AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 17, 1997.
FILE NO. 33-8982
ICA NO. 811-4852
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. _____ [ ]
POST-EFFECTIVE AMENDMENT NO. 35 [X]
AND
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 36
THE VICTORY PORTFOLIOS
(EXACT NAME OF REGISTRANT AS SPECIFIED IN TRUST INSTRUMENT)
3435 STELZER ROAD
COLUMBUS, OHIO 43219
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
(800) 362-5365
(AREA CODE AND TELEPHONE NUMBER)
COPY TO:
GEORGE O. MARTINEZ, ESQ. CARL FRISCHLING, ESQ.
BISYS FUND SERVICES KRAMER, LEVIN, NAFTALIS & FRANKEL
3435 STELZER ROAD 919 THIRD AVENUE
COLUMBUS, OHIO 43219 NEW YORK,NEW YORK 10022
(NAME AND ADDRESS OF AGENT FOR SERVICE)
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE:
[x] IMMEDIATELY UPON FILING [ ] ON ( ) PURSUANT TO
PURSUANT TO PARAGRAPH (b) PARAGRAPH (b)
[ ] 60 DAYS AFTER FILING [ ] ( ) PURSUANT TO
PURSUANT TO PARAGRAPH (a)(1) PARAGRAPH (a)(1)
[ ] 75 DAYS AFTER FILING PURSUANT TO [ ] ON ( ) PURSUANT TO
PARAGRAPH (a)(2) PARAGRAPH (a)(2) OF RULE 485.
IF APPROPRIATE, CHECK THE FOLLOWING BOX:
[ ] THIS POST-EFFECTIVE AMENDMENT DESIGNATES A NEW EFFECTIVE DATE FOR A
PREVIOUSLY FILED POST-EFFECTIVE AMENDMENT.
<PAGE>
THE VICTORY PORTFOLIOS
CROSS-REFERENCE SHEET
THE VICTORY PORTFOLIOS
REAL ESTATE INVESTMENT FUND
<TABLE>
<CAPTION>
Item Number
Form N-1A
Part A Prospectus Caption
- ------------ ------------------
The purpose of this filing is to add language incorporating by reference the
Prospectus which was inadvertently deleted from Post-Effective Amendment No. 33
to the Registrant's Registration Statement on Form N-1A which was filed on
November 25, 1997 (accession number 0000922423-97-000978).
The Registrant has filed the information required in the prospectus of the Real
Estate Investment Fund in the definitive filing of the prospectus pursuant to
Rule 497(c) of the Securities Act of 1933 on April 24, 1997, (accession
0000922423-97-000399) and was further supplemented by a sticker dated September
1, 1997 (filed August 29, 1997, acccession number 0000922423-97-000708) and such
prospectus is hereby incorporated by reference. The Registrant has amended the
Real Estate Investment Fund prospectus solely for the purpose of updating the
financial highlights of the Real Estate Investment Fund.
<S> <C> <C>
1. Cover Page Cover Page; Introduction
2. Synopsis Fund Expenses
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant Introduction; Investment Objectives,
Policies and Strategies; Risk Factors;
Investment Limitations; Additional Information
5. Management of the Fund Organization and Management of the Fund
6.A. Management's Discussion of Fund Investment Performance
Performance
7. Capital Stock and Other Securities INVESTING WITH VICTORY; How to Purchase
Shares; How to Exchange Shares; How to Redeem
Shares; Dividends, Distributions and Taxes; Fund
Organization and Fees; Additional Information
8. Purchase of Securities Being Offered How to Purchase Shares; How to Exchange Shares
9. Redemption or Repurchase How to Exchange Shares; How to Redeem Shares
10. Pending Legal Proceedings Inapplicable
</TABLE>
<PAGE>
THE VICTORY PORTFOLIOS
CROSS REFERENCE SHEET
THE VICTORY PORTFOLIOS
REAL ESTATE INVESTMENT FUND
<TABLE>
<CAPTION>
Item Number
Form N-1A Statement of Additional
Part B Information Caption
- ------------ ----------------------
The purpose of this filing is to add language incorporating by reference the
Statement of Additional Information which was inadvertently deleted from
Post-Effective Amendment No. 33 to the Registrant's Registration Statement on
Form N-1A which was filed on November 25, 1997 (accession number
0000922423-97-000978).
The Registrant has filed the information required in the statement of additional
information in the definitive filing of the combined Statement of Additional
Information pursuant to Rule 497(c) of the Securities Act of 1933 on March 10,
1997 (accession number 0000922423-97-000200) and was further supplemented by
stickers dated September 1, 1997 (filed August 28, 1997, accession number
0000922423-97-000710) and June 30, 1997 (filed June 27, 1997, accession number
000922423-97-000503) and such Statement of Additional Information is hereby
incorporated by reference.
<S> <C> <C>
Item Number
Form N-1A
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Additional Information
13. Investment Objectives and Policies Investment Objectives and Investment Policies
and Limitations
14. Management of the Fund Trustees and Officers
15. Control Persons and Principal Additional Information
Holders of Securities
16. Investment Advisory and Other Advisory and Other Contracts
Services
17. Brokerage Allocation and Other Practices Advisory and Other Contracts
18. Capital Stock and Other Securities Valuation of Portfolio Securities For the Money
Market Funds; Valuation of Portfolio Securities
for the Taxable Bond Funds and the Tax-Free Bond Funds;
Additional Purchase, Exchange and Redemption Information;
Additional Information
19. Purchase, Redemption and Pricing Valuation of Portfolio Securities For the Money
Market Funds; Valuation of Portfolio Securities
for the Taxable Bond Funds and the Tax-Free Bond Funds;
of Securities Being Offered Additional Purchase, Exchange and Redemption Information;
Performance of the Money Market Funds; Performance of
the Non-Money Market Funds; Additional Information
20. Tax Status Dividends and Distributions; Taxes
21. Underwriters Advisory and Other Contracts
22. Calculation of Performance Data Performance; Additional Information
23. Financial Statements
</TABLE>
<PAGE>
The Victory Portfolios
The Real Estate Investment Fund
Supplement Dated November 25, 1997
to the Prospectus Dated March 1, 1997, as Previously Supplemented
The Victory Real Estate Investment Fund Prospectus is supplemented as follows:
The date of the Prospectus is November 25, 1997
The following table is added to the Prospectus after page 6 immediately before
the section titled "Risk Factors."
Financial Highlights
The Real Estate Investment Fund
The Financial Highlights describe the Real Estate Investment Fund's returns and
operating expenses over time. This table shows the results of an investment in
one share of the Real Estate Investment Fund for the period indicated.
April 30, 1997
through
October 31,
1997(a)
--------------
Net Asset Value, Beginning of Period $ 10.00
--------------
Investment Activities
Net investment income 0.23
Net realized and unrealized losses
from investments 2.01
--------------
Total from Investment Activ $ 2.24
--------------
Distributions
Net investment income (0.17)
In excess of net investment income 0.00
Net realized gains 0.00
--------------
Total Distributions (0.17)
--------------
Net Asset Value, End of Period $ 12.07
==============
Total Return (excludes sales charges) 22.42% (b)
Ratios/Supplemental Data:
Net Assets, End of Period (000) $ 4,376
Ratio of expenses to
average net assets 0.00% (c)
Ratio of net investment income
to average net assets 5.11% (c)
Ratio of expenses to
average net assets* 2.76% (c)
Ratio of net investment income
to average net assets* 2.35% (c)
Portfolio turnover 60%
Average commission rate paid (d) $ 0.0464
- ---------------------------
* During the period, certain fees were voluntarily reduced and/or
reimbursed. If such voluntary fee reductions and /or reimbursements
had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) 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.
The Financial Highlights are not audited. This information should be read
in conjunction with the Real Estate Investment Fund's financial statements,
which are incorporated by reference in the SAI.
