ANNUAL REPORT USAA TREASURY MONEY MARKET TRUST MAY

Transcription

1 ANNUAL REPORT USAA TREASURY MONEY MARKET TRUST MAY 31, 2018

2 PRESIDENT S MESSAGE while media coverage during the reporting period suggested that the markets were experiencing extreme turbulence, the volatility has actually been near historical norms. July 2018 When the reporting period began in June 2017, the world generally was experiencing synchronized economic growth. This global expansion, along with mild inflation and strong corporate earnings, helped propel stocks to record highs. In the bond market, prices were generally supported by historically low interest rates. (Bond prices and interest rates move in opposite directions.) Although the Federal Reserve (Fed) raised short-term interest rates at its June 2017 policy meeting, longer-term interest rates, which are determined by the market, fell during the summer 2017 after inflation dropped below the Fed s 2% target. Longer-term interest rates then moved up in the closing months of 2017 as the Fed stated it remained on track to raise short-term interest rates before year-end In December 2017, the Fed implemented another interest rate increase. Investor sentiment shifted in early Volatility, noticeably absent during 2017, returned to the markets in February 2018 as inflation fears surfaced. Stock prices fell, and longer-term interest rates rose. The turbulence continued into March 2018 and through the end of the reporting period. An increase in trade tensions between the U.S. and China further fueled the volatility. In March and April 2018, U.S. inflation rose above the Fed s target, suggesting the central bank might increase the pace of its interest rate increases. (The Fed raised short-term interest rates in March 2018.) The inflation data helped push the 10-year U.S. Treasury yield to 3% for the first time since At the same time, global economic synchronicity faded, with softening growth in Europe. In the U.S., the economic expansion continued, but given that it became the second longest in U.S. history at the beginning of May 2018, a number of observers began to question how much longer it could last. At USAA Investments, we see signs suggesting that the expansion may be in its late phase. An unemployment rate below 4%, wage pressures, higher inflation and rising interest rates we believe each of these factors has the potential to dampen future economic growth. The volatility that re-emerged during the winter seems to be here to stay. Indeed, the markets were negatively affected in the closing days of the reporting period by concerns that Italy s incoming government might try to weaken that country s role

3 in the European Union. Fears about the future of the European Union drove a flight to safety out of riskier asset classes, such as equities, and into bonds. Investors also appeared nervous about potential trade wars and uncertainty surrounding a potential U.S.-North Korea summit. However, while media coverage during the reporting period suggested that the markets were experiencing extreme turbulence, the volatility has actually been near historical norms. Shareholders should try to ignore media noise, which may provoke an emotional reaction, and focus instead on information that can provide the perspective they need to manage their investments. Long-term investors should never make hasty portfolio decisions based on market turmoil. They should make decisions based on their long-term objectives, time horizon, and risk tolerance. One way to avoid the temptation to time the market is dollarcost averaging, which is the strategy of investing a set amount on a regular basis. Diversification is another good investment strategy, one that can potentially protect a portfolio from market turbulence or shifts in performance leadership. The primary goal of diversification, after all, is long-term risk management. Investors who are overly concentrated in particular asset classes could be carrying more risk in their portfolios than they realize. This is true even for those who think they re diversified; U.S. stocks have outperformed for some time, so their weighting within a portfolio may have grown too large and need to be rebalanced. Please call one of our financial advisors who can help you review your portfolio and make sure it is appropriately aligned with your investment plan. Now that vacation time is here, why not make sure your financial house is in order before you leave on a summer getaway? And rest assured that while you are enjoying the summer, our team of portfolio managers will continue monitoring economic conditions, Fed policy, the direction of longer-term interest rates, political developments, and other issues that have the potential to affect your investments. From all of us at USAA Investments, thank you for the opportunity to help you with your investment needs. Sincerely, Brooks Englehardt President USAA Investments Investments provided by USAA Investment Management Company and USAA Financial Advisors, Inc., both registered broker-dealers, and affiliates. Financial planning services and financial advice provided by USAA Financial Planning Services Insurance Agency, Inc. (known as USAA Financial Insurance Agency in California, License # 0E36312), a registered investment adviser and insurance agency and its wholly owned subsidiary, USAA Financial Advisors, Inc., a registered broker dealer.

4 TABLE OF CONTENTS Manager s Commentary 1 Investment Overview 3 Financial Information Distributions to Shareholders 7 Report of Independent Registered Public Accounting Firm 8 Portfolio of Investments 9 Notes to Portfolio of Investments 13 Financial Statements 15 Notes to Financial Statements 18 Financial Highlights 27 Expense Example 28 Advisory Agreement(s) 30 Trustees and Officers Information 35 This report is for the information of the shareholders and others who have received a copy of the currently effective prospectus of the Fund, managed by USAA Asset Management Company. It may be used as sales literature only when preceded or accompanied by a current prospectus, which provides further details about the Fund. IRA DISTRIBUTION WITHHOLDING DISCLOSURE We generally must withhold federal income tax at a rate of 10% of the taxable portion of your distribution and, if you live in a state that requires state income tax withholding, at your state s tax rate. However, you may elect not to have withholding apply or to have income tax withheld at a higher rate. Any withholding election that you make will apply to any subsequent distribution unless and until you change or revoke the election. If you wish to make a withholding election or change or revoke a prior withholding election, call (800) 531-USAA (8722) or (210) If you do not have a withholding election in place by the date of a distribution, federal income tax will be withheld from the taxable portion of your distribution at a rate of 10%. If you must pay estimated taxes, you may be subject to estimated tax penalties if your estimated tax payments are not sufficient and sufficient tax is not withheld from your distribution. For more specific information, please consult your tax adviser. 2018, USAA. All rights reserved.

