<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 28, 1995.
FILE NO. 33-8982
ICA NO. 811-4852
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
PRE-EFFECTIVE AMENDMENT NO. _____ / /
POST-EFFECTIVE AMENDMENT NO. 25 /X/
AND
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 /X/
AMENDMENT NO. 26 /X/
THE VICTORY PORTFOLIOS
(EXACT NAME OF REGISTRANT AS SPECIFIED IN DECLARATION OF TRUST)
3435 STELZER ROAD
COLUMBUS, OHIO 43219
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
(800) 362-5365
(AREA CODE AND TELEPHONE NUMBER)
GEORGE O. MARTINEZ, ESQ.
CONCORD HOLDING CORPORATION
3435 STELZER ROAD
COLUMBUS, OHIO 43219
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPY TO:
CARL FRISCHLING, ESQ.
KRAMER, LEVIN, NAFTALIS,
NESSEN, KAMIN & FRANKEL
919 THIRD AVENUE
NEW YORK, NEW YORK 10022
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE:
/ / IMMEDIATELY UPON FILING PURSUANT TO /X/ ON JANUARY 1, 1996 PURSUANT TO
PARAGRAPH (B) PARAGRAPH (B)
/ / 60 DAYS AFTER FILING PURSUANT TO / / ON (____________) PURSUANT TO
PARAGRAPH (A)(1) PARAGRAPH (A)(1)
/ / 75 DAYS AFTER FILING PURSUANT TO / / ON ( ) PURSUANT TO
PARAGRAPH (A)(2) PARAGRAPH (A)(2), OF RULE 485.
<PAGE> 2
IF APPROPRIATE, CHECK THE FOLLOWING BOX:
/ / THIS POST-EFFECTIVE AMENDMENT DESIGNATES A NEW EFFECTIVE DATE FOR A
PREVIOUSLY FILED POST-EFFECTIVE AMENDMENT.
REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OF SHARES PURSUANT TO RULE 24F-2
AND ITS RULE 24F-2 NOTICE WITH RESPECT TO ITS OHIO MUNICIPAL MONEY MARKET FUND
FOR THE AUGUST 31, 1995 FISCAL YEAR WAS FILED ON OCTOBER 25, 1995, AND WILL FILE
ON OR ABOUT DECEMBER 29, 1995 ITS RULE 24F-2 NOTICE WITH RESPECT TO ITS OHIO
MUNICIPAL MONEY MARKET FUND FOR ITS TWO MONTH PERIOD ENDED OCTOBER 31, 1995, IN
ACCORDANCE WITH RULE 24F-2.
<PAGE> 3
THE VICTORY PORTFOLIOS
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
Form N-1A Part A Item Prospectus Caption
- --------------------- ------------------
<S> <C>
i. Cover Page Cover Page
ii. Synopsis Summary of Fund Expenses
iii. Condensed Financial Information Financial Highlights
iv. General Description of Registrant Investment Objective and Policies;
Limiting Investment Risks;
Additional Information; Additional
Information Regarding Securities in
which the Fund May Invest
v. Management of the Fund Fund Organization and Fees
v.A. Management's Discussion of Fund Portfolio Management
Performance
vi. Capital Stock and Other Securities How to Invest, Exchange and Redeem;
Dividends, Distributions and Taxes;
Additional Information
vii. Purchase of Securities Being Offered How to Invest, Exchange and Redeem
viii. Redemption or Repurchase How to Invest, Exchange and Redeem
ix. Pending Legal Proceedings Inapplicable
</TABLE>
<PAGE> 4
CROSS REFERENCE SHEET
THE VICTORY PORTFOLIOS - STATEMENT OF
ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
Form N-1A Part B Item
---------------------
<S> <C>
x. Cover Page Cover Page
xi. Table of Contents Table of Contents
xii. General Information and History The Victory Portfolios; Additional
Information-Description of Shares
xiii. Investment Objectives and Policies Investment Objective and Policies
xiv. Management of the Fund Management of the Victory Portfolios
xv. Control Persons and Principal Additional Information - Miscellaneous
Holders of Securities
xvi. Investment Advisory and Other Management of The Victory Portfolios
Services
xvii. Brokerage Allocation and Other Practices Management of The Victory Portfolios-
Portfolio Transactions
xviii. Capital Stock and Other Securities Valuation; Additional Purchase and
Redemption Information; Matters
Affecting Redemption; Additional Information
xix. Purchase, Redemption and Pricing Valuation; Additional Purchase and
of Securities Being Offered Redemption Information; Management
of the Victory Portfolios
xx. Tax Status Additional Purchase and
Redemption Information; Additional Tax
Information
</TABLE>
<PAGE> 5
<TABLE>
<S> <C> <C>
xxi. Underwriters Management of the Funds-Distributor
xxii. Calculation of Performance Data Additional Information - Calculation of
Performance Data
xxiii. Financial Statements
</TABLE>
<PAGE> 6
PART A
<PAGE> 7
The
VICTORY
Portfolios
Ohio Municipal Money Market Fund
- --------------------------------------------------------------------------------
PROSPECTUS For current yield, purchase and redemption information,
January 1, 1996 call 800-539-FUND or 800-539-3863
- --------------------------------------------------------------------------------
THE VICTORY PORTFOLIOS is a registered open-end management investment company
that offers investors a selection of money market, fixed-income, municipal bond
and domestic and international equity portfolios. This Prospectus relates to the
Ohio Municipal Money Market Fund (the "Fund"), a non-diversified Fund. KeyCorp
Mutual Fund Advisers, Inc., Cleveland, Ohio, an indirect subsidiary of KeyCorp,
is the investment adviser to the Fund ("Key Advisers" or the "Adviser"). Society
Asset Management, Inc., Cleveland, Ohio, an indirect subsidiary of KeyCorp, is
the investment sub-adviser to the Fund ("Society" or the "Sub-Adviser"). Concord
Holding Corporation is the Fund's Administrator (the "Administrator"). Victory
Broker-Dealer Services, Inc. is the Fund's distributor (the "Distributor").
The Fund seeks to provide current income exempt from federal regular income tax
and the personal income taxes imposed by the State of Ohio and Ohio
municipalities consistent with stability of principal. (Federal regular income
tax does not include the federal alternative minimum tax for individuals and
corporations.) The Fund pursues this investment objective by investing primarily
in a portfolio of short-term Ohio municipal securities. Shares of the Fund are
offered at net asset value.
Please read this Prospectus before investing. It is designed to provide the
investor with information and to help you decide if the Fund's goals match your
own. Retain this document for future reference. A Statement of Additional
Information (dated January 1, 1996) for the Fund and an audited report for the
Fund's fiscal period ended October 31, 1995 have been filed with the Securities
and Exchange Commission (the "Commission") and are incorporated herein by
reference. The Statement of Additional Information is available without charge
upon request by calling 800-539-3863.
SHARES OF THE FUND ARE NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT.
THERE CAN BE NO ASSURANCE THAT THE FUND WILL MAINTAIN A STABLE $1.00 SHARE
PRICE.
SHARES OF THE FUND ARE:
- - NOT INSURED BY THE FDIC;
- - NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR GUARANTEED BY, ANY KEYCORP BANK, ANY
OF ITS AFFILIATES, OR ANY OTHER BANK;
- - SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT
INVESTED.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE, NOR HAS
THE COMMISSION OR ANY SUCH STATE AUTHORITY PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
- ----------------------------------------------------------------------------------------- ---
<S> <C>
Fund Expenses............................................................................ 2
Financial Highlights..................................................................... 3
Investment Objective..................................................................... 4
Investment Policies and Risk Factors..................................................... 4
Additional Information Regarding Securities in Which the Fund May Invest................. 5
Investment Risks......................................................................... 7
Limiting Investment Risks................................................................ 8
How to Invest, Exchange and Redeem....................................................... 9
Dividends, Distributions and Taxes....................................................... 13
Performance.............................................................................. 15
Fund Organization and Fees............................................................... 16
Additional Information................................................................... 19
</TABLE>
1
<PAGE> 8
- --------------------------------------------------------------------------------
FUND EXPENSES
- --------------------------------------------------------------------------------
The table below summarizes the expenses associated with the Fund. This standard
format was developed for use by all mutual funds to help an investor make
investment decisions. Of course, you should consider this expense information
along with other important information in this Prospectus, such as the Fund's
investment objective.
A. SHAREHOLDER TRANSACTION EXPENSE
<TABLE>
<CAPTION>
<S> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of the
offering price)...................................................... None
Sales Charge Imposed on Reinvested Dividends........................... None
Deferred Sales Load (as a percentage of original purchase price or
redemption proceeds, as applicable).................................. None
Redemption Fees (as a percentage of amount redeemed, if applicable).... None
Exchange Fee........................................................... None
</TABLE>
B. ANNUAL FUND OPERATING EXPENSES AFTER EXPENSE WAIVERS AND REIMBURSEMENTS (as a
percentage of average net assets)
<TABLE>
<S> <C>
Management Fee(1)...................................................... .20%
Administration Fee..................................................... .15%
Other Expenses(2)...................................................... .30%
Total Fund Operating Expenses(3)....................................... .65%
</TABLE>
- ---------------
(1) The investment management fee has been reduced to reflect the voluntary
waiver of a portion of the fee by Key Advisers. The Adviser has agreed to
waive a portion of its management fee, to the extent necessary, to maintain
the operating expense ratio of the Fund at .65% until at least August 31,
1996. The maximum management fee absent waiver is .50%.
(2) Includes a maximum .25% shareholder servicing fee payable to certain
financial institutions. See "Fund Organization and Fees -- Shareholder
Servicing."
(3) Without the voluntary waiver, the total operating expense ratio of the Fund
would be .95%.
C. EXAMPLE: You would pay the following expenses on a $1,000 investment in the
Fund, assuming (1) a 5% annual return and (2) redemption at the end of each time
period.
<TABLE>
<CAPTION>
<S> <C>
One Year........................................................... $ 7
Three Years........................................................ $21
Five Years......................................................... $36
Ten Years.......................................................... $81
</TABLE>
THE PURPOSE OF THE TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE VARIOUS
COSTS AND EXPENSES THAT AN INVESTOR IN THE FUND WOULD BEAR EITHER DIRECTLY OR
INDIRECTLY. SEE "FUND ORGANIZATION AND FEES" FOR A MORE COMPLETE DISCUSSION OF
ANNUAL OPERATING EXPENSES OF THE FUND. THE FOREGOING EXAMPLE IS BASED UPON
EXPENSES FOR THE PERIOD ENDED OCTOBER 31, 1995 AND EXPENSES THAT THE FUND IS
EXPECTED TO INCUR DURING THE CURRENT FISCAL YEAR. THE FOREGOING EXAMPLE SHOULD
NOT BE CONSIDERED A REPRESENTATION OF ACTUAL OR EXPECTED FUND PERFORMANCE OR
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Ohio Municipal MMF..................... 7 21 36 81
</TABLE>
2
<PAGE> 9
- --------------------------------------------------------------------------------
THE VICTORY OHIO MUNICIPAL MONEY MARKET FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following information for the two month period ended October 31, 1995 and
the fiscal year ended August 31, 1995 represent selected data for a single share
outstanding of the Fund and has been audited by Coopers & Lybrand, L.L.P.,
independent accountants to the Fund. The information for the year ended August
31, 1994 represents selected data for a single share outstanding of The Victory
Funds: Ohio Municipal Money Market Portfolio (the "Predecessor Fund") and has
been audited by KPMG Peat Marwick LLP, independent accountants for the
Predecessor Fund. All other information represents selected data for a single
share outstanding of A.T. Ohio Municipal Money Fund, the predecessor to The
Victory Funds: Ohio Municipal Money Market Portfolio, throughout each of the
periods shown. Such information has been audited by Ernst & Young LLP,
independent accountants for the A. T. Ohio Municipal Money Market Fund for the
fiscal years indicated in the table below. The Financial Statements and
independent accountants' reports as of October 31, 1995 are incorporated by
reference in this Prospectus and the Statement of Additional Information.
SELECTED PER SHARE DATA
<TABLE>
<CAPTION>
TWO YEARS ENDED AUGUST 31,
MONTHS ENDED -----------------------------------------------------------------
OCTOBER 31, 1995(G) 1995(B) 1994(C) 1993(A)(C)
------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income............ 0.006 0.033 0.021 0.021
LESS DISTRIBUTIONS:
Dividends to shareholders from
net investment income.......... (0.006) (0.033) (0.021) (0.021)
-------- -------- -------- --------
Net asset value, end of period... $ 1.00 $ 1.00 $ 1.00 $ 1.00
================== ======== ======== ========
TOTAL RETURN..................... 0.55%(d) %3.33 %2.10 %2.14
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000).......................... $ 510,414 $ 502,453 $ 318,132 $ 262,681
Ratio of expenses to average net
assets......................... 0.64%(e)(f) %0.63(f) %0.65(f) %0.65(f)
Ratio of net interest income to
average net assets............. 3.31%(e)(f) %3.33(f) %2.08(f) %2.12(f)
<CAPTION>
1992(A)(C) 1991(A)(C) 1990(C) 1989(C)
------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C>
Net asset value, beginning of
period......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income............ 0.031 0.046 0.053 0.056
LESS DISTRIBUTIONS:
Dividends to shareholders from
net investment income.......... (0.031) (0.046) (0.053) (0.056)
-------- -------- -------- --------
Net asset value, end of period... $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ========
TOTAL RETURN..................... %3.18 %4.67 %5.50 %5.76
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000).......................... $ 252,705 $ 253,177 $ 297,845 $ 278,337
Ratio of expenses to average net
assets......................... %0.65(f) %0.64(f) %0.65 %0.65
Ratio of net interest income to
average net assets............. %3.13(f) %4.59(f) %5.36 %5.60
<CAPTION>
1988(C) 1987(C) 1986(C)
------------------- ------------------- -------------------
Net asset value, beginning of
period......................... $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income............ 0.044 0.036 0.045
LESS DISTRIBUTIONS:
Dividends to shareholders from
net investment income.......... (0.044) (0.036) (0.045)
-------- -------- --------
Net asset value, end of period... $ 1.00 $ 1.00 $ 1.00
======== ======== ========
TOTAL RETURN..................... %4.50 %3.75 %4.60
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000).......................... $ 257,002 $ 223,677 $ 160,061
Ratio of expenses to average net
assets......................... %0.63(f) %0.62 %0.63(f)
Ratio of net interest income to
average net assets............. %4.41(f) %3.71 %4.30(f)
</TABLE>
- ---------------
(a)Effective February 27, 1991, Ameritrust Company National Association became
investment adviser to the Predecessor Fund. Effective March 16, 1992, the
Predecessor Fund's investment adviser was acquired by Society Corporation.
Effective July 13, 1992, the adviser was merged into Society National Bank,
another wholly-owned subsidiary of Society Corporation. Effective February 3,
1993, Society Asset Management, Inc., a wholly-owned subsidiary of Society
National Bank, was named investment adviser to the Predecessor Fund.
(b)Effective June 5, 1995, the Predecessor Fund merged into the Fund.
(c)Audited by other auditors (as indicated above).
(d)Not annualized.
(e)Annualized.
(f)For the two month period ended October 31, 1995 and fiscal years ended August
31, 1995, 1994, 1993, 1992, 1991, 1988 and 1986, the former investment
advisers waived all or a portion of their fees and the administrator and
former administrator waived all or a portion of their fees and/or voluntarily
reimbursed certain other operating expenses of the Fund and the predecessor
funds. Had the investment advisers and administrators not undertaken such
action, the ratios of expenses and net investment income to average net
assets would have been 0.92% and 3.03% (annualized), 0.94% and 3.02%, 0.76%
and 1.97%, 0.72% and 2.05%, 0.68% and 3.10%, 0.66% and 4.57%, 0.66% and
4.38%, 0.73% and 4.21%, respectively, on an annualized basis.
(g)Effective January 1, 1996, KeyCorp Mutual Fund Advisers, Inc., a wholly-owned
subsidiary of KeyCorp Asset Management Holdings, Inc., became investment
adviser and Society Asset Management, Inc. became sub-adviser to the Fund.
The Fund's fiscal year was changed to the period ended October 31 of each
year.
3
<PAGE> 10
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
The investment objective of the Fund is to seek to provide current income exempt
from federal regular income tax and the personal income taxes imposed by the
State of Ohio and Ohio municipalities consistent with stability of principal.
This is a fundamental objective which cannot be changed without approval of the
Fund's shareholders.
- --------------------------------------------------------------------------------
INVESTMENT POLICIES AND RISK FACTORS
- --------------------------------------------------------------------------------
Key Advisers and the Sub-Adviser intend to achieve the Fund's objective by
primarily investing in a portfolio of short-term Ohio Municipal Securities, as
defined below. As a matter of fundamental policy, under normal market
conditions, the Fund invests so that at least 80% of its annual interest income
is exempt from federal regular income tax and Ohio state income tax. (Federal
regular income tax does not include the federal individual alternative minimum
tax or the federal alternative minimum tax for corporations.) Most Ohio
municipalities do not subject dividend and interest income to local income tax.
While there is no assurance that the Fund will achieve its investment objective,
it endeavors to do so by following the investment policies described in this
Prospectus. Income distributed by the Fund may not necessarily be exempt from
state or municipal taxes in states other than Ohio.
The investment policies described below may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in these policies becomes effective.
ACCEPTABLE INVESTMENTS
The Fund will invest primarily in Ohio municipal securities with remaining
maturities of 397 days or less at the time of purchase by the Fund. The average
maturity of these securities, computed on a dollar weighted basis, will be 90
days or less. Ohio municipal securities which, under normal market conditions,
will comprise at least 65% of the Fund's assets, are debt obligations issued by
or on behalf of the State of Ohio, its political subdivisions, or agencies; debt
obligations of any state, territory or possession of the United States,
including the District of Columbia; and any political subdivision or financing
authority of any of these, the income from which is, in the opinion of qualified
legal counsel, exempt from both federal regular income tax and the personal
income tax imposed by the State of Ohio ("Municipal Securities"). The Fund may
invest, without limit, in securities the income from which is subject to federal
alternative minimum tax. Municipal Securities consist of:
- - tax and revenue anticipation notes ("TRANs") issued to finance working capital
needs in anticipation of receiving taxes or other revenues;
- - bond anticipation notes ("BANs") that are intended to be refinanced through a
later issuance of longer-term bonds;
- - municipal commercial paper and other short-term notes;
- - variable rate demand notes;
- - municipal bonds (including bonds having serial maturities and pre-refunded
bonds); and
- - participation interests in any of the foregoing obligations.
RATINGS. The Municipal Securities in which the Fund invests must be rated in
one of the two highest short-term rating categories by a nationally recognized
statistical rating organization ("NRSROs") or be of comparable quality to
securities having such ratings. A NRSRO's two highest rating categories are
determined without regard for sub-categories and gradations. For example,
securities rated SP-1+, SP-1 or SP-2 by Standard & Poor's Corporation ("S&P"),
MIG1 or MIG2 by Moody's Investors Service, Inc. ("Moody's"), or FIN-1+, FIN-1,
or FIN-2 by Fitch Investors Service, Inc. ("Fitch") are all considered rated in
one of the two highest short-term rating categories. The Fund will follow
applicable regulations in determining whether a security rated by more than one
NRSRO can be treated as being in one of the two highest short-term rating
categories; currently, such a security must be rated by two NRSROs in one of
these categories. See "Limiting Investment Risks -- Regulatory Compliance."
- - CREDIT ENHANCEMENT. The acceptable investments of the Fund may have a credit
enhancement provided by a guaranty, letter of credit or insurance. The Fund
typically evaluates the credit quality and ratings of securities so enhanced
based upon the financial condition and ratings of the party providing the credit
enhancement (the "credit
4
<PAGE> 11
enhancer"), rather than the issuer. However, such securities will not be treated
as having been issued by the credit enhancer for diversification purposes,
unless the Fund has invested more than 10% of its assets in securities issued,
guaranteed or otherwise enhanced by the credit enhancer, in which case the
securities will be treated as having been issued both by the issuer and the
credit enhancer. The bankruptcy, receivership or default of the credit enhancer
will adversely affect the quality and marketability of the underlying security.
The Fund may have more than 25% of its total assets invested in securities which
are subject to credit enhancements provided by domestic banks.
- - TEMPORARY INVESTMENTS. The Fund invests its assets so that at least 80% of
its annual interest income is exempt from federal regular income tax and Ohio
state income taxes. However, from time to time, when the Adviser determines that
market conditions call for a temporary defensive posture, the Fund may invest in
temporary investments with remaining maturities of 397 days or less at the time
of purchase by the Fund or hold Fund assets in cash. Interest income from such
temporary investments may be taxable to shareholders as ordinary income. These
temporary investments consist of obligations issued by or on behalf of municipal
or corporate issuers having the same quality characteristics as Ohio Municipal
Securities purchased by the Fund; marketable obligations issued or guaranteed by
the U.S. government, its agencies, or instrumentalities; instruments issued by a
U.S. branch of a domestic bank or other depository institutions having capital,
surplus, and undivided profits in excess of $100,000,000 at the time of
investment; repurchase agreements (arrangements in which the organization
selling the Fund a temporary investment agrees at the time of sale to repurchase
it at a mutually agreed upon time and price); and commercial paper rated in one
of the two highest short-term rating categories by NRSROs. See "Ratings" above.
Although the Fund is permitted to make taxable temporary investments, there is
no current intention of generating income subject to federal regular or Ohio
income taxes.
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION REGARDING SECURITIES
IN WHICH THE FUND MAY INVEST
- --------------------------------------------------------------------------------
The following paragraphs provide a brief description of some of the securities
in which the Fund may invest, the transactions it may make and strategies it may
adopt. The Fund may, following notice to its shareholders, take advantage of
other investment practices which are not at present contemplated for use by the
Fund or which currently are not available but which may be developed, to the
extent such investment practices are both consistent with the Fund's investment
objective and legally permissible for the Fund. Such investment practices, if
they arise, may involve risks which exceed those involved in the activities
described in this Prospectus.
- - WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Fund does not intend to
invest in forward commitments for speculative purposes; however, the Fund may
purchase and sell Municipal Securities on a "when-issued" and "delayed delivery"
basis. These are arrangements in which the Fund purchases securities with
payment and delivery scheduled for a future date. If completed, the transaction
will generally settle within 60 days. Purchases of Municipal Securities on a
"when-issued" or "delayed delivery" basis are subject to market fluctuation and
are subject to the risk that the value or yields at delivery may be more or less
than the purchase price or the yields available when the transaction was
initiated. Although the Fund will generally purchase Municipal Securities on a
"when-issued" basis with the intention of acquiring such securities, it may sell
such securities before the settlement date if it is deemed advisable. When the
Fund is the buyer in such a transaction, it will maintain cash or high-grade
readily marketable debt securities sufficient to pay for such purchase
commitments. To the extent the Fund engages in "when-issued" and "delayed
delivery" transactions, it will do so only for the purpose of acquiring
portfolio securities consistent with the Fund's investment objectives and
policies, and not for the purpose of leverage. In "when-issued" and "delayed
delivery" transactions, the Fund relies on the seller to complete the
transaction. The other party's failure may cause the Fund to miss a price or
yield considered advantageous. Securities purchased on a "when-issued" or
"delayed delivery" basis generally do not earn interest until their scheduled
settlement date.
- - VARIABLE RATE DEMAND NOTES. The Fund may purchase variable rate demand notes
("VRDNs"), which are tax-exempt obligations containing a floating or variable
interest rate adjustment formula, together with an unconditional right of the
Fund to demand payment of the unpaid principal balance plus accrued interest
upon a short notice period, generally not to exceed seven days. The Fund may
also invest in participation VRDNs, which
5
<PAGE> 12
provide the Fund with an undivided interest in underlying VRDNs held by major
investment banking institutions. Any purchase of VRDNs will meet applicable
diversification and concentration requirements.
The Fund may acquire an underlying debt instrument for a relatively short period
(usually not more than one business day) subject to an obligation of the seller
to repurchase and the Fund to resell the instrument at a fixed price. In the
event the seller defaults on this agreement to repurchase the instrument, the
Fund may suffer a loss because of a decline in the value of the underlying debt
instrument.
- - REPURCHASE AGREEMENTS. A repurchase agreement is a purchase of and
simultaneous commitment to resell at an agreed upon price and date (which is
usually not more than seven days from the date of purchase). The Fund will enter
into repurchase agreements only with domestic banks or recognized dealers, with
respect to any of the above-mentioned securities. To limit risk, repurchase
agreements maturing in more than seven days and other illiquid assets will not
exceed 10% of the net assets of the Fund. The Fund requires daily valuation of
the underlying debt instrument for any repurchase agreement maturing in more
than one business day and requires that the market value of the collateral be
maintained at a minimum of 100% of the transaction value. The Fund maintains
constructive possession of the securities through a safekeeping arrangement with
third parties who qualify as custodians under Section 17(f) of the Investment
Company Act of 1940, as amended (the "1940 Act"). Repurchase Agreements are
considered by the staff of the Commission to be loans by the Fund.
- - REVERSE REPURCHASE AGREEMENTS. A reverse repurchase agreement is a
transaction where the Fund temporarily transfers possession of a portfolio
security to another party, such as a bank or a broker-dealer, in return for
cash, and agrees to buy the security back at a future date and price. The Fund
can invest the cash it receives or use it to meet redemption requests. If the
Fund reinvests the cash at a rate higher than the rate reflected by the terms of
the agreement, it may earn additional income. At the same time, the Fund is
exposed to greater potential fluctuations in the value of its assets when
engaging in reverse repurchase agreements.
At all times that a reverse repurchase agreement is outstanding, the Fund will
maintain cash and liquid securities in a segregated account at its custodian
bank with a value at least equal to its obligation under the agreement.
Securities and other assets held in the segregated account may not be sold while
the reverse repurchase agreement is outstanding, unless other suitable assets
are substituted.
- - PARTICIPATION INTERESTS. The Fund may purchase interests in Municipal
Securities from financial institutions such as commercial and investment banks,
savings and loan associations and insurance companies and consequently will deem
the participation interest to be issued by such entity. These interests may take
the form of participation interests or any other form of indirect ownership that
allows the Fund to treat the income from the investment as exempt from federal
income tax. The Fund invests in these participation interests in order to obtain
credit enhancement or demand features that would not be available through direct
ownership of the underlying Municipal Securities.
- - DEMAND FEATURES. The Fund may acquire securities that are subject to puts and
standby commitments ("demand features") to purchase the securities at their
principal amount (usually with accrued interest) within a fixed period (usually
seven days) following a demand by the Fund. The demand feature may be issued by
the issuer of the underlying securities, a dealer in the securities or by
another third party, and may not be transferred separately from the underlying
security. The Fund uses these arrangements to provide the Fund with liquidity
and not to protect against changes in the market value of the underlying
securities. The bankruptcy, receivership or default by the issuer of the demand
feature, or a default on the underlying security or other event that terminates
the demand feature before its exercise, will adversely affect the liquidity of
the underlying security. Demand features that are exercisable even after a
payment default on the underlying security may be treated as a form of credit
enhancement.
- - RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest in restricted
securities. Restricted securities are any securities in which the Fund may
invest pursuant to its investment objective and policies but which are subject
to restrictions on resale under federal securities laws. Under criteria
established by the Board of Trustees, certain restricted securities are
considered liquid. To the extent that restricted securities are not found to be
liquid, the Portfolio will limit their purchase, together with other securities
considered to be illiquid to 10% of its net assets.
- - OHIO MUNICIPAL SECURITIES. Ohio Municipal Securities are generally issued to
finance public works, such as airports, bridges, highways, housing, hospitals,
mass transportation projects, schools, streets, and water and sewer works. They
are also issued to repay outstanding obligations, to raise funds for general
operating expenses, and to make loans to other public institutions and
facilities.
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<PAGE> 13
Ohio Municipal Securities include industrial development bonds issued by or on
behalf of public authorities to provide financing aid to acquire sites or to
construct and equip facilities for privately or publicly owned businesses. The
availability of this financing encourages these businesses to locate within the
sponsoring communities and State and thereby increases local employment.
The two principal classifications of Municipal Securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith and credit and taxing power for the payment of
principal and interest. Interest on and principal of revenue bonds, however, are
payable only from the revenue generated by the facility financed by the bond or
other specified sources of revenue. Revenue bonds do not represent a pledge of
credit or create any debt of or charge against the general revenues of a
municipality or public authority. Industrial development bonds are typically
classified as revenue bonds.
The Fund may invest in serial municipal bonds and pre-refunded municipal bonds.
Serial municipal bonds mature in stages (usually annually) in order to maintain
acceptable levels of debt payments by the issuer and often are non-callable,
which means that the issuer cannot force the holder to redeem the bonds if
interest rates fall (among other circumstances). The principal and interest on
pre-refunded municipal bonds are no longer paid from the original revenue source
for such securities. Instead, the source of the payments typically is an escrow
fund consisting of U.S. Government securities. The assets in the escrow fund are
derived from the proceeds of refunding bonds issued by the same issuer as the
pre-refunded municipal bond.
Yields on Ohio Municipal Securities depend on a variety of factors, including
the general conditions of the short-term municipal note market and of the
municipal bond market; the size of the particular offering; the maturity of the
obligations; and the rating of the issue.
- - INVESTMENT COMPANY SECURITIES. The Fund may invest up to 5% of its total
assets in the securities of any one investment company, but may not own more
than 3% of the securities of any one investment company or invest more than 10%
of its total assets in the securities of other investment companies. To the
extent required by the laws of any state in which shares of a fund of the
Victory Portfolios are sold, Key Advisers will waive its investment advisory fee
as to all assets invested in other investment companies. Because such other
investment companies employ an investment adviser, such investment by the Fund
will cause shareholders to bear duplicative fees, such as management fees, to
the extent such fees are not waived by Key Advisers. The Fund will invest only
in the securities of other money market funds which have similar investment
policies and objectives and which invest only in securities of equal or higher
short-term ratings.
- --------------------------------------------------------------------------------
INVESTMENT RISKS
- --------------------------------------------------------------------------------
- - OHIO MUNICIPAL SECURITIES. Any adverse economic conditions or developments
affecting the State of Ohio or its municipalities could impact the Fund. While
diversifying more into the service and non-manufacturing areas, the Ohio economy
continues to rely in part on durable goods manufacturing largely concentrated in
motor vehicles and equipment, steel, rubber products and household appliances.
As a result, general economic activity, as in many other industrially-developed
states, tends to be more cyclical than in some other states and in the nation as
a whole. In prior years, the State's overall unemployment rate was commonly
somewhat higher than the national figure. The unemployment rate and its effects
vary among geographic areas of the State.
Generally, the creditworthiness of Ohio Municipal Securities of local issuers is
unrelated to that of obligations of the State itself, and the State has no
responsibility to make payments on those local obligations. Local school
districts in Ohio receive a major portion (state-wide aggregate in the range of
46% in recent years) of their operating monies from State subsidies, but are
dependent on local property taxes, and in 107 districts from voter-authorized
income taxes, for significant portions of their budgets. Litigation, similar to
that of other states, is pending questioning the constitutionality of Ohio's
system of school funding. A trial court recently concluded that aspects of the
system (including basic operating assistance) are unconstitutional, and ordered
the State to provide for and fund a system complying with the Ohio Constitution.
The State has appealed. Ohio municipalities rely primarily on property and
municipal income taxes for their operations. For those few municipalities that
on occasion have faced significant financial problems, there are statutory
procedures for a joint state/local commission to monitor the municipality's
fiscal affairs and for development of a financial plan to eliminate deficits and
cure any defaults.
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<PAGE> 14
The ability of the Fund to achieve its investment objective also depends on the
continuing ability of the issuers of Ohio Municipal Securities and demand
features, or the credit enhancers of either, to meet their obligations for the
payment of interest and principal when due. Investing in Ohio Municipal
Securities which meet the Fund's quality standards may not be possible if the
State of Ohio and its municipalities do not maintain their current credit
ratings. In addition, certain Ohio constitutional amendments, legislative
measures, executive orders, administrative regulations, and voter initiatives
could result in adverse consequences affecting Ohio Municipal Securities.
- - NON-DIVERSIFICATION. The Fund is non-diversified, thus, there is no limit on
the percentage of assets that may be invested in any single issuer. However, the
Fund intends to comply with Subchapter M of the Internal Revenue Code. This
undertaking requires that at the end of each quarter of the taxable year, with
regard to at least 50% of the Fund's total assets, no more than 5% of its total
assets are invested in the assets of a single issuer; beyond that, no more than
25% of its total assets are invested in the securities of a single issuer. An
investment in the Fund, therefore, will entail greater risk than would exist in
a diversified portfolio because the higher percentage of investments among fewer
issuers may result in greater fluctuation in the total market value of the Fund.
Any economic, political, or regulatory developments affecting the value of the
securities in the Fund could have a greater impact on the total value of the
Fund than would be the case if the Fund was required to be diversified among
more issuers.
SEE THE STATEMENT OF ADDITIONAL INFORMATION FOR AN EXPANDED DISCUSSION OF THE
RISK CONSIDERATIONS FOR THE FUND.
- --------------------------------------------------------------------------------
LIMITING INVESTMENT RISKS
- --------------------------------------------------------------------------------
The Fund is subject to certain investment restrictions described below and in
more detail in the Statement of Additional Information, which have been adopted
by the Victory Portfolios on behalf of the Fund as fundamental policies. These
fundamental policies cannot be changed without the approval of a majority of the
outstanding shares of the Fund.
The Fund will not:
- - invest its assets so that less than 80% of its annual interest income is
exempt from federal regular income tax and Ohio income tax; or
- - issue any senior security (as defined in the 1940 Act) except that (a) the
Fund may engage in transactions which may result in the issuance of senior
securities to the extent permissible under the applicable regulations and
interpretations of the 1940 Act or an exemptive order; (b) the Fund may
acquire other securities that may be deemed senior securities to the extent
permitted under applicable regulations or interpretations of the 1940 Act; (c)
subject to certain restrictions the Fund may borrow money as authorized by the
1940 Act.
With respect to the latter limitation, the Fund will not borrow money or engage
in reverse repurchase agreements for investment leverage, but rather as a
temporary, extraordinary, or emergency measure or to facilitate management of
the Fund by enabling the Fund to meet redemption requests when the liquidation
of Fund securities would be inconvenient or disadvantageous. The Fund will not
purchase any securities while any such borrowings (including reverse repurchase
agreements) are outstanding.
The above investment limitations cannot be changed without shareholder approval.
The following limitations, however, may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material changes
in these limitations become effective.
The Fund will not:
- - pledge assets, except it may pledge assets having a market value not exceeding
10% of the value of its total assets to secure borrowings;
- - invest more than 5% of its total assets in securities of issuers (or in the
alternative, guarantors, where applicable) that have records of less than
three years of continuous operations; or
- - with respect to securities representing 75% of its assets, invest more than
10% of its assets in the securities of any one issuer (except under certain
circumstances described in the Statement of Additional Information); or
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<PAGE> 15
- - invest more than 10% of its net assets in securities which are illiquid,
including repurchase agreements providing for settlement in more than seven
days after notice.
These limitations and the policies discussed in this Prospectus are considered
and applied by Key Advisers and the Sub-Adviser at the time of purchase; the
sale of securities is not required in the event of a subsequent change in
circumstances.
CONCENTRATION OF INVESTMENTS
The Fund may invest 25% or more of its assets in industrial development bonds.
REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in this
Prospectus and its Statement of Additional Information, in order to comply with
applicable laws and regulations, including the provisions of any regulations
under the 1940 Act. In particular, the Fund will comply with the various
requirements of Rule 2a-7, which regulates money market mutual funds. The Fund
will also determine the effective maturity of its investments, as well as its
ability to consider a security as having received the requisite short-term
ratings by NRSROs, according to Rule 2a-7. The Fund may change these operational
policies to reflect changes in the laws and regulations without the approval of
its shareholders.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Key Advisers and the Sub-Adviser are responsible for decisions to buy and sell
securities for the Fund, broker-dealer selection and negotiation of commission
rates. Since purchases and sales of portfolio securities by the Fund are usually
principal transactions, the Fund incurs little or no brokerage commissions.
Portfolio securities are normally purchased directly from the issuer or from a
market maker for the securities. The purchase price paid to dealers serving as
market makers may include a spread between the bid and asked prices. The Fund
may also purchase securities from underwriters at prices which include a
concession paid by the issuer to the underwriter.
Key Advisers' and the Sub-Adviser's primary consideration in effecting a
security transaction is to obtain the best net price and the most favorable
execution of the order. To the extent that the executions and prices offered by
more than one dealer are comparable, Key Advisers and the Sub-Adviser may, in
their discretion, effect transactions with dealers that furnish statistical,
research or other information or services which are deemed by them to be
beneficial to the Fund's investment program. Certain research services furnished
by dealers may be useful to Key Advisers and the Sub-Adviser with respect to
clients other than the Fund. Similarly, any research services received by Key
Advisers and the Sub-Adviser through placement of portfolio transactions of
other clients may be of value to them in fulfilling their obligations to the
Fund.
- --------------------------------------------------------------------------------
HOW TO INVEST, EXCHANGE AND REDEEM
- --------------------------------------------------------------------------------
HOW TO INVEST
Shares may be purchased directly or through an Investment Professional.
Investment Professionals are securities brokers or other financial institutions
that have entered into selling or servicing agreements with the Fund or the
Distributor. The minimum investment is $500 for the initial purchase and $25
thereafter. Shares are also available to clients of bank trust departments who
have qualified trust accounts. Accounts set up through a bank trust department
or an Investment Professional may be subject to different minimums.
- - INVESTING THROUGH YOUR INVESTMENT PROFESSIONAL. Shares are offered
continuously to investors who engage an Investment Professional for investment
advice and may be purchased at an offering price equal to the NAV (as defined
below under "Share Price") next determined after the Transfer Agent receives an
investor's purchase order. If you are investing through your Investment
Professional, you may be required to set up a brokerage or agency account. Call
your Investment Professional for information in establishing an account. Your
Investment Professional will notify you whether subsequent trades should be
directed to the Investment Professional or directly to the Fund's Transfer
Agent. If you are purchasing shares of the Fund through a program of services
offered or administered by your Investment Professional, you should read the
program materials in conjunction with this
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<PAGE> 16
Prospectus. Certain features of the Fund may be modified by the Investment
Professional in these programs and charges may be imposed for the services
rendered. Your Investment Professional may offer any or all of the services
mentioned in this section. Contact your Investment Professional for information
on these services.
- - INVESTING THROUGH YOUR BANK TRUST DEPARTMENT. Your bank trust department may
require a minimum investment and may charge additional fees. Fee schedules for
such accounts are available upon request and are detailed in the agreements by
which a client opens the desired account. Your bank trust department may require
a completed and signed application for the Fund in which an investment is made.
Additional documents may be required from corporations, associations, and
certain fiduciaries. Any account information, such as balances, should be
obtained through your bank trust department. Additional purchases, exchanges or
redemptions should also be coordinated through your bank trust department.
Contact your bank trust department for instructions.
The services rendered by your bank trust department, including affiliates of Key
Advisers or the Sub-Adviser, in the management of its accounts are not
duplicative of any of the services for which Key Advisers is compensated for
advising the Fund. The charges paid by clients of your bank trust department, or
its affiliates, should be considered in calculating the net yield and return on
investments in the Fund, although such charges do not affect the Fund's
dividends and distributions.
INVESTING DIRECTLY
BY MAIL. You may purchase shares by completing and signing an Account
Application (initial purchase only) and mailing it, together with a check (or
other negotiable bank draft or money order) in at least the minimum required
investment amount to: The Victory Ohio Municipal Money Market Fund, Primary
Funds Service Corporation, P.O. Box 9741, Providence, RI 02940-9741. Subsequent
purchases may be made in the same manner.
BY WIRE. Call the Transfer Agent at 800-539-3863 to set up your Fund account to
accommodate wire transactions. YOU MUST CALL TO NOTIFY THE TRANSFER AGENT BEFORE
WIRING FUNDS. If you call the Transfer Agent before 12:00 p.m., Eastern time,
and your wire is received that day, you will earn that day's dividend. If you
call the Transfer Agent after 12:00 p.m. but before 4:00 p.m. Eastern time, your
purchase will be processed at the closing NAV (generally 4:00 p.m.) and you will
begin to earn dividends on the first business day following receipt of your
wire.
Federal funds (monies transferred from one bank to another through the Federal
Reserve System with same-day availability) should be wired to:
Boston Safe Deposit & Trust Co.
ABA 011001234
Credit PFSC DDA 16-918-8
The Victory Portfolios: Ohio Municipal Money
Market Fund
You must include your account number, your name(s), tax identification number(s)
and the control number assigned by the Transfer Agent. The Fund does not impose
a fee for wire transactions, although your bank may charge you a fee for this
service.
INVESTMENT REQUIREMENTS
All purchases must be made in U.S. dollars. Checks must be drawn on U.S. banks.
No cash will be accepted. If you make a purchase with more than one check, each
check must have a value of at least $25, and the minimum investment requirement
still applies. The Fund reserves the right to limit the number of checks
processed at one time. If your check does not clear, your purchase may be
canceled and you could be liable for any losses or fees incurred. Payment is
expected at the time of the order. If payment is not received within three
business days of the date of the order, the order may be canceled, and you could
be held liable for resulting fees and/or losses.
You may initiate any transaction by telephone either through your bank trust
department or through your Investment Professional. Subsequent investments by
telephone may be made directly. See "How to Redeem -- By Telephone" for more
information about telephone transactions.
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<PAGE> 17
THE SYSTEMATIC INVESTMENT PLAN
You can make regular investments in the Fund and all other funds of the Victory
Group with the Systematic Investment Plan by completing the appropriate section
of the Account Application and attaching a voided personal check with your
bank's magnetic ink coding number across the front. If your bank account is
jointly owned, be sure that all owners sign. You must first meet the Fund's
initial investment requirement of $500, then investments may be made monthly by
automatically deducting $25 or more from your bank checking account. For
officers, trustees, directors and employees, including retired directors and
employees, of the Victory Group, KeyCorp and its affiliates, and the
Administrator and its affiliates (and family members of each of the foregoing)
who participate in the Systematic Investment Plan, there is no minimum initial
investment required. You may change the amount of your monthly purchase at any
time. A bank draft form must be completed for this option. Your bank checking
account will be debited on the date indicated on your Account Application. You
may cancel the Systematic Investment Plan at any time without payment of a
cancellation fee. Your monthly account statement will reflect systematic
investment transactions, and a debit entry will appear on your bank statement.
HOW TO EXCHANGE
An exchange is the redemption of shares of one fund and the purchase of shares
of another. The exchange privilege is a convenient way to sell and buy shares of
other funds registered in your state. Shares of the Fund may be exchanged for
shares of another fund of the Victory Group. Exchanges into a fund with a sales
charge from the Fund will be processed at the offering price, unless the shares
of the Fund that you wish to exchange were acquired by exchanging shares of a
fund of the Victory Group that were originally purchased subject to a sales
charge. In that event, the shares will be exchanged on the basis of current net
asset values plus any difference in the sales charge originally paid and the
sales charge applicable to the shares you wish to acquire through the exchange.
You may execute exchange transactions by calling either your Investment
Professional, your bank trust department or the Transfer Agent at 800-539-3863
prior to the valuation time on any Business Day, as defined below. When making
an exchange or opening an account in another portfolio by exchange, the
registration and tax identification numbers of the two accounts must be
identical. In order to open an account through exchange, the applicable minimum
initial investment must be met. It is the Fund's policy to mail to you at your
address of record, within five business days after any telephone call
transaction, a written confirmation of the transaction. All calls will be
recorded for your protection. See "How to Redeem -- By Telephone" for more
information about telephone transactions.
Each exchange may produce a gain or loss for tax purposes. The exchange
privilege is an important benefit. However, in order to protect the Fund's
performance and its shareholders, the Victory Portfolios discourages frequent
exchange activity in response to short-term market fluctuations. The Fund
reserves the right to refuse any specific purchase order, including certain
purchases by exchange if, in the Victory Portfolios' opinion, the Fund would be
unable to invest effectively in accordance with its investment objective and
policies, or would otherwise be affected adversely. Exchanges or purchase orders
may be restricted or refused if the Fund receives or anticipates individual or
simultaneous orders affecting significant portions of the Fund's assets.
Although the Fund will attempt to give prior notice whenever it is reasonably
able to do so, it may impose these restrictions at any time. The Fund reserves
the right to modify or withdraw the exchange privilege, and to suspend the
offering of its shares upon 60 days written notice to shareholders. The exchange
privilege is only available in states where the exchange can legally be made.
HOW TO REDEEM
You may redeem all or a portion of your shares on any day that the Fund is open
for business (See the definition of "Business Day" under "Share Price" below).
Shares will be redeemed at the NAV next calculated after the Transfer Agent has
received the redemption request. You may redeem shares in several ways:
BY MAIL. Send a written request to: The Victory Portfolios: Ohio Municipal
Money Market Fund
P.O. Box 9741
Providence, RI 02940-9741
Write a "letter of instruction" with your name, the Fund's name, your Fund
account number, the dollar amount or number of shares to be redeemed, and any
additional requirements that apply to each particular account. You will
11
<PAGE> 18
need the letter of instruction signed by all persons required to sign for
transactions, exactly as their names appear on the account application. A
signature guarantee is required if: you wish to redeem more than $10,000 worth
of shares; your Fund account registration has changed within the last 60 days;
the check is not being mailed to the address on your account; the check is not
being made out to the account owner; or, if the redemption proceeds are being
transferred to another Victory Group account with a different registration. The
following institutions should be able to provide you with a signature guarantee:
banks, brokers, dealers, credit unions (if authorized under state law),
securities exchanges and associations, clearing agencies, and savings
associations. A signature guarantee may not be provided by a notary public. A
signature guarantee is designed to protect you, the Fund, and its agents from
fraud.
BY WIRE. You may make redemptions by wire provided you have established a Fund
account to accommodate wire transactions. If telephone instructions are received
before 12:00 p.m. Eastern time, proceeds of the redemption for the Fund will be
wired as federal funds on the same Business Day to the bank account designated
with the Transfer Agent. You may change the bank account designated to receive
an amount redeemed at any time by sending a letter of instruction with a
signature guarantee to the Transfer Agent, Primary Funds Service Corporation, at
P. O. Box 9741, Providence, RI 02940-9741.
BY TELEPHONE. To redeem by telephone, you may call the Transfer Agent toll free
at 800-539-3863 or call your Investment Professional or bank trust department.
Generally, neither the Fund, the bank trust department nor the Transfer Agent
will be responsible for any claims, losses or expenses for acting on telephone
instructions that they reasonably believe to be genuine. The Transfer Agent and
the Fund will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine and if they do not employ reasonable
procedures they may be liable for any losses due to unauthorized or fraudulent
instructions. The identification procedures may include, but are not limited to,
the following: account number, registration and address, personalized security
codes, taxpayer identification number and other information particular to the
account. Your Investment Professional, bank trust department or the Transfer
Agent may also record calls, and you should verify the accuracy of your
confirmation or statements immediately after you receive them. See "How to
Invest, Exchange and Redeem -- How to Exchange Shares," for additional
information with respect to losses resulting from unauthorized telephone
transactions.
CHECK WRITING. Check writing service is available to shareholders of the Fund,
whereby a shareholder may write checks on his or her Fund account for $100 or
more. Shareholders must comply with minimum balance requirements in order to
maintain check writing privileges. A shareholder will receive a supply of checks
once a signature card is received by the Fund. The check may be made payable to
any person, and the shareholder's account will continue to earn dividends until
the check clears. Because of the difficulty of determining in advance the exact
value of an account, a shareholder may not use a check to close an account. The
shareholder's account will be charged a fee for stopping payment of a check upon
the shareholder's request, if the check cannot be honored because of
insufficient funds (or other valid reasons), or in accordance with any schedule
of fees set forth in the account application. Shareholders should call the
Transfer Agent at 800-539-3863 to inquire as to the availability of the check
writing service and to receive a check writing signature card.
THE SYSTEMATIC WITHDRAWAL PLAN. You can make regular withdrawals from your
account in any portfolio of the Victory Group with the Systematic Withdrawal
Plan by completing the appropriate section of the account application. If you
own shares in a portfolio worth $5,000 or more, you can have checks sent from
your account directly to you, to a person named by you, or to your bank checking
account on a monthly, quarterly, semi-annual or annual basis. The required
minimum withdrawal is $25. If you are having checks sent to your bank checking
account, attach a voided personal check with your bank's magnetic ink coding
number across the front. If your bank checking account is jointly owned, be sure
that all owners sign the application. You may obtain information about the
Systematic Withdrawal Plan by contacting your Investment Professional. Your
Systematic Withdrawal Plan payments are drawn from share redemptions. If
Systematic Withdrawal Plan redemptions exceed dividend distributions paid on
your Fund shares, your Fund account may eventually become exhausted.
Your account will be debited on the date you indicate on your account
application. Shares will be redeemed at the NAV as determined on the debit date
indicated on your account application. You may cancel the Systematic Withdrawal
Plan at any time without payment of a cancellation fee. Each Systematic
Withdrawal Plan transaction will appear as a debit entry on your monthly account
statement.
ADDITIONAL REDEMPTION REQUIREMENTS. The Fund may withhold payment on
redemptions until it is reasonably satisfied that investments made by check have
been collected, which can take up to 15 days. Also, when the New York Stock
Exchange ("NYSE") is closed (or when trading is restricted) for any reason other
than its customary
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<PAGE> 19
weekend or holiday closings, or under any emergency circumstances as determined
by the Commission to merit such action, the right of redemption may be suspended
or the date of payment postponed for a period of time that may exceed 7 days. In
addition, the Fund reserves the right to advance the time on that day by which
purchase and redemption orders must be received.
If you are unable to reach the Transfer Agent by telephone (for example, during
times of unusual market activity), consider placing your order by mail directly
to the Transfer Agent. In case of suspension of the right of redemption, you may
either withdraw your request for redemption or receive payment based on the NAV
next determined after the termination of the suspension. If your balance in the
Fund falls below $500, you may be given 60 days' notice to reestablish the
minimum balance. If you do not increase your balance, your account may be closed
and the proceeds mailed to you at the address on record. Shares will be redeemed
at the last calculated NAV on the day the account is closed. The Fund will not,
however, exercise this mandatory redemption practice with regard to shares
obtained through the reorganizations of the A.T. Ohio Municipal Money Fund
and/or the Predecessor Fund.
SHARE PRICE. The term "net asset value per share" or "NAV" means the value of
one share. The NAV is calculated by adding the value of all the Fund's
investments, plus cash and other assets, deducting liabilities, and then
dividing the result by the number of shares outstanding. The Fund is open for
business each Business Day. A "Business Day" is a day on which the NYSE is open
for trading, the Federal Reserve Bank of Cleveland is open, and any other day
(other than a day on which no shares of the Fund are tendered for redemption and
no order to purchase any shares is received) during which there is sufficient
trading in its portfolio instruments that the Fund's net asset value per share
might be materially affected. The NYSE or the Federal Reserve Bank of Cleveland
will not be open in observance of the following holidays: New Year's Day, Martin
Luther King, Jr. Day, President's Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving and Christmas. The NAV
of the Fund is calculated twice daily, at 12:00 p.m. Eastern time, and at the
close of the Fund's Business Day, which coincides with the close of normal
trading of the NYSE (generally 4:00 p.m. Eastern time).
The Fund's securities are valued on the basis of amortized cost. This means
valuation assumes a steady rate of payment from the date of purchase until
maturity instead of looking at actual changes in market value. Although the Fund
seeks to maintain an NAV of $1.00, there can be no assurance that it will be
able to do so.
- --------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
DISTRIBUTIONS
The Fund distributes substantially all of its net investment income and net
capital gains, if any, to shareholders within each calendar year as well as on a
fiscal year basis to the extent necessary to qualify for favorable federal tax
treatment. The Fund accrues and declares dividends from its net investment
income daily and pays such dividends on or around the second Business Day of the
succeeding month.
DISTRIBUTION OPTIONS
When you fill out your account application, you can specify how you want to
receive your dividend distributions. Currently, there are five available
options:
1. REINVESTMENT OPTION. Your income and capital gain dividends, if any, will be
automatically reinvested in additional shares of the Fund. Income and capital
gain dividends will be reinvested at the net asset value of the Fund as of
the dividend payment date. If you do not indicate a choice on your
application, you will be assigned this option.
2. CASH OPTION. You will receive a check for each income or capital gain
dividend, if any. Distribution checks will be mailed no later than 7 days
after the last day of the preceding month.
3. INCOME EARNED OPTION. You will have your capital gain dividend
distributions, if any, reinvested automatically in the Fund and have your
income dividends paid in cash.
4. DIRECTED DIVIDENDS OPTION. You will have income and capital gain dividends,
or only capital gain dividends, automatically reinvested in shares of another
fund of the Victory Group. Shares will be purchased as of the dividend
payment date. If you are reinvesting dividends of a portfolio sold without a
sales charge in shares of a
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<PAGE> 20
portfolio sold with a sales charge, the shares will be purchased at the
offering price. If you are reinvesting dividends of a fund sold with a sales
charge in shares of a fund sold with or without a sales charge, the shares
will be purchased at net asset value. Dividend distributions can be directed
only to an existing account with a registration that is identical to that of
your Fund account.
5. DIRECTED BANK ACCOUNT OPTION. You will have your income and capital gain
dividends, or only your income dividends, automatically transferred to your
bank checking or savings account. The amount will be determined on the
dividend record date and will normally be transferred to your account within
7 days of the dividend payment date. Dividend distributions can be directed
only to an existing account with a registration that is identical to that of
your Fund account. Please call or write the Transfer Agent to learn more
about this dividend distribution option.
Any election or revocation of any of the above dividend distribution options may
be made in writing to the Fund and sent to Primary Funds Service Corporation,
P.O. Box 9741, Providence, RI 02940-9741, or by calling the Transfer Agent at
800-539-3863, and will become effective with respect to dividends having record
dates after receipt of the application or request by the Transfer Agent.
Reinvested dividend distributions receive the same tax treatment as dividend
distributions paid in cash.
COMPLETE REDEMPTIONS. If you request a complete redemption of all your Fund
shares, any dividend accrued to your account will be included in the redemption
check.
STATEMENT AND REPORTS. You will receive a monthly statement reflecting all
transactions that affect the share balance or the registration of your Fund
account. You will receive a confirmation after every transaction that affects
the share balance of your Fund account, except for dividend reinvestment,
systematic investment and systematic withdrawal transactions. These transactions
will be detailed in your Fund account statement. Transactions that affect the
share balance of your Fund investment in an account established with an
Investment Professional or financial institution will be detailed in regular
statements or through confirmation procedures of the financial institution.
Certificates representing shares of the Fund will not be issued. An IRS Form
1099-DIV with federal tax information will be mailed to you by January 31 of
each tax year and also will be filed with the IRS. At least twice a year, you
will receive the Fund's financial reports.
FEDERAL TAXES
The Fund intends to qualify each year and elect to be treated as a separate
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "IRS Code"). If the Fund is treated as a "regulated
investment company" and all its taxable income is distributed to its
shareholders in accordance with the timing requirements imposed by the IRS Code
(which the Fund intends to do), it will not be subject to federal income tax on
any of its income. Further, as a regulated investment company, federally
tax-exempt interest earned by the Fund retains its tax-exempt character when
distributed to you as "exempt-interest dividends." The Fund's dividends derived
from any taxable investment income and the excess, if any, of net short-term
capital gains over long-term capital losses are taxable as ordinary income and
are treated as dividends for federal income tax purposes, but do not qualify for
the dividends received deduction. Distributions from a Fund's net long-term
capital gains over its net short-term capital losses, that are designated as
capital gain dividends are taxable to the shareholders as long-term capital
gains regardless of the length of time the shareholder held the shares. The
Fund's distributions are taxable when they are paid, whether taken in cash or
reinvested in additional Fund shares, except that distributions declared in
October, November or December and paid in January are treated as if paid and
received on December 31. The Fund sends a tax statement by January 31 showing
the tax status of distributions paid in the past year.
Although excluded from gross income for regular federal income tax purposes,
exempt-interest dividends, together with other tax-exempt interest, are required
to be reported on shareholders' federal income tax returns, and are taken into
account in determining the portion, if any, of social security benefits which
must be included in gross income for federal income tax purposes. In addition,
exempt-interest dividends paid out of interest on certain Municipal Securities
may be treated as a tax preference item for both individual and corporate
shareholders potentially subject to an alternative minimum tax ("AMT"), and all
exempt-interest dividends will be included in computing a corporate
shareholder's adjusted current earnings, upon which a separate corporate
preference item is based which may be subject to AMT and to the environmental
supertax. Interest on indebtedness incurred, or continued, to purchase or carry
shares of the Fund is not deductible. Further, entities or persons who may be
14
<PAGE> 21
"substantial users" (or persons related to "substantial users") of facilities
financed by Municipal Securities should consult with their own tax advisers
before purchasing shares of the Fund.
REDEMPTIONS OR EXCHANGES
Investors may realize a gain or loss for federal tax purposes when redeeming
(selling) or exchanging shares of the Fund, although no gain or loss would
normally be expected in the case of the Fund if its NAV per share does not
deviate from $1.00. Any loss realized upon a taxable disposition of shares
within six months from the date of their purchase will be disallowed to the
extent of any exempt-interest dividends received on such shares and (to the
extent not disallowed) will be treated as a long-term capital loss to the extent
of any capital gain dividends received on such shares. All or a portion of any
loss realized upon a taxable disposition of shares of the Fund may be disallowed
if other shares of the Fund are purchased within 30 days before or after such
disposition.
For most types of accounts, the Fund will report the proceeds of your
redemptions to you annually. However, because the tax treatment also depends on
your purchase price and your personal tax position, you should keep your regular
account statements for use in determining your tax.
STATE OF OHIO INCOME TAXES
Provided that the Fund continues to qualify as a regulated investment company
under the IRS Code, and that at all times at least 50% of the value of its total
assets consists of obligations issued by or on behalf of the State of Ohio, its
political subdivisions thereof or agencies or instrumentalities of the State or
its political subdivisions ("Ohio Obligations"), or similar obligations of other
states or their subdivisions, (a) dividends paid by the Fund that are properly
attributable to interest on Ohio Obligations or on obligations issued by the
governments of Puerto Rico, the Virgin Islands or Guam will be exempt from Ohio
personal income tax, and municipal and school district income taxes in Ohio, and
will be excluded from net income for purposes of the Ohio corporation franchise
tax, and (b) distributions of "capital gain dividends," as defined in the IRS
Code, that are properly attributable to the Fund's sale or other disposition of
Ohio Obligations will be exempt from Ohio personal income tax, and municipal and
school district income taxes in Ohio, and will be excluded from net income for
purposes of the Ohio corporation franchise tax. However, other distributions
from the Fund will generally not be exempt from Ohio personal income tax,
municipal tax (where applicable to intangible income) on school district income
taxes in Ohio, and shares of the Fund will not be excluded from net worth for
purposes of the Ohio corporation franchise tax.
OTHER STATE AND LOCAL TAXES
Income from the Fund is not necessarily free from regular state income taxes in
states other than Ohio or from personal property taxes. State laws differ on
this issue, and shareholders are urged to consult their own tax advisers
regarding the status of their accounts under state and local tax laws.
OTHER TAX INFORMATION. The information above is only a summary of some of the
tax consequences generally affecting the Fund and its shareholders, and no
attempt has been made to discuss all tax consequences affecting shareholders
based on their particular circumstances. A prospective investor should also
review the more detailed discussion of tax considerations in the Statement of
Additional Information, and should consult his tax adviser to determine whether
an investment in the Fund is suitable to his particular tax situation.
When an investor signs his Account Application, he will be asked to certify that
the social security or other taxpayer identification number provided is the
correct number and that he is not subject to 31% backup withholding for failing
to report interest or dividend income to the IRS. If an investor violates IRS
regulations, the IRS can require the Fund to withhold 31% of his taxable
distributions and the proceeds of redemptions and exchanges.
- --------------------------------------------------------------------------------
PERFORMANCE
- --------------------------------------------------------------------------------
The Fund's performance may be quoted in advertising in terms of yield or
effective yield. Yields refer to the income generated by an investment in the
Fund over a period of time (seven days for a money market fund), expressed as an
annual percentage rate based on its share price. An effective yield is
calculated similarly but assumes that Fund share dividends declared are
reinvested. (The effective yield will be slightly higher than the yield because
of the compounding effect of this assumed reinvestment.) Yield is calculated
according to accounting methods that are standardized for all money market
funds.
15
<PAGE> 22
The performance of the Fund may also be quoted in advertising in terms of total
return. Both types of performance are based on historical results and are not
intended to indicate future performance. Total returns are based on the overall
dollar or percentage change in the value of a hypothetical investment in the
Fund and assumes that all dividend distributions are reinvested. A cumulative
total return reflects a Fund's performance over a stated period of time. An
average annual total return reflects the hypothetical annually compounded rate
that would have produced the same cumulative total return if performance had
been constant over the entire period. Because average annual returns eliminate
variations in a Fund's performance, investors should recognize that they are not
the same as actual year-by-year results. To illustrate the components of overall
performance, the cumulative and average annual total returns of a Fund may be
separated into income results and capital gain or loss. The total return of the
Fund may be quoted on a before or after tax basis. Investing in a mutual fund
involves risks, including the possible loss of principal.
The Fund may also quote taxable equivalent yields, which show the taxable yields
an investor would have to earn, before taxes, to equal the Fund's tax-free
yields. A taxable equivalent yield is calculated by dividing the Fund's tax-
exempt yield by the result of one minus the sum of the federal and Ohio State
and municipal tax rates, which may take into account the deductibility of Ohio
State and municipal taxes on an investor's federal income tax return. If only a
portion of a Fund's income is tax-exempt, only that portion is adjusted in the
calculation.
- --------------------------------------------------------------------------------
FUND ORGANIZATION AND FEES
- --------------------------------------------------------------------------------
The Victory Portfolios is an open-end management investment company, commonly
known as a mutual fund, and currently consisting of twenty-eight portfolios,
four of which are inactive. On or about February 29, 1996, the Victory
Portfolios will convert from a Massachusetts business trust to a Delaware
business trust. The Victory Portfolios has been operating continuously since
1986 when it was created under Massachusetts law as a Massachusetts business
trust, although certain of its funds have a prior operating history from their
predecessor funds. The Victory Portfolios' offices are relocated at 3435 Stelzer
Road, Columbus, Ohio 43219-3035.
REORGANIZATION WITH PREDECESSOR FUND
The Predecessor Fund was a portfolio of The Victory Funds. Effective June 5,
1995, the Predecessor Fund transferred all its assets and liabilities to the
Fund in exchange for shares of the Fund, which were distributed pro rata to
shareholders of the Predecessor Fund, who then became shareholders of the Fund
(the "Reorganization"). The Predecessor Fund ceased operations. The Fund had no
assets and did not begin operations until the Reorganization occurred.
INVESTMENT ADVISER AND SUB-ADVISER
KeyCorp Mutual Fund Advisers, Inc. is the investment adviser to the Fund. Key
Advisers directs the investment of the Fund's assets, subject at all times to
the supervision of the Victory Portfolios' Board of Trustees. Key Advisers
continually conducts investment research and supervision for the Fund and is
responsible for the purchase or sale of the Fund instruments.
Key Advisers was organized as an Ohio corporation on July 27, 1995 and is
registered as an investment adviser under the Investment Advisers Act of 1940,
as amended. It is a wholly-owned subsidiary of KeyCorp Asset Management
Holdings, Inc., which is an indirect wholly-owned subsidiary of Society National
Bank, a wholly-owned subsidiary of KeyCorp. Affiliates of Key Advisers manage
approximately $66 billion for numerous clients including large corporate and
public retirement plans, Taft-Hartley plans, foundations and endowments, high
net worth individuals and mutual funds.
Under an investment advisory agreement between the Victory Portfolios, on behalf
of the Fund, and Key Advisers, the Adviser may delegate a portion of its
responsibilities to a sub-adviser. In addition, the investment advisory
agreement provides that Key Advisers may render services through its own
employees or the employees of one or more affiliated companies that are
qualified to act as an investment adviser of the Fund and are under the common
control of KeyCorp as long as all such persons are functioning as part of an
organized group of persons, managed by authorized officers of Key Advisers.
For the services provided and expenses incurred pursuant to its investment
advisory agreement with the Victory Portfolios respecting the Fund, Key Advisers
is entitled to receive a fee, computed daily and paid monthly, at an
16
<PAGE> 23
annual rate of one half of one percent (.50%) of the average daily net assets of
the Fund. The advisory fees for the Fund have been determined to be fair and
reasonable in light of the services provided to the Fund. Key Advisers has
agreed to waive its advisory fee with respect to the Fund to the extent
necessary to maintain the operating expense ratio of the Fund at .65% until at
least August 31, 1996. Prior to January 1, 1996, the Sub-Adviser served as
investment adviser to the Fund. For the two month period ended October 31, 1995,
Society earned an investment advisory fee of .22% of average daily net assets
after voluntary waivers and reimbursements of .28% of average daily net assets.
For the fiscal year ended August 31, 1995, Society earned an investment advisory
fee of .20% of average daily net assets after voluntary waivers and
reimbursements of .30% of average daily net assets.
Key Advisers has entered into an investment sub-advisory agreement with its
affiliate, Society Asset Management, Inc., a registered investment adviser, on
behalf of the Fund. The Sub-Adviser is a wholly-owned subsidiary of KeyCorp
Asset Management Holdings, Inc. The sub-advisory agreement provides that the
Sub-Adviser may render services through its own employees or the employees of
one or more affiliated companies that are qualified to act as an investment
sub-adviser to the Fund and are under the common control of KeyCorp as long as
all such persons are functioning as part of an organized group of persons,
managed by authorized officers of the Sub-Adviser. For its services under the
investment sub-advisory agreement, Key Advisers pays the Sub-Adviser fees as a
percentage of average daily net assets as follows: .25% of the first $10 million
of average daily net assets; .20% of the next $15 million of average daily net
assets; .15% of the next $25 million of average daily net assets; and .125% of
the average daily net assets in excess of $50 million.
EFFECT OF BANKING LAWS
The Glass-Steagall Act and other banking laws and regulations presently prohibit
a bank holding company registered under the Bank Holding Company Act of 1956 or
any affiliate thereof from sponsoring, organizing or controlling a registered,
open-end investment company continuously engaged in the issuance of its shares,
and from issuing, underwriting, selling or distributing securities in general.
Such laws and regulations do not prohibit such a holding company or affiliate
from acting as investment adviser, transfer agent, custodian or shareholder
servicing agent to such an investment company or from purchasing shares of such
a company as agent for and upon the order of their customers, nor should they
prevent Key Advisers, the Sub-Adviser or the Fund from compensating third
parties for performing such functions. Key Advisers, the Sub-Adviser and their
affiliates are subject to such banking laws and regulations.
Key Advisers and the Sub-Adviser believe that they may perform the investment
advisory services for the Fund contemplated by the investment advisory agreement
with the Fund and investment sub-advisory agreement with the Sub-Adviser without
violating the Glass-Steagall Act or other applicable banking laws or regulations
and that they or their affiliates can perform the other services indicated
above. Changes in either federal or state statutes and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as further judicial or administrative decisions or interpretations of
present or future statutes and regulations could prevent Key Advisers and the
Sub-Adviser and their affiliates from continuing to perform all or a part of the
above services for their customers and/or the Fund. In such event, changes in
the operation of the Fund may occur, including the possible alteration or
termination of any service then being provided by Key Advisers, the Sub-Adviser
and their affiliates, and the Trustees would consider alternate investment
advisers and other means of continuing available services. It is not expected
that the Fund's shareholders would suffer any adverse financial consequences (if
other service providers are retained) as a result of any of these occurrences.
ADMINISTRATOR AND DISTRIBUTOR
Concord Holding Corporation is the Administrator for the Fund. Victory
Broker-Dealer Services, Inc. is the Fund's principal underwriter and
Distributor.
The Administrator generally assists in all aspects of the Fund's administration
and operations. For expenses incurred and services provided pursuant to its
management and administration agreement with the Victory Portfolios, the
Administrator receives a fee from the Fund, computed daily and paid monthly, at
an annual rate of fifteen one-hundredths of one percent (.15%) of the Fund's
average daily assets. The Administrator may periodically waive all or a portion
of its administrative fee with respect to the Fund to increase the net income
available for distribution as dividends.
17
<PAGE> 24
Victory Broker-Dealer Services, Inc. sells shares of the Fund as agent on behalf
of the Victory Portfolios at no cost to the Fund. Key Advisers and the
Sub-Adviser neither participate in nor are responsible for the underwriting of
Fund shares.
For the two month period ended October 31, 1995 and the fiscal year ended August
31, 1995, the Administrator earned .15% of the Fund's average daily net assets.
For the fiscal year ended August 31, 1995, the Administrator voluntarily waived
a portion of its fee equal to .0013% of average daily net assets.
PLAN OF DISTRIBUTION
The Victory Portfolios has adopted a Distribution and Service Plan (the "Plan")
for the Fund under Rule 12b-1 under the 1940 Act. No separate payments are
authorized to be made by the Fund under the Plan. Rather, the Plan recognizes
that Key Advisers, the Administrator and any sub-adviser may use fee revenues,
or other resources to pay expenses associated with activities primarily intended
to result in the sale of Fund shares. The Plan also provides that Key Advisers,
the Administrator and any sub-adviser may make payments from these sources to
third parties, including affiliates, such as banks or broker-dealers, that
provide shareholder support services or engage in the sale of Fund shares. See
"Effect of Banking Laws" with respect to certain prohibitions under the
Glass-Steagall Act.
TRANSFER AGENT
Primary Funds Service Corporation, P.O. Box 9741, Providence, RI 02940-9741,
serves as the Fund's Transfer Agent pursuant to a Transfer Agency Agreement with
the Victory Portfolios and receives a fee for such services based on various
criteria, including assets, transactions and the number of accounts.
CUSTODIAN
Key Trust Company of Ohio, N.A., an affiliate of the Adviser and Sub-Adviser,
serves as custodian for the Fund and may receive fees for the services it
performs as custodian.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P. serves as independent accountants to the Fund.
SHAREHOLDER SERVICING
Shareholder services are provided to the Victory Portfolios pursuant to
agreements between the Victory Portfolios and various shareholder servicing
agents, including Key Trust Company of Ohio, N.A., its affiliates, and other
financial institutions and securities brokers (each a "Shareholder Servicing
Agent"). Each Shareholder Servicing Agent generally will provide support
services to shareholders by establishing and maintaining accounts and records,
processing dividend and distribution payments, providing account information,
arranging for bank wires, responding to routine inquiries, forwarding
shareholder communication, assisting in the processing of purchase, exchange and
redemption requests, and assisting shareholders in changing dividend options,
account designations and addresses. For expenses incurred and services provided
as Shareholder Servicing Agent pursuant to its respective Shareholder Servicing
Agreement, the Fund pays each Shareholder Servicing Agent a fee computed daily
and paid monthly, in amounts aggregating not more than twenty-five
one-hundredths of one percent (.25%) of the average daily net assets of the Fund
per year. A Shareholder Servicing Agent may periodically waive all or a portion
of its respective shareholder servicing fees with respect to the Fund to
increase the net income of the Fund available for distribution as dividends. For
the two month period ended October 31, 1995 and the year ended August 31, 1995,
Shareholder Servicing Agents earned $130,040 and $567,378, respectively.
BUSINESS MANAGEMENT AGREEMENT
In connection with its obligations under the investment sub-advisory agreement,
the Sub-Adviser has entered into a Business Management Agreement with Key
Advisers pursuant to which Key Advisers provides certain administrative and
support services to the Sub-Adviser. Such services include preparing reports to
the Victory Portfolios' Board of Trustees, recordkeeping services, and services
rendered in connection with the preparation of regulatory filings and other
reports, and regulatory and compliance systems and other administrative and
support services.
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<PAGE> 25
For such services, the Sub-Adviser pays fees to Key Advisers as follows: .20% on
the first $10 million of average daily net assets; .15% of the next $15 million
of average daily net assets; .10% of the next $25 million of average daily net
assets; and .075% of average daily net assets in excess of $50 million.
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
The Victory Portfolios may issue an unlimited number of shares and classes of
the Fund. Shares or classes of the Fund participate equally in dividends and
distributions and have equal voting, liquidation and other rights. When issued
and paid for, shares will be fully paid and nonassessable by the Victory
Portfolios and will have no preference, conversion, exchange or preemptive
rights. Shareholders are entitled to one vote for each full share owned and
fractional votes for fractional shares owned. For those investors with qualified
trust accounts established with affiliates of Key Advisers or the Sub-Adviser,
the trustee will vote the shares at meetings of the Fund's shareholders in
accordance with the shareholder's instructions or will vote in the same
percentage as shares that are not so held in trust. The trustee will forward to
these shareholders all communications received by the trustee, including proxy
statements and financial reports. The Victory Portfolios and the Fund are not
required to hold annual meetings of shareholders and in ordinary circumstances
do not intend to hold such meetings. The Trustees may call special meetings of
shareholders for action by shareholder vote as may be required by the 1940 Act
or the Declaration of Trust. Under certain circumstances, the Trustees may be
removed by action of the Trustees or by the shareholders. Shareholders holding
10% or more of the Victory Portfolios' outstanding shares may call a special
meeting of shareholders for the purpose of voting upon the question of removal
of Trustees.
The Victory Portfolio's Board of Trustees may authorize the Victory Portfolios
to offer other funds which may differ in the types of securities in which their
assets may be invested.
Key Advisers, the Sub-Adviser and the Victory Portfolios have adopted a Code of
Ethics (the "Code") which requires investment personnel (a) to pre-clear all
personal securities transactions, (b) to file reports regarding such
transactions, and (c) to refrain from personally engaging in (i) short-term
trading of a security, (ii) transactions involving a security within seven days
of a Victory fund transaction involving the same security, and (iii)
transactions involving securities being considered for investment by a Victory
fund. The Code also prohibits investment personnel from purchasing securities in
an initial public offering. Personal trading reports are reviewed periodically
by Key Advisers and the Sub-Adviser, and the Board of Trustees reviews annually
such reports (including information on any substantial violations of the Code).
Violations of the Code may result in censure, monetary penalties, suspension or
termination of employment.
MASSACHUSETTS LAW
The Victory Portfolios is currently organized as a Massachusetts business trust.
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Victory Portfolios. To
protect its shareholders, the Victory Portfolios has filed legal documents with
Massachusetts that expressly disclaim the liability of its shareholders for acts
or obligations of the Victory Portfolios. These documents require notice of this
disclaimer to be given in each agreement, obligation, or instrument the Fund or
its Trustees enter into or sign.
In the unlikely event a shareholder is held personally liable for the Victory
Portfolios' obligations, the Victory Portfolios is required to use its property
to protect or compensate the shareholder. On request, the Victory Portfolios
will defend any claim made and pay any judgment against a shareholder for any
act or obligation of the Victory Portfolios. Therefore, financial loss resulting
from liability as a shareholder will occur only if the Victory Portfolios itself
cannot meet its obligations to indemnify shareholders and pay judgments against
them.
DELAWARE LAW
On or about February 29, 1996, the Victory Portfolios will convert to a Delaware
business trust. The Delaware Business Trust Act provides that a shareholder of a
Delaware business trust shall be entitled to the same limitation of personal
liability extended to stockholders of Delaware corporations. The Trust
Instrument provides that shareholders will not be personally liable for
liabilities of the Victory Portfolios. In light of Delaware law, the nature of
the Victory Portfolios' business, and the nature of its assets, management of
Victory Portfolios believes that the risk of personal liability to a Fund
shareholder would be extremely remote.
19
<PAGE> 26
In the unlikely event a shareholder is held personally liable for the Victory
Portfolios' obligations, the Delaware successor to the Victory Portfolios will
be required to use its property to protect or compensate the shareholder. On
request, the Delaware successor to the Victory Portfolios will defend any claim
made and pay any judgment against a shareholder for any act or obligation of the
Victory Portfolios. Therefore, financial loss resulting from liability as a
shareholder will occur only if the Delaware successor to the Victory Portfolios
itself cannot meet its obligations to indemnify shareholders and pay judgments
against them.
Delaware law authorizes electronic or telephonic communications between
shareholders and the Victory Portfolios. Under Delaware law, the Delaware
successor to the Victory Portfolios will have the flexibility to respond to
future business contingencies. For example, the Trustees will have the power to
incorporate the Victory Portfolios, to merge or consolidate it with another
entity, to cause each fund to become a separate trust, and to change the Victory
Portfolio's domicile without a shareholder vote. This flexibility could help
reduce the expense and frequency of future shareholder meetings for
non-investment related issues.
MISCELLANEOUS
Shareholders will receive Semi-Annual Reports, which are unaudited, and Annual
Reports, which are audited by independent public accountants, describing the
investment operations of the Fund. Each of these reports, when available for a
particular fiscal year end or the end of a semi-annual fiscal period, is
incorporated herein by reference. The Victory Portfolios may include information
in their Annual Reports and Semi-Annual Reports to shareholders that (a)
describes general economic trends, (b) describes general trends within the
financial services industry or the mutual fund industry, (c) describes past or
anticipated portfolio holdings for the Fund or (d) describes investment
management strategies for the Victory Portfolios. Such information is provided
to inform shareholders of the activities of the Victory Portfolios for the most
recent fiscal year or semi-annual fiscal period and to provide the views of Key
Advisers, the Sub-Adviser and/or the Victory Portfolios' officers regarding
expected trends and strategies.
Inquiries regarding the Victory Portfolios or the Fund may be directed in
writing to the Victory Portfolios at Primary Funds Service Corporation, P.O. Box
9741, Providence, RI 02940-9741, or by telephone, toll-free, at 800-539-3863.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING
MADE BY THIS PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE VICTORY
PORTFOLIOS OR THE DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING
BY THE VICTORY PORTFOLIOS OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE.
20
<PAGE> 27
PART B
<PAGE> 28
THE VICTORY PORTFOLIOS 3435 STELZER ROAD
OHIO MUNICIPAL MONEY MARKET FUND COLUMBUS, OHIO 43219
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information is not a prospectus but should be read
in conjunction with the current Prospectus, dated January 1, 1996. The Financial
Statements and Independent Accountants' Report as of October 31, 1995 of the
Fund are incorporated by reference in this Statement of Additional Information.
Please retain this document for future reference. Copies of the Prospectus may
be obtained by writing The Victory Portfolios at Primary Funds Service
Corporation, P.O. Box 9741, Providence, RI 02940-9711 or by telephoning toll
free 800-539-FUND or 800-539-3863.
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
INVESTMENT OBJECTIVE AND POLICIES......................... 2 INVESTMENT ADVISER
PORTFOLIO TRANSACTIONS.................................... 9 KeyCorp Mutual Fund Advisers, Inc.
DETERMINING NET ASSET VALUE............................... 10
PERFORMANCE COMPARISONS................................... 11 SUB-ADVISER
ADDITIONAL PURCHASE AND REDEMPTION Society Asset Management, Inc.
INFORMATION............................................. 13
DIVIDENDS AND DISTRIBUTIONS............................... 14 ADMINISTRATOR
TAXES..................................................... 14 Concord Holding Corporation
TRUSTEES AND OFFICERS..................................... 18
ADVISORY AND OTHER CONTRACTS.............................. 23 DISTRIBUTOR
FINANCIAL STATEMENTS...................................... 29 Victory Broker-Dealer Services,
ADDITIONAL INFORMATION.................................... 29 Inc.
APPENDIX.................................................. 33
DESCRIPTION OF SECURITY RATINGS........................... 33 TRANSFER AGENT
Primary Funds Service Corporation
CUSTODIAN
Key Trust Company of Ohio N.A.
</TABLE>
January 1, 1996
<PAGE> 29
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
The Victory Portfolios (the "Victory Portfolios") is an open-end management
investment company. The Victory Portfolios consist of twenty-eight series of
units of beneficial interest ("shares"), four of which series are currently
inactive. The outstanding shares represent interests in the twenty-four separate
investment portfolios which are currently active. This Statement of Additional
Information relates to the Victory Ohio Municipal Money Market Fund (the "Fund")
only. Much of the information contained in this Statement of Additional
Information expands on subjects discussed in the Prospectus. Capitalized terms
not defined herein are used as defined in the Prospectus. No investment in
shares of the Fund should be made without first reading the Fund's Prospectus.
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The following policies and limitations supplement those set forth in the
Prospectus. Unless otherwise noted, whenever an investment policy or limitation
states a maximum percentage of the Fund's assets that may be invested in any
security or other asset, or sets forth a policy regarding quality standards,
such standard or percentage limitation will be determined immediately after and
as a result of the Fund's acquisition of such security or other asset.
Accordingly, any subsequent change in values, net assets, or other circumstances
will not be considered when determining whether the investment complies with the
Fund's investment policies and limitations.
The Fund's fundamental investment policies and limitations cannot be changed
without approval by a "majority of the outstanding voting securities" (as
defined in the Investment Company Act of 1940, as amended (the "1940 Act")) of
the Fund. However, except where noted below, the investment policies and
limitations described in this Statement of Additional Information are not
fundamental and may be changed without shareholder approval.
The Fund's investment objective is to provide current income exempt from federal
regular income tax and personal income taxes imposed by the State of Ohio and
Ohio municipalities consistent with stability of principal.
ACCEPTABLE INVESTMENTS
The Fund invests primarily in Ohio municipal securities with remaining
maturities of 397 days or less at the time of purchase by the Fund. The average
maturity of these securities, computed on a dollar weighted basis, will be 90
days or less. Ohio municipal securities are debt obligations issued by or on
behalf of the State of Ohio, its political subdivisions, or agencies, debt
obligations of any state, territory or possession of the United States,
including the District of Columbia, and any political subdivisions or financing
authority of any of these, the income from which is, in the opinion of qualified
legal counsel, exempt from both federal regular income tax and the personal
income tax imposed by the State of Ohio ("Municipal Securities").
CHARACTERISTICS.
When determining whether a Municipal Security presents minimal credit risks, the
Adviser considers the creditworthiness of the issuer of an Ohio Municipal
Security. The holder of a demand feature has the unconditional right to demand
payment on the security from the guarantor of payment.
The Fund is not required to sell an Ohio Municipal Security if the security's
rating is reduced below the required minimum subsequent to the Fund's purchase
of the security. The Adviser considers this event, however, in its determination
of whether the Fund should continue to hold the security. If ratings made by
Moody's Investors Services, Inc., Standard & Poor's Corporation, Fitch Investor
Service, Inc. or other NRSRO change because of changes in those organizations or
in their rating systems, the Fund will try to use comparable ratings as
standards in accordance with the investment policies described in the Fund's
prospectus.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS.
These transactions are arrangements in which the Fund purchases securities with
payment and delivery scheduled for a future time. The Fund engages in
when-issued and delayed delivery transactions only for the purpose of acquiring
portfolio securities consistent with the Fund's investment objective and
policies, not for investment leverage. These transactions are made to secure
what is considered to be an advantageous price and yield for the Fund.
Settlement dates may be a month or more after entering into these transactions,
and the market values of the
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securities purchased may vary from the purchase prices. Normally, liquid assets
of the Fund in a dollar amount sufficient to make payment for the obligations to
be purchased, are segregated at the trade date. These securities are marked to
market daily and maintained until the transaction is settled. The Fund may
engage in these transactions to an extent that would cause the segregation of an
amount up to 20% of the total value of its assets.
REVERSE REPURCHASE AGREEMENTS.
The Fund may also enter into reverse repurchase agreements. This transaction is
similar to borrowing cash. In a reverse repurchase agreement the Fund transfers
possession of a Fund instrument to another person, such as a financial
institution, broker, or dealer, in return for a percentage of the instrument's
market value in cash, and agrees that on a stipulated date in the future the
Fund will repurchase the Fund instrument by remitting the original consideration
plus interest at an agreed upon rate. The use of reverse repurchase agreements
may enable the Fund to avoid selling Fund instruments at a time when a sale may
be deemed to be disadvantageous, but the ability to enter into reverse
repurchase agreements does not ensure that the Fund will be able to avoid
selling Fund instruments at a disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of the Fund, in a
dollar amount sufficient to make payment for the obligations to be purchased,
are segregated on the Fund's records at the trade date. These securities are
marked to market daily and maintained until the transaction is settled.
REPURCHASE AGREEMENTS.
Repurchase agreements are arrangements in which banks, broker/dealers, and other
recognized financial institutions sell U.S. government securities or
certificates of deposit to the Fund and agree at the time of sale to repurchase
them at a mutually agreed upon time and price within one year from the date of
acquisition. The Fund or its custodian will take possession of the securities
subject to repurchase agreements and these securities will be marked to market
daily. To the extent that the original seller does not repurchase the securities
from the Fund, the Fund could receive less than the repurchase price on any sale
of such securities. In the event that such a defaulting seller filed for
bankruptcy or became insolvent, disposition of such securities by the Fund might
be delayed pending court action. The Fund believes that under the regular
procedures normally in effect for custody of the Fund's securities subject to
repurchase agreements, a court of competent jurisdiction would rule in favor of
the Fund and allow retention or disposition of such securities. The Fund will
only enter into repurchase agreements with domestic banks and other recognized
financial institutions such as broker/dealers which are deemed to be
creditworthy by Key Advisers or the Sub-Adviser pursuant to guidelines
established by the Trustees. Repurchase agreements are considered by the staff
of the Commission to be loans by the Fund.
FUTURE DEVELOPMENTS
As discussed in the Prospectus, the Fund may take advantage of other investment
practices which are not at present contemplated for use by the Fund or which
currently are not available but which may be developed, to the extent such
investment practices are both consistent with the Fund's investment objective
and are legally permissible for the Fund. Such investment practices, if they
arise, may involve risks which exceed those involved in the activities described
in the Prospectus and Statement of Additional Information. Prior to commencing
any new investment practice, the Fund will notify shareholders by means of
prospectus supplement.
OHIO INVESTMENT RISKS
As described above, the Fund will invest most of its net assets in securities
issued by or on behalf of (or in certificates of participation in lease-purchase
obligations of) the State of Ohio, political subdivisions of the State, or
agencies or instrumentalities of the State or its political subdivisions ("Ohio
Obligations"). The Fund is therefore susceptible to general or particular
economic, political or regulatory factors that may affect issuers of Ohio
Obligations. The following information constitutes only a brief summary of some
of the many complex factors that may have an effect. The information does not
apply to "conduit" obligations on which the public issuer itself has no
financial responsibility. This information is derived from official statements
of certain Ohio issuers published in connection with their issuance of
securities and from other publicly available information, and is believed to be
accurate. No independent verification has been made of any of the following
information.
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Generally the creditworthiness of Ohio Obligations of local issuers is unrelated
to that of obligations of the State itself, and the State has no responsibility
to make payments on those local obligations.
There may be specific factors that at particular times apply in connection with
investment in particular Ohio Obligations or in those obligations of particular
Ohio issuers. It is possible that the investment may be in particular Ohio
Obligations, or in those of particular issuers, as to which those factors apply.
However, the information below is intended only as a general summary, and is not
intended as a discussion of any specific factors that may affect any particular
obligation or issuer.
Ohio is the seventh most populous state. The 1990 Census count of 10,847,000
indicated a 0.5% population increase from 1980. The Census estimate for 1993 is
11,091,000.
While diversifying more into the service and other non-manufacturing areas, the
Ohio economy continues to rely in part on durable goods manufacturing largely
concentrated in motor vehicles and equipment, steel, rubber products and
household appliances. As a result, general economic activity, as in many other
industrially-developed states, tends to be more cyclical than in some other
states and in the nation as a whole. Agriculture is an important segment of the
economy, with over half the State's area devoted to farming and approximately
15% of total employment in agribusiness.
In prior years, the State's overall unemployment rate was commonly somewhat
higher than the national figure. For example, the reported 1990 average monthly
State rate was 5.7%, compared to the 5.5% national figure. However, for the last
four years the State rates were below the national rates (5.6% versus 6.1% in
1994). The unemployment rate and its effects vary among particular geographic
areas of the State.
There can be no assurance that future national, regional or state-wide economic
difficulties, and the resulting impact on State or local government finances
generally, will not adversely affect the market value of Ohio Obligations held
in the Fund or the ability of particular obligors to make timely payments of
debt service on (or lease payments relating to) those Obligations.
The State operates on the basis of a fiscal biennium for its appropriations and
expenditures, and is precluded by law from ending its July 1 to June 30 fiscal
year ("FY") or fiscal biennium in a deficit position. Most State operations are
financed through the General Revenue Fund ("GRF"), for which personal income and
sales-use taxes are the major sources. Growth and depletion of GRF ending fund
balances show a consistent pattern related to national economic conditions, with
the ending FY balance reduced during less favorable and increased during more
favorable economic periods. The State has well-established procedures for, and
has timely taken, necessary actions to ensure resource/expenditure balances
during less favorable economic periods. Those procedures included general and
selected reductions in appropriations spending.
Key biennium-ending fund balances at June 30, 1989 were $475.1 million in the
GRF and $353 million in the Budget Stabilization Fund ("BSF"), a cash and
budgetary management fund. June 30, 1991 ending fund balances were $135.3
million (GRF) and $300 million (BSF).
The next biennium, 1992-93, presented significant challenges to State finances,
successfully addressed. To allow time to resolve certain budget differences, an
interim appropriations act was enacted effective July 1, 1991; it included debt
service and lease rental appropriations for the entire biennium, while
continuing most other appropriations for a month. Pursuant to the general
appropriations act for the entire biennium, passed on July 11, 1991, $200
million was transferred from the BSF to the GRF in FY 1992.
Based on updated results and forecasts in the course of that FY, both in light
of the continuing uncertain nationwide economic situation, there was projected
and timely addressed an FY 1992 imbalance in GRF resources and expenditures. In
response, the Governor ordered most State agencies to reduce GRF spending in the
last six months of FY 1992 by a total of approximately $184 million; the $100.4
million BSF balance, and additional amounts from certain other funds, were
transferred late in the FY to the GRF; and adjustments were made in the timing
of certain tax payments.
