ANNUAL REPORT
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OCTOBER 31, 1998
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Victory Funds (R)
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TABLE OF CONTENTS
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.
Shares of the Victory Funds are not insured by the FDIC and 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.
Year 2000 Risk. Like other mutual funds, each of the Funds could be adversely
affected if the computer systems used by their third party service providers
do not properly process and calculate date-related information. The Funds'
service providers have been actively updating their systems to be able to
process year 2000 data. However, there can be no assurance that these steps
will be adequate to avoid a temporary service disruption or any adverse impact
on the Funds.
12/19/98
Shareholder Letter 2
Investment Review and Outlook 3
Fund Review and Commentary
Introduction to Victory Money Market Funds 7
Introduction to Victory Taxable Fixed Income Funds 10
Introduction to Victory Municipal Fixed Income Funds 16
Introduction to Victory Specialty Funds 19
Introduction to Victory Growth/Equity Funds 23
How to Read Your Financial Statement 33
Financial Statements
Victory Money Market Funds
U.S. Government Obligations Fund
Schedule of Investments 35
Statements of Assets and Liabilities 43
Statements of Operations 44
Statements of Changes in Net Assets 45
Financial Highlights 46
Statements of Cash Flows 173
Prime Obligations Fund
Schedule of Investments 36
Statements of Assets and Liabilities 43
Statements of Operations 44
Statements of Changes in Net Assets 45
Financial Highlights 47
Financial Reserves Fund
Schedule of Investments 40
Statements of Assets and Liabilities 43
Statements of Operations 44
Statements of Changes in Net Assets 45
Financial Highlights 48
Tax-Free Money Market Fund
Schedule of Investments 49
Statements of Assets and Liabilities 63
Statements of Operations 64
Statements of Changes in Net Assets 65
Financial Highlights 66
Ohio Municipal Money Market Fund
Schedule of Investments 55
Statements of Assets and Liabilities 63
Statements of Operations 64
Statements of Changes in Net Assets 65
Financial Highlights 67
Victory Taxable Fixed Income Funds
Limited Term Income Fund
Schedule of Investments 68
Statements of Assets and Liabilities 79
Statements of Operations 80
Statements of Changes in Net Assets 81
Financial Highlights 83
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TABLE OF CONTENTS
(continued)
Intermediate Income Fund
Schedule of Investments 70
Statements of Assets and Liabilities 79
Statements of Operations 80
Statements of Changes in Net Assets 81
Financial Highlights 84
Fund for Income
Schedule of Investments 73
Statements of Assets and Liabilities 79
Statements of Operations 80
Statements of Changes in Net Assets 81
Financial Highlights 85
Government Mortgage Fund
Schedule of Investments 75
Statements of Assets and Liabilities 79
Statements of Operations 80
Statements of Changes in Net Assets 82
Financial Highlights 86
Investment Quality Bond Fund
Schedule of Investments 76
Statements of Assets and Liabilities 79
Statements of Operations 80
Statements of Changes in Net Assets 82
Financial Highlights 87
Victory Municipal Fixed Income Funds
National Municipal Bond Fund
Schedule of Investments 88
Statements of Assets and Liabilities 98
Statements of Operations 99
Statements of Changes in Net Assets 100
Financial Highlights 101
New York Tax-Free Fund
Schedule of Investments 92
Statements of Assets and Liabilities 98
Statements of Operations 99
Statements of Changes in Net Assets 100
Financial Highlights 102
Ohio Municipal Bond Fund
Schedule of Investments 94
Statements of Assets and Liabilities 98
Statements of Operations 99
Statements of Changes in Net Assets 100
Financial Highlights 103
Victory Specialty Funds
Balanced Fund
Schedule of Investments 105
Statements of Assets and Liabilities 120
Statements of Operations 121
Statements of Changes in Net Assets 122
Financial Highlights 123
Convertible Securities Fund
Schedule of Investments 113
Statements of Assets and Liabilities 120
Statements of Operations 121
Statements of Changes in Net Assets 122
Financial Highlights 124
Real Estate Investment Fund
Schedule of Investments 119
Statements of Assets and Liabilities 120
Statements of Operations 121
Statements of Changes in Net Assets 122
Financial Highlights 125
Victory Equity Funds
Value Fund
Schedule of Investments 126
Statements of Assets and Liabilities 145
Statements of Operations 146
Statements of Changes in Net Assets 147
Financial Highlights 149
Statements of Cash Flows 173
Lakefront Fund
Schedule of Investments 129
Statements of Assets and Liabilities 145
Statements of Operations 146
Statements of Changes in Net Assets 147
Financial Highlights 150
Diversified Stock Fund
Schedule of Investments 131
Statements of Assets and Liabilities 145
Statements of Operations 146
Statements of Changes in Net Assets 147
Financial Highlights 151
Statements of Cash Flows 173
Stock Index Fund
Schedule of Investments 134
Statements of Assets and Liabilities 145
Statements of Operations 146
Statements of Changes in Net Assets 148
Financial Highlights 152
Growth Fund
Schedule of Investments 143
Statements of Assets and Liabilities 145
Statements of Operations 146
Statements of Changes in Net Assets 148
Financial Highlights 153
Special Value Fund
Schedule of Investments 154
Statements of Assets and Liabilities 166
Statements of Operations 167
Statements of Changes in Net Assets 168
Financial Highlights 169
Statements of Cash Flows 173
Ohio Regional Stock Fund
Schedule of Investments 157
Statements of Assets and Liabilities 166
Statements of Operations 167
Statements of Changes in Net Assets 168
Financial Highlights 170
International Growth Fund
Schedule of Investments 159
Statements of Assets and Liabilities 166
Statements of Operations 167
Statements of Changes in Net Assets 168
Financial Highlights 171
Special Growth Fund
Schedule of Investments 164
Statements of Assets and Liabilities 166
Statements of Operations 167
Statements of Changes in Net Assets 168
Financial Highlights 172
Notes 174
Report of Independent Accountants 185
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Letter to our Shareholders
We present the Victory Funds Annual Report for the fiscal year 1998. Although
the major market indices had substantially recovered by October 31, 1998,
the Funds' fiscal year end, the previous months of market volatility created
concern for investors. The accompanying investment review by Charlie Crane
examines the issue of risk in depth, but the point to note here is that if you
are investing for the long haul, a disciplined investment strategy, regardless
of market conditions, is likely to be rewarded.
The recent volatility in the stock market has led investors to look for "safer"
asset classes like money market funds and to a lesser extent bond funds. At
Victory, for instance, inflows into stock funds were approximately $46 million
from January through September 1998; while money market fund inflows reached
nearly $2 billion in the same period. Interestingly, inflows into specialty
funds -- the Balanced, Convertible Securities and LifeChoice funds increased.
Strategic Insight, a research organization which monitors new cash flows into
mutual funds, reported that between January and September 1998 investments into
stock funds declined by 40%, while those into bond funds and money market funds
increased by 88% and 10% respectively. While these trends reflect investor
sentiment away from risk, it is also worth noting that, historically, while
stock funds have been more volatile than other asset classes they have also
resulted in higher long-term returns.*
We welcome your responses to this Annual Report and thank you for the
confidence you have placed in Victory.
Sincerely,
/s/ Leigh A. Wilson
Leigh A. Wilson
President
The Victory Funds
*Past performance is no guarantee of future results.
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Investment Review and Outlook
The subject of risk has received a lot of attention in recent months. For the
first time in several years, investors have tasted the bitter side of the
risk/reward trade-off, and many have discovered that their tolerance for risk
isn't as great as they had believed it to be when stocks climbed higher in
price each month. As a result, some have swapped their riskier assets (such as
stocks and corporate bonds) for ones they believe to be safer (U.S. Treasury
securities, most notably toward the short end of the yield curve), a practice
widely known as "the flight to quality." In turn, the price of those riskier
assets has fallen, and the price of "risk-free" Treasuries has risen, driving
yields down to levels not seen in decades. As is often the case when
uncertainty mounts and emotions run high, the pendulum has swung too far, in my
opinion. Simply stated, I think risk is underpriced as we enter the last couple
of months of 1998, and long-term investors have an unusual opportunity to
enhance their portfolios' potential return by taking the other side of the
"flight to quality" trade.