5 MANAGER S COMMENTARY ON THE FUND Anthony M. Era, Jr. USAA Asset Management Company What were the market conditions during the reporting period? When the reporting period began in June 2017, the Federal Reserve (Fed) was widely expected to raise short-term interest rates two more times during the calendar year. (The Fed had previously increased interest rates during March 2017.) Indeed, during June 2017, the Fed lifted the federal funds (fed funds) target rate by 0.25% to a target range between 1.00% to 1.25% and said it would begin reducing the size of the Fed s balance sheet sometime later in This balance sheet normalization started in October 2017, with the Fed gradually decreasing the reinvestment of its maturing holdings of Treasury and governmentsponsored mortgage-backed securities. In November 2017, President Donald Trump nominated Jerome Powell to succeed Janet Yellen as Fed chair in February In December 2017, policymakers raised the fed funds rate, boosting it another 0.25%, and projected three interest rate increases during 2018, if the economy grew as they expected. The Fed implemented another interest rate increase near the end of March 2018, raising the fed funds rate 0.25% to a range between 1.50% and 1.75%. At the same time, policymakers reaffirmed their plan for three interest rate increases in They left interest rates unchanged in May 2018 but are expected to increase interest rates at their June 2018 meeting. As a result of the Fed s gradual monetary tightening policy, short-term interest rates moved higher during the reporting period. In turn, this resulted in an increase in yields on U.S. Treasury bills and short-term notes. Manager s Commentary on the Fund 1

6 How did the USAA Treasury Money Market Trust (the Fund) perform during the reporting period? For the reporting period ended May 31, 2018, the seven-day yield on the Fund was 1.43%. The total return for the same period was 0.89%, compared to an average of 0.64% for all retail money market funds that hold U.S. Treasuries and repurchase agreements backed by the U.S. Treasury ranked by imoneynet, Inc. USAA Asset Management Company (the Manager) is the Fund s investment adviser. The investment adviser provides day-to-day discretionary management for the Fund s assets. How did you manage the Fund during the reporting period? We maintained our investment approach, which is to invest the Fund in maturities of 397 days or less that are backed by the full faith and credit of the U.S. government. During the reporting period, the Fund extended its weighted average maturity to capture the benefit of rising interest rates on U.S. Treasury securities and reduced its investment in repurchase agreements as they offered a less attractive relative value. The Fund also continued to increase its weighting in U.S. Treasury floating-rate notes in anticipation that short-term interest rates would continue rising over the near term. Thank you for allowing us to help you manage your investments. Refer to page 4 for the imoneynet, Inc. definition. Past performance is no guarantee of future results. 2 USAA Treasury Money Market Trust

7 INVESTMENT OVERVIEW USAA TREASURY MONEY MARKET TRUST (THE FUND) (Ticker Symbol: UATXX) 5/31/18 5/31/17 Net Assets $3.7 Billion $2.6 Billion Net Asset Value Per Share $1.00 $1.00 Dollar-Weighted Average Portfolio Maturity 44 Days 25 Days Obtained by multiplying the dollar value of each investment by the number of days left to its maturity, adding those figures together, and dividing them by the total dollar value of the Fund s portfolio. AVERAGE ANNUAL TOTAL RETURNS AS OF 5/31/18 1 Year 5 Years 10 Years 0.89% 0.19% 0.15% 7-DAY YIELD AS OF 5/31/ % EXPENSE RATIO AS OF 5/31/17* 0.39% The performance data quoted represents past performance and is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. The return and principal value of an investment will fluctuate, so that an investor s shares, when redeemed, may be worth more or less than their original cost. For performance data current to the most recent month-end, visit usaa.com. *The expense ratio represents the total annual operating expenses, before reductions of any expenses paid indirectly and including any acquired fund fees and expenses, as reported in the Fund s prospectus dated October 1, 2017, and is calculated as a percentage of average net assets. The expense ratio may differ from the expense ratio disclosed in the Financial Highlights, which excludes acquired fund fees and expenses. You could lose money by investing in the Fund. Although this Fund seeks to preserve the value of your investment at $1 per share, it cannot guarantee to do so. An investment in this fund is not a depost in USAA Federal Savings Bank, or any other bank, and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund s sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time. Total return measures the price change in a share assuming the reinvestment of all net investment income and realized capital gain distributions, if any. The total returns quoted do not reflect adjustments made to the enclosed financial statements in accordance with U.S. generally accepted accounting principles or the deduction of taxes that a shareholder would pay on net investment income and realized capital gain distributions, including reinvested distributions, or redemptions of shares. Yields and returns fluctuate. The seven-day yield quotation more closely reflects current earnings of the Fund than the total return quotation. Investment Overview 3

