VICTORY PORTFOLIOS, 497, 1996-08-02

VICTORY PORTFOLIOS
497, 1996-08-02

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Rule 497(c)
Registration No. 33-8982

MANAGED BY KEYCORP

THE VICTORY BALANCED FUND

JULY 30, 1996
<PAGE>

THE
VICTORY
PORTFOLIOS
BALANCED FUND

PROSPECTUS FOR CURRENT YIELD, PURCHASE AND REDEMPTION INFORMATION,
JULY 30, 1996 CALL 800-KEY-FUND OR 800-539-3863

THE VICTORY PORTFOLIOS (the "Victory Portfolios") is a registered open-end
management investment company that offers investors a selection of money market,
fixed-income, municipal bond, domestic and international equity portfolios. This
Prospectus relates to the BALANCED FUND (the "Fund"), a diversified portfolio.
KeyCorp Mutual Fund Advisers, Inc., Cleveland, Ohio, an indirect subsidiary of
KeyCorp, is the investment adviser to the Fund ("Key Advisers" or the
"Adviser"). Society Asset Management, Inc., Cleveland, Ohio, an indirect
subsidiary of KeyCorp, is the investment sub-adviser to the Fund (the
"Sub-Adviser" or "Society"). BISYS Fund Services ("BISYS") is the Fund's
administrator (the "Administrator") and distributor (the "Distributor").

The Fund seeks to provide income and long-term growth of capital. The Fund
pursues this objective by investing primarily in common stocks and fixed income
securities.

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

Please read this Prospectus before investing. It is designed to provide you with
information and to help you decide if the Fund's goals match your own. Retain
this document for future reference. A Statement of Additional Information (dated
July 30, 1996) for the Fund , an audited annual report for the Fund's fiscal
year ended October 31, 1995 and an unaudited semi-annual report for the six
months ended April 30, 1996 have been filed with the Securities and Exchange
Commission (the "Commission") and are incorporated herein by reference. All of
these documents are available without charge upon request by writing to the
Victory Funds, P.O. Box 8527, Boston, MA 02266-8527, or by calling 800-539-3863.

SHARES OF THE FUND ARE:

O NOT INSURED BY THE FDIC;

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

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

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE, NOR HAS
THE COMMISSION OR ANY SUCH STATE AUTHORITY PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

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<PAGE>

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

Fund Expenses........................................................... 4
Financial Highlights.................................................... 6
Investment Objective.................................................... 7
Investment Policies and Risk Factors.................................... 7
How to Invest, Exchange and Redeem...................................... 14
Dividends, Distributions and Taxes...................................... 26
Performance............................................................. 28
Fund Organization and Fees.............................................. 29
Additional Information.................................................. 33

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<PAGE>

FUND EXPENSES

The table below summarizes the expenses associated with the Fund. This standard
format was developed for use by all mutual funds to help an investor make
investment decisions. You should consider this expense information along with
other important information in this Prospectus, including the Fund's investment
objective, policies and risk factors.

SHAREHOLDER TRANSACTION EXPENSE(1)

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

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

Redemption Fees.....................................none none
Exchange Fee........................................none none

ANNUAL FUND OPERATING EXPENSES AFTER EXPENSE WAIVERS AND REIMBURSEMENTS (as a
percentage of average daily net assets)

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

Management Fees(2).................................. .85% .85%
Administration Fees ................................ .15% .15%
Rule 12b-1 Distribution Fees........................ .00% .75%
Other Expenses(3)................................... .25% .45%
---- ----
Total Fund Operating Expenses(2)(3).................1.25% 2.20%
==== =====

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

(2) The Adviser has agreed to reduce its investment advisory fees for the
indefinite future. Absent the voluntary reduction of investment
advisory fees, "Management Fees" as a percentage of average daily net
assets would be 1.00%, and "Total Fund Operating Expenses" as a
percentage of average daily net assets for Class A and Class B shares
would be 1.40% and 2.35%, respectively.

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

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

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<PAGE>

Balanced Fund -- Class B Shares $72 $99 $138 $229

The purpose of the table above is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. See "Fund Organization and Fees" for a more complete discussion of
annual operating expenses of the Fund. The foregoing example is based upon
expenses for the fiscal year ended October 31, 1995 for Class A shares, the
period ended April 30, 1996 for Class B shares and expenses that the Fund is
expected to incur during the remainder of the current fiscal year. THE FOREGOING
EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES.
ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.

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FINANCIAL HIGHLIGHTS

The table below sets forth certain financial information with respect to the
financial highlights for the Fund for the periods indicated. The information
below for Class A shares for the fiscal year ended October 31, 1995 has been
derived from financial statements audited by Coopers & Lybrand L.L.P.,
independent accountants for the Victory Portfolios, whose report thereon,
together with the financial statements of the Fund, is incorporated by reference
into the Statement of Additional Information. The information below for Class B
shares for the fiscal period ended April 30, 1996 has not been audited. The
information set forth below is for a Class A share and a Class B share
outstanding for each period indicated.

<TABLE>
<CAPTION>
THE VICTORY BALANCED FUND

CLASS B SHARES CLASS A SHARES

-------------------------- -------------------------------------------------

MARCH 1, 1996 DECEMBER 10, 1993
TO YEAR ENDED TO
APRIL 30, 1996(A)(E) OCTOBER 31, 1995 OCTOBER 31, 1994(A)
-------------------- ---------------- ---------------------

(Unaudited)

<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............. $11.51 $ 9.62 $ 10.00
------ --------

Investment Activities

Net investment income............................ 0.04 0.41 0.33
Net realized and unrealized gains (losses)
on investments and foreign currencies....... 0.14 1.40 (0.39)
------ -------- -------
Total from Investment Activities............ 0.18 1.81 (0.06)
------ -------- -------

Distributions

Net investment income....................... (0.05) (0.42) (0.32)
Net realized gains............................... -- -- --
------ -------- --------
Total Distributions......................... (0.05) (0.42) (0.32
----- -------- --------
NET ASSET VALUE, END OF PERIOD................... $11.64 $ 11.01 $ 9.62
====== ======== ========
Total Return (Excludes Sales Charge)............. (1.70)%(b) 19.24% (0.57%)(b)

RATIOS/SUPPLEMENTAL DATA:

Net Assets, End of Period (000).................. $ 617 $201,073 $127,285
Ratio of expenses to average net assets ......... 1.89%(c) 0.98% 0.87%(c)
Ratio of net investment income to average
net assets ................................. 1.75%(c) 4.05% 3.97%(c)
Ratio of expenses to average net assets 2.08%(c) 1.36% 1.49%(c)
(d)..............................................
Ratio of net investment income to average
net assets (d)............................. 1.56%(c) 3.67% 3.35%(c)
Portfolio turnover............................... 49.95% 69.22% 118.49%

</TABLE>

(a) Period from commencement of operations.
(b) Not Annualized.
(c) Annualized.
(d) During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(e) Effective March 1, 1996, the Fund designated the existing shares as Class A
Shares and commenced offering Class B Shares.

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<PAGE>

INVESTMENT OBJECTIVE

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

INVESTMENT POLICIES AND RISK FACTORS

SUMMARY OF PRINCIPAL INVESTMENT POLICIES

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

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

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

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

ADDITIONAL INFORMATION REGARDING THE FUND'S INVESTMENTS

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advantage of other investment practices which are not at present contemplated
for use by the Fund or which currently are not available but which may be
developed, to the extent such investment practices are both consistent with the
Fund's investment objective and are legally permissible for the Fund. Such
investment practices, if they arise, may involve risks which exceed those
involved in the activities described in this Prospectus.

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

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 Victory Portfolios' Board of Trustees (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

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<PAGE>

specific security, class of securities, foreign currency or an index, purchase
or sell options on any such futures contracts and engage in related closing
transactions. A futures contract on a securities index is an agreement
obligating either party to pay, and entitling the other party to receive, while
the contract is outstanding, cash payments based on the level of a specified
securities index.

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

The acquisition of put and call options on futures contracts will give the Fund
the right (but not the obligation), for a specified price, to sell or to
purchase the underlying futures contract, upon exercise of the option, at any
time during the option period.

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

Futures transactions involve brokerage costs and require the Fund to segregate
assets to cover contracts that would require it to purchase securities or
currencies. The Fund may lose the expected benefit of futures transactions if
interest rates, exchange rates or securities prices move in an unanticipated
manner. Such unanticipated changes may also result in poorer overall performance
than if the Fund had not entered into any futures transactions. In addition, the
value of the Fund's futures positions may not prove to be perfectly or even
highly correlated with the value of its portfolio securities or foreign
currencies, limiting the Fund's ability to hedge effectively against interest
rate, exchange rate and/or market risk and giving rise to additional risks.
There is no assurance of liquidity in the secondary market for purposes of
closing out futures positions.

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

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<PAGE>

("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 Trustees. The Fund will limit its securities lending to 331/3% of total
assets.

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

O VARIABLE AND FLOATING RATE SECURITIES. The Fund may purchase investment grade
variable and floating rate notes. The interest rates on these securities may be
reset daily, weekly, quarterly, or some other reset period, and may be subject
to a floor or ceiling. There is a risk that the current interest rate on such
obligations may not accurately reflect existing market interest rates. There may
be no active secondary market with respect to a particular variable or floating
rate note. Variable and floating rate notes for which no readily available
market exists will be purchased in an amount which, together with other illiquid
securities held by the Fund, does not exceed 15% of the Fund's net assets unless

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such notes are subject to a demand feature that will permit the Fund to receive
payment of the principal within seven days after demand therefor. These
securities are included among those which are sometimes referred to as
"derivative securities."

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

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 Commission, the
Fund may invest in the money market funds of the Victory Portfolios. Key
Advisers or the Sub-Adviser will waive its fee attributable to the Fund's assets
invested in a money market fund of the Victory Portfolios, and, to the extent
required by the laws of any state in which shares of the Fund are sold, Key
Advisers or the Sub-Adviser will waive its investment advisory fees as to all
assets invested in other investment companies. Because such other investment
companies employ an investment adviser, such investment by the Fund will cause
shareholders to bear duplicative fees, such as management fees, to the extent
such fees are not waived by Key Advisers or the Sub-Adviser.

O PRIVATE PLACEMENT INVESTMENTS. The Fund may invest in high quality commercial
paper issued in reliance on the exemption from registration afforded by Section
4(2) of the Securities Act of 1933, as amended (the "1933 Act"). Section 4(2)
commercial paper ("commercial paper") is generally sold to institutional
investors, such as the Fund, that agree that they are purchasing the paper for
investment purposes and not with a view to public distribution. Any resale by
the purchaser must be in an exempt transaction. 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
Trustees are 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,

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

The options and futures contracts described in this section are frequently
referred to as derivative securities. In general, derivative securities are
instruments whose value is based upon, or derived from, some underlying index,
reference rate (e.g., interest rates or currency exchange rates), security,
commodity, or other assets.

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

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

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<PAGE>

INVESTMENT LIMITATIONS

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

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

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

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

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

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>

HOW TO INVEST, EXCHANGE AND REDEEM

HOW TO INVEST

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

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

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

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

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

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

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

O HOW ARE SHARES PURCHASED? Shares may be purchased directly or through an
Investment Professional of a securities broker or other financial institution
that has entered into a selling agreement with the Fund or the Distributor.
Shares are also available to clients of bank trust departments. The minimum
investment is $500 ($250 for Individual Retirement Accounts) for the initial
purchase and $25 thereafter. Accounts set up through a bank trust department or
an Investment Professional may be subject to different minimums. When you buy
shares, be sure to specify Class A or Class B shares. If you do not make a
selection, your investment will be made in Class A shares.

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<PAGE>

requirements and fees will be provided by the Investment Professional. If you
are purchasing shares of any Fund through a program of services offered or
administered by your Investment Professional, you should read the program
materials in conjunction with this Prospectus. You may initiate most
transactions by telephone through your Investment Professional or directly
through the Fund's Transfer Agent . See "Special Investor Services" for more
information about telephone transactions.

O INVESTING THROUGH YOUR BANK TRUST DEPARTMENT. Your bank trust department may
require a different minimum investment and may charge additional fees. Fee
schedules for such accounts are available upon request and are detailed in the
agreements by which a client opens the desired account. Your bank trust
department may require a completed and signed application for the Fund in which
an investment is made. Additional documents may be required from corporations,
associations, and certain fiduciaries. Any account information, such as
balances, should be obtained through your bank trust department. Additional
purchases, exchanges or redemptions should also be coordinated through your bank
trust department. Contact your bank trust department for instructions.

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

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

INVESTING DIRECTLY

O BY MAIL:

You may purchase shares by completing and signing an Account
Application (initial purchase only) and mailing it, together with a check (or
other negotiable bank draft or money order) in the amount of at least the
minimum investment requirement to:

The Victory Funds
P. O. Box 8527
Boston, MA 02266-8527

O BY WIRE:
YOU MUST CALL THE TRANSFER AGENT BEFORE WIRING FUNDS. Federal Funds
should be wired to:
State Street Bank and Trust Company
ABA # 011000028
For Credit to DDA Account # 9905-201-1
For further credit to Account # (insert your account
number, name and control number assigned by the
Transfer Agent)

The Fund does not impose a fee for wire transactions, although your bank may
charge you a fee for this service.

o BY ACH:

The purchase amount will be transferred between the bank account designated and
your fund account via Automated Clearing House ("ACH"). Only a bank account
maintained in a domestic financial institution which is an ACH member may be so
designated. The Fund may modify or terminate the telephone and/or ACH privilege
at any time or charge a service fee upon notice to shareholders. No such fee is
currently contemplated by the Fund; however, your bank may charge you a fee for
this service. If the designated bank account does not contain sufficient assets
at the time your order is processed, the order may be cancelled, and you could
be liable for resulting fees and/or losses. NOTE THAT THIS SERVICE REQUIRES
APPROXIMATELY 15 DAYS TO ESTABLISH. THEREFORE, IT MAY NOT BE APPLICABLE TO
REQUEST YOUR INITIAL PURCHASE UTILIZING THIS METHOD.

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<PAGE>

Transfer Agent must receive your order 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 (as defined in "Shareholder Account Rules
and Policies -- Share Price"). If you buy shares through an Investment
Professional, the Investment Professional must receive your order in a timely
fashion on a regular Business Day. 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
Transfer Agent may reject any purchase order for the Fund's shares, in its sole
discretion.

INVESTMENT REQUIREMENTS

All purchases made by check must be in U.S. dollars and made payable to the
Victory Funds, or in the case of a retirement account, the custodian or trustee.
Third party checks will not be accepted. Checks must be drawn on U.S. banks. No
cash will be accepted. If you make a purchase with more than one check, each
check must have a value of at least $25, and the minimum investment requirement
still applies. The Fund or the Transfer Agent reserves the right to limit the
number of checks processed at one time. If your check does not clear, your
purchase will be canceled and you could be liable for any losses or fees
incurred. Payment for the purchase is expected at the time of the order. If
payment is not received within three business days of the date of the order, the
order may be canceled, and you could be held liable for resulting fees and/or
losses.

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

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<PAGE>

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

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

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

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

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

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

O LETTER OF INTENT FOR CLASS A SHARES. An investor may obtain a reduced sales
charge by means of a written Letter of Intent which expresses the investor's
intention to invest a specified amount within a 13-month period, which if made
at one time, would qualify for a reduced sales charge.

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

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<PAGE>

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

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

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

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

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

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

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

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

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

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

(5) Shareholders of the former Investors Preference Fund For Income, Inc.
and the Investors Preference New York Tax-Free Fund, Inc. who have
continuously maintained accounts with a fund or funds of the Victory
Group with a balance

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<PAGE>

of $250,000 or more (investors with less than $250,000 will pay any
applicable sales charges);

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

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

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

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

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

In the table, a "year" is a 12-month period. Purchases will age based on trade
date of purchase. For example, a purchase made on January 1 will be one year old
on January 1 of the following year.

O WAIVERS OF CLASS B CDSC. The Class B CDSC will be waived if the shareholder
requests it for any of the following redemptions: (1) distributions to
participants or beneficiaries from Retirement Plans, if the distributions are
made (a) under an Automatic Withdrawal Plan after the participant reaches age 59
1/2, as long as the payments are no more than 12% of the account value annually
(measured from the date the Transfer Agent receives the request), or (b)
following the death or disability (as defined in the Internal Revenue Code) of
the participant or the beneficial owner; (2) redemptions from accounts other
than Retirement Plans following the death or disability of the shareholder (as

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<PAGE>

evidenced by a determination of disability by the Social Security
Administration), (3) returns of excess contributions to Retirement Plans; and
(4) distributions of not more than 12% of the account value annually under an
automatic withdrawal plan.

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

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

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

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

SPECIAL INVESTOR SERVICES

O THE SYSTEMATIC INVESTMENT PLAN. You can make regular investments in the Fund
with the Systematic Investment Plan by completing the appropriate section of the
Account Application and attaching a voided personal check with your bank's
magnetic ink coding number across the front. If your bank account is jointly
owned, be sure that all owners sign. You must first meet the Fund's initial
investment requirement of $500, then investments may be made monthly, quarterly,
semi-annually or annually by automatically deducting $25 or more from your bank
account. For officers, trustees, directors and employees, including retired
directors and employees, of the Victory Group, KeyCorp and its affiliates, and
the Administrator and its affiliates (and family members of each of the
foregoing) who participate in the Systematic Investment Plan, there is no
minimum initial investment required. You may change the amount of your purchase
at any time. Your bank account will be debited on the date indicated on your
Account Application. Shares will be purchased at the offering price next
determined

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<PAGE>

following receipt of the order by the Transfer Agent. You may cancel the
Systematic Investment Plan at any time without payment of a cancellation fee.
Your monthly account statement will reflect systematic investment transactions,
and a debit entry will appear on your bank statement.

O THE SYSTEMATIC WITHDRAWAL PLAN. You can make regular withdrawals from your
account with the Systematic Withdrawal Plan by completing the appropriate
section of the Account Application. If you own shares in a fund worth $5,000 or
more, you can have monthly, quarterly, semi-annual or annual payments sent from
your account directly to you, to a person named by you, or to your bank checking
account. The minimum withdrawal is $25. If you are having proceeds sent to your
bank checking account, attach a voided personal check with your bank's magnetic
ink coding number across the front. The proceeds will be transferred between
your fund account and the bank account via ACH. If your account is jointly
owned, be sure that all owners sign. You may obtain information about the
Systematic Withdrawal Plan by contacting the Transfer Agent. Your Systematic
Withdrawal Plan payments are drawn from share redemptions. If Systematic
Withdrawal Plan redemptions exceed income dividends and capital gain dividend
distributions earned on your Fund shares, your account eventually may be
exhausted. If any applicable sales charges are applied to new purchases of
shares of the Fund, it is to your disadvantage to buy shares of the Fund while
also making systematic redemptions. Your account cannot be closed automatically
by depleting the assets in your Systematic Withdrawal Plan.

Your account will be debited on the date you indicate on your Account
Application. Shares will be redeemed at the net asset value per share (the
"NAV") as determined on the debit date indicated on your Account Application.
You may cancel the Systematic Withdrawal Plan at any time without payment of a
cancellation fee. Each Systematic Withdrawal Plan transaction will appear as a
debit entry on your monthly account statement.

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

Generally, neither the Fund, the bank trust department nor the Transfer Agent
will be responsible for any claims, losses or expenses for acting on telephone
instructions that they reasonably believe to be genuine. The Transfer Agent and
the Fund will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine and if they do not employ reasonable
procedures they may be liable for any losses due to unauthorized or fraudulent
instructions. The identification procedures may include, but are not limited to,
the following: account number, registration and address, personalized security
codes, taxpayer identification number and other information particular to the
account. Your Investment Professional, bank trust department or the Transfer
Agent may also record calls, and you should verify the accuracy of your
confirmation statements immediately after you receive them.

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

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<PAGE>

(SEP/IRA), Salary Reduction SEP (SAR-SEP/IRA), 401(k) Plans and 403(b) Plans.
Other fees may be charged by the IRA custodian or trustee.

HOW TO EXCHANGE

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

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

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

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

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

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

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

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

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

Key Mutual Funds, which is managed by Key Advisers and Spears, Benzak, Salomon &
Farrell Inc., both affiliates of KeyCorp, is a part of the Victory Group. BISYS
is the Administrator and Distributor for Key Mutual Funds. Exchange privileges
applicable to the Victory Group will also apply to Key Mutual Funds. Exchanges
of shares involve a redemption of the shares of the Fund and a purchase of
shares of the other fund of the Victory Group.

There are certain exchange policies you should be aware of:

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

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<PAGE>

create excessive turnover in the Fund's portfolio and associated expenses
disadvantageous to the Fund.

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

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

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

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

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

HOW TO REDEEM

You may redeem all or a portion of your shares on any day that the Fund is open
for business (see the definition of "Business Day" under "Shareholder Account
Rules and Policies -- Share Price"). Shares will be redeemed at the NAV
next calculated after the Transfer Agent has received the redemption request.

You may redeem shares in several ways:

O BY MAIL. Send a written request to: The Victory Funds
P.O. Box 8527
Boston, MA 02266-8527

Write a "letter of instruction" with your name, the Fund's name, your Fund
account number, the dollar amount or number of shares to be redeemed, and any
additional requirements that apply to each particular account. You will need the
letter of instruction signed by all persons required to sign for transactions,
exactly as their names appear on the Account Application. A signature guarantee
is required if: you wish to redeem more than $50,000 worth of shares; your Fund
account registration has changed within the last 60 days; the check is not being
mailed to the address on your account; the check is not being made out to the
account owner; or if the redemption proceeds are being transferred to another
Victory Group account with a different registration. The following institutions
should be able to provide you with a signature guarantee: banks, brokers,
dealers, credit unions (if authorized under state law), securities exchanges and
associations, clearing agencies, and savings associations. A signature guarantee
may not be provided by a notary public. A signature guarantee is designed to
protect you, the Fund and its agents from fraud. The Transfer Agent reserves the
right to reject any signature guarantee if (1) it has reason to believe that the
signature is not genuine, (2) it has reason to believe that the transaction
would otherwise be improper, or (3) the guarantor institution is a broker or
dealer that is neither a member of a clearing corporation nor maintains net
capital of at least $100,000.

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<PAGE>

redemption will be wired as federal funds on the next Business Day to the bank
account designated with the Transfer Agent. You may change the bank account
designated to receive an amount redeemed at any time by sending a letter of
instruction with a signature guarantee to the Victory Funds at P.O. Box 8527,
Boston, MA 02266-8527.

O BY TELEPHONE. To redeem by telephone, you may call the Transfer Agent toll
free at 800-539-3863 or call your Investment Professional or bank trust
department. See "Special Investor Services" for more information about telephone
transactions.

O ADDITIONAL REDEMPTION REQUIREMENTS. When purchases are made by check or
periodic account investment, payments on redemptions may be delayed until the
investment being redeemed has been in the account for 15 calendar days. Also,
when the New York Stock Exchange ("NYSE") is closed (or when trading is
restricted) for any reason other than its customary weekend or holiday closings,
or under any emergency circumstances as determined by the Commission to merit
such action, the right of redemption may be suspended or the date of payment
postponed for a period of time that may exceed 7 days. In addition, the Fund
reserves the right to advance the time on that day by which purchase and
redemption orders must be received. To the extent that portfolio securities are
traded in other markets on days when the NYSE is closed, the Fund's NAV may be
affected on days when investors do not have access to the Fund to purchase or
redeem shares.

If you are unable to reach the Transfer Agent by telephone (for example, during
times of unusual market activity), consider placing your order by mail directly
to the Transfer Agent. In case of suspension of the right of redemption, you may
either withdraw your request for redemption or receive payment based on the NAV
next determined after the termination of the suspension. If your balance in the
Fund falls below $500, you may be given 60 days' notice to reestablish the
minimum balance (except with respect to officers, trustees, directors and
employees, including retired directors and employees, of the Victory Portfolios,
KeyCorp and its affiliates, and the Administrator and its affiliates (and family
members of each of the foregoing) participating in the Systematic Investment
Plan, to whom no minimum balance requirement applies). If you do not increase
your balance, your account may be closed and the proceeds mailed to you at the
address on record. Shares will be redeemed at the last calculated NAV on the day
the account is closed.

SHAREHOLDER ACCOUNT RULES AND POLICIES

O SHARE PRICE. The term "net asset value per share," or "NAV", means the value
of one share. The NAV of each class of shares is calculated by adding the value
of all the Fund's investments, plus cash and other assets, deducting liabilities
of the Fund and of the class, and then dividing the result by the number of
shares of the class outstanding. The NAV of the Fund is determined and its
shares are priced as of the close of regular trading of the NYSE, 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 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 will not be open in
observance of the following holidays: New Year's Day, President's Day, Good
Friday, Memorial Day, Independence Day, Labor 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.

- 24 -
<PAGE>

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

o If your account is established with an Investment Professional or a bank, you
may or may not be able to purchase, exchange or sell shares on other holidays
when the Federal Reserve Bank of Cleveland is closed, including Martin Luther
King, Jr. Day, Columbus Day and Veterans Day.

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

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

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

o Payment for redeemed shares is 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.

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

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

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

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<PAGE>

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

DIVIDENDS, DISTRIBUTIONS AND TAXES

DIVIDENDS

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

DISTRIBUTION OPTIONS

When you fill out your Account Application, you can specify how you want to
receive your dividend distributions. Currently, there are five available
options:

1. REINVESTMENT OPTION. Your income and capital gain dividends, if any,
will be automatically reinvested in additional shares of the Fund.
Income and capital gain dividends will be reinvested at the net asset
value of 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 distri-
butions, if any, reinvested automatically in the Fund at the NAV of
your class of shares of the Fund 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. Shares will be purchased
at the NAV as of the day after the record date. If you are reinvesting
dividends of a fund sold without a sales charge in shares of a fund
sold with a sales charge, the shares will be purchased at the public
offering price. If you are reinvesting dividends of a fund sold with a
sales charge in shares of a fund sold with or without a sales charge,
the shares will be purchased at the net asset value of the fund.
Dividend distributions can be directed only to an existing account with
a registration that is identical to that of your Fund account.

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<PAGE>

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.

Any election or revocation of any of the above dividend distribution options may
be made in writing to the Fund and sent to The Victory Funds at P.O. Box 8527,
Boston, MA 02266-8527, or by calling the Transfer Agent at 800-539-3863, and
will become effective with respect to dividends having record dates after
receipt of the Account Application or request by the Transfer Agent.

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

O STATEMENTS AND REPORTS. You will receive a monthly statement reflecting all
transactions that affect the share balance or the registration of your Fund
account. You will receive a confirmation after every transaction that affected
the share balance of your Fund account, except for dividend reinvestment,
systematic investment and systematic withdrawal transactions. These transactions
will be detailed in your Fund account statement. Transactions that affect the
share balance of your Fund investment in an account established with an
Investment Professional or financial institution will be detailed in regular
statements or through confirmation procedures of the financial institution.
Certificates representing shares of the Fund will not be issued. An IRS Form
1099-DIV with federal tax information will be mailed to you by January 31 of
each tax year and also will be filed with the IRS. At least twice a year, you
will receive the Fund's financial reports.

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

O COMPLETE REDEMPTIONS. If you request a complete redemption of all your Fund
shares, any dividend accrued to your account will be included in the redemption
check.

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

FEDERAL TAXES

The Fund intends to qualify as a regulated investment company by satisfying the
requirements under Subchapter M of the Internal Revenue Code of 1986, as amended
(the "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.

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<PAGE>

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 "IRS") by January 31 showing the amounts and tax status of distributions
made (or deemed made) during the preceding calendar year.

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

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

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.

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<PAGE>

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

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

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

FUND ORGANIZATION AND FEES

The Victory Portfolios is an open-end management investment company, commonly
known as a mutual fund, and currently consisting of twenty-four series
portfolios. The Victory Portfolios has been operating continuously since 1986,
when it was created under Massachusetts law as a Massachusetts business trust
although certain of its funds have a prior operating history from their
predecessor funds. On February 29, 1996, the Victory Portfolios converted from a
Massachusetts business trust to a Delaware business trust. The Victory
Portfolios' offices are located at 3435 Stelzer Road, Columbus, Ohio 43219-3035.

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

INVESTMENT ADVISER AND SUB-ADVISER

KeyCorp Mutual Fund Advisers, Inc. is the investment adviser to the Fund. Key
Advisers directs the investment of the Fund's assets, subject at all times to
the supervision of the Victory Portfolios' Board of Trustees. Key Advisers
continually conducts investment research and supervision for the Fund and is
responsible for the purchase and sale of the Fund'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 an indirect wholly-owned subsidiary of KeyBank National
Association, a wholly-owned subsidiary of KeyCorp. Affiliates of Key Advisers
manage approximately $48 billion for numerous clients including large corporate
and public retirement plans, Taft-Hartley plans, foundations and endowments,
high net worth individuals and mutual funds.

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<PAGE>

The investment advisory fee paid by the Fund is higher than the advisory fees
paid by most mutual funds, although the Trustees believes such fees to be
comparable to advisory fees paid by many funds having similar objectives and
policies. The advisory fees for the Fund have been determined to be fair and
reasonable in light of the services provided to the Fund. Key Advisers may
periodically waive all or a portion of its advisory fee with respect to the
Fund. Prior to January 1, 1996, Society Asset Management, Inc. served as
investment adviser to the Fund. During the Fund's fiscal year ended October 31,
1995, Class A shares of the Fund paid investment advisory fees aggregating .62%
of the average daily net assets.

Under the investment advisory agreement between the Victory Portfolios, on
behalf of the Fund and Key Advisers (the "Investment Advisory Agreement"), the
Adviser may delegate a portion of its responsibilities to a sub-adviser. Key
Advisers has entered into an investment sub-advisory agreement with its
affiliate, Society Asset Management, Inc., a registered investment adviser, on
behalf of the Fund (the "Sub-advisory Agreement"). The Sub-Adviser is a
wholly-owned subsidiary of KeyCorp Asset Management Holdings, Inc. The
Investment Advisory Agreement and the Sub-advisory Agreement, respectively,
provide that Key Advisers and the Sub-adviser, respectively, may render services
through their own employees or the employees of one or more affiliated companies
that are qualified to act as an investment adviser of the Fund and are under the
common control of KeyCorp as long as all such persons are functioning as part of
an organized group of persons, managed by authorized officers of Key Advisers
and the Sub-Adviser, respectively. Key Advisers and the Sub-Adviser,
respectively, will be as fully responsible to the Fund for the acts and
omissions of such persons as they are for their own acts and omissions.

For its services under the investment sub-advisory agreement, Key Advisers pays
the Sub-Adviser fees as a percentage of average daily net assets as follows:
.65% of the first $10 million of average daily net assets; .50% of the next $15
million of average daily net assets; .40% of the next $25 million of average
daily net assets; and .35% of average daily net assets in excess of $50 million.

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

PORTFOLIO MANAGING
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.

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

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<PAGE>

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 Key
Advisers, the Sub-Adviser and their affiliates from continuing to perform all or
a part of the above services for their customers and/or the Fund. In such event,
changes in the operation of the Fund may occur, including the possible
alteration or termination of any service then being provided by Key Advisers,
the Sub-Adviser and their affiliates, and the Trustees would consider alternate
investment advisers and other means of continuing available services. It is not
expected that the Fund's shareholders would suffer any adverse financial
consequences (if other service providers are retained) as a result of any of
these occurrences.