Price plays a pivotal role in measuring the risk of an asset, as well as in
determining the return; problems arise when risks are misjudged, or the price
of risk gets out of whack. What we are witnessing at the present time is the
unwinding of a lot of bets that were based on one fundamental premise: that
the level of risk in the world had been permanently reduced by a combination
of political, technological and policy developments. The demise of the Soviet
Union and the fall of the Iron Curtain appeared to increase vastly the number
of potential consumers for the goods and services produced by the world's
capitalist nations. With so much more demand anticipated, new supply needed to
be created. As economic theory would predict, much of this new capacity was
built where the cost of production was low, fueling rapid growth in Asia and
certain Latin American countries. Moreover, the end of the Cold War freed up
resources that had been previously devoted to defense, providing some of the
wherewithal to pay for this new productive capacity.
The rest of the money was supplied by eager lenders from around the world,
who saw tremendous growth potential everywhere they looked. They also saw the
infiltration of technology into every nook and cranny of the business world,
which raised productivity and provided managers with sufficient information
to smooth production, reducing volatility (and therefore credit risk). As
more companies learned how to master these managerial tools, the economy as a
whole also appeared to become less prone to the cyclical pattern of booms and
busts, especially under the watchful eye of skilled policy makers like Alan
Greenspan. Some observers were so enthralled that they pronounced recessions
a relic of the past, declaring a "New Era" of sustained growth, full
employment and low inflation. The equity market gladly hopped aboard the
bandwagon. Investors justified paying ever-higher price/earnings multiples by
saying that profits had become more predictable, which implies a lower equity
risk premium.
With the benefit of hindsight, it is now obvious that a few miscalculations
were made along the way which, left unchecked, led to an array of excesses,
the consequences of which are being felt around the world. Companies
misjudged demand growth when they built so much new capacity at the same time
that old capacity was being rehabilitated with new technology. Lenders
lowered their standards, and extended credit to borrowers that would have
been borderline even under the best of circumstances. The practice of
overbuilding with easy credit was particularly egregious in Japan and
Southeast Asia, where hundreds of billions of dollars worth of loans have
gone bad because borrowers' cash flow has fallen well short of expectations.
The implosion that began in Asia spread to other emerging markets as a
vicious cycle unfolded. When Asian growth slowed, its demand for commodities
diminished, and prices for those commodities declined. This in turn hurt the
economies of other emerging markets around the world, many of which rely upon
the production and export of commodities. As these economies faltered, demand
for all sorts of goods and services fell, commodity prices dropped further,
and more loans went sour, including the debt of such far-out-of-the-way
markets as Russia, a country which represents roughly 1% of the world's
trade. All of a sudden, it became glaringly apparent that investors had paid
way too much for risk, and a scramble began to unload as much of it as
possible.
The impact of this sudden aversion to risk extends well beyond the financial
markets. Simply stated, once-burned lenders want their money back, and they
are twice shy about extending new loans. As a result, even the most
credit-worthy corporations may encounter difficulty financing new projects,
which will constrain investment spending. In turn, job creation will
decelerate, as will income growth and ultimately consumption, which accounts
for over two-thirds of our nation's GDP. Recognizing this possibility, the
Federal Reserve has reduced short-term interest rates twice in the last month,
with a view to sustaining economic growth in an environment of contained
inflation.
I think more rate reductions are forthcoming. After all, this is the same
Federal Reserve that dropped rates 18 times in a span of 26 months stretching
from July 1990 to September 1992. Moreover, in a speech made on October 7th
(just eight days after the first cut and eight days before the second), Fed
Chairman Alan Greenspan said, "But we are clearly facing a set of forces that
should be dampening demand going forward to an unknown extent." He concluded
the speech by saying, "We do not know how far it will go or how much it will
affect consumer and business spending here at home." Unknown or not, it seems
to me that when the Fed Chairman pushes through two rate cuts in sixteen days,
he's saying that he's not going to wait around to find out just how slow
things can get.
The market doesn't seem quite so sure, since many securities across various
asset classes appear to be discounting a fairly severe recession next year.
As noted above, the price of many stocks and bonds has come down sharply in
the face of panicky selling by investors seeking a safe harbor from risk. Price
declines have been exaggerated by a lack of liquidity, as market makers have
been less willing to commit capital as they seek to limit their own risk. This
is particularly true in the corporate bond market, where spreads (the
difference between the yield on corporate bonds and Treasury securities of like
maturity) have increased to the widest level in years.
The spread on some lower-grade securities (such as convertibles rated B and
below, or Latin American "Brady Bonds") is in the mid to high teens as of
this writing, providing yields-to-maturity north of 20%, a rate commensurate
with near-default. While some of these lower-grade issuers are indeed skating
on thin ice, many are not, and I think that a diversified basket of
non-Treasury bonds (including corporates of varying quality, convertibles and
Brady bonds) offers a compelling combination of high current yield and
attractive capital gain potential. For those with less stout constitutions who
prefer the comfort of government issues, I recommend lengthening the maturities
of your Treasury holdings. Agency issues (such as GNMAs) are also worth
considering.
I am also attracted to higher-risk stocks, which I believe to be oversold and
undervalued (even after having bounced back somewhat from their recent lows).
However, instead of the traditional Wall Street definition of risk, which
measures the historical volatility of a stock's price relative to some
benchmark (a.k.a. beta), I am looking at risk in much simpler and more
practical terms: liquidity and earnings.
Looking first at liquidity, I continue to think that smaller and mid-sized
stocks are considerably more attractive than the large issues that populate the
S&P 500, despite the difficulty one encounters buying or selling sizable
positions. For example, as of this writing the S&P Small-Cap 600 is selling for
a little over 15 times estimated 1999 earnings, a discount to its estimated
three to five year earnings growth rate of 15%-18%. Meanwhile, the S&P 500 is
trading for roughly 24 times my 1999 forecast, even though I expect earnings to
grow by only 6% annually over the same time horizon (an implied P/E-to-growth
ratio of four times).
Earnings risk refers to the notion that companies whose fortunes are tied to
the health of the economy exhibit wider fluctuations in earnings from year to
year than companies whose goods or services are considered to be staples, the
demand for which is largely insensitive to economic growth. For example, it
is not unusual for an analyst to predict that a steel company will earn
somewhere between $5.00 and $10.00 per share in a given year, depending on
the strength of business activity. Earnings forecasts for a typical consumer
products company, on the other hand, may vary by only a nickel. Examining the
various segments of the stock market, I think the stocks of the more
cyclically sensitive companies are cheap, even if the U.S. slips into a
recession within the next year (which I think is unlikely). Consumer
cyclicals such as media, homebuilders, autos and selected retailers are among
my favorites, along with value-added industrials. I also think energy stocks
deserve consideration, especiallyfor contrarians.
After paying too much for risk for the past several years, investors today
have the chance to add this most unusual commodity to their portfolios at a
very low price. It may take time for the present imbalances to be corrected,
given the nasty scare that we've endured recently, as well as the lack of
liquidity in the market for certain riskier assets. On the other hand, that
time can be well spent scouring the markets for attractive issues and
performing the necessary due diligence before committing capital. Whether
you've been an investment gunslinger or a money-under-the-mattress
conservative, now is an ideal time to size up your true tolerance for risk,
and to take advantage of the opportunity to enhance your portfolio's
potential long-term return.
/s/ Charles G. Crane
Charlie Crane, Chief Market Strategist
Key Asset Management Inc.
October 31, 1998
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Introduction to Money Market Funds
CREDIT REVIEW
INTEREST RATE ENVIRONMENT
SECTOR SCREEN
TAXABLE FUND PERFORMANCE TAX-FREE FUND PERFORMANCE
The Victory U.S. Government The Victory Tax-Free
Obligations Fund Money Market Fund
The Victory Prime The Victory Ohio Municipal
Obligations Fund Money Market Fund
The Victory Financial
Reserves Fund
THE INVESTMENT PROCESS
As with longer-term fixed income portfolios, each portfolio manager seeks to
enhance portfolio yields by identifying opportunities in the financial
markets for incremental returns and by seeking relative value. Portfolio
managers for the Victory Funds follow the shape and movement of the yield
curve closely. This process helps the portfolios to take advantage of
anticipated movements in short-term interest rates.
