AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 27, 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. 32 [X]
AND
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 33
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:
[ ] IMMEDIATELY UPON FILING PURSUANT TO |X| ON JUNE 30, 1997 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.
REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OF SHARES PURSUANT TO RULE 24F-2
AND ITS RULE 24F-2 NOTICE FOR ITS OCTOBER 31, 1996 FISCAL YEAR WAS FILED ON
DECEMBER 23, 1996, IN ACCORDANCE WITH RULE 24F-2.
<PAGE>
THE VICTORY PORTFOLIOS
CROSS-REFERENCE SHEET
THE VICTORY PORTFOLIOS
LAKEFRONT FUND
U.S. GOVERNMENT OBLIGATIONS FUND
Item Number
Form N-1A
Part A Prospectus Caption
------ ------------------
The Registrant has filed the information required in the prospectus of Lakefront
Fund and the combined prospectus containing U. S. Government Obligations Fund -
Investor Class in the definitive filing of the prospectuses pursuant to Rule
497(c) of the Securities Act of 1933 on March 10, 1997, (accession
#0000922423-97-000200) and such prospectuses are hereby incorporated by
reference. The Registrant has amended the Lakefront Fund prospectus and the
combined prospectus containing U. S. Government Obligations Fund -Investor Class
solely for the purpose of updating the financial highlights of the Lakefront
Fund and U.S. Government Obligations Fund - Investor Class.
i. Cover Page Cover Page; Introduction; An
Overview of the Fund
ii. Synopsis Fund Expenses
iii. Condensed Financial Information Financial Highlights
iv. General Description of Registrant Introduction; An Overview of the
Fund; Investment Policies and
Strategies; Risk Factors;
Investment Limitations; Fund
Organization and Fees; Additional
Information
v. Management of the Fund Organization and Management of the
Fund
v.A. Management's Discussion of Fund Investment Performance
Performance
vi. 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
vii. Purchase of Securities Being Offered How to Purchase Shares; How to
Exchange Shares
viii Redemption or Repurchase How to Exchange Shares; How to
Redeem Shares
ix. Pending Legal Proceedings Inapplicable
<PAGE>
THE VICTORY PORTFOLIOS
CROSS REFERENCE SHEET
THE VICTORY PORTFOLIOS
BALANCED FUND, DIVERSIFIED STOCK FUND, FINANCIAL RESERVES FUND,
FUND FOR INCOME, GOVERNMENT MORTGAGE FUND, GROWTH FUND,
INSTITUTIONAL MONEY MARKET FUND, INTERMEDIATE INCOME FUND,
INTERNATIONAL GROWTH FUND, INVESTMENT QUALITY BOND FUND,
LAKEFRONT FUND, LIMITED TERM INCOME FUND, NATIONAL MUNICIPAL BOND FUND,
OHIO MUNICIPAL BOND FUND, OHIO REGIONAL STOCK FUND, PRIME OBLIGATIONS FUND,
REAL ESTATE INVESTMENT FUND, SPECIAL GROWTH FUND, SPECIAL VALUE FUND,
STOCK INDEX FUND, TAX-FREE MONEY MARKET FUND,
U.S. GOVERNMENT OBLIGATIONS FUND, VALUE FUND
Item Number
Form N-1A Statement of Additional
Part B Information Caption
------ -------------------
The Registrant has filed the information required in the combined statement of
additional information in the definitive filing of the statement of additional
information pursuant to Rule 497(c) of the Securities Act of 1933 on March 10,
1997, (accession #0000922423-97-000200), which is hereby incorporated by
reference.
x. Cover Page Cover Page
xi. Table of Contents Table of Contents
xii. General Information and History Additional Information
xiii. Investment Objectives and Policies Investment Objective and
Policies; Investment
Limitations and Restrictions
xiv. Management of the Fund Trustees and Officers
xv. Control Persons and Principal Additional Information
Holders of Securities
xvi. Investment Advisory and Other Advisory and Other Contracts
Services
xvii. Brokerage Allocation and Other Practices Advisory and Other Contracts
xviii. Capital Stock and Other Securities Valuation of Portfolio
Securities; Additional
Purchase, Exchange and
Redemption Information;
Additional Information
<PAGE>
THE VICTORY PORTFOLIOS
Item Number
Form N-1A Statement of Additional
Part B Information Caption
------ -------------------
xix. Purchase, Redemption and Pricing Valuation of Portfolio Securities;
of Securities Being Offered Additional Purchase, Exchange and
Redemption Information; Performance;
Additional Information
xx. Tax Status Dividends and Distributions
xxi. Underwriters Advisory and Other Contracts
xxii. Calculation of Performance Data Performance; Additional Information
xxiii. Financial Statements
<PAGE>
Dear Shareholder: The Victory Funds is pleased to release the financial
highlights for the Lakefront Fund. This information is important and should be
kept with a copy of your prospectus.
- -------------------------------------------------------------------------------
THE VICTORY PORTFOLIOS
THE LAKEFRONT FUND (THE "FUND")
Supplement Dated June 30, 1997
to the Prospectus Dated March 1, 1997
The Prospectus of the Victory Lakefront Fund is supplemented as follows:
THE DATE OF THE PROSPECTUS IS JUNE 30, 1997.
The following tables and information replace the tables on page 6 of the
Prospectus in their entirety:
This section will help you understand the costs and expenses you will pay,
directly or indirectly, if you invest in the Fund.
- --------------------------------------------------------------------------------
SHAREHOLDER CLASS A
TRANSACTION SHARES
EXPENSES*
- --------------------------------------------------------------------------------
Maximum Sales Charge Imposed on Purchases 4.75%
(as a percentage of the offering price)
- --------------------------------------------------------------------------------
Sales Charge Imposed on Reinvested Dividends NONE
- --------------------------------------------------------------------------------
Deferred Sales Charge NONE
- --------------------------------------------------------------------------------
Redemption Fees NONE
- --------------------------------------------------------------------------------
Exchange Fees NONE
- --------------------------------------------------------------------------------
*You may be charged additional fees if you purchase, exchange, or redeem shares
through a broker or agent.
The Annual Fund Operating Expenses table illustrates the estimated operating
expenses that you will incur as a shareholder of the Fund. THESE EXPENSES ARE
CHARGED DIRECTLY TO THE FUND. Expenses include management fees as well as the
costs of maintaining accounts, administering the Fund, providing shareholder
services, and other activities. The expenses shown are estimated based on
historical or projected expenses of the Fund.
- --------------------------------------------------------------------------------
ANNUAL FUND CLASS A
OPERATING EXPENSES SHARES
After Expense Waivers and Reimbursements
(as a percentage of average daily net assets)
- --------------------------------------------------------------------------------
Management Fee1 .50%
- --------------------------------------------------------------------------------
Other Expenses1,2 .00%
----
- --------------------------------------------------------------------------------
Total Fund Operating Expenses 1 .50%
====
- --------------------------------------------------------------------------------
(1) These fees have been voluntarily reduced. Without this reduction, the
Management Fee would be 1.00% and Total Fund Operating Expenses would be 14.86%.