ADMINISTRATOR AND DISTRIBUTOR

BISYS Fund Services is the Administrator, principal underwriter and Distributor
for the Fund.

The Administrator generally assists in all aspects of the Fund's administration
and operation. For expenses incurred and services provided as Administrator
pursuant to its management and administration agreement with the Victory
Portfolios, the Administrator receives a fee from the Fund, computed daily and
paid monthly, at an annual rate of fifteen one-hundredths of one percent (.15%)
of the Fund's average daily net assets. The Administrator may periodically waive
all or a portion of its administrative fee with respect to the Fund.

BISYS Fund Services sells shares of the Fund as agent on behalf of the Victory
Portfolios at no cost to the Fund. Key Advisers and the Sub-Adviser neither
participate in nor are responsible for the underwriting of Fund shares.

TRANSFER AGENT

State Street Bank and Trust Company, 225 Franklin Street, Boston, MA 02110-3875
("State Street" or the "Transfer Agent") serves as the Transfer Agent for the
Fund, and receives a fee for such services based on various criteria, including
assets, transactions and number of accounts. Boston Financial Data Services,
Inc., Two Heritage Drive, Quincy, MA 02171 ("BFDS") is the dividend disbursing
agent and provides certain shareholder services to the Fund.

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<PAGE>

SHAREHOLDER SERVICING PLAN

The Victory Portfolios has adopted a Shareholder Servicing Plan for each class
of shares of the Fund. In accordance with the Shareholder Servicing Plan, the
Fund may enter into Shareholder Service Agreements under which the Fund pays
fees of up to .25% of the average daily net assets of each class for fees
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
communications, assisting in the processing of purchase, exchange and redemption
requests, and assisting shareholders in changing dividend options, account
designations and addresses. Shareholder Servicing Agents may periodically waive
all or a portion of their respective shareholder servicing fees with respect to
the Fund.

FUND ACCOUNTANT

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

CUSTODIAN

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

INDEPENDENT ACCOUNTANTS

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

BUSINESS MANAGEMENT AGREEMENT

In connection with its obligations under the investment sub-advisory agreement,
the Sub-Adviser has entered into a Business Management Agreement with Key
Advisers pursuant to which Key Advisers provides certain administrative and
support services to the Sub-Adviser. Such services include preparing reports to
the Victory Portfolios' Board of Trustees, recordkeeping services, services
rendered in connection with the preparation of regulatory filings and other
reports, and regulatory, compliance, and other administrative and support
services.

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

EXPENSES

For the fiscal year ended October 31, 1995, total operating expenses for Class A
shares were 1.36% of average net assets, excluding certain voluntary fee
reductions or reimbursements. For the fiscal period ended April 30, 1996, total
operating expenses for Class B shares were 2.08% of average net assets,
excluding certain voluntary fee reductions or reimbursements.

- 32 -
<PAGE>

ADDITIONAL INFORMATION

The Victory Portfolios may issue an unlimited number of shares and classes of
the Fund. Shares of each class of the Fund participate equally in dividends and
distributions and have equal voting, liquidation and other rights. When issued
and paid for, shares will be fully paid and nonassessable by the Victory
Portfolios and will have no preference, conversion, exchange or preemptive
rights. Shareholders are entitled to one vote for each full share owned and
fractional votes for fractional shares owned. For those investors with qualified
trust accounts, the trustee will vote the shares at meetings of the Fund's
shareholders in accordance with the shareholder's instructions or will vote in
the same percentage as shares that are not so held in trust. The trustee will
forward to these shareholders all communications received by the trustee,
including proxy statements and financial reports. The Victory Portfolios and the
Fund are not required to hold annual meetings of shareholders and in ordinary
circumstances do not intend to hold such meetings. The Trustees may call special
meetings of shareholders for action by shareholder vote as may be required by
the 1940 Act or the 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 Victory Portfolios' outstanding shares may call a
special meeting of shareholders for the purpose of voting upon the question of
removal of Trustees.

The Victory Portfolio's Board of Trustees may authorize the Victory Portfolios
to offer other funds which may differ in the types of securities in which their
assets may be invested.

Key Advisers, the Sub-Adviser and the Victory Portfolios have each adopted a
Code of Ethics (the "Codes") 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 Trustees review their Codes and any
substantial violations of the Codes. Violations of the Codes may result in
censure, monetary penalties, suspension or termination of employment.

DELAWARE LAW

On February 29, 1996, the Victory Portfolios 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
Victory Portfolios. In light of Delaware law, the nature of the Victory
Portfolios' business, and the nature of its assets, management of Victory
Portfolios believes that the risk of personal liability to a Fund shareholder
would be extremely remote.

In the unlikely event a shareholder is held personally liable for the Victory
Portfolios' obligations, the Delaware successor to the Victory Portfolios will
be required to use its property to protect or compensate the shareholder. On
request, the Delaware successor to the Victory Portfolios will defend any claim
made and pay any judgment against a shareholder for any act or obligation of the
Victory Portfolios. Therefore, financial loss resulting from liability as a
shareholder will occur only if the Delaware successor to the Victory Portfolios
itself cannot meet its obligations to indemnify shareholders and pay judgments
against them.

- 33 -
<PAGE>

Delaware law authorizes electronic or telephone communications between
shareholders and the Victory Portfolios. Under Delaware law, the Delaware
successor to the Victory Portfolios will have the flexibility to respond to
future business contingencies. For example, the Trustees have the power to
incorporate the Victory Portfolios, to merge or consolidate it with another
entity, to cause each fund to become a separate trust, and to change the Victory
Portfolio's domicile without a shareholder vote. This flexibility could help
reduce the expense and frequency of future shareholder meetings for
non-investment related issues.

MISCELLANEOUS

Prior to June 7, 1996, Class A and Class B shares were the only classes of
shares offered by the Fund. The Fund also offers the Key Class which has
different charges and other expenses. These different charges and expenses would
affect investment performance. The Key Class may not be available through your
Investment Professional. Subsequent to the date of this Prospectus, the Fund may
offer additional classes of shares through a separate prospectus. Any such
additional classes may have different charges and other expenses, which would
affect investment performance. To obtain a free prospectus of another class of
shares or to obtain additional information, call your Investment Professional ,
call (800) 539-3863 or write to the address listed below.

Shareholders will receive Semi-Annual Reports, which are unaudited, and Annual
Reports, which are audited by independent accountants ("Reports"), describing
the investment operations of the Fund. Each of these Reports, when available for
a particular fiscal year end or the end of a semi-annual period, is incorporated
herein by reference. The Victory Portfolios may include information in their
Reports to shareholders that (a) describes general economic trends, (b)
describes general trends within the financial services industry or the mutual
fund industry, (c) describes past or anticipated portfolio holdings for the Fund
or (d) describes investment management strategies for the Victory Portfolios.
Such information is provided to inform shareholders of the activities of the
Victory Portfolios for the most recent fiscal year or semi-annual period and to
provide the views of Key Advisers, the Sub-Adviser and/or the Victory
Portfolios' 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.

Inquiries regarding the Victory Portfolios or the Fund may be directed in
writing to the Victory Portfolios at the Victory Funds , P.O. Box 8527, Boston,
MA 02266-8527, or by telephone, toll-free, at 800-539-3863.

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING
MADE BY THIS PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE VICTORY
PORTFOLIOS OR THE DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING
BY THE VICTORY PORTFOLIOS OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE.

- 34 -
<PAGE>
Rule 497(c)
Registration No. 33-8982

MANAGED BY KEYCORP

THE VICTORY DIVERSIFIED STOCK FUND

JULY 30, 1996

<PAGE>

THE
VICTORY
PORTFOLIOS
DIVERSIFIED STOCK FUND

PROSPECTUS FOR CURRENT YIELD, PURCHASE AND REDEMPTION INFORMATION,
JULY 30, 1996 CALL 800-KEY-FUND OR 800-539-3863

THE VICTORY PORTFOLIOS (the "Victory Portfolios") is a registered open-end
management investment company that offers investors a selection of money market,
fixed-income, municipal bond, domestic and international equity portfolios. This
Prospectus relates to the DIVERSIFIED STOCK FUND (the "Fund"), a diversified
portfolio. KeyCorp Mutual Fund Advisers, Inc., Cleveland, Ohio, an indirect
subsidiary of KeyCorp, is the investment adviser to the Fund ("Key Advisers" or
the "Adviser"). Society Asset Management, Inc., Cleveland, Ohio, an indirect
subsidiary of KeyCorp, is the investment sub-adviser to the Fund (the
"Sub-Adviser"). BISYS Fund Services ("BISYS") is the Fund's administrator (the
"Administrator") and distributor (the "Distributor").

The Fund seeks to provide long-term growth of capital. The Fund pursues this
investment objective by investing primarily in common stocks and securities
convertible into common stocks issued by established domestic and foreign
companies.

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

Please read this Prospectus before investing. It is designed to provide you with
information and to help you decide if the Fund's goals match your own. Retain
this document for future reference. A Statement of Additional Information (dated
July 30, 1996) for the Fund, an audited annual report for the Fund's fiscal year
ended October 31, 1995 and an unaudited semi-annual report for the six months
ended April 30, 1996 have been filed with the Securities and Exchange Commission
(the "Commission") and are incorporated herein by reference. All of these
documents are is available without charge upon request by writing to The Victory
Funds, P.O. Box 8527, Boston, MA 02266-8527, or by calling 800-539-3863.

SHARES OF THE FUND ARE:

O NOT INSURED BY THE FDIC;

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

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

<PAGE>

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

Fund Expenses................................................................2
Financial Highlights.........................................................3
Investment Objective.........................................................4
Investment Policies and Risk Factors.........................................4
How to Invest, Exchange and Redeem...........................................8
Dividends, Distributions and Taxes..........................................17
Performance.................................................................19
Fund Organization and Fees..................................................20
Additional Information......................................................23

- 2 -

<PAGE>

FUND EXPENSES

SHAREHOLDER TRANSACTION EXPENSE(1)

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

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

ANNUAL FUND OPERATING EXPENSES (as a percentage of average daily net assets)

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

Management Fees................................ .65% .65%
Administration Fees............................ .15% .15%
Rule 12b-1 Distribution Fees................... .00% .75%
Other Expenses(2).............................. .25% .40%
----- -----
Total Fund Operating Expenses(2)............... 1.05% 1.95%
==== ====

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

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

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

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

Diversified Stock Fund --
Class A Shares..............$58 $79 $103 $170
Diversified Stock Fund --

Class B Shares............ $70 $91 $125 $204

- 3 -
<PAGE>

- 4 -
<PAGE>

FINANCIAL HIGHLIGHTS

The table below sets forth certain financial information with respect to the
financial highlights for the Fund for the periods indicated. For Class A shares,
the information below for the fiscal year ended October 31, 1995 has been
derived from financial statements audited by Coopers & Lybrand L.L.P.,
independent accountants for the Victory Portfolios, whose report thereon,
together with the financial statements of the Fund, is incorporated by reference
into the Statement of Additional Information. The information below for Class B
shares the fiscal period ended April 30, 1996 has not been audited. The
information set forth below is for a Class A share and a Class B share
outstanding for each period indicated.

<TABLE>
<CAPTION>
THE VICTORY DIVERSIFIED STOCK FUND

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

MARCH 1,
1996 TO OCTOBER 20,
APRIL 30, 1989 TO
1996(a)(g) YEAR ENDED OCTOBER 31, OCTOBER 31,
----------- --------------------------------------------------------------------------
(Unaudited) 1995(e) 1994(e) 1993(e) 1992(e) 1991(e) 1990(e)(f) 1989(a)(e)(f)
------- ------- ------- ------- ------- ---------- -------------

<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD......... $14.18 $ 12.68 $ 13.39 $ 12.16 $ 11.44 $ 9.25 $ 9.90 $ 10.00
------ ------- -------- -------- -------- -------- -------- -------

Investment Activities

Net investment income................... 0.02 0.27 0.25 0.18 0.19 0.23 0.26
Net realized and unrealized gains (losses)
on investments ....................... 0.43 2.33 0.64 1.50 1.11 2.20 (0.67) (0.10)
-------- ------- -------- -------- -------- -------- -------- -------
Total from Investment Activities........ 0.45 2.60 0.89 1.68 1.30 2.43 (0.41) (0.10)
-------- ------- -------- -------- -------- -------- -------- -------

Distributions

Net investment income................... (0.04) (0.28) (0.23) (0.21) (0.19) (0.24) (0.24)
Net realized gains...................... -- (1.38) (1.37) (0.24) (0.39)
--------- -------- -------- -------- --------
Total Distributions..................... (0.04) (1.66) (1.60) (0.45) (0.58) (0.24) (0.24)
--------- -------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD...............$ 14.59 $ 13.62 $ 12.68 $ 13.39 $ 12.16 $ 11.44 $ 9.25 $ 9.90
========== ======== ======== ======== ======== ======== ======== =======
Total Return (Excludes Sales Charge).........(3.76)%(b) 23.54% 7.39% 14.04% 11.57% 27.50% (4.29%) (1.00%)

RATIOS/SUPPLEMENTAL DATA:

Net Assets, End of Period (000).............. $1,021 $409,549 $263,227 $257,405 $227,839 $177,472 $121,754 $80,046
Ratio of expenses to average net assets...... 1.70%(c) 0.92% 0.89% 0.89% 0.91% 0.91% 0.91% 0.75%(c)
Ratio of net investment income to average
net assets ............................... (0.40%)(c) 2.11% 2.06% 1.45% 1.63% 2.06% 2.75% 1.39%(c)
Ratio of expenses to average net assets(d)... 1.72%(c) 0.95% 1.10% 0.90%
Ratio of net investment income to average
net assets(d) ............................. (0.42)%(c) 2.07% 1.86% 1.43%
Portfolio turnover........................... 50.24% 75.05% 103.62% 86.32% 74.83% 50.78% 63.10% 3.00%

</TABLE>
- -------------------------
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) During the period , certain fees were voluntarily reduced and/or
reimbursed. If such voluntary fee reductions and/or reimbursements had
not occurred, the ratios would have been as indicated.
(e) Effective June 5, 1995, the Victory Equity Income Portfolio merged into
the Value Fund. Financial highlights for the periods prior to June 5,
1995 represent the Value Fund.
(f) This information is not included in the financial statements audited by
Coopers & Lybrand L.L.P.
(g) Effective March 1, 1996, the Fund designated the existing shares as
Class A Shares and commenced offering Class B Shares.

- 5 -
<PAGE>

INVESTMENT OBJECTIVE

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

INVESTMENT POLICIES AND RISK FACTORS

SUMMARY OF PRINCIPAL INVESTMENT POLICIES

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

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

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

ADDITIONAL INFORMATION REGARDING THE FUND'S INVESTMENTS

The following paragraphs provide a brief description of some of the types of
securities in which the Fund may invest in accordance with its investment
objective, policies and limitations, including certain transactions it may make
and strategies it may adopt. The following also contains a brief description of
certain risk factors. The Fund may, following notice to its shareholders, take
advantage of other investment practices which are not at present contemplated
for use by the Fund or which currently are not available but which may be
developed, to the extent such investment practices are both consistent with the
Fund's investment objective and are legally permissible for the Fund. Such
investment practices, if they arise, may involve risks which exceed those
involved in the activities described in this Prospectus.

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

- 6 -
<PAGE>

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

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

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

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

- 7 -
<PAGE>

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").

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 Trustees. The Fund will limit its securities lending to 33 1/3% of total
assets.

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

o VARIABLE AND FLOATING RATE SECURITIES. The Fund may purchase investment grade
variable and floating rate notes. The interest rates on these securities may be
reset daily, weekly, quarterly, or some other reset period, and may be subject
to a floor or ceiling. There is a risk that the current interest rate on such
obligations may not accurately reflect existing market interest rates. There may
be no active secondary market with respect to a particular variable or floating
rate note. Variable and floating rate notes for which no readily available
market exists will be purchased in an amount which, together with other illiquid
securities held by the Fund, does not exceed 15% of the Fund's 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

- 8 -
<PAGE>

collateral held pursuant to the agreement at not less than the repurchase price
(including accrued interest). If the seller were to default on its repurchase
obligation or become insolvent, the Fund would suffer a loss to the extent that
the proceeds from a sale of the underlying portfolio securities were less than
the repurchase price, or to the extent that the disposition of such securities
by the Fund was delayed pending court action. Repurchase agreements may be
considered by the staff of the Commission to constitute loans by the Fund.

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 Commission, the
Fund may invest in the money market funds of the Victory Portfolios. Key
Advisers or the Sub-Adviser will waive its fee attributable to the Fund's assets
invested in a money market fund of the Victory Portfolios, and, to the extent
required by the laws of any state in which shares of the Fund are sold, Key
Advisers or the Sub-Adviser will waive its investment advisory fees as to all
assets invested in other investment companies. Because such other investment
companies employ an investment adviser, such investment by the Fund will cause
shareholders to bear duplicative fees, such as management fees, to the extent
such fees are not waived by Key Advisers or the Sub-Adviser.

o PRIVATE PLACEMENT INVESTMENTS. The Fund may invest in high quality commercial
paper issued in reliance on the exemption from registration afforded by Section
4(2) of the Securities Act of 1933, as amended (the "1933 Act"). Section 4(2)
commercial paper ("commercial paper") is generally sold to institutional
investors, such as the Fund, that agree that they are purchasing the paper for
investment purposes and not with a view to public distribution. Any resale by
the purchaser must be in an exempt transaction. 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
Trustees are 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,

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<PAGE>

on securities underlying the options. The Fund intends to limit its investments
in call and index options to 25% of its total assets.

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

The options described in this section are frequently referred to as derivative
securities. In general, derivative securities are instruments whose value is
based upon, or derived from, some underlying index, reference rate (e.g.,
interest rates or currency exchange rates), security, commodity, or other
assets.

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

INVESTMENT LIMITATIONS

1. The Fund may not borrow money other than (a) by entering into
commitments to purchase securities in accordance with its investment
program, including delayed-delivery and when-issued securities and
reverse repurchase agreements, provided that the total amount of such
commitments do not exceed 33=% 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.

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<PAGE>

HOW TO INVEST, EXCHANGE AND REDEEM

HOW TO INVEST

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

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

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

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<PAGE>

o HOW ARE SHARES PURCHASED? Shares may be purchased directly or through an
Investment Professional of a securities broker or other financial institution
that has entered into a selling agreement with the Fund or the Distributor.
Shares are also available to clients of bank trust departments. The minimum
investment is $500 ($250 for Individual Retirement Accounts) for the initial
purchase and $25 thereafter. Accounts set up through a bank trust department or
an Investment Professional may be subject to different minimums. When you buy
shares, be sure to specify Class A or Class B shares. If you do not make a
selection, your investment will be made in Class A shares.

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

o INVESTING THROUGH YOUR BANK TRUST DEPARTMENT. Your bank trust department may
require a different minimum investment and may charge additional fees. Fee
schedules for such accounts are available upon request and are detailed in the
agreements by which a client opens the desired account. Your bank trust
department may require a completed and signed application for the Fund in which
an investment is made. Additional documents may be required from corporations,
associations, and certain fiduciaries. Any account information, such as
balances, should be obtained through your bank trust department. Additional
purchases, exchanges or redemptions should also be coordinated through your bank
trust department. Contact your bank trust department for instructions.

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

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<PAGE>

INVESTING DIRECTLY

o BY MAIL:

You may purchase shares by completing and signing an Account Application
(initial purchase only) and mailing it, together with a check (or other
negotiable bank draft or money order) in the amount of at least the minimum
investment requirement to:

The Victory Funds
P. O. Box 8527
Boston, MA 02266-8527

o BY WIRE:

YOU MUST CALL THE TRANSFER AGENT BEFORE WIRING FUNDS. Federal Funds should be
wired to:

State Street Bank and Trust Company
ABA # 011000028
For Credit to DDA Account # 9905-201-1
For further credit to Account # (insert your account
number, name and control number assigned by the
Transfer Agent)

The Fund does not impose a fee for wire transactions, although your bank may
charge you a fee for this service.

o BY ACH:

The purchase amount will be transferred between the bank account designated and
your fund account via automated clearing house ("ACH"). Only a bank account
maintained in a domestic financial institution which is an ach member may be so
designated. The fund may modify or terminate the telephone and/or ach privilege
at any time or charge a service fee upon notice to shareholders. No such fee is
currently contemplated by the Fund; however, your bank may charge you a fee for
this service. If the designated bank account does not contain sufficient assets
at the time your order is processed, the order may be cancelled, and you could
be liable for resulting fees and/or losses. NOTE THAT THIS SERVICE REQUIRES
APPROXIMATELY 15 DAYS TO ESTABLISH. THEREFORE, IT MAY NOT BE APPLICABLE TO
REQUEST YOUR INITIAL PURCHASE UTILIZING THIS METHOD.

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

INVESTMENT REQUIREMENTS

All purchases made by check must be in U.S. dollars and made payable to the
Victory Funds, or in the case of a retirement account, the custodian or trustee.
Third party checks will not be accepted. Checks must be drawn on U.S. banks. No
cash will be accepted. If you make a purchase with more than one check, each
check must have a value of at least $25, and the minimum investment requirement
still applies. The Fund or Transfer Agent reserves the right to limit the number
of checks processed at one time. If your check does not clear, your purchase
will be canceled and you could be liable for any losses or fees incurred.
Payment for the purchase is expected at the time of the order. If payment is not
received within three business days of the date of the order, the order may be
canceled, and you could be held liable for resulting fees and/or losses.

Class A Shares. Class A shares are sold at their offering price, which is
normally net asset value plus an initial sales charge. However, in some cases,
described below, where purchases are not subject to an initial sales charge, the
offering price may be net asset value. In some cases, reduced sales charges may
be available, as described below. When you invest, the Fund receives the net

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<PAGE>

asset value for your account. The sales charge varies depending on the amount of
your purchase and a portion may be retained by the Distributor and allocated to
your Investment Professional. The Victory Portfolios has a reinstatement policy
which allows an investor who redeems shares originally purchased with a sales
charge to reinvest within 90 days without incurring an additional sales charge.
The current sales charge rates and commissions paid to Investment Professionals
are as follows:

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

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

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

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<PAGE>

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

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

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

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<PAGE>

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

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

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

In the table, a "year" is a 12-month period. Purchases will age based on trade
date of purchase. For example, a purchase made on January 1 will be one year old
on January 1 of the following year.

O WAIVERS OF CLASS B CDSC. The Class B CDSC will be waived if the shareholder
requests it for any of the following redemptions: (1) distributions to
participants or beneficiaries from Retirement Plans, if the distributions are
made (a) under an Automatic Withdrawal Plan after the participant reaches age
59- 1/2, as long as the payments are no more than 12% of the account value
annually (measured from the date the Transfer Agent receives the request), or
(b) following the death or disability (as defined in the Internal Revenue Code)
of the participant or the beneficial owner; (2) redemptions from accounts other
than Retirement Plans following the death or disability of the shareholder (as
evidenced by a determination of disability by the Social Security
Administration), (3) returns of excess contributions to Retirement Plans; and
(4) distributions of not more than 12% of the account value annually under an
automatic withdrawal plan.

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

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<PAGE>

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

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

SPECIAL INVESTOR SERVICES

O THE SYSTEMATIC INVESTMENT PLAN. You can make regular investments in the Fund
with the Systematic Investment Plan by completing the appropriate section of the
Account Application and attaching a voided personal check with your bank's
magnetic ink coding number across the front. If your bank account is jointly
owned, be sure that all owners sign. You must first meet the Fund's initial
investment requirement of $500, then investments may be made monthly, quarterly,
semi-annually or annually by automatically deducting $25 or more from your bank
account. For officers, trustees, directors and employees, including retired
directors and employees, of the Victory Group, KeyCorp and its affiliates, and
the Administrator and its affiliates (and family members of each of the
foregoing) who participate in the Systematic Investment Plan, there is no
minimum initial investment required. You may change the amount of your purchase
at any time. Your bank checking account will be debited on the date indicated on
your Account Application. Shares will be purchased at the offering price next
determined following receipt of the order by the Transfer Agent. You may cancel
the Systematic Investment Plan at any time without payment of a cancellation
fee. Your monthly account statement will reflect systematic investment
transactions, and a debit entry will appear on your bank statement.

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<PAGE>

exhausted. If any applicable sales charges are applied to new purchases of
shares of the Fund, it is to your disadvantage to buy shares of the Fund while
also making systematic redemptions. Your account cannot be closed automatically
by depleting the assets in your Systematic Withdrawal Plan.

HOW TO EXCHANGE

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

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

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

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

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

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<PAGE>

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

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

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

Key Mutual Funds, which is managed by Key Advisers and Spears, Benzak, Salomon &
Farrell, Inc., both affiliates of KeyCorp, is a part of the Victory Group. BISYS
Fund Services is the Administrator and Distributor for Key Mutual Funds.
Exchange privileges applicable to the Victory Group will also apply to Key
Mutual Funds. Exchanges of shares involve a redemption of the shares of the Fund
and a purchase of shares of the other fund of the Victory Group.

There are certain exchange policies you should be aware of:

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

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

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

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

HOW TO REDEEM

You may redeem all or a portion of your shares on any day that the Fund is open
for business (see the definition of "Business Day" under "Shareholder Account
Rules and Policies--Share Price"). Shares will be redeemed at the NAV next
calculated after the Transfer Agent has received the redemption request.

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<PAGE>

You may redeem shares in several ways:

O BY MAIL. Send a written request to: The Victory Funds
P.O. Box 8527
Boston, MA 02266-8527

O BY WIRE. You may make redemptions by wire provided you have established a Fund
account to accommodate wire transactions. If telephone instructions are received
before Valuation Time (normally 4:00 p.m. Eastern time), proceeds of the
redemption will be wired as federal funds on the next Business Day to the bank
account designated with the Transfer Agent. You may change the bank account
designated to receive an amount redeemed at any time by sending a letter of
instruction with a signature guarantee to the Victory Funds at P.O. Box 8527,
Boston, MA 02266-8527.

O ADDITIONAL REDEMPTION REQUIREMENTS. When purchases are made by check or
periodic account investment, payments on redemptions may be delayed until the
investment being redeemed has been in the account for 15 calendar days. Also,
when the NYSE is closed (or when trading is restricted) for any reason other
than its customary weekend or holiday closings, or under any emergency
circumstances as determined by the Commission to merit such action, the right of
redemption may be suspended or the date of payment postponed for a period of
time that may exceed 7 days. In addition, the Fund reserves the right to advance
the time on that day by which purchase and redemption orders must be received.
To the extent that portfolio securities are traded in other markets on days when
the NYSE is closed, the Fund's NAV may be affected on days when investors do not
have access to the Fund to purchase or redeem shares.

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<PAGE>

SHAREHOLDER ACCOUNT RULES AND POLICIES

O SHARE PRICE. The term "net asset value per share," or "NAV", means the value
of one share. The NAV of each class of shares is calculated by adding the value
of all the Fund's investments, plus cash and other assets, deducting liabilities
of the Fund and of the class, and then dividing the result by the number of
shares of the class outstanding. The NAV of the Fund is determined and its
shares are priced as of the close of regular trading of the NYSE 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 will not be open in observance of the following
holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor 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 Trustees believe
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.

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

o Payment for redeemed shares is 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 Securities and Exchange Commission delaying or suspending such payments. The
Transfer Agent may delay forwarding a check for recently purchased shares, but
only until the purchase payment has cleared. That delay may be as much as 15
days from the date the shares were purchased. That delay may be avoided if you
arrange with your bank to provide telephone or written assurance to the Transfer
Agent that your purchase payment has cleared.

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<PAGE>

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

DIVIDENDS, DISTRIBUTIONS AND TAXES

DISTRIBUTIONS

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

DISTRIBUTION OPTIONS

When you fill out your Account Application, you can specify how you want to
receive your dividend distributions. Currently, there are five available
options:

3. INCOME EARNED OPTION. You will have your capital gain dividend
distributions, if any, reinvested automatically in the Fund at the NAV
of your class of shares of the Fund as of the day after the record
date, and have your income dividends paid in cash.

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<PAGE>

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

5. DIRECTED BANK ACCOUNT OPTION. You will have your income and capital
gain dividends, or only your income dividends, automatically
transferred to your bank checking or savings account. The amount will
be determined on the dividend record date and will normally be
transferred to your account within 7 days of the dividend record date.
Dividend distributions can be directed only to an existing account with
a registration that is identical to that of your Fund account. Please
call or write the Transfer Agent to learn more about this dividend
distribution option.

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

O STATEMENTS AND REPORTS. You will receive a monthly statement reflecting all
transactions that affect the share balance or the registration of your Fund
account. You will receive a confirmation after every transaction that affected
the share balance of your Fund account, except for dividend reinvestment,
systematic investment and systematic withdrawal transactions. These transactions
will be detailed in your Fund account statement. Transactions that affect the
share balance of your Fund investment in an account established with an
Investment Professional or financial institution will be detailed in regular
statements or through confirmation procedures of the financial institution.
Certificates representing shares of the Fund will not be issued. An Internal
Revenue Service ("IRS") Form 1099-DIV with federal tax information will be
mailed to you by January 31 of each tax year and also will be filed with the
IRS. At least twice a year, you will receive the Fund's financial reports.

O COMPLETE REDEMPTIONS. If you request a complete redemption of all your Fund
shares, any dividend accrued to your account will be included in the redemption
check.

FEDERAL TAXES

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<PAGE>

Distributions 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
gains, regardless of the length of time shareholders have held their shares.
Such distributions are not eligible for the dividends-received deduction. If a
shareholder disposes of shares in the Fund at a loss before holding such shares
for more than six months, the loss will be treated as a long-term capital loss
to the extent that the shareholder has received a capital 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 IRS) by January 31 showing the amounts and tax status of distributions
made (or deemed made) during the preceding calendar year.

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

PERFORMANCE

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.

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<PAGE>

Investors may also judge, and the Victory Portfolios may at times advertise, the
performance of the Fund by comparing it to the performance of other mutual funds
with comparable investment objectives and policies, which performance may be
contained in various unmanaged mutual fund or market indices or rankings such as
those prepared by Dow Jones & Co., Inc. and Standard & Poor's Corporation, in
publications issued by Lipper Analytical Services, Inc., and in the following
publications: IBC'S MONEY FUND REPORTS, VALUE LINE MUTUAL FUND SURVEY,
MORNINGSTAR, CDA/WIESENBERGER, MONEY MAGAZINE, FORBES, BARRON'S, THE WALL STREET
JOURNAL, THE NEW YORK TIMES, BUSINESS WEEK, AMERICAN BANKER, FORTUNE,
INSTITUTIONAL INVESTOR, U.S.A. TODAY and local newspapers. In addition, general
information about the Fund that appears in publications such as those mentioned
above may also be quoted or reproduced in advertisements, sales literature or in
reports to shareholders.

FUND ORGANIZATION AND FEES

The Victory Portfolios is an open-end management investment company, commonly
known as a mutual fund, and currently consisting of twenty-four series
portfolios. The Victory Portfolios has been operating continuously since 1986,
when it was created under Massachusetts law as a Massachusetts business trust
although certain of its funds have a prior operating history from their
predecessor funds. On February 29, 1996, the Victory Portfolios converted from a
Massachusetts business trust to a Delaware Trust. The Victory Portfolios'
offices are located at 3435 Stelzer Road, Columbus, Ohio 43219-3035.