A significant GRF shortfall (approximately $520 million) was then projected for
FY 1993. It was addressed by appropriate legislative and administrative actions,
including the Governor's ordering $300 million in selected GRF spending
reductions and subsequent executive and legislative action (a combination of tax
revisions and additional spending reductions). The June 30, 1993 ending GRF fund
balance was approximately $111 million, of which, as a first step to BSF
replenishment, $21 million was deposited in the BSF.
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None of the spending reductions were applied to appropriations needed for debt
service or lease rentals on any State obligations.
The 1994-95 biennium presented a more affirmative financial picture. Based on
June 30, 1994 balances, an additional $260 million was deposited in the BSF. The
biennium ended June 30, 1995 with a GRF ending fund balance of $928 million, of
which $535.2 million has been transferred into the BSF (which had a November 21,
1995 balance of over $828 million).
The GRF appropriations act for the 1995-96 biennium was passed on June 28, 1995
and promptly signed (after selective vetoes) by the Governor. All necessary GRF
appropriations for State debt service and lease rental payments then projected
for the biennium were included in that act. In accordance with the
appropriations act, the significant June 30, 1995 GRF fund balance, after
leaving in the GRF an unreserved and undesignated balance of $70 million, has
been transferred to the BSF and other funds including school assistance funds
and, in anticipation of possible federal program changes, a human services
stabilization fund.
The State's incurrence or assumption of debt without a vote of the people is,
with limited exceptions, prohibited by current State constitutional provisions.
The State may incur debt, limited in amount to $750,000, to cover casual
deficits or failures in revenues or to meet expenses not otherwise provided for.
The Constitution expressly precludes the State from assuming the debts of any
local government or corporation. (An exception is made in both cases for any
debt incurred to repel invasion, suppress insurrection or defend the State in
war.)
By 14 constitutional amendments, the last adopted in 1995, Ohio voters have
authorized the incurrence of State debt and the pledge of taxes or excises to
its payment. At December 2, 1995, $778 million (excluding certain highway bonds
payable primarily from highway use charges) of this debt was outstanding. The
only such State debt at that date still authorized to be incurred were portions
of the highway bonds, and the following: (a) up to $100 million of obligations
for coal research and development may be outstanding at any one time ($45.3
million outstanding, (b) $360 million of obligations previously authorized for
local infrastructure improvements, no more than $120 million of which may be
issued in any calendar year ($685.4 million outstanding); and (c) up to $200
million in general obligation bonds for parks, recreation and natural resources
purposes which may be outstanding at any one time ($47.2 million outstanding,
with no more than $50 million to be issued in any one year).
The electors approved in November 1995 a constitutional amendment that extends
the local infrastructure bond program (authorizing an additional $1.2 billion of
State full faith and credit obligations to be issued over 10 years for the
purpose), and authorizes additional highway bonds (expected to be payable
primarily from highway use receipts). The latter supersedes the prior $500
million highway obligation authorization, and authorizes not more that $1.2
billion to be outstanding at any time and not more than $220 million to be
issued in a fiscal year.
Common resolutions are pending in both houses of the General Assembly that would
submit a constitutional amendment relating to certain other aspects of State
debt. The proposal would authorize, among other things, the issuance of State
general obligation debt for a variety of purposes, with debt service on all
State general obligation debt and GRF-supported obligations not to exceed 5% of
the preceding fiscal year's GRF expenditures.
The Constitution also authorizes the issuance of State obligations for certain
purposes, the owners of which do not have the right to have excises or taxes
levied to pay debt service. Those special obligations include obligations issued
by the Ohio Public Facilities Commission and the Ohio Building Authority and
certain obligations issued by the State Treasurer, $4.5 billion of which was
outstanding or awaiting delivery at December 2, 1995.
A 1990 constitutional amendment authorizes greater State and political
subdivision participation (including financing) in the provision of housing. The
General Assembly may for that purpose authorize the issuance of State
obligations secured by a pledge of all or such portion as it authorizes of State
revenues or receipts (but not by a pledge of the State's full faith and credit).
A 1994 constitutional amendment pledges the full faith and credit and taxing
power of the State to meeting certain guarantees under the State's tuition
credit program which provides for purchase of tuition credits, for the benefit
of State residents, guaranteed to cover a specified amount when applied to the
cost of higher education tuition. (A 1965 constitutional provision that
authorized student loan guarantees payable from available State moneys has never
been implemented, apart from a "guarantee fund" approach funded essentially from
program revenues.)
The House has adopted a resolution that would submit to the electors a
constitutional amendment prohibiting the General Assembly from imposing a new
tax or increasing an existing tax unless approved by a three-fifths vote of
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each house or by a majority vote of the electors. It cannot be predicted whether
required Senate concurrence to submission will be received.
State and local agencies issue obligations that are payable from revenues from
or relating to certain facilities (but not from taxes). By judicial
interpretation, these obligations are not "debt" within constitutional
provisions. In general, payment obligations under leasepurchase agreements of
Ohio public agencies (in which certificates of participation may be issued) are
limited in duration to the agency's fiscal period, and are renewable only upon
appropriations being made available for the subsequent fiscal period.
Local school districts in Ohio receive a major portion (state-wide aggregate in
the range of 44% in recent years) of their operating moneys from State
subsidies, but are dependent on local property taxes, and in 120 districts from
voter-authorized income taxes, for significant portions of their budgets.
Litigation, similar to that in other states, is pending questioning the
constitutionality of Ohio's system of school funding. The trial court concluded
that aspects of the system (including basic operating assistance) are
unconstitutional, and ordered the State to provide for and fund a system
complying with the Ohio Constitution. The State appealed and a court of appeals
reversed the trial court's findings for plaintiff districts. The plaintiff
coalition has filed an appeal of the court of appeals decision to the Ohio
Supreme Court. A small number of the State's 612 local school districts have in
any year required special assistance to avoid year-end deficits. A current
program provides for school district cash need borrowing directly from
commercial lenders, with diversion of State subsidy distributions to repayment
if needed. Recent borrowings under this program totalled $94.5 million for 27
districts (including $75 million for one) in FY 1993, $41.1 million for 28
districts in FY 1994, and $71.1 million for 29 districts in FY 1995.
Ohio's 943 incorporated cities and villages rely primarily on property and
municipal income taxes for their operations. With other subdivisions, they also
receive local government support and property tax relief moneys distributed by
the State. For those few municipalities that on occasion have faced significant
financial problems, there are statutory procedures for a joint State/local
commission to monitor the municipality's fiscal affairs and for development of a
financial plan to eliminate deficits and cure any defaults. Since inception in
1979, these procedures have been applied to 23 cities and villages; for 18 of
them the fiscal situation was resolved and the procedures terminated.
At present the State itself does not levy ad valorem taxes on real or tangible
personal property. Those taxes are levied by political subdivisions and other
local taxing districts. The Constitution has since 1934 limited to 1% of true
value in money the amount of the aggregate levy (including a levy for unvoted
general obligations) of property taxes by all overlapping subdivisions, without
a vote of the electors or a municipal charter provision, and statutes limit the
amount of that aggregate levy to 10 mills per $1 of assessed valuation (commonly
referred to as the "ten-mill limitation"). Voted general obligations of
subdivisions are payable from property taxes that are unlimited as to amount or
rate.
INVESTMENT LIMITATIONS
CONCENTRATION OF INVESTMENTS
The Fund will not purchase securities (other than securities issued or
guaranteed by the U.S. government, its agencies, or instrumentalities) if, as a
result of such purchase, 25% or more of the value of the Fund's total assets
would be invested in any one industry. The Fund will not invest 25% or more of
its assets in securities, the interest upon which is paid from revenues of
similar type projects. The Fund may invest 25% or more of its assets in
industrial development bonds.
NON-DIVERSIFICATION
The Fund is non-diversified, thus, there is no limit on the percentage of assets
which can be invested in any single issuer except as indicated below. An
investment in the Fund, therefore, will entail greater risk than would exist in
a diversified portfolio because the higher percentage of investments among fewer
issuers may result in greater fluctuation in the total market value of the Fund.
Any economic, political, or regulatory developments affecting the value of the
securities in the Fund will have a greater impact on the total value of the Fund
than would be the case if the Fund were diversified among more issuers.
The Fund will attempt to minimize the risks associated with a non-diversified
portfolio so as not to impair its ability to stabilize its net asset value at
$1.00 per share by limiting, with respect to 75% of the Fund's total assets,
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<PAGE> 34
investments in one issuer to not more than 10% of the value of its total assets.
The total amount of the remaining 25% of the value of the Fund's total assets
could be invested in a single issuer if the Adviser believes such a strategy to
be prudent. Under Rule 2a-7 under the 1940 Act, the Fund is also subject to
certain diversification requirements. In addition, the Fund intends to comply
with Subchapter M of the Internal Revenue Code. This undertaking requires that
at the end of each quarter of the taxable year, with regard to at least 50% of
the Fund's total assets, no more than 5% of its total assets are invested in the
assets of a single issuer; beyond that, no more than 25% of its total assets are
invested in the securities of a single issuer.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities or commodity contracts.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate, although it may invest in Ohio
Municipal Securities secured by real estate or interests in real estate. The
Fund will not purchase or sell real property, including limited partnership
interests (but excluding readily marketable interests in real estate investment
trusts ("REITS")) or readily marketable securities of companies that invest in
real estate investment trusts or real estate limited partnerships.
ISSUING SENIOR SECURITIES
The Fund will not issue senior securities, except as permitted by its investment
objective and policies, and except that the Fund (i) may borrow money and engage
in reverse repurchase agreements in amounts up to one-third of the value of the
Fund's net assets including the amounts borrowed, and (ii) purchase securities
on a when-issued or delayed delivery basis.
The Fund will not borrow money or engage in reverse repurchase agreements for
investment leverage, but rather as a temporary, extraordinary, or emergency
measure or to facilitate management of the Fund by enabling the Fund to meet
redemption requests when the liquidation of Fund securities would be
inconvenient or disadvantageous. The Fund will not purchase any securities while
any such borrowings (including reverse repurchase agreements) are outstanding.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except through the purchase of a
position of publicly distributed debt instruments or repurchase agreements and
through the lending of its portfolio securities. The Fund may lend its
securities if collateral values are continuously maintained at no less than 100%
of the current market value of such securities by marking to market daily.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it may be deemed
to be an underwriter under the Securities Act of 1933 in connection with the
sale of securities in accordance with its investment objective, policies, and
limitations.
INVESTING IN TAX-FREE SECURITIES
The Fund will not invest its assets so that less than 80% of its annual interest
income is exempt from the federal income tax and Ohio taxes.
The above investment limitations cannot be changed without shareholder approval.
The following limitations, however, may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in these limitations becomes effective.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except to secure
permitted borrowings. In those cases, it may mortgage, pledge, or hypothecate
assets having a market value not exceeding 10% of the value of total assets at
the time of the pledge.
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<PAGE> 35
In addition the Fund will not borrow, pledge, mortgage or hypothecate any assets
in excess of one third of the Fund's total assets.
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities on margin
but may obtain such short-term credits as may be necessary for clearance of
purchases and sales of securities.
ACQUIRING SECURITIES
The Fund will not acquire the voting securities of any issuer or any other
investment company or investment trust, except as part of a merger,
consolidation, reorganization, or acquisition of assets and will not purchase
the securities of any issuer if, as to 75% of its total assets, it would own
more than 10% of the voting securities of any such issuer.
INVESTING IN NEW ISSUERS
The Fund will not invest more than 5% of the value of its total assets in
securities of issuers (or in the alternative, guarantors, where applicable)
which have records of less than three years of continuous operations, including
the operation of any predecessor.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS OF THE FUND
The Fund will not purchase or retain the securities of any issuer if the
officers and Trustees of the Fund or its Investment Adviser owning individually
more than 1/2 of 1% of the issuer's securities together own more than 5% of the
issuer's securities.
INVESTING IN MINERALS
The Fund will not purchase or sell oil, gas, or other mineral exploration or
development programs, or related leases.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 10% of the value of its net assets in
securities which are illiquid, including repurchase agreements providing for
settlement in more than seven days after notice.
DEALING IN PUTS AND CALLS
The Fund will not purchase or sell puts, calls, straddles, spreads, or any
combination of them, except that the Fund may purchase Municipal Securities
accompanied by agreements of sellers to repurchase them at the Fund's option.
INVESTMENTS IN ANY ONE ISSUER
With respect to securities comprising 75% of its total assets, the Fund will not
invest more than 10% of its total assets in the securities of any one issuer. In
addition, the Fund intends to comply with Subchapter M of the Internal Revenue
Code (see "Non-Diversification," above). If a security is guaranteed or secured
by a letter of credit issued by a party other than the issuer of the security,
that guarantee or letter of credit will be considered a separate security.
Under this limitation, each governmental subdivision, including states and the
District of Columbia, territories, possessions of the United States, or their
political subdivisions, agencies, authorities, instrumentalities, or similar
entities, will be considered a separate issuer if its assets and revenues are
separate from those of the governmental body creating it and the security is
backed only by its own assets and revenues.
Industrial development bonds backed only by the assets and revenues of a
nongovernmental user are considered to be issued solely by that user. If in the
case of an industrial development bond or governmental-issued security, a
governmental or other entity guarantees the security, such guarantee would be
considered a separate security issued by the guarantor as well as the other
issuer, subject to limited exclusions allowed by the 1940 Act.
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<PAGE> 36
INVESTING IN WARRANTS
The Fund will not invest more than 5% of its net assets in warrants, valued at
lower of cost or market. In addition, the Fund will not invest more than 2% of
its net assets in warrants not listed on the New York or American Stock
Exchanges.
The Fund will not invest any of its assets in the securities of other investment
companies, except by purchase in the open market where no commission or profit
to a sponsor or dealer results from the purchase other than the customary
broker's commission, or except when the purchase is part of a plan of merger,
consolidation, reorganization or acquisition.
Except with respect to borrowing money, if a percentage limitation is adhered to
at the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
restriction.
The Fund will invest at least 95% of its total assets in securities rated in one
of the two highest short-term rating categories by a nationally recognized
statistical rating organization ("NRSROs") or be of comparable quality to
securities having such ratings. The Fund will invest no more than 5% of its
total assets in securities that would be considered to be in the second highest
rating category ("Second Tier Securities"), and subject to this limitation the
Fund will not invest more than the greater of 1% of its total assets or $1
million in Second Tier Securities of any one issuer.
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PORTFOLIO TRANSACTIONS
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The Fund does not normally engage in short-term trading but may do so when
KeyCorp Mutual Fund Advisers, Inc. ("KeyCorp Advisers" or the "Adviser"), the
Adviser, or Society Asset Management, Inc. ("Society" or the "Sub-Adviser"), the
Sub-Adviser to the Fund, believes a particular action will contribute to the
achievement of a Fund's investment objective.
KeyCorp Advisers (Society) is responsible for decisions to buy and sell
securities for the Fund, broker-dealer selection and negotiation of commission
rates. Since purchases and sales of portfolio securities by the Fund are usually
principal transactions, the Fund incurs little or no brokerage commissions. Fund
securities are normally purchased directly from the issuer or from a market
maker for the securities. The purchase price paid to dealers serving as market
makers may include a spread between the bid and asked prices. The Fund may also
purchase securities from underwriters at prices which include a commission paid
by the issuer to the underwriter.
The Fund does not seek to profit from short-term trading, and will generally
(but not always) hold portfolio securities to maturity, but KeyCorp Advisers
(Society) may seek to enhance the yield of the Fund by taking advantage of yield
disparities or other factors that occur in the money markets. For example,
market conditions frequently result in similar securities trading at different
prices. KeyCorp Advisers (Society) may dispose of any portfolio security prior
to its maturity if such disposition and reinvestment of proceeds are expected to
enhance yield consistent with KeyCorp Advisers' (Society's) judgment as to
desirable portfolio maturity structure or if such disposition is believed to be
advisable due to other circumstances or conditions. The investment policy of the
Fund requires that investments mature in 90 days or less. Thus, there is likely
to be relatively high portfolio turnover, but since brokerage commissions are
not normally paid on money market instruments, the high rate of portfolio
turnover is not expected to have a material effect on the net income or expenses
of the Fund.
KeyCorp Advisers' (Society's) primary consideration in effecting a security
transaction is to obtain the best net price and the most favorable execution of
the order. To the extent that the execution and prices offered by more than one
dealer are comparable, KeyCorp Advisers (Society) may, in its discretion, effect
transactions with dealers that furnish statistical, research or other
information or services which are deemed by KeyCorp Advisers (Society) to be
beneficial to the Fund's investment program. Certain research services furnished
by dealers may be useful to KeyCorp Advisers (Society) with clients other than
the Fund. Similarly, any research services received by KeyCorp Advisers
(Society) through placement of portfolio transactions of other clients may be of
value to KeyCorp Advisers (Society) in fulfilling its obligations to the Fund.
KeyCorp Advisers (Society) is of the opinion that the material received is
beneficial in supplementing KeyCorp Advisers' (Society's) research and analysis;
and, therefore, it may benefit the Fund by improving the quality of KeyCorp
Advisers' (Society's) investment advice. The advisory fees paid by the Fund are
not reduced because KeyCorp Advisers (Society) receives such services. For
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the two-month period ended October 31, 1995 and the fiscal year ended August 31,
1995, the Fund paid no brokerage fees.
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DETERMINING NET ASSET VALUE
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The Fund attempts to stabilize the value of a share at $1.00. The net asset
value is calculated by the Fund twice daily. See "Additional Purchase and
Redemption Information."
USE OF THE AMORTIZED COST METHOD
The Trustees have decided that the best method for determining the value of Fund
instruments is by use of the amortized cost method. Under this method, Fund
instruments are valued at the acquisition cost as adjusted for amortization of
premium or accumulation of discount rather than at current market value.
The Fund's use of the amortized cost method of valuing Fund instruments depends
on its compliance with certain conditions contained in Rule 2a7 (the "Rule")
promulgated by the Securities and Exchange Commission under the 1940 Act. Under
the Rule, the Trustees must establish procedures reasonably designed to
stabilize the net asset value per share ("NAV"), as computed for purposes of
distribution and redemption, at $1.00 per share, taking into account current
market conditions and the Fund's investment objective.
Under the Rule, the Fund is permitted to purchase instruments which are subject
to demand features or standby commitments. As defined by the Rule, a demand
feature entitles the Fund to receive the principal amount of the instrument from
the issuer or a third party on (1) no more than 30 days' notice of and (2) at
specified intervals not exceeding one year on no more than 30 days' notice. A
standby commitment entitles the Fund to achieve same day settlement and to
receive an exercise price equal to the amortized cost of the underlying
instrument plus accrued interest at the time of exercise.
Although demand features and standby commitments are techniques and are defined
as "puts" under the Rule, the Fund does not consider them to be "puts" as that
term is used in the Fund's investment limitations. Demand features and standby
commitments are features which enhance an instrument's liquidity, and the
investment limitation which proscribes puts is designed to prohibit the purchase
and sale of put and call options and is not designed to prohibit the Fund from
using techniques which enhance the liquidity of Fund instruments.
MONITORING PROCEDURES
The Trustees' procedures include monitoring the relationship between the
amortized cost value per share and the net asset value per share based upon
available indications of market value. The Trustees will decide what, if any,
steps should be taken if there is a difference of more than 0.5% between the two
values. The Trustees will take any steps they consider appropriate (such as
redemption in kind or shortening the average Fund maturity) to minimize any
material dilution or other unfair results arising from differences between the
two methods of determining net asset value.
INVESTMENT RESTRICTIONS
The Rule requires that the Fund limit its investments to instruments that, in
the opinion of the Trustees, present minimal credit risks and have received the
requisite rating from one or more NRSRO. The Fund will limit the percentage
allocation of its investments so as to comply with the Rule, which generally
limits to 5% of total assets the amount which may be invested in the securities
of any one issuer. If the instruments are not rated, the Trustees must determine
that they are of comparable quality. The Rule also requires the Fund to maintain
a dollar weighted average portfolio maturity (not more than 90 days) appropriate
to the objective of maintaining a stable net asset value of $1.00 per share. In
addition, no instrument with a remaining maturity of more than 397 days can be
purchased by the Fund.
Should the disposition of a portfolio security result in a dollar weighted
average portfolio maturity of more than 90 days, the Fund will invest its
available cash to reduce the average maturity to 90 days or less as soon as
possible.
The Fund may attempt to increase yield by trading portfolio securities to take
advantage of short-term market variations. This policy may, from time to time,
result in high portfolio turnover. Under the amortized cost method of
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<PAGE> 38
valuation, neither the amount of daily income nor the net asset value is
affected by any unrealized appreciation or depreciation of the portfolio.
In periods of declining interest rates, the indicated daily yield on shares of
the Fund computed by dividing the annualized daily income on the Fund's
portfolio by the net asset value computed as above may tend to be higher than a
similar computation made by using a method of valuation based upon market prices
and estimates.
In periods of rising interest rates, the indicated daily yield on shares of the
Fund computed the same way may tend to be lower than a similar computation made
by using a method of calculation based upon market prices and estimates.
YIELD
The Fund calculates its yield daily, based upon the seven days ending on the day
of the calculation, called the "base period." This yield is computed by:
- - determining the net change in the value of a hypothetical account with a
balance of one share at the beginning of the base period, with the net
change excluding capital changes but including the value of any additional
shares purchased with dividends earned from the original one share and all
dividends declared on the original and any purchased shares;
- - dividing the net change in the account's value by the value of the account
at the beginning of the base period to determine the base period return;
and
- - multiplying the base period return by (365/7).
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with the Fund, the yield will
be reduced for those shareholders paying those fees. For the seven-day period
ended October 31, 1995, the Fund's yield was 3.36%.
EFFECTIVE YIELD
The Fund's effective yield is computed by compounding the unannualized base
period return by:
- - adding 1 to the base period return;
- - raising the sum to the 365/7th power; and
- - subtracting 1 from the result
For the seven-day period ended October 31, 1995, the Fund's effective yield was
3.42%.
TAXABLE-EQUIVALENT YIELD
The Fund's taxable-equivalent yield is calculated similarly to the yield, but
reflects the taxable yield that the Fund would have had to earn to equal its
actual yield, assuming a tax rate of 39.6%, and assuming that income earned by
the Fund is 100% tax-exempt on a regular federal, state, and local basis.
For the seven-day period ended October 31, 1995, the Fund's taxable-equivalent
yield and taxable-equivalent effective yield was 5.56% and 5.66%, respectively.
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISONS
- --------------------------------------------------------------------------------
The Fund's performance depends upon such variables as:
- portfolio quality;
- average portfolio maturity;
- type of instruments in which the portfolio is invested;
- changes in interest rates on money market instruments;
- changes in Fund expenses; and
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<PAGE> 39
- the relative amount of Fund cash flow.
From time to time the Fund may advertise its performance compared to similar
funds or portfolios using certain indices, reporting services, and financial
publications. The Fund may also refer to the performance of A.T. Ohio Municipal
Money Market Fund, its predecessor. These may include the following:
TOTAL RETURN CALCULATIONS
TOTAL RETURNS quoted in advertising reflect all aspects of the Fund's return,
including the effect of reinvesting dividends and capital gain distributions (if
any), and any change in each Fund's net asset value per share ("NAV") over the
period. AVERAGE ANNUAL TOTAL RETURNS are calculated by determining the growth or
decline in value of a hypothetical historical investment in the Fund over a
stated period, and then calculating the annually compounded percentage rate that
would have produced the same result if the rate of growth or decline in value
had been constant over the period. For example, a cumulative total return of
100% over ten years would produce an average annual total return of 7.18%, which
is the steady annual rate of return that would equal 100% growth on an annually
compounded basis in ten years. While average annual total returns are a
convenient means of comparing investment alternatives, investors should realize
that a Fund's performance is not constant over time, but changes from year to
year, and that average annual total returns represent averaged figures as
opposed to the actual year-to-year performance of the Fund. When using total
return and yield to compare the Fund with other mutual funds, investors should
take into consideration permitted portfolio composition methods used to value
portfolio securities and computing offering price. The Fund's average annual
total returns for one-, five-, ten-year periods ended October 31, 1995 were
3.33%, 3.04% and 3.87%, respectively.
In addition to average annual total returns, the Fund may quote unaveraged or
CUMULATIVE TOTAL RETURNS reflecting the total income over a stated period.
Average annual and cumulative total returns may be quoted as a percentage or as
a dollar amount, and may be calculated for a single investment, a series of
investments, or a series of redemptions, over any time period. Total returns may
be broken down into their components of income and capital (including capital
gains and changes in share price) in order to illustrate the relationship of
these factors and their contributions to total return. Total returns, yields,
and other performance information may be quoted numerically or in a table,
graph, or similar illustration. The Fund's cumulative total returns for the
one-, five-, and ten-year periods ended October 31, 1995 were 3.33%, 15.77% and
45.91%, respectively.
LIPPER ANALYTICAL SERVICES, INC.
The Fund's performance may be compared to the performance of other mutual funds
in general, or to the performance of particular types of mutual funds. These
comparisons may be expressed as mutual fund rankings prepared by Lipper
Analytical Services, Inc. ("Lipper"), an independent service located in Summit,
New Jersey which monitors the performance of mutual funds. Lipper generally
ranks funds on the basis of total return, assuming reinvestment of
distributions, but does not take sales charges or redemption fees into
consideration, and is prepared without regard to tax consequences. Lipper may
also rank each Fund based on yield. In addition to the mutual fund rankings,
each Fund's performance may be compared to mutual fund performance indices
prepared by Lipper. Of course, when comparing Fund performance to any index,
factors such as composition of the index and prevailing market conditions should
be considered in assessing the significance of such comparisons.
The Fund may advertise examples of the effects of periodic investment plans,
including the principle of dollar cost averaging. In such a program, the
investor invests a fixed dollar amount in a fund at periodic intervals, thereby
purchasing fewer shares when prices are high and more shares when prices are
low. While such a strategy does not assure a profit or guard against loss in a
declining market, the investor's average cost per share can be lower than if
fixed numbers of shares had been purchased at those intervals. In evaluating
such a plan, investors should consider their ability to continue purchasing
shares through periods of low price levels.
Advertisements and sales literature may also include discussions of a
prospective shareholder's financial concerns and a variety of investment goals,
including, but not limited to, college funding, retirement planning and
providing for long term health care costs. The discussions may also include
statistics (regarding the cost of college tuition, health care, social security,
retirement savings, etc.) from a variety of sources and address the need for
early and regular investing in order to meet these investment goals.
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<PAGE> 40
- --------------------------------------------------------------------------------
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
- --------------------------------------------------------------------------------
The Victory Portfolios is open for business and the NAV of the Fund is
calculated on each Business Day. A Business Day is every day on which the NYSE
is open for business, the Federal Reserve Bank of Cleveland is open and any
other day (other than a day on which no shares of the Fund are tendered for
redemption and no order to purchase any shares is received) during which there
is sufficient trading in portfolio instruments that the Fund's net asset value
per share might be materially affected. The NAV is determined twice daily at
12:00 p.m. Eastern time and as of the close of regular trading hours of the NYSE
(generally 4:00 p.m. Eastern time (the "Valuation Time")). The NYSE or the
Federal Reserve Bank of Cleveland will not be open the following holidays: New
Year's Day, Martin Luther King, Jr. Day, President's Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving Day,
and Christmas Day. The holiday closing schedule is subject to change.
When the NYSE is closed, or when trading is restricted for any reason other than
its customary weekend or holiday closings, or under emergency circumstances as
determined by the SEC to warrant such action, the Fund's transfer agent will
determine the Fund's NAV at Valuation Time. The Fund's NAV may be affected to
the extent that its securities are traded on days that are not Business Days.
If, in the opinion of the Board of Trustees, conditions exist which make cash
payment undesirable, redemption payments may be made in whole or in part in
securities or other property, valued for this purpose as they are valued in
computing the Fund's NAV. Shareholders receiving securities or other property on
redemption may realize a gain or loss for tax purposes, and will incur any costs
of sale, as well as the associated inconveniences.
Pursuant to Rule 11a-3 under the 1940 Act, the Fund is required to give
shareholders at least 60 days' notice prior to terminating or modifying its
exchange privilege. Under the Rule, the 60-day notification requirement may be
waived if (1) the only effect of a modification would be to reduce or eliminate
an administrative fee, redemption fee, or deferred sales charge ordinarily
payable at the time of exchange, or (2) the Fund temporarily suspends the
offering of shares as permitted under the 1940 Act or by the SEC, or because it
is unable to invest amounts effectively in accordance with its investment
objective and policies.
The Fund and KeyCorp Advisers (Society) reserve the right at any time without
prior notice to shareholders to refuse exchange purchases by any person or group
if, in KeyCorp Advisers' (Society's) judgment, the Fund would be unable to
invest effectively in accordance with its investment objective and policies, or
would otherwise potentially be adversely affected.
PURCHASING SHARES
Shares are sold at their net asset value without a sales charge on days the NYSE
and the Federal Reserve Wire System are open for business. The procedure for
purchasing shares of the Fund is explained in the prospectus under "How to
Invest, Exchange and Redeem."
CONVERSION TO FEDERAL FUNDS
It is the Fund's policy to be as fully invested as possible so that maximum
interest may be earned. To this end, all payments from shareholders must be in
federal funds or be converted into federal funds. This conversion must be made
before shares are purchased. Converting the funds to federal funds is normally
accomplished within two business days of receipt of the check.
REDEEMING SHARES
The Fund redeems shares at the next computed net asset value after the
redemption request is received. Redemption procedures are explained in the
prospectus under "How to Invest, Exchange and Redeem."
REDEMPTION IN KIND
Although the Fund intends to redeem shares in cash, it reserves the right under
certain circumstances to pay the redemption price in whole or in part by a
distribution of securities from the Fund. To the extent available, such
securities will be readily marketable.
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<PAGE> 41
Redemption in kind will be made in conformity with applicable SEC rules, taking
such securities at the same value employed in determining net asset value and
selecting the securities in a manner the Trustees determine to be fair and
equitable.
The Fund has elected to be governed by Rule 18f-1 of the Act under which the
Fund is obligated to redeem shares for any one shareholder in cash only up to
the lesser of $250,000 or 1% of the Fund's net asset value during any 90-day
period.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
- --------------------------------------------------------------------------------
The Fund ordinarily declares dividends from its net investment income daily and
pays such dividends on or around the second business day of the succeeding
month. The Fund distributes substantially all of its net investment income and
net capital gains, if any, to shareholders within each calendar year as well as
on a fiscal year basis to the extent required for the Fund to qualify for
favorable federal tax treatment.
For this purpose, the net income of the Fund, from the time of the immediately
preceding determination thereof, shall consist of all interest income accrued on
the assets of the Fund, dividend income, if any, income from securities loans,
if any, and realized capital gains and losses on Fund assets, if any, less all
expenses and liabilities of that Fund chargeable against income. Interest income
shall include discount earned, including both original issue and market
discount, on discount paper accrued ratably to the date of maturity. Expenses,
including the compensation payable to KeyCorp Advisers, are accrued each day.
The expenses and liabilities of the Fund shall include those appropriately
allocable to the Fund as well as a share of the general expenses and liabilities
of the Fund in proportion to the Fund's share of the total net assets of the
Fund.
- --------------------------------------------------------------------------------
TAXES
- --------------------------------------------------------------------------------
The following is only a summary of certain additional tax considerations
generally affecting the Fund and its shareholders that are not described in the
Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of the Fund or its shareholders, and the discussions here and in the
Prospectus are not intended as substitutes for careful tax planning.
QUALIFICATION AS A REGULATED INVESTMENT COMPANY. The Fund has elected to be
taxed as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). As a regulated investment
company, the Fund is not subject to federal income tax on the portion of its net
investment income (i.e., taxable interest, dividends and other taxable ordinary
income, net of expenses) and capital gain net income (i.e., the excess of
capital gains over capital losses) that it distributes to shareholders, provided
that it distributes at least 90% of its investment company taxable income (i.e.,
net investment income and the excess of net short-term capital gain over net
long-term capital loss) and at least 90% of its tax-exempt income (net of
expenses allocable thereto) for the taxable year (the "Distribution
Requirement"), and satisfies certain other requirements of the Code that are
described below. Distributions by a Fund made during the taxable year or, under
specified circumstances, within twelve months after the close of the taxable
year, will be considered distributions of income and gains of the taxable year
and can therefore satisfy the Distribution Requirement.
In addition to satisfying the Distribution Requirement, a regulated investment
company must: (1) derive at least 90% of its gross income from dividends,
interest, certain payments with respect to securities loans, gains from the sale
or other disposition of stock or securities or foreign currencies (to the extent
such currency gains are directly related to the regulated investment company's
principal business of investing in stock or securities) and other income
(including but not limited to gains from options, futures or forward contracts)
derived with respect to its business of investing in such stock, securities or
currencies (the "Income Requirement"); and (2) derive less than 30% of its gross
income (exclusive of certain gains on designated hedging transactions that are
offset by realized or unrealized losses on offsetting positions) from the sale
or other disposition of stock, securities or foreign currencies (or options,
futures or forward contracts thereon) held for less than three months (the
"Short-Short Gain Test"). For purposes of these calculations, gross income
includes tax-exempt income. However, foreign currency gains, including those
derived from options, futures and forwards, will not in any event be
characterized as Short-Short Gain if they are directly related to the regulated
investment company's investments in stock or securities (or options or futures
thereon). Because of the Short-Short Gain Test, the Fund may have to limit the
sale of appreciated
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<PAGE> 42
securities that it has held for less than three months. However, the Short-Short
Gain Test will not prevent a Fund from disposing of investments at a loss, since
the recognition of a loss before the expiration of the three-month holding
period is disregarded for this purpose. Interest (including original issue
discount) received by a Fund at maturity or upon the disposition of a security
held for less than three months will not be treated as gross income derived from
the sale or other disposition of such security within the meaning of the
Short-Short Gain Test. However, income that is attributable to realized market
appreciation will be treated as gross income from the sale or other disposition
of securities for this purpose.
In general, gain or loss recognized by the Fund on the disposition of an asset
will be a capital gain or loss. However, gain recognized on the disposition of a
debt obligation (including municipal obligations) purchased by a Fund at a
market discount (generally, at a price less than its principal amount) will be
treated as ordinary income to the extent of the portion of the market discount
which accrued during the period of time the Fund held the debt obligation.
Treasury Regulations permit a regulated investment company, in determining its
investment company taxable income and net capital gain (i.e., the excess of net
long-term capital gain over net short-term capital loss) for any taxable year,
to elect (unless it has made a taxable year election for excise tax purposes as
discussed below) to treat all or any part of any net capital loss, any net
long-term capital loss or any net foreign currency loss incurred after October
31 as if it had been incurred in the succeeding year.
In addition to satisfying the requirements described above, the Fund must
satisfy an asset diversification test in order to qualify as a regulated
investment company. Under this test, at the close of each quarter of the Fund's
taxable year, at least 50% of the value of the Fund's assets must consist of
cash and cash items, U.S. Government securities, securities of other regulated
investment companies, and securities of other issuers (as to which the Fund has
not invested more than 5% of the value of the Fund's total assets in securities
of such issuer and as to which the Fund does not hold more than 10% of the
outstanding voting securities of such issuer), and no more than 25% of the value
of its total assets may be invested in the securities of any one issuer (other
than U.S. Government securities and securities of other regulated investment
companies), or in two or more issuers which the Fund controls and which are
engaged in the same or similar trades or businesses. For purposes of asset
diversification testing, obligations issued or guaranteed by agencies or
instrumentalities of the U.S. Government such as the Federal Agricultural
Mortgage Corporation, the Farm Credit System Financial Assistance Corporation, a
Federal Home Loan Bank, the Federal Home Loan Mortgage Corporation, the Federal
National Mortgage Association, the Government National Mortgage Corporation, and
the Student Loan Marketing Association are treated as U.S. Government
securities.
If for any taxable year the Fund does not qualify as a regulated investment
company, all of its taxable income (including its net capital gain) will be
subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable to the
shareholders as ordinary dividends to the extent of the Fund's current and
accumulated earnings and profits. Such distributions generally will be eligible
for the dividends-received deduction in the case of corporate shareholders.
EXCISE TAX ON REGULATED INVESTMENT COMPANIES. A 4% non-deductible excise tax is
imposed on a regulated investment company that fails to distribute in each
calendar year an amount equal to 98% of ordinary taxable income for the calendar
year and 98% of capital gain net income for the one-year period ended on October
31 of such calendar year (or, at the election of a regulated investment company
having a taxable year ending November 30 or December 31, for its taxable year (a
"taxable year election")). (Tax-exempt interest on municipal obligations is not
subject to the excise tax.) The balance of such income must be distributed
during the next calendar year. For the foregoing purposes, a regulated
investment company is treated as having distributed any amount on which it is
subject to income tax for any taxable year ending in such calendar year.
The Fund intends to make sufficient distributions or deemed distributions of its
ordinary taxable income and capital gain net income prior to the end of each
calendar year to avoid liability for the excise tax. However, investors should
note that the Fund may in certain circumstances be required to liquidate
portfolio investments to make sufficient distributions to avoid excise tax
liability.
FUND DISTRIBUTIONS. The Fund anticipates distributing substantially all of its
investment company taxable income for each taxable year. Such distributions will
be taxable to shareholders as ordinary income and treated as dividends for
federal income tax purposes, but will not qualify for the 70% dividends-received
deduction for corporate shareholders. The Fund also intends to distribute to
shareholders its net capital gain for each taxable year. Net capital gain that
is distributed and designated as a capital gain dividend will be taxable to
shareholders as long-term
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<PAGE> 43
capital gain, regardless of the length of time the shareholder has held his
shares or whether such gain was recognized by the Fund prior to the date on
which the shareholder acquired his shares.
The Fund intends to qualify to pay exempt-interest dividends by satisfying the
requirement that at the close of each quarter of the Fund's taxable year at
least 50% of its total assets consists of tax-exempt municipal obligations.
Distributions from the Fund will constitute exempt-interest dividends to the
extent of the Fund's tax-exempt interest income (net of expenses and amortized
bond premium). Exempt-interest dividends distributed to shareholders are
excluded by them from gross income for federal income tax purposes. However,
shareholders required to file a federal income tax return will be required to
report the receipt of exempt-interest dividends on their returns. Moreover,
while exempt-interest dividends are excluded from gross income for federal
income tax purposes, they may be subject to the alternative minimum tax ("AMT")
in certain circumstances and may have other collateral tax consequences
discussed below. Distributions by the Fund of any investment company taxable
income or of any net capital gain will be taxable to shareholders as discussed
above.
AMT is imposed in addition to, but only if and to the extent that it exceeds,
the regular tax and is computed -- at a maximum marginal rate of 28% for
noncorporate taxpayers and 20% for corporate taxpayers -- on the excess of the
taxpayer's alternative minimum taxable income ("AMTI") over an exemption amount.
In addition, under the Superfund Amendments and Reauthorization Act of 1986, a
tax is imposed for taxable years beginning after 1986 and before 1996 at the
rate of 0.12% on the excess of a corporate taxpayer's AMTI (determined without
regard to the deduction for this tax and the AMT net operating loss deduction)
over $2 million. Exempt-interest dividends derived from certain "private
activity" municipal obligations issued after August 7, 1986 will generally
constitute an item of tax preference includable in AMTI for both corporate and
noncorporate taxpayers. In addition, exempt-interest dividends derived from all
municipal obligations, regardless of the date of issue, must be included in
adjusted current earnings, which are used in computing another corporate
preference item (i.e., 75% of the excess of a corporate taxpayer's adjusted
current earnings over its AMTI (determined without regard to this item and the
AMT net operating loss deduction)) includable in AMTI.
Exempt-interest dividends must be taken into account in computing the portion,
if any, of social security or railroad retirement benefits that must be included
in an individual shareholder's gross income and subject to, federal income tax.
Further, a shareholder of the Fund is denied a deduction for interest on
indebtedness incurred or continued to purchase or carry shares of the Fund.
Moreover, a shareholder who is (or is "related" to, within the meaning of
Section 147(a) of the Code) a "substantial user" of a facility financed by
industrial development bonds (as defined in Treasury regulations section
1.103-11) held by the Fund will likely be subject to tax on dividends paid by
the Fund that are derived from interest on such bonds. Accordingly, the Fund may
not be an appropriate investment vehicle for such users. Receipt of
exempt-interest dividends may result in other collateral federal income tax
consequences to certain taxpayers, including financial institutions, property
and casualty insurance companies and foreign corporations engaged in a trade or
business in the United States. Prospective investors should consult their own
tax advisers as to such consequences.
Distributions by the Fund that do not constitute ordinary income dividends,
exempt-interest dividends or capital gain dividends will be treated as a return
of capital to the extent of (and in reduction of) the shareholder's tax basis in
his shares; any excess will be treated as gain from a sale of the shares, as
discussed below.
Distributions by a Fund will be treated in the manner described above whether
such distributions are paid in cash or reinvested in additional shares of the
Fund (or of another fund). Shareholders receiving a distribution in the form of
additional shares will be treated as receiving a distribution in an amount equal
to the fair market value of the shares received, determined as of the
reinvestment date. In addition, if the net asset value at the time a shareholder
purchases shares of the Fund reflects undistributed income or gain, or
unrealized appreciation in the value of assets held by the Fund, a subsequent
distribution of such amounts will be taxable to the shareholder in the manner
described above, although it economically constitutes a return of capital.
Ordinarily, shareholders are required to take distributions by the Fund into
account in the year in which they are made. However, dividends declared in
October, November or December of any year and payable to shareholders of record
on a specified date in such a month will be deemed to have been received by the
shareholders (and made by the Fund) on December 31 of such calendar year if such
dividends are actually paid in January of the following year. Shareholders will
be advised annually as to the U.S. federal income tax consequences of
distributions made (or deemed made) to them during the year.
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<PAGE> 44
The Fund will be required in certain cases to withhold and remit to the U.S.
Treasury 31% of ordinary income and capital gain dividends, and the proceeds of
redemption of shares, paid to any shareholder who (1) has provided either an
incorrect tax identification number or no number at all, (2) is subject to
backup withholding by the IRS for failure to report the receipt of interest or
dividend income properly, or (3) has failed to certify to the Fund that it is
not subject to backup withholding or that it is a corporation or other "exempt
recipient."
SALE OR REDEMPTION OF SHARES. The Fund seeks to maintain a stable net asset
value of $1.00 per share; however, there can be no assurance that the Fund will
be able to do so. If the value varies, a shareholder will recognize gain or loss
on a sale or redemption of shares of the Fund in an amount equal to the
difference between the proceeds of the sale or redemption and the shareholder's
adjusted tax basis in the shares. All or a portion of any loss so recognized may
be disallowed if the shareholder purchases other shares of the Fund within 30
days before or after the sale or redemption. In general, any gain or loss
arising from (or treated as arising from) the sale or redemption of shares of
the Fund will be considered capital gain or loss and will be long-term capital
gain or loss if the shares were held longer than one year. However, any capital
loss arising from a sale or redemption of shares held for six months or less
will be disallowed to the extent of the amount of exempt-interest dividends
received on such shares and (to the extent not disallowed) will be treated as a
long-term capital loss to the extent of the amount of capital gain dividends
received on such shares. For this purpose, the special holding period rules of
Code Section 246(c)(3) and (4) generally will apply in determining the holding
period of shares. Long-term capital gains of noncorporate taxpayers are
currently taxed at a maximum rate 11.6% lower than the maximum rate applicable
to ordinary income. Capital losses in any year are deductible only to the extent
of capital gains plus, in the case of noncorporate taxpayers, $3,000 of ordinary
income.
FOREIGN SHAREHOLDERS. Taxation of a shareholder who, as to the United States,
is a nonresident alien individual, foreign trust or estate, foreign corporation,
or foreign partnership ("foreign shareholder"), depends on whether or not the
income from the Fund is "effectively connected" with a U.S. trade or business
carried on by such shareholder.
If the income from the Fund is not effectively connected with a U.S. trade or
business of a foreign shareholder, ordinary income dividends paid to the
shareholder will be subject to U.S. withholding tax at the rate of 30% (or lower
applicable treaty rate) on the gross amount of the dividend. Such a foreign
shareholder would generally be exempt from U.S. federal income tax on gains
realized on the sale of shares of the Fund, capital gain dividends and
exempt-interest dividends.
If the income from the Fund is effectively connected with a U.S. trade or
business of a foreign shareholder, then ordinary income and capital gain
dividends received in respect of, and any gains realized on the sale of, shares
of the Fund will be subject to U.S. federal income tax at the rates applicable
to U.S. citizens or domestic corporations.
In the case of a foreign noncorporate shareholder, the Fund may be required to
withhold U.S. federal income tax at a rate of 31% on distributions that are
otherwise exempt from withholding (or taxable at a reduced treaty rate), unless
the shareholder furnishes the Fund with proper notification of its foreign
status.
The tax consequences to a foreign shareholder entitled to claim the benefits of
an applicable tax treaty may be different from those described herein. Foreign
shareholders are urged to consult their own tax advisers with respect to the
particular tax consequences to them of an investment in the Fund, including the
applicability of foreign taxes.
EFFECT OF FUTURE LEGISLATION; LOCAL TAX CONSIDERATIONS.
The foregoing general discussion of U.S. federal income tax consequences is
based on the Code and Treasury Regulations issued thereunder as in effect on the
date of this Statement. Future legislative or administrative changes or court
decisions may significantly change the conclusions expressed herein, perhaps
with retroactive effect.
Rules of state and local taxation of ordinary income dividends, exempt-interest
dividends and capital gain dividends from regulated investment companies often
differ from the rules for U.S. federal income taxation described above.
Shareholders are urged to consult their tax advisers as to the consequences to
them of federal, state and local tax rules with respect to an investment in the
Victory Portfolios.
-17-
<PAGE> 45
- --------------------------------------------------------------------------------
TRUSTEES AND OFFICERS
- --------------------------------------------------------------------------------
BOARD OF TRUSTEES
Overall responsibility for management of the Victory Portfolios rests with the
Trustees, who are elected by the shareholders of the Victory Portfolios. The
Victory Portfolios are managed by the Trustees in accordance with the laws of
the State of Massachusetts governing business trusts (effective on or about
February 29, 1996, the Victory Portfolios will be reorganized as a Delaware
business trust). There are currently seven Trustees, six of whom are not
"interested persons" of the Victory Portfolios within the meaning of that term
under the 1940 Act. The Trustees, in turn, elect the officers of the Victory
Portfolios to supervise actively its day-to-day operations.
The Trustees of the Victory Portfolios, their addresses, ages and their
principal occupations during the past five years are as follows:
<TABLE>
<CAPTION>
POSITION(S) HELD
WITH THE VICTORY PRINCIPAL OCCUPATION
NAME, ADDRESS AND AGE PORTFOLIOS DURING PAST 5 YEARS
- ------------------------------ ----------------- -------------------------------------------------
<S> <C> <C>
Leigh A. Wilson, 51* Trustee and From 1989 to present, Chairman and Chief
Glenleigh International Ltd. President Executive Officer, Glenleigh International
53 Sylvan Road North Limited; from 1984-1989 Chief Executive Officer,
Westport, CT 06880 Paribas North America and Paribas Corporation;
Trustee, The Victory Funds and Spears, Benzak,
Salomon and Farrell ("SBSF") Funds.
Robert G. Brown, 72 Trustee Retired; from October 1983 to November 1990,
5460 N. Ocean Drive President, Cleveland Advanced Manufacturing
Singer Island Program (non-profit corporation engaged in
Riviera Beach, FL 33404 regional economic development).
Edward P. Campbell, 46 Trustee From March 1, 1994 to present, Executive Vice
Nordson Corporation President and Chief Operating Officer of Nordson
28601 Clemens Road Corporation (manufacturer of application
Westlake, OH 44145 equipment); from May 1988 to March 1994, Vice
President of Nordson Corporation; from 1987 to
December 1994, member of the Supervisory
Committee of Society's Collective Investment
Retirement Fund; from May 1991 to August 1994,
Trustee, Financial Reserves Fund and from May
1993 to August 1994, Trustee, Ohio Municipal
Money Market Fund; Trustee, The Victory Funds and
SBSF Funds.
Dr. Harry Gazelle, 68 Trustee Retired radiologist, Drs. Hill and Thomas, Corp.;
17822 Lake Road Trustee, The Victory Funds.
Lakewood, OH 44107
Stanley I. Landgraf, 70 Trustee Retired; currently, Trustee, Rensselaer
41 Traditional Lane Polytechnic Institute; Director, Elenel
Albany, NY 12211 Corporation and Mechanical Technology, Inc.;
Member, Board of Overseers, School of Management,
Rensselaer Polytechnic Institute; Member, The
Fifty Group (a Capital Region business
organization); Trustee, The Victory Funds.
</TABLE>
- ---------------
* Mr. Wilson is deemed to be an "interested person" of the Victory Portfolios
under the 1940 Act solely by reason of his position as President.
-18-
<PAGE> 46
<TABLE>
<CAPTION>
POSITION(S) HELD
WITH THE VICTORY PRINCIPAL OCCUPATION
NAME, ADDRESS AND AGE PORTFOLIOS DURING PAST 5 YEARS
- ------------------------------ ----------------- -------------------------------------------------
<S> <C> <C>
Dr. Thomas F. Morrissey, 62 Trustee 1995 Visiting Scholar, Bond University,
Weatherhead School of Queensland, Australia; Professor, Weatherhead
Management School of Management, Case Western Reserve
Case Western Reserve University; from 1989 to 1995, Associate Dean of
University Weatherhead School of Management and Professor,
10900 Euclid Avenue Case Western Reserve University; from 1987 to
Cleveland, OH 44106-7235 December 1994, Member of the Supervisory
Committee of Society's Collective Investment
Retirement Fund; from May 1991 to August 1994,
Trustee, Financial Reserves Fund and from May
1993 to August 1994, Trustee, Ohio Municipal
Money Market Fund; Trustee, The Victory Funds.
H. Patrick Swygert, 52 Trustee President, Howard University; formerly President,
Howard University State University of New York at Albany; formerly,
2400 6th Street, N.W. Executive Vice President, Temple University;
Suite 320 Trustee, The Victory Funds.
Washington, DC 20059
</TABLE>
The Board presently has an Investment Policy Committee and a Business,
Legal, and Audit Committee. The members of the Investment Policy Committee are
Messrs. Landgraf (Chairman), Morrissey and Brown, who will serve until May 1996.
The function of the Investment Policy Committee is to review the existing
investment policies of the Victory Portfolios, including the levels of risk and
types of funds available to shareholders, and make recommendations to the Board
of Trustees regarding the revision of such policies or, if necessary, the
submission of such revisions to the Victory Portfolios' shareholders for their
consideration. The members of the Business, Legal and Audit Committee are
Messrs. Swygert (Chairman), Campbell and Gazelle who will serve until May 1996.
The function of the Business, Legal and Audit Committee is to recommend
independent auditors and monitor accounting and financial matters; to nominate
persons to serve as disinterested Trustees and Trustees to serve on committees
of the Board; and to review compliance and contract matters.
The Investment Policy Committee met four times during the 12 months ended
October 31, 1995. The Business, Legal and Audit Committee was constituted on May
24, 1995 (and has met twice since then) and replaced the Audit Committee, the
Legal Committee and the Nominating Committee, which met three times, one time
and one time, respectively, during the 12-month period ended October 31, 1995.
REMUNERATION OF TRUSTEES AND CERTAIN EXECUTIVE OFFICERS
Effective June 1, 1995, each Trustee (other than Leigh A. Wilson) receives
an annual fee of $27,000 for serving as Trustee of all the Funds of the Victory
Portfolios, and an additional per meeting fee ($2,400 in person and $1,200 per
telephonic meeting).
Effective June 1, 1995, Leigh A. Wilson receives an annual fee of $33,000
for serving as President and Trustee for all of the Funds of the Victory
Portfolios, and an additional per meeting fee ($3,000 in person and $1,500 per
telephonic meeting).
-19-
<PAGE> 47
The following table indicates the compensation received by each Trustee
from the Victory "Fund Complex"* for the 12 month period ended October 31, 1995.
For certain Trustees, these amounts include amounts paid by the Predecessor
Fund, a portfolio of The Victory Funds which was reorganized as the Fund as of
June 5, 1995.
<TABLE>
<CAPTION>
PENSION OR ESTIMATED
RETIREMENT BENEFITS ANNUAL TOTAL TOTAL COMPENSATION
ACCRUED AS BENEFITS COMPENSATION FROM VICTORY
PORTFOLIO EXPENSES UPON RETIREMENT FROM FUND "FUND COMPLEX"*
------------------- --------------- ------------ ------------------
<S> <C> <C> <C> <C>
Robert G. Brown, Trustee........ -0- -0- 2,962 $39,815.98
John D. Buckingham, Trustee#.... -0- -0- 1,784 18,841.89
Edward P. Campbell, Trustee..... -0- -0- 4,899 33,799.68
Harry Gazelle, Trustee.......... -0- -0- 3,548 35,916.98
John W. Kemper, Trustee#........ -0- -0- 1,893 22,567.31
Stanley I. Landgraf, Trustee.... -0- -0- 3,183 34,615.98
Thomas F. Morrissey, Trustee.... -0- -0- 5,602 40,366.98
H. Patrick Swygert, Trustee..... -0- -0- 3,102 37,116.98
Leigh A. Wilson, Trustee........ -0- -0- 3,424 46,716.97
John R. Young, Trustee#......... -0- -0- 1,661 21,963.81
</TABLE>
- ---------------
# Resigned
- ---------------
* For certain Trustees, these amounts include compensation received from The
Victory Funds (which were reorganized into the Victory Portfolios as of June
5, 1995), the SBSF Funds (the investment adviser of which was acquired by
KeyCorp effective April, 1995) and Society's Collective Investment Retirement
Funds, which were reorganized into the Victory Balanced Fund and Victory
Government Mortgage Fund as of December 19, 1994. There are presently 28
mutual funds from which the above-named Trustees are compensated in the
Victory "Fund Complex," but not all of the above-named Trustees serve on the
boards of each fund in the "Fund Complex."
OFFICERS
The officers of the Victory Portfolios, their addresses, ages and principal
occupations during the past five years are as follows:
<TABLE>
<CAPTION>
POSITION(S) HELD
WITH THE VICTORY PRINCIPAL OCCUPATION
NAME, ADDRESS AND AGE PORTFOLIOS DURING PAST 5 YEARS
- ------------------------------ ----------------- -------------------------------------------------
<S> <C> <C>
Leigh A. Wilson, 51 President and From 1989 to present, Chairman Chief Executive
Glenleigh International Ltd. Trustee Officer, Glenleigh International Limited; from
53 Sylvan Road North 1984 to 1989, Chief Executive Officer, Paribas
Westport, CT 06880 North America and Paribas Corporation; Trustee to
The Victory Funds and SBSF Funds.
William B. Blundin, 57 Vice President Senior Vice President of BISYS Fund Services;
BISYS Fund Services officer of other investment companies
125 West 55th Street administered by BISYS Fund Services; President
New York, New York 10019 and Chief Executive Officer of Vista
Broker-Dealer Services, Inc., Emerald Asset
Management, Inc. and BNY Hamilton Distributors,
Inc., registered broker/dealers.
J. David Huber, 49 Vice President Executive Vice President, BISYS Fund Services.
BISYS Fund Services
3435 Stelzer Road
Columbus, OH 43219-3035
</TABLE>
-20-
<PAGE> 48
<TABLE>
<CAPTION>
POSITION(S) HELD
WITH THE VICTORY PRINCIPAL OCCUPATION
NAME, ADDRESS AND AGE PORTFOLIOS DURING PAST 5 YEARS
- ------------------------------ ----------------- -------------------------------------------------
<S> <C> <C>
Scott A. Englehart, 33 Secretary From October 1990 to present, employee of BISYS
BISYS Fund Services Fund Services, Inc.; from 1985 to October 1990,
3435 Stelzer Road Manager of Banking Center, Fifth Third Bank.
Columbus, OH 43219-3035
George O. Martinez, 36 Assistant From March 1995 to present, Senior Vice President
BISYS Fund Services Secretary and Director of Legal and Compliance Services,
3435 Stelzer Road BISYS Fund Services; from June 1989-March 1995,
Columbus, OH 43219-3035 Vice President and Associate General Counsel,
Alliance Capital Management.
Martin R. Dean, 32 Treasurer From May 1994 to present, employee of BISYS Fund
BISYS Fund Services Services; from January 1987 -- April 1994; Senior
3435 Stelzer Road Manager, KPMG Peat Marwick.
Columbus, OH 43219-3035
Adrian J. Waters, 33 Assistant From May 1993 to present, employee of BISYS Fund
BISYS Fund Services (Ireland) Treasurer Services; from 1989-May 1993, Manager, Price
Limited Waterhouse.
Floor 2, Block 2
Harcourt Center
Dublin 2, Ireland
</TABLE>
The mailing address of each of the officers of the Victory Portfolios is 3435
Stelzer Road, Columbus, Ohio 43219-3035.
The officers of the Victory Portfolios (other than Leigh Wilson) receive no
compensation directly from the Victory Portfolios for performing the duties of
their offices. BISYS Fund Services, Inc. receives fees from the Victory
Portfolios for acting as Administrator.
As of December 1, 1995, the Trustees and officers as a group owned beneficially
less than 1% of the Fund.
INVESTMENT ADVISER AND SUB-ADVISER
KeyCorp Advisers was organized as an Ohio corporation on July 27, 1995 and is
registered as an investment adviser under the Investment Advisers Act of 1940,
as amended. It is a wholly-owned subsidiary of KeyCorp Asset Management
Holdings, Inc., which is a wholly-owned subsidiary of Society National Bank, a
wholly-owned subsidiary of KeyCorp. Affiliates of KeyCorp Advisers manage
approximately $37 billion for numerous clients including large corporate and
public retirement plans, Taft-Hartley plans, foundations and endowments, high
net worth individuals and mutual funds.
KeyCorp, a financial services holding company, is headquartered at 127 Public
Square, Cleveland, Ohio 44114. As of September 30, 1995, KeyCorp had an asset
base of $68 billion, with banking offices in 26 states from Maine to Alaska, and
trust and investment offices in 16 states. KeyCorp is the resulting entity of
the merger in 1994 of Society Corporation, the bank holding company of which
Society National Bank was a wholly-owned subsidiary, and KeyCorp, the former
bank holding company. KeyCorp's major business activities include providing
traditional banking and associated financial services to consumer, business and
commercial markets. Its non-bank subsidiaries include investment advisory,
securities brokerage, insurance, bank credit card processing, and leasing
companies. Society National Bank is the lead affiliate bank of KeyCorp.
The following schedule lists the advisory fees for each mutual fund that is
advised by KeyCorp Advisers.
.25 OF 1% OF AVERAGE DAILY NET ASSETS
Victory Institutional Money Market Fund(1)
-21-
<PAGE> 49
.35 OF 1% OF AVERAGE DAILY NET ASSETS
Victory Prime Obligations Fund(1)
Victory U.S. Government Obligations Fund(1)
Victory Tax-Free Money Market Fund(1)
.50 OF 1% OF AVERAGE DAILY NET ASSETS
Victory Ohio Municipal Money Market Fund(1)
Victory Limited Term Income Fund(1)
Victory Government Mortgage Fund(1)
Victory Financial Reserves Fund(1)
Victory Fund for Income(2)
.55 OF 1% OF AVERAGE DAILY NET ASSETS
Victory National Municipal Bond Fund(1)
Victory Government Bond Fund(1)
Victory New York Tax-Free Fund(1)
.60 OF 1% OF AVERAGE DAILY NET ASSETS
Victory Ohio Municipal Bond Fund(1)
Victory Stock Index Fund(1)
.65 OF 1% OF AVERAGE DAILY NET ASSETS
Victory Diversified Stock Fund(1)
.75 OF 1% OF AVERAGE DAILY NET ASSETS
Victory Intermediate Income Fund(1)
Victory Investment Quality Bond Fund(1)
Victory Ohio Regional Stock Fund(1)
1% OF AVERAGE DAILY NET ASSETS
Victory Balanced Fund(1)
Victory Value Fund(1)
Victory Growth Fund(1)
Victory Special Value Fund(1)
Victory Special Growth Fund(3)
1.10% OF AVERAGE DAILY ASSETS
Victory International Growth Fund(1)
(1) Society Asset Management, Inc. (the Sub-Adviser) serves as sub-adviser to
each of these Funds. For its services under the Investment Sub-Advisory
Agreement, Key Advisers pays the Sub-Adviser sub-advisory fees at rates
(based on an annual percentage of average daily net assets) which vary
according to the table set forth below:
(2) First Albany Asset Management Corporation serves as sub-adviser to the
Victory Fund for Income, for which it receives .20% of average daily net
assets.
(3) T. Rowe Price Associates, Inc. serves as sub-adviser to the Special Growth
Fund, for which it receives .25% of average daily net assets up to $100
million and .20% of average daily net assets in excess of $100 million.
The following schedule lists the subadvisory fees for each mutual Fund for which
Society Asset Management, Inc. is Sub-Adviser:
For the Victory Balanced Fund, Diversified Stock Fund, Growth Fund, Stock
Index Fund and Value Fund:
<TABLE>
<CAPTION>
RATE OF
NET ASSETS SUB-ADVISORY FEE(1)
- ----------------------- -------------------
<S> <C>
Up to $10,000,000 0.65%
Next $15,000,000 0.50%
Next $25,000,000 0.40%
Above $50,000,000 0.35%
</TABLE>
For the Victory International Growth Fund, Ohio Regional Stock Fund and
Special Value Fund:
<TABLE>
<CAPTION>
RATE OF
NET ASSETS SUB-ADVISORY FEE*
- ------------------------- -----------------
<S> <C>
Up to $10,000,000 0.90%
Next $15,000,000 0.70%
Next $25,000,000 0.55%
Above $50,000,000 0.45%
</TABLE>
-22-
<PAGE> 50
For the Victory Intermediate Income Fund, Investment Quality Bond Fund, Limited
Term Income Fund, Ohio Municipal Bond Fund, Government Bond Fund, Government
Mortgage Fund, National Municipal Bond Fund and New York Tax-Free Fund:
<TABLE>
<CAPTION>
RATE OF
NET ASSETS SUB-ADVISORY FEE(1)
- ----------------------- -------------------
<S> <C>
Up to $10,000,000 0.40%
Next $15,000,000 0.30%
Next $25,000,000 0.25%
Above $50,000,000 0.20%
</TABLE>
For the Victory Prime Obligations Fund, Tax-Free Money Market Fund, U.S.
Government Obligations Fund, Financial Reserves Fund, Institutional Money Market
Fund and Ohio Municipal Money Market Fund:
<TABLE>
<CAPTION>
RATE OF
NET ASSETS SUB-ADVISORY FEE*
- ----------------------- -------------------
<S> <C>
Up to $10,000,000 0.25%
Next $15,000,000 0.20%
Next $25,000,000 0.15%
Above $50,000,000 0.125%
</TABLE>
- ---------------
* As a percentage of average daily net assets. Note, however, that the
Sub-Adviser shall have the right, but not the obligation, to voluntarily waive
any portion of the sub-advisory fee from time to time. Any such voluntary
waiver will be irrevocable and determined in advance of rendering
sub-investment advisory services by the Sub-Adviser, and shall be in writing.
- --------------------------------------------------------------------------------
ADVISORY AND OTHER CONTRACTS
- --------------------------------------------------------------------------------
Unless sooner terminated, the Investment Advisory Agreement between KeyCorp
Advisers and the Funds provides that it will continue in effect as to a
particular Fund for an initial two-year term and for consecutive one-year terms
thereafter, provided that such continuance is approved at least annually by the
Victory Portfolios' Trustees or by vote of a majority of the outstanding shares
of such Fund (as defined under "GENERAL INFORMATION -- Miscellaneous" in the
Prospectuses), and, in either case, by a majority of the Trustees who are not
parties to the Investment Advisory Agreement or interested persons (as defined
in the 1940 Act) of any party to the Investment Advisory Agreement, by votes
cast in person at a meeting called for such purpose.
The Investment Advisory Agreement is terminable as to a particular Fund at any
time on 60 days' written notice without penalty by the Trustees, by vote of a
majority of the outstanding shares of that Fund, or by KeyCorp Advisers. The
Investment Advisory Agreement also terminates automatically in the event of any
assignment, as defined in the 1940 Act.
The Investment Advisory Agreement provides that KeyCorp Advisers shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Victory Portfolios in connection with the performance of services pursuant
to the Investment Advisory Agreement, except a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services or a
loss resulting from willful misfeasance, bad faith, or gross negligence on the
part of Key Advisers in the performance of its duties, or from reckless
disregard by it of either duties and obligations thereunder.
Prior to January 1, 1996, Society Asset Management, Inc. ("Society") served as
investment adviser to the Fund. For the two month period ended October 31, 1995
and the fiscal years ended August 31, 1995, 1994, and 1993, Society earned an
investment advisory fee of $187,594, $1,692,574, $1,517,669 and $1,298,426,
respectively, after $244,500, $320,022, $234,884 and $265,632, respectively, was
voluntarily waived, and $903,705 was voluntarily reimbursed in the year ended
August 31, 1995.
Under an investment advisory agreement between The Victory Portfolios, on behalf
of the Fund, and KeyCorp Advisers, KeyCorp Advisers may delegate a portion of
its responsibilities to a sub-adviser. In addition, the investment advisory
agreement provides that KeyCorp Advisers may render services through its own
employees or the employees of one or more affiliated companies that are
qualified to act as an investment adviser of the Fund and are under the common
control of KeyCorp as long as all such persons are functioning as part of an
organized group of persons, managed by authorized officers of KeyCorp Advisers.
Key Advisers has entered into an investment sub-advisory agreement with its
affiliate, Society Asset Management, Inc. on behalf of the Fund. The Sub-Adviser
is a wholly-owned subsidiary of KeyCorp Asset Management
-23-
<PAGE> 51
Holdings, Inc. With respect to the day-to-day management of the Fund, under the
sub-advisory agreement, the Sub-Adviser makes decisions concerning, and places
all orders for, purchases and sales of securities and helps maintain the records
relating to such purchases and sales. The Sub-Adviser may, in its discretion,
provide such services through its own employees or the employees of one or more
affiliated companies that are qualified to act as an investment adviser to the
Company under applicable laws and are under the common control of KeyCorp;
provided that (i) all persons, when providing services under the sub-advisory
agreement, are functioning as part of an organized group of persons, and (ii)
such organized group of persons is managed at all times by authorized officers
of the Sub-Adviser. This arrangement will not result in the payment of
additional fees by the Fund.
GLASS-STEAGALL ACT
In 1971 the United States Supreme Court held in Investment Company Institute v.
Camp that the federal statute commonly referred to as the Glass-Steagall Act
prohibits a national bank from operating a fund for the collective investment of
managing agency accounts. Subsequently, the Board of Governors of the Federal
Reserve System (the "Board") issued a regulation and interpretation to the
effect that the Glass-Steagall Act and such decision: (a) forbid a bank holding
company registered under the Federal Bank Holding Company Act of 1956 (the
"Holding Company Act") or any non-bank affiliate thereof from sponsoring,
organizing, or controlling a registered, open-end investment company
continuously engaged in the issuance of its shares, but (b) do not prohibit such
a holding company or affiliate from acting as investment adviser, transfer
agent, and custodian to such an investment company. In 1981 the United States
Supreme Court held in Board of Governors of the Federal Reserve System v.
Investment Company Institute that the Board did not exceed its authority under
the Holding Company Act when it adopted its regulation and interpretation
authorizing bank holding companies and their non-bank affiliates to act as
investment advisers to registered closed-end investment companies. In the Board
of Governors case, the Supreme Court also stated that if a national bank
complied with the restrictions imposed by the Board in its regulation and
interpretation authorizing bank holding companies and their non-bank affiliates
to act an investment advisers to investment companies, a national bank
performing investment advisory services for an investment company would not
violate the Glass-Steagall Act.
From time to time, advertisements, supplemental sales literature and information
furnished to present or prospective shareholders of the Fund may include
descriptions of Key Trust Company of Ohio, N.A., Key Advisers and the
Sub-Adviser including, but not limited to, (i) descriptions of the operations of
Key Trust Company of Ohio, N.A., Key Advisers and the Sub-Adviser; (ii)
descriptions of certain personnel and their functions; and (iii) statistics and
rankings related to the operations of Key Trust Company of Ohio, N.A., Key
Advisers and the Sub-Adviser.
PORTFOLIO TRANSACTIONS
Pursuant to the Investment Advisory and Sub-Advisory Agreements, KeyCorp
Advisers and Society determine, subject to the general supervision of the
Trustees of the Victory Portfolios, and in accordance with the Fund's investment
objective and restrictions, which securities are to be purchased and sold by the
Fund, and which brokers are to be eligible to execute its portfolio
transactions.
Purchases and sales of portfolio securities of the Fund usually are principal
transactions; portfolio securities for the Fund are normally purchased directly
from the issuer or from an underwriter or market maker for the securities. While
Key Advisers and the Sub-Adviser generally see competitive spreads or
commissions, the Fund may not necessarily pay the lowest spread or commission
available on each transaction, for reasons discussed below.
Allocation of transactions, including their frequency, to various dealers is
determined by Key Advisers and Society in their best judgment and in a manner
deemed fair and reasonable to shareholders. The primary consideration is prompt
execution of orders in an effective manner at the most favorable price. Subject
to this consideration, dealers who provide supplemental investment research to
Key Advisers and Society may receive orders for transactions by the Fund.
Information so received is in addition to and not in lieu of services required
to be performed by Key Advisers and Society and does not reduce the advisory
fees payable to Key Advisers by the Fund. Such information may be useful to Key
Advisers and Society in serving both the Victory Portfolios and other clients
and, conversely, supplemental information obtained by the placement of business
or other clients may be useful to Key Advisers and Society in carrying out their
obligations to the Victory Portfolios. In the future, the Trustees may also
authorize the allocation of brokerage to affiliated broker-dealers on an agency
basis to effect portfolio transactions. In such event, the Trustees will adopt
procedures incorporating the standards of Rule 17e-1 of the Investment Company
Act of
-24-
<PAGE> 52
1940, as amended (the "1940 Act"), which require that the commission paid to
affiliated broker-dealers must be "reasonable and fair compared to the
commission, fee or other remuneration received, or to be received, by other
brokers in connection with comparable transactions involving similar securities
during a comparable period of time."
The Victory Portfolios will not execute portfolio transactions through, acquire
portfolio securities issued by, make savings deposits in, or enter into
repurchase or reverse repurchase agreements with Key Advisers, Society, Society
National Bank, Concord Holding Corporation, Victory Broker-Dealer Services, Inc.
or their affiliates, and will not give preference to Society National Bank's
correspondent banks or affiliates, or Concord Holding Corporation or Victory
Broker-Dealer Services, Inc. with respect to such transactions, securities,
savings deposits, repurchase agreements, and reverse repurchase agreements.
Investment decisions for the Fund are made independently from those for the
other funds or any other investment company or account managed by Key Advisers
(or Society). Any such other investment company or account may also invest in
the same securities as a particular fund. When a purchase or sale of the same
security is made at substantially the same time on behalf of the Fund and
another fund, investment company or account, the transaction will be averaged as
to price, and available investments allocated as to amount, in a manner which
Key Advisers (or Society) believes to be equitable to the Fund and such other
fund, investment company or account. In some instances, this investment
procedure may adversely affect the price paid or received by the Fund or the
size of the position obtained by the Fund. To the extent permitted by law, Key
Advisers (or Society) may aggregate the securities to be sold or purchased for
the Fund with those to be sold or purchased for the other funds or for other
investment companies or accounts in order to obtain best execution. As provided
by the Investment Advisory (and Sub-Advisory) Agreement, in making investment
recommendations for the Victory Portfolios, Key Advisers (or Society) will not
inquire or take into consideration whether an issuer of securities proposed for
purchase or sale by a Fund is a customer of Society, its parents or subsidiaries
or affiliates and, in dealing with their commercial customers, Key Advisers
(Society), its parents, subsidiaries, and affiliates will not inquire or take
into consideration whether securities of such customers are held by the Victory
Portfolios.
ADMINISTRATOR
Currently, Concord Holding Corporation ("CHC") serves as administrator (the
"Administrator") to the Fund. The Administrator assists in supervising all
operations of the Fund (other than those performed by Key Advisers or the
Sub-Adviser under the Investment Advisory Agreement and Sub-Advisory Agreement.
Prior to August 31, 1994, Federated Administrative Securities ("Federated")
served as the Fund's administrator.
CHC receives a fee from the Fund for its services as Administrator and expenses
assumed pursuant to the Administration Agreements, calculated daily and paid
monthly, at the annual rate of fifteen one hundredths of one percent (.15%) of
the Fund's average daily net assets. CHC may periodically waive all or a portion
of its fee with respect to the Fund in order to increase the net income of the
Fund available for distribution as dividends.
Unless sooner terminated, the Administration Agreement will continue in effect
as to the Fund for a period of two years, and for consecutive one-year terms
thereafter, provided that such continuance is ratified at least annually by the
Victory Portfolios' Board of Trustees or by vote of a majority of the
outstanding shares of the Fund, and in either case by a majority of the Trustees
who are not parties to the Administration Agreement or interested persons (as
defined in the 1940 Act) of any party to the Administration Agreement, by votes
cast in person at a meeting called for such purpose.
The Administration Agreement provides that CHC shall not be liable for any error
of judgment or mistake of law or any loss suffered by the Victory Portfolios in
connection with the matters to which the Administration Agreement relates,
except a loss resulting from willful misfeasance, bad faith, or gross negligence
in the performance of its duties, or from the reckless disregard by it of its
obligations and duties thereunder.
Under the Administration Agreement, CHC assists in the Fund's administration and
operation, including providing statistical and research data, clerical services,
internal compliance and various other administrative services, including among
other responsibilities, forwarding certain purchase and redemption requests to
the Transfer Agent, participation in the updating of the prospectus,
coordinating the preparation, filing, printing and dissemination of reports to
shareholders, coordinating the preparation of income tax returns, arranging for
the maintenance of books and records and providing the office facilities
necessary to carry out the duties thereunder. Under the Administration
Agreement, CHC may delegate all or any part of its responsibilities thereunder.
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<PAGE> 53
For the two month period ended October 31, 1995, CHC earned an administration
fee of $129,644 after $0 in voluntary fee waivers. For the period June 5, 1995
to August 31, 1995, CHC earned administration fees of $165,282 from the Fund
after voluntary fees waived of $4,709. Prior to that, from August 31, 1994 to
June 4, 1995, Primary Funds Service Corporation earned $433,288 from the Fund
after voluntary fees waived of $500.
DISTRIBUTOR
Victory Broker-Dealer Services, Inc. (the "Distributor") serves as distributor
for the continuous offering of the shares of the Fund pursuant to a Distribution
Agreement between the Distributor and the Victory Portfolios. Unless otherwise
terminated, the Distribution Agreement will remain in effect with respect to the
Fund for two years, and thereafter for consecutive one-year terms, provided that
it is approved at least annually (i) by the Victory Portfolios' Board of
Trustees or by the vote of a majority of the outstanding shares of the Fund, and
(ii) by the vote of a majority of the Trustees of the Victory Portfolios who are
not parties to the Distribution Agreement or interested persons of any such
party, cast in person at a meeting called for the purpose of voting on such
approval. The Distribution Agreement will terminate in the event of its
assignment, as defined in the 1940 Act. For the two-month period ended October
31, 1995 and the fiscal year ended August 31, 1995, the Distributor and its
predecessor earned no underwriting fees.
BUSINESS MANAGEMENT AGREEMENT
In connection with its obligations under the investment sub-advisory agreement,
Society has entered into a Business Management Agreement with Key Advisers,
pursuant to which Key Advisers provides certain administrative and support
services to Society. Such services include preparing reports to the Victory
Portfolios' Board of Trustees, recordkeeping services, and services rendered in
connection with the preparation of regulatory filings and other reports, and
regulatory and other administrative and compliance systems and support services.
For such services to the Fund, Society pays fees to Key Advisers (or an
affiliate) which vary according to a sliding scale containing "breakpoints" at
which decreases in the business management fees correspond to increases in the
average daily net asset values of the Fund as follows:
<TABLE>
<CAPTION>
RATE OF
BUSINESS
NET ASSETS OF THE FUND MANAGEMENT FEE*
- ----------------------- ---------------
<S> <C>
Up to $10,000,000 0.20%
Next $15,000,000 0.15%
Next $25,000,000 0.10%
Above $50,000,000 0.075%
</TABLE>
- ---------------
* As a percentage of average daily net assets.
DISTRIBUTION AND SERVICE PLAN
The Victory Portfolios, on behalf of the Fund, has adopted a Distribution and
Service Plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act (the
"Rule"). The Rule provides in substance that a mutual fund may not engage
directly or indirectly in financing any activity that is primarily intended to
result in the sale of shares of such mutual fund except pursuant to a plan
adopted by the Fund under the Rule. The Board of Trustees has adopted the Plan
to allow the investment advisers and the Distributor to incur certain expenses
that might be considered to constitute indirect payment by the Fund of
distribution expenses. Under the Plan, if a payment to the investment advisers
of management fees or to the Distributor of administrative fees should be deemed
to be indirect financing by the Fund of the distribution of its shares, such
payment is authorized by the Plan.
The Plan specifically recognizes that either of the investment advisers or the
Distributor, directly or through an affiliate, may use its fee revenue, past
profits, or other resources, without limitation, to pay promotional and
administrative expenses in connection with the offer and sale of shares of the
Fund. In addition, the Plan provides that the investment advisers and the
Distributor may use their respective resources, including fee revenues, to make
payments to third parties that provide assistance in selling the Fund's shares,
or to third parties, including banks, that render shareholder support services.
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<PAGE> 54
The Plan has been approved by the Board of Trustees. As required by the Rule,
the Trustees carefully considered all pertinent factors relating to the
implementation of the Plan prior to its approval, and have determined that there
is a reasonable likelihood that the Plan will benefit the Fund and its
shareholders. In particular, the Trustees noted that the Plan does not authorize
payments by the Fund other than the advisory and administrative fees authorized
under the investment advisory and administration agreements. To the extent that
the Plan gives Key Advisers (Society) or the Distributor greater flexibility in
connection with the distribution of shares of the Fund, additional sales of the
Fund's shares may result. Additionally, certain shareholder support services may
be provided more effectively under the Plans by local entities with whom
shareholders have other relationships.
SHAREHOLDER SERVICING PLAN
The Victory Portfolios, on behalf of the Fund, has adopted a Shareholder
Servicing Plan to provide payments to shareholder servicing agents which may
include affiliates of two Advisers (each a "Shareholder Servicing Agent") that
provide administrative support services to customers who may from time to time
beneficially own shares, which services include: (i) aggregating and processing
purchase and redemption requests for shares from customers and promptly
transmitting net purchase and redemption orders to our distributor or transfer
agent; (ii) providing customers with a service that invests the assets of their
accounts in shares pursuant to specific or pre-authorized instructions; (iii)
processing dividend and distribution payments on behalf of customers; (iv)
providing information periodically to customers showing their positions in
shares; (v) arranging for bank wires; (vi) responding to customer inquiries;
(vii) providing subaccounting with respect to shares beneficially owned by
customers or providing the information to the Victory Portfolios necessary for
subaccounting; (viii) if required by law, forwarding shareholder communications
from us (such as proxies, shareholder reports, annual and semi-annual financial
statements and dividend, distribution and tax notices) to customers; (ix)
forwarding to customers proxy statements and proxies containing any proposals
regarding this Plan; and (x) providing such other similar services as we may
reasonably request to the extent you are permitted to do so under applicable
statutes, rules or regulations. For expenses incurred and services provided
pursuant to the Shareholder Servicing Agreement, the Fund pays each Shareholder
Servicing Agent a fee computed daily and paid monthly, in amounts aggregating
not more than twenty-five one-hundredths of one percent (.25%) of the average
daily net assets of the Fund per year. A Shareholder Servicing Agent may
periodically waive all or a portion of its respective shareholder servicing fees
with respect to the Fund to increase the net income of the Fund available for
distribution as dividends.
EXPENSES
The Fund bears the following expenses relating to its operations: taxes,
interest, brokerage fees and commissions, fees of the Trustees of the Victory
Portfolios, Commission fees, state securities qualification fees, costs of
preparing and printing prospectuses for regulatory purposes and for distribution
to current shareholders, outside auditing and legal expenses, advisory and
administration fees, fees and out-of-pocket expenses of the custodian and
transfer agent, certain insurance premiums, costs of maintenance of the Fund's
existence, costs of shareholders' reports and meetings, and any extraordinary
expenses incurred in the Fund's operation.
If total expenses borne by the Fund in any fiscal year exceeds expense
limitations imposed by applicable state securities regulations, Key Advisers,
the Sub-Adviser or the Administrator will waive their fees to the extent such
excess expenses exceed such expense limitation in proportion to their respective
fees. As of the date of this Statement of Additional Information, the most
restrictive expense limitation applicable to the Fund limits its aggregate
annual expenses, including management and advisory fees but excluding interest,
taxes, brokerage commissions, and certain other expenses, to 2.5% of the first
$30 million of its average net assets, 2.0% of the next $70 million of its
average net assets, and 1.5% of its remaining average net assets. Any expenses
to be borne by Key Advisers, the Sub-Adviser or the Administrator will be
estimated daily and reconciled and paid on a monthly basis. Fees imposed upon
customer accounts by Key Advisers, the Sub-Adviser, Key Trust Company of Ohio,
N.A. or its correspondents, affiliated banks and other non-bank affiliates for
cash management services are not fund expenses for purposes of any such expense
limitation.
FUND ACCOUNTANT
BISYS Fund Services Ohio, Inc. serves as fund accountant for the Fund pursuant
to a fund accounting agreement with the Victory Portfolios dated May 31, 1995
(the "Fund Accounting Agreement"). As fund accountant for the Victory
Portfolios, BISYS Fund Services Ohio, Inc. calculates the Fund's Portfolios' net
asset value, the dividend
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<PAGE> 55
and capital gain distributions, if any, and the yield. BISYS Fund Services Ohio,
Inc. also provides a current security position report, a summary report of
transactions and pending maturities, a current cash position report, and
maintains the general ledger accounting records for the Fund. Under the Fund
Accounting Agreement, BISYS Fund Services Ohio, Inc. is entitled to receive
annual fees of .03% of the first $100 million of the Fund's daily average net
assets, .02% of the next $100 million of the Fund's daily average net assets,
and .01% of the Fund's remaining daily average net assets. These annual fees are
subject to a minimum monthly asset charge of $2,917 per tax-free fund, and do
not include out-of-pocket expenses or multiple class charges of $833 per month
assessed for each class of shares after the first class. For the two month
period ended October 31, 1995, BISYS Fund Services Ohio, Inc. earned accounting
fees of $13,370. For the fiscal year ended August 31, 1995, BISYS Fund Services
Ohio, Inc. earned accounting fees of $30,071. In the fiscal year ended August
31, 1994, Primary Fund Service Corporation ("PFSC") and Federated Administrative
Services earned accounting fees of $140,235 and $259,581, respectively.
CUSTODIAN
Cash and securities owned by the Fund are held by Key Trust Company of Ohio,
N.A. as custodian. Key Trust Company of Ohio, N.A. serves as custodian to the
Fund pursuant to a Custodian Agreement dated May 24, 1995. Under this Agreement,
Key Trust Company of Ohio, N.A. (1) maintains a separate account or accounts in
the name of the Fund; (2) makes receipts and disbursements of money on behalf of
the Fund; (3) collects and receives all income and other payments and
distributions on account of portfolio securities; (4) responds to correspondence
from security brokers and others relating to its duties; and (5) makes periodic
reports to the Victory Portfolios' Trustees concerning the Victory Portfolios'
operations. Key Trust Company of Ohio, N.A. may, with the approval of the
Victory Portfolios and at the custodian's own expense, open and maintain a
sub-custody account or accounts on behalf of the Fund, provided that Key Trust
Company of Ohio, N.A. shall remain liable for the performance of all of its
duties under the Custodian Agreement.
TRANSFER AGENT
Primary Funds Service Corporation serves as transfer agent and dividend
disbursing agent for the Fund, pursuant to a Transfer Agency Agreement. Under
its agreement with the Victory Portfolios, PFSC has agreed (i) to issue and
redeem shares of the Victory Portfolios; (ii) to address and mail all
communications by the Victory Portfolios to its shareholders, including reports
to shareholders, dividend and distribution notices, and proxy material for its
meetings of shareholders; (iii) to respond to correspondence or inquiries by
shareholders and others relating to its duties; (iv) to maintain shareholder
accounts and certain sub-accounts; and (v) to make periodic reports to the
Victory Portfolios' Trustees concerning the Victory Portfolios' operations. For
the services provided under the Transfer Agency and Shareholder Servicing
Agreement, PFSC receives a maximum monthly fee of $1,250 from the Fund, and a
maximum of $3.50 per account of the Fund. For the period ended August 31, 1995
and the two month period ended October 31, 1995, PFSC earned transfer agency
fees of $16,669 and $10,000, respectively.
AUDITORS
The financial highlights appearing in the Prospectus for the Fund, other than
unaudited information marked as such, has been derived from financial statements
of the Fund incorporated by reference in this Statement of Additional
Information which, for the two month period ended October 31, 1995 and fiscal
year ended August 31, 1995, has been audited by Coopers & Lybrand L.L.P. as set
forth in their report incorporated by reference herein, and are included in
reliance upon such report and on the authority of such firm as experts in
auditing and accounting. Coopers & Lybrand L.L.P. serves as the Victory
Portfolios' auditors. Coopers & Lybrand L.L.P.'s address is 100 East Broad
Street, Columbus, Ohio 43215.
LEGAL COUNSEL
Kramer, Levin, Naftalis, Nessen, Kamin & Frankel, 919 Third Avenue, New York,
New York 10022, serves as counsel to the Victory Portfolios.
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<PAGE> 56
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The audited financial statements of the Predecessor Fund, which are included in
the Annual Report to shareholders dated October 31, 1995, are hereby
incorporated by reference into this Statement of Additional Information.
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
DESCRIPTION OF SHARES
The Victory Portfolios (sometimes referred to as the "Trust") is a Massachusetts
business trust. The Victory Portfolios' Declaration of Trust, pursuant to which
the Victory Portfolios was originally called the North Third Street Fund, was
filed with the Secretary of State of the Commonwealth of Massachusetts on
February 6, 1986. On September 22, 1986, an Amended and Restated Declaration of
Trust was filed to change the name of the Trust to The Emblem Fund and to make
certain other changes. A second amendment was filed October 23, 1986 providing
for voting of shares in the aggregate except where voting of funds by series is
otherwise required by law. An amendment to the Amended and Restated Declaration
of Trust was filed on March 15, 1993 to change the name of the Trust to The
Society Funds. An Amended and Restated Declaration of Trust was then filed on
September 2, 1994 to change the name of the Trust to The Victory Portfolios. On
December 1, 1995 shareholders of The Victory Portfolios approved a plan to
reorganize the Victory Portfolios as a Delaware business trust. The
reorganization is expected to occur on or about February 29, 1996. The
Declaration of Trust authorizes the Trustees to issue an unlimited number of
Shares, which are units of beneficial interest, without par value. The Victory
Portfolios presently have twenty-eight series of which represent interests in
the U.S. Government Obligations Fund, the Prime Obligations Fund, the Tax-Free
Money Market Fund, the Balanced Fund, the Stock Index Fund, the Value Fund, the
Diversified Stock Fund, the Growth Fund, the Special Value Fund, the Special
Growth Fund, the Ohio Regional Stock Fund, the International Growth Fund, the
Limited Term Income Fund, the Government Mortgage Fund, the Ohio Municipal Bond
Fund, the Intermediate Income Fund, the Investment Quality Bond Fund, the
Florida Tax-Free Bond Fund, the Municipal Bond Fund, the Convertible Securities
Fund, the Short-Term U.S. Government Income Fund, the Government Bond Fund, the
Fund For Income, the National Municipal Bond Fund, the New York Tax-Free Fund,
the International Money Market Fund, the Financial Reserves Fund and the Ohio
Municipal Money Market Fund, respectively. The Victory Portfolios' Declaration
of Trust authorizes the Trustees to divide or redivide any unissued shares of
the Victory Portfolios into one or more additional series by setting or changing
in any one or more respects their respective preferences, conversion or other
rights, voting power, restrictions, limitations as to dividends, qualifications,
and terms and conditions of redemption.
Shares have no subscription or preemptive rights and only such conversion or
exchange rights as the Trustees may grant in their discretion. When issued for
payment as described in the Prospectus and this Statement of Additional
Information, the Victory Portfolios' shares will be fully paid and
non-assessable. In the event of a liquidation or dissolution of the Victory
Portfolios, shares of a fund are entitled to receive the assets available for
distribution belonging to the fund, and a proportionate distribution, based upon
the relative asset values of the respective funds, of any general assets not
belonging to any particular fund which are available for distribution.
As described in the Prospectuses under the caption "ADDITIONAL INFORMATION",
shares of the Victory Portfolios are entitled to one vote per share (with
proportional voting for fractional shares) on such matters as shareholders are
entitled to vote. As of December 4, 1995, the Fund believes that SNBOC & Co,
Society National Bank - Private Banking and Key Clearing Corp. are shareholders
of record of 42.5%, 55.3% and 10.2%, respectively, of shares of the Fund.
On any matter submitted to a vote of the shareholders, all shares are voted
separately by individual series (funds), and whenever the Trustees determine
that the matter affects only certain series, may be submitted for a vote by only
such series, except (i) when required by the 1940 Act, shares are voted in the
aggregate and not by individual series; and (ii) when the Trustees have
determined that the matter affects the interests of more than one series and
that voting by shareholders of all series would be consistent with the 1940 Act,
then the shareholders of all such series shall be entitled to vote thereon
(either by individual series or by shares voted in the aggregate, as the
Trustees in their discretion may determine). The Trustees may also determine
that a matter affects only the interests of one or more classes of a series, in
which case (or if required under the 1940 Act) such matter shall be voted on by
such
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<PAGE> 57
class or classes. There will normally be no meetings of shareholders for the
purpose of electing Trustees unless and until such time as less than a majority
of the Trustees have been elected by the shareholders, at which time the
Trustees then in office will call a shareholders' meeting for the election of
Trustees. In addition, Trustees may be removed from office by a vote of the
holders of at least two-thirds of the outstanding shares of the Victory
Portfolios. A meeting shall be held for such purpose upon the written request of
the holders of not less than 10% of the outstanding shares. Upon written request
by ten or more shareholders meeting the qualifications of Section 16(c) of the
1940 Act, (i.e., person who have been shareholders for at least six months, and
who hold shares having an NAV of at least $25,000 or constituting 1% of the
outstanding shares) stating that such shareholders wish to communicate with the
other shareholders for the purpose of obtaining the signatures necessary to
demand a meeting to consider removal of a Trustee, the Victory Portfolios will
provide a list of shareholders or disseminate appropriate materials (at the
expense of the requesting shareholders). Except as set forth above, the Trustees
shall continue to hold office and may appoint their successors.
