as an officer of the Trust. | None |
** Mr. McNamara and Mr. Brown are "Interested Persons" by reason of their relationships with the Adviser.
The Statement of Additional Information includes additional information about the Trustees of the Trust and is available, without charge, on the SEC's website at www.sec.gov and/or by calling (800)-539-3863.
54
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Officers:
The officers of the Trust, their ages, 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, Building Two, 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 with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | ||||||||||||
Interested Officers. | |||||||||||||||
Christopher K. Dyer, Born February 1962 | President | 2019 | Director of Fund Administration, Victory Capital (2004-present) | ||||||||||||
Scott A Stahorsky, Born July 1969 | Vice President | 2019 | Manager, Fund Administration, Victory Capital (since 2015); Senior Analyst, Fund Administration, Victory Capital (prior to 2015) | ||||||||||||
James K. De Vries, Born April 1969 | Treasurer, Principal Financial Officer | 2018 | Executive Director, Victory Capital Management Inc. (since 2019); Treasurer, USAA ETF Trust (September 2018-June 2019); Executive Director, Investment and Financial Administration, USAA (April 2012-June 2019); Assistant Treasurer, USAA ETF Trust (June 2017-September 2018); Assistant Treasurer, USAA Mutual Funds Trust (December 2013-February 2018) | ||||||||||||
Allan Shaer, Born March 1965 | Assistant Treasurer | 2019 | Senior Vice President, Financial Administration, Citi Fund Services Ohio, Inc. (since 2016); Vice President, Mutual Fund Administration, JP Morgan Chase (2011-2016) | ||||||||||||
Carol D. Trevino, Born October 1965 | Assistant Treasurer | 2018 | Director, Accounting and Finance, Victory Capital Management Inc. (since 2019); Accounting/Financial Director, USAA (December 2013-June 2019); Assistant Treasurer, USAA ETF Trust (September 2018-June 2019). | ||||||||||||
Erin G. Wagner, Born February 1974 | Secretary | 2019 | Deputy General Counsel, the Adviser (since 2013) | ||||||||||||
Charles Booth, Born April 1960 | Anti-Money Laundering Compliance Officer and Identity Theft Officer | 2019 | Director, Regulatory Administration and CCO Support Services, Citi Fund Services Ohio, Inc. (2007-present) | ||||||||||||
Amy Campos, Born July 1976 | Chief Compliance Officer | 2019 | Chief Compliance Officer, USAA Mutual Funds Trust (since 2019); Executive Director, Deputy Chief Compliance Officer, USAA Mutual Funds Trust and USAA ETF Trust (July 2017-June 2019); Compliance Director, USAA Mutual Funds Trust (2014-July 2017) |
55
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
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 December 1, 2019 through May 31, 2020.
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. If these transactional costs were included, your costs would have been higher.
Beginning Account Value 12/1/19 | Actual Ending Account Value 5/31/20 | Hypothetical Ending Account Value 5/31/20 | Actual Expenses Paid During Period 12/1/19- 5/31/20* | Hypothetical Expenses Paid During Period 12/1/19- 5/31/20* | Annualized Expense Ratio During Period 12/1/19- 5/31/20 | ||||||||||||||||||
$ | 1,000.00 | $ | 955.40 | $ | 1,020.20 | $ | 4.69 | $ | 4.85 | 0.96 | % |
* Expenses are equal to the average account value multiplied by the Fund's annualized expense ratio multiplied by 183/366 (the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year).
56
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Additional Federal Income Tax Information
The following federal tax information related to the Fund's fiscal year ended May 31, 2020, 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 2021.
With respect to distributions paid, the Fund designates the following amounts (or, if subsequently determined to be different, the maximum amount allowable) for the fiscal year ended May 31, 2020 (amounts in thousands):
Dividend Received Deduction (corporate shareholders)* | Qualified Dividend Income (non-corporate shareholders)* | Long-Term Capital Gain Distributions(a) | |||||||||||||
21.83 | % | 28.58 | % | $ | 15,226 |
* Presented as a percentage of net investment income and excludes short-term capital gain distributions paid, if any. All or a portion of these amounts may be exempt from taxation at the state level.
(a) Pursuant to Section 852 of the Internal Revenue Code.
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 |
23405-0720
MAY 31, 2020
Annual Report
USAA Cornerstone Moderately
Conservative Fund
Beginning January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Fund's shareholder reports like this one will no longer be sent by mail, unless you specifically request paper copies of the reports from the Fund or from your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on VictoryFunds.com, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund or your financial intermediary electronically by notifying your financial intermediary directly, or if you are a direct investor, by calling (800) 235-8396 or logging on to usaa.com. Effective on or about September 8, 2020, a shareholder who has an account directly with the Fund will need to submit their request via email to TA.Processing@FISGlobal.com.
You may elect to receive all future reports in paper free of charge. You can inform the Fund or your financial intermediary that you wish to continue receiving paper copies of your shareholder reports by notifying your financial intermediary directly, or if you are a direct investor, by calling (800) 235-8396 or logging on to usaa.com. Effective on or about September 8, 2020, a shareholder who has an account directly with the Fund will need to submit their request via email to TA.Processing@FISGlobal.com. Your election to receive reports in paper will apply to all funds held with the USAA Mutual Funds or your financial intermediary.
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 logo 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.
USAA Mutual Funds Trust
TABLE OF CONTENTS
Shareholder Letter (Unaudited) | 2 | ||||||
Managers' Commentary (Unaudited) | 4 | ||||||
Investment Overview (Unaudited) | 6 | ||||||
Investment Objective & Portfolio Holdings (Unaudited) | 7 | ||||||
Financial Statements | |||||||
Schedule of Portfolio Investments | 9 | ||||||
Statement of Assets and Liabilities | 24 | ||||||
Statement of Operations | 25 | ||||||
Statements of Changes in Net Assets | 26 | ||||||
Financial Highlights | 28 | ||||||
Notes to Financial Statements | 30 | ||||||
Report of Independent Registered Public Accounting Firm | 43 | ||||||
Supplemental Information (Unaudited) | 44 | ||||||
Proxy Voting and Portfolio Holdings Information | 44 | ||||||
Trustees' and Officers' Information | 45 | ||||||
Expense Examples | 51 | ||||||
Additional Federal Income Tax Information | 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.
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.
1
(Unaudited)
Dear Shareholder,
The previous decade ended with the longest-ever bull market in U.S. equities still intact, even as investors wrestled with issues like softening global economic data, Brexit, and U.S.-China trade relations. In retrospect, those worries seem so pedestrian given what we would soon experience.
A new and unexpected threat—a global pandemic, the novel coronavirus ("COVID-19")—first emerged in Asia and then began spreading globally and throughout the United States during the first quarter of 2020. This unprecedented and unanticipated event not only rendered all existing economic and earnings forecasts moot, but it also roiled stock and bond markets everywhere. Efforts to slow the spread of the virus, though successful to date, also brought the economy to a halt. The historic bull market in stocks ended virtually overnight.
After an initial severe sell-off in March, equity markets recovered sharply. As our annual reporting period drew to a close on May 31, 2020, many of the broad market indexes had recovered and volatility had returned to more palatable levels. In fact, despite all the chaos, the S&P 500® Index, one of the most popular measures of large U.S. stocks, finished the fiscal year (May 31, 2020) at approximately 3,044, which was up more than 10.6% from one year ago.
The market turmoil of early 2020 was not limited to equities. Fixed income volatility spiked when liquidity evaporated in late March as investors struggled to understand the ramifications of stay-at-home orders. Fortunately, the U.S. Federal Reserve (the "Fed") (as well as other global central banks) leapt into action—cutting interest rates, (re)starting quantitative easing and, in the case of the Fed, launching an array of programs to stabilize markets.
The new lending facilities and programs had their intended effect of improving liquidity and trading. Credit spreads across corporate, high-yield, structured, and municipal markets were coaxed down from their highs. In addition, Congress came through with substantial fiscal stimulus that also was applauded by investors and markets. Although fixed income markets regained their footing, the yield on 10-Year Treasurys, a benchmark for low-risk investments, declined steadily during our fiscal year—from 2.14% at the beginning of our reporting period to approximately 0.65% as of May 31, 2020. This suggests that investors remain a little wary.
While the past year has been unprecedented for all of us, both personally and professionally, our portfolio managers continue to scrutinize the financial markets, economic conditions, and the trajectory of the pandemic, which will likely be the guiding factor on Fed policy and the markets.
No matter what happens in the near term, we believe that the massive monetary and fiscal policies introduced earlier this year will have longer-term ramifications. Despite this uncertainty, it's important to remain focused on your long-term investment goals and avoid making emotional decisions. If you invest with us directly, our Member Service Representatives are available to help. Call us at (800) 539-3863 or visit our website at vcm.com.
2
From all of us here at USAA Mutual Funds, thank you for letting us help you work toward your investment goals.
Christopher K. Dyer, CFA
President,
USAA Mutual Funds
3
USAA Mutual Funds Trust
USAA Cornerstone Moderately Conservative Fund
Managers' Commentary
(Unaudited)
Victory Solutions
Mannik S. Dhillon, CFA
Wasif A. Latif
Lance Humphrey, CFA
James F. Jackson, Jr., CFA
R. Neal Graves, CFA, CPA
• What were the market conditions during the reporting period?
Global financial market performance varied widely over the period driven by uncertainty related to the duration and economic impact of the novel coronavirus ("COVID-19") pandemic. This generally led to a risk-off environment as investors flocked to safe haven assets such as U.S. Treasurys and gold. Global equities turned mostly lower with the exception of a small breadth of mega-cap securities well-positioned for an extended economic slowdown and the new stay-at-home paradigm. The final month and a half of the reporting period saw a rebound in risky assets as economies began a phased reopening.
Within the United States, the S&P 500® Index dropped nearly 34% from its 2020 high, before beginning to recoup losses with the support of comprehensive monetary and fiscal stimulus, along with encouraging results in COVID-19 vaccine trials. Over the reporting period, the S&P 500® Index returned 12.84%, with large-cap growth stocks leading the way, up to a return of 26.25% as represented by the Russell 1000 Growth Index. Value stocks and small-cap stocks underperformed growth stocks over the period, but more recently have seen a pickup in momentum. U.S. large-cap value stocks were down to a return of -1.64% over the reporting period as gauged by the Russell 1000 Value Index, while U.S. small-cap stocks, were down to a return of -3.44% as represented by the Russell 2000 Index.
Developed market international and emerging market equities followed a path similar to U.S. equities. Markets led investors on a rollercoaster ride that saw both the MSCI EAFE Index and MSCI Emerging Markets Index drop approximately 34% from their highs in the year. The market drawdown hit bottom on March 23rd and then started a steady ascent, erasing most of the losses as European Central Bank quantitative easing and talks of a 750-billion euros fiscal stimulus helped bolster momentum in the market's recovery. Over the reporting period, developed international equities, represented by the MSCI EAFE Index, were down to a return of -2.81%, while the MSCI Emerging Markets Index returned -4.39%.
Within fixed-income, interest rate-sensitive treasury bonds outperformed credit-sensitive investment-grade and high-yield corporate bonds. Investor demand for U.S. Treasurys drove yields to new lows, while credit spreads reached unprecedented levels as liquidity issues began to seize up parts of credit and municipal markets. The U.S. Federal Reserve (the "Fed") intervened, providing liquidity by expanding open market purchases to include
4
USAA Mutual Funds Trust
USAA Cornerstone Moderately Conservative Fund (continued)
Managers' Commentary (continued)
municipal and corporate bonds. Bloomberg Barclays US Treasury 20+ Year Index returned 27.46% over the reporting period, while the Bloomberg Barclays U.S. Aggregate Bond Index returned 9.42%. High-yield bonds finished the period slightly positive, up 1.32% as gauged by the Bloomberg Barclays US Corporate High Yield Index.
• How did the USAA Cornerstone Moderately Conservative Fund (the "Fund") perform during the reporting period?
For the reporting period ended May 31, 2020, the Fund had a total return of 4.09%. This compares to returns of 8.50% for the Bloomberg Barclays U.S. Universal Index and 7.30% for the Cornerstone Moderately Conservative Composite Index.
• What strategies did you employ during the reporting period?
The equity portfolio's overall tilt toward value stocks, especially within U.S. large-cap stocks, was a key factor in underperformance relative to the benchmark over the reporting period. An underweight to U.S. equities along with negative stock selection effects within emerging market and developed international equities weighed on relative performance.
Within the fixed income portion of the portfolio, a slight overweight to treasurys and an underweight to high yield contributed to relative performance, while allocations to corporate bonds detracted from performance.
Commodities as an asset class were down over the period with the Bloomberg Commodity Index returning -17.06%; however, gold outperformed. Gold's overweight within the portfolio contributed positively to relative performance over the period. A slight overweight to REITs relative to the benchmark detracted from performance.
Thank you for allowing us to assist you with your investment needs.
5
USAA Mutual Funds Trust
USAA Cornerstone Moderately Conservative Fund
Investment Overview
(Unaudited)
Average Annual Total Return
Year Ended May 31, 2020
INCEPTION DATE | 6/8/12 | ||||||||||||||
Net Asset Value | Bloomberg Barclays U.S. Universal Index1 | Cornerstone Moderately Conservative Composite Index2 | |||||||||||||
One Year | 4.09 | % | 8.50 | % | 7.30 | % | |||||||||
Five Year | 2.74 | % | 4.01 | % | 4.81 | % | |||||||||
Since Inception | 4.59 | % | NA | NA |
Past performance is not indicative of future results. 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 for various periods since inception. Without such fee waivers, the total returns would have been lower.
USAA Cornerstone Moderately Conservative Fund — Growth of $10,000
*The performance of the Bloomberg Barclays U.S. Universal Index and Cornerstone Moderately Conservative Composite Index is calculated from the end of the month, May 31, 2012, while the inception date of the USAA Cornerstone Moderately Conservative Fund is June 8, 2012. There may be a slight variation of performance numbers because of this difference.
1The unmanaged Bloomberg Barclays 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.
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 Barclays 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 Barclays U.S. Treasury — Bills (1-3M) (2%).
The graph reflects investment of growth of a hypothetical $10,000 investment in the Fund. Past performance is no guarantee of future results.
The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
6
USAA Mutual Funds Trust USAA Cornerstone Moderately Conservative Fund | May 31, 2020 |
(Unaudited)
Investment Objective & Portfolio Holdings:
The Fund's investment objective is to seek current income with a secondary focus on capital appreciation.
Top 10 Holdings*
May 31, 2020
(% of Net Assets)
Vanguard FTSE Developed Markets ETF | 4.9 | % | |||||
iShares Core S&P 500 ETF | 3.3 | % | |||||
U.S. Treasury Notes, 1 .13%, 2/28/2021 | 3.1 | % | |||||
U.S. Treasury Notes, 2 .25%, 11/15/2025 | 3.1 | % | |||||
Vanguard FTSE Europe ETF | 2.9 | % | |||||
Schwab Fundamental International Large Co. Index ETF | 2.5 | % | |||||
iShares iBoxx $ Investment Grade Corporate Bond ETF | 2.2 | % | |||||
Federal Home Loan Mortgage Corporation, 3.00%, 3/1/2047 | 1.9 | % | |||||
iShares Core MSCI Emerging Markets ETF | 1.8 | % | |||||
iShares Core US Aggregate Bond ETF | 1.8 | % |
* Does not include futures, money market instruments, and short-term investments purchased with cash collateral from securities loaned.
Refer to the Schedule of Portfolio Investments for a complete list of securities.
7
USAA Mutual Funds Trust USAA Cornerstone Moderately Conservative Fund | May 31, 2020 |
Asset Allocation*:
May 31, 2020
(% of Net Assets)
* Does not include futures, 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%.
8
USAA Mutual Funds Trust USAA Cornerstone Moderately Conservative Fund | Schedule of Portfolio Investments May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Asset Backed Securities (4.3%) | |||||||||||
American Express Credit Account Master Trust, Series 2019-2, Class B, 2.86%, 11/15/24 | $ | 358 | $ | 362 | |||||||
Americredit Automobile Receivables Trust, Series 2018-2, Class A3, 3.15%, 3/20/23, Callable 3/18/23 @ 100 | 135 | 136 | |||||||||
Americredit Automobile Receivables Trust, Series 2018-1, Class C, 3.50%, 1/18/24, Callable 10/18/22 @ 100 | 480 | 494 | |||||||||
ARI Fleet Lease Trust, Series 2020-A, Class A3, 1.80%, 8/15/28, Callable 5/15/23 @ 100 (a) | 96 | 96 | |||||||||
BCC Funding Corp. XVI LLC, Series 2019-1A, Class A2, 2.46%, 8/20/24, Callable 8/20/23 @ 100 (a) | 1,500 | 1,506 | |||||||||
Canadian Pacer Auto Receivables Trust, Series 2018-1A, Class C, 3.82%, 4/19/24, Callable 5/19/21 @ 100 (a) | 263 | 266 | |||||||||
CarMax Auto Owner Trust, Series 2020-1, Class B, 2.21%, 9/15/25, Callable 12/15/23 @ 100 | 137 | 134 | |||||||||
Credit Acceptance Auto Loan Trust, Series 2018-3A, Class A, 3.55%, 8/15/27, Callable 10/15/21 @ 100 (a) | 329 | 332 | |||||||||
Dell Equipment Finance Trust, Series 2020-1, Class A3, 2.24%, 2/22/23, Callable 10/22/22 @ 100 (a) | 71 | 71 | |||||||||
Drive Auto Receivables Trust, Series 2019-1, Class C, 3.78%, 4/15/25, Callable 6/15/22 @ 100 | 158 | 160 | |||||||||
Element Rail Leasing I LLC, Series 2014-1A, Class A2, 3.67%, 4/19/44 (a) | 240 | 240 | |||||||||
Enterprise Fleet Financing LLC, Series 2020-1, Class A3, 1.86%, 12/22/25 (a) | 88 | 86 | |||||||||
Evergreen Credit Card Trust, Series 2019-2, Class A, 1.90%, 9/15/24 (a) | 275 | 275 | |||||||||
Exeter Automobile Receivables Trust, Series 2020-1A, Class B, 2.26%, 4/15/24, Callable 5/15/24 @ 100 (a) | 110 | 110 | |||||||||
Exeter Automobile Receivables Trust, Series 2017-3A, Class D, 5.28%, 10/15/24, Callable 3/15/22 @ 100 (a) | 110 | 106 | |||||||||
Exeter Automobile Receivables Trust, Series 2019-2A, Class C, 3.30%, 3/15/24, Callable 12/15/22 @ 100 (a) | 215 | 216 | |||||||||
Ford Credit Auto Owner Trust, Series 2019-A, Class A3, 2.78%, 9/15/23, Callable 3/15/23 @ 100 | 78 | 80 | |||||||||
Ford Credit Auto Owner Trust, Series 2020-1, Class B, 2.29%, 8/15/31, Callable 2/15/25 @ 100 (a) | 143 | 125 | |||||||||
GM Financial Consumer Automobile Receivables Trust, Series 2020-1, Class A4, 1.90%, 3/17/25, Callable 2/16/23 @ 100 | 143 | 147 | |||||||||
GM Financial Consumer Automobile Receivables Trust, Series 2020-2, Class A4, 1.74%, 8/18/25, Callable 12/16/23 @ 100 | 177 | 182 | |||||||||
Goal Capital Funding Trust, Series 2005-2, Class A4, 0.56% (LIBOR03M+20bps), 8/25/44, Callable 8/25/20 @ 100 (b) | 452 | 422 | |||||||||
Great American Auto Leasing, Inc., Series 2019-1, Class A3, 3.05%, 9/15/22, Callable 12/15/22 @ 100 (a) | 98 | 99 | |||||||||
Hertz Vehicle Financing II LP, Series 2019-3A, Class A, 2.67%, 12/26/25 (a) | 176 | 166 | |||||||||
HPEFS Equipment Trust, Series 2019-1A, Class C, 2.49%, 9/20/29, Callable 7/20/22 @ 100 (a) | 97 | 95 | |||||||||
HPEFS Equipment Trust, Series 2020-1A, Class B, 1.89%, 2/20/30, Callable 2/20/23 @ 100 (a) | 55 | 54 | |||||||||
John Deere Owner Trust, Series 2020-A, Class A4, 1.21%, 11/16/26, Callable 4/15/23 @ 100 | 215 | 214 |
See notes to financial statements.
9
USAA Mutual Funds Trust USAA Cornerstone Moderately Conservative Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Kubota Credit Owner Trust, Series 2020-1A, Class A4, 2.26%, 7/15/26, Callable 10/15/23 @ 100 (a) | $ | 92 | $ | 93 | |||||||
MMAF Equipment Finance LLC, Series 2017-B, Class A4, 2.41%, 11/15/24, Callable 2/15/28 @ 100 (a) | 215 | 218 | |||||||||
Navient Student Loan Trust, Series 2015-2, Class B, 1.67% (LIBOR01M+150bps), 8/25/50, Callable 10/25/28 @ 100 (b) | 200 | 173 | |||||||||
NP SPE II LLC, Series 2017-1A, Class A1, 3.37%, 10/21/47, Callable 10/20/27 @ 100 (a) | 78 | 76 | |||||||||
OSCAR US Funding Trust IX LLC, Series 2018-2A, Class A4, 3.63%, 9/10/25 (a) | 560 | 574 | |||||||||
SCF Equipment Leasing LLC, Series 2017-2A, Class A, 3.41%, 12/20/23, Callable 6/20/20 @ 100 (a) | 115 | 115 | |||||||||
Synchrony Credit Card Master Note Trust, Series 2018-2, Class A, 3.47%, 5/15/26 | 381 | 400 | |||||||||
Synchrony Credit Card Master Note Trust, Series 2016-2, Class C, 2.95%, 5/15/24 | 320 | 320 | |||||||||
Transportation Finance Equipment Trust, Series 2019-1, Class A4, 1.88%, 3/25/24, Callable 9/23/23 @ 100 (a) | 215 | 210 | |||||||||
Trinity Rail Leasing LLC, Series 2019-2A, Class A1, 2.39%, 10/18/49, Callable 10/17/20 @ 100 (a) | 464 | 445 | |||||||||
Westlake Automobile Receivables Trust, Series 2018-2A, Class D, 4.00%, 1/16/24, Callable 10/15/21 @ 100 (a) | 350 | 353 | |||||||||
Westlake Automobile Receivables Trust, Series 2020-1A, Class B, 1.94%, 4/15/25, Callable 6/15/24 @ 100 (a) | 358 | 359 | |||||||||
Total Asset Backed Securities (Cost $9,549) | 9,510 | ||||||||||
Collateralized Mortgage Obligations (1.3%) | |||||||||||
Banc of America Commercial Mortgage Trust, Series 2008-1, Class AJ, 6.57%, 2/10/51 (c) | 26 | 26 | |||||||||
Banc of America Commercial Mortgage Trust, Series 2006-3, Class AM, 5.66%, 7/10/44 (c) | 155 | 31 | |||||||||
BANK, Series 2019-BNK20, Class A3, 3.01%, 9/15/61 | 250 | 271 | |||||||||
Barclays Commercial Mortgage Trust, Series 2019-C5, Class ASB, 2.99%, 11/15/52 | 167 | 176 | |||||||||
Benchmark Mortgage Trust, Series 2020-B17, Class ASB, 2.18%, 3/15/53 | 143 | 144 | |||||||||
Benchmark Mortgage Trust, Series 2019-B14, Class A5, 3.05%, 12/15/61 | 286 | 310 | |||||||||
BTH Mortgage-Backed Securities Trust, Series 2018-21, Class A, 2.87% (LIBOR01M+250bps), 10/7/21 (a) (b) | 320 | 308 | |||||||||
BX Trust, Series 2019-OC11, Class A, 3.20%, 12/9/41 (a) | 132 | 133 | |||||||||
Citigroup Commercial Mortgage Trust, Series 2020-555, Class A, 2.65%, 12/10/41 (a) | 215 | 207 | |||||||||
Citigroup Commercial Mortgage Trust, Series 2020-GC46, Class AAB, 2.61%, 1/15/53 | 143 | 148 | |||||||||
COMM Mortgage Trust, Series 2019-GC44, Class ASB, 2.87%, 8/15/57 | 215 | 226 | |||||||||
Credit Suisse Commercial Mortgage Trust, Series 2007-C1, Class AMFL, 0.37% (LIBOR01M+19bps), 2/15/40 (b) | 3 | 3 | |||||||||
CSAIL Commercial Mortgage Trust, Series 2016-C6, Class XA, 1.90%, 1/15/49 (c) (d) | 2,447 | 192 | |||||||||
DBJPM Mortgage Trust, Series 2016-SFC, Class A, 2.83%, 8/10/36 (a) | 500 | 452 | |||||||||
GE Commercial Mortgage Corp., Series 2007-C1, Class AM, 5.61%, 12/10/49 (c) | 57 | 40 |
See notes to financial statements.
10
USAA Mutual Funds Trust USAA Cornerstone Moderately Conservative Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares or Principal Amount | Value | |||||||||
GS Mortgage Securities Trust, Series 2020-GC45, Class A5, 2.91%, 2/13/53 | $ | 91 | $ | 97 | |||||||
GS Mortgage Securities Trust, Series 2020-GC45, Class AAB, 2.84%, 2/13/53 | 77 | 81 | |||||||||
UBS Commercial Mortgage Trust, Series 2012-C1, Class XA, 2.07%, 5/10/45 (a) (c) (d) | 2,444 | 69 | |||||||||
Total Collateralized Mortgage Obligations (Cost $3,067) | 2,914 | ||||||||||
Common Stocks (12.5%) | |||||||||||
Communication Services (1.1%): | |||||||||||
Activision Blizzard, Inc. | 1,708 | 123 | |||||||||
Alphabet, Inc. Class C (e) | 272 | 389 | |||||||||
AT&T, Inc. | 6,672 | 206 | |||||||||
Charter Communications, Inc. Class A (e) | 260 | 141 | |||||||||
Comcast Corp. Class A | 5,000 | 198 | |||||||||
DISH Network Corp. Class A (e) | 5,509 | 174 | |||||||||
Electronic Arts, Inc. (e) | 1,017 | 125 | |||||||||
Facebook, Inc. Class A (e) | 1,266 | 285 | |||||||||
Fox Corp. Class A | 5,179 | 151 | |||||||||
Match Group, Inc. (e) (f) | 1,188 | 106 | |||||||||
Sirius XM Holdings, Inc. (f) | 18,553 | 108 | |||||||||
Take-Two Interactive Software, Inc. (e) | 869 | 118 | |||||||||
Verizon Communications, Inc. | 3,567 | 205 | |||||||||
2,329 | |||||||||||
Consumer Discretionary (0.9%): | |||||||||||
AutoZone, Inc. (e) | 107 | 123 | |||||||||
Booking Holdings, Inc. (e) | 88 | 144 | |||||||||
Dollar General Corp. | 695 | 133 | |||||||||
Domino's Pizza, Inc. | 287 | 111 | |||||||||
Lowe's Cos., Inc. | 1,180 | 154 | |||||||||
Lululemon Athletica, Inc. (e) | 512 | 154 | |||||||||
Nike, Inc. Class B | 3,162 | 312 | |||||||||
O'Reilly Automotive, Inc. (e) | 281 | 117 | |||||||||
Target Corp. (g) | 1,100 | 135 | |||||||||
Tesla, Inc. (e) | 179 | 149 | |||||||||
The Home Depot, Inc. | 1,635 | 406 | |||||||||
Yum! Brands, Inc. | 1,326 | 119 | |||||||||
2,057 | |||||||||||
Consumer Staples (0.9%): | |||||||||||
Colgate-Palmolive Co. | 1,769 | 128 | |||||||||
Costco Wholesale Corp. | 487 | 150 | |||||||||
Kimberly-Clark Corp. | 869 | 123 | |||||||||
Philip Morris International, Inc. | 4,171 | 306 | |||||||||
Sysco Corp. | 2,126 | 117 | |||||||||
The Clorox Co. (f) | 1,125 | 232 | |||||||||
The Kroger Co. | 7,553 | 247 | |||||||||
The Procter & Gamble Co. | 3,452 | 400 | |||||||||
Tyson Foods, Inc. Class A | 2,364 | 145 | |||||||||
Walgreens Boots Alliance, Inc. | 3,261 | 140 | |||||||||
1,988 |
See notes to financial statements.
11
USAA Mutual Funds Trust USAA Cornerstone Moderately Conservative Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Energy (0.4%): | |||||||||||
Chevron Corp. | 1,990 | $ | 183 | ||||||||
ConocoPhillips | 6,300 | 266 | |||||||||
Phillips 66 | 3,494 | 273 | |||||||||
Valero Energy Corp. | 1,879 | 125 | |||||||||
847 | |||||||||||
Financials (1.6%): | |||||||||||
AGNC Investment Corp. | 540 | 7 | |||||||||
Annaly Capital Management, Inc. | 1,428 | 9 | |||||||||
Aon PLC Class A | 652 | 128 | |||||||||
Brown & Brown, Inc. | 3,062 | 123 | |||||||||
Capital One Financial Corp. | 2,275 | 155 | |||||||||
Fifth Third Bancorp | 7,635 | 148 | |||||||||
First Republic Bank (f) | 1,123 | 122 | |||||||||
Intercontinental Exchange, Inc. | 1,339 | 130 | |||||||||
JPMorgan Chase & Co. | 2,190 | 213 | |||||||||
MarketAxess Holdings, Inc. (f) | 238 | 121 | |||||||||
MetLife, Inc. | 4,021 | 145 | |||||||||
Morgan Stanley | 3,723 | 165 | |||||||||
MSCI, Inc. | 686 | 226 | |||||||||
Regions Financial Corp. | 13,189 | 149 | |||||||||
S&P Global, Inc. | 878 | 285 | |||||||||
State Street Corp. | 2,323 | 142 | |||||||||
SVB Financial Group (e) (f) | 584 | 125 | |||||||||
Synchrony Financial | 7,371 | 150 | |||||||||
T. Rowe Price Group, Inc. | 1,020 | 123 | |||||||||
The Allstate Corp. | 2,264 | 222 | |||||||||
The Goldman Sachs Group, Inc. | 805 | 158 | |||||||||
The PNC Financial Services Group, Inc. | 1,221 | 139 | |||||||||
The Progressive Corp. | 3,114 | 242 | |||||||||
U.S. Bancorp | 3,555 | 126 | |||||||||
3,553 | |||||||||||
Health Care (2.1%): | |||||||||||
AbbVie, Inc. | 3,605 | 334 | |||||||||
Amgen, Inc. | 1,340 | 308 | |||||||||
Anthem, Inc. | 541 | 159 | |||||||||
Biogen, Inc. (e) | 855 | 263 | |||||||||
Bristol-Myers Squibb Co. | 5,285 | 316 | |||||||||
Cerner Corp. | 1,629 | 119 | |||||||||
Cigna Corp. | 798 | 157 | |||||||||
CVS Health Corp. | 2,477 | 162 | |||||||||
DaVita, Inc. (e) | 1,321 | 107 | |||||||||
DexCom, Inc. (e) | 320 | 121 | |||||||||
Eli Lilly & Co. | 1,888 | 289 | |||||||||
HCA Healthcare, Inc. | 1,337 | 143 | |||||||||
IDEXX Laboratories, Inc. (e) | 388 | 120 | |||||||||
Johnson & Johnson (g) | 3,226 | 480 | |||||||||
Merck & Co., Inc. | 2,146 | 173 | |||||||||
Mettler-Toledo International, Inc. (e) | 151 | 120 |
See notes to financial statements.
12
USAA Mutual Funds Trust USAA Cornerstone Moderately Conservative Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Pfizer, Inc. | 5,011 | $ | 191 | ||||||||
Regeneron Pharmaceuticals, Inc. (e) (f) | 218 | 134 | |||||||||
ResMed, Inc. | 712 | 114 | |||||||||
UnitedHealth Group, Inc. | 1,395 | 425 | |||||||||
Vertex Pharmaceuticals, Inc. (e) | 477 | 137 | |||||||||
Waters Corp. (e) (f) | 573 | 115 | |||||||||
West Pharmaceutical Services, Inc. | 564 | 122 | |||||||||
4,609 | |||||||||||
Industrials (1.1%): | |||||||||||
3M Co. | 884 | 138 | |||||||||
Carrier Global Corp. (e) | 14,688 | 301 | |||||||||
Cummins, Inc. | 856 | 145 | |||||||||
Eaton Corp. PLC | 1,688 | 143 | |||||||||
FedEx Corp. | 1,159 | 151 | |||||||||
General Dynamics Corp. | 1,100 | 161 | |||||||||
IHS Markit Ltd. | 1,754 | 122 | |||||||||
Illinois Tool Works, Inc. | 747 | 129 | |||||||||
Lockheed Martin Corp. | 715 | 278 | |||||||||
Northrop Grumman Corp. | 381 | 128 | |||||||||
Old Dominion Freight Line, Inc. | 729 | 125 | |||||||||
Otis Worldwide Corp. | 2,247 | 118 | |||||||||
Rockwell Automation, Inc. | 577 | 125 | |||||||||
Teledyne Technologies, Inc. (e) | 347 | 130 | |||||||||
Verisk Analytics, Inc. | 736 | 127 | |||||||||
WW Grainger, Inc. | 379 | 117 | |||||||||
2,438 | |||||||||||
Information Technology (2.9%): | |||||||||||
Accenture PLC Class A | 771 | 155 | |||||||||
Adobe, Inc. (e) | 887 | 343 | |||||||||
Apple, Inc. | 5,405 | 1,718 | |||||||||
Applied Materials, Inc. | 2,759 | 155 | |||||||||
Broadcom, Inc. | 598 | 174 | |||||||||
CDW Corp. (f) | 1,003 | 111 | |||||||||
Cisco Systems, Inc. | 4,388 | 210 | |||||||||
Citrix Systems, Inc. | 762 | 113 | |||||||||
Cognizant Technology Solutions Corp. Class A | 2,334 | 124 | |||||||||
DocuSign, Inc. (e) | 955 | 133 | |||||||||
HP, Inc. | 16,403 | 248 | |||||||||
Intel Corp. | 3,502 | 220 | |||||||||
Intuit, Inc. | 454 | 132 | |||||||||
KLA Corp. | 700 | 123 | |||||||||
Lam Research Corp. | 1,501 | 411 | |||||||||
Leidos Holdings, Inc. | 1,138 | 120 | |||||||||
Mastercard, Inc. Class A | 665 | 200 | |||||||||
Micron Technology, Inc. (e) | 3,054 | 146 | |||||||||
Microsoft Corp. (g) | 2,919 | 535 | |||||||||
NVIDIA Corp. | 1,075 | 382 | |||||||||
Oracle Corp. | 3,137 | 169 | |||||||||
Seagate Technology PLC | 2,691 | 143 |
See notes to financial statements.
13
USAA Mutual Funds Trust USAA Cornerstone Moderately Conservative Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Texas Instruments, Inc. | 1,210 | $ | 144 | ||||||||
VeriSign, Inc. (e) | 515 | 113 | |||||||||
VMware, Inc. Class A (e) (f) | 1,006 | 157 | |||||||||
6,479 | |||||||||||
Materials (0.7%): | |||||||||||
Air Products & Chemicals, Inc. | 547 | 132 | |||||||||
Hycroft Mining Corp. (e) (h) (i) | 562,587 | 794 | |||||||||
Linde PLC | 768 | 156 | |||||||||
LyondellBasell Industries NV Class A | 4,518 | 288 | |||||||||
Newmont Corp. | 1,968 | 115 | |||||||||
The Sherwin-Williams Co. | 222 | 132 | |||||||||
1,617 | |||||||||||
Real Estate (0.4%): | |||||||||||
Alexandria Real Estate Equities, Inc. | 115 | 18 | |||||||||
American Tower Corp. | 442 | 114 | |||||||||
AvalonBay Communities, Inc. | 139 | 22 | |||||||||
Boston Properties, Inc. | 154 | 13 | |||||||||
Camden Property Trust | 97 | 9 | |||||||||
CBRE Group, Inc. Class A (e) | 317 | 14 | |||||||||
Crown Castle International Corp. | 415 | 71 | |||||||||
Digital Realty Trust, Inc. | 262 | 38 | |||||||||
Duke Realty Corp. | 367 | 13 | |||||||||
Equinix, Inc. | 85 | 59 | |||||||||
Equity LifeStyle Properties, Inc. (f) | 173 | 11 | |||||||||
Equity Residential | 371 | 22 | |||||||||
Essex Property Trust, Inc. | 66 | 16 | |||||||||
Extra Space Storage, Inc. | 129 | 13 | |||||||||
Federal Realty Investment Trust (f) | 75 | 6 | |||||||||
Healthpeak Properties, Inc. | 494 | 12 | |||||||||
Host Hotels & Resorts, Inc. (f) | 716 | 9 | |||||||||
Invitation Homes, Inc. | 537 | 14 | |||||||||
Iron Mountain, Inc. (f) | 287 | 7 | |||||||||
Jones Lang LaSalle, Inc. | 51 | 5 | |||||||||
Kimco Realty Corp. | 421 | 5 | |||||||||
Medical Properties Trust, Inc. | 517 | 9 | |||||||||
Mid-America Apartment Communities, Inc. | 114 | 13 | |||||||||
National Retail Properties, Inc. | 171 | 5 | |||||||||
Omega Healthcare Investors, Inc. | 218 | 7 | |||||||||
Prologis, Inc. | 736 | 67 | |||||||||
Public Storage (f) | 157 | 32 | |||||||||
Realty Income Corp. | 325 | 18 | |||||||||
Regency Centers Corp. | 167 | 7 | |||||||||
SBA Communications Corp. | 112 | 35 | |||||||||
Simon Property Group, Inc. | 306 | 18 | |||||||||
SL Green Realty Corp. | 80 | 3 | |||||||||
Sun Communities, Inc. | 92 | 13 | |||||||||
UDR, Inc. | 293 | 11 | |||||||||
Ventas, Inc. | 372 | 13 | |||||||||
VEREIT, Inc. | 1,066 | 6 |
See notes to financial statements.
14
USAA Mutual Funds Trust USAA Cornerstone Moderately Conservative Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares or Principal Amount | Value | |||||||||
VICI Properties, Inc. | 460 | $ | 9 | ||||||||
Vornado Realty Trust (f) | 171 | 6 | |||||||||
Welltower, Inc. | 405 | 21 | |||||||||
Weyerhaeuser Co. | 744 | 15 | |||||||||
WP Carey, Inc. | 172 | 10 | |||||||||
809 | |||||||||||
Utilities (0.4%): | |||||||||||
Duke Energy Corp. (g) | 1,788 | 153 | |||||||||
Eversource Energy (g) | 1,499 | 126 | |||||||||
Exelon Corp. | 3,918 | 150 | |||||||||
NextEra Energy, Inc. (g) | 635 | 162 | |||||||||
The Southern Co. (g) | 2,321 | 133 | |||||||||
WEC Energy Group, Inc. (f) (g) | 1,354 | 124 | |||||||||
848 | |||||||||||
Total Common Stocks (Cost $26,341) | 27,574 | ||||||||||
Preferred Stocks (1.1%) | |||||||||||
Communication Services (0.2%): | |||||||||||
Qwest Corp., 6.50%, 9/1/56 | 20,000 | 469 | |||||||||
Consumer Staples (0.6%): | |||||||||||
CHS, Inc., cumulative redeemable, Series 1, 7.88% (j) | 32,000 | 887 | |||||||||
Dairy Farmers of America, Inc., cumulative redeemable, 7.88% (a) (j) | 5,000 | 430 | |||||||||
1,317 | |||||||||||
Financials (0.3%): | |||||||||||
Delphi Financial Group, Inc., 3.58% (LIBOR03M+319bps), 5/15/37 (b) (h) | 27,414 | 603 | |||||||||
Total Preferred Stocks (Cost $2,517) | 2,389 | ||||||||||
Senior Secured Loans (0.2%) | |||||||||||
Academy Ltd., 1st Lien Term Loan B, 5.00% (LIBOR01M+400bps), 7/2/22 (b) | $ | 580 | 432 | ||||||||
Total Senior Secured Loans (Cost $510) | 432 | ||||||||||
Corporate Bonds (15.5%) | |||||||||||
Communication Services (0.6%): | |||||||||||
AT&T, Inc., 2.30%, 6/1/27, Callable 4/1/27 @ 100 | 211 | 214 | |||||||||
Fox Corp., 3.05%, 4/7/25, Callable 3/7/25 @ 100 | 102 | 109 | |||||||||
The Walt Disney Co., 2.20%, 1/13/28 | 94 | 98 | |||||||||
T-Mobile USA, Inc., 3.88%, 4/15/30, Callable 1/15/30 @ 100 (a) (g) | 257 | 279 | |||||||||
Verizon Communications, Inc., 4.50%, 8/10/33 | 430 | 532 | |||||||||
1,232 | |||||||||||
Consumer Discretionary (0.4%): | |||||||||||
AutoNation, Inc., 4.75%, 6/1/30, Callable 3/1/30 @ 100 | 85 | 89 | |||||||||
eBay, Inc., 1.90%, 3/11/25, Callable 2/11/25 @ 100 | 251 | 254 | |||||||||
General Motors Co., 6.80%, 10/1/27, Callable 8/1/27 @ 100 (f) | 88 | 100 |
See notes to financial statements.
15
USAA Mutual Funds Trust USAA Cornerstone Moderately Conservative Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Hasbro, Inc., 3.55%, 11/19/26, Callable 9/19/26 @ 100 | $ | 172 | $ | 177 | |||||||
Nordstrom, Inc., 4.38%, 4/1/30, Callable 1/1/30 @ 100 | 143 | 105 | |||||||||
VF Corp., 2.95%, 4/23/30, Callable 1/23/30 @ 100 | 106 | 111 | |||||||||
836 | |||||||||||
Consumer Staples (1.2%): | |||||||||||
Altria Group, Inc., 3.40%, 5/6/30, Callable 2/6/30 @ 100 (f) | 101 | 106 | |||||||||
Anheuser-Busch Cos. LLC/Anheuser-Busch InBev Worldwide, Inc., 4.70%, 2/1/36, Callable 8/1/35 @ 100 | 358 | 406 | |||||||||
BAT Capital Corp., 2.79%, 9/6/24, Callable 8/6/24 @ 100 | 300 | 312 | |||||||||
Kraft Heinz Foods Co., 3.75%, 4/1/30, Callable 1/1/30 @ 100 (a) | 161 | 167 | |||||||||
McCormick & Co., Inc., 2.50%, 4/15/30, Callable 1/15/30 @ 100 | 62 | 65 | |||||||||
PepsiCo, Inc., 2.25%, 3/19/25, Callable 2/19/25 @ 100 | 332 | 355 | |||||||||
Sysco Corp., 5.95%, 4/1/30, Callable 1/1/30 @ 100 | 83 | 100 | |||||||||
The Coca-Cola Co., 3.45%, 3/25/30 | 500 | 581 | |||||||||
The Procter & Gamble Co., 3.00%, 3/25/30 | 142 | 163 | |||||||||
Unilever Capital Corp., 2.60%, 5/5/24, Callable 3/5/24 @ 100 | 350 | 375 | |||||||||
2,630 | |||||||||||
Energy (2.2%): | |||||||||||
Cameron LNG LLC, 3.30%, 1/15/35, Callable 9/15/34 @ 100 (a) | 273 | 292 | |||||||||
Cheniere Corpus Christi Holdings LLC, 3.70%, 11/15/29, Callable 5/18/29 @ 100 (a) | 358 | 356 | |||||||||
Diamondback Energy, Inc., 3.25%, 12/1/26, Callable 10/1/26 @ 100 | 215 | 209 | |||||||||
Enable Midstream Partners LP, 4.15%, 9/15/29, Callable 6/15/29 @ 100 | 350 | 285 | |||||||||
Enbridge Energy Partners LP, 7.38%, 10/15/45, Callable 4/15/45 @ 100 (g) | 650 | 893 | |||||||||
Energy Transfer Operating LP, 3.75%, 5/15/30, Callable 2/15/30 @ 100 | 215 | 212 | |||||||||
Enterprise Products Operating LLC, 2.80%, 1/31/30, Callable 10/31/29 @ 100 | 215 | 224 | |||||||||
EOG Resources, Inc., 4.38%, 4/15/30, Callable 1/15/30 @ 100 | 65 | 77 | |||||||||
EQM Midstream Partners LP, 4.75%, 7/15/23, Callable 6/15/23 @ 100 (g) | 700 | 692 | |||||||||
EQT Corp., 7.00%, 2/1/30, Callable 11/1/29 @ 100 | 145 | 154 | |||||||||
Exxon Mobil Corp., 2.99%, 3/19/25, Callable 2/19/25 @ 100 (g) | 357 | 390 | |||||||||
Marathon Petroleum Corp., 4.70%, 5/1/25, Callable 4/1/25 @ 100 | 99 | 110 | |||||||||
National Oilwell Varco, Inc., 3.60%, 12/1/29, Callable 9/1/29 @ 100 | 286 | 267 | |||||||||
Occidental Petroleum Corp., 4.40%, 8/15/49, Callable 2/15/49 @ 100 | 143 | 85 | |||||||||
ONEOK, Inc., 6.35%, 1/15/31, Callable 10/15/30 @ 100 | 176 | 199 | |||||||||
Rockies Express Pipeline LLC, 4.80%, 5/15/30, Callable 2/15/30 @ 100 (a) | 143 | 133 | |||||||||
Sabine Pass Liquefaction LLC, 4.50%, 5/15/30, Callable 11/15/29 @ 100 (a) | 22 | 24 | |||||||||
Targa Resources Partners LP/Targa Resources Partners Finance Corp., 5.50%, 3/1/30, Callable 3/1/25 @ 102.75 (a) | 143 | 143 | |||||||||
Western Midstream Operating LP, 3.10%, 2/1/25, Callable 1/1/25 @ 100 | 151 | 140 | |||||||||
4,885 | |||||||||||
Financials (5.1%): | |||||||||||
Amcor Finance USA, Inc., 3.63%, 4/28/26, Callable 1/28/26 @ 100 | 250 | 267 | |||||||||
AmTrust Financial Services, Inc., 6.13%, 8/15/23 | 332 | 312 | |||||||||
Ares Capital Corp., 3.63%, 1/19/22, Callable 12/19/21 @ 100 (g) | 350 | 347 | |||||||||
BancorpSouth Bank, 4.13% (LIBOR03M+247bps), 11/20/29, Callable 11/20/24 @ 100 (b) | 184 | 180 | |||||||||
BBVA USA, 3.88%, 4/10/25, Callable 3/10/25 @ 100 | 100 | 102 |
See notes to financial statements.
16
USAA Mutual Funds Trust USAA Cornerstone Moderately Conservative Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
BMW U.S. Capital LLC, 3.25%, 8/14/20 (a) (g) | $ | 700 | $ | 701 | |||||||
Capital One NA, 2.15%, 9/6/22, Callable 8/6/22 @ 100 | 350 | 354 | |||||||||
Citizens Financial Group, Inc., 2.50%, 2/6/30, Callable 11/6/29 @ 100 | 215 | 208 | |||||||||
Cullen/Frost Capital Trust II, 3.13% (LIBOR03M+155bps), 3/1/34, Callable 7/6/20 @ 100 (b) | 1,000 | 799 | |||||||||
First Horizon Bank, 5.75%, 5/1/30, Callable 2/1/30 @ 100 | 106 | 107 | |||||||||
First Maryland Capital I, 2.22% (LIBOR03M+100bps), 1/15/27, Callable 7/6/20 @ 100 (b) | 100 | 85 | |||||||||
Ford Motor Credit Co. LLC, 4.06%, 11/1/24, Callable 10/1/24 @ 100 | 500 | 472 | |||||||||
Global Atlantic Financial Co., 4.40%, 10/15/29, Callable 7/15/29 @ 100 (a) | 184 | 168 | |||||||||
HSB Group, Inc., 2.13% (LIBOR03M+91bps), 7/15/27, Callable 7/6/20 @ 100 (b) | 550 | 490 | |||||||||
Hyundai Capital America, 3.75%, 7/8/21 (a) (g) | 700 | 706 | |||||||||
JPMorgan Chase & Co., 2.52% (SOFR+204bps), 4/22/31, Callable 4/22/30 @ 100 (b) | 124 | 127 | |||||||||
KeyCorp, 2.25%, 4/6/27, MTN | 215 | 215 | |||||||||
Level 3 Financing, Inc., 3.88%, 11/15/29, Callable 8/15/29 @ 100 (a) | 287 | 294 | |||||||||
Loews Corp., 3.20%, 5/15/30, Callable 2/15/30 @ 100 | 140 | 148 | |||||||||
Nationwide Mutual Insurance Co., 3.03% (LIBOR03M+229bps), 12/15/24, Callable 7/6/20 @ 100 (a) (b) | 1,100 | 1,083 | |||||||||
PNC Bank NA, 2.70%, 10/22/29 | 1,000 | 1,053 | |||||||||
PPL Capital Funding, Inc., 4.13%, 4/15/30, Callable 1/15/30 @ 100 | 141 | 159 | |||||||||
Prudential Financial, Inc., 5.62% (LIBOR03M+392bps), 6/15/43, Callable 6/15/23 @ 100 (b) | 600 | 622 | |||||||||
Regions Financial Corp., 2.25%, 5/18/25, Callable 4/18/25 @ 100 | 158 | 161 | |||||||||
Santander Holdings USA, Inc., 3.45%, 6/2/25, Callable 5/2/25 @ 100 (k) | 88 | 89 | |||||||||
Signature Bank, 4.13% (LIBOR03M+256bps), 11/1/29, Callable 11/1/24 @ 100 (b) | 250 | 249 | |||||||||
SunTrust Capital, 1.06% (LIBOR03M+67bps), 5/15/27, Callable 7/6/20 @ 100 (b) | 1,000 | 830 | |||||||||
Texas Capital Bank NA, 5.25%, 1/31/26 | 143 | 154 | |||||||||
The Allstate Corp., 5.75% (LIBOR03M+294bps), 8/15/53, Callable 8/15/23 @ 100 (b) | 140 | 143 | |||||||||
The PNC Financial Services Group, Inc., 2.55%, 1/22/30, Callable 10/24/29 @ 100 | 250 | 267 | |||||||||
The Progressive Corp., 3.20%, 3/26/30, Callable 12/26/29 @ 100 (f) | 43 | 48 | |||||||||
Wells Fargo & Co., 2.19% (SOFR+200bps), 4/30/26, Callable 4/30/25 @ 100 (b) | 159 | 161 | |||||||||
Zions Bancorp NA, 3.25%, 10/29/29, Callable 7/29/29 @ 100 | 286 | 268 | |||||||||
11,369 | |||||||||||
Health Care (1.0%): | |||||||||||
AbbVie, Inc., 3.20%, 11/21/29, Callable 8/21/29 @ 100 (a) (g) | 287 | 310 | |||||||||
Biogen, Inc., 2.25%, 5/1/30, Callable 2/1/30 @ 100 | 248 | 252 | |||||||||
CVS Health Corp., 3.25%, 8/15/29, Callable 5/15/29 @ 100 (g) | 534 | 577 | |||||||||
DENTSPLY SIRONA, Inc., 3.25%, 6/1/30, Callable 3/1/30 @ 100 | 158 | 162 | |||||||||
Duke University Health System, Inc., 2.60%, 6/1/30 | 105 | 113 | |||||||||
HCA, Inc., 5.13%, 6/15/39, Callable 12/15/38 @ 100 | 358 | 411 | |||||||||
Laboratory Corp. of America Holdings, 2.95%, 12/1/29, Callable 9/1/29 @ 100 | 215 | 226 | |||||||||
Thermo Fisher Scientific, Inc., 4.13%, 3/25/25, Callable 2/25/25 @ 100 | 142 | 162 | |||||||||
2,213 |
See notes to financial statements.
17
USAA Mutual Funds Trust USAA Cornerstone Moderately Conservative Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Industrials (1.7%): | |||||||||||
Ashtead Capital, Inc. | |||||||||||
4.00%, 5/1/28, Callable 5/1/23 @ 102 (a) | $ | 51 | $ | 50 | |||||||
4.25%, 11/1/29, Callable 11/1/24 @ 102.13 (a) | 38 | 37 | |||||||||
Carlisle Cos., Inc., 2.75%, 3/1/30, Callable 12/1/29 @ 100 | 215 | 212 | |||||||||
Carrier Global Corp., 3.38%, 4/5/40, Callable 10/5/39 @ 100 (a) | 107 | 95 | |||||||||
Caterpillar, Inc., 2.60%, 4/9/30, Callable 1/9/30 @ 100 | 106 | 115 | |||||||||
Dover Corp., 2.95%, 11/4/29, Callable 8/4/29 @ 100 | 215 | 226 | |||||||||
Ferguson Finance PLC, 3.25%, 6/2/30, Callable 3/2/30 @ 100 (a) | 95 | 96 | |||||||||
GATX Corp., 4.00%, 6/30/30, Callable 3/30/30 @ 100 | 68 | 70 | |||||||||
General Dynamics Corp., 3.50%, 4/1/27, Callable 2/1/27 @ 100 | 142 | 160 | |||||||||
Georgia-Pacific LLC, 2.10%, 4/30/27, Callable 2/28/27 @ 100 (a) | 248 | 252 | |||||||||
IDEX Corp., 3.00%, 5/1/30, Callable 2/1/30 @ 100 | 248 | 255 | |||||||||
Otis Worldwide Corp., 3.11%, 2/15/40, Callable 8/15/39 @ 100 (a) | 143 | 140 | |||||||||
Penske Truck Leasing Co. LP/PTL Finance Corp., 4.00%, 7/15/25, Callable 6/15/25 @ 100 (a) | 141 | 151 | |||||||||
Ryder System, Inc. 3.50%, 6/1/21, MTN (g) | 700 | 709 | |||||||||
2.90%, 12/1/26, Callable 10/1/26 @ 100, MTN | 358 | 359 | |||||||||
The Boeing Co., 5.71%, 5/1/40, Callable 11/1/39 @ 100 | 212 | 233 | |||||||||
The Conservation Fund A Nonprofit Corp., 3.47%, 12/15/29, Callable 9/15/29 @ 100 | 325 | 345 | |||||||||
United Airlines Pass Through Trust, 2.90%, 11/1/29 | 300 | 207 | |||||||||
3,712 | |||||||||||
Information Technology (0.9%): | |||||||||||
Amphenol Corp., 2.80%, 2/15/30, Callable 11/15/29 @ 100 | 300 | 314 | |||||||||
Analog Devices, Inc., 2.95%, 4/1/25, Callable 3/1/25 @ 100 | 53 | 56 | |||||||||
Broadcom, Inc., 4.30%, 11/15/32, Callable 8/15/32 @ 100 (a) | 88 | 93 | |||||||||
Hewlett Packard Enterprise Co., 4.65%, 10/1/24, Callable 9/1/24 @ 100 | 141 | 155 | |||||||||
Intel Corp., 3.90%, 3/25/30, Callable 12/25/29 @ 100 | 500 | 600 | |||||||||
Keysight Technologies, Inc., 3.00%, 10/30/29, Callable 7/30/29 @ 100 | 263 | 275 | |||||||||
Microsoft Corp., 3.45%, 8/8/36, Callable 2/8/36 @ 100 | 466 | 549 | |||||||||
2,042 | |||||||||||
Materials (0.5%): | |||||||||||
Avery Dennison Corp., 2.65%, 4/30/30, Callable 2/1/30 @ 100 | 86 | 86 | |||||||||
Colonial Enterprises, Inc., 3.25%, 5/15/30, Callable 2/15/30 @ 100 (a) | 44 | 46 | |||||||||
Ecolab, Inc., 4.80%, 3/24/30, Callable 12/24/29 @ 100 | 83 | 104 | |||||||||
LYB International Finance III LLC, 3.38%, 5/1/30, Callable 2/1/30 @ 100 | 124 | 128 | |||||||||
Packaging Corp. of America, 3.00%, 12/15/29, Callable 9/15/29 @ 100 | 358 | 377 | |||||||||
Sonoco Products Co., 3.13%, 5/1/30, Callable 2/1/30 @ 100 | 164 | 166 | |||||||||
Vulcan Materials Co., 3.50%, 6/1/30, Callable 3/1/30 @ 100 | 141 | 147 | |||||||||
1,054 | |||||||||||
Real Estate (0.5%): | |||||||||||
AvalonBay Communities, Inc., 2.45%, 1/15/31, MTN, Callable 10/15/30 @ 100 | 211 | 217 | |||||||||
Boston Properties LP, 3.25%, 1/30/31, Callable 10/30/30 @ 100 | 93 | 98 |
See notes to financial statements.
18
USAA Mutual Funds Trust USAA Cornerstone Moderately Conservative Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Essex Portfolio LP, 2.65%, 3/15/32, Callable 12/15/31 @ 100 | $ | 250 | $ | 248 | |||||||
Mid-America Apartments LP, 2.75%, 3/15/30, Callable 12/15/29 @ 100 | 358 | 360 | |||||||||
SBA Tower Trust, 2.84%, 1/15/25 (a) | 173 | 175 | |||||||||
VICI Properties LP/VICI Note Co., Inc., 4.63%, 12/1/29, Callable 12/1/24 @ 102.31 (a) | 33 | 33 | |||||||||
1,131 | |||||||||||
Utilities (1.4%): | |||||||||||
AEP Texas, Inc., 3.45%, 1/15/50, Callable 7/15/49 @ 100 | 251 | 268 | |||||||||
Alabama Power Co., 3.85%, 12/1/42 | 215 | 244 | |||||||||
Ameren Corp., 3.50%, 1/15/31, Callable 10/15/30 @ 100 | 71 | 79 | |||||||||
Cleco Corporate Holdings LLC, 3.38%, 9/15/29, Callable 6/11/29 @ 100 (a) | 367 | 372 | |||||||||
DTE Electric Co., 2.25%, 3/1/30, Callable 12/1/29 @ 100 | 215 | 223 | |||||||||
Duke Energy Florida LLC, 3.85%, 11/15/42, Callable 5/15/42 @ 100 | 215 | 249 | |||||||||
Exelon Generation Co. LLC, 3.25%, 6/1/25, Callable 5/1/25 @ 100 | 158 | 164 | |||||||||
IPALCO Enterprises, Inc., 4.25%, 5/1/30, Callable 2/1/30 @ 100 (a) | 161 | 170 | |||||||||
ITC Holdings Corp., 2.95%, 5/14/30, Callable 2/14/30 @ 100 (a) | 158 | 166 | |||||||||
National Fuel Gas Co., 5.50%, 1/15/26, Callable 12/15/25 @ 100 (k) | 211 | 214 | |||||||||
NextEra Energy Capital Holdings, Inc., 3.34%, 9/1/20 | 467 | 470 | |||||||||
The Narragansett Electric Co., 3.40%, 4/9/30, Callable 1/9/30 @ 100 (a) | 106 | 118 | |||||||||
Union Electric Co., 2.95%, 3/15/30, Callable 12/15/29 @ 100 | 357 | 393 | |||||||||
3,130 | |||||||||||
Total Corporate Bonds (Cost $33,314) | 34,234 | ||||||||||
Yankee Dollar (2.0%) | |||||||||||
Consumer Staples (0.1%): | |||||||||||
Alimentation Couche-Tard, Inc., 2.95%, 1/25/30, Callable 10/25/29 @ 100 (a) | 143 | 145 | |||||||||
Energy (0.0%) (l): | |||||||||||
Petroleos Mexicanos, 6.49%, 1/23/27, Callable 11/23/26 @ 100 (a) | 123 | 109 | |||||||||
Petronas Capital Ltd., 3.50%, 4/21/30, Callable 1/21/30 @ 100 (a) | 11 | 12 | |||||||||
121 | |||||||||||
Financials (1.4%): | |||||||||||
Athene Holding Ltd., 4.13%, 1/12/28, Callable 10/12/27 @ 100 | 700 | 686 | |||||||||
Banco Santander Mexico SA Institucion de Banca Multiple Grupo Financiero Santand, 5.38%, 4/17/25 (a) | 101 | 108 | |||||||||
Barclays PLC, 2.85% (LIBOR03M+245bps), 5/7/26, Callable 5/7/25 @ 100 (b) | 212 | 217 | |||||||||
Deutsche Bank AG, 3.96% (SOFR+258bps), 11/26/25, Callable 11/26/24 @ 100 (b) | 215 | 221 | |||||||||
Diageo Capital PLC, 2.13%, 4/29/32, Callable 1/29/32 @ 100 | 248 | 252 | |||||||||
QBE Capital Funding III Ltd., 7.25% (USSW10+405bps), 5/24/41, Callable 5/24/21 @ 100 (a) (b) | 250 | 259 | |||||||||
Royal Bank of Canada, 1.60%, 4/17/23, MTN | 248 | 253 | |||||||||
Sumitomo Mitsui Financial Group, Inc., 2.45%, 9/27/24 | 1,000 | 1,035 | |||||||||
3,031 |
See notes to financial statements.
19
USAA Mutual Funds Trust USAA Cornerstone Moderately Conservative Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Industrials (0.2%): | |||||||||||
CK Hutchison International 19 II Ltd., 2.75%, 9/6/29, Callable 6/6/29 @ 100 (a) | $ | 300 | $ | 312 | |||||||
Heathrow Funding Ltd., 4.88%, 7/15/21 (a) | 142 | 145 | |||||||||
457 | |||||||||||
Materials (0.3%): | |||||||||||
Anglo American Capital PLC, 5.63%, 4/1/30, Callable 1/1/30 @ 100 (a) | 133 | 153 | |||||||||
Braskem Netherlands Finance BV, 4.50%, 1/31/30 (a) | 214 | 188 | |||||||||
CCL Industries, Inc., 3.05%, 6/1/30, Callable 3/1/30 @ 100 (a) (k) | 159 | 160 | |||||||||
Teck Resources Ltd., 6.13%, 10/1/35 | 230 | 240 | |||||||||
741 | |||||||||||
Total Yankee Dollar (Cost $4,402) | 4,495 | ||||||||||
Municipal Bonds (1.2%) | |||||||||||
Florida (0.1%): | |||||||||||
County of Broward Florida Airport System Revenue, Series C, 2.50%, 10/1/28 | 143 | 139 | |||||||||
Hillsborough County School Board Certificate of Participation, Series B, 1.92%, 7/1/25 | 90 | 91 | |||||||||
230 | |||||||||||
Georgia (0.2%): | |||||||||||
Athens Housing Authority Revenue, 2.42%, 12/1/26 | 305 | 316 | |||||||||
Michigan (0.1%): | |||||||||||
Michigan Finance Authority Revenue, 3.08%, 12/1/34 | 215 | 230 | |||||||||
New Jersey (0.1%): | |||||||||||
New Jersey Economic Development Authority Revenue, Series NNN, 2.88%, 6/15/24 | 138 | 131 | |||||||||
New Jersey Transportation Trust Fund Authority Revenue, 4.08%, 6/15/39 | 55 | 45 | |||||||||
North Hudson Sewerage Authority Revenue, 2.88%, 6/1/28 | 72 | 75 | |||||||||
251 | |||||||||||
New York (0.2%): | |||||||||||
New York State Dormitory Authority Revenue, Series B, 2.83%, 7/1/31 | 360 | 363 | |||||||||
New York State Thruway Authority Revenue, Series M, 2.55%, 1/1/28 | 83 | 82 | |||||||||
445 | |||||||||||
Pennsylvania (0.2%): | |||||||||||
State Public School Building Authority Revenue, 3.05%, 4/1/28 | 143 | 143 | |||||||||
University of Pittsburgh-of The Commonwealth System of Higher Education Revenue Series C, 2.53%, 9/15/31 | 145 | 144 | |||||||||
Series C, 2.58%, 9/15/32 | 70 | 69 | |||||||||
Series C, 2.63%, 9/15/33 | 145 | 143 | |||||||||
499 |
See notes to financial statements.
20
USAA Mutual Funds Trust USAA Cornerstone Moderately Conservative Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares or Principal Amount | Value | |||||||||
Texas (0.3%): | |||||||||||
City of Houston Texas Combined Utility System Revenue, 3.72%, 11/15/28 | $ | 180 | $ | 202 | |||||||
Harris County Cultural Education Facilities Finance Corp. Revenue, Series B, 2.81%, 5/15/29 | 145 | 147 | |||||||||
State of Texas, GO, 3.00%, 4/1/28 | 215 | 235 | |||||||||
584 | |||||||||||
Total Municipal Bonds (Cost $2,529) | 2,555 | ||||||||||
U.S. Government Agency Mortgages (7.1%) | |||||||||||
Federal Home Loan Mortgage Corporation Series K047, Class A2, 3.33%, 5/25/25 (c) | 1,100 | 1,222 | |||||||||
3.00%, 4/1/46-3/1/47 | 9,394 | 9,938 | |||||||||
3.50%, 4/1/46-4/1/48 | 4,026 | 4,280 | |||||||||
15,440 | |||||||||||
Federal National Mortgage Association Series 2016-M2, Class AV2, 2.15%, 1/25/23 | 307 | 314 | |||||||||
Total U.S. Government Agency Mortgages (Cost $15,027) | 15,754 | ||||||||||
U.S. Treasury Obligations (15.0%) | |||||||||||
U.S. Treasury Bonds 3.13%, 8/15/44 | 700 | 955 | |||||||||
3.00%, 8/15/48 (g) | 1,000 | 1,376 | |||||||||
2.38%, 11/15/49 | 1,000 | 1,237 | |||||||||
U.S. Treasury Notes 2.50%, 1/31/21 (g) | 1,000 | 1,015 | |||||||||
1.13%, 2/28/21 | 6,802 | 6,849 | |||||||||
1.63%, 11/15/22 | 3,000 | 3,106 | |||||||||
2.00%, 2/15/23 | 618 | 648 | |||||||||
1.63%, 4/30/23 | 3,800 | 3,958 | |||||||||
2.50%, 5/15/24 | 1,500 | 1,633 | |||||||||
2.25%, 11/15/25 | 6,200 | 6,831 | |||||||||
1.63%, 2/15/26 | 2,000 | 2,139 | |||||||||
2.25%, 2/15/27 | 1,000 | 1,117 | |||||||||
2.38%, 5/15/27 (g) | 2,000 | 2,259 | |||||||||
Total U.S. Treasury Obligations (Cost $30,601) | 33,123 | ||||||||||
Exchange-Traded Funds (37.3%) | |||||||||||
Invesco DB Commodity Index Tracking Fund (f) | 22,900 | 270 | |||||||||
Invesco FTSE RAFI Developed Markets ex-US ETF | 45,661 | 1,533 | |||||||||
Invesco FTSE RAFI Emerging Markets ETF | 99,400 | 1,676 | |||||||||
iShares 20+ Year Treasury Bond ETF (f) | 9,209 | 1,507 | |||||||||
iShares Core MSCI EAFE ETF | 23,138 | 1,296 | |||||||||
iShares Core MSCI Emerging Markets ETF | 89,931 | 4,050 | |||||||||
iShares Core S&P 500 ETF | 23,548 | 7,186 | |||||||||
iShares Core S&P Small-Cap ETF | 16,001 | 1,058 | |||||||||
iShares Core US Aggregate Bond ETF | 34,421 | 4,050 | |||||||||
iShares iBoxx $ Investment Grade Corporate Bond ETF | 36,126 | 4,769 |
See notes to financial statements.
21
USAA Mutual Funds Trust USAA Cornerstone Moderately Conservative Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
iShares iBoxx High Yield Corporate Bond ETF (f) | 26,291 | $ | 2,167 | ||||||||
iShares MSCI Canada ETF | 43,295 | 1,088 | |||||||||
iShares MSCI United Kingdom ETF (f) | 9,052 | 233 | |||||||||
Schwab Fundamental Emerging Markets Large Co. Index ETF | 160,268 | 3,622 | |||||||||
Schwab Fundamental International Large Co. Index ETF | 237,343 | 5,497 | |||||||||
Schwab Fundamental International Small Co. Index ETF | 50,100 | 1,369 | |||||||||
SPDR Bloomberg Barclays High Yield Bond ETF | 22,098 | 2,254 | |||||||||
SPDR Gold Shares | 15,510 | 2,527 | |||||||||
SPDR S&P Emerging Markets Smallcap ETF | 7,496 | 285 | |||||||||
U.S. Commodity Index Fund | 5,900 | 157 | |||||||||
VanEck Vectors Gold Miners ETF | 12,715 | 436 | |||||||||
VanEck Vectors Junior Gold Miners ETF | 4,503 | 208 | |||||||||
Vanguard FTSE All-World ex-US ETF | 25,377 | 1,164 | |||||||||
Vanguard FTSE Developed Markets ETF | 287,668 | 10,836 | |||||||||
Vanguard FTSE Europe ETF | 129,488 | 6,314 | |||||||||
Vanguard Mortgage-Backed Securities ETF | 42,318 | 2,308 | |||||||||
Vanguard Real Estate ETF (f) | 12,000 | 929 | |||||||||
Vanguard S&P 500 ETF (g) | 3,106 | 869 | |||||||||
Vanguard Short-Term Bond ETF | 30,480 | 2,530 | |||||||||
Vanguard Small-Cap Value ETF (f) | 27,400 | 2,884 | |||||||||
Vanguard Total Bond Market ETF | 44,684 | 3,929 | |||||||||
Vanguard Total Stock Market ETF (g) | 5,695 | 875 | |||||||||
WisdomTree Emerging Markets SmallCap Dividend Fund | 5,259 | 198 | |||||||||
Xtrackers USD High Yield Corporate Bond ETF | 49,284 | 2,320 | |||||||||
Total Exchange-Traded Funds (Cost $82,476) | 82,394 | ||||||||||
Affiliated Exchange-Traded Funds (0.2%) | |||||||||||
VictoryShares USAA MSCI Emerging Markets Value Momentum ETF | 9,770 | 360 | |||||||||
Total Affiliated Exchange-Traded Funds (Cost $469) | 360 | ||||||||||
Collateral for Securities Loaned^ (1.8%) | |||||||||||
HSBC U.S. Government Money Market Fund I Shares, 0.13% (m) | 1,024,447 | 1,024 | |||||||||
Invesco Government & Agency Portfolio Institutional Shares, 0.12% (m) | 2,935,729 | 2,936 | |||||||||
Total Collateral for Securities Loaned (Cost $3,960) | 3,960 | ||||||||||
Total Investments (Cost $214,762) — 99.5% | 219,694 | ||||||||||
Other assets in excess of liabilities — 0.5% | 1,093 | ||||||||||
NET ASSETS — 100.00% | $ | 220,787 |
At May 31, 2020, the Fund's investments in foreign securities were 16% of net assets.
^ Purchased with cash collateral from securities on loan.
(a) Rule 144A security or other security that is restricted as to resale to institutional investors. The Fund's Adviser has deemed this security to be liquid based upon procedures approved by the Board of Trustees. As of May 31, 2020, the fair value of these securities was $16,126 (thousands) and amounted to 7.3% of net assets.
(b) Variable or Floating-Rate Security. Rate disclosed is as of May 31, 2020.
See notes to financial statements.
22
USAA Mutual Funds Trust USAA Cornerstone Moderately Conservative Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(c) The rate for certain asset-backed and mortgage backed securities may vary based on factors relating to the pool of assets underlying the security. The rate disclosed is the rate in effect at May 31, 2020.
(d) Security is interest only.
(e) Non-income producing security.
(f) All or a portion of this security is on loan.
(g) All or a portion of this security has been designated as collateral for securities purchased on a when-issued basis.
(h) The Fund's Adviser has deemed this security to be illiquid based upon procedures approved by the Board of Trustees. As of May 31, 2020, illiquid securities were 0.6% of the Fund's net assets.
(i) Security was fair valued based upon procedures approved by the Board of Trustees and represents 0.4% of the Fund's net assets as of May 31, 2020. (See Note 2)
(j) Security is perpetual and has no final maturity date but may be subject to calls at various dates in the future.
(k) Security purchased on a when-issued basis.
(l) Amount represents less than 0.05% of net assets.
(m) Rate disclosed is the daily yield on May 31, 2020.
bps — Basis points
ETF — Exchange-Traded Fund
GO — General Obligation
LIBOR — London InterBank Offered Rate
LIBOR01M — 1 Month US Dollar LIBOR, rate disclosed as of May 31, 2020, based on the last reset date of the security
LIBOR03M — 3 Month US Dollar LIBOR, rate disclosed as of May 31, 2020, based on the last reset date of the security
LLC — Limited Liability Company
LP — Limited Partnership
MTN — Medium Term Note
PLC — Public Limited Company
SOFR — Secured Overnight Financing Rate
USSW10 — USD 10 Year Swap Rate, rate disclosed as of May 31, 2020
See notes to financial statements.
23
USAA Mutual Funds Trust | Statement of Assets and Liabilities May 31, 2020 |
(Amounts in Thousands, Except Per Share Amounts)
USAA Cornerstone Moderately Conservative Fund | |||||||
Assets: | |||||||
Affiliated investments, at value (Cost $469) | $ | 360 | |||||
Unaffiliated investments, at value (Cost $214,293) | 219,334 | (a) | |||||
Cash and cash equivalents | 3,932 | ||||||
Receivables: | |||||||
Interest and dividends | 548 | ||||||
Capital shares issued | 50 | ||||||
Investments sold | 1,338 | ||||||
From Adviser | 113 | ||||||
Prepaid expenses | 15 | ||||||
Total assets | 225,690 | ||||||
Liabilities: | |||||||
Payables: | |||||||
Collateral received on loaned securities | 3,960 | ||||||
Investments purchased | 655 | ||||||
Capital shares redeemed | 105 | ||||||
Accrued expenses and other payables: | |||||||
Investment advisory fees | 92 | ||||||
Administration fees | 28 | ||||||
Transfer agent fees | 16 | ||||||
Compliance fees | — | (b) | |||||
Other accrued expenses | 47 | ||||||
Total liabilities | 4,903 | ||||||
Net Assets: | |||||||
Capital | 216,457 | ||||||
Total distributable earnings/(loss) | 4,330 | ||||||
Net assets | $ | 220,787 | |||||
Shares (unlimited number of shares authorized with no par value): | 19,827 | ||||||
Net asset value, offering and redemption price per share: (c) | $ | 11.14 |
(a) Includes $3,901 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.
24
USAA Mutual Funds Trust | Statement of Operations For the Year Ended May 31, 2020 |
(Amounts in Thousands)
USAA Cornerstone Moderately Conservative Fund | |||||||
Investment Income: | |||||||
Income distributions from affiliated funds | $ | 11 | |||||
Dividends | 3,406 | ||||||
Interest | 3,314 | ||||||
Securities lending (net of fees) | 32 | ||||||
Total income | 6,763 | ||||||
Expenses: | |||||||
Investment advisory fees | 1,148 | ||||||
Administration fees | 345 | ||||||
Sub-Administration fees | 62 | ||||||
Custodian fees | 43 | ||||||
Transfer agent fees | 545 | ||||||
Trustees' fees | 49 | ||||||
Compliance fees | 1 | ||||||
Legal and audit fees | 81 | ||||||
State registration and filing fees | 13 | ||||||
Other expenses | 56 | ||||||
Total expenses | 2,343 | ||||||
Expenses waived/reimbursed by Adviser | (252 | ) | |||||
Expenses waived/reimbursed by AMCO | (26 | ) | |||||
Net expenses | 2,065 | ||||||
Net Investment Income (Loss) | 4,698 | ||||||
Realized/Unrealized Gains (Losses) from Investments: | |||||||
Net realized gains (losses) from unaffiliated investment securities and foreign currency translations | 601 | ||||||
Net realized gains (losses) from futures contracts | (151 | ) | |||||
Net change in unrealized appreciation/depreciation on affiliated funds | (55 | ) | |||||
Net change in unrealized appreciation/depreciation on unaffiliated investment securities and foreign currency translations | 3,435 | ||||||
Net change in unrealized appreciation/depreciation on futures contracts | 98 | ||||||
Net realized/unrealized gains (losses) on investments | 3,928 | ||||||
Change in net assets resulting from operations | $ | 8,626 |
See notes to financial statements.
25
USAA Mutual Funds Trust | Statements of Changes in Net Assets |
(Amounts in Thousands)
USAA Cornerstone Moderately Conservative Fund | |||||||||||
Year Ended May 31, 2020 | Year Ended May 31, 2019 | ||||||||||
From Investments: | |||||||||||
Operations: | |||||||||||
Net investment income (loss) | $ | 4,698 | $ | 4,923 | |||||||
Net realized gains (losses) from investments | 450 | (236 | ) | ||||||||
Net change in unrealized appreciation/depreciation on investments | 3,478 | (2,517 | ) | ||||||||
Change in net assets resulting from operations | 8,626 | 2,170 | |||||||||
Change in net assets resulting from distributions to shareholders | (5,060 | ) | (8,928 | ) | |||||||
Change in net assets resulting from capital transactions | (9,263 | ) | 11,521 | ||||||||
Change in net assets | (5,697 | ) | 4,763 | ||||||||
Net Assets: | |||||||||||
Beginning of period | 226,484 | 221,721 | |||||||||
End of period | $ | 220,787 | $ | 226,484 | |||||||
Capital Transactions: | |||||||||||
Proceeds from shares issued | $ | 32,147 | $ | 46,063 | |||||||
Distributions reinvested | 4,808 | 8,481 | |||||||||
Cost of shares redeemed | (46,218 | ) | (43,023 | ) | |||||||
Change in net assets resulting from capital transactions | $ | (9,263 | ) | $ | 11,521 | ||||||
Share Transactions: | |||||||||||
Issued | 2,879 | 4,196 | |||||||||
Reinvested | 429 | 792 | |||||||||
Redeemed | (4,182 | ) | (3,919 | ) | |||||||
Change in Shares | (874 | ) | 1,069 |
See notes to financial statements.
26
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27
USAA Mutual Funds Trust | Financial Highlights |
For a Share Outstanding Throughout Each Period
Investment Activities | Distributions to Shareholders From | ||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss) | Net Realized and Unrealized Gains (Losses) on Investments | Total from Investment Activities | Net Investment Income | Net Realized Gains From Investments | ||||||||||||||||||||||
USAA Cornerstone Moderately Conservative Fund | |||||||||||||||||||||||||||
Year Ended May 31, 2020 | $ | 10.94 | 0.23 | (b) | 0.22 | 0.45 | (0.23 | ) | (0.02 | ) | |||||||||||||||||
Year Ended May 31, 2019 | $ | 11.29 | 0.24 | (0.14 | ) | 0.10 | (0.24 | ) | (0.21 | ) | |||||||||||||||||
Year Ended May 31, 2018 | $ | 11.34 | 0.21 | 0.23 | 0.44 | (0.21 | ) | (0.28 | ) | ||||||||||||||||||
Year Ended May 31, 2017 | $ | 10.67 | 0.23 | 0.68 | 0.91 | (0.24 | ) | — | |||||||||||||||||||
Year Ended May 31, 2016 | $ | 11.42 | 0.28 | (0.68 | ) | (0.40 | ) | (0.26 | ) | (0.09 | ) |
* 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.
^ 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 two year period beginning July 1, 2019 and in effect through June 30, 2021, instead of coinciding with the Fund's fiscal year end. Details of the current contractual expense limitation in effect can be found in Note 4 of the accompanying Notes to Financial Statements.
(a) The expense ratios exclude the impact of expenses paid by each underlying fund.
(b) Per share net investment income (loss) has been calculated using the average daily shares method.
(c) Reflects increased usage of quantitative investment strategies.
See notes to financial statements.
28
USAA Mutual Funds Trust | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Ratios to Average Net Assets | Supplemental Data | ||||||||||||||||||||||||||||||||||
Total Distributions | Net Asset Value, End of Period | Total Return* | Net Expenses^(a) | Net Investment Income (Loss) | Gross Expenses(a) | Net Assets, End of Period (000's) | Portfolio Turnover | ||||||||||||||||||||||||||||
USAA Cornerstone Moderately Conservative Fund | |||||||||||||||||||||||||||||||||||
Year Ended May 31, 2020 | (0.25 | ) | $ | 11.14 | 4.09 | % | 0.90 | % | 2.05 | % | 1.02 | % | $ | 220,787 | 84 | % | |||||||||||||||||||
Year Ended May 31, 2019 | (0.45 | ) | $ | 10.94 | 0.99 | % | 0.90 | % | 2.22 | % | 1.08 | % | $ | 226,484 | 77 | %(c) | |||||||||||||||||||
Year Ended May 31, 2018 | (0.49 | ) | $ | 11.29 | 3.89 | % | 0.90 | % | 1.84 | % | 1.07 | % | $ | 221,721 | 45 | % | |||||||||||||||||||
Year Ended May 31, 2017 | (0.24 | ) | $ | 11.34 | 8.65 | % | 0.90 | % | 2.12 | % | 1.09 | % | $ | 209,270 | 55 | % | |||||||||||||||||||
Year Ended May 31, 2016 | (0.35 | ) | $ | 10.67 | (3.50 | )% | 0.90 | % | 2.56 | % | 1.09 | % | $ | 194,376 | 70 | % |
See notes to financial statements.
29
USAA Mutual Funds Trust | Notes to Financial Statements May 31, 2020 |
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 47 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 November 6, 2018, United Services Automobile Association ("USAA"), the parent company of USAA Asset Management Company ("AMCO"), the investment adviser to the Fund, and USAA Transfer Agency Company, d/b/a USAA Shareholder Account Services ("SAS"), the transfer agent to the Fund, announced that AMCO and SAS would be acquired by Victory Capital Holdings Inc., a global investment management firm headquartered in Cleveland, Ohio (the "Transaction"). The Transaction closed on July 1, 2019. A special shareholder meeting was held on April 18, 2019, at which shareholders of the Fund approved a new investment advisory agreement between the Trust, on behalf of the Fund, and Victory Capital Management Inc. ("VCM" or "Adviser"). Effective July 1, 2019, VCM replaced AMCO as the investment adviser to the Fund and Victory Capital Transfer Agency Company replaced SAS as the Fund's transfer agent. In addition, effective on that same date, shareholders of the Fund also elected the following two new directors to the Board of the Trust to serve upon the closing of the Transaction: (1) David C. Brown, to serve as an Interested Trustee; and (2) John C. Walters, to serve as an Independent Trustee
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 generally accepted accounting principles in the United States of America ("GAAP"). The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses for the period. Actual results could differ from those estimates. The Fund follows the specialized accounting and reporting requirements under GAAP that are applicable to investment companies under Accounting Standards Codification Topic 946.
Investment Valuation:
The Fund records investments at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The valuation techniques described below maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value. The inputs used for valuing the Fund's investments are summarized in the three broad levels listed below:
• Level 1 — quoted prices in active markets for identical securities
• Level 2 — other significant observable inputs (including quoted prices for similar securities or interest rates applicable to those securities, etc.)
• Level 3 — significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments)
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The inputs or methodologies used for valuation techniques are not necessarily an indication of the risk associated with entering into those investments.
30
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
The Adviser has established the Pricing and Liquidity Committee (the "Committee"), and subject to Trust's Board of Trustees (the "Board") oversight, the Committee administers and oversees the Fund's valuation policies and procedures, which are approved by the Board.
Portfolio securities listed or traded on securities exchanges, including exchange-traded funds ("ETFs"), American Depositary Receipts ("ADRs") 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 are valued at 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.
Debt securities of United States ("U.S.") issuers, along with corporate and municipal securities, including short-term investments maturing in 60 days or less, may be valued using evaluated bid or the last sales price to price securities by dealers or an independent pricing service approved by the Board. These valuations are typically categorized as Level 2 in the fair value hierarchy.
Effective July 1, 2019, the valuation methodology applied to certain debt securities changed. Securities that were previously valued at an evaluated mean are now valued at the evaluated bid or the last sales price.
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, the securities are valued in good faith by the Committee in accordance with valuation procedures approved by 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. These valuations are considered as Level 2 in the fair value hierarchy.
A summary of the valuations as of May 31, 2020, based upon the three levels defined above, is included in the table below while the breakdown, by category, of investments is disclosed in the Schedule of Portfolio Investments (amounts in thousands):
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Asset Backed Securities | $ | — | $ | 9,510 | $ | — | $ | 9,510 | |||||||||||
Collateralized Mortgage Obligations | — | 2,914 | — | 2,914 | |||||||||||||||
Common Stocks | 26,780 | 794 | — | 27,574 | |||||||||||||||
Preferred Stocks | 1,356 | 1,033 | — | 2,389 | |||||||||||||||
Senior Secured Loans | — | 432 | — | 432 | |||||||||||||||
Corporate Bonds | — | 34,234 | — | 34,234 | |||||||||||||||
Yankee Dollar | — | 4,495 | — | 4,495 | |||||||||||||||
Municipal Bonds | — | 2,555 | — | 2,555 | |||||||||||||||
U.S. Government Agency Mortgages | — | 15,754 | — | 15,754 | |||||||||||||||
U.S. Treasury Obligations | — | 33,123 | — | 33,123 | |||||||||||||||
Exchange-Traded Funds | 82,394 | — | — | 82,394 | |||||||||||||||
Affiliated Exchange-Traded Funds | 360 | — | — | 360 | |||||||||||||||
Collateral for Securtites Loaned | 3,960 | — | — | 3,960 | |||||||||||||||
Total | $ | 114,850 | $ | 104,844 | $ | — | $ | 219,694 |
31
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
For the year ended May 31, 2020, the Fund had transfers into/out of Level 3 that were less than 0.50% of net assets.
Real Estate Investment Trusts ("REITs"):
The Fund may invest in REITs which report information on the source of their distributions annually. REITs are pooled investment vehicles that invest primarily in income producing real estate or real estate related loans or interests (such as mortgages). Certain distributions received from REITs during the year are recorded as realized gains or return of capital as estimated by the Fund or when such information becomes known.
Investment Companies:
Exchange-Traded Funds:
The Fund may invest in ETFs. ETFs are a type of index fund, 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 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 they are 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 take place a month or more after the trade date. At the time the Fund makes the commitment to purchase a security on a delayed-delivery or when-issued basis, the Fund records the transaction and reflects the value of the security in determining NAV. No interest accrues to the Fund until the transaction settles and payment takes place. A segregated account is established and the Fund maintains cash and/or marketable securities at least equal in value to commitments for delayed-delivery or when-issued securities. If the Fund owns delayed-delivery or when-issued securities, these values are included in Payable for investments purchased on the accompanying Statement of Assets and Liabilities and the segregated assets are identified on the Schedule of Portfolio Investments.
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"), 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.
32
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
Foreign Exchange Currency Contracts:
The Fund may enter into foreign exchange currency contracts to convert U.S. dollars to and from various foreign currencies. A foreign exchange currency contract is an obligation by the Fund to purchase or sell a specific currency at a future date at a price (in U.S. dollars) set at the time of the contract. The Fund does not engage in "cross-currency" foreign exchange contracts (i.e., contracts to purchase or sell one foreign currency in exchange for another foreign currency). The Fund's foreign exchange currency contracts might be considered spot contracts (typically a contract of one week or less) or forward contracts (typically a contract term over one week). A spot contract is entered into for purposes of hedging against foreign currency fluctuations relating to a specific portfolio transaction, such as the delay between a security transaction trade date and settlement date. Forward contracts are entered into for purposes of hedging portfolio holdings or concentrations of such holdings. Each foreign exchange currency contract is adjusted daily by the prevailing spot or forward rate of the underlying currency, and any appreciation or depreciation is recorded for financial statement purposes as unrealized until the contract settlement date, at which time the Fund records realized gains or losses equal to the difference between the value of a contract at the time it was opened and the value at the time it was closed. The Fund could be exposed to risk if a counterparty is unable to meet the terms of a foreign exchange currency contract or if the value of the foreign currency changes unfavorably. In addition, the use of foreign exchange currency contracts does not eliminate fluctuations in the underlying prices of the securities. As of May 31, 2020, the Fund had no open forward foreign exchange currency contracts.
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.
During the period ended May 31, 2020, the Fund held futures contracts primarily for the strategy of gaining exposure to a particular asset class or securities market. The Fund held no futures contracts at May 31, 2020.
33
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
The following table presents the effect of derivative instruments on the Statement of Operations, categorized by risk exposure, for the year ended May 31, 2020 (amounts in thousands):
Net Realized Gains (Losses) on Derivatives Recognized as a Result from 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: | $ | (151 | ) | $ | 98 |
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 on 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 discount. Gains or losses realized on sales of securities are determined by comparing the identified cost of the security lot sold with the net sales proceeds.
Withholding taxes on interest, dividends and gains as a result of certain investments in ADRs by the Fund have been provided for in accordance with each investment's applicable country's tax rules and rates.
Securities Lending:
The Fund, through a securities lending agreement with Citibank, N.A. ("Citibank"), may lend its securities to qualified financial institutions, such as certain broker-dealers, to earn additional income, net of income retained by Citibank. Borrowers are required to 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 cured the next business day once the shortfall exceeds $100 thousand. Collateral may be cash, U.S. government securities, or other securities as permitted by SEC guidelines. Cash collateral may be invested in high-quality short-term investments, primarily open-end investment companies. Collateral requirements are determined daily based on the value of the Fund's securities on loan as of the end of the prior business day. During the time portfolio securities are on loan, the borrower will pay the Fund any dividends or interest paid on such securities plus any fee negotiated between the parties to the lending agreement. The Fund also earns a return from the collateral. The Fund pays Citibank various fees in connection with the investment of cash collateral and fees based on the investment income received from securities lending activities. Securities lending income (net of these fees) is disclosed on the Statement of Operations. Loans are terminable upon demand and the borrower must return the loaned securities within the lesser of one standard settlement period or five business days. Risks relating to securities-lending transactions include that the borrower may not provide additional collateral when required or return the securities when due, and 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 re-pledged except to satisfy borrower default. Cash collateral is listed in the Fund's Portfolio of Investments and Financial Statements while non-cash collateral is not included. The following table (amounts in thousands) is a summary of the Fund's securities lending transactions as of May 31, 2020.
Value of Securities on Loan | Non-Cash Collateral | Cash Collateral | |||||||||
$ | 3,901 | $ | — | $ | 3,960 |
34
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
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 investments and foreign currency translations on the Statement of Operations. Any realized gains or losses from these fluctuations, including foreign currency arising from in-kind redemptions, are disclosed as net realized gains or losses from investment transactions and foreign currency translations on the Statement of Operations.
Federal Income Taxes:
It is the Fund's policy 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.
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., 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 affiliated trust based upon net assets or another appropriate basis.
3. Purchases and Sales:
Cost of purchases and proceeds from sales/maturities of securities (excluding securities maturing less than one year from acquisition) for the year ended May 31, 2020, were as follows for the Fund (amounts in thousands):
Excluding U.S. Government Securities | U.S. Government Securities | ||||||||||||||
Purchases | Sales | Purchases | Sales | ||||||||||||
$ | 166,218 | $ | 132,563 | $ | 18,147 | $ | 57,371 |
4. Fees and Transactions with Affiliates and Related Parties:
Investment Advisory and Management Fees:
Effective with the Transaction on July 1, 2019, investment advisory services are provided to the Fund by the Adviser, a New York corporation registered as an investment adviser with the Securities and Exchange Commission ("SEC"). The Adviser is a wholly-owned indirect subsidiary of Victory Capital Holdings, Inc., a publicly traded Delaware corporation, and a wholly-owned direct subsidiary of Victory Capital Operating, LLC. Under the terms of the Investment Advisory Agreement, the Adviser is entitled to receive fees accrued daily and paid monthly at an annualized rate of 0.50% of the Fund's average daily net assets. The amount incurred and paid to VCM from July 1, 2019 through May 31, 2020, was $1,054 thousand and is reflected on the Statement of Operations as Investment Advisory fees.
35
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
Prior to the Transaction on July 1, 2019, AMCO provided investment management services to the Fund pursuant to an Advisory Agreement. Under this agreement, AMCO was responsible for managing the business and affairs of the Fund, and for directly managing day-to-day investment of the Fund's assets, subject to the authority of and supervision by the Board. The investment management fee for the Fund was accrued daily and paid monthly at an annualized rate of 0.50% of the Fund's average daily net assets. The amount incurred and paid to AMCO from June 1, 2019 through June 30, 2019, was $94 thousand and is reflected on the Statement of Operations as Investment Advisory fees.
In addition, the Fund invests in affiliated USAA exchange-traded fund(s) ("affiliated ETFs"). The Fund's Adviser fee is reimbursed by VCM (and previously AMCO) to the extent of the indirect Adviser fee incurred through the Fund's proportional investment in the affiliated ETF(s). For the period from July 1, 2019 through May 31, 2020, the Fund's Adviser fee was reimbursed by VCM in an amount of $1 thousand, of which less than $1 thousand is receivable from VCM. For the period from June 1, 2019 through June 30, 2019, the Fund's Adviser fee was reimbursed by AMCO in an amount of less than $1 thousand.
Effective with the Transaction on July 1, 2019, 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. Prior to that date, the Trust relied on a similar exemptive order granted by the SEC to the Trust and its affiliated persons. Under a manager of managers' structure, the investment adviser may select (with approval of the Board and without shareholder approval) one or more subadvisers to manage the day-to-day investment of a fund's assets. For the year ended May 31, 2020, the Fund had no subadvisers.
Administration and Servicing Fees:
Effective with the Transaction on July 1, 2019, VCM serves as the Fund's administrator and fund accountant. Under the Fund Administration, Servicing and Accounting Agreement, VCM is paid for its services an annual fee at a rate of 0.15% of average daily net assets of the Fund. Amounts incurred from July 1, 2019 through May 31, 2020, are $317 thousand and are reflected on the Statement of Operations as Administration fees.
Prior to the Transaction on July 1, 2019, AMCO provided certain administration and servicing functions for the Fund. For such services, AMCO received a fee accrued daily and paid monthly at an annualized rate of 0.15% of average daily net assets of the Fund. Amounts incurred from June 1, 2019 through June 30, 2019, were $28 thousand and are reflected on the Statement of Operations as Administration fees.
Effective with the Transaction on July 1, 2019, the Fund (as part of the Trust) has entered into an agreement to provide compliance services with the Adviser, 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. Funds in the Trust, Victory Variable Insurance Funds, Victory Portfolios and Victory Portfolios II (collectively, the "Victory Funds Complex") in the aggregate, compensates the Adviser for these services. The amount incurred during the period from July 1, 2019 to May 31, 2020, is reflected on the Statement of Operations as Compliance fees.
Effective with the Transaction on July 1, 2019, 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 Trust reimburses VCM and Citi for all of their reasonable out-of-pocket expenses incurred in providing these services and certain other expenses specifically allocated to the Funds under the Fund Administration, Servicing, and Accounting Agreement. The amount incurred during the period from July 1, 2019 through May 31, 2020, is reflected on the Statement of Operations as Sub-Administration fees.
36
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
In addition to the services provided under its Administration and Servicing Agreement with the Fund, AMCO also provided certain compliance and legal services for the benefit of the Fund prior to the Transaction on July 1, 2019. The Board approved the reimbursement of a portion of these expenses incurred by AMCO. AMCO did not receive any fees from the Fund for these services.
Transfer Agency Fees:
Effective with the Transaction on July 1, 2019, Victory Capital Transfer Agency, Inc. ("VCTA"), (formerly, USAA Shareholder Account Services ("SAS")), provides transfer agency services to the Fund. VCTA, an affiliate of the Adviser, provides transfer agent services 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 from July 1, 2019 through May 31, 2020, was $500 thousand. Amounts incurred and paid to SAS from June 1, 2019 through June 30, 2019, was $45 thousand. These amounts are reflected on the Statement of Operations as Transfer Agent fees.
Effective with the Transaction on July 1, 2019, 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:
Effective with the Transaction on July 1, 2019, Victory Capital Advisers, 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. Effective on or about June 30, 2020, the Distributor's name will change to Victory Capital Services, Inc.
Prior to the Transaction on July 1, 2019, USAA Investment Management Company provided exclusive underwriting and distribution of the Fund's shares on a continuing best-efforts basis.
Other Fees:
Prior to the Transaction on July 1, 2019, State Street Bank and Trust Company served as the Fund's accounting agent and custodian.
Effective July 1, 2019, Citibank, N.A., serves as the Fund's custodian.
K&L Gates LLP provides legal services to the Trust.
Effective with the Transaction on July 1, 2019, the Adviser has entered into an expense limitation agreement with the Fund until at least June 30, 2021. 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. 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. Effective July 1, 2019 through May 31, 2020, the expense limit (excluding voluntary waivers) is 0.90%.
Under this expense limitation agreement, the Fund has agreed to repay fees and expenses that were waived or reimbursed by the Adviser for a period up to three years after the fiscal year in which 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 May 31, 2020, the following amounts are available to be repaid to the Adviser (amounts in thousands).
Expires 05/31/2023 | |||
$ | 252 |
37
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
The Adviser, may voluntarily waive or reimburse additional fees to assist the Fund in maintaining competitive expense ratios. Voluntary waivers and reimbursements applicable to the Fund are not available to be recouped at a future time. There were no voluntary waivers or reimbursements for the year ended May 31, 2020.
Prior to the Transaction on July 1, 2019, AMCO agreed, through September 30, 2019, to limit the total annual operating expenses to 0.90% of average daily net assets of the Fund, excluding extraordinary expenses and before reductions of any expenses paid indirectly, and to reimburse all expenses in excess of those amounts. Effective with the Transaction on July 1, 2019, this expense limit is no longer in effect and is not available to be recouped by AMCO. For the period June 1, 2019 through June 30, 2019, amounts reimbursed by the Fund are reflected on the Statement of Operations as Expenses waived/reimbursed by AMCO.
Certain officers and/or interested trustees of the Fund are also officers and/or employees of the Adviser, Administrator, Sub-Administrator, Sub-Fund Accountant, and Legal.
5. Risks:
The Fund may be subject to other risks in addition to these identified risks.
Global economies and financial markets are increasingly interconnected, which increases the possibilities that conditions in one country or region might adversely affect issuers in another country or region. Geopolitical and other risks, including war, terrorism, trade disputes, political or economic dysfunction within some nations, public health crises and related geopolitical events, as well as environmental disasters such as earthquakes, fires, and floods, may add to instability in world economies and markets generally. Changes in trade policies and international trade agreements could affect the economies of many countries in unpredictable ways. Epidemics and/or pandemics, such as the coronavirus (or COVID-19), may result in, among other things, closing borders, disruptions to healthcare service preparation and delivery, quarantines, cancellations, disruptions to supply chains and consumer activity, as well as general concern and uncertainty. The impact may be short-term or may last for extended periods.
The COVID-19 pandemic, which has spread rapidly across the world, has led and will continue to lead for an unknown period of time to disruptions in local, regional, national and global markets and economies. Among other things, the outbreak has resulted in, and until fully resolved is likely to continue to result in, among other things (1) government imposition of various forms of "stay at home" orders and the closing of "non-essential" businesses, resulting in significant disruption to the businesses of many issuers as well as lay-offs of employees; (2) increased requests by issuers of debt instruments for amendments and waivers of agreements to avoid default and increased defaults; (3) volatility and disruption of markets, including greater volatility in pricing and spreads; and (4) rapidly evolving proposals and/or actions by state and federal governments to address problems being experienced by the markets and by businesses and the economy in general.
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.
The equity securities in the Fund's portfolio are subject to stock market risk. A company's stock price in general may decline over short or even extended periods, regardless of the success or failure of the company's operations. Stock markets tend to run in cycles, with periods when stock prices generally go up and periods when stock prices generally go down. Equity securities tend to be more volatile than debt securities. In addition, to the degree the Fund invests in foreign securities, there is a possibility that the value of the Fund's investments in foreign securities will decrease because of unique risks, such as currency exchange-rate fluctuations; foreign market illiquidity; emerging market risk; increased price volatility; uncertain political conditions; exchange control regulations; foreign ownership limits; different accounting, reporting, and disclosure requirements; difficulties in obtaining legal judgments;
38
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
and foreign withholding taxes. These risks are particularly heightened in this Fund because investments in emerging-market countries generally are more volatile than investments in developed markets. Emerging-market countries are less economically diverse and mature than more developed countries and tend to be politically less stable.
The Fund may invest in securities of companies of any market capitalization and is subject to mid- and small-cap company risk, which is the greater risk of investing in smaller, less well-known companies, as opposed to investing in established companies with proven track records. Mid- and small-cap companies also may have limited product lines, markets, or financial resources. Securities of such companies may be less liquid and more volatile than securities of larger companies or the market in general and, therefore, may involve greater risk than investing in the securities of larger companies.
Many debt securities, derivatives and other financial instruments, including some of the Fund's investments, use the London Interbank Offered Rate ("LIBOR") as the reference or benchmark rate for variable interest rate calculations. However, the use of LIBOR started to come under pressure following manipulation allegations in 2012. Despite increased regulation and other corrective actions since that time, concerns have arisen regarding its viability as a benchmark, due largely to reduced activity in the financial markets that it measures. In June 2017, the Alternative Reference Rates Committee, a group of large U.S. banks working with the Federal Reserve, announced its selection of a new Secured Overnight Funding Rate ("SOFR"), which is intended to be a broad measure of secured overnight U.S. Treasury repo rates, as an appropriate replacement for LIBOR. The Federal Reserve Bank of New York began publishing the SOFR in 2018, expecting that it could be used on a voluntary basis in new instruments and transactions. Bank working groups and regulators in other countries have suggested other alternatives for their markets, including the Sterling Overnight Interbank Average Rate ("SONIA") in England. In July 2017, the Financial Conduct Authority (the "FCA"), the United Kingdom financial regulatory body, announced that after 2021 it will cease its active encouragement of UK banks to provide the quotations needed to sustain LIBOR. That announcement suggests that LIBOR may cease to be published after that time. The roughly three-year period until the end of 2021 is expected to be enough time for market participants to transition to the use of a different benchmark for both new and existing securities and transactions. Various financial industry groups have begun planning for that transition, but there are obstacles to converting certain longer-term securities and transactions to a new benchmark. Transition planning is at an early stage, and neither the effect of the transition process nor its ultimate success can yet be known. The transition process might lead to increased volatility and illiquidity in markets that currently rely on the LIBOR to determine interest rates. It could also lead to a reduction in the value of some LIBOR-based investments and reduce the effectiveness of new hedges placed against existing LIBOR-based instruments. Since the usefulness of LIBOR as a benchmark could deteriorate during the transition period, these effects could occur before the end of 2021.
6. Borrowing and Interfund Lending:
Line of Credit:
Effective with the Transaction on July 1, 2019, the Victory Funds Complex participates in a short-term, demand note "Line of Credit" agreement with Citibank. Under the agreement with Citibank, the Victory Funds Complex could 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 that Fund paying the related commitment fees for that amount. The purpose of the agreement is to meet temporary or emergency cash needs, Citibank receives an annual commitment fee of 0.15% on $300 million for providing the Line of Credit. Each fund in the Victory Funds Complex pays a pro-rata portion of the commitment fees plus any interest (one month LIBOR plus one percent) on amounts borrowed. Effective June 29, 2020, under an amended Line of Credit agreement, Citibank will also receive an annual upfront fee of 0.10% on the $300 million committed line of credit. Each fund in the Victory Funds Complex will pay a pro-rata portion of the upfront fee. Interest charged to the Fund, if any, during the period is reflected on the Statement of Operations under line of credit fees.
39
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
Prior to the Transaction on July 1, 2019, the line of credit among the Trust, with respect to its funds, and USAA Capital Corporation ("CAPCO") terminated. For the period from June 1, 2019 to June 30, 2019, the Fund paid CAPCO facility fees of less than $1 thousand.
The Fund had no borrowings under either agreement with Citibank or CAPCO during the year ended May 31, 2020.
Interfund Lending:
Effective with the Transaction on July 1, 2019, the Trust and 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 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. The interfund loan rate is determined, as specified in the Order, by averaging the current repurchase agreement rate and the current bank loan rate. As a Borrower, interest charged to the Fund, if any, during the period is reflected on the Statement of Operations under Interest expense on Interfund lending. As a Lender, interest earned by the Fund, if any, during the period is reflected on the Statement of Operations under Income on Interfund lending.
The Fund did not utilize or participate in the Facility during the period July 1, 2019 through May 31, 2020.
7. Federal Income Tax Information:
The Fund intends to declare daily and distribute any net investment income quarterly. Distributable net realized gains, if any, are declared and paid at least annually.
The amounts of dividends from net investment income and distributions from net realized gains (collectively distributions to shareholders) are determined in accordance with federal income tax regulations, which may differ from GAAP. To the extent these "book/tax" differences are permanent in nature (e.g., net operating loss and distribution reclassification), such amounts are reclassified within the components of net assets based on their federal tax-basis treatment; temporary differences (e.g., wash sales) do not require reclassification. To the extent dividends and distributions exceed net investment income and net realized gains for tax purposes, they are reported as distributions of capital. Net investment losses incurred by the Fund may be reclassified as an offset to capital on the accompanying Statement of Assets and Liabilities.
As of May 31, 2020, 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 Statement of Changes in Net Assets because, for tax purposes, dividends are recognized when actually paid) (amounts in thousands).
Year Ended May 31, 2020 | Year Ended May 31, 2019 | ||||||||||||||||||||||||||
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 | ||||||||||||||||||||||
$ | 4,774 | $ | 286 | $ | 5,060 | $ | 6,347 | $ | 2,581 | $ | 8,928 |
40
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
As of May 31, 2020, the components of accumulated earnings (deficit) on a tax basis were as follows (amounts in thousands):
Undistributed Ordinary Income | Other Earnings (Deficit) | Qualified Late-Year Losses* | Unrealized Appreciation (Depreciation)** | Total Accumulated Earnings (Deficit) | |||||||||||||||
$ | 543 | $ | (337 | ) | $ | (218 | ) | $ | 4,342 | $ | 4,330 |
* Qualified late-year losses are comprised of post-October capital losses incurred after October 31 and certain late-year ordinary losses. Late-year ordinary losses represent ordinary losses incurred after December 31 and specified losses incurred after October 31. These losses are deemed to arise on the first day of the Fund's next taxable year.
