ANNUAL REPORT USAA WORLD GROWTH FUND FUND SHARES INSTITUTIONAL SHARES ADVISER SHARES

Transcription

1 ANNUAL REPORT USAA WORLD GROWTH FUND FUND SHARES INSTITUTIONAL SHARES ADVISER SHARES 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 Managers Commentary 1 Investment Overview 4 Financial Information Distributions to Shareholders 12 Report of Independent Registered Public Accounting Firm 13 Portfolio of Investments 14 Notes to Portfolio of Investments 21 Financial Statements 22 Notes to Financial Statements 27 Financial Highlights 43 Expense Example 46 Advisory Agreement(s) 48 Trustees and Officers Information 56 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 MANAGERS COMMENTARY ON THE FUND Ryan P. McAllister MFS Investment Management Roger Morley MFS Investment Management Please review the market conditions over the reporting period. Global equities as an asset class posted positive results over the reporting period ended May 31, 2018, while lagging the performance of the U.S. stock market. Strong domestic equity performance for the reporting period was driven by record corporate profits and a lowering of the corporate income tax rate. In Japan, equities continued to benefit from an economy in recovery mode, while European stock performance was more muted on concerns that the region s economy appeared to be slowing. Stocks globally gave up ground in early 2018 on concerns around the pace of Federal Reserve interest rate increase and a potential global trade war in the wake of the Trump administration s announcement of tariffs on steel and aluminum as well as on a broad range of products from China. Information technology and energy were the strongest sectors globally over the reporting period, while defensive sectors such as consumer staples and utilities & communications lagged. How did the USAA World Growth Fund (the Fund) perform during the reporting period? The Fund has three share classes: Fund Shares, Institutional Shares, and Adviser Shares. For the reporting period ended May 31, 2018, the Fund Shares, Institutional Shares, and Adviser Shares had a total return of 6.64%, 6.70% and 6.36%, respectively. This compares to returns of 9.98% for the Lipper Global Funds Index and 11.84% for the MSCI World Index. Managers Commentary on the Fund 1

6 USAA Asset Management Company (the manager) is the Fund s investment adviser. As the investment adviser, USAA Asset Management Company employs dedicated resources to support the research, selection, and monitoring of the Fund s subadvisers. MFS Investment Management (MFS) is the subadviser to the Fund. The subadviser provides day-to-day discretionary management for the Fund s assets. What factors drove the Fund s performance relative to the Index? During the reporting period, the most significant drivers of the Fund s underperformance included the combination of an underweight position and stock selection in the technology sector as well as a weak stock selection in the leisure sector. The portfolio has avoided many fastgrowing, high-valuation technology and internet stocks that led the market rally in recent years. MFS has not had sufficient confidence in the long-term sustainability of growth for these companies and considers most of them unattractively valued compared to other investment opportunities. The Fund s longstanding overweight allocation to consumer staples also has acted as a constraint on performance, with unfavorable conditions including a challenging competitive environment characterized by new internet-based brands. The managers maintain a positive outlook for the long-term growth and return prospects of the Fund s consumer staples holdings. Positive contributors to relative return included a lack of exposure to the lagging utilities & communications sector and strong stock selection within the financial services sector. In terms of individual holdings, positive contributions to performance were led by overweight exposure to luxury retailer LVMH Moet Hennessy Louis Vuitton SE, overweight exposure to payment processer Visa Inc. A within financial services, and a lack of exposure to Refer to page 5 for benchmark definitions. Past performance is no guarantee of future results. Refer to the Portfolio of Investments for complete list of securities. 2 USAA World Growth Fund