Rule 18f-2 under the 1940 Act provides that any matter required to be submitted
to the holders of the outstanding voting securities of an investment company
such as the Victory Portfolios shall not be deemed to have been effectively
acted upon unless approved by the holders of a majority of the outstanding
shares of each fund of the Victory Portfolios affected by the matter. For
purposes of determining whether the approval of a majority of the outstanding
shares of a fund will be required in connection with a matter, a fund will be
deemed to be affected by a matter unless it is clear that the interests of each
fund in the matter are identical, or that the matter does not affect any
interest of the fund. Under Rule 18f-2, the approval of an investment advisory
agreement or any change in investment policy would be effectively acted upon
with respect to a fund only if approved by a majority of the outstanding shares
of such fund. However, Rule 18f-2 also provides that the ratification of
independent public accountants, the approval of principal underwriting
contracts, and the election of Trustees may be effectively acted upon by
shareholders of all of the Victory Portfolios voting without regard to series.
SHAREHOLDER AND TRUSTEE LIABILITY UNDER MASSACHUSETTS LAW
Under Massachusetts law, holders of units of interest in a business trust may,
under certain circumstances, be held personally liable as partners for the
obligations of the trust. However, the Victory Portfolios' Declaration of Trust
provides that shareholders shall not be subject to any personal liability for
the obligations of the Victory Portfolios, and that every written agreement,
obligation, instrument, or undertaking made by the Victory Portfolios shall
contain a provision to the effect that the shareholders are not personally
liable thereunder. The Declaration of Trust provides for indemnification out of
the trust property of any shareholder held personally liable solely by reason of
his or her being or having been a shareholder. The Declaration of Trust also
provides that the Victory Portfolios shall, upon request, assume the defense of
any claim made against any shareholder for any act or obligation of the Victory
Portfolios, and shall satisfy any judgment thereon. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Funds would be unable to meet their
obligations.
The Declaration of Trust states further that no Trustee, officer, or agent of
the Victory Portfolios shall be personally liable in connection with the
administration or preservation of the assets of the Funds or the conduct of the
Victory Portfolios' business; nor shall any Trustee, officer, or agent be
personally liable to any person for any action or failure to act except for his
own bad faith, willful misfeasance, gross negligence, or reckless disregard of
his duties. The Declaration of Trust also provides that all persons having any
claim against the Trustees or the Victory Portfolios shall look solely to the
assets of the Victory Portfolios for payment.
SHAREHOLDER AND TRUSTEE LIABILITY UNDER DELAWARE LAW
On or about February 29, 1995, the Victory Portfolios will convert to a Delaware
business trust. The Delaware Business Trust Act provides that a shareholder of a
Delaware business trust shall be entitled to the same limitation of personal
liability extended to shareholders of Delaware corporations. The Delaware Trust
Instrument also provides for indemnification out of the trust property of any
shareholder held personally liable solely by reason of his or her being or
having been a shareholder. The Delaware Trust Instrument also provides that the
Victory Portfolios shall, upon request, assume the defense of any claim made
against any shareholder for any act or obligation of the Victory Portfolios, and
shall satisfy any judgment thereon. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is considered to be extremely
remote.
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<PAGE> 58
The Delaware Trust Instrument states further that no Trustee, officer, or agent
of the Victory Portfolios shall be personally liable in connection with the
administration or preservation of the assets of the Funds or the conduct of the
Victory Portfolios' business; nor shall any Trustee, officer, or agent be
personally liable to any person for any action or failure to act except for his
own bad faith, willful misfeasance, gross negligence, or reckless disregard of
his duties. The Declaration of Trust also provides that all persons having any
claim against the Trustees or the Victory Portfolios shall look solely to the
assets of the Victory Portfolios for payment.
MISCELLANEOUS
As used in the Prospectus and in this Statement of Additional Information,
"assets belonging to a fund" (or "assets belonging to the Fund") means the
consideration received by the Victory Portfolios upon the issuance or sale of
shares in that fund, together with all income, earnings, profits, and proceeds
derived from the investment thereof, including any proceeds from the sale,
exchange, or liquidation of such investments, and any funds or payments derived
from any reinvestment of such proceeds and any general assets of the Victory
Portfolios, which general liabilities and expenses are not readily identified as
belonging to a particular fund (or the Fund) that are allocated to that fund (or
the Fund) by the Victory Portfolios' Trustees. The Trustees may allocate such
general assets in any manner they deem fair and equitable. It is anticipated
that the formula that will be used by the Trustees in making allocations of
general assets to a particular fund of the Victory Portfolios will be the
relative net asset value of the respective fund at the time of allocation.
Assets belonging to a particular fund are charged with the direct liabilities
and expenses of that fund, and with a share of the general liabilities and
expenses of each of the funds not readily identified as belonging to a
particular fund that are allocated to each fund in accordance with its
proportionate share of the net asset values of the Victory Portfolios at the
time of allocation. The timing of allocations of general assets and general
liabilities and expenses of the Victory Portfolios to a particular fund will be
determined by the Trustees of the Victory Portfolios and will be in accordance
with generally accepted accounting principles. Determinations by the Trustees of
the Victory Portfolios as to the timing of the allocation of general liabilities
and expenses and as to the timing and allocable portion of any general assets
with respect to a particular fund are conclusive.
As used in the Prospectus and in this Statement of Additional Information, a
"vote of a majority of the outstanding shares" or a "vote of a majority of the
outstanding voting securities" of the Victory Portfolios or a particular fund
means the affirmative vote of the lesser of (a) 67% or more of the shares of the
Victory Portfolios or such fund present at a meeting at which the holders of
more than 50% of the outstanding shares of the Victory Portfolios or such fund
are represented in person or by proxy, or (b) more than 50% of the outstanding
shares of the Victory Portfolios or such fund.
Organizational expenses are allocated to each of the Victory Portfolios and are
amortized over a period of two years from the commencement of the public
offering of shares of the Victory Portfolios.
The Victory Portfolios is registered with the Commission as an open-end
management investment company. Such registration does not involve supervision by
the Commission of the management or policies of the Victory Portfolios.
The Prospectus and this Statement of Additional Information omit certain of the
information contained in the Registration Statement filed with the Commission.
Copies of such information may be obtained from the Commission upon payment of
the prescribed fee.
The Prospectus and this Statement of Additional Information are not an offering
of the securities herein described in any state in which such offering may not
lawfully be made. No salesman, dealer, or other person is authorized to give any
information or make any representation other than those contained in the
Prospectus and this Statement of Additional Information.
The 1995 Annual Report to shareholders of The Victory Portfolios is incorporated
by reference herein. This report includes the financial statements for the two
month period ended October 31, 1995 and the fiscal year ended August 31, 1995.
The opinion in the Annual Report of Coopers & Lybrand L.L.P., independent
accountants, is incorporated by reference herein in its entirety to such Annual
Report, and such financial statements are incorporated in their entirety in
reliance upon such report of Coopers & Lybrand L.L.P. and on the authority of
such firm as experts in auditing and accounting.
Delaware law authorizes electronic or telephonic communications between
shareholders and the Victory Portfolios. Under Delaware law, the Successor
Company has the flexibility to respond to future business contingencies. For
example, the Trustees will have the power to incorporate the Victory Portfolios,
to merge or consolidate it with
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<PAGE> 59
another entity, to cause each fund to become a separate trust, and to change the
Victory Portfolios' domicile without a shareholder vote. This flexibility could
help reduce the expense and frequency of future shareholder meetings for
non-investment related issues.
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<PAGE> 60
- --------------------------------------------------------------------------------
APPENDIX
- --------------------------------------------------------------------------------
Dollar-Weighted Average Maturity for the Fund is derived by dividing the value
of each investment by the total value of all investments and multiplying the
quotient by the number of days remaining to its maturity, adding these
calculations, and then dividing the total by the value of the portfolio. An
obligation's maturity is typically determined on a stated final maturity basis,
although there are some expectations to this rule.
For example, if it is probable that the issuer of an instrument will take
advantage of a maturity-shortening device, such as a call, refunding, or
redemption provision, the date on which the instrument will probably be called,
refunded, or redeemed may be considered to be its maturity date. Also, the
maturities of mortgage-backed securities and some asset-backed securities, such
as collateralized mortgage obligations, are determined on a weighted average
life basis, which is the average time for principal to be repaid. For a mortgage
security, this average time is calculated by assuming a constant prepayment rate
for the life of the mortgage. The weighted average life of these securities is
likely to be substantially shorter than their stated final maturity.
The descriptions that follow are examples of eligible ratings for the Fund. The
Fund may, however, consider the ratings for other types of investments and the
ratings assigned by other rating organizations when determining the eligibility
of a particular investment.
- --------------------------------------------------------------------------------
DESCRIPTION OF SECURITY RATINGS
- --------------------------------------------------------------------------------
The following summarizes the two highest ratings used by Moody's for short-term
municipal notes and variable rate demand obligations:
MIG-1/VMIG-1 -- Obligations bearing these designations are of the best
quality, enjoying strong protection from established cash flows,
superior liquidity support or demonstrated broad-based access to the
market for refinancing.
MIG-2/VMIG-2 -- Obligations bearing these designations are of high
quality, with ample margins of protection although not so large as in
the preceding group.
The following summarizes the two highest ratings used by S&P for short-term
municipal notes:
SP-1 -- Very strong or strong capacity to pay principal and interest.
Those issues determined to possess overwhelming safety characteristics
are given a "plus" (+) designation.
SP-2 -- Satisfactory capacity to pay principal and interest.
The three highest rating categories of Duff & Phelps ("D&P") for short-term
debt, each of which denotes that the securities are investment grade, are Duff
1, Duff 2 and Duff 3. D&P employs three designations, Duff 1+, Duff 1 and Duff
1-, within the highest rating category. Duff 1+ indicates highest certainty of
timely payment. Short-term liquidity, including internal operating factors
and/or access to alternative sources of funds, is judged to be "outstanding, and
safety is just below risk-free U.S. Treasury short-term obligations." Duff 1
indicates very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are
considered to be minor. Duff 1- indicates high certainty of timely payment.
Liquidity factors are strong and supported by good fundamental protection
factors. Risk factors are very small. Duff 2 indicates good certainty of timely
payment. Liquidity factors and company fundamentals are sound. Although ongoing
funding needs may enlarge total financing requirements, access to capital
markets is good. Risk factors are small. Duff 3 indicates satisfactory liquidity
and other protection factors which qualify the issue as investment grade. Risk
factors are larger and subject to more variation. Nevertheless, timely payment
is expected
The following summarizes the three highest rating categories used by Fitch for
short-term obligations, each of which denotes securities that are investment
grade:
F-1+ securities possess exceptionally strong credit quality. Issues
assigned this rating are regarded as having the strongest degree of
assurance for timely payment.
F-1 securities possess very strong credit quality. Issues assigned
this rating reflect an assurance of timely payment only slightly less in
degree than issues rated F-1+.
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<PAGE> 61
F-2 securities possess good credit quality. Issues carrying this
rating have a satisfactory degree of assurance for timely payment, but the
margin of safety is not as great as for issues assigned the F-1+ and F-1
ratings.
Commercial paper rated A-1 by S&P indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted A-1+. Capacity for timely payment on
commercial paper rated A-2 is satisfactory, but the relative degree of safety is
not as high as for issues designated A-1.
The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Issuers rated Prime-1 (or related supporting institutions) are considered to
have a superior capacity for repayment of senior short-term promissory
obligations. Issuers rated Prime-2 (or related supporting institutions) are
considered to have a strong capacity for repayment of senior short-term
promissory obligations. This will normally be evidenced by many of the
characteristics of issuers rated Prime-1, but to a lesser degree. Earnings
trends and coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
D&P uses the short-term ratings described above for commercial paper. Fitch uses
the short-term ratings described above for commercial paper.
-34-
<PAGE> 62
Registration Statement
of
THE VICTORY PORTFOLIOS
on
Form N-1A
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Included in Part A:
-- Condensed Financial Information.
Included in Part B:
-- An audited financial report for the period ended October 31, 1995 is
incorporated by reference in Part B and filed herewith as EX-99.B12.
(b) Exhibits:
99.B(1) (a) Amended and Restated Declaration of Trust dated as of
September 19, 1986 is incorporated herein by reference to
Exhibit 1 to the Registrant's Registration Statement on Form
N-1A filed on September 24, 1986.
(b) Amendment to the Declaration of Trust dated October 22, 1986 is
incorporated herein by reference to Exhibit 1(b) to
Pre-Effective Amendment No. 1 to the Registrant's Registration
Statement on Form N-1A filed on November 13, 1986.
(c) Certificate of Secretary of Resolution of the Board of Trustees
of the Trust dated February 24, 1993, whereby the Trustees
changed the name of the Trust to "The Society Funds" is
incorporated herein by reference to Exhibit 1(c) to
Post-Effective Amendment No. 13 to the Registrant's
Registration Statement on Form N-1A filed on February 26, 1993.
(d) Amended and Restated Declaration of Trust dated September 2,
1994 is incorporated herein by reference to Exhibit 1(d) to
Post-Effective Amendment No. 18 to the Registrant's
Registration Statement on Form N-1A filed on September 2, 1994.
(e) Certificate of Secretary of Resolution of the Board of Trustees
of the Trust dated August 30, 1994, whereby the Trustees
changed the name of the Trust to "The Victory Portfolios" is
incorporated herein by reference to Exhibit 1(e) to
Post-Effective Amendment No. 18 to the Registrant's
Registration Statement on Form N-1A filed on September 2, 1994.
<PAGE> 63
(f) Amendment to the Declaration of Trust dated October 20, 1995 is
incorporated herein by reference to Exhibit 1(f) to
Post-Effective Amendment No. 23 to the Registrant's
Registration Statement on Form N-1A filed on October 31, 1995.
99.B(2) Code of Regulations is incorporated herein by reference to Exhibit 2
to Pre-Effective Amendment No. 1 to the Registrant's Registration
Statement on Form N-1A filed on November 13, 1986.
99.B(3) None.
99.B(4) None.
99.B(5) (a) Form of Investment Advisory Agreement dated as of January 1,
1996, between the Registrant and KeyCorp Mutual Fund
Advisers, Inc. is incorporated herein by reference to
Exhibit 5(a) to Post-Effective Amendment No. 23 to the
Registrant's Registration Statement on Form N-1A filed on
October 31, 1995.
(b) Form of Investment Sub-Advisory Agreement between KeyCorp
Mutual Fund Advisers, Inc. and Society Asset Management,
Inc. dated as of January 1, 1996, is incorporated herein by
reference to Exhibit 5(b) to Post-Effective Amendment No. 23
to the Registrant's Registration Statement on Form N-1A
filed on October 31, 1995.
(c) Form of Investment Sub-Advisory Agreement between KeyCorp
Mutual Fund Advisers, Inc. and T. Rowe Price Associates Inc.
dated as of January 1, 1996, regarding the Special Growth
Fund is incorporated herein by reference to Exhibit 5(c) to
Post-Effective Amendment No. 23 to the Registrant's
Registration Statement on Form N-1A filed on October 31,
1995.
(d) Form of Investment Sub-Advisory Agreement between KeyCorp
Mutual Fund Advisers, Inc. and First Albany Asset Management
Corporation dated as of January 1, 1996, regarding the Fund for
Income is incorporated herein by reference to Exhibit 5(d) to
Post-Effective Amendment No. 23 to the Registrant's
Registration Statement on Form N-1A filed on October 31, 1995.
99.B(6) (a) Distribution Agreement between the Registrant and Victory
Broker-Dealer Services, Inc. dated March 31, 1995 with an
amended Schedule A dated June 5, 1995 is incorporated by
reference to Exhibit 6(a) to Post-Effective Amendment No. 22
to the Registrant's Registration Statement on Form N-1A
filed on August 28, 1995.
99.B(7) None.
99.B(8) (a) Amended and Restated Mutual Fund Custody Agreement dated
May 24, 1995 by and between the Registrant and Key Trust of
Ohio, N.A. is incorporated by
C-2
<PAGE> 64
reference to Exhibit 8(a) to Post-Effective Amendment No. 22 to
the Registrant's Registration Statement on Form N-1A filed on
August 28, 1995.
99.B(9) (a) Administration Agreement dated June 5, 1995 between the
Registrant and Concord Holding Corporation is incorporated by
reference to Exhibit 9(a) to Post-Effective Amendment No. 22 to
the Registrant's Registration Statement on Form N-1A filed on
August 28, 1995.
(b) Transfer Agency and Dividend Disbursing Agreement dated
September 6, 1994 as amended June 5, 1995, between the
Registrant and Primary Funds Service Corporation is
incorporated by reference to Exhibit 9(b) to Post-Effective
Amendment No. 22 to the Registrant's Registration Statement on
Form N-1A filed on August 28, 1995.
(c) Fund Accounting Agreement dated May 31, 1995 between the
Registrant and BISYS Fund Services Ohio, Inc., and Schedule A
thereto, are incorporated by reference to Exhibit 9(d) to
Post-Effective Amendment No. 22 to the Registrant's
Registration Statement on Form N-1A filed on August 28, 1995.
(d) Shareholder Servicing Plan dated June 5, 1995 for The Victory
Portfolios is incorporated herein by reference to Exhibit 9(f)
to Post-Effective Amendment No. 23 to the Registrant's
Registration Statement on Form N-1A filed on October 31, 1995.
(e) Form of Shareholder Servicing Agreement is incorporated herein
by reference to Exhibit 9(e) to Post-Effective Amendment No. 23
to the Registrant's Registration Statement on Form N-1A filed
on October 31, 1995.
99.B(10)(a) Opinion of Counsel was filed with Registrant's Rule 24f-2
Notice for the Ohio Municipal Money Market Fund in respect of
the period ending October 31, 1995, submitted on December 28,
1995.
99.B(11)(a) Consent of Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
is filed herewith.
(b) Consent of Coopers & Lybrand L.L.P. is filed herewith.
(c) Consent of KPMG Peat Marwick LLP is filed herewith.
(d) Consent of Ernst & Young LLP is filed herewith.
99.B(12) Audited financial report for the two month period ended October
31, 1995 is filed herewith as EX-99.B12.
99.B(13)(a) Purchase Agreement dated November 12, 1986 between Registrant
and Physicians Insurance Company of Ohio is incorporated herein
by reference to
C-3
<PAGE> 65
Exhibit 13 to Pre-Effective Amendment No. 1 to the Registrant's
Registration Statement on Form N-1A filed on November 13, 1986.
(b) Purchase Agreement dated October 15, 1989 is incorporated by
reference to Exhibit 13(b) to Post-Effective Amendment No. 7 to
the Registrant's Registration Statement on Form N-1A filed on
December 1, 1989.
(c) Purchase Agreement is incorporated by reference to Exhibit
13(c) to Post-Effective Amendment No. 7 to the Registrant's
Registration Statement on Form N-1A filed on December 1, 1989.
99.B(14) None.
99.B(15)(a) Distribution and Service Plan dated June 5, 1995 for The
Victory Portfolios Class A Shares of Government Bond Fund,
National Municipal Bond Fund, New York Tax-Free Fund, Fund for
Income, Financial Reserves Fund, Institutional Money Market
Fund and Ohio Municipal Money Market Fund is incorporated by
reference to Exhibit 15(a) to Post-Effective Amendment No. 22
to the Registrant's Registration Statement on Form N-1A filed
on August 28, 1995.
(b) Distribution Plan dated June 5, 1995 for Class B Shares of
National Municipal Bond Fund, Government Bond Fund and New York
Tax-Free Fund is incorporated by reference to Exhibit 15(b) to
Post-Effective Amendment No. 22 to the Registrant's
Registration Statement on Form N-1A filed on August 28, 1995.
99.B(16)(a) Forms of computation of performance quotation are incorporated
by reference to Exhibit 16 to Post-Effective Amendment No. 19
to the Registrant's Registration Statement on Fund N-1A filed
on December 23, 1994.
(b) Computation of performance quotation dated August 31, 1995 for
the Ohio Municipal Money Market Fund is to be filed by
amendment.
99.B(17) Financial Data Schedule is filed herewith as 99.B-27.
99.B(18) Rule 18f-3 Multi-Class Plan adopted effective June 5, 1995 is
incorporated by reference to Exhibit 17 to Post-Effective
Amendment No. 22 to the Registrant's Registration Statement on
Form N-1A filed on August 28, 1995.
99.B P of A Powers of Attorney are incorporated by reference to Exhibit 17
to Post-Effective Amendment No. 19 to the Registrant's
Registration Statement on Form N-1A filed on December 23, 1994.
Item 25. Persons Controlled by or under Common Control with Registrant.
C-4
<PAGE> 66
None.
Item 26. Number of Holders of Securities.
As of December 1, 1995 the number of record holders of each series
of Class A Shares of the Registrant were as follows:
C-5
<PAGE> 67
<TABLE>
<CAPTION>
Number of
Title of Series Record Holders
--------------- --------------
<S> <C>
U.S. Government Obligations Fund 159
Prime Obligations Fund 1,012
Tax Free Money Market Fund 79
Balanced Fund 940
Stock Index Fund 57
Value Fund 62
Diversified Stock Fund 4,141
Growth Fund 313
Special Value Fund 602
Special Growth Fund 80
Ohio Regional Stock Fund 1,000
International Growth Fund 1,068
Limited Term Income Fund 152
Government Mortgage Fund 288
Ohio Municipal Bond Fund 258
Intermediate Income Fund 26
Investment Quality Bond Fund 81
Florida Tax-Free Bond Fund 0
Municipal Bond Fund 0
Convertible Securities Fund 0
Short-Term U.S. Government 0
Income Fund 0
</TABLE>
C-6
<PAGE> 68
<TABLE>
<S> <C>
Financial Reserves Fund 78
Fund For Income 1,597
Government Bond Fund 142
Institutional Money Market Fund 17
National Municipal Bond Fund 100
New York Tax-Free Fund 507
Ohio Municipal Money Market Fund 106
</TABLE>
As of December 1, 1995 the number of record holders of each series of
Class B Shares of the Registrant were as follows:
<TABLE>
<CAPTION>
Number of
Title of Series Record Holders
--------------- --------------
<S> <C>
Government Bond 58
National Municipal Bond Fund 19
New York Tax-Free Fund 81
</TABLE>
As of December 1, 1995 the number of record holders of each series of
Service shares of the Registrant were as follows:
<TABLE>
<CAPTION>
Number of
Title of Series Record Holders
--------------- --------------
<S> <C>
Institutional Money Market Fund 8
</TABLE>
Item 27. Indemnification
Article IX, Section 9.2 of the Registrant's Declaration of Trust,
incorporated by reference as Exhibit 1(d) hereto, provides for the
indemnification of Registrant's Trustees and officers. Indemnification
of the Fund's principal underwriter, custodian, fund accountant and
transfer agent is provided for, respectively, in Section V of the
Distribution Agreement incorporated by reference as Exhibit 6(a),
hereto, Section 28 of the Custody Agreement incorporated by reference as
Exhibit 8(a) hereto, Section 5 of the Fund Accounting Agreement
incorporated
C-7
<PAGE> 69
by reference as Exhibit 9(c) hereto, and Section 7 of the Transfer
Agency Agreement incorporated by reference as Exhibit 9(b) hereto.
Registrant has obtained from a major insurance carrier a trustees' and
officers' liability policy covering certain types of errors and
omissions. In no event will Registrant indemnify any of its trustees,
officers, employees or agents against any liability to which such person
would otherwise be subject by reason of his willful misfeasance, bad
faith, or gross negligence in the performance of his duties, or by
reason of his reckless disregard of the duties involved in the conduct
of his office or under his agreement with Registrant. Registrant will
comply with Rule 484 under the Securities Act of 1933 and Release 11330
under the Investment Company Act of 1940 in connection with any
indemnification.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to trustees, officers, and controlling
persons or Registrant pursuant to the foregoing provisions, or
otherwise, Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Investment Company Act of 1940, as
amended, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
Registrant of expenses incurred or paid by a trustee, officer, or
controlling person of Registrant in the successful defense of any
action, suit, or proceeding) is asserted by such trustee, officer, or
controlling person in connection with the securities being registered,
Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is
against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
KeyCorp Mutual Fund Advisers, Inc. ("Key Advisers") is the investment
adviser to each fund of the Victory Portfolios. Key Advisers is a
wholly-owned indirect subsidiary of KeyCorp, a bank holding company
which had projected total assets of approximately $68 billion as of
September 30, 1995. KeyCorp is a leading financial institution doing
business in 26 states from Maine to Alaska, providing a full array of
trust, commercial, and retail banking services. Its non-bank
subsidiaries include investment advisory, securities brokerage,
insurance, bank credit card processing, mortgage and leasing companies.
Society Asset Management, Inc. ("Society"), an affiliate of Key
Advisers, is the sub-adviser of each of the funds (other than Special
Growth Fund and Fund for Income). Key Advisers, Society and their
affiliates have over $37 billion in assets under management, and provide
a full range of investment management services to personal and corporate
clients.
T. Rowe Price Associates, Inc. ("T. Rowe Price"), sub-adviser of the
Special Growth Fund, maintains its principal office at 100 East Pratt
Street, Baltimore, Maryland 21202. T. Rowe Price was founded in 1937
by the late Thomas Rowe Price, Jr. As of September 30, 1995, the
firm and its affiliates managed over $65 billion for over 3 million
individual and institutional investor accounts.
C-8
<PAGE> 70
First Albany Asset Management Corporation ("First Albany"), Sub-adviser
of the Fund for Income, 41 State Street, Albany, New York 12207, was
incorporated on July 3, 1991, as a newly formed subsidiary of First
Albany Companies, Inc. It utilizes the expertise of an experienced staff
of research personnel employed by its affiliate, First Albany
Corporation.
The principal executive officers and directors of KeyCorp Advisers are
as follows:
W. Christopher Maxwell, Director, Chairman and Chief Executive
Officer. Also Executive Vice President of Keycorp Management Company
("KMC")
Kathleen A. Dennis, Director and President. Also Senior Vice
President of KMC.
Martin J. Walker, Director. Also Chairman, President and Chief
Executive Officer of Society and Executive Vice President of KeyCorp.
James W. Wert, Director. Also Senior Executive Vice President and
Chief Investment Officer of KeyCorp.
William G. Spears, Director. Also Chairman, Chief Executive Officer
and Managing Director of Spears, Benzak, Salomon and Farrell, Inc.
("SBSF")
Linda A. Grandstaff, Director. Also Executive Vice President,
Commercial and International Services Group of KeyCorp.
Richard B. Ainsworth, Jr., Director. Also Executive Vice President
of Key Trust Company of Ohio, National Association.
Robert G. Jones, Director. Also Executive Vice President, Community
Banking, of KeyCorp.
Jack L. Kopnisky, Director. Also President, Key Investments, Inc.
John M. Keane, Vice-President and Treasurer. Also Vice President,
KMC.
Ann Kowal Smith, Secretary. Also Vice President and Senior Counsel
of KMC.
Charles G. Crane, Senior Vice-President and Senior Managing
Director. Also Senior Vice President and Managing Director of SBSF.
Dennis M. Grapo, Senior Vice-President and Senior Managing Director.
Also Senior Vice-President and Senior Managing Director of Society.
Frank J. Riccardi, Senior Vice-President and Senior Managing
Director. Also Senior Vice-President and Senior Managing Director of
Society.
C-9
<PAGE> 71
Anthony Aveni, Senior Vice-President and Senior Managing Director.
Also Senior Vice-President and Senior Managing Director of Society.
The business address of each of the foregoing individuals is 127
Public Square, Cleveland, Ohio 44114.
The principal executive officers and directors of Society are as
follows:
Directors:
Martin J. Walker, also Chairman, President and Chief Executive
Officer of Society and Executive Vice President of KeyCorp.
James W. Wert, also Senior Executive Vice President and Chief
Investment Officer of KeyCorp.
Richard B. Ainsworth, Jr., also Executive Vice President of Key Trust
Company of Ohio, National Association.
Dennis M. Grapo, also Senior Vice President and Senior Managing
Director of Society.
Frank J. Riccardi, also Senior Vice President and Senior Managing
Director of Society.
Kenneth W. Ostrowski, also Senior Vice President and Senior Managing
Director of Society.
Anthony Aveni, also Senior Vice President and Senior Managing
Director of Society.
James S. Bingay, also Executive Vice President of KeyCorp.
John E. Kohl, also Executive Vice President of KMC.
Other Officers:
Stacy L. Bauer, Secretary, also Vice President and Associate Counsel
of KMC.
James D. Kacic, Vice President and Treasurer of Society.
The business address of each of the foregoing individuals is 127
Public Square, Cleveland, Ohio 44114.
The following persons are directors of First Albany:
Hugh A. Johnson, Jr. is President and Chairman of the Board of
Directors of First Albany. Mr. Johnson is also Senior Vice President,
Chief Investment Officer and a director of First Albany Corporation.
Mr. Johnson is also Senior Vice President and a director of First
Albany Companies, Inc.
C-10
<PAGE> 72
George C. McNamee is Chairman of the Board of Directors of First
Albany Corporation and of First Albany Companies, Inc.
Alan P. Goldberg is President and a director of First Albany
Corporation and of First Albany Companies, Inc.
In addition to Mr. Johnson, the following persons are executive
officers of First Albany:
Robert T. Hennes, Jr., is Executive Vice President and Secretary of
First Albany. Mr. Hennes was previously Chairman of Dollar Dry Dock
Investment Management Corporation and President of Investors
Preference New York Tax Free Fund, Inc. and Investors Preference Fund
for Income, Inc.
Thomas J. Curran is a Managing Director of First Albany and a Senior
Vice President of First Albany Corporation.
Paul V. Ireland is a Managing Director of First Albany and a Vice
President of First Albany Corporation.
C. Lee Liscom is a Managing Director of First Albany and a Vice
President of First Albany Corporation. Mr. Liscom was previously an
Executive Vice President of Key Trust Corporation.
David J. Cunningham is Treasurer of First Albany and a Senior Vice
President and Chief Financial Officer of First Albany Corporation and
of First Albany Companies, Inc.
The address of each of the above individuals is 41 State Street,
Albany, New York 12207, at which First Albany maintains its offices.
Listed below are the Directors of T. Rowe Price who have other
substantial businesses, professions, vocations, or employment aside from that
of Director of T. Rowe Price:
James E. Halbkat, Jr., President of U.S. Monitor Corporation, a
provider of public response systems. Mr. Halbkat's address is P.O.
Box 23109, Hilton Head Island, South Carolina 29925.
John W. Rosenblum, Tayloe Murphy Professor at the University of
Virginia, and a Director of: Chesapeake Corporation, a manufacturer
of paper products, Camdus Communications Corp., a provider of
printing and communication services, Comdial Corporation, a
manufacturer of telephone systems for businesses, and Cone Mills
Corporation, a textiles producer. Mr. Rosenblum's address is P.O. Box
6550, Charlottesville, Virginia 22906.
Robert L. Strickland, Chairman of Loew's Companies, Inc., a retailer
of specialty home supplies, and a Director of Hannaford Bros. Co., a
food retailer. Mr. Strickland's address is 604 Two Piedmont Plaza
Building, Winston-Salem, North Carolina 27104.
C-11
<PAGE> 73
Philip C. Walsh, Consultant to Cyprus Amax Minerals Company,
Englewood, Colorado, and a Director of Piedmont Mining Company, Inc.,
Charlotte, North Carolina. Mr. Walsh's address is 200 East 66th
Street, Apt. A-1005, New York, New York 10021.
With the exception of Messrs. Halbkat, Rosenblum, Strickland, and
Walsh (listed above), all Directors of T. Rowe Price are employees of T. Rowe
Price. Listed below are the additional Directors and the principal executive
officer of T. Rowe Price:
James S. Riepe, Thomas H. Broadus, Carter O. Hoffman, George A.
Roche, M. David Testa and Henry H. Hopkins - Directors of T. Rowe
Price.
George J. Collins, Chief Executive Officer and President of T. Rowe
Price.
The address of each of the above individuals is 100 East Pratt
Street, Baltimore, Maryland 21202.
Item 29. Principal Underwriter
(a) Victory Broker-Dealer Services, Inc. acts as distributor for the
Registrant and Concord Holding Corporation serves as administrator
for the Registrant.
(b) Directors, officers and partners of Victory Broker-Dealer Services,
Inc. as of October 31, 1995 were as follows:
<TABLE>
<CAPTION>
Name and Principal Positions and Officers with Positions and Offices
Business Addresses Victory Broker-Dealer Services, Inc. with the Registrant
- ------------------ ------------------------------------ ---------------------
<S> <C> <C>
Lynn J. Mangum Chairman None
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43215
Richard E. Stierwalt President/CEO None
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43215
Robert J. McMullen Executive Vice President None
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43215
William B. Blundin Vice President None
BISYS Fund Services, Inc.
</TABLE>
C-12
<PAGE> 74
<TABLE>
<S> <C> <C>
3435 Stelzer Road
Columbus, Ohio 43215
Dennis Sheehan Vice President None
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43215
Catherine T. Dwyer Vice President/Secretary None
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43215
Michael D. Burns Vice President-Compliance None
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43215
Annamaria Porcaro Assistant Secretary None
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43215
Robert Tuch Assistant Secretary None
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43215
Stephen Mintos Executive Vice President/ None
BISYS Fund Services, Inc. COO
3435 Stelzer Road
Columbus, Ohio 43215
George O. Martinez Senior Vice President None
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43215
Dale Smith Vice President/CFO None
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43215
</TABLE>
C-13
<PAGE> 75
Sean Kelly First Vice President None
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43215
Item 30. Location of Accounts and Records
(1) KeyCorp Mutual Fund Advisers, Inc., 127 Public Square, Cleveland,
Ohio 44114-1306 (records relating to its functions as investment
adviser).
(2) Society Asset Management, Inc., 127 Public Square, Cleveland, Ohio
44114-1306 (records relating to its functions as investment
sub-adviser.
(3) Society National Bank, 127 Public Square, Cleveland, Ohio 44114-1306
(records relating to its functions as shareholder servicing agent).
(4) T. Rowe Price Associates, Inc., 100 East Pratt Street, Baltimore,
Maryland 21202 and First Albany Asset Management Corporation, 41
State Street, Albany, New York 12207 (records relating to its
functions as sub-investment adviser).
(5) Concord Holding Corporation, 3435 Stelzer Road, Columbus, Ohio 43219
(records relating to its functions as administrator).
(6) Primary Funds Service Corporation, 859 Williard Street, Quincy,
Massachusetts 02269-9110 (records relating to its functions as
transfer agent).
(7) Key Trust Company of Ohio, N.A., 127 Public Square, Cleveland, Ohio
44114-1306 (records relating to its functions as custodian and
shareholder surviving agent).
(8) The Bank of New York, 90 Washington Street, New York, New York 10286
(records relating to its functions as sub-custodian).
Item 31. Management Services
None.
Item 32. Undertakings
Registrant undertakes to call a meeting of shareholders, at the
request of holders of 10% of the Registrant's outstanding shares, for
the purpose of voting upon the question of removal of a trustee or
trustees and undertakes to assist in communications with other
shareholders as required by Section 16(c) of the Investment Company
Act of 1940.
C-14
<PAGE> 76
Registrant undertakes to furnish to each person to whom a prospectus
is delivered a copy of the Registrant's latest Annual Report to
Shareholders upon request and without charge.
NOTICE
A copy of the Agreement and Declaration of Trust of The Victory Portfolios
is on file with the Secretary of State of The Commonwealth of Massachusetts and
notice is hereby given that this Post-Effective Amendment to Registrant's
Registration Statement is executed on behalf of the Registrant by an officer and
the trustees of the Registrant as an officer, and as trustees, respectively, and
not individually and that the obligations of or arising out of this
Post-Effective Amendment to Registrant's Registration Statement are not binding
upon any of the trustees, officers or shareholders individually but are binding
only upon the assets and property of the Registrant.
C-15
<PAGE> 77
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant has certified that it meets all the requirements for
effectiveness of this registration statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Post-Effective Amendment No. 25
to the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York and State of New York, on the
28th day of December, 1995.
THE VICTORY PORTFOLIOS
By: /s/Leigh A. Wilson
--------------------------------------
Leigh A. Wilson, President and Trustee
- --------------------------------------------------------------------------------
As required by the Securities Act of 1933, this Post-Effective Amendment No. 25
to the Registration Statement has been signed by the following persons in the
capacities indicated on the 28th day of December, 1995.
/s/ Leigh A. Wilson President
--------------------------
Leigh A. Wilson
/s/ Martin Dean Treasurer
--------------------------
Martin Dean
* Trustee
--------------------------
Robert G. Brown
* Trustee
--------------------------
Edward P. Campbell
* Trustee
--------------------------
Harry Gazelle
* Trustee
--------------------------
Stanley I. Landgraf
* Trustee
--------------------------
Thomas F. Morrissey
* Trustee
--------------------------
H. Patrick Swygert
*By: /s/ Carl Frischling
---------------------
Carl Frischling
Power of Attorney
Attorney-in-Fact pursuant to powers of attorney, dated December 12,
1994, as filed with Post-Effective Amendment No. 19 to
Registrant's Registration Statement on December 23, 1994.
C-16
<PAGE> 78
THE VICTORY PORTFOLIOS
INDEX TO EXHIBITS
Exhibit Number
- --------------
EX-99.B11(a) Consent of Kramer, Levin, Naftalis, Nessen, Kamin & Frankel.
EX-99.B11(b) Consent of Coopers & Lybrand L.L.P.
EX-99.B11(c) Consent of KPMG Peat Marwick LLP
EX-99.B11(d) Consent of Ernst & Young LLP
EX-99.B12 Financial Statements
EX-99.B27 Financial Data Schedule.
C-17
<PAGE> 1
EX-99.B11(a)
Consent of Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
<PAGE> 2
December 28, 1995
The Victory Portfolios
3435 Stelzer Road
Columbus, Ohio 43219
Re: The Victory Portfolios
File No. 33-8982
Post-Effective Amendment to
Registration Statement on Form N-1A
Gentlemen:
We hereby consent to the reference of our firm as counsel in the
Post-Effective Amendment No. 25 to the Registration Statement on Form N-1A.
This Post-Effective Amendment does not contain disclosures that would
render it ineligible to become effective pursuant to paragraph (b) of Rule 485
under the Securities Act of 1933.
Very truly yours,
/s/ Kramer, Levin, Naftalis, Nessen,
Kamin & Frankel
<PAGE> 1
EX-99.B11(b)
Consent of Coopers & Lybrand L.L.P.
<PAGE> 2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Post-Effective Amendment
No. 25 to the Registration Statement on Form N-1A (File No. 33-8982) of The
Victory Portfolios (comprising, respectively, the U.S. Government Obligations
Fund, Prime Obligations Fund, Financial Reserves Fund (formerly the Financial
Reserves Portfolio), Institutional Money Market Fund (formerly the Institutional
Money Market Portfolio), Tax-Free Money Market Fund, Ohio Municipal Money Market
Fund (formerly the Ohio Municipal Money Market Portfolio), Limited Term Income
Fund, Intermediate Income Fund, Investment Quality Bond Fund, Government Bond
Fund (formerly the Government Bond Portfolio), Government Mortgage Fund, Fund
for Income (formerly the Fund for Income Portfolio), National Municipal Bond
Fund (formerly the National Municipal Bond Portfolio), New York Tax-Free Fund
(formerly the New York Tax-Free Portfolio), Ohio Municipal Bond Fund, Balanced
Fund, Stock Index Fund, Diversified Stock Fund, Value Fund, Growth Fund, Special
Value Fund, Special Growth Fund, Ohio Regional Stock Fund, and International
Growth Fund) of our report dated December 19, 1995 on our audits of the
financial statements and financial highlights of The Victory Portfolios as of
October 31, 1995 and for the periods then ended. We also consent to the
reference to our Firm under the caption "Independent Accountants" in the
Prospectus, and "Auditors" and "Miscellaneous" in the Statement of Additional
Information relating to The Victory Portfolios in this Post-Effective Amendment
No. 25 to the Registration Statement on Form N-1A (File No. 33-8982).
COOPERS & LYBRAND L.L.P.
Columbus, Ohio
December 20, 1995
<PAGE> 1
EX-99.B11(c)
Consent of KPMG Peat Marwick LLP
<PAGE> 2
INDEPENDENT AUDITOR'S CONSENT
The Trustees and Shareholder
The Victory Portfolios
We consent to the reference to our firm under the caption "Financial
Highlights" in the Prospectus and "Advisory and Other Contracts - Auditors" in
the Statement of Additional Information of the Ohio Municipal Money Market Fund,
a series portfolio of The Victory Portfolios.
KPMG PEAT MARWICK LLP
Boston, Massachusetts
December 27, 1995
<PAGE> 1
EX-99.B11(d)
Consent of Ernst & Young LLP
<PAGE> 2
Consent of Ernst & Young LLP, Independent Auditors
We consent to the references to our firm under the caption "Financial
Highlights" and "Auditors" with respect to the financial statements of Ohio
Municipal Money Market Fund (formerly A.T. Ohio Tax Free Money Fund), in
Post-Effective Amendment Number 25 to the Registration Statement (Form N-1A No.
33-8982) and related Prospectus of Ohio Municipal Money Market Fund (a portfolio
of The Victory Portfolios).
Pittsburgh, Pennsylvania
December 19, 1995
<PAGE> 1
EX-99.B12
FINANCIAL STATEMENTS
<PAGE> 2
To the Shareholders and Trustees of
The Victory Portfolios
We have audited the accompanying statements of assets and liabilities of The
Victory Portfolios (comprising, respectively, the U.S. Government Obligations
Fund, Prime Obligations Fund, Financial Reserves Fund (formerly the Financial
Reserves Portfolio), Institutional Money Market Fund (formerly the Institutional
Money Market Portfolio), Tax-Free Money Market Fund, Ohio Municipal Money Market
Fund (formerly the Ohio Municipal Money Market Portfolio), Limited Term Income
Fund, Intermediate Income Fund, Investment Quality Bond Fund, Government Bond
Fund (formerly the Government Bond Portfolio), Government Mortgage Fund, Fund
for Income (formerly the Fund for Income Portfolio), National Municipal Bond
Fund (formerly the National Municipal Bond Portfolio), New York Tax-Free Fund
(formerly the New York Tax-Free Portfolio), Ohio Municipal Bond Fund, Balanced
Fund, Stock Index Fund, Diversified Stock Fund, Value Fund, Growth Fund, Special
Value Fund, Special Growth Fund, Ohio Regional Stock Fund, and International
Growth Fund), including the schedules of investments, as of October 31, 1995,
and the related statements of operations and changes in net assets, and the
financial highlights for each period presented except as noted in the next
paragraph. These financial statements and financial highlights are the
responsibility of The Victory Portfolios' management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
The Financial Reserves Fund's statement of changes in net assets for the year
ended October 31, 1994 and the financial highlights for each of the four years
in the period ended October 31, 1994 were audited by other auditors, whose
reports dated December 2, 1994 and December 17, 1993, respectively, expressed
unqualified opinions on those financial statements and financial highlights. The
Institutional Money Market Fund's statement of changes in net assets for each of
the two years in the period ended April 30, 1995 and the financial highlights
for each of the five years in the period ended April 30, 1995 were audited by
other auditors, whose report dated June 20, 1995 expressed an unqualified
opinion on those financial statements and financial highlights. The Ohio
Municipal Money Market Fund's statement of changes in net assets for the year
ended August 31, 1994 and the manual highlights for each of the four years in
the period ended August 31, 1994 were audited by other auditors, whose reports
dated October 7, 1994 and October 13, 1993, respectively, expressed unqualified
opinions on those financial statements and financial highlights. The Government
Bond Fund's statements of changes in net assets and financial highlights for the
periods ended April 30, 1995 and 1994 were audited by other auditors, whose
report dated June 20, 1995 expressed an unqualified opinion on those financial
statements and financial highlights. The Fund for Income's statement of changes
in net assets for the period ended October 31, 1994 and the financial highlights
for the period ended October 31, 1994 and for each of the three years in the
period ended January 31, 1994 were audited by other auditors, whose reports
dated December 2, 1994 and February 28, 1994, respectively, expressed
unqualified opinions on those financial statements and financial highlights. The
National Municipal Bond Fund's statements of changes in net assets and financial
highlights for the periods ended April 30, 1995 and 1994 were audited by other
auditors, whose report dated June 20, 1995 expressed an unqualified opinion on
those financial statements and financial highlights. The New York Tax-Free
Fund's statement of changes in net assets for the period ended October 31, 1994
and the financial highlights for the period ended October 31, 1994, two years in
the period ended December 31, 1993 and the period ended December 31, 1991 were
audited by other
<PAGE> 3
auditors, whose reports dated December 2, 1994 and January 31,
1994, respectively, expressed unqualified opinions on those financial statements
and financial highlights. The Special Growth Fund's statements of changes in net
assets and financial highlights for the year ended April 30, 1995 and period
ended April 30, 1994 were audited by other auditors, whose report dated June 20,
1995 expressed an unqualified opinion on those financial statements and
financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation and verification by examination
of securities owned as of October 31, 1995, by correspondence with the
custodians and brokers or other auditing procedures where confirmations from
brokers were not received. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above, except as noted in the second paragraph present fairly, in all material
respects, the financial position of each of the respective funds comprising The
Victory Portfolios as of October 31, 1995, and the results of their operations,
the changes in their net assets and the financial highlights for the periods
then ended in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Columbus, Ohio
December 19, 1995
<PAGE> 4
VICTORY FUNDS
ANNUAL REPORT
THE VICTORY FUNDS
OCTOBER 31, 1995
vic-tor-y (vik'te-re)
n., 1. The act or fact
of winning in a contest
or struggle, as with an
opponent or difficulty;
a triumph.
<PAGE> 5
"The ultimate victory in competition is derived from the inner satisfaction of
knowing that you have done your best and that you have gotten the most out of
what you had to give." - Howard Cosell Sports Broadcaster
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<S> <C>
Shareholder Letter 2
Investment Review and Outlook 3
FUND REVIEW AND COMMENTARY
Introduction to Victory Money Market Funds 4
Introduction to Victory Fixed Income Funds 8
Introduction to Victory Municipal Bond Funds 15
Introduction to Victory Equity Funds 19
Question & Answers 29
Glossary of Terms 30
How to Read Your Financial Statements 31
FINANCIAL STATEMENTS
Schedules of Investments 33
Statements of Assets and Liabilities 109
Statements of Operations 115
Statements of Changes in Net Assets 121
Notes to Financial Statements 129
Financial Highlights 139
Report of Independent Accountants 158
Special Shareholder Meeting 159
</TABLE>
Society Asset Management, Inc. ("SAM"), a subsidiary of KeyCorp, is the
investment adviser to The Victory Funds. The Victory Funds are sponsored and
distributed by Victory Broker Dealer Services, Inc., which is not affiliated
with SAM, KeyCorp, any KeyCorp bank or their affiliates. SAM and Key Trust
Company of Ohio, N.A., also a subsidiary of KeyCorp, receive fees from The
Victory Funds for their services.
This report is not authorized for distribution to prospective investors unless
preceded or accompanied by a current prospectus for The Victory Funds.
NOT Shares of The Victory Funds are not deposits or other obligations
FDIC of, or guaranteed by, any KeyCorp bank, Society Asset Management,
INSURED Inc., or their affiliates, and are subject to investment risks,
including possible loss of the principal amount invested.
THE VICTORY FUNDS
1
<PAGE> 7
LETTER FROM THE PRESIDENT
Dear Shareholder,
The Victory Funds are pleased to provide you with this annual report for the
fiscal year ended October 31, 1995. This past fiscal year has been good for
most investors as the equity markets excluding international, have posted
impressive returns. Fixed income markets have also achieved impressive results
after a disappointing 1994. The average one year total return of our Equity
Funds, including the International Growth Fund, was 18% for the period ending
10/31/95. This compares favorably with the 15.5% average total return of all
equity funds (3,321) in the Morningstar Principia database. There were some
impressive returns in the marketplace during this period, but we believe that
being consistent, being above average, is the best way to achieve an objective.
In this report you will find some very important information on the fund(s) in
which you have invested. We hope that you will look through it carefully and
read the comments of your portfolio manager(s). We have attempted to provide an
overview of each fund's performance and style by interviewing each of the
portfolio managers. We feel that this interview and performance discussion is
the most important section of the annual report as it explains how economic
conditions and market behavior affected the strategy and performance of your
fund(s), outlines the portfolio manager's outlook for the future and more.
We seek to always provide you with interesting information that will continue
to educate or intrigue you as an investor, and to offer you the opportunity to
stay abreast of investment opportunities. In order to accomplish this
objective, we have enclosed with this report a business reply card. Please use
it to order information, send us your ideas and comments or simply to let us
know how we are doing in servicing your investment needs.
The growth of $10,000 chart is information that funds are required to publish
with the exception of money market funds. Each Fund's growth is compared to a
an appropriate index. This chart is meant to provide general information of the
market(s) and should be used only as a guide to the Fund's relative performance
for two very important reasons:
- The mutual fund must clearly define in its prospectus its investment
objective and permissible investments. The index is a measure of the
most appropriate broad market; however, it does not have an
investment objective and may not accurately reflect the types of
investments held by a particular fund.
- In addition, it is important to remember that the index is a 'paper
calculation' and does not reflect any expenses that accompany a real
investment such as sales charges, management fees, portfolio
transaction costs or the cash reserves required to provide daily
liquidity. The performance of the Fund must reflect all expenses
incurred by the Fund as well as the highest front-end or
deferred sales charges that may be applied.
Additionally, each Fund's growth is also plotted without a sales charge. In
some cases we have also included a second index or benchmark to help explain or
highlight a specific aspect of fund performance.
We wish you all a prosperous and successful 1996. Thank you for choosing to
invest in The Victory Funds.
Leigh A. Wilson, President
THE VICTORY FUNDS
P.S. For more information about any of the Victory Funds, request a prospectus
by calling 1-800-539-FUND (3863). The prospectus contains more complete
information, including charges and expenses. Read the prospectus carefully
before you invest or send money.
THE VICTORY FUNDS
2
<PAGE> 8
INVESTMENT REVIEW AND OUTLOOK
In our opinion, as of November 9, 1995.
THE U.S. ECONOMY "Soft landing" minimal turbulence. The 2.0% real annual
growth rate during 1995's first half was followed by the third quarter's 4.2%
growth rate (which included some "quirks"). The next few quarters?. . . Near a
2.0-2.5% real annual rate. The chance of recession remains slim.
THE BUDGET BATTLE - The political nonsense continues. Finger pointing, heated
debate, name-calling, tears, hostility, screaming, mistruths. . . This must be
Washington D.C. The Congress must soon approve a debt extension bill acceptable
to the President. The Administration and the Congress must also reach an
agreement on long-term deficit reduction in coming weeks. Expect the President
to veto the first Republican plan. . . Then the real "fun" begins. When all is
said and done, a legitimate "deal" is expected.
JOB GROWTH/UNEMPLOYMENT - More modest job creation. Impressive job growth
during 1994 (roughly four million net new jobs) gave way to a more timid pace
during 1995. Modest job growth should continue, partly due to a shortage of
skilled labor in many areas of the country. The nation's relatively low
unemployment rate (5.5%) is tied to a mysterious lack of labor force growth.
Unemployment should remain in a range of 5.5-6.0% through mid-1996.
INFLATION - A major success story. The Fed's battle with inflation is
temporarily over. . .The Fed won. Consumer prices rose at a 2.8% annual rate
during 1995's first nine months, identical to consumer inflation of the past
three years. We've lowered our forecast of 1996 consumer inflation to 2.7%.
THE FEDERAL RESERVE - Yes, "government" can work. The Fed is likely to trim
rates more than once in coming months, in line with economic slowing and
minimal inflation anxiety. The Fed will probably "reward" the expected
Administration/Congress deficit reduction package (if completed and credible)
with an easing move on December 19. A 5.0% federal funds rate and an 8.0% prime
rate (versus 5.75% and 8.75% today) are reasonable bets by the end of 1996's
first quarter.
LONG-TERM INTEREST RATES - Additional declines are possible. If the
Administration/Congress finally agree on a legitimate deficit reduction
package by year-end, long-term rates could test their lows of October '93. The
result? Thirty-year fixed-rate mortgages again below 7.0%.
THE DOLLAR - More recent global respect. The dollar has rebounded impressively
against the Japanese yen in recent months, less so versus the German mark.
Additional global dollar strength could emerge following a viable deficit
reduction package.
HOUSING - Very attractive mortgage rates. Today's fixed-rate mortgages - at a
20-month low - will help stimulate new construction and refinance activity.
Even more housing activity is possible if mortgage rates decline further in
coming months.
THE U.S. SUMMARY - Moderate U.S. economic expansion should continue throughout
1996 with. . .Legitimate prospects of smaller future budget deficits. . .
Sluggish job creation/low unemployment. . .Stable consumer spending. . .
Minimal inflation pressures. . . Expectations of lower short-term and
long-term interest rates. . . stable dollar. . . Good housing markets. . .And
balanced regional economic growth. All factors considered an "acceptable"
combination.
NOTE: Economic data courtesy of Regional Financial Associates.
- --------------------------------------------------------------
THE VICTORY FUNDS
"Don't be afraid to take a big step if one is indicated. You can't cross a
chasm in two small jumps."- David Lloyd George
3
<PAGE> 9
INTRODUCTION TO MONEY MARKET FUNDS
THE VICTORY MONEY MARKET FUNDS
Who should invest in money market funds?
- - Money market funds may be most appropriate for investors looking for
stability of principal and income.
- - Money market funds are sometimes used by investors who have short-term
investment goals.
- - Individuals who need quick and easy access to their funds.
What type of securities are found in money market funds?
- - Depending on the objectives of each fund, money market funds usually invest
in shorter-term securities such as U.S. Treasury bills, Commercial Paper,
Certificate of Deposit and repurchase agreements.
- - A tax-free money market fund, such as The Ohio Municipal Money Market Fund,
may invest in securities issued by municipalities of the state of Ohio, while
a U.S. Government money market fund may limit its investments to
government-issued/backed securities only.
Not sure how other Victory Funds can work for you, too? Let us send you our
Consumer Brochure which gives an overview on each asset class and on how the
Victory Funds can help you achieve your objectives. Please complete and return
the business reply card found in this report, and we will promptly send you the
information you request, or for more information about any of the Victory Fixed
Income Funds in particular, including charges and expenses, obtain a prospectus
by calling 1-800-539-FUND. Please read the prospectus carefully before you
invest or send money.
THE VICTORY FUNDS
"If you don't invest very much, then defeat doesn't hurt very much and winning
is not very exciting."
- - Dick Vermeil, NFL Coach
4
<PAGE> 10
VICTORY U.S. GOVERNMENT OBLIGATIONS FUND
Q Can you describe some of the major trends or events that affected your Fund
this past year?
A Changes in Federal Reserve policy from a tightening mode (increasing
interest rates) at the beginning of 1995 to an easing mode (lowering rates)
by July shaped the government bond market. The Federal Reserve reversed
direction due to signs that the economy was slowing, and that inflation
had been subdued.
Q How did you structure the Fund to take advantage of these conditions?
A While the Federal Reserve was tightening, I decreased the average maturity,
and invested in repurchased agreements. This let the Fund yield rise in
response to the market. When the Fed reversed course, I looked to extend the
average maturity of the Fund and lock in yields through a mix of
longer-dated fixed treasury coupons.
Q What does this mean in laymen's terms?
A When rates are rising, repurchase agreements are the investment of choice
because the yield adjusts daily. However, in a market characterized by
declining interest rates, daily resets are not advantageous. Once it became
evident that the Federal Reserve would be in an easing mode, I decided to
lock in yields by investing in longer-dated fixed coupon treasury
securities. In this way the fund is not as sensitive to declining rates.
Q How did the Fund perform during the past year?
A The strategy I described allowed the Fund to outperform the Donoghue
Government Money Market Fund Average1 during the year. In addition the Fund
7-day yield was better than the average 7-day yield for 51 of each of the
past 52 weeks reported.
Q What do you see going forward?
A We expect the Federal Reserve to further ease interest rates during the
remainder of 1995 and into 1996. As a result, we will continue to look for
opportunities to extend the Fund's maturity and lock in higher fixed rates
to keep its yield as high as possible.
<TABLE>
<CAPTION>
AS OF OCTOBER 31, 1995
<S> <C>
Seven-day Yield 5.25%
Seven-day Effective Yield 5.39%
One Year Total Return 5.38%
</TABLE>
<TABLE>
<CAPTION>
MATURITY SCHEDULE 2
As of 10/31/95
<S> <C>
Days to
Maturity
Less Than 30 days 79.8%
31 to 60 days 0.0%
61 to 90 days 0.0%
Greater Than 90 days 20.2%
</TABLE>
THE VICTORY FUNDS
Ellyn M. Morgan is an Assistant Vice-President with Society Asset Management,
Inc. ("SAM"). She has been with SAM and/or an affiliate since 1987. Ms. Morgan
received her B.A. from Cleveland State University.
The performance data quoted represent past performance and therefore are not
indicative of future results. Yields will fluctuate with market conditions.
There can be no assurance that any of the Victory Money Market Funds will be
able to maintain a stable net asset value of $1.00 per share. An investment in
a Victory Money Market Fund is neither insured not guaranteed by the U.S.
Government.
1 IBC/Donoghue's Money Market Fund Averages are based on the unweighted
averages of yields and total returns of funds which have similar investment
policies and objectives. The Average is comprised of funds similar to, but not
necessarily the same as, The Victory U.S. Government Obligations Fund.
2 The Funds Maturity Schedule is presented to illustrate examples of a barbell
strategy and may not be representative of current or future strategies. Fund
strategies may change at any time.
5
<PAGE> 11
VICTORY PRIME OBLIGATIONS FUND
VICTORY FINANCIAL RESERVES FUND
VICTORY INSTITUTIONAL MONEY
MARKET FUND
Q Can you describe the interest rate environment during the year?
A 1995 began with expectations that short-term interest rates would continue
to follow the upward trend initiated by the Federal Reserve in February
1994. However, as the year progressed, softening economic activity and a
benign inflation outlook became the two most important economic factors
affecting short-term rates. This environment influenced the Federal Reserve
to lower rates in July.
Q How did the market environment change your strategy for the funds you
manage?
A Given the accommodative Federal Reserve policy and the tame inflation
levels, I took the opportunity to extend the average maturity of the Funds
in order to capture and maintain higher yields for a longer period of
time.
Q Are the funds managed with the same strategy?
A Yes, each Fund is managed with the same basic strategy. However, due to the
different liquidity needs and cash flows, the implementation may vary.
Q Does this explain why the yields are different?
A Only partially, more importantly, each fund bears different expenses,
depending on their target market and service features. For example, the
Institutional MMKT Fund has the highest yield because the minimum account
size is one million dollars, and it provides no additional services. On the
other hand, Prime is targeted to smaller accounts with more frequent
transactions and it offers extra service features such as check writing
privileges which increases the Fund's costs.
Q What was your strategy to keep the fund yields competitive?
A I used a combination of floating rate securities and a barbell maturity
structure. The barbell strategy concentrated investments between short
maturities (1-2 months) and longer maturities (10-12 months). The short
maturities often carried yields equal to or greater than securities in the
intermediate maturity range (3-9 months). By employing the barbell strategy
a competitive yield was maintained for the Funds without sacrificing
liquidity. The availability of liquidity provided the wherewithal for the
Funds to take advantage of market opportunities as they became available in
the longer end of the yield curve. In addition, floating rate notes were
employed as they provided yield enhancement over other fixed rate securities
of similar maturity.
Q What are your expectations for the coming year?
A The main theme for the remainder of 1995 and the beginning of 1996 is
the continued benign behavior of inflation, currently running at less than
3%. Since short-term rates are currently higher than the inflation rate,
there is room for rates to decline. A further easing in rates could
certainly materialize if the favorable inflation outlook is also accompanied
by weaker economic conditions and credible fiscal reforms that lead to a
balanced budget.
<TABLE>
<CAPTION>
MATURITY SCHEDULE 1
As of 10/31/95
Days to Prime Financial Institutional
Maturity Obligations Reserves Money Market
<S> <C> <C> <C>
Less Than 30 days 65.5% 57.9% 59.7%
31 to 60 days 21.6% 27.4% 26.4%
61 to 90 days 2.0% 2.5% 3.0%
Greater Than 90 days 10.9% 12.2% 10.9%
</TABLE>
<TABLE>
<CAPTION>
AS OF OCTOBER 31, 1995
Prime Financial Institutional Institutional
Obligations Reserves Money Market Service Class
<S> <C> <C> <C> <C>
Seven-Day Yield 5.13% 5.26% 5.53% 5.28%
One Year
Total Return 5.26% 5.50% 5.79% N/A
</TABLE>
THE VICTORY FUNDS
Michael Gabriel joined Society Asset Management Inc. in March 1995 as a
Vice-President of Fixed Income Management. He was previously with Boston Safe
Deposit & Trust Company. Mr. Gabriel received a B.S. in marketing and an MBA
from Fordham University.
The performance data quoted represent past performance and are not indicative
of future results. Yields will fluctuate with market conditions. The Victory
Financial Reserves Fund and the Institutional Money Market Fund and Service
Class yields reflect the waiver of a portion of certain fees for various
periods. In such instances and without such waiver of fees, the current 7-day
yields would have been 5.15%, 5.29% and 5.04% respectively. There can be no
assurance that any of the Victory Money Market Funds will be able to maintain a
stable net asset value of $1.00 per share. An investment in a Victory Money
Market Fund is neither insured nor guaranteed by the U.S. Government.
1 The Funds Maturity Schedule is presented to illustrate examples of a barbell
strategy and may not be representative of current or future strategies. Fund
strategies may change at any time.
6
<PAGE> 12
VICTORY TAX-FREE MONEY MARKET FUND
VICTORY OHIO MUNICIPAL MONEY MARKET FUND
Q Robin, during the past year how have economic
events affected the markets in which these two Funds invest?
A Although the economy continued to improve during the past year, inflation
remained at very subdued levels and did not pose any serious threat. Recent
data has sent mixed signals regarding economic strength for the remainder of
1995. The Federal Reserve is expected to ease interest rates further to
boost what has become a slowing economy.
Q
Do you manage each Fund the same way?
A Yes, except that the Ohio Fund purchases only Ohio muni debt, while the
Tax-Free Fund can buy any state's. Other than that the strategy and
structure of the Funds are very similar.
Q How did each Fund+s structure impact its performance?
A Each Fund maintained a barbelled structure combining short-term
variable rate securities with longer-term fixed-rate resets. As the
anticipated Federal Reserve move to lower interest rates did not materialize
in the third quarter, variable rates remained high, thus boosting the Fund's
yield. The Fund's yield has also benefited from maturity extensions on a
positively sloping yield curve. The maturity allocation schedule shows the
recent barbell structure, with the bulk, over 60% of the funds allocated to
maturities of 30 days or less.
Q What noteworthy changes were made in the Funds during the
past year? Why were these changes made?
A The main changes carried out in the
Funds were the extension of maturities and the addition of more fixed-rate
securities to lock in higher rates should the Federal Reserve decide to ease
monetary policy and lower interest rates.
Q Given the current economic environment, what should investors expect of the
Funds in the near future?
A Short-term money managers are closely watching weekly economic reports to
determine the strength of the economy and whether the Fed will intervene to
lower rates again this year. In light of the uncertainty surrounding the
timing of this move, tax-exempt securities have been trading in a very
narrow range. The Funds will continue to increase the percentage of
fixed-rate bonds they hold in anticipation of a decline in short-term
interest rates. The large percentage of shorter-term securities, however,
will continue to provide liquidity and a hedge if the Fed is slower to ease
and short-term rates remain high.
<TABLE>
<CAPTION>
AS OF OCTOBER 31, 1995
Tax-Free Ohio MMMKT
<S> <C> <C>
Seven-day Yield 3.26% 3.36%
Tax Equivalent Yield1 5.09% 5.88%
One Year Total Return 3.42% 3.42%
</TABLE>
<TABLE>
<CAPTION>
MATURITY SCHEDULE 2
As of 10/31/95
Days to
Maturity Tax-Free Ohio MMMKT
<S> <C> <C>
Less Than 30 days 59.2% 57.5%
31 to 60 days 15.1% 20.8%
61 to 90 days 4.7% 3.5%
Greater Than 90 days 20.7% 17.2%
</TABLE>
THE VICTORY FUNDS
Robin M. Hudson is a Senior Investment Officer with Society Asset Management,
Inc. ("SAM") and a Municipal Research Analyst. She has been with SAM and/or an
affiliate since 1981. Ms. Hudson received her MBA from Baldwin-Wallace College.
The performance data quoted represent past performance and are not indicative
of future results. Yields will fluctuate with market conditions. The Victory
Ohio Funds MMMkt yields reflect the waiver of a portion of certain fees for
various periods. In such instances and without such waiver of fees, the current
7-day yield and Tax-Equivalent Yield would have been 3.16% and 5.53%
respectively. There can be no assurance that any of the Victory Money Market
Funds will be able to maintain a stable net asset value of $1.00 per share. An
investment in a Victory Money Market Fund is neither insured nor guaranteed by
the U.S. Government. Certain investors may be subject to the Federal
Alternative Minimum Tax and to certain state and local taxes.
1 The tax equivalent yield is for illustrative purposes only. The tax rate used
to calculate the tax equivalent yield was based on the 36% Federal regular
income rate, and the rate used for the Ohio MMMKT is the combined 36% federal
and 6.9% Ohio state income tax rate are for illustrative purposes only. The
tax bracket does not reflect the effects of the Federal AMT.
2 The Funds Maturity Schedule is presented to illustrate examples of a barbell
strategy and may not be representative of current or future strategies. Fund
strategies may change at any time.
7
<PAGE> 13
INTRODUCTION TO FIXED-INCOME FUNDS
THE VICTORY FIXED INCOME FUNDS
Who should invest in a fixed-income fund?
- - The Victory Fixed Income Funds may be most appropriate for investors
looking for relative stability of principal and a steady source of income.
- - The Victory Fixed Income Funds may also be appropriate for investors who look
to "balance" by smoothing out some of the ups and downs of more aggressive
investments.
What type of securities are found in fixed-income funds?
- - Most of the securities found in our fixed-income funds are issued by the U.S.
Government, Government Agencies, or major corporations that are generally of
"Investment Quality," meaning they are rated no lower than B.1
- - Many fixed-income bond funds can also invest in very liquid securities, such
as commercial paper and overnight repurchase agreements so that assets are
always available for investors who need to redeem their shares.
How does a fixed income fund fit into a complete portfolio? Let us send you our
Client Guide to Asset Allocation, which describes asset allocation and why it
is important. Please complete and return the business reply card found in this
report, and we will promptly send you the information you request, or for more
information about any of the Victory Fixed Income Funds in particular,
including charges and expenses, obtain a prospectus by calling 1-800-539-FUND.
Please read the prospectus carefully before you invest or send money.
THE VICTORY FUNDS
"Champions take responsibility. When the ball is coming over the net, you can
be sure I want the ball." - Billy Jean King, tennis player
1 As reported by Standard & Poors. Investment Quality is generally defined as
those issues rated either AAA, AA, A or B. Lower ratings may be subject to
additional risk and are therefore not called Investment Quality.
8
<PAGE> 14
VICTORY LIMITED TERM INCOME FUND
Q Can you summarize the short-term bond market environment over the course of
the past year?
A For the first half of 1995 the bond market correctly anticipated a weaker
economy following the Federal Reserve's increase in short-term rates in
February. Benign inflation, coupled with a slower economy, eventually caused
the Fed to reverse the course of its monetary policy in July but by then the
bond market prices had already rallied over 3.5% in the two-year note sector.
This has produced one of the best performance years in fixed-income history.
Q Was the fund able to take advantage of the short-term rally?
A The Fund has been positioned with a slightly longer average life than its
new benchmark, the Merrill Lynch 1-3 Year Treasury Index. This "bull market
posture" helped the Fund outperform the index. The large allocation to
Treasuries along with additional yield received in agency securities helped
also.
Q Do you think the favorable conditions in the short-term market will
continue?
A The economy is somewhat of an open question at the moment. The final
resolution of the budget talks will certainly have a longer-term impact,
while the strength of consumer demand during the important Christmas retail
season is yet to be determined. The suspicion is that high debt levels will
hold consumers back, and the economy will show only modest growth. However\
continued low inflation will probably allow the Fed the opportunity to ease
rates further during 1996. As long as the outlook is favorable for lower
rates, the Fund will stay longer than its benchmark and fully invested.
Q Can you briefly explain the change in the index for measuring the Fund's
relative performance?
A The Limited Term Income Fund has an average life of over two years. This
sets it apart from the longer (four-year) Intermediate Income Fund that I
also manage. In order to more accurately represent the short (two-year)
section of the Treasury curve, the Merrill Lynch 1-3 Year Treasury Index is
now being used. By using an index with a similar average life and duration
as the Fund, the market risk and performance are more comparable. The
fund's 30-Day yield as of 10-31-95 was 4.99%
<TABLE>
<CAPTION>
VICTORY LIMITED TERM INCOME FUND
VS. MERRILL LYNCH 1-3 YR TREAS
& GOV'T CORP 1-5
10/89 4/90 10/90 4/91 10/91 4/92 10/92 4/93 10/93 4/94 10/94 4/95 10/95
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 8,000
$ 9,000
$10,000
$11,000
$12,000
$13,000
$14,000
$15,000
$16,000
</TABLE>
The graph that appears on page 9 of the annual report represents a comparison
between a $10,000 investment made on October 20, 1989 in the Limited Term
Income Fund and identical investments in the Merrill Lynch 1-3 Year Treasury
and Merrill Lynch Government/Corporate Indexes. The chart indicates that
$10,000 invested on October 20, 1989 in the Limited Term Income Fund would be
worth $14,505 at maximum load and $14,794 at New Asset Value on October 31,
1995, as opposed to $15,272 and $15,818 had $10,000 been invested in the
Merrill Lynch 1-3 Year Treasury or Merrill Lynch Government/Corporate 1-5
Indexes, respectively.
The Merrill Lynch 1-3 Year Treasury Index is a broad-based unmanaged index that
represents the general performance of short-term (1-3 year) U.S. Treasury
securities.
The Merrill Lynch Government/Corporate Index is a broad-based unmanaged index
that represents the general performance of short-term (1-5 year),
investment-grade, fixed-income securities.
TOTAL RETURN
As of 10/31/95
<TABLE>
<CAPTION>
Net Asset Maximum
Value Offering Price
<S> <C> <C>
One Year 8.77% 6.62%
Annualized Return
Three Years 4.76% 4.06%
Five Years 6.54% 6.12%
Since Inception
10/20/89 6.77% 6.42%
</TABLE>
THE VICTORY FUNDS
Robert H. Fernald is a Vice-President of Society Asset Management, Inc. ("SAM")
and has managed the Fund since January 1995. He has been with SAM and/or an
affiliate since 1991. Mr. Fernald received his BS from Trinity College.
The performance data quoted represent past performance and, therefore, are not
indicative of future results. Total returns are historical and include the
change in share price and reinvestment of dividends and capital gains
distributions, and unless indicated, show the effect of the maximum 2.00% sales
charge. Investment returns and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost. The total return figures set forth above may reflect the waiver of a
portion of certain fees for various periods since the Fund's inception date. In
such instances and without such waiver of fees, the total returns would have
been lower and the 30-Day yield would have been 4.96%.
9
<PAGE> 15
VICTORY INTERMEDIATE INCOME FUND
Q What economic changes have occurred during the past year, and how have they
affected the intermediate bond market?
A The intermediate sector of the bond market benefited from the tremendous
rally that materialized during the past year. This rally, which started in
January 1995 was propelled by the perception of a slowing economy, sustained
low inflation, and large cash inflows into U.S. markets by foreign central
banks as a result of dollar-support intervention. More recently, a positive
long-term outlook for a balanced budget resolution has also helped the
bullish sentiment in the marketplace.
Q How did you respond to the market conditions you just described?
A Our strategy was to remain as fully invested as possible while maintaining
a longer average life than the Index. Keeping pace with the market's rally
was difficult at times as the market seemed to "get ahead of itself." The
months of May and June were examples of this. The market moved sharply
higher and then experienced some retrenchment.
Q What factors have most affected the performance of the Fund this year?
A Two factors have caused the Fund to modestly underperform the Lehman
Brothers Intermediate Government/Corporate Bond Index. First of all, our
relative value approach to sector selection kept us invested in the
mortgage-backed segment of the market, a sector that has experienced weakness
for most of the year. Secondly, the average life of the Fund was shortened by
the mortgage component, thus holding the Fund's performance back during the
bond market rally.
Q What is your outlook for the coming year, and how do you plan to manage the
Fund to provide the best return for shareholders?
A We expect that a more moderate pace of economic growth coupled with tame
inflation levels (and possibly a favorable resolution of the balanced budget
issue) will allow the Federal Reserve to continue on its path of lowering
interest rates. In the very near term, the market is waiting to find out
whether consumers can lift fourth quarter GDP with strong Christmas
purchases. As long as our outlook for lower rates remain in place, the Fund
will remain fully invested and maintain a longer average life relative to
its benchmark in an attempt to lock in attractive yields. The fund's 30-Day
yield as of 10-31-95 was 5.12%.
TOTAL RETURN
As of 10/31/95
<TABLE>
<CAPTION>
Net Asset Maximum
Value Offering Price
<S> <C> <C>
One Year 11.65% 6.36%
Since Inception Annualized
12/10/93 4.60% 1.93%
</TABLE>
<TABLE>
<CAPTION>
VICTORY INTERMEDIATE INCOME FUND
VS. LEHMAN INT GOV'T/CORP
12/93 2/94 4/94 6/94 8/94 10/94 12/94 2/95 4/95 6/95 8/95 10/95
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 8,000
$ 8,500
$ 9,000
$ 9,500
$10,000
$10,500
$11,000
$11,500
</TABLE>
The graph that appears on page 10 of the annual report represents a comparison
between a $10,000 investment made on December 10, 1993 in the Intermediate
Income Fund and an identical investment in the Lehman Brothers Intermediate
Government/Corporate Bond Index. The chart indicates that $10,000 invested on
December 10, 1993 in the Intermediate Income Fund would be worth $10,387 at
maximum load and $10,909 at Net Asset Value on October 31, 1995, as opposed to
$11,046 had $10,000 been invested in the Lehman Brothers Intermediate
Government/Corporate Bond Index.
The Lehman Brothers Intermediate Government/Corporate Bond Index is an
unmanaged index comprised of investment-grade corporate debt securities and
U.S. Treasury and U.S. Government Agency debt securities that mature in one to
ten years.
THE VICTORY FUNDS
Robert H. Fernald is a Vice-President of Society Asset Management, Inc. ("SAM")
and has managed the Fund since January 1995. He has been with SAM and/or an
affiliate, since 1991. Mr. Fernald received his BS from Trinity College.
The performance data quoted represent past performance and, therefore, are not
indicative of future results. Total returns are historical and include the
change in share price and reinvestment of dividends and capital gains
distributions, and unless indicated show the effect of the maximum 4.75% sales
charge. Investment returns and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost. The total return figures set forth above may reflect the waiver of a
portion of certain fees for various periods since the Fund's inception date. In
such instances and without such waiver of fees, the total returns would have
been lower and the 30-Day yield would have been 4.95%.
10
<PAGE> 16
VICTORY INVESTMENT QUALITY BOND FUND
Q Can you describe what happened in the high-quality bond market this year?
A The bond market experienced one of its best years ever. This follows on the
heels of 1994, which is considered one of the worst bond markets in
history. A number of positive forces fueled the bond market over the past
year. These include low inflation, a slowing economy and a shift to an
accommodative policy by the Federal Reserve.
Q How did the Fund perform in this market?
A The market rally benefited well-structured issues that provided call
protection as interest rates declined. Since the Fund is heavily weighted in
high-quality issues, such as U.S. Treasuries, government mortgage-backed
issues and corporates primarily A rated or above, the Fund was well-
structured to participate in the rally. The Fund performed well, and was up
14.63% for the one-year period, compared to the Lehman Brothers Aggregate
Bond Index, which was up 15.65%.
Q What portion of the Fund contributed the most to performance?
A Fund performance was enhanced by the overweighting in longer-term Treasury
bonds, industrial bonds and bank issues. These issues added significant price
appreciation when long-term interest rates fell in response to the short-term
rate cuts initiated by the Federal Reserve. On the other hand, the weighting
in mortgage-backed issues caused a slight drag on performance as investor
concerns over increased prepayments of mortgages caused them to underperform.
Q Can you describe some of your strategies?
A We use what we like to call a "relative value sector approach," which means
that we look for sectors or issues that have good value compared to similar
sectors or issues. For example, right now the mortgage-backed sector has good
value, with yields about 1.25% higher than a comparable Treasury issue. This
type of approach helps to maintain a competitive yield. The fund's 30-Day
yield as of 10-31-95 was 5.30%.
Q What are your expectations for next year?
A The bond market should continue to ride the current good fundamentals of low
inflation and moderate economic growth. However, areas of concern in the
marketplace include the outcome of the current Federal budget negotiations,
any temporary pick-up in the economy sparked by an improvement in the housing
industry, and indications that the market is overbought.
TOTAL RETURN
As of 10/31/95
<TABLE>
<CAPTION>
Net Asset Maximum
Value Offering Price
<S> <C> <C>
One Year 14.63% 9.23%
Since Inception Annualized
12/10/93 5.23% 2.55%
</TABLE>
<TABLE>
<CAPTION>
VICTORY INVESTMENT QUALITY BOND FUND
VS. LEHMAN AGGREGATE
12/93 2/94 4/94 6/94 8/94 10/94 12/94 2/95 4/95 6/95 8/95 10/95
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 8,000
$ 8,500
$ 9,000
$ 9,500
$10,000
$10,500
$11,000
$11,500
</TABLE>
The graph that appears on page 11 of the annual report represents a comparison
between a $10,000 investment made on December 10, 1993 in the Investment
Quality Bond Fund and an identical investment in the Lehman Brothers Aggregate
Bond Index. The chart indicates that $10,000 invested on December 10, 1993 in
the Investment Quality Bond Fund would be worth $10,527 at maximum load and
$11,057 at Net Asset Value on October 31, 1995, as opposed to $11,175 had
$10,000 been invested in the Lehman Brothers Aggregate Bond Index.
The Lehman Brothers Aggregate Bond Index is a broad-based unmanaged
index that represents the general performance of longer-term (>1 year),
investment-grade fixed-income securities.
THE VICTORY FUNDS
Richard T. Heine is a Chartered Financial Analyst and a Vice-President with
Society Asset Management, Inc. ("SAM"), and has managed the Fund since its
inception. He has been with SAM and/or an affiliate since 1974. Mr. Heine
received his MBA from Case Western Reserve University.
The performance data quoted represent past performance and, therefore, are not
indicative of future results. Total returns are historical and include the
change in share price and reinvestment of dividends and capital gains
distributions, and unless indicated show the effect of the maximum 4.75% sales
charge. Investment returns and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost. The total return figures set forth above may reflect the waiver of a
portion of certain fees for various periods since the Fund's inception date. In
such instances and without such waiver of fees, the total returns would have
been lower and the 30-Day yield would have been 5.17%.
11
<PAGE> 17
VICTORY GOVERNMENT BOND FUND
Q Can you summarize the government bond market environment over the course of
the past year?
A Low inflation and expectations for a slowing economy for 1995 propelled the
longer end of the fixed-income markets to achieve price gains and a resultant
positive total rate of return that is among the highest we have seen in many
years. A strong rally in short rates helped the long end rally as well. The
high levels of return were due to the significant price appreciation that you
get in longer securities over and above the income return. Finally, optimism
about a balanced budget helped keep a bid in the longer end of the Treasury
market, which caused some flattening of the yield curve from late summer
levels.
Q How did you manage the Fund during this period ?
A Since the Fund invests primarily in Treasury bonds, the two most important
elements of performance are the Fund's duration and structure. The strategy
employed was to invest in those parts of the Treasury curve that represented
the best value, while at the same time, maintaining a longer duration than
that of the Lehman Brothers Government Bond Index, the Fund's benchmark.
Q Given your strategy, how did the Fund perform?
A The Fund performed in line with its benchmark. Having the duration longer
than the benchmark during this period enhanced fund performance, but
earlier in the year there was a larger concentration of securities in the
short-end, thus not capturing all of the long-term rally. The Fund was
structured using a barbell approach, with maturities weighted between two
year and 30-year securities. Year-to-date, a bulleted approach with a
concentration in the 10-year sector could have performed a little better.
Toward mid-year the Fund was repositioned, with more emphasis on the
10-year sector.
Q What events are you looking for going forward, and what will your strategy
be?
A While the economy seems to be moving toward a soft landing, the Treasury
market has recently been range bound waiting for the next "shoe to fall."
This could come either in the form of weak fourth quarter final sales, a
Federal Reserve ease on December 19, or a budget resolution that results in
near-term spending cuts and fiscal drag. If any of these scenarios come to
pass, the rally should continue into 1996 and the strategy will be to stay
longer than the Index. The fund's 30-Day yield as of 10-31-95 was 4.82%.
TOTAL RETURN
As of 10/31/95
<TABLE>
<CAPTION>
Net Asset Maximum
Value Offering Price
<S> <C> <C>
GOVERNMENT BOND Class A
One Year 14.40% 8.93%
Since Inception Annualized
5/3/93 5.01% 2.98%
GOVERNMENT BOND Class B
Contingent
Net Asset Deferred
Value Charge
<S> <C> <C>
One Year 13.58% 9.58%
Since Inception Annualized
9/26/94 11.88% 8.27%
</TABLE>
<TABLE>
<CAPTION>
VICTORY GOVERNMENT BOND FUND
VS. LEHMAN GOVERNMENT
5/93 8/93 11/93 2/94 5/94 8/94 11/94 2/95 5/95 10/95
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 8,000
$ 9,000
$10,000
$11,000
$12,000
</TABLE>
The graph that appears on page 12 of the annual report represents a comparison
between a $10,000 investment made on May 3, 1993 in the Government Bond Fund
and an identical investment in the Lehman Brothers Government Bond Index. The
chart indicates that $10,000 invested on May 3, 1993 in the Government Bond
Fund would be worth $10,846 at maximum load and $11,383 at Net Asset Value on
October 31, 1995, as opposed to $11,676 had $10,000 been invested in the Lehman
Brothers Government Bond Index.
The Lehman Brothers Government Bond Index is a broad-based unmanaged index that
represents the general performance of U.S. Treasury and U.S. Government agency
debt securities.
THE VICTORY FUNDS
Robert H. Fernald is a Vice-President of Society Asset Management, Inc. ("SAM")
and has managed the Fund since January 1995. He has been with SAM and/or an
affiliate, since 1991. Mr. Fernald received his BS from Trinity College.
The performance data quoted represent past performance and are not indicative
of future results. Total returns are historical and include the change in share
price and reinvestment of dividends and capital gain distributions. Performance
of the different classes of shares will vary based on the differences in sales
charges and fees paid by shareholders. Class A performance with a sales charge
shows the effect of the maximum 4.75% sales charge applied at the beginning of
the reported period. Class B performance with sales charge shows the effect of
the applicable contingent deferred sales charge, assuming a complete redemption
as of October 31, 1995. Investment returns and principal value will fluctuate
so that an investor's shares, when redeemed, may be worth more or less than
their original cost. The total return figures set forth above may reflect the
waiver of a portion of certain fees for various periods since inception. In
such instances and without such waiver of fees, the total returns would have
been lower and the 30-Day yield would have been 4.65%. The yield on Class B was
4.44% and 4.27% without waiver.
12
<PAGE> 18
VICTORY GOVERNMENT MORTGAGE FUND
Q What are the more significant trends affecting the government mortgage
market over the course of the past year?
A I think that the most significant trend of the past year was definitely the
rapid and significant decline in long-term rates. Ten-year Treasury notes
have fallen nearly 2% so far in 1995. This shortened the duration of mortgage
portfolios significantly as investors rushed to refinance their mortgages to
take advantage of declining interest rates.
Q How have the developments you described above affected your strategy for
managing the Fund?
A These developments in the mortgage market made it very difficult to maintain
a bullish posture in the Fund. When the fixed-income market rallies you want
to hold longer average-life securities, because they appreciate in value when
rates drop. Mortgage investments tend to run counter to this, however.
Mortgage pools tend to move to a shorter life, which means they don't
appreciate in value as much, due to the fact that some of the homeowners in
the pool refinance their mortgages at lower rate.
Q Despite the difficult conditions facing the mortgage market, have there been
any positive accomplishments in the Fund?
A Yes, we successfully managed to consolidate smaller positions into more
manageable larger blocks of mortgages. But, most importantly, after lagging
the index early in the year, we have been able to turn the performance of
the Fund around and the trend has been positive for the past several months.
Q Can you briefly explain the performance of the Fund relative to the Index?
A The Fund has lagged the Lehman Brothers Mortgage-Backed Index during the
year due to a higher concentration of high-coupon (premium price) mortgages
compared to the Index. This type of security performs best in stable markets
and in rising interest rate environments. As the year went on, we adjusted
the Fund's asset mix to include more low-coupon (discount price) securities,
which tend to perform better in a declining interest rate environment such
as the one we have experienced in 1995. The fund's 30-Day yield as of
10-31-95 was 5.76%.
Q What's ahead for the economy, the mortgage market and the Fund?
A Our current expectations for the economy call for lower growth and very
moderate inflationary pressures. These conditions should be conducive to a
continued rally in bonds. The Fund is currently positioned to capture the
expected move to lower interest rates. However, should the economic scenario
strengthen and rates move higher, we may move back to higher-coupon mortgages
to benefit from better performance in this sector and decrease our small
position in 10-year Treasury notes.
TOTAL RETURN
As of 10/31/95
<TABLE>
<CAPTION>
Net Asset Maximum
Value Offering Price
<S> <C> <C>
One Year 13.55% 8.11%
Annualized Return
Three Years 6.30% 4.59%
Five Years 8.56% 7.50%
Since Inception
5/18/90 8.85% 7.88%
</TABLE>
<TABLE>
<CAPTION>
VICTORY GOVERNMENT MORTGAGE FUND
VS. LEHMAN MORTGAGE
5/90 10/90 3/91 8/91 1/92 6/92 11/92 4/93 9/93 2/94 7/94 12/94 5/95 10/95
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 7,000
$ 8,000
$ 9,000
$10,000
$11,000
$12,000
$13,000
$14,000
$15,000
$16,000
$17,000
</TABLE>
The graph that appears on page 13 of the annual report represents a comparison
between a $10,000 investment made on May 18, 1990 in the Government Mortgage
Fund and an identical investment in the Lehman Brothers Mortgage-Backed
Securities Index. The chart indicates that $10,000 invested on May 18, 1990 in
the Government Mortgage Fund would be worth $15,001 at maximum load and $15,745
at Net Asset Value on October 31, 1995, as opposed to $16,059 had $10,000 been
invested in the Lehman Brothers Mortgage-Backed Securities Index.
The Lehman Brothers Mortgage-Backed Securities Index is a broad-based unmanaged
index that represents the general performance of fixed-rate mortgage pools.
THE VICTORY FUNDS
Robert H. Fernald is a Vice-President of Society Asset Management, Inc. ("SAM")
and has managed the Fund since November 1994. He has has been with SAM and/or
an affiliate since 1991. Mr. Fernald received his BS from Trinity College.
The performance data quoted represent past performance and are not indicative
of future results. Total returns are historical and include the change in share
price and reinvestment of dividends and capital gains distributions, and unless
indicated show the effect of the maximum 4.75% sales charge. Investment returns
and principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost. The total return figures
set forth above may reflect the waiver of a portion of certain fees for various
periods since the Fund's inception date. In such instances and without such
waiver of fees, the total returns would have been lower.
13
<PAGE> 19
VICTORY FUND FOR INCOME
Q Can you briefly comment on the bond market environment and, in particular,
on the mortgage market for the past year?
A A combination of declining interest rates and tame inflation figures have
made 1995 a good year for bonds, which have recovered impressively from their
1994 slump. However, in such an environment of declining interest rates,
mortgage-backed securities usually find it difficult to keep pace with U.S.
Treasury bonds and other high-grade bonds with a discrete maturity. The
reason is that when interest rates are falling, homeowners rush to refinance
their mortgages in an attempt to lock in lower rates and this causes the
expected maturity of mortgage-backed securities to shorten.
Q What does the mortgage market situation you described above imply for
performance of the Fund?
A As mortgage-backed securities represent the majority of the Fund's holdings,
it has been difficult at times to invest in a sector of the market that has
fallen temporarily out of favor. The Fund's shorter expected maturity
explains why it generally underperforms when bond prices are rising and why
it tends to outperform when bond prices are declining.
Q Despite your disappointment with the mortgage market performance this year,
have there been any success stories in the Fund?
A Certainly, the Fund has been able to maintain a generous dividend yield
despite the sharp decline in market interest rates and, at the same time, it
has generated significant unrealized capital gains for its shareholders.
Q How is your 1996 outlook for the bond market and, specifically, the mortgage
market?
A The backdrop for bond prices is quite good. The pace of economic growth is
modest; inflation is benign; and the prospect for meaningful deficit
reduction legislations appears good. However, since we believe that the
good news is largely reflected in current bond prices, our expectation is
for a relatively tame bond market. The effect on mortgage-backed securities
should be positive because stable interest rates and bond prices increase
the demand for these types of securities.
Q If you were to summarize the essence of your Fund in just one sentence, what
would you say?
A Our goal for the Fund has always been to provide our shareholders with more
income than short- and intermediate-term Government bonds, but, at the same
time, less price fluctuation than long-term Government bonds through a
portfolio of intermediate-term, high-grade, mortgage-backed securities. The
fund's 30-Day yield as of 10-31-95 was 6.76%.