** The difference between the book-basis and tax-basis of unrealized appreciation/depreciation is attributable to the tax deferral of losses on wash sales.
As of the tax year ended May 31, 2020, the Fund had no capital loss carryforwards, for federal income tax purposes.
As of May 31, 2020, 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) | ||||||||||||
$ | 215,352 | $ | 11,831 | $ | (7,489 | ) | $ | 4,342 |
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 or an investment company managed by VCM. The Fund does not invest in affiliated underlying funds for the purpose of exercising management or control. These underlying funds are noted as affiliated in the Fund's Schedule of Portfolio Investments. The affiliated underlying funds' annual or semiannual reports may be viewed at usaa.com. Transactions in affiliated securities during the year ended May 31, 2020 were as follows (amount in thousands):
Fair Value 5/31/2019 | Purchases at Cost | Proceeds from Sales | Realized Gain (Loss) | Capital Gain Distribution | Net Change in Unrealized Appreciation/ Depreciation | Fair Value 5/31/2020 | Dividend Income | ||||||||||||||||||||||||||||
Affiliated Holdings | |||||||||||||||||||||||||||||||||||
VictoryShares USAA MSCI Emerging Markets Value Momentum ETF | $ | 415 | $ | — | $ | — | $ | — | $ | — | $ | (55 | ) | $ | 360 | $ | 11 |
9. 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 1940 Act. 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 Funds' Board of Trustees approved the appointment of the Fund's investment adviser,
41
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
Victory Capital, as the administrator of the LRMP. At an in-person meeting held on February 26, 2020, Victory Capital provided an oral and written report to the Trustees on the operation and effectiveness of the LRMP during the previous year.
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.
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 reasonably expected to be converted to cash in current market conditions in three business days or less without significantly changing the market value of the investment. Therefore, the Fund has not adopted a Highly Liquid Investment Minimum. The Fund's investments were below the limitation on illiquid investments during the review period. Additionally, Victory Capital indicated that no events occurred that would require the filing of Form N-LIQUID and recommended no material changes to the LRMP.
42
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of USAA Cornerstone Moderately Conservative Fund:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of USAA Cornerstone Moderately Conservative Fund (the "Fund") (one of the funds constituting USAA Mutual Funds Trust (the "Trust")), including the schedule of portfolio investments, as of May 31, 2020, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the funds constituting USAA Mutual Funds Trust) at May 31, 2020, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Trust's management. Our responsibility is to express an opinion on the Fund's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust's internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of May 31, 2020, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Victory Capital investment companies since 1995.
San Antonio, Texas
July 27, 2020
43
USAA Mutual Funds Trust | Supplemental Information May 31, 2020 |
(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) 539-3863. The information is also included in the Fund's Statement of Additional Information, which is available on the SEC's website at www.sec.gov.
Information relating to how the Fund voted proxies relating to portfolio securities held during the most recent 12 months ended June 30 is available on the SEC's website at www.sec.gov.
Availability of Schedules of Portfolio Investments:
The Trust files a complete list of Schedules of Portfolio Investments with the SEC for the first and third quarter of each fiscal year on Form N-PORT. Forms N-PORT are available on the SEC's website at www.sec.gov.
44
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(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 10 Trustees, eight of whom are not "interested persons" of the Trust within the meaning of that term under the 1940 Act ("Independent Trustees") and two 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 ages, position with the Trust, commencement of service, 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 47 portfolios in the Trust. Each Trustee's address is 15935 La Cantera Pkwy, Building Two, San Antonio, TX, 78256. Pursuant to a policy adopted by the Board, the term of office for each Trustee shall be until the Independent Trustee reaches age 75 or an Interested Trustee reaches age 75. The Board may change or grant exceptions from this policy at any time without shareholder approval. A Trustee may resign or be removed by a vote of the other Trustees or the holders of a majority of the outstanding shares of the Trust at any time. Vacancies on the Board can be filled by the action of a majority of the Trustees, provided that after filling such vacancy at least two-thirds of the Trustees have been elected by the shareholders.
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Independent Trustees. | |||||||||||||||||||
Jefferson C. Boyce, Born September 1957 | Lead Independent Trustee, and Vice Chairman | 2013 | Senior Managing Director, New York Life Investments, LLC (1992-2012) | Westhab, Inc. | |||||||||||||||
John C. Walters, Born February 1962 | Trustee | 2019 | Retired. Mr. Walters brings significant Board experience including active involvement with the board of a Fortune 500 company, and a proven record of leading large, complex financial organizations. He has a demonstrated record of success in distribution, manufacturing, investment brokerage, and investment management in both the retail and institutional investment businesses. He has substantial experience in the investment management business with a demonstrated ability to develop and drive strategy while managing operation, financial, and investment risk. | Guardian Variable Products Trust (16 series), Lead Independent Director; Amerilife Holdings LLC, Director; Stadion Money Management; Director; University of North Carolina (Chapel Hill), Member Board of Governors. |
45
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Robert L. Mason, Ph.D., Born July 1946 | Trustee | 1997 | Adjunct Professor in the Department of Management Science and Statistics in the College of Business at the University of Texas at San Antonio (since 2001); Institute Analyst, Southwest Research Institute (March 2002-January 2016) | None | |||||||||||||||
Dawn M. Hawley, Born February 1954 | Trustee | 2014 | Manager of Finance, Menil Foundation, Inc. (May 2007-June 2011), which is a private foundation that oversees the assemblage of sculptures, prints, drawings, photographs, and rare books. Director of Financial Planning and Analysis and Chief Financial Officer, AIM Management Group, Inc. (October 1987-January 2006) | None | |||||||||||||||
Paul L. McNamara, Born July 1948 | Trustee | 2012 | Director, Cantor Opportunistic Alternatives Fund, LLC (March 2010-February 2014) , which is a closed-end fund of funds by Cantor Fitzgerald Investment Advisors, LLC | None |
46
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Richard Y. Newton III, Born January 1956 | Trustee | 2017 | Director, Elta North America (01/18-present), 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 (December 2015-present)); Executive Director, The Union League Club of New York (June 2014-November 2015): Executive Vice President, Air Force Association (August 2012-May 2014); Lieutenant General, United States Air Force (January 2008-June 2012) | None | |||||||||||||||
Barbara B. Ostdiek, Ph.D., Born March 1964 | Trustee | 2008 | Senior Associate Dean of Degree Programs at Jesse H. Jones Graduate School of Business at Rice University (since 2013); Associate Professor of Finance at Jessie H. Jones Graduate School of Business at Rice University (since 2001) | None | |||||||||||||||
Michael F. Reimherr, Born August 1945 | Trustee | 2000 | President of Reimherr Business Consulting (May 1995-December 2017); St. Mary's University Investment Committee overseeing University Endowment (since 2014) | None |
47
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Interested Trustees. | |||||||||||||||||||
David C. Brown, ** Born May 1972 | Trustee | 2019 | Chairman and Chief Executive Officer (since 2013), Co-Chief Executive Officer (2011-2013), Victory Capital Management Inc.; Chairman and Chief Executive Officer, Victory Capital Holdings, Inc. (since 2013). Mr. Brown brings to the Board extensive business, finance and leadership skills gained and developed through years of experience in the financial services industry, including his tenure overseeing the strategic direction as CEO of Victory Capital. These skills, combined with Mr. Brown's extensive knowledge of the financial services industry and demonstrated success in the development and distribution of investment strategies and products, enable him to provide valuable insights to the Board and strategic direction for the Funds | Trustee, Victory Portfolios (42 series), Victory Portfolios II (26 series), Victory Variable Insurance Funds (9 series) |
48
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Daniel S. McNamara, ** Born June 1966 | Trustee and Chair of the Board of Trustees | 2012 | Trustee, President, and Vice Chairman of USAA ETF Trust (June 2017-June 2019); President of Financial Advice & Solutions Group (FASG), USAA (since 2013); Director, IMCO (September 2009-April 2014); President, AMCO (August, 2011-April 2013); Senior Vice President of USAA Financial Planning Services Insurance Agency, Inc. (FPS) (since 2011); Director of USAA Investment Management Company (IMCO) (since 2009); Chairman of Board of IMCO (since 2013); Director of USAA Asset Management Company (AMCO), (August 2011-June 2019); President and Director of USAA Shareholder Account Services (SAS)(October 2009-June 2019); Director and Vice Chairman of FPS (since 2013); President and Director of USAA Investment Corporation (ICORP) (since 2010); Chairman of Board of ICORP (since 2013); Director of USAA Financial Advisors, Inc. (FAI) (since 2013); Chairman of Board of FAI (since 2015). Mr. McNamara brings to the Board extensive experience in the financial services industry, including experience as an officer of the Trust. | None |
** Mr. McNamara and Mr. Brown are "Interested Persons" by reason of their relationships with the Adviser.
The Statement of Additional Information includes additional information about the Trustees of the Trust and is available, without charge, on the SEC's website at www.sec.gov and/or by calling (800)-539-3863.
49
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Officers:
The officers of the Trust, their ages, 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, Building Two, 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 with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | ||||||||||||
Interested Officers. | |||||||||||||||
Christopher K. Dyer, Born February 1962 | President | 2019 | Director of Fund Administration, Victory Capital (2004-present) | ||||||||||||
Scott A Stahorsky, Born July 1969 | Vice President | 2019 | Manager, Fund Administration, Victory Capital (since 2015); Senior Analyst, Fund Administration, Victory Capital (prior to 2015) | ||||||||||||
James K. De Vries, Born April 1969 | Treasurer, Principal Financial Officer | 2018 | Executive Director, Victory Capital Management Inc. (since 2019); Treasurer, USAA ETF Trust (September 2018-June 2019); Executive Director, Investment and Financial Administration, USAA (April 2012-June 2019); Assistant Treasurer, USAA ETF Trust (June 2017-September 2018); Assistant Treasurer, USAA Mutual Funds Trust (December 2013-February 2018) | ||||||||||||
Allan Shaer, Born March 1965 | Assistant Treasurer | 2019 | Senior Vice President, Financial Administration, Citi Fund Services Ohio, Inc. (since 2016); Vice President, Mutual Fund Administration, JP Morgan Chase (2011-2016) | ||||||||||||
Carol D. Trevino, Born October 1965 | Assistant Treasurer | 2018 | Director, Accounting and Finance, Victory Capital Management Inc. (since 2019); Accounting/Financial Director, USAA (December 2013-June 2019); Assistant Treasurer, USAA ETF Trust (September 2018-June 2019). | ||||||||||||
Erin G. Wagner, Born February 1974 | Secretary | 2019 | Deputy General Counsel, the Adviser (since 2013) | ||||||||||||
Charles Booth, Born April 1960 | Anti-Money Laundering Compliance Officer and Identity Theft Officer | 2019 | Director, Regulatory Administration and CCO Support Services, Citi Fund Services Ohio, Inc. (2007-present) | ||||||||||||
Amy Campos, Born July 1976 | Chief Compliance Officer | 2019 | Chief Compliance Officer, USAA Mutual Funds Trust (since 2019); Executive Director, Deputy Chief Compliance Officer, USAA Mutual Funds Trust and USAA ETF Trust (July 2017-June 2019); Compliance Director, USAA Mutual Funds Trust (2014-July 2017) |
50
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
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 December 1, 2019 through May 31, 2020.
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. If these transactional costs were included, your costs would have been higher.
Beginning Account Value 12/1/19 | Actual Ending Account Value 5/31/20 | Hypothetical Ending Account Value 5/31/20 | Actual Expenses Paid During Period 12/1/19- 5/31/20* | Hypothetical Expenses Paid During Period 12/1/19- 5/31/20* | Annualized Expense Ratio During Period 12/1/19- 5/31/20 | ||||||||||||||||||
$ | 1,000.00 | $ | 985.90 | $ | 1,020.55 | $ | 4.42 | $ | 4.50 | 0.89 | % |
* Expenses are equal to the average account value multiplied by the Fund's annualized expense ratio multiplied by 183/366 (the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year).
51
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Additional Federal Income Tax Information
The following federal tax information related to the Fund's fiscal year ended May 31, 2020, 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 2021.
With respect to distributions paid, the Fund designates the following amounts (or, if subsequently determined to be different, the maximum amount allowable) for the fiscal year ended May 31, 2020 (amounts in thousands):
Dividend Received Deduction (corporate shareholders)* | Qualified Dividend Income (non-corporate shareholders)* | Long-Term Capital Gain Distributions(a) | |||||||||||||
14.48 | % | 12.72 | % | $ | 286 |
* Presented as a percentage of net investment income and excludes short-term capital gain distributions paid, if any. All or a portion of these amounts may be exempt from taxation at the state level.
(a) Pursuant to Section 852 of the Internal Revenue Code.
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 |
97447-0720
MAY 31, 2020
Annual Report
USAA Emerging Markets Fund
Beginning January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Fund's shareholder reports like this one will no longer be sent by mail, unless you specifically request paper copies of the reports from the Fund or from your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on VictoryFunds.com, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund or your financial intermediary electronically by notifying your financial intermediary directly, or if you are a direct investor, by calling (800) 235-8396 or logging on to usaa.com. Effective on or about September 8, 2020, a shareholder who has an account directly with the Fund will need to submit their request via email to TA.Processing@FISGlobal.com.
You may elect to receive all future reports in paper free of charge. You can inform the Fund or your financial intermediary that you wish to continue receiving paper copies of your shareholder reports by notifying your financial intermediary directly, or if you are a direct investor, by calling (800) 235-8396 or logging on to usaa.com. Effective on or about September 8, 2020, a shareholder who has an account directly with the Fund will need to submit their request via email to TA.Processing@FISGlobal.com. Your election to receive reports in paper will apply to all funds held with the USAA Mutual Funds or your financial intermediary.
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 logo 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.
USAA Mutual Funds Trust
TABLE OF CONTENTS
Shareholder Letter (Unaudited) | 2 | ||||||
Managers' Commentary (Unaudited) | 4 | ||||||
Investment Overview (Unaudited) | 6 | ||||||
Investment Objective & Portfolio Holdings (Unaudited) | 7 | ||||||
Financial Statements | |||||||
Schedule of Portfolio Investments | 9 | ||||||
Statement of Assets and Liabilities | 23 | ||||||
Statement of Operations | 24 | ||||||
Statements of Changes in Net Assets | 25 | ||||||
Financial Highlights | 28 | ||||||
Notes to Financial Statements | 30 | ||||||
Report of Independent Registered Public Accounting Firm | 42 | ||||||
Supplemental Information (Unaudited) | 43 | ||||||
Proxy Voting and Portfolio Holdings Information | 43 | ||||||
Trustees' and Officers' Information | 44 | ||||||
Expense Examples | 50 | ||||||
Additional Federal Income Tax Information | 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.
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.
1
(Unaudited)
Dear Shareholder,
The previous decade ended with the longest-ever bull market in U.S. equities still intact, even as investors wrestled with issues like softening global economic data, Brexit, and U.S.-China trade relations. In retrospect, those worries seem so pedestrian given what we would soon experience.
A new and unexpected threat—a global pandemic, the novel coronavirus ("COVID-19")—first emerged in Asia and then began spreading globally and throughout the United States during the first quarter of 2020. This unprecedented and unanticipated event not only rendered all existing economic and earnings forecasts moot, but it also roiled stock and bond markets everywhere. Efforts to slow the spread of the virus, though successful to date, also brought the economy to a halt. The historic bull market in stocks ended virtually overnight.
After an initial severe sell-off in March, equity markets recovered sharply. As our annual reporting period drew to a close on May 31, 2020, many of the broad market indexes had recovered and volatility had returned to more palatable levels. In fact, despite all the chaos, the S&P 500® Index, one of the most popular measures of large U.S. stocks, finished the fiscal year (May 31, 2020) at approximately 3,044, which was up more than 10.6% from one year ago.
The market turmoil of early 2020 was not limited to equities. Fixed income volatility spiked when liquidity evaporated in late March as investors struggled to understand the ramifications of stay-at-home orders. Fortunately, the U.S. Federal Reserve (the "Fed") (as well as other global central banks) leapt into action—cutting interest rates, (re)starting quantitative easing and, in the case of the Fed, launching an array of programs to stabilize markets.
The new lending facilities and programs had their intended effect of improving liquidity and trading. Credit spreads across corporate, high-yield, structured, and municipal markets were coaxed down from their highs. In addition, Congress came through with substantial fiscal stimulus that also was applauded by investors and markets. Although fixed income markets regained their footing, the yield on 10-Year Treasurys, a benchmark for low-risk investments, declined steadily during our fiscal year—from 2.14% at the beginning of our reporting period to approximately 0.65% as of May 31, 2020. This suggests that investors remain a little wary.
While the past year has been unprecedented for all of us, both personally and professionally, our portfolio managers continue to scrutinize the financial markets, economic conditions, and the trajectory of the pandemic, which will likely be the guiding factor on Fed policy and the markets.
No matter what happens in the near term, we believe that the massive monetary and fiscal policies introduced earlier this year will have longer-term ramifications. Despite this uncertainty, it's important to remain focused on your long-term investment goals and avoid making emotional decisions. If you invest with us directly, our Member Service Representatives are available to help. Call us at (800) 539-3863 or visit our website at vcm.com.
2
From all of us here at USAA Mutual Funds, thank you for letting us help you work toward your investment goals.
Christopher K. Dyer, CFA
President,
USAA Mutual Funds
3
USAA Mutual Funds Trust
USAA Emerging Markets Fund
Managers' Commentary
(Unaudited)
Victory Solutions
Mannik S. Dhillon, CFA, CAIA
Wasif A. Latif
Sophus Capital, A Victory Capital Investment Franchise
Michael Reynal
Michael Aide*
Tony Chu**
Maria Freund
Trivalent Investments, A Victory Capital Investment Franchise
Robert D. Cerow
John Evers
Lazard Asset Management, LLC
Jai Jacob
James M. Donald, CFA
Kevin O'Hare CFA
Stephen Marra, CFA
Brandes Investment Partners, L.P.***
Christopher J. Garett, CFA
Louis Y. Lau, CFA
Gerardo Zamorano, CFA
Mauricio Abadia
• What were the market conditions during the reporting period?
Global financial market performance varied widely over the period driven by uncertainty related to the duration and economic impact of the novel coronavirus ("COVID-19") pandemic. This generally led to a risk-off environment as investors flocked to safe haven assets such as U.S. Treasurys and gold. Global equities turned mostly lower with the exception of a small breadth of mega-cap securities well-positioned for an extended economic slowdown and the new stay-at-home paradigm. The final month and a half of the reporting period saw a rebound in risky assets as economies began a phased reopening.
Within the United States, the S&P 500® Index dropped nearly 34% from its 2020 high, before beginning to recoup losses with the support of comprehensive monetary and fiscal stimulus, along with encouraging results in COVID-19 vaccine trials. Over the reporting period, the S&P 500® Index returned 12.84%, with large-cap growth stocks leading the way, up to a return of 26.25% as represented by the Russell 1000 Growth Index. Value stocks and small-cap stocks underperformed growth stocks over the period, but more recently have seen a pickup in momentum. U.S. large-cap value stocks were down to a return of -1.64% over the reporting period as gauged by the Russell 1000 Value Index, while U.S. small-cap stocks, were down to a return of -3.44% as represented by the Russell 2000 Index.
*Effective May 1, 2020, Michael Ade no longer manages the Fund.
**Effective December 31, 2019, Tony Chu no longer manages the Fund.
***Effective June 30, 2020 Brandes Investment Partners has been replaced by Victory Solutions.
4
USAA Mutual Funds Trust
USAA Emerging Markets Fund (continued)
Managers' Commentary (continued)
Developed market international and emerging market equities followed a path similar to U.S. equities. Markets led investors on a rollercoaster ride that saw both the MSCI EAFE Index and MSCI Emerging Markets Index drop approximately 34% from their highs in the year. The market drawdown hit bottom on March 23rd and then started a steady ascent, erasing most of the losses as European Central Bank quantitative easing and talks of a 750-billion euros fiscal stimulus helped bolster momentum in the market's recovery. Over the reporting period, developed international equities, represented by the MSCI EAFE Index, were down to a return of -2.81%, while the MSCI Emerging Markets Index returned -4.39%.
• How did the USAA Emerging Markets Fund (the "Fund") perform during the reporting period?
The Fund has three share classes: Fund Shares, Institutional Shares, and Adviser Shares (Redesignated Class A shares). For the reporting period ended May 31, 2020, the Fund Shares, Institutional Shares, and Adviser Shares had total returns of -5.35%, -5.17%, and -5.65%, respectively. This compares to returns of -4.39% for the MSCI Emerging Markets Index and -5.24% for the Lipper Emerging Markets Fund 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 subadvisers. Lazard Asset Management ("Lazard") and Brandes Investment Partners, ("Brandes") are external subadvisers to the Fund, while Sophus Capital and Trivalent Investments are Victory Capital Management franchise utilized as an internal resource for the Fund. The investment adviser and the subadviser each provide day-to-day discretionary management for a portion of the Fund's assets.
Effective June 30, 2020 Brandes no longer manages the Fund.
During the one-year period ending on May 31, 2020, the Fund underperformed the benchmark MSCI Emerging Markets Index. On a country basis, stock selection in South Korea, Malaysia, Thailand and China helped performance. On the negative side, security selection was a detractor in Indonesia, Colombia, India and the Philippines.
Looking at performance from a sector standpoint, cyclical sectors hurt the portfolio as the impact of the COVID-19 pandemic hurt those sectors the most in the spring of 2020. Stock selection in Consumer Discretionary was the largest detractor, with stocks such as Naspers in South Africa*. Stock selection in Financials as well an overweight allocation to Industrials had a negative impact on performance. On the positive side, stock selection in Communications Services aided performance. The Fund's overweight allocation, as well as good security selection in the Information Technology Sector and an underweight and good stock selection, in Materials had a positive impact on performance.
Thank you for allowing us to assist in your investment needs.
*Holdings are subject to change. There is no guarantee that securities mentioned remain in or out of the Fund.
5
USAA Mutual Funds Trust
USAA Emerging Markets Fund
Investment Overview
(Unaudited)
Average Annual Total Return
Year Ended May 31, 2020
Fund Shares | Institutional Shares | Adviser Shares | |||||||||||||||||||||
INCEPTION DATE | 11/7/94 | 8/1/08 | 8/1/10 | ||||||||||||||||||||
Net Asset Value | Net Asset Value | Net Asset Value | MSCI Emerging Markets Index1 | Lipper Emerging Market Funds Index2 | |||||||||||||||||||
One Year | –5.35 | % | –5.17 | % | –5.65 | % | –4.39 | % | –5.24 | % | |||||||||||||
Five Year | 0.38 | % | 0.59 | % | 0.14 | % | 0.88 | % | 1.24 | % | |||||||||||||
Ten Year | 0.54 | % | 0.79 | % | NA | 2.47 | % | 2.91 | % | ||||||||||||||
Since Inception | NA | NA | –0.88 | % | NA | NA |
Past performance is not indicative of future results. 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 for various periods since inception. Without such fee waivers, the total returns would have been lower.
USAA Emerging Markets Fund — Growth of $10,000
1 The unmanaged MSCI Emerging Markets Index is a free-float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets.
2 The unmanaged Lipper Emerging Markets Funds Index tracks the total return performance of the Lipper Emerging Markets Funds category.
The graph reflects investment of growth of a hypothetical $10,000 investment in the Fund. Past performance is no guarantee of future results.
The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
6
USAA Mutual Funds Trust USAA Emerging Markets Fund | May 31, 2020 |
(Unaudited)
Investment Objective & Portfolio Holdings:
The Fund's investment objective is to seek capital appreciation.
Top 10 Sectors
May 31, 2020
(% of Net Assets)
Information Technology | 18.9 | % | |||||
Financials | 18.2 | % | |||||
Consumer Discretionary | 14.2 | % | |||||
Communication Services | 13.8 | % | |||||
Industrials | 7.1 | % | |||||
Energy | 6.9 | % | |||||
Materials | 6.2 | % | |||||
Consumer Staples | 5.5 | % | |||||
Health Care | 4.4 | % | |||||
Real Estate | 2.3 | % | |||||
Utilities | 1.2 | % |
Top 10 Equity Holdings
May 31, 2020
(% of Net Assets)
Alibaba Group Holding Ltd., ADR | 6.2 | % | |||||
Tencent Holdings Ltd. | 5.4 | % | |||||
Samsung Electronics Co. Ltd. | 5.0 | % | |||||
Taiwan Semiconductor Manufacturing Co. Ltd. | 2.3 | % | |||||
China Construction Bank Corp. Class H | 2.1 | % | |||||
Ping An Insurance Group Co. of China Ltd. | 2.1 | % | |||||
NetEase, Inc., ADR | 2.0 | % | |||||
Reliance Industries Ltd. | 1.7 | % | |||||
SK Hynix, Inc. | 1.7 | % | |||||
Wuliangye Yibin Co. Ltd. Class A | 1.4 | % |
Refer to the Schedule of Portfolio Investments for a complete list of securities.
7
USAA Mutual Funds Trust USAA Emerging Markets Fund (continued) | May 31, 2020 |
Country Allocation:
May 31, 2020
(% of Net Assets)
* Includes countries with less than 3.0% of portfolio and short-term investment purchased with cash collateral from securities loaned.
Percentages are of the net assets of the Fund and may not equal 100%.
8
USAA Mutual Funds Trust USAA Emerging Markets Fund | Schedule of Portfolio Investments May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Common Stocks (98.1%) | |||||||||||
Brazil (5.3%): | |||||||||||
Communication Services (0.3%): | |||||||||||
TIM Participacoes SA | 710,300 | $ | 1,813 | ||||||||
Consumer Discretionary (0.2%): | |||||||||||
Afya Ltd. Class A (a) | 13,069 | 257 | |||||||||
Construtora Tenda SA | 127,500 | 600 | |||||||||
Tupy SA (a) | 102,900 | 292 | |||||||||
1,149 | |||||||||||
Consumer Staples (0.0%): (b) | |||||||||||
Ambev SA, ADR | 94,900 | 220 | |||||||||
Energy (0.5%): | |||||||||||
Enauta Participacoes SA | 188,700 | 357 | |||||||||
Petroleo Brasileiro SA, ADR | 378,543 | 2,889 | |||||||||
3,246 | |||||||||||
Financials (1.6%): | |||||||||||
Banco Bradesco SA, ADR | 1,310,836 | 4,535 | |||||||||
Banco do Brasil SA | 914,895 | 5,289 | |||||||||
9,824 | |||||||||||
Health Care (0.0%): (b) | |||||||||||
Notre Dame Intermedica Participacoes SA | 24,500 | 286 | |||||||||
Industrials (0.8%): | |||||||||||
CCR SA | 758,720 | 2,090 | |||||||||
Cia de Locacao das Americas | 513,600 | 1,424 | |||||||||
Iochpe Maxion SA | 63,400 | 164 | |||||||||
JSL SA | 250,500 | 955 | |||||||||
4,633 | |||||||||||
Information Technology (0.6%): | |||||||||||
Cielo SA, ADR | 752,220 | 564 | |||||||||
Pagseguro Digital Ltd. Class A (a) (d) | 95,596 | 3,034 | |||||||||
3,598 | |||||||||||
Materials (0.7%): | |||||||||||
Klabin SA | 428,500 | 1,583 | |||||||||
Vale SA | 289,900 | 2,880 | |||||||||
4,463 | |||||||||||
Utilities (0.6%): | |||||||||||
Cia de Saneamento Do Parana | 68,400 | 352 | |||||||||
Eneva SA (a) | 74,800 | 535 | |||||||||
Neoenergia SA | 706,000 | 2,455 | |||||||||
Omega Geracao SA (a) | 43,500 | 261 | |||||||||
3,603 | |||||||||||
32,835 |
See notes to financial statements.
9
USAA Mutual Funds Trust USAA Emerging Markets Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Canada (0.5%): | |||||||||||
Materials (0.5%): | |||||||||||
First Quantum Minerals Ltd. | 528,731 | $ | 3,099 | ||||||||
China (32.5%): | |||||||||||
Communication Services (7.7%): | |||||||||||
Baidu, Inc., ADR (a) | 23,304 | 2,483 | |||||||||
NetEase, Inc., ADR | 31,400 | 12,023 | |||||||||
Tencent Holdings Ltd. | 607,363 | 32,893 | |||||||||
47,399 | |||||||||||
Consumer Discretionary (9.1%): | |||||||||||
Alibaba Group Holding Ltd., ADR (a) | 183,604 | 38,078 | |||||||||
China East Education Holdings Ltd. (c) | 1,153,000 | 2,278 | |||||||||
China New Higher Education Group Ltd. (c) | 874,000 | 504 | |||||||||
China Yongda Automobiles Services Holdings Ltd. (a) | 1,800,000 | 1,879 | |||||||||
Huayu Automotive Systems Co. Ltd. Class A | 488,700 | 1,317 | |||||||||
JD.com, Inc., ADR (a) | 64,293 | 3,493 | |||||||||
Meituan Dianping Class B (a) (c) | 184,200 | 3,508 | |||||||||
Q Technology Group Co. Ltd. (a) | 1,348,000 | 1,719 | |||||||||
Tianneng Power International Ltd. (d) | 366,000 | 371 | |||||||||
Tongcheng-Elong Holdings Ltd. (a) (c) | 1,620,400 | 2,930 | |||||||||
56,077 | |||||||||||
Consumer Staples (2.2%): | |||||||||||
Ausnutria Dairy Corp. Ltd. | 1,122,000 | 2,279 | |||||||||
China Modern Dairy Holdings Ltd. (a) | 2,405,000 | 267 | |||||||||
Jonjee Hi-Tech Industrial and Commercial Holding Co. Ltd. Class A | 287,500 | 2,223 | |||||||||
Wuliangye Yibin Co. Ltd. Class A | 426,495 | 8,877 | |||||||||
13,646 | |||||||||||
Energy (1.2%): | |||||||||||
China Oilfield Services Ltd. Class H | 1,570,000 | 1,375 | |||||||||
China Shenhua Energy Co. Ltd. Class H | 1,402,000 | 2,568 | |||||||||
CNOOC Ltd., ADR | 29,841 | 3,405 | |||||||||
7,348 | |||||||||||
Financials (5.7%): | |||||||||||
China Construction Bank Corp. Class H | 16,225,000 | 12,797 | |||||||||
China Galaxy Securities Co. Ltd. Class H | 4,216,000 | 2,044 | |||||||||
China Merchants Bank Co. Ltd. Class H | 1,555,000 | 7,327 | |||||||||
Ping An Insurance Group Co. of China Ltd. | 1,281,000 | 12,677 | |||||||||
34,845 | |||||||||||
Health Care (1.0%): | |||||||||||
China Animal Healthcare Ltd. (a) (e) (f) | 1,673,000 | — | (h) | ||||||||
Lepu Medical Technology Beijing Co. Ltd. Class A | 289,700 | 1,417 | |||||||||
Shandong Weigao Group Medical Polymer Co. Ltd. Class H | 336,000 | 589 | |||||||||
Sinopharm Group Co. Ltd. Class H | 769,599 | 1,901 | |||||||||
Wuxi Biologics Cayman, Inc. (a) (c) | 113,000 | 1,784 | |||||||||
YiChang HEC ChangJiang Pharmaceutical Co. Ltd. Class H (c) | 80,400 | 286 | |||||||||
5,977 |
See notes to financial statements.
10
USAA Mutual Funds Trust USAA Emerging Markets Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Industrials (2.4%): | |||||||||||
China Conch Venture Holdings Ltd. | 358,500 | $ | 1,618 | ||||||||
China Lesso Group Holdings Ltd. | 434,000 | 528 | |||||||||
China State Construction International Holdings Ltd. | 5,488,538 | 3,400 | |||||||||
Sany Heavy Industry Co. Ltd. Class A | 703,000 | 1,812 | |||||||||
Zoomlion Heavy Industry Science and Technology Co. Ltd. Class H | 2,980,800 | 2,453 | |||||||||
ZTO Express Cayman, Inc., ADR | 152,670 | 4,980 | |||||||||
14,791 | |||||||||||
Information Technology (0.8%): | |||||||||||
Beijing Sinnet Technology Co. Ltd. Class A | 318,400 | 1,113 | |||||||||
Beijing Thunisoft Corp. Ltd. Class A | 420,600 | 1,575 | |||||||||
Chinasoft International Ltd. (d) | 720,000 | 363 | |||||||||
Kingdee International Software Group Co. Ltd. | 663,000 | 1,180 | |||||||||
Silergy Corp. | 8,000 | 433 | |||||||||
4,664 | |||||||||||
Materials (1.5%): | |||||||||||
Anhui Conch Cement Co. Ltd. Class H | 935,500 | 7,054 | |||||||||
Hengli Petrochemical Co. Ltd. Class A | 1,064,300 | 2,082 | |||||||||
9,136 | |||||||||||
Real Estate (0.8%): | |||||||||||
China SCE Group Holdings Ltd. | 7,297,132 | 3,038 | |||||||||
Sunac China Holdings Ltd. | 476,000 | 2,012 | |||||||||
5,050 | |||||||||||
Utilities (0.1%): | |||||||||||
China Tian Lun Gas Holdings Ltd. | 409,500 | 287 | |||||||||
199,220 | |||||||||||
Colombia (0.5%): | |||||||||||
Financials (0.5%): | |||||||||||
Bancolombia SA, ADR | 112,324 | 2,905 | |||||||||
Cyprus (0.0%): (b) | |||||||||||
Financials (0.0%): (b) | |||||||||||
TCS Group Holding PLC, GDR | 17,581 | 306 | |||||||||
Egypt (0.4%): | |||||||||||
Communication Services (0.1%): | |||||||||||
Telecom Egypt Co. | 641,983 | 442 | |||||||||
Financials (0.3%): | |||||||||||
Commercial International Bank Egypt SAE, GDR | 490,556 | 1,928 | |||||||||
Credit Agricole Egypt SAE | 128,928 | 203 | |||||||||
2,131 | |||||||||||
2,573 | |||||||||||
Greece (0.6%): | |||||||||||
Communication Services (0.3%): | |||||||||||
Hellenic Telecommunications Organization SA | 111,348 | 1,559 |
See notes to financial statements.
11
USAA Mutual Funds Trust USAA Emerging Markets Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Financials (0.2%): | |||||||||||
National Bank of Greece SA (a) | 802,938 | $ | 1,095 | ||||||||
Industrials (0.0%): (b) | |||||||||||
Mytilineos Holdings SA | 29,433 | 235 | |||||||||
Utilities (0.1%): | |||||||||||
Terna Energy SA | 58,977 | 661 | |||||||||
3,550 | |||||||||||
Hong Kong (5.0%): | |||||||||||
Communication Services (0.5%): | |||||||||||
China Mobile Ltd., ADR | 75,720 | 2,662 | |||||||||
NetDragon Websoft Holdings Ltd. | 172,000 | 431 | |||||||||
3,093 | |||||||||||
Consumer Discretionary (1.1%): | |||||||||||
Geely Automobile Holdings Ltd. | 1,237,000 | 1,709 | |||||||||
TCL Electronics Holdings Ltd. | 572,000 | 243 | |||||||||
Techtronic Industries Co. Ltd. | 586,500 | 5,117 | |||||||||
7,069 | |||||||||||
Consumer Staples (0.5%): | |||||||||||
Hengan International Group Co. Ltd. | 289,000 | 2,380 | |||||||||
Vinda International Holdings Ltd. | 164,000 | 499 | |||||||||
2,879 | |||||||||||
Energy (1.3%): | |||||||||||
CNOOC Ltd. | 4,216,719 | 4,818 | |||||||||
Kunlun Energy Co. Ltd. | 4,650,000 | 2,868 | |||||||||
7,686 | |||||||||||
Financials (0.1%): | |||||||||||
Far East Horizon Ltd. | 377,000 | 335 | |||||||||
Health Care (0.3%): | |||||||||||
Sino Biopharmaceutical Ltd. | 1,047,000 | 1,654 | |||||||||
Industrials (0.1%): | |||||||||||
Sinotruk Hong Kong Ltd. | 210,000 | 512 | |||||||||
Information Technology (0.2%): | |||||||||||
Kingboard Laminates Holdings Ltd. | 1,669,500 | 1,475 | |||||||||
Materials (0.1%): | |||||||||||
China Resources Cement Holdings Ltd. | 440,000 | 556 | |||||||||
Nine Dragons Paper Holdings Ltd. | 409,000 | 360 | |||||||||
916 | |||||||||||
Real Estate (0.7%): | |||||||||||
China Overseas Grand Oceans Group Ltd. | 610,000 | 327 | |||||||||
Shimao Property Holdings Ltd. | 964,500 | 4,045 | |||||||||
4,372 |
See notes to financial statements.
12
USAA Mutual Funds Trust USAA Emerging Markets Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Utilities (0.1%): | |||||||||||
Canvest Environmental Protection Group Co. Ltd. | 650,000 | $ | 273 | ||||||||
China Water Affairs Group Ltd. (d) | 432,000 | 289 | |||||||||
562 | |||||||||||
30,553 | |||||||||||
Hungary (0.5%): | |||||||||||
Financials (0.4%): | |||||||||||
OTP Bank Nyrt (a) | 75,943 | 2,556 | |||||||||
Health Care (0.1%): | |||||||||||
Richter Gedeon Nyrt | 24,451 | 535 | |||||||||
3,091 | |||||||||||
India (9.1%): | |||||||||||
Consumer Discretionary (0.7%): | |||||||||||
Aditya Birla Fashion and Retail Ltd. (a) | 686,975 | 1,092 | |||||||||
Bajaj Auto Ltd. | 64,952 | 2,336 | |||||||||
Crompton Greaves Consumer Electricals Ltd. | 86,089 | 256 | |||||||||
Trident Ltd. | 6,311,818 | 381 | |||||||||
4,065 | |||||||||||
Consumer Staples (0.7%): | |||||||||||
Hindustan Unilever Ltd. | 94,733 | 2,584 | |||||||||
Kaveri Seed Co. Ltd. | 71,646 | 380 | |||||||||
Varun Beverages Ltd. | 112,570 | 943 | |||||||||
3,907 | |||||||||||
Energy (1.7%): | |||||||||||
Reliance Industries Ltd. | 546,262 | 10,613 | |||||||||
Financials (2.6%): | |||||||||||
Axis Bank Ltd. | 251,167 | 1,289 | |||||||||
Axis Bank Ltd., GDR | 106,449 | 2,623 | |||||||||
Cholamandalam Investment and Finance Co. Ltd. | 637,396 | 1,203 | |||||||||
Housing Development Finance Corp. Ltd. | 133,309 | 2,941 | |||||||||
ICICI Bank Ltd., ADR | 482,553 | 4,198 | |||||||||
Multi Commodity Exchange of India Ltd. | 148,571 | 2,620 | |||||||||
Muthoot Finance Ltd. | 50,163 | 575 | |||||||||
Power Finance Corp. Ltd. | 331,346 | 331 | |||||||||
15,780 | |||||||||||
Health Care (0.9%): | |||||||||||
Alembic Pharmaceuticals Ltd. | 48,968 | 563 | |||||||||
Dr. Reddy's Laboratories Ltd. | 33,351 | 1,795 | |||||||||
Granules India Ltd. | 326,699 | 740 | |||||||||
Ipca Laboratories Ltd. | 36,159 | 713 | |||||||||
Sanofi India Ltd. | 16,268 | 1,664 | |||||||||
5,475 |
See notes to financial statements.
13
USAA Mutual Funds Trust USAA Emerging Markets Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Industrials (0.1%): | |||||||||||
Engineers India Ltd. | 196,524 | $ | 165 | ||||||||
Escorts Ltd. | 41,761 | 500 | |||||||||
665 | |||||||||||
Information Technology (1.6%): | |||||||||||
HCL Technologies Ltd. | 500,358 | 3,652 | |||||||||
Infosys Technologies Ltd., ADR | 402,820 | 3,666 | |||||||||
Mphasis Ltd. | 25,975 | 296 | |||||||||
Tata Consultancy Services Ltd. | 89,794 | 2,349 | |||||||||
9,963 | |||||||||||
Materials (0.7%): | |||||||||||
Asian Paints Ltd. | 70,505 | 1,573 | |||||||||
Birla Corp. Ltd. | 47,650 | 327 | |||||||||
Coromandel International Ltd. | 47,470 | 406 | |||||||||
HeidelbergCement India Ltd. | 213,476 | 462 | |||||||||
Vedanta Ltd. | 1,388,959 | 1,698 | |||||||||
4,466 | |||||||||||
Utilities (0.1%): | |||||||||||
CESC Ltd. | 34,064 | 250 | |||||||||
Gujarat Gas Ltd. | 143,365 | 456 | |||||||||
706 | |||||||||||
55,640 | |||||||||||
Indonesia (1.7%): | |||||||||||
Communication Services (0.4%): | |||||||||||
PT Media Nusantara Citra Tbk | 4,863,600 | 284 | |||||||||
PT Telekomunikasi Indonesia Persero Tbk, ADR | 100,935 | 2,155 | |||||||||
2,439 | |||||||||||
Financials (1.2%): | |||||||||||
PT Bank Mandiri Persero Tbk | 6,401,290 | 1,972 | |||||||||
PT Bank Negara Indonesia Persero Tbk | 5,788,900 | 1,527 | |||||||||
PT Bank Rakyat Indonesia Persero Tbk | 19,160,164 | 3,889 | |||||||||
7,388 | |||||||||||
Industrials (0.1%): | |||||||||||
PT Wijaya Karya Persero Tbk (a) | 4,336,200 | 324 | |||||||||
10,151 | |||||||||||
Jersey (0.0%): (b) | |||||||||||
Information Technology (0.0%): (b) | |||||||||||
WNS Holdings Ltd., ADR (a) | 6,867 | 332 | |||||||||
Korea, Republic Of (15.6%): | |||||||||||
Communication Services (1.8%): | |||||||||||
Innocean Worldwide, Inc. | 20,937 | 876 | |||||||||
NAVER Corp. | 10,221 | 1,869 | |||||||||
NCSoft Corp. | 12,681 | 8,101 | |||||||||
Neowiz (a) | 18,999 | 337 | |||||||||
11,183 |
See notes to financial statements.
14
USAA Mutual Funds Trust USAA Emerging Markets Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Consumer Discretionary (1.7%): | |||||||||||
Danawa Co. Ltd. (a) | 13,665 | $ | 292 | ||||||||
DoubleUGames Co. Ltd. | 5,443 | 295 | |||||||||
F&F Co. Ltd. | 24,757 | 1,994 | |||||||||
GS Home Shopping, Inc. | 2,282 | 220 | |||||||||
Hwaseung Enterprise Co. Ltd. | 25,768 | 313 | |||||||||
Hyundai Mobis Co. Ltd. | 29,319 | 4,701 | |||||||||
Kia Motors Corp. | 67,849 | 1,887 | |||||||||
SL Corp. (e) (g) | 20,761 | 188 | |||||||||
Youngone Corp. | 13,889 | 345 | |||||||||
10,235 | |||||||||||
Consumer Staples (0.9%): | |||||||||||
GS Retail Co. Ltd. | 41,892 | 1,444 | |||||||||
KT&G Corp. | 22,014 | 1,494 | |||||||||
Maeil Dairies Co. Ltd. | 10,793 | 707 | |||||||||
Orion Corp. | 15,739 | 1,678 | |||||||||
5,323 | |||||||||||
Financials (1.3%): | |||||||||||
DB Insurance Co. Ltd. | 44,469 | 1,564 | |||||||||
Hana Financial Group, Inc. | 117,637 | 2,842 | |||||||||
KIWOOM Securities Co. Ltd. | 6,500 | 416 | |||||||||
Samsung Securities Co. Ltd. | 70,855 | 1,609 | |||||||||
Shinhan Financial Group Co. Ltd. | 75,167 | 1,837 | |||||||||
8,268 | |||||||||||
Health Care (0.9%): | |||||||||||
Celltrion, Inc. (a) | 15,191 | 2,630 | |||||||||
Hanmi Pharm Co. Ltd. | 6,064 | 1,165 | |||||||||
Seegene, Inc. | 16,112 | 1,524 | |||||||||
5,319 | |||||||||||
Industrials (0.7%): | |||||||||||
Daelim Industrial Co. Ltd. | 7,803 | 584 | |||||||||
Hyundai Glovis Co. Ltd. | 3,286 | 301 | |||||||||
KEPCO Plant Service & Engineering Co. Ltd. | 15,901 | 398 | |||||||||
Samsung Engineering Co. Ltd. (a) | 155,232 | 1,525 | |||||||||
SK Holdings Co. Ltd. | 8,928 | 1,731 | |||||||||
4,539 | |||||||||||
Information Technology (8.0%): | |||||||||||
Douzone Bizon Co. Ltd. | 30,092 | 2,926 | |||||||||
NHN KCP Corp. | 18,646 | 795 | |||||||||
Partron Co. Ltd. | 46,748 | 325 | |||||||||
Samsung Electro-Mechanics Co. Ltd. | 32,909 | 3,340 | |||||||||
Samsung Electronics Co. Ltd. | 740,419 | 30,496 | |||||||||
SFA Engineering Corp. | 20,119 | 577 | |||||||||
SK Hynix, Inc. | 156,388 | 10,371 | |||||||||
48,830 |
See notes to financial statements.
15
USAA Mutual Funds Trust USAA Emerging Markets Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Materials (0.3%): | |||||||||||
Korea Petrochemical Ind Co. Ltd. | 2,411 | $ | 254 | ||||||||
SK Materials Co. Ltd. | 7,206 | 945 | |||||||||
Soulbrain Co. Ltd. | 9,325 | 611 | |||||||||
1,810 | |||||||||||
95,507 | |||||||||||
Luxembourg (0.0%): (b) | |||||||||||
Communication Services (0.0%): (b) | |||||||||||
Play Communications SA (c) | 40,032 | 284 | |||||||||
Malaysia (0.9%): | |||||||||||
Communication Services (0.1%): | |||||||||||
TIME dotCom Bhd | 193,000 | 474 | |||||||||
Energy (0.1%): | |||||||||||
Serba Dinamik Holdings Bhd | 1,051,390 | 391 | |||||||||
Health Care (0.6%): | |||||||||||
Supermax Corp. Bhd (a) | 1,034,500 | 1,837 | |||||||||
Top Glove Corp. Bhd | 685,000 | 2,101 | |||||||||
3,938 | |||||||||||
Information Technology (0.1%): | |||||||||||
V.S. Industry Bhd | 1,594,500 | 326 | |||||||||
Materials (0.0%): (b) | |||||||||||
Scientex Bhd | 142,000 | 271 | |||||||||
Real Estate (0.0%): (b) | |||||||||||
Eco World Development Group Bhd (a) | 2,769,800 | 314 | |||||||||
5,714 | |||||||||||
Mexico (2.9%): | |||||||||||
Communication Services (0.5%): | |||||||||||
America Movil SAB de CV, Series L, ADR | 221,656 | 2,939 | |||||||||
Consumer Staples (0.6%): | |||||||||||
Arca Continental SAB de CV | 396,084 | 1,768 | |||||||||
Kimberly-Clark de Mexico SAB de CV, Series A | 1,066,400 | 1,656 | |||||||||
La Comer SAB de CV | 375,752 | 461 | |||||||||
3,885 | |||||||||||
Energy (0.0%): (b) | |||||||||||
Vista Oil & Gas SAB de CV, ADR (a) | 48,674 | 143 | |||||||||
Financials (0.4%): | |||||||||||
Banco del Bajio SA (a) (c) | 198,181 | 181 | |||||||||
Gentera SAB de CV | 2,028,883 | 838 | |||||||||
Grupo Financiero Banorte SAB de CV Class O | 368,100 | 1,117 | |||||||||
Qualitas Controladora SAB de CV | 85,861 | 342 | |||||||||
2,478 |
See notes to financial statements.
16
USAA Mutual Funds Trust USAA Emerging Markets Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Industrials (0.6%): | |||||||||||
Controladora Vuela Cia de Aviacion SAB de CV, ADR (a) | 234,033 | $ | 1,170 | ||||||||
Grupo Aeroportuario del Centro Norte SAB de CV, ADR (a) | 54,355 | 1,916 | |||||||||
Grupo Aeroportuario del Centro Norte SAB de CV (a) | 90,672 | 399 | |||||||||
3,485 | |||||||||||
Materials (0.4%): | |||||||||||
Grupo Cementos de Chihuahua SAB de CV | 157,917 | 580 | |||||||||
Grupo Mexico SAB de CV Class B | 977,300 | 2,094 | |||||||||
2,674 | |||||||||||
Real Estate (0.4%): | |||||||||||
Concentradora Fibra Danhos SA de CV | 328,477 | 304 | |||||||||
Corp Inmobiliaria Vesta SAB de CV | 1,184,366 | 1,619 | |||||||||
Prologis Property Mexico SA de CV | 151,541 | 288 | |||||||||
2,211 | |||||||||||
17,815 | |||||||||||
Peru (0.4%): | |||||||||||
Financials (0.4%): | |||||||||||
Credicorp Ltd. | 16,330 | 2,251 | |||||||||
Philippines (0.6%): | |||||||||||
Financials (0.6%): | |||||||||||
BDO Unibank, Inc. | 1,324,300 | 2,632 | |||||||||
Metropolitan Bank & Trust Co. | 1,641,120 | 1,144 | |||||||||
3,776 | |||||||||||
Real Estate (0.0%): (b) | |||||||||||
Vista Land & Lifescapes, Inc. | 2,294,300 | 148 | |||||||||
3,924 | |||||||||||
Poland (0.2%): | |||||||||||
Energy (0.2%): | |||||||||||
Grupa Lotos SA | 79,339 | 1,179 | |||||||||
Portugal (0.3%): | |||||||||||
Consumer Staples (0.3%): | |||||||||||
Jeronimo Martins SGPS SA (a) | 120,296 | 2,051 | |||||||||
Qatar (0.1%): | |||||||||||
Energy (0.1%): | |||||||||||
Qatar Gas Transport Co. Ltd. | 576,061 | 365 | |||||||||
Romania (0.2%): | |||||||||||
Real Estate (0.2%): | |||||||||||
Nepi Rockcastle PLC | 282,618 | 1,445 | |||||||||
Russian Federation (4.1%): | |||||||||||
Communication Services (0.9%): | |||||||||||
Mobile TeleSystems PJSC, ADR | 296,070 | 2,632 | |||||||||
Yandex NV Class A (a) | 71,391 | 2,872 | |||||||||
5,504 |
See notes to financial statements.
17
USAA Mutual Funds Trust USAA Emerging Markets Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Energy (1.8%): | |||||||||||
LUKOIL PJSC, ADR | 115,568 | $ | 8,701 | ||||||||
Rosneft Oil Co. PJSC, GDR | 403,046 | 2,119 | |||||||||
TMK PJSC | 380,140 | 322 | |||||||||
11,142 | |||||||||||
Financials (1.0%): | |||||||||||
Moscow Exchange MICEX | 187,810 | 307 | |||||||||
Sberbank of Russia PJSC | 1,997,156 | 5,742 | |||||||||
6,049 | |||||||||||
Materials (0.4%): | |||||||||||
MMC Norilsk Nickel PJSC, ADR | 56,650 | 1,801 | |||||||||
Polymetal International PLC | 26,133 | 525 | |||||||||
2,326 | |||||||||||
25,021 | |||||||||||
Saudi Arabia (0.7%): | |||||||||||
Consumer Discretionary (0.2%): | |||||||||||
Leejam Sports Co. JSC | 64,002 | 944 | |||||||||
Financials (0.3%): | |||||||||||
Arab National Bank | 349,437 | 1,856 | |||||||||
Industrials (0.2%): | |||||||||||
Saudi Industrial Services Co. | 263,794 | 1,247 | |||||||||
4,047 | |||||||||||
South Africa (1.6%): | |||||||||||
Communication Services (0.6%): | |||||||||||
Naspers Ltd. Class N | 23,833 | 3,883 | |||||||||
Energy (0.1%): | |||||||||||
Exxaro Resources Ltd. | 48,987 | 348 | |||||||||
Financials (0.4%): | |||||||||||
Nedbank Group Ltd. | 262,845 | 1,489 | |||||||||
Standard Bank Group Ltd. | 200,278 | 1,167 | |||||||||
2,656 | |||||||||||
Materials (0.4%): | |||||||||||
African Rainbow Minerals Ltd. | 65,773 | 636 | |||||||||
Gold Fields Ltd., ADR | 227,425 | 1,756 | |||||||||
Impala Platinum Holdings Ltd. | 42,537 | 284 | |||||||||
2,676 | |||||||||||
Real Estate (0.1%): | |||||||||||
Resilient REIT Ltd. | 120,044 | 255 | |||||||||
9,818 | |||||||||||
Taiwan (11.1%): | |||||||||||
Communication Services (0.1%): | |||||||||||
International Games System Co. Ltd. | 23,000 | 430 |
See notes to financial statements.
18
USAA Mutual Funds Trust USAA Emerging Markets Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Consumer Discretionary (0.6%): | |||||||||||
Fulgent Sun International Holding Co. Ltd. | 80,000 | $ | 267 | ||||||||
Hotai Motor Co. Ltd. | 97,000 | 1,740 | |||||||||
Merida Industry Co. Ltd. | 110,000 | 660 | |||||||||
Nan Liu Enterprise Co. Ltd. | 47,000 | 382 | |||||||||
Poya International Co. Ltd. | 21,000 | 405 | |||||||||
3,454 | |||||||||||
Financials (1.0%): | |||||||||||
Chailease Holding Co. Ltd. | 637,927 | 2,487 | |||||||||
King's Town Bank Co. Ltd. | 402,000 | 417 | |||||||||
Yuanta Financial Holding Co. Ltd. | 6,523,000 | 3,540 | |||||||||
6,444 | |||||||||||
Health Care (0.6%): | |||||||||||
TaiDoc Technology Corp. | 270,000 | 2,640 | |||||||||
Universal Vision Biotechnology Co. Ltd. | 277,000 | 1,314 | |||||||||
3,954 | |||||||||||
Industrials (1.1%): | |||||||||||
Airtac International Group | 195,000 | 3,362 | |||||||||
Chicony Power Technology Co. Ltd. | 265,000 | 592 | |||||||||
Kung Long Batteries Industrial Co. Ltd. | 133,000 | 639 | |||||||||
Shin Zu Shing Co. Ltd. | 69,000 | 313 | |||||||||
Sunonwealth Electric Machine Industry Co. Ltd. | 1,073,000 | 1,922 | |||||||||
6,828 | |||||||||||
Information Technology (7.6%): | |||||||||||
Accton Technology Corp. | 116,000 | 935 | |||||||||
Chipbond Technology Corp. | 238,000 | 489 | |||||||||
Compeq Manufacturing Co. Ltd. | 1,971,000 | 2,770 | |||||||||
Elan Microelectronics Corp. | 194,000 | 648 | |||||||||
FLEXium Interconnect, Inc. | 83,000 | 302 | |||||||||
Formosa Sumco Technology Corp. | 356,000 | 1,878 | |||||||||
Hon Hai Precision Industry Co. Ltd., GDR | 379,551 | 1,876 | |||||||||
Hon Hai Precision Industry Co. Ltd. | 1,849,000 | 4,678 | |||||||||
King Yuan Electronics Co. Ltd. | 316,000 | 318 | |||||||||
Largan Precision Co. Ltd. | 19,406 | 2,486 | |||||||||
MediaTek, Inc. | 188,000 | 2,903 | |||||||||
Micro-Star International Co. Ltd. | 47,000 | 159 | |||||||||
Parade Technologies Ltd. | 24,000 | 691 | |||||||||
Powertech Technology, Inc. | 91,000 | 295 | |||||||||
Radiant Opto-Electronics Corp. | 128,000 | 441 | |||||||||
Silicon Motion Technology Corp., ADR | 93,159 | 4,199 | |||||||||
Simplo Technology Co. Ltd. | 51,000 | 546 | |||||||||
Sinbon Electronics Co. Ltd. | 153,000 | 770 | |||||||||
Taiwan Semiconductor Manufacturing Co. Ltd., ADR | 93,766 | 4,719 | |||||||||
Taiwan Semiconductor Manufacturing Co. Ltd. | 1,440,000 | 14,000 | |||||||||
Tripod Technology Corp. | 172,000 | 647 | |||||||||
Unimicron Technology Corp. | 361,000 | 485 | |||||||||
Wistron Corp. | 308,000 | 294 | |||||||||
46,529 |
See notes to financial statements.
19
USAA Mutual Funds Trust USAA Emerging Markets Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Real Estate (0.1%): | |||||||||||
Chong Hong Construction Co. Ltd. | 195,000 | $ | 544 | ||||||||
68,183 | |||||||||||
Thailand (1.1%): | |||||||||||
Communication Services (0.2%): | |||||||||||
Advanced Info Service PCL | 247,500 | 1,499 | |||||||||
Consumer Discretionary (0.1%): | |||||||||||
Sri Trang Agro-Industry PCL | 434,600 | 363 | |||||||||
Financials (0.1%): | |||||||||||
Bangkok Life Assurance PCL Class R | 527,800 | 249 | |||||||||
Thanachart Capital PCL | 204,000 | 235 | |||||||||
484 | |||||||||||
Industrials (0.4%): | |||||||||||
Gunkul Engineering PCL | 21,916,500 | 1,960 | |||||||||
Sino-Thai Engineering & Construction PCL | 917,500 | 443 | |||||||||
2,403 | |||||||||||
Materials (0.3%): | |||||||||||
Tipco Asphalt PCL | 2,956,600 | 2,050 | |||||||||
6,799 | |||||||||||
Turkey (1.3%): | |||||||||||
Communication Services (0.3%): | |||||||||||
Turk Telekomunikasyon A/S (a) | 1,769,232 | 1,921 | |||||||||
Consumer Discretionary (0.3%): | |||||||||||
Dogus Otomotiv Servis ve Ticaret A/S (d) | 271,575 | 428 | |||||||||
Tofas Turk Otomobil Fabrikasi A/S | 494,632 | 1,618 | |||||||||
2,046 | |||||||||||
Consumer Staples (0.1%): | |||||||||||
Coca-Cola Icecek A/S | 65,326 | 388 | |||||||||
Industrials (0.3%): | |||||||||||
KOC Holding A/S, ADR | 137,770 | 1,579 | |||||||||
Tekfen Holding A/S | 127,032 | 261 | |||||||||
1,840 | |||||||||||
Materials (0.1%): | |||||||||||
Anadolu Cam Sanayii A/S (d) | 631,551 | 393 | |||||||||
Utilities (0.2%): | |||||||||||
Enerjisa Enerji A/S (c) | 1,242,941 | 1,482 | |||||||||
8,070 | |||||||||||
United Kingdom (0.9%): | |||||||||||
Consumer Staples (0.3%): | |||||||||||
Unilever NV | 27,639 | 1,428 |
See notes to financial statements.
20
USAA Mutual Funds Trust USAA Emerging Markets Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Materials (0.6%): | |||||||||||
Anglo American PLC | 96,745 | $ | 2,047 | ||||||||
Antofagasta PLC | 164,576 | 1,797 | |||||||||
3,844 | |||||||||||
5,272 | |||||||||||
Total Common Stocks (Cost $540,001) | 602,000 | ||||||||||
Preferred Stocks (0.6%) | |||||||||||
Brazil (0.6%): | |||||||||||
Consumer Discretionary (0.3%): | |||||||||||
Lojas Americanas SA | 357,700 | 1,894 | |||||||||
Financials (0.0%): (b) | |||||||||||
Banco do Estado do Rio Grande do Sul SA | 82,100 | 193 | |||||||||
Industrials (0.3%): | |||||||||||
Randon SA Implementos e Participacoes | 1,082,200 | 1,785 | |||||||||
3,872 | |||||||||||
Total Preferred Stocks (Cost $4,722) | 3,872 | ||||||||||
Rights (0.0%) (b) | |||||||||||
India (0.0%): (b) | |||||||||||
Energy (0.0%): (b) | |||||||||||
Reliance Industries Ltd. Class R Expires 06/04/20 (a) | 19,987 | 59 | |||||||||
Taiwan (0.0%): (b) | |||||||||||
Information Technology (0.0%): (b) | |||||||||||
Simplo Technology Co. Ltd. Expires 03/26/21 (a) (e) (f) | 1,757 | — | (h) | ||||||||
Total Rights (Cost $—) (h) | 59 | ||||||||||
Exchange-Traded Funds (0.0%) (b) | |||||||||||
United States (0.0%): (b) | |||||||||||
iShares MSCI Emerging Markets Small-Cap ETF | 1,606 | 59 | |||||||||
Total Exchange-Traded Funds (Cost $52) | 59 | ||||||||||
Collateral for Securities Loaned^ (0.6%) | |||||||||||
United States (0.6%): | |||||||||||
HSBC U.S. Government Money Market Fund I Shares, 0.13% (i) | 1,789,215 | 1,789 | |||||||||
Invesco Government & Agency Portfolio Institutional Shares, 0.12% (i) | 1,854,300 | 1,854 | |||||||||
Total Collateral for Securities Loaned (Cost $3,643) | 3,643 | ||||||||||
Total Investments (Cost $548,418) — 99.3% | 609,633 | ||||||||||
Other assets in excess of liabilities — 0.7% | 3,938 | ||||||||||
NET ASSETS — 100.00% | $ | 613,571 |
See notes to financial statements.
21
USAA Mutual Funds Trust USAA Emerging Markets Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
At May 31, 2020 the Fund's investments in foreign securities were 77.68% of net assets.
^ Purchased with cash collateral from securities on loan.
(a) Non-income producing security.
(b) Amount represents less than 0.05% of net assets.
(c) Rule 144A security or other security that is restricted as to resale to institutional investors. The Fund's Adviser has deemed this security to be liquid based upon procedures approved by the Board of Trustees. As of May 31, 2020, the fair value of these securities was $13,430 (thousands) and amounted to 2.2% of net assets.
(d) All or a portion of this security is on loan.
(e) The Fund's Adviser has deemed this security to be illiquid based upon procedures approved by the Board of Trustees. As of May 31, 2020, illiquid securities were less than 0.0% of the Fund's net assets.
(f) Security was fair valued based upon procedures approved by the Board of Trustees and represents 0.0% of the Fund's net assets as of May 31, 2020. This security is classified as Level 3 within the fair value hierarchy. (See Note 2)
(g) Security was fair valued based upon procedures approved by the Board of Trustees and represents less than 0.1% of the Fund's net assets as of May 31, 2020. (See Note 2)
(h) Rounds to less than $1 thousand.
(i) Rate disclosed is the daily yield on May 31, 2020.
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.
22
USAA Mutual Funds Trust | Statement of Assets and Liabilities May 31, 2020 |
(Amounts in Thousands, Except Per Share Amounts)
USAA Emerging Markets Fund | |||||||
Assets: | |||||||
Investments, at value (Cost $548,418) | $ | 609,633 | (a) | ||||
Foreign currency, at value (Cost $2,848) | 2,846 | ||||||
Cash and cash equivalents | 5,838 | ||||||
Receivables: | |||||||
Interest and dividends | 965 | ||||||
Capital shares issued | 821 | ||||||
Investments sold | 4,918 | ||||||
Reclaims | 67 | ||||||
From Adviser | 138 | ||||||
Prepaid expenses | 19 | ||||||
Total assets | 625,245 | ||||||
Liabilities: | |||||||
Payables: | |||||||
Collateral received on loaned securities | 3,643 | ||||||
Investments purchased | 6,842 | ||||||
Capital shares redeemed | 345 | ||||||
Accrued foreign capital gains taxes | 51 | ||||||
Accrued expenses and other payables: | |||||||
Investment advisory fees | 505 | ||||||
Administration fees | 62 | ||||||
Custodian fees | 67 | ||||||
Transfer agent fees | 66 | ||||||
Compliance fees | — | (b) | |||||
12b-1 fees | — | (b) | |||||
Other accrued expenses | 93 | ||||||
Total liabilities | 11,674 | ||||||
Net Assets: | |||||||
Capital | 702,496 | ||||||
Total distributable earnings/(loss) | (88,925 | ) | |||||
Net assets | $ | 613,571 | |||||
Net Assets | |||||||
Fund Shares | $ | 281,937 | |||||
Institutional Shares | 327,156 | ||||||
Adviser Shares | 4,478 | ||||||
Total | $ | 613,571 | |||||
Shares (unlimited number of shares authorized with no par value): | |||||||
Fund Shares | 17,442 | ||||||
Institutional Shares | 20,273 | ||||||
Adviser Shares | 279 | ||||||
Total | 37,994 | ||||||
Net asset value, offering and redemption price per share: (c) | |||||||
Fund Shares | $ | 16.16 | |||||
Institutional Shares | $ | 16.14 | |||||
Adviser Shares | $ | 16.08 |
(a) Includes $3,704 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.
23
USAA Mutual Funds Trust | Statement of Operations For the Year Ended May 31, 2020 |
(Amounts in Thousands)
USAA Emerging Markets Fund | |||||||
Investment Income: | |||||||
Dividends | $ | 22,893 | |||||
Interest | 209 | ||||||
Securities lending (net of fees) | 56 | ||||||
Foreign tax withholding | (1,832 | ) | |||||
Total income | 21,326 | ||||||
Expenses: | |||||||
Investment advisory fees | 7,233 | ||||||
Administration fees — Fund Shares | 493 | ||||||
Administration fees — Institutional Shares | 393 | ||||||
Administration fees — Adviser Shares | 7 | ||||||
Sub-Administration fees | 67 | ||||||
12b-1 fees — Adviser Shares | 12 | ||||||
Custodian fees | 485 | ||||||
Transfer agent fees — Fund Shares | 844 | ||||||
Transfer agent fees — Institutional Shares | 393 | ||||||
Transfer agent fees — Adviser Shares | — | (a) | |||||
Trustees' fees | 49 | ||||||
Compliance fees | 4 | ||||||
Legal and audit fees | 192 | ||||||
State registration and filing fees | 40 | ||||||
Interest expense on interfund lending | 2 | ||||||
Line of credit fees | 9 | ||||||
Other expenses | 117 | ||||||
Total expenses | 10,340 | ||||||
Expenses waived/reimbursed by Adviser | (345 | ) | |||||
Net expenses | 9,995 | ||||||
Net Investment Income (Loss) | 11,331 | ||||||
Realized/Unrealized Gains (Losses) from Investments: | |||||||
Net realized gains (losses) from investment securities and foreign currency translations | 2,403 | ||||||
Foreign taxes on realized gains | (126 | ) | |||||
Net change in unrealized appreciation/depreciation on investment securities and foreign currency translations | (43,998 | ) | |||||
Net change in accrued foreign taxes on unrealized gains | 70 | ||||||
Net realized/unrealized gains (losses) on investments | (41,651 | ) | |||||
Change in net assets resulting from operations | $ | (30,320 | ) |
(a) Rounds to less than $1 thousand.
See notes to financial statements.
24
USAA Mutual Funds Trust | Statements of Changes in Net Assets |
(Amounts in Thousands)
USAA Emerging Markets Fund | |||||||||||
Year Ended May 31, 2020 | Year Ended May 31, 2019 | ||||||||||
From Investments: | |||||||||||
Operations: | |||||||||||
Net investment income (loss) | $ | 11,331 | $ | 10,267 | |||||||
Net realized gains (losses) from investments | 2,277 | (40,644 | ) | ||||||||
Net change in unrealized appreciation/depreciation on investments | (43,928 | ) | (45,173 | ) | |||||||
Change in net assets resulting from operations | (30,320 | ) | (75,550 | ) | |||||||
Distributions to Shareholders: | |||||||||||
Fund Shares | (1,181 | ) | (4,143 | ) | |||||||
Institutional Shares | (1,681 | ) | (7,618 | ) | |||||||
Adviser Shares | (12 | ) | (43 | ) | |||||||
Change in net assets resulting from distributions to shareholders | (2,874 | ) | (11,804 | ) | |||||||
Change in net assets resulting from capital transactions | (190,423 | ) | (79,230 | ) | |||||||
Change in net assets | (223,617 | ) | (166,584 | ) | |||||||
Net Assets: | |||||||||||
Beginning of period | 837,188 | 1,003,772 | |||||||||
End of period | $ | 613,571 | $ | 837,188 | |||||||
Capital Transactions: | |||||||||||
Fund Shares | |||||||||||
Proceeds from shares issued | $ | 35,895 | $ | 48,985 | |||||||
Distributions reinvested | 1,167 | 4,094 | |||||||||
Cost of shares redeemed | (78,125 | ) | (79,610 | ) | |||||||
Total Fund Shares | $ | (41,063 | ) | $ | (26,531 | ) | |||||
Institutional Shares | |||||||||||
Proceeds from shares issued | $ | 28,712 | $ | 73,201 | |||||||
Distributions reinvested | 1,680 | 7,272 | |||||||||
Cost of shares redeemed | (179,763 | ) | (133,195 | ) | |||||||
Total Institutional Shares | $ | (149,371 | ) | $ | (52,722 | ) | |||||
Adviser Shares | |||||||||||
Proceeds from shares issued | $ | 18 | $ | 34 | |||||||
Distributions reinvested | — | (a) | 1 | ||||||||
Cost of shares redeemed | (7 | ) | (12 | ) | |||||||
Total Adviser Shares | $ | 11 | $ | 23 | |||||||
Change in net assets resulting from capital transactions | $ | (190,423 | ) | $ | (79,230 | ) |
See notes to financial statements.
25
USAA Mutual Funds Trust | Statements of Changes in Net Assets — continued |
(Amounts in Thousands)
USAA Emerging Markets Fund | |||||||||||
Year Ended May 31, 2020 | Year Ended May 31, 2019 | ||||||||||
Share Transactions: | |||||||||||
Fund Shares | |||||||||||
Issued | 2,094 | 2,810 | |||||||||
Reinvested | 61 | 255 | |||||||||
Redeemed | (4,572 | ) | (4,569 | ) | |||||||
Total Fund Shares | (2,417 | ) | (1,504 | ) | |||||||
Institutional Shares | |||||||||||
Issued | 1,679 | 4,211 | |||||||||
Reinvested | 88 | 455 | |||||||||
Redeemed | (10,272 | ) | (7,617 | ) | |||||||
Total Institutional Shares | (8,505 | ) | (2,951 | ) | |||||||
Adviser Shares | |||||||||||
Issued | 1 | 2 | |||||||||
Reinvested | — | (a) | — | (a) | |||||||
Redeemed | — | (a) | — | (a) | |||||||
Total Adviser Shares | 1 | 2 | |||||||||
Change in Shares | (10,921 | ) | (4,453 | ) |
(a) Rounds to less than $1 thousand.
See notes to financial statements.
26
This page is intentionally left blank.
27
USAA Mutual Funds Trust | Financial Highlights |
For a Share Outstanding Throughout Each Period
Investment Activities | Distributions to Shareholders From | ||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss) | Net Realized and Unrealized Gains (Losses) on Investments | Total from Investment Activities | Net Investment Income | Total Distributions | ||||||||||||||||||||||
USAA Emerging Markets Fund | |||||||||||||||||||||||||||
Fund Shares | |||||||||||||||||||||||||||
Year Ended May 31, 2020 | $ | 17.14 | 0.25 | (c) | (1.17 | ) | (0.92 | ) | (0.06 | ) | (0.06 | ) | |||||||||||||||
Year Ended May 31, 2019 | $ | 18.84 | 0.17 | (1.67 | ) | (1.50 | ) | (0.20 | ) | (0.20 | ) | ||||||||||||||||
Year Ended May 31, 2018 | $ | 17.60 | 0.16 | 1.15 | 1.31 | (0.07 | ) | (0.07 | ) | ||||||||||||||||||
Year Ended May 31, 2017 | $ | 14.24 | 0.07 | 3.43 | 3.50 | (0.14 | ) | (0.14 | ) | ||||||||||||||||||
Year Ended May 31, 2016 | $ | 16.46 | 0.11 | (c) | (2.22 | ) | (2.11 | ) | (0.11 | ) | (0.11 | ) | |||||||||||||||
Institutional Shares | |||||||||||||||||||||||||||
Year Ended May 31, 2020 | $ | 17.10 | 0.29 | (c) | (1.17 | ) | (0.88 | ) | (0.08 | ) | (0.08 | ) | |||||||||||||||
Year Ended May 31, 2019 | $ | 18.79 | 0.18 | (1.62 | ) | (1.44 | ) | (0.25 | ) | (0.25 | ) | ||||||||||||||||
Year Ended May 31, 2018 | $ | 17.55 | 0.20 | 1.14 | 1.34 | (0.10 | ) | (0.10 | ) | ||||||||||||||||||
Year Ended May 31, 2017 | $ | 14.21 | 0.12 | (c) | 3.40 | 3.52 | (0.18 | ) | (0.18 | ) | |||||||||||||||||
Year Ended May 31, 2016 | $ | 16.42 | 0.18 | (2.25 | ) | (2.07 | ) | (0.14 | ) | (0.14 | ) | ||||||||||||||||
Adviser Shares | |||||||||||||||||||||||||||
Year Ended May 31, 2020 | $ | 17.08 | 0.20 | (c) | (1.16 | ) | (0.96 | ) | (0.04 | ) | (0.04 | ) | |||||||||||||||
Year Ended May 31, 2019 | $ | 18.76 | 0.10 | (1.62 | ) | (1.52 | ) | (0.16 | ) | (0.16 | ) | ||||||||||||||||
Year Ended May 31, 2018 | $ | 17.55 | 0.12 | 1.13 | 1.25 | (0.04 | ) | (0.04 | ) | ||||||||||||||||||
Year Ended May 31, 2017 | $ | 14.20 | 0.05 | 3.42 | 3.47 | (0.12 | ) | (0.12 | ) | ||||||||||||||||||
Year Ended May 31, 2016 | $ | 16.40 | 0.09 | (2.21 | ) | (2.12 | ) | (0.08 | ) | (0.08 | ) |
* 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.
^ 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 two year period beginning July 1, 2019 and in effect through June 30, 2021, instead of coinciding with the Fund's fiscal year end. Details of the current contractual expense limitation in effect can be found in Note 5 of the accompanying Notes to Financial Statements.
(a) Reflects total annual operating expenses for reductions of expenses paid indirectly for the May 31 fiscal years ended 2019, 2018, 2017 and 2016. Expenses paid indirectly decreased the expense ratio for each of these respective years by less than 0.01%.
(b) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
See notes to financial statements.
28
USAA Mutual Funds Trust | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Ratios to Average Net Assets | Supplemental Data | ||||||||||||||||||||||||||||||
Net Asset Value, End of Period | Total Return* | Net Expenses^(a) | Net Investment Income (Loss) | Gross Expenses(a) | Net Assets, End of Period (000's) | Portfolio Turnover(b) | |||||||||||||||||||||||||
USAA Emerging Markets Fund | |||||||||||||||||||||||||||||||
Fund Shares | |||||||||||||||||||||||||||||||
Year Ended May 31, 2020 | $ | 16.16 | (5.41 | )% | 1.48 | % | 1.44 | % | 1.54 | % | $ | 281,937 | 124 | %(f) | |||||||||||||||||
Year Ended May 31, 2019 | $ | 17.14 | (7.86 | )% | 1.48 | % | 1.02 | % | 1.48 | % | $ | 340,465 | 68 | % | |||||||||||||||||
Year Ended May 31, 2018 | $ | 18.84 | 7.41 | % | 1.46 | % | 0.86 | % | 1.46 | % | $ | 402,401 | 59 | % | |||||||||||||||||
Year Ended May 31, 2017 | $ | 17.60 | 24.70 | % | 1.51 | % | 0.50 | % | 1.51 | % | $ | 374,130 | 45 | % | |||||||||||||||||
Year Ended May 31, 2016 | $ | 14.24 | (12.77 | )% | 1.58 | % | 0.73 | % | 1.58 | % | $ | 302,012 | 47 | % | |||||||||||||||||
Institutional Shares | |||||||||||||||||||||||||||||||
Year Ended May 31, 2020 | $ | 16.14 | (5.17 | )% | 1.29 | % | 1.67 | % | 1.33 | % | $ | 327,156 | 124 | %(f) | |||||||||||||||||
Year Ended May 31, 2019 | $ | 17.10 | (7.58 | )% | 1.25 | % | 1.24 | % | 1.25 | % | $ | 491,978 | 68 | % | |||||||||||||||||
Year Ended May 31, 2018 | $ | 18.79 | 7.62 | % | 1.28 | % | 1.09 | % | 1.28 | % | $ | 596,185 | 59 | % | |||||||||||||||||
Year Ended May 31, 2017 | $ | 17.55 | 24.93 | % | 1.29 | % | 0.75 | % | 1.29 | % | $ | 585,468 | 45 | % | |||||||||||||||||
Year Ended May 31, 2016 | $ | 14.21 | (12.53 | )% | 1.30 | % | 1.11 | % | 1.30 | % | $ | 603,981 | 47 | % | |||||||||||||||||
Adviser Shares | |||||||||||||||||||||||||||||||
Year Ended May 31, 2020 | $ | 16.08 | (5.65 | )% | 1.75 | % | 1.13 | % | 1.76 | % | $ | 4,478 | 124 | %(f) | |||||||||||||||||
Year Ended May 31, 2019 | $ | 17.08 | (8.07 | )% | 1.75 | % | 0.73 | % | 1.79 | % | $ | 4,745 | 68 | % | |||||||||||||||||
Year Ended May 31, 2018 | $ | 18.76 | 7.09 | % | 1.72 | %(d) | 0.61 | % | 1.81 | % | $ | 5,186 | 59 | % | |||||||||||||||||
Year Ended May 31, 2017 | $ | 17.55 | 24.53 | % | 1.66 | %(e) | 0.35 | % | 1.87 | % | $ | 4,864 | 45 | % | |||||||||||||||||
Year Ended May 31, 2016 | $ | 14.20 | (12.93 | )% | 1.75 | % | 0.60 | % | 1.92 | % | $ | 3,931 | 47 | % |
(c) Per share net investment income (loss) has been calculated using the average daily shares method.
(d) Prior to October 1, 2017, AMCO voluntarily agreed to limit the annual expenses of the Adviser Shares to 1.65% of the Advisers Shares' average daily net assets.
(e) Prior to October 1, 2016, AMCO voluntarily agreed to limit the annual expenses of the Adviser Shares to 1.75% of the Advisers Shares' average daily net assets.
(f) Reflects increased trading activity due to current year transition or asset allocation shift.
See notes to financial statements.
29
USAA Mutual Funds Trust | Notes to Financial Statements May 31, 2020 |
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 47 funds and is authorized to issue an unlimited number of shares, which are units of beneficial interest with no par value.
The accompanying financial statements are those of the USAA Emerging Markets Fund (the "Fund"). The Fund offers three classes of shares: Fund Shares, Institutional Shares, and Adviser 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 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 November 6, 2018, United Services Automobile Association ("USAA"), the parent company of USAA Asset Management Company ("AMCO"), the investment adviser to the Fund, and USAA Transfer Agency Company, d/b/a USAA Shareholder Account Services ("SAS"), the transfer agent to the Fund, announced that AMCO and SAS would be acquired by Victory Capital Holdings Inc., a global investment management firm headquartered in Cleveland, Ohio (the "Transaction"). The Transaction closed on July 1, 2019. A special shareholder meeting was held on April 18, 2019, at which shareholders of the Fund approved a new investment advisory agreement between the Trust, on behalf of the Fund, and Victory Capital Management Inc. ("VCM" or "Adviser"). Effective July 1, 2019, VCM replaced AMCO as the investment adviser to the Fund and Victory Capital Transfer Agency Company replaced SAS as the Fund's transfer agent. In addition, effective on that same date, shareholders of the Fund also elected the following two new directors to the Board of the Trust to serve upon the closing of the Transaction: (1) David C. Brown, to serve as an Interested Trustee; and (2) John C. Walters, to serve as an Independent Trustee
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 generally accepted accounting principles in the United States of America ("GAAP"). The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses for the period. Actual results could differ from those estimates. The Fund follows the specialized accounting and reporting requirements under GAAP that are applicable to investment companies under Accounting Standards Codification Topic 946.
Investment Valuation:
The Fund records investments at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The valuation techniques described below maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value. The inputs used for valuing the Fund's investments are summarized in the three broad levels listed below:
• Level 1 — quoted prices in active markets for identical securities
• Level 2 — other significant observable inputs (including quoted prices for similar securities or interest rates applicable to those securities, etc.)
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USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
• Level 3 — significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments)
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The inputs or methodologies used for valuation techniques are not necessarily an indication of the risk associated with entering into those investments.
The Adviser has established the Pricing and Liquidity Committee (the "Committee"), and subject to Trust's Board of Trustees (the "Board") oversight, the Committee administers and oversees the Fund's valuation policies and procedures, which are approved by the Board.
Portfolio securities listed or traded on securities exchanges, including exchange-traded funds ("ETFs"), American Depositary Receipts ("ADRs") 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 are valued at 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, are not reflective of market value, or a significant event has been recognized in relation to a security or class of securities, the securities are valued in good faith by the Committee in accordance with valuation procedures approved by 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. These valuations are considered as Level 2 in the fair value hierarchy.
A summary of the valuations as of May 31, 2020, based upon the three levels defined above, is included in the table below while the breakdown, by category, of investments is disclosed in the Schedule of Portfolio Investments (amounts in thousands):
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Common Stocks | $ | 164,929 | $ | 437,071 | $ | — | (a) | $ | 602,000 | ||||||||||
Preferred Stocks | 3,872 | — | — | 3,872 | |||||||||||||||
Rights | 59 | — | — | (a) | 59 | ||||||||||||||
Exchange-Traded Funds | 59 | — | — | 59 | |||||||||||||||
Collateral for Securities Loaned | 3,643 | — | — | 3,643 | |||||||||||||||
Total | $ | 172,562 | $ | 437,071 | $ | — | (a) | $ | 609,633 |
(a) Amount rounds to less than $1 thousand.
For the year ended May 31, 2020, there were no transfers in or out of the Level 3 fair value hierarchy.
Real Estate Investment Trusts ("REITs"):
The Fund may invest in REITs which report information on the source of their distributions annually. REITs are pooled investment vehicles that invest primarily in income producing real estate or real estate related loans or interests (such as mortgages). Certain distributions received from REITs during the year are recorded as realized gains or return of capital as estimated by the Fund or when such information becomes known.
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USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
Investment Companies:
The Fund may invest in portfolios of open-end investment companies. These investment companies value securities in their portfolios for which market quotations are readily available at their market values (generally the last reported sale price) and all other securities and assets at their fair value by the methods established by the board of directors of the underlying funds.
Foreign Exchange Currency Contracts:
The Fund may enter into foreign exchange currency contracts to convert U.S. dollars to and from various foreign currencies. A foreign exchange currency contract is an obligation by the Fund to purchase or sell a specific currency at a future date at a price (in U.S. dollars) set at the time of the contract. The Fund does not engage in "cross-currency" foreign exchange contracts (i.e., contracts to purchase or sell one foreign currency in exchange for another foreign currency). The Fund's foreign exchange currency contracts might be considered spot contracts (typically a contract of one week or less) or forward contracts (typically a contract term over one week). A spot contract is entered into for purposes of hedging against foreign currency fluctuations relating to a specific portfolio transaction, such as the delay between a security transaction trade date and settlement date. Forward contracts are entered into for purposes of hedging portfolio holdings or concentrations of such holdings. Each foreign exchange currency contract is adjusted daily by the prevailing spot or forward rate of the underlying currency, and any appreciation or depreciation is recorded for financial statement purposes as unrealized until the contract settlement date, at which time the Fund records realized gains or losses equal to the difference between the value of a contract at the time it was opened and the value at the time it was closed. The Fund could be exposed to risk if a counterparty is unable to meet the terms of a foreign exchange currency contract or if the value of the foreign currency changes unfavorably. In addition, the use of foreign exchange currency contracts does not eliminate fluctuations in the underlying prices of the securities. As of May 31, 2020, 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 on 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 discount. Gains or losses realized on sales of securities are determined by comparing the identified cost of the security lot sold with the net sales proceeds. Litigation income received during the year is recorded as realized gains by the Fund when such information becomes known. Gains of this type are infrequent to the Fund are not expected to reoccur on a consistent basis. Class action litigation income received by the Fund for the year ended May 31, 2020 amounted to $4,313 thousand and is reflected on the Statement of Operations within Net realized gains (losses) from investment securities and foreign currency translations.
Withholding taxes on interest, dividends and gains as a result of certain investments in ADRs by the Fund has 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, to earn additional income, net of income retained by Citibank. Borrowers are required to 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 cured the next business day once the shortfall exceeds $100 thousand. Collateral may be cash, U.S. government securities, or other securities as permitted by SEC guidelines. Cash collateral may be invested in high-quality short-term investments, primarily open-end investment companies. 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
32
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
borrower will pay the Fund any dividends or interest paid on such securities plus any fee negotiated between the parties to the lending agreement. The Fund also earns a return from the collateral. The Fund pays Citibank various fees in connection with the investment of cash collateral and fees based on the investment income received from securities lending activities. Securities lending income (net of these fees) is disclosed on the Statement of Operations. Loans are terminable upon demand and the borrower must return the loaned securities within the lesser of one standard settlement period or five business days. Risks relating to securities-lending transactions include that the borrower may not provide additional collateral when required or return the securities when due, and 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 re-pledged except to satisfy borrower default. Cash collateral is listed in the Fund's Portfolio of Investments and Financial Statements while non-cash collateral is not included. The following table (amounts in thousands) is a summary of the Fund's securities lending transactions as of May 31, 2020.
Value of Securities on Loan | Non-Cash Collateral | Cash Collateral | |||||||||
$ | 3,704 | $ | — | $ | 3,643 |
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 investments and foreign currency translations on the Statement of Operations. Any realized gains or losses from these fluctuations, including foreign currency arising from in-kind redemptions, are disclosed as net realized gains or losses from investment transactions and foreign currency translations on the Statement of Operations.
Foreign Taxes:
The Fund may be subject to foreign taxes related to foreign income received (a portion of which may be reclaimable), capital gains on the sale of securities, and certain foreign currency transactions. All foreign taxes are recorded in accordance with the applicable regulations and rates that exist in the foreign jurisdictions in which the Fund invests.
Federal Income Taxes:
It is the Fund's policy 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.
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., 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 affiliated trust based upon net assets or another appropriate basis.
33
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
Income, expenses (other than class-specific expenses such as transfer agent fees, state registration fees, 12b-1 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.
3. Purchases and Sales:
Cost of purchases and proceeds from sales/maturities of securities (excluding securities maturing less than one year from acquisition) for the year ended May 31, 2020, were as follows for the Fund (amounts in thousands):
Excluding U.S. Government Securities | |||||||||||
Purchases | Sales | ||||||||||
$ | 867,277 | $ | 962,428 |
There were no purchases and sales of U.S. government securities during the year ended May 31, 2020.
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 semiannual reports may be viewed at usaa.com. As of May 31, 2020, certain fund-of funds owned total outstanding shares of the Fund:
Affiliated USAA Mutual Funds | Ownership % | ||||||
USAA Cornerstone Conservative Fund | 0.4 | ||||||
USAA Cornerstone Equity Fund | 1.3 |
5. Fees and Transactions with Affiliates and Related Parties:
Investment Advisory and Management Fees:
Effective with the Transaction on July 1, 2019, investment advisory services are provided to the Fund by the Adviser, a New York corporation registered as an investment adviser with the Securities and Exchange Commission ("SEC"). The Adviser is a wholly-owned indirect subsidiary of Victory Capital Holdings, Inc., a publicly traded Delaware corporation, and a wholly-owned direct subsidiary of Victory Capital Operating, LLC. Under the terms of the Investment Advisory Agreement, the Adviser is entitled to receive a base fee and a performance adjustment. The Fund's base fee is accrued daily and paid monthly at an annualized rate of 1.00% of the Fund's average daily net assets. The amount incurred and paid to VCM from July 1, 2019 through May 31, 2020, was $6,615 thousand and is reflected on the Statement of Operations as Investment Advisory fees.
Prior to the Transaction on July 1, 2019, AMCO provided investment management services to the Fund pursuant to an Advisory Agreement. Under this agreement, AMCO was responsible for managing the business and affairs of the Fund, and for directly managing day-to-day investment of the Fund's assets, subject to the authority of and supervision by the Board. The investment management fee for the Fund was comprised of a base fee and a performance adjustment. The Fund's base fee was accrued daily and paid monthly at an annualized rate of 1.00% of the Fund's average daily net assets.
Effective with the Transaction on July 1, 2019, no performance adjustments will be made for periods beginning July 1, 2019 through June 30, 2020. Only performance beginning as of July 1, 2019, and thereafter will be utilized in calculating future performance adjustments.
Prior to the Transaction on July 1, 2019, the performance adjustment for each share class was accrued daily and calculated monthly by comparing the Fund's performance to that of the Lipper Emerging Markets Funds Index. The Lipper Emerging Markets Fund Index tracks the total return performance of funds within the Lipper Emerging Markets Funds category.
34
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
The performance period for each share class consists of the current month plus the previous 35 months (or the number of months beginning July 1, 2019, if fewer). The following table is utilized to determine the extent of the performance adjustment:
Over/Under Performance Relative to Index (in basis points)(a) | Annual Adjustment Rate (in basis points)(a) | ||||||
+/- 100 to 400 | +/- 4 | ||||||
+/- 401 to 700 | +/- 5 | ||||||
+/- 701 and greater | +/- 6 |
(a) Based on the difference between average annual performance of the relevant share class of the Fund and its relevant index, rounded to the nearest basis point. Average daily net assets of the share class are calculated over a rolling 36-month period.
Each class' annual performance adjustment rate is multiplied by the average daily net assets of each respective class over the entire performance period, which is then multiplied by a fraction, the numerator of which is the number of days in the month and the denominator of which is 365 (366 in leap years). The resulting amount is then added to (in the case of over performance), 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 Funds Index over that period, even if the class has overall negative returns during the performance period.
For the period June 1, 2019 through June 30, 2019, performance adjustments for Fund Shares, Institutional Shares and Adviser Shares were $(12), $(19), and less than $(1) thousand, respectively. For the Fund Shares, Institutional Shares, and Adviser Shares, the performance adjustments were less than 0.01% of net assets for all classes. Base fees incurred and paid to AMCO from June 1, 2019 through June 30, 2019, were $649 thousand and is reflected on the Statement of Operations as Investment Advisory fees.
Effective with the Transaction on July 1, 2019, 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. Prior to that date, the Trust relied on a similar exemptive order granted by the SEC to the Trust and its affiliated persons. 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.
Effective July 1, 2019, VCM entered into Investment Subadvisory Agreements with Brandes Investment Partners, L.P. ("Brandes"), Lazard Asset Management LLC ("Lazard"), under which Brandes and Lazard, each direct the investment and reinvestment of a portion of the Fund's assets (as allocated from time to time by VCM). These arrangements provide for monthly fees that are paid by VCM. VCM (not the Fund) pays the subadviser fees.
Prior to July 1, 2019, AMCO entered into Investment Subadvisory Agreements with Brandes, Lazard, and Victory Capital Management, Inc. under which each directed the investment and reinvestment of a portion of the Fund's assets (as allocated from time to time by the AMCO). These arrangements provided for monthly fees that were paid by AMCO. AMCO (not the Fund) paid the subadviser fees.
Administration and Servicing Fees:
Effective with the Transaction on July 1, 2019, VCM serves as the Fund's administrator and fund accountant. Under the Fund Administration, Servicing and Accounting Agreement, VCM is paid for its services an annual fee at a rate of 0.15% of average daily net assets for both the Fund Shares and Adviser Shares, and 0.10% of average daily net assets of the Institutional Shares. Amounts incurred from July 1, 2019 through May 31, 2020, are $450, $357, and $6 thousand for Fund Shares, Institutional
35
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
Shares, and Adviser Shares, respectively. These amounts are reflected on the Statement of Operations as Administration fees.
Prior to the Transaction on July 1, 2019, AMCO provided certain administration and servicing functions for the Fund. For such services, AMCO received a fee accrued daily and paid monthly at an annualized rate of 0.15% of average daily net assets for both the Fund Shares and Adviser Shares, and 0.10% of average daily net assets of the Institutional Shares. Amounts incurred from June 1, 2019 through June 30, 2019, were $43, $36, and $1 thousand for Fund Shares, Institutional Shares, and Adviser Shares, respectively. These amounts are reflected on the Statement of Operations as Administration fees.
Effective with the Transaction on July 1, 2019, the Fund (as part of the Trust) has entered into an agreement to provide compliance services with the Adviser, 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. Funds in the Trust, Victory Variable Insurance Funds, Victory Portfolios and Victory Portfolios II (collectively, the "Victory Funds Complex") in the aggregate, compensates the Adviser for these services. The amount incurred during the period from July 1, 2019 to May 31, 2020, is reflected on the Statement of Operations as Compliance fees.
Effective with the Transaction on July 1, 2019, 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 Trust reimburses VCM and Citi for all of their reasonable out-of- pocket expenses incurred in providing these services and certain other expenses specifically allocated to the Funds under the Fund Administration, Servicing, and Accounting Agreement. The amount incurred during the period from July 1, 2019 through May 31, 2020, is reflected on the Statement of Operations as Sub-Administration fees.
In addition to the services provided under its Administration and Servicing Agreement with the Fund, AMCO also provided certain compliance and legal services for the benefit of the Fund prior to the Transaction on July 1, 2019. The Board approved the reimbursement of a portion of these expenses incurred by AMCO. AMCO did not receive any fees from the Fund for these services.
Transfer Agency Fees:
Effective with the Transaction on July 1, 2019, Victory Capital Transfer Agency, Inc. ("VCTA"), (formerly, USAA Shareholder Account Services ("SAS")), provides transfer agency services to the Fund. VCTA, an affiliate of the Adviser, provides transfer agent services to the Fund Shares and Adviser 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's fees for 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 from July 1, 2019 through May 31, 2020, was $771, $357, and less than $1 thousand for the Fund Shares, Institutional Shares, and Adviser Shares, respectively. Amounts incurred and paid to SAS from June 1, 2019 through June 30, 2019, was $73, $36, and less than $1 thousand for the Fund Shares, Institutional Shares, and Adviser Shares, respectively. These amounts are reflected on the Statement of Operations as Transfer Agent fees.
Effective with the Transaction on July 1, 2019, 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.
Distribution and Service 12b-1 Fees:
Effective with the Transaction on July 1, 2019, Victory Capital Advisers, Inc. (the "Distributor"), an affiliate of the Adviser, serves as distributor for the continuous offering of the Adviser Shares pursuant
36
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
to a Distribution Agreement between the Distributor and the Trust. Effective on or about June 30, 2020, the Distributor's name will change to Victory Capital Services, Inc. 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 the Adviser Shares. Amounts incurred and paid to the Distributor from July 1, 2019 through May 31, 2020, are $11 thousand and reflected on the Statement of Operations as 12b-1 fees.
Adviser Shares are offered and sold without imposition of an initial sales charge or a contingent deferred sales charge.
Prior to the Transaction on July 1, 2019, the Fund adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Adviser Shares. Under the plan, the Adviser Shares paid fees to USAA Investment Management Company ("IMCO"), the distributor, for distribution and shareholder services. IMCO paid all or a portion of such fees to intermediaries that made the Adviser Shares available for investment by their customers. The fee was accrued daily and paid monthly at an annual rate of 0.25% of the Adviser Shares' average daily net assets. IMCO also provided exclusive underwriting and distribution of the Fund's shares on a continuing best-efforts basis and received no fee or other compensation for these services, but may have received 12b-1 fees as described above, with respect to Adviser Shares. Amounts incurred and paid to IMCO from June 1, 2019 through June 30, 2019, were $1 thousand and reflected on the Statement of Operations as 12b-1 fees.
Other Fees:
Prior to the Transaction on July 1, 2019, State Street Bank and Trust Company served as the Fund's accounting agent and custodian.
Effective July 1, 2019, Citibank, N.A., serves as the Fund's custodian.
K&L Gates LLP provides legal services to the Trust.
Effective with the Transaction on July 1, 2019, the Adviser has entered into an expense limitation agreement with the Fund until at least June 30, 2021. 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 limit for such classes of the Fund. Such excess amounts will be the liability of the Adviser. 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. Effective July 1, 2019 through May 31, 2020, the expense limit (excluding voluntary waivers) is 1.48%, 1.29%, and 1.75% for the Fund Shares, Institutional Shares, and Adviser Shares, respectively.
Under this expense limitation agreement, the Fund has agreed to repay fees and expenses that were waived or reimbursed by the Adviser for a period up to three years after the fiscal year in which 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 May 31, 2020, the following amounts are available to be repaid to the Adviser (amounts in thousands).
Expires 05/31/2023 | |||
$ | 345 |
The Adviser, may voluntarily waive or reimburse additional fees to assist the Fund in maintaining competitive expense ratios. Voluntary waivers and reimbursements applicable to the Fund are not available to be recouped at a future time. There were no voluntary waivers or reimbursements for the year ended May 31, 2020.
Prior to the Transaction on July 1, 2019, AMCO agreed, through September 30, 2019, to limit the total annual operating expenses of the Adviser Shares to 1.75% of average daily net assets, excluding extraordinary expenses and before reductions of any expenses paid indirectly, and to reimburse the Adviser Shares for all expenses in excess of those amounts. Effective with the Transaction on July 1, 2019, this expense limit is no longer in effect and is not available to be recouped by AMCO. For the
37
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
period June 1, 2019 through June 30, 2019, the Fund did not incur reimbursements. These amounts would have been reflected on the Statement of Operations as Expenses waived/reimbursed by AMCO.
Certain officers and/or interested trustees of the Fund are also officers and/or employees of the Adviser, Administrator, Sub-Administrator, Sub-Fund Accountant, and Legal.
6. Risks:
The Fund may be subject to other risks in addition to these identified risks.
Global economies and financial markets are increasingly interconnected, which increases the possibilities that conditions in one country or region might adversely affect issuers in another country or region. Geopolitical and other risks, including war, terrorism, trade disputes, political or economic dysfunction within some nations, public health crises and related geopolitical events, as well as environmental disasters such as earthquakes, fires, and floods, may add to instability in world economies and markets generally. Changes in trade policies and international trade agreements could affect the economies of many countries in unpredictable ways. Epidemics and/or pandemics, such as the coronavirus (or COVID-19), may result in, among other things, closing borders, disruptions to healthcare service preparation and delivery, quarantines, cancellations, disruptions to supply chains and consumer activity, as well as general concern and uncertainty. The impact may be short-term or may last for extended periods.
The COVID-19 pandemic, which has spread rapidly across the world, has led and will continue to lead for an unknown period of time to disruptions in local, regional, national and global markets and economies. Among other things, the outbreak has resulted in, and until fully resolved is likely to continue to result in, among other things (1) government imposition of various forms of "stay-at-home" orders and the closing of "non-essential" businesses, resulting in significant disruption to the businesses of many issuers as well as lay-offs of employees; (2) increased requests by issuers of debt instruments for amendments and waivers of agreements to avoid default and increased defaults; (3) volatility and disruption of markets, including greater volatility in pricing and spreads; and (4) rapidly evolving proposals and/or actions by state and federal governments to address problems being experienced by the markets and by businesses and the economy in general.
The equity securities in the Fund's portfolio are subject to stock market risk. A company's stock price in general may decline over short or even extended periods, regardless of the success or failure of the company's operations. Stock markets tend to run in cycles, with periods when stock prices generally go up and periods when stock prices generally go down. Equity securities tend to be more volatile than debt securities. In addition, the Fund invests primarily in foreign securities. There is a possibility that the value of the Fund's investments in foreign securities will decrease because of unique risks, such as currency exchange-rate fluctuations; foreign market illiquidity; emerging-market risk; increased price volatility; uncertain political conditions; exchange control regulations; foreign ownership limits; different accounting, reporting, and disclosure requirements; difficulties in obtaining legal judgments; and foreign withholding taxes. These risks are particularly heightened in this Fund because investments in emerging-market countries generally are more volatile than investments in developed markets. Emerging-market countries are less economically diverse and mature than more developed countries and tend to be politically less stable.
The Fund's performance could be closely tied to the market, currency, economic, political, regulatory, geopolitical, or other conditions and developments in the countries or regions in which the Fund invests. As such, the Fund's performance could be more volatile than the performance of more geographically diversified funds.
The Fund also is subject to over-the-counter ("OTC") risk. OTC transactions involve risk in addition to those incurred by transactions in securities traded on exchanges. OTC-listed companies may have limited product lines, markets, or financial resources. Many OTC stocks trade less frequently and in smaller volume than exchange-listed stocks.
38
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
7. Borrowing and Interfund Lending:
Line of Credit:
Effective with the Transaction on July 1, 2019, the Victory Funds Complex participates in a short-term, demand note "Line of Credit" agreement with Citibank. Under the agreement with Citibank, the Victory Funds Complex could 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 that Fund paying the related commitment fees for that amount. The purpose of the agreement is to meet temporary or emergency cash needs. Citibank receives an annual commitment fee of 0.15% on $300 million for providing the Line of Credit. Each fund in the Victory Funds Complex pays a pro-rata portion of the commitment fees plus any interest (one month LIBOR plus one percent) on amounts borrowed. Effective June 29, 2020, under an amended Line of Credit agreement, Citibank will also receive an annual upfront fee of 0.10% on the $300 million committed line of credit. Each fund in the Victory Funds Complex will pay a pro-rata portion of the upfront fee. Interest charged to the Fund, if any, during the period is reflected on the Statement of Operations under line of credit fees.
Prior to the Transaction on July 1, 2019, the line of credit among the Trust, with respect to its funds, and USAA Capital Corporation ("CAPCO") terminated. For the period from June 1, 2019 to June 30, 2019, the Fund paid CAPCO facility fees of $2 thousand.
The average borrowing for the days outstanding and average interest rate for the Fund during the year ended May 31, 2020. were as follows (amounts in thousands):
Amount Outstanding at May 31, 2020 | Average Borrowing* | Days Borrowings Outstanding | Average Interest Rate | Maximum Borrowing During the Period | |||||||||||||||
$ | — | $ | 4,891 | 21 | 3.11 | % | $ | 15,400 |
* For the year ended May 31,2020, based on the number of days borrowings were outstanding.
Interfund Lending:
Effective with the Transaction on July 1, 2019, the Trust and 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 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. The interfund loan rate is determined, as specified in the Order, by averaging the current repurchase agreement rate and the current bank loan rate. As a Borrower, interest charged to the Fund, if any, during the period is reflected on the Statement of Operations under Interest expense on Interfund lending. As a Lender, interest earned by the Fund, if any, during the period is reflected on the Statement of Operations under Income on Interfund lending.
The average borrowing and lending for the days outstanding and average interest rate for the Fund during the year ended May 31, 2020, were as follows (amounts in thousands):
Borrower or Lender | Amount Outstanding at May 31, 2020 | Average Borrowing* | Days Borrowing Outstanding | Average Interest Rate* | Maximum Borrowing During the Period | ||||||||||||||||||
Borrower | $ | — | $ | 1,804 | 20 | 2.14 | % | $ | 3,498 |
* For the year ended May 31, 2020, based on the number of days borrowings were outstanding.
39
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
8. Federal Income Tax Information:
The Fund intends to declare daily and distribute any net investment income annually. Distributable net realized gains, if any, are declared and paid at least annually.
The amounts of dividends from net investment income and distributions from net realized gains (collectively distributions to shareholders) are determined in accordance with federal income tax regulations, which may differ from GAAP. To the extent these "book/tax" differences are permanent in nature (e.g., net operating loss and distribution reclassification), such amounts are reclassified within the components of net assets based on their federal tax-basis treatment; temporary differences (e.g., wash sales) do not require reclassification. To the extent dividends and distributions exceed net investment income and net realized gains for tax purposes, they are reported as distributions of capital. Net investment losses incurred by the Fund may be reclassified as an offset to capital on the accompanying Statement of Assets and Liabilities.
As of May 31, 2020, 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 Statement of Changes in Net Assets because, for tax purposes, dividends are recognized when actually paid) (amounts in thousands):
Year Ended May 31, 2020 | Year Ended May 31, 2019 | ||||||||||||||||||||||
Distributions paid from | Distributions paid from | ||||||||||||||||||||||
Ordinary Income | Total Distributions Paid | Ordinary Income | Net Long-Term Capital Gains | Total Distributions Paid | |||||||||||||||||||
$ | 2,874 | $ | 2,874 | $ | 11,804 | $ | — | $ | 11,804 |
As of May 31, 2020, the components of accumulated earnings (deficit) on a tax basis were as follows (amounts in thousands):
Accumulated Undistributed Ordinary Income | Capital and Other Losses | Total Unrealized Appreciation (Depreciation)* | Accumulated Earnings (Deficit) | ||||||||||||||||
$ | 8,596 | $ | (145,552 | ) | $ | 48,031 | $ | (88,925 | ) |
* The difference between the book-basis and tax-basis of unrealized appreciation/depreciation is attributable primarily to tax deferral of losses on wash sales and passive foreign investment company adjustments.
At May 31, 2020, 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 | |||||||||
$ | 124,591 | $ | 20,961 | $ | 145,552 |
As of May 31, 2020, 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) | ||||||||||||
$ | 561,583 | $ | 126,905 | $ | (78,855 | ) | $ | 48,050 |
40
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
9. 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 1940 Act. 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 Funds' Board of Trustees approved the appointment of the Fund's investment adviser, Victory Capital, as the administrator of the LRMP. At an in-person meeting held on February 26, 2020, Victory Capital provided an oral and written report to the Trustees on the operation and effectiveness of the LRMP during the previous year.
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.
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 reasonably expected to be converted to cash in current market conditions in three business days or less without significantly changing the market value of the investment. Therefore, the Fund has not adopted a Highly Liquid Investment Minimum. The Fund's investments were below the limitation on illiquid investments during the review period. Additionally, Victory Capital indicated that no events occurred that would require the filing of Form N-LIQUID and recommended no material changes to the LRMP.
10. Subsequent Events:
The Board of Trustees of USAA Mutual Funds Trust has approved redesignating the Fund's current Adviser Shares as "Class A" shares ("Redesignation"). This change was effective beginning on June 29th, 2020.
