VICTORY PORTFOLIOS, 485BPOS, 1996-01-31

VICTORY PORTFOLIOS
485BPOS, 1996-01-31

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As filed with the Securities and Exchange Commission on January 31, 1996.
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. 27 [X]
and
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 28 [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)

Copy to:

George O. Martinez Carl Frischling, Esq.
Concord Holding Corporation Kramer, Levin, Naftalis,
3435 Stelzer Road Nessen, Kamin & Frankel
Columbus, Ohio 43219 919 Third Avenue
New York, New York 10022
- --------------------------------------------------------------------------------

(Name and Address of Agent for Service)
It is proposed that this filing will
become effective:

|_| Immediately upon filing pursuant to |X| on February 1, 1996
paragraph (b) pursuant to 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.

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 for its April 30, 1995 fiscal year was filed on June
30, 1995, for its August 31, 1995 fiscal year was filed on October 25, 1995, and
for its October 31, 1995 fiscal year was filed on December 28, 1995, in
accordance with Rule 24f-2.

<PAGE>

The Victory Portfolios

THE VICTORY PORTFOLIOS
CROSS-REFERENCE SHEET

Form N-1A Part A Item Prospectus Caption

i. Cover Page Cover Page

ii. Synopsis Summary of Fund Expenses

iii. Condensed Financial Information Financial Highlights

iv. General Description of Registrant Investment Objective; Investment
Policies and Risk Factors;
Limiting Investment Risks;
Additional Information; Fund
Organization and Fees; Additional

v. Management of the Fund Fund Organization and Fees

v. Management's Discussion of Fund Inapplicable
Performance

vi. Capital Stock and Other Securities How to Invest, Exchange and Redeem;
Dividends, Distributions and Taxes;
Fund Organization and Fees;
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

<PAGE>

The Victory Portfolios

Cross Reference Sheet
The Victory Portfolios - Statement of
Additional Information

Form N-1A Part B Item
---------------------

x. Cover Page Cover Page

xi. Table of Contents Table of Contents

xii. General Information and History Additional Information

xiii. Investment Objectives and Policies Investment Objective and Policies
Investment Limitations and
Restrictions

xiv. Management of the Fund Trustees and Officers

xv. Control Persons and Principal Additional Information -
Holders of Securities

xvi. Investment Advisory and Other Advisory and Other Contracts
Services

xvii. Brokerage Allocation and Other Advisory and Other Contracts
Practices

xviii. Capital Stock and Other Securities Valuation of Portfolio Securities;
Additional Purchase Exchange and
Redemption Information; Affecting
Additional Information

xix. Purchase, Redemption and Pricing Valuation of Portfolio Securities;
of Securities being Offered Additional Purchase Exchange and
Redemption Information; Performance
Additional Information

xx. Tax Status Dividends and Distributions

xxi. Underwriters Advisory and Other Contracts

xxii. Calculation of Performance Data

xxiii. Financial Statements

<PAGE>

The Victory Portfolios

PART A

<PAGE>

THE
VICTORY
PORTFOLIOS

BALANCED FUND

PROSPECTUS For current yield, purchase, and redemption information,
February 1, 1996 call 800-539-FUND or 800-539-3863

THE VICTORY PORTFOLIOS (the "Victory Portfolios") is a registered open-end
management investment company that offers investors a selection of money market,
fixed-income, municipal bond, domestic and international equity portfolios. This
Prospectus relates to the BALANCED FUND (the "Fund"), a diversified portfolio.
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 (the
"Sub-Adviser" or "Society"). 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 income and long-term growth of capital. The Fund
pursues this objective by investing primarily in common stocks and fixed income
securities.

The Fund offers two classes of shares: (1) Class A shares, which are offered at
net asset value plus the applicable sales charge (maximum of 4.75% of public
offering price) and (2) Class B shares, which are offered at net asset value
with a maximum contingent deferred sales charge ("CDSC") of 5.0% imposed on
certain redemptions. At the end of the sixth year after purchase, the CDSC will
no longer apply to redemptions. Class B shares have higher ongoing expenses than
Class A shares, but automatically convert to Class A shares eight years after
purchase.

Please read this Prospectus before investing. It is designed to provide you 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
February 1, 1996) for the Fund and an audited annual report for the Fund's
fiscal year 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:

O NOT INSURED BY THE FDIC;

O NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR GUARANTEED BY, ANY KEYCORP
BANK, ANY OF ITS AFFILIATES, OR ANY OTHER BANK;

O 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.

<PAGE>

TABLE OF CONTENTS PAGE
----

Fund Expenses 3
Financial Highlights 5
Investment Objective 6
Investment Policies and Risk Factors 6
How to Invest, Exchange and Redeem 12
Dividends, Distributions and Taxes 23
Performance 25
Fund Organization and Fees 26
Additional Information 29

- 2 -

<PAGE>

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. You should consider this expense information along with
other important information in this Prospectus, including the Fund's investment
objectives, policies and risk factors.

SHAREHOLDER TRANSACTION EXPENSES(1)
CLASS A CLASS B
------- -------

Maximum Sales Charge Imposed on Purchases
(as a percentage of the offering price) 4.75% none
Maximum Sales Charge Imposed on Reinvested
Dividends none none
Deferred Sales Charge none 5% in the first
year, declining
to 1% in the
sixth year and

eliminated
thereafter
Redemption Fees none none
Exchange Fee none none

ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)

CLASS A CLASS B
------- -------
Management Fees(2) .60% .60%

Administration Fees .15% .15%

Rule 12b-1 Distribution Fees .00% .75%

Other Expenses(3) .50% .64%
----- -----
Total Fund Operating Expenses(2) (3) 1.25% 2.14%
===== =====

(1) Investors may be charged a fee if they effect transactions in Fund
shares through a broker or agent, including affiliated banks and
non-bank affiliates of Key Advisers and KeyCorp. (See "How to Invest,
Exchange and Redeem.")

(2) The Adviser has agreed to reduce its investment advisory fees for the
indefinite future. Absent the voluntary reduction of investment
advisory fees, "Management Fees" as a percentage of average daily net
assets would be 1.00%, and "Total Operating Expenses" as a percentage
of average daily net assets for Class A and Class B shares would be
1.65% and 2.54%, respectively.

(3) These amounts include an estimate of the shareholder servicing fees the
Fund expects to pay (see "Fund Organization and Fees - Shareholder
Servicing").

EXAMPLE: You would pay the following expenses on a $1,000 investment, assuming
(1) a 5% annual return and (2) full redemption at the end of each time period.

- 3 -

<PAGE>

1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------

Balanced Fund - Class A Shares $60 $85 $113 $191

Balanced Fund - Class B Shares $72 $97 $135 $224

The purpose of the table above is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear 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 fiscal year 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 PAST OR FUTURE EXPENSES. ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.

- 4 -

<PAGE>

FINANCIAL HIGHLIGHTS

The table below sets forth certain financial information with respect to the
financial highlights for the Fund for the periods indicated. The information
below has been derived from financial statements audited by Coopers & Lybrand
L.L.P., independent accountants for the Victory Portfolios, whose report
thereon, together with the financial statements of the Fund, is incorporated by
reference into the Statement of Additional Information. No Class B shares were
publicly issued prior to February 1, 1996, and therefore no information on Class
B shares is reflected in the table below. The information set forth below is for
a Class A share outstanding for each period indicated.

THE VICTORY BALANCED FUND
CLASS A SHARES

YEAR ENDED
OCTOBER 31, DECEMBER 10, 1993 TO
1995 OCTOBER 31, 1994(a)
----------- --------------------

NET ASSET VALUE, BEGINNING OF $ 9.62 $ 10.00
PERIOD

Income from Investment Activities
Net investment income 0.41 0.33
Net realized and unrealized
gains (losses) on investments 1.40 (0.39)

Total from Investment
Activities 1.81 (0.06)

Distributions
Net investment income (0.42) (0.32)
Net realized gains -- --
Total Distributions (0.42) (0.32)

NET ASSET VALUE, END OF PERIOD $ 11.01 $ 9.62
======== ==========

Total Return (Excludes Sales
Charge) 19.24% (0.57%)(b)

RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000) $201,073 $127,285

Ratio of expenses to average net
assets 0.98% 0.87%(c)

Ratio of net investment
income to average net assets 4.05% 3.97%(c)

Ratio of expenses to average net
assets(d) 1.36% 1.49%(c)

Ratio of net investment
income to average net assets(d) 3.67% 3.35%(c)

Portfolio turnover 69.22% 118.49%

(a) Period from commencement of operations.

(b) Not Annualized

(d) During the period the investment advisory, administrator and/or
shareholder service fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as
indicated.

- 5 -

<PAGE>

INVESTMENT OBJECTIVE

The Fund seeks to provide income and long-term growth of capital. The investment
objective of the Fund is fundamental and may not be changed without a vote of
the holders of a majority of its outstanding voting securities (as defined in
the Statement of Additional Information). There can be no assurance that the
Fund will achieve its investment objective.

INVESTMENT POLICIES AND RISK FACTORS

SUMMARY OF PRINCIPAL INVESTMENT POLICIES

The Fund will invest primarily in common stocks and fixed income securities. The
Fund may invest in any type or class of security.

Under normal market conditions, the Fund will invest in common stocks, fixed
income securities and securities convertible into common stock (i.e., warrants,
convertible preferred stock, fixed rate preferred stock, convertible fixed
income securities, options and rights). At least 25% of the value of the Fund's
assets will be invested in fixed income securities, primarily preferred stock of
United States corporations and debt securities, such as bonds, notes and
debentures of United States corporations and bonds and notes issued or
guaranteed by the United States Government or its agencies or instrumentalities.
It is anticipated that between 40% to 70% of the total asset value of the Fund
will be invested in common stocks. The average weighted maturity of the Fund's
investment in fixed income securities is expected to be in the range of seven to
twelve years under normal market conditions, but this range may be altered by
Key Advisers or the Sub-Adviser in response to changes in market conditions.

Investments in equity-based securities (which are both common stocks and those
debt securities and preferred stocks which are convertible into common stocks)
will be based on such factors as the growth and profitability prospects for the
economic sector and markets in which the company operates, and for the products
or services it provides; the financial condition of the company, its ability to
meet its liabilities; and the price of the security, how that price compares to
historical price levels, to current price levels in the general market, prices
of competing companies, projected earnings estimates and earnings growth rate
for the company.

It is anticipated that the Fund will invest in debt securities of United States
corporations which are "Investment Grade." The Fund expects to dispose of any
debt security that is no longer "Investment Grade," as defined below under
"Additional Information Regarding the Fund's Investment." Investments in
preferred stock will be based on considerations by Key Advisers or the
Sub-Adviser of matters such as the issuer's financial strength, including its
historic and current financial condition, its projected earnings, cash flow and
borrowing requirements, as well as the issuer's continuing ability to meet its
obligations.

Changes in the value of portfolio securities will not affect cash income, if
any, derived from these securities but will affect the Fund's net asset value.
The value of a convertible security is dependent upon interest rates and the
value of the equity securities into which the debt instrument is convertible.

ADDITIONAL INFORMATION REGARDING THE FUND'S INVESTMENT

- 6 -

<PAGE>

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 this Prospectus.

O SHORT-TERM OBLIGATIONS. There may be times when, in Key Advisers' or the
SubAdviser's opinion, market conditions warrant that, for temporary defensive
purposes, the Fund may hold more than 20% of its total assets in short-term
obligations. To the extent that the Fund's assets are so invested, they will not
be invested so as to meet its investment objective. The instruments may include
"High-Quality" liquid debt securities such as commercial paper, certificates of
deposit, bankers' acceptances, repurchase agreements which mature in less than
seven days and United States Treasury Bills. Bankers' acceptances are
instruments of United States banks which are drafts or bills of exchange
"accepted" by a bank or trust company as an obligation to pay on maturity. For a
discussion of repurchase agreements, see below.

O INVESTMENT GRADE AND HIGH QUALITY SECURITIES. "Investment Grade" obligations
are those rated at the time of purchase within the four highest rating
categories assigned by a nationally recognized statistical ratings organization
("NRSRO") or, if unrated, are obligations that Key Advisers or the Sub-Adviser
determine to be of comparable quality. The applicable securities ratings are
described in the Appendix to the Statement of Additional Information.
"High-Quality" short-term obligations are those obligations which, at the time
of purchase, (1) possess a rating in one of the two highest ratings categories
from at least one NRSRO (for example, commercial paper rated "A-1" or "A-2" by
Standard & Poor's Corporation or "P-1" or "P-2" by Moody's Investors Service,
Inc. or (2) are unrated by an NRSRO but are determined by Key Advisers or the
Sub-Adviser to present minimal credit risks and to be of comparable quality to
rated instruments eligible for purchase by the Fund under guidelines adopted by
the Trustees.

O FOREIGN SECURITIES. The Fund may invest in equity securities of foreign
issuers, including securities traded in the form of American Depository
Receipts. The Fund will limit its investments in such securities to 20% of its
total assets. The Fund will not hold foreign currency as a result of investment
in foreign securities.

Investments in securities of foreign companies generally involve greater risks
than are present in U.S. investments. Compared to U.S. and Canadian companies,
there is generally less publicly available information about foreign companies
and there may be less governmental regulation and supervision of foreign stock
exchanges, brokers and listed companies. Foreign companies generally are not
subject to uniform accounting, auditing and financial reporting standards,
practices and requirements comparable to those applicable to U.S. companies.
Securities of some foreign companies are less liquid, and their prices more
volatile, than securities of comparable U.S. companies. Settlement of
transactions in some foreign markets may be delayed or may be less frequent than
in the U.S., which could affect the liquidity of the Fund's investment. In
addition, with respect to some foreign countries, there is the possibility of
nationalization, expropriation or confiscatory taxation; limitations on the
removal of securities, property or other assets of the Fund; political or social
instability; increased difficulty in obtaining legal judgments; or diplomatic
developments which could affect U.S. investments in those countries. Key
Advisers or the Sub-Adviser will take such factors into consideration in
managing the Fund's investments.

O FUTURES CONTRACTS. The Fund may also 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.

- 7 -

<PAGE>

a decline in the value of its portfolio securities by entering into futures
contract transactions. When interest rates are expected to fall or market values
are expected to rise, the Fund, through the purchase of such contracts, can
attempt to secure better rates or prices than might later be available in the
market when it effects anticipated purchases.

The acquisition of put and call options on futures contracts will give the Fund
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.

Aggregate initial margin deposits for futures contracts, and premiums paid for
related options, may not exceed 5% of the Fund's total assets (other than in
connection with bona fide hedging purposes), and the value of securities that
are the subject of such futures and options (both for receipt and delivery) may
not exceed one-third of the market value of the Fund's total assets. Futures
transactions will be limited to the extent necessary to maintain the Fund's
qualification as a regulated investment company.

Futures transactions involve brokerage costs and require the Fund to segregate
assets to cover contracts that would require it to purchase securities or
currencies. The Fund may lose the expected benefit of futures transactions if
interest rates, exchange rates or securities prices move 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 the 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 the 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.

O ZERO COUPON BONDS. The Fund is permitted to purchase both zero coupon U.S.
government securities and zero coupon corporate securities ("zero coupon
bonds"). Zero coupon bonds are purchased at a discount from the face amount
because the buyer receives only the right to a fixed payment on a certain date
in the future and does not receive any periodic interest payments. The effect of
owning instruments which do not make current interest payments is that a fixed
yield is earned not only on the original investment but also, in effect, on
accretion during the life of the obligations. This implicit reinvestment of
earnings at the same rate eliminates the risk of being unable to reinvest
distributions at a rate as high as the implicit yields on the zero coupon bond,
but at the same time eliminates the holder's ability to reinvest at higher rates
. For this reason, zero coupon bonds are subject to substantially greater price
fluctuations during periods of changing market interest rates than are
comparable securities which pay interest periodically. The amount of price
fluctuation tends to increase as maturity of the security increases.

O RECEIPTS. In addition to bills, notes and bonds issued by the U.S. Treasury,
the Fund may also purchase separately traded interest and principal component
parts of such obligations that are transferable through the Federal book entry
system, known as Separately Traded Registered Interest and Principal Securities
("STRIPS") and Coupon Under Book Entry Safekeeping ("CUBES"). These instruments
are issued by banks and brokerage firms and are created by depositing Treasury
notes and Treasury bonds into a special account at a custodian bank; the
custodian holds the interest and principal payments for the benefit of the
registered owners of the certificates or receipts. The custodian arranges for
the issuance of the certificates or receipts evidencing ownership and maintains
the register. Receipts include Treasury Receipts ("TRs"), Treasury Investment
Growth Receipts ("TIGRs") and Certificates of Accrual on Treasury Securities
("CATS").

- 8 -

<PAGE>

subject to greater fluctuations in value due to changes in interest rates than
interest-paying U.S. Treasury obligations. The Fund will limit its investment in
such instruments to 20% of its total assets.

O SECURITIES LENDING. In order to generate additional income, the Fund may, from
time to time, lend its portfolio securities. The Fund must receive collateral
equal to 100% of the securities' value in the form of cash or U.S. Government
securities, plus any interest due, which collateral must be marked to market
daily by Key Advisers or the Sub-Adviser. Should the market value of the loaned
securities increase, the borrower must furnish additional collateral to the
Fund. During the time portfolio securities are on loan, the borrower pays the
Fund amounts equal to any dividends or interest paid on such securities plus any
interest negotiated between the parties to the lending agreement. Loans are
subject to termination by the Fund or the borrower at any time. While the Fund
does not have the right to vote securities on loan, the Fund intends to
terminate any loan and regain the right to vote if that is considered important
with respect to the Fund's investment. The Fund will only enter into loan
arrangements with broker-dealers, banks or other institutions which Key Advisers
or the Sub-Adviser has determined are creditworthy under guidelines established
by the Victory Portfolios' Board of Trustees (the "Trustees"). The Fund will
limit its securities lending to 33 1/3% of total assets.

O WHEN-ISSUED SECURITIES. The Fund may purchase securities on a when-issued or
delayed delivery basis. These transactions are arrangements in which the Fund
purchases securities with payment and delivery scheduled for a future time. When
the Fund agrees to purchase securities on a when-issued basis, the Fund's
custodian must set aside cash or liquid portfolio securities equal to the amount
of that commitment in a separate account, and may be required to subsequently
place additional assets in the separate account to reflect any increase in the
Fund's commitment. Prior to delivery of when-issued securities, their value is
subject to fluctuation and no income accrues until their receipt. The Fund
engages in when-issued and delayed delivery transactions only for the purpose of
acquiring portfolio securities consistent with its investment objective and
policies, and not for investment leverage. In when-issued and delayed delivery
transactions, the Fund relies on the seller to complete the transaction; its
failure to do so may cause the Fund to miss a price or yield considered to be
advantageous.

O VARIABLE AND FLOATING RATE SECURITIES. The Fund may purchase Investment Grade
variable and floating rate notes . The interest rates on these securities may be
reset daily, weekly, quarterly, or some other reset period, and may be subject
to a floor or ceiling. There is a risk that the current interest rate on such
obligations may not accurately reflect existing market interest rates. There may
be no active secondary market with respect to a particular variable or floating
rate note. Variable and floating rate notes for which no readily available
market exists will be purchased in an amount which, together with other illiquid
securities held by the Fund, does not exceed 15% of the Fund's total assets
unless such notes are subject to a demand feature that will permit the Fund to
receive payment of the principal within seven days after demand therefor. These
securities are included among those which are sometimes referred to as
"derivative securities."

O REPURCHASE AGREEMENTS. Under the terms of a repurchase agreement, the Fund
acquires securities from financial institutions or registered broker-dealers,
subject to the seller's agreement to repurchase such securities at a mutually
agreed upon date and price. The seller is required to maintain the value of
collateral held pursuant to the agreement at not less than the repurchase price
(including accrued interest). If the seller were to default on its repurchase
obligation or become insolvent, the Fund would suffer a loss to the extent that
the proceeds from a sale of the underlying portfolio securities were less than
the repurchase price, or to the extent that the disposition of such securities
by the Fund was delayed pending court action. Repurchase agreements may be
considered by the staff of the Commission to constitute loans by the Fund.

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<PAGE>

to market on a daily basis, and will be continuously monitored to ensure that
such equivalent value is maintained. Reverse repurchase agreements involve the
risk that the market value of the securities sold by the Fund may decline below
the price at which the Fund is obligated to repurchase the securities. Reverse
repurchase agreements are considered to be borrowings under the Investment
Company Act of 1940, as amended (the "1940 Act").

O 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. Pursuant to
an exemptive order received by the Victory Portfolios from the Commission, the
Fund may invest in the money market funds of the Victory Portfolios. Key
Advisers or the Sub-Adviser will waive its fee attributable to the Fund's assets
invested in a fund of the Victory Portfolios, and, to the extent required by the
laws of any state in which shares of the Fund are sold, Key Advisers or the
Sub-Adviser will waive its investment advisory fees 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 or the Sub-Adviser.

O PRIVATE PLACEMENT INVESTMENTS. The Fund may invest in High Quality commercial
paper issued in reliance on the exemption from registration afforded by Section
4(2) of the Securities Act of 1933, as amended (the "1933 Act"). Section 4(2)
commercial paper is generally sold to institutional investors, such as the Fund,
that agree that they are purchasing the paper for investment purposes and not
with a view to public distribution. Any resale by the purchaser must be in an
exempt transaction. Section 4(2) commercial paper is normally resold to other
institutional investors like the Fund through or with the assistance of the
issuer or investment dealers who make a market in Section 4(2) commercial paper,
thus providing liquidity. The Fund believes that Section 4(2) commercial paper
and possibly certain other Restricted Securities (as defined in the Statement of
Additional Information) that meet the criteria for liquidity established by the
Trustees are quite liquid. The Fund intends, therefore, to treat the restricted
securities that meet the criteria for liquidity established by the Trustees,
including Section 4(2) commercial paper, as determined by Key Advisers or the
Sub-Adviser, as liquid and not subject to the investment limitation applicable
to illiquid securities. See "Investment Limitations" below.

O OPTIONS. The Fund may write call options from time to time. The Fund will
write only "covered" call futures (options on securities owned by the Fund and
index options). Such options must be listed on a national securities exchange
and issued by the Options Clearing Corporation. In order to close out a call
option it has written, the Fund will enter into a "closing purchase
transaction," i.e., the purchase of a call option on the same security with the
same exercise price and expiration date as the call option which the Fund
previously wrote on any particular security. When a portfolio security subject
to a call option is sold, the Fund will effect a closing purchase transaction to
close out any existing call option on that security. If the Fund is unable to
effect a closing purchase transaction, it will not be able to sell the
underlying security until the option expires or the Fund delivers the underlying
security upon exercise. Upon the exercise of an option, the Fund is not entitled
to the gains, if any, on securities underlying the options. The Fund intends to
limit its investments in call and index options to 25% of its total assets.

Certain investment management techniques which the Fund may use, such as the
purchase and sale of futures and options (described above), may expose the Fund
to special risks. These products may be used to adjust the risk and return
characteristics of the Fund's portfolio of investments. These various products
may increase or decrease exposure to fluctuation in security prices, interest
rates, or other factors that affect security values, regardless of the issuer's
credit risk. Regardless of whether the intent was to decrease risk or increase
return, if market conditions do not perform consistently with expectations,
these products may result in a loss. In addition, losses may occur if
counterparties involved in transactions do not perform as promised. These
products may expose the Fund to potentially greater risk of loss than more
traditional equity investments.

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<PAGE>

O PORTFOLIO TRANSACTIONS. The Fund may engage in the technique of short-term
trading. Such trading involves the selling of securities held for a short time,
ranging from several months to less than a day. The object of such short-term
trading is to take advantage of what Key Advisers or the Sub-Adviser believes
are changes in market, industry or individual company conditions or outlook. Any
such trading would increase the Fund's turnover rate and its transaction costs.
High turnover will generally result in higher brokerage costs and possible tax
consequences for the Fund. In the fiscal year ended October 31 , 1995, the
portfolio turnover rate was 69.22% compared to 118.49% in the fiscal period
December 10, 1993 to October 31, 1994.

NOTE: The Statement of Additional Information contains additional information
about the investment practices of the Fund and risk factors. The investment
policies and limitations of the Fund may be changed by the Trustees without any
vote of shareholders unless (1) a policy is expressly deemed to be a fundamental
policy of the Fund or (2) a policy is expressly deemed to be changeable only by
such majority vote.

From time to time, the Fund, to the extent consistent with its investment
objective, policies and restrictions, may invest in securities of issuers with
which Key Advisers or the Sub-Adviser or its affiliates have a lending
relationship.

INVESTMENT LIMITATIONS

The following summarizes some of the Fund's principal investment limitations.
The Statement of Additional Information contains a complete listing of the
Fund's investment limitations and provides additional information about
investment restrictions designed to reduce the risk of an investment in the
Fund.

1. The Fund may not borrow money other than (a) by entering into
commitments to purchase securities in accordance with its investment
program, including delayed-delivery and when-issued securities and
reverse repurchase agreements, provided that the total amount of such
commitments do not exceed 33 1/3% of the Fund's total assets; and (b)
for temporary or emergency purposes in an amount not exceeding 5% of
the value of the Fund's total assets.

2. The Fund will not purchase a security if, as a result, more than 15% of
its net assets would be invested in illiquid securities. Illiquid
securities are investments that cannot be readily sold within seven
days in the usual course of business at approximately the price at
which the Fund has valued them. Under the supervision of the Trustees,
Key Advisers or the Sub-Adviser determines the liquidity of the Fund's
investments. The absence of a trading market can make it difficult to
ascertain a market value for illiquid investments. Disposing of
illiquid investments may involve time-consuming negotiation and legal
expenses, and it may be difficult or impossible for the Fund to sell
them promptly at an acceptable price.

3. The Fund is "diversified" within the meaning of the 1940 Act. With
respect to 75% of its total assets, the Fund may not purchase the
securities of any issuer (other than securities issued or guaranteed by
the U.S. government or any of its agencies or instrumentalities) if, as
a result, (a) more than 5% of the Fund's total assets would be invested
in the securities of that issuer, or (b) the Fund would hold more than
10% of the outstanding voting securities of that issuer.

4. The Fund's policy regarding concentration of investments provides that
the Fund may not purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. Government or any of its
agencies or instrumentalities, or repurchase agreements secured
thereby) if, as a result, more than 25% of its total assets would be
invested in the securities of companies whose principal business
activities are in the same industry.

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<PAGE>

Whenever an investment policy or limitation states a maximum percentage of the
Fund's assets that may be invested, such percentage limitation will be
determined immediately after and as a result of the investment and any
subsequent change in values, assets, or other circumstances will not be
considered when determining whether the investment complies with the Fund's
investment policies and limitations, except in the case of borrowing (or other
activities that may be deemed to result in the issuance of a "senior security"
under the 1940 Act). If the value of the Fund's illiquid securities at any time
exceeds the percentage limitation applicable at the time of acquisition due to
subsequent fluctuations in value or other reasons, the Trustees will consider
what actions, if any, are appropriate to maintain adequate liquidity.

HOW TO INVEST, EXCHANGE AND REDEEM

HOW TO INVEST

The Fund offers investors two different classes of shares. The different classes
of shares represent investments in the same portfolio of securities but are
subject to different expenses and will likely have different share prices.

O CLASS A SHARES AND CLASS B SHARES. If Class A shares are purchased, there is
an initial sales charge (on investments up to $1 million). If Class B shares are
purchased, there is no sales charge at the time of purchase, but if the shares
are redeemed within six years, you will normally pay a contingent deferred sales
charge ("CDSC") that varies depending on how long you own your shares.

O WHICH CLASS OF SHARES SHOULD YOU CHOOSE? Once you decide that the Fund is an
appropriate investment for you, the decision as to which class of shares is
better suited to your needs depends on a number of factors which you should
discuss with your financial adviser:

1. AMOUNT OF INVESTMENT. If you plan to invest a substantial amount, the reduced
sales charges available for larger purchases of Class A shares may be more
beneficial to you. Any order for $1 million or more will only be accepted as
Class A shares for that reason.

2. INVESTMENT HORIZON. While future financial needs cannot be predicted with
certainty, investors who prefer not to pay an initial sales charge and who plan
to hold their shares for more than six years might consider Class B shares.
Investors who plan to redeem shares within eight years might prefer Class A
shares.

3. DIFFERENCES IN ACCOUNT FEATURES. The dividends payable to Class B
shareholders will be reduced by the additional expenses borne solely by that
class, such as the asset-based sales charge to which Class B shares are subject,
as described below and in the Statement of Additional Information.

4. INVESTMENT PROFESSIONALS. A salesperson , financial planner, investment
adviser or trust officer who provides you with information regarding the
investment of your assets (an "Investment Professional") or other person who is
entitled to receive compensation for selling Fund shares may receive different
compensation for selling one class than for selling another class. Both the CDSC
(an asset-based sales charge) for Class B shares and the front-end sales charge
on sales of Class A shares are used primarily to compensate such persons.

O HOW ARE SHARES PURCHASED? Shares may be purchased directly or through an
Investment Professional of a securities broker or other financial institution
that has entered into a selling agreement with the Fund or the Distributor.
Shares are also available to clients of bank trust departments . The minimum
investment is $500 for the initial purchase and $25 thereafter. Accounts set up
through a bank trust department or an Investment Professional may be subject to
different minimums. When you buy shares, be sure to specify Class A or Class B
shares. If you do not make a selection, your investment will be made in Class A
shares.

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<PAGE>

o INVESTING THROUGH YOUR INVESTMENT PROFESSIONAL. Your Investment Professional
will place your order with the Transfer Agent (see "Fund Organization and Fees -
Transfer Agent" below) on your behalf. You may be required to establish a
brokerage or agency 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. Accounts established with Investment
Professionals may have different features, requirements and fees. In addition,
Investment Professionals may charge for their services. Information regarding
these features, requirements and fees will be provided by the Investment
Professional. If you are purchasing shares of any Fund through a program of
services offered or administered by your Investment Professional, you should
read the program materials in conjunction with this Prospectus. 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" and "Special Investor Services"
for more information about telephone transactions.

O 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 a bank trust department, including Key Trust Company of
Ohio, N.A. and other affiliates of Key Advisers or the Sub-Adviser are not
duplicative of any of the services for which Key Advisers or the Sub-Adviser as
the investment adviser or sub-adviser, respectively, is compensated for advising
the Fund. The charges paid by clients of bank trust departments, or their
affiliates, should also be considered by the investor in addition to the net
yield and return on the investment in the Fund, although such charges do not
affect the Fund's dividends or distributions.

o INVESTING THROUGH THE SYSTEMATIC INVESTMENT PLAN. You can use the Systematic
Investment Plan to purchase shares directly from your bank account. Please refer
to "The Systematic Investment Plan" below for more details.

INVESTING DIRECTLY

O 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 the amount of at least the
minimum investment requirement to:

The Victory Balanced Fund
Primary Funds Service Corporation
P.O. Box 9741
Providence, RI 02940-9741.

Subsequent purchases may be made in the same manner.

O BY WIRE. Call 800-539-3863 to set up your Fund account to accommodate wire
transactions. YOU MUST CALL THE TRANSFER AGENT BEFORE WIRING FUNDS. 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

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<PAGE>

The Victory Portfolios: Balanced Fund

You must include your account number, your name(s), tax identification number(s)
and the control number assigned by the Transfer Agent (see "Fund Organization
and Fees - Transfer Agent" below). The Fund does not impose a fee for wire
transactions, although your bank may charge you a fee for this service.

Class A shares are sold at the public offering price based on the net asset
value that is next determined after the Transfer Agent receives the purchase
order. In most cases, to receive that day's offering price, the Transfer Agent
must receive your order as of the close of regular trading of the New York Stock
Exchange ("NYSE") (generally 4:00 p.m. Eastern time) (the "Valuation Time") on
each Business Day (as defined in "Shareholder Account Rules and Policies --
Share Price" below). If you buy shares through an Investment Professional, the
Investment Professional must receive your order in a timely fashion on a regular
Business Day and transmit it to the Transfer Agent so that it is received before
the close of business that day. The Transfer Agent may reject any purchase order
for the Fund's shares, in its sole discretion. It is the responsibility of your
Investment Professional to transmit your order to purchase shares to the
Transfer Agent in a timely fashion in order for you to receive that day's share
price.

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 will be
canceled and you could be liable for any losses or fees incurred. Payment for
the purchase 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.

CLASS A SHARES. Class A shares are sold at their offering price, which is
normally net asset value plus an initial sales charge. However, in some cases,
described below, where purchases are not subject to an initial sales charge, the
offering price may be net asset value. In some cases, reduced sales charges may
be available, as described below. When you invest, the Fund receives the net
asset value for your account. The sales charge varies depending on the amount of
your purchase and a portion may be retained by the Distributor and allocated to
your Investment Professional. The Victory Portfolios has a reinstatement policy
which allows an investor who redeems shares originally purchased with a sales
charge to reinvest within 90 days without incurring an additional sales charge.
The current sales charge rates and commissions paid to Investment Professionals
are as follows:

DEALER
CLASS A SALES CHARGE REALLOWANCE
AS A % OF AS A % OF AS A %
OFFERING NET AMOUNT OF OFFERING
AMOUNT OF PURCHASE PRICE INVESTED PRICE
--------- ------------ ------------
Less than $49,999 4.75% 4.99% 4.00%
$50,000 to $99,999 4.50% 4.71% 4.00%
$100,000 to $249,999 3.50% 3.63% 3.00%
$250,000 to $499,999 2.25% 2.30% 2.00%
$500,000 to $999,999 1.75% 1.78% 1.50%
$1,000,000 and above 0.00% 0.00% (1)

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<PAGE>

(1) There is no initial sales charge on purchases of $1 million or more.
Investment Professionals will be compensated at the rate of up to 0.25%
on such purchases.

The Distributor reserves the right to reallow the entire commission to dealers.
If that occurs, the dealer may be considered an "underwriter" under Federal
securities laws.

The Distributor may pay all or a portion of any applicable sales charges and
service fees to Investment Professionals who sell shares of the Fund and provide
ongoing sales support services or shareholder support services. For the
three-year period commencing April 30, 1994, for activities in maintaining and
servicing accounts of customers invested in the Fund, First Albany Corporation
("First Albany") and PFIC Securities Corporation ("PFIC") may receive payments
from the Distributor equal to two-thirds of the Dealer Retention (as defined
below) on any shares of the Fund (and other funds of the Victory Portfolios)
sold by First Albany or PFIC and their broker-dealer affiliates. "Dealer
Retention" is an amount equal to the difference between the applicable sales
charge and such part of the sales charge which is reallowed to broker-dealers.

The Distributor, at its expense, may also provide additional cash compensation
to dealers in connection with sales of shares of the Fund. The maximum cash
compensation payable by the Distributor is 4.00% of the offering price. In
addition, the Distributor will, from time to time and at its own expense,
provide compensation, including financial assistance, to dealers in connection
with conferences, sales or training programs for their employees, seminars for
the public, advertising campaigns regarding one or more Victory Portfolios
and/or other dealer-sponsored special events including payment for travel
expenses, including lodging, incurred in connection with trips taken by invited
registered representatives and members of their families to locations within or
outside of the United States for meetings or seminars of a business nature.
Compensation will include the following types of non-cash compensation offered
through sales contests: (1) vacation trips including the provision of travel
arrangements and lodging; (2) tickets for entertainment events (such as
concerts, cruises and sporting events) and (3) merchandise (such as clothing,
trophies, clocks and pens). Dealers may not use sales of the Fund's shares to
qualify for this compensation if prohibited by the laws of any state or any
self-regulatory organization, such as the National Association of Securities
Dealers, Inc. None of the aforementioned compensation is paid for by the Fund or
its shareholders.

O REDUCED SALES CHARGES FOR CLASS A SHARES. You may be eligible to buy Class A
shares at reduced sales charge rates in one or more of the following ways:

o LETTER OF INTENT. An investor may obtain a reduced sales charge by means of a
written Letter of Intent which expresses the investor's intention to purchase
shares of the Fund at a specified total public offering price within a 13-month
period.

A Letter of Intent is not a binding obligation upon the investor to purchase the
full amount indicated. The minimum initial investment under a Letter of Intent
is 5% of the total amount. Shares purchased with the first 5% of such amount
will be held in escrow (while remaining registered in the name of the investor)
to secure payment of the higher sales charge applicable to the shares actually
purchased if the full amount indicated is not purchased, and such escrowed
shares will be involuntarily redeemed to pay the additional sales charge, if
necessary. Dividends (if any) on escrowed shares, whether paid in cash or
reinvested in additional shares, are not subject to escrow. The escrowed shares
will not be available for redemption, exchange or other disposal by the investor
until all purchases pursuant to the Letter of Intent have been made or the
higher sales charge has been paid. When the full amount indicated has been
purchased, the escrow will be released. A Letter of Intent may include purchases
of shares made not more than 90 days prior to the date the investor signs a
Letter of Intent; however, the 13-month period during which the Letter of Intent
is in effect will begin on the date of the earliest purchase to be included. An
investor may combine purchases that are made in an individual capacity with (1)
purchases that are made by members of the investor's immediate family and (2)
purchases made by businesses that the investor owns as sole proprietorships, for
purposes of obtaining reduced sales charges by means of

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<PAGE>

a written Letter of Intent. In order to accomplish this, however, investors must
designate on the Account Application the accounts that are to be combined for
this purpose. Investors can only designate accounts that are open at the time
the Letter of Intent is executed.

If an investor qualifies for a further reduced sales charge because the investor
has either purchased more than the dollar amount indicated on the Letter of
Intent or has entered into a Letter of Intent which includes shares purchased
prior to the date of the Letter of Intent, the difference in the sales charge
will be used to purchase additional shares of the Fund on behalf of the
investor; thus the total purchases (included in the Letter of Intent) will
reflect the applicable reduced sales charge of the Letter of Intent.

For further information about Letters of Intent, interested investors should
contact the Transfer Agent at 800-539-3863. This program, however, may be
modified or eliminated at any time without notice.

o RIGHT OF ACCUMULATION AND CONCURRENT PURCHASES. A shareholder may qualify for
a reduced sales charge on purchases of Class A Shares of the Fund, and other
funds of the Victory Portfolios, by combining a current purchase with purchases
of another fund(s), or with certain prior purchases of shares of the Victory
Portfolios. The applicable sales charge is based on the sum of (1) the
purchaser's current purchase plus (2) the current public offering price of the
purchaser's previous purchases of (a) all shares held by the purchaser in the
Fund and (b) all shares held by the purchaser in any other fund of the Victory
Portfolios (except money market funds).

To receive the applicable public offering price pursuant to the right of
accumulation, shareholders must provide the Transfer Agent with sufficient
information at the time of purchase to permit confirmation of qualification.
Accumulation privileges may be amended or terminated without notice at any time
by the Distributor. See "Combined Purchases" and "Rights of Accumulation" in the
Statement of Additional Information.

O WAIVERS OF CLASS A SALES CHARGES. No sales charge is imposed on sales of Class
A shares to the following categories of persons (which categories may be changed
or eliminated at any time):

(1) Current or retired Trustees of the Victory Portfolios; employees,
directors, trustees, and their family members of KeyCorp or an
"Affiliated Provider" ("Affiliated Providers" refer to affiliates and
subsidiaries of KeyCorp and service providers to the Victory Portfolios
and the Victory Shares (collectively, the "Victory Group")), dealers
having an agreement with the Distributor and any trade organization to
which Key Advisers, the Sub-Adviser or the Administrator belongs;

(2) Investors who purchase shares for trust, investment management or
certain other advisory accounts established with KeyCorp or any of its
affiliates;

(3) Investors who reinvest assets received in a distribution from a
qualified, non-qualified or deferred compensation plan, agency, trust
or custody account that was either (a) maintained by KeyCorp or an
Affiliated Provider, or (b) invested in a fund of the Victory Group;

(4) Investors who, within 90 days of redemption, use the proceeds from the
redemption of shares of another

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<PAGE>

mutual fund complex for which they previously paid a front end sales
charge or sales charge upon redemption of shares;

(5) Shareholders of the former Investors Preference Fund For Income, Inc.
and the Investors Preference New York Tax-Free Fund, Inc. who have
continuously maintained accounts with a fund or funds of the Victory
Group with a balance of $250,000 or more (investors with less than
$250,000 will pay any applicable sales charges);

(6) Investment advisers or financial planners who place trades for their
own accounts or the accounts of their clients and who charge a
management, consulting or other fee for their services; and clients of
such investment advisers or financial planners who place trades for
their own accounts if the accounts are linked to the master account of
such investment adviser or financial planner on the books and records
of the broker or agent. Such accounts include retirement and deferred
compensation plans and trusts used to fund those plans, including, but
not limited to, those defined in section 401(a), 403(b), or 457 of the
Internal Revenue Code and "rabbi trusts."

CLASS B SHARES. Class B shares are sold at net asset value per share without an
initial sales charge. However, if Class B shares are redeemed within six years
of their purchase, a CDSC will be deducted from the redemption proceeds. That
sales charge will not apply to shares purchased by the reinvestment of dividends
or capital gains distributions. The charge will be assessed on the lesser of the
net asset value of the shares at the time of redemption or the original purchase
price. The CDSC is not imposed on the amount of your account value represented
by the increase in net asset value over the initial purchase price (including
increases due to the reinvestment of dividends and capital gains distributions).
The Class B CDSC is paid to the Distributor to reimburse its expenses of
providing distribution-related services to the Fund in connection with the sale
of Class B shares.

To determine whether the CDSC applies to a redemption, the Victory Portfolios
redeems shares in the following order: (1) shares acquired by reinvestment of
dividends and capital gains distributions, (2) shares held for over six years,
and (3) shares held the longest during the 6-year period. The amount of the CDSC
will depend on the number of years since you invested and the dollar amount
being redeemed, according to the following schedule:

CONTINGENT DEFERRED SALES CHARGE
YEARS SINCE PURCHASE ON REDEMPTIONS IN THAT YEAR
PAYMENT WAS MADE (AS % OF AMOUNT SUBJECT TO CHARGE)
-------------------- --------------------------------

0-1 5.0%
1-2 4.0%
2-3 3.0%
3-4 3.0%
4-5 2.0%
5-6 1.0%
6 and following None

In the table, a "year" is a 12-month period. All purchases are considered to
have been made on the first regular business day of the month in which the
purchase was made.

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<PAGE>

(2) redemptions from accounts other than Retirement Plans following the death or
disability of the shareholder (as evidenced by a determination of disability by
the Social Security Administration), and (3) returns of excess contributions to
Retirement Plans.

The CDSC is also waived on Class B shares in the following cases: (1) shares
sold to Key Advisers, the SubAdviser or their affiliates; (2) shares issued in
plans of reorganization to which the Victory Portfolios is a party; and (3)
shares redeemed in involuntary redemptions as described above.

O AUTOMATIC CONVERSION OF CLASS B SHARES. Eight years after Class B shares are
purchased, those shares will automatically convert to Class A shares. This
conversion feature relieves Class B shareholders of the asset-based sales charge
that applies to Class B shares under the Class B Distribution Plan, described
below. The conversion is based on the relative net asset value of the two
classes, and no sales charge or other charge is imposed. When Class B shares
convert, any other Class B shares that were acquired by the reinvestment of
dividends and distributions on the converted shares will also convert to Class A
shares. The conversion feature is subject to the continued availability of a tax
ruling described in "Alternative Sales Arrangements-Class B Conversion Feature"
in the Statement of Additional Information.

O DISTRIBUTION PLAN FOR CLASS B SHARES. The Victory Portfolios has adopted a
Distribution Plan (the "Plan") under Rule 12b-1 of the 1940 Act for Class B
shares to compensate the Distributor for its services and costs in distributing
Class B shares and servicing accounts. Under the Plan, the Victory Portfolios
pays the Distributor an annual "asset-based sales charge" of 0.75% per year on
Class B shares that are outstanding for 6 years or less. This fee is computed on
the average daily net assets of Class B shares and paid monthly. The asset-based
sales charge allows investors to buy Class B shares without a front-end sales
charge while allowing the Distributor to compensate dealers that sell Class B
shares. The asset-based sales charge increases Class B expenses by up to 0.75%
of average net assets per year.

The Distributor pays sales commissions of 4.00% of the purchase price to dealers
from its own resources at the time of sale. For activities in maintaining and
servicing accounts of customers invested in the Fund, First Albany and PFIC
Securities Corporation may receive payments from the Distributor equal to
two-thirds of the excess of the scheduled CDSC for a redemption of a share
during the first year after purchase over any scheduled payment to the selling
broker on such share. The Distributor retains the asset-based sales charge to
recoup the sales commissions it pays, the advances of service fee payments it
makes, and its financing costs. If the Plan is terminated by the Victory
Portfolios, it provides that the Trustees may elect to continue payments for
certain expenses already incurred. The payments under the Plan increase the
annual expenses of Class B shares. For more details, please refer to "Advisory
and Other Contracts - Class B Shares Distribution Plan" in the Statement of
Additional Information.

SPECIAL INVESTOR SERVICES

O THE SYSTEMATIC INVESTMENT PLAN. You can make regular investments in the Fund
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.
Shares will be purchased at the offering price next determined following receipt
of the order by the Transfer Agent. 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.

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<PAGE>

O THE SYSTEMATIC WITHDRAWAL PLAN. You can make regular withdrawals from your
account with the Systematic Withdrawal Plan by completing the appropriate
section of the Account Application. If you own shares in a fund worth $5,000 or
more, you can have monthly, quarterly, semi-annual or annual checks sent from
your account directly to you, to a person named by you, or to your bank checking
account. The 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
coding number across the front of the account application. If your 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 income dividends
and capital gain dividend distributions earned on your Fund shares, your account
eventually may be exhausted. If any applicable sales charges are applied to new
purchases of shares of the Fund, it is to your disadvantage to buy shares of the
Fund while also making systematic redemptions.

Your account will be debited on the date you indicate on your Account
Application. Shares will be redeemed at the net asset value per share (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.

O TELEPHONE TRANSACTIONS. You can initiate any transaction by telephone. You may
call the Transfer Agent toll-free at 800-539-3863 or call your Investment
Professional or bank trust department. Telephone transaction privileges for
purchases, redemptions or exchanges may be modified, suspended or terminated by
the Fund at any time. If an account has more than one owner, the Fund and the
Transfer Agent may rely on the instructions of any one owner. Telephone
privileges apply to each owner of the account and the dealer representative of
record for the account unless and until the Transfer Agent receives cancellation
instructions from an owner of the account.

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 statements immediately after you receive them.

O RETIREMENT PLANS. Retirement plans can be among the best tax-planning vehicles
available to individuals. Call your Investment Professional for more information
on the plans and their benefits, provisions and fees. Your Investment
Professional can set up your new account in the Fund under one of several
tax-sheltered plans. These plans let you invest for retirement and shelter your
investment income from current taxes. Plans include Individual Retirement
Accounts (IRAs) and Rollover IRAs. Other fees may be charged by the IRA
custodian or trustee.