TOTAL RETURN
As of 10/31/95
<TABLE>
<CAPTION>
Net Asset Maximum
Value Offering Price
<S> <C> <C>
One Year 12.75% 10.52%
Annualized Return
Three Years 5.49% 4.77%
Five Years 7.85% 7.42%
Since Inception
5/8/87 8.66% 8.41%
</TABLE>
<TABLE>
<CAPTION>
VICTORY FUND FOR INCOME
VS. LEHMAN MORTGAGE
5/87 1/88 9/88 5/89 1/90 9/90 5/91 1/92 9/92 5/93 1/94 9/94 10/95
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 8,000
$10,000
$12,000
$14,000
$16,000
$18,000
$20,000
$22,000
</TABLE>
The graph that appears on page 14 of the annual report represents a comparison
between a $10,000 investment made on May 8, 1987 in the Fund For Income and an
identical investment in the lehman Brothers Mortgage-Backed Securities Index.
The chart indicates that $10,000 invested on May 8, 1987 in the Fund For Income
would be worth $19,992 at maximum load and $20,397 at Net Asset Value on
October 31, 1995, as opposed to $21,682 had $10,000 been invested in the Lehman
Brothers Mortgage-Backed Securities Index.
The Lehman Brothers Mortgage-Backed Securities Index is a broad-based unmanaged
index that represents the general performance of fixed-rate mortgage pools.
THE VICTORY FUNDS
Robert T. Hennes, Jr. has been with First Albany Asset Management Corporation
as an Executive Vice-President since 1991. Mr. Hennes has managed the Fund
since its inception in 1987.
The performance data quoted represent past performance and are not indicative
of future results. Total returns are historical and include the change in share
price and reinvestment of dividends and capital gains distributions, and unless
indicated show the effect of the maximum 2.00% sales charge. Investment returns
and principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost. The total return figures
set forth above may reflect the waiver of a portion of certain fees for various
periods since the Fund's inception date. In such instances and without such
waiver of fees, the total returns would have been lower and the 30 Day Yield
would have been 6.37%.
14
<PAGE> 20
INTRODUCTION TO MUNICIPAL BOND FUNDS
THE VICTORY MUNICIPAL BOND FUNDS
Who should invest in a tax-exempt fixed-income fund?
- - Tax-exempt fixed income funds may be most appropriate for investors looking
for relative stability of principal, a steady source of income and an
investment that can provide some shelter from taxation.
- - Depending on your tax bracket, tax-exempt income may be greater than the
after-tax equivalent income provided by a taxable investment.
What type of securities are found in tax-exempt fixed-income funds?
- - Most of the securities found in many tax-exempt funds are bonds issued by
state and local municipalities and governments and can include bonds to pay
for such items as the building of libraries, schools and hospitals and
improving infrastructure, utilities and transportation.
- - Many tax-exempt bond funds can also invest in very liquid securities such
as tax-exempt commercial paper so that assets are always available for
investors who need to redeem their shares.
How do I compare my tax-exempt yield to a taxable yield?
- - Yield + (1 - Tax Bracket) = Tax Equivalent Yield
1. The math is fairly simple, but you have to know your marginal tax rate.
For example an individual earning between $117,000 and $256,000 would be in
the 36% federal income tax bracket. For some states, such as New York and
Ohio, you add your state income tax rate to the federal for a combined tax
rate. However, if you invest in a New York or Ohio fund your income will
likely be exempt from those taxes as well.1
2. Subtract the combined tax rate from 1.
For the federal tax example, it would be (1-.36)=.64
3. You then take the yield of the tax-exempt fund, 4% for example and divide by
the number in step 2.
For example .04/.64=.0625, or 6.25%, which means that you would
have to get 6.25% on a taxable investment to equal the 4% you get
on the tax-exempt.
For more information about any of the Victory Municipal Bond Funds in
particular, including charges and expenses, obtain a prospectus by calling
1-800-539-FUND. Please read the prospectus carefully before you invest
or send money.
THE VICTORY FUNDS
"A winner is someone who sets his goals, commits himself to those goals, and
then pursues his goals with all the ability given to him."
- Anonymous
1 This example assures a maximum rate of 36% and is for illustrative purposes
only. The tax-free yield is hypothetical and does not reflect the performance
of the fund. The example does not reflect the possible effects of the federal
alternative minimum tax.
15
<PAGE> 21
VICTORY NATIONAL MUNICIPAL BOND FUND
Q Can you describe some of the trends that affected the municipal bond market
this past year?
A Although Gross Domestic Product (GDP) grew at a robust annual rate of 4.20%
during the third quarter of 1995, the expectation is for a slowing growth
rate more in line with the Administration's goal of about 2.5%. Inflation
appears to be in check, allowing fixed-income markets to achieve an
impressive recovery from the tough times of 1994. When you look at after-
tax returns, municipal investment returns look very attractive.
Q What was your investment strategy during the past year?
A The fund was managed so that its characteristics were kept fairly close to
the characteristics of the Lehman Brothers 10-Year Municipal Bond Index. The
bull market of 1995, as well as strong net inflows into the Fund, have
allowed for some excellent investment opportunities throughout the year as
well as the attractive total return performance of 14.02% for the year ended
October 31, 1995, compared to 14.77% for the Lehman 10-Year Municipal Bond
Index.
Q How does this performance compare to similar municipal bond funds?
A For the period 10/31/94 through 10/31/95, the Fund was ranked #1 in total
return by Lipper Analytical, from a group of 115 intermediate municipal bond
funds.1
Q Can you describe some of the factors that led to this performance?
A During the past 12 months, the Fund's asset size has grown from less than $1
million to over $10 million. The still relatively small size of the Fund
gives us the opportunity to make a major impact on the Fund's performance
with a relatively small number of trades. In addition, the positive cash
flow coming into the Fund allowed us to strategically purchase new issues
that contributed to the positive performance. The fund's 30-Day yield as of
10-31-95 was 4.54%.
Q What are your expectations for next year?
A We expect a slowing rate of economic growth during the next few months. If
Congress can pass a favorable budget package including a plan to balance the
budget in the year 2002 or 2003, the Federal Reserve should be more open to
further easing of interest rates. If this happens, the fixed income markets
should continue to provide good returns.
TOTAL RETURN
As of 10/31/95
<TABLE>
<CAPTION>
NATIONAL MUNI Class A
Net Asset Maximum
Value Offering Price
<S> <C> <C>
One Year 14.02% 8.62%
Since Inception Annualized
2/3/94 4.93% 2.04%
NATIONAL MUNI Class B
Contingent
Net Asset Deferred
Value Charge
<S> <C> <C>
One Year 13.35% 9.35%
Since Inception Annualized
9/26/94 9.76% 6.15%
</TABLE>
VICTORY NATIONAL MUNICIPAL BOND FUND
VS. LEHMAN 10-YR MUNI
<TABLE>
<CAPTION>
2/94 4/94 6/94 8/94 10/94 12/94 2/95 4/95 6/95 8/95 10/95
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 8,000
$ 9,000
$10,000
$11,000
$12,000
</TABLE>
The graph that appears on page 16 of the annual report represents a comparison
between a $10,000 investment made on February 3, 1994 in the National Municipal
Bond Fund and an identical investment in the Lehman Brothers 10-Year Municipal
Bond Index. The chart indicates that $10,000 invest on February 3, 1994 in the
National Municipal Bond Fund would be worth $10,517 at maximum load and $11,041
at Net Asset Value on October 31, 1995, as opposed to $11,114 had $10,000 been
invested in the Lehman Brothers 10-Year Municipal Bond Index.
The Lehman Brothers 10-Year Municipal Bond Index is a broad-based unmanaged
index that represents the general performance of investment-grade municipal
bonds with maturities of 8 to 12 years.
THE VICTORY FUNDS
Paul Toft is a Vice-President with Society Asset Management, Inc. ("SAM"). He
has been with SAM since 1994. Prior to his affiliation with Society, Mr. Toft
was Vice-President and Manager of Nike Securities (1991-1994) and Assistant
Vice-President with Van Kampen Merritt (1990-1991). Mr. Toft obtained his MBA
from Northwestern University.
The performance data quoted represent past performance and are not indicative
of future results. Total returns are historical and include the change in share
price and reinvestment of dividends and capital gain distributions. Performance
of the different classes of shares will vary based on the differences in sales
charges and fees paid by shareholders. Class A performance with a sales charge
shows the effect of the maximum 4.75% sales charge applied at the beginning of
the reported period. Class B performance with sales charge shows the effect of
the applicable contingent deferred sales charge, assuming a complete redemption
as of October 31, 1995. Investment returns and principal value will fluctuate
so that an investor's shares, when redeemed, may be worth more or less than
their original cost. The total returns figures set forth above may reflect the
waiver of a portion of certain fees for various periods since inception. In
such instances and without such waiver of fees, the total returns would have
been lower and the 30-Day yield would have been 3.87%. The yield on Class B was
3.77% and 3.08% without waiver.
1 Lipper bases this ranking on total return and does not include the effect of
a sales charge, in addition in the absence of the fee waiver the return and
ranking may have been lower.
16
<PAGE> 22
VICTORY NEW YORK TAX-FREE FUND
Q What was the market like for New York municipal bonds this past year?
A The New York municipal market benefited from the rally in interest rates
that was started when the Federal Reserve lowered short-term rates earlier
this year. Municipal bond markets in general performed very nicely, posting
returns comparable to taxable alternatives.
Q Is your strategy for managing this Fund similar to the other two funds you
manage?
A No, the emphasis is a little different. This Fund is being managed with the
primary focus on generating as much tax-free income as possible while
maintaining the high quality of the issues purchased. The Fund holds a lot of
high coupon issues, which helps maintain a high payout rate. However these
same high coupon issues were priced to the first call date, which means
that they behaved like a shorter maturity note, and therefore caused the
Fund to not fully participate in the market rebound this year.
Q How did Fund performance compare to the Index?
A The Fund underperformed the Lehman Brothers 10-Year Municipal Bond Index due
to the shorter duration during the bond market rally. In order to extend
the duration of the Fund at the beginning of the year, it would have
been necessary to take large capital gains and cut the dividend rate
substantially. We chose to focus on maximizing tax-free income instead. For
New York investors, the Fund offers a very competitive distribution yield
with a short duration. Since the dividend income is exempt from New York
state income tax, the gap narrows somewhat when compared to the Lehman Index
which is a national index.1 The fund's 30-Day yield as of 10-31-95 was
3.46%.
Q What do you see for next year?
A If the economy continues to grow at the current rate and inflation remains
under control, then the Federal Reserve may lower interest rates again. In
this environment the municipal bond market rally will most likely continue.
This Fund would participate in any rally, but may continue to lag the
Index. On the other hand, as yields fall for alternative investments, this
Fund's dividend should continue to stay near the same level.
TOTAL RETURN
As of 10/31/95
<TABLE>
NY TAX FREE CLASS A
<CAPTION>
Net Asset Maximum
Value Offering Price
<S> <C> <C>
One Year 10.82% 5.54%
Annualized Return
Three Years 7.22% 5.50%
Since Inception
2/11/91 7.65% 6.54%
NY TAX-FREE CLASS B
<CAPTION>
Contingent
Net Asset Deferred
Value Charge
<S> <C> <C>
One Year 10.18% 6.18%
Since Inception
Annualized 9/26/94 7.98% 4.36%
</TABLE>
<TABLE>
<CAPTION>
VICTORY NEW YORK TAX-FREE FUND
VS. LEHMAN 10-YR MUNI
2/91 7/91 12/91 5/92 10/92 3/93 8/93 1/94 6/94 11/94 4/95 10/95
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 7,000
$ 8,000
$ 9,000
$10,000
$11,000
$12,000
$13,000
$14,000
$15,000
</TABLE>
The graph that appears on page 17 of the annual report represents a comparison
between a $10,000 investment made on February 11, 1991 in the New York Tax-Free
Fund and an identical investment in the Lehman Brothers 10-Year Municipal Bond
Index. The chart indicates that $10,000 invested on February 11, 1991 in the
New York Tax-Free Fund would be worth $13,625 at maximum load and $14,302 at
Net Asset Value on October 31, 1995, as opposed to $14,696 had $10,000 been
invested in the Lehman Brothers 10-Year Municipal Bond Index.
The Lehman Brothers 10-Year Municipal Bond Index is a broad-based unmanaged
index that represents the general performance of investment-grade municipal
bonds with maturities of 8 to 12 years.
THE VICTORY FUNDS
Paul Toft is a Vice-President with Society Asset Management, Inc. ("SAM"). He
has been with SAM since 1994. Prior to his affiliation with Society, Mr. Toft
was Vice-President and Manager of Nike Securities (1991-1994) and Assistant
Vice-President with Van Kampen Merritt (1990-1991). Mr. Toft obtained his MBA
from Northwestern University.
The performance data quoted represent past performance and are not indicative
of future results. Total returns are historical and include the change in share
price and reinvestment of dividends and capital gain distributions.
Performance of the different classes of shares will vary based on the
differences in sales charges and fees paid by shareholders. Class A performance
with a sales charge shows the effect of the maximum 4.75% sales charge applied
at the beginning of the reported period. Class B performance with sales charge
shows the effect of the applicable contingent deferred sales charge, assuming a
complete redemption as of October 31, 1995. Investment returns and principal
value will fluctuate so that an investor's shares, when redeemed, may be worth
more or less than their original cost. The total returns figures set forth
above may reflect the waiver of a portion of certain fees for various periods
since inception. In such instances and without such waiver of fees, the total
returns would have been lower and the 30-Day Yield would have been 2.85%. The
yield on Class B was 3.22% and 2.58% without waiver.
1 Some investors may be subject to the federal alternative minimum tax and
certain state and local taxes.
17
<PAGE> 23
VICTORY OHIO MUNICIPAL BOND FUND
Q Can you describe some of the trends that affected the Ohio municipal bond
market this past year?
A The Ohio municipal bond market participated in the bond market rally much
like the national municipal bond market. Municipal markets were impacted
primarily by the actions taken by the Federal Reserve in the taxable market.
When the Federal Reserve lowered short-term interest rates, most fixed
income markets rallied in response.
Q How did these market conditions affect the Fund?
A The Fund participated nicely in the rally. The Fund is managed similarly to
the National Municipal Bond Fund. Both Funds are managed so that their
characteristics are kept fairly close to the characteristics of the 10-Year
Lehman Brothers Municipal Bond Index. This fund however, is limited to Ohio
municipal bonds only.
Q How did the Fund perform during this period?
A We are very satisfied with the performance of the Fund. The Fund
outperformed the Lehman Index with a total return of 15.03% compared to
14.77% respectively for the period ended 10-31-95. The fund's 30-Day yield
as of 10-31-95 was 4.13%.
Q Can you describe your strategy?
A Through active relative value trading, we were able to outperform the
benchmark without taking any significant interest rate risk by keeping the
Fund's duration similar to the benchmark.
Q Do you think the rally will continue into 1996?
A I think it is very possible. If the economy continues at the current growth
rate, and inflation remains subdued then the Federal Reserve may lower
interest rates again. This would most likely set the tone for the market
causing the rally to continue. Only if inflation heats up, or the economy
starts to grow too fast should the rally falter.
TOTAL RETURN
As of 10/31/95
<TABLE>
<CAPTION>
Net Asset Maximum
Value Offering Price
<S> <C> <C>
One Year 15.03% 9.52%
Annualized Return
Three Years 8.18% 6.45%
Five Years 8.34% 7.30%
Since Inception
5/18/90 8.25% 7.29%
</TABLE>
<TABLE>
<CAPTION>
VICTORY OHIO MUNICIPAL BOND FUND
VS. LEHMAN 10-YR MUNI
5/90 10/90 3/91 8/91 1/92 6/92 11/92 4/93 9/93 2/94 7/94 12/94 5/95 10/95
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 7,000
$ 8,000
$ 9,000
$10,000
$11,000
$12,000
$13,000
$14,000
$15,000
$16,000
</TABLE>
The graph that appears on page 18 of the annual report represents a comparison
between a $10,000 investment made on May 18, 1990 in the Ohio Municipal Bond
Fund and an identical investment in the Lehman Brothers 10-Year Municipal Bond
Index. The chart indicates that $10,000 invested on May 18, 1990 in the Ohio
Municipal Bond Fund would be worth $14,641 at maximum load and $15,371 at Net
Asset Value on October 31, 1995, as opposed to $15,890 had $10,000 been
invested in the Lehman Brothers 10-Year Municipal Bond Index.
The Lehman Brothers 10-Year Municipal Bond Index is a broad-based unmanaged
index that represents the general performance of investment-grade municipal
bonds with maturities of 8 to 12 years.
THE VICTORY FUNDS
Paul Toft is a Vice-President with Society Asset Management, Inc. ("SAM"). He
has been with SAM since 1994. Prior to his affiliation with Society, Mr. Toft
was Vice-President and Manager of Nike Securities (1991-1994) and Assistant
Vice-President with Van Kampen Merritt (1990-1991). Mr. Toft obtained his MBA
from Northwestern University.
The performance data quoted represent past performance and are not indicative
of future results. Total returns are historical and include the change in share
price and reinvestment of dividends and capital gains in distributions, and
unless indicated show the effect of the maximum 4.75% sales charge. Investment
returns and principal value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost. The total return
figures set forth above may reflect the waiver of a portion of certain fees for
various periods since the Fund's inception date. In such instances and without
such waiver of fees, the total returns would have been lower and the 30-Day
Yield would have been 4.04%.
18
<PAGE> 24
INTRODUCTION TO EQUITY FUNDS
THE VICTORY EQUITY FUNDS
Who should invest in an equity fund?
- - Equity funds may be most appropriate for investors looking for long-term
growth over an intermediate- to longer-term time horizon.
- - Many individuals look to equity investments when considering options for
retirement plans and funding for their children+s college education.
What are some of the types of equity funds?
- - There are many different types of equity funds. Some equity funds are
known as "large-capitalization funds" because they invest in major U.S.
corporations. Some examples of large cap stocks may include AT&T, IBM,
McDonalds, Coca-Cola, General Motors, etc.
- - Others, often known as aggressive equity funds or small-capitalization stock
funds, may invest in newer, start-up companies. Keep in mind that small-cap
funds carry additional risks and have historically experienced a greater
degree of market volatility than average.
- - Global equity funds invest in companies located in the United States and
overseas. Foreign funds invest overseas, but not in the U.S. There are also
country specific funds [like a Japan fund or a Germany fund] that invest
primarily in companies headquartered in one country. Keep in mind that
international investing is subject to certain factors such as currency
exchange rate volatility, country risks, foreign taxation, and/or
differences in auditing and other financial standards.
- - Another type of equity fund is an "index" fund. These funds invest in the
same securities in the same proportion of a specific index, like the Standard
and Poor's 500. The goal of these funds is to perform as well as the index
after which they are modeled.
- - And of course, there are also equity funds that have a portion of their
assets invested in bonds. These are known as balanced funds and can provide
investors with longer-term growth potential as well as current income.
- - Many equity funds also invest in very liquid securities such as commercial
paper and overnight repurchase agreements so that assets are always available
for investors who need to redeem their shares.
Curious about the different types of equity fund management? Let us send you
our brochure called "The Art of Portfolio Management," which explains some of
the aspects of stock selection, and the styles of management using an artist
metaphor. Please complete and return the business reply card found in this
this report, and we will promptly send you the information you request, or for
more information about any of the Victory Equity Funds in particular, including
charges and expenses, obtain a prospectus by calling 1-800-539-FUND. Please
read the prospectus carefully before you invest or send money.
"Yesterday I dared to struggle. Today I dare to win."
- Bernadette Devlin
19
<PAGE> 25
VICTORY BALANCED FUND
Q How was the market environment for the Balanced Fund during the past year?
A A combination of lower interest rates, improving corporate earnings and
modest inflation propelled the S&P 500 to all-time high levels in 1995. A
"soft landing" of the economy along with merger activity and corporate
restructurings had a positive impact on stock price and fixed-income
performance. The fixed-income markets came back strongly compared to 1994,
as soon as the Federal Reserve reversed course by lowering interest rates.
Q How has the Fund been structured during this period?
A A "soft landing" economic scenario and our generally positive outlook for
the equity and bond market led us to maintain a relatively high equity (55%)
and fixed-income (42%) exposure and minimal exposure (3%) to cash. This
allocation helped the Fund deliver good returns, as equities have
outperformed both bonds and cash over the past year. While the equity
weighting was important to the overall return, the strong bond market also
contributed. We believe that allocation is the most important determinant of
performance, and we also believe that while this type of fund may lag a bull
equity market, it will capture most of the returns with less risk along the
way.
Q Tell us about the equity process.
A We continue to have a strong value orientation with an above-market dividend
yield and below-market price-earnings ratio. The equity performance of the
Fund was enhanced by an overweight position in financials and an underweight
position in consumer cyclicals relative to the S&P 500. Unfortunately the
Fund was underweighted in technology, a sector that significantly
outperformed the S&P 500 over the past year.
Q Have there been any changes in the Fund this year?
A Yes, we started to allocate some of the equity portion of the Fund to
international stocks. As of October 31, 3.8% of the Fund was invested in
international stocks. As the Fund grows larger, we have added flexibility in
stock selection, and, in this case, flexibility in its allocation of a
portion of investments to international stocks. Based on the historical
relationship between domestic and international investments, an allocation
that includes international stocks may enhance returns and improve risk.1
Q How is the fixed income portion of the Fund managed?
A The fixed-income portion is managed using the same strategy as is employed
in the Investment Quality Bond Fund. We invest primarily in high credit
quality issues, and we utilize a relative value approach to seek good values
in the fixed-income market segments. This year we maintained a longer
duration which contributed to good returns. On the other and, we were
overweighted in government mortgage-backed issues, which did not perform as
strongly when interest rates fell and consumers refinanced their mortgages.
TOTAL RETURN
As of 10/31/95
<TABLE>
<CAPTION>
Net Asset Maximum
Value Offering Price
<S> <C> <C>
One Year 19.24% 13.57%
Since Inception Annualized
12/10/93 9.41% 6.63%
</TABLE>
<TABLE>
<CAPTION>
VICTORY BALANCED FUND
VS. S&P 500 & LIPPER BALANCED
12/93 2/94 4/94 6/94 8/94 10/94 12/94 2/95 4/95 6/95 8/95 10/95
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 7,000
$ 8,000
$ 9,000
$10,000
$11,000
$12,000
$13,000
$14,000
</TABLE>
The graph that appears on page 20 of the annual report represents a comparison
between a $10,000 investment made on December 10, 1993 in the Balanced Fund and
identical investments in the Standard & Poor's 500 Stock and Lipper Balanced
Fund Indexes. The chart indicates that $10,000 invested on December 10, 1993
in the Balanced Fund would be worth $11,251 at maximum load and $11,813 at Net
Asset Value on October 31, 1995, as opposed to $13,100 and $11,628 had $10,000
been invested in the Standard & Poor's 500 Stock or Lipper Balanced Indexes,
respectively.
The Standard & Poor's 500 Stock Index (S&P 500) is a broad-based unmanaged
index that represents the general performance of domestically traded common
stocks of mid- to large-size companies.
The Lipper Balanced Fund Index is a non-weighted index of the 30
largest funds within the Lipper Balanced Fund investment category.
THE VICTORY FUNDS
Denise M. Coyne is a Chartered Financial Analyst as well as a Certified Public
Accountant. She is a Vice-President with Society Asset Management, Inc. ("SAM")
and has been with SAM and/or an affiliate, since 1985. Ms. Coyne received her
MBA from Miami University.
Richard T. Heine is a Chartered Financial Analyst, Vice-President and Portfolio
Manager with Society Asset Management, Inc. ("SAM"). He has been with SAM
and/or an affiliate since 1974. Mr. Heine received his MBA from Case Western
Reserve University.
The performance data quoted represent past performance and, therefore, are not
indicative of future results. Total returns are historical and include the
change in share price and reinvestment of dividends and capital gains
distributions, and unless indicated show the effect of the maximum 4.75% sales
charge. Investment returns and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost. The total return figures set forth above may reflect the waiver of a
portion of certain fees for various periods since the Fund's inception date. In
such instances and without such waiver of fees, the total returns would have
been lower.
1 Source: Ibbotson & Associates Inc., Chicago. 1995 Asset Allocation Seminar
20
<PAGE> 26
VICTORY STOCK INDEX FUND
Q To what factors do you attribute the outstanding performance of the stock
market during the past year?
A I think that a combination of lower interest rates, improving corporate
earnings and modest inflation propelled the S&P 500 to all time high levels
in 1995. Through its careful maneuvering of monetary policy, the Federal
Reserve was successful in carrying out a "soft landing" of the economy,
slowing down the pace of economic growth to more moderate and sustainable
levels. This had a major positive impact on stock price performance
throughout the year.
Q What impact did this favorable climate for equities have on the strategy and
performance of your Fund?
A An index fund, by definition, strives to replicate the performance of a
specific index. In our case, the Fund seeks to replicate the performance of
the S&P 500. In order to achieve our objective, we invest exclusively in S&P
500 stocks keeping our sector weights as close as possible to those of the
Index. As a result, the Fund has participated in the outstanding performance
of the stock market during the past year, and its performance closely
followed the S&P 500.
Q What are your future expectations for the economy and the market and how
will they affect your Fund's strategy?
A Our long-term market outlook remains positive although we are somewhat
cautious near term, due to our expectation of a slower economy and corporate
earnings growth in 1996. As stated in the investment objective, the Fund will
continue to be fully invested in S&P 500 stocks in an attempt to match the
performance of this index.
TOTAL RETURN
As of 10/31/95
<TABLE>
<CAPTION>
Net Asset Maximum
Value Offering Price
<S> <C> <C>
- ------------------------------------------------------------
One Year 25.72% 19.72%
- ------------------------------------------------------------
Since Inception Annualized
12/03/93 14.85% 11.96%
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
VICTORY STOCK INDEX FUND
VS. S&P 500
12/93 2/94 4/94 6/94 8/94 10/94 12/94 2/95 4/95 6/95 8/95 10/95
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 7,000
$ 8,000
$ 9,000
$10,000
$11,000
$12,000
$13,000
$14,000
</TABLE>
The graph that appears on page 21 of the annual report represents a comparison
between a $10,000 investment made on December 3, 1993 in the Stock Index Fund
and an identical investment in the Standard & Poor's 500 Stock Index. The
chart indicates that $10,000 invested on December 3, 1995 in the Stock Index
Fund would be worth $12,350 at maximum load and $12,965 at Net Asset Value on
October 31, 1995, as opposed to $13,100 had $10,000 been invested in the
Standard & Poor's 500 Stock Index.
The Standard & Poor's 500 Stock Index (S&P 500) is a broad-based unmanaged
index that represents the general performance of domestically traded common
stocks of mid- to large-size companies.
THE VICTORY FUNDS
Denise M. Coyne is a Chartered Financial Analyst as well as a Certified Public
Accountant. She is a Vice-President with Society Asset Management, Inc. ("SAM")
and has been with SAM and/or an affiliate, since 1985. Ms. Coyne received her
MBA from Miami University.
The performance data quoted represent past performance and, therefore, are not
indicative of future results. Total returns are historical and include the
change in share price and reinvestment of dividends and capital gains
distributions, and unless indicated show the effect of the maximum 4.75% sales
charge. Investment returns and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost. The total return figures set forth above may reflect the waiver of a
portion of certain fees for various periods since the Fund's inception date. In
such instances and without such waiver of fees, the total returns would have
been lower.
21
<PAGE> 27
VICTORY DIVERSIFIED STOCK FUND
Q Can you briefly comment on the equity market environment over the past year?
A The equity market has performed extremely well in the past year primarily
due to low and declining interest rates, restrained inflation and solid
corporate profitability. In addition, large capitalization stocks have
benefited from the phenomenal growth of mutual funds as the investment
vehicle of choice for many people.
Q How was the Fund's strategy shaped by the market conditions you described
above?
A We maintained a bullish posture all year long but, from time to time, we had
a higher cash position than desired due to our underestimation of the cash
flows in the Fund.
Q Can you describe some of your Fund's success stories and disappointments
during the year?
A The Fund successfully entered 1995 with a significantly overweighted
position in the technology sector, which delivered outstanding returns over
the year. This allowed us the flexibility to reduce our holdings on strength
to a more neutral market weighted position as the year went on. On the other
hand, we were a little late in recognizing the economic slowdown taking
place late in the year. The Fund's underweight in the consumer non-durable
sector, which performed very well in this environment despite high
valuations, caused it to underperform its benchmark.
Q What are your expectations for the stock market and the Fund for the coming
year?
A Our outlook remains positive because most of the factors that have been
supporting higher stock prices remain in place. The Fund continues to be
fully invested but has shifted to an emphasis on the more defensive
financial, utility, and energy sectors.
Q Is there anything else you would like us to know about your Fund?
A The Fund's investment approach has always been to balance risk with reward.
With many investors concerned about the high level reached by the market, it
should be noted that we aim to continue our historical approach of balancing
the potential for return with minimization of risk.
TOTAL RETURN
As of 10/31/95
<TABLE>
<CAPTION>
Net Asset Maximum
Value Offering Price
<S> <C> <C>
One Year 23.54% 17.69%
Annualized Return
Three Years 14.78% 12.92%
Five Years 16.55% 15.42%
Since Inception
10/20/89 12.52% 11.61%
</TABLE>
<TABLE>
<CAPTION>
VICTORY DIVERSIFIED STOCK FUND
VS. S&P 500
10/89 4/90 10/90 4/91 10/91 4/92 10/92 4/93 10/93 4/94 10/94 4/95 10/95
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 8,000
$10,000
$12,000
$14,000
$16,000
$18,000
$20,000
$22,000
</TABLE>
The graph that appears on page 22 of the annual report represents a comparison
between a $10,000 investment made on October 20, 1989 in the Diversified Stock
Fund and an identical investment in the Standard & Poor's 500 Stock Index. The
chart indicates that $10,000 invested on October 20, 1989 in the Diversified
Stock Fund would be worth $19,612 at maximum load and $20,502 at Net Asset
Value on October 31, 1995, as opposed to $20,583 had $10,000 been invested in
the Standard & Poor's 500 Stock Index.
The Standard & Poor's 500 Stock Index (S&P 500) is a broad-based unmanaged
index that represents the general performance of domestically traded common
stocks of mid- to large-size companies.
THE VICTORY FUNDS
Lawrence G. Babin is a Chartered Financial Analyst and a Vice-President at
Society Asset Management, Inc. ("SAM"). He has managed the Fund since its
inception, and he has been with SAM and/or an affiliate, since 1982. Mr. Babin
received his MBA from the University of Michigan.
The Performance data quoted represent past performance and, therefore, are not
indicative of future results. Total returns are historical and include the
change in share price and reinvestment of dividends and capital gains
distributions, and unless indicated show the effect of the maximum 4.75% sales
charge. Investment returns and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost. The total return figures set forth above may reflect the waiver of a
portion of certain fees for various periods since the Fund's inception date. In
such instances and without such waiver of fees, the total returns would have
been lower.
22
<PAGE> 28
VICTORY VALUE FUND
Q What have been the major trends in the stock market over the past year?
A Throughout the past year, merger activity and restructuring stories
continued to boost stock prices. Growth stocks, led by the technology sector,
outperformed value stocks for the period. Small- and mid-cap stocks
outperformed large-cap stocks as investors became more risk oriented.
Q How have these trends shaped the Fund's performance?
A The Victory Value Fund concentrates its holdings in large-cap, high-yield,
low price-to-earnings ratio issues. While these types of stocks (known
as value stocks) performed very well, smaller-cap growth issues did even
better. Thus, the Fund underperformed its benchmark as the value style was
out of favor during this period of time.
Q Can you share some of the Fund's successes or disappointments during the
past year?
A The Fund's largest holding, AT&T rose 20.5% during the third calendar
quarter as the company announced that it will break up into three
separate companies. Financial stocks also had outstanding performance as
they benefited from consolidation and lower interest rates. On the other
hand, we were disappointed by the performance of energy stocks which despite
excellent earnings were hurt by the uncertainty over oil prices. We feel
that this uncertainty will be diminished over the next several quarters and
the oils relative attractiveness is still intact.
Q What do you think 1996 has in store for the economy and the stock market?
A Our economic outlook in 1996 calls for a moderate growth rate of about 2.3%.
U.S. profit growth could be further tamed by slowing global industrial
production and a stronger dollar. We therefore expect a choppy stock market
performance in the near term. However, we strive to maintain a high dividend
yield in the Fund to attempt to provide investors with a safety net should
the stock market undergo some degree of correction. We continue to believe
that value investing will outperform growth over time. Academic studies of
total rate of return support the conclusion that value investing offers
higher returns with lower volatility than the growth style.1
TOTAL RETURN
As of 10/31/95
<TABLE>
<CAPTION>
Net Asset Maximum
Value Offering Price
<S> <C> <C>
One Year 22.28% 16.42%
Since Inception Annualized
12/03/93 12.97% 10.13%
</TABLE>
<TABLE>
<CAPTION>
VICTORY VALUE FUND
VS. LIPPER GRTH & INC & S&P 500
12/93 2/94 4/94 6/94 8/94 10/94 12/94 2/95 4/95 6/95 8/95 10/95
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 7,000
$ 8,000
$ 9,000
$10,000
$11,000
$12,000
$13,000
$14,000
</TABLE>
The graph that appears on page 23 of the annual report represents a comparison
between a $10,000 investment made on December 3, 1993 in the Value Fund and
identical investments in the Lipper Growth & Income and Standard & Poor's 500
Stock Indexes. The chart indicates that $10,000 invested on December 3, 1993
in the Value Fund would be worth $11,899 at maximum load and $12,488 at Net
Asset Value on October 31, 1995, as opposed to $12,285 and $13,100 had $10,000
been invested in the Lipper Growth & Income or Standard & Poor's 500 Stock
Indexes, respectively.
The Lipper Growth & Income Index is a non-weighted index of the 30 largest
funds within the Lipper Growth & Income Fund investment category.
The Standard & Poor's 500 Stock Index (S&P 500) is a broad-based unmanaged
index that represents the general performance of domestically traded common
stocks of mid- to large-size companies.
THE VICTORY FUNDS
Judith Jones is a Chartered Financial Analyst as well as a Certified Financial
Planner. She is a Vice-President with Society Asset Management, Inc. ("SAM")
and has managed the Fund since its inception. She has been with SAM and/or an
affiliate since 1965. Ms. Jones received her MBA from Kent State University.
The performance data quoted represent past performance and, therefore, is not
indicative of future results. Total returns are historical and include the
change in share price and reinvestment of dividends and capital gains
distributions, and unless indicated show the effect of the maximum 4.75% sales
charge. Investment returns and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost. The total return figures set forth above may reflect the waiver of a
portion of certain fees for various periods since the Fund's inception date. In
such instances and without such waiver of fees, the total returns would have
been lower.
1 Source: Ibbotson & Associates Inc., Chicago. 1995 Asset Allocation Seminar
23
<PAGE> 29
VICTORY GROWTH FUND
Q What are some of the highlights of the 1995 market environment?
A The economic and financial backdrop for the equity market during the past
year was extraordinarily favorable. The economy achieved a "soft
landing"; the inflation rate remained moderate, and interest rates dropped
sharply. Corporate profits, benefiting from improving international
economies and strong productivity gains in the U.S., turned in an
exceptional performance and exceeded optimistic expectations.
Q Can you explain the meaning of "soft landing" and what it implies for the
Fund's strategy?
A A "soft landing" generally indicates a mixed economy with some weak areas
and some strong areas. The consumer cyclical sector and, more recently,
the basic industry sector are two areas that in the past year have
experienced weaker sales and earnings. As a result, we decided to
underweight these two sectors and instead overweight the consumer staples
sector, an area that showed a more consistent and predictable earnings
pattern.
Q Have there been any major changes in the Fund over the course of 1995?
A During the past year, we have changed the Fund's diversification strategy
from "sector neutral" relative to the S&P 500 to a more growth-oriented
approach. As a result, in the future we will emphasize growth-oriented
sectors such as consumer staples and technology while lessening our exposure
to such value-oriented sectors as utilities and finance. This new approach
has already improved the performance of the Fund over the past four months.
Q Can you briefly comment on the performance of the Fund for the past year?
A The Fund has underperformed its benchmark over the past year for three
reasons: a large cash withdrawal in the first calendar quarter of 1995
increased our cash position in a strongly rising equity market; an
overweight in the underperforming energy sector and an underweight in the
outperforming consumer staples sector; and, finally, poor performance of a
few issues, namely Telefonos de Mexico, International Game Technology, El
Paso Natural Gas and Home Depot (the first three have been sold from the
portfolio).
Q What is your outlook for 1996, and how is the Fund positioned as we enter
the new year?
A At this time we remain optimistic about the potential for the market to
achieve modest additional gains in the latter part of 1995 and in 1996.
Interest rate cuts by the Federal Reserve, in response to a credible deficit
reduction plan, could be a major positive for the equity market as could a
cut in the capital gains tax rate. Currently we remain overweighted relative
to the S&P 500 in those sectors showing an improving rate of earnings
growth, such as consumer staples, technology and capital goods.
<TABLE>
<CAPTION>
VICTORY GROWTH FUND
VS. S&P 500
12/93 2/94 4/94 6/94 8/94 10/94 12/94 2/95 4/95 6/95 8/95 10/95
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 7,000
$ 8,000
$ 9,000
$10,000
$11,000
$12,000
$13,000
$14,000
</TABLE>
The graph that appears on page 24 of the annual report represents a comparison
between a $10,000 investment made on December 3, 1993 in the Growth Fund and an
identical investment in the Standard & Poor's 500 Stock Index. The chart
indicates that $10,000 invested on December 3, 1993 in the Growth Fund would be
worth $11,808 at maximum load and $12,397 at Net Asset Value on October 31,
1995, as opposed to $13,100 had $10,000 been invested in the Standard & Poor's
500 Stock Index.
The Standard & Poor's 500 stock Index (S&P 500) is a broad-based unmanaged
index that represents the general performance of domestically traded common
stocks of mid- to large-size companies.
TOTAL RETURN
As of 10/31/95
<TABLE>
<CAPTION>
Net Asset Maximum
Value Offering Price
<S> <C> <C>
One Year 20.54% 14.81%
Since Inception Annualized
12/03/93 12.10% 9.28%
</TABLE>
THE VICTORY FUNDS
William Ruple is a Vice-President and a Portfolio Manager with Society Asset
Management, Inc. (SAM). He has been with SAM and/or an affiliate, since 1970.
Mr. Ruple received a BS from Ohio Wesleyan University and an MBA from Case
Western Reserve University.
The performance data quoted represent past performance and, therefore are not
indicative of future results. Total returns are historical and include the
change in share price and reinvestment of dividends and capital gains
distributions, and unless indicated show the effect of the maximum 4.75% sales
charge. Investment returns and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost. The total return figures set forth above may reflect the waiver of a
portion of certain fees for various periods since the Fund's inception date. In
such instances and without such waiver of fees, the total returns would have
been lower.
24
<PAGE> 30
VICTORY SPECIAL VALUE FUND
Q Can you give us a brief overview of the mid-cap market's performance over
the course of the past year?
A The equity markets posted impressive gains in the past year due to the ideal
combination of declining interest rates and stronger than expected
corporate earnings reports. Mid/small-market capitalization equities
participated in the rally, but lagged the larger-market cap sector by a few
percentage points for much of the year. Momentum/growth stocks dominated the
advance among the mid/small-capitalization companies this past year,
creating a particularly challenging environment for value investors. The
technology sector alone generated nearly half of the total return of the S&P
400 Mid-Cap Index for the year.
Q How did these conditions affect the performance of the Fund?
A Although we participated in the technology rally, our underweighting of this
sector throughout the year caused the Fund to underperform the S&P 400
Mid-Cap Index. Our value discipline typically causes the Fund to fall short
of the benchmark in very strong markets but it should better protect capital
in weaker markets.
Q What sectors of the mid/small capitalization equity market worked best for
the Fund ?
A The financial sector was a continuous source of favorable surprises for the
Fund. We started the year with an overweighting in financials, thus
participating in the sector's strong rally. Three of the companies we owned
were the targets of buyouts, starting with Michigan National in February,
which was one of our largest holdings at the time, and continuing with other
outright acquisitions including Kemper and Integra Financial.
Q What are your future expectations for the economy and the markets? How will
they shape your strategy for managing the Fund?
A We believe high valuations and lofty expectations of the technology sector
are a potentially dangerous combination and we remain underweighted in
this sector. We are also reducing our exposure to the financial sector. We
expect valuation to play a more important role in equity performance in the
coming year. As a result, we remain overweighted in the basic industry and
capital goods sectors where expectations and valuations remain generally low
following a lackluster performance in 1995.
Q Can you explain to your shareholders why your Value Fund is "Special"?
A Although the Special Value Fund invests in mid/small-size companies, it is
somewhat unique from most small-cap funds. The Fund is managed with a
disciplined value approach versus the aggressive growth style most commonly
associated with smaller-cap funds. Over time, smaller-cap stocks have
outperformed larger-cap stocks and value stocks have outperformed growth
stocks.(1) By combining the two approaches, we attempt to capture the above
average returns of the small-cap sector, with less volatility than is
typical of small/ mid-cap investing.
<TABLE>
<CAPTION>
TOTAL RETURN
As of 10/31/95
Net Asset Maximum
Value Offering Price
<S> <C> <C>
One Year 18.01% 12.44%
Since Inception Annualized
12/3/93 12.37% 9.54%
</TABLE>
<TABLE>
<CAPTION>
VICTORY SPECIAL VALUE FUND
VS. S&P 400 MID CAP
12/93 2/94 4/94 6/94 8/94 10/94 12/94 2/95 4/95 6/95 8/95 10/95
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 8,000
$ 9,000
$10,000
$11,000
$12,000
$13,000
</TABLE>
The graph that appears on page 25 of the annual report represents a comparison
between a $10,000 investment made on December 3, 1993 in the Special Value Fund
and an identical investment in the Standard & Poor's 400 Mid-Cap Index. The
chart indicates that $10,000 invested on December 3, 1993 in the Special Value
Fund would be worth $11,566 at maximum load and $12,139 at Net Asset Value on
October 31, 1995, as opposed to $12,126 had $10,000 been invested in the
Standard & Poor's 400 Mid-Cap Index.
The Standard & Poor's 400 Mid-Cap Index is a broad-based unmanaged index that
represents the general performance of domestically traded common stocks of mid-
size companies.
THE VICTORY FUNDS
Anthony Aveni is a Chartered Financial Analyst and a Senior Vice-President with
Society Asset Management, Inc. ("SAM"). Mr. Aveni has been a Fund Manager with
SAM since 1987 and is the Managing Director of the Small/Mid-Cap Equity
Investments for SAM. He received his MBA from Case Western Reserve University.
Barbara Myers is a Chartered Financial Analyst, a Portfolio Manager and a
Vice-President with Society Asset Management, Inc. ("SAM"). She joined SAM in
1994 and has seven years of previous investment experience. Ms. Myers received
a BBA from Cleveland State University and an MBA from Baldwin Wallace.
The performance data quoted represent past performance and is not indicative of
future results. Total returns are historical and include the change in share
price and reinvestment of dividends and capital gains distributions, and unless
indicated show the effect of the maximum 4.75% sales charge. Investment returns
and principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost. The total return figures
set forth above may reflect the waiver of a portion of certain fees for various
periods since the Fund's inception date. In such instances and without such
waiver of fees, the total returns would have been lower.
1 Source: Ibbottson & Associates Inc, Chicago.
25
<PAGE> 31
VICTORY SPECIAL GROWTH FUND
Q Can you give us a brief overview of the small-cap market's performance over
the course of the past year?
A The broad stock market delivered outstanding returns during the past year
fueled by a favorable environment of lower interest rates, tame
inflation levels and positive corporate profits. Bigger was better this
year; in fact, smaller-capitalization companies underperformed larger
capitalization companies for most of the year with the exception of the
third quarter. Early in the year, earnings of large-cap companies benefited
to a greater extent from the weakness of the U.S. dollar due to their higher
exposure to foreign sales. In addition, small cap stocks lagged towards the
end of the year as investors began to favor large cap growth stocks which
were seen as a safe haven in the midst of a slowing economy.
Q With this market environment, how did the fund perform?
A The Special Growth Fund lagged the large cap market, as many small cap
investments did. For the one year period ending 10/31/95, the Fund
outperformed its benchmark, the Russell 2000 Growth Index, with a return of
20.83% compared to 18.35% for the Index.
Q Since you took over in June what changes have you made in the Fund?
A The Fund inherited investments in small-cap and mid-cap growth stocks from
the merger of the Victory Aggressive Growth Fund and the Victory Special
Growth Fund. The old Special Growth invested primarily in mid-cap stocks,
but the new Special Growth Fund adopted the style and universe of the
Aggressive Growth Fund. In other words, the Fund is now concentrated in
small-cap issues, with a weighted average market cap of about 700 million,
which is much smaller than before. In addition, we increased the number of
holdings from less than a hundred to about 300 as of October 31, 1995.
Q Why the large increase in the number of holdings?
A We believe that this gives a more risk controlled return, one that is not
dependent (good or bad) on large bets in a low number of stocks. This
approach should help the Fund perform well through broader exposure to the
small-cap market, but with less risk than a concentrated style.
Q Did you make any other changes?
A Yes, we also changed the sector weightings considerably. As with our stock
selection approach, we prefer not to make large bets, but to carefully
balance sector weights versus the market. The Fund's sector weights are much
more closely aligned to the Russell 2000 Growth Index, which is the "Growth"
portion of the Russell 2000.
Q What is your outlook going forward?
A We believe that the outlook for small-cap growth companies still looks good.
If this market does well, we believe that the Fund will continue to
participate.
<TABLE>
<CAPTION>
TOTAL RETURN
As of 10/31/95
Net Asset Maximum
Value Offering Price
<S> <C> <C>
One Year 20.83% 15.07%
Since Inception Annualized
1/11/94 9.75% 6.82%
</TABLE>
<TABLE>
<CAPTION>
VICTORY SPECIAL GROWTH FUND
VS. RUSSELL 2000
1/94 3/94 5/94 7/94 9/94 11/94 1/95 3/95 5/95 7/95 10/95
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 8,000
$ 8,500
$ 9,000
$ 9,500
$10,000
$10,500
$11,000
$11,500
$12,000
$12,500
</TABLE>
The graph that appears on page 26 of the annual report represents a comparison
between a $10,000 investment made on January 11, 1994 in the Special Growth
Fund and an identical investment in the Russell 2000 Growth Index. The chart
indicates that $10,000 invested on January 11, 1994 in the Special Growth Fund
would be worth $11,266 at maximum load and $11,829 at Net Asset Value on
October 31, 1995, as opposed to $11,433 had $10,000 been invested in the
Russell 2000 Growth Index.
The Russell 2000 Growth Index is a broad-based unmanaged index that represents
the general performance of domestically traded common stocks of small- to
mid-sized companies.
THE VICTORY FUNDS
Jonathan M. Greene is Vice-President of T. Rowe Price. The Investment Advisory
Committee of T. Rowe Price is primarily responsible for the investment
management of the Special Growth Fund. Mr. Greene has been with T. Rowe Price
since 1974, and has been managing investments since 1979. Mr. Greene received
his MBA from Dartmouth.
The performance data quoted represent past performance and is not indicative of
future results. Total returns are historical and include the change in share
price and reinvestment of dividends and capital gains distributions, and unless
indicated show the effect of the maximum 4.75% sales charge. Investment returns
and principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost. The total return figures
set forth above may reflect the waiver of a portion of certain fees for various
periods since the Fund's inception date. In such instances and without such
waiver of fees, the total returns would have been lower. Small-Cap Funds carry
additional risks and historically have experienced a greater degree of market
volatility than average.
26
<PAGE> 32
VICTORY OHIO REGIONAL STOCK FUND
Q Your Fund limits the majority of its holdings to stocks of companies based
in the state of Ohio. How did these stocks compare to the broader stock
market during the past year?
A The universe of Ohio-based stocks from which we chose the Fund's holdings is
heavily weighted toward financial, basic industry and capital goods
issues. In 1995, the basic industry and capital goods sectors have
underperformed the S&P 500, whose performance throughout the year was fueled
by the impressive rally in technology stocks. Unfortunately the technology
sector is severely underrepresented in Ohio.
Q How did the Fund perform versus Ohio companies?
A As of November 24, 1995, the Fund was leading an index constructed of
Ohio-based companies with a return of 23% versus 17%.(1) But just because
the fund has lagged the S&P this year, don't count it out. Coincidentally,
the Fund has outperformed the S&P 500 with an annualized return of 23%
versus only 17.25% for the five years ended 10/31/95. So even though the
Fund invests primarily in Ohio companies, that does not mean that its
performance is limited or less competitive.
Q Can you share some of your success stories or disappointments during the
past year?
A Keithley Instruments, Comair, Invacare, Acme Cleveland, Owens Corning,
Omnicare and Telxon were among the better performing issues in the
Fund. On the other hand, disappointments included Mid-American Waste,
Corrpro, Sun TV and The Limited.
Q What is one of the things to which you attribute your successes?
A Since the Fund invests primarily in Ohio companies, I have the opportunity
to talk to the managers of the companies in which we invest. I spend a
considerable amount of time visiting the companies, talking to their
suppliers, competitors and customers. This allows me to become very familiar
with and closer to what is happening with a company. I use a value
discipline coupled with a strong "bottom-up" analysis of companies.
Q What is your "top-down" strategy?
A As the market climbs to higher levels, the Fund has become more defensive,
giving greater weights to utilities, energy and financial issues.
Long-term, we favor the capital goods sector.
THE VICTORY FUNDS
Lynn Hamilton is a Vice-President with Society Asset Management, Inc. ("SAM")
and has been managing the Fund since its inception. Mr. Hamilton has been a
Fund Manager with SAM since 1993. Prior to this position, he was a Fund Manager
with Society National Bank. Mr. Hamilton obtained his MBA from Miami
University.
<TABLE>
<CAPTION>
TOTAL RETURN
As of 10/31/95
Net Asset Maximum
Value Offering Price
<S> <C> <C>
One Year 16.93% 11.35%
Annualized Return
Three Years 14.40% 12.57%
Five Years 23.00% 21.80%
Since Inception
10/20/89 11.73% 10.83%
</TABLE>
<TABLE>
<CAPTION>
VICTORY OHIO REGIONAL STOCK FUND
VS. S&P 500
10/89 4/90 10/90 4/91 10/91 4/92 10/92 4/93 10/93 4/94 10/94 4/95 10/95
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 6,000
$ 8,000
$10,000
$12,000
$14,000
$16,000
$18,000
$20,000
$22,000
</TABLE>
The graph that appears on page 27 of the annual report represents a comparison
between a $10,000 investment made on October 20, 1989 in the Ohio Regional
Stock Fund and an identical investment in the Standard & Poor's 500 Stock
Index. The chart indicates that $10,000 invested on October 20, 1989 in the
Ohio Regional Stock Fund would be worth $19,149 at maximum load and $20,095 at
Net Asset Value on October 31, 1995, as opposed to $20,502 had $10,000 been
invested in the Standard & Poor's 500 Stock Index.
The Standard & Poor's 500 Stock Index (S&P 500) is a broad-based unmanaged
index that represents the general performance of domestically traded common
stocks of mid- to large-size companies.
The performance data quoted represent past performance and is not indicative of
future results. Total returns are historical and include the change in share
price and reinvestment of dividends and capital gains distributions, and unless
indicated show the effect of the maximum 4.75% sales charge. Investment returns
and principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost. The total return figures
set forth above may reflect the waiver of a portion of certain fees for various
periods since the Fund's inception date. In such instances and without such
waiver of fees, the total returns would have been lower.
1 Ohio index constructed by William O'Neil & Company. The index is composed of
approximately 200 Ohio based companies with revenues equal to or greater
than $25 million. KeyCorp is excluded from the index, since the Fund is
prohibited from investing in an affiliated company.
27
<PAGE> 33
VICTORY INTERNATIONAL GROWTH FUND
Q What developments have characterized the international equity markets over
the past year?
A Investors focused on actual and effected changes in interest rates around
the world this past year. In December of 1994, the meltdown of the Mexican peso
became known as the "Tequila Effect" because, as most risk premiums widened,
most emerging markets suffered from fears that similar radical interest rate
increases would cause a collapse in their currencies. On the other hand,
markets have also continued to focus on potential rate cuts by the Bundesbank,
which also would allow the Banque de France to follow through with cuts of its
own. Inflation remained extremely well-behaved around the world, both
directionally and in absolute terms. Global liquidity remains high.
Q Did the performance of the U.S. dollar relative to other major foreign
currencies have any impact on returns to dollar-based investors?
A The U.S. dollar experienced wide swings relative to the Japanese yen and
German Deutschemark during the 12 months ended October 31, 1995. For the
period, however, on an EAFE-weighted basis, the dollar's strength had only a
small negative effect on returns to dollar-based investors.
Q How did you position the Fund given the market developments you outlined
above and how did your strategy impact the Fund's performance?
A We reduced our exposure to higher risk emerging markets. In addition, the
Fund was underweighted in Japan during the entire period, which was beneficial
overall, but hurt performance in the third calendar quarter of 1995, when the
Japanese market rallied briefly. Our overweight in the Nordic countries
benefited the Fund's performance throughout the year.
Q What is your outlook for the coming months and how will it shape your
strategy for managing the Fund?
A We continue to believe in the longer-term merits of international
investments, especially given the likelihood of recovery following the U.S.
market outperformance in recent years. We are looking to increase the Fund's
weightings in energy and finance and lighten the capital goods and services
sectors. This will result in greater diversification across industry segments.
With Japan having performed so poorly over the last several years, this market
is certainly cheap on a historic basis. The latter, combined with Japan's
apparent willingness to let the banks accelerate the recognition and write-off
of non-performing loans, could bode well for the Japanese market. We could be
looking to at least neutral weight Japan in the first half of 1996. Finally,
we anticipate continuing to reduce our weightings in the emerging markets
because we believe that, over the near-term on a risk-adjusted basis, the
developed markets could offer more stable returns.
<TABLE>
<CAPTION>
TOTAL RETURN
As of 10/31/95
Net Asset Maximum
Value Offering Price
<S> <C> <C>
One Year -2.50% -7.10%
Annualized Return
Three Years 13.30% 11.46%
Five Years 7.95% 6.91%
Since Inception
5/18/90 6.35% 5.40%
</TABLE>
<TABLE>
<CAPTION>
VICTORY INTERNATIONAL GROWTH FUND
VS. MSCI EAFE
5/90 10/90 3/91 8/91 1/92 6/92 11/92 4/93 9/93 2/94 7/94 12/94 5/95 10/95
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 7,000
$ 8,000
$ 9,000
$ 10,000
$ 11,000
$ 12,000
$ 13,000
$ 14,000
$ 15,000
</TABLE>
The graph that appears on page 28 of the annual report represents a comparison
between a $10,000 investment made on May 18, 1990 in the International Growth
Fund and an identical investment in the Morgan Stanley Capital International
Europe, Australia and Far East Index. The chart indicates that $10,000
invested on May 18, 1990 in the International Growth Fund would be worth
$13,238 at maximum load and $13,895 at Net Asset Value on October 31, 1995, as
opposed to $12,633 had $10,000 been invested in the Morgan Stanley Capital
International Europe, Australia and Far East Index.
The Morgan Stanley Capital International Europe, Australia and Far East Index
(EAFE) is a broad-based unmanaged index that represents the general performance
of international equity markets.
THE VICTORY FUNDS
Conard R. Metz is a Vice president of International Equity Investments and
Portfolio Manager with Society Asset Management Inc. ("SAM"). He has managed
the International Growth Fund since October 1995. Mr. Metz received a BS
from the University of California at Berkeley.
The performance data quoted represent past performance and are not indicative
of future results. Total returns are historical and include the change in share
price and reinvestment of dividends and capital gains distributions, and unless
indicated show the effect of the maximum 4.75% sales charge. Investment returns
and principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost. The total return figures
set forth above may reflect the waiver of a portion of certain fees for various
periods since the Fund's inception date. In such instances and without such
waiver of fees, the total returns would have been lower. International
investing is subject to certain factors such as currency fluctuation and
differences in accounting and taxation standards.
28
<PAGE> 34
QUESTIONS AND ANSWERS
THESE ARE SOME OF THE QUESTIONS THAT SHAREHOLDERS HAVE ASKED US ABOUT ANNUAL
REPORTS.
Q Who prepares the annual report for The Victory Funds?
A The annual report for The Victory Funds is sent to current shareholders and
is available to anyone interested in learning more about the Fund
complex and the securities held by each portfolio. The report is prepared by
the Fund complex, and the financial pages are audited by an independent
public accounting firm. In the case of The Victory Funds, the independent
auditing firm is Coopers & Lybrand L.L.P.
Q What type of information is available in an annual report?
A Our annual report usually contains a letter to the shareholders written by
the President of the Board of Trustees, an economic review or outlook and
any other educational material the Fund complex feels benefits its
shareholders. Each Fund other than money market funds, must give the
performance for certain periods, as well as show the growth of $10,000 from
inception versus an applicable securities index. In addition each Fund's
performance and strategies are reviewed by the portfolio manager. You can
also find standard financial statements and the holdings of each Fund as of
the close of the fiscal year.
Q When are annual reports issued?
A Usually, annual reports are issued at the end of a company's fiscal year,
which in the case of The Victory Funds is October 31, 1995. Companies are
allowed no more than 60 days after the Fund's books are closed to assemble
the report, complete the audit and mail to shareholders.
Q Where can I find specific information on the Fund[s] I have invested in?
A The annual report is divided in two sections. You can find your Fund[s] in
the front section, which lists each Fund individually according to asset
class.Information on each Fund is also found in the financial
statements.
Q Why are annual reports necessary?
A It is important for you as a shareholder and for other interested parties to
have access to an objective, independently audited review of the Funds. It
is also a requirement of the Securities and Exchange Commission that
shareholders be provided with annual reports. This is the same rule that
applies to most corporations. Shareholders (owners) can check their company
or fund to see what progress it has made over the year. Corporations and
mutual funds are also required to publish a semi-annual report which is not
as detailed; ours is published as of April 30.
Q How can I learn more about The Victory Funds?
A For more information, including a prospectus, on any of The Victory Funds,
please call 1-800-539-FUND. You can also get information on specific topics
by returning the business reply card found in this report.
The Victory Funds
"You have to learn the rules of the game. And then you have to play better than
anyone else." - Dianne Feinstein
29
<PAGE> 35
GLOSSARY OF TERMS
A GLOSSARY OF OFTEN-USED INVESTMENT TERMS
ANNUAL REPORT : A legally required document published annually for each fund. It
includes a list of fund holdings, full financial statements, performance
figures and other pertinent information.
ASSET ALLOCATION: A way to diversify your investments among stocks, bonds and
money-market securities. The appropriate asset allocation for you depends on
several factors - your time horizon, tolerance for risk and investment
objectives.
BOND [fixed-income security]: A debt security issued by a company, municipality
or government agency. The purpose of a bond is to lend money to the issuer. In
exchange, the issuer promises to repay the amount of the loan on a specified
maturity date. The issuer is also obligated to pay the bond holder periodic,
fixed interest payments over the life of the loan.
CAPITAL APPRECIATION: An increase in an investment's value.
CAPITAL GAIN/LOSS: A profit or loss on the sale of a security or other assets.
COMMON STOCK: A security representing proportionate ownership of a
corporation's assets.
INVESTMENT OBJECTIVE: The investment strategy of a shareholder or mutual fund
designed to achieve a particular goal.
INFLATION RISK: The risk that the purchasing power of your investment will be
eroded by inflation.
LIQUIDATE: To convert shares into cash. Equivalent terms include redeem and
sell.
LIQUIDITY: The ease and speed with which an investment can be converted into
cash.
MARKET VALUE: The current price of an investment. Market value is generally
determined by the most recent price at which the investment is traded on the
open market.
MAXIMUM OFFERING PRICE [MOP]: The purchase price of a fund plus applicable
sales charges.
MUTUAL FUND: An investment company that pools money from shareholders and
invests in a variety of securities, including stocks, bonds and money-market
instruments. An open-ended mutual fund stands ready to buy back [redeem] its
shares at their current net asset value. This value depends on the market value
of the fund's portfolio of securities at the time of redemption. Open-ended
mutual funds continuously offer new shares to investors.
NET ASSET VALUE (NAV): The market value of one share of a mutual fund. NAV is
calculated by taking the total value of a mutual fund's assets, less fund
liabilities and dividing them by the number of shares outstanding. NAVs are
commonly listed in the business pages of many newspapers.
PORTFOLIO: Any combination of more than one security. A mutual fund typically
has a large, diversified portfolio of securities or of investments in order to
lower investment risks.
PRINCIPAL: The actual amount of money you invest.
STOCK: [Equity Security] Common stock represents ownership in a company. Stocks
entail the most risk of price fluctuation, however, they also offer the highest
potential reward if the underlying companies perform well.
TOTAL RETURN: A measure of an investment's performance that takes into account
all three components of earnings per share: dividends, capital gain
distribution and price appreciation.
YIELD: The annual rate of return of an investment. Yield is computed by
dividing an investment's interest or dividend by its current market value.
Yield and capital appreciation are the two components of total return.
THE VICTORY FUNDS
30
<PAGE> 36
HOW TO READ YOUR FINANCIAL STATEMENTS
This guide will assist you in extracting information from the report which is
most important to you.
THE FINANCIAL STATEMENTS summarize and describe the Fund's financial
transactions. They are broken down into four different statements, which are
illustrated below:
THE STATEMENT OF ASSETS AND LIABILITIES presents all of the assets and
liabilities of each mutual Fund. This is each individual Fund's "balance sheet"
as of the date of the statement.
SUMMARY OF THE MUTUAL FUND'S ASSETS STATED AT MARKET VALUE INCLUDING
INVESTMENTS OWNED, DIVIDENDS, INTEREST AND OTHER AMOUNTS OWED TO EACH FUND BY
OUTSIDE PARTIES, AND OTHER ASSETS OWNED BY EACH FUND.
SUMMARY OF ALL AMOUNTS OWED BY EACH FUND INCLUDING DISTRIBUTIONS DECLARED BUT
NOT YET PAID TO SHAREHOLDERS AND OTHER AMOUNTS DUE TO OUTSIDE PARTIES.
SUMMARY OF THE AMOUNTS THAT COMPRISE EACH FUND'S NET ASSETS INCLUDING CAPITAL,
UNDISTRIBUTED NET INVESTMENT INCOME, UNREALIZED GAINS FROM INVESTMENTS OWNED
AND REALIZED GAINS FROM INVESTMENTS SOLD.
THE NUMBER OF SHARES OWNED BY SHAREHOLDERS OF EACH FUND.
THE MARKET WORTH OF EACH MUTUAL FUND'S TOTAL NET ASSETS DIVIDED BY THE NUMBER
OF OUTSTANDING SHARES.
THE NET ASSET VALUE PER SHARE PLUS SALES CHARGES.
THE STATEMENT OF OPERATIONS presents the results of operating activities during
the period.
INVESTMENT INCOME INCLUDES DIVIDEND AND INTEREST INCOME EARNED FROM HOLDING
INVESTMENTS.
SUMMARY OF EXPENSES INCURRED BY EACH FUND FROM ITS OPERATIONS.
SUMMARY OF REALIZED GAINS OR LOSSES FROM SELLING EACH FUND'S INVESTMENTS AND
THE CHANGE DURING THE PERIOD IN UNREALIZED GAINS OR LOSSES FROM HOLDING EACH
FUND'S INVESTMENTS.
NET CHANGE DUE TO MUTUAL FUND OPERATIONS.
THE VICTORY FUNDS
31
<PAGE> 37
HOW TO READ YOUR FINANCIAL STATEMENTS
THE STATEMENT OF CHANGES IN NET ASSETS presents the activity that affects the
value of total net assets of each Fund during the two most recent reporting
periods.
SEE STATEMENT OF OPERATIONS.
DISTRIBUTIONS DECLARED TO SHAREHOLDERS FROM NET INVESTMENT INCOME OR FROM NET
REALIZED GAINS DURING THE PERIODS. EACH FUND DECLARES DISTRIBUTIONS BASED ON
TAXABLE INCOME AND TAXABLE REALIZED GAINS, WHICH MAY DIFFER FROM THE FUND'S
OPERATIONS FOR FINANCIAL STATEMENT PURPOSES. THUS, DISTRIBUTIONS MAY EXCEED NET
INVESTMENT INCOME OR REALIZED GAINS.
DOLLAR AMOUNT OF MUTUAL FUND SHARES ISSUED, REINVESTED AND REDEEMED DURING THE
PERIODS. DETAIL OF THIS ACTIVITY PERTAINING TO FUNDS WITH TWO SHARE CLASSES IS
PRESENTED IN THE FOOTNOTES.
COMPARES TOTAL NET ASSETS AS OF THE END OF THE CURRENT AND PRIOR PERIODS.
NUMBER OF MUTUAL FUND SHARES ISSUED, REINVESTED AND REDEEMED DURING THE
PERIODS. DETAIL OF THIS ACTIVITY PERTAINING TO FUNDS WITH TWO SHARE CLASSES IS
PRESENTED IN THE FOOTNOTES.
THE NOTES TO FINANCIAL STATEMENTS provide explanatory information to the
financial statements. These include information on accounting methods used by
the mutual Fund, contractual arrangements between the Fund and its service
providers, certain transactions affecting the Fund, and other general
information about the Fund.
THE FINANCIAL HIGHLIGHTS present changes in net asset value per share as well
as certain ratios and supplementary data for the five most recent reporting
periods.
THE TABLE PRESENTS CHANGES IN THE NET ASSET VALUE PER SHARE CAUSED BY THE
FUND'S INVESTMENT ACTIVITIES AND DISTRIBUTIONS.
TOTAL RETURN PRESENTS THE HISTORICAL RETURN ON AN INVESTMENT IN THE FUND
THROUGHOUT THE PERIOD INCLUDING CHANGES IN NET ASSET VALUE PER SHARE AND
REINVESTMENT OF DIVIDENDS. THE TOTAL RETURN PRESENTED EXCLUDES SALES CHARGES.
ACTUAL RATIOS OF EXPENSES AND NET INVESTMENT INCOME TO AVERAGE NET ASSETS
DURING THE PERIOD.
HYPOTHETICAL RATIOS OF EXPENSES AND NET INVESTMENT INCOME TO AVERAGE NET ASSETS
DURING THE PERIOD ASSUMING NO FEE WAIVERS OR EXPENSE REIMBURSEMENTS HAD
OCCURRED.
PORTFOLIO TURNOVER PRESENTS THE RATE OF INVESTMENT ACTIVITY. HIGHER TURNOVER
INDICATES MORE ACTIVE INVESTMENT PURCHASES AND SALES.
THE VICTORY FUNDS
32
<PAGE> 38
Schedule of Investments
THE VICTORY PORTFOLIOS October 31, 1995
U.S. GOVERNMENT OBLIGATIONS FUND (Amounts in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
- -------------------------------------------
U.S. TREASURY NOTES (20.1%)
$25,000 4.25%, 5/15/96 $ 24,803
25,000 4.63%, 2/29/96 24,911
25,000 5.13%, 3/31/96 24,931
80,000 5.50%, 4/30/96 79,925
40,000 6.13%, 7/31/96 40,121
- -------------------------------------------------------
TOTAL U.S. TREASURY NOTES 194,691
- -------------------------------------------------------
TOTAL INVESTMENTS 194,691
- -------------------------------------------------------
- -------------------------------------------------------
REPURCHASE AGREEMENTS (79.9%)
45,000 Barclays Bank,
5.88%, 11/1/95,
(Collateralized by $44,944
various U.S. Treasury
securities, 0.00%-9.00%,
7/31/97-5/15/98,
market value-$45,901) 45,000
45,000 Chase Securities,
5.85%, 11/1/95,
(Collateralized by $47,539
U.S. Treasury Securities,
0.00%, 5/30/96-6/27/96,
market value-$45,901) 45,000
45,000 Dean Witter,
5.85%, 11/1/95,
(Collateralized by $48,380
various U.S. Treasury
securities, 0.00%-7.88%,
11/15/95-8/15/00,
market value-$45,900) 45,000
45,000 Deutsche Bank,
5.85%, 11/1/95,
(Collateralized by $45,588
various U.S. Treasury
securities, 0.00%-7.37%,
11/2/95-8/15/96,
market value-$45,900) 45,000
41,227 Donaldson-Lufkin Jenrette,
5.88%, 11/1/95,
(Collateralized by $49,847
various U.S. Treasury
securities, 0.00%-8.88%,
5/15/96-8/15/00,
market value-$42,052) 41,227
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
$45,000 Goldman Sachs,
5.88%, 11/1/95,
(Collateralized by $52,348
various U.S. Treasury
securities, 0.00%-5.38%,
5/31/98-2/15/99,
market value-$45,901) $ 45,000
45,000 Harris Securities,
5.87%, 11/1/95,
(Collateralized by $51,292
various U.S. Treasury
securities, 0.00%-5.63%,
11/15/95-5/15/00,
market value-$45,901) 45,000
45,000 Lehman Brothers,
5.85%, 11/1/95,
(Collateralized by $45,000
various U.S. Treasury
securities, 6.00%-7.25%,
12/31/97-2/15/98,
market value-$46,001) 45,000
45,000 Merrill Lynch,
5.75%, 11/1/95,
(Collateralized by $45,000
U.S. Treasury Notes,
5.63%, 6/30/97,
market value-$45,844) 45,000
235,000 NationsBank,
5.88%, 11/1/95,
(Collateralized by
$251,009
various U.S. Treasury
securities, 0.00%-9.50%,
11/15/95-8/15/00,
market value-$239,704) 235,000
45,000 Nomura Securities,
5.87%, 11/1/95,
(Collateralized by $45,365
various U.S. Treasury
securities, 0.00%-7.00%,
5/30/96-8/31/99,
market value-$45,901) 45,000
45,000 Sanwa Bank,
5.85%, 11/1/95,
(Collateralized by $45,679
various U.S. Treasury
securities & U.S.
Government Agencies,
0.00%-6.75%,
1/22/96-8/10/00,
market value-$45,901) 45,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
33
<PAGE> 39
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1995
U.S. GOVERNMENT OBLIGATIONS FUND (Amounts in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
$45,000 UBS Securities,
5.87%, 11/1/95,
(Collateralized by $45,082
U.S. Treasury Notes,
4.25%-9.38%,
2/15/96-7/15/96,
market value-$45,903) $ 45,000
- -------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS 771,227
- -------------------------------------------------------
TOTAL (COST $965,918)(a) $965,918
- -------------------------------------------------------
</TABLE>
- ---------------
Percentages indicated are based on net assets of $964,929.
(a) Cost for federal income tax and financial reporting purposes are the same.
SEE NOTES TO FINANCIAL STATEMENTS.
34
<PAGE> 40
Schedule of Investments
THE VICTORY PORTFOLIOS October 31, 1995
PRIME OBLIGATIONS FUND (Amounts in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
- ----------------------------------------------
BANKER'S ACCEPTANCES (1.1%)
$ 5,000 ABN Amro,
5.61%, 11/20/95 $ 4,985
- --------------------------------------------------------------
TOTAL BANKER'S ACCEPTANCES 4,985
- --------------------------------------------------------------
- ----------------------------------------------
CERTIFICATES OF DEPOSIT (3.6%)
2,500 Banque Nationale De Paris,
6.27%, 8/28/96 2,500
5,000 Deutsche Bank,
6.07%, 9/13/96 5,000
4,000 Deutsche Bank,
5.98%, 10/4/96 4,000
5,000 Huntington National Bank,
6.05%, 8/1/96 4,996
- --------------------------------------------------------------
TOTAL CERTIFICATES OF DEPOSIT 16,496
- --------------------------------------------------------------
- ----------------------------------------------
COMMERCIAL PAPER (55.9%)
5,000 A T & T Capital Corp.,
5.78%*, 11/17/95** 5,000
2,000 A T & T Capital Corp.,
6.30%, 7/30/96 2,004
3,000 American General Finance
Corp., 4.65%, 4/22/96 2,977
2,000 Associates Corp.,
7.50%, 10/15/96 2,029
6,000 Bankers Trust,
5.87%*, 11/20/95 6,000
8,900 Bankers Trust,
5.69%, 12/1/95 8,858
5,000 Bear Stearns Cos.,
6.08%*, 5/23/96** 5,000
10,000 Beta Finance,
5.53%*, 11/7/95 9,999
5,000 Beta Finance,
5.54%*, 4/9/96 4,991
20,000 Bishopgate Funding Corp.,
5.78%, 11/20/95 19,939
5,000 Boatmans First National
Bank,
5.87%*, 6/12/96 5,000
2,000 Broadway Capital Corp.,
5.75%, 11/20/95 1,994
8,000 Fleet Funding Corp.,
5.73%, 12/7/95 7,954
3,000 Ford Motor Credit Corp.,
9.00%, 6/28/96 3,069
4,185 Ford Motor Credit Corp.,
5.63%, 12/1/95 4,165
1,100 Ford Motor Credit Corp.,
8.25%, 7/15/96 1,119
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
$ 5,000 Galicia Funding Corp.,
5.85%, 11/28/95 $ 4,978
2,000 General Electric Capital
Corp.,
5.97%, 8/21/96 2,000
5,350 General Electric Capital
Corp.,
5.60%*, 8/1/96** 5,343
15,000 Goldman Sachs Group,
5.81%*, 8/5/96** 14,979
5,000 Hansen Finance,
5.66%, 11/15/95 4,989
9,500 Hansen Finance,
5.67%, 11/30/95 9,457
5,000 Hanson Overseas,
5.50%, 1/15/96 4,988
7,000 Intel Corp.,
5.71%, 11/10/95 6,990
10,000 Merrill Lynch Corp.,
5.68%*, 1/17/96** 9,998
4,000 Merrill Lynch Corp.,
5.59%*, 3/26/96 3,995
900 Merrill Lynch Corp.,
4.75%, 6/24/96 892
3,779 New Hampshire Higher
Education Loan,
5.75%, 11/16/95 3,767
5,000 Oakland Alameda County
Coliseum Authority,
5.78%, 11/15/95 5,000
5,000 Oakland Alameda County
Coliseum Authority,
5.82%, 11/28/95 5,000
5,000 PHH Corp.,
5.77%*, 8/21/96** 4,998
2,500 Philip Morris,
5.88%, 7/1/96 2,564
9,000 Pitney Bowes Credit Corp.,
5.72%, 11/16/95 8,979
3,000 Pitney Bowes Credit Corp.,
5.65%, 12/4/95 2,985
4,000 Pitney Bowes Credit Corp.,
5.61%, 12/12/95 3,974
5,000 Sara Lee Co.,
5.67%, 12/28/95 4,955
5,000 Sony Capital Corp.,
5.74%, 11/20/95 4,985
10,000 Sony Capital Corp.,
5.72%, 12/4/95 9,948
10,000 Transamerica Finance Corp.,
5.74%, 11/3/95 9,997
5,000 Transamerica Finance Corp.,
5.68%, 11/5/95 4,989
8,000 United States Leasing
Capital Corp., 5.69%,
11/3/95 7,998
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
35
<PAGE> 41
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1995
PRIME OBLIGATIONS FUND (Amounts in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
$ 5,000 United States Leasing
Capital Corp., 5.70%,
12/5/95 $ 4,973
4,500 Vehicle Services,
5.73%, 12/6/95 4,475
1,000 Vehicle Services,
5.76%, 1/16/96 988
5,725 WMX Technologies,
4.88%, 6/15/96 5,673
- --------------------------------------------------------------
TOTAL COMMERCIAL PAPER 254,955
- --------------------------------------------------------------
- ----------------------------------------------
CORPORATE NOTES (19.2%)
3,525 Astro Aluminum,
5.95%*, 4/1/05** 3,525
3,500 Baylis Group Partnership,
6.10%*, 1/1/10** 3,500
275 Carelife, Inc.,
5.95%*, 8/1/11** 275
2,350 Carelife, Inc.,
5.95%, 8/1/11** 2,350
1,560 Cleveland Steel Container,
5.95%*, 12/1/08** 1,560
2,000 Cuyahoga County, Ohio
Taxable Economic
Development Revenue,
6.23%*, 6/1/22** 2,000
900 Dietz Road Ltd. Partnership,
5.95%*, 11/1/08** 900
3,000 Dome Corp. -- Dome Corp.
Project, 5.96%*, 8/31/16** 3,000
320 Fremont Plastics,
5.95%*, 4/1/03** 320
1,900 GMH Enterprises,
5.95%*, 7/1/03** 1,900
435 Highland Road Partners,
5.95%*, 10/1/04** 435
5,000 Lehman Brothers Holding,
Inc., 6.18%*, 3/11/16** 5,000
22,000 Lehman Government Securities
Master Note,
6.08%*, 11/1/95** 22,000
1,800 Letts Industries,
5.95%*, 2/1/20 1,800
1,000 MCMC Pob LII,
5.95%*, 8/1/14** 1,000
950 McKinley Air Transport,
5.95%*, 8/1/09** 950
900 Olen Corp.,
5.95%*, 12/1/04** 900
1,610 Olen Corp.,
5.95%*, 8/1/08** 1,610
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
$ 500 Olympic Steel Corp.,
6.01%*, 10/1/08** $ 500
350 Presrite Corp.,
5.90%*, 1/1/04** 350
700 Rivnut Engineered Products,
5.95%*, 2/1/01** 700
940 S & SLP Project,
5.95%*, 12/1/07** 940
15,000 Sea River Maritime Exxon
Shipping, 5.87%*,
10/1/01** 15,000
60 D.J. Schipper Enterprise,
5.90%*, 4/1/09** 60
420 Schipper -- DJA Properties,
5.91%*, 10/1/05** 420
3,060 Schipper Enterprises,
5.91%*, 4/1/09** 3,060
1,395 Technisand, Inc.,
5.95%*, 11/1/01** 1,395
1,800 Tell-Schipper Properties,
Inc.,
5.91%*, 10/1/03** 1,800
8,300 Tyler Health Facilities,
6.10%*, 11/1/25** 8,300
1,945 Zanetos Partnership Project,
5.95%*, 7/1/13** 1,945
- --------------------------------------------------------------
TOTAL CORPORATE NOTES 87,495
- --------------------------------------------------------------
- ----------------------------------------------
MUNICIPAL BONDS (0.4%)
KENTUCKY (0.4%):
2,000 Bardstown, GO,
5.90%, 3/1/25** 2,000
- --------------------------------------------------------------
TOTAL MUNICIPAL BONDS 2,000
- --------------------------------------------------------------
- ----------------------------------------------
U.S. GOVERNMENT AGENCIES (7.3%)
FEDERAL HOME LOAN BANK:
12,000 5.75%*, 12/15/95 11,999
FEDERAL NATIONAL MORTGAGE ASSOC.:
5,000 5.60%, 11/28/95 4,979
5,000 5.55%, 1/29/96 4,931
5,000 5.82%, 9/27/96 5,000
STUDENT LOAN MORTGAGE ASSOC.:
3,500 6.20%*, 5/1/96 3,506
3,000 6.08%*, 7/1/96** 3,009
- --------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCIES 33,424
- --------------------------------------------------------------
TOTAL INVESTMENTS 399,355
- --------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
36
<PAGE> 42
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1995
PRIME OBLIGATIONS FUND (Amounts in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
- ----------------------------------------------
REPURCHASE AGREEMENTS (12.5%)
$ 22,203 Donaldson-Lufkin Jenrette,
5.88%, 11/1/95
(Collateralized by $25,056
various U.S. Treasury
securities, 0.00%-8.88%,
11/15/95-11/15/99,
market value-$22,647) $ 22,203
17,000 NationsBank,
5.88%, 11/1/95
(Collateralized by $20,360
U.S. Treasury Securities,
0.00%,
5/15/98-2/15/99,
market value-$17,343) 17,000
18,000 UBS Securities,
5.87%, 11/1/95
(Collateralized by $18,095
U.S. Treasury Notes,
6.25%-6.50%,
8/31/96-9/30/96, market
value-$18,361) 18,000
- ------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS 57,203
- ------------------------------------------------------------
TOTAL (COST $456,558)(a) $ 456,558
- ---------------------------------------------------------
</TABLE>
- ---------------
Percentages indicated are based on net assets of $456,266.
(a) Cost for federal income tax and financial reporting purposes are the same.
* Variable rate securities having liquidity sources through bank letters of
credit or other credit and/or liquidity arrangements. The interest rate,
which will change periodically, is based upon bank prime rates or an index of
market interest rates. The rate reflected on the Schedule of Investments is
the rate in effect on October 31, 1995.
** Put and demand features exist allowing the Fund to require the repurchase of
the instrument within variable time periods ranging from daily, weekly,
monthly or semi-annually.
SEE NOTES TO FINANCIAL STATEMENTS.
37
<PAGE> 43
Schedule of Investments
THE VICTORY PORTFOLIOS October 31, 1995
FINANCIAL RESERVES FUND (Amounts in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
- ----------------------------------------------
$10,000 BANKER'S ACCEPTANCES (1.3%)
ABN Amro,
5.61%, 11/20/95 $ 9,970
- ----------------------------------------------------------
TOTAL BANKER'S ACCEPTANCES 9,970
- ----------------------------------------------------------
- ----------------------------------------------
CERTIFICATES OF DEPOSIT (3.9%)
5,000 Banque Nationale De Paris,
6.27%, 8/28/96 5,000
8,000 Deutsche Bank,
6.07%, 9/13/96 8,000
7,000 Deutsche Bank,
5.98%, 10/4/96 7,000
10,000 Huntington National Bank,
6.05%, 8/1/96 9,993
- ----------------------------------------------------------
TOTAL CERTIFICATES OF DEPOSIT 29,993
- ----------------------------------------------------------
- ----------------------------------------------
COMMERCIAL PAPER (59.8%)
1,700 A T &T Capital Corp.,
6.30%, 7/25/96 1,703
10,000 A T &T Capital Corp.,
5.78%*, 11/17/95 10,000
3,244 Banc One, Auto Receivable
Trust, 95-A,
6.36%*, 4/15/96 3,244
30,000 Banc One Industries,
7.18%, 2/6/96 30,000
14,000 Bankers Trust,
5.87%, 11/20/95 14,000
16,000 Bankers Trust,
5.69%, 12/1/95 15,924
10,000 Bear Stearns Cos.,
5.70%, 12/11/95 9,937
9,000 Bear Stearns Cos.,
6.08%*, 5/23/96 9,000
10,000 Beta Finance,
5.53%*, 11/7/95 9,999
25,000 Bishopgate Funding Corp.,
5.78%, 11/20/95 24,924
5,343 Blue Hawk Funding Corp.,
5.80%, 11/1/95 5,343
13,500 Blue Hawk Funding Corp.,
5.75%, 11/8/95 13,485
10,000 Boatmen's First National
Bank
5.87%*, 6/12/96 10,000
7,000 Canadian Imperial Bank
Holdings,
5.74%, 1/24/96 6,906
2,800 Compaigne Bancaire,
5.93%*, 4/29/96 2,799
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
$ 20,000 Fleet Funding Corp.,
5.75%, 11/21/95 $ 19,936
5,312 Fleet Funding Corp.,
5.73%, 12/7/95 5,282
8,000 Ford Motor Credit Corp.,
5.63%, 12/1/95 7,963
5,000 Ford Motor Credit Corp.,
6.13%, 12/11/95 5,001
10,000 Galicia Funding Corp.,
5.85%, 11/28/95 9,956
4,000 General Electric Capital
Corp.,
5.71%, 12/7/95 3,977
10,000 General Electric Capital
Corp.,
5.72%, 12/15/95 9,930
20,000 Hanson Finance,
5.68%, 11/22/95 19,934
12,000 Hanson Finance,
5.72%, 1/8/96 11,870
10,000 Intel Corp.,
5.71%, 11/10/95 9,986
11,500 Intel Corp.,
5.70%, 12/29/95 11,394
25,000 Lehman Brothers Holdings,
6.18%*, 3/18/96 25,000
10,000 Merrill Lynch Corp.,
5.59%*, 3/26/96 9,987
9,000 Oakland Alameda County,
Colliseum Authority,
5.78%, 11/15/95 9,000
5,000 Oakland Alameda County,
Colliseum Authority,
5.82%, 11/28/95 5,000
10,000 PHH Corp.,
5.77%*, 8/21/96 9,997
8,000 Pitney Bowes Credit Corp.,
5.65%, 12/4/95 7,959
10,000 Pitney Bowes Credit Corp.,
5.61%, 12/12/95 9,936
7,557 Retailer Funding Corp.,
5.75%, 11/14/95, 7,541
10,000 Sara Lee,
5.67%, 12/28/95 9,910
9,246 Secondary Market Services,
5.70%, 11/8/95 9,236
8,000 Secondary Market Services,
5.68%, 11/15/95 7,982
6,900 Sony Capital Corp.,
5.74%, 11/20/95 6,879
15,000 Sony Capital Corp.,
5.72%, 12/4/95 14,921
8,000 Transamerica Finance,
5.68%, 11/5/95 7,982
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
38
<PAGE> 44
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1995
FINANCIAL RESERVES FUND (Amounts in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
$ 12,000 USL Capital Corp.,
5.69%, 11/3/95 $ 11,996
9,000 Vehicle Services,
5.73%, 12/6/95 8,950
11,000 WMX Technologies,
4.88%, 6/15/96 10,901
- ----------------------------------------------------------
TOTAL COMMERCIAL PAPER 455,670
- ----------------------------------------------------------
- ----------------------------------------------
CORPORATE NOTES (13.2%)
2,440 Austin Printing Co.,
5.95%*, 8/1/14** 2,440
100 Auto Tracking System,
5.95%*, 5/1/99** 100
2,640 Automated Packaging System,
5.95%*, 10/1/08** 2,640
1,000 Bee Holdings, Inc.,
5.95%*, 9/1/15** 1,000
1,750 Best Sand Corp.,
5.95%*, 7/1/02** 1,750
4,525 Buckeye Corrugated,
5.95%*, 1/1/05** 4,525
6,000 General Electric Capital
Corp.,
5.95%, 8/22/96 5,998
1,500 Hancor, Inc.,
5.95%*, 12/1/04** 1,500
31,982 Lehman Brothers Government
Security,
5.99%*, 1/1/99** 31,982
14,300 Pacific Mutual Funding,
5.82%*, 1/1/99**GIC 14,300
700 Parkway Business Plaza,
5.95%*, 4/1/13** 700
1,985 SGS Tool Co.,
5.95%*, 8/1/08** 1,985
3,750 Sandridge Foods,
5.95%*, 12/1/00** 3,750
25,000 Sea River Maritime, Inc.,
5.87%*, 10/1/11** 25,000
675 TPC Properties, Inc.,
5.95%*, 11/1/09** 675
2,450 Zanetos Partnership Project,
5.95%*, 7/1/13** 2,450
- ----------------------------------------------------------
TOTAL CORPORATE NOTES 100,795
- ----------------------------------------------------------
- ----------------------------------------------
U.S. GOVERNMENT AGENCIES (11.7%)
FEDERAL NATIONAL MORTGAGE ASSOC.:
10,000 5.60%, 11/28/95 9,958
10,000 5.55%, 1/29/96 9,863
10,000 5.81%*, 9/27/96 10,000
15,000 5.63%*, 5/25/99** 15,000
20,000 5.55%*, 7/14/99** 20,000
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
STUDENT LOAN MARKETING ASSOC.:
$ 10,000 5.80%*, 10/30/97** $ 10,037
10,000 5.64%*, 9/28/98** 9,996
4,500 5.66%*, 2/8/99** 4,502
- ----------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCIES 89,356
- ----------------------------------------------------------
TOTAL INVESTMENTS 685,784
- ----------------------------------------------------------
- ----------------------------------------------
REPURCHASE AGREEMENTS (10.1%)
20,787 Donaldson-Lufkin Jenrette,
5.88%, 11/1/95
(Collateralized by $42,977
various U.S. Government
securities, 0.00%,
1/15/96-2/15/00, market
value-$38,927) 20,787
28,000 NationsBank,
5.88%, 11/1/95
(Collateralized by $34,965
U.S. Treasury Strip's
9.13%, 5/15/99, market
value-$28,562) 28,000
28,000 UBS Securities,
5.87%, 11/1/95
(Collateralized by $27,725
U.S. Treasury Notes, 6.25-
7.88%, 7/15/96-8/31/96,
market value-$28,561) 28,000
- ----------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS 76,787
- ----------------------------------------------------------
TOTAL (COST $762,571)(a) $762,571
- ----------------------------------------------
</TABLE>
- ---------------
Percentages indicated are based on net assets of $762,693.
(a) Cost for federal income tax and financial reporting purposes are the same.
* Variable rate securities having liquidity sources through bank letters of
credit or other liquidity arrangements. The interest rate, which will change
periodically, is based upon bank prime rates or an index of market interest
rates. The rate reflected on the Schedule of Investments is the rate in
effect at October 31, 1995.
** Put and demand features exist allowing the Fund to require the repurchase of
the instrument within variable time periods ranging from daily, weekly,
monthly or semi-annually.
GIC -- Guaranteed Insurance Contract.
SEE NOTES TO FINANCIAL STATEMENTS.