7 industrial giant General Electric Co. Leading detractors included overweight exposure to British home and health products company Reckitt Benckiser Group plc, British multinational advertising and public relations firm WPP plc, and U.S.-based beauty product manufacturer Coty, Inc. A. The managers continue to find attractive opportunities within health care in general and particularly in medical technology and life sciences companies, the growth prospects of which are driven generally by longterm demographic trends and distinct product advantages. The Fund is underweight financials on the view that most developed-market commercial banks and insurance companies cannot grow faster than global gross domestic product through a full economic cycle, and that current valuations already reflect the potential for better economic, regulatory and interest rate environments. The Fund remains underweight energy and continues to avoid metals & mining companies, given their sensitivity to commodity prices. Overall, the managers remain cautious on equity markets given elevated valuations and the fact that the current cycle is nine years old. As always, MFS maintains a bottom-up fundamental approach to stock selection, seeking to identify businesses that display sustainable above-average growth and reasonable valuations. Thank you for allowing us to help manage your investments. Investments in foreign securities are subject to additional and more diverse risks, including but not limited to currency fluctuations, market illiquidity, and political and economic instability. Foreign investing may result in more rapid and extreme changes in value than investments made exclusively in the securities of U.S. companies. There may be less publicly available information relating to foreign companies than those in the U.S. Foreign securities may also be subject to foreign taxes. Investments made in emerging market countries may be particularly volatile. Economies of emerging market countries are generally less diverse and mature than more developed countries and may have less stable political systems. Managers Commentary on the Fund 3

8 INVESTMENT OVERVIEW USAA WORLD GROWTH FUND SHARES (FUND SHARES) (Ticker Symbol: USAWX) 5/31/18 5/31/17 Net Assets $1.4 Billion $1.3 Billion Net Asset Value Per Share $31.82 $31.17 AVERAGE ANNUAL TOTAL RETURNS AS OF 5/31/18 1 Year 5 Years 10 Years 6.64% 8.77% 7.03% EXPENSE RATIO AS OF 5/31/17* 1.13% 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. This expense ratio may differ from the expense ratio disclosed in the Financial Highlights, which excludes acquired fund fees and expenses. 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. 4 USAA World Growth Fund

9 CUMULATIVE PERFORMANCE COMPARISON $25,000 $20,000 $15,000 $19,734 $16,895 $16,683 $10,000 $5,000 $0 5/08 5/09 5/10 5/11 5/12 5/13 5/14 5/15 5/16 5/17 5/18 USAA World Growth Fund Shares $19,734 MSCI World Index $16,895 Lipper Global Funds Index $16,683 Data from 5/31/08 through 5/31/18. The graph illustrates the comparison of a $10,000 hypothetical investment in the USAA World Growth Fund Shares to the following benchmarks: The unmanaged Lipper Global Funds Index tracks the total return performance of funds within the Lipper Global Funds category. The unmanaged MSCI World Index reflects the movements of world stock markets by representing a broad selection of domestically listed companies within each market. Past performance is no guarantee of future results, and the cumulative performance quoted does not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of shares. Indexes are unmanaged and you cannot invest directly in an index. The return information for the indexes does not reflect the deduction of any fees, expenses, or taxes, except that the Lipper Global Funds Index reflects the fees and expenses of the underlying funds included in the index. Investment Overview 5

10 USAA WORLD GROWTH FUND INSTITUTIONAL SHARES (INSTITUTIONAL SHARES) (Ticker Symbol: UIWGX) 5/31/18 5/31/17 Net Assets $30.1 Million $6.9 Million Net Asset Value Per Share $31.75 $31.14 AVERAGE ANNUAL TOTAL RETURNS AS OF 5/31/18 1 Year Since Inception 8/7/ % 7.37% EXPENSE RATIOS AS OF 5/31/17* Before Reimbursement 1.37% After Reimbursement 1.10% 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 ratios are reported in the Fund s prospectus dated October 1, 2017, and are based on estimated expenses for the current fiscal year. USAA Asset Management Company (the Manager) has agreed, through September 30, 2018, to make payments or waive management, administration, and other fees so that the total annual operating expenses of the Institutional Shares (exclusive of commission recapture, expense offset arrangements, acquired fund fees and expenses, and extraordinary expenses) do not exceed an annual rate of 1.10% of the Institutional Shares average net assets. If the total annual operating expense ratio of the Institutional Shares is lower than 1.10%, the Institutional Shares will operate at that lower expense ratio. This reimbursement arrangement may not be changed or terminated during this time period without approval of the Fund s Board of Trustees and may be changed or terminated by the Manager at any time after September 30, These estimated expense ratios may differ from the expense ratios disclosed in the Financial Highlights, which excludes acquired fund fees and expenses. Total return measures the price change in a share assuming the reinvestment of all net investment income and realized capital gain distributions, if any. The total returns quoted do not reflect adjustments made to the enclosed financial statements in accordance with U.S. generally accepted accounting principles or the deduction of taxes that a shareholder would pay on net investment income and realized capital gain distributions, including reinvested distributions, or redemptions of shares. The Institutional Shares are available for investment through a USAA discretionary managed account program, and certain advisory programs sponsored by financial 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 other persons or legal entities that the Fund may approve from time to time, or for purchase by a USAA fund participating in a fund-of-funds investment strategy (USAA fund-of-funds). 6 USAA World Growth Fund