Class A shares will be available for purchase through financial intermediaries and the Fund will pay ongoing distribution and/or service (12b-1) fees at annual rate of up to 0.25% of the average daily net assets of its Class A shares. In addition, the Transfer Agency fee will convert to an annual basis point rate of 0.10% of daily net assets of its Class A shares from its current flat per account fee. Class A shares will be offered and sold at their public offering price, which is the NAV per share plus any applicable initial sales charge, also referred to as a "front-end sales load." For purchases on or after the Redesignation Date, Class A Shares will be offered and sold with the imposition of a maximum initial sales charge of up to 5.75% of the offering price of the Fund. For purchases on or after the Redesignation Date, Class A Shares will be offered and sold with the imposition of a maximum initial sales charge of up to 2.25% of the offering price of the Fund. A contingent deferred sales charge of up to 0.75% may be imposed on redemptions of Class A shares purchased without an initial sales charge if shares are redeemed within 18 months of purchase.
The Redesignation will be made without the imposition of any sales loads, fees, or other charges to Adviser Shares held in shareholder accounts on the Redesignation Date. The Redesignation will not be considered a taxable event for federal income tax purposes.
41
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of USAA Emerging Markets Fund:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of USAA Emerging Markets Fund (the "Fund") (one of the funds constituting USAA Mutual Funds Trust (the "Trust")), including the schedule of portfolio investments, as of May 31, 2020, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the funds constituting USAA Mutual Funds Trust) at May 31, 2020, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Trust's management. Our responsibility is to express an opinion on the Fund's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust's internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of May 31, 2020, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Victory Capital investment companies since 1995.
San Antonio, Texas
July 27, 2020
42
USAA Mutual Funds Trust | Supplemental Information May 31, 2020 |
(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) 539-3863. The information is also included in the Fund's Statement of Additional Information, which is available on the SEC's website at www.sec.gov.
Information relating to how the Fund voted proxies relating to portfolio securities held during the most recent 12 months ended June 30 is available on the SEC's website at www.sec.gov.
Availability of Schedules of Portfolio Investments:
The Trust files a complete list of Schedules of Portfolio Investments with the SEC for the first and third quarter of each fiscal year on Form N-PORT. Forms N-PORT are available on the SEC's website at www.sec.gov.
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USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(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 10 Trustees, eight of whom are not "interested persons" of the Trust within the meaning of that term under the 1940 Act ("Independent Trustees") and two 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 ages, position with the Trust, commencement of service, 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 47 portfolios in the Trust. Each Trustee's address is 15935 La Cantera Pkwy, Building Two, San Antonio, TX, 78256. Pursuant to a policy adopted by the Board, the term of office for each Trustee shall be until the Independent Trustee reaches age 75 or an Interested Trustee reaches age 75. The Board may change or grant exceptions from this policy at any time without shareholder approval. A Trustee may resign or be removed by a vote of the other Trustees or the holders of a majority of the outstanding shares of the Trust at any time. Vacancies on the Board can be filled by the action of a majority of the Trustees, provided that after filling such vacancy at least two-thirds of the Trustees have been elected by the shareholders.
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Independent Trustees. | |||||||||||||||||||
Jefferson C. Boyce, Born September 1957 | Lead Independent Trustee, and Vice Chairman | 2013 | Senior Managing Director, New York Life Investments, LLC (1992-2012) | Westhab, Inc. | |||||||||||||||
John C. Walters, Born February 1962 | Trustee | 2019 | Retired. Mr. Walters brings significant Board experience including active involvement with the board of a Fortune 500 company, and a proven record of leading large, complex financial organizations. He has a demonstrated record of success in distribution, manufacturing, investment brokerage, and investment management in both the retail and institutional investment businesses. He has substantial experience in the investment management business with a demonstrated ability to develop and drive strategy while managing operation, financial, and investment risk. | Guardian Variable Products Trust (16 series), Lead Independent Director; Amerilife Holdings LLC, Director; Stadion Money Management; Director; University of North Carolina (Chapel Hill), Member Board of Governors. |
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USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Robert L. Mason, Ph.D., Born July 1946 | Trustee | 1997 | Adjunct Professor in the Department of Management Science and Statistics in the College of Business at the University of Texas at San Antonio (since 2001); Institute Analyst, Southwest Research Institute (March 2002-January 2016) | None | |||||||||||||||
Dawn M. Hawley, Born February 1954 | Trustee | 2014 | Manager of Finance, Menil Foundation, Inc. (May 2007-June 2011), which is a private foundation that oversees the assemblage of sculptures, prints, drawings, photographs, and rare books. Director of Financial Planning and Analysis and Chief Financial Officer, AIM Management Group, Inc. (October 1987-January 2006) | None | |||||||||||||||
Paul L. McNamara, Born July 1948 | Trustee | 2012 | Director, Cantor Opportunistic Alternatives Fund, LLC (March 2010-February 2014) , which is a closed-end fund of funds by Cantor Fitzgerald Investment Advisors, LLC | None |
45
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Richard Y. Newton III, Born January 1956 | Trustee | 2017 | Director, Elta North America (01/18-present), 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 (December 2015-present)); Executive Director, The Union League Club of New York (June 2014-November 2015): Executive Vice President, Air Force Association (August 2012-May 2014); Lieutenant General, United States Air Force (January 2008-June 2012) | None | |||||||||||||||
Barbara B. Ostdiek, Ph.D., Born March 1964 | Trustee | 2008 | Senior Associate Dean of Degree Programs at Jesse H. Jones Graduate School of Business at Rice University (since 2013); Associate Professor of Finance at Jessie H. Jones Graduate School of Business at Rice University (since 2001) | None | |||||||||||||||
Michael F. Reimherr, Born August 1945 | Trustee | 2000 | President of Reimherr Business Consulting (May 1995-December 2017); St. Mary's University Investment Committee overseeing University Endowment (since 2014) | None |
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USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Interested Trustees. | |||||||||||||||||||
David C. Brown, ** Born May 1972 | Trustee | 2019 | Chairman and Chief Executive Officer (since 2013), Co-Chief Executive Officer (2011-2013), Victory Capital Management Inc.; Chairman and Chief Executive Officer, Victory Capital Holdings, Inc. (since 2013). Mr. Brown brings to the Board extensive business, finance and leadership skills gained and developed through years of experience in the financial services industry, including his tenure overseeing the strategic direction as CEO of Victory Capital. These skills, combined with Mr. Brown's extensive knowledge of the financial services industry and demonstrated success in the development and distribution of investment strategies and products, enable him to provide valuable insights to the Board and strategic direction for the Funds | Trustee, Victory Portfolios (42 series), Victory Portfolios II (26 series), Victory Variable Insurance Funds (9 series) |
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USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Daniel S. McNamara, ** Born June 1966 | Trustee and Chair of the Board of Trustees | 2012 | Trustee, President, and Vice Chairman of USAA ETF Trust (June 2017-June 2019); President of Financial Advice & Solutions Group (FASG), USAA (since 2013); Director, IMCO (September 2009-April 2014); President, AMCO (August, 2011-April 2013); Senior Vice President of USAA Financial Planning Services Insurance Agency, Inc. (FPS) (since 2011); Director of USAA Investment Management Company (IMCO) (since 2009); Chairman of Board of IMCO (since 2013); Director of USAA Asset Management Company (AMCO), (August 2011-June 2019); President and Director of USAA Shareholder Account Services (SAS)(October 2009-June 2019); Director and Vice Chairman of FPS (since 2013); President and Director of USAA Investment Corporation (ICORP) (since 2010); Chairman of Board of ICORP (since 2013); Director of USAA Financial Advisors, Inc. (FAI) (since 2013); Chairman of Board of FAI (since 2015). Mr. McNamara brings to the Board extensive experience in the financial services industry, including experience as an officer of the Trust. | None |
** Mr. McNamara and Mr. Brown are "Interested Persons" by reason of their relationships with the Adviser.
The Statement of Additional Information includes additional information about the Trustees of the Trust and is available, without charge, on the SEC's website at www.sec.gov and/or by calling (800)-539-3863.
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USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Officers:
The officers of the Trust, their ages, 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, Building Two, 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 with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | ||||||||||||
Interested Officers. | |||||||||||||||
Christopher K. Dyer, Born February 1962 | President | 2019 | Director of Fund Administration, Victory Capital (2004-present) | ||||||||||||
Scott A Stahorsky, Born July 1969 | Vice President | 2019 | Manager, Fund Administration, Victory Capital (since 2015); Senior Analyst, Fund Administration, Victory Capital (prior to 2015) | ||||||||||||
James K. De Vries, Born April 1969 | Treasurer, Principal Financial Officer | 2018 | Executive Director, Victory Capital Management Inc. (since 2019); Treasurer, USAA ETF Trust (September 2018-June 2019); Executive Director, Investment and Financial Administration, USAA (April 2012-June 2019); Assistant Treasurer, USAA ETF Trust (June 2017-September 2018); Assistant Treasurer, USAA Mutual Funds Trust (December 2013-February 2018) | ||||||||||||
Allan Shaer, Born March 1965 | Assistant Treasurer | 2019 | Senior Vice President, Financial Administration, Citi Fund Services Ohio, Inc. (since 2016); Vice President, Mutual Fund Administration, JP Morgan Chase (2011-2016) | ||||||||||||
Carol D. Trevino, Born October 1965 | Assistant Treasurer | 2018 | Director, Accounting and Finance, Victory Capital Management Inc. (since 2019); Accounting/Financial Director, USAA (December 2013-June 2019); Assistant Treasurer, USAA ETF Trust (September 2018-June 2019). | ||||||||||||
Erin G. Wagner, Born February 1974 | Secretary | 2019 | Deputy General Counsel, the Adviser (since 2013) | ||||||||||||
Charles Booth, Born April 1960 | Anti-Money Laundering Compliance Officer and Identity Theft Officer | 2019 | Director, Regulatory Administration and CCO Support Services, Citi Fund Services Ohio, Inc. (2007-present) | ||||||||||||
Amy Campos, Born July 1976 | Chief Compliance Officer | 2019 | Chief Compliance Officer, USAA Mutual Funds Trust (since 2019); Executive Director, Deputy Chief Compliance Officer, USAA Mutual Funds Trust and USAA ETF Trust (July 2017-June 2019); Compliance Director, USAA Mutual Funds Trust (2014-July 2017) |
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USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
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 December 1, 2019 through May 31, 2020.
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. If these transactional costs were included, your costs would have been higher.
Beginning Account Value 12/1/19 | Actual Ending Account Value 5/31/20 | Hypothetical Ending Account Value 5/31/20 | Actual Expenses Paid During Period 12/1/19- 5/31/20* | Hypothetical Expenses Paid During Period 12/1/19- 5/31/20* | Annualized Expense Ratio During Period 12/1/19- 5/31/20 | ||||||||||||||||||||||
Fund Shares | $ | 1,000.00 | $ | 897.70 | $ | 1,017.75 | $ | 6.88 | $ | 7.31 | 1.45 | % | |||||||||||||||
Institutional Shares | 1,000.00 | 899.30 | 1,018.70 | 5.98 | 6.36 | 1.26 | % | ||||||||||||||||||||
Adviser Shares | 1,000.00 | 896.80 | 1,016.40 | 8.16 | 8.67 | 1.72 | % |
* Expenses are equal to the average account value multiplied by the Fund's annualized expense ratio multiplied by 183/366 (the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year).
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USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Additional Federal Income Tax Information
The following federal tax information related to the Fund's fiscal year ended May 31, 2020, 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 2021.
With respect to distributions paid, the Fund designates the following amounts (or, if subsequently determined to be different, the maximum amount allowable) for the fiscal year ended May 31, 2020 (amounts in thousands):
Qualified Dividend Income (non-corporate shareholders)* | Foreign Taxes Paid(a) | ||||||||||
64.21 | % | $ | 700 |
* Presented as a percentage of net investment income and excludes short-term capital gain distributions paid, if any. All or a portion of these amounts may be exempt from taxation at the state level.
(a) The Fund has elected under Section 853 of the Internal Revenue Code to pass through the credit for taxes paid in foreign countries.
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 |
25558-0720
MAY 31, 2020
Annual Report
USAA Government Securities Fund
Beginning January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Fund's shareholder reports like this one will no longer be sent by mail, unless you specifically request paper copies of the reports from the Fund or from your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on VictoryFunds.com, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund or your financial intermediary electronically by notifying your financial intermediary directly, or if you are a direct investor, by calling (800) 235-8396 or logging on to usaa.com. Effective on or about September 8, 2020, a shareholder who has an account directly with the Fund will need to submit their request via email to TA.Processing@FISGlobal.com.
You may elect to receive all future reports in paper free of charge. You can inform the Fund or your financial intermediary that you wish to continue receiving paper copies of your shareholder reports by notifying your financial intermediary directly, or if you are a direct investor, by calling (800) 235-8396 or logging on to usaa.com. Effective on or about September 8, 2020, a shareholder who has an account directly with the Fund will need to submit their request via email to TA.Processing@FISGlobal.com. Your election to receive reports in paper will apply to all funds held with the USAA Mutual Funds or your financial intermediary.
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 logo 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.
USAA Mutual Funds Trust
TABLE OF CONTENTS
Shareholder Letter (Unaudited) | 2 | ||||||
Managers' Commentary (Unaudited) | 4 | ||||||
Investment Overview (Unaudited) | 6 | ||||||
Investment Objective & Portfolio Holdings (Unaudited) | 7 | ||||||
Financial Statements | |||||||
Schedule of Portfolio Investments | 8 | ||||||
Statement of Assets and Liabilities | 13 | ||||||
Statement of Operations | 14 | ||||||
Statements of Changes in Net Assets | 15 | ||||||
Financial Highlights | 18 | ||||||
Notes to Financial Statements | 20 | ||||||
Report of Independent Registered Public Accounting Firm | 32 | ||||||
Supplemental Information (Unaudited) | 33 | ||||||
Proxy Voting and Portfolio Holdings Information | 33 | ||||||
Trustees' and Officers' Information | 34 | ||||||
Expense Examples | 40 | ||||||
Additional Federal Income Tax Information | 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.
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.
1
(Unaudited)
Dear Shareholder,
The previous decade ended with the longest-ever bull market in U.S. equities still intact, even as investors wrestled with issues like softening global economic data, Brexit, and U.S.-China trade relations. In retrospect, those worries seem so pedestrian given what we would soon experience.
A new and unexpected threat—a global pandemic, the novel coronavirus ("COVID-19")—first emerged in Asia and then began spreading globally and throughout the United States during the first quarter of 2020. This unprecedented and unanticipated event not only rendered all existing economic and earnings forecasts moot, but it also roiled stock and bond markets everywhere. Efforts to slow the spread of the virus, though successful to date, also brought the economy to a halt. The historic bull market in stocks ended virtually overnight.
After an initial severe sell-off in March, equity markets recovered sharply. As our annual reporting period drew to a close on May 31, 2020, many of the broad market indexes had recovered and volatility had returned to more palatable levels. In fact, despite all the chaos, the S&P 500® Index, one of the most popular measures of large U.S. stocks, finished the fiscal year (May 31, 2020) at approximately 3,044, which was up more than 10.6% from one year ago.
The market turmoil of early 2020 was not limited to equities. Fixed income volatility spiked when liquidity evaporated in late March as investors struggled to understand the ramifications of stay-at-home orders. Fortunately, the U.S. Federal Reserve (the "Fed") (as well as other global central banks) leapt into action—cutting interest rates, (re)starting quantitative easing and, in the case of the Fed, launching an array of programs to stabilize markets.
The new lending facilities and programs had their intended effect of improving liquidity and trading. Credit spreads across corporate, high-yield, structured, and municipal markets were coaxed down from their highs. In addition, Congress came through with substantial fiscal stimulus that also was applauded by investors and markets. Although fixed income markets regained their footing, the yield on 10-Year Treasurys, a benchmark for low-risk investments, declined steadily during our fiscal year—from 2.14% at the beginning of our reporting period to approximately 0.65% as of May 31, 2020. This suggests that investors remain a little wary.
While the past year has been unprecedented for all of us, both personally and professionally, our portfolio managers continue to scrutinize the financial markets, economic conditions, and the trajectory of the pandemic, which will likely be the guiding factor on Fed policy and the markets.
No matter what happens in the near term, we believe that the massive monetary and fiscal policies introduced earlier this year will have longer-term ramifications. Despite this uncertainty, it's important to remain focused on your long-term investment goals and avoid making emotional decisions. If you invest with us directly, our Member Service Representatives are available to help. Call us at (800) 539-3863 or visit our website at vcm.com.
2
From all of us here at USAA Mutual Funds, thank you for letting us help you work toward your investment goals.
Christopher K. Dyer, CFA
President,
USAA Mutual Funds
3
USAA Mutual Funds Trust
USAA Government Securities Fund
Managers' Commentary
(Unaudited)
USAA Investments, A Victory Capital Investment Franchise
R. Neal Graves, CFA, CPA
James F. Jackson Jr., CFA
• What were the market conditions during the reporting period?
U.S. Treasury yields ended the reporting period lower than they started. When the period began in June 2019, the U.S. Federal Reserve (the "Fed") Funds Target Rate was at a target range of between 2.25% and 2.50%. Fed officials reduced the Fed Funds Target Rate three times in the second half of calendar year 2019 (to a target range of 1.50% to 1.75%). This resulted in the Treasury curve reversing its inversion and rates across the curve falling. The spread of the novel coronavirus ("COVID-19"), government imposed economic restrictions, and the subsequent unprecedented collapse in economic activity led to substantial Fed easing. The Fed reduced the Fed Funds Target Rate to 0.0% to 0.25% and Treasury rates fell to all-time lows, with the 30-year Treasury bond at one point falling below 1%. At the end of reporting period, rates remained at or near all-time lows and the Fed has indicated that rates will remain low for an extended period.
As yields fell, bond prices rose. The U.S. Treasury yield curve steepened, with shorter-term yields falling more than longer- and intermediate-term yields. The two-year Treasury yield fell 176 basis points to end the reporting period at 0.16%, while the 10-year Treasury yield dropped 147 basis points to finish the period at 0.65%. (A basis point is 1/100th of a percentage point.) In addition, in the closing weeks of the period, the U.S. Treasury initiated a 20-year Treasury bond, as there was record issuance of U.S. Treasury securities to fund COVID-19 relief.
Residential mortgage interest rates, which have historically been tied to the 10-year Treasury yield, fell during the reporting period overall. The interest rate on a 15-year residential mortgage started the period at 3.29%, rose to a high of 3.44% in March 2020, and declined to end the period at 2.84%. The interest rate on a 30-year residential mortgage increased from 4.03% at the beginning of the period to a high of 4.12% during March 2020 and dropped to 3.52% by the end of the period. The peak of mortgage rates in March 2020 was driven by the severe COVID-19 induced disruption in the mortgage-backed securities market, as well as the reduced ability of mortgage companies to originate new loans because of social distancing concerns. As we exit the reporting period, lower rates, pent-up demand from COVID-19 related lockdowns, and states reopening their economies have resulted in increased housing activity.
• How did the USAA Government Securities Fund (the "Fund") perform during the reporting period?
The Fund has four share classes: Fund Shares, Institutional Shares, Adviser Shares (redesignated Class A shares), and R6 Shares. For the reporting period ended May 31, 2020, the Fund Shares, Institutional Shares, Adviser Shares and R6 Shares had total
4
USAA Mutual Funds Trust
USAA Government Securities Fund (continued)
Managers' Commentary (continued)
returns of 6.49%, 6.56%, 6.04% and 6.46%, respectively. This compares to a total return of 7.24% for the Bloomberg Barclays U.S. Aggregate Government Intermediate & Mortgage-Backed Securities Index (the "Index"), and 8.58% for the Lipper Intermediate U.S. Government Funds Index.
• What were your strategies for the Fund during the reporting period?
The Fund benefited from its holdings of longer-duration Agency Commercial Mortgage-Backed Securities ("CMBS"), as longer-term securities outperformed shorter-term securities during the reporting period. For the same reason, investments in longer-duration municipal bonds added to returns. The Fund's under-allocation to U.S. Treasury securities combined with the Fund's shorter-duration U.S. Treasury security holdings were the primary detractors from performance. The Fund also was underweight 30-year mortgage pass-through securities, which performed relatively well given their longer duration and the reduced ability of borrowers to refinance due to social distancing concerns amid COVID-19.
During the reporting period, the Fund's holdings of mortgage pass throughs continued to decline as borrowers repaid their loans. We reallocated a portion of these paydowns back into 30-year Fannie Mae mortgage pass throughs to maintain our desired exposure to the sector. We also invested in high-quality municipal bonds due to their attractive yields and to reduce the portfolio's exposure to extension or contraction risk that exists in mortgage pass throughs. (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. Contraction risk is the risk that mortgage prepayments will accelerate, causing the average life of a mortgage to shorten, necessitating the reinvestment of proceeds at lower yields.) The portfolio managers also sold modest amounts of Agency CMBS and Treasurys to meet redemptions in the Fund.
Thank you for allowing us to assist in your investment needs.
5
USAA Mutual Funds Trust
USAA Government Securities Fund
Investment Overview
(Unaudited)
Average Annual Total Return
Year Ended May 31, 2020
Fund Shares | Institutional Shares | Adviser Shares | R6 Shares | ||||||||||||||||||||||||
INCEPTION DATE | 2/1/91 | 8/10/15 | 8/1/10 | 12/1/16 | |||||||||||||||||||||||
Net Asset Value | Net Asset Value | Net Asset Value | Net Asset Value | Bloomberg Barclays U.S. Aggregate Government Intermediate & Mortgage-Backed Securities Index1 | Lipper Intermediate U.S. Government Funds Index2 | ||||||||||||||||||||||
One Year | 6.49 | % | 6.56 | % | 6.04 | % | 6.46 | % | 7.24 | % | 8.58 | % | |||||||||||||||
Five Year | 2.64 | % | NA | 2.33 | % | NA | 2.97 | % | 3.11 | % | |||||||||||||||||
Ten Year | 2.69 | % | NA | NA | NA | 2.89 | % | 3.10 | % | ||||||||||||||||||
Since Inception | NA | 2.94 | % | 2.19 | % | 3.65 | % | NA | NA |
Past performance is not indicative of future results. 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 for various periods since inception. Without such fee waivers, the total returns would have been lower.
USAA Government Securities Fund — Growth of $10,000
1The unmanaged Bloomberg Barclays 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.
2The unmanaged Lipper Intermediate U.S. Government Funds Index is considered representative of intermediate U.S. government funds.
The graph reflects investment of growth of a hypothetical $10,000 investment in the Fund. Past performance is no guarantee of future results.
The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
6
USAA Mutual Funds Trust USAA Government Securities Fund | May 31, 2020 |
(Unaudited)
Investment Objective & Portfolio Holdings:
The Fund's investment objective is to provide investors a high level of current income consistent with preservation of principal.
Asset Allocation
May 31, 2020
(% of Net Assets)
Percentages are of the net assets of the Fund and may not equal 100%.
Refer to the Schedule of Portfolio Investments for a complete list of securities.
7
USAA Mutual Funds Trust USAA Government Securities Fund | Schedule of Portfolio Investments May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Asset Backed Securities (3.4%) | |||||||||||
Goal Capital Funding Trust, Series 2005-2, Class A4, 0.56% (LIBOR03M+20bps), 8/25/44, Callable 8/25/20 @ 100 (a) | $ | 7,230 | $ | 6,755 | |||||||
Montana Higher Education Student Assistance Corp., Series 2012-1, Class A2, 1.17% (LIBOR01M+100bps), 5/20/30, Callable 12/20/29 @ 100 (a) | 6,510 | 6,423 | |||||||||
Navient Student Loan Trust, Series 2014-1, Class A3, 0.68% (LIBOR01M+51bps), 6/25/31, Callable 11/25/30 @ 100 (a) | 2,532 | 2,399 | |||||||||
Navient Student Loan Trust, Series 2016-2, Class A2, 1.22% (LIBOR01M+105bps), 6/25/65, Callable 12/25/31 @ 100 (a) (b) | 897 | 891 | |||||||||
Navient Student Loan Trust, Series 2019-1, Class A1, 0.50% (LIBOR01M+33bps), 12/27/67, Callable 12/25/31 @ 100 (a) (b) | 1,397 | 1,391 | |||||||||
Nelnet Student Loan Trust, Series 2006-3, Class B, 1.47% (LIBOR03M+25bps), 6/25/41, Callable 9/25/24 @ 100 (a) | 2,818 | 2,470 | |||||||||
Nelnet Student Loan Trust, Series 2015-3, Class A2, 0.77% (LIBOR01M+60bps), 2/27/51, Callable 9/25/34 @ 100 (a) (b) | 4,184 | 4,029 | |||||||||
PHEAA Student Loan Trust, Series 2011-1, Class A1, 2.32% (LIBOR03M+110bps), 6/25/38, Callable 12/25/28 @ 100 (a) (b) | 2,478 | 2,416 | |||||||||
SLM Student Loan Trust, Series 2006-4, Class B, 1.19% (LIBOR03M+20bps), 1/25/70, Callable 1/25/32 @ 100 (a) | 4,273 | 3,765 | |||||||||
SLM Student Loan Trust, Series 2013-6, Class A3, 0.82% (LIBOR01M+65bps), 6/25/55, Callable 7/25/28 @ 100 (a) | 3,290 | 3,116 | |||||||||
SunTrust Student Loan Trust, Series 2006-1A, Class B, 1.16% (LIBOR03M+27bps), 10/28/37, Callable 7/28/26 @ 100 (a) (b) | 1,184 | 991 | |||||||||
Total Asset Backed Securities (Cost $36,162) | 34,646 | ||||||||||
Collateralized Mortgage Obligations (0.1%) | |||||||||||
WF-RBS Commercial Mortgage Trust, Series 2011-C2, Class A4, 4.87%, 2/15/44 (b) (c) | 941 | 951 | |||||||||
Total Collateralized Mortgage Obligations (Cost $936) | 951 | ||||||||||
Municipal Bonds (3.6%) | |||||||||||
Connecticut (0.5%): | |||||||||||
State of Connecticut, GO, 2.92%, 8/1/23 | 5,000 | 5,174 | |||||||||
Kansas (0.3%): | |||||||||||
Kansas Development Finance Authority Revenue, Series H, 3.94%, 4/15/26 | 3,000 | 3,293 | |||||||||
Texas (2.2%): | |||||||||||
City of Abilene, GO 2.41%, 2/15/26 | 1,715 | 1,783 | |||||||||
2.54%, 2/15/27 | 1,195 | 1,247 | |||||||||
2.64%, 2/15/29 | 1,000 | 1,041 | |||||||||
City of Houston Texas Combined Utility System Revenue, 3.72%, 11/15/28 | 1,530 | 1,719 | |||||||||
City of Houston, Texas Combined Utility System Revenue, 3.82%, 11/15/29, Continuously Callable @100 | 3,000 | 3,366 | |||||||||
State of Texas, GO 1.61%, 10/1/22 | 1,585 | 1,602 | |||||||||
2.53%, 10/1/31, Continuously Callable @100 | 3,500 | 3,711 |
See notes to financial statements.
8
USAA Mutual Funds Trust USAA Government Securities Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Texas Public Finance Authority State of Texas, GO Series C, 2.83%, 10/1/25 | $ | 3,000 | $ | 3,208 | |||||||
Series C, 3.01%, 10/1/26, Continuously Callable @100 | 4,000 | 4,287 | |||||||||
21,964 | |||||||||||
Virginia (0.6%): | |||||||||||
Virginia Public Building Authority Revenue Series C, 2.25%, 8/1/26 | 1,370 | 1,438 | |||||||||
Series C, 2.40%, 8/1/27 | 1,475 | 1,553 | |||||||||
Series C, 2.56%, 8/1/29 | 2,700 | 2,844 | |||||||||
5,835 | |||||||||||
Total Municipal Bonds (Cost $34,156) | 36,266 | ||||||||||
U.S. Government Agency Mortgages (66.1%) | |||||||||||
Federal Home Loan Mortgage Corporation Series K011, Class A2, 4.08%, 11/25/20 (c) | 2,806 | 2,817 | |||||||||
5.00%, 1/1/21 | 10 | 10 | |||||||||
Series K715, Class A2, 2.86%, 1/25/21 | 4,702 | 4,720 | |||||||||
Series K019, Class A2, 2.27%, 3/25/22 | 2,214 | 2,254 | |||||||||
Series K026, Class A1, 1.69%, 4/25/22 | 1,464 | 1,471 | |||||||||
Series K720, Class A2, 2.72%, 6/25/22 | 4,000 | 4,098 | |||||||||
Series K022, Class A2, 2.36%, 7/25/22 | 3,000 | 3,092 | |||||||||
Series K023, Class A2, 2.31%, 8/25/22 | 10,000 | 10,312 | |||||||||
Series K026, Class A2, 2.51%, 11/25/22 | 5,000 | 5,194 | |||||||||
Series K027, Class A2, 2.64%, 1/25/23 | 5,000 | 5,219 | |||||||||
Series K029, Class A2, 3.32%, 2/25/23 (c) | 3,000 | 3,191 | |||||||||
Series K722, Class A2, 2.41%, 3/25/23 | 3,000 | 3,101 | |||||||||
Series K725, Class A2, 3.00%, 1/25/24 | 5,000 | 5,341 | |||||||||
Series K037, Class A2, 3.49%, 1/25/24 | 10,030 | 10,925 | |||||||||
Series K038, Class A2, 3.39%, 3/25/24 | 3,000 | 3,271 | |||||||||
Series K727, Class A2, 2.95%, 7/25/24 | 20,000 | 21,467 | |||||||||
Series K052, Class A1, 2.60%, 1/25/25 | 2,773 | 2,868 | |||||||||
Series K045, Class A2, 3.02%, 1/25/25 | 3,000 | 3,278 | |||||||||
Series K730, Class A2, 3.59%, 1/25/25 | 5,000 | 5,552 | |||||||||
Series K048, Class A2, 3.28%, 6/25/25 (c) | 10,000 | 11,082 | |||||||||
Series K056, Class A1, 2.20%, 7/25/25 | 4,159 | 4,317 | |||||||||
Series K049, Class A2, 3.01%, 7/25/25 | 4,000 | 4,390 | |||||||||
Series KC02, Class A2, 3.37%, 7/25/25 | 30,000 | 33,460 | |||||||||
Series K733, Class A2, 3.75%, 8/25/25-9/25/25 | 20,000 | 22,487 | |||||||||
Series K051, Class A2, 3.31%, 9/25/25 | 20,000 | 22,288 | |||||||||
Series KIR1, Class A2, 2.85%, 3/25/26 | 7,709 | 8,354 | |||||||||
Series K056, Class A2, 2.53%, 5/25/26 | 5,000 | 5,386 | |||||||||
Series K057, Class A2, 2.57%, 7/25/26 | 17,000 | 18,361 | |||||||||
Series K061, Class A1, 3.01%, 8/25/26 | 2,223 | 2,373 | |||||||||
Series 3987, Class A, 2.00%, 9/15/26 | 1,379 | 1,403 | |||||||||
Series K059, Class A2, 3.12%, 9/25/26 (c) | 4,500 | 5,015 | |||||||||
Series K061, Class A2, 3.35%, 11/25/26 (c) | 4,000 | 4,519 | |||||||||
Series K066, Class A2, 3.12%, 6/25/27 | 3,000 | 3,357 | |||||||||
Series K067, Class A2, 3.19%, 7/25/27 | 9,274 | 10,438 |
See notes to financial statements.
9
USAA Mutual Funds Trust USAA Government Securities Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Series K069, Class A2, 3.19%, 9/25/27 (c) | $ | 2,879 | $ | 3,244 | |||||||
Series K071, Class A2, 3.29%, 11/25/27 | 5,000 | 5,685 | |||||||||
Series K076, Class A2, 3.90%, 4/25/28-8/25/28 | 20,000 | 23,722 | |||||||||
Series K080, Class A2, 3.93%, 7/25/28 (c) | 15,000 | 17,837 | |||||||||
Series K082, Class A2, 3.92%, 9/25/28 (c) | 5,000 | 5,953 | |||||||||
Series K084, Class A2, 3.78%, 10/25/28 (c) | 10,000 | 11,785 | |||||||||
Series K085, Class A2, 4.06%, 10/25/28 (c) | 9,706 | 11,658 | |||||||||
3.00%, 3/1/32-6/1/42 | 25,298 | 26,804 | |||||||||
3.50%, 10/1/33-8/1/48 | 24,413 | 25,900 | |||||||||
4.00%, 10/1/33-8/1/48 | 23,086 | 24,544 | |||||||||
5.50%, 12/1/35 | 441 | 514 | |||||||||
Series 3134, Class FA, 0.48% (LIBOR01M+30bps), 3/15/36 (a) | 689 | 686 | |||||||||
Series 4023, Class PF, 0.73% (LIBOR01M+55bps), 10/15/41 (a) | 952 | 956 | |||||||||
4.50%, 9/1/48 | 4,165 | 4,499 | |||||||||
Series K078, Class A2, 3.85%, 6/25/51 | 12,500 | 14,759 | |||||||||
433,957 | |||||||||||
Federal National Mortgage Association 3.50%, 5/1/21-2/1/50 | 22,370 | 23,849 | |||||||||
2.63%, 9/1/21 | 10,000 | 10,105 | |||||||||
2.42%, 11/1/22 | 19,879 | 20,415 | |||||||||
2.50%, 4/1/23 | 8,265 | 8,624 | |||||||||
Series M1, Class A2, 3.23%, 7/25/23 (c) | 1,208 | 1,284 | |||||||||
Series M7, Class AV2, 2.16%, 10/25/23 | 4,850 | 4,992 | |||||||||
Series M13, Class A2, 2.71%, 6/25/25 (c) | 2,356 | 2,554 | |||||||||
Series M1, Class A1, 2.42%, 9/25/26 (c) | 1,022 | 1,048 | |||||||||
3.00%, 2/1/27-2/1/50 | 13,697 | 14,426 | |||||||||
Series M8, Class A2, 3.06%, 5/25/27 (c) | 4,000 | 4,413 | |||||||||
Series M12, Class A2, 3.08%, 6/25/27 (c) | 6,250 | 6,997 | |||||||||
Series 73, Class DC, 1.50%, 7/25/27-10/25/27 | 5,555 | 5,650 | |||||||||
Series 102, Class GA, 1.38%, 9/25/27 | 1,208 | 1,217 | |||||||||
Series M4, Class A2, 3.05%, 3/25/28 (c) | 2,842 | 3,162 | |||||||||
Series M10, Class A2, 3.38%, 7/25/28 (c) | 8,049 | 9,198 | |||||||||
Series 29, Class FY, 0.47% (LIBOR01M+60bps), 4/25/35-8/25/37 (a) | 2,164 | 2,149 | |||||||||
5.00%, 12/1/35 | 625 | 718 | |||||||||
5.50%, 11/1/37 | 196 | 226 | |||||||||
6.00%, 5/1/38 | 348 | 404 | |||||||||
4.00%, 8/1/39-2/1/50 | 44,255 | 47,149 | |||||||||
168,580 | |||||||||||
Government National Mortgage Association 8.50%, 6/15/21 | 3 | 3 | |||||||||
9.00%, 7/15/21 | 1 | 1 | |||||||||
6.00%, 8/15/22-12/15/38 | 9,021 | 10,572 | |||||||||
8.00%, 12/20/22-9/15/30 | 377 | 440 | |||||||||
4.50%, 4/20/24-1/15/41 | 23,704 | 26,449 | |||||||||
7.00%, 5/15/27-7/15/32 | 1,095 | 1,269 | |||||||||
7.50%, 2/15/28-11/15/31 | 240 | 274 | |||||||||
6.50%, 5/15/28-8/20/34 | 2,449 | 2,885 | |||||||||
6.75%, 5/15/28 | 7 | 7 | |||||||||
5.50%, 4/20/33-6/15/39 | 14,385 | 16,769 |
See notes to financial statements.
10
USAA Mutual Funds Trust USAA Government Securities Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
5.00%, 5/20/33-2/15/39 | $ | 4,210 | $ | 4,702 | |||||||
4.00%, 7/15/40-11/20/40 | 5,240 | 5,787 | |||||||||
69,158 | |||||||||||
Total U.S. Government Agency Mortgages (Cost $619,222) | 671,695 | ||||||||||
U.S. Treasury Obligations (25.0%) | |||||||||||
U.S. Treasury Notes 2.75%, 11/30/20 | 12,000 | 12,153 | |||||||||
2.63%, 6/15/21 | 20,000 | 20,502 | |||||||||
2.13%, 6/30/21 | 3,000 | 3,062 | |||||||||
2.63%, 7/15/21 | 15,000 | 15,408 | |||||||||
2.75%, 8/15/21 | 10,000 | 10,307 | |||||||||
2.75%, 9/15/21 | 35,000 | 36,155 | |||||||||
2.88%, 11/15/21 | 10,000 | 10,391 | |||||||||
2.00%, 2/15/22 | 3,000 | 3,093 | |||||||||
2.13%, 6/30/22 | 20,000 | 20,814 | |||||||||
1.88%, 7/31/22 | 10,000 | 10,367 | |||||||||
1.63%, 8/31/22 | 20,000 | 20,650 | |||||||||
2.00%, 11/30/22 | 11,000 | 11,498 | |||||||||
1.38%, 6/30/23 | 5,000 | 5,180 | |||||||||
2.13%, 11/30/23 | 22,000 | 23,458 | |||||||||
2.00%, 6/30/24 | 20,000 | 21,414 | |||||||||
1.88%, 8/31/24 | 10,000 | 10,677 | |||||||||
2.25%, 11/15/24 | 5,000 | 5,434 | |||||||||
2.13%, 11/30/24 | 4,000 | 4,328 | |||||||||
2.00%, 2/15/25 | 4,000 | 4,318 | |||||||||
2.13%, 5/15/25 | 4,500 | 4,898 | |||||||||
Total U.S. Treasury Obligations (Cost $243,284) | 254,107 | ||||||||||
Investment Companies (0.0%) (d) | |||||||||||
Federated Treasury Obligations Fund Institutional Shares, 0.35% (e) | 58 | 58 | |||||||||
Total Investment Companies (Cost $58) | 58 | ||||||||||
Repurchase Agreements (1.5%) | |||||||||||
Credit Agricole CIB NY, 0.05%, 6/1/20, Purchased on 5/29/20, with maturity date of 6/1/20, value of $15,000,063, collateralized by U.S. Treasury Notes, 1.50%, 11/30/24, fair value $15,193,047 | 15,000 | 15,000 | |||||||||
Total Repurchase Agreements (Cost $15,000) | 15,000 | ||||||||||
Total Investments (Cost $948,818) — 99.7% | 1,012,723 | ||||||||||
Other assets in excess of liabilities — 0.3% | 2,855 | ||||||||||
NET ASSETS — 100.00% | $ | 1,015,578 |
(a) Variable or Floating-Rate Security. Rate disclosed is as of May 31, 2020.
See notes to financial statements.
11
USAA Mutual Funds Trust USAA Government Securities Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(b) Rule 144A security or other security that is restricted as to resale to institutional investors. The Fund's Adviser has deemed this security to be liquid based upon procedures approved by the Board of Trustees. As of May 31, 2020, the fair value of these securities was $10,669 (thousands) and amounted to 1.1% of net assets.
(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) Amount represents less than 0.05% of net assets.
(e) Rate disclosed is the daily yield on May 31, 2020.
bps — Basis points
GO — General Obligation
LIBOR — London InterBank Offered Rate
LIBOR01M — 1 Month US Dollar LIBOR, rate disclosed as of May 31, 2020, based on the last reset date of the security
LIBOR03M — 3 Month US Dollar LIBOR, rate disclosed as of May 31, 2020, based on the last reset date of the security
See notes to financial statements.
12
USAA Mutual Funds Trust | Statement of Assets and Liabilities May 31, 2020 |
(Amounts in Thousands, Except Per Share Amounts)
USAA Government Securities Fund | |||||||
Assets: | |||||||
Investments, at value (Cost $948,818) | $ | 1,012,723 | |||||
Cash and cash equivalents | 57 | ||||||
Receivables: | |||||||
Interest | 3,847 | ||||||
Capital shares issued | 116 | ||||||
Prepaid expenses | 38 | ||||||
Total assets | 1,016,781 | ||||||
Liabilities: | |||||||
Payables: | |||||||
Distributions | 63 | ||||||
Investments purchased | 57 | ||||||
Capital shares redeemed | 729 | ||||||
Accrued expenses and other payables: | |||||||
Investment advisory fees | 111 | ||||||
Administration fees | 102 | ||||||
Custodian fees | 6 | ||||||
Transfer agent fees | 80 | ||||||
Compliance fees | — | (a) | |||||
12b-1 fees | 1 | ||||||
Other accrued expenses | 54 | ||||||
Total liabilities | 1,203 | ||||||
Net Assets: | |||||||
Capital | 948,451 | ||||||
Total distributable earnings/(loss) | 67,127 | ||||||
Net assets | $ | 1,015,578 | |||||
Net Assets | |||||||
Fund Shares | $ | 364,077 | |||||
Institutional Shares | 638,299 | ||||||
Adviser Shares | 5,299 | ||||||
Class R6 Shares | 7,903 | ||||||
Total | $ | 1,015,578 | |||||
Shares (unlimited number of shares authorized with no par value): | |||||||
Fund Shares | 35,605 | ||||||
Institutional Shares | 62,407 | ||||||
Adviser Shares | 518 | ||||||
Class R6 Shares | 773 | ||||||
Total | 99,303 | ||||||
Net asset value, offering and redemption price per share: (b) | |||||||
Fund Shares | $ | 10.23 | |||||
Institutional Shares | $ | 10.23 | |||||
Adviser Shares | $ | 10.22 | |||||
Class R6 Shares | $ | 10.22 |
(a) Rounds to less than $1 thousand.
(b) Per share amount may not recalculate due to rounding of net assets and/or shares outstanding.
See notes to financial statements.
13
USAA Mutual Funds Trust | Statement of Operations For the Year Ended May 31, 2020 |
(Amounts in Thousands)
USAA Government Securities Fund | |||||||
Investment Income: | |||||||
Interest | $ | 30,205 | |||||
Securities lending (net of fees) | — | (a) | |||||
Total income | 30,205 | ||||||
Expenses: | |||||||
Investment advisory fees | 1,380 | ||||||
Administration fees — Fund Shares | 508 | ||||||
Administration fees — Institutional Shares | 735 | ||||||
Administration fees — Adviser Shares | 8 | ||||||
Administration fees — Class R6 Shares | 3 | ||||||
Sub-Administration fees | 18 | ||||||
12b-1 fees — Adviser Shares | 13 | ||||||
Custodian fees | 60 | ||||||
Transfer agent fees — Fund Shares | 399 | ||||||
Transfer agent fees — Institutional Shares | 735 | ||||||
Transfer agent fees — Adviser Shares | — | (a) | |||||
Transfer agent fees — Class R6 Shares | 1 | ||||||
Trustees' fees | 49 | ||||||
Compliance fees | 6 | ||||||
Interest expense on interfund lending | — | (a) | |||||
Legal and audit fees | 73 | ||||||
State registration and filing fees | 52 | ||||||
Other expenses | 88 | ||||||
Total expenses | 4,128 | ||||||
Expenses waived/reimbursed by Adviser | (1 | ) | |||||
Expenses waived/reimbursed by AMCO | (4 | ) | |||||
Net expenses | 4,123 | ||||||
Net Investment Income | 26,082 | ||||||
Realized/Unrealized Gains (Losses) from Investments: | |||||||
Net realized gains (losses) from investment securities | 6,122 | ||||||
Net change in unrealized appreciation/depreciation on investment securities | 36,218 | ||||||
Net realized/unrealized gains (losses) on investments | 42,340 | ||||||
Change in net assets resulting from operations | $ | 68,422 |
(a) Rounds to less than $1 thousand.
See notes to financial statements.
14
USAA Mutual Funds Trust | Statements of Changes in Net Assets |
(Amounts in Thousands)
USAA Government Securities Fund | |||||||||||
Year Ended May 31, 2020 | Year Ended May 31, 2019 | ||||||||||
From Investments: | |||||||||||
Operations: | |||||||||||
Net investment income (loss) | $ | 26,082 | $ | 23,271 | |||||||
Net realized gains (losses) from investments | 6,122 | (457 | ) | ||||||||
Net change in unrealized appreciation/depreciation on investments | 36,218 | 35,278 | |||||||||
Change in net assets resulting from operations | 68,422 | 58,092 | |||||||||
Distributions to Shareholders: | |||||||||||
Fund Shares | (8,215 | ) | (7,783 | ) | |||||||
Institutional Shares | (18,360 | ) | (15,121 | ) | |||||||
Adviser Shares | (108 | ) | (103 | ) | |||||||
Class R6 Shares | (169 | ) | (158 | ) | |||||||
Change in net assets resulting from distributions to shareholders | (26,852 | ) | (23,165 | ) | |||||||
Change in net assets resulting from capital transactions | (107,815 | ) | 450,985 | ||||||||
Capital contribution from USAA Transfer Agency Company | — | 1 | |||||||||
Change in net assets | (66,245 | ) | 485,913 | ||||||||
Net Assets: | |||||||||||
Beginning of period | 1,081,823 | 595,910 | |||||||||
End of period | $ | 1,015,578 | $ | 1,081,823 | |||||||
Capital Transactions: | |||||||||||
Fund Shares | |||||||||||
Proceeds from shares issued | $ | 94,729 | $ | 36,701 | |||||||
Distributions reinvested | 7,575 | 7,207 | |||||||||
Cost of shares redeemed | (79,266 | ) | (58,880 | ) | |||||||
Total Fund Shares | $ | 23,038 | $ | (14,972 | ) | ||||||
Institutional Shares | |||||||||||
Proceeds from shares issued | $ | 34,931 | $ | 474,117 | |||||||
Distributions reinvested | 18,170 | 15,202 | |||||||||
Cost of shares redeemed | (185,234 | ) | (23,341 | ) | |||||||
Total Institutional Shares | $ | (132,133 | ) | $ | 465,978 | ||||||
Adviser Shares | |||||||||||
Proceeds from shares issued | $ | 114 | $ | 110 | |||||||
Distributions reinvested | 4 | 3 | |||||||||
Cost of shares redeemed | (58 | ) | (24 | ) | |||||||
Total Adviser Shares | $ | 60 | $ | 89 | |||||||
Class R6 Shares | |||||||||||
Proceeds from shares issued | $ | 1,713 | $ | 147 | |||||||
Distributions reinvested | 41 | 35 | |||||||||
Cost of shares redeemed | (534 | ) | (292 | ) | |||||||
Total Class R6 Shares | $ | 1,220 | $ | (110 | ) | ||||||
Change in net assets resulting from capital transactions | $ | (107,815 | ) | $ | 450,985 |
See notes to financial statements.
15
USAA Mutual Funds Trust | Statements of Changes in Net Assets — continued |
(Amounts in Thousands)
USAA Government Securities Fund | |||||||||||
Year Ended May 31, 2020 | Year Ended May 31, 2019 | ||||||||||
Share Transactions: | |||||||||||
Fund Shares | |||||||||||
Issued | 9,416 | 3,829 | |||||||||
Reinvested | 756 | 751 | |||||||||
Redeemed | (7,902 | ) | (6,159 | ) | |||||||
Total Fund Shares | 2,270 | (1,579 | ) | ||||||||
Institutional Shares | |||||||||||
Issued | 3,520 | 49,953 | |||||||||
Reinvested | 1,814 | 1,582 | |||||||||
Redeemed | (18,326 | ) | (2,450 | ) | |||||||
Total Institutional Shares | (12,992 | ) | 49,085 | ||||||||
Adviser Shares | |||||||||||
Issued | 12 | 11 | |||||||||
Reinvested | — | (a) | — | (a) | |||||||
Redeemed | (6 | ) | (2 | ) | |||||||
Total Adviser Shares | 6 | 9 | |||||||||
Class R6 Shares | |||||||||||
Issued | 169 | 15 | |||||||||
Reinvested | 4 | 4 | |||||||||
Redeemed | (53 | ) | (31 | ) | |||||||
Total Class R6 Shares | 120 | (12 | ) | ||||||||
Change in Shares | (10,596 | ) | 47,503 |
(a) Rounds to less than 1 thousand.
See notes to financial statements.
16
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17
USAA Mutual Funds Trust | Financial Highlights |
For a Share Outstanding Throughout Each Period
Investment Activities | Distributions to Shareholders From | ||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss) | Net Realized and Unrealized Gains (Losses) on Investments | Total from Investment Activities | Net Investment Income | Total Distributions | ||||||||||||||||||||||
USAA Government Securities Fund | |||||||||||||||||||||||||||
Fund Shares | |||||||||||||||||||||||||||
Year Ended May 31, 2020 | $ | 9.84 | 0.24 | (d) | 0.39 | 0.63 | (0.24 | ) | (0.24 | ) | |||||||||||||||||
Year Ended May 31, 2019 | $ | 9.55 | 0.23 | 0.29 | 0.52 | (0.23 | ) | (0.23 | ) | ||||||||||||||||||
Year Ended May 31, 2018 | $ | 9.86 | 0.20 | (0.31 | ) | (0.11 | ) | (0.20 | ) | (0.20 | ) | ||||||||||||||||
Year Ended May 31, 2017 | $ | 10.00 | 0.20 | (0.14 | ) | 0.06 | (0.20 | ) | (0.20 | ) | |||||||||||||||||
Year Ended May 31, 2016 | $ | 10.04 | 0.22 | (0.04 | ) | 0.18 | (0.22 | ) | (0.22 | ) | |||||||||||||||||
Institutional Shares | |||||||||||||||||||||||||||
Year Ended May 31, 2020 | $ | 9.85 | 0.24 | (d) | 0.39 | 0.63 | (0.25 | ) | (0.25 | ) | |||||||||||||||||
Year Ended May 31, 2019 | $ | 9.55 | 0.24 | 0.30 | 0.54 | (0.24 | ) | (0.24 | ) | ||||||||||||||||||
Year Ended May 31, 2018 | $ | 9.86 | 0.21 | (0.31 | ) | (0.10 | ) | (0.21 | ) | (0.21 | ) | ||||||||||||||||
Year Ended May 31, 2017 | $ | 10.00 | 0.21 | (0.14 | ) | 0.07 | (0.21 | ) | (0.21 | ) | |||||||||||||||||
August 7, 2015 (e) through May 31, 2016 | $ | 9.94 | 0.18 | 0.06 | 0.24 | (0.18 | ) | (0.18 | ) | ||||||||||||||||||
Adviser Shares | |||||||||||||||||||||||||||
Year Ended May 31, 2020 | $ | 9.84 | 0.20 | (d) | 0.39 | 0.59 | (0.21 | ) | (0.21 | ) | |||||||||||||||||
Year Ended May 31, 2019 | $ | 9.54 | 0.21 | 0.30 | 0.51 | (0.21 | ) | (0.21 | ) | ||||||||||||||||||
Year Ended May 31, 2018 | $ | 9.85 | 0.18 | (0.31 | ) | (0.13 | ) | (0.18 | ) | (0.18 | ) | ||||||||||||||||
Year Ended May 31, 2017 | $ | 10.00 | 0.17 | (0.15 | ) | 0.02 | (0.17 | ) | (0.17 | ) | |||||||||||||||||
Year Ended May 31, 2016 | $ | 10.04 | 0.19 | (0.04 | ) | 0.15 | (0.19 | ) | (0.19 | ) | |||||||||||||||||
Class R6 Shares | |||||||||||||||||||||||||||
Year Ended May 31, 2020 | $ | 9.84 | 0.24 | (d) | 0.39 | 0.63 | (0.25 | ) | (0.25 | ) | |||||||||||||||||
Year Ended May 31, 2019 | $ | 9.55 | 0.24 | 0.29 | 0.53 | (0.24 | ) | (0.24 | ) | ||||||||||||||||||
Year Ended May 31, 2018 | $ | 9.85 | 0.22 | (0.30 | ) | (0.08 | ) | (0.22 | ) | (0.22 | ) | ||||||||||||||||
December 1, 2016 (e) through May 31, 2017 | $ | 9.80 | 0.11 | 0.05 | 0.16 | (0.11 | ) | (0.11 | ) |
* 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.
^ 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 two year period beginning July 1, 2019 and in effect through June 30, 2021, instead of coinciding with the Fund's fiscal year end. Details of the current contractual expense limitation in effect can be found in Note 5 of the accompanying Notes to Financial Statements.
(a) Not annualized for periods less than one year.
(b) Annualized for periods less than one year.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
(d) Per share net investment income (loss) has been calculated using the average daily shares method.
(e) Commencement of operations.
(f) Amount is less than $0.005.
See notes to financial statements.
18
USAA Mutual Funds Trust | Financial Highlights — continued |
Ratios to Average Net Assets | Supplemental Data | ||||||||||||||||||||||||||||||||||
Redemption Fees Added to Beneficial Interests | Net Asset Value, End of Period | Total Return*(a) | Net Expenses^(b) | Net Investment Income (Loss)(b) | Gross Expenses(b) | Net Assets, End of Period (000's) | Portfolio Turnover(a)(c) | ||||||||||||||||||||||||||||
USAA Government Securities Fund | |||||||||||||||||||||||||||||||||||
Fund Shares | |||||||||||||||||||||||||||||||||||
Year Ended May 31, 2020 | — | $ | 10.23 | 6.49 | % | 0.43 | % | 2.36 | % | 0.43 | % | $ | 364,077 | 11 | % | ||||||||||||||||||||
Year Ended May 31, 2019 | — | $ | 9.84 | 5.56 | % | 0.47 | % | 2.42 | % | 0.47 | % | $ | 328,123 | 9 | % | ||||||||||||||||||||
Year Ended May 31, 2018 | — | $ | 9.55 | (1.09 | )% | 0.48 | % | 2.09 | % | 0.48 | % | $ | 333,464 | 15 | % | ||||||||||||||||||||
Year Ended May 31, 2017 | — | $ | 9.86 | 0.62 | % | 0.48 | % | 2.02 | % | 0.48 | % | $ | 390,897 | 18 | % | ||||||||||||||||||||
Year Ended May 31, 2016 | — | $ | 10.00 | 1.80 | % | 0.51 | % | 2.17 | % | 0.51 | % | $ | 432,471 | 14 | % | ||||||||||||||||||||
Institutional Shares | |||||||||||||||||||||||||||||||||||
Year Ended May 31, 2020 | — | $ | 10.23 | 6.45 | % | 0.36 | % | 2.43 | % | 0.36 | % | $ | 638,299 | 11 | % | ||||||||||||||||||||
Year Ended May 31, 2019 | — | $ | 9.85 | 5.76 | % | 0.38 | % | 2.55 | % | 0.38 | % | $ | 742,233 | 9 | % | ||||||||||||||||||||
Year Ended May 31, 2018 | — | $ | 9.55 | (1.01 | )% | 0.39 | % | 2.18 | % | 0.39 | % | $ | 251,297 | 15 | % | ||||||||||||||||||||
Year Ended May 31, 2017 | — | $ | 9.86 | 0.71 | % | 0.40 | % | 2.12 | % | 0.40 | % | $ | 133,607 | 18 | % | ||||||||||||||||||||
August 7, 2015 (e) through May 31, 2016 | — | $ | 10.00 | 2.39 | % | 0.44 | % | 2.16 | % | 0.44 | % | $ | 106,692 | 14 | % | ||||||||||||||||||||
Adviser Shares | |||||||||||||||||||||||||||||||||||
Year Ended May 31, 2020 | — | $ | 10.22 | 6.04 | % | 0.75 | % | 2.03 | % | 0.80 | % | $ | 5,299 | 11 | % | ||||||||||||||||||||
Year Ended May 31, 2019 | — | $ | 9.84 | 5.37 | % | 0.75 | % | 2.14 | % | 0.87 | % | $ | 5,042 | 9 | % | ||||||||||||||||||||
Year Ended May 31, 2018 | — | (f) | $ | 9.54 | (1.36 | )% | 0.75 | % | 1.82 | % | 0.87 | % | $ | 4,804 | 15 | % | |||||||||||||||||||
Year Ended May 31, 2017 | — | $ | 9.85 | 0.25 | % | 0.75 | % | 1.76 | % | 0.93 | % | $ | 6,089 | 18 | % | ||||||||||||||||||||
Year Ended May 31, 2016 | — | $ | 10.00 | 1.55 | % | 0.75 | % | 1.93 | % | 0.95 | % | $ | 5,088 | 14 | % | ||||||||||||||||||||
Class R6 Shares | |||||||||||||||||||||||||||||||||||
Year Ended May 31, 2020 | — | $ | 10.22 | 6.46 | % | 0.35 | % | 2.43 | % | 0.39 | % | $ | 7,903 | 11 | % | ||||||||||||||||||||
Year Ended May 31, 2019 | — | $ | 9.84 | 5.68 | % | 0.35 | % | 2.54 | % | 0.51 | % | $ | 6,425 | 9 | % | ||||||||||||||||||||
Year Ended May 31, 2018 | — | $ | 9.55 | (0.87 | )% | 0.35 | % | 2.22 | % | 0.64 | % | $ | 6,345 | 15 | % | ||||||||||||||||||||
December 1, 2016 (e) through May 31, 2017 | — | $ | 9.85 | 1.62 | % | 0.35 | % | 2.22 | % | 1.12 | % | $ | 5,027 | 18 | % |
For a Share Outstanding Throughout Each Period
See notes to financial statements.
19
USAA Mutual Funds Trust | Notes to Financial Statements May 31, 2020 |
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 47 funds and is authorized to issue an unlimited number of shares, which are units of beneficial interest with no par value.
The accompanying financial statements are those of the USAA Government Securities Fund (the "Fund"). The Fund offers four classes of shares: Fund Shares, Institutional Shares, Adviser Shares 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 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 November 6, 2018, United Services Automobile Association ("USAA"), the parent company of USAA Asset Management Company ("AMCO"), the investment adviser to the Fund, and USAA Transfer Agency Company, d/b/a USAA Shareholder Account Services ("SAS"), the transfer agent to the Fund, announced that AMCO and SAS would be acquired by Victory Capital Holdings Inc., a global investment management firm headquartered in Cleveland, Ohio (the "Transaction"). The Transaction closed on July 1, 2019. A special shareholder meeting was held on April 18, 2019, at which shareholders of the Fund approved a new investment advisory agreement between the Trust, on behalf of the Fund, and Victory Capital Management Inc. ("VCM" or "Adviser"). Effective July 1, 2019, VCM replaced AMCO as the investment adviser to the Fund and Victory Capital Transfer Agency Company replaced SAS as the Fund's transfer agent. In addition, effective on that same date, shareholders of the Fund also elected the following two new directors to the Board of the Trust to serve upon the closing of the Transaction: (1) David C. Brown, to serve as an Interested Trustee; and (2) John C. Walters, to serve as an Independent Trustee.
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 generally accepted accounting principles in the United States of America ("GAAP"). The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses for the period. Actual results could differ from those estimates. The Fund follows the specialized accounting and reporting requirements under GAAP that are applicable to investment companies under Accounting Standards Codification Topic 946.
Investment Valuation:
The Fund records investments at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The valuation techniques described below maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value. The inputs used for valuing the Fund's investments are summarized in the three broad levels listed below:
• Level 1 — quoted prices in active markets for identical securities
20
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
• Level 2 — other significant observable inputs (including quoted prices for similar securities or interest rates applicable to those securities, etc.)
• Level 3 — significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments)
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The inputs or methodologies used for valuation techniques are not necessarily an indication of the risk associated with entering into those investments.
The Adviser has established the Pricing and Liquidity Committee (the "Committee"), and subject to Trust's Board of Trustees (the "Board")oversight, the Committee administers and oversees the Fund's valuation policies and procedures, which are approved by the Board.
Investments in open-end investment companies are valued at net asset value ("NAV"). These valuations are typically categorized as Level 1 in the fair value hierarchy.
Debt securities of United States ("U.S.") issuers, along with corporate and municipal securities, including short-term investments maturing in 60 days or less, may be valued using evaluated bid or the last sales price to price securities by dealers or an independent pricing service approved by the Board. These valuations are typically categorized as Level 2 in the fair value hierarchy.
Effective July 1, 2019, the valuation methodology applied to certain debt securities changed. Securities that were previously valued at an evaluated mean are now valued at the evaluated bid or the last sales price.
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, the securities are valued in good faith by the Committee in accordance with valuation procedures approved by the Board. These valuations are typically categorized as Level 2 or Level 3 in the fair value hierarchy, based on the observability of inputs used to determine the fair value. The effect of fair value pricing is that securities may not be priced on the basis of quotations from the primary market in which they are traded and the actual price realized from the sale of a security may differ materially from the fair value price. Valuing these securities at fair value is intended to cause the Fund's NAV to be more reliable than it otherwise would be.
A summary of the valuations as of May 31, 2020, based upon the three levels defined above, is included in the table below while the breakdown, by category, of investments is disclosed in the Schedule of Portfolio Investments (amounts in thousands):
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Asset Backed Securities | $ | — | $ | 34,646 | $ | — | $ | 34,646 | |||||||||||
Collateralized Mortgage Obligations | — | 951 | — | 951 | |||||||||||||||
Municipal Bonds | — | 36,266 | — | 36,266 | |||||||||||||||
U.S. Government Agency Mortgages | — | 671,695 | — | 671,695 | |||||||||||||||
U.S. Treasury Obligations | — | 254,107 | — | 254,107 | |||||||||||||||
Investment Companies | 58 | — | — | 58 | |||||||||||||||
Repurchase Agreements | — | 15,000 | — | 15,000 | |||||||||||||||
Total | $ | 58 | $ | 1,012,665 | $ | — | $ | 1,012,723 |
For the year ended May 31, 2020, there were no transfers in or out of the Level 3 fair value hierarchy.
Investment Companies:
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 May 31, 2020 |
Securities Purchased on a Delayed-Delivery or When-Issued Basis:
The Fund may purchase securities on a delayed-delivery or when-issued basis. Delivery and payment for securities that have been purchased by the Fund on a delayed-delivery or when-issued basis or for delayed draws on loans can take place a month or more after the trade date. At the time the Fund makes the commitment to purchase a security on a delayed-delivery or when-issued basis, the Fund records the transaction and reflects the value of the security in determining NAV. No interest accrues to the Fund until the transaction settles and payment takes place. A segregated account is established and the Fund maintains cash and/or marketable securities at least equal in value to commitments for delayed-delivery or when-issued securities. If the Fund owns delayed-delivery or when-issued securities, these values are included in Payable for investments purchased on the accompanying Statement of Assets and Liabilities and the segregated assets are identified on the Schedule of Portfolio Investments.
Municipal Obligations:
The values of municipal obligations can fluctuate and may be affected by adverse tax, legislative, or political changes, and by financial developments affecting municipal issuers. Payment 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"), 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 on 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 discount. Gains or losses realized on sales of securities are determined by comparing the identified cost of the security lot sold with the net sales proceeds.
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, to earn additional income, net of income retained by Citibank. Borrowers are required to 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 cured the next business day once the shortfall exceeds $100 thousand. Collateral may be cash, U.S. government securities, or other securities as permitted by SEC guidelines. Cash collateral may be invested in high-quality short-term investments, primarily open-end investment companies. Collateral requirements are determined daily based on the value of the Fund's securities
22
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
on loan as of the end of the prior business day. During the time portfolio securities are on loan, the borrower will pay the Fund any dividends or interest paid on such securities plus any fee negotiated between the parties to the lending agreement. The Fund also earns a return from the collateral. The Fund pays Citibank various fees in connection with the investment of cash collateral and fees based on the investment income received from securities lending activities. Securities lending income (net of these fees) is disclosed on the Statement of Operations. Loans are terminable upon demand and the borrower must return the loaned securities within the lesser of one standard settlement period or five business days. Risks relating to securities-lending transactions include that the borrower may not provide additional collateral when required or return the securities when due, and 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 re-pledged except to satisfy borrower default. Cash collateral is listed in the Fund's Portfolio of Investments and Financial Statements while non-cash collateral is not included.
At May 31, 2020, the Fund had no securities on loan.
Federal Income Taxes:
It is the Fund's policy 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.
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., 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 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, 12b-1 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.
3. Purchases and Sales:
Cost of purchases and proceeds from sales/maturities of securities (excluding securities maturing less than one year from acquisition) for the year ended May 31, 2020, were as follows for the Fund (amounts in thousands):
Excluding U.S. Government Securities | U.S. Government Securities | ||||||||||||||
Purchases | Sales | Purchases | Sales | ||||||||||||
$ | 31,810 | $ | 58,020 | $ | 80,126 | $ | 167,783 |
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
23
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
fund-of-funds' annual and semiannual reports may be viewed at usaa.com. As of May 31, 2020, certain fund-of funds owned total outstanding shares of the Fund:
Affiliated USAA Mutual Funds | Ownership % | ||||||
USAA Cornerstone Conservative Fund | 4.1 | ||||||
USAA Target Retirement Income Fund | 8.6 | ||||||
USAA Target Retirement 2020 Fund | 14.6 | ||||||
USAA Target Retirement 2030 Fund | 18.9 | ||||||
USAA Target Retirement 2040 Fund | 11.2 | ||||||
USAA Target Retirement 2050 Fund | 3.9 | ||||||
USAA Target Retirement 2060 Fund | 0.5 |
5. Fees and Transactions with Affiliates and Related Parties:
Investment Advisory and Management Fees:
Effective with the Transaction on July 1, 2019, investment advisory services are provided to the Fund by the Adviser, a New York corporation registered as an investment adviser with the Securities and Exchange Commission ("SEC"). The Adviser is a wholly-owned indirect subsidiary of Victory Capital Holdings, Inc., a publicly traded Delaware corporation, and a wholly-owned direct subsidiary of Victory Capital Operating, LLC. Under the terms of the Investment Advisory Agreement, the Adviser is entitled to receive a base fee and a performance adjustment. The Fund's base fee is accrued daily and paid monthly at an annualized rate of 0.125% of the Fund's average daily net assets. The amount incurred and paid to VCM from July 1, 2019 through May 31, 2020, was $1,246 thousand and is reflected on the Statement of Operations as Investment Advisory fees.
Prior to the Transaction on July 1, 2019, AMCO provided investment management services to the Fund pursuant to an Advisory Agreement. Under this agreement, AMCO was responsible for managing the business and affairs of the Fund, and for directly managing day-to-day investment of the Fund's assets, subject to the authority of and supervision by the Board. The investment management fee for the Fund was comprised of a base fee and a performance adjustment. The Fund's base fee was accrued daily and paid monthly at an annualized rate of 0.125% of the Fund's average daily net assets.
Effective with the Transaction on July 1, 2019, no performance adjustments will be made for periods beginning July 1, 2019 through June 30, 2020. Only performance beginning as of July 1, 2019, and thereafter will be utilized in calculating future performance adjustments.
Prior to the Transaction on July 1, 2019, the performance adjustment for each share class was accrued daily and calculated monthly by comparing the Fund's performance to that of the Lipper Intermediate U.S. Government Funds Index. The Lipper Intermediate U.S. Government Funds Index measures the total return performance of funds tracked by Lipper that invest 65% of fund assets in securities issued or guaranteed by the U.S. government, its agency, or its instrumentalities, with dollar-weighted average maturities of five to ten years.
The performance period for each share class consists of the current month plus the previous 35 months (or the number of months beginning July 1, 2019, if fewer). The following table is utilized to determine the extent of the performance adjustment:
Over/Under Performance Relative to Index (in basis points)(a) | Annual Adjustment Rate (in basis points)(a) | ||||||
+/- 20 to 50 | +/- 4 | ||||||
+/- 51 to 100 | +/- 5 | ||||||
+/- 101 and greater | +/- 6 |
(a) Based on the difference between average annual performance of the relevant share class of the Fund and its relevant index, rounded to the nearest basis point. Average daily net assets of the share class are calculated over a rolling 36-month period.
24
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
Each class' annual performance adjustment rate is multiplied by the average daily net assets of each respective class over the entire performance period, which is then multiplied by a fraction, the numerator of which is the number of days in the month and the denominator of which is 365 (366 in leap years). The resulting amount is then added to (in the case of overperformance), or subtracted from (in the case of underperformance) the base fee.
Under the performance fee arrangement, each class 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, 2019 through June 30, 2019, performance adjustments for Fund Shares, Institutional Shares, Adviser Shares, and R6 Shares were $12, $11, $0, and less than $1 thousand, respectively. For the Fund Shares, Institutional Shares, Adviser Shares and R6 Shares, the performance adjustments were less than 0.01% of net assets for all classes. Base fees incurred and paid to AMCO from June 1, 2019 through June 30, 2019, were $111 thousand and is reflected on the Statement of Operations as Investment Advisory fees.
Effective with the Transaction on July 1, 2019, 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. Prior to that date, the Trust relied on a similar exemptive order granted by the SEC to the Trust and its affiliated persons. Under a manager of managers structure, the investment adviser may select (with approval of the Board and without shareholder approval) one or more subadvisers to manage the day-to-day investment of a fund's assets. For the year ended May 31, 2020, the Fund had no subadvisers.
Administration and Servicing Fees:
Effective with the Transaction on July 1, 2019, VCM serves as the Fund's administrator and fund accountant. Under the Fund Administration, Servicing and Accounting Agreement, VCM is paid for its services an annual fee at a rate of 0.15% of average daily net assets for both the Fund Shares and Adviser Shares, 0.10% of average daily net assets of the Institutional Shares, and 0.05% of average daily net assets of the R6 Shares. Amounts incurred from July 1, 2019 through May 31, 2020, are $468, $674, $7, and $3 thousand for Fund Shares, Institutional Shares, Adviser Shares, and R6 Shares, respectively. These amounts are reflected on the Statement of Operations as Administration fees.
Prior to the Transaction on July 1, 2019, AMCO provided certain administration and servicing functions for the Fund. For such services, AMCO received a fee accrued daily and paid monthly at an annualized rate of 0.15% of average daily net assets for both the Fund Shares and Adviser Shares, 0.10% of average daily net assets of the Institutional Shares, and 0.05% of average daily net assets of the R6 Shares. Amounts incurred from June 1, 2019 through June 30, 2019 are $40, $61, $1, and less than $1 thousand for Fund Shares, Institutional Shares, Adviser Shares, and R6 Shares, respectively. These amounts are reflected on the Statement of Operations as Administration fees.
Effective with the Transaction on July 1, 2019, the Fund (as part of the Trust) has entered into an agreement to provide compliance services with the Adviser, 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. Funds in the Trust, Victory Variable Insurance Funds, Victory Portfolios and Victory Portfolios II (collectively, the "Victory Funds Complex") in the aggregate, compensates the Adviser for these services. The amount incurred during the period from July 1, 2019 to May 31, 2020, is reflected on the Statement of Operations as Compliance fees.
Effective with the Transaction on July 1, 2019, 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 Trust reimburses VCM and Citi for all of their reasonable out-of-pocket expenses incurred in providing these services and certain other expenses specifically allocated
25
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
to the Funds under the Fund Administration, Servicing, and Accounting Agreement. The amount incurred during the period from July 1, 2019 through May 31, 2020, is reflected on the Statement of Operations as Sub-Administration fees.
In addition to the services provided under its Administration and Servicing Agreement with the Fund, AMCO also provided certain compliance and legal services for the benefit of the Fund prior to the Transaction on July 1, 2019. The Board approved the reimbursement of a portion of these expenses incurred by AMCO. AMCO did not receive any fees from the Fund for these services.
Transfer Agency Fees:
Effective with the Transaction on July 1, 2019, Victory Capital Transfer Agency, Inc. ("VCTA"), (formerly, USAA Shareholder Account Services ("SAS")), provides transfer agency services to the Fund. VCTA, an affiliate of the Adviser, provides transfer agent services to the Fund Shares and Adviser 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's fees for Institutional Shares and R6 Shares are paid monthly based on a fee accrued daily at an annualized rate of 0.10% of the Institutional Shares' and 0.01% of the R6 Shares' average daily net assets, plus out-of pocket expenses. Amounts incurred and paid to VCTA from July 1, 2019 through May 31, 2020, was $365, $674, less than $1, and $1 thousand for the Fund Shares, Institutional Shares, Adviser Shares, and R6 Shares, respectively. Amounts incurred and paid to SAS from June 1, 2019 through June 30, 2019 was $34, $61, less than $1, and less than $1 thousand for the Fund Shares, Institutional Shares, Adviser Shares, and R6 Shares, respectively. These amounts are reflected on the Statement of Operations as Transfer Agent fees.
Effective with the Transaction on July 1, 2019, 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.
Distribution and Service 12b-1 Fees:
Effective with the Transaction on July 1, 2019, Victory Capital Advisers, Inc. (the "Distributor"), an affiliate of the Adviser, serves as distributor for the continuous offering of the Adviser Shares pursuant to a Distribution Agreement between the Distributor and the Trust. Effective on or about June 30, 2020, the Distributor's name will change to Victory Capital Services, Inc. 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 the Adviser Shares. Amounts incurred and paid to the Distributor from July 1, 2019 through May 31, 2020, are $12 thousand and reflected on the Statement of Operations as 12b-1 fees.
Adviser Shares are offered and sold without imposition of an initial sales charge or a contingent deferred sales charge.
Prior to the Transaction on July 1, 2019, the Fund adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Adviser Shares. Under the plan, the Adviser Shares paid fees to USAA Investment Management Company ("IMCO"), the distributor, for distribution and shareholder services. IMCO paid all or a portion of such fees to intermediaries that made the Adviser Shares available for investment by their customers. The fee was accrued daily and paid monthly at an annual rate of 0.25% of the Adviser Shares' average daily net assets. IMCO also provided exclusive underwriting and distribution of the Fund's shares on a continuing best-efforts basis and received no fee or other compensation for these services, but may have received 12b-1 fees as described above, with respect to Adviser Shares. Amounts incurred and paid to IMCO from June 1, 2019 through June 30, 2019, were $1 thousand and reflected on the Statement of Operations as 12b-1 fees.
26
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
Other Fees:
Prior to the Transaction on July 1, 2019, State Street Bank and Trust Company served as the Fund's accounting agent and custodian.
Effective July 1, 2019, Citibank, N.A., serves as the Fund's custodian.
K&L Gates LLP provides legal services to the Trust.
Effective with the Transaction on July 1, 2019, the Adviser has entered into an expense limitation agreement with the Fund until at least June 30, 2021. 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 limit for such classes of the Fund. Such excess amounts will be the liability of the Adviser. 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. Effective July 1, 2019 through May 31, 2020, the expense limit (excluding voluntary waivers) is 0.48%, 0.39%, 0.75% and 0.35% for the Fund Shares, Institutional Shares, Adviser Shares, and R6 Shares, respectively.
Under this expense limitation agreement, the Fund has agreed to repay fees and expenses that were waived or reimbursed by the Adviser for a period up to three years after the fiscal year in which 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 May 31, 2020, the following amounts are available to be repaid to the Adviser (amounts in thousands).
Expires 05/31/2023 | |||
$ | 1 |
The Adviser, may voluntarily waive or reimburse additional fees to assist the Fund in maintaining competitive expense ratios. Voluntary waivers and reimbursements applicable to the Fund are not available to be recouped at a future time. There were no voluntary waivers or reimbursements for the year ended May 31, 2020.
Prior to the Transaction on July 1, 2019, AMCO agreed, through September 30, 2019, to limit the total annual operating expenses of the Adviser Shares and R6 Shares to 0.75% and 0.35%, respectively, of their average daily net assets, excluding extraordinary expenses and before reductions of any expenses paid indirectly, and to reimburse the Adviser Shares and R6 Shares for all expenses in excess of those amounts. Effective with the Transaction on July 1, 2019, these expense limits are no longer in effect and is not available to be recouped by AMCO. For the period June 1, 2019 through June 30, 2019, amounts reimbursed by the Adviser Shares and R6 Shares are reflected on the Statement of Operations as Expenses waived/reimbursed by AMCO.
Certain officers and/or interested trustees of the Fund are also officers and/or employees of the Adviser, Administrator, Sub-Administrator, Sub-Fund Accountant, and Legal.
6. Risks:
The Fund may be subject to other risks in addition to these identified risks.
Global economies and financial markets are increasingly interconnected, which increases the possibilities that conditions in one country or region might adversely affect issuers in another country or region. Geopolitical and other risks, including war, terrorism, trade disputes, political or economic dysfunction within some nations, public health crises and related geopolitical events, as well as environmental disasters such as earthquakes, fires, and floods, may add to instability in world economies and markets generally. Changes in trade policies and international trade agreements could affect the economies of many countries in unpredictable ways. Epidemics and/or pandemics, such as the coronavirus (or COVID-19), may result in, among other things, closing borders, disruptions to healthcare
27
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
service preparation and delivery, quarantines, cancellations, disruptions to supply chains and consumer activity, as well as general concern and uncertainty. The impact may be short-term or may last for extended periods.
The COVID-19 pandemic, which has spread rapidly across the world, has led and will continue to lead for an unknown period of time to disruptions in local, regional, national and global markets and economies. Among other things, the outbreak has resulted in, and until fully resolved is likely to continue to result in, among other things (1) government imposition of various forms of "stay-at-home" orders and the closing of "non-essential" businesses, resulting in significant disruption to the businesses of many issuers as well as lay-offs of employees; (2) increased requests by issuers of debt instruments for amendments and waivers of agreements to avoid default and increased defaults; (3) volatility and disruption of markets, including greater volatility in pricing and spreads; and (4) rapidly evolving proposals and/or actions by state and federal governments to address problems being experienced by the markets and by businesses and the economy in general.
The Fund is subject to the risk that the value of its investments will fluctuate because of changes in interest rates, changes in supply of and demand for fixed-income securities, or other market factors. If interest rates increase, the yield of the Fund may increase and the market value of the Fund's securities may decline, adversely affecting the Fund's NAV and total return. If interest rates decrease, the yield of the Fund may decrease. In addition, the market value of the Fund's securities may increase, which may increase the Fund's NAV and total return. Decisions by the Fed regarding interest rate and monetary policy can have a significant effect on the value of debt 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. Interest rates have been unusually low in recent years in the U.S. and abroad, and central banks have reduced rates further in an effort to combat the economic effects of the COVID-19 pandemic. Extremely low or negative interest rates may become more prevalent or may not work as intended. As there is little precedent for this situation, the impact on various markets that interest rate or other significant policy changes may have is unknown.
In addition, 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 of fixed-income securities could hurt the Fund's performance.
The Fund is subject to legislative risk, which is the risk that changes in government policies may affect the value of the investments held by the Fund in ways we cannot anticipate, and that such policies could have an adverse impact on the value of the Fund's investments and the Fund's NAV.
Many debt securities, derivatives and other financial instruments, including some of the Fund's investments, use the London Interbank Offered Rate ("LIBOR") as the reference or benchmark rate for variable interest rate calculations. However, the use of LIBOR started to come under pressure following manipulation allegations in 2012. Despite increased regulation and other corrective actions since that time, concerns have arisen regarding its viability as a benchmark, due largely to reduced activity in the financial markets that it measures. In June 2017, the Alternative Reference Rates Committee, a group of large U.S. banks working with the Federal Reserve, announced its selection of a new Secured Overnight Funding Rate ("SOFR"), which is intended to be a broad measure of secured overnight U.S. Treasury repo rates, as an appropriate replacement for LIBOR. The Federal Reserve Bank of New York began publishing the SOFR in 2018, expecting that it could be used on a voluntary basis in new instruments and transactions. Bank working groups and regulators in other countries have suggested other alternatives for their markets, including the Sterling Overnight Interbank Average Rate ("SONIA") in England. In July 2017, the Financial Conduct Authority (the "FCA"), the United Kingdom financial regulatory body, announced that after 2021 it will cease its active encouragement of UK banks to provide the quotations needed to sustain LIBOR. That announcement suggests that LIBOR may cease to be published after that time. The roughly three-year period until the end of 2021 is expected to be
28
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
enough time for market participants to transition to the use of a different benchmark for both new and existing securities and transactions. Various financial industry groups have begun planning for that transition, but there are obstacles to converting certain longer-term securities and transactions to a new benchmark. Transition planning is at an early stage, and neither the effect of the transition process nor its ultimate success can yet be known. The transition process might lead to increased volatility and illiquidity in markets that currently rely on the LIBOR to determine interest rates. It could also lead to a reduction in the value of some LIBOR-based investments and reduce the effectiveness of new hedges placed against existing LIBOR-based instruments. Since the usefulness of LIBOR as a benchmark could deteriorate during the transition period, these effects could occur before the end of 2021.
7. Borrowing and Interfund Lending:
Line of Credit:
Effective with the Transaction on July 1, 2019, the Victory Funds Complex participates in a short-term, demand note "Line of Credit" agreement with Citibank. Under the agreement with Citibank, the Victory Funds Complex could 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 that Fund paying the related commitment fees for that amount. The purpose of the agreement is to meet temporary or emergency cash needs. Citibank receives an annual commitment fee of 0.15% on $300 million for providing the Line of Credit. Each fund in the Victory Funds Complex pays a pro-rata portion of the commitment fees plus any interest (one month LIBOR plus one percent) on amounts borrowed. Effective June 29, 2020, under an amended Line of Credit agreement, Citibank will also receive an annual upfront fee of 0.10% on the $300 million committed line of credit. Each fund in the Victory Funds Complex will pay a pro-rata portion of the upfront fee. Interest charged to the Fund, if any, during the period is reflected on the Statement of Operations under line of credit fees.
Prior to the Transaction on July 1, 2019, the line of credit among the Trust, with respect to its funds, and USAA Capital Corporation ("CAPCO") terminated. For the period from June 1, 2019 to June 30, 2019, the Fund paid CAPCO facility fees of $2 thousand.
The Fund had no borrowings under either agreement with Citibank or CAPCO during the year ended May 31, 2020.
Interfund Lending:
Effective with the Transaction on July 1, 2019, the Trust and 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 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. The interfund loan rate is determined, as specified in the Order, by averaging the current repurchase agreement rate and the current bank loan rate. As a Borrower, interest charged to the Fund, if any, during the period is reflected on the Statement of Operations under Interest expense on Interfund lending. As a Lender, interest earned by the Fund, if any, during the period is reflected on the Statement of Operations under Income on Interfund lending.
The average borrowing or lending for the days outstanding and average interest rate for the Fund during the year ended May 31, 2020, were as follows (amounts in thousands):
Borrower or Lender | Amount Outstanding at May 31, 2020 | Average Borrowing* | Days Borrowing Outstanding | Average Interest Rate* | Maximum Borrowing During the Period | ||||||||||||||||||||||
Borrower | $ | — | $ | 19,505 | 1 | 0.83 | % | $ | 19,505 |
* For the year ended May 31, 2020, based on the number of days borrowings were outstanding.
29
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
8. 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 do not require reclassification. To the extent dividends and distributions exceed net investment income and net realized gains for tax purposes, they are reported as distributions of capital. Net investment losses incurred by the Fund may be reclassified as an offset to capital on the accompanying Statement of Assets and Liabilities.
As of May 31, 2020. 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 Statement of Changes in Net Assets because, for tax purposes, dividends are recognized when actually paid) (amounts in thousands):
Year Ended May 31, 2020 | Year Ended May 31, 2019 | ||||||||||||||||||||||
Distributions paid from | Distributions paid from | ||||||||||||||||||||||
Ordinary Income | Net Long-Term Capital Gains | Total Distributions Paid | Ordinary Income | Total Distributions Paid | |||||||||||||||||||
$ | 26,305 | $ | 547 | $ | 26,852 | $ | 23,165 | $ | 23,165 |
As of May 31, 2020, the components of accumulated earnings (deficit) on a tax basis were as follows (amounts in thousands):
Undistributed Long-Term Capital Gains | Distributions Payable | Unrealized Appreciation (Depreciation) | Total Accumulated Earnings (Deficit) | ||||||||||||
$ | 3,285 | $ | (63 | ) | $ | 63,905 | $ | 67,127 |
At May 31, 2020, the Fund had no capital loss carryforwards for federal income tax purposes.
During the tax year ended May 31, 2020, the Fund utilized $2,278 of capital loss carryforwards.
As of May 31, 2020, 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) | ||||||||||||
$ | 948,818 | $ | 65,477 | $ | (1,572 | ) | $ | 63,905 |
9. 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 1940 Act. 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
30
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
USAA Mutual Funds Board of Trustees approved the appointment of the Fund's investment adviser, Victory Capital, as the administrator of the LRMP. At an in-person meeting held on February 26, 2020, Victory Capital provided an oral and written report to the Trustees on the operation and effectiveness of the LRMP during the previous year.
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.
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 reasonably expected to be converted to cash in current market conditions in three business days or less without significantly changing the market value of the investment. Therefore, the Fund has not adopted a Highly Liquid Investment Minimum. The Fund's investments were below the limitation on illiquid investments during the review period. Additionally, Victory Capital indicated that no events occurred that would require the filing of Form N-LIQUID and recommended no material changes to the LRMP.
10. Subsequent Events:
The Board of Trustees of USAA Mutual Funds Trust has approved redesignating the Fund's current Adviser Shares as "Class A" shares ("Redesignation"). This change was effective beginning on June 29, 2020.
Class A shares will be available for purchase through financial intermediaries and the Fund will pay ongoing distribution and/or service (12b-1) fees at annual rate of up to 0.25% of the average daily net assets of its Class A shares. In addition, the Transfer Agency fee will convert to an annual basis point rate of 0.10% of daily net assets of its Class A shares from its current flat per account fee. Class A shares will be offered and sold at their public offering price, which is the NAV per share plus any applicable initial sales charge, also referred to as a "front-end sales load." For purchases on or after the Redesignation Date, Class A Shares will be offered and sold with the imposition of a maximum initial sales charge of up to 2.25% of the offering price of the Fund. A contingent deferred sales charge of up to 0.75% may be imposed on redemptions of Class A shares purchased without an initial sales charge if shares are redeemed within 18 months of purchase.
The Redesignation will be made without the imposition of any sales loads, fees, or other charges to Adviser Shares held in shareholder accounts on the Redesignation Date. The Redesignation will not be considered a taxable event for federal income tax purposes.
31
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of USAA Government Securities Fund:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of USAA Government Securities Fund (the "Fund") (one of the funds constituting USAA Mutual Funds Trust (the "Trust")), including the schedule of portfolio investments, as of May 31, 2020, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the funds constituting USAA Mutual Funds Trust) at May 31, 2020, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Trust's management. Our responsibility is to express an opinion on the Fund's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust's internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of May 31, 2020, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Victory Capital investment companies since 1995.
San Antonio, Texas
July 27, 2020
32
USAA Mutual Funds Trust | Supplemental Information May 31, 2020 |
(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) 539-3863. The information is also included in the Fund's Statement of Additional Information, which is available on the SEC's website at www.sec.gov.
Information relating to how the Fund voted proxies relating to portfolio securities held during the most recent 12 months ended June 30 is available on the SEC's website at www.sec.gov.
Availability of Schedules of Portfolio Investments:
The Trust files a complete list of Schedules of Portfolio Investments with the SEC for the first and third quarter of each fiscal year on Form N-PORT. Forms N-PORT are available on the SEC's website at www.sec.gov.
33
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(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 10 Trustees, eight of whom are not "interested persons" of the Trust within the meaning of that term under the 1940 Act ("Independent Trustees") and two 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 ages, position with the Trust, commencement of service, 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 47 portfolios in the Trust. Each Trustee's address is 15935 La Cantera Pkwy, Building Two, San Antonio, TX, 78256. Pursuant to a policy adopted by the Board, the term of office for each Trustee shall be until the Independent Trustee reaches age 75 or an Interested Trustee reaches age 75. The Board may change or grant exceptions from this policy at any time without shareholder approval. A Trustee may resign or be removed by a vote of the other Trustees or the holders of a majority of the outstanding shares of the Trust at any time. Vacancies on the Board can be filled by the action of a majority of the Trustees, provided that after filling such vacancy at least two-thirds of the Trustees have been elected by the shareholders.
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Independent Trustees. | |||||||||||||||||||
Jefferson C. Boyce, Born September 1957 | Lead Independent Trustee, and Vice Chairman | 2013 | Senior Managing Director, New York Life Investments, LLC (1992-2012) | Westhab, Inc. | |||||||||||||||
John C. Walters, Born February 1962 | Trustee | 2019 | Retired. Mr. Walters brings significant Board experience including active involvement with the board of a Fortune 500 company, and a proven record of leading large, complex financial organizations. He has a demonstrated record of success in distribution, manufacturing, investment brokerage, and investment management in both the retail and institutional investment businesses. He has substantial experience in the investment management business with a demonstrated ability to develop and drive strategy while managing operation, financial, and investment risk. | Guardian Variable Products Trust (16 series), Lead Independent Director; Amerilife Holdings LLC, Director; Stadion Money Management; Director; University of North Carolina (Chapel Hill), Member Board of Governors. |
34
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Robert L. Mason, Ph.D., Born July 1946 | Trustee | 1997 | Adjunct Professor in the Department of Management Science and Statistics in the College of Business at the University of Texas at San Antonio (since 2001); Institute Analyst, Southwest Research Institute (March 2002-January 2016) | None | |||||||||||||||
Dawn M. Hawley, Born February 1954 | Trustee | 2014 | Manager of Finance, Menil Foundation, Inc. (May 2007-June 2011), which is a private foundation that oversees the assemblage of sculptures, prints, drawings, photographs, and rare books. Director of Financial Planning and Analysis and Chief Financial Officer, AIM Management Group, Inc. (October 1987-January 2006) | None | |||||||||||||||
Paul L. McNamara, Born July 1948 | Trustee | 2012 | Director, Cantor Opportunistic Alternatives Fund, LLC (March 2010-February 2014) , which is a closed-end fund of funds by Cantor Fitzgerald Investment Advisors, LLC | None |
35
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Richard Y. Newton III, Born January 1956 | Trustee | 2017 | Director, Elta North America (01/18-present), 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 (December 2015-present)); Executive Director, The Union League Club of New York (June 2014-November 2015): Executive Vice President, Air Force Association (August 2012-May 2014); Lieutenant General, United States Air Force (January 2008-June 2012) | None | |||||||||||||||
Barbara B. Ostdiek, Ph.D., Born March 1964 | Trustee | 2008 | Senior Associate Dean of Degree Programs at Jesse H. Jones Graduate School of Business at Rice University (since 2013); Associate Professor of Finance at Jessie H. Jones Graduate School of Business at Rice University (since 2001) | None | |||||||||||||||
Michael F. Reimherr, Born August 1945 | Trustee | 2000 | President of Reimherr Business Consulting (May 1995-December 2017); St. Mary's University Investment Committee overseeing University Endowment (since 2014) | None |
36
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Interested Trustees. | |||||||||||||||||||
David C. Brown, ** Born May 1972 | Trustee | 2019 | Chairman and Chief Executive Officer (since 2013), Co-Chief Executive Officer (2011-2013), Victory Capital Management Inc.; Chairman and Chief Executive Officer, Victory Capital Holdings, Inc. (since 2013). Mr. Brown brings to the Board extensive business, finance and leadership skills gained and developed through years of experience in the financial services industry, including his tenure overseeing the strategic direction as CEO of Victory Capital. These skills, combined with Mr. Brown's extensive knowledge of the financial services industry and demonstrated success in the development and distribution of investment strategies and products, enable him to provide valuable insights to the Board and strategic direction for the Funds | Trustee, Victory Portfolios (42 series), Victory Portfolios II (26 series), Victory Variable Insurance Funds (9 series) |
37
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Daniel S. McNamara, ** Born June 1966 | Trustee and Chair of the Board of Trustees | 2012 | Trustee, President, and Vice Chairman of USAA ETF Trust (June 2017-June 2019); President of Financial Advice & Solutions Group (FASG), USAA (since 2013); Director, IMCO (September 2009-April 2014); President, AMCO (August, 2011-April 2013); Senior Vice President of USAA Financial Planning Services Insurance Agency, Inc. (FPS) (since 2011); Director of USAA Investment Management Company (IMCO) (since 2009); Chairman of Board of IMCO (since 2013); Director of USAA Asset Management Company (AMCO), (August 2011-June 2019); President and Director of USAA Shareholder Account Services (SAS)(October 2009-June 2019); Director and Vice Chairman of FPS (since 2013); President and Director of USAA Investment Corporation (ICORP) (since 2010); Chairman of Board of ICORP (since 2013); Director of USAA Financial Advisors, Inc. (FAI) (since 2013); Chairman of Board of FAI (since 2015). Mr. McNamara brings to the Board extensive experience in the financial services industry, including experience as an officer of the Trust. | None |
** Mr. McNamara and Mr. Brown are "Interested Persons" by reason of their relationships with the Adviser.
The Statement of Additional Information includes additional information about the Trustees of the Trust and is available, without charge, on the SEC's website at www.sec.gov and/or by calling (800)-539-3863.
38
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Officers:
The officers of the Trust, their ages, 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, Building Two, 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 with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | ||||||||||||
Interested Officers. | |||||||||||||||
Christopher K. Dyer, Born February 1962 | President | 2019 | Director of Fund Administration, Victory Capital (2004-present) | ||||||||||||
Scott A Stahorsky, Born July 1969 | Vice President | 2019 | Manager, Fund Administration, Victory Capital (since 2015); Senior Analyst, Fund Administration, Victory Capital (prior to 2015) | ||||||||||||
James K. De Vries, Born April 1969 | Treasurer, Principal Financial Officer | 2018 | Executive Director, Victory Capital Management Inc. (since 2019); Treasurer, USAA ETF Trust (September 2018-June 2019); Executive Director, Investment and Financial Administration, USAA (April 2012-June 2019); Assistant Treasurer, USAA ETF Trust (June 2017-September 2018); Assistant Treasurer, USAA Mutual Funds Trust (December 2013-February 2018) | ||||||||||||
Allan Shaer, Born March 1965 | Assistant Treasurer | 2019 | Senior Vice President, Financial Administration, Citi Fund Services Ohio, Inc. (since 2016); Vice President, Mutual Fund Administration, JP Morgan Chase (2011-2016) | ||||||||||||
Carol D. Trevino, Born October 1965 | Assistant Treasurer | 2018 | Director, Accounting and Finance, Victory Capital Management Inc. (since 2019); Accounting/Financial Director, USAA (December 2013-June 2019); Assistant Treasurer, USAA ETF Trust (September 2018-June 2019). | ||||||||||||
Erin G. Wagner, Born February 1974 | Secretary | 2019 | Deputy General Counsel, the Adviser (since 2013) | ||||||||||||
Charles Booth, Born April 1960 | Anti-Money Laundering Compliance Officer and Identity Theft Officer | 2019 | Director, Regulatory Administration and CCO Support Services, Citi Fund Services Ohio, Inc. (2007-present) | ||||||||||||
Amy Campos, Born July 1976 | Chief Compliance Officer | 2019 | Chief Compliance Officer, USAA Mutual Funds Trust (since 2019); Executive Director, Deputy Chief Compliance Officer, USAA Mutual Funds Trust and USAA ETF Trust (July 2017-June 2019); Compliance Director, USAA Mutual Funds Trust (2014-July 2017) |
39
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
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 December 1, 2019 through May 31, 2020.
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. If these transactional costs were included, your costs would have been higher.
Beginning Account Value 12/1/19 | Actual Ending Account Value 5/31/20 | Hypothetical Ending Account Value 5/31/20 | Actual Expenses Paid During Period 12/1/19- 5/31/20* | Hypothetical Expenses Paid During Period 12/1/19- 5/31/20* | Annualized Expense Ratio During Period 12/1/19- 5/31/20 | ||||||||||||||||||||||
Fund Shares | $ | 1,000.00 | $ | 1,043.50 | $ | 1,022.90 | $ | 2.15 | $ | 2.12 | 0.42 | % | |||||||||||||||
Institutional Shares | 1,000.00 | 1,043.80 | 1,023.20 | 1.84 | 1.82 | 0.36 | % | ||||||||||||||||||||
Adviser Shares | 1,000.00 | 1,041.80 | 1,021.25 | 3.83 | 3.79 | 0.75 | % | ||||||||||||||||||||
Class R6 Shares | 1,000.00 | 1,043.90 | 1,023.25 | 1.79 | 1.77 | 0.35 | % |
* Expenses are equal to the average account value multiplied by the Fund's annualized expense ratio multiplied by 183/366 (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 May 31, 2020 |
(Unaudited)
Additional Federal Income Tax Information
The following federal tax information related to the Fund's fiscal year ended May 31, 2020, 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 2021.
With respect to distributions paid, the Fund designates the following amounts (or, if subsequently determined to be different, the maximum amount allowable) for the fiscal year ended May 31, 2020 (amounts in thousands):
Long-Term Capital Gain Distributions(a) | |||||||
$ | 547 |
(a) Pursuant to Section 852 of the Internal Revenue Code.
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 |
23413-0720
MAY 31, 2020
Annual Report
USAA Growth and Tax Strategy Fund
Beginning January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Fund's shareholder reports like this one will no longer be sent by mail, unless you specifically request paper copies of the reports from the Fund or from your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on VictoryFunds.com, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund or your financial intermediary electronically by notifying your financial intermediary directly, or if you are a direct investor, by calling (800) 235-8396 or logging on to usaa.com. Effective on or about September 8, 2020, a shareholder who has an account directly with the Fund will need to submit their request via email to TA.Processing@FISGlobal.com.
You may elect to receive all future reports in paper free of charge. You can inform the Fund or your financial intermediary that you wish to continue receiving paper copies of your shareholder reports by notifying your financial intermediary directly, or if you are a direct investor, by calling (800) 235-8396 or logging on to usaa.com. Effective on or about September 8, 2020, a shareholder who has an account directly with the Fund will need to submit their request via email to TA.Processing@FISGlobal.com. Your election to receive reports in paper will apply to all funds held with the USAA Mutual Funds or your financial intermediary.
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 logo 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.
TABLE OF CONTENTS
Shareholder Letter (Unaudited) | 2 | ||||||
Managers' Commentary (Unaudited) | 4 | ||||||
Investment Overview (Unaudited) | 6 | ||||||
Investment Objective & Portfolio Holdings (Unaudited) | 7 | ||||||
Financial Statements | |||||||
Schedule of Portfolio Investments | 9 | ||||||
Statement of Assets and Liabilities | 32 | ||||||
Statement of Operations | 33 | ||||||
Statements of Changes in Net Assets | 34 | ||||||
Financial Highlights | 36 | ||||||
Notes to Financial Statements | 38 | ||||||
Report of Independent Registered Public Accounting Firm | 51 | ||||||
Supplemental Information (Unaudited) | 52 | ||||||
Proxy Voting and Portfolio Holdings Information | 52 | ||||||
Trustees' and Officers' Information | 53 | ||||||
Expense Examples | 59 | ||||||
Additional Federal Income Tax Information | 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.
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.
USAA Mutual Funds Trust
1
(Unaudited)
Dear Shareholder,
The previous decade ended with the longest-ever bull market in U.S. equities still intact, even as investors wrestled with issues like softening global economic data, Brexit, and U.S.-China trade relations. In retrospect, those worries seem so pedestrian given what we would soon experience.
A new and unexpected threat—a global pandemic, the novel coronavirus ("COVID-19")—first emerged in Asia and then began spreading globally and throughout the United States during the first quarter of 2020. This unprecedented and unanticipated event not only rendered all existing economic and earnings forecasts moot, but it also roiled stock and bond markets everywhere. Efforts to slow the spread of the virus, though successful to date, also brought the economy to a halt. The historic bull market in stocks ended virtually overnight.
After an initial severe sell-off in March, equity markets recovered sharply. As our annual reporting period drew to a close on May 31, 2020, many of the broad market indexes had recovered and volatility had returned to more palatable levels. In fact, despite all the chaos, the S&P 500® Index, one of the most popular measures of large U.S. stocks, finished the fiscal year (May 31, 2020) at approximately 3,044, which was up more than 10.6% from one year ago.
The market turmoil of early 2020 was not limited to equities. Fixed income volatility spiked when liquidity evaporated in late March as investors struggled to understand the ramifications of stay-at-home orders. Fortunately, the U.S. Federal Reserve (the "Fed") (as well as other global central banks) leapt into action—cutting interest rates, (re)starting quantitative easing and, in the case of the Fed, launching an array of programs to stabilize markets.
The new lending facilities and programs had their intended effect of improving liquidity and trading. Credit spreads across corporate, high-yield, structured, and municipal markets were coaxed down from their highs. In addition, Congress came through with substantial fiscal stimulus that also was applauded by investors and markets. Although fixed income markets regained their footing, the yield on 10-Year Treasurys, a benchmark for low-risk investments, declined steadily during our fiscal year—from 2.14% at the beginning of our reporting period to approximately 0.65% as of May 31, 2020. This suggests that investors remain a little wary.
While the past year has been unprecedented for all of us, both personally and professionally, our portfolio managers continue to scrutinize the financial markets, economic conditions, and the trajectory of the pandemic, which will likely be the guiding factor on Fed policy and the markets.
No matter what happens in the near term, we believe that the massive monetary and fiscal policies introduced earlier this year will have longer-term ramifications. Despite this uncertainty, it's important to remain focused on your long-term investment goals and avoid making emotional decisions. If you invest with us directly, our Member Service Representatives are available to help. Call us at (800) 539-3863 or visit our website at vcm.com.
2
From all of us here at USAA Mutual Funds, thank you for letting us help you work toward your investment goals.
Christopher K. Dyer, CFA
President,
USAA Mutual Funds
3
USAA Mutual Funds Trust
USAA Growth and Tax Strategy Fund
Managers' Commentary
(Unaudited)
USAA Investments, A Victory Capital Investment Franchise
John C. Bonnell, CFA
Regina G. Conklin, CPA, CFA
Andrew R. Hattman, CFA, CAIA
Victory Solutions
Mannik S. Dhillon, CFA, CAIA
Wasif A. Latif
Northern Trust Investments, Inc.
Jacob C. Weaver, CFA
Mary Lukic
• What were the market conditions during the reporting period?
While tax-exempt bonds generated positive returns in the aggregate during the reporting period ended May 31, 2020, market conditions changed dramatically during this period. The first nine months of the reporting period were characterized by declining yields on AAA tax-exempt securities, tightening credit spreads (yield differentials between municipal bonds with similar maturities but different credit ratings), record setting inflows into tax-exempt mutual funds, and very strong demand for new issuance of tax-exempt securities. In short, investor demand for tax-exempt securities seemed insatiable. The market conditions abruptly changed in March 2020 in response to the novel corona virus ("COVID-19") outbreak and associated measures to curb the spread of the virus, which caused a drastic slowdown in the U.S. economy. Yields on AAA tax-exempt securities spiked, credit spreads increased dramatically, and tax-exempt mutual funds saw back-to-back weeks of record setting outflows. In this profoundly different market environment, the new issue market basically shut down as liquidity in the market (with the exception of contractual liquidity on variable rate demand notes) disappeared. April and May saw the tax-exempt bond market slowly regain its footing, helped by government intervention that included aid for municipal borrowers as well as a pledge to provide borrowing support, if needed. By the end of the reporting period, the new issue market was once again met with strong investor demand and tax-exempt mutual funds were reporting inflows. Yields on high quality municipal bonds dropped considerably, but credit spreads remain relatively high compared to the period before the disruption that began in March.
• How did the USAA Growth and Tax Strategy Fund (the "Fund") perform during the reporting period?
The Fund had a total return of 6.25% for the reporting period ended May 31, 2020. This compares to a total return of 12.84% for the S&P 500® Index (the Index), 3.98% for the Bloomberg Barclays Municipal Bond Index, and 5.49% for the Composite Index.
4
USAA Mutual Funds Trust
USAA Growth and Tax Strategy Fund (continued)
Managers' Commentary (continued)
Victory Capital Management, Inc. ("VCM") is the Fund's investment adviser. As the investment adviser, VCM employs dedicated resources to support the research, selection, and monitoring of the Fund's subadviser. Northern Trust Investments, Inc. (NTI) is a subadviser to the Fund. The investment adviser and the subadviser each provide day-to-day discretionary management for a portion of the Fund's assets.
• How did the municipal bond portion of the Fund perform?
The municipal bond portion of the Fund performed as we would expect during this period with March-April credit widening detracting from performance. In keeping with our investment approach, we continued to focus on income generation. Income distributions and the compounding of that income, not price appreciation, account for most of the long-term total return of the municipal bond portion of the Fund. Because of this income orientation, the municipal bond portion has a higher allocation to BBB and A rated categories compared to the benchmark. While this higher allocation detracted from performance during the reporting period, we believe it will serve our shareholders well in the long term. As always, we maintained our commitment to independent credit research. We sought to identify attractive investment opportunities using fundamental analysis that emphasizes an issuer's ability and willingness to repay its debt. Working with our in-house team of credit analysts, we selected investments on a bond-by-bond basis. We use credit research as we seek both to recognize relative value and avoid potential pitfalls which is especially important in turbulent times like the ones we witnessed during this reporting period. The municipal bond portion of the Fund remains well diversified and we avoid municipal bonds subject to the federal alternative minimum tax for individuals.
• How did the equity portion of the Fund perform?
The equity portion of the Fund through May 31st, 2020 produced a positive return of 12.80%, similar to the return of 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 kept 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. The increased market volatility in early 2020 provided ample opportunities to realize capital losses, which help us manage the capital gains distributions of the Fund. The equity portion of the Fund also continued to receive dividend income from its stock holdings. Because of the solid dividend growth of Index-listed companies, it maintained a dividend yield similar to prior periods.
Thank you for allowing us to assist you with your investment needs.
5
USAA Mutual Funds Trust
USAA Growth and Tax Strategy Fund
Investment Overview
(Unaudited)
Average Annual Total Return
Year Ended May 31, 2020
INCEPTION DATE | 1/11/89 | ||||||||||||||||||||||
Net Asset Value | S&P 500 Index1 | Bloomberg Barclays Municipal Bond Index2 | Composite Index1,2,3 | Lipper Composite Index4 | |||||||||||||||||||
One Year | 6.25 | % | 12.84 | % | 3.98 | % | 8.41 | % | 5.49 | % | |||||||||||||
Five Year | 6.26 | % | 9.85 | % | 3.74 | % | 6.79 | % | 5.83 | % | |||||||||||||
Ten Year | 8.17 | % | 13.14 | % | 4.13 | % | 8.64 | % | 7.86 | % |
Past performance is not indicative of future results. 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 for various periods since inception. Without such fee waivers, the total returns would have been lower.