39
<PAGE> 45
Schedule of Investments
THE VICTORY PORTFOLIOS October 31, 1995
INSTITUTIONAL MONEY MARKET FUND (Amounts in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
- ----------------------------------------------
ALTERNATIVE MINIMUM TAX PAPER (1.7%)
$ 9,000 Oakland, Alameda County,
Colliseum Authority,
5.78%, 11/15/95, LOC
Canadian Imperial Bank $ 9,000
- ----------------------------------------------------------
TOTAL ALTERNATIVE MINIMUM TAX PAPER 9,000
- ----------------------------------------------------------
- ----------------------------------------------
BANKER'S ACCEPTANCES (2.3%)
5,000 ABN Amro,
5.61%, 11/20/95 4,985
2,000 NationsBank, Texas,
5.73%, 1/24/96 1,973
5,000 NationsBank, Texas,
5.64%, 2/28/96 4,908
- ----------------------------------------------------------
TOTAL BANKER'S ACCEPTANCES 11,866
- ----------------------------------------------------------
- ----------------------------------------------
CERTIFICATES OF DEPOSIT (3.6%)
7,000 Deutsche Bank,
6.07%, 9/13/96 7,000
4,000 Deutsche Bank,
5.98%, 10/4/96 4,000
2,500 Banque Nationale De Paris,
6.27%, 8/28/96 2,500
5,000 Huntington National Bank,
6.05%, 8/1/96 4,996
- ----------------------------------------------------------
TOTAL CERTIFICATES OF DEPOSIT 18,496
- ----------------------------------------------------------
- ----------------------------------------------
COMMERCIAL PAPER (45.5%)
5,000 A T &T Capital Corp.,
5.78%*, 11/17/95 5,000
17,000 Bankers Trust,
5.69%, 12/1/95 16,919
5,000 Bear Stearns,
6.08%*, 5/23/96 5,000
5,000 Beta Finance,
5.53%*, 11/7/95 5,000
15,000 Bishopgate Funding Corp.,
5.78%, 11/20/95 14,955
10,280 Blue Hawk Funding,
5.75%, 11/30/95 10,232
5,000 Boatmen's First National
Bank, Kansas City,
5.87%*, 6/12/96 5,000
2,060 Broadway Capital Corp.,
5.80%, 12/22/95 2,043
5,000 Canadian Imperial Bank
Holdings,
5.74%, 1/24/96 4,933
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
$ 10,000 Comerica Bank,
5.56%*, 11/15/95 $ 10,000
2,000 Dean Witter,
6.06%*, 1/29/96 2,002
1,000 Dean Witter,
6.01%*, 2/12/96 1,001
1,500 Exxon Capital Corp.,
8.00%, 12/1/95 1,502
2,000 Ford Motor Credit Corp.,
9.00%*, 7/24/96 2,043
12,000 Ford Motor Credit Corp.,
5.90%, 11/1/95 12,000
8,000 Ford Motor Credit Corp.,
5.63%, 12/1/95 7,962
4,000 General Electric Capital
Corp.,
7.63%, 7/30/96 4,051
3,800 General Electric Capital
Corp.,
7.63%, 7/24/96 3,851
10,000 Hanson Finance,
5.66%, 11/15/95 9,978
12,000 Hanson Finance,
5.67%, 11/30/95 11,945
7,500 Merrill Lynch Corp.,
5.97%*, 2/14/96 7,502
2,500 Merrill Lynch Corp.,
4.75%, 6/24/96 2,484
5,000 Oakland, Alameda County,
Colliseum Authority,
5.82%, 11/28/95, LOC
Canadian Imperial Bank 5,000
5,000 Oakland, Alameda County,
Colliseum Authority,
5.80%, 11/30/95, LOC
Canadian Imperial Bank 5,000
5,000 PHH Corp.,
5.77%*, 8/21/96 4,998
4,000 Pitney Bowes Credit Corp.,
5.65%, 12/4/95 3,979
6,000 Pitney Bowes Credit Corp.,
5.61%, 12/12/95 5,963
5,062 Retailer Funding Corp.,
5.73%, 12/7/95 5,033
5,000 Sara Lee,
5.67%, 12/28/95 4,955
5,000 Secondary Market Services,
5.70%, 11/8/95 4,994
7,906 Secondary Market Services,
5.68%, 11/15/95 7,889
5,000 Sony Capital Corp.,
5.74%, 11/20/95 4,985
5,000 Sony Capital Corp.,
5.72%, 12/4/95 4,974
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
40
<PAGE> 46
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1995
INSTITUTIONAL MONEY MARKET FUND (Amounts in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
$ 10,000 Transamerica Financial
Corp.,
5.68%, 11/5/95 $ 9,978
750 Transamerica Financial
Corp.,
9.68%, 12/7/95 753
3,000 Transamerica Financial
Corp.,
5.69%, 12/29/95 2,972
7,810 Transamerica Financial
Corp.,
5.75%, 1/17/96 7,714
5,000 USL Capital Corp.,
5.69%, 11/3/95 4,998
5,000 Vehicle Services,
5.73%, 12/6/95 4,972
- ----------------------------------------------------------
TOTAL COMMERCIAL PAPER 234,560
- ----------------------------------------------------------
- ----------------------------------------------
CORPORATE NOTES (17.8%)
2,375 Akron Welding,
5.95%*, 12/1/01** 2,375
400 Auto Tracking System,
5.95%*, 5/1/99** 400
2,555 Automated Packaging System,
5.95%*, 10/1/08** 2,555
1,800 Buckeye Corrugated, Inc.
Project,
5.95%*, 1/3/05** 1,800
3,340 Burton I Saltzman,
5.95%*, 8/1/08** 3,340
1,150 Cardinal Packaging,
5.95%*, 8/1/01** 1,150
1,250 Fairborn Christel Mann,
6.06%*, 6/10/10** 1,250
3,000 General Electric Capital
Corp.,
5.95%, 8/22/96 2,999
3,850 Hannah Boulevard Ltd.
Partnership,
5.95%*, 9/1/15** 3,850
2,160 Industrial Dimensions Inc.,
5.95%*, 1/1/00** 2,160
1,100 L & B Realty,
5.95%*, 11/1/04** 1,100
5,000 Lehman Brothers Holding,
Inc.,
6.18%*, 3/11/16** 5,000
8,293 Lehman Government Securities
Master Note,
6.02%*, 1/1/99** 8,293
2,250 Maximum Principal Mubea
Project,
5.95%*, 12/1/04** 2,250
2,400 Monticello Investments,
5.95%*, 7/1/04** 2,400
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
$ 745 Muffin Lane Ltd.
Partnership,
5.95%*, 3/1/06** $ 745
15,000 Pacific Mutual Funding,
5.82%*, 1/1/99**, GIC 15,000
615 Perfection Corp.,
5.95%*, 4/1/09** 615
2,250 Pomeroy Investments,
6.01%*, 9/1/15** 2,250
1,550 Professional Center
Associates Ltd.,
5.95%*, 8/1/15** 1,550
5,000 Republic New York Corp.,
5.99%*, 1/1/99** 5,000
14,600 Sea River Maritime Inc.,
5.87%*, 10/1/11** 14,600
2,700 Sedlak Interiors Inc.,
6.06%*, 5/1/10** 2,700
500 Tube Products,
5.95%*, 11/1/09** 500
7,000 WMX Technologies,
4.88% 6/15/96 6,937
1,000 Xerox Credit Corp.,
6.25%, 1/15/96 1,001
- ----------------------------------------------------------
TOTAL CORPORATE NOTES 91,820
- ----------------------------------------------------------
- ----------------------------------------------
MUNICIPAL BONDS (0.2%)
1,030 Ottawa County Michigan,
Series C, Old Kent Bank,
6.05%*, 3/1/16** 1,030
- ----------------------------------------------------------
TOTAL MUNICIPAL BONDS 1,030
- ----------------------------------------------------------
- ----------------------------------------------
U.S. GOVERNMENT AGENCIES (21.8%)
FEDERAL NATIONAL MORTGAGE ASSOC.:
5,000 5.55%, 1/29/96 4,931
5,000 5.81%, 9/27/96 5,000
25,000 5.63%*, 5/25/99** 25,000
33,000 5.55%*, 7/26/99** 33,000
STUDENT LOAN MORTGAGE ASSOC.:
1,000 5.82%*, 11/27/96** 1,002
1,190 5.80%*, 10/30/97** 1,194
4,000 5.64%*, 9/28/98** 4,000
6,000 5.66%*, 1/13/99** 5,999
32,500 5.67%*, 8/2/99** 32,500
- ----------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCIES 112,626
- ----------------------------------------------------------
TOTAL INVESTMENTS 479,398
- ----------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
41
<PAGE> 47
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1995
INSTITUTIONAL MONEY MARKET FUND (Amounts in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
- ----------------------------------------------
REPURCHASE AGREEMENTS (7.1%)
$ 17,000 Chase Securities,
5.85%, 11/1/95
(Collateralized by 17,340
U.S. Treasury Notes,
5.63%, 10/31/97, market
value-$17,340) $ 17,000
19,464 Donaldson-Lufkin Jenrette,
5.88%, 11/1/95
(Collateralized by 19,638
various U.S. Treasury
securities, 0.00%-9.13%,
1/31/96-5/15/99, market
value-$19,853) 19,464
- ----------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS 36,464
- ----------------------------------------------------------
TOTAL (COST $515,862)(a) $515,862
- ----------------------------------------------
</TABLE>
- ---------------
Percentages indicated are based on net assets of $516,015.
(a) Cost for federal income tax and financial reporting purposes are the same.
* Variable rate securities collateralized by bank letters of credit or other
liquidity arrangements. The interest rate, which will change periodically, is
based upon bank prime rates or an index of market interest rates. The rates
reflected on the Schedule of Investments is the rate in effect at October 31,
1995.
** Put and demand features exist allowing the Fund to require the repurchase of
the instrument within variable time periods ranging from daily, weekly,
monthly or semi-annually.
GIC -- Guaranteed Insurance Contract
LOC -- Letter of credit
SEE NOTES TO FINANCIAL STATEMENTS.
42
<PAGE> 48
Schedule of Investments
THE VICTORY PORTFOLIOS October 31, 1995
TAX-FREE MONEY MARKET FUND (Amounts in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
- ----------------------------------------------
MUNICIPAL BONDS (96.6%)
ALABAMA (2.0%):
$ 3,740 Ardmore IDR,
4.15%*, 6/1/04**, LOC Bank
One $ 3,740
900 Montgomery IDR, 3.85%*
12/1/30**, AMBAC, LOC First
National Bank Chicago 900
1,500 Montgomery IDR, 3.85%*,
12/1/30**, AMBAC, LOC First
National Bank Chicago 1,500
----------
6,140
----------
ARIZONA (4.2%):
1,500 Maricopa County, Southern
California Education,
3.70%, 11/15/95 1,500
5,100 Maricopa County, Southern
California Education
3.85%, 2/8/96 5,100
3,700 Maricopa County, Southern
California Education
3.85%, 2/9/96 3,700
1,500 Maricopa County, Southern
California Education
3.75%, 1/11/96 1,500
1,000 Pima County IDR,
4.10%*, 9/1/09**, LOC
National City Bank 1,000
----------
12,800
----------
ARKANSAS (1.6%):
5,000 University of Arkansas,
3.90%*, 12/1/19**, LOC
Credit Suisse 5,000
----------
CALIFORNIA (0.8%):
2,500 California Housing Finance,
4.60%, 2/1/96, FGIC 2,500
----------
COLORADO (1.1%):
3,400 Pitkin County Colorado IDR,
4.45%*, 4/1/14**, LOC First
National Bank Chicago 3,400
----------
<CAPTION>
SHARES OR
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
FLORIDA (7.8%):
$ 4,500 Broward County, Housing
Finance Authority
4.15%*, 12/1/29**, LOC John
Hancock $ 4,500
9,700 Dade County, Housing Finance
Authority,
3.30%*, 8/1/05**, LOC John
Hancock 9,700
5,000 Dade County, Solid Waste
4.15%*, 12/1/13**, LOC
Banque Paribas 5,000
490 Florida State Board of
Education, GO,
5.50%, 1/1/96** 490
1,500 Jacksonville, Electric
Authority,
3.70%, 11/13/95 1,500
1,000 Jacksonville, Electric
Authority,
3.70%, 11/17/95 1,000
1,200 Jacksonville, Electric
Authority,
3.85%, 2/7/96 1,200
625 Orlando, Orange County,
7.50%, 7/1/96 651
----------
24,041
----------
GEORGIA (3.8%):
2,800 Burke County IDR,
3.55%, 12/5/95, LOC Credit
Swiss 2,800
1,000 Clayton County IDR,
3.90%*, 1/1/21**, LOC
Barclays 1,000
3,900 Georgia Municipal Gas
Authority,
3.55%, 12/7/95, LOC Wachovia 3,900
2,140 Georgia State Residential,
4.05%, 12/1/95 2,140
1,190 Georgia State Residential,
4.05%, 12/1/95 1,190
575 Warner Robins, Georgia Water
& Sewer, prerefunded,
7.76%, 7/1/96 600
----------
11,630
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
43
<PAGE> 49
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1995
TAX-FREE MONEY MARKET FUND (Amounts in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
ILLINOIS (6.6%):
$ 1,000 Dupage Illinois Water
Commercial, prerefunded
7.88%, 3/1/96 $ 1,034
1,100 Illinois Development IDR,
4.00%*, 11/1/08**, LOC ABN
Amro 1,100
1,600 Illinois Development,
Kindlen,
4.15%*, 5/1/06**, LOC
La Salle National Bank 1,600
5,000 Illinois Development, Power
& Light, 3.70%, 11/1/95,
LOC
Canadian Imperial Bank 5,000
3,600 Illinois Development Finance
Authority, 4.00%*,
12/1/95,
LOC ABN Amro 3,600
1,000 Illinois State,
7.75%, 6/1/96 1,043
2,800 Kankakee County, IDR,
4.15%*, 12/1/07**, LOC
Societe Generale 2,800
4,000 Tinley Park Multi-Family
Revenue,
3.95%*, 12/1/08**, LOC La
Salle National Bank 4,000
----------
20,177
----------
INDIANA (9.0%):
1,575 Crawfordsville,
4.10%*, 4/1/30**, GTD
Federal Home Loan Bank 1,575
4,200 Fort Wayne, Economic
Development,
4.15%*, 7/1/09**, LOC
Societe Generale 4,200
1,150 Indianapolis, Calderon,
4.15%*, 2/1/99**, LOC Bank
One 1,150
4,900 Indianapolis, GO,
4.25%, 1/11/96 4,904
2,800 Mt. Vernon, Pollution
Control,
3.80%, 12/12/95, GTD G.E.
Capital Corp. 2,800
1,995 Scottsburg, IDR,
4.45%*, 10/1/09**, LOC
Pittsburg National City
Bank 1,995
1,020 Syracuse, Economic
Development Revenue,
4.00%*, 12/1/05**, LOC Bank
One 1,020
<CAPTION>
SHARES OR
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
$ 1,130 Wakarusa, Economic
Development,
4.00%*, 7/1/03**, LOC Bank
One $ 1,130
9,000 Washington Township Metro
School District,
4.04%, 12/29/95 9,002
----------
27,776
----------
IOWA (1.4%):
4,325 City of Urbandale IDR,
4.15%*, 10/1/15**, GTD
Principal Mutual 4,325
----------
KANSAS (1.2%):
2,300 Fairway IDR,
4.15%*, 11/1/14**, GTD
Principle Mutual 2,300
1,500 Wamego, PCR,
3.90%*, 11/1/14**, LOC
Credit Suisse 1,500
----------
3,800
----------
KENTUCKY (2.9%):
2,475 Boone County,
4.45%*, 12/1/09**, LOC
Pittsburg National City
Bank 2,475
2,465 Covington IDR,
4.00%*, 4/1/05**, LOC
Fifth-Third Bank 2,465
1,100 Lewis County IDR,
4.15%*, 12/1/03**, LOC
Fifth-Third 1,100
3,000 Pendelton IDR,
4.00%, 7/1/96, LOC
Pittsburgh National Bank 3,000
----------
9,040
----------
LOUISIANA (0.5%):
1,450 Louisiana Public Facilities
Authority Revenue,
3.90%*, 9/1/10**, LOC
Societe Generale 1,450
----------
MAINE (0.3%):
770 Maine, State GO,
5.90%, 7/1/96 779
----------
MASSACHUSETTS (0.7%):
2,200 Massachusetts Water
Development Authority,
3.80%, 2/7/96, LOC Morgan
Stanley 2,200
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
44
<PAGE> 50
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1995
TAX-FREE MONEY MARKET FUND (Amounts in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
MICHIGAN (1.7%):
$ 1,250 Detroit Wayne County School
District,
4.50%, 5/1/96, LOC St. Aid $ 1,254
1,000 Farmington Hills, Economic
Development,
4.10%*, 11/1/10**, LOC
CoAmerica 1,000
1,725 Michigan State Strategic,
3.95%*, 4/1/06**, LOC
CoAmerica 1,725
1,120 Michigan State Strategic,
4.10%*, 5/1/05**, LOC
CoAmerica 1,120
----------
5,099
----------
MINNESOTA (2.1%):
3,000 Minnesota School Districts
Tax & Aid,
4.25%, 9/18/96 3,005
3,340 St. Cloud Housing &
Redevelopment Authority,
4.25%*, 11/1/05**, LOC
National City Bank 3,340
----------
6,345
----------
MISSOURI (5.6%):
1,200 Cuba IDR,
4.15%*, 10/1/05**, LOC Bank
One 1,200
3,600 Kansas City,
4.15%*, 5/1/15**, GTD
Principle Mutual 3,600
5,000 St. Louis GO,
4.50%, 6/20/96 5,021
2,830 St. Charles County, Cedar
Ridge,
3.95%*, 10/1/07**, LOC Bank
One 2,830
4,600 St. Louis IDR,
4.15%*, 2/1/07**, GTD John
Hancock 4,600
----------
17,251
----------
NEBRASKA (1.7%):
5,145 Nebraska Investment Finance
Authority, GNMA,
3.75%, 1/15/96**, FGIC 5,145
----------
<CAPTION>
SHARES OR
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
NEVADA (2.5%):
$ 5,000 Clark County,
3.95%*, 10/1/30**, LOC
Barclays $ 5,000
1,375 Director State Department
Business & Industry,
4.15%*, 8/1/01**, LOC Bank
One 1,375
1,290 Director State Department
Business & Industry,
4.15%*, 8/1/14**, LOC Bank
One 1,290
----------
7,665
----------
NEW HAMPSHIRE (1.3%):
1,800 New Hampshire Higher
Education,
3.85%*, 12/1/25**, LOC First
National Bank of Chicago 1,800
2,300 Strafford,
4.00%, 12/28/95 2,301
----------
4,101
----------
NEW YORK (1.9%):
5,800 New York, Water,
4.00%*, 6/15/25**, FGIC 5,800
----------
NORTH CAROLINA (4.3%):
5,000 North Carolina Eastern
Municipal,
3.80%, 1/1/26**, LOC Union
Bank Swiss, GTD JP Morgan 5,000
8,240 Person County, Carolina
Power & Light, PCR,
3.95%*, 11/1/19** 8,240
----------
13,240
----------
OHIO (12.9%):
430 Akron Bath Copley Township
Hospital,
4.10%*, 5/1/13**, LOC
National City Bank 430
1,000 Chillicothe,
4.04%, 7/5/96 1,001
2,850 Dublin School District,
5.57%, 12/20/95 2,851
4,800 East Palestine School
District,
3.85%, 4/4/96 4,800
2,550 Fayetteville Perry,
4.68%, 4/12/96 2,552
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
45
<PAGE> 51
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1995
TAX-FREE MONEY MARKET FUND (Amounts in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
$ 2,300 Franklin County, Childrens
Hospital,
4.10%*, 12/1/14** $ 2,300
2,250 Franklin County IDR,
4.15%*, 6/1/10**, LOC
Fifth-Third Bank, 2,250
2,680 Gallia County IDR,
3.85%*, 12/15/10**, LOC
Fifth-Third Bank 2,680
3,000 Highland Heights,
5.65%, 12/28/95 3,002
2,500 Hillsborough County,
Ringhaven,
4.20%*, 12/1/11**, LOC
Mellon Bank 2,500
1,700 Hudson, Ohio 4.20%, 8/15/96 1,703
1,800 Ohio Housing Finance
Authority,
3.95%*, 3/1/15**, LOC
Bayerische Landesbank 1,800
100 Ohio Housing Finance
Authority,
3.95%*, 3/1/15**, LOC
Bayerische Landesbank 100
2,000 Ohio State Air Quality Bond,
3.50%, 11/6/95, FGIC 2,000
1,500 Ohio State Air Quality Bond,
3.90%, 11/9/95, LOC Toronto
Dominion 1,500
775 Pickerington,
4.15%, 6/28/96 776
1,400 Portage County,
4.15%, 7/11/96 1,401
300 Scioto County, VHA,
3.80%*, 12/1/25**, LOC
Mellon Bank 300
735 Summit County,
4.40%, 11/195 735
5,000 Sylvania, School District,
4.25%, 12/28/95 5,002
----------
39,683
----------
OREGON (0.6%):
2,000 Klamath Falls,
4.40%, 5/1/96 2,000
----------
<CAPTION>
SHARES OR
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
PENNSYLVANIA (1.1%):
$ 1,000 E. Lycoming,
4.25%, 6/28/96 $ 1,002
2,400 Montgomery County, Pollution
Control,
3.70%, 1/10/96, LOC Deutsche
Bank 2,400
----------
3,402
----------
SOUTH CAROLINA (0.8%):
2,500 South Carolina, Job Economic
Development,
4.15%*, 12/1/99**, LOC Bank
One 2,500
----------
TENNESSEE (2.0%):
6,200 Hawkins County, Kingston,
4.50%*, 8/1/09**, LOC
Chemical Bank 6,200
----------
TEXAS (4.7%):
1,251 Austin, Utility Development
Systems,
3.85%, 2/8/96, LOC Swiss
Bank 1,251
4,000 Grapevine IDR,
4.15%*, 4/1/19**, LOC First
National Bank Chicago 4,000
4,140 Harris County, IDR
4.15%*, 10/1/16**. GTD JP
Morgan 4,140
5,000 Texas State GO,
4.75%, 8/30/96 5,028
----------
14,419
----------
UTAH (0.3%):
1,000 Tooele County IDR,
3.85%, 6/1/20**, LOC Union
Bank Swiss 1,000
----------
VIRGINIA (0.3%):
800 Lynchburg IDR, 3.85%*,
12/1/25**, AMBAC, LOC First
National Bank Chicago 800
----------
WASHINGTON (0.6%):
1,000 Pierce County IDR,
4.55%, 11/1/95, LOC Deutsche
Bank 1,000
1,000 Port Seattle, Revenue Bond,
5.00%, 11/1/95 1,000
----------
2,000
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
46
<PAGE> 52
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1995
TAX-FREE MONEY MARKET FUND (Amounts in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
WISCONSIN (6.5%):
$ 1,030 Appleton IDR,
4.15%*, 8/1/01**, LOC Bank
One $ 1,030
3,900 Evansville IDR,
4.15%*, 12/1/08**, LOC Bank
One 3,900
3,870 Kenosha Metalmen IDR,
4.15%*, 9/1/14**, LOC Bank
One 3,870
1,525 New Berlin IDR,
4.15%*, 4/1/07**, LOC Bank
One 1,525
1,400 Oshkosh, Schloesser IDR,
4.15%*, 3/1/02**, LOC Bank
One 1,400
2,800 Plymouth IDR,
4.25%*, 8/1/04**, LOC
Rabobank 2,800
1,600 Prairie Du Chien, 4.15%*,
6/1/02**, LOC
La Salle National Bank 1,600
4,000 Wausaw, School District,
4.05%, 9/20/96 4,002
----------
20,127
----------
WYOMING (1.9%):
3,600 Gillette County, PCR,
3.85%, 12/6/95, LOC Deutsche
Bank 3,600
2,100 Sweetwater County, PCR,
3.75%, 11/16/95, LOC Union
Bank Switzerland 2,100
----------
5,700
- ------------------------------------------------------------
TOTAL MUNICIPAL BONDS 297,535
- ------------------------------------------------------------
<CAPTION>
SHARES OR
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
- ----------------------------------------------
INVESTMENT COMPANIES (3.0%)
$ 9,109 Federated #15 Tax-Free Money
Market $ 9,109
1 Fidelity Ohio Tax-Free 1
- ------------------------------------------------------------
TOTAL INVESTMENT COMPANIES 9,110
- ------------------------------------------------------------
TOTAL (COST $306,645)(a) $ 306,645
- ------------------------------------------------------------
</TABLE>
- ---------------
Percentages indicated are based on net assets of $307,726.
(a) Cost for federal income tax and financial reporting purposes are the same.
* Variable rate securities collateralized by bank letters of credit or other
credit arrangements. The interest rate will change periodically. The rates
reflected on the Schedule of Investments is the rate in effect at October 31,
1995.
** Put and Demand features exist allowing the Fund to require the repurchase of
the instrument within variable time periods ranging from daily, weekly,
monthly or semi-annually.
AMBAC -- American Municipal Bond Assurance Corp.
FGIC -- Financial Guaranty Insurance Company
GO -- General Obligation
GTD -- Guaranteed by
IDR -- Industrial Development Revenue
LOC -- Letter of Credit
PCR -- Pollution Control Revenue
VHA -- Voluntary Hospitals of America
SEE NOTES TO FINANCIAL STATEMENTS.
47
<PAGE> 53
Schedule of Investments
THE VICTORY PORTFOLIOS October 31, 1995
OHIO MUNICIPAL MONEY MARKET FUND (Amounts in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
- ----------------------------------------------
MUNICIPAL BONDS (98.3%)
OHIO (98.3%):
$ 1,950 Akron, 5.25%, 12/14/95 $ 1,951
3,240 Akron Sewer System Revenue,
3.95%*, 12/4/14**, LOC
Credit Suisse 3,240
3,400 Anthony Wayne Local School,
4.00%, 12/14/95 3,401
870 Avon, 4.14%, 7/3/96 871
970 Barberton, 4.05%, 10/4/96 970
1,200 Barberton, 4.86%, 5/16/96 1,202
1,900 Bedford Heights, IDR,
4.15%*, 12/1/04**, LOC
National City Bank 1,900
1,000 Belmont County, 4.34%,
8/30/96 1,002
1,000 Berea, 5.20%, 12/21/95 1,000
1,525 Berea, 4.20%, 7/18/96 1,527
1,240 Blue Ash IDR, 3.90%, 3/1/96,
LOC Society National Bank 1,240
2,000 Bowling Green, 4.30%,
9/12/96 2,006
2,600 Bowling Green IDR, 4.15%*,
8/1/09**, LOC GECC 2,600
950 Brecksville, 4.59%, 5/2/96 951
1,235 Brecksville, 4.10%, 8/9/96 1,236
3,925 Brecksville-Broadview
Heights, City School
district, 5.71%, 1/18/96 3,926
630 Brooklyn Heights IDR,
4.15%*, 2/1/02**, LOC Bank
One 630
700 Cardington, 4.58%, 4/11/96 702
3,500 Centerville Health Bethany,
4.00%*, 11/1/13**, LOC
Pittsburgh National Bank 3,500
2,325 Chillicothe IDR, 4.05%*,
10/1/15**, LOC Pittsburgh
National Bank 2,325
7,400 Cincinnati & Hamilton IDR,
4.05%*, 5/1/15** 7,400
480 Circleville, 4.45%, 6/13/96 481
200 Clark County IDR, 4.05%,
4/1/96**, LOC Huntington
Nationall Bank 200
290 Clark County IDR, 4.05%,
4/1/96**, LOC Huntington
National Bank 290
500 Clark County IDR, 4.05%,
4/1/96**, LOC Huntington
National Bank 500
<CAPTION>
SHARES OR
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
$ 935 Clark County, 3.93%, 7/5/96 $ 936
6,000 Cleveland-Cuyahoga County
IDR, 3.95%*, 12/1/15**,
LOC Credit Locale De
France 6,000
500 Cleveland Heights, 4.15%,
8/29/96 501
500 Clinton County IDR, 4.15%*,
11/1/99**, LOC Fifth-Third
Bank 500
6,000 Clinton County IDR, 3.95%*,
6/1/11**, LOC Wachovia
Bank 6,100
460 Cuyahoga County IDR, 3.95%,
4/15/96**, Bank One 460
3,300 Cuyahoga County IDR, 4.10%*,
12/1/12**, LOC National
City Bank 3,300
4,650 Cuyahoga County IDR, 4.07%*,
9/1/09**, LOC Banque
Nationale De Paris 4,650
300 Cuyahoga County IDR, 4.20%*,
12/1/98**, LOC National
City Bank 300
4,220 Cuyahoga County IDR, 4.28%*,
12/7/05**, LOC National
City Bank 4,220
405 Cuyahoga County IDR, 4.45%*,
11/2/09**, LOC Huntington
National Bank 405
1,300 Cuyahoga County Hospital,
4.00%*, 11/15/20**, LOC
First National Bank of
Chicago 1,300
2,700 Cuyahoga County Revenue,
4.00%*, 4/1/12**, LOC
Union Bank of Switzerland 2,700
2,500 Cuyahoga Falls Ohio IDR,
4.15%*, 9/1/14**, LOC
Fifth-Third Bank 2,500
3,400 Cuyahoga Falls Ohio IDR,
4.15%*, 5/1/15**, LOC
Fifth-Third Bank 3,400
4,500 Dayton, 4.00%, 12/29/95 4,500
1,760 Defiance County IDR, 4.15%*,
12/1/97**, LOC Pittsburgh
National Bank 1,760
900 Delaware County IDR, 3.85%*,
12/1/04**, LOC Wells Fargo 900
1,575 Elyria, 4.18%, 7/25/96 1,576
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
48
<PAGE> 54
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1995
OHIO MUNICIPAL MONEY MARKET FUND (Amounts in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
$ 1,200 Elyria, City School
District, 4.59%, 4/11/96 $ 1,200
900 Erie County, 4.17%, 7/19/96 901
1,200 Euclid IDR, 3.95%, 4/15/96,
LOC Bank One 1,200
2,500 Fairfield, 4.08%, 8/30/96 2,502
767 Fairfield County, 4.75%,
9/4/95 770
900 Findlay, 4.75%, 6/11/96 904
2,205 Franklin County IDR, 4.05%,
3/1/96, LOC Society
National Bank 2,205
1,560 Franklin County IDR, 4.15%*,
10/1/15**, LOC Fifth-Third
Bank 1,560
7,200 Franklin County IDR, 4.25%*,
12/1/15**, LOC Banc One 7,200
2,600 Franklin County IDR, 4.00%*,
12/1/16**, LOC Fifth-Third
Bank 2,600
1,000 Franklin County IDR, 4.20%*,
4/1/19**, LOC Huntington
National Bank 1,000
3,500 Franklin County, Childrens
Hospital, 4.10%*,
12/1/14** 3,500
1,860 Franklin County, Health Care
Facilities, 4.00%*,
6/1/15**, LOC Fifth-Third
Bank 1,860
1,000 Franklin County, Hospital
Revenue, 3.95%*, 5/1/15**,
LOC NBD Bank 1,000
4,800 Franklin County, Holy Cross
Hospital, 3.90%*, 6/1/16** 4,800
3,800 Franklin County IDR, 4.25%*,
12/1/02**, LOC Huntington
National Bank 3,800
1,500 Franklin County IDR, 4.07%*,
4/1/13**, LOC Fifth-Third
Bank 1,500
5,280 Franklin County IDR, 4.07%*,
4/1/13**, LOC Fifth-Third
Bank 5,280
1,650 Geauga County, 5.30%,
12/14/95 1,650
3,300 Greene County, Apple Valley,
3.85%*, 8/1/09**, LOC
Pittsburgh National Bank 3,300
3,615 Hamilton County IDR, 4.15%*,
12/1/04**, LOC Fifth-Third
Bank 3,615
<CAPTION>
SHARES OR
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
$ 2,870 Hamilton County IDR, 4.15%*,
12/1/08**, LOC Fifth-Third
Bank $ 2,870
1,650 Hamilton County IDR, 4.00%*,
6/15/05**, LOC Fifth-Third
Bank 1,650
1,360 Hancock County IDR, 4.40%,
12/1/95**, Bank One 1,360
1,305 Hancock County, 4.40%,
4/15/96 1,309
1,870 Hancock County, 4.77%,
3/7/96 1,871
1,600 Highland County, 3.90%,
3/1/96 1,600
890 Hilliard IDR, 4.15%*,
12/1/14**, LOC Fifth-Third
Bank 890
1,395 Holmes County, 4.65%,
11/21/95 1,395
500 Holmes County IDR, 4.10%*,
4/1/09**, LOC Rabobank 500
2,955 Independence IDR, 4.45%*,
1/1/96, LOC Huntington
National Bank 2,955
1,000 Independence, 3.98%, 3/6/96 1,000
2,000 Licking County IDR, 4.15%*,
4/1/05**, LOC Bank One 2,000
1,455 Lorain County IDR, 3.95%,
4/15/96**, LOC Bank One 1,455
3,450 Lorain County, Elyria Home,
3.95%*, 6/1/12**, LOC
Fifth-Third Bank 3,450
990 Lorain County Hospital,
4.00%*, 5/1/01**, LOC
Pittsburgh National Bank 990
1,050 Lorain County IDR, 4.15%*,
6/1/09**, LOC Bank One 1,050
1,065 Lucas County IDR, 4.40%,
12/1/95**, LOC Bank One 1,065
620 Lucas County IDR, 4.10%*,
3/1/06**, LOC National
City Bank 620
6,000 Lucas County IDR, 4.10%*,
12/1/12**, LOC National
City Bank 6,000
450 Lucas County IDR, 4.10%*,
12/1/07**, LOC National
Cilty Bank 450
2,770 Mahoning County IDR, 4.00%*,
4/1/17**, LOC Bank One 2,770
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
49
<PAGE> 55
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1995
OHIO MUNICIPAL MONEY MARKET FUND (Amounts in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
$ 440 Mahoning County IDR, 4.00%*,
6/1/03**, LOC Bank One $ 440
2,405 Mahoning County Healthcare,
4.00%*, 9/1/20**, LOC Bank
One 2,405
3,310 Marion County Hospital Pool,
4.25%*, 11/1/95**, LOC
Bank One 3,310
1,125 Marion County, 5.10%,
2/15/96 1,125
1,475 Marion County, 5.35%,
2/15/96 1,477
630 Marion County Hospital Pool,
4.00%*, 5/1/19**, LOC Bank
One 630
1,305 Marion County Hospital Pool,
4.00%*, 10/1/22**, LOC
Bank One 1,305
5 Marion County Hospital Pool,
4.00%*, 3/1/16**, LOC Bank
One 5
241 Marion County Hospital Pool,
4.00%*, 8/1/20**, LOC Bank
One 241
715 Marion County Hospital,
4.00%*, 4/1/17**, LOC Bank
One 715
1,200 Marysville School District,
4.27%, 12/20/95 1,201
3,700 Mason School District,
4.33%, 12/19/95 3,703
550 Mayfield Heights, 4.00%,
7/5/96 550
850 Mayfield Heights, 4.00%,
7/25/96 851
3,500 Medina County, 4.25%,
10/10/96 3,509
1,700 Mentor, 4.74%, 11/30/95 1,700
1,200 Middlefield, 5.25%, 3/1/96 1,202
1,700 Milford, 3.92%, 2/1/96 1,701
875 Montgomery County, Health
Care Facility, 4.00%*,
9/1/01**, LOC Society
National Bank 875
2,830 Montgomery Industrial
Development, 4.45%*,
5/2/05**, LOC Huntington
National Bank 2,830
1,945 Muskingum County, Hospital,
4.45%* 1/1/01**, LOC
Huntington National Bank 1,945
<CAPTION>
SHARES OR
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
$ 10,000 North Olmsted, 4.67%,
6/20/96 $ 10,025
1,300 Northwood, 4.70%, 8/1/96 1,306
1,945 Ohio Higher Education, Mt.
Union College, 3.95%*,
9/1/20**, LOC NBD Bank 1,945
10,200 Ohio Housing Finance
Authority, 3.95%*,
3/1/15**, LOC Bayerische
Landesbank 10,200
1,500 Ohio Housing Finance
Authority, 3.95%*,
3/1/15**, LOC Bayerische
Landesbank 1,500
16,530 Ohio Housing Finance
Authority, 4.15%*,
3/1/22**, LoC Bayerische
Landesbank 16,530
2,000 Ohio School District Cash
Flow, 4.52%, 6/28/96 2,008
2,500 Ohio State Air Quality
Development Revenue,
3.90%, 11/9/95, LOC
Toronto Dominion 2,500
6,000 Ohio State Air Quality
Development Revenue,
9.50%, 12/1/95, LOC
Societe Generale 6,177
5,000 Ohio State Air Quality
Development Revenue,
3.75%, 12/4/95, LOC
Toronto Dominion 5,000
7,400 Ohio State Air Quality
Development Revenue,
3.50%, 12/7/95, FGIC 7,400
4,000 Ohio State Air Quality
Development Revenue,
3.80%, 1/10/96, FGIC 4,000
1,000 Ohio State Air Quality
Development Revenue,
3.45%, 2/1/96, LOC Toronto
Dominion 995
3,000 Ohio State Air Quality
Development Revenue,
3.70%, 12/4/95 3,000
2,800 Ohio State Air Quality
Development Revenue,
3.50%, 12/15/95 2,800
3,000 Ohio State Air Quality
Development Revenue,
3.70%, 12/15/95 3,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
50
<PAGE> 56
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1995
OHIO MUNICIPAL MONEY MARKET FUND (Amounts in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
$ 2,000 Ohio State Air Quality
Development Revenue,
3.50%, 12/6/95, LOC J.P.
Morgan $ 2,000
2,500 Ohio State Air Quality
Development Revenue,
3.90%, 11/1/95, LOC
Toronto Dominion 2,500
2,000 Ohio State Air Quality
Development Revenue,
3.65%, 11/7/95, LOC
Toronto; Dominion 2,000
1,500 Ohio State Air Quality
Development Revenue,
3.55%, 11/8/95, LOC Union
Bank of Switzerland 1,500
1,300 Ohio State Air Quality
Development Revenue,
3.60%, 12/5/95, LOC Union
Bank of Switzerland 1,300
6,400 Ohio State Air Quality
Development Revenue,
3.55%, 12/8/95, LOC Union
Bank of Switzerland 6,400
2,200 Ohio State Air Quality
Development Revenue,
3.50%, 1/12/96, LOC Union
Bank of Switzerland 2,200
1,000 Ohio State Air Quality
Development Revenue,
Cincinnati G&E, 3.55%,
12/7/95, LOC J.P. Morgan 1,000
6,000 Ohio State Air Quality
Development Revenue,
Series 1992B, 4.05%*,
4/1/28**, LOC Societe
Generale 6,000
1,000 Ohio State Environmental
IDR, 3.95%*, 12/1/01**,
LOC Pittsburgh National
Bank 1,000
1,000 Ohio State Higher Education,
4.10%*, 9/1/09**, LOC
National City Bank 1,000
1,400 Ohio State Higher Education,
Kenyon College, 3.90%*,
4/1/22** 1,400
210 Ohio State IDR, 4.10%*,
7/1/02**, LOC Bank One 210
2,845 Ohio State IDR, 4.10%*,
1/2/03**, LOC Bank One 2,845
<CAPTION>
SHARES OR
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
$ 995 Ohio State IDR, 4.10%*,
6/7/06**, LOC National
City Bank $ 995
950 Ohio State IDR, 4.10%*,
7/1/07**, LOC Bank One 950
875 Ohio State IDR, 4.10%*,
12/1/11**, LOC Bank One 875
720 Ohio State IDR, 4.10%*,
6/1/16**, LOC National
Cilty Bank 720
2,500 Ohio State IDR, 4.15%*,
6/1/20**, LOC Bank One 2,500
6,300 Ohio State Water Development
Authority, 3.90%, 11/9/95,
LOC Toronto Dominion 6,300
1,500 Ohio State Water Development
Authority, 3.85%, 12/6/95 1,500
2,435 Ohio State Water Development
Authority, 3.50%, 12/7/95,
FGIC 2,435
7,000 Ohio State Water Development
Authority, 3.60%, 12/8/95,
FGIC 7,000
5,300 Ohio State Water Development
Authority, 3.75%, 12/8/95,
LOC Toronto Dominion 5,300
3,050 Ohio State Water Development
Authority, 3.80%, 12/8/95,
LOC Toronto Dominion 3,050
5,600 Ohio State Water Development
Authority, 3.70%,
12/15/95, FGIC 5,600
4,300 Ohio State Water Development
Authority, 3.80%, 1/12/96,
FGIC 4,300
200 Orrville IDR, 4.20%*,
9/1/00**, LOC National
City Bank 200
250 Orrville IDR, 4.20%*,
8/1/03**, LOC National
City Bank 250
4,400 Ottawa County, 4.70%,
4/11/96 4,403
1,280 Ottoville, 5.72%, 11/1/95 1,280
1,600 Paulding County IDR, 4.00%*,
3/1/99**, LOC Fifth-Third
Bank 1,600
750 Perrysburg, 4.65%, 8/22/96 753
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
51
<PAGE> 57
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1995
OHIO MUNICIPAL MONEY MARKET FUND (Amounts in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
$ 590 Pickerington, 4.07%, 8/9/96 $ 590
3,500 Pike County IDR, 4.15%*,
6/1/13**, LOC Fifth-Third
Bank 3,500
2,090 Portsmouth IDR, 4.15%*,
10/1/02**, LOC Bank One 2,090
1,000 Portsmouth IDR, 4.15%*,
12/1/09**, LOC National
City Bank 1,000
2,820 Richland County IDR, 4.15%*,
12/1/16**, LOC Huntington
National Bank 2,820
4,000 Rickenbacker Port Authority,
4.00%*, 12/1/10**, LOC
Bank One 4,000
2,750 Ross County, Ohio Medical
Center, 3.95%*, 12/1/20**,
LOC Fifth-Third 2,750
100 Scioto County Hospital,
3.85%*, 12/1/25**, AMBAC,
LOC Mellon Bank 100
700 Scioto County Hospital,
3.85%*, 12/1/25**, AMBAC,
LOC Mellon Bank 700
1,600 Seneca County, St. Francis
Hospital, 4.05%*,
12/15/13**, LOC National
City Bank 1,600
1,560 Seven Hills, 3.95%, 5/9/95 1,560
1,000 Sharonville IDR, 4.07%*,
11/1/09**, LOC Banque
Nationale De Paris 1,000
1,800 Sharonville IDR, 4.20%*,
10/1/98**, LOC Fifth-Third
Bank 1,800
6,155 Sharonville IDR, 4.00%*,
9/1/14**, LOC National
City Bank 6,155
585 Sheffield Village, 4.50%,
9/20/96 587
2,430 Stark Health Care Facility,
4.00%*, 3/1/13** 2,430
1,950 Stow, 5.10%, 12/21/95 1,950
1,190 Streetsboro, 4.26%, 10/10/96 1,191
1,150 Strongsville, 4.20%, 9/12/96 1,152
9,700 Student Loan Funding Corp.,
Cincinnati, 4.05%*,
1/1/07** 9,700
<CAPTION>
SHARES OR
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
$ 1,000 Student Loan Funding Corp.,
Cincinnati, 4.05%*,
1/1/07** $ 1,000
4,100 Student Loan Funding Corp.,
Cincinnati, 4.05%*,
1/1/07**, LOC Nation West 4,100
13,145 Student Loan Funding Corp.,
Cincinnati, Student Loan
Revenue, 4.00%*,
12/29/98** 13,145
445 Summit County IDR, 4.05%,
3/1/96**, LOC Bank One 445
980 Summit County IDR, 3.80%,
4/1/96**, LOC Bank One 980
1,290 Summit County, 4.25%, 6/6/96 1,292
2,300 Summit County IDR, 4.20%*,
8/1/05**, LOC Huntington
National Bank 2,300
2,000 Summit County, Cuyahoga
Falls Hospital, 4.00%*,
7/1/99**, LOC Bank One 2,000
515 Summit County IDR, 4.50%,
3/1/96**, LOC Bank One 515
700 Summit County IDR, 4.15%*,
9/1/01**, LOC Bank One 700
1,100 Summit County IDR, 4.15%*,
9/1/11**, LOC Bank One 1,100
2,335 Summit County IDR, 4.00%*,
9/1/05**, LOC Bank One 2,335
1,815 Summit County IDR, 4.00%*,
9/1/11**, LOC Bank One 1,815
2,680 Toledo, 3.90%, 6/1/96, LOC
Canadian Imperial Bank of
Commerce 2,682
3,500 Toledo, Lucas County, 3.55%,
11/9/95, LOC Bank of Nova
Scotia 3,500
2,800 Toledo, Lucas County IDR,
4.25%*, 12/1/06**, LOC
Pittsburgh National Bank 2,800
3,000 Toledo, Lucas County, 3.55%,
1/12/96, LOC Bank of Nova
Scotia 3,000
3,200 Toledo, Lucas County, 4.00%,
12/15/21, LOC Bank of Nova
Scotia 3,200
1,205 Toledo, Lucas County, Port
Authority, 4.40%*,
12/1/13**, LOC Old Kent
Bank 1,205
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
52
<PAGE> 58
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1995
OHIO MUNICIPAL MONEY MARKET FUND (Amounts in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
$ 940 Troy IDR, 4.35%, 12/1/95,
LOC Societe Generale $ 940
300 Trumbull County IDR, 4.15%*,
6/1/05**, LOC Pittsburgh
National Bank 300
7,000 Trumbull County IDR, 4.20%*,
12/1/06**, LOC Mellon Bank 7,000
750 Twinsburg IDR, 4.20%*,
7/1/98**, LOC National
City Bank 750
1,955 Union County, 4.19%, 6/28/96 1,959
1,000 University of Cincinnati,
General Receipts, 5.00%,
3/21/96 1,001
600 Wauseon, 5.25%, 5/23/96 602
2,330 Westerville IDR, 3.95*,
12/1/11**, LOC National
City Bank 2,330
1,440 West Clermont, Local School
District, 4.23%, 4/15/96 1,442
6,750 Westlake IDR, 4.28%*,
7/2/08**, LOC National
City Bank 6,750
2,900 Westlake IDR, 4.00%*,
3/1/02**, LOC Bayerische
Landesbank 2,900
2,600 Williams County, 5.25%,
5/16/96 2,609
3,500 Williams County IDR, 4.00%*,
11/1/08**, LOC NBD Bank 3,500
1,500 Wilmington, 4.39%, 4/10/96 1,502
<CAPTION>
SHARES OR
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
$ 300 Wooster, IDR, 3.85%*,
12/1/10**, LOC Dresdner
Bank $ 300
928 Wyoming, 4.19%, 7/10/96 929
- ------------------------------------------------------------
TOTAL MUNICIPAL BONDS 501,731
- ------------------------------------------------------------
- ----------------------------------------------
INVESTMENT COMPANIES (1.3%)
6,547 Federated Ohio Municipal
Cash Trust Fund 6,547
- ------------------------------------------------------------
TOTAL INVESTMENT COMPANIES 6,547
- ------------------------------------------------------------
TOTAL (COST-$508,278)(a) $ 508,278
- ------------------------------------------------------------
</TABLE>
- ---------------
Percentages indicated are based on net assets of $510,414.
(a) Cost for federal income tax and financial reporting purposes are the same.
* Variable rate securities having liquidity sources through bank letters of
credit or other credit and/or liquidity arrangements. The interest rate,
which will change periodically. The rate reflected on the Schedule of
Investments is the rate in effect on October 31, 1995.
** Put and demand features exist allowing the Fund to require the repurchase of
the investment within variable time periods of less than one year.
AMBAC -- American Municipal Bond Assurance Corp.
FGIC -- Financial Guaranty Insurance Company
GECC -- General Electric Capital Corp.
GTD -- Guaranteed
IDR -- Industrial Development Revenue
LOC -- Letter of Credit
SEE NOTES TO FINANCIAL STATEMENTS.
53
<PAGE> 59
Schedule of Investments
THE VICTORY PORTFOLIOS October 31, 1995
LIMITED TERM INCOME FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
- ---------------------------------------------------------
ASSET BACKED SECURITIES (0.8%)
$ 227 Capital Auto Receivables
Asset Trust, 1993-1 Class
A-6, 4.90%, 2/17/98 $ 227
1,000 Capital Auto Receivables
Asset Trust, 1993-1 Class
A-7, 5.35%, 2/15/98 997
121 GMAC 1993 A Grantor Trust,
Class A, 4.15%, 3/15/98 120
- ----------------------------------------------------------
TOTAL ASSET BACKED SECURITIES 1,344
- ----------------------------------------------------------
- ---------------------------------------------------------
COLLATERALIZED MORTGAGE
OBLIGATIONS (7.7%)
FEDERAL HOME LOAN MORTGAGE CORP.:
1,321 7.00%, 7/15/98 1,334
2,000 5.50%, 10/15/02 1,979
2,000 5.50%, 11/15/03 1,975
359 8.40%, 1/15/05 362
519 6.00%, 2/15/13 517
52 8.00%, 1/15/18 52
1,300 8.50%, 9/15/19 1,315
FEDERAL NATIONAL MORTGAGE ASSOC.:
2,000 6.00%, 10/25/03 1,993
1,000 8.00%, 3/25/04 1,014
1,373 5.75%, 6/25/06 1,359
585 7.00%, 2/25/18 584
765 7.50%, 7/25/18 777
- ----------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS 13,261
- ----------------------------------------------------------
- ----------------------------------------------
CORPORATE BONDS (15.3%)
BROKERAGE SERVICES (2.0%):
1,500 Lehman Brothers Holdings,
5.50%, 6/15/96 1,493
2,000 Lehman Brothers Holdings,
5.75%, 11/15/98 1,948
--------
3,441
--------
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
BUSINESS EQUIPMENT (1.2%):
$ 2,175 International Business
Machines Corp.,
6.38%, 11/1/97 $ 2,186
--------
CHEMICALS (0.6%):
1,000 Dow Capital,
5.75%, 9/15/97 993
--------
FINANCIAL SERVICES (6.1%):
1,000 American Express Co.,
6.05%, 7/15/97 1,002
1,000 Associates Corp.,
6.88%, 1/15/97 1,011
1,500 Associates Corp.,
7.25%, 9/1/99 1,551
3,000 Ford Motor Credit,
7.13%, 12/1/97 3,060
1,800 Merrill Lynch, Corp.,
5.00%, 12/15/96 1,800
2,000 Norwest Corp.,
7.75%, 12/31/96 2,042
--------
10,466
--------
GOVERNMENTS (FOREIGN) (0.6%):
1,000 Province of Ontario Global
Bonds,
5.70%, 10/1/97 999
--------
INDUSTRIAL GOODS & SERVICES (2.4%):
2,000 Burlington Resources,
7.15%, 5/1/99 2,060
2,000 WMX Technologies,
7.13%, 3/22/97 2,028
--------
4,088
--------
INSURANCE (1.2%):
2,000 International Lease Finance,
8.35%, 10/1/98 2,115
--------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
54
<PAGE> 60
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1995
LIMITED TERM INCOME FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
UTILITIES -- GAS & ELECTRIC (1.2%):
$ 1,000 Northern Illinois Gas,
5.50%, 2/1/97 $ 994
1,000 Northern States Power Corp.,
5.50%, 2/1/99 979
--------
1,973
- ----------------------------------------------------------
TOTAL CORPORATE BONDS 26,261
- ----------------------------------------------------------
- ----------------------------------------------
U.S. GOVERNMENT AGENCIES (8.7%)
FEDERAL HOME LOAN BANK:
5,000 7.63%, 3/15/99** 5,022
3,000 8.13%, 2/22/00** 3,116
FEDERAL HOME LOAN MORTGAGE CORP.:
2,000 5.20%, 8/4/97 1,979
FEDERAL NATIONAL MORTGAGE ASSOC.:
2,000 5.30%, 1/17/97 1,990
3,000 5.23%, 11/25/98** 2,935
- ----------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCIES 15,042
- ----------------------------------------------------------
- ----------------------------------------------
U.S. TREASURY NOTES (65.0%)
1,000 7.50%, 12/31/96 1,021
8,000 7.50%, 1/31/97 8,180
16,000 6.88%, 2/28/97 16,253
10,000 6.63%, 3/31/97 10,136
2,000 6.50%, 5/15/97 2,025
7,000 6.50%, 8/15/97 7,101
4,000 7.38%, 11/15/97 4,131
10,500 7.88%, 4/15/98 11,021
7,000 5.88%, 8/15/98 7,030
16,000 4.75%, 8/31/98 15,606
9,000 7.75%, 11/30/99 9,626
12,000 7.13%, 2/29/00 12,592
5,000 6.13%, 9/30/00 5,065
2,000 5.75%, 10/31/20 1,995
- ----------------------------------------------------------
TOTAL U.S. TREASURY NOTES 111,782
- ----------------------------------------------------------
- ----------------------------------------------
INVESTMENT COMPANIES (1.3%)
2,181,663 AIM Treasury Portfolio 2,182
- ----------------------------------------------------------
TOTAL INVESTMENT COMPANIES 2,182
- ----------------------------------------------------------
TOTAL (COST $168,101) (a) $169,872
- ---------------------------------------------------------
</TABLE>
- ---------------
Percentages indicated are based on net assets of $172,002.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows (amounts in thousands):
<TABLE>
<S> <C> <C> <C>
Unrealized appreciation $ 2,209
Unrealized depreciation (438)
--------
Net unrealized appreciation $ 1,771
=========
</TABLE>
** Put and demand features exist allowing the Fund to require the repurchase of
the investment within variable time periods of less than one year.
SEE NOTES TO FINANCIAL STATEMENTS.
55
<PAGE> 61
Schedule of Investments
THE VICTORY PORTFOLIOS October 31, 1995
INTERMEDIATE INCOME FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
- ---------------------------------------------------------
ASSET BACKED SECURITIES (0.6%)
$ 1,000 Capital Auto Receivables
Asset Trust,
5.35%, 2/15/98 $ 997
- ----------------------------------------------------------
TOTAL ASSET BACKED SECURITIES 997
- ----------------------------------------------------------
- ----------------------------------------------
COLLATERALIZED MORTGAGE
OBLIGATIONS (12.7%)
FEDERAL HOME LOAN MORTGAGE CORP.:
2,114 5.80%, 4/15/14 2,098
1,800 6.50%, 5/15/03 1,808
1,994 6.50%, 7/15/16 1,991
1,000 7.00%, 5/15/99 1,019
1,736 7.50%, 9/15/20 1,756
52 8.00%, 1/15/18 52
2,500 8.40%, 1/15/21 2,554
FEDERAL NATIONAL MORTGAGE ASSOC.:
2,475 6.00%, 10/25/03 2,466
4,000 6.25%, 5/25/19 3,957
956 7.50%, 7/25/18 972
2,000 8.50%, 8/25/19 2,071
- ----------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS 20,744
- ----------------------------------------------------------
- ----------------------------------------------
CORPORATE BONDS (29.3%)
APPLIANCES (0.7%):
1,000 Whirlpool Corp. Notes,
9.50%, 6/15/00 1,125
--------
AUTOMOTIVE (2.1%):
1,000 General Motors Corp.,
9.13%, 7/15/01 1,124
1,000 General Motors Corp.,
9.63%, 12/1/00 1,137
1,000 Ford Motor Co.,
9.00%, 9/15/01 1,126
--------
3,387
--------
BANKING (0.7%):
1,000 Wells Fargo & Co.,
8.75%, 5/1/02 1,119
--------
BROKERAGE SERVICES (3.0%):
5,000 Lehman Brothers Sr.
Subordinated Note,
5.75%, 11/15/98 4,869
--------
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
CHEMICALS (1.3%):
$ 1,000 Dow Chemical,
5.75%, 9/15/97 $ 992
1,000 Monsanto Defined,
8.13%, 12/15/06 1,111
--------
2,103
--------
FINANCIAL SERVICES (11.6%):
2,000 American Express Credit,
8.50%, 8/15/01 2,212
2,000 American Express Credit,
6.75%, 6/1/01 2,040
4,000 Bear Stearns Co.,
9.38%, 6/1/01 4,515
2,500 Merrill Lynch,
8.25%, 11/15/99 2,666
1,000 Norwest Corp.,
7.75%, 12/31/96 1,021
3,500 Salomon, Inc.,
6.75%, 1/15/06 3,259
3,000 Transamerica Financial,
8.75%, 10/1/99 3,240
--------
18,953
--------
FOOD PRODUCTS (0.6%):
1,000 Super Valu, Inc.,
5.88%, 11/15/95 1,000
--------
INDUSTRIAL GOODS & SERVICES (5.9%):
3,000 Amoco Canada,
7.25%, 12/1/02 3,157
1,000 Grand Metropolitan Investment
Corp.,
8.63%, 8/15/01 1,114
3,000 Service Corp. International,
8.38%, 12/15/04 3,349
2,000 WMX Technologies,
7.13%, 3/22/97 2,028
--------
9,648
--------
OIL & GAS EXPLORATION (0.6%):
1,000 Chevron Corp. Amortization
Notes,
8.11%, 12/1/04 1,108
--------
PRINTING & PUBLISHING (1.4%):
1,000 Knight Ridder, Inc.,
8.50%, 9/1/01 1,114
1,000 R.R. Donnelley & Sons Co.,
9.13%, 12/1/00 1,135
--------
2,249
--------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
56
<PAGE> 62
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1995
INTERMEDIATE INCOME FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
UTILITIES -- TELECOMMUNICATIONS (1.4%):
$ 2,000 GTE Corp. Notes,
9.10%, 6/1/03 $ 2,265
- ----------------------------------------------------------
TOTAL CORPORATE BONDS 47,826
- ----------------------------------------------------------
MEDIUM TERM NOTES (0.6%):
INDUSTRIAL (0.6%):
1,000 J.C. Penney, Inc.,
6.38%, 9/15/00 1,005
- ----------------------------------------------------------
TOTAL MEDIUM TERM NOTE 1,005
- ----------------------------------------------------------
U.S. GOVERNMENT AGENCIES (4.3%):
FEDERAL HOME LOAN BANK:
5,000 7.63%, 3/15/99, 3/15/96** 5,022
FEDERAL NATIONAL MORTGAGE ASSOC.:
2,000 5.23%, 11/25/98, 11/25/96** 1,957
- ----------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCIES 6,979
- ----------------------------------------------------------
- ----------------------------------------------
U.S. TREASURY NOTES (46.9%)
3,000 4.75%, 8/31/98 2,926
3,000 5.75%, 10/31/00 2,992
5,000 5.88%, 8/15/98 5,022
3,000 6.13%, 9/30/00 3,039
11,000 6.50%, 8/15/05 11,386
4,000 6.88%, 4/30/97 4,072
7,000 7.00%, 4/15/99 7,266
16,000 7.13%, 2/29/00 16,789
22,000 7.88%, 4/15/98 23,091
- ----------------------------------------------------------
TOTAL U.S. TREASURY NOTES 76,583
- ----------------------------------------------------------
- ----------------------------------------------
INVESTMENT COMPANIES (4.4%)
7,138,512 Aim Treasury Portfolio 7,139
- ----------------------------------------------------------
TOTAL INVESTMENT COMPANIES 7,139
- ----------------------------------------------------------
TOTAL (COST $159,722)(a) $161,273
- ----------------------------------------------------------
</TABLE>
- ---------------
Percentages indicated are based on net assets of $163,281.
(a) Represents cost for financial reporting purposes and differs from cost basis
for federal income tax reporting purposes by the amount of losses recognized
for financial reporting purposes in excess of federal income tax reporting
of approximately $13. Cost for federal income tax purposes differs from
value by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C> <C> <C>
Unrealized appreciation $ 2,450
Unrealized depreciation (912)
--------
Net unrealized appreciation $ 1,538
=========
</TABLE>
** Put and demand features exist allowing the Fund to require the repurchase of
the investment within variable time periods of less than one year.
SEE NOTES TO FINANCIAL STATEMENTS.
57
<PAGE> 63
Schedule of Investments
THE VICTORY PORTFOLIOS October 31, 1995
INVESTMENT QUALITY BOND FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
- ----------------------------------------------
ASSET BACKED SECURITIES (0.6%)
$ 233 Capital Auto Receivables
Asset Trust,
4.90%, 2/17/98 $ 233
442 Railcar Trust, Series 92-1,
7.75%, 6/1/04 470
- ------------------------------------------------------------
TOTAL ASSET BACKED SECURITIES 703
- ------------------------------------------------------------
- ----------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS (0.9%)
FEDERAL HOME LOAN MORTGAGE CORP.:
1,092 7.50%, 4/1/07 1,113
FEDERAL NATIONAL MORTGAGE ASSOC.:
41 7.00%, 3/25/18 41
10 7.25%, 6/25/18 10
- ------------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS 1,164
- ------------------------------------------------------------
- ----------------------------------------------
CORPORATE BONDS (22.3%)
AUTOMOTIVE (2.3%):
1,000 Ford Motor Co.,
8.88%, 1/15/22 1,196
1,000 Ford Motor Co.,
9.00%, 9/15/01 1,126
500 General Motors,
9.13%, 7/15/01 562
----------
2,884
----------
BANKING (3.9%):
600 BankAmerica Corp.,
9.63%, 2/13/01 684
1,020 First Union Corp,
9.45%, 6/15/99 1,123
800 SunTrust Banks Inc.,
7.38%, 7/1/02 853
2,000 Wells Fargo & Co.,
8.75%, 5/1/02 2,238
----------
4,898
----------
BROKERAGE SERVICES (1.3%):
500 Morgan Stanley,
8.00%, 10/15/96 509
1,000 Morgan Stanley,
8.88%, 10/15/01 1,116
----------
1,625
----------
ELECTRICAL & ELECTRONIC (0.8%):
1,000 Philips Electronics,
7.13%, 5/15/25 1,027
----------
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
FINANCIAL SERVICES (1.9%):
$ 255 Ford Motor Credit Co.,
9.40%, 11/16/95 $ 255
1,000 Lehman Brothers Holdings,
7.38%, 5/15/07 1,025
1,020 Merrill Lynch,
8.25%, 11/15/99 1,088
----------
2,368
----------
GOVERNMENTS (FOREIGN) (0.6%):
700 Quebec Province, Canada,
7.50%, 7/15/23 702
----------
HEALTH CARE (0.9%):
1,000 Columbia Health Care,
8.85%, 1/1/07, 1,154
----------
INDUSTRIAL GOODS & SERVICES (5.3%):
1,500 Black & Decker,
7.50%, 4/1/03 1,541
500 Dean Foods Co.,
6.75%, 6/15/05 505
1,000 Georgia-Pacific,
9.95%, 6/15/02 1,171
500 Loral,
7.63%, 8/15/25 508
1,000 Lubrizol Corp.,
7.25%, 6/15/25 1,031
1,200 Nabisco, Inc.,
8.00%, 1/15/00 1,267
500 Westvaco Corp.,
9.75%, 6/15/20 644
----------
6,667
----------
MACHINERY & EQUIPMENT (1.0%):
1,100 John Deere Capital,
8.63%, 8/1/19 1,222
----------
TOBACCO & TOBACCO RELATED (1.8%):
2,000 Phillip Morris,
9.00%, 1/1/01 2,213
----------
UTILITIES -- TELECOMMUNICATIONS (1.1%):
510 GTE Hawaiian Telephone
Service,
9.00%, 12/1/00 519
510 MCI Communications,
7.63%, 11/7/96 519
360 Northern Telecom Ltd.,
8.25%, 6/13/96 365
----------
1,403
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
58
<PAGE> 64
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1995
INVESTMENT QUALITY BOND FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
UTILITIES -- TELEPHONE (1.4%):
$ 750 A T &T Corp.,
4.50%, 2/15/96 $ 748
1,000 New England Telephone &
Telegraph,
6.25%, 12/15/97 1,003
----------
1,751
- ------------------------------------------------------------
TOTAL CORPORATE BONDS 27,914
- ------------------------------------------------------------
- ----------------------------------------------
U.S. GOVERNMENT AGENCIES (36.4%)
FEDERAL HOME LOAN MORTGAGE CORP.:
133 8.00%, 5/1/02 136
FEDERAL NATIONAL MORTGAGE ASSOC.:
2,969 6.00%, 8/1/10 2,901
1,506 7.50%, 3/1/24 1,522
2,396 9.00%, 3/1/25 2,502
1,276 9.00%, 5/1/25 1,333
GOVERNMENT NATIONAL MORTGAGE ASSOC.:
2,574 6.50%, 2/15/09 2,570
957 6.50%, 7/15/23 932
1,409 7.00%, 10/15/23 1,401
2,594 7.50%, 8/15/22 2,629
198 7.50%, 8/15/23 201
612 7.50%, 8/15/23 621
1,370 7.50%, 10/15/23 1,389
4,646 7.50%, 1/15/24 4,711
1,912 7.50%, 5/15/24 1,939
1,407 8.50%, 9/15/17 1,462
1,573 8.50%, 8/15/22 1,639
1,124 8.50%, 2/15/23 1,169
7,253 8.50%, 12/15/24 7,552
1,454 9.00%, 2/15/17 1,523
803 9.00%, 6/15/18 842
776 9.00%, 10/15/19 813
805 9.00%, 10/15/19 843
1,148 9.00%, 12/15/19 1,202
719 9.00%, 12/15/19 753
673 9.00%, 12/15/19 705
1,608 9.00%, 1/15/20 1,690
570 9.00%, 10/15/21 597
- ------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCIES 45,577
- ------------------------------------------------------------
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
- ----------------------------------------------
U.S. TREASURY BONDS (12.8%)
$ 2,000 7.13%, 2/15/23 $ 2,179
11,155 7.50%, 11/15/24 12,741
1,000 7.63%, 2/15/25 1,160
- ------------------------------------------------------------
TOTAL U.S. TREASURY BONDS 16,080
- ------------------------------------------------------------
- ----------------------------------------------
U.S. TREASURY NOTES (21.5%)
3,100 5.75%, 9/30/97 3,108
5,000 6.13%, 5/31/97 5,036
1,500 6.13%, 9/30/00 1,520
5,000 7.13%, 2/29/00 5,247
4,000 7.25%, 5/15/04 4,328
4,000 7.50%, 1/31/96 4,019
1,000 7.50%, 2/29/96 1,006
2,500 7.75%, 1/31/00 2,679
- ------------------------------------------------------------
TOTAL U.S. TREASURY NOTES 26,943
- ------------------------------------------------------------
- ----------------------------------------------
INVESTMENT COMPANIES (4.0%)
5,021,916 Aim Treasury Portfolio 5,022
- ------------------------------------------------------------
TOTAL INVESTMENT COMPANIES 5,022
- ------------------------------------------------------------
TOTAL (COST $122,273)(A) $ 123,403
- ---------------------------------------------------------
</TABLE>
- ---------------
Percentages indicated are based on net assets of $125,248.
(a) Represents cost for financial reporting purposes and differs from cost basis
for federal income tax reporting purposes by the amount of losses recognized
for financial reporting proposes in excess of federal income tax reporting
of approximately $43. Cost for federal income tax purposes and differs from
value by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C> <C> <C>
Unrealized appreciation $ 1,948
Unrealized depreciation (861)
----------
Net unrealized depreciation $ 1,087
==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
59
<PAGE> 65
Schedule of Investments
THE VICTORY PORTFOLIOS October 31, 1995
GOVERNMENT BOND FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
- ----------------------------------------------
U.S. TREASURY BONDS (21.9%)
$ 4,000 8.13%, 8/15/19 $ 4,812
1,000 12.00%, 8/15/13 1,500
- ----------------------------------------------------------
TOTAL U.S. TREASURY BONDS 6,312
- ----------------------------------------------------------
- ---------------------------------------------------------
U.S. TREASURY NOTES (72.9%)
5,200 6.50%, 4/30/99 5,321
2,000 6.50%, 5/15/05 2,069
2,000 6.50%, 8/15/05 2,070
5,000 6.75%, 5/31/99 5,156
3,000 7.75%, 11/30/99 3,209
3,000 7.88%, 4/15/98 3,149
- ----------------------------------------------------------
TOTAL U.S. TREASURY NOTES 20,974
- ----------------------------------------------------------
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
- ---------------------------------------------------------
INVESTMENT COMPANIES (3.8%)
$1,081,904 Federated Treasury
Obligation $ 1,082
- ----------------------------------------------------------
TOTAL INVESTMENT COMPANIES 1,082
- ----------------------------------------------------------
TOTAL (COST $27,598)(a) $ 28,368
- ----------------------------------------------------------
</TABLE>
- ---------------
Percentages indicated are based on net assets of $28,765.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C> <C> <C>
Unrealized appreciation $ 779
Unrealized depreciation (9)
--------
Net unrealized depreciation $ 770
=========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
60
<PAGE> 66
Schedule of Investments
THE VICTORY PORTFOLIOS October 31, 1995
GOVERNMENT MORTGAGE FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
- ---------------------------------------------------------
COLLATERALIZED MORTGAGE
OBLIGATIONS (11.2%)
FEDERAL HOME LOAN MORTGAGE CORP.:
$ 5,000 5.50%, 10/15/02 $ 4,947
FEDERAL NATIONAL MORTGAGE ASSOC.:
10,000 7.50%, 8/25/22 10,284
- ---------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS 15,231
- ---------------------------------------------------------
- ---------------------------------------------------------
U.S. GOVERNMENT
AGENCIES (80.6%)
FEDERAL HOME LOAN MORTGAGE CORP.:
2,774 5.99%, 12/1/23* 2,831
4,759 7.50%, 4/1/24 4,815
4,675 7.50%, 4/1/24 4,730
4,870 7.50%, 4/1/24 4,927
4,841 7.50%, 4/1/24 4,898
202 9.50%, 8/1/21 212
FEDERAL NATIONAL MORTGAGE ASSOC.:
9,084 6.00%, 8/1/10 8,878
9,597 6.50%, 4/1/24 9,332
1,308 8.00%, 5/1/17 1,339
2,253 8.00%, 2/1/23 2,310
3,720 8.50%, 8/1/24 3,855
2,081 9.50%, 6/1/22 2,188
GOVERNMENT NATIONAL MORTGAGE ASSOC.:
4,706 7.00%, 9/15/23 4,679
2,717 7.00%, 10/15/23 2,702
4,590 7.00%, 12/15/23 4,564
4,389 7.50%, 7/15/23 4,450
2,764 7.50%, 1/15/24 2,803
6,275 8.00%, 5/15/22 6,456
5,901 8.00%, 5/15/22 6,072
3,935 8.00%, 10/15/22 4,050
1,520 8.00%, 8/15/23 1,565
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
U.S. GOVERNMENT AGENCIES, CONTINUED:
$ 451 8.50%, 12/15/19 $ 468
42 8.50%, 2/15/20 44
93 8.50%, 5/15/21 97
2,135 8.50%, 3/15/23 2,218
388 8.50%, 3/15/23 404
1,708 8.75%, 8/15/25 1,777
513 9.00%, 11/15/18 537
1,401 9.00%, 3/15/21 1,467
1,179 9.00%, 5/15/21 1,234
1,136 9.00%, 6/15/21 1,189
2,913 9.00%, 2/15/23 3,056
1,965 9.50%, 11/15/17 2,089
360 9.50%, 1/15/19 383
1,220 9.50%, 5/15/20 1,297
2,193 9.50%, 6/15/21 2,334
3,265 9.75%, 1/15/21 3,425
- ---------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCIES 109,675
- ---------------------------------------------------------
- ---------------------------------------------
U.S. TREASURY NOTES (3.0%)
1,000 6.50%, 5/15/05 1,035
3,000 6.50%, 8/15/05 3,105
- ---------------------------------------------------------
TOTAL U.S. TREASURY NOTES 4,140
- ---------------------------------------------------------
- ---------------------------------------------
INVESTMENT COMPANIES (0.7%)
956,684 Aim Treasury Portfolio 957
- ---------------------------------------------------------
TOTAL INVESTMENT COMPANIES 957
- ---------------------------------------------------------
TOTAL (COST $129,826)(a) $130,003
- ---------------------------------------------------------
</TABLE>
- ---------------
Percentages indicated are based on net assets of $136,103.
(a) Represents cost for financial reporting purposes and differs from cost basis
for federal income tax reporting purposes by the amount of losses recognized
for financial reporting purposes in excess of federal income tax reporting
of approximately $29. Cost for federal income tax purposes and differs from
value by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C> <C> <C>
Unrealized appreciation $ 1,592
Unrealized depreciation (1,444)
--------
Net unrealized appreciation $ 148
=========
</TABLE>
*Adjustable Rate Mortgage.
SEE NOTES TO FINANCIAL STATEMENTS.
61
<PAGE> 67
Schedule of Investments
THE VICTORY PORTFOLIOS October 31, 1995
FUND FOR INCOME (Amounts in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
- ---------------------------------------------------------
COLLATERALIZED MORTGAGE
OBLIGATIONS (60.5%)
$ 1,079 Bear Stearns Mortgage
Capital Corp.,
9.40%, 6/25/21 $ 1,079
2,291 Bear Stearns Secured
Investors Trust,
7.50%, 9/20/20 2,302
83 Drexel, Burnham, & Lambert
Trust,
6.30%, 6/1/17 85
1,000 General Electric Capital
Mortgage Services, Inc.,
7.00%, 3/25/08 968
213 Federal Home Loan Mortgage
Corp., 138c
8.85%, 4/15/20 214
92 Federal Home Loan Mortgage
Corp., Series 8B-3, C
9.30%, 8/15/15 94
1,000 Federal National Mortgage
Assoc., 1991-13, C
8.25%, 3/25/04 1,023
1,996 Federal National Mortgage
Assoc., 1988, 4Z
9.25%, 3/25/18 2,092
1,921 Housing Securities, Inc.,
7.25%, 4/25/08 1,908
1,000 Kidder Peabody Acceptance
Corp.,
6.80%, 9/1/06 997
118 Merrill Lynch Trust,
8.90%, 10/20/15 119
1,334 Prudential Home Mortgage
Securities,
7.00%, 1/25/08 1,337
1,500 Resolution Trust Corp.,
8.20%, 11/25/21 1,549
- ------------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS 13,767
- ------------------------------------------------------------
- ----------------------------------------------
COMMERCIAL PAPER (1.9%)
FINANCIAL SERVICES (1.9%):
441 Cooperative Assoc. of
Tractor Dealers,
5.85%, 11/1/95 441
- ------------------------------------------------------------
TOTAL COMMERCIAL PAPER 441
- ------------------------------------------------------------
<CAPTION>
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
- ----------------------------------------------
U.S. GOVERNMENT AGENCIES (34.4%)
FEDERAL HOME LOAN MORTGAGE CORPORATION:
$ 128 9.50%, 8/1/19 $ 134
195 9.50%, 11/1/19 204
81 9.50%, 11/1/19 85
838 9.50%, 12/1/22 882
21 10.00%, 2/1/17 23
215 10.00%, 9/1/19 231
13 12.00%, 10/1/10 14
2 12.00%, 7/1/14 2
3 12.00%, 7/1/14 3
FEDERAL NATIONAL MORTGAGE ASSOCIATION:
805 8.50%, 10/1/24 834
573 8.50%, 10/1/24 594
25 9.50%, 1/1/19 26
12 10.00%, 5/1/13 14
11 10.00%, 1/1/14 12
8 10.00%, 8/1/17 9
20 10.00%, 8/1/17 22
5 10.00%, 10/1/17 6
12 10.00%, 10/1/17 13
6 10.00%, 11/1/17 7
12 10.00%, 1/1/18 13
10 10.00%, 1/1/18 11
12 10.00%, 1/1/18 13
41 10.00%, 2/1/18 44
10 10.50%, 1/1/18 11
33 12.00%, 8/1/13 36
22 12.00%, 4/1/15 24
36 13.00%, 12/1/12 40
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION:
181 9.50%, 8/15/17 192
56 9.50%, 8/15/17 60
408 9.50%, 5/15/18 434
214 9.50%, 6/15/18 228
232 9.50%, 10/15/19 247
1,036 9.50%, 9/20/20 1,092
108 10.00%, 3/15/16 117
98 10.00%, 10/15/17 107
91 10.00%, 1/15/18 99
83 10.00%, 1/15/18 90
22 10.00%, 2/15/18 24
63 10.00%, 3/15/18 68
8 10.00%, 7/15/18 9
124 10.00%, 7/15/18 134
73 10.00%, 9/15/18 79
117 10.00%, 9/15/18 127
99 10.00%, 9/15/18 107
121 10.00%, 9/15/18 131
91 10.00%, 9/15/18 98
332 10.00%, 11/15/18 360
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
62
<PAGE> 68
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1995
FUND FOR INCOME (Amounts in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
$ 111 10.00%, 1/15/19 $ 120
312 10.00%, 6/15/21 338
48 10.25%, 3/15/19 52
49 10.25%, 6/15/19 53
72 10.50%, 2/15/16 79
66 11.00%, 9/20/14 72
- ------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCIES 7,824
- ------------------------------------------------------------
- ----------------------------------------------
U.S. TREASURY OBLIGATIONS (1.8%)
U.S. Treasury Strip's
2,000 0.00%, 8/15/20 397
- ------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS 397
- ------------------------------------------------------------
TOTAL (COST $21,384)(a) $ 22,429
- ---------------------------------------------------------
</TABLE>
- ---------------
Percentages indicated are based on net assets of $22,756.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C> <C> <C>
Unrealized appreciation $ 1,099
Unrealized depreciation (54)
----------
Net unrealized appreciation $ 1,045
==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
63
<PAGE> 69
Schedule of Investments
THE VICTORY PORTFOLIOS October 31, 1995
NATIONAL MUNICIPAL FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
- ----------------------------------------------
MUNICIPAL BONDS (97.0%)
ALABAMA (2.4%):
$ 5 East Alabama, Health Care
Authority, Series A,
5.10%, 9/1/08, MBIA $ 5
300 Mobile, Water & Sewer,
4.50%, 1/1/00, FGIC 300
----------
305
----------
ARIZONA (1.5%):
125 Maricopa County, School
District #95, Queens
Creek, Series A,
5.20%, 7/1/05 129
50 Salt River Project,
Agriculture Improvement,
Series A,
5.63%, 1/1/06 53
----------
182
----------
CALIFORNIA (0.1%):
5 California State Public
Works, Department of
Corrections,
Del Norte Project, Series
C,
4.88%, 12/1/06 5
5 Capital Area Development
Authority, GO, Tax
Allocation,
4.35%, 10/1/01 5
----------
10
----------
COLORADO (7.3%):
250 Adams County, School
District #12,
4.70%, 12/15/02, MBIA 251
400 Routt County, School
District, GO, 3.90%,
12/1/96 400
250 Summit County, School
District, GO,
4.75%, 12/1/02, FGIC 253
----------
904
----------
CONNECTICUT (1.8%):
5 Connecticut State, Special
Tax Obligation,
Transportation
Infrastructure, Series B,
4.30%, 10/1/03 5
200 Connecticut State, Special
Tax Obligation,
Transportation
Infrastructure, Series B,
6.00%, 9/1/06 217
----------
222
----------
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
FLORIDA (1.4%):
$ 5 Melbourne, Water & Sewer,
Series A,
4.50%, 10/1/05, FGIC $ 5
150 Orlando, Utilities
Commission, Water &
Electric,
5.80%, 10/1/06 160
5 Palm Bay, Utility Revenue
Bonds,
5.00%, 10/1/08, MBIA 5
----------
170
----------
GEORGIA (1.7%):
200 Georgia State, GO, Series E,
5.50%, 7/1/03 213
----------
ILLINOIS (10.1%):
250 Chicago Public Building
Commission, Revenue Bonds,
6.05%, 1/1/06, AMBAC 269
250 Chicago Public Building
Commission, Revenue Bonds,
6.20%, 1/1/08, AMBAC 267
200 Illinois State Sales Tax
Revenue Bonds, Series V,
5.88%, 6/15/05 214
500 Northlake, Illinois Tax
Increment,
5.00%, 12/1/04, MBIA 508
----------
1,258
----------
INDIANA (0.1%):
15 Indiana Board Book Revenue
Bonds,
5.38%, 2/1/03 15
----------
IOWA (3.2%):
400 Woodbury, Iowa Health
Systems Revenue Bonds,
5.10%, 9/1/06, MBIA 398
----------
KENTUCKY (0.4%):
15 Kentucky Economic
Development Finance
Authority, St. Claire
Medical Center,
5.35%, 9/1/04 15
30 Kentucky State Turnpike
Authority, Revitalization
Projects,
5.30%, 7/1/04, AMBAC 31
----------
46
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
64
<PAGE> 70
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1995
NATIONAL MUNICIPAL FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
MAINE (1.3%):
$ 150 Maine Health & Higher
Educational Facilities,
6.20%, 7/1/25 $ 153
5 Maine State Housing
Authority,
5.00%, 11/15/06 5
----------
158
----------
MASSACHUSETTS (0.5%):
50 Massachusetts State, GO,
Series B,
5.20%, 11/1/04 51
10 New England Education Loan
Marketing Corp., Series A,
5.80%, 3/1/02 10
----------
61
----------
MICHIGAN (10.7%):
255 Byron Center,
5.40%, 5/1/07 261
240 Farmington Hills, Economic
Development Corp.,
5.30%, 2/15/06, MBIA 244
5 Imlay City, Community School
District,
5.00%, 5/1/08, AMBAC 5
250 Leslie, Public Schools
5.55%, 5/1/07 259
225 Michigan Municipal Bond
Authority, Revenue Bonds,
6.70%, 11/1/06 253
275 Michigan Municipal Bond
Authority, Revenue Bonds,
6.80%, 11/1/07 308
----------
1,330
----------
MINNESOTA (8.1%):
1,000 Minneapolis, Series B,
5.10%, 9/1/07 1,010
----------
MISSOURI (4.3%):
500 Excelsior Springs School
District Building Corp.,
6.50%, 3/1/09 538
----------
NEVADA (0.3%):
25 Nevada State, GO, Series B,
5.60%, 7/15/06 26
15 Washoe County, School
District, Series A,
4.70%, 6/1/99, MBIA 15
----------
41
----------
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
NEW JERSEY (0.2%):
$ 20 New Jersey State
Transportation Authority,
Series A,
5.40%, 12/15/02 $ 21
----------
NEW YORK (0.2%):
5 Albany, GO, 4.70% 11/1/01,
MBIA 5
5 Nassau County, GO, Series A,
4.10%, 5/1/00, FGIC 5
5 New York State Mortgage
Agency, Series 33,
4.50%, 10/1/02 5
5 Schenectady Industrial
Development Agency,
Broadway Center Project,
Series A,
5.00%, 9/1/09, FGIC 5
----------
20
----------
OHIO (14.2%):
200 Columbus Sewer, Revenue
Bonds,
5.50%, 6/1/01 209
400 Huber Heights Ohio Water
Systems,
5.10%, 12/1/06, MBIA 404
100 Lorain, GO, 5.00%, 12/1/05 102
500 Middleburg Heights Hospital,
5.75%, 8/15/21, FSA 492
15 Ohio State Building
Authority, State
Correctional Facilities,
Series A, 5.50%, 10/1/05 16
5 Ohio State, GO, 4.90%,
8/1/09 5
500 Ohio State, Special
Obligation,
5.80%, 6/1/03 538
----------
1,766
----------
OKLAHOMA (3.3%):
500 Oklahoma State Municipal
Power,
4.50%, 1/1/28, FGIC 415
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
65
<PAGE> 71
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1995
NATIONAL MUNICIPAL FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
PENNSYLVANIA (0.1%):
$ 5 Allegheny County, Higher
Education, Community
College, Capital Guaranty,
Series B,
5.00%, 7/15/10 $ 5
5 Harrisburg Water Authority,
Series A,
5.00%, 8/15/08, FGIC 5
----------
10
----------
RHODE ISLAND (0.0%):
5 Rhode Island State Health &
Educational, Butler
Hospital Financing,
4.60%, 1/1/01 5
----------
SOUTH CAROLINA (2.2%):
5 Charleston County, GO,
4.20%, 6/1/00 5
250 Hilton Head Public Service
District #1, Waterworks &
Sewer Systems,
5.00%, 8/1/05 253
20 Piedmont Municipal Power
Agency,
5.50%, 1/1/08, MBIA 21
----------
279
----------
SOUTH DAKOTA (4.1%):
250 Rapid City, Sales Tax,
Revenue Bonds, Series C,
4.70%, 6/1/00 253
250 Rapid City, Water Revenue
Bonds,
5.00%, 11/1/04, FGIC 254
----------
507
----------
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
TEXAS (6.4%):
$ 200 Conroe Independent School
District, GO, 6.50%,
2/1/04 $ 222
15 Dallas County, Hospital
District,
5.40%, 5/15/06, AMBAC 15
5 Houston Public Improvement,
GO, 3.85%, 3/1/99 5
200 Keller Independent School
District,
6.20%, 8/15/04 220
15 North Texas Water District,
4.20%, 6/1/00, AMBAC 15
100 Texas State, GO, Series A,
6.00%, 10/1/08 108
200 Ysleta, Independent School
District,
5.60%, 8/15/02 211
----------
796
----------
UTAH (3.4%):
5 Brigham City, GO, Series A,
4.90%, 6/1/07 5
410 St. George, Water Revenue
Bonds,
5.05%, 6/1/05, AMBAC 414
----------
419
----------
WASHINGTON (1.9%):
15 Seattle Indian Services
Commission,
4.95%, 11/1/00 15
200 Seattle Municipal Light &
Power, Revenue Bonds,
6.00%, 7/1/03 217
----------
232
----------
WISCONSIN (2.3%):
200 Milwaukee Sewer District,
Series A,
6.70%, 10/1/02 224
5 Sturgeon Bay, Combined
Utilities,
4.75%, 1/1/05, AMBAC 5
20 Wisconsin State,
5.80%, 5/1/01 21
25 Wisconsin State
Transportation, Series A,
7.50%, 7/1/04 30
----------
280
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
66
<PAGE> 72
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1995
NATIONAL MUNICIPAL FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
WYOMING (1.5%):
$ 185 Lincoln County, School
District,
5.10%, 6/1/03 $ 191
----------
WEST VIRGINIA (2.0%):
250 West Virginia State
Hospital,
5.00%, 9/1/05, MBIA 251
- ------------------------------------------------------------
TOTAL MUNICIPAL BONDS 12,053
- ------------------------------------------------------------
- ----------------------------------------------
INVESTMENT COMPANIES (1.1%)
133,272 Nuveen Reserves Fund 133
- ------------------------------------------------------------
TOTAL INVESTMENT COMPANIES 133
- ------------------------------------------------------------
TOTAL (COST $11,691)(a) $ 12,186
- ---------------------------------------------------------
</TABLE>
- ---------------
Percentages indicated are based on net assets of $12,420.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C> <C> <C>
Unrealized appreciation $ 497
Unrealized depreciation (2)
----------
Net unrealized appreciation $ 495
==========
</TABLE>
AMBAC -- American Municipal Bond Assurance Corp.
FGIC -- Financial Guaranty Insurance Company
GO -- General Obligation
MBIA -- Municipal Bond Insurance Assoc.
SEE NOTES TO FINANCIAL STATEMENTS.
67
<PAGE> 73
Schedule of Investments
THE VICTORY PORTFOLIOS October 31, 1995
NEW YORK TAX-FREE FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
- -------------------------------------------
MUNICIPAL BONDS (97.3%)
$ 250 County of Erie, GO, 5.50%,
6/15/25 $ 244
1,200 Metropolitan Transit
Authority, 7.50%, 7/1/98,
AMBAC 1,326
220 Metropolitan Transit
Authority, 7.50%, 1/1/20,
AMBAC 251
250 Metropolitan Transit
Authority, Revenue Bonds,
Series I, 7.00%, 7/1/09,
AMBAC 293
250 Nassau County Industrial
Development Agency, Civic
Facilities Revenue Bonds,
Hofstra University
Project, 6.75%, 8/1/11,
AMBAC 273
680 New York City, Cultural
Resources, Revenue Bonds,
6.63%, 1/1/11, AMBAC 743
300 New York City, GO, Series B,
7.00%, 10/1/18, FSA 327
350 New York City, GO, Series C,
7.00%, 2/1/12, FGIC 359
700 New York City, Housing
Development, Refunding
Revenue Bonds, Multi-Unit
Mortgage, Series A, FHA,
7.30%, 6/1/10 756
675 New York City, Housing
Development, Refunding
Revenue Bonds, Multi-Unit
Mortgage, Series A, FHA,
7.35%, 6/1/19 724
335 New York City, Housing
Development, Revenue
Bonds, Series 1, MBIA,
7.38%, 4/1/17 353
200 New York City, Industrial
Development Agency, Civic
Facilities Revenue Bonds,
USTA National Tennis
Center, 6.38%, 11/15/14 212
750 New York City, Municipal
Water Finance Authority,
6.75%, 6/15/16 823
<CAPTION>
SHARES
OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
$ 750 New York State, Dormitory
Authority, Revenue Bonds,
Ithaca College, 6.50%,
7/1/10, MBIA $ 808
225 New York State, Dormitory
Authority, Revenue Bonds,
Judicial Facilities
Leases, Series B, 7.00%,
4/15/16, MBIA 249
700 New York State, Dormitory
Authority, Revenues Bonds,
City University, Series 2,
MBIA 6.75%, 7/1/24 770
370 New York State, GO, 6.75%,
8/1/18, AMBAC 404
325 New York State, GO, 6.75%,
8/1/19, AMBAC 353
340 New York State, Medical Care
Facilities, 7.45%, 2/15/00 387
200 New York State, Medical Care
Facilities Finance Agency,
Montefiore Medical 5.75%,
2/15/25, AMBAC 197
815 New York State, Medical Care
Facilities Finance Agency,
Refunding Revenue Bonds,
North Shore University,
7.20%, 11/1/20, MBIA 917
550 New York State, Medical Care
Facilities Finance Agency,
Revenue Bonds,
St. Luke's, Series A, BIG,
7.10%, 2/15/27 579
500 New York State, Medical
Care, Facilities Finance
Agency, Unrefunded/Revenue
Bonds, 7.38%, 8/15/19,
MBIA 558
550 New York State, TWY
Authority, General Revenue
Bonds, Series C, 6.00%,
1/1/25, FGIC 559
1,000 New York State, Urban
Development, 7.50%, 1/1/98 1,093
400 New York State, Urban
Development, 7.50%, 1/1/00 457
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
68
<PAGE> 74
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1995
NEW YORK TAX-FREE FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
$ 250 New York State, Urban
Development, 5.50%, 1/1/25 $ 244
900 Triborough Bridge & Tunnel
Authority, 7.00%, 1/1/01 1,022
1,000 Triborough Bridge & Tunnel
Authority, Special
Obligation Refunding
Revenue Bonds, Series B,
6.88%, 1/1/15, AMBAC 1,097
500 University Puerto Rico,
Revenue Bonds, 5.25%,
6/1/25, MBIA 478
- ------------------------------------------------------
TOTAL MUNICIPAL BONDS 16,856
- ------------------------------------------------------
- -------------------------------------------
INVESTMENT COMPANIES (0.3%)
$57,738 Providence of New York $ 58
- ------------------------------------------------------
TOTAL INVESTMENT COMPANIES 58
- ------------------------------------------------------
TOTAL (COST $15,602)(a) $16,914
- ------------------------------------------------------
</TABLE>
- ---------------
Percentages indicated are based on net assets of $17,327.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows (amounts in thousands):
<TABLE>
<S> <C> <C> <C>
Unrealized appreciation $ 1,312
Unrealized depreciation
-------
Net unrealized appreciation $ 1,312
========
</TABLE>
AMBAC -- American Municipal Bond Assurance Corp.