The past year can be characterized as having split personalities. The first
half of the year saw a relatively calm short term market. The second half of
the year was dominated by financial uncertainty in Russia, Asia, Brazil and
finally the U.S. These factors combined to pressure the stock market into a
large correction in the third quarter. Under both international and domestic
pressure the Federal Reserve eased monetary policy by decreasing the Federal
Funds Rate twice. This swift and decisive move by the Federal Reserve brought
confidence back to the market. Stocks rallied during the month of October in
response to lower interest rates and the anticipation of further Fed action
to decrease short term rates before the end of the year.
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VICTORY MONEY MARKET FUNDS
The Victory U.S. Government Obligations Fund
The Victory Prime Obligations Fund
The Victory Financial Reserves Fund
The Victory U.S. Government Obligations, Prime Obligations and Financial
Reserves Funds all operate under the same philosophy, which is the
preservation of capital, high levels of liquidity to the shareholder and
competitive market yields. For the year ended October 31, 1998 the markets
were generally lackluster until a major change in the third quarter.
Then, the Federal Reserve lowered short-term interest rates at its late third
quarter policy meeting. This was followed within two weeks by another easing
of rates. Concern that domestic capital markets would be disrupted by a
crisis overseas and a related collapse of a highly publicized hedge fund were
the main motivators behind the Federal Reserve's actions.
For the year, the Funds performed equal to, or better than the averages of
their peer groups. This was accomplished with a Fund average maturity
generally shorter than our competitors. Investments in floating rate
securities provided yield enhancement and liquidity features over fixed rate
securities with longer maturities.
Looking ahead, we expect further interest rate declines. The Funds are
positioned with substantial liquidity to take advantage of usual year-end
yield pick-up by investing in selective fixed rate trades. This should serve
to enhance return. In addition, various types of floating rate securities
also present attractive investment alternatives at higher relative yields.
As of October 31, 1998
US GOVT US GOVT
OBLIGATIONS OBLIGATIONS PRIME FINANCIAL
SELECT INVESTOR OBLIGATIONS RESERVES
Seven-Day Yield 4.47% 4.71% 4.69% 4.73%
Seven-Day Effective Yield 4.57% 4.82% 4.80% 4.84%
One Year Total Return 4.86% 5.12% 4.98% 5.10%
Maturity Schedule 1
As of 10/31/98
Days to US GOVT PRIME FINANCIAL
Maturity OBLIGATIONS OBLIGATIONS RESERVES
Less than 30 Days 80.4% 57.7% 55.3%
30 to 60 Days 1.2% 19.6% 22.7%
60 to 90 Days 2.3% 12.3% 9.0%
90 Days or Greater 16.1% 10.4% 13.0%
An investment in the Fund is not insured or guaranteed by the FDIC or any
other Government Agency. Although the Fund seeks to preserve the value of
your investment at $1.00 per share, it is possible to lose money by investing
in the Fund.
1 The funds' Maturity Schedules presented may not be representative of
current or future investment strategies. Fund strategies may change at any
time.
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VICTORY MONEY MARKET FUNDS
The Victory Tax-Free Money Market Fund
The Victory Ohio Municipal Money Market Fund
The Victory Tax-Free Money Market Funds entered 1998 during a period of
strong growth in the economy, low unemployment and inflationary concerns.
However, by the third quarter, international factors, including the
deterioration of the Japanese and Russian economies had changed the
environment drastically. A U.S. recession was now a concern. To shift
sentiment, the Fed eased short-term interest rates twice.
The Ohio Municipal Money Market Fund has had to push to remain competitive.
This is due to the Fund being the largest Ohio money market fund, with over
$750 million in assets. It is often difficult to strategically position the
Fund in an environment of extremely limited debt supply. Therefore, higher
yield investments are more difficult to find.
Looking forward to 1999, the bond market is looking for further Federal
Reserve intervention which should effectively move yields higher on
short-term securities and lower on one year fixed rate bonds. To profit from
this municipal market environment the Fund will continue to look for
opportunities to add short term securities to their portfolios. Additionally,
we will continue to take advantage of supply imbalances and yield
opportunities to add longer term high quality municipal bonds to the
portfolios.
As of October 31, 1998
TAX-FREE OHIO MMMKT
Seven-Day Yield 2.62% 2.59%
Tax Equivalent Yield 1 4.34% 4.84%
Seven-Day Effective Yield 2.65% 2.62%
Seven-Day Tax Equivalent
Effective Yield1 4.39% 4.90%
One Year Total Return 2.91% 2.94%
Maturity Schedule 2
As of 10/31/98
Days to Maturity TAX-FREE OHIO MMMKT
Less than 30 Days 71.6% 71.2%
30 to 60 Days 5.6% 6.7%
60 to 90 Days 2.1% 5.9%
90 Days or Greater 20.7% 16.2%
The performance data quoted is past performance and are not indicative of
future results. Yields will fluctuate with market conditions. The Victory
Ohio MMMKT yields reflect the waiver of a portion of certain fees for various
periods. In such instances and without such waivers, the current 7-day yield
and Tax-Equivalent Yield would have been 2.45% and 4.58%, and the 7-day
effective yield and 7-day effective Tax Equivalent Yield would have been 2.38%
and 4.45% respectively. An investment in the Fund is not insured or guaranteed
by the FDIC or any other Government Agency. Although the Fund seeks to preserve
the value of your investment at $1.00 per share, it is possible to lose money
by investing in the Fund. Certain investors may be subject to the Federal
Alternative Minimum Tax (AMT) and to certain state and local taxes.
1 The tax equivalent yield is for illustrative purposes only. The tax rate
used to calculate the tax equivalent yield was based on the highest Federal
regular income tax rate of 39.6%, and the rate used for the Ohio MMMKT is the
combined 39.6% federal and 6.9% Ohio state income tax rates and are for
illustrative purposes only. The income tax rate does not reflect the effects
of the Federal AMT.
2 The Maturity Schedules presented may not be representative of current or
future investment strategies. Fund strategies may change at any time.
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Introduction to Taxable Fixed Income Funds
FIXED INCOME SECURITIES UNIVERSE
CREDIT SCREENING PROCESS
DURATION AND MATURITY SCREEN
SHORT-TERM POOL INTERMEDIATE-TERM POOL LONG-TERM POOL
Yield Curve Shape and Movement Analysis
Relative Value Analysis
Supply and Demand Scarcity; Regulatory Changes;
New Products or Securities; New Issues; Technical
Innovation; Sector Analysis; Investor Sentiment
SHORT-TERM FUND INTERMEDIATE-TERM FUNDS LONG-TERM FUNDS
The Victory Limited The Victory Intermediate The Victory Investment
Term Income Fund Income Fund Quality Bond Fund
The Victory Fund for
Income
The Victory Government
Mortgage Fund
THE INVESTMENT PROCESS
Selecting fixed income securities involves ongoing analysis not only of the
bonds available in the marketplace, but of interest rates, yield curves,
relative values and sector weightings. To conduct their security selection,
the experienced fixed income management team follows a disciplined and tested
process.
The investment advisor assigns a relative value to each economic sector by
utilizing its in-house analytical capabilities as well as a wide range of
outside research. It considers the broad economic environment in making
duration decisions for each of the Victory Funds. The portfolio managers have
developed a proprietary process to identify those securities that have strong
potential for income and total return. They are active managers, continually
monitoring portfolio holdings for shifts in value that will affect buy and
sell decisions.
1 Superior Research.
Before any fixed income security can be considered for purchase by a
portfolio manager, it must pass a stringent internal credit review process.
As part of this process, credit analysts review the structure and credit
ratings of the individual securities as well as the financial statements of
the organizations that issue them.