USAA Growth and Tax Strategy Fund — Growth of $10,000
1 The unmanaged S&P 500 Index represents the weighted average performance of a group of 500 widely held, publicly traded stocks.
2 The unmanaged Bloomberg Barclays Municipal Bond Index is a benchmark of total return performance for the long-term, investment-grade, tax-exempt bond market.
3 The Composite Index is comprised of 50% of the S&P 500 Index and 50% of the Bloomberg Barclays Municipal Bond Index.
4 The 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.
The graph reflects investment of growth of a hypothetical $10,000 investment in the Fund. Past performance is no guarantee of future results.
The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
6
USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | May 31, 2020 |
(Unaudited)
Investment Objective & Portfolio Holdings:
The Fund's investment objective is to seek a conservative balance for the investor between income, the majority of which is exempt from federal income tax, and the potential for long-term growth of capital to preserve purchasing power.
Top 10 Sectors
May 31, 2020
(% of Net Assets)
Information Technology | 12.1 | % | |||||
Health Care | 7.0 | % | |||||
Communication Services | 5.1 | % | |||||
Consumer Discretionary | 4.9 | % | |||||
Financials | 4.9 | % | |||||
Industrials | 3.7 | % | |||||
Consumer Staples | 3.3 | % | |||||
Utilities | 1.5 | % | |||||
Energy | 1.4 | % | |||||
Real Estate | 1.3 | % |
Top 5 Tax-Exempt Bonds
May 31, 2020
(% of Net Assets)
Port of Port Arthur Navigation District Revenue | 2.4 | % | |||||
Illinois Finance Authority Revenue | 1.8 | % | |||||
Massachusetts Development Finance Agency Revenue | 1.7 | % | |||||
New Jersey Economic Development Authority Revenue | 1.2 | % | |||||
San Francisco City Housing Revenue, 1500 Mission Street Apts. | 0.8 | % |
Top 5 Blue Chip Stocks
May 31, 2020
(% of Net Assets)
Microsoft Corp. | 2.6 | % | |||||
Apple, Inc. | 2.5 | % | |||||
Amazon.com, Inc. | 1.9 | % | |||||
Facebook, Inc. Class A | 1.0 | % | |||||
Alphabet, Inc. Class C | 0.8 | % |
Refer to the Schedule of Portfolio of Investments for a complete list of securities.
7
USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund (continued) | May 31, 2020 |
Asset Allocation*:
May 31, 2020
(% of Net Assets)
* Does not include money market instruments, futures 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%.
8
USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Common Stocks (46.4%) | |||||||||||
Blue Chip Stocks (46.4%): | |||||||||||
Communication Services (5.1%): | |||||||||||
Activision Blizzard, Inc. | 9,016 | $ | 649 | ||||||||
Alphabet, Inc. Class A (a) | 3,201 | 4,589 | |||||||||
Alphabet, Inc. Class C (a) | 3,266 | 4,667 | |||||||||
AT&T, Inc. | 79,523 | 2,454 | |||||||||
CenturyLink, Inc. | 11,256 | 111 | |||||||||
Charter Communications, Inc. Class A (a) | 1,764 | 960 | |||||||||
Comcast Corp. Class A | 49,729 | 1,969 | |||||||||
Discovery, Inc. Class A (a) | 1,428 | 31 | |||||||||
Discovery, Inc. Class C (a) | 1,172 | 23 | |||||||||
DISH Network Corp. Class A (a) | 2,685 | 85 | |||||||||
Electronic Arts, Inc. (a) | 3,504 | 430 | |||||||||
Facebook, Inc. Class A (a) | 25,806 | 5,809 | |||||||||
Fox Corp. Class A | 3,545 | 103 | |||||||||
Fox Corp. Class B | 2,036 | 59 | |||||||||
Live Nation Entertainment, Inc. (a) (b) | 1,845 | 91 | |||||||||
Netflix, Inc. (a) | 4,910 | 2,061 | |||||||||
News Corp. Class A | 2,721 | 33 | |||||||||
Omnicom Group, Inc. | 2,738 | 150 | |||||||||
Take-Two Interactive Software, Inc. (a) | 1,508 | 205 | |||||||||
The Interpublic Group of Cos., Inc. | 2,760 | 47 | |||||||||
The Walt Disney Co. | 19,621 | 2,301 | |||||||||
T-Mobile U.S., Inc. (a) | 3,497 | 350 | |||||||||
Twitter, Inc. (a) (b) | 8,577 | 266 | |||||||||
Verizon Communications, Inc. | 45,085 | 2,587 | |||||||||
ViacomCBS, Inc. Class B (b) | 5,699 | 118 | |||||||||
30,148 | |||||||||||
Consumer Discretionary (4.9%): | |||||||||||
Advance Auto Parts, Inc. | 867 | 121 | |||||||||
Amazon.com, Inc. (a) | 4,538 | 11,083 | |||||||||
Aptiv PLC | 2,948 | 222 | |||||||||
AutoZone, Inc. (a) | 255 | 293 | |||||||||
Best Buy Co., Inc. | 2,415 | 189 | |||||||||
Booking Holdings, Inc. (a) | 471 | 772 | |||||||||
BorgWarner, Inc. | 1,420 | 46 | |||||||||
Capri Holdings Ltd. (a) | 1,926 | 29 | |||||||||
CarMax, Inc. (a) (b) | 2,090 | 184 | |||||||||
Carnival Corp. (b) | 2,980 | 47 | |||||||||
Chipotle Mexican Grill, Inc. (a) (b) | 325 | 326 | |||||||||
D.R. Horton, Inc. | 3,224 | 178 | |||||||||
Darden Restaurants, Inc. | 1,633 | 125 | |||||||||
Delphi Technologies PLC (a) | 1 | — | (c) | ||||||||
Dollar General Corp. | 2,615 | 501 | |||||||||
Dollar Tree, Inc. (a) | 3,101 | 303 | |||||||||
Domino's Pizza, Inc. | 278 | 107 | |||||||||
eBay, Inc. | 9,005 | 410 | |||||||||
Expedia Group, Inc. (b) | 1,583 | 126 | |||||||||
Ford Motor Co. | 48,980 | 280 |
See notes to financial statements.
9
USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Garmin Ltd. | 1,580 | $ | 142 | ||||||||
General Motors Co. Class C | 13,707 | 355 | |||||||||
Genuine Parts Co. | 1,110 | 93 | |||||||||
H&R Block, Inc. | 1,670 | 28 | |||||||||
Hanesbrands, Inc. | 4,535 | 45 | |||||||||
Harley-Davidson, Inc. (b) | 1,559 | 33 | |||||||||
Hasbro, Inc. | 1,600 | 118 | |||||||||
Hilton Worldwide Holdings, Inc. (b) | 2,260 | 179 | |||||||||
Kohl's Corp. (d) | 1,406 | 27 | |||||||||
L Brands, Inc. | 1,450 | 23 | |||||||||
Las Vegas Sands Corp. (d) | 3,772 | 181 | |||||||||
Leggett & Platt, Inc. | 859 | 26 | |||||||||
Lennar Corp. Class A | 3,093 | 187 | |||||||||
Lennar Corp. Class B | 1 | — | (c) | ||||||||
LKQ Corp. (a) | 3,837 | 105 | |||||||||
Lowe's Cos., Inc. | 8,086 | 1,054 | |||||||||
Marriott International, Inc. Class A (b) | 3,413 | 302 | |||||||||
McDonald's Corp. | 7,730 | 1,440 | |||||||||
MGM Resorts International | 6,448 | 111 | |||||||||
Mohawk Industries, Inc. (a) | 618 | 58 | |||||||||
Newell Brands, Inc. | 2,180 | 29 | |||||||||
Nike, Inc. Class B | 14,322 | 1,412 | |||||||||
Nordstrom, Inc. | 1,027 | 17 | |||||||||
Norwegian Cruise Line Holdings Ltd. (a) | 2,676 | 42 | |||||||||
NVR, Inc. (a) | 38 | 122 | |||||||||
O'Reilly Automotive, Inc. (a) | 961 | 401 | |||||||||
PulteGroup, Inc. | 2,649 | 90 | |||||||||
PVH Corp. | 928 | 42 | |||||||||
Ralph Lauren Corp. | 657 | 50 | |||||||||
Ross Stores, Inc. | 3,683 | 357 | |||||||||
Royal Caribbean Cruises Ltd. | 2,155 | 112 | |||||||||
Starbucks Corp. | 13,706 | 1,069 | |||||||||
Tapestry, Inc. | 420 | 6 | |||||||||
Target Corp. (d) | 5,924 | 725 | |||||||||
The Home Depot, Inc. | 11,626 | 2,889 | |||||||||
The TJX Cos., Inc. | 12,486 | 659 | |||||||||
Tiffany & Co. | 1,361 | 174 | |||||||||
Tractor Supply Co. | 1,578 | 193 | |||||||||
Ulta Beauty, Inc. (a) | 550 | 134 | |||||||||
Under Armour, Inc. Class C (a) | 2,448 | 19 | |||||||||
VF Corp. | 4,105 | 230 | |||||||||
Whirlpool Corp. (b) | 792 | 96 | |||||||||
Wynn Resorts Ltd. | 1,053 | 88 | |||||||||
Yum! Brands, Inc. | 3,843 | 345 | |||||||||
29,150 | |||||||||||
Consumer Staples (3.3%): | |||||||||||
Altria Group, Inc. | 17,140 | 669 | |||||||||
Archer-Daniels-Midland Co. | 4,489 | 176 | |||||||||
Brown-Forman Corp. Class B | 2,315 | 153 | |||||||||
Campbell Soup Co. | 2,319 | 118 |
See notes to financial statements.
10
USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Church & Dwight Co., Inc. | 3,119 | $ | 234 | ||||||||
Colgate-Palmolive Co. | 9,374 | 678 | |||||||||
Conagra Brands, Inc. | 6,489 | 226 | |||||||||
Constellation Brands, Inc. Class A | 1,572 | 271 | |||||||||
Costco Wholesale Corp. | 4,892 | 1,509 | |||||||||
General Mills, Inc. | 6,777 | 427 | |||||||||
Hormel Foods Corp. (b) | 2,891 | 141 | |||||||||
Kellogg Co. | 2,529 | 165 | |||||||||
Kimberly-Clark Corp. | 3,787 | 536 | |||||||||
Lamb Weston Holdings, Inc. | 1,591 | 96 | |||||||||
McCormick & Co., Inc. | 1,570 | 275 | |||||||||
Molson Coors Beverage Co. Class B | 2,362 | 90 | |||||||||
Mondelez International, Inc. Class A | 16,937 | 883 | |||||||||
Monster Beverage Corp. (a) | 4,648 | 334 | |||||||||
PepsiCo, Inc. (b) | 15,179 | 1,997 | |||||||||
Philip Morris International, Inc. | 16,961 | 1,244 | |||||||||
Sysco Corp. | 5,774 | 319 | |||||||||
The Clorox Co. | 1,652 | 341 | |||||||||
The Coca-Cola Co. | 41,977 | 1,960 | |||||||||
The Estee Lauder Cos., Inc. Class A | 2,575 | 508 | |||||||||
The Hershey Co. | 1,885 | 256 | |||||||||
The J.M. Smucker Co. | 1,064 | 121 | |||||||||
The Kraft Heinz Co. | 6,811 | 208 | |||||||||
The Kroger Co. | 8,771 | 286 | |||||||||
The Procter & Gamble Co. | 26,798 | 3,106 | |||||||||
Tyson Foods, Inc. Class A | 3,309 | 203 | |||||||||
Walgreens Boots Alliance, Inc. | 6,234 | 268 | |||||||||
Walmart, Inc. | 15,331 | 1,902 | |||||||||
19,700 | |||||||||||
Energy (1.4%): | |||||||||||
Apache Corp. (b) | 4,708 | 51 | |||||||||
Baker Hughes Co. | 8,513 | 141 | |||||||||
Cabot Oil & Gas Corp. | 5,589 | 111 | |||||||||
Chevron Corp. | 21,969 | 2,015 | |||||||||
Concho Resources, Inc. | 2,521 | 137 | |||||||||
ConocoPhillips | 13,598 | 574 | |||||||||
Devon Energy Corp. (b) | 4,845 | 52 | |||||||||
Diamondback Energy, Inc. | 2,111 | 90 | |||||||||
EOG Resources, Inc. | 5,644 | 288 | |||||||||
Exxon Mobil Corp. | 36,021 | 1,638 | |||||||||
Halliburton Co. | 9,010 | 106 | |||||||||
Hess Corp. | 2,347 | 111 | |||||||||
HollyFrontier Corp. | 1,867 | 59 | |||||||||
Kinder Morgan, Inc. | 21,852 | 345 | |||||||||
Marathon Oil Corp. | 10,479 | 56 | |||||||||
Marathon Petroleum Corp. | 7,393 | 260 | |||||||||
National Oilwell Varco, Inc. | 4,837 | 60 | |||||||||
Noble Energy, Inc. | 6,016 | 52 | |||||||||
Occidental Petroleum Corp. | 7,620 | 99 | |||||||||
ONEOK, Inc. (b) | 5,171 | 190 |
See notes to financial statements.
11
USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Phillips 66 | 5,562 | $ | 435 | ||||||||
Pioneer Natural Resources Co. | 1,847 | 169 | |||||||||
Schlumberger Ltd. | 18,134 | 335 | |||||||||
TechnipFMC PLC | 5,504 | 41 | |||||||||
The Williams Cos., Inc. | 15,877 | 324 | |||||||||
Valero Energy Corp. | 4,476 | 298 | |||||||||
8,037 | |||||||||||
Financials (4.9%): | |||||||||||
Aflac, Inc. | 9,189 | 335 | |||||||||
American Express Co. (b) | 7,305 | 695 | |||||||||
American International Group, Inc. | 9,061 | 272 | |||||||||
Ameriprise Financial, Inc. | 1,259 | 176 | |||||||||
Aon PLC Class A | 2,698 | 531 | |||||||||
Arthur J. Gallagher & Co. | 2,370 | 223 | |||||||||
Bank of America Corp. | 89,376 | 2,156 | |||||||||
Berkshire Hathaway, Inc. Class B (a) | 21,324 | 3,957 | |||||||||
BlackRock, Inc. Class A | 1,662 | 879 | |||||||||
Capital One Financial Corp. | 4,854 | 330 | |||||||||
Cboe Global Markets, Inc. | 1,409 | 150 | |||||||||
Chubb Ltd. | 5,155 | 629 | |||||||||
Cincinnati Financial Corp. (b) | 970 | 57 | |||||||||
Citigroup, Inc. | 26,026 | 1,247 | |||||||||
Citizens Financial Group, Inc. (b) | 5,450 | 131 | |||||||||
CME Group, Inc. | 3,901 | 712 | |||||||||
Comerica, Inc. (b) | 1,808 | 66 | |||||||||
Discover Financial Services | 3,983 | 189 | |||||||||
E*TRADE Financial Corp. | 3,084 | 140 | |||||||||
Everest Re Group Ltd. | 511 | 101 | |||||||||
Fifth Third Bancorp | 8,885 | 172 | |||||||||
Franklin Resources, Inc. (b) | 3,497 | 66 | |||||||||
Huntington Bancshares, Inc. | 12,948 | 115 | |||||||||
Intercontinental Exchange, Inc. | 5,711 | 555 | |||||||||
JPMorgan Chase & Co. | 35,526 | 3,457 | |||||||||
KeyCorp | 12,331 | 146 | |||||||||
Lincoln National Corp. (b) | 2,487 | 94 | |||||||||
Loews Corp. (b) | 2,091 | 70 | |||||||||
M&T Bank Corp. | 660 | 70 | |||||||||
MarketAxess Holdings, Inc. | 414 | 211 | |||||||||
Marsh & McLennan Cos., Inc. | 5,030 | 533 | |||||||||
MetLife, Inc. | 9,800 | 353 | |||||||||
Moody's Corp. | 1,624 | 434 | |||||||||
Morgan Stanley | 12,754 | 564 | |||||||||
MSCI, Inc. | 992 | 326 | |||||||||
Nasdaq, Inc. | 1,159 | 137 | |||||||||
Northern Trust Corp. (b) (e) | 1,948 | 154 | |||||||||
People's United Financial, Inc. | 5,567 | 64 | |||||||||
Principal Financial Group, Inc. (b) | 3,248 | 125 | |||||||||
Prudential Financial, Inc. | 4,170 | 254 | |||||||||
Raymond James Financial, Inc. | 1,547 | 107 | |||||||||
Regions Financial Corp. | 12,093 | 137 |
See notes to financial statements.
12
USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
S&P Global, Inc. | 2,912 | $ | 947 | ||||||||
State Street Corp. (b) | 4,122 | 251 | |||||||||
SVB Financial Group (a) | 645 | 139 | |||||||||
Synchrony Financial | 7,065 | 144 | |||||||||
T. Rowe Price Group, Inc. | 2,905 | 351 | |||||||||
The Allstate Corp. | 3,329 | 326 | |||||||||
The Bank of New York Mellon Corp. (b) | 6,973 | 259 | |||||||||
The Charles Schwab Corp. | 12,464 | 448 | |||||||||
The Goldman Sachs Group, Inc. | 3,261 | 641 | |||||||||
The Hartford Financial Services Group, Inc. | 4,519 | 173 | |||||||||
The PNC Financial Services Group, Inc. | 5,395 | 615 | |||||||||
The Progressive Corp. | 6,394 | 497 | |||||||||
The Travelers Cos., Inc. | 3,045 | 326 | |||||||||
Truist Financial Corp. | 14,396 | 530 | |||||||||
U.S. Bancorp | 17,818 | 634 | |||||||||
Unum Group | 2,620 | 40 | |||||||||
W.R. Berkley Corp. (b) | 1,826 | 106 | |||||||||
Wells Fargo & Co. | 35,615 | 943 | |||||||||
Willis Towers Watson PLC | 1,633 | 331 | |||||||||
Zions Bancorp NA | 1,440 | 47 | |||||||||
28,868 | |||||||||||
Health Care (7.0%): | |||||||||||
Abbott Laboratories | 18,379 | 1,745 | |||||||||
AbbVie, Inc. | 19,278 | 1,786 | |||||||||
ABIOMED, Inc. (a) | 568 | 127 | |||||||||
Agilent Technologies, Inc. | 4,127 | 364 | |||||||||
Alexion Pharmaceuticals, Inc. (a) | 2,421 | 290 | |||||||||
Align Technology, Inc. (a) | 809 | 199 | |||||||||
AmerisourceBergen Corp. | 1,410 | 134 | |||||||||
Amgen, Inc. | 6,499 | 1,493 | |||||||||
Anthem, Inc. | 2,760 | 812 | |||||||||
Baxter International, Inc. | 5,585 | 503 | |||||||||
Becton Dickinson & Co. | 2,959 | 731 | |||||||||
Biogen, Inc. (a) | 2,097 | 644 | |||||||||
Boston Scientific Corp. (a) | 13,776 | 523 | |||||||||
Bristol-Myers Squibb Co. | 25,647 | 1,532 | |||||||||
Cardinal Health, Inc. | 3,662 | 200 | |||||||||
Centene Corp. (a) | 6,386 | 423 | |||||||||
Cerner Corp. (b) | 3,437 | 251 | |||||||||
Cigna Corp. | 4,126 | 814 | |||||||||
CVS Health Corp. | 14,239 | 934 | |||||||||
Danaher Corp. | 6,992 | 1,165 | |||||||||
DaVita, Inc. (a) | 1,271 | 103 | |||||||||
DENTSPLY SIRONA, Inc. | 2,789 | 130 | |||||||||
DexCom, Inc. (a) | 900 | 340 | |||||||||
Edwards Lifesciences Corp. (a) | 2,050 | 461 | |||||||||
Eli Lilly & Co. | 9,241 | 1,413 | |||||||||
Gilead Sciences, Inc. (d) | 13,838 | 1,077 | |||||||||
HCA Healthcare, Inc. | 2,781 | 297 | |||||||||
Henry Schein, Inc. (a) (b) | 1,136 | 69 |
See notes to financial statements.
13
USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Hologic, Inc. (a) | 2,574 | $ | 136 | ||||||||
Humana, Inc. | 1,448 | 595 | |||||||||
IDEXX Laboratories, Inc. (a) | 1,090 | 337 | |||||||||
Illumina, Inc. (a) | 1,608 | 584 | |||||||||
Incyte Pharmaceuticals, Inc. (a) | 2,342 | 239 | |||||||||
Intuitive Surgical, Inc. (a) | 1,115 | 647 | |||||||||
IQVIA Holdings, Inc. (a) | 1,574 | 235 | |||||||||
Johnson & Johnson (d) | 28,785 | 4,282 | |||||||||
Laboratory Corp. of America Holdings (a) | 738 | 129 | |||||||||
McKesson Corp. | 1,766 | 280 | |||||||||
Medtronic PLC | 14,660 | 1,445 | |||||||||
Merck & Co., Inc. | 27,754 | 2,240 | |||||||||
Mettler-Toledo International, Inc. (a) | 250 | 199 | |||||||||
Mylan NV (a) | 6,470 | 110 | |||||||||
PerkinElmer, Inc. | 1,398 | 140 | |||||||||
Perrigo Co. PLC | 1,463 | 80 | |||||||||
Pfizer, Inc. | 60,960 | 2,328 | |||||||||
Quest Diagnostics, Inc. | 1,359 | 161 | |||||||||
Regeneron Pharmaceuticals, Inc. (a) | 873 | 535 | |||||||||
ResMed, Inc. | 1,423 | 229 | |||||||||
STERIS PLC | 1,110 | 184 | |||||||||
Stryker Corp. | 3,521 | 689 | |||||||||
Teleflex, Inc. | 536 | 194 | |||||||||
The Cooper Cos., Inc. | 549 | 174 | |||||||||
Thermo Fisher Scientific, Inc. | 4,383 | 1,531 | |||||||||
UnitedHealth Group, Inc. | 10,362 | 3,159 | |||||||||
Universal Health Services, Inc. Class B | 617 | 65 | |||||||||
Varian Medical Systems, Inc. (a) | 1,190 | 144 | |||||||||
Vertex Pharmaceuticals, Inc. (a) | 2,828 | 814 | |||||||||
Waters Corp. (a) | 690 | 138 | |||||||||
West Pharmaceutical Services, Inc. | 438 | 95 | |||||||||
Zimmer Biomet Holdings, Inc. (b) | 2,069 | 261 | |||||||||
Zoetis, Inc. | 4,796 | 669 | |||||||||
41,608 | |||||||||||
Industrials (3.7%): | |||||||||||
3M Co. | 7,372 | 1,153 | |||||||||
Alaska Air Group, Inc. | 1,550 | 53 | |||||||||
Allegion PLC | 880 | 88 | |||||||||
American Airlines Group, Inc. (b) | 4,888 | 51 | |||||||||
AMETEK, Inc. | 2,905 | 266 | |||||||||
AO Smith Corp. | 1,795 | 85 | |||||||||
C.H. Robinson Worldwide, Inc. (b) | 1,815 | 147 | |||||||||
Carrier Global Corp. (a) | 8,626 | 177 | |||||||||
Caterpillar, Inc. | 6,025 | 724 | |||||||||
Cintas Corp. | 1,066 | 264 | |||||||||
Copart, Inc. (a) | 2,286 | 204 | |||||||||
CSX Corp. | 8,013 | 574 | |||||||||
Cummins, Inc. | 1,364 | 231 | |||||||||
Deere & Co. | 3,919 | 596 | |||||||||
Delta Air Lines, Inc. | 7,217 | 182 |
See notes to financial statements.
14
USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Dover Corp. | 1,832 | $ | 178 | ||||||||
Eaton Corp. PLC | 4,316 | 366 | |||||||||
Emerson Electric Co. | 5,920 | 361 | |||||||||
Equifax, Inc. (b) | 1,407 | 216 | |||||||||
Expeditors International of Washington, Inc. | 1,610 | 123 | |||||||||
Fastenal Co. | 7,647 | 315 | |||||||||
FedEx Corp. | 2,126 | 278 | |||||||||
Flowserve Corp. | 1,210 | 32 | |||||||||
Fortive Corp. | 2,506 | 153 | |||||||||
Fortune Brands Home & Security, Inc. | 1,743 | 106 | |||||||||
General Dynamics Corp. | 2,532 | 372 | |||||||||
General Electric Co. | 82,865 | 544 | |||||||||
Honeywell International, Inc. | 7,793 | 1,137 | |||||||||
Howmet Aerospace, Inc. (a) | 4,857 | 64 | |||||||||
Huntington Ingalls Industries, Inc. | 499 | 100 | |||||||||
IDEX Corp. | 757 | 121 | |||||||||
IHS Markit Ltd. | 3,349 | 233 | |||||||||
Illinois Tool Works, Inc. | 3,212 | 554 | |||||||||
Ingersoll Rand, Inc. (a) (b) (d) | 4,167 | 117 | |||||||||
Jacobs Engineering Group, Inc. | 1,348 | 113 | |||||||||
JB Hunt Transport Services, Inc. | 1,116 | 134 | |||||||||
Johnson Controls International PLC | 8,409 | 264 | |||||||||
Kansas City Southern | 1,279 | 192 | |||||||||
L3Harris Technologies, Inc. | 2,253 | 449 | |||||||||
Lockheed Martin Corp. | 2,705 | 1,051 | |||||||||
Masco Corp. | 3,700 | 173 | |||||||||
Nielsen Holdings PLC | 4,460 | 62 | |||||||||
Norfolk Southern Corp. | 2,880 | 513 | |||||||||
Northrop Grumman Corp. | 1,594 | 534 | |||||||||
Old Dominion Freight Line, Inc. | 1,278 | 219 | |||||||||
Otis Worldwide Corp. | 3,383 | 178 | |||||||||
PACCAR, Inc. | 4,366 | 322 | |||||||||
Parker-Hannifin Corp. | 1,448 | 261 | |||||||||
Pentair PLC | 909 | 36 | |||||||||
Quanta Services, Inc. | 1,704 | 63 | |||||||||
Raytheon Technologies Corp. | 15,187 | 980 | |||||||||
Republic Services, Inc. (d) | 2,497 | 213 | |||||||||
Robert Half International, Inc. | 1,284 | 65 | |||||||||
Rockwell Automation, Inc. | 1,436 | 310 | |||||||||
Rollins, Inc. | 1,930 | 81 | |||||||||
Roper Technologies, Inc. | 1,322 | 521 | |||||||||
Southwest Airlines Co. | 4,959 | 159 | |||||||||
Stanley Black & Decker, Inc. | 1,786 | 224 | |||||||||
Textron, Inc. (b) | 2,070 | 64 | |||||||||
The Boeing Co. | 5,849 | 853 | |||||||||
Trane Technologies PLC | 2,877 | 260 | |||||||||
TransDigm Group, Inc. | 632 | 268 | |||||||||
Union Pacific Corp. | 7,559 | 1,284 | |||||||||
United Airlines Holdings, Inc. (a) | 3,124 | 88 | |||||||||
United Parcel Service, Inc. Class B | 7,664 | 764 |
See notes to financial statements.
15
USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
United Rentals, Inc. (a) | 947 | $ | 132 | ||||||||
Verisk Analytics, Inc. | 1,865 | 322 | |||||||||
Wabtec Corp. | 1,745 | 107 | |||||||||
Waste Management, Inc. | 3,869 | 413 | |||||||||
WW Grainger, Inc. | 582 | 180 | |||||||||
Xylem, Inc. | 1,548 | 103 | |||||||||
22,120 | |||||||||||
Information Technology (12.1%): | |||||||||||
Accenture PLC Class A | 7,653 | 1,543 | |||||||||
Adobe, Inc. (a) | 5,295 | 2,047 | |||||||||
Advanced Micro Devices, Inc. (a) | 13,725 | 738 | |||||||||
Akamai Technologies, Inc. (a) | 1,627 | 172 | |||||||||
Alliance Data Systems Corp. | 516 | 24 | |||||||||
Amphenol Corp. Class A | 3,244 | 313 | |||||||||
Analog Devices, Inc. | 4,155 | 469 | |||||||||
ANSYS, Inc. (a) | 1,058 | 299 | |||||||||
Apple, Inc. | 45,848 | 14,577 | |||||||||
Applied Materials, Inc. | 11,152 | 627 | |||||||||
Arista Networks, Inc. (a) | 724 | 169 | |||||||||
Autodesk, Inc. (a) | 2,558 | 538 | |||||||||
Automatic Data Processing, Inc. | 4,365 | 639 | |||||||||
Broadcom, Inc. | 4,130 | 1,203 | |||||||||
Broadridge Financial Solutions, Inc. | 1,502 | 182 | |||||||||
Cadence Design Systems, Inc. (a) | 2,583 | 236 | |||||||||
CDW Corp. | 1,572 | 174 | |||||||||
Cisco Systems, Inc. | 46,400 | 2,219 | |||||||||
Citrix Systems, Inc. | 1,327 | 197 | |||||||||
Cognizant Technology Solutions Corp. Class A | 5,526 | 293 | |||||||||
Corning, Inc. | 8,056 | 184 | |||||||||
DXC Technology Co. | 2,701 | 38 | |||||||||
F5 Networks, Inc. (a) | 811 | 118 | |||||||||
Fidelity National Information Services, Inc. | 6,160 | 855 | |||||||||
Fiserv, Inc. (a) | 6,247 | 667 | |||||||||
FleetCor Technologies, Inc. (a) | 1,103 | 269 | |||||||||
FLIR Systems, Inc. | 1,385 | 64 | |||||||||
Fortinet, Inc. (a) | 1,647 | 229 | |||||||||
Gartner, Inc. (a) | 1,126 | 137 | |||||||||
Global Payments, Inc. | 3,409 | 612 | |||||||||
Hewlett Packard Enterprises Co. | 14,301 | 139 | |||||||||
HP, Inc. | 15,371 | 233 | |||||||||
Intel Corp. | 48,424 | 3,047 | |||||||||
International Business Machines Corp. | 8,532 | 1,066 | |||||||||
Intuit, Inc. | 2,547 | 739 | |||||||||
IPG Photonics Corp. (a) | 466 | 72 | |||||||||
Jack Henry & Associates, Inc. | 769 | 139 | |||||||||
Juniper Networks, Inc. | 4,493 | 109 | |||||||||
Keysight Technologies, Inc. (a) | 2,383 | 258 | |||||||||
KLA Corp. | 1,555 | 274 | |||||||||
Lam Research Corp. | 1,595 | 437 | |||||||||
Leidos Holdings, Inc. | 1,455 | 153 |
See notes to financial statements.
16
USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Mastercard, Inc. Class A | 9,272 | $ | 2,790 | ||||||||
Maxim Integrated Products, Inc. | 2,767 | 160 | |||||||||
Microchip Technology, Inc. (b) | 2,122 | 204 | |||||||||
Micron Technology, Inc. (a) | 12,129 | 581 | |||||||||
Microsoft Corp. (d) | 83,257 | 15,257 | |||||||||
Motorola Solutions, Inc. | 1,577 | 213 | |||||||||
NetApp, Inc. | 2,488 | 111 | |||||||||
NortonLifeLock, Inc. | 4,853 | 111 | |||||||||
NVIDIA Corp. | 6,713 | 2,383 | |||||||||
Oracle Corp. | 25,234 | 1,357 | |||||||||
Paychex, Inc. | 3,191 | 231 | |||||||||
Paycom Software, Inc. (a) | 617 | 183 | |||||||||
PayPal Holdings, Inc. (a) | 12,173 | 1,887 | |||||||||
Qorvo, Inc. (a) | 1,188 | 124 | |||||||||
QUALCOMM, Inc. | 13,436 | 1,087 | |||||||||
Salesforce.com, Inc. (a) | 9,034 | 1,579 | |||||||||
Seagate Technology PLC | 2,345 | 124 | |||||||||
ServiceNow, Inc. (a) (d) | 2,007 | 779 | |||||||||
Skyworks Solutions, Inc. | 1,864 | 221 | |||||||||
Synopsys, Inc. (a) | 1,398 | 253 | |||||||||
TE Connectivity Ltd. | 3,470 | 282 | |||||||||
Texas Instruments, Inc. | 8,950 | 1,063 | |||||||||
The Western Union Co. | 3,055 | 61 | |||||||||
VeriSign, Inc. (a) | 1,070 | 234 | |||||||||
Visa, Inc. Class A (b) | 18,637 | 3,639 | |||||||||
Western Digital Corp. (b) | 2,709 | 120 | |||||||||
Xerox Holdings Corp. (b) | 1,220 | 19 | |||||||||
Xilinx, Inc. | 3,446 | 317 | |||||||||
Zebra Technologies Corp. (a) | 706 | 184 | |||||||||
72,052 | |||||||||||
Materials (1.2%): | |||||||||||
Air Products & Chemicals, Inc. | 2,193 | 530 | |||||||||
Albemarle Corp. (b) | 1,394 | 107 | |||||||||
Amcor PLC (b) | 20,282 | 207 | |||||||||
Arconic Corp. (a) | 113 | 2 | |||||||||
Avery Dennison Corp. | �� | 906 | 100 | ||||||||
Ball Corp. | 3,726 | 266 | |||||||||
Celanese Corp. | 1,536 | 138 | |||||||||
CF Industries Holdings, Inc. | 2,763 | 81 | |||||||||
Corteva, Inc. | 8,159 | 223 | |||||||||
Dow, Inc. | 9,283 | 358 | |||||||||
DuPont de Nemours, Inc. | 8,076 | 410 | |||||||||
Eastman Chemical Co. | 1,781 | 121 | |||||||||
Ecolab, Inc. | 2,743 | 583 | |||||||||
FMC Corp. | 1,542 | 152 | |||||||||
Freeport-McMoRan, Inc. | 12,339 | 112 | |||||||||
International Flavors & Fragrances, Inc. | 1,398 | 186 | |||||||||
International Paper Co. | 4,916 | 167 | |||||||||
Linde PLC | 5,503 | 1,114 | |||||||||
LyondellBasell Industries NV Class A | 3,229 | 206 |
See notes to financial statements.
17
USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Martin Marietta Materials, Inc. | 721 | $ | 139 | ||||||||
Newmont Corp. | 9,032 | 528 | |||||||||
Nucor Corp. | 3,801 | 161 | |||||||||
Packaging Corp. of America | 1,262 | 128 | |||||||||
PPG Industries, Inc. | 2,394 | 243 | |||||||||
Sealed Air Corp. | 1,340 | 43 | |||||||||
The Mosaic Co. | 4,580 | 55 | |||||||||
The Sherwin-Williams Co. | 964 | 572 | |||||||||
Vulcan Materials Co. (b) | 1,110 | 120 | |||||||||
Westrock Co. (b) | 1,335 | 37 | |||||||||
7,089 | |||||||||||
Real Estate (1.3%): | |||||||||||
Alexandria Real Estate Equities, Inc. | 1,101 | 169 | |||||||||
American Tower Corp. | 4,845 | 1,251 | |||||||||
Apartment Investment & Management Co. | 1,867 | 69 | |||||||||
AvalonBay Communities, Inc. | 1,046 | 163 | |||||||||
Boston Properties, Inc. | 1,803 | 155 | |||||||||
CBRE Group, Inc. Class A (a) | 3,167 | 139 | |||||||||
Crown Castle International Corp. | 5,001 | 861 | |||||||||
Digital Realty Trust, Inc. | 2,875 | 413 | |||||||||
Duke Realty Corp. | 4,814 | 166 | |||||||||
Equinix, Inc. | 1,002 | 699 | |||||||||
Equity Residential | 2,994 | 181 | |||||||||
Essex Property Trust, Inc. | 612 | 149 | |||||||||
Extra Space Storage, Inc. | 1,147 | 111 | |||||||||
Federal Realty Investment Trust (b) | 884 | 71 | |||||||||
Healthpeak Properties, Inc. | 2,973 | 73 | |||||||||
Host Hotels & Resorts, Inc. | 8,991 | 107 | |||||||||
Iron Mountain, Inc. (b) | 3,600 | 93 | |||||||||
Kimco Realty Corp. | 5,294 | 59 | |||||||||
Mid-America Apartment Communities, Inc. | 1,273 | 148 | |||||||||
Prologis, Inc. | 9,667 | 884 | |||||||||
Public Storage (b) | 1,883 | 382 | |||||||||
Realty Income Corp. | 3,322 | 184 | |||||||||
Regency Centers Corp. | 2,100 | 90 | |||||||||
SBA Communications Corp. | 1,391 | 437 | |||||||||
Simon Property Group, Inc. | 3,132 | 181 | |||||||||
UDR, Inc. | 2,624 | 97 | |||||||||
Ventas, Inc. | 4,666 | 163 | |||||||||
Vornado Realty Trust (b) | 1,992 | 72 | |||||||||
Welltower, Inc. | 3,102 | 157 | |||||||||
Weyerhaeuser Co. | 9,341 | 189 | |||||||||
7,913 | |||||||||||
Utilities (1.5%): | |||||||||||
AES Corp. (b) | 6,122 | 76 | |||||||||
Alliant Energy Corp. | 3,054 | 151 | |||||||||
Ameren Corp. | 2,468 | 184 | |||||||||
American Electric Power Co., Inc. (d) | 4,911 | 419 | |||||||||
American Water Works Co., Inc. | 2,297 | 292 |
See notes to financial statements.
18
USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares or Principal Amount | Value | |||||||||
Atmos Energy Corp. | 1,302 | $ | 134 | ||||||||
CenterPoint Energy, Inc. | 6,318 | 112 | |||||||||
CMS Energy Corp. | 3,607 | 211 | |||||||||
Consolidated Edison, Inc. (d) | 2,789 | 209 | |||||||||
Dominion Energy, Inc. | 8,668 | 737 | |||||||||
DTE Energy Co. | 1,653 | 178 | |||||||||
Duke Energy Corp. (d) | 7,948 | 681 | |||||||||
Edison International | 3,254 | 189 | |||||||||
Entergy Corp. | 2,505 | 255 | |||||||||
Evergy, Inc. (b) (d) | 3,068 | 189 | |||||||||
Eversource Energy (b) (d) | 3,443 | 288 | |||||||||
Exelon Corp. | 11,459 | 439 | |||||||||
FirstEnergy Corp. | 5,569 | 235 | |||||||||
NextEra Energy, Inc. (d) | 4,818 | 1,231 | |||||||||
NRG Energy, Inc. (b) | 2,789 | 101 | |||||||||
Pinnacle West Capital Corp. | 1,380 | 107 | |||||||||
PPL Corp. | 8,145 | 228 | |||||||||
Public Service Enterprise Group, Inc. (b) | 6,361 | 325 | |||||||||
Sempra Energy | 3,073 | 388 | |||||||||
The Southern Co. (d) | 12,049 | 688 | |||||||||
WEC Energy Group, Inc. (d) | 4,007 | 368 | |||||||||
Xcel Energy, Inc. (b) (d) | 6,662 | 433 | |||||||||
8,848 | |||||||||||
Total Common Stocks (Cost $126,249) | 275,533 | ||||||||||
Municipal Bonds (52.2%) | |||||||||||
Alabama (0.2%): | |||||||||||
The Lower Alabama Gas District Revenue, Series A, 5.00%, 9/1/46 | $ | 1,000 | 1,301 | ||||||||
Arizona (1.3%): | |||||||||||
Arizona IDA Revenue, 5.00%, 7/1/47, Continuously Callable @100 | 1,000 | 1,172 | |||||||||
City of Phoenix IDA Revenue, 5.00%, 7/1/46, Continuously Callable @100 | 1,300 | 1,358 | |||||||||
Maricopa County IDA Revenue Series A, 5.00%, 9/1/42, Continuously Callable @100 | 500 | 574 | |||||||||
Series A, 5.00%, 7/1/49, Continuously Callable @100 | 1,000 | 1,111 | |||||||||
Series A, 5.00%, 7/1/54, Continuously Callable @100 | 1,275 | 1,413 | |||||||||
Pima County IDA Revenue, 5.00%, 6/15/47, Continuously Callable @100 (f) | 1,000 | 949 | |||||||||
Student & Academic Services LLC Revenue, 5.00%, 6/1/44, Continuously Callable @100 | 1,000 | 1,146 | |||||||||
7,723 | |||||||||||
Arkansas (0.2%): | |||||||||||
Arkansas Development Finance Authority Revenue, 4.00%, 12/1/44, Continuously Callable @100 | 1,000 | 1,063 | |||||||||
California (3.1%): | |||||||||||
California Statewide Communities Development Authority Revenue (INS — Assured Guaranty Municipal Corp.), 5.00%, 11/15/49, Continuously Callable @100 | 1,000 | 1,137 | |||||||||
San Francisco City Housing Revenue, 1500 Mission Street Apts., Series E (LIQ — Deutsche Bank A.G.), Series DBE-8038, 4.90%, 12/1/52, Callable 12/1/20 @ 100 (f) (g) | 4,650 | 4,650 |
See notes to financial statements.
19
USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Jurupa Public Financing Authority Special Tax, Series A, 5.00%, 9/1/42, Continuously Callable @100 | $ | 1,200 | $ | 1,276 | |||||||
Monterey Peninsula Unified School District, GO (INS — Assured Guaranty Municipal Corp.), Series A, 5.50%, 8/1/34, Pre-refunded 8/1/21 @ 100 | 2,000 | 2,125 | |||||||||
State of California, GO 5.00%, 2/1/43, Continuously Callable @100 | 1,000 | 1,102 | |||||||||
5.00%, 8/1/45, Continuously Callable @100 | 1,000 | 1,167 | |||||||||
Sutter Butte Flood Agency Special Assessment (INS — Build America Mutual Assurance Co.), 5.00%, 10/1/40, Continuously Callable @100 | 1,000 | 1,135 | |||||||||
Twin Rivers Unified School District, GO (INS — Build America Mutual Assurance Co.), Series A, 5.00%, 8/1/40, Pre-refunded 2/1/24 @ 100 | 1,500 | 1,699 | |||||||||
Val Verde Unified School District, GO (INS — Build America Mutual Assurance Co.), Series B, 5.00%, 8/1/44, Continuously Callable @100 | 1,000 | 1,148 | |||||||||
West Contra Costa Unified School District, GO (INS — National Public Finance Guarantee Corp.), 8/1/34 (h) | 4,435 | 3,158 | |||||||||
18,597 | |||||||||||
Colorado (2.0%): | |||||||||||
Colorado Educational & Cultural Facilities Authority Revenue 5.00%, 12/1/38, Continuously Callable @100 | 1,000 | 1,168 | |||||||||
5.00%, 4/1/48, Continuously Callable @100 | 710 | 814 | |||||||||
Colorado Health Facilities Authority Revenue 5.00%, 12/1/42, Pre-refunded 6/1/22 @ 100 | 1,000 | 1,096 | |||||||||
5.00%, 6/1/45, Pre-refunded 6/1/25 @ 100 | 1,000 | 1,226 | |||||||||
Denver Convention Center Hotel Authority Revenue, 5.00%, 12/1/40, Continuously Callable @100 | 1,000 | 1,024 | |||||||||
Denver Health & Hospital Authority Certificate of Participation, 5.00%, 12/1/48, Continuously Callable @100 | 1,900 | 2,040 | |||||||||
Park Creek Metropolitan District Revenue 5.00%, 12/1/41, Continuously Callable @100 | 250 | 288 | |||||||||
5.00%, 12/1/45, Continuously Callable @100 | 1,000 | 1,137 | |||||||||
Rampart Range Metropolitan District No. 1 Revenue (INS — Assured Guaranty Municipal Corp.), 5.00%, 12/1/47, Continuously Callable @100 | 1,000 | 1,199 | |||||||||
Regional Transportation District Certificate of Participation, Series A, 5.38%, 6/1/31, Pre-refunded 6/1/20 @ 100 | 2,000 | 2,000 | |||||||||
11,992 | |||||||||||
Connecticut (0.5%): | |||||||||||
Mashantucket Western Pequot Tribe Revenue PIK, 2.05%, 7/1/31 (i) (j) | 4,864 | 170 | |||||||||
State of Connecticut, GO Series A, 5.00%, 4/15/36, Continuously Callable @100 | 1,500 | 1,810 | |||||||||
Series A, 5.00%, 4/15/37, Continuously Callable @100 | 1,000 | 1,182 | |||||||||
3,162 | |||||||||||
District of Columbia (0.2%): | |||||||||||
District of Columbia Revenue, 5.00%, 7/1/42, Continuously Callable @100 | 1,100 | 1,166 | |||||||||
Florida (2.7%): | |||||||||||
City of Atlantic Beach Revenue, Series A, 5.00%, 11/15/53, Continuously Callable @103 | 1,000 | 1,003 | |||||||||
City of Jacksonville Revenue, 5.00%, 10/1/29, Continuously Callable @100 | 1,000 | 1,094 |
See notes to financial statements.
20
USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
County of Miami-Dade Water & Sewer System Revenue, 5.00%, 10/1/34, Pre-refunded 10/1/20 @ 100 | $ | 1,300 | $ | 1,321 | |||||||
County of Polk Florida Uility System Revenue, 4.00%, 10/1/43, Continuously Callable @100 | 2,000 | 2,389 | |||||||||
Halifax Hospital Medical Center Revenue, 5.00%, 6/1/46, Continuously Callable @100 | 1,000 | 1,083 | |||||||||
Lee County IDA Revenue 5.00%, 11/1/25, Continuously Callable @100 | 2,000 | 2,040 | |||||||||
5.50%, 10/1/47, Continuously Callable @102 | 645 | 623 | |||||||||
Lee Memorial Health System Revenue, Series A-1, 5.00%, 4/1/44, Continuously Callable @100 | 1,450 | 1,667 | |||||||||
Sarasota County Health Facilities Authority Revenue, 5.00%, 5/15/38, Continuously Callable @103 | 700 | 710 | |||||||||
Southeast Overtown Park West Community Redevelopment Agency Tax Allocation, Series A-1, 5.00%, 3/1/30, Continuously Callable @100 (f) | 1,000 | 1,126 | |||||||||
Tampa-Hillsborough County Expressway Authority Revenue, Series A, 5.00%, 7/1/37, Continuously Callable @100 | 1,505 | 1,607 | |||||||||
Volusia County Educational Facility Authority Revenue, Series B, 5.00%, 10/15/45, Pre-refunded 4/15/25 @ 100 | 1,000 | 1,221 | |||||||||
15,884 | |||||||||||
Georgia (0.5%): | |||||||||||
Gainesville & Hall County Hospital Authority Revenue, 4.00%, 2/15/45, Continuously Callable @100 | 2,000 | 2,103 | |||||||||
Glynn-Brunswick Memorial Hospital Authority Revenue, 5.00%, 8/1/47, Continuously Callable @100 | 1,000 | 1,081 | |||||||||
3,184 | |||||||||||
Guam (0.3%): | |||||||||||
Antonio B Won Pat International Airport Authority Revenue (INS — Assured Guaranty Municipal Corp.), 5.50%, 10/1/33, Continuously Callable @100 | 750 | 848 | |||||||||
Guam Government Waterworks Authority Revenue, 5.50%, 7/1/43, Continuously Callable @100 | 1,000 | 1,041 | |||||||||
1,889 | |||||||||||
Illinois (4.7%): | |||||||||||
Bureau County Township High School District No. 502, GO (INS — Build America Mutual Assurance Co.), Series A, 5.00%, 12/1/37, Continuously Callable @100 | 1,000 | 1,209 | |||||||||
Chicago Midway International Airport Revenue, Series B, 5.00%, 1/1/41, Continuously Callable @100 | 1,000 | 1,100 | |||||||||
Chicago O'Hare International Airport Revenue, Series C, 5.00%, 1/1/41, Continuously Callable @100 | 1,000 | 1,132 | |||||||||
Chicago O'Hare International Airport Revenue (INS — Assured Guaranty Municipal Corp.), 5.25%, 1/1/33, Continuously Callable @100 | 1,000 | 1,096 | |||||||||
Chicago Park District, GO, Series C, 4.00%, 1/1/42, Continuously Callable @100 (k) | 1,250 | 1,300 | |||||||||
City of Chicago Wastewater Transmission Revenue 5.00%, 1/1/44, Continuously Callable @100 | 1,000 | 1,067 | |||||||||
Series A, 5.00%, 1/1/47, OWN MERIT, Continuously Callable @100 | 1,000 | 1,097 |
See notes to financial statements.
21
USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
City of Chicago Waterworks Revenue, 5.00%, 11/1/44, Continuously Callable @100 | $ | 1,000 | $ | 1,071 | |||||||
Cook County Community College District No. 508, GO (INS — Build America Mutual Assurance Co.), 5.00%, 12/1/47, Continuously Callable @100 | 1,000 | 1,175 | |||||||||
County of Cook Sales Tax Revenue, 5.00%, 11/15/38, Continuously Callable @100 | 1,000 | 1,157 | |||||||||
Illinois Educational Facilities Authority Revenue, 4.00%, 11/1/36, Continuously Callable @102 | 1,000 | 1,118 | |||||||||
Illinois Finance Authority Revenue 3.90%, 3/1/30, Continuously Callable @100 | 1,000 | 1,108 | |||||||||
5.00%, 5/15/37, Continuously Callable @100 | 1,000 | 951 | |||||||||
5.00%, 5/15/40, Continuously Callable @100 | 1,275 | 1,205 | |||||||||
5.00%, 8/15/44, Continuously Callable @100 | 1,000 | 1,066 | |||||||||
5.00%, 10/1/44, Continuously Callable @100 | 1,000 | 1,213 | |||||||||
5.00%, 5/15/45, Continuously Callable @100 | 1,000 | 996 | |||||||||
Series A, 6.00%, 10/1/32, Pre-refunded 4/1/21 @ 100 | 2,000 | 2,095 | |||||||||
Series A, 4.00%, 10/1/40, Continuously Callable @100 | 1,000 | 1,022 | |||||||||
Series C, 4.00%, 2/15/41, Continuously Callable @100 | 955 | 1,032 | |||||||||
Series C, 4.00%, 2/15/41, Pre-refunded 2/15/27 @ 100 | 45 | 55 | |||||||||
Northern Illinois Municipal Power Agency Revenue, Series A, 4.00%, 12/1/41, Continuously Callable @100 | 1,000 | 1,078 | |||||||||
Northern Illinois University Revenue (INS — Build America Mutual Assurance Co.), Series B, 4.00%, 4/1/40, Continuously Callable @100 | 600 | 615 | |||||||||
Sangamon County Water Reclamation District, GO Series A, 4.00%, 1/1/49, Continuously Callable @100 | 1,000 | 1,121 | |||||||||
Series A, 5.75%, 1/1/53, Continuously Callable @100 | 1,235 | 1,478 | |||||||||
State of Illinois, GO, 5.50%, 5/1/39, Continuously Callable @100 | 225 | 235 | |||||||||
27,792 | |||||||||||
Indiana (0.9%): | |||||||||||
Ball State University Revenue, Series P, 5.00%, 7/1/30, Pre-refunded 7/1/20 @ 100 | 500 | 502 | |||||||||
Evansville Redevelopment Authority Revenue (INS — Build America Mutual Assurance Co.), 4.00%, 2/1/39, Continuously Callable @100 | 1,000 | 1,128 | |||||||||
Indiana Finance Authority Revenue 5.00%, 2/1/40, Continuously Callable @100 | 1,000 | 1,063 | |||||||||
5.00%, 10/1/44, Continuously Callable @100 | 1,000 | 1,023 | |||||||||
Richmond Hospital Authority Revenue, 5.00%, 1/1/39, Continuously Callable @100 | 1,500 | 1,619 | |||||||||
5,335 | |||||||||||
Kansas (1.1%): | |||||||||||
City of Coffeyville Electric System Revenue (INS — National Public Finance Guarantee Corp.), Series B, 5.00%, 6/1/42, Continuously Callable @100 (f) | 1,000 | 1,002 | |||||||||
City of Lawrence Revenue, 5.00%, 7/1/43, Continuously Callable @100 | 1,500 | 1,712 | |||||||||
City of Wichita Revenue, 4.63%, 9/1/33, Continuously Callable @100 | 1,000 | 1,003 | |||||||||
Wyandotte County-Kansas City Unified Government Utility System Revenue Series A, 5.00%, 9/1/44, Continuously Callable @100 | 1,250 | 1,437 | |||||||||
Series A, 5.00%, 9/1/45, Continuously Callable @100 | 1,000 | 1,170 | |||||||||
6,324 |
See notes to financial statements.
22
USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Kentucky (0.5%): | |||||||||||
City of Ashland Revenue, 5.00%, 2/1/40, Continuously Callable @100 | $ | 1,000 | $ | 1,040 | |||||||
Kentucky Economic Development Finance Authority Revenue, 5.00%, 5/15/46, Continuously Callable @100 | 1,000 | 808 | |||||||||
Kentucky Economic Development Finance Authority Revenue (INS — Assured Guaranty Municipal Corp.), Series A, 5.00%, 12/1/45, Continuously Callable @100 | 1,000 | 1,124 | |||||||||
2,972 | |||||||||||
Louisiana (2.8%): | |||||||||||
City of Shreveport Water & Sewer Revenue 5.00%, 12/1/40, Continuously Callable @100 | 1,000 | 1,172 | |||||||||
Series B, 4.00%, 12/1/44, Continuously Callable @100 | 500 | 571 | |||||||||
City of Shreveport Water & Sewer Revenue (INS — Build America Mutual Assurance Co.), Series C, 5.00%, 12/1/39, Continuously Callable @100 | 1,000 | 1,153 | |||||||||
Jefferson Sales Tax District Revenue, Series B, 4.00%, 12/1/42, Continuously Callable @100 | 1,500 | 1,688 | |||||||||
Louisiana Local Government Environmental Facilities & Community Development Authority Revenue (INS — Assured Guaranty Municipal Corp.) 5.00%, 10/1/39, Continuously Callable @100 | 1,000 | 1,217 | |||||||||
5.00%, 10/1/43, Continuously Callable @100 | 1,000 | 1,140 | |||||||||
4.00%, 10/1/46, Continuously Callable @100 | 1,000 | 1,029 | |||||||||
Louisiana Public Facilities Authority Revenue 5.00%, 11/1/45, Continuously Callable @100 | 1,000 | 1,059 | |||||||||
5.00%, 7/1/52, Continuously Callable @100 | 1,000 | 1,090 | |||||||||
4.00%, 1/1/56, Continuously Callable @100 | 1,000 | 1,016 | |||||||||
Louisiana Public Facilities Authority Revenue (INS — Build America Mutual Assurance Co.), 5.25%, 6/1/51, Continuously Callable @100 | 1,000 | 1,129 | |||||||||
Parish of East Baton Rouge Capital Improvements District Revenue, 4.00%, 8/1/44, Continuously Callable @100 | 1,400 | 1,661 | |||||||||
State of Louisiana Gasoline & Fuels Tax Revenue, Series C, 5.00%, 5/1/45, Continuously Callable @100 | 1,500 | 1,769 | |||||||||
Tobacco Settlement Financing Corp. Revenue, Series A, 5.25%, 5/15/35, Continuously Callable @100 | 1,000 | 1,071 | |||||||||
16,765 | |||||||||||
Maine (0.2%): | |||||||||||
Maine Health & Higher Educational Facilities Authority Revenue, Series A, 4.00%, 7/1/46, Continuously Callable @100 | 1,000 | 979 | |||||||||
Massachusetts (1.7%): | |||||||||||
Massachusetts Development Finance Agency Revenue 5.00%, 4/15/40, Continuously Callable @100 | 1,000 | 1,051 | |||||||||
5.25%, 11/15/41, Continuously Callable @100 | 1,000 | 1,093 | |||||||||
5.00%, 7/1/46, Continuously Callable @100 | 1,000 | 1,072 | |||||||||
5.00%, 10/1/57, Continuously Callable @105 (f) | 1,000 | 961 | |||||||||
Series A, 5.00%, 6/1/39, Continuously Callable @100 | 1,000 | 1,107 | |||||||||
Series A, 5.50%, 7/1/44, Continuously Callable @100 | 1,000 | 1,025 | |||||||||
Series A, 5.00%, 7/1/44, Continuously Callable @100 | 1,600 | 1,782 | |||||||||
Series D, 5.00%, 7/1/44, Continuously Callable @100 | 1,000 | 1,068 | |||||||||
Series F, 5.75%, 7/15/43, Continuously Callable @100 | 1,000 | 1,028 | |||||||||
10,187 |
See notes to financial statements.
23
USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Michigan (1.5%): | |||||||||||
City of Wyandotte Electric System Revenue (INS — Build America Mutual Assurance Co.), Series A, 5.00%, 10/1/44, Continuously Callable @100 | $ | 1,000 | $ | 1,120 | |||||||
Detroit Downtown Development Authority Tax Allocation (INS — Assured Guaranty Municipal Corp.), 5.00%, 7/1/43, Continuously Callable @100 | 1,750 | 1,839 | |||||||||
Jackson Public Schools, GO (NBGA — Michigan School Bond Qualification & Loan Program), 5.00%, 5/1/42, Continuously Callable @100 | 1,000 | 1,207 | |||||||||
Karegnondi Water Authority Revenue, 5.00%, 11/1/41, Continuously Callable @100 | 1,000 | 1,158 | |||||||||
Lincoln Consolidated School District, GO (INS — Assured Guaranty Municipal Corp.), Series A, 5.00%, 5/1/40, Continuously Callable @100 | 1,250 | 1,484 | |||||||||
Livonia Public Schools, GO (INS — Assured Guaranty Municipal Corp.), 5.00%, 5/1/45, Continuously Callable @100 | 1,000 | 1,181 | |||||||||
Wayne County Airport Authority Revenue, 5.00%, 12/1/44, Continuously Callable @100 | 1,000 | 1,097 | |||||||||
9,086 | |||||||||||
Minnesota (0.4%): | |||||||||||
Housing & Redevelopment Authority Revenue 5.00%, 11/15/44, Pre-refunded 11/15/25 @ 100 | 1,000 | 1,245 | |||||||||
5.00%, 11/15/47, Continuously Callable @100 | 1,000 | 1,116 | |||||||||
2,361 | |||||||||||
Missouri (0.7%): | |||||||||||
Health & Educational Facilities Authority of the State of Missouri Revenue, 4.00%, 2/1/48, Continuously Callable @100 | 1,500 | 1,230 | |||||||||
Health & Educational Facilities Authority Revenue 5.00%, 8/1/45, Continuously Callable @100 | 1,270 | 1,269 | |||||||||
4.00%, 2/15/49, Continuously Callable @100 | 250 | 268 | |||||||||
St. Louis Municipal Finance Corp. Revenue (INS — Assured Guaranty Municipal Corp.), 5.00%, 10/1/38, Continuously Callable @100 | 1,000 | 1,214 | |||||||||
3,981 | |||||||||||
Nebraska (0.2%): | |||||||||||
Douglas County Hospital Authority No. 3 Revenue, 5.00%, 11/1/48, Continuously Callable @100 | 1,000 | 1,089 | |||||||||
Nevada (0.7%): | |||||||||||
City of Carson City Revenue, 5.00%, 9/1/42, Continuously Callable @100 | 1,000 | 1,119 | |||||||||
Las Vegas Convention & Visitors Authority Revenue, Series C, 4.00%, 7/1/41, Continuously Callable @100 | 1,555 | 1,587 | |||||||||
Las Vegas Redevelopment Agency Tax Allocation, 5.00%, 6/15/45, Continuously Callable @100 | 1,500 | 1,670 | |||||||||
4,376 | |||||||||||
New Jersey (2.3%): | |||||||||||
New Jersey Economic Development Authority Revenue 5.00%, 6/15/29, Continuously Callable @100 | 1,000 | 1,025 | |||||||||
5.00%, 6/15/42, Continuously Callable @100 | 2,000 | 2,036 | |||||||||
5.00%, 6/15/43, Continuously Callable @100 | 1,000 | 1,022 | |||||||||
Series A, 4.00%, 7/1/34, Continuously Callable @100 | 1,000 | 970 | |||||||||
Series A, 5.00%, 6/15/47, Continuously Callable @100 | 1,000 | 1,017 | |||||||||
Series B, 5.00%, 6/15/43, Continuously Callable @100 | 1,000 | 1,022 |
See notes to financial statements.
24
USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
New Jersey Economic Development Authority Revenue (INS — Assured Guaranty Municipal Corp.), 5.00%, 6/1/37, Continuously Callable @100 | $ | 500 | $ | 579 | |||||||
New Jersey Educational Facilities Authority Revenue, Series B, 5.00%, 9/1/36, Continuously Callable @100 | 1,000 | 1,016 | |||||||||
New Jersey Health Care Facilities Financing Authorty Revenue, 5.00%, 10/1/37, Continuously Callable @100 | 1,000 | 1,011 | |||||||||
New Jersey Transportation Trust Fund Authority Revenue Series A, 5.00%, 12/15/35, Continuously Callable @100 | 1,000 | 1,027 | |||||||||
Series AA, 5.00%, 6/15/44, Continuously Callable @100 | 1,000 | 1,012 | |||||||||
South Jersey Transportation Authority LLC Revenue, Series A, 5.00%, 11/1/39, Continuously Callable @100 | 1,250 | 1,329 | |||||||||
Tobacco Settlement Financing Corp. Revenue, Series A, 5.25%, 6/1/46, Continuously Callable @100 | 500 | 554 | |||||||||
13,620 | |||||||||||
New Mexico (0.3%): | |||||||||||
City of Farmington Revenue, 5.90%, 6/1/40, Continuously Callable @100 | 1,000 | 1,002 | |||||||||
New Mexico Hospital Equipment Loan Council Revenue, Series LA, 5.00%, 7/1/49, Continuously Callable @102 | 1,000 | 892 | |||||||||
1,894 | |||||||||||
New York (1.7%): | |||||||||||
County of Suffolk, GO, Series A, 5.00%, 11/13/20 | 1,000 | 1,008 | |||||||||
Metropolitan Transportation Authority Revenue, Series C, 5.00%, 11/15/42, Continuously Callable @100 | 1,000 | 1,028 | |||||||||
New York Liberty Development Corp. Revenue 5.25%, 10/1/35 | 630 | 829 | |||||||||
5.50%, 10/1/37 | 1,500 | 2,075 | |||||||||
2.80%, 9/15/69, Continuously Callable @100 | 1,000 | 1,011 | |||||||||
New York State Dormitory Authority Revenue, Series A, 4.00%, 9/1/50, Continuously Callable @100 | 2,000 | 2,035 | |||||||||
New York State Dormitory Authority Revenue (INS — AMBAC Assurance Corp.), Series 1, 5.50%, 7/1/40 | 1,205 | 1,823 | |||||||||
9,809 | |||||||||||
North Carolina (0.4%): | |||||||||||
North Carolina Medical Care Commission Revenue 5.00%, 10/1/35, Continuously Callable @100 | 1,000 | 1,015 | |||||||||
5.00%, 1/1/49, Continuously Callable @104 | 1,500 | 1,516 | |||||||||
2,531 | |||||||||||
North Dakota (0.2%): | |||||||||||
County of Ward Revenue, Series C, 5.00%, 6/1/43, Continuously Callable @100 | 1,000 | 1,042 | |||||||||
Ohio (0.3%): | |||||||||||
County of Warren Revenue, Series A, 4.00%, 7/1/45, Continuously Callable @100 | 735 | 766 | |||||||||
Southeastern Ohio Port Authority Revenue, 5.00%, 12/1/43, Continuously Callable @100 | 750 | 740 | |||||||||
1,506 |
See notes to financial statements.
25
USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Oklahoma (0.6%): | |||||||||||
Comanche County Hospital Authority Revenue, Series A, 5.00%, 7/1/32, Continuously Callable @100 | $ | 1,315 | $ | 1,331 | |||||||
Oklahoma Development Finance Authority Revenue, Series B, 5.50%, 8/15/57, Continuously Callable @100 | 1,000 | 1,091 | |||||||||
Tulsa County Industrial Authority Revenue, 5.25%, 11/15/37, Continuously Callable @102 | 750 | 773 | |||||||||
3,195 | |||||||||||
Oregon (0.2%): | |||||||||||
Salem Hospital Facility Authority Revenue, 5.00%, 5/15/53, Continuously Callable @102 | 1,250 | 1,252 | |||||||||
Pennsylvania (5.1%): | |||||||||||
Allegheny County Hospital Development Authority Revenue 4.00%, 7/15/39, Continuously Callable @100 | 1,185 | 1,279 | |||||||||
5.00%, 4/1/47, Continuously Callable @100 | 1,000 | 1,118 | |||||||||
Altoona Area School District, GO (INS — Build America Mutual Assurance Co.), 5.00%, 12/1/48, Continuously Callable @100 | 1,000 | 1,150 | |||||||||
Berks County IDA Revenue 5.00%, 5/15/43, Continuously Callable @102 | 350 | 353 | |||||||||
5.00%, 11/1/50, Continuously Callable @100 | 1,500 | 1,568 | |||||||||
Bucks County IDA Revenue, 4.00%, 8/15/44, Continuously Callable @100 | 1,000 | 1,047 | |||||||||
Butler County Hospital Authority Revenue, 5.00%, 7/1/39, Continuously Callable @100 | 1,125 | 1,195 | |||||||||
Canon Mcmillan School District, GO, 4.00%, 6/1/48, Continuously Callable @100 | 1,500 | 1,653 | |||||||||
Chester County IDA Revenue, 5.00%, 10/1/44, Continuously Callable @100 | 1,000 | 1,033 | |||||||||
Commonwealth Financing Authority Revenue, 5.00%, 6/1/35, Continuously Callable @100 | 1,000 | 1,178 | |||||||||
Commonwealth of Pennsylvania Certificate of Participation, Series A, 5.00%, 7/1/43, Continuously Callable @100 | 1,000 | 1,213 | |||||||||
County of Lehigh Revenue, 4.00%, 7/1/49, Continuously Callable @100 | 1,000 | 1,047 | |||||||||
Indiana County Hospital Authority Revenue, Series A, 6.00%, 6/1/39, Continuously Callable @100 | 1,625 | 1,688 | |||||||||
Lancaster County Hospital Authority Revenue, 5.00%, 11/1/35, Continuously Callable @100 | 1,000 | 1,090 | |||||||||
Montgomery County IDA Revenue, 5.25%, 1/15/45, Continuously Callable @100 | 1,000 | 1,035 | |||||||||
Northampton County General Purpose Authority Revenue 4.00%, 8/15/40, Continuously Callable @100 | 1,000 | 1,041 | |||||||||
5.00%, 8/15/43, Continuously Callable @100 | 1,000 | 1,131 | |||||||||
Pennsylvania Turnpike Commission Revenue Series A-1, 5.00%, 12/1/46, Continuously Callable @100 | 1,000 | 1,105 | |||||||||
Series A-1, 5.00%, 12/1/47, Continuously Callable @100 | 1,000 | 1,167 | |||||||||
Series B, 5.00%, 12/1/39, Continuously Callable @100 | 1,000 | 1,185 | |||||||||
Series B, 5.25%, 12/1/44, Continuously Callable @100 | 1,000 | 1,104 | |||||||||
Philadelphia School District, GO, Series A, 5.00%, 9/1/38, STATE AID WITHHOLDING, Continuously Callable @100 | 1,000 | 1,202 | |||||||||
Reading School District, GO (INS — Assured Guaranty Municipal Corp.), 5.00%, 3/1/38, Continuously Callable @100 | 1,500 | 1,809 |
See notes to financial statements.
26
USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
School District of Philadelphia, GO, Series F, 5.00%, 9/1/37, Continuously Callable @100 | $ | 1,000 | $ | 1,160 | |||||||
Wilkes-Barre Area School District, GO (INS — Build America Mutual Assurance Co.), 4.00%, 4/15/49, Continuously Callable @100 | 1,500 | 1,727 | |||||||||
30,278 | |||||||||||
Puerto Rico (0.2%): | |||||||||||
Commonwealth of Puerto Rico, GO (INS — Assured Guaranty Municipal Corp.), Series A, 5.00%, 7/1/35, Continuously Callable @100 | 1,000 | 1,007 | |||||||||
Rhode Island (0.8%): | |||||||||||
Rhode Island Health & Educational Building Corp. Revenue (LOC — Citizens Financial Group), 0.25%, 6/1/35, Callable 7/1/20 @ 100 (g) | 3,360 | 3,360 | |||||||||
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 | 1,145 | |||||||||
4,545 | |||||||||||
South Carolina (0.6%): | |||||||||||
Piedmont Municipal Power Agency Revenue (INS — Assured Guaranty Municipal Corp.), Series D, 5.75%, 1/1/34, Continuously Callable @100 | 2,000 | 2,111 | |||||||||
South Carolina Jobs-Economic Development Authority Revenue 5.00%, 11/15/47, Continuously Callable @103 | 1,000 | 1,053 | |||||||||
4.00%, 4/1/49, Continuously Callable @103 | 620 | 556 | |||||||||
3,720 | |||||||||||
Tennessee (0.9%): | |||||||||||
Greeneville Health & Educational Facilities Board Revenue, 5.00%, 7/1/37, Continuously Callable @100 | 1,500 | 1,646 | |||||||||
Metropolitan Government Nashville & Davidson County Health & Educational Facilities Board Revenue 5.00%, 10/1/45, Continuously Callable @100 | 1,000 | 1,060 | |||||||||
5.00%, 7/1/46, Continuously Callable @100 | 1,000 | 1,115 | |||||||||
5.00%, 10/1/48, Continuously Callable @100 | 500 | 534 | |||||||||
The Metropolitan Nashville Airport Authority Revenue, Series A, 4.00%, 7/1/49, Continuously Callable @100 | 1,000 | 1,098 | |||||||||
5,453 | |||||||||||
Texas (9.6%): | |||||||||||
Arlington Higher Education Finance Corp. Revenue (NBGA — Texas Permanent School Fund), 4.00%, 8/15/44, Continuously Callable @100 | 2,165 | 2,541 | |||||||||
Austin Convention Enterprises, Inc. Revenue, 5.00%, 1/1/34, Continuously Callable @100 | 1,380 | 1,279 | |||||||||
Bexar County Health Facilities Development Corp. Revenue, 5.00%, 7/15/37, Continuously Callable @105 | 1,000 | 1,005 | |||||||||
Central Texas Regional Mobility Authority Revenue 4.00%, 1/1/41, Continuously Callable @100 | 1,000 | 1,020 | |||||||||
Series A, 5.00%, 1/1/45, Continuously Callable @100 | 1,000 | 1,071 | |||||||||
Central Texas Turnpike System Revenue, Series C, 5.00%, 8/15/42, Continuously Callable @100 | 1,000 | 1,049 |
See notes to financial statements.
27
USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
City of Arlington Special Tax (INS — Assured Guaranty Municipal Corp.), Series A, 5.00%, 2/15/48, Continuously Callable @100 | $ | 1,000 | $ | 1,152 | |||||||
City of Houston Hotel Occupancy Tax & Special Revenue 5.00%, 9/1/39, Continuously Callable @100 | 1,000 | 971 | |||||||||
5.00%, 9/1/40, Continuously Callable @100 | 1,000 | 968 | |||||||||
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 | 1,109 | |||||||||
City of Lewisville Special Assessment (INS — ACA Financial Guaranty Corp.), 5.80%, 9/1/25 (d) | 3,920 | 3,999 | |||||||||
Clifton Higher Education Finance Corp. Revenue (NBGA-Texas Permanent School Fund) 5.00%, 8/15/39, Continuously Callable @100 | 1,000 | 1,144 | |||||||||
4.00%, 8/15/44, Continuously Callable @100 | 1,000 | 1,155 | |||||||||
County of Bexar Revenue, 4.00%, 8/15/44, Continuously Callable @100 | 1,500 | 1,680 | |||||||||
Everman Independent School District, GO (NBGA — Texas Permanent School Fund), 4.00%, 2/15/50, Continuously Callable @100 | 1,500 | 1,772 | |||||||||
Harris County Cultural Education Facilities Finance Corp. Revenue, 5.00%, 6/1/38, Continuously Callable @100 | 1,000 | 1,035 | |||||||||
Harris County Hospital District Revenue, 4.00%, 2/15/42, Continuously Callable @100 | 1,000 | 1,055 | |||||||||
Karnes County Hospital District Revenue, 5.00%, 2/1/44, Continuously Callable @100 | 1,000 | 1,071 | |||||||||
Matagorda County Navigation District No. 1 Revenue, 4.00%, 6/1/30, Continuously Callable @100 | 1,000 | 1,024 | |||||||||
Mesquite Health Facilities Development Corp. Revenue, 5.00%, 2/15/35, Continuously Callable @100 | 1,000 | 831 | |||||||||
New Hope Cultural Education Facilities Finance Corp. Revenue Series A, 5.00%, 4/1/47, Continuously Callable @100 | 1,600 | 1,552 | |||||||||
Series A, 5.00%, 7/1/47, Continuously Callable @100 | 1,000 | 823 | |||||||||
New Hope Cultural Education Facilities Finance Corp. Revenue (INS — Assured Guaranty Municipal Corp.), Series A1, 5.00%, 7/1/38, Continuously Callable @100 | 225 | 260 | |||||||||
North Texas Tollway Authority Revenue Series B, 5.00%, 1/1/31, Continuously Callable @100 | 1,500 | 1,683 | |||||||||
Series B, 5.00%, 1/1/45, Continuously Callable @100 | 1,000 | 1,125 | |||||||||
Port of Arthur Navigation District Industrial Development Corp. Revenue, 0.30%, 3/1/42, Callable 9/1/20 @ 100 (g) | 3,000 | 3,000 | |||||||||
Port of Port Arthur Navigation District Revenue 2.38%, 11/1/40, Continuously Callable @100 (d) (g) | 4,650 | 4,650 | |||||||||
Series C, 1.65%, 4/1/40, OWN MERIT, Continuously Callable @100 (g) | 9,350 | 9,350 | |||||||||
Princeton Independent School District, GO (NBGA — Texas Permanent School Fund), 5.00%, 2/15/43, Continuously Callable @100 | 1,000 | 1,242 | |||||||||
Prosper Independent School District, GO (NBGA — Texas Permanent School Fund), 5.00%, 2/15/48, Continuously Callable @100 | 1,000 | 1,251 | |||||||||
Tarrant County Cultural Education Facilities Finance Corp. Revenue 5.00%, 11/15/46, Continuously Callable @100 | 1,000 | 1,106 | |||||||||
Series A, 5.00%, 11/15/45, Continuously Callable @100 | 1,000 | 642 | |||||||||
Series B, 5.00%, 11/15/36, Continuously Callable @100 | 1,000 | 722 | |||||||||
Series B, 5.00%, 7/1/48, Continuously Callable @100 | 1,500 | 1,712 | |||||||||
57,046 |
See notes to financial statements.
28
USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares or Principal Amount | Value | |||||||||
Virginia (0.2%): | |||||||||||
Alexandria IDA Revenue, 5.00%, 10/1/45, Continuously Callable @100 | $ | 1,000 | $ | 1,005 | |||||||
Longwood University Student Housing Project (LIQ — Deutsche Bank A.G.), Series DBE-8039, 0.49%, 1/1/57, Callable 1/1/23 @ 100 (f) (g) | 250 | 250 | |||||||||
1,255 | |||||||||||
Washington (0.7%): | |||||||||||
King County Public Hospital District No 2, GO, Series A, 4.00%, 12/1/41, Continuously Callable @100 | 1,000 | 1,145 | |||||||||
Washington Health Care Facilities Authority Revenue 4.00%, 7/1/42, Continuously Callable @100 | 1,000 | 1,041 | |||||||||
5.00%, 1/1/47, Continuously Callable @100 | 1,000 | 1,155 | |||||||||
Washington State Housing Finance Commission Revenue, 5.00%, 1/1/38, Continuously Callable @102 (f) | 1,000 | 1,036 | |||||||||
4,377 | |||||||||||
West Virginia (0.3%): | |||||||||||
West Virginia Hospital Finance Authority Revenue, 4.00%, 1/1/38, Continuously Callable @100 | 1,500 | 1,530 | |||||||||
Wisconsin (1.2%): | |||||||||||
Public Finance Authority Revenue 5.00%, 7/1/38, Continuously Callable @100 | 1,000 | 1,208 | |||||||||
Series A, 5.25%, 10/1/48, Continuously Callable @100 | 1,500 | 1,624 | |||||||||
Series A, 4.00%, 10/1/49, Continuously Callable @100 | 1,500 | 1,594 | |||||||||
Public Finance Authority Revenue (INS — Assured Guaranty Municipal Corp.), 5.00%, 7/1/44, Continuously Callable @100 | 600 | 695 | |||||||||
Wisconsin Health & Educational Facilities Authority Revenue 5.25%, 4/15/35, Pre-refunded 4/15/23 @ 100 | 1,000 | 1,149 | |||||||||
5.00%, 9/15/45, Continuously Callable @100 | 1,000 | 952 | |||||||||
7,222 | |||||||||||
Wyoming (0.2%): | |||||||||||
County of Laramie Revenue, 5.00%, 5/1/37, Continuously Callable @100 | 1,250 | 1,287 | |||||||||
Total Municipal Bonds (Cost $305,306) | 309,777 | ||||||||||
U.S. Treasury Obligations (0.1%) | |||||||||||
U.S. Treasury Bills, 0.12%, 7/16/20 (l) | 700 | 700 | |||||||||
Total U.S. Treasury Obligations (Cost $699) | 700 | ||||||||||
Collateral for Securities Loaned^ (1.9%) | |||||||||||
HSBC U.S. Government Money Market Fund I Shares, 0.13% (m) | 10,362,501 | 10,363 | |||||||||
Invesco Government & Agency Portfolio Institutional Shares, 0.12% (m) | 1,077,251 | 1,077 | |||||||||
Total Collateral for Securities Loaned (Cost $11,440) | 11,440 | ||||||||||
Total Investments (Cost $443,694) — 100.7% | 597,450 | ||||||||||
Liabilities in excess of other assets — (0.7)% | (3,871 | ) | |||||||||
NET ASSETS — 100.00% | $ | 593,579 |
See notes to financial statements.
29
USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
At May 31, 2020 the Fund's investments in foreign securities were 2.4% 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) Rounds to less than $1 thousand.
(d) All or a portion of this security has been segregated as collateral for derivative instruments and/or securities purchased on a when-issued basis.
(e) Northern Trust Corp. is the parent of Northern Trust Investments Inc., which is the sub adviser of the Fund.
(f) Rule 144A security or other security that is restricted as to resale to institutional investors. The Fund's Adviser has deemed this security to be liquid based upon procedures approved by the Board of Trustees. As of May 31, 2020, the fair value of these securities was $9,974 (thousands) and amounted to 1.7% 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) Zero-coupon bond.
(i) All of the coupon is paid in kind.
(j) The Fund's Adviser has deemed this security to be illiquid based upon procedures approved by the Board of Trustees. As of May 31, 2020, illiquid securities were 0.0% of the Fund's net assets.
(k) Security purchased on a when-issued basis.
(l) Rate represents the effective yield at May 31, 2020.
(m) Rate disclosed is the daily yield on May 31, 2020.
AMBAC — American Municipal Bond Assurance Corporation
GO — General Obligation
IDA — Industrial Development Authority
LLC — Limited Liability Company
LOC — Line Letter of Credit
PIK — Paid in-kind
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.
30
USAA Mutual Funds Trust USAA Growth and Tax Strategy Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
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 guarantee agreement from the name listed.
Futures Contracts Purchased
(Amounts not in thousands)
Number of Contracts | Expiration Date | Notional Amount | Value | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||
E-Mini S&P 500 Futures | 34 | 6/19/20 | $ | 4,160,616 | $ | 5,171,400 | $ | 1,010,784 | |||||||||||||||
Total unrealized appreciation | $ | 1,010,784 | |||||||||||||||||||||
Total unrealized depreciation | — | ||||||||||||||||||||||
Total net unrealized appreciation (depreciation) | $1,010,784 |
See notes to financial statements.
31
USAA Mutual Funds Trust | Statement of Assets and Liabilities May 31, 2020 |
(Amounts in Thousands, Except Per Share Amounts)
USAA Growth and Tax Strategy Fund | |||||||
Assets: | |||||||
Investments, at value (Cost $443,694) | $ | 597,450 | (a) | ||||
Cash and cash equivalents | 5,755 | ||||||
Receivables: | |||||||
Interest and dividends | 4,470 | ||||||
Capital shares issued | 531 | ||||||
Variation margin on open futures contracts | 10 | ||||||
Prepaid expenses | 20 | ||||||
Total Assets | 608,236 | ||||||
Liabilities: | |||||||
Payables: | |||||||
Collateral received on loaned securities | 11,440 | ||||||
Collateral received from brokers for futures contract | 29 | ||||||
Investments purchased | 2,347 | ||||||
Capital shares redeemed | 534 | ||||||
Accrued expenses and other payables: | |||||||
Investment advisory fees | 147 | ||||||
Administration fees | 74 | ||||||
Transfer agent fees | 29 | ||||||
Compliance fees | — | (b) | |||||
Other accrued expenses | 57 | ||||||
Total Liabilities | 14,657 | ||||||
Net Assets: | |||||||
Capital | 454,630 | ||||||
Total distributable earnings/(loss) | 138,949 | ||||||
Net Assets | $ | 593,579 | |||||
Shares (unlimited number of shares authorized with no par value): | 28,315 | ||||||
Net asset value, offering and redemption price per share: (c) | $ | 20.96 |
(a) Includes $11,117 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.
32
USAA Mutual Funds Trust | Statement of Operations For the Year Ended May 31, 2020 |
(Amounts in Thousands)
USAA Growth and Tax Strategy Fund | |||||||
Investment Income: | |||||||
Dividends | $ | 5,578 | |||||
Interest | 10,908 | ||||||
Securities lending (net of fees) | 2 | ||||||
Total Income | 16,488 | ||||||
Expenses: | |||||||
Investment advisory fees | 1,743 | ||||||
Administration fees | 879 | ||||||
Sub-Administration fees | 37 | ||||||
Custodian fees | 38 | ||||||
Transfer agent fees | 401 | ||||||
Trustees' fees | 49 | ||||||
Compliance fees | 3 | ||||||
Legal and audit fees | 84 | ||||||
State registration and filing fees | 35 | ||||||
Interest expense on interfund lending | 1 | ||||||
Line of credit fees | 1 | ||||||
Other expenses | 75 | ||||||
Total Expenses | 3,346 | ||||||
Net Investment Income (Loss) | 13,142 | ||||||
Realized/Unrealized Gains (Losses) from Investments: | |||||||
Net realized gains (losses) from investment securities | (13,801 | ) | |||||
Net realized gains (losses) from futures contracts | (459 | ) | |||||
Net change in unrealized appreciation/depreciation on investment securities | 28,938 | ||||||
Net change in unrealized appreciation/depreciation on futures contracts | 1,198 | ||||||
Net realized/unrealized gains (losses) on investments | 15,876 | ||||||
Change in net assets resulting from operations | $ | 29,018 |
See notes to financial statements.
33
USAA Mutual Funds Trust | Statements of Changes in Net Assets |
(Amounts in Thousands)
USAA Growth and Tax Strategy Fund | |||||||||||
Year Ended May 31, 2020 | Year Ended May 31, 2019 | ||||||||||
From Investments: | |||||||||||
Operations: | |||||||||||
Net investment income (loss) | $ | 13,142 | $ | 12,004 | |||||||
Net realized gains (losses) from investments | (14,260 | ) | (3,046 | ) | |||||||
Net change in unrealized appreciation/depreciation on investments | 30,136 | 13,921 | |||||||||
Change in net assets resulting from operations | 29,018 | 22,879 | |||||||||
Change in net assets resulting from distributions to shareholders | (12,679 | ) | (12,847 | ) | |||||||
Change in net assets resulting from capital transactions | 50,920 | 56,606 | |||||||||
Change in net assets | 67,259 | 66,638 | |||||||||
Net Assets: | |||||||||||
Beginning of period | 526,320 | 459,682 | |||||||||
End of period | $ | 593,579 | $ | 526,320 | |||||||
Capital Transactions: | |||||||||||
Proceeds from shares issued | $ | 180,586 | $ | 135,329 | |||||||
Distributions reinvested | 11,553 | 11,981 | |||||||||
Cost of shares redeemed | (141,219 | ) | (90,704 | ) | |||||||
Change in net assets resulting from capital transactions | $ | 50,920 | $ | 56,606 | |||||||
Share Transactions: | |||||||||||
Issued | 8,571 | 6,806 | |||||||||
Reinvested | 571 | 610 | |||||||||
Redeemed | (6,904 | ) | (4,593 | ) | |||||||
Change in Shares | 2,238 | 2,823 |
See notes to financial statements.
34
This page is intentionally left blank.
35
USAA Mutual Funds Trust | Financial Highlights |
For a Share Outstanding Throughout Each Period
Investment Activities | Distributions to Shareholders From | ||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss) | Net Realized and Unrealized Gains (Losses) on Investments | Total from Investment Activities | Net Investment Income | Net Realized Gains from Investments | ||||||||||||||||||||||
USAA Growth and Tax Strategy Fund | |||||||||||||||||||||||||||
Year Ended May 31, 2020 | $ | 20.18 | 0.47 | (a) | 0.77 | 1.24 | (0.46 | ) | — | ||||||||||||||||||
Year Ended May 31, 2019 | $ | 19.77 | 0.47 | 0.47 | 0.94 | (0.48 | ) | (0.05 | ) | ||||||||||||||||||
Year Ended May 31, 2018 | $ | 18.76 | 0.44 | 1.01 | 1.45 | (0.44 | ) | — | |||||||||||||||||||
Year Ended May 31, 2017 | $ | 17.79 | 0.42 | 0.96 | 1.38 | (0.41 | ) | — | |||||||||||||||||||
Year Ended May 31, 2016 | $ | 17.48 | 0.43 | 0.35 | 0.78 | (0.47 | ) | — |
* 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.
^ 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 two year period beginning July 1, 2019 and in effect through June 30, 2021, instead of coinciding with the Fund's fiscal year end. Details of the current contractual expense limitation in effect can be found in Note 4 of the accompanying Notes to Financial Statements.
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) Reflects an overall increase in purchases and sales of securities.
See notes to financial statements.
36
USAA Mutual Funds Trust | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Ratios to Average Net Assets | Supplemental Data | ||||||||||||||||||||||||||||||||||
Total Distributions | Net Asset Value, End of Period | Total Return* | Net Expenses^ | Net Investment Income (Loss) | Gross Expenses | Net Assets, End of Period (000's) | Portfolio Turnover | ||||||||||||||||||||||||||||
USAA Growth and Tax Strategy Fund | |||||||||||||||||||||||||||||||||||
Year Ended May 31, 2020 | (0.46 | ) | $ | 20.96 | 6.25 | % | 0.57 | % | 2.25 | % | 0.57 | % | $ | 593,579 | 34 | %(b) | |||||||||||||||||||
Year Ended May 31, 2019 | (0.53 | ) | $ | 20.18 | 4.83 | % | 0.60 | % | 2.44 | % | 0.60 | % | $ | 526,320 | 7 | % | |||||||||||||||||||
Year Ended May 31, 2018 | (0.44 | ) | $ | 19.77 | 7.81 | % | 0.68 | % | 2.32 | % | 0.68 | % | $ | 459,682 | 10 | % | |||||||||||||||||||
Year Ended May 31, 2017 | (0.41 | ) | $ | 18.76 | 7.88 | % | 0.84 | % | 2.33 | % | 0.84 | % | $ | 391,020 | 4 | % | |||||||||||||||||||
Year Ended May 31, 2016 | (0.47 | ) | $ | 17.79 | 4.60 | % | 0.87 | % | 2.53 | % | 0.87 | % | $ | 327,334 | 10 | % |
See notes to financial statements.
37
USAA Mutual Funds Trust | Notes to Financial Statements May 31, 2020 |
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 47 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 is classified as diversified under the 1940 Act.
On November 6, 2018, United Services Automobile Association ("USAA"), the parent company of USAA Asset Management Company ("AMCO"), the investment adviser to the Fund, and USAA Transfer Agency Company, d/b/a USAA Shareholder Account Services ("SAS"), the transfer agent to the Fund, announced that AMCO and SAS would be acquired by Victory Capital Holdings Inc., a global investment management firm headquartered in Cleveland, Ohio (the "Transaction"). The Transaction closed on July 1, 2019. A special shareholder meeting was held on April 18, 2019, at which shareholders of the Fund approved a new investment advisory agreement between the Trust, on behalf of the Fund, and Victory Capital Management Inc. ("VCM" or "Adviser"). Effective July 1, 2019, VCM replaced AMCO as the investment adviser to the Fund and Victory Capital Transfer Agency Company replaced SAS as the Fund's transfer agent. In addition, effective on that same date, shareholders of the Fund also elected the following two new directors to the Board of the Trust to serve upon the closing of the Transaction: (1) David C. Brown, to serve as an Interested Trustee; and (2) John C. Walters, to serve as an Independent Trustee.
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 generally accepted accounting principles in the United States of America ("GAAP"). The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses for the period. Actual results could differ from those estimates. The Fund follows the specialized accounting and reporting requirements under GAAP that are applicable to investment companies under Accounting Standards Codification Topic 946.
Investment Valuation:
The Fund records investments at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The valuation techniques described below maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value. The inputs used for valuing the Fund's investments are summarized in the three broad levels listed below:
• Level 1 — quoted prices in active markets for identical securities
• Level 2 — other significant observable inputs (including quoted prices for similar securities or interest rates applicable to those securities, etc.)
• Level 3 — significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments)
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The inputs or methodologies used for valuation techniques are not necessarily an indication of the risk associated with entering into those investments.
38
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
The Adviser has established the Pricing and Liquidity Committee (the "Committee"), and subject to Trust's Board of Trustees (the "Board") oversight, the Committee administers and oversees the Fund's valuation policies and procedures, which are approved by the Board.
Portfolio securities listed or traded on securities exchanges, including exchange-traded funds ("ETFs"), American Depositary Receipts ("ADRs") 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 are valued at 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.
Debt securities of United States ("U.S.") issuers, along with corporate and municipal securities, including short-term investments maturing in 60 days or less, may be valued using evaluated bid or the last sales price to price securities by dealers or an independent pricing service approved by the Board. These valuations are typically categorized as Level 2 in the fair value hierarchy.
Effective July 1, 2019, the valuation methodology applied to certain debt securities changed. Securities that were previously valued at an evaluated mean are now valued at the evaluated bid or the last sales price.
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, the securities are valued in good faith by the Committee in accordance with valuation procedures approved by the Board. These valuations are typically categorized as Level 2 or Level 3 in the fair value hierarchy, based on the observability of inputs used to determine the fair value. The effect of fair value pricing is that securities may not be priced on the basis of quotations from the primary market in which they are traded and the actual price realized from the sale of a security may differ materially from the fair value price. Valuing these securities at fair value is intended to cause the Fund's NAV to be more reliable than it otherwise would be.
A summary of the valuations as of May 31, 2020, based upon the three levels defined above, is included in the table below while the breakdown, by category, of investments is disclosed in the Schedule of Portfolio Investments (amounts in thousands):
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Common Stocks | $ | 275,533 | $ | 275,533 | |||||||||||||||
Municipal Bonds | — | $ | 309,777 | $ | — | 309,777 | |||||||||||||
U.S. Treasury | — | 700 | — | 700 | |||||||||||||||
Collateral for Securities Loaned | 11,440 | — | — | 11,440 | |||||||||||||||
Total | $ | 286,973 | $ | 310,477 | $ | — | $ | 597,450 | |||||||||||
Other Financial Investments^: | |||||||||||||||||||
Assets: | |||||||||||||||||||
Future Contracts | 1,011 | — | — | 1,011 | |||||||||||||||
Total | $ | 1,011 | $ | — | $ | — | $ | 1,011 |
^ Includes cumulative appreciation/depreciation of futures contracts as reported on the Schedule of Portfolio Investments. Only current day's variation margin for futures contracts are reported within the Statement of Assets and Liabilities.
For the year ended May 31, 2020, there were no transfers in or out of the Level 3 fair value hierarchy.
39
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
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:
The Fund may invest in portfolios of open-end investment companies. These investment companies value securities in their portfolios for which market quotations are readily available at their market values (generally the last reported sale price) and all other securities and assets at their fair value by the methods established by the board of directors of the underlying funds.
Securities Purchased on a Delayed-Delivery or When-Issued Basis:
The Fund may purchase securities on a delayed-delivery or when-issued basis. Delivery and payment for securities that have been purchased by the Fund on a delayed-delivery or when-issued basis or for delayed draws on loans can take place a month or more after the trade date. At the time the Fund makes the commitment to purchase a security on a delayed-delivery or when-issued basis, the Fund records the transaction and reflects the value of the security in determining NAV. No interest accrues to the Fund until the transaction settles and payment takes place. A segregated account is established and the Fund maintains cash and/or marketable securities at least equal in value to commitments for delayed-delivery or when-issued securities. If the Fund owns delayed-delivery or when-issued securities, these values are included in Payable for investments purchased on the accompanying Statement of Assets and Liabilities and the segregated assets are identified on the Schedule of Portfolio Investments.
Municipal Obligations:
The values of municipal obligations can fluctuate and may be affected by adverse tax, legislative, or political changes, and by financial developments affecting municipal issuers. Payment 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.
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
40
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
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.
As of May 31, 2020, the Fund entered into futures contracts primarily for the strategy of hedging or other purposes, including but not limited to, providing liquidity and equitizing cash.
Summary of Derivative Instruments:
The following table summarizes the fair values of derivative instruments on the Statement of Assets and Liabilities, categorized by risk exposure, as of May 31, 2020 (amounts in thousands):
Assets | Liabilities | ||||||||||
Variation Margin Receivable on Open Futures Contracts* | Variation Margin Payable on Open Futures Contracts* | ||||||||||
Equity Risk Exposure: | $ | 1,011 | $ | — |
* Includes cumulative appreciation (depreciation) of futures contracts as reported on the Schedule of Portfolio Investments. Only current day's variation margin for futures contracts is reported within the Statement of Assets and Liabilities.
The following table presents the effect of derivative instruments on the Statement of Operations, categorized by risk exposure, for the period ended May 31, 2020 (amounts in thousands):
Net Realized Gains (Losses) on Derivatives Recognized as a Result from 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: | $ | (459 | ) | $ | 1,198 |
All open derivative positions at year end are reflected in the Fund's Schedule of Portfolio Investments. The underlying face value of open derivative positions relative to the Fund's net assets at year end is generally representative of the notional amount of open positions to net assets throughout the year.
Investment Transactions and Related Income:
Changes in holdings of investments are accounted for no later than one business day following the trade date. For financial reporting purposes, however, investment transactions are accounted for on trade date on 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 discount. Gains or losses realized on sales of securities are determined by comparing the identified cost of the security lot sold with the net sales proceeds.
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, to earn additional income, net of income retained by Citibank. Borrowers are required to 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 cured the next business day once the shortfall exceeds $100 thousand. Collateral may be cash, U.S. government securities, or other securities as permitted by SEC guidelines. Cash collateral may be invested in high-quality short-term investments, primarily open-end investment companies. 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
41
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
between the parties to the lending agreement. The Fund also earns a return from the collateral. The Fund pays Citibank various fees in connection with the investment of cash collateral and fees based on the investment income received from securities lending activities. Securities lending income (net of these fees) is disclosed on the Statement of Operations. Loans are terminable upon demand and the borrower must return the loaned securities within the lesser of one standard settlement period or five business days. Risks relating to securities-lending transactions include that the borrower may not provide additional collateral when required or return the securities when due, and 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 re-pledged except to satisfy borrower default. Cash collateral is listed in the Fund's Portfolio of Investments and Financial Statements while non-cash collateral is not included.
The following table (amounts in thousands) is a summary of the Fund's securities lending transactions as of May 31, 2020.
Value of Securities on Loan | Non-Cash Collateral | Cash Collateral | |||||||||
$ | 11,117 | $ | — | $ | 11,440 |
Federal Income Taxes:
It is the Fund's policy 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.
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., 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 affiliated trust based upon net assets or another appropriate basis.
Cross-Trade Transactions:
Pursuant to Rule 17a-7 under the 1940 Act, the Fund may engage in cross-trades which are securities transactions with affiliated investment companies and advisory accounts managed by the Adviser and any applicable sub-adviser. Any such purchase or sale transaction must be effected without brokerage commission or other remuneration, except for customary transfer fees. The transaction must be effected at the current market price, which is either the security's last sale price on an exchange or, if there are no transactions in the security that day, at the average of the highest bid and lowest asked price. For the year ended May 31, 2020, 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) | |||||||||
$ | 35,175 | $ | 19,175 | $ | — |
Fees Paid Indirectly:
Expense offsets to custody fees that arise from credits on cash balances maintained on deposit are reflected on the Statement of Operations, as applicable, as Fees paid indirectly.
42
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
3. Purchases and Sales:
Cost of purchases and proceeds from sales/maturities of securities (excluding securities maturing less than one year from acquisition) for the year ended May 31, 2020, were as follows for the Fund (amounts in thousands):
Excluding U.S. Government Securities | |||||||||||
Purchases | Sales | ||||||||||
$ | 245,857 | $ | 194,518 |
There were no purchases and sales of U.S. government securities during the year ended May 31, 2020.
4. Fees and Transactions with Affiliates and Related Parties:
Investment Advisory and Management Fees:
Effective with the Transaction on July 1, 2019, investment advisory services are provided to the Fund by the Adviser, a New York corporation registered as an investment adviser with the Securities and Exchange Commission ("SEC"). The Adviser is a wholly-owned indirect subsidiary of Victory Capital Holdings, Inc., a publicly traded Delaware corporation, and a wholly-owned direct subsidiary of Victory Capital Operating, LLC. Under the terms of the Investment Advisory Agreement, the Adviser is entitled to receive a base fee and a performance adjustment. The Fund's base fee is accrued daily and paid monthly at an annualized rate of 0.30% of the Fund's average daily net assets. The amount incurred and paid to VCM from July 1, 2019 through May 31, 2020, was $1,625 thousand and is reflected on the Statement of Operations as Investment Advisory fees.
Prior to the Transaction on July 1, 2019, AMCO provided investment management services to the Fund pursuant to an Advisory Agreement. Under this agreement, AMCO was responsible for managing the business and affairs of the Fund, and for directly managing day-to-day investment of the Fund's assets, subject to the authority of and supervision by the Board. The investment management fee for the Fund was comprised of a base fee and a performance adjustment. The Fund's base fee was accrued daily and paid monthly at an annualized rate of 0.30% of the Fund's average daily net assets.
Effective with the Transaction on July 1, 2019, no performance adjustments will be made for periods beginning July 1, 2019 through June 30, 2020. Only performance beginning as of July 1, 2019, and thereafter will be utilized in calculating future performance adjustments.
Prior to the Transaction on July 1, 2019, the performance adjustment was accrued daily and calculated monthly by comparing the Fund's performance to that of the Lipper Composite Index which is comprised of 51% of the Lipper General & Insured Municipal Bond Funds Index, which measures the total return performance of the largest funds tracked by Lipper that invest at least 65% of their assets in municipal debt issues in the top four credit categories, and 49% of the Lipper Large-Cap Core Funds Index, which measures the total return performance of funds tracked by Lipper that by portfolio practice invest at least 75% of their equity assets in companies with market capitalizations of greater than 300% of the dollar-weighted median market capitalization of the middle 1,000 securities of the S&P 1500 Index.
The performance period consists of the current month plus the previous 35 months (or the number of months beginning July 1, 2019, if fewer). The following table is utilized to determine the extent of the performance adjustment:
Over/Under Performance Relative to Index (in basis points)(a) | Annual Adjustment Rate (in basis points)(a) | ||||||
+/- 20 to 50 | +/- 4 | ||||||
+/- 51 to 100 | +/- 5 | ||||||
+/- 101 and greater | +/- 6 |
(a) Based on the difference between average annual performance of the Fund and its relevant index, rounded to the nearest basis point. Average daily net assets of the Fund are calculated over a rolling 36-month period.
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USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
The annual performance adjustment rate is multiplied by the average daily net assets of the Fund 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, the Fund pays a positive performance fee adjustment for a performance period whenever the Fund outperforms the Composite Index over that period, even if the Fund has overall negative returns during the performance period.
For the period June 1, 2019 through June 30, 2019, performance adjustments for the Fund was $(14) thousand and was less than 0.01% of net assets. Base fees incurred and paid to AMCO from June 1, 2019 through June 30, 2019, were $132 thousand and is reflected on the Statement of Operations as Investment Advisory fees.
Effective with the Transaction on July 1, 2019, 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. Prior to that date, the Trust relied on a similar exemptive order granted by the SEC to the Trust and its affiliated persons. 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.
Effective July 1, 2019, 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 invested in blue chip stocks (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.
Prior to July 1, 2019, AMCO, entered into an Investment Subadvisory Agreement with NTI, under which NTI directed the investment and reinvestment of the portion of the Fund's assets invested in blue chip stocks (as allocated from time to time by AMCO). This arrangement provided for monthly fees that were paid by AMCO. AMCO (not the Fund) paid the subadviser fees.
Administration and Servicing Fees:
Effective with the Transaction on July 1, 2019, VCM serves as the Fund's administrator and fund accountant. Under the Fund Administration, Servicing and Accounting Agreement, VCM is paid for its services an annual fee at a rate of 0.15% of average daily net assets of the Fund. Amounts incurred from July 1, 2019 through May 31, 2020, are $813 thousand and are reflected on the Statement of Operations as Administration fees.
Prior to the Transaction on July 1, 2019, AMCO provided certain administration and servicing functions for the Fund. For such services, AMCO received a fee accrued daily and paid monthly at an annualized rate of 0.15% of average daily net assets of the Fund. Amounts incurred from June 1, 2019 through June 30, 2019, were $66 thousand and are reflected on the Statement of Operations as Administration fees.
Effective with the Transaction on July 1, 2019, the Fund (as part of the Trust) has entered into an agreement to provide compliance services with the Adviser, 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. Funds in the Trust, Victory Variable Insurance Funds, Victory Portfolios and Victory Portfolios II (collectively, the "Victory Funds Complex") in the aggregate, compensates the Adviser for these services. The amount incurred during the period from July 1, 2019 to May 31, 2020, is reflected on the Statement of Operations as Compliance fees.
Effective with the Transaction on July 1, 2019, 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
44
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
fee for providing these services. The Trust reimburses VCM and Citi for all of their reasonable out-of- pocket expenses incurred in providing these services. The amount incurred during the period from July 1, 2019 through May 31, 2020, is reflected on the Statement of Operations as Sub-Administration fees.
In addition to the services provided under its Administration and Servicing Agreement with the Fund, AMCO also provided certain compliance and legal services for the benefit of the Fund prior to the Transaction on July 1, 2019. The Board approved the reimbursement of a portion of these expenses incurred by AMCO. AMCO did not receive any fees from the Fund for these services.
Transfer Agency Fees:
Effective with the Transaction on July 1, 2019, Victory Capital Transfer Agency, Inc. ("VCTA"), (formerly, USAA Shareholder Account Services ("SAS")), provides transfer agency services to the Fund. VCTA, an affiliate of the Adviser, provides transfer agent services 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 from July 1, 2019 through May 31, 2020, was $372 thousand. Amounts incurred and paid to SAS from June 1, 2019 through June 30, 2019, was $29 thousand. These amounts are reflected on the Statement of Operations as Transfer Agent fees.
Effective with the Transaction on July 1, 2019, 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:
Effective with the Transaction on July 1, 2019, Victory Capital Advisers, 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. Effective on or about June 30, 2020, the Distributor's name will change to Victory Capital Services, Inc.
Prior to the Transaction on July 1, 2019, USAA Investment Management Company provided exclusive underwriting and distribution of the Fund's shares on a continuing best-efforts basis.
Other Fees:
Prior to the Transaction on July 1, 2019, State Street Bank and Trust Company served as the Fund's accounting agent and custodian.
Effective July 1, 2019, Citibank, N.A., serves as the Fund's custodian.
K&L Gates LLP provides legal services to the Trust.
Effective with the Transaction on July 1, 2019, the Adviser has entered into an expense limitation agreement with the Fund until at least June 30, 2021. 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 the Fund in any fiscal year exceed the expense limit for the Fund. Such excess amounts will be the liability of the Adviser. 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. Effective July 1, 2019 through May 31, 2020, the expense limit (excluding voluntary waivers) is 0.61%.
Under this expense limitation agreement, the Fund has agreed to repay fees and expenses that were waived or reimbursed by the Adviser for a period up to three years after the fiscal year in which 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 May 31, 2020, there are no amounts available to be repaid to the Adviser.
45
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
The Adviser, may voluntarily waive or reimburse additional fees to assist the Fund in maintaining competitive expense ratios. Voluntary waivers and reimbursements applicable to the Fund are not available to be recouped at a future time. There were no voluntary waivers or reimbursements for the year ended May 31, 2020.
Certain officers and/or interested trustees of the Fund are also officers and/or employees of the Adviser, Administrator, Sub-Administrator, Sub-Fund Accountant, and Legal.
5. Risks:
The Fund may be subject to other risks in addition to these identified risks.
Global economies and financial markets are increasingly interconnected, which increases the possibilities that conditions in one country or region might adversely affect issuers in another country or region. Geopolitical and other risks, including war, terrorism, trade disputes, political or economic dysfunction within some nations, public health crises and related geopolitical events, as well as environmental disasters such as earthquakes, fires, and floods, may add to instability in world economies and markets generally. Changes in trade policies and international trade agreements could affect the economies of many countries in unpredictable ways. Epidemics and/or pandemics, such as the coronavirus (or COVID-19), may result in, among other things, closing borders, disruptions to healthcare service preparation and delivery, quarantines, cancellations, disruptions to supply chains and consumer activity, as well as general concern and uncertainty. The impact may be short-term or may last for extended periods.