HOW TO EXCHANGE

Shares of the Fund may be exchanged for shares of certain funds of the Victory
Group at net asset value per share at the time of exchange, without a sales
charge. To exchange shares, you must meet several conditions:

(1) Shares of the fund selected for exchange must be available for sale in
your state of residence.

(2) The prospectuses of this Fund and the fund whose shares you want to buy
must offer the exchange privilege.

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(3) You must hold the shares you buy when you establish your account for at
least 7 days before you can exchange them; after the account is open 7
days, you can exchange shares on any Business Day.

(4) You must meet the minimum purchase requirements for the fund you
purchase by exchange.

(5) The registration and tax identification numbers of the two accounts
must be identical.

(6) BEFORE EXCHANGING, OBTAIN AND READ THE PROSPECTUS FOR THE FUND YOU WISH
TO PURCHASE BY EXCHANGE.

SHARES OF A PARTICULAR CLASS MAY BE EXCHANGED ONLY FOR SHARES OF THE SAME CLASS
IN THE OTHER FUNDS OF THE VICTORY GROUP. For example, you can exchange Class A
shares of this Fund only for Class A shares of another fund. At present, not all
of the funds offer the same two classes of shares. If a fund has only one class
of shares that does not have a class designation, they are "Class A" shares for
exchange purposes. In some cases, sales charges may be imposed on exchange
transactions. Certain funds offer Class A or Class B shares and a list can be
obtained by calling the Transfer Agent at 800-539-3863. Please refer to the
Statement of Additional Information for more details about this policy.

Telephone exchange requests may be made either by calling your Investment
Professional or the Transfer Agent at 800-539-3863 prior to the Valuation Time
on any Business Day (See "Shareholder Account Rules and Policies--Share Price"
below).

You can obtain a list of eligible funds of the Victory Group by calling the
Transfer Agent at 800-539-3863. Exchanges of shares involve a redemption of the
shares of the Fund and a purchase of shares of the other fund of the Victory
Group.

There are certain exchange policies you should be aware of:

o Shares are normally redeemed from one fund and issued by the other fund in the
exchange transaction on the same Business Day on which the Transfer Agent
receives an exchange request by Valuation Time (generally 4:00 p.m. Eastern
time) that is in proper form, but either fund may delay the issuance of shares
of the fund into which you are exchanging if it determines it would be
disadvantaged by a same-day transfer of the proceeds to buy shares. For example,
the receipt of multiple exchange requests from a dealer in a "market-timing"
strategy might create excessive turnover in the Fund's portfolio and associated
expenses disadvantageous to the Fund.

o Because excessive trading can hurt fund performance and harm shareholders, the
Victory Portfolios reserves the right to refuse any exchange request that will
impede the Fund's ability to invest effectively or otherwise have the potential
to disadvantage the Fund, or to refuse multiple exchange requests submitted by a
shareholder or dealer.

o The Victory Portfolios may amend, suspend or terminate the exchange privilege
at any time upon 60 days' written notice to shareholders.

o If the Transfer Agent cannot exchange all the shares you request because of a
restriction cited above, only the shares eligible for exchange will be
exchanged.

o Each exchange may produce a gain or loss for tax purposes.

Shareholders of the former Investors Preference Fund for Income, Inc. and
Investors Preference New York Tax-Free Fund, Inc. will not be subject to any
additional sales load upon an exchange of shares attributable to an Investors
Preference Funds account for shares of other funds of the Victory Portfolios.

HOW TO REDEEM

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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 "Shareholder Account
Rules and Policies--Share Price" below). Shares will be redeemed at the NAV next
calculated after the Transfer Agent has received the redemption request. If the
Fund account is closed, any accrued dividends will be paid at the beginning of
the following month.

You may redeem shares in several ways:

O BY MAIL. Send a written request to: The Victory Portfolios: Balanced 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 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. The Transfer Agent reserves the
right to reject any signature guarantee if (1) it has reason to believe that the
signature is not genuine, (2) it has reason to believe that the transaction
would otherwise be improper, or (3) the guarantor institution is a broker or
dealer that is neither a member of a clearing corporation nor maintains net
capital of at least $100,000.

o 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 Valuation Time (generally 4:00 p.m. Eastern time), proceeds of the
redemption will be wired as federal funds on the next 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, P.O. Box 9741, Providence, RI 02940-9741.

O 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. See "Special Investor Services" for more information about telephone
transactions.

O ADDITIONAL REDEMPTION REQUIREMENTS. The Fund may hold 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 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. To the extent
that portfolio securities are traded in other markets on days when the NYSE is
closed, the Fund's NAV may be affected on days when investors do not have access
to the Fund to purchase or redeem shares.

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<PAGE>

family members of each of the foregoing) participating in the Systematic
Investment Plan, to whom no minimum balance requirement applies). 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.

SHAREHOLDER ACCOUNT RULES AND POLICIES

O SHARE PRICE. The term "net asset value per share," or "NAV", means the value
of one share. The NAV of each class of shares is calculated by adding the value
of all the Fund's investments, plus cash and other assets, deducting liabilities
of the Fund and of the class, and then dividing the result by the number of
shares of the class outstanding. The NAV of the Fund is determined and its
shares are priced as of the close of regular trading of the NYSE (generally 4:00
p.m. Eastern time) (the "Valuation Time") on each Business Day of the Fund. 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, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Columbus Day, Veterans' Day, Thanksgiving and Christmas .

The Fund's securities are valued primarily on the basis of market quotations or,
if quotations are not readily available, by a method that the Board of Trustees
believes accurately reflects fair value. Fair value of these portfolio
securities may be determined by an independent pricing service based primarily
upon information concerning market transactions and dealers quotations for
comparable securities.

o The offering of shares may be suspended during any period in which the
determination of NAV is suspended, and the offering may be suspended by the
Trustees at any time the Trustees believe it is in the Fund's best interest to
do so.

o Redemption or transfer requests will not be honored until the Transfer Agent
receives all required documents in proper form. From time to time, the Transfer
Agent in its discretion may waive certain of the requirements for redemptions
stated in this Prospectus.

o Dealers that can perform account transactions for their clients by
participating in NETWORKING through the National Securities Clearing Corporation
are responsible for obtaining their clients' permission to perform those
transactions and are responsible to their clients who are shareholders of the
Victory Portfolios if the dealer performs any transaction erroneously.

o The redemption price for shares will vary from day to day because the value of
the securities in the Fund fluctuates, and the value of your shares may be more
or less than their original cost.

o Payment for redeemed shares is made ordinarily in cash and forwarded by check
within three business days after the Transfer Agent receives redemption
instructions in proper form, except under unusual circumstances determined by
the Securities and Exchange Commission delaying or suspending such payments. The
Transfer Agent may delay forwarding a check for recently purchased shares, but
only until the purchase payment has cleared. That delay may be as much as 15
days from the date the shares were purchased. That delay may be avoided if you
arrange with your bank to provide telephone or written assurance to the Transfer
Agent that your purchase payment has cleared.

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<PAGE>

from the cancellation of share purchase orders. Under unusual circumstances,
shares of the Fund may be redeemed "in kind," which means that the redemption
proceeds will be paid with securities from the Fund. Please refer to the
Statement of Additional Information for more details.

o "Backup Withholding" of Federal income tax may be applied at the rate of 31%
from dividends, distributions and redemption proceeds (including exchanges) if
you fail to furnish the Victory Portfolios with a certified Social Security or
taxpayer identification number when you sign your application, or if you violate
Internal Revenue Service regulations on tax reporting of dividends.

o The Victory Portfolios does not charge a redemption fee, but if an Investment
Professional handles your redemption, the Investment Professional may charge a
separate service fee. Under the circumstances described in "How to Invest," you
may be subject to a CDSC when redeeming Class B shares.

DIVIDENDS, DISTRIBUTIONS AND TAXES

DIVIDENDS

The Fund ordinarily declares and pays dividends separately for Class A and Class
B shares from its net investment income monthly. The Fund may make distributions
at least annually out of any realized capital gains, and the Fund may make
supplemental distributions of dividends and capital gains following the end of
its fiscal year.

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 day after the record 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 dividend payment date which may be more than 7 days
after the dividend record date.

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
at the NAV as of the day after the record date. If you are reinvesting
dividends of a fund sold without a sales charge in shares of a fund
sold with a sales charge, the shares will be purchased at the public
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 the net asset value of the fund.
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 record date.
Dividend distributions can be directed only to an existing account
with a registration that is

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<PAGE>

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.

O STATEMENTS 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 affected
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.

O REDEMPTIONS OR EXCHANGES. Investors may realize a gain or loss when redeeming
(selling) or exchanging shares. For most types of accounts, the Fund reports the
proceeds to the IRS annually. Because the shareholders' tax treatment also
depends on their purchase price and personal tax positions, shareholders should
keep their regular account statements to use in determining their tax. See
"Buying a Dividend."

O 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.

o BUYING A DIVIDEND. On the record date for a distribution of ordinary income
or capital gains dividend, the net asset value of the Fund is reduced by the
amount of the distribution. An investor who buys shares just before the record
date ("buying a dividend") will pay the full price for the shares and then
receive a portion of the purchase price back as a taxable distribution.

FEDERAL TAXES

The Fund intends to qualify as a regulated investment company by satisfying the
requirements under Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"). The Fund contemplates the distribution of all of its net
investment income and capital gains, if any, in accordance with the timing
requirements imposed by the Code, so that it will not be subject to federal
income taxes or the 4% excise tax on undistributed income.

Distributions by the Fund of its net investment income and the excess, if any,
of its net short-term capital gain over its net long-term capital loss are
taxable to shareholders as ordinary income. These distributions are treated as
dividends for federal income tax purposes, but only a portion thereof may
qualify for the 70% dividends received deduction for corporate shareholders
(which portion may not exceed the aggregate amount of qualifying dividends from
domestic corporations received by the Fund and must be designated by the Fund as
so qualifying). Distributions by a Fund of the excess, if any, of its net
long-term capital gain over its net short-term capital loss are designated as
capital gain dividends and are taxable to shareholders as long-term capital
gains, regardless of the length of time shareholders have held their

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<PAGE>

shares. Such distributions are not eligible for the dividends-received
deduction. If a shareholder disposes of shares in the Fund at a loss before
holding such shares for more than six months, the loss will be treated as a
long-term capital loss to the extent that the shareholder has received a capital
gains dividend on those shares.

Distributions to shareholders will be treated in the same manner for federal
income tax purposes whether received in cash or in additional shares and may
also be subject to state and local taxes. Distributions received by shareholders
of the Fund in January of a given year will be treated as received on December
31 of the preceding year provided that they were declared to shareholders of
record on a date in October, November or December of such preceding year. The
Fund sends tax statements to its shareholders (with copies to the Internal
Revenue Service (the "IRS")) by January 31 showing the amounts and tax status of
distributions made (or deemed made) during the preceding calendar year.

Income from securities of foreign issuers may be subject to foreign withholding
taxes. Credit for such foreign taxes, if any, will not pass through to the
shareholders.

o OTHER TAX INFORMATION. The information above is only a summary of some of the
federal income tax consequences generally affecting the Fund and its U.S.
shareholders, and no attempt has been made to discuss individual tax
consequences. A prospective investor should also review the more detailed
discussion of federal income tax considerations in the Statement of Additional
Information. In addition to the federal income tax, a shareholder may be subject
to state or local taxes on his or her investment in the Fund, depending on the
laws in the shareholder's jurisdiction. INVESTORS CONSIDERING AN INVESTMENT IN
THE FUND SHOULD CONSULT THEIR TAX ADVISER TO DETERMINE WHETHER THE FUND IS
SUITABLE TO THEIR PARTICULAR TAX SITUATION.

When investors sign their Account Application, they are asked to provide their
correct social security or taxpayer identification number and other required
certifications. Investors who do not comply with IRS regulations are subject to
withholding by the Fund, at the rate of 31% of amounts distributed to them by
the Fund as dividends or in redemption of their shares.

PERFORMANCE

From time to time, performance information for each class of shares of the Fund
showing total return of each class of shares may be presented in advertisements,
sales literature and in reports to shareholders. Such performance figures are
based on historical earnings and are not intended to indicate future
performance. Average annual total return will be calculated over a stated period
of more than one year. Average annual total return is measured by comparing the
value of an investment in a class at the beginning of the relevant period (as
adjusted for sales charges, if any) to the redemption value of the investment at
the end of the period (assuming immediate reinvestment of any dividends or
capital gains distributions) and annualizing that figure. Cumulative total
return is calculated similarly to average annual total return, except that the
resulting difference is not annualized.

From time to time performance information for each class of shares of the Fund
showing the yield may also be presented in advertisements, sales literature and
in reports to shareholders. Yield will be computed by dividing the Fund's net
investment income per share earned during a recent thirty-day period by the
Fund's maximum offering price per share (reduced by any undeclared earned income
expected to be paid shortly as a dividend) on the last day of the period and
annualizing the result. All performance figures are based on historical earnings
and are not intended to indicate future performance.

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<PAGE>

American Banker, Fortune, Institutional Investor, U.S.A. Today and local
newspapers. In addition, general information about the Fund that appears in
publications such as those mentioned above may also be quoted or reproduced in
advertisements, sales literature or in reports to shareholders.

Performance is a function of the type and quality of instruments held in the
Fund's portfolio, operating expenses, and market conditions. Consequently,
performance will fluctuate and data reported are not necessarily representative
of future results. Any fees charged by service providers with respect to
customer accounts for investing in shares of the Fund will not be reflected in
performance calculations.

Additional information regarding the performance of each of the Victory
Portfolios is included in the Victory Portfolios' annual report, which is
available free of charge by calling 800-539-3863.

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 series
portfolios. 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 located at 3435 Stelzer Road, Columbus, Ohio 43219-3035.

Overall responsibility for management of the Victory Portfolios rests with its
Board of Trustees, who are elected by the shareholders of the Victory
Portfolios.

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 and sale of the Fund investments.

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 a 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.

For the services provided and expenses incurred pursuant to the investment
advisory agreement between the Victory Portfolios respecting the Fund, Key
Advisers is entitled to receive a fee, computed daily and paid monthly, at an
annual rate of one percent (1.00%) of the average daily net assets of the Fund.
The investment advisory fee paid by the Fund is higher than the advisory fees
paid by most mutual funds, although the Victory Portfolios' Board of Trustees
believes such fees to be comparable to advisory fees paid by many funds having
similar objectives and policies. 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 may periodically waive all or a portion of its advisory fee
with respect to the Fund . Prior to January, 1996, Society Asset Management,
Inc. served as investment adviser to the Fund. During the Fund's fiscal period
ended October 31, 1995, Society Asset Management, Inc. earned investment
advisory fees aggregating .60% of the average daily net assets of the Fund.

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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 Investment Advisory Agreement and the subadvisory agreement,
respectively, provide that Key Advisers and the Sub-Adviser, respectively, may
render services through their 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 and the Sub-Adviser, respectively, and Key Advisers and
the Sub-Adviser, respectively, will be as fully responsible to the Fund for the
acts and omissions of such persons as they are for their own acts and omissions.

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:
.65% of the first $10 million of average daily net assets; .50% of the next $15
million of average daily net assets; .40% of the next $25 million of average
daily net assets; and .35% of average daily net assets in excess of $50 million.

The persons primarily responsible for the investment management of the Fund as
well as their previous experience is as follows:

PORTFOLIO MANAGING PREVIOUS
MANAGER FUND SINCE EXPERIENCE
--------- ---------- ----------

Denise Coyne January, 1995 Portfolio Manager for Society Asset
Management, Inc., 1995; Vice
President Equity Research for Society
National Bank since 1992; Research
Analyst with Ameritrust Company
National Association since 1985.

Richard T. Heine Commencement of Vice President and Portfolio Manager
Operations for Society Asset Management, Inc.
beginning in 1993; Vice President and
Portfolio Manager for Society
National Bank since 1992; with
Ameritrust Company National
Association from 1973 to 1992.

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.

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<PAGE>

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 operation. For expenses incurred and services provided as Administrator
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 net assets. The Administrator may periodically waive
all or a portion of its administrative fee with respect to the Fund .

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.

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 and
Shareholder Service Agreement with the Victory Portfolios and receives a fee for
such services based on various criteria, including assets, transactions and the
number of accounts.

SHAREHOLDER SERVICING

The Victory Portfolios has adopted a Shareholder Servicing Plan for each class
of shares of the Fund. In accordance with the Shareholder Servicing Plan, the
Fund may enter into Shareholder Service Agreements under which the Fund pays
fees of up to .25% of the net assets of each class incurred in connection with
the personal service and maintenance of accounts holding the shares of such
class. Such agreements are entered into between the Victory Portfolios and
various shareholder servicing agents, including the Distributor, Key Trust
Company of Ohio, N.A. and 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 inquires, forwarding shareholder communication, assisting
in the processing of purchase, exchange and redemption requests, and assisting
shareholders in changing dividend options, account designations and addresses.
Shareholder Servicing Agents may periodically waive all or a portion of their
respective shareholder servicing fees with respect to the Fund .

FUND ACCOUNTANT

BISYS Fund Services Ohio, Inc., 3435 Stelzer Road, Columbus, OH 43219, provides
certain accounting services for the Fund pursuant to a Fund Accounting Agreement
and receives a fee for such services.

CUSTODIAN

Key Trust Company of Ohio, N.A. , an affiliate of the Adviser and Sub-Adviser,
serves as custodian for the Fund and receives fees for the services it performs
as custodian.

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<PAGE>

INDEPENDENT ACCOUNTANTS

Coopers & Lybrand L.L.P. serves as independent accountants to the Fund.

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, services
rendered in connection with the preparation of regulatory filings and other
reports, and regulatory , compliance , and other administrative and support
services.

For such services, the Sub-Adviser pays fees to Key Advisers as follows: .45% on
the first $10 million of average daily net assets; .30% of the next $15 million
of average daily net assets ; .20% of the next $25 million of average daily net
assets; and .15% of average daily net assets in excess of $50 million.

EXPENSES

For the fiscal year ended October 31, 1995, the Fund's total operating expenses
(for Class A shares) were 1.36% of the Fund's average net assets, excluding
certain voluntary fee reductions or reimbursements.

ADDITIONAL INFORMATION

The Victory Portfolios may issue an unlimited number of shares and classes of
the Fund. Shares of each class 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, 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 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.

- 29 -

<PAGE>

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 and 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.

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 telephone 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

As of the date of this Prospectus, the Fund offers only the classes of shares
that are offered by this Prospectus. Subsequent to the date of this Prospectus,
the Fund may offer additional classes of shares through a separate prospectus.
Any such additional classes may have different sales charges and other expenses,
which would affect investment performance. Further information may be obtained
by contacting your Investment Professional or by calling (800) 539- 3863.

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 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

- 30 -

<PAGE>

activities of the Victory Portfolios for the most recent fiscal year or
semi-annual 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.

The Fund intends to eliminate duplicate mailings of annual reports and
semi-annual reports ("Reports") to an address at which more than one shareholder
of record with the same last name has indicated that mail is to be delivered.
Shareholders may receive additional copies of any Report at no cost by writing
to the Fund at the address listed on the cover of this Prospectus or by calling
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.

- 31 -

<PAGE>
The
Victory

Portfolios
Diversified Stock Fund

Prospectus For current yield, purchase, and redemption information,
February 1, 1996 call 800-539-FUND or 800-539-3863

The Victory Portfolios (the "Victory Portfolios") is a registered open-end
management investment company that offers investors a selection of money market,
fixed-income, municipal bond, domestic and international equity portfolios. This
Prospectus relates to the Diversified Stock Fund (the "Fund"), a diversified
portfolio. 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 (the
"Sub-Adviser" or "Society"). 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 long-term growth of capital. The Fund pursues this
investment objective by investing primarily in common stocks and securities
convertible into common stocks issued by established domestic and foreign
companies.

SHARES OF THE FUND ARE:

o NOT INSURED BY THE FDIC;

o NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR GUARANTEED BY, ANY KEYCORP
BANK, ANY OF ITS AFFILIATES, OR ANY OTHER BANK;

o SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL
AMOUNT INVESTED.

<PAGE>

TABLE OF CONTENTS PAGE
- ----------------- ----

Fund Expenses 3
Financial Highlights 4
Investment Objective 5
Investment Policies and Risk Factors 5
How to Invest, Exchange and Redeem 10
Dividends, Distributions and Taxes 20
Performance 22
Fund Organization and Fees 23
Additional Information 26

- 2 -

<PAGE>

Fund Expenses

SHAREHOLDER TRANSACTION EXPENSES(1)
CLASS A CLASS B

Maximum Sales Charge Imposed on Purchases
(as a percentage of the offering price) 4.75% none
---
Maximum Sales Charge Imposed on Reinvested none none
Dividends
Deferred Sales Charge none 5% in the first
------ year, declining
to 1% in the
sixth year and
eliminated
thereafter
Redemption Fees none none
Exchange Fee none none

ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)

CLASS A CLASS B
Management Fees .65% .65%

Administration Fees .15% .15%
Rule 12b-1 Distribution Fee .00% .75%
Other Expenses(2) .25% .39%
-------- ----
Total Fund Operating Expenses(2) 1.05% 1.94%
====----- -----

(1) Investors may be charged a fee if they effect transactions in Fund shares
through a broker or agent, including affiliated banks and non-bank
affiliates of Key Advisers and KeyCorp. (See "How to Invest, Exchange and
Redeem.")

(2) These amounts include an estimate of the shareholder servicing fees the
Fund expects to pay (see "Fund Organization and Fees - Shareholder
Servicing").

Example: You would pay the following expenses on a $1,000 investment, assuming
(1) a 5% annual return and (2) full redemption at the end of each time period.

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------

Diversified Stock Fund - Class A Shares $58 $79 $103 $170
--- ---- ----
Diversified Stock Fund - Class B Shares $70 $91 $125 $203
--- --- ---- ----

- 3 -

<PAGE>

FINANCIAL HIGHLIGHTS

The Victory Diversified Stock Fund
Class A Shares
October 20,
1989 to
Year Ended October 31, October 31,
1995 1994 1993 1992 1991 1990(c) 1989(a)(c)
---- ---- ---- ---- ---- ---- ----

<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period ........................ $ 12.68 $ 13.39 $ 12.16 $ 11.44 $ 9.25 $ 9.90 $ 10.00

Income from Investment Activities
Net investment income ......... 0.27 0.25 0.18 0.19 0.23 0.26

Net realized and unrealized
gains (losses) on investments 2.33 0.64 1.50 1.11 2.20 (0.67) (0.10)
--------- --------- --------- --------- --------- --------- ---------

Total from Investment
Activities
2.60 0.89 1.68 1.30 2.43 (0.41) (0.10)
--------- --------- --------- --------- --------- --------- ---------

Distributions

Net investment income ......... (0.28) (0.23) (0.21) (0.19) (0.24) (0.24)
Net realized gains ............ (1.38) (1.37) (0.24) (0.39)
------- --------- --------- --------- --------- ---------
Total Distributions ..... (1.66) (1.60) (0.45) (0.58) (0.24) (0.24)
--------- --------- --------- --------- --------- ---------
Net Asset Value, End of Period ... $ 13.62 $ 12.68 $ 13.39 $ 12.16 $ 11.44 $ 9.25 $ 9.90
========= ========= ========= ========= ========= ========= =========
Total Return (Excludes Sales
Charge) 23.54% 7.39% 14.04% 11.57% 27.50% (4.29%) (1.00%)

Ratios/Supplemental Data:

Net Assets, End of Period (000) .. $ 409,549 $ 263,227 $ 257,405 $ 227,839 $ 177,472 $ 121,754 $ 80,046
Ratio of expenses to average
net .............................. 0.92% 0.89% 0.89% 0.91% 0.91% 0.91% 0.75%
assets
Ratio of net investment ...... 2.11% 2.06% 1.45% 1.63% 2.06% 2.75% 1.39%
income to average net assets ..
Ratio of expenses to average net . 0.95% 1.10% 0.90%
assets(b) ......................
Ratio of net investment income ... 2.07% 1.86% 1.43%
to average net assets(b) ......

Portfolio turnover ............... 75.05% 103.62% 86.32% 74.83% 50.78% 63.10% 3.00%
</TABLE>

(a) Period from commencement of operations.

(b) During the period the investment advisory, administrator and/or
shareholder service fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as
indicated.

- 4 -

<PAGE>

INVESTMENT OBJECTIVE

The Fund seeks to provide long-term growth of capital. The investment objective
of the Fund is fundamental and may not be changed without a vote of the holders
of a majority of its outstanding voting securities (as defined in the Statement
of Additional Information). There can be no assurance that the Fund will achieve
its investment objective.

INVESTMENT POLICIES AND RISK FACTORS

SUMMARY OF PRINCIPAL INVESTMENT POLICIES

The Fund pursues its objective by investing primarily in common stocks and
securities convertible into common stocks (i.e., warrants, convertible preferred
stock, fixed-rate preferred stock, convertible fixed income securities, options,
and rights) issued by established domestic and foreign companies which Key
Advisers or the Sub-Adviser believe represent investment value because their
market prices do not reflect their earnings performance or because Key Advisers
or the Sub-Adviser believe they are selling below historical price relationships
and/or underlying asset values.

Investments are based on analysis by Key Advisers or the Sub-Adviser of cash
flow, book value, dividend yield and growth potential, quality of management,
adequacy of revenues, earnings and capitalization, and future relative earnings
growth. Key Advisers and the Sub-Adviser will attempt to choose investments
which, in the aggregate, provide above average dividend yield and potential for
appreciation.

Under normal market conditions, the Fund will invest at least 80% of the value
of its total assets in common stocks and securities convertible into common
stocks, and no more than 20% of the value of its total assets in preferred
stocks, investment-grade corporate bonds and notes, warrants, and high quality
short-term debt obligations (including variable amount master demand notes),
bankers' acceptances, certificates of deposit, repurchase agreements,
obligations issued or guaranteed by the U.S. Government, its agencies and
instrumentalities, and demand and time deposits of domestic and foreign banks
and savings and loan associations.

ADDITIONAL INFORMATION REGARDING THE FUND'S INVESTMENTS

The following paragraphs provide a brief description of some of the types of
securities in which the Fund may invest in accordance with its investment
objective, policies and limitations, including certain transactions it may make
and strategies it may adopt. The following also contains a brief description of
certain risk factors. 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 are 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.

o SHORT-TERM OBLIGATIONS. While the Fund will normally be predominantly invested
in equity securities, there may be times when, in Key Advisers' or the Sub-
Adviser's opinion, market conditions warrant that, for temporary defensive
purposes, the Fund may hold more than 20% of its total assets in short-term
obligations. To the extent that the Fund's assets are so invested, they will not
be invested so as to meet its investment objective. The instruments may include
"High-Quality" liquid debt securities such as commercial paper, certificates of
deposit, bankers' acceptances, repurchase agreements which mature in less than
seven days and United States

- 5 -

<PAGE>

Treasury Bills. Bankers' acceptances are instruments of United States banks
which are drafts or bills of exchange "accepted" by a bank or trust company as
an obligation to pay on maturity. For a discussion of repurchase agreements, see
below.

o INVESTMENT GRADE AND HIGH QUALITY SECURITIES. "Investment Grade" obligations
are those rated at the time of purchase within the four highest rating
categories assigned by a nationally recognized statistical ratings organization
("NRSRO") or, if unrated, are obligations that Key Advisers or the Sub-Adviser
determine to be of comparable quality. The applicable securities ratings are
described in the Appendix to the Statement of Additional Information.
"High-Quality" short-term obligations are those obligations which, at the time
of purchase, (1) possess a rating in one of the two highest ratings categories
from at least one NRSRO (for example, commercial paper rated "A-1" or "A-2" by
Standard & Poor's Corporation or "P-1" or "P-2" by Moody's Investors Service,
Inc. or (2) are unrated by an NRSRO but are determined by Key Advisers or the
Sub-Adviser to present minimal credit risks and to be of comparable quality to
rated instruments eligible for purchase by the Fund under guidelines adopted by
the Trustees.

o FOREIGN SECURITIES. The Fund may invest in equity securities of foreign
issuers, including securities traded in the form of American Depository
Receipts. The Fund will limit its investments in such securities to 20% of its
total assets. The Fund will not hold foreign currency as a result of investment
in foreign securities.

o ZERO COUPON BONDS. The Fund is permitted to purchase both zero coupon U.S.
government securities and zero coupon corporate securities ("zero coupon
bonds"). Zero coupon bonds are purchased at a discount from the face amount
because the buyer receives only the right to a fixed payment on a certain date
in the future and does not receive any periodic interest payments. The effect of
owning instruments which do not make current interest payments is that a fixed
yield is earned not only on the original investment but also, in effect, on
accretion during the life of the obligations. This implicit reinvestment of
earnings at the same rate eliminates the risk of being unable to reinvest
distributions at a rate as high as the implicit yields on the zero coupon bond,
but at the same time eliminates the holder's ability to reinvest at higher rates
. For this reason, zero coupon bonds are subject to substantially greater price
fluctuations during periods of changing market interest rates than are
comparable securities which pay interest periodically. The amount of price
fluctuation tends to increase as maturity of the security increases.

o RECEIPTS. In addition to bills, notes and bonds issued by the U.S. Treasury,
the Fund may also purchase separately traded interest and principal component
parts of such obligations that are transferable through the Federal book entry
system, known as Separately Traded Registered Interest and Principal Securities
("STRIPS") and Coupon Under Book Entry Safekeeping ("CUBES"). These instruments
are issued by banks and brokerage firms and are created by depositing Treasury
notes and Treasury bonds into a special account at a custodian bank; the
custodian holds the interest and principal payments for the benefit of the
registered owners of the certificates or receipts. The custodian arranges for
the issuance of the certificates or receipts evidencing ownership and maintains
the register. Receipts include Treasury Receipts ("TRs"), Treasury Investment
Growth Receipts ("TIGRs") and Certificates of Accrual on Treasury Securities
("CATS").
- 6 -

<PAGE>

STRIPS, CUBES, TRs, TIGRs and CATS are sold as zero coupon securities, which
means that they are sold at a substantial discount and redeemed at face value at
their maturity date without interim cash payments of interest or principal. This
discount is amortized over the life of the security, and such amortization will
constitute the income earned on the security for both accounting and tax
purposes. Because of these features, these securities may be subject to greater
fluctuations in value due to changes in interest rates than interest-paying U.S.
Treasury obligations. The Fund will limit its investment in such instruments to
20% of its total assets.

o SECURITIES LENDING. In order to generate additional income, the Fund may, from
time to time, lend its portfolio securities. The Fund must receive collateral
equal to 100% of the securities' value in the form of cash or U.S. Government
securities, plus any interest due, which collateral must be marked to market
daily by Key Advisers or the Sub-Adviser. Should the market value of the loaned
securities increase, the borrower must furnish additional collateral to the
Fund. During the time portfolio securities are on loan, the borrower pays the
Fund amounts equal to any dividends or interest paid on such securities plus any
interest negotiated between the parties to the lending agreement. Loans are
subject to termination by the Fund or the borrower at any time. While the Fund
does not have the right to vote securities on loan, the Fund intends to
terminate any loan and regain the right to vote if that is considered important
with respect to the Fund's investment. The Fund will only enter into loan
arrangements with broker-dealers, banks or other institutions which Key Advisers
or the Sub-Adviser has determined are creditworthy under guidelines established
by the Victory Portfolios' Board of Trustees (the "Trustees"). The Fund will
limit its securities lending to 33 1/3% of total assets.

o WHEN-ISSUED SECURITIES. The Fund may purchase securities on a when-issued or
delayed delivery basis. These transactions are arrangements in which the Fund
purchases securities with payment and delivery scheduled for a future time. When
the Fund agrees to purchase securities on a when-issued basis, the Fund's
custodian must set aside cash or liquid portfolio securities equal to the amount
of that commitment in a separate account, and may be required to subsequently
place additional assets in the separate account to reflect any increase in the
Fund's commitment. Prior to delivery of when-issued securities, their value is
subject to fluctuation and no income accrues until their receipt. The Fund
engages in when-issued and delayed delivery transactions only for the purpose of
acquiring portfolio securities consistent with its investment objective and
policies, and not for investment leverage. In when-issued and delayed delivery
transactions, the Fund relies on the seller to complete the transaction; its
failure to do so may cause the Fund to miss a price or yield considered to be
advantageous.

o VARIABLE AND FLOATING RATE SECURITIES. The Fund may purchase Investment Grade
variable and floating rate notes . The interest rates on these securities may be
reset daily, weekly, quarterly, or some other reset period, and may be subject
to a floor or ceiling. There is a risk that the current interest rate on such
obligations may not accurately reflect existing market interest rates. There may
be no active secondary market with respect to a particular variable or floating
rate note. Variable and floating rate notes for which no readily available
market exists will be purchased in an amount which, together with other illiquid
securities held by the Fund, does not exceed 15% of the Fund's total assets
unless such notes are subject to a demand feature that will permit the Fund to
receive payment of the principal within seven days after demand therefor. These
securities are included among those which are sometimes referred to as
"derivative securities."

o REPURCHASE AGREEMENTS. Under the terms of a repurchase agreement, the Fund
acquires securities from financial institutions or registered broker-dealers,
subject to the seller's agreement to repurchase such securities at a mutually
agreed upon date and price. The seller is required to maintain the value of
collateral held pursuant to the agreement at not less than the repurchase price
(including accrued interest). If the seller were to default on its repurchase
obligation or become insolvent, the Fund would suffer a loss to the extent that
the proceeds from a sale of the underlying portfolio securities were less than
the repurchase price, or to the extent that the disposition of such securities
by the Fund was delayed pending court action. Repurchase agreements may be
considered by the staff of the Commission to constitute loans by the Fund.

- 7 -

<PAGE>

account assets having a value equal to the repurchase price (including accrued
interest); the collateral will be marked to market on a daily basis, and will be
continuously monitored to ensure that such equivalent value is maintained.
Reverse repurchase agreements involve the risk that the market value of the
securities sold by the Fund may decline below the price at which the Fund is
obligated to repurchase the securities. Reverse repurchase agreements are
considered to be borrowings under the Investment Company Act of 1940, as amended
(the "1940 Act").

o 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. Pursuant to
an exemptive order received by the Victory Portfolios from the Commission, the
Fund may invest in the money market funds of the Victory Portfolios. Key
Advisers or the Sub-Adviser will waive its fee attributable to the Fund's assets
invested in a fund of the Victory Portfolios, and, to the extent required by the
laws of any state in which shares of the Fund are sold, Key Advisers or the
Sub-Adviser will waive its investment advisory fees 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 or the Sub-Adviser.

o PRIVATE PLACEMENT INVESTMENTS. The Fund may invest in High Quality commercial
paper issued in reliance on the exemption from registration afforded by Section
4(2) of the Securities Act of 1933, as amended (the "1933 Act"). Section 4(2)
commercial paper is generally sold to institutional investors, such as the Fund,
that agree that they are purchasing the paper for investment purposes and not
with a view to public distribution. Any resale by the purchaser must be in an
exempt transaction. Section 4(2) commercial paper is normally resold to other
institutional investors like the Fund through or with the assistance of the
issuer or investment dealers who make a market in Section 4(2) commercial paper,
thus providing liquidity. The Fund believes that Section 4(2) commercial paper
and possibly certain other Restricted Securities (as defined in the Statement of
Additional Information) that meet the criteria for liquidity established by the
Trustees are quite liquid. The Fund intends, therefore, to treat the restricted
securities that meet the criteria for liquidity established by the Trustees,
including Section 4(2) commercial paper, as determined by Key Advisers or the
Sub-Adviser, as liquid and not subject to the investment limitation applicable
to illiquid securities. See "Investment Limitations" below.

o OPTIONS. The Fund may write call options from time to time. The Fund will
write only " covered" call options (options on securities owned by the Fund and
index options). Such options must be listed on a national securities exchange
and issued by the Options Clearing Corporation. In order to close out a call
option it has written, the Fund will enter into a "closing purchase
transaction," i.e., the purchase of a call option on the same security with the
same exercise price and expiration date as the call option which the Fund
previously wrote on any particular security. When a portfolio security subject
to a call option is sold, the Fund will effect a closing purchase transaction to
close out any existing call option on that security. If the Fund is unable to
effect a closing purchase transaction, it will not be able to sell the
underlying security until the option expires or the Fund delivers the underlying
security upon exercise. Upon the exercise of an option, the Fund is not entitled
to the gains, if any, on securities underlying the options. The Fund intends to
limit its investments in call and index options to 25% of its total assets.

Certain investment management techniques which the Fund may use, such as the
purchase and sale of options (described above), may expose the Fund to special
risks. These products may be used to adjust the risk and return characteristics
of the Fund's portfolio of investments. These various products may increase or
decrease exposure to fluctuation in security prices, interest rates, or other
factors that affect security values, regardless of the issuer's credit risk.
Regardless of whether the intent was to decrease risk or increase return, if
market conditions do not perform consistently with expectations, these products
may result in a loss. In addition, losses may occur if counterparties involved
in transactions do not perform as promised. These products may expose the Fund
to potentially greater risk of loss than more traditional equity investments.

- 8 -

<PAGE>

o PORTFOLIO TRANSACTIONS. The Fund may engage in the technique of short-term
trading. Such trading involves the selling of securities held for a short time,
ranging from several months to less than a day. The object of such short-term
trading is to take advantage of what Key Advisers or the Sub-Adviser believes
are changes in market, industry or individual company conditions or outlook. Any
such trading would increase the Fund's turnover rate and its transaction costs.
High turnover will generally result in higher brokerage costs and possible tax
consequences for the Fund. In the fiscal year ended October 31, 1995, the
portfolio turnover rate was 75.05% compared to 103.62% in the prior fiscal year.

INVESTMENT LIMITATIONS

- 9 -

<PAGE>

complies with the Fund's investment policies and limitations, except in the case
of borrowing (or other activities that may be deemed to result in the issuance
of a "senior security" under the 1940 Act). If the value of the Fund's illiquid
securities at any time exceeds the percentage limitation applicable at the time
of acquisition due to subsequent fluctuations in value or other reasons, the
Trustees will consider what actions, if any, are appropriate to maintain
adequate liquidity.

HOW TO INVEST, EXCHANGE AND REDEEM

HOW TO INVEST

o CLASS A SHARES AND CLASS B SHARES. If Class A shares are purchased, there is
an initial sales charge (on investments up to $1 million). If Class B shares are
purchased, there is no sales charge at the time of purchase, but if the shares
are redeemed within six years, you will normally pay a contingent deferred sales
charge ("CDSC") that varies depending on how long you own your shares.

o WHICH CLASS OF SHARES SHOULD YOU CHOOSE? Once you decide that the Fund is an
appropriate investment for you, the decision as to which class of shares is
better suited to your needs depends on a number of factors which you should
discuss with your financial adviser:

4. INVESTMENT PROFESSIONALS. A salesperson , financial planner, investment
adviser or trust officer who provides you with information regarding the
investment of your assets (an "Investment Professional") or other person who is
entitled to receive compensation for selling Fund shares may receive different
compensation for selling one class than for selling another class. Both the CDSC
(an asset-based sales charge ) for Class B shares and the front-end sales charge
on sales of Class A shares are used primarily to compensate such persons.

o HOW ARE SHARES PURCHASED? Shares may be purchased directly or through an
Investment Professional of a securities broker or other financial institution
that has entered into a selling agreement with the Fund or the Distributor.
Shares are also available to clients of bank trust departments . The minimum
investment is $500 for the initial purchase and $25 thereafter. Accounts set up
through a bank trust department or an Investment Professional may be subject to
different minimums. When you buy shares, be sure to specify Class A or Class B
shares. If you do not make a selection, your investment will be made in Class A
shares.

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<PAGE>

regarding these features, requirements and fees will be provided by the
Investment Professional. If you are purchasing shares of any Fund through a
program of services offered or administered by your Investment Professional, you
should read the program materials in conjunction with this Prospectus. 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" and "Special Investor
Services" for more information about telephone transactions.

o 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.

INVESTING DIRECTLY

o 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 the amount of at least the
minimum investment requirement to:

The Victory Diversified Stock Fund
Primary Funds Service Corporation
P.O. Box 9741
Providence, RI 02940-9741

Subsequent purchases may be made in the same manner.

o BY WIRE. Call 800-539-3863 to set up your Fund account to accommodate wire
transactions. YOU MUST CALL THE TRANSFER AGENT BEFORE WIRING FUNDS. 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: Diversified Stock 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.

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<PAGE>

Agent must receive your order as of the close of regular trading of the New York
Stock Exchange ("NYSE") (generally 4:00 p.m. Eastern time) (the "Valuation
Time") on each Business Day (as defined in "Shareholder Account Rules and
Policies -- Share Price" below). If you buy shares through an Investment
Professional, the Investment Professional must receive your order in a timely
fashion on a regular Business Day and transmit it to the Transfer Agent so that
it is received before the close of business that day. The Transfer Agent may
reject any purchase order for the Fund's shares, in its sole discretion. It is
the responsibility of your Investment Professional to transmit your order to
purchase shares to the Transfer Agent in a timely fashion in order for you to
receive that day's share price.

INVESTMENT REQUIREMENTS

DEALER
CLASS A SALES CHARGE REALLOWANCE
AS A % OF AS A % OF AS A %
OFFERING NET AMOUNT OF OFFERING
AMOUNT OF PURCHASE PRICE INVESTED PRICE
------------------ ----- -------- -----

Less than $49,999 4.75% 4.99% 4.00%
$50,000 to $99,999 4.50% 4.71% 4.00%
$100,000 to $249,999 3.50% 3.63% 3.00%
$250,000 to $499,999 2.25% 2.30% 2.00%
$500,000 to $999,999 1.75% 1.78% 1.50%
$1,000,000 and above 0.00% 0.00% (1)

(1) There is no initial sales charge on purchases of $1 million or more.
Investment Professionals will be compensated at the rate of up to 0.25%
on such purchases.

The Distributor reserves the right to reallow the entire commission to dealers.
If that occurs, the dealer may be considered an "underwriter" under Federal
securities laws.

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<PAGE>

the Victory Portfolios) sold by First Albany or PFIC and their broker-dealer
affiliates. "Dealer Retention" is an amount equal to the difference between the
applicable sales charge and such part of the sales charge which is reallowed to
broker-dealers.

o REDUCED SALES CHARGES FOR CLASS A SHARES. You may be eligible to buy Class A
shares at reduced sales charge rates in one or more of the following ways:

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<PAGE>

o WAIVERS OF CLASS A SALES CHARGES. No sales charge is imposed on sales of Class
A shares to the following categories of persons (which categories may be changed
or eliminated at any time):

(2) Investors who purchase shares for trust, investment management or
certain other advisory accounts established with KeyCorp or any of its
affiliates;

(4) Investors who, within 90 days of redemption, use the proceeds from the
redemption of shares of another mutual fund complex for which they
previously paid a front end sales charge or sales charge upon
redemption of shares;

(5) Shareholders of the former Investors Preference Fund
For Income, Inc. and the Investors Preference New York
Tax-Free Fund, Inc. who have continuously maintained
accounts with a fund or funds of the Victory Group with
a balance of $250,000 or more (investors with less than
$250,000 will pay any applicable sales charges);

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<PAGE>

will be assessed on the lesser of the net asset value of the shares at the time
of redemption or the original purchase price. The CDSC is not imposed on the
amount of your account value represented by the increase in net asset value over
the initial purchase price (including increases due to the reinvestment of
dividends and capital gains distributions). The Class B CDSC is paid to the
Distributor to reimburse its expenses of providing distribution-related services
to the Fund in connection with the sale of Class B shares.

CONTINGENT DEFERRED SALES CHARGE
YEARS SINCE PURCHASE ON REDEMPTIONS IN THAT YEAR
PAYMENT WAS MADE (AS % OF AMOUNT SUBJECT TO CHARGE)
---------------- ----------------------------------

0-1 5.0%
1-2 4.0%
2-3 3.0%
3-4 3.0%
4-5 2.0%
5-6 1.0%
6 and following None

In the table, a "year" is a 12-month period. All purchases are considered to
have been made on the first regular business day of the month in which the
purchase was made.

o WAIVERS OF CLASS B CDSC. The Class B CDSC will be waived if the shareholder
requests it for any of the following redemptions: (1) distributions to
participants or beneficiaries from Retirement Plans, if the distributions are
made (a) under an Automatic Withdrawal Plan after the participant reaches age
59, as long as the payments are no more than 10% of the account value annually
(measured from the date the Transfer Agent receives the request), or (b)
following the death or disability (as defined in the Internal Revenue Code) of
the participant or beneficiary; (2) redemptions from accounts other than
Retirement Plans following the death or disability of the shareholder (as
evidenced by a determination of disability by the Social Security
Administration), and (3) returns of excess contributions to Retirement Plans.

o AUTOMATIC CONVERSION OF CLASS B SHARES. Eight years after Class B shares are
purchased, those shares will automatically convert to Class A shares. This
conversion feature relieves Class B shareholders of the asset-based sales charge
that applies to Class B shares under the Class B Distribution Plan, described
below. The conversion is based on the relative net asset value of the two
classes, and no sales charge or other charge is imposed. When Class B shares
convert, any other Class B shares that were acquired by the reinvestment of
dividends and distributions on the converted shares will also convert to Class A
shares. The conversion feature is subject to the continued availability of a tax
ruling described in "Alternative Sales Arrangements-Class B Conversion Feature"
in the Statement of Additional Information.

o DISTRIBUTION PLAN FOR CLASS B SHARES. The Victory Portfolios has adopted a
Distribution Plan (the "Plan") under Rule 12b-1 of the 1940 Act for Class B
shares to compensate the Distributor for its services and costs in distributing
Class B shares and servicing accounts. Under the Plan, the Victory Portfolios
pays the Distributor an annual "asset-based sales charge" of 0.75% per year on
Class B shares that are outstanding for 6 years or less. This fee is computed on
the average daily net assets of Class B shares and paid monthly. The asset-based
sales charge allows investors to buy Class B

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<PAGE>
shares without a front-end sales charge while allowing the Distributor to
compensate dealers that sell Class B shares. The asset-based sales charge
increases Class B expenses by up to 0.75% of average net assets per year.

