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SEMIANNUAL REPORTUSAA VALUE FUNDFUND SHARES (UVALX) ■ INSTITUTIONAL SHARES (UIVAX)■ ADVISER SHARES (UAVAX)

JANUARY 31, 2019

Beginning on January 1, 2021, as permitted by regulations adopted by the Securities andExchange Commission, paper copies of the Fund’s shareholder reports like this one willno longer be sent by mail, unless you specifically request paper copies of the reportsfrom the Fund or from your financial intermediary, such as a broker-dealer or bank.Instead, the reports will be made available on usaa.com, and you will be notified by maileach 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 beaffected by this change and you need not take any action. You may elect to receiveshareholder reports and other communications from the Fund or your financial intermediary electronically by notifying your financial intermediary directly, or if you area direct investor, by calling (800) 531-USAA (8722) or logging on to usaa.com.

You may elect to receive all future reports in paper free of charge. You can inform theFund or your financial intermediary that you wish to continue receiving paper copies ofyour shareholder reports by notifying your financial intermediary directly, or if you are adirect investor, by calling (800) 531-USAA (8722) or logging on to usaa.com. Your electionto receive reports in paper will apply to all funds held with the USAA family of funds oryour financial intermediary.

TABLE OF CONTENTS

Investment Overview 1

Financial InformationPortfolio of Investments 2Notes to Portfolio of Investments 9Financial Statements 11Notes to Financial Statements 15Financial Highlights 30

Expense Example 33

Advisory Agreement(s) 35

This report is for the information of the shareholders and others who have received a copy of thecurrently effective prospectus of the Fund, managed by USAA Asset Management Company. It maybe used as sales literature only when preceded or accompanied by a current prospectus, whichprovides further details about the Fund.

IRA DISTRIBUTION WITHHOLDING DISCLOSUREWe generally must withhold federal income tax at a rate of 10% of the taxable portionof 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 tohave income tax withheld at a higher rate. Any withholding election that you make willapply 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 withholdingelection, call (800) 531-USAA (8722) or (210) 531-8722.If you do not have a withholding election in place by the date of a distribution, federalincome tax will be withheld from the taxable portion of your distribution at a rate of10%. If you must pay estimated taxes, you may be subject to estimated tax penalties ifyour estimated tax payments are not sufficient and sufficient tax is not withheld fromyour distribution.For more specific information, please consult your tax adviser.

©2019, USAA. All rights reserved.

Investment Overview | 1

■ TOP 10 HOLDINGS* – 1/31/19 ■(% of Net Assets)

Anthem, Inc. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

2.8%Medtronic plc

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -2.2%

Johnson Controls International plc - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

2.1%Pfizer, Inc.

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -2.1%

Oracle Corp. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

2.0%Wells Fargo & Co.

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -1.9%

J.P. Morgan Chase & Co. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

1.7%BP plc ADR

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -1.7%

ConocoPhillips - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

1.7%Dollar General Corp.

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -1.7%

*Does not include money market instruments and short-term investments purchased with cash collateral fromsecurities loaned.Percentages are of the net assets of the Fund and may not equal 100%.Refer to the Portfolio of Investments for a complete list of securities.The Portfolio of Investments uses the Bloomberg Industry Classification System (BICS), which may differ fromthe Fund’s compliance classification.

■ SECTOR ALLOCATION* – 1/31/19 ■(% of Net Assets)

Energy11.6%

Consumer, Non-cyclical

18.7%

Communications1.9%

Industrial14.7%

Technology11.4%

Utilities3.0%

Financial21.5%

Consumer, Cyclical11.3%

Basic Materials5.3%

INVESTMENT OVERVIEW

PORTFOLIO OF INVESTMENTSJanuary 31, 2019 (unaudited)

MarketNumber Valueof Shares Security (000)

2 | USAA Value Fund

EQUITY SECURITIES (99.4%)COMMON STOCKS (99.4%)Basic Materials (5.3%)Chemicals (4.3%)

112,769 Air Products & Chemicals, Inc. $ 18,538246,510 DowDuPont, Inc. 13,265113,476 Linde plc 18,498144,656 PolyOne Corp. 4,682

54,983Iron/Steel (0.7%)

324,199 Allegheny Technologies, Inc.(a) 8,880

Mining (0.3%)542,408 Ferroglobe plc 1,242

65,069 Materion Corp. 3,0544,296

Total Basic Materials 68,159

Communications (1.9%)Media (1.5%)

525,833 Comcast Corp. “A” 19,230

Telecommunications (0.4%)132,115 Ciena Corp.(a) 5,032

Total Communications 24,262

Consumer, Cyclical (11.3%)Auto Parts & Equipment (0.6%)

533,396 American Axle & Manufacturing Holdings, Inc.(a) 7,884

Food Service (0.9%)339,297 Aramark 11,180

Home Builders (0.8%)217,344 Lennar Corp. “A” 10,306

Home Furnishings (0.6%)53,384 Whirlpool Corp. 7,101

Portfolio of Investments | 3


Leisure Time (2.8%)334,092 Norwegian Cruise Line Holdings Ltd.(a) $ 17,183159,836 Royal Caribbean Cruises Ltd. 19,188

36,371Lodging (0.9%)

383,341 MGM Resorts International 11,285

Retail (4.2%)101,397 Advance Auto Parts, Inc. 16,142183,834 Dollar General Corp. 21,220175,185 Lowe’s Companies, Inc. 16,846

54,208Storage/Warehousing (0.5%)

153,722 Mobile Mini, Inc. 5,809Total Consumer, Cyclical 144,144

Consumer, Non-cyclical (18.7%)Agriculture (1.0%)

93,915 Altria Group, Inc. 4,635112,190 Philip Morris International, Inc. 8,607

13,242Beverages (1.3%)

341,208 Coca-Cola European Partners plc 16,235

Commercial Services (2.0%)38,007 AMERCO 13,783

452,284 Nielsen Holdings plc 11,61525,398

Food (0.7%)316,274 Darling Ingredients, Inc.(a) 6,727633,406 SunOpta, Inc.(a) 2,635

9,362Healthcare Products (2.2%)

222,246 Invacare Corp. 1,142309,268 Medtronic plc 27,336

28,478Healthcare-Services (4.4%)

118,947 Anthem, Inc. 36,04176,568 Encompass Health Corp. 5,11852,409 UnitedHealth Group, Inc. 14,161

55,320

Pharmaceuticals (7.1%)82,378 Cigna Corp. $ 16,460

267,112 CVS Health Corp. 17,509142,594 Merck & Co., Inc. 10,613634,119 Pfizer, Inc. 26,918267,585 Sanofi ADR 11,627366,286 Teva Pharmaceutical Industries Ltd. ADR(a) 7,271

90,398Total Consumer, Non-cyclical 238,433

Energy (11.6%)Oil & Gas (11.6%)

519,839 BP plc ADR 21,376540,360 Callon Petroleum Co.(a) 4,399152,464 Chevron Corp. 17,480315,532 ConocoPhillips 21,358322,009 Hess Corp. 17,388

1,604,276 Kosmos Energy Ltd.(a) 8,230489,463 Parsley Energy, Inc. “A”(a) 9,094213,376 Phillips 66 20,358168,542 Valero Energy Corp. 14,801522,352 Vermilion Energy, Inc. 12,824

Total Energy 147,308

Financial (21.5%)Banks (9.8%)

368,252 Bank of New York Mellon Corp. 19,267200,660 Cadence BanCorp 3,762214,645 J.P. Morgan Chase & Co. 22,216612,900 KeyCorp 10,094

83,661 Prosperity Bancshares, Inc. 5,952224,125 State Street Corp. 15,890115,447 Texas Capital Bancshares, Inc.(a) 6,727235,831 U.S. Bancorp. 12,065

79,032 UMB Financial Corp. 5,087492,632 Wells Fargo & Co. 24,095

125,155Diversified Financial Services (4.9%)

194,603 American Express Co. 19,986213,571 E*TRADE Financial Corp. 9,965618,624 Jefferies Financial Group, Inc. 12,873490,862 Navient Corp. 5,596


4 | USAA Value Fund


127,584 PRA Group, Inc.(a) $ 3,765966,443 SLM Corp.(a) 10,351

62,536Insurance (3.5%)

265,374 American International Group, Inc. 11,472176,000 Fidelity National Financial, Inc. 6,364535,355 MGIC Investment Corp.(a) 6,681117,885 Willis Towers Watson plc 19,191

43,708REITS (2.3%)

275,395 Liberty Property Trust 12,982529,189 MGM Growth Properties, LLC “A” 16,405

29,387Savings & Loans (1.0%)

1,096,877 New York Community Bancorp, Inc. 12,746Total Financial 273,532

Industrial (14.7%)Aerospace/Defense (2.8%)

67,255 Barnes Group, Inc. 3,973144,531 Spirit AeroSystems Holdings, Inc. “A” 12,054168,388 United Technologies Corp. 19,882

35,909

Building Materials (4.0%)146,200 Gibraltar Industries, Inc.(a) 5,212809,211 Johnson Controls International plc 27,327221,679 Owens Corning 11,614108,659 Simpson Manufacturing Co., Inc. 6,669

50,822

Electrical Components & Equipment (0.3%)80,039 Encore Wire Corp. 4,314

Electronics (1.3%)95,138 FARO Technologies, Inc.(a) 4,045

177,778 II-VI, Inc.(a) 6,74977,846 Park Electrochemical Corp. 1,773

220,526 Vishay Intertechnology, Inc. 4,30016,867

Engineering & Construction (0.3%)201,245 Primoris Services Corp. 4,015


Hand/Machine Tools (1.4%)137,886 Stanley Black & Decker, Inc. $ 17,434

Machinery-Construction & Mining (0.5%)190,921 Terex Corp. 5,863

Machinery-Diversified (0.9%)161,938 Wabtec Corp.(b) 11,200

Miscellaneous Manufacturers (2.7%)234,601 Actuant Corp. “A” 5,370180,519 Colfax Corp.(a) 4,468252,032 Federal Signal Corp. 5,540

1,891,376 General Electric Co. 19,21634,594

Transportation (0.5%)264,066 Air Transport Services Group, Inc.(a) 6,272

Total Industrial 187,290

Technology (11.4%)Computers (1.0%)