The COVID-19 pandemic, which has spread rapidly across the world, has led and will continue to lead for an unknown period of time to disruptions in local, regional, national and global markets and economies. Among other things, the outbreak has resulted in, and until fully resolved is likely to continue to result in, among other things (1) government imposition of various forms of "stay at home" orders and the closing of "non-essential" businesses, resulting in significant disruption to the businesses of many issuers as well as lay-offs of employees; (2) increased requests by issuers of debt instruments for amendments and waivers of agreements to avoid default and increased defaults; (3) volatility and disruption of markets, including greater volatility in pricing and spreads; and (4) rapidly evolving proposals and/or actions by state and federal governments to address problems being experienced by the markets and by businesses and the economy in general.
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.
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.
Decisions by the Fed regarding interest rate and monetary policy can have a significant effect on the value of debt 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. Interest rates have been unusually low in recent years in the U.S. and abroad, and central banks have reduced rates further in an effort to
46
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
combat the economic effects of the COVID-19 pandemic. Extremely low or negative interest rates may become more prevalent or may not work as intended. As there is little precedent for this situation, the impact on various markets that interest rate or other significant policy changes may have is unknown.
During a period of declining interest rates, many municipal bonds may be "called," or redeemed, by the issuer before the stated maturity. An issuer might call, or refinance, a higher-yielding bond for the same reason that a homeowner would refinance a home mortgage. When bonds are called, the Fund is affected in several ways. Most likely, the Fund will reinvest the bond-call proceeds in bonds with lower interest rates. The Fund's income may drop as a result. The Fund also may realize a taxable capital gain (or loss).
Many debt securities, derivatives and other financial instruments, including some of the Fund's investments, use the London Interbank Offered Rate ("LIBOR") as the reference or benchmark rate for variable interest rate calculations. However, the use of LIBOR started to come under pressure following manipulation allegations in 2012. Despite increased regulation and other corrective actions since that time, concerns have arisen regarding its viability as a benchmark, due largely to reduced activity in the financial markets that it measures. In June 2017, the Alternative Reference Rates Committee, a group of large U.S. banks working with the Federal Reserve, announced its selection of a new Secured Overnight Funding Rate ("SOFR"), which is intended to be a broad measure of secured overnight U.S. Treasury repo rates, as an appropriate replacement for LIBOR. The Federal Reserve Bank of New York began publishing the SOFR in 2018, expecting that it could be used on a voluntary basis in new instruments and transactions. Bank working groups and regulators in other countries have suggested other alternatives for their markets, including the Sterling Overnight Interbank Average Rate ("SONIA") in England. In July 2017, the Financial Conduct Authority (the "FCA"), the United Kingdom financial regulatory body, announced that after 2021 it will cease its active encouragement of UK banks to provide the quotations needed to sustain LIBOR. That announcement suggests that LIBOR may cease to be published after that time. The roughly three-year period until the end of 2021 is expected to be enough time for market participants to transition to the use of a different benchmark for both new and existing securities and transactions. Various financial industry groups have begun planning for that transition, but there are obstacles to converting certain longer-term securities and transactions to a new benchmark. Transition planning is at an early stage, and neither the effect of the transition process nor its ultimate success can yet be known. The transition process might lead to increased volatility and illiquidity in markets that currently rely on the LIBOR to determine interest rates. It could also lead to a reduction in the value of some LIBOR-based investments and reduce the effectiveness of new hedges placed against existing LIBOR-based instruments. Since the usefulness of LIBOR as a benchmark could deteriorate during the transition period, these effects could occur before the end of 2021.
6. Borrowing and Interfund Lending:
Line of Credit:
Effective with the Transaction on July 1, 2019, the Victory Funds Complex participates in a short-term, demand note "Line of Credit" agreement with Citibank. Under the agreement with Citibank, the Victory Funds Complex could 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 that Fund paying the related commitment fees for that amount. The purpose of the agreement is to meet temporary or emergency cash needs. Citibank receives an annual commitment fee of 0.15% on $300 million for providing the Line of Credit. Each fund in the Victory Funds Complex pays a pro-rata portion of the commitment fees plus any interest (one month LIBOR plus one percent) on amounts borrowed. Effective June 29, 2020, under an amended Line of Credit agreement, Citibank will also receive an annual upfront fee of 0.10% on the $300 million committed line of credit. Each fund in the Victory Funds Complex will pay a pro-rata portion of the upfront fee. Interest charged to the Fund, if any, during the period is reflected on the Statement of Operations under line of credit fees.
Prior to the Transaction on July 1, 2019, the line of credit among the Trust, with respect to its funds, and USAA Capital Corporation ("CAPCO") terminated. For the period from June 1, 2019 to June 30, 2019, the Fund paid CAPCO facility fees of $1 thousand.
47
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
The average borrowing for the days outstanding and average interest rate for the Fund during the year ended May 31, 2020, were as follows (amounts in thousands):
Amount Outstanding at May 31, 2020 | Average Borrowing* | Days Borrowing Outstanding | Average Interest Rate* | Maximum Borrowing During the Period | |||||||||||||||
$ | — | $ | 1,400 | 5 | 3.31 | % | $ | 1,400 |
* For the year ended May 31, 2020, based on the number of days borrowings were outstanding.
Interfund Lending:
Effective with the Transaction on July 1, 2019, the Trust and 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 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. The interfund loan rate is determined, as specified in the Order, by averaging the current repurchase agreement rate and the current bank loan rate. As a Borrower, interest charged to the Fund, if any, during the period is reflected on the Statement of Operations under Interest expense on Interfund lending. As a Lender, interest earned by the Fund, if any, during the period is reflected on the Statement of Operations under Income on Interfund lending.
The average borrowing or lending for the days outstanding and average interest rate for the Fund during the year ended May 31, 2020 were as follows (amounts in thousands):
Borrower or Lender | Amount Outstanding at May 31, 2020 | Average Borrowing* | Days Borrowing Outstanding | Average Interest Rate* | Maximum Borrowing During the Period | ||||||||||||||||||
Borrower | $ | — | $ | 1,937 | 12 | 1.11 | % | $ | 3,642 |
* For the year ended May 31, 2020, based on the number of days borrowings were outstanding.
7. Federal Income Tax Information:
The Fund intends to declare daily and distribute any net investment income quarterly. Distributable net realized gains, if any, are declared and paid at least annually.
The amounts of dividends from net investment income and distributions from net realized gains (collectively distributions to shareholders) are determined in accordance with federal income tax regulations, which may differ from GAAP. To the extent these "book/tax" differences are permanent in nature (e.g., net operating loss and distribution reclassification), such amounts are reclassified within the components of net assets based on their federal tax-basis treatment; temporary differences (e.g., wash sales) do not require reclassification. To the extent dividends and distributions exceed net investment income and net realized gains for tax purposes, they are reported as distributions of capital. Net investment losses incurred by the Fund may be reclassified as an offset to capital on the accompanying Statement of Assets and Liabilities.
As of May 31, 2020, 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 Statement of Changes in Net Assets because, for tax purposes, dividends are recognized when actually paid) (amounts in thousands).
Year Ended May 31, 2020 | Year Ended May 31, 2019 | ||||||||||||||||||||||||||||||||||
Distributions paid from | Distributions paid from | ||||||||||||||||||||||||||||||||||
Net Ordinary Income | Long-Term Capital Gains | Total Tax-Exempt Income | Distributions Paid | Net Ordinary Income | Long-Term Capital Gains | Total Tax-Exempt Income | Distributions Paid | ||||||||||||||||||||||||||||
$ | 3,912 | $ | 83 | $ | 8,684 | $ | 12,679 | $ | 3,664 | $ | 982 | $ | 8,201 | $ | 12,847 |
48
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
As of May 31, 2019, the components of accumulated earnings (deficit) on a tax basis were as follows (amounts in thousands):
Undistributed Ordinary Income | Undistributed Tax-Exempt Income | Accumulated Capital and Other Losses | Unrealized Appreciation (Depreciation)* | Total Accumulated Earnings (Deficit) | |||||||||||||||
$ | 2,062 | $ | 519 | $ | (17,164 | ) | $ | 153,532 | $ | 138,949 |
* The difference between the book-basis and tax-basis of unrealized appreciation/depreciation is attributable to the tax deferral of losses on wash sales.
At May 31, 2020, 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 | |||||||||
$ | 11,911 | $ | 5,253 | $ | 17,164 |
As of May 31, 2020, 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) | ||||||||||||
$ | 443,918 | $ | 163,144 | $ | (9,612 | ) | $ | 153,532 |
8. 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 1940 Act. 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 Funds' Board of Trustees approved the appointment of the Fund's investment adviser, Victory Capital, as the administrator of the LRMP. At an in-person meeting held on February 26, 2020, Victory Capital provided an oral and written report to the Trustees on the operation and effectiveness of the LRMP during the previous year.
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.
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 reasonably expected to be converted to cash in current
49
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
market conditions in three business days or less without significantly changing the market value of the investment. Therefore, the Fund has not adopted a Highly Liquid Investment Minimum. The Fund's investments were below the limitation on illiquid investments during the review period. Additionally, Victory Capital indicated that no events occurred that would require the filing of Form N-LIQUID and recommended no material changes to the LRMP.
9. Subsequent Events:
The Board of Trustees of USAA Mutual Funds Trust has approved the addition of Class A shares, Class C shares, and Institutional Class shares for the Fund. These new share classes are expected to be effective June 29, 2020.
Class A shares will be available for purchase through financial intermediaries and the Fund will pay ongoing distribution and/or service (12b-1) fees at annual rate of up to 0.25% of the average daily net assets of its Class A shares. In addition, a Transfer Agency fee at an annual basis point rate of 0.10% of daily net assets of its Class A shares.
Class A shares will be offered and sold at their public offering price, which is the NAV per share plus any applicable initial sales charge, also referred to as a "front-end sales load." For purchases on or after the Redesignation Date, Class A Shares will be offered and sold with the imposition of a maximum initial sales charge of up to 2.25% of the offering price of the Fund. A contingent deferred sales charge of up to 0.75% may be imposed on redemptions of Class A shares purchased without an initial sales charge if shares are redeemed within 18 months of purchase.
Class C shares will be available for purchase through financial intermediaries and the Fund will pay ongoing distribution and/or service (12b-1) fees at annual rate of up to 1.00% of the average daily net assets of its Class C shares. In addition, a Transfer Agency fee at an annual basis point rate of 0.10% of daily net assets of its Class C shares. Class C shares will be offered and sold at their public offering price. A contingent deferred sales charge of up to 1.00% may be imposed on redemptions of Class C shares if shares are redeemed within 12 months of purchase.
Institutional Class shares will be available for purchase through financial intermediaries and the Fund will pay a Transfer Agency fee at an annual basis point rate of 0.10% of daily net assets of its Institutional Class shares. Institutional Class shares will be offered and sold at their public offering price.
50
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of USAA Growth and Tax Strategy Fund:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of USAA Growth and Tax Strategy Fund (the "Fund") (one of the funds constituting USAA Mutual Funds Trust (the "Trust")), including the schedule of portfolio investments, as of May 31, 2020, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the funds constituting USAA Mutual Funds Trust) at May 31, 2020, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Trust's management. Our responsibility is to express an opinion on the Fund's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust's internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of May 31, 2020, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Victory Capital investment companies since 1995.
San Antonio, Texas
July 27, 2020
51
USAA Mutual Funds Trust | Supplemental Information May 31, 2020 |
(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) 539-3863. The information is also included in the Fund's Statement of Additional Information, which is available on the SEC's website at www.sec.gov.
Information relating to how the Fund voted proxies relating to portfolio securities held during the most recent 12 months ended June 30 is available on the SEC's website at www.sec.gov.
Availability of Schedules of Portfolio Investments:
The Trust files a complete list of Schedules of Portfolio Investments with the SEC for the first and third quarter of each fiscal year on Form N-PORT. Forms N-PORT are available on the SEC's website at www.sec.gov.
52
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(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 10 Trustees, eight of whom are not "interested persons" of the Trust within the meaning of that term under the 1940 Act ("Independent Trustees") and two 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 ages, position with the Trust, commencement of service, 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 47 portfolios in the Trust. Each Trustee's address is 15935 La Cantera Pkwy, Building Two, San Antonio, TX, 78256. Pursuant to a policy adopted by the Board, the term of office for each Trustee shall be until the Independent Trustee reaches age 75 or an Interested Trustee reaches age 75. The Board may change or grant exceptions from this policy at any time without shareholder approval. A Trustee may resign or be removed by a vote of the other Trustees or the holders of a majority of the outstanding shares of the Trust at any time. Vacancies on the Board can be filled by the action of a majority of the Trustees, provided that after filling such vacancy at least two-thirds of the Trustees have been elected by the shareholders.
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Independent Trustees. | |||||||||||||||||||
Jefferson C. Boyce, Born September 1957 | Lead Independent Trustee, and Vice Chairman | 2013 | Senior Managing Director, New York Life Investments, LLC (1992-2012) | Westhab, Inc. | |||||||||||||||
John C. Walters, Born February 1962 | Trustee | 2019 | Retired. Mr. Walters brings significant Board experience including active involvement with the board of a Fortune 500 company, and a proven record of leading large, complex financial organizations. He has a demonstrated record of success in distribution, manufacturing, investment brokerage, and investment management in both the retail and institutional investment businesses. He has substantial experience in the investment management business with a demonstrated ability to develop and drive strategy while managing operation, financial, and investment risk. | Guardian Variable Products Trust (16 series), Lead Independent Director; Amerilife Holdings LLC, Director; Stadion Money Management; Director; University of North Carolina (Chapel Hill), Member Board of Governors. |
53
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Robert L. Mason, Ph.D., Born July 1946 | Trustee | 1997 | Adjunct Professor in the Department of Management Science and Statistics in the College of Business at the University of Texas at San Antonio (since 2001); Institute Analyst, Southwest Research Institute (March 2002-January 2016) | None | |||||||||||||||
Dawn M. Hawley, Born February 1954 | Trustee | 2014 | Manager of Finance, Menil Foundation, Inc. (May 2007-June 2011), which is a private foundation that oversees the assemblage of sculptures, prints, drawings, photographs, and rare books. Director of Financial Planning and Analysis and Chief Financial Officer, AIM Management Group, Inc. (October 1987-January 2006) | None | |||||||||||||||
Paul L. McNamara, Born July 1948 | Trustee | 2012 | Director, Cantor Opportunistic Alternatives Fund, LLC (March 2010-February 2014) , which is a closed-end fund of funds by Cantor Fitzgerald Investment Advisors, LLC | None |
54
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Richard Y. Newton III, Born January 1956 | Trustee | 2017 | Director, Elta North America (01/18-present), 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 (December 2015-present)); Executive Director, The Union League Club of New York (June 2014-November 2015): Executive Vice President, Air Force Association (August 2012-May 2014); Lieutenant General, United States Air Force (January 2008-June 2012) | None | |||||||||||||||
Barbara B. Ostdiek, Ph.D., Born March 1964 | Trustee | 2008 | Senior Associate Dean of Degree Programs at Jesse H. Jones Graduate School of Business at Rice University (since 2013); Associate Professor of Finance at Jessie H. Jones Graduate School of Business at Rice University (since 2001) | None | |||||||||||||||
Michael F. Reimherr, Born August 1945 | Trustee | 2000 | President of Reimherr Business Consulting (May 1995-December 2017); St. Mary's University Investment Committee overseeing University Endowment (since 2014) | None |
55
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Interested Trustees. | |||||||||||||||||||
David C. Brown, ** Born May 1972 | Trustee | 2019 | Chairman and Chief Executive Officer (since 2013), Co-Chief Executive Officer (2011-2013), Victory Capital Management Inc.; Chairman and Chief Executive Officer, Victory Capital Holdings, Inc. (since 2013). Mr. Brown brings to the Board extensive business, finance and leadership skills gained and developed through years of experience in the financial services industry, including his tenure overseeing the strategic direction as CEO of Victory Capital. These skills, combined with Mr. Brown's extensive knowledge of the financial services industry and demonstrated success in the development and distribution of investment strategies and products, enable him to provide valuable insights to the Board and strategic direction for the Funds | Trustee, Victory Portfolios (42 series), Victory Portfolios II (26 series), Victory Variable Insurance Funds (9 series) |
56
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Daniel S. McNamara, ** Born June 1966 | Trustee and Chair of the Board of Trustees | 2012 | Trustee, President, and Vice Chairman of USAA ETF Trust (June 2017-June 2019); President of Financial Advice & Solutions Group (FASG), USAA (since 2013); Director, IMCO (September 2009-April 2014); President, AMCO (August, 2011-April 2013); Senior Vice President of USAA Financial Planning Services Insurance Agency, Inc. (FPS) (since 2011); Director of USAA Investment Management Company (IMCO) (since 2009); Chairman of Board of IMCO (since 2013); Director of USAA Asset Management Company (AMCO), (August 2011-June 2019); President and Director of USAA Shareholder Account Services (SAS)(October 2009-June 2019); Director and Vice Chairman of FPS (since 2013); President and Director of USAA Investment Corporation (ICORP) (since 2010); Chairman of Board of ICORP (since 2013); Director of USAA Financial Advisors, Inc. (FAI) (since 2013); Chairman of Board of FAI (since 2015). Mr. McNamara brings to the Board extensive experience in the financial services industry, including experience as an officer of the Trust. | None |
** Mr. McNamara and Mr. Brown are "Interested Persons" by reason of their relationships with the Adviser.
The Statement of Additional Information includes additional information about the Trustees of the Trust and is available, without charge, on the SEC's website at www.sec.gov and/or by calling (800)-539-3863.
57
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Officers:
The officers of the Trust, their ages, 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, Building Two, 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 with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | ||||||||||||
Interested Officers. | |||||||||||||||
Christopher K. Dyer, Born February 1962 | President | 2019 | Director of Fund Administration, Victory Capital (2004-present) | ||||||||||||
Scott A Stahorsky, Born July 1969 | Vice President | 2019 | Manager, Fund Administration, Victory Capital (since 2015); Senior Analyst, Fund Administration, Victory Capital (prior to 2015) | ||||||||||||
James K. De Vries, Born April 1969 | Treasurer, Principal Financial Officer | 2018 | Executive Director, Victory Capital Management Inc. (since 2019); Treasurer, USAA ETF Trust (September 2018-June 2019); Executive Director, Investment and Financial Administration, USAA (April 2012-June 2019); Assistant Treasurer, USAA ETF Trust (June 2017-September 2018); Assistant Treasurer, USAA Mutual Funds Trust (December 2013-February 2018) | ||||||||||||
Allan Shaer, Born March 1965 | Assistant Treasurer | 2019 | Senior Vice President, Financial Administration, Citi Fund Services Ohio, Inc. (since 2016); Vice President, Mutual Fund Administration, JP Morgan Chase (2011-2016) | ||||||||||||
Carol D. Trevino, Born October 1965 | Assistant Treasurer | 2018 | Director, Accounting and Finance, Victory Capital Management Inc. (since 2019); Accounting/Financial Director, USAA (December 2013-June 2019); Assistant Treasurer, USAA ETF Trust (September 2018-June 2019). | ||||||||||||
Erin G. Wagner, Born February 1974 | Secretary | 2019 | Deputy General Counsel, the Adviser (since 2013) | ||||||||||||
Charles Booth, Born April 1960 | Anti-Money Laundering Compliance Officer and Identity Theft Officer | 2019 | Director, Regulatory Administration and CCO Support Services, Citi Fund Services Ohio, Inc. (2007-present) | ||||||||||||
Amy Campos, Born July 1976 | Chief Compliance Officer | 2019 | Chief Compliance Officer, USAA Mutual Funds Trust (since 2019); Executive Director, Deputy Chief Compliance Officer, USAA Mutual Funds Trust and USAA ETF Trust (July 2017-June 2019); Compliance Director, USAA Mutual Funds Trust (2014-July 2017) |
58
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
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 December 1, 2019 through May 31, 2020.
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. If these transactional costs were included, your costs would have been higher.
Beginning Account Value 12/1/19 | Actual Ending Account Value 5/31/20 | Hypothetical Ending Account Value 5/31/20 | Actual Expenses Paid During Period 12/1/19- 5/31/20* | Hypothetical Expenses Paid During Period 12/1/19- 5/31/20* | Annualized Expense Ratio During Period 12/1/19- 5/31/20 | ||||||||||||||||||
$ | 1,000.00 | $ | 980.70 | $ | 1,022.20 | $ | 2.77 | $ | 2.83 | 0.56 | % |
* Expenses are equal to the average account value multiplied by the Fund's annualized expense ratio multiplied by 183/366 (the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year).
59
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Additional Federal Income Tax Information
The following federal tax information related to the Fund's fiscal year ended May 31, 2020, 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 2021.
With respect to distributions paid, the Fund designates the following amounts (or, if subsequently determined to be different, the maximum amount allowable) for the fiscal year ended May 31, 2020 (amounts in thousands):
Long-Term Capital Gain Distributions(a) | Tax Exempt Income* | ||||||||||
$ | 83 | 100.00 | % |
(a) Pursuant to Section 852 of the Internal Revenue Code.
* Presented as a percentage of net investment income and excludes short-term capital gain distributions paid, if any. All or a portion of these amounts may be exempt from taxation at the state level.
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 |
23403-0720
MAY 31, 2020
Annual Report
USAA International Fund
Beginning January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Fund's shareholder reports like this one will no longer be sent by mail, unless you specifically request paper copies of the reports from the Fund or from your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on VictoryFunds.com, and you will be notified by mail each time a report is posted and provided with a website link to access the report. Effective on or about September 8, 2020, a shareholder who has an account directly with the Fund will need to submit their request via email to TA.Processing@FISGlobal.com.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund or your financial intermediary electronically by notifying your financial intermediary directly, or if you are a direct investor, by calling (800) 235-8396 or logging on to usaa.com. Effective on or about September 8, 2020, a shareholder who has an account directly with the Fund will need to submit their request via email to TA.Processing@FISGlobal.com.
You may elect to receive all future reports in paper free of charge. You can inform the Fund or your financial intermediary that you wish to continue receiving paper copies of your shareholder reports by notifying your financial intermediary directly, or if you are a direct investor, by calling (800) 235-8396 or logging on to usaa.com. Effective on or about September 8, 2020, a shareholder who has an account directly with the Fund will need to submit their request via email to TA.Processing@FISGlobal.com. Your election to receive reports in paper will apply to all funds held with the USAA Mutual Funds or your financial intermediary.
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 logo 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.
USAA Mutual Funds Trust
TABLE OF CONTENTS
Shareholder Letter (Unaudited) | 2 | ||||||
Managers' Commentary (Unaudited) | 4 | ||||||
Investment Overview (Unaudited) | 6 | ||||||
Investment Objective & Portfolio Holdings (Unaudited) | 7 | ||||||
Financial Statements | |||||||
Schedule of Portfolio Investments | 9 | ||||||
Statement of Assets and Liabilities | 35 | ||||||
Statement of Operations | 36 | ||||||
Statements of Changes in Net Assets | 37 | ||||||
Financial Highlights | 40 | ||||||
Notes to Financial Statements | 46 | ||||||
Report of Independent Registered Public Accounting Firm | 59 | ||||||
Supplemental Information (Unaudited) | 60 | ||||||
Proxy Voting and Portfolio Holdings Information | 60 | ||||||
Trustees' and Officers' Information | 61 | ||||||
Expense Examples | 67 | ||||||
Additional Federal Income Tax Information | 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.
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.
1
(Unaudited)
Dear Shareholder,
The previous decade ended with the longest-ever bull market in U.S. equities still intact, even as investors wrestled with issues like softening global economic data, Brexit, and U.S.-China trade relations. In retrospect, those worries seem so pedestrian given what we would soon experience.
A new and unexpected threat—a global pandemic, the novel coronavirus ("COVID-19")—first emerged in Asia and then began spreading globally and throughout the United States during the first quarter of 2020. This unprecedented and unanticipated event not only rendered all existing economic and earnings forecasts moot, but it also roiled stock and bond markets everywhere. Efforts to slow the spread of the virus, though successful to date, also brought the economy to a halt. The historic bull market in stocks ended virtually overnight.
After an initial severe sell-off in March, equity markets recovered sharply. As our annual reporting period drew to a close on May 31, 2020, many of the broad market indexes had recovered and volatility had returned to more palatable levels. In fact, despite all the chaos, the S&P 500® Index, one of the most popular measures of large U.S. stocks, finished the fiscal year (May 31, 2020) at approximately 3,044, which was up more than 10.6% from one year ago.
The market turmoil of early 2020 was not limited to equities. Fixed income volatility spiked when liquidity evaporated in late March as investors struggled to understand the ramifications of stay-at-home orders. Fortunately, the U.S. Federal Reserve (the "Fed") (as well as other global central banks) leapt into action—cutting interest rates, (re)starting quantitative easing and, in the case of the Fed, launching an array of programs to stabilize markets.
The new lending facilities and programs had their intended effect of improving liquidity and trading. Credit spreads across corporate, high-yield, structured, and municipal markets were coaxed down from their highs. In addition, Congress came through with substantial fiscal stimulus that also was applauded by investors and markets. Although fixed income markets regained their footing, the yield on 10-Year Treasurys, a benchmark for low-risk investments, declined steadily during our fiscal year—from 2.14% at the beginning of our reporting period to approximately 0.65% as of May 31, 2020. This suggests that investors remain a little wary.
While the past year has been unprecedented for all of us, both personally and professionally, our portfolio managers continue to scrutinize the financial markets, economic conditions, and the trajectory of the pandemic, which will likely be the guiding factor on Fed policy and the markets.
No matter what happens in the near term, we believe that the massive monetary and fiscal policies introduced earlier this year will have longer-term ramifications. Despite this uncertainty, it's important to remain focused on your long-term investment goals and avoid making emotional decisions. If you invest with us directly, our Member Service Representatives are available to help. Call us at (800) 539-3863 or visit our website at vcm.com.
2
From all of us here at USAA Mutual Funds, thank you for letting us help you work toward your investment goals.
Christopher K. Dyer, CFA
President,
USAA Mutual Funds
3
USAA Mutual Funds Trust
USAA International Fund
Managers' Commentary
(Unaudited)
Victory Solutions
Mannik S. Dhillon, CFA, CAIA
Wasif A. Latif
RS Investments Developed Markets, A Victory Capital Investment Franchise
U-Wen Kok, CFA
Adam Mezan, CFA
Trivalent Investments, A Victory Capital Investment Franchise
Peter S. Carpenter
Jeffery R. Sullivan
Lazard Asset Management, LLC
Paul Moghtader, CFA
Taras Ivanenko, CFA
Ciprian Marin
Craig Scholl, CFA
Susanne Willumsen
Wellington Management Company, LLP
James H. Shakin, CFA
Andrew M. Corry, CFA
• What were the market conditions during the reporting period?
Global financial market performance varied widely over the period driven by uncertainty related to the duration and economic impact of the novel coronavirus ("COVID-19") pandemic. This generally led to a risk-off environment as investors flocked to safe haven assets such as U.S. Treasurys and gold. Global equities turned mostly lower with the exception of a small breadth of mega-cap securities well-positioned for an extended economic slowdown and the new stay-at-home paradigm. The final month and a half of the reporting period saw a rebound in risky assets as economies began a phased reopening.
Within the United States, the S&P 500® Index dropped nearly 34% from its 2020 high, before beginning to recoup losses with the support of comprehensive monetary and fiscal stimulus, along with encouraging results in COVID-19 vaccine trials. Over the reporting period, the S&P 500® Index returned 12.84%, with large-cap growth stocks leading the way, up to a return of 26.25% as represented by the Russell 1000 Growth Index. Value stocks and small-cap stocks underperformed growth stocks over the period, but more recently have seen a pickup in momentum. U.S. large-cap value stocks were down to a return of -1.64% over the reporting period as gauged by the Russell 1000 Value Index, while U.S. small-cap stocks, were down to a return of -3.44% as represented by the Russell 2000 Index.
Developed market international and emerging market equities followed a path similar to U.S. equities. Markets led investors on a rollercoaster ride that saw both the MSCI EAFE
4
USAA Mutual Funds Trust
USAA International Fund (continued)
Managers' Commentary (continued)
Index and MSCI Emerging Markets Index drop approximately 34% from their highs in the year. The market drawdown hit bottom on March 23rd and then started a steady ascent, erasing most of the losses as European Central Bank quantitative easing and talks of a 750-billion euros fiscal stimulus helped bolster momentum in the market's recovery. Over the reporting period, developed international equities, represented by the MSCI EAFE Index, were down to a return of -2.81%, while the MSCI Emerging Markets Index returned -4.39%.
• How did the USAA International Fund (the "Fund") perform during the reporting period?
The Fund has four share classes: Fund Shares, Institutional Shares, Adviser Shares (Redesignated Class A shares), and R6 Shares. For the reporting period ended May 31, 2020, the Fund Shares, Institutional Shares, Adviser Shares, and R6 Shares had a total return of -6.13%, -6.05%, -6.37%, and -5.95%, respectively. This compares to returns of -0.46% for the Lipper International Funds Index and -2.81% 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 subadvisers. Lazard Asset Management ("Lazard") and Wellington Management Company ("Wellington") are external subadvisers to the Fund, while RS Investments Developed Markets and Trivalent Investments are a Victory Capital Management franchise utilized as an internal resource for the Fund. The investment adviser and the subadviser each provide day-to-day discretionary management for a portion of the Fund's assets.
• What strategies did you employ during the reporting period?
During the period in question, the International Fund underperformed the benchmark MSCI EAFE Index primarily due to stock selection across various countries and sectors. On a country basis, stock selection in Japan, Netherlands, Denmark, and the United Kingdom detracted from performance while positive security selection boosted performance in Sweden and Italy whereas both stock selection and underweight allocations had a positive impact in Hong Kong and Australia.
Looking at performance from a sector standpoint, the impact from the COVID-19 pandemic in the spring of 2020 on the Fund's portfolio was negative. An underweight allocation and poor stock selection in Healthcare detracted from performance while an overweight in Energy also detracted from performance. Additionally, weak stock selection in Communication Services, Information Technology, Industrials, and Consumer Discretionary was also a detractor. On the positive side, stock selection in Materials, RIETs, and Financials had a positive impact on performance, but it was not enough to offset the weakness from the other sectors.
Thank you for allowing us to assist in your investment needs.
5
USAA Mutual Funds Trust
USAA International Fund
Investment Overview
(Unaudited)
Average Annual Total Return
Year Ended May 31, 2020
Fund Shares | Institutional Shares | Adviser Shares | R6 Shares | ||||||||||||||||||||||||
INCEPTION DATE | 2/1/91 | 8/1/08 | 8/1/10 | 12/1/16 | |||||||||||||||||||||||
Net Asset Value | Net Asset Value | Net Asset Value | Net Asset Value | MSCI EAFE Index1 | Lipper International Funds Index2 | ||||||||||||||||||||||
One Year | –6.13 | % | –6.05 | % | –6.37 | % | –5.95 | % | –2.81 | % | –0.46 | % | |||||||||||||||
Five Year | 0.92 | % | 1.02 | % | 0.67 | % | NA | 0.79 | % | 1.26 | % | ||||||||||||||||
Ten Year | 5.88 | % | 6.03 | % | NA | NA | 5.27 | % | 5.43 | % | |||||||||||||||||
Since Inception | NA | NA | 4.41 | % | –4.72 | % | NA | NA |
Past performance is not indicative of future results. 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 for various periods since inception. Without such fee waivers, the total returns would have been lower.
USAA International Fund — Growth of $10,000
1 The 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.
2 The unmanaged Lipper International Funds Index tracks the total return performance of funds within the Lipper International Funds category.
The graph reflects investment of growth of a hypothetical $10,000 investment in the Fund. Past performance is no guarantee of future results.
The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
6
USAA Mutual Funds Trust USAA International Fund | May 31, 2020 |
(Unaudited)
Investment Objective & Portfolio Holdings:
The Fund's investment objective is to seek capital appreciation.
Top 10 Sectors
May 31, 2020
(% of Net Assets)
Financials | 16.7 | % | |||||
Industrials | 13.6 | % | |||||
Health Care | 11.2 | % | |||||
Consumer Discretionary | 10.9 | % | |||||
Consumer Staples | 9.5 | % | |||||
Information Technology | 8.6 | % | |||||
Materials | 7.4 | % | |||||
Communication Services | 6.9 | % | |||||
Energy | 5.2 | % | |||||
Real Estate | 4.7 | % |
Top 10 Equity Holdings*
May 31, 2020
(% of Net Assets)
Nestle SA | 2.7 | % | |||||
Roche Holding AG | 2.3 | % | |||||
Toyota Motor Corp. | 1.9 | % | |||||
Novartis AG | 1.8 | % | |||||
LVMH Moet Hennessy Louis Vuitton SE | 1.6 | % | |||||
Enel SpA | 1.4 | % | |||||
SAP SE | 1.4 | % | |||||
Atlas Copco AB | 1.2 | % | |||||
Tencent Holdings Ltd. | 1.1 | % | |||||
Rio Tinto PLC | 1.1 | % |
* Does not include short-term investments purchased with cash collateral from securities loaned.
Refer to the Schedule of Portfolio Investments for a complete list of securities.
7
USAA Mutual Funds Trust USAA International Fund (continued) | May 31, 2020 |
Country Allocation:
May 31, 2020
(% 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%.
8
USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Common Stocks (97.8%) | |||||||||||
Argentina (0.0%): (a) | |||||||||||
Energy (0.0%): (a) | |||||||||||
YPF SA, ADR | 197,720 | $ | 996 | ||||||||
Australia (4.9%): | |||||||||||
Consumer Discretionary (0.1%): | |||||||||||
Aristocrat Leisure Ltd. | 95,000 | 1,638 | |||||||||
JB Hi-Fi Ltd. | 42,880 | 1,063 | |||||||||
Kogan.com Ltd. | 174,270 | 1,309 | |||||||||
4,010 | |||||||||||
Consumer Staples (0.0%): (a) | |||||||||||
Select Harvests Ltd. | 148,263 | 613 | |||||||||
Energy (0.2%): | |||||||||||
Beach Energy Ltd. | 3,825,885 | 4,133 | |||||||||
4,133 | |||||||||||
Financials (0.9%): | |||||||||||
Australia & New Zealand Banking Group Ltd. | 106,376 | 1,266 | |||||||||
Macquarie Group Ltd. | 301,686 | 22,184 | |||||||||
Netwealth Group Ltd. | 98,122 | 544 | |||||||||
23,994 | |||||||||||
Health Care (0.6%): | |||||||||||
CSL Ltd. | 90,433 | 16,744 | |||||||||
Pro Medicus Ltd. | 47,308 | 911 | |||||||||
17,655 | |||||||||||
Industrials (0.1%): | |||||||||||
Aurizon Holdings Ltd. | 565,929 | 1,795 | |||||||||
Austal Ltd. | 604,986 | 1,350 | |||||||||
3,145 | |||||||||||
Information Technology (0.3%): | |||||||||||
Data#3 Ltd. | 737,944 | 2,634 | |||||||||
Dicker Data Ltd. | 99,049 | 518 | |||||||||
Technology One Ltd. | 682,807 | 4,174 | |||||||||
7,326 | |||||||||||
Materials (1.6%): | |||||||||||
BHP Group Ltd. | 1,246,632 | 29,334 | |||||||||
Igo Ltd. | 192,298 | 644 | |||||||||
Iluka Resources Ltd. | 212,246 | 1,170 | |||||||||
Perseus Mining Ltd. (b) | 939,638 | 797 | |||||||||
Regis Resources Ltd. | 677,211 | 2,408 | |||||||||
Rio Tinto Ltd. | 127,013 | 7,931 | |||||||||
Saracen Mineral Holdings Ltd. (b) | 644,372 | 2,160 | |||||||||
Western Areas Ltd. | 353,010 | 539 | |||||||||
44,983 |
See notes to financial statements.
9
USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Real Estate (1.1%): | |||||||||||
Centuria Office REIT | 338,778 | $ | 448 | ||||||||
Charter Hall Group | 1,093,143 | 7,075 | |||||||||
Cromwell Property Group | 3,730,731 | 1,994 | |||||||||
Mirvac Group | 970,758 | 1,523 | |||||||||
National Storage REIT | 1,662,099 | 2,075 | |||||||||
Scentre Group | 10,336,020 | 15,404 | |||||||||
Waypoint REIT Ltd. | 1,916,646 | 3,388 | |||||||||
31,907 | |||||||||||
137,766 | |||||||||||
Austria (0.4%): | |||||||||||
Communication Services (0.0%): (a) | |||||||||||
Telekom Austria AG | 86,005 | 615 | |||||||||
Financials (0.3%): | |||||||||||
BAWAG Group AG (b) (c) | 83,914 | 2,772 | |||||||||
Erste Group Bank AG (b) | 92,679 | 2,050 | |||||||||
Raiffeisen Bank International AG | 81,376 | 1,491 | |||||||||
Vienna Insurance Group AG Wiener Versicherung Gruppe (b) | 42,087 | 887 | |||||||||
7,200 | |||||||||||
Information Technology (0.0%): (a) | |||||||||||
ams AG (b) | 47,924 | 732 | |||||||||
Materials (0.1%): | |||||||||||
RHI Magnesita NV | 30,597 | 921 | |||||||||
Wienerberger AG (b) | 36,389 | 730 | |||||||||
1,651 | |||||||||||
Real Estate (0.0%): (a) | |||||||||||
CA Immobilien Anlagen AG (b) | 36,669 | 1,239 | |||||||||
Utilities (0.0%): (a) | |||||||||||
EVN AG | 34,763 | 593 | |||||||||
12,030 | |||||||||||
Belgium (1.0%): | |||||||||||
Communication Services (0.1%): | |||||||||||
Telenet Group Holding NV | 69,633 | 2,849 | |||||||||
Consumer Staples (0.0%): (a) | |||||||||||
Ontex Group NV | 37,548 | 598 | |||||||||
Financials (0.2%): | |||||||||||
Ageas (b) | 92,454 | 3,155 | |||||||||
KBC Ancora | 15,036 | 505 | |||||||||
KBC Group NV | 30,971 | 1,625 | |||||||||
5,285 | |||||||||||
Health Care (0.1%): | |||||||||||
UCB SA | 35,589 | 3,561 | |||||||||
Information Technology (0.5%): | |||||||||||
Melexis NV | 195,451 | 12,884 |
See notes to financial statements.
10
USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Real Estate (0.1%): | |||||||||||
Aedifica SA | 4,140 | $ | 444 | ||||||||
Befimmo SA | 29,311 | 1,216 | |||||||||
Warehouses De Pauw CVA | 54,237 | 1,435 | |||||||||
3,095 | |||||||||||
28,272 | |||||||||||
Bermuda (0.0%): (a) | |||||||||||
Energy (0.0%): (a) | |||||||||||
DHT Holdings, Inc. | 105,900 | 629 | |||||||||
Brazil (0.1%): | |||||||||||
Financials (0.1%): | |||||||||||
Banco Santander Brasil SA | 526,600 | 2,517 | |||||||||
Canada (1.5%): | |||||||||||
Consumer Staples (0.1%): | |||||||||||
Maple Leaf Foods, Inc. | 128,364 | 2,461 | |||||||||
Energy (0.3%): | |||||||||||
ARC Resources Ltd. (d) | 182,122 | 734 | |||||||||
Cameco Corp. | 128,209 | 1,393 | |||||||||
Ovintiv, Inc. (d) | 178,242 | 1,344 | |||||||||
Parex Resources, Inc. (b) | 243,811 | 2,742 | |||||||||
Suncor Energy, Inc. | 103,610 | 1,781 | |||||||||
Tourmaline Oil Corp. | 97,902 | 973 | |||||||||
8,967 | |||||||||||
Financials (0.5%): | |||||||||||
Bank of Montreal | 39,674 | 1,957 | |||||||||
iA Financial Corp., Inc. | 64,987 | 2,076 | |||||||||
IGM Financial, Inc. | 106,038 | 2,519 | |||||||||
National Bank of Canada | 71,351 | 3,108 | |||||||||
Sun Life Financial, Inc. | 87,635 | 3,006 | |||||||||
12,666 | |||||||||||
Industrials (0.1%): | |||||||||||
Canadian Pacific Railway Ltd. | 13,429 | 3,366 | |||||||||
Materials (0.5%): | |||||||||||
Barrick Gold Corp. | 379,027 | 9,116 | |||||||||
Kinross Gold Corp. (b) | 470,360 | 3,081 | |||||||||
Kirkland Lake Gold Ltd. | 57,418 | 2,212 | |||||||||
14,409 | |||||||||||
41,869 | |||||||||||
China (3.2%): | |||||||||||
Communication Services (1.4%): | |||||||||||
China Telecom Corp. Ltd. Class H | 13,520,304 | 4,485 | |||||||||
NetEase, Inc., ADR | 8,045 | 3,081 | |||||||||
Tencent Holdings Ltd. | 588,100 | 31,850 | |||||||||
39,416 |
See notes to financial statements.
11
USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Consumer Discretionary (0.6%): | |||||||||||
Alibaba Group Holding Ltd., ADR (b) | 66,376 | $ | 13,765 | ||||||||
Dongfeng Motor Group Co. Ltd. Class H | 6,486,727 | 4,104 | |||||||||
17,869 | |||||||||||
Financials (0.8%): | |||||||||||
Bank of China Ltd. Class H | 6,726,000 | 2,472 | |||||||||
China Merchants Bank Co. Ltd. Class H | 2,853,500 | 13,446 | |||||||||
Industrial & Commercial Bank of China Ltd. Class H | 6,669,000 | 4,320 | |||||||||
Ping An Insurance Group Co. of China Ltd. | 197,500 | 1,955 | |||||||||
22,193 | |||||||||||
Industrials (0.1%): | |||||||||||
China Railway Group Ltd. Class H | 3,251,000 | 1,785 | |||||||||
S-Enjoy Service Group Co. Ltd. (b) | 651,000 | 1,640 | |||||||||
3,425 | |||||||||||
Materials (0.2%): | |||||||||||
Anhui Conch Cement Co. Ltd. Class H | 795,500 | 5,999 | |||||||||
Real Estate (0.1%): | |||||||||||
Country Garden Holdings Co. Ltd. | 1,941,000 | 2,430 | |||||||||
91,332 | |||||||||||
Denmark (1.5%): | |||||||||||
Consumer Staples (0.9%): | |||||||||||
Carlsberg A/S Class B | 18,601 | 2,411 | |||||||||
Royal Unibrew A/S (b) | 231,626 | 18,619 | |||||||||
Scandinavian Tobacco Group A/S (c) | 246,388 | 3,710 | |||||||||
24,740 | |||||||||||
Energy (0.0%): (a) | |||||||||||
The Drilling Co. of 1972 A/S (b) | 6,977 | 153 | |||||||||
Health Care (0.3%): | |||||||||||
Bavarian Nordic A/S (b) | 16,721 | 502 | |||||||||
Chemometec A/S | 54,483 | 2,707 | |||||||||
GN Store Nord A/S | 54,153 | 2,946 | |||||||||
Novo Nordisk A/S Class B | 32,138 | 2,106 | |||||||||
8,261 | |||||||||||
Industrials (0.2%): | |||||||||||
A.P. Moller-Maersk A/S Class B | 4,859 | 4,791 | |||||||||
Per Aarsleff Holding A/S | 28,592 | 970 | |||||||||
5,761 | |||||||||||
Utilities (0.1%): | |||||||||||
Orsted A/S (c) | 31,436 | 3,698 | |||||||||
42,613 | |||||||||||
Finland (0.6%): | |||||||||||
Consumer Discretionary (0.0%): (a) | |||||||||||
Tokmanni Group Corp. | 59,858 | 809 |
See notes to financial statements.
12
USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Health Care (0.0%): (a) | |||||||||||
Terveystalo Oyj (b) (c) | 56,543 | $ | 596 | ||||||||
Industrials (0.2%): | |||||||||||
Metso Oyj | 53,673 | 1,750 | |||||||||
Valmet Oyj (b) | 184,190 | 4,815 | |||||||||
6,565 | |||||||||||
Information Technology (0.2%): | |||||||||||
Nokia Oyj (d) | 1,433,298 | 5,699 | |||||||||
Materials (0.2%): | |||||||||||
Huhtamaki Oyj (b) | 65,328 | 2,654 | |||||||||
Kemira Oyj | 142,714 | 1,830 | |||||||||
4,484 | |||||||||||
18,153 | |||||||||||
France (8.4%): | |||||||||||
Communication Services (0.1%): | |||||||||||
Vivendi SA | 85,160 | 1,947 | |||||||||
Consumer Discretionary (2.7%): | |||||||||||
Cie Generale des Etablissements Michelin SCA (b) | 127,439 | 12,896 | |||||||||
Faurecia SE (b) | 411,946 | 15,970 | |||||||||
Kering SA | 3,413 | 1,789 | |||||||||
LVMH Moet Hennessy Louis Vuitton SE | 106,542 | 44,691 | |||||||||
Renault SA | 103,463 | 2,345 | |||||||||
77,691 | |||||||||||
Consumer Staples (0.1%): | |||||||||||
L'Oreal SA (b) | 5,777 | 1,694 | |||||||||
Energy (1.5%): | |||||||||||
Gaztransport Et Technigaz SA | 137,313 | 10,306 | |||||||||
Total SA | 825,230 | 31,289 | |||||||||
41,595 | |||||||||||
Financials (0.8%): | |||||||||||
Amundi SA (c) | 24,860 | 1,856 | |||||||||
AXA SA (b) | 437,827 | 8,033 | |||||||||
BNP Paribas SA (b) | 205,738 | 7,403 | |||||||||
Coface SA (b) | 90,881 | 521 | |||||||||
SCOR SE (b) | 58,105 | 1,457 | |||||||||
Societe Generale SA | 217,020 | 3,210 | |||||||||
22,480 | |||||||||||
Health Care (0.2%): | |||||||||||
AB Science SA (b) (d) | 57,345 | 579 | |||||||||
Korian SA | 12,521 | 452 | |||||||||
Sanofi (d) | 41,083 | 4,018 | |||||||||
Sartorius Stedim Biotech (b) | 6,991 | 1,902 | |||||||||
6,951 |
See notes to financial statements.
13
USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Industrials (0.9%): | |||||||||||
Alstom SA | 40,165 | $ | 1,690 | ||||||||
Compagnie de Saint-Gobain | 284,573 | 9,312 | |||||||||
Elis SA (b) | 183,848 | 2,291 | |||||||||
Mersen | 34,540 | 797 | |||||||||
Rexel SA | 479,841 | 4,891 | |||||||||
Teleperformance (b) | 17,064 | 4,063 | |||||||||
Vinci SA | 20,291 | 1,893 | |||||||||
24,937 | |||||||||||
Information Technology (0.9%): | |||||||||||
Capgemini SE | 225,346 | 23,274 | |||||||||
Worldline SA (b) (c) | 29,151 | 2,188 | |||||||||
25,462 | |||||||||||
Materials (0.9%): | |||||||||||
Arkema SA | 291,577 | 25,565 | |||||||||
25,565 | |||||||||||
Real Estate (0.0%): (a) | |||||||||||
Nexity SA (d) | 39,832 | 1,224 | |||||||||
Utilities (0.3%): | |||||||||||
Engie SA (b) | 481,762 | 5,725 | |||||||||
Rubis SCA | 31,692 | 1,518 | |||||||||
7,243 | |||||||||||
236,789 | |||||||||||
Georgia (0.0%): (a) | |||||||||||
Financials (0.0%): (a) | |||||||||||
Bank of Georgia Group PLC | 81,176 | 928 | |||||||||
Germany (5.2%): | |||||||||||
Communication Services (0.1%): | |||||||||||
CTS Eventim AG & Co. KGaA (b) | 20,404 | 929 | |||||||||
New Work SE | 2,314 | 730 | |||||||||
1,659 | |||||||||||
Consumer Discretionary (0.3%): | |||||||||||
Ceconomy AG (b) | 288,985 | 857 | |||||||||
Daimler AG Registered Shares (b) | 148,499 | 5,533 | |||||||||
HelloFresh SE (b) | 62,788 | 2,567 | |||||||||
Hornbach Holding AG & Co. KGaA | 12,246 | 882 | |||||||||
9,839 | |||||||||||
Consumer Staples (0.1%): | |||||||||||
METRO AG | 99,335 | 929 | |||||||||
Suedzucker AG | 40,213 | 602 | |||||||||
1,531 | |||||||||||
Energy (0.0%): (a) | |||||||||||
CropEnergies AG | 81,695 | 802 |
See notes to financial statements.
14
USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Financials (1.0%): | |||||||||||
Allianz SE | 134,177 | $ | 24,314 | ||||||||
Hannover Rueck SE | 22,011 | 3,554 | |||||||||
Wuestenrot & Wuerttembergische AG | 23,750 | 434 | |||||||||
28,302 | |||||||||||
Health Care (0.3%): | |||||||||||
Compugroup Medical SE | 20,554 | 1,684 | |||||||||
Dermapharm Holding SE | 26,892 | 1,451 | |||||||||
Eckert & Ziegler Strahlen- und Medizintechnik AG | 6,012 | 951 | |||||||||
Evotec SE (b) (d) | 52,920 | 1,440 | |||||||||
Fresenius Medical Care AG & Co. KGaA (b) | 35,610 | 3,012 | |||||||||
8,538 | |||||||||||
Industrials (0.8%): | |||||||||||
Amadeus Fire AG (b) | 7,802 | 879 | |||||||||
Cewe Stiftung & Co. KGaA | 4,728 | 484 | |||||||||
Deutsche Post AG Registered Shares (b) | 73,725 | 2,308 | |||||||||
Hamburger Hafen Und Logistik AG | 27,757 | 453 | |||||||||
Siemens AG | 68,922 | 7,598 | |||||||||
Varta AG (b) (d) | 25,694 | 2,654 | |||||||||
Washtec AG (b) | 211,461 | 8,703 | |||||||||
23,079 | |||||||||||
Information Technology (1.5%): | |||||||||||
LPKF Laser & Electronics AG (b) | 50,625 | 1,200 | |||||||||
SAP SE | 300,457 | 38,340 | |||||||||
TeamViewer AG (b) | 49,457 | 2,511 | |||||||||
42,051 | |||||||||||
Materials (0.1%): | |||||||||||
HeidelbergCement AG (b) | 22,665 | 1,134 | |||||||||
Salzgitter AG (b) | 35,729 | 481 | |||||||||
1,615 | |||||||||||
Real Estate (0.8%): | |||||||||||
alstria Office REIT-AG (b) | 107,213 | 1,563 | |||||||||
DIC Asset AG | 176,007 | 2,290 | |||||||||
Leg Immobilien AG (b) | 20,946 | 2,621 | |||||||||
Sirius Real Estate Ltd. | 1,350,661 | 1,338 | |||||||||
Vonovia SE | 259,352 | 14,915 | |||||||||
22,727 | |||||||||||
Utilities (0.2%): | |||||||||||
E.ON SE | 344,295 | 3,652 | |||||||||
Encavis AG (d) | 181,538 | 2,476 | |||||||||
6,128 | |||||||||||
146,271 |
See notes to financial statements.
15
USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Hong Kong (2.4%): | |||||||||||
Communication Services (0.4%): | |||||||||||
China Mobile Ltd. | 732,698 | $ | 5,181 | ||||||||
China Unicom Hong Kong Ltd. | 7,193,515 | 4,183 | |||||||||
HKT Trust & HKT Ltd. | 1,309,000 | 1,862 | |||||||||
NetDragon Websoft Holdings Ltd. | 607,000 | 1,520 | |||||||||
12,746 | |||||||||||
Consumer Discretionary (0.1%): | |||||||||||
Perfect Shape Medical Ltd. | 1,644,000 | 455 | |||||||||
Xinyi Glass Holdings Ltd. | 1,282,000 | 1,362 | |||||||||
1,817 | |||||||||||
Consumer Staples (0.2%): | |||||||||||
Sun Art Retail Group Ltd. | 2,212,500 | 3,406 | |||||||||
Vinda International Holdings Ltd. | 658,000 | 2,003 | |||||||||
5,409 | |||||||||||
Energy (0.1%): | |||||||||||
CNOOC Ltd. | 1,580,208 | 1,806 | |||||||||
Kunlun Energy Co. Ltd. | 2,776,000 | 1,712 | |||||||||
3,518 | |||||||||||
Financials (0.6%): | |||||||||||
AIA Group Ltd. | 1,690,600 | 13,873 | |||||||||
BOC Hong Kong Holdings Ltd. | 750,500 | 2,114 | |||||||||
15,987 | |||||||||||
Health Care (0.0%): (a) | |||||||||||
The United Laboratories International Holdings Ltd. | 896,000 | 800 | |||||||||
Industrials (0.2%): | |||||||||||
CK Hutchison Holdings Ltd. | 444,000 | 2,734 | |||||||||
Johnson Electric Holdings Ltd. | 887,000 | 1,526 | |||||||||
SITC International Holdings Co. Ltd. | 1,342,000 | 1,273 | |||||||||
5,533 | |||||||||||
Information Technology (0.1%): | |||||||||||
Cowell E Holdings, Inc. | 2,464,000 | 502 | |||||||||
VTech Holdings Ltd. | 192,800 | 1,167 | |||||||||
1,669 | |||||||||||
Real Estate (0.7%): | |||||||||||
CK Asset Holdings Ltd. | 3,582,984 | 19,680 | |||||||||
19,680 | |||||||||||
Utilities (0.0%): (a) | |||||||||||
China Water Affairs Group Ltd. (d) | 1,834,000 | 1,226 | |||||||||
68,385 | |||||||||||
Hungary (0.1%): | |||||||||||
Financials (0.1%): | |||||||||||
OTP Bank Nyrt (b) | 73,040 | 2,458 |
See notes to financial statements.
16
USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
India (0.6%): | |||||||||||
Communication Services (0.1%): | |||||||||||
Zee Entertainment Enterprises Ltd. | 646,088 | $ | 1,575 | ||||||||
Energy (0.1%): | |||||||||||
Oil & Natural Gas Corp. Ltd. | 1,344,988 | 1,487 | |||||||||
Reliance Industries Ltd. | 129,721 | 2,520 | |||||||||
4,007 | |||||||||||
Financials (0.1%): | |||||||||||
Canara Bank (b) | 804,408 | 897 | |||||||||
HDFC Bank Ltd. | 145,496 | 1,842 | |||||||||
Power Finance Corp. Ltd. | 1,218,757 | 1,217 | |||||||||
3,956 | |||||||||||
Health Care (0.1%): | |||||||||||
Ipca Laboratories Ltd. | 160,335 | 3,164 | |||||||||
Information Technology (0.1%): | |||||||||||
HCL Technologies Ltd. | 308,770 | 2,254 | |||||||||
Utilities (0.1%): | |||||||||||
NTPC Ltd. | 296,829 | 385 | |||||||||
Power Grid Corp. of India Ltd. | 801,384 | 1,673 | |||||||||
2,058 | |||||||||||
17,014 | |||||||||||
Indonesia (0.2%): | |||||||||||
Communication Services (0.1%): | |||||||||||
PT Sarana Menara Nusantara Tbk (b) | 27,657,200 | 1,809 | |||||||||
Financials (0.0%): (a) | |||||||||||
PT Bank Mandiri Persero Tbk | 3,081,352 | 949 | |||||||||
Industrials (0.1%): | |||||||||||
PT Wijaya Karya Persero Tbk (b) | 25,377,700 | 1,895 | |||||||||
4,653 | |||||||||||
Ireland (1.2%): | |||||||||||
Communication Services (0.2%): | |||||||||||
WPP PLC | 548,875 | 4,176 | |||||||||
Financials (0.1%): | |||||||||||
AIB Group PLC | 1,308,003 | 1,443 | |||||||||
Bank of Ireland Group PLC | 953,277 | 1,702 | |||||||||
3,145 | |||||||||||
Health Care (0.1%): | |||||||||||
ICON PLC (b) | 24,511 | 4,129 | |||||||||
Industrials (0.8%): | |||||||||||
Experian PLC | 627,276 | 21,997 | |||||||||
33,447 |
See notes to financial statements.
17
USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Israel (0.3%): | |||||||||||
Financials (0.1%): | |||||||||||
Plus500 Ltd. | 217,502 | $ | 3,551 | ||||||||
Industrials (0.1%): | |||||||||||
Ashtrom Group Ltd. (d) | 38,400 | 510 | |||||||||
Danel Adir Yeoshua Ltd. | 10,318 | 1,059 | |||||||||
Elco Ltd. | 21,562 | 794 | |||||||||
2,363 | |||||||||||
Information Technology (0.0%): (a) | |||||||||||
Nova Measuring Instruments Ltd. (b) | 26,600 | 1,269 | |||||||||
Real Estate (0.1%): | |||||||||||
Alony Hetz Properties & Investment Ltd. | 93,313 | 1,070 | |||||||||
Melisron Ltd. | 23,273 | 891 | |||||||||
Mivne Real Estate KD Ltd. (b) | 282,317 | 601 | |||||||||
2,562 | |||||||||||
9,745 | |||||||||||
Italy (3.7%): | |||||||||||
Consumer Discretionary (0.0%): (a) | |||||||||||
Unieuro SpA (c) | 64,433 | 586 | |||||||||
Energy (0.3%): | |||||||||||
Eni SpA | 658,979 | 5,992 | |||||||||
Saipem SpA | 797,716 | 1,912 | |||||||||
7,904 | |||||||||||
Financials (1.1%): | |||||||||||
Assicurazioni Generali SpA | 195,579 | 2,726 | |||||||||
Banca Farmafactoring SpA (b) (c) | 155,188 | 923 | |||||||||
Banca Generali SpA (b) | 692,767 | 18,899 | |||||||||
Banca Sistema SpA (b) (c) | 289,805 | 443 | |||||||||
BPER Banca (b) (d) | 328,573 | 792 | |||||||||
UniCredit SpA | 547,046 | 4,682 | |||||||||
Unipol Gruppo SpA (b) | 377,884 | 1,334 | |||||||||
29,799 | |||||||||||
Health Care (0.6%): | |||||||||||
Recordati SpA | 376,802 | 17,157 | |||||||||
Industrials (0.1%): | |||||||||||
ASTM SpA (b) | 59,776 | 1,233 | |||||||||
Fiera Milano SpA | 135,067 | 512 | |||||||||
Leonardo SpA (b) | 159,629 | 1,002 | |||||||||
2,747 | |||||||||||
Materials (0.0%): (a) | |||||||||||
Buzzi Unicem SpA | 64,972 | 1,299 | |||||||||
Real Estate (0.0%): (a) | |||||||||||
Immobiliare Grande Distribuzione SIIQ SpA (b) | 154,525 | 560 |
See notes to financial statements.
18
USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Utilities (1.6%): | |||||||||||
ACEA SpA | 121,164 | $ | 2,349 | ||||||||
Enel SpA | 4,998,912 | 38,645 | |||||||||
Hera SpA | 823,461 | 3,154 | |||||||||
Iren SpA | 174,937 | 437 | |||||||||
44,585 | |||||||||||
104,637 | |||||||||||
Japan (24.6%): | |||||||||||
Communication Services (2.2%): | |||||||||||
DeNA Co. Ltd. | 169,821 | 2,336 | |||||||||
Dip Corp. | 43,000 | 1,012 | |||||||||
Fuji Media Holdings, Inc. | 92,074 | 925 | |||||||||
Gree, Inc. | 390,767 | 1,606 | |||||||||
Internet Initiative Japan, Inc. | 52,800 | 1,863 | |||||||||
Kakaku.com, Inc. | 420,700 | 10,218 | |||||||||
KDDI Corp. | 119,100 | 3,477 | |||||||||
Nexon Co. Ltd. | 145,300 | 3,028 | |||||||||
Nintendo Co. Ltd. | 6,200 | 2,521 | |||||||||
Nippon Telegraph & Telephone Corp. | 1,187,000 | 27,021 | |||||||||
Nippon Television Holdings, Inc. | 177,617 | 2,056 | |||||||||
SKY Perfect JSAT Holdings, Inc. | 333,800 | 1,361 | |||||||||
TV Asahi Holdings Corp. | 126,300 | 1,984 | |||||||||
Z Holdings Corp. | 824,162 | 3,390 | |||||||||
62,798 | |||||||||||
Consumer Discretionary (4.2%): | |||||||||||
Benesse Holdings, Inc. | 16,346 | 443 | |||||||||
Daido Metal Co. Ltd. | 79,400 | 421 | |||||||||
DCM Holdings Co. Ltd. | 123,700 | 1,285 | |||||||||
Doutor Nichires Holdings Co. Ltd. | 34,400 | 586 | |||||||||
Exedy Corp. | 26,500 | 428 | |||||||||
Foster Electric Co. Ltd. | 39,500 | 451 | |||||||||
Hikari Tsushin, Inc. | 67,600 | 14,828 | |||||||||
Honda Motor Co. Ltd. | 400,892 | 10,440 | |||||||||
Honeys Holdings Co. Ltd. (d) | 126,000 | 1,450 | |||||||||
Isuzu Motors Ltd. | 228,800 | 2,149 | |||||||||
KFC Holdings Japan Ltd. | 28,000 | 693 | |||||||||
Komeri Co. Ltd. | 63,200 | 1,564 | |||||||||
Mitsubishi Motors Corp. | 638,464 | 1,809 | |||||||||
Nikon Corp. | 291,063 | 2,679 | |||||||||
Nissan Motor Co. Ltd. | 751,552 | 2,849 | |||||||||
Nojima Corp. | 26,700 | 623 | |||||||||
Shimamura Co. Ltd. | 63,728 | 4,488 | |||||||||
Sony Corp. | 141,100 | 9,140 | |||||||||
Sumitomo Forestry Co. Ltd. | 39,000 | 496 | |||||||||
Sumitomo Riko Co. Ltd. | 96,400 | 568 | |||||||||
Takashimaya Co. Ltd. | 180,500 | 1,738 | |||||||||
Tama Home Co. Ltd. (d) | 169,500 | 2,057 | |||||||||
Tamron Co. Ltd. | 110,700 | 2,087 |
See notes to financial statements.
19
USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Tokyo Dome Corp. (d) | 151,600 | $ | 1,266 | ||||||||
Tokyotokeiba Co. Ltd. | 54,000 | 1,780 | |||||||||
Topre Corp. | 70,900 | 856 | |||||||||
Torikizoku Co. Ltd. | 30,700 | 535 | |||||||||
Toyota Motor Corp. | 833,200 | 52,517 | |||||||||
120,226 | |||||||||||
Consumer Staples (1.7%): | |||||||||||
Arcs Co. Ltd. | 60,200 | 1,222 | |||||||||
Cawachi Ltd. | 31,700 | 775 | |||||||||
Heiwado Co. Ltd. | 29,500 | 530 | |||||||||
Hokuto Corp. | 60,400 | 1,126 | |||||||||
Kewpie Corp. | 95,000 | 1,862 | |||||||||
Key Coffee, Inc. | 29,600 | 646 | |||||||||
Kobe Bussan Co. Ltd. (d) | 278,800 | 14,512 | |||||||||
Life Corp. | 23,700 | 746 | |||||||||
Marudai Food Co. Ltd. | 20,100 | 364 | |||||||||
Matsumotokiyoshi Holdings Co. Ltd. | 378,800 | 14,193 | |||||||||
Nihon Chouzai Co. Ltd. | 45,200 | 725 | |||||||||
Niitaka Co. Ltd. | 46,800 | 1,587 | |||||||||
Nippon Suisan Kaisha Ltd. | 407,000 | 1,894 | |||||||||
Prima Meat Packers Ltd. | 49,300 | 1,212 | |||||||||
Showa Sangyo Co. Ltd. | 19,300 | 591 | |||||||||
The Nisshin Oillio Group Ltd. | 47,700 | 1,530 | |||||||||
Toyo Suisan Kaisha Ltd. | 62,000 | 3,249 | |||||||||
Transaction Co. Ltd. | 93,300 | 892 | |||||||||
Yokohama Reito Co. Ltd. | 120,700 | 1,029 | |||||||||
48,685 | |||||||||||
Energy (0.2%): | |||||||||||
Inpex Corp. | 609,538 | 4,269 | |||||||||
Japan Petroleum Exploration Co. Ltd. | 45,700 | 862 | |||||||||
5,131 | |||||||||||
Financials (3.3%): | |||||||||||
Credit Saison Co. Ltd. | 132,900 | 1,589 | |||||||||
Dai-ichi Life Holdings, Inc. | 277,799 | 3,645 | |||||||||
Fuyo General Lease Co. Ltd. | 13,900 | 800 | |||||||||
Jaccs Co. Ltd. | 30,300 | 533 | |||||||||
Jafco Co. Ltd. | 228,000 | 7,675 | |||||||||
Mitsubishi UFJ Financial Group, Inc. | 5,271,894 | 21,887 | |||||||||
Mizuho Financial Group, Inc. | 1,197,000 | 1,494 | |||||||||
Nomura Holdings, Inc. | 671,098 | 2,893 | |||||||||
North Pacific Bank Ltd. | 601,200 | 1,139 | |||||||||
ORIX Corp. | 276,300 | 3,657 | |||||||||
Resona Holdings, Inc. | 1,259,062 | 4,554 | |||||||||
Ricoh Leasing Co. Ltd. | 27,500 | 802 | |||||||||
Shinsei Bank Ltd. | 134,300 | 1,718 | |||||||||
Sumitomo Mitsui Financial Group, Inc. | 310,546 | 9,014 | |||||||||
Sumitomo Mitsui Trust Holdings, Inc. | 203,503 | 6,021 | |||||||||
Suruga Bank Ltd. | 389,600 | 1,418 |
See notes to financial statements.
20
USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
T&D Holdings, Inc. | 701,259 | $ | 6,371 | ||||||||
The 77 Bank Ltd. | 127,500 | 1,824 | |||||||||
The Hyakujushi Bank Ltd. | 30,200 | 552 | |||||||||
The Juroku Bank Ltd. | 40,900 | 800 | |||||||||
Tokio Marine Holdings, Inc. | 338,800 | 14,703 | |||||||||
TOMONY Holdings, Inc. | 165,100 | 534 | |||||||||
93,623 | |||||||||||
Health Care (2.7%): | |||||||||||
Alfresa Holdings Corp. | 37,000 | 747 | |||||||||
Astellas Pharma, Inc. | 215,800 | 3,857 | |||||||||
Daito Pharmaceutical Co. Ltd. | 22,800 | 923 | |||||||||
Eisai Co. Ltd. | 29,676 | 2,330 | |||||||||
Hoya Corp. | 314,300 | 29,578 | |||||||||
Kaken Pharmaceutical Co. Ltd. | 15,000 | 827 | |||||||||
Shin Nippon Biomedical Laboratories Ltd. (d) | 83,200 | 501 | |||||||||
Shionogi & Co. Ltd. | 371,500 | 22,033 | |||||||||
Suzuken Co. Ltd. | 69,000 | 2,511 | |||||||||
Takeda Pharmaceutical Co. Ltd. | 212,071 | 8,297 | |||||||||
Torii Pharmaceutical Co. Ltd. | 56,400 | 1,699 | |||||||||
Towa Pharmaceutical Co. Ltd. | 82,900 | 1,754 | |||||||||
Vital KSK Holdings, Inc. | 79,200 | 786 | |||||||||
75,843 | |||||||||||
Industrials (4.5%): | |||||||||||
Bunka Shutter Co. Ltd. | 152,000 | 1,138 | |||||||||
Central Japan Railway Co. | 10,300 | 1,766 | |||||||||
Chiyoda Corp. (b) (d) | 179,987 | 452 | |||||||||
CTI Engineering Co. Ltd. | 48,600 | 794 | |||||||||
Duskin Co. Ltd. | 28,000 | 767 | |||||||||
en-japan, Inc. | 276,800 | 7,488 | |||||||||
Fuji Electric Co. Ltd. | 559,600 | 14,952 | |||||||||
Furukawa Co. Ltd. | 70,000 | 727 | |||||||||
Hino Motors Ltd. | 214,900 | 1,457 | |||||||||
Hitachi Construction Machinery Co. Ltd. | 529,600 | 13,972 | |||||||||
IDEA Consultants, Inc. | 24,200 | 399 | |||||||||
Inabata & Co. Ltd. | 57,300 | 703 | |||||||||
ITOCHU Corp. | 723,000 | 15,550 | |||||||||
JGC Holdings Corp. | 334,150 | 3,604 | |||||||||
Kamigumi Co. Ltd. | 36,100 | 708 | |||||||||
Kandenko Co. Ltd. | 315,000 | 2,881 | |||||||||
Kawada Technologies, Inc. | 9,000 | 426 | |||||||||
Kyowa Exeo Corp. | 252,700 | 5,822 | |||||||||
Mitsubishi Electric Corp. | 172,900 | 2,283 | |||||||||
Mitsubishi Heavy Industries Ltd. | 70,776 | 1,838 | |||||||||
Mitsui & Co. Ltd. | 176,000 | 2,677 | |||||||||
Mitsui-Soko Holdings Co. Ltd. | 75,500 | 1,127 | |||||||||
Nikkon Holdings Co. Ltd. | 63,200 | 1,283 | |||||||||
Nippon Sheet Glass Co. Ltd. | 357,000 | 1,362 | |||||||||
NSK Ltd. | 94,600 | 696 | |||||||||
Obayashi Corp. | 209,300 | 1,941 |
See notes to financial statements.
21
USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
OKUMA Corp. | 149,300 | $ | 6,239 | ||||||||
Organo Corp. | 53,900 | 3,043 | |||||||||
OSJB Holdings Corp. | 433,900 | 999 | |||||||||
PS Mitsubishi Construction Co. Ltd. | 130,500 | 673 | |||||||||
Relia, Inc. | 244,700 | 2,780 | |||||||||
Sanki Engineering Co. Ltd. | 157,000 | 2,004 | |||||||||
Sankyo Tateyama, Inc. (d) | 42,600 | 382 | |||||||||
Sanwa Holdings Corp. | 1,134,100 | 9,746 | |||||||||
SEC Carbon Ltd. (d) | 12,600 | 821 | |||||||||
Secom Co. Ltd. | 29,700 | 2,578 | |||||||||
Seino Holdings Co. Ltd. | 41,400 | 565 | |||||||||
Sintokogio Ltd. | 53,700 | 395 | |||||||||
SWCC Showa Holdings Co. Ltd. | 50,600 | 546 | |||||||||
Taisei Corp. | 45,800 | 1,591 | |||||||||
Takara Standard Co. Ltd. | 40,200 | 589 | |||||||||
Tanseisha Co. Ltd. | 131,600 | 921 | |||||||||
Tekken Corp. | 30,000 | 620 | |||||||||
THK Co. Ltd. | 110,751 | 2,898 | |||||||||
Tokyu Construction Co. Ltd. | 376,600 | 2,059 | |||||||||
Toyo Construction Co. Ltd. | 254,400 | 1,016 | |||||||||
Wakita & Co. Ltd. | 113,400 | 1,088 | |||||||||
Will Group, Inc. | 137,400 | 935 | |||||||||
129,301 | |||||||||||
Information Technology (3.2%): | |||||||||||
Advantest Corp. | 58,600 | 2,909 | |||||||||
Canon, Inc. | 96,533 | 1,983 | |||||||||
Citizen Watch Co. Ltd. | 431,506 | 1,547 | |||||||||
Cybernet Systems Co. Ltd. | 217,100 | 1,365 | |||||||||
Denki Kogyo Co. Ltd. | 16,600 | 409 | |||||||||
FUJIFILM Holdings Corp. | 48,400 | 2,220 | |||||||||
Fujitsu Ltd. | 270,341 | 27,862 | |||||||||
Future Corp. | 30,100 | 502 | |||||||||
Hitachi Ltd. | 67,000 | 2,164 | |||||||||
Hosiden Corp. | 186,700 | 1,634 | |||||||||
Ines Corp. | 86,800 | 1,128 | |||||||||
Mimasu Semiconductor Industry Co. Ltd. | 113,600 | 2,373 | |||||||||
Murata Manufacturing Co. Ltd. | 58,400 | 3,285 | |||||||||
Nippon Signal Co. Ltd. | 70,300 | 793 | |||||||||
Nohmi Bosai Ltd. | 66,400 | 1,244 | |||||||||
NSD Co. Ltd. | 78,600 | 1,228 | |||||||||
Obic Co. Ltd. | 14,400 | 2,502 | |||||||||
Oracle Corp. | 126,900 | 14,849 | |||||||||
PCA Corp. (d) | 32,000 | 1,252 | |||||||||
Restar Holdings Corp. | 67,700 | 1,315 | |||||||||
Roland DG Corp. | 34,000 | 398 | |||||||||
Ryoyo Electro Corp. | 50,800 | 1,262 | |||||||||
Seikoh Giken Co. Ltd. (d) | 26,100 | 627 | |||||||||
SUMCO Corp. | 99,500 | 1,537 | |||||||||
TIS, Inc. | 67,500 | 1,435 | |||||||||
TKC Corp. | 16,900 | 885 |
See notes to financial statements.
22
USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Tokyo Electron Device Ltd. | 41,700 | $ | 1,096 | ||||||||
Ulvac, Inc. | 297,300 | 8,980 | |||||||||
United, Inc. | 104,100 | 1,119 | |||||||||
89,903 | |||||||||||
Materials (0.8%): | |||||||||||
Daiki Aluminium Industry Co. Ltd. | 78,800 | 447 | |||||||||
Godo Steel Ltd. | 41,800 | 827 | |||||||||
Hokuetsu Corp. | 117,200 | 443 | |||||||||
JSR Corp. | 165,565 | 3,262 | |||||||||
Kanto Denka Kogyo Co. Ltd. | 153,900 | 1,332 | |||||||||
Kureha Corp. | 83,500 | 3,690 | |||||||||
Nasu Denki Tekko Co. Ltd. (d) | 7,300 | 585 | |||||||||
Nippon Pillar Packing Co. Ltd. | 73,700 | 985 | |||||||||
Nitto Denko Corp. | 68,537 | 3,722 | |||||||||
Rengo Co. Ltd. | 180,200 | 1,424 | |||||||||
Shin-Etsu Chemical Co. Ltd. | 16,600 | 1,944 | |||||||||
Tosoh Corp. | 97,200 | 1,356 | |||||||||
Ube Industries Ltd. | 126,500 | 2,264 | |||||||||
22,281 | |||||||||||
Real Estate (1.0%): | |||||||||||
Daiwa House Industry Co. Ltd. | 96,200 | 2,387 | |||||||||
Goldcrest Co. Ltd. | 80,500 | 1,180 | |||||||||
Kenedix Retail REIT Corp. | 871 | 1,620 | |||||||||
Kenedix, Inc. | 219,900 | 1,196 | |||||||||
Mirai Corp. | 3,099 | 1,138 | |||||||||
Mitsubishi Estate Co. Ltd. | 227,690 | 3,619 | |||||||||
Open House Co. Ltd. | 44,200 | 1,219 | |||||||||
SAMTY Co. Ltd. (d) | 119,700 | 1,633 | |||||||||
Sekisui House REIT, Inc. | 1,119 | 695 | |||||||||
Sumitomo Realty & Development Co. Ltd. | 333,800 | 9,245 | |||||||||
Takara Leben Co. Ltd. | 327,600 | 1,142 | |||||||||
Takara Leben Real Estate Investment Corp. | 1,656 | 1,395 | |||||||||
Tosei Corp. | 108,700 | 1,080 | |||||||||
27,549 | |||||||||||
Utilities (0.8%): | |||||||||||
Chubu Electric Power Co., Inc. | 1,360,100 | 18,336 | |||||||||
Electric Power Development Co. Ltd. | 40,400 | 765 | |||||||||
Hokkaido Electric Power Co., Inc. | 294,100 | 1,191 | |||||||||
The Kansai Electric Power Co., Inc. | 164,800 | 1,645 | |||||||||
21,937 | |||||||||||
697,277 | |||||||||||
Jersey (0.1%): | |||||||||||
Materials (0.1%): | |||||||||||
Centamin PLC | 1,183,049 | 2,408 | |||||||||
2,408 |
See notes to financial statements.
23
USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Korea, Republic Of (1.2%): | |||||||||||
Communication Services (0.3%): | |||||||||||
KT Corp. | 236,943 | $ | 4,646 | ||||||||
NCSoft Corp. | 4,014 | 2,564 | |||||||||
7,210 | |||||||||||
Consumer Discretionary (0.0%): (a) | |||||||||||
Hankook Tire & Technology Co. Ltd. | 75,470 | 1,434 | |||||||||
Consumer Staples (0.2%): | |||||||||||
GS Retail Co. Ltd. | 53,934 | 1,859 | |||||||||
Orion Corp. | 33,764 | 3,600 | |||||||||
5,459 | |||||||||||
Financials (0.3%): | |||||||||||
KB Financial Group, Inc. | 156,012 | 4,258 | |||||||||
Shinhan Financial Group Co. Ltd. | 158,107 | 3,865 | |||||||||
8,123 | |||||||||||
Health Care (0.1%): | |||||||||||
Seegene, Inc. | 26,160 | 2,474 | |||||||||
Industrials (0.0%): (a) | |||||||||||
Samsung Engineering Co. Ltd. (b) | 144,688 | 1,422 | |||||||||
Information Technology (0.3%): | |||||||||||
LG Innotek Co. Ltd. | 31,211 | 3,740 | |||||||||
Samsung Electronics Co. Ltd. | 127,696 | 5,259 | |||||||||
8,999 | |||||||||||
35,121 | |||||||||||
Luxembourg (0.1%): | |||||||||||
Communication Services (0.1%): | |||||||||||
RTL Group SA (b) | 46,433 | 1,579 | |||||||||
Real Estate (0.0%): (a) | |||||||||||
Corestate Capital Holding SA (b) | 21,652 | 439 | |||||||||
2,018 | |||||||||||
Macau (0.4%): | |||||||||||
Consumer Discretionary (0.4%): | |||||||||||
Wynn Macau Ltd. | 6,094,400 | 10,439 | |||||||||
Malaysia (0.2%): | |||||||||||
Financials (0.2%): | |||||||||||
CIMB Group Holdings Bhd | 1,963,669 | 1,707 | |||||||||
RHB Bank Bhd | 2,813,200 | 3,092 | |||||||||
4,799 | |||||||||||
Mexico (0.0%): (a) | |||||||||||
Industrials (0.0%): (a) | |||||||||||
Grupo Aeroportuario del Centro Norte SAB de CV (b) | 357,815 | 1,576 |
See notes to financial statements.
24
USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Netherlands (3.7%): | |||||||||||
Communication Services (0.5%): | |||||||||||
Koninklijke KPN NV | 5,693,454 | $ | 13,915 | ||||||||
VEON Ltd., ADR | 980,771 | 1,461 | |||||||||
15,376 | |||||||||||
Consumer Discretionary (0.1%): | |||||||||||
Prosus NV (b) | 47,749 | 3,984 | |||||||||
Consumer Staples (0.2%): | |||||||||||
Koninklijke Ahold Delhaize NV | 179,132 | 4,541 | |||||||||
Energy (0.3%): | |||||||||||
Royal Dutch Shell PLC Class B | 476,379 | 7,272 | |||||||||
Financials (1.2%): | |||||||||||
ABN AMRO Bank NV (c) | 437,535 | 3,481 | |||||||||
Euronext NV (c) | 42,966 | 3,991 | |||||||||
ING Groep NV | 3,622,884 | 23,551 | |||||||||
NN Group NV | 66,076 | 2,028 | |||||||||
33,051 | |||||||||||
Health Care (0.0%): (a) | |||||||||||
Pharming Group NV (b) | 550,534 | 817 | |||||||||
Industrials (1.3%): | |||||||||||
Alfen Beheer BV (b) (c) | 107,486 | 3,358 | |||||||||
Intertrust NV (c) | 31,389 | 496 | |||||||||
PostNL NV | 830,661 | 1,238 | |||||||||
Signify NV (b) (c) | 24,255 | 522 | |||||||||
Wolters Kluwer NV | 381,871 | 30,473 | |||||||||
36,087 | |||||||||||
Information Technology (0.1%): | |||||||||||
ASM International NV | 22,321 | 2,603 | |||||||||
ASML Holding NV | 5,528 | 1,811 | |||||||||
4,414 | |||||||||||
105,542 | |||||||||||
New Zealand (0.5%): | |||||||||||
Health Care (0.5%): | |||||||||||
Fisher & Paykel Healthcare Corp. Ltd. | 622,183 | 11,596 | |||||||||
Metlifecare Ltd. | 337,921 | 882 | |||||||||
Summerset Group Holdings Ltd. | 113,126 | 422 | |||||||||
12,900 | |||||||||||
Information Technology (0.0%): (a) | |||||||||||
Pushpay Holdings Ltd. (b) | 264,572 | 1,262 | |||||||||
14,162 | |||||||||||
Norway (1.2%): | |||||||||||
Consumer Staples (0.1%): | |||||||||||
Salmar ASA | 24,946 | 1,126 |
See notes to financial statements.
25
USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Energy (0.4%): | |||||||||||
Aker BP ASA | 414,528 | $ | 6,705 | ||||||||
Equinor ASA | 290,495 | 4,240 | |||||||||
10,945 | |||||||||||
Financials (0.6%): | |||||||||||
DNB ASA (b) | 150,047 | 2,049 | |||||||||
Norwegian Finans Holding ASA (b) | 394,887 | 2,818 | |||||||||
SpareBank 1 SMN | 1,582,586 | 12,717 | |||||||||
17,584 | |||||||||||
Materials (0.1%): | |||||||||||
Norsk Hydro ASA (b) | 1,464,418 | 3,725 | |||||||||
Utilities (0.0%): (a) | |||||||||||
Fjordkraft Holding ASA (c) | 124,399 | 1,070 | |||||||||
34,450 | |||||||||||
Portugal (0.2%): | |||||||||||
Communication Services (0.1%): | |||||||||||
NOS SGPS SA (b) | 424,938 | 1,740 | |||||||||
1,740 | |||||||||||
Consumer Staples (0.0%): (a) | |||||||||||
Sonae SGPS SA | 1,921,674 | 1,439 | |||||||||
Energy (0.1%): | |||||||||||
Galp Energia SGPS SA | 188,767 | 2,246 | |||||||||
Industrials (0.0%): (a) | |||||||||||
CTT-Correios de Portugal SA (b) | 312,669 | 712 | |||||||||
Utilities (0.0%): (a) | |||||||||||
Redes Energeticas Nacionais SA | 431,358 | 1,155 | |||||||||
7,292 | |||||||||||
Russian Federation (0.8%): | |||||||||||
Energy (0.3%): | |||||||||||
Gazprom PJSC, ADR | 630,770 | 3,564 | |||||||||
LUKOIL PJSC, ADR | 61,676 | 4,643 | |||||||||
8,207 | |||||||||||
Financials (0.1%): | |||||||||||
Sberbank of Russia PJSC | 673,760 | 1,937 | |||||||||
Sberbank of Russia PJSC, ADR | 198,328 | 2,269 | |||||||||
4,206 | |||||||||||
Materials (0.4%): | |||||||||||
Evraz PLC | 2,079,082 | 7,284 | |||||||||
Petropavlovsk PLC (b) (d) | 6,700,734 | 2,052 | |||||||||
Polymetal International PLC | 77,836 | 1,564 | |||||||||
10,900 | |||||||||||
23,313 |
See notes to financial statements.
26
USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Singapore (0.5%): | |||||||||||
Communication Services (0.0%): (a) | |||||||||||
StarHub Ltd. | 864,400 | $ | 832 | ||||||||
Consumer Staples (0.0%): (a) | |||||||||||
Sheng Siong Group Ltd. | 452,200 | 503 | |||||||||
Financials (0.1%): | |||||||||||
DBS Group Holdings Ltd. | 118,600 | 1,641 | |||||||||
Singapore Exchange Ltd. | 374,600 | 2,202 | |||||||||
3,843 | |||||||||||
Industrials (0.0%): (a) | |||||||||||
Frencken Group Ltd. (b) | 1,599,200 | 904 | |||||||||
Information Technology (0.1%): | |||||||||||
AEM Holdings Ltd. | 539,800 | 1,177 | |||||||||
Real Estate (0.3%): | |||||||||||
AIMS APAC REIT | 487,700 | 440 | |||||||||
First Real Estate Investment Trust | 1,562,900 | 982 | |||||||||
Keppel DC REIT | 1,726,900 | 3,152 | |||||||||
UOL Group Ltd. (b) | 240,300 | 1,168 | |||||||||
Yanlord Land Group Ltd. (b) | 1,560,900 | 1,220 | |||||||||
6,962 | |||||||||||
14,221 | |||||||||||
South Africa (0.4%): | |||||||||||
Communication Services (0.2%): | |||||||||||
MTN Group Ltd. | 381,059 | 1,182 | |||||||||
Naspers Ltd. Class N | 19,747 | 3,218 | |||||||||
4,400 | |||||||||||
Materials (0.2%): | |||||||||||
Gold Fields Ltd. | 334,428 | 2,583 | |||||||||
Impala Platinum Holdings Ltd. | 227,639 | 1,521 | |||||||||
Kumba Iron Ore Ltd. | 77,029 | 2,082 | |||||||||
6,186 | |||||||||||
10,586 | |||||||||||
Spain (1.5%): | |||||||||||
Communication Services (0.7%): | |||||||||||
Masmovil Ibercom SA (b) | 193,613 | 4,042 | |||||||||
Telefonica SA | 3,368,408 | 15,771 | |||||||||
19,813 | |||||||||||
Consumer Discretionary (0.1%): | |||||||||||
CIE Automotive SA | 59,681 | 1,078 | |||||||||
Industria de Diseno Textil SA | 66,460 | 1,851 | |||||||||
2,929 | |||||||||||
Consumer Staples (0.1%): | |||||||||||
Viscofan SA | 39,479 | 2,593 |
See notes to financial statements.
27
USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Financials (0.3%): | |||||||||||
Banco Santander SA | 1,954,208 | $ | 4,467 | ||||||||
CaixaBank SA | 2,223,137 | 4,135 | |||||||||
8,602 | |||||||||||
Health Care (0.0%): (a) | |||||||||||
Faes Farma SA | 288,613 | 1,165 | |||||||||
Industrials (0.2%): | |||||||||||
ACS Actividades de Construccion y Servicios SA | 113,222 | 2,897 | |||||||||
Sacyr SA | 608,441 | 1,193 | |||||||||
4,090 | |||||||||||
Utilities (0.1%): | |||||||||||
Atlantica Sustainable Infrastructure PLC | 80,925 | 2,120 | |||||||||
41,312 | |||||||||||
Sweden (3.5%): | |||||||||||
Communication Services (0.2%): | |||||||||||
Paradox Interactive AB | 73,476 | 1,623 | |||||||||
Stillfront Group AB (b) | 33,162 | 2,446 | |||||||||
4,069 | |||||||||||
Consumer Discretionary (0.2%): | |||||||||||
Evolution Gaming Group AB (b) (c) | 110,224 | 6,484 | |||||||||
Consumer Staples (0.3%): | |||||||||||
Axfood AB | 96,137 | 2,157 | |||||||||
Essity AB Class B (b) | 97,795 | 3,241 | |||||||||
Swedish Match AB | 52,441 | 3,662 | |||||||||
9,060 | |||||||||||
Energy (0.0%): (a) | |||||||||||
Tethys Oil AB Registered Shares (b) | 148,332 | 47 | |||||||||
Tethys Oil AB | 148,332 | 737 | |||||||||
784 | |||||||||||
Financials (0.1%): | |||||||||||
Skandinaviska Enskilda Banken AB Class A (b) | 243,463 | 2,120 | |||||||||
Health Care (0.2%): | |||||||||||
Biotage AB (b) | 112,961 | 1,742 | |||||||||
Getinge AB Class B (b) | 106,108 | 1,971 | |||||||||
Swedish Orphan Biovitrum AB (b) | 116,487 | 2,545 | |||||||||
Vitrolife AB (b) (d) | 24,657 | 506 | |||||||||
6,764 | |||||||||||
Industrials (1.9%): | |||||||||||
Atlas Copco AB Class B | 931,852 | 33,138 | |||||||||
Coor Service Management (b) (c) | 123,324 | 766 | |||||||||
Epiroc AB Class B | 686,356 | 7,700 | |||||||||
Instalco AB | 54,919 | 882 | |||||||||
Inwido AB (b) | 172,325 | 1,100 | |||||||||
Lindab International AB | 116,335 | 1,187 |
See notes to financial statements.
28
USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Loomis AB Class B (b) | 31,652 | $ | 801 | ||||||||
NCC AB Class B | 44,412 | 707 | |||||||||
Nobina AB (b) (c) | 187,079 | 1,097 | |||||||||
Nolato AB Class B (b) | 47,110 | 3,198 | |||||||||
Sandvik AB (b) | 126,690 | 2,119 | |||||||||
Volvo AB Class B | 163,574 | 2,335 | |||||||||
55,030 | |||||||||||
Information Technology (0.2%): | |||||||||||
Fortnox AB | 86,702 | 2,394 | |||||||||
Mycronic AB (b) | 57,956 | 1,026 | |||||||||
Pricer AB Class B | 301,415 | 680 | |||||||||
Telefonaktiebolaget LM Ericsson Class B | 198,175 | 1,816 | |||||||||
5,916 | |||||||||||
Materials (0.2%): | |||||||||||
Boliden AB | 167,716 | 3,667 | |||||||||
Svenska Cellulosa AB SCA Class B (b) | 55,754 | 698 | |||||||||
4,365 | |||||||||||
Real Estate (0.2%): | |||||||||||
Fastighets AB Balder Class B (b) | 50,624 | 2,080 | |||||||||
Klovern AB | 308,464 | 492 | |||||||||
Nyfosa AB (b) | 331,829 | 2,182 | |||||||||
4,754 | |||||||||||
99,346 | |||||||||||
Switzerland (9.9%): | |||||||||||
Communication Services (0.1%): | |||||||||||
Sunrise Communications Group AG (c) | 13,413 | 1,126 | |||||||||
Consumer Staples (2.8%): | |||||||||||
Barry Callebaut AG Registered Shares | 789 | 1,592 | |||||||||
Coca-Cola HBC AG | 57,238 | 1,449 | |||||||||
Nestle SA Registered Shares | 709,322 | 77,040 | |||||||||
80,081 | |||||||||||
Financials (1.5%): | |||||||||||
Cembra Money Bank AG | 107,910 | 10,725 | |||||||||
Helvetia Holding AG Registered Shares | 16,751 | 1,494 | |||||||||
Julius Baer Group Ltd. | 56,391 | 2,428 | |||||||||
Swiss Life Holding AG | 13,226 | 4,689 | |||||||||
UBS Group AG Registered Shares | 2,237,391 | 23,960 | |||||||||
43,296 | |||||||||||
Health Care (4.4%): | |||||||||||
Bachem Holding AG Registered Shares | 4,693 | 1,200 | |||||||||
Galenica AG (c) | 85,763 | 6,355 | |||||||||
Lonza Group AG Registered Shares | 6,315 | 3,120 | |||||||||
Novartis AG Registered Shares | 572,158 | 49,825 | |||||||||
Roche Holding AG | 186,530 | 64,769 | |||||||||
125,269 |
See notes to financial statements.
29
USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Industrials (0.4%): | |||||||||||
Adecco Group AG | 138,516 | $ | 6,662 | ||||||||
Belimo Holding AG Class R | 547 | 4,147 | |||||||||
Interroll Holding AG Class R | 254 | 558 | |||||||||
11,367 | |||||||||||
Information Technology (0.2%): | |||||||||||
Logitech International SA Class R | 61,799 | 3,673 | |||||||||
STMicroelectronics NV | 107,554 | 2,671 | |||||||||
6,344 | |||||||||||
Materials (0.4%): | |||||||||||
Gurit Holding AG Class BR | 818 | 1,245 | |||||||||
LafargeHolcim Ltd. | 167,675 | 6,993 | |||||||||
SIG Combibloc Group AG | 97,162 | 1,636 | |||||||||
Vetropack Holding AG (b) | 17,275 | 1,082 | |||||||||
10,956 | |||||||||||
Real Estate (0.1%): | |||||||||||
Allreal Holding AG | 9,274 | 1,800 | |||||||||
280,239 | |||||||||||
Taiwan (0.9%): | |||||||||||
Financials (0.2%): | |||||||||||
Chailease Holding Co. Ltd. | 659,000 | 2,569 | |||||||||
Fubon Financial Holding Co. Ltd. | 1,926,000 | 2,726 | |||||||||
Shin Kong Financial Holding Co. Ltd. | 5,893,467 | 1,641 | |||||||||
6,936 | |||||||||||
Information Technology (0.7%): | |||||||||||
Accton Technology Corp. | 535,000 | 4,313 | |||||||||
Innolux Corp. | 7,602,087 | 1,579 | |||||||||
Radiant Opto-Electronics Corp. | 555,000 | 1,911 | |||||||||
Realtek Semiconductor Corp. | 541,000 | 4,673 | |||||||||
Taiwan Semiconductor Manufacturing Co. Ltd. | 645,000 | 6,270 | |||||||||
18,746 | |||||||||||
25,682 | |||||||||||
Thailand (0.2%): | |||||||||||
Consumer Staples (0.1%): | |||||||||||
Charoen Pokphand Foods PCL | 2,031,300 | 2,017 | |||||||||
Financials (0.1%): | |||||||||||
Kasikornbank PCL | 1,102,677 | 3,344 | |||||||||
5,361 | |||||||||||
United Arab Emirates (0.1%): | |||||||||||
Financials (0.1%): | |||||||||||
Emirates NBD Bank PJSC | 736,683 | 1,728 |
See notes to financial statements.
30
USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
United Kingdom (12.4%): | |||||||||||
Communication Services (0.3%): | |||||||||||
BT Group PLC | 2,180,026 | $ | 3,138 | ||||||||
Future PLC | 101,941 | 1,746 | |||||||||
Vodafone Group PLC | 1,244,794 | 2,047 | |||||||||
6,931 | |||||||||||
Consumer Discretionary (1.5%): | |||||||||||
Barratt Developments PLC | 309,038 | 1,911 | |||||||||
Dunelm Group PLC | 88,292 | 1,167 | |||||||||
Fiat Chrysler Automobiles NV (b) | 126,461 | 1,129 | |||||||||
Games Workshop Group PLC | 49,069 | 4,855 | |||||||||
Gamesys Group PLC (b) | 71,912 | 768 | |||||||||
Halfords Group PLC | 206,381 | 467 | |||||||||
JD Sports Fashion PLC | 273,077 | 2,238 | |||||||||
Kingfisher PLC | 1,662,623 | 4,035 | |||||||||
Marks & Spencer Group PLC | 1,128,884 | 1,370 | |||||||||
Mitchells & Butlers PLC (b) | 218,088 | 490 | |||||||||
Moneysupermarket.com Group PLC | 526,467 | 2,247 | |||||||||
Next PLC | 280,191 | 16,942 | |||||||||
Pets at Home Group PLC | 665,650 | 1,894 | |||||||||
Redrow PLC | 329,198 | 1,916 | |||||||||
Vistry Group PLC | 158,211 | 1,503 | |||||||||
42,932 | |||||||||||
Consumer Staples (2.7%): | |||||||||||
British American Tobacco PLC | 89,294 | 3,541 | |||||||||
Cranswick PLC | 33,620 | 1,535 | |||||||||
Diageo PLC | 640,863 | 22,356 | |||||||||
Imperial Brands PLC | 951,123 | 17,346 | |||||||||
J Sainsbury PLC | 2,054,560 | 4,926 | |||||||||
Nomad Foods Ltd. (b) | 31,000 | 657 | |||||||||
Premier Foods PLC (b) | 1,129,627 | 614 | |||||||||
Tate & Lyle PLC | 257,838 | 2,150 | |||||||||
Tesco PLC | 1,595,594 | 4,530 | |||||||||
Unilever PLC | 356,771 | 19,153 | |||||||||
76,808 | |||||||||||
Energy (1.4%): | |||||||||||
BP PLC | 5,785,314 | 22,119 | |||||||||
Cairn Energy PLC (b) | 900,330 | 1,399 | |||||||||
Royal Dutch Shell PLC Class A | 986,149 | 15,606 | |||||||||
39,124 | |||||||||||
Financials (2.0%): | |||||||||||
3i Group PLC | 338,436 | 3,463 | |||||||||
Barclays PLC | 1,023,716 | 1,463 | |||||||||
Close Brothers Group PLC | 807,867 | 10,818 | |||||||||
HSBC Holdings PLC | 2,473,423 | 11,389 | |||||||||
IntegraFin Holdings PLC | 183,512 | 1,220 | |||||||||
Investec PLC | 416,513 | 754 |
See notes to financial statements.
31
USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Legal & General Group PLC | 7,112,864 | $ | 17,558 | ||||||||
Man Group PLC | 1,622,986 | 2,856 | |||||||||
Phoenix Group Holdings PLC | 235,118 | 1,807 | |||||||||
Standard Chartered PLC | 909,448 | 4,148 | |||||||||
TP ICAP PLC | 382,667 | 1,616 | |||||||||
57,092 | |||||||||||
Health Care (0.8%): | |||||||||||
AstraZeneca PLC | 31,090 | 3,348 | |||||||||
AstraZeneca PLC | 1 | — | (e) | ||||||||
Hikma Pharmaceuticals PLC | 133,773 | 4,260 | |||||||||
Smith & Nephew PLC | 666,988 | 13,605 | |||||||||
21,213 | |||||||||||
Industrials (1.4%): | |||||||||||
Aggreko PLC | 175,470 | 1,028 | |||||||||
Ashtead Group PLC | 98,820 | 2,951 | |||||||||
Avon Rubber PLC | 15,983 | 649 | |||||||||
Babcock International Group PLC | 511,327 | 2,425 | |||||||||
BAE Systems PLC | 509,213 | 3,142 | |||||||||
Bodycote PLC | 55,452 | 417 | |||||||||
Howden Joinery Group PLC | 743,465 | 5,452 | |||||||||
ITM Power PLC (b) (d) | 152,892 | 544 | |||||||||
Judges Scientific PLC | 8,526 | 590 | |||||||||
Morgan Sindall Group PLC | 74,770 | 1,133 | |||||||||
National Express Group PLC | 382,942 | 1,033 | |||||||||
Qinetiq Group PLC | 151,936 | 558 | |||||||||
RELX PLC | 877,038 | 20,410 | |||||||||
Stagecoach Group PLC | 667,831 | 564 | |||||||||
40,896 | |||||||||||
Information Technology (0.3%): | |||||||||||
Avast PLC (c) | 138,125 | 861 | |||||||||
Dialog Semiconductor PLC (b) | 37,282 | 1,491 | |||||||||
Softcat PLC | 278,871 | 3,971 | |||||||||
Spirent Communications PLC | 583,839 | 1,813 | |||||||||
8,136 | |||||||||||
Materials (1.7%): | |||||||||||
Anglo American PLC | 399,715 | 8,460 | |||||||||
Croda International PLC | 140,932 | 9,066 | |||||||||
Rio Tinto PLC | 586,254 | 31,790 | |||||||||
49,316 | |||||||||||
Real Estate (0.2%): | |||||||||||
Grainger PLC | 382,222 | 1,363 | |||||||||
Land Securities Group PLC | 246,924 | 1,857 | |||||||||
Safestore Holdings PLC | 161,658 | 1,339 | |||||||||
St. Modwen Properties PLC | 111,420 | 467 | |||||||||
The British Land Co. PLC | 371,990 | 1,885 | |||||||||
6,911 |
See notes to financial statements.
32
USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Utilities (0.1%): | |||||||||||
Centrica PLC | 2,962,019 | $ | 1,343 | ||||||||
Pennon Group PLC | 58,333 | 827 | |||||||||
2,170 | |||||||||||
351,529 | |||||||||||
United States (0.1%): | |||||||||||
Consumer Discretionary (0.1%): | |||||||||||
Yum China Holdings, Inc. | 39,883 | 1,848 | |||||||||
Total Common Stocks (Cost $2,816,797) | 2,770,753 | ||||||||||
Preferred Stocks (0.3%) | |||||||||||
Brazil (0.1%): | |||||||||||
Communication Services (0.1%): | |||||||||||
Telefonica Brasil SA | 191,800 | 1,695 | |||||||||
Energy (0.0%): (a) | |||||||||||
Petroleo Brasileiro SA | 383,800 | 1,463 | |||||||||
3,158 | |||||||||||
Germany (0.2%): | |||||||||||
Consumer Discretionary (0.2%): | |||||||||||
Schaeffler AG | 58,031 | 447 | |||||||||
Volkswagen AG | 34,632 | 5,127 | |||||||||
5,574 | |||||||||||
Total Preferred Stocks (Cost $11,328) | 8,732 | ||||||||||
Exchange-Traded Funds (0.0%) (a) | |||||||||||
United States (0.0%): (a) | |||||||||||
iShares Core MSCI EAFE ETF | 8,636 | 484 | |||||||||
iShares Core MSCI Emerging Markets ETF | 662 | 30 | |||||||||
514 | |||||||||||
Total Exchange-Traded Funds (Cost $433) | 514 | ||||||||||
Collateral for Securities Loaned^ (2.3%) | |||||||||||
United States (2.3%): | |||||||||||
HSBC U.S. Government Money Market Fund I Shares, 0.13% (f) | 56,467,124 | 56,467 | |||||||||
Invesco Government & Agency Portfolio Institutional Shares, 0.12% (f) | 8,342,730 | 8,343 | |||||||||
Total Collateral for Securities Loaned (Cost $64,810) | 64,810 | ||||||||||
Total Investments (Cost $2,893,368) — 100.4% | 2,844,809 | ||||||||||
Liabilities in excess of other assets — (0.4)% | (12,656 | ) | |||||||||
NET ASSETS — 100.00% | $ | 2,832,153 |
At May 31, 2020 the Fund's investments in foreign securities were 96.91% of net assets.
^ Purchased with cash collateral from securities on loan.
See notes to financial statements.
33
USAA Mutual Funds Trust USAA International Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(a) Amount represents less than 0.05% of net assets.
(b) Non-income producing security.
(c) Rule 144A security or other security that is restricted as to resale to institutional investors. The Fund's Adviser has deemed this security to be liquid based upon procedures approved by the Board of Trustees. As of May 31, 2020, the fair value of these securities was $46,379 (thousands) and amounted to 1.6% of net assets.
(d) All or a portion of this security is on loan.
(e) Rounds to less than $1 thousand.
(f) Rate disclosed is the daily yield on May 31, 2020.
ADR — American Depositary Receipt
ETF — Exchange-Traded Fund
PCL — Public Company Limited
PLC — Public Limited Company
REIT — Real Estate Investment Trust
See notes to financial statements.
34
USAA Mutual Funds Trust | Statement of Assets and Liabilities May 31, 2020 |
(Amounts in Thousands, Except Per Share Amounts)
USAA International Fund | |||||||
Assets: | |||||||
Investments, at value (Cost $2,893,368) | $ | 2,844,809 | (a) | ||||
Foreign currency, at value (Cost $6,202) | 6,268 | ||||||
Cash and cash equivalents | 22,396 | ||||||
Receivables: | |||||||
Interest and dividends | 12,833 | ||||||
Capital shares issued | 575 | ||||||
Investments sold | 10,784 | ||||||
Reclaims | 10,374 | ||||||
From Adviser | 5 | ||||||
Prepaid expenses | 27 | ||||||
Total assets | 2,908,071 | ||||||
Liabilities: | |||||||
Payables: | |||||||
Collateral received on loaned securities | 64,810 | ||||||
Investments purchased | 6,842 | ||||||
Capital shares redeemed | 1,790 | ||||||
Accrued foreign capital gains taxes | 18 | ||||||
Accrued expenses and other payables: | |||||||
Investment advisory fees | 1,728 | ||||||
Administration fees | 287 | ||||||
Custodian fees | 96 | ||||||
Transfer agent fees | 231 | ||||||
Compliance fees | 1 | ||||||
12b-1 fees | 1 | ||||||
Other accrued expenses | 114 | ||||||
Total liabilities | 75,918 | ||||||
Net Assets: | |||||||
Capital | 2,967,547 | ||||||
Total distributable earnings/(loss) | (135,394 | ) | |||||
Net assets | $ | 2,832,153 | |||||
Net Assets | |||||||
Fund Shares | $ | 1,391,279 | |||||
Institutional Shares | 1,431,107 | ||||||
Adviser Shares | 6,402 | ||||||
Class R6 Shares | 3,365 | ||||||
Total | $ | 2,832,153 | |||||
Shares (unlimited number of shares authorized with no par value): | |||||||
Fund Shares | 64,621 | ||||||
Institutional Shares | 66,692 | ||||||
Adviser Shares | 299 | ||||||
Class R6 Shares | 156 | ||||||
Total | 131,768 | ||||||
Net asset value, offering and redemption price per share: (b) | |||||||
Fund Shares | $ | 21.53 | |||||
Institutional Shares | $ | 21.46 | |||||
Adviser Shares | $ | 21.39 | |||||
Class R6 Shares | $ | 21.52 |
(a) Includes $38,752 of securities on loan.
(b) Per share amount may not recalculate due to rounding of net assets and/or shares outstanding.
See notes to financial statements.