FGIC -- Financial Guaranty Insurance Company
FHA -- Federal Housing Administration
MBIA -- Municipal Bond Insurance Assoc.
GO -- General Obligation
SEE NOTES TO FINANCIAL STATEMENTS.
69
<PAGE> 75
Schedule of Investments
THE VICTORY PORTFOLIOS October 31, 1995
OHIO MUNICIPAL BOND FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARE OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
- ----------------------------------------------
MUNICIPAL BONDS (97.4%)
ALTERNATIVE MINIMUM TAX PAPER (12.8%):
$ 3,500 Student Loan Funding Corp.,
Series A, 5.50%, 12/1/01 $ 3,576
4,000 Student Loan Funding Corp.,
Series A, 5.85%, 8/1/04 4,105
- ------------------------------------------------------------
TOTAL ALTERNATIVE MINIMUM TAX PAPER 7,681
- ------------------------------------------------------------
- ----------------------------------------------
GENERAL OBLIGATION BONDS (35.7%)
COUNTY, CITY, SPECIAL DISTRICT & SCHOOLS (35.4%):
1,000 Adams County,
5.35%, 12/1/07, MBIA 1,027
1,000 Anthony Wayne School
District,
5.75%, 12/1/18, FGIC 1,001
1,500 Batavia Local School
District,
7.00%, 12/1/14 1,700
750 Batavia Local School
District,
6.30%, 12/1/22 796
500 Canton Waterworks System,
5.75%, 12/1/10,
AMBAC 513
1,100 Chardon,
5.80%, 12/1/05, MBIA 1,101
500 Columbus,
5.35%, 9/15/06 519
1,385 Crawford County,
6.75%, 12/1/19, AMBAC 1,560
500 Dawson Bryant Local
School District,
6.70%, 12/1/17, FGIC 553
1,250 Delaware City School
District,
5.75%, 12/1/20, FGIC 1,251
1,000 Hilliard School District,
6.15%, 12/1/06 1,071
2,500 Indian Valley Local
School District,
7.00%, 12/1/14 2,886
1,250 Lakeview Local School
District,
6.95%, 12/1/19,
AMBAC 1,426
250 Lorain,
5.35%, 12/01/08, AMBAC 254
600 Madison County,
7.00%, 12/1/19, AMBAC 688
1,000 Marysville Exempt Village
School District,
5.75%, 12/1/23, MBIA 997
<CAPTION>
SHARE OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
$ 1,000 Monroe Falls,
Series A
6.95%, 12/1/14, AMBAC $ 1,112
500 Olentangy Local
School District,
6.25%, 12/1/14 523
250 St. Henry Local
School District,
5.25%, 12/1/19, MBIA 239
1,000 Sylvania City School
District,
5.75%, 12/1/22, FGIC 997
1,000 Toledo,
6.10%, 12/1/14, AMBAC 1,037
----------
21,251
----------
SPECIAL TAX (LIMITED TAXES, TAX ALLOCATION) (0.3%):
200 North Ridgeville,
5.70%, 12/1/15, AMBAC 201
- ------------------------------------------------------------
TOTAL GENERAL OBLIGATION BONDS 21,452
- ------------------------------------------------------------
- ----------------------------------------------
REVENUE BONDS (48.8%)
HOSPITALS, NURSING HOMES & HEALTH CARE (23.1%):
2,250 Butler County, Middletown
Regional Hospital,
6.75%, 11/15/10, FGIC 2,463
1,720 Franklin County, Riverside
Hospital,
7.25%, 5/15/20 1,924
1,000 Garfield Heights Marymont
Hospital, Refunding &
Improvement,
6.70%, 11/15/15 1,043
2,200 Lake County Hospital
Improvement Facilities,
6.38%, 8/15/03 2,374
1,500 Middleburg Heights Hospital,
5.75%, 8/15/21 1,476
635 Portage County Hospital
6.50%, 11/15/03, MBIA 712
675 Portage County Hospital,
6.50%, 11/15/04, MBIA 759
715 Portage County Hospital,
6.50%, 11/15/05, MBIA 806
2,315 Portage County Hospital,
5.50%, 11/15/09, MBIA 2,347
----------
13,904
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
70
<PAGE> 76
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1995
OHIO MUNICIPAL BOND FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARE OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
HOUSING (8.9%):
$ 2,000 Cuyahoga County Multifamily
Revenue, GNMA
6.60%, 10/20/30, $ 2,041
275 Ohio Cap Corp.,
5.75%, 7/1/06 283
1,775 Ohio Cap Corp.,
6.35%, 7/1/22 1,805
1,170 Ohio Capital Corp.,
6.50%, 1/1/24 1,194
----------
5,323
----------
PUBLIC FACILITIES (CONVENTION, SPORT) (5.3%):
2,000 Ohio State Building
Authority,
Adult Correctional
Facilities,
6.00%, 10/1/07 2,135
1,000 Ohio State Higher
Educational Facility,
5.88%, 12/1/04 1,067
----------
3,202
----------
TRANSPORTATION (AIRPORTS, TOLL ROADS) (1.7%):
1,000 Greater Cleveland Regulatory
Transit Authority,
4.45%, 7/1/99, FGIC 1,006
----------
UTILITY (SEWERS, TELEPHONE, ELECTRIC) (9.8%):
540 Cambridge Ohio Water System,
5.50%, 12/1/08 552
1,985 Cleveland Public Power
Systems,
7.00%, 11/15/24, MBIA 2,271
500 Huber Heights Water System,
5.25%, 12/1/07, MBIA 507
815 Huber Heights Water System,
5.55%, 12/1/10, MBIA 822
1,185 Huber Heights Water System,
0.00%, 12/1/21, MBIA 266
1,205 Huber Heights Water System,
0.00%, 12/1/22, MBIA 255
1,225 Huber Heights Water System,
0.00%, 12/1/23, MBIA 244
1,245 Huber Heights Water System,
0.00%, 12/1/24, MBIA 234
1,265 Huber Heights Water System,
0.00%, 12/1/25, MBIA 224
500 Southwest Regional Water,
6.00%, 12/1/20, MBIA 513
----------
5,888
- ------------------------------------------------------------
TOTAL REVENUE BONDS 29,323
- ------------------------------------------------------------
TOTAL MUNICIPAL BONDS 58,456
- ------------------------------------------------------------
<CAPTION>
SHARE OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
- ----------------------------------------------
INVESTMENT COMPANIES (0.8%)
$ 505,774 Federated Ohio Municipal
Cash Trust Fund $ 506
- ------------------------------------------------------------
Total Investment Companies 506
- ------------------------------------------------------------
TOTAL (COST $56,549) (a) $ 58,962
- ---------------------------------------------------------
</TABLE>
- ---------------
Percentages indicated are based on net assets of $60,031.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows (amounts in thousands):
<TABLE>
<S> <C> <C> <C>
Unrealized appreciation $ 2,503
Unrealized depreciation (90)
----------
Net unrealized appreciation $ 2,413
==========
AMBAC American Municipal Bond Assurance Corp.
FGIC Financial Guaranty Insurance Company
GNMA Government National Mortgage Assoc.
LOC Letter of Credit
MBIA Municipal Bond Insurance Assoc.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
71
<PAGE> 77
Schedule of Investments
THE VICTORY PORTFOLIOS October 31, 1995
BALANCED FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
- ---------------------------------------------------------
COLLATERALIZED MORTGAGE
OBLIGATIONS (0.8%)
FEDERAL HOME LOAN MORTGAGE CORP.:
$ 430,890 7.50%, 4/1/07 $ 439
FEDERAL NATIONAL MORTGAGE ASSOC.:
1,129,727 7.40%, 7/25/17 1,130
- ------------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS 1,569
- ------------------------------------------------------------
- ----------------------------------------------
COMMON STOCKS (53.9%)
AEROSPACE/DEFENSE (2.6%):
19,900 Boeing Co. 1,306
11,800 General Dynamics Corp. 653
47,300 Raytheon Co. 2,063
18,400 Textron, Inc. 1,265
----------
5,287
----------
ALUMINUM (1.3%):
50,300 Aluminum Co. of America 2,565
----------
AUTOMOBILES (0.7%):
8,000 Chrysler Corp. 413
1,200 Fiat - ADR 20
35,000 Ford Motor Co. 1,006
----------
1,439
----------
BANKS (4.0%):
54,900 BankAmerica Corp. 3,157
900 BBV - ADR 27
28,200 Comerica, Inc. 948
27,600 First Union Corp. 1,370
1,300 IMI - ADR 21
33,150 J.P. Morgan & Co., Inc. 2,557
2,000 Westpac Banking-ADR(b) 41
----------
8,121
----------
BEVERAGES (1.2%):
35,400 Anheuser Busch Co., Inc. 2,336
2,300 Coca-Cola Femsa - ADR 41
----------
2,377
----------
BROADCASTING (0.0%):
2,000 Grupo Televisa - ADR 34
----------
CHEMICALS (1.1%):
14,800 Dow Chemical Co. 1,016
8,300 Eastman Chemical 494
1,200 Imperial Chemical - ADR 58
21,200 Lubrizol Corp. 610
3,200 Montedison - ADR(b) 22
1,000 Norsk Hydro - ADR 40
----------
2,240
----------
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
CLOSED END FUNDS (0.1%):
5,600 Alliance Worldwide
Privatization Fund, Class
A $ 58
11,000 Italy Fund, Inc. 83
5,000 Japan OTC Equity Fund(b) 40
2,300 Latin American Equity Fund 30
2,000 Malaysia Fund 35
----------
246
----------
COMPUTERS & PERIPHERALS (1.1%):
11,000 Cisco Systems(b) 853
13,400 Hewlett Packard Co. 1,241
----------
2,094
----------
CONTAINERS (0.8%):
28,600 Newell Co. 690
34,600 Sonoco Products Co. 856
----------
1,546
----------
COSMETICS & RELATED (0.5%):
15,400 Avon Products 1,095
----------
ELECTRICAL EQUIPMENT (2.0%):
24,100 Emerson Electric Co. 1,717
34,400 General Electric Co. 2,176
900 Hitachi - ADR 94
----------
3,987
----------
ELECTRONIC COMPUTING EQUIPMENT (0.9%):
32,900 Compaq Computer Corp.(b) 1,834
----------
ENTERTAINMENT (0.1%):
450 Matsushita Electric - ADR 65
1,500 Sony - ADR 69
----------
134
----------
FINANCIAL SERVICES (2.0%):
26,400 American Express Co. 1,073
1,000 Barclays - ADR 47
15,300 Federal National Mortgage
Assoc. 1,605
23,300 Household International,
Inc. 1,311
----------
4,036
----------
FOOD DISTRIBUTORS (0.3%):
16,500 Supervalu Inc. 507
----------
FOOD PROCESSING & PACKAGING (0.7%):
16,000 ConAgra, Inc. 618
2,000 Grand Metropolitan PLC - ADR 55
22,000 Sara Lee Corp. 646
----------
1,319
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
72
<PAGE> 78
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1995
BALANCED FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
FOREST PRODUCTS (1.7%):
44,000 International Paper Co. $ 1,628
14,000 Mead Corp. 807
19,700 Union Camp Corp. 1,002
----------
3,437
----------
HEALTH CARE (0.5%):
20,000 Columbia HCA Healthcare 983
----------
HEAVY MACHINERY (0.8%):
58,500 Baker Hughes, Inc. 1,148
4,500 Deere & Co. 402
----------
1,550
----------
HOLDING COMPANIES (0.0%):
150 U.S. Industries, Inc.(b) 2
----------
INDUSTRIAL SERVICES (0.7%):
16,700 American Home Products Corp. 1,480
----------
INSURANCE (2.3%):
51,942 Allstate 1,909
12,000 American General Corp. 395
9,200 Chubb Corp. 827
30,200 St. Paul Cos., Inc. 1,533
----------
4,664
----------
MANAGEMENT COMPANIES (0.0%):
3,000 Hanson PLC - ADR 47
----------
MANUFACTURING (0.8%):
24,700 Allied Signal, Inc. 1,050
15,300 Litton Industries, Inc.(b) 606
----------
1,656
----------
MEDICAL SUPPLIES (0.4%):
13,200 Medtronic, Inc. 762
----------
METALS (0.3%):
1,300 SKF Corp. - ADR 25
22,100 USX U.S. Steel Group 660
----------
685
----------
OFFICE EQUIPMENT & SUPPLIES (0.0%):
1,000 Canon - ADR 85
----------
OIL (7.6%):
16,000 Atlantic Richfield Co. 1,708
700 British Petroleum Co., PLC -
ADR 62
19,800 Chevron Corp. 926
41,000 Exxon Corp. 3,131
44,200 Mobil Corp. 4,453
1,400 Repsol - ADR 41
24,100 Royal Dutch Petroleum Co. -
ADR 2,962
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
29,500 Texaco, Inc. $ 2,010
2,800 YPF S.A. - ADR 48
----------
15,341
----------
OIL & GAS EXPLORATION (2.3%):
52,600 Enron Corp. 1,808
85,900 Phillips Petroleum Co. 2,770
----------
4,578
----------
OILFIELD EQUIPMENT & SERVICES (0.5%):
16,000 Schlumberger Limited 996
----------
PAINT, VARNISHES & ENAMELS (0.3%):
17,700 Sherwin Williams Co. 666
----------
PAPER (0.0%):
913 Fletcher Challange - ADR 23
----------
PHARMACEUTICALS (3.5%):
49,000 Abbott Laboratories 1,948
13,600 Merck & Co., Inc. 782
44,800 Pfizer, Inc. 2,570
30,200 Schering-Plough 1,619
1,400 Smithkline Beecham 73
----------
6,992
----------
PUBLISHING (0.4%):
2,500 News Corp. - ADR 50
20,000 Time Warner, Inc. 730
----------
780
----------
RETAIL (1.9%):
23,800 Dayton Hudson Corp. 1,636
25,200 Pep Boys -- Manny, Moe &
Jack 551
19,500 Sears & Roebuck Co. 663
7,500 Wal-Mart Stores, Inc. 162
27,800 Walgreen Co. 792
----------
3,804
----------
SEMICONDUCTORS (0.7%):
19,700 Intel Corp. 1,377
600 Kyocera - ADR 99
----------
1,476
----------
SOAPS & CLEANING AGENTS (0.1%):
1,300 Procter & Gamble Co. 105
----------
SOFTWARE & COMPUTER SERVICES (0.8%):
10,650 Microsoft(b) 1,065
32,000 Novell, Inc.(b) 528
----------
1,593
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
73
<PAGE> 79
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1995
BALANCED FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
STEEL (0.1%):
2,100 British Steel - ADR $ 54
880 Broken Hill Proprietary -
ADR 48
2,300 Worthington Industries, Inc. 38
----------
140
----------
TAX RETURN PREPARATION (0.2%):
10,500 H & R Block 433
----------
TOBACCO & TOBACCO PRODUCTS (0.8%):
4,000 B.A.T. Industries - ADR 67
16,500 Philip Morris Cos., Inc. 1,394
3,900 UST, Inc. 117
----------
1,578
----------
TRANSPORTATION (0.0%):
900 British Airways -ADR 64
3,000 TMM - ADR (b) 21
----------
85
----------
UTILITIES - ELECTRIC (3.5%):
64,900 Consolidated Edison Co. NY,
Inc. 1,971
51,000 DQE Co. 1,403
17,400 Houston Industries 807
75,300 Texas Utilities Co. 2,767
----------
6,948
----------
UTILITIES - TELECOMMUNICATIONS (4.3%):
68,600 A T & T Corp 4,390
15,000 Ameritech Corp. 810
900 British Telecom - ADR 54
700 CIA Telecommunicacion -
Chile - ADR 50
60,500 GTE Corp. 2,496
1,000 Hong Kong Telecom - ADR 17
29,000 MCI Telecommunications Corp. 723
1,000 Telefonica De Espana - ADR 38
2,000 Telephonos De Mexico - ADR 55
----------
8,633
- ------------------------------------------------------------
TOTAL COMMON STOCKS 108,383
- ------------------------------------------------------------
- ----------------------------------------------
COMMON STOCKS - FOREIGN (1.4%)
BRITAIN (0.1%):
PUBLISHING (0.0%):
2,200 Reed Elsevier International 33
----------
FOOD MANUFACTURING (0.0%):
5,000 United Biscuits 22
----------
RETAIL (0.0%):
8,000 Marks & Spencer 53
----------
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
UTILITIES - WATER (0.0%):
5,000 Severn Trent PLC $ 51
- ------------------------------------------------------------
TOTAL BRITAIN 159
- ------------------------------------------------------------
DENMARK (0.0%):
FINANCIAL SERVICES (0.0%):
1,000 Dansk Bank 66
- ------------------------------------------------------------
TOTAL DENMARK 66
- ------------------------------------------------------------
FINLAND (0.0%):
FOOD PRODUCTS (0.0%):
1,000 Huhtamaki 1 30
- ------------------------------------------------------------
TOTAL FINLAND 30
- ------------------------------------------------------------
FRANCE (0.2%):
AUTOMOBILES (0.0%):
400 PSA Peugeot Citroen 52
----------
BUILDING PRODUCTS (0.0%):
700 LaFarge 46
----------
BANKS (0.0%):
900 Cie Financiere De Paribas-A 49
----------
BUILDING MATERIALS (0.0%):
450 Compagnie De Saint Gobain 54
----------
OIL & GAS PRODUCTION (0.0%):
700 Elf Aquitaine 48
----------
UTILITIES - TELECOMMUNICATIONS (0.0%):
600 Alcatel-Alsthom 51
----------
UTILITIES - WATER (0.0%):
500 Cie Generale Des Eaux 46
- ------------------------------------------------------------
TOTAL FRANCE 346
- ------------------------------------------------------------
GERMANY (0.2%):
AUTOMOBILES (0.0%):
190 Volkswagen 60
----------
BANKING (0.0%):
200 Commerzbank 46
1,000 Deutsche Bank 45
----------
91
----------
BUILDING PRODUCTS (0.0%):
100 M.A.N. AG 29
----------
CHEMICALS (0.0%):
200 Bayer 53
----------
MACHINERY & ENGINEERING (0.0%):
100 Mannesmann 33
----------
MANUFACTURING (0.0%):
100 Siemens AG 52
----------
RETAIL (0.0%):
1,000 Douglas Holding AG 36
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
74
<PAGE> 80
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1995
BALANCED FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
UTILITIES - ELECTRIC (0.0%):
1,400 Veba $ 57
- ------------------------------------------------------------
TOTAL GERMANY 411
- ------------------------------------------------------------
HOLLAND (0.1%):
BANKING (0.0%):
1,400 ABN/Amro Holding 59
----------
CHEMICALS (0.0%):
200 Akzo Nobel NV 23
----------
TELECOMMUNICATIONS (0.0%):
2,400 Koninklijke PTT NED NV 84
- ------------------------------------------------------------
TOTAL HOLLAND 166
- ------------------------------------------------------------
HONG KONG (0.1%):
BROKERAGE (0.0%):
20,000 Peregrine Investments
Holding Co. 26
----------
REAL ESTATE (0.1%):
10,000 Cheung Kong 56
10,000 Hutchinson Whampoa 55
----------
111
- ------------------------------------------------------------
TOTAL HONG KONG 137
- ------------------------------------------------------------
JAPAN (0.6%):
AUTOMOBILES (0.0%):
4,000 Nippon Denso Co., Ltd. 73
----------
BANKS (0.1%):
2,000 Mitsubishi Bank 39
3,000 Sanwa Bank 51
4,000 Sumitomo Bank 71
----------
161
----------
BEVERAGES (0.0%):
5,000 Kirin Brewery Co. 50
----------
CHEMICALS (0.0%):
11,000 Mitsubishi Chemical, Inc. 50
5,000 Toray Industries, Inc. 31
----------
81
----------
CONSTRUCTION (0.0%):
4,000 Kajima Corp. 37
----------
FINANCIAL SERVICES (0.1%):
3,000 Kinden 52
3,000 Nomura Securities 55
----------
107
----------
HOUSEHOLD PRODUCTS (0.0%):
6,000 Kao Corp. 73
----------
INSURANCE (0.0%):
4,000 Tokio Marine & Fire
Insurance 41
----------
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
PAPER (0.0%):
6,000 New Oji Paper Co., Ltd. $ 55
----------
PHARMACEUTICALS (0.1%):
2,000 Sankyo Co. Ltd. 44
3,000 Yamanouchi Pharmaceutical 67
----------
111
----------
REAL ESTATE (0.0%):
4,000 Mitsui Fudosan 46
----------
RETAIL (0.1%):
2,000 Ito Yokado Co. 109
2,000 Jusco 47
4,000 Marui Co., Ltd. 69
----------
225
----------
RUBBER & RUBBER PRODUCTS (0.0%):
4,000 Bridgestone(b) 55
----------
STEEL (0.0%):
15,000 Nippon Steel 50
----------
UTILITIES - ELECTRIC (0.0%):
2,100 Tokyo Electric Power 55
----------
UTILITIES - WATER (0.0%):
3,000 Kurita Water Ind. 84
- ------------------------------------------------------------
TOTAL JAPAN 1,304
- ------------------------------------------------------------
SWEDEN (0.0%):
AUTOMOTIVE (0.0%):
2,500 Volvo AB 56
- ------------------------------------------------------------
TOTAL SWEDEN 56
- ------------------------------------------------------------
SWITZERLAND (0.1%):
ENGINEERING (0.0%):
50 ABB Asea Brown Boveri,
Series A 58
----------
FINANCIAL SERVICES (0.0%):
725 CS Holding 74
----------
FOOD MANUFACTURING (0.0%):
50 Nestle SA Registered 52
----------
PHARMACEUTICALS (0.0%):
5 Roche Genussshein 36
- ------------------------------------------------------------
TOTAL SWITZERLAND 220
- ------------------------------------------------------------
TOTAL FOREIGN COMMON STOCKS 2,895
- ------------------------------------------------------------
- ----------------------------------------------
CONVERTIBLE PREFERRED STOCKS (0.2%)
AUTOMOTIVE (0.2%):
4,300 Ford Motor Co., Series A 404
- ------------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCKS 404
- ------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
75
<PAGE> 81
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1995
BALANCED FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
- ----------------------------------------------
CORPORATE BONDS (9.6%)
AUTOMOTIVE (1.3%):
800,000 Ford Motor Co., 8.88%,
1/15/22 $ 957
1,500,000 General Motors, 9.13%,
7/15/01 1,686
----------
2,643
----------
BANKING (1.5%):
300,000 BankAmerica Corp., 9.63%,
2/13/01 342
1,200,000 First Union Corp., 9.45%,
8/15/01 1,382
500,000 Nation Bank Corp., 5.38%,
12/1/95 500
300,000 SunTrust Banks, Inc., 7.38%,
7/1/02 320
500,000 Wells Fargo & Co., 8.75%,
5/1/02 559
----------
3,103
----------
BROKERAGE SERVICES (0.4%):
750,000 Morgan Stanley, 8.88%,
10/15/01 837
----------
ELECTRICAL & ELECTRONIC (0.2%):
500,000 Philips Electronics, 7.13%,
5/15/25 514
----------
FINANCIAL SERVICES (2.0%):
1,000,000 Associates, 7.50%, 10/15/96 1,015
700,000 John Deere Capital Corp.,
8.63%, 8/1/19 778
500,000 Lehman Brothers Holdings,
7.38%, 5/15/07 513
1,000,000 Merrill Lynch Corp., 8.25%,
11/15/99 1,066
500,000 Merrill Lynch Corp., 4.75%,
6/24/96 497
200,000 U.S. West Capital Funding,
Inc., 8.00%, 10/15/96 204
----------
4,073
----------
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
GOVERNMENTS (FOREIGN) (0.2%):
500,000 Province of Quebec, 7.50%,
7/15/23 $ 501
----------
HEALTH CARE (0.6%):
1,000,000 Columbia Health Care, 8.85%,
1/1/07 1,154
----------
INDUSTRIAL GOODS & SERVICES (2.6%):
1,200,000 Black & Decker, 7.50%,
4/1/03 1,233
400,000 Dean Foods Co., 6.75%,
6/15/05 404
500,000 Georgia-Pacific, 9.95%,
6/15/02 586
500,000 Loral, 7.63%, 8/15/25 508
500,000 Lubrizol Corp., 7.25%,
6/15/25 516
700,000 Nabisco, Inc., 8.00%,
1/15/00 739
500,000 Waste Management, 7.88%,
8/15/96 507
500,000 Westvaco Corp., 9.75%,
6/15/20 644
----------
5,137
----------
TOBACCO & TOBACCO PRODUCTS (0.6%):
1,000,000 Philip Morris, 9.00%, 1/1/01 1,106
----------
UTILITIES - TELECOMMUNICATIONS (0.2%):
300,000 Southwestern Bell Co.,
8.30%, 6/1/96 304
- ------------------------------------------------------------
TOTAL CORPORATE BONDS 19,372
- ------------------------------------------------------------
- ----------------------------------------------
U.S. GOVERNMENT SECURITIES (14.8%)
FEDERAL HOME LOAN MORTGAGE CORP.:
119 8.00%, 5/1/02 121
FEDERAL NATIONAL MORTGAGE ASSOC.:
2,110 6.00%, 11/1/08 2,067
2,969 6.00%, 8/1/10 2,901
1,772 7.50%, 3/1/24 1,791
1,276 9.00%, 5/1/25 1,333
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
76
<PAGE> 82
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1995
BALANCED FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
GOVERNMENT NATIONAL MORTGAGE ASSOC.:
$ 1,704 6.50%, 2/15/09 $ 1,701
219 9.50%, 7/15/09 233
1,427 9.00%, 10/15/16 1,500
204 9.00%, 11/15/16 213
767 9.00%, 6/15/18 803
21 10.00%, 10/15/18 22
744 9.00%, 9/15/19 779
1,080 9.00%, 10/15/19 1,131
686 9.00%, 12/15/19 719
745 9.00%, 12/15/19 780
804 9.00%, 1/15/20 845
516 9.00%, 2/15/20 541
1,510 8.50%, 5/15/20 1,569
608 8.50%, 4/15/21 631
797 7.50%, 12/15/22 808
410 8.50%, 3/15/23 427
946 7.50%, 11/15/23 959
1,951 7.50%, 1/15/24 1,978
1,434 7.50%, 5/15/24 1,454
2,883 8.50% 9/15/24 3,002
1,397 9.00%, 4/1/25 1,460
- ------------------------------------------------------------
TOTAL U.S. GOVERNMENT SECURITIES 29,768
- ------------------------------------------------------------
- ----------------------------------------------
U.S. TREASURY BONDS (5.0%)
500 7.13%, 2/15/23 545
8,350 7.50%, 11/15/24 9,537
- ------------------------------------------------------------
TOTAL U.S. TREASURY BONDS 10,082
- ------------------------------------------------------------
- ----------------------------------------------
U.S. TREASURY NOTES (10.3%)
5,000 7.50%, 12/31/96 5,106
4,000 6.13%, 5/31/97 4,029
500 7.13%, 9/30/99 523
1,000 7.75%, 12/31/99 1,071
3,700 7.75%, 1/31/00 3,965
3,600 7.13%, 2/29/00 3,777
1,000 6.13%, 9/30/00 1,013
1,000 7.25%, 5/15/04 1,082
- ------------------------------------------------------------
TOTAL U.S. TREASURY NOTES 20,566
- ------------------------------------------------------------
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
- ----------------------------------------------
INVESTMENT COMPANIES (3.3%)
6,493,638 AIM Treasury Fund $ 6,494
65,396 Federated Treasury
Obligation Fund 65
- ------------------------------------------------------------
TOTAL INVESTMENT COMPANIES 6,559
- ------------------------------------------------------------
TOTAL (COST - $181,749)(a) $ 199,598
- ---------------------------------------------------------
</TABLE>
- ---------------
Percentages indicated are based on net assets of $201,073.
(a) Represents cost for financial reporting purposes and differs from cost basis
for federal income tax purposes by the amount of losses recognized for
financial reporting purposes in excess of federal income tax reporting of
approximately $691. Cost for federal income tax purposes differs from value
by net unrealized appreciation of securities as follows (amounts in
thousands):
<TABLE>
<S> <C> <C> <C>
Unrealized appreciation $ 17,307
Unrealized depreciation (149)
----------
Net unrealized appreciation $ 17,158
==========
</TABLE>
(b) Represents non-income producing securities.
ADR -- American Depository Receipt
SEE NOTES TO FINANCIAL STATEMENTS.
77
<PAGE> 83
Schedule of Investments
THE VICTORY PORTFOLIOS October 31, 1995
STOCK INDEX FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
- ----------------------------------------------
COMMERCIAL PAPER (17.7%)
FINANCIAL SERVICES (17.7%):
$ 5,000 American General Finance,
5.75%, 11/2/95 $ 5,000
5,000 Ford Motor Credit,
5.71%, 12/22/95 5,000
4,000 General Electric Capital
Services,
5.75%, 11/16/95 4,000
5,000 Household Finance,
5.72%, 11/3/95 5,000
4,000 Merrill Lynch,
5.73%, 11/3/95 3,999
5,500 General Motors Acceptance
Corp.,
5.77%, 12/14/95 5,500
- ----------------------------------------------------------
TOTAL COMMERCIAL PAPER 28,499
- ----------------------------------------------------------
- ----------------------------------------------
COMMON STOCKS (78.8%)
ADVERTISING (0.1%):
2,286 Interpublic Group Cos., Inc. 89
--------
AEROSPACE/DEFENSE (1.2%):
10,066 Boeing Co. 661
1,900 General Dynamics Corp. 105
5,861 Lockheed Martin Corp. 399
3,346 McDonnell Douglas 274
1,498 Northrop Grumman Corp 86
6,420 Rockwell International Corp. 286
2,480 Textron, Inc. 170
--------
1,981
--------
AIRCRAFT & AIRCRAFT PARTS (0.2%):
3,604 United Technologies Corp. 320
--------
AIR FREIGHT (0.1%):
2,206 AMR Corp. Delaware(b) 146
1,834 U. S. Air Group, Inc.(b) 25
--------
171
--------
AIRLINES (0.1%):
1,537 Delta Air Lines 101
--------
ALUMINUM (0.2%):
5,260 Aluminum Co. of America 268
--------
APPAREL (0.0%):
2,202 Liz Claiborne, Inc. 62
--------
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
AUTOMOBILES (1.6%):
11,221 Chrysler Corp. $ 579
31,694 Ford Motor Co. 911
22,040 General Motors 964
2,200 Navistar International
Corp.(b) 23
1,172 Paccar, Inc. 49
--------
2,526
--------
AUTOMOTIVE PARTS (0.4%):
1,204 Cummins Engine, Inc. 42
2,958 Dana Corp. 76
2,328 Eaton Corp. 119
1,754 Echlin, Inc. 63
3,614 Genuine Parts Co. 143
1,931 TRW, Inc. 127
--------
570
--------
BANKS (3.1%):
3,333 Bank of Boston Corp. 148
10,991 BankAmerica Corp. 632
2,322 Bankers Trust New York 148
2,816 Barnett Banks, Inc. 156
3,736 Boatmens Bancshares, Inc. 142
5,177 Chase Mahattan Corp. 295
7,387 Chemical Banking Corp. 420
2,622 First Chicago Corp. 178
2,364 First Fidelity Bancorp. 155
2,206 First Interstate Bancorp. 285
5,064 First Union Corp. 251
5,513 J.P. Morgan & Co., Inc. 425
8,014 NationsBank Corp. 527
9,549 Norwest Corp. 282
6,814 PNC Bank Corp. 179
3,324 SunTrust Banks, Inc. 214
5,022 Wachovia Corp. 222
1,415 Wells Fargo & Co. 297
--------
4,956
--------
BANKS -- MONEY CENTERS (REGIONAL) (0.8%):
11,690 Citicorp 758
4,107 CoreStates Financial Corp. 149
1,731 Golden West Financial Corp.
Delaware 87
4,547 NBD Bancorp., Inc. 173
4,350 National City Corp. 134
--------
1,301
--------
BANKS -- OUTSIDE MONEY CENTER (0.4%):
11,648 Banc One Corp. 393
3,870 First Bank Systems, Inc. 193
--------
586
--------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
78
<PAGE> 84
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1995
STOCK INDEX FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
BEVERAGES (3.0%):
7,558 Anheuser Busch Co., Inc. $ 499
2,021 Brown Forman Corp., Class B 77
37,212 Coca Cola Co. 2,675
1,143 Coors Adolph Co., Class B 20
23,182 PepsiCo, Inc. 1,223
10,971 Seagram Co. Limited 395
--------
4,889
--------
BUILDING MATERIALS (0.5%):
1,143 Armstrong World Industries,
Inc. 68
866 Centex Corp. 28
846 Crane Co. 30
1,360 Fleetwood Enterprises, Inc. 28
904 Kaufman & Broad Home Corp. 11
4,631 Masco Corp. 130
3,446 Monsanto Co. 361
4,354 Morton International, Inc. 133
1,521 Owens Corning Fiberglas
Corp.(b) 64
807 Pulte Corp. 26
--------
879
--------
CHEMICALS (0.1%):
1,948 Great Lakes Chemical 131
--------
CHEMICALS -- GENERAL (2.0%):
3,268 Air Products & Chemicals,
Inc. 169
7,906 Dow Chemical Co. 543
16,394 E.I. Du Pont De Nemours Co. 1,023
2,373 Eastman Chemical 141
1,857 Ecolab, Inc. 54
1,124 FMC Corp.(b) 80
3,263 Hercules, Inc. 174
2,225 Mallinckrodt 77
2,009 Nalco Chemical Co. 60
6,004 PPG Industries, Inc. 255
4,059 Praxair, Inc. 110
1,989 Rohm & Haas Co. 110
1,500 Sigma-Aldrich 71
4,012 Union Carbide Corp. 152
2,758 W.R. Grace & Co. 154
--------
3,173
--------
CHEMICALS -- SPECIALTY (0.0%):
1,554 Avery Dennison Corp. 70
--------
COMMERCIAL SERVICES (0.1%):
5,150 CUC International(b) 178
--------
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
COMPUTERS & PERIPHERALS (2.9%):
3,468 Amdahl Corp.(b) $ 32
3,588 Apple Computer, Inc. 130
7,950 Cisco Systems(b) 616
1,656 Computer Sciences Corp.(b) 111
788 Cray Research, Inc.(b) 16
1,104 Data General Corp.(b) 13
4,321 Digital Equipment Corp.(b) 234
15,110 Hewlett Packard Corp. 1,399
1,298 Integraph Corp.(b) 16
16,742 International Business
Machines Corp. 1,628
4,650 Silicon Graphics(b) 155
2,852 Sun Microsystems, Inc.(b) 222
3,449 Tandem Computers, Inc.(b) 39
5,086 Unisys Corp.(b) 29
--------
4,640
--------
CONGLOMERATES (0.5%):
6,749 Corning Glass Works 176
12,424 Minnesota Mining &
Manufacturing Co. 707
--------
883
--------
CONSTRUCTION (0.1%):
2,403 Fluor Corp. 136
1,024 Foster Wheeler Corp. 38
--------
174
--------
CONSUMER CREDIT (0.2%):
4,984 Dean Witter Discover & Co. 248
--------
CONSUMER GOODS (0.1%):
2,167 American Greetings Corp. 68
1,046 Jostens, Inc. 24
--------
92
--------
CONTAINERS -- METAL, GLASS, PAPER, PLASTIC
(0.3%):
927 Ball Corp. 26
1,457 Bemis, Inc. 38
2,680 Crown Cork & Seal, Inc.(b) 93
1,321 Federal Paper Board, Inc. 55
4,690 Newell Co. 113
4,647 Rubbermaid, Inc. 121
2,743 Stone Container Corp. 45
--------
491
--------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
79
<PAGE> 85
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1995
STOCK INDEX FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
COSMETICS & RELATED (0.6%):
827 Alberto Culver Co. $ 26
2,048 Avon Products 146
2,758 Dial Corp. 67
13,040 Gillette Co. 631
3,289 International Flavor &
Fragrance, Inc. 159
--------
1,029
--------
DEPARTMENT STORES (0.3%):
3,349 Dillard Department Stores,
Inc., Class A 91
6,734 J. C. Penney 283
1,043 Mercantile Stores, Inc. 47
--------
421
--------
DIVERSIFIED -- CONGLOMERATES, HOLDINGS (0.3%):
3,446 International Telephone &
Telegraph 422
1,418 National Service Industries,
Inc. 42
--------
464
--------
DRUG STORES (0.1%):
591 Longs Drug Stores Corp. 24
2,480 Rite Aid Corp. 67
--------
91
--------
ELECTRICAL EQUIPMENT (2.6%):
1,379 Bally Manufacturing Corp.(b) 15
3,390 DSC Communications Corp.(b) 125
6,598 Emerson Electric Co. 470
49,948 General Electric Co. 3,159
1,182 Johnson Controls, Inc. 69
572 Thomas & Betts Corp. 37
1,457 W.W. Grainger, Inc. 91
11,521 Westinghouse Electric Corp. 163
--------
4,129
--------
ELECTRICAL SERVICES (0.1%):
3,450 General Public Utilities
Corp. 108
--------
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
ELECTRONIC COMPUTING EQUIPMENT (0.4%):
2,100 Cabletron Systems,(b) $ 165
7,809 Compaq Computer Corp.(b) 435
--------
600
--------
ELECTRONIC & ELECTRICAL -- GENERAL (1.8%):
3,019 Advanced Micro Devices(b) 72
6,447 AMP, Inc. 253
1,167 Andrew Corp.(b) 49
3,168 Cooper Industries 107
1,515 E G & G, Inc. 28
1,379 General Signal Corp. 44
1,182 Harris Corp. 69
3,759 Honeywell, Inc. 158
17,354 Motorola, Inc. 1,139
3,611 National Semiconductor
Corp.(b) 88
7,158 Raytheon Co. 312
1,925 Tandy Corp. 95
946 Tektronix, Inc. 56
5,544 Texas Instruments, Inc. 378
--------
2,848
--------
ELECTRONICS -- DEFENSE RELATED (0.1%):
5,006 Loral Corp. 148
--------
ENTERTAINMENT (0.9%):
2,797 Brunswick Corp. 54
3,034 Harrahs Entertainment(b) 75
2,580 Hasbro, Inc. 79
1,043 King World Productions(b) 36
1,700 Loews Corp. 249
4,734 Lowes Cos., Inc. 128
15,368 Walt Disney Co. 886
--------
1,507
--------
ENVIRONMENTAL CONTROL (0.0%):
8,100 Laidlaw, Inc., Class B 73
--------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
80
<PAGE> 86
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1995
STOCK INDEX FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
FINANCIAL SERVICES (3.1%):
14,400 American Express Co. $ 585
4,276 Automatic Data Processing,
Inc. 306
5,700 Bank of New York Co., Inc. 239
1,576 Beneficial Corp. 77
1,321 Ceridian Corp.(b) 57
5,319 Federal Home Loan Mortgage
Corp. 368
7,996 Federal National Mortgage
Assoc. 839
4,198 Fleet Financial Group 163
4,021 Great Western Financial
Corp. 91
3,407 H.F. Ahmanson & Co. 85
2,877 Household International,
Inc. 162
6,700 Keycorp 226
4,382 MBNA Corp. 162
4,346 Mellon Bank Corp. 218
5,204 Merrill Lynch & Co., Inc. 289
2,280 Morgan Stanley Group, Inc. 198
3,110 Salomon, Inc. 112
3,777 Shawmut National Corp. 128
2,045 Transamerica Corp. 139
9,468 Travelers, Inc. 478
2,845 U.S. Bancorp 84
--------
5,006
--------
FOOD DISTRIBUTORS (0.2%):
7,505 Albertsons, Inc. 250
--------
FOOD DISTRIBUTORS
(SUPERMARKETS & WHOLESALERS) (0.3%):
1,143 Fleming Cos., Inc. 26
1,163 Great Altantic & Pacific
Tea, Inc. 24
3,652 Kroger Co.(b) 122
2,048 Supervalu, Inc. 63
5,416 Sysco Corp. 165
2,225 Winn Dixie Stores, Inc. 145
--------
545
--------
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
FOOD PROCESSING & PACKAGING (2.1%):
15,961 Archer Daniels Midland Co. $ 257
4,331 CPC International, Inc. 287
7,386 Campbell Soup Co. 387
7,286 ConAgra, Inc. 281
4,647 General Mills 267
7,225 H.J. Heinz Co. 336
2,319 Hershey Foods Corp. 139
6,456 Kellogg Co. 466
2,509 Pioneer Hi-Bred
International, Inc. 125
3,996 Quaker Oats Co. 136
3,113 Ralston-Ralston Purina Group 185
14,100 Sara Lee Corp. 414
3,407 Wm. Wrigley Jr. Co. 158
--------
3,438
--------
FOREST PRODUCTS -- LUMBER & PAPER (1.5%):
1,679 Alco Standard Corp. 149
1,363 Boise Casacade Corp. 49
2,858 Champion International Corp. 153
2,719 Georgia Pacific Corp. 224
7,408 International Paper Co. 274
2,383 James River Corp. Virginia 77
4,747 Kimberly Clark Corp. 345
3,210 Louisiana Pacific Corp. 77
1,554 Mead Corp. 90
2,955 Moore Corp. Ltd. 57
827 Potlatch Corp. 35
4,472 Scott Paper Co. 238
1,615 Temple Inland, Inc. 73
2,028 Union Camp Corp. 103
2,955 Westvaco Corp. 82
5,988 Weyerhaeuser Co. 264
1,650 Willamette Industries, Inc. 96
--------
2,386
--------
FUNERAL SERVICES (0.1%):
2,822 Service Corp. International 113
--------
GOLD & SILVER MINING (0.0%):
3,800 Santa Fe Pacific Gold Corp. 38
--------
HEALTH CARE (0.4%):
13,078 Columbia HCA Healthcare 642
--------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
81
<PAGE> 87
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1995
STOCK INDEX FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
HEAVY MACHINERY (0.6%):
4,156 Baker Hughes, Inc. $ 82
5,848 Caterpillar Tractor, Inc. 328
2,522 Deere & Co. 225
1,369 Harnischfeger Industries,
Inc. 43
3,133 Ingersoll Rand Co. 111
1,557 McDermott International,
Inc. 25
2,279 Tyco Laboratories, Inc. 138
1,218 Varity Corp.(b) 44
--------
996
--------
HOLDING COMPANIES (0.1%):
1,700 Republic New York Corp. 100
--------
HOSPITAL & NURSING EQUIPMENT (1.0%):
1,557 Bard C.R., Inc. 44
18,983 Johnson & Johnson, Inc. 1,547
--------
1,591
--------
HOTELS & MOTELS (0.1%):
1,398 Hilton Hotels Corp. 94
3,694 Marriott International, Inc. 136
--------
230
--------
HOUSEHOLD GOODS --
APPLIANCES & FURNISHINGS (0.2%):
416 Bassett Furniture Ind. 8
3,171 Maytag Corp. 60
1,832 Premark International, Inc. 85
2,128 Whirlpool Corp. 113
1,300 Zenith Electronics(b) 11
--------
277
--------
INDUSTRIAL SERVICES (0.6%):
9,120 American Home Products Corp. 808
3,268 Dover Corp. 129
--------
937
--------
INSURANCE -- LIFE (0.5%):
1,437 Jefferson Pilot Corp. 95
2,774 Providian Corp 109
2,067 Torchmark Corp. 86
5,150 United Healthcare 274
4,550 U. S. Healthcare, Inc. 175
945 USLIFE Corp. 27
--------
766
--------
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
INSURANCE -- MULTI-LINE (1.7%):
3,310 Aetna Life & Casualty Co. $ 233
1,301 Alexander & Alexander
Services, Inc. 29
6,062 American General Corp. 199
13,936 American International
Group, Inc. 1,176
2,148 Cigna Corp. 213
2,442 General Re Corp. 354
2,777 Lincoln National Corp. 124
2,167 Marsh & Mclennan Cos., Inc. 177
1,812 SafeCo Corp. 116
2,442 St. Paul Cos., Inc. 124
44 Transport Holdings, Inc.(b) 2
3,242 USF & G Corp. 54
--------
2,801
--------
INSURANCE -- PROPERTY, CASUALTY, HEALTH (0.5%):
13,170 Allstate 484
2,580 Chubb Corp. 232
2,100 UNUM Corp. 111
--------
827
--------
LEISURE -- RECREATION, GAMING (0.0%):
985 Handleman Co. 8
--------
MACHINE TOOLS (0.0%):
985 Cincinnati Milacron, Inc. 25
1,004 Giddings & Lewis, Inc. 16
--------
41
--------
MANUFACTURING -- CAPITAL GOODS (0.1%):
3,449 Illinois Tool Works, Inc. 200
807 Trinova Corp. 23
--------
223
--------
MANUFACTURING -- CONSUMER GOODS (0.1%):
591 Outboard Marine Corp. 12
1,615 Teledyne, Inc. 40
1,560 Western Atlas(b) 68
--------
120
--------
MANUFACTURING -- MISCELLANEOUS (0.8%):
8,312 Allied Signal, Inc. 353
826 Briggs & Stratton Corp. 33
1,314 Millipore Corp. 46
966 Morrison Knudsen Corp. 6
3,401 Pall Corp. 83
2,127 Parker-Hannifin Corp. 72
4,747 Unilever N. V. 622
3,071 Whitman Corp. 65
--------
1,280
--------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
82
<PAGE> 88
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1995
STOCK INDEX FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
MEDICAL SERVICES (0.1%):
2,903 Beverly Enterprises, Inc.(b) $ 34
1,321 Community Psychiatric
Centers, Inc.(b) 14
1,844 Manor Care, Inc. 60
5,825 Tenet Healthcare Corp.(b) 104
--------
212
--------
MEDICAL SUPPLIES (0.8%):
1,673 Bausch & Lomb, Inc. 58
8,135 Baxter International, Inc. 314
1,906 Becton Dickinson & Co. 124
3,388 Biomet, Inc.(b) 56
4,500 Boston Scientific Corp.(b) 190
6,816 Medtronic, Inc. 394
1,379 St. Jude Medical, Inc.(b) 73
1,615 United States Surgical Corp. 40
--------
1,249
--------
METALS -- FABRICATION (0.5%):
6,669 Alcan Aluminum Ltd. 211
1,201 Asarco, Inc. 39
2,700 Cyprus Amax Minerals 71
5,950 Freeport McMoran Copper,
Class B 135
4,098 Homestake Mining Co. 63
1,424 Inland Steel Industries,
Inc. 33
2,527 Newmont Mining Corp. 95
2,028 Phelps Dodge Corp. 129
1,873 Reynolds Metals Co. 94
--------
870
--------
PRIMARY METAL & MINERAL PRODUCTION (0.5%):
3,113 Armco, Inc.(b) 19
10,377 Barrick Gold Corp. 240
3,239 Bethlehem Steel Corp.(b) 43
3,330 Echo Bay Mines Ltd. 30
4,270 Englehard Corp. 106
3,510 Inco Ltd. 121
2,561 Nucor Corp. 123
2,413 USX U.S. Steel Group 72
--------
754
--------
NEWSPAPERS (0.4%):
4,134 Gannett Co., Inc. 225
1,495 Knight-Ridder, Inc. 83
2,852 New York Times Co., Class A 79
3,282 Times Mirror Co., Class A 95
1,870 Tribune Co. 118
--------
600
--------
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
OFFICE EQUIPMENT & SUPPLIES (0.4%):
4,509 Pitney Bowes, Inc. $ 197
3,213 Xerox Corp. 417
--------
614
--------
OIL & GAS EXPLORATION & PRODUCTION (1.2%):
2,758 Amerada Hess Corp. 124
1,873 Ashland, Inc. 59
3,123 Coastal Corp. 101
1,437 Columbia Gas System(b) 55
630 Eastern Enterprises 19
7,473 Enron Corp. 257
1,970 Enserch Corp. 29
769 Helmerich & Payne, Inc. 20
1,498 Kerr-Mcgee Corp. 83
985 Louisiana Land & Exploration
Co. 35
3,585 Noram Energy Corp. 28
9,362 Occidental Petroleum Corp. 201
788 Oneok, Inc. 19
2,916 Oryx Energy Co.(b) 34
1,360 Pennzoil Co. 51
7,722 Phillips Petroleum Co. 249
2,422 Rowan Cos.(b) 16
2,619 Sante Fe Energy Resources,
Inc.(b) 23
2,561 Sonat, Inc. 74
2,252 Sun Co., Inc. 64
8,790 USX -- Marathon Group 156
7,231 Unocal Corp. 190
2,994 Williams Co., Inc. 116
--------
2,003
--------
OIL & GAS PRODUCTION (1.0%):
3,701 Burlington Resource, Inc. 133
11,639 Mobil Corp. 1,173
5,364 Tenneco, Inc. 235
--------
1,541
--------
OIL -- INTEGRATED COMPANIES (4.7%):
14,655 Amoco Corp. 936
4,728 Atlantic Richfield Co. 505
19,206 Chevron Corp. 898
36,639 Exxon Corp. 2,798
15,837 Royal Dutch Petroleum Co. 1,946
7,683 Texaco, Inc. 523
--------
7,606
--------
OILFIELD EQUIPMENT & SERVICES (0.4%):
5,418 Dresser Industries, Inc. 112
3,368 Halliburton Co. 140
7,131 Schlumberger Limited 444
--------
696
--------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
83
<PAGE> 89
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1995
STOCK INDEX FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
PAINT, VARNISHES & ENAMELS (0.1%):
2,500 Sherwin Williams Co. $ 94
--------
PHARMACEUTICALS (4.9%):
23,344 Abbott Laboratories 928
7,758 Amgen, Inc.(b) 372
1,870 Allergan, Inc. 55
2,406 Alza Corp., Class A(b) 53
14,966 Bristol-Myers Squibb Co. 1,141
8,568 Eli Lilly & Co. 828
36,416 Merck & Co., Inc. 2,094
18,574 Pfizer, Inc. 1,066
11,004 Schering-Plough 590
5,041 Upjohn Co. 256
3,979 Warner-Lambert Co. 339
--------
7,722
--------
PHOTOGRAPHY (0.4%):
10,092 Eastman Kodak Co. 632
1,379 Polaroid Corp. 59
--------
691
--------
POLLUTION CONTROL SERVICES & EQUIPMENT (0.4%):
6,322 Browning-Ferris Industries,
Inc. 184
1,644 Safety Kleen 25
14,242 WMX Technologies, Inc. 401
375 Zurn Industries, Inc. 9
--------
619
--------
PRECISION INSTRUMENTS & RELATED (0.0%):
1,240 Perkin Elmer 44
--------
PUBLISHING, EXCEPT NEWSPAPER (0.8%):
2,403 Deluxe Corp. 64
2,855 Dow Jones & Co., Inc. 101
5,000 Dun & Bradstreet Corp. 299
866 John H. Harland Co. 18
1,518 McGraw Hill, Inc. 124
826 Meredith Corp. 30
4,470 R.R. Donnelley & Sons Co. 163
11,382 Time Warner, Inc. 415
--------
1,214
--------
RADIO & TELEVISION (1.0%):
1,955 CBS, Inc. 158
4,530 Capital Cities ABC, Inc. 537
6,775 Comcast, Class A Special
Shares 121
300 Comcast Corp., Class A 5
19,285 Tele-Communications, Inc.,
Class A(b) 328
10,687 Viacom, Class B(b) 534
--------
1,683
--------
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
RAILROAD & RAILROAD HOLDING
COMPANIES (0.7%):
4,422 Burlington Northern/Santa
Fe, Inc. $ 371
3,113 CSX Corp. 261
2,264 Conrail, Inc. 156
6,088 Union Pacific Corp. 398
--------
1,186
--------
RAILROADS (0.2%):
3,837 Norfolk Southern Corp. 296
--------
RESTAURANTS (0.6%):
4,647 Darden Restaurants, Inc. 53
707 Luby's Cafeterias, Inc. 15
20,520 McDonald's Corp. 841
1,576 Ryans Family Steak House(b) 12
1,182 Shoney's, Inc.(b) 13
2,955 Wendy's International 59
--------
993
--------
RETAIL (1.9%):
4,356 American Stores Co. 130
2,994 Charming Shoppes, Inc. 9
2,148 Dayton Hudson Corp. 148
2,125 Harcourt General, Inc. 84
13,556 K-Mart Corp. 110
7,328 May Department Stores 288
2,403 Nordstrom, Inc. 89
5,712 Price/Costco, Inc.(b) 97
11,521 Sears & Roebuck Co. 392
67,700 Wal-Mart Stores, Inc. 1,464
7,208 Walgreen Co. 205
3,921 Woolworth Corp. 57
--------
3,073
--------
RETAIL -- SPECIALTY STORES (0.9%):
2,897 Circuit City Stores, Inc. 97
4,215 The Gap 166
1,773 Giant Food, Inc. 57
14,031 Home Depot, Inc. 523
10,496 The Limited, Inc. 193
3,133 Melville Corp. 100
1,792 Pep Boys - Manny, Moe & Jack 39
2,167 TJX Cos., Inc. 29
8,168 Toys R Us, Inc.(b) 179
--------
1,383
--------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
84
<PAGE> 90
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1995
STOCK INDEX FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
RUBBER & RUBBER PRODUCTS (0.2%):
769 B.F. Goodrich, Inc. $ 51
2,422 Cooper Tire & Rubber Co. 56
4,534 Goodyear Tire & Rubber Co. 172
--------
279
--------
SEMICONDUCTORS (1.5%):
5,200 Applied Materials, Inc.(b) 261
24,300 Intel Corp. 1,698
6,100 Micron Technology, Inc. 431
--------
2,390
--------
SERVICES (NON-FINANCIAL) (0.2%):
3,550 First Data Corp. 235
1,440 Ogden Corp. 33
--------
268
--------
SHOES, LEATHER GOODS &
CLOTHING ACCESSORIES (0.2%):
552 Brown Group, Inc. 8
4,212 Nike, Inc. 239
2,261 Reebok International Ltd. 77
1,437 Stride Rite Corp. 16
--------
340
--------
SOAPS & CLEANING AGENTS (1.3%):
1,595 Clorox Co. 114
4,270 Colgate Palmolive, Inc. 296
20,271 Procter & Gamble Co. 1,642
--------
2,052
--------
SOFTWARE & COMPUTER SERVICES (1.8%):
1,398 Autodesk, Inc. 48
7,037 Computer Associates
International, Inc. 387
17,300 Microsoft Corp.(b) 1,730
10,862 Novell, Inc.(b) 179
12,819 Oracle Systems Corp.(b) 559
730 Shared Medical Systems 28
--------
2,931
--------
STEEL (0.0%):
2,719 Worthington Industries, Inc. 45
--------
TAX RETURN PREPARATION (0.1%):
3,052 H & R Block 126
--------
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
TELECOMMUNICATIONS (2.0%):
14,612 Airtouch Communications(b) $ 416
5,600 Alltel Corp. 172
12,844 Bell Atlantic Corp. 817
7,447 Northern Telecom Ltd. 268
12,572 Pacific Telesis Group 382
2,266 Scientific-Atlanta, Inc. 28
10,266 Sprint Corp. 395
2,580 Tellabs, Inc.(b) 88
13,891 U. S. West, Inc. 662
--------
3,228
--------
TEXTILE MANUFACTURING (0.1%):
2,250 Fruit of The Loom(b) 39
1,101 Russell Corp. 27
552 Springs Industries, Inc.,
Class A 24
1,931 V. F. Corp. 92
--------
182
--------
TOBACCO & TOBACCO PRODUCTS (1.6%):
5,549 American Brands, Inc. 238
24,804 Philip Morris Cos., Inc. 2,096
5,746 UST, Inc. 172
--------
2,506
--------
TOOLS & HARDWARE MANUFACTURING (0.1%):
2,522 Black & Decker Corp. 85
1,221 Snap On Tools, Inc. 52
1,260 Stanley Works 60
946 Timken Co. 38
--------
235
--------
TOYS & BICYCLES -- MANUFACTURING (0.1%):
6,525 Mattel, Inc. 188
--------
TRANSPORTATION-AIR (0.1%):
4,250 Southwest Airlines Co. 85
--------
TRANSPORTATION LEASING & TRUCKING (0.2%):
1,324 Consolidated Freightways,
Inc. 31
1,695 Federal Express Corp.(b) 139
1,201 Pittston Services Group 33
1,163 Roadway Services, Inc. 52
2,306 Ryder Systems, Inc. 56
807 Yellow Corp. 11
--------
322
--------
TRUCKS -- MANUFACTURING (0.1%):
236 Nacco Industries, Inc. 14
7,073 Placer Dome, Inc. 155
--------
169
--------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
85
<PAGE> 91
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1995
STOCK INDEX FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
UTILITIES -- ELECTRIC (2.6%):
5,497 American Electric Power $ 210
4,547 Carolina Power & Light 149
5,655 Central & South West Corp. 151
4,628 Cinergy Corp. 131
6,914 Consolidated Edison Co. NY,
Inc. 210
4,353 Detroit Edison Co. 147
5,115 Dominion Resources 203
5,988 Duke Power Co. 268
6,661 Entergy Corp 190
5,435 FPL Group, Inc. 228
3,901 Houston Industries 181
4,276 Niagara Mohawk Power Corp. 46
1,970 Northern States Power Co.
Minnesota 93
4,531 Ohio Edison 104
8,396 Pacificorp 158
6,540 Peco Energy Co. 191
7,231 Public Service Enterprise 212
1,301 Raychem Corp. 60
13,138 SCEcorp. 223
19,612 Southern Co. 468
6,659 Texas Utilities Co. 245
6,323 Unicom Corp. 207
2,994 Union Electric Co. 117
--------
4,192
--------
UTILITIES -- ELECTRIC & GAS (0.3%):
4,324 Baltimore Gas & Electric 116
12,524 Pacific Gas & Electric Co. 368
1,004 Peoples Energy Corp. 29
--------
513
--------
UTILITIES -- NATURAL GAS (0.2%):
2,758 Consolidated Natural Gas 105
1,515 Nicor, Inc. 41
2,522 Pacific Enterprises 62
4,427 Panhandle Eastern Corp. 112
--------
320
--------
UTILITIES -- TELECOMMUNICATIONS (5.0%):
46,798 A T & T Corp 2,995
16,316 Ameritech Corp. 881
14,636 Bellsouth Corp. 1,120
28,613 GTE Corp. 1,180
19,940 MCI Telecommunications Corp. 497
12,633 Nynex Corp. 594
17,949 SBC Communications, Inc. 1,003
--------
8,270
- ----------------------------------------------------------
TOTAL COMMON STOCKS 126,596
- ----------------------------------------------------------
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
- ----------------------------------------------
U.S. TREASURY BILLS (0.8%)
$ 20 5.22%, 12/14/95(c) $ 20
1,315 5.38%, 12/21/95(c) 1,305
--------
1,325
--------
- ----------------------------------------------
INVESTMENT COMPANIES (2.7%)
4,367,074 AIM Treasury Portfolio 4,367
- ----------------------------------------------------------
TOTAL INVESTMENT COMPANIES 4,367
- ----------------------------------------------------------
TOTAL (COST $138,797)(a) $160,787
- ----------------------------------------------
</TABLE>
- ---------------
Percentages indicated are based on net assets of $160,822.
(a) Represents cost for financial reporting purposes and differs from cost basis
for federal income tax reporting purposes by the amount of losses recognized
for financial reporting purposes in excess of federal income tax reporting
of approximately $530. Cost for federal income tax purposes differs from
value by net unrealized appreciation of securities as follows (amount in
thousands):
<TABLE>
<S> <C> <C> <C>
Unrealized appreciation $ 24,874
Unrealized depreciation $ (2,988)
--------
Net unrealized appreciation $ 21,886
=========
</TABLE>
(b) Represents non-income producing security.
(c) Serves as collateral for futures contracts.
<TABLE>
<S> <C> <C> <C>
- ----------------------------------------------
FUTURES CONTRACTS
<CAPTION>
NUMBER OF MARKET
CONTRACTS VALUE
<S> <C> <C> <C>
Long, Standard & Poor's 500
Index Futures Contract,
face amount $34,605,
expiring December 1995 120 $35,031
-------
Total Futures Contracts $35,031
========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
86
<PAGE> 92
Schedule of Investments
THE VICTORY PORTFOLIOS October 31, 1995
DIVERSIFIED STOCK FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
- ----------------------------------------------
COMMON STOCKS (94.7%)
AEROSPACE/DEFENSE (5.2%):
128,500 Boeing Co. $ 8,432
98,000 General Dynamics Corp. 5,427
105,000 Textron, Inc. 7,219
--------
21,078
--------
AIR FREIGHT (1.0%):
60,000 AMR Corp., Delaware (b) 3,960
--------
ALUMINUM (1.4%):
110,200 Aluminum Co. of America 5,620
--------
BANKS (7.0%):
125,800 BankAmerica Corp. 7,234
100,000 First Union Corp. 4,963
96,800 J.P. Morgan & Co., Inc. 7,466
174,400 Norwest Corp. 5,145
150,000 PNC Bank Corp. 3,938
--------
28,746
--------
CHEMICALS (3.4%):
110,200 Dow Chemical Co. 7,562
120,000 Lubrizol Corp. 3,450
145,000 RPM, Inc., Ohio 2,809
--------
13,821
--------
COMPUTERS & PERIPHERALS (1.1%):
50,000 Hewlett Packard Co. 4,631
--------
CONTAINERS - METAL, GLASS, PAPER, PLASTIC
(0.8%):
134,300 Newell Co. 3,240
--------
COSMETICS & RELATED (0.7%):
40,300 Avon Products 2,866
--------
ELECTRICAL EQUIPMENT (3.1%):
110,800 General Electric Co. 7,008
86,800 W.W. Grainger, Inc. 5,425
--------
12,433
--------
ELECTRONIC & ELECTRICAL - GENERAL (1.6%):
60,000 Motorola, Inc. 3,938
40,800 Texas Instruments, Inc. 2,785
--------
6,723
--------
ENGINEERING & CONSTRUCTION (1.6%):
113,700 Fluor Corp. 6,424
--------
ENTERTAINMENT (0.4%):
70,400 Harrah's Entertainment (b) 1,742
--------
FINANCIAL SERVICES (2.8%):
260,000 Bear Stearns Cos., Inc. 5,168
130,000 Travelers, Inc. 6,565
--------
11,733
--------
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
FOREST PRODUCTS (2.7%):
200,000 International Paper Co. $ 7,400
31,900 Mead Corp. 1,838
38,900 Union Camp Corp. 1,979
--------
11,217
--------
FUNERAL SERVICES (0.5%):
46,900 Service Corp. International 1,882
--------
HEALTH CARE (1.9%):
160,000 Columbia HCA Healthcare 7,860
--------
HOTELS & MOTELS (1.2%):
115,000 Mirage Resorts, Inc. (b) 3,766
56,700 Promus Hotel Corp. (b) 1,247
--------
5,013
--------
HOUSEHOLD GOODS - APPLIANCES, FURNISHINGS
(1.3%):
100,000 Whirlpool Corp. 5,300
--------
INSURANCE - LIFE (1.0%):
60,000 Jefferson Pilot Corp. 3,960
--------
INSURANCE - MULTI-LINE (3.4%):
45,000 Aetna Life & Casualty Co. 3,167
80,350 American International
Group, Inc. 6,780
80,000 St. Paul Companies, Inc. 4,060
--------
14,007
--------
INSURANCE - PROPERTY, CASUALTY, HEALTH & OTHER
(0.8%):
35,000 Chubb Corp. 3,146
--------
MANUFACTURING - MISCELLANEOUS (0.8%):
81,100 Allied Signal, Inc. 3,447
--------
OFFICE EQUIPMENT & SUPPLIES (1.5%):
47,500 Xerox Corp. 6,163
--------
OIL & GAS EXPLORATION (2.8%):
168,700 Enron Corp. 5,799
170,000 Phillips Petroleum Co. 5,483
--------
11,282
--------
OIL & GAS PRODUCTION (1.3%):
120,000 Tenneco, Inc. 5,265
--------
OIL - INTEGRATED COMPANIES (7.4%):
40,400 Atlantic Richfield Co. 4,313
88,200 Chevron Corp. 4,123
135,500 Exxon Corp. 10,349
170,500 Texaco, Inc. 11,615
--------
30,400
--------
OILFIELD EQUIPMENT & SERVICES (3.9%):
270,000 Baker Hughes, Inc. 5,299
252,600 Dresser Industries, Inc. 5,241
89,800 Schlumberger Ltd. 5,590
--------
16,130
--------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
87
<PAGE> 93
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1995
DIVERSIFIED STOCK FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
PHARMACEUTICALS (4.8%):
120,000 Abbott Laboratories $ 4,770
159,000 Amgen, Inc. (b) 7,632
50,000 Pfizer, Inc. 2,869
50,000 Warner-Lambert Co. 4,256
--------
19,527
--------
POLLUTION CONTROL SERVICES (0.8%):
110,000 Browning-Ferris Industries,
Inc. 3,204
--------
RADIO & TELEVISION (1.2%):
100,000 Viacom, Class B (b) 5,000
--------
RETAIL (3.7%):
101,500 Dayton Hudson Corp. 6,977
110,000 Nordstrom, Inc. 4,077
149,000 Walgreen Co. 4,247
--------
15,301
--------
RETAIL - SPECIALTY STORES (0.8%):
148,000 Pep Boys -- Manny,
Moe & Jack 3,238
--------
RUBBER & RUBBER PRODUCTS (2.1%):
170,000 Cooper Tire & Rubber Co. 3,931
119,600 Goodyear Tire & Rubber Co. 4,545
--------
8,476
--------
SEMICONDUCTORS (1.2%):
70,000 Intel Corp. 4,891
--------
SHIPPING (1.1%):
250,650 TNT Freightways Corp. 4,512
--------
SOFTWARE & COMPUTER SERVICES (2.6%):
75,800 Microsoft (b) 7,580
70,000 Oracle Systems Corp. (b) 3,054
--------
10,634
--------
TAX RETURN PREPARATION (1.0%):
100,000 H&R Block 4,125
--------
TOBACCO & TOBACCO RELATED (2.7%):
130,000 Philip Morris Cos., Inc. 10,984
--------
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
UTILITIES - ELECTRIC (5.2%):
200,000 Consolidated Edison Co. NY,
Inc. $ 6,075
100,000 Houston Industries 4,638
150,000 Southern Co. 3,581
188,500 Texas Utilities Co. 6,927
--------
21,221
--------
UTILITIES - TELECOMMUNICATIONS (6.9%):
175,000 A T & T Corp 11,200
380,000 GTE Corp. 15,674
33,100 Nynex Corp. 1,556
--------
28,430
- ----------------------------------------------------------
TOTAL COMMON STOCKS 387,632
- ----------------------------------------------------------
- ----------------------------------------------
INVESTMENT COMPANIES (6.4%)
16,704,032 Aim Treasury Portfolio 16,704
9,672,252 Federated Treasury
Obligation Fund 9,672
- ----------------------------------------------------------
TOTAL INVESTMENT COMPANIES 26,376
- ----------------------------------------------------------
TOTAL (COST--$372,310)(A) $414,008
- ---------------------------------------------------------
</TABLE>
- ---------------
Percentages indicated are based on net assets of $409,549.
(a) Represents cost for financial reporting purposes and differs from cost basis
for federal income tax purposes by the amount of losses recognized for
financial reporting purposes in excess of federal income tax reporting of
approximately $268. Cost for federal income tax purposes differs from value
by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C> <C> <C>
Unrealized appreciation $ 47,305
Unrealized depreciation (5,875)
--------
Net unrealized appreciation $ 41,430
=========
</TABLE>
(b) Represents non-income producing securities.
SEE NOTES TO FINANCIAL STATEMENTS.
88
<PAGE> 94
Schedule of Investments
THE VICTORY PORTFOLIOS October 31, 1995
VALUE FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
- ----------------------------------------------
COMMON STOCKS (94.7%)
AEROSPACE/DEFENSE (4.7%):
72,000 Boeing Co. $ 4,725
40,000 General Dynamics Corp. 2,215
51,500 Litton Industries, Inc.(b) 2,041
114,000 Raytheon Co. 4,973
--------
13,954
--------
AUTOMOTIVE (2.9%):
62,000 Chrysler Corp. 3,201
84,000 Ford Motor Co. 2,415
47,000 TRW, Inc. 3,090
--------
8,706
--------
BANKS (7.0%):
92,000 BankAmerica Corp. 5,290
110,000 Comerica, Inc. 3,699
54,500 CoreStates Financial Corp. 1,982
71,000 First Union Corp. 3,523
79,100 J.P. Morgan & Co., Inc. 6,101
--------
20,595
--------
BEVERAGES (1.3%):
58,000 Anheuser Busch Co., Inc. 3,828
--------
CHEMICALS (2.1%):
31,000 Dow Chemical Co. 2,127
18,000 Eastman Chemical 1,071
60,000 Lubrizol Corp. 1,725
70,000 RPM, Inc., Ohio 1,356
--------
6,279
--------
COMPUTER SOFTWARE (1.5%):
28,000 Microsoft Corp.(b) 2,800
92,000 Novell, Inc.(b) 1,518
--------
4,318
--------
COMPUTERS & OFFICE EQUIPMENT (1.4%):
22,000 International Business
Machines Corp. 2,140
45,000 Pitney Bowes, Inc. 1,963
--------
4,103
--------
CONTAINERS & PACKAGING (0.3%):
40,000 Sonoco Products Co. 990
--------
ELECTRICAL EQUIPMENT (2.8%):
36,000 Emerson Electric Co. 2,565
91,000 General Electric Co. 5,756
--------
8,321
--------
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
ELECTRONICS (2.7%):
42,000 Hewlett Packard Co. $ 3,890
60,000 Intel Corp. 4,193
--------
8,083
--------
FINANCIAL SERVICES (3.4%):
70,000 American Express Co. 2,844
29,000 Federal National Mortgage
Assoc. 3,041
33,000 H & R Block 1,361
52,500 Household International,
Inc. 2,953
--------
10,199
--------
FOOD PROCESSING & PACKAGING (1.3%):
58,500 ConAgra, Inc. 2,260
31,000 Pioneer Hi-Bred
International, Inc. 1,538
--------
3,798
--------
HOME PRODUCTS (1.8%):
95,000 Newell Co. 2,292
53,000 Sherwin Williams Co. 1,994
23,000 Stanley Works 1,098
--------
5,384
--------
INDUSTRIAL -- MISCELLANEOUS (2.8%):
40,000 Allied Signal, Inc. 1,700
43,500 Minnesota Mining &
Manufacturing Co. 2,474
35,000 Textron, Inc. 2,406
62,000 WMX Technologies, Inc. 1,744
--------
8,324
--------
INSURANCE (5.1%):
43,000 Aetna Life & Casualty Co. 3,026
135,000 Allstate 4,961
105,200 American General Corp. 3,458
69,000 St. Paul Cos., Inc. 3,502
--------
14,947
--------
MACHINERY & MANUFACTURING (1.1%):
54,000 Cooper Industries 1,822
15,500 Deere & Co. 1,385
--------
3,207
--------
MEDIA (2.6%):
34,700 Cox Communications, Inc.,
Class A(b) 651
47,000 Dow Jones & Co., Inc. 1,657
40,000 Dun & Bradstreet Corp. 2,390
48,000 Time Warner, Inc. 1,752
46,000 Times Mirror Co., Class A 1,334
--------
7,784
--------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
89
<PAGE> 95
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1995
VALUE FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
METALS & MINING (2.6%):
55,000 Aluminum Co. of America $ 2,805
83,000 Cyprus Amax Minerals 2,168
92,000 USX U.S. Steel Group 2,749
--------
7,722
--------
OIL -- INTEGRATED (DOMESTIC) (3.5%):
44,000 Atlantic Richfield Co. 4,697
179,000 Phillips Petroleum Co. 5,773
--------
10,470
--------
OIL -- INTEGRATED (INTERNATIONAL) (9.3%):
111,600 Chevron Corp. 5,217
70,000 Exxon Corp. 5,346
73,000 Mobil Corp. 7,355
19,500 Royal Dutch Petroleum Co. 2,396
105,200 Texaco, Inc. 7,167
--------
27,481
--------
OILFIELD WELL EQUIPMENT & SERVICES (1.4%):
127,000 Baker Hughes, Inc. 2,492
25,000 Schlumberger Ltd. 1,556
--------
4,048
--------
PAPER & FOREST PRODUCTS (2.6%):
10,000 Georgia Pacific Corp. 825
136,000 International Paper Co. 5,032
33,000 Mead Corp. 1,902
--------
7,759
--------
PHARMACEUTICALS (6.0%):
75,200 Abbott Laboratories 2,989
38,400 American Home Products Corp. 3,403
44,000 Merck & Co., Inc. 2,530
88,000 Pfizer, Inc. 5,049
70,200 Schering-Plough 3,764
--------
17,735
--------
RETAIL -- FOOD & DRUGS (1.5%):
80,200 Supervalu, Inc. 2,466
72,000 Walgreen Co. 2,052
--------
4,518
--------
RETAIL -- SPECIALTY STORES (0.6%):
80,000 Pep Boys -- Manny, Moe &
Jack 1,750
--------
RETAIL -- TRADE (2.5%):
62,000 Dayton Hudson Corp. 4,263
90,000 Sears & Roebuck Co. 3,060
--------
7,323
--------
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
SOAPS & PERSONAL CARE (1.3%):
41,000 Avon Products $ 2,916
10,000 Procter & Gamble Co. 810
--------
3,726
--------
TOBACCO (1.7%):
46,000 Philip Morris Cos., Inc. 3,887
42,000 UST Corp. 1,260
--------
5,147
--------
TRANSPORTATION (1.0%):
15,500 Norfolk Southern Corp. 1,197
40,000 Roadway Services, Inc. 1,790
--------
2,987
--------
UTILITIES -- ELECTRIC (6.0%):
136,000 Consolidated Edison Co. NY,
Inc. 4,131
90,000 DQE Light Co. 2,475
66,000 Houston Industries 3,061
95,000 Public Service Co. of
Colorado 3,242
130,000 Texas Utilities Co. 4,778
--------
17,687
--------
UTILITIES -- NATURAL GAS (2.1%):
75,000 Consolidated Natural Gas 2,850
52,000 Enron Corp. 1,788
50,000 Peoples Energy Corp. 1,438
--------
6,076
--------
UTILITIES -- TELECOMMUNICATIONS (7.8%):
127,000 A T & T Corp. 8,128
62,000 Ameritech Corp. 3,348
41,000 Comsat Corp. 815
156,000 GTE Corp. 6,435
82,000 MCI Telecommunications Corp. 2,045
47,000 Nynex Corp. 2,209
--------
22,980
--------
- ----------------------------------------------------------
TOTAL COMMON STOCKS $280,229
- ----------------------------------------------------------
- ----------------------------------------------
INVESTMENT COMPANIES (5.3%)
12,892,123 AIM Treasury Portfolio 12,892
2,824,635 Federated Treasury
Obligation Fund 2,825
- ----------------------------------------------------------
TOTAL INVESTMENT COMPANIES 15,717
- ----------------------------------------------------------
TOTAL (COST $257,181)(a) $295,946
- ---------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
90
<PAGE> 96
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1995
VALUE FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
- ---------------
Percentages indicated are based on net assets of $295,871.
(a) Represents cost for financial reporting purposes and differs from cost basis
for federal income tax reporting purposes by the amount of losses recognized
for financial reporting purposes in excess of federal income tax reporting
of approximately $148. Cost for federal income tax purposes differs from
value by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C> <C> <C>
Unrealized appreciation $ 43,806
Unrealized depreciation (5,189)
--------
Net unrealized appreciation $ 38,617
=========
</TABLE>
(b) Represents non-income producing securities.
SEE NOTES TO FINANCIAL STATEMENTS.
91
<PAGE> 97
Schedule of Investments
THE VICTORY PORTFOLIOS October 31, 1995
GROWTH FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
- ----------------------------------------------
COMMON STOCKS (98.5%)
AEROSPACE/DEFENSE (0.8%):
12,500 Boeing Co. $ 820
----------
ALUMINUM (0.5%):
10,000 Aluminum Co. of America 510
----------
AUTOMOTIVE (0.1%):
30,000 Pep Boys -- Manny, Moe, &
Jack 656
----------
BANKS (1.9%):
20,500 BankAmerica Corp. 1,179
29,700 Norwest Corp. 876
----------
2,055
----------
BEVERAGES (4.5%):
15,000 Anheuser Busch Co., Inc. 990
54,700 Coca-Cola Co. 3,932
----------
4,922
----------
CHEMICALS-SPECIALTY (1.9%):
15,000 Eastman Co. 892
15,000 Lubrizol Corp. 431
37,500 RPM, Inc. 727
----------
2,050
----------
CHEMICALS -- GENERAL (1.3%):
20,000 Dow Chemical Co. 1,372
----------
COMPUTERS & PERIPHERALS (2.1%):
15,000 Hewlett Packard Co. 1,389
20,000 3-Com Corp. (b) 940
----------
2,329
----------
COSMETICS & RELATED (1.6%):
35,000 Gillette Co. 1,693
----------
ELECTRICAL EQUIPMENT (7.8%):
35,000 Emerson Electric Co. 2,494
72,000 General Electric Co. 4,554
20,000 W.W. Grainger, Inc. 1,250
----------
8,298
----------
ELECTRONIC COMPUTING EQUIPMENT (1.0%):
20,000 Compaq Computer Corp. (b) 1,115
----------
ELECTRONIC & ELECTRICAL -- GENERAL (2.6%):
42,000 Motorola, Inc. 2,756
----------
ENTERTAINMENT (1.6%):
30,000 Walt Disney Co. 1,729
----------
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
FINANCIAL SERVICES (2.3%):
14,600 Federal National Mortgage
Assoc. $ 1,531
20,000 First USA, Inc. 920
----------
2,451
----------
FOOD PROCESSING & PACKAGING (1.2%):
20,000 ConAgra, Inc. 772
18,000 Sara Lee Corp. 529
----------
1,301
----------
FOREST PRODUCTS -- LUMBER, PAPER (2.8%):
50,000 International Paper Co. 1,850
10,000 Mead Corp. 576
25,000 Sonoco Products Co. 619
----------
3,045
----------
HEALTH CARE (2.0%):
45,000 Columbia HCA Healthcare 2,211
----------
HOME PRODUCTS (1.9%):
85,000 Newell Co. 2,051
----------
INSURANCE (3.0%):
30,000 American International
Group, Inc. 2,531
15,000 St. Paul Cos., Inc. 761
----------
3,292
----------
MANUFACTURING -- MISCELLANEOUS (2.2%):
30,000 Allied Signal, Inc. 1,275
18,000 Minnesota Mining &
Manufacturing Co. 1,024
----------
2,299
----------
MEDICAL SUPPLIES (2.8%):
30,000 Johnson & Johnson, Inc. 2,445
10,000 Medtronic, Inc. 577
----------
3,022
----------
OFFICE EQUIPMENT & SUPPLIES (1.0%):
25,000 Pitney Bowes, Inc. 1,091
----------
OILFIELD EQUIPMENTS & SERVICES (0.9%):
50,000 Baker Hughes, Inc. 981
----------
OIL-DOMESTIC INTEGRATED (5.8%):
20,000 Atlantic Richfield Co. 2,135
75,000 Enron Corp. 2,578
50,000 Phillips Petroleum Corp. 1,612
----------
6,325
----------
OIL -- INTEGRATED COMPANIES (4.2%):
54,000 Chevron Corp. 2,525
19,700 Mobil Corp. 1,985
----------
4,510
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
92
<PAGE> 98
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1995
GROWTH FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
PHARMACEUTICALS (13.5%):
50,000 Abbott Laboratories $ 1,988
20,000 Alza Corp., Class A (b) 440
27,500 American Home Products Corp. 2,437
21,000 Amgen, Inc. (b) 1,008
30,000 Merck & Co., Inc. 1,725
55,000 Pfizer, Inc. 3,156
69,000 Schering-Plough 3,700
----------
14,454
----------
RETAIL (5.6%):
65,000 Home Depot, Inc. 2,421
30,000 The Gap 1,181
70,000 Wal Mart Stores, Inc. 1,514
32,000 Walgreen Co. 912
----------
6,028
----------
SEMICONDUCTORS (3.2%):
50,000 Intel Corp. 3,494
----------
SOAPS & CLEANING AGENTS (2.6%):
35,000 Procter & Gamble Co. 2,835
----------
SOFTWARE & COMPUTER SERVICES (4.7%):
10,000 Automatic Data Processing,
Inc. 715
32,000 Microsoft (b) 3,200
40,000 Novell, Inc. (b) 660
10,000 Oracle Systems Corp. (b) 436
----------
5,011
----------
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
TOBACCO & TOBACCO PRODUCTS (3.7%):
40,000 Philip Morris Cos., Inc. $ 3,380
20,000 UST, Inc. 600
----------
3,980
----------
TRANSPORTATION -- AIR (0.6%):
30,000 Southwest Airlines Co. 600
----------
UTILITIES -- TELECOMMUNICATIONS (6.8%):
62,500 A T & T Corp. 4,000
60,000 SBC Communications, Inc. 3,353
----------
7,353
- ------------------------------------------------------------
TOTAL COMMON STOCKS 106,639
- ------------------------------------------------------------
- ----------------------------------------------
INVESTMENT COMPANIES (1.5%)
1,652,960 AIM Treasury Portfolio 1,653
- ------------------------------------------------------------
TOTAL INVESTMENT COMPANIES 1,653
- ------------------------------------------------------------
TOTAL (COST $91,022) $ 108,292
- ---
</TABLE>
- ---------------
Percentages indicated are based on net assets of $108,253.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C> <C> <C>
Unrealized appreciation $ 19,144
Unrealized depreciation (1,874)
----------
Net unrealized appreciation $ 17,270
==========
</TABLE>
(b) Represents non-income producing securities.
SEE NOTES TO FINANCIAL STATEMENTS.
93
<PAGE> 99
Schedule of Investments
THE VICTORY PORTFOLIOS October 31, 1995
SPECIAL VALUE FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
- ----------------------------------------------
COMMON STOCKS (90.6%)
AEROSPACE/DEFENSE (2.9%):
113,400 GenCorp, Inc. $ 1,191
43,100 General Dynamics Corp. 2,387
58,000 Thiokol Corp. Delaware 2,008
----------
5,586
----------
AIRLINES (0.5%):
41,100 Atlantic Southeast Airlines 1,017
----------
AUTOMOTIVE PARTS (3.2%):
26,000 Echlin, Inc. 930
44,200 Genuine Parts Co. 1,751
121,331 Mark IV Industries 2,366
51,600 Mascotech, Inc. 529
85,775 T B C Corp.(b) 600
----------
6,176
----------
BANKS (4.3%):
35,500 Bank of Boston Corp. 1,580
30,100 Central Fidelity Banks, Inc. 948
89,600 Comerica, Inc. 3,013
16,129 Michigan National Corp. 1,770
17,500 Star Bank 969
----------
8,280
----------
BEVERAGES (1.0%):
71,000 Coca Cola Enterprises, Inc. 1,890
----------
CHEMICALS (6.1%):
42,100 A. Schulman, Inc. 789
70,000 Arcadian Corp.(b) 1,444
42,550 Avery Dennison Corp. 1,904
32,000 Lubrizol Corp. 920
57,500 Olin Corp. 3,680
8,500 Raychem Corp. 394
96,500 RPM, Inc. 1,870
21,900 WD 40 Co. 862
----------
11,863
----------
CONSTRUCTION (1.5%):
10,700 CBI Industries, Inc. 333
71,100 Foster Wheeler Corp. 2,666
----------
2,999
----------
CONSUMER GOODS (1.6%):
41,400 Jostens, Inc. 937
89,000 Newell Co. 2,147
----------
3,084
----------
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
CONTAINERS (1.0%):
74,550 Sonoco Products Co. $ 1,845
----------
ELECTRICAL EQUIPMENT (5.5%):
39,200 Arrow Electronics, Inc.(b) $ 1,989
28,000 Harris Corp. 1,628
16,000 Lam Research Corp.(b) 974
41,625 Molex Corp. 1,374
24,900 Sensormatic Electronic 532
31,000 Varian Associates, Inc 1,593
37,000 Vishay Intertechnology,
Inc.(b) 1,304
22,500 W.W. Grainger, Inc. 1,406
----------
10,800
----------
ENVIRONMENTAL CONTROL (0.9%):
199,650 Laidlaw, Inc., Class B 1,797
----------
FINANCIAL SERVICES (8.1%):
95,000 Bear Stearns Cos., Inc. 1,888
54,000 Capital One Financial Corp. 1,323
53,300 Equifax, Inc. 2,079
36,800 H & R Block 1,518
13,900 Integra Financial Corp. 817
51,900 Northern Trust Corp. 2,478
70,600 PMI Group, Inc. 3,389
69,100 UJB Financial Corp. 2,203
----------
15,695
----------
FOOD & DRUG DISTRIBUTORS (1.2%):
70,000 Rite Aid Corp. 1,890
15,500 Supervalu, Inc. 477
----------
2,367
----------
FOOD PROCESSING & PACKAGING (2.4%):
72,100 Dean Foods Co. 2,010
45,250 IBP, Inc. 2,709
----------
4,719
----------
FOREST PRODUCTS (0.8%):
64,600 Louisiana Pacific Corp. 1,542
----------
FUNERAL SERVICES (1.9%):
93,000 Service Corp. International 3,732
----------
FURNITURE (0.8%):
67,100 Leggett & Platt, Inc. 1,610
----------
HOTELS & MOTELS (1.5%):
88,300 Mirage Resorts, Inc.(b) 2,892
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
94
<PAGE> 100
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1995
SPECIAL VALUE FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
INSURANCE (6.0%):
38,800 American Re Corp. $ 1,484
55,000 Horace Mann Educators 1,464
55,200 Kemper Corp. 2,677
46,000 Progressive Corp. 1,909
72,000 Prudential Reinsurance
Holdings, Inc.(b) 1,467
25,000 Transatlantic Holdings 1,684
63,800 USF&G Corp. 1,069
----------
11,754
----------
MACHINE TOOLS (2.1%):
80,000 Albany International Corp. 1,660
22,900 Greenfield Industries 687
28,000 Kennametal, Inc. 872
28,100 Manitowoc Industries 797
----------
4,016
----------
MANUFACTURING (6.2%):
38,000 Briggs & Stratton Corp. 1,534
71,333 Federal Signal Corp. 1,596
19,100 Hillenbrand 606
72,200 Kaydon Corp. 2,085
56,466 Pall Corp. 1,376
8,100 Paragon Trade Brands,
Inc.(b) 129
40,062 Pentair, Inc. 2,023
13,000 Stewart & Stevenson
Services, Inc. 296
40,650 Tyco Laboratories, Inc. 2,469
----------
12,114
----------
MEDICAL SERVICES (4.0%):
139,300 Community Psychiatric
Centers, Inc. 1,515
67,200 Coventry Corp.(b) 1,319
53,900 Integrated Health Services,
Inc.(b) 1,233
33,000 Lincare Holdings(b) 821
73,300 Quorum Health Group(b) 1,571
42,437 Vivra, Inc.(b) 1,400
----------
7,859
----------
MEDICAL SUPPLIES (0.1%):
10,000 Sunrise Medical, Inc.(b) 181
----------
METALS (1.9%):
31,800 Minerals Technologies, Inc. 1,268
84,000 Ucar International(b) 2,394
----------
3,662
----------
NEWSPAPERS (1.8%):
35,900 New York Times Co., Class A 996
41,100 Tribune Co. 2,594
----------
3,590
----------
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
OILFIELD EQUIPMENTS & SERVICES (1.3%):
125,200 Baker Hughes, Inc. $ 2,457
----------
OIL & GAS EXPLORATION (2.5%):
80,100 Anadarko Petroleum 3,474
145,000 ENSERCH Exploration(b) 1,432
----------
4,906
----------
OIL & GAS PRODUCTION (1.2%):
26,000 Diamond Shamrock, Inc. 670
46,100 Snyder Oil Corp. 473
42,500 Vastar Resources, Inc. 1,201
----------
2,344
----------
RETAIL (2.7%):
90,200 Fingerhut Cos., Inc. 1,229
70,800 Hannaford Brothers 1,850
48,000 Tiffany & Co. 2,094
----------
5,173
----------
RUBBER (0.5%):
15,800 Bandag, Inc. 810
4,500 Bandag, Inc., Class A 224
----------
1,034
----------
SEMICONDUCTORS (0.6%):
25,000 Advanced Micro Devices(b) 597
16,000 MEMC Electronic Materials,
Inc.(b) 512
----------
1,109
----------
SHOES, LEATHER GOODS (0.8%):
28,000 Nike, Inc. 1,589
----------
SOFTWARE & COMPUTER SERVICES (0.9%):
10,000 American Software, Inc.(b) 78
14,750 Analysts International Corp. 437
28,300 Policy Management Systems
Corp.(b) 1,334
----------
1,849
----------
STEEL (0.6%):
68,620 Worthington Industries, Inc. 1,141
----------
TELECOMMUNICATIONS (1.2%):
4,600 Comsat Corp. 91
69,400 Worldcom, Inc.(b) 2,264
----------
2,355
----------
TRANSPORTATION (3.7%):
47,150 GATX Corp. 2,240
80,750 Illinois Central Corp. 3,089
66,000 Pittston Services Group 1,815
----------
7,144
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
95
<PAGE> 101
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1995
SPECIAL VALUE FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
TRUCKS -- MANUFACTURING (0.4%):
28,700 Wabash National Corp. $ 728
----------
UTILITIES - ELECTRIC & GAS (6.9%):
32,400 Brooklyn Union Gas Co. 814
40,530 DQE Co. 1,114
118,600 Florida Progress Corp. 3,929
154,300 Northeast Utilities 3,818
79,400 Public Service Co. of
Colorado 2,710
55,400 Washington Gas Light Co. 1,060
----------
13,445
- ------------------------------------------------------------
TOTAL COMMON STOCKS 176,344
- ------------------------------------------------------------
- ----------------------------------------------
PREFERRED STOCKS (0.0%)
INSURANCE (0.0%):
1,766 Everen Capital, Series A(b) 39
- ------------------------------------------------------------
TOTAL PREFERRED STOCKS 39
- ------------------------------------------------------------
- ----------------------------------------------
INVESTMENT COMPANIES (8.3%)
8,244,719 AIM Treasury Portfolio $ 8,245
8,016,471 Federated Treasury
Obligation 8,016
- ------------------------------------------------------------
TOTAL INVESTMENT COMPANIES 16,261
- ------------------------------------------------------------
TOTAL (COST $171,447)(a) $ 192,644
- ---------------------------------------------------------
</TABLE>
- ---------------
Percentages indicated are based on net assets of $194,700.
