As filed with the Securities and Exchange Commission on April 8, 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. 29 [X]
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 30
The Victory Portfolios
(Exact name of Registrant as Specified in Trust Instrument)
3435 Stelzer Road
Columbus, Ohio 43219
(Address of Principal Executive Office)
(800) 362-5365
(Area Code and Telephone Number)
Copy to:
George O. Martinez, Esq. Carl Frischling, Esq.
Concord Holding Corporation Kramer, Levin, Naftalis,
3435 Stelzer Road Nessen, Kamin & Frankel
Columbus, Ohio 43219 919 Third Avenue
(Name and Address of Agent for Service) New York, New York 10022
It is proposed that this filing will become effective:
|_| Immediately upon filing pursuant to |_| on ( ) pursuant to
paragraph (b) paragraph (b)
|X| 60 days after filing pursuant to |_| ( ) 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 with respect to its Balanced Fund for its October 31,
1995 fiscal year was filed on December 29, 1995, in accordance with Rule 24f-2.
<PAGE>
The Victory Portfolios
THE VICTORY PORTFOLIOS
CROSS-REFERENCE SHEET
The Registrant has filed the information required in the statement of additional
information in the Post-Effective Amendment No. 27 to its Registration Statement
on Form N-1A on January 31, 1996, and is incorporated herein by reference. The
Registrant has not amended its statement of additional information.
Form N-1A Part A Item Prospectus Caption
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i. Cover Page Cover Page
ii. Synopsis Fund Expenses
iii. Condensed Financial Information Financial Highlights
iv. General Description of Registrant Investment Objective; Investment
Policies and Risk Factors;
Limiting Investment Risks; Fund
Organization and Fees; Additional
Information
v. Management of the Fund Fund Organization and Fees
v.A. 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>
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 Advisory and Other Contracts
Other Practices
xviii. Capital Stock and Other Securities Valuation of Portfolio
Securities; Additional Purchase,
Exchange and Redemption
Information; Additional
Information
xix. Purchase, Redemption and Pricing Valuation of Portfolio
Securities; Additional of
Securities Being OfferedPurchase,
Exchange and Redemption
Information; Performance;
Additional Information
xx. Tax Status Dividends and Distributions
xxi. Underwriters Advisory and Other Contracts
xxii. Calculation of Performance Data Performance; Additional
Information
xxiii. Financial Statements
<PAGE>
PART A
<PAGE>
KEY BALANCED SHARES
OF THE VICTORY BALANCED FUND
3435 STELZER ROAD
COLUMBUS, OHIO 43219-3035
PROSPECTUS
[LOGO]
KEY SHARES
DATE
Key Shares are a class of shares of the Victory Balanced Fund (the "Fund"), a
portfolio of The Victory Portfolios (the "Company") a professionally managed
open-end series investment company currently having several different
portfolios. The Fund offers Key Shares, and other portfolios of the Company may
also offer Key Shares (the "Key Funds"). Each of the Key Funds is a separately
managed portfolio with its own investment objective and policies. The Key Shares
class of each of the Key Funds has no sales charges, redemption fees or exchange
fees. This prospectus relates only to the Fund, which is 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 ("Concord" or the "Administrator"). Victory Broker-Dealer
Services, Inc. is the Fund's distributor (the "Distributor"). Key Funds provide
informed investors with experienced, professional investment management and
personal service.
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.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, KEY ADVISERS, SOCIETY, ANY KEYCORP BANK, ANY OF THEIR AFFILIATES, OR ANY
OTHER BANK. THE KEY SHARES OF THE FUND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION (FDIC), THE FEDERAL RESERVE BOARD OR ANY OTHER
AGENCY. AN INVESTMENT IN MUTUAL FUND SHARES IS SUBJECT TO INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
This Prospectus sets forth concisely the information about the Key Shares of the
Fund that a prospective investor ought to know before investing. Additional
information about the Fund has been filed with the Securities and Exchange
Commission (the "Commission") in a Statement of Additional Information dated
_______, 1996, as supplemented from time to time, which is incorporated herein
by reference and is available without charge upon request by writing or calling
the Fund at 1-800-539-3863.
_____________________, ______________________________ (the "Transfer Agent").
Investors are advised to read and retain this Prospectus for future reference.
For current yield, purchase and redemption information, call 1-800-539-FUND or
1-800-539-3863.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
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TABLE OF CONTENTS
Page
Fund Expenses...............................................................
Financial Highlights........................................................
Investment Objective and Policies...........................................
Management of the Fund......................................................
Expenses and Distribution Plan..............................................
Determination of Net Asset Value............................................
Purchasing Shares...........................................................
The Systematic Investment Plan..............................................
The Systematic Withdrawal Plan..............................................
Redeeming Shares............................................................
Exchanging Shares...........................................................
Investing For Retirement....................................................
Dividends and Distributions.................................................
Federal Income Taxes........................................................
Performance.................................................................
Description of Shares and Fund Organization.................................
Custodian, Transfer Agent
and Other Service Providers........................................
Shareholder Reports.........................................................
Miscellaneous Information...................................................
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<PAGE>
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FUND EXPENSES
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The following table sets forth the fees that an investor in the Key Shares of
the Fund might pay, based upon the expenses paid by the Fund during the fiscal
year ended October 31, 1995.
Key
Shares
------
SHAREHOLDER TRANSACTION EXPENSES:
Maximum sales charge imposed on purchases .................... None
Maximum sales charge imposed on reinvested dividends.......... None
Deferred sales charge......................................... None
Redemption Fees............................................... None
Exchange Fees................................................. None
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average daily net assets)
Management Fees (1)........................................... 0.60%
Administration Fees........................................... 0.15%
Rule 12b-1 Distribution Fees.................................. 0.00%
Other Expenses(2)............................................. 0.50%
-----
Total Fund Operating Expenses (1)(2).......................... 1.25%
====
The purpose of this table is to assist an investor in understanding the various
costs and expenses that an investor in the Key Shares of the Fund will bear
directly (shareholder transaction expenses) or indirectly (annual Fund operating
expenses). "Other Expenses" includes such expenses as administration fees,
custodial and transfer agent fees, audit, legal and other business expenses. For
further details, see the Fund's annual report which is available upon request
and without charge by writing or calling the Fund at 1-800-539-3863.
(1) 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 Fund Operating Expenses" as a percentage of average
daily net assets for Key Shares would be 1.65%.
(2) These amounts include an estimate of the shareholder servicing fees the
Fund expects to pay (see "Fund Organization and Fees -- Shareholder
Servicing Plan").
The following example demonstrates the projected dollar amount of total
cumulative expenses that would be incurred over various periods with respect to
the Key Shares of the Fund.
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
------ ------- ------- --------
Balanced Fund .................. $14 $43 $74 $162
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. MOREOVER,
WHILE THE TABLE ASSUMES A 5% ANNUAL RETURN, THE FUND'S ACTUAL
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<PAGE>
PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL RETURN GREATER OR LESS THAN
5%. YOU WOULD PAY THE SAME AMOUNT OF EXPENSES ON THE SAME INVESTMENT ASSUMING NO
REDEMPTION AT THE END OF EACH TIME PERIOD.
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FINANCIAL HIGHLIGHTS
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The following information has been audited by Coopers & Lybrand L.L.P.,
independent accountants, whose unqualified report for the year ended October 31,
1995 is contained in the Fund's Annual Report and should be read in conjunction
with the financial statements and notes thereto. No Key Shares were publicly
issued prior to __________, 1996, and therefore no information on Key Shares is
reflected below. The information set forth below is for a Class A Share of the
Fund outstanding for each period indicated.
<TABLE>
<CAPTION>
THE VICTORY BALANCED FUND
YEAR ENDED DECEMBER 10, 1993
OCTOBER 31, TO
1995 OCTOBER 31, 1994(A)
---- -------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............................... $ 9.62 $ 10.00
-------- --------
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%
</TABLE>
(a) Period from commencement of operations.
(b) Not Annualized.
(c) Annualized.
(d) During the period the investment advisory, administration and/or
shareholder servicing fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as
indicated.
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<PAGE>
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INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The Fund seeks to provide income and long-term growth of capital. This
investment objective of the Fund is fundamental and may not be changed without a
vote of the holders of a majority of the Fund's outstanding voting securities
(as defined in the Statement of Additional Information). There can be no
assurance that the Fund will achieve its investment objective.
In seeking its objective, 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 that are convertible into common stocks)
will be based on such factors as (1) the growth and profitability prospects for
the economic sector and markets in which the company operates, and for the
products or services it provides; (2) the financial condition of the company and
its ability to meet its liabilities; and (3) the price of the security, how that
price compares to historical price levels, to current price levels in the
general market, to prices of competing companies, projected earnings estimates
and earnings growth rate for the company.
It is anticipated that the Fund will invest in "Investment Grade" debt
securities of United States corporations. The Fund expects to dispose of any
debt security that is no longer "Investment Grade," as defined under "Investment
Techniques." 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.
