Rule 497(e)
Registration No. 33-8982
Dear Shareholder:
The Victory Funds Prospectuses are being revised. Effective October 1, 1997, Key
Asset Management Inc. will assume the duties of sub-administrator to the Funds.
Shareholders will not pay additional fees because of this change. Effective
September 1, 1997, the sales charge for the funds indicated has been changed.
This Supplement also provides additional information related to securities
lending. This information is important and should be kept with a copy of your
Prospectus.
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The Victory Funds
Fund for Income
Government Mortgage Fund
Intermediate Income Fund
Investment Quality Bond Fund
Limited Term Income Fund
Supplement Dated September 1, 1997
to the Prospectus Dated March 1, 1997
The Prospectus of the above named funds is supplemented as follows:
1. The paragraph under "Fees and Expenses" on page 4 is revised as follows:
All of the Funds in this prospectus offer only Class A shares. If you purchase
Class A shares of a Fund, you may pay a sales charge of up to 5.75% of the
offering price, depending on the Fund in which you invest and the amount you
invest. You also will incur expenses for investment advisory, administrative,
and shareholder services, all of which are included in a Fund's expense ratio.
See "Choosing a Share Class."
2. The table on page 5 titled "General Information about each of the Funds" is
replaced as follows:
<TABLE>
<CAPTION>
- ------------------------------ --------------------- ----------------------- ----------------- --------------------
Estimated Annual
Inception Expenses Maximum Newspaper
Victory Fund Date After Waivers Sales Charge Abbreviation*
(as a % of net assets)
- ------------------------------ --------------------- ----------------------- ----------------- --------------------
<S> <C> <C> <C> <C>
Fund for Income --
Class A 5/8/87 1.00% 2.00% Victory Incm
- ------------------------------ --------------------- ----------------------- ----------------- --------------------
- ------------------------------ --------------------- ----------------------- ----------------- --------------------
Government Mortgage Victory
Fund --Class A 5/18/90 0.90% 5.75% Gvt Mtg
- ------------------------------ --------------------- ----------------------- ----------------- --------------------
- ------------------------------ --------------------- ----------------------- ----------------- --------------------
Intermediate Income Victory
Fund -- Class A 12/10/93 0.95% 5.75% IntmInc
- ------------------------------ --------------------- ----------------------- ----------------- --------------------
- ------------------------------ --------------------- ----------------------- ----------------- --------------------
Investment Quality Victory
Bond Fund -- Class A 12/10/93 1.00% 5.75% InvQulBd
- ------------------------------ --------------------- ----------------------- ----------------- --------------------
- ------------------------------ --------------------- ----------------------- ----------------- --------------------
Limited Term Income
Fund -- Class A 10/20/89 0.86% 2.00% Victory Ltd In
- ------------------------------ --------------------- ----------------------- ----------------- --------------------
*All newspapers do not use the same abbreviation.
</TABLE>
3. On page 8 for the GOVERNMENT MORTGAGE FUND, page 10 for the INTERMEDIATE
INCOME FUND, and page 12 for the INVESTMENT QUALITY BOND FUND, the first table
under "Fund Expenses" is replaced as follows:
<TABLE>
<CAPTION>
---------------------------------------------------- -----------------------------------------
Shareholder Transaction Expenses* Class A Shares
---------------------------------------------------- -----------------------------------------
---------------------------------------------------- -----------------------------------------
<S> <C>
Maximum Sales Charge Imposed on Purchases 5.75%
(as a percentage of offering price)
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Sales Charge Imposed on Reinvested Dividends NONE
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Deferred Sales Charge NONE
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Redemption Fees NONE
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Exchange Fees NONE
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*You may be charged additional fees if you purchase, exchange, or
redeem shares through a broker or agent.
</TABLE>
<PAGE>
4. The last paragraphs and tables on the pages indicated are replaced with the
following:
EXAMPLE: You would pay the following expenses on a $1,000 investment in
the Fund, assuming: (1) a 5% annual return and (2) redemption at the end of each
time period.