8 7-DAY YIELD COMPARISON 1.50% 1.00% 0.50% 0.00% 5/17 6/17 7/17 8/17 9/17 10/17 11/17 12/17 1/18 2/18 3/18 4/18 5/18 USAA Treasury Money Market Trust 1.42% imoneynet, Inc. Average 1.06% Data represents the last Tuesday of each month. Ending date 5/29/18. The graph tracks the Fund s seven-day yield against the imoneynet, Inc. average for all retail money market funds that hold U.S. Treasuries and repurchase agreements backed by the U.S. Treasury and all retail money funds that hold 100% in U.S. Treasuries. imoneynet, Inc. is an organization that tracks the performance of money market funds. 4 USAA Treasury Money Market Trust

9 CUMULATIVE PERFORMANCE OF $10,000 $10,200 $10,148 $10,100 $10,000 5/08 5/09 5/10 5/11 5/12 5/13 5/14 5/15 5/16 5/17 5/18 USAA Treasury Money Market Trust $10,148 Data from 5/31/08 through 5/31/18. The graph illustrates the performance of a hypothetical $10,000 investment in the USAA Treasury Money Market Trust. Past performance is no guarantee of future results. The cumulative performance quoted does not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of shares. Income may be subject to federal, state, or local taxes, or to the federal alternative minimum tax. For seven-day yield information, please refer to the Fund s Investment Overview page. Investment Overview 5

10 PORTFOLIO MIX 5/31/18 U.S. Treasury Bills 56.5% U.S. Treasury Notes 29.3% Repurchase Agreements 14.3% Percentages are of the net assets of the Fund and may not equal 100%. 6 USAA Treasury Money Market Trust

11 DISTRIBUTIONS TO SHAREHOLDERS The following federal tax information related to the Fund s fiscal year ended May 31, 2018, is provided for information purposes only and should not be used for reporting to federal or state revenue agencies. Federal tax information for the calendar year will be reported to you on Form 1099-DIV in January With respect to distributions paid, the Fund designates the following amounts (or, if subsequently determined to be different, the maximum amount allowable) for the fiscal year ended May 31, 2018: Qualified Interest Income $29,773,000 For the fiscal year ended May 31, 2018, the Fund hereby designates the maximum amount allowable of its net taxable income as qualified dividends taxed at individual net capital gain rates. Distributions to Shareholders 7

12 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Trustees of USAA Treasury Money Market Trust: Opinion on the Financial Statements We have audited the accompanying statement of assets and liabilities of USAA Treasury Money Market Trust (the Fund ) (one of the portfolios constituting the USAA Mutual Funds Trust (the Trust )), including the portfolio of investments, as of May 31, 2018, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the financial statements ). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the portfolios constituting the USAA Mutual Funds Trust) at May 31, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. Basis for Opinion These financial statements are the responsibility of the Trust s management. Our responsibility is to express an opinion on the Fund s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ( PCAOB ) and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust s internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of May 31, 2018, by correspondence with the custodian. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. We have served as the auditor of one or more USAA investment companies since San Antonio, Texas July 24, USAA Treasury Money Market Trust

13 PORTFOLIO OF INVESTMENTS May 31, 2018 Principal Amount Value (000) Security (000) U.S. TREASURY SECURITIES (85.8%) Bills (56.5%) (a) $ 25, %, 06/07/2018 $ 24,994 25, %, 06/14/ ,987 29, %, 06/14/ ,985 15, %, 06/07/ ,996 10, %, 06/14/2018 9,995 22, %, 06/21/ ,982 6, %, 06/14/2018 5,997 7, %, 06/14/2018 6,996 11, %, 06/28/ ,988 15, %, 06/28/ ,983 15, %, 06/28/ ,983 14, %, 06/28/ ,984 10, %, 07/12/2018 9,982 13, %, 07/12/ ,977 12, %, 07/12/ ,979 14, %, 07/26/ ,966 15, %, 08/16/ ,950 19, %, 06/07/ ,995 10, %, 06/07/2018 9,997 20, %, 07/12/ ,963 50, %, 06/14/ ,971 25, %, 06/07/ ,993 10, %, 06/14/2018 9,994 16, %, 06/21/ ,985 20, %, 06/28/ ,975 14, %, 08/16/ ,951 10, %, 06/14/2018 9,994 15, %, 07/05/ ,976 5, %, 07/19/2018 4,989 50, %, 06/21/ ,953 50, %, 07/05/ ,920 12, %, 07/19/ ,973 25, %, 07/05/ ,960 Portfolio of Investments 9