11 CUMULATIVE PERFORMANCE COMPARISON $13,500 $13,000 $12,500 $12,000 $12,546 $12,453 $12,212 $11,500 $11,000 $10,500 $10,000 $9,500 $9,000 $8,500 7/15 11/15 5/16 11/16 5/17 11/17 MSCI World Index $12,546 Lipper Global Funds Index $12,453 USAA World Growth Fund Institutional Shares $12,212 Data from 7/31/15 through 5/31/18.* 5/18 The graph illustrates the comparison of a $10,000 hypothetical investment in the USAA World Growth Fund Institutional Shares to the Fund s benchmarks listed above (see page 5 for benchmark definitions). Past performance is no guarantee of future results, and the cumulative performance quoted does not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of shares. Indexes are unmanaged and you cannot invest directly in an index. The return information for the indexes does not reflect the deduction of any fees, expenses, or taxes, except that the Lipper Global Funds Index reflects the fees and expenses of the underlying funds included in the index. *The performance of the MSCI World Index and the Lipper Global Funds Index is calculated from the end of the month, July 31, 2015, while the Institutional Shares inception date is August 7, There may be a slight variation of performance numbers because of this difference. Investment Overview 7

12 USAA WORLD GROWTH FUND ADVISER SHARES (ADVISER SHARES) (Ticker Symbol: USWGX) 5/31/18 5/31/17 Net Assets $10.1 Million $19.7 Million Net Asset Value Per Share $31.86 $31.07 AVERAGE ANNUAL TOTAL RETURNS AS OF 5/31/18 1 Year 5 Years Since Inception 8/1/ % 8.52% 10.64% EXPENSE RATIOS AS OF 5/31/17* Before Reimbursement 1.42% After Reimbursement 1.35% 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 ratios are reported in the Fund s prospectus dated October 1, 2017, and are based on estimated expenses for the current fiscal year. USAA Asset Management Company (the Manager) has agreed, through September 30, 2018, to make payments or waive management, administration, and other fees so that the total annual operating expenses of the Adviser Shares (exclusive of commission recapture, expense offset arrangements, acquired fund fees and expenses, and extraordinary expenses) do not exceed an annual rate of 1.35% of the Adviser Shares average net assets. If the total annual operating expense ratio of the Adviser Shares is lower than 1.35%, the Adviser Shares will operate at that lower expense ratio. This reimbursement arrangement may not be changed or terminated during this time period without approval of the Fund s Board of Trustees and may be changed or terminated by the Manager at any time after September 30, These estimated expense ratios may differ from the expense ratios disclosed in the Financial Highlights, which excludes acquired fund fees and expenses. Effective October 1, 2017, an expense limitation was added to the Adviser Shares. 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. 8 USAA World Growth Fund