(2) Other Expenses include an estimate of shareholder servicing fees the Fund
expects to pay. See "Organization and Management of the Fund-- Shareholder
Servicing Plan."
This example is designed to help you understand the various costs you will bear,
directly or indirectly, as an investor in the Fund.
EXAMPLE:
You would pay the following expenses on a $1,000 investment in the Fund,
assuming: (1) a 5% annual return, and (2) redemption at the end of each time
period.
- --------------------------------------------------------------------------------
1 YEAR 3 YEARS
- --------------------------------------------------------------------------------
Class A Shares $52 $63
- --------------------------------------------------------------------------------
THIS EXAMPLE IS ONLY AN ILLUSTRATION.
ACTUAL EXPENSES AND RETURNS WILL VARY.
<PAGE>
The following table is added to the Prospectus in page 6 after the Section "Fund
Expenses."
FINANCIAL HIGHLIGHTS
The Financial Highlights describe the Lakefront Fund's returns and operating
expenses over time. This table shows the results of an investment in one share
of the Lakefront Fund for the period indicated.
March 3, 1997
through
April 30,
1997(a)
---------------
(Unaudited)
---------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
---------------
Investment Activities
Net investment income 0.03
Net realized and unrealized losses on investments (0.02)
Total from Investment Activities $ 0.01
---------------
Distributions
Net investment income (0.01)
In excess of net investment income ---
Net realized gains ---
---------------
Total Distributions (0.01)
---------------
NET ASSET VALUE, END OF PERIOD $ 10.00
===============
Total Return (excludes sales charges) 0.10% (b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000) $ 994
Ratio of expenses to average net assets 0.00% (c)
Ratio of net investment income to average net assets 2.17% (c)
Ratio of expenses to average net assets* 14.86% (c)
Ratio of net investment income to average net assets* (12.69%) (c)
Portfolio turnover 6%
Average commission rate paid (d) $ 0.0800
----------
*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 unaudited. This information should be read in
conjunction with the Lakefront Fund's most recent Semi-annual Report to
shareholders. If you would like a copy of the Semi-annual Report, please write
or call us at 800-KEY-FUND (R)
VF-LF-SUPP1
<PAGE>
THE VICTORY PORTFOLIOS
THE FINANCIAL RESERVES FUND
OHIO MUNICIPAL MONEY MARKET FUND
PRIME OBLIGATIONS FUND
TAX-FREE MONEY MARKET FUND
THE U.S. GOVERNMENT OBLIGATIONS FUND (THE "FUND")
Supplement Dated June 30, 1997
to the Prospectus Dated March 1, 1997
THE DATE OF THE PROSPECTUS IS JUNE 30, 1997.
The following replaces the Financial Highlights table on page 13 of
the prospectus with respect to the U.S. Government Obligations Fund:
The Financial Highlights describe the U.S. Government Obligations Fund's returns
and operating expenses over time. This table shows the results of an investment
in one share of the U.S. Government Obligations Fund for each of the periods
indicated.
<TABLE>
<CAPTION>
Investor Shares (Select Shares (a)
Period Six Months
Ended April 30, Ended April 30, Year Ended October 31,
---------------------------------------------------------------
1997 1997 1996 1995(b) 1994 1993 1992 1991
---- ---- ---- ------- ---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------ ------ ------ ------ ------
Investment Activities
Net investment income 0.014 0.024 0.049 0.052 0.032 0.026 0.036 0.060
Distributions
Net investment income (0.014) (0.024) (0.049) (0.052) (0.032) (0.026) (0.036) (0.060)
-------
NET ASSET VALUE, END OF $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
=======
PERIOD
Total Return 1.46%(c) 2.42%(c) 4.96% 5.38% 3.30% 2.62% 3.66% 6.14%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period $515,471 $1,052,98 $1,357,817 $964,929 $412,048 $515,734 $579,836 $430,248
(000)
Ratio of expenses to
average net assets 0.56%(d) 0.68%(d) 0.61% 0.58% 0.63% 0.60% 0.60% 0.60%
Ratio of net investment income
to average net assets 4.86%(d) 4.75%(d) 4.84% 5.28% 3.20% 2.57% 3.50% 5.92%
Ratio of expenses to
average net assets* (e) (e) (e) 0.60% 0.80% (e)
Ratio of net investment income
to average net assets* (e) (e) (e) 5.26% 3.03% (e)
Year Ended October 31,
------------------------------
1990(f) 1989(f)
---- ----
<S> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $1.000 $1.000
Investment Activities
Net investment income 0.076 0.081
Distributions
Net investment income (0.076) (0.081)
NET ASSET VALUE, END OF $1.000 $1.000
PERIOD
Total Return 7.83% 8.44%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period $376,021 $152,718
(000)
Ratio of expenses to
average net assets 0.62% 0.62%
Ratio of net investment income
to average net assets 7.56% 8.16%
Ratio of expenses to
average net assets*
Ratio of net investment income
to average net assets*
</TABLE>
*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 January 8, 1997, the Fund designated the existing shares as
Select Shares and commenced offering Investor Shares.
(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 Obligations
Fund.
(c) Not annualized.
(d) Annualized.
(e) There were no waivers during the period.
(f) Audited by other auditors.
The financial highlights for the fiscal years ended October 31 were audited by
Coopers & Lybrand L.L.P. The periods ended April 30, 1997 are unaudited. This
information should be read in conjunction with the U.S. Government Obligations
Fund's Annual Report to shareholders, which is incorporated by reference in the
SAI. If you would like a copy of the Annual Report, write or call us at
800-KEY-FUND(R).
VF-GO-SUPP1
<PAGE>
The Victory Portfolios
Supplement Dated June 30, 1997
to the Statement of Additional Information ("SAI")
dated March 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
Effective June 30, 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."
<PAGE>
Effective June 30, 1997, the following paragraph is in addition to current
information contained in the "Miscellaneous " section in the SAI:
"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."
Please keep this Supplement with your SAI. Investors wishing to obtain more
information, please call the Transfer Agent without charge at 800-KEY-FUND(R) or
800-539-3863.
<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:
-- Condensed Financial Information.
Included in Part B:
-- Annual reports for the period ended October 31, 1996 are
incorporated by reference in Part B and 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. For the Lakefront Fund and U.S. Government
Obligations Fund - Investor Class, unaudited semi-annual reports
for the period ended April 30, 1997 are incorporated by reference
in Part B and filed herewith as Exhibit 99.B12(b).
(b) Exhibits:
EX-99.B1 (a) Delaware Trust Instrument 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 Februry 28, 1997, between the
Registrant and Key Asset Management Inc. is incorporated herein
by reference to Exhibit 99.B5(a) 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.