14 Principal Amount Value (000) Security (000) $ 50, %, 06/28/2018 $ 49,936 50, %, 07/19/ ,886 50, %, 06/14/ ,969 10, %, 08/02/2018 9,970 40, %, 07/19/ ,907 25, %, 07/19/ ,942 15, %, 08/02/ ,955 15, %, 08/02/ ,955 50, %, 07/12/ ,900 20, %, 07/26/ ,946 5, %, 08/09/2018 4,983 22, %, 08/02/ ,933 4, %, 08/09/2018 3,987 60, %, 07/26/ ,838 40, %, 07/26/ ,892 30, %, 08/02/ ,909 40, %, 08/23/ ,837 15, %, 07/26/ ,959 5, %, 08/02/2018 4,985 25, %, 08/23/ ,897 10, %, 08/02/2018 9,969 15, %, 08/09/ ,948 10, %, 08/16/2018 9,962 18, %, 08/30/ ,919 10, %, 08/09/2018 9,965 50, %, 08/09/ ,827 20, %, 08/30/ ,910 25, %, 09/06/ ,878 40, %, 08/02/ ,875 8, %, 08/09/2018 7,972 30, %, 08/16/ ,885 10, %, 09/06/2018 9,951 11, %, 08/16/ ,958 20, %, 08/30/ ,908 7, %, 09/13/2018 6,963 13, %, 08/02/ ,959 25, %, 08/09/ ,912 8, %, 08/23/2018 7,966 48, %, 08/09/ ,830 16, %, 08/23/ ,932 10, %, 08/30/2018 9,954 32, %, 08/30/ ,852 26, %, 08/23/ , USAA Treasury Money Market Trust

15 Principal Amount Value (000) Security (000) $ 25, %, 09/06/2018 $ 24,875 21, %, 09/06/ ,895 30, %, 08/23/ ,870 50, %, 08/30/ ,765 8, %, 09/13/2018 7,957 10, %, 09/27/2018 9,938 10, %, 08/16/2018 9,960 22, %, 08/23/ ,904 10, %, 09/20/2018 9,941 15, %, 10/04/ ,900 10, %, 10/04/2018 9,933 15, %, 10/11/ ,893 10, %, 10/11/2018 9,929 40, %, 10/25/ ,685 13, %, 10/18/ ,902 10, %, 10/25/2018 9,921 14, %, 10/25/ ,889 15, %, 10/18/ ,886 20, %, 10/25/ ,841 11, %, 10/18/ ,916 10, %, 11/08/2018 9,912 25, %, 11/15/ ,770 15, %, 10/18/ ,885 11, %, 01/03/ ,868 20, %, 11/08/ ,822 20, %, 11/08/ ,821 15, %, 11/15/ ,857 2,109,818 Notes (29.3%) (b) 15, %, 07/15/ ,983 15, %, 10/15/ , , %, 08/15/ ,795 83, %, 06/15/ ,984 15, %, 07/31/ ,991 25, %, 08/31/ , , %, 04/30/2019, (3 mo. USTMMR %) (c) 212, , %, 01/31/2019, (3 mo. USTMMR %) (c) 245, , %, 10/31/2018, (3 mo. USTMMR %) (c) 179, , %, 07/31/2018, (3 mo. USTMMR %) (c) 188,070 1,092,531 Total U.S. Treasury Securities (cost: $3,202,349) 3,202,349 Portfolio of Investments 11

16 Principal Amount Value (000) Security (000) REPURCHASE AGREEMENTS (14.3%) $ 107,000 Bank of America Corp., 1.77%, acquired 5/31/2018 and due on 6/01/2018 at 107,000 (collateralized by $15,586 of U.S. Treasury, 1.63%, due 2/15/2026; $216,753 of U.S. Treasury, 3.04%, due 11/15/2045; combined market value $109,140) (b),(f) $ 107, ,000 Credit Agricole Corp. Inv. Bank, 1.74%, acquired 5/31/2018 and due on 6/01/2018 at 100,000 (collateralized by $103,051 of U.S. Treasury, 0.38%, due 7/15/2027; market value $102,000) (d) 100, ,000 Natixis Securities Americas, LLC, 1.77%, acquired 5/31/2018 and due on 6/01/2018 at $200,000 (collateralized by $3,412 of GNMA, 4.50% %, due 5/20/2048; $4,334 of U.S. Treasury, 2.38% %, due 1/15/2027-1/15/2029; $197,803 of U.S. Treasury, 1.38% %, due 8/31/2021-8/15/2046; combined market value $204,010) (b),(d),(e) 200, ,000 Bank of Montreal, 1.75%, acquired 5/31/2018 and due on 6/01/2018 at $125,000 (collateralized by $4,766 of U.S. Treasury, 0.38% %, due 1/15/2027-2/15/2043; $923 of U.S. Treasury, 1.63% %, due 6/14/2018-1/03/2019; $125,698 of U.S. Treasury, 1.38% %, due 7/31/ /15/2047; combined market value $127,506) (a),(b),(d) 125,000 Total Repurchase Agreements (cost: $532,000) 532,000 Total Investments (cost: $3,734,349) $3,734,349 ($ in 000s) VALUATION HIERARCHY Assets LEVEL 1 LEVEL 2 LEVEL 3 Total U.S. Treasury Securities: Bills $ $2,109,818 $ $2,109,818 Notes 1,092,531 1,092,531 Repurchase Agreements 532, ,000 Total $ $3,734,349 $ $3,734, USAA Treasury Money Market Trust