INVESTMENT TECHNIQUES
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 that exceed those
involved in the activities described in this Prospectus.
O SHORT-TERM OBLIGATIONS. 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
- 5 -
<PAGE>
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.
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 also
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
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<PAGE>
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 that 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").
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.
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<PAGE>
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 net 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.
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").
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 Securities and
Exchange Commission (the "Commission"), the Fund may invest in the money market
funds of the Company. Key Advisers or the Sub-Adviser will waive its fee
attributable to the Fund's assets invested in a fund of the Company, 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 ("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
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<PAGE>
distribution. Any resale by the purchaser must be in an exempt transaction.
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 Commercial Paper, thus providing liquidity. The Fund believes that
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 Victory Portfolios Board of Trustees (the "Board of Trustees"
or the "Trustees") is quite liquid. The Fund intends, therefore, to treat the
restricted securities that meet the criteria for liquidity established by the
Trustees, including 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."
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 and options, 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.
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 of
December 10, 1993 to October 31, 1994.
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.
Additional information with respect to the special investment methods described
above and the conditions under which the Fund may utilize them may be found
under "Investment Objectives and Policies" in the Statement of Additional
Information. The Fund is subject to the usual market risks incident to its
investments and consequently there can be no assurance that the objective of the
fund will be attained. In addition, investments in the Fund are not insured
against loss of principal. No single Fund should be considered, by itself, to
provide a complete investment program for any investor.
The investment policies of the Fund set forth above which are not specifically
identified as being fundamental may be changed or altered by the Trustees
without shareholder approval.
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<PAGE>
In order to permit the sale of a Fund's shares in certain states the Company
may, on behalf of a Fund, make commitments to a state or states that are more
restrictive than the investment policies and limitations described in this
Prospectus and in the Statement of Additional Information.
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 limitations 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 does 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.
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 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.
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<PAGE>
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MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------
TRUSTEES AND OFFICERS
The Trustees, in addition to reviewing the actions of the Fund's Adviser,
Administrator and Distributor, as set forth below, decide upon matters of
general policy. The Company's officers conduct and supervise the daily business
operations of the Fund. The names, addresses and business affiliations of the
Trustees and officers of the Company are set forth in the Statement of
Additional Information.
THE 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 Trustees. Key Advisers continually conducts investment
research and supervision for the Fund and is responsible for the purchase and
sale of the Fund's 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 with respect to 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 Board of Trustees believes such fee 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 1, 1996, Society served as investment adviser to the
Fund. During the Fund's fiscal period ended October 31, 1995, Society earned
investment advisory fees aggregating .62% of the average daily net assets of the
Fund.
Under the investment advisory agreement between the Company, 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, 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 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 or
the Sub-Adviser, respectively. Key Advisers and the Sub-Adviser, respectively,
will be as fully responsible 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.
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<PAGE>
The persons primarily responsible for the investment management of the Fund as
well as their previous experience is as follows:
PORTFOLIO MANAGING
MANAGER FUND SINCE PREVIOUS EXPERIENCE
- ------- ---------- -------------------
Denise Coyne January, 1995 Portfolio Manager for Society Asset
Management, Inc., since 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 for
operations 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.
THE ADMINISTRATOR
Concord Holding Corporation serves as Administrator to the Fund. The
Administrator generally assists in all aspects of the Fund's administration and
operation. In this capacity, Concord administers certain of the Fund's
operations subject to the supervision of the Trustees. Pursuant to an
Administration Agreement, in consideration of its administration fee, Concord
performs clerical, accounting and office service functions for the Fund and
provides the Fund with personnel to perform accounting and related services.
Concord also oversees the calculation of net asset value and yield, prepares
reports to and filings with regulatory authorities, services shareholder
accounts and performs such other services as the Fund may from time to time
request. The Administration Agreement provides that in the absence of willful
misfeasance, bad faith or gross negligence on the part of Concord, or of
reckless disregard of its obligations thereunder, Concord shall not be liable
for any action or failure to act in accordance with its duties thereunder.
For expenses incurred and services provided as Administrator pursuant to its
Administration Agreement, Concord 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. See "Expenses and Distribution Plan".
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EXPENSES AND DISTRIBUTION PLAN
- --------------------------------------------------------------------------------
The Fund bears the expenses directly applicable to it and a portion of the
general administrative expenses applicable to all the funds of the Company,
which may be allocated among funds in a manner believed to be fair and equitable
except as set forth under "Management of the Fund" and as set forth below.
Expenses that are directly applicable to the Fund include expenses such as
portfolio transactions, shareholder servicing costs, expenses of registering the
shares under Federal and state securities laws, pricing costs (including the
daily calculation of net asset value), interest, certain taxes, legal and
auditing expenses directly incurred by the Fund, and fees of the Adviser, the
Custodian and Transfer Agent. General expenses which would be allocated include,
but are not limited to, Trustee fees, general corporate legal and auditing
expenses, state franchise taxes, costs of printing proxies, stock certificates,
shareholder reports and prospectuses sent to existing shareholders, trade
association fees, Commission fees, and accounting costs.
Victory Broker-Dealer Services, Inc. serves as independent
underwriter/distributor of the Fund's shares pursuant to a distribution
agreement between the Fund and the Distributor which provides that the
Distributor will use its best
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<PAGE>
efforts to sell shares of the Fund. Under the distribution agreement, the
Distributor may enter into agreements with selected dealers for the distribution
of shares.
Key Advisers agreed that if in any fiscal year the sum of the Fund's expenses
exceeds the limits set by applicable regulations of state securities
commissions, the amounts payable by the Fund to Key Advisers for the advisory
fee for that year shall each be proportionately reduced. For further information
see "Expenses and Distribution Plan" in the Statement of Additional Information.
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DETERMINATION OF NET ASSET VALUE
- --------------------------------------------------------------------------------
The term "net asset value per share," or "NAV", means the value of one share.
The NAV of the 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 New York Stock Exchange
("NYSE"), which is normally 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 is determined by an independent pricing service based primarily upon
information concerning market transactions and dealers quotations for comparable
securities.
The net asset value per share of the Key Shares of the Fund appears daily in The
Wall Street Journal and most major newspapers. The net asset value per share of
the Key Shares of the Fund can be obtained by calling 1-800- 539-3863.
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PURCHASING SHARES
- --------------------------------------------------------------------------------
Shares may be purchased directly or through an Investment Professional.
"Investment Professionals" are securities brokers or other financial
institutions that have entered into selling or servicing agreements with the
Company or the Distributor. Shares are also available to clients of bank trust
departments who have qualified trust accounts. The initial 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.
Shares of the Key Shares class of the Fund are sold at the net asset value per
share (see "Determination of Net Asset Value") next determined after receipt and
acceptance by the Transfer Agent, of an order to purchase shares. When you buy
shares, be sure to specify Key Shares. There are no sales commissions on Key
Shares.
Purchases of shares will be effected only on a Business Day (as defined in
"Determination of Net Asset Value") of the Fund. An order received prior to the
Valuation Time on any Business Day will be executed at the net asset value
determined as of the next Valuation Time on that Business Day. An order received
after the Valuation Time on any Business Day will be executed at the net asset
value determined as of the next Valuation Time on the next
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<PAGE>
Business Day of the Fund. Generally, shares of the Fund begin accruing income
dividends on the day they are purchased. 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.
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.
INVESTING DIRECTLY
BY MAIL:
You may purchase shares by completing and signing an Account Application
(initial purchase only) and mailing it, together with a check (or other
negotiable bank draft or money order) in at least the minimum investment
required to:
The Victory Balanced Fund - Key Shares
[To Come]
Subsequent purchases may be made in the same manner.
BY TELEPHONE OR WIRE:
If an Account Application has been previously received by the Transfer Agent,
you may also purchase shares by wiring funds to: _________________ ABA
#011001234, For Credit to ________________, For Further Credit to Key Shares
Account # insert your account number, name and control number assigned by the
Transfer Agent. The Transfer Agent does not charge a wire fee. PRIOR TO WIRING
ANY FUNDS AND IN ORDER TO ENSURE THAT WIRE ORDERS ARE INVESTED PROMPTLY, YOU
MUST CALL THE TRANSFER AGENT AT 1-800- 539-3863.
INVESTING THROUGH INVESTMENT PROFESSIONALS OR A BANK TRUST DEPARTMENT
Shares may be purchased by investors who designate an Investment Professional or
a bank trust department through procedures established by the Transfer Agent in
connection with requirements of qualified accounts maintained by or on behalf of
certain persons by Investment Professionals and bank trust departments. With
respect to such purchases, it is the responsibility of the Investment
Professional or a bank trust department to transmit purchase orders to the
Transfer Agent and to deliver federal funds for purchase on a timely basis. Your
bank trust department or Investment Professional may charge additional fees.
Contact your trust representative or Investment Professional for complete
information.
The services rendered by your bank trust department, including affiliates of Key
Advisers in the management of its accounts are not duplicative of any of the
services for which Key Advisers is compensated. The additional fees paid by
clients of bank trust departments, their affiliates or an Investment
Professional should be considered in calculating the net yield on an investment
in the Fund, although such charges do not affect the Fund's dividends or
distributions.