2 No large duration bets are taken.
To keep the interest rate sensitivity of the Victory Funds' fixed income
portfolios consistent with the market, a security benchmark is chosen that
is appropriate for a given portfolio. The portfolio is then managed to keep
its duration as close as possible to that of the given benchmark. By not
taking large "duration bets," interest rate risk of the portfolio is
dramatically reduced relative to the benchmark.
3 Relative Value.
The portfolio managers for the Victory Funds combine both technical research
and market experience to identify inefficiencies and anomalies in the
marketplace. Inefficiencies give the portfolio manager the opportunity to
purchase securities for the portfolio that may provide higher yields or total
returns. Differences in relative value are a function of securities' yield
differentials (e.g. between corporate, government and mortgage/asset backed
securities), caused by regulatory changes, forces of supply and demand, and
investor sentiments.
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VICTORY TAXABLE FIXED INCOME FUNDS
The Victory Limited Term Income Fund
The bond market moved from the relatively calm first half of the year into
the third quarter where prices spread between Treasuries and corporate bonds.
The market had changed its focus to the global financial turmoil dominated by
the economic news in Russia and Asia. The development of a large domestic
hedge fund failure gave the Federal Reserve all the evidence it needed to
lower interest rates twice during the second half of the year. The prompt
financial action by the Federal Reserve has had a calming effect on the bond
market as witnessed by downward pricing pressure on Treasuries.
The Victory Limited Term Bond Funds' performance was in line with the Merrill
Lynch 1-3 year Treasury Index. The Fund benefited from holding a larger
percentage of high quality issues. The high percentage of Treasuries,
Government Agencies and high quality corporate bonds provided the Fund the
necessary liquidity to weather the storm. An overweighted position in
Treasuries would have been the key to even stronger performance over the
period.
If the Federal Reserve Board continues to ease monetary policies, Treasury
yield curves should continue to steepen. We expect relative liquidity will
continue to improve and non-government bonds will be the biggest benefactor
of this trend. In this environment we will pursue attractive opportunities to
add high quality non-government bonds, including mortgage backed, asset
backed and corporate bonds, to the portfolio.
Victory Limited Term Income Fund
vs. Merrill Lynch 1-3 Yr Treas
(Dollars in thousands)
10/31/89 9805 10000 10000
11/30/89 9886 10083 10089
12/31/89 9922 10119 10130
1/31/90 9919 10116 10138
2/28/90 9958 10157 10185
3/31/90 9974 10172 10220
4/30/90 9980 10179 10240
5/31/90 10140 10342 10396
6/30/90 10245 10449 10506
7/31/90 10376 10583 10636
8/31/90 10389 10596 10668
9/30/90 10450 10659 10756
10/31/90 10565 10775 10874
11/30/90 10691 10904 10981
12/31/90 10790 11005 11114
1/31/91 10892 11109 11216
2/28/91 10964 11182 11282
3/31/91 11024 11243 11358
4/30/91 11116 11337 11466
5/31/91 11194 11417 11535
6/30/91 11212 11435 11582
7/31/91 11308 11533 11683
8/31/91 11462 11690 11843
9/30/91 11591 11822 11971
10/31/91 11707 11940 12100
11/30/91 11835 12070 12226
12/31/91 12030 12270 12412
1/31/92 11977 12215 12393
2/29/92 12000 12239 12436
3/31/92 11965 12203 12431
4/30/92 12063 12304 12545
5/31/92 12194 12437 12659
6/30/92 12319 12564 12789
7/31/92 12488 12736 12932
8/31/92 12581 12831 13046
9/30/92 12715 12968 13170
10/31/92 12617 12869 13091
11/30/92 12564 12814 13070
12/31/92 12675 12928 13194
1/31/93 12825 13080 13331
2/28/93 12966 13224 13445
3/31/93 12970 13229 13485
4/30/93 13088 13348 13569
5/31/93 13068 13328 13531
6/30/93 13181 13443 13631
7/31/93 13200 13463 13662
8/31/93 13348 13614 13781
9/30/93 13405 13672 13826
10/31/93 13424 13691 13853
11/30/93 13389 13656 13857
12/31/93 13451 13719 13908
1/31/94 13554 13824 13997
2/28/94 13420 13688 13908
3/31/94 13291 13556 13838
4/30/94 13214 13477 13789
5/31/94 13220 13484 13809
6/30/94 13244 13507 13850
7/31/94 13380 13646 13969
8/31/94 13404 13671 14018
9/30/94 13327 13592 13986
10/31/94 13335 13601 14018
11/30/94 13253 13517 13955
12/31/94 13282 13547 13987
1/31/95 13446 13714 14182
2/28/95 13653 13925 14376
3/31/95 13726 13999 14457
4/30/95 13841 14117 14585
5/31/95 14131 14413 14840
6/30/95 14201 14484 14920
7/31/95 14239 14523 14982
8/31/95 14323 14609 15071
9/30/95 14393 14680 15144
10/31/95 14505 14794 15272
11/30/95 14644 14936 15407
12/31/95 14741 15034 15525
1/31/96 14869 15165 15657
2/29/96 14792 15087 15591
3/31/96 14741 15035 15577
4/30/96 14740 15034 15590
5/31/96 14762 15056 15622
6/30/96 14863 15159 15734
7/31/96 14904 15201 15796
8/31/96 14939 15237 15851
9/30/96 15074 15374 15994
10/31/96 15222 15525 16174
11/30/96 15329 15635 16298
12/31/96 15334 15639 16298
1/31/97 15386 15693 16375
2/28/97 15427 15734 16412
3/31/97 15408 15714 16406
4/30/97 15519 15828 16540
5/31/97 15601 15912 16653
6/30/97 15705 16018 16768
7/31/97 15856 16172 16952
8/31/97 15859 16175 16968
9/30/97 15973 16291 17096
10/31/97 16070 16390 17223
11/30/97 16119 16440 17265
12/31/97 16216 16539 17383
1/31/98 16361 16686 17552
2/28/98 16359 16685 17567
3/31/98 16423 16750 17638
4/30/98 16483 16811 17721
5/31/98 16575 16906 17815
6/30/98 16647 16978 17908
7/31/98 16707 17040 17992
8/31/98 16901 17238 18218
9/30/98 17147 17488 18459
10/31/98 17171 17513 18550
Graph reflects investment growth from end of month of fund commencement.
The Merrill Lynch 1-3 Year Treasury Index (Merrill Lynch 1-3 Yr Treas) is a
broad-based unmanaged index that represents the general performance of
short-term (1-3 year) U.S. Treasury securities.
Total Return
As of 10/31/98
Maximum
Net Asset Offering
Value Price
One Year 6.86% 4.75%
Three Years 5.79% 5.06%
Five Years 5.05% 4.63%
Average Annual
Since Inception
10/20/89 6.45% 6.21%
Asset Type
Corporate Bonds 29.7%
U.S. Treasury Obligations 27.8%
Asset Backed Securities 26.1%
Commercial Paper 16.3%
Other Assets 0.1%
The performance data quoted represent past performance and therefore are
not indicative of future results. Total returns are historical and include
the change in share price and reinvestment of dividends and capital gains
distributions, and unless indicated, show the effect of the maximum 2.00%
sales charge. Investment returns and principal values will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than their
original cost. The total return figures set forth above may reflect the
waiver of a portion of certain fees for various periods since the Fund's
inception date. In such instances and without such waiver of fees, the total
returns would have been lower.
Fee waivers are voluntary and may be modified or terminated at any time.
<PAGE>
VICTORY TAXABLE FIXED INCOME FUNDS
The Victory Intermediate Income Fund
The fear is subsiding and liquidity is slowly inching back into the bond
market. The Federal Reserve appears to be doing its part to keep the economy
from going into a recession. In 1998, especially from June on, investors were
afraid to take risk so they bought U.S. Treasury bonds and sold non-government
bonds.
Over the year ended October 31, 1998, the Intermediate Income Fund
outperformed the Lehman Brothers Intermediate Govt/Corp Index. The overall
credit quality and liquidity of the portfolio were key ingredients to this
year's performance. An even more aggressive move out of non-government bonds
would have increased Fund performance over the last 12 months.