On page 8 for the GOVERNMENT MORTGAGE FUND:
<TABLE>
<CAPTION>
--------------------- ---------------- ----------------- ------------------- -----------------
1 Year 3 Years 5 Years 10 Years
--------------------- ---------------- ----------------- ------------------- -----------------
--------------------- ---------------- ----------------- ------------------- -----------------
<S> <C> <C> <C> <C>
Class A Shares $66 $85 $104 $162
--------------------- ---------------- ----------------- ------------------- -----------------
On page 10 for the INTERMEDIATE INCOME FUND:
--------------------- ---------------- ----------------- ------------------- -----------------
1 Year 3 Years 5 Years 10 Years
--------------------- ---------------- ----------------- ------------------- -----------------
--------------------- ---------------- ----------------- ------------------- -----------------
Class A Shares $67 $86 $107 $167
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On page 12 for the INVESTMENT QUALITY BOND FUND:
--------------------- ---------------- ----------------- ------------------- -----------------
1 Year 3 Years 5 Years 10 Years
--------------------- ---------------- ----------------- ------------------- -----------------
--------------------- ---------------- ----------------- ------------------- -----------------
Class A Shares $67 $88 $110 $173
--------------------- ---------------- ----------------- ------------------- -----------------
</TABLE>
5. The table under "Calculation of Sales Charges -- Class A" on page 21 is
revised as follows:
<TABLE>
<CAPTION>
Your investment in:
Government Mortgage Fund Sales Charge Sales Charge Dealer Reallowance
Intermediate Income Fund as a % of as a % of as a % of the
Investment Quality Bond Fund Offering Price Your Investment Offering Price
- -------------------------------------- ----------------------- ----------------------- ------------------------------
- -------------------------------------- ----------------------- ----------------------- ------------------------------
<S> <C> <C> <C>
Up to $50,000 5.75% 6.10% 5.00%
- -------------------------------------- ----------------------- ----------------------- ------------------------------
- -------------------------------------- ----------------------- ----------------------- ------------------------------
$50,000 up to $100,000 4.50% 4.71% 4.00%
- -------------------------------------- ----------------------- ----------------------- ------------------------------
- -------------------------------------- ----------------------- ----------------------- ------------------------------
$100,000 up to $250,000 3.50% 3.63% 3.00%
- -------------------------------------- ----------------------- ----------------------- ------------------------------
- -------------------------------------- ----------------------- ----------------------- ------------------------------
$250,000 up to $500,000 2.50% 2.56% 2.00%
- -------------------------------------- ----------------------- ----------------------- ------------------------------
- -------------------------------------- ----------------------- ----------------------- ------------------------------
$500,000 up to $1,000,000 2.00% 2.04% 1.75%
- -------------------------------------- ----------------------- ----------------------- ------------------------------
- -------------------------------------- ----------------------- ----------------------- ------------------------------
$1,000,000 and above* 0.00% 0.00% *
- -------------------------------------- ----------------------- ----------------------- ------------------------------
</TABLE>
*There is no initial sales charge on purchases of $1 million or more. However, a
contingent deferred sales charge (CDSC) of up to 1.00% of the purchase price
will be charged to the shareholder if shares are redeemed in the first year
after purchase, or at .50% within two years of the purchase. This charge will be
based on either the cost of the shares or net asset value at the time of
redemption, whichever is lower. There will be no CDSC on reinvested
distributions. Investment Professionals may be paid at a rate of up to 1.00% of
the purchase price.
6. On page 10 for the INTERMEDIATE INCOME FUND, the following paragraph replaces
the information under "Portfolio Management:"
Eric Rasmussen is the Portfolio Manager of the Intermediate Income Fund, a
position he has held since April, 1997. A Portfolio Manager and Managing
Director of the Taxable Fixed Income Department of Key Asset Management Inc., he
has been in the investment advisory business since 1988.
7. Effective October 1, 1997, under "Organization and Management of the Funds,"
the first paragraph on page 27 in the subtopic "The Administrator, Distributor,
and Fund Accountant" should be replaced with the following:
BISYS Fund Services is the Administrator and the Distributor. BISYS is paid a
fee at the following annual rate based on the Fund's average daily net assets as
the Administrator: .15% for portfolio assets of $300 million and less, .12% for
the next $300 million through $600 million of portfolio assets; and .10% for
portfolio assets greater than $600 million. Under a Sub-Administration
Agreement, BISYS pays Key Asset Management Inc. to perform some of the
administrative duties for the Fund. BISYS pays Key Asset Management Inc. a
sub-administration fee at an annual rate of up to .05% of the Fund's average
daily net assets. BISYS does not charge a fee for its services as Distributor.
BISYS Fund Services Ohio, Inc. receives a fee as the Fund's Accountant.
8. On the bottom of page 31 under the heading, "Other Securities and Investment
Practices," the information in the table under "Securities Lending" should be
revised by adding the following sentence at the end of the paragraph, and a new
category, "Investment Company Securities," should also be added to the table.
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------- ------------ ---------------- -------------- -------------- ---------------
Government Intermediate Investment
List of Allowable Investments Fund for Mortgage Fund Income Quality Limited Term
and Investment Practices (continued) Income Fund Bond Fund Income Fund
- ------------------------------------------- ------------ ---------------- -------------- -------------- ---------------
- ------------------------------------------- ------------ ---------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
SECURITIES LENDING. In order to generate
additional income, a Fund may lend its
portfolios securities. A Fund will
receive collateral for the value of the 33 1/3% 33 1/3% 33 1/3% 33 1/3% 33 1/3%
security plus any interest due. A Fund
only will enter into loan arrangements
with entities that the Adviser has
determined are creditworthy. Subject
to the receipt of exemptive relief
from the SEC, Key Trust Company of Ohio,
N.A., the lending agent, may earn a
fee based on the amount of income earned
on the investment of collateral.
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- ------------------------------------------- ------------ ---------------- -------------- -------------- ---------------
INVESTMENT COMPANY SECURITIES. Shares of
other mutual funds with similar
investment objectives. The following 5% 5% 5% 5% 5%
limitations apply: (1) No more than 5% 3% 3% 3% 3% 3%
of the Fund's total assets may be 10% 10% 10% 10% 10%
invested in one mutual fund, (2) a Fund
and its affiliates may not own more than
3% of the securities of any one mutual
fund, and (3) no more than 10% of the
Fund's total assets may be invested in
combined mutual fund holdings.
- ------------------------------------------- ------------ ---------------- -------------- -------------- ---------------
</TABLE>
Please insert this Supplement in the front of your Prospectus. Investors wishing
to obtain more information should call the Funds at 800-KEY-FUND(R).
VF-TXFI-SUP1