SPECIAL INVESTOR SERVICES

o THE SYSTEMATIC INVESTMENT PLAN. You can make regular investments in the Fund
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.
Shares will be purchased at the offering price next determined following receipt
of the order by the Transfer Agent. 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.

o THE SYSTEMATIC WITHDRAWAL PLAN. You can make regular withdrawals from your
account with the Systematic Withdrawal Plan by completing the appropriate
section of the Account Application. If you own shares in a fund worth $5,000 or
more, you can have monthly, quarterly, semi-annual or annual checks sent from
your account directly to you, to a person named by you, or to your bank checking
account. The 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
coding number across the front of the account application. If your 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 income dividends
and capital gain dividend distributions earned on your Fund shares, your account
eventually may be exhausted. If any applicable sales charges are applied to new
purchases of shares of the Fund, it is to your disadvantage to buy shares of the
Fund while also making systematic redemptions.

o TELEPHONE TRANSACTIONS. You can initiate any transaction by telephone. You may
call the Transfer Agent toll-free at 800-539-3863 or call your Investment
Professional or bank trust department. Telephone transaction privileges for
purchases, redemptions or exchanges may be modified, suspended or terminated by
the Fund at any time. If an account has more than one owner, the Fund and the
Transfer Agent may rely on the instructions of any one owner. Telephone
privileges apply to each owner of the account and the dealer representative of
record for the account unless and until the Transfer Agent receives cancellation
instructions from an owner of the account.

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<PAGE>

o Retirement Plans. Retirement plans can be among the best tax-planning vehicles
available to individuals. Call your Investment Professional for more information
on the plans and their benefits, provisions and fees. Your Investment
Professional can set up your new account in the Fund under one of several
tax-sheltered plans. These plans let you invest for retirement and shelter your
investment income from current taxes. Plans include Individual Retirement
Accounts (IRAs) and Rollover IRAs. Other fees may be charged by the IRA
custodian or trustee.

HOW TO EXCHANGE

(1) Shares of the fund selected for exchange must be available for sale
in your state of residence.

(2) The prospectuses of this Fund and the fund whose shares you want to
buy must offer the exchange privilege.

(3) You must hold the shares you buy when you establish your account
for at least 7 days before you can exchange them; after the
account is open 7 days, you can exchange shares on any Business
Day.

(4) You must meet the minimum purchase requirements for the fund you
purchase by exchange.

(5) The registration and tax identification numbers of the two accounts
must be identical. (6) Before exchanging, obtain and read the
prospectus for the fund you wish to purchase by exchange.

Shares of a particular class may be exchanged only for shares of the same class
in the other funds of the Victory Group. For example, you can exchange Class A
shares of this Fund only for Class A shares of another fund. At present, not all
of the funds offer the same two classes of shares. If a fund has only one class
of shares that does not have a class designation, they are "Class A" shares for
exchange purposes. In some cases, sales charges may be imposed on exchange
transactions. Certain funds offer Class A or Class B shares and a list can be
obtained by calling the Transfer Agent at 800-539-3863. Please refer to the
Statement of Additional Information for more details about this policy.

There are certain exchange policies you should be aware of:

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<PAGE>

of multiple exchange requests from a dealer in a "market-timing" strategy might
create excessive turnover in the Fund's portfolio and associated expenses
disadvantageous to the Fund.

o The Victory Portfolios may amend, suspend or terminate the exchange privilege
at any time upon 60 days' written notice to shareholders.

o If the Transfer Agent cannot exchange all the shares you request because of a
restriction cited above, only the shares eligible for exchange will be
exchanged.

o Each exchange may produce a gain or loss for tax purposes.

HOW TO REDEEM

You may redeem shares in several ways:

o BY MAIL. Send a written request to: The Victory Portfolios:
Diversified Stock Fund
P.O. Box 9741
Providence, RI 02940-9741

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<PAGE>

o 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. See "Special Investor Services" for more information about telephone
transactions.

o ADDITIONAL REDEMPTION REQUIREMENTS. The Fund may hold 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 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. To the extent
that portfolio securities are traded in other markets on days when the NYSE is
closed, the Fund's NAV may be affected on days when investors do not have access
to the Fund to purchase or redeem shares.

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 a
Fund falls below $500, you may be given 60 days' notice to reestablish the
minimum balance (except with respect to officers, trustees, directors and
employees, including retired directors and employees, of the Victory Portfolios,
KeyCorp and its affiliates, and the Administrator and its affiliates (and family
members of each of the foregoing) participating in the Systematic Investment
Plan, to whom no minimum balance requirement applies). 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.

SHAREHOLDER ACCOUNT RULES AND POLICIES

o SHARE PRICE. The term "net asset value per share," or "NAV", means the value
of one share. The NAV of each class of shares is calculated by adding the value
of all the Fund's investments, plus cash and other assets, deducting liabilities
of the Fund and of the class, and then dividing the result by the number of
shares of the class outstanding. The NAV of the Fund is determined and its
shares are priced as of the close of regular trading of the NYSE (generally 4:00
p.m. Eastern time) (the "Valuation Time") on each Business Day of the Fund. 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, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Columbus Day, Veterans' Day, Thanksgiving and Christmas .

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<PAGE>

o The redemption price for shares will vary from day to day because the value of
the securities in the Fund fluctuates, and the value of your shares may be more
or less than their original cost.

o If your account value has fallen below $500, you may be given 60 days' notice
to reestablish the minimum balance. If you do not increase your minimum balance,
your account may be closed and the proceeds mailed to you at the record address.
In some cases involuntary redemptions may be made to repay the Distributor for
losses from the cancellation of share purchase orders. Under unusual
circumstances, shares of the Fund may be redeemed "in kind," which means that
the redemption proceeds will be paid with securities from the Fund. Please refer
to the Statement of Additional Information for more details.

DIVIDENDS, DISTRIBUTIONS AND TAXES

Dividends

The Fund ordinarily declares and pays dividends separately for Class A and Class
B shares from its net investment income quarterly. The Fund may make
distributions at least annually out of any realized capital gains, and the Fund
may make supplemental distributions of dividends and capital gains following the
end of its fiscal year.

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 day after the record 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 dividend payment date which may be more than 7 days after the dividend
record date.

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<PAGE>

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 at the NAV as
of the day after the record date. If you are reinvesting dividends of a
fund sold without a sales charge in shares of a fund sold with a sales
charge, the shares will be purchased at the public 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
the net asset value of the fund. 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 record 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.

Reinvested dividend distributions receive the same tax treatment as dividend
distributions paid in cash.

o STATEMENTS 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 affected
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.

o REDEMPTIONS OR EXCHANGES. Investors may realize a gain or loss when redeeming
(selling) or exchanging shares. For most types of accounts, the Fund reports the
proceeds to the IRS annually. Because the shareholders' tax treatment also
depends on their purchase price and personal tax positions, shareholders should
keep their regular account statements to use in determining their tax. See
"Buying a Dividend."

o 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.

FEDERAL TAXES

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<PAGE>

Distributions to shareholders will be treated in the same manner for federal
income tax purposes whether received in cash or in additional shares and may
also be subject to state and local taxes. Distributions received by shareholders
of the Fund in January of a given year will be treated as received on December
31 of the preceding year provided that such dividends were declared to
shareholders of record on a date in October, November or December of such
preceding year. The Fund sends tax statements to its shareholders (with copies
to the Internal Revenue Service (the "IRS")) by January 31 showing the amounts
and tax status of distributions made (or deemed made) during the preceding
calendar year.

Income from securities of foreign issuers may be subject to foreign withholding
taxes. Credit for such foreign taxes, if any, will not pass through to the
shareholders.

PERFORMANCE

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<PAGE>

the period and annualizing the result. All performance figures are based on
historical earnings and are not intended to indicate future performance.

Investors may also judge, and the Victory Portfolios may at times advertise, the
performance of the Fund by comparing it to the performance of other mutual funds
with comparable investment objectives and policies, which performance may be
contained in various unmanaged mutual fund or market indices or rankings such as
those prepared by Dow Jones & Co., Inc. and Standard & Poor's Corporation, in
publications issued by Lipper Analytical Services, Inc., and in the following
publications: IBC's Money Fund Reports, Value Line Mutual Fund Survey,
Morningstar, CDA/Wiesenberger, Money Magazine, Forbes, Barron's, The Wall Street
Journal, The New York Times, Business Week, American Banker, Fortune,
Institutional Investor, U.S.A. Today and local newspapers. In addition, general
information about the Fund that appears in publications such as those mentioned
above may also be quoted or reproduced in advertisements, sales literature or in
reports to shareholders.

Additional information regarding the performance of each of the Victory
Portfolios is included in the Victory Portfolios' annual report, which is
available free of charge by calling 800-539-3863.

FUND ORGANIZATION AND FEES

Overall responsibility for management of the Victory Portfolios rests with its
Board of Trustees, who are elected by the shareholders of the Victory
Portfolios.

INVESTMENT ADVISER AND SUB-ADVISER

For the services provided and expenses incurred pursuant to the investment
advisory agreement between the Victory Portfolios respecting the Fund, Key
Advisers is entitled to receive a fee, computed daily and paid monthly, at an
annual rate of sixty-five one-hundredths of one percent (.65%) 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 may periodically waive all or a portion of its advisory fee
with respect to the Fund . Prior to January, 1996, Society Asset Management,
Inc. served as investment adviser to the Fund. During the Fund's fiscal period
ended October 31, 1995, Society Asset Management, Inc. earned investment
advisory fees aggregating .62% of the average daily net assets of the Fund.

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<PAGE>

Under the investment advisory agreement between the Victory Portfolios, on
behalf of the Fund, and Key Advisers (the "Investment Advisory Agreement"), the
Adviser may delegate a portion of its responsibilities to a sub-adviser. 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 Investment Advisory Agreement and the
subadvisory agreement, respectively, provide that Key Advisers and the
Sub-Adviser, respectively, may render services through their 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 and the Sub-Adviser,
respectively, and Key Advisers and the Sub-Adviser, respectively, will be as
fully responsible to the Fund for the acts and omissions of such persons as they
are for their own acts and omissions.

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: 65%
of the first $10 million of average daily net assets; .50% of the next $15
million of average daily net assets; .40% of the next $25 million of average
daily net assets; and .35% of average daily net assets in excess of $50 million.

The person primarily responsible for the investment management of the Fund as
well as his previous experience is as follows:

PORTFOLIO MANAGING PREVIOUS
MANAGER FUND SINCE EXPERIENCE
------- ---------- ----------

Lawrence G. Babin Commencement of Portfolio Manager with
Operations Society Asset Management, Inc.
since 1993; Portfolio Manager
with Society National Bank
since 1981.

EFFECT OF BANKING LAWS

Key Advisers and the Sub-Adviser believe that they may perform the investment
advisory services for the Fund contemplated by the Investment Advisory Agreement
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 the
Key Advisers, 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

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<PAGE>

Concord Holding Corporation is the administrator for the Fund. Victory
Broker-Dealer Services, Inc. is the Fund's principal underwriter and
Distributor.

TRANSFER AGENT

SHAREHOLDER SERVICING

FUND ACCOUNTANT

BISYS Fund Services Ohio, Inc., 3435 Stelzer Road, Columbus, OH 43219, provides
certain accounting services for the Fund pursuant to a Fund Accounting Agreement
and receives a fee for such services.

CUSTODIAN

Key Trust Company of Ohio, N.A. , an affiliate of the Adviser and Sub-Adviser,
serves as custodian for the Fund and receives fees for the services it performs
as custodian.

INDEPENDENT ACCOUNTANTS

Coopers & Lybrand L.L.P. serves as independent accountants to the Fund.

BUSINESS MANAGEMENT AGREEMENT

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<PAGE>

support services to the Sub-Adviser. Such services include preparing reports to
the Victory Portfolios' Board ofTrustees, recordkeeping services, services
rendered in connection with the preparation of regulatory filings and other
reports, and regulatory , compliance and other administrative and support
services.

For such services, the Sub-Adviser pays fees to Key Advisers as follows: .30% on
the first $10 million of average daily net assets; .15% of the next $15 million
of average daily net assets ; .05% of the next $25 million of average daily net
assets; and .00% of average daily net assets in excess of $50 million.

EXPENSES

For the fiscal year ended October 31, 1995, the Fund's total operating expenses
(for Class A shares) were .95% of the Fund's average net assets, excluding
certain voluntary fee reductions or reimbursements.

ADDITIONAL INFORMATION

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.

MASSACHUSETTS LAW

- 26 -

<PAGE>

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

MISCELLANEOUS

- 27 -

<PAGE>

- 28 -
<PAGE>

THE
VICTORY
PORTFOLIOS

INTERNATIONAL GROWTH FUND

PROSPECTUS For current yield, purchase, and redemption information,
February 1, 1996 call 800-539-FUND or 800-539-3863

THE VICTORY PORTFOLIOS (the "Victory Portfolios") is a registered open-end
management investment company that offers investors a selection of money market,
fixed-income, municipal bond, domestic and international equity portfolios. This
Prospectus relates to the INTERNATIONAL GROWTH FUND (the "Fund"), a diversified
portfolio. 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 (the
"Sub-Adviser" or "Society"). 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 capital growth consistent with reasonable investment
risk. The Fund pursues this objective by investing primarily in equity
securities of foreign corporations, most of which will be denominated in foreign
currencies.

SHARES OF THE FUND ARE:

O NOT INSURED BY THE FDIC;

O NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR GUARANTEED BY, ANY KEYCORP
BANK, ANY OF ITS AFFILIATES, OR ANY OTHER BANK;

O SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL
AMOUNT INVESTED.

<PAGE>

TABLE OF CONTENTS PAGE

Fund Expenses................................................................ 3
Financial Highlights......................................................... 4
Investment Objective......................................................... 5
Investment Policies and Risk Factors......................................... 5
How to Invest, Exchange and Redeem........................................... 11
Dividends, Distributions and Taxes........................................... 21
Performance.................................................................. 23
Fund Organization and Fees................................................... 24
Additional Information....................................................... 27

- 2 -

<PAGE>

FUND EXPENSES

SHAREHOLDER TRANSACTION EXPENSES(1)

CLASS A CLASS B
------- -------

Maximum Sales Charge Imposed on Purchases
(as a percentage of the offering price) 4.75% none
Maximum Sales Charge Imposed on Reinvested none none
Dividends none none
Deferred Sales Charge 5% in the first
year, declining
to 1% in the
sixth year and
eliminated
thereafter
Redemption Fees none none
Exchange Fee none none

ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)

CLASS A CLASS B
------- -------

Management Fees 1.10% 1.10%
Administration Fees .15% .15%
Rule 12b-1 Distribution Fee .00% .75%
Other Expenses(2) .45% .60%
Total Fund Operating Expenses(2) 1.70% 2.60%
===== ====

(2) These amounts include an estimate of the shareholder servicing fees the
Fund expects to pay (see "Fund Organization and Fees - Shareholder
Servicing").

EXAMPLE: You would pay the following expenses on a $1,000 investment, assuming
(1) a 5% annual return and (2) full redemption at the end of each time period.

1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------

International Growth Fund - Class A Shares $64 $99 $135 $239
International Growth Fund - Class B Shares $76 $111 $158 $272

- 3 -

<PAGE>

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
THE VICTORY INTERNATIONAL GROWTH FUND
CLASS A SHARES

MAY 18, 1990
YEAR ENDED OCTOBER 31, TO
----------------------------------------------------------------- OCTOBER 31,
1995(c) 1994 1993 1992 1991 1990(a)(d)
---- ---- ---- ---- ---- ----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD ..................... $13.32 $11.93 $8.93 $9.20 $9.46 $10.00
------ ------ ----- ----- ----- ------
INVESTMENT ACTIVITIES
Net investment income (loss) .... (0.05) (0.01) (0.03) (0.02) 0.51 0.09
Net realized and unrealized
gains (losses) on investments .. (0.42) 1.40 3.03 (0.17) (0.25) (0.55)
----- ---- ---- ----- ----- -----
Total from Investment Activities (0.37) 1.39 3.00 (0.19) 0.26 (0.46)
----- ---- ---- ----- ---- -----
Distributions:
Net investment income ........... (0.01) (0.52) (0.08)
Net realized gains .............. (0.55) (0.07)
Tax return of capital ........... (0.07)
TOTAL DISTRIBUTIONS .............. (0.62) (0.08) (0.52) 0.08)
----- ----- ----- -----
Net Asset Value, End of Period ... $12.33 $13.32 $11.93 $8.93 $9.20 $9.46
====== ====== ====== ===== ===== =====
TOTAL RETURN(Excludes
Sales Charge) .................. (2.50%) 11.65% 33.59% (2.08%) 2.93% (4.54%)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000) .. $106,477 $81,307 30,629 $11,091 $5,682 $9,878
Ratio of expenses to average
net assets ..................... 1.53% 1.48% 1.46% 1.56% 1.72% 1.70%(b)
Ratio of net investment
income (loss) to average
net assets ..................... 0.75% (0.51%) (0.74%) (0.20%) 5.97% 2.51%(b)
Ratio of expenses to average
net assets (b) ................. 1.65% 1.83% 1.63% 1.72%
Ratio of net investment loss
to average net assets (b) ...... 0.63% (0.86%) (0.91%) (0.35%)
Portfolio turnover ............... 68.09% 50.66% 45.43% 91.92% 102.53% 12.16%
</TABLE>

(a) Period from commencement of operations.

(c) Effective June 5, 1995, the Victory Foreign Markets Portfolio merged
into the Fund. Financial highlights for the periods prior to June 5,
1995 represent the Fund.

(d) This information is not included in the financial statements audited by
Coopers & Lybrand.

- 4 -

<PAGE>

INVESTMENT OBJECTIVE

The Fund seeks to provide capital growth consistent with reasonable investment
risk. The investment objective of the Fund is fundamental and may not be changed
without a vote of the holders of a majority of its outstanding voting securities
(as defined in the Statement of Additional Information). There can be no
assurance that the Fund will achieve its investment objective.

INVESTMENT POLICIES AND RISK FACTORS

SUMMARY OF PRINCIPAL INVESTMENT POLICIES

The Fund pursues its objective by investing primarily in equity securities of
foreign corporations, most of which will be denominated in foreign currencies.

Under normal market conditions, the Fund will invest at least 65% of its total
assets in securities of companies which derive more than 50% of their gross
revenues from or have more than 50% of their assets outside the United States
including in the form of American Depository Receipts ("ADRs"). Additionally,
under normal market conditions, at least 65% of the Fund's assets will be
invested in securities for which the principal trading market is located in at
least three different countries (excluding the United States), although for
temporary defensive purposes the Fund may invest all of its assets in a single
foreign country. The Fund invests most of its assets in securities of companies
located either in developed countries in Western Europe or in Japan, although it
may purchase securities of companies located in developing countries and other
developed countries.

By investing in foreign securities, the Fund attempts to take advantage of
differences between economic trends and the performance of securities markets in
various countries, regions and geographic areas. The return on equity
investments in some countries has at times exceeded the return on similar
investments in the U.S., while at other times the return has been less than that
of similar U.S. securities. The Fund seeks diversification by investing in
securities from various countries and geographic areas that offer different
investment opportunities and are affected by different economic trends. The
multinational character of the Fund's investments should reduce the effect that
events in any one country or geographic area will have on its investment
holdings. Of course, negative movement by one of the Fund's investments in one
foreign market may offset gains from the Fund's investments in another market.
See "Additional Information Regarding The Fund's Investments -- Foreign
Securities" below for a discussion of the certain risks associated with
investment in foreign securities.

Although the Fund intends to invest primarily in foreign equity securities, a
portion of its assets, normally not to exceed 35% of its total assets, may be
invested in domestic money market securities (including repurchase agreements)
for liquidity purposes. In addition, the Fund may invest in securities
convertible into common stock, attached and unattached warrants, sponsored and
unsponsored ADRs, as well as forward spot currency contracts.

For temporary defensive purposes, when deemed necessary by Key Advisers or the
Sub-Adviser, the Fund may invest up to 100% of its assets in U.S. Government
obligations or "high-quality" debt obligations of companies incorporated and
having principal business activities in the United States. When the Fund's
assets are so invested, they are not invested so as to meet the Fund's
investment objective. "High-Quality" short-term obligations are those
obligations which, at the time of purchase , (1) possess a rating in one of the
two highest ratings categories from at least one nationally recognized
statistical ratings organization ("NRSRO") (for example, commercial paper rated
"A-1" or "A-2" by Standard & Poor's Corporation or "P-1" or "P-2" by Moody's
Investors Service, Inc. or (2) are unrated by an NRSRO but are determined by Key
Advisers or the Sub-Adviser to present minimal credit risks and to be of
comparable quality to rated instruments eligible for purchase by the Fund under
guidelines adopted by the Trustees. The applicable securities ratings are
described in the Appendix to the Statement of Additional Information.

Additionally, as long the Fund's shares are registered under the securities laws
of the State of Texas and such restrictions are required as a consequence of
such registration, the Fund will invest only in debt securities which

- 5 -

<PAGE>

are rated at the time of purchase within the three highest rating groups
assigned by an NRSRO, or if unrated, those securities which Key Advisers or the
Sub-Adviser deems to be of comparable quality.

ADDITIONAL INFORMATION REGARDING THE FUND'S INVESTMENTS

O FOREIGN SECURITIES. Investments in securities of foreign companies generally
involve greater risks than are present in U.S. investments. Compared to U.S. and
Canadian companies, there is generally less publicly available information about
foreign companies and there may be less governmental regulation and supervision
of foreign stock exchanges, brokers and listed companies. Foreign companies
generally are not subject to uniform accounting, auditing and financial
reporting standards, practices and requirements comparable to those applicable
to U.S. companies. Securities of some foreign companies are less liquid, and
their prices more volatile, than securities of comparable U.S. companies.
Settlement of transactions in some foreign markets may be delayed or may be less
frequent than in the U.S., which could affect the liquidity of the Fund's
investment. In addition, with respect to some foreign countries, there is the
possibility of nationalization, expropriation or confiscatory taxation;
limitations on the removal of securities, property or other assets of the Fund;
political or social instability; increased difficulty in obtaining legal
judgments; or diplomatic developments which could affect U.S. investments in
those countries. Key Advisers or the Sub-Adviser will take such factors into
consideration in managing the Fund's investments.

The Fund may invest up to twenty percent (20%) of its total assets in companies
located in developing countries. In addition to the above-described risks of
investments in the securities of foreign issuers, companies located in
developing countries are subject to some additional risks. Compared to the
United States and other developed countries, developing countries may have
relatively unstable governments, economies based on only a few industries, and
securities markets which trade a small number of securities. Prices on these
exchanges tend to be volatile and, in the past, securities in these countries
have offered greater potential for gain, as well as greater risk of loss, than
securities of companies located in developed countries.

When the Fund invests in foreign securities, such securities will usually be
denominated in foreign currency, and the Fund may temporarily hold funds in
foreign currencies. Thus, the value of the Fund's shares will be affected by
changes in currency exchange rates. The value of the Fund's investments
denominated in foreign currencies and any cash it holds in foreign currencies
will depend on the relative strength of those currencies and the U.S. dollar,
and the Fund may be affected favorably or unfavorably by exchange control
regulations or changes in the exchange rate between foreign currencies and the
U.S. dollar. The rate of exchange between the U.S. dollar and other currencies
is determined by the forces of supply and demand in the foreign exchange market
as well as by political factors. Changes in the foreign currency exchange rates
may also affect the value of dividends and interest earned, gains and losses
realized on the sale of securities and net investment income and gains, if any,
to be distributed to shareholders by the Fund. Accordingly, the Fund's ability
to achieve its investment objective will depend, to a great extent, on favorable
exchange rates.

O FUTURES CONTRACTS. The 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,

- 6 -

<PAGE>

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.

The Fund may enter into futures contracts in an effort to hedge against market
and currency risks. For example, when interest rates are expected to rise or
market values of portfolio securities are expected to fall, the Fund can seek to
offset a decline in the value of its portfolio securities by entering into
futures contract transactions. When interest rates are expected to fall or
market values are expected to rise, the Fund, through the purchase of such
contracts, can attempt to secure better rates or prices than might later be
available in the market when it effects anticipated purchases.

Aggregate initial margin deposits for futures contracts, and premiums paid for
related options, may not exceed 5% of a Fund's total assets (other than in
connection with bona fide hedging purposes), and the value of securities that
are the subject of such futures and options (both for receipt and delivery) may
not exceed one-third of the market value of a Fund's total assets. Futures
transactions will be limited to the extent necessary to maintain the Fund's
qualification as a regulated investment company.

Futures transactions involve brokerage costs and require a Fund 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 move 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 the 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.

- 7 -

<PAGE>

principal. This discount is amortized over the life of the security, and such
amortization will constitute the income earned on the security for both
accounting and tax purposes. Because of these features, these securities may be
subject to greater fluctuations in value due to changes in interest rates than
interest-paying U.S. Treasury obligations. The Fund will limit its investment in
such instruments to 20% of its total assets.

- 8 -

<PAGE>

Reverse repurchase agreements involve the risk that the market value of the
securities sold by the Fund may decline below the price at which the Fund is
obligated to repurchase the securities. Reverse repurchase agreements are
considered to be borrowings under the Investment Company Act of 1940, as amended
(the "1940 Act").

O OPTIONS. The Fund may write call options from time to time. The Fund will
write only covered call options (options on securities owned by the Fund and
index options). Such options must be listed on a national securities exchange
and issued by the Options Clearing Corporation. In order to close out a call
option it has written, the Fund will enter into a "closing purchase
transaction," i.e., the purchase of a call option on the same security with the
same exercise price and expiration date as the call option which the Fund
previously wrote on any particular security. When a portfolio security subject
to a call option is sold, the Fund will effect a closing purchase transaction to
close out any existing call option on that security. If the Fund is unable to
effect a closing purchase transaction, it will not be able to sell the
underlying security until the option expires or the Fund delivers the underlying
security upon exercise. Upon the exercise of an option, the Fund is not entitled
to the gains, if any, on securities underlying the options. The Fund intends to
limit its investments in call and index options to 25% of its total assets.

Certain investment management techniques which the Fund may use, such as the
purchase and sale of futures contracts and options (described above), may expose
the Fund to special risks. These products may be used to adjust the risk and
return characteristics of the Fund's portfolio of investments. These various
products may increase or decrease exposure to fluctuation in security prices,
interest rates, or other factors that affect security values, regardless of the
issuer's credit risk. Regardless of whether the intent was to decrease risk or
increase return, if market conditions do not perform consistently with
expectations, these products may result in a loss. In addition, losses may occur
if counterparties involved in transactions do not perform as promised. These
products may expose the Fund to potentially greater risk of loss than more
traditional equity investments.

- 9 -

<PAGE>

O PORTFOLIO TRANSACTIONS. The Fund may engage in the technique of short-term
trading. Such trading involves the selling of securities held for a short time,
ranging from several months to less than a day. The object of such short-term
trading is to take advantage of what Key Advisers or the Sub-Adviser believes
are changes in market, industry or individual company conditions or outlook. Any
such trading would increase the Fund's turnover rate and its transaction costs.
High turnover will generally result in higher brokerage costs and possible tax
consequences for the Fund. In the fiscal year ended October 31, 1995, the
portfolio turnover rate was 68.09%, compared to 50.66% in the prior fiscal year.

INVESTMENT LIMITATIONS

- 10 -

<PAGE>

HOW TO INVEST, EXCHANGE AND REDEEM

HOW TO INVEST

4. INVESTMENT PROFESSIONALS. A salesperson , financial planner, investment
adviser or trust officer who provides you with information regarding the
investment of your assets (an "Investment Professional") or other person who is
entitled to receive compensation for selling Fund shares may receive different
compensation for selling one class than for selling another class. Both the CDSC
(an asset-based sales charge ) for Class B shares and the front-end sales charge
on sales of Class A shares are used primarily to compensate such person.

- 11 -

<PAGE>

INVESTING DIRECTLY

The Victory International Growth Fund
Primary Funds Service Corporation
P.O. Box 9741
Providence, RI 02940-9741

Subsequent purchases may be made in the same manner.

Boston Safe Deposit & Trust Co.
ABA #011001234
Credit PFSC DDA#16-918-8
The Victory Portfolios: International Growth Fund

- 12 -

<PAGE>

INVESTMENT REQUIREMENTS

DEALER
CLASS A SALES CHARGE REALLOWANCE
AS A % OF AS A % OF AS A %
OFFERING NET AMOUNT OF OFFERING
AMOUNT OF PURCHASE PRICE INVESTED PRICE

(1) There is no initial sales charge on purchases of $1 million or more.
Investment Professionals will be compensated at the rate of up to 0.25%
on such purchases.

The Distributor reserves the right to reallow the entire commission to dealers.
If that occurs, the dealer may be considered an "underwriter" under Federal
securities laws.

- 13 -

<PAGE>

O REDUCED SALES CHARGES FOR CLASS A SHARES. You may be eligible to buy Class A
shares at reduced sales charge rates in one or more of the following ways:

- 14 -

<PAGE>

O WAIVERS OF CLASS A SALES CHARGES. No sales charge is imposed on sales of Class
A shares to the following categories of persons (which categories may be changed
or eliminated at any time):

(2) Investors who purchase shares for trust, investment management or
certain other advisory accounts established with KeyCorp or any of its
affiliates;

(6) Investment advisers or financial planners who place trades for their
own accounts or the accounts of their clients and who charge a
management, consulting or other fee for their services; and clients of
such investment advisers or financial planners who place trades for
their own accounts if the accounts are linked to the master account of
such investment adviser or financial planner on the books and records
of the broker or agent. Such accounts include retirement and deferred
compensation plan and trusts used to fund those plan, including, but
not limited to, those defined in section 401(a), 403(b), or 457 of the
Internal Revenue Code and "rabbi trusts."

- 15 -

<PAGE>

charge will be assessed on the lesser of the net asset value of the shares at
the time of redemption or the original purchase price. The CDSC is not imposed
on the amount of your account value represented by the increase in net asset
value over the initial purchase price (including increases due to the
reinvestment of dividends and capital gains distributions). The Class B CDSC is
paid to the Distributor to reimburse its expenses of providing
distribution-related services to the Fund in connection with the sale of Class B
shares.

CONTINGENT DEFERRED SALES CHARGE
YEARS SINCE PURCHASE ON REDEMPTIONS IN THAT YEAR
PAYMENT WAS MADE (AS % OF AMOUNT SUBJECT TO CHARGE)

0-1 5.0%
1-2 4.0%
2-3 3.0%
3-4 3.0%
4-5 2.0%
5-6 1.0%
6 and following None

In the table, a "year" is a 12-month period. All purchases are considered to
have been made on the first regular business day of the month in which the
purchase was made.

O WAIVERS OF CLASS B CDSC. The Class B CDSC will be waived if the shareholder
requests it for any of the following redemptions: (1) distributions to
participants or beneficiaries from Retirement Plans, if the distributions are
made (a) under an Automatic Withdrawal Plan after the participant reaches age
59, as long as the payments are no more than 10% of the account value annually
(measured from the date the Transfer Agent receives the request), or (b)
following the death or disability (as defined in the Internal Revenue Code) of
the participant or beneficiary; (2) redemptions from accounts other than
Retirement Plans following the death or disability of the shareholder (as
evidenced by a determination of disability by the Social Security
Administration), and (3) returns of excess contributions to Retirement Plans.

- 16 -

<PAGE>

SPECIAL INVESTOR SERVICES

O THE SYSTEMATIC WITHDRAWAL PLAN. You can make regular withdrawals from your
account with the Systematic Withdrawal Plan by completing the appropriate
section of the Account Application. If you own shares in a fund worth $5,000 or
more, you can have monthly, quarterly, semi-annual or annual checks sent from
your account directly to you, to a person named by you, or to your bank checking
account. The 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
coding number across the front of the Account Application. If your 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 income dividends
and capital gain dividend distributions earned on your Fund shares, your account
eventually may be exhausted. If any applicable sales charges are applied to new
purchases of shares of the Fund, it is to your disadvantage to buy shares of the
Fund while also making systematic redemptions.

- 17 -

<PAGE>

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 statements
immediately after you receive them.

HOW TO EXCHANGE

(1) Shares of the fund selected for exchange must be available for sale in
your state of residence.

(2) The prospectuses of this Fund and the fund whose shares you want to buy
must offer the exchange privilege.

(3) You must hold the shares you buy when you establish your account for at
least 7 days before you can exchange them; after the account is open 7
days, you can exchange shares on any Business Day.

(4) You must meet the minimum purchase requirements for the fund you
purchase by exchange.

(5) The registration and tax identification numbers of the two accounts
must be identical.

(6) BEFORE EXCHANGING, OBTAIN AND READ THE PROSPECTUS FOR THE FUND YOU WISH
TO PURCHASE BY EXCHANGE.

There are certain exchange policies you should be aware of:

- 18 -

<PAGE>

o The Victory Portfolios may amend, suspend or terminate the exchange privilege
at any time upon 60 days' written notice to shareholders.

o If the Transfer Agent cannot exchange all the shares you request because of a
restriction cited above, only the shares eligible for exchange will be
exchanged.

o Each exchange may produce a gain or loss for tax purposes.

HOW TO REDEEM

You may redeem shares in several ways:

O BY MAIL. Send a written request to:
The Victory Portfolios:International Growth Fund

P.O. Box 9741
Providence, RI 02940-9741

- 19 -

<PAGE>

SHAREHOLDER ACCOUNT RULES AND POLICIES

- 20 -

<PAGE>

o The redemption price for shares will vary from day to day because the value of
the securities in the Fund fluctuates, and the value of your shares may be more
or less than their original cost.

DIVIDENDS, DISTRIBUTIONS AND TAXES

DIVIDENDS

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:

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.

- 21 -

<PAGE>

in shares of a fund sold with a sales charge, the shares will be
purchased at the public 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 the
net asset value of the fund. Dividend distributions can be directed
only to an existing account with a registration that is identical to
that of your Fund account.

Reinvested dividend distributions receive the same tax treatment as dividend
distributions paid in cash.

O 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.

O BUYING A DIVIDEND. On the record date for a distribution of ordinary income or
capital gains dividend, the net asset value of the Fund is reduced by the amount
of the distribution. An investor who buys shares just before the record date
("buying a dividend") will pay the full price for the shares and then receive a
portion of the purchase price back as a taxable distribution.

FEDERAL TAXES

- 22 -

<PAGE>

Distributions by the Fund of its net investment income and the excess, if any,
of its net short-term capital gain over its net long-term capital loss are
taxable to shareholders as ordinary income. These distributions are treated as
dividends for federal income tax purposes, but only a portion thereof may
qualify for the 70% dividends-received deduction for corporate shareholders
(which portion may not exceed the aggregate amount of qualifying dividends from
domestic corporations received by the Fund and must be designated by the Fund as
so qualifying). Distributions by a Fund of the excess, if any, of its net
long-term capital gain over its net short-term capital loss are designated as
capital gain dividends and are taxable to shareholders as long-term capital
gains, regardless of the length of time shareholders have held their shares.
Such distributions are not eligible for the dividends-received deduction. If a
shareholder disposes of shares in the Fund at a loss before holding such shares
for more than six months, the loss will be treated as a long-term capital loss
to the extent that the shareholder has received a capital gains dividend on
those shares.

Under certain circumstances, the Fund may be in a position to (in which case it
would) elect to "pass-through" to its shareholders the right to a credit or
deduction for income or other creditable taxes paid by the Fund to foreign
governments.

PERFORMANCE

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<PAGE>

Additional information regarding the performance of each of the Victory
Portfolios is included in the Victory Portfolios' annual report, which is
available free of charge by calling 800-539-3863.

FUND ORGANIZATION AND FEES

Overall responsibility for management of the Victory Portfolios rests with its
Board of Trustees, who are elected by the shareholders of the Victory
Portfolios.

INVESTMENT ADVISER AND SUB-ADVISER

For the services provided and expenses incurred pursuant to the investment
advisory agreement between the Victory Portfolios respecting the Fund, Key
Advisers is entitled to receive a fee, computed daily and paid monthly, at an
annual rate of one and ten one-hundredths of one percent (1.10%) of the average
daily net assets of the Fund. The investment advisory fee paid by the Fund is
higher than the advisory fees paid by most mutual funds, although the Victory
Portfolios' Board of Trustees believes such fees to be comparable to advisory
fees paid by many international funds having similar objectives and policies.
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 may periodically waive
all or a portion of its advisory fee with respect to the Fund . Prior to
January, 1996, Society Asset Management, Inc. served as investment adviser to
the Fund. Clay Finlay Inc. served as sub-adviser to the Fund from November 1,
1994 until June 5, 1995. During the Fund's fiscal year ended October 31, 1995,
Society Asset

- 24 -

<PAGE>

Management, Inc. received investment advisory fees aggregating .54% of the
Fund's average daily net assets, and Clay Finlay Inc. received investment
sub-advisory fees aggregating .43% of the Fund's average daily net assets.

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:
.90% of the first $10 million of average daily net assets; .70% of the next $15
million of average daily net assets; .55% of the next $25 million of average
daily net assets; and .45% of average daily net assets in excess of $50 million.

The person primarily responsible for the investment management of the Fund as
well as his previous experience is as follows:

MANAGING PREVIOUS
Portfolio Manager PORTFOLIOS SINCE EXPERIENCE
- ----------------- ---------------- ----------

Conrad R. Metz October, 1995 Vice President and Portfolio Manager with
Society Asset Management, Inc. since 1995;
Senior Vice President, International
Equities, with Bailard, Biehl & Kaiser from
1993 - 1995; Principal, International
Port-folio Manager, Vice President and
Analyst with Harris Investment Management
from 1983 - 1993; Assistant Vice President
and Investment Officer, Equity Research
with National Bank of Detroit from 1978 -
1983.

EFFECT OF BANKING LAWS

- 25 -

<PAGE>

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 the Key Advisers, 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.

TRANSFER AGENT

SHAREHOLDER SERVICING

FUND ACCOUNTANT

BISYS Fund Services Ohio, Inc., 3435 Stelzer Road, Columbus, OH 43219, provides
certain accounting services for the Fund pursuant to a Fund Accounting Agreement
and receives a fee for such services.

CUSTODIAN

- 26 -

<PAGE>

Key Trust Company of Ohio, N.A. , an affiliate of the Adviser and Sub-Adviser,
serves as custodian for the Fund and receives fees for the services it performs
as custodian. The Bank of New York serves as sub-custodian for the Fund and
receives fees for the services it performs as sub-custodian.

INDEPENDENT ACCOUNTANTS

Coopers & Lybrand L.L.P. serves as independent accountants to the Fund.

BUSINESS MANAGEMENT AGREEMENT

For such services, the Sub-Adviser pays fees to Key Advisers as follows: .55% on
the first $10 million of average daily net assets; .35% of the next $15 million
of average daily net assets; .20% of the next $25 million of average daily net
assets; and .10% of average daily net assets in excess of $50 million.

EXPENSES

For the fiscal year ended October 31, 1995, the Fund's total operating expenses
(for Class A shares) were 1.65% of the Fund's average net assets, excluding
certain voluntary fee reductions or reimbursements.

ADDITIONAL INFORMATION

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.

- 27 -

<PAGE>

MASSACHUSETTS LAW

DELAWARE LAW

MISCELLANEOUS

- 28 -

<PAGE>

The Fund intends to eliminate duplicate mailing of annual reports and
semi-annual reports ("Reports") to an address at which more than one shareholder
of record with the same last name has indicated that mail is to be delivered.
Shareholders may receive additional copies of any Report at no cost by writing
to the Fund at the address listed on the cover of this Prospectus or by calling
800-539-3863.

- 29 -

<PAGE>
THE
VICTORY

PORTFOLIOS
OHIO REGIONAL STOCK FUND

PROSPECTUS For current yield, purchase, and redemption information,
February 1, 1996 call 800-539-FUND or 800-539-3863

THE VICTORY PORTFOLIOS (the "Victory Portfolios") is a registered open-end
management investment company that offers investors a selection of money market,
fixed-income, municipal bond, domestic and international equity portfolios. This
Prospectus relates to the OHIO REGIONAL STOCK FUND (the "Fund"), a diversified
portfolio. 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 (the
"Sub-Adviser" or "Society"). 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 capital appreciation. The Fund pursues this objective
by investing primarily in common stocks and securities convertible into common
stocks issued by companies whose headquarters are located in the State of Ohio.

SHARES OF THE FUND ARE:

O NOT INSURED BY THE FDIC;

O NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR GUARANTEED BY, ANY KEYCORP
BANK, ANY OF ITS AFFILIATES, OR ANY OTHER BANK;

O SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL
AMOUNT INVESTED.

<PAGE>

TABLE OF CONTENTS PAGE
----------------- ----

Fund Expenses......................................................... 3
Financial Highlights.................................................. 4
Investment Objective.................................................. 5
Investment Policies and Risk Factors.................................. 5
How to Invest, Exchange and Redeem................................... 10
Dividends, Distributions and Taxes................................... 21
Performance.......................................................... 23
Fund Organization and Fees........................................... 24
Additional Information............................................... 27

- 2 -

<PAGE>

FUND EXPENSES

SHAREHOLDER TRANSACTION EXPENSES(1)
- -----------------------------------

CLASS A CLASS B
------- -------

Maximum Sales Charge Imposed on Purchases
(as a percentage of the offering price) 4.75% none

Maximum Sales Charge Imposed on Reinvested none none
Dividends
Deferred Sales Charge none 5% in the first
year, declining
to 1% in the
sixth year and
eliminated
thereafter
Redemption Fees none none
Exchange Fee none none

ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)

CLASS A CLASS B

Management Fees .75% .75%

Administration Fees .15% .15%

Rule 12b-1 Distribution Fee .00% .75%

Other Expenses(2) .55% .68%
----- -----
Total Fund Operating Expenses(2) 1.45% 2.33%
===== =====

(1) Investors may be charged a fee if they effect transactions in Fund shares
through a broker or agent, including affiliated banks and non-bank
affiliates of Key Advisers and KeyCorp. (See "How to Invest, Exchange and
Redeem.")

(2) These amounts include an estimate of the shareholder servicing fees the
Fund expects to pay (see "Fund Organization and Fees - Shareholder
Servicing").

EXAMPLE: You would pay the following expenses on a $1,000 investment, assuming
(1) a 5% annual return and (2) full redemption at the end of each time period.

1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------

Ohio Regional Stock Fund - Class A Shares $62 $ 91 $123 $213

Ohio Regional Stock Fund - Class B Shares $74 $103 $145 $245

- 3 -

<PAGE>

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
THE VICTORY OHIO REGIONAL STOCK FUND
CLASS A SHARES OCTOBER 20,
-------------- 1989 TO
YEAR ENDED OCTOBER 31, OCTOBER 31,
1995 1994 1993 1992 1991 1990(a)(c) 1989(a)(c)
---- ---- ---- ---- ---- ---------- ----------

<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $14.56 $14.69 $12.12 $11.15 $6.75 $9.72 $10.00

Income from Investment Activities
Net investment income 0.17 0.18 0.16 0.20 0.21 0.24
Net realized and unrealized
gains (losses) on investments 2.13 0.39 2.63 1.07 4.39 (2.98) (0.28)

Total from Investment
Activities 2.30 0.57 2.79 1.27 4.60 (2.74) (0.28)
- ---------- ---- ---- ---- ---- ---- ------ ------

Distributions
Net investment income (0.18) (0.17) (0.18) (0.21) (0.20) (0.23)
Net realized gains (0.74) (0.53) (0.04) (0.09)
Total Distributions (0.92) (0.70) (0.22) (0.30) (0.20) (0.23)
==== ==== ==== ==== ==== ====

NET ASSET VALUE, END OF PERIOD $15.94 $14.56 $14.69 $12.12 $11.15 $6.75 $9.72

Total Return (Excludes Sales
Charge) 16.93% 3.96% 23.16% 11.50% 68.68% (28.63%) (2.80%)

RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000) $39,048 $33,965 $34,926 $36,115 $27,092 $13,039 $20,277
Ratio of expenses to average net 1.20% 1.04% 1.04% 1.04% 1.08% 1.11% 0.88%(b)
assets
Ratio of net investment 1.13% 1.27% 1.17% 1.73% 2.16% 2.66% 0.47%(b)
income to average net assets
Ratio of expenses to average 1.24% 1.27% 1.06%
net assets(b)
Ratio of net investment income 1.09% 1.04% 1.15%
to average net assets (b)

Portfolio turnover 11.44% 14.38% 7.25% 7.56% 14.59% 11.17%

</TABLE>

(a) Period from commencement of operations.

- 4 -

<PAGE>

INVESTMENT OBJECTIVE

The Fund seeks to provide capital appreciation. The investment objective of the
Fund is fundamental and may not be changed without a vote of the holders of a
majority of its outstanding voting securities (as defined in the Statement of
Additional Information). There can be no assurance that the Fund will achieve
its investment objective.

INVESTMENT POLICIES AND RISK FACTORS

SUMMARY OF PRINCIPAL INVESTMENT POLICIES

The Fund pursues its objective by investing primarily in common stocks and
securities convertible into common stocks issued by companies whose headquarters
are located in the State of Ohio.

Under normal conditions, the Fund will invest at least 80% of the value of its
total assets in common stocks and securities convertible into common stocks
issued by companies whose headquarters are located in the State of Ohio.
Investments are based on analysis by Key Advisers or the Sub- Adviser of cash
flow, book value, dividend growth potential, quality of management, adequacy of
revenues, earnings and capitalization, and future relative earnings growth.
Along with investments in nationally recognized companies, the Fund will seek to
invest in companies which are relatively unknown because they are new or have a
small capitalization, but which offer the potential for capital appreciation.
The stock prices of such lesser-known companies are generally more volatile than
stock prices of stocks of mature companies.

Changes in the value of portfolio securities will not affect cash income, if
any, derived from these securities but will affect the Fund's net asset value.
Because the Fund invests primarily in equity securities, which fluctuate in
value, the Fund's shares will fluctuate in value. The Fund's policy of
concentrating its investments in the State of Ohio means that its assets may be
subject to greater risk from economic, political, or other developments having
an unfavorable impact upon the State of Ohio. Moreover, because of the
geographic limitation, the Fund may be less varied (by industry and by issuer)
than other funds with a similar investment objective and no such geographic
limitation.

ADDITIONAL INFORMATION REGARDING THE FUND'S INVESTMENTS

O SHORT-TERM OBLIGATIONS. While the Fund will normally be predominantly invested
in equity securities, there may be times when, in Key Advisers' or the Sub-
Adviser's opinion, market conditions warrant that, for temporary defensive
purposes, the Fund may hold more than 20% of its total assets in short-term
obligations. To the extent that the Fund's assets are so invested, they will not
be invested so as to meet its investment objective. The instruments may include
"High-Quality" liquid debt securities such as commercial paper, certificates of
deposit, bankers' acceptances, repurchase agreements which mature in less than
seven days and United States Treasury Bills. Bankers' acceptances are
instruments of United States banks which are drafts or bills of exchange
"accepted" by a bank or trust company as an obligation to pay on maturity. For a
discussion of repurchase agreements, see below.

