<PAGE> 1
ANNUAL REPORT
[graphic]
OCTOBER 31,
1996
[logo]
Victory Funds
<PAGE> 2
[photo of a woman and her dog]
Only one other thing makes you feel this good...a well-managed mutual fund
portfolio.
Investing in mutual funds can provide you with many opportunities to meet your
financial goals and objectives. If you'd like to learn more about a fund complex
that can help you do that, consider the Victory Funds. Get to know us. We
promise you it won't just be a case of puppy love.
The Victory Funds are distrubuted by BISYS Fund Services which is not affiliated
with KeyCorp. Certain subsidiaries of KeyCorp provide services to the Victory
Funds, including advisory services, and recieve fees from the funds for their
services, as set forth in the prospectus.
For more information about the Victory Funds, including charges and expenses,
request a prospectus by calling 1-800-KEY-FUND (1-800-539-3863). Please read the
prospectus carefully before investing or sending money.
o Not FDIC Insured
o No Bank Guarantee
o May Lose Value
[logo]
Victory Funds
<PAGE> 3
TABLE OF CONTENTS
Shareholder Letter 2
Investment Review and Outlook 3
Fund Review and Commentary
- --------------------------
Introduction to Victory Money Market Funds 4
Introduction to Victory Taxable Fixed Income Funds 8
Introduction to Victory Municipal Income Funds 16
Introduction to Victory Equity Funds 20
(Diversified)
Introduction to Victory Equity Funds 26
(Value)
Introduction to Victory Equity Funds 31
(Growth)
Questions and Answers 37
Glossary of Terms 38
How to Read Your Statement 39
- ----------------
NOT FDIC INSURED
Shares of the Victory Funds are not deposits or other obligations of, or
guaranteed by, any KeyCorp bank, KeyCorp Mutual Fund Advisers, Inc., or
their affiliates, and are subject to investment risks, including possible
loss of the principal amount invested.
- ----------------
KeyCorp Mutual Fund Advisers, Inc. (KMFA) a subsidiary of KeyCorp, is the
investment adviser to The Victory Portfolios (The Victory Funds). The Victory
Funds are sponsored and distributed by BISYS Fund Services, which is not
affiliated with KeyCorp or its subsidiaries. KMFA receives a fee for its
services from the Victory Funds.
This report is not authorized for distribution to prospective investors unless
preceded or accompanied by a current prospectus for the Victory Funds.
Financial Statements
- --------------------
Schedules of Investments 41
Statements of Asset and Liabilities 114
Statements of Operations 120
Statements of Changes in Net Assets 126
Notes to Financial Statements 134
Financial Highlights 143
Report of Independent Accountants 163
Special Shareholder Meeting 164
1
<PAGE> 4
LETTER TO OUR SHAREHOLDERS
[photo]
We are pleased to provide you with this annual report for the Funds' fiscal
year ended October 31, 1996. During this period, investors enjoyed substantial
investment returns as the market maintained its upward momentum and a new
record was witnessed as the Dow Jones Industrial Average surpassed the 6,000
mark. In the pages that follow, your fund managers discuss the investment
strategies and performance results of the portfolios they manage. These
commentaries, along with the related financial data, provide comprehensive
information about your Victory Fund investments.
We take great pleasure in announcing the impressive increase of assets in the
Victory Funds. At approximately $7.7 billion, the current asset level
represents a 30.6% increase in assets over the past twelve months. This growth
is testimony of your confidence in Victory.
We encourage you to read the annual report carefully and share any comments
you may have. Thank you for choosing to invest in the Victory Funds and best
wishes for a healthy and prosperous New Year.
/s/Leigh A. Wilson
Leigh A. Wilson, President
The Victory Funds
2
<PAGE> 5
[graphic]
INVESTMENT REVIEW AND OUTLOOK
In our opinion, as of November 12, 1996
The stock market offered something for every investor in the Funds' fiscal year
ended October 31, 1996: for the bears, a heart-stopping correction in July,
the sharpest such setback in two and a half years; for the bulls, a spirited
rebound that sent most market averages to record highs as the Funds' fiscal
year drew to a close; and for the uncommitted, total returns that were neither
good nor bad, roughly equaling the long-term average of the past seventy
years.
Aided by a favorable bond market, equities enjoyed good performance over the
last twelve months ended October 31, 1996, with the Standard & Poor's 500
rising by slightly more than 24%. Looking ahead, stock market conditions may
not be quite so hospitable, as a much anticipated economic slowdown appears
to be underway.
Outlook for 1997
* The Labor Market
Job growth was one of the brightest stars in the economy this past year
helping to drive unemployment to a seven-year low of 5.1%. Reflecting
the tight market, hourly earnings nudged to their highest rate of
increase in the current expansion. This has helped boost consumer
confidence in the final months of 1996.
* Corporate Profitability
Competitive forces prevented most companies from passing on these higher wage
costs to consumers in the form of higher prices, thereby squeezing profit
margins. Margin deterioration has been aggravated by rising commodity
costs, most notably energy. As a result, profit growth has decelerated
sharply through 1996 and some blue chip companies have warned analysts of
disappointing earnings.
* Our Economic Forecast
We think the sluggish profit growth of 1996 could lead to fewer new jobs and
higher unemployment in 1997 which, in turn, could depress income growth and
limit consumption. As a result, we think real GDP growth is likely to slow
to 1.0%-2.0%, with a bias towards the lower end of the range. Despite higher
labor costs, inflation should moderate a bit, and we believe the Consumer
Price Index will stand at 2.5%, give or take a few basis points, throughout
the next 12-18 months.
* Interest Rates
Should our economic scenario prove correct, long-term interest rates are
likely to move lower in 1997, establishing a new range of 6.25% to 7.0%.
Short rates have room to move lower as well, and we think that the Federal
Reserve may lower interest rates sometime in the first half of the year.
Given the current pressure on corporate profits, these lower rates may not
necessarily lead to sustainably higher stock prices. Moreover, lower rates
do little to mitigate the heightened risks businesses face in a decelerating
economic climate. All in all, we expect continued market volatility in 1997
and recommend investors bear this in mind when constructing their equity
and fixed income portfolios.
3
<PAGE> 6
INTRODUCTION TO MONEY MARKET FUNDS
THE INVESTMENT PROCESS
As with longer-term fixed income portfolios, each portfolio manager seeks to
enhance portfolio yields by identifying opportunities in the financial
markets for incremental returns and by seeking relative value. Portfolio
managers for the Victory Funds follow the shape and movement of the yield
curve closely. This process helps the portfolios to take advantage of
anticipated movements in short-term interest rates.
CREDIT REVIEW
INTEREST RATE ENVIRONMENT
SECTOR SCREEN
GOVERNMENT FUND DIVERSIFIED FUNDS TAX-EXEMPT FUNDS
The Victory U.S. Governemnt The Victory Financial The Victory Ohio Municipal
Obligations Fund Reserves Fund Money Market Fund
The Victory Prime The Victory Tax-Free
Obligations Fund Money Market Fund
Victory Money Market Funds and their respective portfolio managers are as
follows:
[photo]
The Victory Ohio Municipal Money Market Fund
The Victory Tax-Free Money Market Fund
Robin Hudson (right)
Robin Hudson is a Senior Investment Officer with Society Asset Management,
Inc. ("SAM") and a Municipal Research Analyst. She has been with SAM and/or
its affiliates since 1981. Ms. Hudson received her MBA from Baldwin Wallace
College.
The Victory Prime Obligations Fund
The Victory Financial Reserves Fund
Michael Gabriel (left)
Michael Gabriel joined Society Asset Management, Inc. ("SAM") in March, 1995
as a Vice President of Fixed Income Management. Previously, he was with
Boston Safe Deposit & Trust Company.
Mr. Gabriel received his B.S. in Marketing and an MBA from Fordham University.
The Victory U.S. Government Obligations Fund
Ellyn Morgan (center)
Ellyn M. Morgan is an Assistant Vice President with Society Asset Management,
Inc. ("SAM"). She has been with SAM and/or its affiliates since 1987.
4
<PAGE> 7
VICTORY MONEY MARKET FUNDS
AS MANAGERS OF MONEY MARKET FUNDS, CAN YOU TELL US IF THE ECONOMY PERFORMED
IN LINE WITH MARKET EXPECTATIONS AND WHAT THE INTEREST RATE ENVIRONMENT
DID FOR THE FUNDS THIS PAST YEAR?
Robin: Well, from my perspective the economy did not perform in line with
market expectations. Initially, the perception was that the economy was
going to slow down and the Fed would lower interest rates. As it turned
out, the economy began to show signs of stronger than expected growth as
1996 progressed. The market thought the Fed would tighten policy, rather
than the other way around.
Michael: I agree with Robin's assessment of the market. There was a dramatic
turnaround in expectations as the year progressed. While the Federal Reserve
was engaged in an easy money policy in 1995, the first three quarters of 1996
saw the mood change to expectations of Fed tightening and higher interest
rates. The fact that the Fed refrained from such a move as of the third
quarter of '96 can be attributed to the relatively quiet behavior of various
inflation indicators.
Ellyn: I'd just like to add to what Mike said. Some of the economic strength
was evidenced by stronger consumer confidence levels, tight labor market
conditions, housing market activity and industrial production. Since, in
general, inflationary pressure did not appear in consumer or producer indices
or prices, monetary policy remained stable.
ROBIN, YOU MUST HAVE SOME SPECIAL CONCERNS WORKING WITH TAX-EXEMPT SECURITIES.
CAN YOU SHARE SOME OF THEM WITH US?
Robin: Supply and demand factors play a vital part in the tax exempt money
market area. Let me give you an example. When the yield curve steepened late
in the second quarter of 1996, part of the reason was because municipalities
began flooding the market with new debt issues to support their financing
needs.
The Victory Prime Obligations Fund & The Victory Financial Reserves Fund
Portfolio Manager
Michael Gabriel
<TABLE>
As of October 31, 1996
<CAPTION>
PRIME FINANCIAL
OBLIGATIONS RESERVES
<S> <C> <C>
Seven-Day Yield 4.54% 4.79%
Seven-Day Effective Yield 4.64% 4.90%
One Year Total Return 4.81% 5.00%
</TABLE>
<TABLE>
Maturity Schedule (1)
As of 10/31/96
<CAPTION>
Days to PRIME FINANCIAL
Maturity OBLIGATIONS RESERVES
<S> <C> <C>
Less than 30 Days 58.6% 61.7%
31 to 60 Days 24.5% 19.9%
61 to 90 Days 5.2% 3.1%
Greater than 90 Days 11.7% 15.3%
</TABLE>
The performance data quoted represent past performance and are not
indicative of future results. Yields will fluctuate with market
conditions. The Victory Financial Reserves Fund yield reflects
the waiver of a portion of fees for various periods. Without such
waiver of fees, the current 7-day yield would have been 4.72%, and
the 7-day effective yield would have been 4.83%, respectively. There
can be no assurance that any of the Victory Money Market Funds will
be able to maintain a stable net asset value of $1.00 per share. An
investment in a Victory Money Market Fund is neither insured nor
guaranteed by the U.S. Government.
(1) The funds' Maturity Schedules presented may not be representative
of current or future investment strategies. Fund strategies may
change at any time.
5
<PAGE> 8
VICTORY MONEY MARKET FUNDS
DO YOU MANAGE BOTH FUNDS IN THE SAME MANNER?
Robin: Yes, I do, except that the Ohio Fund only purchases Ohio muni debt
while the Tax-Free Fund can buy any state's paper. Other than that, the
strategy and structure of the Funds are very similar.
ELLYN AND MICHAEL, WHAT ABOUT THE FUNDS YOU MANAGE? HOW DID YOUR FUNDS
RESPOND TO THE ECONOMIC CONDITIONS OF 1996?
Ellyn: Well, at the beginning of the year, the expectation was for slower
growth so our efforts were directed at extending the average maturity of
the fund to lock in higher fixed rates. As expectations changed, we moved
to a more neutral position and finally, we closed out the Fund's fiscal
year with shorter average weighted maturities for the Funds.
MICHAEL?
Michael: I chose to shorten average weighted maturities in anticipation of a
possible firming in monetary policy. As you may know, any change in
monetary policy can have an immediate and substantial impact on a money
market portfolio, depending on the direction and magnitude of the change
and the portfolio's average weighted maturity. A portfolio with a shorter
average weighted maturity would be able to capture higher interest rates
more quickly than if the maturity was extended.
WELL, DESPITE THE WEIGHT IN SHORTER MATURITIES, THE FUNDS STILL OFFERED YIELDS
THAT WERE COMPETITIVE. HOW DID YOU DO THAT?
Michael: To some extent, this was due to floating rate securities owned by the
Fund. As interest rates increased, so did the rates on these relatively
short-term investments. I also made some timely purchases of relatively
longer term securities and avoided purchasing high priced securities earlier
in the year.
The Victory Tax-Free Money Market Fund &
The Victory Ohio Municipal Money Market Fund
Portfolio Manager
Robin Hudson
<TABLE>
As of October 31, 1996
<CAPTION>
TAX-FREE OHIO MMMKT
<S> <C> <C>
Seven-Day Yield 2.99% 2.97%
Tax Equivalent Yield (1) 4.67% 5.19%
Seven-Day Effective Yield 3.03% 3.01%
Seven-Day Tax Equivalent
Effective Yield (1) 4.74% 5.21%
One Year Total Return 3.04% 3.11%
</TABLE>
<TABLE>
Maturity Schedule (2)
As of 10/31/96
<CAPTION>
Days to Maturity TAX-FREE OHIO MMMKT
<S> <C> <C>
Less than 30 Days 63.4% 60.9%
31 to 60 Days 13.0% 16.7%
61 to 90 Days 9.4% 3.1%
Greater than 90 Days 14.2% 19.3%
</TABLE>
The performance data quoted is past performance and are not indicative of
future results. Yields will fluctuate with market conditions. The Victory
Ohio MMMKT yields reflect the waiver of a portion of certain fees for
various periods. In such instances and without such waivers, the current
7-day yield and Tax-Equivalent Yield would have been 2.79% and 5.01%, and
the 7-day effective yield and 7-day effective tax equivalent yield would
have been 2.83% and 5.03% respectively. There can be no assurance that any
of the Victory Money Market Funds will be able to maintain a stable net
asset value of $1.00 per share. An investment in a Victory Money Market
Fund is neither insured nor guaranteed by the U.S. Government. Certain
investors may be subject to the Federal Alternative Minimum Tax and to
certain state and local taxes.
(1) The tax equivalent yield is for illustrative purposes only. The tax rate
used to calculate the tax equivalent yield was based on the 36% Federal
regular income rate, and the rate used for the Ohio MMMKT is the combined
36% federal and 6.9% Ohio state income tax rate and are for illustrative
purposes only. The tax bracket does not reflect the effects of the Federal
AMT.
(2) The Maturity Schedules presented may not be representative of current or
future investment strategies. Fund strategies may change at any time.
6
<PAGE> 9
VICTORY MONEY MARKET FUNDS
ELLYN, HOW DID YOUR FUND RESPOND TO THE ECONOMIC ENVIRONMENT OF '96?
Ellyn: I'd like to start out by saying that I agree with both Michael and
Robin's assessment of the market. And individuals and professionals who are
in the investment arena know that any change in monetary policy can have an
immediate impact on a money market portfolio. A shorter average weighted
maturity portfolio would be able to capture higher interest rates more
quickly than if the maturity was extended. I believe our ability to do so
was a direct result of actively managing the Fund's average weighted maturity.
WHAT ARE YOUR COLLECTIVE EXPECTATIONS, GOING FORWARD?
Ellyn: I believe the Fed will keep monetary policy unchanged into early 1997
and I'll continue to position the Fund based on an assessment of current
market sentiment and the release of economic data.
Robin: There seems to be no clear direction for the economy or short-term
interest rates; therefore, I'm beginning to lengthen the portfolios' average
weighted maturity.
Michael: Going forward, I intend to increase maturities in line with the
peer group averages. The fact that the Fed has not raised rates so far
should provide a firm "tone" to the market and permit the selective
purchase of higher yielding securities in a positive yield curve environment.
As long as the reported inflation numbers remain at 3% or less, monetary
policy should remain constant, since it is not economic growth as
such, that prompts Fed action, as much as related fears of inflation.
The Victory U.S. Government Obligations Fund
Portfolio Manager
Ellyn Morgan
<TABLE>
As of October 31, 1996
<CAPTION>
<S> <C>
Seven-Day Yield 4.79%
Seven-Day Effective Yield 4.90%
One Year Total Return 4.96%
</TABLE>
<TABLE>
Maturity Schedule (1)
As of 10/31/96
<CAPTION>
Days to Maturity
<S> <C>
Less than 30 Days 77.9%
Greater than 90 Days 22.1%
</TABLE>
The performance and ranking data quoted represent past performance and
therefore are not indicative of future results. Yields will fluctuate
with market conditions. There can be no assurance that any of the Victory
Money Market Funds will be able to maintain a stable net asset value of
$1.00 per share. An investment in a Victory Money Market Fund is neither
insured nor guaranteed by the U.S. Government.
(1) The funds' Maturity Schedule presented may not be representative of
current or future investment strategies. Fund strategies may change at any time.
7
<PAGE> 10
INTRODUCTION TO TAXABLE FIXED INCOME FUNDS
THE INVESTMENT PROCESS
Selecting fixed income securities involves on-going analysis not only of the
bonds available in the marketplace, but of interest rates, yield curves,
relative values and sector weightings. To conduct their security selection,
the experienced fixed income management team follows a disciplined and
tested process.
The investment advisor assigns a relative value to each economic sector by
utilizing its in-house analytical capabilities as well as a wide range of
outside research. It considers the broad economic environment in making
duration decisions for each of the Victory Funds. The portfolio managers
have developed a proprietary process to identify those securities
that have strong potential for income and total return. They are active
managers, continually monitoring portfolio holdings for shifts in value that
will affect buy and sell decisions.
FIXED INCOME SECURITIES UNIVERSE
CREDIT SCREENING PROCESS
DURATION AND MATURITY SCREEN
------------------------------------------------------------------
SHORT-TERM POOL INTERMEDIATE-TERM POOL LONG-TERM POOL
Yield Curve Shape and RELATIVE VALUE ANALYSIS
Movement Analysis Supply and Demand Scarcity; Regulatory Changes;
New Products or Securities; New Issues;
Technical Innovation; Sector Analysis;
Investor Sentiment
------------------------------------------------------------------
SHORT-TERM FUND INTERMEDIATE-TERM FUNDS LONG-TERM FUNDS
The Victory Limited The Victory Intermediate The Victory Investment
Term Income Fund Income Fund Quality Bond Fund
The Victory Fund for Income The Victory Government
Bond Fund
The Victory Government
Mortgage Fund
8
<PAGE> 11
VICTORY TAXABLE FIXED INCOME FUNDS
Victory Taxable Fixed Income Funds and their respective portfolio managers are
as follows:
The Victory Limited Term Income Fund
The Victory Government Bond Fund
The Victory Government Mortgage Fund
The Victory Fund for Income
Robert Fernald (center)
Robert (Rob) Fernald, is a Vice President for Fixed Income Securities. He has
also been a Fund Manager with Society Asset Management, Inc. ("SAM") since
1993. Previously, Rob was a Fund Manager with Ameritrust Company National
Association.
The Intermediate Income Fund
David Bacille (right)
David M. Bacille has been a Portfolio Manager with Society Asset Management,
Inc. ("SAM") since 1994. He joined KeyCorp in 1990. Mr. Bacille received a
BBA degree in Accounting from Siena College and is currently a CFA candidate
for the Association of Investment Management and Research.
The Victory Investment Quality Bond Fund
Richard Heine (left)
Richard (Rick) Heine is a Chartered Financial Analyst and a Vice President for
Society Asset Management, Inc. ("SAM"). Rick has managed the Fund since its
inception. He has been with SAM and/or its affiliates since 1974. Rick
received his MBA from Case Western Reserve University.
The portfolio managers of the Victory Funds utilize a three-dimensional
approach to managing taxable fixed income portfolios.
1. Superior Research.
Before any fixed income security can be considered for purchase by a portfolio
manager, it must pass a stringent internal credit review process. As part of
this process, credit analysts review the structure and credit ratings of the
individual securities as well as the financial statements of the
organizations that issue them.
2. No large duration bets are taken.
To keep the interest rate sensitivity of the Victory Funds' fixed income
portfolios consistent with the market, a security benchmark is chosen that
is appropriate for a given portfolio. The portfolio is then managed to keep
its duration as close as possible to that of the given benchmark. By not
taking large "duration bets," interest rate risk of the portfolio is
dramatically reduced relative to the benchmark.
3. Relative Value.
The portfolio managers for the Victory Funds combine both technical research
and market experience to identify inefficiencies and anomalies in the
marketplace. Inefficiencies give the portfolio manager the opportunity to
purchase securities for the portfolio that may provide higher yields or
total returns. Differences in relative value are a function of securities'
yield differentials (e.g. between corporate, government and mortgage/asset
backed securities), caused by regulatory changes, forces of supply and
demand, and investor sentiments.
9
<PAGE> 12
VICORY TAXABLE FIXED INCOME FUNDS
AS PORTFOLIO MANAGERS FOR THE VICTORY TAXABLE FIXED INCOME FUNDS, CAN YOU
TELL US WHAT ECONOMIC CONDITIONS AFFECTED YOUR MARKET THE MOST THIS PAST YEAR?
Rob: Well, we know that bond markets and interest rates are very sensitive
to economic activity. Throughout most of the year, the markets were
concerned with conflicting economic indicators that were reported. For
example, at one point during the year, unemployment reached a seven year
low (5.1%) while inflation remained fairly subdued.
It was really an endless guessing game as to whether the Fed would raise
interest rates or not. Since its goal is to keep inflation in check, Fed
members might be inclined to raise interest rates when they see increased
activity in the economy. Investors might remember that the Fed lowered
interest rates earlier this year, but rates were left unchanged in the
remaining months despite on-going concerns about a strong economy.
David: Rob made a good point before when he talked about conflicting economic
indicators. I'd like to add that while employment figures seemed to point to
a strong economy, both the consumer and producer price indices seemed to
indicate the economy would remain stable. But toward the end of the year,
we started to see higher consumer debt and an increase in personal
bankruptcies which suggested to us that an economic slowdown was underway.
The Victory Limited Term Income Fund
Portfolio Manager
Robert Fernald
<TABLE>
Total Return
As of 10/31/96
<CAPTION>
Maximum
Net Asset Offering
Value Price
<S> <C> <C>
One Year 4.94% 2.81%
Annualized Return
Three Years 4.28% 3.59%
Five Years 5.39% 4.97%
Since Inception
10/20/89 6.51% 6.21%
</TABLE>
<TABLE>
Victory Limited Term Income Fund
vs. Merrill Lynch 1-3 Yr Treas
(Dollars in thousands)
<CAPTION>
Limited Term Income Limited Term @ NAV Merill Lynch 1-3yr Treas
<S> <C> <C> <C>
10/89 9,805 10,000 10,000
5/90 10,140 10,342 10,396
12/90 10,790 11,005 11,114
7/91 11,308 11,533 11,683
2/92 12,000 12,239 12,436
9/92 12,715 12,968 13,170
4/93 13,088 13,348 13,569
11/93 13,389 13,656 13,857
6/94 13,244 13,507 13,850
1/95 13,446 13,714 14,182
8/95 14,323 14,609 15,071
3/96 14,741 15,035 15,577
10/96 15,222 15,525 16,174
<FN>
Graph reflects investment growth from end of month of fund commencement.
The Merrill Lynch 1-3 Year Treasury Index (Merrill Lynch 1-3 Yr Treas) is a
broad-based unmanaged index that represents the general performance of
short-term (1-3 year) U.S. Treasury securities.
</TABLE>
The performance data quoted represent past performance and therefore, are not
indicative of future results. Total returns are historical and include the
change in share price and reinvestment of dividends and capital gains
distributions, and unless indicated, show the effect of the maximum 2.00%
sales charge. Investment returns and principal values will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than their
original cost. The total return figures set forth above may reflect the
waiver of a portion of certain fees for various periods since the Fund's
inception date. In such instances and without such waiver of fees, the total
returns would have been lower.
Fee waivers are voluntary and may be modified or terminated at any time.
10
<PAGE> 13
VICTORY TAXABLE FIXED INCOME FUNDS
Rick: Investors may also remember that in the first quarter of 1996 there was
a dramatic shift in market sentiment when signs of an improving economy
began to surface. When the February employment report was announced, the
total number of jobs created in the economy was almost double what had been
expected. As far as the Fed is concerned, its decision not to change the
discount or the Fed Funds Rate after Labor Day or in a presidential election
year has historical precedence, so I don't think many people were surprised.
SOUNDS LIKE THERE WAS PLENTY OF VOLATILITY IN THE FIXED INCOME MARKETS IN
'96. HOW DID YOU RESPOND TO THOSE CHANGES AS YOU MANAGED THE PORTFOLIOS?
Rob: Well, I manage four Funds with different average weighted maturities, so
each responds in a slightly different way to any particular piece of
economic news. With the Limited Term Income Fund, I took a slightly
defensive position--which means I shortened the duration of the
maturities--earlier in the year. As rates rose, I invested in overnight
securities, repositioning the portfolio and enabling it to respond to a stable
interest rate environment.
The interest rate environment posed some interesting challenges with the two
intermediate maturity funds (Government
The Victory Government Bond Fund
Portfolio Manager
Robert Fernald
<TABLE>
Total Return
As of 10/31/96
<CAPTION>
GOVERNMENT BOND Class A
Maximum
Net Asset Offering
Value Price
<S> <C> <C>
One Year 3.52% -1.38%
Annualized Returns
Three Years 3.94% 2.27%
Since Inception
5/3/93 4.58% 3.13%
</TABLE>
<TABLE>
GOVERNMENT BOND Class B
Contingent
Net Asset Deferred
Value Charge
<S> <C> <C>
One Year 2.77% -1.15%
Since Inception Annualized
9/26/94 7.43% 5.65%
</TABLE>
<TABLE>
Victory Government Bond Fund
vs. Lehman Government
(Dollars in thousands)
<CAPTION>
Victory Government Bond Victory Government Lehman Government
Class A Class A @ NAV
<S> <C> <C> <C>
5/93 9,528 10,000 10,000
10/93 9,997 10,492 10,594
3/94 9,608 10,084 10,201
8/94 9,649 10,127 10,272
1/95 9,652 10,129 10,352
6/95 10,534 11,055 11,302
11/95 11,010 11,555 11,858
4/96 10,764 11,297 11,679
10/96 11,228 11,784 12,274
<FN>
Graph reflects investment growth from end of month of fund commencement.
The Lehman Government Bond Index (Lehman Government) is a broad-based
unmanaged index that represents the general performance of U.S. Treasury
and U.S. Government agency debt securities.
</TABLE>
The performance data quoted represent past performance and are not indicative
of future results. Total returns are historical and include the change in
share price and reinvestment of dividends and capital gain distributions.
Performance of the different classes of shares will vary based on the
differences in sales charges and class specific expenses paid by
shareholders. Class A performance with sales charge shows the effect of
the maximum 4.75% sales charge applied at the beginning of the period.
Class B performance with sales charge shows the effect of the applicable
contingent deferred sales charge, assuming a complete redemption as of
October 31, 1996. Investment returns and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost. The total return figures set forth above may
reflect the waiver of a portion of certain fees for various periods since
the Fund's inception. In such instances and without such waiver of fees,
the total returns would have been lower.
Fee waivers are voluntary and may be modified or terminated at any time.
11
<PAGE> 14
VICTORY TAXABLE FIXED INCOME FUNDS
Mortgage and Fund for Income) because the mortgage-backed sector is more
vulnerable to interest rate volatility than other sectors of the bond market.
When rates rose during the second half of the year, weak bond price
performance was evident across all fixed income sectors. My strategy with
the Government Mortgage Fund was to be fully invested in a mix of Treasury
and government agency mortgage-backed securities. I used Treasury securities
for both liquidity needs and to adjust the Fund's duration. I also did some
swapping from Ginnie Maes to the Fannie Mae sector to take advantage of
relatively better value.
The Fund for Income is less price sensitive than many of the mortgage funds
because its emphasis is on income. The Fund has a higher average coupon and
yield than most funds, so what we call "price erosion" is largely reduced.
In other words, coupon income is a larger contributor to performance than
the price component.
I also pursued a defensive duration strategy in the Victory Government Bond
Fund last spring, but by mid-summer, I established what we call a "bullet
structure," because I anticipated a market rally which did occur, but not
until the fall. Aside from this, the strategy for the Fund has been to pick
attractive sectors along the yield curve and securities I consider promising.
The Victory Government Mortgage Fund
Portfolio Manager
Robert Fernald
<TABLE>
Total Return
As of 10/31/96
<CAPTION>
Maximum
Net Asset Offering
Value Price
<S> <C> <C>
One Year 5.54% 0.54%
Annualized Return
Three Years 5.14% 3.44%
Five Years 6.94% 5.89%
Since Inception
5/18/90 8.33% 7.51%
</TABLE>
<TABLE>
Victory Government Mortgage
vs. Lehman Mortgage
(Dollars in thousands)
<CAPTION>
Government Mortgage Government Mortgage @ NAV Lehman Mortgage
<S> <C> <C> <C>
5/90 9,528 10,000 10,000
12/90 10,269 10,778 10,823
7/91 10,743 11,276 11,559
2/92 11,643 12,220 12,496
9/92 12,706 13,336 13,300
4/93 13,211 13,866 13,862
11/93 13,549 14,221 14,195
6/94 13,171 13,823 13,899
1/95 13,548 14,220 14,381
8/95 14,742 15,472 15,778
3/96 15,199 15,952 16,372
10/96 15,833 16,617 17,171
<FN>
Graph reflects investment growth from end of month of fund commencement.
The Lehman Brothers Mortgage-Backed Securities Index (Lehman Mortgage) is a
broad-based unmanaged index that represents the general performance of
fixed rate mortgage bonds.
</TABLE>
The performance data quoted represent past performance and therefore, are not
indicative of future results. Total returns are historical and include the
change in share price and reinvestment of dividends and capital gains
distributions, and unless indicated, show the effect of the maximum 4.75%
sales charge. Investment returns and principal values will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than
their original cost. The total return figures set forth above may reflect the
waiver of a portion of certain fees for various periods since the Fund's
inception date. In such instances and without such waiver of fees, the
total returns would have been lower.
Fee waivers are voluntary and may be modified or terminated at any time.
12
<PAGE> 15
VICTORY TAXABLE FIXED INCOME FUNDS
DAVID AND RICK HOW ABOUT THE INTERMEDIATE INCOME FUND AND THE INVESTMENT
QUALITY BOND FUND?
David: Well as we mentioned earlier, the bond market received many
conflicting economic signals, so as the year progressed I repositioned
the Fund to respond to an environment where market yields would either remain
unchanged or fall. The Fund was heavily weighted in the five year sector by
fall to take advantage of higher average yields in the market.
Rick: The Investment Quality Bond Fund was heavily weighted in
mortgage-backed securities. I use a relative value sector approach, so
I'm always looking for sectors or issues I think have good value.
AS A RESULT OF THIS POSITIONING, HOW DID YOUR FUNDS PERFORM?
Rob: Well, as you might expect, each fund performed differently because of the
markets and policies of each Fund. The Limited Term Fund invested cash,
previously held in overnight securities, in two year Treasury notes as their
rates peaked, repositioning it for a stable interest rate environment. The rally
that followed in the fall provided an opportunity for price appreciation. The
Fund's performance was a one-year total return of 4.94%, which does not reflect
the affects of the 2.00% maximum sales charge, compared to the Merrill Lynch 1-3
Year Treasury Index which returned 5.91% as of October 31, 1996.
And, as I mentioned, mortgages distinguished themselves as a strong
performing
The Victory Fund for Income
Portfolio Manager
Robert Fernald
<TABLE>
Total Return
As of 10/31/96
<CAPTION>
Maximum
Net Asset Offering
Value Price
<S> <C> <C>
One Year 6.35% 4.25%
Annualized Return
Three Years 5.85% 5.13%
Five Years 6.28% 5.86%
Since Inception
5/8/87 8.42% 8.19%
</TABLE>
<TABLE>
Victory Fund for Income
vs. Lehman Mortgage
(Dollars in thousands)
<CAPTION>
Victory Fund for Income Victory Fund for Income @ NAV Lehman Mortgage
<S> <C> <C> <C>
5/87 9,801 10,000 10,000
4/88 10,683 10,900 10,933
3/89 11,283 11,512 11,584
2/90 12,806 13,066 13,182
1/91 14,298 14,588 14,835
12/91 16,335 16,666 16,909
11/92 17,037 17,383 17,854
10/93 17,930 18,294 19,204
9/94 17,795 18,156 18,929
8/95 19,584 19,981 21,303
7/96 20,614 21,031 22,364
10/96 21,262 21,693 23,184
<FN>
Graph reflects investment growth from end of month of fund commencement.
The Lehman Brothers Mortgage-Backed Securities Index (Lehman Mortgage) is a
broad-based unmanaged index that represents the general performance of
fixed rate mortgage bonds.
</TABLE>
The performance data quoted represent past performance and therefore, are not
indicative of future results. Total returns are historical and include the
change in share price and reinvestment of dividends and capital gains
distributions, and unless indicated, show the effect of the maximum 2.00%
sales charge. Investment returns and principal values will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than
their original cost. The total return figures set forth above may reflect the
waiver of a portion of certain fees for various periods since the Fund's
inception date. In such instances and without such waiver of fees, the
total returns would have been lower.
Fee waivers are voluntary and may be modified or terminated at any time.
13
<PAGE> 16
VICTORY TAXABLE FIXED INCOME FUNDS
sector, and the performance of these securities strengthened the
performance of The Victory Government Mortgage Fund which finished the year
with a return of 5.54%, which does not reflect the maximum sales charge of
4.75%, compared to the Lehman Government Mortgage Bond Index return of 6.92%
as of October 31, 1996.
Fund for Income returned 6.35%, which does not reflect the 2.00% maximum
sales charge, for one year compared to the Lehman Mortgage Index return of
6.92% as of October 31, 1996. Price volatility affected returns and offset
much of The Victory Government Bond Fund's income. As of October 31, 1996,
the Fund's total return was 3.52% for one year, which does not reflect the
effect of the 4.75% maximum sales charge, compared to 5.12% for the Lehman
Government Bond Index for the same period.
David: As Rob mentioned, mortgage securities were the year's best performers
and the Intermediate Income Fund was heavily weighted in this sector for the
year, which helped its performance. However, we have since reduced our
position in this sector because we believe it has peaked, and increased our
Treasury holdings.
Rick: Much like David, I also benefited from an emphasis on the mortgage
security sector. And with our "relative value sector approach," this helped
the performance of the Victory Investment Quality Fund in all but the last
quarter of 1995.
The Victory Intermediate Income Fund
Portfolio Manager
David Bacille
<TABLE>
Total Return
As of 10/31/96
<CAPTION>
Net Asset Maximum
Value Offering
Price
<S> <C> <C>
One Year 4.56% -0.38%
Since Inception Annualized
12/10/93 4.58% 2.83%
</TABLE>
<TABLE>
Victory Intermediate Income Fund
vs. Lehman Int Gov't/Corp
(Dollars in thousands)
<CAPTION>
Intermediate Income Intermediate Income @ NAV Lehman Int Govt/Corp
<S> <C> <C> <C>
12/93 9,522 10,000 10,000
3/94 9,349 9,819 9,797
6/94 9,279 9,745 9,738
9/94 9,306 9,773 9,818
12/94 9,294 9,761 9,807
3/95 9,665 10,151 10,236
6/95 10,121 10,630 10,747
9/95 10,273 10,789 10,924
12/95 10,599 11,132 11,308
3/96 10,494 11,022 11,214
6/96 10,523 11,052 11,284
10/96 10,860 11,406 11,688
<FN>
Graph reflects investment growth from end of month of fund commencement.
The Lehman Brothers Intermediate Government/Corporate Bond Index (Lehman Int
Gov't/Corp) is an unmanaged index comprised of investment-grade corporate
debt securities and U.S. Treasury and U.S. Government Agency debt securities
that mature in one to ten years.
</TABLE>
The performance data quoted represent past performance and therefore, are not
indicative of future results. Total returns are historical and include the
change in share price and reinvestment of dividends and capital gains
distributions, and unless indicated,show the effect of the maximum 4.75%
sales charge. Investment returns and principal values will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than
their original cost. The total return figures set forth above may reflect the
waiver of a portion of certain fees for various periods since the Fund's
inception date. In such instances and without such waiver of fees, the
total returns would have been lower.
Fee waivers are voluntary and may be modified or terminated at any time.
14
<PAGE> 17
VICTORY TAXABLE FIXED INCOME FUNDS
GENTLEMEN, WHAT ARE YOUR OUTLOOKS FOR THE COMING YEAR?
Rick: From my perspective, the most recent economic releases, (especially
1996's third quarter GDP) seem to indicate that a slowdown in economic
growth is finally underway. I also think there is the potential for a price
rally in the months ahead and that the Fed will continue with its neutral
monetary policy. If this happens, our sector allocation for The Limited
Term Income Fund may shift more toward Treasuries and I may reduce
the mortgage and corporate holdings.
David: My plan is to continue to emphasize very high quality holdings during
the coming year and I may add corporate bonds of companies with improving
financial conditions. At any rate, mortgage-backed securities will play an
important role to help current income without sacrificing the Fund's high
credit quality.
Rick: I support the economy slow down expectation.
The Victory Investment Quality Bond Fund
Portfolio Manager
Richard Heine
<TABLE>
Total Return As of 10/31/96
<CAPTION>
Maximum
Net Asset Offering
Value Price
<S> <C> <C>
One Year 4.65% -0.35%
Since Inception Annualized
12/10/93 5.03% 3.27%
</TABLE>
<TABLE>
Victory Investment Quality Bond Fund
vs. Lehman Aggregate
(Dollars in thousands)
<CAPTION>
Invest Quality Bond Invest Quality Bond @ NAV Lehman Aggregate
<S> <C> <C> <C>
12/93 9,521 10,000 10,000
3/94 9,281 9,749 9,713
6/94 9,172 9,633 9,613
9/94 9,205 9,668 9,672
12/94 9,272 9,739 9,708
3/95 9,669 10,156 10,198
6/95 10,235 10,750 10,819
9/95 10,398 10,922 11,032
12/95 10,818 11,362 11,502
3/96 10,603 11,137 11,297
6/96 10,604 11,137 11,361
10/96 11,016 11,571 11,827
<FN>
Graph reflects investment growth from end of month of fund commencement.
The Lehman Brothers Aggregate Bond Index (Lehman Aggregate) is a broad-based
unmanaged index that represents the general performance of longer-term
(greater than 1 year), investment-grade fixed-income securities.
</TABLE>
The performance data quoted represent past performance and therefore, are not
indicative of future results. Total returns are historical and include the
change in share price and reinvestment of dividends and capital gains
distributions, and unless indicated, show the effect of the maximum 4.75%
sales charge. Investment returns and principal values will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than
their original cost. The total return figures set forth above may reflect the
waiver of a portion of certain fees for various periods since the Fund's
inception date. In such instances and without such waiver of fees, the total
returns would have been lower.
Fee waivers are voluntary and may be modified or terminated at any time.
15
<PAGE> 18
INTRODUCTION TO MUNICIPAL FIXED INCOME FUNDS
TAX-EXEMPT SECURITIES UNIVERSE
2000+ issues reviewed per year;
500 new issues reviewed per year
ISSUE AND ISSUER CREDIT QUALITY
DURATION AND MATURITY SCREEN
INTERMEDIATE-TERM POOL LONG-TERM POOL
RELATIVE VALUE
Scarcity/Liquidity; Geographic/Economic Trends;
Positive Curve Convexity; New Issues; Sector Analysis
CAPITAL GAINS
INTERMEDIATE-TERM FUNDS LONG-TERM FUND
The Victory National Municipal The Victory New York
Bond Fund Tax-Free Fund
The Victory Ohio Municipal
Bond Fund
Victory Municipal Fixed Income Funds and the respective portfolio manager are
as follows:
The Victory National Municipal Bond Fund
The Victory New York Tax-Free Fund
The Victory Ohio Municipal Bond Fund
[PHOTO]
Paul Toft
Paul Toft is a Vice President with Society Asset Management, Inc. ("SAM"). He
has been with SAM since 1994. Prior to his affiliation with Society, he was
Vice President and Manager of Nike Securities and Assistant Vice President
with Van Kampen Merritt. He obtained his MBA from Northwestern University.
THE INVESTMENT PROCESS
The Victory Funds offer a series of Municipal investment strategies that can
help you manage your investments. The investment advisor's fixed income
specialists maintain a close watch on the credit ratings of the issuers of
holdings in the Victory Funds. In addition, our portfolio management team
continuously assesses new municipal issues from across the nation for
special values and incremental returns.
The portfolio managers of the Victory Funds utilize a three-dimensional
approach to managing municipal portfolios.
1. Superior Research.
Credit analysis of municipal securities and issuers is an on-going process.
Portfolio managers and credit analysts review over 2,000 existing issues
annually in addition to up to 500 new issues each year. Analysts review
important factors such as the structure of the offering and the financial
status of the issuing entity, as well as any underlying credit
enhancements, including insurance and letters of credit.
2. No large "Duration Bets" are taken.
Portfolios are carefully managed to keep their duration consistent with their
appropriate benchmark.
3. Relative Value.
The portfolio manager seeks to identify inefficiencies in the marketplace that
may result in an increase in the relative value of the securities both in
the portfolio and available in the market place. Differences in relative
value of municipal securities are created by factors such as geographic and
economic trends, regulatory changes, forces of supply and demand and
investor sentiment.
The portfolio management team for the Victory Municipal Funds seeks to keep
the municipal portfolios fully invested while focusing on maintaining
superior credit quality and adequate liquidity.
16
<PAGE> 19
VICTORY MUNICIPAL FIXED INCOME FUNDS
PAUL, CAN YOU DESCRIBE SOME OF THE TRENDS THAT AFFECTED THE MUNICIPAL BOND
MARKET THIS YEAR?
Paul: I would have to say that generally speaking, the first quarter of 1996
was quite volatile, as market expectations of slower growth and declining
interest rates were contradicted by strong economic numbers. The Federal
Reserve Board followed a neutral monetary policy, and the latest quarter
seems to support the prospect for slower growth and modest inflation. The
issue of a flat tax, which was popular during the primary elections,
affected municipal yields for part of the year, although the issue has
faded since the presidential election.
CAN YOU TELL US WHAT YOUR INVESTMENT STRATEGY IS FOR THE COMING YEAR FOR EACH
OF THE FUNDS YOU MANAGE?
Paul: My strategy for the National Municipal Bond Fund has been to keep the
portfolios average weighted maturity slightly longer than that of its peer
group, and I intend to keep pursuing that strategy for the near future.
Beyond that, we've also focused on relative value trading. This strategy
has really worked out well, as the Fund returned 5.83% for
the year ended October 31, 1996, without the effect of the maximum sales
charge of 4.75%, compared to the Lehman 10 year Muni Fund Index return of
4.95%.
The Victory National Municipal Bond Fund
Portfolio Manager
Paul Toft
<TABLE>
Total Return As of 10/31/96
<CAPTION>
NATIONAL MUNI Class A
Maximum
Net Asset Offering
Value Price
<S> <C> <C>
One Year 5.83% 0.82%
Since Inception Annualized
2/3/94 5.25% 3.40%
</TABLE>
<TABLE>
<CAPTION>
NATIONAL MUNI Class B
Contingent
Net Asset Deferred
Value Charges
<S> <C> <C>
One Year 4.85% 0.85%
Since Inception Annualized
9/26/94 7.38% 6.06%
</TABLE>
<TABLE>
Victory National Municipal Bond Fund
vs. Lehman 10-Yr Muni
(Dollars in thousands)
<CAPTION>
National Muni National Muni @ NAV Lehman 10-Yr Muni
<S> <C> <C> <C>
2/94 9,525 10,000 10,000
5/94 9,452 9,923 9,802
8/94 9,595 10,073 9,962
11/94 9,021 9,471 9,501
2/95 9,664 10,146 10,203
5/95 10,060 10,562 10,682
8/95 10,316 10,830 10,918
11/95 10,643 11,173 11,263
2/96 10,931 11,476 11,400
5/96 10,757 11,293 11,187
8/96 10,918 11,463 11,402
10/96 11,130 11,685 11,665
<FN>
Graph reflects investment growth from end of month of fund commencement.
The Lehman Brothers 10-Year Municipal Bond Index (Lehman 10 Yr Muni) is a
broad-based unmanaged index that represents the general performance of
investment-grade municipal bonds with maturities of 8 to 12 years.
</TABLE>
The performance data quoted represent past performance and are not indicative
of future results. Total returns are historical and include the change in
share price and reinvestment of dividends and capital gain distributions.
Performance of the different classes of shares will vary based on the
differences in sales charges and class specific expenses paid by the
shareholders. Class A performance with a sales charge shows the effect of the
maximum 4.75% sales charge applied at the beginning of the reported period.
Class B performance with sales charge shows the effect of the applicable
deferred charge, assuming a complete redemption as of October 31, 1996.
Investment returns and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original
cost. The total return figures set forth above may reflect the waiver of a
portion of certain fees for various periods since inception. In such
instances and without such waiver of fees, the total returns would have
been lower.
Certain investors may be subject to Federal AMT.
Fee waivers are voluntary and may be modified or terminated at any time.
17
<PAGE> 20
VICTORY MUNICIPAL FIXED INCOME FUNDS
The strategy I just described differs slightly from the ones I use for the
state specific Funds. With the New York Tax-Free Fund, the focus is on
generating as much tax-free income as possible while maintaining the high
quality of the issues we buy. The Fund's portfolio holds many high coupon
issues in order to help us maintain a high payout rate. The high payout
rate and yield objective has its negative side, as it affects
the overall ability of the Fund to trade on relative value.
With the Ohio Municipal Bond Fund, I continue to focus on relative value
trading strategy rather than high interest income. I try to keep the Fund's
average weighted maturity between ten and twelve years.
HOW DID THESE STRATEGIES AFFECT THE FUND'S PERFORMANCE?
Paul: Well, The National Municipal Bond Fund ranked 8th highest out of 134
funds within the Lipper Intermediate Municipal Bond* fund category, for
the 12 month period ended October 31, 1996 according to Lipper Analytical
Services.*
The performance of The Ohio Municipal Bond Fund declined a little since 1995,
however, it is still a top performer within its peer group. The Fund ranked
3rd highest out of 56 funds in the Ohio Municipal Debt Funds* category
according to Lipper, for the one year period ending October 31, 1996. At
4.53%, without reflecting the effect of the 4.75% maximum
The Victory New York Tax-Free Fund
Portfolio Manager
Paul Toft
<TABLE>
Total Return As of 10/31/96
<CAPTION>
NY TAX-FREE Class A
Maximum
Net Asset Offering
Value Price
<S> <C> <C>
One Year 4.53% -0.42%
Annualized Return
Three Years 3.81% 2.13%
Five Years 6.67% 5.62%
Since Inception
2/11/91 7.09% 6.18%
</TABLE>
<TABLE>
<CAPTION>
NY TAX-FREE Class B
Contingent
Net Asset Deferred
Value Charges
<S> <C> <C>
One Year 3.72% -0.24%
Since Inception
9/26/94 5.92% 4.57%
</TABLE>
<TABLE>
Victory New York Tax-Free Fund
vs. Lehman 10-Yr Muni
(Dollars in thousands)
<CAPTION>
NY Tax Free NY Tax Free @ NAV Lehman 10-Yr Muni
<S> <C> <C> <C>
2/91 9,526 10,000 10,000
8/91 10,100 10,602 10,443
2/92 10,557 11,081 10,941
8/92 11,210 11,767 11,585
2/93 11,957 12,551 12,554
8/93 12,532 13,154 13,076
2/94 12,745 13,378 13,222
8/94 12,559 13,183 13,172
2/95 12,788 13,423 13,491
8/95 13,380 14,045 14,436
2/96 13,937 14,630 15,073
8/96 14,027 14,724 15,076
10/96 14,242 14,950 15,423
<FN>
Graph reflects investment growth from end of month of fund commencement.
The Lehman Brothers 10-Year Municipal Bond Index (Lehman 10-Yr Muni) is a
broad-based unmanaged index that represents the general performance of
investment-grade municipal bonds with maturities of 8 to 12 years.
</TABLE>
The performance data quoted represent past performance and are not indicative
of future results. Total returns are historical and include the change in
share price and reinvestment of dividends and capital gain distributions.
Performance of the different classes of shares will vary based on the
differences in sales charges and class specific expenses paid by the
shareholders. Class A performance with a sales charge shows the effect of
the maximum 4.75% sales charge applied at the beginning of the reported
period. Class B performance with sales charge shows the effect of the
applicable deferred charge, assuming a complete redemption as of
October 31, 1996. Investment returns and principal value will fluctuate
so that an investor's shares, when redeemed, may be worth more or less than
their original cost. The total return figures set forth above may reflect the
waiver of a portion of certain fees for various periods since the Fund's
inception. In such instances and without such fee waivers, the total
returns would have been lower.
Fee waivers are voluntary and may be modified or terminated at any time.
* Lipper Analytical Service Rankings-Lipper ranks funds according to
investment objectives and are based on total returns, which do not include
the effect of sales charges and in the absence of fee waivers, the returns
and rankings may have been lower. Past performance is no guarantee of future
results.
18
<PAGE> 21
VICTORY MUNICIPAL FIXED INCOME FUNDS
sales charge, the New York Tax Free Bond Fund's one year return was slightly
lower than the Lehman 10 year Muni Index, which was 4.95% as of October 31,
1996.
PAUL, CAN YOU TELL US WHAT YOU ENVISION FOR THE MARKET IN THE COMING YEAR?
Paul: Since the election is over, I doubt there will be many surprises in
terms of major policy shifts next year and inflation does not seem to be
an immediate threat. The market appears to be more confident of the Fed's
ability to practice effective monetary policy, so I expect a pretty good
environment for municipals, going forward.
The Victory Ohio Municipal Bond Fund
Portfolio Manager
Paul Toft
<TABLE>
Total Return As of 10/31/96
<CAPTION>
Maximum
Net Asset Offering
Value Price
<S> <C> <C>
One Year 5.87% 0.88%
Annualized Return
Three Years 5.31% 3.63%
Five Years 7.54% 6.50%
Since Inception
5/18/90 7.88% 7.06%
</TABLE>
<TABLE>
Victory Ohio Municipal Bond Fund
vs. Lehman 10-Yr Muni
(Dollars in thousands)
<CAPTION>
Ohio Muni Ohio Muni @ NAV Lehman 10-Yr Muni
<S> <C> <C> <C>
5/90 9,525 10,000 10,000
11/90 9,954 10,450 10,521
5/91 10,401 10,919 11,039
11/91 10,802 11,341 11,577
5/92 11,274 11,836 12,064
11/92 11,786 12,373 12,730
5/93 12,540 13,166 13,551
11/93 13,120 13,774 14,218
5/94 12,979 13,626 14,013
11/94 12,539 13,164 13,584
5/95 14,150 14,856 15,272
11/95 14,866 15,607 16,103
5/96 14,824 15,563 15,995
10/96 15,500 16,273 16,677
<FN>
Graph reflects investment growth from end of month of fund commencement.
The Lehman Brothers 10-Year Municipal Bond (Lehman 10-Yr Muni) Index is a
broad-based unmanaged index that represents the general performance of
investment-grade municipal bonds with maturities of 8 to 12 years.
</TABLE>
The performance data quoted represent past performance and are not indicative
of future results. Total returns are historical and include the change in
share price and reinvestment of dividends and capital gain distributions,
and unless indicated show the effect of the maximum 4.75% sales charge.
Investment returns and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
The total return figures set forth above may reflect the waiver of a portion
of certain fees for various periods since the Fund's inception date. In
such cases and without such waiver of fees, the total returns would
have been lower.
Certain investors may be subject to Federal AMT.
Fee waivers are voluntary and may be modified or terminated at any time.
19
<PAGE> 22
INTRODUCTION TO EQUITY FUNDS (DIVERSIFIED)
[GRAPHIC]
EQUITY RESEARCH UNIVERSE
DIVERSIFIED MANAGEMENT
Value Growth
Market Condition Assessment
buy/sell decisions
----------------------------------
DIVERSIFIED FUNDS
The Victory Diversified Stock Fund
The Victory Stock Index Fund
The Victory Balanced Fund
THE INVESTMENT PROCESS
The Victory Equity Funds that are managed according to the diversified style
attempt to remain flexible in order to adjust to changing market conditions.
For the Victory Diversified Stock Fund, the portfolio manager seeks to
produce a higher return with less risk by pursuing a blended investment
strategy. This rigorous, two-dimensional approach to stock selection allows
the portfolio manager flexibility to sell into strength and buy into
weakness, always driving toward the goal of producing consistently positive
returns across market cycles.
For the Victory Stock Index Fund, the objective is to seek to match the
investment performance of the Standard & Poor's 500 Composite Index.
Victory Equity Funds are managed with a Diversified Proposition. Their
respective portfolio managers are as follows:
[PHOTO]
The Victory Diversified Stock Fund
Lawrence Babin (seated)
Larry Babin is a Chartered Financial Analyst and a Vice President at Society
Asset Management, Inc. ("SAM"). He has managed the Fund since its inception
and has been with SAM and/or its affiliates since 1982. Larry received his
MBA from the University of Michigan.
The Victory Stock Index Fund
Malini Menon (standing)
Malini Menon is a Vice President and Senior Portfolio Manager with Applied
Technology Investments, Inc., an affiliate of KeyCorp Asset Management
Holding, Inc. She has been with KeyCorp and/or its affiliates since 1990.
Malini holds a Bachelor of Science in mathematics from Majaraja Sayajirao
University and two MBAs: one is in Market Research and International
Business from South Gujarat University and the other is in Quantitative
Business Analysis from Cleveland State University. In addition, she is
pursuing postgraduate studies in Operations Research at Case Western Reserve
University.
The Victory Balanced Fund and its respective portfolio managers are as
follows:
[PHOTO]
The Victory Balanced Fund
Denise M. Coyne (seated)
Denise Coyne is a Chartered Financial Analyst as well as a Certified Public
Accountant. She is a Vice President with Society Asset Management, Inc.
("SAM") and has been with SAM and/or an affiliate since 1985. Ms. Coyne
received her MBA from Miami University.
Richard T. Heine (standing)
Rick Heine is a Chartered Financial Analyst, Vice President and Portfolio
Manager with Society Asset Management, Inc. ("SAM"). He has been with SAM
and/or an affiliate since 1974. Mr. Heine received his MBA from Case Western
Reserve University.
20
<PAGE> 23
VICTORY EQUITY FUNDS (DIVERSIFIED)
LARRY, MALINI, YOU BOTH MANAGE DIVERSIFIED STOCK PORTFOLIOS, BUT LARRY, YOURS
IS AN ACTIVELY MANAGED FUND, WHILE MALINI, YOURS IS PASSIVELY MANAGED. CAN
YOU TELL US THE DIFFERENCE BETWEEN MANAGEMENT STYLES AND HOW YOUR
PORTFOLIO'S REFLECT THAT?
Malini: Well, the fund I manage, The Victory Stock Index, attempts to
replicate the performance of the S&P 500 and we invest exclusively in the
stocks that make up that Index and futures. Also, we attempt to maintain our
stock and sector weights close to the Index as well.
Larry: Victory Diversified Stock is, as it's name implies, a diversified stock
fund, but I am not held to the restriction of only being able to invest in
the stocks of companies within its growth and income benchmark. I can
purchase securities outside of that benchmark that meet our particular
screening requirements. Additionally, because the fund has a growth
orientation as well as a value orientation, we have unique opportunities
to seek out investment opportunities. My goal is to try to take advantage of
those opportunities before the market reacts.
WELL, LARRY, THAT'S QUITE AN UNDERTAKING. DID YOU HAVE TO CHANGE YOUR
STRATEGY AS THE YEAR PROGRESSED?
Larry: When we began the fiscal year in 1995, the emphasis was on the
financial, utility and energy sectors. We were also relatively underweighted
in technology companies, a classic defensive move that is very typical of a
value orientation. But, as the economic environment of the last twelve months
began to unfold, I switched to a more growth oriented strategy and increased
investments in the technology sector and that move has paid off. IBM is
currently the Fund's single largest holding, and as of this interview, is
doing quite well.
The Victory Diversified Stock Fund
Portfolio Manager
Lawrence Babin
<TABLE>
Total Return As of 10/31/96
<CAPTION>
DIVERSIFIED FUND Class A
Maximum
Net Asset Offering
Value Price
<S> <C> <C>
One Year 27.16% 21.11%
Annualized Return
Three Years 19.02% 17.10%
Five Years 16.49% 15.36%
Since Inception
10/20/89 14.48% 13.69%
</TABLE>
<TABLE>
<CAPTION>
DIVERSIFIED FUND Class B
Contingent
Net Asset Deferred
Value Charges
<S> <C> <C>
Since Inception
3/1/96 11.62% 6.62%
</TABLE>
<TABLE>
Victory Diversified Stock Fund
vs. S&P 500
(Dollars in thousands)
<CAPTION>
Diversified Stock Diversified Stock S&P 500
Class A Class A @ NAV
<S> <C> <C> <C>
10/89 9,528 10,000 10,000
5/90 10,524 11,044 10,846
12/90 10,049 10,546 10,125
7/91 11,690 12,269 12,109
2/92 12,543 13,164 13,133
9/92 12,788 13,421 13,536
4/93 13,732 14,411 14,479
11/93 14,602 15,325 15,463
6/94 14,784 15,515 15,120
1/95 15,984 16,776 16,267
8/95 19,322 20,278 19,743
3/96 22,553 23,669 22,986
10/96 24,939 26,173 25,442
<FN>
Graph reflects investment growth from end of month of fund commencement.
The Standard & Poor's 500 Stock Index (S&P 500) is a broad-based unmanaged
index that represents the general performance of domestically traded common
stocks of mid- to large-size companies.
</TABLE>
The performance data quoted represent past performance and are not indicative
of future results. Total returns are historical and include the change in
share price and reinvestment of dividends and capital gain distributions.
Performance of the different classes of shares will vary based on the
differences in sales charges and class specific expenses paid by
shareholders. Class A performance with sales charge shows the effect of the
maximum 4.75% sales charge applied at the beginning of the period. Class B
performance with sales charge shows the effect of the applicable contingent
deferred sales charge, assuming a complete redemption as of October 31, 1996.
Investment returns and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
The total return figures set forth above may reflect the waiver of a
portion of certain fees for various periods since inception. In such instances
and without such waiver of fees, the total returns would have been lower.
Fee waivers are voluntary and may be modified or terminated at any time.
21
<PAGE> 24
VICTORY EQUITY FUNDS (DIVERSIFIED)
MALINI, SINCE YOUR FUND IS PASSIVELY MANAGED, WERE YOU ABLE TO TAKE ANY TYPE
OF ACTION IN SUCH A VOLATILE MARKET ENVIRONMENT?
Malini: I did. Remember, passive management doesn't mean you're not acutely
aware of market conditions and unable to react to them. It means that you must
work in a "tighter" environment. For example, I couldn't purchase securities
that weren't in the S&P 500, but I did invest in the S&P 500 futures
contracts to hedge cash flows, providing us some liquidity while reducing
investment transaction costs, which should benefit our shareholders.
CAN EITHER OF YOU TELL US WHY IT WAS SUCH A GOOD YEAR FOR EQUITIES?
Malini: We had sound corporate earnings, record inflows to mutual funds into
the markets and subdued inflation. In a sense, it was the best of both
worlds--economic expansion accompanied by price stability.
Larry: I would agree with Malini. Low inflation, coupled with modest growth,
has been particularly good for large-cap stocks. Corporate earnings have
remained strong and many companies have met their profit expectations.
Perhaps the most important reason for the continued good stock market was
nothing more than robust supply and demand.
DO YOU THINK THE MARKETS WILL PERFORM AS WELL NEXT YEAR?
Malini: Well, without the assistance of a crystal ball, let me answer your
question this way. I believe the economic slowdown the market has been
looking for will finally materialize next year. I don't anticipate a
The Victory Stock Index Fund
Portfolio Manager
Malini Menon
<TABLE>
Total Return As of 10/31/96
<CAPTION>
Maximum
Net Asset Offering
Value Price
<S> <C> <C>
One Year 23.38% 17.55%
Since Inception Annualized
12/3/93 17.70% 15.74%
</TABLE>
<TABLE>
Victory Stock Index Fund
vs. S&P 500
(Dollars in thousands)
<CAPTION>
Stock Index Stock Index @ NAV S&P 500
<S> <C> <C> <C>
12/93 9,526 10,000 10,000
3/94 9,149 9,605 9,621
6/94 9,180 9,637 9,661
9/94 9,611 10,090 10,133
12/94 9,613 10,092 10,132
3/95 10,521 11,044 11,118
6/95 11,493 12,065 12,179
9/95 12,389 13,006 13,147
12/95 13,119 13,773 13,939
3/96 13,821 14,509 14,687
6/96 14,419 15,137 15,346
10/96 15,238 15,997 16,257
<FN>
Graph reflects investment growth from end of month of fund commencement.
The Standard & Poor's 500 Stock Index (S&P 500) is a broad-based unmanaged
index that represents the general performance of domestically traded common
stocks of mid- to large-size companies.
</TABLE>
The performance data quoted represent past performance and are not indicative
of future results. Total returns are historical and include the change in
share price and the reinvestment of dividends and capital gain distributions,
and unless indicated show the effect of the maximum 4.75% sales charge.
Investment returns and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
Total return figures set forth above may reflect the waiver of a portion
of certain fees for various periods since the Fund's inception date. In such
cases and without such waiver of fees, the total returns would have been
lower.
Fee waivers are voluntary and may be modified or terminated at any time.
22
<PAGE> 25
VICTORY EQUITY FUNDS (DIVERSIFIED)
recession though. We'll just have to take it a day at a time and continue
to make decisions based on our knowledge of the companies we select and I
intend to remain fully invested in all S&P 500 stocks and/or futures in a
continued attempt to match the performance of the Index.
Larry: I can't predict either, but I can tell you that I remain optimistic
about the market. As a manager for this Fund since it's inception, my
emphasis has always been on consistency and taking a long-term perspective.
The Fund's approach of selling into strength and buying into weakness has
proven its worth over the long-term in many different market environments
and has historically done well for its shareholders.
The Victory Balanced Fund
The Victory Balance Fund's objective is to attempt to provide both current
income and capital appreciation for investors. Since the Fund invests in
both stocks and bonds there are two portfolio managers, each of whom manages
their area of expertise. The challenge of this Fund is to find the right
"balance" between these two investment vehicles. This requires teamwork,
talent and a strong fundamental knowledge of both markets. Portfolio
managers Denise Coyne and Rick Heine explain.
AS MANAGERS THAT HOLD BOTH STOCKS AND BONDS IN THE MUTUAL FUND YOU MANAGE,
YOU MUST HAVE HAD SOME INTERESTING CHALLENGES DURING THIS PAST YEAR. CAN YOU
TELL US A LITTLE ABOUT THE ECONOMIC ENVIRONMENT IN YOUR RESPECTIVE AREAS AND
THE ISSUES YOU DEALT WITH IN '96?
Denise: Well, the first important point our shareholders should know is that
even though the fund holds stocks and bonds, and I manage the stock portion
and Rick manages the bond portion, we actually work very closely together to
ensure that the portfolio maintains the asset allocation strategy we've
decided on. We choose the securities for the portfolio carefully and are
very concerned and committed to maintaining that balance.
Rick: Denise is right. We don't manage the portfolio as two independent
entities. We are very aware of what each other is doing and are constantly
re-evaluating our choices and allocations.
THEN IT MUST HAVE BEEN EVEN MORE CHALLENGING TO MANAGE THE PORTFOLIO THIS
PAST YEAR. HOW DID EVENTS IN THE ECONOMY AFFECT IT?