13 CUMULATIVE PERFORMANCE COMPARISON $24,000 $22,000 $20,000 $22,079 $21,858 $20,459 $18,000 $16,000 $14,000 $12,000 $10,000 $8,000 7/10 5/11 5/12 5/13 5/14 5/15 5/16 5/17 5/18 USAA World Growth Fund Adviser Shares $22,079 MSCI World Index $21,858 Lipper Global Funds Index $20,459 Data from 7/31/10 through 5/31/18.* The graph illustrates the comparison of a $10,000 hypothetical investment in the USAA World Growth Fund Adviser Shares to the Fund s benchmarks listed above (see page 5 for benchmark definitions). Past performance is no guarantee of future results, and the cumulative performance quoted does not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of shares. Indexes are unmanaged and you cannot invest directly in an index. The return information for the indexes does not reflect the deduction of any fees, expenses, or taxes, except that the Lipper Global Funds Index reflects the fees and expenses of the underlying funds included in the index. *The performance of the MSCI World Index and Lipper Global Funds Index is calculated from the end of the month of July 31, 2010, while the inception date of the Adviser Shares is August 1, There may be a slight variation of performance numbers because of this difference. Investment Overview 9

14 TOP 10 INDUSTRIES 5/31/18 (% of Net Assets) Health Care Equipment % Pharmaceuticals % Household Products % Packaged Foods & Meats % Asset Management & Custody Banks % Apparel, Accessories & Luxury Goods % Distillers & Vintners % Industrial Conglomerates % Life Sciences Tools & Services % Railroads % TOP 10 EQUITY HOLDINGS 5/31/18 (% of Net Assets) Thermo Fisher Scientific, Inc % Visa, Inc., A % Bayer AG % Medtronic plc % Accenture plc, A % Honeywell International, Inc % LVMH Moet Hennessy Louis Vuitton SE % Comcast Corp., A % Nestle S.A % Stryker Corp % Refer to the Portfolio of Investments for complete list of securities. 10 USAA World Growth Fund

15 COUNTRY ALLOCATION 5/31/18 France 9.8% United Kingdom 8.1% United States 52.7% Switzerland 7.4% Germany 6.6% Other* 16.5% *Includes countries with less than 3% of portfolio, money market instruments and short-term investments purchased with cash collateral from securities loaned. Percentages are of the net assets of the Fund and may not equal 100%. Investment Overview 11

16 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: Dividend Received Long-Term Foreign Foreign Qualified Deduction (corporate Capital Gain Taxes Source Interest shareholders) (1) Distributions (2) Paid (3) Income Income 74.11% $47,997,000 $711,000 $15,718,000 $46,000 (1) Presented as a percentage of net investment income and short-term capital gain distributions paid, if any. (2) Pursuant to Section 852 of the Internal Revenue Code. (3) The Fund has elected under Section 853 of the Internal Revenue Code to pass through the credit for taxes paid in foreign countries. 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. 12 USAA World Growth Fund

17 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Trustees of USAA World Growth Fund: Opinion on the Financial Statements We have audited the accompanying statement of assets and liabilities of USAA World Growth Fund (the Fund ) (one of the 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, 2018 Report of Independent Registered Public Accounting Firm 13

18 PORTFOLIO OF INVESTMENTS May 31, 2018 Market Number Value of Shares Security (000) EQUITY SECURITIES (99.4%) COMMON STOCKS (99.4%) Consumer Discretionary (15.9%) Advertising (2.0%) 102,002 Omnicom Group, Inc. $ 7,352 1,278,916 WPP plc 20,954 28,306 Apparel Retail (0.1%) 30,203 Urban Outfitters, Inc. (a) 1,255 Apparel, Accessories & Luxury Goods (4.4%) 339,924 Burberry Group plc 9, ,166 Cie Financiere Richemont S.A. 14,406 4,968 Hermes International 3,536 97,112 LVMH Moet Hennessy Louis Vuitton SE 33,724 61,015 Auto Parts & Equipment (0.6%) 90,917 Aptiv plc 8,865 Automotive Retail (0.5%) 11,323 AutoZone, Inc. (a) 7,352 Cable & Satellite (2.3%) 1,026,618 Comcast Corp. A 32,010 Casinos & Gaming (0.6%) 560,000 Sands China Ltd. 3,352 22,800 Wynn Resorts Ltd. 4,469 7,821 Motorcycle Manufacturers (0.4%) 121,911 Harley-Davidson, Inc. 5,008 Movies & Entertainment (3.0%) 187,121 Time Warner, Inc. 17, ,317 Walt Disney Co. 24,899 42,518 Restaurants (1.7%) 690,551 Compass Group plc 14, USAA World Growth Fund