- 6 -

<PAGE>

O INVESTMENT GRADE SECURITIES. The Fund may invest in "investment grade"
obligations -- those rated at the time of purchase within the four highest
rating categories assigned by a nationally recognized statistical ratings
organization ("NRSRO") or, if unrated, are obligations that Key Advisers or the
Sub-Adviser determine to be of comparable quality. The applicable securities
ratings are described in the Appendix to the Statement of Additional
Information. "High-Quality" short-term obligations are those obligations which,
at the time of purchase, (1) possess a rating in one of the two highest ratings
categories from at least one NRSRO (for example, commercial paper rated "A-1" or
"A-2" by Standard & Poor's Corporation or "P-1" or "P-2" by Moody's Investors
Service, Inc. or (2) are unrated by an NRSRO but are determined by Key Advisers
or the Sub-Adviser to present minimal credit risks and to be of comparable
quality to rated instruments eligible for purchase by the Fund under guidelines
adopted by the Trustees.

O ZERO COUPON BONDS. The Fund is permitted to purchase both zero coupon U.S.
government securities and zero coupon corporate securities ("zero coupon
bonds"). Zero coupon bonds are purchased at a discount from the face amount
because the buyer receives only the right to receive a fixed payment on a
certain date in the future and does not receive any periodic interest payments.
The effect of owning instruments which do not make current interest payments is
that a fixed yield is earned not only on the original investment but also, in
effect, on accretion during the life of the obligations. This implicit
reinvestment of earnings at the same rate eliminates the risk of being unable to
reinvest distributions at a rate as high as the implicit yields on the zero
coupon bond, but at the same time eliminates the holder's ability to reinvest at
higher rates . For this reason, zero coupon bonds are subject to substantially
greater price fluctuations during periods of changing market interest rates than
are comparable securities which pay interest currently, which fluctuation
increases in accordance with the length of the period to maturity.

- 7 -

<PAGE>

earned on the security for both accounting and tax purposes. Because of these
features, these securities may be subject to greater fluctuations in value due
to changes in interest rates than interest-paying U.S. Treasury obligations. The
Fund will limit its investment in such instruments to 20% of its total assets.

O REPURCHASE AGREEMENTS. Under the terms of a repurchase agreement, the Fund
acquires securities from financial institutions or registered broker-dealers,
subject to the seller's agreement to repurchase such securities at a mutually
agreed upon date and price. The seller is required to maintain the value of
collateral held pursuant to the agreement at not less than the repurchase price
(including accrued interest). If the seller were to default on its repurchase
obligation or become insolvent, the Fund would suffer a loss to the extent that
the proceeds from a sale of the underlying portfolio securities were less than
the repurchase price, or to the extent that the disposition of such securities
by the Fund was delayed pending court action. Repurchase agreements are
considered by the staff of the Commission to constitute loans by the Fund.

O REVERSE REPURCHASE AGREEMENTS. The Fund may borrow funds for temporary
purposes by entering into reverse repurchase agreements. Pursuant to such
agreements, the Fund sells portfolio securities to financial institutions such
as banks and broker-dealers, and agrees to repurchase them at a mutually
agreed-upon date and price. At the time the Fund enters into a reverse
repurchase agreement, it must place in a segregated custodial account assets
having a value equal to the repurchase price (including accrued interest); the
collateral will be marked to market on a daily basis, and will be continuously
monitored to ensure that such equivalent value is maintained. Reverse repurchase
agreements involve the risk that the market value of the securities sold by the
Fund may decline

- 8 -

<PAGE>

below the price at which the Fund is obligated to repurchase the securities.
Reverse repurchase agreements are considered to be borrowings under the
Investment Company Act of 1940, as amended (the "1940 Act").

O OPTIONS. The Fund may write call options from time to time. The Fund will
write only "covered" call options (options on securities owned by the Fund and
index options). Such options must be listed on a national securities exchange
and issued by the Options Clearing Corporation. In order to close out a call
option it has written, the Fund will enter into a "closing purchase
transaction," i.e., the purchase of a call option on the same security with the
same exercise price and expiration date as the call option which the Fund
previously wrote on any particular security. When a portfolio security subject
to a call option is sold, the Fund will effect a closing purchase transaction to
close out any existing call option on that security. If the Fund is unable to
effect a closing purchase transaction, it will not be able to sell the
underlying security until the option expires or the Fund delivers the underlying
security upon exercise. Upon the exercise of an option, the Fund is not entitled
to the gains, if any, on securities underlying the options. The Fund intends to
limit its investments in call and index options to 25% of its total assets.

Certain investment management techniques which the Fund may use, such as the
purchase and sale of options (described above), may expose the Fund to special
risks. These products may be used to adjust the risk and return characteristics
of the Fund's portfolio of investments. These various products may increase or
decrease exposure to security prices, interest rates, or other factors that
affect security values, regardless of the issuer's credit risk. Regardless of
whether the intent was to decrease risk or increase return, if market conditions
do not perform consistently with expectations, these products may result in a
loss. In addition, losses may occur if counterparties involved in transactions
do not perform as promised. These products may expose the Fund to potentially
greater risk of loss than more traditional equity investments.

- 9 -

<PAGE>

short-term trading is to take advantage of what Key Advisers or the Sub-Adviser
believes are changes in market, industry or individual company conditions or
outlook. Any such trading would increase the Fund's turnover rate and its
transaction costs. High turnover will generally result in higher brokerage costs
and possible tax consequences for the Fund. In the fiscal year ended October 31,
1995, the portfolio turnover rate was 11.44% compared to 14.38% in the prior
fiscal year.

INVESTMENT LIMITATIONS

Each of the investment limitations indicated above in this subsection are
fundamental, except for the limitation pertaining to illiquid securities.
Non-fundamental limitations may be changed without shareholder approval.
Whenever an investment policy or limitation states a maximum percentage of the
Fund's assets that may be invested, such percentage limitation will be
determined immediately after and as a result of the investment and any
subsequent change in values, assets, or other circumstances will not be
considered when determining whether the investment complies with the Fund's
investment policies and limitations, except in the case of borrowing (or other
activities that may be deemed to result in the issuance of a "senior security"
under the 1940 Act). If the value of the Fund's

- 10 -

<PAGE>

illiquid securities at any time exceeds the percentage limitation applicable at
the time of acquisition due to subsequent fluctuations in value or other
reasons, the Trustees will consider what actions, if any, are appropriate to
maintain adequate liquidity.

HOW TO INVEST, EXCHANGE AND REDEEM

HOW TO INVEST

4. INVESTMENT PROFESSIONALS. A salesperson , financial planner, investment
adviser or trust officer who provides you with information regarding the
investment of your assets (an "Investment Professional") or other person who is
entitled to receive compensation for selling Fund shares may receive different
compensation for selling one class than for selling another class. Both the CDSC
(an asset-based sales charge ) for Class B shares and the front-end sales charge
on sales of Class A shares are used primarily to compensate such persons.

o INVESTING THROUGH YOUR INVESTMENT PROFESSIONAL. Your Investment Professional
will place your order with the Transfer Agent (see "Fund Organiztation Fees -
Transfer Agent" below) on your behalf. You may be required to establish a
brokerage or agency 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. Accounts established with Investment
Professionals may have different features, requirements and fees. In addition,
Investment Professionals may charge for their services. Information regarding
these features, requirements and fees will be provided by the Investment
Professional. If you are purchasing shares of any Fund through a program of
services offered or administered by your Investment

- 11 -

<PAGE>

Professional, you should read the program materials in conjunction with this
Prospectus. 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"
and "Special Investor Services" for more information about telephone
transactions.

INVESTING DIRECTLY

O 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 the amount of at least the
minimum investment requirement to:

The Victory Ohio Regional Stock Fund
Primary Funds Service Corporation,
P.O. Box 9741, Providence, RI 02940-9741.

Subsequent purchases may be made in the same manner.

Boston Safe Deposit & Trust Co.
ABA #011001234 Credit PFSC DDA#16-918-8
The Victory Portfolios: Ohio Regional Stock Fund

- 12 -

<PAGE>

Investment Professional must receive your order in a timely fashion on a regular
Business Day and transmit it to the Transfer Agent so that it is received before
the close of business that day. The Transfer Agent may reject any purchase order
for the Fund's shares, in its sole discretion. It is the responsibility of your
Investment Professional to transmit your order to purchase shares to the
Transfer Agent in a timely fashion in order for you to receive that day's share
price.

INVESTMENT REQUIREMENTS

CLASS A SHARES. Class A shares are sold at their offering price, which is
normally net asset value plus an initial sales charge. However, in some cases,
described below, where purchases are not subject to an initial sales charge, the
offering price may be net asset value. In some cases, reduced sales charges may
be available, as described below. When you invest, the Fund receives the net
asset value for your account. The sales charge varies depending on the amount of
your purchase and a portion may be retained by the Distributor and allocated to
your Investment Professional. The Victory Portfolios has a reinstatement policy
which allows an investor who redeems his/her shares originally purchased with a
sales charge to reinvest within 90 days without incurring an additional sales
charge. The current sales charge rates and commissions paid to Investment
Professionals are as follows:

DEALER
CLASS A SALES CHARGE REALLOWANCE
AS A % OF AS A % OF AS A %
OFFERING NET AMOUNT OF OFFERING
AMOUNT OF PURCHASE PRICE INVESTED PRICE
------------------ ----- -------- -----

(1) There is no initial sales charge on purchases of $1 million or more.
Investment Professionals will be compensated at the rate of up to 0.25%
on such purchases.

The Distributor reserves the right to reallow the entire commission to dealers.
If that occurs, the dealer may be considered an "underwriter" under Federal
securities laws.

- 13 -

<PAGE>

O REDUCED SALES CHARGES FOR CLASS A SHARES. You may be eligible to buy Class A
shares at reduced sales charge rates in one or more of the following ways:

o RIGHT OF ACCUMULATION AND CONCURRENT PURCHASES. A shareholder may qualify for
a reduced sales charge on purchases of Class A Shares of the Fund and other
funds of the Victory Portfolios by combining a current purchase with purchases
of another fund(s) or with certain prior purchases of shares of the Victory
Portfolios. The applicable sales

- 14 -

<PAGE>

charge is based on the sum of (1) the purchaser's current purchase plus (2) the
current public offering price of the purchaser's previous purchases of (a) all
shares held by the purchaser in the Fund and (b) all shares held by the
purchaser in any other fund of the Victory Portfolios (except money market
funds).

O WAIVERS OF CLASS A SALES CHARGES. No sales charge is imposed on sales of Class
A shares to the following categories of persons (which categories may be changed
or eliminated at any time):

(2) Investors who purchase shares for trust, investment management or
certain other advisory accounts established with KeyCorp or any of its
affiliates;

- 15 -

<PAGE>

Class B CDSC is paid to the Distributor to reimburse its expenses of providing
distribution-related services to the Fund in connection with the sale of Class B
shares.

CONTINGENT DEFERRED SALES CHARGE
YEARS SINCE PURCHASE ON REDEMPTIONS IN THAT YEAR
PAYMENT WAS MADE (AS % OF AMOUNT SUBJECT TO CHARGE)
---------------- ----------------------------------

0-1 5.0%
1-2 4.0%
2-3 3.0%
3-4 3.0%
4-5 2.0%
5-6 1.0%
6 and following None

In the table, a "year" is a 12-month period. All purchases are considered to
have been made on the first regular business day of the month in which the
purchase was made.

- 16 -

<PAGE>

SPECIAL INVESTOR SERVICES

- 17 -

<PAGE>

HOW TO EXCHANGE

(1) Shares of the fund selected for exchange must be available for sale in
your state of residence.

(2) The prospectuses of this Fund and the fund whose shares you want to buy
must offer the exchange privilege.

(3) You must hold the shares you buy when you establish your account for at
least 7 days before you can exchange them; after the account is open 7 days,
you can exchange shares on any Business Day.

(4) You must meet the minimum purchase requirements for the fund you purchase by
exchange.

(5) The registration and tax identification numbers of the two accounts must be
identical.

(6) BEFORE EXCHANGING, OBTAIN AND READ THE PROSPECTUS FOR THE FUND YOU WISH TO
PURCHASE BY EXCHANGE.

There are certain exchange policies you should be aware of:

- 18 -

<PAGE>

o The Victory Portfolios may amend, suspend or terminate the exchange privilege
at any time upon 60 days' written notice to shareholders.

o If the Transfer Agent cannot exchange all the shares you request because of a
restriction cited above, only the shares eligible for exchange will be
exchanged.

o Each exchange may produce a gain or loss for tax purposes.

HOW TO REDEEM

You may redeem shares in several ways:

O BY MAIL. Send a written request to: The Victory Portfolios: Ohio Regional
Stock Fund P.O. Box 9741
Providence, RI 02940-9741

- 19 -

<PAGE>

SHAREHOLDER ACCOUNT RULES AND POLICIES

The Fund's securities are valued primarily on the basis of market quotations or,
if quotations are not readily available, by a method that the Board of Trustees
believes accurately reflects fair value. Fair value of these portfolio
securities is determined by an independent pricing service approved by the
Trustees based primarily upon information concerning market transactions and
dealers quotations for similar securities.

- 20 -

<PAGE>

o The redemption price for shares will vary from day to day because the value of
the securities in the Fund fluctuates, and the value of your shares may be more
or less than their original cost.

DIVIDENDS, DISTRIBUTIONS AND TAXES

DIVIDENDS

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:

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.

- 21 -

<PAGE>

in shares of a fund sold with a sales charge, the shares will be
purchased at the public 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 the net asset
value of the fund. 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 record 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.

Reinvested dividend distributions receive the same tax treatment as dividend
distributions paid in cash.

O 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.

FEDERAL TAXES

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<PAGE>

Income from securities of foreign issuers may be subject to foreign withholding
taxes. Credit for such foreign taxes, if any, will not pass through to the
shareholders.

PERFORMANCE

From time to time performance information for each class of shares of the Fund
showing the yield and/or effective yield for each class of shares may also be
presented in advertisements, sales literature and in reports to shareholders.
Such performance figures are based on historical earnings and are not intended
to indicate future performance. Yield will be computed by dividing the Fund's
net investment income per share earned during a recent thirty-day period by the
Fund's maximum offering price per share (reduced by any undeclared earned income
expected to be paid shortly as a dividend) on the last day of the period and
annualizing the result. Effective yield is computed in a similar manner, but,
when annualized, the income earned by an investment in the Fund is assumed to be
reinvested. The effective yield will be slightly higher than the yield because
of the compounding effect of this assumed reinvestment.

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<PAGE>

Performance is a function of the type and quality of instruments held in the
Fund's portfolio, operating expenses, and market conditions. Consequently,
current performance will fluctuate and is not necessarily representative of
future results. Any fees charged by service providers with respect to customer
accounts for investing in shares of the Fund will not be reflected in
performance calculations.

Additional information regarding the performance of each of the Victory
Portfolios is included in the Victory Portfolios' annual report, which is
available free of charge by calling 800-539-3863.

FUND ORGANIZATION AND FEES

Overall responsibility for management of the Victory Portfolios rests with its
Board of Trustees, who are elected by the shareholders of the Victory
Portfolios.

INVESTMENT ADVISER AND SUB-ADVISER

For the services provided and expenses incurred pursuant to the investment
advisory agreement between the Victory Portfolios respecting the Fund, Key
Advisers is entitled to receive a fee, computed daily and paid monthly, at an
annual rate of seventy-five one-hundredths of one percent (.75%) of the average
daily net assets of the Fund. The investment advisory fee paid by the Fund is
higher than the advisory fees paid by most mutual funds, although the Victory
Portfolios' Board of Trustees believes such fees to be comparable to advisory
fees paid by many funds having similar objectives and policies. The investment
advisory fee paid by the Fund is higher than the advisory fees paid by most
mutual funds, although the Victory Portfolios' Board of Trustees believes such
fees to be comparable to advisory fees paid by many funds having similar
objectives and policies. 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 may periodically waive all or a portion of its advisory fee with
respect to the Fund . Prior to January, 1996, Society

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<PAGE>

Asset Management, Inc. served as investment adviser to the Fund. During the
Fund's fiscal period ended October 31, 1995, Society Asset Management, Inc.
earned investment advisory fees aggregating .71% of the average daily net assets
of the Fund.

Under the investment advisory agreement between the Victory Portfolios, on
behalf of the Fund, and Key Advisers (the "Investment Advisory Agreement"), the
Adviser may delegate a portion of its responsibilities to a sub-adviser. 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 Investment Advisory Agreement and the
sub-advisory agreement, respectively, provide that Key Advisers and the
Sub-Adviser, respectively, may render services through their 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 and the Sub-Adviser,
respectively, and Key Advisers and the Sub-Adviser, respectively, will be as
fully responsible to the Fund for the acts and omissions of such persons as they
are for their own acts and omissions.

The person primarily responsible for the investment management of the Fund as
well as his previous experience is as follows:

PORTFOLIO MANAGER MANAGING FUND PREVIOUS EXPEREINCE
----------------- ------------- -------------------
Lynn S Hamilton Commencement of Portfolio Manager
Operation with Society Asset
Management since 1993;
Portfolio Manager with
with Society Natnional
Bank since 1982.

EFFECT OF BANKING LAWS

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<PAGE>

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.

TRANSFER AGENT

SHAREHOLDER SERVICING

The Victory Portfolios has adopted a Shareholder Servicing Plan for each class
of shares of the Fund. In accordance with the Shareholder Servicing Plan, the
Fund may enter into Shareholder Service Agreements under which the Fund pays
fees of up to 25% of the net assets of each class incurred in connection with
the personal service and maintenance of accounts holding the shares of such
class. Such agreements are entered into between the Victory Portfolios and
various shareholder servicing agents, including the Distributor, Key Trust
Company of Ohio, N.A. and 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 inquires, forwarding shareholder communication, assisting
in the processing of purchase, exchange and redemption requests, and assisting
shareholders in changing dividend options, account designations and addresses.
Shareholder Servicing Agents may periodically waive all or a portion of their
respective shareholder servicing fees with respect to the Fund .

FUND ACCOUNTANT

BISYS Fund Services Ohio, Inc., 3435 Stelzer Road, Columbus, OH 43219, provides
certain accounting services for the Fund pursuant to a Fund Accounting Agreement
and receives a fee for such services.

CUSTODIAN

Key Trust Company of Ohio, N.A. , an affiliate of the Adviser and Sub-Adviser,
serves as custodian for the Fund and receives fees for the services it performs
as custodian.

INDEPENDENT ACCOUNTANTS

Coopers & Lybrand L.L.P. serves as independent accountants to the Fund.

BUSINESS MANAGEMENT AGREEMENT

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<PAGE>

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.

For such services, the Sub-Adviser pays fees to Key Advisers as follows: .55% on
the first $10 million of average daily net assets; .35% of the next $15 million
of average daily net assets ; .20% of the next $25 million of average daily net
assets; and .10% of average daily net assets in excess of $50 million.

EXPENSES

For the fiscal year ended October 31, 1995, the Fund's total operating expenses
(for Class A shares) were 1.24% of the Fund's average net assets, excluding
certain voluntary fee reductions or reimbursements.

ADDITIONAL INFORMATION

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.

MASSACHUSETTS LAW

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<PAGE>

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

MISCELLANEOUS

- 28 -

<PAGE>

- 29 -
<PAGE>
The
Victory

Portfolios
Special Value Fund

Prospectus For current yield, purchase, and redemption information,
February 1, 1996 call 800-539-FUND or 800-539-3863

The Victory Portfolios (the "Victory Portfolios") is a registered open-end
management investment company that offers investors a selection of money market,
fixed-income, municipal bond, domestic and international equity portfolios. This
Prospectus relates to the Special Value Fund (the "Fund"), a diversified
portfolio. 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 (the
"Sub-Adviser" or "Society"). 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 long-term growth of capital and dividend income. The
Fund pursues this objective by investing primarily in common stocks of small and
medium-size companies listed on a nationally recognized exchange with an
emphasis on companies with above average total return potential.

SHARES OF THE FUND ARE:

o NOT INSURED BY THE FDIC;

o NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR GUARANTEED BY, ANY KEYCORP
BANK, ANY OF ITS AFFILIATES, OR ANY OTHER BANK;

o SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL
AMOUNT INVESTED.

<PAGE>

Table of Contents Page

Fund Expenses 3
Financial Highlights 4
Investment Objective 5
Investment Policies and Risk Factors 5
How to Invest, Exchange and Redeem 10
Dividends, Distributions and Taxes 21
Performance 23
Fund Organization and Fees 24
Additional Information 27

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<PAGE>

Fund Expenses

Shareholder Transaction Expenses(1)

CLASS A CLASS B
------- -------

Annual Fund Operating Expenses (as a percentage of average daily net assets)

CLASS A CLASS B
------- -------
Management Fees 1.00% 1.00%

Administration Fees .15% .15%
Rule 12b-1 Distribution Fees .00% .75%
Other Expenses(2) .30% .45%
----- ----
Total Fund Operating Expenses(2) 1.45% 2.35%
===== ====

(2) These amounts include an estimate of the shareholder servicing fees the
Fund expects to pay (see "Fund Organization and Fees - Shareholder
Servicing").

Example: You would pay the following expenses on a $1,000 investment, assuming
(1) a 5% annual return and (2) full redemption at the end of each time period.

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------

Special Value Fund - Class A Shares $62 $91 $123 $213

Special Value Fund - Class B Shares $74 $103 $146 $246

- 3 -

<PAGE>

Financial Highlights

The Victory Special Value Fund
Class A Shares

December 3,
Year Ended 1993 to
October 31, October 31,
1995 1994(a)
---------- ------------

Net Asset Value, Beginning of
Period $10.49 $10.00

Income from Investment Activities
Net Investment income 0.15 0.11
Net realized and unrealized
gains (losses)on investments 1.71 0.48

Total from Investment
Activities 1.86 0.59

Distributions
Net investment income (0.15) (0.10)
Net ealized gains (0.05) --
---- -----
Total Distributions (0.20) (0.10)
---- -----
Net Asset Value, End of Period $12.15 $10.49
===== =====
Total Return (Excludes Sales
Charge) 18.01% 5.92%(c)

Ratios/Supplemental Data:
Net Assets, End of Period (000) $194,700 $118,600
Ratio of expenses to average net
assets 1.04% 1.00%(b)
Ratio of net investment
income to average net assets 1.35% 1.23%(b)
Ratio of expenses to average
net assets (d) 1.30% 1.49%(b)
Ratio of net investment income
to average net assets (d) 1.09% 0.74%(b)

Portfolio turnover 38.57% 17.90%

(a) Period from commencement of operations.

(b) Annualized.

- 4 -

<PAGE>

INVESTMENT OBJECTIVE

The Fund seeks to provide long-term growth of capital and dividend income. The
investment objective of the Fund is fundamental and may not be changed without a
vote of the holders of a majority of its outstanding voting securities (as
defined in the Statement of Additional Information). There can be no assurance
that the Fund will achieve its investment objective.

INVESTMENT POLICIES AND RISK FACTORS

SUMMARY OF PRINCIPAL INVESTMENT POLICIES

The Fund pursues its objective by investing primarily in common stocks of small
and medium-size companies listed on a nationally recognized exchange with an
emphasis on companies with above average total return potential.

Under normal market conditions, the Fund will invest in a diversified portfolio
of common stocks , and will invest at least 65% of its total assets in common
and preferred stocks, debt securities, and securities convertible into common
stock of small and medium-sized companies . For purposes of the foregoing
sentence, small-sized companies are considered to be those with [a market]
capitalization of less than $1 billion and medium-sized companies are considered
to be those with [a market] capitalization of $1 billion or more but less than
$5 billion. In selecting such investments, the Fund will seek to emphasize the
common stocks of under-valued companies, which posses above-average yields,
below-average price/earnings, price/book value and price/cash flow ratios, and
which are therefore considered to be statistically cheap.

Changes in the value of portfolio securities will not affect cash income, if
any, derived from these securities but will affect the Fund's net asset value.
Because the Fund invests primarily in equity securities, which fluctuate in
value, the Fund's shares will fluctuate in value. In addition, smaller, less
seasoned companies may be subject to greater business risks than larger,
established companies. They may be more vulnerable to changes in economic
conditions, specific industry conditions, market fluctuations and other factors
affecting the profitability of companies. Therefore, the stock price of smaller
capitalization companies may be subject to greater price fluctuations than that
of larger, established companies. Due to these and other risk factors, the net
asset value of shares of the Fund will fluctuate.

ADDITIONAL INFORMATION REGARDING THE FUND'S INVESTMENTS

- 5 -

<PAGE>

exchange "accepted" by a bank or trust company as an obligation to pay on
maturity. For a discussion of repurchase agreements, see below.

o INVESTMENT GRADE. The Fund may invest in "investment grade" obligations,
which are those rated at the time of purchase within the four highest rating
categories assigned by a nationally recognized statistical ratings organization
("NRSRO") or, if unrated, are obligations that Key Advisers or the Sub-Adviser
determine to be of comparable quality. The applicable securities ratings are
described in the Appendix to the Statement of Additional Information.

o FUTURES CONTRACTS. The 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.

The Fund may enter into futures contracts in an effort to hedge against market
risks. For example, when interest rates are expected to rise or market values of
portfolio securities are expected to fall, the Fund can seek to offset a decline
in the value of its portfolio securities by entering into futures contract
transactions. When interest rates are expected to fall or market values are
expected to rise, the Fund, through the purchase of such contracts, can attempt
to secure better rates or prices than might later be available in the market
when it effects anticipated purchases.

- 6 -

<PAGE>

the value of the 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 the 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.

- 7 -

<PAGE>

of acquiring portfolio securities consistent with its investment objective and
policies, and not for investment leverage. In when-issued and delayed delivery
transactions, the Fund relies on the seller to complete the transaction; its
failure to do so may cause the Fund to miss a price or yield considered to be
advantageous.

o REVERSE REPURCHASE AGREEMENTS. The Fund may borrow funds for temporary
purposes by entering into reverse repurchase agreements. Pursuant to such
agreements, the Fund sells portfolio securities to financial institutions such
as banks and broker-dealers, and agrees to repurchase them at a mutually
agreed-upon date and price. At the time the Fund enters into a reverse
repurchase agreement, it must place in a segregated custodial account assets
having a value equal to the repurchase price (including accrued interest); the
collateral will be marked to market on a daily basis, and will be continuously
monitored to ensure that such equivalent value is maintained. Reverse repurchase
agreements involve the risk that the market value of the securities sold by the
Fund may decline below the price at which the Fund is obligated to repurchase
the securities. Reverse repurchase agreements are considered to be borrowings
under the Investment Company Act of 1940, as amended (the "1940 Act").

- 8 -

<PAGE>

Information) that meet the criteria for liquidity established by the Trustees
are quite liquid. The Fund intends, therefore, to treat the restricted
securities that meet the criteria for liquidity established by the Trustees,
including Section 4(2) commercial paper, as determined by Key Advisers or the
Sub-Adviser, as liquid and not subject to the investment limitation applicable
to illiquid securities. See "Investment Limitations" below.

o OPTIONS. The Fund may write call options from time to time. The Fund will
write only "covered" call options (options on securities owned by the Fund and
index options). Such options must be listed on a national securities exchange
and issued by the Options Clearing Corporation. In order to close out a call
option it has written, the Fund will enter into a "closing purchase
transaction," i.e., the purchase of a call option on the same security with the
same exercise price and expiration date as the call option which the Fund
previously wrote on any particular security. When a portfolio security subject
to a call option is sold, the Fund will effect a closing purchase transaction to
close out any existing call option on that security. If the Fund is unable to
effect a closing purchase transaction, it will not be able to sell the
underlying security until the option expires or the Fund delivers the underlying
security upon exercise. Upon the exercise of an option, the Fund is not entitled
to the gains, if any, on securities underlying the options. The Fund intends to
limit its investments in call and index options to 25% of its total assets.

o PORTFOLIO TRANSACTIONS. The Fund may engage in the technique of short-term
trading. Such trading involves the selling of securities held for a short time,
ranging from several months to less than a day. The object of such short-term
trading is to take advantage of what Key Advisers or the Sub-Adviser believes
are changes in market, industry or individual company conditions or outlook. Any
such trading would increase the Fund's turnover rate and its transaction costs.
High turnover will generally result in higher brokerage costs and possible tax
consequences for the Fund. In the fiscal year ended October 31, 1995, the
portfolio turnover rate was 38.57% compared to 17.90% in the fiscal period
December 3, 1993 to October 31, 1994 .

INVESTMENT LIMITATIONS

- 9 -

<PAGE>

Fund's total assets; and (b) for temporary or emergency purposes in an
amount not exceeding 5% of the value of the Fund's total assets.

HOW TO INVEST, EXCHANGE AND REDEEM

HOW TO INVEST

- 10 -

<PAGE>

4. INVESTMENT PROFESSIONALS. A salesperson , financial planner, investment
adviser or trust officer who provides you with information regarding the
investment of your assets (an "Investment Professional") or other person who is
entitled to receive compensation for selling Fund shares may receive different
compensation for selling one class than for selling another class. Both the CDSC
(an asset-based sales charge ) for Class B shares and the front-end sales charge
on sales of Class A shares are used primarily to compensate such persons.

- 11 -

<PAGE>

Investing Directly

The Victory Special Value Fund
Primary Funds Service Corporation
P.O. Box 9741
Providence, RI 02940-9741

Subsequent purchases may be made in the same manner.

o By Wire. Call 800-539-3863 to set up your Fund account to accommodate wire
transactions. YOU MUST CALL THE TRANSFER AGENT BEFORE WIRING FUNDS. 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: Special Value Fund

INVESTMENT REQUIREMENTS

- 12 -

<PAGE>

originally purchased with a sales charge to reinvest within 90 days without
incurring an additional sales charge. The current sales charge rates and
commissions paid to Investment Professionals are as follows:

Dealer
Class A Sales Charge Reallowance
As a % of As a % of As a %
Offering Net Amount of Offering
Amount of Purchase Price Invested Price
------------------ --------- ---------- -----------
Less than $49,999 4.75% 4.99% 4.00%
$50,000 to $99,999 4.50% 4.71% 4.00%
$100,000 to $249,999 3.50% 3.63% 3.00%
$250,000 to $499,999 2.25% 2.30% 2.00%
$500,000 to $999,999 1.75% 1.78% 1.50%
$1,000,000 and above 0.00% 0.00% (1)

(1) There is no initial sales charge on purchases of $1 million or more.
Investment Professionals will be compensated at the rate of up to 0.25% on
such purchases.

The Distributor reserves the right to reallow the entire commission to dealers.
If that occurs, the dealer may be considered an "underwriter" under Federal
securities laws.

o REDUCED SALES CHARGES FOR CLASS A SHARES. You may be eligible to buy Class A
shares at reduced sales charge rates in one or more of the following ways:

- 13 -

<PAGE>

o Waivers of Class A Sales Charges. No sales charge is imposed on sales of Class
A shares to the following categories of persons (which categories may be changed
or eliminated at any time):

- 14 -

<PAGE>

(2) Investors who purchase shares for trust, investment management or
certain other advisory accounts established with KeyCorp or any of its
affiliates;

(5) Shareholders of the former Investors Preference Fund For Income, Inc.
and the Investors reference New York Tax-Free Fund, Inc. who have
continuously maintained accounts with a fund or funds of the Victory
Group with a balance of $250,000 or more (investors with less than
$250,000 will pay any applicable sales charges);

Contingent Deferred Sales Charge
Years Since Purchase On Redemptions in That Year
Payment Was Made (As % of Amount Subject to Charge)
-------------------- ----------------------------------
0-1 5.0%
1-2 4.0%

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<PAGE>

2-3 3.0%
3-4 3.0%
4-5 2.0%
5-6 1.0%
6 and following None

In the table, a "year" is a 12-month period. All purchases are considered to
have been made on the first regular business day of the month in which the
purchase was made.

The CDSC is also waived on Class B shares in the following cases: (1) shares
sold to Key Advisers, the Sub- Adviser or their affiliates; (2) shares issued in
plans of reorganization to which the Victory Portfolios is a party; and (3)
shares redeemed in involuntary redemptions as described above.

SPECIAL INVESTOR SERVICES

- 16 -

<PAGE>

o RETIREMENT PLANS. Retirement plans can be among the best tax-planning vehicles
available to individuals. Call your Investment Professional for more information
on the plans and their benefits, provisions and fees. Your

- 17 -

<PAGE>

Investment Professional can set up your new account in the Fund under one of
several tax-sheltered plans. These plans let you invest for retirement and
shelter your investment income from current taxes. Plans include Individual
Retirement Accounts (IRAs) and Rollover IRAs. Other fees may be charged by the
IRA custodian or trustee.

HOW TO EXCHANGE

(1) Shares of the fund selected for exchange must be available for sale in
your state of residence.

(2) The prospectuses of this Fund and the fund whose shares you want to buy
must offer the exchange privilege.

(3) You must hold the shares you buy when you establish your account for at
least 7 days before you can exchange them; after the account is open 7
days, you can exchange shares on any Business Day.

(4) You must meet the minimum purchase requirements for the fund you
purchase by exchange.

(5) The registration and tax identification numbers of the two accounts
must be identical.

(6) Before exchanging, obtain and read the prospectus for the fund you wish
to purchase by exchange.

There are certain exchange policies you should be aware of:

o The Victory Portfolios may amend, suspend or terminate the exchange privilege
at any time upon 60 days' written notice to shareholders.

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<PAGE>

o If the Transfer Agent cannot exchange all the shares you request because of a
restriction cited above, only the shares eligible for exchange will be
exchanged.

o Each exchange may produce a gain or loss for tax purposes.

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 "Shareholder Account
Rules and Policies--Share Price" below). Shares will be redeemed at the NAV
next calculated after the Transfer Agent has received the redemption request. If
the Fund account is closed, any accrued dividends will be paid at the beginning
of the following month.

You may redeem shares in several ways:

o BY MAIL. Send a written request to: The Victory Portfolios:Special Value Fund
P.O. Box 9741
Providence, RI 02940-9741

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<PAGE>

by which purchase and redemption orders must be received. To the extent that
portfolio securities are traded in other markets on days when the NYSE is
closed, the Fund's NAV may be affected on days when investors do not have access
to the Fund to purchase or redeem shares.

SHAREHOLDER ACCOUNT RULES AND POLICIES

o The redemption price for shares will vary from day to day because the value of
the securities in the Fund fluctuates, and the value of your shares may be more
or less than their original cost.

- 20 -

<PAGE>

DIVIDENDS, DISTRIBUTIONS AND TAXES

DIVIDENDS

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:

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.

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<PAGE>

a fund sold with or without a sales charge, the shares will be
purchased at the net asset value of the fund. Dividend distributions
can be directed only to an existing account with a registration that
is identical to that of your Fund account.

Reinvested dividend distributions receive the same tax treatment as dividend
distributions paid in cash.

o 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.

o BUYING A DIVIDEND. On the record date for a distribution of ordinary income or
capital gains dividend, the net asset value of the Fund is reduced by the amount
of the distribution. An investor who buys shares just before the record date
("buying a dividend") will pay the full price for the shares and then receive a
portion of the purchase price back as a taxable distribution.

FEDERAL TAXES

- 22 -

<PAGE>

from domestic corporations received by the Fund and must be designated by the
Fund as so qualifying). Distributions by a Fund of the excess, if any, of its
net long-term capital gain over its net short-term capital loss are designated
as capital gain dividends and are taxable to shareholders as long-term capital
gains, regardless of the length of time shareholders have held their shares.
Such distributions are not eligible for the dividends-received deduction. If a
shareholder disposes of shares in the Fund at a loss before holding such shares
for more than six months, the loss will be treated as a long-term capital loss
to the extent that the shareholder has received a capital gains dividend on
those shares.

Income from securities of foreign issuers may be subject to foreign withholding
taxes. Credit for such foreign taxes, if any, will not pass through to the
shareholders.

o OTHER TAX INFORMATION. The information above is only a summary of some of the
federal income tax consequences generally affecting the Fund and its U.S.
shareholders, and no attempt has been made to discuss individual tax
consequences. A prospective investor should also review the more detailed
discussion of federal income tax considerations in the Statement of Additional
Information. In addition to the federal income tax, a shareholder may be subject
to state or local taxes on his or her investment in the Fund, depending on the
laws in the shareholder's jurisdiction. Investors considering an investment in
the Fund should consult their tax adviser to determine whether the Fund is
suitable to their particular tax situation.

PERFORMANCE

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<PAGE>

Services, Inc., and in the following publications: IBC's Money Fund Reports,
Value Line Mutual Fund Survey, Morningstar, CDA/Wiesenberger, Money Magazine,
Forbes, Barron's, The Wall Street Journal, The New York Times, Business Week,
American Banker, Fortune, Institutional Investor, U.S.A. Today and local
newspapers. In addition, general information about the Fund that appears in
publications such as those mentioned above may also be quoted or reproduced in
advertisements, sales literature or in reports to shareholders.

Additional information regarding the performance of each of the Victory
Portfolios is included in the Victory Portfolios' annual report, which is
available free of charge by calling 800-539-3863.

FUND ORGANIZATION AND FEES

Overall responsibility for management of the Victory Portfolios rests with its
Board of Trustees, who are elected by the shareholders of the Victory
Portfolios.

INVESTMENT ADVISER AND SUB-ADVISER

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<PAGE>

Under the investment advisory agreement between the Victory Portfolios, on
behalf of the Fund, and Key Advisers (the "Investment Advisory Agreement"), the
Adviser may delegate a portion of its responsibilities to a sub-adviser. 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 Investment Advisory Agreement and the sub-
advisory agreement, respectively, provide that Key Advisers and the Sub-Adviser,
respectively, may render services through their 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 and the Sub- Adviser, respectively, and
Key Advisers and the Sub-Adviser, respectively, will be as fully responsible to
the Fund for the acts and omissions of such persons as they are for their own
acts and omissions.

Managing
Portfolio Fund
Manager Since Previous Experience

Anthony Aveni Commencement of Portfolio Manager with Society Asset
Operations Management, Inc. since 1993;
Portfolio Manager with Ameritrust
from 1981 to 1992

Barbara Myers June, 1995 Portfolio Manager with Society Asset
Management, Inc. since June, 1994;
Portfolio Manager with Duff & Phelps,
Inc. from 1989 to June, 1994

EFFECT OF BANKING LAWS

- 25 -

<PAGE>

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.

TRANSFER AGENT

SHAREHOLDER SERVICING

FUND ACCOUNTANT

BISYS Fund Services Ohio, Inc., 3435 Stelzer Road, Columbus, OH 43219, provides
certain accounting services for the Fund pursuant to a Fund Accounting Agreement
and receives a fee for such services.

CUSTODIAN

Key Trust Company of Ohio, N.A. , an affiliate of the Adviser and Sub-Adviser,
serves as custodian for the Fund and receives fees for the services it performs
as custodian.

- 26 -

<PAGE>

INDEPENDENT ACCOUNTANTS

Coopers & Lybrand L.L.P. serves as independent accountants to the Fund.

BUSINESS MANAGEMENT AGREEMENT

For such services, the Sub-Adviser pays fees to Key Advisers as follows: .55% on
the first $10 million of average daily net assets; .35% of the next $15 million
of average daily net assets ; .20% of the next $25 million of average daily net
assets; and .10% of average daily net assets in excess of $50 million.

EXPENSES

For the fiscal year ended October 31, 1995, the Fund's total operating expenses
(for Class A shares) were 1.04% of the Fund's average net assets, excluding
certain voluntary fee reductions or reimbursements.

ADDITIONAL INFORMATION

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.

MASSACHUSETTS LAW

- 27 -

<PAGE>

DELAWARE LAW

MISCELLANEOUS

- 28 -

<PAGE>

- 29 -

<PAGE>
THE
VICTORY
PORTFOLIOS

U.S. GOVERNMENT OBLIGATIONS FUND - INVESTOR SHARES

PROSPECTUS For current yield, purchase, and redemption information,
February 1, 1996 call 800-539-FUND or 800-539-3863

THE VICTORY PORTFOLIOS (the "Victory Portfolios") is a registered open-end
management investment company that offers investors a selection of money market,
fixed-income, municipal bond, domestic and international equity portfolios. This
Prospectus relates to the Investor Shares class of the U.S. GOVERNMENT
OBLIGATIONS FUND (the "Fund"), a diversified portfolio. 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 (the "Sub- Adviser" or "Society"). 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 consistent with liquidity and stability
of principal. The Fund pursues this investment objective by investing only in
short-term U.S. Government securities backed by the full faith and credit of the
U.S. Treasury.

The Fund seeks to maintain a constant net asset value of $1.00 per unit of
beneficial interest, and shares of the Fund are offered at net asset value. The
Fund offers two classes of shares: (1) Investor Shares, which bear no
shareholder servicing fee and are available to certain institutions, and (2)
Select Shares, which bear a shareholder servicing fee not to exceed 0.25% of the
aggregate net assets of that class, paid to financial institutions and
securities brokers that provide shareholder services.

AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER UNIT.

SHARES OF THE FUND ARE:

O NOT INSURED BY THE FDIC;

O NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR GUARANTEED BY, ANY KEYCORP
BANK, ANY OF ITS AFFILIATES, OR ANY OTHER BANK;

O SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL
AMOUNT INVESTED.

<PAGE>

TABLE OF CONTENTS PAGE

Fund Expenses 3
Financial Highlights 4
Investment Objective 5
Investment Policies and Risk Factors 5
How to Invest, Exchange and Redeem 6
Dividends, Distributions and Taxes 12
Performance 14
Fund Organization and Fees 15
Additional Information 17

- 2 -

<PAGE>

FUND EXPENSES

SHAREHOLDER TRANSACTION EXPENSES(1)

Maximum Sales Charge Imposed on Purchases
(as a percentage of the offering price).................................. none
Maximum Sales Charge Imposed on Reinvested
Dividends................................................................. none
Deferred Sales Charge.................................................... none
Redemption Fees.......................................................... none
Exchange Fee.............................................................. none

ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)

Investor
Shares
--------
Management Fees......................................................... .35%
Administration Fees..................................................... .15%
Other Expenses.......................................................... .10%
Total Fund Operating Expenses........................................... .60%

(1) Investors may be charged a fee if they effect transactions in fund
shares through a broker or agent, including affiliated banks and
non-bank affiliates of Key Advisers and KeyCorp. (See "How to Invest,
Exchange and Redeem.")

EXAMPLE: You would pay the following expenses on a $1,000 investment, assuming
(1) a 5% annual return and (2) full redemption at the end of each time period.

1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------

U.S. Government Obligations
Fund - Investor Shares $6 $19 $33 $75

The purpose of the table above is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear 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 that the Fund is expected to incur during the current fiscal year. THE
FOREGOING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.

- 3 -

<PAGE>

FINANCIAL HIGHLIGHTS

The table below sets forth certain financial information with respect to the
financial highlights for the Select Shares class of the Fund for the periods
indicated. The information below has been derived from financial statements
audited by Coopers & Lybrand L.L.P., independent accountants for the Victory
Portfolios, whose report thereon, together with the financial statements of the
Fund, is incorporated by reference into the Statement of Additional Information.
No Investor Shares were publicly issued prior to February 1, 1996, and therefore
no information on Investor Shares is reflected in the table below. The
information set forth below is for a Select Share outstanding throughout each
period indicated.

<TABLE>
<CAPTION>
THE VICTORY U.S. GOVERNMENT OBLIGATIONS FUND
SELECT SHARES

YEAR ENDED OCTOBER 31,

1995(a) 1994 1993 1992 1991 1990(c) 1989(c)
------- ---- ---- ---- ---- ------- -------

<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00

Investment Activities

Net Investment Income 0.052 0.032 0.026 0.036 0.060 0.076 0.081

Distributions

Net Investment Income (0.052) (0.032) (0.026) (0.036) (0.060) (0.076) (0.081)

NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00

Total Return 5.38% 3.30% 2.62% 3.66% 6.14% 7.83% 8.44%

RATIOS/SUPPLEMENTAL DATA:

Net Assets, End of Period (000) $964,929 $412,048 $515,734 $579,836 $430,248 $376,021 $152,718

Ratio of expenses to average net
assets 0.58% 0.63% 0.60% 0.60% 0.60% 0.62% 0.62%

Ratio of net investment income to
average net assets 5.28% 3.20% 2.57% 3.50% 5.92% 7.56% 8.16%

Ratio of expenses to average net
assets (b) 0.60% 0.80%

Ratio of net investment income to
average net assets(b) 5.26% 3.03%
</TABLE>

(a) Effective June 5, 1995, the Victory U.S. Treasury Money Market
Portfolio merged into the Fund.

- 4 -

<PAGE>

INVESTMENT OBJECTIVE

The Fund seeks to provide current income consistent with liquidity and stability
of principal. The investment objective of the Fund is fundamental and therefore
may not be changed without a vote of the holders of a majority of its
outstanding voting securities (as defined in the Statement of Additional
Information). There can be no assurance that the Fund will achieve its
investment objective.

INVESTMENT POLICIES AND RISK FACTORS

SUMMARY OF PRINCIPAL INVESTMENT POLICIES

Pursuant to a fundamental policy, the Fund invests only in U.S. Treasury bills,
notes, and other obligations issued or guaranteed by the U.S. Government or its
agencies or instrumentalities whose obligations are backed by the full faith and
credit of the U.S. Treasury, some of which may be subject to repurchase
agreements.

All securities or instruments in which the Fund may invest must have remaining
maturities of 397 days or less, although securities subject to repurchase
agreements and certain variable interest rate instruments may bear longer
maturities. The average weighted maturity of the securities in the Fund will not
exceed 90 days.

ADDITIONAL INFORMATION REGARDING THE FUND'S INVESTMENTS

- 5 -

<PAGE>

INVESTMENT LIMITATIONS

The following summarizes one of the Fund's principal investment limitations. The
Statement of Additional Information contains a complete listing of the Fund's
investment limitations.

The Fund does not engage in borrowing for the purpose of leverage.

The investment limitation on borrowing indicated in numbered paragraph 1 above
is fundamental. Non-fundamental limitations may be changed without shareholder
approval. Whenever an investment policy or limitation states a maximum
percentage of the Fund's assets that may be invested, such percentage limitation
will be determined immediately after and as a result of the investment and any
subsequent change in values, assets, or other circumstances will not be
considered when determining whether the investment complies with the Fund's
investment policies and limitations, except in the case of borrowing (or other
activities that may be deemed to result in the issuance of a "senior security"
under the 1940 Act).

HOW TO INVEST, EXCHANGE AND REDEEM

HOW TO INVEST

o INVESTMENT PROFESSIONALS. An "Investment Professional" is a salesperson,
financial planner, investment adviser or trust officer who provides you with
information regarding the investment of your assets.

o INVESTING THROUGH YOUR INVESTMENT PROFESSIONAL . Your Investment Professional
will place your order with the Transfer Agent (See "Fund Organizational Fees -
Transfer Agent" below) on your behalf. You may be required to establish a
brokerage or agency 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. Accounts established with Investment
Professionals may have different features, requirements and fees. In addition,
Investment Professionals may charge for their services. Information regarding
these features, requirements and fees will be provided by the Investment
Professional. If you are purchasing shares of any Fund through a program of
services offered or administered by your Investment Professional, you should
read the program materials in conjunction with this Prospectus. 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" and "Special Investor Services"
for more information about telephone transactions.