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

INVESTMENT ADVISER AND SUB-ADVISER

KeyCorp Mutual Fund Advisers, Inc. is the investment adviser to the Fund. Key
Advisers directs the investment of the Fund's assets, subject at all times to
the supervision of the of Trustees. Key Advisers continually conducts investment
research and supervision for the Fund and is responsible for the purchase or
sale of the Fund investments.

For the services provided and expenses incurred pursuant to the investment
advisory agreement between the Victory Portfolios respecting the Fund, Key
Advisers is entitled to receive a fee, computed daily and paid monthly, at an
annual rate of sixty-five one-hundredths of one percent (.65%) of the average
daily net assets of the Fund. The advisory fees for the Fund have been
determined to be fair and reasonable in light of the services provided to the
Fund. Key Advisers may periodically waive all or a portion of its advisory fee
with respect to the Fund. Prior to January 1, 1996, Society Asset Management,
Inc. served as investment adviser to the Fund. During the Fund's fiscal year
ended October 31, 1995, Society Asset Management, Inc. earned investment
advisory fees aggregating .61% of the average daily net assets of Class A shares
of the

- 25 -
<PAGE>

Fund.

Under the investment advisory agreement between the Victory Portfolios, on
behalf of the Fund and Key Advisers (the "Investment Advisory Agreement"), the
Adviser may delegate a portion of its responsibilities to a sub-adviser. Key
Advisers has entered into an investment sub-advisory agreement with its
affiliate, Society Asset Management, Inc., a registered investment adviser, on
behalf of the Fund ("Sub-advisory Agreement"). The Sub-Adviser is a wholly-owned
subsidiary of KeyCorp Asset Management Holdings, Inc. The Investment Advisory
Agreement and the Sub-advisory Agreement, respectively, provide that Key
Advisers and the Sub-Adviser, respectively, may render services through their
own employees or the employees of one or more affiliated companies that are
qualified to act as an investment adviser of the Fund and are under the common
control of KeyCorp as long as all such persons are functioning as part of an
organized group of persons, managed by authorized officers of Key Advisers and
the Sub-Adviser, respectively. Key Advisers and the Sub-Adviser, respectively,
will be as fully responsible to the Fund for the acts and omissions of such
persons as they are for their own acts and omissions.

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

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

Lawrence G. Babin Commencement of Portfolio Manager with Society
Operations Asset Management, Inc. since

1993; Portfolio Manager with
Society National Bank since
1981.

EFFECT OF BANKING LAWS

Key Advisers and the Sub-Adviser believe that they may perform the investment
advisory services for the Fund contemplated by the Investment Advisory Agreement
without violating the Glass-Steagall Act or other applicable banking laws or
regulations and that they or their affiliates can perform the other services
indicated above. Changes in either federal or state statutes and regulations
relating to the permissible activities of banks and their subsidiaries or
affiliates, as well as further judicial or administrative decisions or
interpretations of present or future statutes and regulations could prevent the
Key Advisers, the Sub-Adviser and their affiliates from continuing to perform
all or a part of the above services for their customers and/or the Fund. In such
event, changes in the operation of the Fund may occur, including the possible
alteration or termination of any service then being provided by Key Advisers,
the

- 26 -
<PAGE>

Sub-Adviser and their affiliates, and the Trustees would consider alternate
investment advisers and other means of continuing available services. It is not
expected that the Fund's shareholders would suffer any adverse financial
consequences (if other service providers are retained) as a result of any of
these occurrences.

ADMINISTRATOR AND DISTRIBUTOR

BISYS Fund Services is the Administrator, principal underwriter and Distributor
for the Fund.

BISYS sells shares of the Fund as agent on behalf of the Victory Portfolios at
no cost to the Fund. Key Advisers and the Sub-Adviser neither participate in nor
are responsible for the underwriting of Fund shares.

TRANSFER AGENT

State Street Bank and Trust Company, 225 Franklin Street, Boston, MA 02110-3875
("State Street" or the "Transfer Agent") serves as the Transfer Agent for the
Funds, and receives a fee for such services based on various criteria, including
assets, transactions and number of accounts. Boston Financial Data Services,
Inc., Two Heritage Drive, Quincy, MA 02171 ("BFDS") is the dividend disbursing
agent and provides certain shareholder services to the Fund.

SHAREHOLDER SERVICING PLAN

FUND ACCOUNTANT

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

CUSTODIAN

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

- 27 -
<PAGE>

INDEPENDENT ACCOUNTANTS

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

BUSINESS MANAGEMENT AGREEMENT

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

EXPENSES

For the fiscal year ended October 31, 1995, total operating expenses for Class A
shares were .95% of average net assets, excluding certain voluntary fee
reductions or reimbursements. For the fiscal period ended April 30, 1996, total
operating expenses for Class B shares were 1.72% of average net assets,
excluding certain voluntary fee reductions or reimbursements.

ADDITIONAL INFORMATION

The Victory Portfolio's Board of Trustees may authorize the Victory Portfolios
to offer other funds which may differ in the types of securities in which their
assets may be invested.

Key Advisers, the Sub-Adviser and the Victory Portfolios have each adopted a
Code of Ethics (the "Codes") 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 Trustees review their Codes and any
substantial violations of the Codes. Violations of the Codes may result in
censure, monetary penalties, suspension or termination of employment.

- 28 -
<PAGE>

DELAWARE LAW

In the unlikely event a shareholder is held personally liable for the Victory
Portfolios' obligations, the Victory Portfolios will be required to use its
property to protect or compensate the shareholder. On request, the Victory
Portfolios will defend any claim made and pay any judgment against a shareholder
for any act or obligation of the Victory Portfolios. Therefore, financial loss
resulting from liability as a shareholder will occur only if the Victory
Portfolios itself cannot meet its obligations to indemnify shareholders and pay
judgments against them.

Delaware law authorizes electronic or telephone communications between
shareholders and the Victory Portfolios. Under Delaware law, the Victory
Portfolios will have the flexibility to respond to future business
contingencies. For example, the Trustees have the power to incorporate the
Victory Portfolios, to merge or consolidate it with another entity, to cause
each fund to become a separate trust, and to change the Victory Portfolio's
domicile without a shareholder vote. This flexibility could help reduce the
expense and frequency of future shareholder meetings for non-investment related
issues.

MISCELLANEOUS

As of the date of this Prospectus, the Fund offers only the classes of shares
that are offered by this Prospectus. Subsequent to the date of this Prospectus,
the Fund may offer additional classes of shares through a separate prospectus.
Any such additional classes may have different charges and other expenses, which
would affect investment performance. To obtain a free prospectus of another
class of shares or to obtain additional information, call your Investment
Professional , call (800) 539-3863 or write to the address listed below.

Inquiries regarding the Victory Portfolios or the Fund may be directed in
writing to the Victory Portfolios at The Victory Funds at P.O. Box 8527, Boston,
MA 02266-8527, or by telephone, toll-free, at 800-539-3863.

- 29 -
<PAGE>

- 30 -

<PAGE>
Rule 497(c)
Registration No. 33-8982

MANAGED BY KEYCORP

THE VICTORY INTERNATIONAL GROWTH FUND

JULY 30, 1996

<PAGE>

THE
VICTORY
PORTFOLIOS
INTERNATIONAL GROWTH FUND

PROSPECTUS For current yield, purchase, and redemption information,
July 30, 1996 call 800-KEY-FUND or 800-539-3863

THE VICTORY PORTFOLIOS (the "Victory Portfolios") is a registered open-end
management investment company that offers investors a selection of money market,
fixed-income, municipal bond, domestic and international equity portfolios. This
Prospectus relates to the INTERNATIONAL GROWTH FUND (the "Fund"), a diversified
portfolio. KeyCorp Mutual Fund Advisers, Inc., Cleveland, Ohio, an indirect
subsidiary of KeyCorp, is the investment adviser to the Fund ("Key Advisers" or
the "Adviser"). Society Asset Management, Inc., Cleveland, Ohio, an indirect
subsidiary of KeyCorp, is the investment sub-adviser to the Fund (the
"Sub-Adviser"). BISYS Fund Services ("BISYS") is the Fund's administrator (the
"Administrator") and distributor (the "Distributor").

The Fund seeks to provide capital growth consistent with reasonable investment
risk. The Fund pursues this objective by investing primarily in equity
securities of foreign corporations, most of which will be denominated in foreign
currencies.

Please read this Prospectus before investing. It is designed to provide you with
information and to help you decide if the Fund's goals match your own. Retain
this document for future reference. A Statement of Additional Information (dated
July 30, 1996) for the Fund, an audited annual report for the Fund's fiscal year
ended October 31, 1995 and an unaudited semi-annual report for the six months
ended April 30, 1996 have been filed with the Securities and Exchange Commission
(the "Commission") and are incorporated herein by reference. All of these
documents are available without charge upon request by writing to the Victory
Funds at P.O. Box 8527, Boston, MA 02266-8527, or by calling 800-539-3863.

SHARES OF THE FUND ARE:

O NOT INSURED BY THE FDIC;

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

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

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

Fund Expenses.............................................................. 3
Financial Highlights....................................................... 5
Investment Objective....................................................... 6
Investment Policies and Risk Factors....................................... 6
How to Invest, Exchange and Redeem......................................... 12
Dividends, Distributions and Taxes......................................... 24
Performance................................................................ 26
Fund Organization and Fees................................................. 27
Additional Information..................................................... 30

- 2 -
<PAGE>

FUND EXPENSES

The table below summarizes the expenses associated with the Fund. This
standard format was developed for use by all mutual funds to help an investor
make investment decisions. You should consider this expense information along
with other important information in this Prospectus, including the Fund's
investment objectives, policies and risk factors.

SHAREHOLDER TRANSACTION EXPENSES(1)

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

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

ANNUAL FUND OPERATING EXPENSES (as a
percentage of average daily net assets)

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

Management Fees................................ 1.10% 1.10%
Administrative Fees.......................... .15% .15%
Rule 12b -1 Distribution Fees................ .00% .75%
Other Expenses(2)............................ .45% 1.10%
---- ----
Total Fund Operating Expenses(2)............... 1.70% 3.10%
==== ====

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

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

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

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

International Growth Fund --
Class A Shares $64 $ 99 $135 $239

International Growth Fund --
Class B Shares $81 $126 $183 $308

The purpose of the table above is to assist the investor in understanding
the various costs and expenses that an investor in the Fund will bear directly
or indirectly. See "Fund Organization and Fees" for a more complete discussion
of annual operating expenses of the Fund. The foregoing example is based upon
expenses for the fiscal year ended October 31, 1995 for Class A shares, the
period ended April 30, 1996 for Class B shares and expenses that the Fund is
expected to incur during the remainder of the current fiscal year. THE FOREGOING
EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES.
ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.

- 3 -
<PAGE>

FINANCIAL HIGHLIGHTS

The table below sets forth certain financial information with respect to
the financial highlights for the Fund for the periods indicated. For Class A
shares, the information below for the fiscal year ended October 31, 1995 has
been derived from financial statements audited by Coopers & Lybrand L.L.P.,
independent accountants for the Victory Portfolios, whose report thereon,
together with the financial statements of the Fund, is incorporated by reference
into the Statement of Additional Information. The information below for Class B
shares, for the fiscal period ended April 30, 1996 has not been audited. The
information set forth below is for a Class A share and a Class B share
outstanding for each period indicated.

<TABLE>
<CAPTION>
The Victory International Growth Fund

Class A Shares
Year Ended October 31,
Class B Shares --------------------------------------------------------------- MAY 18, 1990
March 1, 1996 TO
to OCTOBER 31,
April 30, 1996(a)(f) 1995(e) 1994 1993 1992 1991 1990(a)(g)
------------------- ------- ---------- ---------- ----------- --------- -------------
(unaudited)

NET ASSET VALUE, BEGINNING OF
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PERIOD...... $12.79 $13.32 $11.93 $ 8.93 $ 9.20 $ 9.46 $10 .00
------ ------ ------ ------ ------ ------ --- ---
Investment Activities
Net investment income (loss)...... -- 0.05 (0.01) (0.03) (0.02) 0.51 0 .09
Net realized and unrealized
gains (losses) on investments
and foreign currencies... 0.54 (0.42) 1.40 3.03 (0.17) (0.25) (0.55)
---- ----- ---- ---- ----- ----- -----
Total from Investment Activities.. 0.54 (0.37) 1.39 3.00 (0.19) 0.26 (0.46)
---- ----- ---- ---- ----- ---- -----
Distributions:
Net investment income............. -- (0.01) (0.52) (0.08)
Net realized gains................ -- (0.62) (0.07)
---- ----- ----- ----- -----
Total Distributions.......... -- (0.62) . . (0.08) (0.52) (0.08)
---- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD.... $13.33 $12.33 $13.32 $11.93 $ 8.93 $ 9.20 $ 9.46
====== ====== ====== ====== ====== ====== ======
Total Return (Excludes Sales
Charge)...... 4.22%(b) (2.50%) 11.65% 33.59% (2.08%) 2.93% (4.54%)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000)... $64 $106,477 $81,307 $30,629 $11,091 $5,682 $9,878
Ratio of expenses to average
net assets... 2.45%(c) 1.49% 1.48% 1.46% 1.56% 1.72% 1.70%(d)
Ratio of net investment income
(loss) to average net assets).... 0.27%(c) 0.75% (0.51%) (0.74%) (0.20%) 5.97% 2.51%(d)
Ratio of expenses to average net
assets(d)..................... 3.20%(c) 1.65% 1.83% 1.63% 1.72%
Ratio of net investment loss to
average net assets(d)............ (0.49)%(c) 0.59% (0.86%) (0.91%) (0.35%)
Portfolio turnover................ 101.51% 68.09% 50.66% 45.43% 91.92% 102.53% 12.16%

</TABLE>

- -------
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) During the period, certain fees were voluntarily reduced and/or
reimbursed. If such voluntary fee reductions and/or reimbursements had
not occurred, the ratios would have been as indicated.
(e) Effective June 5, 1995, the Victory Foreign Markets Portfolio merged
into the Fund. Financial highlights for the periods prior to June 5,
1995 represent the Fund.
(f) Effective March 1, 1996, the Fund designated the existing shares as
Class A Shares and commenced offering Class B shares.
(g) This information is not included in the financial statements audited by
Coopers & Lybrand L.L.P.

- 4 -
<PAGE>

INVESTMENT OBJECTIVE

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

INVESTMENT POLICIES AND RISK FACTORS

SUMMARY OF PRINCIPAL INVESTMENT POLICIES

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

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

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

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

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

- 5 -
<PAGE>

Additionally, as long the Fund's shares are registered under the securities laws
of the State of Texas and such restrictions are required as a consequence of
such registration, the Fund will invest only in debt securities which are rated
at the time of purchase within the three highest rating groups assigned by an
NRSRO, or if unrated, those securities which Key Advisers or the Sub-Adviser
deems to be of comparable quality.

ADDITIONAL INFORMATION REGARDING THE FUND'S INVESTMENTS

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

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

When the Fund invests in foreign securities, such securities will usually be
denominated in foreign currency, and the Fund may temporarily hold funds in
foreign currencies. Thus, the value of the Fund's shares will be affected by
changes in currency exchange rates. The value of the Fund's investments
denominated in foreign currencies and any cash it holds in foreign currencies
will depend on the relative strength of those currencies and the U.S. dollar,
and the Fund may be affected favorably or unfavorably by exchange control
regulations or changes in the exchange rate between foreign currencies and the
U.S. dollar. The rate of exchange between the U.S. dollar and other currencies
is determined

- 6 -
<PAGE>

by the forces of supply and demand in the foreign exchange market as well as by
political factors. Changes in the foreign currency exchange rates may also
affect the value of dividends and interest earned, gains and losses realized on
the sale of securities and net investment income and gains, if any, to be
distributed to shareholders by the Fund. Accordingly, the Fund's ability to
achieve its investment objective will depend, to a great extent, on favorable
exchange rates. O ZERO COUPON BONDS. The Fund is permitted to purchase both zero
coupon U.S. government securities and zero coupon corporate securities ("zero
coupon bonds"). Zero coupon bonds are purchased at a discount from the face
amount because the buyer receives only the right to a fixed payment on a certain
date in the future and does not receive any periodic interest payments. The
effect of owning instruments which do not make current interest payments is that
a fixed yield is earned not only on the original investment but also, in effect,
on accretion during the life of the obligations. This implicit reinvestment of
earnings at the same rate eliminates the risk of being unable to reinvest
distributions at a rate as high as the implicit yields on the zero coupon bond,
but at the same time eliminates the holder's ability to reinvest at higher
rates. For this reason, zero coupon bonds are subject to substantially greater
price fluctuations during periods of changing market interest rates than are
comparable securities which pay interest periodically. The amount of price
fluctuation tends to increase as maturity of the security increases.

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

- 7 -
<PAGE>

- 8 -
<PAGE>

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 FUTURES CONTRACTS. The Fund may enter into contracts for the future delivery
of securities or foreign currencies and futures contracts based on a specific
security, class of securities, foreign currency or an index, purchase or sell
options on any such futures contracts and engage in related closing
transactions. A futures contract on a securities index is an agreement
obligating either party to pay, and entitling the other party to receive, while
the contract is outstanding, cash payments based on the level of a specified
securities index.

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

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

- 9 -
<PAGE>

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

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

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

INVESTMENT LIMITATIONS

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

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<PAGE>

investment limitations and provides additional information about investment
restrictions designed to reduce the risk of an investment in the Fund.

1. The Fund may not borrow money other than (a) by entering into
commitments to purchase securities in accordance with its investment
program, including delayed-delivery and when-issued securities and
reverse repurchase agreements, provided that the total amount of such
commitments do not exceed 33% 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.

HOW TO INVEST, EXCHANGE AND REDEEM

How To Invest

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<PAGE>

are redeemed within six years, you will normally pay a contingent deferred sales
charge ("CDSC") that varies depending on how long you own your shares.

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

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<PAGE>

balances, should be obtained through your bank trust department. Additional
purchases, exchanges or redemptions should also be coordinated through your bank
trust department. Contact your bank trust department for instructions.

INVESTING DIRECTLY

O BY MAIL:

The Victory Funds
P. O. Box 8527
Boston, MA 02266-8527

O BY WIRE:

YOU MUST CALL THE TRANSFER AGENT BEFORE WIRING FUNDS. Federal Funds
should be wired to:

State Street Bank and Trust Company
ABA # 011000028
For Credit to DDA Account # 9905-201-1
For further credit to Account # (insert your account number,
name and control number assigned by the Transfer Agent)

The Fund does not impose a fee for wire transactions, although your bank may
charge you a fee for this service.

o BY ACH:

Class A shares are sold at the public offering price based on the net asset
value that is next determined after the Transfer Agent receives the purchase
order. Class B shares are sold at net asset value per share, but may be subject
to a CDSC (see "Class B Shares"). In most cases, to receive that day's price,
the Transfer Agent must receive your order 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 (as defined in "Shareholder Account
Rules and Policies -- Share Price"). If you buy shares through an Investment
Professional, the Investment Professional must receive your order in a timely
fashion on a regular Business Day . 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

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<PAGE>

Transfer Agent may reject any purchase order for the Fund's shares, in its sole
discretion.

INVESTMENT REQUIREMENTS

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

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

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<PAGE>

is an amount equal to the difference between the applicable sales charge and
such part of the sales charge which is reallowed to broker-dealers.

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

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

- 15 -
<PAGE>

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

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

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

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

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<PAGE>

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

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

In the table, a "year" is a 12-month period. Purchases will age based on trade
date of purchase. For example, a purchase made on January 1 will be one year old
on January 1 of the following year.

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

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

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<PAGE>

SPECIAL INVESTOR SERVICES

O THE SYSTEMATIC INVESTMENT PLAN. You can make regular investments in the Fund
with the Systematic Investment Plan by completing the appropriate section of the
Account Application and attaching a voided personal check with your bank's
magnetic ink coding number across the front. If your bank account is jointly
owned, be sure that all owners sign. You must first meet the Fund's initial
investment requirement of $500, then investments may be made monthly, quarterly,
semi-annually or annually by automatically deducting $25 or more from your bank
account. For officers, trustees, directors and employees, including retired
directors and employees, of the Victory Group, KeyCorp and its affiliates, and
the Administrator and its affiliates (and family members of each of the
foregoing) who participate in the Systematic Investment Plan, there is no
minimum initial investment required. You may change the amount of your purchase
at any time. Your bank checking account will be debited on the date indicated on
your Account Application. Shares will be purchased at the offering price next
determined following receipt of the order by the Transfer Agent. You may cancel
the Systematic Investment Plan at any time without payment of a cancellation
fee. Your monthly account statement will reflect systematic investment
transactions, and a debit entry will appear on your bank statement.

Your account will be debited on the date you indicate on your Account
Application. Shares will be redeemed at the NAV as determined on the debit date
indicated on your Account Application. You may cancel the Systematic Withdrawal
Plan at any time without payment of a cancellation fee. Each Systematic
Withdrawal Plan transaction will appear as a debit entry on your monthly account
statement.

- 18 -
<PAGE>

O RETIREMENT PLANS. Retirement plans can be among the best tax-planning vehicles
available to individuals. Call your Investment Professional for more information
on the plans and their benefits, provisions and fees. Your Investment
Professional can set up your new account in the Fund under one of several
tax-sheltered plans. These plans let you invest for retirement and shelter your
investment income from current taxes. Plans include Individual Retirement
Accounts (IRAs) , Rollover IRAs and other retirement plans such as Simplified
Employee Pension Plans (SEP/IRA), Salary Reduction SEP (SAR-SEP/IRA), 401(k)
Plans and 403(b) Plans. Other fees may be charged by the IRA custodian or
trustee. Other fees may be charged by the IRA custodian or trustee.

HOW TO EXCHANGE

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

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

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

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

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

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

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<PAGE>

Key Mutual Funds, which is managed by Key Advisers and Spears, Benzak, Salomon &
Farrell, Inc., both affiliates of KeyCorp, is a part of the Victory Group. BISYS
is the Administrator and Distributor for Key Mutual Funds. Exchange privileges
applicable to the Victory Group will also apply to Key Mutual Funds. Exchanges
of shares involve a redemption of the shares of the Fund and a purchase of
shares of the other fund of the Victory Group.

There are certain exchange policies you should be aware of:

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

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

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

HOW TO REDEEM

You may redeem all or a portion of your shares on any day that the Fund is open
for business (see the definition of "Business Day" under "Shareholder Account
Rules and Policies--Share Price" ). Shares will be redeemed at the NAV next
calculated after the Transfer Agent has received the redemption request.

You may redeem shares in several ways:

O BY MAIL. Send a written request to: The Victory Funds
P.O. Box 8527
Boston, MA 02266-8527

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<PAGE>

Victory Group account with a different registration. The following institutions
should be able to provide you with a signature guarantee: banks, brokers,
dealers, credit unions (if authorized under state law), securities exchanges and
associations, clearing agencies, and savings associations. A signature guarantee
may not be provided by a notary public. A signature guarantee is designed to
protect you, the Fund and its agents from fraud. The Transfer Agent reserves the
right to reject any signature guarantee if (1) it has reason to believe that the
signature is not genuine, (2) it has reason to believe that the transaction
would otherwise be improper, or (3) the guarantor institution is a broker or
dealer that is neither a member of a clearing corporation nor maintains net
capital of at least $100,000.

O ADDITIONAL REDEMPTION REQUIREMENTS. When purchases are made by check or
periodic account investment, payments or redemptions may be delayed until the
investment being redeemed has been in the account for 15 calendar days. Also,
when the New York Stock Exchange ("NYSE") is closed (or when trading is
restricted) for any reason other than its customary weekend or holiday closings,
or under any emergency circumstances as determined by the Commission to merit
such action, the right of redemption may be suspended or the date of payment
postponed for a period of time that may exceed 7 days. In addition, the Fund
reserves the right to advance the time on that day by which purchase and
redemption orders must be received. To the extent that portfolio securities are
traded in other markets on days when the NYSE is closed, the Fund's NAV may be
affected on days when investors do not have access to the Fund to purchase or
redeem shares.

SHAREHOLDER ACCOUNT RULES AND POLICIES

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<PAGE>

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 will not be open in
observance of the following holidays: New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas.

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

o Payment for redeemed shares is 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 Securities and Exchange Commission delaying or suspending such payments. The
Transfer Agent may delay forwarding a check for recently purchased shares, but
only until the purchase payment has cleared. That delay may be as much as 15
days from the date the shares were purchased. That delay may be avoided if you
arrange with your bank to provide telephone or written assurance to the Transfer
Agent that your purchase payment has cleared.

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

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<PAGE>

separate service fee. Under the circumstances described in "How to Invest," you
may be subject to a CDSC when redeeming Class B shares.

DIVIDENDS, DISTRIBUTIONS AND TAXES

DIVIDENDS

DISTRIBUTION OPTIONS

When you fill out your Account Application, you can specify how you want to
receive your dividend distributions. Currently, there are five available
options:

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<PAGE>

distributions can be directed only to an existing account with a
registration that is identical to that of your Fund account.

Any election or revocation of any of the above dividend distribution options may
be made in writing to the Fund and sent to the Victory Funds at P.O. Box 8527,
Boston, MA 02266-8527, or by calling the Transfer Agent at 800-539-3863, and
will become effective with respect to dividends having record dates after
receipt of the Account Application or request by the Transfer Agent.

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

O COMPLETE REDEMPTIONS. If you request a complete redemption of all your Fund
shares, any dividend accrued to your account will be included in the redemption
check.

FEDERAL TAXES

- 24 -
<PAGE>

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.

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

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 such dividends were declared
to shareholders of record on a date in October, November or December of such
preceding year. The Fund sends tax statements to its shareholders (with copies
to the IRS) by January 31 showing the amounts and tax status of distributions
made (or deemed made) during the preceding calendar year, including the amount
of any foreign taxes "passed-through."

PERFORMANCE

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<PAGE>

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

FUND ORGANIZATION AND FEES

The Victory Portfolios is an open-end management investment company, commonly
known as a mutual fund, and currently consisting of twenty-four series
portfolios. The Victory Portfolios has been operating continuously since 1986,
when it was created under Massachusetts law as a Massachusetts business trust
although certain of its funds have a prior operating history from their
predecessor funds. On February 29, 1996, the Victory Portfolios converted to a
Delaware business trust from a Massachusetts business trust. The Victory
Portfolios' offices are located at 3435 Stelzer Road, Columbus, Ohio 43219-3035.

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

INVESTMENT ADVISER AND SUB-ADVISER

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<PAGE>

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 Asset Management, Inc. served as investment adviser to the
Fund. Clay Finlay Inc. served as sub-adviser to the Fund from November 1, 1994
until June 5, 1995. During the Fund's fiscal year ended October 31, 1995,
Society Asset Management, Inc. earned investment advisory fees aggregating .54%
of the Fund's average daily net assets, and Clay Finlay Inc. earned investment
sub-advisory fees aggregating .43% of the Fund's average daily net assets of the
Class A shares of the Fund.

Under the investment advisory agreement between the Victory Portfolios, on
behalf of the Fund, and Key Advisers (the "Investment Advisory Agreement"), the
Adviser may delegate a portion of its responsibilities to a sub-adviser. Key
Advisers has entered into an investment sub-advisory agreement with its
affiliate, Society Asset Management, Inc., a registered investment adviser, on
behalf of the Fund (the "Sub-advisory Agreement). The Sub-Adviser is a
wholly-owned subsidiary of KeyCorp Asset Management Holdings, Inc. The
Investment Advisory Agreement and the Sub-advisory Agreement, respectively,
provide that Key Advisers and the Sub-Adviser, respectively, may render services
through their own employees or the employees of one or more affiliated companies
that are qualified to act as an investment adviser of the Fund and are under the
common control of KeyCorp as long as all such persons are functioning as part of
an organized group of persons, managed by authorized officers of Key Advisers
and the Sub-Adviser, respectively, Key Advisers and the Sub-Adviser,
respectively, will be as fully responsible to the Fund for the acts and
omissions of such persons as they are for their own acts and omissions.

For its services under the investment sub-advisory agreement, Key Advisers pays
the Sub-Adviser fees as a percentage of average daily net assets as follows:
.90% of the first $10 million of average daily net assets; .70% of the next $15
million of average daily net assets; .55% of the next $25 million of average
daily net assets; and .45% of average daily net assets in excess of $50 million.

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

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

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

EFFECT OF BANKING LAWS

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<PAGE>

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.

ADMINISTRATOR AND DISTRIBUTOR

BISYS Fund Services is the Administrator, principal underwriter and Distributor
for the Fund.

TRANSFER AGENT

SHAREHOLDER SERVICING PLAN

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<PAGE>

bank wires, responding to routine inquires, forwarding shareholder
communications, assisting in the processing of purchase, exchange and redemption
requests, and assisting shareholders in changing dividend options, account
designations and addresses. Shareholder Servicing Agents may periodically waive
all or a portion of their respective shareholder servicing fees with respect to
the Fund.

FUND ACCOUNTANT

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

CUSTODIAN

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

INDEPENDENT ACCOUNTANTS

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

BUSINESS MANAGEMENT AGREEMENT

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

EXPENSES

For the fiscal year ended October 31, 1995, total operating expenses for Class A
shares were 1.65% of average net assets, excluding certain voluntary fee
reductions or reimbursements. For the fiscal period ended April 30, 1996, total
operating expenses for Class B shares were 3.20% of average net assets,
excluding certain voluntary fee reductions or reimbursements.

ADDITIONAL INFORMATION

- 29 -
<PAGE>

1940 Act or the 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 Victory Portfolios' outstanding shares may call a
special meeting of shareholders for the purpose of voting upon the question of
removal of Trustees.

The Victory Portfolio's Board of Trustees may authorize the Victory Portfolios
to offer other funds which may differ in the types of securities in which their
assets may be invested.

Key Advisers, the Sub-Adviser and the Victory Portfolios have each adopted a
Code of Ethics ( the "Codes") 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 Trustees review their Codes and any
substantial violations of the Codes. Violations of the Codes may result in
censure, monetary penalties, suspension or termination of employment.

DELAWARE LAW

Delaware law authorizes electronic or telephone communications between
shareholders and the Victory Portfolios. Under Delaware law, the Victory
Portfolios will have the flexibility to respond to future business
contingencies. For example, the Trustees will have the power to incorporate the
Victory Portfolios, to merge or consolidate it with another entity, to cause
each fund to become a separate trust, and to change the Victory Portfolio's
domicile without a shareholder vote. This flexibility could help reduce the
expense and frequency of future shareholder meetings for non-investment related
issues.

MISCELLANEOUS

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<PAGE>

The Fund intends to eliminate duplicate mailing 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.

Inquiries regarding the Victory Portfolios or the Fund may be directed in
writing to the Victory Funds at P.O. Box 8527, Boston, MA 02266-8527, or by
telephone, toll-free, at 800-539-3863.

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<PAGE>
Rule 497(c)
Registration No. 33-8982

MANAGED BY KEYCORP

THE VICTORY OHIO REGIONAL STOCK FUND

JULY 30, 1996
<PAGE>

The
VICTORY
Portfolios
OHIO REGIONAL STOCK FUND

PROSPECTUS For current yield, purchase and redemption information,
July 30, 1996 call 800-KEY-FUND or 800-539-3863

THE VICTORY PORTFOLIOS (the "Victory Portfolios") is a registered open-end
management investment company that offers investors a selection of money market,
fixed-income, municipal bond, domestic and international equity portfolios. This
Prospectus relates to the OHIO REGIONAL STOCK FUND (the "Fund"), a diversified
portfolio. KeyCorp Mutual Fund Advisers, Inc., Cleveland, Ohio, an indirect
subsidiary of KeyCorp, is the investment adviser to the Fund ("Key Advisers" or
the "Adviser"). Society Asset Management, Inc., Cleveland, Ohio, an indirect
subsidiary of KeyCorp, is the investment sub-adviser to the Fund (the
"Sub-Adviser"). BISYS Fund Services ("BISYS") is the Fund's
administrator (the "Administrator") and distributor (the "Distributor").