590,093 Hewlett Packard Enterprise Co. 9,19978,883 MTS Systems Corp. 3,949

13,148

Semiconductors (7.0%)68,809 Broadcom, Inc. 18,458

242,778 Brooks Automation, Inc. 7,558222,104 Cohu, Inc. 3,896204,723 Diodes, Inc.(a) 6,885579,675 Marvell Technology Group Ltd. 10,741123,784 Microchip Technology, Inc.(b) 9,948344,069 Photronics, Inc.(a) 3,678229,724 QUALCOMM, Inc. 11,376164,329 Texas Instruments, Inc. 16,545

89,085

Software (3.4%)167,215 Microsoft Corp. 17,462511,055 Oracle Corp. 25,671

43,133Total Technology 145,366


6 | USAA Value Fund


Utilities (3.0%)Electric (3.0%)

254,983 Dominion Energy, Inc. $ 17,910413,096 Exelon Corp. 19,729

Total Utilities 37,639Total Common Stocks (cost: $1,030,934) 1,266,133

RIGHTS (0.0%)Basic Materials (0.0%)Mining (0.0%)

545,600 Ferroglobe Representation & Warranty Insurance Trust(a),(c),(d),(e) (cost: $0) –Total Equity Securities (cost: $1,030,934) 1,266,133

MONEY MARKET INSTRUMENTS (0.7%)GOVERNMENT & U.S. TREASURY MONEY MARKET FUNDS (0.7%)

8,994,526 State Street Institutional Treasury Money Market Fund Premier Class, 2.31%(f)

(cost: $8,995) 8,995

SHORT-TERM INVESTMENT PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED (0.6%)GOVERNMENT & U.S. TREASURY MONEY MARKET FUNDS (0.6%)

8,135,330 HSBC U.S. Government Money Market Fund Class I, 2.38%(f) 8,135Total Short-Term Investment Purchased with Cash Collateral

from Securities Loaned (cost: $8,135) 8,135

Total Investments (cost: $1,048,064) $1,283,263


($ in 000s) VALUATION HIERARCHY

Assets LEVEL 1 LEVEL 2 LEVEL 3 Total

Equity Securities:Common Stocks $1,266,133 $– $– $1,266,133Rights – – – –

Money Market Instruments:Government & U.S. Treasury

Money Market Funds 8,995 – – 8,995

Short-Term Investment Purchased withCash Collateral from Securities Loaned:Government & U.S. Treasury

Money Market Funds 8,135 – – 8,135

Total $1,283,263 $– $– $1,283,263

Refer to the Portfolio of Investments for additional industry, country, or geographic region classifications.

The Portfolio of Investments uses the Bloomberg Industry Classification System (BICS), which may differfrom the Fund’s compliance classification.

At January 31, 2019, the Fund did not have any transfers into/out of Level 3.

8 | USAA Value Fund

Notes to Portfolio of Investments | 9

NOTES TO PORTFOLIOOF INVESTMENTSJanuary 31, 2019 (unaudited)

■ GENERAL NOTES

Market values of securities are determined by procedures and practicesdiscussed in Note 1A to the financial statements.

The Portfolio of Investments category percentages shown represent thepercentages of the investments to net assets, and, in total, may not equal100%. A category percentage of 0.0% represents less than 0.1% of netassets. Investments in foreign securities were 8.6% of net assets atJanuary 31, 2019.

■ CATEGORIES AND DEFINITIONS

Rights – Enable the holder to buy a specified number of shares of newissues of a common stock before it is offered to the public.

■ PORTFOLIO ABBREVIATIONS AND DESCRIPTIONS

ADR American depositary receipts are receipts issued by a U.S. bankevidencing ownership of foreign shares. Dividends are paid inU.S. dollars.

REITS Real estate investment trusts – Dividend distributions fromREITs may be recorded as income and later characterized bythe REIT at the end of the fiscal year as capital gains or areturn of capital. Thus, the Fund will estimate the componentsof distributions from these securities and revise when actualdistributions are known.

■ SPECIFIC NOTES

(a) Non-income-producing security.

(b) The security, or a portion thereof, was out on loan as of January 31,2019.

(c) Security was fair valued at January 31, 2019, by USAA AssetManagement Company in accordance with valuation proceduresapproved by USAA Mutual Funds Trust’s Board of Trustees.

(d) Security deemed illiquid by USAA Asset Management Company,under liquidity guidelines approved by USAA Mutual Funds Trust’sBoard of Trustees.

(e) Security was classified as Level 3.

(f) Rate represents the money market fund annualized seven-day yield atJanuary 31, 2019.

See accompanying notes to financial statements.

10 | USAA Value Fund

STATEMENT OF ASSETS AND LIABILITIES(IN THOUSANDS)

January 31, 2019 (unaudited)

Financial Statements | 11

ASSETSInvestments in securities, at market value (including securities on

loan of $8,011) (cost of $1,048,064) $1,283,263Receivables:

Capital shares sold 414Dividends and interest 1,273Securities sold 2,686Other 2

Total assets 1,287,638

LIABILITIESPayables:

Upon return of securities loaned 8,135Securities purchased 75

Capital shares redeemed:Affiliated transactions (Note 8) 3,590Unaffiliated transactions 789

Accrued management fees 679Accrued transfer agent’s fees 42Other accrued expenses and payables 138

Total liabilities 13,448Net assets applicable to capital shares outstanding $1,274,190

NET ASSETS CONSIST OF:Paid-in capital $1,000,553Distributable earnings 273,637

Net assets applicable to capital shares outstanding $1,274,190Net asset value, redemption price, and offering price per share:

Fund Shares (net assets of $919,516/50,456 capitalshares outstanding, no par value) $ 18.22

Institutional Shares (net assets of $346,520/19,015 capitalshares outstanding, no par value) $ 18.22

Adviser Shares (net assets of $8,154/449 capitalshares outstanding, no par value) $ 18.17


STATEMENT OF OPERATIONS(IN THOUSANDS)

Six-month period ended January 31, 2019 (unaudited)


INVESTMENT INCOMEDividends (net of foreign taxes withheld of $87) $ 16,167Interest 164Securities lending (net) 8

Total income 16,339

EXPENSESManagement fees 4,759Administration and servicing fees:

Fund Shares 719Institutional Shares 248Adviser Shares 7

Transfer agent’s fees:Fund Shares 597Institutional Shares 248

Distribution and service fees (Note 7):Adviser Shares 11

Custody and accounting fees:Fund Shares 52Institutional Shares 38Adviser Shares 1

Postage:Fund Shares 30

Shareholder reporting fees:Fund Shares 21

Trustees’ fees 17Registration fees:

Fund Shares 20Institutional Shares 13Adviser Shares 9

Professional fees $ 52Other 15

Total expenses 6,857

NET INVESTMENT INCOME 9,482NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS

Net realized gain 92,886Change in net unrealized appreciation/(depreciation) (197,551)

Net realized and unrealized loss (104,665)

Decrease in net assets resulting from operations $ (95,183)See accompanying notes to financial statements.

Financial Statements | 13


STATEMENTS OF CHANGES IN NET ASSETS(IN THOUSANDS)

Six-month period ended January 31, 2019 (unaudited), and year ended July 31, 2018

1/31/2019 7/31/2018

FROM OPERATIONSNet investment income $ 9,482 $ 18,162Net realized gain on investments 92,886 104,388Net realized loss on foreign currency transactions – (2)Change in net unrealized appreciation/(depreciation)

of investments (197,551) 25,409

Increase (decrease) in net assets resulting fromoperations (95,183) 147,957

DISTRIBUTIONS TO SHAREHOLDERS FROMDISTRIBUTABLE EARNINGS:

Fund Shares (109,577) (69,470)Institutional Shares (48,387) (44,214)Adviser Shares (1,039) (688)

Distributions to shareholders (159,003) (114,372)

NET INCREASE (DECREASE) IN NET ASSETS FROMCAPITAL SHARE TRANSACTIONS (NOTE 6)

Fund Shares 80,649 50,610Institutional Shares (210,091) 35,983Adviser Shares 18 (18)

Total net increase (decrease) in net assets from capitalshare transactions (129,424) 86,575

Net increase (decrease) in net assets (383,610) 120,160

NET ASSETSBeginning of period 1,657,800 1,537,640

End of period $1,274,190 $1,657,800


NOTES TO FINANCIAL STATEMENTSJanuary 31, 2019 (unaudited)

Notes to Financial Statements | 15

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESUSAA MUTUAL FUNDS TRUST (the Trust), registered under theInvestment Company Act of 1940, as amended (the 1940 Act), is an open-end management investment company organized as a Delaware statutorytrust consisting of 47 separate funds. The USAA Value Fund (the Fund)qualifies as a registered investment company under Accounting StandardsCodification Topic 946. The information presented in this semiannualreport pertains only to the Fund, which is classified as diversified underthe 1940 Act. The Fund’s investment objective is to seek long-term growthof capital.

The Fund consists of three classes of shares: Value Fund Shares (Fund Shares),Value Fund Institutional Shares (Institutional Shares), and Value Fund AdviserShares (Adviser Shares). Each class of shares has equal rights to assets andearnings, except that each class bears certain class-related expenses specific tothe particular class. These expenses include administration and servicing fees,transfer agent fees, postage, shareholder reporting fees, distribution andservice (12b-1) fees, and certain registration and custodian fees. Expensesnot attributable to a specific class, income, and realized gains or losses oninvestments are allocated to each class of shares based on each class’ relativenet assets. Each class has exclusive voting rights on matters related solely tothat class and separate voting rights on matters that relate to all classes. TheInstitutional Shares are available for investment through a USAA discretionarymanaged account program and certain advisory programs sponsored byfinancial intermediaries, such as brokerage firms, investment advisors,financial planners, third-party administrators, and insurance companies.Institutional Shares also are available to institutional investors, which include


retirement plans, endowments, foundations, and bank trusts, as well as otherpersons or legal entities that the Fund may approve from time to time, orfor purchase by a USAA fund participating in a fund-of-funds investmentstrategy (USAA fund-of-funds). The Adviser Shares permit investors topurchase shares through financial intermediaries, including banks, broker-dealers, insurance companies, investment advisers, plan sponsors, andfinancial professionals that provide various administrative and distributionservices.

On November 6, 2018, United Services Automobile Association (USAA),the parent company of USAA Asset Management Company (AMCO orManager), the investment adviser to the Fund, and USAA Transfer AgencyCompany, d/b/a USAA Shareholder Account Services (SAS), the transferagent to the Fund, announced that AMCO and SAS would be acquired byVictory Capital Holdings, Inc. (Victory), a global investment managementfirm headquartered in Cleveland, Ohio (the Transaction). The closing of theTransaction is expected to be completed during the second quarter of 2019,pending satisfaction of certain closing conditions and approvals, includingcertain approvals of the Fund’s Board of Trustees and of the Fund’sshareholders at a special shareholder meeting to be held on April 18, 2019.The Transaction is not expected to result in any material changes to the Fund’sinvestment objectives and principal investment strategies. In connection withthe Transaction, Victory proposes to add portfolio managers from one ormore investment teams employed by Victory to serve as additional portfoliomanagers to manage all or a portion of the Fund according to each team’sown investment process.