ADDITIONAL 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 requirements
still applies. The Fund or the Transfer Agent reserves the right to limit the
number of checks processed at one time. If your check does not clear, your
purchases may be cancelled and you could be
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<PAGE>
liable for any losses and/or fees incurred. Payment for purchase is expected at
the time of the order. If payment is not received within three business days of
the order, the order may be cancelled and you could be held liable for resulting
fees and/or losses. Although the Fund continuously offers its shares for sale,
it reserves the right to reject any purchase request.
You may initiate most transactions by telephone through your Investment
Professional or bank trust department. Subsequent investments by telephone may
be made directly by calling the Transfer Agent toll-free at 1-800-539- 3863.
Note that the Fund and its agents will not be responsible for any losses
resulting from unauthorized transactions if they follow reasonable procedures
designed to verify the identity of the caller. See "Redeeming Shares - By
Telephone." Your Investment Professional or the Transfer Agent may also record
calls and you should verify the accuracy of your confirmation statements
immediately after you receive them.
Each investment in shares of the Fund, including dividends and capital gains
distributions reinvested, is acknowledged by a statement showing the number of
shares purchased, the net asset value at which the shares were purchased, and
the new balance of Key Shares owned. The Fund does not issue certificates for
the Key Shares.
The Distributor, at its expense, may provide cash compensation to dealers in
connection with sales of shares of the Fund. In addition, the Distributor may,
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 Key Funds 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.
- --------------------------------------------------------------------------------
THE SYSTEMATIC INVESTMENT PLAN
- --------------------------------------------------------------------------------
Under the Systematic Investment Plan you may make regular systematic monthly
purchases of the Key Shares of the Fund through automatic deductions from your
bank account(s). Upon obtaining your authorization, the Transfer Agent will
deduct the specified amounts from your designated bank account which amount will
then be automatically invested in shares of the Fund at the net asset value next
determined. Bank accounts will be debited on any day from the 1st through the
28th of each month as selected by the shareholder. You must first meet the
initial investment requirement of $500 and are subject to a minimum subsequent
investment of $25. For officers, trustees, directors and employees, including
retired directors and employees of Key Advisers, Society, KeyCorp and its
affiliates and the Administrator and its affiliates (and family members on each
of the foregoing) (the "Victory Group") who participate in the Systematic
Investment Plan, there is no minimum initial investment required.
To participate in the Systematic Investment Plan, complete the appropriate
section on the Account Application and attach a voided personal check with the
bank's magnetic ink coding number across the front. If the bank account is
jointly owned, all owners must sign. Account Applications can be obtained by
calling the Transfer Agent at 1- 800-539-3863. To change or discontinue existing
Systematic Investment Plan instructions, submit a written request to or call the
Transfer Agent at 1-800-539-3863.
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<PAGE>
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THE SYSTEMATIC WITHDRAWAL PLAN
- --------------------------------------------------------------------------------
The Systematic Withdrawal Plan enables shareholders to make regular monthly,
quarterly, semi-annual or annual redemptions of shares. With your authorization,
the Transfer Agent will automatically redeem shares at the net asset value on
the date of the withdrawal and have the proceeds transferred according to your
written instructions. Fund accounts will be debited on any day from the 1st
through the 28th of each month.
You can have checks sent from your Fund account directly to you, to your bank
checking account or to a third person. If you opt to have checks sent to your
bank checking account, a voided personal check with the bank's magnetic ink
coding number across the front must be attached to the Account Application. If
your account is jointly owned, be sure that all owners sign.
To participate in the Systematic Withdrawal Plan, the required minimum balance
is $5,000 for the Fund. The required minimum withdrawal is $25.
Call 1-800-539-3863 for more information about participation in the Systematic
Withdrawal Plan. Systematic Withdrawal Plan payments are drawn from share
redemptions. If Systematic Withdrawal Plan redemptions exceed income and capital
gain dividend distributions earned on Fund shares, the Fund account may
eventually be exhausted. Purchases of additional shares concurrent with
withdrawals may be disadvantageous to certain shareholders because of tax
liabilities. The Systematic Withdrawal Plan is not necessarily appropriate for
use in conjunction with the Systematic Investment Plan. To change or terminate
Systematic Withdrawal Plan instructions, submit a written request to, or call
the transfer Agent at 1-800-539-3863. The Systematic Withdrawal Plan may be
modified or terminated at any time without notice.
If the amount of the automatic withdrawal exceeds the income accrued for the
period, the principal balance invested will be reduced and shares will be
redeemed.
- --------------------------------------------------------------------------------
REDEEMING SHARES
- --------------------------------------------------------------------------------
Shares may ordinarily be redeemed by mail or telephone. However, all or part of
your shares may be redeemed in accordance with instructions and limitations
pertaining to your account with an Investment Professional. For example, if you
have agreed with an Investment Professional to maintain a minimum balance to
your account with the Investment Professional, and the balance in that account
falls below that minimum, you may be obligated to redeem, or the Investment
Professional may redeem for you and on your behalf, all or part of your shares
to the extent necessary to maintain the required minimum balance.
BY MAIL:
In order to redeem shares by mail send a written request to the Transfer Agent.
The Transfer Agent may require a signature guarantee by an eligible guarantor
institution. A signature guarantee is designed to protect you, the Fund, and the
Fund's agents from fraud. A written redemption request requires a signature
guarantee for redemptions of more than $10,000 worth of shares; if your Fund
account registration has changed within the last 60 days; if the check is not
being mailed to the address on your account; if the check is not being made out
to the account owner; or if the redemption proceeds are being transferred to
another account within the Victory Group or the Key Funds 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
- 16 -
<PAGE>
public. 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 clearing
corporation nor maintains net capital of at least $100,000.
BY TELEPHONE:
You may have the payment of redemption requests wired or mailed directly to a
domestic commercial bank account previously designated on your Account
Application. Such wire redemption requests may be made by telephone to the
Transfer Agent. It is not necessary to confirm telephone redemption requests in
writing. If you did not originally select the telephone redemption privilege,
you must provide written instructions as well as a signature guarantee to the
Transfer Agent to add this feature. Neither the Fund nor its service agents will
be liable for any loss, damages, expense or cost arising out of any telephone
redemption effected in accordance with the Fund telephone redemption procedures
and pursuant to instructions reasonably believed to be genuine. The Fund will
employ procedures designed to provide reasonable assurance that instructions by
telephone are genuine; if these procedures are not followed, the Fund or their
service agents may be liable for any losses due to unauthorized or fraudulent
instructions. These procedures include recording of phone conversations, sending
confirmations to shareholders within 72 hours of the telephone transaction,
verification of account name and account number or tax identification number and
sending redemption proceeds only to the address of record or to a previously
authorized bank account. For telephone redemptions, call the Transfer Agent at
1-800-539-3863. If you are unable to reach the Transfer Agent by telephone (for
example, during time of unusual market activity), consider placing your order by
mail directly to the Transfer Agent.
ADDITIONAL REDEMPTION INFORMATION
Redemption orders are effected at the net asset value per share next determined
after the shares are properly tendered for redemption as described above. The
proceeds paid upon redemption of shares in the Fund may be more or less than the
amount invested. Generally, payment to shareholders for shares redeemed will be
made within three business days after receipt by the Transfer Agent of the
request for redemption.
At various times, the Fund may be requested to redeem shares of the Fund for
which good payment has not yet been received. In such circumstances the Fund may
delay the forwarding of proceeds for 15 days or more without interest to the
shareholder until payment has been collected for the purchase of such shares.
The Fund intends to pay cash for all shares redeemed, but under unusual
circumstances, the Fund may make payment wholly or partly in portfolio
securities at their then-current market value equal to the redemption price. In
such cases, an investor may incur brokerage costs in converting such securities
to cash.
Due to the relatively high cost of handling small investments, the Fund reserves
the right to redeem, at net asset value, shares in your account if, because of
redemptions of shares by you or on your behalf, your account in the Fund has a
value of less than $500 (except with respect to officers, trustees, directors,
and employees, including retired directors and employees of Key Advisers,
Society, the Company, Key Funds, 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.) Before the Fund exercises the right to redeem such shares
and to send the proceeds to you, you will be given notice that the value of the
shares in your account is less than the minimum amount and will be allowed 60
days to make an additional investment in the Fund in an amount which will
increase the value of the account to at least $500, if applicable. IRA and Keogh
accounts are exempt from this mandatory redemption. In some cases involuntary
redemptions may be made to repay the Distributor for losses from the
cancellation of share purchase orders. The Fund reserves the right to reject any
order for the purchase of its shares in whole or in part. See the Statement of
Additional Information for examples of when the Fund may suspend the right of
redemption or redeem shares involuntarily.