(b) Investment Sub-Advisory Agreement between Key Asset Management
Inc. and Society Asset Management, Inc. dated February 28, 1997,
is incorporated herein by reference to Exhibit 99.B5(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.B5 (c) Form of Investment Advisory Agreement between the Registrant and
Key Asset Management Inc. regarding Lakefront Fund and Real
Estate Investment Fund is incorporated herein by reference to
Exhibit 99.B5(c) 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.
(d) Form of Investment Sub-Advisory Agreement between Key Asset
Management Inc. and Lakefront Capital Investors, Inc. regarding
the Lakefront Fund is incorporated herein by reference to Exhibit
99.B5(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.
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.
C-2
<PAGE>
THE VICTORY PORTFOLIOS
(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) 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.
EX-99.B11 (b) Consent of Coopers & Lybrand L.L.P. is filed herewith.
C-3
<PAGE>
THE VICTORY PORTFOLIOS
EX-99.B12 (a) Annual 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.
EX-99.B12 (b) Semi-Annual Reports for the period ended April 30,
1997, with respect to the Lakefront Fund and U.S. Government
Obligations Fund - Investor Class, 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.
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.
C-4
<PAGE>
THE VICTORY PORTFOLIOS
(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
filed herewith.
EX-99.B17 Financial Data Schedules for the period ended April 30, 1997,
with respect to the Lakefront Fund and U.S. Government
Obligations Fund - Investor Class, are 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.
(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.
C-5
<PAGE>
THE VICTORY PORTFOLIOS
Item 26. Number of Holders of Securities.
As of May 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 1,963
Class B Shares 228
Diversified Stock Fund
Class A Shares 0,706
Class B Shares 2,032
Financial Reserves Fund 175
Fund For Income 2,069
Government Bond Fund
Class A Shares 234
Class B Shares 98
Government Mortgage Fund 382
Growth Fund 487
Intermediate Income Fund 234
International Growth Fund
Class A Shares 1,661
Class B Shares 49
Institutional Money Market Fund
Investor Class Shares 56
Select Class Shares 21
Investment Quality Bond Fund 1,089
Lakefront Fund 38
Limited Term Income Fund 615
National Municipal Bond Fund
Class A Shares 1,315
Class B Shares 76
C-6
<PAGE>
THE VICTORY PORTFOLIOS
New York Tax-Free Fund
Class A Shares 711
Class B Shares 124
Ohio Municipal Bond Fund 390
Ohio Municipal Money Market Fund 192
Ohio Regional Stock Fund
Class A Shares 1,428
Class B Shares 94
Prime Obligations Fund 1,620
Real Estate Investment Fund 73
Special Growth Fund 325
Special Value Fund
Class A Shares 2,924
Class B Shares 120
Stock Index Fund 369
Tax Free Money Market Fund 124
U.S. Government Obligations Fund
Select Class Shares 418
Investor Class Shares 105
Value Fund 186
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
C-7
<PAGE>
THE VICTORY PORTFOLIOS
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) 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
C-8
<PAGE>
THE VICTORY PORTFOLIOS
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.
Item 28. Business and Other Connections of Investment Adviser
Key Asset Management Inc. ("KAMI") is the investment adviser to each
fund of the Victory Portfolios. KAMI is a wholly-owned indirect
subsidiary of KeyCorp, a bank holding company which had total assets
of approximately $68 billion as of March 31, 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. KAMI 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
KAMI 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 KAMI also hold
positions with KeyCorp or its subsidiaries.
C-9
<PAGE>
THE VICTORY PORTFOLIOS
The principal executive officers and directors of KAMI 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
of SBSF.
Richard E. Salomon, Senior Managing Director. Also President and
Director of Wealth Management, SBSF.
Gary R. Martzolf, Senior Managing Director.
Other Officers:
Charles G. Crane, Senior Managing Director and Chief Market
Director.
James D. Kacic, Treasurer and Chief Financial Officer and Managing
Director.
Michael Foisel, Assistant Treasurer.
Robert M. Siewert, Chief Compliance Officer. 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.
Frank J. Riccardi, 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.
C-10
<PAGE>
THE VICTORY PORTFOLIOS
The business address of each of the foregoing individuals is The
Hanna Building, 1422 Euclid Avenue, Suite 840, Cleveland, Ohio 44115.
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 January 23, 1997 were
as follows:
Name and Principal Positions and Officers with Positions and Offices
Business Addresses BISYS Fund Services with the Registrant
- ------------------ ------------------- -------------------
Lynn J. Mangum Chairman/CEO None
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43215
J. David Huber
BISYS Fund Services, Inc.
3435 Stelzer Road President None
Columbus, Ohio 43215
Robert J. McMullan
BISYS Fund Services, Inc. Executive Vice
3435 Stelzer Road President/CFO/Treasurer None
Columbus, Ohio 43215
Kevin J. Dell
BISYS Fund Services, Inc. Vice President/General
3435 Stelzer Road Counsel/Secretary None
Columbus, Ohio 43215
Michael D. Burns
BISYS Fund Services, Inc.
3435 Stelzer Road Vice President None
Columbus, Ohio 43215
Annamaria Porcaro
BISYS Fund Services, Inc.
3435 Stelzer Road Assistant Secretary None
Columbus, Ohio 43215
Robert Tuch
BISYS Fund Services, Inc.
3435 Stelzer Road Assistant Secretary None
Columbus, Ohio 43215
C-11
<PAGE>
THE VICTORY PORTFOLIOS
Stephen Mintos
BISYS Fund Services, Inc.
3435 Stelzer Road Executive Vice President None
Columbus, Ohio 43215
George O. Martinez
BISYS Fund Services, Inc.
3435 Stelzer Road Senior Vice President Assistant Secretary
Columbus, Ohio 43215
Mark J. Rybarczyk
BISYS Fund Services, Inc.
3435 Stelzer Road Senior Vice President None
Columbus, Ohio 43215
Paul H. Bourke
BISYS Fund Services, Inc.
3435 Stelzer Road Vice Chairman None
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).
(2) Lakefront Capital Investors, Inc., Suite 840, The Hanna Building,
1422 Euclid Avenue, Cleveland, Ohio 44115 (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).
(7) Key Trust Company of Ohio, N.A., 127 Public Square, Cleveland, Ohio
44114-1306 (records relating to its functions as custodian).
(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).
C-12
<PAGE>
THE VICTORY PORTFOLIOS
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 Delaware Trust Instrument 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-13
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant has certified that it meets 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 No. 32
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
26th day of June, 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 26th day of
June, 1997.
/s/ Leigh A. Wilson President and Trustee
- -------------------
Leigh A. Wilson
/s/ Kevin L. Martin Treasurer
- -------------------
Kevin L. Martin
* Trustee
- -------------------
Robert G. Brown
* Trustee
- -------------------
Edward P. Campbell
* Trustee
- -------------------
Harry Gazelle
* Trustee
- -------------------
Stanley I. Landgraf
* 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-14
<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) Semi-Annual Report for the period ended April 30,
1997, with respect to the Lakefront Fund and U.S. Government
Obligations Fund - Investor Class.