- 6 -

<PAGE>

INVESTING DIRECTLY

The Victory U.S. Government Obligations Fund - Investor Shares
Primary Funds Service Corporation
P.O. Box 9741
Providence, RI 02940-9741.

Subsequent purchases may be made in the same manner.

Boston Safe Deposit & Trust Co.
ABA #011001234
Credit PFSC DDA#16-918-8
The Victory Portfolios: U.S. Government Obligations Fund - Investor
Shares

Shares are sold at the net asset value that is next determined after the
Transfer Agent receives the purchase order. The net asset value of each share of
the Fund is determined on each Business Day (as defined in "Shareholder Account
Rules and Policies -- Share Price" below) as of 2:00 p.m. (Eastern time) and all
net income of the Fund is declared as a dividend to the Fund's shareholders of
record as of that time. If you buy shares through an Investment Professional,
the Investment Professional must receive your order in a timely fashion on a
regular Business Day and transmit it to the Transfer Agent so that it is
received before the close of business that day. The Transfer Agent may reject
any purchase order for the Fund's shares, in its sole discretion. It is the
responsibility of your Investment Professional to transmit your order to
purchase shares to the Transfer Agent in

- 7 -

<PAGE>

a timely fashion in order for you to begin earning dividends on the Business Day
when the order to purchase such shares is deemed to have been received as
provided above.

INVESTMENT REQUIREMENTS

SPECIAL INVESTOR SERVICES

O THE SYSTEMATIC INVESTMENT PLAN. You can make regular investments in the Fund
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.
Shares will be purchased at the net asset value next determined following
receipt of the order by the Transfer Agent. 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.

- 8 -

<PAGE>

HOW TO EXCHANGE

(1) Shares of the fund selected for exchange must be available for sale in
your state of residence.

(2) The prospectuses of this Fund and the fund whose shares you want to buy
must offer the exchange privilege.

(3) You must hold the shares you buy when you establish your account for at
least 7 days before you can exchange them; after the account is open 7
days, you can exchange shares on any Business Day.

(4) You must meet the minimum purchase requirements for the fund you
purchase by exchange.

(5) The registration and tax identification numbers of the two accounts
must be identical.

(6) BEFORE EXCHANGING, OBTAIN AND READ THE PROSPECTUS FOR THE FUND YOU WISH
TO PURCHASE BY EXCHANGE.

Exchanges into a fund with a sales charge 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. Please refer to the Statement of Additional
Information for more details about this policy.

- 9 -

<PAGE>

Telephone exchange requests may be made either by calling your Investment
Professional or the Transfer Agent at 800-539-3863 prior to the applicable
valuation time for both Funds involved in the exchange on any Business Day (See
"Shareholder Account Rules and Policies--Share Price" below).

There are certain exchange policies you should be aware of:

o Shares are normally redeemed from one fund and issued by the other fund in the
exchange transaction on the same Business Day on which the Transfer Agent
receives an exchange request by the applicable valuation time that is in proper
form, but either fund may delay the issuance of shares of the fund into which
you are exchanging if it determines it would be disadvantaged by a same-day
transfer of the proceeds to buy shares. For example, the receipt of multiple
exchange requests from a dealer in a "market-timing" strategy might create
excessive turnover in the Fund's portfolio and associated expenses
disadvantageous to the Fund.

o The Victory Portfolios may amend, suspend or terminate the exchange privilege
at any time upon 60 days' written notice to shareholders.

o If the Transfer Agent cannot exchange all the shares you request because of a
restriction cited above, only the shares eligible for exchange will be
exchanged.

o Each exchange may produce a gain or loss for tax purposes.

Shareholders of the former Investors Preference Fund for Income, Inc. and
Investors Preference New York Tax-Free Fund, Inc. will not be subject to any
additional sales charge upon an exchange of shares attributable to an Investors
Preference Funds account for shares of other funds of the Victory Portfolios.

HOW TO REDEEM

You may redeem shares in several ways:

O BY MAIL. Send a written request to:

The Victory Portfolios: U.S. Government
Obligations Fund - Investor Shares
P.O. Box 9741
Providence, RI 02940-9741

- 10 -

<PAGE>

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. The Transfer Agent reserves the right to
reject any signature guarantee if (1) it has reason to believe that the
signature is not genuine, (2) it has reason to believe that the transaction
would otherwise be improper, or (3) the guarantor institution is a broker or
dealer that is neither a member of a clearing corporation nor maintains net
capital of at least $100,000.

o 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 the valuation time (2:00 p.m. Eastern time), proceeds of the redemption
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 , P.O. Box 9741, Providence, RI 02940-9741.

SHAREHOLDER ACCOUNT RULES AND POLICIES

O SHARE PRICE. The term "net asset value per share," or "NAV", means the value
of one share. The NAV of Investor Shares is calculated by adding the value of
all the Fund's investments, plus cash and other assets, deducting liabilities of
the Fund and of the Investor Shares class, and then dividing the result by the
number of Investor Shares outstanding. The NAV of the Fund is determined and its
shares are priced as of 2:00 p.m. Eastern time) (the "Valuation Time") on each
Business Day of the Fund. 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

- 11 -

<PAGE>

Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Columbus Day, Veterans' Day, Thanksgiving and
Christmas .

The Fund's assets 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.

o The Victory Portfolios does not charge a redemption fee, but if an Investment
Professional handles your redemption, the Investment Professional may charge a
separate service fee.

O The Distributor at its expense, may provide cash compensation to dealers in
connection with sales of shares of the Fund. The Distributor will, from time to
time at its own expense, provide compensation, including financial assistance,
to dealers in connection with conferences, sales or training programs for their
employees, seminars for the public, advertising campaigns regarding one or more
Victory Portfolios and/or other dealersponsored special events including payment
for travel expenses, including lodging, incurred in connection with trips taken
by invited registered representatives and members of their families to locations
within or outside of the United States for meetings or seminars of a business
nature. Compensation will include the following types of non-cash compensation
offered through sales contests: (1) vacation trips including the provision of
travel arrangements and lodging; (2) tickets for entertainment events (such as
concerts, cruises and sporting events) and (3) merchandise (such as clothing,
trophies, clocks and pens). Dealers may not use sales of the Fund's shares to
qualify for this compensation if prohibited by the laws of any state or any
self-regulatory organization, such as the National Association of Securities
Dealers, Inc. None of the aforementioned compensation is paid for by the Fund or
its shareholders.

DIVIDENDS, DISTRIBUTIONS AND TAXES

DIVIDENDS

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

- 12 -

<PAGE>

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
the Fund in shares of a fund sold with a sales charge, the shares will
be purchased at the public offering price for such other fund. 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 the net asset value of the fund. 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.

Reinvested dividend distributions receive the same tax treatment as dividend
distributions paid in cash.

O 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.

O FEDERAL TAXES

- 13 -

<PAGE>

The Fund intends to qualify as a regulated investment company by satisfying the
requirements under Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"). The Fund contemplates the distribution of all of its net
investment income and capital gains, if any, in accordance with the timing
requirements imposed by the Code, so that the Fund will not be subject to
federal income taxes or the 4% excise tax on undistributed income.

It is anticipated that no part of any Fund distribution will be eligible for the
dividends received deduction for corporations.

Distributions by the Fund of its net investment income and the excess, if any,
of its net short-term capital gain over its net long-term capital loss are
taxable to shareholders as ordinary income. Distributions by a Fund of the
excess, if any, of its net long-term capital gain over its net short-term
capital loss are designated as capital gain dividends and are taxable to
shareholders as long-term capital gains, regardless of the length of time
shareholders have held their shares. The Fund does not expect to realize any,
such capital gains

To the extent that dividends paid to shareholders are derived from taxable
income or from capital gains, such dividends will be subject to federal income
tax whether received in cash or in additional shares and may also be subject to
state and local taxes.

Distributions received by shareholders of the Fund in January of a
given year will be treated as received on December 31 of the preceding year
provided that they were declared to shareholders of record on a date in October,
November or December of such preceding year. The Fund sends tax statements to
its shareholders (with copies to the Internal Revenue Service (the "IRS")) by
January 31 showing the amounts and tax status of distributions made (or deemed
made) during the preceding calendar year.

The Fund's distributions may be exempt from state and local taxes to the extent
that they consist of interest from obligations of the U.S. Government and
certain of its agencies and instrumentalities. The fund intends to advise
shareholders of the proportion of their dividend distributions which consist of
such interest. Shareholders are urged to consult their own tax advisers
regarding the possible exclusion of a portion of their dividend distributions
for state and local tax purposes in their respective jurisdictions.

When investors sign their Account Application, they are asked to provide their
correct social security or taxpayer identification number and other required
certifications. If investors do not comply with IRS regulations, the IRS may
require the Fund to withhold 31% of taxable distributions and redemptions from
their account.

PERFORMANCE

From time to time, the Fund's "yield" and "effective yield" for the Investor
Shares may be presented in advertisements, sales literature and in reports to
shareholders. The "yield" of the Investor Shares of the Fund is based upon the
income earned by the Fund over a seven-day period, which is then annualized,
i.e., the income earned in the period is assumed to be earned every seven days
over a 52-week period and is stated as a percentage of the investment. The
"effective yield" of the Investor Shares of the Fund is calculated similarly,
but when annualized, the income earned by the investment is assumed to be
reinvested in shares of the Fund and thus compounded in the course of a 52-week
period. The effective yield will be higher than the yield because of the
compounding effect of this assumed reinvestment.

- 14 -

<PAGE>

From time to time, performance information for the Investor Shares of the Fund
showing total return of this class of shares may also be presented in
advertisements, sales literature and in reports to shareholders. Such
performance figures are based on historical earnings and are not intended to
indicate future performance. Average annual total return will be calculated over
a stated period of more than one year. Average annual total return is measured
by comparing the value of an investment in the Investor Shares at the beginning
of the relevant period to the redemption value of the investment at the end of
the period (assuming immediate reinvestment of any dividends or capital gains
distributions) and annualizing that figure. Cumulative total return is
calculated similarly to average annual total return, except that the resulting
difference is not annualized.

Performance is a function of the type and quality of instruments held in the
Fund's portfolio, operating expenses, and market conditions. Consequently,
performance will fluctuate and is not necessarily representative of future
results. Any fees charged by service providers with respect to customer accounts
for investing in shares of the Fund will not be reflected in performance
calculations.

Additional information regarding the performance of each fund of the Victory
Portfolios is included in the Victory Portfolios' annual report, which is
available free of charge by calling 800-539-3863.

FUND ORGANIZATION AND FEES

Overall responsibility for management of the Victory Portfolios rests with its
Board of Trustees, who are elected by the shareholders of the Victory
Portfolios.

INVESTMENT ADVISER AND SUB-ADVISER

- 15 -

<PAGE>

For the services provided and expenses incurred pursuant to the investment
advisory agreement between the Victory Portfolios respecting the Fund, Key
Advisers is entitled to receive a fee, computed daily and paid monthly, at an
annual rate of thirty-five one-hundredths of one percent (.35%) 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 may periodically waive all or a portion of its advisory fee
with respect to the Fund . Prior to January, 1996, Society Asset Management,
Inc. served as investment adviser to the Fund. During the Fund's fiscal period
ended October 31, 1995, Society Asset Management, Inc. earned investment
advisory fees aggregating .35% of the average daily net assets of the Fund.

Under the investment advisory agreement between the Victory Portfolios, on
behalf of the Fund, and Key Advisers (the "Investment Advisory Agreement"), the
Adviser may delegate a portion of its responsibilities to a sub-adviser. 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 Investment Advisory Agreement and the
sub-advisory agreement, respectively, provide that Key Advisers and the
Sub-Adviser, respectively, may render services through their 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 and the Sub-Adviser,
respectively, and Key Advisers and the Sub-Adviser, respectively, will be as
fully responsible to the Fund for the acts and omissions of such persons as they
are for their own acts and omissions.

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 average daily net assets in excess of $50
million.

EFFECT OF BANKING LAWS

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.

- 16 -

<PAGE>

During the fiscal year ended October 31, 1995, the Administrator earned
administration fees of .14% of the average daily net assets of the Fund, after a
voluntary waiver of its fees.

TRANSFER AGENT

FUND ACCOUNTANT

BISYS Fund Services Ohio, Inc., 3435 Stelzer Road, Columbus, OH 43219, provides
certain accounting services for the Fund pursuant to a Fund Accounting Agreement
and receives a fee for such services.

CUSTODIAN

Key Trust Company of Ohio, N.A. , an affiliate of the Adviser and Sub-Adviser,
serves as custodian for the Fund and receives fees for the services it performs
as custodian.

INDEPENDENT ACCOUNTANTS

Coopers & Lybrand L.L.P. serves as independent accountants to the Fund.

BUSINESS MANAGEMENT AGREEMENT

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.

EXPENSES

For the fiscal year ended October 31, 1995, the Fund's total operating expenses
were .60% of the Fund's average net assets, excluding certain voluntary fee
reductions or reimbursements. Prior to February 1, 1996, the Investor Shares
class had not commenced operations.

ADDITIONAL INFORMATION

- 17 -

<PAGE>

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.

MASSACHUSETTS LAW

DELAWARE LAW

- 18 -

<PAGE>

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.

MISCELLANEOUS

The Fund also offers the Select Shares class, which has different charges and
other expenses. These charges and expenses would affect investment performance.
Subsequent to the date of this Prospectus, the Fund may offer additional classes
of shares through a separate prospectus. Any such additional classes may have
different charges and other expenses, which would affect investment performance.
To obtain a free prospectus of another class of shares or to obtain additional
information, call your Investment Professional, call (800) 539-3863 or write to
the address listed on the cover of this Prospectus.

- 19 -
<PAGE>
THE
VICTORY
PORTFOLIOS

U.S. GOVERNMENT OBLIGATIONS FUND - SELECT SHARES

PROSPECTUS For current yield, purchase, and redemption information,
February 1, 1996 call 800-539-FUND or 800-539-3863

THE VICTORY PORTFOLIOS (the "Victory Portfolios") is a registered open-end
management investment company that offers investors a selection of money market,
fixed-income, municipal bond, domestic and international equity portfolios. This
Prospectus relates to the Select Shares class of the U.S. GOVERNMENT OBLIGATIONS
FUND (the "Fund"), a diversified portfolio. Prior to February 1, 1996, the
Select Shares class was the only class of shares offered by the 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 (the "Sub-Adviser" or "Society"). 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 maintain a constant net asset value of $1.00 per unit of
beneficial interest, and shares of the Fund are offered at net asset value.

AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER UNIT.

SHARES OF THE FUND ARE:

O NOT INSURED BY THE FDIC;

O NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR GUARANTEED BY, ANY KEYCORP
BANK, ANY OF ITS AFFILIATES, OR ANY OTHER BANK;

O SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL
AMOUNT INVESTED.

<PAGE>

TABLE OF CONTENTS PAGE
- ----------------- ----

- 2 -

<PAGE>

FUND EXPENSES

SHAREHOLDER TRANSACTION EXPENSES(1)

Maximum Sales Charge Imposed on Purchases
(as a percentage of the offering price)......................... none

Maximum Sales Charge Imposed on Reinvested
Dividends....................................................... none
Deferred Sales Charge............................................. none
Redemption Fees............................................... none
Exchange Fee...................................................... none

ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)

Select
Shares

Management Fees.................................................... .35%
Administration Fees................................................ .15%
Other Expenses(2).................................................. .35%
---

Total Fund Operating Expenses(2)................................... .85%
===

(2) These amounts include an estimate of the shareholder servicing fees the
Fund expects to pay (see "Fund Organization and Fees - Shareholder
Servicing").

EXAMPLE: You would pay the following expenses on a $1,000 investment, assuming
(1) a 5% annual return and (2) full redemption at the end of each time period.

1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------

U.S.Government Obligations Fund - Select Shares $9 $27 $47 $105

- 3 -

<PAGE>

FINANCIAL HIGHLIGHTS

The table below sets forth certain financial information with respect to the
financial highlights for the Fund for the periods indicated. The information
below has been derived from financial statements audited by Coopers & Lybrand
L.L.P., independent accountants for the Victory Portfolios, whose report
thereon, together with the financial statements of the Fund, is incorporated by
reference into the Statement of Additional Information. The information set
forth below is for a Select Share outstanding for each period indicated.

<TABLE>
<CAPTION>
THE VICTORY U.S. GOVERNMENT OBLIGATIONS FUND
SELECT SHARES

Year Ended October 31,

1995(a) 1994 1993 1992 1991 1990(c) 1989(c)
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD ........................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00

Income from Investment Activities

Net Investment Income ............. 0.052 0.032 0.026 0.036 0.060 0.076 0.081

Distributions

Net Investment Income ............ (0.052) (0.032) (0.026) (0.036) (0.060) (0.076) (0.081)
------ ------ ------ ------ ------ ------ ------

NET ASSET VALUE, END OF PERIOD ...... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ======== ========

Total Return ........................ 5.38% 3.30% 2.62% 3.66% 6.14% 7.83% 8.44%

RATIOS/SUPPLEMENTAL DATA:

Net Assets, End of Period (000) . $964,929 412,048 $515,734 $579,836 $430,248 $376,021 $152,718

Ratio of expenses to average net
assets ........................... 0.58% 0.63% 0.60% 0.60% 0.60% 0.62% 0.62%

Ratio of net investment income to
average net assets ............... 5.28% 3.20% 2.57% 3.50% 5.92% 7.56% 8.16%

Ratio of expenses to average net
assets (b) ...................... 0.60% 0.80%

Ratio of net investment income to
average net assets(b) ........... 5.26% 3.03%

</TABLE>

(a) Effective June 5, 1995, the Victory U.S. Treasury Money Market
Portfolio merged into the Fund.

- 4 -

<PAGE>

INVESTMENT OBJECTIVE

INVESTMENT POLICIES AND RISK FACTORS

SUMMARY OF PRINCIPAL INVESTMENT POLICIES

ADDITIONAL INFORMATION REGARDING THE FUND'S INVESTMENTS

- 5 -

<PAGE>

From time to time, the Fund, to the extent consistent with its investment
objectives, policies and restrictions, may invest in securities of issuers with
which Key Advisers or the Sub-Adviser or its affiliates have a binding
relationship.

INVESTMENT LIMITATIONS

The following summarizes one of the Fund's principal investment limitations. The
Statement of Additional Information contains a complete listing of the Fund's
investment limitations.

The Fund does not engage in borrowing for the purpose of leverage.

HOW TO INVEST, EXCHANGE AND REDEEM

HOW TO INVEST

o INVESTING THROUGH YOUR INVESTMENT PROFESSIONAL . Your Investment Professional
will place your order with the Transfer Agent (See "Fund Organization nad Fees -
Transfer Agent" below) on your behalf. You may be required to establish a
brokerage or agency 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. Accounts established with Investment
Professionals may have different features, requirements and fees. In addition,
Investment Professionals may charge for their services. Information regarding
these features, requirements and fees will be provided by the Investment
Professional. If you are purchasing shares of any Fund through a program of
services offered or administered by your Investment Professional, you should
read the program materials in conjunction with this Prospectus. 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" and "Special Investor Services"
for more information about telephone transactions.

- 6 -

<PAGE>

INVESTING DIRECTLY

The Victory U.S. Government Obligations Fund - Select Shares
Primary Funds Service Corporation
P.O. Box 9741
Providence, RI 02940-9741.

Subsequent purchases may be made in the same manner.

Boston Safe Deposit & Trust Co.
ABA #011001234
Credit PFSC DDA#16-918-8
The Victory Portfolios: U.S. Government Obligations Fund - Select Shares

- 7 -

<PAGE>

a timely fashion in order for you to begin earning dividends on the Business Day
when the order to purchase such shares is deemed to have been received, as
provided above.

INVESTMENT REQUIREMENTS

The Distributor, at its expense, may provide additional cash compensation to
dealers in connection with sales of shares of the Fund. The Distributor will,
from time to time at its own expense, provide compensation, including financial
assistance, to dealers in connection with conferences, sales or training
programs for their employees, seminars for the public, advertising campaigns
regarding one or more Victory Portfolios and/or other dealersponsored special
events including payment for travel expenses, including lodging, incurred in
connection with trips taken by invited registered representatives and members of
their families to locations within or outside of the United States for meetings
or seminars of a business nature. Compensation will include the following types
of non-cash compensation offered through sales contests: (1) vacation trips
including the provision of travel arrangements and lodging; (2) tickets for
entertainment events (such as concerts, cruises and sporting events) and (3)
merchandise (such as clothing, trophies, clocks and pens). Dealers may not use
sales of the Fund's shares to qualify for this compensation if prohibited by the
laws of any state or any self-regulatory organization, such as the National
Association of Securities Dealers, Inc. None of the aforementioned compensation
is paid for by the Fund or its shareholders.

SPECIAL INVESTOR SERVICES

O THE SYSTEMATIC INVESTMENT PLAN. You can make regular investments in the Fund
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.
Shares will be purchased at the offering price next determined following receipt
of the order by the Transfer Agent. 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.

- 8 -

<PAGE>

HOW TO EXCHANGE

(1) Shares of the fund selected for exchange must be available for sale in your
state of residence.

(2) The prospectuses of this Fund and the fund whose shares you want to buy
must offer the exchange privilege.

(3) You must hold the shares you buy when you establish your account for at
least 7 days before you can exchange them; after the account is open 7
days, you can exchange shares on any Business Day.

(4) You must meet the minimum purchase requirements for the fund you purchase
by exchange.

(5) The registration and tax identification numbers of the two accounts must be
identical.

(6) BEFORE EXCHANGING, OBTAIN AND READ THE PROSPECTUS FOR THE FUND YOU WISH TO
PURCHASE BY EXCHANGE.

- 9 -

<PAGE>

There are certain exchange policies you should be aware of:

o Shares are normally redeemed from one fund and issued by the other fund in the
exchange transaction on the same Business Day on which the Transfer Agent
receives an exchange request by the applicable valuation time that is in proper
form, but either fund may delay the issuance of shares of the fund into which
you are exchanging if it determines it would be disadvantaged by a same-day
transfer of the proceeds to buy shares. For example, the receipt of multiple
exchange requests from a dealer in a "market-timing" strategy might create
excessive turnover in the Fund's portfolio and associated expenses
disadvantageous to the Fund.

o The Victory Portfolios may amend, suspend or terminate the exchange privilege
at any time upon 60 days' written notice to shareholders.

o If the Transfer Agent cannot exchange all the shares you request because of a
restriction cited above, only the shares eligible for exchange will be
exchanged.

o Each exchange may produce a gain or loss for tax purposes.

HOW TO REDEEM

You may redeem shares in several ways:

O BY MAIL. Send a written request to:
The Victory Portfolios: U.S. Government Obligations Fund - Select Shares
P.O. Box 9741
Providence, RI 02940-9741

- 10 -

<PAGE>

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. The Transfer Agent reserves the
right to reject any signature guarantee if (1) it has reason to believe that the
signature is not genuine, (2) it has reason to believe that the transaction
would otherwise be improper, or (3) the guarantor institution is a broker or
dealer that is neither a member of a clearing corporation nor maintains net
capital of at least $100,000.

SHAREHOLDER ACCOUNT RULES AND POLICIES

O SHARE PRICE. The term "net asset value per share," or "NAV", means the value
of one share. The NAV of Select Shares is calculated by adding the value of all
the Fund's investments, plus cash and other assets, deducting liabilities of the
Fund and of the Select Shares class, and then dividing the result by the number
of Select Shares outstanding. The NAV of the Fund is determined and its shares
are priced as of 2:00 p.m. Eastern time) (the "Valuation Time") on each Business
Day of the Fund. 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, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Columbus Day, Veterans' Day, Thanksgiving and Christmas .

- 11 -

<PAGE>

o The Victory Portfolios does not charge a redemption fee, but if an Investment
Professional handles your redemption, the Investment Professional may charge a
separate service fee.

DIVIDENDS, DISTRIBUTIONS AND TAXES

DIVIDENDS

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:

- 12 -

<PAGE>

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
the Fund in shares of a fund sold with a sales charge, the shares will
be purchased at the public offering price for such other fund. 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 the net asset value of the fund. 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.

Reinvested dividend distributions receive the same tax treatment as dividend
distributions paid in cash.

O 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.

FEDERAL TAXES

- 13 -

<PAGE>

timing requirements imposed by the Code, so that the Fund will not be subject to
federal income taxes or the 4% excise tax on undistributed income.

It is anticipated that no part of any Fund distribution will be eligible for the
dividends received deduction for corporations.

Distributions by the Fund of its net investment income and the excess, if any,
of its net short-term capital gain over its net long-term capital loss are
taxable to shareholders as ordinary income. Distributions by a Fund of the
excess, if any, of its net long-term capital gain over its net short-term
capital loss are designated as capital gain dividends and are taxable to
shareholders as long-term capital gains, regardless of the length of time
shareholders have held their shares. The Fund does not expect to realize much,
if any, such capital gain.

To the extent that Fund distributions are derived from taxable income (for
example, interest on certificates of deposit or repurchase agreements) or from
capital gains, such distributions will be subject to federal income tax whether
received in cash or in additional shares and may also be subject to state and
local taxes. Distributions received by shareholders of the Fund in January of a
given year will be treated as received on December 31 of the preceding year
provided that they were declared to shareholders of record on a date in October,
November or December of such preceding year. The Fund sends tax statements to
its shareholders (with copies to the Internal Revenue Service (the "IRS")) by
January 31 showing the amounts and tax status of distributions made (or deemed
made) during the preceding calendar year.

PERFORMANCE

From time to time, the Fund's "yield" and "effective yield" for the Select
Shares may be presented in advertisements, sales literature and in reports to
shareholders. The "yield" of the Select Shares of the Fund is based upon the
income earned by the Fund over a seven-day period, which is then annualized,
i.e., the income earned in the period is assumed to be earned every seven days
over a 52-week period and is stated as a percentage of the investment. The
"effective yield" of the Select Shares of the Fund is calculated similarly, but
when annualized, the income earned by the investment is assumed to be reinvested
in shares of the Fund and thus compounded in the course of a 52-week period. The
effective yield will be higher than the yield because of the compounding effect
of this assumed reinvestment.

From time to time, performance information for the Select Shares of the Fund
showing total return of this class of shares may also be presented in
advertisements, sales literature and in reports to shareholders. Such
performance figures are based on historical earnings and are not intended to
indicate future

- 14 -

<PAGE>

performance. Average annual total return will be calculated over a stated period
of more than one year. Average annual total return is measured by comparing the
value of an investment in the Select Shares at the beginning of the relevant
period to the redemption value of the investment at the end of the period
(assuming immediate reinvestment of any dividends or capital gains
distributions) and annualizing that figure. Cumulative total return is
calculated similarly to average annual total return, except that the resulting
difference is not annualized.

FUND ORGANIZATION AND FEES

Overall responsibility for management of the Victory Portfolios rests with its
Board of Trustees, who are elected by the shareholders of the Victory
Portfolios.

INVESTMENT ADVISER AND SUB-ADVISER

- 15 -

<PAGE>

and paid monthly, at an annual rate of thirty-five one-hundredths of one percent
(.35%) 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 may periodically waive all or a portion of
its advisory fee with respect to the Fund . Prior to January, 1996, Society
Asset Management, Inc. served as investment adviser to the Fund. During the
Fund's fiscal period ended October 31, 1995, Society Asset Management, Inc.
earned investment advisory fees aggregating .35% of the average daily net assets
of the Fund.

Under the investment advisory agreement between the Victory Portfolios, on
behalf of the Fund, and Key Advisers (the "Investment Advisory Agreement"), the
Adviser may delegate a portion of its responsibilities to a sub-adviser. 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 Investment Advisory Agreement and the
sub-advisory agreement, respectively, provide that Key Advisers and the
Sub-Adviser, respectively, may render services through their 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 and the Sub-Adviser,
respectively, and Key Advisers and the Sub-Adviser, respectively, will be as
fully responsible to the Fund for the acts and omissions of such persons as they
are for their own acts and omissions.

EFFECT OF BANKING LAWS

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.

- 16 -

<PAGE>

During the fiscal year ended October 31, 1995, the Administrator earned
administration fees of .14% of the average daily net assets of the Fund, after a
voluntary waiver of its fees.

TRANSFER AGENT

SHAREHOLDER SERVICING

The Victory Portfolios has adopted a Shareholder Servicing Plan for the Select
Shares class of the Fund. In accordance with the Shareholder Servicing Plan for
the Select Shares, the Fund may enter into Shareholder Service Agreements under
which the Fund pays fees of up to .25% of the net assets of such class incurred
in connection with the personal service and maintenance of accounts holding the
shares of such class. Such agreements are entered into between the Victory
Portfolios and various shareholder servicing agents, including the Distributor,
Key Trust Company of Ohio, N.A. and 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 inquires, forwarding shareholder
communication, assisting in the processing of purchase, exchange and redemption
requests, and assisting shareholders in changing dividend options, account
designations and addresses. Shareholder Servicing Agents may periodically waive
all or a portion of their respective shareholder servicing fees with respect to
the Fund .

FUND ACCOUNTANT

BISYS Fund Services Ohio, Inc., 3435 Stelzer Road, Columbus, OH 43219, provides
certain accounting services for the Fund pursuant to a Fund Accounting Agreement
and receives a fee for such services.

CUSTODIAN

Key Trust Company of Ohio, N.A. , an affiliate of the Adviser and Sub-Adviser,
serves as custodian for the Fund and receives fees for the services it performs
as custodian.

INDEPENDENT ACCOUNTANTS

Coopers & Lybrand L.L.P. serves as independent accountants to the Fund.

BUSINESS MANAGEMENT AGREEMENT

- 17 -

<PAGE>

administrative and support services to the Sub-Adviser. Such services include
preparing reports to the Victory Portfolios' Board of Trustees, recordkeeping
services, services rendered in connection with the preparation of regulatory
filings and other reports, and regulatory , compliance and other administrative
and support services.

EXPENSES

For the fiscal year ended October 31, 1995, the Fund's total operating expenses
were .60% of the Fund's average net assets, excluding certain voluntary fee
reductions or reimbursements.

ADDITIONAL INFORMATION

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.

MASSACHUSETTS LAW

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DELAWARE LAW

MISCELLANEOUS

Prior to February 1, 1996, the Select Shares class was the only class of shares
offered by the Fund. The Fund also offers the Investor Shares class which has
different charges and other expenses. These different charges and expenses would
affect investment performance. The Investor Shares class may not be available
through your investment professional. Subsequent to the date of this Prospectus,
the Fund may offer additional classes of shares through a separate prospectus.
Any such additional classes may have different charges and other expenses, which
would affect investment performance. To obtain a free prospectus of another
class of shares or to obtain additional information, call your Investment
Professional, call (800) 539-3863 or write to the address listed on the cover of
this Prospectus.

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The Victory Portfolios

PART B

<PAGE>
STATEMENT OF ADDITIONAL INFORMATION

THE VICTORY PORTFOLIOS

BALANCED FUND

February 1, 1996

This Statement of Additional Information is not a Prospectus, but should be read
in conjunction with the Prospectus of The Victory Portfolios - Balanced Fund,
dated the same date as the date hereof (the "Prospectus"). This Statement of
Additional Information is incorporated by reference in its entirety into the
Prospectus. Copies of the Prospectus may be obtained by writing The Victory
Portfolios at Primary Funds Service Corporation, P.O. Box 9741, Providence, RI
02940-9741, or by telephoning toll free 800-539-FUND or 800-539-3863.

TABLE OF CONTENTS

INVESTMENT OBJECTIVE AND POLICIES ..... 1 INVESTMENT ADVISER
INVESTMENT LIMITATIONS AND KeyCorp Mutual Fund Advisers, Inc.
RESTRICTIONS....................... 6
VALUATION OF PORTFOLIO SECURITIES...... 9 INVESTMENT SUB-ADVISER
PERFORMANCE............................ 9 Society Asset Management, Inc.
ADDITIONAL PURCHASE, EXCHANGE AND
REDEMPTION INFORMATION............. 13 ADMINISTRATOR
DIVIDENDS AND DISTRIBUTIONS............ 17 Concord Holding Corporation
TAXES.................................. 17
TRUSTEES AND OFFICERS.................. 17 DISTRIBUTOR
ADVISORY AND OTHER CONTRACTS........... 23 Victory Broker-Dealer Services,
ADDITIONAL INFORMATION................. 32 Inc.
APPENDIX............................... 37
TRANSFER AGENT
INDEPENDENT AUDITORS REPORT Primary Funds Service Corporation
FINANCIAL STATEMENTS

CUSTODIAN
Key Trust Company of Ohio, N.A.

<PAGE>

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 Balanced 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

ADDITIONAL INFORMATION REGARDING FUND INVESTMENTS.

The following policies supplement the investment policies of the Fund set forth
in the Prospectus. The Fund's investments in the following securities and other
financial instruments are subject to the other investment policies and
limitations described in the Prospectus and this Statement of Additional
Information.

BANKERS' ACCEPTANCES AND CERTIFICATES OF DEPOSIT. The Fund may invest in
bankers' acceptances, certificates of deposit, and demand and time deposits.
Bankers' acceptances are negotiable drafts or bills of exchange typically drawn
by an importer or exporter to pay for specific merchandise, which are "accepted"
by a bank, meaning, in effect, that the bank unconditionally agrees to pay the
face value of the instrument on maturity. Certificates of deposit are negotiable
certificates issued against funds deposited in a commercial bank or a savings
and loan association for a definite period of time and earning a specified
return.

Bankers' acceptances will be those guaranteed by domestic and foreign banks, if
at the time of purchase such banks have capital, surplus, and undivided profits
in excess of $100,000,000 (as of the date of their most recently published
financial statements). Certificates of deposit and demand and time deposits
invested in by the Fund will be those of domestic and foreign banks and savings
and loan associations, if (a) at the time of purchase such financial
institutions have capital, surplus, and undivided profits in excess of
$100,000,000 (as of the date of their most recently published financial
statements) or (b) the principal amount of the instrument is insured in full by
the Federal Deposit Insurance Corporation (the "FDIC") or the Savings
Association Insurance Fund.

The Fund may also invest in Eurodollar Certificates of Deposit ("ECDs") which
are U.S. dollar-denominated certificates of deposit issued by branches of
foreign and domestic banks located outside the United States, Yankee
Certificates of Deposit ("Yankee CDs") which are certificates of deposit issued
by a U.S. branch of a foreign bank denominated in U.S. dollars and held in the
United States, Eurodollar Time Deposits ("ETDs") which are U.S.
dollar-denominated deposits in a foreign branch of a U.S. bank or a foreign
bank, and Canadian Time Deposits ("CTDs") which are U.S. dollar-denominated
certificates of deposit issued by Canadian offices of major Canadian Banks.

COMMERCIAL PAPER. Commercial paper consists of unsecured promissory notes issued
by corporations. Except as noted below with respect to variable amount master
demand notes, issues of commercial paper normally have maturities of less than
nine months and fixed rates of return.

<PAGE>

(i.e., in one of the two top ratings categories) by a NRSRO that is neither
controlling, controlled by, or under common control with the issuer of, or any
issuer, guarantor, or provider of credit support for, the instruments. For a
description of the rating symbols of each NRSRO see the Appendix to this
Statement of Additional Information.

VARIABLE AMOUNT MASTER DEMAND NOTES. Variable amount master demand notes in
which the Fund may invest are unsecured demand notes that permit the
indebtedness thereunder to vary and provide for periodic adjustments in the
interest rate according to the terms of the instrument. Although there is no
secondary market for these notes, the Fund may demand payment of principal and
accrued interest at any time and may resell the notes at any time to a third
party. The absence of an active secondary market, however, could make it
difficult for the Fund to dispose of a variable amount master demand note if the
issuer defaulted on its payment obligations, and the Fund could, for this or
other reasons, suffer a loss to the extent of the default. While the notes are
not typically rated by credit rating agencies, issuers of variable amount master
demand notes must satisfy the same criteria as set forth above for unrated
commercial paper, and Key Advisers or the Sub-Adviser will continuously monitor
the issuer's financial status and ability to make payments due under the
instrument. Where necessary to ensure that a note is of "high quality," the Fund
will require that the issuer's obligation to pay the principal of the note be
backed by an unconditional bank letter or line of credit, guarantee or
commitment to lend. For purposes of the Fund's investment policies, a variable
amount master note will be deemed to have a maturity equal to the longer of the
period of time remaining until the next readjustment of its interest rate or the
period of time remaining until the principal amount can be recovered from the
issuer through demand.

FOREIGN INVESTMENT. The Fund may invest in securities issued by foreign branches
of U.S. banks, foreign banks, or other foreign issuers, including American
Depository Receipts ("ADRs") and securities purchased on foreign securities
exchanges. Such investment may subject the Fund to significant investment risks
that are different from, and additional to, those related to investments in
obligations of U.S. domestic issuers or in U.S. securities markets.

The value of securities denominated in or indexed to foreign currencies, and of
dividends and interest from such securities, can change significantly when
foreign currencies strengthen or weaken relative to the U.S. dollar. Foreign
securities markets generally have less trading volume and less liquidity than
U.S. markets, and prices on some foreign markets can be highly volatile. Many
foreign countries lack uniform accounting and disclosure standards comparable to
those applicable to U.S. companies, and it may be more difficult to obtain
reliable information regarding an issuer's financial condition and operations.
In addition, the costs of foreign investing, including withholding taxes,
brokerage commissions, and custodial costs, are generally higher than for U.S.
investments.

Foreign markets may offer less protection to investors than U.S. markets.
Foreign issuers, brokers, and securities markets may be subject to less
government supervision. Foreign security trading practices, including those
involving the release of assets in advance of payment, may involve increased
risks in the event of a failed trade or the insolvency of a broker-dealer, and
may involve substantial delays. It may also be difficult to enforce legal rights
in foreign countries.

Investing abroad also involves different political and economic risks. Foreign
investments may be affected by actions of foreign governments adverse to the
interests of U.S. investors, including the possibility of expropriation or
nationalization of assets, confiscatory taxation, restrictions on U.S.
investment or on the ability to repatriate assets or convert currency into U.S.
dollars, or other government intervention. There may be a greater possibility of
default by foreign governments or foreign government-sponsored enterprises.
Investments in foreign countries also involve a risk of local political,
economic, or social instability, military action or unrest, or adverse
diplomatic developments. There is no assurance that Key Advisers or the
Sub-Adviser will be able to anticipate these potential events or counter their
effects.

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The considerations noted above generally are intensified for investments in
developing countries. Developing countries may have relatively unstable
governments, economies based on only a few industries, and securities markets
that trade a small number of securities.

The Fund may invest in foreign securities that impose restrictions on transfer
within the U.S. or to U.S. persons. Although securities subject to transfer
restrictions may be marketable abroad, they may be less liquid than foreign
securities of the same class that are not subject to such restrictions.

VARIABLE AND FLOATING RATE NOTES. The Fund may acquire variable and floating
rate notes. A variable rate note is one whose terms provide for the readjustment
of its interest rate on set dates and which, upon such readjustment, can
reasonably be expected to have a market value that approximates its par value. A
floating rate note is one whose terms provide for the readjustment of its
interest rate whenever a specified interest rate changes and which, at any time,
can reasonably be expected to have a market value that approximates its par
value. Such notes are frequently not rated by credit rating agencies; however,
unrated variable and floating rate notes purchased by the Fund will only be
those determined by Key Advisers or the Sub-Adviser, under guidelines
established by the Trustees, to pose minimal credit risks and to be of
comparable quality, at the time of purchase, to rated instruments eligible for
purchase under the Fund's investment policies. In making such determinations,
Key Advisers or the Sub-Adviser will consider the earning power, cash flow and
other liquidity ratios of the issuers of such notes (such issuers include
financial, merchandising, bank holding and other companies) and will
continuously monitor their financial condition. Although there may be no active
secondary market with respect to a particular variable or floating rate note
purchased by the Fund, the Fund may resell the note at any time to a third
party. The absence of an active secondary market, however, could make it
difficult for the Fund to dispose of a variable or floating rate note in the
event the issuer of the note defaulted on its payment obligations and the Fund
could, for this or other reasons, suffer a loss to the extent of the default.
Variable or floating rate notes may be secured by bank letters of credit.

Variable or floating rate notes may have maturities of more than one
year, as follows:

1. A note that is issued or guaranteed by the United States government
or any agency thereof and which has a variable rate of interest readjusted no
less frequently than annually will be deemed by the Fund to have a maturity
equal to the period remaining until the next readjustment of the interest rate.

2. A variable rate note, the principal amount of which is scheduled on
the face of the instrument to be paid in one year or less, will be deemed by the
Fund to have a maturity equal to the period remaining until the next
readjustment of the interest rate.

3. A variable rate note that is subject to a demand feature scheduled
to be paid in one year or more will be deemed by the Fund to have a maturity
equal to the longer of the period remaining until the next readjustment of the
interest rate or the period remaining until the principal amount can be
recovered through demand.

4. A floating rate note that is subject to a demand feature will be
deemed by the Fund to have a maturity equal to the period remaining until the
principal amount can be recovered through demand.

As used above, a note is "subject to a demand feature" where the Fund is
entitled to receive the principal amount of the note either at any time on no
more than 30 days' notice or at specified intervals not exceeding one year and
upon no more than 30 days' notice.

OPTIONS. The Fund may sell (write) call options which are traded on national
securities exchanges with respect to common stock in its portfolio. The Fund
must at all times have in its portfolio the securities which it may be

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obligated to deliver if the option is exercised. The Fund may write such call
options in an attempt to realize a greater level of current income than would be
realized on the securities alone. The Fund may also write call options as a
partial hedge against a possible stock market decline or to extend a holding
period on a stock which is under consideration for sale in order to create a
long-term capital gain. In view of its investment objective, the Fund generally
would write call options only in circumstances where Key Advisers or the
Sub-Adviser does not anticipate significant appreciation of the underlying
security in the near future or has otherwise determined to dispose of the
security. As the writer of a call option, the Fund receives a premium for
undertaking the obligation to sell the underlying security at a fixed price
during the option period, if the option is exercised. So long as the Fund
remains obligated as a writer of a call option, it forgoes the opportunity to
profit from increases in the market price of the underlying security above the
exercise price of the option, except insofar as the premium represents such a
profit . The Fund retains the risk of loss should the value of the underlying
security decline. The Fund may also enter into "closing purchase transactions"
in order to terminate its obligation as a writer of a call option prior to the
expiration of the option. Although the writing of call options only on national
securities exchanges increases the likelihood of the Fund's ability to make
closing purchase transactions, there is no assurance that the Fund will be able
to effect such transactions at any particular time or at any acceptable price.
The writing of call options could result in increases in the Fund's portfolio
turnover rate, especially during periods when market prices of the underlying
securities appreciate.

MISCELLANEOUS SECURITIES. The Fund can invest in various securities issued by
domestic and foreign corporations, including preferred stocks and investment
grade corporate bonds, notes, and warrants. Bonds are long-term corporate debt
instruments secured by some or all of the issuer's assets, debentures are
general corporate debt obligations backed only by the integrity of the borrower,
and warrants are instruments that entitle the holder to purchase a certain
amount of common stock at a specified price, which price is usually higher than
the current market price at the time of issuance. Preferred stocks are
instruments that combine qualities both of equity and debt securities.
Individual issues of preferred stock will have those rights and liabilities that
are spelled out in the governing document. Preferred stocks usually pay a fixed
dividend per quarter (or annum) and are senior to common stock in terms of
liquidation and dividends rights, and preferred stocks typically do not have
voting rights. The Fund also may invest in zero coupon bonds, which are debt
instruments that do not pay current interest and are typically sold at prices
greatly discounted from par value. The return on a zero-coupon obligation, when
held to maturity, equals the difference between the par value and the original
purchase price. Zero-coupon obligations have greater price volatility than
coupon obligations.

"WHEN-ISSUED" SECURITIES. The Fund may purchase securities on a "when issued"
basis (i.e., for delivery beyond the normal settlement date at a stated price
and yield). When the Fund agrees to purchase securities on a "when issued"
basis, the custodian will set aside cash or liquid portfolio securities equal to
the amount of the commitment in a separate account. Normally, the custodian will
set aside portfolio securities to satisfy the purchase commitment, and in such a
case, the Fund may be required subsequently to place additional assets in the
separate account in order to assure that the value of the account remains equal
to the amount of the Fund's commitment. It may be expected that the Fund's net
assets will fluctuate to a greater degree when it sets aside portfolio
securities to cover such purchase commitments than when it sets aside cash. When
the Fund engages in "when-issued" transactions, it relies on the seller to
consummate the trade. Failure of the seller to do so may result in the Fund
incurring a loss or missing the opportunity to obtain a price considered to be
advantageous. The Fund does not intend to purchase "when issued" securities for
speculative purposes, but only in furtherance of its investment objective.

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<PAGE>

from the U.S. Treasury; others are supported by the discretionary authority of
the U.S. Government to purchase the agency's obligations; and still others are
supported only by the credit of the agency or instrumentality. No assurance can
be given that the U.S. Government will provide financial support to U.S.
Government-sponsored agencies or instrumentalities if it is not obligated to do
so by law.

SECURITIES LENDING. The Fund may lend its portfolio securities to
broker-dealers, banks or institutional borrowers of securities. The Fund must
receive a minimum of 100% collateral, plus any interest due in the form of cash
or U.S. Government securities. This collateral must be valued daily and should
the market value of the loaned securities increase, the borrower must furnish
additional collateral to the Fund. During the time portfolio securities are on
loan, the borrower will pay the Fund any dividends or interest paid on such
securities plus any interest negotiated between the parties to the lending
agreement. Loans will be subject to termination by the Fund or the borrower at
any time. While the Fund will not have the right to vote securities on loan, it
intends to terminate the loan and regain the right to vote if that is considered
important with respect to the investment. The Fund will only enter into loan
arrangements with broker-dealers, banks or other institutions which Key Advisers
or the Sub-Adviser has determined are creditworthy under guidelines established
by the Trustees. The Fund will limit its securities lending to 33 1/3% of total
assets.

OTHER INVESTMENT COMPANIES. 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. Pursuant to an
exemptive order received by the Victory Portfolios from the Securities and
Exchange Commission (the "Commission"), the Fund may invest in the money market
funds of the Victory Portfolios. Key Advisers will waive its investment advisory
fee with respect to assets of the Fund invested in any of the money market funds
of the Victory Portfolios, and, to the extent required by the laws of any state
in which the Fund's shares are sold, Key Advisers will waive its investment
advisory fee as to all assets invested in other investment companies.

REPURCHASE AGREEMENTS. Securities held by the Fund may be subject to repurchase
agreements. Under the terms of a repurchase agreement, the Fund would acquire
securities from financial institutions or registered broker-dealers deemed
creditworthy by Key Advisers or the Sub-Adviser pursuant to guidelines adopted
by the Trustees, subject to the seller's agreement to repurchase such securities
at a mutually agreed upon date and price. The seller is required to maintain the
value of collateral held pursuant to the agreement at not less than the
repurchase price (including accrued interest). If the seller were to default on
its repurchase obligation or become insolvent, the Fund would suffer a loss to
the extent that the proceeds from a sale of the underlying portfolio securities
were less than the repurchase price, or to the extent that the disposition of
such securities by the Fund is delayed pending court action.