We have seen a continued improvement in relative liquidity and given that,
non-government bonds should again be a strong performers. If the Federal
Reserve continues to ease the monetary policies a favorable climate should
exist in the non-government bond sectors including corporate and mortgage
bonds. This would lead to an underweighted portfolio position in U.S.
Treasury securities.
Total Return
As of 10/31/98
Net Asset Maximum
Value Offering
Price
One Year 8.30% 2.03%
Three Years 6.48% 4.40%
Average Annual
Since Inception
12/10/93 5.75% 4.47%
Victory Intermediate Income Fund
vs. Lehman Int Gov't/Corp
(Dollars in thousands)
12/31/93 9422 10000 10000
1/31/94 9517 10101 10111
2/28/94 9379 9953 9961
3/31/94 9251 9819 9797
4/30/94 9179 9742 9730
5/31/94 9179 9742 9737
6/30/94 9183 9745 9738
7/31/94 9288 9858 9878
8/31/94 9301 9871 9909
9/30/94 9209 9773 9818
10/31/94 9207 9771 9817
11/30/94 9160 9722 9773
12/31/94 9197 9761 9807
1/31/95 9349 9922 9972
2/28/95 9507 10090 10178
3/31/95 9565 10151 10236
4/30/95 9673 10266 10363
5/31/95 9961 10572 10676
6/30/95 10016 10630 10747
7/31/95 10012 10626 10749
8/31/95 10104 10724 10846
9/30/95 10166 10789 10924
10/31/95 10279 10909 11046
11/30/95 10402 11040 11190
12/31/95 10489 11132 11308
1/31/96 10582 11231 11405
2/29/96 10446 11087 11272
3/31/96 10385 11022 11214
4/30/96 10333 10967 11175
5/31/96 10309 10941 11166
6/30/96 10413 11052 11284
7/31/96 10433 11072 11318
8/31/96 10431 11070 11327
9/30/96 10567 11214 11485
10/31/96 10747 11406 11688
11/30/96 10852 11517 11842
12/31/96 10809 11472 11767
1/31/97 10846 11511 11812
2/28/97 10860 11526 11835
3/31/97 10777 11437 11753
4/30/97 10899 11567 11892
5/31/97 10969 11642 11991
6/30/97 11065 11743 12100
7/31/97 11291 11983 12345
8/31/97 11221 11909 12284
9/30/97 11352 12048 12426
10/31/97 11459 12162 12564
11/30/97 11483 12187 12592
12/31/97 11571 12281 12692
1/31/98 11720 12439 12859
2/28/98 11717 12435 12848
3/31/98 11741 12460 12890
4/30/98 11798 12521 12954
5/31/98 11890 12619 13049
6/30/98 11966 12700 13132
7/31/98 11998 12733 13178
8/31/98 12203 12951 13385
9/30/98 12483 13248 13721
10/31/98 12410 13171 13707
Graph reflects investment growth from end of month of fund commencement.
The Lehman Brothers Intermediate Government/Corporate Bond Index (Lehman Int
Gov't/Corp) is an unmanaged index comprised of investment-grade corporate
debt securities and U.S. Treasury and U.S. Government Agency debt securities
that mature in one to ten years.
Asset Type
Corporate Bonds 34.7%
U.S. Treasury Obligations 30.4%
Asset Backed Securities 16.2%
Other Assets 9.2%
Commercial Paper 6.8%
U.S. Gov't Agencies 2.7%
The performance data quoted represent past performance and therefore are not
indicative of future results. Total returns are historical and include the
change in share price and reinvestment of dividends and capital gains
distributions, and unless indicated, show the effect of the maximum 5.75%
sales charge. Investment returns and principal values will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than their
original cost. The total return figures set forth above may reflect the waiver
of a portion of certain fees for various periods since the Fund's inception
date. In such instances and without such waiver of fees, the total returns
would have been lower.
Fee waivers are voluntary and may be modified or terminated at any time.
<PAGE>
VICTORY TAXABLE FIXED INCOME FUNDS
The Victory Fund for Income
The first half of 1998 was, in retrospect, relatively calm. Market yields
moved grudgingly lower. The tug of war between deflationary Asian weakness
and the potentially inflationary domestic strength ultimately bolstered
market prices. Despite strong refinancing activity and a robust housing
market, mortgages remained a better investment alternative when compared to
Treasuries.
It was a different story in the third quarter. In August, a confluence of
events: accelerating global economic weakness, questionable political
leadership (Russian, Japanese, etc.), and vanishing liquidity in the capital
markets, served to burst the market bubble. On average, treasury yields fell
30 basis points (bps) during the first half of 1998. They fell an additional
100 bps in the second half of the third quarter alone. This flight to quality
was global in nature but very limited in scope. Investor demand revolved
around the most recently issued U.S. treasuries. Affiliated debt markets, on
the whole, did not participate. Mortgage rates had fallen by only 30 to 40
bps by the end of the quarter. Certain corporate and asset-backed issues,
including some held by the fund, actually saw their yields rise.
The 6.60% one year return of the Victory Fund for Income lagged the Lehman
Brothers Mortgage-Backed Index (7.30%) on a gross basis, but was very much in
line with the mortgage fund universe* for the period ended October 31,
1998. Throughout the year, while maintaining an income focus, the fund
benefited from a growing emphasis on newer, par priced mortgage pools. As the
global economic environment worsened, newly issued mortgages became one of
the few sources of both liquidity and spread. As the market rallied, the
strong price performance of the new pools mitigated the effect of the more
sluggishly performing income-oriented securities. The Victory Fund for Income
typically holds more income-oriented securities than the Lehman Brothers
Mortgage-Backed Index, and therefore, tends to lag in a bond rally, as was
evident in the past year. The benefits of the relatively defensive strategy
are most notable in bear markets.
As stated earlier, liquidity has been an important focus of the fund this
year. As a result, as much as 20% of the fund has featured securities that
are readily available and well understood by a broad range of investors
(e.g., newly issued non-premium mortgage securities). Emphasis on security
selection has been rewarded as a result.
Currently, there are many opportunities in the mortgage market. The typical
security has a 200 bps yield advantage to Treasuries. As the new year
unfolds, the fund will look to take advantage of some compelling values in
the high quality, high yielding mortgage market.