EX-99.B16 Forms of computation of performance quotation for Lakefront
Fund and U. S. Government Obligations Fund - Investor Class.
EX-27 Financial Data Schedules
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
-------------
June 27, 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
--------------------------------------
Gentlemen:
We hereby consent to the reference to our firm as counsel in
Post-Effective Amendment No. 32 to the Registration Statement on Form N-1A.
Very turly yours,
/s/Kramer, Levin, Naftalis & Frankel
------------------------------------
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Post-Effective
Amendment No. 32 to the Registration Statement on Form N-1A (File No.
33-8982) of The Victory Portfolios of our reports 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 captions "Financial Highlights" and "Independent Accountants" in the
prospectus for the U.S. Government Obligations Fund, and under the caption
"Independent Accountants" for the Lakefront Fund, under the captions
"Miscellaneous" and "Independent Accountants" in the Statement of
Additional Information relating to The Victory Portfolios in the
Post-Effective Amendment No. 32 to the Registration Statement on Form N-1A
(File No. 33-8982).
/s/COOPERS & LYBRAND L.L.P.
---------------------------
Columbus, Ohio
June 27, 1997
EX-99.B12(b)
SEMI-ANNUAL REPORT
APRIL 30,
1997
Victory Funds(R)
<PAGE>
TABLE OF CONTENTS
Shareholder Letter 2
Investment Review and Outlook 3
Glossary of Terms 4
FINANCIAL STATEMENTS
Schedules of Investments 5
Statements of Assets and Liabilities 78
Statements of Operations 85
Statements of Changes in Net Assets 92
Notes to Financial Statements 101
Financial Highlights 108
- --------------------------------------------------------------------------------
NOT FDIC INSURED
Shares of the Victory Funds are not deposits or other obligations of, or
guaranteed by, any KeyCorp bank, Key Asset Management Inc., or their affiliates,
and are subject to investment risks, including possible loss of the principal
amount invested.
- --------------------------------------------------------------------------------
Key Asset Management Inc. (KAM) a subsidiary of KeyCorp, is the investment
adviser to The Victory Funds. The Victory Funds are sponsored and
distributed by BISYS Fund Services, which is not affiliated with KeyCorp
or its subsidiaries. KAM 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.
1
<PAGE>
LETTER TO OUR SHAREHOLDERS
I'm pleased to present the Victory Funds semiannual report for the
period ended April 30, 1997.
During this period management has undertaken several important initiatives
and has continued to demonstrate tangible enhancements to the Funds.
Key Asset Management Inc. (KAM) was introduced as adviser to the
Funds on March 1, 1997. KAM represents a recent consolidation of
KeyCorp's investment advisory subsidiaries and encompasses a broad
range of customized investment solutions available through Society
Asset Management, Key Mutual Fund Advisers, Applied Technology
Investments and Spears, Benzak Salomon & Farrell. Together, KAM's
advisory team embodies more than 100 years of investment experience
and the new structure will help ensure the Fund's easy access to
specialized investment skills.
The Victory Lakefront Fund was launched on March 3, 1997, with Lakefront
Capital Investors, Inc., a Cleveland based African American-owned
institutional advisory firm, as the Fund's sub-adviser. Among Lakefront's
investment criteria is a unique interest in a company's corporate
diversity philosophy and strategy.
In April of this year, the Victory Real Estate Investment Fund came
to the market providing our clients and prospective investors with yet
another specialized investment solution. This Fund, managed out of
Key Asset Management Inc.'s Spears, Benzak, Salomon and Farrell
division, invests in the securities of real estate related companies,
offering individual and institutional investors liquidity,
diversification and easy access to this industry.
We're also proud that the Victory "Plain English" prospectuses were
available within days of the Securities and Exchange Commission's
announcement of its proposals to overhaul mutual fund disclosure
requirements. Our attempt to better direct investors through
important investment, risk, financial and operational information was
well worth the effort and we welcome your comments, questions or
suggestions.
Thank you for your continued investment and confidence in Victory.
/s/ Leigh A. Wilson
- -------------------
Leigh A. Wilson
President
- --------------------------------------------------------------------------------
o Not FDIC Insured o No Bank Guarantee o May Lose Value
- --------------------------------------------------------------------------------
For more information about the Victory Funds, including charges and
expenses, request a prospectus by calling 1-800-KEY-FUND(R) (1-800-539-3863).
Please read the prospectus carefully before investing or sending money.
INVESTMENT REVIEW AND OUTLOOK
1997 began with some trepidation among fund managers, whose overriding
concern was, "How long will this scenario of low inflation and high
employment last?" The Federal Reserve Board, which sets monetary policy,
seemed to share this concern when it raised the Federal Funds rate
by a quarter of a percentage point in March. This move was deemed
"anticipatory" because visible signs of inflation had not yet kicked in.
The market is concerned about inflation and the resultant impact on
interest rates because it affects the value of the future stream of
cash flows. For now this concern has been lulled by recent economic
reports that indicate that inflation has not yet become a major
problem. Of these, perhaps the most important was the employment cost
index (released April 29) which revealed no appreciable acceleration
in wages and salaries, despite the tightest labor market in some years.
Companies' earnings estimates have been nudging up a bit after this
year's first quarter results were reported. Although the pace of this
earnings growth is not as spectacular as in previous years, profits
were still respectable, especially when compared to the most recent
analysts' estimates (which had been talked down by company
managements eager to "beat the Street").
The dollar's very recent weakness has also bolstered the outlook for
company earnings, since it could result in a boost to U.S. exports.
Add in the notion that foreign economies are reviving a bit as the
U.S. settles back, and one has near ideal conditions for the big
multinationals that populate the major market benchmarks.
Needless to say, large-cap stock funds have a field day in this
environment, but shopping for a large-cap stock is much like shopping
at Tiffany's: nothing is on sale and one may pay a premium for the
privilege of taking home something in that little robin's egg blue
bag. There is also some evidence that historically, periods of high
valuations have coincided with periods of high volatility. Although
past performance is no indication of future results, it is well worth
keeping in mind that diversification is one of the best defenses
against volatility.
The perennial wisdom of proper asset allocation cannot be overemphasized.
Simply put, investors should not ignore other asset classes like bonds
and money market instruments. Bonds right now look very attractive
on a risk-adjusted basis. Among stocks, there are great bargains in
the market's small and mid-cap bins. In other words, here's where
we may find Tiffany's quality without the blue bag and hefty price tag!
May 30, 1997
/s/ Charlie Crane
- -----------------
Charlie Crane, Chief Market Strategist
Key Asset Management Inc.
3
<PAGE>
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 one year
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 a profit and does not protect against loss in
declining markets. An investor should be prepared to continue the program
of investing at regular intervals, even during economic downturns, in order
to fully utilize a dollar cost averaging program.