Please insert this Supplement into the front of your Prospectus. If you
would like to obtain more information, please call the Fund at
800-KEY-FUND(R)
VF-REIF-SUP2
<PAGE>
THE VICTORY PORTFOLIOS
Supplement Dated November 25, 1997 to
the Statement of Additional Information ("SAI") dated
March 1, 1997,
As Supplemented June 30, 1997 and September 1, 1997
The Victory Balanced Fund
The Victory Diversified Stock Fund
The Victory Financial Reserves Fund
The Victory Fund For Income
The Victory Government Mortgage Fund
The Victory Growth Fund
The Victory Institutional Money Market Fund
The Victory Intermediate Income Fund
The Victory International Growth Fund
The Victory Investment Quality Bond Fund
The Victory Lakefront Fund
The Victory Limited Term Income Fund
The Victory National Municipal Bond Fund
The Victory New York Tax-Free Fund
The Victory Ohio Municipal Bond Fund
The Victory Ohio Municipal Money Market Fund
The Victory Ohio Regional Stock Fund
The Victory Prime Obligations Fund
The Victory Real Estate Investment Fund
The Victory Special Growth Fund
The Victory Special Value Fund
The Victory Stock Index Fund
The Victory Tax-Free Money Market Fund
The Victory U.S. Government Obligations Fund
The Victory Value Fund
The SAI of the above Funds is supplemented as follows:
1. Effective November 25, 1997, the following information replaces the first
sentence in the first paragraph in the SAI:
"This Statement of Additional Information is not a prospectus, but should be
read in conjunction with each prospectus of The Victory Portfolios
(individually, a "Prospectus," and collectively, the "Prospectuses"), each of
which is dated March 1, 1997 except for the Prospectus for the Lakefront Fund
and the combined Prospectus for Financial Reserves Fund, Ohio Municipal Money
Market Fund, Prime Obligations Fund, Tax-Free Money Market Fund and U.S.
Government Obligations Fund, both of which are dated June 30, 1997 and the
Prospectus for the Real Estate Investment Fund which is dated November 25,
1997."
<PAGE>
2. On page 88 under "Performance of the Non-Money Market Funds" in the chart
under the subsection "Standardized Yield", add the following:
================================================================================
YIELD FOR THE 30-DAY PERIOD
FUND ENDED OCTOBER 31, 1997
- --------------------------------------------------------------------------------
Lakefront Fund 1.47%
================================================================================
================================================================================
YIELD FOR THE 30-DAY PERIOD
FUND ENDED OCTOBER 31, 1997
- --------------------------------------------------------------------------------
Real Estate Investment Fund 3.51%
================================================================================
3. Effective November 25, 1997, the following paragraph under "Additional
Information" and the subsection "Miscellaneous" on page 133, add the
following:
"The 1996 Annual Report and 1997 Semi-Annual Report to shareholders of The
Victory Portfolios are incorporated herein in their entirety. These reports
include the financial statements for the fiscal year ended October 31, 1996
and for the semi-annual period ended April 30, 1997. The opinion in the
Annual Report of Coopers & Lybrand L.L.P., independent accountants, is
incorporated herein in its entirety to such Annual Report, and such
financial statements are incorporated in their entirety. The unaudited
financial statements for The Victory Real Estate Investment Fund for the
period ended October 31, 1997 are also incorporated herein."
Please keep this Supplement with your SAI. Investors wishing to obtain more
information should call the Funds at 800-KEY-FUND(R) or 800-539-3863.
VF-SAI-SUP3
<PAGE>
THE VICTORY PORTFOLIOS
Registration Statement
of
THE VICTORY PORTFOLIOS
on
Form N-1A
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Included in Part A:
Financial Highlights for the Real Estate Investment Fund
Included in Part B:
Financial Statements and the Reports thereon for The Victory
Portfolios for the six month period ended April 30, 1997 included in
the SemiAnnual Report to Shareholders and Financial Statements and the
Reports thereon for The Victory Portfolios for the fiscal year ended
October 31, 1997, included in the Annual Report to Shareholder are
incorporated herein by reference in the Statement of Additional
Information from the Rule 30-D filing made by the Registrant on June
23, 1997 (Accession Number 0000906197-97-000036) and on January 1,
1997 (Accession Number 0000950152-97-000146), respectively. For the
Real Estate Investment Fund, unaudited financial reports for the
period ended October 31, 1997 are incorporated in Part B and filed
herewith as Exhibit 99.B12(b).
(b) Exhibits:
EX-99.B1 (a) Declaration of Trust dated December 6, 1995 is incorporated
herein by reference to Exhibit 99B.1(a) to Post-Effective
Amendment No. 26 to the Registrant's Registration Statement on
Form N-1A filed electronically on December 28, 1995, accession
number 0000950152-95-003085.
EX-99.B2 By-Laws adopted December 6, 1995 are incorporated herein by reference
to Exhibit 99.B2 to Post-Effective Amendment No. 26 to the Registrant's
Registration Statement on Form N-1A filed electronically on December
28, 1995, accession number 0000950152-95- 003085.
EX-99.B3 None.
EX-99.B4 None.
<PAGE>
THE VICTORY PORTFOLIOS
EX-99.B5 (a) Investment Advisory Agreement dated as of March 1, 1997, between
the Registrant and Key Asset Management Inc. is is incorporated
herein by reference to Exhibit 99.B5(a) to Post- Effective
Amendment No. 34 to the Registrant's Registration Statement on
Form N-1A filed electronically on December 12, 1997, accession
number 0000922423-97-1015.
(b) Investment Advisory Agreement between the Registrant and Key
Asset Management Inc. regarding Lakefront Fund and Real Estate
Investment Fund is is incorporated herein by reference to Exhibit
99.B5(b) to Post- Effective Amendment No. 34 o the Registrant's
Registration Statement on Form N-1A filed electronically on
December 12, 1997, accession number 0000922423-97-1015.
(c) Investment Sub-Advisory Agreement between Key Asset Management
Inc. and Lakefront Capital Investors, Inc. regarding the
Lakefront Fund is is incorporated herein by reference to Exhibit
99.B5(c) to Post- Effective Amendment No. 35 to the Registrant's
Registration Statement on Form N-1A filed electronically on
December 12, 1997, accession number 0000922423-97-1015.
EX-99.B6 (a) Distribution Agreement dated June 1, 1996 between the Registrant
and BISYS Fund Services Limited Partnership is incorporated
herein by reference to Exhibit 99.B6(a) to Post-Effective
Amendment No. 30 to the Registrant's Registration Statement on
Form N-1A filed electronically on July 30, 1996, accession number
0000922423-96-000344.
(b) Form of Broker-Dealer Agreement is incorporated herein by
reference to Exhibit 99.B6(b) to Post-Effective Amendment No. 27
to the Registrant's Registration Statement on Form N-1A filed
electronically on January 31, 1996, accession number
0000922423-96-000047.
EX-99.B7 None.
EX-99.B8 (a) Amended and Restated Mutual Fund Custody Agreement dated May 24,
1995 by and between the Registrant and Key Trust Custody of Ohio,
N.A. is incorporated herein by reference to Exhibit 8(a) to
Post-Effective Amendment No. 22 to the Registrant's Registration
Statement on Form N-1A filed on August 28, 1995.
(b) Custody Agreement dated May 31, 1996 between Morgan Stanley Trust
Company and Key Trust Company of Ohio is incorporated herein by
reference to Exhibit 99.B8(c) to Post-Effective Amendment No. 30
to the Registrant's Registration Statement on Form N-1A filed
electronically on July 30, 1996, accession number
0000922423-96-000344.
EX-99.B9 (a) Administration Agreement dated June 1, 1996 between the
Registrant and BISYS Fund Services Limited Partnership is
incorporated herein by reference to Exhibit 99.B9(a) to
Post-Effective Amendment No. 30 to the Registrant's Registration
Statement on Form N-1A filed electronically on July 30, 1996,
accession number 0000922423-96-000344.
(b) Transfer Agency and Service Agreement dated July 12, 1996 between
the Registrant and State Street Bank and Trust Company is
incorporated herein by reference to Exhibit 99.B9(b) to
Post-Effective Amendment No. 30 to the Registrant's Registration
Statement on Form N-1A filed electronically on July 30, 1996,
accession number 0000922423-96-000344.