19 Market Number Value of Shares Security (000) 150,052 Whitbread plc $ 8,408 23,256 Specialty Stores (0.3%) 270,462 Sally Beauty Holdings, Inc. (a),(b) 4,095 Total Consumer Discretionary 221,501 Consumer Staples (17.3%) Brewers (2.0%) 1,094,629 Ambev S.A. (c) 5,786 81,700 Carlsberg A/S B 9, ,617 Heineken N.V. 13,377 28,249 Distillers & Vintners (4.1%) 814,188 Diageo plc 29, ,106 Pernod Ricard S.A. 27,568 57,468 Household Products (5.0%) 222,040 Colgate-Palmolive Co. 14,009 1,059,937 Essity AB B 26, ,744 Reckitt Benckiser Group plc 29,082 70,013 Packaged Foods & Meats (5.0%) 326,607 Danone S.A. 24, ,371 Kellogg Co. 13, ,521 Nestle S.A. 31,056 69,118 Personal Products (1.2%) 1,191,185 Coty, Inc. A 15,783 Total Consumer Staples 240,631 Energy (1.1%) Oil & Gas Equipment & Services (1.1%) 106,593 National Oilwell Varco, Inc. 4, ,065 Schlumberger Ltd. 10,580 Total Energy 14,995 Financials (10.6%) Asset Management & Custody Banks (4.9%) 444,391 Bank of New York Mellon Corp. 24, ,878 Franklin Resources, Inc. 9, ,107 Julius Baer Group Ltd. (a) 8, ,922 State Street Corp. 27,000 68,890 Portfolio of Investments 15

20 Market Number Value of Shares Security (000) Consumer Finance (1.5%) 217,388 American Express Co. $ 21,369 Diversified Banks (0.9%) 142,030 Erste Group Bank AG (a),(c) 5, ,224 Grupo Financiero Banorte SAB de CV 3, ,100 Kasikornbank PCL 3,067 12,810 Diversified Capital Markets (1.2%) 1,097,520 UBS Group AG (a) 16,536 Financial Exchanges & Data (0.4%) 45,416 Deutsche Boerse AG 6,074 Insurance Brokers (0.7%) 65,751 Aon plc 9,197 Investment Banking & Brokerage (1.0%) 58,790 Goldman Sachs Group, Inc. 13,280 Total Financials 148,156 Health Care (19.2%) Health Care Equipment (8.4%) 313,488 Abbott Laboratories 19, ,798 Medtronic plc 37,100 29,291 Sonova Holding AG 5, ,194 Stryker Corp. 31, ,809 Zimmer Biomet Holdings, Inc. 24, ,356 Health Care Supplies (1.7%) 67,275 Cooper Cos., Inc. 15, ,800 Hoya Corp. 8,973 24,198 Life Sciences Tools & Services (3.8%) 198,780 Thermo Fisher Scientific, Inc. 41,400 61,453 Waters Corp. (a) 11,837 53,237 Pharmaceuticals (5.3%) 318,681 Bayer AG 37,948 42,438 Johnson & Johnson 5, ,857 Merck KGaA 11,115 91,394 Roche Holding AG 19,571 73,710 Total Health Care 268, USAA World Growth Fund