4
<PAGE>
<TABLE>
THE VICTORY PORTFOLIOS Schedule of Investments
U.S. Government Obligations Fund April 30, 1997
(Amounts in Thousands) (Unaudited)
<CAPTION>
Principal Amortized
Amount Security Description Cost
<S> <C> <C>
U.S. Treasury Notes (25.5%)
$ 25,000 6.50%, 5/15/97 $ 25,007
25,000 6.13%, 5/31/97 25,006
25,000 6.50%, 8/15/97 25,070
225,000 5.75%, 9/30/97 225,175
50,000 5.63%, 10/31/97 50,012
25,000 5.38%, 11/30/97 24,950
25,000 6.13%, 3/31/98 25,023
Total U.S. Treasury Notes 400,243
Total Investments 400,243
Repurchase Agreements (74.7%)
75,000 Aubrey G.
Lanston & Co., Inc.,
5.40%, 5/1/97,
(Collateralized by $77,344
various U.S. Treasury
Securities, 0.00%-6.50%,
10/2/97-5/15/05,
market value--$76,501) 75,000
77,000 Barclays de Zoete Wedd Securities, Inc.,
5.42%, 5/1/97,
(Collateralized by $109,061
U.S. Treasury
Securities, 0.00%-6.88%,
3/31/98-8/15/24,
market value--$78,541) 77,000
75,000 Chase Securities, Inc.,
5.40%, 5/1/97,
(Collateralized by $75,084
U.S. Treasury
Notes, 5.00%-7.00%,
2/15/99-6/30/99,
market value--$76,501) 75,000
30,000 Dean Witter Reynolds, Inc.,
5.25%, 5/1/97
(Collateralized by $30,201
various U.S. Treasury
Securities, 0.00%-8.50%,
5/29/97-8/31/01,
market value--$30,600) 30,000
77,000 Deutsche Morgan Grenfell,
5.38%, 5/1/97,
(Collateralized by $74,439
various U.S. Treasury
Secutities, 6.63%-9.88%,
8/15/99-2/15/27,
market value--$78,541) 77,000
75,000 Donaldson-Lufkin Jenrette
Securities Corp.,
5.38%, 5/1/97,
(Collateralized by $150,784
various U.S. Treasury
Secutities, 0.00%-10.75%,
7/10/97-2/15/24,
market value--$76,501) 75,000
75,000 Goldman Sachs Group L.P.,
5.38%, 5/1/97,
(Collateralized by $79,320
U.S. Treasury
Bonds, 6.50%,
11/15/28,
market value--$76,501) 75,000
77,000 Harris-Nesbitt Burns Securities,
5.41%, 5/1/97,
(Collateralized by $238,847
U.S.Treasury
Strips, 0.00%,
8/15/00-8/15/21,
market value--$78,540) 77,000
75,568 Lehman Brothers, Inc.,
5.45%, 5/1/97,
(Collateralized by $78,961
U.S. Treasury
Notes, 5.25%-8.00%,
1/31/01-5/15/01,
market value--$77,083) 75,568
385,000 NationsBanc Capital Markets, Inc.,
5.45%, 5/1/97,
(Collateralized by $425,814
various U.S. Government
Securities, 0.00%-9.25%,
5/2/97-4/30/02,
market value--$392,700) 385,000
75,000 Nomura Securities International, Inc.,
5.27%, 5/1/97,
(Collateralized by $360,882
U.S. Treasury
Strips, 0.00%,
2/15/19,
market value--$76,500) 75,000
75,000 Smith Barney Securities, Inc.,
5.45%, 5/1/97,
(Collateralized by $75,614
U.S Treasury
Notes, 6.63%,
6/30/01-4/30/02,
market value--$76,500) 75,000
Total Repurchase Agreements 1,171,568
- --------------------------------------------------------------------------------
Total (Cost $1,571,811) <F1> $1,571,811
- --------------------------------------------------------------------------------
<FN>
Percentages indicated are based on net assets of $1,568,399.
<F1> Cost for federal income tax and financial reporting purposes
are the same.
</FN>
</TABLE>
See notes to financial statements.
5
<PAGE>
<TABLE>
THE VICTORY PORTFOLIOS Schedule of Investments
Lakefront Growth Fund April 30, 1997
(Amounts in Thousands, Except Shares) (Unaudited)
<CAPTION>
Market
Shares Security Description Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Common Stocks (100.5%)
Aerospace/Defense (4.7%):
163 Boeing Co. $ 16
395 United Technologies Corp. 30
46
Aluminum (3.9%):
193 Aluminum Co. of America 13
380 Reynolds Metal Co. 26
39
Apparel & Footwear (1.7%):
449 Reebok International Ltd. 17
Automobiles (1.9%):
553 Ford Motor Co. 19
Automotive Parts (4.1%):
573 Federal-Mogul Corp. 16
395 TRW, Inc. 25
41
Banks (6.6%):
335 Chase Manhattan Corp. 31
452 MBNA Corp. 15
73 Wells Fargo & Co. 19
65
Brokerage Services (3.3%):
975 Lehman Brothers Holding, Inc. 33
Building Materials (2.0%):
310 Armstrong World Industries, Inc. 20
Chemicals (3.0%):
760 Cabot Corp. 17
340 IMC Global, Inc. 13
30
Computers & Peripherals (6.9%):
550 Diebold, Inc. 18
543 Hewlett-Packard Co. 28
134 International Business Machines Corp. 22
68
Conglomerates (3.0%):
268 General Electric Co. 30
Consumer Products (1.9%):
168 Colgate-Palmolive Co. 19
Electronic & Electrical--General (10.8%):
534 AMP, Inc. 19
302 Johnson Controls, Inc. 11
380 Rockwell International Corp. 25
382 Texas Instrumrents, Inc. 34
372 Varian Associates, Inc. 18
107
Financial Services (4.6%):
376 American Express Co. 25
385 Travelers Group, Inc. 21
46
Health Care (1.7%):
479 Columbia/HCA Healthcare Corp. 17
Heavy Machinery--Industrial, Farm,
Construction (5.0%):
213 Caterpillar Tractor, Inc. 19
662 Deere & Co. 30
49
Medical Supplies (2.3%):
711 C.R. Bard, Inc. 23
Oil--Integrated Companies (3.5%):
129 Mobil Corp. 17
174 Texaco, Inc. 18
35
Pharmaceuticals (6.9%):
352 American Home Products Corp. 23
312 Bristol-Myers Squibb Co. 21
303 Schering-Plough Corp. 24
68
Photography (4.1%):
488 Eastman Kodak Co. 41
Retail (3.2%):
2,315 K-Mart Corp. <F2> 32
Retail--Specialty Stores (2.4%):
765 Gap, Inc. 24
Rubber & Rubber Products (1.7%):
793 M.A. Hanna Co. 17
Semiconductors (2.2%):
141 Intel Corp. 22
Software & Computer Service (2.4%):
470 Computer Associates International, Inc. 24
Steel (1.9%):
1,470 LTV Corp. 19
Tobacco & Tobacco Related (2.4%):
603 Philip Morris Cos., Inc. 24
Utilities--Telecommunications (2.4%):
334 AT&T Corp. 11
203 Ameritech Corp. 13
24
Total Common Stocks 999
Investment Companies (5.7%)
$ 57 Federated Treasury Obligation Fund $ 57
Total Investment Companies 57
Total (Cost $1,022) <F1> $1,056
<FN>
Percentages indicated are based on net assets of $994.
