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PRICEWATERHOUSECOOPERS [logo]
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| PricewaterhouseCoopers LLP
| 100 East Broad Street
| Suite 2100
| Columbus, OH 43215-3671
| Telephone (614) 225 8700
| Facsimile (614) 224 1044
INDEPENDENT ACCOUNTANTS' REPORT
To the Trustees of The Victory Variable Insurance Funds
We have examined management's assertion about The Victory Variable Insurance
Funds' (comprising the Victory Variable Investment Quality Bond Fund, the
Victory Variable Investment Diversified Stock Fund, and the Victory Variable
Investment Small Company Opportunity Fund) compliance with the requirements of
subsections (b) and (c) of Rule 17f-2 under the Investment Company Act of 1940
as of July 16, 1999, included in the accompanying Management Statement
Regarding Compliance with Certain Provisions of the Investment Company Act of
1940. Management is responsible for The Victory Variable Insurance Funds'
compliance with those requirements. Our responsibility is to express an opinion
on management's assertion about The Victory Variable Insurance Funds' compliance
based on our examination.
Our examination was made in accordance with standards established by the
American Institute of Certified Public Accountants and, accordingly, included
examining, on a test basis, evidence about The Victory Variable Insurance
Funds' compliance with those requirements and performing such other procedures
as we considered necessary in the circumstances. Included among our procedures
were the following tests performed as of July 16, 1999, with respect to
securities of The Victory Variable Insurance Funds:
* Count and inspection of all securities located in the vault of Key
Trust Company of Ohio, N.A. in Cleveland, Ohio, without prior notice;
* Confirmation, or other procedures as we considered necessary, of all
securities held in book entry form by the Federal Reserve Bank of
Cleveland, Depository Trust Company or Bank of New York;
* Confirmation or other procedures as we considered necessary, of all
securities out for transfer with brokers;
* Reconciliation of all such securities to the books and records of The
Victory Variable Insurance Funds and Key Trust Company of Ohio, N.A.
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We believe that our examination provides a reasonable basis for our opinion. Our
examination does not provide a legal determination on The Victory Variable
Insurance Funds' compliance with specified requirements.
In our opinion, management's assertion that The Victory Variable Insurance
Funds were in compliance with the requirements of subsections (b) and (c) of
Rule 17f-2 of the Investment Company Act of 1940 as of July 16, 1999, with
respect to securities reflected in the investment accounts of The Victory
Variable Insurance Funds is fairly stated, in all material respects.
This report is intended solely for the information and use of management of The
Victory Variable Insurance Funds and the Securities and Exchange Commission and
should not be used for any other purpose.
/s/ PRICEWATERHOUSECOOPERS LLP
August 23, 1999
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MANAGEMENT STATEMENT REGARDING COMPLIANCE WITH CERTAIN PROVISIONS
OF THE INVESTMENT COMPANY ACT OF 1940
We, as members of management of The Victory Variable Insurance Funds
(comprising the Victory Variable Investment Quality Bond Fund, the Victory
Variable Investment Diversified Stock Fund, and the Victory Variable Investment
Small Company Opportunity Fund) are responsible for complying with the
requirements of subsections (b) and (c) of Rule 17f-2, "Custody of Investments
by Registered Management Investment Companies," of the Investment Company Act
of 1940. We are also responsible for establishing and maintaining effective
internal controls over compliance with those requirements. We have performed an
evaluation of The Victory Variable Insurance Funds' compliance with the
requirements of subsections (b) and (c) of Rule 17f-2 as of July 16, 1999.
Based on this evaluation, we assert that The Victory Variable Insurance Funds
were in compliance with the provisions of subsections (b) and (c) of Rule 17f-2
of the Investment Company Act of 1940 as of July 16, 1999, with respect to
securities reflected in the investment accounts of The Victory Variable
Insurance Funds.
The Victory Variable Insurance Funds