C-2
<PAGE>
THE VICTORY PORTFOLIOS
(c) Fund Accounting Agreement dated May 31, 1995 between the
Registrant and BISYS Fund Services Ohio, Inc., and Schedule A
thereto, are incorporated herein by reference to Exhibit 9(d) to
Post-Effective Amendment No. 22 to the Registrant's Registration
Statement on Form N-1A filed on August 28, 1995.
(d) Shareholder Servicing Plan dated June 5, 1995 with an amended
Schedule I dated March 1, 1997 is incorporated herein by
reference to Exhibit 99.B9(d) to Post-Effective Amendment No. 31
to the Registrant's Registration Statement on Form N-1A filed
electronically on February 7, 1997, accession number
0000922423-97- 000066.
(e) Form of Shareholder Servicing Agreement is incorporated herein by
reference to Exhibit 99.B8(e) to Post-Effective Amendment No. 26
to the Registrant's Registration Statement on Form N-1A filed
electronically on December 28, 1995, accession number
0000950152-95-003085.
EX-99.B10 (a) Opinion of Counsel was filed with Registrant's Rule 24f-2 Notice
in respect of the period ending October 31, 1996, submitted
electronically on December 23, 1996, accession number
0000950152-96-006841.
EX-99.B11 (a) Consent of Kramer, Levin, Naftalis & Frankel is filed herewith.
(b) Consent of Coopers & Lybrand L.L.P. is filed herewith.
EX-99.B12 (a) Audited financial reports for the period ended October 31, 1996
are incorporated herein by reference to Exhibit 99.B12 to
Post-Effective Amendment No. 31 to the Registrant's Registration
Statement on Form N-1A filed electronically on February 7, 1997,
accession number 000922423-97-000066.
(b) Unaudited financial reports for the period ended October 31, 1997
with respect to the Real Estate Invesetment Fund are filed
herewith.
EX-99.B13 (a) Purchase Agreement dated November 12, 1986 between Registrant and
Physicians Insurance Company of Ohio is incorporated herein by
reference to Exhibit 13 to Pre-Effective Amendment No. 1 to the
Registrant's Registration Statement on Form N-1A filed on
November 13, 1986.
(b) Purchase Agreement dated October 15, 1989 is incorporated herein
by reference to Exhibit 13(b) to Post-Effective Amendment No. 7
to the Registrant's Registration Statement on Form N-1A filed on
December 1, 1989.
(c) Purchase Agreement is incorporated herein by reference to Exhibit
13(c) to Post- Effective Amendment No. 7 to the Registrant's
Registration Statement on Form N-1A filed on December 1, 1989.
EX-99.B14 None.
C-3
<PAGE>
THE VICTORY PORTFOLIOS
EX-99.B15 (a) Distribution and Service Plan dated June 5, 1995 for The Victory
Portfolios Class A Shares of Government Bond Fund, National
Municipal Bond Fund, New York Tax-Free Fund, Fund for Income,
Financial Reserves Fund, Institutional Money Market Fund, Ohio
Municipal Money Market Fund Lakefront Fund and Real Estate
Investment Fund with amended Schedule I dated March 1, 1997 is
incorporated herein by reference to Exhibit 99.B15(a) to
Post-Effective Amendment No. 31 to the Registrant's Registration
Statement on Form N-1A filed electronically on February 7, 1997,
accession number 0000922423-97-000066.
(b) Distribution Plan dated June 5, 1995 for Class B Shares of
National Municipal Bond Fund, Government Bond Fund and New York
Tax-Free Fund and adopted December 6, 1995 for Class B Shares of
Balanced Fund, Diversified Stock Fund, International Growth Fund,
Ohio Regional Stock Fund, Special Value Fund, Institutional Money
Market Fund and U.S. Government Obligations Fund is incorporated
by reference to Exhibit 99.B15(b) to Post-Effective Amendment No.
22 to the Registrant's Registration Statement on Form N-1A filed
on August 28, 1995, and the updated schedule thereto dated
December 6, 1995 is incorporated by reference to Exhibit 99B(b)
to Post-Effective Amendment No. 27 to the Registrant's
Registration Statement on Form N-1A filed electronically on
January 31, 1996, accession number 0000922423-96-000047.
EX-99.B16 (a) Forms of computation of performance quotation are incorporated
herein by reference to Exhibit 16 to Post-Effective Amendment No.
19 to the Registrant's Registration Statement on Form N-1A filed
on December 23, 1994.
(b) Forms of computation of performance quotation for the Balanced
Fund, Diversified Stock Fund, International Growth Fund, Ohio
Regional Stock Fund and Special Value Fund are incorporated
herein by reference to Exhibit 99.B16(b) to Post-Effective
Amendment No. 30 to the Registrant's Registration Statement on
Form N-1A filed electronically on July 30, 1996, accession number
0000922423- 96-000344.
(c) Forms of computation of performance quotation for the Lakefront
Fund and U. S. Government Obligations Fund - Investor Class are
incorporated herein by reference to Exhibit 99.B16(c) to
Post-Effective Amendment No. 32 to the Registrant's Registration
Statement on Form N-1A filed electronically on June 27, 1997,
accession number 0000922423-97-000530.
(d) Computation of performance quotation for the Real Estate
Investment Fund is filed herewith.
EX-99.B17 Financial Data Schedule for the period ended October 31, 1997,
with respect to the Real Estate Investment Fund is filed herewith
as Exhibit 27.
EX-99.B18 (a) Rule 18f-3 Multi-Class Plan adopted effective June 5, 1995 is
incorporated by reference to Exhibit 17 to Post-Effective
Amendment No. 22 to the Registrant's Registration Statement on
Form N-1A filed on August 28, 1995.
C-4
<PAGE>
THE VICTORY PORTFOLIOS
(b) Amended and Restated Rule 18f-3 Multi-Class Plan effective as of
December 6, 1995 is incorporated herein by reference to Exhibit
99.B18(b) to Post-Effective Amendment No. 26 to the Registrant's
Registration Statement on Form N-1A filed electronically on
December 28, 1995, accession number 0000950152-95-003085.
(c) Amended and Restated Rule 18f-3 Multi-Class Plan effective as of
February 14, 1996 is incorporated herein by reference to Exhibit
99.B18(c) to Post-Effective Amendment No. 28 to the Registrant's
Registration Statement on Form N-1A filed electronically on
February 28, 1996, accession number 0000922423-96-000106.
EX-99.B19 (a) Power of Attorney of Leigh A. Wilson is incorporated herein by
reference to Exhibit 99.B P of A to Post-Effective Amendment No.
27 to Registrant's Registration Statement on Form N-1A and Powers
of Attorney of Robert G. Brown, Edward P. Campbell, Harry
Gazelle, Stanley I. Landgraf, Thomas F. Morrissey and H. Patrick
Swygert are incorporated herein by reference to Exhibit 99.B P of
A to Post-Effective Amendment No. 26 to the Registrant's
Registration Statement on Form N-1A filed electronically on
January 31, 1996, accession number 0000922423-96-000047 and
December 28, 1995, accession number 0000950152-95-003085,
respectively.
Item 25. Persons Controlled by or under Common Control with Registrant.
None.
Item 26. Number of Holders of Securities.
As of September 30, 1997 the number of record holders of each Fund of the
Registrant were as follows:
Number of
Title of Fund Record Holders
Balanced Fund
Class A Shares 1,317
Class B Shares 264
Diversified Stock Fund
Class A Shares 11,706
Class B Shares 2,751
Financial Reserves Fund 124
Fund For Income 1,525
C-5
<PAGE>
THE VICTORY PORTFOLIOS
Government Mortgage Fund 310
Growth Fund 480
Intermediate Income Fund 248
International Growth Fund
Class A Shares 1,348
Class B Shares 53
Institutional Money Market Fund
Select Class Shares 23
Investor Class Shares 36
Investment Quality Bond Fund 1,778
Lakefront Fund 57
Limited Term Income Fund 554
National Municipal Bond Fund
Class A Shares 1,277
Class B Shares 69
New York Tax-Free Fund
Class A Shares 489
Class B Shares 100
Ohio Municipal Bond Fund 318
Ohio Municipal Money Market Fund 147
Ohio Regional Stock Fund
Class A Shares 1,188
Class B Shares 104
Prime Obligations Fund 1,220
Real Estate Investment Fund 120
Special Growth Fund 347
Special Value Fund
Class A Shares 3,884
Class B Shares 165
Stock Index Fund 493
C-6
<PAGE>
THE VICTORY PORTFOLIOS
Tax Free Money Market Fund 85
U.S. Government Obligations Fund
Select Class Shares 331
Investor Class Shares 113
Value Fund 189
Item 27. Indemnification
Article X, Section 10.02 of the Registrant's Delaware Trust
Instrument, incorporated herein as Exhibit 99.B1(a) hereto, provides
for the indemnification of Registrant's Trustees and officers, as
follows:
"SECTION 10.02 INDEMNIFICATION.