<F1> Represents cost for federal income tax purposes and differs
from value by net unrealized appreciation of securities
as follows:
Unrealized appreciation $53
Unrealized depreciation (19)
Net unrealized appreciation $34
<F2> Represents non-income producing securities.
</FN>
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
Statements of Assets and Liabilities
The Victory Portfolios April 30, 1997
(Amounts in Thousands, Except Per Share Amounts) (Unaudited)
<CAPTION>
U.S. Government
Obligations
Fund
<S> <C>
ASSETS:
Investments, at amortized cost $ 400,243
Repurchase agreements, at cost 1,171,568
Total 1,571,811
Cash 1
Interest receivable 3,696
Prepaid expenses and other assets 67
Total Assets 1,575,575
LIABILITIES:
Dividends payable 6,292
Capital gains distribution payable --
Accrued expenses and other payables:
Investment advisory fees 463
Administration fees 33
Custodian fees 29
Accounting and transfer agent fees 25
Shareholder service fees --
Shareholder service fees--Select Shares 216
Other 118
Total Liabilities 7,176
NET ASSETS:
Capital 1,568,540
Undistributed (distributions in excess of) net investment income (80)
Accumulated undistributed net realized gains
(losses) from investment transactions (61)
Net Assets $1,568,399
Net Assets
Investor Shares 515,471
Select Shares 1,052,928
Total 1,568,399
Outstanding units of beneficial interest (shares)
Investor Shares 515,462
Select Shares 1,053,057
Total 1,568,519
Net asset value
Offering and redemption price per share --
Offering and redemption price per share--Investor Shares $ 1.00
Offering and redemption price per share--Select Shares 1.00
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
Lakefront
Fund
<S> <C>
ASSETS:
Investments, at value (Cost $279,696; $79,200;
$25,106; $106,708 & $1,022) $ 1,056
Interest and dividends receivable 2
Receivable for capital shares issued --
Receivable from brokers for investments sold --
Unamortized organization costs 29
Reclaim receivable --
Prepaid expenses and other assets 6
Total Assets 1,093
LIABILITIES:
Payable for capital shares redeemed --
Payable to brokers for investments purchased 56
Payable for organization costs 30
Accrued expenses and other payables:
Investment advisory fees --
Administration fees --
Custodian fees 1
Accounting, and transfer agent fees 7
Shareholder service fees --
Shareholder service fees--Class A --
Shareholder service and 12b-1 fees--Class B --
Other 5
Total Liabilities 99
NET ASSETS:
Capital 961
Undistributed (distributions in excess of )
net investment income 2
Net unrealized appreciation (depreciation)
from investments 34
Net unrealized depreciation from translation of
assets and liabilities in foreign currencies --
Accumulated undistributed net realized gains
(losses) from investment transactions (3)
Accumulated undistributed net realized gains
from foreign currency transactions --
Net Assets $ 994
Net Assets
Class A
Class B
Total
Outstanding units of beneficial interest (shares)
Class A
Class B
Total 99
Net asset value
Redemption price per share $ 10.00
Redemption price per share--Class A
Offering and redemption price per share--Class B
Maximum sales charge 4.75%
Maximum offering price per share (100%/
(100%-maximum sales charge) of net asset
value adjusted to nearest cent) $ 10.50
Maximum offering price per share (100%/
(100%-maximum sales charge) of net asset
value adjusted to nearest cent)--Class A
</TABLE>
See notes to financial statements.
<TABLE>
Statements of Operations
The Victory Portfolios For the Six Months Ended April 30, 1997
(Amounts in Thousands) (Unaudited)
<CAPTION>
U.S. Government
Obligations
Fund
<S> <C>
Investment Income:
Interest income $39,917
Expenses:
Investment advisory fees 2,574
Administration fees 1,103
Shareholder service fees --
Shareholder service fees--Investor Shares 42
Shareholder service fees--Select Shares 599
Accounting fees 47
Custodian fees 142
Legal and audit fees 81
Trustees' fees and expenses 25
Transfer agent fees 56
Registration and filing fees 73
Printing fees 103
Other 2
Expenses voluntarily reduced --
Net Expenses 4,847
Net Investment Income 35,070
Realized Gains from Investments:
Net realized gains from investment transactions 32
Change in net assets resulting from operations $35,102
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
<PAGE>
Lakefront
Fund<F1>
<S> <C>
Investment Income:
Interest income $ 1
Dividend income 1
Foreign tax withholding --
Total Income 2
Expenses:
Investment advisory fees 1
Administration fees --
Shareholder service fees --
Shareholder service fees--Class A --
Shareholder service fees and 12b-1 fees--Class B --
Accounting fees 6
Custodian fees 1
Legal and audit fees 1
Amortization of organization costs 1
Trustees' fees and expenses --
Transfer agent fees 1
Registration and filing fees --
Printing fees 4
Other --
Expenses voluntarily reduced (1)
Expenses before reimbursement from distributor 14
Expenses reimbursed by distributor (14)
Net Expenses --
Net Investment Income (Loss) 2
Realized/Unrealized Gains (Losses) from
Investments and Foreign Currencies:
Net realized gains (losses) from
investment transactions (3)
Net realized losses from foreign
currency transactions --
Net change in unrealized appreciation
(depreciation) from investments 34
Change in unrealized depreciation from translation
of assets and liabilities in foreign currencies --
Net realized/unrealized gains from investments
and foreign currencies 31
Change in net assets resulting from operations $ 33
<FN>
<F1> The Lakefront Fund commenced operations as of March 3, 1997.
</FN>
</TABLE>
See notes to financial statements.
The Victory Portfolios Statements of Changes in Net Assets
(Amounts in Thousands) (Unaudited)
<TABLE>
<CAPTION>
U.S. Government
Obligations Fund
Months Year
Ended Ended
April 30, October 31
1997 1996<F1>
From Investment Activities:
<S> <C> <C>
Operations:
Net investment income $ 35,070 $ 58,184
Net realized gains from
investment transactions 32 24
Change in net assets resulting
from operations 35,102 58,208
Distributions to Shareholders:
From net investment income -- (58,184)
From net investment income by class:
Investor Shares (28,734) --
Select Shares (6,336) --
From net realized gains from
investment transactions -- --
Change in net assets from
distributions to shareholders (35,070) (58,184)
Capital Transactions:
Proceeds from shares issued 2,078,324 3,877,755
Dividends reinvested 12,518 13,036
Cost of shares redeemed (1,880,292) (3,497,927)
Change in net assets from
capital transactions 210,550 392,864
Change in net assets 210,582 392,888
Net Assets:
Beginning of period 1,357,817 964,929
End of period $ 1,568,399 $ 1,357,817
Share Transactions:
Issued 2,078,324 3,877,755
Reinvested 12,518 13,036
Redeemed (1,880,292) (3,497,927)
Change shares 210,550 392,864
<FN>
<F1> Effective February 1, 1996, the U.S. Government Obligations Fund
designated the existing shares as Select Shares and on January 8,
1997 commenced offering Investor Shares.