The Fund may suspend the right of redemption during any period when (a) trading
on the NYSE is restricted as determined by the Commission or the NYSE is closed,
other than customary weekend and holiday closings, (b) the Commission has by
order permitted such suspension or postponement, or (c) an emergency, as defined
by rules of
- 17 -
<PAGE>
the Commission, exists making disposal of portfolio securities or determination
of the value of assets of the Fund not reasonably practicable. In case of a
suspension of the right of redemption, the shareholder may withdraw his request
for redemption, or he will receive payment of the net asset value next
determined after the suspension has been terminated.
Redemption or transfer requests will not be honored until the Transfer Agent
receives all required documents in proper form. From time to time, in its
discretion may waive certain of the requirements for redemptions stated in this
Prospectus.
Payment for redeemed shares is ordinarily made 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 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.
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 for their clients who are sharehodlers of the
Key Shares if the dealer performs any transaction erroneously.
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.
- --------------------------------------------------------------------------------
EXCHANGING SHARES
- --------------------------------------------------------------------------------
You may exchange shares of the Fund for shares of any of the other Key Funds of
the Victory Group that offer Key Shares, or for shares of any of the Key Funds,
so long as you maintain the requisite minimum account balance applicable to each
fund owned immediately after the exchange. The exchange will be made on the
basis of the relative net asset values of the shares exchanged. An exchange is
considered to be a sale of shares for federal income tax purposes on which you
may realize a capital gain or loss. BEFORE AN EXCHANGE CAN BE EFFECTED, YOU MUST
RECEIVE A CURRENT PROSPECTUS OF THE FUND FOR WHICH THE SHARES ARE EXCHANGED. To
request a prospectus for any fund of the Victory Group that offers Key Shares,
or for shares of any of the Key Funds, call the Transfer Agent at
1-800-539-3863. The exchange privilege may only be exercised in states where the
exchange may legally be made, and the Fund reserves the right to restrict, limit
or terminate the terms of this exchange privilege upon sixty days' written
notice to shareholders.
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 Key
Shares of this Fund only for Key Shares of another fund. At present, not all of
the funds offer the same 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 1-1-800-539-3863. Before exchanging,
obtain and read the prospectus for the fund you wish to purchase by exchange.
Please refer to the Statement of Additional Information for more details about
this policy.
See "Redeeming Shares -- By Telephone" for a discussion of certain limitations
on the liability of the Fund and the Transfer Agent in connection with
unauthorized telephone transactions.
- 18 -
<PAGE>
- --------------------------------------------------------------------------------
INVESTING FOR RETIREMENT
- --------------------------------------------------------------------------------
You may wish to invest in the Fund in connection with Individual Retirement
Accounts (IRAs) and other retirement plans such as Simple Employee Pension Plans
(SEP/IRA), Salary Reduction Simplified Employee Pensions Plans (SAR-SEP/IRA,
401(k) Plans, and 403(b) Plans. For more information about investing in the Fund
through taxfavored accounts, call 1-800-539-3863.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
- --------------------------------------------------------------------------------
The Fund distributes to shareholders substantially all of its net investment
income and any net realized taxable capital gains resulting from sales of
portfolio securities.
The Fund ordinarily declares and pays dividends separately for the Key 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.
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 Key Shares of the Fund. Income
and capital gain dividends will be reinvested at the net asset value of
your class of shares of the Fund as of the day after the record date. If
you do not indicate a choice on your Account 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 Key Shares of the Fund
at the NAV as of the day after the record date, 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 or Key Funds. Shares will be purchased at
the NAV as of the day after the record date. If you are reinvesting
dividends of Key Shares in shares of a fund sold with a sales charge, the
shares will be purchased at the public offering price, which reflects the
imposition of the sales charge. 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.
- 19 -
<PAGE>
Any election or revocation of any of the above dividend distribution options may
be made in writing to the Fund and sent to _____________________________________
____________________________________________, or by calling the Transfer Agent
at 1-800-539-3863, and will become effective with respect to dividends having
record dates after receipt of the Account Application or request by the Transfer
Agent.
Reinvested dividend distributions receive the same tax treatment as dividend
distributions paid in cash. Shareholders are advised as to the source of each
distribution. A notice of each dividend or distribution reinvestment transaction
will be mailed to the shareholder by the Transfer Agent.
- --------------------------------------------------------------------------------
FEDERAL INCOME 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 "IRS 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 IRS 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 the 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
gain, 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 gain dividend on those
shares.
Distributions to shareholders of the Fund 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.
"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 Fund with a certified Social Security or taxpayer
identification number when you sign your Account Application, or if you violate
Internal Revenue Service regulations on tax reporting of dividends.
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 of the shareholder's jurisdiction. INVESTORS CONSIDERING AN INVESTMENT IN
THE FUND SHOULD CONSULT THEIR TAX ADVISERS TO DETERMINE WHETHER THE FUND IS
SUITABLE TO THEIR PARTICULAR TAX SITUATION.
- 20 -
<PAGE>
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
requires the Fund to withhold 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.
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.
Investors may also judge, and the Fund 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.
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
Group and the Key Funds is included in their respective annual and semi-annual
reports, which are available free of charge by calling 1-800-539-3863.
- --------------------------------------------------------------------------------
DESCRIPTION OF SHARES AND FUND ORGANIZATION
- --------------------------------------------------------------------------------
The Company is an open-end management investment company, commonly known as a
mutual fund, and currently consisting of twenty-eight series portfolios. The
Company has been operating continuously since 1986, although certain of its
funds have a prior operating history from their predecessor funds. The Company's
offices are located at 3435 Stelzer Road, Columbus, Ohio 43219-3035.
Overall responsibility for management of the Company rests with its Board of
Trustees, who are elected by the shareholders of the Company.
- 21 -
<PAGE>
The Company 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 Company 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 Company 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
Company's Trust Instrument. Under certain circumstances, the Trustees may be
removed by action of the Trustees or by the shareholders. Shareholders holding
10% or more of the Company's outstanding shares may call a special meeting of
shareholders for the purpose of voting upon the question of removal of Trustees.
The Company's Board of Trustees may authorize the Company to offer other funds
which may differ in the types of securities in which their assets may be
invested.
On February 29, 1996, the Company converted 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 Company. In
light of Delaware law, the nature of the Company's business, and the nature of
its assets, management 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 Company's
obligations, the Company will be required to use its property to protect or
compensate the shareholder. On request, the Company will defend any claim made
and pay any judgment against a shareholder for any act or obligation of the
Company. Therefore, financial loss resulting from liability as a shareholder
will occur only if the Company itself cannot meet its obligations to indemnify
shareholders and pay judgments against them.
Delaware law authorizes electronic or telephone communications between
shareholders and the Company. Under Delaware law, the Company will have the
flexibility to respond to future business contingencies. For example, the
Trustees will have the power to incorporate the Company, to merge or consolidate
it with another entity, to cause each fund to become a separate trust, and to
change the Company's domicile without a shareholder vote. This flexibility could
help reduce the expense and frequency of future shareholder meetings for
non-investment related issues.
- --------------------------------------------------------------------------------
CUSTODIAN, TRANSFER AGENT AND OTHER SERVICE PROVIDERS
- --------------------------------------------------------------------------------
Key Trust Company of Ohio, N.A., 127 Public Square, Cleveland, Ohio 44114, is
the Custodian for the Fund's cash and securities and is Transfer Agent and
Dividend Disbursing Agent for the shares of the Key Funds. Key Trust Company of
Ohio, N.A., does not assist in any way, and is not responsible for, investment
decisions involving assets of the Key Funds. Key Trust Company of Ohio, N.A., is
a subsidiary of KeyCorp and an affiliate of the Adviser and receives
compensation from the Fund for the services it performs as custodian.
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.
Coopers & Lybrand L.L.P. serves as independent accountants to the Fund.
- 22 -
<PAGE>
- --------------------------------------------------------------------------------
SHAREHOLDER REPORTS
- --------------------------------------------------------------------------------
The Fund will prepare and send to shareholders semi-annual unaudited and annual
audited reports ("Reports") which will include a list of investment securities
held by the Fund. In addition, shareholders of the Fund will receive, monthly, a
cumulative account statement for the calendar year.
The Company may include information in its 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 Company. Such information is provided to inform
shareholders of the activities of the Company for the most recent fiscal year or
semi-annual period and to provide the views of Key Advisers, the Sub-Adviser
and/or the Company's officers regarding expected trends and strategies.
The Fund intends to eliminate duplicate mailings of 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
Reports at no cost by writing to the Fund at the address listed below or by
calling 800-539-3863.
Shareholder inquiries should be addressed to the Key Funds at __________________
_________________. Shareholders may also call the Fund at 1-800-539-3863.
- --------------------------------------------------------------------------------
MISCELLANEOUS INFORMATION
- --------------------------------------------------------------------------------
EFFECT OF BANKING LAWS
The Glass-Steagall Act and other banking laws and regulations presently prohibit
a bank holding company registered under the Bank Holding Company Act of 1956 or
any affiliate thereof from sponsoring, organizing or controlling a registered,
open-end investment company continuously engaged in the issuance of its shares,
and from issuing, underwriting, selling or distributing securities in general.