(a) Subject to the exceptions and limitations contained in Subsection
10.02(b):
(i) every person who is, or has been, a Trustee or officer
of the Trust (hereinafter referred to as a "Covered Person") shall be
indemnified by the Trust to the fullest extent permitted by law
against liability and against all expenses reasonably incurred or
paid by him in connection with any claim, action, suit or proceeding
in which he becomes involved as a party or otherwise by virtue of his
being or having been a Trustee or officer and against amounts paid or
incurred by him in the settlement thereof;
(ii) the words "claim," "action," "suit," or "proceeding"
shall apply to all claims, actions, suits or proceedings (civil,
criminal or other, including appeals), actual or threatened while in
office or thereafter, and the words "liability" and "expenses" shall
include, without limitation, attorneys' fees, costs, judgments,
amounts paid in settlement, fines, penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Covered
Person:
(i) who shall have been adjudicated by a court or body
before which the proceeding was brought (A) to be liable to the Trust
or its Shareholders by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the
conduct of his office or (B) not to have acted in good faith in the
reasonable belief that his action was in the best interest of the
Trust; or
(ii) in the event of a settlement, unless there has been a
determination that such Trustee or officer did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office, (A) by the court or
other body approving the settlement; (B) by at least a majority of
those Trustees who are neither Interested Persons of the Trust nor
are parties to the matter based upon a review of readily available
facts (as opposed to a full trial-type inquiry); or (C) by written
opinion of independent legal counsel based upon a review of readily
available facts (as opposed to a full trial-type inquiry).
C-7
<PAGE>
THE VICTORY PORTFOLIOS
(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable,
shall not be exclusive of or affect any other rights to which any
Covered Person may now or hereafter be entitled, shall continue as to
a person who has ceased to be a Covered Person and shall inure to the
benefit of the heirs, executors and administrators of such a person.
Nothing contained herein shall affect any rights to indemnification
to which Trust personnel, other than Covered Persons, and other
persons may be entitled by contract or otherwise under law.
(d) Expenses in connection with the preparation and presentation of a
defense to any claim, action, suit or proceeding of the character
described in Subsection (a) of this Section 10.02 may be paid by the
Trust or Series from time to time prior to final disposition thereof
upon receipt of an undertaking by or on behalf of such Covered Person
that such amount will be paid over by him to the Trust or Series if
it is ultimately determined that he is not entitled to
indemnification under this Section 10.02; provided, however, that
either (i) such Covered Person shall have provided appropriate
security for such undertaking, (ii) the Trust is insured against
losses arising out of any such advance payments or (iii) either a
majority of the Trustees who are neither Interested Persons of the
Trust nor parties to the matter, or independent legal counsel in a
written opinion, shall have determined, based upon a review of
readily available facts (as opposed to a trial-type inquiry or full
investigation), that there is reason to believe that such Covered
Person will be found entitled to indemnification under this Section
10.02."
Indemnification of the Fund's principal underwriter, custodian, fund
accountant, and transfer agent is provided for, respectively, in
Section V of the Distribution Agreement incorporated by reference as
Exhibit 6(a) hereto, Section 28 of the Custody Agreement incorporated
by reference as Exhibit 8(a) hereto, Section 5 of the Fund Accounting
Agreement incorporated by reference as Exhibit 9(c) hereto, and
Section 7 of the Transfer Agency Agreement incorporated by reference
as Exhibit 9(b) hereto. Registrant has obtained from a major
insurance carrier a trustees' and officers' liability policy covering
certain types of errors and omissions. In no event will Registrant
indemnify any of its trustees, officers, employees or agents against
any liability to which such person would otherwise be subject by
reason of his willful misfeasance, bad faith, or gross negligence in
the performance of his duties, or by reason of his reckless disregard
of the duties involved in the conduct of his office or under his
agreement with Registrant. Registrant will comply with Rule 484 under
the Securities Act of 1933 and Release 11330 under the Investment
Company Act of 1940 in connection with any indemnification.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to trustees, officers, and controlling
persons or Registrant pursuant to the foregoing provisions, or
otherwise, Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Investment Company Act of 1940, as
amended, and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment
by Registrant of expenses incurred or paid by a trustee, officer, or
controlling person of Registrant in the successful defense of any
action, suit, or proceeding) is asserted by such trustee, officer, or
controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
C-8
<PAGE>
THE VICTORY PORTFOLIOS
Item 28. Business and Other Connections of Investment Adviser
Key Asset Management Inc. ("KAM") is the investment adviser to each
fund of the Victory Portfolios. KAM is a wholly-owned indirect
subsidiary of KeyCorp, a bank holding company which had total assets
of approximately $72 billion as of September 30, 1997. KeyCorp is a
leading financial institution doing business in 26 states from Maine
to Alaska, providing a full array of trust, commercial, and retail
banking services. Its non-bank subsidiaries include investment
advisory, securities brokerage, insurance, bank credit card
processing, mortgage and leasing companies. KAM and its affiliates
have over $50 billion in assets under management, and provides a full
range of investment management services to personal and corporate
clients.
Lakefront Capital Investors, Inc. ("Lakefront"), sub-adviser of the
Lakefront Fund, The Hanna Building, 1422 Euclid Avenue, Suite 840,
Cleveland, Ohio 44115, was incorporated in 1991.
To the knowledge of Registrant, none of the directors or officers of
KAM or Lakefront, except those set forth below, is or has been at any
time during the past two calendar years engaged in any other business,
profession, vocation or employment of a substantial nature, except
that certain directors and officers of KAM also hold positions with
KeyCorp or its subsidiaries.
The principal executive officers and directors of KAM are as follows:
Directors:
William G. Spears, Senior Managing Director, Chairman and Chief
Executive Officer.
Richard J. Buoncore, President and Chief Operating Officer and Senior
Managing Director.
Anthony Aveni, Senior Managing Director, Also Chief Investment Officer
of Society Asset Management Division.
Vincent DeP. Farrell, Senior Managing Director. Also Chief Investment
Officer of Spears, Benzak, Salomon & Farrell Division ("SBSF").
Richard E. Salomon, Senior Managing Director. Also President of SBSF
and Director of Wealth Management.
Gary R. Martzolf, Senior Managing Director.
Other Officers:
Charles G. Crane, Senior Managing Director and Chief Market Director.
James D. Kacic, Treasurer, Chief Financial Officer and Managing
Director.
C-9
<PAGE>
THE VICTORY PORTFOLIOS
Michael Foisel, Assistant Treasurer.
Robert M. Siewert, Chief Compliance Officer and Director. Also,
Assistant Vice President and Compliance Officer, Society.
William J. Blake, Secretary.
Steven N. Bulloch, Assistant Secretary. Also, Senior Vice President
and Senior Counsel of KMC.
Louis R. Benzak, Senior Managing Director.
Judith A. Jones, Senior Managing Director.
Lisa A. Tuckerman, Senior Managing Director.
Dennis M. Grapo, Senior Managing Director
Richard A. Janus, Senior Managing Director.
Kathleen A. Dennis, Senior Managing Director.
The business address of each of the foregoing individuals is 127 Public
Square, Cleveland, Ohio 44114.
The principal executive officers and directors of Lakefront are as
follows:
Nathaniel E. Carter, President. Also Chief Investment Officer of
Lakefront.