(a) Represents cost for financial reporting purposes and differs from cost basis
for federal income tax reporting purposes by the amount of losses recognized
for financial reporting purposes in excess of federal income tax reporting
of approximately $31. Cost for federal income tax purposes differs from
value by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C> <C> <C>
Unrealized appreciation $ 27,076
Unrealized depreciation (5,910)
----------
Net unrealized appreciation $ 21,166
==========
</TABLE>
(b) Represents non-income producing securities.
SEE NOTES TO FINANCIAL STATEMENTS.
96
<PAGE> 102
Schedule of Investments
THE VICTORY PORTFOLIOS October 31, 1995
SPECIAL GROWTH FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
- ----------------------------------------------
COMMERCIAL PAPER (4.7%)
FINANCIAL SERVICES (1.0%):
130,000 Corporate Asset Funding,
5.70%, 12/13/95 $ 129
430,000 Preferred Receivables Fund,
5.73%, 12/6/95 427
----------
556
----------
INSURANCE (1.6%):
324,000 Aon Corp., 5.90%, 11/1/95 324
375,000 Aon Corp., 5.75%, 11/27/95 373
172,000 Metlife Funding, 5.72%,
11/10/95 172
----------
869
----------
PUBLISHING(1.3%):
685,000 Dow Jones & Co., Inc.,
5.70%, 12/18/95 680
----------
RETAIL (0.8%):
425,000 Wal-Mart Stores, Inc.,
5.70%, 11/21/95 424
- ------------------------------------------------------------
TOTAL COMMERCIAL PAPER 2,529
- ------------------------------------------------------------
- ----------------------------------------------
COMMON STOCKS (95.3%)
ADVERTISING (0.4%):
4,400 Catalina Marketing Group
Corp.(b) 222
----------
AEROSPACE/DEFENSE (0.4%):
1,000 Alliant Techsystems, Inc.(b) 46
5,000 Precision Castparts 179
----------
225
----------
AGRICULTURE & LIVESTOCK (0.2%):
2,500 Delta & Pine Land Co. 97
----------
AUTOMOTIVE PARTS (2.1%):
18,100 Breed Technologies, Inc. 337
4,000 Exide Corp. 175
3,000 Gentex Corp.(b) 67
3,100 Intermet Corp.(b) 36
16,300 Kaydon Corp. 471
3,000 OEA, Inc. 82
----------
1,168
----------
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
BANKS (0.9%):
3,163 First Bank Systems, Inc. $ 157
3,400 Firstbank Puerto Rico 66
13,300 Peoples Heritage Financial
Group 253
----------
476
----------
BROADCASTING (1.5%):
6,000 Emmis Broadcasting, Inc.,
Class A(b) 159
5,500 Evergreen Media Corp.(b) 150
2,500 Heartland Wireless
Communications, Inc.(b) 64
5,500 Heritage Media Corp.,
Class A(b) 153
6,000 TCA Cable TV, Inc. 178
7,000 Westwood One, Inc.(b) 110
----------
814
----------
BUILDING MATERIALS (0.7%):
5,600 Medusa Corp. 140
5,800 Oakwood Homes Corp. 217
----------
357
----------
CHEMICALS (2.5%):
2,700 Church & Dwight Co., Inc. 55
5,500 First Mississippi Corp. 113
28,700 Lilly Industries, Inc.,
Class A 366
13,300 Om Group, Inc. 386
6,800 Synalloy Corp. 139
7,000 WD 40 Co. 276
----------
1,335
----------
COMMERCIAL SERVICES (1.6%):
2,000 Affiliated Computer
Services, Inc.(b) 67
4,650 Apollo Group, Class A(b) 122
4,500 Concord Efs, Inc.(b) 155
3,000 Corrections Corp. of
America(b) 164
5,900 Robert Half International,
Inc.(b) 215
11,400 Sothebys Holdings, Class A 158
----------
881
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
97
<PAGE> 103
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1995
SPECIAL GROWTH FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
COMPUTERS & PERIPHERALS (9.6%):
4,500 Alantec Corp.(b) $ 161
9,000 Cheyenne Software, Inc.(b) 188
6,600 Cognex Corp.(b) 394
14,500 Conner Peripherals(b) 261
7,600 Control Data Systems,
Inc.(b) 101
7,600 Davidson & Associates(b) 270
3,300 FTP Software, Inc.(b) 89
2,000 FileNet Corp.(b) 91
5,400 Henry(Jack) & Associates 117
3,800 Hyperion Software Corp.(b) 187
7,000 In Focus Systems, Inc.(b) 230
10,000 MapInfo Corp.(b) 201
1,000 McAfee Associates, Inc.(b) 58
5,200 Minnesota Educational
Computing Corp.(b) 161
10,800 Netmanage, Inc.(b) 220
4,000 Network General Corp.(b) 166
9,900 Optical Data Systems(b) 296
6,000 Safeguard Scientifics,
Inc.(b) 270
5,400 Sequent Computer Systems,
Inc.(b) 94
2,200 Shiva Corp.(b) 132
5,200 Sterling Software, Inc.(b) 240
12,300 Sungard Data Systems,
Inc.(b) 338
4,000 Systems & Computers
Technology Corp.(b) 72
2,600 Tivoli Systems, Inc.(b) 84
5,800 VeriFone, Inc.(b) 157
5,200 Wonderware Corp.(b) 165
5,000 Zebra Technologies(b) 297
5,200 Zilog, Inc.(b) 185
----------
5,225
----------
CONSUMER GOODS (0.9%):
14,000 Bell Industries(b) 294
5,500 Tootsie Roll Industries 199
----------
493
----------
CONTAINERS (0.2%):
3,500 Chesapeake Corp. 107
----------
COSMETICS & RELATED (0.3%):
7,000 Maybelline, Inc. 165
----------
DRUG STORES (0.6%):
8,000 Eckerd Corp.(b) 317
----------
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
ELECTRICAL EQUIPMENT (3.5%):
13,600 Belden, Inc. $ 328
3,800 C-Cube Microsystems, Inc.(b) 263
3,500 Cable Design Technologies(b) 115
4,000 Checkpoint Systems, Inc.(b) 116
4,000 CIDCO, Inc.(b) 118
1,800 Electro Scientific, Inc.(b) 56
2,000 FORE Systems, Inc.(b) 106
4,000 Input/Output, Inc.(b) 150
2,000 ITI Technologies, Inc.(b) 50
5,000 Littelfuse, Inc.(b) 162
5,500 Methode Electronics, Inc. 127
6,000 Pioneer-Standard
Electronics, Inc. 83
4,800 SCI Systems, Inc.(b) 169
4,000 Tech Data Corp.(b) 48
----------
1,891
----------
ELECTRICAL & ELECTRONICS (6.1%):
8,500 AMETECK, Inc. 150
7,000 Allen Group 172
7,950 Alliance Semiconductor
Corp.(b) 244
9,000 Atmel Corp.(b) 281
3,300 Avnet, Inc. 166
5,250 Harman International 242
18,000 Integrated Circuit
Systems(b) 244
8,600 Kent Electronics Corp.(b) 419
5,000 Lam Research Corp.(b) 304
5,000 Lattice Semiconductor(b) 196
5,000 Rexel, Inc.(b) 58
6,000 Teleflex, Inc. 254
4,000 Thermedics, Inc.(b) 74
2,500 Thermotrex Corp.(b) 90
1,750 Transpro, Inc.(b) 19
5,200 Ultratech Stepper, Inc.(b) 208
9,000 VLSI Technology, Inc.(b) 212
----------
3,333
----------
ENTERTAINMENT (0.5%):
10,000 Carmike Cinemas, Inc.,
Class A(b) 209
3,800 Players International,
Inc.(b) 41
----------
250
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
98
<PAGE> 104
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1995
SPECIAL GROWTH FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
ENVIRONMENTAL CONTROL (1.8%):
5,200 Donaldson Co., Inc. $ 127
5,000 Sanifill, Inc.(b) 157
7,500 U.S.A. Waste Services,
Inc.(b) 158
4,700 United States Filter
Corp.(b) 109
6,300 United Waste Systems,
Inc.(b) 249
8,800 Western Waste Industries(b) 174
----------
974
----------
FINANCIAL SERVICES (2.4%):
8,300 Aames Financial Corp. 208
2,600 Eaton Vance Corp. 95
7,000 Green Tree Financial Corp. 186
8,000 North American Mortgage Co. 165
8,700 Pioneer Group, Inc. 228
9,450 Quick & Reilly Group 224
2,900 Value Line, Inc. 95
5,250 Waterhouse Investor Services 104
----------
1,305
----------
FOOD PROCESSING & PACKAGING (0.2%):
5,200 Goodmark Foods 96
----------
FURNITURE (0.7%):
10,000 Juno Lighting 145
8,300 La Z Boy Chair Co. 247
----------
392
----------
HEALTH CARE SERVICES (1.3%):
8,000 Charter Medical Corp.(b) 144
8,000 Medaphis Corp.(b) 254
19,000 Res-Care, Inc.(b) 313
----------
711
----------
HOSPITAL & NURSING EQUIPMENT & SUPPLIES
(0.8%):
11,000 Invacare Corp. 278
2,300 Omnicare, Inc. 83
5,500 Vital Signs, Inc. 100
----------
461
----------
HOTELS & MOTELS (0.2%):
5,200 Doubletree Corp.(b) 114
600 Marcus Corp. 21
----------
135
----------
HOUSEHOLD GOODS -- APPLIANCES, FURNISHINGS &
ELECTRONICS (0.2%):
5,800 Williams-Sonoma Co.(b) 101
----------
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
INDUSTRIAL SERVICES (1.4%):
15,000 Peak Technologies Group,
Inc.(b) $ 379
16,900 Unitog Co. 397
----------
776
----------
INSURANCE (1.3%):
2,800 CMAC Investment Corp. 133
17,120 Gainsco, Inc. 148
2,000 Gallagher (Arthur J.) & Co. 71
6,700 Maxicare Health Plans,
Inc.(b) 116
3,900 Reliastar Financial Corp. 163
6,600 United American Healthcare,
Inc.(b) 73
----------
704
----------
LEISURE -- RECREATION, GAMING (0.4%):
12,200 Callaway Golf Co. 200
----------
MACHINERY & ENGINEERING (2.1%):
10,000 Alamo Group, Inc. 171
4,600 Applied Power, Inc., Class A 140
5,500 Credence Systems Corp.(b) 206
2,300 Electroglas, Inc.(b) 162
3,600 Helix Technology Corp. 135
6,500 IDEX Corp. 245
4,600 JLG Industries, Inc. 108
----------
1,167
----------
MACHINE TOOLS (1.2%):
5,000 Cascade Corp. 69
3,000 FSI International, Inc.(b) 71
6,300 Greenfield Industries 189
4,600 Kulicke & Soffa
Industries(b) 161
7,200 Telxon Corp. 166
----------
656
----------
MANUFACTURING -- MISCELLANEOUS (1.9%):
3,000 AptarGroup, Inc. 103
5,000 Fisher Scientific
International, Inc. 157
3,600 Graco, Inc. 121
11,500 Keystone International, Inc. 256
10,000 Pall Corp. 243
2,000 Plantronics, Inc.(b) 67
3,000 Watts Industries, Class A 62
----------
1,009
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
99
<PAGE> 105
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1995
SPECIAL GROWTH FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
MEDICAL-BIOTECHNOLOGY (0.8%):
3,100 Liposome Company, Inc.(b) $ 48
6,000 Mentor Corp. 132
7,500 Protein Design Labs, Inc.(b) 126
7,000 Somatogen, Inc.(b) 109
----------
415
----------
MEDICAL SERVICES (6.3%):
2,000 American Oncology
Resources(b) 70
9,000 Apria Healthcare Group,
Inc.(b) 195
7,400 Community Health Systems,
Inc.(b) 235
5,000 Express Scripts, Inc.,
Class A(b) 190
2,400 Gelman Sciences, Inc.(b) 51
9,000 Health Management Assoc.,
Inc.-A(b) 193
5,400 Health Management Systems,
Inc.(b) 173
5,500 Horizon/CMS Healthcare
Corp.(b) 111
6,000 Integrated Health Services,
Inc. 137
4,000 Living Centers of America(b) 103
10,000 Mid-Atlantic Medical
Services, Inc.(b) 199
5,400 Nellcor Puritan Bennett,
Inc.(b) 311
10,000 Ornda Healthcorp(b) 176
7,400 Orthodontic Centers of
America(b) 237
7,000 Pacific Physician Services,
Inc.(b) 111
4,800 Pacificare Health System(b) 349
7,200 PhyCor, Inc.(b) 265
3,600 Renal Treatment Centers,
Inc.(b) 130
1,200 Sierra Health Services(b) 34
5,200 Vivra, Inc.(b) 172
----------
3,442
----------
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
MEDICAL SUPPLIES (2.8%):
5,300 AMSCO International, Inc.(b) $ 85
9,900 Centocor, Inc.(b) 111
4,400 Diagnostic Products Corp. 163
2,800 Fresenius USA, Inc.(b) 46
6,200 Haemonetics Corp.(b) 117
7,500 IDEXX Laboratories, Inc.(b) 306
4,000 MediSense, Inc.(b) 85
3,500 PLC Systems, Inc.(b) 67
1,000 Sofamor Danek Group, Inc.(b) 24
4,500 STERIS Corp.(b) 152
5,000 Summit Technology, Inc.(b) 222
1,500 Target Therapeutics, Inc.(b) 116
----------
1,494
----------
MERCHANDISING (0.3%):
10,000 Lands End, Inc.(b) 150
----------
METALS -- FABRICATION (1.7%):
13,000 Commercial Metals Co. 335
8,000 Kennametal, Inc. 249
3,900 Mueller Industries, Inc.(b) 92
7,000 Quanex Corp. 138
3,000 Wolverine Tube, Inc.(b) 107
----------
921
----------
MINING (1.1%):
16,400 Addington Resources, Inc.(b) 205
7,100 Coeur D'Alene Mines Corp. 120
3,897 Firstmiss Gold, Inc.(b) 70
5,500 Minerals Technologies, Inc. 219
----------
614
----------
OFFICE EQUIPMENT & SUPPLIES
(NON-COMPUTER REL) (0.3%):
6,300 American Business Products 138
----------
OIL & GAS EXPLORATION, PRODUCTION
& SERVICES (3.1%):
9,000 Barrett Resources Corp.(b) 209
5,000 Camco International, Inc. 114
13,000 Devon Energy Corp. 283
25,000 H.S. Resource, Inc.(b) 347
14,100 Newfield Exploration(b) 416
11,300 Smith International, Inc.(b) 181
9,000 United Meridian Corp.(b) 152
----------
1,702
----------
OILFIELD EQUIPMENT & SERVICES (0.5%):
8,200 BJ Services Co.(b) 193
10,000 Pride Petroleum Services(b) 87
----------
280
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
100
<PAGE> 106
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1995
SPECIAL GROWTH FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
PHARMACEUTICALS (2.3%):
3,100 Alpharma, Inc., Class A $ 74
10,000 Amylin Pharmaceuticals(b) 74
2,900 Dura Pharmaceuticals(b) 85
5,000 Gilead Sciences, Inc.(b) 98
8,200 Immunex Corp.(b) 105
4,000 INCYTE Pharmaceuticals,
Inc.(b) 83
9,500 ISIS Pharmaceuticals,
Inc.(b) 96
4,200 Roberts Pharmaceutical(b) 81
5,000 Teva Pharmaceutical
Industries Ltd. 196
8,000 Watson Pharmaceutical(b) 358
----------
1,250
----------
PRECISION INSTRUMENTS & RELATED (0.4%):
4,000 Dionex Corp.(b) 216
----------
PUBLISHING (1.7%):
5,700 A. H. Belo Corp. 197
3,100 Edmark Corp.(b) 133
4,700 Meredith Corp. 168
4,000 Houghton Mifflin Co. 164
17,800 Valassis Communications(b) 247
----------
909
----------
RADIO & TELEVISION (0.3%):
8,250 Renaissance Communications
Corp.(b) 185
----------
REAL ESTATE INVESTMENT TRUSTS (3.9%):
4,000 Beacon Corp. 87
6,000 Cail Realty Corp. 117
4,500 Chelsea GCA Realty, Inc. 125
5,500 Crescent Real Estate
Equities, Inc. 176
8,000 DeBartolo Realty Corp. 104
3,900 Developers Divers Realty 111
6,000 Federal Realty Investment
Trust 122
5,500 General Growth Properties 111
4,500 Liberty Property Trust 91
4,000 National Health Investors,
Inc. 120
4,500 Nationwide Health
Properties, Inc. 185
5,900 Post Properties, Inc. 177
3,800 Reckson Associates Realty
Corp. 102
3,500 Saul Centers, Inc. 50
6,000 Spieker Properties, Inc. 145
5,000 Starwood Lodging Trust 136
2,000 Summit Properties, Inc. 37
4,500 Weeks Corp. 104
----------
2,100
----------
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
RESTAURANTS (1.1%):
5,100 Apple South, Inc. $ 105
8,000 Applebees International,
Inc. 225
5,700 IHOP Corp.(b) 123
6,800 Sbarro, Inc. 142
----------
595
----------
RETAIL (2.2%):
2,000 Circle K Corp.(b) 41
8,300 Gymboree Corp.(b) 188
6,000 Medicine Shoppe
International, Inc. 258
7,500 Micro Warehouse, Inc.(b) 334
10,200 Nautica Enterprises, Inc.(b) 349
----------
1,170
----------
RETAIL -- SPECIALTY STORES (1.7%):
1,700 CDW Computer Centers,
Inc.(b) 82
12,900 Lillian Vernon Corp. 173
6,200 Men's Wearhouse(b) 242
4,000 Michaels Stores, Inc.(b) 54
4,100 Tiffany & Co. 179
13,800 Zale Corp.(b) 204
----------
934
----------
SEMICONDUCTORS (2.2%):
9,600 Actel Corp.(b) 113
8,000 International Rectifier
Corp.(b) 361
7,100 Linear Technology 311
13,400 S-3, Inc.(b) 229
10,000 Sierra Semiconductor(b) 179
----------
1,193
----------
SERVICES (NON-FINANCIAL) (0.2%):
11,000 IDEON Group, Inc. 98
----------
SHIPPING (0.7%):
20,500 TNT Freightways Corp. 369
----------
SHOES, LEATHER GOODS & CLOTHING ACCESSORIES
(0.3%):
6,200 Wolverine World Wide 186
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
101
<PAGE> 107
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1995
SPECIAL GROWTH FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
SOFTWARE & COMPUTER SERVICES (5.4%):
4,600 Acxiom Corp.(b) $ 138
5,600 American Management Systems,
Inc.(b) 162
6,500 Analysts International Corp. 192
4,000 Avid Technology, Inc.(b) 175
3,600 Bolt Beranek & Newman,
Inc.(b) 111
5,900 Continuum Co., Inc.(b) 232
4,000 Electronics For Imaging,
Inc.(b) 329
3,000 Expert Software, Inc.(b) 62
8,000 Intersolv, Inc.(b) 126
10,600 Macromedia, Inc.(b) 392
9,800 National Data Corp. 260
5,800 ParGain Technologies,
Inc.(b) 248
7,400 Sierra On-Line, Inc.(b) 276
4,500 Wallace Computer Services,
Inc. 254
----------
2,957
----------
STEEL (0.3%):
2,000 Carpenter Technology 76
5,000 J&L Speciality Steel, Inc. 82
----------
158
----------
TRANSPORTATION (2.0%):
5,000 Air Express International 104
8,500 Comair Holding, Inc. 238
14,000 Landstar System, Inc.(b) 367
18,800 Railtex, Inc.(b) 390
----------
1,099
----------
TRUCKING LOCAL & LONG DISTANCE (0.5%):
21,000 American Freightways,
Inc.(b) 268
----------
TRUCKS -- MANUFACTURING (0.2%):
5,000 Wabash National Corp. 127
----------
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
UTILITIES-TELECOMMUNICATIONS (4.8%):
12,200 Aspect Telecommunications(b) $ 419
6,000 BroadBand Technologies,
Inc.(b) 105
4,500 CellStar Corp.(b) 125
6,000 Cellular Communications,
Class A(b) 322
5,000 Cellular Communication of
Puerto Rico(b) 145
10,100 Centennial Cellular(b) 184
4,600 Coherent Communications
Systems Corp.(b) 94
15,000 Digi International, Inc.(b) 401
6,100 Network Equipment
Technologies, Inc.(b) 199
4,900 Picture Tel Corp.(b) 323
23,000 U.S. Long Distance Corp.(b) 296
----------
2,613
----------
WINE & SPIRITS (0.3%):
6,100 Robert Mondavi Corp.(b) 172
- ------------------------------------------------------------
TOTAL COMMON STOCKS 51,798
- ------------------------------------------------------------
TOTAL (COST $51,675)(a) $ 54,327
- ----------------------------------------------
</TABLE>
- ---------------
Percentages indicated are based on net assets of $54,335.
(a) Represents cost for financial reporting purposes and differs from cost basis
for federal income tax reporting purposes by the amount of losses recognized
for financial reporting purposes in excess of federal income tax reporting
of approximately $34. Cost for federal income tax purposes differs from
value by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C> <C> <C>
Unrealized appreciation $ 5,887
Unrealized depreciation (3,269)
----------
Net unrealized appreciation $ 2,618
==========
</TABLE>
(b) Represents non-income producing securities.
SEE NOTES TO FINANCIAL STATEMENTS.
102
<PAGE> 108
Schedule of Investments
THE VICTORY PORTFOLIOS October 31, 1995
OHIO REGIONAL STOCK FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
- ----------------------------------------------
COMMON STOCKS (95.4%)
AMUSEMENT & RECREATION SERVICES (0.6%):
7,000 Cedar Fair L.P. $ 221
----------
AUTOMOTIVE PARTS (4.8%):
24,000 Dana Corp. 615
19,800 Myers Industries, Inc. 285
15,000 TRW, Inc. 986
----------
1,886
----------
BANKS (7.9%):
24,000 Charter One Financial, Inc. 681
19,000 First Merit Corp. 513
9,843 Huntington Bancshares, Inc. 235
20,000 National City Corp. 618
15,000 Provident Bancorp 634
2,000 Second Bancorp 59
6,000 Star Bank 332
----------
3,072
----------
BUILDING MATERIALS (1.2%):
10,000 Medusa Corp 250
5,000 Owens Corning Fiberglass
Corp.(b) 212
----------
462
----------
CHEMICALS (6.0%):
12,500 A. Schulman, Inc. 234
15,000 Chemed Corp. 525
12,500 Chempower, Inc.(b) 48
20,000 Ferro Corp. 463
19,000 Lubrizol Corp. 546
26,250 RPM, Inc. 509
----------
2,325
----------
CONSUMER GOODS (2.7%):
12,000 American Greetings Corp. 378
15,000 Cincinnati Microwave, Inc.
(b) 86
43,000 Gibson Greetings, Inc. 597
----------
1,061
----------
ELECTRICAL EQUIPMENT (4.5%):
78,500 Pioneer-Standard
Electronics,
Inc. 1,089
20,000 Robbins & Myers, Inc. 670
----------
1,759
----------
ENGINEERING (0.1%):
10,000 Corrpro(b) 56
----------
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
FINANCIAL SERVICES (2.8%):
16,500 Haverfield Corp. $ 233
18,000 Mcdonald & Co. Investments 322
24,000 State Auto Financial 528
----------
1,083
----------
FOOD DISTRIBUTORS (1.0%):
10,000 Chiquita Brands
International 162
7,000 Kroger Co.(b) 234
----------
396
----------
FOOD PROCESSING & PACKAGING (0.2%):
5,000 Smuckers Class A 98
----------
FOREST PRODUCTS (3.1%):
12,000 Mead Corp. 692
15,000 Reynolds & Reynolds Co. 534
----------
1,226
----------
HEALTH CARE (0.3%):
9,000 Health Power, Inc.(b) 101
----------
HOSPITAL & NURSING EQUIPMENT (6.0%):
38,000 Invacare Corp. 960
38,000 Omnicare, Inc. 1,377
----------
2,337
----------
HOUSEHOLD GOODS (2.5%):
26,099 Lancaster Colony Corp. 868
20,000 Sun Television & Appliance 110
----------
978
----------
INDUSTRIAL SERVICES (3.2%):
40,000 ACME Cleveland Corp. 875
22,000 Amcast Industrial Corp. 374
----------
1,249
----------
INSURANCE (2.9%):
15,000 Ohio Casualty 532
15,000 Progressive Corp. 623
----------
1,155
----------
MACHINE TOOLS (8.3%):
15,750 Bearings, Inc. 571
17,000 Cincinnati Milacron, Inc. 438
37,050 Commercial Intertech Corp. 625
46,500 Gorman Rupp Co. 668
14,000 Lincoln Electric Co. 354
5,000 Monarch Machine Tool Co. 58
24,000 Telxon Corp. 555
----------
3,269
----------
MANUFACTURING (1.3%):
15,000 Parker-Hannifin Corp. 506
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
103
<PAGE> 109
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1995
OHIO REGIONAL STOCK FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
MEDICAL -- BIOTECHNOLOGY (0.1%):
5,000 Gliatech, Inc.(b) $ 48
----------
METALS (0.9%):
10,000 Brush Wellman, Inc. 168
7,000 Cold Metal Products, Inc.(b) 40
10,000 Park-Ohio Industries,
Inc.(b) 137
----------
345
----------
OFFICE EQUIPMENT & SUPPLIES (3.1%):
23,000 Diebold, Inc. 1,219
----------
OIL & GAS EXPLORATION (3.1%):
68,000 USX -- Marathon Group 1,207
----------
PAINT, VARNISHES & ENAMELS (1.3%):
14,000 Sherwin Williams Co. 527
----------
POLLUTION CONTROL SERVICES (0.6%):
51,100 Mid American Waste
Systems(b) 217
----------
PRECISION INSTRUMENTS (2.2%):
30,000 Keithley Instruments, Inc. 863
----------
PRINTING (0.2%):
20,000 Multi-Color Corp.(b) 75
----------
PUBLISHING (3.4%):
35,000 Scripps (E.W.) Co. 1,321
----------
REAL ESTATE INVESTMENT TRUSTS (0.8%):
16,000 Health Care Reit, Inc. 300
----------
RESTAURANTS (3.0%):
29,500 Bob Evans Farms, Inc. 531
20,000 Frisch's Restaurants 200
22,000 Wendy's International 437
----------
1,168
----------
RETAIL (2.0%):
17,000 Fabri-Centers of America,
Inc.(b) 253
17,000 Fabri-Centers of America-B
(b) 198
15,000 The Limited, Inc. 275
10,000 Value City Department
Stores,
Inc.(b) 60
----------
786
----------
RUBBER AND RUBBER PRODUCTS (1.5%):
5,000 Cooper Tire & Rubber Co. 116
12,000 Goodyear Tire & Rubber Co. 456
----------
572
----------
SERVICES (NON-FINANCIAL) (0.4%):
4,200 Roto Rooter, Inc. 139
----------
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
SHIPPING (0.3%):
3,000 Oglebay Norton Co. $ 105
----------
STEEL (2.0%):
35,000 Shiloh(b) 380
25,000 Worthington Industries, Inc. 416
----------
796
----------
TEXTILE MANUFACTURING (1.2%):
25,000 Essef Corp.(b) 456
----------
TOOLS AND HARDWARE MANUFACTURING (0.9%):
9,000 Timken Co. 362
----------
TRANSPORTATION (3.0%):
31,500 Comair Holding, Inc. 884
6,000 Roadway Services, Inc. 268
----------
1,152
----------
TRUCKS (0.8%):
20,000 Thor Industries, Inc. 318
----------
UTILITIES -- ELECTRIC (3.0%):
14,000 American Electric Power 534
22,500 D.P.L., Inc. 534
5,000 Ohio Edison 114
----------
1,182
----------
UTILITIES -- TELECOMMUNICATIONS (2.2%):
29,000 Cincinnati Bell 852
- ------------------------------------------------------------
TOTAL COMMON STOCKS 37,250
- ------------------------------------------------------------
- ----------------------------------------------
RIGHTS & WARRANTS (0.1%)
10,000 Cincinnati Microwave, Inc. 41
- ------------------------------------------------------------
TOTAL RIGHTS & WARRANTS 41
- ------------------------------------------------------------
- ----------------------------------------------
INVESTMENT COMPANIES (4.5%)
1,746,220 AIM Treasury Portfolio 1,746
9,659 Federated Treasury
Obligation 10
- ------------------------------------------------------------
TOTAL INVESTMENT COMPANIES 1,756
- ------------------------------------------------------------
TOTAL (COST $26,212)(a) $ 39,047
- ---------------------------------------------------------
</TABLE>
- ---------------
Percentages indicated are based on net assets of $ 39,048.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows (amounts in thousands):
<TABLE>
<S> <C> <C> <C>
Unrealized appreciation $ 14,542
Unrealized depreciation (1,707)
----------
Net unrealized appreciation $ 12,835
==========
</TABLE>
(b) Represents non-income producing securities.
SEE NOTES TO FINANCIAL STATEMENTS.
104
<PAGE> 110
Schedule of Investments
THE VICTORY PORTFOLIOS October 31, 1995
INTERNATIONAL GROWTH FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
- ----------------------------------------------
COMMON STOCKS (93.3%)
AUSTRALIA (1.3%):
ENERGY SOURCES (1.0%)
80,211 The Broken Hill Proprietary
Co., Ltd. $ 1,085
--------
METALS (0.2%)
234,000 Australian National
Industries, Ltd. 183
--------
OIL & GAS PRODUCTION (0.1%):
43,000 Australian Gas Light Co. 149
- ----------------------------------------------------------
TOTAL AUSTRALIA 1,417
- ----------------------------------------------------------
BRITAIN (13.7%):
AIRLINES (0.7%):
104,375 British Airways 749
--------
BANKS (1.5%):
38,000 National Westminster Bank 379
151,000 Standard Charter Bank 1,241
--------
1,620
--------
BUSINESS & PUBLIC SERVICES (2.5%):
122,200 British Airport Authority 949
65,800 Carlton Communications PLC 1,001
77,800 Reuters 722
--------
2,672
--------
BUILDING MATERIALS (0.2%):
47,000 Blue Circle 216
--------
CHEMICALS (0.9%):
82,900 Imperial Chemical Industries
PLC 1,012
--------
CONGLOMERATES (0.7%):
150,000 Hanson PLC 459
64,000 Tomkins PLC 252
--------
711
--------
FOOD PROCESSING & PACKAGING (0.3%):
39,000 Grand Metropolitan PLC 270
--------
HOTELS & MOTELS (0.2%):
30,000 Greenalls Group PLC 229
--------
INSURANCE (0.2%):
60,000 Guardian Royal Exchange PLC 217
--------
MANUFACTURING -- CAPITAL GOODS (0.2%):
100,000 Ladbroke 262
--------
METALS (0.6%):
254,000 British Steel PLC 655
--------
OIL & GAS PRODUCTION (1.0%):
144,400 British Petroleum 1,061
--------
PHARMACEUTICALS (0.6%):
50,000 Glaxo Wellcome PLC 673
--------
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
PUBLISHING (0.7%):
51,400 Reed International $ 780
--------
RETAIL (0.3%):
18,000 Great Universal Stores PLC $ 162
24,000 Tesco 114
--------
276
--------
TELECOMMUNICATIONS EQUIPMENT (1.9%):
120,000 British Telecom PLC 713
122,600 Cable Wireless 801
111,000 Vodafone 457
--------
1,971
--------
TEXTILE MANUFACTURING (0.2%):
75,000 Coats Vivella PLC 221
--------
TOBACCO & TOBACCO PRODUCTS (0.3%):
37,732 B.A.T. Industries PLC 309
--------
UTILITIES -- NATURAL GAS (0.2%):
54,000 British Gas PLC 205
--------
UTILITIES -- WATER (0.5%):
50,000 Severn Trent PLC 507
- ----------------------------------------------------------
TOTAL BRITAIN 14,616
- ----------------------------------------------------------
FINLAND (1.5%):
ELECTRONIC & ELECTRICAL (1.3%):
25,000 Nokia AB 1,430
--------
FOOD PROCESSING & PACKAGING (0.2%):
6,000 Huhtamaki I Free 178
- ----------------------------------------------------------
TOTAL FINLAND 1,608
- ----------------------------------------------------------
FRANCE (7.9%):
AUTOMOTIVE PARTS (0.8%):
18,700 Valeo 844
--------
BUILDING MATERIALS (0.2%):
2,973 LaFarge Coppee 197
--------
CHEMICALS (0.2%):
7,550 Rhone-Poulence A 165
--------
COSMETICS & RELATED (0.3%):
2,800 Christian Dior 275
--------
ELECTRICAL EQUIPMENT (1.0%):
26,600 Schneider 1,025
--------
ENERGY SOURCES (0.4%):
6,940 Elf Aquitaine 472
--------
FOOD PROCESSING & PACKAGING (0.4%):
3,000 Group Danone 479
--------
INSURANCE (1.4%):
26,450 Axa 1,468
--------
RECREATION/OTHER CONSUMER GOODS (0.7%):
7,400 BIC Corp. 702
--------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
105
<PAGE> 111
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1995
INTERNATIONAL GROWTH FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
RETAIL (2.5%):
1,120 Carrefour $ 657
3,600 Castorama 583
7,250 Pinault-Printemps 1,571
--------
2,811
- ----------------------------------------------------------
TOTAL FRANCE 8,438
- ----------------------------------------------------------
GERMANY (6.3%):
AUTOMOBILES (1.0%):
3,300 Volkswagen 1,037
--------
BANKS (2.0%):
4,920 Commerzbank AG 1,136
13,800 Deutsche Bank 622
8,700 Deutsche Bank AG 392
--------
2,150
--------
CHEMICALS (0.5%):
1,950 Bayer AG 515
--------
COSMETICS & RELATED (0.5%):
14,000 Douglas Holdings 504
--------
MACHINERY & ENGINEERING (1.2%):
1,000 Mannesmann 328
1,900 Siemens 992
--------
1,320
--------
UTILITIES -- ELECTRIC (1.1%):
28,750 Veba 1,177
- ----------------------------------------------------------
TOTAL GERMANY 6,703
- ----------------------------------------------------------
HOLLAND (4.7%):
BREWERIES (0.6%):
4,000 Heineken Holdings 660
--------
COMMERCIAL SERVICES (1.2%):
25,200 Randstad Holdings 1,135
--------
FINANCIAL SERVICES (1.0%):
18,600 Internationale Nederlanden 1,108
--------
FOREST PRODUCTS (0.8%):
29,300 Koninklijke KNP 881
--------
WHOLESALE & INTERNATIONAL TRADE (1.1%):
23,960 Hagemeyer 1,192
- ----------------------------------------------------------
TOTAL HOLLAND 4,976
- ----------------------------------------------------------
HONG KONG (3.5%):
BANKS (0.5%):
35,000 Hong Kong & Shanghai Bank 509
--------
DIVERSIFIED (1.9%):
197,000 Hutchinson Whampoa 1,086
122,000 Swire Pacific "A" 915
--------
2,001
--------
FINANCIAL SERVICES (0.3%):
250,000 Peregrine Investment
Holdings 318
--------
REAL ESTATE (0.8%):
150,000 Cheung Kong 846
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
- ----------------------------------------------------------
TOTAL HONG KONG $ 3,674
- ----------------------------------------------------------
ITALY (1.7%):
AUTOMOBILES (0.1%):
74,000 Fiat 146
--------
CHEMICALS (0.1%):
199,000 Montedison(b) 137
--------
INSURANCE (0.4%):
20,000 Assicurazioni Generali 466
--------
TELECOMMUNICATIONS EQUIPMENT (0.2%):
86,500 Stet Societa Finanziaria
Telefonica S.p.A. 189
--------
UTILITIES -- TELECOMMUNICATIONS (0.9%):
282,000 Telecom Italia 428
282,000 Telecom Italia Mobile 473
--------
901
- ----------------------------------------------------------
TOTAL ITALY 1,839
- ----------------------------------------------------------
JAPAN (33.4%):
AEROSPACE/DEFENSE (1.0%):
140,000 Mitsubishi Heavy Industry 1,080
--------
AUTOMOBILES (1.4%):
60,000 Honda Motor Co. 1,044
25,000 Toyota Motor Corp. 465
--------
1,509
--------
BANKS (2.6%):
41,000 Mitsubishi Bank 802
62,000 Sanwa Bank 1,055
52,000 Sumitomo 921
--------
2,778
--------
BUILDING MATERIALS (1.2%):
66,000 Matsushita Electric Works 652
22,000 Tostem Corp. 676
--------
1,328
--------
CHEMICALS (1.0%):
35,000 Mitsui Petrochemical
Industries 278
36,000 Shin Etsu Chemical 736
--------
1,014
--------
ELECTRICAL EQUIPMENT (10.3%):
86,000 Canon, Inc. $ 1,472
134,000 Hitachi, Ltd. 1,376
7,300 Keyence 900
17,000 Kyocera 1,393
50,000 Mitsubishi Electric Corp. 374
28,000 Murata Manufacturing 983
50,000 Nippon Denso Co. 914
25,000 Rohm Co., Ltd. 1,518
12,000 TDK Corp. 619
32,000 Tokyo Electron 1,390
--------
10,939
--------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
106
<PAGE> 112
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1995
INTERNATIONAL GROWTH FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
ENGINEERING/INDUSTRIAL CONSTRUCTION (0.5%):
30,000 Kinden $ 516
--------
FOOD PROCESSING (0.0%):
1,000 Mos Food Services 25
--------
FINANCE (0.7%):
12,000 Nichiei Co. 745
--------
FORREST PRODUCTS (0.4%):
50,000 New Oji Paper Co., Ltd. 459
--------
HOUSEHOLD GOODS (0.7%):
20,400 Amway Japan 778
--------
INSURANCE (0.4%):
40,000 Tokio Marine & Fire
Insurance 411
--------
MACHINE TOOLS (0.4%):
11,000 Fuji Machine 414
--------
MANUFACTURING -- CAPITAL GOODS (1.0%):
16,000 Secom & Co. 1,042
--------
PHARMACEUTICALS (1.1%):
51,000 Yamanouchi Pharmaceutical 1,137
--------
PRINTING (0.5%):
42,000 Toppan Printing Co., Ltd. 555
--------
REAL ESTATE (0.9%):
80,000 Sekisui House 923
--------
RETAIL (2.0%):
10,000 Ito-Yokado Co., Ltd. 547
50,000 Marui 866
11,000 Seven-Eleven Japan 734
--------
2,147
--------
RUBBER & RUBBER PRODUCTS (0.7%):
56,000 Bridgestone 778
--------
STEEL (1.6%):
268,000 NKK Corp. 647
315,000 Nippon Steel 1,044
--------
1,691
--------
STORAGE & WAREHOUSING (0.7%):
51,000 Mitsubishi Warehouse 703
--------
TELECOMMUNICATIONS EQUIPMENT (0.9%):
98 DDI Corp. 795
24,000 Nippon Denwa Shisetsu 199
--------
994
--------
TEXTILE MANUFACTURING (0.2%):
20,000 Kuraray Co., Ltd. 198
--------
UTILITIES -- TELECOMMUNICATIONS (0.8%):
99 Nippon Telephone & Telegraph 812
--------
UTILITIES -- WATER (1.0%):
40,000 Kurita Water Ind. 1,115
--------
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
WHOLESALE & INTERNATIONAL TRADE (1.4%):
33,000 Canon Sales $ 781
122,000 Itochu Corp. 723
--------
1,504
- ----------------------------------------------------------
TOTAL JAPAN 35,595
- ----------------------------------------------------------
MALAYSIA (1.6%):
BANKS (0.1%):
12,000 AMMB Holdings Berhad 148
--------
DIVERSIFIED (0.8%):
496,000 Renong Berhad 757
--------
ENTERTAINMENT (0.1%):
16,000 Genting Berhad 138
--------
FINANCIAL SERVICES (0.5%):
125,000 Hong Leong Credit 531
--------
SHIPPING (0.1%):
38,666 Malaysian International
Shipping 102
- ----------------------------------------------------------
TOTAL MALAYSIA 1,676
- ----------------------------------------------------------
NEW ZEALAND (0.8%):
FOREST PRODUCTS (0.8%):
338,000 Fletcher Challenge 895
- ----------------------------------------------------------
TOTAL NEW ZEALAND 895
- ----------------------------------------------------------
NORWAY (0.6%):
ENERGY SOURCES (0.2%):
5,000 Norsk Hydro 225
--------
OIL & GAS PRODUCTION (0.4%):
30,000 Saga Petroleum 376
- ----------------------------------------------------------
TOTAL NORWAY 601
- ----------------------------------------------------------
SINGAPORE (2.2%):
AIRLINES (0.7%):
84,000 Singapore Airlines, Series F 778
--------
BANKS (1.3%):
81,000 Overseas Chinese Banking
Corp. 950
43,320 United Overseas Bank 380
--------
1,330
--------
SHIP REPAIR (0.2%):
33,000 Jurong Shipyard Ltd. 219
- ----------------------------------------------------------
TOTAL SINGAPORE 2,327
- ----------------------------------------------------------
SPAIN (2.2%):
BANKS (0.3%):
2,600 Banco De Santander 113
1,500 Banco Popular Espanola 238
--------
351
--------
ENERGY SOURCES (0.3%):
42,200 Iberdrola I 318
--------
FOOD DISTRIBUTORS (1.0%):
48,600 Pryca 1,034
--------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
107
<PAGE> 113
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1995
INTERNATIONAL GROWTH FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
OIL & GAS PRODUCTION (0.3%):
9,400 Repsol SA $ 280
--------
UTILITIES -- TELECOMMUNICATIONS (0.3%):
25,000 Telefonica 315
- ----------------------------------------------------------
TOTAL SPAIN 2,298
- ----------------------------------------------------------
SWEDEN (3.8%):
AUTOMOBILES (1.0%):
46,400 Volvo AB 1,044
--------
MANUFACTURING (1.6%):
68,000 Atlas Copco(b) 1029
30,000 Ericsson (L.M.) Series B 637
--------
1,666
--------
PHARMACEUTICALS (1.2%):
37,300 Astra A Free 1,370
- ----------------------------------------------------------
TOTAL SWEDEN 4,080
- ----------------------------------------------------------
SWITZERLAND (4.8%):
BANKS (0.9%):
9,200 CS Holding 939
--------
FOOD PROCESSING (0.9%):
960 Nestle Registered 1,005
--------
HOLDING COMPANY (1.3%):
1,180 Brown Boveri, Series A 1,367
--------
PHARMACEUTICALS (1.7%):
385 Ciba Geigy AG 333
199 Roche Holdings AG 1,445
--------
1,778
- ----------------------------------------------------------
TOTAL SWITZERLAND 5,089
- ----------------------------------------------------------
UNITED STATES (3.3%):
INVESTMENT FUNDS -- CLOSED END (1.3%):
34,000 Chile Fund 774
12,700 India Magnum Fund NV A 629
--------
1,403
--------
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
OIL (1.6%):
8,800 Royal Dutch Petroleum $ 1,081
35,000 YPF S.A. Sponsored ADR 599
--------
1,680
--------
TELECOMMUNICATIONS EQUIPMENT (0.3%):
5,000 Cia Telecommunicacion -- ADR 360
--------
WHOLESALE & INTERNATIONAL TRADE (0.1%):
7,000 Grupo Casa Autrey -- ADR 89
- ----------------------------------------------------------
TOTAL UNITED STATES 3,532
- ----------------------------------------------------------
TOTAL COMMON STOCKS 99,364
- ----------------------------------------------------------
- ---------------------------------------------------------
INVESTMENT COMPANIES (4.9%)
4,847,717 AIM Treasury Portfolio 4,848
8,700 Brazilian Investment Co. 271
126,618 Federated Trust for U.S.
Treasury Obligations Money
Market Fund 126
- ---------------------------------------------------------
TOTAL INVESTMENT COMPANIES 5,245
- ----------------------------------------------
TOTAL (COST $96,839)(a) $104,609
- ---------------------------------------------------------
</TABLE>
- ---------------
Percentages indicated are based on net assets of $106,477.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows (amounts in thousands):
<TABLE>
<S> <C>
Unrealized appreciation $ 8,058
Unrealized depreciation (288)
-------
Net unrealized
appreciation $ 7,770
========
</TABLE>
(b) Represents non-income producing securities.
SEE NOTES TO FINANCIAL STATEMENTS.
108
<PAGE> 114
Statements of Assets and Liabilities
THE VICTORY PORTFOLIOS October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S.
GOVERNMENT PRIME FINANCIAL
OBLIGATIONS OBLIGATIONS RESERVES
FUND FUND FUND
(000) (000) (000)
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS:
Investments, at amortized cost $ 194,691 $ 399,355 $ 685,784
Repurchase agreements 771,227 57,203 76,787
- --------------------------------------------------------------------------------------------------
965,918 456,558 762,571
Interest receivable 3,789 2,032 4,328
Prepaid expenses and other assets 99
- --------------------------------------------------------------------------------------------------
Total Assets 969,707 458,590 766,998
- --------------------------------------------------------------------------------------------------
LIABILITIES:
Dividends payable 4,176 1,958 3,783
Accrued expenses and other payables:
Investment advisory fees 279 135 259
Administration fees 119 58 99
Accounting and transfer agent fees 43 24 25
Shareholder service fees 27 91
Other 134 58 139
- --------------------------------------------------------------------------------------------------
Total Liabilities 4,778 2,324 4,305
- --------------------------------------------------------------------------------------------------
NET ASSETS:
Capital 965,083 456,266 762,721
Accumulated undistributed net realized gains (losses)
from investment transactions (154) (28)
- --------------------------------------------------------------------------------------------------
Net Assets $ 964,929 $ 456,266 $ 762,693
- --------------------------------------------------------------------------------------------------
Outstanding units of beneficial interest (shares) 965,105 456,366 762,846
- --------------------------------------------------------------------------------------------------
Net asset value -- offering and redemption price per
share $ 1.00 $ 1.00 $ 1.00
- --------------------------------------------------------------------------------------------------
Investments, at cost $ 965,918 $ 456,558 $ 762,571
- --------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
109
<PAGE> 115
Statements of Assets and Liabilities
THE VICTORY PORTFOLIOS October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
OHIO
INSTITUTIONAL TAX-FREE MUNICIPAL
MONEY MONEY MONEY
MARKET FUND MARKET FUND MARKET FUND
(000) (000) (000)
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS:
Investments, at amortized cost $ 479,398 $ 306,645 $ 508,278
Repurchase agreements 36,464
- ----------------------------------------------------------------------------------------------------------
515,862 306,645 508,278
Cash 31
Interest receivable 2,733 2,140 4,005
Prepaid expenses and other assets 8 93
- ----------------------------------------------------------------------------------------------------------
Total Assets 518,634 308,785 512,376
- ----------------------------------------------------------------------------------------------------------
LIABILITIES:
Dividends payable 2,449 831 1,662
Accrued expenses and other payables:
Investment advisory fees 45 89 86
Administration fees 27 39 66
Accounting and transfer agent fees 21 13 41
Shareholder service fees 43 24
Shareholder service fees -- Service Shares 1
Other 76 44 83
- ----------------------------------------------------------------------------------------------------------
Total Liabilities 2,619 1,059 1,962
- ----------------------------------------------------------------------------------------------------------
NET ASSETS:
Capital 515,919 307,664 510,395
Undistributed net investment income 76
Accumulated undistributed net realized gains from investment
transactions 20 62 19
- ----------------------------------------------------------------------------------------------------------
Net Assets $ 516,015 $ 307,726 $ 510,414
- ----------------------------------------------------------------------------------------------------------
Net Assets
Institutional Shares $ 504,536
Service Shares 11,479
- ----------------------------------------------------------------------------------------------------------
Total $ 516,015
- ----------------------------------------------------------------------------------------------------------
Outstanding units of beneficial interest (shares)
Institutional Shares 504,506
Service Shares 11,479
- ----------------------------------------------------------------------------------------------------------
Total 515,985 307,664 510,395
- ----------------------------------------------------------------------------------------------------------
Net asset value
Offering and redemption price per share $ 1.00 $ 1.00
Offering and redemption price per share -- Institutional
Shares $ 1.00
Offering and redemption price per share -- Service Shares 1.00
- ----------------------------------------------------------------------------------------------------------
Investments, at cost $ 515,862 306,645 $ 508,278
- ----------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
110
<PAGE> 116
Statements of Assets and Liabilities
THE VICTORY PORTFOLIOS October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LIMITED INVESTMENT GOVERNMENT
TERM INCOME INTERMEDIATE QUALITY GOVERNMENT MORTGAGE
FUND INCOME FUND BOND FUND BOND FUND FUND
(000) (000) (000) (000) (000)
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments, at value $ 169,872 $ 161,273 $ 123,403 $ 28,368 $ 130,003
Interest receivable 2,271 2,145 1,937 805 926
Receivable for capital shares issued 9 2 28 342
Receivable from brokers for investments
sold 4 5,420
Prepaid expenses and other assets 7 9
- ----------------------------------------------------------------------------------------------------------------
Total Assets 172,152 163,420 125,372 29,522 136,358
- ----------------------------------------------------------------------------------------------------------------
LIABILITIES:
Cash overdraft 112
Dividends payable 14
Payable for capital shares redeemed 573 102
Accrued expenses and other payables:
Investment advisory fees 70 76 63 9 58
Administration fees 22 21 16 4 17
Accounting and transfer agent fees 19 9 15 19 7
Shareholder service fees 15 13 11 12
Shareholder service fees -- Class A 3
Shareholder service fees -- Class B 1
Other 24 20 19 22 59
- ----------------------------------------------------------------------------------------------------------------
Total Liabilities 150 139 124 757 255
- ----------------------------------------------------------------------------------------------------------------
NET ASSETS:
Capital 171,615 165,455 132,597 35,206 138,607
Undistributed net investment income 179 172 133 98 365
Net unrealized appreciation from
investments 1,771 1,551 1,130 770 177
Accumulated net realized losses from
investment transactions (1,563) (3,897) (8,612) (7,309) (3,046)
- ----------------------------------------------------------------------------------------------------------------
Net Assets $ 172,002 $ 163,281 $ 125,248 $ 28,765 $ 136,103
- ----------------------------------------------------------------------------------------------------------------
Net Assets
Class A $ 27,856
Class B 909
- ----------------------------------------------------------------------------------------------------------------
Total $ 28,765
- ----------------------------------------------------------------------------------------------------------------
Outstanding units of beneficial interest (shares)
Class A 2,824
Class B 92
- ----------------------------------------------------------------------------------------------------------------
Total 16,940 16,857 12,827 2,916 12,533
- ----------------------------------------------------------------------------------------------------------------
Net asset value
Redemption price per share $ 10.15 $ 9.69 $ 9.76 $ 10.86
Redemption price per share -- Class A $ 9.87
Offering and redemption price per
share -- Class B $ 9.85
- ----------------------------------------------------------------------------------------------------------------
Maximum Sales Charge 2.00% 4.75% 4.75% 4.75% 4.75%
- ----------------------------------------------------------------------------------------------------------------
Maximum Offering Price (100%(100% --
Maximum Sales Charge) of net asset
value adjusted to nearest cent) per
share $ 10.36 $ 10.17 $ 10.25 $ 11.40
- ----------------------------------------------------------------------------------------------------------------
Maximum Offering Price (100%(100% --
Maximum Sales Charge) of net asset
value adjusted to nearest cent) per
share --
Class A $ 10.36
- ----------------------------------------------------------------------------------------------------------------
Investments, at cost $ 168,101 $ 159,722 $ 122,273 $ 27,598 $ 129,826
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
111
<PAGE> 117
Statements of Assets and Liabilities
THE VICTORY PORTFOLIOS October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NATIONAL NEW YORK OHIO
FUND FOR MUNICIPAL TAX-FREE MUNICIPAL
INCOME BOND FUND FUND BOND FUND
(000) (000) (000) (000)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS:
Investments, at value $22,429 $12,186 $16,914 $58,962
Cash 112
Interest receivable 293 170 348 1,117
Receivable for capital shares issued 26 162 5
Receivable from brokers for investments sold 1
Prepaid expenses and other assets 37 91 39
- ----------------------------------------------------------------------------------------------------------------
Total Assets 22,898 12,447 17,463 60,084
- ----------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable to brokers for investments purchased 3
Payable for capital shares redeemed 118 110
Accrued expenses and other payables:
Investment advisory fees 4 24
Administration fees 1 2 8
Accounting and transfer agent fees 5 7 7 4
Shareholder service fees 2 5
Shareholder service fees -- Class A 1 11
Shareholder service fees -- Class B 1
Other 12 14 7 12
- ----------------------------------------------------------------------------------------------------------------
Total Liabilities 142 27 136 53
- ----------------------------------------------------------------------------------------------------------------
NET ASSETS:
Capital 23,336 11,867 16,007 58,102
Undistributed net investment income 140 13 68 43
Net unrealized appreciation from investments 1,045 495 1,312 2,413
Accumulated undistributed net realized gains (losses)
from investment transactions (1,765) 45 (60) (527)
- ----------------------------------------------------------------------------------------------------------------
Net Assets $22,756 $12,420 $17,327 $60,031
- ----------------------------------------------------------------------------------------------------------------
Net Assets
Class A $11,964 $15,374
Class B 456 1,953
- ----------------------------------------------------------------------------------------------------------------
Total $12,420 $17,327
- ----------------------------------------------------------------------------------------------------------------
Outstanding units of beneficial interest (shares)
Class A 1,189 1,196
Class B 45 152
- ----------------------------------------------------------------------------------------------------------------
Total 2,291 1,234 1,348 5,302
- ----------------------------------------------------------------------------------------------------------------
Net asset value
Redemption price per share $ 9.93 $ 11.32
Redemption price per share -- Class A $ 10.06 $ 12.85
Offering and redemption price per share -- Class B $ 10.07 $ 12.86
- ----------------------------------------------------------------------------------------------------------------
Maximum Sales Charge 2.00% 4.75% 4.75% 4.75%
- ----------------------------------------------------------------------------------------------------------------
Maximum Offering Price (100%/(100%-Maximum Sales
Charge) of net asset value adjusted to nearest cent)
per share $ 10.14 $ 11.88
- ----------------------------------------------------------------------------------------------------------------
Maximum Offering Price (100%/(100%-Maximum Sales
Charge) of net asset value adjusted to nearest cent)
per share -- Class A $ 10.56 $ 13.49
- ----------------------------------------------------------------------------------------------------------------
Investments, at cost $21,384 $11,691 $15,602 $56,549
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
112
<PAGE> 118
Statements of Assets and Liabilities
THE VICTORY PORTFOLIOS October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BALANCED STOCK INDEX DIVERSIFIED
FUND FUND STOCK FUND VALUE FUND GROWTH FUND
(000) (000) (000) (000) (000)
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments, at value $ 199,598 $ 160,787 $ 414,008 $ 295,946 $ 108,292
Interest and dividends receivable 1,466 281 292 470 106
Receivable for capital shares issued 23 81
Receivable from brokers for investments
sold 704 1,117 643
Unamortized organization costs 1 1 1
Prepaid expenses and other assets 18 25 18
- ----------------------------------------------------------------------------------------------------------------
Total Assets 201,810 161,069 415,523 297,078 108,398
- ----------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for capital shares redeemed 225 6
Payable to brokers for investments
purchased 298 5,609 852
Net variation margin on open futures
contracts 167
Accrued expenses and other payables:
Investment advisory fees 126 57 213 233 90
Administration fees 26 51 38 14
Accounting and transfer agent fees 7 1 12 16 14
Shareholder service fees 17 36 29 10
Other 38 22 47 39 17
- ----------------------------------------------------------------------------------------------------------------
Total Liabilities 737 247 5,974 1,207 145
- ----------------------------------------------------------------------------------------------------------------
NET ASSETS:
Capital 182,467 135,958 335,022 248,414 86,466
Undistributed net investment income 88 363 73 232 13
Net unrealized appreciation from
investments 18,085 22,416 41,698 38,765 17,270
Net unrealized depreciation from
translation of assets and liabilities
in foreign currencies (236)
Accumulated undistributed net realized
gains from investment transactions 658 2,085 32,756 8,460 4,504
Accumulated undistributed net realized
gains from foreign currency
transactions 11
- ----------------------------------------------------------------------------------------------------------------
Net Assets $ 201,073 $ 160,822 $ 409,549 $ 295,871 $ 108,253
- ----------------------------------------------------------------------------------------------------------------
Outstanding units of beneficial interest
(shares) 18,255 12,870 30,069 24,927 8,910
- ----------------------------------------------------------------------------------------------------------------
Net asset value -- redemption price per
share $ 11.01 $ 12.50 $ 13.62 $ 11.87 $ 12.15
- ----------------------------------------------------------------------------------------------------------------
Maximum Sales Charge 4.75% 4.75% 4.75% 4.75% 4.75%
- ----------------------------------------------------------------------------------------------------------------
Maximum Offering Price (100%/(100%-
Maximum Sales Charge) of net asset
value adjusted to nearest cent) per
share $ 11.56 $ 13.12 $ 14.30 $ 12.46 $ 12.76
- ----------------------------------------------------------------------------------------------------------------
Investments, at cost $ 181,749 $ 138,797 $ 372,310 $ 257,181 $ 91,022
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
113
<PAGE> 119
Statements of Assets and Liabilities
THE VICTORY PORTFOLIOS October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SPECIAL SPECIAL OHIO REGIONAL INTERNATIONAL
VALUE GROWTH STOCK GROWTH
FUND FUND FUND FUND
(000) (000) (000) (000)
-------- ------- ------------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Investments, at value $192,644 $54,327 $39,047 $ 104,609
Foreign currency (cost $124) 126
Interest and dividends receivable 253 27 45 584
Receivable for capital shares issued 34 13
Receivable from brokers for investments sold 1,988 881 2,299
Unamortized organization costs 1
Prepaid expenses and other assets 12 1 5
- ---------------------------------------------------------------------------------------------------------------
Total Assets 194,932 55,236 39,092 107,636
- ---------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for capital shares redeemed 10 1
Payable to brokers for investments purchased 829 991
Accrued expenses and other payables:
Investment advisory fees 152 33 24 91
Administration fees 25 7 5 14
Accounting and transfer agent fees 5 12 3 19
Shareholder service fees 16 5 4 9
Other 24 15 8 34
- ---------------------------------------------------------------------------------------------------------------
Total Liabilities 232 901 44 1,159
- ---------------------------------------------------------------------------------------------------------------
NET ASSETS:
Capital 168,004 51,968 24,726 101,870
Undistributed net investment income 57 1 247
Net unrealized appreciation from investments 21,197 2,652 12,835 5,515
Net unrealized appreciation from translation of
assets and liabilities in foreign currencies 2,248
Accumulated undistributed net realized gains (losses)
from investment transactions 5,442 (285) 1,486 (7,337)
Accumulated undistributed net realized gains from
foreign currency transactions 3,934
- ---------------------------------------------------------------------------------------------------------------
Net Assets $194,700 $54,335 $39,048 $ 106,477
- ---------------------------------------------------------------------------------------------------------------
Outstanding units of beneficial interest (shares) 16,026 4,601 2,449 8,637
- ---------------------------------------------------------------------------------------------------------------
Net asset value - redemption price per share $ 12.15 $ 11.81 $ 15.94 $ 12.33
- ---------------------------------------------------------------------------------------------------------------
Maximum Sales Charge 4.75% 4.75% 4.75% 4.75%
- ---------------------------------------------------------------------------------------------------------------
Maximum Offering Price (100%/(100%-Maximum Sales
Charge) of net asset value adjusted to nearest
cent) per share $ 12.76 $ 12.40 $ 16.73 $ 12.94
- ---------------------------------------------------------------------------------------------------------------
Investments, at cost $171,447 $51,675 $26,212 $ 96,839
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
114
<PAGE> 120
THE VICTORY PORTFOLIOS Statements of Operations
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S.
GOVERNMENT PRIME FINANCIAL
OBLIGATIONS OBLIGATIONS RESERVES
FUND FUND FUND
---------- ---------- ----------
YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER OCTOBER OCTOBER
31, 31, 31,
1995 1995 1995
(000) (000) (000)
---------- ---------- ----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income $ 37,623 $ 31,781 $ 42,563
- ---------------------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees 2,246 1,908 3,544
Administration fees 962 817 1,064
Shareholder service fees 25 706
Accounting fees 243 261 101
Custodian fees 14 7 15
Legal and audit fees 141 114 186
Trustees' fees and expenses 47 41 73
Transfer agent fees 24 35 23
Registration and filing fees 34 52 260
Printing fees 87 57 121
Other 12 20 1
Expenses voluntarily reduced (88) (421)
- ---------------------------------------------------------------------------------------------------------
Expenses before reimbursement from investment adviser 3,747 4,018 4,967
Expenses reimbursed by investment adviser (722)
- ---------------------------------------------------------------------------------------------------------
Total Expenses 3,747 4,018 4,245
- ---------------------------------------------------------------------------------------------------------
Net Investment Income 33,876 27,763 38,318
- ---------------------------------------------------------------------------------------------------------
REALIZED GAINS FROM INVESTMENTS:
Net realized gains from investment transactions 94
- ---------------------------------------------------------------------------------------------------------
Change in net assets resulting from operations $ 33,970 $ 27,763 $ 38,318
- ---------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
115
<PAGE> 121
THE VICTORY PORTFOLIOS Statements of Operations
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INSTITUTIONAL
MONEY TAX-FREE OHIO MUNICIPAL
MARKET MONEY MONEY MARKET
FUND MARKET FUND
----------- FUND --------------
SIX MONTHS ----------- TWO MONTHS
ENDED YEAR ENDED ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31,
1995 1995 1995
(000) (000) (000)
----------- ----------- --------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income $15,508 $ 9,444 $ 3,369
Dividend income 360 43
- -----------------------------------------------------------------------------------------------------
Total Income 15,508 9,804 3,412
- -----------------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees 652 864 432
Administration fees 391 370 130
Shareholder service fees 1 43 130
Accounting fees 50 113 13
Custodian fees 8 5 8
Legal and audit fees 57 49 31
Trustees' fees and expenses 22 18 8
Transfer agent fees 2 17 10
Registration and filing fees 8 22 12
Printing fees 52 29 19
Other 27 5 5
Expenses voluntarily reduced (595) (34) (245)
- -----------------------------------------------------------------------------------------------------
Total Expenses 675 1,501 553
- -----------------------------------------------------------------------------------------------------
Net Investment Income 14,833 8,303 2,859
- -----------------------------------------------------------------------------------------------------
REALIZED GAINS FROM INVESTMENTS:
Net realized gains from investment transactions 62
- -----------------------------------------------------------------------------------------------------
Change in net assets resulting from operations $14,833 $ 8,365 $ 2,859
- -----------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
116
<PAGE> 122
THE VICTORY PORTFOLIOS Statements of Operations
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LIMITED INVESTMENT
TERM INTERMEDIATE QUALITY GOVERNMENT
INCOME INCOME BOND BOND GOVERNMENT
FUND FUND FUND FUND MORTGAGE
---------- ---------- ---------- ---------- FUND
YEAR ENDED YEAR ENDED YEAR ENDED SIX MONTHS ------------
OCTOBER OCTOBER OCTOBER OCTOBER YEAR ENDED
31, 31, 31, 31, OCTOBER 31,
1995 1995 1995 1995 1995
(000) (000) (000) (000) (000)
---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income $ 9,405 $ 9,451 $ 7,610 $ 1,956 $ 10,729
Dividend income 181 243 214 23 175
- ---------------------------------------------------------------------------------------------------------
Total Income 9,586 9,694 7,824 1,979 10,904
- ---------------------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees 731 1,018 786 156 719
Administration fees 220 203 157 43 216
Shareholder service fees 15 13 11 12
Shareholder service fees -
Class A 6
Shareholder service fees and
12b-1 fees - Class B 2
Accounting fees 89 71 71 29 83
Custodian fees 3 2 3 2 2
Legal and audit fees 30 26 21 9 26
Amortization of organization
costs 16 16
Trustees' fees and expenses 10 10 7 2 10
Transfer agent fees 20 17 21 10 18
Registration and filing fees 16 44 40 15 25
Printing fees 25 18 20 25 14
Other 4 4 4 3 3
Expenses voluntarily reduced (21) (326) (239) (39) (16)
- ---------------------------------------------------------------------------------------------------------
Total Expenses 1,142 1,116 918 263 1,112
- ---------------------------------------------------------------------------------------------------------
Net Investment Income 8,444 8,578 6,906 1,716 9,792
- ---------------------------------------------------------------------------------------------------------
REALIZED/UNREALIZED GAINS
(LOSSES) FROM INVESTMENTS:
Net realized gains (losses)
from investment transactions (892) (1,399) (4,593) 3,139 (2,407)
Change in unrealized
appreciation (depreciation)
from investments 4,613 7,769 6,997 (101) 11,075
- ---------------------------------------------------------------------------------------------------------
Net realized/unrealized gains
from investments 3,721 6,370 2,404 3,038 8,668
- ---------------------------------------------------------------------------------------------------------
Change in net assets resulting
from operations $ 12,165 $ 14,948 $ 9,310 $ 4,754 $ 18,460
- ---------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
117
<PAGE> 123
THE VICTORY PORTFOLIOS Statements of Operations
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NATIONAL
MUNICIPAL NEW YORK OHIO
FUND FOR BOND FUND TAX-FREE MUNICIPAL
INCOME ----------- FUND BOND FUND
----------- SIX MONTHS ----------- -----------
YEAR ENDED ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1995 1995 1995 1995
(000) (000) (000) (000)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income $ 2,175 $ 236 $ 1,134 $ 3,087
Dividend income 7 12 54
- -------------------------------------------------------------------------------------------------------------
Total Income 2,175 243 1,146 3,141
- -------------------------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees 124 26 93 347
Administration fees 37 7 25 87
Shareholder service fees 62 5
Shareholder service fees - Class A 1 36
Shareholder service fees and 12b-1 fees - Class B 2 14
Accounting fees 32 24 49 43
Custodian fees 2 2 2
Legal and audit fees 14 13 23 12
Trustees' fees and expenses 3 2 5
Transfer agent fees 36 6 19 16
Registration and filing fees 44 21 27 13
Printing fees 36 17 42 13
Other 5 2 2
Expenses voluntarily reduced (46) (31) (52) (164)
- -------------------------------------------------------------------------------------------------------------
Expenses before reimbursement from investment
adviser 349 86 282 381
Expenses reimbursed by investment adviser (68) (85) (76)
- -------------------------------------------------------------------------------------------------------------
Total Expenses 281 1 206 381
- -------------------------------------------------------------------------------------------------------------
Net Investment Income 1,894 242 940 2,760
- -------------------------------------------------------------------------------------------------------------
REALIZED/UNREALIZED GAINS (LOSSES) FROM INVESTMENTS:
Net realized gains (losses) from investment
transactions (328) 35 (60) (128)
Change in unrealized appreciation from investments 1,370 326 740 5,317
- -------------------------------------------------------------------------------------------------------------
Net realized/unrealized gains from investments 1,042 361 680 5,189
- -------------------------------------------------------------------------------------------------------------
Change in net assets resulting from operations $ 2,936 $ 603 $ 1,620 $ 7,949
- -------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
118
<PAGE> 124
THE VICTORY PORTFOLIOS Statements of Operations
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BALANCED STOCK INDEX DIVERSIFIED
FUND FUND STOCK FUND VALUE FUND GROWTH FUND
----------- ----------- ----------- ----------- -----------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1995 1995 1995 1995 1995
(000) (000) (000) (000) (000)
----------- ----------- ----------- ----------- -----------
INVESTMENT INCOME:
<S> <C> <C> <C> <C> <C>
Interest income $ 2,834 $ 802 $ 28 $ 832 $ 2
Dividend income 5,464 2,711 9,901 8,298 1,537
- ------------------------------------------------------------------------------------------------------------------
Total Income 8,298 3,513 9,929 9,130 1,539
- ------------------------------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees 1,649 684 2,132 2,583 743
Administration fees 247 171 492 387 111
Shareholder service fees 17 36 29 10
Accounting fees 88 23 142 124 50
Custodian fees 5 8 7 8 4
Legal and audit fees 31 23 61 49 18
Amortization of organization costs 10 7 16 7
Trustees' fees and expenses 12 8 23 17 6
Transfer agent fees 116 17 182 19 55
Registration and filing fees 44 33 20 56 30
Printing fees 20 14 28 38 19
Other 3 3 6 30 4
Expenses voluntarily reduced (624) (366) (128) (811) (264)
- ------------------------------------------------------------------------------------------------------------------
Total Expenses 1,618 625 3,001 2,545 793
- ------------------------------------------------------------------------------------------------------------------
Net Investment Income 6,680 2,888 6,928 6,585 746
- ------------------------------------------------------------------------------------------------------------------
REALIZED/UNREALIZED GAINS (LOSSES) FROM
INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gains from investment transactions 2,774 2,091 32,800 8,481 4,504
Net realized gains from foreign currency
transactions 11
Net change in unrealized appreciation from
investments 20,046 20,860 29,446 39,805 15,906
Change in unrealized depreciation from
translation of assets and liabilities in
foreign currencies (236)
- ------------------------------------------------------------------------------------------------------------------
Net realized/unrealized gains from investments
and foreign currencies 22,595 22,951 62,246 48,286 20,410
- ------------------------------------------------------------------------------------------------------------------
Change in net assets resulting from operations $29,275 $25,839 $69,174 $54,871 $21,156
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
119
<PAGE> 125
THE VICTORY PORTFOLIOS Statements of Operations
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SPECIAL OHIO
SPECIAL GROWTH FUND REGIONAL INTERNATIONAL
VALUE FUND ----------- STOCK FUND GROWTH FUND
----------- SIX MONTHS ----------- -----------
YEAR ENDED ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1995 1995 1995 1995
(000) (000) (000) (000)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income $ 34 $ 71 $ 214
Dividend income 3,659 155 $ 830 2,221
Foreign tax withholding (325)
- -------------------------------------------------------------------------------------------------------------
Total Income 3,693 226 830 2,110
- -------------------------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees 1,546 440 268 1,018
Administration fees 232 66 53 139
Shareholder service fees 16 5 4 9
Accounting fees 76 21 31 121
Custodian fees 4 1 1 92
Legal and audit fees 29 46 9 19
Amortization of organization costs 8 1
Trustees' fees and expenses 11 2 3 6
Transfer agent fees 18 11 43 72
Registration and filing fees 48 12 16 32
Printing fees 19 10 13 20
Other 3 1 1 2
Expenses voluntarily reduced (407) (330) (14) (116)
- -------------------------------------------------------------------------------------------------------------
Total Expenses 1,603 286 428 1,414
- -------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) 2,090 (60) 402 696
- -------------------------------------------------------------------------------------------------------------
REALIZED/UNREALIZED GAINS (LOSSES) FROM INVESTMENTS AND
FOREIGN CURRENCIES:
Net realized gains (losses) from investment
transactions 5,442 2,326 1,485 (7,848)
Net realized gains from foreign currency transactions 4,365
Net change in unrealized appreciation (depreciation)
from investments 18,049 (358) 3,578 (1,929)
Change in unrealized appreciation from translation of
assets and liabilities in foreign currencies 2,233
- -------------------------------------------------------------------------------------------------------------
Net realized/unrealized gains (losses) from investments
and foreign currencies 23,491 1,968 5,063 (3,179)
- -------------------------------------------------------------------------------------------------------------
Change in net assets resulting from operations $25,581 $ 1,908 $ 5,465 $(2,483)
- -------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
120
<PAGE> 126
THE VICTORY PORTFOLIOS Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. GOVERNMENT
OBLIGATIONS FUND PRIME OBLIGATIONS FUND FINANCIAL RESERVES FUND
-------------------------- ------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31 OCTOBER 31, OCTOBER 31, OCTOBER 31,
1995(B) 1994 1995 1994 1995(B) 1994(A)
(000) (000) (000) (000) (000) (000)
----------- ----------- ---------- ----------- ----------- -----------
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income $ 33,876 $ 14,747 $ 27,763 $ 26,637 $ 38,318 $ 14,872
Net realized gains (losses) from
investment transactions 94 (167) (2,506) (28)
- ---------------------------------------------------------------------------------------------------------------------------
Change in net assets resulting from
operations 33,970 14,580 27,763 24,131 38,318 14,844
- ---------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (33,876) (14,747) (27,763) (26,637) (38,353) (14,873)
In excess of net realized gains
from investment transactions (81)
Tax return of capital (88)
- ---------------------------------------------------------------------------------------------------------------------------
Change in net assets from
distributions to shareholders (33,876) (14,828) (27,763) (26,637) (38,441) (14,873)
- ---------------------------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
Proceeds from shares issued 1,782,085 935,449 1,719,347 2,109,682 4,803,998 3,005,810
Proceeds from shares issued in
connection with acquisition 242,973
Dividends reinvested 3,962 1,179 15,471 8,381 1,265
Cost of shares redeemed (1,476,233) (1,040,066) (2,060,855) (2,055,784) (4,475,713) (3,030,387)
- ---------------------------------------------------------------------------------------------------------------------------
Change in net assets from capital
transactions 552,787 (103,438) (326,037) 62,279 329,550 (24,577)
- ---------------------------------------------------------------------------------------------------------------------------
Contribution by KeyCorp 2,506
- ---------------------------------------------------------------------------------------------------------------------------
Change in net assets 552,881 (103,686) (326,037) 62,279 329,427 (24,606)
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 412,048 515,734 782,303 720,024 433,266 457,872
- ---------------------------------------------------------------------------------------------------------------------------
End of period $ 964,929 $ 412,048 $ 456,266 $ 782,303 $ 762,693 $ 433,266
- ---------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Issued 1,782,107 935,449 1,719,347 2,109,682 4,803,998 3,005,810
Issued in connection with
acquisition 242,973
Reinvested 3,962 1,179 15,471 8,381 1,265
Redeemed (1,476,233) (1,040,066) (2,060,755) (2,055,784) (4,475,713) (3,030,387)
- ---------------------------------------------------------------------------------------------------------------------------
Change in shares 552,809 (103,438) (325,937) 62,279 329,550 (24,577)
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Audited by other auditors.
(b) Effective June 5, 1995, the Victory U.S. Treasury Money Market Portfolio
merged into the U.S. Government Obligations Fund. Changes in net assets for
periods prior to June 5, 1995 represent the U.S. Government Obligations
Fund. Also, effective June 5, 1995 the Victory Financial Reserves Portfolio
became the Financial Reserves Fund.
SEE NOTES TO FINANCIAL STATEMENTS.
121
<PAGE> 127
THE VICTORY PORTFOLIOS Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INSTITUTIONAL TAX-FREE
MONEY MARKET FUND MONEY MARKET FUND OHIO MUNICIPAL MONEY MARKET FUND
-------------------------------------- ---------------------- -----------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SIX
MONTHS YEAR YEAR TWO MONTHS
ENDED YEAR ENDED YEAR ENDED ENDED ENDED ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, APRIL 30, APRIL 30, OCTOBER 31, OCTOBER 31, OCTOBER 31, AUGUST 31, AUGUST 31,
1995(b) 1995(a) 1994(a) 1995 1994 1995 1995(b) 1994(a)
(000) (000) (000) (000) (000) (000) (000) (000)
--------- ----------- ---------- --------- --------- ----------- ----------- -----------
FROM INVESTMENT
ACTIVITIES:
OPERATIONS:
Net investment
income $ 14,833 $ 22,107 $ 9,184 $ 8,303 $ 4,538 $ 2,859 $ 13,393 $ 6,365
Net realized
gains from
investment
transactions 20 8 62 7
- ---------------------------------------------------------------------------------------------------------------------------------
Change in net
assets resulting
from operations 14,833 22,127 9,192 8,365 4,545 2,859 13,393 6,365
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS:
From net
investment
income (9,184) (8,303) (4,538) (2,859) (13,393) (6,365)
Institutional
Shares (14,857) (21,993)
Service Shares (22)
From net realized
losses from
investment
transactions (7)
- ---------------------------------------------------------------------------------------------------------------------------------
Change in net
assets from
distributions to
shareholders (14,879) (21,993) (9,184) (8,303) (4,545) (2,859) (13,393) (6,365)
- ---------------------------------------------------------------------------------------------------------------------------------
CAPITAL
TRANSACTIONS:
Proceeds from
shares issued 648,875 1,197,333 1,238,739 518,760 534,878 363,385 1,872,345 1,247,387
Dividends
reinvested 144 1,508 390 900 355 472 945 5,662
Cost of shares
redeemed (582,772) (1,290,390) (853,005) (410,557) (526,023) (355,896) (1,688,969) (1,197,598)
- ---------------------------------------------------------------------------------------------------------------------------------
Change in net
assets from
capital
transactions 66,247 (91,549) 386,124 109,103 9,210 7,961 184,321 55,451
- ---------------------------------------------------------------------------------------------------------------------------------
Change in net
assets 66,201 (91,415) 386,132 109,165 9,210 7,961 184,321 55,451
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of
period 449,814 541,229 155,097 198,561 189,351 502,453 318,132 262,681
- ---------------------------------------------------------------------------------------------------------------------------------
End of period $ 516,015 $ 449,814 $ 541,229 $ 307,726 $ 198,561 $ 510,414 $ 502,453 $ 318,132
- ---------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Issued 648,875 1,197,333 1,238,739 518,760 534,878 363,385 1,872,345 1,247,387
Reinvested 144 1,508 390 900 355 472 945 5,662
Redeemed (582,772) (1,290,390) (853,005) (410,557) (526,023) (355,896) (1,688,969) (1,197,598)
- ---------------------------------------------------------------------------------------------------------------------------------
Change in shares 66,247 (91,549) 386,124 109,103 9,210 7,961 184,321 55,451
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Audited by other auditors.
(b) Effective June 5, 1995, the Victory Institutional Money Market Portfolio and
the Victory Ohio Municipal Money Market Portfolio became the Institutional
Money Market Fund and Ohio Municipal Money Market Fund, respectively.
SEE NOTES TO FINANCIAL STATEMENTS.
122
<PAGE> 128
THE VICTORY PORTFOLIOS Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LIMITED TERM INTERMEDIATE INVESTMENT QUALITY
INCOME FUND INCOME FUND BOND FUND
-------------------------- -------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C>
DECEMBER DECEMBER
10, 10,
YEAR ENDED YEAR ENDED YEAR ENDED 1993 TO YEAR ENDED 1993 TO
OCTOBER 31, OCTOBER 31, OCTOBER 31 OCTOBER 31, OCTOBER 31, OCTOBER 31,
1995(b) 1994 1995 1994(a) 1995(b) 1994(a)
(000) (000) (000) (000) (000) (000)
----------- ----------- ----------- ----------- ----------- -----------
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income $ 8,444 $ 4,521 $ 8,578 $ 5,951 $ 6,906 $ 5,712
Net realized losses from investment
transactions (892) (671) (1,399) (2,498) (4,593) (4,019)
Net change in unrealized appreciation
(depreciation) from investments 4,613 (4,406) 7,769 (6,218) 6,997 (5,867)
- --------------------------------------------------------------------------------------------------------------------------------
Change in net assets resulting from
operations 12,165 (556) 14,948 (2,765) 9,310 (4,174)
- --------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (8,403) (4,506) (8,634) (5,724) (6,970) (5,516)
In excess of net realized gains from
investment transactions (357)
- --------------------------------------------------------------------------------------------------------------------------------
Change in net assets from distributions
to shareholders (8,403) (4,863) (8,634) (5,724) (6,970) (5,516)
- --------------------------------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
Proceeds from shares issued 121,860 34,263 73,087 159,988 48,431 139,893
Proceeds from shares issued in
connection with acquisition 14,263 27,853
Dividends reinvested 8,381 4,378 8,632 5,511 6,932 5,495
Cost of shares redeemed (55,414) (35,843) (37,675) (44,087) (54,993) (41,013)
- --------------------------------------------------------------------------------------------------------------------------------
Change in net assets from capital
transactions 89,090 2,798 44,044 121,412 28,223 104,375
- --------------------------------------------------------------------------------------------------------------------------------
Change in net assets 92,852 (2,621) 50,358 112,923 30,563 94,685
NET ASSETS:
Beginning of period 79,150 81,771 112,923 94,685
- --------------------------------------------------------------------------------------------------------------------------------
End of period $ 172,002 $ 79,150 $ 163,281 $ 112,923 $ 125,248 $ 94,685
- ---------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Issued 12,215 3,336 7,738 16,205 4,675 14,142
Issued in connection with acquisition 1,398 2,849
Reinvested 836 433 915 579 735 582
Redeemed (5,518) (3,529) (4,005) (4,575) (5,833) (4,323)
- --------------------------------------------------------------------------------------------------------------------------------
Change in shares 8,931 240 4,648 12,209 2,426 10,401
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Period from commencement of operations.
(b) Effective June 5, 1995, the Victory Short-Term Government Income Portfolio
merged into the Limited Term Income Fund, and the Victory Corporate Bond
Portfolio merged into the Investment Quality Bond Fund. Changes in net
assets for the periods prior to June 5, 1995 represent the Limited Term
Income Fund and the Investment Quality Bond Fund, respectively.
SEE NOTES TO FINANCIAL STATEMENTS.
123
<PAGE> 129
THE VICTORY PORTFOLIOS Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FUND FOR INCOME
GOVERNMENT BOND FUND GOVERNMENT MORTGAGE -------------------------------------
------------------------------------- FUND NINE
----------------------- MONTHS
ENDED YEAR ENDED MAY 3, 1993 YEAR ENDED YEAR ENDED YEAR ENDED ENDED YEAR ENDED
OCTOBER 31, APRIL 30, TO APRIL 30, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, JANUARY 31,
1995(c) 1995(b) 1994(a)(b) 1995 1994 1995(c) 1994(b) 1994(b)
(000) (000) (000) (000) (000) (000) (000) (000)
---------- ---------- ----------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FROM INVESTMENT
ACTIVITIES:
OPERATIONS:
Net investment income $ 1,716 $ 6,571 $ 3,192 $ 9,792 $ 10,593 $ 1,894 $ 1,967 $ 4,063
Net realized gains
(losses) from
investment
transactions 3,139 (7,388) (3,114) (2,407) 615 (328) (654) (839)
Net change in unrealized
appreciation
(depreciation) from
investments (101) 5,974 (5,103) 11,075 (16,536) 1,370 (2,075) (1,330)
- ---------------------------------------------------------------------------------------------------------------------------------
Change in net assets
resulting from
operations 4,754 5,157 (5,025) 18,460 (5,328) 2,936 (762) 1,894
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income (9,746) (10,495) (1,704) (1,911) (4,053)
From net investment
income by class:
Class A (1,750) (6,395) (3,192)
Class B (14) (1)
In excess of net
investment income (92) (49)
From net realized gains
from investment
transactions (596) (386) (86)
In excess of net
realized gains from
investment
transactions (638)
Tax return of capital (218)
- ---------------------------------------------------------------------------------------------------------------------------------
Change in net assets from
distributions to
shareholders (1,764) (6,396) (3,284) (11,198) (10,881) (1,704) (1,960) (4,139)
- ---------------------------------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
Proceeds from shares
issued 3,800 13,782 136,272 36,846 119,347 3,698 3,073 17,079
Dividends reinvested 1,292 75 4 11,183 9,714 569 525 3,044
Cost of shares redeemed (64,039) (48,532) (7,331) (67,356) (97,422) (12,101) (18,150) (26,321)
- ---------------------------------------------------------------------------------------------------------------------------------
Change in net assets from
capital transactions (58,947) (34,675) 128,945 (19,327) 31,639 (7,834) (14,552) (6,198)
- ---------------------------------------------------------------------------------------------------------------------------------
Change in net assets (55,957) (35,914) 120,636 (12,065) 15,430 (6,602) (17,274) (8,443)
NET ASSETS:
Beginning of period 84,722 120,636 148,168 132,738 29,358 46,632 55,075
- ---------------------------------------------------------------------------------------------------------------------------------
End of period $ 28,765 $ 84,722 $ 120,636 $136,103 $148,168 $ 22,756 $ 29,358 $ 46,632
- ---------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Issued 390 1,475 13,500 3,517 10,724 382 312 1,645
Reinvested 132 8 1,065 906 58 54 294
Redeemed (6,585) (5,266) (738) (6,399) (8,967) (1,261) (1,853) (2,549)
- ---------------------------------------------------------------------------------------------------------------------------------
Change in shares (6,063) (3,783) 12,762 (1,817) 2,663 (821) (1,487) (610)
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Period from commencement of operations.
(b) Audited by other auditors.
(c) Effective June 5, 1995, the Victory Government Bond Portfolio and the
Victory Fund for Income Portfolio became the Government Bond Fund and Fund
for Income, respectively.
SEE NOTES TO FINANCIAL STATEMENTS.
124
<PAGE> 130
THE VICTORY PORTFOLIOS Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
OHIO MUNICIPAL BOND
NATIONAL MUNICIPAL BOND FUND NEW YORK TAX-FREE FUND FUND
---------------------------------------- ----------------------------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SIX MONTHS PERIOD FROM PERIOD FROM
ENDED YEAR ENDED FEBRUARY 3, 1994 YEAR ENDED JANUARY 1, 1994 YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, APRIL 30, TO APRIL 30, OCTOBER 31, TO OCTOBER 31, DECEMBER 31, OCTOBER 31, OCTOBER 31,
1995(c) 1995(b) 1994(a)(b) 1995(c) 1994(b) 1993(b) 1995 1994
(000) (000) (000) (000) (000) (000) (000) (000)
---------- ---------- ---------------- ---------- --------------- ------------ ---------- ----------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FROM INVESTMENT
ACTIVITIES:
OPERATIONS:
Net investment
income $ 242 $ 108 $ 3 $ 940 $ 1,033 $ 1,537 $ 2,760 $ 2,580
Net realized gains
(losses) from
investment
transactions 35 10 (1) (60) 229 142 (128) (399)
Net change in
unrealized
appreciation
(depreciation)
from investments 326 179 (10) 740 (2,384) 1,661 5,317 (4,662)
- -------------------------------------------------------------------------------------------------------------------------------
Change in net assets
resulting from
operations 603 297 (8) 1,620 (1,122) 3,340 7,949 (2,481)
- -------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net
investment
income (2,801) (2,557)
From net
investment
income by class:
Class A (221) (108) (3) (830) (1,033) (1,537)
Class B (6) (42)
In excess of net
investment
income (3)
From net realized
gains from
investment
transactions (60) (117) (1,169)
In excess of net
realized gains
from investment
transactions (169)
- -------------------------------------------------------------------------------------------------------------------------------
Change in net assets
from distributions
to shareholders (227) (111) (3) (1,101) (1,033) (1,654) (2,801) (3,726)
- -------------------------------------------------------------------------------------------------------------------------------
CAPITAL
TRANSACTIONS:
Proceeds from
shares issued 6,782 4,792 502 5,527 6,305 7,439 15,932 28,815
Dividends
reinvested 216 103 3 509 455 1,285 2,784 2,767
Cost of shares
redeemed (219) (310) (7,068) (15,295) (7,914) (21,537) (18,347)
- -------------------------------------------------------------------------------------------------------------------------------
Change in net assets
from capital
transactions 6,779 4,585 505 (1,032) (8,535) 810 (2,821) 13,235
- -------------------------------------------------------------------------------------------------------------------------------
Change in net assets 7,155 4,771 494 (513) (10,690) 2,496 2,327 7,028
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of
period 5,265 494 17,840 28,530 26,034 57,704 50,676
- -------------------------------------------------------------------------------------------------------------------------------
End of period $ 12,420 $5,265 $494 $ 17,327 $ 17,840 28,530 $ 60,031 $ 57,704
- ---------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Issued 685 519 51 443 482 566 1,474 2,625
Reinvested 21 11 39 35 97 257 255
Redeemed (21) (33) (574) (1,185) (595) (2,014) (1,693)
- -------------------------------------------------------------------------------------------------------------------------------
Change in shares 685 497 51 (92) (668) 68 (283) 1,187
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Period from commencement of operations.
(b) Audited by other auditors.
(c) Effective June 5, 1995, the Victory National Municipal Bond Portfolio and
Victory New York Tax-Free Portfolio became the National Municipal Bond Fund
and New York Tax-Free Fund, respectively.
SEE NOTES TO FINANCIAL STATEMENTS.