The Fund seeks to provide capital appreciation. The Fund pursues this objective
by investing primarily in common stocks and securities convertible into common
stocks issued by companies whose headquarters are located in the State of Ohio.

Please read this Prospectus before investing. It is designed to provide you with
information and to help you decide if the Fund's goals match your own. Retain
this document for future reference. A Statement of Additional Information (dated
July 30, 1996) for the Fund , an audited annual report for the Fund's fiscal
year ended October 31, 1995 and an unaudited semi-annual report for the six
months ended April 30, 1996 have been filed with the Securities and Exchange
Commission (the "Commission") and are incorporated herein by reference. All of
these documents are available without charge upon request by writing to The
Victory Funds, P.O. Box 8725, Boston, MA 02266-8725, or by calling 800-539-3863.

SHARES OF THE FUND ARE:

O NOT INSURED BY THE FDIC;

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

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

- 2 -
<PAGE>

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

Fund Expenses................................................................2
Financial Highlights.........................................................3
Investment Objective.........................................................4
Investment Policies and Risk Factors.........................................4
How to Invest, Exchange and Redeem...........................................8
Dividends, Distributions and Taxes..........................................18
Performance.................................................................20
Fund Organization and Fees..................................................20
Additional Information......................................................23

- 3 -
<PAGE>

FUND EXPENSES

SHAREHOLDER TRANSACTION EXPENSE(1)

CLASS A CLASS B

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

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

ANNUAL FUND OPERATING EXPENSES (as a percentage of average daily net assets)

CLASS A CLASS B

Management Fees .75% .75%
Administration Fees .15% .15%
Rule 12b-1 Distribution Fees .00% .75%
Other Expenses(2) .55% .85%
---- ----
Total Fund Operating Expenses(2) 1.45% 2.50%
==== ====

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

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

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

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

Shares $75 $108 $153 $258

The purpose of the table above is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. See "Fund Organization and Fees" for a more complete discussion of
annual operating expenses of the Fund. The foregoing example is based upon
expenses for the fiscal year ended October 31, 1995 for Class A shares, the
period ended April 30, 1996 for Class B Shares and expenses that the Fund is
expected to incur during the remainder of the current fiscal year. THE FOREGOING
EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES.
ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.

- 4 -
<PAGE>

FINANCIAL HIGHLIGHTS

The table below sets forth certain financial information with respect to the
financial highlights for the Fund for the periods indicated. For Class A shares,
the information below for the fiscal year ended October 31, 1995 has been
derived from financial statements audited by Coopers & Lybrand L.L.P.,
independent accountants for the Victory Portfolios, whose report thereon,
together with the financial statements of the Fund, is incorporated by reference
into the Statement of Additional Information. For Class B shares, the
information below for the fiscal period ended April 30, 1996, has not been
audited. The information set forth below is for a Class A share and a Class B
share outstanding for each period indicated.

THE VICTORY OHIO REGIONAL STOCK FUND

Class B Shares Class A Shares
-------------- ------------------------------------------------------------------------
October 20
March 1, 1996 1989 to,
through October 31
April 30, Year Ended October 31, 1989(a)(f)
1996(a)(e) ------------------------------------------------------------- ----------
-----------
(Unaudited) 1995 1994 1993 1992 1991 1990(f)
---- ---- ---- ---- ---- ----------

<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 16.43 $ 14.56 $ 14.69 $ 12.12 $ 11.15 $ 6.75 $ 9.72 $ 10.00
------- ------- ------- ------- ------- ------- ------- -------
Investment Activities
Net investment income -- 0.17 0.18 0.16 0.20 0.21 0.24
Net realized and unrealized gains
(losses) on investments 1.13 2.13 0.39 2.63 1.07 4.39 (2.98) (0.28)
---- ------- ------- ------- ------- ------- -------- --------
Total from Investment Activities 1.13 2.30 0.57 2.79 1.27 4.60 (2.74) (0.28)
==== ======= ======= ======= ======= ======= ======== ========
Distributions
Net investment income (0.03) (0.18) (0.17) (0.18) (0.21) (0.20) (0.23)
Net realized gains -- (0.74) (0.53) (0.04) (0.09)
-------- -------- -------- -------- --------
Total Distributions (0.03) (0.92) (0.70) (0.22) (0.30) (0.20) (0.23)
--------- -------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 17.53 $ 15.94 $ 14.56 $ 14.69 $ 12.12 $ 11.15 $ 6.75 $ 9.72
======== ======= ======= ======= ======= ======= ======= =======
Total Return (Excludes Sales Charge) 6.86%(b) 16.93% 3.96% 23.16% 11.50% 68.68% (28.63%) (2.80%)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000) $ 169 $39,048 $33,965 $34,926 $36,115 $27,092 $13,039 $20,277
Ratio of expenses to average net assets 2.12%(c) 1.20% 1.04% 1.04% 1.04% 1.08% 1.11% 0.88%(c)(d)
Ratio of net investment income to
average net assets (1.11%)(c) 1.13% 1.27% 1.17% 1.73% 2.16% 2.66% 0.47%(c)(d)
Ratio of expenses to average net assets(d) 2.13% (c) 1.24% 1.27% 1.06%
Ratio of net investment income to
average net assets(d) (1.12%)(c) 1.09% 1.04% 1.15%
Portfolio turnover 3.04 11.44% 14.38% 7.25% 7.56% 14.59% 11.17%
</TABLE>

(a) Period from commencement of operations.

(b) Not annualized
(c) Annualized

(d) During the period certain service fees were voluntarily reduced. If
such voluntary fee reductions had not occurred, the ratios would have
been as indicated.

(e) Effective March 1, 1996, the Fund designated the existing shares as
Class A Shares and commenced offering Class B Shares.

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

- 5 -
<PAGE>

INVESTMENT OBJECTIVE

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

INVESTMENT POLICIES AND RISK FACTORS

SUMMARY OF PRINCIPAL INVESTMENT POLICIES

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

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

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

ADDITIONAL INFORMATION REGARDING THE FUND'S INVESTMENTS

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

- 6 -
<PAGE>

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. See
the discussion on repurchase agreements.

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

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

- 7 -
<PAGE>

- 8 -
<PAGE>

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."

- 9 -
<PAGE>

Statement of Additional Information) that meet the criteria for liquidity
established by the Trustees are quite liquid. The Fund intends, therefore, to
treat the restricted securities that meet the criteria for liquidity established
by the Trustees, including 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."

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

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 11.44% compared to 14.38% in the prior fiscal year.

- 10 -
<PAGE>

policy of the Fund or (2) a policy is expressly deemed to be changeable only by
such majority vote.

INVESTMENT LIMITATIONS

1. The Fund may not borrow money other than (a) by entering into
commitments to purchase securities in accordance with its investment
program, including delayed-delivery and when-issued securities and
reverse repurchase agreements, provided that the total amount of such
commitments do not exceed 331/3% 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.

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 for other reasons, the Trustees will
consider what actions, if any, are appropriate to maintain adequate liquidity.

- 11 -
<PAGE>

HOW TO INVEST, EXCHANGE AND REDEEM

HOW TO INVEST

- 12 -
<PAGE>

Professionals may charge for their services. Information regarding these
features, requirements and fees will be provided by the Investment Professional.
If you are purchasing shares of any Fund through a program of services offered
or administered by your Investment Professional, you should read the program
materials in conjunction with this Prospectus. You may initiate most
transactions by telephone either through your bank trust department or through
your Investment Professional or directly through the Funds Transfer Agent. See
"Special Investor Services" for more information about telephone transactions.

INVESTING DIRECTLY

O BY MAIL:

You may purchase shares by completing and signing an Account Application
(initial purchase only) and mailing it, together with a check (or other
negotiable bank draft or money order) in the amount of at least the minimum
investment requirement to:

The Victory Funds
P. O. Box 8527
Boston, MA 02266-8527

Subsequent purchases may be made in the same manner.

O BY WIRE:
YOU MUST CALL THE TRANSFER AGENT BEFORE WIRING FUNDS. Federal Funds should be
wired to:

The Fund does not impose a fee for wire transactions, although your bank may
charge you a fee for this service.

- 13 -
<PAGE>

o BY ACH:

The purchase amount will be transferred between the bank account designated and
your fund account via automated clearing house ("ACH"). Only a bank account
maintained in a domestic financial institution which is an ACH member may be so
designated. The fund may modify or terminate the telephone and/or ach privilege
at any time or charge a service fee upon notice to shareholders. No such fee is
currently contemplated by the Fund; however, your bank may charge you a fee for
this service. If the designated bank account does not contain sufficient assets
at the time your order is processed, the order may be cancelled, and you could
be liable for resulting fees and/or losses. NOTE THAT THIS SERVICE REQUIRES
APPROXIMATELY 15 DAYS TO ESTABLISH. THEREFORE, IT MAY NOT BE APPLICABLE TO
REQUEST YOUR INITIAL PURCHASE UTILIZING THIS METHOD.

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

INVESTMENT REQUIREMENTS

- 14 -
<PAGE>

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

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

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

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

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

- 15 -
<PAGE>

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

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

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

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

(5) Shareholders of the former Investors Preference Fund For Income, Inc.
and the Investors Preference New York Tax-Free Fund, Inc. who have

- 16 -
<PAGE>

continuously maintained accounts with a fund or funds of the Victory
Group with a balance of $250,000 or more (investors with less than
$250,000 will pay any applicable sales charges);

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

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

Purchases will age based on trade date of purchase. For example, a purchase made
on January 1 will be one year old on January 1 of the following year.

O WAIVERS OF CLASS B CDSC. The Class B CDSC will be waived if the shareholder
requests it for any of the following redemptions: (1) distributions to
participants or beneficiaries from Retirement Plans, if the distributions are
made (a) under an Automatic Withdrawal Plan after the participant reaches age 59
1/2 , as long as the payments are no more than 12% of the account value annually
(measured from the date the Transfer Agent receives the request); or (b)
following the death or disability (as defined in the Internal Revenue Code) of
the participant or the beneficial owner; (2) redemptions from accounts other
than Retirement Plans following the death or disability of the shareholder (as

- 17 -
<PAGE>

evidenced by a determination of disability by the Social Security
Administration); (3) returns of excess contributions to Retirement Plans; and
(4) distributions of not more than 12% of the account value annually under an
automatic withdrawal plan.

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

SPECIAL INVESTOR SERVICES

O THE SYSTEMATIC INVESTMENT PLAN. You can make regular investments in the Fund
with the Systematic Investment Plan by completing the appropriate section of the
Account Application and attaching a voided personal check with your bank's
magnetic ink coding number across the front. If your bank account is jointly
owned, be sure that all owners sign. You must first meet the Fund's initial
investment requirement of $500, then investments may be made monthly, quarterly,
semi-annually or annually by automatically deducting $25 or more from your bank
account. For officers, trustees, directors and employees, including retired
directors and employees, of the Victory Group, KeyCorp and its affiliates, and
the Administrator and its affiliates (and family members of each of the
foregoing) who participate in the Systematic Investment Plan, there is no
minimum initial investment required. You may change the amount of your purchase
at any time. Your bank checking account will be debited on the date indicated on
your

- 18 -
<PAGE>

Account Application. Shares will be purchased at the offering price next
determined following receipt of the order by the Transfer Agent. You may cancel
the Systematic Investment Plan at any time without payment of a cancellation
fee. Your monthly account statement will reflect systematic investment
transactions, and a debit entry will appear on your bank statement.

O THE SYSTEMATIC WITHDRAWAL PLAN. You can make regular withdrawals from your
account with the Systematic Withdrawal Plan by completing the appropriate
section of the Account Application. If you own shares in a fund worth $5,000 or
more, you can have monthly, quarterly, semi-annual or annual funds sent from
your account directly to you, to a person named by you, or to your bank checking
account. The minimum withdrawal is $25. If you are having proceeds sent to your
bank checking account, attach a voided personal check with your bank's magnetic
ink coding number across the front. The proceeds will be transferred between
your fund account and the bank account via ACH. If your account is jointly
owned, be sure that all owners sign. You may obtain information about the
Systematic Withdrawal Plan by contacting the Transfer Agent. Your Systematic
Withdrawal Plan payments are drawn from share redemptions. If Systematic
Withdrawal Plan redemptions exceed income dividends and capital gain dividend
distributions earned on your Fund shares, your account eventually may be
exhausted. If any applicable sales charges are applied to new purchases of
shares of the Fund, it is to your disadvantage to buy shares of the Fund while
also making systematic redemptions. Your account cannot be closed automatically
by depleting the assets in your Systematic Withdrawal Plan.

- 19 -
<PAGE>

Retirement Accounts (IRAs) , Rollover IRAs and other retirement plans such as
Simplified Employee Pension Plans (SEP/IRA), Salary Reduction SEP (SAR-SEP/IRA),
401(k) Plans and 403(b) Plans. Other fees may be charged by the IRA custodian or
trustee.

HOW TO EXCHANGE

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

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

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

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

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

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

There are certain exchange policies you should be aware of:

- 20 -
<PAGE>

a same-day transfer of the proceeds to buy shares. For example, the receipt of
multiple exchange requests from a dealer in a "market-timing" strategy might
create excessive turnover in the Fund's portfolio and associated expenses
disadvantageous to the Fund.

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

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

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

HOW TO REDEEM

You may redeem all or a portion of your shares on any day that the Fund is open
for business (see the definition of "Business Day" under "Shareholder Account
Rules and Policies--Share Price"). Shares will be redeemed at the NAV next
calculated after the Transfer Agent has received the redemption request.

You may redeem shares in several ways:

O BY MAIL. Send a written request to: The Victory Funds
P.O. Box 8527
Boston, MA 02266-8527

- 21 -
<PAGE>

SHAREHOLDER ACCOUNT RULES AND POLICIES

O SHARE PRICE. The term "net asset value per share," or "NAV", means the value
of one share. The NAV of each class of shares is calculated by adding the value
of all the Fund's investments, plus cash and other assets, deducting liabilities
of the Fund and of the class, and then dividing the result by the number of
shares of the class outstanding. The NAV of the Fund is determined and its
shares are priced as of the close of regular trading of the NYSE, 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, 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 will not be open in
observance of the following holidays: New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas.

- 22 -
<PAGE>

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

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

o Payment for redeemed shares is 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 Securities and Exchange Commission delaying or suspending such payments. The
Transfer Agent may delay forwarding a check for recently purchased shares, but
only until the purchase payment has cleared. That delay may be as much as 15
days from the date the shares were purchased. That delay may be avoided if you
arrange with your bank to provide telephone or written assurance to the Transfer
Agent that your purchase payment has cleared.

- 23 -
<PAGE>

DIVIDENDS, DISTRIBUTIONS AND TAXES

DIVIDENDS

DISTRIBUTION OPTIONS

When you fill out your Account Application, you can specify how you want to
receive your dividend distributions. Currently, there are five available
options:

3. INCOME EARNED OPTION. You will have your capital gain dividend
distributions, if any, reinvested automatically in the Fund and have
your income dividends paid in cash.

- 24 -
<PAGE>

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

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

O STATEMENTS AND REPORTS. You will receive a monthly statement reflecting all
transactions that affect the share balance or the registration of your Fund
account. You will receive a confirmation after every transaction that affected
the share balance of your Fund account, except for dividend reinvestment,
systematic investment and systematic withdrawal transactions. These transactions
will be detailed in your Fund account statement. Transactions that affect the
share balance of your Fund investment in an account established with an
Investment Professional or financial institution will be detailed in regular
statements or through confirmation procedures of the financial institution.
Certificates representing shares of the Fund will not be issued. An Internal
Revenue Service ("IRS") Form 1099-DIV with federal tax information will be
mailed to you by January 31 of each tax year and also will be filed with the
IRS. At least twice a year, you will receive the Fund's financial reports.

O COMPLETE REDEMPTIONS. If you request a complete redemption of all your Fund
shares, any dividend accrued to your account will be included in the redemption
check.

FEDERAL TAXES

- 25 -
<PAGE>

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

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

PERFORMANCE

- 26 -
<PAGE>

distributions) and annualizing that figure. Aggregate total return is calculated
similarly to average annual total return, except that the resulting difference
is not annualized.

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

FUND ORGANIZATION AND FEES

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

INVESTMENT ADVISER AND SUB-ADVISER

KeyCorp Mutual Fund Advisers, Inc. is the investment adviser to the Fund. Key
Advisers directs the investment of the Fund's assets, subject at all times to
the supervision of the 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.

- 27 -
<PAGE>

approximately $48 billion for numerous clients including large corporate and
public retirement plans, Taft-Hartley plans, foundations and endowments, high
net worth individuals and mutual funds.

For the services provided and expenses incurred pursuant to the investment
advisory agreement between the Victory Portfolios respecting the Fund, Key
Advisers is entitled to receive a fee, computed daily and paid monthly, at an
annual rate of seventy-five one-hundredths of one percent (.75%) of the average
daily net assets of the Fund. The investment advisory fee paid by the Fund is
higher than the advisory fees paid by most mutual funds, although the Trustees
believe such fees to be comparable to advisory fees paid by many funds having
similar objectives and policies. The advisory fees for the Fund have been
determined to be fair and reasonable in light of the services provided to the
Fund. Key Advisers may periodically waive all or a portion of its advisory fee
with respect to the Fund. Prior to January 1, 1996, Society Asset Management,
Inc. served as investment adviser to the Fund. During the Fund's fiscal year
ended October 31, 1995, Society Asset Management, Inc. earned investment
advisory fees aggregating .71% of average daily net assets of Class A shares of
the Fund.

Under the investment advisory agreement between the Victory Portfolios, on
behalf of the Fund and Key Advisers (the "Investment Advisory Agreement"), the
Adviser may delegate a portion of its responsibilities to a sub-adviser. Key
Advisers has entered into an investment sub-advisory agreement with its
affiliate, Society Asset Management, Inc. (the "Sub-advisory Agreement"), a
registered investment adviser, on behalf of the Fund. The Sub-Adviser is a
wholly-owned subsidiary of KeyCorp Asset Management Holdings, Inc. The
Investment Advisory Agreement and the Sub-advisory Agreement, respectively,
provide that Key Advisers and the Sub-Adviser, respectively, may render services
through their own employees or the employees of one or more affiliated companies
that are qualified to act as an investment adviser of the Fund and are under the
common control of KeyCorp as long as all such persons are functioning as part of
an organized group of persons, managed by authorized officers of Key Advisers
and the Sub-Adviser, respectively. Key Advisers and the Sub-Adviser,
respectively, will be as fully responsible to the Fund for the acts and
omissions of such persons as they are for their own acts and omissions.

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

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

Lynn S. Hamilton October 1991 Portfolio Manager with Society
Asset Management since 1993;
Portfolio Manager with Society
National Bank since 1982.

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

- 28 -
<PAGE>

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.

ADMINISTRATOR AND DISTRIBUTOR

BISYS Fund Services is the Administrator, principal underwriter and Distributor
for the Fund.

TRANSFER AGENT

SHAREHOLDER SERVICING PLAN

- 29 -
<PAGE>

of up to .25% of the average daily net assets of each class for fees 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
communications, assisting in the processing of purchase, exchange and redemption
requests, and assisting shareholders in changing dividend options, account
designations and addresses. Shareholder Servicing Agents may periodically waive
all or a portion of their respective shareholder servicing fees with respect to
the Fund.

FUND ACCOUNTANT

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

CUSTODIAN

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

INDEPENDENT ACCOUNTANTS

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

BUSINESS MANAGEMENT AGREEMENT

In connection with its obligations under the investment sub-advisory agreement,
the Sub-Adviser has entered into a Business Management Agreement with Key
Advisers pursuant to which Key Advisers provides certain administrative and
support services to the Sub-Adviser. Such services include preparing reports to
the Victory Portfolios' Board of Trustees, recordkeeping services, and services
rendered in connection with the preparation of regulatory filings and other
reports, and regulatory and compliance systems and other administrative and
support services.

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

EXPENSES

For the fiscal year ended October 31, 1995, total operating expenses for Class A
shares were 1.24% of average net assets, excluding certain voluntary fee
reductions or reimbursements. For the fiscal period ended April 30, 1996, total
operating expenses for Class B shares were 2.13% of average net assets,
excluding certain voluntary fee reductions or reimbursements.

ADDITIONAL INFORMATION

The Victory Portfolios may issue an unlimited number of shares and classes of
the Fund. Shares of each class of the Fund participate equally in dividends and

- 30 -
<PAGE>

distributions and have equal voting, liquidation and other rights. When issued
and paid for, shares will be fully paid and nonassessable by the Victory
Portfolios and will have no preference, conversion, exchange or preemptive
rights. Shareholders are entitled to one vote for each full share owned and
fractional votes for fractional shares owned. For those investors with qualified
trust accounts, the trustee will vote the shares at meetings of the Fund's
shareholders in accordance with the shareholder's instructions or will vote in
the same percentage as shares that are not so held in trust. The trustee will
forward to these shareholders all communications received by the trustee,
including proxy statements and financial reports. The Victory Portfolios and the
Fund are not required to hold annual meetings of shareholders and in ordinary
circumstances do not intend to hold such meetings. The Trustees may call special
meetings of shareholders for action by shareholder vote as may be required by
the 1940 Act or the 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 Victory Portfolios' outstanding shares may call a
special meeting of shareholders for the purpose of voting upon the question of
removal of Trustees.

The Victory Portfolio's Board of Trustees may authorize the Victory Portfolios
to offer other funds which may differ in the types of securities in which their
assets may be invested.

Key Advisers, the Sub-Adviser and the Victory Portfolios have each adopted a
Code of Ethics ( the "Codes") 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 Trustees review their Codes and any
substantial violations of the Codes. Violations of the Codes may result in
censure, monetary penalties, suspension or termination of employment.

DELAWARE LAW

On February 29, 1996, the Victory Portfolios 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
Victory Portfolios. In light of Delaware law, the nature of the Victory
Portfolios' business, and the nature of its assets, management of the Victory
Portfolios believes that the risk of personal liability to a Fund shareholder
would be extremely remote.

Delaware law authorizes electronic or telephone communications between
shareholders and the Victory Portfolios. Under Delaware law,

- 31 -
<PAGE>

the Victory Portfolios will have the flexibility to respond to future business
contingencies. For example, the Trustees have the power to incorporate the
Victory Portfolios, to merge or consolidate it with another entity, to cause
each fund to become a separate trust, and to change the Victory Portfolio's
domicile without a shareholder vote. This flexibility could help reduce the
expense and frequency of future shareholder meetings for non-investment related
issues.

MISCELLANEOUS

- 32 -
<PAGE>
Rule 497(c)
Registration No. 33-8982

MANAGED BY KEYCORP

THE VICTORY SPECIAL VALUE FUND

July 30, 1996
<PAGE>

THE
VICTORY
PORTFOLIOS
SPECIAL VALUE FUND

PROSPECTUS For current yield, purchase and redemption information,
July 30, 1996 call 800-KEY-FUND or 800-539-3863

THE VICTORY PORTFOLIOS (the "Victory Portfolios") is a registered open-end
management investment company that offers investors a selection of money market,
fixed-income, municipal bond, domestic and international equity portfolios. This
Prospectus relates to the SPECIAL VALUE FUND (the "Fund"), a diversified
portfolio. KeyCorp Mutual Fund Advisers, Inc., Cleveland, Ohio, an indirect
subsidiary of KeyCorp, is the investment adviser to the Fund ("Key Advisers" or
the "Adviser"). Society Asset Management, Inc., Cleveland, Ohio, an indirect
subsidiary of KeyCorp, is the investment sub-adviser to the Fund (the
"Sub-Adviser"). BISYS Fund Services ("BISYS") is the Fund's administrator (the
"Administrator") and distributor (the "Distributor").

The Fund seeks to provide long-term growth of capital and dividend income. The
Fund pursues this objective by investing primarily in common stocks of small and
medium-sized companies listed on a nationally recognized exchange with an
emphasis on companies with above average total return potential.

Please read this Prospectus before investing. It is designed to provide you with
information and to help you decide if the Fund's goals match your own. Retain
this document for future reference. A Statement of Additional Information (dated
July 30, 1996) for the Fund , an audited annual report for the Fund's fiscal
year ended October 31, 1995 and an unaudited semi-annual report for the six
months ended April 30, 1996 have been filed with the Securities and Exchange
Commission (the "Commission") and are incorporated herein by reference. All of
these documents are available without charge upon request by writing to the
Victory Funds at P.O. Box 8527, Boston, MA 02266-8527, or by calling
800-539-3863.

SHARES OF THE FUND ARE:

O NOT INSURED BY THE FDIC;

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

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

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

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

- 2 -
<PAGE>

FUND EXPENSES

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

Maximum Sales Charge Imposed on Purchases
(as a percentage of the offering

price)........................................4.75% none

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

Redemption Fees.................................none none
Exchange Fee....................................none none

ANNUAL FUND OPERATING EXPENSES (as a percentage of average daily net assets)

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

Management Fees..................................1.00% 1.00%
Administration Fees.............................. .15% .15%
Rule 12b-1 Distribution Fees..................... .00% .75%
Other Expenses(2)................................ .30% .45%
---- ----
Total Fund Operating Expenses(2).................1.45% 2.35%
==== ====

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

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

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

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

Special Value Fund -- Class A Shares $62 $ 91 $123 $213
Special Value Fund -- Class B Shares $74 $103 $146 $246

THE PURPOSE OF THE TABLE ABOVE IS TO ASSIST THE INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT AN INVESTOR IN THE FUND WILL BEAR DIRECTLY OR
INDIRECTLY. SEE "FUND ORGANIZATION AND FEES" FOR A MORE COMPLETE DISCUSSION OF
ANNUAL OPERATING EXPENSES OF THE FUND. THE FOREGOING EXAMPLE IS BASED UPON
EXPENSES FOR THE FISCAL YEAR ENDED OCTOBER 31, 1995 FOR CLASS A SHARES, THE
PERIOD ENDED APRIL 30, 1996 FOR CLASS B SHARES AND EXPENSES THAT THE FUND IS
EXPECTED TO INCUR DURING THE REMAINDER OF THE CURRENT FISCAL YEAR. THE FOREGOING
EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES.
ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.

- 3 -
<PAGE>

FINANCIAL HIGHLIGHTS

The table below sets forth certain financial information with respect to the
financial highlights for the Fund for the periods indicated. For Class A shares,
the information below for the fiscal year ended October 31, 1995 has been
derived from financial statements audited by Coopers & Lybrand L.L.P.,
independent accountants for the Victory Portfolios, whose report thereon,
together with the financial statements of the Fund, is incorporated by reference
into the Statement of Additional Information. The information below for Class B
shares for the fiscal period ended April 30, 1996 has not been audited. The
information set forth below is for a Class A share and a Class B share
outstanding for each period indicated.

o THE VICTORY SPECIAL VALUE FUND

CLASS B SHARES CLASS A SHARES
-------------- -------------------------------------
MARCH 1, 1996 TO YEAR ENDED DECEMBER 3, 1993
APRIL 30, 1996(a)(e) OCTOBER 31, TO OCTOBER 31,
(UNAUDITED) 1995 1994(A)

<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............. $ 12.89 $ 10.49 $ 10.00
--------- -------- --------
Investment Activities
Net investment income................ 0.01 0.15 0.11
Net realized and unrealized gains
on investments ........................ 0.51 1.71 0.48
--------- -------- --------
Total from Investment Activities....... 0.52 1.86 0.59
--------- -------- --------
Distributions
Net investment income.................. (0.03) (0.15) (0.10)
Net realized gains..................... -- (0.05) --
-------- -------- --------
Total Distributions.................... (0.03) (0.20) (0.10)
------ -------- --------
NET ASSET VALUE, END OF PERIOD.................. $ 13.38 $ 12.15 $ 10.49
======== ======== ========
Total Return (Excludes Sales Charge)............ 4.00%(b) 18.01% 5.92%(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000)................. $ 87 $194,700 $118,600
Ratio of expenses to average net assets......... 2.05%(c) 1.04% 1.00%(c)
Ratio of net investment income to average net assets (0.14%) 1.35% 1.23 %(c)
Ratio of expenses to average net assets(d).... 2.07%(c) 1.30% 1.49%(c)
Ratio of net investment income to average net
assets(d) (0.16%)(c) 1.09% 0.74%(c)
Portfolio turnover.............................. 29.45% 38.57% 17.90%

</TABLE>

(a) Period from commencement of operations.

(b) Not annualized.

(d) During the period certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been
as indicated.

(e) Effective March 1, 1996, the Fund designated the existing shares of
Class A shares and commenced offering Class B shares.

- 4 -
<PAGE>

INVESTMENT OBJECTIVE

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

INVESTMENT POLICIES AND RISK FACTORS

SUMMARY OF PRINCIPAL INVESTMENT POLICIES

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

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

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

ADDITIONAL INFORMATION REGARDING THE FUND'S INVESTMENTS

- 5 -
<PAGE>

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

- 6 -
<PAGE>

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.

- 7 -
<PAGE>

agreed-upon date and price. At the time the Fund enters into a reverse
repurchase agreement, it must place in a segregated custodial account assets
having a value equal to the repurchase price (including accrued interest); the
collateral will be marked to market on a daily basis, and will be continuously
monitored to ensure that such equivalent value is maintained. Reverse repurchase
agreements involve the risk that the market value of the securities sold by the
Fund may decline below the price at which the Fund is obligated to repurchase
the securities. Reverse repurchase agreements are considered to be borrowings
under the Investment Company Act of 1940, as amended (the "1940 Act").

- 8 -
<PAGE>

the subject of such futures and options (both for receipt and delivery) may not
exceed one-third of the market value of the Fund's total assets. Futures
transactions will be limited to the extent necessary to maintain the Fund's
qualification as a regulated investment company.

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

- 9 -
<PAGE>

INVESTMENT LIMITATIONS

- 10 -
<PAGE>

HOW TO INVEST, EXCHANGE AND REDEEM

HOW TO INVEST

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

- 11 -
<PAGE>

INVESTING DIRECTLY

O BY MAIL

You may purchase shares by completing and signing an Account Application
(initial purchase only) and mailing it, together with a check (or other
negotiable bank draft or money order) in the amount of at least the minimum
investment requirement to:

The Victory Funds
P. O. Box 8527
Boston, MA 02266-8527

Subsequent purchases may be made in the same manner.

O BY WIRE
YOU MUST CALL THE TRANSFER AGENT BEFORE WIRING FUNDS. Federal Funds should be
wired to:

The Fund does not impose a fee for wire transactions, although your bank may
charge you a fee for this service.

o BY ACH

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

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<PAGE>

INVESTMENT REQUIREMENTS

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

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

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

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<PAGE>

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

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

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

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<PAGE>

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

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

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

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<PAGE>

In the table, a "year" is a 12-month period. Purchases will age based on trade
date of purchase. For example, a purchase made on January 1 will be one year old
on January 1 of the following year.