35
USAA Mutual Funds Trust | Statement of Operations For the Year Ended May 31, 2020 |
(Amounts in Thousands)
USAA International Fund | |||||||
Investment Income: | |||||||
Dividends | $ | 102,104 | |||||
Interest | 374 | ||||||
Securities lending (net of fees) | 935 | ||||||
Foreign tax withholding | (10,500 | ) | |||||
Total income | 92,913 | ||||||
Expenses: | |||||||
Investment advisory fees | 25,471 | ||||||
Administration fees — Fund Shares | 2,459 | ||||||
Administration fees — Institutional Shares | 1,728 | ||||||
Administration fees — Adviser Shares | 12 | ||||||
Administration fees — R6 Shares | 2 | ||||||
Sub-Administration fees | 86 | ||||||
12b-1 fees — Adviser Shares | 20 | ||||||
Custodian fees | 688 | ||||||
Transfer agent fees — Fund Shares | 2,040 | ||||||
Transfer agent fees — Institutional Shares | 1,728 | ||||||
Transfer agent fees — Adviser Shares | 2 | ||||||
Transfer agent fees — Class R6 Shares | — | (a) | |||||
Trustees' fees | 49 | ||||||
Compliance fees | 21 | ||||||
Legal and audit fees | 156 | ||||||
State registration and filing fees | 67 | ||||||
Interest expense on interfund lending | 2 | ||||||
Line of credit fees | 5 | ||||||
Other expenses | 253 | ||||||
Total expenses | 34,789 | ||||||
Expenses waived/reimbursed by Adviser | (91 | ) | |||||
Expenses waived/reimbursed by AMCO | (5 | ) | |||||
Net expenses | 34,693 | ||||||
Net Investment Income (Loss) | 58,220 | ||||||
Realized/Unrealized Gains (Losses) from Investments: | |||||||
Net realized gains (losses) from investment securities and foreign currency translations | 557,252 | ||||||
Foreign taxes on realized gains | (2,985 | ) | |||||
Net change in unrealized appreciation/depreciation on investment securities | (772,855 | ) | |||||
Net change in accrued foreign taxes on unrealized gains | 2,860 | ||||||
Net realized/unrealized gains (losses) on investments | (215,728 | ) | |||||
Change in net assets resulting from operations | $ | (157,508 | ) |
(a) 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 International Fund | |||||||||||
Year Ended May 31, 2020 | Year Ended May 31, 2019 | ||||||||||
From Investments: | |||||||||||
Operations: | |||||||||||
Net investment income (loss) | $ | 58,220 | $ | 69,481 | |||||||
Net realized gains (losses) from investments | 554,267 | 72,035 | |||||||||
Net change in unrealized appreciation/depreciation on investments | (769,995 | ) | (361,351 | ) | |||||||
Change in net assets resulting from operations | (157,508 | ) | (219,835 | ) | |||||||
Distributions to Shareholders: | |||||||||||
Fund Shares | (374,850 | ) | (127,420 | ) | |||||||
Institutional Shares | (364,227 | ) | (153,261 | ) | |||||||
Adviser Shares | (1,941 | ) | (536 | ) | |||||||
Class R6 Shares | (1,190 | ) | (364 | ) | |||||||
Change in net assets resulting from distributions to shareholders | (742,208 | ) | (281,581 | ) | |||||||
Change in net assets resulting from capital transactions | 49,137 | (49,254 | ) | ||||||||
Change in net assets | (850,579 | ) | (550,670 | ) | |||||||
Net Assets: | |||||||||||
Beginning of period | 3,682,732 | 4,233,402 | |||||||||
End of period | $ | 2,832,153 | $ | 3,682,732 | |||||||
Capital Transactions: | |||||||||||
Fund Shares | |||||||||||
Proceeds from shares issued | $ | 168,101 | $ | 201,762 | |||||||
Distributions reinvested | 367,804 | 125,125 | |||||||||
Cost of shares redeemed | (369,347 | ) | (286,917 | ) | |||||||
Total Fund Shares | $ | 166,558 | $ | 39,970 | |||||||
Institutional Shares | |||||||||||
Proceeds from shares issued | $ | 226,207 | $ | 212,013 | |||||||
Distributions reinvested | 363,973 | 153,184 | |||||||||
Cost of shares redeemed | (708,658 | ) | (460,053 | ) | |||||||
Total Institutional Shares | $ | (118,478 | ) | $ | (94,856 | ) | |||||
Adviser Shares | |||||||||||
Proceeds from shares issued | $ | 1,350 | $ | 740 | |||||||
Distributions reinvested | 309 | 6 | |||||||||
Cost of shares redeemed | (727 | ) | (114 | ) | |||||||
Total Adviser Shares | $ | 932 | $ | 632 | |||||||
Class R6 Shares (b) | |||||||||||
Proceeds from shares issued | $ | 938 | $ | 5,000 | |||||||
Distributions reinvested | 172 | — | |||||||||
Cost of shares redeemed | (985 | ) | — | ||||||||
Total Class R6 Shares | $ | 125 | $ | 5,000 | |||||||
Change in net assets resulting from capital transactions | $ | 49,137 | $ | (49,254 | ) |
See notes to financial statements.
37
USAA Mutual Funds Trust | Statements of Changes in Net Assets — continued |
(Amounts in Thousands)
USAA International Fund | |||||||||||
Year Ended May 31, 2020 | Year Ended May 31, 2019 | ||||||||||
Share Transactions: | |||||||||||
Fund Shares | |||||||||||
Issued | 6,674 | 6,664 | |||||||||
Reinvested | 13,947 | 4,674 | |||||||||
Redeemed | (14,914 | ) | (9,590 | ) | |||||||
Total Fund Shares | 5,707 | 1,748 | |||||||||
Institutional Shares | |||||||||||
Issued | 9,486 | 7,022 | |||||||||
Reinvested | 13,849 | 5,739 | |||||||||
Redeemed | (25,837 | ) | (15,361 | ) | |||||||
Total Institutional Shares | (2,502 | ) | (2,600 | ) | |||||||
Adviser Shares | |||||||||||
Issued | 47 | 25 | |||||||||
Reinvested | 12 | — | (a) | ||||||||
Redeemed | (30 | ) | (3 | ) | |||||||
Total Adviser Shares | 29 | 22 | |||||||||
Class R6 Shares (b) | |||||||||||
Issued | 31 | 156 | |||||||||
Reinvested | 6 | — | |||||||||
Redeemed | (37 | ) | — | ||||||||
Total Class R6 Shares | — | (a) | 156 | ||||||||
Change in Shares | 3,234 | (674 | ) |
(a) Rounds to less than 1 thousand.
(b) Class R6 commenced operations on August 17, 2018.
See notes to financial statements.
38
This page is intentionally left blank.
39
USAA Mutual Funds Trust | Financial Highlights |
For a Share Outstanding Throughout Each Period
Investment Activities | Distributions to Shareholders From | ||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss) | Net Realized and Unrealized Gains (Losses) on Investments | Total from Investment Activities | Net Investment Income | Net Realized Gains from Investments | Total Distributions | |||||||||||||||||||||||||
USAA International Fund | |||||||||||||||||||||||||||||||
Fund Shares | |||||||||||||||||||||||||||||||
Year Ended May 31, 2020 | $ | 28.70 | 0.44 | (e) | (1.12 | ) | (0.68 | ) | (0.73 | ) | (5.76 | ) | (6.49 | ) | |||||||||||||||||
Year Ended May 31, 2019 | $ | 32.82 | 0.53 | (2.41 | ) | (1.88 | ) | (0.44 | ) | (1.80 | ) | (2.24 | ) | ||||||||||||||||||
Year Ended May 31, 2018 | $ | 31.16 | 0.60 | 2.08 | 2.68 | (0.63 | ) | (0.39 | ) | (1.02 | ) | ||||||||||||||||||||
Year Ended May 31, 2017 | $ | 26.40 | 0.42 | 4.76 | 5.18 | (0.42 | ) | — | (0.42 | ) | |||||||||||||||||||||
Year Ended May 31, 2016 | $ | 30.90 | 0.35 | (e) | (3.34 | ) | (2.99 | ) | (0.37 | ) | (1.14 | ) | (1.51 | ) |
* 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.
^ 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 two year period beginning July 1, 2019 and in effect through June 30, 2021, instead of coinciding with the Fund's fiscal year end. Details of the current contractual expense limitation in effect can be found in Note 5 of the accompanying Notes to Financial Statements.
(a) Not annualized for periods less than one year.
(b) Annualized for periods less than one year.
(c) Reflects total annual operating expenses for reductions of expenses paid indirectly for the May 31 fiscal years ended 2019, 2018, 2017, and 2016. Expenses paid indirectly decreased the expense ratio for each of these respective years by less than 0.01%.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
(e) Per share net investment income (loss) has been calculated using the average daily shares method.
(f) Reflects increased trading activity due to current year transition or asset allocation shift.
See notes to financial statements.
40
USAA Mutual Funds Trust | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Ratios to Average Net Assets | Supplemental Data | ||||||||||||||||||||||||||||||||||
Redemption Fees Added to Beneficial Interests | Net Asset Value, End of Period | Total Return*(a) | Net Expenses^(b)(c) | Net Investment Income (Loss)(b) | Gross Expenses(b)(c) | Net Assets, End of Period (000's) | Portfolio Turnover(a)(d) | ||||||||||||||||||||||||||||
USAA International Fund | |||||||||||||||||||||||||||||||||||
Fund Shares | |||||||||||||||||||||||||||||||||||
Year Ended May 31, 2020 | — | $ | 21.53 | (6.13 | )% | 1.06 | % | 1.68 | % | 1.07 | % | $ | 1,391,279 | 119 | %(f) | ||||||||||||||||||||
Year Ended May 31, 2019 | — | $ | 28.70 | (5.14 | )% | 1.08 | % | 1.76 | % | 1.08 | % | $ | 1,690,782 | 30 | % | ||||||||||||||||||||
Year Ended May 31, 2018 | — | $ | 32.82 | 8.61 | % | 1.08 | % | 1.58 | % | 1.08 | % | $ | 1,876,020 | 36 | % | ||||||||||||||||||||
Year Ended May 31, 2017 | — | $ | 31.16 | 19.87 | % | 1.11 | % | 1.33 | % | 1.11 | % | $ | 1,696,372 | 40 | % | ||||||||||||||||||||
Year Ended May 31, 2016 | — | $ | 26.40 | (9.75 | )% | 1.13 | % | 1.27 | % | 1.13 | % | $ | 1,430,667 | 62 | % |
(continues on next page)
See notes to financial statements.
41
USAA Mutual Funds Trust | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Investment Activities | Distributions to Shareholders From | ||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss) | Net Realized and Unrealized Gains (Losses) on Investments | Total from Investment Activities | Net Investment Income | Net Realized Gains from Investments | Total Distributions | |||||||||||||||||||||||||
USAA International Fund | |||||||||||||||||||||||||||||||
Institutional Shares | |||||||||||||||||||||||||||||||
Year Ended May 31, 2020 | $ | 28.61 | 0.47 | (e) | (1.12 | ) | (0.65 | ) | (0.74 | ) | (5.76 | ) | (6.50 | ) | |||||||||||||||||
Year Ended May 31, 2019 | $ | 32.72 | 0.56 | (2.41 | ) | (1.85 | ) | (0.46 | ) | (1.80 | ) | (2.26 | ) | ||||||||||||||||||
Year Ended May 31, 2018 | $ | 31.07 | 0.64 | 2.06 | 2.70 | (0.66 | ) | (0.39 | ) | (1.05 | ) | ||||||||||||||||||||
Year Ended May 31, 2017 | $ | 26.34 | 0.45 | 4.74 | 5.19 | (0.46 | ) | — | (0.46 | ) | |||||||||||||||||||||
Year Ended May 31, 2016 | $ | 30.82 | 0.47 | (e) | (3.42 | ) | (2.95 | ) | (0.39 | ) | (1.14 | ) | (1.53 | ) |
* 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.
^ 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 two year period beginning July 1, 2019 and in effect through June 30, 2021, instead of coinciding with the Fund's fiscal year end. Details of the current contractual expense limitation in effect can be found in Note 5 of the accompanying Notes to Financial Statements.
(a) Not annualized for periods less than one year.
(b) Annualized for periods less than one year.
(c) Reflects total annual operating expenses for reductions of expenses paid indirectly for the May 31 fiscal years ended 2019, 2018, 2017, and 2016. Expenses paid indirectly decreased the expense ratio for each of these respective years by less than 0.01%.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
(e) Per share net investment income (loss) has been calculated using the average daily shares method.
(f) Reflects increased trading activity due to current year transition or asset allocation shift.
See notes to financial statements.
42
USAA Mutual Funds Trust | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period (continued)
Ratios to Average Net Assets | Supplemental Data | ||||||||||||||||||||||||||||||||||
Redemption Fees Added to Beneficial Interests | Net Asset Value, End of Period | Total Return*(a) | Net Expenses^(b)(c) | Net Investment Income (Loss)(b) | Gross Expenses(b)(c) | Net Assets, End of Period (000's) | Portfolio Turnover(a)(d) | ||||||||||||||||||||||||||||
USAA International Fund | |||||||||||||||||||||||||||||||||||
Institutional Shares | |||||||||||||||||||||||||||||||||||
Year Ended May 31, 2020 | — | $ | 21.46 | (6.05 | )% | 0.99 | % | 1.77 | % | 0.99 | % | $ | 1,431,107 | 119 | %(f) | ||||||||||||||||||||
Year Ended May 31, 2019 | — | $ | 28.61 | (5.06 | )% | 1.00 | % | 1.81 | % | 1.00 | % | $ | 1,979,758 | 30 | % | ||||||||||||||||||||
Year Ended May 31, 2018 | — | $ | 32.72 | 8.68 | % | 1.00 | % | 1.62 | % | 1.00 | % | $ | 2,349,281 | 36 | % | ||||||||||||||||||||
Year Ended May 31, 2017 | — | $ | 31.07 | 19.97 | % | 1.00 | % | 1.43 | % | 1.00 | % | $ | 2,308,470 | 40 | % | ||||||||||||||||||||
Year Ended May 31, 2016 | — | $ | 26.34 | (9.61 | )% | 1.00 | % | 1.74 | % | 1.00 | % | $ | 1,996,349 | 62 | % |
(continues on next page)
See notes to financial statements.
43
USAA Mutual Funds Trust | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Investment Activities | Distributions to Shareholders From | ||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss) | Net Realized and Unrealized Gains (Losses) on Investments | Total from Investment Activities | Net Investment Income | Net Realized Gains from Investments | Total Distributions | |||||||||||||||||||||||||
USAA International Fund | |||||||||||||||||||||||||||||||
Adviser Shares | |||||||||||||||||||||||||||||||
Year Ended May 31, 2020 | $ | 28.58 | 0.36 | (e) | (1.10 | ) | (0.74 | ) | (0.69 | ) | (5.76 | ) | (6.45 | ) | |||||||||||||||||
Year Ended May 31, 2019 | $ | 32.67 | 0.47 | (2.41 | ) | (1.94 | ) | (0.35 | ) | (1.80 | ) | (2.15 | ) | ||||||||||||||||||
Year Ended May 31, 2018 | $ | 31.04 | 0.53 | 2.04 | 2.57 | (0.55 | ) | (0.39 | ) | (0.94 | ) | ||||||||||||||||||||
Year Ended May 31, 2017 | $ | 26.31 | 0.35 | 4.74 | 5.09 | (0.36 | ) | — | (0.36 | ) | |||||||||||||||||||||
Year Ended May 31, 2016 | $ | 30.77 | 0.31 | (3.35 | ) | (3.04 | ) | (0.28 | ) | (1.14 | ) | (1.42 | ) | ||||||||||||||||||
Class R6 Shares | |||||||||||||||||||||||||||||||
Year Ended May 31, 2020 | $ | 28.66 | 0.49 | (e) | (1.12 | ) | (0.63 | ) | (0.75 | ) | (5.76 | ) | (6.51 | ) | |||||||||||||||||
August 17, 2018(h) through May 31, 2019 | $ | 32.01 | 0.52 | (e) | (1.54 | ) | (1.02 | ) | (0.53 | ) | (1.80 | ) | (2.33 | ) |
* 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.
^ 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 two year period beginning July 1, 2019 and in effect through June 30, 2021, instead of coinciding with the Fund's fiscal year end. Details of the current contractual expense limitation in effect can be found in Note 5 of the accompanying Notes to Financial Statements.
(a) Not annualized for periods less than one year.
(b) Annualized for periods less than one year.
(c) Reflects total annual operating expenses for reductions of expenses paid indirectly for the May 31 fiscal years ended 2019, 2018, 2017, and 2016. Expenses paid indirectly decreased the expense ratio for each of these respective years by less than 0.01%.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
(e) Per share net investment income (loss) has been calculated using the average daily shares method.
(f) Amount is less than $0.005.
See notes to financial statements.
44
USAA Mutual Funds Trust | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period (continued)
Ratios to Average Net Assets | Supplemental Data | ||||||||||||||||||||||||||||||||||
Redemption Fees Added to Beneficial Interests | Net Asset Value, End of Period | Total Return*(a) | Net Expenses^(b)(c) | Net Investment Income (Loss)(b) | Gross Expenses(b)(c) | Net Assets, End of Period (000's) | Portfolio Turnover(a)(d) | ||||||||||||||||||||||||||||
USAA International Fund | |||||||||||||||||||||||||||||||||||
Adviser Shares | |||||||||||||||||||||||||||||||||||
Year Ended May 31, 2020 | — | $ | 21.39 | (6.37 | )% | 1.35 | % | 1.37 | % | 1.39 | % | $ | 6,402 | 119 | %(i) | ||||||||||||||||||||
Year Ended May 31, 2019 | — | $ | 28.58 | (5.39 | )% | 1.35 | % | 1.52 | % | 1.41 | % | $ | 7,715 | 30 | % | ||||||||||||||||||||
Year Ended May 31, 2018 | — | $ | 32.67 | 8.29 | % | 1.35 | % | 1.29 | % | 1.42 | % | $ | 8,101 | 36 | % | ||||||||||||||||||||
Year Ended May 31, 2017 | — | $ | 31.04 | 19.58 | % | 1.35 | % | 1.08 | % | 1.51 | % | $ | 7,540 | 40 | % | ||||||||||||||||||||
Year Ended May 31, 2016 | — | (f) | $ | 26.31 | (9.94 | )% | 1.37 | %(g) | 1.14 | % | 1.46 | % | $ | 6,362 | 62 | % | |||||||||||||||||||
Class R6 Shares | |||||||||||||||||||||||||||||||||||
Year Ended May 31, 2020 | — | $ | 21.52 | (5.95 | )% | 0.85 | % | 1.83 | % | 1.18 | % | $ | 3,365 | 119 | %(i) | ||||||||||||||||||||
August 17, 2018(h) through May 31, 2019 | — | $ | 28.66 | (2.55 | )% | 0.85 | % | 2.19 | % | 2.03 | % | $ | 4,477 | 30 | % |
(g) Prior to October 1, 2015, AMCO had voluntarily agreed to limit the annual expenses of the Adviser Shares to 1.40% of the Adviser Shares' average daily net assets.
(h) Commencement of operations.
(i) Reflects increased trading activity due to current year transition or asset allocation shift.
See notes to financial statements.
45
USAA Mutual Funds Trust | Notes to Financial Statements May 31, 2020 |
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 47 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, Adviser Shares 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 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 November 6, 2018, United Services Automobile Association ("USAA"), the parent company of USAA Asset Management Company ("AMCO"), the investment adviser to the Fund, and USAA Transfer Agency Company, d/b/a USAA Shareholder Account Services ("SAS"), the transfer agent to the Fund, announced that AMCO and SAS would be acquired by Victory Capital Holdings Inc., a global investment management firm headquartered in Cleveland, Ohio (the "Transaction"). The Transaction closed on July 1, 2019. A special shareholder meeting was held on April 18, 2019, at which shareholders of the Fund approved a new investment advisory agreement between the Trust, on behalf of the Fund, and Victory Capital Management Inc. ("VCM" or "Adviser"). Effective July 1, 2019, VCM replaced AMCO as the investment adviser to the Fund and Victory Capital Transfer Agency Company replaced SAS as the Fund's transfer agent. In addition, effective on that same date, shareholders of the Fund also elected the following two new directors to the Board of the Trust to serve upon the closing of the Transaction: (1) David C. Brown, to serve as an Interested Trustee; and (2) John C. Walters, to serve as an Independent Trustee.
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 generally accepted accounting principles in the United States of America ("GAAP"). The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses for the period. Actual results could differ from those estimates. The Fund follows the specialized accounting and reporting requirements under GAAP that are applicable to investment companies under Accounting Standards Codification Topic 946.
Investment Valuation:
The Fund records investments at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The valuation techniques described below maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value. The inputs used for valuing the Fund's investments are summarized in the three broad levels listed below:
• Level 1 — quoted prices in active markets for identical securities
• Level 2 — other significant observable inputs (including quoted prices for similar securities or interest rates applicable to those securities, etc.)
46
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
• Level 3 — significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments)
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The inputs or methodologies used for valuation techniques are not necessarily an indication of the risk associated with entering into those investments.
The Adviser has established the Pricing and Liquidity Committee (the "Committee"), and subject to Trust's Board of Trustees (the "Board") oversight, the Committee administers and oversees the Fund's valuation policies and procedures, which are approved by the Board.
Portfolio securities listed or traded on securities exchanges, including exchange-traded funds ("ETFs"), American Depositary Receipts ("ADRs") 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 are valued at 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, are not reflective of market value, or a significant event has been recognized in relation to a security or class of securities, the securities are valued in good faith by the Committee in accordance with valuation procedures approved by 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. These valuations are considered as Level 2 in the fair value hierarchy.
A summary of the valuations as of May 31, 2020, based upon the three levels defined above, is included in the table below while the breakdown, by category, of investments is disclosed in the Schedule of Portfolio Investments (amounts in thousands):
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Common Stocks | $ | 88,834 | $ | 2,681,919 | $ | — | $ | 2,770,753 | |||||||||||
Preferred Stocks | 3,158 | 5,574 | — | 8,732 | |||||||||||||||
Exchange-Traded Funds | 514 | — | — | 514 | |||||||||||||||
Collateral for Securities Loaned | 64,810 | — | — | 64,810 | |||||||||||||||
Total | $ | 157,316 | $ | 2,687,493 | $ | — | $ | 2,844,809 |
For the year ended May 31, 2020, there were no transfers in or out of the Level 3 fair value hierarchy.
Real Estate Investment Trusts ("REITs"):
The Fund may invest in REITs which report information on the source of their distributions annually. REITs are pooled investment vehicles that invest primarily in income producing real estate or real estate related loans or interests (such as mortgages). Certain distributions received from REITs during the year are recorded as realized gains or return of capital as estimated by the Fund or when such information becomes known.
47
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
Investment Companies:
Exchange-Traded Funds:
The Fund may invest in ETFs. ETFs are a type of index fund, 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 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 they are 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.
Foreign Exchange Currency Contracts:
The Fund may enter into foreign exchange currency contracts to convert U.S. dollars to and from various foreign currencies. A foreign exchange currency contract is an obligation by the Fund to purchase or sell a specific currency at a future date at a price (in U.S. dollars) set at the time of the contract. The Fund does not engage in "cross-currency" foreign exchange contracts (i.e., contracts to purchase or sell one foreign currency in exchange for another foreign currency). The Fund's foreign exchange currency contracts might be considered spot contracts (typically a contract of one week or less) or forward contracts (typically a contract term over one week). A spot contract is entered into for purposes of hedging against foreign currency fluctuations relating to a specific portfolio transaction, such as the delay between a security transaction trade date and settlement date. Forward contracts are entered into for purposes of hedging portfolio holdings or concentrations of such holdings. Each foreign exchange currency contract is adjusted daily by the prevailing spot or forward rate of the underlying currency, and any appreciation or depreciation is recorded for financial statement purposes as unrealized until the contract settlement date, at which time the Fund records realized gains or losses equal to the difference between the value of a contract at the time it was opened and the value at the time it was closed. The Fund could be exposed to risk if a counterparty is unable to meet the terms of a foreign exchange currency contract or if the value of the foreign currency changes unfavorably. In addition, the use of foreign exchange currency contracts does not eliminate fluctuations in the underlying prices of the securities. As of May 31, 2020, 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 on 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 discount. Gains or losses realized on sales of securities are determined by comparing the identified cost of the security lot sold with the net sales proceeds.
Withholding taxes on interest, dividends and gains as a result of certain investments in ADRs by the Fund has 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, to earn additional income, net of
48
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
income retained by Citibank. Borrowers are required to 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 cured the next business day once the shortfall exceeds $100 thousand. Collateral may be cash, U.S. government securities, or other securities as permitted by SEC guidelines. Cash collateral may be invested in high-quality short-term investments, primarily open-end investment companies. Collateral requirements are determined daily based on the value of the Fund's securities on loan as of the end of the prior business day. During the time portfolio securities are on loan, the borrower will pay the Fund any dividends or interest paid on such securities plus any fee negotiated between the parties to the lending agreement. The Fund also earns a return from the collateral. The Fund pays Citibank various fees in connection with the investment of cash collateral and fees based on the investment income received from securities lending activities. Securities lending income (net of these fees) is disclosed on the Statement of Operations. Loans are terminable upon demand and the borrower must return the loaned securities within the lesser of one standard settlement period or five business days. Risks relating to securities-lending transactions include that the borrower may not provide additional collateral when required or return the securities when due, and 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 re-pledged except to satisfy borrower default. Cash collateral is listed in the Fund's Portfolio of Investments and Financial Statements while non-cash collateral is not included.
The following table (amounts in thousands) is a summary of the Fund's securities lending transactions as of May 31, 2020.
Value of Securities on Loan | Non-Cash Collateral | Cash Collateral | |||||||||
$ | 38,752 | $ | — | $ | 64,810 |
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 investments and foreign currency translations on the Statement of Operations. Any realized gains or losses from these fluctuations, including foreign currency arising from in-kind redemptions, are disclosed as net realized gains or losses from investment transactions and foreign currency translations on the Statement of Operations.
Foreign Taxes:
The Fund may be subject to foreign taxes related to foreign income received (a portion of which may be reclaimable), capital gains on the sale of securities, and certain foreign currency transactions. All foreign taxes are recorded in accordance with the applicable regulations and rates that exist in the foreign jurisdictions in which the Fund invests.
Federal Income Taxes:
It is the Fund's policy 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.
49
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
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., 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 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, 12b-1 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.
3. Purchases and Sales:
Cost of purchases and proceeds from sales/maturities of securities (excluding securities maturing less than one year from acquisition) for the year ended May 31, 2020, were as follows for the Fund (amounts in thousands):
Excluding U.S. Government Securities | |||||||||||
Purchases | Sales | ||||||||||
$ | 3,939,888 | $ | 4,568,508 |
There were no purchases and sales of U.S. government securities during the year ended May 31, 2020.
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 semiannual reports may be viewed at usaa.com. As of May 31, 2020, certain fund-of funds owned total outstanding shares of the Fund:
Affiliated USAA Mutual Funds | Ownership % | ||||||
USAA Cornerstone Conservative Fund | 0.2 | ||||||
USAA Cornerstone Equity Fund | 1.0 | ||||||
USAA Target Retirement Income Fund | 0.0 | (a) | |||||
USAA Target Retirement 2020 Fund | 0.0 | (a) | |||||
USAA Target Retirement 2040 Fund | 0.0 | (a) | |||||
USAA Target Retirement 2050 Fund | 0.0 | (a) | |||||
USAA Target Retirement 2060 Fund | 0.0 | (a) |
(a) Amount is less than 0.005%.
5. Fees and Transactions with Affiliates and Related Parties:
Investment Advisory and Management Fees:
Effective with the Transaction on July 1, 2019, investment advisory services are provided to the Fund by the Adviser, a New York corporation registered as an investment adviser with the Securities and Exchange Commission ("SEC"). The Adviser is a wholly-owned indirect subsidiary of Victory Capital Holdings, Inc., a publicly traded Delaware corporation, and a wholly-owned direct subsidiary of Victory Capital Operating, LLC. Under the terms of the Investment Advisory Agreement, the Adviser is entitled to receive a base fee and a performance adjustment. The Fund's base fee is accrued daily and paid
50
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
monthly at an annualized rate of 0.75% of the Fund's average daily net assets. The amount incurred and paid to VCM from July 1, 2019 through May 31, 2020, was $23,002 thousand and is reflected on the Statement of Operations as Investment Advisory fees.
Prior to the Transaction on July 1, 2019, AMCO provided investment management services to the Fund pursuant to an Advisory Agreement. Under this agreement, AMCO was responsible for managing the business and affairs of the Fund, and for directly managing day-to-day investment of the Fund's assets, subject to the authority of and supervision by the Board. The investment management fee for the Fund was comprised of a base fee and a performance adjustment. The Fund's base fee was accrued daily and paid monthly at an annualized rate of 0.75% of the Fund's average daily net assets.
Effective with the Transaction on July 1, 2019, no performance adjustments will be made for periods beginning July 1, 2019, through June 30, 2020. Only performance beginning as of July 1, 2019, and thereafter will be utilized in calculating future performance adjustments.
Prior to the Transaction on July 1, 2019, the performance adjustment for each share class was accrued daily and calculated monthly by comparing the Fund's performance to that of the Lipper International Funds Index. The Lipper International Funds Index tracks the total return performance of funds within the Lipper International Funds category.
The performance period for each share class consists of the current month plus the previous 35 months (or the number of months beginning July 1, 2019, if fewer). The following table is utilized to determine the extent of the performance adjustment:
Over/Under Performance Relative to Index (in basis points)(a) | Annual Adjustment Rate (in basis points)(a) | ||||||
+/- 100 to 400 | +/- 4 | ||||||
+/- 401 to 700 | +/- 5 | ||||||
+/- 701 and greater | +/- 6 |
(a) Based on the difference between average annual performance of the relevant share class of the Fund and its relevant index, rounded to the nearest basis point. Average daily net assets of the share class are calculated over a rolling 36-month period.
Each class' annual performance adjustment rate is multiplied by the average daily net assets of each respective class over the entire performance period, which is then multiplied by a fraction, the numerator of which is the number of days in the month and the denominator of which is 365 (366 in leap years). The resulting amount is then added to (in the case of overperformance), or subtracted from (in the case of underperformance) the base fee.
Under the performance fee arrangement, each class 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, 2019 through June 30, 2019, performance adjustments for Fund Shares, Institutional Shares, Adviser Shares, and R6 Shares were $56, $72, less than $1 thousand, and less than $1 thousand, respectively. For the Fund Shares, Institutional Shares, Adviser Shares and R6 Shares, the performance adjustments were less than 0.01% of net assets for all classes. Base fees incurred and paid to AMCO from June 1, 2019 through June 30, 2019, were $2,341 thousand and is reflected on the Statement of Operations as Investment Advisory fees.
Effective with the Transaction on July 1, 2019, 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. Prior to that date, the Trust relied on a similar exemptive order granted by the SEC to the Trust and its affiliated persons. 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.
51
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
Effective July 1, 2019, VCM entered into Investment Subadvisory Agreements with Lazard Asset Management LLC ("Lazard") and Wellington Management Company LLP ("Wellington Management") and terminated an Investment Subadvisory Agreement with MFS Investment Management ("MFS"). Lazard and Wellington Management each directed the investment and reinvestment of a portion of the Fund's assets (as allocated from time to time by VCM). These arrangements provide for monthly fees that are paid by VCM. VCM (not the Fund) pays the subadviser fees.
Prior to July 1, 2019, AMCO entered into Investment Subadvisory Agreements with Lazard, MFS, and Wellington Management under which each direct the investment and reinvestment of a portion of the Fund's assets (as allocated from time to time by the AMCO). These arrangements provided for monthly fees that were paid by AMCO. AMCO (not the Fund) paid the subadviser fees.
Administration and Servicing Fees:
Effective with the Transaction on July 1, 2019, VCM serves as the Fund's administrator and fund accountant. Under the Fund Administration, Servicing and Accounting Agreement, VCM is paid for its services an annual fee at a rate of 0.15% of average daily net assets for both the Fund Shares and Adviser Shares, 0.10% of average daily net assets of the Institutional Shares, and 0.05% of average daily net assets of the R6 Shares. Amounts incurred from July 1, 2019 through May 31, 2020, are $2,244, $1,560, $11, and $2 thousand for Fund Shares, Institutional Shares, Adviser Shares, and R6 Shares, respectively. These amounts are reflected on the Statement of Operations as Administration fees.
Prior to the Transaction on July 1, 2019, AMCO provided certain administration and servicing functions for the Fund. For such services, AMCO received a fee accrued daily and paid monthly at an annualized rate of 0.15% of average daily net assets for both the Fund Shares and Adviser Shares, 0.10% of average daily net assets of the Institutional Shares, and 0.05% of average daily net assets of the R6 Shares. Amounts incurred from June 1, 2019 through June 30, 2019, are $215, $168, $1, and less than $1 thousand for Fund Shares, Institutional Shares, Adviser Shares, and R6 Shares, respectively. These amounts are reflected on the Statement of Operations as Administration fees.
Effective with the Transaction on July 1, 2019, the Fund (as part of the Trust) has entered into an agreement to provide compliance services with the Adviser, 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. Funds in the Trust, Victory Variable Insurance Funds, Victory Portfolios and Victory Portfolios II (collectively, the "Victory Funds Complex") in the aggregate, compensates the Adviser for these services. The amount incurred during the period from July 1, 2019 to May 31, 2020, is reflected on the Statement of Operations as Compliance fees.
Effective with the Transaction on July 1, 2019, 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 Trust reimburses VCM and Citi for all of their reasonable out-of-pocket expenses incurred in providing these services and certain other expenses specifically allocated to the Fund under the Fund Administration, Servicing, and Accounting Agreement. The amount incurred during the period from July 1, 2019 through May 31, 2020, is reflected on the Statement of Operations as Sub-Administration fees.
In addition to the services provided under its Administration and Servicing Agreement with the Fund, AMCO also provided certain compliance and legal services for the benefit of the Fund prior to the Transaction on July 1, 2019. The Board approved the reimbursement of a portion of these expenses incurred by AMCO. AMCO did not receive any fees from the Fund for these services.
52
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
Transfer Agency Fees:
Effective with the Transaction on July 1, 2019, Victory Capital Transfer Agency, Inc. ("VCTA"), (formerly, USAA Shareholder Account Services ("SAS")), provides transfer agency services to the Fund. VCTA, an affiliate of the Adviser, provides transfer agent services to the Fund Shares and Adviser 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's fees for Institutional Shares and R6 Shares are paid monthly based on a fee accrued daily at an annualized rate of 0.10% of the Institutional Shares' and 0.01% of the R6 Shares' average daily net assets, plus out-of pocket expenses. Amounts incurred and paid to VCTA from July 1, 2019 through May 31, 2020, was $1,867, $1,560, $2, and less than $1 thousand for the Fund Shares, Institutional Shares, Adviser Shares, and R6 Shares, respectively. Amounts incurred and paid to SAS from June 1, 2019 through June 30, 2019, was $173, $168, less than $1 thousand, and less than $1 thousand for the Fund Shares, Institutional Shares, Adviser Shares, and R6 Shares, respectively. These amounts are reflected on the Statement of Operations as Transfer Agent fees.
Effective with the Transaction on July 1, 2019, 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.
Distribution and Service 12b-1 Fees:
Effective with the Transaction on July 1, 2019, Victory Capital Advisers, Inc. (the "Distributor"), an affiliate of the Adviser, serves as distributor for the continuous offering of the Adviser Shares pursuant to a Distribution Agreement between the Distributor and the Trust. Effective on or about June 30, 2020, the Distributor's name will change to Victory Capital Services, Inc. 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 the Adviser Shares. Amounts incurred and paid to the Distributor from July 1, 2019 through May 31, 2020, are $18 thousand and reflected on the Statement of Operations as 12b-1 fees.
Adviser Shares are offered and sold without imposition of an initial sales charge or a contingent deferred sales charge.
Prior to the Transaction on July 1, 2019, the Fund adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Adviser Shares. Under the plan, the Adviser Shares paid fees to USAA Investment Management Company ("IMCO"), the distributor, for distribution and shareholder services. IMCO paid all or a portion of such fees to intermediaries that made the Adviser Shares available for investment by their customers. The fee was accrued daily and paid monthly at an annual rate of 0.25% of the Adviser Shares' average daily net assets. IMCO also provided exclusive underwriting and distribution of the Fund's shares on a continuing best-efforts basis and received no fee or other compensation for these services, but may have received 12b-1 fees as described above, with respect to Adviser Shares. Amounts incurred and paid to IMCO from June 1, 2019 through June 30, 2019, were $2 thousand and reflected on the Statement of Operations as 12b-1 fees.
Other Fees:
Prior to the Transaction on July 1, 2019, State Street Bank and Trust Company served as the Fund's accounting agent and custodian.
Effective July 1, 2019, Citibank, N.A., serves as the Fund's custodian.
K&L Gates LLP provides legal services to the Trust.
Effective with the Transaction on July 1, 2019, the Adviser has entered into an expense limitation agreement with the Fund until at least June 30, 2021. 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 limit for such classes of the Fund. Such excess amounts will be the liability of the Adviser. Interest, taxes, brokerage commissions,
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USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
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.
Effective July 1, 2019 through May 31, 2020, the expense limit (excluding voluntary waivers) is 1.06%, 0.99%, 1.35%, and 0.85% for the Fund Shares, Institutional Shares, Adviser Shares, and R6 Shares, respectively.
Under this expense limitation agreement, the Fund has agreed to repay fees and expenses that were waived or reimbursed by the Adviser for a period up to three years after the fiscal year in which 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 May 31, 2020, the following amounts are available to be repaid to the Adviser (amounts in thousands).
Expires 05/31/2023 | |||||||
$ | 91 |
The Adviser, may voluntarily waive or reimburse additional fees to assist the Fund in maintaining competitive expense ratios. Voluntary waivers and reimbursements applicable to the Fund are not available to be recouped at a future time. There were no voluntary waivers or reimbursements for the year ended May 31, 2020.
Prior to the Transaction on July 1, 2019, AMCO agreed, through September 30, 2019, to limit the total annual operating expenses of the Adviser Shares and R6 Shares to 1.35% and 0.85%, respectively, of their average daily net assets, excluding extraordinary expenses and before reductions of any expenses paid indirectly, and to reimburse the Adviser Shares and R6 Shares for all expenses in excess of those amounts. Effective with the Transaction on July 1, 2019, these expense limits are no longer in effect and is not available to be recouped by AMCO. For the period June 1, 2019 through June 30, 2019, amounts reimbursed by the Adviser Shares and R6 Shares are reflected on the Statement of Operations as Expenses waived/reimbursed by AMCO.
Certain officers and/or interested trustees of the Fund are also officers and/or employees of the Adviser, Administrator, Sub-Administrator, Sub-Fund Accountant, and Legal.
6. Risks:
The Fund may be subject to other risks in addition to these identified risks.
Global economies and financial markets are increasingly interconnected, which increases the possibilities that conditions in one country or region might adversely affect issuers in another country or region. Geopolitical and other risks, including war, terrorism, trade disputes, political or economic dysfunction within some nations, public health crises and related geopolitical events, as well as environmental disasters such as earthquakes, fires, and floods, may add to instability in world economies and markets generally. Changes in trade policies and international trade agreements could affect the economies of many countries in unpredictable ways. Epidemics and/or pandemics, such as the coronavirus (or COVID-19), may result in, among other things, closing borders, disruptions to healthcare service preparation and delivery, quarantines, cancellations, disruptions to supply chains and consumer activity, as well as general concern and uncertainty. The impact may be short-term or may last for extended periods.
The COVID-19 pandemic, which has spread rapidly across the world, has led and will continue to lead for an unknown period of time to disruptions in local, regional, national and global markets and economies. Among other things, the outbreak has resulted in, and until fully resolved is likely to continue to result in, among other things (1) government imposition of various forms of "stay-at-home" orders and the closing of "non-essential" businesses, resulting in significant disruption to the businesses of many issuers as well as lay-offs of employees; (2) increased requests by issuers of debt instruments for amendments and waivers of agreements to avoid default and increased defaults; (3) volatility and disruption of markets, including greater volatility in pricing and spreads; and (4) rapidly evolving
54
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
proposals and/or actions by state and federal governments to address problems being experienced by the markets and by businesses and the economy in general.
The equity securities in the Fund's portfolio are subject to stock market risk. A company's stock price in general may decline over short or even extended periods, regardless of the success or failure of the company's operations. Stock markets tend to run in cycles, with periods when stock prices generally go up and periods when stock prices generally go down. Equity securities tend to be more volatile than debt securities. In addition, the Fund invests primarily in foreign securities. There is a possibility that the value of the Fund's investments in foreign securities will decrease because of unique risks, such as currency exchange-rate fluctuations; foreign market illiquidity; emerging market risk; increased price volatility; uncertain political conditions; exchange control regulations; foreign ownership limits; different accounting, reporting, and disclosure requirements; difficulties in obtaining legal judgments; and foreign withholding taxes. These risks are particularly heightened in this Fund because investments in emerging-market countries generally are more volatile than investments in developed markets. Emerging-market countries are less economically diverse and mature than more developed countries and tend to be politically less stable.
The Fund's performance could be closely tied to the market, currency, economic, political, regulatory, geopolitical, or other conditions and developments in the countries or regions in which the Fund invests. As such, the Fund's performance could be more volatile than the performance of more geographically diversified funds.
The Fund may invest in securities of companies of any market capitalization and is subject to mid- and small-cap company risk, which is the greater risk of investing in smaller, less well-known companies, as opposed to investing in established companies with proven track records. Mid- and small-cap companies also may have limited product lines, markets, or financial resources. Securities of such companies may be less liquid and more volatile than securities of larger companies or the market in general and, therefore, may involve greater risk than investing in the securities of larger companies.
7. Borrowing and Interfund Lending:
Line of Credit:
Effective with the Transaction on July 1, 2019, the Victory Funds Complex participates in a short-term, demand note "Line of Credit" agreement with Citibank. Under the agreement with Citibank, the Victory Funds Complex could 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 that Fund paying the related commitment fees for that amount. The purpose of the agreement is to meet temporary or emergency cash needs. Citibank receives an annual commitment fee of 0.15% on $300 million for providing the Line of Credit. Each fund in the Victory Funds Complex pays a pro-rata portion of the commitment fees plus any interest (one month LIBOR plus one percent) on amounts borrowed. Effective June 29, 2020, under an amended Line of Credit agreement, Citibank will also receive an annual upfront fee of 0.10% on the $300 million committed line of credit. Each fund in the Victory Funds Complex will pay a pro-rata portion of the upfront fee. Interest charged to the Fund, if any, during the period is reflected on the Statement of Operations under line of credit fees.
Prior to the Transaction on July 1, 2019, the line of credit among the Trust, with respect to its funds, and USAA Capital Corporation ("CAPCO") terminated. For the period from June 1, 2019 to June 30, 2019, the Fund paid CAPCO facility fees of $8 thousand.
55
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
The average borrowing for the days outstanding and average interest rate for the Fund during the year ended May 31, 2020 were as follows (amounts in thousands):
Amount Outstanding at May 31, 2020 | Average Borrowing* | Days Borrowings Outstanding | Average Interest Rate | Maximum Borrowing During the Period | |||||||||||||||
$ | — | $ | 8,983 | 6 | 2.99 | % | $ | 21,500 |
* For the year ended May 31, 2020, based on the number of days borrowings were outstanding.
Interfund Lending:
Effective with the Transaction on July 1, 2019, the Trust and 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 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. The interfund loan rate is determined, as specified in the Order, by averaging the current repurchase agreement rate and the current bank loan rate. As a Borrower, interest charged to the Fund, if any, during the period is reflected on the Statement of Operations under Interest expense on Interfund lending. As a Lender, interest earned by the Fund, if any, during the period is reflected on the Statement of Operations under Income on Interfund lending.
The average borrowing for the days outstanding and average interest rate for the Fund during the year ended May 31, 2020 were as follows (amounts in thousands):
Borrower or Lender | Amount Outstanding at May 31, 2020 | Average Borrowing* | Days Borrowing Outstanding | Average Interest Rate* | Maximum Borrowing During the Period | ||||||||||||||||||||||
Borrower | $ | — | $ | 3,642 | 11 | 3.01 | % | $ | 5,500 |
* For the year ended May 31, 2020, based on the number of days borrowings were outstanding.
8. Federal Income Tax Information:
The Fund intends to declare daily and distribute any net investment income annually. Distributable net realized gains, if any, are declared and paid at least annually.
The amounts of dividends from net investment income and distributions from net realized gains (collectively distributions to shareholders) are determined in accordance with federal income tax regulations, which may differ from GAAP. To the extent these "book/tax" differences are permanent in nature (e.g., net operating loss and distribution reclassification), such amounts are reclassified within the components of net assets based on their federal tax-basis treatment; temporary differences (e.g., wash sales) do not require reclassification. To the extent dividends and distributions exceed net investment income and net realized gains for tax purposes, they are reported as distributions of capital. Net investment losses incurred by the Fund may be reclassified as an offset to capital on the accompanying Statement of Assets and Liabilities.
As of May 31, 2020, on the Statement of Assets and Liabilities, there were no permanent book-to-tax difference reclassification adjustments.
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USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
The tax character of distributions paid during the tax years ended as noted below, were as follows (total distributions paid may differ from the Statement of Changes in Net Assets because, for tax purposes, dividends are recognized when actually paid) (amounts in thousands).
Year Ended May 31, 2020 | Year Ended May 31, 2019 | ||||||||||||||||||||||||||
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 | ||||||||||||||||||||||
$ | 98,693 | $ | 643,515 | $ | 742,208 | $ | 87,922 | $ | 193,659 | $ | 281,581 |
As of May 31, 2020, the components of accumulated earnings (deficit) on a tax basis were as follows (amounts in thousands):
Undistributed Ordinary Income | Qualified Late-Year Losses* | Unrealized Appreciation (Depreciation)** | Total Accumulated Earnings (Deficit) | ||||||||||||
$ | 20,036 | $ | (63,491 | ) | $ | (91,939 | ) | $ | (135,394 | ) |
* Qualified late-year losses are comprised of post-October capital losses incurred after October 31 and certain late-year ordinary losses. Late-year ordinary losses represent ordinary losses incurred after December 31 and specified losses incurred after October 31. These losses are deemed to arise on the first day of the Fund's next taxable year.
** The difference between the book-basis and tax-basis of unrealized appreciation/depreciation is attributable primarily to tax deferral of losses on wash sales and passive foreign investment company adjustments.
At May 31, 2020, the Fund had no capital loss carryforwards for federal income tax purposes.
As of May 31, 2020, 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) | ||||||||||||
$ | 2,937,005 | $ | 367,116 | $ | (459,312 | ) | $ | (92,196 | ) |
9. 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 1940 Act. 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 Funds' Board of Trustees approved the appointment of the Fund's investment adviser, Victory Capital, as the administrator of the LRMP. At an in-person meeting held on February 26, 2020, Victory Capital provided an oral and written report to the Trustees on the operation and effectiveness of the LRMP during the previous year.
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USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
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.
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 reasonably expected to be converted to cash in current market conditions in three business days or less without significantly changing the market value of the investment. Therefore, the Fund has not adopted a Highly Liquid Investment Minimum. The Fund's investments were below the limitation on illiquid investments during the review period. Additionally, Victory Capital indicated that no events occurred that would require the filing of Form N-LIQUID and recommended no material changes to the LRMP.
10. Subsequent Events:
The Board of Trustees of USAA Mutual Funds Trust has approved redesignating the Fund's current Adviser Shares as "Class A" shares ("Redesignation"). This change was effective beginning on June 29th, 2020.
Class A shares will be available for purchase through financial intermediaries and the Fund will pay ongoing distribution and/or service (12b-1) fees at annual rate of up to 0.25% of the average daily net assets of its Class A shares. In addition, the Transfer Agency fee will convert to an annual basis point rate of 0.10% of daily net assets of its Class A shares from its current flat per account fee. Class A shares will be offered and sold at their public offering price, which is the NAV per share plus any applicable initial sales charge, also referred to as a "front-end sales load." For purchases on or after the Redesignation Date, Class A Shares will be offered and sold with the imposition of a maximum initial sales charge of up to 2.25% of the offering price of the Fund. A contingent deferred sales charge of up to 0.75% may be imposed on redemptions of Class A shares purchased without an initial sales charge if shares are redeemed within 18 months of purchase.
The Redesignation will be made without the imposition of any sales loads, fees, or other charges to Adviser Shares held in shareholder accounts on the Redesignation Date. The Redesignation will not be considered a taxable event for federal income tax purposes.
58
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of USAA International Fund:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of USAA International Fund (the "Fund") (one of the funds constituting USAA Mutual Funds Trust (the "Trust")), including the schedule of portfolio investments, as of May 31, 2020, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the funds constituting USAA Mutual Funds Trust) at May 31, 2020, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Trust's management. Our responsibility is to express an opinion on the Fund's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust's internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of May 31, 2020, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Victory Capital investment companies since 1995.
San Antonio, Texas
July 27, 2020
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USAA Mutual Funds Trust | Supplemental Information May 31, 2020 |
(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) 539-3863. The information is also included in the Fund's Statement of Additional Information, which is available on the SEC's website at www.sec.gov.
Information relating to how the Fund voted proxies relating to portfolio securities held during the most recent 12 months ended June 30 is available on the SEC's website at www.sec.gov.
Availability of Schedules of Portfolio Investments:
The Trust files a complete list of Schedules of Portfolio Investments with the SEC for the first and third quarter of each fiscal year on Form N-PORT. Forms N-PORT are available on the SEC's website at www.sec.gov.
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(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 10 Trustees, eight of whom are not "interested persons" of the Trust within the meaning of that term under the 1940 Act ("Independent Trustees") and two 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 ages, position with the Trust, commencement of service, 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 47 portfolios in the Trust. Each Trustee's address is 15935 La Cantera Pkwy, Building Two, San Antonio, TX, 78256. Pursuant to a policy adopted by the Board, the term of office for each Trustee shall be until the Independent Trustee reaches age 75 or an Interested Trustee reaches age 75. The Board may change or grant exceptions from this policy at any time without shareholder approval. A Trustee may resign or be removed by a vote of the other Trustees or the holders of a majority of the outstanding shares of the Trust at any time. Vacancies on the Board can be filled by the action of a majority of the Trustees, provided that after filling such vacancy at least two-thirds of the Trustees have been elected by the shareholders.
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Independent Trustees. | |||||||||||||||||||
Jefferson C. Boyce, Born September 1957 | Lead Independent Trustee, and Vice Chairman | 2013 | Senior Managing Director, New York Life Investments, LLC (1992-2012) | Westhab, Inc. | |||||||||||||||
John C. Walters, Born February 1962 | Trustee | 2019 | Retired. Mr. Walters brings significant Board experience including active involvement with the board of a Fortune 500 company, and a proven record of leading large, complex financial organizations. He has a demonstrated record of success in distribution, manufacturing, investment brokerage, and investment management in both the retail and institutional investment businesses. He has substantial experience in the investment management business with a demonstrated ability to develop and drive strategy while managing operation, financial, and investment risk. | Guardian Variable Products Trust (16 series), Lead Independent Director; Amerilife Holdings LLC, Director; Stadion Money Management; Director; University of North Carolina (Chapel Hill), Member Board of Governors. |
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(Unaudited)
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Robert L. Mason, Ph.D., Born July 1946 | Trustee | 1997 | Adjunct Professor in the Department of Management Science and Statistics in the College of Business at the University of Texas at San Antonio (since 2001); Institute Analyst, Southwest Research Institute (March 2002-January 2016) | None | |||||||||||||||
Dawn M. Hawley, Born February 1954 | Trustee | 2014 | Manager of Finance, Menil Foundation, Inc. (May 2007-June 2011), which is a private foundation that oversees the assemblage of sculptures, prints, drawings, photographs, and rare books. Director of Financial Planning and Analysis and Chief Financial Officer, AIM Management Group, Inc. (October 1987-January 2006) | None | |||||||||||||||
Paul L. McNamara, Born July 1948 | Trustee | 2012 | Director, Cantor Opportunistic Alternatives Fund, LLC (March 2010-February 2014) , which is a closed-end fund of funds by Cantor Fitzgerald Investment Advisors, LLC | None |
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(Unaudited)
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Richard Y. Newton III, Born January 1956 | Trustee | 2017 | Director, Elta North America (01/18-present), 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 (December 2015-present)); Executive Director, The Union League Club of New York (June 2014-November 2015): Executive Vice President, Air Force Association (August 2012-May 2014); Lieutenant General, United States Air Force (January 2008-June 2012) | None | |||||||||||||||
Barbara B. Ostdiek, Ph.D., Born March 1964 | Trustee | 2008 | Senior Associate Dean of Degree Programs at Jesse H. Jones Graduate School of Business at Rice University (since 2013); Associate Professor of Finance at Jessie H. Jones Graduate School of Business at Rice University (since 2001) | None | |||||||||||||||
Michael F. Reimherr, Born August 1945 | Trustee | 2000 | President of Reimherr Business Consulting (May 1995-December 2017); St. Mary's University Investment Committee overseeing University Endowment (since 2014) | None |
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(Unaudited)
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Interested Trustees. | |||||||||||||||||||
David C. Brown, ** Born May 1972 | Trustee | 2019 | Chairman and Chief Executive Officer (since 2013), Co-Chief Executive Officer (2011-2013), Victory Capital Management Inc.; Chairman and Chief Executive Officer, Victory Capital Holdings, Inc. (since 2013). Mr. Brown brings to the Board extensive business, finance and leadership skills gained and developed through years of experience in the financial services industry, including his tenure overseeing the strategic direction as CEO of Victory Capital. These skills, combined with Mr. Brown's extensive knowledge of the financial services industry and demonstrated success in the development and distribution of investment strategies and products, enable him to provide valuable insights to the Board and strategic direction for the Funds | Trustee, Victory Portfolios (42 series), Victory Portfolios II (26 series), Victory Variable Insurance Funds (9 series) |
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(Unaudited)
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Daniel S. McNamara, ** Born June 1966 | Trustee and Chair of the Board of Trustees | 2012 | Trustee, President, and Vice Chairman of USAA ETF Trust (June 2017-June 2019); President of Financial Advice & Solutions Group (FASG), USAA (since 2013); Director, IMCO (September 2009-April 2014); President, AMCO (August, 2011-April 2013); Senior Vice President of USAA Financial Planning Services Insurance Agency, Inc. (FPS) (since 2011); Director of USAA Investment Management Company (IMCO) (since 2009); Chairman of Board of IMCO (since 2013); Director of USAA Asset Management Company (AMCO), (August 2011-June 2019); President and Director of USAA Shareholder Account Services (SAS)(October 2009-June 2019); Director and Vice Chairman of FPS (since 2013); President and Director of USAA Investment Corporation (ICORP) (since 2010); Chairman of Board of ICORP (since 2013); Director of USAA Financial Advisors, Inc. (FAI) (since 2013); Chairman of Board of FAI (since 2015). Mr. McNamara brings to the Board extensive experience in the financial services industry, including experience as an officer of the Trust. | None |
** Mr. McNamara and Mr. Brown are "Interested Persons" by reason of their relationships with the Adviser.
The Statement of Additional Information includes additional information about the Trustees of the Trust and is available, without charge, on the SEC's website at www.sec.gov and/or by calling (800)-539-3863.
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Officers:
The officers of the Trust, their ages, 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, Building Two, 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 with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | ||||||||||||
Interested Officers. | |||||||||||||||
Christopher K. Dyer, Born February 1962 | President | 2019 | Director of Fund Administration, Victory Capital (2004-present) | ||||||||||||
Scott A Stahorsky, Born July 1969 | Vice President | 2019 | Manager, Fund Administration, Victory Capital (since 2015); Senior Analyst, Fund Administration, Victory Capital (prior to 2015) | ||||||||||||
James K. De Vries, Born April 1969 | Treasurer, Principal Financial Officer | 2018 | Executive Director, Victory Capital Management Inc. (since 2019); Treasurer, USAA ETF Trust (September 2018-June 2019); Executive Director, Investment and Financial Administration, USAA (April 2012-June 2019); Assistant Treasurer, USAA ETF Trust (June 2017-September 2018); Assistant Treasurer, USAA Mutual Funds Trust (December 2013-February 2018) | ||||||||||||
Allan Shaer, Born March 1965 | Assistant Treasurer | 2019 | Senior Vice President, Financial Administration, Citi Fund Services Ohio, Inc. (since 2016); Vice President, Mutual Fund Administration, JP Morgan Chase (2011-2016) | ||||||||||||
Carol D. Trevino, Born October 1965 | Assistant Treasurer | 2018 | Director, Accounting and Finance, Victory Capital Management Inc. (since 2019); Accounting/Financial Director, USAA (December 2013-June 2019); Assistant Treasurer, USAA ETF Trust (September 2018-June 2019). | ||||||||||||
Erin G. Wagner, Born February 1974 | Secretary | 2019 | Deputy General Counsel, the Adviser (since 2013) | ||||||||||||
Charles Booth, Born April 1960 | Anti-Money Laundering Compliance Officer and Identity Theft Officer | 2019 | Director, Regulatory Administration and CCO Support Services, Citi Fund Services Ohio, Inc. (2007-present) | ||||||||||||
Amy Campos, Born July 1976 | Chief Compliance Officer | 2019 | Chief Compliance Officer, USAA Mutual Funds Trust (since 2019); Executive Director, Deputy Chief Compliance Officer, USAA Mutual Funds Trust and USAA ETF Trust (July 2017-June 2019); Compliance Director, USAA Mutual Funds Trust (2014-July 2017) |
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(Unaudited)
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 December 1, 2019 through May 31, 2020.
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. If these transactional costs were included, your costs would have been higher.
Beginning Account Value 12/1/19 | Actual Ending Account Value 5/31/20 | Hypothetical Ending Account Value 5/31/20 | Actual Expenses Paid During Period 12/1/19- 5/31/20* | Hypothetical Expenses Paid During Period 12/1/19- 5/31/20* | Annualized Expense Ratio During Period 12/1/19- 5/31/20 | ||||||||||||||||||||||
Fund Shares | $ | 1,000.00 | $ | 865.50 | $ | 1,019.75 | $ | 4.90 | $ | 5.30 | 1.05 | % | |||||||||||||||
Institutional Shares | 1,000.00 | 865.70 | 1,020.05 | 4.62 | 5.00 | 0.99 | % | ||||||||||||||||||||
Adviser Shares | 1,000.00 | 864.40 | 1,018.35 | 6.20 | 6.71 | 1.33 | % | ||||||||||||||||||||
Class R6 Shares | 1,000.00 | 865.90 | 1,020.80 | 3.92 | 4.24 | 0.84 | % |
* Expenses are equal to the average account value multiplied by the Fund's annualized expense ratio multiplied by 183/366 (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 May 31, 2020 |
(Unaudited)
Additional Federal Income Tax Information
The following federal tax information related to the Fund's fiscal year ended May 31, 2020, 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 2021.
With respect to distributions paid, the Fund designates the following amounts (or, if subsequently determined to be different, the maximum amount allowable) for the fiscal year ended May 31, 2020 (amounts in thousands):
Dividend Received Deduction (corporate shareholders)* | Qualified Dividend Income (non-corporate shareholders)* | Long-Term Capital Gain Distributions(a) | Foreign Taxes Paid(b) | ||||||||||||||||
0.14 | % | 95.29 | % | $ | 643,515 | $ | 12,303 |
* Presented as a percentage of net investment income and excludes short-term capital gain distributions paid, if any. All or a portion of these amounts may be exempt from taxation at the state level.
(a) Pursuant to Section 852 of the Internal Revenue Code.
(b) The Fund has elected under Section 853 of the Internal Revenue Code to pass through the credit for taxes paid in foreign countries.
68
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 |
23409-0720
MAY 31, 2020
Annual Report
USAA Managed Allocation Fund
Beginning January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Fund's shareholder reports like this one will no longer be sent by mail, unless you specifically request paper copies of the reports from the Fund or from your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on VictoryFunds.com, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund or your financial intermediary electronically by notifying your financial intermediary directly, or if you are a direct investor, by calling (800) 235-8396 or logging on to usaa.com. Effective on or about September 8, 2020, a shareholder who has an account directly with the Fund will need to submit their request via email to TA.Processing@FISGlobal.com.
You may elect to receive all future reports in paper free of charge. You can inform the Fund or your financial intermediary that you wish to continue receiving paper copies of your shareholder reports by notifying your financial intermediary directly, or if you are a direct investor, by calling (800) 235-8396 or logging on to usaa.com. Effective on or about September 8, 2020, a shareholder who has an account directly with the Fund will need to submit their request via email to TA.Processing@FISGlobal.com. Your election to receive reports in paper will apply to all funds held with the USAA Mutual Funds or your financial intermediary.
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 logo 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.
TABLE OF CONTENTS
Shareholder Letter (Unaudited) | 2 | ||||||
Managers' Commentary (Unaudited) | 4 | ||||||
Investment Overview (Unaudited) | 6 | ||||||
Investment Objective & Portfolio Holdings (Unaudited) | 7 | ||||||
Financial Statements | |||||||
Schedule of Portfolio Investments | 8 | ||||||
Statement of Assets and Liabilities | 9 | ||||||
Statement of Operations | 10 | ||||||
Statements of Changes in Net Assets | 11 | ||||||
Financial Highlights | 12 | ||||||
Notes to Financial Statements | 14 | ||||||
Report of Independent Registered Public Accounting Firm | 23 | ||||||
Supplemental Information (Unaudited) | 24 | ||||||
Proxy Voting and Portfolio Holdings Information | 24 | ||||||
Trustees' and Officers' Information | 25 | ||||||
Expense Examples | 31 | ||||||
Additional Federal Income Tax Information | 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.
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.
USAA Mutual Funds Trust
1
(Unaudited)
Dear Shareholder,
The previous decade ended with the longest-ever bull market in U.S. equities still intact, even as investors wrestled with issues like softening global economic data, Brexit, and U.S.-China trade relations. In retrospect, those worries seem so pedestrian given what we would soon experience.
A new and unexpected threat—a global pandemic, the novel coronavirus ("COVID-19")—first emerged in Asia and then began spreading globally and throughout the United States during the first quarter of 2020. This unprecedented and unanticipated event not only rendered all existing economic and earnings forecasts moot, but it also roiled stock and bond markets everywhere. Efforts to slow the spread of the virus, though successful to date, also brought the economy to a halt. The historic bull market in stocks ended virtually overnight.
After an initial severe sell-off in March, equity markets recovered sharply. As our annual reporting period drew to a close on May 31, 2020, many of the broad market indexes had recovered and volatility had returned to more palatable levels. In fact, despite all the chaos, the S&P 500® Index, one of the most popular measures of large U.S. stocks, finished the fiscal year (May 31, 2020) at approximately 3,044, which was up more than 10.6% from one year ago.
The market turmoil of early 2020 was not limited to equities. Fixed income volatility spiked when liquidity evaporated in late March as investors struggled to understand the ramifications of stay-at-home orders. Fortunately, the U.S. Federal Reserve (the "Fed") (as well as other global central banks) leapt into action—cutting interest rates, (re)starting quantitative easing and, in the case of the Fed, launching an array of programs to stabilize markets.
The new lending facilities and programs had their intended effect of improving liquidity and trading. Credit spreads across corporate, high-yield, structured, and municipal markets were coaxed down from their highs. In addition, Congress came through with substantial fiscal stimulus that also was applauded by investors and markets. Although fixed income markets regained their footing, the yield on 10-Year Treasurys, a benchmark for low-risk investments, declined steadily during our fiscal year—from 2.14% at the beginning of our reporting period to approximately 0.65% as of May 31, 2020. This suggests that investors remain a little wary.
While the past year has been unprecedented for all of us, both personally and professionally, our portfolio managers continue to scrutinize the financial markets, economic conditions, and the trajectory of the pandemic, which will likely be the guiding factor on Fed policy and the markets.
No matter what happens in the near term, we believe that the massive monetary and fiscal policies introduced earlier this year will have longer-term ramifications. Despite this uncertainty, it's important to remain focused on your long-term investment goals and avoid making emotional decisions. If you invest with us directly, our Member Service Representatives are available to help. Call us at (800) 539-3863 or visit our website at vcm.com.
2
From all of us here at USAA Mutual Funds, thank you for letting us help you work toward your investment goals.
Christopher K. Dyer, CFA
President,
USAA Mutual Funds
3
USAA Mutual Funds Trust
USAA Managed Allocation Fund
Managers' Commentary
(Unaudited)
Victory Solutions
Mannik S. Dhillon, CFA, CAIA
Wasif A. Latif
Lance Humphrey, CFA
• What were the market conditions during the reporting period?
Global financial market performance varied widely over the period driven by uncertainty related to the duration and economic impact of the novel coronavirus ("COVID-19") pandemic. This generally led to a risk-off environment as investors flocked to safe haven assets such as U.S. Treasurys and gold. Global equities turned mostly lower with the exception of a small breadth of mega-cap securities well-positioned for an extended economic slowdown and the new stay-at-home paradigm. The final month and a half of the reporting period saw a rebound in risky assets as economies began a phased reopening.
Within the United States, the S&P 500® Index dropped nearly 34% from its 2020 high, before beginning to recoup losses with the support of comprehensive monetary and fiscal stimulus, along with encouraging results in COVID-19 vaccine trials. Over the reporting period, the S&P 500® Index (the "Index") returned 12.84%, with large-cap growth stocks leading the way, up to a return of 26.25% as represented by the Russell 1000 Growth Index. Value stocks and small-cap stocks underperformed growth stocks over the period, but more recently have seen a pickup in momentum. U.S. large-cap value stocks were down to a return of -1.64% over the reporting period as gauged by the Russell 1000 Value Index, while U.S. small-cap stocks, were down to a return of -3.44% as represented by the Russell 2000 Index.
Developed market international and emerging market equities followed a path similar to U.S. equities. Markets led investors on a rollercoaster ride that saw both the MSCI EAFE Index and MSCI Emerging Markets Index drop approximately 34% from their highs in the year. The market drawdown hit bottom on March 23rd and then started a steady ascent, erasing most of the losses as European Central Bank quantitative easing and talks of a 750-billion euros fiscal stimulus helped bolster momentum in the market's recovery. Over the reporting period, developed international equities, represented by the MSCI EAFE Index, were down to a return of -2.81%, while the MSCI Emerging Markets Index returned -4.39%.
Within fixed income, interest rate-sensitive treasury bonds outperformed credit-sensitive investment-grade and high-yield corporate bonds. Investor demand for U.S. Treasurys drove yields to new lows, while credit spreads reached unprecedented levels as liquidity issues began to seize up parts of credit and municipal markets. The U.S. Federal Reserve (the "Fed") intervened, providing liquidity by expanding open market purchases to include municipal and corporate bonds. The Bloomberg Barclays US Treasury 20+ Year Total Return Index returned 27.46% over the reporting period, while the Bloomberg Barclays
4
USAA Mutual Funds Trust
USAA Managed Allocation Fund (continued)
Managers' Commentary (continued)
U.S. Aggregate Bond Index returned 9.42%. High-yield bonds finished the period slightly positive, up 1.32% as gauged by the Bloomberg Barclays US Corporate High Yield Total Return Index.
• How did the USAA Managed Allocation Fund (the "Fund") perform during the reporting period?
For the reporting period ended May 31, 2020, the Fund had a total return of 6.66%. This compares to returns of 12.84% for the Index and 9.42% for the Bloomberg Barclays U.S. Aggregate Bond Index.
• What strategies did you employ during the reporting period?
This Fund is designed to provide us with the flexibility to implement tactical asset allocation shifts within a client's managed portfolio program. By using this Fund in this manner, it allows us to make allocation changes to the managed portfolios quicker and with less disruption than we would by shifting their existing holdings. The Fund primarily uses exchange-traded funds, or ETFs, to implement our asset allocation views since ETFs are highly liquid vehicles that allow us to apply our tactical allocation decisions efficiently. The Fund's allocations reflect the need to round out the managed portfolios, rather than representing an active strategy.
With this in mind, the Fund's positive reporting period mainly reflected our exposure to equity and fixed-income markets, which both posted positive returns for the period. On the domestic side, we held a position in large-cap U.S. stocks for the full period, which benefitted the Fund relative to other investable asset classes and domestically oriented stocks were the best performing major asset class over the period.
Our positioning in various fixed income asset classes also contributed to the positive results for the period. The Fund held a position in an ETF that tracks the U.S. corporate bond market for nearly the entire reporting period, which produced strong results. The Fund tactically rotated into a position in an ETF that tracks 7-10 year Treasury Bond issues during March 2020, which provided a cushion to performance during turbulent market conditions caused by the COVID-19 pandemic.
Our positioning in developed-market international stocks further hurt results, primarily due to a weighting in iShares Core MSCI EAFE ETF during the first quarter of 2020.
Thank you for allowing us to assist in your investment needs.
5
USAA Mutual Funds Trust
USAA Managed Allocation Fund
Investment Overview
(Unaudited)
Average Annual Total Return
Year Ended May 31, 2020
INCEPTION DATE | 2/1/10 |
|
| ||||||||||||
Net Asset Value | S&P 500 Index1 | Bloomberg Barclays U.S. Aggregate Bond Index2 | |||||||||||||
One Year | 6.66 | % | 12.84 | % | 9.42 | % | |||||||||
Five Year | 1.68 | % | 9.85 | % | 3.94 | % | |||||||||
Ten Year | 4.55 | % | 13.14 | % | 3.92 | % |
Past performance is not indicative of future results. 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 for various periods since inception. Without such fee waivers, the total returns would have been lower.
USAA Managed Allocation Fund — Growth of $10,000
1 The unmanaged S&P 500 Index represents the weighted average performance of a group of 500 widely held, publicly traded stocks.
2 The unmanaged Bloomberg Barclays U.S. Aggregate Bond Index covers the U.S. investment-grade fixed-rate bond market, including government and credit securities, agency mortgage pass-through securities, asset-backed securities, and commercial mortgage-backed securities that have remaining maturities of more than one year.
The graph reflects investment of growth of a hypothetical $10,000 investment in the Fund. Past performance is no guarantee of future results.
The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
6
USAA Mutual Funds Trust USAA Managed Allocation Fund | May 31, 2020 |
(Unaudited)
Investment Objective & Portfolio Holdings:
The Fund's investment objective is to seek to maximize total return, consisting primarily of capital appreciation.
Asset Allocation*
May 31, 2020
(% of Net Assets)
* Does not include 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 Managed Allocation Fund | Schedule of Portfolio Investments May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Exchange-Traded Funds (78.0%) | |||||||||||
iShares Core S&P 500 ETF | 566,932 | $ | 173,016 | ||||||||
iShares iBoxx $ Investment Grade Corporate Bond ETF | 1,284,936 | 169,637 | |||||||||
iShares JP Morgan USD Emerging Markets Bond ETF | 1,626,463 | 173,056 | |||||||||
Total Exchange-Traded Funds (Cost $476,093) | 515,709 | ||||||||||
Total Investments (Cost $476,093) — 78.0% | 515,709 | ||||||||||
Other assets in excess of liabilities — 22.0% | 145,083 | ||||||||||
NET ASSETS — 100.00% | $ | 660,792 |
ETF — Exchange-Traded Fund
See notes to financial statements.
8
USAA Mutual Funds Trust | Statement of Assets and Liabilities May 31, 2020 |
(Amounts in Thousands, Except Per Share Amounts)
USAA Managed Allocation Fund | |||||||
Assets: | |||||||
Investments, at value (Cost $476,093) | $ | 515,709 | |||||
Cash and cash equivalents | 145,624 | ||||||
Receivables: | |||||||
Interest and dividends | 35 | ||||||
Capital shares issued | 12 | ||||||
From Adviser | 88 | ||||||
Prepaid expenses | 7 | ||||||
Total assets | 661,475 | ||||||
Liabilities: | |||||||
Payables: | |||||||
Capital shares redeemed | 223 | ||||||
Accrued expenses and other payables: | |||||||
Investment advisory fees | 331 | ||||||
Administration fees | 28 | ||||||
Custodian fees | 6 | ||||||
Transfer agent fees | 28 | ||||||
Compliance fees | — | (a) | |||||
Other accrued expenses | 67 | ||||||
Total liabilities | 683 | ||||||
Net Assets: | |||||||
Capital | 671,376 | ||||||
Total distributable earnings/(loss) | (10,584 | ) | |||||
Net assets | $ | 660,792 | |||||
Shares (unlimited number of shares authorized with no par value): | 57,319 | ||||||
Net asset value, offering and redemption price per share: (b) | $ | 11.53 |
(a) Rounds to less than $1 thousand.
(b) Per share amount may not recalculate due to rounding of net assets and/or shares outstanding.
See notes to financial statements.
9
USAA Mutual Funds Trust | Statement of Operations For the Year Ended May 31, 2020 |
(Amounts in Thousands)
USAA Managed Allocation Fund | |||||||
Investment Income: | |||||||
Dividends | $ | 21,324 | |||||
Interest | 121 | ||||||
Securities lending (net of fees) | 83 | ||||||
Total income | 21,528 | ||||||
Expenses: | |||||||
Investment advisory fees | 4,342 | ||||||
Administration fees | 362 | ||||||
Sub-Administration fees | 15 | ||||||
Custodian fees | 40 | ||||||
Transfer agent fees | 362 | ||||||
Trustees' fees | 49 | ||||||
Compliance fees | 4 | ||||||
Legal and audit fees | 62 | ||||||
State registration and filing fees | 27 | ||||||
Interest expense on interfund lending | 3 | ||||||
Other expenses | 115 | ||||||
Total expenses | 5,381 | ||||||
Expenses waived/reimbursed by Adviser | (1,060 | ) | |||||
Net expenses | 4,321 | ||||||
Net Investment Income (Loss) | 17,207 | ||||||
Realized/Unrealized Gains (Losses) from Investments: | |||||||
Net realized gains (losses) from investment securities | (28,991 | ) | |||||
Net change in unrealized appreciation/depreciation on investment securities | 57,008 | ||||||
Net realized/unrealized gains (losses) on investments | 28,017 | ||||||
Change in net assets resulting from operations | $ | 45,224 |
See notes to financial statements.
10
USAA Mutual Funds Trust | Statements of Changes in Net Assets |
(Amounts in Thousands)
USAA Managed Allocation Fund | |||||||||||
Year Ended May 31, 2020 | Year Ended May 31, 2019 | ||||||||||
From Investments: | |||||||||||
Operations: | |||||||||||
Net investment income (loss) | $ | 17,207 | $ | 13,137 | |||||||
Net realized gains (losses) from investments | (28,991 | ) | (17,330 | ) | |||||||
Net change in unrealized appreciation/depreciation on investments | 57,008 | (43,917 | ) | ||||||||
Change in net assets resulting from operations | 45,224 | (48,110 | ) | ||||||||
Change in net assets resulting from distributions to shareholders | (19,579 | ) | (12,583 | ) | |||||||
Change in net assets resulting from capital transactions | (89,372 | ) | (23,297 | ) | |||||||
Change in net assets | (63,727 | ) | (83,990 | ) | |||||||
Net Assets: | |||||||||||
Beginning of period | 724,519 | 808,509 | |||||||||
End of period | $ | 660,792 | $ | 724,519 | |||||||
Capital Transactions: | |||||||||||
Proceeds from shares issued | $ | 54,008 | $ | 74,923 | |||||||
Distributions reinvested | 19,579 | 12,583 | |||||||||
Cost of shares redeemed | (162,959 | ) | (110,803 | ) | |||||||
Change in net assets resulting from capital transactions | $ | (89,372 | ) | $ | (23,297 | ) | |||||
Share Transactions: | |||||||||||
Issued | 4,613 | 6,501 | |||||||||
Reinvested | 1,636 | 1,192 | |||||||||
Redeemed | (14,195 | ) | (9,730 | ) | |||||||
Change in Shares | (7,946 | ) | (2,037 | ) |
See notes to financial statements.
11
USAA Mutual Funds Trust | Financial Highlights |
For a Share Outstanding Throughout Each Period
Investment Activities | Distributions to Shareholders From | Ratios to Average Net Assets | Supplemental Data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss) | Net Realized and Unrealized Gains (Losses) on Investments | Total from Investment Activities | Net Investment Income | Net Realized Gains from Investments | Total Distributions | Net Asset Value, End of Period | Total Return* | Net Expenses^ | Net Investment Income (Loss) | Gross Expenses | Net Assets, End of Period (000's) | Portfolio Turnover | ||||||||||||||||||||||||||||||||||||||||||||||
USAA Managed Allocation Fund | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended May 31, 2020 | $ | 11.10 | 0.28 | (a) | 0.47 | 0.75 | (0.32 | ) | — | (0.32 | ) | $ | 11.53 | 6.66 | % | 0.60 | % | 2.38 | % | 0.74 | % | $ | 660,792 | 167 | % | ||||||||||||||||||||||||||||||||||
Year Ended May 31, 2019 | $ | 12.01 | 0.20 | (0.92 | ) | (0.72 | ) | (0.11 | ) | (0.08 | ) | (0.19 | ) | $ | 11.10 | (5.92 | )% | 0.75 | % | 1.72 | % | 0.75 | % | $ | 724,519 | 156 | %(b) | ||||||||||||||||||||||||||||||||
Year Ended May 31, 2018 | $ | 11.61 | 0.23 | 0.46 | 0.69 | (0.29 | ) | — | (0.29 | ) | $ | 12.01 | 5.91 | % | 0.74 | % | 1.83 | % | 0.74 | % | $ | 808,509 | 97 | %(c) | |||||||||||||||||||||||||||||||||||
Year Ended May 31, 2017 | $ | 10.90 | 0.24 | 0.72 | 0.96 | (0.25 | ) | — | (0.25 | ) | $ | 11.61 | 8.94 | % | 0.76 | % | 2.13 | % | 0.76 | % | $ | 765,879 | 194 | %(b) | |||||||||||||||||||||||||||||||||||
Year Ended May 31, 2016 | $ | 11.99 | 0.24 | (a) | (0.97 | ) | (0.73 | ) | (0.21 | ) | (0.15 | ) | (0.36 | ) | $ | 10.90 | (6.13 | )% | 0.75 | % | 2.09 | % | 0.75 | % | $ | 708,592 | 90 | % |
* 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.
^ 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 two year period beginning July 1, 2019 and in effect through June 30, 2021, instead of coinciding with the Fund's fiscal year end. Details of the current contractual expense limitation in effect can be found in Note 4 of the accompanying Notes to Financial Statements.
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) Reflects an increase in trading activity due to asset allocation shifts.
(c) Reflects a return to normal trading levels after a prior year transition or allocation shift.
See notes to financial statements.
12
USAA Mutual Funds Trust | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
See notes to financial statements.
13
USAA Mutual Funds Trust | Notes to Financial Statements May 31, 2020 |
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 47 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 Managed Allocation Fund (the "Fund"). The Fund is classified as diversified under the 1940 Act.
On November 6, 2018, United Services Automobile Association ("USAA"), the parent company of USAA Asset Management Company ("AMCO"), the investment adviser to the Fund, and USAA Transfer Agency Company, d/b/a USAA Shareholder Account Services ("SAS"), the transfer agent to the Fund, announced that AMCO and SAS would be acquired by Victory Capital Holdings Inc., a global investment management firm headquartered in Cleveland, Ohio (the "Transaction"). The Transaction closed on July 1, 2019. A special shareholder meeting was held on April 18, 2019, at which shareholders of the Fund approved a new investment advisory agreement between the Trust, on behalf of the Fund, and Victory Capital Management Inc. ("VCM" or "Adviser"). Effective July 1, 2019, VCM replaced AMCO as the investment adviser to the Fund and Victory Capital Transfer Agency Company replaced SAS as the Fund's transfer agent. In addition, effective on that same date, shareholders of the Fund also elected the following two new directors to the Board of the Trust to serve upon the closing of the Transaction: (1) David C. Brown, to serve as an Interested Trustee; and (2) John C. Walters, to serve as an Independent Trustee.
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 generally accepted accounting principles in the United States of America ("GAAP"). The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses for the period. Actual results could differ from those estimates. The Fund follows the specialized accounting and reporting requirements under GAAP that are applicable to investment companies under Accounting Standards Codification Topic 946.
Investment Valuation:
The Fund records investments at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The valuation techniques described below maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value. The inputs used for valuing the Fund's investments are summarized in the three broad levels listed below:
• Level 1 — quoted prices in active markets for identical securities
• Level 2 — other significant observable inputs (including quoted prices for similar securities or interest rates applicable to those securities, etc.)
• Level 3 — significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments)
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USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
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 risk associated with entering into those investments.
The Adviser has established the Pricing and Liquidity Committee (the "Committee"), and subject to Trust's Board of Trustees (the "Board") oversight, the Committee administers and oversees the Fund's valuation policies and procedures, which are approved by the Board.
Portfolio securities listed or traded on securities exchanges, including exchange-traded funds ("ETFs"), American Depositary Receipts ("ADRs") 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 are valued at 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, are not reflective of market value, or a significant event has been recognized in relation to a security or class of securities, the securities are valued in good faith by the Committee in accordance with valuation procedures approved by the Board. These valuations are typically categorized as Level 2 or Level 3 in the fair value hierarchy, based on the observability of inputs used to determine the fair value. The effect of fair value pricing is that securities may not be priced on the basis of quotations from the primary market in which they are traded and the actual price realized from the sale of a security may differ materially from the fair value price. Valuing these securities at fair value is intended to cause the Fund's NAV to be more reliable than it otherwise would be.
A summary of the valuations as of May 31, 2020, based upon the three levels defined above, is included in the table below while the breakdown, by category, of investments is disclosed in the Schedule of Portfolio Investments (amounts in thousands):
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Exchange-Traded Funds | $ | 515,709 | $ | — | $ | — | $ | 515,709 | |||||||||||
Total | $ | 515,709 | $ | — | $ | — | $ | 515,709 |
For the year ended May 31, 2020, there were no transfers in or out of the Level 3 fair value hierarchy.
Investment Companies:
Exchange-Traded Funds:
The Fund may invest in ETFs. ETFs are a type of index fund, 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 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 they are 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.
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USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
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 on 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 discount. Gains or losses realized on sales of securities are determined by comparing the identified cost of the security lot sold with the net sales proceeds.
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, to earn additional income, net of income retained by Citibank. Borrowers are required to 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 cured the next business day once the shortfall exceeds $100 thousand. Collateral may be cash, U.S. government securities, or other securities as permitted by SEC guidelines. Cash collateral may be invested in high-quality short-term investments, primarily open-end investment companies. Collateral requirements are determined daily based on the value of the Fund's securities on loan as of the end of the prior business day. During the time portfolio securities are on loan, the borrower will pay the Fund any dividends or interest paid on such securities plus any fee negotiated between the parties to the lending agreement. The Fund also earns a return from the collateral. The Fund pays Citibank various fees in connection with the investment of cash collateral and fees based on the investment income received from securities lending activities. Securities lending income (net of these fees) is disclosed on the Statement of Operations. Loans are terminable upon demand and the borrower must return the loaned securities within the lesser of one standard settlement period or five business days. Risks relating to securities-lending transactions include that the borrower may not provide additional collateral when required or return the securities when due, and 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 re-pledged except to satisfy borrower default. Cash collateral is listed in the Fund's Portfolio of Investments and Financial Statements while non-cash collateral is not included.
At May 31, 2020, the Fund had no securities on loan.
Federal Income Taxes:
It is the Fund's policy 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 May31.
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., 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 affiliated trust based upon net assets or another appropriate basis.
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USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
3. Purchases and Sales:
Cost of purchases and proceeds from sales/maturities of securities (excluding securities maturing less than one year from acquisition) for the year ended May 31, 2020, were as follows for the Fund (amounts in thousands):
Excluding U.S. Government Securities | |||||||
Purchases | Sales | ||||||
$ | 1,141,631 | $ | 1,378,801 |
There were no purchases and sales of U.S. government securities during the year ended May 31, 2020.
4. Fees and Transactions with Affiliates and Related Parties:
Investment Advisory and Management Fees:
Effective with the Transaction on July 1, 2019, investment advisory services are provided to the Fund by the Adviser, a New York corporation registered as an investment adviser with the Securities and Exchange Commission ("SEC"). The Adviser is a wholly-owned indirect subsidiary of Victory Capital Holdings, Inc., a publicly traded Delaware corporation, and a wholly-owned direct subsidiary of Victory Capital Operating, LLC. Under the terms of the Investment Advisory Agreement, the Adviser is entitled to receive fees accrued daily and paid monthly at an annualized rate of 0.60% of the Fund's average daily net assets. The Adviser has contractually agreed to waive its management fee from 0.60% to 0.44%. These waivers are not available for recoupment and are reflected on the Statement of Operations as Expenses waived/reimbursed by Adviser. The amounts incurred and paid to VCM from July 1, 2019 through May 31, 2020, was $3,976 thousand and is reflected on the Statement of Operations as Investment Advisory fees.
Prior to the Transaction on July 1, 2019, AMCO provided investment management services to the Fund pursuant to an Advisory Agreement. Under this agreement, AMCO was responsible for managing the business and affairs of the Fund, and for directly managing day-to-day investment of the Fund's assets, subject to the authority of and supervision by the Board. The investment management fee for the Fund was 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 AMCO from June 1, 2019 through June 30, 2019, was $366 thousand and is reflected on the Statement of Operations as Investment Advisory fees.
Effective with the Transaction on July 1, 2019, 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. Prior to that date, the Trust relied on a similar exemptive order granted by the SEC to the Trust and its affiliated persons. Under a manager of managers structure, the investment adviser may select (with approval of the Board and without shareholder approval) one or more subadvisers to manage the day-to-day investment of a fund's assets. For the year ended May 31, 2020, the Fund had no subadvisers.
Administration and Servicing Fees:
Effective with the Transaction on July 1, 2019, VCM serves as the Fund's administrator and fund accountant. Under the Fund Administration, Servicing and Accounting Agreement, VCM is paid for its services an annual fee at a rate of 0.05% of average daily net assets of the Fund. Amounts incurred from July 1, 2019 through May 31, 2020, were $331 thousand and are reflected on the Statement of Operations as Administration fees.
Prior to the Transaction on July 1, 2019, AMCO provided certain administration and servicing functions for the Fund. For such services, AMCO received a fee accrued daily and paid monthly at an annualized rate of 0.05% of average daily net assets of the Fund. Amounts incurred from June 1, 2019 through June 30, 2019, were $31 thousand and are reflected on the Statement of Operations as Administration fees.
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USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
Effective with the Transaction on July 1, 2019, the Fund (as part of the Trust) has entered into an agreement to provide compliance services with the Adviser, 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. Funds in the Trust, Victory Variable Insurance Funds, Victory Portfolios and Victory Portfolios II (collectively, the "Victory Funds Complex") in the aggregate, compensates the Adviser for these services. The amount incurred during the period from July 1, 2019 to May 31, 2020, is reflected on the Statement of Operations as Compliance fees.
Effective with the Transaction on July 1, 2019, 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 Trust reimburses VCM and Citi for all of their reasonable out-of- pocket expenses incurred in providing these services and certain other expenses specifically allocated to the Funds under the Fund Administration, Servicing, and Accounting Agreement. The amount incurred during the period from July 1, 2019 through May 31, 2020, is reflected on the Statement of Operations as Sub-Administration fees.
In addition to the services provided under its Administration and Servicing Agreement with the Fund, AMCO also provided certain compliance and legal services for the benefit of the Fund prior to the Transaction on July 1, 2019. The Board approved the reimbursement of a portion of these expenses incurred by AMCO. AMCO did not receive any fees from the Fund for these services.
Transfer Agency Fees:
Effective with the Transaction on July 1, 2019, Victory Capital Transfer Agency, Inc. ("VCTA"), (formerly, USAA Shareholder Account Services ("SAS")), provides transfer agency services to the Fund. VCTA, an affiliate of the Adviser, provides transfer agent services to the Fund based on an annual rate of 0.05% 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 from July 1, 2019 through May 31, 2020, was $331 thousand. Amounts incurred and paid to SAS from June 1, 2019 through June 30, 2019, was $31 thousand. These amounts are reflected on the Statement of Operations as Transfer Agent fees.
Effective with the Transaction on July 1, 2019, 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:
Effective with the Transaction on July 1, 2019, Victory Capital Advisers, 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. Effective on or about June 30, 2020, the Distributor's name will change to Victory Capital Services, Inc.
Prior to the Transaction on July 1, 2019, USAA Investment Management Company provided exclusive underwriting and distribution of the Fund's shares on a continuing best-efforts basis.
Other Fees:
Prior to the Transaction on July 1, 2019, State Street Bank and Trust Company served as the Fund's accounting agent and custodian.
Effective July 1, 2019, Citibank, N.A., serves as the Fund's custodian.
K&L Gates LLP provides legal services to the Trust.
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USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
Effective with the Transaction on July 1, 2019, the Adviser has entered into an expense limitation agreement with the Fund until at least June 30, 2021. 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. 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. Effective July 1, 2019 through May 31, 2020, the expense limit (excluding voluntary waivers) is 0.74%.
Under this expense limitation agreement, the Fund has agreed to repay fees and expenses that were waived or reimbursed by the Adviser for a period up to three years after the fiscal year in which 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 May 31, 2020, there are no amounts available to be repaid to the Adviser.
The Adviser, may voluntarily waive or reimburse additional fees to assist the Fund in maintaining competitive expense ratios. Voluntary waivers and reimbursements applicable to the Fund are not available to be recouped at a future time. There were no voluntary waivers or reimbursements for the year ended May 31, 2020.
Certain officers and/or interested trustees of the Fund are also officers and/or employees of the Adviser, Administrator, Sub-Administrator, Sub-Fund Accountant, and Legal.
5. Risks:
The Fund may be subject to other risks in addition to these identified risks.
Global economies and financial markets are increasingly interconnected, which increases the possibilities that conditions in one country or region might adversely affect issuers in another country or region. Geopolitical and other risks, including war, terrorism, trade disputes, political or economic dysfunction within some nations, public health crises and related geopolitical events, as well as environmental disasters such as earthquakes, fires, and floods, may add to instability in world economies and markets generally. Changes in trade policies and international trade agreements could affect the economies of many countries in unpredictable ways. Epidemics and/or pandemics, such as the coronavirus (or COVID-19), may result in, among other things, closing borders, disruptions to healthcare service preparation and delivery, quarantines, cancellations, disruptions to supply chains and consumer activity, as well as general concern and uncertainty. The impact may be short-term or may last for extended periods.
The COVID-19 pandemic, which has spread rapidly across the world, has led and will continue to lead for an unknown period of time to disruptions in local, regional, national and global markets and economies. Among other things, the outbreak has resulted in, and until fully resolved is likely to continue to result in, among other things (1) government imposition of various forms of "stay-at-home" orders and the closing of "non-essential" businesses, resulting in significant disruption to the businesses of many issuers as well as lay-offs of employees; (2) increased requests by issuers of debt instruments for amendments and waivers of agreements to avoid default and increased defaults; (3) volatility and disruption of markets, including greater volatility in pricing and spreads; and (4) rapidly evolving proposals and/or actions by state and federal governments to address problems being experienced by the markets and by businesses and the economy in general.
The Fund may change the allocation of its portfolio holdings on a frequent basis, which may 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.
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USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
Because the Fund invests in stocks and other instruments whose value is tied to stocks, it is subject to stock market risk, which is the possibility that the value of the Fund's investments in stocks will decline regardless of the success or failure of a company's operations. In addition, there is a possibility that the value of the Fund's investments in foreign securities will decrease because of unique risks, such as currency exchange rate fluctuations; foreign market illiquidity; emerging-market risk; increased price volatility; uncertain political conditions and environments; exchange control regulations; foreign ownership limits; different accounting, reporting, and disclosure requirements; less publicly available information about foreign issuers; difficulties in obtaining legal judgments; and foreign withholding taxes.
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.
6. Borrowing and Interfund Lending:
Line of Credit:
Effective with the Transaction on July 1, 2019, the Victory Funds Complex participates in a short-term, demand note "Line of Credit" agreement with Citibank. Under the agreement with Citibank, the Victory Funds Complex could 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 that Fund paying the related commitment fees for that amount. The purpose of the agreement is to meet temporary or emergency cash needs. Citibank receives an annual commitment fee of 0.15% on $300 million for providing the Line of Credit. Each fund in the Victory Funds Complex pays a pro-rata portion of the commitment fees plus any interest (one month LIBOR plus one percent) on amounts borrowed. Effective June 29, 2020, under an amended Line of Credit agreement, Citibank will also receive an annual upfront fee of 0.10% on the $300 million committed line of credit. Each fund in the Victory Funds Complex will pay a pro-rata portion of the upfront fee. Interest charged to the Fund, if any, during the period is reflected on the Statement of Operations under line of credit fees.
Prior to the Transaction on July 1, 2019, the line of credit among the Trust, with respect to its funds, and USAA Capital Corporation ("CAPCO") terminated. For the period from June 1, 2019 to June 30, 2019, the Fund paid CAPCO facility fees of $2 thousand.
The Fund had no borrowings under either agreement with Citibank or CAPCO during the year ended May 31, 2020.
Interfund Lending:
Effective with the Transaction on July 1, 2019, the Trust and 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 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. The interfund loan rate is determined, as specified in the Order, by averaging the current repurchase agreement rate and the current bank loan rate. As a Borrower, interest charged to the Fund, if any, during the period is reflected on the Statement of Operations under Interest expense on
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USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
Interfund lending. As a Lender, interest earned by the Fund, if any, during the period is reflected on the Statement of Operations under Income on Interfund lending.
The average borrowing or lending for the days outstanding and average interest rate for the Fund during the year ended May 31, 2020, were as follows (amounts in thousands):
Borrower or Lender | Amount Outstanding at May 31, 2020 | Average Borrowing* | Days Borrowing Outstanding | Average Interest Rate* | Maximum Borrowing During the Period | ||||||||||||||||||||||
Borrower | $ | — | $ | 14,387 | 8 | 2.22 | % | $ | 37,586 |
* For the year ended May 31, 2020, based on the number of days borrowings were outstanding.
7. Federal Income Tax Information:
The Fund intends to declare daily and distribute any net investment income annually. Distributable net realized gains, if any, are declared and paid at least annually.
The amounts of dividends from net investment income and distributions from net realized gains (collectively distributions to shareholders) are determined in accordance with federal income tax regulations, which may differ from GAAP. To the extent these "book/tax" differences are permanent in nature (e.g., net operating loss and distribution reclassification), such amounts are reclassified within the components of net assets based on their federal tax-basis treatment; temporary differences (e.g., wash sales) do not require reclassification. To the extent dividends and distributions exceed net investment income and net realized gains for tax purposes, they are reported as distributions of capital. Net investment losses incurred by the Fund may be reclassified as an offset to capital on the accompanying Statement of Assets and Liabilities.
As of May 31, 2020, 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 Statement of Changes in Net Assets because, for tax purposes, dividends are recognized when actually paid) (amounts in thousands):
Year Ended May 31, 2020 | Year Ended May 31, 2019 | ||||||||||||||||||||||
Distribution paid from | Distributions paid from | ||||||||||||||||||||||
Ordinary Income | Total Distributions Paid | Ordinary Income | Net Long-Term Capital Gains | Total Distributions Paid | |||||||||||||||||||
$ | 19,579 | $ | 19,579 | $ | 7,497 | $ | 5,086 | $ | 12,583 |
As of May 31, 2020, the components of accumulated earnings (deficit) on a tax basis were as follows (amounts in thousands):
Undistributed Ordinary Income | Accumulated Capital and Other Losses | Unrealized Appreciation (Depreciation)* | Total Accumulated Earnings (Deficit) | ||||||||||||||||
$ | 2,104 | $ | (52,213 | ) | $ | 39,525 | $ | (10,584 | ) |
* The difference between the book-basis and tax-basis of unrealized appreciation/depreciation is attributable primarily to tax deferral of losses on wash sales.
At May 31, 2020, 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.
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USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
Short-Term Amount | Long-Term Amount | Total | |||||||||
$ | 39,025 | $ | 13,188 | $ | 52,213 |
As of May 31, 2020, 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) | ||||||||||||
$ | 476,184 | $ | 39,616 | $ | (91 | ) | $ | 39,525 |
8. 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 1940 Act. 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 Funds' Board of Trustees approved the appointment of the Fund's investment adviser, Victory Capital, as the administrator of the LRMP. At an in-person meeting held on February 26, 2020, Victory Capital provided an oral and written report to the Trustees on the operation and effectiveness of the LRMP during the previous year.
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.
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 reasonably expected to be converted to cash in current market conditions in three business days or less without significantly changing the market value of the investment. Therefore, the Fund has not adopted a Highly Liquid Investment Minimum. The Fund's investments were below the limitation on illiquid investments during the review period. Additionally, Victory Capital indicated that no events occurred that would require the filing of Form N-LIQUID and recommended no material changes to the LRMP.
22
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of USAA Managed Allocation Fund:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of USAA Managed Allocation Fund (the "Fund") (one of the funds constituting USAA Mutual Funds Trust (the "Trust")), including the schedule of portfolio investments, as of May 31, 2020, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the funds constituting USAA Mutual Funds Trust) at May 31, 2020, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Trust's management. Our responsibility is to express an opinion on the Fund's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust's internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of May 31, 2020, by correspondence with the custodian. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Victory Capital investment companies since 1995.
San Antonio, Texas
July 27, 2020
23
USAA Mutual Funds Trust | Supplemental Information May 31, 2020 |
(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) 539-3863. The information is also included in the Fund's Statement of Additional Information, which is available on the SEC's website at www.sec.gov.
Information relating to how the Fund voted proxies relating to portfolio securities held during the most recent 12 months ended June 30 is available on the SEC's website at www.sec.gov.
Availability of Schedules of Portfolio Investments:
The Trust files a complete list of Schedules of Portfolio Investments with the SEC for the first and third quarter of each fiscal year on Form N-PORT. Forms N-PORT are available on the SEC's website at www.sec.gov.
24
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(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 10 Trustees, eight of whom are not "interested persons" of the Trust within the meaning of that term under the 1940 Act ("Independent Trustees") and two 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 ages, position with the Trust, commencement of service, 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 47 portfolios in the Trust. Each Trustee's address is 15935 La Cantera Pkwy, Building Two, San Antonio, TX, 78256. Pursuant to a policy adopted by the Board, the term of office for each Trustee shall be until the Independent Trustee reaches age 75 or an Interested Trustee reaches age 75. The Board may change or grant exceptions from this policy at any time without shareholder approval. A Trustee may resign or be removed by a vote of the other Trustees or the holders of a majority of the outstanding shares of the Trust at any time. Vacancies on the Board can be filled by the action of a majority of the Trustees, provided that after filling such vacancy at least two-thirds of the Trustees have been elected by the shareholders.
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Independent Trustees. | |||||||||||||||||||
Jefferson C. Boyce, Born September 1957 | Lead Independent Trustee, and Vice Chairman | 2013 | Senior Managing Director, New York Life Investments, LLC (1992-2012) | Westhab, Inc. | |||||||||||||||
John C. Walters, Born February 1962 | Trustee | 2019 | Retired. Mr. Walters brings significant Board experience including active involvement with the board of a Fortune 500 company, and a proven record of leading large, complex financial organizations. He has a demonstrated record of success in distribution, manufacturing, investment brokerage, and investment management in both the retail and institutional investment businesses. He has substantial experience in the investment management business with a demonstrated ability to develop and drive strategy while managing operation, financial, and investment risk. | Guardian Variable Products Trust (16 series), Lead Independent Director; Amerilife Holdings LLC, Director; Stadion Money Management; Director; University of North Carolina (Chapel Hill), Member Board of Governors. |
25
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Robert L. Mason, Ph.D., Born July 1946 | Trustee | 1997 | Adjunct Professor in the Department of Management Science and Statistics in the College of Business at the University of Texas at San Antonio (since 2001); Institute Analyst, Southwest Research Institute (March 2002-January 2016) | None | |||||||||||||||
Dawn M. Hawley, Born February 1954 | Trustee | 2014 | Manager of Finance, Menil Foundation, Inc. (May 2007-June 2011), which is a private foundation that oversees the assemblage of sculptures, prints, drawings, photographs, and rare books. Director of Financial Planning and Analysis and Chief Financial Officer, AIM Management Group, Inc. (October 1987-January 2006) | None | |||||||||||||||
Paul L. McNamara, Born July 1948 | Trustee | 2012 | Director, Cantor Opportunistic Alternatives Fund, LLC (March 2010-February 2014) , which is a closed-end fund of funds by Cantor Fitzgerald Investment Advisors, LLC | None |
26
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Richard Y. Newton III, Born January 1956 | Trustee | 2017 | Director, Elta North America (01/18-present), 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 (December 2015-present)); Executive Director, The Union League Club of New York (June 2014-November 2015): Executive Vice President, Air Force Association (August 2012-May 2014); Lieutenant General, United States Air Force (January 2008-June 2012) | None | |||||||||||||||
Barbara B. Ostdiek, Ph.D., Born March 1964 | Trustee | 2008 | Senior Associate Dean of Degree Programs at Jesse H. Jones Graduate School of Business at Rice University (since 2013); Associate Professor of Finance at Jessie H. Jones Graduate School of Business at Rice University (since 2001) | None | |||||||||||||||
Michael F. Reimherr, Born August 1945 | Trustee | 2000 | President of Reimherr Business Consulting (May 1995-December 2017); St. Mary's University Investment Committee overseeing University Endowment (since 2014) | None |
27
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Interested Trustees. | |||||||||||||||||||
David C. Brown, ** Born May 1972 | Trustee | 2019 | Chairman and Chief Executive Officer (since 2013), Co-Chief Executive Officer (2011-2013), Victory Capital Management Inc.; Chairman and Chief Executive Officer, Victory Capital Holdings, Inc. (since 2013). Mr. Brown brings to the Board extensive business, finance and leadership skills gained and developed through years of experience in the financial services industry, including his tenure overseeing the strategic direction as CEO of Victory Capital. These skills, combined with Mr. Brown's extensive knowledge of the financial services industry and demonstrated success in the development and distribution of investment strategies and products, enable him to provide valuable insights to the Board and strategic direction for the Funds | Trustee, Victory Portfolios (42 series), Victory Portfolios II (26 series), Victory Variable Insurance Funds (9 series) |
28
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Daniel S. McNamara, ** Born June 1966 | Trustee and Chair of the Board of Trustees | 2012 | Trustee, President, and Vice Chairman of USAA ETF Trust (June 2017-June 2019); President of Financial Advice & Solutions Group (FASG), USAA (since 2013); Director, IMCO (September 2009-April 2014); President, AMCO (August, 2011-April 2013); Senior Vice President of USAA Financial Planning Services Insurance Agency, Inc. (FPS) (since 2011); Director of USAA Investment Management Company (IMCO) (since 2009); Chairman of Board of IMCO (since 2013); Director of USAA Asset Management Company (AMCO), (August 2011-June 2019); President and Director of USAA Shareholder Account Services (SAS)(October 2009-June 2019); Director and Vice Chairman of FPS (since 2013); President and Director of USAA Investment Corporation (ICORP) (since 2010); Chairman of Board of ICORP (since 2013); Director of USAA Financial Advisors, Inc. (FAI) (since 2013); Chairman of Board of FAI (since 2015). Mr. McNamara brings to the Board extensive experience in the financial services industry, including experience as an officer of the Trust. | None |
** Mr. McNamara and Mr. Brown are "Interested Persons" by reason of their relationships with the Adviser.
The Statement of Additional Information includes additional information about the Trustees of the Trust and is available, without charge, on the SEC's website at www.sec.gov and/or by calling (800)-539-3863.
29
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Officers:
The officers of the Trust, their ages, 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, Building Two, 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 with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | ||||||||||||
Interested Officers. | |||||||||||||||
Christopher K. Dyer, Born February 1962 | President | 2019 | Director of Fund Administration, Victory Capital (2004-present) | ||||||||||||
Scott A Stahorsky, Born July 1969 | Vice President | 2019 | Manager, Fund Administration, Victory Capital (since 2015); Senior Analyst, Fund Administration, Victory Capital (prior to 2015) | ||||||||||||
James K. De Vries, Born April 1969 | Treasurer, Principal Financial Officer | 2018 | Executive Director, Victory Capital Management Inc. (since 2019); Treasurer, USAA ETF Trust (September 2018-June 2019); Executive Director, Investment and Financial Administration, USAA (April 2012-June 2019); Assistant Treasurer, USAA ETF Trust (June 2017-September 2018); Assistant Treasurer, USAA Mutual Funds Trust (December 2013-February 2018) | ||||||||||||
Allan Shaer, Born March 1965 | Assistant Treasurer | 2019 | Senior Vice President, Financial Administration, Citi Fund Services Ohio, Inc. (since 2016); Vice President, Mutual Fund Administration, JP Morgan Chase (2011-2016) | ||||||||||||
Carol D. Trevino, Born October 1965 | Assistant Treasurer | 2018 | Director, Accounting and Finance, Victory Capital Management Inc. (since 2019); Accounting/Financial Director, USAA (December 2013-June 2019); Assistant Treasurer, USAA ETF Trust (September 2018-June 2019). | ||||||||||||
Erin G. Wagner, Born February 1974 | Secretary | 2019 | Deputy General Counsel, the Adviser (since 2013) | ||||||||||||
Charles Booth, Born April 1960 | Anti-Money Laundering Compliance Officer and Identity Theft Officer | 2019 | Director, Regulatory Administration and CCO Support Services, Citi Fund Services Ohio, Inc. (2007-present) | ||||||||||||
Amy Campos, Born July 1976 | Chief Compliance Officer | 2019 | Chief Compliance Officer, USAA Mutual Funds Trust (since 2019); Executive Director, Deputy Chief Compliance Officer, USAA Mutual Funds Trust and USAA ETF Trust (July 2017-June 2019); Compliance Director, USAA Mutual Funds Trust (2014-July 2017) |
30
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
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 December 1, 2019 through May 31, 2020.
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. If these transactional costs were included, your costs would have been higher.
Beginning Account Value 10/1/19 | Actual Ending Account Value 3/31/20 | Hypothetical Ending Account Value 3/31/20 | Actual Expenses Paid During Period 10/1/19- 3/31/20* | Hypothetical Expenses Paid During Period 10/1/19- 3/31/20* | Annualized Expense Ratio During Period 10/1/19- 3/31/20 | ||||||||||||||||||
$ | 1,000.00 | $ | 991.60 | $ | 1,022.10 | $ | 2.89 | $ | 2.93 | 0.58 | % |
* Expenses are equal to the average account value multiplied by the Fund's annualized expense ratio multiplied by 183/366 (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 May 31, 2020 |
(Unaudited)
Additional Federal Income Tax Information
The following federal tax information related to the Fund's fiscal year ended May 31, 2020, 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 2021.