Such laws and regulations do not prohibit such a holding company or affiliate
from acting as investment adviser, transfer agent, custodian or shareholder
servicing agent to such an investment company or from purchasing shares of such
a company as agent for and upon the order of their customers, nor should they
prevent Key Advisers, the Sub-Adviser or the Fund from compensating third
parties for performing such functions. Key Advisers, the Sub-Adviser and their
affiliates are subject to such banking laws and regulations.
Key Advisers and the Sub-Adviser believe that they may perform the investment
advisory services for the Fund contemplated by the Investment Advisory Agreement
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.
- 23 -
<PAGE>
SHAREHOLDER SERVICING PLAN
The Victory Portfolios has adopted a Shareholder Servicing Plan for the Key
Shares 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.
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 Company's 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.
CODE OF ETHICS
Key Advisers, the Sub-Adviser and the Company have each adopted a Code of Ethics
(the "Code") which require 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 Codes also prohibit 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 their Codes and any substantial violations of
the Codes). Violations of the Codes may result in censure, monetary penalties,
suspension or termination of employment.
OTHER CLASSES OF SHARES. As of the date of this Prospectus, the Fund offers
additional classes of shares through a separate prospectus. Such additional
classes have different sales charges and other expenses, which affect investment
performance. Further information may be obtained by contacting your Investment
Professional or by calling 1-800-539-3863.
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.
- 24 -
<PAGE>
INVESTMENT ADVISER & SUB-ADVISER
KeyCorp Mutual Fund Advisers, Inc. (Investment Adviser)
Society Asset Management, Inc. (Investment Sub-Adviser)
127 Public Square
Cleveland, Ohio 44114-1306
ADMINISTRATOR
Concord Holding Corporation
3435 Stelzer Road
Columbus, Ohio 43219
COUNSEL
Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
919 Third Avenue
New York, New York 10022
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
100 East Broad Street
Columbus, Ohio 43215
CUSTODIAN
Key Trust Company of Ohio, N.A.
127 Public Square
Cleveland, Ohio 44114
TRANSFER AGENT
[To Come]
DISTRIBUTOR
Victory Broker-Dealer Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43219
The Date of this Prospectus is _____, 1996
- 25 -
<PAGE>
PART B
<PAGE>
Registration Statement
of
THE VICTORY PORTFOLIOS
on
Form N-1A
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Included in Part A:
-- Condensed Financial Information.
Included in Part B:
-- For the Balanced Fund an audited financial report dated October
31, 1995 is incorporated by reference in Part B and was filed as an
Exhibit to Post-Effective Amendment No. 25 on December 28, 1995.
(b) Exhibits:
99.B(1) (a) Delaware Trust Instrument dated December 6, 1995 is
incorporated herein by reference to as Exhibit 99B.1(a) to
Post-Effective Amendment No. 26 to the Registrant's
Registration Statement on Form N-1A filed on December 28,
1995.
99.B(2) By-Laws adopted December 6, 1995 are incorporated herein by
reference to Exhibit 99.B2 to Post-Effective Amendment No. 26 to
the Registrant's Registration Statement on Form N-1A filed on
December 28, 1995.
99.B(3) None.
99.B(4) None.
99.B(5) (a) Investment Advisory Agreement dated as of January 1, 1996,
between the Registrant and KeyCorp Mutual Fund Advisers,
Inc. is incorporated herein by reference to Exhibit 99.B5(a)
to Post-Effective Amendment No. 27 to the Registrant's
Registration Statement on Form N-1A filed on January 31,
1996.
(b) Investment Sub-Advisory Agreement between KeyCorp Mutual
Fund Advisers, Inc. and Society Asset Management, Inc. dated
as of January 1, 1996, is incorporated herein by reference
to Exhibit 99.B5(b) to Post-Effective
<PAGE>
Amendment No. 27 to the Registrant's Registration Statement
on Form N-1A filed on January 31, 1996.
(c) Investment Sub-Advisory Agreement between KeyCorp Mutual
Fund Advisers, Inc. and T. Rowe Price Associates Inc. dated
as of January 1, 1996, regarding the Special Growth Fund is
incorporated herein by reference to Exhibit 99.B5(c) to
Post-Effective Amendment No. 27 to the Registrant's
Registration Statement on Form N-1A filed on January 31,
1996.
(d) Investment Sub-Advisory Agreement between KeyCorp Mutual
Fund Advisers, Inc. and First Albany Asset Management
Corporation dated as of January 1, 1996, regarding the Fund
for Income is incorporated herein by reference to Exhibit
99.B5(d) to Post-Effective Amendment No. 27 to the
Registrant's Registration Statement on Form N-1A filed on
January 31, 1996.
99.B(6) (a) Distribution Agreement between the Registrant and Victory
Broker-Dealer Services, Inc. dated March 31, 1995 with an
amended Schedule A dated February 1, 1996 is incorporated
herein by reference to Exhibit 99.B6(a) to Post-Effective
Amendment No. 27 to the Registrant's Registration Statement
on Form N-1A filed on January 31, 1996.
(b) Form of Broker-Dealer Agreement is incorporated herein by
reference to Exhibit 99.B6(b) to Post-Effective Amendment
No. 27 to the Registrant's Registration Statement on Form
N-1A filed on January 31, 1996.
99.B(7) None.
99.B(8) (a) Amended and Restated Mutual Fund Custody Agreement dated May
24, 1995 by and between the Registrant and Key Trust Custody
of Ohio, N.A. is incorporated herein by reference to Exhibit
8(a) to Post-Effective Amendment No. 22 to the Registrant's
Registration Statement on Form N-1A filed on August 28,
1995.
(b) Institutional Custody and Clearance Agreement dated October
30, 1995 by and between The Bank of New York and Key
Services Corporation is incorporated herein by reference to
Exhibit 99.B8(b) to Post-Effective Amendment No. 27 to the
Registrant's Registration Statement on Form N-1A filed on
January 31, 1996.
99.B(9) (a) Administration Agreement dated June 5, 1995 between the
Registrant and Concord Holding Corporation is incorporated
herein by reference to Exhibit 9(a) to Post-Effective
Amendment No. 22 to the Registrant's Registration Statement
on Form N-1A filed on August 28, 1995.
(b) Transfer Agency and Dividend Disbursing Agreement dated
September 6, 1994 as amended June 5, 1995, between the
Registrant and Primary Funds Service
C-2
<PAGE>
Corporation is incorporated herein by reference to Exhibit
9(b) to Post-Effective Amendment No. 22 to the Registrant's
Registration Statement on Form N-1A filed on August 28,
1995.
(c) Fund Accounting Agreement dated May 31, 1995 between the
Registrant and BISYS Fund Services Ohio, Inc., and Schedule
A thereto, are incorporated herein by reference to Exhibit
9(d) to Post-Effective Amendment No. 22 to the Registrant's
Registration Statement on Form N-1A filed on August 28,
1995.
(d) Shareholder Servicing Plan dated June 5, 1995 with an
amended Schedule I dated February 1, 1996 is incorporated
herein by reference to Exhibit 99.B8(d) to Post-Effective
Amendment No. 27 to the Registrant's Registration Statement
on Form N-1A filed on January 31, 1996.
(e) Form of Shareholder Servicing Agreement is incorporated
herein by reference to Exhibit 99.B8(e) to Post-Effective
Amendment No. 26 to the Registrant's Registration Statement
on Form N-1A filed on December 28, 1995.
99.B(10) (a) Opinion of Counsel was filed with Registrant's Rule 24f-2
Notice in respect of the period ending October 31, 1995,
submitted on December 28, 1995.
99.B(11) (a) Consent of Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
is filed herewith as Exhibit 99.B11(a).
(b) Consent of Coopers & Lybrand L.L.P. is filed herewith as
Exhibit 99.B11(b).
99.B(12) Audited financial report for the period ended October 31, 1995 is
incorporated herein by reference to Exhibit 99.B12 to
Post-Effective Amendment No. 25 to the Registrant's Registration
Statement on Form N-1A filed on December 28, 1995.
99.B(13) (a) Purchase Agreement dated November 12, 1986 between
Registrant and Physicians Insurance Company of Ohio is
incorporated herein by reference to Exhibit 13 to
Pre-Effective Amendment No. 1 to the Registrant's
Registration Statement on Form N-1A filed on November 13,
1986.
(b) Purchase Agreement dated October 15, 1989 is incorporated
herein by reference to Exhibit 13(b) to Post-Effective
Amendment No. 7 to the Registrant's Registration Statement
on Form N-1A filed on December 1, 1989.
(c) Purchase Agreement is incorporated herein by reference to
Exhibit 13(c) to Post-Effective Amendment No. 7 to the
Registrant's Registration Statement on Form N-1A filed on
December 1, 1989.
99.B(14) None.
C-3
<PAGE>
99.B(15) (a) Distribution and Service Plan dated June 5, 1995 for The
Victory Portfolios Class A Shares of Government Bond Fund,
National Municipal Bond Fund, New York Tax-Free Fund, Fund
for Income, Financial Reserves Fund, Institutional Money
Market Fund and Ohio Municipal Money Market Fund is
incorporated by reference to Exhibit 15(a) to Post-Effective
Amendment No. 22 to the Registrant's Registration Statement
on Form N-1A filed on August 28, 1995.