Kenneth A. Louard, Chief Operating Officer.
The business address of each of the foregoing individuals is 127 Public
Square, Cleveland, Ohio 44114.
Item 29. Principal Underwriter
(a) BISYS Fund Services acts as distributor and serves as administrator
for the Registrant.
(b) Directors, officers and partners of BISYS Fund Services, Inc., the
General Partner of BISYS Fund Services, as of October 24, 1997 were as
follows:
C-10
<PAGE>
THE VICTORY PORTFOLIOS
Lynn J. Mangum, Chairman and CEO.
J. David Huber, President.
Robert J. McMullan, Executive Vice President, CFO and Treasurer.
Kevin J. Dell, Vice President, General Counsel and Secretary.
Michael D. Burns, Vice President.
Annamaria Porcaro, Assistant Secretary.
Robert Tuch, Assistant Secretary.
Dennis Sheehan, Senior Vice President.
George O. Martinez, Senior Vice President. Also Assistant Secretary,
The Victory Portfolios.
Mark J. Rybarczyk, Senior Vice President.
The business address of each of the foregoing individuals is BISYS Fund
Services, Inc., 3435 Stelzer Road, Columbus, Ohio 43215.
Item 30. Location of Accounts and Records
(1) Key Asset Management Inc., 127 Public Square, Cleveland, Ohio
44114-1306 (records relating to its functions as investment adviser
and sub-administrator).
(2) Lakefront Capital Investors, Inc., 127 Public Square, Cleveland, Ohio
44114-1306 (records relating to its functions as investment
sub-adviser for the Lakefront Fund only).
(3) KeyBank National Association, 127 Public Square, Cleveland, Ohio
44114-1306 (records relating to its functions as shareholder
servicing agent).
(4) BISYS Fund Services, 3435 Stelzer Road, Columbus, Ohio 43219 (records
relating to its functions as administrator, distributor and fund
accountant).
(5) State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110- 3875 (records relating to its functions as
transfer agent).
(6) Boston Financial Data Services, Inc. Two Heritage Drive, Quincy,
Massachusetts 02171 (records relating to its functions as dividend
disbursing agent and shareholder servicing agent).
C-11
<PAGE>
THE VICTORY PORTFOLIOS
(7) Key Trust Company of Ohio, N.A., 127 Public Square, Cleveland, Ohio
44114-1306 (records relating to its functions as custodian and
securities lending agent).
(8) Morgan Stanley Trust Company, 1585 Broadway, New York, New York 10036
(records relating to its functions as sub-custodian of Balanced Fund
and International Growth Fund).
Item 31. Management Services
None.
Item 32. Undertakings
(a) Registrant undertakes to call a meeting of shareholders, at the
request of holders of 10% of the Registrant's outstanding shares, for
the purpose of voting upon the question of removal of a trustee or
trustees and undertakes to assist in communications with other
shareholders as required by Section 16(c) of the Investment Company
Act of 1940.
(b) Not applicable.
(c) Registrant undertakes to furnish to each person to whom a prospectus
is delivered a copy of the Registrant's latest Annual Report to
Shareholders upon request and without charge.
NOTICE
A copy of the Declaration of Trust of The Victory Portfolios is on file with the
Secretary of State of Delaware and notice is hereby given that this
Post-Effective Amendment to the Registrant's Registration Statement has been
executed on behalf of the Registrant by officers of, and Trustees of, the
Registrant as officers and as Trustees, respectively, and not individually, and
that the obligations of or arising out of this instrument are not binding upon
any of the Trustees, officers or shareholders of The Victory Portfolios
individually but are binding only upon the assets and property of the
Registrant.
C-12
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certified that it has met all the requirements for
effectiveness of this Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Post-Effective Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York and State of New York, on the 17th day
of December, 1997.
THE VICTORY PORTFOLIOS
By: /s/ Leigh A. Wilson
----------------------
Leigh A. Wilson, President and Trustee
As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities indicated on the 17th day of
December, 1997.
/s/ Leigh A. Wilson President and Trustee
- -------------------
Leigh A. Wilson
/s/ Thomas E. Line Treasurer
- ----------------------------
Thomas E. Line
* Trustee
- ----------------------------
Robert G. Brown
* Trustee
- ----------------------------
Edward P. Campbell
* Trustee
- ----------------------------
Harry Gazelle
* Trustee
- ----------------------------
Thomas F. Morrissey
* Trustee
- ----------------------------
H. Patrick Swygert
*By: /s/ Carl Frischling
-------------------
Carl Frischling
Attorney-in-Fact
Attorney-in-Fact pursuant to powers of attorney, dated December 18, 1995
filed with Post-Effective Amendments 27 and 26 to Registrant's Registration
Statement on January 31, 1996 and December 28, 1995, respectively.
C-13
<PAGE>
THE VICTORY PORTFOLIO
THE VICTORY PORTFOLIOS
INDEX TO EXHIBITS
Exhibit Number
EX-99.B11(a) Consent of Kramer, Levin, Naftalis & Frankel
EX-99.B11(b) Consent of Coopers & Lybrand L.L.P.
EX-99.B12(b) Unaudited financial reports for the period ended October 31, 1997
with respect to the Real Estate Invesetment Fund
EX-99.B16(d) Computation of performance quotation for the Real Estate
Investment Fund
EX-27 Financial Data Schedule
Kramer, Levin, Naftalis & Frankel
919 THIRD AVENUE
NEW YORK, N.Y. 10022 - 3852
(212) 715 - 9100
Arthur H. Aufses III Monica C. Lord Sherwin Kamin
Thomas D. Balliett Richard Marlin Arthur B. Kramer
Jay G. Baris Thomas E. Molner Maurice N. Nessen
Philip Bentley Thomas H. Moreland Founding Partners
Saul E. Burian Ellen R. Nadler Counsel
Barry Michael Cass Gary P. Naftalis _____
Thomas E. Constance Michael J. Nassau
Michael J. Dell Michael S. Nelson Martin Balsam
Kenneth H. Eckstein Jay A. Neveloff Joshua M. Berman
Charlotte M. Fischman Michael S. Oberman Jules Buchwald
David S. Frankel Paul S. Pearlman Rudolph de Winter
Marvin E. Frankel Susan J. Penry-Williams Meyer Eisenberg
Alan R. Friedman Bruce Rabb Arthur D. Emil
Carl Frischling Allan E. Reznick Maria T. Jones
Mark J. Headley Scott S. Rosenblum Maxwell M. Rabb
Robert M. Heller Michele D. Ross James Schreiber
Philip S. Kaufman Howard J. Rothman Counsel
Peter S. Kolevzon Max J. Schwartz _____
Kenneth P. Kopelman Mark B. Segall
Michael Paul Korotkin Judith Singer M. Frances Buchinsky
Shari K. Krouner Howard A. Sobel Abbe L. Dienstag
Kevin B. Leblang Jeffrey S. Trachtman Ronald S. Greenberg
David P. Levin Jonathan M. Wagner Debora K. Grobman
Ezra G. Levin Harold P. Weinberger Christian S. Herzeca
Larry M. Loeb E. Lisk Wyckoff, Jr. Jane Lee
Pinchas Mendelson
Lynn R. Saidenberg
Special Counsel
-----
FAX
(212) 715-8000
---
WRITER'S DIRECT NUMBER
(212)715-9100
-------------
December 17, 1997
The Victory Portfolios
3435 Stelzer Road
Columbus, Ohio 43219
Re: The Victory Portfolios
File No. 33-8982
Post-Effective Amendment
to Registration Statement on Form N-1A
--------------------------------------
Dear Gentlemen:
We hereby consent to the reference of our firm as counsel in
Post-Effective Amendment No. 35 to the Registration Statement on Form N-1A.
Very truly yours,
/s/ Kramer, Levin, Naftalis & Frankel
-------------------------------------
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Post-Effective Amendment
No. 35 to the Registration Statement on Form N-1A (File No. 33-8982) of The
Victory Portfolios of our report dated December 13, 1996 on our audits of the
financial statements and financial highlights 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, Institutional 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) as
of October 31, 1996 and for the periods then ended. We also consent to the
reference to our Firm under the caption "Miscellaneous" in the supplement to the
Statement of Additional Information relating to The Victory Portfolios in the
Post-Effective Amendment No. 35 to the Registration Statement on Form N-1A (File
No. 33-8982).