17 NOTES TO PORTFOLIO OF INVESTMENTS May 31, 2018 GENERAL NOTES Values of securities are determined by procedures and practices discussed in Note 1A to the financial statements. The Portfolio of Investments category percentages shown represent the percentages of the investments to net assets, and, in total, may not equal 100%. A category percentage of 0.0% represents less than 0.1% of net assets. PORTFOLIO ABBREVIATIONS AND DESCRIPTIONS USTMMR Quarterly U.S. Treasury Money Market Rate SPECIFIC NOTES (a) Rate represents an annualized yield at time of purchase, not coupon rate. (b) Rates for U.S. Treasury notes or bonds represent the stated coupon payment rate at time of issuance. (c) Rates for U.S. Treasury floating-rate notes rise and fall based on discount rates in auctions of 13-week Treasury bills, and are paid quarterly. (d) U.S. Treasury inflation-indexed notes designed to provide a real rate of return after being adjusted over time to reflect the impact of inflation. Their principal value periodically adjusts to the rate of inflation. They trade at the prevailing real, or after inflation, interest rates. The U.S. Treasury guarantees repayment of these securities of at least their face value in the event of sustained deflation or a drop in prices. Notes to Portfolio of Investments 13

18 (e) Mortgage-backed securities issued by Government National Mortgage Association (GNMA) are supported by the full faith and credit of the U.S. Government. (f) Zero-coupon security. Rate represents the effective yield at the date of purchase. See accompanying notes to financial statements. 14 USAA Treasury Money Market Trust

19 STATEMENT OF ASSETS AND LIABILITIES (IN THOUSANDS) May 31, 2018 ASSETS Investments in securities (amortized cost approximates market value) $3,202,349 Investments in repurchase agreements (cost approximates market value) 532,000 Cash 5,346 Receivables: Capital shares sold 46,310 Interest 2,498 Total assets 3,788,503 LIABILITIES Payables: Capital shares redeemed 55,455 Dividends on capital shares 3 Accrued management fees 393 Other accrued expenses and payables 293 Total liabilities 56,144 Net assets applicable to capital shares outstanding $3,732,359 NET ASSETS CONSIST OF: Paid-in capital $3,732,359 Capital shares outstanding, no par value 3,732,359 Net asset value, redemption price, and offering price per share $ 1.00 See accompanying notes to financial statements. Financial Statements 15

20 STATEMENT OF OPERATIONS (IN THOUSANDS) Year ended May 31, 2018 INVESTMENT INCOME Interest income $41,355 EXPENSES Management fees 4,095 Administration and servicing fees 3,276 Transfer agent s fees 3,276 Custody and accounting fees 260 Postage 321 Shareholder reporting fees 34 Trustees fees 34 Registration fees 148 Professional fees 100 Other 38 Total expenses 11,582 NET INVESTMENT INCOME $29,773 See accompanying notes to financial statements. 16 USAA Treasury Money Market Trust

21 STATEMENTS OF CHANGES IN NET ASSETS (IN THOUSANDS) Years ended May 31, FROM OPERATIONS Net investment income $ 29,773 $ 2,115 DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income (29,773) (2,115) FROM CAPITAL SHARE TRANSACTIONS Proceeds from shares sold 12,083,156 9,649,637 Reinvested dividends 29,749 2,113 Cost of shares redeemed (11,006,596) (7,214,563) Increase in net assets from capital share transactions 1,106,309 2,437,187 Net increase in net assets 1,106,309 2,437,187 NET ASSETS Beginning of year 2,626, ,863 End of year $ 3,732,359 $ 2,626,050 CHANGE IN SHARES OUTSTANDING Shares sold 12,083,156 9,649,637 Shares issued for dividends reinvested 29,749 2,113 Shares redeemed (11,006,596) (7,214,563) Increase in shares outstanding 1,106,309 2,437,187 See accompanying notes to financial statements. Financial Statements 17