</FN>
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
Lakefront Fund<F1>
Period Ended
April 30,
1997
<S> <C>
From Investment Activities:
Operations:
Net investment income $ 2
Net realized (losses) from investment transactions (3)
Net change in unrealized appreciation (depreciation) from investments 34
Change in net assets resulting from operations 33
Distributions to Shareholders:
From net investment income --
From net realized gains from investment transactions --
Change in net assets from distributions to shareholders --
Capital Transactions:
Proceeds from shares issued 961
Dividends reinvested --
Cost of shares redeemed --
Change in net assets from capital transactions 961
Change in net assets 994
Net Assets:
Beginning of period --
End of period $994
Share Transactions:
Issued 99
Reinvested --
Redeemed --
Change in shares 99
<FN>
<F1> The Lakefront Fund commenced operations as of March 3, 1997.
</FN>
</TABLE>
See notes to financial statements.
<PAGE>
Notes to Financial Statements
The Victory Portfolios April 30, 1997
- --------------------------------------------------------------------------------
(Unaudited)
1. Organization:
The Victory Portfolios (collectively, the "Funds" and individually,
a "Fund") 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 26 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 ("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
regular 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:
As of April 30, 1997, The Victory Portfolios also included the
Government Bond Fund, which was authorized to issue two classes of
shares: Class A and Class B shares, each class having the same voting
rights and expense allocation policies as the other Class A and B
shares of the Victory Portfolios. 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 will occur on June 13, 1997. 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 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 within 397 days, or
(b) maintain a dollar-weighted-average portfolio maturity which exceeds
90 days.
<PAGE>
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 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 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 Fund 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.
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 variable net asset value funds, except Fund for Income and the
REIT 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 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
<PAGE>
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, 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.
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 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.
<PAGE>
4. Purchases and Sales of Securities:
Purchases and sales of securities (excluding short-term securities)
for the six months ended April 30, 1997 were as follows (amounts in
thousands):
<TABLE>
<CAPTION>
Purchases Sales
<S> <C> <C>
Limited Term Income Fund $ 37,159 $ 42,234
Intermediate Income Fund 217,846 242,880
Investment Quality Bond Fund 162,610 190,784
Government Mortgage Fund 22,547 21,012
Fund for Income 145 1,684
National Municipal Bond Fund 31,963 27,798
New York Tax-Free Fund 2,858 102
Ohio Municipal Bond Fund 30,745 32,031
Balanced Fund 139,931 150,879
Stock Index Fund 83,927 10,248
Diversified Stock Fund 276,022 246,239
Value Fund 47,716 48,307
Growth Fund 13,944 19,643
Special Value Fund 83,739 69,732
Special Growth Fund 95,292 98,392
Ohio Regional Stock Fund 1,202 2,978
International Growth Fund 85,637 93,043
Lakefront Fund 2,333 42
REIT Fund 866 --
</TABLE>
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 N.A., 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 (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 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
fee is 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 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. 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.
Fees may be voluntarily reduced to assist the Funds in maintaining
competitive expense ratios.
Additional information regarding related party transactions is as
follows for the six months ended April 30, 1997:
<TABLE>
<CAPTION>
Mutual
Investment Fund
Advisory Administration Accountant Custodian
Fees Fees Fees Fees
Percentage
of Average Voluntary Voluntary Semi Semi
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% $ -- $ -- $47 $142
Lakefront Fund 1.00% 1 -- 6 1
</TABLE>
6. Capital Share Transactions:
Transactions in capital shares for the Funds with multiple share classes
were as follows (amounts in thousands):
<PAGE>
<TABLE>
<CAPTION>
U.S. Government
Obligations Fund
Six Months Year
Ended Ended
April 30, October 31,
1997 1996<F1>
<S> <C> <C>
Capital and Share Transactions:
Investor Shares:
Proceeds from shares issued $ 674,496 $ --
Dividends reinvested 2 --
Cost of shares redeemed (159,036) --
Total $ 515,462 $ --
Select Shares:
Proceeds from shares issued $ 1,403,828 $ 3,877,755
Dividends reinvested 12,516 13,036
Cost of shares redeemed (1,721,256) $(3,497,927)
Total $ (304,912) 392,864
<FN>
<F1> Effective February 1, 1996, the U.S. Government Obligations Fund
designated the existing shares as Select Shares and on January 8, 1997
commenced offering Investor Shares.
</FN>
</TABLE>
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 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 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.
<TABLE>
The Victory Portfolios Financial Highlights
<CAPTION>
U.S. Government Obligations Fund
Investor Select
Shares<F2> Shares<F2>
Period Six Months
Ended Ended
April 30, April 30, Year Ended October 31,
1997 1997 1996 1995<F3> 1994 1993
(Unaudited) (Unaudited)
<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 0.014 0.024 0.049 0.052 0.032 0.026
Distributions
Net investment income (0.014) (0.024) (0.049) (0.052) (0.032) (0.026)
Net Asset Value, End of Period $ 1.000
Total Return 1.46%<F4> 2.42%<F4> 4.96% 5.38% 3.30% 2.62%
Ratios/Supplemental Data:
Net Assets, End of Period (000) $515,471 $1,052,928 $1,357,817 $964,929 $412,048 $515,734
Ratio of expenses to average
net assets 0.56%<F5> 0.68%<F5> 0.61% 0.58% 0.63% 0.60%
Ratio of net investment income to
average net assets 4.86%<F5> 4.75%<F5> 4.84% 5.28% 3.20% 2.57%
Ratio of expenses to average
net assets<F1> <F6> <F6> <F6> 0.60% 0.80% <F6>
Ratio of net investment income to
average net assets<F1> <F6> <F6> <F6> 5.26% 3.03% <F6>
<FN>
<F1> During the period, certain fees were voluntarily reduced.
If such voluntary fee reductions had not occurred, the ratios would
have been as indicated.
<F2> Effective February 1, 1996, the Fund designated the existing
shares as Select Shares and on January 8, 1997, commenced offering Investor Shares.
<F3> 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.
<F4> Not annualized.
<F5> Annualized.
<F6> There were no waivers during the period.