A. Security valuation – The Trust’s Board of Trustees (the Board) hasestablished the Valuation and Liquidity Committee (the Committee),and subject to Board oversight, the Committee administers and overseesthe Fund’s valuation policies and procedures, which are approved by theBoard. The Fund utilizes independent pricing services, quotations fromsecurities dealers, and a wide variety of sources and information toestablish and adjust the fair value of securities as events occur andcircumstances warrant.


The value of each security is determined (as of the close of trading onthe New York Stock Exchange (NYSE) on each business day the NYSEis open) as set forth below:

1. Equity securities, including exchange-traded funds (ETFs), except asotherwise noted, traded primarily on a domestic securities exchangeor the over-the-counter markets, are valued at the last sales price orofficial closing price on the exchange or primary market on whichthey trade. Securities traded primarily on foreign securities exchangesor markets are valued at the last quoted sale price, or the most recentlydetermined official closing price calculated according to local marketconvention, available at the time the Fund is valued. If no last sale orofficial closing price is reported or available, the average of the bidand ask prices generally is used. Actively traded equity securitieslisted on a domestic exchange generally are categorized in Level 1 ofthe fair value hierarchy. Certain preferred and equity securities tradedin inactive markets generally are categorized in Level 2 of the fairvalue hierarchy.

2. Equity securities trading in various foreign markets may take placeon days when the NYSE is closed. Further, when the NYSE is open,the foreign markets may be closed. Therefore, the calculation of theFund’s net asset value (NAV) may not take place at the same time theprices of certain foreign securities held by the Fund are determined.In many cases, events affecting the values of foreign securities thatoccur between the time of their last quoted sale or official closingprice and the close of normal trading on the NYSE on a day theFund’s NAV is calculated will not need to be reflected in the value ofthe Fund’s foreign securities. However, the Manager and the Fund’ssubadviser(s) will monitor for events that would materially affect thevalue of the Fund’s foreign securities. The Fund’s subadviser(s) haveagreed to notify the Manager of significant events they identify thatwould materially affect the value of the Fund’s foreign securities. Ifthe Manager determines that a particular event would materiallyaffect the value of the Fund’s foreign securities, then the Committeewill consider such available information that it deems relevant andwill determine a fair value for the affected foreign securities in


accordance with valuation procedures. In addition, informationfrom an external vendor or other sources may be used to adjust theforeign market closing prices of foreign equity securities to reflectwhat the Committee believes to be the fair value of the securities asof the close of the NYSE. Fair valuation of affected foreign equitysecurities may occur frequently based on an assessment that eventswhich occur on a fairly regular basis (such as U.S. market movements)are significant. Such securities are categorized in Level 2 of the fairvalue hierarchy.

3. Investments in open-end investment companies, commingled, or otherfunds, other than ETFs, are valued at their NAV at the end of eachbusiness day and are categorized in Level 1 of the fair value hierarchy.

4. Short-term debt securities with original or remaining maturities of60 days or less may be valued at amortized cost, provided thatamortized cost represents the fair value of such securities.

5. Repurchase agreements are valued at cost.

6. In the event that price quotations or valuations are not readilyavailable, are not reflective of market value, or a significant event hasbeen recognized in relation to a security or class of securities, thesecurities are valued in good faith by the Committee in accordancewith valuation procedures approved by the Board. The effect of fairvalue pricing is that securities may not be priced on the basis ofquotations from the primary market in which they are traded andthe actual price realized from the sale of a security may differmaterially from the fair value price. Valuing these securities at fairvalue is intended to cause the Fund’s NAV to be more reliable than itotherwise would be.

Fair value methods used by the Manager include, but are not limitedto, obtaining market quotations from secondary pricing services,broker-dealers, other pricing services, or widely used quotationsystems. General factors considered in determining the fair valueof securities include fundamental analytical data, the nature andduration of any restrictions on disposition of the securities,


evaluation of credit quality, and an evaluation of the forces thatinfluenced the market in which the securities are purchased and sold.

B. Fair value measurements – Fair value is defined as the price that would bereceived to sell an asset or paid to transfer a liability in an orderlytransaction between market participants at the measurement date. Thethree-level valuation hierarchy disclosed in the Portfolio of Investments isbased upon the transparency of inputs to the valuation of an asset orliability as of the measurement date. The three levels are defined as follows:

Level 1 – inputs to the valuation methodology are quoted prices(unadjusted) in active markets for identical securities.

Level 2 – inputs to the valuation methodology are other significantobservable inputs, including quoted prices for similar securities, inputsthat are observable for the securities, either directly or indirectly, andmarket-corroborated inputs such as market indexes.

Level 3 – inputs to the valuation methodology are unobservable andsignificant to the fair value measurement, including the Manager’s ownassumptions in determining the fair value.

The inputs or methodologies used for valuing securities are not necessarilyan indication of the risks associated with investing in those securities.

C. Investments in securities – Securities transactions are accounted for as ofthe date the securities are purchased or sold (trade date). Gains orlosses from sales of investment securities are computed on the identifiedcost basis. Dividend income, less foreign taxes, if any, is recorded on theex-dividend date. If the ex-dividend date has passed, certain dividendsfrom foreign securities are recorded upon notification. Interest income isrecorded daily on the accrual basis. Premiums and discounts on short-term securities are amortized on a straight-line basis over the life of therespective securities.

D. Federal taxes – The Fund’s policy is to comply with the requirements ofthe Internal Revenue Code of 1986, as amended, applicable to regulatedinvestment companies and to distribute substantially all of its taxableincome and net capital gains, if any, to its shareholders. Therefore, nofederal income tax provision is required.


For the six-month period ended January 31, 2019, the Fund did not incurany income tax, interest, or penalties, and has recorded no liability for netunrecognized tax benefits relating to uncertain income tax positions. Onan ongoing basis, the Manager will monitor the Fund’s tax basis todetermine if adjustments to this conclusion are necessary. The statute oflimitations on the Fund’s tax return filings generally remain open forthe three preceding fiscal reporting year ends and remain subject toexamination by the Internal Revenue Service and state taxing authorities.

E. Foreign taxation – Foreign income and capital gains on some foreignsecurities may be subject to foreign taxes, which are reflected as areduction to such income and realized gains. The Fund records a liabilitybased on unrealized gains to provide for potential foreign taxes payableupon the sale of these securities. Foreign taxes have been provided for inaccordance with the Fund’s understanding of the applicable countries’prevailing tax rules and rates.

F. Foreign currency translations – The Fund’s assets may be invested in thesecurities of foreign issuers and may be traded in foreign currency. Sincethe Fund’s accounting records are maintained in U.S. dollars, foreigncurrency amounts are translated into U.S. dollars on the following bases:

1. Purchases and sales of securities, income, and expenses at the exchangerate obtained from an independent pricing service on the respectivedates of such transactions.

2. Market value of securities, other assets, and liabilities at the exchangerate obtained from an independent pricing service on a daily basis.

The Fund does not isolate that portion of the results of operationsresulting from changes in foreign exchange rates on investments fromthe fluctuations arising from changes in market prices of securities held.Such fluctuations are included with the net realized and unrealized gainor loss from investments.

Separately, net realized foreign currency gains/losses may arise from salesof foreign currency, currency gains/losses realized between the trade andsettlement dates on security transactions, and from the difference betweenamounts of dividends, interest, and foreign withholding taxes recorded onthe Fund’s books and the U.S. dollar equivalent of the amounts received.


At the end of the Fund’s fiscal year, net realized foreign currencygains/losses are reclassified from accumulated net realized gains/losses toaccumulated undistributed net investment income on the Statement ofAssets and Liabilities, as such amounts are treated as ordinary income/lossfor federal income tax purposes. Net unrealized foreign currency exchangegains/losses arise from changes in the value of assets and liabilities, otherthan investments in securities, resulting from changes in the exchange rate.

G. Expenses paid indirectly – A portion of the brokerage commissions thatthe Fund pays may be recaptured as a credit that is tracked and used bythe custodian to directly reduce expenses paid by the Fund. EffectiveSeptember 30, 2018, the commission recapture program ended. For thesix-month period ended January 31, 2019, the Fund did not receive anybrokerage commission recapture credits.

H. Indemnifications – Under the Trust’s organizational documents, itsofficers and trustees are indemnified against certain liabilities arising outof the performance of their duties to the Trust. In addition, in the normalcourse of business, the Trust enters into contracts that contain a varietyof representations and warranties that provide general indemnifications.The Trust’s maximum exposure under these arrangements is unknown,as this would involve future claims that may be made against the Trustthat have not yet occurred. However, the Trust expects the risk of loss tobe remote.

I. Use of estimates – The preparation of financial statements in conformitywith U.S. generally accepted accounting principles requires managementto make estimates and assumptions that may affect the reported amountsin the financial statements.

(2) LINE OF CREDITThe Fund participates, along with other funds of the Trust and USAA ETFTrust (together, the Trusts), in a joint, short-term, revolving, committed loanagreement of $500 million with USAA Capital Corporation (CAPCO), anaffiliate of the Manager. The purpose of the agreement is to provide temporaryor emergency cash needs, including redemption requests that might otherwiserequire the untimely disposition of securities. Subject to availability (includingusage of the facility by other funds of the Trusts), the Fund may borrow from


CAPCO an amount up to 5% of the Fund’s total assets at an interest rate basedon the London Interbank Offered Rate (LIBOR), plus 100.0 basis points.

The Trusts are also assessed facility fees by CAPCO in the amount of 14.0 basispoints of the amount of the committed loan agreement. Prior to September 30,2018, the maximum annual facility fee was 13.0 basis points of the amount ofthe committed loan agreement. The facility fees are allocated among the fundsof the Trusts based on their respective average daily net assets for the period.

The Trusts may request an optional increase of the committed loanagreement from $500 million up to $750 million. If the Trusts increase thecommitted loan agreement, the assessed facility fee on the amount of theadditional commitment will be 15.0 basis points.

For the six-month period ended January 31, 2019, the Fund paid CAPCOfacility fees of $6,000, which represents 1.8% of the total fees paid toCAPCO by the funds of the Trusts. The Fund had no borrowings under thisagreement during the six-month period ended January 31, 2019.