(b) Distribution Plan dated June 5, 1995 for Class B Shares of
National Municipal Bond Fund, Government Bond Fund and New
York Tax-Free Fund and adopted December 6, 1995 for Class B
Shares of Balanced Fund, Diversified Stock Fund,
International Growth Fund, Ohio Regional Stock Fund, Special
Value Fund, Institutional Money Market Fund and U.S.
Government Obligations Fund is incorporated by reference to
Exhibit 99.B15(b) to Post-Effective Amendment No. 22 to the
Registrant's Registration Statement on Form N-1A filed on
August 28, 1995, and the updated schedule thereto dated
December 6, 1995 is incorporated by reference to Exhibit
99B(b) to Post-Effective Amendment No. 27 to the
Registrant's Registration Statement on Form N-1A filed on
January 31, 1996.
99.B(16) (a) Forms of computation of performance quotation are
incorporated herein by reference to Exhibit 16 to
Post-Effective Amendment No. 19 to the Registrant's
Registration Statement on Form N-1A filed on December 23,
1994.
99.B(17) Financial Data Schedule is incorporated herein by reference to
Exhibit 99.B(17) to Post-Effective Amendment No. 27 to the
Registration Statement on Form N-1A filed on January 31, 1996.
99.B(18) (a) Rule 18f-3 Multi-Class Plan adopted effective June 5, 1995
is incorporated by reference to Exhibit 17 to Post-Effective
Amendment No. 22 to the Registrant's Registration Statement
on Form N-1A filed on August 28, 1995.
(b) Amended and Restated Rule 18f-3 Multi-Class Plan effective
as of December 6, 1995 is incorporated herein by reference
to Exhibit 99.B18(b) to Post-Effective Amendment No. 26 to
the Registrant's Registration Statement on Form N-1A filed
on December 28, 1995.
(c) Amended and Restated Rule 18f-3 Multi-Class Plan effective
as of February 14, 1996 is incorporated herein by reference
to Exhibit 99.B18(c) to Post-Effective Amendment No. 28 to
the Registrant's Registration Statement on Form N-1A filed
February 28, 1996.
99.B(19) (a) Power of Attorney of Leigh A. Wilson is incorporated herein
by reference to Exhibit 99.B P of A to Post-Effective
Amendment No. 27 to Registrant's Registration Statement on
Form N-1A and Powers of Attorney of Robert G. Brown, Edward
P. Campbell, Harry Gazelle, Stanley I. Landgraf, Thomas F.
C-4
<PAGE>
Morrissey and H. Patrick Swygert are incorporated herein by
reference to Exhibit 99.B P of A to Post-Effective Amendment
No. 26 to the Registrant's Registration Statement on Form
N-1A filed on January 31, 1996 and December 28, 1995,
respectively.
Item 25. Persons Controlled by or under Common Control with Registrant.
None.
Item 26. Number of Holders of Securities.
As of February 27, 1996 the number of record holders of each Fund of
the Registrant were as follows:
Number of
Title of Fund Record Holders
------------- --------------
U.S. Government Obligations Fund
Investor Class Shares 163
Select Class Shares 0
Prime Obligations Fund 869
Tax Free Money Market Fund 80
Balanced Fund
Class A Shares 1,533
Class B Shares 0
Stock Index Fund 70
Value Fund 81
Diversified Stock Fund
Class A Shares 4,898
Class B Shares 0
Growth Fund 311
Special Value Fund
Class A Shares 766
Class B Shares 0
Special Growth Fund 97
C-5
<PAGE>
Ohio Regional Stock Fund
Class A Shares 1,017
Class B Shares 0
International Growth Fund
Class A Shares 1,131
Class B Shares 0
Limited Term Income Fund 170
Government Mortgage Fund 288
Ohio Municipal Bond Fund 248
Intermediate Income Fund 50
Investment Quality Bond Fund 123
Florida Tax-Free Bond Fund 0
Municipal Bond Fund 0
Convertible Securities Fund 0
Short-Term U.S. Government 0
Income Fund 0
Financial Reserves Fund 163
Fund For Income 1,652
Government Bond Fund
Class A Shares 176
Class B Shares 72
Institutional Money Market Fund
Investor Class Shares 14
Select Class Shares 15
National Municipal Bond Fund
Class A Shares 735
Class B Shares 22
C-6
<PAGE>
New York Tax-Free Fund
Class A Shares 621
Class B Shares 94
Ohio Municipal Money Market Fund 103
Item 27. Indemnification
Article X, Section 10.02 of the Registrant's Delaware Trust
Instrument, incorporated herein as Exhibit 99.B1(a) hereto, provides
for the indemnification of Registrant's Trustees and officers, as
follows:
"Section 10.02 Indemnification.
(a) Subject to the exceptions and limitations contained in Subsection
10.02(b):
(i) every person who is, or has been, a Trustee or officer
of the Trust (hereinafter referred to as a "Covered Person") shall be
indemnified by the Trust to the fullest extent permitted by law
against liability and against all expenses reasonably incurred or paid
by him in connection with any claim, action, suit or proceeding in
which he becomes involved as a party or otherwise by virtue of his
being or having been a Trustee or officer and against amounts paid or
incurred by him in the settlement thereof;
(ii) the words "claim," "action," "suit," or "proceeding"
shall apply to all claims, actions, suits or proceedings (civil,
criminal or other, including appeals), actual or threatened while in
office or thereafter, and the words "liability" and "expenses" shall
include, without limitation, attorneys' fees, costs, judgments,
amounts paid in settlement, fines, penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Covered
Person:
(i) who shall have been adjudicated by a court or body
before which the proceeding was brought (A) to be liable to the Trust
or its Shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct
of his office or (B) not to have acted in good faith in the reasonable
belief that his action was in the best interest of the Trust; or
(ii) in the event of a settlement, unless there has been a
determination that such Trustee or officer did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office, (A) by the court or
other body approving the settlement; (B) by at least a majority of
those Trustees who are neither Interested Persons of the Trust nor are
parties to the matter based upon a review of readily available facts
(as opposed to a full trial-type inquiry); or (C) by written opinion
of independent legal counsel based upon a review of readily available
facts (as opposed to a full trial-type inquiry).
C-7
<PAGE>
(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall
not be exclusive of or affect any other rights to which any Covered
Person may now or hereafter be entitled, shall continue as to a person
who has ceased to be a Covered Person and shall inure to the benefit
of the heirs, executors and administrators of such a person. Nothing
contained herein shall affect any rights to indemnification to which
Trust personnel, other than Covered Persons, and other persons may be
entitled by contract or otherwise under law.
(d) Expenses in connection with the preparation and presentation of a
defense to any claim, action, suit or proceeding of the character
described in Subsection (a) of this Section 10.02 may be paid by the
Trust or Series from time to time prior to final disposition thereof
upon receipt of an undertaking by or on behalf of such Covered Person
that such amount will be paid over by him to the Trust or Series if it
is ultimately determined that he is not entitled to indemnification
under this Section 10.02; provided, however, that either (i) such
Covered Person shall have provided appropriate security for such
undertaking, (ii) the Trust is insured against losses arising out of
any such advance payments or (iii) either a majority of the Trustees
who are neither Interested Persons of the Trust nor parties to the
matter, or independent legal counsel in a written opinion, shall have
determined, based upon a review of readily available facts (as opposed
to a trial-type inquiry or full investigation), that there is reason
to believe that such Covered Person will be found entitled to
indemnification under this Section 10.02."
Indemnification of the Fund's principal underwriter, custodian, fund
accountant, and transfer agent is provided for, respectively, in
Section V of the Distribution Agreement incorporated by reference as
Exhibit 6(a) hereto, Section 28 of the Custody Agreement incorporated
by reference as Exhibit 8(a) hereto, Section 5 of the Fund Accounting
Agreement incorporated by reference as Exhibit 9(c) hereto, and
Section 7 of the Transfer Agency Agreement incorporated by reference
as Exhibit 9(b) hereto. Registrant has obtained from a major insurance
carrier a trustees' and officers' liability policy covering certain
types of errors and omissions. In no event will Registrant indemnify
any of its trustees, officers, employees or agents against any
liability to which such person would otherwise be subject by reason of
his willful misfeasance, bad faith, or gross negligence in the
performance of his duties, or by reason of his reckless disregard of
the duties involved in the conduct of his office or under his
agreement with Registrant. Registrant will comply with Rule 484 under
the Securities Act of 1933 and Release 11330 under the Investment
Company Act of 1940 in connection with any indemnification.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to trustees, officers, and controlling
persons or Registrant pursuant to the foregoing provisions, or
otherwise, Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Investment Company Act of 1940, as
amended, and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment
by Registrant of expenses incurred or paid by a trustee, officer, or
controlling person of Registrant in the successful defense of any
action, suit, or proceeding) is asserted by such trustee, officer, or
controlling person in connection with the securities
C-8
<PAGE>
being registered, Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
KeyCorp Mutual Fund Advisers, Inc. ("Key Advisers") is the investment
adviser to each fund of the Victory Portfolios. Key Advisers is a
wholly-owned indirect subsidiary of KeyCorp, a bank holding company
which had total assets of approximately $68 billion as of September
30, 1995. KeyCorp is a leading financial institution doing business in
26 states from Maine to Alaska, providing a full array of trust,
commercial, and retail banking services. Its non-bank subsidiaries
include investment advisory, securities brokerage, insurance, bank
credit card processing, mortgage and leasing companies. Society Asset
Management, Inc. ("Society"), an affiliate of Key Advisers, is the
sub-adviser of each of the funds (other than Special Growth Fund and
Fund for Income). Key Advisers, Society and their affiliates have over
$66 billion in assets under management, and provide a full range of
investment management services to personal and corporate clients.