22 NOTES TO FINANCIAL STATEMENTS May 31, 2018 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES USAA MUTUAL FUNDS TRUST (the Trust), registered under the Investment Company Act of 1940, as amended (the 1940 Act), is an openend management investment company organized as a Delaware statutory trust consisting of 51 separate funds. The USAA Treasury Money Market Trust (the Fund) qualifies as a registered investment company under Accounting Standards Codification Topic 946. The information presented in this annual report pertains only to the Fund, which is classified as diversified under the 1940 Act and is authorized to issue an unlimited number of shares. The Fund seeks to provide investors maximum current income while maintaining the highest degree of safety and liquidity. The Fund operates as a government money market fund in compliance with the requirements of Rule 2a-7 under the 1940 Act; and as a government money market fund, shares of the Fund are available for sale only to accounts that are beneficially owned by natural persons. A. Security valuation The Trust s Board of Trustees (the Board) has established the Valuation and Liquidity Committee (the Committee), and subject to Board oversight, the Committee administers and oversees the Fund s valuation policies and procedures, which are approved by the Board. Among other things, these policies and procedures allow the Fund to utilize independent pricing services, quotations from securities dealers, and a wide variety of sources and information to establish and adjust the fair value of securities as events occur and circumstances warrant. The Committee reports to the Board on a quarterly basis and makes recommendations to the Board as to pricing methodologies and services used by the Fund and presents additional information to the Board 18 USAA Treasury Money Market Trust

23 regarding application of the pricing and fair valuation policies and procedures during the preceding quarter. The Committee meets as often as necessary to make pricing and fair value determinations. In addition, the Committee holds regular monthly meetings to review prior actions taken by the Committee and USAA Asset Management Company (the Manager), an affiliate of the Fund. Among other things, these monthly meetings include a review and analysis of backtesting reports, pricing service quotation comparisons, illiquid securities and fair value determinations, pricing movements, and daily stale price monitoring. The value of each security is determined (as of the close of trading on the New York Stock Exchange (NYSE) on each business day the NYSE is open) as set forth below: 1. All securities held in the Fund are short-term debt securities which are valued pursuant to Rule 2a-7 under the 1940 Act. This method values a security at its purchase price, and thereafter, assumes a constant amortization to maturity of any premiums or discounts. 2. Repurchase agreements are valued at cost. 3. Securities for which amortized cost valuations are considered unreliable or whose values have been materially affected by a significant event are valued in good faith at fair value, using methods determined by the Committee, under procedures to stabilize net asset value and valuation procedures approved by the Board. B. Fair value measurements Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The three-level valuation hierarchy disclosed in the Portfolio of Investments is based upon the transparency of inputs to the valuation of an asset or liability 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. Notes to Financial Statements 19

24 Level 2 inputs to the valuation methodology are other significant observable inputs, including quoted prices for similar securities, inputs that are observable for the securities, either directly or indirectly, and market-corroborated inputs such as market indexes. Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement, including the Manager s own assumptions in determining the fair value. The inputs or methodologies used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. For example, money market securities are valued using amortized cost, in accordance with rules under the 1940 Act. Generally, amortized cost approximates the current fair value of a security, but since the value is not obtained from a quoted price in an active market, such securities are reflected as Level 2. C. Federal taxes The Fund s policy is to comply with the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies and to distribute substantially all of its taxable income and net capital gains, if any, to its shareholders. Therefore, no federal income tax provision is required. For the year ended May 31, 2018, the Fund did not incur any income tax, interest, or penalties, and has recorded no liability for net unrecognized tax benefits relating to uncertain income tax positions. On an ongoing basis, the Manager will monitor the Fund s tax basis to determine if adjustments to this conclusion are necessary. The statute of limitations on the Fund s tax return filings generally remain open for the three preceding fiscal reporting year ends and remain subject to examination by the Internal Revenue Service and state taxing authorities. D. Investments in securities Securities transactions are accounted for as of the date the securities are purchased or sold (trade date). Gains or losses from sales of investment securities are computed on the identified cost basis. Interest income is recorded daily on the accrual basis. Premiums and discounts are amortized over the life of the respective securities using the straight-line method. 20 USAA Treasury Money Market Trust

25 E. Repurchase agreements The Fund may enter into repurchase agreements with commercial banks or recognized security dealers pursuant to the terms of a Master Repurchase Agreement. A repurchase agreement is an arrangement wherein the Fund purchases securities and the seller agrees to repurchase the securities at an agreed upon time and at an agreed upon price. The purchased securities are marked-to-market daily to ensure their value is equal to or in excess of the purchase price plus accrued interest and are held by the Fund, either through its regular custodian or through a special tri-party custodian that maintains separate accounts for both the Fund and its counterparty, until maturity of the repurchase agreement. Master Repurchase Agreements typically contain netting provisions, which provide for the net settlement of all transactions and collateral with the Fund through a single payment in the event of default or termination. Repurchase agreements are subject to credit risk, and the Fund s Manager monitors the creditworthiness of sellers with which the Fund may enter into repurchase agreements. Investments in repurchase agreements as presented on the Portfolio of Investments are not net settlement amounts but gross. At May 31, 2018, the value of the related collateral exceeded the value of the repurchase agreements, reducing the net settlement amount to zero. Details on the collateral are included on the Portfolio of Investments. F. Securities purchased on a delayed-delivery or when-issued basis Delivery and payment for securities that have been purchased by the Fund on a delayed-delivery or when-issued basis can take place a month or more after the trade date. During the period prior to settlement, these securities do not earn interest, are subject to market fluctuation, and may increase or decrease in value prior to their delivery. The Fund maintains segregated assets with a market value equal to or greater than the amount of its purchase commitments. G. Expenses paid indirectly Through arrangements with the Fund s custodian and other banks utilized by the Fund for cash management purposes, realized credits, if any, generated from cash balances in the Fund s bank accounts may be used to directly reduce the Fund s Notes to Financial Statements 21