(3) DISTRIBUTIONSThe tax basis of distributions and any accumulated undistributed netinvestment income will be determined as of the Fund’s tax year-end ofJuly 31, 2019, in accordance with applicable federal tax law.

Distributions of net investment income and realized gains from securitytransactions not offset by capital losses are made annually in the succeedingfiscal year or as otherwise required to avoid the payment of federal taxes.

At July 31, 2018, the Fund had no capital loss carryforwards, for federalincome tax purposes.

As of January 31, 2019, the cost of securities, including short-term securities,for federal income tax purposes, was approximately the same as the cost reportedin the financial statements. The net unrealized appreciation/(depreciation) oninvestments are disclosed below:

NetGross Gross Unrealized

Unrealized Unrealized Appreciation/Fund Appreciation Depreciation (Depreciation)

USAA Value Fund $319,566,000 $(84,367,000) $235,199,000


(4) INVESTMENT TRANSACTIONSCost of purchases and proceeds from sales/maturities of securities, excludingshort-term securities, for the six-month period ended January 31, 2019, were$213,084,000 and $452,149,000, respectively.

(5) SECURITIES LENDINGThe Fund, through a securities lending agreement with Citibank, N.A.(Citibank), may lend its securities to qualified financial institutions, such ascertain broker-dealers, to earn additional income, net of income retained byCitibank. The borrowers are required to secure their loans continuously withcollateral in an amount at least equal to 102% of the fair value of domesticsecurities and foreign government securities loaned and 105% of the fair valueof foreign securities and all other securities loaned. 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.Collateral requirements are determined daily based on the value of the Fund’ssecurities on loan as of the end of the prior business day. Loans are terminableupon demand and the borrower must return the loaned securities within thelesser of one standard settlement period or five business days. Risks relating tosecurities-lending transactions include that the borrower may not provideadditional collateral when required or return the securities when due, and thatthe value of the short-term investments will be less than the amount of cashcollateral required to be returned to the borrower. The Fund’s agreement withCitibank does not include master netting provisions. Non-cash collateralreceived by the Fund may not be sold or re-pledged except to satisfy borrowerdefault. Cash collateral is listed in the Fund’s Portfolio of Investments andFinancial Statements while non-cash collateral is not included.

At January 31, 2019, the Fund’s value of outstanding securities on loan andthe value of collateral are as follows:

Value of Securities Non-Cash Collateral Cash Collateralon Loan Received Received

$8,011,000 $– $8,135,000


(6) CAPITAL SHARE TRANSACTIONSAt January 31, 2019, there were an unlimited number of shares of capitalstock at no par value authorized for the Fund.

Capital share transactions for the Institutional Shares resulted from purchasesand sales by the affiliated USAA fund-of-funds as well as other persons orlegal entities that the Fund may approve from time to time. Capital sharetransactions for all classes were as follows, in thousands:

Six-Month Period Ended Year Ended

January 31, 2019 July 31, 2018Shares Amount Shares Amount

Fund Shares:Shares sold 2,164 $ 44,109 5,478 $ 119,297Shares issued from reinvested

dividends 6,172 108,344 3,176 68,754Shares redeemed (3,659) (71,804) (6,340) (137,441)Net increase from capital

share transactions 4,677 $ 80,649 2,314 $ 50,610

Institutional Shares:Shares sold 1,204 $ 23,327 2,751 $ 59,818Shares issued from reinvested

dividends 2,756 48,382 2,043 44,214Shares redeemed (14,045) (281,800) (3,148) (68,049)Net increase (decrease) from capital

share transactions (10,085) $(210,091) 1,646 $ 35,983

Adviser Shares:Shares sold 1 $ 22 1 $ 30Shares issued from reinvested

dividends 1 14 1 11Shares redeemed (1) (18) (3) (59)Net increase (decrease) from

capital share transactions 1 $ 18 (1) $ (18)

(7) TRANSACTIONS WITH MANAGER

Management fees – The Manager provides investment management servicesto the Fund pursuant to an Advisory Agreement. Under this agreement, the


Manager is responsible for managing the business and affairs of the Fund.The Manager is authorized to select (with approval of the Board and withoutshareholder approval) one or more subadvisers to manage the day-to-dayinvestment of all or a portion of the Fund’s assets.

The Manager monitors each subadviser’s performance through quantitativeand qualitative analysis and periodically reports to the Board as to whethereach subadviser’s agreement should be renewed, terminated, or modified.The Manager is also responsible for determining the asset allocation for thesubadviser(s). The allocation for each subadviser could range from 0% to100% of the Fund’s assets, and the Manager could change the allocationswithout shareholder approval.

The investment management fee for the Fund is comprised of a base fee anda performance adjustment. The Fund’s base fee is accrued daily and paidmonthly at an annualized rate of 0.65% of the Fund’s average daily net assets.

The performance adjustment is calculated separately for each share class on amonthly basis by comparing each class’ performance over the performanceperiod to that of the Lipper Multi-Cap Value Funds Index. The LipperMulti-Cap Value Funds Index tracks the total return performance of fundswithin the Lipper Multi-Cap Value Funds category.

The performance period for each share class consists of the current monthplus the previous 35 months. The following table is utilized to determine theextent of the performance adjustment:

Over/Under Performance Relative to Index Annual Adjustment Rate(in basis points)1 (in basis points)1

+/– 100 to 400 +/– 4

+/– 401 to 700 +/– 5

+/– 701 and greater +/– 61Based on the difference between average annual performance of the relevant share class of the Fundand its relevant Lipper index, rounded to the nearest basis point. Average daily net assets of theshare class are calculated over a rolling 36-month period.

Each class’ annual performance adjustment rate is multiplied by the averagedaily 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), orsubtracted from (in the case of underperformance) the base fee.

The performance adjustment is calculated separately for each share class on amonthly basis by comparing each class’ performance over the performanceperiod to that of the Lipper Multi-Cap Value Funds Index. The LipperMulti-Cap Value Funds Index tracks the total return performance of fundswithin the Lipper Multi-Cap Value Funds category.

For the six-month period ended January 31, 2019, the Fund incurredmanagement fees, paid or payable to the Manager, of $4,759,000. The FundShares, Institutional Shares, and Adviser Shares did not incur any performanceadjustment.

Subadvisory arrangement(s) – The Manager entered into an InvestmentSubadvisory Agreement with Barrow, Hanley, Mewhinney & Strauss, LLC(BHMS), under which BHMS directs the investment and reinvestment ofthe Fund’s assets (as allocated from time to time by the Manager). Thisarrangement provides for monthly fees that are paid by the Manager.

The Manager (not the Fund) pays BHMS a subadvisory fee based on theaggregate average daily net assets that BHMS manages in the USAA ValueFund and the USAA Growth & Income Fund combined, in the annual amountof 0.75% on the first $15 million in assets, 0.55% on assets over $15 million andup to $25 million, 0.45% on assets over $25 million and up to $100 million,0.35% on assets over $100 million and up to $200 million, 0.25% on assets over$200 million and up to $1 billion, and 0.15% on assets over $1 billion. For thesix-month period ended January 31, 2019, the Manager incurred subadvisoryfees with respect to the Fund, paid or payable to BHMS, of $1,558,000.

Administration and servicing fees – The Manager provides certainadministration and servicing functions for the Fund. For such services, theManager receives a fee accrued daily and paid monthly at an annualizedrate of 0.15% of average daily net assets of the Fund Shares and AdviserShares, and 0.10% of average daily net assets of the Institutional Shares. Forthe six-month period ended January 31, 2019, the Fund Shares, InstitutionalShares, and Adviser Shares incurred administration and servicing fees, paidor payable to the Manager, of $719,000, $248,000, and $7,000, respectively.


In addition to the services provided under its Administration and ServicingAgreement with the Fund, the Manager also provides certain complianceand legal services for the benefit of the Fund. The Board has approved thereimbursement of a portion of these expenses incurred by the Manager. Forthe six-month period ended January 31, 2019, the Fund reimbursed theManager $1,000 for these compliance and legal services. These expenses areincluded in the professional fees on the Fund’s Statement of Operations.

Expense limitation – The Manager agreed, through November 30, 2018, tolimit the total annual operating expenses of the Adviser Shares to 1.30% of itsaverage daily net assets, excluding extraordinary expenses and before reductionsof any expenses paid indirectly, and to reimburse the Adviser Shares for allexpenses in excess of that amount. Effective December 1, 2018, the Managerterminated this agreement. For the six-month period ended January 31, 2019,the Adviser Shares did not incur any reimbursable expenses.

Transfer agent’s fees – SAS, an affiliate of the Manager, provides transferagent services to the Fund Shares and Adviser Shares based on an annualcharge of $23 per shareholder account plus out-of-pocket expenses. SASpays a portion of these fees to certain intermediaries for the administrationand servicing of accounts that are held with such intermediaries. Transferagent’s fees for Institutional Shares are paid monthly based on a fee accrueddaily at an annualized rate of 0.10% of the Institutional Shares’ average dailynet assets, plus out-of-pocket expenses. For the six-month period endedJanuary 31, 2019, the Fund Shares, Institutional Shares, and Adviser Sharesincurred transfer agent’s fees, paid or payable to SAS, of $597,000, $248,000,and less than $500, respectively.

Distribution and service (12b-1) fees – The Fund has adopted a plan pursuantto Rule 12b-1 under the 1940 Act with respect to the Adviser Shares. Underthe plan, the Adviser Shares pay fees to USAA Investment ManagementCompany (IMCO), the distributor, for distribution and shareholder services.IMCO pays all or a portion of such fees to intermediaries that make theAdviser Shares available for investment by their customers. The fee is accrueddaily and paid monthly at an annual rate of 0.25% of the Adviser Shares’average daily net assets. Adviser Shares are offered and sold withoutimposition of an initial sales charge or a contingent deferred sales charge.


For the six-month period ended January 31, 2019, the Adviser Sharesincurred distribution and service (12b-1) fees of $11,000.

Underwriting services – IMCO provides exclusive underwriting and distributionof the Fund’s shares on a continuing best-efforts basis and receives no fee orother compensation for these services, but may receive 12b-1 fees as describedabove, with respect to Adviser Shares.