T. Rowe Price Associates, Inc. ("T. Rowe Price"), sub-adviser of the
Special Growth Fund, maintains its principal office at 100 East Pratt
Street, Baltimore, Maryland 21202. T. Rowe Price was founded in 1937
by the late Thomas Rowe Price, Jr. As of December 31, 1995, the firm
and its affiliates managed over $70 billion for over 2.5 million
individual and institutional investor accounts.
First Albany Asset Management Corporation ("First Albany"),
sub-adviser of the Fund for Income, 41 State Street, Albany, New York
12207, was incorporated on July 3, 1991, as a newly formed subsidiary
of First Albany Companies, Inc. It utilizes the expertise of an
experienced staff of research personnel employed by its affiliate,
First Albany Corporation.
To the knowledge of Registrant, none of the directors or officers of
Key Advisers, Society, T. Rowe Price, or First Albany, except those
set forth below, is or has been at any time during the past two
calendar years engaged in any other business, profession, vocation or
employment of a substantial nature, except that certain directors and
officers of Key Advisers and Society also hold positions with KeyCorp
or its subsidiaries.
The principal executive officers and directors of Key Advisers are as
follows:
W. Christopher Maxwell, Director, Chairman and Chief Executive
Officer. Also Executive Vice President of KeyCorp Management Company
("KMC").
Kathleen A. Dennis, Director and President. Also Senior Vice President
of KMC.
C-9
<PAGE>
Martin J. Walker, Director. Also Chairman, President and Chief
Executive Officer of Society and Executive Vice President of KeyCorp.
James W. Wert, Director. Also Senior Executive Vice President and
Chief Investment Officer of KeyCorp.
William G. Spears, Director. Also Chairman, Chief Executive Officer
and Managing Director of Spears, Benzak, Salomon and Farrell, Inc.
("SBSF")
Linda A. Grandstaff, Director. Also Executive Vice President,
Commercial and International Services Group of KeyCorp.
Richard B. Ainsworth, Jr., Director. Also Executive Vice President of
Key Trust Company of Ohio, National Association.
Robert G. Jones, Director. Also Executive Vice President, Community
Banking, of KeyCorp.
Jack L. Kopnisky, Director. Also President, Key Investments, Inc.
John M. Keane, Vice President and Treasurer. Also Vice President, KMC.
Ann Kowal Smith, Secretary. Also Vice President and Senior Counsel of
KMC.
Charles G. Crane, Senior Vice President and Senior Managing Director.
Also Senior Vice President and Managing Director of SBSF.
Dennis M. Grapo, Senior Vice President and Senior Managing Director.
Also Senior Vice President and Senior Managing Director of Society.
Frank J. Riccardi, Senior Vice President and Senior Managing Director.
Also Senior Vice President and Senior Managing Director of Society.
Anthony Aveni, Senior Vice President and Senior Managing Director.
Also Senior Vice President and Senior Managing Director of Society.
The business address of each of the foregoing individuals is 127
Public Square, Cleveland, Ohio 44114.
The principal executive officers and directors of Society are as
follows:
Directors:
Martin J. Walker, also Chairman, President and Chief Executive Officer
of Society and Executive Vice President of KeyCorp.
C-10
<PAGE>
James W. Wert, also Senior Executive Vice President and Chief
Investment Officer of KeyCorp.
Richard B. Ainsworth, Jr., also Executive Vice President of Key Trust
Company of Ohio, National Association.
Dennis M. Grapo, also Senior Vice President and Senior Managing
Director of Society.
Frank J. Riccardi, also Senior Vice President and Senior Managing
Director of Society.
Kenneth W. Ostrowski, also Senior Vice President and Senior Managing
Director of Society.
Anthony Aveni, also Senior Vice President and Senior Managing Director
of Society.
James S. Bingay, also Executive Vice President of KeyCorp.
John E. Kohl, also Executive Vice President of KMC.
Other Officers:
James D. Kacic, Vice President and Treasurer of Society.
The business address of each of the foregoing individuals is 127
Public Square, Cleveland, Ohio 44114.
The following persons are directors of First Albany:
Hugh A. Johnson, Jr. is President and Chairman of the Board of
Directors of First Albany. Mr. Johnson is also Senior Vice President,
Chief Investment Officer and a Director of First Albany Corporation.
Mr. Johnson is also Senior Vice President and a Director of First
Albany Companies, Inc.
George C. McNamee is Chairman of the Board of Directors of First
Albany Corporation and of First Albany Companies, Inc.
Alan P. Goldberg is President and a director of First Albany
Corporation and of First Albany Companies, Inc.
In addition to Mr. Johnson, the following persons are executive
officers of First Albany:
Robert T. Hennes, Jr., is Executive Vice President and Secretary of
First Albany. Mr. Hennes was previously Chairman of Dollar Dry Dock
Investment Management Corporation
C-11
<PAGE>
and President of Investors Preference New York Tax Free Fund, Inc. and
Investors Preference Fund for Income, Inc.
Thomas J. Curran is a Managing Director of First Albany and a Senior
Vice President of First Albany Corporation.
Paul V. Ireland is a Managing Director of First Albany and a Vice
President of First Albany Corporation.
C. Lee Liscom is a Managing Director of First Albany and a Vice
President of First Albany Corporation. Mr. Liscom was previously an
Executive Vice President of Key Trust Corporation.
David J. Cunningham is Treasurer of First Albany and a Senior Vice
President and Chief Financial Officer of First Albany Corporation and
of First Albany Companies, Inc.
The address of each of the above individuals is 41 State Street,
Albany, New York 12207, at which First Albany maintains its offices.
Listed below are the Directors of T. Rowe Price who have other
substantial businesses, professions, vocations, or employment aside from that of
Director of T. Rowe Price:
James E. Halbkat, Jr., President of U.S. Monitor Corporation, a
provider of public response systems. Mr. Halbkat's address is P.O. Box
23109, Hilton Head Island, South Carolina 29925.
John W. Rosenblum, Tayloe Murphy Professor at the University of
Virginia, and a Director of: Chesapeake Corporation, a manufacturer of
paper products, Camdus Communications Corp., a provider of printing
and communication services, Comdial Corporation, a manufacturer of
telephone systems for businesses, and Cone Mills Corporation, a
textiles producer. Mr. Rosenblum's address is P.O. Box 6550,
Charlottesville, Virginia 22906.
Robert L. Strickland, Chairman of Loew's Companies, Inc., a retailer
of specialty home supplies, and a Director of Hannaford Bros. Co., a
food retailer. Mr. Strickland's address is 604 Two Piedmont Plaza
Building, Winston-Salem, North Carolina 27104.
Philip C. Walsh, Consultant to Cyprus Amax Minerals Company,
Englewood, Colorado, and a Director of Piedmont Mining Company, Inc.,
Charlotte, North Carolina. Mr. Walsh's address is 200 East 66th
Street, Apt. A-1005, New York, New York 10021.
With the exception of Messrs. Halbkat, Rosenblum, Strickland, and
Walsh (listed above), all Directors of T. Rowe Price are employees of T. Rowe
Price. Listed below are the additional Directors and the principal executive
officer of T. Rowe Price:
C-12
<PAGE>
James S. Riepe, Thomas H. Broadus, Carter O. Hoffman, George A. Roche,
M. David Testa and Henry H. Hopkins - Directors of T. Rowe Price.
George J. Collins, Chief Executive Officer and President of T. Rowe
Price.
The address of each of the above individuals is 100 East Pratt Street,
Baltimore, Maryland 21202.
Item 29. Principal Underwriter
(a) Victory Broker-Dealer Services, Inc. acts as distributor for the
Registrant and Concord Holding Corporation serves as administrator for
the Registrant.