Victory Fund for Income
vs. Lehman Mortgage
(Dollars in thousands)
5/31/87 9801 10000 10000
6/30/87 9960 10161 10180
7/31/87 10006 10208 10219
8/31/87 10044 10248 10173
9/30/87 9789 9987 9968
10/31/87 9955 10157 10269
11/30/87 10152 10357 10394
12/31/87 10230 10437 10531
1/31/88 10547 10760 10925
2/29/88 10687 10903 11064
3/31/88 10741 10959 10981
4/30/88 10683 10900 10933
5/31/88 10611 10826 10855
6/30/88 10853 11073 11164
7/31/88 10851 11071 11119
8/31/88 10849 11069 11144
9/30/88 11083 11307 11421
10/31/88 11317 11546 11671
11/30/88 11222 11450 11502
12/31/88 11198 11425 11442
1/31/89 11346 11576 11640
2/28/89 11262 11490 11567
3/31/89 11283 11512 11584
4/30/89 11494 11727 11818
5/31/89 11815 12054 12184
6/30/89 12151 12397 12484
7/31/89 12367 12617 12766
8/31/89 12242 12490 12600
9/30/89 12326 12575 12690
10/31/89 12595 12850 12979
11/30/89 12741 12999 13119
12/31/89 12812 13072 13197
1/31/90 12681 12938 13104
2/28/90 12806 13066 13182
3/31/90 12840 13100 13215
4/30/90 12694 12951 13096
5/31/90 13083 13348 13502
6/30/90 13290 13559 13715
7/31/90 13484 13757 13954
8/31/90 13371 13641 13806
9/30/90 13514 13788 13919
10/31/90 13701 13978 14076
11/30/90 13955 14237 14372
12/31/90 14169 14456 14613
1/31/91 14298 14588 14835
2/28/91 14399 14691 14960
3/31/91 14473 14766 15062
4/30/91 14591 14886 15200
5/31/91 14707 15005 15334
6/30/91 14767 15066 15348
7/31/91 14972 15275 15607
8/31/91 15280 15589 15891
9/30/91 15547 15862 16188
10/31/91 15677 15994 16457
11/30/91 15884 16205 16576
12/31/91 16335 16666 16909
1/31/92 16062 16388 16713
2/29/92 16138 16465 16871
3/31/92 16080 16406 16764
4/30/92 16124 16450 16928
5/31/92 16429 16762 17232
6/30/92 16691 17029 17436
7/31/92 16998 17342 17589
8/31/92 17118 17464 17818
9/30/92 17287 17637 17957
10/31/92 17029 17374 17799
11/30/92 17037 17383 17854
12/31/92 17217 17565 18084
1/31/93 17419 17772 18321
2/28/93 17551 17906 18506
3/31/93 17576 17932 18619
4/30/93 17534 17889 18716
5/31/93 17558 17914 18823
6/30/93 17829 18190 18966
7/31/93 17775 18135 19042
8/31/93 17913 18276 19131
9/30/93 17918 18281 19148
10/31/93 17930 18294 19204
11/30/93 17890 18253 19165
12/31/93 17927 18290 19321
1/31/94 18072 18438 19512
2/28/94 17950 18314 19375
3/31/94 17883 18245 18872
4/30/94 17748 18108 18732
5/31/94 17783 18143 18807
6/30/94 17763 18123 18766
7/31/94 17903 18266 19141
8/31/94 17933 18296 19202
9/30/94 17795 18156 18929
10/31/94 17732 18091 18918
11/30/94 17630 17988 18859
12/31/94 17716 18075 19010
1/31/95 17981 18345 19417
2/28/95 18336 18707 19912
3/31/95 18550 18926 20006
4/30/95 18743 19122 20290
5/31/95 19422 19815 20929
6/30/95 19520 19915 21048
7/31/95 19512 19907 21084
8/31/95 19584 19981 21303
9/30/95 19780 20181 21491
10/31/95 19992 20397 21682
11/30/95 20206 20615 21929
12/31/95 20392 20805 22203
1/31/96 20577 20994 22370
2/29/96 20389 20802 22184
3/31/96 20388 20801 22104
4/30/96 20382 20795 22043
5/31/96 20372 20784 21979
6/30/96 20505 20921 22282
7/31/96 20614 21031 22364
8/31/96 20678 21097 22364
9/30/96 20901 21324 22738
10/31/96 21262 21693 23184
11/30/96 21495 21931 23515
12/31/96 21431 21865 23393
1/31/97 21559 21996 23566
2/28/97 21646 22085 23644
3/31/97 21544 21981 23421
4/30/97 21802 22244 23794
5/31/97 21954 22399 24027
6/30/97 22131 22580 24308
7/31/97 22477 22933 24765
8/31/97 22429 22884 24706
9/30/97 22677 23137 25019
10/31/97 22873 23336 25297
11/30/97 22913 23377 25381
12/31/97 23057 23524 25612
1/31/98 23322 23794 25865
2/28/98 23298 23770 25919
3/31/98 23391 23865 26028
4/30/98 23472 23948 26177
5/31/98 23614 24093 26349
6/30/98 23780 24262 26476
7/31/98 23848 24332 26611
8/31/98 24211 24701 26853
9/30/98 24505 25002 27178
10/31/98 24381 24875 27143
Graph reflects investment growth from end of month of fund commencement.
The Lehman Brothers Mortgage-Backed Securities Index (Lehman Mortgage) is a
broad-based unmanaged index that represents the general performance of fixed
rate mortgage bonds.
Total Return
As of 10/31/98
Maximum
Net Asset Offering
Value Price
One Year 6.60% 4.47%
Three Years 6.84% 6.13%
Five Years 6.34% 5.91%
Ten Years 7.98% 7.76%
Average Annual
Since Inception
5/8/87 8.19% 8.00%
Asset Type
U.S. Gov't Mortgage Backed 46.4%
Asset Backed Securities 35.9%
Other Assets 7.1%
Commercial Paper 6.0%
U.S. Gov't Agencies 2.5%
U.S. Treasury Obligations 2.1%
The performance data quoted represent past performance and therefore are not
indicative of future results. Total returns are historical and include the
change in share price and reinvestment of dividends and capital gains
distributions, and unless indicated, show the effect of the maximum 2.00%
sales charge. Investment returns and principal values will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than their
original cost. The total return figures set forth above may reflect the waiver
of a portion of certain fees for various periods since the Fund's inception
date. In such instances and without such waiver of fees, the total returns
would have been lower.
Fee waivers are voluntary and may be modified or terminated at any time.
*Lipper US Mortgage Funds Index, which is a non-weighted index of the 30
largest funds within the Lipper US Mortgage Funds category.
<PAGE>
VICTORY TAXABLE FIXED INCOME FUNDS
The Victory Government Mortgage Fund
The 7.23% one year return of the Victory Government Mortgage Fund was very
much in line with that of the Lehman Brothers Mortgage-Backed Index (7.30%)
on a gross basis, but was ahead of the mortgage fund universe* for the
period ended October 31, 1998. Throughout the year, the fund benefited from a
growing emphasis on newer, par priced mortgage pools. As the global economic
environment worsened, newly issued mortgages became one of the few sources of
both liquidity and spread. As the market rallied, the strong price
performance of the new pools more than offset the sluggish income-oriented
premium securities held by the fund.
The first half of 1998 was, in retrospect, relatively calm. Market yields
moved grudgingly lower. The tug of war between deflationary Asian weakness
and the potentially inflationary domestic strength ultimately bolstered
market prices. Despite strong refinancing activity and a robust housing
market, mortgages remained a better investment alternative when compared to
treasuries.
It was a different story in the third quarter. In August, a confluence of
events: accelerating global economic weakness, questionable political
leadership (Russian, Japanese, etc.), and vanishing liquidity in the capital
markets, served to burst the market bubble. On average, treasury yields fell
30 basis points (bps) during the first half of 1998. They fell an additional
100 bps in the second half of the third quarter alone. This flight to quality
was global in nature but very limited in scope. Investor demand revolved
around the most recently issued U.S. Treasuries. Affiliated debt markets, on
the whole, did not participate. Mortgage rates had fallen by only 30 to 40
bps by the end of the September. Certain corporate issues actually saw their
yields rise.
As stated earlier, relatively high liquidity has been a major focus of the
fund. As a result, the fund has featured securities that are readily
available and well understood by a broad range of investors (e.g., newly
issued non-premium mortgage securities). The Fund's emphasis on security
selection has been rewarded as a result.
Currently, there are many opportunities in the mortgage market. The typical
security has a 2.00% yield advantage to treasuries. As the new year unfolds,
the fund will cautiously look to take advantage of some compelling values.