Rick: The two issues that defined the economy for most of '96 were low
inflation and moderate to high growth levels. We had expected growth to be
considerably slower than it turned out to be. In fact, some economic
releases--like employment--indicated the economy was stronger than the market
had anticipated. However, the Fed didn't seem to consider inflation a big
threat, so they didn't increase short-term interest rates.
HOW DID STOCKS AND BONDS PERFORM IN THIS ENVIRONMENT?
Denise: Stocks outperformed both cash and bonds through October 31, 1996.
And the asset allocation of the Balanced Fund was 62% stocks, 5% of that in
the foreign market, 36% in bonds and 2% in cash. That produced a total return
for the Fund of 16.27%, without the effect of the 4.75% maximum sales charge,
for the year ended October 31, 1996. Thus our Fund outperformed the Lipper
Balanced Fund Index,* which posted a return of 14.49% for the past twelve
months.
* Lipper Balanced Fund Index-The net asset weighted performance, adjusted
for capital gains and income dividends, of the thirty largest balanced funds.
The primary objective of Funds which comprise the Index, is to conserve
principal by maintaining at all times a balanced portion of both stocks and
bonds with the stock/bond ratio of the funds investments typically ranging
around 60%/40%.
23
<PAGE> 26
VICTORY EQUITY FUNDS (DIVERSIFIED)
That's true, but our asset allocation analysis indicates that bonds should be
pretty attractive in a slow growth environment which is what we envision for
the coming year.
DENISE, WE KNOW YOU'VE TOLD US THAT BOTH THE STOCK AND BOND PORTIONS OF THE
PORTFOLIOS ARE MANAGED IN TANDEM, BUT CAN YOU GIVE US SOME SPECIFIC INSIGHT
AS TO HOW THE STOCK PORTION OF THE PORTFOLIO PERFORMED THIS PAST YEAR?
Denise: Sure, our equities lean toward a strong "value" orientation, which
happens to be one of our strengths. This means we look for stocks with
above-market dividend yield and below market price-earnings ratios. We
focused on the financial, energy and utility sectors of the market, and
within the financial section, we selected bank stocks that appeared to be
selling at reasonable prices. In a slower growing economy, increasing the
utility sector seemed appropriate.
RICK, HOW ABOUT THE FIXED INCOME PORTION? ANY THOUGHTS YOU'D LIKE TO SHARE
WITH US?
Rick: Well, I hope our shareholders realize that finding high quality credit
issues is the focus for most of the fixed income portfolios in The Victory
Fund complex. Also, we utilize a relative value approach to find "good
values" within the high quality, fixed income market segments. Right now,
the areas where I'm finding good values are with putable corporate issues,
discount mortgage-backed issues and high coupon callable government agencies.
The Victory Balanced Fund
Portfolio Managers
Denise Coyne
Richard Heine
<TABLE>
Total Return
As of 10/31/96
<CAPTION>
BALANCED FUND Class A
Maximum
Net Asset Offering
Value Price
<S> <C> <C>
One Year 16.27% 10.74%
Since Inception Annualized
12/10/93 11.72% 9.86%
</TABLE>
<TABLE>
<CAPTION>
BALANCED FUND Class B
Contingent
Net Asset Deferred
Value Charges
<S> <C> <C>
Since Inception
3/1/96 8.72% 3.72%
</TABLE>
<TABLE>
Victory Balanced Fund
vs. S&P 500 & Lipper Balanced
(Dollars in thousands)
<CAPTION>
Balanced Class A Balanced Class A @ NAV S&P 500 Lipper Balanced
<S> <C> <C> <C> <C>
12/93 9,525 10,000 10,000 10,000
3/94 9,135 9,591 9,621 9,678
6/94 9,159 9,616 9,661 9,599
9/94 9,332 9,797 10,133 9,872
12/94 9,361 9,828 10,132 9,751
3/95 10,036 10,536 11,118 10,334
6/95 10,693 11,227 12,179 11,059
9/95 11,235 11,795 13,147 11,710
12/95 11,806 12,396 13,939 12,233
3/96 12,141 12,747 14,687 12,507
6/96 12,389 13,007 15,346 12,760
10/96 13,082 13,735 16,257 13,373
<FN>
Graph reflects investment growth from end of month of fund commencement.
The Standard & Poor's 500 Stock Index (S&P 500) is a broad-based unmanaged
index that represents the general performance of domestically traded common
stocks of mid- to large-size companies.
The Lipper Balanced Fund Index is a non-weighted index of the 30 largest
funds within the Lipper Balanced Fund investment category.
</TABLE>
The performance data quoted represent past performance and are not indicative
of future results. Total returns are historical and include the change in
share price and reinvestment of dividends and capital gain distributions.
Performance of the different classes of shares will vary based on the
differences in sales charges and class specific expenses paid by shareholders.
Class A performance with sales charge shows the effect of the maximum
4.75% sales charge applied at the beginning of the period. Class B performance
with sales charge shows the effect of the applicable contingent deferred
sales charge, assuming a complete redemption as of October 31, 1996.
Investment returns and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
The total return figures set forth above may reflect the waiver of a
portion of certain fees for various periods since inception. In such instances
and without such waiver of fees, the total returns would have been lower.
Fee waivers are voluntary and may be modified or terminated at any time.
24
<PAGE> 27
[PHOTO OF A MAN AND BOY]
You teach him how to invest. He'll teach you how to program the VCR.
You showed him how to ride his bike. You helped him learn how to catch a
baseball. You made him promise not to leave gummy worms in his sister's shoes
anymore. now is the time to start teaching him about investments. If you'd like
to learn more about how to reach a financial goal like paying for a college
education, learn more about the Victory Funds. Because at Victory, we believe
teaching a child about investing is one way to help them secure a strong
financial future.
The Victory Funds are distrubuted by BISYS Fund Services which is not affiliated
with KeyCorp. Certain subsidiaries of KeyCorp provide services to the Victory
Funds, including advisory services, and recieve fees from the funds for their
services, as set forth in the prospectus.
For more information about the Victory Funds, including charges and expenses,
request a prospectus by calling 1-800-KEY-FUNd (1-800-539-3863). Please read the
prospectus carefully before investing or sending money.
o Not FDIC Insured
o No Bank Guarantee
o May Lose Value
[logo]
Victory Funds
<PAGE> 28
INTRODUCTION TO EQUITY FUNDS (VALUE)
[Graphic]
EQUITY RESEARCH UNIVERSE
VALUE MANAGEMENT
Valuation Statistical Cheapness Earnings Revisions
buy/sell decisions
-------------------------
VALUE FUNDS
The Victory Value Fund
The Victory Special Value Fund
The Victory Ohio Regional Stock Fund
THE INVESTMENT PROCESS
The Victory Funds that are managed according to a "Value style" seek to
outperform an appropriate market benchmark such as the S&P 500 or The S&P 500
Barra Value Index,* while maintaining broad market sector exposure. The
approach to managing these funds is to target stocks that are statistically
inexpensive (low P/Es, low price-to-book, high-yield stocks) and find those
issues where investor sentiment is improving as evidenced by upward earnings
revisions and positive earning events.
* The S&P 500/Barra Value Index contains firms with lower price-to-book
ratios and has 50 percent of the market capitalization of the S&P 500 Index.
Victory Equity Funds are managed with a Value Proposition. Their respective
portfolio managers are as follows:
[photo]
The Victory Value Fund
Judith Jones (seated)
Judith (Judy) Jones is a Chartered Financial Analyst as well as a Certified
Financial Planner. She is a Vice President with Society Asset Management,
Inc. ("SAM") and has managed the Victory Value Fund since its inception. She
has been with SAM and its affiliates since 1965. Judy received her MBA from
Kent State University.
The Victory Special Value Fund
Anthony Aveni (right)
Anthony (Tony) Aveni is a Chartered Financial Analyst and a Senior Vice
President with Society Asset Management, Inc., ("SAM"). Tony has been a Fund
Manager with SAM since 1987 and is the Chief Investment Officer of SAM. He
received his MBA from Case Western Reserve University and has managed The
Victory Special Value Fund since its inception.
Barbara Myers (left)
Barbara Myers is a Chartered Financial Analyst, a Portfolio Manager and a Vice
President with Society Asset Management, Inc. ("SAM"). She joined SAM in 1994
and has seven years of previous investment experience. Ms. Myers received a
BBA from Cleveland State University and an MBA from Baldwin Wallace College.
The Victory Ohio Regional Stock Fund
Lynn Hamilton (center)
Lynn Hamilton is a Vice President with Society Asset Management, Inc. (SAM)
and has managed The Victory Ohio Regional Stock Fund since its inception.
Mr. Hamilton has been a Fund Manager since 1993. Prior to this position, he
was a Fund Manager with Society National Bank. Mr. Hamilton obtained his MBA
from Miami University.
Also pictured is Paul Danes (seated)
26
<PAGE> 29
TONY, CAN YOU GIVE US AN OVERALL VIEW OF THE MID-CAP STOCK MARKET ENVIRONMENT
FOR THIS PAST YEAR?
Tony: I'd be happy to. Obviously, there have been impressive gains in the
equity markets during the past twelve months. Similar to last year, the
larger capitalization stocks outperformed their mid and small-cap
counterparts. I can give you the specifics on that. The S&P 400 Mid-cap
Index* rose 17.35% during the Fund's fiscal year ended October 31, 1996,
while the S&P 500 increased by 24.09%.
BARBARA, CAN YOU TELL US IF THE PERFORMANCE OF THE SPECIAL VALUE FUND WAS DUE
TO INVESTMENTS IN ANY PARTICULAR SECTORS?
Barbara: No, performance of the Fund this year hasn't been the result of any
particular sector or economic bet. The key to out-performance was stock
selection. In fact, the Fund's largest sector weightings, which were basic
industry and capital goods companies, have underperformed the overall Mid-cap
Index. Most of our holdings within these sectors dramatically outperformed the
Index, including Tyco which was up 64%, GenCorp, up 61%, Avery Dennison, up 50%
and Kaydon Corp, up 42%. We also added to
The Victory Value Fund
Portfolio Manager
Judith Jones
<TABLE>
Total Return As of 10/31/96
<CAPTION>
Maximum
Net Asset Offering
Value Price
<S> <C> <C>
One Year 24.66% 18.76%
Since Inception Annualized
12/3/93 16.84% 14.90%
</TABLE>
<TABLE>
Victory Value Stock Fund
vs. Lipper Grth & Inc vs. S&P 500
<CAPTION>
Value Stock Value Stock @ NAV S&P 500 Lipper Grth & Inc
<S> <C> <C> <C> <C>
12/93 9,528 10,000 10,000 10,000
3/94 9,080 9,529 9,621 9,676
6/94 9,249 9,706 9,661 9,727
9/94 9,568 10,041 10,133 10,128
12/94 9,553 10,026 10,132 9,932
3/95 10,441 10,958 11,118 10,711
6/95 11,183 11,736 12,179 11,590
9/95 12,010 12,604 13,147 12,487
12/95 12,776 13,408 13,939 13,060
3/96 13,600 14,273 14,687 13,810
6/96 14,031 14,726 15,346 14,164
10/96 14,834 15,568 16,257 14,953
<FN>
Graph reflects investment growth from end of month of fund commencement.
The Lipper Growth & Income Index is a non-weighted index of the 30 largest
funds in the Lipper Growth & Income Fund investment category.
The Standard & Poor's 500 Stock Index (S&P 500) is a broad-based unmanaged
index that represents the general performance of domestically traded common
stocks of mid- to large-size companies.
</TABLE>
The performance data quoted represent past performance and are not indicative
of future results. Total returns are historical and include the change in
share price and the reinvestment of dividends and capital gain distributions,
and unless indicated show the effect of the maximum 4.75% sales charge.
Investment returns and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
Total return figures set forth above may reflect the waiver of a portion
of certain fees for various periods since the Fund's inception date. In such
cases and without such waiver of fees, the total returns would have been
lower.
Fee waivers are voluntary and may be modified or terminated at any time.
* The S&P 400 Mid-cap Index is comprised of companies in the S&P
Industrials Index (a subset of the S&P 500 Index that excludes
transportation, financial and utility stocks) whose market capitalization
between $200 million and $5 billion.
27
<PAGE> 30
VICTORY EQUITY FUNDS (VALUE)
our retail sector throughout the year which contributed to the Fund's
performance which was 20.60% compared to 17.35% for the S&P 400 Mid-cap Index
for the year ended October 31, 1996.
TONY, IS THERE ANYTHING YOU'D LIKE TO ADD TO THAT?
Tony: Yes. While we reduced our basic and capital goods sector weights we also
added some securities such as Nalco Chemical, a water treatment company,
McCormick and Company, they're known for distribution of spices, and Nellcor,
which is in hospital and home healthcare supplies. Barbara was talking about
the performance of some of the securities in the portfolio. These companies
are all very different industries, are attractive values with good franchises
and for a variety of reasons, are currently out of favor among investors.
However, we believe there are fundamental changes occurring in these
companies that make them attractive investments.
JUDY, AS MANAGER OF THE VALUE FUND, DID YOU HAVE SIMILAR EXPERIENCES AS TONY
AND BARBARA WITH YOUR FUND?
Judy: Well, let me answer your question this way, the general feeling at the
beginning of 1996 was that value stocks would outperform growth stocks.
Unfortunately, this was not the way it turned out--growth outperformed
value. In spite of that, the Value Fund posted a return of 24.66%, which
does not include the effect of the
The Victory Special Value Fund
Portfolio Managers
Anthony Aveni
Barbara Myers
<TABLE>
Total Return As of 10/31/96
<CAPTION>
SPECIAL VALUE Class A
Maximum
Net Asset Offering
Value Price
<S> <C> <C>
One Year 20.60% 14.84%
Since Inception Annualized
12/3/93 15.12% 13.21%
</TABLE>
<TABLE>
SPECIAL VALUE Class B
Contingent
Net Asset Deferred
Value Charge
<S> <C> <C>
Since Inception
3/1/96 9.66% 4.66%
</TABLE>
<TABLE>
Victory Special Value Fund
vs. S&P 400 Mid Cap
(Dollars in thousands)
<CAPTION>
Special Value Special Value S&P 400 Mid Cap
Class A Class A @ NAV
<S> <C> <C> <C>
12/93 9,528 10,000 10,000
3/94 9,422 9,889 9,620
6/94 9,281 9,741 9,269
9/94 9,717 10,198 9,897
12/94 9,649 10,127 9,641
3/95 10,431 10,948 10,430
6/95 11,045 11,592 11,340
9/95 11,813 12,399 12,446
12/95 12,234 12,840 12,624
3/96 12,773 13,406 13,401
6/96 13,277 13,935 13,787
10/96 13,949 14,640 14,230
<FN>
Graph reflects investment growth from end of month of fund commencement.
The Standard & Poor's 400 Mid-Cap Index (S&P 400 Mid Cap) is a broad-based
unmanaged index that represents the general performance of domestically
traded common stocks of mid-sized companies.
</TABLE>
The performance data quoted represent past performance and are not indicative
of future results. Total returns are historical and include the change in
share price and reinvestment of dividends and capital gain distributions.
Performance of the different classes of shares will vary based on the
differences in sales charges and class specific expenses paid by shareholders.
Class A performance with sales charge shows the effect of the maximum
4.75% sales charge applied at the beginning of the period. Class B performance
with sales charge shows the effect of the applicable contingent deferred sales
charge, assuming a complete redemption as of October 31, 1996. Investment
returns and principal value will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost. The total
return figure set forth above may reflect the waiver of a portion of certain
fees for various periods since the Fund's inception. In such instances
and without such waiver of fees, the total returns would have been lower.
Fee waivers are voluntary and may be modified or terminated at any time.
28
<PAGE> 31
VICTORY EQUITY FUNDS (VALUE)
4.75% maximum sales charge, as opposed to the S&P 500/Barra Value Index* with a
return of 24.61% and the S&P 500 return of 24.09% for the 12 months ending
October 31, 1996.
CONGRATULATIONS! THAT'S IMPRESSIVE NEWS. BUT WAS THERE EVER A TIME DURING THE
PAST YEAR WHEN VALUE OUTPERFORMED GROWTH?
Judy: In the first quarter of '96, consumer cyclical stocks, which lagged all
of last year, were one of the best performing groups. This sector includes
the auto stocks and many retailers which had strong earnings comparisons,
attractive valuations and low market performance expectations. The Value Fund
benefited from its holdings in this sector.
LYNN, WHAT ABOUT THE OHIO REGIONAL STOCK FUND? DID YOU HAVE ANY SPECIAL
CONCERNS THIS YEAR?
Lynn: Well, fortunately, the Ohio economy has been particularly strong...
in fact, Ohio was a leader in the economic recovery that began a few years
ago. In terms of stock performance, we have participated in the upward
momentum of the S&P 500, but keep in mind, as Judy said, during the last
three quarters of the Fund's fiscal year, the rally was led by the large cap
growth oriented industries and technology stocks in particular.
SO, HOW DID YOUR FUND PERFORM?
Lynn: The strong value orientation of the Fund caused it to lag the S&P 500,
which as I
The Victory Ohio Regional Stock Fund
Portfolio Manager
Lynn Hamilton
<TABLE>
Total Return As of 10/31/96
<CAPTION>
OHIO REGIONAL Class A
Maximum
Net Asset Offering
Value Price
<S> <C> <C>
One Year 17.79% 12.23%
Annualized Return
Three Years 12.71% 10.90%
Five Years 14.48% 13.36%
Since Inception
10/20/89 12.57% 11.79%
OHIO REGIONAL Class B
Since Inception
3/1/96 9.03% 4.03%
</TABLE>
<TABLE>
Victory Ohio Regional Stock Fund
vs. S&P 500
(Dollars in thousands)
<CAPTION>
Ohio Regional Ohio Regional @ NAV S&P 500
<S> <C> <C> <C>
10/89 9,529 10,000 10,000
4/90 8,939 9,380 9,883
10/90 6,801 7,137 9,253
4/91 10,029 10,524 11,624
10/91 11,473 12,039 12,353
4/92 12,992 13,634 13,255
10/92 12,791 13,423 13,582
4/93 14,154 14,853 14,479
10/93 15,754 16,532 15,612
4/94 16,051 16,844 15,250
10/94 16,376 17,185 16,215
4/95 17,532 18,398 17,913
10/95 19,149 20,095 20,502
4/96 21,966 23,051 23,324
10/96 22,556 23,670 25,442
<FN>
Graph reflects investment growth from end of month of fund commencement.
The Standard & Poor's 500 Stock Index (S&P 500) is a broad-based unmanaged
index that represents the general performance of domestically traded common
stocks of mid- to large-size companies.
</TABLE>
The performance data quoted represent past performance and are not indicative
of future results. Total returns are historical and include the change in
share price and reinvestment of dividends and capital gain distributions.
Performance of the different classes of shares will vary based on the
differences in sales charges and class specific expenses paid by shareholders.
Class A performance with sales charge shows the effect of the maximum
4.75% sales charge applied at the beginning of the period. Class B performance
with sales charge shows the effect of the applicable contingent deferred
sales charge, assuming a complete redemption as of October 31, 1996.
Investment returns and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
The total return figures set forth above may reflect the waiver of a
portion of certain fees for various periods since inception. In such instances
and without such waiver of fees, the total returns would have been lower.
Fee waivers are voluntary and may be modified or terminated at any time.
* The S&P 500/Barra Value Index contains firms with lower price-to-book
ratios and has 50 percent of the market capitalization of the S&P 500 Index.
29
<PAGE> 32
VICTORY EQUITY FUNDS (VALUE)
said, was due to the surge in the market led by the technology sector.
Havingsaid that, let me also say that careful stock selection is the key to the
Ohio Regional Fund. I believe that the strength of the Fund is in knowing the
companies so well. I have an opportunity to talk to the managers of the
companies that I actually invest in. I spend a considerable amount of time
visiting the companies, talking to their suppliers, competitors and customers. I
use a value discipline, coupled with a strong "bottom-up" analysis of the
companies.
LYNN, YOU MUST HAVE AN OPPORTUNITY TO REALLY GET TO KNOW OHIO.
Lynn: I do. You know what they say, "It's the heart of it all."
THANKS, LYNN. LET'S TALK ABOUT YOUR COLLECTIVE OUTLOOK FOR THE MONTHS AHEAD.
TONY, BARBARA, YOUR IMPRESSIONS?
Tony: So far, economic conditions of moderate growth and low inflation have
been ideal for stocks. However, corporate profit margins are at historically
high levels and the pace of profit growth and lofty valuation levels of
common stocks do raise the element of risk. If any of these factors begin to
wane, and we view that as likely, a defensive or value oriented investment
style should be beneficial.
Barbara: Tony's right. Our emphasis on below average price/earnings and
price/book ratios and above average dividend yields when selecting
investments served the Fund's well this year during market weakness. And
value stocks have historically superior performance over the long-term.
JUDY, HOW ABOUT FROM YOUR PERSPECTIVE?
Judy: I think investors will continue to focus on corporate earnings which,
in all likelihood, will lead to increased stock market volatility. This has
been one of the longest bull markets on record. Staying with the value
proposition, the high yield, low price to earnings ratio, and low price to
book value, the Value Fund is well positioned and we believe it will
continue to provide relatively good returns compared to funds that do not
invest in value oriented stocks.
ALL OF YOU MENTIONED THAT GROWTH STOCKS OUTPERFORMED VALUE STOCKS FOR MUCH OF
1996, BUT IT SEEMS LIKE YOUR FUNDS ALL HAD A GOOD YEAR AND THAT THEY
PERFORMED VERY COMPETITIVELY.
Tony: If I can answer this for the group. The risks associated with investing
in each of these funds is different. The Victory Value Fund invests in larger
companies with more predictable earnings growth; the risk is therefore lower
than that associated with the mid-cap universe, which is comprised of smaller
companies with the potential for greater long term growth, but also greater
volatility of earnings. By the same token, the Ohio Regional Stock Fund may
be subject to region specific risk and reduced scope for industry
diversification because of this geographical limitation.
30
<PAGE> 33
INTRODUCTION TO EQUITY FUNDS (GROWTH)
[Graphic]
THE INVESTMENT PROCESS
The Victory Equity Funds that are managed according to the growth style
subscribe to the philosophy of "Growth At a Reasonable Price" (GARP). They
seek to identify stocks believed to have future return prospects greater
than the overall market.
EQUITY RESEARCH UNIVERSE
Growth Management
Return Prospects Statistical Valuation Risk Assessment
buy/sell decisions
--------------------------------------------
GROWTH FUNDS
The Victory Growth Fund
The Victory Special Growth Fund
The Victory International Growth Fund
Victory Equity Funds are managed with a Growth Proposition. Their respective
portfolio managers are as follows:
[Photo]
The Victory Growth Fund
William Ruple (right)
William (Bill) Ruple is a Vice President and Portfolio Manager with Society
Asset Management, Inc. ("SAM"). He has been with SAM and its affiliates
since 1970. Bill received his B.S. from Ohio Wesleyan University and his
MBA from Case Western Reserve University.
The Victory Special Growth Fund
Annette Geddes (left)
Annette Geddes is Managing Director at Spears, Benzak, Salomon & Farrell
("SBSF"), a subsidiary of KeyCorp. Annette has been managing the Fund since
April 1, 1996. Prior to joining SBSF, Annette managed a $100 million
diversified equity portfolio at Steinhardt Management Company and has, in
addition, a long record of managing equity portfolios for important corporate
and public clients. Annette holds a B.A. in Economics from Wellesley College.
The Victory International Growth Fund
Conrad Metz (center)
Conrad Metz is a Vice President of International Equity Investments and
Portfolio Manager with Society Asset Management, Inc. (SAM). He has managed
the International Growth Fund since October, 1995. Mr. Metz received a
B.A. from the University of California at Berkley. He is a charter member of
the International Society of Financial Analysts.
31
<PAGE> 34
VICTORY EQUITY FUNDS (GROWTH)
ANNETTE, CAN YOU TELL US A LITTLE ABOUT THE CIRCUMSTANCES SURROUNDING THE
SMALL CAP EQUITY MARKET DURING THE PAST YEAR? DID IT DIFFER SIGNIFICANTLY
FROM OTHER AREAS OF THE MARKET?
Annette: That's a good question. While the large cap sector of the stock
market outperformed small stocks in the past year, we believe the six-year
old bull market for emerging growth stocks remains intact. The peak in growth
stock performance occurred in the second quarter of 1996, coinciding with the
peak in growth of the gross domestic product. Subsequently, the increase in
interest rates with the long Treasury Bond crossing 7% for the first time in
a year penalized small growth stocks the most.
The market also had to deal with investor anxiety which was caused by a
string of earnings disappointments and the usual election year jitters. With
the election behind us, and our belief that the S&P 500 will slow
dramatically in 1997, small cap growth stocks that have the potential to
deliver earning gains in excess of 25%, while selling at meaningful P/E
discounts should be very attractive to investors.
CONRAD, SINCE YOU MANAGE THE INTERNATIONAL GROWTH FUND, CAN YOU TELL US A
LITTLE ABOUT THAT ENVIRONMENT? WAS IT VERY DIFFERENT FROM OUR DOMESTIC
ECONOMIC SCENARIO?
Conrad: I think in the past year that international investing(1) has been
remarkably challenging. Investors needed to remind themselves of the proven
long-term benefits of international diversification. Foreign equity markets
took a back seat to the U.S. stock
The Victory Growth Fund
Portfolio Manager
William Ruple
<TABLE>
Total Return As of 10/31/96
<CAPTION>
Maximum
Net Asset Offering
Value Price
<S> <C> <C>
One Year 25.66% 19.65%
Since Inception Annualized
12/3/93 16.57% 14.63%
</TABLE>
<TABLE>
Victory Growth Fund
vs. S&P 500
(Dollars in thousands)
<CAPTION>
Growth Stock Growth Stock @ NAV S&P 500
<S> <C> <C> <C>
12/93 9,525 10,000 10,000
3/94 9,189 9,647 9,621
6/94 9,197 9,655 9,661
9/94 9,509 9,983 10,133
12/94 9,478 9,950 10,132
3/95 10,202 10,711 11,118
6/95 11,048 11,599 12,179
9/95 11,837 12,428 13,147
12/95 12,461 13,082 13,939
3/96 13,089 13,741 14,687
6/96 13,916 14,609 15,346
10/96 14,838 15,578 16,257
<FN>
Graph reflects investment growth from end of month of fund commencement.
The Standard & Poor's 500 Stock Index (S&P 500) is a broad-based unmanaged
index that represents the general performance of domestically traded common
stocks of mid- to large-size companies.
</TABLE>
The performance data quoted represent past performance and are not indicative
of future results. Total returns are historical and include the change in
share price and the reinvestment of dividends and capital gains
distributions, and unless indicated show the effect of the maximum 4.75%
sales charge. Investment returns and principal value will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than their
original cost. Total return figures set forth above may reflect the waiver of
a portion of certain fees for various periods since the Fund's inception
date. In such cases and without such waiver of fees, the total returns would
have been lower.
Fee waivers are voluntary and may be modified or terminated at any time.
(1) International investing is subject to certain factors such as currency
exchange rate volatility, possible political, social or economic instability,
foreign taxation and differences in auditing and other financial standards.
32
<PAGE> 35
VICTORY EQUITY FUNDS (GROWTH)
markets, and the U.S. dollar gained strength throughout the year. Generally,
foreign central banks lowered their discount rates while Fed watchers
anticipated a U.S. rate hike. The end result is that the MSCI EAFE Index*
trailed the S&P 500 by more than 50% in the twelve months that ended on October
31, 1996.
Let's stay with the international fund for a minute. You've said that the S&P
500 outperformed the EAFE Index. How did the International Growth Fund do
against the EAFE, since that's the Fund's benchmark?
Conrad: The Fund returned 5.65%** during the past twelve months while EAFE
returned 10.47% in U.S. dollar terms. About 3% of the under performance in
the fourth quarter of 1995 is attributable to the Fund's exposure to emerging
markets. In the calendar's first quarter of 1996, above-average turnover of
the portfolio holdings was partly responsible for 1% of under performance.
However, in the second half of the Fund's fiscal year, the Fund outperformed
EAFE by a small margin. This was accomplished by reducing exposures in Japan
and by successful stock selection in Australia, Malaysia and the Netherlands.
THANKS, CONRAD. WE'LL COME BACK TO THE INTERNATIONAL FUND IN JUST A MOMENT.
IN THE MEANTIME, BILL CAN YOU TELL US ABOUT THE GROWTH FUND'S PERFORMANCE
THIS YEAR?
Bill: Sure, in mid-1995, we adjusted the Fund's diversification profile from
"sector neutral"
The Victory Special Growth Fund
Portfolio Manager
Annette Geddes
<TABLE>
Total Return As of 10/31/96
<CAPTION>
Maximum
Net Asset Offering
Value Price
<S> <C> <C>
One Year 19.73% 14.03%
Since Inception Annualized
1/11/94 13.19% 11.25%
</TABLE>
<TABLE>
Victory Special Growth Fund
vs. Russell 2000
(Dollars in thousands)
<CAPTION>
Special Growth Special Growth @ NAV Russell 2000
<S> <C> <C> <C>
1/94 9,524 10,000 10,000
4/94 9,352 9,820 9,494
7/94 8,705 9,140 9,217
10/94 9,324 9,790 9,660
1/95 9,062 9,515 9,399
4/95 10,054 10,557 10,180
7/95 11,285 11,849 11,520
10/95 11,266 11,829 11,433
1/96 12,020 12,621 12,214
4/96 13,708 14,393 13,539
7/96 12,067 12,671 12,316
10/96 13,489 14,163 13,331
<FN>
Graph reflects investment growth from end of month of fund commencement.
The Russell 2000 Index (Russell 2000) is a broad-based unmanaged index that
represents the general performance of domestically traded common stocks of
small- to mid-sized companies.
</TABLE>
The performance data quoted represent past performance and are not indicative
of future results. Total returns are historical and include the change in
share price and the reinvestment of dividends and capital gains
distributions, and unless indicated show the effect of the maximum 4.75%
sales charge. Investment returns and principal value will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than
their original cost. Total return figures set forth above may reflect the
waiver of a portion of certain fees for various periods since the Fund's
inception date. In such cases and without such waiver of fees, the total
returns would have been lower. Small-Cap funds carry additional risks and
historically have experienced a greater degree of market volatility than
average.
Fee waivers are voluntary and may be modified or terminated at any time.
* MSCI EAFE Index-Morgan Stanley Capital International Europe, Australia,
and Far East Index (MSCI EAFE) is a broad based capitalization weighted
unmanaged index that represents the general performance of over 1,000
companies of the European, Australian and Far Eastern equity markets.
** Reflects the total return on Class A shares without showing the effect of
the 4.75% maximum sales charge.
33
<PAGE> 36
VICTORY EQUITY FUNDS (GROWTH)
relative to the S&P 500 to a more growth oriented approach. As a result, more
emphasis was placed on the consumer staples and technology sectors. This
strategy really paid off well because we were in an environment of low inflation
and steady growth in the large cap sector. As a result, the Fund returned
25.66%, which does not reflect the effect of the 4.75% maximum sales charge, vs.
24.09% for the S&P 500 over the past year ended October 31, 1996.
DID YOU ADD ANY NEW SECURITIES TO THE PORTFOLIO?
Bill: Actually, I did. I took advantage of the July stock market sell-off to
add positions in technology companies like Cisco Systems, Electronic Data
Systems and 3Com.
ANNETTE, WHAT ABOUT THE SPECIAL GROWTH FUND? HOW DID IT PERFORM AND WHAT
SECTORS DID YOU INVEST IN?
Annette: Well, technology stocks represent the largest commitment in the
portfolio and this sector worked out well for us. New product launches and
solid earnings reports bolster our confidence that good stock selection will
bring in rewards. In the computer software business, two of our promising
holdings are Viasoft and Systemsofe. In the pharmaceutical arena, one our
largest holdings, Interneuron, had a very successful launch of its diet drug
Redux. Basically, most of the stocks we own either already have or are in
the process of, resuming leadership positions within their respective
industries.
As far as the performance of the Fund is concerned, the fundamental
characteristics of the portfolio have never been
The Victory International Growth Fund
<TABLE>
Total Return As of 10/31/96
<CAPTION>
INTERNATIONAL GROWTH Class A
Maximum
Net Asset Offering
Value Price
<S> <C> <C>
One Year 5.65% 6.65%
Annualized Return
Three Years 4.77% 3.09%
Five Years 8.51% 7.45%
Since Inception
5/18/90 6.23% 5.44%
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL GROWTH Class B
Contingent
Net Asset Deferred
Value Charges
<S> <C> <C>
Since Inception
3/1/96 1.11% -3.89%
</TABLE>
<TABLE>
Victory Internationl Growth Fund
vs. MSCI EAFE
(Dollars in thousands)
<CAPTION>
International Growth International Growth MSCII EAFE
Class A Class A @ NAV
<S> <C> <C> <C>
5/90 9,527 10,000 10,000
12/90 8,841 9,279 8,633
7/91 9,187 9,643 9,199
2/92 9,490 9,961 9,134
9/92 9,592 10,068 8,843
4/93 10,764 11,298 10,424
11/93 11,396 11,962 10,511
6/94 12,741 13,374 12,260
1/95 11,778 12,362 11,680
8/95 13,302 13,963 12,733
3/96 13,915 14,606 13,898
10/96 13,985 14,679 13,956
<FN>
Graph reflects investment growth from end of month of fund commencement.
*MSCI EAFE Index-Morgan Stanley Capital International Europe, Australia,
and Far East Index (MSCI EAFE) is a broad based capitalization weighted
unmanaged index that represents the general performance of over 1,000
companies of the European, Australian and Far Eastern equity markets.
</TABLE>
The performance data quoted represent past performance and are not indicative
of future results. Total returns are historical and include the change in
share price and reinvestment of dividends and capital gain distributions.
Performance of the different classes of shares will vary based on the
differences in sales charges and class specific expenses paid by
shareholders. Class A performance with sales charge shows the effect of the
maximum 4.75% sales charge applied at the beginning of the period. Class B
performance with sales charge shows the effect of the applicable contingent
deferred sales charge, assuming a complete redemption as of October 31, 1996.
Investment returns and principle value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
The total return figures set forth above may reflect the waiver of a portion
of certain fees for various periods since the Fund's inception. In such
instances and without such waiver of fees, the total returns would have been
lower.
Fee waivers are voluntary and may be modified or terminated at any time.
34
<PAGE> 37
VICTORY EQUITY FUNDS (GROWTH)
stronger. On average, the companies in the portfolio reflect earnings gains of
58% for the current year and their price/earnings ratio at 33 times is at a
discount to this earnings growth rate. The portfolio remains broadly diversified
with 25 industry groups represented, and we think we're well diversified and
well positioned for '97.
BILL, WHAT'S YOUR OUTLOOK?
Bill: Well, I don't think we should ignore the fact that there could be a
pullback in the market, but it's our view that the equity market can
continue to rise as long as economic growth slows to a more sustainable
2 1/2% rate. In the slow growth-low inflation environment that we envision
for the near-term future, we believe investors will continue to focus on
stable and consistent earning growth stocks.
CONRAD, LET'S GO BACK TO THE INTERNATIONAL FUND FOR A MINUTE. CAN YOU TELL US
ABOUT ANY TRENDS YOU'RE SEEING IN FOREIGN STOCK MARKETS AND HOW THAT HAS
AFFECTED YOUR CHOICES FOR THE PORTFOLIO?
Conrad: For the sixth year running, Japan proved to be one of the worst
performing stock markets outside of the U.S., with a negative total return
of 0.83% in the trailing 12 months to October 31, 1996, vs. the EAFE's
+10.47%. Non Japanese Asian markets grew 19.69% during the same time period
and were led by countries like Hong Kong and Malaysia. It's important for
investors to remember that Hong Kong and U.S. currencies are tied, so at the
present, there is very little currency risk involved with investments in
Hong Kong. Australia was also up strongly in the twelve months ended October
31, 1996, aided by official interest rate cuts and rising GDP expectations.
WHAT ABOUT EUROPE?
Conrad: Well, in what we consider "Continental Europe" the stock markets
returned 16.09% in the same time period and this was spurred by interest rate
cuts at the major central banks. Let me give you a specific example: The MSCI
United Kingdom Index* returned 20.33% in the twelve month period to
October 31, 1996, which is almost double that of the broader EAFE return.
Generally speaking, I'd say that over the past several months, fears of a
Federal Reserve Bank interest rate hike have caused emerging stock markets to
pull back as those countries rely heavily on dollar inflows to keep their
economies buoyant. Consequently, the developed markets of Europe had begun to
outperform their smaller cousins.
As far as how this affects the International Growth Fund, we remain under
weighted in Japan relative to the EAFE and hold high quality stocks there.
We've increased our exposure to Hong Kong. Though we remain cautious, we are
reviewing sound fundamentals of companies in Chile, Portugal, Taiwan and
Thailand.
* MSCI United Kingdom Index--A capitalization weighted index,
including net dividends and capital gains reinvested, consisting of
137 companies of the United Kingdom.
35
<PAGE> 38
[photo of a female scientist]
Think investing is as complicated as rocket science? It is.
If you think successful investing can only be done by a professional with over
100 years of investment experience, consider one of the mutual funds offered by
Victory. We'll see if one of our portfolio managers can engineer the right
investment solution for you so you can get a smooth and easy landing.
The Victory Funds are distrubuted by BISYS Fund Services which is not affiliated
with KeyCorp. Certain subsidiaries of KeyCorp provide services to the Victory
Funds, including advisory services, and recieve fees from the funds for their
services, as set forth in the prospectus.
For more information about the Victory Funds, including charges and expenses,
request a prospectus by calling 1-800-KEY-FUND (1-800-539-3863). Please read the
prospectus carefully before investing or sending money.
o Not FDIC Insured
o No Bank Guarantee
o May Lose Value
[logo]
Victory Funds
<PAGE> 39
[graphic]
ARE WE FAILING TO PLAN OR PLANNING TO FAIL?
Many people just can't seem to get a financial plan started. Baby Boomers
are struggling to send their children to college and they wonder about how
to save for retirement at the same time.
Generation Xers are trying to establish themselves in the job market and to
set up their own households. But amid large mortgages, soaring medical and
child-care costs and numerous credit card bills, there never seems to be any
money left over to set aside as savings.
Most people don't plan to fail at financial security...however, they fail to
plan for it. Financial planning may require a bit of a sacrifice and it means
you may have to give up little luxuries like eating out or buying new
clothes. But by shifting our focus from the immediate delight to the future
need, we can learn to defer gratification and achieve financial security.
HOW CAN I GET STARTED?
FINANCIAL PLANNING ISN'T THAT HARD TO DO, BUT IT DOES TAKE DISCIPLINE. HERE
ARE SOME TIPS TO HELP YOU GET STARTED ON THE ROAD TO FINANCIAL SECURITY:
* NO MATTER WHAT YOUR AGE, IT IS NEVER TOO LATE TO START. Obviously, if you
begin when you are younger, you'll have more time to acquire and grow your
nest egg. But start saving now, no matter how old you are. You'll be
surprised at how quickly your savings can add up.
* SIMPLIFY YOUR LIFESTYLE. Everyone can find a few ways to reduce their
discretionary expenses. You may opt to eat in more often, rent movies
instead of going out, or plan a stay-at-home vacation in order to stay true
to your savings plan.
* PAY YOURSELF FIRST. Determine what you can afford to save each month, then
transfer it to savings first, before you pay bills or spend money.
* PAY DOWN CREDIT CARDS AND INSTALLMENT LOANS and try to pay cash for
purchases such as clothes, entertainment and gasoline. If you need to use
your credit card, try to pay off the balance at the end of the month. At the
very least, pay more than the minimum amount due. Research shows that if you
have a $1,500 credit card balance and only pay $25.00 a month or 2% of the
minimum balance (whichever is greater), it will take you almost 10 years to
pay off your debt. In the meantime, you will have incurred $1,543.00
in interest charges.*
* CONTRIBUTE A SET AMOUNT EACH MONTH TO A MUTUAL FUND OR OTHER INVESTMENT.
Many mutual funds allow you to have your money automatically withdrawn from
your checking or savings account, thereby making it very convenient for you
to maintain your investment program.
* EVEN IF YOU BEGIN BY SAVING ONLY A FEW DOLLARS EACH WEEK, STICK WITH YOUR
SAVINGS PLAN. When you pay down credit card bills or earn a raise at work,
try to supplement your savings with a portion of this "found" money.
* INVEST WITH A LONG-TERM FOCUS. Instead of trying to beat the market through
speculative, high-risk investments, consider looking for low-to-moderate risk
investments that grow over time. Mutual funds offer a wide range of
investment opportunities that provide diversification, asset allocation and
acceptable levels of risk.
* Assumes APR of 16.99% (Source: Mutual Funds Product Group).
37
<PAGE> 40
[graphic]
GLOSSARY OF OFTEN-USED INVESTMENT TERMS
* BOND RATING
An indication of the risk of a bond issue, as determined by a bond rating
service (such as Moody's or Standard & Poor's). Bonds with the highest
ratings (AAA) have the lowest credit risk.
* PAR VALUE
The face value of a security. A bond selling at par, for instance, is worth
the same dollar amount it was issued for or at which it will be redeemed at
maturity--typically, $1000 per bond.
* PORTFOLIO
Any combination of more than one security. A mutual fund typically has a
large, diversified portfolio of securities or of investments in order to help
lower investment risks.
* SETTLEMENT DATE
Date by which an executed order must be settled, either by a buyer paying for
the securities with cash or by a seller delivering the securities and
receiving the proceeds of the sale for them. In a regular way delivery of
stocks and bonds, the settlement date is three business days after the trade
was executed. For listed options and government securities, settlement is
required by the next business day.
* SHORT-TERM CAPITAL GAIN (LOSS)
A capital gain (loss) arising from an asset which was held six months or less.
Short-term capital gains are taxed at the taxpayer's ordinary tax rate.
* CALL OPTIONS
A contract for the right to buy a specified number of shares at a
predetermined price on or before a stated date. The purchaser of a call
option feels the underlying stock price will rise, and he purchases the call
option from an investor equally convinced the underlying stock price will
either stay the same or fall.
* PUT OPTION
A specified contract for the right to sell a specified number of shares at a
predetermined price on or before a stated date. The purchaser of a put option
feels the underlying stock price will fall, and he purchases the put option
from an investor equally convinced the price will stay the same or rise.
* PROSPECTUS
A document providing investors information about the fund's investment
objective, policies, and risks. It also provides the basic information and
details of the funds operations and services; information on sales charges;
redemption rights; tax status of the dividends and income; expenses; the fund
custodian and other service providers; and how to buy and sell shares.
* DOLLAR COST AVERAGING OR CONSTANT DOLLAR PLAN*
A method of accumulating assets by investing a fixed amount of dollars in
securities at set intervals. The result is that more shares are purchased
when the price is low and fewer shares are purchased when the price is high.
The overall cost is lower than it would be if a constant number of shares
were bought at set intervals assuming a general upward price trend.
* CONVERTIBLE SECURITIES
Corporate bonds, preferred stocks and other securities that carry an option
to be exchanged for, or "converted" into, a set number of shares of common
stock.
* This strategy does not assure profit and does not protect against loss in
declining markets. An investor should be prepared to continue the program of
investment at regual intervals, even during economic downterms, in order to
fully utilize a dollar cost averaging program.
38
<PAGE> 41
How To Read Your Financial Statement
This guide will assist you in extracting information from the report which is
most important to you.
The Financial Statements summarize and describe the Fund's financial
transactions. They are broken down into four different statements.
THE STATEMENT OF ASSETS AND LIABILITIES
[graphic]
Presents all of the assets and liabilities of each mutual Fund. This is each
individual Fund's "balance sheet" as of the date of the statement.
1. Summary of the mutual fund's assets stated at market value including
investments owned, dividends, interest and other amounts owed to each Fund by
outside parties, and other assets owned by each fund.
2. Summary of all amounts owed by each Fund including distributions declared
but not yet paid to shareholders and other amounts due to outside parties.
3. Summary of the amounts that comprise each Fund's net assets including
capital, undistributed net investment income, unrealized gains from
investments owned and realized gains from investments sold.
4. The number of shares owned by shareholders of each Fund.
5. The market worth of each mutual fund's total net assets divided by the
number of outstanding shares.
6. The net asset value per share plus sales charges.
THE STATEMENT OF OPERATIONS
[graphic]
Presents the results of operating activities during the period.
1. Investment income includes dividend and interest income earned from
holding investments.
2. Summary of expenses incurred by each Fund from its operations.
3. Summary of realized gains or losses from selling each Fund's investments
and the change during the period in unrealized gains or losses from holding
each Fund's investments.
4. Net change due to mutual fund operations.
39
<PAGE> 42
HOW TO READ YOUR FINANCIAL STATEMENT
THE STATEMENT OF CHANGES IN NET ASSETS
[GRAPHIC]
Presents the activity that affects the value of total net assets of each Fund
during the two most recent reporting periods.
1. See Statement of Operations.
2. Distributions declared to shareholders from net investment income or from
net realized gains during the periods. Each Fund declares distributions based
on investment income and taxable realized gains, which may differ from the
Fund's operations for financial statement purposes. Thus, distributions may
exceed net investment income or realized gains.
3. Dollar amount of mutual fund shares issued, reinvested and redeemed during
the periods. Detail of this activity pertaining to Funds with two share
classes is presented in the footnotes.
4. Compares total net assets as of the end of the current and prior periods.
5. Number of mutual fund shares issued, reinvested and redeemed during the
periods. Detail of this activity pertaining to Funds with two share classes
is presented in the footnotes.
The Notes to Financial Statements provide explanatory information to the
financial statements. These include information on accounting methods used
by the mutual Fund, contractual arrangements between the Fund and its service
providers, certain transactions affecting the Fund, and other general
information about the Fund.
THE FINANCIAL HIGHLIGHTS
[GRAPHIC]
Present changes in net asset value per share as well as certain ratios and
supplementary data for the five most recent reporting periods.
1. The table presents changes in the net asset value per share caused by the
Fund's investment activities and distributions.
2. Total return presents the historical return on an investment in the Fund
throughout the period including changes in net asset value per share and
reinvestment of dividends. The total return presented excludes sales charges.
3. Actual ratios of expenses and net investment income to average net assets
during the period.
4. Hypothetical ratios of expenses and net investment income to average net
assets during the period assuming no fee waivers or expense reimbursements
had occurred.
5. Portfolio turnover presents the rate of investment activity. Higher
turnover indicates more active investment purchases and sales.
40
<PAGE> 43
Schedule of Investments
THE VICTORY PORTFOLIOS October 31, 1996
U.S. GOVERNMENT OBLIGATIONS FUND (Amounts in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
- ---------------------------------------------------------
U.S. TREASURY NOTES (22.2%)
$70,000 7.50%, 1/31/97 $ 70,356
10,000 6.75%, 2/28/97 10,033
15,000 6.88%, 2/28/97 15,056
50,000 6.63%, 3/31/97 50,219
25,000 6.50%, 4/30/97 25,083
50,000 6.50%, 5/15/97 50,229
25,000 6.13%, 5/31/97 25,039
25,000 5.63%, 6/30/97 25,024
30,000 6.38%, 6/30/97 30,172
- ---------------------------------------------------------
TOTAL U.S. TREASURY NOTES 301,211
- ---------------------------------------------------------
TOTAL INVESTMENTS 301,211
- ---------------------------------------------------------
- ---------------------------------------------------------
REPURCHASE AGREEMENTS (77.9%)
60,000 Aubrey G. Lanston & Co.,
Inc.,
5.54%, 11/1/96,
(Collateralized by $60,000
various U.S. Treasury
Securities, 4.75%-10.63%,
8/31/98-8/15/15, market
value-$61,907) 60,000
65,000 Barclays de Zoete Wedd
Securities, Inc.,
5.53%, 11/1/96,
(Collateralized by $65,244
U.S. Treasury Notes,
6.38%, 3/31/01, market
value-$66,301) 65,000
60,000 Chase Securities, Inc.,
5.50%, 11/1/96,
(Collateralized by $60,923
U.S. Treasury Notes,
5.13%-5.88%,
12/31/98-3/31/99, market
value-$61,203) 60,000
60,000 Dean Witter Reynolds, Inc.,
5.47%, 11/1/96,
(Collateralized by $61,964
various U.S. Treasury
Securities, 0.00%-7.25%,
11/21/96-5/15/16, market
value-$61,201) 60,000
50,000 Deutsche Morgan Grenfell,
5.40%, 11/1/96,
(Collateralized by $51,645
various U.S. Treasury
Securities, 0.00%-6.38%,
3/20/97-8/15/02, market
value-$51,001) 50,000
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
$65,000 Donaldson-Lufkin Jenrette
Securities Corp.,
5.55%, 11/1/96,
(Collateralized by
$160,616 U.S. Treasury
Strips, 0.00%,
5/15/97-8/15/17, market
value-$66,300) $ 65,000
65,000 Goldman Sachs Group L.P.,
5.54%, 11/1/96,
(Collateralized by $63,763
various U.S. Treasury
Securities, 5.50%-7.88%,
6/30/97-2/15/21, market
value-$66,301) 65,000
65,000 Nesbitt Burns Securities,
5.55%, 11/1/96,
(Collateralized by
$236,218 U.S. Treasury
Strips, 0.00%,
5/15/04-8/15/23, market
value-$66,300) 65,000
58,055 Lehman Brothers, Inc.,
5.55%, 11/1/96,
(Collateralized by $58,280
U.S. Treasury Notes,
6.13%, 8/31/98, market
value-$59,216) 58,055
60,000 Morgan Stanley Group, Inc.,
5.53%, 11/1/96,
(Collateralized by $61,670
U.S. Treasury Bills,
0.00%, 12/26/96, market
value-$61,202) 60,000
335,000 NationsBanc Capital Markets,
Inc.,
5.55%, 11/1/96,
(Collateralized by
$334,634 various U.S.
Treasury Securities,
0.00%-9.13%,
11/15/96-10/31/01, market
value-$341,701) 335,000
50,000 Nomura Securities
International, Inc.,
5.40%, 11/1/96,
(Collateralized by $46,900
U.S. Treasury Notes,
7.07%, 8/15/01, market
value-$51,781) 50,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
41
<PAGE> 44
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1996
U.S. GOVERNMENT OBLIGATIONS FUND (Amounts in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
$65,000 UBS Securities, Inc.,
5.53%, 11/1/96,
(Collateralized by
$150,284 various U.S.
Treasury Strips, 0.00%,
5/15/08-5/15/10, market
value-$66,301) $ 65,000
- ---------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS 1,058,055
- ---------------------------------------------------------
TOTAL (COST $1,359,266)(a) $1,359,266
- ---------------------------------------------------------
</TABLE>
- ---------------
Percentages indicated are based on net assets of $1,357,817.
(a) Cost for federal income tax and financial reporting purposes are the same.
SEE NOTES TO FINANCIAL STATEMENTS.
42
<PAGE> 45
Schedule of Investments
THE VICTORY PORTFOLIOS October 31, 1996
PRIME OBLIGATIONS FUND (Amounts in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
- ----------------------------------------------------------
BANK DEPOSIT NOTES (0.8%)
$ 4,000 Huntington Bank Note,
5.85%, 9/30/97 $ 4,000
- ----------------------------------------------------------
TOTAL BANK DEPOSIT NOTES 4,000
- ----------------------------------------------------------
- ----------------------------------------------------------
BANKER'S ACCEPTANCES (1.8%)
3,000 Republic Bank of New York,
5.44%, 11/26/96 2,989
4,000 First National Bank of
Chicago, 5.25%, 12/3/96 3,981
2,200 Republic Bank of New York,
5.54%, 1/21/97 2,173
- ----------------------------------------------------------
TOTAL BANKER'S ACCEPTANCES 9,143
- ----------------------------------------------------------
- ----------------------------------------------------------
CERTIFICATES OF DEPOSIT (0.4%)
2,000 Deutsche Bank,
5.94%, 6/10/97 1,998
- ----------------------------------------------------------
TOTAL CERTIFICATES OF DEPOSIT 1,998
- ----------------------------------------------------------
- ----------------------------------------------------------
COMMERCIAL PAPER (36.0%)
3,700 Ameritech Corp.,
5.26%, 11/25/96 3,687
4,565 Asset Securitization Co-op
Corp., 5.32%, 12/4/96 4,543
5,000 Asset Securitization Co-op
Corp., 5.35%, 12/9/96 4,972
3,800 Broadway Capital Corp.,
5.43%, 11/20/96 3,789
4,500 Broadway Capital Corp.,
5.30%, 12/31/96 4,460
3,692 Broadway Capital Corp.,
5.50%, 1/7/97 3,654
6,000 CIMC, 5.45%, 1/9/97, LOC
Societe Generale 5,937
10,000 Coca-Cola Co.,
5.23%, 12/2/96 9,955
10,045 Fleet Funding, Inc.,
5.30%, 11/15/96 10,024
8,119 Fleet Funding, Inc.,
5.27% 12/2/96 8,082
5,000 General Motors Acceptance
Corp., 5.32%, 12/16/96 4,967
3,200 IBM Credit Corp.,
5.30%, 11/13/96 3,194
2,500 Merrill Lynch, 5.27%,
11/20/96 2,493
5,000 Merrill Lynch, 5.28%,
12/2/96 4,977
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
$ 10,000 Morgan Stanley Group, Inc.,
5.70%, 11/1/96 $ 10,000
8,000 Pemex, 5.33%, 12/27/96, LOC
Swiss Bank 7,934
3,515 Retailer Funding Corp.,
5.30%, 12/4/96 3,498
2,873 Retailer Funding Corp.,
5.30%, 12/5/96 2,858
10,000 Sanwa Business Credit Corp.,
5.40%, 11/8/96 9,989
5,000 Sanwa Business Credit Corp.,
5.30%, 11/15/96 4,990
4,000 Sharp Electronics Corp.,
5.35%, 12/20/96 3,971
6,070 Sheffield Receivables Corp.,
5.27%, 11/8/96 6,064
15,000 Smith Barney, Inc.,
5.26%, 11/14/96 14,971
6,865 Sony Capital Corp.,
5.27%, 11/20/96 6,846
8,000 Sony Capital Corp.,
5.26%,12/23/96 7,939
5,000 Toshiba America, Inc.,
5.47%, 1/2/97 4,953
5,000 Toyota Motor Credit Corp.,
5.24%, 12/20/96 4,964
4,000 Unibanco, 5.48%, 1/31/97,
LOC Westdeutsche
Landesbank 3,945
5,800 Vehicle Services, 5.52%,
9/6/97, LOC NationsBank of
Texas 5,770
5,000 WMX Technologies, Inc.,
5.28%, 11/4/96 4,998
- ----------------------------------------------------------
TOTAL COMMERCIAL PAPER 178,424
- ----------------------------------------------------------
- ---------------------------------------------------------
CORPORATE BONDS(0.5%)
1,000 PepsiCo, Inc.,
7.00%, 11/15/96 1,000
1,500 WMX Technologies, Inc.,
7.13%, 3/22/97 1,507
- ----------------------------------------------------------
TOTAL CORPORATE BONDS 2,507
- ----------------------------------------------------------
- ---------------------------------------------------------
CORPORATE NOTES(33.8%)
3,020 Astro Aluminum,
5.50%*, 4/1/05** 3,020
5,000 AT&T Capital Corp.,
5.45%*, 11/1/96 5,000
10,000 AT&T Capital Corp.,
5.41%*, 11/29/96 10,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
43
<PAGE> 46
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1996
PRIME OBLIGATIONS FUND (Amounts in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
$ 3,300 Baylis Group Partnership,
5.50%*, 1/1/10** $ 3,300
5,000 Bear Stearns Cos.,
5.91%*, 12/16/96 5,002
5,000 Bear Stearns Cos.,
5.44%*, 2/14/97 5,000
200 Carelife, Inc.,
5.50%*, 8/1/11** 200
2,350 Carelife, Inc.,
5.50%*, 8/1/11** 2,350
1,485 Cleveland Steel Container,
5.50%*, 12/1/08** 1,485
5,000 Dean Witter Discover & Co.,
5.69%*, 2/3/97 5,002
835 Dietz Road Ltd. Partnership,
5.50%*, 11/1/08** 835
2,920 Dome Corp.,
5.52%*, 8/31/16** 2,920
247 D.J. Schipper Enterprise,
5.51%*, 4/1/09** 247
1,500 Ford Motor Credit Corp.,
5.68%, 5/27/96 1,502
2,500 Ford Motor Credit Corp.,
5.46%*, 3/14/97 2,499
5,000 Ford Motor Credit Corp.,
5.61%*, 5/20/97 4,998
15,000 General American Life
Insurance, 5.70%*,
12/31/89, GIC** 15,000
1,800 GMH Enterprises,
5.50%*, 7/1/03** 1,800
930 GNWT, 5.40%*, 11/1/09** 930
335 Highland Road Partners,
5.50%*, 10/1/04** 335
815 Highland Road Partners,
5.50%*, 10/1/04** 815
4,000 Huntington National Bank,
5.40%*, 11/13/96 4,000
4,000 Huntington National Bank,
5.36%*, 6/27/97 3,997
2,000 IBM Credit Corp.,
5.60%, 11/6/96 2,000
5,000 Industrial Development
Authority of Bedford, VA,
5.70%*, 12/12/96 5,000
22,000 Lehman Government Securities
Master Note, 5.71%*,
12/31/99** 22,000
900 McKinley Air Transport,
5.50%*, 8/1/09** 900
940 MCMC Pob LII,
5.50%*, 8/1/14** 940
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
$ 3,125 Morgan Stanley Group, Inc.,
5.74%*, 1/20/97 $ 3,127
8,000 Morgan Stanley Group, Inc.,
5.73%*, 3/15/01** 8,000
3,340 Olympic Steel Corp.,
5.40%*, 10/1/08** 3,340
675 Pharmed, Inc. Project,
5.40%*, 4/1/09** 675
1,125 Presrite Corp.,
5.90%*, 1/1/04** 1,125
3,280 Reichert Limited
Partnership, 5.50%*,
4/15/11** 3,280
600 Rivnut Engineered Products,
5.50%*, 2/1/01** 600
10,000 RKS LLC Health Care, 5.45%*,
5/1/26** 10,000
840 S & SLP Project,
5.50%*, 12/1/07** 840
2,963 Schipper Enterprises,
5.51%*, 4/1/09** 2,963
15,000 Sea River Maritime Exxon
Shipping, 5.42%*,
10/1/01** 15,000
750 Sofa Express Project,
5.50%*, 4/1/06** 750
1,660 Tell-Schipper Properties,
Inc. 5.51%*, 10/1/03** 1,660
3,500 Transamerica Financial,
5.48%*, 5/24/97 3,498
1,890 Zanetos Partnership Project,
5.50%*, 7/1/13** 1,890
- ----------------------------------------------------------
TOTAL CORPORATE NOTES 167,825
- ----------------------------------------------------------
- ----------------------------------------------------------
MEDIUM TERM NOTES (3.0%)
1,000 Associates Corp. of North
America, 7.35%, 1/24/97 1,004
5,000 Bear Stearns Cos., Inc.,
5.53%*, 2/14/97 5,000
1,500 Ford Motor Credit Co.,
7.80%, 3/17/97 1,511
4,000 General Motors Acceptance
Corp., 7.60%, 1/9/97 4,014
1,100 General Motors Acceptance
Corp., 7.45%, 6/5/97 1,111
1,000 Morgan Stanley Group, Inc.,
7.79%, 2/3/97 1,006
1,000 Phillip Morris Cos., Inc.,
8.75%, 6/15/97 1,017
- ----------------------------------------------------------
TOTAL MEDIUM TERM NOTES 14,663
- ----------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
44
<PAGE> 47
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1996
PRIME OBLIGATIONS FUND (Amounts in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
- ----------------------------------------------------------
MUNICIPAL BONDS (1.5%)
OHIO (1.5%):
$ 7,500 Cuyahoga County Taxable
Economic Development
Revenue, 5.49%*, 6/1/22** $ 7,500
- ----------------------------------------------------------
TOTAL MUNICIPAL BONDS 7,500
- ----------------------------------------------------------
- ----------------------------------------------------------
U.S. GOVERNMENT AGENCIES (9.0%)
FEDERAL FARM CREDIT BANK:
4,030 5.93%, 7/1/97 4,035
3,500 5.93%, 6/13/97 3,500
FEDERAL HOME LOAN BANK:
4,000 5.38%, 3/14/97 4,000
4,000 5.40%, 3/25/97 3,998
5,000 4.25%, 6/30/97 4,944
2,050 5.80%, 11/4/97 2,050
FEDERAL HOME LOAN MORTGAGE CORP.:
5,500 5.10%, 1/13/97 5,500
FEDERAL NATIONAL MORTGAGE ASSOC.:
4,000 5.60%, 11/1/96 4,000
STUDENT LOAN MORTGAGE ASSOC.:
10,000 5.37%*, 9/3/97 9,994
2,400 6.00%, 9/12/97 2,400
- ----------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCIES 44,421
- ----------------------------------------------------------
- ----------------------------------------------------------
U.S. TREASURY NOTES (1.6%)
4,000 8.50%, 4/15/97 4,051
4,000 5.75%, 9/30/97 3,998
- ----------------------------------------------------------
TOTAL U.S. TREASURY NOTES 8,049
- ----------------------------------------------------------
TOTAL INVESTMENTS 438,530
- ----------------------------------------------------------
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
- ----------------------------------------------------------
REPURCHASE AGREEMENTS (12.2%)
$ 20,000 Goldman Sachs Group, L.P.,
5.54%, 11/1/96,
(Collateralized by $20,664
U.S. Treasury Notes,
5.50%, 4/15/00, market
value - $20,401) $ 20,000
20,572 Lehman Brothers, Inc.,
5.55%, 11/1/96,
(Collateralized by $20,655
U.S. Treasury Notes,
6.13%, 8/31/98, market
value - $20,987) 20,572
20,000 NationsBanc Capital Markets,
Inc., 5.55%, 11/1/96,
(Collateralized by $22,771
U.S. Treasury Strips,
0.00%, 5/15/98-2/15/99,
market value - $20,400) 20,000
- ----------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS 60,572
- ----------------------------------------------------------
TOTAL (COST $499,102) (A) $499,102
- ----------------------------------------------------------
</TABLE>
- ---------------
Percentages indicated are based on net assets of $496,019.
(a) Cost for federal income tax and financial reporting purposes are the same.
* Variable rate securities having liquidity sources through bank letters of
credit or other credit and/or liquidity agreements. The interest rate, which
will change periodically, is based upon bank prime rates or an index of
market interest rates. The rate reflected on the Schedule of Investments is
the rate in effect on October 31, 1996.
** Put and demand features exist allowing the Fund to require the repurchase of
the instrument within variable time periods of less than one year.
GIC -- Guaranteed Insurance Contract.
LOC -- Letter of Credit.
SEE NOTES TO FINANCIAL STATEMENTS.