(8) TRANSACTIONS WITH AFFILIATESThe Fund offers its Institutional Shares for investment by other USAAFunds and is one of 16 USAA mutual funds in which the affiliated USAAfund-of-funds invest. The USAA fund-of-funds do not invest in the underlyingfunds for the purpose of exercising management or control, and the affiliatedfund-of-funds’ annual or semiannual reports may be viewed at usaa.com. Asof January 31, 2019, the Fund recorded a payable for capital shares redeemedof $3,590,000 for the USAA fund-of-funds purchases and redemptions ofInstitutional Shares. As of January 31, 2019, the USAA fund-of-funds ownedthe following percentages of the total outstanding shares of the Fund:

Affiliated USAA Fund Ownership %

Cornerstone Conservative 0.1

Cornerstone Equity 0.7

Target Retirement Income 0.3

Target Retirement 2020 0.9





The Manager is indirectly wholly owned by USAA a large, diversifiedfinancial services institution. At January 31, 2019, USAA and its affiliatesowned 441,000 Adviser Shares, which represents 98.1% of the Adviser Sharesoutstanding and 0.6% of the Fund’s total outstanding shares.

Certain trustees and officers of the Fund are also directors, officers, and/oremployees of the Manager. None of the affiliated trustees or Fund officersreceived any compensation from the Fund.


(9) UPCOMING REGULATORY MATTERSIn October 2016, the U.S. Securities and Exchange Commission (SEC) issuedFinal Rule Release No. 33-10233, Investment Company Liquidity RiskManagement Programs (Liquidity Rule). The Liquidity Rule requires fundsto establish a liquidity risk management program and enhances disclosuresregarding funds’ liquidity. The requirements to implement a liquidity riskmanagement program and establish a 15% illiquid investment limit becameeffective December 1, 2018. However, in February 2018, the SEC issuedRelease No. IC-33010, Investment Company Liquidity Risk ManagementPrograms; Commission Guidance for In-Kind ETFs, which delayed certainrequirements related to liquidity classification, highly liquid investmentminimums, and board approval of the liquidity risk management programsto June 1, 2019. The Manager continues to evaluate the impact of this ruleon the Fund’s financial statements and various filings.

(10) RECENTLY ADOPTED ACCOUNTING STANDARDSIn August 2018, the SEC adopted amendments to Regulation S-X forinvestment companies governing the form and content of financialstatements. The amendments to Regulation S-X took effect on November 5,2018, and the financial statements have been modified accordingly, for thecurrent and prior periods.

ASU 2018-13, Fair Value MeasurementIn August 2018, the Financial Accounting Standards Board (FASB) issuedAccounting Standards Update (ASU) 2018-13, Fair Value Measurement(Topic 820). The amendments in the ASU impact disclosure requirements forfair value measurement. ASU 2018-13 is effective for fiscal years beginningafter December 15, 2019. Early adoption is permitted and can include theentire standard or certain provisions that exclude or amend disclosures.Management has elected to early adopt ASU 2018-13 effective with the currentreporting period. The adoption of ASU 2018-13 guidance is limited to changesin the Fund’s notes to financial statement disclosures regarding valuationmethod, fair value, and transfers between levels of the fair value hierarchy.


FINANCIAL HIGHLIGHTS

FUND SHARES (unaudited)

Per share operating performance for a share outstanding throughout eachperiod is as follows:

Six-Month Period Ended January 31, Year Ended July 31,

2019 2018 2017 2016 2015 2014Net asset value at

beginning of period $ 22.01 $ 21.55 $ 19.41 $ 20.50 $ 20.00 $ 18.37Income (loss) from

investment operations:Net investment income .11 .21 .27 .23 .20 .27Net realized and

unrealized gain (loss) (1.50) 1.84 2.74 (.31) 1.28 2.11Total from investment

operations (1.39) 2.05 3.01 (.08) 1.48 2.38Less distributions from:

Net investment income (.24) (.21) (.29) (.23) (.25) (.20)Realized capital gains (2.16) (1.38) (.58) (.78) (.73) (.55)

Total distributions (2.40) (1.59) (.87) (1.01) (.98) (.75)Net asset value at

end of period $ 18.22 $ 22.01 $ 21.55 $ 19.41 $ 20.50 $ 20.00

Total return (%)* (5.80) 9.69 15.72 (.14) 7.47 13.21Net assets at end

of period (000) $919,516 $1,007,712 $936,630 $807,052 $960,925 $844,121Ratios to average

daily net assets:**Expenses (%)(a) .96(b) .99 1.08(c) 1.11(c) 1.09 1.11(c),(d)

Expenses, excluding reimbursements (%)(a) .96(b) .99 1.08(c) 1.11(c) 1.09 1.11(c)

Net investment income (%) 1.28(b) 1.10 1.37 1.28 1.06 1.55

Portfolio turnover (%) 15 29 27 20 30 20* 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 accountingprinciples and could differ from the Lipper reported return. Total returns for periods of less than oneyear are not annualized.

** For the six-month period ended January 31, 2019, average daily net assets were $949,667,000.(a) Does not include acquired fund fees, if any.(b) Annualized. The ratio is not necessarily indicative of 12 months of operations.(c) Reflects total annual operating expenses of the Fund Shares before reductions of any expenses paid

indirectly. The Fund Shares’ expenses paid indirectly decreased the expense ratio by less than 0.01%.(d) Prior to December 1, 2013, the Manager had voluntarily agreed to limit the annual expenses of the

Fund Shares to 1.15% of the Fund Shares’ average daily net assets.

Financial Highlights | 31

INSTITUTIONAL SHARES (unaudited)




beginning of period $ 22.00 $ 21.54 $ 19.40 $ 20.49 $ 20.00 $ 18.36Income (loss) from

investment operations:Net investment income .17 .23 .30 .25 .26(a) .29Net realized and

unrealized gain (loss) (1.55) 1.84 2.73 (.31) 1.24(a) 2.11Total from investment

operations (1.38) 2.07 3.03 (.06) 1.50(a) 2.40Less distributions from:


Total distributions (2.40) (1.61) (.89) (1.03) (1.01) (.76)Net asset value at

end of period $ 18.22 $ 22.00 $ 21.54 $ 19.40 $ 20.49 $ 20.00


of period (000) $346,520 $640,281 $591,384 $522,721 $299,990 $330,114Ratios to average

daily net assets:**Expenses (%)(b) .89(c) .91 .98(d) .98(d) .98 1.00(d)

Net investment income (%) 1.35(c) 1.18 1.48 1.41 1.23 1.59



** For the six-month period ended January 31, 2019, average daily net assets were $490,313,000.(a) Calculated using average shares.(b) Does not include acquired fund fees, if any.(c) Annualized. The ratio is not necessarily indicative of 12 months of operations.(d) Reflects total annual operating expenses of the Institutional Shares before reductions of any expenses

paid indirectly. The Institutional Shares’ expenses paid indirectly decreased the expense ratios by lessthan 0.01%.





beginning of period $21.91 $21.46 $19.32 $20.43 $19.94 $18.29Income (loss) from

investment operations:Net investment income .10 .15 .23 .17 .17 .25Net realized and

unrealized gain (loss) (1.52) 1.83 2.72 (.32) 1.26 2.08Total from investment

operations (1.42) 1.98 2.95 (.15) 1.43 2.33Less distributions from:


Total distributions (2.32) (1.53) (.81) (.96) (.94) (.68)Net asset value at

end of period $18.17 $21.91 $21.46 $19.32 $20.43 $19.94


of period (000) $8,154 $9,807 $9,626 $8,767 $9,269 $8,861Ratios to average

daily net assets:**Expenses (%)(a) 1.28(b),(f) 1.30 1.33(c),(d) 1.42(d) 1.34 1.35(d),(e)

Expenses, excluding reimbursements (%)(a) 1.28(b) 1.30 1.38(d) 1.42(d) 1.34 1.35(d)

Net investment income (%) .96(b) .79 1.13 .97 .82 1.30



** For the six-month period ended January 31, 2019, average daily net assets were $9,048,000.(a) Does not include acquired fund fees, if any.(b) Annualized. The ratio is not necessarily indicative of 12 months of operations.(c) Effective December 1, 2016, the Manager had voluntarily agreed to limit the annual expenses of the

Adviser Shares to 1.30% of the Adviser Shares’ average daily net assets.(d) Reflects total annual operating expenses of the Adviser Shares before reductions of any expenses paid

indirectly. The Adviser Shares’ expenses paid indirectly decreased the expense ratio by 0.01%.(e) Prior to December 1, 2013, the Manager had voluntarily agreed to limit the annual expenses of the

Adviser Shares to 1.65% of the Adviser Shares’ average daily net assets.(f) Prior to December 1, 2018, the Manager voluntarily agreed to limit the annual expenses of the

Adviser Shares to 1.30% of the Adviser Shares’ average daily net assets.

ADVISER SHARES (unaudited)

EXPENSE EXAMPLEJanuary 31, 2019 (unaudited)

Expense Example | 33

EXAMPLEAs a shareholder of the Fund, you incur two types of costs: direct costs, suchas wire fees, redemption fees, and low balance fees; and indirect costs, includingmanagement fees, transfer agency fees, distribution and service (12b-1) fees,and other Fund operating expenses. This example is intended to help youunderstand your indirect costs, also referred to as “ongoing costs” (in dollars),of investing in the Fund and to compare these costs with the ongoing costsof investing in other mutual funds.

The example is based on an investment of $1,000 invested at the beginningof the period and held for the entire six-month period of August 1, 2018,through January 31, 2019.

ACTUAL EXPENSESThe line labeled “actual” under each share class in the table providesinformation about actual account values and actual expenses. You may usethe information in this line, together with the amount you invested at thebeginning of the period, to estimate the expenses that you paid over theperiod. Simply divide your account value by $1,000 (for example, an $8,600account value divided by $1,000 = 8.6), then multiply the result by the numberfor your share class in the “actual” line under the heading “Expenses PaidDuring Period” to estimate the expenses you paid on your account duringthis period.

HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSESThe line labeled “hypothetical” under each share class in the table providesinformation about hypothetical account values and hypothetical expensesbased on the Fund’s actual expense ratios for each class and an assumed rateof 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 toestimate the actual ending account balance or expenses you paid for the period.You may use this information to compare the ongoing costs of investing inthe Fund and other funds. To do so, compare this 5% hypothetical examplewith the 5% hypothetical examples that appear in the shareholder reports ofother funds.

Please note that the expenses shown in the table are meant to highlight yourongoing costs only and do not reflect any direct costs, such as wire fees,redemption fees, or low balance fees. Therefore, the line labeled “hypothetical”is useful in comparing ongoing costs only, and will not help you determinethe relative total costs of owning different funds. In addition, if these directcosts were included, your costs would have been higher.