/s/COOPERS & LYBRAND L.L.P.
---------------------------
Columbus, Ohio
December 17, 1997
THE VICTORY PORTFOLIOS
Statement of Assets and Liabilities
October 31, 1997
(Amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
Real Estate
Investment Trust
Fund
----------------
<S> <C>
ASSETS:
Investments, at value (Cost $3,674) $ 4,168
Interest and dividends receivable 8
Receivable for capital shares issued 31
Receivable from brokers for investments sold 169
------------
Total Assets 4,376
------------
LIABILITIES:
Total Liabilities 0
------------
NET ASSETS:
Capital 3,842
Undistributed net investment income 20
Net unrealized depreciation from investments 494
Accumulated undistributed net realized gains (losses)
from investment 20
------------
Net Assets $ 4,376
============
Outstanding units of beneficial interest (shares)
Total 363
Net asset value
Redemption price per share $ 12.07
============
Maximum sales charge 5.75%
============
Maximum offering price per share (100%/(100%-maximum sales
charge) of net asset value adjusted to
nearest cent) $ 12.81
============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE VICTORY PORTFOLIOS
Statements of Operations
For the Period Ended October 31, 1997
Amounts in Thousands
Real Estate Investment
Trust Fund (a)
---------------------
Period Ended
October 31,
1997
(000)
---------------------
<S> <C>
Investment Income:
Interest income $ 65
Dividend income 14
Foreign tax withholding 0
--------------
Total Income 79
--------------
Expenses: 0
Investment advisory fees 16
Administration fees 2
Shareholder service fees 0
Shareholder service fees-Class A 0
Shareholder service fees and 12b-1 fees-Class B 0
Accounting fees 15
Custodian fees 1
Legal and audit fees 2
Amortization of organization costs 2
Trustees' fees and expenses 0
Transfer agent fees 5
Registration and filing fees 1
0
Printing fees 1
Other 0
Expenses voluntarily reduced (18)
--------------
Expenses before reimbursement from distributor 27
Expenses reimbursed by investment distributor (27)
--------------
Total Expenses 0
--------------
Net Investment Income 79
--------------
Realized/Unrealized Gains (Losses) from Investments
and Foreign Currencies:
Net realized gains from investment transactions 20
Net realized gains (losses) from foreign currency transactions 0
Net change in unrealized depreciation from investments 494
Change in unrealized appreciation from translation of 0
assets and liabilities in foreign currencies 0
--------------
Net realized/unrealized losses from investments: 514
--------------
0
Change in net assets resulting from operations $ 593
==============
CHECK: 593
0
</TABLE>
(a) The Real Estate Investment Trust Fund commenced operations on
April 18, 1997.
<PAGE>
THE VICTORY PORTFOLIOS
Statements of Changes in Net Assets
(Amounts in Thousands)
<TABLE>
<CAPTION>
Real Estate Investment Fund (a)
-------------------------------
Period Ended
October 31,
1997
(000)
-------------------------------
<S> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income $ 79
Net realized (losses) from investment transactions 20
Net change in unrealized appreciation
(depreciation) from investments 494
---------------
Change in net assets resulting
from operations 593
---------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (59)
In excess of net investment income 0
From net realized gains from investment transactions 0
In excess of net realized gains from investment transactions 0
---------------
Change in net assets from
distributions to shareholders (59)
---------------
CAPITAL TRANSACTIONS:
Proceeds from shares issued 3,842
Proceeds from shares issued in connection with acquisition
Dividends reinvested 0
Cost of shares redeemed 0
---------------
Change in net assets from
capital transactions 3,842
---------------
Change in net assets 4,376
NET ASSETS:
Beginning of period 0
---------------
End of period $ 4,376
===============
CHECK: 4,376
0
SHARE TRANSACTIONS:
Issued 363
Issued in connection with acquisition
Reinvested 0
Redeemed 0
---------------
Change in shares 363
===============
(a) The Real Estate Investment Fund commenced operations as of April
30, 1997.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1997
THE VICTORY PORTFOLIOS
- --------------------------------------------------------------------------------
1. Organization:
The Victory Portfolios (collectively, the "Trust" and individually, a "Fund")
was organized on December 6, 1995 as a successor to a company of the same name
organized as a Massachusetts business trust on February 5, 1986. The Trust is
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 Trust is authorized to issue an unlimited number of shares which are
units of beneficial interest with a par value of $0.001. The Trust presently
offers shares of 25 active funds. Included are the financial statements and
financial highlights of 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 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, International Growth Fund,
Lakefront Fund, and the Real Estate Investment Trust ("REIT") Fund.
The U.S. Government Obligations Fund is authorized to issue two classes of
shares: Investor Shares and Select Shares. The 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 The 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 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 tax
and Ohio personal income tax. 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 and the
Growth Fund seek to provide long term growth of capital. The Value Fund seeks to
provide long-term growth of capital and dividend income. The Special Value Fund
seeks to provide long-term growth of capital and dividend income. The Special
Growth Fund and The Ohio Regional Stock Fund seek to provide capital
appreciation. The International Growth Fund seeks to provide capital growth
consistent with reasonable investment risk. The Lakefront Fund seeks to provide
long-term growth of capital and income. The REIT Fund seeks to provide total
return through investments in real estate-related securities.
2. Reorganization
On May 16, 1997, the Shareholders approved a reorganization plan to exchange
Class A and B shares of the Government Bond Fund for shares of the Investment
Quality Bond Fund. The reorganization occurred on June 13, 1997. On that date
1,928,982 shares of the Government Bond Fund were exchanged for shares of the
Investment Quality Bond Fund with a value of $18,518,225. The financial
statements of the Government Bond Fund are not included in the accompanying
financial statements.
3. Significant Accounting Policies:
The following is a summary of significant accounting policies followed by the
Trust in the preparation of its 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.
<PAGE>
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 within 397 days, or (b) maintain
a dollar-weighted-average portfolio maturity which exceeds 90 days.
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 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, International Growth Fund, Lakefront Fund and REIT Fund,
(collectively "the variable net asset value funds"), and investments in Real
Estate Investment Trusts of the REIT Fund 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. Gains or losses realized on 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 Trust 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 Trust isolates 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 acquire repurchase agreements from 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 securities. 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. Repurchase agreements are considered to be
loans by a Fund under the 1940 Act.
<PAGE>
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,
International Growth Fund, and Lakefront Fund may enter into contracts for the
future delivery of securities or foreign currencies and futures contracts based
on a specific security, class of securities, foreign currency or an index,
purchase or sell options on any such futures contracts and engage in related
closing transactions. A futures contract on a securities index is an agreement
obligating either party to pay, and entitling the other party to receive, while
the contract is outstanding, cash payments based on the level of a specified
securities index. The Trust 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 Trust 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 Trust 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.
Securities Lending:
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
Mortgage Fund, Fund for Income, Balanced Fund, Stock Index Fund, Diversified
Stock Fund, Value Fund, Growth Fund, Special Value Fund, Special Growth Fund,
Ohio Regional Stock Fund, International Growth Fund, Lakefront Fund and the REIT
Fund may, from time to time, lend securities from their portfolio to
broker-dealers, banks, financial institutions and institutional borrowers of
securities approved by the Board. The Trust will limit its securities lending to
33 1/3% of the total assets of each Fund. Key Trust Company of Ohio, N.A. ("Key
Trust"), an affiliate of the Adviser, serves as the lending agent for the Trust
pursuant to a Securities Lending Agency Agreement (the "Lending Agreement").
Under guidelines established by the Board of Trustees, Key Trust must maintain
the loan collateral at all times in an amount equal to at least 102% of the
current market value of the loaned securities in the form of cash or U.S.
Government obligations, to secure the return of the loaned securities. Key
Trust, at the direction of the Adviser, may invest the collateral in short-term
debt instruments that the Adviser has determined present minimal credit risks.