45
<PAGE> 48
Schedule of Investments
THE VICTORY PORTFOLIOS October 31, 1996
FINANCIAL RESERVES FUND (Amounts in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
- ----------------------------------------------------------
BANKER'S ACCEPTANCES (0.5%)
$ 4,000 FNB Chicago,
5.48%, 12/30/96 $ 3,964
- ----------------------------------------------------------
TOTAL BANKER'S ACCEPTANCES 3,964
- ----------------------------------------------------------
- ----------------------------------------------------------
COMMERCIAL PAPER (41.8%)
5,000 Ameritech Corp.,
5.40%, 1/30/97 4,932
11,157 Arizona Higher Education
Loan Program,
5.30%, 11/1/96,
LOC Dresdner Bank 11,157
10,000 Asset Securitization Co-op
Corp.,
5.32%*, 12/4/96 9,951
10,000 Asset Securitization Co-op
Corp., 5.35%, 12/9/96 9,944
4,500 Avco Financial Services,
Inc.,
5.25%, 11/15/96 4,491
5,000 Banco Nacional Comerico,
5.40%, 12/5/96,
LOC Societe Generale 4,975
10,138 Broadway Capital Corp.,
5.37%, 1/27/97 10,006
10,000 Canadian Wheat Board,
5.42%, 12/4/96 9,950
13,240 Coca-Cola Co.,
5.23%, 12/2/96 13,180
20,000 Fleet Funding Corp.,
5.30%, 11/15/96 19,959
12,000 Fleet Funding Corp.,
5.27%, 12/2/96 11,945
15,000 Ford Motor Credit Corp.,
5.44%, 1/29/97 14,798
5,000 General Motors Acceptance
Corp.,
5.32%, 12/16/96 4,967
5,000 Merrill Lynch Corp.,
5.28%, 12/2/96 4,977
15,869 Nebraska Higher Education
Capital Services,
5.37%, 11/4/96,
LOC State Street 15,862
5,507 Nebraska Higher Education
Loan Program,
5.26%, 11/1/96,
LOC State Street 5,507
13,000 Pemex,
5.33%, 12/27/96 12,892
20,000 Phillip Morris Cos., Inc.,
5.25%, 11/13/96 19,965
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
$ 10,000 Retailer Funding Corp.,
5.27%, 11/15/96 $ 9,979
10,144 Retailer Funding Corp.,
5.27%, 11/20/96 10,116
5,000 Sanwa Business Credit Corp.,
5.34%, 11/4/96 4,998
10,000 Sanwa Business Credit Corp.,
5.37%, 11/6/96 9,992
15,000 Sanwa Business Credit Corp.,
5.30%, 11/15/96 14,969
5,000 Sharp Electronics Corp.,
5.42%, 11/22/96 4,984
10,000 Sheffield Receivables Corp.,
5.27%, 11/8/96 9,990
15,000 Smith Barney, Inc.,
5.26%, 11/14/96 14,972
7,000 Sony Capital Corp.,
5.26%, 12/23/96 6,947
10,000 Toshiba America, Inc.,
5.47%, 1/2/97 9,906
6,000 Toshiba Capital,
5.35%, 11/19/96 5,984
8,000 Toyota Motor Credit Corp.,
5.24%, 12/20/96 7,943
6,000 Unibanco,
5.48%, 1/31/97,
LOC West Deutsche Bank 5,917
15,000 WMX Technologies, Inc.,
5.28%, 11/4/96 14,993
- ----------------------------------------------------------
TOTAL COMMERCIAL PAPER 321,148
- ----------------------------------------------------------
- ----------------------------------------------------------
CORPORATE NOTES (37.3%)
10,000 Armstrong County Hospital,
5.45%*, 9/1/17** 10,000
3,000 Associates Corp.,
6.75%, 6/13/97 3,015
8,000 A T & T Capital Corp.,
5.45%*, 11/1/96 8,000
16,000 A T & T Capital Corp.,
5.41%*, 11/29/96 16,000
2,215 Austin Printing Co.,
5.50%*, 8/1/14** 2,215
3,325 Automated Packaging System,
5.50%*, 10/1/08**,
LOC National City Bank 3,325
5,000 Bank of Hawaii,
5.57%, 11/6/96 5,000
8,000 Bear Stearns Co.,
5.44%*, 5/14/97 8,000
10,000 Bear Stearns Co.,
5.91%*, 12/16/96,
LOC Euroclear 10,004
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
46
<PAGE> 49
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1996
FINANCIAL RESERVES FUND (Amounts in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
$ 980 Bee Holdings, Inc.,
5.50%*, 9/1/15** $ 980
1,950 Bee Holdings, Inc.,
5.50%*, 9/1/15** 1,950
4,025 Buckeye Corrugated,
5.50%*, 1/1/05** 4,025
4,000 CIT Group Holdings,
7.63%, 12/5/96 4,007
4,000 Ford Motor Credit Corp.,
7.70%, 2/27/97 4,030
1,000 Ford Motor Credit Corp.,
8.05%, 3/28/97 1,009
5,000 Ford Motor Credit Corp.,
5.63%*, 9/2/97 5,004
25,000 General American Life
Insurance,
5.70%*, 12/31/89** GIC 25,000
4,000 General Motors Acceptance
Corp.,
7.60%, 2/10/97 4,022
5,000 General Motors Acceptance
Corp.,
5.56%*, 10/15/97 5,002
1,350 Hancor, Inc.,
5.50%*, 12/1/04** 1,350
7,000 Huntington National Bank,
5.40%*, 11/13/96 7,000
8,000 Huntington National Bank,
5.44%*, 6/27/97 7,994
7,000 Huntington National Bank,
5.85%, 9/30/97 7,000
8,000 Industrial Development
Authority of Bedford, VA,
5.45%*, 12/12/96 8,000
31,982 Lehman Brothers Government
Security,
5.48%*, 1/1/99 31,982
4,000 Morgan Stanley Group, Inc.,
5.66%*, 10/31/97 4,001
15,000 Morgan Stanley Group, Inc.,
5.73%*, 3/15/01** 15,000
11,800 OFC Corp.,
5.45%*, 1/1/26**,
LOC LaSalle Bank 11,800
650 Parkway Business Plaza,
5.50%*, 4/1/13** 650
1,000 PepsiCo, Inc.,
7.22%, 11/15/96 1,001
3,950 Phillip Morris Cos., Inc.,
8.75%, 6/15/97 4,016
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
$ 7,000 PNC Bank,
5.28%*, 3/4/97 $ 6,998
3,125 Sandridge Foods,
5.50%*, 12/1/00** 3,125
25,000 Sea River Maritime, Inc.,
5.42%*, 10/1/11** 25,000
1,405 SGS Tool Co.,
5.50%*, 8/1/08** 1,405
7,170 Shelbourne Realty,
5.40%*, 4/1/17**
LOC Star Bank 7,170
660 TPC Properties, Inc.,
5.50%*, 11/1/09** 660
5,000 Venturecor, Inc.,
5.45%*, 4/1/36** 5,000
14,000 Xerox Credit Corp.,
5.43%*, 5/13/97 13,993
2,380 Zanetos Partnership Project,
5.50%*, 7/1/13** 2,380
- ----------------------------------------------------------
TOTAL CORPORATE NOTES 286,113
- ----------------------------------------------------------
- ----------------------------------------------
U.S. GOVERNMENT AGENCIES (13.2%)
FEDERAL FARM CREDIT BANK:
5,000 5.93%, 7/1/97 5,007
FEDERAL HOME LOAN BANK:
7,000 5.38%, 3/14/97 7,000
7,000 5.40%, 3/25/97 6,996
8,000 4.25%, 6/30/97 7,910
FEDERAL NATIONAL MORTGAGE ASSOC.:
5,000 5.60%, 11/1/96 5,000
15,000 5.36%*, 5/25/99 15,000
20,000 5.36%*, 7/14/99 20,000
STUDENT LOAN MORTGAGE ASSOC.:
6,000 5.37%*, 9/3/97 5,997
4,000 6.00%, 9/12/97 4,000
10,000 5.53%*, 10/30/97 10,018
10,000 5.34%*, 9/28/98 9,997
4,500 5.39%*, 2/8/99 4,501
- ----------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCIES 101,426
- ----------------------------------------------------------
- ----------------------------------------------
U.S. TREASURY NOTES (1.8%)
7,000 8.50%, 4/15/97 7,090
7,000 5.75%, 9/30/97 6,997
- ----------------------------------------------------------
TOTAL U.S. TREASURY NOTES 14,087
- ----------------------------------------------------------
TOTAL INVESTMENTS 726,738
- ----------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
47
<PAGE> 50
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1996
FINANCIAL RESERVES FUND (Amounts in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
- -----------------------------------------------------------
REPURCHASE AGREEMENTS (5.4%)
$ 21,405 Lehman Brothers, Inc.,
5.55%, 11/1/96,
(Collateralized by $21,574
U.S. Treasury Notes,
6.13%, 8/31/98, market
value-$21,920) $ 21,405
20,000 NationsBanc Capital Markets,
Inc.,
5.55%, 11/1/96,
(Collateralized by $19,544
various U.S. Treasury
Notes, 6.00-9.13%,
5/15/99-12/31/99, market
value-$20,405) 20,000
- ----------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS 41,405
- ----------------------------------------------------------
TOTAL (COST $768,143) (a) $768,143
- ---------------------------------------------------------
</TABLE>
- ---------------
Percentages indicated are based on net assets of $767,990.
(a) Cost and value for federal income tax and financial reporting purposes are
the same.
* Variable rate securities having liquidity sources through bank letters of
credit or other credit and/or liquidity agreements. The interest rate, which
will change periodically, is based upon bank prime rates or an index of
market interest rates. The rate reflected on the Schedule of Investments is
the rate in effect at October 31, 1996.
** Put and demand features exist allowing the Fund to require the repurchase of
the instrument within variable time periods of less than one year.
GIC -- Guaranteed Insurance Contract.
LOC -- Letter of Credit.
SEE NOTES TO FINANCIAL STATEMENTS.
48
<PAGE> 51
Schedule of Investments
THE VICTORY PORTFOLIOS October 31, 1996
TAX-FREE MONEY MARKET FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
- -------------------------------------------------------------
MUNICIPAL BONDS (99.4%)
ALASKA (0.2%):
$ 750 Anchorage, Prerefunded,
5.90%, 6/1/97 $ 759
----------
ARIZONA (1.0%):
1,500 Pima County IDR,
3.90%*, 9/1/09**,
LOC National City Bank 1,500
2,100 Salt River Program,
3.55%, 12/6/96 2,100
----------
3,600
----------
CALIFORNIA (1.6%):
5,500 State,
4.50%, 6/30/97 5,519
----------
COLORADO (0.3%):
1,000 Arvada Industrial,
3.70%*, 8/1/02**,
LOC Union Bank of
Switzerland 1,000
----------
FLORIDA (5.6%):
9,800 Dade County Housing Finance
Authority,
3.80%*, 8/1/05**,
LOC John Hancock 9,800
1,900 Housing Finance,
Prerefunded,
5.50%, 11/1/96 1,900
4,500 Housing Finance Authority of
Broward County,
3.65%*, 12/1/29**,
LOC John Hancock 4,500
1,000 Jacksonville Electric,
3.55%, 12/6/96 1,000
2,000 Sunshine State Government,
3.70%, 12/11/96,
LOC National Westminster
Bank 2,000
----------
19,200
----------
GEORGIA (1.8%):
1,500 Burke County, Oglethorpe
Power,
3.65%, 11/12/96,
LOC Credit Suisse 1,500
4,590 State Residential,
3.75%, 12/1/18**,
LOC FNB Chicago 4,590
----------
6,090
----------
<CAPTION>
SHARES OR
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
ILLINOIS (7.3%):
$ 1,050 Development IDR,
3.75%*, 11/1/08**,
LOC ABN Amro Bank $ 1,050
1,500 Development, Kindlen,
3.80%*, 5/1/06**, LOC
LaSalle National Bank 1,500
3,600 Financial Authority,
3.70%*, 12/1/05**,
LOC LaSalle National Bank 3,600
5,000 Health Facility,
3.50%*, 8/1/15**, LOC
FNB Chicago 5,000
4,900 Health Facility,
3.60%, 12/1/18**, LOC
FNB Chicago 4,900
2,800 Kankakee County IDR,
3.75%*, 12/1/07**,
LOC Societe Generale 2,800
2,470 Lincoln IDR Self Storage,
3.60%*, 2/1/04**,
LOC Bank One Milwaukee 2,470
1,785 River Grove IDR,
3.60%*, 2/1/03**,
LOC Bank One Milwaukee 1,785
1,975 Tinley Park Multi-Family
Revenue,
3.60%*, 12/1/08**,
LOC LaSalle National Bank 1,975
----------
25,080
----------
INDIANA (14.0%):
1,575 Crawfordsville,
3.65%*, 4/1/30**,
LOC Federal Home Loan Bank 1,575
2,334 Duneland School Corp.,
4.21%, 12/30/96 2,335
2,000 Duneland School Corp.,
4.24%, 12/30/96 2,001
4,874 Goshen Community Schools,
4.00%, 12/31/96 4,877
2,600 Greenwood IDR,
3.70%*, 2/1/16**,
LOC Bank One Indianapolis 2,600
1,750 Hamilton Southeastern
Schools,
3.90%, 12/31/96 1,751
1,050 Indianapolis, Calderon,
3.70%*, 2/1/99**,
LOC Bank One Indianapolis 1,050
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
49
<PAGE> 52
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1996
TAX-FREE MONEY MARKET FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
$ 835 Indianapolis Local,
6.64%, 12/1/96 $ 835
6,755 Michigan City,
4.25%, 12/31/96 6,758
2,540 Scottsburg,
3.70%*, 10/1/09**,
LOC PNC Bank 2,540
4,100 Seymour,
3.65%*, 1/1/31**,
LOC Federal Home Loan Bank 4,100
500 Seymour,
3.65%*, 1/1/31**,
LOC Federal Home Loan Bank 500
5,750 State Bd Bk,
4.50%, 1/30/97 5,758
935 Syracuse Economic
Development Revenue,
3.60%*, 12/1/05**,
LOC Bank One Indianapolis 935
5,000 Tippecanoe School Corp.,
3.66%, 12/30/96, LOC
Bank One 5,000
1,030 Wakarusa Economic
Development,
3.60%*, 7/1/03**, LOC
Bank One Indianapolis 1,030
3,250 Wayne Township School
District,
4.18%, 12/31/96 3,251
1,300 West Central School Corp.,
4.20%, 12/30/96 1,301
----------
48,197
----------
IOWA (2.1%):
4,325 City of Urbandale,
4.00%*, 10/1/15**, LOC
Principle Mutual Life
Insurance Co. 4,325
3,100 Ottumwa Community School
District,
4.30%, 8/5/97 3,106
----------
7,431
<CAPTION> ----------
SHARES OR
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
KANSAS (2.5%):
$ 6,200 Burlington Pollution
Control,
3.50%, 12/4/96, LOC
Societe Generale $ 6,200
2,300 Fairway,
4.00%*, 11/1/14**, LOC
Principle Mutual Life
Insurance Co. 2,300
----------
8,500
----------
KENTUCKY (9.7%):
1,285 Bath County,
3.70%*, 12/1/13**, LOC
Fifth Third Bank 1,285
2,475 Boone County,
3.70%*, 12/1/09**, LOC
PNC Bank 2,475
3,000 Boone County,
3.72%*, 9/1/16**, LOC
Star Bank 3,000
5,000 Carroll County IDR,
4.00%*, 9/1/10**, LOC
National City Bank 5,000
3,190 Covington,
3.60%*, 4/1/05**, LOC
Fifth Third Bank 3,190
2,500 Hillsborough County,
Ringhaven,
3.75%*, 12/1/11**, LOC
Mellon Bank 2,500
4,500 Jefferson County,
3.72%*, 12/1/11**, LOC
Fifth Third Bank 4,500
1,400 Lewis County,
3.70%*, 12/1/03**, LOC
Fifth Third Bank 1,400
2,000 Louisville, Zeochem,
3.70%*, 9/1/01**, LOC
National City Bank 2,000
3,600 Mayfield Multi-City Lease
Revenue,
3.75%*, 7/1/26**, LOC
PNC Bank 3,600
1,450 Rural Economic Development
Authority,
3.70%*, 9/1/10**, LOC
Westdeutsche Landesbank 1,450
3,000 Somerset Glen Oak,
3.70%*, 4/1/06**, LOC
Bank One Milwaukee 3,000
----------
33,400
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
50
<PAGE> 53
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1996
TAX-FREE MONEY MARKET FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
LOUISIANA (2.3%):
$ 8,000 St. Tammany Public Finance
Authority,
3.85%*, 6/1/05**, LOC
Banque Paribas $ 8,000
----------
MAINE (0.7%):
1,000 Portland Schools, GO,
4.10%, 6/1/97 1,000
1,355 Scarborough,
3.90%, 12/20/96 1,355
----------
2,355
----------
MICHIGAN (1.4%):
1,200 State Strategic Fund,
3.65%*, 5/1/05**, LOC
Comerica Bank 1,200
800 State Strategic Fund,
3.75%*, 11/1/06**, LOC
Harris Trust 800
3,000 Wayne Charter County
Airport Revenue,
3.65%, 12/1/16**, LOC
Bayerische Landesbank 3,000
----------
5,000
----------
MINNESOTA (1.0%):
3,330 St.Cloud Housing, Webway,
3.80%*, 11/1/05**, LOC
National City Bank 3,330
----------
MISSOURI (4.7%):
1,130 Cuba IDR,
3.70%*, 10/1/05**, LOC
Bank One Cleveland 1,130
2,000 Independence Water Utility,
3.55%, 12/5/96, LOC
Westdeutsche Landesbank 2,000
3,600 Kansas City,
4.00%*, 5/1/15**, LOC
Principle Mutual Life
Insurance Co. 3,600
4,600 St. Louis IDR,
3.80%*, 2/1/07**, LOC
John Hancock 4,600
4,725 St. Louis IDR,
3.65%*, 9/1/16**, LOC
LaSalle National Bank 4,725
----------
16,055
----------
<CAPTION>
SHARES OR
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
NEBRASKA (1.4%):
$ 5,000 Investment Finance,
3.80%, 1/15/97**, GNMA/FGIC $ 5,000
----------
NEVADA (0.7%):
1,150 Director State Department
Business & Industry,
3.70%*, 8/1/01**, LOC
Bank One Milwaukee 1,150
1,245 Director State Department
Business & Industry,
3.70%*, 8/1/14**, LOC
Bank One Milwaukee 1,245
----------
2,395
----------
NEW HAMPSHIRE (0.9%):
1,100 Belknap County,
4.16%, 6/30/97 1,100
2,000 Belknap County,
4.10%, 6/30/97 2,001
----------
3,101
----------
NEW YORK (0.6%):
1,200 Monroe County IDA,
Prerefunded,
8.00%, 12/15/03** 1,230
1,000 New York City, Series B,
3.65%*, 10/1/21**, FGIC 1,000
----------
2,230
----------
NORTH CAROLINA (1.4%):
5,000 North Carolina Eastern,
3.65%, 11/12/96, LOC Morgan
Guaranty 5,000
----------
OHIO (17.3%):
635 Akron Bath Copley
Township Hospital,
3.65%*, 5/1/13**, LOC
National City Bank 635
4,465 Akron Sewer
System Revenue,
3.55%*, 12/4/14**, LOC
Credit Suisse 4,465
275 Beavercreek,
4.25%, 5/1/97 275
775 Cleveland Public
Power System, Prerefunded,
5.38%, 8/1/17** 815
1,500 Crawford County,
4.21%, 5/16/97 1,501
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
51
<PAGE> 54
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1996
TAX-FREE MONEY MARKET FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
$ 1,900 Franklin County,
Childrens Hospital,
3.70%*, 12/1/14** $ 1,900
4,040 Franklin County IDR,
3.70%*, 6/1/10**, LOC
Fifth Third Bank 4,040
3,030 Franklin County,
Wesley Glen,
3.72%*, 4/1/13**, LOC
Fifth Third Bank 3,030
1,500 Geneva Area City Schools,
4.06%, 5/1/97 1,501
1,660 Lebanon, Bond Anticipation
Note,
3.92%, 12/20/96 1,661
4,850 Lorain County Elyria Home,
3.60%*, 6/1/12**, LOC
Fifth Third Bank 4,850
5,045 Mahoning County,
3.60%*, 4/1/17**, LOC
Bank One Akron 5,045
1,240 Northwood,
4.80%, 7/31/97 1,246
4,500 Scioto County Hospital,
3.45%*, 12/1/25**, LOC
Mellon Bank 4,500
900 Seven Hills,
4.15%, 7/31/97 900
500 Sheffield Lake,
4.27%, 8/1/97 500
2,750 State Air Quality,
3.70%, 12/10/96, FGIC 2,750
700 State Common Higher
Education,
4.63%, 12/1/96 700
6,800 State Water Development,
3.65%, 12/6/96, FGIC 6,800
800 Strongsville,
3.90%, 12/26/96 800
10,700 Student Loan Funding Corp.,
3.55%*, 12/29/98** 10,700
1,000 Wilmington,
3.91%, 12/27/96 1,000
----------
59,614
----------
TENNESSEE (1.8%):
6,200 Hawkins County, Kingston,
4.15%*, 8/1/09**, LOC
Bankers Trust 6,200
----------
SHARES OR
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
TEXAS (5.8%):
$ 6,000 Grapevine,
3.70%*, 4/1/19**, LOC
FNB Chicago $ 6,000
4,140 Harris County,
3.70%*, 10/1/16**, LOC
Morgan Guaranty 4,140
1,000 State GO,
6.70%, 12/1/96 1,002
5,000 State,
4.75%, 8/29/97 5,031
4,000 Veteran Housing Association,
3.90%, 11/6/96** 4,000
----------
20,173
----------
WASHINGTON (0.3%):
1,000 Pierce County,
3.90%, 11/1/96, LOC
Deutsche Bank 1,000
----------
WISCONSIN (11.4%):
860 Appleton IDR,
3.70%*, 8/1/01**, LOC
Bank One Milwaukee 860
1,450 Berlin IDR,
3.75%*, 4/1/07**, LOC
Bank One Milwaukee 1,450
3,635 Fredonia IDR,
3.70%*, 4/1/06**, LOC
Bank One Milwaukee 3,635
2,500 Germantown School District,
3.93%, 8/29/97 2,501
2,800 Janesville,
3.72%*, 9/1/07**, LOC
General Electric Credit
Corp. 2,800
3,735 Kenosha Metalmen,
3.70%*, 9/1/14**, LOC
Bank One Milwaukee 3,735
1,280 Mosinee School District,
4.08%, 9/15/97 1,281
1,960 New Richmond School
District,
4.11%, 10/31/97 1,960
1,600 Oak Creek,
3.70%*, 12/1/07**, LOC
Bank One Milwaukee 1,600
1,200 Oshkosh, Schloesser,
3.70%*, 3/1/02**, LOC
Bank One Milwaukee 1,200
3,000 Plymouth IDR,
3.80%*, 8/1/04**, LOC
Rabobank 3,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
52
<PAGE> 55
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1996
TAX-FREE MONEY MARKET FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
$ 1,675 Port Washington-Saukville
School District,
4.11%, 10/30/97 $ 1,675
1,300 Prairie Du Chien,
3.80%*, 6/1/02**, LOC
LaSalle National Bank 1,300
6,700 Stevens Point Area School
District,
3.92%, 10/8/97 6,701
2,000 Waukesha IDR,
3.70%*, 12/1/07**,
LOC Bank One Milwaukee 2,000
3,600 Whitefish Bay School
District,
3.83%, 6/20/97 3,601
----------
39,299
----------
WYOMING (1.5%):
1,500 Converse County Pollution,
3.55%, 12/6/96, LOC
Deutsche Bank 1,500
1,300 Gillette County,
3.55%, 12/6/96, LOC
Deutsche Bank 1,300
2,250 Lincoln County,
3.65%, 1/1/16**, LOC
Union Bank of Switzerland 2,250
----------
5,050
- --------------------------------------------------------------
TOTAL MUNICIPAL BONDS 342,578
- --------------------------------------------------------------
- --------------------------------------------------------------
INVESTMENT COMPANIES (0.3%)
934,260 Federated Tax-Free Money
Market Fund 934
628 Fidelity Ohio Tax Free Fund 1
- --------------------------------------------------------------
TOTAL INVESTMENT COMPANIES 935
- --------------------------------------------------------------
TOTAL (COST $343,513) (a) $ 343,513
- --------------------------------------------------------------
</TABLE>
- ---------------
Percentages indicated are based on net assets of $344,796.
(a) Cost and value for federal income tax and financial reporting purposes are
the same.
* Variable rate securities having liquidity sources through bank letters of
credit or other credit and/or liquidity agreements. The interest rate, which
will change periodically, is based upon bank prime rates or an index of
market interest rates. The rate reflected on the Schedule of Investments is
the rate in effect at October 31, 1996.
** Put and demand features exist allowing the Fund to require the repurchase of
the investment within variable time periods of less than one year.
FGIC -- Insured by Financial Guaranty Insurance Corp.
GNMA -- Government National Mortgage Assoc.
GO -- General Obligation
IDR -- Industrial Development Revenue
IDA -- Industrial Development Authority
LOC -- Letter of Credit
SEE NOTES TO FINANCIAL STATEMENTS.
53
<PAGE> 56
Schedule of Investments
THE VICTORY PORTFOLIOS October 31, 1996
OHIO MUNICIPAL MONEY MARKET FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
- ----------------------------------------------
MUNICIPAL BONDS (98.3%)
OHIO (98.3%):
$ 6,000 Akron,
3.51%, 12/19/96 $ 6,000
2,000 Archbold,
4.31%, 3/27/97 2,004
3,000 Auglaize County IDR,
3.70%*, 5/1/03**, LOC Bank
One Dayton 3,000
1,700 Avon,
4.24%, 7/2/97 1,703
1,300 Barberton,
4.15%, 5/15/97 1,302
1,400 Beavercreek,
4.13%, 11/15/96 1,400
2,750 Beavercreek,
4.13%, 11/15/96 2,750
600 Beavercreek Local School
District,
4.30%, 6/27/97 601
1,750 Bedford Heights IDR,
3.80%*, 12/1/04**, LOC
National City Bank 1,750
960 Bellville,
4.16%, 10/22/97 961
1,000 Belmont County,
4.09%, 11/26/96 1,000
1,550 Belmont County,
3.89%, 12/19/96 1,551
1,165 Blue Ash,
3.80%, 3/1/97**, LOC
KeyCorp 1,165
2,950 Bowling Green,
4.09%, 9/11/97, LOC
General Electric Capital
Corp. 2,951
2,500 Bowling Green IDR,
3.70%*, 8/1/09** 2,500
530 Brecksville,
3.99%, 4/30/97 530
6,400 Brecksville-Broadview
Heights City School
District,
3.90%, 1/17/97 6,405
540 Brooklyn Heights IDR,
3.70%*, 2/1/02**, LOC Bank
One Cleveland 540
1,000 Butler County,
4.30%*, 11/1/20**, LOC
Fifth Third Bank 1,000
<CAPTION>
SHARES OR
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
$ 4,750 Centerville Health Bethany
IDR,
3.55%*, 11/1/13**, LOC PNC
Bank $ 4,750
2,270 Chillicothe IDR,
3.65%*, 10/1/15**, LOC
Huntington National Bank 2,270
400 Cincinnati,
4.60%, 12/1/96 400
1,600 Cincinnati,
3.55%*, 11/1/00**, LOC PNC
Bank 1,600
6,850 Cincinnati City School
District,
4.54%, 12/31/96 6,858
7,400 Cincinnati & Hamilton IDR,
3.60%*, 5/1/15**, LOC PNC
Bank 7,400
7,000 Cleveland, Cuyahoga County
IDR,
3.55%*, 12/1/15**, LOC
Credit Local De France 7,000
1,784 Cleveland Heights,
4.10%, 8/28/97 1,786
1,530 Cleveland Water Works,
7.88%, 1/1/16, Pre-
Refunded 1/1/97 1,571
500 Clinton County,
3.70%*, 11/1/99**, LOC
Fifth Third Bank 500
6,700 Clinton County IDR,
3.60%*, 6/1/11**, LOC
Union Bank of Switzerland 6,700
1,050 Crawford County,
4.35%, 5/16/97 1,052
545 Cuyahoga County,
3.85%, 4/15/97**, LOC Bank
One Cleveland 545
400 Cuyahoga County IDR,
3.83%*, 12/1/98**, LOC
National City Bank 400
4,030 Cuyahoga County IDR,
3.95%*, 12/7/05**, LOC
National City Bank 4,030
380 Cuyahoga County IDR,
4.00%*, 11/2/09**, LOC
Huntington National Bank 380
4,525 Cuyahoga County IDR,
3.65%*, 12/1/12**, LOC
National City Bank 4,525
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
54
<PAGE> 57
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1996
OHIO MUNICIPAL MONEY MARKET FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
$ 3,500 Cuyahoga County IDR,
3.75%*, 4/1/16**, LOC Bank
One Cleveland $ 3,500
2,700 Cuyahoga County Revenue,
Allen Group Project,
3.60%*, 4/1/12**, LOC
Union Bank of Switzerland 2,700
2,400 Cuyahoga Falls Portage,
3.70%*, 9/1/14**, LOC
Fifth Third Bank 2,400
3,300 Cuyahoga Falls Portage,
3.70%*, 5/1/15**, LOC
Fifth Third Bank 3,300
4,250 Dayton,
4.50%, 3/25/97 4,258
1,340 Defiance County IDR,
3.85%*, 12/1/97**, LOC PNC
Bank 1,340
900 Delaware County IDR,
3.65%*, 12/1/04**, LOC
Wells Fargo 900
570 Dover,
4.15%, 5/23/97 571
7,900 Dublin,
4.03%, 6/18/97 7,901
1,800 East Palestine City School
District,
3.50%, 2/28/97 1,801
1,455 Eastern Local School
District,
4.65%, 5/30/97 1,459
980 Elyria,
3.74%, 3/20/97 981
950 Elyria City School District,
4.13%, 4/10/97 951
1,800 Euclid,
4.15%, 7/11/97 1,802
1,075 Euclid IDR,
3.85%, 4/15/97**, LOC Bank
One Cleveland 1,075
661 Fairfield County,
4.65%, 9/3/97 664
809 Franklin County,
3.96%, 4/9/97 809
1,525 Franklin County,
3.70%*, 10/1/15**, LOC
Fifth Third Bank 1,525
2,070 Franklin County IDR,
3.95%, 3/1/97**, LOC
KeyCorp 2,070
7,000 Franklin County IDR,
3.75%*, 12/1/15**, LOC
Bank One Cleveland 7,000
<CAPTION>
SHARES OR
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
$ 2,600 Franklin County IDR,
3.60%*, 12/1/16**, LOC
Fifth Third Bank $ 2,600
700 Franklin County IDR,
3.75%*, 4/1/19**, LOC
Huntington National Bank 700
1,000 Franklin County Children's
Hospital,
3.70%*, 12/1/14** 1,000
1,820 Franklin County Health Care
Facilities,
3.60%*, 6/1/15**, LOC
Fifth Third Bank 1,820
1,000 Franklin County Hospital
Revenue,
3.55%*, 5/1/15**, LOC
National Bank of Detroit 1,000
3,860 Franklin County IDR,
3.75%*, 12/1/02**, LOC
Huntington National Bank 3,860
1,075 Franklin County, Wesley
Glen,
3.72%*, 4/1/13**, LOC
Fifth Third Bank 1,075
4,000 Geauga County,
3.94%, 12/12/96 4,001
1,100 Geauga County,
3.79%, 12/20/96 1,100
1,100 Geauga County Park,
4.04%, 12/12/96 1,100
1,408 Georgetown School District,
3.84%, 12/19/96 1,408
940 Granville,
4.06%, 11/19/96 940
3,200 Greene County IDR,
3.85%*, 8/1/09**, LOC PNC
Bank 3,200
1,810 Grove City Cross County,
3.60%*, 6/1/06**, LOC Bank
One Cleveland 1,810
10,000 Hamilton County,
4.25%, 7/10/97 10,019
3,100 Hamilton County,
3.60%*, 6/15/05**, LOC
Fifth Third Bank 3,100
2,605 Hamilton County,
3.70%*, 12/1/08**, LOC
Fifth Third Bank 2,605
3,690 Hamilton County IDR,
3.70%*, 12/1/04**, LOC
Fifth Third Bank 3,690
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
55
<PAGE> 58
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1996
OHIO MUNICIPAL MONEY MARKET FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
$ 1,290 Hancock County,
3.75%, 12/1/96**, LOC Bank
One Cleveland $ 1,290
1,083 Harrison,
3.80%, 1/10/97 1,084
2,895 Higher Education Facilities,
3.60%*, 10/1/11**, LOC
Fifth Third Bank 2,895
3,095 Higher Education Facilities,
Mt. Union College,
3.55%*, 9/1/20**, LOC
National Bank of Detroit 3,095
870 Highland Local School
District,
4.38%, 12/19/96 871
3,800 Highland Heights,
3.89%, 12/19/96 3,801
865 Hilliard IDR,
3.70%*, 12/1/14**, LOC
Fifth Third Bank 865
500 Holmes County,
3.65%*, 4/1/09**, LOC
Rabobank 500
5,000 Housing Finance Agency,
3.40%, 9/1/28**, GIC AIG 5,000
6,250 Housing Finance Authority,
3.75%*, 3/1/20**, LOC Bank
of New York 6,250
7,400 Housing Finance Authority,
Hunters Green Apartments,
3.75%*, 4/1/26**, LOC PNC
Bank 7,400
1,076 Huber Heights,
3.75%, 4/1/97 1,076
1,900 Hudson,
3.78%, 11/14/96 1,900
2,225 Huron County,
3.70%*, 4/1/11**, LOC Bank
One Indianapolis 2,225
2,000 Indian Lake,
4.14%, 4/9/97 2,002
2,100 Kent,
4.19%, 4/10/97 2,103
700 Kings Local School District,
4.40%, 7/11/97 701
2,125 Lake County,
4.15%, 10/9/97 2,128
657 Lake County,
4.15%, 10/29/97 658
1,650 Lebanon,
4.37%, 10/16/97 1,654
<CAPTION>
SHARES OR
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
$ 1,840 Licking County,
3.70%*, 4/1/05**, LOC Bank
One Cleveland $ 1,840
1,320 Lorain County,
3.85%, 4/15/97**, LOC Bank
One Cleveland 1,320
1,083 Lorain County,
4.22%, 8/29/97 1,086
1,959 Lorain County,
4.75%, 10/29/97 1,969
1,370 Lorain County Hospital, Mary
Health,
3.55%*, 5/1/01**, LOC PNB
Bank 1,370
1,000 Lorain County Industrial
Development,
3.85%*, 6/1/09**, LOC Bank
One Cleveland 1,000
1,195 Lucas County,
3.75%, 12/1/96**, LOC Bank
One Cleveland 1,195
565 Lucas County,
3.65%*, 3/1/06**, LOC
National City Bank 565
425 Lucas County,
3.65%*, 12/1/07**, LOC
National City Bank 425
6,000 Lucas County,
3.65%*, 12/1/12**, LOC
National City Bank 6,000
2,000 Mahoning County,
3.65%*, 12/1/21**, LOC PNC
Bank 2,000
390 Mahoning County IDR,
3.65%*, 6/1/03**, LOC Bank
One Akron 390
4,400 Mahoning County IDR,
3.55%*, 3/15/20**, LOC PNC
Bank 4,400
860 Maple Heights,
3.50%, 12/12/96 860
660 Maple Heights,
4.10%, 7/9/97 660
5 Marion County,
3.60%*, 3/1/16**, LOC Bank
One Cleveland 5
895 Marion County IDR,
3.60%*, 4/1/17**, LOC Bank
One Cleveland 895
530 Marion County IDR,
3.60%* 5/1/19**, LOC Bank
One Cleveland 530
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
56
<PAGE> 59
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1996
OHIO MUNICIPAL MONEY MARKET FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
$ 211 Marion County IDR,
3.60%*, 8/1/20**, LOC Bank
One Cleveland $ 211
1,255 Marion County IDR,
3.60%*, 11/1/21**, LOC
Bank One Cleveland 1,255
1,045 Marion County IDR,
3.60%*, 10/1/22**, LOC
Bank One Cleveland 1,045
900 Mayfield Heights,
4.22%, 7/3/97 901
360 Medina,
3.85%, 11/1/96 360
500 Medina County,
4.50%, 10/9/97 502
600 Miami County,
4.45%, 11/26/96 600
700 Middlefield,
3.49%, 2/28/97 700
500 Millford,
4.27%, 4/14/96 501
685 Montgomery County,
3.75%, 11/1/96, LOC MBIA 685
500 Montgomery County,
6.60%, 11/1/10, Pre-
Refunded 11/1/96 500
760 Montgomery County IDR,
3.65%*, 9/1/01**, LOC
KeyCorp 760
335 Montgomery County IDR,
3.80%, 12/15/04**, LOC
Bank One Dayton 335
3,500 Montgomery County IDR,
3.65%*, 1/1/29**, LOC
Federal Home Loan Bank 3,500
3,900 Montgomery County Miami
Valley Northern,
3.45%, 12/6/96, LOC
Northern Trust 3,900
2,770 Montgomery IDR,
4.00%*, 5/2/05**, LOC
Huntington National Bank 2,770
1,695 Muskingum County IDR,
4.00%*, 6/1/02**, LOC
Huntington National Bank 1,695
2,000 Muskingum County Health,
7.50%, 3/1/12, Pre-
Refunded 3/1/97 2,064
1,800 Napoleon City School
District,
4.08%, 3/18/97 1,801
<CAPTION>
SHARES OR
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
$ 200 North Baltimore Local School
District,
4.65%, 4/17/97 $ 201
660 Norwalk,
4.50%, 9/25/97 662
200 Orrville IDR,
3.85%*, 9/1/00**, LOC
National City Bank 200
200 Orrville IDR,
3.85%*, 8/1/03**, LOC
National City Bank 200
1,650 Orrville IDR,
3.65%*, 12/1/07**, LOC
National City Bank 1,650
1,200 Paulding County IDR,
3.60%*, 3/1/99**, LOC
Fifth Third Bank 1,200
700 Perrysburg,
4.90%, 11/21/96 700
750 Perrysburg,
4.75%, 8/21/97 753
1,550 Pickerington,
4.00%, 11/26/96 1,550
875 Pickerington,
4.25%, 6/27/97 876
3,400 Pike County IDR,
3.70%*, 6/1/13**, LOC
Fifth Third Bank 3,400
1,805 Portage County,
4.20%, 3/11/97 1,807
910 Portage County,
4.05%, 7/10/97 910
1,780 Portage County,
4.35%, 7/10/97 1,784
2,000 Portsmouth,
3.70%*, 12/1/09**, LOC
National City Bank 2,000
1,715 Portsmouth IDR,
3.70%*, 10/1/02**, LOC
Bank One Akron 1,715
1,366 Richland County,
4.39%, 6/26/97 1,369
3,350 Richland County IDR,
3.70%*, 12/1/16**, LOC
Huntington National Bank 3,350
3,000 Ross County Medical Center,
3.55%*, 12/1/20**, LOC
Fifth Third Bank 3,000
580 Rossford,
4.80%, 1/2/97 581
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
57
<PAGE> 60
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1996
OHIO MUNICIPAL MONEY MARKET FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
$ 2,530 Salem Hospital Facility,
3.55%*, 11/1/11**, LOC PNC
Bank $ 2,530
1,000 School District Cash
Program,
4.53%, 12/31/96 1,001
7,700 School District Cash
Program,
4.53%, 6/30/97 7,726
2,300 Seneca County, St. Francis
Hospital,
3.60%*, 12/15/13**, LOC
National City Bank 2,300
1,200 Sharonville IDR,
3.75%, 10/1/98**, LOC
Fifth Third Bank 1,200
6,025 Sharonville IDR,
3.60%*, 9/1/14**, LOC
National City Bank 6,025
2,350 Stark County,
3.60%*, 3/1/13**, LOC Bank
One Akron 2,350
7,500 State Air Quality
Development Revenue,
3.55%, 11/1/96**, LOC
Toronto Dominion 7,500
400 State Air Quality
Development Revenue,
3.65%, 12/2/96, FGIC 400
4,200 State Air Quality
Development Revenue,
3.45%, 12/4/96, FGIC 4,200
7,700 State Air Quality
Development Revenue,
3.65%, 12/6/96, FGIC 7,700
1,200 State Air Quality
Development Revenue,
3.70%, 12/10/96, FGIC 1,200
2,500 State Air Quality
Development Revenue,
3.60%, 12/12/96, FGIC 2,500
2,000 State Air Quality
Development Revenue,
3.65%, 12/16/96, LOC
Toronto Dominion 2,000
440 State Cincinnati River IDR,
3.85%*, 6/1/00**, LOC PNC
Bank 440
1,000 State Environmental,
6.85%*, 12/1/01**, LOC PNC
Bank 1,000
1,000 State Higher Education,
5.30%, 12/1/96 1,001
<CAPTION>
SHARES OR
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
$ 1,000 State Higher Education,
3.65%*, 9/1/09**, LOC
National City Bank $ 1,000
2,105 State IDR,
3.65%*, 1/2/03**, LOC Bank
One Cleveland 2,105
390 State IDR,
3.65%*, 1/2/03**, LOC Bank
One Cleveland 390
875 State IDR,
3.65%*, 6/7/06**, LOC
National City Bank 875
870 State IDR,
3.65%*, 8/1/07**, LOC Bank
One Cleveland 870
830 State IDR,
3.65%*, 12/1/11**, LOC
National City Bank 830
685 State IDR,
3.65%*, 6/1/16**, LOC
National City Bank 685
2,385 State IDR,
3.70%*, 6/1/20**, LOC Bank
One Cleveland 2,385
2,385 State IDR,
3.70%*, 6/1/20**, LOC Bank
One Cleveland 2,385
180 State Rolen Plastic,
3.65%*, 8/7/02**, LOC Bank
One Cleveland 180
5,000 State Water Development
Authority,
3.70%, 11/22/96, LOC
Toronto Dominion 5,000
900 State Water Development
Authority,
3.65%, 12/6/96, LOC FGIC 900
3,000 State Water Development
Authority, Water Pollution
Development,
3.70%, 12/9/96, LOC
Toronto Dominion 3,000
1,500 State Water Development
Authority,
3.60%, 12/12/96, LOC FGIC 1,500
6,000 State Water Pollution
Development,
3.65%, 12/17/96, LOC
Toronto Dominion 6,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
58
<PAGE> 61
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1996
OHIO MUNICIPAL MONEY MARKET FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
$ 8,350 State Water Pollution
Development,
3.65%, 12/18/96, LOC
Toronto Dominion $ 8,350
840 Streetsboro,
4.20%, 10/10/97 841
8,490 Strongsville School
District,
4.30%, 12/12/96 8,495
1,750 Student Loan Funding Corp.,
Cincinnati,
5.25%, 7/1/97 1,763
5,100 Student Loan Funding Corp.,
Cincinnati,
3.65%*, 1/1/07**, LOC
National Westminster Bank 5,100
3,400 Student Loan Funding Corp.,
Cincinnati,
3.65%*, 1/1/07**, LOC
National Westminster Bank 3,400
9,700 Student Loan Funding Corp.,
Cincinnati,
3.65%*, 1/1/07**, LOC
National Westminster Bank 9,700
42,685 Student Loan Funding Corp.,
Cincinnati, Student Loan
Revenue,
3.55%*, 12/29/98**, LOC
Fuji Bank 42,685
2,200 Summit County, Cuyahoga
Falls Hospital,
3.60%*, 7/1/99**, LOC Bank
One Cleveland 2,200
485 Summit County Economic
Development,
4.31%, 3/1/97**, LOC Bank
One Akron 485
680 Summit County IDR,
3.80%, 11/1/96**, LOC Bank
One Akron 680
405 Summit County IDR,
4.00%, 3/1/97**, LOC Bank
One Akron 405
890 Summit County IDR,
3.70%*, 9/1/01**, LOC Bank
One Akron 890
1,040 Summit County IDR,
3.75%*, 9/1/01**, LOC Bank
One Akron 1,040
400 Summit County IDR,
3.75%*, 11/1/01**, LOC
Fifth Third Bank 400
<CAPTION>
SHARES OR
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
$ 2,140 Summit County IDR,
3.95%*, 8/1/05**, LOC
Huntington National Bank $ 2,140
2,185 Summit County IDR,
3.60%*, 9/1/05**, LOC Bank
One Cleveland 2,185
2,465 Summit County IDR,
3.67%*, 6/6/16**, LOC
Fifth Third Bank 2,465
240 Summit County IDR,
3.70%, 10/1/06**, LOC Bank
One Akron 240
1,735 Summit County IDR,
3.60%*, 9/1/11**, LOC Bank
One Akron 1,735
505 Sunbury,
4.27%, 5/1/97 506
950 Tallmadge,
4.25%, 7/23/97 951
575 Tiffin,
4.36%, 7/10/97 576
5,220 Toledo,
4.38%, 12/1/96, LOC
Canadian Imperial Bank of
Commerce 5,224
2,000 Toledo Lucas County,
3.45%, 12/4/96, LOC Bank
of Nova Scotia 2,000
3,100 Toledo, Lucas County,
3.65%, 12/10/96, LOC Bank
of Nova Scotia 3,100
2,800 Toledo, Lucas County IDR,
3.80%*, 12/1/06**, LOC PNC
Bank 2,800
1,700 Toledo, Lucas County Port
Authority,
3.65%*, 12/1/13**, LOC Old
Kent Bank 1,700
1,685 Troy Economic Development
Revenue,
3.85%*, 6/1/08**, LOC
Societe Generale 1,685
715 Trumbull County,
4.45%, 2/11/97 716
1,150 Trumbull County,
4.07%, 4/10/97 1,151
300 Trumbull County IDR,
3.85%*, 6/1/05**, LOC PNC
Bank 300
7,000 Trumbull County IDR,
3.75%*, 12/1/06**, LOC
Mellon Bank 7,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
59
<PAGE> 62
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1996
OHIO MUNICIPAL MONEY MARKET FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
$ 500 Twinsburg IDR,
3.85%*, 7/1/98**, LOC
National City Bank $ 500
485 Union County,
4.50%, 6/27/97 487
1,625 Vermilion IDR,
3.55%*, 10/1/04**, LOC
Bank One Dayton 1,625
980 Warren County,
4.38%, 6/3/97 982
1,950 Washington County,
3.88%, 12/19/96 1,951
700 Washington County,
4.30%, 2/3/97 701
475 Wauseon,
4.75%, 5/22/97 477
4,940 Wayne County IDR,
3.68%*, 9/1/21**, LOC
Fifth Third Bank 4,940
1,600 West Clermont Local School
District,
4.32%, 4/15/97 1,603
2,260 Westerville IDR,
3.55%*, 12/1/11**, LOC
National City Bank 2,260
250 Westlake IDR,
3.75%, 11/1/96**, LOC
Huntington National Bank 250
2,450 Westlake IDR,
3.55%*, 3/1/02**, LOC
Bayerische Vereinsbank 2,450
6,530 Westlake IDR,
3.95%*, 7/2/08**, LOC
National City Bank 6,530
1,700 Westlake IDR,
3.67%*, 6/1/16**, LOC
Fifth Third Bank 1,700
1,400 Williams County,
5.05%, 11/21/96 1,401
350 Williams County,
4.75%, 5/15/97 351
<CAPTION>
SHARES OR
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
<S> <C> <C> <C>
$ 5,525 Williams County,
3.65%*, 11/1/08**, LOC
National Bank of Detroit $ 5,525
3,000 Wooster,
3.53%, 12/19/96 3,000
2,353 Wyoming,
4.30%, 6/27/97 2,358
654 Wyoming,
4.24%, 7/10/97 655
- ------------------------------------------------------------
TOTAL MUNICIPAL BONDS 550,748
- ------------------------------------------------------------
- ------------------------------------------------------------
INVESTMENT COMPANIES (1.3%)
7,466,624 Federated Ohio Municipal
Cash Trust Fund 7,467
- ------------------------------------------------------------
TOTAL INVESTMENT COMPANIES 7,467
- ------------------------------------------------------------
TOTAL (COST-$558,215)(A) $ 558,215
- ------------------------------------------------------------
</TABLE>
- ---------------
Percentages indicated are based on net assets of $561,131.
(a) Cost for federal income tax and financial reporting purposes are the same.
* Variable rate securities having liquidity sources through bank letters of
credit or other credit and/or liquidity agreements. The interest rate, which
will change periodically, is based upon bank prime rates or an index of
market interest rates. The rate reflected on the Schedule of Investments is
the rate in effect at October 31, 1996.
** Put and demand features exist allowing the Fund to require the repurchase of
the investment within variable time periods of less than one year.
AIG -- American International Group
FGIC -- Insured by Financial Guaranty Insurance Corp.
GIC -- Guaranteed Insurance Contract
GO -- General Obligation
IDR -- Industrial Development Revenue
LOC -- Letter of Credit
MBIA -- Insured by Municipal Bond Insurance Association
SEE NOTES TO FINANCIAL STATEMENTS.
60
<PAGE> 63
Schedule of Investments
THE VICTORY PORTFOLIOS October 31, 1996
LIMITED TERM INCOME FUND (Amounts in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
- ---------------------------------------------------------
ASSET BACKED SECURITIES (1.2%)
$ 1,000 American Express,
6.05%, 7/15/97 $ 1,003
34 GMAC 1993 A Grantor Trust,
Class A,
4.15%, 3/15/98 34
- ----------------------------------------------------------
TOTAL ASSET BACKED SECURITIES 1,037
- ----------------------------------------------------------
- ----------------------------------------------------------
COMMERCIAL PAPER (0.7%)
FINANCIAL SERVICES (0.7%):
650 General Electric Capital
Corp.,
5.57%, 11/1/96 650
- ----------------------------------------------------------
TOTAL COMMERCIAL PAPER 650
- ----------------------------------------------------------
- ----------------------------------------------------------
CORPORATE BONDS (25.2%)
AUTOMOTIVE (3.4%):
3,000 Ford Motor Credit Corp.,
7.13%, 12/1/97 3,039
--------
BROKERAGE SERVICES (4.2%):
2,000 Lehman Brothers, Inc.,
5.75%, 11/15/98 1,980
1,800 Merrill Lynch Corp.,
5.00%, 12/15/96 1,800
--------
3,780
--------
BUSINESS EQUIPMENT (2.4%):
2,175 International Business
Machines Corp.,
6.38%, 11/1/97 2,187
--------
CHEMICALS (1.1%):
1,000 Dow Capital BV.,
5.75%, 9/15/97 1,001
--------
FINANCIAL SERVICES (5.1%):
1,000 Associates Corp.,
6.88%, 1/15/97 1,003
1,500 Associates Corp.,
7.25%, 9/1/99 1,541
2,000 Norwest Corp.,
7.75%, 12/31/96 2,008
--------
4,552
--------
INDUSTRIAL GOODS & SERVICES (4.5%):
2,000 Burlington Resources, Inc.,
7.15%, 5/1/99 2,045
2,000 WMX Technologies, Inc.,
7.13%, 3/22/97 2,010
--------
4,055
--------
<CAPTION>
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
INSURANCE (2.3%):
$ 2,000 International Lease
Finance Corp.,
8.35%, 10/1/98 $ 2,083
--------
UTILITY--GAS & ELECTRIC (2.2%):
1,000 Northern Illinois Gas Co.,
5.50%, 2/1/97 999
1,000 Northern States Power Co.,
5.50%, 2/1/99 984
--------
1,983
- ----------------------------------------------------------
TOTAL CORPORATE BONDS 22,680
- ----------------------------------------------------------
- ----------------------------------------------------------
U.S. GOVERNMENT AGENCIES (13.0%)
FEDERAL HOME LOAN MORTGAGE CORP.:
1,000 7.19%, 9/15/99 1,008
FEDERAL NATIONAL MORTGAGE ASSOC.:
2,511 9.00%, 3/1/25 2,641
7,652 9.00%, 5/1/25 8,049
- ----------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCIES 11,698
- ----------------------------------------------------------
- ----------------------------------------------------------
U.S. TREASURY NOTES (58.1%)
3,000 7.38%, 11/15/97 3,053
5,000 5.25%, 12/31/97 4,982
2,000 5.13%, 2/28/98 1,987
4,000 7.88%, 4/15/98 4,123
26,000 8.25%, 7/15/98 27,059
5,000 5.13%, 11/30/98 4,937
6,000 6.88%, 7/31/99 6,144
- ----------------------------------------------------------
TOTAL U.S. TREASURY NOTES 52,285
- ----------------------------------------------------------
TOTAL (COST $88,344) (A) $ 88,350
- ----------------------------------------------------------
</TABLE>
- ---------------
Percentages indicated are based on net assets of $90,019.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C> <C>
Unrealized appreciation $ 443
Unrealized depreciation (437)
--------
Net unrealized appreciation $ 6
=========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
61
<PAGE> 64
Schedule of Investments
THE VICTORY PORTFOLIOS October 31, 1996
INTERMEDIATE INCOME FUND (Amounts in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
- ----------------------------------------------------------
COLLATERALIZED MORTGAGE
OBLIGATIONS (1.4%)
FEDERAL HOME LOAN MORTGAGE CORP.:
$ 904 6.00%, 10/25/03 $ 901
970 5.80%, 4/15/14 968
698 7.50%, 7/25/18 712
1,119 7.50%, 9/15/20 1,136
- ----------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS 3,717
- ----------------------------------------------------------
- ----------------------------------------------------------
COMMERCIAL PAPER (0.6%)
FINANCIAL SERVICES (0.6%):
1,555 General Electric Capital
Corp., 5.57%, 11/1/96 1,555
- ----------------------------------------------------------
TOTAL COMMERCIAL PAPER 1,555
- ----------------------------------------------------------
- ----------------------------------------------------------
CORPORATE BONDS (22.8%)
AUTOMOTIVE (3.1%):
5,000 Daimler-Benz North America,
7.38%, 9/15/06 5,162
1,000 Ford Motor Co.,
9.00%, 9/15/01 1,099
1,000 General Motors Corp.,
9.63%, 12/1/00 1,109
1,000 General Motors Corp.,
9.13%, 7/15/01 1,099
--------
8,469
--------
BANKING (1.5%):
2,000 Republic New York Corp.,
7.75%, 5/15/02 2,115
2,000 SouthTrust Bank, Birmingham,
5.58%, 2/6/06 1,945
--------
4,060
--------
BROKERAGE SERVICES (1.8%):
5,000 Lehman Brothers, Senior
Subordinated Note,
5.75%, 11/15/98 4,950
--------
CHEMICALS (0.4%):
1,000 Dow Capital BV,
5.75%, 9/15/97 1,001
--------
<CAPTION>
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
FINANCIAL SERVICES (6.2%):
$ 5,000 Grand Metro Financial,
6.50%, 9/15/99 $ 5,031
2,500 Merrill Lynch,
8.25%, 11/15/99 2,634
1,000 Norwest Corp.,
7.75%, 12/31/96 1,004
3,000 Transamerica Financial,
8.75%, 10/1/99 3,184
2,000 Travelers Group,
6.88%, 6/1/25** 2,002
3,000 U.S. West Capital Funding,
6.31%, 11/1/05 2,989
--------
16,844
--------
INDUSTRIAL GOODS & SERVICES (5.3%):
2,000 ConAgra Inc.,
7.13%, 10/1/26** 2,035
7,000 Eaton Corp.,
9.38%, 4/1/99 7,017
2,000 News America Holdings,
7.43%, 10/1/26** 2,038
3,000 Service Corp. International,
8.38%, 12/15/04 3,236
--------
14,326
--------
OIL & GAS EXPLORATION & PRODUCTION SERVICES (1.5%):
4,000 Standard Oil,
9.00%, 6/1/19 4,180
--------
UTILITIES -- ELECTRIC (0.4%):
1,000 Cincinnati Gas & Electric,
6.90%, 6/1/25** 992
--------
UTILITIES -- GAS (1.8%):
5,000 Columbia Gas Systems,
6.39%, 11/28/00 4,956
--------
UTILITIES -- TELECOMMUNICATIONS (0.8%):
2,000 GTE Corp.,
9.10%, 6/1/03 2,245
- ----------------------------------------------------------
TOTAL CORPORATE BONDS 62,023
- ----------------------------------------------------------
- ----------------------------------------------------------
U.S. GOVERNMENT AGENCIES (9.5%)
FEDERAL HOME LOAN MORTGAGE CORP.:
4,964 6.00%, 3/11/11 4,792
FEDERAL NATIONAL MORTGAGE ASSOC.:
2,000 5.23%, 11/25/98 1,978
2,500 7.92%, 3/30/05 2,559
GOVERNMENT NATIONAL MORTGAGE ASSOC.:
4,925 6.50%, 3/15/26 4,711
5,067 6.00%, 4/15/26 4,716
3,000 8.00%, 11/1/26 3,063
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
62
<PAGE> 65
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1996
INTERMEDIATE INCOME FUND (Amounts in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
TENNESSEE VALLEY AUTHORITY:
$ 4,000 6.24%, 7/15/45 $ 3,985
- ----------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCIES 25,804
- ----------------------------------------------------------
- ----------------------------------------------------------
U.S. TREASURY BONDS (0.7%)
2,000 6.75% , 8/15/26 2,022
- ----------------------------------------------------------
TOTAL U.S. TREASURY BONDS 2,022
- ----------------------------------------------------------
- ----------------------------------------------------------
U.S. TREASURY NOTES (63.5%)
3,000 6.50%, 5/15/97 3,018
45,000 7.88%, 4/15/98 46,384
8,000 5.13%, 11/30/98 7,900
43,000 7.00%, 4/15/99 44,134
5,000 6.75%, 5/31/99 5,104
57,850 6.25%, 8/31/00 58,273
5,000 5.75%, 8/15/03 4,870
3,000 7.00%, 7/15/06 3,133
- ----------------------------------------------------------
TOTAL U.S. TREASURY NOTES 172,816
- ----------------------------------------------------------
- ----------------------------------------------------------
U.S. TREASURY OBLIGATIONS (1.2%)
U.S. TREASURY STRIPS (1.2%)
5,000 0.00%, 2/8/03 3,342
- ----------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS 3,342
- ----------------------------------------------------------
TOTAL (COST $270,156) (a) $271,279
- ----------------------------------------------------------
</TABLE>
- ---------------
Percentages indicated are based on net assets of $272,087.
(a) Represents cost for financial reporting purposes and differs from cost basis
for federal income tax reporting purposes by the amount of losses recognized
for financial reporting purposes in excess of federal income tax reporting
of approximately $272. Cost for federal income tax purposes differs from
value by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C> <C>
Unrealized appreciation $ 2,092
Unrealized depreciation (1,241)
--------
Net unrealized appreciation $ 851
=========
</TABLE>
** Put and demand features exist allowing the Fund to require the repurchase of
the investment within variable time periods less than one year.
SEE NOTES TO FINANCIAL STATEMENTS.
63
<PAGE> 66
Schedule of Investments
THE VICTORY PORTFOLIOS October 31, 1996
INVESTMENT QUALITY BOND FUND (Amounts in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
- ---------------------------------------------------------
ASSET BACKED SECURITIES (0.3%)
$ 410 Railcar Trust, Series 92-1,
7.75%, 6/1/04 $ 431
- ---------------------------------------------------------
TOTAL ASSET BACKED SECURITIES 431
- ---------------------------------------------------------
- ---------------------------------------------------------
COMMERCIAL PAPER (0.3%)
FINANCIAL SERVICES (0.3):
520 General Electric Capital
Corp., 5.57%, 11/1/96 520
- ---------------------------------------------------------
TOTAL COMMERCIAL PAPER 520
- ---------------------------------------------------------
- ---------------------------------------------------------
CORPORATE BONDS (27.9%)
AUTOMOTIVE (3.6%):
2,000 Daimler-Benz North America,
7.38%, 9/15/06 2,065
1,000 Ford Motor Co.,
9.00%, 9/15/01 1,099
1,000 Ford Motor Co.,
8.88%, 1/15/22 1,155
939 General Motors Corp.,
9.13%, 7/15/01 1,032
--------
5,351
--------
BANKING (4.2%):
1,000 BankAmerica Corp.,
9.63%, 2/13/01 1,111
1,020 First Union Corp.,
9.45%, 6/15/99 1,099
2,000 Societe Generale,
7.40%, 6/1/06 2,053
1,000 SunTrust Banks, Inc.,
7.38%, 7/1/02 1,034
1,000 Wachovia Corp.,
6.05%, 10/1/25 990
--------
6,287
--------
BROKERAGE SERVICES (4.2%):
2,000 Lehman Brothers, Inc.,
7.63, 6/1/06 2,038
1,000 Morgan Stanley Group, Inc.,
5.63, 3/1/99 987
1,000 Morgan Stanley Group, Inc.,
8.88%, 10/15/01 1,095
1,000 Morgan Stanley Mortgage,
7.22%*, 11/15/28 1,023
1,200 Salomon Brothers,
6.70%, 12/1/98 1,210
--------
6,353
--------
<CAPTION>
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
ELECTRICAL & ELECTRONIC (1.5%):
$ 2,300 Philips Electronics,
7.13%, 5/15/25** $ 2,326
--------
FINANCIAL SERVICES (3.7%):
2,546 BHP Finance, 6.69%, 3/1/06 2,501
1,000 Liberty Mutual,
7.88%, 10/15/26 1,014
1,020 Merrill Lynch,
8.25%, 11/15/99 1,075
1,000 Merrill Lynch,
6.00%, 3/1/01 980
--------
5,570
--------
INDUSTRIAL GOODS & SERVICES (6.7%):
1,000 ConAgra, Inc.,
7.13%, 10/1/26, callable
on 10/1/06 @ 100 1,018
2,500 Eaton Corp.,
9.38%, 4/1/99 2,506
1,500 Georgia-Pacific,
9.95%, 6/15/02 1,717
2,200 Harris Corp.,
6.65%, 8/1/06** 2,214
1,000 Tosco,
7.63%, 5/15/06 1,027
1,000 USX Corp.,
7.20%, 2/15/04 999
500 Westvaco Corp.,
9.75%, 6/15/20 623
--------
10,104
--------
INSURANCE (0.6%):
900 Aetna Insurance,
6.97%, 8/15/36 915
--------
OIL & GAS (0.6%):
1,000 Union Oil of California,
6.38%, 2/1/04 964
--------
PRINTING & PUBLISHING (1.4%):
2,000 Time Warner, Inc.,
9.15%, 2/1/23 2,173
--------
RETAIL STORES (0.7%):
1,000 Dayton Hudson,
6.40%, 2/15/03 976
--------
TEXTILE PRODUCTS (0.7%):
1,000 Levi Straus,
6.80%, 11/1/03 996
- ---------------------------------------------------------
TOTAL CORPORATE BONDS 42,015
- ---------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
64
<PAGE> 67
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1996
INVESTMENT QUALITY BOND FUND (Amounts in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
- ---------------------------------------------------------
U.S. GOVERNMENT AGENCIES (35.3%)
FEDERAL HOME LOAN MORTGAGE CORP.:
$ 2,000 8.19%, 10/6/04 $ 2,069
860 7.50%, 4/1/07 874
1,410 6.00%, 2/1/11 1,362
7,798 6.00%, 5/1/11 7,522
FEDERAL NATIONAL MORTGAGE ASSOC.:
2,700 8.50%, 2/1/05 2,852
2,000 6.65%, 3/8/06 1,955
2,743 6.00%, 8/1/10 2,649
7,721 6.00%, 5/1/11 7,444
1,564 9.00%, 3/1/25 1,642
899 9.00%, 5/1/25 943
GOVERNMENT NATIONAL MORTGAGE ASSOC.:
2,323 6.50%, 2/15/09 2,297
1,197 9.00%, 2/15/17 1,261
1,168 8.50%, 9/15/17 1,210
993 9.00%, 12/15/19 1,046
1,399 9.00%, 1/15/20 1,480
873 6.50%, 7/15/23 840
172 7.50%, 8/15/23 173
541 7.50%, 8/15/23 542
1,296 7.00%, 10/15/23 1,274
1,934 6.50%, 1/15/24 1,846
5,045 8.50%, 12/15/24 5,232
4,985 6.50%, 2/15/26 4,773
2,025 6.50%, 4/15/26 1,937
- ---------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCIES 53,223
- ---------------------------------------------------------
- ---------------------------------------------------------
U.S. TREASURY BONDS (3.9%)
1,300 7.50%, 11/15/24 1,426
3,400 6.00%, 2/15/26 3,102
1,300 6.75%, 8/15/26 1,314
- ---------------------------------------------------------
TOTAL U.S. TREASURY BONDS 5,842
- ---------------------------------------------------------
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
- ---------------------------------------------------------
U.S. TREASURY NOTES (30.9%)
$ 600 7.25%, 2/15/98 $ 612
5,200 6.00%, 8/15/99 5,213
2,500 7.75%, 1/31/00 2,630
12,060 6.13%, 9/30/00 12,098
9,400 6.38%, 8/15/02 9,508
3,500 12.38%, 5/15/04 4,766
6,400 7.88%, 11/15/04 7,024
1,500 6.88%, 5/15/06 1,554
3,100 7.00%, 7/15/06 3,237
- ---------------------------------------------------------
TOTAL U.S. TREASURY NOTES 46,642
- ---------------------------------------------------------
TOTAL (COST $147,366) (a) $148,673
- ---------------------------------------------------------
</TABLE>
- ---------------
Percentages indicated are based on net assets of $150,807.