Expenses PaidBeginning Ending During Period*

Account Value Account Value August 1, 2018 –August 1, 2018 January 31, 2019 January 31, 2019

Fund Shares Actual $1,000.00 $ 942.00 $4.70

Hypothetical(5% return before expenses) 1,000.00 1,020.37 4.89

Institutional Shares Actual 1,000.00 942.40 4.36


Adviser Shares Actual 1,000.00 940.20 6.26


*Expenses are equal to the annualized expense ratio of 0.96% for Fund Shares, 0.89% for InstitutionalShares, and 1.28% for Adviser Shares, which are net of any reimbursements and expenses paid indirectly,multiplied by the average account value over the period, multiplied by 184 days/365 days (to reflect theone-half-year period). The Fund’s actual ending account values are based on its actual total returns of(5.80)% for Fund Shares, (5.76)% for Institutional Shares, and (5.98)% for Adviser Shares for the six-month period of August 1, 2018, through January 31, 2019.

Advisory Agreement(s) | 35

ADVISORY AGREEMENT(S)January 31, 2019 (unaudited)

At an in-person meeting held on January 15, 2019, the USAA Mutual FundsTrust’s (“Trust”) Board of Trustees (“Board”), including those Trustees whoare not parties to any investment advisory or management agreement betweenUSAA Asset Management Company (“AMCO”) and the Trust (“ExistingManagement Agreements”) or the new Investment Advisory Agreementbetween the Trust and Victory Capital Management Inc. (“Victory Capital”)(the “New Advisory Agreement”) or “interested persons” (as that term isdefined in the Investment Company Act of 1940 Act, as amended (“1940Act”)) of such parties or the Trust (the “Independent Trustees”), consideredand unanimously approved the New Advisory Agreement between the Trust,on behalf of each of its series (each a “Fund” and together the “Funds”),and Victory Capital, and, as applicable, new Investment SubadvisoryAgreements between Victory Capital and each investment subadviser (“NewSubadvisory Agreements,” and together with the New Advisory Agreement,the “New Agreements”), as listed below. The Board also determined torecommend that shareholders of each Fund approve the New AdvisoryAgreement. Shareholder approval is not required for the New SubadvisoryAgreements. The Independent Trustees reviewed the proposed approval ofthe New Agreements in private sessions with their independent legal counselat which no representatives of Victory Capital or AMCO were present.

BACKGROUND FOR THE BOARD APPROVALSAt a telephonic meeting of the Board held on November 5, 2018, representativesof USAA and AMCO informed the Board that USAA’s subsidiary, USAAInvestment Corporation, would enter into a stock purchase agreement withVictory Capital Holdings, Inc. (“Victory Holdings”) pursuant to whichVictory Holdings would acquire all of the outstanding stock of AMCO andUSAA Transfer Agency Company d/b/a USAA Shareholder AccountServices (“USAA Transfer Agent”) (the “Transaction”). The IndependentTrustees were advised that the Transaction, if completed, would constitute

an “assignment” (as that term is defined in Section 2(a)(4) of the 1940 Act)and result in the automatic termination of the Existing ManagementAgreements (“Change of Control Event”). The Independent Trustees alsowere advised that it was proposed that Victory Capital, a subsidiary ofVictory Holdings, would serve as the investment adviser to each Fund afterthe closing of the Transaction (“Post-Transaction”) and that the Boardwould be asked to consider approval of the terms and conditions of the NewAdvisory Agreement with Victory Capital and thereafter to submit the NewAdvisory Agreement to each Fund’s shareholders for approval. Because theChange of Control Event also would result in the termination of each existingsubadvisory agreement between AMCO and the subadvisers to the Funds(“Existing Subadvisory Agreements”), the Independent Trustees were advisedthat the Board would also be asked to approve the New SubadvisoryAgreements.

In anticipation of the Transaction, the Trustees met at a series of subsequentin-person meetings on November 27-28, 2018, January 7-8, 2019, andJanuary 14-15, 2019, which included meetings of the full Board and separatemeetings of the Independent Trustees for the purposes of considering,among other things: whether it would be in the best interests of each Fundand its respective shareholders to approve the New Agreements; and theanticipated impacts of the Transaction on the Funds and their shareholders(each, a “Meeting”). During each of these Meetings, the Board soughtadditional and clarifying information as it deemed necessary or appropriate.In this connection, the Independent Trustees worked with their independentlegal counsel to prepare formal due diligence requests (the “Diligence Requests”)that were submitted to Victory Capital, Victory Capital Advisers, Inc. (“VCA”),and the subadvisers. The Diligence Requests sought information relevant tothe Board’s consideration of the New Advisory Agreement, the NewSubadvisory Agreements, distribution arrangements, and other anticipatedimpacts of the Transaction on the Funds and their shareholders. VictoryCapital, VCA, and the subadvisers provided documents and information inresponse to the Diligence Requests (the “Response Materials”). Followingtheir review of the Response Materials, the Independent Trustees submitted asupplemental due diligence request for additional and clarifying information(the “Supplemental Diligence Request”) to Victory Capital and VCA. Victory


Capital and VCA provided further information in response to the SupplementalDiligence Request, which the Board reviewed. Senior managementrepresentatives of Victory Capital and/or AMCO participated in a portionof each Meeting and addressed various questions raised by the Board.Throughout the process, the Independent Trustees were assisted by theirindependent legal counsel and counsel to the Funds, who advised them on,among other things, their duties and obligations relating to their considerationof the New Agreements.

The Board’s evaluation of the New Agreements reflected the informationprovided specifically in connection with its review of the New Agreements, aswell as, where relevant, information that was previously furnished to theBoard in connection with the most recent renewal of the Existing ManagementAgreements and Existing Subadvisory Agreements at an in-person meetingof the Board on April 18, 2018 (the “2018 15(c) Meeting”) and at othersubsequent Board meetings in 2018. The Board’s evaluation of the NewAgreements also reflected the knowledge gained as Board members of theFunds with respect to services provided by AMCO, its affiliates, and eachsubadviser to the Funds.

The Board’s approvals and recommendations were based on its determination,within its business judgment, that it would be in the best interests of eachFund and its respective shareholders, for Victory Capital and, as applicable,the subadvisers, to provide investment advisory, investment subadvisory, andrelated services to the Funds, following the closing of the Transaction.

FACTORS CONSIDERED IN APPROVING THE NEW ADVISORYAGREEMENTIn connection with the Board’s consideration of the New Advisory Agreement,Victory Capital and AMCO advised the Board about a variety of matters,including the following:

• The nature, extent, and quality of the services to be provided to theFunds by Victory Capital Post-Transaction are expected to be of atleast the same level as the services currently provided to the Funds byAMCO.


• Victory Capital’s stated commitment to maintaining and enhancingthe USAA member/USAA Fund shareholder experience, includingcreating a dedicated USAA Fund sales and client service call centerthat will provide ongoing client service and advice to existing and newUSAA members.

• Victory Capital proposes to: (1) replace the underlying indexes for theUSAA Extended Market Index Fund and USAA S&P 500 IndexFund with indexes designed to provide shareholders with comparableexposure and investment outcomes; (2) change the USAA ExtendedMarket Index Fund’s and USAA S&P 500 Index Fund’s investmentobjectives and strategies in light of the changes to their underlyingindexes; and (3) change the name of the USAA S&P 500 Index Fundto the USAA 500 Index Fund.

• Victory Capital does not propose changes to the investmentobjective(s) of any other Funds. Although the investment processesused by Victory Capital’s portfolio managers may differ from thoseused by AMCO’s portfolio managers or, if applicable, any subadviser’sportfolio managers, such differences are not currently expected toresult in changes to the principal investment strategies or principalinvestment risks of the Funds.

• The New Advisory Agreement does not change any Fund’s advisoryfee rate or the computation method for calculating such fees (exceptthat Victory Capital, subject to Board approval, may in the future usea single designated share class to calculate the performance adjustment).For at least two years after the Transaction closes, Victory Capital hasagreed to waive fees and/or reimburse expenses so that each Fund’sannual expense ratio (excluding certain customary items) does notexceed the levels reflected in each Fund’s most recent audited financialstatements at the time the Transaction closes (or the levels of AMCO’sthen-current expense caps, if applicable), excluding the impact of anyperformance adjustment to the Fund’s advisory fee.


• The portfolio managers at AMCO that manage the Fixed IncomeFunds1 as well as the USAA’s Global Multi-Asset team servicing theCornerstone Funds2, Target Retirement Funds3, Global ManagedVolatility Fund, Managed Allocation Fund, and Target ManagedAllocation Fund, are expected to continue to do so Post-Transaction asemployees of Victory Capital, if they choose to become employees ofVictory Capital. Post-Transaction, the investment teams for the Funds,other than the Fixed Income Funds, will be replaced or augmented.

• With the exception of the USAA S&P 500 Index Fund, USAAExtended Market Index Fund, and USAA Nasdaq-100 Index Fund,which will be advised by Victory Capital through its Victory Solutionsplatform, Victory Capital proposes that the same subadvisers beretained Post-Transaction, although Victory Capital may change theallocation to a particular subadviser Post-Transaction. No changes areexpected to the portfolio managers of the subadvisers who will serveas subadvisers Post-Transaction.

• VCA’s distribution capabilities, including its significant network ofintermediary relationships, which may provide additional opportunitiesfor the Funds to grow assets and lower fees and expenses throughincreased economies of scale.

• The experience of Victory Capital in acquiring and integratinginvestments in investment management companies and its plans totransition and integrate AMCO’s and USAA Transfer Agent’s


1The Fixed Income Funds include the following Funds: California Bond Fund, Government SecuritiesFund, High Income Fund, Income Fund, Intermediate-Term Bond Fund, Tax Exempt Intermediate-TermFund, Tax Exempt Long-Term Fund, New York Bond Fund, Short-Term Bond Fund, Tax Exempt Short-Term Fund, Ultra Short-Term Bond Fund, Virginia Bond Fund, Money Market Fund, Tax ExemptMoney Market Fund and Treasury Money Market Trust.

2The Cornerstone Funds include the following Funds: Cornerstone Aggressive Fund, CornerstoneConservative Fund, Cornerstone Equity Fund, Cornerstone Moderate Fund, Cornerstone ModeratelyAggressive Fund, and Cornerstone Moderately Conservative Fund.