O WAIVERS OF CLASS B CDSC. The Class B CDSC will be waived if the shareholder
requests it for any of the following redemptions: (1) distributions to
participants or beneficiaries from Retirement Plans, if the distributions are
made (a) under an Automatic Withdrawal Plan after the participant reaches age 59
1/2 , as long as the payments are no more than 12% of the account value annually
(measured from the date the Transfer Agent receives the request), or (b)
following the death or disability (as defined in the Internal Revenue Code) of
the participant or the beneficial owner; (2) redemptions from accounts other
than Retirement Plans following the death or disability of the shareholder (as
evidenced by a determination of disability by the Social Security
Administration), (3) returns of excess contributions to Retirement Plans; and
(4) distributions of not more than 12% of the account value annually under an
automatic withdrawal plan.

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

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

SPECIAL INVESTOR SERVICES

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<PAGE>

the Administrator and its affiliates (and family members of each of the
foregoing) who participate in the Systematic Investment Plan, there is no
minimum initial investment required. You may change the amount of your purchase
at any time. Your bank account will be debited on the date indicated on your
Account Application. Shares will be purchased at the offering price next
determined following receipt of the order by the Transfer Agent. You may cancel
the Systematic Investment Plan at any time without payment of a cancellation
fee. Your monthly account statement will reflect systematic investment
transactions, and a debit entry will appear on your bank statement.

O THE SYSTEMATIC WITHDRAWAL PLAN. You can make regular withdrawals from your
account with the Systematic Withdrawal Plan by completing the appropriate
section of the Account Application. If you own shares in a fund worth $5,000 or
more, you can have monthly, quarterly, semi-annual or annual payment sent from
your account directly to you, to a person named by you, or to your bank checking
account. The minimum withdrawal is $25. If you are having proceeds sent to your
bank checking account, attach a voided personal check with your bank's magnetic
ink coding number across the front. The proceeds will be transferred between
your fund account and the bank account via ACH. If your account is jointly
owned, be sure that all owners sign. You may obtain information about the
Systematic Withdrawal Plan by contacting the Transfer Agent. Your Systematic
Withdrawal Plan payments are drawn from share redemptions. If Systematic
Withdrawal Plan redemptions exceed income dividends and capital gain dividend
distributions earned on your Fund shares, your account eventually may be
exhausted. If any applicable sales charges are applied to new purchases of
shares of the Fund, it is to your disadvantage to buy shares of the Fund while
also making systematic redemptions. Your account cannot be closed automatically
by depleting the assets in your Systematic Withdrawal Plan.

Your account will be debited on the date you indicate on your Account
Application. Shares will be redeemed at the net asset value per share ("NAV") as
determined on the debit date indicated on your Account Application. You may
cancel the Systematic Withdrawal Plan at any time without payment of a
cancellation fee. Each Systematic Withdrawal Plan transaction will appear as a
debit entry on your monthly account statement.

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<PAGE>

HOW TO EXCHANGE

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

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

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

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

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

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

There are certain exchange policies you should be aware of:

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

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

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<PAGE>

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

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

HOW TO REDEEM

You may redeem all or a portion of your shares on any day that the Fund is open
for business (see the definition of "Business Day" under "Shareholder Account
Rules and Policies -- Share Price"). Shares will be redeemed at the NAV next
calculated after the Transfer Agent has received the redemption request.

You may redeem shares in several ways:

O BY MAIL. Send a written request to: The Victory Funds
P.O. Box 8527
Boston, MA 02266-8527

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<PAGE>

affected on days when investors do not have access to the Fund to purchase or
redeem shares.

SHAREHOLDER ACCOUNT RULES AND POLICIES

O SHARE PRICE. The term "net asset value per share," or "NAV", means the value
of one share. The NAV of each class of shares is calculated by adding the value
of all the Fund's investments, plus cash and other assets, deducting liabilities
of the Fund and of the class, and then dividing the result by the number of
shares of the class outstanding. The NAV of the Fund is determined and its
shares are priced as of the close of regular trading of the NYSE 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 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 will not be open in
observance of the following holidays: New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas.

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

- 20 -
<PAGE>

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.

DIVIDENDS, DISTRIBUTIONS AND TAXES

DISTRIBUTIONS

DISTRIBUTION OPTIONS

When you fill out your Account Application, you can specify how you want to
receive your dividend distributions. Currently, there are five available
options:

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<PAGE>

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

O COMPLETE REDEMPTIONS. If you request a complete redemption of all your Fund
shares, any dividend accrued to your account will be included in the redemption
check.

FEDERAL TAXES

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<PAGE>

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 IRS) by January 31 showing the amounts and tax status of distributions
made (or deemed made) during the preceding calendar year.

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

PERFORMANCE

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<PAGE>

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

FUND ORGANIZATION AND FEES

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

INVESTMENT ADVISER AND SUB-ADVISER

Key Advisers was organized as an Ohio corporation on July 27, 1995 and is
registered as an investment adviser under the Investment Advisers Act of 1940,
as amended. It is a wholly-owned subsidiary of KeyCorp Asset Management
Holdings, Inc., which is an indirect wholly-owned subsidiary of KeyBank National
Association, a wholly-owned subsidiary of KeyCorp. Affiliates of Key Advisers
manage approximately $48 billion for numerous clients including large corporate
and public retirement plans, Taft Hartley plans, foundations and endowments,
high net worth individuals and mutual funds.

For the services provided and expenses incurred pursuant to the investment
advisory agreement between the Victory Portfolios respecting the Fund, Key
Advisers is entitled to receive a fee, computed daily and paid monthly, at an
annual rate of one percent (1.00%) of the average daily net assets of the Fund.
The investment advisory fee paid by the Fund is higher than the advisory fees
paid by most mutual funds, although the Victory Portfolios' Board of Trustees
believes such fees to be comparable to advisory fees paid by many funds having
similar objectives and policies. The advisory fees for the Fund have been
determined to be fair and reasonable in light of the services provided to the
Fund. Key Advisers may periodically waive all or a portion of its advisory fee
with respect to the Fund. Prior to January 1, 1996, Society Asset Management,
Inc. served as investment adviser to the Fund. During the Fund's fiscal year
ended October 31, 1995 Society Asset Management, Inc. earned investment advisory
fees aggregating .74% of the average daily net assets of Class A shares of the
Fund.

- 24 -
<PAGE>

Under the investment advisory agreement between the Victory Portfolios, on
behalf of the Fund, and Key Advisers (the "Investment Advisory Agreement"), the
Adviser may delegate a portion of its responsibilities to a sub-adviser. Key
Advisers has entered into an investment sub-advisory agreement with its
affiliate, Society Asset Management, Inc., a registered investment adviser, on
behalf of the Fund (the "Sub-advisory Agreement"). The Sub-Adviser is a
wholly-owned subsidiary of KeyCorp Asset Management Holdings, Inc. The
Investment Advisory Agreement and the Sub-advisory Agreement, respectively,
provide that Key Advisers and the Sub-Adviser, respectively, may render services
through their own employees or the employees of one or more affiliated companies
that are qualified to act as an investment adviser of the Fund and are under the
common control of KeyCorp as long as all such persons are functioning as part of
an organized group of persons, managed by authorized officers of Key Advisers
and the Sub-Adviser, respectively. Key Advisers and the Sub-Adviser,
respectively, will be as fully responsible to the Fund for the acts and
omissions of such persons as they are for their own acts and omissions.

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

PORTFOLIO MANAGER MANAGING FUND SINCE PREVIOUS EXPERIENCE

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

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

EFFECT OF BANKING LAWS

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<PAGE>

consequences (if other service providers are retained) as a result of any of
these occurrences.

ADMINISTRATOR AND DISTRIBUTOR

BISYS Fund Services is the Administrator, principal underwriter and Distributor
for the Fund.

TRANSFER AGENT

SHAREHOLDER SERVICING PLAN

FUND ACCOUNTANT

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

CUSTODIAN

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

INDEPENDENT ACCOUNTANTS

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

BUSINESS MANAGEMENT AGREEMENT

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<PAGE>

the Victory Portfolios' Board of Trustees, recordkeeping services, services
rendered in connection with the preparation of regulatory filings and other
reports, and regulatory, compliance and other administrative and support
services.

EXPENSES

For the fiscal year ended October 31, 1995, total operating expenses for Class A
shares were 1.30% of average net assets, excluding certain voluntary fee
reductions or reimbursements. For the fiscal period ended April 30, 1996, total
operating expenses for Class B shares were 2.07% of average net assets,
excluding certain voluntary fee reductions or reimbursements.

ADDITIONAL INFORMATION

The Victory Portfolio's Board of Trustees may authorize the Victory Portfolios
to offer other funds which may differ in the types of securities in which their
assets may be invested.

Key Advisers, the Sub-Adviser and the Victory Portfolios have each adopted a
Code of Ethics (the "Codes") 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 Trustees review their Codes and any
substantial violations of the Codes. Violations of the Codes may result in
censure, monetary penalties, suspension or termination of employment.

DELAWARE LAW

On February 29, 1996, the Victory Portfolios 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
Victory Portfolios. In light of Delaware law, the nature of the Victory
Portfolios' business, and the nature of its assets, management of the Victory
Portfolios believes that the risk of personal liability to a Fund shareholder
would be extremely remote.

- 27 -
<PAGE>

MISCELLANEOUS

As of the date of this Prospectus, the Fund offers only the classes of shares
that are offered by this Prospectus. Subsequent to the date of this Prospectus,
the Fund may offer additional classes of shares through a separate prospectus.
Any such additional classes may have different charges and other expenses, which
would affect investment performance. To obtain a free prospectus of another
class of shares or to obtain additional information, call your Investment
Professional, call (800) 539-3863 or write to the address listed below.

Inquiries regarding the Victory Portfolios or the Fund may be directed in
writing to the Victory Funds at P.O. Box 8527, Boston, MA 02266-8527 or by
telephone, toll-free, at 800-539-3863.

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<PAGE>
Rule 497(c)
Registration No. 33-8982

STATEMENT OF ADDITIONAL INFORMATION

THE VICTORY PORTFOLIOS

BALANCED FUND

July 30, 1996

This Statement of Additional Information is not a Prospectus, but should be read
in conjunction with the Prospectus of The Victory Portfolios Balanced Fund,
dated the same date as the date hereof (the "Prospectus"). This Statement of
Additional Information is incorporated by reference in its entirety into the
Prospectus. Copies of the Prospectus may be obtained by writing The Victory
Funds at P.O Box 8527, Boston, MA 02266-8527, or by telephoning toll free
800-539-FUND or 800-539-3863.

TABLE OF CONTENTS

INVESTMENT OBJECTIVE AND POLICIES.........1
INVESTMENT LIMITATIONS AND RESTRICTIONS..10
VALUATION OF PORTFOLIO SECURITIES........12 INVESTMENT ADVISER
PERFORMANCE..............................12 KeyCorp Mutual Fund Advisers,
ADDITIONAL PURCHASE, EXCHANGE AND Inc.

REDEMPTION INFORMATION...............16 INVESTMENT SUB-ADVISER
DIVIDENDS AND DISTRIBUTIONS..............19 Society Asset Management, Inc
TAXES....................................20
TRUSTEES AND OFFICERS....................21 ADMINISTRATOR
ADVISORY AND OTHER CONTRACTS.............26 BISYS Fund Services
ADDITIONAL INFORMATION...................34
APPENDIX.................................38 DISTRIBUTOR
BISYS Fund Services

TRANSFER AGENT
State Street Bank and Trust
Company

CUSTODIAN
Key Trust Company of Ohio,
N.A.
<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

The Victory Portfolios (the "Victory Portfolios") is an open-end management
investment company. The Victory Portfolios consist of twenty-four series of
units of beneficial interest ("shares"). The outstanding shares represent
interests in the twenty-four separate investment portfolios which are currently
active. This Statement of Additional Information relates to the Class A and
Class B shares of the Victory Balanced Fund (the "Fund") only. Much of the
information contained in this Statement of Additional Information expands on
subjects discussed in the Prospectus. Capitalized terms not defined herein are
used as defined in the Prospectus. No investment in shares of the Fund should be
made without first reading the Fund's Prospectus.

INVESTMENT OBJECTIVE AND POLICIES

ADDITIONAL INFORMATION REGARDING FUND INVESTMENTS.

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

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

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

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

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

The Fund will purchase only commercial paper rated in one of the two highest
categories at the time of purchase by a nationally recognized statistical rating
organization (an "NRSRO") or, if not rated, found by the Victory Portfolios'
Board of Trustees (the "Trustees") to present minimal credit risks and to be of
comparable quality to instruments that are rated high quality (i.e., in one
<PAGE>

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

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

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

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

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

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

- 3 -
<PAGE>

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

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

The Fund currently invests in the securities of issuers based in a number of
foreign countries. The Adviser continuously evaluates issuers based in countries
all over the world. Accordingly, the Fund may invest in the securities of
issuers based in any country, subject to approval by the Trustees, when such
securities met the investment criteria of the Adviser and are consistent with
the investment objectives and policies of the Fund.

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

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

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

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

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

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

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<PAGE>

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

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

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

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

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<PAGE>

U.S. GOVERNMENT OBLIGATIONS. The Fund may invest in obligations issued or
guaranteed by the U.S. Government, its agencies and instrumentalities.
Obligations of certain agencies and instrumentalities of the U.S. Government are
supported by the full faith and credit of the U.S. Treasury; others are
supported by the right of the issuer to borrow from the U.S. Treasury; others
are supported by the discretionary authority of the U.S. Government to purchase
the agency's obligations; and still others are supported only by the credit of
the agency or instrumentality. No assurance can be given that the U.S.
Government will provide financial support to U.S. Government-sponsored agencies
or instrumentalities if it is not obligated to do so by law.

OTHER INVESTMENT COMPANIES. The Fund may invest up to 5% of its total assets in
the securities of any one investment company, but may not own more than 3% of
the securities of any one investment company or invest more than 10% of its
total assets in the securities of other investment companies. Pursuant to an
exemptive order received by the Victory Portfolios from the Securities and
Exchange Commission (the "Commission"), the Fund may invest in the money market
funds of the Victory Portfolios. Key Advisers or the Sub-Adviser will waive its
investment advisory fee with respect to assets of the Fund invested in any of
the money market funds of the Victory Portfolios, and, to the extent required by
the laws of any state in which the Fund's shares are sold, Key Advisers or the
Sub-Adviser will waive its investment advisory fee as to all assets invested in
other investment companies.

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

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

MORTGAGE-RELATED SECURITIES -- IN GENERAL

Mortgage-related securities are backed by mortgage obligations including, among
others, conventional 30-year fixed rate mortgage obligations, graduated payment
mortgage obligations, 15-year mortgage obligations, and adjustable rate mortgage
obligations. All of these mortgage obligations can be used to create
pass-through securities. A pass-through security is created when mortgage
obligations are pooled together and undivided interests in the pool or pools are
sold. The cash flow from the mortgage obligations is passed through to the
holders of the securities in the form of periodic payments of interest,
principal and prepayments (net of a service fee). Prepayments occur when the
holder of an individual mortgage obligation prepays the remaining principal
before the mortgage obligation's scheduled maturity date. As a result of the
pass-through of prepayments of principal on the underlying securities,
mortgage-backed securities are often subject to more rapid prepayment of
principal than their stated

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<PAGE>

maturity would indicate. Because the prepayment characteristics of the
underlying mortgage obligations vary, it is not possible to predict accurately
the realized yield or average life of a particular issue of pass-through
certificates. Prepayment rates are important because of their effect on the
yield and price of the securities. Accelerated prepayments have an adverse
impact on yields for pass-throughs purchased at a premium (i.e., a price in
excess of principal amount) and may involve additional risk of loss of principal
because the premium may not have been fully amortized at the time the obligation
is repaid. The opposite is true for pass-throughs purchased at a discount. The
Fund may purchase mortgage-related securities at a premium or at a discount.
Among the U.S. Government securities in which the Fund may invest are government
"mortgage-backed" (or government guaranteed mortgage related securities). Such
guarantees do not extend to the value of yield of the mortgage-backed securities
themselves or of the Fund's shares.

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

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

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

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

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

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

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<PAGE>

GOVERNMENT "MORTGAGE-BACKED" SECURITIES. The Fund may invest in obligations of
certain agencies and instrumentalities of the U.S. Government. Some such
obligations, such as those issued by GNMA or the Export-Import Bank of the
United States, are supported by the full faith and credit of the U.S. Treasury;
others, such as those of FNMA, are supported by the right of the issuer to
borrow from the Treasury; others are supported by the discretionary authority of
the U.S. Government to purchase the agency's obligations; still others, such as
those of the Federal Farm Credit Banks or FHLMC, are supported only by the
credit of the instrumentality. No assurance can be given that the U.S.
Government would provide financial support to U.S. Government-sponsored agencies
and instrumentalities if it is not obligated to do so by law.

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

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

Although futures contracts by their terms call for actual delivery and
acceptance of the underlying securities, in most cases the contracts are closed
out before the settlement date without the making or taking of delivery. Closing
out an open futures position is done by taking an opposite position (buying a
contract which has previously been "sold," or "selling" a contract previously
purchased) in an identical contract to terminate the position. A futures
contract on a securities index is an agreement obligating either party to pay,
and entitling the other party to receive, while the contract is outstanding,
cash payments based on the level of a specified securities index. The
acquisition of put and call options on futures contracts will, respectively,
give the Fund the right (but not the obligation), for a specified price, to sell
or to purchase the underlying futures contract, upon exercise of the option, at
any time during the option period. Brokerage commissions are incurred when a
futures contract is bought or sold.

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

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<PAGE>

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

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

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

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

RESTRICTIONS ON THE USE OF FUTURES CONTRACTS. The Fund will not enter into
futures contract transactions for purposes other than bona fide hedging purposes
to the extent that, immediately thereafter, the sum of its initial margin
deposits on open contracts exceeds 5% of the market value of the Fund's total
assets. In addition, the Fund will not enter into futures contracts to the
extent that the value of the futures contracts held would exceed 33 1/3% of the
Fund's total assets. Futures transactions will be limited to the extent
necessary to maintain the Fund's qualification as a regulated investment
company.

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

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<PAGE>

contract, it may cover by owning the instruments underlying the contract. The
Fund may also cover such a position by holding a call option permitting it to
purchase the same futures contract at a price no higher than the price at which
the short position was established. Where the Fund sells a call option on a
futures contract, it may cover either by entering into a long position in the
same contract at a price no higher than the strike price of the call option or
by owning the instruments underlying the futures contract. The Fund could also
cover this position by holding a separate call option permitting it to purchase
the same futures contract at a price no higher than the strike price of the call
option sold by the Fund.

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

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

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

Utilization of futures transactions by the Fund does involve the risk of
imperfect or no correlation where the securities underlying futures contract
have different maturities than the portfolio securities being hedged. It is also
possible that the Fund could both lose money on futures contracts and also
experience a decline in value of its portfolio securities. There is also the
risk of loss by the Fund of margin deposits in the event of bankruptcy of a
broker with whom the Fund has an open position in a futures contract or related
option.

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<PAGE>

INVESTMENT LIMITATIONS AND RESTRICTIONS

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

THE FUND MAY NOT:

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

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

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

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

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

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

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

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

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

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<PAGE>

The following restrictions are not fundamental and may be changed without
shareholder approval:

1. The Fund will not purchase or retain securities of any issuer if the officers
or Trustees of the Victory Portfolios or the officers or directors of its
investment adviser owning beneficially more than one-half of 1% of the
securities of such issuer together own beneficially more than 5% of such
securities.

2. The Fund will not invest more than 10% of its total assets in the securities
of issuers which together with any predecessors have a record of less than three
years of continuous operation.

3. The Fund will not write or sell puts, straddles, spreads or combinations
thereof or write or purchase put options or purchase call options.

4. The Fund will not invest more than 15% of its net assets in illiquid
securities. Illiquid securities are securities that are not readily marketable
or cannot be disposed of promptly within seven days and in the usual course of
business at approximately the price at which the Fund has valued them. Such
securities include, but are not limited to, time deposits and repurchase
agreements with maturities longer than seven days. Securities that may be resold
under Rule 144A, securities offered pursuant to Section 4(2) of, or securities
otherwise subject to restrictions or limitations on resale under the 1933 Act
("Restricted Securities") shall not be deemed illiquid solely by reason of being
unregistered. Key Advisers or the Sub-Adviser determine whether a particular
security is deemed to be liquid based on the trading markets for the specific
security and other factors. However, because state securities laws may limit the
Fund's investment in Restricted Securities (regardless of the liquidity of the
investment), investments in Restricted Securities resalable under Rule 144A will
continue to be subject to applicable state law requirements until such time, if
ever, that such limitations are changed.

5. The Fund will not make short sales of securities, other than short sales
"against the box," or purchase securities on margin except for short-term
credits necessary for clearance of portfolio transactions, provided that this
restriction will not be applied to limit the use of options, futures contracts
and related options, in the manner otherwise permitted by the investment
restrictions, policies and investment program of the Fund.

6. The Fund may invest up to 5% of its total assets in the securities of any one
investment company, but may not own more than 3% of the securities of any one
investment company or invest more than 10% of its total assets in the securities
of other investment companies. Pursuant to an exemptive order received by the
Victory Portfolios from the Commission, the Fund may invest in the other market
funds of the Victory Portfolios.

STATE REGULATIONS.

In addition, the Fund, so long as its shares are registered under the securities
laws of the State of Texas and such restrictions are required as a consequence
of such registration, is subject to the following non-fundamental policies,
which may be modified in the future by the Trustees without a vote of the Fund's
shareholders: (1) the Fund has represented to the Texas State Securities Board,
that it will not invest in oil, gas or mineral leases or purchase or sell real
property (including limited partnership interests, but excluding readily
marketable securities of companies which invest in real estate); and (2) the
Fund has represented to the Texas State Securities Board that it will not invest
more than 5% of its net assets in warrants valued at the lower of cost or
market; provided that, included within that amount, but not to exceed 2% of net
assets, may be warrants which are not listed on the New York or American Stock
Exchanges. For purposes of this restriction, warrants acquired in units or
attached to securities are deemed to be without value.

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<PAGE>

GENERAL.

The policies and limitations listed above supplement those set forth in the
Prospectus. Unless otherwise noted, whenever an investment policy or limitation
states a maximum percentage of the Fund's assets that may be invested in any
security or other asset, or sets forth a policy regarding quality standards,
such standard or percentage limitation will be determined immediately after and
as a result of the Fund's acquisition of such security or other asset except in
the case of borrowing (or other activities that may be deemed to result in the
issuance of a "senior security" under the 1940 Act). Accordingly, any subsequent
change in values, net assets, or other circumstances will not be considered when
determining whether the investment complies with the Fund's investment policies
and limitations. If the value of the Fund's holdings of illiquid securities at
any time exceeds the percentage limitation applicable at the time of acquisition
due to subsequent fluctuations in value or other reasons, the Trustees will
consider what actions, if any, are appropriate to maintain adequate liquidity.

The investment policies of the Fund may be changed without an affirmative vote
of the holders of a majority of the Fund's outstanding voting securities unless
(1) a policy is expressly deemed to be a fundamental policy of the Fund or (2) a
policy is expressly deemed to be changeable only by such majority vote.

VALUATION OF PORTFOLIO SECURITIES

Investment securities held by the Fund are valued on the basis of valuations
provided by an independent pricing service, approved by the Trustees, which uses
information with respect to transactions of a security, quotations from dealers,
market transactions in comparable securities, and various relationships between
securities, in determining value. Specific investment securities which are not
priced by the approved pricing service will be valued according to quotations
obtained from dealers who are market makers in those securities. Investment
securities with less than 60 days to maturity when purchased are valued at
amortized cost which approximates market value. Investment securities not having
readily available market quotations will be priced at fair value using a
methodology approved in good faith by the Trustees.

PERFORMANCE

From time to time the "standardized yield," "distribution return," "dividend
yield," "average annual total return," "total return," and "total return at net
asset value" of an investment in each class of Fund shares may be advertised. An
explanation of how yields and total returns are calculated for each class and
the components of those calculations are set forth below.

Yield and total return information may be useful to investors in reviewing the
Fund's performance. The Fund's advertisement of its performance must, under
applicable Commission rules, include the average annual total returns for each
class of shares of the Fund for the 1, 5 and 10-year period (or the life of the
class, if less) as of the most recently ended calendar quarter. This enables an
investor to compare the Fund's performance to the performance of other funds for
the same periods. However, a number of factors should be considered before using
such information as a basis for comparison with other investments. An investment
in the Fund is not insured; its yield and total return are not guaranteed and
normally will fluctuate on a daily basis. When redeemed, an investor's shares
may be worth more or less than their original cost. Yield and total return for
any given past period are not a prediction or representation by the Victory
Portfolios of future yields or rates of return on its shares. The yield and
total returns of the Class A and Class B shares of the Fund are affected by
portfolio quality, portfolio maturity, the type of investments the Fund holds
and operating expenses.

Performance - Class B Shares

Class B shares of the Fund were initially offered on March 1, 1996. The
performance figures for Class B shares for periods prior to such date represent
the performance for Class A shares of the Fund which has been restated to
reflect the applicable CDSC payable at redemption within 6 years from purchase.
Class B shares are subject to an asset-based sales charge of .75% of average
daily net assets per year and other class-specific expenses. Had these fees and
expenses been reflected, performance quoted would have been lower.

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<PAGE>

STANDARDIZED YIELD.

The Fund's "yield" (referred to as "standardized yield") for a given 30-day
period for a class of shares is calculated using the following formula set forth
in rules adopted by the Commission that apply to all funds that quote yields:

Standardized Yield = 2 [(a-b + 1)^6 - 1]
---
cd

The symbols above represent the following factors:

a = dividends and interest earned during the 30-day period.

b = expenses accrued for the period (net of any expense reimbursements).

c = the average daily number of shares of that class outstanding during the
30-day period that were entitled to receive dividends.

d = the maximum offering price per share of the class on the last day of
the period, adjusted for undistributed net investment income.

The standardized yield of a class of shares for a 30-day period may differ from
its yield for any other period. The Commission formula assumes that the
standardized yield for a 30-day period occurs at a constant rate for a six-month
period and is annualized at the end of the six-month period. This standardized
yield is not based on actual distributions paid by the Fund to shareholders in
the 30-day period, but is a hypothetical yield based upon the net investment
income from the Fund's portfolio investments calculated for that period. The
standardized yield may differ from the "dividend yield" of that class, described
below. Additionally, because each class of shares is subject to different
expenses, it is likely that the standardized yields of the Fund classes of
shares will differ. The yield on Class A shares for the 30-day period ended
October 31, 1995 was 3.25%. The yield on Class B shares for the 30-day period
ended April 30, 1996 was 2.38%.

DIVIDEND YIELD AND DISTRIBUTION RETURNS.

From time to time the Fund may quote a "dividend yield" or a "distribution
return" for each class. Dividend yield is based on the Class A or Class B share
dividends derived from net investment income during a stated period.
Distribution return includes dividends derived from net investment income and
from realized capital gains declared during a stated period. Under those
calculations, the dividends and/or distributions for that class declared during
a stated period of one year or less (for example, 30 days) are added together,
and the sum is divided by the maximum offering price per share of that class on
the last day of the period. When the result is annualized for a period of less
than one year, the "dividend yield" is calculated as follows:

Dividend Yield
of the Class = Dividends of the Class + Number of days (accrual period) x365
---------------------------
Max. Offering Price of the
Class (last day of period)

The maximum offering price for Class A shares includes the maximum front-end
sales charge. For Class B shares, the maximum offering price is the net asset
value per share, without considering the effect of contingent deferred sales
charges ("CDSC").

From time to time similar yield or distribution return calculations may also be
made using the Class A net asset value (instead of its respective maximum
offering price) at the end of the period. The dividend yields on Class A shares
at maximum offering price and net asset value for the 30-day period ended
October 31, 1995 were 3.61% and 3.80%, respectively. The distribution returns on
Class A shares at maximum offering price and net asset value as of October 31,
1995 were 3.61% and 3.80%, respectively. The dividend yields on Class B shares,
with and without the CDSC for the one-year period ended April 30, 1996, were
2.92% and 3.06%, respectively. The

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<PAGE>

distribution returns on Class B shares, with and without the CDSC as of April
30, 1996 were 3.50% and 3.68%, respectively.

TOTAL RETURNS.

The "average annual total return" of each class is an average annual compounded
rate of return for each year in a specified number of years. It is the rate of
return based on the change in value of a hypothetical initial investment of
$1,000 ("P" in the formula below) held for a number of years ("n") to achieve an
Ending Redeemable Value ("ERV"), according to the following formula:

( ERV )^1^n - 1 = Average Annual Total Return
-------
( P )

The cumulative "total return" calculation measures the change in value of a
hypothetical investment of $1,000 over an entire period of years. Its
calculation uses some of the same factors as average annual total return, but it
does not average the rate of return on an annual basis. Total return is
determined as follows:

ERV - P = Total Return
-------
P

In calculating total returns for Class A shares, the current maximum sales
charge of 4.75% (as a percentage of the offering price) is deducted from the
initial investment ("P") (unless the return is shown at net asset value, as
discussed below). For Class B shares, the payment of the applicable CDSC (5.0%
for the first year, 4.0% for the second year, 3.0% for the third and fourth
years, 2.0% in the fifth year, 1.0% in the sixth year and none thereafter) is
applied to the investment result for the time period shown (unless the total
return is shown at net asset value, as described below). Total returns also
assume that all dividends and capital gains distributions during the period are
reinvested to buy additional shares at net asset value per share, and that the
investment is redeemed at the end of the period. The average annual total return
and cumulative total return on Class A shares at maximum offering price and on
Class B shares with the CDSC for the period December 10, 1993 (commencement of
operations) to October 31, 1995 (life of fund), were 6.63% and 12.92%,
respectively. For the one year ended October 31, 1995, the annual total return
for Class A shares at maximum offering price was 13.57%. The average annual
total return and cumulative total return on Class B shares with the CDSC for the
period December 10, 1993 (commencement of perations - Class A shares) to April
30, 1996 (life of fund), were 9.84% and 25.35%, respectively. For the one year
ended April 30, 1996, the annual total return for Class B shares with the CDSC
was 14.67%.

From time to time the Fund may also quote an "average annual total return at net
asset value" or a cumulative "total return at net asset value" for Class A or
Class B shares. It is based on the difference in net asset value per share at
the beginning and the end of the period for a hypothetical investment in that
class of shares (without considering front-end or contingent sales charges) and
takes into consideration the reinvestment of dividends and capital gains
distributions. The average annual total return and cumulative total return on
Class A shares at net asset value and on Class B shares without the CDSC for the
period December 10, 1993 (commencement of operations) to October 31, 1995 (life
of fund) was 9.41% and 18.56%, respectively. For the year ended October 31,
1995, the average annual total return for Class A shares at net asset was 1.92%.
The average annual total return and cumulative total return on Class B shares
with the CDSC for the period December 10, 1993 (commencement of perations -
Class A shares) to April 30, 1996 (life of fund), were 10.92% and 28.35%,
respectively. For the one year ended April 30, 1996, the annual total return for
Class B shares with the CDSC was 18.67%.

OTHER PERFORMANCE COMPARISONS.

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<PAGE>

Fund's classes against (1) all other funds, excluding money market funds, and
(2) all other government bond funds. The Lipper performance rankings are based
on total return that includes the reinvestment of capital gains distributions
and income dividends but does not take sales charges or taxes into
consideration.