(a) Represents cost for financial reporting purposes and differs from cost basis
for federal income tax reporting purposes by the amount of losses recognized
for financial reporting purposes in excess of federal income tax reporting
of approximately $766. Cost for federal income tax puposes differs from
value by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C> <C>
Unrealized appreciation $ 1,378
Unrealized depreciation (837)
--------
Net unrealized appreciation $ 541
========
</TABLE>
* Variable rate securities having liquidity sources through bank letters of
credit or other credit and/or liquidity agreements. The interest rate, which
will change periodically, is based upon bank prime rates or an index of
market interest rates. The rate reflected on the Schedule of Investments is
the rate in effect at October 31, 1996.
** Put and demand features exist allowing the Fund to require the repurchase of
the investment within variable time periods of less than one year.
SEE NOTES TO FINANCIAL STATEMENTS.
65
<PAGE> 68
Schedule of Investments
THE VICTORY PORTFOLIOS October 31, 1996
GOVERNMENT BOND FUND (Amounts in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
- ----------------------------------------------
COMMERCIAL PAPER (0.5%)
FINANCIAL SERVICES (0.5%):
$ 137 General Eelectric Capital
Corp., 5.57%, 11/01/96 $ 137
- ----------------------------------------------------------
TOTAL COMMERCIAL PAPER 137
- ----------------------------------------------------------
- ----------------------------------------------------------
U.S. TREASURY NOTES (85.5%)
6,850 6.25%, 7/31/98 6,910
2,000 6.38%, 5/15/99 2,023
2,000 6.00%, 8/15/99 2,005
5,000 6.38%, 8/15/02 5,058
2,200 6.25%, 2/15/03 2,209
4,100 6.50%, 8/15/05 4,143
- ----------------------------------------------------------
TOTAL U.S. TREASURY NOTES 22,348
- ----------------------------------------------------------
<CAPTION>
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
- ----------------------------------------------------------
U.S. TREASURY BONDS (12.6%)
$ 3,500 6.25%, 8/15/23 $ 3,286
- ----------------------------------------------------------
TOTAL U.S. TREASURY BONDS 3,286
- ----------------------------------------------------------
TOTAL (COST $25,335)(a) $ 25,771
- ----------------------------------------------------------
</TABLE>
- ---------------
Percentages indicated are based on net assets of $26,130.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C> <C>
Unrealized appreciation $ 436
Unrealized depreciation 0
--------
Net unrealized depreciation $ 436
========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
66
<PAGE> 69
Schedule of Investments
THE VICTORY PORTFOLIOS October 31, 1996
GOVERNMENT MORTGAGE FUND (Amounts in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
- ---------------------------------------------------------
U.S. GOVERNMENT AGENCIES (98.7%)
FEDERAL HOME LOAN MORTGAGE CORP.:
$ 3,970 0.00%, 11/1/96*** $ 3,969
164 9.50%, 8/1/21 175
1,289 7.71%*, 12/1/23 1,335
3,929 7.50%, 4/1/24 3,942
4,360 7.50%, 4/1/24 4,375
4,369 7.50%, 4/1/24 4,384
4,418 7.50%, 4/1/24 4,433
3,762 9.50%, 6/1/25 4,028
FEDERAL NATIONAL MORTGAGE ASSOC.:
8,395 6.00%, 8/1/10 8,105
1,090 8.00%, 5/1/17 1,110
1,662 9.50%, 6/1/22 1,780
1,966 8.00%, 2/1/23 2,015
4,664 6.50%, 4/1/24 4,473
2,727 8.50%, 8/1/24 2,819
2,095 8.50%, 6/1/25 2,166
3,933 9.00%, 6/1/25 4,130
GOVERNMENT NATIONAL MORTGAGE ASSOC.:
4,274 9.50%, 4/15/10 4,619
9,212 6.00%, 1/15/11 8,934
1,638 9.50%, 11/15/17 1,756
414 9.00%, 11/15/18 436
284 9.50%, 1/15/19 305
384 8.50%, 12/15/19 398
30 8.50%, 2/15/20 31
920 9.50%, 5/15/20 987
1,213 9.00%, 3/15/21 1,277
92 8.50%, 5/15/21 95
889 9.00%, 5/15/21 936
801 9.00%, 6/15/21 843
1,685 9.50%, 6/15/21 1,807
5,247 8.00%, 5/15/22 5,361
5,370 8.00%, 5/15/22 5,486
3,243 8.00%, 10/15/22 3,314
2,513 9.00%, 2/15/23 2,650
3,820 7.50%, 7/15/23 3,832
1,505 8.00%, 8/15/23 1,538
4,469 7.00%, 9/15/23 4,391
2,563 7.00%, 10/15/23 2,518
4,274 7.00%, 12/15/23 4,199
2,784 6.50%, 1/15/24 2,658
2,565 7.50%, 1/15/24 2,573
10,304 7.00%, 8/15/24 10,149
- ---------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCIES 124,332
- ---------------------------------------------------------
<CAPTION>
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
- ---------------------------------------------
U.S. TREASURY NOTES (0.8%)
$ 1,000 6.38%, 9/30/01 $ 1,011
- ---------------------------------------------------------
TOTAL U.S. TREASURY NOTES 1,011
- ---------------------------------------------------------
TOTAL (COST $126,359) (a) $125,343
- ---------------------------------------------------------
</TABLE>
- ---------------
Percentages are based on net assets of $125,992.
(a) Represents cost for financial reporting purposes and differs from cost basis
for federal income tax reporting purposes by the amount of losses recognized
for financial reporting purposes in excess of federal income tax reporting
of approximately $31. Cost for federal income tax puposes differs from value
by net unrealized depreciation of securities as follows:
<TABLE>
<S> <C> <C>
Unrealized appreciation $ 588
Unrealized depreciation (1,635)
--------
Net unrealized appreciation $ (1,047)
=========
</TABLE>
* Variable rate securities having liquidity sources through bank letters of
credit or other credit and/or liquidity agreements. The interest rate, which
will change periodically, is based upon bank prime rates or an index of
market interest rates. The rate reflected on the Schedule of Investments is
the rate in effect at October 31, 1996.
*** Discount Rate Note.
SEE NOTES TO FINANCIAL STATEMENTS.
67
<PAGE> 70
Schedule of Investments
THE VICTORY PORTFOLIOS October 31, 1996
FUND FOR INCOME (Amounts in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
- --------------------------------------------------------
COLLATERALIZED MORTGAGE
OBLIGATIONS (66.2%)
$ 987 Bear Stearns Mortgage
Capital Corp., 9.40%,
6/25/21 $ 979
2,469 Bear Stearns Secured
Investors Trust, 7.50%,
9/20/20 2,477
17 Drexel, Burnham & Lambert,
9.30%, 6/1/17 17
37 Federal Home Loan Mortgage
Corp., 9.30%, 8/15/15 37
1,000 Federal Home Mortgage
Assoc., 8.25%, 3/25/04 1,017
1,800 Federal Home Mortgage
Assoc., 8.50%, 2/1/05 1,901
1,690 Federal Home Mortgage
Assoc., 9.25%, 3/25/18 1,803
1,000 General Electric Capital
Mortgage Services, Inc.,
7.00%, 3/25/08 973
1,816 Housing Securities, Inc.,
7.25%, 4/25/08 1,821
1,259 Prudential Home Mortgage
Securities, 7.00%, 1/25/08 1,252
1,500 Resolution Trust Corp.,
8.20%, 11/25/21 1,511
- --------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS 13,788
- --------------------------------------------------------
- --------------------------------------------------------
COMMERCIAL PAPER (1.6%)
FINANCIAL SERVICES (1.6%):
334 General Electric Capital
Corp., 5.57%, 11/1/96 334
- --------------------------------------------------------
TOTAL COMMERCIAL PAPER 334
- --------------------------------------------------------
- --------------------------------------------------------
U.S. GOVERNMENT AGENCIES (29.8%)
FEDERAL HOME LOAN MORTGAGE CORP.:
9 12.00%, 10/1/10 10
2 12.00%, 7/1/14 2
2 12.00%, 7/1/14 3
21 10.00%, 2/1/17 23
127 9.50%, 8/1/19 135
144 10.00%, 9/1/19 156
193 9.50%, 11/1/19 206
76 9.50%, 11/1/19 81
648 9.50%, 12/1/22 692
<CAPTION>
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
FEDERAL NATIONAL MORTGAGE ASSOC.:
$ 35 13.00%, 12/1/12 $ 39
11 10.00%, 5/1/13 12
27 12.00%, 8/1/13 30
11 10.00%, 1/1/14 12
21 12.00%, 4/1/15 24
16 10.00%, 8/1/17 17
8 10.00%, 8/1/17 8
11 10.00%, 10/1/17 12
4 10.00%, 10/1/17 4
6 10.00%, 11/1/17 7
10 10.50%, 1/1/18 11
9 10.00%, 1/1/18 9
6 10.00%, 1/1/18 7
4 10.00%, 1/1/18 4
24 10.00%, 2/1/18 26
22 9.50%, 1/1/19 24
GOVERNMENT NATIONAL MORTGAGE ASSOC.:
65 11.00%, 9/20/14 70
35 10.50%, 2/15/16 39
48 10.00%, 3/15/16 53
121 10.00%, 6/15/17 131
89 9.50%, 8/15/17 95
45 9.50%, 8/15/17 48
87 10.00%, 10/15/17 95
78 10.00%, 1/15/18 85
60 10.00%, 1/15/18 66
16 10.00%, 2/15/18 18
24 10.00%, 3/15/18 26
402 9.50%, 5/15/18 432
90 9.50%, 6/15/18 97
68 10.00%, 7/15/18 74
8 10.00%, 7/15/18 8
94 10.00%, 9/15/18 103
81 10.00%, 9/15/18 89
70 10.00%, 9/15/18 76
44 10.00%, 9/15/18 48
28 10.00%, 9/15/18 30
282 10.00%, 11/15/18 308
101 10.00%, 1/15/19 110
47 10.25%, 3/15/19 51
31 10.25%, 6/15/19 33
160 9.50%, 10/15/19 171
143 10.00%, 7/15/20 156
715 9.50%, 9/20/20 762
260 10.00%, 6/15/21 283
990 10.00%, 8/15/25 1,084
- --------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCIES 6,195
- --------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
68
<PAGE> 71
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1996
FUND FOR INCOME (Amounts in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
- --------------------------------------------------------
U.S. TREASURY OBLIGATIONS (1.9%)
U.S. TREASURY STRIPS
$ 2,000 0.00%, 8/15/20 $ 394
- --------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS 394
- --------------------------------------------------------
TOTAL (COST $19,927) (a) $20,711
- --------------------------------------------------------
</TABLE>
- ---------------
Percentages indicated are based on net assets of $20,816.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C> <C>
Unrealized appreciation $ 856
Unrealized depreciation (72)
-------
Net unrealized appreciation $ 784
========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
69
<PAGE> 72
Schedule of Investments
THE VICTORY PORTFOLIOS October 31, 1996
NATIONAL MUNICIPAL BOND FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
- ----------------------------------------------
MUNICIPAL BONDS (91.8%)
ALABAMA (10.6%):
$ 1,150 University of South Alabama
Revenue Bond, Series B,
4.00%, 11/15/98, MBIA $ 1,148
1,290 University of South Alabama
Revenue Bond, 4.20%,
11/15/03, AMBAC 1,230
1,825 University of South Alabama
Revenue Bond, 4.60%,
11/15/07, AMBAC 1,721
-------
4,099
-------
ALASKA (0.7%):
250 Anchorage, GO, 5.25%,
10/1/02, FGIC 258
-------
ARIZONA (2.7%):
125 Maricopa County, School
District #95, Queens
Creek, Series A, 5.20%,
7/1/05 128
270 Pinal County, School
District, GO, 5.40%,
7/1/07, FGIC 274
600 Yuma County, School
District, GO, 6.00%,
7/1/08 650
-------
1,052
-------
COLORADO (6.1%):
765 Eagle, Garfield & Routt
Counties, School District,
GO, 5.15%, 12/1/03 786
410 Eagle, Garfield & Routt
Counties, School District,
GO, 5.25%, 12/1/04 423
250 Summit County, School
District, GO, 4.75%,
12/1/02 252
885 Westminster, Sales & Use Tax
Revenue Bond, 5.00%,
12/1/97 895
-------
2,356
-------
CONNECTICUT (0.5%):
200 State, Special Tax
Obligation, 6.00%, 9/1/06 215
-------
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
FLORIDA (5.5%):
$ 150 Orlando, Utilities
Commission, Water &
Electric, 5.80%, 10/1/06 $ 160
1,830 Sarasota Hospital, Revenue
Bonds, 6.00%, 10/1/05 1,979
-------
2,139
-------
HAWAII (7.2%):
1,635 Honolulu City, 6.00%,
11/1/05 1,758
1,000 Honolulu City & County, GO,
5.40%, 4/1/05 1,034
-------
2,792
-------
ILLINOIS (9.2%):
250 Chicago Public Building
Commission, Revenue Bonds,
6.05%, 1/1/06, AMBAC 267
530 Cicero, GO, 5.25%, 12/1/05 537
530 Cicero, GO, 5.35%, 12/1/06 538
500 Northlake, Tax Increment,
GO, 5.00%, 12/1/04, MBIA 505
500 Southern Illinois
University, Revenue Bonds,
5.00%, 4/1/97 503
500 Southern Illinois
University, Revenue Bonds,
5.20%, 4/1/07 499
200 State Sales Tax Revenue
Bonds, Series V, 5.88%,
6/15/05 213
500 Will County, Public Building
Commission, 5.00%,
12/1/97, FGIC 506
-------
3,568
-------
INDIANA (6.2%):
2,500 Southwest Allen,
5.13%, 7/15/16 2,392
-------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
70
<PAGE> 73
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1996
NATIONAL MUNICIPAL BOND FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
KANSAS (3.1%):
$ 100 Haysville, Water &
Wastewater Utility Revenue
Bond, 4.00%, 10/1/97 $ 100
110 Haysville, Water &
Wastewater Utility Revenue
Bond, 4.25%, 10/1/98 111
105 Haysville, Water &
Wastewater Utility Revenue
Bond, 4.50%, 10/1/99 106
130 Haysville, Water &
Wastewater Utility Revenue
Bond, 4.60%, 10/1/00, FSA 131
170 Haysville, Water &
Wastewater Utility Revenue
Bond, 4.70%, 10/1/01, FSA 172
180 Haysville, Water &
Wastewater Utility Revenue
Bond, 4.80%, 10/1/02 182
400 Haysville, Water &
Wastewater Utility Revenue
Bond, 5.70%, 10/1/11 411
-------
1,213
-------
MICHIGAN (8.5%):
255 Byron Center, GO, 5.40%,
5/1/07 260
250 Grosse Ile Township, School
District, GO, 6.00%,
5/1/22, FGIC 255
500 Inkster School District,
5.40%, 5/1/11 505
500 Kalamazoo, GO, 4.90%,
5/1/08, MBIA 487
1,000 Kalamazoo, GO, 5.00%,
5/1/09, MBIA 975
250 Leslie Public Schools, GO,
5.55%, 5/1/07 259
225 Municipal Bond Authority
Revenue Bonds, 6.70%,
11/1/06 250
275 Municipal Bond Authority
Revenue Bonds, 6.80%,
11/1/07 305
-------
3,296
-------
MISSOURI (1.4%):
500 Excelsior Springs School
District Building Corp.,
6.50%, 3/1/09 547
-------
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
MONTANA (4.7%):
$ 500 University of Montana,
0.00%*, 11/15/14, MBIA $ 184
1,750 University of Montana,
5.00%, 11/15/17 1,633
-------
1,817
-------
NEW YORK (3.9%):
1,500 New York City, Sub-Series
A-10, 3.65%*, 8/1/16, LOC
Morgan Guaranty Trust 1,500
-------
OHIO (7.6%):
390 Butler County Waterworks,
3.60%, 12/1/97 389
200 Columbus Sewer, Revenue
Bonds, 5.50%, 6/1/01 208
1,000 Franklin County, Hospital
Revenue, 5.75%, 11/1/15,
callable 11/1/06 @ 101 990
230 Kent State University,
5.00%, 5/1/05 230
615 Springboro Community City
School District, GO,
3.80%, 12/10/98 613
500 State, Special Obligation,
5.80%, 6/1/03 531
-------
2,961
-------
PENNSYLVANIA (0.5%):
820 Erie, School District, GO,
0.00%, 5/1/23, MBIA 179
-------
SOUTH DAKOTA (3.3%):
250 Rapid City, Water Revenue,
5.00%, 11/1/04, FGIC 253
1,000 State, Health & Educational
Facility Revenue Bonds,
5.00%, 7/1/03, MBIA 1,010
-------
1,263
-------
TENNESSEE (1.3%):
500 Dickson, Electric Utility
Revenue Bond, 5.00%,
3/1/03, MBIA 509
-------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
71
<PAGE> 74
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1996
NATIONAL MUNICIPAL BOND FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
TEXAS (3.3%):
$ 200 Conroe Independent School
District, GO, 6.50%,
2/1/04 $ 220
200 Keller Independent School
District, GO, 6.20%,
8/15/04 218
100 State, Series A, GO, 6.00%,
10/1/08 108
525 Wichita Falls, 4.40%, 9/1/98 527
200 Ysleta Independent School
District, GO, 5.60%,
8/15/02 210
-------
1,283
-------
WASHINGTON (0.5%):
200 Seattle Municipal Light &
Power, Revenue Bonds,
6.00%, 7/1/03 214
-------
WISCONSIN (4.4%):
200 Milwaukee Sewer District,
Series A, GO, 6.70%,
10/1/02 221
450 Sheboygan Area School
District, 6.80%, 4/1/98 468
1,000 State, Health Revenue Bonds,
5.50%, 12/1/98 1,027
-------
1,716
-------
WYOMING (0.6%):
225 Sweetwater County School
District, 6.00%, 6/1/98 232
- ---------------------------------------------------------
TOTAL MUNICIPAL BONDS 35,601
- ---------------------------------------------------------
- ---------------------------------------------------------
MUNICIPAL WARRANTS (2.4%)
ALABAMA (2.4%):
400 Scottsboro, Revenue Warrant,
5.20%, 7/1/05 408
100 Scottsboro, Revenue Warrant,
5.30%, 7/1/06 102
400 Scottsboro, Revenue Warrant,
5.38%, 7/1/07 407
-------
917
- ---------------------------------------------------------
TOTAL MUNICIPAL WARRANTS 917
- ---------------------------------------------------------
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
- ---------------------------------------------------------
INVESTMENT COMPANIES (7.7%)
1,164,900 Federated Tax-Free Money
Market Fund $ 1,165
1,811,991 Lehman Municipal Money
Market Fund 1,812
- ---------------------------------------------------------
TOTAL INVESTMENT COMPANIES 2,977
- ---------------------------------------------------------
TOTAL (COST $39,189) (a) $39,495
- ---------------------------------------------------------
</TABLE>
- ---------------
Percentages indicated are based on net assets of $38,766.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C> <C> <C>
Unrealized appreciation $ 611
Unrealized depreciation (305)
-------
Net unrealized appreciation $ 306
========
</TABLE>
* Variable rate securities having liquidity sources through bank letters of
credit or other credit and/or liquidity agreements. The interest rate, which
will change periodically, is based upon bank prime rates or an index of market
interest rates. The rate reflected on the Schedule of Investments is the rate
in effect at October 31, 1996.
AMBAC -- AMBAC Indemnity Corp.
FGIC -- Financial Guaranty Insurance Co.
FSA -- Financial Security Assurance
GO -- General Obligation
LOC -- Letter of Credit
MBIA -- Municipal Bond Insurance Assoc.
SEE NOTES TO FINANCIAL STATEMENTS.
72
<PAGE> 75
Schedule of Investments
THE VICTORY PORTFOLIOS October 31, 1996
NEW YORK TAX-FREE FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
- -------------------------------------------------------
NEW YORK MUNICIPAL BONDS (94.7%)
$ 1,200 Metropolitan Transit
Authority, 7.50%, 7/1/17,
AMBAC, Prerefunded 7/1/98
@ 102 $ 1,291
250 Metropolitan Transit
Authority, 7.00%, 7/1/09,
AMBAC 292
250 Nassau County Industrial
Development Agency, Civic
Facilities Revenue Bonds,
6.75%, 8/1/11, AMBAC,
callable 8/1/01 @ 102 277
680 New York City, Cultural
Resources Revenue Bonds,
6.63%, 1/1/11, AMBAC 742
300 New York City, Series B, GO,
7.00%, 10/1/18, FSA 319
350 New York City, Series C, GO,
7.00%, 2/1/12, FGIC,
Callable 2/1/97 @ 101.5 358
700 New York City, Housing
Development, Refunding
Revenue Bonds, Multi-Unit
Mortgage, Series A, 7.30%,
6/1/10, FHA 748
675 New York City, Housing
Development Refunding
Revenue Bonds, Multi-Unit
Mortgage, Series A, 7.35%,
6/1/19, FHA 716
335 New York City, Housing
Development Revenue Bonds,
Series 1, 7.38%, 4/1/17,
MBIA 349
200 New York City, Industrial
Development Agency, Civic
Facilities Revenue Bonds,
USTA National Tennis
Center, 6.38%, 11/15/14 214
650 New York City, Municipal
Water Finance Authority,
6.75%, 6/15/16, FGIC,
callable 6/15/01 @ 101 710
220 New York City Transit
Authority, 7.50%, 1/1/00 244
370 State, GO, 6.75%, 8/1/18,
AMBAC 406
325 State, GO, 6.75%, 8/1/19,
AMBAC 357
<CAPTION>
SHARES
OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
$ 700 State Dormitory Authority,
Revenue Bonds, City
University, Series 2,
6.75%, 7/1/24, MBIA $ 800
750 State Dormitory Authority,
Ithaca College, Revenue
Bonds, 6.50%, 7/1/10, MBIA 809
225 State Dormitory Authority,
Revenue Bonds, Judicial
Facilities Leases, Series
B, 7.00%, 4/15/16, MBIA 250
340 State Medical Care
Facilities Finance Agency,
7.45%, 2/15/29, MBIA,
Prerefunded 2/15/00 @ 102 378
565 State Medical Care
Facilities Finance Agency,
Refunding Revenue Bonds,
North Shore University,
7.20%, 11/1/20, MBIA 625
550 State Medical Care
Facilities Finance Agency,
Revenue Bonds, St. Luke's,
Series A, 7.10%, 2/15/27,
FHA, callable 2/15/97 @
102 565
500 State Medical Care
Facilities, Unrefunded
Revenue Bonds, 7.38%,
8/15/19, MBIA 546
550 State Tollway Authority,
General Revenue Bonds,
Series C, 6.00%, 1/1/25,
FGIC 564
1,000 State Urban Development,
7.50%, 1/1/12, AMBAC,
Prerefunded 1/1/98 @ 102 1,061
400 State Urban Development,
7.50%, 1/1/20, FSA,
Prerefunded 1/1/00 @ 102 444
900 Triborough Bridge & Tunnel
Authority, 7.00%, 1/1/20,
MBIA, Prerefunded 1/1/01 @
102 1,002
1,000 Triborough Bridge & Tunnel
Authority, Special
Obligation Refunding
Revenue Bonds, Series B,
6.88%, 1/1/15, AMBAC 1,097
250 University Puerto Rico
Revenue Bonds, 5.25%,
6/1/25, MBIA 240
- -------------------------------------------------------
TOTAL NEW YORK MUNICIPAL BONDS 15,404
- -------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
73
<PAGE> 76
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1996
NEW YORK TAX-FREE FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
- -------------------------------------------------------
INVESTMENT COMPANIES (3.4%)
547,732 Providence of New York Fund $ 548
- -------------------------------------------------------
TOTAL INVESTMENT COMPANIES 548
- -------------------------------------------------------
TOTAL (COST $14,834)(a) $15,952
- -------------------------------------------------------
</TABLE>
- ---------------
Percentages indicated are based on net assets of $16,269.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C> <C>
Unrealized appreciation $ 1,118
Unrealized depreciation --
-------
Net unrealized appreciation $ 1,118
========
</TABLE>
AMBAC -- AMBAC Indemnity Corporation
FGIC -- Financial Guaranty Insurance Company
FHA -- Federal Housing Administration
FSA -- Financial Security Assurance
GO -- General Obligation
MBIA -- Municipal Bond Insurance Association
SEE NOTES TO FINANCIAL STATEMENTS.
74
<PAGE> 77
Schedule of Investments
THE VICTORY PORTFOLIOS October 31, 1996
OHIO MUNICIPAL BOND FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARE OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
- ------------------------------------------------------------
MUNICIPAL BONDS (95.8%)
- ------------------------------------------------------------
ALTERNATIVE MINIMUM TAX PAPER (9.1%)
$ 3,500 Student Loan Funding Corp.,
Series A, 5.50%, 12/1/01 $ 3,582
3,000 Student Loan Funding Corp.,
Series A, 5.85%*, 8/1/04 3,132
- ------------------------------------------------------------
TOTAL ALTERNATIVE MINIMUM TAX PAPER 6,714
- ------------------------------------------------------------
- ------------------------------------------------------------
GENERAL OBLIGATION BONDS (36.9%)
STATE (0.2%):
150 Ohio State, GO,
4.35%, 8/1/02 148
----------
COUNTY, CITY, SPECIAL DISTRICT & SCHOOLS (36.7%):
1,000 Anthony Wayne School
District,
5.75%, 12/1/18, FGIC 1,011
665 Avon Local School District,
5.50%, 12/1/04, AMBAC 696
250 Avon Local School District,
5.55%, 12/1/05, AMBAC 262
1,500 Batavia Local School
District,
7.00%, 12/1/14, MBIA 1,716
350 Belmont County,
5.85%, 12/1/16, callable
12/1/06 @ 101 355
1,000 Brecksville-Broadview
Heights,
City School District,
6.50%, 12/1/16 1,107
355 Butler County,
5.60%, 12/1/09 361
455 Butler County,
5.65%, 12/1/10 463
500 Canton Waterworks System,
5.75%, 12/1/10, AMBAC 514
1,385 Crawford County,
6.75%, 12/1/19, AMBAC 1,545
1,000 Delaware City School
District,
5.75%, 12/1/20, FGIC 1,005
300 Groveport,
5.60%, 12/1/11, AMBAC 307
1,000 Hilliard School District,
6.15%, 12/1/06, callable
12/1/03 @ 100 1,062
1,135 Holmes County,
5.80%, 12/1/19, AMBAC 1,147
285 Huron County Landfill Issue
II,
5.40%, 12/1/07 290
<CAPTION>
SHARE OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
$ 320 Huron County Landfill Issue
II,
5.60%, 12/1/09 $ 327
450 Indian Lake School Distrct,
3.85%, 12/1/98, FGIC 449
2,500 Indian Valley Local School
District,
7.00%, 12/1/14, callable
12/1/05 @ 102 2,885
1,250 Lakeview Local School
District,
6.95%, 12/1/19, AMBAC 1,413
600 Madison County,
7.00%, 12/1/19, AMBAC 689
780 Middletown,
5.70%, 12/1/06 789
1,000 Monroe Falls, Series A,
6.95%, 12/1/14, AMBAC 1,139
500 Northeastern Local School
District,
5.55%, 12/1/18, FGIC 496
500 Olentangy Local School
District,
6.25%, 12/1/14, callable
12/1/04 @ 102 526
1,000 Toledo,
6.10%, 12/1/14, AMBAC, 1,046
1,500 Twinsburg Local School
District,
5.90%, 12/1/21 1,536
3,000 Upper Arlington City School
District,
5.13%, 12/1/19, MBIA 2,828
1,000 Westerville City School
District,
5.65%, 12/1/06 1,001
----------
26,965
- ------------------------------------------------------------
TOTAL GENERAL OBLIGATION BONDS 27,113
- ------------------------------------------------------------
- ------------------------------------------------------------
REVENUE BONDS (49.8%)
EDUCATION (5.4%):
3,000 Kent State University,
5.50%, 5/1/28 2,904
1,000 State Higher Education
Facility,
5.88%, 12/1/04, callable
12/1/01 @ 102 1,058
----------
3,962
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
75
<PAGE> 78
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1996
OHIO MUNICIPAL BOND FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARE OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
HOSPITALS, NURSING HOMES & HEALTH CARE (18.3%):
$ 1,300 Cuyahoga County Hospital,
5.63%,1/15/21, MBIA,
callable 1/15/06 @ 102 $ 1,285
1,000 Cuyahoga County Hospital,
5.63%,1/15/26, callable
1/15/06 @ 102 984
330 Franklin County Hospital,
4.50%, 11/1/98 332
455 Franklin County Hospital,
4.90%, 11/1/00 460
500 Franklin County Hospital,
5.88%, 11/1/25, callable
11/1/06 @ 101 498
1,720 Franklin County, Riverside
Hospital,
7.25%, 5/15/20, MBIA 1,886
1,000 Garfield Heights, Marymont
Hospital,
Refunding & Improvement,
6.70%, 11/15/15 1,053
2,000 Lake County Hospital
Improvement Facilities,
6.38%, 8/15/03, AMBAC 2,188
2,000 Lucas County Hospital,
5.75%, 11/15/14, MBIA 2,016
500 Montgomery County Hospital,
5.50%, 4/1/26 483
635 Portage County Hospital,
6.50%, 11/15/03, MBIA 701
675 Portage County Hospital,
6.50%, 11/15/04, MBIA 749
715 Portage County Hospital,
6.50%, 11/15/05, MBIA 796
----------
13,431
----------
HOUSING (5.7%):
2,000 Cuyahoga County Multifamily
Revenue,
6.60%, 10/20/30, GNMA 2,074
275 Ohio Cap Corp.,
5.75%, 7/1/06, MBIA 285
1,775 Ohio Cap Corp.,
6.35%, 7/1/22, callable
7/1/05 @ 102 1,820
----------
4,179
----------
<CAPTION>
SHARE OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
PUBLIC FACILITIES (CONVENTION, SPORT, PUBLIC
BUILDINGS) (3.9%):
$ 2,000 State Building Authority,
Adult Correctional
Facilities,
6.00%, 10/1/07 $ 2,120
500 Toledo, Lucas County,
5.50%, 10/1/10, MBIA 503
200 Toledo, Lucas County
Convention Center,
5.70%, 10/1/15, MBIA 202
----------
2,825
----------
TRANSPORTATION (4.1%):
3,000 State Highway,
4.80%, 5/15/04 3,013
----------
UTILITY (SEWERS, TELEPHONE, ELECTRIC) (12.4%):
1,985 Cleveland Public Power
Systems,
7.00%, 11/15/24, MBIA 2,279
1,575 Franklin County Water
System,
5.80%, 12/1/22 1,594
250 Huber Heights Water System,
5.25%, 12/1/07, MBIA 252
815 Huber Heights Water System,
5.55%, 12/1/10, MBIA 826
650 Huber Heights Water System,
0.00%, 12/1/21, MBIA 157
1,000 Huber Heights Water System,
0.00%, 12/1/22, MBIA 228
1,000 Huber Heights Water System,
0.00%, 12/1/23, MBIA 215
1,245 Huber Heights Water System,
0.00%, 12/1/24, MBIA 253
1,195 Huber Heights Water System,
0.00%, 12/1/25, MBIA 230
500 State Water Development
Authority Revenue,
Fresh Water Service,
5.90%, 12/1/21, AMBAC 511
1,205 Stark County Sewer District,
6.25%, 12/1/07 1,323
500 Southwest Regional Water,
6.00%, 12/1/20, MBIA 514
500 Toledo Waterworks,
5.00%, 11/15/02, FGIC 508
250 Warren County Sewer,
5.65%, 12/1/20, FGIC 248
----------
9,138
- ------------------------------------------------------------
TOTAL REVENUE BONDS 36,548
- ------------------------------------------------------------
TOTAL MUNICIPAL BONDS 70,375
- ------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
76
<PAGE> 79
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1996
OHIO MUNICIPAL BOND FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARE OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
- ------------------------------------------------------------
INVESTMENT COMPANIES (2.6%)
1,554,119 Federated Ohio Municipal
Cash Trust $ 1,554
347,593 Vanguard Ohio Tax Free
Money Market Portfolio 348
- ------------------------------------------------------------
Total Investment Companies 1,902
- ------------------------------------------------------------
TOTAL (COST $69,716) (a) $ 72,277
- ------------------------------------------------------------
</TABLE>
- ---------------
Percentages indicated are based on net assets of $73,463.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C> <C>
Unrealized appreciation $ 2,570
Unrealized depreciation (9)
----------
Net unrealized appreciation $ 2,561
==========
</TABLE>
* Variable rate securities having liquidity sources through bank letters of
credit or other credit and/or liquidity agreements. The interest rate, which
will change periodically, is based upon bank prime rates or an index of market
interest rates. The rate reflected on the Schedule of Investments is the rate
in effect at October 31, 1996.
AMBAC -- American Municipal Bond Assurance Corp.
FGIC -- Financial Guaranty Insurance Company
GO -- General Obligation
GNMA -- Government National Mortgage Assoc.
MBIA -- Municipal Bond Insurance Assoc.
SEE NOTES TO FINANCIAL STATEMENTS.
77
<PAGE> 80
Schedule of Investments
THE VICTORY PORTFOLIOS October 31, 1996
BALANCED FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
- ------------------------------------------------------------
COMMERCIAL PAPER (2.0%)
FINANCIAL SERVICES (2.0%):
$ 5,384 General Electric Capital
Corp., 5.57%, 11/1/96 $ 5,384
- ------------------------------------------------------------
TOTAL COMMERCIAL PAPER 5,384
- ------------------------------------------------------------
- ------------------------------------------------------------
COMMON STOCKS (57.5%)
AEROSPACE/DEFENSE (2.4%):
37,700 AlliedSignal, Inc. 2,469
20,400 Boeing Co. 1,946
24,400 Textron, Inc. 2,166
----------
6,581
----------
ALUMINUM (0.5%):
25,300 Aluminum Co. of America 1,483
----------
AUTOMOBILES (0.7%):
16,000 Chrysler Corp. 538
30,000 Ford Motor Co. 938
4,300 Ford Motor Co., Convertible
Preferred 440
----------
1,916
----------
AUTOMOTIVE PARTS (0.3%):
30,000 AutoZone, Inc. (b) 769
----------
BANKS (4.7%):
39,900 BankAmerica Corp. 3,651
36,000 Chase Manhattan Corp. 3,087
23,600 First Union Corp. 1,717
7,000 J.P. Morgan & Co., Inc. 605
25,000 Mellon Bank Corp. 1,628
48,500 Norwest Corp. 2,128
----------
12,816
----------
BEVERAGES (0.9%):
66,800 Anheuser-Busch Co., Inc. 2,572
----------
CHEMICALS (1.3%):
30,500 Air Products & Chemicals,
Inc. 1,830
23,800 Dow Chemical Co. 1,850
----------
3,680
----------
COMPUTERS & PERIPHERALS (2.4%):
52,000 Bay Networks, Inc. (b) 1,053
15,000 Cisco Systems, Inc. (b) 928
30,300 Hewlett Packard Co. 1,337
25,000 International Business
Machines Corp. 3,225
----------
6,543
----------
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
CONSUMER GOODS (0.7%):
20,000 Colgate-Palmolive, Inc. $ 1,840
30,000 Jardine Strategic Holdings
Ltd. ADR 98
16,000 Professional Staff PLC
ADR (b) 156
----------
2,094
----------
CONTAINERS -- METAL, GLASS, PAPER,
PLASTIC (0.5%):
22,600 Newell Co. 641
30,000 Sonoco Products Co. 799
----------
1,440
----------
COSMETICS & RELATED (0.5%):
27,100 Avon Products, Inc. 1,470
----------
ELECTRONIC & ELECTRICAL -- GENERAL (2.9%):
15,000 Altera Corp. (b) 930
25,100 Emerson Electric Co. 2,234
30,400 General Electric Co. 2,941
900 Hitachi ADR 80
36,300 Raytheon Co. 1,788
----------
7,973
----------
FINANCIAL SERVICES (2.0%):
31,400 American Express Co. 1,476
61,200 Federal National Mortgage
Assoc. 2,394
18,300 Household International,
Inc. 1,620
----------
5,490
----------
FOOD DISTRIBUTORS, SUPERMARKETS &
WHOLESALERS (0.2%):
16,500 Supervalu, Inc. 491
----------
FOOD PROCESSING & PACKAGING (1.5%):
31,500 ConAgra, Inc. 1,571
69,000 Sara Lee Corp. 2,450
----------
4,021
----------
FOREST PRODUCTS -- LUMBER & PAPER (0.3%):
14,000 Mead Corp. 795
----------
HEALTH CARE (0.7%):
52,500 Columbia HCA Healthcare
Corp. 1,877
----------
HEAVY MACHINERY -- INDUSTRIAL, FARM,
CONSTRUCTION (0.9%):
69,300 Baker Hughes, Inc. 2,469
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
78
<PAGE> 81
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1996
BALANCED FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
INSURANCE (3.1%):
10,000 Aetna Insurance Co. $ 669
69,942 Allstate Corp. 3,925
23,400 Chubb Corp. 1,170
31,000 Everest Re Holdings, Inc. 791
36,700 St. Paul Cos., Inc. 1,996
----------
8,551
----------
MANUFACTURING -- CONSUMER GOODS (0.3%):
17,300 Litton Industries, Inc. (b) 776
----------
MEDICAL SUPPLIES (0.9%):
60,000 Biomet, Inc. 968
24,200 Medtronic, Inc. 1,558
----------
2,526
----------
OIL & GAS EXPLORATION, PRODUCTION & SERVICES
(8.9%):
12,000 Atlantic Richfield Co. 1,590
67,600 Enron Corp. 3,143
23,000 Exxon Corp. 2,038
41,700 Mobil Corp. 4,868
57,600 Phillips Petroleum Co. 2,362
400 Royal Dutch Petroleum Co.
ADR 66
23,500 Royal Dutch Petroleum Co.
ADR 3,886
16,000 Schlumberger Ltd. 1,586
48,500 Texaco, Inc. 4,929
----------
24,468
----------
PAINT, VARNISHES, ENAMELS (0.3%):
17,700 Sherwin-Williams Co. 887
----------
PHARMACEUTICALS (4.8%):
44,000 Abbott Laboratories 2,228
43,900 American Home Products Corp. 2,689
7,000 Bristol-Myers Squibb Co. 740
20,600 Merck & Co., Inc. 1,527
52,800 Pfizer, Inc. 4,369
24,200 Schering-Plough Corp. 1,549
----------
13,102
----------
PRIMARY METAL & MINERAL PRODUCTION (0.2%):
17,100 USX-U.S. Steel Group, Inc. 466
----------
PUBLISHING (0.5%):
35,000 Time Warner, Inc. 1,304
----------
RADIO & TELEVISION (0.6%):
53,700 Viacom, Class B (b) 1,752
----------
RAILROAD & RAILROAD HOLDING COMPANIES (0.6%):
19,000 Norfolk Southern Corp. 1,693
----------
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
RETAIL (3.0%):
82,400 Dayton Hudson Corp. $ 2,853
24,000 Lowes Cos., Inc. 969
16,000 May Department Stores Co. 758
19,500 Sears, Roebuck & Co. 943
51,800 Wal-Mart Stores, Inc. 1,379
32,800 Walgreen Co. 1,238
----------
8,140
----------
RETAIL -- SPECIALTY STORES (0.4%):
20,000 Home Depot, Inc. 1,095
----------
SEMICONDUCTORS (1.5%):
19,700 Intel Corp. 2,165
300 Kyocera ADR 39
75,000 LSI Logic Corp. (b) 1,988
----------
4,192
----------
SOFTWARE & COMPUTER SERVICES (1.1%):
10,650 Microsoft Corp. (b) 1,462
32,000 Novell, Inc. (b) 296
30,000 Oracle Systems Corp. (b) 1,269
----------
3,027
----------
TAX RETURN PREPARATION (0.4%):
40,500 H & R Block, Inc. 1,002
----------
TOBACCO & TOBACCO PRODUCTS (0.6%):
16,500 Philip Morris Cos., Inc. 1,528
----------
UTILITIES -- ELECTRIC (3.2%):
54,900 Consolidated Edison Co. NY,
Inc. 1,606
52,000 DQE, Inc. 1,495
20,000 FPL Group, Inc. 920
111,800 Houston Industries 2,557
57,800 Texas Utilities Co. 2,341
----------
8,919
----------
UTILITIES -- TELECOMMUNICATIONS (3.7%):
38,000 AT&T Corp. 1,325
37,000 Ameritech Corp. 2,026
700 Cia Telecommuncaciones de
Chile SA ADR 69
66,500 GTE Corp. 2,801
17,176 Lucent Technologies, Inc. 807
100,000 MCI Telecommunications Corp. 2,513
1,000 Telefonica de Espana ADR 60
25,000 Worldcom, Inc. (b) 609
----------
10,210
- ------------------------------------------------------------
TOTAL COMMON STOCKS 158,118
- ------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
79
<PAGE> 82
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1996
BALANCED FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
- ------------------------------------------------------------
FOREIGN COMMON STOCKS (4.2%)
AUSTRALIA (0.2%):
BANKS (0.1%):
10,700 National Australia Bank Ltd. $ 117
----------
BUILDING PRODUCTS (0.0%+):
27,300 CSR Ltd. 92
----------
OIL & GAS EXPLORATION, PRODUCTION & SERVICE
(0.1%):
26,500 Santos Ltd. 106
----------
PUBLISHING (0.0%+):
22,000 Publishing & Broadcasting
Ltd. 99
- ------------------------------------------------------------
TOTAL AUSTRALIA 414
- ------------------------------------------------------------
AUSTRIA (0.0%+):
OIL & GAS EXPLORATION, PRODUCTION & SERVICE
(0.0%+):
270 OMV AG 26
- ------------------------------------------------------------
TOTAL AUSTRIA 26
- ------------------------------------------------------------
BELGIUM (0.1%):
UTILITIES -- ELECTRIC (0.1%):
700 Power Financial Corp. 103
- ------------------------------------------------------------
TOTAL BELGIUM 103
- ------------------------------------------------------------
BRITAIN (0.8%):
AEROSPACE & DEFENSE (0.0%):
22,000 Rolls-Royce PLC 91
----------
BANKS (0.1%):
21,000 Allied Irish Banks PLC 133
2,100 HSBC Holdings 44
----------
177
----------
COMPUTER SOFTWARE & SERVICES (0.0%+):
10,000 JBA Holdings PLC 83
----------
FOOD PRODUCTS (0.1%):
43,000 Tesco PLC 233
----------
INDUSTRIAL GOODS & SERVICES (0.1%):
70,000 Hanson PLC 92
----------
INSURANCE (0.1%):
28,700 Commercial Union PLC 303
----------
OIL & GAS EXPLORATION, PRODUCTION & SERVICE
(0.1%):
13,200 Shell Transport & Trading 216
----------
PHARMACEUTICALS (0.1%):
7,000 Glaxo Wellcome PLC 110
----------
PUBLISHING (0.0%+):
2,200 Reed International PLC 41
----------
REAL ESTATE (0.0%+):
20,000 Slough Estates PLC 81
----------
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
RETAIL (0.0%+):
33,600 Marks & Spencer PLC $ 282
----------
TRANSPORTATION (0.1%):
22,000 Peninsular & Oriental Steam
Navigation Co. 216
----------
UTILITIES -- WATER (0.1%):
28,300 Severn Trent PLC 285
- ------------------------------------------------------------
TOTAL BRITAIN 2,210
- ------------------------------------------------------------
CANADA (0.0%+):
FOREST PRODUCTS (0.0%+):
5,900 Abitibi-Price, Inc. 83
- ------------------------------------------------------------
TOTAL CANADA 83
- ------------------------------------------------------------
DENMARK (0.0%+):
BANKING (0.0%+):
1,000 Den Danske Bank 72
- ------------------------------------------------------------
TOTAL DENMARK 72
- ------------------------------------------------------------
FINLAND (0.1%):
BANKING (0.1%):
53,000 Merita, Ltd. (b) 157
- ------------------------------------------------------------
TOTAL FINLAND 157
- ------------------------------------------------------------
FRANCE (0.3%):
AGRICULTURE (0.0%+):
300 Eridania Beghin-Say SA 48
----------
BUILDING PRODUCTS (0.1%):
2,350 Compagnie de Saint Gobain 317
----------
CHEMICALS (0.0%+):
1,000 Rhone-Poulenc SA, Class A 30
----------
FINANCIAL SERVICES (0.1%):
900 Credit Local de France 78
----------
INSURANCE (0.1%):
1,250 Cardif SA 171
----------
OIL & GAS EXPLORATION, PRODUCTION & SERVICE
(0.0%+):
700 Elf Aquitaine SA 56
----------
RETAIL (0.0%+):
1,300 Casino Guichard-Perrichon 59
----------
TOBACCO & TOBACCO PRODUCTS (0.0%+):
700 SEITA 28
- ------------------------------------------------------------
TOTAL FRANCE 787
- ------------------------------------------------------------
GERMANY (0.3%):
AUTOMOTIVE (0.1%):
1,100 Volkswagen AG 334
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
80
<PAGE> 83
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1996
BALANCED FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
BANKS (0.1%):
1,900 Bayerische Hypotheken-und
Weschel-Bank AG $ 56
8,000 Commerzbank AG 179
----------
235
----------
ELECTRICAL & ELECTRONIC (0.0%+):
1,000 Siemens AG 52
----------
CHEMICALS (0.1%):
6,300 BASF AG 201
----------
STEEL (0.0%+):
900 SGL Carbon AG 100
- ------------------------------------------------------------
TOTAL GERMANY 922
- ------------------------------------------------------------
HOLLAND (0.2%):
BANKS (0.1%):
4,497 ING Groep N.V. 140
----------
DISTRIBUTION/WHOLESALE (0.0%+):
4,500 Internatio-Muller N.V. 109
----------
ELECTRICAL & ELECTRONIC (0.1%):
3,300 Philips Electronics N.V. 116
----------
OIL & GAS EXPLORATION, PRODUCTION & SERVICE
(0.0%+):
500 Royal Dutch Petroleum Co. 83
----------
TRANSPORTATION (0.0%+):
3,600 Nedlloyd Group N.V. 90
- ------------------------------------------------------------
TOTAL HOLLAND 538
- ------------------------------------------------------------
HONG KONG (0.2%):
HOTELS & LODGING (0.1%):
35,000 Wharf Holdings Ltd. 145
----------
REAL ESTATE (0.1%):
10,000 Cheung Kong 80
56,000 Hang Lung Development Co. 111
15,000 Hutchison Whampoa Ltd. 105
----------
296
----------
TRANSPORTATION (0.0%+):
60,000 Cross-Harbour Tunnel Co. 130
- ------------------------------------------------------------
TOTAL HONG KONG 571
- ------------------------------------------------------------
ITALY (0.3%):
AGRICULTURE (0.1%):
157,000 Parmalat Finanziaria SpA 225
----------
BANKS (0.1%):
28,000 Istituto Mobiliare Italiano
SpA 222
----------
UTILITIES -- TELECOMMUNICATIONS (0.1%):
121,800 Telecom Italia SpA 232
- ------------------------------------------------------------
TOTAL ITALY 679
- ------------------------------------------------------------
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
JAPAN (1.3%):
AUTOMOTIVE (0.2%):
13,000 Honda Motor Co. $ 311
5,000 Toyota Motor Co. 118
----------
429
----------
BANKS (0.1%):
17,000 77 Bank 160
20,000 Higo Bank 147
----------
307
----------
BREWERY (0.1%):
15,000 Kirin Brewery Co. Ltd. 154
----------
BROKERAGE SERVICES (0.1%):
9,000 Nomura Securities Co. Ltd. 149
----------
BUILDING PRODUCTS (0.0%+):
12,000 Inax 102
----------
CHEMICALS (0.0%+):
14,000 Konica Corp. 94
----------
COSMETICS (0.0%+):
6,000 Kao Corp. 71
----------
DISTRIBUTION/WHOLESALE (0.1%):
49,000 Marubeni Corp. 227
----------
ELECTRICAL & ELECTRONIC (0.1%):
7,000 Hitachi Ltd. 62
19,000 Matsushita Electric Works 304
----------
366
----------
ENGINEERING (0.0%+):
3,000 Kinden Corp. 42
----------
ENTERTAINMENT (0.0%+):
800 Toho Co. 123
----------
MANUFACTURING-CONSUMER GOODS (0.1%):
24,000 Furukawa Co. Ltd. 105
3,000 Kurita Water Industries 60
----------
165
----------
PUBLISHING (0.1%):
12,000 Toppan Printing Co. Ltd. 147
----------
REAL ESTATE (0.1%):
10,000 Daito Trust Construction Co.
Ltd. 126
13,000 Daiwa Kosho Lease Co. Ltd. 119
8,000 Mitsui Fudosan 99
----------
344
----------
RETAIL (0.1%):
21,000 Mycal Corp. 323
----------
TOOLS (0.0%+):
10,000 Makita Corp. 137
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
81
<PAGE> 84
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1996
BALANCED FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
UTILITIES-ELECTRIC (0.2%):
22,000 Shikoku Electric Power $ 445
- ------------------------------------------------------------
TOTAL JAPAN 3,625
- ------------------------------------------------------------
MALAYSIA (0.0%+):
STEEL (0.0%+):
52,000 Malayawata Steel Berhad 104
- ------------------------------------------------------------
TOTAL MALAYSIA 104
- ------------------------------------------------------------
NEW ZEALAND (0.1%):
AIRLINES (0.0%+):
25,000 Air New Zealand Ltd., Class
B 61
HOUSEHOLD GOODS-APPLIANCES & FURNISHINGS (0.1%):
34,800 Fisher & Paykel Industries
Ltd. 127
- ------------------------------------------------------------
TOTAL NEW ZEALAND 188
- ------------------------------------------------------------
SINGAPORE (0.0%+):
REAL ESTATE (0.0%+):
27,000 Straits Steamship Land Ltd. 83
- ------------------------------------------------------------
TOTAL SINGAPORE 83
- ------------------------------------------------------------
SPAIN (0.0%+):
BANKS (0.0%+):
600 Banco Bilbao Vizcaya
(Registered) 29
----------
INSURANCE (0.0%+):
1,300 Corporacion Mapfre 64
----------
UTILITIES-ELECTRIC (0.0%+):
8,000 Iberdrola SA 85
- ------------------------------------------------------------
TOTAL SPAIN 178
- ------------------------------------------------------------
SWEDEN (0.1%):
BANKS (0.1%):
11,200 Sparbanken Sverige AB,
Class A 177
----------
PUBLISHING (0.0%+):
5,000 Marieberg Tidnings AB 122
- ------------------------------------------------------------
TOTAL SWEDEN 299
- ------------------------------------------------------------
SWITZERLAND (0.2%):
BANKS (0.1%):
1,297 CS Holding AG 130
----------
BUSINESS SERVICES (0.0%+):
35 Societie Generale de
Surveillance Holding SA,
Class B 80
----------
FOOD PRODUCTS (0.0%+):
97 Nestle SA-Registered 106
----------
INSURANCE (0.1%):
60 Baloise Holdings-Registered 126
----------
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
PHARMACEUTICALS (0.0%+):
68 Ciba-Geigy AG -- Registered $ 84
- ------------------------------------------------------------
TOTAL SWITZERLAND 526
- ------------------------------------------------------------
TOTAL FOREIGN COMMON STOCKS 11,565
- ------------------------------------------------------------
- ------------------------------------------------------------
CONVERTIBLE BONDS (0.1%)
BANKS (0.0%+):
$ 94 Mitsubishi Bank
International Finance
Bermuda, 3.00%, 11/30/02 102
----------
TELECOMMUNICATIONS (0.1%):
100 Nominal Telekom Malaysia,
4.00%, 10/3/04 105
- ------------------------------------------------------------
TOTAL CONVERTIBLE BONDS 207
- ------------------------------------------------------------
- ------------------------------------------------------------
CORPORATE BONDS (9.8%)
AUTOMOTIVE (1.5%):
1,500 Daimler-Benz North America,
7.38%, 9/15/06 1,549
800 Ford Motor Co., 8.88%,
1/15/22 924
1,500 General Motors Corp., 9.13%,
7/15/01 1,648
----------
4,121
----------
BANKS (1.7%):
300 BankAmerica Corp., 9.63%,
2/13/01 333
1,000 BankAmerica Corp., 8.38%,
3/15/02 1,081
1,200 First Union Corp., 9.45%,
8/15/01 1,335
1,000 Societe Generale-New York,
7.40%, 6/1/06 1,026
400 SunTrust Banks, Inc., 7.38%,
7/1/02 414
500 Wachovia Corp., 6.05%,
10/1/25 495
----------
4,684
----------
BROKERAGE SERVICES (2.0%):
1,000 Lehman Brothers, Inc.,
7.63%, 6/1/06 1,019
1,000 Merrill Lynch Corp., 8.25%,
11/15/99 1,054
1,000 Merrill Lynch Corp., 6.00%,
3/1/01 980
750 Morgan Stanley Group, Inc.,
8.88%, 10/15/01 821
800 Morgan Stanley Group, Inc.,
5.63, 3/1/99 790
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
82
<PAGE> 85
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1996
BALANCED FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
$ 800 Salomon Brothers, Inc.,
6.70%, 12/1/98 $ 807
----------
5,471
----------
ELECTRICAL & ELECTRONIC (0.4%):
1,000 Philips Electronics,
7.13%, 5/15/25 1,011
----------
FINANCIAL SERVICES (0.7%):
1,500 BHP Finance,
6.69%, 3/1/06 1,474
500 Liberty Mutual,
7.88%, 10/15/26 507
----------
1,981
----------
INDUSTRIAL GOODS & SERVICES (2.1%):
1,200 Black & Decker,
7.50%, 4/1/03 1,241
500 ConAgra, Inc.,
7.13%, 10/1/26 509
500 EG&G,
6.80%, 10/15/05 488
1,000 Georgia-Pacific,
9.95%, 6/15/02 1,145
1,000 Harris Corp.,
6.65%, 8/1/06 1,006
700 Tosco,
7.63%, 5/15/06 719
500 Westvaco Corp.,
9.75%, 6/15/20 623
----------
5,731
----------
INSURANCE (0.2%):
600 Aetna Insurance Co.,
6.97%, 8/15/36 610
----------
MEDIA (0.5%):
1,200 Time Warner, Inc.,
9.15%, 2/1/23 1,303
----------
OIL & GAS EXPLORATION & PRODUCTION SERVICES
(0.4%):
1,000 Union Oil of California,
6.38%, 2/1/04 964
----------
RETAIL STORES (0.2%):
500 Dayton Hudson,
6.40%, 2/15/03 488
----------
TEXTILE PRODUCTS (0.2%):
500 Levi Straus Co.,
6.80%, 11/1/03 498
- ------------------------------------------------------------
TOTAL CORPORATE BONDS 26,862
- ------------------------------------------------------------
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
- -----------------------------------------------------------
RIGHTS & WARRANTS (0.0%)
6,818 Air New Zealand Ltd. Class B
Rights $ 7
- ------------------------------------------------------------
TOTAL RIGHTS & WARRANTS 7
- ------------------------------------------------------------
- ------------------------------------------------------------
U.S. TREASURY NOTES (10.7%)
$ 2,500 6.00%, 8/15/99 2,506
3,700 7.75%, 1/31/00 3,892
2,600 7.13%, 2/29/00 2,689
9,580 6.13%, 9/30/00 9,611
7,400 6.38%, 8/15/02 7,485
2,000 7.88%, 11/15/04 2,195
1,050 7.00%, 7/15/06 1,097
- ------------------------------------------------------------
TOTAL U.S. TREASURY NOTES** 29,475
- ------------------------------------------------------------
- ------------------------------------------------------------
U.S. TREASURY BONDS (2.4%)
50 7.13%, 2/15/23 52
2,075 7.50%, 11/15/24 2,277
900 6.00%, 2/15/26 821
3,650 6.75% , 8/15/26 3,689
- ------------------------------------------------------------
TOTAL U.S. TREASURY BONDS 6,839
- ------------------------------------------------------------
- ----------------------------------------------
U.S. GOVERNMENT SECURITIES (13.0%)
FEDERAL HOME LOAN MORTGAGE CORP.:
1,000 8.19%, 10/6/04 1,035
339 7.50%, 4/1/07 344
1,880 6.00%, 2/1/11 1,817
2,855 6.00%, 5/1/11 2,754
FEDERAL NATIONAL MORTGAGE ASSOC.:
1,500 8.50%, 2/1/05 1,585
1000 6.65%, 3/8/06 978
1,843 6.00%, 11/1/08 1,788
2,743 6.00%, 8/1/10 2,649
2,942 6.00%, 5/1/11 2,836
321 7.40%, 7/25/17 320
991 9.00%, 4/1/25 1,040
899 9.00%, 5/1/25 943
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
83
<PAGE> 86
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1996
BALANCED FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
GOVERNMENT NATIONAL MORTGAGE ASSOC.:
$ 1,530 6.50%, 2/15/09 $ 1,510
185 9.50%, 7/15/09 198
1,382 6.00%, 1/15/11 1,340
1,211 9.00%, 10/15/16 1,281
168 9.00%, 11/15/16 177
641 9.00%, 9/15/19 675
579 9.00%, 12/15/19 610
700 9.00%, 1/15/20 740
415 9.00%, 2/15/20 437
1,381 8.50%, 5/15/20 1,431
601 8.50%, 4/15/21 622
344 8.50%, 3/15/23 356
913 7.50%, 11/15/23 915
1,934 6.50%, 1/15/24 1,846
1,326 7.50%, 5/15/24 1,330
2,991 6.50%, 2/15/26 2,864
1,519 6.50%, 4/15/26 1,453
- ------------------------------------------------------------
TOTAL U.S. GOVERNMENT SECURITIES 35,874
- ------------------------------------------------------------
TOTAL (COST $236,773) (a) $ 274,331
- ------------------------------------------------------------
</TABLE>
- ---------------
Percentages indicated are based on net assets of $274,985.
(a) Represents cost for financial reporting purposes and differs from cost basis
for federal income tax purposes by the amount of losses recognized for
financial reporting purposes in excess of federal income tax reporting of
approximately $726. Cost for federal income tax purposes differs from value
by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation $37,138
Unrealized depreciation (306)
-------
Net unrealized appreciation $36,832
========
</TABLE>
(b) Represents non-income producing securities.
** Put and demand features exist allowing the Fund to require the repurchase of
the investment within variable time periods less than one year.
+ Percentage is less than 0.1%.
SEE NOTES TO FINANCIAL STATEMENTS.
84
<PAGE> 87
Schedule of Investments
THE VICTORY PORTFOLIOS October 31, 1996
STOCK INDEX FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
- ----------------------------------------------------------
COMMERCIAL PAPER (23.0%)
AUTOMOTIVE (2.9%):
$ 8,000 General Motors Acceptance
Corp., 5.27%, 11/8/96 $ 8,000
--------
FINANCIAL SERVICES (20.1%):
55,667 General Electric Capital
Corp., 5.57%, 11/1/96 55,667
- ----------------------------------------------------------
TOTAL COMMERCIAL PAPER 63,667
- ----------------------------------------------------------
- ----------------------------------------------------------
COMMON STOCKS (75.9%)
ADVERTISING (0.1%):
3,139 Interpublic Group Cos., Inc. 152
--------
AEROSPACE/DEFENSE (1.8%):
11,180 AlliedSignal, Inc. 732
13,797 Boeing Co. 1,316
2,463 General Dynamics Corp. 169
7,981 Lockheed Martin Corp. 715
8,634 McDonnell Douglas Corp. 471
1,995 Northrop Grumman Corp. 161
8,656 Rockwell International Corp. 476
3,288 Textron, Inc. 292
4,915 United Technologies Corp. 633
--------
4,965
--------
AIRLINES (0.2%):
3,607 AMR Corp. Delaware (b) 303
2,574 Delta Air Lines, Inc. 183
5,715 Southwest Airlines Co. 129
2,305 U.S. Air Group, Inc. (b) 40
--------
655
--------
ALUMINUM (0.2%):
6,976 Aluminum Co. of America 409
--------
APPAREL (0.0%+):
2,902 Liz Claiborne, Inc. 123
--------
AUTOMOBILES (1.5%):
29,213 Chrysler Corp. 982
44,954 Ford Motor Co. 1,405
29,805 General Motors Corp. 1,606
2,790 Navistar International
Corp. (b) 26
1,560 PACCAR, Inc. 87
--------
4,106
--------
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
AUTOMOTIVE PARTS (0.3%):
1,587 Cummins Engine, Inc. $ 66
4,011 Dana Corp. 119
3,097 Eaton Corp. 185
2,440 Echlin, Inc. 80
4,750 Genuine Parts Co. 208
2,582 TRW, Inc. 234
--------
892
--------
BANKS (4.4%):
4,344 Bank of Boston Corp. 278
14,660 Bank of New York Co. 486
14,441 BankAmerica Corp. 1,321
3,170 Bankers Trust New York 268
7,818 Barnett Banks, Inc. 298
6,178 Boatmen's Bancshares, Inc. 375
17,067 Chase Manhattan Corp. 1,463
4,386 Comerica, Inc. 233
12,337 First Chicago NBD Corp. 629
10,776 First Union Corp. 784
5,474 Great Western Financial
Corp. 153
7,352 J.P. Morgan & Co., Inc. 635
8,320 KeyCorp 388
5,972 Mellon Bank Corp. 389
11,501 NationsBank Corp. 1,084
14,644 Norwest Corp. 643
13,420 PNC Bank Corp. 486
2,202 Republic New York Corp. 168
9,002 SunTrust Banks, Inc. 420
5,310 U.S. Bancorp 212
6,659 Wachovia Corp. 358
3,720 Wells Fargo & Co. 994
--------
12,065
--------
BANKS -- MONEY CENTERS (REGIONAL) (1.0%):
18,965 Citicorp 1,878
8,508 CoreStates Financial Corp. 414
2,321 Golden West Financial Corp.,
Delaware 151
7,803 National City Corp. 338
--------
2,781
--------
BANKS -- OUTSIDE MONEY CENTER (0.5%):
17,261 Banc One Corp. 731
4,211 Fifth Third Bancorp 264
5,165 First Bank Systems, Inc. 341
--------
1,336
--------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
85
<PAGE> 88
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1996
STOCK INDEX FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
BEVERAGES (3.0%):
19,809 Anheuser-Busch Co., Inc. $ 763
3,228 Brown Forman Corp., Class B 140
99,192 Coca-Cola Co. 5,009
1,427 Coors Adolph Co., Class B 28
62,071 PepsiCo, Inc. 1,839
14,746 Seagram Co. Ltd. 558
--------
8,337
--------
BROKERAGE SERVICES (0.3%):
6,728 Merrill Lynch & Co., Inc. 473
5,956 Morgan Stanley Group, Inc. 299
4,102 Salomon Brothers, Inc. 185
--------
957
--------
BUILDING MATERIALS (0.6%):
1,500 Armstrong World Industries,
Inc. 100
1,073 Centex Corp. 32
1,162 Crane Co. 54
1,860 Fleetwood Enterprises, Inc. 63
1,139 Kaufman & Broad Home Corp. 14
6,257 Masco Corp. 196
23,107 Monsanto Co. 916
5,680 Morton International, Inc. 224
1,994 Owens Corning Fiberglas
Corp. (b) 77
975 Pulte Corp. 26
--------
1,702
--------
CHEMICALS -- GENERAL (2.0%):
2,127 Avery Dennison Corp. 140
4,377 Air Products & Chemicals,
Inc. 263
10,002 Dow Chemical Co. 778
22,253 E.I. Du Pont De Nemours Co. 2,064
3,087 Eastman Chemical Co. 163
2,534 Ecolab, Inc. 92
1,491 FMC Corp. (b) 110
2,448 Great Lakes Chemical Corp. 128
4,235 Hercules, Inc. 202
2,990 Mallinckrodt, Inc. 130
2,712 Nalco Chemical Co. 99
7,753 PPG Industries, Inc. 442
5,626 Praxair, Inc. 249
2,611 Rohm & Haas Co. 186
1,969 Sigma-Aldrich Corp. 116
5,115 Union Carbide Corp. 218
3,813 W.R. Grace & Co. (b) 202
--------
5,582
--------
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
COMMERCIAL SERVICES (0.1%):
11,913 CUC International, Inc. (b) $ 292
--------
COMPUTERS & PERIPHERALS (3.4%):
6,612 3Com Corp. (b) 447
4,806 Amdahl Corp. (b) 49
4,820 Apple Computer, Inc. 111
7,326 Bay Networks, Inc. (b) 148
2,827 Cabletron Systems, Inc. (b) 176
25,293 Cisco Systems, Inc. (b) 1,565
10,571 Compaq Computer Corp. (b) 736
2,167 Computer Sciences Corp. (b) 161
1,435 Data General Corp. (b) 21
2,098 Dell Computer, Inc. (b) 171
5,899 Digital Equipment Corp. (b) 174
8,987 EMC Corp. (b) 236
40,630 Hewlett Packard Corp. 1,793
1,884 Integraph Corp. (b) 18
20,971 International Business
Machines Corp. 2,705
2,833 Seagate Technology, Inc. (b) 189
6,904 Silicon Graphics, Inc. (b) 128
7,650 Sun Microsystems, Inc. (b) 467
4,620 Tandem Computers, Inc. (b) 58
6,787 Unisys Corp. (b) 42
--------
9,395
--------
CONGLOMERATES (0.6%):
9,060 Corning, Inc. 351
16,643 Minnesota Mining &
Manufacturing Co. 1,275
--------
1,626
--------
CONSTRUCTION (0.2%):
2,920 Case Corp. 136
3,323 Fluor Corp. 218
1,604 Foster Wheeler Corp. 66
--------
420
--------
CONSUMER PRODUCTS (1.6%):
2,920 American Greetings Corp. 86
2,075 Clorox Co. 226
5,812 Colgate-Palmolive Co. 535
1,526 Jostens, Inc. 33
11,330 Nike, Inc. 667
27,196 Procter & Gamble Co. 2,692
2,349 Reebok International Ltd. 84
1,801 Stride Rite Corp. 15
--------
4,338
--------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
86
<PAGE> 89
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1996
STOCK INDEX FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
CONTAINERS (0.3%):
1,150 Ball Corp. $ 28
2,039 Bemis, Inc. 71
5,043 Crown Cork & Seal, Inc. 242
6,263 Newell Co. 178
5,932 Rubbermaid, Inc. 138
3,763 Stone Container Corp. 57
2,557 Tupperware Corp. 131
--------
845
--------
COSMETICS & RELATED (0.7%):
1,032 Alberto Culver Co. 47
5,373 Avon Products, Inc. 291
17,590 Gillette Co. 1,315
4,401 International Flavor &
Fragance, Inc. 182
--------
1,835
--------
DEPARTMENT STORES (0.2%):
4,525 Dillard Department Stores,
Inc., Class A 144
9,051 J. C. Penney Co., Inc. 475
1,415 Mercantile Stores, Inc. 70
--------
689
--------
DIVERSIFIED -- CONGLOMERATES, HOLDINGS (0.0%+)
1,854 National Service Industries,
Inc. 64
--------
DRUG STORES (0.1%):
840 Longs Drug Stores Corp. 38
3,304 Rite Aid Corp. 112
--------
150
--------
ELECTRICAL EQUIPMENT (2.8%):
4,618 DSC Communications
Corp. (b) 64
8,853 Emerson Electric Co. 788
65,258 General Electric Co. 6,314
4,633 General Instrument Corp. (b) 93
1,594 Johnson Controls, Inc. 116
1,645 Thomas & Betts Corp. 70
2,036 W. W. Grainger, Inc. 151
15,778 Westinghouse Electric Corp. 270
--------
7,866
--------
ELECTRICAL SERVICES (0.1%):
4,618 General Public Utilities
Corp. 152
--------
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
ELECTRONIC & ELECTRICAL -- GENERAL (1.2%):
5,327 Advanced Micro Devices, Inc.