Total Return
As of 10/31/98
Maximum
Net Asset Offering
Value Price
One Year 7.23% 1.04%
Three Years 6.99% 4.91%
Five Years 6.17% 4.92%
Average Annual
Since Inception
5/18/90 8.19% 7.43%
Asset Type
U.S. Gov't Mortgage Backed 60.6%
Other Assets 15.9%
Discount Notes 13.6%
Asset Backed Securities 6.0%
U.S. Gov't Agencies 3.9%
Victory Government Mortgage
vs. Lehman Mortgage
(Dollars in thousands)
5/31/90 9421 10000 10000
6/30/90 9537 10123 10158
7/31/90 9681 10276 10335
8/31/90 9632 10224 10225
9/30/90 9710 10306 10309
10/31/90 9839 10443 10426
11/30/90 10027 10643 10644
12/31/90 10154 10778 10823
1/31/91 10251 10881 10988
2/28/91 10322 10956 11080
3/31/91 10361 10998 11155
4/30/91 10460 11103 11258
5/31/91 10527 11174 11357
6/30/91 10509 11155 11367
7/31/91 10623 11276 11559
8/31/91 10871 11539 11770
9/30/91 11069 11749 11990
10/31/91 11194 11882 12189
11/30/91 11357 12055 12277
12/31/91 11682 12400 12524
1/31/92 11505 12212 12378
2/29/92 11512 12220 12496
3/31/92 11436 12139 12416
4/30/92 11544 12253 12538
5/31/92 11747 12469 12763
6/30/92 11939 12672 12914
7/31/92 12203 12953 13027
8/31/92 12342 13100 13197
9/30/92 12564 13336 13300
10/31/92 12351 13110 13183
11/30/92 12243 12995 13224
12/31/92 12412 13175 13394
1/31/93 12682 13461 13570
2/28/93 12910 13703 13707
3/31/93 12946 13741 13790
4/30/93 13063 13866 13862
5/31/93 13016 13816 13941
6/30/93 13186 13996 14047
7/31/93 13200 14011 14103
8/31/93 13394 14217 14169
9/30/93 13444 14271 14182
10/31/93 13469 14296 14223
11/30/93 13398 14221 14195
12/31/93 13427 14252 14310
1/31/94 13531 14362 14452
2/28/94 13414 14238 14350
3/31/94 13108 13914 13977
4/30/94 12997 13795 13874
5/31/94 13057 13859 13929
6/30/94 13023 13823 13899
7/31/94 13255 14069 14177
8/31/94 13271 14086 14222
9/30/94 13091 13895 14020
10/31/94 13063 13866 14012
11/30/94 13044 13846 13968
12/31/94 13151 13959 14080
1/31/95 13397 14220 14381
2/28/95 13713 14556 14748
3/31/95 13752 14597 14817
4/30/95 13931 14787 15028
5/31/95 14343 15224 15501
6/30/95 14431 15317 15589
7/31/95 14442 15330 15616
8/31/95 14576 15472 15778
9/30/95 14698 15601 15917
10/31/95 14833 15745 16059
11/30/95 14980 15900 16242
12/31/95 15153 16084 16445
1/31/96 15247 16184 16568
2/29/96 15089 16016 16431
3/31/96 15029 15952 16372
4/30/96 14980 15900 16326
5/31/96 14956 15875 16278
6/30/96 15088 16015 16503
7/31/96 15150 16080 16564
8/31/96 15149 16080 16564
9/30/96 15373 16318 16841
10/31/96 15655 16617 17171
11/30/96 15870 16845 17416
12/31/96 15787 16757 17326
1/31/97 15897 16874 17454
2/28/97 15914 16892 17512
3/31/97 15776 16746 17347
4/30/97 16015 16999 17623
5/31/97 16153 17145 17796
6/30/97 16340 17344 18004
7/31/97 16652 17675 18342
8/31/97 16594 17614 18298
9/30/97 16782 17814 18531
10/31/97 16942 17983 18736
11/30/97 17012 18057 18798
12/31/97 17170 18225 18969
1/31/98 17357 18424 19157
2/28/98 17366 18433 19197
3/31/98 17438 18509 19278
4/30/98 17542 18620 19388
5/31/98 17659 18744 19516
6/30/98 17740 18830 19609
7/31/98 17795 18888 19709
8/31/98 18013 19119 19889
9/30/98 18229 19349 20129
10/31/98 18168 19284 20103
Graph reflects investment growth from end of month of fund commencement.
The Lehman Brothers Mortgage-Backed Securities Index (Lehman Mortgage)
is a broad-based unmanaged index that represents the general performance
of fixed rate mortgage bonds.
The performance data quoted represent past performance and therefore are not
indicative of future results. Total returns are historical and include the
change in share price and reinvestment of dividends and capital gains
distributions, and unless indicated, show the effect of the maximum 5.75% sales
charge. Investment returns and principal values will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost. The total return figures set forth above may reflect the waiver of a
portion of certain fees for various periods since the Fund's inception date.
In such instances and without such waiver of fees, the total returns would
have been lower.
Fee waivers are voluntary and may be modified or terminated at any time.
*Lipper US Mortgage Funds Index, which is a non-weighted index of the 30
largest funds within the Lipper US Mortgage Funds category.
<PAGE>
VICTORY TAXABLE FIXED INCOME FUNDS
The Victory Investment Quality Bond Fund
A series of headline events dominated the bond market throughout the year.
The fiscal year began under the cloud of the Asian financial crisis. Russia
collapsed financially in late August. The Japanese bank problem remained
unresolved as the dollar gained sizably against the yen. Domestically,
Congress prepared for the possibility of impeachment proceedings and
leveraged hedge funds, starting with Long Term Capital, began to unravel.
During the stormy fiscal year the Fund's gross performance was in line with
its benchmark the Lehman Aggregate Index. Bond portfolio returns varied
greatly, with higher quality funds outperforming lower quality funds. Even
quality corporate bonds had their worst comparison to Treasuries since 1981
as nervous investors fled to the security of Governments. In hindsight,
underweighting in lower quality corporate securities would have helped the
fund. Overall, under the stormy conditions that existed, the Fund weathered
the year well.
The fund benefited from it's high overall quality with the majority of the
portfolio in Treasury, Government Agency or AAA rated securities. Shifts in
the corporate sector weighting helped enhance return during the spring rally
and reduce the drag during the liquidity and supply issues which erupted in
late summer bond market.
Our Government mortgage holdings were adjusted quickly as that sector faced
the largest refinancing period since 1993. This led to higher turnover and an
effective use of the portfolio's structure.
At this time, the market offers attractive pricing in corporate, mortgage,
and asset backed bonds. Recent Federal Reserve rate decreases and equity
market gains may provide the support necessary for improvements in several of
the bond sectors.
Victory Investment Quality Bond Fund
vs. Lehman Aggregate
(Dollars in thousands)
12/31/93 9421 10000 10000
1/31/94 9528 10114 10135
2/28/94 9390 9967 9959
3/31/94 9184 9749 9713
4/30/94 9111 9671 9635
5/31/94 9101 9660 9634
6/30/94 9076 9633 9613
7/31/94 9234 9801 9804
8/31/94 9229 9796 9816
9/30/94 9108 9668 9672
10/31/94 9088 9646 9663
11/30/94 9093 9652 9642
12/31/94 9175 9739 9708
1/31/95 9327 9900 9900
2/28/95 9528 10113 10136
3/31/95 9568 10156 10198
4/30/95 9700 10295 10341
5/31/95 10075 10693 10741
6/30/95 10128 10750 10819
7/31/95 10087 10706 10795
8/31/95 10203 10830 10926
9/30/95 10290 10922 11032
10/31/95 10417 11057 11175
11/30/95 10565 11214 11343
12/31/95 10705 11362 11502
1/31/96 10748 11408 11578
2/29/96 10573 11222 11376
3/31/96 10492 11137 11297
4/30/96 10421 11062 11233
5/31/96 10379 11016 11211
6/30/96 10493 11137 11361
7/31/96 10515 11161 11392
8/31/96 10479 11123 11372
9/30/96 10662 11317 11570
10/31/96 10901 11571 11827
11/30/96 11091 11773 12029
12/31/96 10968 11642 11918
1/31/97 11007 11683 11955
2/28/97 11019 11695 11984
3/31/97 10886 11555 11851
4/30/97 11033 11711 12029
5/31/97 11125 11808 12143
6/30/97 11251 11942 12288
7/31/97 11557 12267 12620
8/31/97 11440 12142 12512
9/30/97 11595 12307 12698
10/31/97 11737 12458 12882
11/30/97 11774 12498 12941
12/31/97 11895 12625 13072
1/31/98 12052 12792 13239
2/28/98 12024 12763 13228
3/31/98 12062 12803 13273
4/30/98 12122 12866 13342
5/31/98 12241 12993 13469
6/30/98 12342 13100 13584
7/31/98 12350 13109 13612
8/31/98 12559 13330 13834
9/30/98 12816 13603 14158
10/31/98 12683 13462 14083
Graph reflects investment growth from end of month of fund commencement.
The Lehman Brothers Aggregate Bond Index (Lehman Aggregate) is a broad-based
unmanaged index that represents the general performance of longer-term (greater
than 1 year), investment-grade fixed-income securities.