125
<PAGE> 131
THE VICTORY PORTFOLIOS Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BALANCED FUND STOCK INDEX FUND DIVERSIFIED STOCK FUND
------------------------------ ---------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
PERIOD FROM
PERIOD FROM DECEMBER 3,
YEAR ENDED DECEMBER 10, 1993 YEAR ENDED 1993 YEAR ENDED YEAR ENDED
OCTOBER 31, TO OCTOBER 31, OCTOBER 31, TO OCTOBER 31, OCTOBER 31, OCTOBER 31,
1995 1994(a) 1995 1994(a) 1995 1994
(000) (000) (000) (000) (000) (000)
---------- ----------------- ---------- --------------- ---------- --------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income $ 6,680 $ 3,706 $ 2,888 $ 1,515 $ 6,928 $ 5,177
Net realized gains (losses)
from investment transactions 2,774 (2,116) 2,091 (6) 32,800 30,135
Net realized gains from
foreign currency
transactions 11
Net change in unrealized
appreciation (depreciation)
from investments 20,046 (1,961) 20,860 1,556 29,446 (18,237)
Change in unrealized
depreciation from
translation of assets and
liabilities in foreign
currencies (236)
- ---------------------------------------------------------------------------------------------------------------------------
Change in net assets resulting
from operations 29,275 (371) 25,839 3,065 69,174 17,075
- ---------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (6,753) (3,545) (2,709) (1,331) (7,205) (4,738)
From net realized gains from
investment transactions (29,668) (26,397)
- ---------------------------------------------------------------------------------------------------------------------------
Change in net assets from
distributions to shareholders (6,753) (3,545) (2,709) (1,331) (36,873) (31,135)
- ---------------------------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
Proceeds from shares issued 111,470 176,193 74,489 114,187 144,852 94,732
Dividends reinvested 6,726 3,529 2,709 1,321 36,846 22,231
Cost of shares redeemed (66,930) (48,521) (29,192) (27,556) (67,677) (97,081)
- ---------------------------------------------------------------------------------------------------------------------------
Changes in net assets from
capital transactions 51,266 131,201 48,006 87,952 114,021 19,882
- ---------------------------------------------------------------------------------------------------------------------------
Change in net assets 73,788 127,285 71,136 89,686 146,322 5,822
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 127,285 89,686 263,227 257,405
- ---------------------------------------------------------------------------------------------------------------------------
End of period $201,073 $ 127,285 $160,822 $ 89,686 $409,549 $263,227
- ---------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Issued 11,125 17,854 6,638 11,441 11,560 7,718
Reinvested 659 366 241 135 3,276 1,830
Redeemed (6,762) (4,987) (2,815) (2,770) (5,529) (8,003)
- ---------------------------------------------------------------------------------------------------------------------------
Change in shares 5,022 13,233 4,064 8,806 9,307 1,545
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Period from commencement of operations.
SEE NOTES TO FINANCIAL STATEMENTS.
126
<PAGE> 132
THE VICTORY PORTFOLIOS Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE FUND GROWTH FUND SPECIAL VALUE FUND
-------------------------- -------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C>
PERIOD FROM PERIOD FROM PERIOD FROM
DECEMBER 3, DECEMBER 3, DECEMBER 3,
YEAR ENDED 1993 TO YEAR ENDED 1993 TO YEAR ENDED 1993 TO
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1995(b) 1994(a) 1995(b) 1994(a)(c) 1995 1994(a)
(000) (000) (000) (000) (000) (000)
----------- ----------- ----------- ----------- ----------- -----------
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income $ 6,585 $ 3,602 $ 746 $ 636 $ 2,090 $ 1,020
Net realized gains from investment
transactions 8,481 3,124 4,504 298 5,442 588
Net change in unrealized appreciation
(depreciation) from investments 39,805 (1,040) 15,906 1,364 18,049 3,148
- --------------------------------------------------------------------------------------------------------------------------------
Change in net assets resulting from
operations 54,871 5,686 21,156 2,298 25,581 4,756
- --------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (6,666) (3,289) (783) (586) (2,126) (927)
From net realized gains from
investment transactions (3,145) (298) (588)
- --------------------------------------------------------------------------------------------------------------------------------
Change in net assets from distributions
to shareholders (9,811) (3,289) (1,081) (586) (2,714) (927)
- --------------------------------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
Proceeds from shares issued 169,271 229,389 10,526 92,029 87,892 137,158
Proceeds from shares issued in
connection with acquisition 423 65,632
Dividends reinvested 9,809 3,283 1,067 584 2,712 924
Cost of shares redeemed (116,876) (46,885) (55,968) (27,404) (37,371) (23,311)
- --------------------------------------------------------------------------------------------------------------------------------
Change in net assets from capital
transactions 62,627 185,787 21,257 65,209 53,233 114,771
- --------------------------------------------------------------------------------------------------------------------------------
Change in net assets 107,687 188,184 41,332 66,921 76,100 118,600
NET ASSETS:
Beginning of period 188,184 66,921 118,600
- --------------------------------------------------------------------------------------------------------------------------------
End of period $ 295,871 $ 188,184 $ 108,253 $ 66,921 $ 194,700 $ 118,600
- ---------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Issued 16,259 22,949 1,655 9,240 7,864 13,472
Issued in connection with acquisition 38 5,881
Reinvested 940 336 100 60 246 91
Redeemed (10,888) (4,707) (5,267) (2,759) (3,389) (2,258)
- --------------------------------------------------------------------------------------------------------------------------------
Change in shares 6,349 18,578 2,369 6,541 4,721 11,305
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Period from commencement of operations.
(b) Effective June 5, 1995, the Victory Equity Income Portfolio and the Victory
Equity Portfolio merged into the Value Fund and Growth Fund, respectively.
Changes in net assets for periods prior to June 5, 1995 represent the Value
Fund and Growth Fund, respectively.
(c) Effective March 17, 1994, the Society Earnings Momentum Fund merged into the
Growth Fund. Changes in net assets for periods prior to March 17, 1994
represent the Growth Fund.
SEE NOTES TO FINANCIAL STATEMENTS.
127
<PAGE> 133
THE VICTORY PORTFOLIOS Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
OHIO REGIONAL STOCK INTERNATIONAL GROWTH
SPECIAL GROWTH FUND FUND FUND
------------------------------------------------ ----------------------- -----------------------
PERIOD FROM
SIX MONTHS ENDED YEAR ENDED JANUARY 11, 1994 YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, APRIL 30, TO APRIL 30, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1995 1995(b)(c) 1994(a)(b)(c) 1995 1994 1995 1994
(000) (000) (000) (000) (000) (000) (000)
---------------- ---------- ---------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income
(loss) $ (60) $ 49 $ (15) $ 402 $ 438 $ 696 $ (136)
Net realized gains (losses)
from investment
transactions 2,326 (2,209) (402) 1,485 1,699 (7,848) 4,064
Net realized losses from
foreign currency
transactions 4,365 (152)
Net change in unrealized
appreciation
(depreciation) from
investments (358) 3,557 (547) 3,578 (867) (1,929) 2,879
Change in unrealized
appreciation from
translation of assets and
liabilities in foreign
currencies 2,233 15
- ---------------------------------------------------------------------------------------------------------------------------------
Change in net assets
resulting from operations 1,908 1,397 (964) 5,465 1,270 (2,483) 6,670
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment income (49) (419) (409)
In excess of net investment
income (4)
From net realized gains
from investment and
foreign currency
transactions (1,699) (1,293) (3,413)
Tax return of capital (512)
- ---------------------------------------------------------------------------------------------------------------------------------
Change in net assets from
distributions to
shareholders (53) (2,118) (1,702) (3,925)
- ---------------------------------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
Proceeds from shares issued 16,956 4,996 32,410 9,494 16,543 42,668 53,804
Proceeds from shares issued
in connection with
acquisition 19,565 21,742
Dividends reinvested 2,114 1,560 3,922
Cost of shares redeemed (4,890) (16,411) (579) (9,872) (18,632) (36,754) (9,796)
- ---------------------------------------------------------------------------------------------------------------------------------
Change in net assets from
capital transactions 31,631 (11,415) 31,831 1,736 (529) 31,578 44,008
- ---------------------------------------------------------------------------------------------------------------------------------
Change in net assets 33,539 (10,071) 30,867 5,083 (961) 25,170 50,678
NET ASSETS:
Beginning of period 20,796 30,867 33,965 34,926 81,307 30,629
- ---------------------------------------------------------------------------------------------------------------------------------
End of period $ 54,335 $ 20,796 $ 30,867 $ 39,048 $ 33,965 $106,477 $ 81,307
- ---------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Issued 1,241 530 3,203 630 1,143 3,463 4,323
Issued in connection with
acquisition 1,816 1,797
Reinvested 156 109 337
Redeemed (429) (1,701) (59) (670) (1,297) (3,065) (784)
- ---------------------------------------------------------------------------------------------------------------------------------
Change in shares 2,628 (1,171) 3,144 116 (45) 2,532 3,539
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Period from commencement of operations.
(b) Audited by other auditors.
(c) Effective June 5, 1995, the Victory Aggressive Growth Portfolio and Victory
Foreign Markets Portfolio merged into the Special Growth Fund and
International Growth Fund, respectively. Changes in net assets for periods
prior to June 5, 1995 represent the Aggressive Growth Portfolio and
International Growth Fund, respectively.
SEE NOTES TO FINANCIAL STATEMENTS.
128
<PAGE> 134
Notes to Financial Statements
THE VICTORY PORTFOLIOS October 31, 1995
- --------------------------------------------------------------------------------
1. ORGANIZATION:
The Victory Portfolios (collectively, the "Funds" and individually, a "Fund")
were organized on February 5, 1986, and are registered under the Investment
Company Act of 1940 (the "1940 Act"), as amended, as an open-end investment
company established as a Massachusetts business trust. The Funds are authorized
to issue an unlimited number of shares which are units of beneficial interest
without par value. The Funds presently offer shares of the U.S. Government
Obligations Fund, Prime Obligations Fund, Financial Reserves Fund, Institutional
Money Market Fund, Tax-Free Money Market Fund, Ohio Municipal Money Market Fund,
Limited Term Income Fund, Intermediate Income Fund, Investment Quality Bond
Fund, Government Bond Fund, Government Mortgage Fund, Fund for Income, National
Municipal Bond Fund, New York Tax-Free Fund, Ohio Municipal Bond Fund, Balanced
Fund, Stock Index Fund, Diversified Stock Fund, Value Fund, Growth Fund, Special
Value Fund, Special Growth Fund, Ohio Regional Stock Fund, and International
Growth Fund.
As described in note 3, certain portfolios of the Victory Funds merged into
corresponding series of The Victory Porfolios. Subsequent to this merger, the
fiscal period end changed from April 30 to October 31 for the Institutional
Money Market Fund, Government Bond Fund, National Municipal Bond Fund, and
Special Growth Fund. Likewise, the fiscal period end changed from August 31 to
October 31 for the Ohio Municipal Money Market Fund. Therefore, the current
period statements of operations and changes in net assets for those Funds
present results of operations and changes in net assets for the six-month period
and two-month period ended October 31, 1995, respectively.
The Institutional Money Market Fund is authorized to issue two classes of
shares, Institutional Shares and Service Shares. The Government Bond Fund,
National Municipal Bond Fund and New York Tax-Free Fund are each authorized to
issue two classes of shares, Class A Shares and Class B Shares. Each class of
shares in a Fund has identical rights and privileges except with respect to fees
paid under shareholder servicing or distribution plans, expenses allocable
exclusively to each class of shares, voting rights on matters affecting a single
class of shares, and the exchange privilege of each class of shares.
2. SIGNIFICANT ACCOUNTING POLICIES:
SECURITIES VALUATION:
- --------------------
Investments of the U.S. Government Obligations Fund, Prime Obligations Fund,
Financial Reserves Fund, Institutional Money Market Fund, Tax-Free Money Market
Fund, and Ohio Municipal Money Market Fund (collectively "the money market
funds") are valued at either amortized cost which approximates market value, or
at original cost which, combined with accrued interest, approximates market
value. Under the amortized cost valuation method, discount or premium is
amortized on a constant basis to the maturity of the security. In addition, the
money market funds may not (a) purchase any instrument with a remaining maturity
greater than thirteen months unless such instrument is subject to a demand
feature, or (b) maintain a dollar-weighted-average portfolio maturity which
exceeds 90 days.
Investments in common and preferred stocks, corporate bonds, commercial paper,
municipal and foreign government bonds, U.S. Government securities and
securities of U.S. Government agencies of the Limited Term Income Fund,
Intermediate Income Fund, Investment Quality Bond Fund, Government Bond Fund,
Government Mortgage Fund, Fund for Income, National Municipal Bond Fund, New
York Tax-Free Fund, Ohio Municipal Bond Fund, Balanced Fund, Stock Index Fund,
Diversified Stock Fund, Value Fund, Growth Fund, Special Value Fund, Special
Growth Fund, Ohio Regional Stock Fund, and International Growth Fund
(collectively "the variable net asset value funds") are valued at their market
values determined on the basis of the latest available bid prices in the
principal market (closing sales prices if the principal market is an exchange)
in which such securities are normally traded. Investments in investment
companies are valued at their respective net asset values as reported by such
companies. Investments in foreign securities, currency holdings and other assets
and liabilities of the Balanced Fund and International Growth Fund are valued
based on quotations from the primary market in which they are traded and are
translated from the local currency into U.S. dollars using current exchange
rates. The differences between the cost and market values of investments held by
the variable net asset value funds are reflected as either unrealized
appreciation or depreciation.
SECURITIES TRANSACTIONS AND RELATED INCOME:
- -------------------------------------------
Securities transactions are accounted for on the date the security is purchased
or sold (trade date). Interest income is recognized on the accrual basis and
includes, where applicable, the pro rata amortization of premium or accretion of
discount. Dividend income is recorded on the ex-dividend date. Dividend income
is recorded net of foreign taxes withheld. Gains or losses realized on sales of
securities are determined by comparing the identified cost of the security lot
sold with the net sales proceeds.
FOREIGN CURRENCY TRANSLATION:
- -----------------------------
The accounting records of the Funds are maintained in U.S. dollars. Investment
securities, other assets and liabilities of the Balanced Fund and International
Growth Fund denominated in a foreign currency are translated into U.S. dollars
at the current exchange rate. Purchases and sales of securities, income receipts
and expense payments are translated into U.S. dollars at the exchange rate on
the dates of the transactions.
129
<PAGE> 135
Notes to Financial Statements--Continued
THE VICTORY PORTFOLIOS October 31, 1995
- --------------------------------------------------------------------------------
The Funds isolate that portion of the results of operations resulting from
changes in foreign exchange rates from the fluctuation arising from changes in
market prices of securities held.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of securities, sales of foreign currencies, currency exchange
fluctuations between the trade and settlement dates of securities transactions,
and the difference between the amount of assets and liabilities recorded and the
U.S. dollar equivalent of the amounts actually received or paid. Net unrealized
foreign exchange gains and losses arise from changes in the value of assets and
liabilities, including investments in securities, resulting from changes in
currency exchange rates.
REPURCHASE AGREEMENTS:
- -----------------------
Each Fund may acquire repurchase agreements from financial institutions such as
banks and broker-dealers which Society Asset Management, Inc. (the Funds'
investment adviser) deems creditworthy under guidelines approved by the Board of
Trustees, subject to the seller's agreement to repurchase such securities at a
mutually agreed-upon date and price. The repurchase price generally equals the
price paid by a Fund plus interest negotiated on the basis of current short-term
rates, which may be more or less than the rate on the underlying Fund
securities. The seller, under a repurchase agreement, is required to maintain
the value of collateral held pursuant to the agreement at not less than the
repurchase price (including accrued interest). Securities subject to repurchase
agreements are held by the Funds' custodian or another qualified custodian or in
the Federal Reserve/Treasury book-entry system. Repurchase agreements are
considered to be loans by a Fund under the 1940 Act.
FORWARD CURRENCY CONTRACTS:
- ----------------------------
A forward currency contract ("forward") is an agreement between two parties to
buy and sell a currency at a set price on a future date. The market value of the
forward fluctuates with changes in currency exchange rates. The forward is
marked-to-market daily and the change in market value is recorded by a Fund as
unrealized appreciation or depreciation. When the forward is closed, the Fund
records a realized gain or loss equal to the fluctuation in value during the
period the forward was opened. A Fund could be exposed to risk if a counterparty
is unable to meet the terms of a forward or if the value of the currency changes
unfavorably.
FUTURES CONTRACTS:
- -----------------
The Balanced Fund, Stock Index Fund, Diversified Stock Fund, Value Fund, Growth
Fund, Special Value Fund, Special Growth Fund, Ohio Regional Stock Fund, and
International Growth Fund may enter into contracts for the future delivery of
securities or foreign currencies and futures contracts based on a specific
security, class of securities, foreign currency or an index, purchase or sell
options on any such futures contracts and engage in related closing
transactions. A futures contract on a securities index is an agreement
obligating either party to pay, and entitling the other party to receive, while
the contract is outstanding, cash payments based on the level of a specified
securities index. These Funds may enter into futures contracts in an effort to
hedge against market risks. The acquisition of put and call options on futures
contracts will give the Funds the right (but not the obligation), for a
specified price, to sell or to purchase the underlying futures contract, upon
exercise of the option, at any time during the option period. Futures
transactions involve brokerage costs and require the Funds to segregate assets
to cover contracts that would require it to purchase securities or currencies. A
Fund may lose the expected benefit of futures transactions if interest rates,
exchange rates or securities prices change in an unanticipated manner. Such
unanticipated changes may also result in poorer overall performance than if the
Fund had not entered into any futures transactions. In addition, the value of a
Fund's futures positions may not prove to be perfectly or even highly correlated
with the value of its portfolio securities or foreign currencies, limiting a
Fund's ability to hedge effectively against interest rate, exchange rate and/or
market risk and giving rise to additional risks. There is no assurance of
liquidity in the secondary market for purposes of closing out futures positions.
SECURITIES PURCHASED ON A WHEN-ISSUED AND DELAYED DELIVERY BASIS:
- ------------------------------------------------------------------
Each Fund may purchase securities on a "when-issued" basis. When-issued
securities are securities purchased for delivery beyond the normal settlement
date at a stated price and/or yield, thereby, involving the risk that the price
and/or yield obtained may be more or less than those available in the market
when delivery takes place. At the time a Fund makes the commitment to purchase a
security on a when-issued basis, the Fund records the transaction and reflects
the value of the security in determining net asset value. Normally, the
settlement date occurs within one month of the purchase. A segregated account is
established and the Funds maintain cash and marketable securities at least equal
in value to commitments for when-issued securities. Securities purchased on a
when-issued basis or delayed delivery basis do not earn income until settlement
date.
130
<PAGE> 136
Notes to Financial Statements--Continued
THE VICTORY PORTFOLIOS October 31, 1995
- --------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS:
- -------------------------
Dividends from net investment income are declared daily and paid monthly for the
money market funds. Dividends from net investment income are declared and paid
quarterly for the Stock Index Fund, Diversified Stock Fund, Value Fund, Growth
Fund, Special Value Fund, Special Growth Fund, Ohio Regional Stock Fund, and
International Growth Fund. Dividends from net investment income are declared and
paid monthly for the Limited Term Income Fund, Intermediate Income Fund,
Investment Quality Bond Fund, Government Bond Fund, Government Mortgage Fund,
Fund for Income, National Municipal Bond Fund, New York Tax-Free Fund, Ohio
Municipal Bond Fund, and Balanced Fund. Distributable net realized capital
gains, if any, are declared and distributed at least annually.
During the year ended October 31, 1994, the Funds adopted Statement of Position
93-2, Determination, Disclosure, and Financial Statement Presentation of Income,
Capital Gain, and Return of Capital Distributions by Investment Companies.
Accordingly, timing differences relating to shareholder distributions are
reflected in the components of net assets and permanent book and tax basis
differences relating to shareholder distributions have been reclassified to
additional paid-in capital. Net investment income, net realized gains and net
assets were not affected by this change.
Dividends from net investment income and from net realized capital gains are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. These differences are primarily due to
differing treatments for mortgage-backed securities, foreign currency
transactions, expiring capital loss carryforwards and deferrals of certain
losses.
FEDERAL INCOME TAXES:
- ---------------------
It is the policy of each Fund to continue to qualify as a regulated investment
company by complying with the provisions available to certain investment
companies, as defined in applicable sections of the Internal Revenue Code, and
to make distributions of net investment income and net realized capital gains
sufficient to relieve it from all, or substantially all, federal income taxes.
OTHER:
- ------
Expenses that are directly related to one of the Funds are charged directly to
that Fund. Other operating expenses of The Victory Portfolios are prorated to
each Fund on the basis of relative net assets or other appropriate basis. Fees
paid under a Fund's shareholder servicing or distribution plans are borne by the
specific class of shares to which they apply.
All expenses in connection with Intermediate Income, Investment Quality Bond,
Balanced, Stock Index, Value, Growth, Special Value, and Special Growth Funds'
organization and registration under the 1940 Act and the Securities Act of 1933
were paid by those Funds. Such expenses are being amortized over a period of two
years commencing with the respective inception dates.
Certain prior year balances have been reclassified to be consistent with current
year presentation.
3. MERGERS:
As approved by vote of shareholders of The Victory Funds via proxy dated April
28, 1995, effective June 5, 1995, certain portfolios of The Victory Funds merged
into corresponding series of The Victory Portfolios. The mergers were
accomplished by the tax-free transfer of all assets of each Victory Fund to a
corresponding investment fund of The Victory Portfolios in exchange for the
assumption of liabilities of each Victory Fund. The portfolios of The Victory
Funds merged into existing funds of The Victory Portfolios as follows:
<TABLE>
<CAPTION>
THE VICTORY FUNDS THE VICTORY PORTFOLIOS
- ----------------------------------------- ------------------------------------------------------
<S> <C> <C>
U.S. Treasury Money Market Portfolio to U.S. Government Obligations Fund
Short-Term Government Income Portfolio to Limited Term Income Fund
Corporate Bond Portfolio to Investment Quality Bond Fund
Equity Income Portfolio to Value Fund
Equity Portfolio to Growth Fund
Aggressive Growth Portfolio to Special Growth Fund
Foreign Markets Portfolio to International Growth Fund
</TABLE>
The Special Growth Fund assumed the past performance of the Aggressive Growth
Portfolio.
131
<PAGE> 137
Notes to Financial Statements--Continued
THE VICTORY PORTFOLIOS October 31, 1995
- --------------------------------------------------------------------------------
Additionally, the following portfolios of The Victory Funds merged into newly
created funds of The Victory Portfolios:
<TABLE>
<CAPTION>
THE VICTORY FUNDS THE VICTORY PORTFOLIOS
- ----------------------------------------- ------------------------------------------------------
<S> <C> <C>
Financial Reserves Portfolio to Financial Reserves Fund
Institutional Money Market Portfolio to Institutional Money Market Fund
Ohio Municipal Money Market Portfolio to Ohio Municipal Money Market Fund
Government Bond Portfolio to Government Bond Fund
Fund for Income Portfolio to Fund for Income
National Municipal Bond Portfolio to National Municipal Bond Fund
New York Tax-Free Portfolio to New York Tax-Free Fund
</TABLE>
On March 17, 1994, the Growth Fund acquired all the net assets of the Society
Earnings Momentum Fund pursuant to a plan of reorganization approved by the
shareholders of the Society Earnings Momentum Fund.
The following is a summary of Shares Outstanding, Net Assets, Net Asset Value
per Share, and Unrealized Appreciation immediately before and after the mergers
(amounts in thousands except Net Asset Value):
<TABLE>
<CAPTION>
BEFORE MERGER AFTER MERGER
------------------------------------ ---------------
U.S. TREASURY U.S. GOVERNMENT U.S. GOVERNMENT
MONEY MARKET OBLIGATIONS OBLIGATIONS
JUNE 5, 1995 PORTFOLIO FUND FUND
---------------- --------------- ---------------
<S> <C> <C> <C>
Shares............................................ 242,970 531,916 774,889
Net Assets........................................ $242,973 $ 531,733 $ 774,706
Net Asset Value................................... $ 1.00 $ 1.00 $ 1.00
Unrealized Appreciation........................... $ 0 $ 0 $ 0
</TABLE>
<TABLE>
<CAPTION>
SHORT-TERM
GOVERNMENT LIMITED TERM LIMITED TERM
INCOME PORTFOLIO INCOME FUND INCOME FUND
---------------- --------------- ---------------
<S> <C> <C> <C>
Shares............................................ 1,460 16,699 18,097
Net Assets........................................ $ 14,265 $ 170,408 $ 184,673
Net Asset Value................................... $ 9.77 $ 10.20 $ 10.20
Unrealized Appreciation........................... $ 124 $ 2,956 $ 3,080
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT INVESTMENT
CORPORATE BOND QUALITY QUALITY
PORTFOLIO BOND FUND BOND FUND
---------------- --------------- ---------------
<S> <C> <C> <C>
Shares............................................ 2,857 10,475 13,322
Net Assets........................................ $ 27,848 $ 102,403 $ 130,251
Net Asset Value................................... $ 9.75 $ 9.78 $ 9.78
Unrealized Appreciation........................... $ 414 $ 1,992 $ 2,406
</TABLE>
<TABLE>
<CAPTION>
EQUITY INCOME
PORTFOLIO VALUE FUND VALUE FUND
---------------- --------------- ---------------
<S> <C> <C> <C>
Shares............................................ 39 24,535 24,573
Net Assets........................................ $ 423 $ 273,791 $ 274,214
Net Asset Value................................... $ 10.63 $ 11.16 $ 11.16
Unrealized Appreciation........................... $ 41 $ 25,387 $ 25,428
</TABLE>
<TABLE>
<CAPTION>
EQUITY PORTFOLIO GROWTH FUND GROWTH FUND
---------------- --------------- ---------------
<S> <C> <C> <C>
Shares............................................ 5,603 4,026 9,907
Net Assets........................................ $ 65,632 $ 44,910 $ 110,542
Net Asset Value................................... $ 11.71 $ 11.16 $ 11.16
Unrealized Appreciation........................... $ 8,173 $ 5,315 $ 13,488
</TABLE>
<TABLE>
<CAPTION>
AGGRESSIVE SPECIAL SPECIAL
GROWTH PORTFOLIO GROWTH FUND GROWTH FUND
---------------- --------------- ---------------
<S> <C> <C> <C>
Shares............................................ 1,930 2,073 3,746
Net Assets........................................ $ 20,796 $ 19,565 $ 40,361
Net Asset Value................................... $ 10.77 $ 9.44 $ 10.77
Unrealized Appreciation........................... $ 3,089 $ 1,428 $ 4,517
</TABLE>
132
<PAGE> 138
Notes to Financial Statements--Continued
THE VICTORY PORTFOLIOS October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BEFORE MERGER AFTER MERGER
------------------------------------ ---------------
FOREIGN MARKETS INTERNATIONAL INTERNATIONAL
PORTFOLIO GROWTH FUND GROWTH FUND
---------------- --------------- ---------------
<S> <C> <C> <C>
Shares............................................ 2,245 6,986 8,783
Net Assets........................................ $ 21,748 $ 84,507 $ 106,255
Net Asset Value................................... $ 9.69 $ 12.10 $ 12.10
Unrealized Appreciation (Depreciation)............ $ (138) $ 6,550 $ 6,412
</TABLE>
<TABLE>
<CAPTION>
SOCIETY EARNINGS
MARCH 17, 1994 MOMENTUM FUND GROWTH FUND GROWTH FUND
---------------- --------------- ---------------
<S> <C> <C> <C>
Shares............................................ 883 6,053 6,912
Net Assets........................................ $ 8,794 $ 61,983 $ 70,777
Net Asset Value................................... $ 9.96 $ 10.24 $ 10.24
</TABLE>
4. PURCHASES AND SALES OF SECURITIES:
Purchases and sales of securities (excluding short-term securities) for the
period ended October 31, 1995 were as follows (amounts in thousands):
<TABLE>
<CAPTION>
PURCHASES SALES
------------ ------------
<S> <C> <C>
Limited Term Income Fund............. $ 219,352 $ 134,222
Intermediate Income Fund............. 164,126 124,722
Investment Quality Bond Fund......... 185,247 156,582
Government Bond Fund*................ 34,227 95,081
Government Mortgage Fund............. 81,862 106,516
Fund for Income...................... 8,139 19,372
National Municipal Bond Fund*........ 13,535 6,531
New York Tax-Free Fund............... 3,075 3,211
Ohio Municipal Bond Fund............. 70,385 71,668
Balanced Fund........................ 156,241 108,135
Stock Index Fund..................... 40,250 11,336
Diversified Stock Fund............... 320,417 232,263
Value Fund........................... 111,553 53,516
Growth Fund.......................... 100,486 76,374
Special Value Fund................... 97,912 55,387
Special Growth Fund*................. 54,021 25,441
Ohio Regional Stock Fund............. 4,264 3,878
International Growth Fund............ 81,845 58,858
</TABLE>
* For the period May 1, 1995 through October 31, 1995.
5. RELATED PARTY TRANSACTIONS:
Investment advisory services are provided to all the Funds by Society Asset
Management, Inc. ("SAM"), a wholly owned subsidiary of KeyCorp Asset Management
Holdings, Inc., which is a wholly owned subsidiary of Society National Bank
("Society"), a wholly owned subsidiary of KeyCorp. Under the terms of the
investment advisory agreements, SAM is entitled to receive fees based on a
percentage of the average daily net assets of the Funds. Society serves the
Funds as custodian. Society received custodian fees from the Funds for providing
custodian services in addition to reimbursement of actual out-of-pocket expenses
incurred.
Society also serves as Shareholder Servicing Agent for all the Funds. As such,
Society provides support services to their clients who are shareholders, which
may include establishing and maintaining accounts and records, processing
dividend and distribution payments, providing account information, assisting in
processing of purchase, exchange and redemption requests, and assisting
shareholders in changing dividend options, account designations and addresses.
For providing such services, Society may receive a fee computed daily as 0.25%
of the average net assets of certain shares of the Funds.
Concord Holding Corporation (the "Administrator"), an indirect, wholly-owned
subsidiary of The BISYS Group, Inc. ("BISYS") serves as the administrator to the
Funds, and Victory Broker Dealer Services, Inc. (the "Distributor"), a wholly-
owned subsidiary of BISYS, serves as the distributor to the Funds. Certain
officers of the Funds are affiliated with BISYS. Such officers receive no direct
payments or fees from the Fund for serving as officers of the Funds.
Under the terms of the administration agreement, the Administrator's fees are
computed as 0.15% of the average daily net assets of the Funds. Pursuant to a
12b-1 Plan, the Distributor may receive fees computed as 0.25% of the average
daily net
133
<PAGE> 139
Notes to Financial Statements--Continued
THE VICTORY PORTFOLIOS October 31, 1995
- --------------------------------------------------------------------------------
assets of Service Shares of the Institutional Money Market Fund and 0.75% of the
average daily net assets of Class B Shares of each of the Government Bond Fund,
National Municipal Bond Fund and New York Tax-Free Fund for providing
distribution services and is entitled to receive commissions on sales of shares
of the variable net asset value funds. For the year ended October 31, 1995, the
Distributor received $721,000 from commissions earned on sales of shares of the
variable net asset value funds all of which the Distributor reallowed to dealers
of the Funds' shares including $614,000 to affiliates of the Funds. BISYS Fund
Services, Ohio, Inc. (the Company), an affiliate of BISYS, serves the Funds as
Mutual Fund Accountant. Under the terms of the Fund Accounting Agreement, the
Company's fee is based on a percentage of average daily net assets.
Fees may be voluntarily reduced to assist the Funds in maintaining competitive
expense ratios.
Additional information regarding related party transactions is as follows for
the year ended October 31, 1995:
<TABLE>
<CAPTION>
INVESTMENT
ADVISORY ADMINISTRATION MUTUAL FUND
FEES FEES ACCOUNTANT CUSTODIAN
------------------------------- -------------- FEES FEES
(PERCENTAGES VOLUNTARY VOLUNTARY ----------- ---------
OF AVERAGE DAILY FEE FEE ANNUAL ANNUAL
NET ASSETS) REDUCTIONS REDUCTIONS FEE FEE
---------------- ---------- -------------- ----------- ---------
(000) (000) (000) (000)
<S> <C> <C> <C> <C> <C>
U.S. Government Obligations Fund 0.35% $ 88 $ 243 $14
Prime Obligations Fund 0.35% 261 7
Financial Reserves Fund 0.50% $420 1 101 15
Institutional Money Market Fund** 0.25% 338 257 50 8
Tax-Free Money Market Fund 0.35% 34 113 5
Ohio Municipal Money Market Fund* 0.50% 245 13 8
Limited Term Income Fund 0.50% 21 89 3
Intermediate Income Fund 0.75% 326 71 2
Investment Quality Bond Fund 0.75% 239 71 3
Government Bond Fund** 0.55% 36 3 29 2
Government Mortgage Fund 0.50% 16 83 2
Fund for Income 0.50% 37 9 32 2
National Municipal Bond Fund** 0.55% 25 6 24
New York Tax-Free Fund 0.55% 45 7 49 2
Ohio Municipal Bond Fund 0.60% 164 43 2
Balanced Fund 1.00% 624 88 5
Stock Index Fund 0.60% 195 171 23 8
Diversified Stock Fund 0.65% 126 2 142 7
Value Fund 1.00% 811 124 8
Growth Fund 1.00% 216 48 50 4
Special Value Fund 1.00% 406 1 76 4
Special Growth Fund** 1.00% 297 33 21 1
Ohio Regional Stock Fund 0.75% 14 31 1
International Growth Fund 1.10% 116 121 92
</TABLE>
* For the period September 1, 1995 through October 31, 1995
**For the period May 1, 1995 through October 31, 1995.
134
<PAGE> 140
Notes to Financial Statements--Continued
THE VICTORY PORTFOLIOS October 31, 1995
- --------------------------------------------------------------------------------
6. CAPITAL SHARE TRANSACTIONS:
Transactions in capital shares for the Funds with multiple share classes were as
follows (amounts in thousands):
<TABLE>
<CAPTION>
INSTITUTIONAL
MONEY MARKET FUND
-----------------------------------------------
SIX MONTHS
ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, APRIL 30, APRIL 30,
1995(c) 1995(a) 1994(a)
------------- -------------- --------------
<S> <C> <C> <C>
CAPITAL AND SHARE TRANSACTIONS:
Institutional
Shares:
Issued 629,396 1,197,333 1,238,739
Reinvested 133 1,508 390
Redeemed (574,761) (1,290,390) (853,005)
- ----------------------------------------------------
Total 54,768 (91,549) 386,124
Service
Shares:
Issued 19,479
Reinvested 11
Redeemed (8,011)
- ----------------------------------------------------
Total 11,479
</TABLE>
<TABLE>
<CAPTION>
NEW YORK
NATIONAL MUNICIPAL TAX-FREE
GOVERNMENT BOND FUND BOND FUND FUND
-------------------------------------------- -------------------------------------------- ------------
SIX MONTHS PERIOD FROM SIX MONTHS PERIOD FROM
ENDED YEAR ENDED MAY 3, 1993 TO ENDED YEAR ENDED FEBRUARY 3, 1994 YEAR ENDED
OCTOBER 31, APRIL 30, APRIL 30, OCTOBER 31, APRIL 30, TO APRIL 30, OCTOBER 31,
1995 1995(a)(c) 1994(a)(b) 1995 1995(a)(c) 1994(a)(b) 1995
------------ -------------- -------------- -------------- ------------ ---------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
CAPITAL
TRANSACTIONS:
Class A Shares:
Proceeds from
shares issued.... 3,055 13,632 136,272 6,441 4,646 502 3,395
Dividends
reinvested....... 1,283 73 4 211 102 3 468
Cost of shares
redeemed......... (64,259) (48,532) (7,331) (169) (310) (6,784)
- ---------------------------------------------------------------------------------------------------------------------------
Total.............. (59,921) (34,827) 128,945 6,483 4,438 505 (2,921)
Class B Shares:
Proceeds from
shares issued.... 745 150 341 146 2,132
Dividends
reinvested....... 9 2 5 1 41
Cost of shares
redeemed......... (10) (50) (284)
- ---------------------------------------------------------------------------------------------------------------------------
Total.............. 744 152 296 147 1,889
SHARE TRANSACTIONS:
Class A Shares:
Issued............. 314 1,459 13,500 651 504 51 271
Reinvested......... 131 8 21 11 37
Redeemed........... (6,584) (5,266) (738) (17) (33) (552)
- ---------------------------------------------------------------------------------------------------------------------------
Total.............. (6,139) (3,799) 12,762 655 482 51 (244)
Class B Shares:
Issued............. 76 16 34 15 172
Reinvested......... 1 2
Redeemed........... (1) (4) (22)
- ---------------------------------------------------------------------------------------------------------------------------
Total.............. 76 16 30 15 152
<CAPTION>
PERIOD FROM
JANUARY 1,
1994 THROUGH YEAR ENDED
OCTOBER 31, DECEMBER 31,
1994(a)(c) 1993(a)
-------------- ------------
<S> <<C> <C>
CAPITAL
TRANSACTIONS:
Class A Shares:
Proceeds from
shares issued.... 6,305 7,439
Dividends
reinvested....... 455 1,285
Cost of shares
redeemed......... (15,295) (7,914)
- -------------------
Total.............. (8,535) 810
Class B Shares:
Proceeds from
shares issued....
Dividends
reinvested.......
Cost of shares
redeemed.........
- -------------------
Total..............
SHARE TRANSACTIONS:
Class A Shares:
Issued............. 482 566
Reinvested......... 35 97
Redeemed........... (1,185) (595)
- -------------------
Total.............. (668) 68
Class B Shares:
Issued.............
Reinvested.........
Redeemed...........
- -------------------
Total..............
</TABLE>
(a) Audited by other auditors.
(b) Period from commencement of operations.
(c) Service shares commenced offering June 5, 1995 for the Institutional Money
Market Fund. Class B Shares commenced offering September 26, 1994 for each
of the Government Bond Fund, National Municipal Bond Fund and New York
Tax-Free Fund.
135
<PAGE> 141
Notes to Financial Statements--Continued
THE VICTORY PORTFOLIOS October 31, 1995
- --------------------------------------------------------------------------------
7. CONCENTRATION OF RISK:
The Ohio Municipal Money Market Fund, New York Tax-Free Fund, Ohio Municipal
Bond Fund and Ohio Regional Stock Fund invest primarily in debt obligations
issued by the respective States and their political subdivisions, agencies and
public authorities to obtain funds for various public purposes and equity
securities issued by organizations domiciled in the respective States. The Funds
are more susceptible to economic and political factors that may adversely affect
issuers of the States' specific municipal securities than are municipal bond
funds that are not concentrated in these issuers to the same extent.
8. FEDERAL INCOME TAX INFORMATION (UNAUDITED):
The Victory Portfolios designate the following eligible distributions for the
dividends received deduction for corporations for the taxable year ended October
31, 1995:
<TABLE>
<CAPTION>
DIVIDEND INCOME
(000) DIVIDEND INCOME PER SHARE
--------------- -------------------------
<S> <C> <C>
Balanced Fund $ 5,464 $ 0.275
Stock Index Fund 2,711 0.203
Diversified Stock Fund 9,901 0.281
Value Fund 8,298 0.252
Growth Fund 1,537 0.110
Special Value Fund 3,659 0.154
Special Growth Fund 155 0.000
Ohio Regional Stock 830 0.177
</TABLE>
The Victory Portfolios designate the following exempt-interest dividends for the
taxable year ended October 31, 1995:
<TABLE>
<CAPTION>
TAX-FREE OHIO
MONEY MUNICIPAL NATIONAL NEW YORK OHIO
MARKET MONEY MARKET MUNICIPAL TAX-FREE MUNICIPAL
FUND FUND BOND FUND FUND BOND FUND
-------- ------------ --------- -------- ---------
<S> <C> <C> <C> <C> <C>
Exempt-interest dividends (000) $8,301 $2,859 $ 2,801
Exempt-interest dividends (000) Class A $ 214 $ 830
Exempt-interest dividends (000) Class B 6 42
Exempt-interest dividends per share 0.034 0.006 0.525
Exempt-interest dividends per share Class
A 0.225 0.826
Exempt-interest dividends per share Class
B 0.180 0.744
</TABLE>
136
<PAGE> 142
Notes to Financial Statements--Continued
THE VICTORY PORTFOLIOS October 31, 1995
- --------------------------------------------------------------------------------
The percentage break-down of exempt-interest income by state for the Funds'
taxable year ended October 31, 1995 is as follows:
<TABLE>
<CAPTION>
TAX-FREE OHIO MUNICIPAL NATIONAL NEW YORK OHIO
MONEY MARKET MONEY MARKET MUNICIPAL TAX-FREE MUNICIPAL
FUND FUND BOND FUND BOND FUND BOND FUND
------------ -------------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Alabama 2.1% 0.3%
Arizona 3.9% 2.9%
Arkansas 1.8%
California 3.0% 0.1%
Colorado 1.2% 1.8%
Connecticut 2.4%
District of Columbia 0.3%
Florida 8.6% 1.9%
Georgia 1.5% 2.3%
Illinois 8.1% 14.0%
Indiana 5.1% 0.2%
Iowa 3.4% 1.0%
Kansas 1.3%
Kentucky 2.6% 0.5%
Louisiana 0.3%
Maine 2.0%
Maryland 0.2% 0.1%
Massachusetts 0.1% 0.7%
Michigan 1.9% 15.5%
Minnesota 1.4% 1.4%
Missouri 5.3% 6.5%
Montana 0.1%
Nebraska 1.8%
Nevada 1.8% 0.4%
New Hampshire 1.0%
New Jersey 0.2%
New Mexico 0.4%
New York 1.3% 3.5% 97.5%
North Carolina 3.7%
North Dakota 3.5%
Ohio 16.7% 100.0% 11.5% 100.0%
Oklahoma 1.8%
Oregon 0.5%
Pennsylvania 1.9% 0.1%
Puerto Rico 2.5%
South Carolina 1.4% 2.3%
South Dakota 3.5%
Tennessee 2.8% 2.3%
Texas 4.9% 8.6%
Utah 0.1% 0.2%
Virginia 1.1% 0.5%
Washington 0.7% 2.8%
West Virginia 0.6%
Wisconsin 7.2% 2.9%
Wyoming 0.5% 1.7%
------ ------ --------- --------- ---------
100.0% 100.0% 100.0% 100.0% 100.0%
=============== =============== =========== =========== ===========
</TABLE>
137
<PAGE> 143
Notes to Financial Statements--Continued
THE VICTORY PORTFOLIOS October 31, 1995
- --------------------------------------------------------------------------------
The International Growth Fund elected to pass the benefits of the foreign tax
credit to shareholders for the year ended October 31, 1995. The following
information is presented with respect to the election:
<TABLE>
<CAPTION>
INTERNATIONAL GROWTH FUND
-------------------------
<S> <C>
Gross income from foreign countries (000) $ 2,435
Gross income from foreign countries per share 0.17
Income taxes paid to foreign countries (000) 325
Income taxes paid to foreign countries per share 0.02
</TABLE>
As of October 31, 1995, for Federal income tax purposes, the following funds
have capital loss carryforwards available to offset future capital gains, if any
(amounts in thousands):
<TABLE>
<CAPTION>
AMOUNT EXPIRES
------ -------
<S> <C> <C>
U.S. Government Obligations Fund..................................... $ 117 2002
Limited Term Income Fund............................................. 1,856 2002
Limited Term Income Fund............................................. 946 2003
Intermediate Income Fund............................................. 2,498 2002
Intermediate Income Fund............................................. 1,429 2003
Investment Quality Bond Fund......................................... 4,019 2003
Investment Quality Bond Fund......................................... 4,392 2004
Government Bond Fund................................................. 3,935 2003
Government Bond Fund................................................. 3,374 2004
Government Mortgage Fund............................................. 2,013 2004
Fund for Income...................................................... 839 2001
Fund for Income...................................................... 598 2002
Fund for Income...................................................... 314 2003
New York Tax-Free Fund............................................... 60 2003
Ohio Municipal Bond Fund............................................. 399 2002
Ohio Municipal Bond Fund............................................. 138 2003
Special Growth Fund.................................................. 2,524 2003
Special Growth Fund.................................................. 3,826 2004
International Growth Fund............................................ 362 2003
International Growth Fund............................................ 3,020 2004
</TABLE>
138
<PAGE> 144
THE VICTORY PORTFOLIOS Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. GOVERNMENT OBLIGATIONS FUND
-----------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------
1995(a) 1994 1993 1992 1991
---------- ------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ----------------------------------------------------------------------------------------------------------
Investment Activities
Net investment income 0.052 0.032 0.026 0.036 0.060
Distributions
Net investment income (0.052) (0.032) (0.026) (0.036) (0.060)
- ----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ----------------------------------------------------------------------------------------------------------
Total Return 5.38% 3.30% 2.62% 3.66% 6.14%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000) $964,929 $ 412,048 $515,734 $579,836 $430,248
Ratio of expenses to average net assets 0.58% 0.63% 0.60% 0.60% 0.60%
Ratio of net investment income to
average net assets 5.28% 3.20% 2.57% 3.50% 5.92%
Ratio of expenses to average net
assets* 0.60% 0.80%
Ratio of net investment income to
average net assets* 5.26% 3.03%
</TABLE>
- ---------------
<TABLE>
<C> <S>
* During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the
ratios would have been as indicated.
(a) Effective June 5, 1995, the Victory U.S. Treasury Money Market Portfolio merged into the U.S. Government
Obligations Fund. Financial highlights for the periods prior to June 5, 1995 represent the U.S. Government
Obligations Fund.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
139
<PAGE> 145
THE VICTORY PORTFOLIOS Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRIME OBLIGATIONS FUND
-----------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------
1995 1994 1993 1992 1991
---------- ------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ----------------------------------------------------------------------------------------------------------
Investment Activities
Net investment income 0.051 0.035 0.030 0.037 0.061
Net realized losses from investment
transactions (0.003)
- ----------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.051 0.032 0.030 0.037 0.061
- ----------------------------------------------------------------------------------------------------------
Distributions
Net investment income (0.051) (0.035) (0.030) (0.037) (0.061)
- ----------------------------------------------------------------------------------------------------------
Capital transactions 0.003
- ----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ----------------------------------------------------------------------------------------------------------
Total Return 5.26% 3.57% 3.05% 3.77% 6.32%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000) $456,266 $ 782,303 $720,024 $524,338 $442,263
Ratio of expenses to average net assets 0.74% 0.62% 0.60% 0.61% 0.62%
Ratio of net investment income to
average net assets 5.09% 3.52% 2.96% 3.68% 6.14%
Ratio of expenses to average net
assets* 0.79%
Ratio of net investment income to
average net assets* 3.35%
</TABLE>
- ---------------
<TABLE>
<C> <S>
* During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the
ratios would have been as indicated.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
140
<PAGE> 146
THE VICTORY PORTFOLIOS Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FINANCIAL RESERVES FUND
-----------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------
1995(c) 1994(b) 1993(a)(b) 1992(a)(b) 1991(a)(b)
---------- ------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ----------------------------------------------------------------------------------------------------------
Investment Activities
Net investment income 0.054 0.035 0.030 0.040 0.060
Distributions
Net investment income (0.054) (0.035) (0.030) (0.040) (0.060)
- ----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ----------------------------------------------------------------------------------------------------------
Total Return 5.50% 3.57% 2.81% 3.76% 6.28%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000) $762,693 $ 433,266 $457,872 $523,889 $412,542
Ratio of expenses to average net assets 0.60% 0.57% 0.55% 0.55% 0.55%
Ratio of net investment income to
average net assets 5.40% 3.48% 2.78% 3.67% 6.12%
Ratio of expenses to average net
assets* 0.76% 0.73% 0.70% 0.70% 0.62%
Ratio of net investment income to
average net assets* 5.24% 3.32% 2.63% 3.52% 6.05%
</TABLE>
- ---------------
<TABLE>
<C> <S>
* During the period, certain fees were voluntarily reduced and/or reimbursed. If such voluntary fee reductions
and/or reimbursements had not occurred, the ratios would have been as indicated.
(a) Effective May 16, 1991, Ameritrust Company National Association became investment adviser to the Fund. Effective
March 16, 1992, Ameritrust was acquired by Society Corporation and merged into Society National Bank, a
wholly-owned subsidiary of Society Corporation, on July 13, 1992. Effective January 7, 1993, Society Asset
Management, Inc., a wholly-owned subsidiary of Society Corporation, was named investment adviser to the Fund.
(b) Audited by other auditors.
(c) Effective June 5, 1995, the Victory Financial Reserves Portfolio became the Financial Reserves Fund.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
141
<PAGE> 147
THE VICTORY PORTFOLIOS Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INSTITUTIONAL MONEY MARKET FUND
-------------------------------------------------------------------------------------------
SERVICE INSTITUTIONAL
SHARES SHARES
------------- -------------
SIX MONTHS
JUNE 5, 1995 ENDED YEAR ENDED APRIL 30,
TO OCTOBER 31, OCTOBER 31, ---------------------------------------------------------
1995(a)(e) 1995(e) 1995(d) 1994(d) 1993(d) 1992(d) 1991(d)
------------- ------------- -------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- -------------------------------------------------------------------------------------------------------------------------
Investment Activities
Net investment income 0.012 0.290 0.500 0.028 0.032 0.051 0.076
Distributions
Net investment income (0.012) (0.290) (0.500) (0.028) (0.032) (0.051) (0.076)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END
OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ------------------------------------------------------------------------------------------------------------------------
Total Return 1.23%(b) 2.90%(b) 4.91 % 2.80 % 3.26 % 5.21 % 7.83 %
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of
Period (000) $11,479 $ 504,536 $449,814 $541,229 $155,097 $177,640 $248,515
Ratio of expenses to
average net assets 0.51%(c) 0.26%(c) 0.27% 0.55% 0.43% 0.30% 0.30%
Ratio of net investment
income to average net
assets 5.33%(c) 5.69%(c) 4.91% 2.78% 3.19% 5.06% 7.46%
Ratio of expenses to
average net assets* 1.00%(c) 0.49%(c) 0.51% 0.55% 0.48% 0.42% 0.44%
Ratio of net investment
income to average net
assets* 4.84%(c) 5.46%(c) 4.67% 2.78% 3.14% 4.94% 7.32%
</TABLE>
- ---------------
<TABLE>
<C> <S>
* During the period, certain fees were voluntarily reduced and/or reimbursed. If such voluntary fee reductions
and/or reimbursements had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Audited by other auditors.
(e) Effective June 5, 1995, the Victory Institutional Money Market Portfolio became the Institutional Money Market
Fund, and the Fund commenced offering separate share classes.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
142
<PAGE> 148
THE VICTORY PORTFOLIOS Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TAX-FREE MONEY MARKET FUND
-----------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------
1995 1994 1993 1992 1991
---------- ------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ----------------------------------------------------------------------------------------------------------
Investment Activities
Net investment income 0.034 0.021 0.020 0.027 0.043
Distributions
Net investment income (0.034) (0.021) (0.020) (0.027) (0.043)
- ----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ----------------------------------------------------------------------------------------------------------
Total Return 3.42% 2.17% 2.06% 2.77% 4.44%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000) $307,726 $ 198,561 $189,351 $151,012 $129,601
Ratio of expenses to average net assets 0.61% 0.60% 0.59% 0.61% 0.62%
Ratio of net investment income to
average net assets 3.36% 2.14% 2.04% 2.70% 4.29%
Ratio of expenses to average net
assets* 0.62% 0.79% 0.60%
Ratio of net investment income to
average net assets* 3.35% 1.95% 2.02%
</TABLE>
- ---------------
<TABLE>
<C> <S>
* During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the
ratios would have been as indicated.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
143
<PAGE> 149
THE VICTORY PORTFOLIOS Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
OHIO MUNICIPAL MONEY MARKET FUND
---------------------------------------------------------------------------------
TWO MONTHS
ENDED YEAR ENDED AUGUST 31,
OCTOBER 31, -----------------------------------------------------------------
1995 1995(b) 1994(c) 1993(a)(c) 1992(A)(c) 1991(a)(c)
------------- ---------- ------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ------------------------------------------------------------------------------------------------------------
Investment Activities
Net investment income 0.006 0.033 0.021 0.021 0.031 0.046
Distributions
Net investment income (0.006) (0.033) (0.021) (0.021) (0.031) (0.046)
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END
OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ------------------------------------------------------------------------------------------------------------
Total Return 0.55%(d) 3.33% 2.10% 2.14% 3.18% 4.67%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of
Period (000) $ 510,414 $502,453 $ 318,132 $262,681 $252,705 $253,177
Ratio of expenses to
average net assets 0.64%(e) 0.63% 0.65% 0.65% 0.65% 0.64%
Ratio of net investment
income to average net
assets 3.31%(e) 3.33% 2.08% 2.12% 3.13% 4.59%
Ratio of expenses to
average net assets* 0.92%(e) 0.94% 0.76% 0.72% 0.68% 0.66%
Ratio of net investment
income to average net
assets* 3.03%(e) 3.02% 1.97% 2.05% 3.10% 4.57%
</TABLE>
- ---------------
<TABLE>
<C> <S>
* During the period, certain fees were voluntarily reduced and/or reimbursed. If such voluntary fee reductions
and/or reimbursements had not occurred, the ratios would have been as indicated.
(a) Effective February 27, 1991, Ameritrust Company National Association became investment adviser to the Fund.
Effective March 16, 1992, Ameritrust was acquired by Society Corporation and merged into Society National Bank, a
wholly-owned subsidiary of Society Corporation, on July 13, 1992. Effective February 3, 1993, Society Asset
Management, Inc. a wholly-owned subsidiary of Society Corporation was named investment adviser to the Fund.
(b) Effective June 5, 1995, the Victory Ohio Municipal Money Market Portfolio became the Ohio Municipal Money Market
Fund.
(c) Audited by other auditors.
(d) Not annualized.
(e) Annualized.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
144
<PAGE> 150
THE VICTORY PORTFOLIOS Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LIMITED TERM INCOME FUND
-----------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------
1995(a) 1994 1993 1992 1991
---------- ------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.88 $ 10.53 $ 10.45 $ 10.33 $ 10.02
- ----------------------------------------------------------------------------------------------------------
Investment Activities
Net investment income 0.57 0.54 0.57 0.64 0.73
Net realized and unrealized gains
(losses) from investments 0.27 (0.61) 0.08 0.13 0.31
- ----------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.84 (0.07) 0.65 0.77 1.04
- ----------------------------------------------------------------------------------------------------------
Distributions
Net investment income (0.57) (0.54) (0.57) (0.64) (0.73)
In excess of net realized gains (0.04) (0.01)
- ----------------------------------------------------------------------------------------------------------
Total Distributions (0.57) (0.58) (0.57) (0.65) (0.73)
- ----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.15 $ 9.88 $ 10.53 $ 10.45 $ 10.33
- ----------------------------------------------------------------------------------------------------------
Total Return (excludes sales charges) 8.77% (0.66)% 6.39% 7.77% 10.82%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000) $172,002 $79,150 $ 81,771 $ 55,565 $ 43,763
Ratio of expenses to average net assets 0.78% 0.79% 0.77% 0.78% 0.80%
Ratio of net investment income to
average net assets 5.77% 5.29% 5.49% 6.18% 7.20%
Ratio of expenses to average net
assets* 0.79% 0.97% 0.78%
Ratio of net investment income to
average net assets* 5.76% 5.10% 5.48%
Portfolio turnover 97.25% 41.26% 50.27% 14.97% 9.79%
</TABLE>
- ---------------
<TABLE>
<C> <S>
* During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the
ratios would have been as indicated.
(a) Effective June 5, 1995, the Victory Short-Term Government Income Portfolio merged into the Limited Term Income
Fund. Financial highlights for the periods prior to June 5, 1995 represent the Limited Term Income Fund.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
145
<PAGE> 151
THE VICTORY PORTFOLIOS Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERMEDIATE INCOME FUND INVESTMENT QUALITY BOND FUND
-------------------------------- --------------------------------
YEAR ENDED DECEMBER 10, 1993 YEAR ENDED DECEMBER 10, 1993
OCTOBER 31, TO OCTOBER 31, OCTOBER 31, TO OCTOBER 31,
1995 1994(a) 1995(d) 1994(a)
---------- ------------------- ---------- -------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.25 $ 10.00 $ 9.10 $ 10.00
- -------------------------------------------------------------------------------------------------------------------------
Investment Activities
Net investment income 0.60 0.52 0.62 0.53
Net realized and unrealized gains (losses)
from investments 0.44 (0.76) 0.67 (0.92)
- -------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 1.04 (0.24) 1.29 (0.39)
- -------------------------------------------------------------------------------------------------------------------------
Distributions
Net investment income (0.60) (0.51) (0.63) (0.51)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.69 $ 9.25 $ 9.76 $ 9.10
- ---------------------------------------------------------------------------------------------------------------------
Total Return (excludes sales charges) 11.65% (2.48)%(b) 14.63% (3.92)%(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000) $163,281 $ 112,923 $125,248 $94,685
Ratio of expenses to average net assets 0.82% 0.79%(c) 0.88% 0.79%(c)
Ratio of net investment income to average net
assets 6.32% 6.23%(c) 6.59% 6.33%(c)
Ratio of expenses to average net assets* 1.06% 1.25%(c) 1.10% 1.25%(c)
Ratio of net investment income to average net
assets* 6.08% 5.77%(c) 6.37% 5.87%(c)
Portfolio turnover 98.07% 55.06% 160.01% 89.92%
</TABLE>
- ---------------
<TABLE>
<C> <S>
* During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the
ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Effective June 5, 1995, the Victory Corporate Bond Portfolio merged into the Investment Quality Bond Fund.
Financial highlights for the periods prior to June 5, 1995 represent the Investment Quality Bond Fund.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
146
<PAGE> 152
THE VICTORY PORTFOLIOS Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GOVERNMENT BOND FUND
-----------------------------------------------------------------------------
CLASS B CLASS A
---------------------------------- -------------------------
SIX MONTHS SIX MONTHS
ENDED SEPTEMBER 26, 1994 ENDED YEAR ENDED MAY 3, 1993
OCTOBER 31, TO APRIL 30, OCTOBER 31, APRIL 30, TO APRIL 30,
1995(e) 1995(a)(d) 1995(e) 1995(d) 1994(a)(d)
----------- -------------------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.43 $ 9.25 $ 9.44 $ 9.45 $ 10.00
- -----------------------------------------------------------------------------------------------------------------------
Investment Activities
Net investment income 0.25 0.31 0.33 0.55 0.45
Net realized and unrealized gains
(losses) from investments 0.45 0.17 0.40 (0.02) (0.54)
- -----------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.70 0.48 0.73 0.53 (0.09)
- -----------------------------------------------------------------------------------------------------------------------
Distributions
Net investment income (0.22) (0.30) (0.29) (0.54) (0.45)
In excess of net investment income (0.06) (0.01)
Net realized gains (0.01)
- -----------------------------------------------------------------------------------------------------------------------
Total Distributions (0.28) (0.30) (0.30) (0.54) (0.46)
- -----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.85 $ 9.43 $ 9.87 $ 9.44 $ 9.45
- ------------------------------------------------------------------------------------------------------------------
Total Return (excludes sales charges) 7.47%(b) 5.26%(b) 7.86%(b) 5.87% (1.06)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000) $ 909 $ 155 $27,856 $84,567 $120,636
Ratio of expenses to average net assets 1.82%(c) 1.43%(c) 0.92%(c) 0.63% 0.38%(c)
Ratio of net investment income to
average net assets 4.98%(c) 5.03%(c) 6.04%(c) 5.97% 4.61%(c)
Ratio of expenses to average net assets* 2.12%(c) 1.60%(c) 1.06%(c) 0.98% 0.96%(c)
Ratio of net investment income to
average net assets* 4.68%(c) 4.86%(c) 5.90%(c) 5.62% 4.03%(c)
Portfolio turnover 68.82% 127.00% 68.82% 127.00% 121.00%
</TABLE>
- ---------------
<TABLE>
<C> <S>
* During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the
ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Audited by other auditors.
(e) Effective June 5, 1995, the Victory Government Bond Portfolio became the Government Bond Fund.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
147
<PAGE> 153
THE VICTORY PORTFOLIOS Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GOVERNMENT MORTGAGE FUND
-----------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------
1995 1994 1993 1992 1991
---------- ------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.33 $ 11.36 $ 11.07 $ 10.73 $ 10.18
- ----------------------------------------------------------------------------------------------------------
Investment Activities
Net investment income 0.72 0.68 0.66 0.74 0.80
Net realized and unrealized
gains(losses) from investments 0.62 (1.02) 0.32 0.34 0.55
- ----------------------------------------------------------------------------------------------------------
Total from Investment Activities 1.34 (0.34) 0.98 1.08 1.35
- ----------------------------------------------------------------------------------------------------------
Distributions
Net investment income (0.71) (0.67) (0.66) (0.74) (0.80)
Net realized gains (0.03) (0.02) (0.03)
In excess of net realized gains (0.05)
Tax return of capital (0.02)
- ----------------------------------------------------------------------------------------------------------
Total Distributions (0.81) (0.69) (0.69) (0.74) (0.80)
- ----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.86 $ 10.33 $ 11.36 $ 11.07 $ 10.73
- ----------------------------------------------------------------------------------------------------------
Total Return (excludes sales charges) 13.55% (3.01)% 9.05% 10.34% 13.77%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000) $136,103 $ 148,168 $132,738 $ 73,660 $ 42,616
Ratio of expenses to average net assets 0.77% 0.76% 0.75% 0.77% 0.78%
Ratio of net investment income to
average net assets 6.81% 6.38% 5.92% 6.82% 7.68%
Ratio of expenses to average net
assets* 0.79% 0.96% 0.76%
Ratio of net investment income to
average net assets* 6.80% 6.18% 5.92%
Portfolio turnover 59.14% 131.63% 50.18% 11.19% 20.70%
</TABLE>
- ---------------
<TABLE>
<C> <S>
* During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the
ratios would have been as indicated.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
148
<PAGE> 154
THE VICTORY PORTFOLIOS Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FUND FOR INCOME
-----------------------------------------------------------------------------
PERIOD FROM
YEAR ENDED FEBRUARY 1, 1994 YEAR ENDED JANUARY 31,
OCTOBER 31, TO OCTOBER 31, ----------------------------------------
1995(d) 1994(c) 1994(c) 1993(c) 1992(c) 1991(c)
----------- ------------------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.43 $ 10.14 $ 10.57 $ 10.55 $ 10.19 $ 9.90
- -------------------------------------------------------------------------------------------------------------------------
Investment Activities
Net investment income 0.73 0.52 0.80 0.80 0.85 0.91
Net realized and unrealized gains
(losses) on investments 0.43 (0.71) (0.41) 0.06 0.36 0.29
- -------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 1.16 (0.19) 0.39 0.86 1.21 1.20
- -------------------------------------------------------------------------------------------------------------------------
Distributions
Net investment income (0.59) (0.51) (0.80) (0.80) (0.85) (0.91)
In excess of net investment income (0.07) (0.01)
Net realized gains (0.02) (0.04)
- -------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.66) (0.52) (0.82) (0.84) (0.85) (0.91)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.93 $ 9.43 $ 10.14 $ 10.57 $ 10.55 $ 10.19
- ---------------------------------------------------------------------------------------------------------------------
Total Return (excludes sales charges) 12.75% (1.99)%(a) 3.75% 8.45% 12.34% 12.75%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000) $22,756 $ 29,358 $46,632 $55,075 $58,055 $44,097
Ratio of expenses to average net assets 1.12% 1.12%(b) 1.13% 1.12% 0.92% 0.50%
Ratio of net investment income to average
net assets 7.62% 7.21%(b) 7.65% 7.56% 8.18% 9.15%
Ratio of expenses to average net assets* 1.58% 1.26%(b)
Ratio of net investment income to average
net assets* 7.16% 7.07%(b)
Portfolio turnover 35.20% 18.00% 47.00% 23.00% 24.00% 5.00%
</TABLE>
- ---------------
<TABLE>
<C> <S>
* During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the
ratios would have been as indicated.
(a) Not annualized.
(b) Annualized.
(c) Audited by other auditors.
(d) Effective June 5, 1995, the Victory Fund For Income Portfolio became the Fund For Income.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
149
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- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NATIONAL MUNICIPAL BOND FUND
-----------------------------------------------------------------------------------
CLASS B CLASS A
---------------------------------- -------------------------
SIX MONTHS SIX MONTHS
ENDED SEPTEMBER 26, 1994 ENDED YEAR ENDED FEBRUARY 3, 1994
OCTOBER 31, TO APRIL 30, OCTOBER 31, APRIL 30, TO APRIL 30,
1995(e) 1995(a)(d) 1995(e) 1995(d) 1994(a)(d)
----------- -------------------- ----------- ----------- ------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.59 $ 9.53 $ 9.59 $ 9.64 $10.00
- ---------------------------------------------------------------------------------------------------------------------------
Investment Activities
Net investment income 0.20 0.28 0.24 0.44 0.08
Net realized and unrealized gains
(losses) from investments 0.47 0.05 0.46 (0.05) (0.36)
- ---------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.67 0.33 0.70 0.39 (0.28)
- ---------------------------------------------------------------------------------------------------------------------------
Distributions
Net investment income (0.19) (0.27) (0.23) (0.44) (0.08)
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.07 $ 9.59 $ 10.06 $ 9.59 $ 9.64
- ---------------------------------------------------------------------------------------------------------------------
Total Return (excludes sales charges) 6.99%(b) 3.54%(b) 7.39%(b) 4.21% (2.82)%(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000) $ 456 $ 147 $11,964 $ 5,118 $ 494
Ratio of expenses to average net
assets 0.96%(c) (0.05)%(c) 0.02%(c) 0.20% 0.65%(c)
Ratio of net investment income (loss)
to average net assets 4.15%(c) 4.35%(c) 5.11%(c) 5.01% 3.15%(c)
Ratio of expenses to average net
assets* 3.67%(c) 2.63%(c) 2.57%(c) 3.95% 26.10%(c)
Ratio of net investment loss to
average net assets* 1.44%(c) 1.67%(c) 2.56%(c) 1.26% (22.30%(c))
Portfolio turnover 72.46% 52.00% 72.46% 52.00% 13.00%
</TABLE>
- ---------------
<TABLE>
<C> <S>
* During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the
ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Audited by other auditors.
(e) Effective June 5, 1995, the Victory National Municipal Bond Portfolio became the National Municipal Bond Fund.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
150
<PAGE> 156
THE VICTORY PORTFOLIOS Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NEW YORK TAX-FREE FUND
----------------------------------------------------------------------------------------------------
CLASS B CLASS A
------------------------------ ---------------------------
PERIOD FROM PERIOD FROM PERIOD FROM
SEPTEMBER 26, JANUARY 1, YEARS ENDED FEBRUARY 11,
YEAR ENDED 1994 TO YEAR ENDED 1994 TO DECEMBER 31, 1991 TO
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, ------------------ DECEMBER 31,
1995(e) 1994(d) 1995(e) 1994(d) 1993(d) 1992(d) 1991(a)(d)
----------- --------------- ----------- ------------ ------- ------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 12.39 $ 12.62 $ 12.39 $ 13.54 $12.76 $12.50 $ 12.00
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities
Net investment income 0.85 0.07 0.87 0.57 0.70 0.74 0.64
Net realized and
unrealized gains
(losses) from
investments 0.36 (0.23) 0.42 (1.15) 0.84 0.26 0.50
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment
Activities 1.21 (0.16) 1.29 (0.58) 1.54 1.00 1.14
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions
Net investment income (0.74) (0.07) (0.83) (0.57) (0.70 ) (0.74 ) (0.64)
Net realized gains (0.06 )
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.74) (0.07) (0.83) (0.57) (0.76 ) (0.74 ) (0.64)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END
OF PERIOD $ 12.86 $ 12.39 $ 12.85 $ 12.39 $13.54 $12.76 $ 12.50
- ---------------------------------------------------------------------------------------------------------------------
Total Return (excludes
sales charges) 10.18% (1.25)%(b) 10.82% (4.31)%(b) 12.34 % 8.26 % 11.06%(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period
(000) $ 1,953 $ (f) $15,374 $ 17,840 $28,530 $26,034 $20,995
Ratio of expenses to
average net assets 2.02% 0.52%(c) 1.16% 0.91%(c) 0.87 % 0.66 % 0.45%(c)
Ratio of net investment
income (loss) to average
net assets 5.94% 5.94%(c) 5.50% 5.33%(c) 5.28 % 5.89 % 6.28%(c)
Ratio of expenses to
average net assets* 2.25% 0.86%(c) 1.96% 1.25%(c) 0.96 % 0.96 % 0.95%(c)
Ratio of net investment
loss to average net
assets* 5.71% 5.60%(c) 4.70% 4.99%(c) 5.19 % 5.59 % 5.78%(c)
Portfolio turnover 18.33% 18.00% 18.33% 18.00% 12.00 % 14.00 % 61.00%
</TABLE>
- ---------------
<TABLE>
<C> <S>
* During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the
ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Audited by other auditors.
(e) Effective June 5, 1995, the Victory New York Tax-Free Portfolio became the New York Tax-Free Fund.
(f) Amount is less than $1,000.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
151
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THE VICTORY PORTFOLIOS Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
OHIO MUNICIPAL BOND FUND
-----------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------
1995 1994 1993 1992 1991
---------- ------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.33 $ 11.52 $ 10.52 $ 10.37 $10.06
- ----------------------------------------------------------------------------------------------------------
Investment Activities
Net investment income 0.52 0.49 0.52 0.60 0.65
Net realized and unrealized
gains(losses) from investments 1.00 (0.94) 1.00 0.15 0.31
- ----------------------------------------------------------------------------------------------------------
Total from Investment Activities 1.52 (0.45) 1.52 0.75 0.96
- ----------------------------------------------------------------------------------------------------------
Distributions
Net investment income (0.53) (0.49) (0.52) (0.60) (0.65)
Net realized gains (0.25)
- ----------------------------------------------------------------------------------------------------------
Total Distributions (0.53) (0.74) (0.52) (0.60) (0.65)
- ----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.32 $ 10.33 $ 11.52 $ 10.52 $10.37
- ----------------------------------------------------------------------------------------------------------
Total Return (excludes sales charges) 15.03% (4.08)% 14.75% 7.34% 9.87%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000) $ 60,031 $57,704 $ 50,676 $ 17,676 $8,042
Ratio of expenses to average net assets 0.66% 0.51% 0.42% 0.09% 0.01%
Ratio of net investment income to
average net assets 4.78% 4.58% 4.77% 5.76% 6.39%
Ratio of expenses to average net
assets* 0.94% 1.09% 0.86% 0.84%
Ratio of net investment income to
average net assets* 4.49% 4.01% 4.33% 5.01%
Portfolio turnover 124.79% 52.59% 150.76% 47.28% 15.06%
</TABLE>
- ---------------
<TABLE>
<C> <S>
* During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the
ratios would have been as indicated.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
152
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THE VICTORY PORTFOLIOS Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BALANCED FUND STOCK INDEX FUND
---------------------------------- ---------------------------------
YEAR ENDED DECEMBER 10, 1993 YEAR ENDED DECEMBER 3, 1993
OCTOBER 31, TO OCTOBER 31, OCTOBER 31, TO OCTOBER 31,
1995 1994(a) 1995 1994(a)
----------- -------------------- ----------- -------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.62 $ 10.00 $ 10.18 $ 10.00
- -------------------------------------------------------------------------------------------------------------------------
Investment Activities
Net investment income 0.41 0.33 0.27 0.20
Net realized and unrealized gains (losses)
from investments and foreign currencies 1.40 (0.39) 2.31 0.16
- -------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 1.81 (0.06) 2.58 0.36
- -------------------------------------------------------------------------------------------------------------------------
Distributions
Net investment income (0.42) (0.32) (0.26) (0.18)
Net realized gains
- -------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.42) (0.32) (0.26) (0.18)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.01 $ 9.62 $ 12.50 $ 10.18
- ---------------------------------------------------------------------------------------------------------------------
Total Return (excludes sales charges) 19.24% (0.57)%(b) 25.72% 3.66%(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000) $ 201,073 $127,285 $ 160,822 $89,686
Ratio of expenses to average net assets 0.98% 0.87%(c) 0.55% 0.58%(c)
Ratio of net investment income to average net
assets 4.05% 3.97%(c) 2.53% 2.35%(c)
Ratio of expenses to average net assets* 1.36% 1.49%(c) 0.87% 1.10%(c)
Ratio of net investment income to average net
assets* 3.67% 3.35%(c) 2.21% 1.82%(c)
Portfolio turnover 69.22% 118.49% 11.91% 1.44%
</TABLE>
- ---------------
<TABLE>
<C> <S>
* During the period, certain fees were voluntarily reduced and/or reimbursed. If such voluntary fee reductions
and/or reimbursements had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
153
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THE VICTORY PORTFOLIOS Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE FUND
DIVERSIFIED STOCK FUND ------------------------------
--------------------------------------------------------- DECEMBER 3,
YEAR ENDED OCTOBER 31, YEAR ENDED 1993
--------------------------------------------------------- OCTOBER 31, TO OCTOBER 31,
1995 1994 1993 1992 1991 1995(d) 1994(a)
-------- --------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 12.68 $ 13.39 $ 12.16 $ 11.44 $ 9.25 $ 10.13 $ 10.00
- -------------------------------------------------------------------------------------------------------------------------
Investment Activities
Net investment income 0.27 0.25 0.18 0.19 0.23 0.27 0.21
Net realized and
unrealized gains from
investments 2.33 0.64 1.50 1.11 2.20 1.92 0.11
- -------------------------------------------------------------------------------------------------------------------------
Total from Investment
Activities 2.60 0.89 1.68 1.30 2.43 2.19 0.32
- -------------------------------------------------------------------------------------------------------------------------
Distributions
Net investment income (0.28 ) (0.23 ) (0.21 ) (0.19 ) (0.24 ) (0.28) (0.19)
Net realized gains (1.38 ) (1.37 ) (0.24 ) (0.39 ) (0.17)
- -------------------------------------------------------------------------------------------------------------------------
Total Distributions (1.66 ) (1.60 ) (0.45 ) (0.58 ) (0.24 ) (0.45) (0.19)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END
OF PERIOD $ 13.62 $ 12.68 $ 13.39 $ 12.16 $ 11.44 $ 11.87 $ 10.13
- ---------------------------------------------------------------------------------------------------------------------
Total Return (excludes
sales charges) 23.54 % 7.39 % 14.04 % 11.57 % 27.50 % 22.28% 3.27%(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period
(000) $409,549 $263,227 $257,405 $227,839 $177,472 $ 295,871 $ 188,184
Ratio of expenses to
average net assets 0.92 % 0.89 % 0.89 % 0.91 % 0.91 % 0.99% 0.92%(c)
Ratio of net investment
income to average net
assets 2.11 % 2.06 % 1.45 % 1.63 % 2.06 % 2.55% 2.32%(c)
Ratio of expenses to
average net assets* 0.95 % 1.10 % 0.90 % 1.30% 1.48%(c)
Ratio of net investment
income to average net
assets* 2.07 % 1.86 % 1.43 % 2.24% 1.76%(c)
Portfolio turnover 75.05 % 103.62 % 86.32 % 74.83 % 50.78 % 23.03% 39.05%
</TABLE>
- ---------------
<TABLE>
<C> <S>
* During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the
ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Effective June 5, 1995, the Victory Equity Income Portfolio merged into the Value Fund. Financial highlights for
the periods prior to June 5, 1995 represent the Value Fund.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
154
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THE VICTORY PORTFOLIOS Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SPECIAL GROWTH FUND
GROWTH FUND SPECIAL VALUE FUND ------------------------------------
---------------------------- ---------------------------- SIX JANUARY 11,
YEAR DECEMBER 3, YEAR DECEMBER 3, MONTHS YEAR 1994
ENDED 1993 ENDED 1993 ENDED ENDED TO APRIL 30,
OCTOBER 31, TO OCTOBER 31, OCTOBER 31, TO OCTOBER 31, OCTOBER 31, APRIL 30, 1994
1995(f) 1994(a)(g) 1995 1994(a) 1995 1995(d)(e) (a)(d)(e)
----------- -------------- ----------- -------------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 10.23 $ 10.00 $ 10.49 $ 10.00 $ 10.54 $ 9.82 $ 10.00
- -------------------------------------------------------------------------------------------------------------------------
Investment Activities
Net investment
income (loss) 0.11 0.10 0.15 0.11 0.02 (0.01)
Net realized and
unrealized gains
(losses) from
investments 1.97 0.22 1.71 0.48 1.27 0.72 (0.17)
- -------------------------------------------------------------------------------------------------------------------------
Total from
Investment
Activities 2.08 0.32 1.86 0.59 1.27 0.74 (0.18)
- -------------------------------------------------------------------------------------------------------------------------
Distributions
Net investment
income (0.11) (0.09) (0.15) (0.10) (0.02)
Net realized gains (0.05) (0.05)
- -------------------------------------------------------------------------------------------------------------------------
Total
Distributions (0.16) (0.09) (0.20) (0.10) (0.02)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END
OF PERIOD $ 12.15 $ 10.23 $ 12.15 $ 10.49 $ 11.81 $ 10.54 $ 9.82
- ---------------------------------------------------------------------------------------------------------------------
Total Return
(excludes sales
charges) 20.54 % 3.22%(b) 18.01 % 5.92%(b) 12.05%(b) 7.51% (1.80)%(b)
RATIOS/SUPPLEMENTAL
DATA:
Net Assets, End of
Period (000) $108,253 $ 66,921 $194,700 $118,600 $54,335 $20,796 $30,867
Ratio of expenses to
average net assets 1.07 % 0.94%(c) 1.04 % 1.00%(c) 0.65%(c) 1.04% 0.82%(c)
Ratio of net
investment income
to average net
assets 1.00 % 1.10%(c) 1.35 % 1.23%(c) (0.13)%(c) 0.17% (0.27)%(c)
Ratio of expenses to
average net assets* 1.42 % 1.51%(c) 1.30 % 1.49%(c) 1.40%(c) 1.35% 1.47%(c)
Ratio of net
investment income
(loss) to average
net assets* 0.65 % 0.52%(c) 1.09 % 0.74%(c) (0.88)%(c) (0.14)% (0.92)%
Portfolio turnover 107.13 % 28.09% 38.57 % 17.90% 54.37% 102.00% 61.00%
</TABLE>
- ---------------
<TABLE>
<C> <S>
* During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the
ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Audited by other auditors.
(e) Effective June 5, 1995, the Victory Aggressive Growth Portfolio merged into the Special Growth Fund. Financial
highlights for the periods prior to June 5, 1995 represent the Aggressive Growth Portfolio.
(f) Effective June 5, 1995, the Victory Equity Portfolio merged into the Growth Fund. Financial highlights for the
period prior to June 5, 1995 represent the Growth Fund.
(g) Effective March 17, 1994, the Society Earnings Momentum Fund merged into the Growth Fund. Financial highlights for
the period prior to March 17, 1994 represent the Growth Fund.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
155
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THE VICTORY PORTFOLIOS Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
OHIO REGIONAL STOCK FUND
-----------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------
1995 1994 1993 1992 1991
---------- ------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.56 $ 14.69 $ 12.12 $ 11.15 $ 6.75
- ----------------------------------------------------------------------------------------------------------
Investment Activities
Net investment income 0.17 0.18 0.16 0.20 0.21
Net realized and unrealized gains
from investments 2.13 0.39 2.63 1.07 4.39
- ----------------------------------------------------------------------------------------------------------
Total from Investment Activities 2.30 0.57 2.79 1.27 4.60
- ----------------------------------------------------------------------------------------------------------
Distributions
Net investment income (0.18) (0.17) (0.18) (0.21) (0.20)
Net realized gains (0.74) (0.53) (0.04) (0.09)
- ----------------------------------------------------------------------------------------------------------
Total Distributions (0.92) (0.70) (0.22) (0.30) (0.20)
- ----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 15.94 $ 14.56 $ 14.69 $ 12.12 $ 11.15
- ----------------------------------------------------------------------------------------------------------
Total Return (excludes sales charges) 16.93% 3.96% 23.16% 11.50% 68.68%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000) $ 39,048 $33,965 $ 34,926 $ 36,115 $ 27,092
Ratio of expenses to average net assets 1.20% 1.04% 1.04% 1.04% 1.08%
Ratio of net investment income to
average net assets 1.13% 1.27% 1.17% 1.73% 2.16%
Ratio of expenses to average net
assets* 1.24% 1.27% 1.06%
Ratio of net investment income to
average net assets* 1.09% 1.04% 1.15%
Portfolio turnover 11.44% 14.38% 7.25% 7.56% 14.59%
</TABLE>
- ---------------
<TABLE>
<C> <S>
* During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the
ratios would have been as indicated.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
156
<PAGE> 162
THE VICTORY PORTFOLIOS Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL GROWTH FUND
-----------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------
1995(A) 1994 1993 1992 1991
---------- ------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.32 $ 11.93 $ 8.93 $ 9.20 $ 9.46
- ----------------------------------------------------------------------------------------------------------
Investment Activities
Net investment income (loss) 0.05 (0.01) (0.03) (0.02) 0.51
Net realized and unrealized gains
(losses) from investments and
foreign currencies (0.42) 1.40 3.03 (0.17) (0.25)
- ----------------------------------------------------------------------------------------------------------
Total from Investment Activities (0.37) 1.39 3.00 (0.19) 0.26
- ----------------------------------------------------------------------------------------------------------
Distributions
Net investment income (0.01) (0.52)
Net realized gains (0.55) (0.07)
Tax return of capital (0.07)
- ----------------------------------------------------------------------------------------------------------
Total Distributions (0.62) (0.08) (0.52)
- ----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.33 $ 13.32 $ 11.93 $ 8.93 $ 9.20
- ----------------------------------------------------------------------------------------------------------
Total Return (excludes sales charges) (2.50)% 11.65% 33.59% (2.08)% 2.93%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000) $106,477 $81,307 $ 30,629 $ 11,091 $5,682
Ratio of expenses to average net assets 1.53% 1.48% 1.46% 1.56% 1.72%
Ratio of net investment income (loss)
to average net assets 0.75% (0.51)% (0.74)% (0.20)% 5.97%
Ratio of expenses to average net
assets* 1.65% 1.83% 1.63% 1.72%
Ratio of net investment loss to average
net assets* 0.63% (0.86)% (0.91)% (0.35)%
Portfolio turnover 68.09% 50.66% 45.43% 91.92% 102.53%
</TABLE>
- ---------------
<TABLE>
<C> <S>
* During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the
ratios would have been as indicated.
(a) Effective June 5, 1995, the Victory Foreign Markets Portfolio merged into the International Growth Fund. Financial
highlights for the periods prior to June 5, 1995 represent the International Growth Portfolio.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
157
<PAGE> 163
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Trustees of
The Victory Portfolios
We have audited the accompanying statements of assets and liabilities of The
Victory Portfolios (comprising, respectively, the U.S. Government Obligations
Fund, Prime Obligations Fund, Financial Reserves Fund (formerly the Financial
Reserves Portfolio), Institutional Money Market Fund (formerly the Institutional
Money Market Portfolio), Tax-Free Money Market Fund, Ohio Municipal Money Market
Fund (formerly the Ohio Municipal Money Market Portfolio), Limited Term Income
Fund, Intermediate Income Fund, Investment Quality Bond Fund, Government Bond
Fund (formerly the Government Bond Portfolio), Government Mortgage Fund, Fund
for Income (formerly the Fund for Income Portfolio), National Municipal Bond
Fund (formerly the National Municipal Bond Portfolio), New York Tax-Free Fund
(formerly the New York Tax-Free Portfolio), Ohio Municipal Bond Fund, Balanced
Fund, Stock Index Fund, Diversified Stock Fund, Value Fund, Growth Fund, Special
Value Fund, Special Growth Fund, Ohio Regional Stock Fund, and International
Growth Fund), including the schedules of investments, as of October 31, 1995,
and the related statements of operations and changes in net assets, and the
financial highlights for each period presented except as noted in the next
paragraph. These financial statements and financial highlights are the
responsibility of The Victory Portfolios' management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
The Financial Reserves Fund's statement of changes in net assets for the
year ended October 31, 1994 and the financial highlights for each of the four
years in the period ended October 31, 1994 were audited by other auditors, whose
reports dated December 2, 1994 and December 17, 1993, respectively, expressed
unqualified opinions on those financial statements and financial highlights. The
Institutional Money Market Fund's statement of changes in net assets for each of
the two years in the period ended April 30, 1995 and the financial highlights
for each of the five years in the period ended April 30, 1995 were audited by
other auditors, whose report dated June 20, 1995 expressed an unqualified
opinion on those financial statements and financial highlights. The Ohio
Municipal Money Market Fund's statement of changes in net assets for the year
ended August 31, 1994 and the financial highlights for each of the four years in
the period ended August 31, 1994 were audited by other auditors, whose reports
dated October 7, 1994 and October 13, 1993, respectively, expressed unqualified
opinions on those financial statements and financial highlights. The Government
Bond Fund's statements of changes in net assets and financial highlights for the
periods ended April 30, 1995 and 1994 were audited by other auditors, whose
report dated June 20, 1995 expressed an unqualified opinion on those financial
statements and financial highlights. The Fund for Income's statements of changes
in net assets for the period ended October 31, 1994 and the financial highlights
for the period ended October 31, 1994 and for each of the three years in the
period ended January 31, 1994 were audited by other auditors, whose reports
dated December 2, 1994 and February 28, 1994, respectively, expressed
unqualified opinions on those financial statements and financial highlights. The
National Municipal Bond Fund's statements of changes in net assets and financial
highlights for the periods ended April 30, 1995 and 1994 were audited by other
auditors, whose report dated June 20, 1995 expressed an unqualified opinion on
those financial statements and financial highlights. The New York Tax-Free
Fund's statement of changes in net assets for the periods ended October 31, 1994
and the financial highlights for the period ended October 31, 1994, two years in
the period ended December 31, 1993 and the period ended December 31, 1991 were
audited by other auditors, whose reports dated December 2, 1994 and January 13,
1994, respectively, expressed unqualified opinions on those financial statements
and financial highlights. The Special Growth Fund's statements of changes in net
assets and financial highlights for the year ended April 30, 1995 and period
ended April 30, 1994 were audited by other auditors, whose report dated June 20,
1995 expressed an unqualified opinion on those financial statements and
financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation and verification by examination
of securities owned as of October 31, 1995, by correspondence with the
custodians and brokers or other auditing procedures where confirmations from
brokers were not received. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above, except as noted in the second paragraph present fairly, in all
material respects, the financial position of each of the respective funds
comprising The Victory Portfolios as of October 31, 1995, and the results of
their operations, the changes in their net assets and the financial highlights
for the periods then ended in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Columbus, Ohio
December 19, 1995
158
<PAGE> 164
THE VICTORY PORTFOLIOS Special Shareholder Meeting
- --------------------------------------------------------------------------------
On December 1, 1995, a special meeting of the shareholders of The Victory
Portfolios was held to consider various proposals.
The shareholders approved each of the following proposals:
With respect to all of the Funds:
1. To convert The Victory Portfolios to a Delaware business trust.
2. To designate KeyCorp Mutual Fund Advisers, Inc. as investment adviser
pursuant to a new investment advisory agreement between each of the
Funds and KeyCorp Mutual Fund Advisers, Inc.
3(a). To elect the following Trustees: Robert G. Brown, Edward P. Campbell,
Dr. Harry Gazelle, Dr. Thomas F. Morrissey, Stanley I. Landgraf, Leigh
A. Wilson and Dr. H. Patrick Swygert.
3(b). To select Coopers & Lybrand L.L.P. as independent accountants.
With respect to all of the Funds other than the Fund for Income and Special
Growth Fund:
4. To designate Society Asset Management, Inc. as sub-investment adviser
pursuant to a new sub-investment advisory agreement between Society
Asset Management, Inc. and KeyCorp Mutual Fund Advisors, Inc.
With respect to the Fund for Income:
5. To designate First Albany Asset Management Corporation as
sub-investment adviser pursuant to a new sub-investment advisory
agreement between First Albany Asset Management Corporation and
KeyCorp Mutual Fund Advisers, Inc.
With respect to the Special Growth Fund:
6. To designate T. Rowe Price Associates, Inc. as sub-investment adviser
pursuant to a new sub-investment advisory agreement between T. Rowe
Price Associates, Inc. and KeyCorp Mutual Fund Advisers, Inc.
With respect to the U.S. Government Obligations Fund, Prime Obligations Fund and
Tax-Free Money Market Fund:
7. To increase the maximum remaining maturity for each security purchased
to 397 days.
With respect to all of the Funds other than the Financial Reserves Fund,
Institutional Money Market Fund, Ohio Municipal Money Market Fund, Government
Bond Fund, Fund for Income, National Municipal Bond Fund, New York Tax-Free Bond
Fund, Ohio Municipal Bond Fund and Value Fund:
8. To restate each Fund's investment objective; and
With respect to all of the Funds other than the Financial Reserves Fund,
Institutional Money Market Fund, Ohio Municipal Money Market Fund, Government
Bond Fund, Fund for Income, National Municipal Bond Fund, New York Tax-Free Bond
Fund and Value Fund:
9. To amend certain fundamental investment restrictions.
159
<PAGE> 165
Bulk Rate
U.S. Postage
PAID
Cleveland,OH
Permit No. 469
VICTORY FUNDS
1-800-539-FUND
AR/VP-001 12/95
<PAGE> 1
[ARTICLE] 6
[CIK] 0008114852
[NAME] THE VICTORY PORTFOLIOS
[SERIES]
[NUMBER] 1
[NAME] OHIO MUNICIPAL MONEY MARKET FUND
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 2-MOS
[FISCAL-YEAR-END] OCT-31-1995
[PERIOD-START] SEP-01-1995
[PERIOD-END] OCT-31-1995
[INVESTMENTS-AT-COST] 508,278
[INVESTMENTS-AT-VALUE] 508,278
[RECEIVABLES] 4,005
[ASSETS-OTHER] 93
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 512,376
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 1,962
[TOTAL-LIABILITIES] 1,962
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 510,395
[SHARES-COMMON-STOCK] 510,395
[SHARES-COMMON-PRIOR] 502,434
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 19
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 510,414
[DIVIDEND-INCOME] 43
[INTEREST-INCOME] 3,369
[OTHER-INCOME] 0
[EXPENSES-NET] 553
[NET-INVESTMENT-INCOME] 2,859
[REALIZED-GAINS-CURRENT] 0
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 2,859
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 2,859
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 363,385
[NUMBER-OF-SHARES-REDEEMED] 355,896
[SHARES-REINVESTED] 472
[NET-CHANGE-IN-ASSETS] 7,961
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 19
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 432
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 798
[AVERAGE-NET-ASSETS] 517,157
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] 0.01
[PER-SHARE-GAIN-APPREC] 0.00
[PER-SHARE-DIVIDEND] 0.01
[PER-SHARE-DISTRIBUTIONS] 0.00
[RETURNS-OF-CAPITAL] 0.00
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] 0.64%
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