26 expenses. For the year ended May 31, 2018, there were no custodian and other bank credits. H. Indemnifications Under the Trust s organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust. In addition, in the normal course of business, the Trust enters into contracts that contain a variety of 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 Trust that have not yet occurred. However, the Trust expects the risk of loss to be remote. I. Use of estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that may affect the reported amounts in the financial statements. (2) LINE OF CREDIT The Fund participates, along with other funds of the Trust and USAA ETF Trust (together, the Trusts), in a joint, short-term, revolving, committed loan agreement of $500 million with USAA Capital Corporation (CAPCO), an affiliate of the Manager. The purpose of the agreement is to provide temporary or emergency cash needs, including redemption requests that might otherwise require the untimely disposition of securities. Subject to availability (including usage 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 based on the London Interbank Offered Rate (LIBOR), plus basis points. The Trusts are also assessed facility fees by CAPCO in the amount of 13.0 basis points of the amount of the committed loan agreement. Prior to September 30, 2017, the maximum annual facility fee was 12.0 basis points of the amount of the committed loan agreement. The facility fees are allocated among the funds of the Trusts based on their respective average net assets for the period. The Trusts may request an optional increase of the committed loan agreement from $500 million up to $750 million. If the Trusts increase the committed loan agreement, the assessed facility fee on the amount of the additional commitment will be 14.0 basis points. 22 USAA Treasury Money Market Trust

27 For the year ended May 31, 2018, the Fund paid CAPCO facility fees of $25,000, which represents 4.0% of the total fees paid to CAPCO by the funds of the Trusts. The Fund had no borrowings under this agreement during the year ended May 31, (3) DISTRIBUTIONS The character of any distributions made during the year from net investment income or net realized gains is determined in accordance with federal tax regulations and may differ from those determined in accordance with U.S. generally accepted accounting principles. Also, due to the timing of distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains were recorded by the Fund. The tax character of distributions paid during the years ended May 31, 2018, and 2017, was as follows: Ordinary income* $29,773,000 $2,115,000 As of May 31, 2018, the components of net assets representing distributable earnings on a tax basis were as follows: Undistributed ordinary income* $3,000 * Includes short-term realized capital gains, if any, which are taxable as ordinary income. Net investment income is accrued daily as dividends and distributed to shareholders monthly. Distributions of realized gains from security transactions not offset by capital losses are made annually in the succeeding fiscal year or as otherwise required to avoid the payment of federal taxes. At May 31, 2018, the Fund had no capital loss carryforwards, for federal income tax purposes. The cost of securities at May 31, 2018, for federal income tax purposes, was $3,734,349,000. Notes to Financial Statements 23

28 (4) TRANSACTIONS WITH MANAGER Management fees The Manager provides investment management services to the Fund pursuant to an Advisory Agreement. Under this agreement, the Manager is responsible for managing the business and affairs of the Fund, and for directly managing the day-to-day investment of the Fund s assets, subject to the authority of and supervision by the Board. The Fund s investment management fee is accrued daily and paid monthly at an annualized rate of 0.125% of the Fund s average net assets. For the year ended May 31, 2018, the Fund incurred management fees, paid or payable to the Manager, of $4,095,000. Administration and servicing fees The Manager provides certain administration and servicing functions for the Fund. For such services, the Manager receives a fee accrued daily and paid monthly at an annualized rate of 0.10% of the Fund s average net assets. For the year ended May 31, 2018, the Fund incurred administration and servicing fees, paid or payable to the Manager, of $3,276,000. In addition to the services provided under its Administration and Servicing Agreement with the Fund, the Manager also provides certain compliance and legal services for the benefit of the Fund. The Board has approved the reimbursement of a portion of these expenses incurred by the Manager. For the year ended May 31, 2018, the Fund reimbursed the Manager $43,000 for these compliance and legal services. These expenses are included in the professional fees on the Fund s Statement of Operations. Transfer agent s fees USAA Transfer Agency Company, d/b/a USAA Shareholder Account Services (SAS), an affiliate of the Manager, provides transfer agent services to the Fund. The Fund s transfer agent s fees are accrued daily and paid monthly at an annualized rate of 0.10% of the Fund s average net assets for the fiscal year. SAS pays a portion of these fees to certain intermediaries for the administration and servicing of accounts that are held with such intermediaries. For the year ended May 31, 2018, the Fund incurred transfer agent s fees, paid or payable to SAS, of $3,276,000. Underwriting services USAA Investment Management Company provides exclusive underwriting and distribution of the Fund s shares on a continuing 24 USAA Treasury Money Market Trust