21 Market Number Value of Shares Security (000) Industrials (17.0%) Aerospace & Defense (1.9%) 60,246 MTU Aero Engines AG $ 11, ,657 United Technologies Corp. 14,811 26,199 Agricultural & Farm Machinery (1.0%) 816,400 Kubota Corp. 13,756 Air Freight & Logistics (1.8%) 214,571 United Parcel Service, Inc. B 24,916 Airport Services (1.0%) 74,199 Aena SME S.A. 14,252 Electrical Components & Equipment (2.3%) 161,789 Legrand S.A. 12, ,047 Schneider Electric SE 20,619 32,826 Human Resource & Employment Services (0.6%) 130,588 Adecco Group AG 7,833 Industrial Conglomerates (4.0%) 110,053 3M Co. 21, ,225 Honeywell International, Inc. 34,644 56,350 Railroads (3.7%) 340,497 Canadian National Railway Co. 28, ,440 Kansas City Southern 22,977 51,402 Trading Companies & Distributors (0.7%) 104,946 Brenntag AG 6,054 62,325 NOW, Inc. (a) 876 7,286 WW Grainger, Inc. 2,251 9,181 Total Industrials 236,715 Information Technology (13.3%) Communications Equipment (0.8%) 269,701 Cisco Systems, Inc. 11,519 Data Processing & Outsourced Services (3.4%) 100,887 PayPal Holdings, Inc. (a) 8, ,034 Visa, Inc. A (b) 39,220 47,500 Portfolio of Investments 17

22 Market Number Value of Shares Security (000) Electronic Components (0.5%) 86,320 Amphenol Corp. A $ 7,504 Internet Software & Services (0.9%) 321,181 ebay, Inc. (a) 12,115 IT Consulting & Other Services (3.5%) 223,333 Accenture plc A 34, ,603 Cognizant Technology Solutions Corp. A 13,910 48,692 Semiconductors (0.5%) 71,184 Microchip Technology, Inc. 6,932 Systems Software (2.7%) 171,869 Check Point Software Technologies Ltd. (a) 16, ,125 Oracle Corp. 20,609 37,342 Technology Hardware, Storage, & Peripherals (1.0%) 291,100 Samsung Electronics Co. Ltd. 13,691 Total Information Technology 185,295 Materials (5.0%) Fertilizers & Agricultural Chemicals (0.8%) 93,347 Monsanto Co. 11,898 Industrial Gases (2.8%) 113,068 Air Liquide S.A. (b) 13,932 83,326 Linde AG 19,093 37,961 Praxair, Inc. 5,932 38,957 Specialty Chemicals (1.4%) 220,274 Akzo Nobel N.V. 19,339 Total Materials 70,194 Total Common Stocks (cost: $840,133) 1,385,988 Total Equity Securities (cost: $840,133) 1,385,988 MONEY MARKET INSTRUMENTS (0.4%) GOVERNMENT & U.S. TREASURY MONEY MARKET FUNDS (0.4%) 4,813,039 State Street Institutional Treasury Money Market Fund Premier Class, 1.66% (d) (cost: $4,813) 4, USAA World Growth Fund

23 Market Number Value of Shares Security (000) SHORT-TERM INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED (1.3%) GOVERNMENT & U.S. TREASURY MONEY MARKET FUNDS (1.3%) 24,265 Federated Government Obligations Fund Institutional Class, 1.61% (d) $ ,515 Fidelity Government Portfolio Class I, 1.64% (d) ,533,638 Goldman Sachs Financial Square Government Fund Institutional Class, 1.65% (d) 11,534 16,093 HSBC U.S. Government Money Market Fund Institutional Class, 1.65% (d) 16 3,782,918 Invesco Government & Agency Portfolio Institutional Class, 1.64% (d) 3,783 2,187,007 Western Asset Institutional Government Reserve Institutional Class, 1.64% (d) 2,187 Total Short-Term Investments Purchased with Cash Collateral from Securities Loaned (cost: $18,174) 18,174 Total Investments (cost: $863,120) $1,408,975 ($ in 000s) VALUATION HIERARCHY Assets LEVEL 1 LEVEL 2 LEVEL 3 Total Equity Securities: Common Stocks $1,374,322 $11,666 $ $1,385,988 Money Market Instruments: Government & U.S. Treasury Money Market Funds 4,813 4,813 Short-Term Investments Purchased with Cash Collateral from Securities Loaned: Government & U.S. Treasury Money Market Funds 18,174 18,174 Total $1,397,309 $11,666 $ $1,408,975 Refer to the Portfolio of Investments for additional industry, country, or geographic region classifications. For the period of June 1, 2017, through May 31, 2018, the table below shows the transfers between Level 1, Level 2, and Level 3. The Fund s policy is to recognize any transfers in and transfers out as of the beginning of the reporting period in which the event or circumstance that caused the transfer occurred. Portfolio of Investments 19