</FN>
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
Lakefront Fund
March 3, 1997
through
April 30,
1997<F2>
(Unaudited)
<S> <C>
Net Asset Value, Beginning of Period $ 10.00
Investment Activities
Net investment income 0.03
Net realized and unrealized losses from investments (0.02)
Total from Investment Activities $ 0.01
Distributions
Net investment income (0.01)
In excess of net investment income --
Net realized gains --
Total Distributions (0.01)
Net Asset Value, End of Period $ 10.00
Total Return (excludes sales charges) 0.10%<F3>
Ratios/Supplemental Data:
Net Assets, End of Period (000) $ 994
Ratio of expenses to average net assets 0%<F4>
Ratio of net investment income to average net assets 2.17%<F4>
Ratio of expenses to average net assets<F1> 14.86%<F4>
Ratio of net investment income to average
net assets<F1> (12.69)%<F4>
Portfolio turnover 6%
Average commission rate paid <F5> $0.0800
<FN>
<F1> 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.
<F2> Period from commencement of operations.
<F3> Not annualized.
<F4> Annualized.
<F5> 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.
</FN>
</TABLE>
See notes to financial statements.
This page is intentionally left blank.
VICTORY FUNDS
EXHIBIT 16
TOTAL RETURN
INVESTOR SHARES
U.S. GOVERNMENT OBLIGATIONS
MONEY MARKET
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: ( 01/08/97 TO 04/30/97 ):
( 1,014.6/1,000) -1 = 1.46%
QUARTERLY: ( 01/31/97 TO 04/30/97 ):
( 1,011.36/1,000) - 1 = 1.14%
MONTHLY: ( 03/31/97 TO 04/30/97 ):
( 1,003.84/1,000) - 1 = 0.38%
<PAGE>
VICTORY FUNDS
EXHIBIT 16
TOTAL RETURN
LOAD CALCULATIONS
LAKEFRONT 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: ( 03/03/97 TO 04/30/97 ):
WITH LOAD OF = 4.75% ( 953.4/1,000) -1 = -4.67%
MONTHLY: ( 03/31/97 TO 04/30/97 ):
WITH LOAD OF = 4.75% ( 1,002.00/1,000) - 1 = 0.20%
<PAGE>
VICTORY FUNDS
EXHIBIT 16
TOTAL RETURN
LAKEFRONT 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: ( 03/03/97 TO 04/30/97 ):
( 1,001.0/1,000) -1 = 0.10%
MONTHLY: ( 03/31/97 TO 04/30/97 ):
( 1,051.52/1,000) - 1 = 5.15%
<PAGE>
VICTORY FUNDS
EXHIBIT 16
30-DAY S.E.C. YIELD CALCULATIONS
LAKEFRONT FUND
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 or the maximum redemption price per share
on the last day of the period
MAXIMUM FEE (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 or the maximum redemption price per share
on the last day of the period
ACTUAL
( 1,814.98 - 0.00)
----------------------------------
2 *{[( +1)^6]-1} = 2.19%
( 95,038.799 * 10.50)
FULL FEES (WITHOUT WAIVERS)
( 1,814.98 - 9,391.30)
-------------------------------
2 *{[( +1)^6]-1} = -8.94%
( 95,038.799 * 10.50)
The performance was computed based on the thirty day period ending April 30,
1997
<PAGE>
VICTORY FUNDS
EXHIBIT 16
YIELD COMPUTATION SCHEDULE
U.S. GOVT OBLIGATIONS
MONEY MARKET
7 DAY YIELD CALCULATION
Base period 7 Days
Beginning Account Balance - 1 share at $1.00 1.000000000
------------
Dividend Declaration
APRIL 24 0.000135217
APRIL 25 0.000134091
APRIL 26 0.000134091
APRIL 27 0.000134091
APRIL 28 0.000136329
APRIL 29 0.000134667
APRIL 30 0.000135976
Less: Deductions from Shareholders Accounts 0.000000000
---------------
Base period return 0.000944462
---------------
Ending Account Balance 1.000944462
Less: Beginning Account Balance 1.000000000
---------------
Difference 0.000944462
Base Period Return
(Difference/Beginning Account Balance) 0.000944462
Yield Quotation
(Base Period Return * 365/Base Period) 4.92%
Effective Yield Quotation
[(Base Period Return + 1)^365/Base Period] -1 5.05%
The quotations were computed based on the seven days ending April 30, 199_
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000802716
<NAME> THE VICTORY PORTFOLIOS
<SERIES>
<NUMBER> 022
<NAME> VICTORY U.S. GOVERNMENT OBLIGATIONS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> APR-30-1997
<INVESTMENTS-AT-COST> 1571811
<INVESTMENTS-AT-VALUE> 1571811
<RECEIVABLES> 3696
<ASSETS-OTHER> 68
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1575575
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7176
<TOTAL-LIABILITIES> 7176
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1568540
<SHARES-COMMON-STOCK> 515462<F1>
<SHARES-COMMON-PRIOR> 0<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 80
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 61
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1568399
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 39917
<OTHER-INCOME> 0
<EXPENSES-NET> 4847
<NET-INVESTMENT-INCOME> 35070
<REALIZED-GAINS-CURRENT> 32
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 35102
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 6336<F1>
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2078324
<NUMBER-OF-SHARES-REDEEMED> 1880292
<SHARES-REINVESTED> 12518
<NET-CHANGE-IN-ASSETS> 210582
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 80
<OVERDIST-NET-GAINS-PRIOR> 93
<GROSS-ADVISORY-FEES> 2574
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4847
<AVERAGE-NET-ASSETS> 421506<F1>
<PER-SHARE-NAV-BEGIN> 1.000<F1>
<PER-SHARE-NII> .014<F1>
<PER-SHARE-GAIN-APPREC> 0<F1>
<PER-SHARE-DIVIDEND> .014<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 1.000<F1>
<EXPENSE-RATIO> 0.56<F1>
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>Investor Shares
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000802716
<NAME> THE VICTORY PORTFOLIOS
<SERIES>
<NUMBER> 25
<NAME> VICTORY LAKEFRONT FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> APR-30-1997
<INVESTMENTS-AT-COST> 1022
<INVESTMENTS-AT-VALUE> 1056
<RECEIVABLES> 2
<ASSETS-OTHER> 35
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1093
<PAYABLE-FOR-SECURITIES> 56
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 43
<TOTAL-LIABILITIES> 99
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 961
<SHARES-COMMON-STOCK> 99
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 2
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 3
<ACCUM-APPREC-OR-DEPREC> 34
<NET-ASSETS> 994
<DIVIDEND-INCOME> 1
<INTEREST-INCOME> 1
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 2
<REALIZED-GAINS-CURRENT> (3)
<APPREC-INCREASE-CURRENT> 34
<NET-CHANGE-FROM-OPS> 33
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 99
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 994
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 14
<AVERAGE-NET-ASSETS> 652
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> (0.02)
<PER-SHARE-DIVIDEND> 0.01
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.00
<EXPENSE-RATIO> 0.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