There is a risk of delay in receiving collateral or in receiving the securities
loaned or even a loss of rights in the collateral should the borrower of the
securities fail financially. By lending its securities, a Fund can increase its
income by continuing to receive interest or dividends on the loaned securities
as well as either investing the cash collateral in short-term instruments or
obtaining yield in the form of interest paid by the borrower when U.S.
Government securities are used as collateral. Loans are subject to termination
by the Trust or the borrower at any time. During the year ended October 31,
1997, the Trust did not loan any securities.
<PAGE>
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,
International Growth Fund, Lakefront Fund, and the REIT 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
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.
The amounts of dividends from net investment income and of distributions from
net realized gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the composition of net assets based on their federal
tax-basis treatment; temporary differences do not require reclassification.
Dividends and distributions to shareholders which exceed net investment income
and realized capital gains for financial reporting purposes but not for tax
purposes are reported as dividends in excess of net investment income or
distributions in excess of net realized gains. To the extent they exceed net
investment income and net realized gains for tax purposes, they are reported as
distributions of capital.
Federal Income Taxes:
It is the policy of each Fund to qualify or 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 Trust 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 Lakefront and REIT's organization and
registration under the 1940 Act and the Securities Act of 1933 will be paid by
those Funds. Such expenses are being amortized over a period of five years
commencing with the respective inception dates.
4. Purchases and Sales of Securities:
Purchases and sales of securities (excluding short-term securities) for the year
ended October 31, 1997 were as follows (amounts in thousands):
Purchases Sales
--------- -----
Limited Term Income Fund $115,936 133,532
Intermediate Income Fund 485,621 516,454
Investment Quality Bond Fund 398,969 371,833
Government Mortgage Fund 127,433 147,743
Fund for Income 5,338 5,107
National Municipal Bond Fund 70,873 61,960
New York Tax-Free Fund 9,950 17,643
Ohio Municipal Bond Fund 57,418 53,774
Balanced Fund 333,828 319,219
Stock Index Fund 153,451 37,428
Diversified Stock Fund 515,589 419,315
Value Fund 107,351 114,237
Growth Fund 34,778 35,353
Special Value Fund 176,221 131,848
Special Growth Fund 172,958 179,669
Ohio Regional Stock Fund 3,793 8,997
International Growth Fund 133,427 155,684
Lakefront Fund 1,471 383
REIT Fund 14,768 1,741
5. Related Party Transactions:
Investment advisory services are provided to all the Funds by Key Asset
Management Inc. ("the Adviser"), a wholly owned subsidiary of KeyBank National
Association ("Key"), formerly Society National Bank, a wholly owned subsidiary
of KeyCorp. On February 28, 1997, Key Asset Management Inc. became the surviving
corporation after the reorganization of four indirect investment adviser
subsidiaries of KeyCorp, including KeyCorp Mutual Fund Advisers. Lakefront
Capital Investors, Inc. serves as the sub-adviser for the Lakefront Fund. 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, serving as custodian for all of the Funds, receives
custodian fees in addition to reimbursement of actual out-of-pocket expenses
incurred.
<PAGE>
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
(Investor Shares), Financial Reserves Fund and Stock Index Fund. As such, Key
and its affiliates provide 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 a 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 Trust. Certain officers of the Funds are affiliated with BISYS. Such
officers receive no direct payments or fees from the Trust for serving as
officers of the Trust.
Under the terms of the administration agreement, effective October 1, 1997, the
Administrator's fee is computed at the annual rate of 0.15% of each funds
average daily net assets of $300 million and less, 0.12% of each funds average
daily net assets between $300 million and $600 million and 0.10% of each funds
average daily net assets greater than $600 million. Under a Sub-Administration
agreement, BISYS pays Key Asset Management Inc. a fee of up to 0.05% of each
funds average daily net assets to perform some of the administrative duties for
the Funds. Prior to October 1, 1997, the Administrator's fee was computed at the
annual rate of 0.15% of each funds average daily net assets. 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 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, 1997, the
Distributor received approximately $911,000 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 $32,000 to
affiliates of the Funds. BISYS Fund Services, Ohio, Inc. (the Company), an
affiliate of BISYS, serves the Trust 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.
Fees may be voluntarily reduced or reimbursed to assist the Trust in maintaining
competitive expense ratios.
Additional information regarding related party transactions is as follows for
the year ended October 31, 1997:
<TABLE>
<CAPTION>
Mutual
Investment Fund
Advisory Administration Accountant Custodian
Fees Fees Fees Fees
--------------------------- ------------- --------- ----------------
Percentage
of Average Voluntary Voluntary
Daily Fee Fee Annual Annual
Net Assets Reductions Reductions Fee Fee
------------- ----------- ----------- --------- ----------------
(000) (000) (000) (000)
<S> <C> <C> <C> <C> <C>
U.S. Government Obligations Fund 0.35% $ -- $ -- $ 98 $ 293
Prime Obligations Fund 0.35% -- -- 93 111
Financial Reserves Fund 0.50% 301 -- 89 162
Tax-Free Money Market Fund 0.35% 38 -- 80 78
Ohio Municipal Money Market Fund 0.50% 833 376 100 122
Limited Term Income Fund 0.50% 16 -- 34 20
Intermediate Income Fund 0.75% 341 -- 67 57
Investment Quality Bond Fund 0.75% 209 -- 57 46
Government Mortgage Fund 0.50% -- -- 38 27
Fund for Income 0.50% 92 18 48 17
National Municipal Bond Fund 0.55% 240 -- 57 13
New York Tax-Free Fund 0.55% 73 16 49 5
Ohio Municipal Bond Fund 0.60% 80 -- 46 19
Balanced Fund 1.00% 354 -- 90 88
Stock Index Fund 0.60% 574 568 121 164
Diversified Stock Fund 0.65% -- -- 120 145
Value Fund 1.00% -- -- 84 92
Growth Fund 1.00% -- -- 52 39
Special Value Fund 1.00% -- -- 88 86
Special Growth Fund 1.00% -- -- 39 35
Ohio Regional Stock Fund 0.75% -- -- 46 15
International Growth Fund 1.10% -- -- 71 229
Lakefront Fund 1.00% 5 -- 24 2
Real Estate Investment Fund 1.00% 15 2 15 1
</TABLE>
<PAGE>
6. Capital Share Transactions:
Transactions in capital shares for the Funds with multiple share classes were as
follows (amounts in thousands):
<TABLE>
<CAPTION>
National Municipal
Bond Fund New York Tax-Free Fund
-----------------------------------------------------------------------------
Year Year Year Year
Ended Ended Ended Ended
October 31, October 31, October 31, October 31,
1997 1996 1997 1996
------------------ --------------- ---------------- -------------------
Capital Transactions:
Class A Shares:
<S> <C> <C> <C> <C>
Proceeds from shares issued $ 24,151 $ 63,557 $ 4,570 $ 2,391
Dividends reinvested 1,600 1,520 559 547
Cost of shares redeemed (16,416) (39,445) (3,498) (4,419)
- --------------------------------------------------------------------------------------------------------------------
Total $ 9,335 $ 25,632 $ 1,631 ($1,481)
Class B Shares:
Proceeds from shares issued $ 545 $ 1,441 $ 585 $ 859
Dividends reinvested 64 44 115 88
Cost of shares redeemed (204) (141) (476) (370)
- --------------------------------------------------------------------------------------------------------------------
Total $ 405 $ 1,344 $ 224 $ 577
Share Transactions:
Class A Shares:
Issued 2,343 6,209 362 181
Reinvested 156 152 44 43
Redeemed (1,596) (3,912) (277) (341)
- --------------------------------------------------------------------------------------------------------------------
Total 903 2,449 129 (117)
Class B Shares:
Issued 53 143 46 67
Reinvested 6 4 9 7
Redeemed (20) (14) (37) (28)
- --------------------------------------------------------------------------------------------------------------------
Total 39 133 18 46
</TABLE>
<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,
1997 1996 (a) 1997 1996 (a) 1997 1996 (a)
------------ ------------- ------------ ------------ -------------- -----------
Capital Transactions:
Class A Shares:
<S> <C> <C> <C> <C> <C> <C>
Proceeds from shares issued 75,657 84,671 426,586 133,383 120,389 87,823
Dividends reinvested 14,836 8,742 71,806 39,512 18,714 7,377
Cost of shares redeemed (58,208) (47,743) (394,709) (87,452) (67,494) (36,916)
- --------------------------------------------------------------------------------------------------------------------------
Total 32,285 45,670 103,683 85,443 71,609 58,284
Class B Shares:
Proceeds from shares issued 1,819 1,388 19,901 7,937 1,117 415
Dividends reinvested 73 11 1,122 22 36 --
Cost of shares redeemed (315) (33) (1,815) (215) (35) (52)
- --------------------------------------------------------------------------------------------------------------------------
Total 1,577 1,366 19,208 7,744 1,118 363
Share Transactions:
Class A Shares:
Issued 5,819 7,287 25,259 9,364 7,776 6,676
Reinvested 1,167 753 4,810 3,020 1,357 591
Redeemed (4,438) (4,110) (23,399) (6,199) (4,402) (2,842)
- --------------------------------------------------------------------------------------------------------------------------
Total 2,548 3,930 6,670 6,185 4,731 4,425
Class B Shares:
Issued 139 118 1,220 537 73 30
Reinvested 6 1 76 2 2 --
Redeemed (24) (3) (106) (15) (2) (4)
- --------------------------------------------------------------------------------------------------------------------------
Total 121 116 1,190 524 73 26
</TABLE>
(a) Effective March 1, 1996, the Fund designated the existing shares as Class A
Shares and commenced offering Class B Shares.
