Independent Auditors' Report
To the Trustees of The Victory Portfolios and
the Securities and Exchange Commission
We have examined management's assertion about The Victory Portfolios'
(comprising the U.S. Government Obligations Fund, the Prime Obligations
Fund, the Financial Reserves Fund, the Institutional Money Market Fund,
the Tax-Free Money Market Fund, the Ohio Municipal Money Market Fund,
the Limited Term Income Fund, the Intermediate Income Fund, the
Investment Quality Bond Fund, the Government Bond Fund, the Government
Mortgage Fund, the Fund for Income, the National Municipal Bond Fund,
the New York Tax-Free Fund, the Ohio Municipal Bond Fund, the Balanced Fund,
the Stock Index Fund, the Diversified Stock Fund, the Value Fund, the Growth
Fund, the Special Value Fund, the Special Growth Fund, the Ohio Regional Stock
Fund, the International Growth Fund, the Lakefront Fund and the Real Estate
Investment Fund) compliance with the requirements of subsections (b) and (c) of
Rule 17F-2 under the Investment Company Act of 1940 as of June 12, 1997,
included in the accompanying Management Statement Regarding Compliance With
Certain Provisions of the Investment Company Act of 1940. Management is
responsible for The Victory Portfolios' compliance with those requirements. Our
responsibility is to express an opinion on management's assertion about The
Victory Portfolios' compliance based on our examination.
Our examination was made in accordance with standards established by the
American Institute of Certified Public Accountants and, accordingly, included
examining, on a test basis, evidence about The Victory Portfolios' compliance
with those requirements and performing such other procedures as we considered
necessary in the circumstances. Included among our procedures were the following
tests performed as of June 12, 1997, with respect to securities of The Victory
Portfolios:
Count and inspection of all securities located in the vault of Key
Services Corporation in Cleveland, Ohio without prior notice to management;
Confirmation, or other procedures as we considered necessary, of all securities
held in book entry form by the Federal Reserve Bank of Cleveland, Depository
Trust Company, Bank of New York or Morgan Stanley Trust Company;
Confirmation, or other procedures as we considered necessary, of all
securities out for transfer with brokers;
Confirmation, or other procedures as we considered necessary, of all repurchase
agreements with brokers/banks and agreement of underlying collateral with Key
Trust Company of Ohio, N.A.'s records; and
Reconciliation of all such securities to the books and records of The Victory
Portfolios and Key Trust Company of Ohio, N.A.
We believe that our examination provides a reasonable basis for our opinion. Our
examination does not provide a legal determination on The Victory Portfolios'
compliance with specified requirements.
In our opinion, management's assertion that The Victory Portfolios was in
compliance with the requirements of subsections (b) and (c) of Rule 17f-2 of the
Investment Company Act of 1940 as of June 12, 1997, with respect to securities
reflected in the investment accounts of The Victory Portfolios is fairly stated,
in all material respects.
This report is intended solely for the information and use of management of The
Victory Portfolios and the Securities and Exchange Commission and should not be
used for any other purpose.
COOPERS & LYBRAND L.L.P.
<PAGE>
Columbus, Ohio
July 8, 1997
Management Statement Regarding Compliance With Certain Provisions of the
Investment Company Act of 1940 We, as members of management of The Victory
Portfolios (comprising the U.S. Government Obligations Fund, the Prime
Obligations Fund, the Financial Reserves Fund, the Institutional Money Market
Fund, the Tax-Free Money Market Fund, the Ohio Municipal Money Market Fund, the
Limited Term Income Fund, the Intermediate Income Fund, the Investment Quality
Bond Fund, the Government Bond Fund, the Government Mortgage Fund, the Fund for
Income, the National Municipal Bond Fund, the New York Tax-Free Fund, the Ohio
Municipal Bond Fund, the Balanced Fund, the Stock Index Fund, the Diversified
Stock Fund, the Value Fund, the Growth Fund, the Special Value Fund, the Special
Growth Fund, the Ohio Regional Stock Fund, the International Growth Fund, the
Lakefront Fund and the Real Estate Investment Fund) are responsible for
complying with the requirements of subsections (b) and (c) of Rule 17f-2,
"Custody of Investments by Registered Management Investment Companies," of the
Investment Company Act of l940. We are also responsible for establishing and
maintaining effective internal controls over compliance with those requirements.
We have performed an evaluation of The Victory Portfolios' compliance with the
requirements of subsections (b) and (c) of Rule 17f-2 as of June 12, 1997. Based
on this evaluation, we assert that The Victory Portfolios was in compliance with
the provisions of subsections (b) and (c) of Rule 17f-2 of the Investment
Company Act of l940 as of June 12, 1997 with respect to securities reflected in
the investment accounts of The Victory Portfolios. The Victory Portfolios