3The Target Retirement Funds include the following Funds: Target Retirement 2020 Fund, TargetRetirement 2030 Fund, Target Retirement 2040 Fund, Target Retirement 2050 Fund, Target Retirement2060 Fund, and Target Retirement Income Fund.

businesses to Victory Capital. Victory Capital and USAA expect toenter into a transition services agreement under which USAA willcontinue to provide Victory Capital with certain services that arecurrently provided by USAA to AMCO and the USAA TransferAgent for a specified period of time after the closing of the Transactionto assist Victory Capital in transitioning the USAA member distributionchannel and member support services.

• Pursuant to a transitional trademark license agreement with USAA,Victory Capital and the Funds will have a non-exclusive license, subjectto certain restrictions and limitations, to continue using certain licensedmarks including “USAA,” “United Services Automobile Association,”and the USAA Logo in connection with their asset management andtransfer agency businesses for a period of three years following theclosing of the Transaction, which agreement may thereafter beextended for an additional year.

• The support expressed by the current senior management team atAMCO for the Transaction and AMCO’s recommendation that theBoard approve the New Agreements.

• The commitments of Victory Capital and AMCO to bear all of thedirect expenses of the Transaction, including all legal costs and costsassociated with the proxy solicitation, regardless of whether theTransaction is consummated.

In addition to the matters noted above, in their deliberations regardingapproval of the New Advisory Agreement, the Board considered the factorsdiscussed below, among others.

The nature, extent, and quality of services expected to be provided by VictoryCapital – The Board considered information provided by Victory Capitalregarding its investment philosophy, investment management capabilities,business and operating structure, scale of operations, leadership andreputation, distribution capabilities, and financial condition. The Board alsoconsidered the capabilities, resources, and personnel of Victory Capital,including senior and other personnel of AMCO who had been extendedoffers to join Victory Capital, in order to determine whether Victory Capital


is capable of providing the same level of investment management servicescurrently provided to each Fund, and also considered the transition andintegration plans to move management of the Funds to Victory Capital. TheBoard recognized that the AMCO personnel who had been extended offersmay not accept such offers and personnel changes may occur in the future inthe ordinary course. The Board considered the resources and infrastructurethat Victory Capital intends to devote to its compliance program to ensurecompliance with applicable laws and regulations, as well as Victory Capital’scommitment to those programs. The Board also considered the resourcesthat Victory Capital has devoted to its risk management program andcybersecurity program. The Board also reviewed information provided byVictory Capital related to its business, legal, and regulatory affairs. Thisreview considered the resources available to Victory Capital to provide theservices specified under the New Advisory Agreement. The Board consideredVictory Capital’s financial condition, including the financing of the Transaction,and noted that Victory Capital is expected to be able to provide a high levelof service to the Funds and continuously invest and re-invest in its business.

The Board considered that, while it was proposed that Victory Capital wouldbecome the investment adviser to the Funds, the same portfolio managers atAMCO that manage the Fixed Income Funds, as well as USAA’s GlobalMulti-Asset team servicing the Cornerstone Funds, Target Retirement Funds(including Target Managed Allocation Fund), Global Managed VolatilityFund, and Managed Allocation Fund, are expected to continue to do so afterthe Transaction as employees of Victory Capital, if they choose to becomeemployees of Victory Capital. The Board determined that it had consideredthe qualifications of the portfolio managers at AMCO and the subadvisers atits 2018 15(c) Meeting. The Board considered the professional experience,education, affiliations and/or other credentials or qualifications of theanticipated portfolio managers at Victory Capital that would manage theEquity Funds4, Cornerstone Funds, and Target Retirement Funds. The Boardnoted that the Equity Funds or portions of Equity Funds currently managedby AMCO would be replaced with portfolio managers from Victory Capital.


4The Equity Funds include the following Funds: Aggressive Growth Fund, Growth & Income Fund, IncomeStock Fund, Global Equity Income Fund, and Precious Metals and Minerals Fund.

The Board considered that certain Funds would continue to operate in amanager-of-managers structure Post-Transaction. The Board considered thatVictory Capital’s experience in allocating assets to, and overseeing the advisoryservices of, its investment franchises and the Victory Solutions platform, wassimilar to AMCO’s role in allocating assets to and overseeing the advisoryservices provided by the subadvisers.

The Board considered that the terms and conditions of the New AdvisoryAgreement are substantially similar to the terms and conditions of the ExistingManagement Agreements. The Board also considered that the NewSubadvisory Agreements are substantially similar to the terms and conditionsof the Existing Subadvisory Agreements and that no changes were proposedto the allocation of responsibilities as between Victory Capital and anysubadviser, except to the extent that under the New Subadvisory Agreementseach subadviser would be responsible for voting proxies with respect to assetsallocated to that subadviser, while AMCO currently votes all Fund proxies.The Board considered that Victory Capital also would provide certainadministrative, fund accounting, and shareholder servicing services under aseparate administration agreement with the Funds. In this connection, theBoard considered information on Victory Capital’s use of third-party serviceproviders to provide certain sub-administration and sub-accounting servicesto the Funds.

After review of these and other considerations, the Board concluded thatVictory Capital will be capable of providing investment advisory services ofthe same high quality as the investment advisory services provided to theFunds by AMCO, and that these services are appropriate in nature andextent in light of the Funds’ operations and investor needs.

Performance of the Funds – With respect to the performance of the Funds,the Board considered its review at the 2018 15(c) Meeting of peer group andbenchmark investment performance comparison data relating to each Fundand, if applicable, each subadviser’s performance record for similar accounts.The Board considered that information reviewed at the 2018 15(c) Meetingmay be more relevant for those Funds that would retain their current portfoliomanagers or subadvisers. With respect to the Funds whose portfolio managerswould be replaced, the Board considered the performance of funds sponsoredand managed by Victory Capital (“Victory Funds”) with similar investment


objectives and strategies managed by the portfolio managers who wouldmanage the Funds. Based on information presented to the Board at theMeetings and its discussions with Victory Capital, the Board concluded thatVictory Capital is capable of generating a level of long-term investmentperformance that is appropriate in light of each Fund’s investment objectives,strategies and restrictions.

Fees to be paid to Victory Capital and expenses of the Funds – The Boardconsidered that it had reviewed each Fund’s existing advisory fee rate andcomputation method for calculating such fees at the 2018 15(c) Meeting. TheBoard considered that the New Advisory Agreement does not change anyFund’s advisory fee rate or the computation method for calculating such fees,except that Victory Capital, subject to Board approval, may in the future usea single designated share class to calculate the performance adjustment andapply the resulting performance adjustment across each other class of sharesof the Fund. The Board considered that the use of a single designated classto calculate the performance adjustment for each other class of shares of theFund could mean that shareholders of a class other than the class used tomeasure the performance adjustment may pay a performance adjustmentthat is higher or lower than if the adjustment were calculated on a class byclass basis, primarily due to the impact of differences in the fees and expensesbetween share classes on performance. The Board considered that the NewAdvisory Agreement stipulates that the period for measuring performancefor calculating a Fund’s performance adjustment begins on the date thatVictory Capital begins managing the Fund; therefore, no performanceadjustments will be made for the first twelve months of the New AdvisoryAgreement, consistent with applicable regulations. The Board also consideredVictory Capital’s contractual commitment under the expense limitationagreement (“ELA”) to waive fees and/or reimburse expenses for at least twoyears after the closing of the Transaction, so that each Fund’s annual expenseratio (excluding acquired fund fees and expenses, any performance adjustmentto a Fund’s advisory fee, interest, taxes, brokerage commissions, otherexpenditures which are capitalized in accordance with generally acceptedaccounting principles, and other extraordinary expenses not incurred in theordinary course of such Fund’s business) does not exceed the levels reflectedin each Fund’s most recent audited financial statements at the time the


Transaction closes (or the levels of AMCO’s then-current expense caps, ifapplicable), excluding the impact of any performance adjustment to a Fund’sadvisory fee. The Board considered that the ELA permits Victory Capital torecoup advisory fees waived and expenses reimbursed for up to three yearsafter the fiscal year in which the waiver or reimbursement took place, subjectto the lesser of any operating expense limitation in effect at the time of: (1) theoriginal waiver or expense reimbursement; or (2) recoupment. The Boardalso considered that Victory Capital and AMCO had represented to theBoard that they will use their best efforts to ensure that they and their respectiveaffiliates do not take any action that imposes an “unfair burden” on theFunds as a result of the Transaction or as a result of any express or impliedterms, conditions or understandings applicable to the Change of ControlEvent, for so long as the requirements of Section 15(f) of the 1940 Act apply.The Board also considered a comparison of the proposed advisory fees to bepaid by each Fund to the advisory fees paid by funds and other accountsmanaged by Victory Capital deemed to be comparable to the Fund in termsof investment objectives and strategies. The Board considered that, with fewexceptions, mostly involving weighted average fees for separate accounts, theadvisory fees to be paid by the Funds were lower than the fees paid by theseother funds and accounts. The Board concluded that the retention of VictoryCapital was unlikely to impose an unfair burden on the Funds because, afterthe Transaction, none of AMCO, Victory Capital, VCA, or any of theirrespective affiliates, would be entitled to receive any compensation directly orindirectly (i) from any person in connection with the purchase or sale ofsecurities or other property to, from, or on behalf of the Funds (other thanordinary fees for bona fide principal underwriting services), or (ii) from theFunds or their shareholders for other than bona fide investment advisory orother services. Based on its review, the Board determined, with respect toeach Fund, that Victory Capital’s advisory fee is fair and reasonable.

The extent to which Victory Capital may realize economies of scale as theFunds grow larger and whether fee levels reflect these economies of scale forthe benefit of Fund shareholders – The Board considered potential oranticipated economies of scale in relation to the services Victory Capitalwould provide to each Fund. The Board considered that the New AdvisoryAgreement includes the same advisory fee breakpoints for the same Funds as


the Existing Advisory Agreements. The Board also considered that VictoryCapital has contractually agreed to cap the Funds’ annual operating expenseratios, pursuant to the ELA, which will remain in effect for at least two yearsfrom the closing of the Transaction, and may be extended. The Board alsoconsidered Victory Capital’s representation that the significant increase in itsassets under management Post-Transaction may reasonably be expected toenable the new combined firm to reach greater economies of scale in ashorter time frame. The Board noted that it will have the opportunity toperiodically re-examine whether a Fund or the Trust has achieved economiesof scale, and the appropriateness of investment advisory and administrativefees payable to Victory Capital, in the future.