With respect to distributions paid, the Fund designates the following amounts (or, if subsequently determined to be different, the maximum amount allowable) for the fiscal year ended May 31, 2020 :
Dividend Received Deduction (corporate shareholders)* | |||||||
6.14 | % |
* Presented as a percentage of net investment income and excludes short-term capital gain distributions paid, if any. All or a portion of these amounts may be exempt from taxation at the state level.
32
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 |
93923-0720
MAY 31, 2020
Annual Report
USAA Precious Metals and Minerals Fund
Beginning January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Fund's shareholder reports like this one will no longer be sent by mail, unless you specifically request paper copies of the reports from the Fund or from your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on VictoryFunds.com, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund or your financial intermediary electronically by notifying your financial intermediary directly, or if you are a direct investor, by calling (800) 235-8396 or logging on to usaa.com. Effective on or about September 8, 2020, a shareholder who has an account directly with the Fund will need to submit their request via email to TA.Processing@FISGlobal.com.
You may elect to receive all future reports in paper free of charge. You can inform the Fund or your financial intermediary that you wish to continue receiving paper copies of your shareholder reports by notifying your financial intermediary directly, or if you are a direct investor, by calling (800) 235-8396 or logging on to usaa.com. Effective on or about September 8, 2020, a shareholder who has an account directly with the Fund will need to submit their request via email to TA.Processing@FISGlobal.com. Your election to receive reports in paper will apply to all funds held with the USAA Mutual Funds or your financial intermediary.
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 logo 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.
USAA Mutual Funds Trust
TABLE OF CONTENTS
Shareholder Letter (Unaudited) | 2 | ||||||
Managers' Commentary (Unaudited) | 4 | ||||||
Investment Overview (Unaudited) | 6 | ||||||
Investment Objective & Portfolio Holdings (Unaudited) | 7 | ||||||
Financial Statements | |||||||
Schedule of Portfolio Investments | 9 | ||||||
Statement of Assets and Liabilities | 12 | ||||||
Statement of Operations | 13 | ||||||
Statements of Changes in Net Assets | 14 | ||||||
Financial Highlights | 16 | ||||||
Notes to Financial Statements | 18 | ||||||
Report of Independent Registered Public Accounting Firm | 30 | ||||||
Supplemental Information (Unaudited) | 31 | ||||||
Proxy Voting and Portfolio Holdings Information | 31 | ||||||
Trustees' and Officers' Information | 32 | ||||||
Expense Examples | 38 | ||||||
Privacy Policy (inside back cover) |
This report is for the information of the shareholders and others who have received a copy of the currently effective prospectus of the Fund, managed by Victory Capital Management Inc. It may be used as sales literature only when preceded or accompanied by a current prospectus, which provides further details about the Fund.
IRA DISTRIBUTION WITHHOLDING DISCLOSURE
We generally must withhold federal income tax at a rate of 10% of the taxable portion of your distribution and, if you live in a state that requires state income tax withholding, at your state's tax rate. However, you may elect not to have withholding apply or to have income tax withheld at a higher rate. Any withholding election that you make will apply to any subsequent distribution unless and until you change or revoke the election. If you wish to make a withholding election, or change or revoke a prior withholding election, call (800) 235-8396.
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.
1
(Unaudited)
Dear Shareholder,
The previous decade ended with the longest-ever bull market in U.S. equities still intact, even as investors wrestled with issues like softening global economic data, Brexit, and U.S.-China trade relations. In retrospect, those worries seem so pedestrian given what we would soon experience.
A new and unexpected threat—a global pandemic, the novel coronavirus ("COVID-19")—first emerged in Asia and then began spreading globally and throughout the United States during the first quarter of 2020. This unprecedented and unanticipated event not only rendered all existing economic and earnings forecasts moot, but it also roiled stock and bond markets everywhere. Efforts to slow the spread of the virus, though successful to date, also brought the economy to a halt. The historic bull market in stocks ended virtually overnight.
After an initial severe sell-off in March, equity markets recovered sharply. As our annual reporting period drew to a close on May 31, 2020, many of the broad market indexes had recovered and volatility had returned to more palatable levels. In fact, despite all the chaos, the S&P 500® Index, one of the most popular measures of large U.S. stocks, finished the fiscal year (May 31, 2020) at approximately 3,044, which was up more than 10.6% from one year ago.
The market turmoil of early 2020 was not limited to equities. Fixed income volatility spiked when liquidity evaporated in late March as investors struggled to understand the ramifications of stay-at-home orders. Fortunately, the U.S. Federal Reserve (the "Fed") (as well as other global central banks) leapt into action—cutting interest rates, (re)starting quantitative easing and, in the case of the Fed, launching an array of programs to stabilize markets.
The new lending facilities and programs had their intended effect of improving liquidity and trading. Credit spreads across corporate, high-yield, structured, and municipal markets were coaxed down from their highs. In addition, Congress came through with substantial fiscal stimulus that also was applauded by investors and markets. Although fixed income markets regained their footing, the yield on 10-Year Treasurys, a benchmark for low-risk investments, declined steadily during our fiscal year—from 2.14% at the beginning of our reporting period to approximately 0.65% as of May 31, 2020. This suggests that investors remain a little wary.
While the past year has been unprecedented for all of us, both personally and professionally, our portfolio managers continue to scrutinize the financial markets, economic conditions, and the trajectory of the pandemic, which will likely be the guiding factor on Fed policy and the markets.
No matter what happens in the near term, we believe that the massive monetary and fiscal policies introduced earlier this year will have longer-term ramifications. Despite this uncertainty, it's important to remain focused on your long-term investment goals and avoid making emotional decisions. If you invest with us directly, our Member Service Representatives are available to help. Call us at (800) 539-3863 or visit our website at vcm.com.
2
From all of us here at USAA Mutual Funds, thank you for letting us help you work toward your investment goals.
Christopher K. Dyer, CFA
President,
USAA Mutual Funds
3
USAA Mutual Funds Trust
USAA Precious Metals and Minerals Fund
Managers' Commentary
(Unaudited)
Victory Solutions
Mannik S. Dhillon, CFA, CAIA
Wasif A. Latif
• What were the market conditions during the reporting period?
Global financial market performance varied widely over the period driven by uncertainty related to the duration and economic impact of the novel coronavirus ("COVID-19") pandemic. This generally led to a risk-off environment as investors flocked to safe haven assets such as U.S. Treasurys and gold. Global equities turned mostly lower with the exception of a small breadth of mega-cap securities well-positioned for an extended economic slowdown and the new stay-at-home paradigm. The final month and a half of the reporting period saw a rebound in risky assets as economies began a phased reopening.
Despite the crisis-related selloff in the first quarter of 2020, gold continued to march higher during the one-year period ending on May 31, 2020. The GOLDS Commodities Index posted a return of 32.88% return during that one-year period, outperforming stocks and bonds. The stocks of gold mining companies, as represented by the NYSE Arca Gold Miners Index, fared even better with a 61.76% return.
• How did the USAA Precious Metals and Minerals Fund (the "Fund") perform during the reporting period?
The Fund has three share classes: Fund Shares, Institutional Shares, and Adviser Shares (Redesignated Class A shares). For the reporting period ended May 31, 2020, the Fund Shares, Institutional Shares, and Adviser Shares had a total return of 59.13%, 59.35%, and 58.89%, respectively. This compares to a total return of 12.84% for the S&P 500® Index, MSCI All-Country World Index 5.43%, and 65.75% for the MSCI ACWI Gold Miners IMI Index.
• What strategies did the fund employ during the reporting period.
At the end of May 2020, the Fund held approximately 99% of its net assets in gold stocks. The Fund outperformed the S&P 500® Index as gold miners performed better than the broad market but underperformed the more concentrated MSCI ACWI Gold Miners IMI Index.
Within the MSCI ACWI Gold Miners IMI Index, two securities, Newmont Corp. and Barrick Gold Corp., accounted for approximately 30% of the index. The Fund caps security weights at 10% of the portfolio. Over the reporting period, while both Newmont Corp. and Barrick Gold Corp. outperformed the index, their relative underweight in the Fund detracted the Fund's performance.
4
USAA Mutual Funds Trust
USAA Precious Metals and Minerals Fund (continued)
Managers' Commentary (continued)
Additional detractors in performance where an overweight to OceanaGold Corp., down 26.58%, and underweights to Kinross Gold Corp., up 98.05%, and AngloGold Ashanti Ltd., up 81.03%.
Overweights to Kinross Gold Corp., up 100.31%, and Eldorado Gold Corp., up 125.81%, along with an underweight to Cia de Minas Buenaventura SAA, ADR, down 28.16%, were the largest contributors to relative performance.
As always, we believe the primary purpose of maintaining exposure to gold should be to help diversify investor portfolios. Thank you for your continued confidence and investment in the Fund.
Holdings are subject to change. There is no guarantee that securities mentioned remain in or out of the Fund.
5
USAA Mutual Funds Trust
USAA Precious Metals and Minerals Fund
Investment Overview
(Unaudited)
Average Annual Total Return
Year Ended May 31, 2020
Fund Shares | Institutional Shares | Adviser Shares | |||||||||||||||||||||||||||||
INCEPTION DATE | 8/15/84 | 8/1/08 | 8/1/10 | ||||||||||||||||||||||||||||
Net Asset Value | Net Asset Value | Net Asset Value | S&P 500 Index1 | MSCI All-Country World Index2 | MSCI ACWI Select Gold Miners IMI Index3 | Lipper Precious Metals Equity Funds Index4 | |||||||||||||||||||||||||
One Year | 59.13 | % | 59.35 | % | 58.89 | % | 12.84 | % | 5.43 | % | 65.75 | % | 58.59 | % | |||||||||||||||||
Five Year | 10.55 | % | 10.91 | % | 10.48 | % | 9.85 | % | 5.28 | % | 13.18 | % | 11.15 | % | |||||||||||||||||
Ten Year | –3.49 | % | –3.21 | % | NA | 13.14 | % | 8.47 | % | –3.27 | % | –1.96 | % | ||||||||||||||||||
Since Inception | NA | NA | –3.58 | % | NA | NA | NA | NA |
Past performance is not indicative of future results. 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 for various periods since inception. Without such fee waivers, the total returns would have been lower.
USAA Precious Metals and Minerals Fund — Growth of $10,000
As of October 1, 2019, the MSCI All-Country World Index replaced the S&P 500 as the Fund's primary benchmark because it's believed the MSCI All-Country World Index is more representative of the Fund's investment universe.
1The unmanaged S&P 500 Index represents the weighted average performance of a group of 500 widely held, publicly traded stocks.
2The 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.
3The MSCI ACWI Select Gold Miners IMI aims to focus on companies in the gold mining industry that are highly sensitive to underlying prices of gold.
4The 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 graph reflects investment of growth of a hypothetical $10,000 investment in the Fund. Past performance is no guarantee of future results.
The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
6
USAA Mutual Funds Trust USAA Precious Metals and Minerals Fund | May 31, 2020 |
(Unaudited)
Investment Objective & Portfolio Holdings:
The Fund's investment objective is to seek long-term capital appreciation and to protect the purchasing power of shareholders' capital against inflation.
Top 10 Equity Holdings*
May 31, 2020
(% of Net Assets)
Newmont Corp. | 11.1 | % | |||||
Barrick Gold Corp. | 10.0 | % | |||||
Franco-Nevada Corp. | 5.1 | % | |||||
Kinross Gold Corp. | 5.0 | % | |||||
Kirkland Lake Gold Ltd. | 4.7 | % | |||||
B2Gold Corp. | 4.3 | % | |||||
Newcrest Mining Ltd. | 4.2 | % | |||||
AngloGold Ashanti Ltd. | 3.3 | % | |||||
Yamana Gold, Inc. | 3.2 | % | |||||
Royal Gold, Inc. | 3.1 | % |
* Does not include short-term investments purchased with cash collateral from securities loaned.
Refer to the Schedule of Portfolio Investments for a complete list of securities.
7
USAA Mutual Funds Trust USAA Precious Metals and Minerals Fund (continued) | May 31, 2020 |
Porfolio Composition*:
May 31, 2020
(% of Net Assets)
* Does not include 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 Precious Metals and Minerals Fund | Schedule of Portfolio Investments May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Common Stocks (100.0%) | |||||||||||
Metals & Mining (100.0%): | |||||||||||
Agnico Eagle Mines Ltd. (a) | 329,312 | $ | 21,076 | ||||||||
Alacer Gold Corp. | 1,031,100 | 6,426 | |||||||||
Alamos Gold, Inc. | 982,100 | 7,954 | |||||||||
AngloGold Ashanti Ltd. | 976,230 | 23,631 | |||||||||
Argonaut Gold, Inc. (b) | 655,200 | 885 | |||||||||
B2Gold Corp. | 5,525,119 | 30,461 | |||||||||
Barrick Gold Corp. | 2,970,409 | 71,290 | |||||||||
Centamin PLC | 4,216,310 | 8,606 | |||||||||
Centerra Gold, Inc. | 2,048,742 | 20,790 | |||||||||
China Gold International Resources Corp. Ltd. (b) | 516,300 | 169 | |||||||||
Cia de Minas Buenaventura SAA, ADR | 68,157 | 535 | |||||||||
Coeur Mining, Inc. (b) | 333,807 | 1,919 | |||||||||
Dundee Precious Metals, Inc. | 1,781,264 | 9,691 | |||||||||
Eldorado Gold Corp. (b) | 448,099 | 3,764 | |||||||||
Endeavour Mining Corp. (a) (b) | 311,957 | 7,518 | |||||||||
Equinox Gold Corp. (b) | 68,782 | 632 | |||||||||
Evolution Mining Ltd. | 4,178,674 | 16,986 | |||||||||
Franco-Nevada Corp. | 257,443 | 36,140 | |||||||||
Gold Fields Ltd., ADR | 2,407,700 | 18,587 | |||||||||
Gold Resource Corp. | 202,002 | 788 | |||||||||
Gold Road Resources Ltd. (b) | 313,388 | 378 | |||||||||
Golden Star Resources Ltd. (a) (b) | 464,607 | 1,371 | |||||||||
Great Basin Gold Ltd. (b) (c) (d) | 8,566,400 | — | (e) | ||||||||
Great Basin Gold Ltd. (b) (c) (d) | 6,500,000 | — | (e) | ||||||||
Guyana Goldfields, Inc. (a) (b) | 1,562,700 | 1,635 | |||||||||
Harmony Gold Mining Co. Ltd. (b) | 1,463,504 | 4,790 | |||||||||
IAMGOLD Corp. (a) (b) | 1,265,194 | 4,732 | |||||||||
IAMGOLD Corp. (b) | 411,532 | 1,536 | |||||||||
Kinross Gold Corp. (b) | 5,379,389 | 35,235 | |||||||||
Kirkland Lake Gold Ltd. | 875,783 | 33,748 | |||||||||
Koza Altin Isletmeleri A/S (b) | 298,319 | 3,243 | |||||||||
Lundin Gold, Inc. (b) | 78,200 | 707 | |||||||||
McEwen Mining, Inc. (a) (b) | 494,100 | 447 | |||||||||
Nautilus Minerals, Inc. (b) (c) (d) | 5,757,622 | — | (e) | ||||||||
New Gold, Inc. (a) (b) | 1,183,000 | 1,409 | |||||||||
Newcrest Mining Ltd. | 1,473,440 | 30,027 | |||||||||
Newmont Corp. | 1,347,656 | 78,797 | |||||||||
Northern Star Mining Corp. (b) (c) (d) | 375,000 | — | (e) | ||||||||
Northern Star Resources Ltd. | 1,226,203 | 12,094 | |||||||||
Novagold Resources, Inc. (a) (b) | 421,400 | 4,037 | |||||||||
OceanaGold Corp. (b) | 3,283,648 | 6,678 | |||||||||
Osisko Gold Royalties Ltd. | 303,400 | 3,010 | |||||||||
Perseus Mining Ltd. (b) (c) | 5,838,238 | 4,962 | |||||||||
Polymetal International PLC | 722,124 | 14,508 | |||||||||
Polyus PJSC (f) | 62,088 | 10,309 | |||||||||
Premier Gold Mines Ltd. (a) (b) | 493,500 | 717 | |||||||||
Pretium Resources, Inc. (b) | 431,655 | 3,764 | |||||||||
Ramelius Resources Ltd. | 5,473,285 | 6,401 |
See notes to financial statements.
9
USAA Mutual Funds Trust USAA Precious Metals and Minerals Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Regis Resources Ltd. | 2,733,555 | $ | 9,837 | ||||||||
Resolute Mining Ltd. (b) | 490,758 | 373 | |||||||||
Royal Gold, Inc. | 167,915 | 22,366 | |||||||||
Sandstorm Gold Ltd. (b) | 1,079,600 | 9,003 | |||||||||
Saracen Mineral Holdings Ltd. (b) | 2,439,914 | 8,309 | |||||||||
Seabridge Gold, Inc. (a) (b) | 95,100 | 1,484 | |||||||||
SEMAFO, Inc. (b) | 1,634,750 | 5,628 | |||||||||
Shandong Gold Mining Co. Ltd. Class H (g) | 1,183,000 | 3,495 | |||||||||
Sibanye Stillwater Ltd. (b) | 7,982,589 | 14,734 | |||||||||
Silver Lake Resources Ltd. (b) | 4,268,850 | 6,230 | |||||||||
SSR Mining, Inc. (a) (b) | 839,145 | 16,137 | |||||||||
St Barbara Ltd. | 3,096,281 | 6,438 | |||||||||
Teranga Gold Corp. (b) | 227,200 | 1,786 | |||||||||
TMAC Resources, Inc. (a) (b) | 98,100 | 104 | |||||||||
Torex Gold Resources, Inc. (b) | 976,108 | 13,471 | |||||||||
Wesdome Gold Mines Ltd. (b) | 578,000 | 4,832 | |||||||||
Yamana Gold, Inc. | 3,023,400 | 16,205 | |||||||||
Yamana Gold, Inc. | 1,190,747 | 6,444 | |||||||||
Zhaojin Mining Industry Co. Ltd. Class H | 2,609,000 | 3,191 | |||||||||
Zijin Mining Group Co. Ltd. Class H | 21,124,000 | 8,448 | |||||||||
710,898 | |||||||||||
Total Common Stocks (Cost $480,361) | 710,898 | ||||||||||
Collateral for Securities Loaned^ (3.0%) | |||||||||||
HSBC U.S. Government Money Market Fund I Shares, 0.13% (h) | 13,791,373 | 13,791 | |||||||||
Invesco Government & Agency Portfolio Institutional Shares, 0.12% (h) | 7,752,086 | 7,752 | |||||||||
Total Collateral for Securities Loaned (Cost $21,543) | 21,543 | ||||||||||
Total Investments (Cost $501,904) — 103.0% | 732,441 | ||||||||||
Liabilities in excess of other assets — (3.0)% | (21,163 | ) | |||||||||
NET ASSETS — 100.00% | $ | 711,278 |
At May 31, 2020 the Fund's investments in foreign securities were 82.59% of net assets.
^ Purchased with cash collateral from securities on loan.
(a) All or a portion of this security is on loan.
(b) Non-income producing security.
(c) The Fund's Adviser has deemed this security to be illiquid based upon procedures approved by the Board of Trustees. As of May 31, 2020, illiquid securities were 0.7% of the Fund's net assets.
(d) Security was fair valued based upon procedures approved by the Board of Trustees and represents 0.0% of the Fund's net assets as of May 31, 2020. This security is classified as Level 3 within the fair value hierarchy. (See Note 2)
(e) Rounds to less than $1 thousand.
(f) Security was fair valued based upon procedures approved by the Board of Trustees and represents 1.4% of the Fund's net assets as of May 31, 2020. (See Note 2)
See notes to financial statements.
10
USAA Mutual Funds Trust USAA Precious Metals and Minerals Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(g) Rule 144A security or other security that is restricted as to resale to institutional investors. The Fund's Adviser has deemed this security to be liquid based upon procedures approved by the Board of Trustees. As of May 31, 2020, the fair value of these securities was $3,495 (thousands) and amounted to 0.5% of net assets.
(h) Rate disclosed is the daily yield on May 31, 2020.
ADR — American Depositary Receipt
PLC — Public Limited Company
See notes to financial statements.
11
USAA Mutual Funds Trust | Statement of Assets and Liabilities May 31, 2020 |
(Amounts in Thousands, Except Per Share Amounts)
USAA Precious Metals and Minerals Fund | |||||||
Assets: | |||||||
Investments, at value (Cost $501,904) | $ | 732,441 | (a) | ||||
Cash and cash equivalents | 281 | ||||||
Receivables: | |||||||
Interest and dividends | 382 | ||||||
Capital shares issued | 492 | ||||||
Investments sold | 1,758 | ||||||
Reclaims | 7 | ||||||
From Adviser | — | (b) | |||||
Prepaid expenses | 29 | ||||||
Total assets | 735,390 | ||||||
Liabilities: | |||||||
Payables: | |||||||
Collateral received on loaned securities | 21,543 | ||||||
Capital shares redeemed | 997 | ||||||
Accrued foreign capital gains taxes | 877 | ||||||
Accrued expenses and other payables: | |||||||
Investment advisory fees | 461 | ||||||
Administration fees | 91 | ||||||
Custodian fees | 13 | ||||||
Transfer agent fees | 73 | ||||||
Compliance fees | — | (b) | |||||
12b-1 fees | 3 | ||||||
Other accrued expenses | 54 | ||||||
Total liabilities | 24,112 | ||||||
Net Assets: | |||||||
Capital | 1,310,756 | ||||||
Total distributable earnings/(loss) | (599,478 | ) | |||||
Net assets | $ | 711,278 | |||||
Net Assets | |||||||
Fund Shares | $ | 660,770 | |||||
Institutional Shares | 21,855 | ||||||
Adviser Shares | 28,653 | ||||||
Total | $ | 711,278 | |||||
Shares (unlimited number of shares authorized with no par value): | |||||||
Fund Shares | 34,159 | ||||||
Institutional Shares | 1,106 | ||||||
Adviser Shares | 1,498 | ||||||
Total | 36,763 | ||||||
Net asset value, offering and redemption price per share: (c) | |||||||
Fund Shares | $ | 19.34 | |||||
Institutional Shares | $ | 19.76 | |||||
Adviser Shares | $ | 19.13 |
(a) Includes $21,213 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.
12
USAA Mutual Funds Trust | Statement of Operations For the Year Ended May 31, 2020 |
(Amounts in Thousands)
USAA Precious Metals and Minerals Fund | |||||||
Investment Income: | |||||||
Dividends | $ | 6,576 | |||||
Interest | 69 | ||||||
Securities lending (net of fees) | 152 | ||||||
Foreign tax withholding | (945 | ) | |||||
Total income | 5,852 | ||||||
Expenses: | |||||||
Investment advisory fees | 4,675 | ||||||
Administration fees — Fund Shares | 863 | ||||||
Administration fees — Institutional Shares | 26 | ||||||
Administration fees — Adviser Shares | 33 | ||||||
Sub-Administration fees | 18 | ||||||
12b-1 fees — Adviser Shares | 56 | ||||||
Custodian fees | 82 | ||||||
Transfer agent fees — Fund Shares | 1,341 | ||||||
Transfer agent fees — Institutional Shares | 26 | ||||||
Transfer agent fees — Adviser Shares | 4 | ||||||
Trustees' fees | 48 | ||||||
Compliance fees | 4 | ||||||
Legal and audit fees | 85 | ||||||
State registration and filing fees | 43 | ||||||
Other expenses | 86 | ||||||
Total expenses | 7,390 | ||||||
Expenses waived/reimbursed by Adviser | (12 | ) | |||||
Expenses waived/reimbursed by AMCO | (4 | ) | |||||
Net expenses | 7,374 | ||||||
Net Investment Income (Loss) | (1,522 | ) | |||||
Realized/Unrealized Gains (Losses) from Investments: | |||||||
Net realized gains (losses) from investment securities and foreign currency translations | (113,741 | ) | |||||
Foreign taxes on realized gains | (1 | ) | |||||
Net change in unrealized appreciation/depreciation on investment securities and foreign currency translations | 395,111 | ||||||
Net change in accrued foreign taxes on unrealized gains | 543 | ||||||
Net realized/unrealized gains (losses) on investments | 281,912 | ||||||
Change in net assets resulting from operations | $ | 280,390 |
See notes to financial statements.
13
USAA Mutual Funds Trust | Statements of Changes in Net Assets |
(Amounts in Thousands)
USAA Precious Metals and Minerals Fund | |||||||||||
Year Ended May 31, 2020 | Year Ended May 31, 2019 | ||||||||||
From Investments: | |||||||||||
Operations: | |||||||||||
Net investment income (loss) | $ | (1,522 | ) | $ | (1,042 | ) | |||||
Net realized gains (losses) from investments | (113,742 | ) | (12,422 | ) | |||||||
Net change in unrealized appreciation/(depreciation) on investments | 395,654 | (17,660 | ) | ||||||||
Change in net assets resulting from operations | 280,390 | (31,124 | ) | ||||||||
Change in net assets resulting from capital transactions | (76,391 | ) | (23,062 | ) | |||||||
Change in net assets | 203,999 | (54,186 | ) | ||||||||
Net Assets: | |||||||||||
Beginning of period | 507,279 | 561,465 | |||||||||
End of period | $ | 711,278 | $ | 507,279 | |||||||
Capital Transactions: | |||||||||||
Fund Shares | |||||||||||
Proceeds from shares issued | $ | 95,260 | $ | 50,928 | |||||||
Cost of shares redeemed | (164,383 | ) | (94,610 | ) | |||||||
Total Fund Shares | $ | (69,123 | ) | $ | (43,682 | ) | |||||
Institutional Shares | |||||||||||
Proceeds from shares issued | $ | 1,928 | $ | 31,991 | |||||||
Cost of shares redeemed | (9,661 | ) | (12,919 | ) | |||||||
Total Institutional Shares | $ | (7,733 | ) | $ | 19,072 | ||||||
Adviser Shares | |||||||||||
Proceeds from shares issued | $ | 14,218 | $ | 6,048 | |||||||
Cost of shares redeemed | (13,753 | ) | (4,500 | ) | |||||||
Total Adviser Shares | $ | 465 | $ | 1,548 | |||||||
Change in net assets resulting from capital transactions | $ | (76,391 | ) | $ | (23,062 | ) | |||||
Share Transactions: | |||||||||||
Fund Shares | |||||||||||
Issued | 6,001 | 4,375 | |||||||||
Redeemed | (10,335 | ) | (7,930 | ) | |||||||
Total Fund Shares | (4,334 | ) | (3,555 | ) | |||||||
Institutional Shares | |||||||||||
Issued | 119 | 2,582 | |||||||||
Redeemed | (733 | ) | (1,140 | ) | |||||||
Total Institutional Shares | (614 | ) | 1,442 | ||||||||
Adviser Shares | |||||||||||
Issued | 895 | 531 | |||||||||
Redeemed | (871 | ) | (382 | ) | |||||||
Total Adviser Shares | 24 | 149 | |||||||||
Change in Shares | (4,924 | ) | (1,964 | ) |
See notes to financial statements.
14
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15
USAA Mutual Funds Trust | Financial Highlights |
For a Share Outstanding Throughout Each Period
Investment Activities | Distributions to Shareholders From | ||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss) | Net Realized and Unrealized Gains (Losses) on Investments | Total from Investment Activities | Net Investment Income | Total Distributions | ||||||||||||||||||||||
USAA Precious Metals and Minerals Fund | |||||||||||||||||||||||||||
Fund Shares | |||||||||||||||||||||||||||
Year Ended May 31, 2020 | $ | 12.16 | (0.04 | )(b) | 7.22 | 7.18 | — | — | |||||||||||||||||||
Year Ended May 31, 2019 | $ | 12.87 | (0.03 | )(b) | (0.68 | ) | (0.71 | ) | — | — | |||||||||||||||||
Year Ended May 31, 2018 | $ | 12.93 | (0.05 | )(b) | (0.01 | ) | (0.06 | ) | — | — | |||||||||||||||||
Year Ended May 31, 2017 | $ | 13.90 | 0.14 | (0.60 | ) | (0.46 | ) | (0.51 | ) | (0.51 | ) | ||||||||||||||||
Year Ended May 31, 2016 | $ | 12.29 | 0.08 | 1.53 | (c) | 1.61 | — | — | |||||||||||||||||||
Institutional Shares | |||||||||||||||||||||||||||
Year Ended May 31, 2020 | $ | 12.40 | (0.01 | )(b) | 7.37 | 7.36 | — | — | |||||||||||||||||||
Year Ended May 31, 2019 | $ | 13.06 | 0.01 | (b) | (0.67 | ) | (0.66 | ) | — | — | |||||||||||||||||
Year Ended May 31, 2018 | $ | 13.07 | (0.01 | )(b) | — | (e) | (0.01 | ) | — | — | |||||||||||||||||
Year Ended May 31, 2017 | $ | 13.98 | 0.07 | (b) | (0.47 | ) | (0.40 | ) | (0.51 | ) | (0.51 | ) | |||||||||||||||
Year Ended May 31, 2016 | $ | 12.34 | 0.01 | (b) | 1.63 | (c) | 1.64 | — | — | ||||||||||||||||||
Adviser Shares | |||||||||||||||||||||||||||
Year Ended May 31, 2020 | $ | 12.04 | (0.05 | )(b) | 7.14 | 7.09 | — | — | |||||||||||||||||||
Year Ended May 31, 2019 | $ | 12.74 | (0.03 | )(b) | (0.67 | ) | (0.70 | ) | — | — | |||||||||||||||||
Year Ended May 31, 2018 | $ | 12.82 | 0.16 | (0.24 | ) | (0.08 | ) | — | — | ||||||||||||||||||
Year Ended May 31, 2017 | $ | 13.79 | 0.04 | (0.50 | ) | (0.46 | ) | (0.51 | ) | (0.51 | ) | ||||||||||||||||
Year Ended May 31, 2016 | $ | 12.20 | (0.04 | )(b) | 1.63 | (c) | 1.59 | — | — |
* 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.
^ 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 two year period beginning July 1, 2019 and in effect through June 30, 2021, instead of coinciding with the Fund's fiscal year end. Details of the current contractual expense limitation in effect can be found in Note 5 of the accompanying Notes to Financial Statements.
(a) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between classes of shares issued.
(b) Per share net investment income (loss) has been calculated using the average daily shares method.
(c) During the year ended May 31, 2016, AMCO reimbursed the Fund Shares, Institutional Shares, and Adviser Shares $50,000, $1,000, and $1,000 for a loss incurred from the sale of a security that exceeded the amount allowed to be held of that type of security under the Fund's investment restrictions. The effect of this reimbursement on the Fund Shares', Institutional Shares, and Adviser Shares of net realized loss and total return was less than $0.005/0.005% per share.
(d) Effective June 6, 2018, AMCO has voluntarily agreed to limit the annual expenses of the Institutional Shares to 1.00% of the Institutional Shares' average daily net assets.
(e) Amount is less than $0.005.
(f) Reflects increased trading activity due to current year transition or asset allocation shift.
See notes to financial statements.
16
USAA Mutual Funds Trust | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Ratios to Average Net Assets | Supplemental Data | ||||||||||||||||||||||||||||||||||
Redemption Fees Added to Beneficial Interests | Net Asset Value, End of Period | Total Return* | Net Expenses^ | Net Investment Income (Loss) | Gross Expenses | Net Assets, End of Period (000's) | Portfolio Turnover(a) | ||||||||||||||||||||||||||||
USAA Precious Metals and Minerals Fund | |||||||||||||||||||||||||||||||||||
Fund Shares | |||||||||||||||||||||||||||||||||||
Year Ended May 31, 2020 | — | $ | 19.34 | 59.13 | % | 1.19 | % | (0.25 | )% | 1.19 | % | $ | 660,770 | 47 | %(f) | ||||||||||||||||||||
Year Ended May 31, 2019 | — | $ | 12.16 | (5.52 | )% | 1.31 | % | (0.22 | )% | 1.31 | % | $ | 468,208 | 7 | % | ||||||||||||||||||||
Year Ended May 31, 2018 | — | $ | 12.87 | (0.46 | )% | 1.23 | % | (0.36 | )% | 1.23 | % | $ | 540,952 | 13 | % | ||||||||||||||||||||
Year Ended May 31, 2017 | — | $ | 12.93 | (2.68 | )% | 1.22 | % | 0.02 | % | 1.22 | % | $ | 585,515 | 14 | % | ||||||||||||||||||||
Year Ended May 31, 2016 | — | $ | 13.90 | 13.10 | %(c) | 1.33 | % | (0.31 | )% | 1.33 | % | $ | 647,140 | 17 | % | ||||||||||||||||||||
Institutional Shares | |||||||||||||||||||||||||||||||||||
Year Ended May 31, 2020 | — | $ | 19.76 | 59.35 | % | 1.00 | % | (0.05 | )% | 1.06 | % | $ | 21,855 | 47 | %(f) | ||||||||||||||||||||
Year Ended May 31, 2019 | — | $ | 12.40 | (5.05 | )% | 1.00 | %(d) | 0.12 | % | 1.19 | % | $ | 21,327 | 7 | % | ||||||||||||||||||||
Year Ended May 31, 2018 | — | $ | 13.06 | (0.08 | )% | 0.89 | % | (0.07 | )% | 0.89 | % | $ | 3,632 | 13 | % | ||||||||||||||||||||
Year Ended May 31, 2017 | — | $ | 13.07 | (2.23 | )% | 0.76 | % | 0.46 | % | 0.76 | % | $ | 2,893 | 14 | % | ||||||||||||||||||||
Year Ended May 31, 2016 | — | $ | 13.98 | 13.29 | %(c) | 0.99 | % | 0.13 | % | 0.99 | % | $ | 14,050 | 17 | % | ||||||||||||||||||||
Adviser Shares | |||||||||||||||||||||||||||||||||||
Year Ended May 31, 2020 | — | $ | 19.13 | 58.89 | % | 1.27 | % | (0.32 | )% | 1.27 | % | $ | 28,653 | 47 | %(f) | ||||||||||||||||||||
Year Ended May 31, 2019 | — | $ | 12.04 | (5.49 | )% | 1.38 | % | (0.27 | )% | 1.38 | % | $ | 17,744 | 7 | % | ||||||||||||||||||||
Year Ended May 31, 2018 | — | (e) | $ | 12.74 | (0.62 | )% | 1.30 | % | (0.43 | )% | 1.30 | % | $ | 16,881 | 13 | % | |||||||||||||||||||
Year Ended May 31, 2017 | — | (e) | $ | 12.82 | (2.68 | )% | 1.30 | % | (0.04 | )% | 1.30 | % | $ | 18,309 | 14 | % | |||||||||||||||||||
Year Ended May 31, 2016 | — | (e) | $ | 13.79 | 13.03 | %(c) | 1.37 | % | (0.36 | )% | 1.37 | % | $ | 16,873 | 17 | % |
See notes to financial statements.
17
USAA Mutual Funds Trust | Notes to Financial Statements May 31, 2020 |
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 47 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 & Minerals Fund (the "Fund"). The Fund offers three classes of shares: Fund Shares, Institutional Shares, and Adviser Shares. 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 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 November 6, 2018, United Services Automobile Association ("USAA"), the parent company of USAA Asset Management Company ("AMCO"), the investment adviser to the Fund, and USAA Transfer Agency Company, d/b/a USAA Shareholder Account Services ("SAS"), the transfer agent to the Fund, announced that AMCO and SAS would be acquired by Victory Capital Holdings Inc., a global investment management firm headquartered in Cleveland, Ohio (the "Transaction"). The Transaction closed on July 1, 2019. A special shareholder meeting was held on April 18, 2019, at which shareholders of the Fund approved a new investment advisory agreement between the Trust, on behalf of the Fund, and Victory Capital Management Inc. ("VCM" or "Adviser"). Effective July 1, 2019, VCM replaced AMCO as the investment adviser to the Fund and Victory Capital Transfer Agency Company replaced SAS as the Fund's transfer agent. In addition, effective on that same date, shareholders of the Fund also elected the following two new directors to the Board of the Trust to serve upon the closing of the Transaction: (1) David C. Brown, to serve as an Interested Trustee; and (2) John C. Walters, to serve as an Independent Trustee.
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 generally accepted accounting principles in the United States of America ("GAAP"). The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses for the period. Actual results could differ from those estimates. The Fund follows the specialized accounting and reporting requirements under GAAP that are applicable to investment companies under Accounting Standards Codification Topic 946.
Investment Valuation:
The Fund records investments at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The valuation techniques described below maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value. The inputs used for valuing the Fund's investments are summarized in the three broad levels listed below:
• Level 1 — quoted prices in active markets for identical securities
• Level 2 — other significant observable inputs (including quoted prices for similar securities or interest rates applicable to those securities, etc.)
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USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
• Level 3 — significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments)
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The inputs or methodologies used for valuation techniques are not necessarily an indication of the risk associated with entering into those investments.
The Adviser has established the Pricing and Liquidity Committee (the "Committee"), and subject to Trust's Board of Trustees (the "Board")oversight, the Committee administers and oversees the Fund's valuation policies and procedures, which are approved by the Board.
Portfolio securities listed or traded on securities exchanges, including exchange-traded funds ("ETFs"), American Depositary Receipts ("ADRs") 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 are valued at net asset value ("NAV"). These valuations are typically categorized as Level 1 in the fair value hierarchy.
Debt securities of United States ("U.S.") issuers, along with corporate and municipal securities, including short-term investments maturing in 60 days or less, may be valued using evaluated bid or the last sales price to price securities by dealers or an independent pricing service approved by the Board. These valuations are typically categorized as Level 2 in the fair value hierarchy.
Effective July 1, 2019, the valuation methodology applied to certain debt securities changed. Securities that were previously valued at an evaluated mean are now valued at the evaluated bid or the last sales price.
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, the securities are valued in good faith by the Committee in accordance with valuation procedures approved by 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. These valuations are considered as Level 2 in the fair value hierarchy.
The Adviser will monitor for events that materially affect the value of the Fund's foreign securities and the Committee will consider such available information that it deems relevant and will determine a fair value for the affected foreign securities in accordance with valuation procedures. In addition, information from an external vendor or other sources may be used to adjust the foreign market closing prices of foreign equity securities to reflect what the Committee believes to be the fair value of the securities as of the close of the NYSE. Fair valuation of affected foreign equity securities may occur frequently based on an assessment that events which occur on a fairly regular basis (such as U.S. market movements) are significant.
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USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
A summary of the valuations as of May 31, 2020, based upon the three levels defined above, is included in the table below while the breakdown, by category, of investments is disclosed in the Schedule of Portfolio Investments (amounts in thousands):
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Common Stocks | $ | 700,589 | $ | 10,309 | $ | — | (a) | $ | 710,898 | ||||||||||
Collateral for Securities Loaned | 21,543 | — | — | 21,543 | |||||||||||||||
Total | $ | 722,132 | $ | 10,309 | $ | — | (a) | $ | 732,441 |
(a) Amount is less than $1 thousand.
For the year ended May 31, 2020, there were no transfers in or out of the Level 3 fair value hierarchy.
Investment Companies:
The Fund may invest in portfolios of open-end investment companies. These investment companies value securities in their portfolios for which market quotations are readily available at their market values (generally the last reported sale price) and all other securities and assets at their fair value by the methods established by the board of directors of the underlying funds.
Foreign Exchange Currency Contracts:
The Fund may enter into foreign exchange currency contracts to convert U.S. dollars to and from various foreign currencies. A foreign exchange currency contract is an obligation by the Fund to purchase or sell a specific currency at a future date at a price (in U.S. dollars) set at the time of the contract. The Fund does not engage in "cross-currency" foreign exchange contracts (i.e., contracts to purchase or sell one foreign currency in exchange for another foreign currency). The Fund's foreign exchange currency contracts might be considered spot contracts (typically a contract of one week or less) or forward contracts (typically a contract term over one week). A spot contract is entered into for purposes of hedging against foreign currency fluctuations relating to a specific portfolio transaction, such as the delay between a security transaction trade date and settlement date. Forward contracts are entered into for purposes of hedging portfolio holdings or concentrations of such holdings. Each foreign exchange currency contract is adjusted daily by the prevailing spot or forward rate of the underlying currency, and any appreciation or depreciation is recorded for financial statement purposes as unrealized until the contract settlement date, at which time the Fund records realized gains or losses equal to the difference between the value of a contract at the time it was opened and the value at the time it was closed. The Fund could be exposed to risk if a counterparty is unable to meet the terms of a foreign exchange currency contract or if the value of the foreign currency changes unfavorably. In addition, the use of foreign exchange currency contracts does not eliminate fluctuations in the underlying prices of the securities. As of May 31, 2020, 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 on 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 discount. Gains or losses realized on sales of securities are determined by comparing the identified cost of the security lot sold with the net sales proceeds.
Withholding taxes on interest, dividends and gains as a result of certain investments in ADRs by the Fund has been provided for in accordance with each investment's applicable country's tax rules and rates.
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USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
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, to earn additional income, net of income retained by Citibank. Borrowers are required to 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 cured the next business day once the shortfall exceeds $100 thousand. Collateral may be cash, U.S. government securities, or other securities as permitted by SEC guidelines. Cash collateral may be invested in high-quality short-term investments, primarily open-end investment companies. Collateral requirements are determined daily based on the value of the Fund's securities on loan as of the end of the prior business day. During the time portfolio securities are on loan, the borrower will pay the Fund any dividends or interest paid on such securities plus any fee negotiated between the parties to the lending agreement. The Fund also earns a return from the collateral. The Fund pays Citibank various fees in connection with the investment of cash collateral and fees based on the investment income received from securities lending activities. Securities lending income (net of these fees) is disclosed on the Statement of Operations. Loans are terminable upon demand and the borrower must return the loaned securities within the lesser of one standard settlement period or five business days. Risks relating to securities-lending transactions include that the borrower may not provide additional collateral when required or return the securities when due, and 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 re-pledged except to satisfy borrower default. Cash collateral is listed in the Fund's Portfolio of Investments and Financial Statements while non-cash collateral is not included. The following table (amounts in thousands) is a summary of the Fund's securities lending transactions as of May 31, 2020.
Value of Securities on Loan | Non-Cash Collateral | Cash Collateral | |||||||||
$ | 21,213 | $ | — | $ | 21,543 |
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 investments and foreign currency translations on the Statement of Operations. Any realized gains or losses from these fluctuations, including foreign currency arising from in-kind redemptions, are disclosed as net realized gains or losses from investment transactions and foreign currency translations on the Statement of Operations.
Foreign Taxes:
The Fund may be subject to foreign taxes related to foreign income received (a portion of which may be reclaimable), capital gains on the sale of securities, and certain foreign currency transactions. All foreign taxes are recorded in accordance with the applicable regulations and rates that exist in the foreign jurisdictions in which the Fund invests.
Federal Income Taxes:
It is the Fund's policy 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
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USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
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.
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., 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 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, 12b-1 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.
3. Purchases and Sales:
Cost of purchases and proceeds from sales/maturities of securities (excluding securities maturing less than one year from acquisition) for the year ended May 31, 2020, were as follows for the Fund (amounts in thousands):
Excluding U.S. Government Securities | |||||||||||
Purchases | Sales | ||||||||||
$ | 289,135 | $ | 362,263 |
There were no purchases and sales of U.S. government securities during the year ended May 31, 2020.
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 semiannual reports may be viewed at usaa.com. As of May 31, 2020, certain fund-of funds owned total outstanding shares of the Fund:
Affiliated USAA Mutual Funds | Owership % | ||||||
USAA Cornerstone Conservative Fund | 0.2 | ||||||
USAA Cornerstone Equity Fund | 0.2 | ||||||
USAA Target Retirement Income Fund | 0.2 | ||||||
USAA Target Retirement 2020 Fund | 0.3 | ||||||
USAA Target Retirement 2030 Fund | 0.7 | ||||||
USAA Target Retirement 2040 Fund | 0.8 | ||||||
USAA Target Retirement 2050 Fund | 0.4 | ||||||
USAA Target Retirement 2060 Fund | 0.1 |
5. Fees and Transactions with Affiliates and Related Parties:
Investment Advisory and Management Fees:
Effective with the Transaction on July 1, 2019, investment advisory services are provided to the Fund by the Adviser, a New York corporation registered as an investment adviser with the Securities and Exchange Commission ("SEC"). The Adviser is a wholly-owned indirect subsidiary of Victory Capital Holdings, Inc., a publicly traded Delaware corporation, and a wholly-owned direct subsidiary of Victory Capital Operating, LLC. Under the terms of the Investment Advisory Agreement, the Adviser is entitled
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USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
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. The amount incurred and paid to VCM from July 1, 2019 through May 31, 2020, was $4,339 thousand and is reflected on the Statement of Operations as Investment Advisory fees.
Prior to the Transaction on July 1, 2019, AMCO provided investment management services to the Fund pursuant to an Advisory Agreement. Under this agreement, AMCO was responsible for managing the business and affairs of the Fund, and for directly managing day-to-day investment of the Fund's assets, subject to the authority of and supervision by the Board. The investment management fee for the Fund was comprised of a base fee and a performance adjustment. The Fund's base fee was accrued daily and paid monthly at an annualized rate of 0.75% of the Fund's average daily net assets.
Effective with the Transaction on July 1, 2019, no performance adjustments will be made for periods beginning July 1, 2019, through June 30, 2020. Only performance beginning as of July 1, 2019, and thereafter will be utilized in calculating future performance adjustments.
Prior to the Transaction on July 1, 2019, the performance adjustment for each share class was accrued daily and calculated monthly by comparing the Fund's performance to that of the Lipper Precious Metals Equity Funds Index. The Lipper Precious Metals Equity Funds Index tracks the total return performance of funds within the Lipper Precious Metals Equity Funds category.
The performance period for each share class consists of the current month plus the previous 35 months (or the number of months beginning July 1, 2019, if fewer). The following table is utilized to determine the extent of the performance adjustment:
Over/Under Performance Relative to Index (in basis points)(a) | Annual Adjustment Rate (in basis points)(a) | ||||||
+/- 100 to 400 | +/- 4 | ||||||
+/- 401 to 700 | +/- 5 | ||||||
+/- 701 and greater | +/- 6 |
(a) Based on the difference between average annual performance of the relevant share class of the Fund and its relevant index, rounded to the nearest basis point. Average daily net assets of the share class are calculated over a rolling 36-month period.
Each class' annual performance adjustment rate is multiplied by the average daily net assets of each respective class over the entire performance period, which is then multiplied by a fraction, the numerator of which is the number of days in the month and the denominator of which is 365 (366 in leap years). The resulting amount is then added to (in the case of overperformance), or subtracted from (in the case of underperformance) the base fee.
Under the performance fee arrangement, each class 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, 2019 through June 30, 2019, there were no performance adjustments for Fund Shares, Institutional Shares and Adviser Shares, respectively. Base fees incurred and paid to AMCO from June 1, 2019 through June 30, 2019, were $336 thousand and is reflected on the Statement of Operations as Investment Advisory fees.
Effective with the Transaction on July 1, 2019, 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. Prior to that date, the Trust relied on a similar exemptive order granted by the SEC to the Trust and its affiliated persons. Under a manager of managers structure, the investment adviser may select (with approval of the Board and without shareholder approval) one or more subadvisers to manage the day-to-day investment of a fund's assets. For the year ended May 31, 2020, the Fund had no subadvisers.
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USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
Administration and Servicing Fees:
Effective with the Transaction on July 1, 2019, VCM serves as the Fund's administrator and fund accountant. Under the Fund Administration, Servicing and Accounting Agreement, VCM is paid for its services an annual fee at a rate of 0.15% of average daily net assets for both the Fund Shares and Adviser Shares, and 0.10% of average daily net assets of the Institutional Shares. Amounts incurred from July 1, 2019 through May 31, 2020, are $801, $24, and $31 thousand for Fund Shares, Institutional Shares, and Adviser Shares, respectively. These amounts are reflected on the Statement of Operations as Administration fees.
Prior to the Transaction on July 1, 2019, AMCO provided certain administration and servicing functions for the Fund. For such services, AMCO received a fee accrued daily and paid monthly at an annualized rate of 0.15% of average daily net assets for both the Fund Shares and Adviser Shares, and 0.10% of average daily net assets of the Institutional Shares. Amounts incurred from June 1, 2019 through June 30, 2019, are $62, $2, and $2 thousand for Fund Shares, Institutional Shares, and Adviser Shares, respectively. These amounts are reflected on the Statement of Operations as Administration fees.
Effective with the Transaction on July 1, 2019, the Fund (as part of the Trust) has entered into an agreement to provide compliance services with the Adviser, 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. Funds in the Trust, Victory Variable Insurance Funds, Victory Portfolios and Victory Portfolios II (collectively, the "Victory Funds Complex") in the aggregate, compensates the Adviser for these services. The amount incurred during the period from July 1, 2019 to May 31, 2020, is reflected on the Statement of Operations as Compliance fees.
Effective with the Transaction on July 1, 2019, 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 Trust reimburses VCM and Citi for all of their reasonable out-of- pocket expenses incurred in providing these services and certain other expenses specifically allocated to the Funds under the Fund Administration, Servicing, and Accounting Agreement. The amount incurred during the period from July 1, 2019 through May 31, 2020, is reflected on the Statement of Operations as Sub-Administration fees.
In addition to the services provided under its Administration and Servicing Agreement with the Fund, AMCO also provided certain compliance and legal services for the benefit of the Fund prior to the Transaction on July 1, 2019. The Board approved the reimbursement of a portion of these expenses incurred by AMCO. AMCO did not receive any fees from the Fund for these services.
Transfer Agency Fees:
Effective with the Transaction on July 1, 2019, Victory Capital Transfer Agency, Inc. ("VCTA"), (formerly, USAA Shareholder Account Services ("SAS")), provides transfer agency services to the Fund. VCTA, an affiliate of the Adviser, provides transfer agent services to the Fund Shares and Adviser 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's fees for Institutional Shares are paid monthly based on a fee accrued daily at an annualized rate of 0.10% of the Institutional Shares', plus out-of pocket expenses.
Amounts incurred and paid to VCTA from July 1, 2019 through May 31, 2020 was $1,227, $24, and $4 thousand for the Fund Shares, Institutional Shares, and Adviser Shares, respectively. Amounts incurred and paid to SAS from June 1, 2019 through June 30, 2019, was $114, $2, and less than $1 thousand for the Fund Shares, Institutional Shares, and Adviser Shares, respectively. These amounts are reflected on the Statement of Operations as Transfer Agent fees.
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USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
Effective with the Transaction on July 1, 2019, 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.
Distribution and Service 12b-1 Fees:
Effective with the Transaction on July 1, 2019, Victory Capital Advisers, Inc. (the "Distributor"), an affiliate of the Adviser, serves as distributor for the continuous offering of the Adviser Shares pursuant to a Distribution Agreement between the Distributor and the Trust. Effective on or about June 30, 2020, the Distributor's name will change to Victory Capital Services, Inc. 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 the Adviser Shares. Amounts incurred and paid to the Distributor from July 1, 2019 through May 31, 2020, are $52 thousand and reflected on the Statement of Operations as 12b-1 fees.
Adviser Shares are offered and sold without imposition of an initial sales charge or a contingent deferred sales charge.
Prior to the Transaction on July 1, 2019, the Fund adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Adviser Shares. Under the plan, the Adviser Shares paid fees to USAA Investment Management Company ("IMCO"), the distributor, for distribution and shareholder services. IMCO paid all or a portion of such fees to intermediaries that made the Adviser Shares available for investment by their customers. The fee was accrued daily and paid monthly at an annual rate of 0.25% of the Adviser Shares' average daily net assets. IMCO also provided exclusive underwriting and distribution of the Fund's shares on a continuing best-efforts basis and received no fee or other compensation for these services, but may have received 12b-1 fees as described above, with respect to Adviser Shares. Amounts incurred and paid to IMCO from June 1, 2019 through June 30, 2019, were $4 thousand and reflected on the Statement of Operations as 12b-1 fees.
Other Fees:
Prior to the Transaction on July 1, 2019, State Street Bank and Trust Company served as the Fund's accounting agent and custodian.
Effective July 1, 2019, Citibank, N.A., serves as the Fund's custodian.
K&L Gates LLP provides legal services to the Trust.
Effective with the Transaction on July 1, 2019, the Adviser has entered into an expense limitation agreement with the Fund until at least June 30, 2021. 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 limit for such classes of the Fund. Such excess amounts will be the liability of the Adviser. 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. Effective July 1, 2019 through May 31, 2020, the expense limit (excluding voluntary waivers) is 1.27%, 1.00%, and 1.34% for the Fund Shares, Institutional Shares, and Adviser Shares, respectively.
Under this expense limitation agreement, the Fund has agreed to repay fees and expenses that were waived or reimbursed by the Adviser for a period up to three years after the fiscal year in which 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 May 31, 2020, the following amounts are available to be repaid to the Adviser (amounts in thousands).
Expires 05/31/2023 | |||
$ | 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
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USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
available to be recouped at a future time. There were no voluntary waivers or reimbursements for the year ended May 31, 2020.
Prior to the Transaction on July 1, 2019, AMCO agreed, through September 30, 2019, to limit the total annual operating expenses of the Institutional Shares to 1.00% of its average daily net assets, excluding extraordinary expenses and before reductions of any expenses paid indirectly, and to reimburse the Institutional Shares for all expenses in excess of those amounts. Effective with the Transaction on July 1, 2019, this expense limit is no longer in effect and is not available to be recouped by AMCO. For the period June 1, 2019 through June 30, 2019, amounts reimbursed by the Institutional Shares are reflected on the Statement of Operations as Expenses waived/reimbursed by AMCO.
Certain officers and/or interested trustees of the Fund are also officers and/or employees of the Adviser, Administrator, Sub-Administrator, Sub-Fund Accountant, and Legal.
6. Risks:
The Fund may be subject to other risks in addition to these identified risks.
Global economies and financial markets are increasingly interconnected, which increases the possibilities that conditions in one country or region might adversely affect issuers in another country or region. Geopolitical and other risks, including war, terrorism, trade disputes, political or economic dysfunction within some nations, public health crises and related geopolitical events, as well as environmental disasters such as earthquakes, fires, and floods, may add to instability in world economies and markets generally. Changes in trade policies and international trade agreements could affect the economies of many countries in unpredictable ways. Epidemics and/or pandemics, such as the coronavirus (or COVID-19), may result in, among other things, closing borders, disruptions to healthcare service preparation and delivery, quarantines, cancellations, disruptions to supply chains and consumer activity, as well as general concern and uncertainty. The impact may be short-term or may last for extended periods.
The COVID-19 pandemic, which has spread rapidly across the world, has led and will continue to lead for an unknown period of time to disruptions in local, regional, national and global markets and economies. Among other things, the outbreak has resulted in, and until fully resolved is likely to continue to result in, among other things (1) government imposition of various forms of "stay-at-home" orders and the closing of "non-essential" businesses, resulting in significant disruption to the businesses of many issuers as well as lay-offs of employees; (2) increased requests by issuers of debt instruments for amendments and waivers of agreements to avoid default and increased defaults; (3) volatility and disruption of markets, including greater volatility in pricing and spreads; and (4) rapidly evolving proposals and/or actions by state and federal governments to address problems being experienced by the markets and by businesses and the economy in general.
The equity securities in the Fund's portfolio are subject to stock market risk. A company's stock price in general may decline over short or even extended periods, regardless of the success or failure of the company's operations. Stock markets tend to run in cycles, with periods when stock prices generally go up and periods when stock prices generally go down. Equity securities tend to be more volatile than debt securities. In addition, to the extent the Fund invests in foreign securities, there is a possibility that the value of the Fund's investments in foreign securities will decrease because of unique risks, such as currency exchange-rate fluctuations; foreign market illiquidity; emerging market risk; increased price volatility; uncertain political conditions; exchange control regulations; foreign ownership limits; different accounting, reporting, and disclosure requirements; difficulties in obtaining legal judgments; and foreign withholding taxes. These risks are particularly heightened in this Fund because investments in emerging-market countries generally are more volatile than investments in developed markets. Emerging-market countries are less economically diverse and mature than more developed countries and tend to be politically less stable.
Because of commodity price volatility and the increased impact such volatility has on the profitability of precious metals and minerals and natural resources industries, there are additional risks involved in investing in the securities of companies in these industries. The natural resources and precious metals and minerals industries can be significantly affected by global economic, financial, and political developments. Investments related to natural resources and precious metals and minerals may fluctuate
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USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
in price significantly over short periods of time. However, because the market action of such securities has tended to move independently of the broader financial markets, the addition of these securities to a portfolio may reduce overall fluctuations in portfolio value.
The Fund is non-diversified, which means that it may invest a greater percentage of its assets in a single issuer, such as a single stock or bond. Because a relatively high percentage of the Fund's total assets may be invested in the securities of a single issuer or a limited number of issuers, the securities of the Fund may be more sensitive to changes in the market value of a single issuer, a limited number of issuers, or large companies generally. Such a focused investment strategy may increase the volatility of the Fund's investment results because this Fund may be more susceptible to risks associated with a single issuer or economic, political, or regulatory event compared to those of a diversified fund.
7. Borrowing and Interfund Lending:
Line of Credit:
Effective with the Transaction on July 1, 2019, the Victory Funds Complex participates in a short-term, demand note "Line of Credit" agreement with Citibank. Under the agreement with Citibank, the Victory Funds Complex could 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 that Fund paying the related commitment fees for that amount. The purpose of the agreement is to meet temporary or emergency cash needs. Citibank receives an annual commitment fee of 0.15% on $300 million for providing the Line of Credit. Each fund in the Victory Funds Complex pays a pro-rata portion of the commitment fees plus any interest (one month LIBOR plus one percent) on amounts borrowed. Effective June 29, 2020, under an amended Line of Credit agreement, Citibank will also receive an annual upfront fee of 0.10% on the $300 million committed line of credit. Each fund in the Victory Funds Complex will pay a pro-rata portion of the upfront fee. Interest charged to the Fund, if any, during the period is reflected on the Statement of Operations under line of credit fees.
Prior to the Transaction on July 1, 2019, the line of credit among the Trust, with respect to its funds, and USAA Capital Corporation ("CAPCO") terminated. For the period from June 1, 2019 to June 30, 2019, the Fund paid CAPCO facility fees of $1 thousand.
The Fund had no borrowings under either agreement with Citibank or CAPCO during the year ended May 31, 2020.
Interfund Lending:
Effective with the Transaction on July 1, 2019, the Trust and 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 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. The interfund loan rate is determined, as specified in the Order, by averaging the current repurchase agreement rate and the current bank loan rate. As a Borrower, interest charged to the Fund, if any, during the period is reflected on the Statement of Operations under Interest expense on Interfund lending. As a Lender, interest earned by the Fund, if any, during the period is reflected on the Statement of Operations under Income on Interfund lending.
The average borrowing or lending for the days outstanding and average interest rate for the Fund during the year ended May 31, 2020, were as follows (amounts in thousands):
Borrower or Lender | Amount Outstanding at May 31, 2020 | Average Borrowing* | Days Borrowing Outstanding | Average Interest Rate* | Maximum Borrowing During the Period | ||||||||||||||||||
Borrower | $ | — | $ | 1,225 | 10 | 1.40 | % | $ | 2,141 |
* For the year ended May 31, 2020, based on the number of days borrowings were outstanding.
27
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
8. Federal Income Tax Information:
The Fund intends to declare daily and distribute any net investment income annually. Distributable net realized gains, if any, are declared and paid at least annually.
The amounts of dividends from net investment income and distributions from net realized gains (collectively distributions to shareholders) are determined in accordance with federal income tax regulations, which may differ from GAAP. To the extent these "book/tax" differences are permanent in nature (e.g., net operating loss and distribution reclassification), such amounts are reclassified within the components of net assets based on their federal tax-basis treatment; temporary differences (e.g., wash sales) do not require reclassification. To the extent dividends and distributions exceed net investment income and net realized gains for tax purposes, they are reported as distributions of capital. Net investment losses incurred by the Fund may be reclassified as an offset to capital on the accompanying Statement of Assets and Liabilities.
As of May 31, 2020, on the Statement of Assets and Liabilities, there were no permanent book-to-tax difference reclassification adjustments.
As of May 31, 2020, the components of accumulated earnings (deficit) on a tax basis were as follows (amounts in thousands):
Undistributed Ordinary Income | Accumulated Capital and Other Losses | Unrealized Appreciation (Depreciation)* | Total Accumulated Earnings (Deficit) | ||||||||||||
$ | 325 | $ | (809,901 | ) | $ | 210,098 | $ | (599,478 | ) |
* The difference between the book-basis and tax-basis of unrealized appreciation/depreciation is attributable primarily to tax deferral of losses on wash sales and passive foreign investment company adjustments.
At May 31, 2020, 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 | |||||||||
$ | 14,061 | $ | 795,840 | $ | 809,901 |
As of May 31, 2020, 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) | ||||||||||||
$ | 521,466 | $ | 263,342 | $ | (52,367 | ) | $ | 210,975 |
9. 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 1940 Act. 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 Funds' Board of Trustees approved the appointment of the Fund's investment adviser, Victory Capital, as the administrator of the LRMP. At an in-person meeting held on February 26, 2020, Victory Capital provided an oral and written report to the Trustees on the operation and effectiveness of the LRMP during the previous year.
28
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
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.
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 reasonably expected to be converted to cash in current market conditions in three business days or less without significantly changing the market value of the investment. Therefore, the Fund has not adopted a Highly Liquid Investment Minimum. The Fund's investments were below the limitation on illiquid investments during the review period. Additionally, Victory Capital indicated that no events occurred that would require the filing of Form N-LIQUID and recommended no material changes to the LRMP.
10. Subsequent Events:
The Board of Trustees of USAA Mutual Funds Trust has approved redesignating the Fund's current Adviser Shares as "Class A" shares ("Redesignation"). This change was effective beginning on June 29th, 2020.
Class A shares will be available for purchase through financial intermediaries and the Fund will pay ongoing distribution and/or service (12b-1) fees at annual rate of up to 0.25% of the average daily net assets of its Class A shares. In addition, the Transfer Agency fee will convert to an annual basis point rate of 0.10% of daily net assets of its Class A shares from its current flat per account fee. Class A shares will be offered and sold at their public offering price, which is the NAV per share plus any applicable initial sales charge, also referred to as a "front-end sales load." For purchases on or after the Redesignation Date, Class A Shares will be offered and sold with the imposition of a maximum initial sales charge of up to 5.75% of the offering price of the Fund. A contingent deferred sales charge of up to 0.75% may be imposed on redemptions of Class A shares purchased without an initial sales charge if shares are redeemed within 18 months of purchase.
The Redesignation will be made without the imposition of any sales loads, fees, or other charges to Adviser Shares held in shareholder accounts on the Redesignation Date. The Redesignation will not be considered a taxable event for federal income tax purposes.
29
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of USAA Precious Metals and Minerals Fund:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of USAA Precious Metals and Minerals Fund (the "Fund") (one of the funds constituting USAA Mutual Funds Trust (the "Trust")), including the schedule of portfolio investments, as of May 31, 2020, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the funds constituting USAA Mutual Funds Trust) at May 31, 2020, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Trust's management. Our responsibility is to express an opinion on the Fund's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust's internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of May 31, 2020, by correspondence with the custodian. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Victory Capital investment companies since 1995.
San Antonio, Texas
July 27, 2020
30
USAA Mutual Funds Trust | Supplemental Information May 31, 2020 |
(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) 539-3863. The information is also included in the Fund's Statement of Additional Information, which is available on the SEC's website at www.sec.gov.
Information relating to how the Fund voted proxies relating to portfolio securities held during the most recent 12 months ended June 30 is available on the SEC's website at www.sec.gov.
Availability of Schedules of Portfolio Investments:
The Trust files a complete list of Schedules of Portfolio Investments with the SEC for the first and third quarter of each fiscal year on Form N-PORT. Forms N-PORT are available on the SEC's website at www.sec.gov.
31
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(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 10 Trustees, eight of whom are not "interested persons" of the Trust within the meaning of that term under the 1940 Act ("Independent Trustees") and two 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 ages, position with the Trust, commencement of service, 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 47 portfolios in the Trust. Each Trustee's address is 15935 La Cantera Pkwy, Building Two, San Antonio, TX, 78256. Pursuant to a policy adopted by the Board, the term of office for each Trustee shall be until the Independent Trustee reaches age 75 or an Interested Trustee reaches age 75. The Board may change or grant exceptions from this policy at any time without shareholder approval. A Trustee may resign or be removed by a vote of the other Trustees or the holders of a majority of the outstanding shares of the Trust at any time. Vacancies on the Board can be filled by the action of a majority of the Trustees, provided that after filling such vacancy at least two-thirds of the Trustees have been elected by the shareholders.
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Independent Trustees. | |||||||||||||||||||
Jefferson C. Boyce, Born September 1957 | Lead Independent Trustee, and Vice Chairman | 2013 | Senior Managing Director, New York Life Investments, LLC (1992-2012) | Westhab, Inc. | |||||||||||||||
John C. Walters, Born February 1962 | Trustee | 2019 | Retired. Mr. Walters brings significant Board experience including active involvement with the board of a Fortune 500 company, and a proven record of leading large, complex financial organizations. He has a demonstrated record of success in distribution, manufacturing, investment brokerage, and investment management in both the retail and institutional investment businesses. He has substantial experience in the investment management business with a demonstrated ability to develop and drive strategy while managing operation, financial, and investment risk. | Guardian Variable Products Trust (16 series), Lead Independent Director; Amerilife Holdings LLC, Director; Stadion Money Management; Director; University of North Carolina (Chapel Hill), Member Board of Governors. |
32
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Robert L. Mason, Ph.D., Born July 1946 | Trustee | 1997 | Adjunct Professor in the Department of Management Science and Statistics in the College of Business at the University of Texas at San Antonio (since 2001); Institute Analyst, Southwest Research Institute (March 2002-January 2016) | None | |||||||||||||||
Dawn M. Hawley, Born February 1954 | Trustee | 2014 | Manager of Finance, Menil Foundation, Inc. (May 2007-June 2011), which is a private foundation that oversees the assemblage of sculptures, prints, drawings, photographs, and rare books. Director of Financial Planning and Analysis and Chief Financial Officer, AIM Management Group, Inc. (October 1987-January 2006) | None | |||||||||||||||
Paul L. McNamara, Born July 1948 | Trustee | 2012 | Director, Cantor Opportunistic Alternatives Fund, LLC (March 2010-February 2014) , which is a closed-end fund of funds by Cantor Fitzgerald Investment Advisors, LLC | None |
33
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Richard Y. Newton III, Born January 1956 | Trustee | 2017 | Director, Elta North America (01/18-present), 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 (December 2015-present)); Executive Director, The Union League Club of New York (June 2014-November 2015): Executive Vice President, Air Force Association (August 2012-May 2014); Lieutenant General, United States Air Force (January 2008-June 2012) | None | |||||||||||||||
Barbara B. Ostdiek, Ph.D., Born March 1964 | Trustee | 2008 | Senior Associate Dean of Degree Programs at Jesse H. Jones Graduate School of Business at Rice University (since 2013); Associate Professor of Finance at Jessie H. Jones Graduate School of Business at Rice University (since 2001) | None | |||||||||||||||
Michael F. Reimherr, Born August 1945 | Trustee | 2000 | President of Reimherr Business Consulting (May 1995-December 2017); St. Mary's University Investment Committee overseeing University Endowment (since 2014) | None |
34
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Interested Trustees. | |||||||||||||||||||
David C. Brown, ** Born May 1972 | Trustee | 2019 | Chairman and Chief Executive Officer (since 2013), Co-Chief Executive Officer (2011-2013), Victory Capital Management Inc.; Chairman and Chief Executive Officer, Victory Capital Holdings, Inc. (since 2013). Mr. Brown brings to the Board extensive business, finance and leadership skills gained and developed through years of experience in the financial services industry, including his tenure overseeing the strategic direction as CEO of Victory Capital. These skills, combined with Mr. Brown's extensive knowledge of the financial services industry and demonstrated success in the development and distribution of investment strategies and products, enable him to provide valuable insights to the Board and strategic direction for the Funds | Trustee, Victory Portfolios (42 series), Victory Portfolios II (26 series), Victory Variable Insurance Funds (9 series) |
35
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Daniel S. McNamara, ** Born June 1966 | Trustee and Chair of the Board of Trustees | 2012 | Trustee, President, and Vice Chairman of USAA ETF Trust (June 2017-June 2019); President of Financial Advice & Solutions Group (FASG), USAA (since 2013); Director, IMCO (September 2009-April 2014); President, AMCO (August, 2011-April 2013); Senior Vice President of USAA Financial Planning Services Insurance Agency, Inc. (FPS) (since 2011); Director of USAA Investment Management Company (IMCO) (since 2009); Chairman of Board of IMCO (since 2013); Director of USAA Asset Management Company (AMCO), (August 2011-June 2019); President and Director of USAA Shareholder Account Services (SAS)(October 2009-June 2019); Director and Vice Chairman of FPS (since 2013); President and Director of USAA Investment Corporation (ICORP) (since 2010); Chairman of Board of ICORP (since 2013); Director of USAA Financial Advisors, Inc. (FAI) (since 2013); Chairman of Board of FAI (since 2015). Mr. McNamara brings to the Board extensive experience in the financial services industry, including experience as an officer of the Trust. | None |
** Mr. McNamara and Mr. Brown are "Interested Persons" by reason of their relationships with the Adviser.
The Statement of Additional Information includes additional information about the Trustees of the Trust and is available, without charge, on the SEC's website at www.sec.gov and/or by calling (800)-539-3863.
36
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Officers:
The officers of the Trust, their ages, 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, Building Two, 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 with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | ||||||||||||
Interested Officers. | |||||||||||||||
Christopher K. Dyer, Born February 1962 | President | 2019 | Director of Fund Administration, Victory Capital (2004-present) | ||||||||||||
Scott A Stahorsky, Born July 1969 | Vice President | 2019 | Manager, Fund Administration, Victory Capital (since 2015); Senior Analyst, Fund Administration, Victory Capital (prior to 2015) | ||||||||||||
James K. De Vries, Born April 1969 | Treasurer, Principal Financial Officer | 2018 | Executive Director, Victory Capital Management Inc. (since 2019); Treasurer, USAA ETF Trust (September 2018-June 2019); Executive Director, Investment and Financial Administration, USAA (April 2012-June 2019); Assistant Treasurer, USAA ETF Trust (June 2017-September 2018); Assistant Treasurer, USAA Mutual Funds Trust (December 2013-February 2018) | ||||||||||||
Allan Shaer, Born March 1965 | Assistant Treasurer | 2019 | Senior Vice President, Financial Administration, Citi Fund Services Ohio, Inc. (since 2016); Vice President, Mutual Fund Administration, JP Morgan Chase (2011-2016) | ||||||||||||
Carol D. Trevino, Born October 1965 | Assistant Treasurer | 2018 | Director, Accounting and Finance, Victory Capital Management Inc. (since 2019); Accounting/Financial Director, USAA (December 2013-June 2019); Assistant Treasurer, USAA ETF Trust (September 2018-June 2019). | ||||||||||||
Erin G. Wagner, Born February 1974 | Secretary | 2019 | Deputy General Counsel, the Adviser (since 2013) | ||||||||||||
Charles Booth, Born April 1960 | Anti-Money Laundering Compliance Officer and Identity Theft Officer | 2019 | Director, Regulatory Administration and CCO Support Services, Citi Fund Services Ohio, Inc. (2007-present) | ||||||||||||
Amy Campos, Born July 1976 | Chief Compliance Officer | 2019 | Chief Compliance Officer, USAA Mutual Funds Trust (since 2019); Executive Director, Deputy Chief Compliance Officer, USAA Mutual Funds Trust and USAA ETF Trust (July 2017-June 2019); Compliance Director, USAA Mutual Funds Trust (2014-July 2017) |
37
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
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 December 1, 2019 through May 31, 2020.
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. If these transactional costs were included, your costs would have been higher.
Beginning Account Value 12/1/19 | Actual Ending Account Value 5/31/20 | Hypothetical Ending Account Value 5/31/20 | Actual Expenses Paid During Period 12/1/19- 5/31/20* | Hypothetical Expenses Paid During Period 12/1/19- 5/31/20* | Annualized Expense Ratio During Period 12/1/19- 5/31/20 | ||||||||||||||||||||||
Fund Shares | $ | 1,000.00 | $ | 1,273.00 | $ | 1,019.20 | $ | 6.59 | $ | 5.86 | 1.16 | % | |||||||||||||||
Institutional Shares | 1,000.00 | 1,274.00 | 1,020.05 | 5.63 | 5.00 | 0.99 | % | ||||||||||||||||||||
Adviser Shares | 1,000.00 | 1,272.80 | 1,018.90 | 6.93 | 6.16 | 1.22 | % |
* Expenses are equal to the average account value multiplied by the Fund's annualized expense ratio multiplied by 183/366 (the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year).
38
Privacy Policy
Protecting the Privacy of Information
The Trust respects your right to privacy. We also know that you expect us to conduct and process your business in an accurate and efficient manner. To do so, we must collect and maintain certain personal information about you. This is the information we collect from you on applications or other forms, and from the transactions you make with us or third parties. It may include your name, address, social security number, account transactions and balances, and information about investment goals and risk tolerance.
We do not disclose any information about you or about former customers to anyone except as permitted or required by law. Specifically, we may disclose the information we collect to companies that perform services on our behalf, such as the transfer agent that processes shareholder accounts and printers and mailers that assist us in the distribution of investor materials. We may also disclose this information to companies that perform marketing services on our behalf. This allows us to continue to offer you Victory investment products and services that meet your investing needs, and to effect transactions that you request or authorize. These companies will use this information only in connection with the services for which we hired them. They are not permitted to use or share this information for any other purpose.
To protect your personal information internally, we permit access only by authorized employees and maintain physical, electronic and procedural safeguards to guard your personal information.*
* | You may have received communications regarding information about privacy policies from other financial institutions which gave you the opportunity to “opt-out” of certain information sharing with companies which are not affiliated with that financial institution. The Trust does not share information with other companies for purposes of marketing solicitations for products other than the Trust. Therefore, the Trust does not provide opt-out options to their shareholders. |
P.O. Box 182593
Columbus, Ohio 43218-2593
Visit our website at: | Call | ||||||
vcm.com | (800) 235-8396 |
23407-0720
MAY 31, 2020
Annual Report
USAA Treasury Money Market Trust®
Beginning January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Fund's shareholder reports like this one will no longer be sent by mail, unless you specifically request paper copies of the reports from the Fund or from your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on VictoryFunds.com, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund or your financial intermediary electronically by notifying your financial intermediary directly, or if you are a direct investor, by calling (800) 235-8396 or logging on to usaa.com. Effective on or about September 8, 2020, a shareholder who has an account directly with the Fund will need to submit their request via email to TA.Processing@FISGlobal.com.
You may elect to receive all future reports in paper free of charge. You can inform the Fund or your financial intermediary that you wish to continue receiving paper copies of your shareholder reports by notifying your financial intermediary directly, or if you are a direct investor, by calling (800) 235-8396 or logging on to usaa.com. Your election to receive reports in paper will apply to all funds held with the USAA Mutual Funds or your financial intermediary.
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 logo 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.
USAA Mutual Funds Trust
TABLE OF CONTENTS
Shareholder Letter (Unaudited) | 2 | ||||||
Managers' Commentary (Unaudited) | 4 | ||||||
Investment Overview (Unaudited) | 5 | ||||||
Investment Objective & Portfolio Holdings (Unaudited) | 7 | ||||||
Financial Statements | |||||||
Schedule of Portfolio Investments | 8 | ||||||
Statement of Assets and Liabilities | 9 | ||||||
Statement of Operations | 10 | ||||||
Statements of Changes in Net Assets | 11 | ||||||
Financial Highlights | 12 | ||||||
Notes to Financial Statements | 14 | ||||||
Report of Independent Registered Public Accounting Firm | 22 | ||||||
Supplemental Information (Unaudited) | 23 | ||||||
Proxy Voting and Portfolio Holdings Information | 23 | ||||||
Trustees' and Officers' Information | 24 | ||||||
Expense Examples | 30 | ||||||
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.
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.
1
(Unaudited)
Dear Shareholder,
The previous decade ended with the longest-ever bull market in U.S. equities still intact, even as investors wrestled with issues like softening global economic data, Brexit, and U.S.-China trade relations. In retrospect, those worries seem so pedestrian given what we would soon experience.
A new and unexpected threat—a global pandemic, the novel coronavirus ("COVID-19")—first emerged in Asia and then began spreading globally and throughout the United States during the first quarter of 2020. This unprecedented and unanticipated event not only rendered all existing economic and earnings forecasts moot, but it also roiled stock and bond markets everywhere. Efforts to slow the spread of the virus, though successful to date, also brought the economy to a halt. The historic bull market in stocks ended virtually overnight.
After an initial severe sell-off in March, equity markets recovered sharply. As our annual reporting period drew to a close on May 31, 2020, many of the broad market indexes had recovered and volatility had returned to more palatable levels. In fact, despite all the chaos, the S&P 500® Index, one of the most popular measures of large U.S. stocks, finished the fiscal year (May 31, 2020) at approximately 3,044, which was up more than 10.6% from one year ago.
The market turmoil of early 2020 was not limited to equities. Fixed income volatility spiked when liquidity evaporated in late March as investors struggled to understand the ramifications of stay-at-home orders. Fortunately, the U.S. Federal Reserve (the "Fed") (as well as other global central banks) leapt into action—cutting interest rates, (re)starting quantitative easing and, in the case of the Fed, launching an array of programs to stabilize markets.
The new lending facilities and programs had their intended effect of improving liquidity and trading. Credit spreads across corporate, high-yield, structured, and municipal markets were coaxed down from their highs. In addition, Congress came through with substantial fiscal stimulus that also was applauded by investors and markets. Although fixed income markets regained their footing, the yield on 10-Year Treasurys, a benchmark for low-risk investments, declined steadily during our fiscal year—from 2.14% at the beginning of our reporting period to approximately 0.65% as of May 31, 2020. This suggests that investors remain a little wary.
While the past year has been unprecedented for all of us, both personally and professionally, our portfolio managers continue to scrutinize the financial markets, economic conditions, and the trajectory of the pandemic, which will likely be the guiding factor on Fed policy and the markets.
No matter what happens in the near term, we believe that the massive monetary and fiscal policies introduced earlier this year will have longer-term ramifications. Despite this uncertainty, it's important to remain focused on your long-term investment goals and avoid making emotional decisions. If you invest with us directly, our Member Service Representatives are available to help. Call us at (800) 539-3863 or visit our website at vcm.com.
2
From all of us here at USAA Mutual Funds, thank you for letting us help you work toward your investment goals.
Christopher K. Dyer, CFA
President,
USAA Mutual Funds
3
USAA Mutual Funds Trust
USAA Treasury Money Market Trust
Managers' Commentary
(Unaudited)
USAA Investments, A Victory Capital Investment Franchise
Cody Perkins, CFA
Andrew Hattman, CFA, CAIA
• What were the market conditions during the reporting period?
In June 2019, when the reporting period began, the federal funds ("fed funds") rate was at a target range of between 2.25% and 2.50%, with most U.S. Federal Reserve (the "Fed") officials signaling no rate changes during the 2019 calendar year. However, due to intensifying U.S.-China trade tensions and global economic weakness, the Fed cut short-term interest rates three times in the second half of calendar year 2019 (to a target range of 1.50% - 1.75%). At the beginning of 2020, Fed policymakers maintained their monetary policy stance — holding short-term interest rates steady — and said that they were evaluating the economic impact of their three 2019 rate cuts. In February, as the emergence of a novel coronavirus ("COVID-19") raised concerns about a global economic slowdown, Fed Chair Jerome Powell said the U.S. central bank would "act as appropriate" to support the U.S. economy. In March, amid rising recession risks, the Fed implemented an emergency 0.50% cut to the target fed funds rate. Just two weeks later, as the pandemic spread and major parts of the U.S. economy shut down, Fed officials made another emergency rate cut, slashing the fed funds rate by 1% to a range between 0% and 0.25%. The Fed also said it would keep the rate at that level "until it is confident that the economy has weathered recent events and is on track" to achieve its goals of stable prices and strong employment.
As a result of the Fed's interest rate cuts during the reporting period, short-term interest rates moved significantly lower. This resulted in a decrease in yields on U.S. Treasury bills and short-term notes during the reporting period.
• How did the USAA Treasury Money Market Trust (the "Fund") perform during the reporting period?
For the reporting period ended May 31, 2020, the seven-day yield on the Fund was 0.01%. The total return for the same period was 1.23%, compared to an average of 1.07% for all retail money market funds that hold U.S. Treasurys and repurchase agreements backed by the U.S. Treasury ranked by iMoneyNet, Inc.
• What strategies did you employ during the period?
In keeping with our investment approach, we continued to invest the Fund in securities with maturities of 397 days or less that are backed by the full faith and credit of the U.S. government. During the reporting period, the Fund shortened its weighted average maturity in order to increase liquidity. The Fund also maintained or slightly lowered its weighting in U.S. Treasury floating-rate notes in anticipation that short-term interest rates would continue to move down over the near term.
Thank you for allowing us to assist in your investment needs.
4
USAA Mutual Funds Trust
USAA Treasury Money Market Trust
Investment Overview
(Unaudited)
Average Annual Total Return
Year Ended May 31, 2020
INCEPTION DATE | 2/1/91 | ||||||
Net Asset Value | |||||||
One Year | 1.23 | % | |||||
Five Year | 0.82 | % | |||||
Ten Year | 0.41 | % |
Past performance is not indicative of future results. 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 USAA Federal Savings Bank, or any other 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 for various periods since inception. Without such fee waivers, the total returns would have been lower.
USAA Treasury Money Market Trust — Growth of $10,000
The graph reflects investment of growth of a hypothetical $10,000 investment in the Fund. Past performance is no guarantee of future results.
The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
5
USAA Mutual Funds Trust
USAA Treasury Money Market Trust (continued)
n 7-DAY YIELD COMPARISON n
Data represents the last Tuesday of each month. Ending 5/31/20.
The graph tracks the USAA Treasury Money Market Trust's seven-day yield against an average of money market fund yields of all tax-free national retail money funds average of money market fund yields calculated by iMoneyNet, Inc. iMoneyNet, Inc. is an organization that tracks the performance of money market funds.
Past performance is no guarantee of future results.
6
USAA Mutual Funds Trust USAA Treasury Money Market Trust | May 31, 2020 |
(Unaudited)
Investment Objective & Portfolio Holdings:
The Fund's investment objective is to seek to provide investors maximum current income while maintaining the highest degree of safety and liquidity.
Portfolio Mix
May 31, 2020
(% 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 Treasury Money Market Trust | Schedule of Portfolio Investments May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
U.S. Treasury Obligations (36.7%) | |||||||||||
U.S. Treasury Bills, 1.79%, 8/13/20 (a) | $ | 100,000 | $ | 99,633 | |||||||
U.S. Treasury Notes, 0.17% (USBMMY3M+4bps), 7/31/20 (b) | 100,000 | 99,986 | |||||||||
Total U.S. Treasury Obligations (Cost $199,619) | 199,619 | ||||||||||
Repurchase Agreements (63.6%) | |||||||||||
Fixed Income Clearing Corporation-State Street Bank & Trust Co., 0.03%, 6/1/20, purchase 5/29/20 due on 6/1/20, with a value of $346,001 (collateralized by U.S. Treasury Bonds, 2.25%-3.38%, due 2/15/46-11/15/49, with a value of $352,925) | 346,000 | 346,000 | |||||||||
Total Repurchase Agreements (Cost $346,000) | 346,000 | ||||||||||
Total Investments (Cost $545,619) — 100.3% | 545,619 | ||||||||||
Liabilities in excess of other assets — (0.3)% | (1,706 | ) | |||||||||
NET ASSETS — 100.00% | $ | 543,913 |
(a) Rate represents the effective yield at May 31, 2020.
(b) Variable or Floating-Rate Security. Rate disclosed is as of May 31, 2020.
bps — Basis points
USBMMY3M — 3 Month Treasury Bill Rate
See notes to financial statements.
8
USAA Mutual Funds Trust | Statement of Assets and Liabilities May 31, 2020 |
(Amounts in Thousands, Except Per Share Amounts)
USAA Treasury Money Market Trust | |||||||
Assets: | |||||||
Investments, at value (Cost $199,619) | $ | 199,619 | |||||
Repurchase agreements, at value (Cost $346,000) | 346,000 | ||||||
Cash and cash equivalents | 271 | ||||||
Receivables: | |||||||
Interest | 16 | ||||||
Capital shares issued | 1,211 | ||||||
From Adviser | 745 | ||||||
Prepaid expenses | 36 | ||||||
Total assets | 547,898 | ||||||
Liabilities: | |||||||
Payables: | |||||||
Distributions | — | (a) | |||||
Capital shares redeemed | 2,569 | ||||||
Accrued expenses and other payables: | |||||||
Investment advisory fees | 521 | ||||||
Administration fees | 417 | ||||||
Transfer agent fees | 418 | ||||||
Compliance fees | 3 | ||||||
Other accrued expenses | 57 | ||||||
Total liabilities | 3,985 | ||||||
Net Assets: | |||||||
Capital | 543,913 | ||||||
Net assets | $ | 543,913 | |||||
Shares (unlimited number of shares authorized with no par value): | 543,913 | ||||||
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.
9
USAA Mutual Funds Trust | Statement of Operations For the Year Ended May 31, 2020 |
(Amounts in Thousands)
USAA Treasury Money Market Trust | |||||||
Investment Income: | |||||||
Interest | $ | 82,686 | |||||
Total income | 82,686 | ||||||
Expenses: | |||||||
Investment advisory fees | 6,722 | ||||||
Administration fees | 5,377 | ||||||
Sub-Administration fees | 25 | ||||||
Custodian fees | 142 | ||||||
Transfer agent fees | 5,379 | ||||||
Trustees' fees | 49 | ||||||
Compliance fees | 32 | ||||||
Legal and audit fees | 74 | ||||||
State registration and filing fees | 29 | ||||||
Other expenses | 425 | ||||||
Total expenses | 18,254 | ||||||
Expenses waived/reimbursed by Adviser | (745 | ) | |||||
Net expenses | 17,509 | ||||||
Net Investment Income | 65,177 | ||||||
Change in net assets resulting from operations | $ | 65,177 |
See notes to financial statements.
10
USAA Mutual Funds Trust | Statements of Changes in Net Assets |
(Amounts in Thousands)
USAA Treasury Money Market Trust | |||||||||||
Year Ended May 31, 2020 | Year Ended May 31, 2019 | ||||||||||
From Investments: | |||||||||||
Operations: | |||||||||||
Net investment income (loss) | $ | 65,177 | $ | 82,178 | |||||||
Change in net assets resulting from operations | 65,177 | 82,178 | |||||||||
Change in net assets resulting from distributions to shareholders | (65,177 | ) | (82,178 | ) | |||||||
Change in net assets resulting from capital transactions | (4,315,085 | ) | 1,126,639 | ||||||||
Change in net assets | (4,315,085 | ) | 1,126,639 | ||||||||
Net Assets: | |||||||||||
Beginning of period | 4,858,998 | 3,732,359 | |||||||||
End of period | $ | 543,913 | $ | 4,858,998 | |||||||
Capital Transactions: | |||||||||||
Proceeds from shares issued | $ | 15,634,427 | $ | 12,721,521 | |||||||
Distributions reinvested | 65,132 | 82,115 | |||||||||
Cost of shares redeemed | (20,014,644 | ) | (11,676,997 | ) | |||||||
Change in net assets resulting from capital transactions | $ | (4,315,085 | ) | $ | 1,126,639 | ||||||
Share Transactions: | |||||||||||
Issued | 15,634,427 | 12,721,521 | |||||||||
Reinvested | 65,132 | 82,115 | |||||||||
Redeemed | (20,014,644 | ) | (11,676,997 | ) | |||||||
Change in Shares | (4,315,085 | ) | 1,126,639 |
See notes to financial statements.
11
USAA Mutual Funds Trust | Financial Highlights |
For a Share Outstanding Throughout Each Period
Investment Activities | Distributions to Shareholders From | ||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss) | Total from Investment Activities | Net Investment Income | Total Distributions | |||||||||||||||||||
USAA Treasury Money Market Trust | |||||||||||||||||||||||
Year Ended May 31, 2020 | $ | 1.00 | 0.01 | (a) | 0.01 | (0.01 | ) | (0.01 | ) | ||||||||||||||
Year Ended May 31, 2019 | $ | 1.00 | 0.02 | 0.02 | (0.02 | ) | (0.02 | ) | |||||||||||||||
Year Ended May 31, 2018 | $ | 1.00 | 0.01 | 0.01 | (0.01 | ) | (0.01 | ) | |||||||||||||||
Year Ended May 31, 2017 | $ | 1.00 | — | (c) | — | (c) | — | (c) | — | (c) | |||||||||||||
Year Ended May 31, 2016 | $ | 1.00 | — | (c) | — | (c) | — | (c) | — | (c) |
* Assumes reinvestment of all net investment income and realized capital gain distributions, if any, during the period. Includes adjustments in accordance with U.S. generally accepted accounting principles and could differ from the Lipper reported return.
^ 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 two year period beginning July 1, 2019 and in effect through June 30, 2021, instead of coinciding with the Fund's fiscal year end. Details of the current contractual expense limitation in effect can be found in Note 4 of the accompanying Notes to Financial Statements.
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) Prior to August 1, 2017, AMCO 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.
(c) Amount is less than $0.005 per share.
(d) Amount is less than 0.005%.
See notes to financial statements.
12
USAA Mutual Funds Trust | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Ratios to Average Net Assets | Supplemental Data | ||||||||||||||||||||||||||
Net Asset Value, End of Period | Total Return* | Net Expenses^ | Net Investment Income (Loss) | Gross Expenses | Net Assets, End of Period (000's) | ||||||||||||||||||||||
USAA Treasury Money Market Trust | |||||||||||||||||||||||||||
Year Ended May 31, 2020 | $ | 1.00 | 1.23 | % | 0.33 | % | 1.21 | % | 0.34 | % | $ | 543,913 | |||||||||||||||
Year Ended May 31, 2019 | $ | 1.00 | 1.88 | % | 0.35 | % | 1.88 | % | 0.35 | % | $ | 4,858,998 | |||||||||||||||
Year Ended May 31, 2018 | $ | 1.00 | 0.89 | %(b) | 0.35 | %(b) | 0.91 | % | 0.35 | % | $ | 3,732,359 | |||||||||||||||
Year Ended May 31, 2017 | $ | 1.00 | 0.08 | % | 0.35 | % | 0.12 | % | 0.39 | % | $ | 2,626,050 | |||||||||||||||
Year Ended May 31, 2016 | $ | 1.00 | — | %(d) | 0.17 | % | — | %(d) | 0.49 | % | $ | 188,863 |
See notes to financial statements.
13
USAA Mutual Funds Trust | Notes to Financial Statements May 31, 2020 |
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 47 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.
On November 6, 2018, United Services Automobile Association ("USAA"), the parent company of USAA Asset Management Company ("AMCO"), the investment adviser to the Fund, and USAA Transfer Agency Company, d/b/a USAA Shareholder Account Services ("SAS"), the transfer agent to the Fund, announced that AMCO and SAS would be acquired by Victory Capital Holdings Inc., a global investment management firm headquartered in Cleveland, Ohio (the "Transaction"). The Transaction closed on July 1, 2019. A special shareholder meeting was held on April 18, 2019, at which shareholders of the Fund approved a new investment advisory agreement between the Trust, on behalf of the Fund, and Victory Capital Management Inc. ("VCM" or "Adviser"). Effective July 1, 2019, VCM replaced AMCO as the investment adviser to the Fund and Victory Capital Transfer Agency Company replaced SAS as the Fund's transfer agent. In addition, effective on that same date, shareholders of the Fund also elected the following two new directors to the Board of the Trust to serve upon the closing of the Transaction: (1) David C. Brown, to serve as an Interested Trustee; and (2) John C. Walters, to serve as an Independent Trustee.
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 generally accepted accounting principles in the United States of America ("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.
14
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
The valuation techniques described below maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value. The inputs used for valuing the Fund's investments are summarized in the three broad levels listed below:
• Level 1 — quoted prices in active markets for identical securities
• Level 2 — other significant observable inputs (including quoted prices for similar securities or interest rates applicable to those securities, etc.)
• Level 3 — significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments)
The Adviser has established the Pricing and Liquidity Committee (the "Committee"), and subject to Trust's Board of Trustees (the "Board") oversight, the Committee administers and oversees the Fund's valuation policies and procedures, which are approved by the Board.
Repurchase agreements are valued at cost.
All securities held in the Fund are short-term debt securities, which are valued pursuant to Rule 2a-7 under the 1940 Act. This method values a security at its purchase price, and thereafter, assumes a constant amortization to maturity of any premiums or discounts. Securities for which amortized cost valuations are considered unreliable or whose values have been materially affected by a significant event are valued in good faith, at fair value, using methods determined by the Committee, under procedures to stabilize net assets and valuation procedures approved by the Board.
Repurchase Agreements:
The Fund may enter into repurchase agreements with commercial banks or recognized security dealers pursuant to the terms of a Master Repurchase Agreement. A repurchase agreement is an arrangement wherein the Fund purchases securities and the seller agrees to repurchase the securities at an agreed upon time and at an agreed upon price. The purchased securities are marked-to-market daily to ensure their value is equal to or in excess of the purchase price plus accrued interest and are held by the Fund, either through its regular custodian or through a special "tri-party" custodian that maintains separate accounts for both the Fund and its counterparty, until maturity of the repurchase agreement. Master Repurchase Agreements typically contain netting provisions, which provide for the net settlement of all transactions and collateral with the Fund through a single payment in the event of default or termination. Repurchase agreements are subject to credit risk, and the Fund's Manager monitors the creditworthiness of sellers with which the Fund may enter into repurchase agreements.
Investments in repurchase agreements as reflected on the Schedule of Portfolio of Investments are not net settlement amounts but gross. At May 31, 2020, 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 of Investments.
Securities Purchased on a Delayed-Delivery or When-Issued Basis:
The Fund may purchase securities on a delayed-delivery or when-issued basis. Delivery and payment for securities that have been purchased by the Fund on a delayed-delivery or when-issued basis or for delayed draws on loans can take place a month or more after the trade date. At the time the Fund makes the commitment to purchase a security on a delayed-delivery or when-issued basis, the Fund records the transaction and reflects the value of the security in determining NAV. No interest accrues to the Fund until the transaction settles and payment takes place. A segregated account is established and the Fund maintains cash and/or marketable securities at least equal in value to commitments for delayed-delivery or when-issued securities. If the Fund owns delayed-delivery or when-issued securities, these values are included in Payable for investments purchased on the accompanying Statement of Assets and Liabilities and the segregated assets are identified on the Schedule of Portfolio Investments.
15
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
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 on 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 discount. Gains or losses realized on sales of securities are determined by comparing the identified cost of the security lot sold with the net sales proceeds.
Federal Income Taxes:
It is the Fund's policy 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.
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., 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 affiliated trust based upon net assets or another appropriate basis.
Fees Paid Indirectly:
Expense offsets to custody fees that arise from credits on cash balances maintained on deposit are reflected on the Statement of Operations, as applicable, as "Fees paid indirectly".
3. Fees and Transactions with Affiliates and Related Parties:
Investment Advisory and Management Fees:
Effective with the Transaction on July 1, 2019, investment advisory services are provided to the Fund by the Adviser, a New York corporation registered as an investment adviser with the Securities and Exchange Commission ("SEC"). The Adviser is a wholly-owned indirect subsidiary of Victory Capital Holdings, Inc., a publicly traded Delaware corporation, and a wholly-owned direct subsidiary of Victory Capital Operating, LLC. The Fund's Investment Adviser fee is accrued daily and paid monthly at an annualized rate of 0.125% of the Fund's average daily net assets. The amount incurred and paid to VCM from July 1, 2019 through May 31, 2020, was $6,218 thousand and is reflected on the Statement of Operations as Investment Advisory fees.
Prior to the Transaction on July 1, 2019, AMCO provided investment management services to the Fund pursuant to an Advisory Agreement. Under this agreement, AMCO was responsible for managing the business and affairs of the Fund, and for directly managing day-to-day investment of the Fund's assets, subject to the authority of and supervision by the Board. The investment management fee for the Fund was accrued daily and paid monthly at an annualized rate of 0.125% of the Fund's average daily net assets. The amount incurred and paid to AMCO from June 1, 2019 through June 30, 2019, was $504 thousand and is reflected on the Statement of Operations as Investment Advisory fees.
Administration and Servicing Fees:
Effective with the Transaction on July 1, 2019, VCM serves as the Fund's administrator and fund accountant. Under the Fund Administration, Servicing and Accounting Agreement, VCM is paid for its
16
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
services an annual fee at a rate of 0.10% of average daily net assets of the Fund. Amounts incurred from July 1, 2019 through May 31, 2020, are $4,974 thousand and are reflected on the Statement of Operations as Administration fees.
Prior to the Transaction on July 1, 2019, AMCO provided certain administration and servicing functions for the Fund. For such services, AMCO received a fee accrued daily and paid monthly at an annualized rate of 0.10% of average daily net assets of the Fund. Amounts incurred from June 1, 2019 through June 30, 2019, were $403 thousand and are reflected on the Statement of Operations as Administration fees.
Effective with the Transaction on July 1, 2019, the Fund (as part of the Trust) has entered into an agreement to provide compliance services with the Adviser, 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. Funds in the Trust, Victory Variable Insurance Funds, Victory Portfolios and Victory Portfolios II (collectively, the "Victory Funds Complex") in the aggregate, compensates the Adviser for these services. The amount incurred during the period from July 1, 2019 to May 31, 2020, is reflected on the Statement of Operations as Compliance fees.
Effective with the Transaction on July 1, 2019, 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 Trust reimburses VCM and Citi for all of their reasonable out-of- pocket expenses incurred in providing these services and certain other expenses specifically allocated to the Funds under the Fund Administration, Servicing, and Accounting Agreement. The amount incurred during the period from July 1, 2019 through May 31, 2020, is reflected on the Statement of Operations as Sub-Administration fees.
In addition to the services provided under its Administration and Servicing Agreement with the Fund, AMCO also provided certain compliance and legal services for the benefit of the Fund prior to the Transaction on July 1, 2019. The Board approved the reimbursement of a portion of these expenses incurred by AMCO. AMCO did not receive any fees from the Fund for these services.
Transfer Agency Fees:
Effective with the Transaction on July 1, 2019, Victory Capital Transfer Agency, Inc. ("VCTA"), (formerly, USAA Shareholder Account Services ("SAS")), provides transfer agency services to the Fund. VCTA, an affiliate of the Adviser, provides transfer agent services to the Fund. Fees for these services are accrued daily and paid monthly at an annualized rate of 0.10% of the Fund's average daily net assets. 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 from July 1, 2019 through May 31, 2020, was $4,976 thousand. Amounts incurred and paid to SAS from June 1, 2019 through June 30, 2019, was $403 thousand. These amounts are reflected on the Statement of Operations as Transfer Agent fees.
Effective with the Transaction on July 1, 2019, 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:
Effective with the Transaction on July 1, 2019, Victory Capital Advisers, 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. Effective on or about June 30, 2020, the Distributor's name will change to Victory Capital Services, Inc.
17
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
Prior to the Transaction on July 1, 2019, USAA Investment Management Company provided exclusive underwriting and distribution of the Fund's shares on a continuing best-efforts basis.
Other Fees:
Prior to the Transaction on July 1, 2019, State Street Bank and Trust Company served as the Fund's accounting agent and custodian.
Effective July 1, 2019, Citibank, N.A., serves as the Fund's custodian.
K&L Gates LLP provides legal services to the Trust.
Effective with the Transaction on July 1, 2019, the Adviser has entered into an expense limitation agreement with the Fund until at least June 30, 2021. 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 the Fund in any fiscal year exceed the expense limit. Such excess amounts will be the liability of the Adviser. 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. Effective July 1, 2019 through May 31, 2020, the expense limit (excluding voluntary waivers) is 0.35%.
Under this expense limitation agreement, the Fund has agreed to repay fees and expenses that were waived or reimbursed by the Adviser for a period up to three years after the fiscal year in which 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 May 31, 2020, there are no amounts available to be repaid to the Adviser.
Amendment #1 to the expense limitation agreement was effective March 23, 2020. Under this amendment, the Adviser agreed to further reimburse fees in excess of the Fund's expense limit agreement of 0.35% dated July 1, 2019. 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 up to three years after the fiscal year in which the waiver or reimbursement took place, to the extent any repayments would not cause the Fund's net yield to fall below the Fund's minimum yield at the time of: (a) the original waiver or expense reimbursement; or (b) the expense limit in effect at the time of the extra waiver. As of May 31, 2020, the following amounts are available to be repaid to the Adviser (amounts in thousands):
Expires 05/31/2023 | |||
$ | 745 |
Certain officers and/or interested trustees of the Fund are also officers and/or employees of the Adviser, Administrator, Sub-Administrator, Sub-Fund Accountant, and Legal.
4. Risks:
The Fund may be subject to other risks in addition to these identified risks.
Global economies and financial markets are increasingly interconnected, which increases the possibilities that conditions in one country or region might adversely affect issuers in another country or region. Geopolitical and other risks, including war, terrorism, trade disputes, political or economic dysfunction within some nations, public health crises and related geopolitical events, as well as environmental disasters such as earthquakes, fires, and floods, may add to instability in world economies and markets generally. Changes in trade policies and international trade agreements could affect the economies of many countries in unpredictable ways. Epidemics and/or pandemics, such as the coronavirus (or COVID-19), may result in, among other things, closing borders, disruptions to healthcare service preparation and delivery, quarantines, cancellations, disruptions to supply chains and consumer
18
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
activity, as well as general concern and uncertainty. The impact may be short-term or may last for extended periods.
The COVID-19 pandemic, which has spread rapidly across the world, has led and will continue to lead for an unknown period of time to disruptions in local, regional, national and global markets and economies. Among other things, the outbreak has resulted in, and until fully resolved is likely to continue to result in, among other things (1) government imposition of various forms of "stay-at-home" orders and the closing of "non-essential" businesses, resulting in significant disruption to the businesses of many issuers as well as lay-offs of employees; (2) increased requests by issuers of debt instruments for amendments and waivers of agreements to avoid default and increased defaults; (3) volatility and disruption of markets, including greater volatility in pricing and spreads; and (4) rapidly evolving proposals and/or actions by state and federal governments to address problems being experienced by the markets and by businesses and the economy in general.
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. As a money market fund, the Fund is permitted, pursuant to applicable federal securities laws, to use amortized cost to value its portfolio securities and to transact at a stable $1 NAV per share. The Fund intends to qualify as a government money market fund in compliance with the requirements of Rule 2a-7.
Any investment involves risk, and there is no assurance that the Fund's objective will be achieved. The Fund is actively managed, and the investment techniques and risk analyses used by the Fund's portfolio managers may not produce the desired results. As you consider an investment in the Fund, you also should take into account your tolerance for the daily fluctuations of the financial markets and whether you can afford to leave your money in the Fund for long periods of time to ride out down periods. As with other mutual funds, losing money is a risk of investing in the Fund.
Credit risk is expected to be low for the Fund because it invests in securities that are considered to be of high quality, including securities that are backed by the full faith and credit of the U.S. government. However, there is the possibility that a borrower cannot make timely interest and 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.
Many debt securities, derivatives and other financial instruments, including some of the Fund's investments, use the London Interbank Offered Rate ("LIBOR") as the reference or benchmark rate for variable interest rate calculations. However, the use of LIBOR started to come under pressure following manipulation allegations in 2012. Despite increased regulation and other corrective actions since that time, concerns have arisen regarding its viability as a benchmark, due largely to reduced activity in the financial markets that it measures. In June 2017, the Alternative Reference Rates Committee, a group of large U.S. banks working with the Federal Reserve, announced its selection of a new Secured Overnight Funding Rate ("SOFR"), which is intended to be a broad measure of secured overnight U.S. Treasury repo rates, as an appropriate replacement for LIBOR. The Federal Reserve Bank of New York began publishing the SOFR in 2018, expecting that it could be used on a voluntary basis in new instruments and transactions. Bank working groups and regulators in other countries have suggested other alternatives for their markets, including the Sterling Overnight Interbank Average Rate ("SONIA") in England. In July 2017, the Financial Conduct Authority (the "FCA"), the United Kingdom financial regulatory body, announced that after 2021 it will cease its active encouragement of UK banks to provide the quotations needed to sustain LIBOR. That announcement suggests that LIBOR may cease to be published after that time. The roughly three-year period until the end of 2021 is expected to be enough time for market participants to transition to the use of a different benchmark for both new and existing securities and transactions. Various financial industry groups have begun planning for that transition, but there are obstacles to converting certain longer-term securities and transactions to a new benchmark. Transition planning is at an early stage, and neither the effect of the transition process
19
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
nor its ultimate success can yet be known. The transition process might lead to increased volatility and illiquidity in markets that currently rely on the LIBOR to determine interest rates. It could also lead to a reduction in the value of some LIBOR-based investments and reduce the effectiveness of new hedges placed against existing LIBOR-based instruments. Since the usefulness of LIBOR as a benchmark could deteriorate during the transition period, these effects could occur before the end of 2021.
5. Line of Credit:
Effective with the Transaction on July 1, 2019, the Victory Funds Complex participates in a short-term, demand note "Line of Credit" agreement with Citibank. Under the agreement with Citibank, the Victory Funds Complex could 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 that Fund paying the related commitment fees for that amount. The purpose of the agreement is to meet temporary or emergency cash needs. Citibank receives an annual commitment fee of 0.15% on $300 million for providing the Line of Credit. Each fund in the Victory Funds Complex pays a pro-rata portion of the commitment fees plus any interest (one month LIBOR plus one percent) on amounts borrowed. Effective June 29, 2020, under an amended Line of Credit agreement, Citibank will also receive an annual upfront fee of 0.10% on the $300 million committed line of credit. Interest charged to the Fund, if any, during the period is reflected on the Statement of Operations under line of credit fees.