24 FAIR VALUE LEVEL TRANSFERS For the period of June 1, 2017, through May 31, 2018, the table below shows the transfers between Level 1, Level 2, and Level 3. The Fund's policy is to recognize any transfers in and transfers out as of the beginning of the reporting period in which the event or circumstance that caused the transfer occurred. Transfers into Transfers into Transfers into (out of) (out of) (out of) Assets ($ in 000s) Level 1 Level 2 Level 3 Common Stocks (I) $(12,507) $12,507 $ Total $(12,507) $12,507 $ (I) Transferred from Level 1 to Level 2 due to an assessment of events at the end of the current reporting period, these securities had adjustments to their foreign market closing prices to reflect changes in value that occurred after the close of foreign markets and prior to the close of the U.S. securities markets. 20 USAA World Growth Fund

25 NOTES TO PORTFOLIO OF INVESTMENTS May 31, 2018 GENERAL NOTES Market 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. Investments in foreign securities were 45.2% of net assets at May 31, SPECIFIC NOTES (a) Non-income-producing security. (b) The security, or a portion thereof, was out on loan as of May 31, (c) Securities with a value of $11,666,000, which represented 0.8% of the Fund s net assets, were classified as Level 2 at May 31, 2018, due to the prices being adjusted to take into account significant market movements following the close of local trading. (d) Rate represents the money market fund annualized seven-day yield at May 31, See accompanying notes to financial statements. Notes to Portfolio of Investments 21

26 STATEMENT OF ASSETS AND LIABILITIES (IN THOUSANDS) May 31, 2018 ASSETS Investments in securities, at market value (including securities on loan of $55,957) (cost of $863,120) $1,408,975 Receivables: Capital shares sold 371 USAA Asset Management Company (Note 7) 6 USAA Transfer Agency Company (Note 7) 2 Dividends and interest 4,242 Securities sold 446 Other 58 Total assets 1,414,100 LIABILITIES Payables: Upon return of securities loaned 18,174 Capital shares redeemed 610 Accrued management fees 899 Accrued transfer agent s fees 58 Other accrued expenses and payables 238 Total liabilities 19,979 Net assets applicable to capital shares outstanding $1,394,121 NET ASSETS CONSIST OF: Paid-in capital $ 809,846 Accumulated undistributed net investment income 8,630 Accumulated net realized gain on investments 29,868 Net unrealized appreciation of investments 545,855 Net unrealized depreciation of foreign capital gains tax (66) Net unrealized depreciation of foreign currency translations (12) Net assets applicable to capital shares outstanding $1,394,121 Net asset value, redemption price, and offering price per share: Fund Shares (net assets of $1,353,880/42,547 capital shares outstanding, no par value) $ Institutional Shares (net assets of $30,127/949 capital shares outstanding, no par value) $ Adviser Shares (net assets of $10,114/317 capital shares outstanding, no par value) $ See accompanying notes to financial statements. 22 USAA World Growth Fund

27 STATEMENT OF OPERATIONS (IN THOUSANDS) Year ended May 31, 2018 INVESTMENT INCOME Dividends (net of foreign taxes withheld of $1,756) $28,994 Interest 103 Securities lending (net) 206 Total income 29,303 EXPENSES Management fees 10,683 Administration and servicing fees: Fund Shares 2,060 Institutional Shares 22 Adviser Shares 21 Transfer agent s fees: Fund Shares 2,035 Institutional Shares 22 Adviser Shares 15 Distribution and service fees (Note 7): Adviser Shares 35 Custody and accounting fees: Fund Shares 247 Institutional Shares 3 Adviser Shares 2 Postage: Fund Shares 92 Institutional Shares 1 Adviser Shares 1 Shareholder reporting fees: Fund Shares 66 Trustees fees 34 Registration fees: Fund Shares 31 Institutional Shares 24 Adviser Shares 17 Professional fees 122 Other 27 Total expenses 15,560 Financial Statements 23