(b) $ 95
8,718 AMP, Inc. 295
2,380 Andrew Corp. (b) 116
4,257 Cooper Industries, Inc. 171
2,036 E G & G, Inc. 36
2,024 General Signal Corp. 82
1,570 Harris Corp. 98
4,984 Honeywell, Inc. 310
23,359 Motorola, Inc. 1,075
5,056 National Semiconductor
Corp. (b) 97
9,463 Raytheon Co. 466
2,474 Tandy Corp. 93
1,253 Tektronix, Inc. 49
7,439 Texas Instruments, Inc. 358
--------
3,341
--------
ENTERTAINMENT (1.0%):
1,884 Bally Entertainment Corp.
(b) 57
3,894 Brunswick Corp. 92
4,086 Harrahs Entertainment (b) 68
3,357 Hasbro, Inc. 131
1,416 King World Productions (b) 51
4,579 Loews Corp. 378
26,234 Walt Disney Co. 1,728
--------
2,505
--------
ENVIRONMENTAL CONTROL (0.1%):
12,004 Laidlaw, Inc., Class B 141
--------
FINANCIAL SERVICES (2.5%):
18,860 American Express Co. 886
11,417 Automatic Data Processing,
Inc. 475
2,073 Beneficial Corp. 121
2,663 Ceridian Corp. (b) 132
6,507 Dean Witter Discover & Co. 383
7,062 Federal Home Loan Mortgage
Corp. 713
43,206 Federal National Mortgage
Assoc. 1,690
8,803 First Data Corp. 702
10,030 Fleet Financial Group 500
6,089 Green Tree Financial Corp. 241
4,337 H.F. Ahmanson & Co. 136
3,834 Household International,
Inc. 339
8,819 MBNA Corp. 333
2,637 TransAmerica Corp. 200
--------
6,851
--------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
87
<PAGE> 90
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1996
STOCK INDEX FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
FOOD DISTRIBUTORS (0.4%):
10,020 Albertsons, Inc. $ 344
1,438 Fleming Cos., Inc. 25
1,447 Great Atlantic & Pacific
Tea, Inc. 44
4,909 Kroger Co. (b) 219
2,655 Supervalu, Inc. 79
7,213 Sysco Corp. 245
5,907 Winn Dixie Stores, Inc. 197
--------
1,153
--------
FOOD PROCESSING & PACKAGING (2.0%):
21,442 Archer-Daniels-Midland Co. 466
5,783 CPC International, Inc. 456
9,144 Campbell Soup Co. 732
9,577 ConAgra, Inc. 478
6,350 General Mills, Inc. 363
14,448 H.J. Heinz Co. 513
6,153 Hershey Foods Corp. 298
8,455 Kellogg Co. 537
3,305 Pioneer Hi-Bred
International, Inc. 222
5,343 Quaker Oats Co. 190
4,083 Ralston Purina Group 270
18,996 Sara Lee Corp. 674
4,562 Wm. Wrigley Jr. Co. 275
--------
5,474
--------
FOREST PRODUCTS -- LUMBER & PAPER (1.3%):
4,499 Alco Standard Corp. 209
1,924 Boise Cascade Corp. 60
3,824 Champion International Corp. 166
3,547 Georgia Pacific Corp. 266
12,105 International Paper Co. 517
3,299 James River Corp. 104
11,098 Kimberly-Clark Corp. 1,035
4,318 Louisiana Pacific Corp. 90
2,091 Mead Corp. 119
3,992 Moore Corp. Ltd. 81
1,139 Potlatch Corp. 49
2,181 Temple Inland, Inc. 112
2,681 Union Camp Corp. 131
4,048 Westvaco Corp. 115
7,949 Weyerhauser Co. 365
2,159 Willamette Industries, Inc. 146
--------
3,565
--------
FUNERAL SERVICES (0.1%):
8,270 Service Corp. International 236
--------
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
HEALTH CARE (0.4%):
26,452 Columbia HCA Healthcare
Corp. $ 946
6,423 Humana, Inc. (b) 117
--------
1,063
--------
HEAVY MACHINERY (0.6%):
5,653 Baker Hughes, Inc. 201
7,743 Caterpillar Tractor, Inc. 531
10,159 Deere & Co. 424
1,971 Harnischfeger Industries,
Inc. 79
4,230 Ingersoll Rand Co. 176
2,168 McDermott International,
Inc. 39
6,092 Tyco Laboratories, Inc. 302
--------
1,752
--------
HOLDING COMPANIES (0.2%):
4,521 ITT Hartford Group, Inc. 285
4,506 ITT Corp. (b) 189
4,563 ITT Industries 106
--------
580
--------
HOSPITAL & NURSING EQUIPMENT (1.0%):
2,165 Bard C.R., Inc. 61
52,587 Johnson & Johnson, Inc. 2,590
--------
2,651
--------
HOTELS & MOTELS (0.3%):
4,310 HFS, Inc. (b) 316
7,832 Hilton Hotels Corp. 238
5,017 Marriott International, Inc. 285
--------
839
--------
HOUSEHOLD GOODS -- APPLIANCES &
FURNISHINGS (0.1%):
4,006 Maytag Corp. 80
2,978 Whirlpool Corp. 141
--------
221
--------
INDUSTRIAL SERVICES (0.1%):
4,502 Dover Corp. 231
--------
INSURANCE -- LIFE (0.3%):
2,832 Jefferson Pilot Corp. 161
3,676 Providian Corp 173
2,798 Torchmark Corp. 135
7,209 United Healthcare 273
1,355 USLIFE Corp. 42
--------
784
--------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
88
<PAGE> 91
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1996
STOCK INDEX FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
INSURANCE -- MULTI-LINE (2.1%):
5,865 Aetna Life & Casualty Co. $ 392
1,787 Alexander & Alexander
Services, Inc. 27
8,054 American General Corp. 300
18,603 American International
Group, Inc. 2,021
3,899 AON Corp. 225
2,916 Cigna Corp. 381
3,112 General Re Corp. 458
4,185 Lincoln National Corp. 203
2,884 Marsh & McLennan Cos., Inc. 300
2,307 MGIC Investment Corp. 158
4,951 Safeco Corp. 187
3,327 St. Paul Cos., Inc. 181
19,105 Travelers, Inc. 1,036
4,680 USF&G Corp. 89
--------
5,958
--------
INSURANCE -- PROPERTY, CASUALTY,
HEALTH (0.5%):
17,624 Allstate Corp. 989
6,837 Chubb Corp. 342
2,836 UNUM Corp. 178
--------
1,509
--------
MACHINE TOOLS (0.0%+):
1,335 Cincinnati Milacron, Inc. 26
1,258 Giddings & Lewis, Inc. 15
--------
41
--------
MANUFACURING -- CAPITAL GOODS (0.1%):
4,821 Illinois Tool Works, Inc. 339
1,071 Trinova Corp. 35
--------
374
--------
MANUFACTURING -- CONSUMER GOODS (0.2%):
10,828 Mattel, Inc. 313
2,052 Western Atlas, Inc. (b) 142
--------
455
--------
MANUFACTURING -- MISCELLANEOUS (0.5%):
1,145 Briggs & Stratton Corp. 46
1,666 Millipore Corp. 58
403 NACCO Industries, Inc. 19
4,556 Pall Corp. 117
2,879 Parker-Hannifin Corp. 109
6,329 Unilever N. V. 968
4,175 Whitman Corp. 101
--------
1,418
--------
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
MEDICAL SERVICES (0.1%):
3,996 Beverly Enterprises, Inc.
(b) $ 49
1,645 Community Psychiatric
Centers, Inc. (b) 15
2,515 Manor Care, Inc. 99
8,186 Tenet Healthcare Corp. (b) 171
--------
334
--------
MEDICAL SUPPLIES (0.7%):
2,243 Bausch & Lomb, Inc. 76
11,033 Baxter International, Inc. 459
5,054 Becton Dickinson & Co. 220
4,538 Biomet, Inc. 73
7,015 Boston Scientific Corp. (b) 381
9,398 Medtronic, Inc. 605
2,809 St. Jude Medical, Inc. (b) 111
2,257 United States Surgical Corp. 95
--------
2,020
--------
METALS -- FABRICATION (0.4%):
8,942 Alcan Aluminum Ltd. 294
1,715 Asarco, Inc. 45
3,684 Cyprus Amax Minerals 83
7,779 Freeport-McMoRan Copper &
Gold, Inc., Class B 236
5,414 Homestake Mining Co. 77
1,879 Inland Steel Industries,
Inc. 30
3,382 Newmont Mining Corp. 156
2,578 Phelps Dodge Corp. 162
2,583 Reynolds Metals Co. 145
--------
1,228
--------
MINING (0.0%+):
5,173 Santa Fe Pacific Gold Corp. 61
--------
NEWSPAPERS (0.4%):
5,574 Gannett Co., Inc. 423
3,840 Knight-Ridder, Inc. 144
3,912 New York Times Co., Class A 141
4,191 Times Mirror Co., Class A 194
2,440 Tribune Co. 199
--------
1,101
--------
OFFICE EQUIPMENT & SUPPLIES (0.3%):
5,913 Pitney Bowes, Inc. 330
12,648 Xerox Corp. 587
--------
917
--------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
89
<PAGE> 92
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1996
STOCK INDEX FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
OIL & GAS EXPLORATION & PRODUCTION (2.2%):
3,647 Amerada Hess Corp. $ 202
2,564 Ashland, Inc. 109
4,988 Burlington Resource, Inc. 251
4,242 Coastal Corp. 182
2,053 Columbia Gas System, Inc. 125
779 Eastern Enterprises 30
9,973 Enron Corp. 464
2,682 Enserch Corp. 58
952 Helmerich & Payne, Inc. 52
1,960 Kerr-McGee Corp. 123
1,335 Louisiana Land &
Exploration Co. 76
15,623 Mobil Corp. 1,824
4,964 Noram Energy Corp. 76
12,789 Occidental Petroleum Corp. 313
991 Oneok, Inc. 27
4,081 Oryx Energy Co. (b) 79
5,989 Panenergy Corp. 231
1,804 Pennzoil Co. 92
3,381 Rowan Cos. (b) 76
3,587 Sante Fe Energy Resources,
Inc. (b) 51
3,437 Sonat, Inc. 169
2,967 Sun Co., Inc. 66
7,081 Tenneco, Inc. 351
11,745 USX -- Marathon Group 257
8,491 Union Pacific Resources
Group, Inc. 234
9,756 Unocal Corp. 357
4,177 Williams Co., Inc. 218
--------
6,093
--------
OIL -- INTEGRATED COMPANIES (4.8%):
19,627 Amoco Corp. 1,487
6,309 Atlantic Richfield Co. 836
25,833 Chevron Corp. 1,699
49,198 Exxon Corp. 4,360
10,383 Phillips Petroleum Co. 426
21,170 Royal Dutch Petroleum Co. 3,501
10,300 Texaco, Inc. 1,047
--------
13,356
--------
OILFIELD EQUIPMENT & SERVICES (0.5%):
7,165 Dresser Industries, Inc. 236
4,505 Halliburton Co. 255
9,706 Schlumberger Ltd. 962
--------
1,453
--------
PAINT, VARNISHES & ENAMELS (0.1%):
3,378 Sherwin-Williams Co. 169
--------
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
PHARMACEUTICALS (5.6%):
30,995 Abbott Laboratories $ 1,569
2,561 Allergan, Inc. 78
3,312 Alza Corp., Class A (b) 86
25,043 American Home Products Corp. 1,534
10,470 Amgen, Inc. (b) 642
20,028 Bristol-Myers Squibb Co. 2,118
21,632 Eli Lilly & Co. 1,525
48,391 Merck & Co., Inc. 3,587
25,285 Pfizer, Inc. 2,092
20,087 Pharmacia & Upjohn Co. 723
14,927 Schering-Plough Corp. 955
10,754 Warner-Lambert Co. 684
--------
15,593
--------
PHOTOGRAPHY (0.4%):
13,313 Eastman Kodak Co. 1,062
1,852 Polaroid Corp. 75
--------
1,137
--------
POLLUTION CONTROL SERVICES & EQUIPMENT (0.3%):
8,378 Browning-Ferris Industries,
Inc. 220
2,283 Safety Kleen 36
19,404 WMX Technologies,Inc. 667
--------
923
--------
PRECISION INSTRUMENTS & RELATED (0.0%+):
1,669 Perkin-Elmer Corp. 89
--------
PRIMARY METAL & MINERAL PRODUCTION (0.4%):
3,947 Armco, Inc. (b) 15
3,514 Battle Mountain Gold Co. 27
14,104 Barrick Gold Corp. 368
4,324 Bethlehem Steel Corp. (b) 35
5,018 Echo Bay Mines Ltd. 39
5,629 Englehard Corp. 103
4,636 Inco Ltd. 147
3,507 Nucor Corp. 166
3,246 USX-U.S. Steel Group, Inc. 89
--------
989
--------
PUBLISHING (0.7%):
3,311 Deluxe Corp. 108
3,860 Dow Jones & Co., Inc. 127
6,807 Dun & Bradstreet Corp. 394
1,196 John H. Harland Co. 37
3,934 McGraw Hill, Inc. 184
1,012 Meredith Corp. 51
6,111 R.R. Donnelley & Sons Co. 186
21,011 Time Warner, Inc. 783
--------
1,870
--------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
90
<PAGE> 93
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1996
STOCK INDEX FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
RADIO & TELEVISION (0.4%):
9,237 Comcast, Class A Special
Shares $ 136
25,848 Tele-Communications, Inc.,
Class A (b) 321
18,743 US West Media Group (b) 293
13,913 Viacom, Class B (b) 454
--------
1,204
--------
RAILROADS (0.8%):
5,683 Burlington Northern/
Santa Fe, Inc. 468
8,412 CSX Corp. 363
3,238 Conrail, Inc. 308
5,056 Norfolk Southern Corp. 451
8,788 Union Pacific Corp. 493
--------
2,083
--------
RESTAURANTS (0.5%):
6,201 Darden Restaurants, Inc. 52
897 Luby's Cafeterias, Inc. 19
27,539 McDonald's Corp. 1,222
1,919 Ryan's Family Steak Houses,
Inc. (b) 14
1,841 Shoney's, Inc. (b) 14
5,092 Wendy's International, Inc. 105
--------
1,426
--------
RETAIL (2.1%):
5,836 American Stores Co. 241
3,773 Charming Shoppes, Inc. (b) 17
8,630 Dayton Hudson Corp. 299
8,192 Federated Department Stores,
Inc. (b) 270
2,839 Harcourt General, Inc. 141
19,076 K-Mart Corp. 186
6,317 Lowes Cos., Inc. 255
9,911 May Department Stores Co. 470
3,219 Nordstrom, Inc. 116
7,759 Price/Costco, Inc. (b) 154
15,507 Sears, Roebuck & Co. 750
90,736 Wal-Mart Stores, Inc. 2,416
9,717 Walgreen Co. 367
5,188 Woolworth Corp. (b) 109
--------
5,791
--------
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
RETAIL -- SPECIALTY STORES (0.9%):
3,873 Circuit City Stores, Inc. $ 127
1,188 Footstar, Inc. (b) 26
11,315 The Gap 328
2,313 Giant Food, Inc. 78
18,932 Home Depot, Inc. 1,037
10,748 The Limited, Inc. 197
4,126 Melville Corp. 154
2,453 Pep Boys -- Manny,
Moe & Jack 86
2,910 TJX Cos., Inc. 116
10,919 Toys R Us, Inc. (b) 370
--------
2,519
--------
RUBBER & RUBBER PRODUCTS (0.2%):
2,153 B.F. Goodrich, Inc. 91
3,337 Cooper Tire & Rubber Co. 65
6,193 Goodyear Tire & Rubber Co. 284
--------
440
--------
SEMICONDUCTORS (1.5%):
7,032 Applied Materials, Inc. (b) 186
32,616 Intel Corp. 3,584
5,053 LSI Logic Corp. (b) 134
8,198 Micron Technology, Inc. 208
--------
4,112
--------
SOFTWARE & COMPUTER SERVICES (1.9%):
1,837 Autodesk, Inc. 42
14,277 Computer Associates
International, Inc. 844
23,410 Microsoft Corp. (b) 3,213
14,098 Novell, Inc. (b) 130
25,782 Oracle Systems Corp. (b) 1,091
910 Shared Medical Systems Corp. 44
--------
5,364
--------
STEEL (0.1%):
4,270 Allegheny Teledyne, Inc. (b) 91
3,602 Worthington Industries, Inc. 75
--------
166
--------
TAX RETURN PREPARATION (0.0%+):
4,123 H & R Block, Inc. 102
--------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
91
<PAGE> 94
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1996
STOCK INDEX FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
TELECOMMUNICATIONS (2.2%):
19,668 AirTouch Communications,
Inc. (b) $ 514
7,510 Alltel Corp. 229
17,283 Bell Atlantic Corp. 1,041
24,926 Lucent Technologies, Inc. 1,172
10,154 Northern Telecom Ltd. 661
16,941 Pacific Telesis Group 576
3,026 Scientific-Atlanta, Inc. 44
16,962 Sprint Corp. 666
3,537 Tellabs, Inc. (b) 301
18,943 U. S. West, Inc. 575
9,701 Worldcom, Inc. (b) 236
--------
6,015
--------
TEXTILE MANUFACTURING (0.1%):
3,054 Fruit of The Loom, Inc. (b) 111
1,573 Russell Corp. 45
801 Springs Industries, Inc.,
Class A 36
2,496 V. F. Corp. 163
--------
355
--------
TOBACCO & TOBACCO PRODUCTS (1.3%):
7,053 American Brands, Inc. 337
32,713 Philip Morris Cos., Inc. 3,030
7,525 UST, Inc. 217
--------
3,584
--------
TOOLS & HARDWARE MANUFACTURING (0.1%):
3,455 Black & Decker Corp. 129
2,432 Snap On Tools, Inc. 78
3,591 Stanley Works 101
1,182 Timken Co. 53
--------
361
--------
TRANSPORTATION LEASING & TRUCKING (0.1%):
1,551 Caliber Systems, Inc. 26
1,647 Consolidated Freightways,
Inc. 40
2,222 Federal Express Corp. (b) 179
3,157 Ryder Systems, Inc. 94
1,014 Yellow Corp. (b) 13
--------
352
--------
TRUCKS -- MANUFACTURING (0.1%):
9,450 Placer Dome, Inc. 227
--------
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
UTILITIES -- ELECTRIC (2.1%):
7,399 American Electric Power Co. $ 307
6,097 Carolina Power & Light Co. 220
7,718 Central & South West Corp. 205
6,189 CINergy Corp. 205
9,247 Consolidated Edison Co. NY,
Inc. 270
5,835 Detroit Edison Co. 176
6,977 Dominion Resources, Inc. 263
8,023 Duke Power Co. 392
17,402 Edison International 344
9,088 Entergy Corp. 254
7,236 FPL Group, Inc. 333
10,436 Houston Industries 239
5,729 Niagara Mohawk Power Corp. 49
2,736 Northern States Power Co.
Minnesota 129
6,058 Ohio Edison Co. 126
11,366 PacifiCorp 240
8,791 Peco Energy Co. 222
6,436 PP&L Resources, Inc. 150
9,636 Public Service Enterprise
Group 259
1,728 Raychem Corp. 135
26,606 Southern Co. 589
8,879 Texas Utilities Co. 360
8,536 Unicom Corp. 222
4,051 Union Electric Co. 156
--------
5,845
--------
UTILITIES -- ELECTRIC & GAS (0.2%):
5,815 Baltimore Gas & Electric Co. 158
16,635 Pacific Gas & Electric Co. 391
1,361 Peoples Energy Corp. 48
--------
597
--------
UTILITIES -- NATURAL GAS (0.1%):
3,672 Consolidated Natural Gas Co. 195
1,986 Nicor, Inc. 69
3,349 Pacific Enterprises 103
--------
367
--------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
92
<PAGE> 95
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1996
STOCK INDEX FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
UTILITIES -- TELECOMMUNICATIONS (3.3%):
63,430 A T & T Corp. $ 2,212
21,788 Ameritech Corp. 1,193
39,321 BellSouth Corp. 1,602
38,380 GTE Corp. 1,617
27,148 MCI Telecommunications Corp. 682
17,241 Nynex Corp. 767
24,116 SBC Communications, Inc. 1,174
--------
9,247
- ----------------------------------------------------------
TOTAL COMMON STOCKS 210,366
- ----------------------------------------------------------
- ----------------------------------------------------------
U.S. TREASURY BILLS (0.8%)
2,320 5.20%, 12/19/96(c) 2,302
- ----------------------------------------------------------
TOTAL (COST $221,337)(a) $276,335
- ----------------------------------------------------------
</TABLE>
- ---------------
Percentages indicated are based on net assets of $277,124.
(a) Represents cost for financial reporting purposes and differs from cost basis
for federal income tax reporting purposes by the amount of losses recognized
for financial reporting purposes in excess of federal income tax reporting
of approximately $533. Cost for federal income tax purposes differs from
value by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation $58,822
Unrealized depreciation (4,357)
-------
Net unrealized appreciation $54,465
-------
</TABLE>
(b) Represents non-income producing security.
(c) Serves as collateral for futures contracts.
+ Percentage is less than 0.1%.
<TABLE>
<CAPTION>
NUMBER OF MARKET
CONTRACTS VALUE
<S> <C> <C>
- ----------------------------------------------------
FUTURES CONTRACTS
Long, Standard & Poor's 500
Index Futures Contract,
face amount $56,204
expiring December 19,
1996 167 $59,256
- ----------------------------------------------------
Total Futures Contracts $59,256
- ----------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
93
<PAGE> 96
Schedule of Investments
THE VICTORY PORTFOLIOS October 31, 1996
DIVERSIFIED STOCK FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
<S> <C> <C> <C>
- ----------------------------------------------------------
COMMERCIAL PAPER (6.8%)
$ 39,390 General Elecric Capital
Corp.,
5.57%, 11/1/96 $ 39,390
- ----------------------------------------------------------
TOTAL COMMERCIAL PAPER 39,390
- ----------------------------------------------------------
- ----------------------------------------------------------
COMMON STOCKS (91.0%)
AEROSPACE/DEFENSE (4.0%):
96,100 AlliedSignal, Inc. 6,295
103,500 Boeing Co. 9,871
77,000 Textron, Inc. 6,834
--------
23,000
--------
AIRLINES (1.6%):
85,000 AMR Corp. Delaware (b) 7,140
32,700 Delta Air Lines, Inc. 2,318
--------
9,458
--------
BANKS (8.4%):
50,800 BankAmerica Corp. 4,648
70,000 Citicorp 6,930
130,000 First Union Corp. 9,457
102,000 Mellon Bank Corp. 6,643
75,000 NationsBank Corp. 7,069
160,100 Norwest Corp. 7,024
195,000 PNC Bank Corp. 7,069
--------
48,840
--------
BEVERAGES (2.7%):
255,000 Anheuser-Busch Co., Inc. 9,817
205,000 PepsiCo, Inc. 6,073
--------
15,890
--------
CHEMICALS (4.4%):
211,100 Air Products & Chemicals,
Inc. 12,666
193,900 Nalco Chemical Co. 7,053
326,750 RPM Inc., Ohio 5,473
--------
25,192
--------
COMPUTERS & PERIPHERALS (4.6%):
145,000 Bay Networks, Inc. (b) 2,936
125,000 Hewlett Packard Co. 5,516
140,000 International Business
Machines Corp. 18,060
--------
26,512
--------
CONGLOMERATES (0.7%):
49,500 Minnesota Mining &
Manufacturing Co. 3,793
--------
CONSUMER PRODUCTS (1.5%):
90,000 Procter & Gamble Co. 8,910
--------
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
<S> <C> <C> <C>
ELECTRICAL EQUIPMENT (3.6%):
110,800 General Electric Co. $ 10,720
327,500 Westinghouse Electric Corp. 5,608
56,700 W.W. Grainger, Inc. 4,203
--------
20,531
--------
ELECTRONIC & ELECTRICAL -- GENERAL (0.7%):
90,000 Motorola, Inc. 4,140
--------
ENGINEERING & CONSTRUCTION (1.1%):
98,700 Fluor Corp. 6,465
--------
ENTERTAINMENT (1.3%):
110,000 Walt Disney Co. 7,246
--------
FINANCIAL SERVICES (2.3%):
213,265 Bear Stearns Cos., Inc. 5,038
150,000 Travelers, Inc. 8,137
--------
13,175
--------
FOOD PROCESSING & PACKAGING (2.2%):
125,300 ConAgra, Inc. 6,249
95,000 Pioneer Hi-Bred
International, Inc. 6,377
--------
12,626
--------
FOREST PRODUCTS (1.5%):
90,000 Kimberly-Clark Corp. 8,392
--------
HOTELS & MOTELS (0.5%):
140,000 Mirage Resorts, Inc. (b) 3,080
--------
HOUSEHOLD GOODS -- APPLIANCES, FURNISHINGS
(1.1%):
135,000 Whirlpool Corp. 6,379
--------
INSURANCE -- MULTI-LINE (1.7%):
65,350 American International
Group, Inc. 7,099
50,000 St. Paul Cos., Inc. 2,719
--------
9,818
--------
INSURANCE -- PROPERTY, CASUALTY, HEALTH (1.5%):
75,000 Allstate Corp. 4,209
147,000 Travelers/Aetna Property
Casualty Corp. 4,410
--------
8,619
--------
MEDICAL SUPPLIES (0.7%):
247,600 Biomet, Inc. 3,992
--------
METALS -- FABRICATION (0.6%):
100,000 Kennametal, Inc. 3,400
--------
NATURAL GAS (2.6%):
320,700 Enron Corp. 14,913
--------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
94
<PAGE> 97
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1996
DIVERSIFIED STOCK FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
<S> <C> <C> <C>
OIL & GAS EXPLORATION & PRODUCTION (1.2%):
140,000 Tenneco, Inc. $ 6,930
--------
OIL -- INTEGRATED COMPANIES (7.3%):
30,400 Atlantic Richfield Co. 4,028
190,500 Exxon Corp. 16,883
159,500 Phillips Petroleum Co. 6,539
40,000 Royal Dutch Petroleum Co. 6,615
80,500 Texaco, Inc. 8,181
--------
42,246
--------
OILFIELD EQUIPMENT & SERVICES (4.4%):
320,000 Baker Hughes, Inc. 11,400
195,600 Dresser Industries, Inc. 6,430
80,000 Schlumberger, Ltd. 7,930
--------
25,760
--------
PAPER (0.5%):
82,600 Bowater, Inc. 2,922
--------
PHARMACEUTICALS (5.2%):
90,000 Abbott Laboratories 4,556
150,000 Eli Lilly & Co. 10,575
80,000 Merck & Co., Inc. 5,930
110,000 Pfizer, Inc. 9,103
--------
30,164
--------
RADIO & TELEVISION (1.1%):
200,000 Viacom, Class B (b) 6,525
--------
RETAIL (6.1%):
210,800 Dayton Hudson Corp. 7,299
160,000 Lowes Cos., Inc. 6,460
270,000 Nordstrom, Inc. 9,737
275,000 Wal-Mart Stores, Inc. 7,322
125,000 Walgreen Co. 4,719
--------
35,537
--------
SEMICONDUCTORS (3.6%):
110,000 Intel Corp. 12,086
325,000 LSI Logic Corp. (b) 8,613
--------
20,699
<CAPTION> --------
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
<S> <C> <C> <C>
SOFTWARE & COMPUTER SERVICE (0.7%):
100,000 Oracle Systems Corp. (b) $ 4,231
--------
TOBACCO & TOBACCO RELATED (1.9%):
120,000 Philip Morris Cos., Inc. 11,115
--------
UTILITIES -- ELECTRIC (4.7%):
50,000 CINergy Corp. 1,656
570,300 Houston Industries 13,046
290,300 Southern Co. 6,423
153,500 Texas Utilities Co. 6,217
--------
27,342
--------
UTILITIES -- TELECOMMUNICATIONS (5.0%):
350,000 GTE Corp. 14,744
59,722 Lucent Technologies, Inc. 2,807
125,000 MCI Telecommunications Corp. 3,141
350,000 Worldcom, Inc. (b) 8,531
--------
29,223
- ----------------------------------------------------------
TOTAL COMMON STOCKS 527,065
- ----------------------------------------------------------
TOTAL (COST $483,043) (a) $566,455
- ---------------------------------------------------------
</TABLE>
- ---------------
Percentages indicated are based on net assets of $579,381.
(a) Represents cost for financial reporting purposes and differs from cost basis
for federal income tax reporting purposes by the amount of losses recognized
for financial reporting purposes in excess of federal income tax reporting
of approximately $260. Cost for federal income tax purposes differs from
value by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C> <C>
Unrealized appreciation $ 90,530
Unrealized depreciation (7,378)
--------
Net unrealized appreciation $ 83,152
=========
</TABLE>
(b) Represents non-income producing securities.
SEE NOTES TO FINANCIAL STATEMENTS.
95
<PAGE> 98
Schedule of Investments
THE VICTORY PORTFOLIOS October 31, 1996
VALUE FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
- ---------------------------------------------------------
COMMERCIAL PAPER (4.2%)
15,927 General Electric Capital
Corp., 5.57%, 11/1/96 $ 15,927
- ---------------------------------------------------------
TOTAL COMMERCIAL PAPER 15,927
- ---------------------------------------------------------
- ---------------------------------------------------------
COMMON STOCKS (96.0%)
AEROSPACE/DEFENSE (5.6%):
49,000 AlliedSignal, Inc. 3,210
65,500 Boeing Co. 6,247
56,000 Litton Industries, Inc. (b) 2,513
96,000 Raytheon Co. 4,728
55,000 Textron, Inc. 4,881
--------
21,579
--------
AUTOMOTIVE (1.6%):
110,000 Chrysler Corp. 3,699
82,400 Ford Motor Co. 2,575
--------
6,274
--------
AUTOMOTIVE PARTS (0.6%):
83,800 AutoZone, Inc. (b) 2,147
--------
BANKS (6.6%):
92,000 BankAmerica Corp. 8,418
74,800 Chase Manhattan Corp. 6,414
71,000 First Union Corp. 5,165
40,550 Mellon Bank Corp. 2,641
62,000 Norwest Corp. 2,720
--------
25,358
--------
BEVERAGES (0.9%):
92,000 Anheuser-Busch Co., Inc. 3,542
--------
CHEMICALS (2.3%):
53,000 Air Products &
Chemicals, Inc. 3,180
35,400 Dow Chemical Co. 2,752
42,000 Lubrizol Corp. 1,250
90,000 RPM, Inc., Ohio 1,507
--------
8,689
--------
COMPUTERS & PERIPHERALS (1.7%):
60,000 Hewlett Packard Co. 2,647
30,800 International Business
Machines Corp. 3,973
--------
6,620
--------
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
COMPUTER SOFTWARE (2.1%):
103,000 Bay Networks, Inc. (b) $ 2,086
28,000 Microsoft Corp. (b) 3,843
52,350 Oracle Systems Corp. (b) 2,215
--------
8,144
--------
CONTAINERS & PACKAGING (1.2%):
102,000 Newell Co. 2,894
67,100 Sonoco Products Co. 1,787
--------
4,681
--------
COSMETICS & RELATED (1.0%):
71,400 Avon Products, Inc. 3,873
--------
ELECTRICAL EQUIPMENT (3.2%):
43,000 Emerson Electric Co. 3,827
86,000 General Electric Co. 8,320
--------
12,147
--------
FINANCIAL SERVICES (4.2%):
75,000 American Express Co. 3,525
124,000 Federal National
Mortgage Assoc. 4,851
100,400 H & R Block, Inc. 2,485
56,800 Household International,
Inc. 5,027
--------
15,888
--------
FOOD PROCESSING & PACKAGING (3.3%):
79,000 ConAgra, Inc. 3,940
54,500 Pioneer Hi-Bred
International, Inc. 3,658
136,100 Sara Lee Corp. 4,832
--------
12,430
--------
HEALTH CARE (0.9%):
94,200 Columbia HCA
Healthcare Corp. 3,368
--------
HOME PRODUCTS (0.5%):
36,800 Sherwin-Williams Co. 1,845
--------
INSURANCE-MULTI-LINE (4.1%):
66,000 Aetna Life & Casualty Co. 4,414
110,000 American General Corp. 4,097
106,300 Everest Re Holdings, Inc. 2,711
84,000 St. Paul Cos., Inc. 4,567
--------
15,789
--------
INSURANCE -- PROPERTY, CASUALTY, HEALTH (2.6%):
150,000 Allstate Corp. 8,419
50,000 Travelers/Aetna Property
Casualty Corp. 1,500
--------
9,919
--------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
96
<PAGE> 99
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1996
VALUE FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
MACHINERY & MANUFACTURING (1.0%):
62,000 Cooper Industries, Inc. $ 2,496
33,000 Deere & Co. 1,378
--------
3,874
--------
MEDIA (1.7%):
91,800 Cox Communications, Inc. (b) 1,698
47,000 Dow Jones & Co., Inc. 1,551
96,400 Viacom, Inc. Class B (b) 3,145
--------
6,394
--------
MEDICAL SUPPLIES (1.4%):
110,500 Biomet, Inc. 1,782
57,500 Medtronic, Inc. 3,702
--------
5,484
--------
METALS & MINING (1.3%):
48,000 Aluminum Co. of America 2,814
91,000 Cyprus Amax Minerals Co. 2,059
--------
4,873
--------
OIL -- INTEGRATED COMPANIES (11.5%):
28,600 Atlantic Richfield Co. 3,790
23,200 Exxon Corp. 2,056
103,000 Mobil Corp. 12,025
167,800 Phillips Petroleum Co. 6,880
52,000 Royal Dutch Petroleum Co. 8,600
105,200 Texaco, Inc. 10,691
--------
44,042
--------
OILFIELD WELL EQUIPMENT & SERVICES (2.0%):
113,000 Baker Hughes, Inc. 4,025
35,000 Schlumberger Ltd. 3,469
--------
7,494
--------
PAPER & FOREST PRODUCTS (1.5%):
50,100 Bowater, Inc. 1,772
27,100 International Paper Co. 1,159
46,000 Mead Corp. 2,610
--------
5,541
--------
PHARMACEUTICALS (7.3%):
89,000 Abbott Laboratories 4,506
70,000 American Home Products Corp. 4,288
48,300 Merck & Co., Inc. 3,580
104,500 Pfizer, Inc. 8,647
58,000 Pharmacia & Upjohn, Inc. 2,088
76,000 Schering-Plough Corp. 4,864
--------
27,973
--------
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
POLLUTION CONTROL SERVICES & EQUIPMENT (0.5%):
56,000 WMX Technologies, Inc. $ 1,925
--------
PRIMARY METAL & MINERAL PRODUCTION (0.6%):
92,000 USX -- U.S. Steel Group,
Inc. 2,507
--------
RETAIL (3.7%):
160,500 Dayton Hudson Corp. 5,557
45,900 Lowes Cos., Inc. 1,853
84,550 Sears, Roebuck & Co. 4,090
103,000 Wal-Mart Stores, Inc. 2,742
--------
14,242
--------
RETAIL -- FOOD & DRUGS (1.5%):
85,000 Supervalu, Inc. 2,529
82,000 Walgreen Co. 3,096
--------
5,625
--------
SEMICONDUCTORS (2.2%):
50,000 Intel Corp. 5,494
106,800 LSI Logic Corp. (b) 2,830
--------
8,324
--------
SOAPS & PERSONAL CARE (1.0%):
41,000 Colgate-Palmolive, Inc. 3,772
--------
TOBACCO (1.5%):
60,000 Philip Morris Cos., Inc. 5,558
--------
TRANSPORTATION (1.0%):
30,900 Norfolk Southern Corp. 2,754
42,000 U.S. Freightways Corp. 919
--------
3,673
--------
UTILITIES -- ELECTRIC (5.4%):
45,300 CINergy Corp. 1,501
136,000 Consolidated Edison Co.
NY, Inc. 3,978
99,900 DQE, Inc. 2,872
39,200 FPL Group, Inc. 1,803
204,300 Houston Industries 4,673
144,000 Texas Utilities Co. 5,832
--------
20,659
--------
UTILITIES -- NATURAL GAS (2.2%):
62,500 Consolidated Natural Gas Co. 3,320
89,100 Enron Corp. 4,143
30,000 Peoples Energy Corp. 1,058
--------
8,521
--------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
97
<PAGE> 100
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1996
VALUE FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
UTILITIES -- TELECOMMUNICATIONS (6.3%):
112,000 AT&T Corp. $ 3,906
89,800 Ameritech Corp. 4,916
173,000 GTE Corp. 7,288
34,000 Lucent Technologies, Inc. 1,598
156,800 MCI Telecommunications Corp. 3,940
54,000 Nynex Corp. 2,403
--------
24,051
- ---------------------------------------------------------
TOTAL COMMON STOCKS 366,825
- ---------------------------------------------------------
TOTAL (COST $292,902) (a) $382,752
- ---------------------------------------------------------
</TABLE>
- ---------------
Percentages indicated are based on net assets of $382,083.
(a) Represents cost for financial reporting purposes and differs from cost basis
for federal income tax reporting purposes by the amount of losses recognized
for financial reporting purposes in excess of federal income tax reporting
of approximately $109. Cost for federal income tax puposes differs from
value by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C> <C>
Unrealized appreciation $ 95,376
Unrealized depreciation (5,635)
--------
Net unrealized appreciation $ 89,741
=========
</TABLE>
(b) Represents non-income producing securities.
SEE NOTES TO FINANCIAL STATEMENTS.
98
<PAGE> 101
Schedule of Investments
THE VICTORY PORTFOLIOS October 31, 1996
GROWTH FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
- ---------------------------------------------------------
COMMERCIAL PAPER (3.6%)
FINANCIAL SERVICES (3.6%):
$ 5,354 General Electric Capital
Corp.,
5.57%, 11/01/96 $ 5,355
- ---------------------------------------------------------
TOTAL COMMERCIAL PAPER 5,355
- ---------------------------------------------------------
- ---------------------------------------------------------
COMMON STOCKS (96.9%)
AEROSPACE/DEFENSE (2.4%):
35,000 AlliedSignal, Inc. 2,293
12,500 Boeing Co. 1,192
--------
3,485
--------
AIRLINES (0.6%):
42,500 Southwest Airlines Co. 956
--------
ALUMINUM (0.4%):
10,000 Aluminum Co. of America 586
--------
AUTOMOTIVE PARTS (0.7%):
39,000 AutoZone, Inc. (b) 999
--------
BANKS (3.7%):
35,000 BankAmerica Corp. 3,202
50,000 Norwest Corp. 2,194
--------
5,396
--------
BEVERAGES (4.8%):
50,000 Anheuser-Busch Co., Inc. 1,925
80,000 Coca-Cola Co. 4,040
40,000 PepsiCo, Inc. 1,185
--------
7,150
--------
BROKERAGE SERVICES (0.7%):
12,500 J.P. Morgan & Co., Inc. 1,080
--------
CHEMICALS (2.9%):
35,000 Air Products &
Chemicals, Inc. 2,100
15,000 Dow Chemical Co. 1,166
65,000 RPM, Inc., Ohio 1,089
--------
4,355
--------
COMPUTERS & PERIPHERALS (3.5%):
17,500 Bay Networks (b) 354
20,000 Cisco Systems (b) 1,238
25,000 Electronic Data Systems 1,125
15,000 Hewlett Packard Co. 662
25,000 3Com Corp. (b) 1,691
--------
5,070
--------
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
CONTAINERS -- METAL, GLASS, PAPER, PLASTIC
(1.4%):
50,000 Newell Co. $ 1,419
25,000 Sonoco Products Co. 666
--------
2,085
--------
COSMETICS & RELATED (1.8%):
35,000 Gillette Co. 2,616
--------
ELECTRONIC & ELECTRICAL -- GENERAL (7.4%):
5,000 Altera Corp. (b) 310
32,500 Emerson Electric Co. 2,893
67,500 General Electric Co. 6,530
17,500 W.W. Grainger, Inc. 1,297
--------
11,030
--------
ENTERTAINMENT (1.3%):
30,000 Walt Disney Co. 1,976
--------
FINANCIAL SERVICES (3.0%):
35,000 Automatic Data
Processing, Inc. 1,457
75,000 Federal National
Mortgage Assoc. 2,934
--------
4,391
--------
FOOD PROCESSING & PACKAGING (2.7%):
35,000 ConAgra, Inc. 1,746
63,000 Sara Lee Corp. 2,236
--------
3,982
--------
FOREST PRODUCTS -- LUMBER, PAPER (1.7%):
20,000 International Paper Co. 855
30,000 Mead Corp. 1,702
--------
2,557
--------
HEALTH CARE (2.3%):
71,250 Columbia HCA
Healthcare Corp. 2,547
40,000 Health Management
Assoc., Inc. (b) 880
--------
3,427
--------
HEAVY MACHINERY -- INDUSTRIAL, FARM,
CONSTRUCTION (0.6%):
25,000 Baker Hughes, Inc. 891
--------
INSURANCE (3.7%):
30,000 American International
Group, Inc. 3,258
42,500 Everest Re Holdings 1,084
4,000 General Re Corp. 589
10,000 St. Paul Cos., Inc. 544
--------
5,475
--------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
99
<PAGE> 102
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1996
GROWTH FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
MANUFACTURING-CAPITAL GOODS (1.3%):
25,000 Minnesota Mining &
Manufacturing Co. $ 1,916
--------
MEDICAL SUPPLIES (1.9%):
70,000 Biomet, Inc. 1,129
25,000 Medtronic, Inc. 1,609
--------
2,738
--------
OIL & GAS EXPLORATION, PRODUCTION, & SERVICES (8.0%):
15,000 Atlantic Richfield Co. 1,988
40,000 Chevron Corp. 2,630
57,500 Enron Corp. 2,674
27,500 Mobil Corp. 3,210
20,000 Phillips Petroleum Co. 820
5,000 Schlumberger, Ltd. 496
--------
11,818
--------
PHARMACEUTICALS (12.6%):
60,000 Abbott Laboratories 3,038
20,000 Alza Corp., Class A (b) 518
50,000 American Home
Products Corp. 3,063
20,000 Amgen, Inc. (b) 1,226
40,000 Johnson & Johnson, Inc. 1,970
35,000 Merck & Co., Inc. 2,594
52,000 Pfizer, Inc. 4,302
30,000 Schering-Plough Corp. 1,920
--------
18,631
--------
RADIO & TELEVISION (0.9%):
40,000 Viacom, Class B (b) 1,305
--------
RESTAURANTS (0.6%):
40,000 Wendy's International, Inc. 825
--------
RETAIL -- SPECIALTY STORES (5.2%):
30,000 Dayton Hudson Corp. 1,039
60,000 Home Depot, Inc. 3,285
50,000 Wal-Mart Stores, Inc. 1,331
55,000 Walgreen Co. 2,076
--------
7,731
--------
SEMICONDUCTORS (4.0%):
45,000 Intel Corp. 4,943
35,000 LSI Logic Corp. (b) 928
--------
5,871
--------
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
SOAPS & CLEANING AGENTS (3.6%):
15,000 Colgate-Palmolive, Inc. $ 1,380
40,000 Procter & Gamble Co. 3,960
--------
5,340
--------
SOFTWARE & COMPUTER SERVICES (4.0%):
30,000 Microsoft Corp. (b) 4,119
42,500 Oracle Systems Corp. (b) 1,798
--------
5,917
--------
TOBACCO & TOBACCO PRODUCTS (3.2%):
42,500 Philip Morris Cos., Inc. 3,937
25,000 UST, Inc. 722
--------
4,659
--------
TRANSPORTATION-SHIPPING (0.5%):
35,000 US Freightways Corp. 766
--------
UTILITIES -- TELECOMMUNICATIONS (5.5%):
35,000 Airtouch Communications,
Inc. (b) 914
20,000 Ameritech Corp. 1,095
7,000 GTE Corp. 295
17,499 Lucent Technologies, Inc. 822
50,000 MCI Telecommunications Corp. 1,256
48,000 SBC Communications, Inc. 2,334
35,000 Sprint Corp. 1,374
--------
8,090
- ---------------------------------------------------------
TOTAL COMMON STOCKS 143,114
- ---------------------------------------------------------
TOTAL (COST $109,847) $148,469
- ---------------------------------------------------------
</TABLE>
- ---------------
Percentages indicated are based on net assets of $147,753.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C> <C> <C>
Unrealized appreciation $ 40,071
Unrealized depreciation (1,449)
--------
Net unrealized appreciation $ 38,622
=========
</TABLE>
(b) Represents non-income producing securities.
SEE NOTES TO FINANCIAL STATEMENTS.
100
<PAGE> 103
Schedule of Investments
THE VICTORY PORTFOLIOS October 31, 1996
SPECIAL VALUE FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
- ------------------------------------------------------------
COMMERCIAL PAPER (2.7%)
$ 7,833 General Electric Capital
Corp.,
5.57%, 11/1/96 $ 7,833
- ------------------------------------------------------------
TOTAL COMMERCIAL PAPER 7,833
- ------------------------------------------------------------
- ------------------------------------------------------------
COMMON STOCKS (95.8%)
AEROSPACE/DEFENSE (3.4%):
140,900 GenCorp, Inc. 2,325
91,500 Gulfstream Aerospace (b) 2,162
59,400 Litton Industries, Inc. (b) 2,666
64,000 Thiokol Corp. Delaware 2,680
----------
9,833
----------
AIRLINES (0.5%):
18,000 Delta Air Lines, Inc. 1,276
----------
AUTOMOTIVE PARTS (2.6%):
115,500 Echlin Inc. 3,768
46,200 Genuine Parts Co. 2,021
79,700 ITT Industries 1,853
----------
7,642
----------
BANKS (6.7%):
49,550 Central Fidelity Banks, Inc. 1,257
79,000 First American Bank Corp. 4,295
109,700 First Security Corp. 3,222
84,400 First Tennessee National
Corp. 3,070
59,000 Northern Trust Corp. 4,086
86,700 Summit Bancorp 3,544
----------
19,474
----------
BEVERAGES (1.4%):
95,500 Coca-Cola Enterprises, Inc. 4,071
----------
CHEMICALS (4.1%):
87,600 Arcadian Corp. 2,157
35,900 Avery Dennison Corp. 2,365
97,000 Nalco Chemical Co. 3,528
158,100 RPM, Inc., Ohio 2,648
23,900 WD 40 Co. 1,195
----------
11,893
----------
CONSTRUCTION (0.5%):
31,400 Foster Wheeler Corp. 1,287
----------
CONSUMER GOODS (0.9%):
91,500 Newell Co. 2,596
----------
CONTAINERS (0.9%):
102,100 Sonoco Products Co. 2,718
----------
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
ELECTRICAL EQUIPMENT (3.5%):
44,600 Arrow Electronics, Inc. (b) $ 2,124
45,200 Harris Corp. 2,830
165,000 Mark IV Industries 3,568
22,000 W.W. Grainger, Inc. 1,631
----------
10,153
----------
ELECTRONICS (0.7%):
55,525 Molex Corp. 1,999
----------
ENTERTAINMENT (0.8%):
99,000 Brunswick Corp. 2,326
----------
ENVIRONMENTAL CONTROL (0.9%):
221,450 Laidlaw, Inc., Class B 2,602
----------
FINANCIAL SERVICES (5.0%):
141,800 Bear Stearns Cos. Inc. 3,350
57,900 Donaldson Lufkin & Jenrette 1,860
117,800 Equifax, Inc. 3,505
90,300 H & R Block, Inc. 2,235
60,500 PMI Group, Inc. 3,456
----------
14,406
----------
FOOD PROCESSING & PACKAGING (3.5%):
109,800 Dole Food, Inc. 4,282
119,300 IBP, Inc. 2,983
115,000 McCormick & Co., Inc. 2,774
----------
10,039
----------
FURNITURE (0.8%):
75,200 Leggett & Platt, Inc. 2,247
----------
HEALTH & PERSONAL CARE (0.8%):
56,300 Tambrands, Inc. 2,400
----------
HOTELS & MOTELS (0.5%):
61,000 Mirage Resorts, Inc. (b) 1,342
----------
HOUSEHOLD GOODS -- APPLIANCES,
FURNISHING & ELECTRONICS, (0.9%):
105,000 Sunbeam Corp. 2,586
----------
INSURANCE (4.9%):
72,400 American Financial Group,
Inc. 2,597
124,900 Amerin Corp. (b) 2,467
156,600 Everest Re Holdings 3,993
61,300 Horace Mann Educators 2,100
21,600 Progressive Corp. 1,485
20,500 Transatlantic Holdings 1,476
----------
14,118
----------
LEISURE -- RECREATION, GAMING (1.6%):
217,900 International Game
Technology 4,603
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
101
<PAGE> 104
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1996
SPECIAL VALUE FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
MACHINE TOOLS (2.3%):
89,200 Albany International Corp. $ 2,007
135,500 Kennametal, Inc. 4,607
----------
6,614
----------
MANUFACURING -- CAPITAL GOODS (4.1%):
67,900 Hillenbrand 2,512
65,500 Kaydon Corp. 2,669
97,500 Pall Corp. 2,498
77,324 Pentair, Inc. 1,952
47,650 Tyco Laboratories, Inc. 2,365
----------
11,996
----------
MANUFACTURING -- CONSUMER GOODS (1.4%):
43,000 Briggs & Stratton Corp. 1,720
90,133 Federal Signal Corp. 2,321
----------
4,041
----------
MEDICAL SERVICES (4.0%):
187,600 Coventry Corp. (b) 1,899
183,000 Nellcor Puritan Bennett,
Inc. (b) 3,569
148,200 Quorum Health Group (b) 4,001
70,855 Vivra, Inc. (b) 2,259
----------
11,728
----------
MEDICAL SUPPLIES (1.2%):
224,300 Biomet, Inc. 3,617
----------
METALS -- NONFERROUS (2.6%):
102,200 Titanium Metal (b) 3,143
112,300 Ucar International (b) 4,394
----------
7,537
----------
MERCHANDISING (0.8%):
107,600 Lands End, Inc. (b) 2,313
----------
NEWSPAPERS (1.5%):
53,800 Tribune Co. 4,398
----------
OIL & GAS EXPLORATION, PRODUCTION
& SERVICES (2.8%):
70,900 Anadarko Petroleum 4,511
198,400 Enserch Exploration (b) 1,959
46,100 Vastar Resources, Inc. 1,711
----------
8,181
----------
OIL MARKETING & REFINING (0.4%):
43,600 Diamond Shamrock, Inc. 1,281
----------
OILFIELD WELL EQUIPMENT & SERVICES (1.7%):
141,500 Baker Hughes, Inc. 5,041
----------
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
PRIMARY METAL & MINERAL PRODUCTION (0.8%):
59,700 Minerals Technologies, Inc. $ 2,343
----------
RADIO & TELEVISION (0.8%):
26,000 American Radio System (b) 793
51,000 Evergreen Media Corp. (b) 1,377
----------
2,170
----------
RAILROADS (2.0%):
115,000 Canadian National Railway
Co. 3,163
82,975 Illinois Central Corp. 2,686
----------
5,849
----------
REAL ESTATE INVESTMENT TRUSTS (3.5%):
91,900 Equity Residential
Properties Trust 3,377
116,300 Meditrust Corp. 4,187
127,100 Merry Land & Investment Co.,
Inc. 2,669
----------
10,233
----------
RESTAURANTS (1.5%):
209,200 Wendy's International, Inc. 4,315
----------
RETAIL (3.4%):
269,300 General Nutrition Co. (b) 4,915
102,900 Hannaford Brothers 3,100
64,000 Talbots, Inc. 1,824
----------
9,839
----------
SEMICONDUCTORS (3.4%):
41,000 Altera Corp.(b) 2,542
192,200 LSI Logic Corp. (b) 5,093
126,145 Vishay Intertechnology,
Inc. (b) 2,270
----------
9,905
----------
SOFTWARE & COMPUTER SERVICES (0.5%):
134,000 Symantec Corp. (b) 1,457
----------
STEEL (0.9%):
120,770 Worthington Industries, Inc. 2,506
----------
TEXTILE MANUFACTURING (1.5%):
179,200 Warnaco Group 4,458
----------
TRANSPORTATION LEASING & TRUCKING (2.0%):
69,550 GATX Corp. 3,321
89,500 Pittston Brinks Group 2,551
----------
5,872
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
102
<PAGE> 105
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1996
SPECIAL VALUE FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
UTILITIES -- ELECTRIC (7.1%):
92,000 CINergy Corp $ 3,048
72,100 DQE, Inc. 2,073
175,300 Florida Progress Corp. 5,851
104,000 PP&L Resources, Inc. 2,431
137,500 Public Service Co. of
Colorado 5,088
105,100 Public Service Co. of
New Mexico 1,971
----------
20,462
----------
UTILITIES -- NATURAL GAS (0.7%):
37,300 Brooklyn Union Gas Co. 1,082
41,900 Washington Gas Light Co. 938
----------
2,020
- ------------------------------------------------------------
TOTAL COMMON STOCKS 277,787
- ------------------------------------------------------------
TOTAL (COST $242,913)(a) $ 285,620
- ------------------------------------------------------------
</TABLE>
- ---------------
Percentages indicated are based on net assets of $289,846.
(a) Represents cost for financial reporting purposes and differs from cost basis
for federal income tax reporting purposes by the amount of losses recognized
for financial reporting purposes in excess of federal income tax reporting
of approximately $14. Cost for federal income tax puposes differs from value
by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C> <C>
Unrealized appreciation $ 48,795
Unrealized depreciation (6,102)
----------
Net unrealized appreciation $ 42,693
==========
</TABLE>
(b) Non-income producing securities.
SEE NOTES TO FINANCIAL STATEMENTS.
103
<PAGE> 106
Schedule of Investments
THE VICTORY PORTFOLIOS October 31, 1996
SPECIAL GROWTH FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
- ---------------------------------------------------------
COMMERCIAL PAPER (5.2%)
FINANCIAL SERVICES (5.2%):
$ 4,444 General Electric Capital
Corp., 5.24%, 10/31/96 $ 4,606
- ---------------------------------------------------------
TOTAL COMMERCIAL PAPER 4,606
- ---------------------------------------------------------
- ---------------------------------------------------------
COMMON STOCKS (95.1%)
AEROSPACE/DEFENSE (0.9%):
35,000 BE Aerospace (b) 761
-------
APPAREL (2.1%):
25,000 Nautica Enterprises, Inc.
(b) 769
30,000 Tag Heuer ADR (b) 480
20,000 Unitog Co. 540
-------
1,789
-------
BANKS (0.1%):
4,456 Toronto-Dominion Bank 104
-------
COMMERCIAL SERVICES (4.1%):
20,000 Abacus Direct Corp. (b) 525
22,500 Concord EFS, Inc. (b) 653
40,000 Hooper Holmes, Inc. 595
40,000 Metzler Group, Inc. (b) 933
50,000 Sothebys Holdings, Class A 850
-------
3,556
-------
COMPUTERS & PERIPHERALS (9.6%):
35,000 Amati Communications Corp.
(b) 604
50,000 Bitstream, Inc. (b) 300
40,000 BBN Corp. (b) 855
40,000 Casino Data Systems (b) 575
50,000 Ciprico, Inc. (b) 800
60,000 Forefront Group, Inc. (b) 465
80,000 Interlink Computer Service
(b) 750
35,000 Netcom On-Line
Communications (b) 534
40,000 Network General Corp. (b) 965
40,000 Ontrack Data International
(b) 565
60,000 Splash Technology (b) 825
12,000 Sungard Data
Systems, Inc. (b) 513
40,000 Xcellenet Incorporated
Networking Products (b) 650
-------
8,401
-------
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
ELECTRICAL EQUIPMENT (5.4%):
40,000 CIDCO, Inc. (b) $ 755
25,000 ITI Technologies, Inc. (b) 719
75,000 Printrak International (b) 731
25,000 Sipex Corp. Circuits (b) 659
20,000 Thermotrex Corp. (b) 710
25,000 Uniphase Corp. (b) 1,206
-------
4,780
-------
ENERGY (1.0%):
50,000 Global Industries Ltd. (b) 900
-------
ENVIRONMENTAL CONTROL (3.6%):
40,000 TETRA Technologies (b) 835
23,700 U.S.A. Waste
Services, Inc. (b) 758
30,000 United States Filter Corp.
(b) 1,035
15,600 United Waste
Systems, Inc. (b) 536
-------
3,164
-------
FINANCIAL SERVICES (3.6%):
12,500 Aames Financial Corp. 558
15,000 Eaton Vance Corp. 656
25,000 Envoy Corp. (b) 919
188 Investors Financial Services 5
10,000 U.S. Trust Corp. 622
12,100 Value Line, Inc. 442
-------
3,202
-------
FOOD DISTRIBUTORS (0.7%):
30,000 Dominick's Supermarket (b) 596
-------
HOUSEHOLD GOODS --
APPLIANCES, FURNISHINGS & ELECTRONICS (0.9%):
30,000 Williams-Sonoma Co. (b) 825
-------
INSURANCE (0.9%):
25,000 Allmerica Financial Corp. 759
-------
LEISURE -- RECREATION, GAMING (0.8%):
25,000 Family Golf Centers (b) 734
-------
MEDICAL SERVICES --
HOSPITAL MANAGEMENT & NURSING HOMES (1.6%):
50,000 Atria Communities, Inc. (b) 631
40,000 FPA Medical
Management, Inc. (b) 745
-------
1,376
-------
MEDICAL SUPPLIES (2.4%):
60,000 Cardiovascular Dynamics (b) 780
50,000 Staar Surgical Co. (b) 619
30,000 Ultrafem, Inc. (b) 675
-------
2,074
-------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
104
<PAGE> 107
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1996
SPECIAL GROWTH FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
MERCHANDISING (0.7%):
30,000 Lands End, Inc. (b) $ 645
-------
METALS -- FABRICATION (0.7%):
20,000 Oregon Metallurgical Corp.
(b) 630
-------
MINING (0.6%):
50,000 Uranium Resources (b) 563
-------
OFFICE EQUIPMENT & SUPPLIES
(NON-COMPUTER RELATED) (1.0%):
30,000 American Pad & Paper (b) 563
50,000 Faxsav Commercial Services
(b) 306
-------
869
-------
OIL & GAS EXPLORATION, PRODUCTION & SERVICES (16.6%):
35,000 Benton Oil & Gas (b) 858
20,000 Camco International, Inc. 775
50,000 Denbury Resources, Inc. (b) 653
25,000 Devon Energy Corp. 872
22,000 Energy Ventures, Inc. (b) 968
40,000 Forest Oil Corp. (b) 600
50,000 Midcoast Energy Resources 500
15,000 Newfield Exploration (b) 709
20,000 Newpark Resources, Inc. (b) 750
40,000 Noble Drilling Corp. (b) 745
25,000 Nuevo Energy Co. (b) 1,247
40,000 Oceaneering International
(b) 720
60,000 Pool Energy Services Co. (b) 885
50,000 Pride Petroleum Services (b) 875
20,000 Smith International, Inc.
(b) 760
40,000 Snyder Oil Corp. 610
45,000 Swift Energy Co. (b) 1,102
20,000 United Meridian Corp. (b) 942
-------
14,571
-------
PHARMACEUTICALS (3.9%):
15,000 Agouron Pharmaceuticals (b) 859
35,000 Curative Technologies (b) 796
15,000 INCYTE Pharmaceuticals, Inc.
(b) 607
25,000 Interneuron Pharmaceuticals
(b) 619
40,000 Pharmacyclics (b) 570
-------
3,451
-------
PUBLISHING (1.6%):
24,000 Harte-Hanks
Communications, Inc. 621
15,000 Meredith Corp. 754
-------
1,375
-------
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
RADIO & TELEVISION (0.8%):
20,000 Renaissance Communications
Corp. (b) $ 708
-------
REAL ESTATE INVESTMENT TRUSTS (6.1%):
25,000 Beacon Corp. 734
25,000 Cali Realty Corp. 672
15,000 Crescent Real Estate
Equities, Inc. 626
15,000 Post Properties, Inc. 593
20,000 Reckson Associates
Realty Corp. 713
20,400 Simon Debartolo Group 538
20,000 Spieker Properties, Inc. 615
20,000 Starwood Lodging Trust 900
-------
5,391
-------
RESTAURANTS (0.9%):
25,000 Rainforest Cafe (b) 813
-------
RETAIL (2.3%):
25,000 Loehmann's, Inc. (b) 672
30,000 Stein Mart, Inc. (b) 536
25,000 Wet Seal (b) 788
-------
1,996
-------
RETAIL -- SPECIALTY STORES (2.9%):
25,000 The Sports Authority (b) 606
53,600 Travis Boats & Motors, Inc.