From time to time the Fund may publish the ranking of the performance of its
Class A or Class B shares by Morningstar, Inc., an independent mutual fund
monitoring service that ranks mutual funds, including the Fund, in broad
investment categories (equity, taxable bond, tax-exempt and other) monthly,
based upon each fund's three, five and ten-year average annual total returns
(when available) and a risk adjustment factor that reflects Fund performance
relative to three-month U.S. Treasury bill monthly returns. Such returns are
adjusted for fees and sales loads. There are five ranking categories with a
corresponding number of stars: highest (5), above average (4), neutral (3),
below average (2) and lowest (1). Ten percent of the funds, series or classes in
an investment category receive 5 stars, 22.5% receive 4 stars, 35% receive 3
stars, 22.5% receive 2 stars, and the bottom 10% receive one star.

The total return on an investment made in Class A or Class B shares of the Fund
may be compared with the performance for the same period of one or more of the
following indices: the Consumer Price Index, the Salomon Brothers World
Government Bond Index, the Standard & Poor's 500 Index, the Shearson Lehman
Government/Corporate Bond Index, the Lehman Aggregate Bond Index, and the J.P.
Morgan Government Bond Index. Other indices may be used from time to time. The
Consumer Price Index is generally considered to be a measure of inflation. The
Salomon Brothers World Government Bond Index generally represents the
performance of government debt securities of various markets throughout the
world, including the United States. The Lehman Government/Corporate Bond Index
generally represents the performance of intermediate and long-term government
and investment grade corporate debt securities. The Lehman Aggregate Bond Index
measures the performance of U.S. corporate bond issues, U.S. government
securities and mortgage-backed securities. The J.P. Morgan Government Bond Index
generally represents the performance of government bonds issued by various
countries including the United States. The S&P 500 Index is a composite index of
500 common stocks generally regarded as an index of U.S. stock market
performance. The foregoing bond indices are unmanaged indices of securities that
do not reflect reinvestment of capital gains or take investment costs into
consideration, as these items are not applicable to indices.

From time to time, the yields and the total returns of Class A or Class B shares
of the Fund may be quoted in and compared to other mutual funds with similar
investment objectives in advertisements, shareholder reports or other
communications to shareholders. The Fund may also include calculations in such
communications that describe hypothetical investment results. (Such performance
examples are based on an express set of assumptions and are not indicative of
the performance of any Fund.) Such calculations may from time to time include
discussions or illustrations of the effects of compounding in advertisements.
"Compounding" refers to the fact that, if dividends or other distributions on a
Fund investment are reinvested by being paid in additional Fund shares, any
future income or capital appreciation of a Fund would increase the value, not
only of the original Fund investment, but also of the additional Fund shares
received through reinvestment. As a result, the value of the Fund investment
would increase more quickly than if dividends or other distributions had been
paid in cash. The Fund may also include discussions or illustrations of the
potential investment goals of a prospective investor (including but not limited
to tax and/or retirement planning), investment management techniques, policies
or investment suitability of the Fund, economic conditions, legislative
developments (including pending legislation), the effects of inflation and
historical performance of various asset classes, including but not limited to
stocks, bonds and Treasury bills. From time to time advertisements or
communications to shareholders may summarize the substance of information
contained in shareholder reports (including the investment composition of a
Fund, as well as the views of the investment adviser as to current market,
economic, trade and interest rate trends, legislative, regulatory and monetary
developments, investment strategies and related matters believed to be of
relevance to the Fund.) The Fund may also include in advertisements, charts,
graphs or drawings which illustrate the potential risks and rewards of
investment in various investment vehicles, including but not limited to stock,
bonds, and Treasury bills, as compared to an investment in shares of the Fund,
as well as charts or graphs which illustrate strategies such as

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<PAGE>

dollar cost averaging, and comparisons of hypothetical yields of investment in
tax-exempt versus taxable investments. In addition, advertisements or
shareholder communications may include a discussion of certain attributes or
benefits to be derived by an investment in the Fund. Such advertisements or
communications may include symbols, headlines or other material which highlight
or summarize the information discussed in more detail therein. With proper
authorization, the Fund may reprint articles (or excerpts) written regarding the
Fund and provide them to prospective shareholders. Performance information with
respect to the Fund is generally available by calling 1-800-539-3863.

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

Advertisements may also include descriptive information about the investment
adviser, including, but not limited to, its status within the industry, other
services and products it makes available, total assets under management, and its
investment philosophy.

When comparing yield, total return and investment risk of an investment in Class
A or Class B shares of the Fund with other investments, investors should
understand that certain other investments have different risk characteristics
than an investment in shares of the Fund. For example, certificates of deposit
may have fixed rates of return and may be insured as to principal and interest
by the FDIC, while the Fund's returns will fluctuate and its share values and
returns are not guaranteed. Money market accounts offered by banks also may be
insured by the FDIC and may offer stability of principal. U.S. Treasury
securities are guaranteed as to principal and interest by the full faith and
credit of the U.S. government. Money market mutual funds may seek to maintain a
fixed price per share.

ADDITIONAL PURCHASE, EXCHANGE AND REDEMPTION INFORMATION

The New York Stock Exchange ("NYSE") holiday closing schedule indicated in the
Prospectus under "Share Price" is subject to change.

When the NYSE is closed, or when trading is restricted for any reason other than
its customary weekend or holiday closings, or under emergency circumstances as
determined by the Commission to warrant such action, the Fund's Transfer Agent
will determine the Fund's net asset value at Valuation Time. A Fund's net asset
value may be affected to the extent that its securities are traded on days that
are not Business Days.

If, in the opinion of the Trustees, conditions exist which make cash payment
undesirable, redemption payments may be made in whole or in part in securities
or other property, valued for this purpose as they are valued in computing the
net asset value of each class of the Fund. Shareholders receiving securities or
other property on redemption may realize a gain or loss for tax purposes and
will incur any costs of sale as well as the associated inconveniences.

- 17 -
<PAGE>

Pursuant to Rule 11a-3 under the 1940 Act, the Fund is required to give
shareholders at least 60 days' notice prior to terminating or modifying the
Fund's exchange privilege. Under the Rule, the 60-day notification requirement
may be waived if (1) the only effect of a modification would be to reduce or
eliminate an administrative fee, redemption fee or deferred sales charge
ordinarily payable at the time of exchange or (2) the Fund temporarily suspends
the offering of shares as permitted under the 1940 Act or by the Commission or
because it is unable to invest amounts effectively in accordance with its
investment objective and policies.

The Fund reserves the right at any time without prior notice to shareholders to
refuse exchange purchases by any person or group if, in Key Advisers or the
Sub-Adviser's judgment, the Fund would be unable to invest effectively in
accordance with its investment objective and policies, or would otherwise
potentially be adversely affected.

PURCHASING SHARES.

ALTERNATIVE SALES ARRANGEMENTS - CLASS A AND CLASS B SHARES. The alternative
sales arrangements permit an investor to choose the method of purchasing shares
that is more beneficial depending on the amount of the purchase, the length of
time the investor expects to hold shares and other relevant circumstances.
Investors should understand that the purpose and function of the deferred sales
charge and asset-based sales charge with respect to Class B shares are the same
as those of the initial sales charge with respect to Class A shares. Any
salesperson or other person entitled to receive compensation for selling Fund
shares may receive different compensation with respect to one class of shares on
behalf of a single investor (not including dealer "street name" or omnibus
accounts) because generally it will be more advantageous for that investor to
purchase Class A shares of the Fund instead.

The two classes of shares each represent an interest in the same portfolio
investments of the Fund. However, each class has different shareholder
privileges and features. The net income attributable to Class B shares and the
dividends payable on Class B shares will be reduced by incremental expenses
borne solely by that class, including the asset-based sales charge to which
Class B shares are subject.

CLASS B CONVERSION FEATURE. Ninety-six months after an investor's purchase order
for Class B shares is accepted, such "Matured Class B Shares" automatically will
convert to Class A shares, on the basis of the relative net asset value of the
two classes, without the imposition of any sales load or other charge. Each time
any Matured Class B shares convert to Class A shares, any Class B shares
acquired by the reinvestment of dividends or distributions on such Matured Class
B shares that are still held will also convert to Class A shares, on the same
basis. The conversion feature is intended to relieve holders of Matured Class B
shares of the asset-based sales charge under the Class B Distribution Plan after
such shares have been outstanding long enough that the Distributor may have been
compensated for distribution expenses related to such shares.

The conversion of Matured Class B shares to Class A shares is subject to the
continuing availability of a private letter ruling from the Internal Revenue
Service, or an opinion of counsel or tax adviser, to the effect that the
conversion of Matured Class B shares does not constitute a taxable event for the
holder under Federal income tax law. If such a revenue ruling or opinion is no
longer available, the automatic conversion feature may be suspended, in which
event no further conversion of Matured Class B shares would occur while such
suspension remained in effect. Although Matured Class B shares could then be
exchanged for Class A shares on the basis of relative net asset value of the two
classes, without the imposition of a sales charge or fee, such exchange could
constitute a taxable event for the holder, and absent such exchange, Class B
shares might continue to be subject to the asset-based sales charge for longer
than six years.

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<PAGE>

total net assets, and then pro rata to each outstanding share within a given
class. Such general expenses include (1) management fees, (2) legal, bookkeeping
and audit fees, (3) printing and mailing costs of shareholder reports,
prospectuses, statements of additional information and other materials for
current shareholders, (4) fees to the Trustees who are not affiliated with Key
Advisers, (5) custodian expenses, (6) share issuance costs, (7) organization and
start-up costs, (8) interest, taxes and brokerage commissions, and (9)
non-recurring expenses, such as litigation costs. Other expenses that are
directly attributable to a class are allocated equally to each outstanding share
within that class. Such expenses include (1) Rule 12b-1 distribution fees and
shareholder servicing fees, (2) incremental transfer and shareholder servicing
agent fees and expenses, (3) registration fees and (4) shareholder meeting
expenses, to the extent that such expenses pertain to a specific class rather
than to the Fund as a whole.

REDUCED SALES CHARGE. Reduced sales charges are available for purchases of
$50,000 or more of Class A shares of the Fund alone or in combination with
purchases of shares of other Class A shares of funds of the Victory Portfolios.
To obtain the reduction of the sales charge, you or your Investment Professional
must notify the Transfer Agent at the time of purchase whenever a quantity
discount is applicable to your purchase.

In addition to investing at one time in any combination of Class A shares of the
Victory Portfolios in an amount entitling you to a reduced sales charge, you may
qualify for a reduction in the sales charge under the following programs:

COMBINED PURCHASES. When you invest in Class A shares of the Victory Portfolios
for several accounts at the same time, you may combine these investments into a
single transaction if purchased through one Investment Professional, and if the
total is $50,000 or more. The following may qualify for this privilege: an
individual, or "company" as defined in Section 2(a)(8) of the 1940 Act; an
individual, spouse, and their children under age 21 purchasing for his, her, or
their own account; a trustee, administrator or other fiduciary purchasing for a
single trust estate or single fiduciary account or for a single or a
parent-subsidiary group of "employee benefit plans" (as defined in Section 3(3)
of ERISA); and tax-exempt organizations under Section 501(c)(3) of the Internal
Revenue Code.

RIGHTS OF ACCUMULATION. "Rights of Accumulation" permit reduced sales charges on
future purchases of Class A shares after you have reached a new breakpoint. You
can add the value of existing Victory Portfolios Class A shares held by you,
your spouse, and your children under age 21, determined at the previous day's
net asset value at the close of business, to the amount of your new purchase
valued at the current offering price to determine your reduced sales charge.

LETTER OF INTENT. If you anticipate purchasing $50,000 or more of shares of the
Fund alone or in combination with Class A shares of certain other Victory
Portfolios within a 13-month period, you may obtain shares of the portfolios at
the same reduced sales charge as though the total quantity were invested in one
lump sum, by filing a non-binding Letter of Intent (the "Letter") within 90 days
of the start of the purchases. Each investment you make after signing the Letter
will be entitled to the sales charge applicable to the total investment
indicated in the Letter. For example, a $2,500 purchase toward a $60,000 Letter
would receive the same reduced sales charge as if the $60,000 had been invested
at one time. To ensure that the reduced price will be received on future
purchases, you or your Investment Professional must inform the transfer agent
that the Letter is in effect each time shares are purchased. Neither income
dividends nor capital gain distributions taken in additional shares will apply
toward the completion of the Letter.

You are not obligated to complete the additional purchases contemplated by a
Letter. If you do not complete your purchase under the Letter within the
13-month period, your sales charge will be adjusted upward, corresponding to the
amount actually purchased, and if after written notice, you do not pay the
increased sales charge, sufficient escrowed shares will be redeemed to pay such
charge.

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<PAGE>

If you purchase more than the amount specified in the Letter and qualify for a
further sales charge reduction, the sales charge will be adjusted to reflect
your total purchase at the end of 13 months. Surplus funds will be applied to
the purchase of additional shares at the then current offering price applicable
to the total purchase.

EXCHANGING SHARES.

Shares of any Victory money market fund or Class A shares of any other fund of
the Victory Portfolios with a reduced sales charge may be exchanged for shares
of the Fund upon payment of the difference in the sales charge. Shares of any
Victory money market fund may be used to purchase Class B shares of the Fund.

Shares of the Fund may be exchanged for the same class of shares of any other
fund of the Victory Portfolios. When Class B shares are redeemed to effect an
exchange, the priorities described in "How to Invest, Exchange and Redeem -
Class B shares" in the Prospectus for the imposition of the Class B CDSC will be
followed in determining the order in which the shares are exchanged.
Shareholders should take into account the effect of any exchange on the
applicability and rate of any CDSC that might be imposed in the subsequent
redemption of remaining shares. Shareholders owning shares of both classes must
specify whether they intend to exchange Class A or Class B shares. If you do not
make a selection, your investment will be made in Class A shares.

REDEEMING SHARES.

REINSTATEMENT PRIVILEGE. Within 90 days of a redemption, a shareholder may
reinvest all or part of the redemption proceeds of (1) Class A shares, or (2)
Class B shares that were subject to the Class B CDSC when redeemed, in Class A
shares of the Fund or any of the other Victory Portfolios into which shares of
the Fund are exchangeable as described below, at the net asset value next
computed after receipt by the Transfer Agent of the reinvestment order. No
service charge is currently made for reinvestment in shares of the Fund . The
shareholder must ask the Distributor for such privilege at the time of
reinvestment. Any capital gain that was realized when the shares were redeemed
is taxable, and reinvestment will not alter any capital gains tax payable on
that gain. If there has been a capital loss on the redemption, some or all of
the loss may not be tax deductible, depending on the timing and amount of the
reinvestment. Under the Internal Revenue Code of 1986, as amended (the "IRS
Code"), if the redemption proceeds of Fund shares on which a sales charge was
paid are reinvested in shares of the Fund or another of the Victory Portfolios
within 90 days of payment of the sales charge, the shareholder's basis in the
shares of the Fund that were redeemed may not include the amount of the sales
charge paid. That would reduce the loss or increase the gain recognized from
redemption. The Fund may amend, suspend or cease offering this reinvestment
privilege at any time as to shares redeemed after the date of such amendment,
suspension or cessation. The reinstatement must be into an account bearing the
same registration.

DIVIDENDS AND DISTRIBUTIONS

The Fund ordinarily declares and pays dividends separately for Class A and Class
B shares from its net investment income monthly. The Fund distributes
substantially all of its net investment income and net capital gains, if any, to
shareholders within each calendar year as well as on a fiscal year basis to the
extent required for the Fund to qualify for favorable federal tax treatment.

The amount of a class's distributions may vary from time to time depending on
market conditions, the composition of the Fund's portfolio, and expenses borne
by the Fund or borne separately by the class, as described in "Alternative Sales
Arrangements - Class A and Class B," above. Dividends are calculated in the same
manner, at the same time and on the same day for shares of each class. However,
dividends on Class B shares are expected to be lower as a result of the
asset-based sales charge on Class B shares, and Class B dividends will also
differ in amount as a consequence of any difference in net asset value between
Class A and Class B shares.

- 20 -
<PAGE>

For this purpose, the net income of the Fund, from the time of the immediately
preceding determination thereof, shall consist of all interest income accrued on
the portfolio assets of the Fund, dividend income, if any, income from
securities loans, if any, and realized capital gains and losses on the Fund's
assets, less all expenses and liabilities of the Fund chargeable against income.
Interest income shall include discount earned, including both original issue and
market discount, on discount paper accrued ratably to the date of maturity.
Expenses, including the compensation payable to Key Advisers or the Sub-Adviser,
are accrued each day. The expenses and liabilities of the Fund shall include
those appropriately allocable to the Fund as well as a share of the general
expenses and liabilities of the Victory Portfolios in proportion to the Fund's
share of the total net assets of the Victory Portfolios.

TAXES

It is the policy of the Fund to seek the favorable tax treatment accorded
regulated investment companies ("RICs") under Subchapter M of the IRS Code for
so long as such qualification is in the best interest of its shareholders. By
following such policy and distributing its income and gains currently with
respect to each taxable year, the Fund expects to eliminate or reduce to a
nominal amount the federal income and excise taxes to which it may otherwise be
subject.

In order to qualify as a RIC, the Fund must, among other things, (1) derive at
least 90% of its gross income from dividends, interest, payments with respect to
securities loans, and gains from the sale or other disposition of stock or
securities, foreign currencies or other income (including gains from options,
futures or forward contracts) derived with respect to its business of investing
in stock, securities or currencies, (2) derive less than 30% of its gross income
from the sale or other disposition of stock, securities, options, futures,
forward contracts, and certain foreign currencies (or options, futures, or
forward contracts on foreign currencies) held for less than three months, and
(3) diversify its holdings so that at the end of each quarter of its taxable
year (a) at least 50% of the market value of the fund's assets is represented by
cash or cash items, U.S. Government securities, securities of other RICs and
other securities limited, in respect of any one issuer, to an amount not greater
than 5% of the value of the fund's total assets and 10% of the outstanding
voting securities of such issuer, and (b) not more than 25% of the value of its
total assets is invested in the securities of any one issuer (other than U.S.
Government securities) or of two or more issuers that the Fund controls and that
are engaged in the same, similar, or related trades or businesses. These
requirements may restrict the degree to which the Fund may engage in short-term
trading and concentrate investments. If the Fund qualifies as a RIC, it will not
be subject to federal income tax on the part of its net investment income and
net realized capital gains, if any, that it distributes to shareholders with
respect to each taxable year within the time limits specified in the Code.

A non-deductible excise tax is imposed on regulated investment companies that do
not distribute in each calendar year an amount equal to 98% of their ordinary
income for the year plus 98% of their capital gain net income for the 1-year
period ending on October 31 of such calendar year. The balance of such income
must be distributed during the following calendar year. If distributions during
a calendar year are less than the required amount, the fund is subject to a
non-deductible excise tax equal to 4% of the deficiency.

Certain investment and hedging activities of the Fund, including transactions in
options, futures contracts, hedging transactions, forward contracts, straddles,
foreign currencies, and foreign securities, are subject to special tax rules. In
a given case, these rules may accelerate income to the Fund, defer losses to the
Fund, cause adjustments in the holding periods of the Fund's securities, convert
short-term capital losses into long-term capital losses, or otherwise affect the
character of the Fund's income. These rules could therefore affect the amount,
timing and character of distributions to shareholders. The Victory Portfolios
will endeavor to make any available elections pertaining to such transactions in
a manner believed to be in the best interest of the Fund and its shareholders.

- 21 -
<PAGE>

The Fund will be required in certain cases to withhold and remit to the U.S.
Treasury 31% of taxable dividends paid to any shareholder who has failed to
provide a (or has provided an incorrect) tax identification number, or is
subject to withholding pursuant to a notice from the Internal Revenue Service
for failure to properly include on his or her income tax return payments of
interest or dividends. This "backup withholding" is not an additional tax, and
any amounts withheld may be credited against the shareholder's ultimate U.S. tax
liability.

Information set forth in the Prospectus and this Statement of Additional
Information that relates to federal taxation is only a summary of certain key
federal tax considerations generally affecting purchasers of shares of the Fund.
No attempt has been made to present a complete explanation of the federal tax
treatment of the Fund or its shareholders, and this discussion is not intended
as a substitute for careful tax planning. Accordingly, potential purchasers of
shares of the Fund are urged to consult their tax advisers with specific
reference to their own tax circumstances. In addition, the tax discussion in the
Prospectus and this Statement of Additional Information is based on tax law in
effect on the date of the Prospectus and this Statement of Additional
Information; such laws and regulations may be changed by legislative, judicial
or administrative action, sometimes with retroactive effect.

- 22 -
<PAGE>

TRUSTEES AND OFFICERS

BOARD OF TRUSTEES.

Overall responsibility for management of the Victory Portfolios rests with the
Trustees, who are elected by the shareholders of the Victory Portfolios. The
Victory Portfolios are managed by the Trustees in accordance with the laws of
the State of Delaware governing business trusts. There are currently seven
Trustees, six of whom are not "interested persons" of the Victory Portfolios
within the meaning of that term under the 1940 Act ("Independent Trustees"). The
Trustees, in turn, elect the officers of the Victory Portfolios to actively
supervise its day-to-day operations.

The Trustees of the Victory Portfolios, their addresses, ages and their
principal occupations during the past five years are as follows:

Position(s) Held
With the Victory Principal Occupation
Name, Address and Age Portfolios During Past 5 Years
- --------------------- ---------- -------------------

Leigh A. Wilson*, 51 Trustee and From 1989 to present,
Glenleigh International Ltd. President Chairman and Chief
53 Sylvan Road North Executive Officer,
Westport, CT 06880 Glenleigh International
Limited; from 1984 to
1989, Chief Executive
Officer, Paribas North
America and Paribas
Corporation; President
and Trustee, The Victory
Funds and the Key Mutual
Funds.

Robert G. Brown, 73 Trustee Retired; from October
5460 N. Ocean Drive 1983 to November 1990,
Singer Island President, Cleveland
Riviera Beach, FL 33404 Advanced Manufacturing
Program (non-profit
corporation engaged in
regional economic
development).

Edward P. Campbell, 46 Trustee From March 1994 to
Nordson Corporation present, Executive Vice
28601 Clemens Road President and Chief
Westlake, OH 44145 Operating Officer of
Nordson Corporation
(manufacturer of
application equipment);
from May 1988 to March
1994, Vice President of
Nordson Corporation; from
1987 to December 1994,
member of the Supervisory
Committee of Society's
Collective Investment
Retirement Fund; from May
1991 to August 1994,
Trustee, Financial
Reserves Fund and from
May 1993 to August 1994,
Trustee, Ohio Municipal
Money Market Fund;
Trustee, The Victory
Funds and the Key Mutual
Funds.

- ------------
* Mr. Wilson is deemed to be an "interested person" of the Victory Portfolios
under the 1940 Act solely by reason of his position as President.

- 23 -
<PAGE>

Position(s) Held
With the Victory Principal Occupation
Name, Address and Age Portfolios During Past 5 Years
- --------------------- ---------- -------------------

Dr. Harry Gazelle, 68 Trustee Retired radiologist, Drs.
17822 Lake Road Hill and Thomas Corp.;
Lakewood, Ohio 44107 Trustee, The Victory
Funds.

Stanley I. Landgraf, 71 Trustee Retired; currently,
41 Traditional Lane Trustee, Rensselaer
Loudonville, NY 12211 Polytechnic Institute;
Director, Elenel
Corporation and
Mechanical Technology,
Inc.; Member, Board of
Overseers, School of
Management, Rensselaer
Polytechnic Institute;
Member, The Fifty Group
(a Capital Region
business organization);
Trustee, The Victory
Funds.

Dr. H. Patrick Swygert, 53 Trustee President, Howard
Howard University University; formerly
2400 6th Street, N.W. President, State
Suite 320 University of New York at
Washington, D.C. 20059 Albany; formerly,
Executive Vice President,
Temple University;
Trustee, the Victory
Funds.

- 24 -
<PAGE>

The Board presently has an Investment Policy Committee and a Business, Legal,
and Audit Committee. The members of the Investment Policy Committee are Messrs.
Landgraf (Chairman), Morrissey and Brown, who will serve until August 1997. The
function of the Investment Policy Committee is to review the existing investment
policies of the Victory Portfolios, including the levels of risk and types of
funds available to shareholders, and make recommendations to the Trustees
regarding the revision of such policies or, if necessary, the submission of such
revisions to the Victory Portfolios' shareholders for their consideration. The
members of the Business, Legal and Audit Committee are Messrs. Swygert
(Chairman), Campbell and Gazelle who will serve until August 1997. The function
of the Business, Legal and Audit Committee is to recommend independent auditors
and monitor accounting and financial matters; to nominate persons to serve as
Independent Trustees and Trustees to serve on committees of the Board; and to
review compliance and contract matters.

The Investment Policy Committee met four times during the 12 months ended
October 31, 1995. The Business, Legal and Audit Committee was constituted on May
24, 1995 (and has met twice since then) and replaced the Audit Committee, the
Legal Committee and the Nominating Committee, which met three times, one time
and one time, respectively, during the 12 month period ended October 31, 1995.

REMUNERATION OF TRUSTEES AND CERTAIN EXECUTIVE OFFICERS.

Effective June 1, 1995, each Trustee (other than Leigh A. Wilson) receives an
annual fee of $27,000 for serving as Trustee of all the Funds of the Victory
Portfolios, and an additional per meeting fee ($2,400 in person and $1,200 per
telephonic meeting).

Effective June 1, 1995, Leigh A. Wilson receives an annual fee of $33,000 for
serving as President and Trustee for all of the funds of the Victory Portfolios,
and an additional per meeting fee ($3,000 in person and $1,500 per telephonic
meeting).

The following table indicates the compensation received by each Trustee from the
Victory "Fund Complex"(1) for the 12 month period ended October 31, 1995.

<TABLE>
<CAPTION>
Estimated Annual Total Total Compensation
Pension or Retirement Benefits Compensation from Victory
Accrued as Portfolio Expenses Upon Retirement from Fund "Fund Complex" ^(1)
----------------------------- ---------------- ------------ -------------------

<S> <C> <C> <C> <C>
Leigh A. Wilson, Trustee..... -0- -0- $1,112.55 $46,716.97
Robert G. Brown, Trustee..... -0- -0- 1,178.91 39,815.98
John D. Buckingham, Trustee(2) -0- -0- 541.57 18,841.89
Edward P. Campbell,Trustee.... -0- -0- 1,539.75 33,799.68
Harry Gazelle, Trustee....... -0- -0- 974.79 35,916.98
John W. Kemper, Trustee(2)... -0- -0- 541.47 22,567.31
Stanley I. Landgraf, Trustee.. -0- -0- 1,014.75 34,615.98
Thomas F. Morrissey, Trustee.. -0- -0- 1,539.75 40,366.98
H. Patrick Swygert, Trustee.. -0- -0- 1,014.75 37,116.98
John R. Young, Trustee(2).... -0- -0- 577.04 21,963.81

</TABLE>

(1) For certain Trustees, these amounts include compensation received from The
Victory Funds (which were reorganized into the Victory Portfolios as of
June 5, 1995), the Key Funds, formerly the SBSF Funds (the investment
adviser of which was acquired by KeyCorp effective April, 1995) and
Society's Collective Investment Retirement Funds, which were reorganized
into the Victory Balanced Fund and Victory Government Mortgage Fund as of
December 19, 1994. There are presently 24 mutual funds from which the
above-named Trustees are compensated in the Victory "Fund Complex," but not
all of the above-named Trustees serve on the board of each fund in the
"Fund Complex."

(2) Resigned

- 25 -
<PAGE>

OFFICERS.

The officers of the Victory Portfolios, their ages, addresses and principal
occupations during the past five years, are as follows:

POSITION(S) WITH THE PRINCIPAL OCCUPATION
NAME, AGE AND ADDRESS VICTORY PORTFOLIOS DURING PAST 5 YEARS
- ---------------------------- ---------------------- ---------------------

Leigh A. Wilson, 51 President and Trustee From 1989 to present,
Glenleigh International Ltd. Chairman and Chief
53 Sylvan Road North Executive Officer,
Westport, CT 06880 Glenleigh
International
Limited; from 1984 to
1989, Chief Executive
Officer, Paribas
North America and
Paribas Corporation;
President and Trustee
to The Victory Funds
the SBSF Funds Inc.,
dba Key Mutual Funds.

William B. Blundin, 57 Vice President Senior Vice President
BISYS Fund Services of BISYS Fund
125 West 55th Street Services ("BISYS");
New York, New York 10019 Officer of other
investment companies
administered by BISYS
; President and Chief
Executive Officer of
Vista Broker-Dealer
Services, Inc.,
Emerald Asset
Management, Inc. and
BNY Hamilton
Distributors, Inc.,
registered
broker/dealers.

J. David Huber, 50 Vice President Executive Vice
BISYS Fund Services President, BISYS .
3435 Stelzer Road
Columbus, OH 43219-3035

Scott A. Englehart, 33 Secretary From October 1990 to
BISYS Fund Services present, employee of
3435 Stelzer Road BISYS .
Columbus, OH 43219-3035

George O. Martinez, 37 Assistant Secretary From March 1995 to
BISYS Fund Services present, Senior Vice
3435 Stelzer Road President and
Columbus, OH 43219-3035 Director of Legal and
Compliance Services,
BISYS ; from June
1989 to March 1995,
Vice President and
Associate General
Counsel, Alliance
Capital Management.

- 26 -
<PAGE>

POSITION(S) WITH THE PRINCIPAL OCCUPATION
NAME, AGE AND ADDRESS VICTORY PORTFOLIOS DURING PAST 5 YEARS
- ---------------------------- ---------------------- ---------------------

Kevin L. Martin , 35 Treasurer From February 1996 to
BISYS Fund Services present, employee of
3435 Stelzer Road BISYS ; From 1984 to
Columbus, OH 43219-3035 February 1996, Senior
Manager, Ernst &
Young

The mailing address of each of the officers of the Victory Portfolios is 3435
Stelzer Road, Columbus, Ohio 43219-3035.

The officers of the Victory Portfolios (other than Leigh Wilson) receive no
compensation directly from the Victory Portfolios for performing the duties of
their offices. BISYS receives fees from the Victory Portfolios as Administrator.

As of July 1, 1996, the Trustees and officers as a group owned beneficially less
than 1% of the Fund.

ADVISORY AND OTHER CONTRACTS

INVESTMENT ADVISER AND SUB-ADVISER.

Key Advisers was organized as an Ohio corporation on July 27, 1995 and is
registered as an investment adviser under the Investment Advisers Act of 1940.
It is a wholly-owned subsidiary of KeyCorp Asset Management Holdings, Inc.,
which is a wholly-owned subsidiary of KeyBank National Association ("KeyBank"),
a wholly-owned subsidiary of KeyCorp. Affiliates of Key Advisers manage
approximately $48 billion for numerous clients including large corporate and
public retirement plans, Taft-Hartley plans, foundations and endowments, high
net worth individuals and mutual funds.

KeyCorp, a financial services holding company, is headquartered at 127 Public
Square, Cleveland, Ohio 44114. As of March 31, 1996, KeyCorp had an asset base
of $65 billion, with banking offices in 26 states from Maine to Alaska, and
trust and investment offices in 16 states. KeyCorp is the resulting entity of a
merger in 1994 of Society Corporation, the bank holding company of which
KeyBank, formerly Society National Bank was a wholly-owned subsidiary, and
KeyCorp, the former bank holding company. KeyCorp's major business activities
include providing traditional banking and associated financial services to
consumer, business and commercial markets. Its non-bank subsidiaries include
investment advisory, securities brokerage, insurance, bank credit card
processing, and leasing companies. Key Bank is the lead affiliate bank of
KeyCorp.