The profits to be realized by Victory Capital and its affiliates from theirrelationship with the Trust – The Board considered the benefits Victory Capitaland its affiliates may derive from their relationship with the Funds, includingcompensation to be paid to Victory Capital for the provision of certainadministrative, fund accounting and shareholder services to the Funds andcompensation to be paid to USAA Transfer Agent for the provision of transferagency services to the Funds. The Board considered the significant investmentsVictory Capital expected to make to support and grow the USAA memberchannel and the costs to integrate the USAA Fund business into VictoryCapital. The Board also considered Victory Capital’s profitability reportpresented to the board of trustees of the Victory Funds in connection withtheir most recent 15(c) process. The Board considered Victory Capital’srepresentation that the fully integrated USAA Fund business, includinginvestments to support ongoing growth, was expected to have an overallmarginally positive impact on Victory Capital’s overall financial profitability.The Board noted the difficulty of accurately projecting profitability underthe current circumstance and noted that it would have the opportunity togive further consideration to Victory Capital’s profitability with respect tothe Funds at the end of the initial two-year term of the New AdvisoryAgreement.

Fall-Out and other benefits to Victory Capital and its affiliates – The Boardconsidered the possible fall-out benefits and other types of benefits that mayaccrue to Victory Capital and its affiliates. The Board noted that theTransaction provides Victory Capital and its affiliates the opportunity to


deliver investment products and services to USAA’s direct member-basedchannel. The Board also considered that Victory Capital may derive reputationaland other benefits from its ability to use “USAA” and related names inconnection with operating and marketing the Funds. The Board consideredthat the Transaction, if completed, would significantly increase VictoryCapital’s assets under management and expand Victory Capital’s investmentcapabilities. This increased size and diversification could facilitate VictoryCapital’s continued investment in its business and products, which VictoryCapital would be able to leverage across a broader base of assets. VictoryCapital also would be able to use trading commission credits from the Funds’transactions in securities to “purchase” third party research and executionservices to support its investment process. Based on its review, the Boarddetermined that any “fall-out” benefits and other types of benefits that mayaccrue to Victory Capital are fair and reasonable.

Conclusions – Based on the foregoing and other relevant considerations, atthe Meeting of the Board held on January 15, 2019, the Board, including amajority of the Independent Trustees, acting within its business judgment,(1) concluded that the terms of the New Advisory Agreement are fair andreasonable and that approval of the New Advisory Agreement is in the bestinterests of each Fund and its respective shareholders, (2) voted to approvethe New Advisory Agreement, and (3) voted to recommend approval of theNew Advisory Agreement by shareholders of the Funds. The Board evaluatedall information available to it on a Fund-by-Fund basis and its determinationswere made separately in respect of each Fund. The Board noted some factorsmay have been more or less important with respect to any particular Fundand that no one factor was determinative of its decisions which, instead,were premised upon the totality of factors considered. In this connection, theBoard also noted that different Board members likely placed emphasis ondifferent factors in reaching their individual conclusions to vote in favor ofthe New Advisory Agreement and to recommend approval of the NewAdvisory Agreement by shareholders of the Funds.

FACTORS CONSIDERED IN APPROVING THE NEWSUBADVISORY AGREEMENTSIn approving the New Subadvisory Agreements with each of Barrow, Hanley,Mewhinney & Strauss, LLC, Brandes Investment Partners, L.P., ClariVest Asset


Management LLC, Epoch Investment Partners, Inc., Granahan InvestmentManagement, Inc., Lazard Asset Management LLC, Loomis, Sayles &Company LP, Massachusetts Financial Services Company, Northern TrustInvestments, Inc., QS Investors, LLC, The Renaissance Group LLP andWellington Management Company LLP (each, a “Subadviser” and togetherthe “Subadvisers”) with respect to the applicable Funds, the Board consideredvarious factors, among them: (i) the nature, extent, and quality of services tobe provided to the applicable Funds by the Subadvisers; (ii) each Subadviser’scompensation and any other benefits derived from the subadvisory relationship;(iii) comparisons, to the extent applicable, of subadvisory fees and performanceto comparable investment companies; and (iv) the terms of each NewSubadvisory Agreement. The Board’s evaluation of the New SubadvisoryAgreements reflected the information provided specifically in connectionwith its review of the New Subadvisory Agreements, as well as, whererelevant, information that was previously furnished to the Board inconnection with the most recent renewal of the Existing SubadvisoryAgreements at the 2018 15(c) meeting and at other subsequent Boardmeetings in 2018. A summary of the Board’s analysis of these factors is setforth below. After full consideration of a variety of factors, the Board,including the Independent Trustees, voted to approve each New SubadvisoryAgreement. In approving each New Subadvisory Agreement, the Board didnot identify any single factor as controlling, and each Trustee may haveattributed different weights to various factors. The Independent Trusteesreviewed the proposed approval of the New Subadvisory Agreements in privatesessions with their independent legal counsel at which no representatives ofVictory Capital or AMCO were present.

The nature, extent, and quality of services expected to be provided by theSubadvisers – The Board considered information provided to them regardingthe services to be provided by each Subadviser, including informationpresented periodically throughout the previous year. The Board consideredeach Subadviser’s level of knowledge and investment style. The Boardreviewed the experience and credentials of the investment personnel who areresponsible for managing the investment of portfolio securities with respectto each applicable Fund and each Subadviser’s level of staffing. The Boardalso noted each Subadviser’s brokerage practices. The Board also considered


each Subadviser’s regulatory and compliance history. The Board also tookinto account each Subadviser’s risk management processes. The Board notedthat AMCO’s monitoring processes of each Subadviser include, and VictoryCapital’s expected monitoring processes of each Subadviser would include,among others: (i) regular telephonic meetings to discuss, among other matters,investment strategies and to review portfolio performance; (ii) monthlyportfolio compliance checklists and quarterly compliance certifications to theBoard; and (iii) due diligence visits to each Subadviser. The Board alsoconsidered that the terms and conditions of the New Subadvisory Agreementsare substantially similar to the terms and conditions of the ExistingSubadvisory Agreements.

Subadviser Compensation – The Board took into account the financialcondition of each Subadviser. In considering the cost of services to beprovided by each Subadviser and the profitability to that Subadviser of itsrelationship with the applicable Fund, the Board noted that the fees underthe New Subadvisory Agreements will be paid by Victory Capital. The Boardalso relied on the ability of AMCO to negotiate each Existing SubadvisoryAgreement and the fees thereunder at arm’s length. The Board consideredthat the fee rate to be payable under each New Subadvisory Agreement wereproposed to be identical to the fee rate currently payable under eachcorresponding Existing Subadvisory Agreement. For the above reasons, theBoard determined that the expected profitability of each Subadviser from itsrelationship with the applicable Fund was not a material factor in itsdeliberations with respect to the consideration of the approval of each NewSubadvisory Agreement. For similar reasons, the Board concluded that thepotential for economies of scale in each Subadviser’s management of theapplicable Fund was not a material factor in considering each NewSubadvisory Agreement, although the Board noted that certain NewSubadvisory Agreements contain breakpoints in their fee schedules.

Subadvisory Fees and Fund Performance – The Board previously comparedthe subadvisory fees for each applicable Fund with the fees that eachSubadviser charges comparable clients, as applicable. The Board consideredthat each applicable Fund will pay a management fee to Victory Capital andthat, in turn, Victory Capital will pay a subadvisory fee to each Subadviser.


At the 2018 15(c) meeting, the Board considered, among other data, eachapplicable Fund’s performance over shorter and longer term periods, ascompared to each Fund’s respective peer group and noted that the Boardreviews at its regularly scheduled meetings information about each Fund’sperformance results. The Board considered Victory Capital’s capabilities withrespect to monitoring the performance, investment style and risk-adjustedperformance of each Subadviser. The Board also noted each Subadviser’sperformance record for similar accounts, as applicable.

Conclusions – The Board reached the following conclusions regarding eachNew Subadvisory Agreement, among others: (i) each Subadviser is qualifiedto manage the applicable Fund’s assets in accordance with its investmentobjective and policies; (ii) each Subadviser maintains an appropriatecompliance program; (iii) the performance of each applicable Fund isreasonable in relation to the performance of funds with similar investmentobjectives and to relevant indices in view of the Fund’s investment approachand Victory Capital is expected to appropriately monitor each Fund’sperformance; and (iv) each Fund’s advisory expenses are reasonable inrelation to those of similar funds and to the services to be provided byVictory Capital and each Subadviser. Based on its conclusions, the Boarddetermined that the approval of each New Subadvisory Agreement withrespect to each applicable Fund would be in the best interests of the Fundand its shareholders.


Trustees Daniel S. McNamaraRobert L. Mason, Ph.D.Jefferson C. BoyceDawn M. HawleyPaul L. McNamaraRichard Y. Newton IIIBarbara B. Ostdiek, Ph.D. Michael F. Reimherr

Administrator and USAA Asset Management CompanyInvestment Adviser P.O. Box 659453

San Antonio, Texas 78265-9825

Underwriter and USAA Investment Management CompanyDistributor P.O. Box 659453

San Antonio, Texas 78265-9825

Transfer Agent USAA Shareholder Account Services9800 Fredericksburg RoadSan Antonio, Texas 78288

Custodian, State Street Bank and Trust CompanyAccounting Agent, and P.O. Box 1713Sub-Administrator Boston, Massachusetts 02105

Independent Ernst & Young LLPRegistered Public 100 West Houston St., Suite 1700Accounting Firm San Antonio, Texas 78205

Copies of the Manager’s proxy voting policies and procedures, approved by the Trust’s Board ofTrustees for use in voting proxies on behalf of the Fund, are available without charge (i) by calling(800) 531-USAA (8722) or (210) 531-8722; (ii) at usaa.com; and (iii) in summary within theStatement of Additional Information on the SEC’s website at http://www.sec.gov. Informationregarding how the Fund voted proxies relating to portfolio securities during the most recent 12-monthperiod ended June 30 is available without charge (i) at usaa.com; and (ii) on the SEC’s website athttp://www.sec.gov.

The Fund files its complete schedule of monthly portfolio holdings with the SEC for the first andthird quarters of each fiscal year as an exhibit to its reports on Form N-PORT (beginning withfilings after March 31, 2019). Previously, the Fund made its complete schedule of portfolio holdingsavailable after the first and third fiscal quarters in regulatory filings on Form N-Q. The Fund’sForms N-CSR, N-PORT, and N-Q are available at no charge (i) by calling (800) 531-USAA (8722) or(210) 531-8722; (ii) at usaa.com; and (iii) on the SEC’s website at http://www.sec.gov.

40847-0319 ©2019, USAA. All rights reserved.

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