(b) 576
25,000 Wolverine World Wide 619
40,000 Zale Corp. (b) 775
-------
2,576
-------
SEMICONDUCTORS (1.0%):
40,000 Supertex, Inc. (b) 900
-------
SOFTWARE & COMPUTER SERVICES (13.6%):
20,000 Acxiom Corp. (b) 785
20,000 American Management Systems,
Inc. (b) 633
30,000 Analysts International Corp. 750
40,000 Axent Technologies (b) 715
40,000 Cotelligent Group, Inc. (b) 710
25,000 Dialogic Corp. (b) 856
35,000 Geoworks (b) 713
20,000 National Data Corp. 822
35,000 SPSS, Inc. (b) 1,089
50,000 Summit Design, Inc. (b) 531
50,000 Systemsoft Corp. (b) 1,413
50,000 Versant Object Technology
Corp. (b) 975
40,000 Viasoft, Inc. (b) 1,970
-------
11,962
-------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
105
<PAGE> 108
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1996
SPECIAL GROWTH FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
TECHNOLOGY (0.6%):
30,000 Premiere Technologies (b) $ 487
-------
TEXTILE MANUFACTURING (0.6%):
50,000 Cutter & Buck, Inc. (b) 531
-------
TRANSPORTATION (0.9%):
25,000 Air Express International 756
-------
UTILITIES -- TELECOMMUNICATIONS (2.6%):
20,000 Davox Corp. (b) 720
50,000 Pacific Gateway Exchange (b) 1550
-------
2,270
- ---------------------------------------------------------
TOTAL COMMON STOCKS 83,515
- ---------------------------------------------------------
TOTAL (COST $77,827) (a) $88,121
- ---------------------------------------------------------
</TABLE>
- ---------------
Percentages indicated are based on net assets of $87,837.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C> <C>
Unrealized appreciation $14,735
Unrealized depreciation (4,441)
-------
Net unrealized appreciation $10,294
========
</TABLE>
(b) Non-income producing securities.
ADR -- American Depository Receipt
SEE NOTES TO FINANCIAL STATEMENTS.
106
<PAGE> 109
Schedule of Investments
THE VICTORY PORTFOLIOS October 31, 1996
OHIO REGIONAL STOCK FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
- --------------------------------------------------------
COMMERCIAL PAPER (3.3%)
ELECTRICAL & ELECTRONIC (3.3%):
$ 1,506 General Electric Capital
Corp., 5.57%, 11/1/96 $ 1,506
- --------------------------------------------------------
TOTAL COMMERCIAL PAPER 1,506
- --------------------------------------------------------
- --------------------------------------------------------
CONVERTIBLE BONDS (0.2%)
MEDICAL SUPPLIES (0.2%):
75 Meridian Diagnostics, Inc.
7.00%, 9/1/06 73
- --------------------------------------------------------
TOTAL CONVERTIBLE BONDS 73
- --------------------------------------------------------
- --------------------------------------------------------
COMMON STOCKS (96.6%)
AGRICULTURE & LIVESTOCK (0.1%):
5,000 Andersons, Inc. (b) 45
-------
AMUSEMENT & RECREATION SERVICES (0.8%):
10,000 Cedar Fair L.P. 350
-------
AUTOMOTIVE PARTS (5.2%):
24,000 Dana Corp. 711
19,800 Myers Industries Inc. 307
15,000 TRW, Inc. 1,357
-------
2,375
-------
BANKS (10.8%):
10,000 Banc First Ohio 283
25,200 Charter One Financial, Inc. 1,094
21,000 First Merit Corp. 683
10,827 Huntington Bancshares, Inc. 260
5,100 Mahoning National Bancorp 124
20,000 National City Corp. 868
22,500 Provident Bancorp 997
2,235 Second Bancorp 69
6,000 Star Bank 540
-------
4,918
-------
BROADCASTING (3.6%):
35,000 Scripps (E.W.) Co. 1,658
-------
BUILDING MATERIALS (1.8%):
5,000 Holophane Corp. (b) 95
10,000 Medusa Corp. 328
10,000 Owens Corning
Fiberglas Corp. 387
-------
810
-------
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
CHEMICALS (5.7%):
15,000 Chemed Corp. $ 585
9,000 Chempower, Inc. (b) 51
20,000 Ferro Corp. 540
9,000 Lubrizol Corp. 268
10,000 OM Group, Inc. 410
32,812 RPM Inc., Ohio 550
12,500 A. Schulman, Inc. 264
-------
2,668
-------
COMPUTERS & PERIPHERALS (0.9%):
1,000 Lanvision (b) 9
34,000 Telxon Corp. 416
-------
425
-------
CONSUMER GOODS (2.5%):
14,000 American Greetings Corp. 410
15,000 Cincinnati Microwave, Inc.
(b) 37
43,000 Gibson Greetings, Inc. (b) 671
-------
1,118
-------
ELECTRONIC & ELECTRICAL -- GENERAL (2.5%):
20,000 Allen Group (b) 317
78,500 Pioneer-Standard
Electronics, Inc. 824
-------
1,141
-------
ENGINEERING, INDUSTRIAL CONSTRUCTION (0.2%):
10,000 Corrpro (b) 84
-------
ENVIRONMENTAL CONTROL (1.3%):
37,050 Cuno, Inc. (b) 593
-------
FINANCIAL SERVICES (2.9%):
16,500 Haverfield Corp. 305
18,000 McDonald & Co. Investments 438
40,500 State Auto Financial 567
-------
1,310
-------
FOOD DISTRIBUTORS (SUPERMARKETS)
& WHOLESALERS (1.0%):
10,000 Chiquita Brands
International 125
7,000 Kroger Co. (b) 312
-------
437
-------
FOOD PROCESSING & PACKAGING (0.2%):
5,000 Smuckers, Class A 82
-------
FOREST PRODUCTS -- LUMBER, PAPER (1.5%):
12,000 Mead Corp. 681
-------
HEALTH CARE (0.1%):
9,000 Health Power, Inc. (b) 31
-------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
107
<PAGE> 110
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1996
OHIO REGIONAL STOCK FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
HOSPITAL & NURSING EQUIPMENT & SUPPLIES (5.8%):
36,000 Invacare Corp. $ 1,008
60,000 Omnicare, Inc. 1,635
-------
2,643
-------
HOUSEHOLD GOODS --
APPLIANCES & FURNISHINGS (2.1%):
25,000 Lancaster Colony Corp. 937
10,000 Sun Television & Appliance 26
-------
963
-------
INDUSTRIAL SERVICES (1.0%):
22,000 Amcast Industrial Corp. 448
-------
INSURANCE (3.9%):
3,150 Cincinnati Financial Corp. 181
18,000 Ohio Casualty 585
15,000 Progressive Corp. 1,031
-------
1,797
-------
MACHINE TOOLS (5.3%):
23,625 Bearings, Inc. 614
17,000 Cincinnati Milacron, Inc. 325
37,050 Commercial Intertech Corp. 412
46,500 Gorman Rupp 639
14,000 Lincoln Electric Co. 385
5,000 Monarch Machine Tool Co. 49
-------
2,424
-------
MANUFACURING -- CAPITAL GOODS (2.6%):
10,000 Gradall Industries, Inc. (b) 109
15,000 Parker-Hannifin Corp. 568
20,000 Thor Industries, Inc. 500
-------
1,177
-------
MEDICAL SUPPLIES (0.3%):
12,000 Meridian Diagnostics 126
-------
MEDICAL-BIOTECHNOLOGY (0.1%):
5,000 Gliatech, Inc. (b) 41
-------
METALS -- FABRICATION (0.8%):
10,000 Brush Wellman, Inc. 189
7,000 Cold Metal Products, Inc.
(b) 41
10,000 Park-Ohio Industries, Inc.
(b) 150
-------
380
-------
OFFICE EQUIPMENT & SUPPLIES (6.1%):
34,500 Diebold, Inc. 1,984
30,000 Reynolds & Reynolds Co. 791
-------
2,775
-------
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
OIL & GAS EXPLORATION, PRODUCTION,
& SERVICES (3.7%):
5,000 Belden & Blake (b) $ 133
5,000 Lomak Petroleum, Inc. 82
68,000 USX-Marathon Group 1,488
-------
1,703
-------
PAINT, VARNISHES, ENAMELS (1.5%):
14,000 Sherwin-Williams Co. 702
-------
POLLUTION CONTROL SERVICES & EQUIPMENT (0.0%):
20,100 Mid American Waste Systems,
Inc. (b) 14
-------
PRECISION INSTRUMENTS & RELATED (3.0%):
60,000 Keithley Instruments, Inc. 465
40,000 Robbins & Myers, Inc. 900
-------
1,365
-------
REAL ESTATE INVESTMENT TRUSTS (0.8%):
16,000 Health Care REIT, Inc. 378
-------
RESTAURANTS (1.8%):
29,500 Bob Evans Farms, Inc. 369
22,000 Wendy's International, Inc. 454
-------
823
-------
RETAIL -- SPECIALTY STORES (1.9%):
17,000 Fabri-Centers of America
Class B (b) 221
17,000 Fabri-Centers of America
Inc. (b) 221
15,000 The Limited, Inc. 276
10,000 Value City Department
Stores, Inc. (b) 128
-------
846
-------
RUBBER & RUBBER PRODUCTS INCLUDING TIRES (1.4%):
5,000 Cooper Tire & Rubber Co. 98
12,000 Goodyear Tire & Rubber Co. 551
-------
649
-------
STEEL (3.3%):
35,000 Shiloh (b) 578
9,000 Timken Co. 402
25,000 Worthington Industries, Inc. 519
-------
1,499
-------
TEXTILE MANUFACTURING (1.0%):
25,000 Essef Corp. (b) 438
-------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
108
<PAGE> 111
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1996
OHIO REGIONAL STOCK FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
<S> <C> <C> <C>
TRANSPORTATION LEASING & TRUCKING (2.3%):
6,000 Caliber System, Inc. $ 101
45,000 Comair Holding, Inc. 906
3,000 Roadway Express, Inc. 48
-------
1,055
-------
TRANSPORTATION -- MARINE (0.3%):
3,000 Oglebay Norton Co. 131
-------
UTILITIES -- ELECTRIC (3.4%):
14,000 American Electric Power Co. 581
10,000 CINergy Corp. 331
22,500 D.P.L., Inc. 537
5,000 Ohio Edison 104
-------
1,553
-------
UTILITIES -- TELECOMMUNICATIONS (3.1%):
29,000 Cincinnati Bell 1,432
- --------------------------------------------------------
TOTAL COMMON STOCKS 44,088
- --------------------------------------------------------
SHARES OR
PRINCIPAL MARKET
AMOUNT SECURITY DESCRIPTION VALUE
- ---------------------------------------------
RIGHTS/WARRANTS (0.0%)
10,000 Cincinnati Microwave, Inc. (b)
Expires 12/31/98 $ 6
- --------------------------------------------------------
TOTAL RIGHTS/WARRANTS 6
- --------------------------------------------------------
TOTAL (COST $27,176) (a) $45,673
- --------------------------------------------------------
</TABLE>
- ---------------
Percentages indicated are based on net assets of $45,620.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C> <C>
Unrealized appreciation $20,115
Unrealized depreciation (1,618)
-------
Net unrealized appreciation $18,497
========
</TABLE>
(b) Non-income producing securities.
SEE NOTES TO FINANCIAL STATEMENTS.
109
<PAGE> 112
Schedule of Investments
THE VICTORY PORTFOLIOS October 31, 1996
INTERNATIONAL GROWTH FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
<S> <C> <C> <C>
- ----------------------------------------------------------
COMMERCIAL PAPER (8.1%)
$ 9,823 General Electric Capital
Corp.,
5.57%, 11/1/96 $ 9,823
- ----------------------------------------------------------
TOTAL COMMERCIAL PAPER 9,823
- ----------------------------------------------------------
- ----------------------------------------------------------
COMMON STOCKS (91.0%)
AUSTRALIA (3.9%):
BANKS (1.4%):
150,400 National Australia Bank Ltd. 1,652
--------
BROADCASTING & PUBLISHING (0.6%):
175,500 Publishing & Broadcasting
Ltd. 790
--------
BUILDING MATERIALS (0.6%):
235,000 CSR Ltd. 790
--------
OIL & GAS PRODUCTION (1.3%):
380,000 Santos Ltd. 1,519
- ----------------------------------------------------------
TOTAL AUSTRALIA 4,751
- ----------------------------------------------------------
BRITAIN (16.3%):
AEROSPACE & DEFENSE (0.8%):
220,000 Rolls-Royce PLC 910
--------
BANKS (3.5%):
232,000 Allied Irish Bank PLC 1,471
244,371 National Westminster Bank
PLC 2,792
--------
4,263
--------
BUSINESS & PUBLIC SERVICES (0.8%):
122,500 Carlton Communications PLC 981
--------
COMPUTERS & PERIPHERALS (0.9%):
125,000 JBA Holdings PLC 1,038
--------
CONGLOMERATES (1.0%):
940,000 Hanson PLC 1,236
--------
FOOD DISTRIBUTORS-SUPERMARKETS &
WHOLESALERS (1.1%):
250,000 Tesco PLC 1,354
--------
FOOD PROCESSING & PACKAGING (1.1%):
175,000 Grand Metropolitan PLC 1,321
--------
INSURANCE (0.7%):
83,000 Commercial Union PLC 876
--------
LEISURE (1.4%):
172,000 Rank Group PLC 1,144
200,000 Ladbroke Group PLC 650
--------
1,794
--------
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
<S> <C> <C> <C>
OIL & GAS PRODUCTION (1.3%):
147,065 British Petroleum Co. PLC $ 1,583
--------
PHARMACEUTICALS (1.6%):
120,000 Glaxo Wellcome PLC 1,884
--------
TRANSPORTATION (1.0%):
125,000 Peninsular & Oriental Steam
Navigation Co. 1,228
--------
UTILITIES -- WATER (1.1%):
117,000 Hyder PLC 1,349
- ----------------------------------------------------------
TOTAL BRITAIN 19,817
- ----------------------------------------------------------
CANADA (0.6%):
FOREST PRODUCTS (0.6%):
56,100 Abitibi-Price, Inc. 784
- ----------------------------------------------------------
TOTAL CANADA 784
- ----------------------------------------------------------
DENMARK (0.4%):
BANKS (0.4%):
7,500 Den Danske Bank 538
- ----------------------------------------------------------
TOTAL DENMARK 538
- ----------------------------------------------------------
FINLAND (2.8%):
BANKS (2.0%):
836,000 Merita Ltd., Class A (b) 2,472
--------
RETAIL (0.8%):
61,000 Kesko 942
- ----------------------------------------------------------
TOTAL FINLAND 3,414
- ----------------------------------------------------------
FRANCE (7.6%):
AUTOMOTIVE PARTS (0.5%):
9,700 Valeo SA 583
--------
BANKS (1.3%):
14,800 Societe Generale 1,596
--------
BUILDING MATERIAL (0.8%):
6,950 Compagnie de Saint Gobain 939
--------
DIVERSIFIED (1.5%):
15,000 Compagnie Generale des Eaux 1,794
--------
ENERGY SOURCES (0.7%):
11,200 Elf Aquitaine SA 896
--------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
110
<PAGE> 113
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1996
INTERNATIONAL GROWTH FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
<S> <C> <C> <C>
FOOD DISTRIBUTORS-SUPERMARKETS &
WHOLESALERS (0.9%):
25,000 Etablissements Economiques
du Casino Guichard-
Perrichon $ 1,138
--------
FOOD PROCESSING & PACKAGING (1.3%):
1,250 Bongrain SA 507
6,600 Eridania Beghin-Say SA 1,052
--------
1,559
--------
INSURANCE (0.6%):
10,800 AXA SA 675
- ----------------------------------------------------------
TOTAL FRANCE 9,180
- ----------------------------------------------------------
GERMANY (7.0%):
BANKS (2.1%):
43,600 Bayerische Hypotheken-und
Wechsel-Bank AG 1,278
55,000 Commerzbank AG 1,234
--------
2,512
--------
CHEMICALS (3.3%):
98,500 BASF AG 3,151
18,000 Henkel KGAA 811
--------
3,962
--------
MACHINE TOOLS (0.3%):
1,000 Mannesmann AG 390
--------
MISCELLANEOUS MANUFACTURING (1.3%):
14,500 SGL Carbon AG 1,608
- ----------------------------------------------------------
TOTAL GERMANY 8,472
- ----------------------------------------------------------
HOLLAND (5.1%):
BANKS (0.7%):
25,915 ING Groep N.V. 808
--------
COMMERCIAL SERVICES (0.3%):
4,000 Randstad Holdings N.V. 324
--------
CONGLOMERATES (0.5%):
24,000 Internatio-Muller N.V. 579
--------
ELECTRICAL EQUIPMENT (1.3%):
46,000 Phillips Electronics N.V. 1,622
--------
OIL -- INTEGRATED COMPANIES (1.6%):
12,000 Royal Dutch Petroleum Co. 1,983
--------
TRANSPORTATION (0.7%):
36,000 Nedlloyd Groep N.V. 904
- ----------------------------------------------------------
TOTAL HOLLAND 6,220
- ----------------------------------------------------------
HONG KONG (5.3%):
BANKS (0.8%):
156,100 Wing Lung Bank 969
--------
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
DIVERSIFIED (1.3%):
220,000 Hutchison Whampoa Ltd. $ 1,536
--------
HOTELS & LODGING (0.5%):
2,150,000 Regal Hotels International 591
--------
REAL ESTATE (1.8%):
123,000 Sun Hung Kai Properties 1,400
914,000 Tai Cheung Holdings 745
--------
2,145
--------
TRANSPORTATION-MARINE (0.9%):
625,000 Hong Kong Ferry Holdings 1,164
- ----------------------------------------------------------
TOTAL HONG KONG 6,405
- ----------------------------------------------------------
ITALY (3.9%):
CONGLOMERATES (1.5%):
1,240,000 Parmalat Finanziaria SpA 1,779
--------
FINANCIAL SERVICES (0.9%):
143,000 Instituto Mobiliare Italiano
SpA 1,132
--------
UTILITIES -- TELECOMMUNICATIONS (1.5%):
967,000 Telecom Italia SpA 1,843
- ----------------------------------------------------------
TOTAL ITALY 4,754
- ----------------------------------------------------------
JAPAN (24.9%):
AEROSPACE/DEFENSE (0.9%):
140,000 Mitsubishi Heavy Industries
Ltd. 1,077
--------
AUTOMOBILES (1.9%):
66,000 Honda Motor Co. 1,578
30,000 Toyota Motor Co. 710
--------
2,288
--------
AUTOMOTIVE PARTS (1.6%):
94,000 Denso Corp. 1,950
--------
BANKS (2.5%):
197,000 77 Bank 1,853
164,000 Higo Bank 1,209
--------
3,062
--------
BREWERIES (0.9%):
110,000 Asahi Breweries Ltd. 1,131
--------
CONSTRUCTION & HOUSING (0.8%):
74,000 Daito Trust Construction Co.
Ltd. 937
--------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
111
<PAGE> 114
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1996
INTERNATIONAL GROWTH FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
<S> <C> <C> <C>
ELECTRICAL EQUIPMENT (3.5%):
134,000 Hitachi Ltd. $ 1,190
88,000 Makita Corp. 1,207
96,000 Matsushita Electric Works 928
16,000 Sony Corp. 961
--------
4,286
--------
ENTERTAINMENT (1.0%):
8,200 Toho Co. 1,262
--------
FOOD PROCESSING (1.2%):
70,000 Katokichi 1,397
--------
HEAVY MACHINERY (1.3%):
185,000 Komatsu Ltd. 1,516
--------
INSURANCE (0.9%):
213,000 Chiyoda Fire & Marine
Insurance Co. Ltd. 1,099
--------
PHOTOGRAPHY (1.5%):
65,000 Fuji Photo Film 1,869
--------
PRINTING (0.7%):
73,000 Toppan Printing Co. Ltd. 892
--------
REAL ESTATE (1.0%):
132,000 Daiwa Kosho Lease Co. Ltd. 1,207
--------
RETAIL (1.4%):
112,000 Mycal Corp. 1,723
--------
TELECOMMUNICATIONS (0.7%):
66,000 Nippon Comsys Corp. 847
--------
UTILITIES-ELECTRIC (1.2%):
71,000 Kansai Electric Power Co.,
Inc. 1,492
--------
WHOLESALE & INTERNATIONAL TRADE (1.9%):
43,000 Canon Sales Co., Inc. 1,093
255,000 Marubeni Corp. 1,181
--------
2,274
- ----------------------------------------------------------
TOTAL JAPAN 30,309
- ----------------------------------------------------------
MALAYSIA (0.9%):
AUTOMOBILES (0.9%):
163,800 Oriental Holdings Berhad 1,115
- ----------------------------------------------------------
TOTAL MALAYSIA 1,115
- ----------------------------------------------------------
NEW ZEALAND (1.3%):
AIRLINES (0.4%):
217,500 Air New Zealand Ltd.,
Class B 531
--------
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
HOUSEHOLD GOODS-APPLIANCES & FURNISHINGS (0.9%):
283,500 Fisher & Paykel Industries
Ltd. $ 1,037
- ----------------------------------------------------------
TOTAL NEW ZEALAND 1,568
- ----------------------------------------------------------
SINGAPORE (0.8%):
REAL ESTATE (0.8%):
305,000 Straits Steamship Land Ltd. 935
- ----------------------------------------------------------
TOTAL SINGAPORE 935
- ----------------------------------------------------------
SPAIN (1.4%):
INSURANCE-MULTILINE (0.7%):
18,000 Corporacion Mapfre 890
--------
UTILITIES-TELECOMMUNICATIONS (0.7%):
42,000 Telefonica de Espana 843
- ----------------------------------------------------------
TOTAL SPAIN 1,733
- ----------------------------------------------------------
SWEDEN (2.3%):
BANKS (0.9%):
70,000 Sparbanken Sverige AB,
Class A 1,109
--------
NEWSPAPERS (0.6%):
32,000 Marieberg Tidnings AB 780
--------
WHOLESALE & INTERNATIONAL TRADE (0.8%):
45,000 Dahl International AB (b) 846
- ----------------------------------------------------------
TOTAL SWEDEN 2,735
- ----------------------------------------------------------
SWITZERLAND (3.5%):
BANKS (1.4%):
17,530 CS Holding AG 1,758
--------
FOOD PROCESSING (0.7%):
800 Nestle SA-Registered 873
--------
INSURANCE (0.4%):
850 Winterthur Schweizerische
Versischerungs-Gesellschaft 509
--------
PHARMACEUTICALS (1.0%):
950 Ciba-Geigy AG -- Registered 1,175
- ----------------------------------------------------------
TOTAL SWITZERLAND 4,315
- ----------------------------------------------------------
THAILAND (0.4%):
MEDIA (0.4%):
250,000 Wattachack PLC 466
- ----------------------------------------------------------
TOTAL THAILAND 466
- ----------------------------------------------------------
UNITED STATES (2.6%):
COMMERCIAL SERVICES (0.9%):
108,000 Professional Staff PLC
ADR (b) 1,053
--------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
112
<PAGE> 115
Schedule of Investments -- Continued
THE VICTORY PORTFOLIOS October 31, 1996
INTERNATIONAL GROWTH FUND (Amounts in Thousands, except shares)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
<S> <C> <C> <C>
CONGLOMERATES (1.3%):
494,000 Jardine Strategic Holdings
Ltd. ADR $ 1,611
--------
TELECOMMUNICATIONS (0.4%):
5,000 Cia Telecommunicaciones de
Chile SA ADR 493
- ----------------------------------------------------------
TOTAL UNITED STATES 3,157
- ----------------------------------------------------------
TOTAL COMMON STOCKS 110,668
- ----------------------------------------------------------
- ----------------------------------------------------------
CONVERTIBLE BONDS (2.0%)
BANKS (0.8%):
$ 943 Mitsubishi Bank
International
Finance-Bermuda,
3.00%, 11/30/02 1,024
ELECTRONICS (0.7%):
720 United Microelectronics,
1.25%, 6/8/04 884
TELECOMMUNICATIONS (0.5%):
500 Bilboa Vizcaya Invest BV
3.50%, 7/12/06 558
- ----------------------------------------------------------
TOTAL CONVERTIBLE BONDS 2,466
- ----------------------------------------------------------
- ----------------------------------------------------------
PREFERRED STOCKS (1.3%)
5,000 CKAG Colonia Konzern AG 302
6,300 SAP AG 849
1,500 Volkswagen AG 455
- ----------------------------------------------------------
TOTAL PREFERRED STOCKS 1,606
- ----------------------------------------------------------
- ----------------------------------------------------------
RIGHTS & WARRANTS (0.1%)
59,318 Air New Zealand Ltd., Class
B Rights(b) 62
- ----------------------------------------------------------
TOTAL RIGHTS & WARRANTS 62
- ----------------------------------------------------------
TOTAL (COST $117,379) (a) $124,625
- ----------------------------------------------------------
</TABLE>
- ---------------
Percentages indicated are based on net assets of $121,635.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation $ 9,476
Unrealized depreciation (2,230)
-------
Net unrealized
appreciation $ 7,246
========
</TABLE>
(b) Represents non-income producing securities.
ADR -- American Depository Receipts
SEE NOTES TO FINANCIAL STATEMENTS.
113
<PAGE> 116
Statements of Assets and Liabilities
October 31, 1996
(Amounts in thousands,
THE VICTORY PORTFOLIOS except per share amounts)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S.
GOVERNMENT PRIME FINANCIAL
OBLIGATIONS OBLIGATIONS RESERVES
FUND(a) FUND FUND
---------- ----------- ---------
<S> <C> <C> <C>
ASSETS:
Investments, at amortized cost $ 301,211 $ 438,530 $ 726,738
Repurchase agreements, at cost 1,058,055 60,572 41,405
- ---------------------------------------------------------------------------------------------------------------
Total 1,359,266 499,102 768,143
Cash 1 -- --
Interest receivable 5,414 2,003 3,534
Prepaid expenses and other assets 3 6 3
- ---------------------------------------------------------------------------------------------------------------
Total Assets 1,364,684 501,111 771,680
- ---------------------------------------------------------------------------------------------------------------
LIABILITIES:
Dividends payable 6,025 1,870 3,184
Payable to brokers for investments purchased -- 2,850 --
Accrued expenses and other payables:
Investment advisory fees 444 144 292
Administration fees 190 62 99
Accounting and transfer agent fees 32 30 23
Shareholder service fees 25 92 --
Other 151 44 92
- ---------------------------------------------------------------------------------------------------------------
Total Liabilities 6,867 5,092 3,690
- ---------------------------------------------------------------------------------------------------------------
NET ASSETS:
Capital 1,357,990 496,006 768,187
Undistributed (distributions in excess of) net investment income (80) -- (173)
Accumulated undistributed net realized gains (losses) from
investment transactions (93) 13 (24)
- ---------------------------------------------------------------------------------------------------------------
Net Assets $1,357,817 $ 496,019 $ 767,990
- ---------------------------------------------------------------------------------------------------------------
Outstanding units of beneficial interest (shares) 1,357,969 496,006 767,905
- ---------------------------------------------------------------------------------------------------------------
Net asset value offering and redemption price per share $ 1.00 $ 1.00 $ 1.00
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Select shares. Investor shares have not commenced operations as of October
31, 1996.
SEE NOTES TO FINANCIAL STATEMENTS.
114
<PAGE> 117
Statements of Assets and Liabilities
October 31, 1996
(Amounts in thousands,
THE VICTORY PORTFOLIOS except per share amounts)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
OHIO
TAX-FREE MUNICIPAL
MONEY MARKET MONEY MARKET
FUND FUND
------------ ------------
<S> <C> <C>
ASSETS:
Investments, at amortized cost $343,513 $558,215
Interest and dividends receivable 2,418 4,676
Prepaid expenses and other assets 4 4
- ----------------------------------------------------------------------------------------------------------
Total Assets 345,935 562,895
- ----------------------------------------------------------------------------------------------------------
LIABILITIES:
Dividends payable 879 1,407
Accrued expenses and other payables:
Investment advisory fees 102 132
Administration fees 45 72
Accounting and transfer agent fees 16 15
Shareholder service fees 59 78
Other 38 60
- ----------------------------------------------------------------------------------------------------------
Total Liabilities 1,139 1,764
- ----------------------------------------------------------------------------------------------------------
NET ASSETS:
Capital 344,791 561,127
Undistributed net investment income -- 2
Accumulated undistributed net realized gains (losses) from investment
transactions 5 2
- ----------------------------------------------------------------------------------------------------------
Net Assets $344,796 $561,131
- ----------------------------------------------------------------------------------------------------------
Outstanding units of beneficial interest (shares) 344,791 561,127
- ----------------------------------------------------------------------------------------------------------
Net asset value
Offering and redemption price per share $ 1.00 $ 1.00
- ----------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
115
<PAGE> 118
Statements of Assets and Liabilities
October 31, 1996
(Amounts in thousands,
THE VICTORY PORTFOLIOS except per share amounts)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LIMITED INVESTMENT GOVERNMENT
TERM INCOME INTERMEDIATE QUALITY GOVERNMENT MORTGAGE
FUND INCOME FUND BOND FUND BOND FUND FUND
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments, at value (Cost $88,344;
$270,156; $147,366; $25,335 & $126,359) $ 88,350 $ 271,279 $ 148,673 $ 25,771 $ 125,343
Interest and dividends receivable 1,645 3,144 2,127 392 772
Receivable for capital shares issued 107 4 156 -- --
Receivable from brokers for investments
sold -- 3,120 1,010 3 3
Prepaid expenses and other assets -- -- -- 2 1
- ----------------------------------------------------------------------------------------------------------------
Total Assets 90,102 277,547 151,966 26,168 126,119
- ----------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable to brokers for investments
purchased -- 5,100 996 -- --
Payable for capital shares redeemed -- -- 3 9 --
Accrued expenses and other payables:
Investment advisory fees 36 138 78 7 53
Administration fees 11 34 19 3 16
Accounting and transfer agent fees 9 10 11 9 10
Shareholder service fees 8 24 14 11
Shareholder service fees -- Class A 2
Other 19 154 38 8 37
- ----------------------------------------------------------------------------------------------------------------
Total Liabilities 83 5,460 1,159 38 127
- ----------------------------------------------------------------------------------------------------------------
NET ASSETS:
Capital 92,119 275,858 159,420 33,192 129,017
Undistributed (distributions in excess
of) net investment income 89 130 (11) 82 (1)
Net unrealized appreciation
(depreciation) from investments 6 1,123 1,307 436 (1,016)
Accumulated undistributed net realized
losses from investment transactions (2,195) (5,024) (9,909) (7,580) (2,008)
- ----------------------------------------------------------------------------------------------------------------
Net Assets $ 90,019 $ 272,087 $ 150,807 $ 26,130 $ 125,992
- ----------------------------------------------------------------------------------------------------------------
Net Assets
Class A $ 24,632
Class B 1,498
- ----------------------------------------------------------------------------------------------------------------
Total $ 26,130
- ----------------------------------------------------------------------------------------------------------------
Outstanding units of beneficial interest (shares)
Class A 2,553
Class B 155
- ----------------------------------------------------------------------------------------------------------------
Total 8,992 28,473 15,659 2,708 11,713
- ----------------------------------------------------------------------------------------------------------------
Net asset value
Redemption price per share $ 10.01 $ 9.56 $ 9.63 $ 10.76
Redemption price per share -- Class A $ 9.65
Offering price per share -- Class B* $ 9.64
- ----------------------------------------------------------------------------------------------------------------
Maximum sales charge 2.00% 4.75% 4.75% 4.75% 4.75%
- ----------------------------------------------------------------------------------------------------------------
Maximum offering price per share
(100%/(100%-maximum sales charge) of
net asset value adjusted to nearest
cent) $ 10.21 $ 10.04 $ 10.11 $ 11.30
Maximum offering price per share
(100%/(100%-maximum sales charge) of
net asset value adjusted to nearest
cent) -- Class A $ 10.13
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
* Redemption price per Class B Share varies based on length of time held.
SEE NOTES TO FINANCIAL STATEMENTS.
116
<PAGE> 119
Statements of Assets and Liabilities
October 31, 1996
(Amounts in thousands,
THE VICTORY PORTFOLIOS except per share amounts)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NATIONAL NEW YORK OHIO
FUND FOR MUNICIPAL TAX-FREE MUNICIPAL
INCOME BOND FUND FUND BOND FUND
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS:
Investments, at value (Cost $19,927; $39,189; $14,834 &
$69,716) $20,711 $39,495 $15,952 $72,277
Interest and dividends receivable 161 628 318 1,468
Receivable for capital shares issued -- 55 1 --
Receivable from brokers for investments sold 2 -- -- 2,733
Prepaid expenses and other assets 7 41 10 --
- ----------------------------------------------------------------------------------------------------------------
Total Assets 20,881 40,219 16,281 76,478
- ----------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable to brokers for investments purchased -- 1,378 -- 2,870
Payable for capital shares redeemed 37 33 -- --
Accrued expenses and other payables:
Investment advisory fees -- -- -- 29
Administration fees 1 5 1 9
Accounting and transfer agent fees 16 20 7 8
Shareholder service fees 4 -- -- 7
Shareholder service fees -- Class A 6 1
Shareholder service and 12b-1 fees -- Class B 1 --
Other 7 10 3 92
- ----------------------------------------------------------------------------------------------------------------
Total Liabilities 65 1,453 12 3,015
- ----------------------------------------------------------------------------------------------------------------
NET ASSETS:
Capital 21,752 38,843 15,033 70,863
Undistributed net investment income 1 17 62 39
Net unrealized appreciation from investments 784 306 1,118 2,561
Accumulated undistributed net realized gains (losses)
from investment transactions (1,721) (400) 56 --
- ----------------------------------------------------------------------------------------------------------------
Net Assets $20,816 $38,766 $16,269 $73,463
- ----------------------------------------------------------------------------------------------------------------
Net Assets
Class A $36,958 $13,754
Class B 1,808 2,515
- ----------------------------------------------------------------------------------------------------------------
Total $38,766 $16,269
- ----------------------------------------------------------------------------------------------------------------
Outstanding units of beneficial interest (shares)
Class A 3,638 1,080
Class B 178 197
- ----------------------------------------------------------------------------------------------------------------
Total 2,132 3,816 1,277 6,426
- ----------------------------------------------------------------------------------------------------------------
Net asset value
Redemption price per share $ 9.77 $ 11.43
Redemption price per share -- Class A $ 10.16 $ 12.73
Offering price per share -- Class B* $ 10.16 $ 12.74
- ----------------------------------------------------------------------------------------------------------------
Maximum sales charge 2.00% 4.75% 4.75% 4.75%
- ----------------------------------------------------------------------------------------------------------------
Maximum offering price per share (100%/(100% -- maximum
sales charges) of net asset value adjusted to nearest
cent) $ 9.97 $ 12.00
Maximum offering price per share (100%/(100% -- maximum
sales charge) of net asset value adjusted to nearest
cent) -- Class A $ 10.67 $ 13.36
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
* Redemption price per Class B Share varies based on length of time held.
SEE NOTES TO FINANCIAL STATEMENTS.
117
<PAGE> 120
Statements of Assets and Liabilities
October 31, 1996
(Amounts in thousands,
THE VICTORY PORTFOLIOS except per share amounts)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BALANCED STOCK INDEX DIVERSIFIED
FUND FUND STOCK FUND VALUE FUND GROWTH FUND
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments, at value (Cost $236,773;
$221,337; $483,043; $292,902 &
$109,847) $ 274,331 $ 276,335 $ 566,455 $ 382,752 $ 148,469
Interest and dividends receivable 1,555 341 701 598 166
Receivable for capital shares issued 6 -- 508 -- --
Receivable from brokers for investments
sold 608 118 13,484 340 1
Net variation margin on open futures
contracts -- 581 -- -- --
Prepaid expenses and other assets 16 2 2 3
- ----------------------------------------------------------------------------------------------------------------
Total Assets 276,516 277,375 581,150 383,692 148,639
- ----------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for capital shares redeemed 8 -- 56 -- --
Payable to brokers for investments
purchased 1,177 92 1,155 1,161 699
Accrued expenses and other payables:
Investment advisory fees 198 99 314 311 125
Administration fees 35 -- 72 48 19
Accounting and transfer agent fees 24 20 66 15 11
Shareholder service fees 30 12
Shareholder service fees -- Class A 26 54
Shareholder service and 12b-1 fees --
Class B 1 6
Other 62 40 46 44 20
- ----------------------------------------------------------------------------------------------------------------
Total Liabilities 1,531 251 1,769 1,609 886
- ----------------------------------------------------------------------------------------------------------------
NET ASSETS:
Capital 229,498 215,551 428,203 274,254 102,775
Undistributed net investment income 123 555 291 416 53
Net unrealized appreciation from
investments 37,742 58,050 83,412 89,850 38,622
Net unrealized depreciation from
translation of assets and liabilities
in foreign currencies (180) -- -- -- --
Accumulated undistributed net realized
(losses) gains from investment
transactions 8,053 2,968 67,475 17,563 6,303
Accumulated undistributed net realized
gains (losses) from foreign currency
transactions (251) -- -- -- --
- ----------------------------------------------------------------------------------------------------------------
Net Assets $ 274,985 $ 277,124 $ 579,381 $ 382,083 $ 147,753
- ----------------------------------------------------------------------------------------------------------------
Net Assets
Class A $ 273,553 $ 571,153
Class B 1,432 8,228
- ----------------------------------------------------------------------------------------------------------------
Total $ 274,985 $ 579,381
- ----------------------------------------------------------------------------------------------------------------
Outstanding units of beneficial interest (shares)
Class A 22,185 36,254
Class B 116 524
- ----------------------------------------------------------------------------------------------------------------
22,301 18,663 36,778 26,944 10,141
- ----------------------------------------------------------------------------------------------------------------
Net asset value
Redemption price per share $ 14.85 $ 14.18 $ 14.57
Redemption price per share -- Class A $ 12.33 $ 15.75
Offering price per share -- Class B* $ 12.34 $ 15.71
- ----------------------------------------------------------------------------------------------------------------
Maximum sales charge 4.75% 4.75% 4.75% 4.75% 4.75%
- ----------------------------------------------------------------------------------------------------------------
Maximum offering price per share
(100%/(100%-maximum sales charge) of
net asset value adjusted to nearest
cent) $ 15.59 $ 14.89 $ 15.30
Maximum offering price per share
(100%/(100%-maximum sales Charge) of
net asset value adjusted to nearest
cent) -- Class A $ 12.94 $ 16.54
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
* Redemption price per Class B Share varies based on length of time held.
SEE NOTES TO FINANCIAL STATEMENTS.
118
<PAGE> 121
Statements of Assets and Liabilities
October 31, 1996
(Amounts in thousands,
THE VICTORY PORTFOLIOS except per share amounts)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SPECIAL SPECIAL OHIO REGIONAL INTERNATIONAL
VALUE GROWTH STOCK GROWTH
FUND FUND FUND FUND
-------- ------- ------------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Investments, at value (Cost $242,913; $77,827;
$27,176 & $117,379) $285,620 $88,121 $45,673 $ 124,625
Interest and dividends receivable 406 33 49 348
Receivable for capital shares issued 188 -- 2 1
Receivable from brokers for investments sold 5,076 2,606 -- 3,952
Reclaims receivable -- -- -- 308
Prepaid expenses and other assets 7 -- -- 6
- ---------------------------------------------------------------------------------------------------------------
Total Assets 291,297 90,760 45,724 129,240
- ---------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for capital shares redeemed 3 -- -- --
Payable to brokers for investments purchased 1,090 2,801 39 7,399
Accrued expenses and other payables:
Investment advisory fees 244 74 29 113
Administration fees 37 11 6 15
Accounting, and transfer agent fees 20 13 18 23
Shareholder service fees 7
Shareholder service fees -- Class A 28 5 11
Other 29 17 7 44
- ---------------------------------------------------------------------------------------------------------------
Total Liabilities 1,451 2,923 104 7,605
- ---------------------------------------------------------------------------------------------------------------
NET ASSETS:
Capital 226,652 73,476 26,252 110,033
Undistributed (distributions in excess of) net
investment income 658 (3) 1 128
Net unrealized appreciation from investments 42,707 10,294 18,497 8,204
Net unrealized depreciation from translation of
assets and liabilities in foreign currencies -- -- -- (952)
Accumulated undistributed net realized gains (losses)
from investment transactions 19,829 4,070 870 1,369
Accumulated undistributed net realized gains from
foreign currency transactions -- -- -- 2,853
- ---------------------------------------------------------------------------------------------------------------
Net Assets $289,846 $87,837 $45,620 $ 121,635
- ---------------------------------------------------------------------------------------------------------------
Net Assets
Class A $289,460 $45,294 $ 121,517
Class B 386 326 118
- ---------------------------------------------------------------------------------------------------------------
Total $289,846 $45,620 $ 121,635
- ---------------------------------------------------------------------------------------------------------------
Outstanding units of beneficial interest (shares)
Class A 20,450 2,523 9,343
Class B 27 18 9
- ---------------------------------------------------------------------------------------------------------------
Total 20,477 6,211 2,541 9,352
- ---------------------------------------------------------------------------------------------------------------
Net asset value
Redemption price per share $ 14.14
Redemption price per share-Class A $ 14.15 $ 17.95 $ 13.01
Offering and redemption price per share-Class B $ 14.09 $ 17.87 $ 12.93
- ---------------------------------------------------------------------------------------------------------------
Maximum sales charge 4.75% 4.75% 4.75% 4.75%
- ---------------------------------------------------------------------------------------------------------------
Maximum offering price per share
(100%/(100%-maximum sales charge) of net asset
value adjusted to nearest cent) $ 14.85
Maximum offering price per share
(100%/(100%-maximum sales charge) of net asset
value adjusted to nearest cent) -- Class A $ 14.86 $ 18.85 $ 13.66
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
119
<PAGE> 122
Statements of Operations
For the Year Ended October 31, 1996
THE VICTORY PORTFOLIOS (Amounts in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S.
GOVERNMENT PRIME FINANCIAL
OBLIGATIONS OBLIGATIONS RESERVES
FUND(a) FUND FUND
---------- ----------- ---------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income $ 65,501 $26,000 $44,299
- ----------------------------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees 4,209 1,628 3,984
Administration fees 1,804 698 1,196
Shareholder service fees 280 1,080 --
Accounting fees 85 85 78
Custodian fees 237 103 160
Legal and audit fees 251 107 198
Trustees' fees and expenses 49 19 35
Transfer agent fees 55 71 43
Registration and filing fees 160 16 104
Printing fees 170 232 46
Other 17 8 104
- ----------------------------------------------------------------------------------------------------------------
Total Expenses 7,317 4,047 5,948
Expenses voluntarily reduced -- -- (582)
- ----------------------------------------------------------------------------------------------------------------
Net Expenses 7,317 4,047 5,366
- ----------------------------------------------------------------------------------------------------------------
Net Investment Income 58,184 21,953 38,933
- ----------------------------------------------------------------------------------------------------------------
REALIZED GAINS FROM INVESTMENTS:
Net realized gains from investment transactions 24 13 4
- ----------------------------------------------------------------------------------------------------------------
Change in net assets resulting from operations $ 58,208 $21,966 $38,937
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Select shares. Investor Shares have not commenced operations as of October
31, 1996.
SEE NOTES TO FINANCIAL STATEMENTS.
120
<PAGE> 123
Statements of Operations
For the Year Ended October 31, 1996
THE VICTORY PORTFOLIOS (Amounts in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
OHIO
TAX-FREE MUNICIPAL
MONEY MARKET MONEY MARKET
FUND FUND
------------ ------------
<S> <C> <C>
INVESTMENT INCOME:
Interest income $ 12,018 $ 20,963
- ----------------------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees 1,124 2,836
Administration fees 482 851
Shareholder service fees 567 1,234
Accounting fees 108 65
Custodian fees 68 116
Legal and audit fees 75 110
Trustees' fees and expenses 13 27
Transfer agent fees 25 36
Registration and filing fees 40 80
Printing fees 51 143
Other 5 9
- ----------------------------------------------------------------------------------------------------------
Total Expenses 2,558 5,507
Expenses voluntarily reduced (67) (1,706)
- ----------------------------------------------------------------------------------------------------------
Net Expenses 2,491 3,801
- ----------------------------------------------------------------------------------------------------------
Net Investment Income 9,527 17,162
- ----------------------------------------------------------------------------------------------------------
REALIZED GAINS FROM INVESTMENTS:
Net realized gains from investment transactions 3 --
- ----------------------------------------------------------------------------------------------------------
Change in net assets resulting from operations $ 9,530 $ 17,162
- ----------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
121
<PAGE> 124
Statements of Operations
For the Year Ended October 31, 1996
THE VICTORY PORTFOLIOS (Amounts in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LIMITED
TERM INVESTMENT GOVERNMENT
INCOME INTERMEDIATE QUALITY GOVERNMENT MORTGAGE
FUND INCOME FUND BOND FUND BOND FUND FUND
------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income $ 9,713 $ 14,112 $ 9,460 $ 1,802 $ 9,517
Dividend income -- 70 73 10 41
- --------------------------------------------------------------------------------------------------------------
Total Income 9,713 14,182 9,533 1,812 9,558
- --------------------------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees 718 1,576 1,022 150 650
Administration fees 216 315 205 41 195
Shareholder service fees 148 213 144 134
Shareholder service fees -- Class A 29
Shareholder service fees and 12b-1
fees -- Class B 10
Accounting fees 39 62 53 33 51
Custodian fees 33 45 37 9 36
Legal and audit fees 38 51 36 23 30
Trustees' fees and expenses 7 9 6 1 6
Transfer agent fees 20 18 17 22 30
Registration and filing fees 39 26 22 22 13
Printing fees 20 21 16 4 18
Other 1 3 1 -- 2
- --------------------------------------------------------------------------------------------------------------
Total Expenses 1,279 2,339 1,559 344 1,165
Expenses voluntarily reduced (47) (358) (185) (65) (3)
- --------------------------------------------------------------------------------------------------------------
Net Expenses 1,232 1,981 1,374 279 1,162
- --------------------------------------------------------------------------------------------------------------
Net Investment Income 8,481 12,201 8,159 1,533 8,396
- --------------------------------------------------------------------------------------------------------------
REALIZED/UNREALIZED GAINS (LOSSES) FROM
INVESTMENTS:
Net realized losses from investment
transactions (475) (1,103) (1,769) (271) (338)
Net change in unrealized appreciation
(depreciation) from investments (1,765) (428) 177 (334) (1,193)
- --------------------------------------------------------------------------------------------------------------
Net realized/unrealized gains (losses)
from investments (2,240) (1,531) (1,592) (605) (1,531)
- --------------------------------------------------------------------------------------------------------------
Change in net assets
resulting from operations $ 6,241 $ 10,670 $ 6,567 $ 928 $ 6,865
- --------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
122
<PAGE> 125
Statements of Operations
For the Year Ended October 31, 1996
THE VICTORY PORTFOLIOS (Amounts in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NATIONAL NEW YORK OHIO
FUND FOR MUNICIPAL TAX-FREE MUNICIPAL
INCOME BOND FUND FUND BOND FUND
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income $1,782 $ 1,686 $1,006 $ 3,691
Dividend income -- 61 11 64
- ------------------------------------------------------------------------------------------------------------
Total Income 1,782 1,747 1,017 3,755
- ------------------------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees 110 206 91 401
Administration fees 33 55 25 100
Shareholder service fees 54 74
Shareholder service fees -- Class A 70 23
Shareholder service fees and 12b-1 fees -- Class B 10 20
Accounting fees 57 65 51 52
Custodian fees 20 15 5 15
Legal and audit fees 14 15 17 17
Trustees' fees and expenses 1 2 1 2
Transfer agent fees 44 41 21 19
Registration and filing fees 15 25 6 5
Printing fees 33 10 17 14
Other -- -- 1 1
- ------------------------------------------------------------------------------------------------------------
Total Expenses 381 514 278 700
Expenses voluntarily reduced (108) (242) (98) (103)
Expenses reimbursed by distributor (49) (153) (11) --
- ------------------------------------------------------------------------------------------------------------
Net Expenses 224 119 169 597
- ------------------------------------------------------------------------------------------------------------
Net Investment Income 1,558 1,628 848 3,158
- ------------------------------------------------------------------------------------------------------------
REALIZED/UNREALIZED GAINS (LOSSES) FROM INVESTMENTS:
Net realized gains (losses) from investment transactions 28 (400) 56 549
Net change in unrealized appreciation (depreciation) from
investments (261) (189) (194) 148
- ------------------------------------------------------------------------------------------------------------
Net realized/unrealized gains (losses) from investments (233) (589) (138) 697
- ------------------------------------------------------------------------------------------------------------
Change in net assets resulting from operations $1,325 $ 1,039 $ 710 $ 3,855
- ------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
123
<PAGE> 126
Statements of Operations
For the Year Ended October 31, 1996
THE VICTORY PORTFOLIOS (Amounts in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BALANCED STOCK DIVERSIFIED GROWTH
FUND INDEX FUND STOCK FUND VALUE FUND FUND
-------- ---------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income $ 6,860 $ 1,552 $ 713 $ 474 $ 123
Dividend income 3,662 4,412 11,388 9,454 2,343
Foreign tax withholding (10) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------
Total Income 10,512 5,964 12,101 9,928 2,466
- ------------------------------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees 2,382 1,319 3,204 3,441 1,252
Administration fees 357 330 739 516 188
Shareholder service fees 339 126
Shareholder service fees -- Class A 251 533
Shareholder service fees and 12b-1 fees --
Class B 6 21
Accounting fees 94 87 159 71 35
Custodian fees 64 89 105 70 27
Legal and audit fees 60 61 125 89 39
Amortization of organization costs 1 1 -- 2 --
Trustees' fees and expenses 10 9 20 13 4
Transfer agent fees 91 20 292 25 35
Registration and filing fees 58 26 53 32 16
Printing fees 32 20 78 29 17
Other 2 2 8 5 2
- ------------------------------------------------------------------------------------------------------------------
Total Expenses 3,408 1,964 5,337 4,632 1,741
Expenses voluntarily reduced (376) (712) (116) (62) (71)
- ------------------------------------------------------------------------------------------------------------------
Net Expenses 3,032 1,252 5,221 4,570 1,670
- ------------------------------------------------------------------------------------------------------------------
Net Investment Income 7,480 4,712 6,880 5,358 796
- ------------------------------------------------------------------------------------------------------------------
REALIZED/UNREALIZED GAINS (LOSSES) FROM
INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gains from investment transactions 8,750 3,924 67,743 17,738 6,303
Net realized gains (losses) from foreign
currency transactions (289) -- -- -- --
Net change in unrealized appreciation from
investments 19,657 35,634 41,714 51,084 21,351
Net change in unrealized appreciation from
translation of assets and liabilities in
foreign currencies 56 -- -- -- --
- ------------------------------------------------------------------------------------------------------------------
Net realized/unrealized gains from investments
and foreign currencies 28,174 39,558 109,457 68,822 27,654
- ------------------------------------------------------------------------------------------------------------------
Change in net assets resulting from operations $35,654 $ 44,270 $116,337 $ 74,180 $28,450
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
124
<PAGE> 127
Statements of Operations
For the Year Ended October 31, 1996
THE VICTORY PORTFOLIOS (Amounts in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SPECIAL OHIO
SPECIAL GROWTH REGIONAL INTERNATIONAL
VALUE FUND FUND STOCK FUND GROWTH FUND
---------- ------- ---------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income $ 331 $ 142 $ 62 $ 307
Dividend income 5,005 489 877 2,460
Foreign tax withholding -- -- -- (68)
- ------------------------------------------------------------------------------------------------------------------
Total Income 5,336 631 939 2,699
- ------------------------------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees 2,376 745 323 1,255
Administration fees 356 113 65 171
Shareholder service fees 74
Shareholder service fees -- Class A 249 46 117
Shareholder service fees and 12b-1 fees -- Class B 1 1 --
Accounting fees 79 58 51 91
Custodian fees 63 44 15 201
Legal and audit fees 61 27 11 35
Amortization of organization costs 1 1 -- --
Trustees' fees and expenses 10 2 2 4
Transfer agent fees 68 25 59 75
Registration and filing fees 34 20 12 26
Printing fees 26 18 21 24
Other 2 1 1 2
- ------------------------------------------------------------------------------------------------------------------
Total Expenses 3,326 1,128 607 2,001
Expenses voluntarily reduced (71) (34) (5) (30)
- ------------------------------------------------------------------------------------------------------------------
Net Expenses 3,255 1,094 602 1,971
- ------------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) 2,081 (463) 337 728
- ------------------------------------------------------------------------------------------------------------------
REALIZED/UNREALIZED GAINS (LOSSES) FROM INVESTMENTS AND
FOREIGN CURRENCIES:
Net realized gains from investment transactions 20,290 4,480 869 7,046
Net realized gains (losses) from foreign currency
transactions -- -- -- (1,537)
Net change in unrealized appreciation (depreciation) from
investments 21,511 7,642 5,662 2,689
Net change in unrealized appreciation (depreciation) from
translation of assets and liabilities in foreign
currencies -- -- -- (3,200)
- ------------------------------------------------------------------------------------------------------------------
Net realized/unrealized gains from investments and
foreign currencies 41,801 12,122 6,531 4,998
- ------------------------------------------------------------------------------------------------------------------
Change in net assets resulting from operations $ 43,882 $11,659 $6,868 $ 5,726
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
125
<PAGE> 128
Statements of Changes in Net Assets
THE VICTORY PORTFOLIOS (Amounts in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. GOVERNMENT
OBLIGATIONS FUND PRIME OBLIGATIONS FUND FINANCIAL RESERVES FUND
-------------------------- ------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED
YEAR ENDED YEAR ENDED OCTOBER YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1996(a) 1995(b) 1996 1995 1996 1995 (c)
----------- ----------- ---------- ----------- ----------- -----------
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income $ 58,184 $ 33,876 $ 21,953 $ 27,763 $ 38,933 $ 38,318
Net realized gains (losses) from
investment transactions 24 113 13 -- 4 --
- ---------------------------------------------------------------------------------------------------------------------------
Change in net assets resulting from
operations 58,208 33,989 21,966 27,763 38,937 38,318
- ---------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (58,184) (33,876) (21,953) (27,763) (38,877) (38,264)
- ---------------------------------------------------------------------------------------------------------------------------
Change in net assets from
distributions to shareholders (58,184) (33,876) (21,953) (27,763) (38,877) (38,264)
- ---------------------------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
Proceeds from shares issued 3,877,755 1,782,066 1,282,599 1,719,347 2,348,380 4,803,998
Proceeds from shares issued in
connection with acquisition -- 242,973 -- -- -- --
Dividends reinvested 13,036 3,962 18,208 15,471 2,546 1,265
Cost of shares redeemed (3,497,927) (1,476,233) (1,261,067) (2,060,855) (2,345,866) (4,475,713)
- ---------------------------------------------------------------------------------------------------------------------------
Change in net assets from capital
transactions 392,864 552,768 39,740 (326,037) 5,060 329,550
- ---------------------------------------------------------------------------------------------------------------------------
Change in net assets 392,888 552,881 39,753 (326,037) 5,120 329,604
NET ASSETS:
- ---------------------------------------------------------------------------------------------------------------------------
Beginning of period 964,929 412,048 456,266 782,303 762,870 433,266
End of period $ 1,357,817 $ 964,929 $ 496,019 $ 456,266 $ 767,990 $ 762,870
- ---------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Issued 3,877,755 1,782,107 1,282,599 1,719,347 2,348,379 4,803,998
Issued in connection with
acquisition -- 242,973 -- -- -- --
Reinvested 13,036 3,962 18,208 15,471 2,546 1,265
Redeemed (3,497,927) (1,476,233) (1,261,167) (2,060,755) (2,345,866) (4,475,713)
- ---------------------------------------------------------------------------------------------------------------------------
Change in shares 392,864 552,809 39,640 (325,937) 5,059 329,550
- ---------------------------------------------------------------------------------------------------------------------------
<FN>
(a) Select shares. Investor shares have not commenced operations as of October
31, 1996.
(b) Effective June 5, 1995, the Victory U.S. Treasury Money Market Portfolio
merged into the U.S. Government Obligations Fund. Changes in net assets for
periods prior to June 5, 1995 represents the U.S. Government Obligations
Fund.