REVERSE REPURCHASE AGREEMENTS. The Fund may borrow funds for temporary purposes
by entering into reverse repurchase agreements. Pursuant to such agreements, the
Fund would sell portfolio securities to financial institutions such as banks and
broker-dealers, and agree to repurchase them at a mutually agreed-upon date and
price. At the time the Fund enters into a reverse repurchase agreement, it will
place in a segregated custodial account assets (such as cash or other liquid
high-grade securities) consistent with the Fund's investment restrictions having
a value equal to the repurchase price (including accrued interest); the
collateral will be marked-to-market on a daily basis, and will be continuously
monitored to ensure that such equivalent value is maintained. Reverse repurchase
agreements involve the risk that the market value of the securities sold by the
Fund may decline below the price at which the Fund is obligated to repurchase
the securities.

GOVERNMENT "MORTGAGE-BACKED" SECURITIES. The Fund may invest in obligations of
certain agencies and instrumentalities of the U.S. Government. Some such
obligations, such as those issued by GNMA or the Export-Import Bank of the
United States, are supported by the full faith and credit of the U.S. Treasury;
others, such as those of FNMA, are supported by the right of the issuer to
borrow from the Treasury; others are supported

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by the discretionary authority of the U.S. Government to purchase the agency's
obligations; still others, such as those of the Federal Farm Credit Banks or
FHLMC, are supported only by the credit of the instrumentality. No assurance can
be given that the U.S. Government would provide financial support to U.S.
Government-sponsored agencies and instrumentalities if it is not obligated to do
so by law.

The principal governmental (i.e., backed by the full faith and credit of the
U.S. Government) guarantor of mortgage-related securities is GNMA. GNMA is a
wholly owned U.S. Government corporation within the Department of Housing and
Urban Development. GNMA is authorized to guarantee, with the full faith and
credit of the U.S. Government, the timely payment of principal and interest on
securities issued by institutions approved by GNMA (such as savings and loan
institutions, commercial banks and mortgage bankers) and pools of FHA-insured or
VA-guaranteed mortgages. Government-related (i.e., not backed by the full faith
and credit of the U.S. Government) guarantors include FNMA and FHLMC. FNMA and
FHLMC are government-sponsored corporations owned entirely by private
stockholders. Pass-through securities issued by FNMA and FHLMC are guaranteed as
to timely payment of principal and interest by FNMA and FHLMC, respectively, but
are not backed by the full faith and credit of the U.S. Government.

MORTGAGE-RELATED SECURITIES -- IN GENERAL

Mortgage-related securities are backed by mortgage obligations including, among
others, conventional 30-year fixed rate mortgage obligations, graduated payment
mortgage obligations, 15-year mortgage obligations, and adjustable rate mortgage
obligations. All of these mortgage obligations can be used to create
pass-through securities. A pass-through security is created when mortgage
obligations are pooled together and undivided interests in the pool or pools are
sold. The cash flow from the mortgage obligations is passed through to the
holders of the securities in the form of periodic payments of interest,
principal and prepayments (net of a service fee). Prepayments occur when the
holder of an individual mortgage obligation prepays the remaining principal
before the mortgage obligation's scheduled maturity date. As a result of the
pass-through of prepayments of principal on the underlying securities,
mortgage-backed securities are often subject to more rapid prepayment of
principal than their stated maturity would indicate. Because the prepayment
characteristics of the underlying mortgage obligations vary, it is not possible
to predict accurately the realized yield or average life of a particular issue
of pass-through certificates. Prepayment rates are important because of their
effect on the yield and price of the securities. Accelerated prepayments have an
adverse impact on yields for pass-throughs purchased at a premium (i.e., a price
in excess of principal amount) and may involve additional risk of loss of
principal because the premium may not have been fully amortized at the time the
obligation is repaid. The opposite is true for pass-throughs purchased at a
discount. The Fund may purchase mortgage-related securities at a premium or at a
discount. Among the U.S. Government securities in which the Fund may invest are
government "mortgage-backed" (or government guaranteed mortgage related
securities). Such guarantees do not extend to the value of yield of the
mortgage-backed securities themselves or of the Fund's shares.

GNMA CERTIFICATES. Certificates of the Government National Mortgage Association
("GNMA") are mortgage-backed securities which evidence an undivided interest in
a pool or pools of mortgages. GNMA Certificates that the funds may purchase are
the "modified pass-through" type, which entitle the holder to receive timely
payment of all interest and principal payments due on the mortgage pool, net of
fees paid to the "issuer" and GNMA, regardless of whether or not the mortgagor
actually makes the payment.

The National Housing Act authorizes GNMA to guarantee the timely payment of
principal and interest on securities backed by a pool of mortgages insured by
the Federal Housing Administration ("FHA") or guaranteed by the Veterans
Administration ("VA"). The GNMA guarantee is backed by the full faith and credit
of the U.S. Government. GNMA is also empowered to borrow without limitation from
the U.S. Treasury if necessary to make any payments required under its
guarantee.

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<PAGE>

The estimated average life of a GNMA Certificate is likely to be substantially
shorter than the original maturity of the mortgages underlying the securities.
Prepayments of principal by mortgagors and mortgage foreclosures will usually
result in the return of the greater part of principal investment long before the
maturity of the mortgages in the pool. Foreclosures impose no risk to principal
investment because of the GNMA guarantee, except to the extent that the Fund has
purchased the certificates above par in the secondary market.

FHLMC SECURITIES. The Federal Home Loan Mortgage Corporation ("FHLMC") was
created in 1970 to promote development of a nationwide secondary market in
conventional residential mortgages. The FHLMC issues two types of mortgage
pass-through securities ("FHLMC Certificates"), mortgage participation
certificates ("PCs") and collateralized mortgage obligations ("CMOs"). PCs
resemble GNMA Certificates in that each PC represents a pro rata share of all
interest and principal payments made and owed on the underlying pool. The FHLMC
guarantees timely monthly payment of interest on PCs and the ultimate payment of
principal. Recently introduced FHLMC Gold PCs guarantee the timely payment of
both principal and interest.

CMOs are securities backed by a pool of mortgages in which the principal and
interest cash flows of the pool are channeled on a prioritized basis into two or
more classes, or tranches, of bonds. FHLMC CMOs are backed by pools of agency
mortgage-backed securities and the timely payment of principal and interest of
each tranche is guaranteed by the FHLMC. The FHLMC guarantee is not backed by
the full faith and credit of the U.S.
Government.

FNMA SECURITIES. The Federal National Mortgage Association ("FNMA") was
established in 1938 to create a secondary market in mortgages insured by the
FHA, but has expanded its activity to the secondary market for conventional
residential mortgages. FNMA primarily issues two types of mortgage-backed
securities, guaranteed mortgage pass-through certificates ("FNMA Certificates")
and CMOs. FNMA Certificates resemble GNMA Certificates in that each FNMA
Certificate represents a pro rata share of all interest and principal payments
made and owed on the underlying pool. FNMA guarantees timely payment of interest
and principal on FNMA Certificates and CMOs. The FNMA guarantee is not backed by
the full faith and credit of the U.S. Government.

FUTURES CONTRACTS. The Fund may enter into futures contracts, options on futures
contracts and stock index futures contracts and options thereon for the purposes
of remaining fully invested and reducing transaction costs. Futures contracts
provide for the future sale by one party and purchase by another party of a
specified amount of a specific security, class of securities, or an index at a
specified future time and at a specified price. A stock index futures contract
is a bilateral agreement pursuant to which two parties agree to take or make
delivery of an amount of cash equal to a specified dollar amount times the
difference between the stock index value at the close of trading of the
contracts and the price at which the futures contract is originally struck.
Futures contracts which are standardized as to maturity date and underlying
financial instrument are traded on national futures exchanges. Futures exchanges
and trading are regulated under the Commodity Exchange Act by the Commodity
Futures Trading Commission (the "CFTC"), a U.S. Government agency.

Although futures contracts by their terms call for actual delivery and
acceptance of the underlying securities, in most cases the contracts are closed
out before the settlement date without the making or taking of delivery. Closing
out an open futures position is done by taking an opposite position (buying a
contract which has previously been "sold," or "selling" a contract previously
purchased) in an identical contract to terminate the position. 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. The
acquisition of put and call options on futures contracts will, respectively,
give the Fund 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. Brokerage commissions are incurred when a
futures contract is bought or sold.

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<PAGE>

Futures traders are required to make a good faith margin deposit in cash or
government securities with a broker or custodian to initiate and maintain open
positions in futures contracts. A margin deposit is intended to assure
completion of the contract (delivery or acceptance of the underlying security)
if it is not terminated prior to the specified delivery date. Minimal initial
margin requirements are established by the futures exchange and may be changed.
Brokers may establish deposit requirements which are higher than the exchange
minimums. Initial margin deposits on futures contracts are customarily set at
levels much lower than the prices at which the underlying securities are
purchased and sold, typically ranging upward from less than 5% of the value of
the contract being traded.

After a futures contract position is opened, the value of the contract is
marked-to-market daily. If the futures contract price changes to the extent that
the margin on deposit does not satisfy margin requirements, payment of
additional "variation" margin will be required. Conversely, change in the
contract value may reduce the required margin, resulting in a repayment of
excess margin to the contract holder. Variation margin payments are made to and
from the futures broker for as long as the contract remains open. The Fund
expects to earn interest income on its margin deposits.

When interest rates are expected to rise or market values of portfolio
securities are expected to fall, the Fund can seek through the sale of futures
contracts to offset a decline in the value of its portfolio securities. When
interest rates are expected to fall or market values are expected to rise, the
Fund, through the purchase of such contracts, can attempt to secure better rates
or prices for the Fund than might later be available in the market when it
effects anticipated purchases.

The Fund will only sell futures contracts to protect securities it owns against
price declines or purchase contracts to protect against an increase in the price
of securities it intends to purchase.

The Fund's ability to effectively utilize futures trading depends on several
factors. First, it is possible that there will not be a perfect price
correlation between the futures contracts and their underlying stock index.
Second, it is possible that a lack of liquidity for futures contracts could
exist in the secondary market, resulting in an inability to close a futures
position prior to its maturity date. Third, the purchase of a futures contract
involves the risk that the Fund could lose more than the original margin deposit
required to initiate a futures transaction.

RESTRICTIONS ON THE USE OF FUTURES CONTRACTS. The Fund will not enter into
futures contract transactions for purposes other than bona fide hedging purposes
to the extent that, immediately thereafter, the sum of its initial margin
deposits on open contracts exceeds 5% of the market value of the Fund's total
assets. In addition, the Fund will not enter into futures contracts to the
extent that the value of the futures contracts held would exceed 1/3 of the
Fund's total assets. Futures transactions will be limited to the extent
necessary to maintain the Fund's qualification as a regulated investment
company.

The Victory Portfolios have undertaken to restrict their futures contract
trading as follows: first, the Victory Portfolios will not engage in
transactions in futures contracts for speculative purposes; second, the Victory
Portfolios will not market its funds to the public as commodity pools or
otherwise as vehicles for trading in the commodities futures or commodity
options markets; third, the Victory Portfolios will disclose to all prospective
shareholders the purpose of and limitations on its funds' commodity futures
trading; fourth, the Victory Portfolios will submit to the CFTC special calls
for information. Accordingly, registration as a commodities pool operator with
the CFTC is not required.

- 8 -

<PAGE>

(less any margin on deposit). For a short position in futures or forward
contracts held by the Fund, those requirements may mandate the establishment of
a segregated account (not with a futures commission merchant or broker) with
cash or certain liquid assets that, when added to the amounts deposited as
margin, equal the market value of the instruments underlying the futures
contracts (but are not less than the price at which the short positions were
established). However, segregation of assets is not required if the Fund
"covers" a long position. For example, instead of segregating assets, the Fund,
when holding a long position in a futures contract, could purchase a put option
on the same futures contract with a strike price as high or higher than the
price of the contract held by the Fund. In addition, where the Fund takes short
positions, or engages in sales of call options, it need not segregate assets if
it "covers" these positions. For example, where the Fund holds a short position
in a futures contract, it may cover by owning the instruments underlying the
contract. The Fund may also cover such a position by holding a call option
permitting it to purchase the same futures contract at a price no higher than
the price at which the short position was established. Where the Fund sells a
call option on a futures contract, it may cover either by entering into a long
position in the same contract at a price no higher than the strike price of the
call option or by owning the instruments underlying the futures contract. The
Fund could also cover this position by holding a separate call option permitting
it to purchase the same futures contract at a price no higher than the strike
price of the call option sold by the Fund.

In addition, the extent to which the Fund may enter into transactions involving
futures contracts may be limited by the Internal Revenue Code's requirements for
qualification as a registered investment company and the Fund's intention to
qualify as such.

RISK FACTORS IN FUTURES TRANSACTIONS. Positions in futures contracts may be
closed out only on an exchange which provides a secondary market for such
futures. However, there can be no assurance that a liquid secondary market will
exist for any particular futures contract at any specific time. Thus, it may not
be possible to close a futures position. In the event of adverse price
movements, the Fund would continue to be required to make daily cash payments to
maintain the required margin. In such situations, if the Fund has insufficient
cash, it may have to sell portfolio securities to meet daily margin requirements
at a time when it may be disadvantageous to do so. In addition, the Fund may be
required to make delivery of the instruments underlying futures contracts it
holds. The inability to close options and futures positions also could have an
adverse impact on the ability to effectively hedge them. The Fund will minimize
the risk that it will be unable to close out a futures contract by only entering
into futures contracts which are traded on national futures exchanges and for
which there appears to be a liquid secondary market.

The risk of loss in trading futures contracts in some strategies can be
substantial, due both to the low margin deposits required, and the extremely
high degree of leverage involved in futures pricing. Because the deposit
requirements in the futures markets are less onerous than margin requirements in
the securities market, there may be increased participation by speculators in
the futures market which may also cause temporary price distortions. A
relatively small price movement in a futures contract may result in immediate
and substantial loss (as well as gain) to the investor. For example, if at the
time of purchase, 10% of the value of the futures contract is deposited as
margin, a subsequent 10% decrease in the value of the futures contract would
result in a total loss of the margin deposit, before any deduction for the
transaction costs, if the account were then closed out. A 15% decrease would
result in a loss equal to 150% of the original margin deposit if the contract
were closed out. Thus, a purchaser or sale of a futures contract may result in
losses in excess of the amount invested in the contract. However, because the
futures strategies engaged in by the Fund are only for hedging purposes, Key
Advisers and the Sub-Adviser do not believe that the Fund is subject to the
risks of loss frequently associated with futures transactions. The Fund would
presumably have sustained comparable losses if, instead of the futures contract,
it had invested in the underlying financial instrument and sold it after the
decline.

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<PAGE>

possible that the Fund could both lose money on futures contracts and also
experience a decline in value of its portfolio securities. There is also the
risk of loss by the Fund of margin deposits in the event of bankruptcy of a
broker with whom the Fund has an open position in a futures contract or related
option.

INVESTMENT LIMITATIONS AND RESTRICTIONS

The following investment restrictions are fundamental with respect to the Fund
and may be changed only by a vote of a majority of the outstanding shares of the
Fund as defined in "ADDITIONAL INFORMATION -Miscellaneous" of this Statement of
Additional Information).

THE FUND MAY NOT:

1. Participate on a joint or joint and several basis in any securities
trading account.

2. Purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent the
Fund from purchasing or selling options and futures contracts or from investing
in securities or other instruments backed by physical commodities).

3. Purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the Fund from
investing in securities or other instruments backed by real estate or securities
of companies engaged in the real estate business). Investments by the Fund in
securities backed by mortgages on real estate or in marketable securities of
companies engaged in such activities are not hereby precluded.

4. Issue any senior security (as defined in the Investment Company Act
of 1940 as amended (the "1940 Act")), except that (a) the Fund may engage in
transactions that may result in the issuance of senior securities to the extent
permitted under applicable regulations and interpretations of the 1940 Act or an
exemptive order; (b) the Fund may acquire other securities, the acquisition of
which may result in the issuance of a senior security, to the extent permitted
under applicable regulations or interpretations of the 1940 Act; (c) subject to
the restrictions set forth below, the Fund may borrow money as authorized by the
1940 Act.

5. Borrow money, except that (a) the Fund may enter into commitments to
purchase securities in accordance with its investment program, including
delayed-delivery and when-issued securities and reverse repurchase agreements,
provided that the total amount of any such borrowing does not exceed 33 1/3% of
the Fund's total assets; and (b) the Fund may borrow money for temporary or
emergency purposes in an amount not exceeding 5% of the value of its total
assets at the time when the loan is made. Any borrowings representing more than
5% of the Fund's total assets must be repaid before the Fund may make additional
investments.

6. Lend any security or make any other loan if, as a result, more than
33 1/3% of its total assets would be lent to other parties, but this limitation
does not apply to purchases of publicly issued debt securities or to repurchase
agreements.

7. Underwrite securities issued by others, except to the extent that the
Fund may be considered an underwriter within the meaning of the Securities Act
of 1933 (the "1933 Act") in the disposition of restricted securities.

- 10 -

<PAGE>

8. With respect to 75% of the Fund's total assets, the Fund may not
purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. Government or any of its agencies or instrumentalities)
if, as a result, (a) more than 5% of the Fund's total assets would be invested
in the securities of that issuer, or (b) the Fund would hold more than 10% of
the outstanding voting securities of that issuer.

9. Purchase the securities of any issuer (other than securities issued
or guaranteed by the U.S. Government or any of its agencies or
instrumentalities, or repurchase agreements secured thereby) if, as a result,
more than 25% of the Fund's total assets would be invested in the securities of
companies whose principal business activities are in the same industry. In the
utilities category, the industry shall be determined according to the service
provided. For example, gas, electric, water and telephone will be considered as
separate industries.

The following restrictions are not fundamental and may be changed
without shareholder approval:

1. The Fund will not purchase or retain securities of any issuer if the
officers or Trustees of the Victory Portfolios or the officers or directors of
its investment adviser owning beneficially more than one-half of 1% of the
securities of such issuer together own beneficially more than 5% of such
securities.

2. The Fund will not invest more than 10% of its total assets in the
securities of issuers which together with any predecessors have a record of less
than three years of continuous operation.

3. The Fund will not write or sell puts, straddles, spreads or
combinations thereof or write or purchase put options or purchase call options.

4. The Fund will not invest more than 15% of its net assets in illiquid
securities. Illiquid securities are securities that are not readily marketable
or cannot be disposed of promptly within seven days and in the usual course of
business at approximately the price at which the Fund has valued them. Such
securities include, but are not limited to, time deposits and repurchase
agreements with maturities longer than seven days. Securities that may be resold
under Rule 144A, securities offered pursuant to Section 4(2) of, or securities
otherwise subject to restrictions or limitations on resale under the 1933 Act
("Restricted Securities") shall not be deemed illiquid solely by reason of being
unregistered. Key Advisers or the Sub-Adviser determine whether a particular
security is deemed to be liquid based on the trading markets for the specific
security and other factors. However, because state securities laws may limit the
Fund's investment in Restricted Securities (regardless of the liquidity of the
investment), investments in Restricted Securities resalable under Rule 144A will
continue to be subject to applicable state law requirements until such time, if
ever, that such limitations are changed.

5. The Fund will not make short sales of securities, other than short
sales "against the box," or purchase securities on margin except for short-term
credits necessary for clearance of portfolio transactions, provided that this
restriction will not be applied to limit the use of options, futures contracts
and related options, in the manner otherwise permitted by the investment
restrictions, policies and investment program of the Fund.

6. 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. Pursuant to an exemptive order
received by the Victory Portfolios from the Commission, the Fund may invest in
the money market funds of the Victory Portfolios.

STATE REGULATIONS.

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<PAGE>

policies, which may be modified in the future by the Trustees without a vote of
the Fund's shareholders: (1) the Fund has represented to the Texas State
Securities Board, that it will not invest in oil, gas or mineral leases or
purchase or sell real property (including limited partnership interests, but
excluding readily marketable securities of companies which invest in real
estate); and (2) the Fund has represented to the Texas State Securities Board
that it will not invest more than 5% of its net assets in warrants valued at the
lower of cost or market; provided that, included within that amount, but not to
exceed 2% of net assets, may be warrants which are not listed on the New York or
American Stock Exchanges. For purposes of this restriction, warrants acquired in
units or attached to securities are deemed to be without value.

GENERAL.

The policies and limitations listed above 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 except in
the case of borrowing (or other activities that may be deemed to result in the
issuance of a "senior security" under the 1940 Act). 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. If the value of the Fund's holdings of illiquid securities at
any time exceeds the percentage limitation applicable at the time of acquisition
due to subsequent fluctuations in value or other reasons, the Trustees will
consider what actions, if any, are appropriate to maintain adequate liquidity.

The investment policies of the Fund may be changed without an affirmative vote
of the holders of a majority of the Fund's outstanding voting securities unless
(1) a policy is expressly deemed to be a fundamental policy of the Fund or (2) a
policy is expressly deemed to be changeable only by such majority vote.

VALUATION OF PORTFOLIO SECURITIES

Investment securities held by the Fund are valued on the basis of valuations
provided by an independent pricing service, approved by the Trustees, which uses
information with respect to transactions of a security, quotations from dealers,
market transactions in comparable securities, and various relationships between
securities, in determining value. Specific investment securities which are not
priced by the approved pricing service will be valued according to quotations
obtained from dealers who are market makers in those securities. Investment
securities with less than 60 days to maturity when purchased are valued at
amortized cost which approximates market value. Investment securities not having
readily available market quotations will be priced at fair value using a
methodology approved in good faith by the Trustees.

PERFORMANCE

From time to time the "standardized yield," "dividend yield," "average annual
total return," "total return," and "total return at net asset value" of an
investment in each class of Fund shares may be advertised. An explanation of how
yields and total returns are calculated for each class and the components of
those calculations are set forth below.

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<PAGE>

returns for each class of shares of the Fund for the 1, 5 and 10-year period (or
the life of the class, if less) as of the most recently ended calendar quarter.
This enables an investor to compare the Fund's performance to the performance of
other funds for the same periods. However, a number of factors should be
considered before using such information as a basis for comparison with other
investments. An investment in the Fund is not insured; its yield and total
return are not guaranteed and normally will fluctuate on a daily basis. When
redeemed, an investor's shares may be worth more or less than their original
cost. Yield and total return for any given past period are not a prediction or
representation by the Victory Portfolios of future yields or rates of return on
its shares. The yield and total returns of the Class A and Class B shares of the
Fund are affected by portfolio quality, portfolio maturity, the type of
investments the Fund holds and operating expenses.

STANDARDIZED YIELD.

The Fund's "yield" (referred to as "standardized yield") for a given 30-day
period for a class of shares is calculated using the following formula set forth
in rules adopted by the Commission that apply to all funds that quote yields:

Standardized Yield = 2 [(a-b + 1)^6 - 1]
-------------------
cd

The symbols above represent the following factors:

a = dividends and interest earned during the 30-day period.

b = expenses accrued for the period (net of any expense
reimbursements).
c = the average daily number of shares of that class outstanding
during the 30-day period that were entitled to receive
dividends.
d = the maximum offering price per share of the class on the last
day of the period, adjusted for undistributed net investment
income.

The standardized yield of a class of shares for a 30-day period may differ from
its yield for any other period. The Commission formula assumes that the
standardized yield for a 30-day period occurs at a constant rate for a six-month
period and is annualized at the end of the six-month period. This standardized
yield is not based on actual distributions paid by the Fund to shareholders in
the 30-day period, but is a hypothetical yield based upon the net investment
income from the Fund's portfolio investments calculated for that period. The
standardized yield may differ from the "dividend yield" of that class, described
below. Additionally, because each class of shares is subject to different
expenses, it is likely that the standardized yields of the Fund classes of
shares will differ. The yield on Class A shares for the 30-day period ended
October 31, 1995 was 3.25% .

DIVIDEND YIELD AND DISTRIBUTION RETURNS.

From time to time the Fund may quote a "dividend yield" or a "distribution
return" for each class. Dividend yield is based on the Class A or Class B share
dividends derived from net investment income during a stated period.
Distribution return includes dividends derived from net investment income and
from realized capital gains declared during a stated period. Under those
calculations, the dividends and/or distributions for that class declared during
a stated period of one year or less (for example, 30 days) are added together,
and the sum is divided by the maximum offering price per share of that class A)
on the last day of the period. When the result is annualized for a period of
less than one year, the "dividend yield" is calculated as follows:

Dividend Yield of the
Class = Dividends of the Class + Number of days
-------------------------------- (accrual period) x 365
Max. Offering Price of the Class
(last day of period)

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<PAGE>

The maximum offering price for Class A shares includes the maximum front-end
sales charge. For Class B shares, the maximum offering price is the net asset
value per share, without considering the effect of contingent deferred sales
charges ("CDSC").

From time to time similar yield or distribution return calculations may also be
made using the Class A net asset value (instead of its respective maximum
offering price) at the end of the period. The dividend yields on Class A shares
at maximum offering price and net asset value for the 30-day period ended
October 31, 1995 were 3.61% and 3.80%, respectively. The distribution returns on
Class A shares at maximum offering price and net asset value as of October 31,
1995 were 3.61% and 3.80%, respectively.

TOTAL RETURNS.

The "average annual total return" of each class is an average annual compounded
rate of return for each year in a specified number of years. It is the rate of
return based on the change in value of a hypothetical initial investment of
$1,000 ("P" in the formula below) held for a number of years ("n") to achieve an
Ending Redeemable Value ("ERV"), according to the following formula:

(ERV)^1n - 1 = Average Annual Total Return
-----
( P )

The cumulative "total return" calculation measures the change in value of a
hypothetical investment of $1,000 over an entire period of years. Its
calculation uses some of the same factors as average annual total return, but it
does not average the rate of return on an annual basis. Total return is
determined as follows:

ERV - P = Total Return
-------
P

In calculating total returns for Class A shares, the current maximum sales
charge of 4.75% (as a percentage of the offering price) is deducted from the
initial investment ("P") (unless the return is shown at net asset value, as
discussed below). For Class B shares, the payment of the applicable CDSC (5.0%
for the first year, 4.0% for the second year, 3.0% for the third and fourth
years, 2.0% in the fifth year, 1.0% in the sixth year and none thereafter) is
applied to the investment result for the time period shown (unless the total
return is shown at net asset value, as described below). Total returns also
assume that all dividends and capital gains distributions during the period are
reinvested to buy additional shares at net asset value per share, and that the
investment is redeemed at the end of the period. The average annual total return
and cumulative total return on Class A shares for the period December 10, 1993
(commencement of operations) to October 31, 1995 (life of fund) at maximum
offering price were 6.63% and 12.92%, respectively. For the one year ended
October 31, 1995 the annual total return for Class A shares was 13.57%.

From time to time the Fund may also quote an "average annual total return at net
asset value" or a cumulative "total return at net asset value" for Class A or
Class B shares. It is based on the difference in net asset value per share at
the beginning and the end of the period for a hypothetical investment in that
class of shares (without considering front-end or contingent sales charges) and
takes into consideration the reinvestment of dividends and capital gains
distributions. The average annual total return and cumulative total return on
Class A shares for the period December 10, 1993 (commencement of operations) to
October 31, 1995 (life of fund), at net asset value, was 9.41% and 18.56%,
respectively. For the year ended October 31, 1995, the average annual total
return at net asset value for Class A shares was 1.92%.

OTHER PERFORMANCE COMPARISONS.

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<PAGE>

From time to time the Fund may publish the ranking of the performance of its
Class A or Class B shares by Lipper Analytical Services, Inc. ("Lipper"), a
widely-recognized independent mutual fund monitoring service. Lipper monitors
the performance of regulated investment companies, including the Fund, and ranks
the performance of the Fund's classes against (1) all other funds, excluding
money market funds, and (2) all other government bond funds. The Lipper
performance rankings are based on total return that includes the reinvestment of
capital gains distributions and income dividends but does not take sales charges
or taxes into consideration.

From time to time the Fund may publish the ranking of the performance of its
Class A or Class B shares by Morningstar, Inc., an independent mutual fund
monitoring service that ranks mutual funds, including the Fund, in broad
investment categories (equity, taxable bond, tax-exempt and other) monthly,
based upon each fund's three, five and ten-year average annual total returns
(when available) and a risk adjustment factor that reflects Fund performance
relative to three-month U.S. Treasury bill monthly returns. Such returns are
adjusted for fees and sales loads. There are five ranking categories with a
corresponding number of stars: highest (5), above average (4), neutral (3),
below average (2) and lowest (1). Ten percent of the funds, series or classes in
an investment category receive 5 stars, 22.5% receive 4 stars, 35% receive 3
stars, 22.5% receive 2 stars, and the bottom 10% receive one star.

The total return on an investment made in Class A or Class B shares of the Fund
may be compared with the performance for the same period of one or more of the
following indices: the Consumer Price Index, the Salomon Brothers World
Government Bond Index, the Standard & Poor's 500 Index, the Shearson Lehman
Government/Corporate Bond Index, the Lehman Aggregate Bond Index, and the J.P.
Morgan Government Bond Index. Other indices may be used from time to time. The
Consumer Price Index is generally considered to be a measure of inflation. The
Salomon Brothers World Government Bond Index generally represents the
performance of government debt securities of various markets throughout the
world, including the United States. The Lehman Government/Corporate Bond Index
generally represents the performance of intermediate and long-term government
and investment grade corporate debt securities. The Lehman Aggregate Bond Index
measures the performance of U.S. corporate bond issues, U.S. government
securities and mortgage-backed securities. The J.P. Morgan Government Bond Index
generally represents the performance of government bonds issued by various
countries including the United States. The S&P 500 Index is a composite index of
500 common stocks generally regarded as an index of U.S. stock market
performance. The foregoing bond indices are unmanaged indices of securities that
do not reflect reinvestment of capital gains or take investment costs into
consideration, as these items are not applicable to indices.

- 15 -

<PAGE>

Fund.) The Fund may also include in advertisements, charts, graphs or drawings
which illustrate the potential risks and rewards of investment in various
investment vehicles, including but not limited to stock, bonds, and Treasury
bills , as compared to an investment in shares of the Fund, as well as charts or
graphs which illustrate strategies such as dollar cost averaging, and
comparisons of hypothetical yields of investment in tax-exempt versus taxable
investments. In addition, advertisements or shareholder communications may
include a discussion of certain attributes or benefits to be derived by an
investment in the Fund. Such advertisements or communications may include
symbols, headlines or other material which highlight or summarize the
information discussed in more detail therein. With proper authorization, the
Fund may reprint articles (or excerpts) written regarding the Fund and provide
them to prospective shareholders. Performance information with respect to the
Fund is generally available by calling 1-800-539-3863.

Investors may also judge, and the Fund may at times advertise, the performance
of Class A or Class B shares by comparing it to the performance of other mutual
funds or mutual fund portfolios with comparable investment objectives and
policies, which performance may be contained in various unmanaged mutual fund or
market indices or rankings such as those prepared by Dow Jones & Co., Inc.,
Standard & Poor's Corporation, Lehman Brothers, Merrill Lynch, and Salomon
Brothers, and in publications issued by Lipper and in the following
publications: IBC's Money Fund Reports, Value Line Mutual Fund Survey,
Morningstar, CDA/Wiesenberger, Money Magazine, Forbes, Barron's, The Wall Street
Journal, The New York Times, Business Week, American Banker, Fortune,
Institutional Investor, and U.S.A. Today. In addition to yield information,
general information about the Fund that appears in a publication such as those
mentioned above may also be quoted or reproduced in advertisements or in reports
to shareholders.

Advertisements and sales literature may include discussions of specifics of the
portfolio manager's investment strategy and process, including, but not limited
to, descriptions of security selection and analysis.

Advertisements may also include descriptive information about the investment
adviser, including, but not limited to, its status within the industry, other
services and products it makes available, total assets under management, and its
investment philosophy.

When comparing yield, total return and investment risk of an investment in Class
A or Class B shares of the Fund with other investments, investors should
understand that certain other investments have different risk characteristics
than an investment in shares of the Fund. For example, certificates of deposit
may have fixed rates of return and may be insured as to principal and interest
by the FDIC, while the Fund's returns will fluctuate and its share values and
returns are not guaranteed. Money market accounts offered by banks also may be
insured by the FDIC and may offer stability of principal. U.S. Treasury
securities are guaranteed as to principal and interest by the full faith and
credit of the U.S. government. Money market mutual funds may seek to maintain a
fixed price per share.

ADDITIONAL PURCHASE, EXCHANGE AND REDEMPTION INFORMATION

The New York Stock Exchange ("NYSE") and Federal Reserve Bank of Cleveland
holiday closing schedule indicated in the Prospectus under "Share Price" are
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 Commission to warrant such action, the Fund's Transfer Agent
will determine the Fund's net asset value at Valuation Time. A Fund's net asset
value may be affected to the extent that its securities are traded on days that
are not Business Days.

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<PAGE>

If, in the opinion of the 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
net asset value of each class of the Fund. 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 the
Fund's 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 Commission or
because it is unable to invest amounts effectively in accordance with its
investment objective and policies.

The Fund reserves the right at any time without prior notice to shareholders to
refuse exchange purchases by any person or group if, in Key Advisers or the
Sub-Adviser'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.

ALTERNATIVE SALES ARRANGEMENTS - CLASS A AND CLASS B SHARES. The alternative
sales arrangements permit an investor to choose the method of purchasing shares
that is more beneficial to the investor depending on the amount of the purchase,
the length of time the investor expects to hold shares and other relevant
circumstances. Investors should understand that the purpose and function of the
deferred sales charge and asset-based sales charge with respect to Class B
shares are the same as those of the initial sales charge with respect to Class A
shares. Any salesperson or other person entitled to receive compensation for
selling Fund shares may receive different compensation with respect to one class
of shares on behalf of a single investor (not including dealer "street name" or
omnibus accounts) because generally it will be more advantageous for that
investor to purchase Class A shares of the Fund instead.

The two classes of shares each represent an interest in the same portfolio
investments of the Fund. However, each class has different shareholder
privileges and features. The net income attributable to Class B shares and the
dividends payable on Class B shares will be reduced by incremental expenses
borne solely by that class, including the asset-based sales charge to which
Class B shares are subject.

CLASS B CONVERSION FEATURE. Ninety-six months after an investor's purchase order
for Class B shares is accepted, such "Matured Class B Shares" automatically will
convert to Class A shares, on the basis of the relative net asset value of the
two classes, without the imposition of any sales load or other charge. Each time
any Matured Class B shares convert to Class A shares, any Class B shares
acquired by the reinvestment of dividends or distributions on such Matured Class
B shares that are still held will also convert to Class A shares, on the same
basis. The conversion feature is intended to relieve holders of Matured Class B
shares of the asset-based sales charge under the Class B Distribution Plan after
such shares have been outstanding long enough that the Distributor may have been
compensated for distribution expenses related to such shares.

- 17 -

<PAGE>

effect. Although Matured Class B shares could then be exchanged for Class A
shares on the basis of relative net asset value of the two classes, without the
imposition of a sales charge or fee, such exchange could constitute a taxable
event for the holder, and absent such exchange, Class B shares might continue to
be subject to the asset-based sales charge for longer than six years.

The methodology for calculating the net asset value, dividends and distributions
of the Fund's Class A and Class B shares recognizes two types of expenses.
General expenses that do not pertain specifically to either class are allocated
to the shares of each class, based upon the percentage that the net assets of
such class bears to the Fund's total net assets, and then pro rata to each
outstanding share within a given class. Such general expenses include (1)
management fees, (2) legal, bookkeeping and audit fees, (3) printing and mailing
costs of shareholder reports, prospectuses, statements of additional information
and other materials for current shareholders, (4) fees to the Trustees who are
not affiliated with Key Advisers, (5) custodian expenses, (6) share issuance
costs, (7) organization and start-up costs, (8) interest, taxes and brokerage
commissions, and (9) non-recurring expenses, such as litigation costs. Other
expenses that are directly attributable to a class are allocated equally to each
outstanding share within that class. Such expenses include (1) Rule 12b-1
distribution fees and shareholder servicing fees, (2) incremental transfer and
shareholder servicing agent fees and expenses, (3) registration fees and (4)
shareholder meeting expenses, to the extent that such expenses pertain to a
specific class rather than to the Fund as a whole.

REDUCED SALES CHARGE. Reduced sales charges are available for purchases of
$50,000 or more of Class A shares of the Fund alone or in combination with
purchases of shares of other funds of the Victory Portfolios . To obtain the
reduction of the sales charge, you or your Investment Professional must notify
the Transfer Agent at the time of purchase whenever a quantity discount is
applicable to your purchase.

In addition to investing at one time in any combination of Class A shares of the
Victory Portfolios in an amount entitling you to a reduced sales charge, you may
qualify for a reduction in the sales charge under the following programs:

COMBINED PURCHASES. When you invest in Class A shares of the Victory Portfolios
for several accounts at the same time, you may combine these investments into a
single transaction if purchased through one Investment Professional, and if the
total is $50,000 or more. The following may qualify for this privilege: an
individual, or "company" as defined in Section 2(a)(8) of the 1940 Act; an
individual, spouse, and their children under age 21 purchasing for his, her, or
their own account; a trustee, administrator or other fiduciary purchasing for a
single trust estate or single fiduciary account or for a single or a
parent-subsidiary group of "employee benefit plans" (as defined in Section 3(3)
of ERISA); and tax-exempt organizations under Section 501(c)(3) of the Internal
Revenue Code.

RIGHTS OF ACCUMULATION. "Rights of Accumulation" permit reduced sales charges on
future purchases of Class A shares after you have reached a new breakpoint. You
can add the value of existing Victory Portfolios shares held by you, your
spouse, and your children under age 21, determined at the previous day's net
asset value at the close of business, to the amount of your new purchase valued
at the current offering price to determine your reduced sales charge.

LETTER OF INTENT. If you anticipate purchasing $50,000 or more of shares of the
Fund alone or in combination with Class A shares of certain other Victory
Portfolios within a 13-month period, you may obtain shares of the portfolios at
the same reduced sales charge as though the total quantity were invested in one
lump sum, by filing a non-binding Letter of Intent (the "Letter") within 90 days
of the start of the purchases. Each investment you make after signing the Letter
will be entitled to the sales charge applicable to the total investment
indicated in the Letter. For example, a $2,500 purchase toward a $60,000 Letter
would receive the same reduced sales charge as if the $60,000 had been invested
at one time. To ensure that the reduced price will be received on future
purchases, you or your Investment Professional must inform the transfer agent
that the Letter is in effect each time shares are purchased.

- 18 -

<PAGE>

Neither income dividends nor capital gain distributions taken in additional
shares will apply toward the completion of the Letter.

You are not obligated to complete the additional purchases contemplated by a
Letter. If you do not complete your purchase under the Letter within the
13-month period, your sales charge will be adjusted upward, corresponding to the
amount actually purchased, and if after written notice, you do not pay the
increased sales charge, sufficient escrowed shares will be redeemed to pay such
charge.

If you purchase more than the amount specified in the Letter and qualify for a
further sales charge reduction, the sales charge will be adjusted to reflect
your total purchase at the end of 13 months. Surplus funds will be applied to
the purchase of additional shares at the then current offering price applicable
to the total purchase.

EXCHANGING SHARES.

Class A shares of the Fund may be exchanged for shares of any Victory money
market fund or any other fund of the Victory Portfolios with a reduced sales
charge. Shares of any Victory money market fund or any other fund of the Victory
Portfolios with a reduced sales charge may be exchanged for shares of the Fund
upon payment of the difference in the sales charge (or, if applicable, shares of
any Victory money market fund may be used to purchase Class B shares of the
Fund.)

Class B shares of the Fund may be exchanged for shares of other Victory
Portfolios that offer Class B shares. When Class B shares are redeemed to effect
an exchange, the priorities described in "How to Invest, Exchange and Redeem -
Class B shares " in the Prospectus for the imposition of the Class B CDSC will
be followed in determining the order in which the shares are exchanged.
Shareholders should take into account the effect of any exchange on the
applicability and rate of any CDSC that might be imposed in the subsequent
redemption of remaining shares. Shareholders owning shares of both classes must
specify whether they intend to exchange Class A or Class B shares.

REDEEMING SHARES.

REINSTATEMENT PRIVILEGE. Within 90 days of a redemption, a shareholder may
reinvest all or part of the redemption proceeds of (1) Class A shares, or (2)
Class B shares that were subject to the Class B CDSC when redeemed, in Class A
shares of the Fund or any of the other Victory Portfolios into which shares of
the Fund are exchangeable as described below, at the net asset value next
computed after receipt by the Transfer Agent of the reinvestment order. No
charge is currently made for reinvestment in shares of the Fund but a
reinvestment in shares of certain other Victory Portfolios is subject to a $5.00
service fee. The shareholder must ask the Distributor for such privilege at the
time of reinvestment. Any capital gain that was realized when the shares were
redeemed is taxable, and reinvestment will not alter any capital gains tax
payable on that gain. If there has been a capital loss on the redemption, some
or all of the loss may not be tax deductible, depending on the timing and amount
of the reinvestment. Under the Internal Revenue Code of 1986, as amended (the
"IRS Code"), if the redemption proceeds of Fund shares on which a sales charge
was paid are reinvested in shares of the Fund or another of the Victory
Portfolios within 90 days of payment of the sales charge, the shareholder's
basis in the shares of the Fund that were redeemed may not include the amount of
the sales charge paid. That would reduce the loss or increase the gain
recognized from redemption. The Fund may amend, suspend or cease offering this
reinvestment privilege at any time as to shares redeemed after the date of such
amendment, suspension or cessation. The reinstatement must be into an account
bearing the same registration. This privilege may be exercised only once by a
shareholder with respect to the Fund.

- 19 -

<PAGE>

DIVIDENDS AND DISTRIBUTIONS

The Fund ordinarily declares and pays dividends separately for Class A and Class
B shares from its net investment income monthly. 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.

The amount of a class's distributions may vary from time to time depending on
market conditions, the composition of the Fund's portfolio, and expenses borne
by the Fund or borne separately by the class, as described in "Alternative Sales
Arrangements - Class A and Class B," above. Dividends are calculated in the same
manner, at the same time and on the same day for shares of each class. However,
dividends on Class B shares are expected to be lower as a result of the
asset-based sales charge on Class B shares, and Class B dividends will also
differ in amount as a consequence of any difference in net asset value between
Class A and Class B shares.

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 portfolio assets of the Fund, dividend income, if any, income from
securities loans, if any, and realized capital gains and losses on the Fund's
assets, less all expenses and liabilities of the 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 Key Advisers or the Sub-Adviser,
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 Victory Portfolios in proportion to the Fund's
share of the total net assets of the Victory Portfolios.

TAXES

It is the policy of the Fund to qualify for the favorable tax treatment accorded
regulated investment companies ("RICs") under Subchapter M of the IRS Code. By
following such policy and distributing its income and gains currently with
respect to each taxable year, the Fund expects to eliminate or reduce to a
nominal amount the federal income and excise taxes to which it may otherwise be
subject.

In order to qualify as a RIC, the Fund must, among other things, (1) derive at
least 90% of its gross income from dividends, interest, payments with respect to
securities loans, and gains from the sale or other disposition of stock or
securities, foreign currencies or other income (including gains from options,
futures or forward contracts) derived with respect to its business of investing
in stock, securities or currencies, (2) derive less than 30% of its gross income
from the sale or other disposition of stock, securities, options, futures,
forward contracts, and certain foreign currencies (or options, futures, or
forward contracts on foreign currencies) held for less than three months, and
(3) diversify its holdings so that at the end of each quarter of its taxable
year (a) at least 50% of the market value of the fund's assets is represented by
cash or cash items, U.S. Government securities, securities of other RICs and
other securities limited, in respect of any one issuer, to an amount not greater
than 5% of the value of the fund's total assets and 10% of the outstanding
voting securities of such issuer, and (b) not more than 25% of the value of its
total assets is invested in the securities of any one issuer (other than U.S.
Government securities) or of two or more issuers that the Fund controls and that
are engaged in the same, similar, or related trades or businesses. These
requirements may restrict the degree to which the Fund may engage in short-term
trading and concentrate investments. If the Fund qualifies as a RIC, it will not
be subject to federal income tax on the part of its net investment income and
net realized capital gains, if any, that it distributes to shareholders with
respect to each taxable year within the time limits specified in the Code.

- 20 -

<PAGE>

the 1-year period ending on October 31 of such calendar year. The balance of
such income must be distributed during the following calendar year. If
distributions during a calendar year are less than the required amount, the fund
is subject to a non-deductible excise tax equal to 4% of the deficiency.

Certain investment and hedging activities of the Fund, including transactions in
options, futures contracts, hedging transactions, forward contracts, straddles,
foreign currencies, and foreign securities, are subject to special tax rules. In
a given case, these rules may accelerate income to the Fund, defer losses to the
Fund, cause adjustments in the holding periods of the Fund's securities, convert
short-term capital losses into long-term capital losses, or otherwise affect the
character of the Fund's income. These rules could therefore affect the amount,
timing and character of distributions to shareholders. The Victory Portfolios
will endeavor to make any available elections pertaining to such transactions in
a manner believed to be in the best interest of the Fund and its shareholders.

The Fund will be required in certain cases to withhold and remit to the U.S.
Treasury 31% of taxable dividends paid to any shareholder who has failed to
provide a (or has provided an incorrect) tax identification number, or is
subject to withholding pursuant to a notice from the Internal Revenue Service
for failure to properly include on his or her income tax return payments of
interest or dividends. This "backup withholding" is not an additional tax, and
any amounts withheld may be credited against the shareholder's ultimate U.S. tax
liability.

Information set forth in the Prospectus and this Statement of Additional
Information that relates to federal taxation is only a summary of certain key
federal tax considerations generally affecting purchasers of shares of the Fund.
No attempt has been made to present a complete explanation of the federal tax
treatment of the Fund or its shareholders, and this discussion is not intended
as a substitute for careful tax planning. Accordingly, potential purchasers of
shares of the Fund are urged to consult their tax advisers with specific
reference to their own tax circumstances. In addition, the tax discussion in the
Prospectus and this Statement of Additional Information is based on tax law in
effect on the date of the Prospectus and this Statement of Additional
Information; such laws and regulations may be changed by legislative, judicial
or administrative action, sometimes with retroactive effect.