Prior to the Transaction on July 1, 2019, the line of credit among the Trust, with respect to its funds, and USAA Capital Corporation ("CAPCO") terminated. For the period from June 1, 2019 to June 30, 2019, the Fund paid CAPCO facility fees of $10 thousand.
The Fund had no borrowings under either agreement with Citibank or CAPCO during the year ended May 31, 2020.
6. Federal Income Tax Information:
The Fund intends to declare daily and distribute any net investment income monthly. Distributable net realized gains, if any, are declared and paid at least annually.
The amounts of dividends from net investment income and distributions from net realized gains (collectively distributions to shareholders) are determined in accordance with federal income tax regulations, which may differ from GAAP. To the extent these "book/tax" differences are permanent in nature (e.g., net operating loss and distribution reclassification), such amounts are reclassified within the components of net assets based on their federal tax-basis treatment; temporary differences (e.g., wash sales) do not require reclassification. To the extent dividends and distributions exceed net investment income and net realized gains for tax purposes, they are reported as distributions of capital. Net investment losses incurred by the Fund may be reclassified as an offset to capital on the accompanying Statement of Assets and Liabilities.
As of May 31, 2020, 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 Statement of Changes in Net Assets because, for tax purposes, dividends are recognized when actually paid) (amounts in thousands).
Year Ended May 31, 2020 | Year Ended May 31, 2019 | ||||||||||||||
Distributions paid from | Distributions paid from | ||||||||||||||
Ordinary Income | Total Distributions Paid | Ordinary Income | Total Distributions Paid | ||||||||||||
$ | 65,177 | $ | 65,177 | $ | 82,178 | $ | 82,178 |
20
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
At May 31, 2020, the Fund had no capital loss carryforwards for federal income tax purposes.
As of May 31, 2020, 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) | ||||||||||||
$ | 545,619 | $ | — | $ | — | $ | — |
21
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of USAA Treasury Money Market Trust:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of USAA Treasury Money Market Trust (the "Fund") (one of the funds constituting USAA Mutual Funds Trust (the "Trust")), including the schedule of portfolio investments, as of May 31, 2020, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the funds constituting USAA Mutual Funds Trust) at May 31, 2020, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Trust's management. Our responsibility is to express an opinion on the Fund's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust's internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of May 31, 2020, by correspondence with the custodian. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Victory Capital investment companies since 1995.
San Antonio, Texas
July 27, 2020
22
USAA Mutual Funds Trust | Supplemental Information May 31, 2020 |
(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) 539-3863. The information is also included in the Fund's Statement of Additional Information, which is available on the SEC's website at www.sec.gov.
Information relating to how the Fund voted proxies relating to portfolio securities held during the most recent 12 months ended June 30 is available on the SEC's website at www.sec.gov.
23
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(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 10 Trustees, eight of whom are not "interested persons" of the Trust within the meaning of that term under the 1940 Act ("Independent Trustees") and two 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 ages, position with the Trust, commencement of service, 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 47 portfolios in the Trust. Each Trustee's address is 15935 La Cantera Pkwy, Building Two, San Antonio, TX, 78256. Pursuant to a policy adopted by the Board, the term of office for each Trustee shall be until the Independent Trustee reaches age 75 or an Interested Trustee reaches age 75. The Board may change or grant exceptions from this policy at any time without shareholder approval. A Trustee may resign or be removed by a vote of the other Trustees or the holders of a majority of the outstanding shares of the Trust at any time. Vacancies on the Board can be filled by the action of a majority of the Trustees, provided that after filling such vacancy at least two-thirds of the Trustees have been elected by the shareholders.
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Independent Trustees. | |||||||||||||||||||
Jefferson C. Boyce, Born September 1957 | Lead Independent Trustee, and Vice Chairman | 2013 | Senior Managing Director, New York Life Investments, LLC (1992-2012) | Westhab, Inc. | |||||||||||||||
John C. Walters, Born February 1962 | Trustee | 2019 | Retired. Mr. Walters brings significant Board experience including active involvement with the board of a Fortune 500 company, and a proven record of leading large, complex financial organizations. He has a demonstrated record of success in distribution, manufacturing, investment brokerage, and investment management in both the retail and institutional investment businesses. He has substantial experience in the investment management business with a demonstrated ability to develop and drive strategy while managing operation, financial, and investment risk. | Guardian Variable Products Trust (16 series), Lead Independent Director; Amerilife Holdings LLC, Director; Stadion Money Management; Director; University of North Carolina (Chapel Hill), Member Board of Governors. |
24
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Robert L. Mason, Ph.D., Born July 1946 | Trustee | 1997 | Adjunct Professor in the Department of Management Science and Statistics in the College of Business at the University of Texas at San Antonio (since 2001); Institute Analyst, Southwest Research Institute (March 2002-January 2016) | None | |||||||||||||||
Dawn M. Hawley, Born February 1954 | Trustee | 2014 | Manager of Finance, Menil Foundation, Inc. (May 2007-June 2011), which is a private foundation that oversees the assemblage of sculptures, prints, drawings, photographs, and rare books. Director of Financial Planning and Analysis and Chief Financial Officer, AIM Management Group, Inc. (October 1987-January 2006) | None | |||||||||||||||
Paul L. McNamara, Born July 1948 | Trustee | 2012 | Director, Cantor Opportunistic Alternatives Fund, LLC (March 2010-February 2014) , which is a closed-end fund of funds by Cantor Fitzgerald Investment Advisors, LLC | None |
25
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Richard Y. Newton III, Born January 1956 | Trustee | 2017 | Director, Elta North America (01/18-present), 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 (December 2015-present)); Executive Director, The Union League Club of New York (June 2014-November 2015): Executive Vice President, Air Force Association (August 2012-May 2014); Lieutenant General, United States Air Force (January 2008-June 2012) | None | |||||||||||||||
Barbara B. Ostdiek, Ph.D., Born March 1964 | Trustee | 2008 | Senior Associate Dean of Degree Programs at Jesse H. Jones Graduate School of Business at Rice University (since 2013); Associate Professor of Finance at Jessie H. Jones Graduate School of Business at Rice University (since 2001) | None | |||||||||||||||
Michael F. Reimherr, Born August 1945 | Trustee | 2000 | President of Reimherr Business Consulting (May 1995-December 2017); St. Mary's University Investment Committee overseeing University Endowment (since 2014) | None |
26
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Interested Trustees. | |||||||||||||||||||
David C. Brown, ** Born May 1972 | Trustee | 2019 | Chairman and Chief Executive Officer (since 2013), Co-Chief Executive Officer (2011-2013), Victory Capital Management Inc.; Chairman and Chief Executive Officer, Victory Capital Holdings, Inc. (since 2013). Mr. Brown brings to the Board extensive business, finance and leadership skills gained and developed through years of experience in the financial services industry, including his tenure overseeing the strategic direction as CEO of Victory Capital. These skills, combined with Mr. Brown's extensive knowledge of the financial services industry and demonstrated success in the development and distribution of investment strategies and products, enable him to provide valuable insights to the Board and strategic direction for the Funds | Trustee, Victory Portfolios (42 series), Victory Portfolios II (26 series), Victory Variable Insurance Funds (9 series) |
27
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Daniel S. McNamara, ** Born June 1966 | Trustee and Chair of the Board of Trustees | 2012 | Trustee, President, and Vice Chairman of USAA ETF Trust (June 2017-June 2019); President of Financial Advice & Solutions Group (FASG), USAA (since 2013); Director, IMCO (September 2009-April 2014); President, AMCO (August, 2011-April 2013); Senior Vice President of USAA Financial Planning Services Insurance Agency, Inc. (FPS) (since 2011); Director of USAA Investment Management Company (IMCO) (since 2009); Chairman of Board of IMCO (since 2013); Director of USAA Asset Management Company (AMCO), (August 2011-June 2019); President and Director of USAA Shareholder Account Services (SAS)(October 2009-June 2019); Director and Vice Chairman of FPS (since 2013); President and Director of USAA Investment Corporation (ICORP) (since 2010); Chairman of Board of ICORP (since 2013); Director of USAA Financial Advisors, Inc. (FAI) (since 2013); Chairman of Board of FAI (since 2015). Mr. McNamara brings to the Board extensive experience in the financial services industry, including experience as an officer of the Trust. | None |
** Mr. McNamara and Mr. Brown are "Interested Persons" by reason of their relationships with the Adviser.
The Statement of Additional Information includes additional information about the Trustees of the Trust and is available, without charge, on the SEC's website at www.sec.gov and/or by calling (800)-539-3863.
28
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Officers:
The officers of the Trust, their ages, 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, Building Two, 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 with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | ||||||||||||
Interested Officers. | |||||||||||||||
Christopher K. Dyer, Born February 1962 | President | 2019 | Director of Fund Administration, Victory Capital (2004-present) | ||||||||||||
Scott A Stahorsky, Born July 1969 | Vice President | 2019 | Manager, Fund Administration, Victory Capital (since 2015); Senior Analyst, Fund Administration, Victory Capital (prior to 2015) | ||||||||||||
James K. De Vries, Born April 1969 | Treasurer, Principal Financial Officer | 2018 | Executive Director, Victory Capital Management Inc. (since 2019); Treasurer, USAA ETF Trust (September 2018-June 2019); Executive Director, Investment and Financial Administration, USAA (April 2012-June 2019); Assistant Treasurer, USAA ETF Trust (June 2017-September 2018); Assistant Treasurer, USAA Mutual Funds Trust (December 2013-February 2018) | ||||||||||||
Allan Shaer, Born March 1965 | Assistant Treasurer | 2019 | Senior Vice President, Financial Administration, Citi Fund Services Ohio, Inc. (since 2016); Vice President, Mutual Fund Administration, JP Morgan Chase (2011-2016) | ||||||||||||
Carol D. Trevino, Born October 1965 | Assistant Treasurer | 2018 | Director, Accounting and Finance, Victory Capital Management Inc. (since 2019); Accounting/Financial Director, USAA (December 2013-June 2019); Assistant Treasurer, USAA ETF Trust (September 2018-June 2019). | ||||||||||||
Erin G. Wagner, Born February 1974 | Secretary | 2019 | Deputy General Counsel, the Adviser (since 2013) | ||||||||||||
Charles Booth, Born April 1960 | Anti-Money Laundering Compliance Officer and Identity Theft Officer | 2019 | Director, Regulatory Administration and CCO Support Services, Citi Fund Services Ohio, Inc. (2007-present) | ||||||||||||
Amy Campos, Born July 1976 | Chief Compliance Officer | 2019 | Chief Compliance Officer, USAA Mutual Funds Trust (since 2019); Executive Director, Deputy Chief Compliance Officer, USAA Mutual Funds Trust and USAA ETF Trust (July 2017-June 2019); Compliance Director, USAA Mutual Funds Trust (2014-July 2017) |
29
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
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 December 1, 2019 through May 31, 2020.
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. If these transactional costs were included, your costs would have been higher.
Beginning Account Value 12/1/19 | Actual Ending Account Value 5/31/20 | Hypothetical Ending Account Value 5/31/20 | Actual Expenses Paid During Period 12/1/19- 5/31/20* | Hypothetical Expenses Paid During Period 12/1/19- 5/31/20* | Annualized Expense Ratio During Period 12/1/19- 5/31/20 | ||||||||||||||||||||||
$ | 1,000.00 | $ | 1,003.70 | $ | 1,023.45 | $ | 1.55 | $ | 1.57 | 0.31 | % |
* Expenses are equal to the average account value multiplied by the Fund's annualized expense ratio multiplied by 183/366 (the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year).
Effective March 23, 2020 the Adviser agreed to further reimburse fees in excess of the Fund's expense limit agreement of 0.35% dated July 1, 2019. The Fund's expense ratio excluding these reimbursements for the six months ended May 31, 2020 is 0.34%. The values in the table below reflect your costs (in dollars) of investing in the Fund, had the Adviser not reimbursed these fees for the entire six months ended May 31, 2020.
Beginning Account Value 12/1/19 | Ending Account Value 5/31/20 | Hypothetical Ending Account Value 5/31/20 | Actual Expenses Paid During Period* 12/1/19- 5/31/20 | Hypothetical Expenses Paid During Period* 12/1/19- 5/31/20 | Annualized Expense Ratio During Period 12/1/19- 5/31/20 | ||||||||||||||||||||||
$ | 1,000.00 | $ | 1,003.70 | $ | 1,023.30 | $ | 1.70 | $ | 1.72 | 0.34 | % |
* Expenses are equal to the average account value multiplied by the Fund's annualized expense ratio multiplied by 183/366 (the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year).
30
Privacy Policy
Protecting the Privacy of Information
The Trust respects your right to privacy. We also know that you expect us to conduct and process your business in an accurate and efficient manner. To do so, we must collect and maintain certain personal information about you. This is the information we collect from you on applications or other forms, and from the transactions you make with us or third parties. It may include your name, address, social security number, account transactions and balances, and information about investment goals and risk tolerance.
We do not disclose any information about you or about former customers to anyone except as permitted or required by law. Specifically, we may disclose the information we collect to companies that perform services on our behalf, such as the transfer agent that processes shareholder accounts and printers and mailers that assist us in the distribution of investor materials. We may also disclose this information to companies that perform marketing services on our behalf. This allows us to continue to offer you Victory investment products and services that meet your investing needs, and to effect transactions that you request or authorize. These companies will use this information only in connection with the services for which we hired them. They are not permitted to use or share this information for any other purpose.
To protect your personal information internally, we permit access only by authorized employees and maintain physical, electronic and procedural safeguards to guard your personal information.*
* | You may have received communications regarding information about privacy policies from other financial institutions which gave you the opportunity to “opt-out” of certain information sharing with companies which are not affiliated with that financial institution. The Trust does not share information with other companies for purposes of marketing solicitations for products other than the Trust. Therefore, the Trust does not provide opt-out options to their shareholders. |
P.O. Box 182593
Columbus, Ohio 43218-2593
Visit our website at: | Call | ||||||
vcm.com | (800) 235-8396 |
23415-0720
MAY 31, 2020
Annual Report
USAA World Growth Fund
Beginning January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Fund's shareholder reports like this one will no longer be sent by mail, unless you specifically request paper copies of the reports from the Fund or from your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on VictoryFunds.com, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund or your financial intermediary electronically by notifying your financial intermediary directly, or if you are a direct investor, by calling (800) 235-8396 or logging on to usaa.com. Effective on or about September 8, 2020, a shareholder who has an account directly with the Fund will need to submit their request via email to TA.Processing@FISGlobal.com.
You may elect to receive all future reports in paper free of charge. You can inform the Fund or your financial intermediary that you wish to continue receiving paper copies of your shareholder reports by notifying your financial intermediary directly, or if you are a direct investor, by calling (800) 235-8396 or logging on to usaa.com. Effective on or about September 8, 2020, a shareholder who has an account directly with the Fund will need to submit their request via email to TA.Processing@FISGlobal.com. Your election to receive reports in paper will apply to all funds held with the USAA Mutual Funds or your financial intermediary.
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 logo 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.
USAA Mutual Funds Trust
TABLE OF CONTENTS
Shareholder Letter (Unaudited) | 2 | ||||||
Managers' Commentary (Unaudited) | 4 | ||||||
Investment Overview (Unaudited) | 6 | ||||||
Investment Objective & Portfolio Holdings (Unaudited) | 7 | ||||||
Financial Statements | |||||||
Schedule of Portfolio Investments | 9 | ||||||
Statement of Assets and Liabilities | 18 | ||||||
Statement of Operations | 19 | ||||||
Statements of Changes in Net Assets | 20 | ||||||
Financial Highlights | 22 | ||||||
Notes to Financial Statements | 24 | ||||||
Report of Independent Registered Public Accounting Firm | 36 | ||||||
Supplemental Information (Unaudited) | 37 | ||||||
Proxy Voting and Portfolio Holdings Information | 37 | ||||||
Trustees' and Officers' Information | 38 | ||||||
Expense Examples | 44 | ||||||
Additional Federal Income Tax Information | 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.
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.
1
(Unaudited)
Dear Shareholder,
The previous decade ended with the longest-ever bull market in U.S. equities still intact, even as investors wrestled with issues like softening global economic data, Brexit, and U.S.-China trade relations. In retrospect, those worries seem so pedestrian given what we would soon experience.
A new and unexpected threat—a global pandemic, the novel coronavirus ("COVID-19")—first emerged in Asia and then began spreading globally and throughout the United States during the first quarter of 2020. This unprecedented and unanticipated event not only rendered all existing economic and earnings forecasts moot, but it also roiled stock and bond markets everywhere. Efforts to slow the spread of the virus, though successful to date, also brought the economy to a halt. The historic bull market in stocks ended virtually overnight.
After an initial severe sell-off in March, equity markets recovered sharply. As our annual reporting period drew to a close on May 31, 2020, many of the broad market indexes had recovered and volatility had returned to more palatable levels. In fact, despite all the chaos, the S&P 500® Index, one of the most popular measures of large U.S. stocks, finished the fiscal year (May 31, 2020) at approximately 3,044, which was up more than 10.6% from one year ago.
The market turmoil of early 2020 was not limited to equities. Fixed income volatility spiked when liquidity evaporated in late March as investors struggled to understand the ramifications of stay-at-home orders. Fortunately, the U.S. Federal Reserve (the "Fed") (as well as other global central banks) leapt into action—cutting interest rates, (re)starting quantitative easing and, in the case of the Fed, launching an array of programs to stabilize markets.
The new lending facilities and programs had their intended effect of improving liquidity and trading. Credit spreads across corporate, high-yield, structured, and municipal markets were coaxed down from their highs. In addition, Congress came through with substantial fiscal stimulus that also was applauded by investors and markets. Although fixed income markets regained their footing, the yield on 10-Year Treasurys, a benchmark for low-risk investments, declined steadily during our fiscal year—from 2.14% at the beginning of our reporting period to approximately 0.65% as of May 31, 2020. This suggests that investors remain a little wary.
While the past year has been unprecedented for all of us, both personally and professionally, our portfolio managers continue to scrutinize the financial markets, economic conditions, and the trajectory of the pandemic, which will likely be the guiding factor on Fed policy and the markets.
No matter what happens in the near term, we believe that the massive monetary and fiscal policies introduced earlier this year will have longer-term ramifications. Despite this uncertainty, it's important to remain focused on your long-term investment goals and avoid making emotional decisions. If you invest with us directly, our Member Service Representatives are available to help. Call us at (800) 539-3863 or visit our website at vcm.com.
2
From all of us here at USAA Mutual Funds, thank you for letting us help you work toward your investment goals.
Christopher K. Dyer, CFA
President,
USAA Mutual Funds
3
USAA Mutual Funds Trust
USAA World Growth Fund
Managers' Commentary
(Unaudited)
Victory Solutions
Mannik S. Dhillon, CFA, CAIA
Wasif A. Latif
RS Investments Developed Markets, A Victory Capital Investment Franchise
U-Wen Kok, CFA
Adam Mezan, CFA
MFS Investment Management
Ryan McAllister
Roger Morley
• What were the market conditions over the reporting period?
Global financial market performance varied widely over the period driven by uncertainty related to the duration and economic impact of the novel coronavirus ("COVID-19") pandemic. This generally led to a risk-off environment as investors flocked to safe haven assets such as U.S. Treasurys and gold. Global equities turned mostly lower with the exception of a small breadth of mega-cap securities well-positioned for an extended economic slowdown and the new stay-at-home paradigm. The final month and a half of the reporting period saw a rebound in risky assets as economies began a phased reopening.
Within the United States, the S&P 500® Index dropped nearly 34% from its 2020 high, before beginning to recoup losses with the support of comprehensive monetary and fiscal stimulus, along with encouraging results in COVID-19 vaccine trials. Over the reporting period, the S&P 500® Index returned 12.84%, with large-cap growth stocks leading the way, up to a return of 26.25% as represented by the Russell 1000 Growth Index. Value stocks and small-cap stocks underperformed growth stocks over the period, but more recently have seen a pickup in momentum. U.S. large-cap value stocks were down to a return of -1.64% over the reporting period as gauged by the Russell 1000 Value Index, while U.S. small-cap stocks, returned -3.44% as represented by the Russell 2000 Index.
Developed market international and emerging market equities followed a path similar to U.S. equities. Markets led investors on a rollercoaster ride that saw both the MSCI EAFE Index and MSCI Emerging Markets Index drop approximately 34% from their highs in the year. The market drawdown hit bottom on March 23rd and then started a steady ascent, erasing most of the losses as European Central Bank quantitative easing and talks of a 750-billion euros fiscal stimulus helped bolster momentum in the market's recovery. Over the reporting period, developed international equities, represented by the MSCI EAFE Index, were down to a return of -2.81%, while the MSCI Emerging Markets Index returned -4.39%.
Within fixed income, interest rate-sensitive treasury bonds outperformed credit-sensitive investment-grade and high-yield corporate bonds. Investor demand for U.S. Treasurys drove yields to new lows, while credit spreads reached unprecedented levels as liquidity
4
USAA Mutual Funds Trust
USAA World Growth Fund (continued)
Managers' Commentary (continued)
issues began to seize up parts of credit and municipal markets. The U.S. Federal Reserve (the"Fed") intervened, providing liquidity by expanding open market purchases to include municipal and corporate bonds. The ICE US Treasury 20+ Year bond Index returned 27.34% over the reporting period, while the Bloomberg Barclays U.S. Aggregate Bond Index returned 9.42%. High-yield bonds finished the period slightly positive, up 0.35% as gauged by the ICE BofA US High Yield Index.
• How did the USAA World Growth Fund (the "Fund") perform during the reporting period?
The Fund has three share classes: Fund Shares, Institutional Shares and Adviser Shares (Redesignated Class A shares). For the reporting period ended May 31, 2020, the Fund Shares, Institutional Shares and Adviser Shares had a total return of 7.81%, 7.85% and 7.49% respectively. This compares to returns of 3.98% for the Lipper Global Funds Index and 6.80% for the MSCI World 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 subadvisers. MFS Investment Management ("MFS") is an external subadviser to the Fund, while RS Developed Markets is a Victory Capital Management franchise utilized as an internal resource for the Fund. The investment adviser and the subadviser each provide day-to-day discretionary management for a portion of the Fund's assets.
• What strategies did you employ during the reporting period?
During the reporting period, the Fund outperformed the MSCI World Index. Among the positive contributors were good stock selection in the United States and a relative underweight to Canada, which had a negative return. Although stock selection was positive in the United States, a relative underweight to the country detracted from performance. Another detracting factor at the country level was negative stock selection in Japan.
On a sector basis, the Healthcare sector was the biggest contributor to the Fund's outperformance where both stock selection and allocation had a positive impact. Within the Healthcare sector, a relative overweight to Roche Holding AG helped drive the Fund's performance. The most detracting sector was Information Technology. The sector had a double-digit positive return during the period and a relative underweight in the Fund resulted in lower return contribution. An underweight to Apple Inc. was a meaningful detractor within the Information Technology sector. Apple Inc. returned over 80% during the reporting period.
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 Mutual Funds Trust
USAA World Growth Fund
Investment Overview
(Unaudited)
Average Annual Total Return
Year Ended May 31, 2020
Fund Shares | Institutional Shares | Adviser Shares | |||||||||||||||||
INCEPTION DATE | 10/1/92 | 8/7/15 | 8/1/10 | ||||||||||||||||
Net Asset Value | Net Asset Value | Net Asset Value | MSCI World Index1 | Lipper Global Funds Index2 | |||||||||||||||
One Year 7.81% | 7.85 | % | 7.49 | % | 6.80 | % | 3.98 | % | |||||||||||
Five Year 6.40% | NA | 6.12 | % | 5.84 | % | 4.42 | % | ||||||||||||
Ten Year 10.53% | NA | NA | 9.28 | % | 7.99 | % | |||||||||||||
Since Inception NA | 6.61 | % | 9.52 | % | NA | NA |
Past performance is not indicative of future results. 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 for various periods since inception. Without such fee waivers, the total returns would have been lower.
USAA World Growth Fund — Growth of $10,000
1 The unmanaged MSCI World Index reflects the movements of world stock markets by representing a broad selection of domestically listed companies within each market.
2 The unmanaged Lipper Global Funds Index tracks the total return performance of funds within the Lipper Global Funds category.
The graph reflects investment of growth of a hypothetical $10,000 investment in the Fund. Past performance is no guarantee of future results.
The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
6
USAA Mutual Funds Trust USAA World Growth Fund | May 31, 2020 |
(Unaudited)
Investment Objective & Portfolio Holdings:
The Fund's investment objective is to seek capital appreciation.
Top 10 Sectors
May 31, 2020
(% of Net Assets)
Information Technology | 17.3 | % | |||||
Health Care | 15.3 | % | |||||
Industrials | 14.0 | % | |||||
Financials | 13.3 | % | |||||
Consumer Staples | 10.6 | % | |||||
Consumer Discretionary | 10.5 | % | |||||
Communication Services | 7.9 | % | |||||
Materials | 4.6 | % | |||||
Energy | 3.2 | % | |||||
Utilities | 1.5 | % |
Top 10 Equity Holdings*
May 31, 2020
(% of Net Assets)
Microsoft Corp. | 3.8 | % | |||||
Apple, Inc. | 2.9 | % | |||||
Roche Holding AG | 2.3 | % | |||||
Mastercard, Inc. | 2.1 | % | |||||
Amazon.com, Inc. | 2.0 | % | |||||
Facebook, Inc. | 1.6 | % | |||||
Alphabet, Inc. | 1.5 | % | |||||
Johnson & Johnson | 1.5 | % | |||||
Cisco Systems, Inc. | 1.5 | % | |||||
PepsiCo, Inc. | 1.5 | % |
* Does not include short-term investments purchased with cash collateral from securities loaned.
Refer to the Schedule of Portfolio Investments for a complete list of securities.
7
USAA Mutual Funds Trust USAA World Growth Fund (continued) | May 31, 2020 |
Country Allocation:
May 31, 2020
(% 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%.
8
USAA Mutual Funds Trust USAA World Growth Fund | Schedule of Portfolio Investments May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Common Stocks (98.5%) | |||||||||||
Australia (1.3%): | |||||||||||
Financials (0.5%): | |||||||||||
Macquarie Group Ltd. | 83,788 | $ | 6,161 | ||||||||
Health Care (0.8%): | |||||||||||
CSL Ltd. | 55,768 | 10,326 | |||||||||
16,487 | |||||||||||
Austria (0.1%): | |||||||||||
Financials (0.1%): | |||||||||||
Erste Group Bank AG (a) | 33,581 | 743 | |||||||||
Belgium (0.4%): | |||||||||||
Information Technology (0.4%): | |||||||||||
Melexis NV | 82,465 | 5,436 | |||||||||
Bermuda (0.5%): | |||||||||||
Industrials (0.5%): | |||||||||||
Triton International Ltd. | 212,305 | 6,475 | |||||||||
Brazil (0.0%): (b) | |||||||||||
Consumer Staples (0.0%): (b) | |||||||||||
Ambev SA | 220,729 | 516 | |||||||||
Canada (2.1%): | |||||||||||
Energy (0.4%): | |||||||||||
Parex Resources, Inc. (a) | 418,002 | 4,700 | |||||||||
Industrials (1.2%): | |||||||||||
Canadian National Railway Co. | 69,566 | 5,986 | |||||||||
Canadian Pacific Railway Ltd. | 37,216 | 9,329 | |||||||||
15,315 | |||||||||||
Materials (0.5%): | |||||||||||
Kirkland Lake Gold Ltd. | 163,161 | 6,287 | |||||||||
26,302 | |||||||||||
China (2.5%): | |||||||||||
Communication Services (1.2%): | |||||||||||
Tencent Holdings Ltd. | 269,100 | 14,574 | |||||||||
Consumer Staples (0.3%): | |||||||||||
Foshan Haitan Flavouring & Food Co. Ltd. Class A | 272,560 | 4,408 | |||||||||
Financials (1.0%): | |||||||||||
Industrial & Commercial Bank of China Ltd. Class H | 19,012,000 | 12,315 | |||||||||
31,297 | |||||||||||
Denmark (0.9%): | |||||||||||
Consumer Staples (0.9%): | |||||||||||
Carlsberg A/S Class B | 13,315 | 1,726 | |||||||||
Royal Unibrew A/S (a) | 114,863 | 9,233 | |||||||||
10,959 |
See notes to financial statements.
9
USAA Mutual Funds Trust USAA World Growth Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
France (6.3%): | |||||||||||
Consumer Discretionary (2.0%): | |||||||||||
Faurecia SE (a) | 168,483 | $ | 6,531 | ||||||||
Hermes International | 1,003 | 838 | |||||||||
LVMH Moet Hennessy Louis Vuitton SE | 41,984 | 17,611 | |||||||||
24,980 | |||||||||||
Consumer Staples (0.8%): | |||||||||||
Danone SA | 77,974 | 5,364 | |||||||||
Pernod Ricard SA | 29,643 | 4,619 | |||||||||
9,983 | |||||||||||
Energy (1.0%): | |||||||||||
Gaztransport Et Technigaz SA | 64,012 | 4,804 | |||||||||
Total SA | 214,284 | 8,125 | |||||||||
12,929 | |||||||||||
Financials (0.5%): | |||||||||||
BNP Paribas SA (a) | 167,499 | 6,027 | |||||||||
Health Care (0.1%): | |||||||||||
EssilorLuxottica SA | 9,006 | 1,172 | |||||||||
Industrials (0.9%): | |||||||||||
Legrand SA | 46,832 | 3,208 | |||||||||
Schneider Electric SE | 80,986 | 8,018 | |||||||||
11,226 | |||||||||||
Materials (1.0%): | |||||||||||
Air Liquide SA (c) | 22,433 | 3,050 | |||||||||
Arkema SA | 100,584 | 8,819 | |||||||||
11,869 | |||||||||||
78,186 | |||||||||||
Germany (1.5%): | |||||||||||
Financials (0.1%): | |||||||||||
Deutsche Boerse AG | 9,163 | 1,508 | |||||||||
Health Care (0.6%): | |||||||||||
Bayer AG Registered Shares | 76,786 | 5,249 | |||||||||
Merck KGaA | 23,888 | 2,753 | |||||||||
8,002 | |||||||||||
Industrials (0.7%): | |||||||||||
Brenntag AG | 33,062 | 1,759 | |||||||||
MTU Aero Engines AG | 8,295 | 1,341 | |||||||||
Washtec AG (a) | 125,288 | 5,156 | |||||||||
8,256 | |||||||||||
Real Estate (0.1%): | |||||||||||
Deutsche Wohnen SE | 27,548 | 1,233 | |||||||||
18,999 |
See notes to financial statements.
10
USAA Mutual Funds Trust USAA World Growth Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Hong Kong (0.4%): | |||||||||||
Energy (0.4%): | |||||||||||
CNOOC Ltd. | 4,866,792 | $ | 5,560 | ||||||||
India (0.6%): | |||||||||||
Consumer Staples (0.6%): | |||||||||||
Nestle India Ltd. | 32,547 | 7,577 | |||||||||
Indonesia (0.5%): | |||||||||||
Communication Services (0.5%): | |||||||||||
PT Telekomunikasi Indonesia PerseroTbk | 25,830,700 | 5,588 | |||||||||
Ireland (1.9%): | |||||||||||
Communication Services (0.2%): | |||||||||||
WPP PLC | 258,049 | 1,964 | |||||||||
Industrials (1.0%): | |||||||||||
Eaton Corp. PLC | 152,277 | 12,928 | |||||||||
Information Technology (0.7%): | |||||||||||
Accenture PLC Class A | 41,086 | 8,284 | |||||||||
23,176 | |||||||||||
Israel (0.3%): | |||||||||||
Information Technology (0.3%): | |||||||||||
Check Point Software Technologies Ltd. | 34,706 | 3,806 | |||||||||
Italy (1.9%): | |||||||||||
Financials (0.5%): | |||||||||||
Banca Generali SpA (a) | 252,190 | 6,880 | |||||||||
Health Care (0.7%): | |||||||||||
Recordati SpA | 181,874 | 8,281 | |||||||||
Utilities (0.7%): | |||||||||||
Enel SpA | 1,149,264 | 8,885 | |||||||||
24,046 | |||||||||||
Japan (6.2%): | |||||||||||
Communication Services (0.3%): | |||||||||||
Kakaku.com, Inc. | 175,800 | 4,270 | |||||||||
Consumer Discretionary (1.4%): | |||||||||||
Hikari Tsushin, Inc. | 29,800 | 6,537 | |||||||||
Toyota Motor Corp. | 175,600 | 11,068 | |||||||||
17,605 | |||||||||||
Consumer Staples (0.4%): | |||||||||||
Kobe Bussan Co. Ltd. (c) | 90,500 | 4,711 | |||||||||
Financials (0.7%): | |||||||||||
Jafco Co. Ltd. | 110,800 | 3,730 | |||||||||
Resona Holdings, Inc. | 1,205,600 | 4,360 | |||||||||
8,090 |
See notes to financial statements.
11
USAA Mutual Funds Trust USAA World Growth Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Health Care (1.6%): | |||||||||||
As One Corp. (c) | 45,700 | $ | 5,051 | ||||||||
Hoya Corp. | 135,000 | 12,705 | |||||||||
Olympus Corp. | 138,700 | 2,412 | |||||||||
20,168 | |||||||||||
Industrials (1.4%): | |||||||||||
en-japan, Inc. | 204,200 | 5,524 | |||||||||
Hitachi Construction Machinery Co. Ltd. | 203,800 | 5,377 | |||||||||
Kubota Corp. | 276,300 | 3,721 | |||||||||
OKUMA Corp. | 79,700 | 3,330 | |||||||||
17,952 | |||||||||||
Information Technology (0.4%): | |||||||||||
Ulvac, Inc. | 142,800 | 4,313 | |||||||||
77,109 | |||||||||||
Korea, Republic Of (1.1%): | |||||||||||
Information Technology (1.1%): | |||||||||||
Samsung Electronics Co. Ltd. | 333,764 | 13,747 | |||||||||
13,747 | |||||||||||
Macau (0.5%): | |||||||||||
Consumer Discretionary (0.5%): | |||||||||||
Sands China Ltd. | 112,800 | 443 | |||||||||
Wynn Macau Ltd. | 3,512,400 | 6,016 | |||||||||
6,459 | |||||||||||
Mexico (0.2%): | |||||||||||
Financials (0.0%): (b) | |||||||||||
Grupo Financiero Banorte SAB de CV Class O | 147,136 | 446 | |||||||||
Industrials (0.2%): | |||||||||||
Promotora y Operadora de Infraestructura SAB de CV | 234,332 | 1,768 | |||||||||
2,214 | |||||||||||
Netherlands (1.8%): | |||||||||||
Consumer Staples (0.4%): | |||||||||||
Heineken NV | 46,879 | 4,293 | |||||||||
Industrials (1.1%): | |||||||||||
Wolters Kluwer NV | 173,738 | 13,864 | |||||||||
Materials (0.3%): | |||||||||||
Akzo Nobel NV | 44,070 | 3,619 | |||||||||
21,776 | |||||||||||
New Zealand (0.5%): | |||||||||||
Health Care (0.5%): | |||||||||||
Fisher & Paykel Healthcare Corp. Ltd. | 365,523 | 6,812 |
See notes to financial statements.
12
USAA Mutual Funds Trust USAA World Growth Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Norway (0.9%): | |||||||||||
Energy (0.4%): | |||||||||||
Aker BP ASA | 292,735 | $ | 4,736 | ||||||||
Financials (0.5%): | |||||||||||
SpareBank 1 SMN | 823,159 | 6,614 | |||||||||
11,350 | |||||||||||
Russian Federation (0.4%): | |||||||||||
Materials (0.4%): | |||||||||||
Evraz PLC | 1,439,219 | 5,042 | |||||||||
Singapore (1.0%): | |||||||||||
Financials (1.0%): | |||||||||||
Singapore Exchange Ltd. | 2,058,600 | 12,098 | |||||||||
Spain (0.3%): | |||||||||||
Industrials (0.3%): | |||||||||||
Aena SME SA (d) | 22,050 | 3,147 | |||||||||
Sweden (2.3%): | |||||||||||
Consumer Staples (0.6%): | |||||||||||
Essity AB Class B (a) | 213,542 | 7,077 | |||||||||
Industrials (1.7%): | |||||||||||
Atlas Copco AB Class B | 333,415 | 11,857 | |||||||||
Nolato AB Class B (a) | 132,731 | 9,011 | |||||||||
20,868 | |||||||||||
27,945 | |||||||||||
Switzerland (3.7%): | |||||||||||
Consumer Discretionary (0.2%): | |||||||||||
Cie Financiere Richemont SA Registered Shares | 47,049 | 2,767 | |||||||||
Consumer Staples (0.7%): | |||||||||||
Nestle SA Registered Shares | 82,069 | 8,914 | |||||||||
Financials (0.3%): | |||||||||||
Julius Baer Group Ltd. | 28,472 | 1,226 | |||||||||
UBS Group AG Registered Shares | 221,449 | 2,371 | |||||||||
3,597 | |||||||||||
Health Care (2.4%): | |||||||||||
Roche Holding AG | 81,618 | 28,340 | |||||||||
Sonova Holding AG | 3,844 | 848 | |||||||||
29,188 | |||||||||||
Industrials (0.1%): | |||||||||||
Adecco Group AG | 26,348 | 1,267 | |||||||||
45,733 | |||||||||||
Thailand (0.0%): (b) | |||||||||||
Financials (0.0%): (b) | |||||||||||
Kasikornbank PCL | 101,500 | 313 |
See notes to financial statements.
13
USAA Mutual Funds Trust USAA World Growth Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
United Kingdom (6.4%): | |||||||||||
Consumer Discretionary (0.8%): | |||||||||||
Aptiv PLC | 18,344 | $ | 1,382 | ||||||||
Burberry Group PLC | 81,897 | 1,529 | |||||||||
Compass Group PLC | 135,797 | 1,990 | |||||||||
Next PLC | 59,710 | 3,611 | |||||||||
Whitbread PLC | 30,278 | 950 | |||||||||
9,462 | |||||||||||
Consumer Staples (2.1%): | |||||||||||
Diageo PLC | 350,137 | 12,214 | |||||||||
Imperial Brands PLC | 245,849 | 4,484 | |||||||||
Reckitt Benckiser Group PLC | 69,055 | 6,184 | |||||||||
Unilever PLC | 63,110 | 3,388 | |||||||||
26,270 | |||||||||||
Financials (0.8%): | |||||||||||
Aon PLC Class A | 19,505 | 3,841 | |||||||||
Close Brothers Group PLC | 319,759 | 4,282 | |||||||||
HSBC Holdings PLC | 296,804 | 1,367 | |||||||||
Willis Towers Watson PLC | 3,262 | 662 | |||||||||
10,152 | |||||||||||
Industrials (0.5%): | |||||||||||
RELX PLC | 181,778 | 4,230 | |||||||||
Rolls-Royce Holdings PLC (a) | 347,491 | 1,184 | |||||||||
5,414 | |||||||||||
Materials (2.2%): | |||||||||||
Croda International PLC | 70,959 | 4,564 | |||||||||
Linde PLC | 7,659 | 1,550 | |||||||||
Linde PLC (c) | 26,150 | 5,271 | |||||||||
Rio Tinto PLC | 298,348 | 16,178 | |||||||||
27,563 | |||||||||||
78,861 | |||||||||||
United States (52.0%): | |||||||||||
Communication Services (5.7%): | |||||||||||
Alphabet, Inc. Class C (a) | 13,422 | 19,179 | |||||||||
Comcast Corp. Class A | 252,033 | 9,980 | |||||||||
Facebook, Inc. Class A (a) | 89,440 | 20,132 | |||||||||
Omnicom Group, Inc. | 18,694 | 1,024 | |||||||||
The Walt Disney Co. | 49,716 | 5,832 | |||||||||
Verizon Communications, Inc. | 261,251 | 14,991 | |||||||||
71,138 | |||||||||||
Consumer Discretionary (5.5%): | |||||||||||
Amazon.com, Inc. (a) | 10,361 | 25,305 | |||||||||
eBay, Inc. | 70,076 | 3,191 | |||||||||
Harley-Davidson, Inc. | 6,595 | 141 | |||||||||
Marriott International, Inc. Class A | 19,759 | 1,749 |
See notes to financial statements.
14
USAA Mutual Funds Trust USAA World Growth Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
McDonald's Corp. | 76,575 | $ | 14,268 | ||||||||
Ross Stores, Inc. | 137,776 | 13,359 | |||||||||
The TJX Cos., Inc. | 194,149 | 10,243 | |||||||||
Wynn Resorts Ltd. | 4,600 | 383 | |||||||||
68,639 | |||||||||||
Consumer Staples (3.8%): | |||||||||||
Colgate-Palmolive Co. | 244,407 | 17,678 | |||||||||
Kellogg Co. | 22,599 | 1,476 | |||||||||
PepsiCo, Inc. | 138,073 | 18,164 | |||||||||
The Estee Lauder Cos., Inc. Class A | 49,442 | 9,763 | |||||||||
47,081 | |||||||||||
Energy (1.0%): | |||||||||||
ConocoPhillips | 150,029 | 6,328 | |||||||||
Phillips 66 | 74,149 | 5,803 | |||||||||
12,131 | |||||||||||
Financials (6.8%): | |||||||||||
American Express Co. | 33,840 | 3,217 | |||||||||
Bank of America Corp. | 652,592 | 15,740 | |||||||||
CME Group, Inc. | 30,923 | 5,647 | |||||||||
JPMorgan Chase & Co. | 182,693 | 17,778 | |||||||||
MSCI, Inc. | 35,212 | 11,579 | |||||||||
State Street Corp. | 38,371 | 2,339 | |||||||||
TD Ameritrade Holding Corp. | 62,160 | 2,317 | |||||||||
The Bank of New York Mellon Corp. (c) | 89,664 | 3,333 | |||||||||
The Charles Schwab Corp. | 20,460 | 735 | |||||||||
The Goldman Sachs Group, Inc. | 19,734 | 3,878 | |||||||||
The PNC Financial Services Group, Inc. | 66,612 | 7,596 | |||||||||
The Progressive Corp. | 125,807 | 9,773 | |||||||||
83,932 | |||||||||||
Health Care (8.5%): | |||||||||||
Abbott Laboratories | 50,333 | 4,778 | |||||||||
Amedisys, Inc. (a) | 47,042 | 9,034 | |||||||||
Amgen, Inc. | 55,145 | 12,667 | |||||||||
CVS Health Corp. | 155,962 | 10,226 | |||||||||
Eli Lilly & Co. | 87,003 | 13,307 | |||||||||
Johnson & Johnson | 127,011 | 18,893 | |||||||||
Medtronic PLC | 87,463 | 8,622 | |||||||||
Stryker Corp. | 29,386 | 5,752 | |||||||||
The Cooper Cos., Inc. | 10,400 | 3,296 | |||||||||
Thermo Fisher Scientific, Inc. | 29,935 | 10,453 | |||||||||
Waters Corp. (a) | 17,191 | 3,436 | |||||||||
Zimmer Biomet Holdings, Inc. (c) | 41,136 | 5,197 | |||||||||
105,661 | |||||||||||
Industrials (4.5%): | |||||||||||
3M Co. | 95,296 | 14,908 | |||||||||
Carrier Global Corp. (a) | 23,942 | 490 | |||||||||
Equifax, Inc. | 21,453 | 3,294 |
See notes to financial statements.
15
USAA Mutual Funds Trust USAA World Growth Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
HD Supply Holdings, Inc. (a) | 211,703 | $ | 6,713 | ||||||||
Honeywell International, Inc. | 115,892 | 16,903 | |||||||||
Kansas City Southern | 39,066 | 5,880 | |||||||||
Otis Worldwide Corp. | 27,802 | 1,464 | |||||||||
Union Pacific Corp. | 15,953 | 2,710 | |||||||||
United Parcel Service, Inc. Class B | 30,649 | 3,056 | |||||||||
55,418 | |||||||||||
Information Technology (14.4%): | |||||||||||
Amphenol Corp. Class A | 17,418 | 1,682 | |||||||||
Apple, Inc. | 113,906 | 36,215 | |||||||||
Cisco Systems, Inc. | 392,984 | 18,793 | |||||||||
Cognizant Technology Solutions Corp. Class A | 49,769 | 2,638 | |||||||||
Fidelity National Information Services, Inc. | 12,975 | 1,801 | |||||||||
Mastercard, Inc. Class A | 84,992 | 25,573 | |||||||||
Microchip Technology, Inc. (c) | 14,364 | 1,379 | |||||||||
Microsoft Corp. | 257,479 | 47,183 | |||||||||
NVIDIA Corp. | 30,627 | 10,873 | |||||||||
Oracle Corp. | 84,910 | 4,566 | |||||||||
PayPal Holdings, Inc. (a) | 20,355 | 3,155 | |||||||||
Texas Instruments, Inc. | 120,878 | 14,353 | |||||||||
Visa, Inc. Class A | 54,103 | 10,563 | |||||||||
178,774 | |||||||||||
Materials (0.3%): | |||||||||||
PPG Industries, Inc. | 31,981 | 3,252 | |||||||||
Real Estate (0.7%): | |||||||||||
Prologis, Inc. | 102,200 | 9,351 | |||||||||
Utilities (0.8%): | |||||||||||
MGE Energy, Inc. | 149,775 | 10,168 | |||||||||
645,545 | |||||||||||
Total Common Stocks (Cost $1,012,350) | 1,223,304 | ||||||||||
Preferred Stocks (0.6%) | |||||||||||
Brazil (0.6%): | |||||||||||
Financials (0.6%): | |||||||||||
Itau Unibanco Holding SA | 1,578,400 | 6,816 | |||||||||
Total Preferred Stocks (Cost $11,300) | 6,816 | ||||||||||
Rights (0.0%) (b) | |||||||||||
United Kingdom (0.0%): (b) | |||||||||||
Consumer Discretionary (0.0%): (b) | |||||||||||
Whitbread PLC Expires 06/10/20 @ $— (a) | 15,139 | 187 | |||||||||
Total Rights (Cost $275) | 187 |
See notes to financial statements.
16
USAA Mutual Funds Trust USAA World Growth Fund | Schedule of Portfolio Investments — continued May 31, 2020 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Collateral for Securities Loaned^ (0.6%) | |||||||||||
United States (0.6%): | |||||||||||
HSBC U.S. Government Money Market Fund I Shares, 0.13% (e) | 7,797,639 | $ | 7,798 | ||||||||
Total Collateral for Securities Loaned (Cost $7,798) | 7,798 | ||||||||||
Total Investments (Cost $1,031,723) — 99.7% | 1,238,105 | ||||||||||
Other assets in excess of liabilities — 0.3% | 3,449 | ||||||||||
NET ASSETS — 100.00% | $ | 1,241,554 |
At May 31, 2020 the Fund's investments in foreign securities were 47.80% of net assets.
^ Purchased with cash collateral from securities on loan.
(a) Non-income producing security.
(b) Amount represents less than 0.05% of net assets.
(c) All or a portion of this security is on loan.
(d) Rule 144A security or other security that is restricted as to resale to institutional investors. The Fund's Adviser has deemed this security to be liquid based upon procedures approved by the Board of Trustees. As of May 31, 2020, the fair value of these securities was $3,147 (thousands) and amounted to 0.3% of net assets.
(e) Rate disclosed is the daily yield on May 31, 2020.
PCL — Public Company Limited
PLC — Public Limited Company
See notes to financial statements.
17
USAA Mutual Funds Trust | Statement of Assets and Liabilities May 31, 2020 |
(Amounts in Thousands, Except Per Share Amounts)
USAA World Growth Fund | |||||||
Assets: | |||||||
Investments, at value (Cost $1,031,723) | $ | 1,238,105 | (a) | ||||
Foreign currency, at value (Cost $754) | 767 | ||||||
Cash and cash equivalents | 8,451 | ||||||
Receivables: | |||||||
Interest and dividends | 1,825 | ||||||
Capital shares issued | 194 | ||||||
Reclaims | 1,946 | ||||||
From Adviser | 6 | ||||||
Prepaid expenses | 28 | ||||||
Total assets | 1,251,322 | ||||||
Liabilities: | |||||||
Payables: | |||||||
Collateral received on loaned securities | 7,798 | ||||||
Investments purchased | 190 | ||||||
Capital shares redeemed | 586 | ||||||
Accrued foreign capital gains taxes | 62 | ||||||
Accrued expenses and other payables: | |||||||
Investment advisory fees | 762 | ||||||
Administration fees | 152 | ||||||
Custodian fees | 21 | ||||||
Transfer agent fees | 112 | ||||||
Compliance fees | 1 | ||||||
12b-1 fees | 1 | ||||||
Other accrued expenses | 83 | ||||||
Total liabilities | 9,768 | ||||||
Net Assets: | |||||||
Capital | 1,049,241 | ||||||
Total distributable earnings/(loss) | 192,313 | ||||||
Net assets | $ | 1,241,554 | |||||
Net Assets | |||||||
Fund Shares | $ | 1,228,986 | |||||
Institutional Shares | 6,143 | ||||||
Adviser Shares | 6,425 | ||||||
Total | $ | 1,241,554 | |||||
Shares (unlimited number of shares authorized with no par value): | |||||||
Fund Shares | 52,569 | ||||||
Institutional Shares | 262 | ||||||
Adviser Shares | 275 | ||||||
Total | 53,106 | ||||||
Net asset value, offering and redemption price per share: (b) | |||||||
Fund Shares | $ | 23.38 | |||||
Institutional Shares | $ | 23.42 | |||||
Adviser Shares | $ | 23.40 |
(a) Includes $7,468 of securities on loan.
(b) 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 | Statement of Operations For the Year Ended May 31, 2020 |
(Amounts in Thousands)
USAA World Growth Fund | |||||||
Investment Income: | |||||||
Dividends | $ | 28,585 | |||||
Interest | 198 | ||||||
Securities lending (net of fees) | 75 | ||||||
Foreign tax withholding | (1,376 | ) | |||||
Total income | 27,482 | ||||||
Expenses: | |||||||
Investment advisory fees | 10,078 | ||||||
Administration fees — Fund Shares | 1,978 | ||||||
Administration fees — Institutional Shares | 11 | ||||||
Administration fees — Adviser Shares | 12 | ||||||
Sub-Administration fees | 33 | ||||||
12b-1 fees — Adviser Shares | 19 | ||||||
Custodian fees | 157 | ||||||
Transfer agent fees — Fund Shares | 1,708 | ||||||
Transfer agent fees — Institutional Shares | 11 | ||||||
Transfer agent fees — Adviser Shares | 6 | ||||||
Trustees' fees | 49 | ||||||
Compliance fees | 8 | ||||||
Legal and audit fees | 100 | ||||||
State registration and filing fees | 44 | ||||||
Line of credit fees | 1 | ||||||
Other expenses | 163 | ||||||
Total expenses | 14,378 | ||||||
Expenses waived/reimbursed by Adviser | (14 | ) | |||||
Expenses waived/reimbursed by AMCO | (6 | ) | |||||
Net expenses | 14,358 | ||||||
Net Investment Income (Loss) | 13,124 | ||||||
Realized/Unrealized Gains (Losses) from Investments: | |||||||
Net realized gains (losses) from investment securities and foreign currency translations | 406,773 | ||||||
Foreign taxes on realized gains | (36 | ) | |||||
Net change in unrealized appreciation/depreciation on investment securities and foreign currency translations | (320,687 | ) | |||||
Net change in accrued foreign taxes on unrealized gains | (17 | ) | |||||
Net realized/unrealized gains (losses) on investments | 86,033 | ||||||
Change in net assets resulting from operations | $ | 99,157 |
See notes to financial statements.
19
USAA Mutual Funds Trust | Statements of Changes in Net Assets |
(Amounts in Thousands)
USAA World Growth Fund | |||||||||||
Year Ended May 31, 2020 | Year Ended May 31, 2019 | ||||||||||
From Investments: | |||||||||||
Operations: | |||||||||||
Net investment income (loss) | $ | 13,124 | $ | 14,474 | |||||||
Net realized gains (losses) from investments | 406,737 | 45,224 | |||||||||
Net change in unrealized appreciation/depreciation on investments | (320,704 | ) | (18,728 | ) | |||||||
Change in net assets resulting from operations | 99,157 | 40,970 | |||||||||
Distributions to Shareholders: | |||||||||||
Fund Shares | (426,145 | ) | (79,970 | ) | |||||||
Institutional Shares | (4,055 | ) | (695 | ) | |||||||
Adviser Shares | (2,733 | ) | (564 | ) | |||||||
Change in net assets resulting from distributions to shareholders | (432,933 | ) | (81,229 | ) | |||||||
Change in net assets resulting from capital transactions | 273,969 | (52,501 | ) | ||||||||
Change in net assets | (59,807 | ) | (92,760 | ) | |||||||
Net Assets: | |||||||||||
Beginning of period | 1,301,361 | 1,394,121 | |||||||||
End of period | $ | 1,241,554 | $ | 1,301,361 | |||||||
Capital Transactions: | |||||||||||
Fund Shares | |||||||||||
Proceeds from shares issued | $ | 85,742 | $ | 65,889 | |||||||
Distributions reinvested | 419,589 | 78,879 | |||||||||
Cost of shares redeemed | (228,526 | ) | (178,538 | ) | |||||||
Total Fund Shares | $ | 276,805 | $ | (33,770 | ) | ||||||
Institutional Shares | |||||||||||
Proceeds from shares issued | $ | 958 | $ | 2,667 | |||||||
Distributions reinvested | 2,199 | 363 | |||||||||
Cost of shares redeemed | (6,304 | ) | (20,065 | ) | |||||||
Total Institutional Shares | $ | (3,147 | ) | $ | (17,035 | ) | |||||
Adviser Shares | |||||||||||
Proceeds from shares issued | $ | 969 | $ | 523 | |||||||
Distributions reinvested | 556 | 175 | |||||||||
Cost of shares redeemed | (1,214 | ) | (2,394 | ) | |||||||
Total Adviser Shares | $ | 311 | $ | (1,696 | ) | ||||||
Change in net assets resulting from capital transactions | $ | 273,969 | $ | (52,501 | ) |
See notes to financial statements.
20
USAA Mutual Funds Trust | Statements of Changes in Net Assets — continued |
(Amounts in Thousands)
USAA World Growth Fund | |||||||||||
Year Ended May 31, 2020 | Year Ended May 31, 2019 | ||||||||||
Share Transactions: | |||||||||||
Fund Shares | |||||||||||
Issued | 3,075 | 2,120 | |||||||||
Reinvested | 16,485 | 2,792 | |||||||||
Redeemed | (8,689 | ) | (5,761 | ) | |||||||
Total Fund Shares | 10,871 | (849 | ) | ||||||||
Institutional Shares | |||||||||||
Issued | 36 | 85 | |||||||||
Reinvested | 86 | 13 | |||||||||
Redeemed | (269 | ) | (638 | ) | |||||||
Total Institutional Shares | (147 | ) | (540 | ) | |||||||
Adviser Shares | |||||||||||
Issued | 36 | 17 | |||||||||
Reinvested | 22 | 6 | |||||||||
Redeemed | (47 | ) | (76 | ) | |||||||
Total Adviser Shares | 11 | (53 | ) | ||||||||
Change in Shares | 10,735 | (1,442 | ) |
See notes to financial statements.
21
USAA Mutual Funds Trust | Financial Highlights |
For a Share Outstanding Throughout Each Period
Investment Activities | Distributions to Shareholders From | ||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss) | Net Realized and Unrealized Gains (Losses) on Investments | Total from Investment Activities | Net Investment Income | Net Realized Gains from Investments | ||||||||||||||||||||||
USAA World Growth Fund | |||||||||||||||||||||||||||
Fund Shares | |||||||||||||||||||||||||||
Year Ended May 31, 2020 | $ | 30.71 | 0.27 | (d) | 2.87 | 3.14 | (0.32 | ) | (10.15 | ) | |||||||||||||||||
Year Ended May 31, 2019 | $ | 31.82 | 0.33 | 0.51 | 0.84 | (0.28 | ) | (1.67 | ) | ||||||||||||||||||
Year Ended May 31, 2018 | $ | 31.16 | 0.30 | 1.78 | 2.08 | (0.23 | ) | (1.19 | ) | ||||||||||||||||||
Year Ended May 31, 2017 | $ | 27.20 | 0.19 | 4.55 | 4.74 | (0.21 | ) | (0.57 | ) | ||||||||||||||||||
Year Ended May 31, 2016 | $ | 28.69 | 0.21 | (0.95 | ) | (0.74 | ) | (0.19 | ) | (0.56 | ) | ||||||||||||||||
Institutional Shares | |||||||||||||||||||||||||||
Year Ended May 31, 2020 | $ | 30.74 | 0.29 | (d) | 2.86 | 3.15 | (0.32 | ) | (10.15 | ) | |||||||||||||||||
Year Ended May 31, 2019 | $ | 31.75 | 0.38 | 0.48 | 0.86 | (0.20 | ) | (1.67 | ) | ||||||||||||||||||
Year Ended May 31, 2018 | $ | 31.14 | 0.29 | 1.80 | 2.09 | (0.29 | ) | (1.19 | ) | ||||||||||||||||||
Year Ended May 31, 2017 | $ | 27.14 | 0.20 | 4.55 | 4.75 | (0.18 | ) | (0.57 | ) | ||||||||||||||||||
August 10, 2015 (f) through May 31, 2016 | $ | 28.83 | 0.24 | (1.11 | ) | (0.87 | ) | (0.26 | ) | (0.56 | ) | ||||||||||||||||
Adviser Shares | |||||||||||||||||||||||||||
Year Ended May 31, 2020 | $ | 30.77 | 0.19 | (d) | 2.86 | 3.05 | (0.27 | ) | (10.15 | ) | |||||||||||||||||
Year Ended May 31, 2019 | $ | 31.86 | 0.24 | (d) | 0.53 | 0.77 | (0.19 | ) | (1.67 | ) | |||||||||||||||||
Year Ended May 31, 2018 | $ | 31.07 | 0.18 | (d) | 1.80 | 1.98 | — | (g) | (1.19 | ) | |||||||||||||||||
Year Ended May 31, 2017 | $ | 27.13 | 0.12 | 4.53 | 4.65 | (0.14 | ) | (0.57 | ) | ||||||||||||||||||
Year Ended May 31, 2016 | $ | 28.55 | 0.14 | (0.93 | ) | (0.79 | ) | (0.07 | ) | (0.56 | ) |
* 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.
^ 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 two year period beginning July 1, 2019 and in effect through June 30, 2021, instead of coinciding with the Fund's fiscal year end. Details of the current contractual expense limitation in effect can be found in Note 4 of the accompanying Notes to Financial Statements.
(a) Not annualized for periods less than one year.
(b) Annualized for periods less than one year.
See notes to financial statements.
22
USAA Mutual Funds Trust | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Ratios to Average Net Assets | Supplemental Data | ||||||||||||||||||||||||||||||||||||||
Total Distributions | Redemption Fees Added to Beneficial Interests | Net Asset Value, End of Period | Total Return*(a) | Net Expenses^(b) | Net Investment Income (Loss)(b) | Gross Expenses(b) | Net Assets, End of Period (000's) | Portfolio Turnover(a)(c) | |||||||||||||||||||||||||||||||
USAA World Growth Fund | |||||||||||||||||||||||||||||||||||||||
Fund Shares | |||||||||||||||||||||||||||||||||||||||
Year Ended May 31, 2020 | (10.47 | ) | — | $ | 23.38 | 7.81 | % | 1.07 | % | 0.98 | % | 1.07 | % | $ | 1,228,986 | 103 | %(i) | ||||||||||||||||||||||
Year Ended May 31, 2019 | (1.95 | ) | — | $ | 30.71 | 3.23 | % | 1.09 | % | 1.09 | % | 1.09 | % | $ | 1,280,661 | 8 | % | ||||||||||||||||||||||
Year Ended May 31, 2018 | (1.42 | ) | — | $ | 31.82 | 6.68 | % | 1.10 | % | 0.98 | % | 1.10 | % | $ | 1,353,880 | 10 | % | ||||||||||||||||||||||
Year Ended May 31, 2017 | (0.78 | ) | — | $ | 31.16 | 17.81 | % | 1.13 | % | 0.72 | % | 1.13 | % | $ | 1,319,357 | 12 | % | ||||||||||||||||||||||
Year Ended May 31, 2016 | (0.75 | ) | — | $ | 27.20 | (2.49 | )% | 1.17 | % | 0.81 | % | 1.17 | % | $ | 1,157,148 | 10 | % | ||||||||||||||||||||||
Institutional Shares | |||||||||||||||||||||||||||||||||||||||
Year Ended May 31, 2020 | (10.47 | ) | — | $ | 23.42 | 7.85 | % | 1.00 | % | 1.00 | % | 1.13 | % | $ | 6,143 | 103 | %(i) | ||||||||||||||||||||||
Year Ended May 31, 2019 | (1.87 | ) | — | $ | 30.74 | 3.29 | % | 1.05 | %(e) | 1.13 | % | 1.11 | % | $ | 12,567 | 8 | % | ||||||||||||||||||||||
Year Ended May 31, 2018 | (1.48 | ) | — | $ | 31.75 | 6.70 | % | 1.10 | % | 1.19 | % | 1.10 | % | $ | 30,127 | 10 | % | ||||||||||||||||||||||
Year Ended May 31, 2017 | (0.75 | ) | — | $ | 31.14 | 17.89 | % | 1.09 | % | 0.78 | % | 1.37 | % | $ | 6,877 | 12 | % | ||||||||||||||||||||||
August 10, 2015 (f) through May 31, 2016 | (0.82 | ) | — | $ | 27.14 | (2.92 | )% | 1.10 | % | 1.11 | % | 1.54 | % | $ | 5,228 | 10 | % | ||||||||||||||||||||||
Adviser Shares | |||||||||||||||||||||||||||||||||||||||
Year Ended May 31, 2020 | (10.42 | ) | — | $ | 23.40 | 7.49 | % | 1.35 | % | 0.68 | % | 1.43 | % | $ | 6,425 | 103 | %(i) | ||||||||||||||||||||||
Year Ended May 31, 2019 | (1.86 | ) | — | $ | 30.77 | 2.98 | % | 1.35 | % | 0.76 | % | 1.46 | % | $ | 8,133 | 8 | % | ||||||||||||||||||||||
Year Ended May 31, 2018 | (1.19 | ) | — | (g) | $ | 31.86 | 6.36 | % | 1.39 | %(h) | 0.57 | % | 1.43 | % | $ | 10,114 | 10 | % | |||||||||||||||||||||
Year Ended May 31, 2017 | (0.71 | ) | — | (g) | $ | 31.07 | 17.50 | % | 1.42 | % | 0.45 | % | 1.42 | % | $ | 19,722 | 12 | % | |||||||||||||||||||||
Year Ended May 31, 2016 | (0.63 | ) | — | (g) | $ | 27.13 | (2.72 | )% | 1.42 | % | 0.49 | % | 1.42 | % | $ | 16,580 | 10 | % |
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between classes of shares issued.
(d) Per share net investment income (loss) has been calculated using the average daily shares method.
(e) Effective October 1, 2018, AMCO had voluntarily agreed to limit the annual expenses of the Institutional Shares to 1.00% of the Institutional Shares' average daily net assets.
(f) Commencement of operations.
(g) Amount is less than $0.005 per share.
(h) Effective October 1, 2017, AMCO had voluntarily agreed to limit the annual expenses of the Adviser Shares to 1.35% of the Adviser Shares' average daily net assets.
(i) Reflects increased trading activity due to current year transition or asset allocation shift.
See notes to financial statements.
23
USAA Mutual Funds Trust | Notes to Financial Statements May 31, 2020 |
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 47 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 World Growth Fund (the "Fund"). The Fund offers three classes of shares: Fund Shares, Institutional Shares, and Adviser 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 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 November 6, 2018, United Services Automobile Association ("USAA"), the parent company of USAA Asset Management Company ("AMCO"), the investment adviser to the Fund, and USAA Transfer Agency Company, d/b/a USAA Shareholder Account Services ("SAS"), the transfer agent to the Fund, announced that AMCO and SAS would be acquired by Victory Capital Holdings Inc., a global investment management firm headquartered in Cleveland, Ohio (the "Transaction"). The Transaction closed on July 1, 2019. A special shareholder meeting was held on April 18, 2019, at which shareholders of the Fund approved a new investment advisory agreement between the Trust, on behalf of the Fund, and Victory Capital Management Inc. ("VCM" or "Adviser"). Effective July 1, 2019, VCM replaced AMCO as the investment adviser to the Fund and Victory Capital Transfer Agency Company replaced SAS as the Fund's transfer agent. In addition, effective on that same date, shareholders of the Fund also elected the following two new directors to the Board of the Trust to serve upon the closing of the Transaction: (1) David C. Brown, to serve as an Interested Trustee; and (2) John C. Walters, to serve as an Independent Trustee
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 generally accepted accounting principles in the United States of America ("GAAP"). The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses for the period. Actual results could differ from those estimates. The Fund follows the specialized accounting and reporting requirements under GAAP that are applicable to investment companies under Accounting Standards Codification Topic 946.
Investment Valuation:
The Fund records investments at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The valuation techniques described below maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value. The inputs used for valuing the Fund's investments are summarized in the three broad levels listed below:
• Level 1 — quoted prices in active markets for identical securities
• Level 2 — other significant observable inputs (including quoted prices for similar securities or interest rates applicable to those securities, etc.)
• Level 3 — significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments)
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USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
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 risk associated with entering into those investments.
The Adviser has established the Pricing and Liquidity Committee (the "Committee"), and subject to Trust's Board of Trustees (the "Board") oversight, the Committee administers and oversees the Fund's valuation policies and procedures, which are approved by the Board.
Portfolio securities listed or traded on securities exchanges, including exchange-traded funds ("ETFs"), American Depositary Receipts ("ADRs") 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 are valued at 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, are not reflective of market value, or a significant event has been recognized in relation to a security or class of securities, the securities are valued in good faith by the Committee in accordance with valuation procedures approved by 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. These valuations are considered as Level 2 in the fair value hierarchy.
A summary of the valuations as of May 31, 2020, based upon the three levels defined above, is included in the table below while the breakdown, by category, of investments is disclosed in the Schedule of Portfolio Investments (amounts in thousands):
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Common Stocks | $ | 713,507 | $ | 509,797 | $ | — | $ | 1,223,304 | |||||||||||
Preferred Stocks | 6,816 | — | — | 6,816 | |||||||||||||||
Rights | 187 | — | — | 187 | |||||||||||||||
Collateral for Securities Loaned | 7,798 | — | — | 7,798 | |||||||||||||||
Total | $ | 728,308 | $ | 509,797 | $ | — | $ | 1,238,105 |
For the year ended May 31, 2020, there were no transfers in or out of the Level 3 fair value hierarchy.
Investment Companies:
The Fund may invest in portfolios of open-end investment companies. These investment companies value securities in their portfolios for which market quotations are readily available at their market values (generally the last reported sale price) and all other securities and assets at their fair value by the methods established by the board of directors of the underlying funds.
Foreign Exchange Currency Contracts:
The Fund may enter into foreign exchange currency contracts to convert U.S. dollars to and from various foreign currencies. A foreign exchange currency contract is an obligation by the Fund to purchase or sell a specific currency at a future date at a price (in U.S. dollars) set at the time of the contract. The Fund does not engage in "cross-currency" foreign exchange contracts (i.e., contracts to purchase or sell one foreign currency in exchange for another foreign currency). The Fund's foreign exchange currency contracts might be considered spot contracts (typically a contract of one week or
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USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
less) or forward contracts (typically a contract term over one week). A spot contract is entered into for purposes of hedging against foreign currency fluctuations relating to a specific portfolio transaction, such as the delay between a security transaction trade date and settlement date. Forward contracts are entered into for purposes of hedging portfolio holdings or concentrations of such holdings. Each foreign exchange currency contract is adjusted daily by the prevailing spot or forward rate of the underlying currency, and any appreciation or depreciation is recorded for financial statement purposes as unrealized until the contract settlement date, at which time the Fund records realized gains or losses equal to the difference between the value of a contract at the time it was opened and the value at the time it was closed. The Fund could be exposed to risk if a counterparty is unable to meet the terms of a foreign exchange currency contract or if the value of the foreign currency changes unfavorably. In addition, the use of foreign exchange currency contracts does not eliminate fluctuations in the underlying prices of the securities. As of May 31, 2020, 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 on 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 discount. Gains or losses realized on sales of securities are determined by comparing the identified cost of the security lot sold with the net sales proceeds.
Withholding taxes on interest, dividends and gains as a result of certain investments in ADRs by the Fund has 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, to earn additional income, net of income retained by Citibank. Borrowers are required to 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 cured the next business day once the shortfall exceeds $100 thousand. Collateral may be cash, U.S. government securities, or other securities as permitted by SEC guidelines. Cash collateral may be invested in high-quality short-term investments, primarily open-end investment companies. Collateral requirements are determined daily based on the value of the Fund's securities on loan as of the end of the prior business day. During the time portfolio securities are on loan, the borrower will pay the Fund any dividends or interest paid on such securities plus any fee negotiated between the parties to the lending agreement. The Fund also earns a return from the collateral. The Fund pays Citibank various fees in connection with the investment of cash collateral and fees based on the investment income received from securities lending activities. Securities lending income (net of these fees) is disclosed on the Statement of Operations. Loans are terminable upon demand and the borrower must return the loaned securities within the lesser of one standard settlement period or five business days. Risks relating to securities-lending transactions include that the borrower may not provide additional collateral when required or return the securities when due, and 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 re-pledged except to satisfy borrower default. Cash collateral is listed in the Fund's Portfolio of Investments and Financial Statements while non-cash collateral is not included. The following table (amounts in thousands) is a summary of the Fund's securities lending transactions as of May 31, 2020.
Value of Securities on Loan | Non-Cash Collateral | Cash Collateral | |||||||||
$ | 7,468 | $ | — | $ | 7,798 |
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USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
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 investments and foreign currency translations on the Statement of Operations. Any realized gains or losses from these fluctuations, including foreign currency arising from in-kind redemptions, are disclosed as net realized gains or losses from investment transactions and foreign currency translations on the Statement of Operations.
Foreign Taxes:
The Fund may be subject to foreign taxes related to foreign income received (a portion of which may be reclaimable), capital gains on the sale of securities, and certain foreign currency transactions. All foreign taxes are recorded in accordance with the applicable regulations and rates that exist in the foreign jurisdictions in which the Fund invests.
Federal Income Taxes:
It is the Fund's policy 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.
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., 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 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, 12b-1 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.
Cross-Trade Transactions:
Pursuant to Rule 17a-7 under the 1940 Act, the Fund may engage in cross-trades which are securities transactions with affiliated investment companies and advisory accounts managed by the Adviser and any applicable sub-adviser. Any such purchase or sale transaction must be effected without brokerage commission or other remuneration, except for customary transfer fees. The transaction must be effected at the current market price, which is either the security's last sale price on an exchange or, if there are no transactions in the security that day, at the average of the highest bid and lowest asked price. For the year ended May 31, 2020, 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) | |||||||||
$ | — | $ | 6,403 | $ | — |
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USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
3. Purchases and Sales:
Cost of purchases and proceeds from sales/maturities of securities (excluding securities maturing less than one year from acquisition) for the year ended May 31, 2020, were as follows for the Fund (amounts in thousands):
Excluding U.S. Government Securities | |||||||||||
Purchases | Sales | ||||||||||
$ | 1,355,241 | $ | 1,494,394 |
There were no purchases and sales of U.S. government securities during the year ended May 31, 2020.
4. Fees and Transactions with Affiliates and Related Parties:
Investment Advisory and Management Fees:
Effective with the Transaction on July 1, 2019, investment advisory services are provided to the Fund by the Adviser, a New York corporation registered as an investment adviser with the Securities and Exchange Commission ("SEC"). The Adviser is a wholly-owned indirect subsidiary of Victory Capital Holdings, Inc., a publicly traded Delaware corporation, and a wholly-owned direct subsidiary of Victory Capital Operating, LLC. Under the terms of the Investment Advisory Agreement, the Adviser is entitled to receive a base fee and a performance adjustment. The Fund's base fee is accrued daily and paid monthly at an annualized rate of 0.75% of the Fund's average daily net assets. The amount incurred and paid to VCM from July 1, 2019 through May 31, 2020, was $9,199 thousand and is reflected on the Statement of Operations as Investment Advisory fees.
Prior to the Transaction on July 1, 2019, AMCO provided investment management services to the Fund pursuant to an Advisory Agreement. Under this agreement, AMCO was responsible for managing the business and affairs of the Fund, and for directly managing day-to-day investment of the Fund's assets, subject to the authority of and supervision by the Board. The investment management fee for the Fund was comprised of a base fee and a performance adjustment. The Fund's base fee was accrued daily and paid monthly at an annualized rate of 0.75% of the Fund's average daily net assets.
Effective with the Transaction on July 1, 2019, no performance adjustments will be made for periods beginning July 1, 2019, through June 30, 2020. Only performance beginning as of July 1, 2019, and thereafter will be utilized in calculating future performance adjustments.
Prior to the Transaction on July 1, 2019, the performance adjustment for each share class was accrued daily and calculated monthly by comparing the Fund's performance to that of the Lipper Global Funds Index. The Lipper Global Funds Index tracks the total return performance of funds within the Lipper Global Funds category.
The performance period for each share class consists of the current month plus the previous 35 months (or the number of months beginning July 1, 2019, if fewer). The following table is utilized to determine the extent of the performance adjustment:
Over/Under Performance Relative to Index (in basis points)(a) | Annual Adjustment Rate (in basis points)(a) | ||||||
+/- 100 to 400 | +/- 4 | ||||||
+/- 401 to 700 | +/- 5 | ||||||
+/- 701 and greater | +/- 6 |
(a) Based on the difference between average annual performance of the relevant share class of the Fund and its relevant index, rounded to the nearest basis point. Average daily net assets of the share class are calculated over a rolling 36-month period.
Each class' annual performance adjustment rate is multiplied by the average daily net assets of each respective class over the entire performance period, which is then multiplied by a fraction, the
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USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
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, 2019 through June 30, 2019, performance adjustments for Fund Shares, Institutional Shares and Adviser Shares were $43, less than $1 thousand, and less than $1 thousand, respectively. For the Fund Shares, Institutional Shares, and Adviser Shares, the performance adjustments were less than 0.01% of net assets for all classes. Base fees incurred and paid to AMCO from June 1, 2019 through June 30, 2019, were $836 thousand and is reflected on the Statement of Operations as Investment Advisory fees.
Effective with the Transaction on July 1, 2019, 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. Prior to that date, the Trust relied on a similar exemptive order granted by the SEC to the Trust and its affiliated persons. 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.
Effective July 1, 2019, VCM entered into an Investment Subadvisory Agreement with MFS Investment Management ("MFS"), under which MFS directs the investment and reinvestment 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.
Prior to July 1, 2019, AMCO entered into an Investment Subadvisory Agreement with MFS, under which MFS directed the investment and reinvestment of a portion of the Fund's assets (as allocated from time to time by AMCO). This arrangement provided for monthly fees that were paid by AMCO. AMCO (not the Fund) paid the subadviser fees.
Administration and Servicing Fees:
Effective with the Transaction on July 1, 2019, VCM serves as the Fund's administrator and fund accountant. Under the Fund Administration, Servicing and Accounting Agreement, VCM is paid for its services an annual fee at a rate of 0.15% of average daily net assets for both the Fund Shares and Adviser Shares, and 0.10% of average daily net assets of the Institutional Shares. Amounts incurred from July 1, 2019 through May 31, 2020 are $1,814, $10, and $11 thousand for Fund Shares, Institutional Shares, and Adviser Shares, respectively. These amounts are reflected on the Statement of Operations as Administration fees.
Prior to the Transaction on July 1, 2019, AMCO provided certain administration and servicing functions for the Fund. For such services, AMCO received a fee accrued daily and paid monthly at an annualized rate of 0.15% of average daily net assets for both the Fund Shares and Adviser Shares, and 0.10% of average daily net assets of the Institutional Shares. Amounts incurred from June 1, 2019 through June 30, 2019, were $164, $1, and $1 thousand for Fund Shares, Institutional Shares, and Adviser Shares, respectively. These amounts are reflected on the Statement of Operations as Administration fees.
Effective with the Transaction on July 1, 2019, the Fund (as part of the Trust) has entered into an agreement to provide compliance services with the Adviser, 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. Funds in the Trust, Victory Variable Insurance Funds, Victory Portfolios and Victory Portfolios II (collectively, the "Victory Funds Complex") in the aggregate, compensates the Adviser for these services. The amount incurred during the period from July 1, 2019 to May 31, 2020, is reflected on the Statement of Operations as Compliance fees.
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USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
Effective with the Transaction on July 1, 2019, 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 Trust reimburses VCM and Citi for all of their reasonable out-of-pocket expenses incurred in providing these services and certain other expenses specifically allocated to the Funds under the Fund Administration, Servicing, and Accounting Agreement. The amount incurred during the period from July 1, 2019 through May 31, 2020, is reflected on the Statement of Operations as Sub-Administration fees.
In addition to the services provided under its Administration and Servicing Agreement with the Fund, AMCO also provided certain compliance and legal services for the benefit of the Fund prior to the Transaction on July 1, 2019. The Board approved the reimbursement of a portion of these expenses incurred by AMCO. AMCO did not receive any fees from the Fund for these services.
Transfer Agency Fees:
Effective with the Transaction on July 1, 2019, Victory Capital Transfer Agency, Inc. ("VCTA"), (formerly, USAA Shareholder Account Services ("SAS")), provides transfer agency services to the Fund. VCTA, an affiliate of the Adviser, provides transfer agent services to the Fund Shares and Adviser 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's fees for Institutional Shares are paid monthly based on a fee accrued daily at an annualized rate of 0.10% of the Institutional Shares', plus out-of pocket expenses. Amounts incurred and paid to VCTA from July 1, 2019 through May 31, 2020, was $1,562, $10, and $5 thousand for the Fund Shares, Institutional Shares, and Adviser Shares, respectively. Amounts incurred and paid to SAS from June 1, 2019 through June 30, 2019, was $146, $1, and $1 thousand for the Fund Shares, Institutional Shares, and Adviser Shares, respectively. These amounts are reflected on the Statement of Operations as Transfer Agent fees.
Effective with the Transaction on July 1, 2019, 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.
Distribution and Service 12b-1 Fees:
Effective with the Transaction on July 1, 2019, Victory Capital Advisers, Inc. (the "Distributor"), an affiliate of the Adviser, serves as distributor for the continuous offering of the Adviser Shares pursuant to a Distribution Agreement between the Distributor and the Trust. Effective on or about June 30, 2020, the Distributor's name will change to Victory Capital Services, Inc.
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 the Adviser Shares. Amounts incurred and paid to the Distributor from July 1, 2019 through May 31, 2020, are $17 thousand and reflected on the Statement of Operations as 12b-1 fees.
Adviser Shares are offered and sold without imposition of an initial sales charge or a contingent deferred sales charge.
Prior to the Transaction on July 1, 2019, the Fund adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Adviser Shares. Under the plan, the Adviser Shares paid fees to USAA Investment Management Company ("IMCO"), the distributor, for distribution and shareholder services. IMCO paid all or a portion of such fees to intermediaries that made the Adviser Shares available for investment by their customers. The fee was accrued daily and paid monthly at an annual rate of 0.25% of the Adviser Shares' average daily net assets. IMCO also provided exclusive underwriting and distribution of the Fund's shares on a continuing best-efforts basis and received no fee or other compensation for these services, but may have received 12b-1 fees as described above, with respect to Adviser Shares. Amounts incurred and paid to IMCO from June 1, 2019 through June 30, 2019 were $2 thousand and reflected on the Statement of Operations as 12b-1 fees.
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USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
Other Fees:
Prior to the Transaction on July 1, 2019, State Street Bank and Trust Company served as the Fund's accounting agent and custodian.
Effective July 1, 2019, Citibank, N.A., serves as the Fund's custodian.
K&L Gates LLP provides legal services to the Trust.
Effective with the Transaction on July 1, 2019, the Adviser has entered into an expense limitation agreement with the Fund until at least June 30, 2021. 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 limit for such classes of the Fund. Such excess amounts will be the liability of the Adviser. 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. Effective July 1, 2019 through May 31, 2020, the expense limit (excluding voluntary waivers) is 1.09%, 1.00%, and 1.35% for the Fund Shares, Institutional Shares, and Adviser Shares, respectively.
Under this expense limitation agreement, the Fund has agreed to repay fees and expenses that were waived or reimbursed by the Adviser for a period up to three years after the fiscal year in which 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 May 31, 2020, the following amounts are available to be repaid to the Adviser (amounts in thousands).
Expires 05/31/2023 | |||||||
$ | 14 |
The Adviser, may voluntarily waive or reimburse additional fees to assist the Fund in maintaining competitive expense ratios. Voluntary waivers and reimbursements applicable to the Fund are not available to be recouped at a future time. There were no voluntary waivers or reimbursements for the year ended May 31, 2020.
Prior to the Transaction on July 1, 2019, AMCO agreed, through September 30, 2019, to limit the total annual operating expenses of the Institutional Shares and Adviser Shares to 1.00% and 1.35%, respectively, of their average daily net assets, excluding extraordinary expenses and before reductions of any expenses paid indirectly, and to reimburse the Institutional Shares and Adviser Shares for all expenses in excess of those amounts. Effective with the Transaction on July 1, 2019, these expense limits are no longer in effect. For the period June 1, 2019 through June 30, 2019, amounts reimbursed by the Institutional Shares and Adviser Shares are reflected on the Statement of Operations as Expenses waived/reimbursed by AMCO.
Certain officers and/or interested trustees of the Fund are also officers and/or employees of the Adviser, Administrator, Sub-Administrator, Sub-Fund Accountant, and Legal.
5. Risks:
The Fund may be subject to other risks in addition to these identified risks.
Global economies and financial markets are increasingly interconnected, which increases the possibilities that conditions in one country or region might adversely affect issuers in another country or region. Geopolitical and other risks, including war, terrorism, trade disputes, political or economic dysfunction within some nations, public health crises and related geopolitical events, as well as environmental disasters such as earthquakes, fires, and floods, may add to instability in world economies and markets generally. Changes in trade policies and international trade agreements could affect the economies of many countries in unpredictable ways. Epidemics and/or pandemics, such as the coronavirus (or COVID-19), may result in, among other things, closing borders, disruptions to healthcare service preparation and delivery, quarantines, cancellations, disruptions to supply chains and consumer activity, as well as general concern and uncertainty. The impact may be short-term or may last for extended periods.
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USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
The COVID-19 pandemic, which has spread rapidly across the world, has led and will continue to lead for an unknown period of time to disruptions in local, regional, national and global markets and economies. Among other things, the outbreak has resulted in, and until fully resolved is likely to continue to result in, among other things (1) government imposition of various forms of "stay-at-home" orders and the closing of "non-essential" businesses, resulting in significant disruption to the businesses of many issuers as well as lay-offs of employees; (2) increased requests by issuers of debt instruments for amendments and waivers of agreements to avoid default and increased defaults; (3) volatility and disruption of markets, including greater volatility in pricing and spreads; and (4) rapidly evolving proposals and/or actions by state and federal governments to address problems being experienced by the markets and by businesses and the economy in general.
The equity securities in the Fund's portfolio are subject to stock market risk. A company's stock price in general may decline over short or even extended periods, regardless of the success or failure of the company's operations. Stock markets tend to run in cycles, with periods when stock prices generally go up and periods when stock prices generally go down. Equity securities tend to be more volatile than debt securities. In addition, to the degree the Fund invests in foreign securities, there is a possibility that the value of the Fund's investments in foreign securities will decrease because of unique risks, such as currency exchange-rate fluctuations; foreign market illiquidity; emerging market risk; increased price volatility; uncertain political conditions; exchange control regulations; foreign ownership limits; different accounting, reporting, and disclosure requirements; difficulties in obtaining legal judgments; and foreign withholding taxes. These risks are particularly heightened in this Fund because investments in emerging-market countries generally are more volatile than investments in developed markets. Emerging-market countries are less economically diverse and mature than more developed countries and tend to be politically less stable.
The Fund's performance could be closely tied to the market, currency, economic, political, regulatory, geopolitical, or other conditions and developments in the countries or regions in which the Fund invests. As such, the Fund's performance could be more volatile than the performance of more geographically diversified funds.
6. Borrowing and Interfund Lending:
Line of Credit:
Effective with the Transaction on July 1, 2019, the Victory Funds Complex participates in a short-term, demand note "Line of Credit" agreement with Citibank. Under the agreement with Citibank, the Victory Funds Complex could 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 that Fund paying the related commitment fees for that amount. The purpose of the agreement is to meet temporary or emergency cash needs, Citibank receives an annual commitment fee of 0.15% on $300 million for providing the Line of Credit. Each fund in the Victory Funds Complex pays a pro-rata portion of the commitment fees plus any interest (one month LIBOR plus one percent) on amounts borrowed. Effective June 29, 2020, under an amended Line of Credit agreement, Citibank will also receive an annual upfront fee of 0.10% on the $300 million committed line of credit. Each fund in the Victory Funds Complex will pay a pro-rata portion of the upfront fee. Interest charged to the Fund, if any, during the period is reflected on the Statement of Operations under line of credit fees.
Prior to the Transaction on July 1, 2019, the line of credit among the Trust, with respect to its funds, and USAA Capital Corporation ("CAPCO") terminated. For the period from June 1, 2019 to June 30, 2019, the Fund paid CAPCO facility fees of $3 thousand.
32
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
The average borrowing for the days outstanding and average interest rate for the Fund during the year ended May 31, 2020 were as follows (amounts in thousands):
Amount Outstanding at May 31, 2020 | Average Borrowing* | Days Borrowings Outstanding | Average Interest Rate | Maximum Borrowing During the Period | |||||||||||||||||||
$ | — | $ | 3,933 | 3 | 2.90 | % | $ | 5,000 |
* For the year ended May 31,2020, based on the number of days borrowings were outstanding.
Interfund Lending:
Effective with the Transaction on July 1, 2019, the Trust and 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 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. The interfund loan rate is determined, as specified in the Order, by averaging the current repurchase agreement rate and the current bank loan rate. As a Borrower, interest charged to the Fund, if any, during the period is reflected on the Statement of Operations under Interest expense on Interfund lending. As a Lender, interest earned by the Fund, if any, during the period is reflected on the Statement of Operations under Income on Interfund lending.
The Fund did not utilize or participate in the Facility during the period July 1, 2019 through May 31, 2020.
7. Federal Income Tax Information:
The Fund intends to declare daily and 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.
The following permanent reclassifications were made between capital accounts to reflect the portion of the payment made to redeeming shareholders that was claimed as a distribution for income tax purposes during the year ended May 31, 2020 (amounts in thousands):
Total Distributable Earnings/(Loss) | Capital | ||||||
$ | (17,927 | ) | $ | 17,927 |
33
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
The tax character of distributions paid during the taxs year ended as noted below, were as follows (total distributions paid may differ from the Statement of Changes in Net Assets because, for tax purposes, dividends are recognized when actually paid) (amounts in thousands).
Year Ended May 31, 2020 | Year Ended May 31, 2019 | ||||||||||||||||||||||||||
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 | ||||||||||||||||||||||
$ | 22,510 | $ | 410,423 | $ | 432,933 | $ | 13,991 | $ | 67,238 | $ | 81,229 |
As of May 31, 2020, the components of accumulated earnings (deficit) on a tax basis were as follows (amounts in thousands):
Undistributed Ordinary Income | Unrealized Appreciation (Depreciation)* | Total Accumulated Earnings (Deficit) | |||||||||
$ | 2,999 | $ | 189,314 | $ | 192,313 |
* The difference between the book-basis and tax-basis of unrealized appreciation/depreciation is attributable primarily to tax deferral of losses on wash sales and non-REIT return of capital dividend adjustments.
At May 31, 2020, the Fund had no capital loss carryforwards for federal income tax purposes.
As of May 31, 2020, 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) | ||||||||||||
$ | 1,048,755 | $ | 271,565 | $ | (82,215 | ) | $ | 189,350 |
8. 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 1940 Act. 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 Funds' Board of Trustees approved the appointment of the Fund's investment adviser, Victory Capital, as the administrator of the LRMP. At an in-person meeting held on February 26, 2020, Victory Capital provided an oral and written report to the Trustees on the operation and effectiveness of the LRMP during the previous year.
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
34
USAA Mutual Funds Trust | Notes to Financial Statements — continued May 31, 2020 |
information including input from the Fund's portfolio managers (including the portfolio managers employed by any investment sub-advisers) in determining final liquidity classifications.
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 reasonably expected to be converted to cash in current market conditions in three business days or less without significantly changing the market value of the investment. Therefore, the Fund has not adopted a Highly Liquid Investment Minimum. The Fund's investments were below the limitation on illiquid investments during the review period. Additionally, Victory Capital indicated that no events occurred that would require the filing of Form N-LIQUID and recommended no material changes to the LRMP.
9. Subsequent Events:
The Board of Trustees of USAA Mutual Funds Trust has approved redesignating the Fund's current Adviser Shares as "Class A" shares ("Redesignation"). This change was effective beginning on June 29th, 2020.
Class A shares will be available for purchase through financial intermediaries and the Fund will pay ongoing distribution and/or service (12b-1) fees at annual rate of up to 0.25% of the average daily net assets of its Class A shares. In addition, the Transfer Agency fee will convert to an annual basis point rate of 0.10% of daily net assets of its Class A shares from its current flat per account fee. Class A shares will be offered and sold at their public offering price, which is the NAV per share plus any applicable initial sales charge, also referred to as a "front-end sales load." For purchases on or after the Redesignation Date, Class A Shares will be offered and sold with the imposition of a maximum initial sales charge of up to 2.25% of the offering price of the Fund. A contingent deferred sales charge of up to 0.75% may be imposed on redemptions of Class A shares purchased without an initial sales charge if shares are redeemed within 18 months of purchase.
The Redesignation will be made without the imposition of any sales loads, fees, or other charges to Adviser Shares held in shareholder accounts on the Redesignation Date. The Redesignation will not be considered a taxable event for federal income tax purposes.
35
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of USAA World Growth Fund:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of USAA World Growth Fund (the "Fund") (one of the funds constituting USAA Mutual Funds Trust (the "Trust")), including the schedule of portfolio investments, as of May 31, 2020, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the funds constituting USAA Mutual Funds Trust) at May 31, 2020, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Trust's management. Our responsibility is to express an opinion on the Fund's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust's internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of May 31, 2020, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Victory Capital investment companies since 1995.
San Antonio, Texas
July 27, 2020
36
USAA Mutual Funds Trust | Supplemental Information May 31, 2020 |
(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) 539-3863. The information is also included in the Fund's Statement of Additional Information, which is available on the SEC's website at www.sec.gov.
Information relating to how the Fund voted proxies relating to portfolio securities held during the most recent 12 months ended June 30 is available on the SEC's website at www.sec.gov.
Availability of Schedules of Portfolio Investments:
The Trust files a complete list of Schedules of Portfolio Investments with the SEC for the first and third quarter of each fiscal year on Form N-PORT. Forms N-PORT are available on the SEC's website at www.sec.gov.
37
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(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 10 Trustees, eight of whom are not "interested persons" of the Trust within the meaning of that term under the 1940 Act ("Independent Trustees") and two 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 ages, position with the Trust, commencement of service, 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 47 portfolios in the Trust. Each Trustee's address is 15935 La Cantera Pkwy, Building Two, San Antonio, TX, 78256. Pursuant to a policy adopted by the Board, the term of office for each Trustee shall be until the Independent Trustee reaches age 75 or an Interested Trustee reaches age 75. The Board may change or grant exceptions from this policy at any time without shareholder approval. A Trustee may resign or be removed by a vote of the other Trustees or the holders of a majority of the outstanding shares of the Trust at any time. Vacancies on the Board can be filled by the action of a majority of the Trustees, provided that after filling such vacancy at least two-thirds of the Trustees have been elected by the shareholders.
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Independent Trustees. | |||||||||||||||||||
Jefferson C. Boyce, Born September 1957 | Lead Independent Trustee, and Vice Chairman | 2013 | Senior Managing Director, New York Life Investments, LLC (1992-2012) | Westhab, Inc. | |||||||||||||||
John C. Walters, Born February 1962 | Trustee | 2019 | Retired. Mr. Walters brings significant Board experience including active involvement with the board of a Fortune 500 company, and a proven record of leading large, complex financial organizations. He has a demonstrated record of success in distribution, manufacturing, investment brokerage, and investment management in both the retail and institutional investment businesses. He has substantial experience in the investment management business with a demonstrated ability to develop and drive strategy while managing operation, financial, and investment risk. | Guardian Variable Products Trust (16 series), Lead Independent Director; Amerilife Holdings LLC, Director; Stadion Money Management; Director; University of North Carolina (Chapel Hill), Member Board of Governors. |
38
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Robert L. Mason, Ph.D., Born July 1946 | Trustee | 1997 | Adjunct Professor in the Department of Management Science and Statistics in the College of Business at the University of Texas at San Antonio (since 2001); Institute Analyst, Southwest Research Institute (March 2002-January 2016) | None | |||||||||||||||
Dawn M. Hawley, Born February 1954 | Trustee | 2014 | Manager of Finance, Menil Foundation, Inc. (May 2007-June 2011), which is a private foundation that oversees the assemblage of sculptures, prints, drawings, photographs, and rare books. Director of Financial Planning and Analysis and Chief Financial Officer, AIM Management Group, Inc. (October 1987-January 2006) | None | |||||||||||||||
Paul L. McNamara, Born July 1948 | Trustee | 2012 | Director, Cantor Opportunistic Alternatives Fund, LLC (March 2010-February 2014) , which is a closed-end fund of funds by Cantor Fitzgerald Investment Advisors, LLC | None |
39
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Richard Y. Newton III, Born January 1956 | Trustee | 2017 | Director, Elta North America (01/18-present), 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 (December 2015-present)); Executive Director, The Union League Club of New York (June 2014-November 2015): Executive Vice President, Air Force Association (August 2012-May 2014); Lieutenant General, United States Air Force (January 2008-June 2012) | None | |||||||||||||||
Barbara B. Ostdiek, Ph.D., Born March 1964 | Trustee | 2008 | Senior Associate Dean of Degree Programs at Jesse H. Jones Graduate School of Business at Rice University (since 2013); Associate Professor of Finance at Jessie H. Jones Graduate School of Business at Rice University (since 2001) | None | |||||||||||||||
Michael F. Reimherr, Born August 1945 | Trustee | 2000 | President of Reimherr Business Consulting (May 1995-December 2017); St. Mary's University Investment Committee overseeing University Endowment (since 2014) | None |
40
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Interested Trustees. | |||||||||||||||||||
David C. Brown, ** Born May 1972 | Trustee | 2019 | Chairman and Chief Executive Officer (since 2013), Co-Chief Executive Officer (2011-2013), Victory Capital Management Inc.; Chairman and Chief Executive Officer, Victory Capital Holdings, Inc. (since 2013). Mr. Brown brings to the Board extensive business, finance and leadership skills gained and developed through years of experience in the financial services industry, including his tenure overseeing the strategic direction as CEO of Victory Capital. These skills, combined with Mr. Brown's extensive knowledge of the financial services industry and demonstrated success in the development and distribution of investment strategies and products, enable him to provide valuable insights to the Board and strategic direction for the Funds | Trustee, Victory Portfolios (42 series), Victory Portfolios II (26 series), Victory Variable Insurance Funds (9 series) |
41
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Name and Date of Birth | Position Held with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Daniel S. McNamara, ** Born June 1966 | Trustee and Chair of the Board of Trustees | 2012 | Trustee, President, and Vice Chairman of USAA ETF Trust (June 2017-June 2019); President of Financial Advice & Solutions Group (FASG), USAA (since 2013); Director, IMCO (September 2009-April 2014); President, AMCO (August, 2011-April 2013); Senior Vice President of USAA Financial Planning Services Insurance Agency, Inc. (FPS) (since 2011); Director of USAA Investment Management Company (IMCO) (since 2009); Chairman of Board of IMCO (since 2013); Director of USAA Asset Management Company (AMCO), (August 2011-June 2019); President and Director of USAA Shareholder Account Services (SAS)(October 2009-June 2019); Director and Vice Chairman of FPS (since 2013); President and Director of USAA Investment Corporation (ICORP) (since 2010); Chairman of Board of ICORP (since 2013); Director of USAA Financial Advisors, Inc. (FAI) (since 2013); Chairman of Board of FAI (since 2015). Mr. McNamara brings to the Board extensive experience in the financial services industry, including experience as an officer of the Trust. | None |
** Mr. McNamara and Mr. Brown are "Interested Persons" by reason of their relationships with the Adviser.
The Statement of Additional Information includes additional information about the Trustees of the Trust and is available, without charge, on the SEC's website at www.sec.gov and/or by calling (800)-539-3863.
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USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Officers:
The officers of the Trust, their ages, 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, Building Two, 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 with the Trust | Year Commenced Service | Principal Occupation During Past 5 Years | ||||||||||||
Interested Officers. | |||||||||||||||
Christopher K. Dyer, Born February 1962 | President | 2019 | Director of Fund Administration, Victory Capital (2004-present) | ||||||||||||
Scott A Stahorsky, Born July 1969 | Vice President | 2019 | Manager, Fund Administration, Victory Capital (since 2015); Senior Analyst, Fund Administration, Victory Capital (prior to 2015) | ||||||||||||
James K. De Vries, Born April 1969 | Treasurer, Principal Financial Officer | 2018 | Executive Director, Victory Capital Management Inc. (since 2019); Treasurer, USAA ETF Trust (September 2018-June 2019); Executive Director, Investment and Financial Administration, USAA (April 2012-June 2019); Assistant Treasurer, USAA ETF Trust (June 2017-September 2018); Assistant Treasurer, USAA Mutual Funds Trust (December 2013-February 2018) | ||||||||||||
Allan Shaer, Born March 1965 | Assistant Treasurer | 2019 | Senior Vice President, Financial Administration, Citi Fund Services Ohio, Inc. (since 2016); Vice President, Mutual Fund Administration, JP Morgan Chase (2011-2016) | ||||||||||||
Carol D. Trevino, Born October 1965 | Assistant Treasurer | 2018 | Director, Accounting and Finance, Victory Capital Management Inc. (since 2019); Accounting/Financial Director, USAA (December 2013-June 2019); Assistant Treasurer, USAA ETF Trust (September 2018-June 2019). | ||||||||||||
Erin G. Wagner, Born February 1974 | Secretary | 2019 | Deputy General Counsel, the Adviser (since 2013) | ||||||||||||
Charles Booth, Born April 1960 | Anti-Money Laundering Compliance Officer and Identity Theft Officer | 2019 | Director, Regulatory Administration and CCO Support Services, Citi Fund Services Ohio, Inc. (2007-present) | ||||||||||||
Amy Campos, Born July 1976 | Chief Compliance Officer | 2019 | Chief Compliance Officer, USAA Mutual Funds Trust (since 2019); Executive Director, Deputy Chief Compliance Officer, USAA Mutual Funds Trust and USAA ETF Trust (July 2017-June 2019); Compliance Director, USAA Mutual Funds Trust (2014-July 2017) |
43
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
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 December 1, 2019 through May 31, 2020.
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. If these transactional costs were included, your costs would have been higher.
Beginning Account Value 12/1/19 | Actual Ending Account Value 5/31/20 | Hypothetical Ending Account Value 5/31/20 | Actual Expenses Paid During Period 12/1/19- 5/31/20* | Hypothetical Expenses Paid During Period 12/1/19- 5/31/20* | Annualized Expense Ratio During Period 12/1/19- 5/31/20 | ||||||||||||||||||||||
Fund Shares | $ | 1,000.00 | $ | 954.40 | $ | 1,019.70 | $ | 5.18 | $ | 5.35 | 1.06 | % | |||||||||||||||
Institutional Shares | 1,000.00 | 954.60 | 1,020.05 | 4.84 | 5.00 | 0.99 | |||||||||||||||||||||
Adviser Shares | 1,000.00 | 953.20 | 1,018.30 | 6.54 | 6.76 | 1.34 |
* Expenses are equal to the average account value multiplied by the Fund's annualized expense ratio multiplied by 183/366 (the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year).
44
USAA Mutual Funds Trust | Supplemental Information — continued May 31, 2020 |
(Unaudited)
Additional Federal Income Tax Information
The following federal tax information related to the Fund's fiscal year ended May 31, 2020, 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 2021.
With respect to distributions paid, the Fund designates the following amounts (or, if subsequently determined to be different, the maximum amount allowable) for the fiscal year ended May 31, 2020 (amounts in thousands):
Dividend Received Deduction (corporate shareholders)* | Qualified Dividend Income (non-corporate shareholders)* | Short-Term Capital Gains Distributions(a) | Long-Term Capital Gain Distributions(a) | Foreign Taxes Paid(b) | |||||||||||||||||||
67.96 | % | 100.00 | % | $ | 1,928 | $ | 428,349 | $ | 1,200 |
* Presented as a percentage of net investment income and excludes short-term capital gain distributions paid, if any. All or a portion of these amounts may be exempt from taxation at the state level.
(a) Pursuant to Section 852 of the Internal Revenue Code.
(b) The Fund has elected under Section 853 of the Internal Revenue Code to pass through the credit for taxes paid in foreign countries.
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 |
23411-0720
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.
2020 | 2019 | |||||||
(a) Audit Fees (1) | $ | 360,300 | $ | 454,300 | ||||
(b) Audit-Related Fees (2) | - | - | ||||||
(c) Tax Fees (3) | 67,388 | 66,900 | ||||||
(d) All Other Fees (4) | - | - |
(1) Audit fees include amounts related to the audit of the Registrant’s annual financial statements and services normally provided by the accountant in connection with statutory and regulatory filings. Audit fees billed were for professional services provided by Ernst & Young LLP for statutory and regulatory filings.
(2) For the fiscal years ended May 31, 2020 and May 31, 2019, there were no audit-related fees billed by Ernst & Young LLP to the Registrant.
(3) Represents the aggregate tax fee billed for professional services rendered by Ernst & Young LLP for assistance with PFIC Analyzer Service and tax consulting services.
(4) For the fiscal years ended May 31, 2020 and May 31, 2019, 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 | |||||||
2020 | $ | 67,388 | $ | 155,957 | ||||
2019 | $ | 66,900 | $ | 151,735 |
(h) The aggregate non-audit fees related to fees billed by Ernst & Young LLP for services rendered to the Registrant; the investment adviser, USAA Asset Management Company (AMCO) and its affiliate, USAA Investment Management Company (IMCO); and the Funds' transfer agent, Victory Capital Transfer Agency Inc. and prior transfer agent, USAA Shareholder Account Services (SAS), which includes aggregate fees accrued or paid to Ernst & Young, LLP for professional services rendered related to the annual study of internal controls of the transfer agent for fiscal years listed above. All services were preapproved by the Audit Committee.
Effective July 1, 2019, AMCO, the prior investment adviser to the Funds, and SAS, the prior transfer agent to the Funds, were acquired by Victory Capital Holdings, Inc. Effective July 1, 2019, Victory Capital Management Inc. is the new investment adviser and administrator to the Funds; SAS was renamed Victory Capital Transfer Agency, Inc. and is the new transfer agent to the Funds.
Ernst & Young LLP provided non-audit services to AMCO and IMCO in 2020 and 2019 and also provided certain tax services to Victory Capital Holdings, Inc. in 2019 that were not required to be pre-approved by the Registrant's Audit and Compliance Committee because the services were not directly related to the operations of the Registrant's Funds. The Board of Trustees will consider Ernst & Young LLP's independence and will consider whether the provision of these non-audit services to AMCO is compatible with maintaining Ernst & Young LLP's independence.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Investments.
(a) Not applicable.
(b) Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
The Corporate Governance Committee selects and nominates candidates for membership on the Board as independent trustees. The Corporate Governance Committee has adopted procedures to consider Board candidates suggested by shareholders. The procedures are initiated by the receipt of nominations submitted by a fund shareholder sent to Board member(s) at the address specified in fund disclosure documents or as received by the Adviser or a fund officer. Any recommendations for a nomination by a shareholder, to be considered by the Board, must include at least the following information: name; date of birth; contact information; education; business profession and other expertise; affiliations; experience relating to serving on the Board; and references. The Corporate Governance Committee gives shareholder recommendations the same consideration as any other candidate.
Item 11. Controls and Procedures.
(a)The registrant’s principal executive officer and principal financial officer have concluded, based on their evaluation of the registrant's disclosure controls and procedures as conducted within 90 days of the filing date of this report, that these disclosure controls and procedures are adequately designed and are operating effectively to ensure that information required to be disclosed by the registrant on Form N-CSR is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms.
(b)There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940 (17 CFR 270.30a-3(d)) that occurred during the period covered by this report that have materially affected or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
(a)(1) Not applicable.
(a)(2) Not applicable.
(a)(3) Not applicable.
(a)(4) Not applicable.
(b) Not applicable.
Item 13. Exhibits.
(a)(2) Certifications pursuant to Rule 30a-2(a) are attached hereto.
(a)(3) Not applicable.
(a)(4) Not applicable.
(b) Certifications pursuant to Rule 30a-2(b) are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant
has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) | USAA Mutual Fund Trust |
By (Signature and Title)* | /s/ James K. De Vries | |
James K. De Vries, Principal Financial Officer |
Date | August 05, 2020 | |
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 | August 05, 2020 |
By (Signature and Title)* | /s/ James K. De Vries | |
James K. De Vries, Principal Financial Officer |
Date | August 05, 2020 | |