(c) Effective June 5, 1995, the Victory Financial Reserve Portfolio became the
Financial Reserves Fund.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
126
<PAGE> 129
Statements of Changes in Net Assets
THE VICTORY PORTFOLIOS (Amounts in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
OHIO MUNICIPAL MONEY MARKET FUND
-------------------------------------------
TAX-FREE MONEY MARKET FUND TWO
---------------------------- MONTHS
YEAR ENDED YEAR ENDED YEAR ENDED ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER AUGUST 31,
1996 1995 1996 31, 1995 1995(a)
----------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income $ 9,527 $ 8,303 $ 17,162 $ 2,859 $ 13,393
Net realized gains (losses) from
investment transactions 3 62 -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
Change in net assets resulting from
operations 9,530 8,365 17,162 2,859 13,393
- ----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (9,527) (8,303) (17,162) (2,859) (13,175)
In excess of net investment income -- -- (216) -- --
From net realized gains from investment
transactions (3) -- -- -- --
In excess of net realized gain from
investment transactions (57) -- (17) -- --
- ----------------------------------------------------------------------------------------------------------------------------
Change in net assets from distributions to
shareholders (9,587) (8,303) (17,395) (2,859) (13,175)
- ----------------------------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
Proceeds from shares issued 562,564 518,760 1,157,311 363,385 1,872,345
Dividends reinvested 3,035 900 10,022 472 945
Cost of shares redeemed (528,472) (410,557) (1,116,601) (355,896) (1,688,969)
- ----------------------------------------------------------------------------------------------------------------------------
Change in net assets from capital
transactions 37,127 109,103 50,732 7,961 184,321
- ----------------------------------------------------------------------------------------------------------------------------
Change in net assets 37,070 109,165 50,499 7,961 184,539
NET ASSETS:
Beginning of period 307,726 198,561 510,632 502,671 318,132
- ----------------------------------------------------------------------------------------------------------------------------
End of period $ 344,796 $ 307,726 $ 561,131 $ 510,632 $ 502,671
- ----------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Issued 562,564 518,760 1,157,311 363,385 1,872,345
Reinvested 3,035 900 10,022 472 945
Redeemed (528,472) (410,557) (1,116,601) (355,896) (1,688,969)
- ----------------------------------------------------------------------------------------------------------------------------
Change in shares 37,127 109,103 50,732 7,961 184,321
- ----------------------------------------------------------------------------------------------------------------------------
<FN>
(a) Effective June 5, 1995, the Victory Ohio Municipal Money Market Portfolio
became the Ohio Municipal Money Market Fund.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
127
<PAGE> 130
Statements of Changes in Net Assets
THE VICTORY PORTFOLIOS (Amounts in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LIMITED TERM INTERMEDIATE INVESTMENT QUALITY
INCOME FUND INCOME FUND BOND FUND
-------------------------- -------------------------- --------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1996 1995(a) 1996 1995 1996 1995(a)
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income $ 8,481 $ 8,444 $ 12,201 $ 8,578 $ 8,159 $ 6,906
Net realized gains (losses) from
investment transactions (475) 292 (1,103) (1,399) (1,769) 44
Net change in unrealized appreciation
(depreciation) from investments (1,765) 4,613 (428) 7,769 177 6,997
- -------------------------------------------------------------------------------------------------------------------------------
Change in net assets resulting
from operations 6,241 13,349 10,670 14,948 6,567 13,947
- -------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (8,481) (8,403) (12,201) (8,578) (7,938) (6,906)
In excess of net investment income (125) -- (14) (56) -- (64)
In excess of net realized gains from
investment transactions (122) -- (52) -- -- --
Tax Return of Capital -- -- -- -- (122) --
- -------------------------------------------------------------------------------------------------------------------------------
Change in net assets from
distributions to shareholders (8,728) (8,403) (12,267) (8,634) (8,060) (6,970)
- -------------------------------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
Proceeds from shares issued 29,303 120,676 145,956 73,087 54,446 43,794
Proceeds from shares issued in
connection with acquisition -- 14,263 -- -- -- 27,853
Dividends reinvested 8,683 8,381 12,260 8,632 8,045 6,932
Cost of shares redeemed (117,482) (55,414) (47,813) (37,675) (35,439) (54,993)
- -------------------------------------------------------------------------------------------------------------------------------
Change in net assets from
capital transactions (79,496) 87,906 110,403 44,044 27,052 23,586
- -------------------------------------------------------------------------------------------------------------------------------
Change in net assets (81,983) 92,852 108,806 50,358 25,559 30,563
NET ASSETS:
Beginning of period 172,002 79,150 163,281 112,923 125,248 94,685
- -------------------------------------------------------------------------------------------------------------------------------
End of period $ 90,019 $ 172,002 $ 272,087 $ 163,281 $ 150,807 $ 125,248
- -------------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Issued 2,898 12,215 15,335 7,738 5,668 4,675
Issued in connection with acquisition -- 1,398 -- -- -- 2,849
Reinvested 864 836 1,286 915 840 735
Redeemed (11,710) (5,518) (5,005) (4,005) (3,676) (5,833)
- -------------------------------------------------------------------------------------------------------------------------------
Change in shares (7,948) 8,931 11,616 4,648 2,832 2,426
- -------------------------------------------------------------------------------------------------------------------------------
<FN>
(a) Effective June 5, 1995, the Victory Short-Term Government Income Portfolio
merged into the Limited Term Income Fund and the Victory Corporate Bond
Portfolio merged into the Investment Quality Bond Fund. Changes in net
assets for the period prior to June 5, 1995 represent the Limited Term
Income Fund and the Investment Quality Bond Fund, respectively.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
128
<PAGE> 131
Statements of Changes in Net Assets
THE VICTORY PORTFOLIOS (Amounts in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GOVERNMENT BOND FUND
--------------------------------------- FUND FOR
SIX MONTHS GOVERNMENT MORTGAGE FUND INCOME
ENDED --------------------------- -----------
YEAR ENDED OCTOBER YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 31, APRIL 30, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1996 1995(a) 1995 1996 1995 1996
----------- ---------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income $ 1,533 $ 1,716 $ 6,571 $ 8,396 $ 9,792 $ 1,558
Net realized gains (losses)
from investment
transactions (271) 3,139 (7,388) (338) (2,407) 28
Net change in unrealized
appreciation (depreciation)
from investments (334) (101) 5,974 (1,193) 11,075 (261)
- -----------------------------------------------------------------------------------------------------------------------
Change in net assets resulting
from operations 928 4,754 5,157 6,865 18,460 1,325
- -----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (7,983) (9,746) (1,558)
From net investment income by
class:
Class A (1,470) (1,702) (6,395)
Class B (63) (14) (1)
In excess of net investment
income (16) (48) -- -- -- (65)
In excess of net realized
gains from investment
transactions -- -- -- -- (1,234) --
Tax return of capital -- -- -- (180) (218) (102)
- -----------------------------------------------------------------------------------------------------------------------
Change in net assets from
distributions to shareholders (1,549) (1,764) (6,396) (8,163) (11,198) (1,725)
- -----------------------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
Proceeds from shares issued 6,505 3,800 13,782 22,111 36,846 4,189
Dividends reinvested 1,510 1,292 75 8,134 11,183 1,208
Cost of shares redeemed (10,029) (64,039) (48,532) (39,058) (67,356) (6,937)
- -----------------------------------------------------------------------------------------------------------------------
Change in net assets from
capital transactions (2,014) (58,947) (34,675) (8,813) (19,327) (1,540)
- -----------------------------------------------------------------------------------------------------------------------
Change in net assets (2,635) (55,957) (35,914) (10,111) (12,065) (1,940)
NET ASSETS:
Beginning of period 28,765 84,722 120,636 136,103 148,168 22,756
- -----------------------------------------------------------------------------------------------------------------------
End of period $26,130 $ 28,765 $ 84,722 $ 125,992 $ 136,103 $ 20,816
- ----------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Issued 671 390 1,475 2,051 3,517 425
Reinvested 156 132 8 758 1,065 124
Redeemed (1,035) (6,585) (5,266) (3,629) (6,399) (708)
- -----------------------------------------------------------------------------------------------------------------------
Change in shares (208) (6,063) (3,783) (820) (1,817) (159)
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
FUND FOR
INCOME
YEAR ENDED
OCTOBER 31,
1995(a)
-----------
<S> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income $ 1,894
Net realized gains (losses)
from investment
transactions (328)
Net change in unrealized
appreciation (depreciation)
from investments 1,370
- --------------------------------------------
Change in net assets resulting
from operations 2,936
- --------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (1,704)
From net investment income by
class:
Class A
Class B
In excess of net investment
income --
In excess of net realized
gains from investment
transactions --
Tax return of capital --
- --------------------------------------------
Change in net assets from
distributions to shareholders (1,704)
- --------------------------------------------
CAPITAL TRANSACTIONS:
Proceeds from shares issued 3,698
Dividends reinvested 569
Cost of shares redeemed (12,101)
- --------------------------------------------
Change in net assets from
capital transactions (7,834)
- --------------------------------------------
Change in net assets (6,602)
NET ASSETS:
Beginning of period 29,358
- --------------------------------------------
End of period $ 22,756
- --------------------------------------------
SHARE TRANSACTIONS:
Issued 382
Reinvested 58
Redeemed (1,261)
- --------------------------------------------
Change in shares (821)
- --------------------------------------------
<FN>
(a) Effective June 5, 1995, the Victory Government Bond Portfolio and the
Victory Fund for Income Portfolio became the Government Bond Fund and Fund
for Income, respectively.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
129
<PAGE> 132
Statements of Changes in Net Assets
THE VICTORY PORTFOLIOS (Amounts in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NATIONAL MUNICIPAL BOND FUND
---------------------------------- NEW YORK TAX-FREE FUND
SIX MONTHS ----------------------- OHIO MUNICIPAL BOND FUND
YEAR ENDED ENDED YEAR ENDED --------------------------
OCTOBER OCTOBER YEAR ENDED OCTOBER YEAR ENDED YEAR ENDED YEAR ENDED
31, 31, APRIL 30, 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1996 1995(a) 1995 1996 1995(a) 1996 1995
---------- ---------- ---------- ---------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income $ 1,628 $ 242 $ 108 $ 848 $ 940 $ 3,158 $ 2,760
Net realized gains (losses) from
investment transactions (400) 35 10 56 10 549 (128)
Net change in unrealized appreciation
(depreciation) from investments (189) 326 179 (194) 740 148 5,317
- ------------------------------------------------------------------------------------------------------------------------------
Change in net assets resulting from
operations 1,039 603 297 710 1,690 3,855 7,949
- ------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (3,158) (2,760)
From net investment income by class:
Class A (1,581) (221) (108) (744) (830)
Class B (43) (6) -- (104) (42)
In excess of net investment income -- -- (3) (6) -- (15) (41)
From net realized gains from
investment transactions -- -- -- (10) (10) (11) --
In excess of net realized gains from
investment transactions (45) -- -- -- (219) -- --
- ------------------------------------------------------------------------------------------------------------------------------
Change in net assets from distributions
to shareholders (1,669) (227) (111) (864) (1,101) (3,184) (2,801)
- ------------------------------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
Proceeds from shares issued 64,998 6,782 4,792 3,250 5,457 23,494 15,932
Dividends reinvested 1,564 216 103 635 509 3,096 2,784
Cost of shares redeemed (39,586) (219) (310) (4,789) (7,068) (13,829) (21,537)
- ------------------------------------------------------------------------------------------------------------------------------
Change in net assets from capital
transactions 26,976 6,779 4,585 (904) (1,102) 12,761 (2,821)
- ------------------------------------------------------------------------------------------------------------------------------
Change in net assets 26,346 7,155 4,771 (1,058) (513) 13,432 2,327
NET ASSETS:
Beginning of period 12,420 5,265 494 17,327 17,840 60,031 57,704
- ------------------------------------------------------------------------------------------------------------------------------
End of period $ 38,766 $ 12,420 $5,265 $ 16,269 $17,327 $ 73,463 $ 60,031
- ------------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Issued 6,352 685 519 248 443 2,070 1,474
Reinvested 156 21 11 50 39 273 257
Redeemed (3,926) (21) (33) (369) (574) (1,219) (2,014)
- ------------------------------------------------------------------------------------------------------------------------------
Change in shares 2,582 685 497 (71) (92) 1,124 (283)
- ------------------------------------------------------------------------------------------------------------------------------
<FN>
(a) Effective June 5, 1995, the Victory National Municipal Bond Portfolio and
Victory New York Tax-Free Portfolio became the National Municipal Bond Fund
and New York Tax-Free Fund, respectively.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
130
<PAGE> 133
Statements of Changes in Net Assets
THE VICTORY PORTFOLIOS (Amounts in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BALANCED FUND STOCK INDEX FUND DIVERSIFIED STOCK FUND
------------------------------ ---------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER OCTOBER 31, OCTOBER OCTOBER 31, OCTOBER OCTOBER 31,
31, 1996 1995 31, 1996 1995 31, 1996 1995
---------- ----------------- ---------- --------------- ---------- --------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income $ 7,480 $ 6,680 $ 4,712 $ 2,888 $ 6,880 $ 6,928
Net realized gains from
investment transactions 8,750 2,774 3,924 2,091 67,743 32,800
Net realized gains (losses)
from foreign currency
transactions (289) 11 -- -- -- --
Net change in unrealized
appreciation from
investments 19,657 20,046 35,634 20,860 41,714 29,446
Change in unrealized
appreciation (depreciation)
from translation of assets
and liabilities in foreign
currencies 56 (236) -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
Change in net assets resulting
from operations 35,654 29,275 44,270 25,839 116,337 69,174
- ---------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (6,680) (4,526) (2,709) (6,928)
From net investment income by
class:
Class A (7,390) (6,646)
Class B (12) (23)
In excess of net investment
income -- (73) -- -- -- (277)
From net realized gains from
investment transactions (1,376) -- (3,041) -- (33,023) (29,668)
- ---------------------------------------------------------------------------------------------------------------------------
Change in net assets from
distributions to shareholders (8,778) (6,753) (7,567) (2,709) (39,692) (36,873)
- ---------------------------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
Proceeds from shares issued 86,059 111,470 109,909 74,489 141,320 144,852
Dividends reinvested 8,753 6,726 7,563 2,709 39,534 36,846
Cost of shares redeemed (47,776) (66,930) (37,873) (29,192) (87,667) (67,677)
- ---------------------------------------------------------------------------------------------------------------------------
Change in net assets from
capital transactions 47,036 51,266 79,599 48,006 93,187 114,021
- ---------------------------------------------------------------------------------------------------------------------------
Change in net assets 73,912 73,788 116,302 71,136 169,832 146,322
NET ASSETS:
Beginning of period 201,073 127,285 160,822 89,686 409,549 263,227
- ---------------------------------------------------------------------------------------------------------------------------
End of period $274,985 $ 201,073 $277,124 $ 160,822 $579,381 $409,549
- ---------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Issued 7,405 11,125 7,985 6,638 9,901 11,560
Reinvested 754 659 563 241 3,022 3,276
Redeemed (4,113) (6,762) (2,755) (2,815) (6,214) (5,529)
- ---------------------------------------------------------------------------------------------------------------------------
Change in shares 4,046 5,022 5,793 4,064 6,709 9,307
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
131
<PAGE> 134
Statements of Changes in Net Assets
THE VICTORY PORTFOLIOS (Amounts in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE FUND GROWTH FUND SPECIAL VALUE FUND
-------------------------- -------------------------- --------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1996 1995(a) 1996 1995(a) 1996 1995
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income $ 5,358 $ 6,585 $ 796 $ 746 $ 2,081 $ 2,090
Net realized gains (losses) from
investment transactions 17,738 8,493 6,303 4,983 20,290 5,442
Net change in unrealized appreciation
(depreciation) from investments 51,084 39,805 21,351 15,906 21,511 18,049
- --------------------------------------------------------------------------------------------------------------------------------
Change in net assets resulting from
operations 74,180 54,883 28,450 21,635 43,882 25,581
- --------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (5,326) (6,585) (765) (746) (2,090)
From net investment income by class:
Class A (1,910)
In excess of net investment income -- (81) -- (37) -- (36)
From net realized gains from
investment transactions (8,483) (3,145) (4,494) (298) (5,473) (588)
- --------------------------------------------------------------------------------------------------------------------------------
Change in net assets from
distributions to shareholders (13,809) (9,811) (5,259) (1,081) (7,383) (2,714)
- --------------------------------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
Proceeds from shares issued 66,804 169,259 39,189 10,047 88,238 87,892
Proceeds from shares issued in
connection with acquisition -- 423 -- 65,632 -- --
Dividends reinvested 13,808 9,809 5,250 1,067 7,377 2,712
Cost of shares redeemed (54,771) (116,876) (28,130) (55,968) (36,968) (37,371)
- --------------------------------------------------------------------------------------------------------------------------------
Change in net assets from capital
transactions 25,841 62,615 16,309 20,778 58,647 53,233
- --------------------------------------------------------------------------------------------------------------------------------
Change in net assets 86,212 107,687 39,500 41,332 95,146 76,100
NET ASSETS:
Beginning of period 295,871 188,184 108,253 66,921 194,700 118,600
- --------------------------------------------------------------------------------------------------------------------------------
End of period $ 382,083 $ 295,871 $ 147,753 $ 108,253 $ 289,846 $ 194,700
- --------------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Issued 5,130 16,259 2,989 1,655 6,706 7,864
Issued in connection with acquisition -- 38 -- 5,881 -- --
Reinvested 1,101 940 425 100 591 246
Redeemed (4,214) (10,888) (2,183) (5,267) (2,846) (3,389)
- --------------------------------------------------------------------------------------------------------------------------------
Change in shares 2,017 6,349 1,231 2,369 4,451 4,721
- --------------------------------------------------------------------------------------------------------------------------------
<FN>
(a) Effective June 5, 1995, the Victory Equity Income Portfolio and the Victory
Equity Portfolio merged into the Value Fund and Growth Fund, respectively.
Changes in net assets for periods prior to June 5, 1995 represent the Value
Fund and Growth Fund, respectively.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
132
<PAGE> 135
Statements of Changes in Net Assets
THE VICTORY PORTFOLIOS (Amounts in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
OHIO REGIONAL STOCK INTERNATIONAL GROWTH
SPECIAL GROWTH FUND FUND FUND
------------------------------------------------ ----------------------- -----------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER SIX MONTHS ENDED YEAR ENDED OCTOBER OCTOBER OCTOBER OCTOBER
31, OCTOBER 31, APRIL 30, 31, 31, 31, 31,
1996 1995(a) 1995 1996 1995 1996 1995(a)
---------- ---------------- ---------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income
(loss) $ (463) $ (60) $ 49 $ 337 $ 402 $ 728 $ 696
Net realized gains (losses)
from investment
transactions 4,480 4,556 (2,209) 869 1,485 7,046 (6,203)
Net realized gains (losses)
from foreign currency
transactions -- -- -- -- -- (1,537) 4,365
Net change in unrealized
appreciation
(depreciation) from
investments 7,642 (358) 3,557 5,662 3,578 2,689 (1,929)
Change in unrealized
appreciation
(depreciation) from
translation of assets and
liabilities in foreign
currencies -- -- -- -- -- (3,200) 2,233
- ---------------------------------------------------------------------------------------------------------------------------------
Change in net assets
resulting from operations 11,659 4,138 1,397 6,868 5,465 5,726 (838)
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment income -- -- (49) (402) --
From net investment income
by class:
Class A (337) (144)
In excess of net investment
income -- -- (4) -- (17) -- --
From net realized gains
from investment
transactions -- -- -- (869) (1,485) -- --
In excess of net realized
gains from investment
transactions -- -- -- (616) (214) -- (3,413)
Tax return of capital -- -- -- -- -- -- (512)
- ---------------------------------------------------------------------------------------------------------------------------------
Change in net assets from
distributions to
shareholders -- -- (53) (1,822) (2,118) (144) (3,925)
- ---------------------------------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
Proceeds from shares issued 33,870 14,726 4,996 8,066 9,494 47,665 41,023
Proceeds from shares issued
in connection with
acquisition -- 19,565 -- -- -- -- 21,742
Dividends reinvested -- -- -- 1,805 2,114 144 3,922
Cost of shares redeemed (12,027) (4,890) (16,411) (8,345) (9,872) (38,233) (36,754)
- ---------------------------------------------------------------------------------------------------------------------------------
Change in net assets from
capital transactions 21,843 29,401 (11,415) 1,526 1,736 9,576 29,933
- ---------------------------------------------------------------------------------------------------------------------------------
Change in net assets 33,502 33,539 (10,071) 6,572 5,083 15,158 25,170
NET ASSETS:
Beginning of period 54,335 20,796 30,867 39,048 33,965 106,477 81,307
- ---------------------------------------------------------------------------------------------------------------------------------
End of period $ 87,837 $ 54,335 $ 20,796 $ 45,620 $ 39,048 $121,635 $106,477
- ---------------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Issued 2,512 1,241 530 473 1,143 3,700 3,463
Issued in connection with
acquisition -- 1,816 -- -- -- -- 1,797
Reinvested -- -- -- 111 109 11 337
Redeemed (902) (429) (1,701) (492) (1,297) (2,996) (3,065)
- ---------------------------------------------------------------------------------------------------------------------------------
Change in shares 1,610 2,628 (1,171) 92 (45) 715 2,532
- ---------------------------------------------------------------------------------------------------------------------------------
<FN>
(a) Effective June 5, 1995, the Victory Aggressive Growth Portfolio and Victory
Foreign Markets Portfolio merged into the Special Growth Fund and
International Growth Fund, respectively. Changes in net assets for periods
prior to June 5, 1995 represent the Aggressive Growth Portfolio and
International Growth Fund, respectively.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
133
<PAGE> 136
Notes to Financial Statements
THE VICTORY PORTFOLIOS October 31, 1996
- --------------------------------------------------------------------------------
1. ORGANIZATION:
The Victory Portfolios were organized on February 5, 1986, and are registered
under the Investment Company Act of 1940, as amended, (the "1940 Act") as an
open-end investment company established as a Delaware business trust. The Funds
are authorized to issue an unlimited number of shares which are units of
beneficial interest without par value. The Funds presently offer shares of the
U.S. Government Obligations Fund, Prime Obligations Fund, Financial Reserves
Fund, Institutional Money Market Fund, Tax-Free Money Market Fund, Ohio
Municipal Money Market Fund, Limited Term Income Fund, Intermediate Income Fund,
Investment Quality Bond Fund, Government Bond Fund, Government Mortgage Fund,
Fund for Income, National Municipal Bond Fund, New York Tax-Free Fund, Ohio
Municipal Bond Fund, Balanced Fund, Stock Index Fund, Diversified Stock Fund,
Value Fund, Growth Fund, Special Value Fund, Special Growth Fund, Ohio Regional
Stock Fund, and International Growth Fund (collectively, the "Funds" and
individually, a "Fund"). The accompanying financial statements and financial
highlights are those of each Fund except the Institutional Money Market Fund.
The U.S. Government Obligations Fund is authorized to issue two classes of
shares: Investor Shares and Select Shares. As of October 31, 1996, the U.S.
Government Obligations Fund had not yet sold Investor Shares. The Government
Bond Fund, National Municipal Bond Fund, New York Tax-Free Fund, Balanced Fund,
Diversified Stock Fund, Special Value Fund, Ohio Regional Stock Fund and
International Growth Fund, are authorized to issue two classes of shares: Class
A Shares and Class B Shares. Each class of shares in a Fund has identical rights
and privileges except with respect to fees paid under shareholder servicing or
distribution plans, expenses allocable exclusively to each class of shares,
voting rights on matters affecting a single class of shares, and the exchange
privilege of each class of shares.
The U.S. Government Obligations Fund, and Prime Obligations Fund seek to provide
current income consistent with liquidity and stability of principal. The
Financial Reserves Fund seeks to obtain as high a level of current income as is
consistent with preserving capital and providing liquidity. The Tax-Free Money
Market Fund seeks to provide current interest income free from federal income
taxes consistent with relative liquidity and stability of principal. The Ohio
Municipal Money Market Fund seeks to provide current income exempt from federal
income tax and the personal income taxes imposed by the State of Ohio and Ohio
municipalities consistent with the stability of principal. The Limited Term
Income Fund seeks to provide income consistent with limited fluctuation of
principal. The Intermediate Income Fund and Investment Quality Bond Fund seek to
provide a high level of income. The Government Bond Fund seeks to provide as
high a level of current income as is consistent with preservation of capital by
investing in U.S. Government securities. The Government Mortgage Fund seeks to
provide a high level of current income consistent with safety of principal. The
Fund for Income seeks to provide a high level of current income consistent with
preservation of shareholders' capital. The National Municipal Bond Fund seeks to
provide a high level of current interest income exempt from federal income tax,
as is consistent with the preservation of capital. The New York Tax-Free Fund
seeks to provide a high level of current income exempt from federal, New York
State, and New York City income taxes, consistent with the preservation of
shareholders' capital. The Ohio Municipal Bond Fund seeks to produce a high
level of current interest income which is exempt from both federal income taxes
and Ohio personal income taxes. The Balanced Fund seeks to provide income and
long-term growth of capital. The Stock Index Fund seeks to provide long-term
capital appreciation by attempting to match the investment performance of the
Standard & Poor's 500 Composite Stock Index. The Diversified Stock Fund seeks to
provide long term growth of capital. The Value Fund seeks to provide long-term
growth of capital and dividend income. The Growth Fund seeks to provide
long-term growth of capital. The Special Value Fund seeks to provide long-term
growth of capital and dividend income. The Special Growth Fund and Ohio Regional
Stock Fund seek to provide capital appreciation. The International Growth Fund
seeks to provide capital growth consistent with reasonable investment risk.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements. The policies are in
conformity with generally accepted accounting principles. The preparation of
financial statements requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses for the
period. Actual results could differ from those estimates.
SECURITIES VALUATION:
- --------------------
Investments of the U.S. Government Obligations Fund, Prime Obligations Fund,
Financial Reserves Fund, Tax-Free Money Market Fund, and Ohio Municipal Money
Market Fund (collectively "the money market funds") are valued at either
amortized cost which approximates market value, or at original cost which,
combined with accrued interest, approximates market value. Under the amortized
cost valuation method, discount or premium is amortized on a constant basis to
the maturity of the security. In addition, the money market funds may not (a)
purchase any instrument with a remaining maturity greater than 397 days unless
such instrument is subject to a demand feature, or (b) maintain a
dollar-weighted-average portfolio maturity which exceeds 90 days.
134
<PAGE> 137
Notes to Financial Statements--Continued
THE VICTORY PORTFOLIOS October 31, 1996
- --------------------------------------------------------------------------------
Investments in common and preferred stocks, corporate bonds, commercial paper,
municipal and foreign government bonds, U.S. Government securities and
securities of U.S. Government agencies of the Limited Term Income Fund,
Intermediate Income Fund, Investment Quality Bond Fund, Government Bond Fund,
Government Mortgage Fund, Fund for Income, National Municipal Bond Fund, New
York Tax-Free Fund, Ohio Municipal Bond Fund, Balanced Fund, Stock Index Fund,
Diversified Stock Fund, Value Fund, Growth Fund, Special Value Fund, Special
Growth Fund, Ohio Regional Stock Fund, and International Growth Fund
(collectively "the variable net asset value funds") are valued at their market
values determined on the basis of the latest available bid prices in the
principal market (closing sales prices if the principal market is an exchange)
in which such securities are normally traded or on the basis of valuation
procedures approved by the Board of Trustees. Investments in investment
companies are valued at their respective net asset values as reported by such
companies. Investments in foreign securities, currency holdings and other assets
and liabilities of the Balanced Fund and International Growth Fund are valued
based on quotations from the primary market in which they are traded and are
translated from the local currency into U.S. dollars using current exchange
rates. The differences between the cost and market values of investments held by
the variable net asset value funds are reflected as either unrealized
appreciation or depreciation.
SECURITIES TRANSACTIONS AND RELATED INCOME:
- -------------------------------------------
Securities transactions are accounted for on the date the security is purchased
or sold (trade date). Interest income is recognized on the accrual basis and
includes, where applicable, the pro rata amortization of premium or accretion of
discount. Dividend income is recorded on the ex-dividend date, net of foreign
taxes withheld, if any. Gains or losses realized from sales of securities are
determined by comparing the identified cost of the security lot sold with the
net sales proceeds.
FOREIGN CURRENCY TRANSLATION:
- -----------------------------
The accounting records of the Funds are maintained in U.S. dollars. Investment
securities and other assets and liabilities of the Balanced Fund and the
International Growth Fund denominated in a foreign currency are translated into
U.S. dollars at the current exchange rate. Purchases and sales of securities,
income receipts and expense payments are translated into U.S. dollars at the
exchange rate on the dates of the transactions.
The Funds isolate that portion of the results of operations resulting from
changes in foreign exchange rates from those resulting from changes in market
prices of securities held.
Realized foreign exchange gains or losses arise from sales and maturities of
securities, sales of foreign currencies, currency exchange fluctuations between
the trade and settlement dates of securities transactions, and the difference
between the amount of assets and liabilities recorded and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in the value of assets and
liabilities, including investments in securities, resulting from changes in
currency exchange rates.
REPURCHASE AGREEMENTS:
- -----------------------
Each Fund may enter into repurchase agreements with financial institutions such
as banks and broker-dealers which the Funds' investment adviser deems
creditworthy under guidelines approved by the Board of Trustees, subject to the
seller's agreement to repurchase such securities at a mutually agreed-upon date
and price. The repurchase price generally equals the price paid by a Fund plus
interest negotiated on the basis of current short-term rates, which may be more
or less than the rate on the underlying Fund securities held as collateral. The
seller, under a repurchase agreement, is required to maintain the value of
collateral held pursuant to the agreement at not less than the repurchase price
(including accrued interest). Securities subject to repurchase agreements are
held by the Funds' custodian or another qualified custodian or in the Federal
Reserve/Treasury book-entry system.
FORWARD CURRENCY CONTRACTS:
- ----------------------------
A forward currency contract ("forward") is an agreement between two parties to
buy and sell a currency at a set price on a future date. The market value of the
forward fluctuates with changes in currency exchange rates. The forward is
marked-to-market daily and the change in market value is recorded by a Fund as
unrealized appreciation or depreciation. When the forward is closed, the Fund
records a realized gain or loss equal to the fluctuation in value during the
period the forward was open. A Fund could be exposed to risk if a counterparty
is unable to meet the terms of a forward or if the value of the currency changes
unfavorably.
FUTURES CONTRACTS
- -----------------
The Balanced Fund, Stock Index Fund, Diversified Stock Fund, Value Fund, Growth
Fund, Special Value Fund, Special Growth Fund, Ohio Regional Stock Fund, and
International Growth Fund 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
135
<PAGE> 138
Notes to Financial Statements--Continued
THE VICTORY PORTFOLIOS October 31, 1996
- --------------------------------------------------------------------------------
outstanding, cash payments based on the level of a specified securities index.
The Funds may enter into futures contracts in an effort to hedge against market
risks. The acquisition of put and call options on futures contracts will give
the Funds 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. Futures transactions involve brokerage costs and
require the Funds to segregate assets to cover contracts that would require it
to purchase securities or currencies. A Fund may lose the expected benefit of
futures transactions if interest rates, exchange rates or securities prices
change in an unanticipated manner. Such unanticipated changes may also result in
lower overall performance than if the Fund had not entered into any futures
transactions. In addition, the value of a Fund's futures positions may not prove
to be perfectly or even highly correlated with the value of its portfolio
securities or foreign currencies, limiting a 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.
SECURITIES PURCHASED ON A WHEN-ISSUED BASIS:
- ---------------------------------------------
Each Fund may purchase securities on a "when-issued" basis. When-issued
securities are securities purchased for delivery beyond the normal settlement
date at a stated price and/or yield, thereby, involving the risk that the price
and/or yield obtained may be more or less than those available in the market
when delivery takes place. At the time a Fund makes the commitment to purchase a
security on a when-issued basis, the Fund records the transaction and reflects
the value of the security in determining net asset value. Normally, the
settlement date occurs within one month of the purchase. A segregated account is
established and the Funds maintain cash and marketable securities at least equal
in value to commitments for when-issued securities. Securities purchased on a
when-issued basis do not earn income until settlement date.
DIVIDENDS TO SHAREHOLDERS:
- -------------------------
Dividends from net investment income are declared daily and paid monthly for the
money market funds. Dividends from net investment income are declared and paid
quarterly for the Stock Index Fund, Diversified Stock Fund, Value Fund, Growth
Fund, Special Value Fund, Special Growth Fund, Ohio Regional Stock Fund, and
International Growth Fund. Dividends from net investment income are declared and
paid monthly for the Limited Term Income Fund, Intermediate Income Fund,
Investment Quality Bond Fund, Government Bond Fund, Government Mortgage Fund,
Fund for Income, National Municipal Bond Fund, New York Tax-Free Fund, Ohio
Municipal Bond Fund, and Balanced Fund. Distributable net realized capital
gains, if any, are declared and distributed at least annually.
Dividends from net investment income and from net realized capital gains are
determined in accordance with federal income tax regulations which may differ
from generally accepted accounting principles. These differences are primarily
due to differing treatments for mortgage-backed securities, foreign currency
transactions, expiring capital loss carryforwards and deferrals of certain
losses. Permanent book and tax basis differences are reflected in the components
of net assets.
FEDERAL INCOME TAXES:
- ---------------------
It is the policy of each Fund to continue to qualify as a regulated investment
company by complying with the provisions available to certain investment
companies, as defined in applicable sections of the Internal Revenue Code, and
to make distributions of net investment income and net realized capital gains
sufficient to relieve it from all, or substantially all, federal income taxes.
OTHER:
- ------
Expenses that are directly related to one of the Funds are charged directly to
that Fund. Other operating expenses of the Funds are prorated to each Fund on
the basis of relative net assets or other appropriate basis. Fees paid under a
Fund's shareholder servicing or distribution plans are borne by the specific
class of shares to which they apply.
All expenses in connection with Intermediate Income, Investment Quality Bond,
Balanced, Stock Index, Value, Growth, Special Value, and Special Growth Funds'
organization and registration under the 1940 Act and the Securities Act of 1933
were paid by those Funds. Such expenses are being amortized over a period of two
years commencing with the respective inception dates.
Certain prior year balances have been reclassified to be consistent with current
year presentation.
136
<PAGE> 139
Notes to Financial Statements--Continued
THE VICTORY PORTFOLIOS October 31, 1996
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES:
Purchases and sales of securities (excluding short-term securities) for the year
ended October 31, 1996 were as follows (amounts in thousands):
<TABLE>
<CAPTION>
PURCHASES SALES
-------- --------
<S> <C> <C>
Limited Term Income Fund.................... $311,330 $389,236
Intermediate Income Fund.................... 450,493 330,103
Investment Quality Bond Fund................ 274,028 238,506
Government Bond Fund........................ 100,091 101,177
Government Mortgage Fund.................... 160,676 169,880
Fund for Income............................. 5,337 6,769
National Municipal Bond Fund................ 70,469 47,351
New York Tax-Free Fund...................... -- 1,299
Ohio Municipal Bond Fund.................... 54,539 50,460
Balanced Fund............................... 223,058 179,402
Stock Index Fund............................ 56,496 6,816
Diversified Stock Fund...................... 467,596 437,607
Value Fund.................................. 108,780 91,008
Growth Fund................................. 41,892 33,042
Special Value Fund.......................... 181,859 122,815
Special Growth Fund......................... 128,355 108,962
Ohio Regional Equity Fund................... 2,945 2,601
International Growth Fund................... 207,789 193,703
</TABLE>
4. RELATED PARTY TRANSACTIONS:
Investment advisory services are provided to all the Funds by KeyCorp Mutual
Fund Advisers, Inc. ("the Adviser"), a wholly owned subsidiary of KeyCorp Asset
Management Holdings, Inc., which is a wholly owned subsidiary of KeyBank
National Association ("Key"), formerly Society National Bank, a wholly owned
subsidiary of KeyCorp. Under the terms of the investment advisory agreements,
the Adviser is entitled to receive fees based on a percentage of the average
daily net assets of the Funds. KeyTrust Company of Ohio, N.A., an affiliate of
the adviser, serving as custodian for all of the Funds, received custodian fees
in addition to reimbursement of actual out-of-pocket expenses incurred.
Key and its affiliated brokerage and banking companies also serve as Shareholder
Servicing Agent for all the Funds except the U.S. Government Obligations Funds,
Financial Reserves Fund, and Stock Index Fund. As such, Key and its affiliates
provides support services to their clients who are shareholders, which may
include establishing and maintaining accounts and records, processing dividend
and distribution payments, providing account information, assisting in
processing of purchase, exchange and redemption requests, and assisting
shareholders in changing dividend options, account designations and addresses.
For providing such services, Key and its affiliates may receive an annual fee of
up to 0.25% of the average daily net assets of the Funds serviced.
BISYS Fund Services (the "Administrator"), an indirect, wholly-owned subsidiary
of The BISYS Group, Inc. ("BISYS") serves as the administrator and distributor
to the Funds. Certain officers of the Funds are affiliated with BISYS. Such
officers receive no direct payments or fees from the Fund for serving as
officers of the Funds.
Under the terms of the administration agreement, the Administrator's fees are
computed at the annual rate of 0.15% of the average daily net assets of the
Funds. Pursuant to a 12b-1 Plan, the Distributor may receive fees computed at
the annual rate of 0.75% of the average daily net assets of Class B Shares of
the Government Bond Fund, National Municipal Bond Fund, New York Tax-Free Fund,
Balanced Fund, Diversified Stock Fund, Special Value Fund, Ohio Regional Stock
Fund and International Growth Fund for providing distribution services and is
entitled to receive commissions on sales of shares of the variable net asset
value funds. For the year ended October 31, 1996, the Distributor received
approximately $828,000 from commissions earned on sales of shares of the
variable net asset value funds a portion of which the Distributor reallowed to
dealers of the Funds' shares including approximately $750,000 to affiliates of
the Funds. BISYS Fund Services, Ohio, Inc. (the Company), an affiliate of BISYS,
serves the Funds as Mutual Fund Accountant. Under the terms of the Fund
Accounting Agreement, the Company's fee is based on a percentage of average
daily net assets. During the year ended October 31, 1996, BISYS paid
approximately $34,000 and $83,000 to the Fund for Income and New York Tax Free
Fund, respectively, to relieve certain balances receivable.
137
<PAGE> 140
Notes to Financial Statements--Continued
THE VICTORY PORTFOLIOS October 31, 1996
- --------------------------------------------------------------------------------
Fees may be voluntarily reduced or reimbursed to assist the Funds in maintaining
competitive expense ratios. Additional information regarding related party
transactions is as follows for the year ended October 31, 1996:
<TABLE>
<CAPTION>
INVESTMENT
ADVISORY
FEES
-------------------------- MUTUAL
PERCENTAGES ADMINISTRATION FUND CUSTODIAN
OF AVERAGE FEES ACCOUNTANT FEES
DAILY -------------- FEES ---------
NET ASSETS VOLUNTARY VOLUNTARY ---------- ANNUAL
----------- FEE FEE ANNUAL FEES
REDUCTIONS REDUCTIONS FEES ---------
---------- -------------- ---------- (000)
(000) (000) (000)
<S> <C> <C> <C> <C> <C>
U.S. Government Obligations Fund.... 0.35% $ -- $ -- $ 85 $ 237
Prime Obligations Fund.............. 0.35% -- -- 85 103
Financial Reserves Fund............. 0.50% 582 -- 78 160
Tax-Free Money Market Fund.......... 0.35% 32 35 108 68
Ohio Municipal Money Market......... 0.50% 1,706 -- 65 116
Limited Term Income Fund............ 0.50% 47 -- 39 33
Intermediate Income Fund............ 0.75% 358 -- 62 45
Investment Quality Bond Fund........ 0.75% 185 -- 53 37
Government Bond Fund................ 0.55% 65 -- 33 9
Government Mortgage Fund............ 0.50% 3 -- 51 36
Fund for Income..................... 0.50% 88 20 57 20
National Municipal Bond Fund........ 0.55% 206 36 65 15
New York Tax-Free Fund.............. 0.55% 83 15 51 5
Ohio Municipal Bond Fund............ 0.60% 103 -- 52 15
Balanced Fund....................... 1.00% 376 -- 94 64
Stock Index Fund.................... 0.60% 382 330 87 89
Diversified Stock Fund.............. 0.65% 55 61 159 105
Value Fund.......................... 1.00% 62 -- 71 70
Growth Fund......................... 1.00% 71 -- 35 27
Special Value Fund.................. 1.00% 71 -- 79 63
Special Growth Fund................. 1.00% 34 -- 58 44
Ohio Regional Stock Fund............ 0.75% 5 -- 51 15
International Growth Fund........... 1.10% 30 -- 91 201
</TABLE>
5. CAPITAL SHARE TRANSACTIONS:
Transactions in capital shares for the Funds with multiple share classes were as
follows (amounts in thousands):
<TABLE>
<CAPTION>
NATIONAL MUNICIPAL
GOVERNMENT BOND FUND BOND FUND
----------------------------------- ----------------------------------- NEW YORK TAX-FREE FUND
SIX SIX ------------------------
YEAR MONTHS YEAR YEAR MONTHS YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, APRIL 30, OCTOBER 31, OCTOBER 31 APRIL 30, OCTOBER 31, OCTOBER 31,
1996 1995 1995(a) 1996 1995 1995(a) 1996 1995
----------- ----------- --------- ----------- ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
Class A Shares:
Proceeds from shares
issued.................... $ 5,625 $ 3,055 $ 13,632 $ 63,557 $ 6,441 $ 4,646 $ 2,391 $ 3,329
Dividends reinvested........ 1,466 1,283 73 1,520 211 102 547 468
Cost of shares redeemed..... (9,719) (64,259) (48,532) (39,445) (169) (310) (4,419) (6,784)
- -------------------------------------------------------------------------------------------------------------------------------
Total....................... $(2,628) $ (59,921) $(34,827) $ 25,632 $ 6,483 $ 4,438 $(1,481) $(2,987)
Class B Shares:
Proceeds from shares
issued.................... $ 880 $ 745 $ 150 $ 1,441 $ 341 $ 146 $ 859 $ 2,128
Dividends reinvested........ 44 9 2 44 5 1 88 41
Cost of shares redeemed..... (310) (10) -- (141) (50) -- (370) (284)
- -------------------------------------------------------------------------------------------------------------------------------
Total....................... $ 614 $ 744 $ 152 $ 1,344 $ 296 $ 147 $ 577 $ 1,885
SHARE TRANSACTIONS:
Class A Shares:
Issued...................... 580 314 1,459 6,209 651 504 181 271
Reinvested.................. 151 131 8 152 21 11 43 37
Redeemed.................... (1,002) (6,584) (5,266) (3,912) (17) (33) (341) (552)
- -------------------------------------------------------------------------------------------------------------------------------
Total....................... (271) (6,139) (3,799) 2,449 655 482 (117) (244)
Class B Shares:
Issued...................... 91 76 16 143 34 15 67 172
Reinvested.................. 5 1 -- 4 -- -- 7 2
Redeemed.................... (33) (1) -- (14) (4) -- (28) (22)
- -------------------------------------------------------------------------------------------------------------------------------
Total....................... 63 76 16 133 30 15 46 152
<FN>
(a) Effective September 26, 1994, the Fund designated the existing shares as
Class A Shares and commenced offering Class B Shares.
</TABLE>
138
<PAGE> 141
Notes to Financial Statements--Continued
THE VICTORY PORTFOLIOS October 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BALANCED FUND DIVERSIFIED STOCK FUND SPECIAL VALUE FUND
-------------------------- -------------------------- --------------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1996(a) 1995 1996(a) 1995 1996(a) 1995
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
Class A Shares:
Proceeds from shares issued............ $ 84,671 $ 111,470 $ 133,383 $ 144,852 $ 87,823 $ 87,892
Dividends reinvested................... 8,742 6,726 39,512 36,846 7,377 2,712
Cost of shares redeemed................ (47,743) (66,930) (87,452) (67,677) (36,916) (37,371)
- --------------------------------------------------------------------------------------------------------------------------------
Total.................................. $ 45,670 $ 51,266 $ 85,443 $ 114,021 $ 58,284 $ 53,233
Class B Shares:
Proceeds from shares issued............ $ 1,388 $ 7,937 $ 415
Dividends reinvested................... 11 22 --
Cost of shares redeemed................ (33) (215) (52)
- --------------------------------------------------------------------------------------------------------------------------------
Total.................................. $ 1,366 $ 7,744 $ 363
SHARE TRANSACTIONS:
Class A Shares:
Issued................................. 7,287 11,125 9,364 11,560 6,676 7,864
Reinvested............................. 753 659 3,020 3,276 591 246
Redeemed............................... (4,110) (6,762) (6,199) (5,529) (2,842) (3,389)
- --------------------------------------------------------------------------------------------------------------------------------
Total.................................. 3,930 5,022 6,185 9,307 4,425 4,721
Class B Shares:
Issued................................. 118 537 30
Reinvested............................. 1 2 --
Redeemed............................... (3) (15) (4)
- --------------------------------------------------------------------------------------------------------------------------------
Total.................................. 116 524 26
</TABLE>
<TABLE>
<CAPTION>
OHIO REGIONAL INTERNATIONAL
STOCK FUND GROWTH FUND
-------------------------- --------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1996(a) 1995 1996(a) 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
Class A Shares:
Proceeds from shares issued.................................... $ 7,754 $ 9,494 $ 47,527 $ 41,023
Proceeds from shares issued in connection with acquisition..... -- -- -- 21,742
Dividends reinvested........................................... 1,805 2,114 144 3,922
Cost of shares redeemed........................................ (8,344) (9,872) (38,212) (36,754)
- --------------------------------------------------------------------------------------------------------------------------
Total.......................................................... $ 1,215 $ 1,736 $ 9,459 $ 29,933
Class B Shares:
Proceeds from shares issued.................................... $ 312 $ 138
Dividends reinvested........................................... -- --
Cost of shares redeemed........................................ (1) (21)
- --------------------------------------------------------------------------------------------------------------------------
Total.......................................................... $ 311 $ 117
SHARE TRANSACTIONS:
Class A Shares:
Issued......................................................... 455 630 3,689 3,463
Issued in connection with aquisition........................... -- -- -- 1,797
Reinvested..................................................... 111 156 11 337
Redeemed....................................................... (492) (670) (2,994) (3,065)
- --------------------------------------------------------------------------------------------------------------------------
Total.......................................................... 74 116 706 2,532
Class B Shares:
Issued......................................................... 18 11
Reinvested..................................................... -- --
Redeemed....................................................... -- (2)
- --------------------------------------------------------------------------------------------------------------------------
Total.......................................................... 18 9
<FN>
(a) Effective March 1, 1996, the Fund designated the existing shares as Class A
Shares and commenced offering Class B Shares.
</TABLE>
139
<PAGE> 142
Notes to Financial Statements--Continued
THE VICTORY PORTFOLIOS October 31, 1996
- --------------------------------------------------------------------------------
6. CONCENTRATION OF CREDIT RISK:
The Ohio Municipal Money Market Fund, New York Tax-Free Fund, and Ohio Municipal
Bond Fund invest primarily in debt obligations issued by the respective States
and their political subdivisions, agencies and public authorities to obtain
funds for various public purposes and the Ohio Regional Stock Fund invests in
equity securities issued by organizations domiciled in Ohio. These Funds are
more susceptible to economic and political factors that may adversely affect
companies domiciled in these states and issuers of the States' specific
municipal securities than are municipal bond funds and stock funds that are not
geographically concentrated to the same extent.
7. FEDERAL INCOME TAX INFORMATION (UNAUDITED):
For the taxable year ended October 31, 1996, the following percentages of income
dividends paid by the following funds qualify for the dividends received
deduction available to corporations:
<TABLE>
<CAPTION>
QUALIFIED DIVIDEND INCOME
-------------------------
<S> <C>
Balanced Fund 47.4%
Stock Index Fund 68.3%
Diversified Stock Fund 38.1%
Value Fund 10.0%
Growth Fund 95.6%
Special Value Fund 43.0%
Ohio Regional Stock Fund 21.9%
</TABLE>
The Victory Portfolios designate the following exempt-interest dividends for the
year ended October 31, 1996:
<TABLE>
<CAPTION>
OHIO
TAX-FREE MUNICIPAL NATIONAL NEW YORK OHIO
MONEY MARKET MONEY MARKET MUNICIPAL TAX-FREE MUNICIPAL
FUND FUND BOND FUND FUND BOND FUND
------------ ------------ --------- -------- ---------
<S> <C> <C> <C> <C> <C>
Exempt-interest dividends (000):
Fund Shares $9,527 $ 17,378 $ 3,158
Class A Shares $ 1,581 $ 750
Class B Shares 43 104
Exempt-interest dividends per share:
Fund Shares 0.030 0.031 0.540
Class A Shares 0.440 0.670
Class B Shares 0.350 0.570
</TABLE>
140
<PAGE> 143
Notes to Financial Statements--Continued
THE VICTORY PORTFOLIOS October 31, 1996
- --------------------------------------------------------------------------------
The percentage break-down of exempt-interest income by state for the period
ended October 31, 1996 is as follows:
<TABLE>
<CAPTION>
TAX-FREE OHIO MUNICIPAL NATIONAL NEW YORK OHIO
MONEY MARKET MONEY MARKET MUNICIPAL TAX-FREE MUNICIPAL
FUND FUND BOND FUND FUND BOND FUND
------------ -------------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Alabama 0.79% 0.03% 6.38% -- 0.14%
Alaska 0.16% -- 1.29% -- --
Arizona 1.76% -- 3.86% -- --
Arkansas 0.37% -- -- -- --
California 4.91% -- 0.01% -- --
Colorado 0.42% -- 3.94% -- --
Connecticut -- -- 0.69% -- --
District of Columbia 0.26% -- 0.14% -- --
Florida 7.87% -- 9.05% -- --
Georgia 3.23% -- 6.95% -- --
Hawaii -- -- 5.95% -- --
Illinois 7.19% -- 4.88% -- --
Indiana 12.76% -- 6.21% -- --
Iowa 1.69% -- 0.66% -- --
Kansas 1.52% -- 2.12% -- --
Kentucky 5.78% -- 0.09% -- --
Louisiana 2.22% -- -- -- --
Maine 1.67% -- 0.02% -- --
Massachusetts 0.30% -- 0.12% -- --
Michigan 1.25% -- 8.68% -- --
Minnesota 1.94% -- 5.57% -- --
Missouri 4.95% -- 2.40% -- --
Montana 0.11% -- 4.56% -- --
Nebraska 0.81% -- -- -- --
Nevada 0.87% -- 0.07% -- --
New Hampshire 0.57% -- -- -- --
New Jersey -- -- 0.04% -- --
New York 0.78% -- 1.76% 97.64% --
North Carolina 1.47% -- 0.21% -- --
North Dakota 0.27% -- -- -- --
Ohio 12.59% 99.97% 11.11% -- 99.86%
Oklahoma -- -- 0.06% -- --
Oregon 0.73% -- -- -- --
Pennsylvania 0.50% -- 0.08% -- --
Puerto Rico -- -- 1.26% 2.36% --
Rhode Island -- -- 0.01% -- --
South Carolina 0.32% -- 0.14% -- --
South Dakota -- -- 2.42% -- --
Tennessee 2.13% -- 0.36% -- --
Texas 7.30% -- 3.33% -- --
Utah 0.57% -- 0.90% -- --
Virginia 0.08% -- -- -- --
Washington 0.39% -- 1.25% -- --
West Virginia -- -- 0.46% -- --
Wisconsin 8.44% -- 2.00% -- --
Wyoming 1.03% -- 0.97% -- --
----- ----- ----- ----- -----
100.00% 100.00% 100.00% 100.00% 100.00%
===== ===== ===== ===== =====
</TABLE>
The International Growth Fund elected to pass the following benefits of the
foreign tax credit to shareholders for the year ended October 31, 1996.
<TABLE>
<CAPTION>
INTERNATIONAL GROWTH FUND
-------------------------
<S> <C>
Gross income from foreign countries (000) $ 2,745
Income taxes paid to foreign countries (000) 68
Income taxes paid to foreign countries per share 0.02
</TABLE>
141
<PAGE> 144
Notes to Financial Statements--Continued
THE VICTORY PORTFOLIOS October 31, 1996
- --------------------------------------------------------------------------------
The following table presents capital gain dividend distributions from long-term
capital gains for the following Funds for the year ended October 31, 1996
(amounts in thousands):
<TABLE>
<S> <C>
New York Tax-Free Fund $ 10
Balanced Fund 309
Stock Index Fund 2,161
Diversified Stock Fund 11,448
Value Fund 2,957
Growth Fund 3,794
Special Value Fund 4,885
Ohio Regional Equity Fund 1,341
</TABLE>
As of October 31, 1996, for Federal income tax purposes, the following funds
have capital loss carryforwards available to offset future capital gains, if any
(amounts in thousands):
<TABLE>
<CAPTION>
AMOUNT EXPIRES
------ -------
<S> <C> <C>
U.S. Government Obligations Fund $ 94 2002
Financial Reserves Fund 24 2001
Limited Term Income Fund 1,642 2002
Limited Term Income Fund 553 2003
Intermediate Income Fund 2,498 2001
Intermediate Income Fund 1,386 2002
Intermediate Income Fund 869 2003
Investment Quality Bond Fund 9,100 2002
Government Bond Fund 36 2002
Government Bond Fund 3,898 2003
Government Bond Fund 2,723 2004
Government Mortgage Fund 1,977 2002
Fund for Income 806 2001
Fund for Income 588 2002
Fund for Income 328 2003
</TABLE>
142
<PAGE> 145
THE VICTORY PORTFOLIOS Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. GOVERNMENT OBLIGATIONS FUND
----------------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------------
1996(a) 1995(b) 1994 1993 1992
---------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- -----------------------------------------------------------------------------------------------------------
Investment Activities
Net investment income 0.049 0.052 0.032 0.026 0.036
Distributions
Net investment income (0.049) (0.052) (0.032) (0.026) (0.036)
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- -----------------------------------------------------------------------------------------------------------
Total Return 4.96% 5.38% 3.30% 2.62% 3.66%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000) $1,357,817 $964,929 $412,048 $515,734 $579,836
Ratio of expenses to average net assets 0.61% 0.58% 0.63% 0.60% 0.60%
Ratio of net investment income to average
net assets 4.84% 5.28% 3.20% 2.57% 3.50%
Ratio of expenses to average net assets* 0.60% 0.80%
Ratio of net investment income to average
net assets* 5.26% 3.03%
- ---------------
<FN>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Select Shares. Investor Shares have not commenced operations as of October
31, 1996.
(b) Effective June 5, 1995, the Victory U.S. Treasury Money Market Portfolio
merged into the U.S. Government Obligations Fund. Financial highlights for
the periods prior to June 5, 1995 represent the U.S. Government Obligation
Fund.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
143
<PAGE> 146
THE VICTORY PORTFOLIOS Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRIME OBLIGATIONS FUND
--------------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ---------------------------------------------------------------------------------------------------------
Investment Activities
Net investment income 0.047 0.051 0.035 0.030 0.037
Net realized losses from investment
transactions -- -- (0.003) -- --
- ---------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.047 0.051 0.032 0.030 0.037
- ---------------------------------------------------------------------------------------------------------
Distributions
Net investment income (0.047) (0.051) (0.035) (0.030) (0.037)
- ---------------------------------------------------------------------------------------------------------
Capital transactions -- -- 0.003(a) -- --
- ---------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ---------------------------------------------------------------------------------------------------------
Total Return 4.81% 5.26% 3.57% 3.05% 3.77%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000) $496,019 $456,266 $782,303 $720,024 $524,338
Ratio of expenses to average net assets 0.87% 0.74% 0.62% 0.60% 0.61%
Ratio of net investment income to average
net assets 4.72% 5.09% 3.52% 2.96% 3.68%
Ratio of expenses to average net assets* 0.79%
Ratio of net investment income to average
net assets* 3.35%
- ---------------------------------------------------------------------------------------------------------
<FN>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) During 1994, KeyCorp made a capital contribution of approximately $2,506,000
for losses realized from the disposition of certain securities.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
144
<PAGE> 147
THE VICTORY PORTFOLIOS Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FINANCIAL RESERVES FUND
--------------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------------------
1996 1995(b) 1994 1993(a) 1992(a)
-------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ---------------------------------------------------------------------------------------------------------
Investment Activities
Net investment income 0.049 0.054 0.035 0.030 0.040
Distributions
Net investment income (0.049) (0.054) (0.035) (0.030) (0.040)
- ---------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ---------------------------------------------------------------------------------------------------------
Total Return 5.00% 5.50% 3.57% 2.81% 3.76%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000) $767,990 $762,870 $433,266 $457,872 $523,889
Ratio of expenses to average net assets 0.67% 0.60% 0.57% 0.55% 0.55%
Ratio of net investment income to average
net assets 4.89% 5.40% 3.48% 2.78% 3.67%
Ratio of expenses to average net assets* 0.75% 0.76% 0.73% 0.70% 0.70%
Ratio of net investment income to average
net assets* 4.81% 5.24% 3.32% 2.63% 3.52%
- ---------------
<FN>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Effective May 16, 1991, Ameritrust Company National Association became
investment adviser to the Fund. Effective March 16, 1992 Ameritrust was
acquired by Society Corporation and merged into Society National Bank, a
wholly-owned subsidiary of Society Corporation, on July 13, 1992. On January
7, 1993, Society Asset Management, Inc., a wholly-owned subsidiary of
Society Corporation, was named investment adviser to the Fund.
(b) Effective June 5, 1995, the Victory Financial Reserves Portfolio became the
Financial Reserves Fund.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
145
<PAGE> 148
THE VICTORY PORTFOLIOS Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TAX-FREE MONEY MARKET FUND
--------------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ---------------------------------------------------------------------------------------------------------
Investment Activities
Net investment income 0.030 0.034 0.021 0.020 0.027
Distributions
Net investment income (0.030) (0.034) (0.021) (0.020) (0.027)
- ---------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ---------------------------------------------------------------------------------------------------------
Total Return 3.04% 3.42% 2.17% 2.06% 2.77%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000) $344,796 $307,726 $198,561 $189,351 $151,012
Ratio of expenses to average net assets 0.78% 0.61% 0.60% 0.59% 0.61%
Ratio of net investment income to average
net assets 2.97% 3.36% 2.14% 2.04% 2.70%
Ratio of expenses to average net assets* 0.80% 0.62% 0.79% 0.60%
Ratio of net investment income to average
net assets* 2.95% 3.35% 1.95% 2.02%
- ---------------
<FN>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
146
<PAGE> 149
THE VICTORY PORTFOLIOS Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
OHIO MUNICIPAL MONEY MARKET FUND
--------------------------------------------------------------------------------------
YEAR ENDED TWO MONTHS ENDED YEAR ENDED AUGUST 31,
OCTOBER 31, OCTOBER 31, -----------------------------------------------------
1996 1995 1995(b) 1994 1993(a) 1992(a)
----------- ---------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ------------------------------------------------------------------------------------------------------------------
Investment Activities
Net investment income 0.030 0.006 0.033 0.021 0.021 0.031
Distributions
Net investment income (0.030) (0.006) (0.033) (0.021) (0.021) (0.031)
- ------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ------------------------------------------------------------------------------------------------------------------
Total Return 3.11% 0.55%(c) 3.33% 2.10% 2.14% 3.18%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period
(000) $ 561,131 $510,632 $ 502,453 $ 318,132 $ 262,681 $ 252,705
Ratio of expenses to
average net assets 0.67% 0.64%(d) 0.63% 0.65% 0.65% 0.65%
Ratio of net investment
income to average net
assets 3.03% 3.31%(d) 3.33% 2.08% 2.12% 3.13%
Ratio of expenses to
average net assets* 0.97% 0.92%(d) 0.94% 0.76% 0.72% 0.68%
Ratio of net investment
income to average net
assets* 2.73% 3.03%(d) 3.02% 1.97% 2.05% 3.10%
- ---------------
<FN>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Effective February 27, 1991, Ameritrust Company National Association became
investment adviser to the Fund. Effective March 16, 1992, was acquired by
Society Corporation and merged into Society National Bank, a wholly-owned
subsidiary of Society Corporation, on July 13, 1992. Effective February 3,
1993, Society Asset Management, Inc. a wholly-owned subsidiary of Society
Corporation was named investment adviser to the Fund.
(b) Effective June 5, 1995, the Victory Ohio Municipal Money Market Portfolio
became the Ohio Municipal Money Market Fund.
(c) Not annualized.
(d) Annualized.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
147
<PAGE> 150
THE VICTORY PORTFOLIOS Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LIMITED TERM INCOME FUND
--------------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------------------
1996 1995(a) 1994 1993 1992
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.15 $ 9.88 $ 10.53 $ 10.45 $ 10.33
- ---------------------------------------------------------------------------------------------------------
Investment Activities
Net investment income 0.63 0.57 0.54 0.57 0.64
Net realized and unrealized gains
(losses) from investments (0.14) 0.27 (0.61) 0.08 0.13
- ---------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.49 0.84 (0.07) 0.65 0.77
- ---------------------------------------------------------------------------------------------------------
Distributions
Net investment income (0.62) (0.57) (0.54) (0.57) (0.64)
In excess of net investment income (0.01) -- -- -- --
Net realized gains -- -- (0.04) -- (0.01)
- ---------------------------------------------------------------------------------------------------------
Total Distributions (0.63) (0.57) (0.58) (0.57) (0.65)
- ---------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.01 $ 10.15 $ 9.88 $ 10.53 $ 10.45
- ---------------------------------------------------------------------------------------------------------
Total Return (excludes sales charges) 4.94% 8.77% (0.66)% 6.39% 7.77%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000) $ 90,019 $172,002 $ 79,150 $ 81,771 $ 55,565
Ratio of expenses to average net assets 0.86% 0.78% 0.79% 0.77% 0.78%
Ratio of net investment income to average
net assets 5.90% 5.77% 5.29% 5.49% 6.18%
Ratio of expenses to average net assets* 0.89% 0.79% 0.97% 0.78%
Ratio of net investment income to average
net assets* 5.87% 5.76% 5.10% 5.48%
Portfolio turnover 221% 97% 41% 50% 15%
- ---------------
<FN>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Effective June 5, 1995, the Victory Short-Term Government Income Portfolio
merged into the Limited Term Income Fund. Financial highlights for the
periods prior to June 5, 1995 represent the Limited Term Income Fund.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
148
<PAGE> 151
THE VICTORY PORTFOLIOS Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERMEDIATE INCOME FUND INVESTMENT QUALITY BOND FUND
----------------------------------------------- -----------------------------------------------
YEAR ENDED YEAR ENDED DECEMBER 30, 1993 YEAR ENDED YEAR ENDED DECEMBER 30, 1993
OCTOBER 31, OCTOBER 31, TO OCTOBER 31, OCTOBER 31, OCTOBER 31, TO OCTOBER 31,
1996 1995 1994(a) 1996 1995(d) 1994(a)
----------- ----------- ----------------- ----------- ----------- -----------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 9.69 $ 9.25 $ 10.00 $ 9.76 $ 9.10 $ 10.00
- ----------------------------------------------------------------------------------------------------------------------------
Investment Activities
Net investment income 0.56 0.60 0.52 0.57 0.62 0.53
Net realized and
unrealized gains
(losses) from
investments (0.13) 0.44 (0.76) (0.13) 0.67 (0.92)
- ----------------------------------------------------------------------------------------------------------------------------
Total from
Investment
Activities 0.43 1.04 (0.24) 0.44 1.29 (0.39)
- ----------------------------------------------------------------------------------------------------------------------------
Distributions
Net investment income (0.56) (0.60) (0.51) (0.56) (0.62) (0.51)
In excess of net
investment income -- -- -- -- (0.01) --
Tax return of capital -- -- -- (0.01) -- --
- ----------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.56) (0.60) (0.51) (0.57) (0.63) (0.51)
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 9.56 $ 9.69 $ 9.25 $ 9.63 $ 9.76 $ 9.10
- ----------------------------------------------------------------------------------------------------------------------------
Total Return(excludes
sales charges) 4.56% 11.65% (2.48)%(b) 4.65% 14.63% (3.92)%(b)
RATIOS/SUPPLEMENTAL
DATA:
Net Assets, End of
Period (000) $ 272,087 $ 163,281 $ 112,923 $ 150,807 $ 125,248 $ 94,685
Ratio of expenses to
average net assets 0.94% 0.82% 0.79%(c) 1.01% 0.88% 0.79%(c)
Ratio of net
investment income to
average net assets 5.81% 6.32% 6.23%(c) 5.99% 6.59% 6.33%(c)
Ratio of expenses to
average net assets* 1.11% 1.06% 1.25%(c) 1.14% 1.10% 1.25%(c)
Ratio of net
investment income to
average net assets* 5.64% 6.08% 5.77%(c) 5.86% 6.37% 5.87%(c)
Portfolio turnover 164% 98% 55% 182% 160% 90%
- ---------------
<FN>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Effective June 5, 1995, the Victory Corporate Bond Portfolio merged into the
Investment Quality Bond Fund. Financial highlights for the periods prior to
June 5, 1995 represent the Investment Quality Bond Fund.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
149
<PAGE> 152
THE VICTORY PORTFOLIOS Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GOVERNMENT BOND FUND
------------------------------------------------------------------------------------------------
CLASS A CLASS B
-------------------------------------- -----------------------------------------
SIX MONTHS SIX MONTHS SEPTEMBER 26, MAY 3, 1993
YEAR ENDED ENDED YEAR ENDED YEAR ENDED ENDED 1994 TO TO APRIL
OCTOBER 31, OCTOBER 31, APRIL 30, OCTOBER 31, OCTOBER 31, APRIL 30, 30,
1996 1995(d) 1995(e) 1996 1995(d) 1995(e) 1994(a)
----------- ----------- ---------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 9.87 $ 9.44 $ 9.45 $ 9.85 $9.43 $9.25 $ 10.00
- ----------------------------------------------------------------------------------------------------------------------------
Investment Activities
Net investment income 0.55 0.33 0.55 0.46 0.25 0.31 0.45
Net realized and
unrealized gains
(losses) from
investments (0.22) 0.40 (0.02) (0.20) 0.45 0.17 (0.54)
- ----------------------------------------------------------------------------------------------------------------------------
Total from Investment
Activities 0.33 0.73 0.53 0.26 0.70 0.48 (0.09)
- ----------------------------------------------------------------------------------------------------------------------------
Distributions
Net investment income (0.55) (0.29) (0.54) (0.46) (0.22) (0.30) (0.45)
In excess of net
investment income -- (0.01) -- (0.01) (0.06) -- --
Net realized gains -- -- -- -- -- -- (0.01)
- ----------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.55) (0.30) (0.54) (0.47) (0.28) (0.30) (0.46)
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 9.65 $ 9.87 $ 9.44 $ 9.64 $9.85 $9.43 $ 9.45
- ---------------------------------------------------------------------------------------------------------------------------
Total Return (excludes
sales charges) 3.52% 7.86%(b) 5.87% 2.77% 7.47%(b) 5.26%(b) (1.06)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of
Period (000) $24,632 $27,856 $ 84,567 $ 1,498 $ 909 $ 155 $ 120,636
Ratio of expenses to
average net assets 0.98% 0.92%(c) 0.63% 1.84% 1.82%(c) 1.43%(c) 0.38%(c)
Ratio of net investment
income to average net
assets 5.64% 6.04%(c) 5.97% 4.78% 4.98%(c) 5.03%(c) 4.61%(c)
Ratio of expenses to
average net assets* 1.22% 1.06%(c) 0.98% 2.06% 2.12%(c) 1.60%(c) 0.96%(c)
Ratio of net investment
income to average net
assets* 5.40% 5.90%(c) 5.62% 4.56% 4.68%(c) 4.86%(c) 4.03%(c)
Portfolio turnover(f) 378% 69% 127% 378% 69% 127% 121%
</TABLE>
- ---------------
<TABLE>
<C> <S>
* During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the
ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Effective June 5, 1995, the Victory Government Bond Portfolio became the Government Bond Fund.
(e) Effective September 26, 1994, the Fund designated the existing shares as Class A Shares and commenced offering
Class B Shares.
(f) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of
shares issued.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
150
<PAGE> 153
THE VICTORY PORTFOLIOS Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GOVERNMENT MORTGAGE FUND
--------------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.86 $ 10.33 $ 11.36 $ 11.07 $ 10.73
- ---------------------------------------------------------------------------------------------------------
Investment Activities
Net investment income 0.70 0.72 0.68 0.66 0.74
Net realized and unrealized gains
(losses) from investments (0.12) 0.62 (1.02) 0.32 0.34
- ---------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.58 1.34 (0.34) 0.98 1.08
Distributions
Net investment income (0.67) (0.71) (0.67) (0.66) (0.74)
Net realized gains -- -- (0.02) (0.03) --
In excess of net realized gains -- (0.08) -- -- --
Tax return of capital (0.01) (0.02) -- -- --
- ---------------------------------------------------------------------------------------------------------
Total Distributions (0.68) (0.81) (0.69) (0.69) (0.74)
- ---------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.76 $ 10.86 $ 10.33 $ 11.36 $ 11.07
- ---------------------------------------------------------------------------------------------------------
Total Return (excludes sales charges) 5.54% 13.55% (3.01)% 9.05% 10.34%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000) $125,992 $136,103 $148,168 $132,738 $ 73,660
Ratio of expenses to average net assets 0.89% 0.77% 0.76% 0.75% 0.77%
Ratio of net investment income to average
net assets 6.46% 6.81% 6.38% 5.92% 6.82%
Ratio of expenses to average net assets* 0.90% 0.79% 0.96% 0.76%
Ratio of net investment income to average
net assets* 6.45% 6.80% 6.18% 5.92%
Portfolio turnover 127% 59% 132% 50% 11%
</TABLE>
- ---------------
<TABLE>
<C> <S>
* During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the
ratios would have been as indicated.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
151
<PAGE> 154
THE VICTORY PORTFOLIOS Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FUND FOR INCOME
----------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, FEBRUARY 1, 1994 YEAR ENDED JANUARY 31,
----------------------- THROUGH OCTOBER -----------------------------
1996 1995(c) 31, 1994 1994 1993 1992
---------- ---------- ---------------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.93 $ 9.43 $ 10.14 $ 10.57 $ 10.55 10.19
- -----------------------------------------------------------------------------------------------------------------------
Investment Activities
Net investment income 0.68 0.73 0.52 0.80 0.80 0.85
Net realized and unrealized gains
(losses) on investments (0.08) 0.43 (0.71) (0.41) 0.06 0.36
- -----------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.60 1.16 (0.19) 0.39 0.86 1.21
- -----------------------------------------------------------------------------------------------------------------------
Distributions
Net investment income (0.68) (0.66) (0.51) (0.80) (0.80) (0.85)
In excess of net investment income (0.03) -- (0.01) -- -- --
Net realized gains -- -- -- (0.02) (0.04) --
Tax return of capital (0.05) -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------
Total Distributions (0.76) (0.66) (0.52) (0.82) (0.84) (0.85)
- -----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.77 $ 9.93 $ 9.43 $ 10.14 $ 10.57 10.55
- -----------------------------------------------------------------------------------------------------------------------
Total Return (excludes sales charges) 6.35% 12.75% (1.99)%(a) 3.75% 8.45% 12.34%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000) $ 20,816 $ 22,756 $ 29,358 $46,632 $55,075 58,055
Ratio of expenses to average net assets 1.02% 1.12% 1.12%(b) 1.13% 1.12% 0.92%
Ratio of net investment income to average
net assets 7.05% 7.62% 7.21%(b) 7.65% 7.56% 8.18%
Ratio of expenses to average net assets* 1.73% 1.58% 1.26%(b)
Ratio of net investment income to average
net assets* 6.34% 7.16% 7.07%(b)
Portfolio turnover 25% 35% 18% 47% 23% 24%
</TABLE>
- ---------------
<TABLE>
<C> <S>
* During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the
ratios would have been as indicated.