28 Expenses reimbursed: Adviser Shares $ (6) Net expenses 15,554 NET INVESTMENT INCOME 13,749 NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, AND FOREIGN CURRENCY Net realized gain (loss) on: Investments (net of foreign taxes withheld of $3) 58,464 Foreign currency transactions (23) Change in net unrealized appreciation/(depreciation) of: Investments 17,949 Foreign capital gains tax (21) Foreign currency translations (43) Net realized and unrealized gain 76,326 Increase in net assets resulting from operations $90,075 See accompanying notes to financial statements. 24 USAA World Growth Fund

29 STATEMENTS OF CHANGES IN NET ASSETS (IN THOUSANDS) Years ended May 31, FROM OPERATIONS Net investment income $ 13,749 $ 8,722 Net realized gain on investments 58,464 30,993 Net realized loss on foreign currency transactions (23) (112) Change in net unrealized appreciation/(depreciation) of: Investments 17, ,425 Foreign capital gains tax (21) (45) Foreign currency translations (43) 92 Increase in net assets resulting from operations 90, ,075 DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income: Fund Shares (10,111) (8,757) Institutional Shares (244) (40) Adviser Shares (84) Total distributions of net investment income (10,355) (8,881) Net realized gains: Fund Shares (49,677) (23,893) Institutional Shares (971) (125) Adviser Shares (372) (344) Total distributions of net realized gains (51,020) (24,362) Distributions to shareholders (61,375) (33,243) NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS (NOTE 6) Fund Shares 6,339 (6,270) Institutional Shares 23, Adviser Shares (10,300) 657 Total net increase (decrease) in net assets from capital share transactions 19,463 (4,832) Capital contribution from USAA Transfer Agency Company (Note 7) Fund Shares 2 Net increase in net assets 48, ,000 Financial Statements 25

30 NET ASSETS Beginning of year $1,345,956 $1,178,956 End of year $1,394,121 $1,345,956 Accumulated undistributed net investment income: End of year $ 8,630 $ 5,883 See accompanying notes to financial statements. 26 USAA World Growth Fund

31 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 World Growth Fund (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. The Fund s investment objective is to seek capital appreciation. The Fund consists of three classes of shares: World Growth Fund Shares (Fund Shares), World Growth Fund Institutional Shares (Institutional Shares), and World Growth Fund Adviser Shares (Adviser Shares). Each class of shares has equal rights to assets and earnings, except that each class bears certain class-related expenses specific to the particular class. These expenses include administration and servicing fees, transfer agent fees, postage, shareholder reporting fees, distribution and service (12b-1) fees, and certain registration and custodian fees. Expenses not attributable to a specific class, income, and realized gains or losses on investments are allocated to each class of shares based on each class relative net assets. Each class has exclusive voting rights on matters related solely to that class and separate voting rights on matters that relate to all classes. The Institutional Shares are available for investment through a USAA discretionary managed account program and certain advisory programs sponsored by financial 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 other persons or legal entities that the Fund may approve from time to time, or for purchase by a USAA fund Notes to Financial Statements 27

32 participating in a fund-of-funds investment strategy (USAA fund-of-funds). The Adviser Shares permit investors to purchase shares through financial intermediaries, including banks, broker-dealers, insurance companies, investment advisers, plan sponsors, and financial professionals that provide various administrative and distribution services. 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 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. Equity securities, including exchange-traded funds (ETFs), except as otherwise noted, traded primarily on a domestic securities exchange or the over-the-counter markets, are valued at the last sales price or official closing price on the exchange or primary market on which 28 USAA World Growth Fund