The following schedule lists the advisory fees for each mutual fund that is
advised by Key Advisers.

.25 OF 1% OF AVERAGE DAILY NET ASSETS

Victory Institutional Money Market Fund

- 27 -
<PAGE>

.35 OF 1% OF AVERAGE DAILY NET ASSETS
Victory Prime Obligations Fund
Victory U.S. Government Obligations Fund
Victory Tax-Free Money Market Fund

.50 OF 1% OF AVERAGE DAILY NET ASSETS
Victory Ohio Municipal Money Market Fund
Victory Limited Term Income Fund
Victory Government Mortgage Fund
Victory Financial Reserves Fund
Victory Fund for Income

.55 OF 1% OF AVERAGE DAILY NET ASSETS
Victory National Municipal Bond Fund
Victory Government Bond Fund
Victory New York Tax-Free Fund

.60 OF 1% OF AVERAGE DAILY NET ASSETS
Victory Ohio Municipal Bond Fund
Victory Stock Index Fund

.65 OF 1% OF AVERAGE DAILY NET ASSETS
Victory Diversified Stock Fund

.75 OF 1% OF AVERAGE DAILY NET ASSETS
Victory Intermediate Income Fund
Victory Investment Quality Bond Fund
Victory Ohio Regional Stock Fund

1% OF AVERAGE DAILY NET ASSETS
Victory Balanced Fund
Victory Value Fund
Victory Growth Fund
Victory Special Value Fund
Victory Special Growth Fund

1.10% OF AVERAGE DAILY NET ASSETS
Victory International Growth Fund

Society Asset Management, Inc. serves as sub-adviser to each of these funds. For
its services under the Investment Sub-Advisory Agreement, Key Advisers pays the
Sub-Adviser sub-advisory fees at rates (based on an annual percentage of average
daily net assets) which vary according to the table set forth below.

- 28 -
<PAGE>

The Investment Sub-advisory fees payable by Key Advisers to the Sub-Adviser are
as follows:

For the Victory Balanced Fund, For theVictory International Growth
Diversified Stock Fund, Growth Fund, Ohio Regional Stock Fund and
Fund, Stock Index Fund and Value Special Value Fund:
Fund:

Rate of Rate of
Net Assets Sub-Advisory Fee^(1) Net Assets Sub-Advisory Fee^(1)
---------- -------------------- ---------- --------------------

Up to $10,000,000 0.65% Up to $10,000,000 0.90%
Next $15,000,000 0.50% Next $15,000,000 0.70%
Next $25,000,000 0.40% Next $25,000,000 0.55%
Above $50,000,000 0.35% Above $50,000,000 0.45%

For the Victory Intermediate Income For the Victory Prime Obligations
Fund, Investment Quality Bond Fund, Fund, Tax-Free Money Market Fund,
Limited Term Income Fund, Ohio U.S. Government Obligations
Municipal Bond Fund, Government Financial Reserves Fund,
Bond Fund, Fund, Government Institutional Money Market Fund and
Mortgage Fund, National Municipal Ohio Municipal Money Market Fund:
Bond Fund and New York Tax-Free
Fund:

Rate of Rate of
Net Assets Sub-Advisory Fee^(1) Net Assets Sub-Advisory Fee^(1)
---------- -------------------- ---------- --------------------

Up to $10,000,000 0.40% Up to $10,000,000 0.25%
Next $15,000,000 0.30% Next $15,000,000 0.20%
Next $25,000,000 0.25% Next $25,000,000 0.15%
Above $50,000,000 0.20% Above $50,000,000 0.125%

- --------------------

(1) As a percentage of average daily net assets. Note, however, that the
Sub-Adviser shall have the right, but not the obligation, to voluntarily
waive any portion of the sub-advisory fee from time to time. Any such
voluntary waiver will be irrevocable and determined in advance of rendering
sub-investment advisory services by the Sub-Adviser, and will be in
writing.

THE INVESTMENT ADVISORY AND INVESTMENT SUB-ADVISORY AGREEMENTS.

Unless sooner terminated, the Investment Advisory Agreement between Key Advisers
and the Victory Portfolios on behalf of the Fund (the "Investment Advisory
Agreement") provides that it will continue in effect as to the Fund for an
initial two-year term and for consecutive one-year terms thereafter, provided
that such continuance is approved at least annually by the Trustees or by vote
of a majority of the outstanding shares of the Fund (as defined under
"Additional Information - Miscellaneous"), and, in either case, by a majority of
the Trustees who are not parties to the Investment Advisory Agreement or
interested persons (as defined in the 1940 Act) of any party to the Investment
Advisory Agreement, by votes cast in person at a meeting called for such
purpose.

The Investment Advisory Agreement is terminable as to the Fund at any time on 60
days' written notice without penalty by the Trustees, by vote of a majority of
the outstanding shares of the Fund, or by Key Advisers. The Investment Advisory
Agreement also terminates automatically in the event of any assignment, as
defined in the 1940 Act.

- 29 -
<PAGE>

for services or a loss resulting from willful misfeasance, bad faith, or gross
negligence on the part of Key Advisers in the performance of its duties, or from
reckless disregard by it of its duties and obligations thereunder.

From January, 1993 until December 31, 1995, Society Asset Management, Inc.
served as investment adviser to the Fund. For the fiscal years ended October 31,
1994 and 1995, the Adviser earned investment advisory fees of $536,712 and
$1,024,165, respectively, after fee reductions of $396,767 and $624,474,
respectively.

Under the Investment Advisory Agreement, Key Advisers may delegate a portion of
its responsibilities to a sub-adviser. In addition, the Investment Advisory
Agreement provides that Key Advisers may render services through its own
employees or the employees of one or more affiliated companies that are
qualified to act as an investment adviser of the Fund and are under the common
control of KeyCorp as long as all such persons are functioning as part of an
organized group of persons, managed by authorized officers of Key Advisers

Key Advisers has entered into an investment sub-advisory agreement with its
affiliate, Society Asset Management, Inc. on behalf of the Fund. The Sub-Adviser
is a wholly-owned subsidiary of KeyCorp Asset Management Holdings, Inc. With
respect to the day to day management of the Fund, under the sub-advisory
agreement, the Sub-Adviser makes decisions concerning, and places all orders
for, purchases and sales of securities and helps maintain the records relating
to such purchases and sales. The Sub-Adviser may, in its discretion, provide
such services through its own employees or the employees of one or more
affiliated companies that are qualified to act as an investment adviser to the
Company under applicable laws and are under the common control of KeyCorp;
provided that (i) all persons, when providing services under the sub-advisory
agreement, are functioning as part of an organized group of persons, and (ii)
such organized group of persons is managed at all times by authorized officers
of the Sub-Adviser. The sub-advisory arrangement does not result in the payment
of additional fees by the Fund.

GLASS-STEAGALL ACT.

In 1971 the United States Supreme Court held in Investment Company Institute v.
Camp that the federal statute commonly referred to as the Glass-Steagall Act
prohibits a national bank from operating a fund for the collective investment of
managing agency accounts. Subsequently, the Board of Governors of the Federal
Reserve System (the "Board") issued a regulation and interpretation to the
effect that the Glass-Steagall Act and such decision: (a) forbid a bank holding
company registered under the Federal Bank Holding Company Act of 1956 (the
"Holding Company Act") or any non-bank affiliate thereof from sponsoring,
organizing, or controlling a registered, open-end investment company
continuously engaged in the issuance of its shares, but (b) do not prohibit such
a holding company or affiliate from acting as investment adviser, transfer
agent, and custodian to such an investment company. In 1981 the United States
Supreme Court held in Board of Governors of the Federal Reserve System v.
Investment Company Institute that the Board did not exceed its authority under
the Holding Company Act when it adopted its regulation and interpretation
authorizing bank holding companies and their non-bank affiliates to act as
investment advisers to registered closed-end investment companies. In the Board
of Governors case, the Supreme Court also stated that if a national bank
complied with the restrictions imposed by the Board in its regulation and
interpretation authorizing bank holding companies and their non-bank affiliates
to act as investment advisers to investment companies, a national bank
performing investment advisory services for an investment company would not
violate the Glass-Steagall Act.

From time to time, advertisements, supplemental sales literature and information
furnished to present or prospective shareholders of the Fund may include
descriptions of Key Trust Company of Ohio, N.A., Key Advisers and the SubAdviser
including, but not limited to, (1) descriptions of the operations of Key Trust
Company of Ohio, N.A., Key Advisers and the Sub-Adviser; (2) descriptions of
certain personnel and their functions; and (3) statistics and rankings related
to the operations of Key Trust Company of Ohio, N.A., Key Advisers and the
Sub-Adviser.

PORTFOLIO TRANSACTIONS.

- 30 -
<PAGE>

which brokers are to be eligible to execute its portfolio transactions.
Purchases from underwriters and/or broker-dealers of portfolio securities
include a commission or concession paid by the issuer to the underwriter and/or
broker-dealer and purchases from dealers serving as market makers may include
the spread between the bid and asked price. While Key Advisers and the
Sub-Adviser generally seek competitive spreads or commissions, the Fund may not
necessarily pay the lowest spread or commission available on each transaction,
for reasons discussed below.

Allocation of transactions to dealers is determined by Key Advisers or the
Sub-Adviser in their best judgment and in a manner deemed fair and reasonable to
shareholders. The primary consideration is prompt execution of orders in an
effective manner at the most favorable price. Subject to this consideration,
dealers who provide supplemental investment research to Key Advisers or the
Sub-Adviser may receive orders for transactions by the Victory Portfolios.
Information so received is in addition to and not in lieu of services required
to be performed by Key Advisers or the Sub-Adviser and does not reduce the
investment advisory fees payable to Key Advisers by the Fund. Such information
may be useful to Key Advisers or the Sub-Adviser in serving both the Victory
Portfolios and other clients and, conversely, such supplemental research
information obtained by the placement of orders on behalf of other clients may
be useful to Key Advisers or the Sub-Adviser in carrying out its obligations to
the Victory Portfolios. In the future, the Trustees may also authorize the
allocation of brokerage to affiliated broker-dealers on an agency basis to
effect portfolio transactions. In such event, the Trustees will adopt procedures
incorporating the standards of Rule 17e-1 of the 1940 Act, which require that
the commission paid to affiliated broker-dealers must be reasonable and fair
compared to the commission, fee or other remuneration received, or to be
received, by other brokers in connection with comparable transactions involving
similar securities during a comparable period of time. At times, the Fund may
also purchase portfolio securities directly from dealers acting as principals,
underwriters or market makers. As these transactions are usually conducted on a
net basis, no brokerage commissions are paid by the Fund.

The Victory Portfolios will not execute portfolio transactions through, acquire
portfolio securities issued by, make savings deposits in, or enter into
repurchase or reverse repurchase agreements with Key Advisers, the Sub-Adviser,
Key Trust Company of Ohio, N.A. ("Key Trust") or their affiliates, or BISYS or
its affiliates, and will not give preference to Key Trust's correspondent banks
or affiliates, or BISYS with respect to such transactions, securities, savings
deposits, repurchase agreements, and reverse repurchase agreements.

Investment decisions for the Fund are made independently from those made for the
other funds of the Victory Portfolios or any other investment company or account
managed by Key Advisers or the Sub-Adviser. Such other funds, investment
companies or accounts may also invest in the securities in which the Fund
invests. When a purchase or sale of the same security is made at substantially
the same time on behalf of the Fund and another fund, investment company or
account, the transaction will be averaged as to price, and available investments
allocated as to amount, in a manner which Key Advisers or the Sub-Adviser
believes to be equitable to the Fund and such other fund, investment company or
account. In some instances, this investment procedure may affect the price paid
or received by the Fund or the size of the position obtained by the Fund in an
adverse manner relative to the result that would have been obtained if only the
Fund had participated in or been allocated such trades. To the extent permitted
by law, Key Advisers or the SubAdviser may aggregate the securities to be sold
or purchased for the Fund with those to be sold or purchased for the other funds
of the Victory Portfolios or for other investment companies or accounts in order
to obtain best execution. In making investment recommendations for the Victory
Portfolios, Key Advisers and the Sub-Adviser will not inquire or take into
consideration whether an issuer of securities proposed for purchase or sale by
the Fund is a customer of Key Advisers or the Sub-Adviser, their parents or
subsidiaries or affiliates and, in dealing with their commercial customers, Key
Advisers or the Sub-Adviser, their parents, subsidiaries, and affiliates will
not inquire or take into consideration whether securities of such customers are
held by the Victory Portfolios.

In the fiscal years ended October 31, 1994 and 1995, the Fund paid $238,762 and
$125,079, respectively, in brokerage commissions.

PORTFOLIO TURNOVER.

- 31 -
<PAGE>

year or less. In the fiscal year ended October 31, 1995 and the period from
December 10, 1993 through October 31, 1994, the Fund's portfolio turnover rates
were 69.22% and 118.49%, respectively.

ADMINISTRATOR.

As of July 1, 1996, BISYS serves as administrator (the "Administrator") to the
Fund. The Administrator assists in supervising all operations of the Fund (other
than those performed by Key Advisers or the Sub-Adviser under the Investment
Advisory Agreement and Sub-Investment Advisory Agreement). The Winsbury Company
("Winsbury") served as the Fund's administrator prior to June 5, 1995. Winsbury
was succeeded by Concord Holding Corporation on that date. Both entities are
affiliated with BISYS.

BISYS receives a fee from the Fund for its services as Administrator and
expenses assumed pursuant to the Administration Agreements, calculated daily and
paid monthly, at the annual rate of fifteen one hundredths of one percent (.15%)
of the Fund's average daily net assets. BISYS may periodically waive all or a
portion of its fee with respect to the Fund in order to increase the net income
of the Fund.

Unless sooner terminated, the Administration Agreement will continue in effect
as to the Fund for a period of two years, and for consecutive one-year terms
thereafter, provided that such continuance is ratified at least annually by the
Trustees or by vote of a majority of the outstanding shares of the Fund, and in
either case by a majority of the Trustees who are not parties to the
Administration Agreement or interested persons (as defined in the 1940 Act) of
any party to the Administration Agreement, by votes cast in person at a meeting
called for such purpose.

The Administration Agreement provides that BISYS shall not be liable for any
error of judgment or mistake of law or any loss suffered by the Victory
Portfolios in connection with the matters to which the Administration Agreement
relates, except a loss resulting from willful misfeasance, bad faith, or gross
negligence in the performance of its duties, or from the reckless disregard by
it of its obligations and duties thereunder.

Under the Administration Agreement, BISYS assists in the Fund's administration
and operation, including providing statistical and research data, clerical
services, internal compliance and various other administrative services,
including among other responsibilities, forwarding certain purchase and
redemption requests to the Transfer Agent, participation in the updating of the
prospectus, coordinating the preparation, filing, printing and dissemination of
reports to shareholders, coordinating the preparation of income tax returns,
arranging for the maintenance of books and records and providing the office
facilities necessary to carry out the duties thereunder. Under the
Administration Agreement, BISYS may delegate all or any part of its
responsibilities thereunder.

In the fiscal years ended October 31, 1994 and October 31, 1995, the
Administrator earned aggregate administration fees of $131,378, and $246,993,
respectively, after fee reductions of $8,644 and $303, respectively.

DISTRIBUTOR.

BISYS Fund Services serves as distributor (the "Distributor") for the continuous
offering of the shares of the Fund pursuant to a Distribution Agreement between
the Distributor and the Victory Portfolios. Prior to May 31, 1995, Winsbury
served as distributor of the Fund. Unless otherwise terminated, the Distribution
Agreement will remain in effect with respect to the Fund for two years, and
thereafter for consecutive one-year terms, provided that it is approved at least
annually (1) by the Trustees or by the vote of a majority of the outstanding
shares of the Fund, and (2) by the vote of a majority of the Trustees of the
Victory Portfolios who are not parties to the Distribution Agreement or
interested persons of any such party, cast in person at a meeting called for the
purpose of voting on such approval. The Distribution Agreement will terminate in
the event of its assignment, as defined under the 1940 Act. For the Victory
Portfolios' fiscal year ended October 31, 1994 Winsbury earned $212,021, in
underwriting commissions, and retained $15; for the fiscal year ended October
31, 1995, the Distributor earned $0 in underwriting commissions, and retained
$0.

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TRANSFER AGENT.

State Street Bank and Trust Company ("State Street") serves as transfer agent
for the Fund. Boston Financial Data Services, Inc. ("BFDS") serves as the
dividend disbursing agent and shareholder servicing agent for the Fund, pursuant
to a Transfer Agency and Service Agreement. Under its agreement with the Victory
Portfolios, State Street has agreed (1) to issue and redeem shares of the
Victory Portfolios; (2) to address and mail all communications by the Victory
Portfolios to its shareholders, including reports to shareholders, dividend and
distribution notices, and proxy material for its meetings of shareholders; (3)
to respond to correspondence or inquiries by shareholders and others relating to
its duties; (4) to maintain shareholder accounts and certain sub-accounts; and
(5) to make periodic reports to the Trustees concerning the Victory Portfolios'
operations.

SHAREHOLDER SERVICING PLAN.

Payments made under the Shareholder Servicing Plan to Shareholder Servicing
Agents (which may include affiliates of the Adviser and Sub- Adviser) are for
administrative support services to customers who may from time to time
beneficially own shares, which services may include: (1) aggregating and
processing purchase and redemption requests for shares from customers and
transmitting promptly net purchase and redemption orders to our distributor or
transfer agent; (2) providing customers with a service that invests the assets
of their accounts in shares pursuant to specific or pre-authorized instructions;
(3) processing dividend and distribution payments on behalf of customers; (4)
providing information periodically to customers showing their positions in
shares; (5) arranging for bank wires; (6) responding to customer inquiries; (7)
providing subaccounting with respect to shares beneficially owned by customers
or providing the information to the Fund as necessary for subaccounting; (8) if
required by law, forwarding shareholder communications from us (such as proxies,
shareholder reports, annual and semi-annual financial statements and dividend,
distribution and tax notices) to customers; (9) forwarding to customers proxy
statements and proxies containing any proposals regarding this Plan; and (10)
providing such other similar services as we may reasonably request to the extent
you are permitted to do so under applicable statutes, rules or regulations.

CLASS B SHARES DISTRIBUTION PLAN.

The Victory Portfolios has adopted a Distribution Plan for Class B shares of the
Fund under Rule 12b-1 of the 1940 Act.

The Distribution Plan adopted by the Trustees with respect to the Class B shares
of the Fund provides that the Fund will pay the Distributor a distribution fee
under the Plan at the annual rate of 0.75% of the average daily net assets of
the Fund attributable to the Class B shares. The distribution fees may be used
by the Distributor for: (a) costs of printing and distributing the Fund's
prospectus, statement of additional information and reports to prospective
investors in the Fund; (b) costs involved in preparing, printing and
distributing sales literature pertaining to the Fund; (c) an allocation of
overhead and other branch office distribution-related expenses of the
Distributor; (d) payments to persons who provide support services in connection
with the distribution of the Fund's Class B shares, including but not limited
to, office space and equipment, telephone facilities, answering routine
inquiries regarding the Fund, processing shareholder transactions and providing
any other shareholder services not otherwise provided by the Victory Portfolios'
transfer agent; (e) accruals for interest on the amount of the foregoing
expenses that exceed the distribution fee and the CDSCs received by the
Distributor; and (f) any other expense primarily intended to result in the sale
of the Fund's Class B shares, including, without limitation, payments to
salesmen and selling dealers at the time of the sale of Class B shares, if
applicable, and continuing fees to each such salesmen and selling dealers, which
fee shall begin to accrue immediately after the sale of such shares.

The amount of the Distribution Fees payable by any Fund under the Distribution
Plan is not related directly to expenses incurred by the Distributor and the
Distribution Plan does not obligate the Fund to reimburse the Distributor for
such expenses. The Distribution Fees set forth in the Distribution Plan will be
paid by the Fund to the Distributor unless and until the Plan is terminated or
not renewed with respect to the Fund; any distribution or service expenses
incurred by the Distributor on behalf of the Fund in excess of payments of the
Distribution Fees specified above which the Distributor has accrued through the
termination date are the sole responsibility and liability of the Distributor
and not an obligation of the Fund.

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<PAGE>

The Distribution Plan for the Class B shares specifically recognizes that either
Key Advisers, the Sub-Adviser or the Distributor, directly or through an
affiliate, may use its fee revenue, past profits, or other resources, without
limitation, to pay promotional and administrative expenses in connection with
the offer and sale of shares of the Fund. In addition, the Plan provides that
Key Advisers, the Sub-Adviser and the Distributor may use their respective
resources, including fee revenues, to make payments to third parties that
provide assistance in selling the Fund's Class B shares, or to third parties,
including banks, that render shareholder support services.

The Distribution Plan was approved by the Trustees, including the Independent
Trustees, at a meeting called for that purpose. As required by Rule 12b-1, the
Trustees carefully considered all pertinent factors relating to the
implementation of the Plan prior to its approval, and have determined that there
is a reasonable likelihood that the Plan will benefit the Fund and its Class B
shareholders. To the extent that the Plan gives Key Advisers, the SubAdviser or
the Distributor greater flexibility in connection with the distribution of Class
B shares of the Fund, additional sales of the Fund's Class B shares may result.
Additionally, certain Class B shareholder support services may be provided more
effectively under the Plan by local entities with whom shareholders have other
relationships.

FUND ACCOUNTANT.

BISYS Fund Services Ohio, Inc. ("BISYS, Inc.") serves as fund accountant for the
Fund pursuant to a fund accounting agreement with the Victory Portfolios dated
June 5, 1995 (the "Fund Accounting Agreement"). As fund accountant for the
Victory Portfolios, BISYS, Inc. calculates the Fund's net asset value, the
dividend and capital gain distribution, if any, and the yield. BISYS Fund
Services Ohio, Inc. also provides a current security position report, a summary
report of transactions and pending maturities, a current cash position report,
and maintains the general ledger accounting records for the Fund. Under the Fund
Accounting Agreement, BISYS, Inc. is entitled to receive annual fees of .03% of
the first $100 million of the Fund's daily average net assets, .02% of the next
$100 million of the Fund's daily average net assets, and .01% of the Fund's
remaining daily average net assets. These annual fees are subject to a minimum
monthly assets charge of $2,500 per taxable fund, and does not include
out-of-pocket expenses or multiple class charges of $833 per month assessed for
each class of shares after the first class. For the fiscal years ended October
31, 1994 and October 31, 1995 the Fund accountant earned fund accounting fees of
$60,781, and $87,894, respectively.

CUSTODIAN.

Cash and securities owned by each of the Victory Portfolio's are held by Key
Trust as custodian pursuant to a Custodian Agreement dated May 24, 1995. Cash
and securities owned by the Fund are also held by Morgan Stanley Trust Company
("Morgan Stanley") as Sub-Custodian, and certain foreign Sub-Custodians,
pursuant to a Sub-Custody Agreement. Under their Agreements, Key Trust and
Morgan Stanley each (1) maintains a separate account or accounts in the name of
each respective fund; (2) makes receipts and disbursements of money on behalf of
each fund; (3) collects and receives all income and other payments and
distributions on account of portfolio securities; (4) responds to correspondence
from security brokers and others relating to its duties; and (5) makes periodic
reports to the Trustees concerning the Victory Portfolios' operations. Key Trust
and Morgan Stanley each may, with the approval of a fund and at the custodian's
own expense, open and maintain a sub-custody account or accounts on behalf of a
fund, provided that Key Trust and Morgan Stanley each shall remain liable for
the performance of all of its duties under the Custodian Agreement.

INDEPENDENT ACCOUNTANTS.

The unaudited financial statements for the period ended April 30, 1996 and the
audited financial statements for the fiscal year ended October 31, 1995 are
incorporated by reference herein. The audited financial statements for the
fiscal year ended October 31, 1995 have been audited by Coopers & Lybrand L.L.P.
as set forth in their report incorporated by reference herein, and are included
in reliance upon such report and on the authority of such firm as experts in
auditing and accounting. Coopers & Lybrand L.L.P. serves as the Victory
Portfolios' auditors. Coopers & Lybrand L.L.P.'s address is 100 East Broad
Street, Columbus, Ohio 43215.

LEGAL COUNSEL.

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<PAGE>

Kramer, Levin, Naftalis & Frankel, 919 Third Avenue, New York, New York 10022 is
the counsel to the Victory Portfolios.

EXPENSES.

The Fund bears the following expenses relating to its operations: taxes,
interest, brokerage fees and commissions, fees of the Trustees, Commission fees,
state securities qualification fees, costs of preparing and printing
prospectuses for regulatory purposes and for distribution to current
shareholders, outside auditing and legal expenses, advisory and administration
fees, fees and out-of-pocket expenses of the custodian and transfer agent,
certain insurance premiums, costs of maintenance of the fund's existence, costs
of shareholders' reports and meetings, and any extraordinary expenses incurred
in the Fund's operation.

If total expenses borne by the Fund in any fiscal year exceeds expense
limitations imposed by applicable state securities regulations, Key Advisers or
the Administrator will waive their fees to the extent such excess expenses
exceed such expense limitation in proportion to their respective fees. As of the
date of this Statement of Additional Information, the most restrictive expense
limitation applicable to the Fund limits its aggregate annual expenses,
including management and advisory fees but excluding interest, taxes, brokerage
commissions, and certain other expenses, to 2.5% of the first $30 million of its
average net assets, 2.0% of the next $70 million of its average net assets, and
1.5% of its remaining average net assets. Any expenses to be borne by Key
Advisers or the Administrator will be estimated daily and reconciled and paid on
a monthly basis. Fees imposed upon customer accounts by Key Advisers, the
Sub-Adviser, Key Trust Company of Ohio, N.A. or its correspondents, affiliated
banks and other non-bank affiliates for cash management services are not fund
expenses for purposes of any such expense limitation.

ADDITIONAL INFORMATION

DESCRIPTION OF SHARES.

The Victory Portfolios (sometimes referred to as the "Trust") is a Delaware
business trust. The Delaware Trust Instrument authorizes the Trustees to issue
an unlimited number of shares, which are units of beneficial interest, without
par value. The Victory Portfolios presently has twenty- four series of shares,
which represent interests in the U.S. Government Obligations Fund, the Prime
Obligations Fund, the Tax-Free Money Market Fund, the Balanced Fund, the Stock
Index Fund, the Value Fund, the Diversified Stock Fund, the Growth Fund, the
Special Value Fund, the Special Growth Fund, the Ohio Regional Stock Fund, the
International Growth Fund, the Limited Term Income Fund, the Government Mortgage
Fund, the Ohio Municipal Bond Fund, the Intermediate Income Fund, the Investment
Quality Bond Fund, the Government Bond Fund, the Fund for Income, the National
Municipal Bond Fund, the New York Tax-Free Fund, the Institutional Money Market
Fund, the Financial Reserves Fund and the Ohio Municipal Money Market Fund,
respectively. The Victory Portfolios' Trust Instrument authorizes the Trustees
to divide or redivide any unissued shares of the Victory Portfolios into one or
more additional series by setting or changing in any one or more aspects their
respective preferences, conversion or other rights, voting power, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption.

Shares have no subscription or preemptive rights and only such conversion or
exchange rights as the Trustees may grant in their discretion. When issued for
payment as described in the Prospectus and this Statement of Additional
Information, the Victory Portfolios' shares will be fully paid and
non-assessable. In the event of a liquidation or dissolution of the Victory
Portfolios, shares of a fund are entitled to receive the assets available for
distribution belonging to the fund, and a proportionate distribution, based upon
the relative asset values of the respective funds, of any general assets not
belonging to any particular fund which are available for distribution.

As of July 1, 1996, the Fund believes that Society National Bank of Cleveland
and Company was shareholder of record of 96.89% of the outstanding Class A
shares of the

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<PAGE>

Fund, but did not hold such shares beneficially. The following shareholders
beneficially owned 5% or more of the outstanding shares of the Fund as of July
1, 1996:

Number of Shares % of Shares of
Outstanding Class A Outstanding
----------- -------------------

Class A
- -------

KeyCorp Plan Balanced Fund 3,230,707.07 15.57%
127 Public Square
Cleveland, OH 44114

Class B
- -------

Dr. Benjamin Zolov 7,799.40 9.01%
David M. Zolov JTWROS
430 Baxter Blvd
Portland, ME 04103

Lillian M. White 4,429.05 5.12%
9931 S. Highway 211
Canby, OR 97013

DLFSG Inc. 4,386.70 5.07%
Attn: David Fleury
P.O. Box 89
Winthrop, ME 04364

William T. Stevens 4,336.74 5.01%
Iris Stevens JRWROS
9801 Heinz Rd
Canby, OR 97013

Shares of the Victory Portfolios are entitled to one vote per share (with
proportional voting for fractional shares) on such matters as shareholders are
entitled to vote. Shareholders vote as a single class on all matters except (1)
when required by the 1940 Act, shares shall be voted by individual series, and
(2) when the Trustees have determined that the matter affects only the interests
of one or more series, then only shareholders of such series shall be entitled
to vote thereon. There will normally be no meetings of shareholders for the
purpose of electing Trustees unless and until such time as less than a majority
of the Trustees have been elected by the shareholders, at which time the
Trustees then in office will call a shareholders' meeting for the election of
Trustees. A meeting shall be held for such purpose upon the written request of
the holders of not less than 10% of the outstanding shares. Upon written request
by ten or more shareholders meeting the qualifications of Section 16(c) of the
1940 Act, (i.e., persons who have been shareholders for at least six months, and
who hold shares having a net asset value of at least $25,000 or constituting 1%
of the outstanding shares) stating that such shareholders wish to communicate
with the other shareholders for the purpose of obtaining the signatures
necessary to demand a meeting to consider removal of a Trustee, the Victory
Portfolios will provide a list of shareholders or disseminate appropriate
materials (at the expense of the requesting shareholders). Except as set forth
above, the Trustees shall continue to hold office and may appoint their
successors.

Rule 18f-2 under the 1940 Act provides that any matter required to be submitted
to the holders of the outstanding voting securities of an investment company
such as the Victory Portfolios shall not be deemed to have been effectively
acted upon unless approved by the holders of a majority of the outstanding
shares of each fund of the Victory Portfolios affected by the matter. For
purposes of determining whether the approval of a majority of the outstanding
shares of a fund will be required in connection with a matter, a fund will be
deemed to be affected by a matter unless it is clear that the interests of each
fund in the matter are identical, or that the matter does not affect any
interest of the fund. Under Rule 18f-2, the approval of an investment advisory
agreement or any change in investment policy would be effectively acted upon
with respect to a fund only if approved by a majority of the outstanding shares
of such fund. However, Rule 18f-2 also provides that the ratification of
independent accountants, the approval of principal underwriting contracts, and
the election of Trustees may be effectively acted upon by shareholders of the
Victory Portfolios voting without regard to series.

SHAREHOLDER AND TRUSTEE LIABILITY .

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<PAGE>

Instrument provides that shareholders of the Victory Portfolios shall not be
liable for the obligations of the Victory Portfolios. The Delaware Trust
Instrument also provides for indemnification out of the trust property of any
shareholder held personally liable solely by reason of his or her being or
having been a shareholder. The Delaware Trust Instrument also provides that the
Victory Portfolios shall, upon request, assume the defense of any claim made
against any shareholder for any act or obligation of the Victory Portfolios, and
shall satisfy any judgment thereon. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is considered to be extremely
remote.