(b) Directors, officers and partners of Victory Broker-Dealer Services,
Inc. as of December 31, 1995 were as follows:
<TABLE>
<CAPTION>
Name and Principal Positions and Officers with Positions and Offices
Business Addresses Victory Broker-Dealer Services, Inc. with the Registrant
- ------------------ ------------------------------------ -------------------
<S> <C> <C>
Lynn J. Mangum Chairman None
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43215
Richard E. Stierwalt President/CEO None
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43215
Robert J. McMullan Executive Vice President None
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43215
William B. Blundin Vice President Vice President
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43215
</TABLE>
C-13
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Positions and Officers with Positions and Offices
Business Addresses Victory Broker-Dealer Services, Inc. with the Registrant
- ------------------ ------------------------------------ -------------------
<S> <C> <C>
Dennis Sheehan Vice President None
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43215
Catherine T. Dwyer Vice President/Secretary None
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43215
Michael D. Burns Vice President-Compliance None
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43215
Annamaria Porcaro Assistant Secretary None
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43215
Robert Tuch Assistant Secretary None
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43215
Stephen Mintos Executive Vice President/ None
BISYS Fund Services, Inc. COO
3435 Stelzer Road
Columbus, Ohio 43215
George O. Martinez Senior Vice President Senior Vice President
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43215
</TABLE>
C-14
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Positions and Officers with Positions and Offices
Business Addresses Victory Broker-Dealer Services, Inc. with the Registrant
- ------------------ ------------------------------------ -------------------
<S> <C> <C>
Dale Smith Vice President/CFO None
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43215
Sean Kelly First Vice President None
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43215
</TABLE>
Item 30. Location of Accounts and Records
(1) KeyCorp Mutual Fund Advisers, Inc., 127 Public Square, Cleveland, Ohio
44114-1306 (records relating to its functions as investment adviser).
(2) Society Asset Management, Inc., 127 Public Square, Cleveland, Ohio
44114-1306 (records relating to its functions as investment
sub-adviser).
(3) Society National Bank, 127 Public Square, Cleveland, Ohio 44114-1306
(records relating to its functions as shareholder servicing agent).
(4) T. Rowe Price Associates, Inc., 100 East Pratt Street, Baltimore,
Maryland 21202 and First Albany Asset Management Corporation, 41 State
Street, Albany, New York 12207 (records relating to its functions as
investment sub-adviser).
(5) Concord Holding Corporation, 3435 Stelzer Road, Columbus, Ohio 43219
(records relating to its functions as administrator).
(6) Primary Funds Service Corporation, 859 Williard Street, Quincy,
Massachusetts, 02269- 9110 (records relating to its functions as
transfer agent).
(7) Key Trust Company of Ohio, N.A., 127 Public Square, Cleveland, Ohio
44114-1306 (records relating to its functions as custodian and
shareholder servicing agent).
(8) The Bank of New York, 90 Washington Street, New York, New York 10286
(records relating to its functions as sub-custodian of International
Growth Fund).
Item 31. Management Services
None.
C-15
<PAGE>
Item 32. Undertakings
Registrant undertakes to call a meeting of shareholders, at the
request of holders of 10% of the Registrant's outstanding shares, for
the purpose of voting upon the question of removal of a trustee or
trustees and undertakes to assist in communications with other
shareholders as required by Section 16(c) of the Investment Company
Act of 1940.
Registrant undertakes to furnish to each person to whom a prospectus
is delivered a copy of the Registrant's latest Annual Report to
Shareholders upon request and without charge.
NOTICE
A copy of the Delaware Trust Instrument of The Victory Portfolios is on file
with the Secretary of State of Delaware and notice is hereby given that this
Post-Effective Amendment to the Registrant's Registration Statement has been
executed on behalf of the Registrant by officers of, and Trustees of, the
Registrant as officers and as Trustees, respectively, and not individually, and
that the obligations of or arising out of this instrument are not binding upon
any of the Trustees, officers or shareholders of The Victory Portfolios
individually but are binding only upon the assets and property of the
Registrant.
C-16
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant has duly caused this Post-Effective Amendment No. 29 to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York and State of New York, on the 8th day
of April, 1996.
THE VICTORY PORTFOLIOS
By: /s/Leigh A. Wilson
------------------
Leigh A. Wilson, President and Trustee
================================================================================
As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities indicated on the 8th day of
April, 1996.
/s/ Leigh A. Wilson President and Trustee
- -----------------------------
Leigh A. Wilson
/s/ Martin Dean Treasurer
- -----------------------------
Martin Dean
* Trustee
- -----------------------------
Robert G. Brown
* Trustee
- -----------------------------
Edward P. Campbell
* Trustee
- -----------------------------
Harry Gazelle
* Trustee
- -----------------------------
Stanley I. Landgraf
* Trustee
- -----------------------------
Thomas F. Morrissey
* Trustee
- -----------------------------
H. Patrick Swygert
*By: /s/ Carl Frischling
------------------------
Carl Frischling
Attorney-in-Fact
Attorney-in-Fact pursuant to powers of attorney, dated December 18, 1995 filed
with Post-Effective Amendments 27 and 26 to Registrant's Registration Statement
on January 31, 1996 and December 28, 1995, respectively.
C-17
<PAGE>
The Victory Portfolio
THE VICTORY PORTFOLIOS
INDEX TO EXHIBITS
Exhibit Number
- --------------
EX-99.B11(a) Consent of Kramer, Levin, Naftalis, Nessen, Kamin & Frankel.
EX-99.B11(b) Consent of Coopers & Lybrand L.L.P.
C-18
<PAGE>
EX-99.B11(a)
Consent of Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
C-19
<PAGE>
Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
Arthur H. Aufses III 9 1 9 T H I R D A V E N U E Martin Balsam
Thomas D. Balliett NEW YORK, N.Y. 10022-3852 Joshua M. Berman
Jay G. Baris (212) 715-9100 Jules Buchwald
Barry Michael Cass Rudolph de Winter
Thomas E. Constance Meyer Eisenberg
Michael J. Dell Arthur D. Emil
Kenneth H. Eckstein Sherwin Kamin
Charlotte M. Fischman Maxwell M. Rabb
David S. Frankel James Schreiber
Marvin E. Frankel Counsel
Alan R. Friedman -----
Carl Frischling
Robert M. Heller M. Frances Buchinsky
Philip S. Kaufman Debora K. Grobman
Peter S. Kolevzon Christian S. Herzeca
Kenneth P. Kopelman Pinchas Mendelson
Michael Paul Korotkin Lynn R. Saidenberg
Kevin B. Leblang Jonathan M. Wagner
David P. Levin Special Counsel
Ezra G. Levin -----
Larry M. Loeb
Monica C. Lord
Richard Marlin
Thomas H. Moreland
Ellen R. Nadler
Gary P. Naftalis
Michael J. Nassau
Michael S. Nelson
Maurice N. Nessen
Jay A. Neveloff
Michael S. Oberman
Paul S. Pearlman
Susan J. Penry-Williams
Bruce Rabb
Allan E. Reznick
Scott S. Rosenblum
Michele D. Ross
Max J. Schwartz
Howard A. Sobel
Steven C. Todrys
Jeffrey S. Trachtman
D. Grant Vingoe
Harold P. Weinberger
E. Lisk Wyckoff, Jr.
FAX
(212) 715-8000
------
WRITER'S DIRECT NUMBER
(212) 715-7515
April 8, 1996
The Victory Portfolios
3435 Stelzer Road
Columbus, Ohio 43219
Re: The Victory Portfolios
File No. 33-8982
Post-Effective Amendment
to Registration Statement on Form N-1A
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Gentlemen:
We hereby consent to the reference of our firm as counsel in
Post-Effective Amendment No. 29 to the Registration Statement on Form N-1A.
Very truly yours,
/s/ Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
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EX-99.B11(b)
Consent of Coopers & Lybrand L.L.P.
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CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Post-Effective Amendment
No. 29 to the Registration Statement on Form N-1A (File No. 33-8982) of The
Victory Portfolios of our report dated December 19, 1995 on our audits of the
financial statements and financial highlights of the U.S. Government Obligations
Fund, Prime Obligations Fund, Financial Reserves Fund, Institutional Money
Market Fund, Tax-Free Money Market Fund, Ohio Municipal Money Market Fund,
Limited Term Income Fund, Intermediate Income Fund, Investment Quality Bond
Fund, Government Bond Fund, Government Mortgage Fund, Fund for Income, National
Municipal Bond Fund, New York Tax-Free Fund, Ohio Municipal Bond Fund, Balanced
Fund, Stock Index Fund, Diversified Stock Fund, Value Fund, Growth Fund, Special
Value Fund, Special Growth Fund, Ohio Regional Stock Fund, and International
Growth Fund. The Victory Portfolios as of October 31, 1995 and for the periods
then ended referred to in the 1995 Annual Report to Shareholders which is
incorporated by reference into the Statement of Additional Information. We also
consent to the references to our Firm under the captions "Financial Highlights",
"Custodian, Transfer Agent and Other Service Providers" and "Independent
Accountants" in the prospectus relating to the Key Balanced Shares of the
Victory Balanced Fund; and under the caption "Auditors" and "Miscellaneous" in
the Statement of Additional Information which is incorporated by reference into
this Post-Effective Amendment No. 29.
/s/COOPERS & LYBRAND L.L.P.
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Columbus, Ohio
April 5, 1996