<PAGE>
<TABLE>
<CAPTION>
Ohio Regional Stock Fund International Growth Fund
--------------------------- ----------------------------
Year Year Year Year
Ended Ended Ended Ended
October 31, October 31, October 31, October 31,
1997 1996 (a) 1997 1996 (a)
----------- ------------- -------------- ------------
Capital Transactions:
Class A Shares:
<S> <C> <C> <C> <C>
Proceeds from shares issued 8,156 7,754 32,789 47,527
Dividends reinvested 869 1,805 2,590 144
Cost of shares redeemed (13,887) (8,344) (53,968) (38,212)
- ------------------------------------------------------------------------------------------
Total (4,862) 1,215 (18,589) 9,459
Class B Shares:
Proceeds from shares issued 241 312 78 138
Dividends reinvested 8 -- 6 --
Cost of shares redeemed (11) (1) (18) (21)
- ------------------------------------------------------------------------------------------
Total 238 311 66 117
Share Transactions:
Class A Shares:
Issued 390 455 2,427 3,689
Reinvested 45 111 201 11
Redeemed (678) (492) (3,995) (2,994)
- ------------------------------------------------------------------------------------------
Total (243) 74 (1,367) 706
Class B Shares:
Issued 12 18 6 11
Reinvested -- -- 1 --
Redeemed -- -- (1) (2)
- ------------------------------------------------------------------------------------------
Total 12 18 6 9
</TABLE>
(a) Effective March 1, 1996, the Fundsignated the existing shares as Class A
Shares and commenced offering Class B Shares.
U.S. Government Obligations Fund
---------------------------------
Year Year
Ended Ended
October 31, October 31,
1997 1996 (a)
-------------- -------------
Capital and Share Transactions:
Investor Shares:
Proceeds from shares issued 1,096,594 --
Dividends reinvested 9 --
Cost of shares redeemed (640,492) --
- ------------------------------------------------------------------------
Total 456,111 --
Select Shares:
Proceeds from shares issued 3,000,667 3,877,755
Dividends reinvested 30,376 13,036
Cost of shares redeemed (3,153,435) (3,497,927)
- ------------------------------------------------------------------------
Total (122,392) 392,864
(a) Effective February 1, 1996, the U.S. Government Obligations Fund designated
the existing shares as Select Shares and commenced offering Investor
Shares.
7. 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 invest 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 within each of the 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.
VICTORY FUNDS
EXHIBIT 16
TOTAL RETURN
LOAD CALCULATIONS
REIT FUND
AGGREGATE TOTAL RETURN
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END OF
THE PERIOD OF A HYPOTHETICAL $1,000
INVESTMENT MADE AT THE BEGINNING OF
THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
SINCE INCEPTION: ( 04/30/97 TO 10/31/97 ):
WITH LOAD OF = 5.75% ( 1,153./1,000) - 1 = 15.38%
YEAR TO DATE: ( 12/31/96 TO 10/31/97 ):
WITH LOAD OF = 5.75% ( 1,153./1,000) - 1 = 15.38%
QUARTERLY: ( 07/31/97 TO 10/31/97 ):
WITH LOAD OF = 5.75% ( 1,011./1,000) - 1 = 1.17%
MONTHLY: ( 09/30/97 TO 10/31/97 ):
WITH LOAD OF = 5.75% ( 917./1,000) - 1 = -8.21%
<PAGE>
VICTORY FUNDS
EXHIBIT 16
TOTAL RETURN
REIT FUND
AGGREGATE TOTAL RETURN
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END OF THE
PERIOD OF A HYPOTHETICAL $1,000
INVESTMENT MADE AT THE BEGINNING OF
THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
SINCE INCEPTION: ( 04/30/97 TO 10/31/97 ):
( 1,224./1,000) - 1 = 22.42%
YEAR TO DATE: ( 12/31/96 TO 10/31/97 ):
( 1,224./1,000) - 1 = 22.42%
QUARTERLY: ( 07/31/97 TO 10/31/97 ):
( 1,073./1,000) - 1 = 7.39%
MONTHLY: ( 09/30/97 TO 10/31/97 ):
( 974./1,000) - 1 = -2.58%
<PAGE>
VICTORY FUNDS
EXHIBIT 16
30-DAY S.E.C. YIELD CALCULATIONS
ACTUAL(WITH WAIVERS)
(a-b)
-----------
30-Day S.E.C. Yield Equation = 2 *{[( (cd) +1)^6]-1} =
WHERE a = Dividends and interest earned during the period
b = Expenses accrued for the period (net of reimbursements)
c = The average daily number of shares outstanding during
the period that were entitled to receive dividends
d = The offering price (without CDSC) or the maximum redemption price
(with CDSC) per share on the last day of the period
MAXIMUM FEES (without waivers)
(a-b)
-----------
30-Day S.E.C. Yield Equation = 2 *{[( (cd) +1)^6]-1} =
WHERE a = Dividends and interest earned during the period
b = Expenses accrued for the period (without waivers)
c = The average daily number of shares outstanding during
the period that were entitled to receive dividends
d = The offering price (without CDSC) or the maximum redemption price
(with CDSC) per share on the last day of the period
ACTUAL
( 13,248.64 - 0.00 )
-----------------------------------------
2 *{[( +1)^6]-1} = 3.51%
( 356,201.585 * 12.81 )
FULL FEES (WITHOUT WAIVERS)
( 13,248.64 - 8,276.80)
-----------------------------------------
2 *{[( +1)^6]-1} = 1.31%
( 356,201.585 * 12.81)
The performance was computed based on the thirty day period ending
October 31, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000802716
<NAME> THE VICTORY PORTFOLIOS
<SERIES>
<NUMBER> 26
<NAME> VICTORY REAL ESTATE INVESTMENT FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> APR-30-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 3674
<INVESTMENTS-AT-VALUE> 4168
<RECEIVABLES> 208
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4376
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3842
<SHARES-COMMON-STOCK> 363
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 20
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 20
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 494
<NET-ASSETS> 4376
<DIVIDEND-INCOME> 14
<INTEREST-INCOME> 65
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 79
<REALIZED-GAINS-CURRENT> 20
<APPREC-INCREASE-CURRENT> 494
<NET-CHANGE-FROM-OPS> 593
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 59
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 363
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 4376
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 16
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 27
<AVERAGE-NET-ASSETS> 2613
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.23
<PER-SHARE-GAIN-APPREC> 2.01
<PER-SHARE-DIVIDEND> 0.17
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 12.07
<EXPENSE-RATIO> 0.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