29 best-efforts basis and receives no fee or other compensation for these services. (5) TRANSACTIONS WITH AFFILIATES The Manager is indirectly wholly owned by United Services Automobile Association (USAA), a large, diversified financial services institution. Certain trustees and officers of the Fund are also directors, officers, and/or employees of the Manager. None of the affiliated trustees or Fund officers received any compensation from the Fund. (6) UPCOMING REGULATORY MATTERS In October 2016, the U.S. Securities and Exchange Commission (SEC) issued Final Rule Release No , Investment Company Reporting Modernization. In part, the rules require the filing of new forms N-PORT and N-CEN, and amend Regulation S-X to require standardized, enhanced disclosure about derivatives in investment company financial statements, as well as other amendments. In December 2017, the SEC issued Temporary Final Rule Release No , Investment Company Reporting Modernization (Temporary Rule), which extends to April 2019 the compliance date on which funds in larger fund groups, such as the Fund, are required to begin filing form N-PORT. In the interim, in lieu of filing form N-PORT, the Temporary Rule requires that funds in larger fund groups maintain in their records the information that is required to be included in form N-PORT. The Temporary Rule does not affect the filing date or requirements of form N-CEN. In October 2016, the SEC issued Final Rule Release No , Investment Company Liquidity Risk Management Programs (Liquidity Rule). The Liquidity Rule requires funds to establish a liquidity risk management program and enhances disclosures regarding funds liquidity. In February 2018, the SEC issued Interim Final Rule Release No. IC-33010, Investment Company Liquidity Risk Management Programs; Commission Guidance for In-Kind ETFs, which extends, among others, the compliance dates for certain disclosure requirements under the Liquidity Rule. The compliance date for the liquidity disclosure required in form N-PORT has been extended Notes to Financial Statements 25

30 to June 1, 2019 for larger entities such as the Fund. The compliance date for the liquidity disclosure required in form N-CEN for large entities such as the Fund remains December 1, The Fund is expected to comply with these compliance dates for forms N-PORT and N-CEN. The Manager continues to evaluate the impact these rules and amendments will have on the financial statements and other disclosures. 26 USAA Treasury Money Market Trust

31 FINANCIAL HIGHLIGHTS Per share operating performance for a share outstanding throughout each period is as follows: Year Ended May 31, Net asset value at beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Income from investment operations: Net investment income (a).00 (a).00 (a).00 (a) Less distributions from: Net investment income (.01) (.00) (a) (.00) (a) (.00) (a) (.00) (a) Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Total return (%)*.89 (c) (b).00 (b).00 (b) Net assets at end of period (000) $3,732,359 $2,626,050 $188,863 $119,654 $128,416 Ratios to average net assets:** Expenses (%).35 (c) (d) Expenses, excluding reimbursements (%) (d) Net investment income (%) (b).00 (b).00 (b) * Assumes reinvestment of all net investment income and realized capital gain distributions, if any, during the period. Includes adjustments in accordance with U.S. generally accepted accounting principles and could differ from the imoneynet reported return. Total returns for periods of less than one year are not annualized. ** For the year ended May 31, 2018, average net assets were $3,279,951,000. (a) Represents less than $0.01 per share. (b) Represents less than 0.01%. (c) Prior to August 1, 2017, the Manager voluntarily agreed, on a temporary basis, to reimburse management, administrative, or other fees to limit the Fund s expenses and attempt to prevent a negative yield. (d) Reflects total annual operating expenses of the Fund before reductions of any expenses paid indirectly. The Fund s expenses paid indirectly decreased the expense ratio by 0.01%. Financial Highlights 27

32 EXPENSE EXAMPLE May 31, 2018 (unaudited) EXAMPLE As a shareholder of the Fund, you incur two types of costs: direct costs, such as wire fees, redemption fees, and low balance fees; and indirect costs, including management fees, transfer agency fees, and other Fund operating expenses. This example is intended to help you understand your indirect costs, also referred to as ongoing costs (in dollars), of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire six-month period of December 1, 2017, through May 31, ACTUAL EXPENSES The line labeled actual in the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested at the beginning of the period, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the actual line under the heading Expenses Paid During Period to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The line labeled hypothetical in the table provides information about hypothetical account values and hypothetical expenses based on the Fund s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account 28 USAA Treasury Money Market Trust

33 balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing 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 determine the relative total costs of owning different funds. In addition, if these direct costs were included, your costs would have been higher. Expenses Paid Beginning Ending During Period* Account Value Account Value December 1, 2017 December 1, 2017 May 31, 2018 May 31, 2018 Actual $1, $1, $1.75 Hypothetical (5% return before expenses) 1, , *Expenses are equal to the Fund s annualized expense ratio of 0.35%, which is net of any expenses paid indirectly, multiplied by the average account value over the period, multiplied by 182 days/365 days (to reflect the one-half-year period). The Fund s actual ending account value is based on its actual total return of 0.56% for the six-month period of December 1, 2017, through May 31, Notes to Financial Statements 29