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 Commonwealth of Massachusetts governing business trusts (however, effective
on or about February 29, 1996, the Victory Portfolios will be converted to 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 ("Independent Trustees"). The Trustees, in turn, elect
the officers of the Victory Portfolios to actively supervise 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:

Position(s) Held
With the Victory Principal Occupation
Name, Address and Age Portfolios During Past 5 Years
- --------------------- ---------------- ---------------------

Leigh A. Wilson*, 51 Trustee and From 1989 to present,
Glenleigh International Ltd. President Chairman and Chief
Executive Officer,
Glenleigh

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<PAGE>

53 Sylvan Road North International Limited;
Westport, CT 06880 from 1984 to 1989, Chief
Executive Officer,
Paribas North America and
Paribas Corporation;
Trustee, The Victory
Funds and the Key Mutual
Funds (the "Key Funds"),
formerly the Spears,
Benzak, Salomon and
Farrell Funds (the "SBSF
Funds").

- ------------
* 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.

- 22 -

<PAGE>

Position(s) Held
With the Victory Principal Occupation
Name, Address and Age Portfolios During Past 5 Years
- --------------------- ---------------- ---------------------

Robert G. Brown, 72 Trustee Retired; from October
5460 N. Ocean Drive 1983 to November 1990,
Singer Island President, Cleveland
Riviera Beach, FL 33404 Advanced Manufacturing
Program (non-profit
corporation engaged in
regional economic
development).

Edward P. Campbell, 46 Trustee From March 1994 to
Nordson Corporation present, Executive Vice
28601 Clemens Road President and Chief
Westlake, OH 44145 Operating Officer of
Nordson Corporation
(manufacturer of
application 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 the Key Funds,
formerly the SBSF Funds.

Dr. Harry Gazelle, 68 Trustee Retired radiologist, Drs.
17822 Lake Road Hill and Thomas Corp.;
Lakewood, Ohio 44107 Trustee, The Victory
Funds.

Stanley I. Landgraf, 70 Trustee Retired; currently,
41 Traditional Lane Trustee, Rensselaer
Loudonville, NY 12211 Polytechnic Institute;
Director, Elenel
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.

- 23 -

<PAGE>

Position(s) Held
With the Victory Principal Occupation
Name, Address and Age Portfolios During Past 5 Years
- --------------------- ---------------- ---------------------

Dr. Thomas F. Morrissey, 62 Trustee 1995 Visiting Scholar,
Weatherhead School of Bond University,
Management Queensland, Australia;
Case Western Reserve Professor, Weatherhead
University School of Management,
10900 Euclid Avenue Case Western Reserve
Cleveland, OH 44106-7235 University; from 1989 to
1995, Associate Dean of
Weatherhead School of
Management; 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.

Dr. H. Patrick Swygert, 52 Trustee President, Howard
Howard University University; formerly
2400 6th Street, N.W. President, State
Suite 320 Washington, D.C. 20059 University of New York at
Albany; formerly,
Executive Vice President,
Temple University;
Trustee, the Victory
Funds.

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 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
Independent 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).

- 24 -

<PAGE>

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).

The following table indicates the compensation received by each Trustee from the
Victory "Fund Complex"(1) for the 12 month period ended October 31, 1995.

Pension or Total
Retirement Estimated Compensation
Benefits Annual Total from
Accrued as Benefits Compen- Victory
Portfolio Upon sation "Fund
Expenses Retirement from Fund Complex"(1)
---------- ---------- --------- ----------
Leigh A. Wilson, Trustee ...... -0- -0- $1,112.55 $46,716.97
Robert G. Brown, Trustee ...... -0- -0- 1,178.91 39,815.98
John D. Buckingham, Trustee(2) -0- -0- 541.57 18,841.89
Edward P. Campbell, Trustee ... -0- -0- 1,539.75 33,799.68
Harry Gazelle, Trustee ........ -0- -0- 974.79 35,916.98
John W. Kemper, Trustee(2) .... -0- -0- 541.47 22,567.31
Stanley I. Landgraf, Trustee .. -0- -0- 1,014.75 34,615.98
Thomas F. Morrissey, Trustee .. -0- -0- 1,539.75 40,366.98
H. Patrick Swygert, Trustee ... -0- -0- 1,014.75 37,116.98
John R. Young, Trustee (2) -0- -0- 577.04 21,963.81

(1) 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 Key Funds, formerly 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."

(2) Resigned

OFFICERS.

The officers of the Victory Portfolios, their ages, addresses and principal
occupations during the past five years, are as follows:

Position(s) Held
With the Victory Principal Occupation
Name, Address and Age Portfolios During Past 5 Years
- --------------------- ---------------- ---------------------

- 25 -

<PAGE>

Position(s) Held
With the Victory Principal Occupation
Name, Address and Age Portfolios During Past 5 Years
- --------------------- ---------------- ---------------------

William B. Blundin, 57 Vice President Senior Vice President of
BISYS Fund Services BISYS Fund Services;
125 West 55th Street officer of other
New York, New York 10019 investment companies
administered by BISYS
Fund Services; President
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

Scott A. Englehart, 33 Secretary From October 1990 to
BISYS Fund Services present, employee of
3435 Stelzer Road BISYS Fund Services,
Columbus, OH 43219-3035 Inc.; from 1985 to
October 1990, Manager of
Banking Center, Fifth
Third Bank.

George O. Martinez, 36 Assistant Secretary From March 1995 to
BISYS Fund Services present, Senior Vice
3435 Stelzer Road President and Director of
Columbus, OH 43219-3035 Legal and Compliance
Services, BISYS Fund
Services; from June 1989
to March 1995, Vice
President and Associate
General Counsel, Alliance
Capital Management.

Martin R. Dean, 32 Treasurer From May 1994 to present,
BISYS Fund Services employee of BISYS Fund
3435 Stelzer Road Services; from January
Columbus, OH 43219-3035 1987 to April 1994;
Senior Manager,

Adrian J. Waters, 33 Assistant Treasurer From May 1993 to present,
BISYS Fund Services employee of BISYS Fund
(Ireland) Limited Services; from 1989 to
Floor 2, Block 2 May 1993, Manager, Price
Harcourt Center, Waterhouse.
Dublin 2, Ireland

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. Concord Holding Corporation receives fees from the Victory
Portfolios for acting as Administrator.

As of January 6, 1996, the Trustees and officers as a group owned beneficially
less than 1% of the Fund.

- 26 -

<PAGE>

ADVISORY AND OTHER CONTRACTS

INVESTMENT ADVISER AND SUB-ADVISER.

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 .
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 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.

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 a
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 Key Advisers.

.25 OF 1% OF AVERAGE DAILY NET ASSETS

Victory Institutional Money Market Fund (1)

.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)

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<PAGE>

.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 NET ASSETS
Victory International Growth Fund (1)

- --------------

(1) Society Asset Management , Inc. 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, following these footnotes.

(2) First Albany Asset Management Corporation serves as sub-adviser to the
Victory Fund for Income, for which it receives .20% of such fund's
average daily net assets.

(3) T. Rowe Price Associates, Inc. serves as sub-adviser to the Victory
Special Growth Fund, for which it receives .25% of such fund's average
daily net assets up to $100 million and .20% of average daily net
assets in excess of $100 million .

The Sub-Investment advisory fees payable by Key Advisers to the
Sub-Adviser are as follows:

For the Victory Balanced Fund, For the Victory International Growth
Diversified Stock Fund, Growth Fund, Ohio Regional Stock Fund and
Fund, Stock Index Fund and Special Value
Value Fund:

Rate of Rate of
Net Assets Fee(1) Sub-Advisory Fee(1) Net Assets Sub-Advisory
- ----------------- ------------------- ---------- ------------

Up to $10,000,000 0.65% Up to $10,000,000 0.90%
Next $15,000,000 0.50% Next $15,000,000 0.70%
Next $25,000,000 0.40% Next $25,000,000 0.55%
Above $50,000,000 0.35% Above $50,000,000 0.45%

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<PAGE>

For the Victory Intermediate For the Victory Prime Obligations Fund,
Income Fund, Investment Tax-Free Money Market Fund, U.S.
Quality Bond Fund, Limited Government Obligations Fund, Financial
Term Income Fund, Ohio Reserves Fund, Institutional Money
Municipal Bond Fund, Market Fund and Ohio Money Market
Government Bond Fund, Municipal
Government Mortgage Fund,
National Municipal Bond Fund
and New York Tax-Free Fund:
Fund:

Rate of Rate of
Net Assets Sub-Advisory Fee(1) Net Assets Sub-Advisory
- ----------------- ------------------- ---------- ------------

Up to $10,000,000 0.40% Up to $10,000,000 0.25%
Next $15,000,000 0.30% Next $15,000,000 0.20%
Next $25,000,000 0.25% Next $25,000,000 0.15%
Above $50,000,000 0.20% Above $50,000,000 0.125%

- --------------------

(1) 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
SubAdviser, and will be in writing .

THE INVESTMENT ADVISORY AND INVESTMENT SUB-ADVISORY AGREEMENTS.

Unless sooner terminated, the Investment Advisory Agreement between Key Advisers
and the Victory Portfolios on behalf of the Fund (the "Investment Advisory
Agreement") provides that it will continue in effect as to the 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 the Fund (as
defined under "Additional Information - Miscellaneous"), 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 the Fund at any time on 60
days' written notice without penalty by the Trustees, by vote of a majority of
the outstanding shares of the Fund, or by Key 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 Key Advisers shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the Fund
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 its duties
and obligations thereunder.

Prior to January, 1993, Society served as investment adviser to the Fund.] From
January, 1993 until December 31, 1995, Society Asset Management, Inc. served as
investment adviser to the Fund. For the fiscal years ended October 31, 1994 and
1995 the Fund paid investment advisory fees of $536,712 and $1,024,165,
respectively, after fee reductions of $396,767 and $624,474, respectively.

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<PAGE>

Under the Investment Advisory Agreement, Key Advisers 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

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 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. The sub-advisory arrangement does 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 as 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 SubAdviser
including, but not limited to, (1) descriptions of the operations of Key Trust
Company of Ohio, N.A., Key Advisers and the Sub-Adviser; (2) descriptions of
certain personnel and their functions; and (3) 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 Agreement and the Investment Sub-Advisory
Agreement, Key Advisers and the Sub- Adviser determine, subject to the general
supervision of the Trustees of the Victory Portfolios, and in accordance with
each 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 from underwriters and/or broker-dealers of
portfolio securities include a commission or concession paid by the issuer to
the underwriter and/or broker-dealer and purchases from dealers serving as
market makers may

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<PAGE>

include the spread between the bid and asked price. While Key Advisers and the
Sub-Adviser generally seek 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 to dealers is determined by Key Advisers or the
Sub-Adviser 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 or the
Sub-Adviser may receive orders for transactions by the Victory Portfolios.
Information so received is in addition to and not in lieu of services required
to be performed by Key Advisers or the Sub-Adviser and does not reduce the
investment advisory fees payable to Key Advisers by the Fund. Such information
may be useful to Key Advisers or the Sub-Adviser in serving both the Victory
Portfolios and other clients and, conversely, such supplemental research
information obtained by the placement of orders on behalf of other clients may
be useful to Key Advisers or the Sub-Adviser in carrying out its 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 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. At times, the Fund may
also purchase portfolio securities directly from dealers acting as principals,
underwriters or market makers. As these transactions are usually conducted on a
net basis, no brokerage commissions are paid by the Fund.

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, the Sub-Adviser,
Key Trust Company of Ohio, N.A. or their affiliates, or Concord Holding
Corporation, Victory Broker-Dealer Services, Inc. or their affiliates, and will
not give preference to Key Trust Company of Ohio, N.A.'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 made for the
other funds of the Victory Portfolios or any other investment company or account
managed by Key Advisers or the Sub-Adviser. Such other funds, investment
companies or accounts may also invest in the securities in which the Fund
invests. 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 the Sub-Adviser
believes to be equitable to the Fund and such other fund, investment company or
account. In some instances, this investment procedure may affect the price paid
or received by the Fund or the size of the position obtained by the Fund in an
adverse manner relative to the result that would have been obtained if only the
Fund had participated in or been allocated such trades. To the extent permitted
by law, Key Advisers or the Sub-Adviser may aggregate the securities to be sold
or purchased for the Fund with those to be sold or purchased for the other funds
of the Victory Portfolios or for other investment companies or accounts in order
to obtain best execution. In making investment recommendations for the Victory
Portfolios, Key Advisers and the Sub-Adviser will not inquire or take into
consideration whether an issuer of securities proposed for purchase or sale by
the Fund is a customer of Key Advisers or the Sub-Adviser, their parents or
subsidiaries or affiliates and, in dealing with their commercial customers, Key
Advisers or the SubAdviser, their parents, subsidiaries, and affiliates will not
inquire or take into consideration whether securities of such customers are held
by the Victory Portfolios.

In the fiscal years ended October 31, 1994 and 1995, the Fund paid $238,762 and
$125,079, respectively, in brokerage commissions.

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<PAGE>

PORTFOLIO TURNOVER. The turnover rate stated in the Prospectus for the Fund's
investment portfolio is calculated by dividing the lesser of the Fund's
purchases or sales of portfolio securities for the year by the monthly average
value of the portfolio securities. The calculation excludes all securities whose
maturities, at the time of acquisition, were one year or less. In the fiscal
year ended October 31, 1995 and the period from December 10, 1993 through
October 31, 1994, the Fund's portfolio turnover rates were 69.22% and 118.49%,
respectively.

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-Investment Advisory
Agreement). Prior to June 5, 1995, the Winsbury Company ("Winsbury"), now known
as BISYS Fund Services, served as the Fund's administrator.

While CHC and Winsbury are distinct legal entities from BISYS Fund Services, CHC
and Winsbury are considered to be affiliated persons of BISYS Fund Services
under the Investment Company Act of 1940 due to, among other things, the fact
that CHC and Winsbury are owned by substantially the same persons that directly
or indirectly own BISYS Fund Services.

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.

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
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.

In the fiscal years ended October 31, 1994 and October 31, 1995, the Fund paid
aggregate administration fees of $131,378, and $246,993, respectively, after fee
reductions of $8,644 and $303, respectively.

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<PAGE>

DISTRIBUTOR.

Victory Broker-Dealer Services, Inc. serves as distributor (the "Distributor")
for the continuous offering of the shares of the Fund pursuant to a Distribution
Agreement between the Distributor and the Victory Portfolios. Prior to May 31,
1995, Winsbury served as distributor of the Fund. 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 (1) by the Trustees or by the vote of a majority of
the outstanding shares of the Fund, and (2) 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 under the 1940 Act.
For the Victory Portfolios' fiscal year ended October 31, 1994 Winsbury received
$212,021, in underwriting commissions, and retained $0; for the fiscal year
ended October 31, 1995, the Distributor received from the Fund $0 in
underwriting commissions, and retained $0.

TRANSFER AGENT.

Primary Funds Service Corporation ("PFSC") 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 (1) to issue and
redeem shares of the Victory Portfolios; (2) 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; (3) to respond to correspondence or inquiries by
shareholders and others relating to its duties; (4) to maintain shareholder
accounts and certain sub-accounts; and (5) to make periodic reports to the
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.

SHAREHOLDER SERVICING PLAN.

Payments made under the Shareholder Servicing Plan to Shareholder Servicing
Agents (which may include affiliates of the Adviser and Sub-Adviser)are for
administrative support services to customers who may from time to time
beneficially own shares, which services may include: (1) aggregating and
processing purchase and redemption requests for shares from customers and
transmitting promptly net purchase and redemption orders to our distributor or
transfer agent; (2) providing customers with a service that invests the assets
of their accounts in shares pursuant to specific or pre-authorized instructions;
(3) processing dividend and distribution payments on behalf of customers; (4)
providing information periodically to customers showing their positions in
shares; (5) arranging for bank wires; (6) responding to customer inquiries; (7)
providing subaccounting with respect to shares beneficially owned by customers
or providing the information to the Fund as necessary for subaccounting; (8) 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; (9) forwarding to customers proxy
statements and proxies containing any proposals regarding this Plan; and (10)
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.

CLASS B SHARES DISTRIBUTION PLAN.

The Victory Portfolios has adopted a Distribution Plan for Class B shares of the
Fund under Rule 12b-1 of the 1940 Act.

The Distribution Plan adopted by the Trustees with respect to the Class B shares
of the Fund provides that the Fund will pay the Distributor a distribution fee
under the Plan at the annual rate of 0.75% of the average daily net assets of
the Fund attributable to the Class B shares. The distribution fees may be used
by the Distributor for: (a) costs of printing and distributing the Fund's
prospectus, statement of additional information and reports to prospective
investors in the

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<PAGE>

Fund; (b) costs involved in preparing, printing and distributing sales
literature pertaining to the Fund; (c) an allocation of overhead and other
branch office distribution-related expenses of the Distributor; (d) payments to
persons who provide support services in connection with the distribution of the
Fund's Class B shares, including but not limited to, office space and equipment,
telephone facilities, answering routine inquiries regarding the Fund, processing
shareholder transactions and providing any other shareholder services not
otherwise provided by the Victory Portfolios' transfer agent; (e) accruals for
interest on the amount of the foregoing expenses that exceed the distribution
fee and the CDSCs received by the Distributor; and (f) any other expense
primarily intended to result in the sale of the Fund's Class B shares,
including, without limitation, payments to salesmen and selling dealers at the
time of the sale of Class B shares, if applicable, and continuing fees to each
such salesmen and selling dealers, which fee shall begin to accrue immediately
after the sale of such shares.

The amount of the Distribution Fees payable by any Fund under the Distribution
Plan is not related directly to expenses incurred by the Distributor and the
Distribution Plan does not obligate the Fund to reimburse the Distributor for
such expenses. The Distribution Fees set forth in the Distribution Plan will be
paid by the Fund to the Distributor unless and until the Plan is terminated or
not renewed with respect to the Fund; any distribution or service expenses
incurred by the Distributor on behalf of the Fund in excess of payments of the
Distribution Fees specified above which the Distributor has accrued through the
termination date are the sole responsibility and liability of the Distributor
and not an obligation of the Fund.

The Distribution Plan for the Class B shares specifically recognizes that either
Key Advisers, the Sub-Adviser 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
Key Advisers, the Sub-Adviser 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 Class B shares, or to third parties,
including banks, that render shareholder support services.

The Distribution Plan was approved by the Trustees, including the Independent
Trustees, at a meeting called for that purpose . As required by Rule 12b-1, 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 Class B
shareholders. To the extent that the Plan gives Key Advisers, the Sub-Adviser or
the Distributor greater flexibility in connection with the distribution of Class
B shares of the Fund, additional sales of the Fund's Class B shares may result.
Additionally, certain Class B shareholder support services may be provided more
effectively under the Plan by local entities with whom shareholders have other
relationships.

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 June 5, 1995
(the "Fund Accounting Agreement"). As fund accountant for the Victory
Portfolios, BISYS Fund Services Ohio, Inc. calculates the Fund's net asset
value, the dividend and capital gain distribution, 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 assets charge of $2,500 per taxable
fund, and does not include out-of-pocket expenses or multiple class charges of
$833 per month assessed for each class of shares after the first class. In the
fiscal years ended October 31, 1993, October 31, 1994 and October 31, 1995 the
Victory Portfolios paid fund accounting fees of $144,288, $152,663 and $141,598,
respectively.

CUSTODIAN.

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<PAGE>

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 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.

INDEPENDENT ACCOUNTANTS.

The financial highlights appearing in the Prospectus has been derived from
financial statements of the Fund incorporated by reference in this Statement of
Additional Information which, for the fiscal year ended October 31, 1995, have
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 is the counsel to the Victory Portfolios.

EXPENSES.

The Fund bears the following expenses relating to its operations: taxes,
interest, brokerage fees and commissions, fees of the Trustees , 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 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 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.

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<PAGE>

ADDITIONAL INFORMATION

DESCRIPTION OF SHARES.

The Victory Portfolios (sometimes referred to as the "Trust") is a Massachusetts
business trust as of the date of this Statement of Additional Information. 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 shares 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. The
Declaration of Trust, as amended, authorizes the Trustees to issue an unlimited
number of shares, which are units of beneficial interest, without par value. The
Victory Portfolios presently has twenty-eight series of shares, 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 Institutional 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 aspects 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 of January 2, 1996, the Fund believes that Society National Bank of Cleveland
and Company was shareholder of record of 96.36% of the outstanding Class A
shares of the Fund, but did not hold such shares beneficially. The following
shareholder beneficially owned 5% or more of the outstanding Class A shares of
the Fund as of January 2, 1996:

Number of Shares % of Shares of
Outstanding Class A Outstanding
---------------- -------------------
KeyCorp Plan Balanced Fund
127 Public Square
Cleveland, OH 44114 1,930,099.131 10.13%

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<PAGE>

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.,
persons who have been shareholders for at least six months, and who hold shares
having a net asset value 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 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 its
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 December 1, 1995 shareholders of The Victory Portfolios approved a plan to
convert the Victory Portfolios to a Delaware business trust. The conversion is
expected to occur on or about February 29, 1996. 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, and the Delaware Trust Instrument provides that shareholders of
the Victory Portfolios shall not be liable for the obligations of the Victory
Portfolios. 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>

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 of a fund (or the 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 Trustees. The Trustees may allocate such general
assets in any manner they deem fair and equitable. It is anticipated that the
factor 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 each respective fund at the time of allocation. Assets belonging to a
particular fund are charged with the direct liabilities and expenses in respect
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 , which
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 and
will be in accordance with generally accepted accounting principles.
Determinations by the Trustees 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" of the Fund means the affirmative
vote of the lesser of (a) 67% or more of the shares of the Fund present at a
meeting at which the holders of more than 50% of the outstanding shares of the
Fund are represented in person or by proxy, or (b) more than 50% of the
outstanding shares of the Fund.

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.

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<PAGE>

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.

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<PAGE>

APPENDIX

DESCRIPTION OF SECURITY RATINGS.

The nationally recognized statistical rating organizations
(individually, an "NRSRO") that may be utilized by Key Advisers or the
Sub-Adviser with regard to portfolio investments for the Funds include Moody's
Investors Service, Inc. ("Moody's"), Standard & Poor's Corporation ("S&P"), Duff
& Phelps, Inc. ("Duff"), Fitch Investors Service, Inc. ("Fitch"), IBCA Limited
and its affiliate, IBCA Inc. (collectively, "IBCA"), and Thomson BankWatch, Inc.
("Thomson"). Set forth below is a description of the relevant ratings of each
such NRSRO. The NRSROs that may be utilized by Key Advisers or the Sub-Adviser
and the description of each NRSRO's ratings is as of the date of this Statement
of Additional Information, and may subsequently change.

LONG-TERM DEBT RATINGS (may be assigned, for example, to corporate and municipal
bonds).

Description of the five highest long-term debt ratings by Moody's
(Moody's applies numerical modifiers (e.g., 1, 2, and 3) in each rating category
to indicate the security's ranking within the category):

Aaa. Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.

Aa. Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risk appear somewhat larger than in Aaa securities.

A. Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment some time in the future.

Baa. Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.

Ba. Bonds which are rated Ba are judged to have speculative elements -
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times in the future. Uncertainty of
position characterizes bonds in this class.

Description of the five highest long-term debt ratings by S&P (S&P may
apply a plus (+) or minus (-) to a particular rating classification to show
relative standing within that classification):

AAA. Debt rated AAA has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.

AA. Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.

A. Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.

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<PAGE>

BBB. Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.

BB. Debt rated BB is regarded, on balance, as predominately speculative
with respect to capacity to pay interest and repay principal in accordance with
the terms of the obligation. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposure to adverse conditions.

Description of the three highest long-term debt ratings by Duff:

AAA. Highest credit quality. The risk factors are negligible being only
slightly more than for risk-free U.S. Treasury debt.

AA+.High credit quality Protection factors are strong.

AA.Risk is modest but may vary slightly from time to time

AA-.because of economic conditions.

A+.Protection factors are average but adequate. However, risk factors
are more variable and greater in periods of economic stress.

Description of the three highest long-term debt ratings by Fitch (plus
or minus signs are used with a rating symbol to indicate the relative position
of the credit within the rating category):

AAA. Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.

AA. Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated "AAA." Because
bonds rated in the "AAA" and "AA" categories are not significantly
vulnerable to foreseeable future developments, short-term debt of these
issues is generally rated "[-]+."

A. Bonds considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is considered
to be strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.

IBCA's description of its three highest long-term debt ratings:

AAA. Obligations for which there is the lowest expectation of
investment risk. Capacity for timely repayment of principal and
interest is substantial. Adverse changes in business, economic or
financial conditions are unlikely to increase investment risk
significantly.

AA. Obligations for which there is a very low expectation of investment
risk. Capacity for timely repayment of principal and interest is
substantial. Adverse changes in business, economic, or financial
conditions may increase investment risk albeit not very significantly.

A. Obligations for which there is a low expectation of investment risk.
Capacity for timely repayment of principal and interest is strong,
although adverse changes in business, economic or financial conditions
may lead to increased investment risk.

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<PAGE>

SHORT-TERM DEBT RATINGS (may be assigned, for example, to commercial paper,
master demand notes, bank instruments, and letters of credit).

Moody's description of its three highest short-term debt ratings:

Prime-1. Issuers rated Prime-1 (or supporting institutions) have a
superior capacity for repayment of senior short-term promissory obligations.
Prime-1 repayment capacity will normally be evidenced by many of the following
characteristics:

- Leading market positions in well-established industries.

- High rates of return on funds employed.

- Conservative capitalization structures with moderate reliance
on debt and ample asset protection.

- Broad margins in earnings coverage of fixed financial charges
and high internal cash generation.

- Well-established access to a range of financial markets and
assured sources of alternate liquidity.

Prime-2. Issuers rated Prime-2 (or supporting institutions) have a
strong capacity for repayment of senior short-term debt obligations. This will
normally be evidenced by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.

Prime-3. Issuers rated Prime-3 (or supporting institutions) have an
acceptable ability for repayment of senior short-term obligations. The effect of
industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.

S&P's description of its three highest short-term debt ratings:

A-1. This designation indicates that the degree of safety regarding
timely payment is strong. Those issues determined to have extremely
strong safety characteristics are denoted with a plus sign (+).

A-2. Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as
for issues designated "A-1."

A-3. Issues carrying this designation have adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher
designations.

Duff's description of its five highest short-term debt ratings (Duff
incorporates gradations of "1+" (one plus) and "1-" (one minus) to
assist investors in recognizing quality differences within the highest
rating category):

Duff 1+. Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or access to alternative
sources of funds, is outstanding, and safety is just below risk-free
U.S. Treasury short-term obligations.

Duff 1. Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors. Risk
factors are minor.

Duff 1-. High certainty of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk factors are
very small.

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<PAGE>

Duff 2. 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. Satisfactory liquidity and other protection factors qualify
issue as to investment grade.

Risk factors are larger and subject to more variation. Nevertheless,
timely payment is expected.

Fitch's description of its four highest short-term debt ratings:

F-1+. Exceptionally Strong Credit Quality. Issues assigned this rating
are regarded as having the strongest degree of assurance for timely
payment.

F-1. Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues
rated F-1+.

F-2. Good Credit Quality. Issues assigned this rating have a
satisfactory degree of assurance for timely payment, but the margin of
safety is not as great as for issues assigned F-1+ or F-1 ratings.

F-3. Fair Credit Quality. Issues assigned this rating have
characteristics suggesting that the degree of assurance for timely
payment is adequate, however, near-term adverse changes could cause
these securities to be rated below investment grade.

IBCA's description of its three highest short-term debt ratings:

A+. Obligations supported by the highest capacity for timely repayment

A1. Obligations supported by a very strong capacity for timely
repayment.

A2. Obligations supported by a strong capacity for timely repayment,
although such capacity may be susceptible to adverse changes in
business, economic or financial conditions.

Short-Term Loan/Municipal Note Ratings

Moody's description of its two highest short-term loan/municipal note
ratings:

MIG-1/VMIG-1. This designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity support
or demonstrated broad-based access to the market for refinancing.

MIG-2/VMIG-2. This designation denotes high quality. Margins of
protection are ample although not so large as in the preceding group.

S&P's description of its two highest municipal note ratings:
SP-1. Very strong or strong capacity to pay principal and interest.
Those issues determined to possess overwhelming safety characteristics
will be given a plus (+) designation.

SP-2. Satisfactory capacity to pay principal and interest.

Short-Term Debt Ratings

Thomson BankWatch, Inc. ("TBW") ratings are based upon a qualitative
and quantitative analysis of all segments of the organization including, where
applicable, holding company and operating subsidiaries.

BankWatch Ratings do not constitute a recommendation to buy or sell
securities of any of these companies. Further, BankWatch does not suggest
specific investment criteria for individual clients.

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<PAGE>

The TBW Short-Term Ratings apply to commercial paper, other senior
short-term obligations and deposit obligations of the entities to which the
rating has been assigned.

The TBW Short-Term Ratings apply only to unsecured instruments that
have a maturity of one year or less.

The TBW Short-Term Ratings specifically assess the likelihood of an
untimely payment of principal or interest.

TBW-1. The highest category; indicates a very high degree of likelihood
that principal and interest will be paid on a timely basis.

TBW-2. The second highest category; while the degree of safety
regarding timely repayment of principal and interest is strong, the relative
degree of safety is not as high as for issues rated "TBW-1".

TBW-3. The lowest investment grade category; indicates that while more
susceptible to adverse developments (both internal and external) than
obligations with higher ratings, capacity to service principal and interest in a
timely fashion is considered adequate.

TBW-4. The lowest rating category; this rating is regarded as
non-investment grade and therefore speculative.

Definitions of Certain Money Market Instruments

Commercial Paper

Commercial paper consists of unsecured promissory notes issued by
corporations. Issues of commercial paper normally have maturities of less than
nine months and fixed rates of return.

Certificates of Deposit

Certificates of Deposit are negotiable certificates issued against
funds deposited in a commercial bank or a savings and loan association for a
definite period of time and earning a specified return.

Bankers' Acceptances

Bankers' acceptances are negotiable drafts or bills of exchange,
normally drawn by an importer or exporter to pay for specific merchandise, which
are "accepted" by a bank, meaning, in effect, that the bank unconditionally
agrees to pay the face value of the instrument on maturity.

U.S. Treasury Obligations

U.S. Treasury Obligations are obligations issued or guaranteed as to
payment of principal and interest by the full faith and credit of the U.S.
Government. These obligations may include Treasury bills, notes and bonds, and
issues of agencies and instrumentalities of the U.S. Government, provided such
obligations are guaranteed as to payment of principal and interest by the full
faith and credit of the U.S. Government.

U.S. Government Agency and Instrumentality Obligations

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<PAGE>

Bank of the United States, are supported by the right of the issuer to borrow
from the Treasury; others, such as those of the Federal National Mortgage
Association, are supported by the discretionary authority of the U.S. Government
to purchase the agency's obligations; still others, such as those of the Student
Loan Marketing Association, are supported only by the credit of the
instrumentality. No assurance can be given that the U.S. Government would
provide financial support to U.S. Government-sponsored instrumentalities if it
is not obligated to do so by law. A Fund will invest in the obligations of such
instrumentalities only when the investment adviser believes that the credit risk
with respect to the instrumentality is minimal.

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<PAGE>
STATEMENT OF ADDITIONAL INFORMATION

THE VICTORY PORTFOLIOS

DIVERSIFIED STOCK FUND

February 1, 1996

This Statement of Additional Information is not a Prospectus, but should be read
in conjunction with the Prospectus of The Victory Portfolios - Diversified Stock
Fund, dated the same date as the date hereof (the "Prospectus"). This Statement
of Additional Information is incorporated by reference in its entirety into the
Prospectus. Copies of the Prospectus may be obtained by writing The Victory
Portfolios at Primary Funds Service Corporation, P.O. Box 9741, Providence, RI
02940-9741, or by telephoning toll free 800-539-FUND or 800-539-3863.

TABLE OF CONTENTS

INVESTMENT OBJECTIVE AND POLICIES ...... 1 INVESTMENT ADVISER
INVESTMENT LIMITATIONS AND KeyCorp Mutual Fund Advisers,
RESTRICTIONS........................ 6 Inc.
VALUATION OF PORTFOLIO SECURITIES....... 8
PERFORMANCE............................. 8 INVESTMENT SUB-ADVISER
ADDITIONAL PURCHASE, EXCHANGE AND Society Asset Management, Inc.
REDEMPTION INFORMATION.............. 12
DIVIDENDS AND DISTRIBUTIONS............. 15 ADMINISTRATOR
TAXES................................... 16 Concord Holding Corporation
TRUSTEES AND OFFICERS................... 16
ADVISORY AND OTHER CONTRACTS............ 22 DISTRIBUTOR
ADDITIONAL INFORMATION.................. 30 Victory Broker-Dealer
APPENDIX................................ 34 Services, Inc.
INDEPENDENT AUDITOR'S REPORT
FINANCIAL STATEMENTS TRANSFER AGENT
Primary Funds Service
Corporation

CUSTODIAN
Key Trust Company of Ohio,
N.A.

<PAGE>

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 Diversified Stock 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

ADDITIONAL INFORMATION REGARDING FUND INVESTMENTS.

The Fund will purchase only commercial paper rated in one of the two highest
categories at the time of purchase by a nationally recognized statistical rating
organization (an "NRSRO") or, if not rated, found by the Trustees to present
minimal credit risks and to be of comparable quality to instruments that are
rated high quality (i.e., in one of the two top ratings categories) by an NRSRO
that is neither controlling, controlled by, or under common control with the
issuer of, or any issuer, guarantor, or provider of credit support for, the

<PAGE>

instruments. For a description of the rating symbols of each NRSRO see the
Appendix to this Statement of Additional Information.

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<PAGE>

Variable or floating rate notes may have maturities of more than one
year, as follows:

4. A floating rate note that is subject to a demand feature will be
deemed by the Fund to have a maturity equal to the period remaining until the
principal amount can be recovered through demand.

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<PAGE>

U.S. GOVERNMENT OBLIGATIONS. The Fund may invest in obligations issued or
guaranteed by the U.S. Government, its agencies and instrumentalities.
Obligations of certain agencies and instrumentalities of the U.S. Government are
supported by the full faith and credit of the U.S. Treasury; others are
supported by the right of the issuer to borrow from the U.S. Treasury; others
are supported by the discretionary authority of the U.S. Government to purchase
the agency's obligations; and still others are supported only by the credit of
the agency or instrumentality. No

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<PAGE>

assurance can be given that the U.S. Government will provide financial support
to U.S. Government-sponsored agencies or instrumentalities if it is not
obligated to do so by law. [The Fund will invest in the obligations of such
agencies and instrumentalities only when Key Advisers or the Sub-Adviser
believes that the credit risk with respect thereto is minimal.]

SECURITIES LENDING. The Fund may lend its portfolio securities to
broker-dealers, banks or institutional borrowers of securities. The Fund must
receive a minimum of 100% collateral, plus any interest due in the form of cash
or U.S. Government securities. This collateral must be valued daily and should
the market value of the loaned securities increase, the borrower must furnish
additional collateral to the Fund. During the time portfolio securities are on
loan, the borrower will pay the Fund any dividends or interest paid on such
securities plus any interest negotiated between the parties to the lending
agreement. Loans will be subject to termination by the Fund or the borrower at
any time. While the Fund will not have the right to vote securities on loan, it
intends to terminate the loan and regain the right to vote if that is considered
important with respect to the investment. The Fund will only enter into loan
arrangements with broker-dealers, banks or other institutions which Key Advisers
or the Sub-Adviser has determined are creditworthy under guidelines established
by the Trustees. The Fund will to limit its securities lending to 33 1/3% of
total assets.

REVERSE REPURCHASE AGREEMENTS. The Fund may borrow funds for temporary purposes
by entering into reverse repurchase agreements . Pursuant to such agreements,
the Fund would sell portfolio securities to financial institutions such as banks
and broker-dealers, and agree to repurchase them at a mutually agreed-upon date
and price. At the time the Fund enters into a reverse repurchase agreement, it
will place in a segregated custodial account assets (such as cash or other
liquid high-grade securities) consistent with the Fund's investment restrictions
having a value equal to the repurchase price (including accrued interest); the
collateral will be marked-to-market on a daily basis, and will be continuously
monitored to ensure that such equivalent value is maintained. Reverse repurchase
agreements involve the risk that the market value of the securities sold by the
Fund may decline below the price at which the Fund is obligated to repurchase
the securities.

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<PAGE>

INVESTMENT LIMITATIONS AND RESTRICTIONS

THE FUND MAY NOT:

1. Participate on a joint or joint and several basis in any securities
trading account.

4. Issue any senior security (as defined in the Investment Company Act
of 1940, as amended (the "1940 Act")), except that (a) the Fund may engage in
transactions that may result in the issuance of senior securities to the extent
permitted under applicable regulations and interpretations of the 1940 Act or an
exemptive order; (b) the Fund may acquire other securities, the acquisition of
which may result in the issuance of a senior security, to the extent permitted
under applicable regulations or interpretations of the 1940 Act; (c) subject to
the restrictions set forth below, the Fund may borrow money as authorized by the
1940 Act.

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<PAGE>

activities are in the same industry. In the utilities category, the industry
shall be determined according to the service provided. For example, gas,
electric, water and telephone will be considered as separate industries.

The following restrictions are not fundamental and may be changed
without shareholder approval:

2. The Fund will not invest more than 10% of its total assets in the
securities of issuers which together with any predecessors have a record of less
than three years of continuous operation.

3. The Fund will not write or sell puts, straddles, spreads or
combinations thereof or write or purchase put options or purchase call options.

7. The Fund will not buy state, municipal, or private activity bonds.

STATE REGULATIONS.

In addition, the Fund, so long as its shares are registered under the securities
laws of the State of Texas and such restrictions are required as a consequence
of such registration, is subject to the following non-fundamental policies,
which may be modified in the future by the Trustees without a vote of the Fund's
shareholders: (1) the Fund has represented to the Texas State Securities Board,
that it will not invest in oil, gas or mineral leases or purchase or sell real
property (including limited partnership interests, but excluding readily
marketable securities of companies which invest in real estate); and (2) the
Fund has represented to the Texas State Securities Board that it will not invest
more than 5% of its net assets in warrants valued at the lower of cost or
market; provided that, included within that amount, but not to exceed 2% of net

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<PAGE>

assets, may be warrants which are not listed on the New York or American Stock
Exchanges. For purposes of this restriction, warrants acquired in units or
attached to securities are deemed to be without value.

GENERAL.

VALUATION OF PORTFOLIO SECURITIES

PERFORMANCE

Yield and total return information may be useful to investors in reviewing the
Fund's performance. The Fund's advertisement of its performance must, under
applicable Commission rules, include the average annual total returns for each
class of shares of the Fund for the 1, 5 and 10-year period (or the life of the
class, if less) as of the most recently ended calendar quarter. This enables an
investor to compare the Fund's performance to the performance of other funds for
the same periods. However, a number of factors should be considered before using
such information as a basis for comparison with other investments. An investment
in the Fund is not insured; its yield and total return are not guaranteed and
normally will fluctuate on a daily basis. When redeemed, an investor's shares
may be worth more or less than their original cost. Yield and total return for
any given past period are not

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<PAGE>

a prediction or representation by the Victory Portfolios of future yields or
rates of return on its shares. The yield and total returns of the Class A and
Class B shares of the Fund are affected by portfolio quality, portfolio
maturity, the type of investments the Fund holds and operating expenses.

STANDARDIZED YIELD.

Standardized Yield = 2 [(a-b + 1)^6 - 1]
-------------------
cd

The symbols above represent the following factors:

a = dividends and interest earned during the 30-day period.
b = expenses accrued for the period (net of any expense
reimbursements).
c = the average daily number of shares of that class outstanding
during the 30-day period that were entitled to receive
dividends.
d = the maximum offering price per share of the class on the last
day of the period, adjusted for undistributed net investment
income.

DIVIDEND YIELD AND DISTRIBUTION RETURNS.

Dividend Yield
of the Class = Dividends of the Class + Number of days
-------------------------------- (accrual period) x 365
Max. Offering Price of the Class
(last day of period)

- 9 -

<PAGE>

respectively. The distribution returns on Class A shares at maximum offering
price and net asset value as of October 31, 1995 were 11.59% and 12.17%,
respectively.

TOTAL RETURNS.

( ERV )^1n - 1 = Average Annual Total Return
---
( P )

ERV - P = Total Return
-------
P

In calculating total returns for Class A shares, the current maximum sales
charge of 4.75% (as a percentage of the offering price) is deducted from the
initial investment ("P") (unless the return is shown at net asset value, as
discussed below). For Class B shares, the payment of the applicable CDSC (5.0%
for the first year, 4.0% for the second year, 3.0% for the third and fourth
years, 2.0% in the fifth year, 1.0% in the sixth year and none thereafter) is
applied to the investment result for the time period shown (unless the total
return is shown at net asset value, as described below). Total returns also
assume that all dividends and capital gains distributions during the period are
reinvested to buy additional shares at net asset value per share, and that the
investment is redeemed at the end of the period. The average annual total return
and cumulative total return on Class A shares for the period October 20, 1989
(commencement of operations) to October 31, 1995 (life of fund) at maximum
offering price were 11.61% and 94.07%, respectively. For the one and five year
periods ended October 31, 1995 annual total returns for Class A shares were
17.69% and 15.42%, respectively.

From time to time the Fund may also quote an "average annual total return at net
asset value" or a cumulative "total return at net asset value" for Class A or
Class B shares. It is based on the difference in net asset value per share at
the beginning and the end of the period for a hypothetical investment in that
class of shares (without considering front-end or contingent sales charges) and
takes into consideration the reinvestment of dividends and capital gains
distributions. The average annual total return and cumulative total return on
Class A shares for the period October 20, 1989 (commencement of operations) to
October 31, 1995 (life of fund), at net asset value, was 12.52% and 103.77%,
respectively. For the one and five year periods ended October 31, 1995, average
annual total return for Class A shares was 23.54% and 16.55%, respectively.

OTHER PERFORMANCE COMPARISONS.

- 10 -

<PAGE>

From time to time, the yields and the total returns of Class A or Class B shares
of the Fund may be quoted in and compared to other mutual funds with similar
investment objectives in advertisements, shareholder reports or other
communications to shareholders. The Fund may also include calculations in such
communications that describe hypothetical investment results. (Such performance
examples are based on an express set of assumptions and are not indicative of
the performance of any Fund.) Such calculations may from time to time include
discussions or illustrations of the effects of compounding in advertisements.
"Compounding" refers to the fact that, if dividends or other distributions on a
Fund investment are reinvested by being paid in additional Fund shares, any
future income or capital appreciation of a Fund would increase the value, not
only of the original Fund investment, but also of the additional Fund shares
received through reinvestment. As a result, the value of the Fund investment
would increase more quickly than if dividends or other distributions had been
paid in cash. The Fund may also include discussions or illustrations of the
potential investment goals of a prospective investor (including but not limited
to tax and/or retirement planning), investment management techniques, policies
or investment suitability of the Fund, economic conditions, legislative
developments (including pending legislation), the effects of inflation and
historical performance of various asset classes, including but not limited to
stocks, bonds and Treasury bills. From time to time advertisements or
communications to shareholders may summarize the substance of information
contained in shareholder reports (including the investment composition of a
Fund, as well as the views of the investment adviser as to current market,
economic, trade and interest rate trends, legislative, regulatory and monetary
developments, investment strategies and related matters believed to be of
relevance to the Fund.) The Fund may also include in advertisements, charts,
graphs or drawings which illustrate the potential risks and rewards of
investment in various investment vehicles, including but not limited to stocks,
bonds, and Treasury bills , as compared to an investment in shares of the Fund,
as well as charts or graphs which illustrate strategies such as dollar cost
averaging, and comparisons of hypothetical yields of investment in tax-exempt
versus taxable investments. In addition, advertisements or shareholder
communications may include a discussion of certain attributes or benefits to be
derived by an investment in the Fund. Such advertisements or communications may
include symbols, headlines or other material which highlight or summarize the
information discussed in more

- 11 -

<PAGE>

detail therein. With proper authorization, the Fund may reprint articles (or
excerpts) written regarding the Fund and provide them to prospective
shareholders. Performance information with respect to the Fund is generally
available by calling 1-800-539-3863.

ADDITIONAL PURCHASE, EXCHANGE AND REDEMPTION INFORMATION

The New York Stock Exchange ("NYSE") and Federal Reserve Bank of Cleveland
holiday closing schedules indicated in the Prospectus under "Share Price" are
subject to change.

- 12 -

<PAGE>

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 Commission or
because it is unable to invest amounts effectively in accordance with its
investment objective and policies.

PURCHASING SHARES.

The conversion of Matured Class B shares to Class A shares is subject to the
continuing availability of a private letter ruling from the Internal Revenue
Service, or an opinion of counsel or tax adviser, to the effect that the
conversion of Matured Class B shares does not constitute a taxable event for the
holder under Federal income tax law. If such a revenue ruling or opinion is no
longer available, the automatic conversion feature may be suspended, in which
event no further conversion of Matured Class B shares would occur while such
suspension remained in effect. Although Matured Class B shares could then be
exchanged for Class A shares on the basis of relative net asset value of the two
classes, without the imposition of a sales charge or fee, such exchange could
constitute a taxable event for the holder, and absent such exchange, Class B
shares might continue to be subject to the asset-based sales charge for longer
than six years.

- 13 -

<PAGE>

class bears to the Fund's total net assets, and then pro rata to each
outstanding share within a given class. Such general expenses include (1)
management fees, (2) legal, bookkeeping and audit fees, (3) printing and mailing
costs of shareholder reports, prospectuses, statements of additional information
and other materials for current shareholders, (4) fees to the Trustees who are
not affiliated with Key Advisers, (5) custodian expenses, (6) share issuance
costs, (7) organization and start-up costs, (8) interest, taxes and brokerage
commissions, and (9) non-recurring expenses, such as litigation costs. Other
expenses that are directly attributable to a class are allocated equally to each
outstanding share within that class. Such expenses include (1) Rule 12b-1
distribution fees and shareholder servicing fees, (2) incremental transfer and
shareholder servicing agent fees and expenses, (3) registration fees and (4)
shareholder meeting expenses, to the extent that such expenses pertain to a
specific class rather than to the Fund as a whole.

- 14 -

<PAGE>

EXCHANGING SHARES.

REDEEMING SHARES.

DIVIDENDS AND DISTRIBUTIONS

The Fund ordinarily declares and pays dividends separately for Class A and Class
B shares from its net investment income quarterly. 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.

- 15 -

<PAGE>

"Alternative Sales Arrangements - Class A and Class B," above. Dividends are
calculated in the same manner, at the same time and on the same day for shares
of each class. However, dividends on Class B shares are expected to be lower as
a result of the asset-based sales charge on Class B shares, and Class B
dividends will also differ in amount as a consequence of any difference in net
asset value between Class A and Class B shares.

TAXES

A non-deductible excise tax is imposed on regulated investment companies that do
not distribute in each calendar year an amount equal to 98% of their ordinary
income for the year plus 98% of their capital gain net income for the 1-year
period ending on October 31 of such calendar year. The balance of such income
must be distributed during the following calendar year. If distributions during
a calendar year are less than the required amount, the fund is subject to a
non-deductible excise tax equal to 4% of the deficiency.