The Delaware Trust Instrument states further that no Trustee, officer, or agent
of the Victory Portfolios shall be personally liable in connection with the
administration or preservation of the assets of the funds or the conduct of the
Victory Portfolios' business; nor shall any Trustee, officer, or agent be
personally liable to any person for any action or failure to act except for his
own bad faith, willful misfeasance, gross negligence, or reckless disregard of
his duties. The Declaration of Trust also provides that all persons having any
claim against the Trustees or the Victory Portfolios shall look solely to the
assets of the Victory Portfolios for payment.

MISCELLANEOUS.

As used in the Prospectus and in this Statement of Additional Information,
"assets belonging to a fund" (or "assets belonging to the Fund") means the
consideration received by the Victory Portfolios upon the issuance or sale of
shares of a fund (or the Fund), together with all income, earnings, profits, and
proceeds derived from the investment thereof, including any proceeds from the
sale, exchange, or liquidation of such investments, and any funds or payments
derived from any reinvestment of such proceeds and any general assets of the
Victory Portfolios, which general liabilities and expenses are not readily
identified as belonging to a particular fund (or the Fund) that are allocated to
that fund (or the Fund) by the Trustees. The Trustees may allocate such general
assets in any manner they deem fair and equitable. It is anticipated that the
factor that will be used by the Trustees in making allocations of general assets
to a particular fund of the Victory Portfolios will be the relative net asset
value of each respective fund at the time of allocation. Assets belonging to a
particular fund are charged with the direct liabilities and expenses in respect
of that fund, and with a share of the general liabilities and expenses of each
of the funds not readily identified as belonging to a particular fund, which are
allocated to each fund in accordance with its proportionate share of the net
asset values of the Victory Portfolios at the time of allocation. The timing of
allocations of general assets and general liabilities and expenses of the
Victory Portfolios to a particular fund will be determined by the Trustees and
will be in accordance with generally accepted accounting principles.
Determinations by the Trustees as to the timing of the allocation of general
liabilities and expenses and as to the timing and allocable portion of any
general assets with respect to a particular fund are conclusive.

As used in the Prospectus and in this Statement of Additional Information, a
"vote of a majority of the outstanding shares" of the Fund means the affirmative
vote of the lesser of (a) 67% or more of the shares of the Fund present at a
meeting at which the holders of more than 50% of the outstanding shares of the
Fund are represented in person or by proxy, or (b) more than 50% of the
outstanding shares of the Fund.

The Victory Portfolios is registered with the Commission as an open-end
management investment company. Such registration does not involve supervision by
the Commission of the management or policies of the Victory Portfolios.

The Prospectus and this Statement of Additional Information omit certain of the
information contained in the Registration Statement filed with the Commission.
Copies of such information may be obtained from the Commission upon payment of
the prescribed fee.

THE PROSPECTUS AND THIS STATEMENT OF ADDITIONAL INFORMATION ARE NOT AN OFFERING
OF THE SECURITIES HEREIN DESCRIBED IN ANY STATE IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE. NO SALESMAN, DEALER, OR OTHER PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THE
PROSPECTUS AND THIS STATEMENT OF ADDITIONAL INFORMATION.

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<PAGE>

APPENDIX

DESCRIPTION OF SECURITY RATINGS.

The nationally recognized statistical rating organizations (individually, an
"NRSRO") that may be utilized by Key Advisers or the Sub-Adviser with regard to
portfolio investments for the Funds include Moody's Investors Service, Inc.
("Moody's"), Standard & Poor's Corporation ("S&P"), Duff & Phelps, Inc.
("Duff"), Fitch Investors Service, Inc. ("Fitch"), IBCA Limited and its
affiliate, IBCA Inc. (collectively, "IBCA"), and Thomson BankWatch, Inc.
("Thomson"). Set forth below is a description of the relevant ratings of each
such NRSRO. The NRSROs that may be utilized by Key Advisers or the Sub-Adviser
and the description of each NRSRO's ratings is as of the date of this Statement
of Additional Information, and may subsequently change.

LONG-TERM DEBT RATINGS (may be assigned, for example, to corporate and municipal
bonds).

Description of the five highest long-term debt ratings by Moody's (Moody's
applies numerical modifiers (e.g., 1, 2, and 3) in each rating category to
indicate the security's ranking within the category):

Aaa. Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

Aa. Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risk appear somewhat larger than in Aaa securities.

A. Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment some time in the future.

Baa. Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

Ba. Bonds which are rated Ba are judged to have speculative elements - their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times in the future. Uncertainty of position
characterizes bonds in this class.

Description of the five highest long-term debt ratings by S&P (S&P may apply a
plus (+) or minus (-) to a particular rating classification to show relative
standing within that classification):

AAA. Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.

AA. Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree.

A. Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.

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<PAGE>

likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.

BB. Debt rated BB is regarded, on balance, as predominately speculative with
respect to capacity to pay interest and repay principal in accordance with the
terms of the obligation. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposure to adverse conditions.

Description of the three highest long-term debt ratings by Duff:

AAA. Highest credit quality. The risk factors are negligible being only slightly
more than for risk-free U.S. Treasury debt.

AA+.High credit quality Protection factors are strong.

AA.Risk is modest but may vary slightly from time to time

AA-.because of economic conditions.

A+.Protection factors are average but adequate. However, risk factors are more
variable and greater in periods of economic stress.

Description of the three highest long-term debt ratings by Fitch (plus or minus
signs are used with a rating symbol to indicate the relative position of the
credit within the rating category):

AAA. Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.

AA. Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated "AAA." Because bonds rated in the "AAA" and
"AA" categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issues is generally rated "[-]+."

A. Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.

IBCA's description of its three highest long-term debt ratings:

AAA. Obligations for which there is the lowest expectation of investment risk.
Capacity for timely repayment of principal and interest is substantial. Adverse
changes in business, economic or financial conditions are unlikely to increase
investment risk significantly.

AA. Obligations for which there is a very low expectation of investment risk.
Capacity for timely repayment of principal and interest is substantial. Adverse
changes in business, economic, or financial conditions may increase investment
risk albeit not very significantly.

A. Obligations for which there is a low expectation of investment risk. Capacity
for timely repayment of principal and interest is strong, although adverse
changes in business, economic or financial conditions may lead to increased
investment risk.

SHORT-TERM DEBT RATINGS (may be assigned, for example, to commercial paper,
master demand notes, bank instruments, and letters of credit).

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<PAGE>

Moody's description of its three highest short-term debt ratings:

Prime-1. Issuers rated Prime-1 (or supporting institutions) have a superior
capacity for repayment of senior short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by many of the following
characteristics:

- - Leading market positions in well-established industries.

- - High rates of return on funds employed.

- - Conservative capitalization structures with moderate reliance on debt and
ample asset protection.

- - Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.

- - Well-established access to a range of financial markets and assured sources
of alternate liquidity.

Prime-2. Issuers rated Prime-2 (or supporting institutions) have a strong
capacity for repayment of senior short-term debt obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.

Prime-3. Issuers rated Prime-3 (or supporting institutions) have an acceptable
ability for repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protection
measurements and may require relatively high financial leverage. Adequate
alternate liquidity is maintained.

S&P's description of its three highest short-term debt ratings:

A-1. This designation indicates that the degree of safety regarding timely
payment is strong. Those issues determined to have extremely strong safety
characteristics are denoted with a plus sign (+).

A-2. Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1."

A-3. Issues carrying this designation have adequate capacity for timely payment.
They are, however, more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations.

Duff's description of its five highest short-term debt ratings (Duff
incorporates gradations of "1+" (one plus) and "1-" (one minus) to assist
investors in recognizing quality differences within the highest rating
category):

Duff 1+. Highest certainty of timely payment. Short-term liquidity, including
internal operating factors and/or access to alternative sources of funds, is
outstanding, and safety is just below risk-free U.S. Treasury short-term
obligations.

Duff 1. Very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are minor.

Duff 1-. High certainty of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are very small.

Duff 2. Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small.

Duff 3. Satisfactory liquidity and other protection factors qualify issue as to
investment grade.

- 40 -
<PAGE>

Risk factors are larger and subject to more variation. Nevertheless, timely
payment is expected.

Fitch's description of its four highest short-term debt ratings:

F-1+. Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.

F-1. Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated F-1+.

F-2. Good Credit Quality. Issues assigned this rating have a satisfactory degree
of assurance for timely payment, but the margin of safety is not as great as for
issues assigned F-1+ or F-1 ratings.

F-3. Fair Credit Quality. Issues assigned this rating have characteristics
suggesting that the degree of assurance for timely payment is adequate, however,
near-term adverse changes could cause these securities to be rated below
investment grade.

IBCA's description of its three highest short-term debt ratings:

A+. Obligations supported by the highest capacity for timely repayment.

A1. Obligations supported by a very strong capacity for timely repayment.

A2. Obligations supported by a strong capacity for timely repayment, although
such capacity may be susceptible to adverse changes in business, economic or
financial conditions.

SHORT-TERM LOAN/MUNICIPAL NOTE RATINGS

Moody's description of its two highest short-term loan/municipal note ratings:

MIG-1/VMIG-1. This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing.

MIG-2/VMIG-2. This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.

S&P's description of its two highest municipal note ratings:

SP-1. Very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics will be given a plus
(+) designation.

SP-2. Satisfactory capacity to pay principal and interest.

SHORT-TERM DEBT RATINGS

Thomson BankWatch, Inc. ("TBW") ratings are based upon a qualitative and
quantitative analysis of all segments of the organization including, where
applicable, holding company and operating subsidiaries.

BankWatch Ratings do not constitute a recommendation to buy or sell securities
of any of these companies. Further, BankWatch does not suggest specific
investment criteria for individual clients.

The TBW Short-Term Ratings apply to commercial paper, other senior short-term
obligations and deposit obligations of the entities to which the rating has been
assigned.

The TBW Short-Term Ratings apply only to unsecured instruments that have a
maturity of one year or less.

- 41 -
<PAGE>

The TBW Short-Term Ratings specifically assess the likelihood of an untimely
payment of principal or interest.

TBW-1. The highest category; indicates a very high degree of likelihood that
principal and interest will be paid on a timely basis.

TBW-2. The second highest category; while the degree of safety regarding timely
repayment of principal and interest is strong, the relative degree of safety is
not as high as for issues rated "TBW-1".

TBW-3. The lowest investment grade category; indicates that while more
susceptible to adverse developments (both internal and external) than
obligations with higher ratings, capacity to service principal and interest in a
timely fashion is considered adequate.

TBW-4. The lowest rating category; this rating is regarded as non-investment
grade and therefore speculative.

DEFINITIONS OF CERTAIN MONEY MARKET INSTRUMENTS

Commercial Paper

Commercial paper consists of unsecured promissory notes issued by corporations.
Issues of commercial paper normally have maturities of less than nine months and
fixed rates of return.

Certificates of Deposit

Certificates of Deposit are negotiable certificates issued against funds
deposited in a commercial bank or a savings and loan association for a definite
period of time and earning a specified return.

Bankers' Acceptances

Bankers' acceptances are negotiable drafts or bills of exchange, normally drawn
by an importer or exporter to pay for specific merchandise, which are "accepted"
by a bank, meaning, in effect, that the bank unconditionally agrees to pay the
face value of the instrument on maturity.

U.S. Treasury Obligations

U.S. Treasury Obligations are obligations issued or guaranteed as to payment of
principal and interest by the full faith and credit of the U.S. Government.
These obligations may include Treasury bills, notes and bonds, and issues of
agencies and instrumentalities of the U.S. Government, provided such obligations
are guaranteed as to payment of principal and interest by the full faith and
credit of the U.S. Government.

U.S. Government Agency and Instrumentality Obligations

Obligations issued by agencies and instrumentalities of the U.S. Government
include such agencies and instrumentalities as the Government National Mortgage
Association, the Export-Import Bank of the United States, the Tennessee Valley
Authority, the Farmers Home Administration, the Federal Home Loan Banks, the
Federal Intermediate Credit Banks, the Federal Farm Credit Banks, the Federal
Land Banks, the Federal Housing Administration, the Federal National Mortgage
Association, the Federal Home Loan Mortgage Corporation, and the Student Loan
Marketing Association. Some of these obligations, such as those of the
Government National Mortgage Association are supported by the full faith and
credit of the U.S. Treasury; others, such as those of the Export-Import Bank of
the United States, are supported by the right of the issuer to borrow from the
Treasury; others, such as those of the Federal National Mortgage Association,
are supported by the discretionary authority of the U.S. Government to purchase
the agency's obligations; still others, such as those of the Student Loan
Marketing Association, are supported only by the credit of the instrumentality.
No assurance can be given that the U.S. Government would provide financial
support to U.S. Government-sponsored instrumentalities if it is not obligated to
do so by law. A Fund will invest in the obligations of such instrumentalities
only when the investment adviser believes that the credit risk with respect to
the instrumentality is minimal.

- 42 -
<PAGE>
Rule 497(c)
Registration No. 33-8982

STATEMENT OF ADDITIONAL INFORMATION

THE VICTORY PORTFOLIOS

DIVERSIFIED STOCK FUND

July 30, 1996

This Statement of Additional Information is not a Prospectus, but should be read
in conjunction with the Prospectus of The Victory Portfolios Diversified Stock
Fund, dated the same date as the date hereof (the "Prospectus"). This Statement
of Additional Information is incorporated by reference in its entirety into the
Prospectus. Copies of the Prospectus may be obtained by writing The Victory
Funds at P.O. Box 8527, Boston, MA 02266-8527, or by telephoning toll free
800-539-FUND or 800-539-3863.

TABLE OF CONTENTS

INVESTMENT OBJECTIVE AND POLICIES.........1 INVESTMENT ADVISER
INVESTMENT LIMITATIONS AND RESTRICTIONS..10 KeyCorp Mutual Fund Advisers,
VALUATION OF PORTFOLIO SECURITIES........12 Inc.
PERFORMANCE..............................12
INVESTMENT SUB-ADVISER
ADDITIONAL PURCHASE, EXCHANGE AND Society Asset Management,
Inc.
REDEMPTION INFORMATION...............16
DIVIDENDS AND DISTRIBUTIONS..............19 ADMINISTRATOR
TAXES....................................20 BISYS Fund Services
TRUSTEES AND OFFICERS....................21
ADVISORY AND OTHER CONTRACTS.............26 DISTRIBUTOR
ADDITIONAL INFORMATION...................34 BISYS Fund Services
APPENDIX................................38
TRANSFER AGENT
State Street Bank and Trust
Company

CUSTODIAN
Key Trust Company of Ohio,
N.A.
<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

The Victory Portfolios (the "Victory Portfolios") is an open-end management
investment company. The Victory Portfolios consist of twenty-four series of
units of beneficial interest ("shares"). The outstanding shares represent
interests in the twenty-four separate investment portfolios which are currently
active. This Statement of Additional Information relates to the Victory
Diversified Stock Fund (the "Fund") only. Much of the information contained in
this Statement of Additional Information expands on subjects discussed in the
Prospectus. Capitalized terms not defined herein are used as defined in the
Prospectus. No investment in shares of the Fund should be made without first
reading the Fund's Prospectus.

INVESTMENT OBJECTIVE AND POLICIES

ADDITIONAL INFORMATION REGARDING FUND INVESTMENTS.

with the issuer of, or any issuer, guarantor, or provider of credit support for,
the instruments. For a description of the rating symbols of each NRSRO see the
Appendix to this Statement of Additional Information.

- 2 -
<PAGE>

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

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

- 3 -
<PAGE>

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

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

- 4 -
<PAGE>

INVESTMENT LIMITATIONS AND RESTRICTIONS

- 5 -
<PAGE>

THE FUND MAY NOT:

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

The following restrictions are not fundamental and may be changed without
shareholder approval:

- 6 -
<PAGE>

2. The Fund will not invest more than 10% of its total assets in the securities
of issuers which together with any predecessors have a record of less than three
years of continuous operation.

3. The Fund will not write or sell puts, straddles, spreads or combinations
thereof or write or purchase put options or purchase call options.

7. The Fund will not buy state, municipal, or private activity bonds.

STATE REGULATIONS.

GENERAL.

- 7 -
<PAGE>

security" under the 1940 Act). Accordingly, any subsequent change in values, net
assets, or other circumstances will not be considered when determining whether
the investment complies with the Fund's investment policies and limitations. If
the value of the Fund's holdings of illiquid securities at any time exceeds the
percentage limitation applicable at the time of acquisition due to subsequent
fluctuations in value or other reasons, the Trustees will consider what actions,
if any, are appropriate to maintain adequate liquidity.

VALUATION OF PORTFOLIO SECURITIES

PERFORMANCE

From time to time the "standardized yield," "dividend yield," "distribution
return," "average annual total return," "total return," and "total return at net
asset value" of an investment in each class of Fund shares may be advertised. An
explanation of how yields and total returns are calculated for each class and
the components of those calculations are set forth below.

Performance - Class B Shares

STANDARDIZED YIELD.

- 8 -
<PAGE>

Standardized Yield = 2 [(a-b + 1)^6 - 1]
---
cd

The symbols above represent the following factors:

a = dividends and interest earned during the 30-day period.

b = expenses accrued for the period (net of any expense reimbursements).

c = the average daily number of shares of that class outstanding during the
30-day period that were entitled to receive dividends.

d = the maximum offering price per share of the class on the last day of
the period, adjusted for undistributed net investment income.

The standardized yield of a class of shares for a 30-day period may differ from
its yield for any other period. The Commission formula assumes that the
standardized yield for a 30-day period occurs at a constant rate for a six-month
period and is annualized at the end of the six-month period. This standardized
yield is not based on actual distributions paid by the Fund to shareholders in
the 30-day period, but is a hypothetical yield based upon the net investment
income from the Fund's portfolio investments calculated for that period. The
standardized yield may differ from the "dividend yield" of that class, described
below. Additionally, because each class of shares is subject to different
expenses, it is likely that the standardized yields of the Fund classes of
shares will differ. The yield on Class A shares for the 30-day period ended
October 31, 1995 was 1.65%. The yield on Class B shares for the 30-day period
ended April 30, 1996 was 0.56%.

DIVIDEND YIELD AND DISTRIBUTION RETURNS.

Dividend Yield
of the Class = Dividends of the Class + Number of days (accrual period) x365
---------------------------
Max. Offering Price of the
Class (last day of period)

From time to time similar yield or distribution return calculations may also be
made using the Class A net asset value (instead of its respective maximum
offering price) at the end of the period. The dividend yields on Class A shares
at maximum offering price and net asset value as of October 31, 1995 were 1.97%
and 2.07%, respectively. The distribution returns on Class A shares at maximum
offering price and net asset value as of October 31, 1995 were 11.59% and
12.17%, respectively. The dividend yields on Class B shares with and without the
CDSC for the one-year period ended April 30, 1996, were 1.49% and 1.57%,
respectively. The distribution returns on Class B shares with and without the
CDSC as of April 30, 1996 were 8.58% and 9.01%, respectively.

- 9 -
<PAGE>

TOTAL RETURNS.

( ERV )^1^n - 1 = Average Annual Total Return
-------
( P )

ERV - P = Total Return
-------
P

In calculating total returns for Class A shares, the current maximum sales
charge of 4.75% (as a percentage of the offering price) is deducted from the
initial investment ("P") (unless the return is shown at net asset value, as
discussed below). For Class B shares, the payment of the applicable CDSC (5.0%
for the first year, 4.0% for the second year, 3.0% for the third and fourth
years, 2.0% in the fifth year, 1.0% in the sixth year and none thereafter) is
applied to the investment result for the time period shown (unless the total
return is shown at net asset value, as described below). Total returns also
assume that all dividends and capital gains distributions during the period are
reinvested to buy additional shares at net asset value per share, and that the
investment is redeemed at the end of the period. The average annual total return
and cumulative total return on Class A shares at maximum offering price for the
period October 20, 1989 (commencement of operations) to October 31, 1995 (life
of fund), were 11.61% and 94.07%, respectively. For the five- and one-year
periods ended October 31, 1995, the annual total return for Class A shares at
maximum offering price was 15.42% and 17.69%, respectively. The average annual
total return and cumulative total return on Class B shares with the CDSC for the
period October 20, 1989 (commencement of operations - Class A shares) to April
30, 1996 (life of fund), were 14.43% and 139.84%, respectively. For the five-
and one-year periods ended April 30, 1996, the annual total return for Class B
shares with CDSC were 15.21% and 27.20%, respectively.

From time to time the Fund may also quote an "average annual total return at net
asset value" or a cumulative "total return at net asset value" for Class A or
Class B shares. It is based on the difference in net asset value per share at
the beginning and the end of the period for a hypothetical investment in that
class of shares (without considering front-end or contingent sales charges) and
takes into consideration the reinvestment of dividends and capital gains
distributions. The average annual total return and cumulative total return on
Class A shares at net assets value the period October 20, 1989 (commencement of
operations) to October 31, 1995 (life of fund), was 12.52% and 103.77%,
respectively. For the five- and one-year periods ended October 31, 1995, the
average annual total return for Class A shares at net asset value were 16.55%
and 23.54%, respectively. The average annual total return and cumulative total
return on Class B shares without the CDSC for the period October 20, 1989
(commencement of operations - Class A shares) to April 30, 1996 (life of fund),
were 14.33% and 139.84%, respectively. For the five- and one-year periods ended
April 30, 1996, the annual total return for Class B shares without CDSC were
15.21% and 31.20%, respectively.

OTHER PERFORMANCE COMPARISONS.

From time to time the Fund may publish the ranking of the performance of its
Class A or Class B shares by Lipper Analytical Services, Inc. ("Lipper"), a
widely-recognized independent mutual fund monitoring service. Lipper monitors
the performance of regulated investment companies, including the Fund, and ranks
the performance of the Fund's classes against (1) all other funds, excluding
money market funds, and (2) all other government bond funds. The Lipper
performance rankings are based on total return that includes the reinvestment of
capital gains distributions and income dividends but does not take sales charges
or taxes into consideration.

- 10 -
<PAGE>

From time to time, the yields and the total returns of Class A or Class B shares
of the Fund may be quoted in and compared to other mutual funds with similar
investment objectives in advertisements, shareholder reports or other
communications to shareholders. The Fund may also include calculations in such
communications that describe hypothetical investment results. (Such performance
examples are based on an express set of assumptions and are not indicative of
the performance of any Fund.) Such calculations may from time to time include
discussions or illustrations of the effects of compounding in advertisements.
"Compounding" refers to the fact that, if dividends or other distributions on a
Fund investment are reinvested by being paid in additional Fund shares, any
future income or capital appreciation of a Fund would increase the value, not
only of the original Fund investment, but also of the additional Fund shares
received through reinvestment. As a result, the value of the Fund investment
would increase more quickly than if dividends or other distributions had been
paid in cash. The Fund may also include discussions or illustrations of the
potential investment goals of a prospective investor (including but not limited
to tax and/or retirement planning), investment management techniques, policies
or investment suitability of the Fund, economic conditions, legislative
developments (including pending legislation), the effects of inflation and
historical performance of various asset classes, including but not limited to
stocks, bonds and Treasury bills. From time to time advertisements or
communications to shareholders may summarize the substance of information
contained in shareholder reports (including the investment composition of a
Fund, as well as the views of the investment adviser as to current market,
economic, trade and interest rate trends, legislative, regulatory and monetary
developments, investment strategies and related matters believed to be of
relevance to the Fund.) The Fund may also include in advertisements, charts,
graphs or drawings which illustrate the potential risks and rewards of
investment in various investment vehicles, including but not limited to stocks,
bonds, and Treasury bills, as compared to an investment in shares of the Fund,
as well as charts or graphs which illustrate strategies such as dollar cost
averaging, and comparisons of hypothetical yields of investment in tax-exempt
versus taxable investments. In addition, advertisements or shareholder
communications may include a discussion of certain attributes or benefits to be
derived by an investment in the Fund. Such advertisements or communications may
include symbols, headlines or other material which highlight or summarize the
information discussed in more detail

- 11 -
<PAGE>

therein. With proper authorization, the Fund may reprint articles (or excerpts)
written regarding the Fund and provide them to prospective shareholders.
Performance information with respect to the Fund is generally available by
calling 1-800-539-3863.

Advertisements and sales literature may include discussions of specifics of the
portfolio manager's investment strategy and process, including, but not limited
to, descriptions of security selection and analysis. Advertisements may also
include descriptive information about the investment adviser, including, but not
limited to, its status within the industry, other services and products it makes
available, total assets under management, and its investment philosophy.

ADDITIONAL PURCHASE, EXCHANGE AND REDEMPTION INFORMATION

The New York Stock Exchange ("NYSE") holiday closing schedule indicated in the
Prospectus under "Share Price" is subject to change.

- 12 -
<PAGE>

suspends the offering of shares as permitted under the 1940 Act or by the
Commission or because it is unable to invest amounts effectively in accordance
with its investment objective and policies.

PURCHASING SHARES.

- 13 -
<PAGE>

costs. Other expenses that are directly attributable to a class are allocated
equally to each outstanding share within that class. Such expenses include (1)
Rule 12b-1 distribution fees and shareholder servicing fees, (2) incremental
transfer and shareholder servicing agent fees and expenses, (3) registration
fees and (4) shareholder meeting expenses, to the extent that such expenses
pertain to a specific class rather than to the Fund as a whole.

REDUCED SALES CHARGE. Reduced sales charges are available for purchases of
$50,000 or more of Class A shares of the Fund alone or in combination with
purchases of Class A shares of other funds of the Victory Portfolios. To obtain
the reduction of the sales charge, you or your Investment Professional must
notify the Transfer Agent at the time of purchase whenever a quantity discount
is applicable to your purchase.

RIGHTS OF ACCUMULATION. "Rights of Accumulation" permit reduced sales charges on
future purchases of Class A shares after you have reached a new breakpoint. You
can add the value of existing Class A shares of Victory Portfolios (excluding
money markets) held by you, your spouse, and your children under age 21,
determined at the previous day's net asset value at the close of business, to
the amount of your new purchase valued at the current offering price to
determine your reduced sales charge.

- 14 -
<PAGE>

EXCHANGING SHARES.

REDEEMING SHARES.

DIVIDENDS AND DISTRIBUTIONS

The Fund ordinarily declares and pays dividends separately for Class A and Class
B shares from its net investment income quarterly. The Fund distributes
substantially all of its net investment income and net capital gains, if any, to
shareholders within each calendar year as well as on a fiscal year basis to the
extent required for the Fund to qualify for favorable federal tax treatment.

- 15 -
<PAGE>

securities loans, if any, and realized capital gains and losses on the Fund's
assets, less all expenses and liabilities of the Fund chargeable against income.
Interest income shall include discount earned, including both original issue and
market discount, on discount paper accrued ratably to the date of maturity.
Expenses, including the compensation payable to Key Advisers or the Sub-Adviser,
are accrued each day. The expenses and liabilities of the Fund shall include
those appropriately allocable to the Fund as well as a share of the general
expenses and liabilities of the Victory Portfolios in proportion to the Fund's
share of the total net assets of the Victory Portfolios.

TAXES

It is the policy of the Fund to seek to qualify for the favorable tax treatment
accorded regulated investment companies ("RICs") under Subchapter M of the IRS
Code for so long as such qualification is in the best interest of its
shareholders. By following such policy and distributing its income and gains
currently with respect to each taxable year, the Fund expects to eliminate or
reduce to a nominal amount the federal income and excise taxes to which it may
otherwise be subject.

- 16 -
<PAGE>

or her income tax return payments of interest or dividends. This "backup
withholding" is not an additional tax, and any amounts withheld may be credited
against the shareholder's ultimate U.S. tax liability.

TRUSTEES AND OFFICERS

BOARD OF TRUSTEES.

The Trustees of the Victory Portfolios, their addresses, ages and their
principal occupations during the past five years are as follows:

Position(s) Held
With the Victory Principal Occupation
Name, Address and Age Portfolios During Past 5 Years
- --------------------- ---------- -------------------

- ------------
* Mr. Wilson is deemed to be an "interested person" of the Victory Portfolios
under the 1940 Act solely by reason of his position as President.

- 17 -
<PAGE>

Position(s) Held
With the Victory Principal Occupation
Name, Address and Age Portfolios During Past 5 Years
- --------------------- ---------- -------------------

Dr. Harry Gazelle, 68 Trustee Retired radiologist, Drs.
17822 Lake Road Hill and Thomas Corp.;
Lakewood, Ohio 44107 Trustee, The Victory
Funds.

- 18 -
<PAGE>

Position(s) Held
With the Victory Principal Occupation
Name, Address and Age Portfolios During Past 5 Years
- --------------------- ---------- -------------------

Dr. Harry Gazelle, 68 Trustee Retired radiologist, Drs.
17822 Lake Road Hill and Thomas Corp.;
Lakewood, Ohio 44107 Trustee, The Victory
Funds.

REMUNERATION OF TRUSTEES AND CERTAIN EXECUTIVE OFFICERS.

- 19 -
<PAGE>

The following table indicates the compensation received by each Trustee from the
Victory "Fund Complex"(1) for the 12 month period ended October 31, 1995.

<S> <C> <C> <C> <C>
Leigh A. Wilson, Trustee..... -0- -0- $2,206.35 $46,716.97
Robert G. Brown, Trustee..... -0- -0- 2,331.48 39,815.98
John D. Buckingham, Trustee(2) -0- -0- 1,060.05 18,841.89
Edward P. Campbell,Trustee.... -0- -0- 2,009.87 33,799.68
Harry Gazelle, Trustee....... -0- -0- 1,929.86 35,916.98
John W. Kemper, Trustee(2)... -0- -0- 1,060.05 22,567.31
Stanley I. Landgraf, Trustee.. -0- -0- 2,009.87 34,615.98
Thomas F. Morrissey, Trustee.. -0- -0- 2,009.87 40,366.98
H. Patrick Swygert, Trustee.. -0- -0- 2,009.87 37,116.98
John R. Young, Trustee(2).... -0- -0- 1,132.82 21,963.81

</TABLE>

(2) Resigned

OFFICERS.

The officers of the Victory Portfolios, their ages, addresses and principal
occupations during the past five years, are as follows:

POSITION(S) WITH THE PRINCIPAL OCCUPATION
NAME, AGE AND ADDRESS VICTORY PORTFOLIOS DURING PAST 5 YEARS
- ---------------------------- ---------------------- ---------------------

- 20 -
<PAGE>

POSITION(S) WITH THE PRINCIPAL OCCUPATION
NAME, AGE AND ADDRESS VICTORY PORTFOLIOS DURING PAST 5 YEARS
- ---------------------------- ---------------------- ---------------------

J. David Huber, 50 Vice President Executive Vice
BISYS Fund Services President, BISYS .
3435 Stelzer Road
Columbus, OH 43219-3035

Scott A. Englehart, 33 Secretary From October 1990 to
BISYS Fund Services present, employee of
3435 Stelzer Road BISYS .
Columbus, OH 43219-3035

The mailing address of each of the officers of the Victory Portfolios is 3435
Stelzer Road, Columbus, Ohio 43219-3035.

As of July 1, 1996, the Trustees and officers as a group owned beneficially less
than 1% of the Fund.

ADVISORY AND OTHER CONTRACTS

INVESTMENT ADVISER AND SUB-ADVISER.

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including large corporate and public retirement plans, Taft-Hartley plans,
foundations and endowments, high net worth individuals and mutual funds.