(a) Not annualized.
(b) Annualized.
(c) Effective June 5, 1995, the Victory Fund for Income Portfolio became the Fund for Income.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
152
<PAGE> 155
THE VICTORY PORTFOLIOS Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NATIONAL MUNICIPAL BOND FUND
----------------------------------------------------------------------------------------
CLASS A
-------------------------------------- CLASS B
YEAR ---------------------------------------------
SIX MONTHS ENDED SIX MONTHS SEPTEMBER 26,
YEAR ENDED ENDED APRIL YEAR ENDED ENDED 1994 TO
OCTOBER 31, OCTOBER 31, 30, OCTOBER 31, OCTOBER 31, APRIL 30,
1996 1995(d) 1995(e) 1996 1995(d) 1995(e)
----------- ----------- ------ ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 10.06 9.59 $ 9.64 $ 10.07 $ 9.59 $9.53
Investment Activities
Net investment income 0.44 0.24 0.44 0.35 0.20 0.28
Net realized and unrealized
gains (losses) from
investments 0.13 0.46 (0.05) 0.13 0.47 0.05
- -------------------------------------------------------------------------------------------------------------------------
Total from Investment
Activities 0.57 0.70 0.39 0.48 0.67 0.33
- -------------------------------------------------------------------------------------------------------------------------
Distributions
Net investment income (0.44) (0.23) (0.44) (0.35) (0.19) (0.27)
In excess of net investment
income -- -- -- (0.01) -- --
Net realized gains -- -- -- (0.03) -- --
In excess of net realized
gains (0.03) -- -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.47) (0.23) (0.44) (0.39) (0.19) (0.27)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.16 $ 10.06 $ 9.59 $ 10.16 $ 10.07 $9.59
- -------------------------------------------------------------------------------------------------------------------------
Total Return (excludes sales
charges) 5.83% 7.39%(b) 4.21% 4.85% 6.99%(b) 3.54%(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000) $36,958 $11,964 $5,118 $ 1,808 $ 456 $ 147
Ratio of expenses to average
net assets 0.29% 0.02%(c) 0.20% 1.20% 0.96%(c) (0.05)%(c)
Ratio of net investment income
(loss) to average net assets 4.37% 5.11%(c) 5.01% 3.50% 4.15%(c) 4.35%(c)
Ratio of expenses to average
net assets* 1.35% 2.57%(c) 3.95% 2.17% 3.67%(c) 2.63%(c)
Ratio of net investment income
(loss) to average net assets* 3.31% 2.56%(c) 1.26% 2.53% 1.44%(c) 1.67%(c)
Portfolio turnover (f) 143% 72% 52% 143% 72% 52%
<CAPTION>
CLASS B
FEBRUARY 3,
1994 TO
APRIL 30,
1994(e)
------------
<S> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $10.00
Investment Activities
Net investment income 0.08
Net realized and unrealized
gains (losses) from
investments (0.36)
- ----------------------------------------------
Total from Investment
Activities (0.28)
- ----------------------------------------------
Distributions
Net investment income (0.08)
In excess of net investment
income --
Net realized gains --
In excess of net realized
gains --
- ----------------------------------------------
Total Distributions (0.08)
- ----------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.64
- ----------------------------------------------
Total Return (excludes sales
charges) 2.82%(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000) $ 494
Ratio of expenses to average
net assets 0.65%(c)
Ratio of net investment income
(loss) to average net assets 3.15%(c)
Ratio of expenses to average
net assets* 26.10%(c)
Ratio of net investment income
(loss) to average net assets* (22.30)%(c)
Portfolio turnover (f) 13%
- ---------------
<FN>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Effective June 5, 1995, the Victory National Municipal Bond Portfolio became
the National Municipal Bond Fund.
(e) Effective September 26, 1994, the Fund designated the existing shares as
Class A Shares and commenced offering Class B Shares.
(f) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
153
<PAGE> 156
THE VICTORY PORTFOLIOS Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NEW YORK TAX-FREE FUND
-------------------------------------------------------------------------------------------
CLASS A CLASS B
------------------------------------ -------------------------------------- YEAR
ENDED
YEAR ENDED JANUARY 1, YEAR ENDED SEPTEMBER 26, DECEMBER
OCTOBER 31, 1994 TO OCTOBER 31, 1994 TO 31,
------------------- OCTOBER 31, ------------------- OCTOBER 31, -------
1996 1995(a) 1994(d) 1996 1995(d) 1994(d) 1993
------- ------- ------------ ------- ------- -------------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.85 $ 12.39 $ 13.54 $ 12.86 $ 12.39 $ 12.62 $ 12.76
- -----------------------------------------------------------------------------------------------------------------------------------
Investment Activities
Net investment income 0.68 0.87 0.57 0.57 0.85 0.07 0.70
Net realized and unrealized gains
(losses) from investments (0.11) 0.42 (1.15) (0.10) 0.36 (0.23) 0.84
- -----------------------------------------------------------------------------------------------------------------------------------
Total from Investment
Activities 0.57 1.29 (0.58) 0.47 1.21 (0.16) 1.54
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions
Net investment income (0.68) (0.83) (0.57) (0.57) (0.74) (0.07) (0.70)
In excess of net investment income -- -- -- (0.01) -- -- --
Net realized gains (0.01) -- -- (0.01) -- -- (0.06)
- -----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.69) (0.83) (0.57) (0.59) (0.74) (0.07) (0.76)
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.73 $ 12.85 $ 12.39 $ 12.74 $ 12.86 $ 12.39 $ 13.54
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return(excludes sales charges) 4.53% 10.82% (4.31)%(b) 3.72% 10.18% (1.25)%(b) 12.34%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000) $13,754 $15,374 $ 17,840 $ 2,515 $ 1,953 $ (e) $28,530
Ratio of expenses to average net
assets 0.93% 1.16% 0.91%(c) 1.65% 2.02% 0.52%(c) 0.87%
Ratio of net investment income
(loss) to average net assets 5.25% 5.50% 5.33%(c) 4.52% 5.94% 5.94%(c) 5.28%
Ratio of expenses to average net
assets* 1.58% 1.96% 1.25%(c) 2.34% 2.25% 0.86%(c) 0.96%
Ratio of net investment income
(loss) to average net assets* 4.60% 4.70% 4.99%(c) 3.83% 5.71% 5.60%(c) 5.19%
Portfolio turnover (f) 0% 18% 18% 0% 18% 18% 12%
<CAPTION>
YEAR
ENDED
DECEMBER 31,
1992
------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.50
- ------------------------------------------------
Investment Activities
Net investment income 0.74
Net realized and unrealized gains
(losses) from investments 0.26
- ------------------------------------------------
Total from Investment
Activities 1.00
- ------------------------------------------------
Distributions
Net investment income (0.74)
In excess of net investment income --
Net realized gains --
- ------------------------------------------------
Total Distributions (0.74)
- ------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.76
- ------------------------------------------------
Total Return(excludes sales charges) 8.26%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000) $26,034
Ratio of expenses to average net
assets 0.66%
Ratio of net investment income
(loss) to average net assets 5.89%
Ratio of expenses to average net
assets* 0.96%
Ratio of net investment income
(loss) to average net assets* 5.59%
Portfolio turnover (f) 14%
- ---------------
<FN>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Effective June 5, 1995, the Victory New York Tax-Free Portfolio became the
New York Tax-Free Fund.
(b) Not annualized.
(c) Annualized.
(d) Effective September 26, 1994, the Fund designated the existing shares as
Class A Shares and commenced offering Class B Shares.
(e) Amount is less than $1,000.
(f) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
154
<PAGE> 157
THE VICTORY PORTFOLIOS Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
OHIO MUNICIPAL BOND FUND
-----------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------
1996 1995 1994 1993 1992
---------- ------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.32 $ 10.33 $ 11.52 $ 10.52 $ 10.37
- ----------------------------------------------------------------------------------------------------------
Investment Activities
Net investment income 0.54 0.52 0.49 0.52 0.60
Net realized and unrealized
gains(losses) from investments 0.11 1.00 (0.94) 1.00 0.15
- ----------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.65 1.52 (0.45) 1.52 0.75
- ----------------------------------------------------------------------------------------------------------
Distributions
Net investment income (0.54) (0.52) (0.49) (0.52) (0.60)
In excess of net investment income -- (0.01) -- -- --
Net realized gains -- -- (0.25) -- --
- ----------------------------------------------------------------------------------------------------------
Total Distributions (0.54) (0.53) (0.74) (0.52) (0.60)
- ----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.43 $ 11.32 $ 10.33 $ 11.52 $ 10.52
- ----------------------------------------------------------------------------------------------------------
Total Return (excludes sales charges) 5.87% 15.03% (4.08)% 14.75% 7.34%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000) $ 73,463 $60,031 $ 57,704 $ 50,676 $ 17,676
Ratio of expenses to average net assets 0.89% 0.66% 0.51% 0.42% 0.09%
Ratio of net investment income to
average net assets 4.72% 4.78% 4.58% 4.77% 5.76%
Ratio of expenses to average net
assets* 1.05% 0.94% 1.09% 0.86% 0.84%
Ratio of net investment income to
average net assets* 4.56% 4.49% 4.01% 4.33% 5.01%
Portfolio turnover 81% 125% 53% 151% 47%
</TABLE>
- ---------------
<TABLE>
<C> <S>
* During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the
ratios would have been as indicated.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
155
<PAGE> 158
THE VICTORY PORTFOLIOS Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BALANCED FUND
-------------------------------------------------------
CLASS B STOCK INDEX FUND
CLASS A SHARES ---------------------------------
SHARES -------------
----------- MARCH 1, 1996 YEAR ENDED DECEMBER 10, YEAR ENDED OCTOBER DECEMBER 3,
YEAR ENDED THROUGH OCTOBER 1993 TO 31, 1993 TO
OCTOBER 31, OCTOBER 31, 31, OCTOBER 31, ------------------- OCTOBER 31,
1996(d) 1996(d) 1995 1994(a) 1996 1995 1994(a)
----------- ------------- ---------- ------------ -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 11.01 $ 11.51 $ 9.62 $ 10.00 $ 12.50 $ 10.18 $ 10.00
- -------------------------------------------------------------------------------------------------------------------------------
Investment Activities
Net investment income 0.36 0.14 0.41 0.33 0.28 0.27 0.20
Net realized and unrealized
gains (losses) from
investments and foreign
currencies 1.39 0.85 1.40 (0.39) 2.58 2.31 0.16
- -------------------------------------------------------------------------------------------------------------------------------
Total from Investment
Activities 1.75 0.99 1.81 (0.06) 2.86 2.58 0.36
- -------------------------------------------------------------------------------------------------------------------------------
Distributions
Net investment income (0.36) (0.14) (0.41) (0.32) (0.28) (0.26) (0.18)
In excess of net investment
income -- (0.02) (0.01) -- -- -- --
Net realized gains (0.07) -- -- -- (0.23) -- --
- -------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.43) (0.16) (0.42) (0.32) (0.51) (0.26) (0.18)
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.33 $ 12.34 $ 11.01 $ 9.62 14.85 $ 12.50 $ 10.18
- -------------------------------------------------------------------------------------------------------------------------------
Total Return (excludes sales
charges) 16.27% 15.73%(e) 19.24% (0.57)%(b) 23.38% 25.72% 3.66%(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000) $ 273,553 $ 1,432 $201,073 $127,285 $277,124 $160,822 $89,686
Ratio of expenses to average net
assets 1.27% 2.46%(c) 0.98% 0.87%(c) 0.57% 0.55% 0.58%(c)
Ratio of net investment income to
average net assets 3.14% 1.78%(c) 4.05% 3.97%(c) 2.14% 2.53% 2.35%(c)
Ratio of expenses to average net
assets* 1.43% 2.67%(c) 1.36% 1.49%(c) 0.89% 0.87% 1.10%(c)
Ratio of net investment income to
average net assets* 2.98% 1.57%(c) 3.67% 3.35%(c) 1.82% 2.21% 1.82%(c)
Portfolio turnover(f) 80% 80% 69% 118% 4% 12% 1%
Average commission rate paid(g) $ 0.0084 $0.0084 $ 0.0186
</TABLE>
- ---------------
<TABLE>
<C> <S>
* During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the
ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Effective March 1, 1996, the Fund designated the existing shares as Class A Shares and commenced offering Class B
Shares.
(e) Represents total return for the Fund for the period November 1, 1995 through February 29, 1996 plus total return
for Class B Shares for the period March 1, 1996 through October 31, 1996.
(f) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of
shares issued.
(g) Represents the total dollar amount of commissions paid on portfolio security transactions divided by total number
of shares purchased and sold by the Fund for which commissions were charged.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
156
<PAGE> 159
THE VICTORY PORTFOLIOS Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DIVERSIFIED STOCK FUND
---------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES
-------------- --------------
MARCH 1, 1996
YEAR ENDED THROUGH YEAR ENDED OCTOBER 31,
OCTOBER 31, OCTOBER 31, -----------------------------------------
1996(a) 1996(a) 1995 1994 1993 1992
-------------- -------------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.62 $ 14.18 $ 12.68 $ 13.39 $ 12.16 $ 11.44
- ------------------------------------------------------------------------------------------------------------------
Investment Activities
Net investment income 0.20 0.07 0.27 0.25 0.18 0.19
Net realized and unrealized gains
from investments 3.21 1.57 2.33 0.64 1.50 1.11
- ------------------------------------------------------------------------------------------------------------------
Total from Investment
Activities 3.41 1.64 2.60 0.89 1.68 1.30
- ------------------------------------------------------------------------------------------------------------------
Distributions
Net investment income (0.19) (0.07) (0.27) (0.23) (0.21) (0.19)
In excess of net investment income -- (0.04) (0.01) -- -- --
Net realized gains (1.09) -- (1.38) (1.37) (0.24) (0.39)
- ------------------------------------------------------------------------------------------------------------------
Total Distributions (1.28) (0.11) (1.66) (1.60) (0.45) (0.58)
- ------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 15.75 $ 15.71 $ 13.62 $ 12.68 $ 13.39 $ 12.16
- ------------------------------------------------------------------------------------------------------------------
Total Return (excludes sales charges) 27.16% 26.61%(c) 23.54% 7.39% 14.04% 11.57%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000) $571,153 $ 8,228 $409,549 $263,227 $257,405 $227,839
Ratio of expenses to average net
assets 1.05% 2.07%(b) 0.92% 0.89% 0.89% 0.91%
Ratio of net investment income to
average net assets 1.40% 0.11%(b) 2.11% 2.06% 1.45% 1.63%
Ratio of expenses to average net
assets* 1.08% 2.08%(b) 0.95% 1.10% 0.90%
Ratio of net investment income to
average net assets* 1.37% 0.10%(b) 2.07% 1.86% 1.43%
Portfolio turnover (d) 94% 94% 75% 104% 86% 75%
Average commission rate paid (e) $ 0.0504 $ 0.0504
- ---------------
<FN>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Effective March 1, 1996, the Fund designated the existing shares as Class A
Shares and commenced offering Class B Shares.
(b) Annualized.
(c) Represents total return for the Fund for the period November 1, 1995 through
February 29, 1996 plus total return for Class B Shares for the period March
1, 1996 through October 31, 1996.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
(e) Represents the total dollar amount of commissions paid on portfolio security
transactions divided by total number of shares purchased and sold by the
Fund for which commissions were charged.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
157
<PAGE> 160
THE VICTORY PORTFOLIOS Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE FUND
-------------------------------------------
YEAR ENDED YEAR ENDED DECEMBER 3, 1993
OCTOBER OCTOBER 31, TO OCTOBER 31,
31, 1996 1995(d) 1994 (a)
---------- ----------- ----------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.87 $ 10.13 $ 10.00
- -------------------------------------------------------------------------------------------------------------
Investment Activities
Net investment income 0.20 0.27 0.21
Net realized and unrealized gains from investments 2.65 1.92 0.11
- -------------------------------------------------------------------------------------------------------------
Total from Investment Activities 2.85 2.19 0.32
- -------------------------------------------------------------------------------------------------------------
Distributions
Net investment income (0.20) (0.27) (0.19)
In excess of net investment income -- (0.01) --
Net realized gains (0.34) (0.17) --
- -------------------------------------------------------------------------------------------------------------
Total Distributions (0.54) (0.45) (0.19)
- -------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.18 $ 11.87 $ 10.13
- -------------------------------------------------------------------------------------------------------------
Total Return (excludes sales charges) 24.66% 22.28% 3.27%(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000) $382,083 $ 295,871 $188,184
Ratio of expenses to average net assets 1.33% 0.99% 0.92%(c)
Ratio of net investment income to average net assets 1.56% 2.55% 2.32%(c)
Ratio of expenses to average net assets* 1.35% 1.30% 1.48%(c)
Ratio of net investment income to average net assets* 1.54% 2.24% 1.76%(c)
Portfolio turnover 28% 23% 39%
Average commission rate paid(e) $ 0.0524
- ---------------
<FN>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) 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.
(e) Represents the total dollar amount of commissions paid on portfolio security
transactions divided by total number of shares purchased and sold by the
Fund for which commissions were charged.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
158
<PAGE> 161
THE VICTORY PORTFOLIOS Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SPECIAL VALUE FUND
------------------------------------------------------------
CLASS B
GROWTH FUND CLASS A SHARES
-------------------------------------------- SHARES -------------
----------- MARCH 1, 1996
YEAR ENDED OCTOBER 31, DECEMBER 3, 1993 YEAR ENDED THROUGH YEAR ENDED DECEMBER 3, 1993
------------------------- TO OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, TO OCTOBER 31,
1996 1995(d) 1994 (a)(e) 1996(f) 1996(f) 1995 1994(a)
----------- ----------- ---------------- ----------- ------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 12.15 $ 10.23 $ 10.00 $ 12.15 $ 12.89 $ 10.49 $ 10.00
- ---------------------------------------------------------------------------------------------------------------------------------
Investment
Activities
Net investment
income (loss) 0.08 0.11 0.10 0.12 0.01 0.15 0.11
Net realized and
unrealized gains
(losses) on
investments 2.93 1.97 0.22 2.33 1.23 1.71 0.48
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
Investment
Activities 3.01 2.08 0.32 2.45 1.24 1.86 0.59
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions
Net investment
income (0.08) (0.11) (0.09) (0.11) (0.01) (0.15) (0.10)
In excess of net
investment income -- -- -- -- (0.03) -- --
Net realized gains (0.51) (0.05) -- (0.34) -- (0.05) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total
Distributions (0.59) (0.16) (0.09) (0.45) (0.04) (0.20) (0.10)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END
OF PERIOD $ 14.57 $ 12.15 $ 10.23 $ 14.15 $ 14.09 $ 12.15 $ 10.49
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return
(excludes sales
charges) 25.66% 20.54% 3.22%(b) 20.60% 19.80%(g) 18.01% 5.92%(b)
RATIOS/SUPPLEMENTAL
DATA:
Net Assets, End of
Period (000) $ 147,753 $ 108,253 $ 66,921 $ 289,460 $ 386 $ 194,700 $118,600
Ratio of expenses
to average net
assets 1.33% 1.07% 0.94%(c) 1.37% 2.51%(c) 1.04% 1.00%(c)
Ratio of net
investment income
to average net
assets 0.64% 1.00% 1.10%(c) 0.88% (0.31)%(c) 1.35% 1.23%(c)
Ratio of expenses
to average net
assets* 1.39% 1.42% 1.51%(c) 1.40% 3.75%(c) 1.30% 1.49%(c)
Ratio of net
investment income
(loss) to average
net assets* 0.58% 0.65% 0.52%(c) 0.85% (1.55)%(c) 1.09% 0.74%(c)
Portfolio turnover
(h) 27% 107% 28% 55% 55% 39% 18%
Average commission
rate paid (i) $ 0.0618 $ 0.0501 $0.0501
</TABLE>
- ---------------
<TABLE>
<C> <S>
* During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the
ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Effective June 5, 1995, the Victory Equity Portfolio merged into the Growth Fund. Financial highlights for the
periods prior to June 5, 1995 represent the Growth Fund.
(e) Effective March 17, 1994, the Society Earnings Momentum Fund merged into the Growth Fund. Financial highlights for
the period prior to March 17, 1994 represent the Growth Fund.
(f) Effective March 1, 1996, the Fund designated the existing shares as Class A Shares and commenced offering Class B
Shares.
(g) Represents total return for the Fund for the period November 1, 1995 through February 29, 1996 plus total return
for Class B Shares for the period March 1, 1996 through October 31, 1996.
(h) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of
shares issued.
(i) Represents the total dollar amount of commissions paid on portfolio security transactions divided by total number
of shares purchased and sold by the Fund for which commissions were charged.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
159
<PAGE> 162
THE VICTORY PORTFOLIOS Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SPECIAL GROWTH FUND
-------------------------------------------------------------
YEAR ENDED SIX MONTHS ENDED YEAR ENDED JANUARY 11, 1994
OCTOBER OCTOBER 31, APRIL 30, TO APRIL 30,
31, 1996 1995 1995(d) 1994 (a)
---------- ---------------- ---------- ----------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.81 $ 10.54 $ 9.82 $ 10.00
- -------------------------------------------------------------------------------------------------------------
Investment Activities
Net investment income (loss) (0.07) 0.00 0.02 (0.01)
Net realized and unrealized gains (losses)
on investments 2.40 1.27 0.72 (0.17)
- -------------------------------------------------------------------------------------------------------------
Total from Investment Activities 2.33 1.27 0.74 (0.18)
- -------------------------------------------------------------------------------------------------------------
Distributions
Net investment income -- -- (0.02) --
- -------------------------------------------------------------------------------------------------------------
Total Distributions (0.02)
- -------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.14 $ 11.81 $ 10.54 $ 9.82
- -------------------------------------------------------------------------------------------------------------
Total Return (excludes sales charges) 19.73% 12.05%(b) 7.51% (1.80)%(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000) $ 87,837 $ 54,335 $ 20,796 $ 30,867
Ratio of expenses to average net assets 1.47% 0.65%(c) 1.04% 0.82%(c)
Ratio of net investment income (loss) to
average net assets (0.62%) (0.13%)(c) 0.17% (0.27%)(c)
Ratio of expenses to average net assets* 1.51% 1.40%(c) 1.35% 1.47%(c)
Ratio of net investment income (loss) to
average net assets* (0.66%) (0.88%)(c) (0.14%) (0.92%)(c)
Portfolio turnover 152% 54% 102% 61%
Average commisson rate paid(e) $ 0.0468
</TABLE>
- ---------------
<TABLE>
<C> <S>
* During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the
ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Effective June 5, 1995, the Victory Aggressive Growth Portfolio merged into the Special Growth Fund. Financial
highlights for the periods prior to June 5, 1995 represent the Aggressive Growth Portfolio.
(e) Represents the total dollar amount of commissions paid on portfolio security transactions divided by total number
of shares purchased and sold by the Fund for which commissions were charged.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
160
<PAGE> 163
THE VICTORY PORTFOLIOS Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
OHIO REGIONAL STOCK FUND
----------------------------------------------------------------------------
CLASS A CLASS B
SHARES SHARES
----------- -------------
YEAR MARCH 1, 1996
ENDED THROUGH YEAR ENDED OCTOBER 31,
OCTOBER 31, OCTOBER 31, -------------------------------------------
1996(a) 1996(a) 1995 1994 1993 1992
----------- ------------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 15.94 $ 16.43 $ 14.56 $ 14.69 $ 12.12 $ 11.15
Investment Activities
Net investment income (loss) 0.14 (0.03) 0.17 0.18 0.16 0.20
Net realized and unrealized gains
from investments 2.62 1.51 2.13 0.39 2.63 1.07
- -----------------------------------------------------------------------------------------------------------------
Total from Investment
Activities 2.76 1.48 2.30 0.57 2.79 1.27
- -----------------------------------------------------------------------------------------------------------------
Distributions
Net investment income (0.14) -- (0.17) (0.17) (0.18) (0.21)
In excess of net investment
income -- (0.04) (0.01) -- -- --
Net realized gains (0.36) -- (0.65) (0.53) (0.04) (0.09)
In excess of net realized gains (0.25) -- (0.09) -- -- --
- -----------------------------------------------------------------------------------------------------------------
Total Distributions (0.75) (0.04) (0.92) (0.70) (0.22) (0.30)
- -----------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 17.95 $ 17.87 $ 15.94 $ 14.56 $ 14.69 $ 12.12
- -----------------------------------------------------------------------------------------------------------------
Total Return (excludes sales
charges) 17.79% 16.95%(b) 16.93% 3.96% 23.16% 11.50%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000) $45,294 $ 326 $39,048 $33,965 $34,926 $36,115
Ratio of expenses to average net
assets 1.39% 2.61%(c) 1.20% 1.04% 1.04% 1.04%
Ratio of net investment income
(loss) to average net assets 0.79% (0.60%)(c) 1.13% 1.27% 1.17% 1.73%
Ratio of expenses to average net
assets* 1.40% 3.50%(c) 1.24% 1.27% 1.06%
Ratio of net investment income
(loss) to average net assets* 0.78% (1.49%)(c) 1.09% 1.04% 1.15%
Portfolio turnover (d) 6% 6% 11% 14% 7% 8%
Average commission rate paid(e) $0.0513 $0.0513
- ---------------
<FN>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Effective March 1, 1996, the Fund designated the existing shares as Class A
Shares and commenced offering Class B Shares.
(b) Represents total return for the Fund for the period November 1, 1995 through
February 29, 1996 plus total return for Class B Shares for the period March
1, 1996 through October 31, 1996.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
(e) Represents the total dollar amount of commissions paid on portfolio security
transactions divided by total number of shares purchased and sold by the
Fund for which commissions were charged.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
161
<PAGE> 164
THE VICTORY PORTFOLIOS Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL GROWTH FUND
-----------------------------------------------------------------------------
CLASS A CLASS B
SHARES SHARES
----------- -------------
YEAR MARCH 1, 1996
ENDED THROUGH YEAR ENDED OCTOBER 31,
OCTOBER 31, OCTOBER 31, --------------------------------------------
1996(a) 1996(a) 1995(b) 1994 1993 1992
----------- ------------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 12.33 $ 12.79 $ 13.32 $ 11.93 $ 8.93 $ 9.20
Investment Activities
Net investment income (loss) 0.08 -- 0.05 (0.01) (0.03) (0.02)
Net realized and unrealized
gains (losses) from
investments and foreign
curriencies 0.62 0.14 (0.42) 1.40 3.03 (0.17)
- -----------------------------------------------------------------------------------------------------------------
Total from Investment
Activities 0.70 0.14 (0.37) 1.39 3.00 (0.19)
Distributions
Net investment income (0.02) -- -- -- -- (0.01)
Net realized gains -- -- (0.55) -- -- (0.07)
Tax return of capital -- -- (0.07) -- -- --
- -----------------------------------------------------------------------------------------------------------------
Total Distributions (0.02) -- (0.62) (0.08)
- -----------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.01 $ 12.93 $ 12.33 $ 13.32 $ 11.93 $ 8.93
- -----------------------------------------------------------------------------------------------------------------
Total Return(excludes sales
charges) 5.65% 4.89%(c) (2.50%) (11.65%) 33.59% (2.08%)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000) $ 121,517 $ 118 $106,477 $81,307 $30,629 $11,091
Ratio of expenses to average net
assets 1.73% 2.91%(d) 1.53% 1.48% 1.46% 1.56%
Ratio of net investment income
(loss) to average net assets 0.64% (0.10%)(d) 0.75% (0.51%) (0.74%) (0.20%)
Ratio of expenses to average net
assets* 1.75% 6.46%(d) 1.65% 1.83% 1.63% 1.72%
Ratio of net investment loss to
average net assets* 0.62% (3.65%)(d) 0.63% (0.86%) (0.91%) (0.35%)
Portfolio turnover (e) 178% 178% 68% 51% 45% 92%
Average commission rate paid (f) $ 0.0242 $0.0242
- ---------------
<FN>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Effective March 1, 1996, the Fund designated the existing shares as Class A
Shares and commenced offering Class B Shares.
(b) Effective June 5, 1995, the Victory Foreign Markets Portfolio merged into
the International Growth Fund. Financial highlights for the periods prior to
June 5, 1995 represent the International Growth Portfolio.
(c) Represents total return for the Fund for the period November 1, 1995 through
February 29, 1995 plus total return for Class B Shares for the Period March
1, 1995 through October 31, 1996.
(d) Annualized.
(e) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
(f) Represents the total dollar amount of commissions paid on portfolio security
transactions divided by total number of shares purchased and sold by the
Fund for which commissions were charged.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
162
<PAGE> 165
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Trustees of
The Victory Portfolios
We have audited the accompanying statements of assets and liabilities of The
Victory Portfolios (comprising, respectively, the U.S. Government Obligations
Fund, Prime Obligations Fund, Financial Reserves Fund, Tax-Free Money Market
Fund, Ohio Municipal Money Market Fund, Limited Term Income Fund, Intermediate
Income Fund, Investment Quality Bond Fund, Government Bond Fund, Government
Mortgage Fund, Fund for Income, National Municipal Bond Fund, New York Tax-Free
Fund, Ohio Municipal Bond Fund, Balanced Fund, Stock Index Fund, Diversified
Stock Fund, Value Fund, Growth Fund, Special Value Fund, Special Growth Fund,
Ohio Regional Stock Fund, and International Growth Fund), including the
schedules of investments, as of October 31, 1996, and the related statements of
operations and changes in net assets, and the financial highlights for each
period presented except as noted in the next paragraph. These financial
statements and financial highlights are the responsibility of The Victory
Portfolios' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
The Financial Reserves Fund's financial highlights for each of the three
years in the period ended October 31, 1994 were audited by other auditors, whose
reports dated December 2, 1994 and December 17, 1993, respectively, expressed
unqualified opinions on those financial highlights. The Ohio Municipal Money
Market Fund's financial highlights for each of the three years in the period
ended August 31, 1994 were audited by other auditors, whose reports dated
October 7, 1994 and October 13, 1993, respectively, expressed unqualified
opinions on those financial highlights. The Government Bond Fund's statement of
changes in net assets for the period ended April 30, 1995 and financial
highlights for the periods ended April 30, 1995 and 1994 were audited by other
auditors, whose report dated June 20, 1995 expressed an unqualified opinion on
those financial statements and financial highlights. The Fund for Income's
financial highlights for the period ended October 31, 1994 and for each of the
three years in the period ended January 31, 1994 were audited by other auditors,
whose reports dated December 2, 1994 and February 28, 1994, respectively,
expressed unqualified opinions on those financial highlights. The National
Municipal Bond Fund's statements of changes in net assets for the period ended
April 30, 1995 and financial highlights for the periods ended April 30, 1995 and
1994 were audited by other auditors, whose report dated June 20, 1995 expressed
an unqualified opinion on those financial statements and financial highlights.
The New York Tax-Free Fund's financial highlights for the period ended October
31, 1994 and two years in the period ended December 31, 1993 were audited by
other auditors, whose reports dated December 2, 1994 and January 31, 1994,
respectively, expressed unqualified opinions on those financial highlights. The
Special Growth Fund's statement of changes in net assets for the period ended
April 30, 1995 and financial highlights for each of the periods ended April 30,
1995 and 1994 were audited by other auditors, whose report dated June 20, 1995
expressed an unqualified opinion on those financial statements and financial
highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation and verification by examination
of securities owned as of October 31, 1996, by correspondence with the
custodians and brokers or other auditing procedures where confirmations from
brokers were not received. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above, except as noted in the second paragraph, present fairly, in all
material respects, the financial position of each of the respective funds
comprising The Victory Portfolios as of October 31, 1996, and the results of
their operations, the changes in their net assets and the financial highlights
for the periods then ended in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Columbus, Ohio
December 13, 1996
163
<PAGE> 166
SPECIAL SHAREHOLDER MEETING
THE VICTORY PORTFOLIOS (UNAUDITED)
- --------------------------------------------------------------------------------
On December 1, 1995, a special meeting of the shareholders of The Victory
Portfolios was held to consider various proposals. The shareholders approved
each of the following proposals (with actual vote tabulations):
With respect to all of the Funds:
1. To convert The Victory Portfolios to a Delaware business trust.
<TABLE>
<CAPTION>
FUND NAME VOTES IN FAVOR VOTES AGAINST VOTES ABSTAINED NOT VOTED
- ---------------------------------------------- -------------- ------------- --------------- -----------
<S> <C> <C> <C> <C>
Balanced Fund 15,249,856 396,342 1,026,115 1,627,876
Diversified Stock Fund 24,659,415 57,627 1,745,723 3,244,162
Financial Reserves Fund 435,468,657 6,803,167 3,645,911 331,139,633
Fund for Income 1,062,403 11,928 93,088 1,121,270
Government Bond Fund 2,065,064 38,895 506,255 325,396
Government Mortgage Fund 11,335,804 115,319 129,579 1,024,445
Growth Fund 8,403,699 35,860 126,551 362,482
Intermediate Income Fund 11,130,361 169,748 4,463,734 911,459
International Growth Fund 7,462,788 0 343,540 846,934
Investment Quality Bond Fund 10,248,527 203,067 1,573,959 653,664
Limited Term Income Fund 15,845,870 23,527 658,301 493,463
National Municipal Bond Fund 617,944 0 22,346 588,955
New York Tax-Free Fund 753,835 11,293 43,559 544,915
Ohio Municipal Bond Fund 4,027,726 253,514 376 1,049,764
Ohio Municipal Money Market Fund 272,562,299 5,628,207 12,714,448 219,117,050
Ohio Regional Stock Fund 2,036,503 3,192 29,387 364,895
Prime Obligations Fund 231,998,103 6,243,503 17,774,269 203,677,006
Special Growth Fund 4,347,989 0 41,335 188,802
Special Value Fund 14,838,524 925 205,629 863,793
Stock Index Fund 10,217,072 0 0 2,388,453
Tax-Free Money Market Fund 161,628,767 707,076 7,364,096 141,893,010
U.S. Government Obligations Fund 507,284,588 4,793,247 7,974,717 389,003,370
Value Fund 24,222,240 0 56,101 595,888
</TABLE>
2. To designate KeyCorp Mutual Fund Advisers, Inc. as investment adviser
pursuant to a new Investment Advisory agreement between each of the
Funds and KeyCorp Mutual Fund Advisers, Inc.
<TABLE>
<CAPTION>
FUND NAME VOTES IN FAVOR VOTES AGAINST VOTES ABSTAINED NOT VOTED
- ---------------------------------------------- -------------- ------------- --------------- -----------
<S> <C> <C> <C> <C>
Balanced Fund 15,250,970 394,786 1,026,556 1,627,877
Diversified Stock Fund 24,667,732 56,435 1,738,600 3,244,160
Financial Reserves Fund 436,491,146 6,226,943 3,199,645 331,139,634
Fund for Income 1,063,792 7,979 95,648 1,121,270
Government Bond Fund 2,056,618 47,341 506,255 325,394
Government Mortgage Fund 11,331,948 115,319 133,436 1,024,444
Growth Fund 8,403,438 36,214 126,458 362,482
Intermediate Income Fund 11,135,822 169,748 4,458,273 911,459
International Growth Fund 7,462,530 272 343,524 846,936
Investment Quality Bond Fund 10,253,892 197,703 1,573,960 653,662
Limited Term Income Fund 15,835,583 23,527 668,588 493,463
National Municipal Bond Fund 618,009 0 22,282 588,954
New York Tax-Free Fund 754,311 10,879 43,497 544,915
Ohio Municipal Bond Fund 4,027,719 253,520 377 1,049,764
Ohio Municipal Money Market Fund 273,698,727 4,863,247 12,342,980 219,117,050
Ohio Regional Stock Fund 2,036,276 3,037 29,769 364,895
Prime Obligations Fund 235,671,425 4,468,852 15,875,598 203,677,006
Special Growth Fund 4,348,687 0 40,637 188,802
Special Value Fund 14,843,666 894 200,518 863,793
Stock Index Fund 10,217,072 0 0 2,388,453
Tax-Free Money Market Fund 161,795,646 727,330 7,176,961 141,893,012
U.S. Government Obligations Fund 507,342,913 4,716,161 7,993,478 389,003,370
Value Fund 24,211,318 11,682 55,341 595,888
</TABLE>
164
<PAGE> 167
SPECIAL SHAREHOLDER MEETING -- CONTINUED
THE VICTORY PORTFOLIOS (UNAUDITED)
- --------------------------------------------------------------------------------
3a. To elect the following trustees:
<TABLE>
<CAPTION>
TRUSTEE NAME VOTES IN FAVOR VOTES AGAINST VOTES ABSTAINED
- ---------------------------------------------- -------------- ------------- ---------------
<S> <C> <C> <C>
Robert G. Brown 2,080,048,334 0 81,016,242
Edward P. Campbell 2,085,377,298 0 75,687,281
Dr. Harry Gazelle 2,084,165,281 0 76,899,296
Dr. Thomas F. Morrissey 2,084,083,891 0 76,980,686
Stanley I. Landgraf 2,081,571,794 0 79,492,783
Leigh A. Wilson 2,084,944,888 0 76,119,690
Dr. H. Patrick Swygert 2,083,840,673 0 77,223,904
</TABLE>
3b. To select Coopers & Lybrand L.L.P. as independent accountants:
<TABLE>
<CAPTION>
FUND NAME VOTES IN FAVOR VOTES AGAINST VOTES ABSTAINED NOT VOTED
- ---------------------------------------------- -------------- ------------- --------------- -----------
<S> <C> <C> <C> <C>
Balanced Fund 15,253,772 392,460 1,026,080 1,627,877
Diversified Stock Fund 24,659,302 57,252 1,746,213 3,244,160
Financial Reserves Fund 437,057,481 5,294,868 3,565,385 331,139,634
Fund for Income 1,072,743 5,739 88,939 1,121,268
Government Bond Fund 2,057,699 46,260 506,255 325,396
Government Mortgage Fund 11,345,250 110,751 124,702 1,024,444
Growth Fund 8,403,792 35,860 126,458 362,482
Intermediate Income Fund 11,139,860 164,567 4,459,416 911,459
International Growth Fund 7,462,628 0 343,700 846,934
Investment Quality Bond Fund 10,252,737 0 1,772,818 653,662
Limited Term Income Fund 15,845,828 23,568 658,301 493,464
National Municipal Bond Fund 618,009 0 22,282 588,954
New York Tax-Free Fund 762,436 1,784 44,467 544,915
Ohio Municipal Bond Fund 4,037,833 243,407 376 1,049,764
Ohio Municipal Money Market Fund 275,587,599 3,592,920 11,724,435 219,117,050
Ohio Regional Stock Fund 2,031,116 7,775 30,192 364,894
Prime Obligations Fund 238,399,335 1,899,541 15,716,999 203,677,006
Special Growth Fund 4,347,886 0 41,438 188,802
Special Value Fund 14,843,599 961 200,518 863,793
Stock Index Fund 10,217,072 0 0 2,388,453
Tax-Free Money Market Fund 161,869,350 672,469 7,158,120 141,893,010
U.S. Government Obligations Fund 507,255,539 4,714,501 8,082,510 389,003,372
Value Fund 24,223,000 0 55,341 595,888
</TABLE>
165
<PAGE> 168
SPECIAL SHAREHOLDER MEETING -- CONTINUED
THE VICTORY PORTFOLIOS (UNAUDITED)
- --------------------------------------------------------------------------------
4. With respect to all of the Funds other than the Fund for Income and
Special Growth Fund, to designate Society Asset Management, Inc. as
Sub-Investment Adviser pursuant to a new sub-investment advisory
agreement between Society Asset Management, Inc. and KeyCorp Mutual Fund
Advisers, Inc.:
<TABLE>
<CAPTION>
FUND NAME VOTES IN FAVOR VOTES AGAINST VOTES ABSTAINED NOT VOTED
- ---------------------------------------------- -------------- ------------- --------------- -----------
<S> <C> <C> <C> <C>
Balanced Fund 15,247,252 395,254 1,029,806 1,627,877
Diversified Stock Fund 24,655,653 67,755 1,739,358 3,244,161
Financial Reserves Fund 437,057,481 5,294,868 3,565,385 331,139,634
Government Bond Fund 2,057,539 46,420 506,255 325,396
Government Mortgage Fund 11,331,948 115,319 133,436 1,024,444
Growth Fund 8,403,792 35,860 126,458 362,482
Intermediate Income Fund 11,121,619 183,951 4,458,273 911,459
International Growth Fund 7,462,493 223 343,612 846,934
Investment Quality Bond Fund 10,248,527 203,067 1,573,960 653,663
Limited Term Income Fund 15,835,583 23,527 668,588 493,463
National Municipal Bond Fund 618,009 0 22,282 588,954
New York Tax-Free Fund 752,942 10,879 44,866 544,915
Ohio Municipal Bond Fund 4,037,696 243,414 506 1,049,764
Ohio Municipal Money Market Fund 272,043,356 6,129,782 12,731,816 219,117,050
Ohio Regional Stock Fund 2,032,057 7,632 29,394 364,894
Prime Obligations Fund 233,928,943 5,303,393 16,783,539 203,677,006
Special Value Fund 14,841,714 2,848 200,516 863,793
Stock Index Fund 10,217,072 0 0 2,388,453
Tax-Free Money Market Fund 161,633,285 661,303 7,405,350 141,893,011
U.S. Government Obligations Fund 506,137,566 5,037,622 8,877,362 389,003,372
Value Fund 24,208,887 14,113 55,341 595,888
</TABLE>
5. With respect to the Fund for Income, [1,063,505] Shares were voted in
favor, [11,378] Shares against, [92,537] Shares abstained, [1,121,269]
Shares were not voted and the resolution that the Investment
Sub-Advisory Agreement between KeyCorp Mutual Fund Advisers, Inc. and
First Albany Asset Management Corporation with respect to the fund was
approved.
6. With respect to the Special Growth Fund, [4,348,089] Shares were voted
in favor, [0] Shares against, [41,235] Shares abstained, [188,802]
Shares were not voted and the resolution that the Investment
Sub-Advisory Agreement between KeyCorp Mutual Fund Advisers, Inc. and T.
Rowe Price Associates, Inc. with respect to the fund was approved.
7. With respect to the Funds listed below to increase the maximum remaining
maturity for the securities which may be purchased to 397 days:
<TABLE>
<CAPTION>
FUND NAME VOTES IN FAVOR VOTES AGAINST VOTES ABSTAINED NOT VOTED
- ---------------------------------------------- -------------- ------------- --------------- -----------
<S> <C> <C> <C> <C>
Prime Obligations Fund 235,772,947 2,932,947 17,309,982 203,677,005
Tax-Free Money Market Fund 161,669,975 663,624 7,366,339 141,893,011
U.S. Government Obligations Fund 506,957,927 5,114,709 7,979,914 389,003,372
</TABLE>
8. With respect to the Funds listed below to restate each Fund's investment
objective:
<TABLE>
<CAPTION>
FUND NAME VOTES IN FAVOR VOTES AGAINST VOTES ABSTAINED NOT VOTED
- ---------------------------------------------- -------------- ------------- --------------- -----------
<S> <C> <C> <C> <C>
Balanced Fund 15,243,053 403,349 1,025,909 1,627,878
Diversified Stock Fund 24,655,521 66,204 1,741,041 3,244,161
Government Mortgage Fund 11,338,300 114,785 127,618 1,024,444
Growth Fund 8,403,699 35,860 126,551 362,482
Intermediate Income Fund 11,139,860 164,567 4,459,416 911,459
International Growth Fund 7,462,071 406 343,849 846,936
Investment Quality Bond Fund 10,252,737 197,703 1,575,114 653,663
Limited Term Income Fund 15,827,899 29,848 669,950 493,464
Ohio Regional Stock Fund 2,028,976 8,435 31,671 364,895
Prime Obligations Fund 235,133,881 4,440,019 16,441,974 203,677,007
Special Value Fund 14,843,011 895 201,171 863,794
Stock Index Fund 10,217,072 0 0 2,388,453
Tax-Free Money Market Fund 161,157,811 1,709,991 6,832,137 141,893,010
U.S. Government Obligations Fund 505,098,842 7,220,486 7,733,223 389,003,371
Value Fund 24,208,887 2,431 67,023 595,888
</TABLE>
166
<PAGE> 169
SPECIAL SHAREHOLDER MEETING -- CONTINUED
THE VICTORY PORTFOLIOS (UNAUDITED)
- --------------------------------------------------------------------------------
9. Amendments as listed below to fundamental investment restrictions were
approved by the designated Funds as follows:
a. To amend the Fund's fundamental investment restrictions concerning
borrowing and senior securities:
<TABLE>
<CAPTION>
FUND NAME VOTES IN FAVOR VOTES AGAINST VOTES ABSTAINED NOT VOTED
- ---------------------------------------------- -------------- ------------- --------------- -----------
<S> <C> <C> <C> <C>
Balanced Fund 14,968,144 586,169 1,117,998 1,627,878
Diversified Stock Fund 24,624,847 70,395 1,767,525 3,244,160
Government Mortgage Fund 11,321,071 107,835 151,797 1,024,444
Growth Fund 8,402,966 35,953 127,191 362,482
Intermediate Income Fund 11,117,387 179,914 4,466,542 911,459
International Growth Fund 7,462,050 665 343,612 846,935
Investment Quality Bond Fund 10,253,779 197,703 1,574,073 653,662
Limited Term Income Fund 15,825,765 30,230 671,701 493,465
Ohio Municipal Bond Fund 4,020,814 259,780 1,022 1,049,764
Ohio Regional Stock Fund 2,023,706 11,211 34,356 364,894
Prime Obligations Fund 229,910,065 2,359,558 23,746,253 203,677,006
Special Value Fund 14,828,941 2,832 213,304 863,794
Stock Index Fund 10,217,072 0 0 2,388,453
Tax-Free Money Market Fund 161,290,130 1,009,137 7,400,672 141,893,010
U.S. Government Obligations Fund 503,242,895 7,179,868 9,629,787 389,003,372
Value Fund 24,220,569 2,431 55,341 595,888
</TABLE>
b. To eliminate the Fund's fundamental investment restriction concerning
investment for the purpose of exercising control:
<TABLE>
<CAPTION>
FUND NAME VOTES IN FAVOR VOTES AGAINST VOTES ABSTAINED NOT VOTED
- ---------------------------------------------- -------------- ------------- --------------- -----------
<S> <C> <C> <C> <C>
Balanced Fund 15,236,372 401,796 1,034,144 1,627,877
Diversified Stock Fund 24,662,015 65,605 1,735,147 3,244,160
Government Mortgage Fund 11,332,247 108,369 140,087 1,024,444
Growth Fund 8,404,044 35,860 126,206 362,482
Intermediate Income Fund 11,122,987 179,914 4,460,942 911,459
International Growth Fund 7,461,744 567 344,016 846,935
Investment Quality Bond Fund 10,254,099 197,703 1,573,753 653,662
Limited Term Income Fund 15,844,438 24,916 658,342 493,465
Ohio Municipal Bond Fund 4,020,177 244,240 17,199 1,049,764
Ohio Regional Stock Fund 2,035,326 5,365 28,392 364,894
Prime Obligations Fund 228,730,449 3,538,972 23,746,454 203,677,006
Special Value Fund 14,837,873 2,847 204,357 863,794
Stock Index Fund 10,217,072 0 0 2,388,453
Tax-Free Money Market Fund 158,733,438 1,825,385 9,141,115 141,893,011
U.S. Government Obligations Fund 503,081,628 7,341,136 9,629,787 389,003,371
Value Fund 24,220,569 2,431 55,341 595,888
</TABLE>
167
<PAGE> 170
SPECIAL SHAREHOLDER MEETING -- CONTINUED
THE VICTORY PORTFOLIOS (UNAUDITED)
- --------------------------------------------------------------------------------
c. To amend the Fund's fundamental investment restriction concerning the
making of loans:
<TABLE>
<CAPTION>
FUND NAME VOTES IN FAVOR VOTES AGAINST VOTES ABSTAINED NOT VOTED
- ---------------------------------------------- -------------- ------------- --------------- -----------
<S> <C> <C> <C> <C>
Balanced Fund 15,048,272 589,517 1,034,524 1,627,876
Diversified Stock Fund 24,663,323 65,002 1,734,442 3,244,160
Government Mortgage Fund 11,332,245 108,369 140,089 1,024,444
Growth Fund 8,404,044 35,953 126,113 362,482
Intermediate Income Fund 11,117,807 185,094 4,460,942 911,459
International Growth Fund 7,457,916 830 347,580 846,936
Investment Quality Bond Fund 10,254,099 197,703 1,573,753 653,662
Limited Term Income Fund 15,837,753 31,601 658,342 493,465
Ohio Municipal Bond Fund 4,035,941 244,653 1,022 1,049,764
Ohio Regional Stock Fund 2,033,295 8,108 27,680 364,894
Prime Obligations Fund 229,214,144 3,055,478 23,746,253 203,677,006
Special Value Fund 14,837,887 2,833 204,357 863,794
Stock Index Fund 10,217,072 0 0 2,388,453
Tax-Free Money Market Fund 158,962,635 1,596,188 9,141,115 141,893,011
U.S. Government Obligations Fund 505,808,304 4,614,460 9,629,787 389,003,371
Value Fund 24,220,569 2,431 55,341 595,888
</TABLE>
d. To amend the Fund's fundamental investment restriction concerning
purchases of securities on margin:
<TABLE>
<CAPTION>
FUND NAME VOTES IN FAVOR VOTES AGAINST VOTES ABSTAINED NOT VOTED
- ---------------------------------------------- -------------- ------------- --------------- -----------
<S> <C> <C> <C> <C>
Balanced Fund 15,057,489 589,656 1,025,167 1,627,877
Diversified Stock Fund 24,648,359 79,909 1,734,499 3,244,160
Government Mortgage Fund 11,318,815 121,801 140,087 1,024,444
Growth Fund 8,403,959 35,953 126,198 362,482
Intermediate Income Fund 11,122,987 179,914 4,460,942 911,459
International Growth Fund 7,457,796 782 347,748 846,936
Investment Quality Bond Fund 10,254,099 197,703 1,573,753 653,662
Limited Term Income Fund 15,832,469 23,527 671,701 493,464
Ohio Municipal Bond Fund 4,014,229 244,016 23,321 1,049,764
Ohio Regional Stock Fund 2,030,486 10,878 27,719 364,894
Prime Obligations Fund 228,334,743 3,934,880 23,746,253 203,677,005
Special Value Fund 14,837,886 2,834 204,357 863,794
Stock Index Fund 10,217,072 0 0 2,388,453
Tax-Free Money Market Fund 158,849,817 1,709,006 9,141,115 141,893,011
U.S. Government Obligations Fund 502,301,964 8,120,799 9,629,787 389,003,372
Value Fund 24,220,569 2,431 55,341 595,888
</TABLE>
e. To amend the Fund's fundamental investment restriction concerning
underwriting the securities of other issuers:
<TABLE>
<CAPTION>
FUND NAME VOTES IN FAVOR VOTES AGAINST VOTES ABSTAINED NOT VOTED
- ---------------------------------------------- -------------- ------------- --------------- -----------
<S> <C> <C> <C> <C>
Balanced Fund 15,236,695 402,540 1,033,077 1,627,877
Diversified Stock Fund 24,662,893 69,998 1,729,876 3,244,160
Government Mortgage Fund 11,332,247 108,369 140,087 1,024,444
Growth Fund 8,403,690 36,306 126,113 362,483
Intermediate Income Fund 11,122,987 179,914 4,460,942 911,459
International Growth Fund 7,453,258 5,369 347,700 846,935
Investment Quality Bond Fund 10,254,099 197,703 1,573,753 653,662
Limited Term Income Fund 15,839,124 30,230 658,342 493,465
Ohio Municipal Bond Fund 4,030,595 243,827 7,194 1,049,764
Ohio Regional Stock Fund 2,033,994 7,409 27,680 364,894
Prime Obligations Fund 229,405,927 2,863,695 23,746,253 203,677,006
Special Value Fund 14,837,890 2,831 204,357 863,793
Stock Index Fund 10,217,072 0 0 2,388,453
Tax-Free Money Market Fund 157,957,149 2,601,674 9,141,115 141,893,011
U.S. Government Obligations Fund 505,584,181 4,838,582 9,629,787 389,003,372
Value Fund 24,220,569 2,431 55,341 595,888
</TABLE>
168
<PAGE> 171
SPECIAL SHAREHOLDER MEETING -- CONTINUED
THE VICTORY PORTFOLIOS (UNAUDITED)
- --------------------------------------------------------------------------------
f. To amend the Fund's fundamental investment restriction concerning
diversification:
<TABLE>
<CAPTION>
FUND NAME VOTES IN FAVOR VOTES AGAINST VOTES ABSTAINED NOT VOTED
- ---------------------------------------------- -------------- ------------- --------------- -----------
<S> <C> <C> <C> <C>
Balanced Fund 15,246,174 400,971 1,025,167 1,627,877
Diversified Stock Fund 24,668,741 61,984 1,732,042 3,244,160
Growth Fund 8,404,137 35,860 126,113 362,482
Intermediate Income Fund 11,122,987 179,914 4,460,942 911,459
International Growth Fund 7,458,202 750 347,375 846,935
Investment Quality Bond Fund 10,254,099 197,703 1,573,753 653,662
Limited Term Income Fund 15,845,828 23,527 658,342 493,464
Ohio Municipal Bond Fund 4,014,831 243,414 23,371 1,049,764
Ohio Regional Stock Fund 2,037,359 4,044 27,680 364,894
Prime Obligations Fund 230,944,771 1,324,851 23,746,253 203,677,006
Special Value Fund 14,837,890 2,831 204,357 863,793
Stock Index Fund 10,217,072 0 0 2,388,453
Value Fund 24,220,569 2,431 55,341 595,888
</TABLE>
g. To amend the Fund's fundamental investment restriction concerning
concentration of investment:
<TABLE>
<CAPTION>
FUND NAME VOTES IN FAVOR VOTES AGAINST VOTES ABSTAINED NOT VOTED
- ---------------------------------------------- -------------- ------------- --------------- -----------
<S> <C> <C> <C> <C>
Balanced Fund 15,242,545 402,410 1,027,358 1,627,876
Diversified Stock Fund 24,670,186 63,695 1,728,886 3,244,160
Growth Fund 8,404,137 35,860 126,113 362,482
Intermediate Income Fund 11,122,987 179,914 4,460,942 911,459
International Growth Fund 7,458,430 522 347,375 846,935
Investment Quality Bond Fund 10,254,099 197,703 1,573,753 653,662
Limited Term Income Fund 15,845,828 23,527 658,342 493,464
Ohio Municipal Bond Fund 4,014,831 243,414 23,371 1,049,764
Ohio Regional Stock Fund 2,035,582 5,821 27,680 364,894
Prime Obligations Fund 230,585,953 1,683,669 23,746,253 203,677,006
Special Value Fund 14,837,890 2,831 204,357 863,793
Stock Index Fund 10,217,072 0 0 2,388,453
Tax-Free Money Market Fund 159,384,834 1,173,989 9,141,115 141,893,011
Value Fund 24,220,569 2,431 55,341 595,888
</TABLE>
h. To amend the Fund's fundamental investment restrictions concerning
commodities and real estate:
<TABLE>
<CAPTION>
FUND NAME VOTES IN FAVOR VOTES AGAINST VOTES ABSTAINED NOT VOTED
- ---------------------------------------------- -------------- ------------- --------------- -----------
<S> <C> <C> <C> <C>
Balanced Fund 15,242,490 404,655 1,025,167 1,627,877
Diversified Stock Fund 24,670,186 63,695 1,728,886 3,244,160
Government Mortgage Fund 11,318,815 121,801 140,087 1,024,444
Growth Fund 8,401,362 38,550 126,198 362,482
Intermediate Income Fund 11,122,987 179,914 4,460,942 911,459
International Growth Fund 7,458,039 828 347,459 846,936
Investment Quality Bond Fund 10,254,099 197,703 1,573,753 653,662
Limited Term Income Fund 15,845,828 23,527 658,342 493,464
Ohio Municipal Bond Fund 4,019,764 260,641 1,211 1,049,764
Ohio Regional Stock Fund 2,033,991 7,339 27,753 364,894
Prime Obligations Fund 228,781,079 3,488,543 23,746,253 203,677,006
Special Value Fund 14,837,890 2,831 204,357 863,793
Stock Index Fund 10,217,072 0 0 2,388,453
Tax-Free Money Market Fund 158,707,651 1,851,172 9,141,115 141,893,011
U.S. Government Obligations Fund 503,239,625 7,183,138 9,629,787 389,003,372
Value Fund 24,220,569 2,431 55,341 595,888
</TABLE>
169
<PAGE> 172
SPECIAL SHAREHOLDER MEETING -- CONTINUED
THE VICTORY PORTFOLIOS (UNAUDITED)
- --------------------------------------------------------------------------------
i. To amend the Fund's fundamental investment restriction concerning
investments in other investment companies:
<TABLE>
<CAPTION>
FUND NAME VOTES IN FAVOR VOTES AGAINST VOTES ABSTAINED NOT VOTED
- ---------------------------------------------- -------------- ------------- --------------- -----------
<S> <C> <C> <C> <C>
Diversified Stock Fund 24,657,575 66,029 1,739,162 3,244,161
International Growth Fund 7,456,925 1,940 347,461 846,936
Limited Term Income Fund 15,839,124 30,230 658,342 493,465
Ohio Municipal Bond Fund 4,030,819 243,603 7,194 1,049,764
Ohio Regional Stock Fund 2,033,729 7,601 27,753 364,894
Prime Obligations Fund 277,288,741 4,987,230 23,741,905 203,677,005
Tax-Free Money Market Fund 159,380,403 1,178,420 9,141,115 141,893,011
U.S. Government Obligations Fund 503,239,625 7,183,138 9,629,787 389,003,372
</TABLE>
j. To amend the Fund's fundamental investment restriction regarding
securities in which affiliates have invested:
<TABLE>
<CAPTION>
FUND NAME VOTES IN FAVOR VOTES AGAINST VOTES ABSTAINED NOT VOTED
- ---------------------------------------------- -------------- ------------- --------------- -----------
<S> <C> <C> <C> <C>
Diversified Stock Fund 24,663,329 63,122 1,736,316 3,244,160
International Growth Fund 7,457,708 830 347,788 846,936
Limited Term Income Fund 15,845,828 23,527 658,342 493,464
Ohio Municipal Bond Fund 4,020,814 243,603 17,199 1,049,764
Ohio Regional Stock Fund 2,031,727 8,964 28,392 364,894
Prime Obligations Fund 229,153,125 3,116,497 23,746,253 203,677,006
Tax-Free Money Market Fund 159,817,495 741,327 9,141,115 141,893,012
U.S. Government Obligations Fund 503,239,625 7,183,138 9,629,787 389,003,372
</TABLE>
k. To reclassify the Fund's fundamental investment restriction regarding
securities of unseasoned issuers:
<TABLE>
<CAPTION>
FUND NAME VOTES IN FAVOR VOTES AGAINST VOTES ABSTAINED NOT VOTED
- ---------------------------------------------- -------------- ------------- --------------- -----------
<S> <C> <C> <C> <C>
Diversified Stock Fund 24,657,237 73,560 1,731,969 3,244,161
International Growth Fund 7,457,869 758 347,700 846,935
Limited Term Income Fund 15,845,828 23,527 658,342 493,464
Ohio Municipal Bond Fund 4,014,229 260,193 7,194 1,049,764
Ohio Regional Stock Fund 2,031,347 10,056 27,680 364,894
Prime Obligations Fund 225,084,903 7,184,719 23,746,253 203,677,006
Tax-Free Money Market Fund 158,251,329 2,307,494 9,141,115 141,893,011
U. S. Government Obligations Fund 503,239,625 7,183,138 9,629,787 389,003,372
</TABLE>
l. To amend the Fund's fundamental investment restriction regarding
investments in restricted and illiquid securities:
<TABLE>
<CAPTION>
FUND NAME VOTES IN FAVOR VOTES AGAINST VOTES ABSTAINED NOT VOTED
- ---------------------------------------------- -------------- ------------- --------------- -----------
<S> <C> <C> <C> <C>
Limited Term Income Fund 7,457,250 1,701 347,375 846,936
Ohio Municipal Bond Fund 4,030,406 244,016 7,194 1,049,764
Prime Obligations Fund 225,387,957 6,881,665 23,746,253 203,677,006
Tax-Free Money Market Fund 158,400,192 2,158,631 9,141,115 141,893,011
U.S. Government Obligations Fund 503,239,625 7,183,138 9,629,787 389,003,372
</TABLE>
m. With respect to the Tax-Free Money Market Fund [158,400,192] Shares
were voted in favor, [2,158,631] Shares against, [9,141,115] Shares
abstained, [141,893,011] Shares were not voted and the resolution that
the reclassification of certain restrictions with respect to the Fund
was voted on and approved by the Shareholders.
n. To reclassify the Fund's fundamental investment restriction concerning
the use of options:
<TABLE>
<CAPTION>
FUND NAME VOTES IN FAVOR VOTES AGAINST VOTES ABSTAINED NOT VOTED
- ---------------------------------------------- -------------- ------------- --------------- -----------
<S> <C> <C> <C> <C>
Diversified Stock Fund 24,655,013 72,357 1,735,397 3,244,160
Limited Term Income Fund 15,845,828 23,527 658,342 493,464
Ohio Municipal Bond Fund 4,013,592 244,653 23,371 1,049,764
Ohio Regional Stock Fund 2,029,612 11,079 28,392 364,894
Tax-Free Money Market Fund 158,400,192 2,158,631 9,141,115 141,893,011
</TABLE>
o. With respect to the U.S. Government Obligations Fund [503,239,625]
Shares were voted in favor, [7,183,138] Shares against, [9,629,787]
Shares abstained, [389,003,372] Shares were not voted and the
amendment of the fundamental restrictions of the Fund concerning
permissible investment in government securities was voted on and
approved by the Shareholders.
p. To change the status of the Ohio Municipal Bond Fund from a
diversified to a nondiversified fund:
<TABLE>
<CAPTION>
FUND NAME VOTES IN FAVOR VOTES AGAINST VOTES ABSTAINED NOT VOTED
- ---------------------------------------------- -------------- ------------- --------------- -----------
<S> <C> <C> <C> <C>
Ohio Municipal Bond Fund 4,014,229 260,193 7,194 1,049,764
</TABLE>
170
<PAGE> 173
Make the dreams of
your youth become the
realities of your future.
What you want to be when you grow up may require some financial assistance. To
learn more about how the Victory Funds may help make your dreams come true,
call 1-800-KEY-FUND. Because at Victory, we know dreaming about the future
isn't just kid's stuff.
The Victory Funds are distributed by BISYS Fund Services which is not
affiliated with KeyCorp. Certain subsidiaries of KeyCorp provide services to
the Victory Funds, including advisory services, and receive fees from the funds
for their services, as set forth in the prospectus.
For more information about
the Victory Funds, including
charges and expenses, request
a prospectus by calling
1-800-KEY-FUND
(1-800-539-3863).
Please read the prospectus
carefully before investing
or sending money.
- - NOT FDIC INSURED
- - NO BANK GUARANTEE
- - MAY LOSE VALUE
LOGO
VICTORY FUNDS
<PAGE> 174
Bulk Rate
U.S. Postage
PAID
Cleveland, OH
Permit No. 469
LOGO
VICTORY FUNDS
1-800-KEY-FUND(SM)
(1-800-539-3863)
[LOGO] PRINTED ON RECYCLED PAPER AR/VP-001 10/96