- 16 -

<PAGE>

affect the amount, timing and character of distributions to shareholders. The
Victory Portfolios will endeavor to make any available elections pertaining to
such transactions in a manner believed to be in the best interest of the Fund
and its shareholders.

TRUSTEES AND OFFICERS

BOARD OF TRUSTEES.

The Trustees of the Victory Portfolios, their addresses, ages and their
principal occupations during the past five years are as follows:

Position(s) Held
With the Victory Principal Occupation
Name, Address and Age Portfolios During Past 5 Years
- --------------------- ---------------- ---------------------

Leigh A. Wilson*, 51 Trustee and From 1989 to present,
Glenleigh International Ltd. President Chairman and Chief
53 Sylvan Road North Executive Officer,
Westport, CT 06880 Glenleigh International
Limited; from 1984 to
1989, Chief Executive
Officer, Paribas North
America and Paribas
Corporation; Trustee, The
Victory Funds and the Key
Mutual Funds (the "Key
Funds"), formerly the
Spears, Benzak, Salomon
and Farrell Funds (the
"SBSF Funds").

- 17 -

<PAGE>

- ------------

* 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>

Position(s) Held
With the Victory Principal Occupation
Name, Address and Age Portfolios During Past 5 Years
- --------------------- ---------------- ---------------------

Dr. Harry Gazelle, 68 Trustee Retired radiologist, Drs.
17822 Lake Road Hill and Thomas Corp.;
Lakewood, Ohio 44107 Trustee, The Victory
Funds.

- 19 -

<PAGE>

Position(s) Held
With the Victory Principal Occupation
Name, Address and Age Portfolios During Past 5 Years
- --------------------- ---------------- ---------------------

REMUNERATION OF TRUSTEES AND CERTAIN EXECUTIVE OFFICERS.

- 20 -

<PAGE>

The following table indicates the compensation received by each Trustee from the
Victory "Fund Complex"(1) for the 12 month period ended October 31, 1995.

Pension or Total
Retirement Estimated Compensation
Benefits Annual Total from
Accrued as Benefits Compen- Victory
Portfolio Upon sation "Fund
Expenses Retirement from Fund Complex"(1)
---------- ---------- --------- ----------
Leigh A. Wilson, Trustee ...... -0- -0- $2,206.35 $46,716.97
Robert G. Brown, Trustee ...... -0- -0- 2,331.48 39,815.98
John D. Buckingham, Trustee(2) -0- -0- 1,060.05 18,841.89
Edward P. Campbell, Trustee ... -0- -0- 2,009.87 33,799.68
Harry Gazelle, Trustee ........ -0- -0- 1,929.86 35,916.98
John W. Kemper, Trustee(2) .... -0- -0- 1,060.05 22,567.31
Stanley I. Landgraf, Trustee .. -0- -0- 2,009.87 34,615.98
Thomas F. Morrissey, Trustee .. -0- -0- 2,009.87 40,366.98
H. Patrick Swygert, Trustee ... -0- -0- 2,009.87 37,116.98
John R. Young, Trustee(2)...... -0- -0- 1,132.82 21,963.81

(1) For certain Trustees, these amounts include compensation r eceived from
The Victory Funds (which were reorganized into the Victory Portfolios
as of June 5, 1995), the Key Funds, formerly 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."

(2) Resigned

OFFICERS.

The officers of the Victory Portfolios, their ages, addresses and principal
occupations during the past five years, are as follows:

POSITION(S) WITH THE PRINCIPAL OCCUPATION
NAME, AGE AND ADDRESS VICTORY PORTFOLIOS DURING PAST 5 YEARS
- ---------------------------- --------------------- -------------------------

Leigh A. Wilson, 51 President and Trustee From 1989 to present,
Glenleigh International Ltd. Chairman and Chief
53 Sylvan Road North Executive Officer,
Westport, CT 06880 Glenleigh International
Limited; from 1984 to
1989, Chief Executive
Officer, Paribas North
America and Paribas
Corporation; Trustee to
The Victory Funds and the
Key Funds.

- 21 -

<PAGE>

POSITION(S) WITH THE PRINCIPAL OCCUPATION
NAME, AGE AND ADDRESS VICTORY PORTFOLIOS DURING PAST 5 YEARS
- ---------------------------- --------------------- -------------------------

J. David Huber, 49 Vice President Executive Vice President,
BISYS Fund Services BISYS Fund Services.
3435 Stelzer Road
Columbus, OH 43219-3035

Martin R. Dean, 32 Treasurer From May 1994 to present,
BISYS Fund Services employee of BISYS Fund
3435 Stelzer Road Services; from January
Columbus, OH 43219-3035 1987 to April 1994;
Senior Manager, KPMG Peat
Marwick.

The mailing address of each of the officers of the Victory Portfolios is 3435
Stelzer Road, Columbus, Ohio 43219- 3035.

As of January 6, 1996, the Trustees and officers as a group owned beneficially
less than 1% of the Fund.

- 22 -

<PAGE>

ADVISORY AND OTHER CONTRACTS

INVESTMENT ADVISER AND SUB-ADVISER.

The following schedule lists the advisory fees for each mutual fund that is
advised by Key Advisers.

.25 OF 1% OF AVERAGE DAILY NET ASSETS
Victory Institutional Money Market Fund (1)

.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)

- 23 -

<PAGE>

.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 NET ASSETS
Victory International Growth Fund (1)

- --------------

(2) First Albany Asset Management Corporation serves as sub-adviser to the
Victory Fund for Income, for which it receives .20% of such fund's
average daily net assets.

The Sub-Investment advisory fees payable by Key Advisers to the
Sub-Adviser are as follows:

For the Victory Balanced Fund, For the Victory International Growth
Diversified Stock Fund, Growth Fund, Fund, Ohio Regional Stock Fund and
Stock Index Fund and Value Fund: Special Value Fund:

Rate of Rate of
Net Assets Sub-Advisory Fee(1) Net Assets Sub-Advisory Fee(1)
---------- ------------------- ---------- -------------------

Up to $10,000,000 0.65% Up to $10,000,000 0.90%
Next $15,000,000 0.50% Next $15,000,000 0.70%
Next $25,000,000 0.40% Next $25,000,000 0.55%
Above $50,000,000 0.35% Above $50,000,000 0.45%

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<PAGE>

For the Victory Intermediate Income For the Victory Prime Obligations
Fund, Investment Quality Bond Fund, Fund, Tax-Free Money Market Fund, U.S.
Limited Term Income Fund, Ohio Government Obligations Fund, Financial
Municipal Bond Fund, Government Bond Reserves Fund, Institutional Money
Fund, Government Mortgage Fund, Market Fund and Ohio Municipal Money
National Municipal Bond Fund and New Market Fund:
York Tax-Free Fund:

Rate of Rate of
Net Assets Sub-Advisory Fee(1) Net Assets Sub-Advisory Fee(1)
---------- ------------------- ---------- -------------------

Up to $10,000,000 0.40% Up to $10,000,000 0.25%
Next $15,000,000 0.30% Next $15,000,000 0.20%
Next $25,000,000 0.25% Next $25,000,000 0.15%
Above $50,000,000 0.20% Above $50,000,000 0.125%

- --------------------

THE INVESTMENT ADVISORY AND INVESTMENT SUB-ADVISORY AGREEMENTS.

Prior to January, 1993, Society served as investment adviser to the Fund. From
January, 1993 until December 31, 1995, Society Asset Management, Inc. served as
investment adviser to the Fund. For the fiscal years ended October 31, 1993,
1994 and 1995 the Fund paid investment advisory fees of $1,563,647, $1,548,683
and $2,006,479, respectively, after fee reductions of $33,190, $82,207 and
$126,000, respectively.

- 25 -

<PAGE>

GLASS-STEAGALL ACT.

PORTFOLIO TRANSACTIONS.

- 26 -

<PAGE>

In the fiscal years ended October 31, 1993 , 1994 and 1995, the Fund paid
$421,782 , $550,131 and $615,260, respectively, in brokerage commissions.

- 27 -

<PAGE>

PORTFOLIO TURNOVER. The turnover rate stated in the Prospectus for the Fund's
investment portfolio is calculated by dividing the lesser of the Fund's
purchases or sales of portfolio securities for the year by the monthly average
value of the portfolio securities. The calculation excludes all securities whose
maturities, at the time of acquisition, were one year or less. In the fiscal
years ended October 31, 1995 and 1994, the Fund's portfolio turnover rates were
75.05% and 103.62%, respectively.

ADMINISTRATOR.

In the fiscal years ended October 31, 1993, October 31, 1994 and October 31,
1995, the Fund paid aggregate administration fees of $360,842, $364,211, and
$490,419, respectively, after fee reductions of $1,520, $12,148 and $1,612,
respectively.

- 28 -

<PAGE>

DISTRIBUTOR.

Victory Broker-Dealer Services, Inc. serves as distributor (the "Distributor")
for the continuous offering of the shares of the Fund pursuant to a Distribution
Agreement between the D istributor and the Victory Portfolios. Prior to May 31,
1995, Winsbury served as Distributor of the Fund. 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 (2) by the Trustees or by the vote of a majority of
the outstanding shares of the Fund, and (2) 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 under the 1940 Act.
For the Victory Portfolios' fiscal years ended October 31, 1993 and 1994
Winsbury received $77,258 and $212,021, respectively, in underwriting
commissions, and retained $0 and $0, respectively; for the fiscal year ended
October 31, 1995, the Distributor received from the Fund $0 in underwriting
commissions, and retained $0.

TRANSFER AGENT.

Primary Funds Service Corporation ("PFSC") 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
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.

SHAREHOLDER SERVICING PLAN.

CLASS B SHARES DISTRIBUTION PLAN.

The Victory Portfolios has adopted a Distribution Plan for Class B shares of the
Fund under Rule 12b-1 of the 1940 Act.

- 29 -

<PAGE>

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 June 5, 1995
(the "Fund Accounting Agreement"). As fund accountant for the Victory
Portfolios, BISYS Fund Services Ohio, Inc. calculates the Fund's net asset
value, the dividend and capital gain distribution, 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 assets charge of $2,500 per taxable
fund, and does not include out-of-pocket expenses or multiple class charges of
$833 per month assessed for each class of shares after the first class. In the
fiscal years ended October 31, 1993, October 31, 1994 and October 31, 1995, the
Victory Portfolios paid fund accounting fees of $144,288, $152,663 and $141,598,
respectively.

CUSTODIAN.

- 30 -

<PAGE>

INDEPENDENT ACCOUNTANTS.

LEGAL COUNSEL.

Kramer, Levin, Naftalis, Nessen, Kamin & Frankel, 919 Third Avenue, New York,
New York 10022 is the counsel to the Victory Portfolios.

EXPENSES.

- 31 -

<PAGE>

ADDITIONAL INFORMATION

DESCRIPTION OF SHARES.

As of January 2, 1996, the Fund believes that Society National Bank of Cleveland
and Company was shareholder of record of 94.78% of the outstanding shares of the
Fund, but did not hold such shares beneficially.

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. Shareholders vote as a single class on all matters except (1)
when required by the 1940 Act, shares shall be voted by individual series, and
(2) when the Trustees have determined that the matter affects only the interests
of one or more series, then only shareholders of such series shall be entitled
to vote thereon. 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., persons who have been shareholders for at least six
months, and who hold shares having a net asset value 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.

- 32 -

<PAGE>

SHAREHOLDER AND TRUSTEE LIABILITY UNDER MASSACHUSETTS LAW.

SHAREHOLDER AND TRUSTEE LIABILITY UNDER DELAWARE LAW.

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.

- 33 -

<PAGE>

MISCELLANEOUS.

- 34 -

<PAGE>

APPENDIX

DESCRIPTION OF SECURITY RATINGS.

LONG-TERM DEBT RATINGS (may be assigned, for example, to corporate and municipal
bonds).

Description of the five highest long-term debt ratings by S&P (S&P may
apply a plus (+) or minus (-) to a particular rating classification to show
relative standing within that classification):

AAA. Debt rated AAA has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.

AA. Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.

- 35 -

<PAGE>

Description of the three highest long-term debt ratings by Duff:

AAA. Highest credit quality. The risk factors are negligible being only
slightly more than for risk-free U.S. Treasury debt.

AA+.High credit quality Protection factors are strong.

AA.Risk is modest but may vary slightly from time to time

AA-.because of economic conditions.

A+.Protection factors are average but adequate. However, risk factors
are more variable and greater in periods of economic stress.

Description of the three highest long-term debt ratings by Fitch (plus
or minus signs are used with a rating symbol to indicate the relative position
of the credit within the rating category):

IBCA's description of its three highest long-term debt ratings:

- 36 -

<PAGE>

SHORT-TERM DEBT RATINGS (may be assigned, for example, to commercial paper,
master demand notes, bank instruments, and letters of credit).

Moody's description of its three highest short-term debt ratings:

- Leading market positions in well-established industries.

- High rates of return on funds employed.

- Conservative capitalization structures with moderate reliance on
debt and ample asset protection.

- Broad margins in earnings coverage of fixed financial charges and
high internal cash generation.

- Well-established access to a range of financial markets and
assured sources of alternate liquidity.

S&P's description of its three highest short-term debt ratings:

A-1. This designation indicates that the degree of safety regarding
timely payment is strong. Those issues determined to have extremely
strong safety characteristics are denoted with a plus sign (+).

A-2. Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as
for issues designated "A-1."

Duff 1. Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors. Risk
factors are minor.

Duff 1-. High certainty of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk factors are
very small.

- 37 -

<PAGE>

Duff 3. Satisfactory liquidity and other protection factors qualify
issue as to investment grade.

Risk factors are larger and subject to more variation. Nevertheless,
timely payment is expected.

Fitch's description of its four highest short-term debt ratings:

F-1+. Exceptionally Strong Credit Quality. Issues assigned this rating
are regarded as having the strongest degree of assurance for timely
payment.

F-1. Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues
rated F-1+.

F-2. Good Credit Quality. Issues assigned this rating have a
satisfactory degree of assurance for timely payment, but the margin of
safety is not as great as for issues assigned F-1+ or F-1 ratings.

IBCA's description of its three highest short-term debt ratings:

A+. Obligations supported by the highest capacity for timely repayment.

A1. Obligations supported by a very strong capacity for timely
repayment.

A2. Obligations supported by a strong capacity for timely repayment,
although such capacity may be susceptible to adverse changes in
business, economic or financial conditions.

Short-Term Loan/Municipal Note Ratings

Moody's description of its two highest short-term loan/municipal note
ratings:

MIG-2/VMIG-2. This designation denotes high quality. Margins of
protection are ample although not so large as in the preceding group.

SP-2. Satisfactory capacity to pay principal and interest.

Short-Term Debt Ratings

BankWatch Ratings do not constitute a recommendation to buy or sell
securities of any of these companies. Further, BankWatch does not suggest
specific investment criteria for individual clients.

- 38 -

<PAGE>

The TBW Short-Term Ratings apply to commercial paper, other senior
short-term obligations and deposit obligations of the entities to which the
rating has been assigned.

The TBW Short-Term Ratings apply only to unsecured instruments that
have a maturity of one year or less.

The TBW Short-Term Ratings specifically assess the likelihood of an
untimely payment of principal or interest.

TBW-1. The highest category; indicates a very high degree of likelihood
that principal and interest will be paid on a timely basis.

TBW-4. The lowest rating category; this rating is regarded as
non-investment grade and therefore speculative.

Definitions of Certain Money Market Instruments

Commercial Paper

Commercial paper consists of unsecured promissory notes issued by
corporations. Issues of commercial paper normally have maturities of less than
nine months and fixed rates of return.

Certificates of Deposit

Certificates of Deposit are negotiable certificates issued against
funds deposited in a commercial bank or a savings and loan association for a
definite period of time and earning a specified return.

Bankers' Acceptances

U.S. Treasury Obligations

U.S. Government Agency and Instrumentality Obligations

- 39 -

<PAGE>

- 40 -

<PAGE>
STATEMENT OF ADDITIONAL INFORMATION

THE VICTORY PORTFOLIOS

INTERNATIONAL GROWTH FUND

February 1, 1996

This Statement of Additional Information is not a Prospectus, but should be read
in conjunction with the Prospectus of The Victory Portfolios - International
Growth Fund, dated the same date as the date hereof (the "Prospectus"). This
Statement of Additional Information is incorporated by reference in its entirety
into the Prospectus. Copies of the Prospectus may be obtained by writing The
Victory Portfolios at Primary Funds Service Corporation, P.O. Box 9741,
Providence, RI 02940-9741, or by telephoning toll free 800-539-FUND or
800-539-3863.

TABLE OF CONTENTS

INVESTMENT OBJECTIVE AND POLICIES ....1 INVESTMENT ADVISER
INVESTMENT LIMITATIONS AND KeyCorp Mutual Fund Advisers, Inc.
RESTRICTIONS......................9
VALUATION OF PORTFOLIO SECURITIES....11
PERFORMANCE..........................12 INVESTMENT SUB-ADVISER
ADDITIONAL PURCHASE, EXCHANGE AND Society Asset Management, Inc.
REDEMPTION INFORMATION...........15
DIVIDENDS AND DISTRIBUTIONS..........19 ADMINISTRATOR
TAXES................................20 Concord Holding Corporation
TRUSTEES AND OFFICERS................26
ADVISORY AND OTHER CONTRACTS.........34 DISTRIBUTOR
APPENDIX.............................39 Victory Broker-Dealer Services, Inc.

INDEPENDENT AUDITOR'S REPORT TRANSFER AGENT
FINANCIAL STATEMENTS Primary Funds Service Corporation

CUSTODIAN
Key Trust Company of Ohio, N.A.

<PAGE>

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 International Growth 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

ADDITIONAL INFORMATION REGARDING FUND INVESTMENTS.

<PAGE>

(i.e., in one of the two top ratings categories) by an NRSRO that is neither
controlling, controlled by, or under common control with the issuer of, or any
issuer, guarantor, or provider of credit support for, the instrument). For a
description of the rating symbols of each NRSRO see the Appendix to this
Statement of Additional Information.

FOREIGN INVESTMENT. The Fund may invest in securities issued by foreign branches
of U.S. banks, foreign banks, or other foreign issuers, including sponsored and
unsponsored American Depository Receipts ("ADRs") and securities purchased on
foreign securities exchanges. Such investment may subject the Fund to
significant investment risks that are different from, and additional to, those
related to investments in obligations of U.S. domestic issuers or in U.S.
securities markets. Unsponsored ADRs may involve additional risks.

- 2 -

<PAGE>

Variable or floating rate notes may have maturities of more than one
year, as follows:

4. A floating rate note that is subject to a demand feature will be
deemed by the Fund to have a maturity equal to the period remaining until the
principal amount can be recovered through demand.

- 3 -

<PAGE>

- 4 -

<PAGE>

assurance can be given that the U.S. Government will provide financial support
to U.S. Government-sponsored agencies or instrumentalities if it is not
obligated to do so by law.

SECURITIES LENDING. The Fund may lend its portfolio securities to
broker-dealers, banks or institutional borrowers of securities. The Fund must
receive a minimum of 100% collateral, plus any interest due in the form of cash
or U.S. Government securities. This collateral must be valued daily and should
the market value of the loaned securities increase, the borrower must furnish
additional collateral to the Fund. During the time portfolio securities are on
loan, the borrower will pay the Fund any dividends or interest paid on such
securities plus any interest negotiated between the parties to the lending
agreement. Loans will be subject to termination by the Fund or the borrower at
any time. While the Fund will not have the right to vote securities on loan, it
intends to terminate the loan and regain the right to vote if that is considered
important with respect to the investment. The Fund will only enter into loan
arrangements with broker-dealers, banks or other institutions which Key Advisers
or the Sub-Adviser has determined are creditworthy under guidelines established
by the Trustees. The Fund will to limit its securities lending to 33 1/3% of
total assets.

- 5 -

<PAGE>

contracts and the price at which the futures contract is originally struck.
Futures contracts which are standardized as to maturity date and underlying
financial instrument are traded on national futures exchanges. Futures exchanges
and trading are regulated under the Commodity Exchange Act by the Commodity
Futures Trading Commission (the "CFTC"), a U.S. Government agency.

Futures traders are required to make a good faith margin deposit in
cash or government securities with a broker or custodian to initiate and
maintain open positions in futures contracts. A margin deposit is intended to
assure completion of the contract (delivery or acceptance of the underlying
security) if it is not terminated prior to the specified delivery date. Minimal
initial margin requirements are established by the futures exchange and may be
changed. Brokers may establish deposit requirements which are higher than the
exchange minimums. Initial margin deposits on futures contracts are customarily
set at levels much lower than the prices at which the underlying securities are
purchased and sold, typically ranging upward from less than 5% of the value of
the contract being traded.

After a futures contract position is opened, the value of the contract
is marked-to-market daily. If the futures contract price changes to the extent
that the margin on deposit does not satisfy margin requirements, payment of
additional "variation" margin will be required. Conversely, change in the
contract value may reduce the required margin, resulting in a repayment of
excess margin to the contract holder. Variation margin payments are made to and
from the futures broker for as long as the contract remains open. The Fund
expects to earn interest income on its margin deposits.

The Fund will only sell futures contracts to protect securities it owns
against price declines or purchase contracts to protect against an increase in
the price of securities it intends to purchase.

The Fund's ability to effectively utilize futures trading depends on
several factors. First, it is possible that there will not be a perfect price
correlation between the futures contracts and their underlying stock index.
Second, it is possible that a lack of liquidity for futures contracts could
exist in the secondary market, resulting in an inability to close a futures
position prior to its maturity date. Third, the purchase of a futures contract
involves the risk that the Fund could lose more than the original margin deposit
required to initiate a futures transaction.

Restrictions on the Use of Futures Contracts. The Fund will not enter
into futures contract transactions for purposes other than bona fide hedging
purposes to the extent that, immediately thereafter, the sum of its initial
margin deposits on open contracts exceeds 5% of the market value of the Fund's
total assets. In addition, the Fund will not enter into futures contracts to the
extent that the value of the futures contracts held would exceed 1/3 of

- 6 -

<PAGE>

the Fund's total assets. Futures transactions will be limited to the extent
necessary to maintain the Fund's qualification as a regulated investment
company.

The Victory Portfolios have undertaken to restrict their futures
contract trading as follows: first, the Victory Portfolios will not engage in
transactions in futures contracts for speculative purposes; second, the Victory
Portfolios will not market its funds to the public as commodity pools or
otherwise as vehicles for trading in the commodities futures or commodity
options markets; third, the Victory Portfolios will disclose to all prospective
shareholders the purpose of and limitations on its funds' commodity futures
trading; fourth, the Victory Portfolios will submit to the CFTC special calls
for information. Accordingly, registration as a commodities pool operator with
the CFTC is not required.

In addition to the margin restrictions discussed above, transactions in
futures contracts may involve the segregation of funds pursuant to requirements
imposed by the Commission. Under those requirements, where the Fund has a long
position in a futures contract, it may be required to establish a segregated
account (not with a futures commission merchant or broker) containing cash or
certain liquid assets equal to the purchase price of the contract (less any
margin on deposit). For a short position in futures or forward contracts held by
the Fund, those requirements may mandate the establishment of a segregated
account (not with a futures commission merchant or broker) with cash or certain
liquid assets that, when added to the amounts deposited as margin, equal the
market value of the instruments underlying the futures contracts (but are not
less than the price at which the short positions were established). However,
segregation of assets is not required if the Fund "covers" a long position. For
example, instead of segregating assets, the Fund, when holding a long position
in a futures contract, could purchase a put option on the same futures contract
with a strike price as high or higher than the price of the contract held by the
Fund. In addition, where the Fund takes short positions, or engages in sales of
call options, it need not segregate assets if it "covers" these positions. For
example, where the Fund holds a short position in a futures contract, it may
cover by owning the instruments underlying the contract. The Fund may also cover
such a position by holding a call option permitting it to purchase the same
futures contract at a price no higher than the price at which the short position
was established. Where the Fund sells a call option on a futures contract, it
may cover either by entering into a long position in the same contract at a
price no higher than the strike price of the call option or by owning the
instruments underlying the futures contract. The Fund could also cover this
position by holding a separate call option permitting it to purchase the same
futures contract at a price no higher than the strike price of the call option
sold by the Fund.

In addition, the extent to which the Fund may enter into transactions
involving futures contracts may be limited by the Internal Revenue Code's
requirements for qualification as a registered investment company and the Fund's
intention to qualify as such.

Risk Factors in Futures Transactions. Positions in futures contracts
may be closed out only on an exchange which provides a secondary market for such
futures. However, there can be no assurance that a liquid secondary market will
exist for any particular futures contract at any specific time. Thus, it may not
be possible to close a futures position. In the event of adverse price
movements, the Fund would continue to be required to make daily cash payments to
maintain the required margin. In such situations, if the Fund has insufficient
cash, it may have to sell portfolio securities to meet daily margin requirements
at a time when it may be disadvantageous to do so. In addition, the Fund may be
required to make delivery of the instruments underlying futures contracts it
holds. The inability to close options and futures positions also could have an
adverse impact on the ability to effectively hedge them. The Fund will minimize
the risk that it will be unable to close out a futures contract by only entering
into futures contracts which are traded on national futures exchanges and for
which there appears to be a liquid secondary market.

- 7 -

<PAGE>

may be increased participation by speculators in the futures market which may
also cause temporary price distortions. A relatively small price movement in a
futures contract may result in immediate and substantial loss (as well as gain)
to the investor. For example, if at the time of purchase, 10% of the value of
the futures contract is deposited as margin, a subsequent 10% decrease in the
value of the futures contract would result in a total loss of the margin
deposit, before any deduction for the transaction costs, if the account were
then closed out. A 15% decrease would result in a loss equal to 150% of the
original margin deposit if the contract were closed out. Thus, a purchaser or
sale of a futures contract may result in losses in excess of the amount invested
in the contract. However, because the futures strategies engaged in by the Fund
are only for hedging purposes, Key Advisers and the Sub-Adviser do not believe
that the Fund is subject to the risks of loss frequently associated with futures
transactions. The Fund would presumably have sustained comparable losses if,
instead of the futures contract, it had invested in the underlying financial
instrument and sold it after the decline.

Utilization of futures transactions by the Fund does involve the risk
of imperfect or no correlation where the securities underlying futures contract
have different maturities than the portfolio securities being hedged. It is also
possible that the Fund could both lose money on futures contracts and also
experience a decline in value of its portfolio securities. There is also the
risk of loss by the Fund of margin deposits in the event of bankruptcy of a
broker with whom the Fund has an open position in a futures contract or related
option.

INVESTMENT LIMITATIONS AND RESTRICTIONS

THE FUND MAY NOT:

1. Participate on a joint or joint and several basis in any
securities trading account.

2. Purchase or sell physical commodities unless acquired as a result
of ownership of securities or other instruments (but this shall not prevent the
Fund from purchasing or selling options and futures contracts or from investing
in securities or other instruments backed by physical commodities).

3. Purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent the
Fund from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business). Investments by the
Fund in securities backed by mortgages on real estate or in marketable
securities of companies engaged in such activities are not hereby precluded.

4. Issue any senior security (as defined in the Investment Company
Act of 1940, as amended (the "1940 Act")), except that (a) the Fund may engage
in transactions that may result in the issuance of senior securities to the
extent permitted under applicable regulations and interpretations of the 1940
Act or an exemptive order; (b) the Fund may acquire other securities, the
acquisition of which may result in the issuance of a senior security, to the
extent permitted under applicable regulations or interpretations of the 1940
Act; (c) subject to the restrictions set forth below, the Fund may borrow money
as authorized by the 1940 Act.

- 8 -

<PAGE>

exceeding 5% of the value of its total assets at the time when the loan is made.
Any borrowings representing more than 5% of the Fund's total assets must be
repaid before the Fund may make additional investments. For purposes of this
restriction, collateral arrangements with respect to margins for currency
futures contracts are not deemed to be a pledge of assets.

6. Lend any security or make any other loan if, as a result, more
than 33 1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of publicly issued debt securities or to
repurchase agreements.

7. Underwrite securities issued by others, except to the extent that
the Fund may be considered an underwriter within the meaning of the Securities
Act of 1933 (the "1933 Act") in the disposition of restricted securities.

9. Purchase the securities of any issuer (other than securities
issued or guaranteed by the U.S. Government or any of its agencies or
instrumentalities, or repurchase agreements secured thereby) if, as a result,
more than 25% of the Fund's total assets would be invested in the securities of
companies whose principal business activities are in the same industry. In the
utilities category, the industry shall be determined according to the service
provided. For example, gas, electric, water and telephone will be considered as
separate industries.

The following restrictions are not fundamental and may be changed
without shareholder approval:

1. The Fund will not purchase or retain securities of any issuer if
the officers or Trustees of the Victory Portfolios or the officers or directors
of its investment adviser owning beneficially more than one-half of 1% of the
securities of such issuer together own beneficially more than 5% of such
securities.

2. The Fund will not invest more than 10% of its total assets in the
securities of issuers which together with any predecessors have a record of less
than three years of continuous operation.

3. The Fund will not write or sell puts, straddles, spreads or
combinations thereof or write or purchase put options or purchase call options.

4. The Fund will not invest more than 15% of its net assets in
illiquid securities. Illiquid securities are securities that are not readily
marketable cannot be disposed of promptly within seven days and in the usual
course of business at approximately the price at which the Fund has valued them.
Such securities include, but are not limited to, time deposits and repurchase
agreements with maturities longer than seven days. Securities that may be resold
under Rule 144A, securities offered pursuant to Section 4(2) of, or securities
otherwise subject to restrictions or limitations on resale under the 1933 Act
("Restricted Securities") shall not be deemed illiquid solely by reason of being
unregistered. Key Advisers or the Sub-Adviser determine whether a particular
security is deemed to be liquid based on the trading markets for the specific
security and other factors. However, because state securities laws may limit the
Fund's investment in Restricted Securities (regardless of the liquidity of the
investment), investments in Restricted Securities resalable under Rule 144A will
continue to be subject to applicable state law requirements until such time, if
ever, that such limitations are changed.

- 9 -

<PAGE>

this restriction will not be applied to limit the use of options, futures
contracts and related options, in the manner otherwise permitted by the
investment restrictions, policies and investment program of the Fund, and shall
not limit the Fund's ability to make margin payments in connection with
tranactions in currency future options.

6. 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. Pursuant to an exemptive
order received by the Victory Portfolios from the Commission, the Fund may
invest in the money market funds of the Victory Portfolios.

7. The Fund will not buy state, municipal, or private activity
bonds.

STATE REGULATIONS.

Furthermore, the Fund will invest only in debt securities which are rated, at
the time of purchase, within the three highest rating groups assigned by a
NRSRO, or if unrated, those securities which Key Advisers or the Sub-Adviser
deems to be of comparable quality.

GENERAL.

- 10 -

<PAGE>

VALUATION OF PORTFOLIO SECURITIES

PERFORMANCE

STANDARDIZED YIELD.

Standardized Yield = 2[(a-b + 1)^6 - 1]
------------------
cd

The symbols above represent the following factors:

- 11 -

<PAGE>

DIVIDEND YIELD AND DISTRIBUTION RETURNS.

Dividend Yield of the Class = Dividends of the Class + Number of days
------------------------ (accrual period) x 365
Max. Offering Price of
the Class (last day of
period)

TOTAL RETURNS.

( ERV )^n - 1 = Average Annual Total Return
-----
( P )

ERV - P = Total Return
-------
P

- 12 -

<PAGE>

sixth year and none thereafter) is applied to the investment result for the time
period shown (unless the total return is shown at net asset value, as described
below). Total returns also assume that all dividends and capital gains
distributions during the period are reinvested to buy additional shares at net
asset value per share, and that the investment is redeemed at the end of the
period. The average annual total return and cumulative total return on Class A
shares for the period May 18, 1990 (commencement of operations) to October 31,
1995 (life of fund) at maximum offering price were 5.40% and 33.26%,
respectively. For the one and five year periods ended October 31, 1995 annual
total returns for Class A shares were 7.10% and 6.91%, respectively.

From time to time the Fund may also quote an "average annual total return at net
asset value" or a cumulative "total return at net asset value" for Class A or
Class B shares. It is based on the difference in net asset value per share at
the beginning and the end of the period for a hypothetical investment in that
class of shares (without considering front-end or contingent sales charges) and
takes into consideration the reinvestment of dividends and capital gains
distributions. The average annual total return and cumulative total return on
Class A shares for the period May 18, 1990 (commencement of operations) to
October 31, 1995 (life of fund), at net asset value, was 6.35% and 39.92%,
respectively. For the one and five year periods ended October 31, 1995, average
annual total return for Class A shares was (2.50%) and 7.95%, respectively.

OTHER PERFORMANCE COMPARISONS.

- 13 -

<PAGE>

that do not reflect reinvestment of capital gains or take investment costs into
consideration, as these items are not applicable to indices.

Investors may also judge, and the Fund may at times advertise, the performance
of Class A or Class B shares by comparing it to the performance of other mutual
funds or mutual fund portfolios with comparable investment objectives and
policies, which performance may be contained in various unmanaged mutual fund or
market indices or rankings such as those prepared by Dow Jones & Co., Inc.,
Standard & Poor's Corporation, Lehman Brothers, Merrill Lynch, and Salomon
Brothers, and in publications issued by Lipper and in the following
publications: IBC's Money Fund Reports, Value Line Mutual Fund Survey;
Morningstar, CDA/Wiesenberger, Money Magazine, Forbes, Barron's, The Wall Street
Journal, The New York Times, Business Week, American Banker, Fortune,
Institutional Investor, and U.S.A. Today. In addition to yield information,
general information about the Fund that appears in a publication such as those
mentioned above may also be quoted or reproduced in advertisements or in reports
to shareholders.

- 14 -

<PAGE>

ADDITIONAL PURCHASE, EXCHANGE AND REDEMPTION INFORMATION

The New York Stock Exchange (the "NYSE") and Federal Reserve Bank of Cleveland
holiday closing schedule indicated in the Prospectus under "Share Price" are
subject to change.

PURCHASING SHARES.

- 15 -

<PAGE>

- 16 -

<PAGE>

"company" as defined in Section 2(a)(8) of the 1940 Act; an individual, spouse,
and their children under age 21 purchasing for his, her, or their own account; a
trustee, administrator or other fiduciary purchasing for a single trust estate
or single fiduciary account or for a single or a parent-subsidiary group of
"employee benefit plans" (as defined in Section 3(3) of ERISA); and tax-exempt
organizations under Section 501(c)(3) of the Internal Revenue Code.

EXCHANGING SHARES.

- 17 -

<PAGE>

REDEEMING SHARES.

DIVIDENDS AND DISTRIBUTIONS

TAXES

- 18 -

<PAGE>

Gain or loss on the sale or other disposition of foreign currency on a spot (or
cash) basis will result in ordinary gain or loss for federal income tax
purposes.

- 19 -

<PAGE>

Investment by the Fund in certain "passive foreign investment companies" might
subject the Fund to a U.S. federal income tax or other charge on distributions
received from or the sale of its investment in such a company at a gain, which
tax would not be eliminated by making distributions to Fund shareholders. The
Fund could avoid such a tax or charge by electing to treat the passive foreign
investment company as a "qualified electing fund;" however, the Fund may not be
in the position to make such an election.

TRUSTEES AND OFFICERS

BOARD OF TRUSTEES.

The Trustees of the Victory Portfolios, their addresses, ages and their
principal occupations during the past five years are as follows:

Position(s) Held
With the Victory Principal Occupation
Name, Address and Age Portfolios During Past 5 Years
- --------------------- ---------------- ---------------------
Leigh A. Wilson*, 51 Trustee and From 1989 to present,
Glenleigh President Chairman and Chief
International Ltd. Executive Officer,
53 Sylvan Road North Glenleigh International
Westport, CT 06880 Limited; from 1984 to
1989, Chief Executive
Officer, Paribas North
America and Paribas
Corporation; Trustee, The
Victory Funds and the Key
Mutual Funds (the "Key
Funds"), formerly the
Spears, Benzak, Salomon
and Farrell Funds (the
"SBSF Funds").
- ------------
* 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.

- 20 -

<PAGE>

Position(s) Held Principal Occupation
With the Victory During Past 5 Years
Name, Address and Age Portfolios
- --------------------- ---------------- ---------------------

Dr. Harry Gazelle, 68 Trustee Retired radiologist, Drs.
17822 Lake Road Hill and Thomas Corp.;
Lakewood, Ohio 44107 Trustee, The Victory
Funds.

- 21 -

<PAGE>

Position(s) Held
With the Victory Principal Occupation
Name, Address and Age Portfolios During Past 5 Years
- --------------------- ---------------- ---------------------

REMUNERATION OF TRUSTEES AND CERTAIN EXECUTIVE OFFICERS.

- 22 -

<PAGE>

The following table indicates the compensation received by each Trustee from the
Victory "Fund Complex"(1) for the 12 month period ended October 31, 1995.

Pension or Total
Retirement Estimated Compensation
Benefits Annual Total from
Accrued as Benefits Compen- Victory
Portfolio Upon sation "Fund
Expenses Retirement from Fund Complex"(1)
---------- ---------- --------- ----------
Leigh A. Wilson, Trustee ...... -0- -0- 865.44 $46,716.97
Robert G. Brown, Trustee ...... -0- -0- 880.52 39,815.98
John D. Buckingham, Trustee(2) -0- -0- 409.93 18,841.89
Edward P. Campbell, Trustee ... -0- -0- 670.63 33,799.68
Harry Gazelle, Trustee ........ -0- -0- 735.72 35,916.98
John W. Kemper, Trustee(2) .... -0- -0- 506.60 22,567.31
Stanley I. Landgraf, Trustee .. -0- -0- 708.01 34,615.98
Thomas F. Morrissey, Trustee .. -0- -0- 802.87 40,366.98
H. Patrick Swygert, Trustee ... -0- -0- 802.87 37,116.98
John R. Young, Trustee(2).. -0- -0- 494.95 21,963.81

(2) Resigned

OFFICERS.

The officers of the Victory Portfolios, their ages, addresses and principal
occupations during the past five years, are as follows:

Position(s) Held
With the Victory Principal Occupation
Name, Address and Age Portfolios During Past 5 Years
- --------------------- ---------------- ---------------------

Leigh A. Wilson, 51 President and Trustee From 1989 to present,
Glenleigh International Ltd. Chairman and Chief
53 Sylvan Road North Executive Officer,
Westport, CT 06880 Glenleigh International
Limited; from 1984 to
1989, Chief Funds.
Executive Officer,
Paribas North America and
Paribas Corporation;
Trustee to The Victory
Funds and the Key Funds,
formerly the SBSF Funds

. - 23 -

<PAGE>

Position(s) Held
With the Victory Principal Occupation
Name, Address and Age Portfolios During Past 5 Years
- --------------------- ---------------- ---------------------

J. David Huber, 49 Vice President Executive Vice President,
BISYS Fund Services BISYS Fund Services.
3435 Stelzer Road
Columbus, OH 43219-3035

The mailing address of each of the officers of the Victory Portfolios is 3435
Stelzer Road, Columbus, Ohio 43219- 3035.

As of January 6, 1996, the Trustees and officers as a group owned beneficially
less than 1% of the Fund.

- 24 -

<PAGE>

ADVISORY AND OTHER CONTRACTS

INVESTMENT ADVISER AND SUB-ADVISER.

The following schedule lists the advisory fees for each mutual fund that is
advised by Key Advisers.

.25 OF 1% OF AVERAGE DAILY NET ASSETS
Victory Institutional Money Market Fund (1)

.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)

.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)

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<PAGE>

.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 NET ASSETS
Victory International Growth Fund (1)

- --------------

(2) First Albany Asset Management Corporation serves as sub-adviser to the
Victory Fund for Income, for which it receives .20% of such fund's
average daily net assets.

The Sub-Investment advisory fees payable by Key Advisers to the
Sub-Adviser are as follows:

For the Victory Balanced Fund, For the Victory International Growth
Diversified Stock Fund, Growth Fund, Ohio Regional Stock Fund and
Fund, Stock Index Fund and Value Special Value Fund:
Fund:
Rate of Rate of
Net Assets Fee(1) Sub-Advisory Fee(1) Net Assets Sub-Advisory
- ----------------- ------------------- ---------- ------------

Up to $10,000,000 0.65% Up to $10,000,000 0.90%
Next $15,000,000 0.50% Next $15,000,000 0.70%
Next $25,000,000 0.40% Next $25,000,000 0.55%
Above $50,000,000 0.35% Above $50,000,000 0.45%

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For the Victory Intermediate Income For the Victory Prime Obligations
Fund, Investment Quality Bond Fund, Fund, Tax-Free Money Market Fund,
Limited Term Income Fund, Ohio U.S. Government Obligations Fund,
Municipal Bond Fund, Government Financial Reserves Fund,
Bond Fund, Government Mortgage Institutional Money Market Fund and
Fund, National Municipal Bond Fund Ohio Municipal Money Market Fund:
and New York Tax-Free Fund:

Rate of Rate of
Net Assets Sub-Advisory Fee(1) Net Assets Sub-Advisory
- ----------------- ------------------- ---------- ------------

Up to $10,000,000 0.40% Up to $10,000,000 0.25%
Next $15,000,000 0.30% Next $15,000,000 0.20%
Next $25,000,000 0.25% Next $25,000,000 0.15%
Above $50,000,000 0.20% Above $50,000,000 0.125%

- --------------------

THE INVESTMENT ADVISORY AND INVESTMENT SUB-ADVISORY AGREEMENTS.

Prior to January, 1993, Society National Bank served as investment adviser to
the Fund. From January, 1993 through December 31, 1995, Society Asset
Management, Inc. served as investment adviser to the Fund. Clay Finlay Inc.
served as sub-adviser to the Fund from February 22, 1994 until June 5, 1995. For
the fiscal years ended October 31, 1993, 1994 and 1995, the Fund paid investment
advisory fees of $284,002, $532,331 and $901,337, respectively, after fee
reductions of $25,853, $90,406 and $116,464, respectively.

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GLASS-STEAGALL ACT.

PORTFOLIO TRANSACTIONS.

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In the fiscal years ended October 31, 1993 , 1994 and 1995, the Fund paid
$187,410 , $272,288 and $333,609, respectively, in brokerage commissions.

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PORTFOLIO TURNOVER. The turnover rate stated in the Prospectus for the Fund's
investment portfolio is calculated by dividing the lesser of the Fund's
purchases or sales of portfolio securities for the year by the monthly average
value of the portfolio securities. The calculation excludes all securities whose
maturities, at the time of acquisition, were one year or less. In the fiscal
years ended October 31, 1995 and 1994, the Fund's portfolio turnover rates were
68.09% and 50.66%, respectively.

ADMINISTRATOR.

In the fiscal years ended October 31, 1993, October 31, 1994 and October 31,
1995, the Fund paid aggregate administration fees of $24,124, $69,419, and
$138,965, respectively, after fee reductions of $1,711, $15,500 and $0,
respectively.

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DISTRIBUTOR.

Victory Broker-Dealer Services, Inc. serves as distributor (the "Distributor")
for the continuous offering of the shares of the Fund pursuant to a Distribution
Agreement between the Distributor and the Victory Portfolios. Prior to May 31,
1995, Winsbury served as distributor of the Fund. 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 (1) by the Trustees or by the vote of a majority of
the outstanding shares of the Fund, and (2) 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 under the 1940 Act.
For the Victory Portfolios' fiscal years ended October 31, 1993 and 1994
Winsbury received $77,258 and $212,021, respectively, in underwriting
commissions, and retained $0 and $0, respectively; for the fiscal year ended
October 31, 1995, the Distributor received from the Fund $0 in underwriting
commissions, and retained $0.

TRANSFER AGENT.

SHAREHOLDER SERVICING PLAN.

CLASS B SHARES DISTRIBUTION PLAN.

The Victory Portfolios has adopted a Distribution Plan for Class B shares of the
Fund under Rule 12b-1 of the Act .

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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 June 5, 1995
(the "Fund Accounting Agreement"). As fund accountant for the Victory
Portfolios, BISYS Fund Services Ohio, Inc. calculates the Fund's net asset
value, the dividend and capital gain distribution, 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 assets charge of $3,333 per
international fund, and does not include out-of-pocket expenses or multiple
class charges of $833 per month assessed for each class of shares after the
first class. In the fiscal years ended October 31, 1993, October 31, 1994 and
October 31, 1995 the Victory Portfolios paid fund accounting fees of $144,288,
$152,663 and $141,598, respectively.

CUSTODIAN.

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Cash and securities owned by the International Growth Fund are held by The Bank
of New York and certain foreign sub-custodians, and by Key Trust Company of
Ohio, N.A. as sub-custodian; cash and securities owned by each of the other
funds of the Victory Portfolio are held by Key Trust Company of Ohio, N.A. as
custodian. The Bank of New York serves as custodian to the International Growth
Fund pursuant to a Custodian Agreement dated October 30, 1995. Key Trust Company
of Ohio, N.A. serves as custodian to each of the other funds of the Victory
Portfolios pursuant to a Custodian Agreement dated May 24, 1995. Under these
Agreements, Key Trust Company of Ohio, N.A. and The Bank of New York each (i)
maintain a separate account or accounts in the name of each respective fund;
(ii) make receipts and disbursements of money on behalf of each fund; (iii)
collect and receive all income and other payments and distributions on account
of portfolio securities; (iv) respond to correspondence from security brokers
and others relating to its duties; and (v) make periodic reports to the Victory
Portfolios' Trustees concerning the Victory Portfolios' operations. The Bank of
New York and Key Trust Company of Ohio, N.A. each may, with the approval of a
fund and at the custodian's own expense, open and maintain a subcustody account
or accounts on behalf of a fund, provided that Key Trust Company of Ohio, N.A.
or The Bank of New York shall remain liable for the performance of all of its
duties under its respective Custodian Agreement.

INDEPENDENT ACCOUNTANTS.

LEGAL COUNSEL.

Kramer, Levin, Naftalis, Nessen, Kamin & Frankel, 919 Third Avenue, New York,
New York 10022 is the counsel to the Victory Portfolios .

EXPENSES.

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ADDITIONAL INFORMATION

DESCRIPTION OF SHARES.

As of January 2, 1996, the Fund believes that Society National Bank of Cleveland
and Company was shareholder of record of 96.32% of the outstanding Class A
shares of the Fund, but did not hold such shares beneficially.

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. Shareholders vote as a single class on all matters except (1)
when required by the 1940 Act, shares shall be voted by individual series, and
(2) when the Trustees have determined that the matter affects only the interests
of one or more series, then only shareholders of such series shall be entitled
to vote thereon. 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., persons who have been shareholders for at least six
months, and who hold shares having an net asset value 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.