Total Return
As of 10/31/98
Maximum
Net Asset Offering
Value Price
One Year 8.06% 1.81%
Three Years 6.78% 4.68%
Average Annual
Since Inception
12/10/93 6.18% 4.90%
Asset Type
Corporate Bonds 24.6%
U.S. Treasury Obligations 20.3%
Asset Backed Securities 10.6%
U.S. Gov't Mortgage Backed 32.5%
Commercial Paper 9.6%
Other Assets 2.4%
The performance data quoted represent past performance and therefore are not
indicative of future results. Total returns are historical and include the
change in share price and reinvestment of dividends and capital gains
distributions, and unless indicated, show the effect of the maximum 5.75% sales
charge. Investment returns and principal values will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost. The total return figures set forth above may reflect the waiver of a
portion of certain fees for various periods since the Fund's inception date. In
such instances and without such waiver of fees, the total returns would have
been lower.
Fee waivers are voluntary and may be modified or terminated at any time.
<PAGE>
Introduction to Municipal Fixed Income Funds
TAX-EXEMPT SECURITIES UNIVERSE
2000+ issues reviewed per year;
500 new issues reviewed per year
ISSUE AND ISSUER CREDIT QUALITY
DURATION AND MATURITY SCREEN
INTERMEDIATE-TERM POOL LONG-TERM POOL
RELATIVE VALUE
Scarcity/Liquidity; Geographic/Economic Trends;
Positive Curve Convexity; New Issues; Sector Analysis
CAPITAL GAINS
INTERMEDIATE-TERM FUNDS LONG-TERM FUND
The Victory New York The Victory National Municipal
Tax-Free Fund Bond Fund
The Victory Ohio Municipal
Bond Fund
THE INVESTMENT PROCESS
The Victory Funds offer a series of Municipal investment strategies that can
help you manage your investments. The investment advisor's fixed income
specialists maintain a close watch on the credit ratings of the issuers of
holdings in the Victory Funds. In addition, our portfolio management team
continuously assesses new municipal issues from across the nation for special
values and incremental returns.
The portfolio managers of the Victory Funds utilize a three-dimensional
approach to managing municipal portfolios.
1. Superior Research.
Credit analysis of municipal securities and issuers is an on-going process.
Portfolio managers and credit analysts review over 2,000 existing issues
annually in addition to up to 500 new issues each year. Analysts review
important factors such as the structure of the offering and the financial
status of the issuing entity, as well as any underlying credit enhancements,
including insurance and letters of credit.
2. No large "Duration Bets" are taken.
Portfolios are carefully managed to keep their duration consistent with their
appropriate benchmark.
3. Relative Value.
The portfolio manager seeks to identify inefficiencies in the marketplace
thatmay result in an increase in the relative value of the securities both
in the portfolio and available in the market place. Differences in relative
value of municipal securities are created by factors such as geographic and
economic trends, regulatory changes, forces of supply and demand and
investor sentiment.
The portfolio management team for the Victory Municipal Funds seeks to keep
the municipal portfolios fully invested while focusing on maintaining
superior credit quality and adequate liquidity.
<PAGE>
VICTORY MUNICIPAL FIXED INCOME FUNDS
The Victory National Municipal Bond Fund
The Victory New York Tax-Free Fund
The Victory Ohio Municipal Bond Fund
The municipal bond market is near record pace for volume of new issues
brought to market. Supply has not been at these levels since 1993. On the
backdrop of heavy supply is a very tight quality spread, with very little
reward given for lower quality offerings.
In this climate the National Municipal Bond Fund was listed in the top
quartile of performance versus its Lipper peer group of approximately 145
funds with total return of 8.15%* for the year ended 10/31/98. The relative
value style of management was a key to this years performance. By maintaining
a high quality portfolio the Fund is well positioned to take advantage of the
current falling rate environment.
The Ohio Municipal Bond Fund had another excellent year, placing in the top
ten percent in its Lipper peer group of Ohio Municipal Debt Funds. The
commitment to maintaining its high quality bonds along with a mix of zero
coupon bonds, which perform well in market rallies, should allow the fund to
continue to perform well.
The New York Tax-Free Bond Fund continues to be managed for income and as
such slightly underperformed its Lehman ten year municipal index. Higher
coupon securities that matured were replaced by offerings at significantly
lower rates during the second and third quarters. By continuing to maintain
the overall high credit quality with an emphasis on AAA rated and insured
bonds, the Fund is well positioned to take advantage of the Federal Reserve
Board actions in reducing key interest rate levels.
The Victory National Municipal Bond Fund
Victory National Municipal Bond Fund
vs. Lehman 7-Yr & 10-Yr Muni
(Dollars in thousands)
2/28/94 9425 10000 10000 10000
3/31/94 9222 9785 9733 9618
4/30/94 9299 9866 9805.02 9724
5/31/94 9352 9923 9854.05 9802
6/30/94 9324 9893 9836.31 9759
7/31/94 9449 10026 9975 9923
8/31/94 9494 10073 10026.87 9962
9/30/94 9301 9869 9931.61 9828
10/31/94 9127 9684 9831.3 9684
11/30/94 8926 9471 9687.76 9501
12/31/94 9090 9644 9835.01 9672
1/31/95 9362 9933 10018.92 9923
2/28/95 9562 10146 10244.35 10203
3/31/95 9677 10268 10350.89 10341
4/30/95 9690 10281 10377.8 10354
5/31/95 9954 10562 10653.85 10682
6/30/95 9942 10549 10644.26 10616
7/31/95 10083 10698 10779.44 10772
8/31/95 10207 10830 10906.64 10918
9/30/95 10261 10887 10948.09 10988
10/31/95 10406 11041 11043.34 11114
11/30/95 10531 11173 11164.82 11263
12/31/95 10697 11350 11223.99 11332
1/31/96 10797 11456 11332.86 11446
2/29/96 10816 11476 11294.33 11400
3/31/96 10655 11306 11184.77 11258
4/30/96 10632 11281 11164.64 11219
5/31/96 10643 11293 11147.89 11187
6/30/96 10704 11357 11233.73 11294
7/31/96 10816 11476 11326.97 11402
8/31/96 10803 11463 11332.63 11402
9/30/96 10892 11557 11434.62 11520
10/31/96 11013 11685 11558.11 11665
11/30/96 11198 11882 11751.13 11900
12/31/96 11174 11856 11715.88 11847
1/31/97 11180 11863 11758.06 11893
2/28/97 11281 11969 11854.48 12005
3/31/97 11149 11829 11701.56 11844
4/30/97 11229 11914 11762.41 11932
5/31/97 11394 12089 11910.62 12101
6/30/97 11517 12220 12024.96 12234
7/31/97 11833 12555 12303.94 12578
8/31/97 11706 12420 12216.58 12456
9/30/97 11846 12569 12346.08 12614
10/31/97 11905 12631 12418.92 12681
11/30/97 11963 12694 12462.39 12739
12/31/97 12151 12893 12615.68 12940
1/31/98 12248 12996 12748.14 13084
2/28/98 12278 13028 12759.61 13083
3/31/98 12278 13028 12759.61 13074
4/30/98 12183 12927 12685.6 13002
5/31/98 12410 13168 12872.08 13223
6/30/98 12461 13221 12908.12 13272
7/31/98 12491 13253 12950.72 13293
8/31/98 12708 13484 13147.57 13524
9/30/98 12855 13640 13317.17 13726
10/31/98 12875 13661 13337.15 13731
Graph reflects investment growth from end of month of fund commencement.
The Lehman Brothers 7-year Muni Bond Fund Index is an unmanaged index
comprised of investment grade muni bonds with maturities of 6-8 years,
weighted according to the total market value of each bond in the Index.
The Lehman Brothers 10-year Municipal Bond Index (Lehman 10 Yr Muni)
is a broad-based unmanaged index that represents the general performance
of investment-grade municipal bonds with maturities of 8-12 years.
Total Return
As of 10/31/98
NATIONAL MUNI Class A NATIONAL MUNI Class B
Maximum Contingent
Net Asset Offering Net Asset Deferred
Value Price Value Charges
One Year 8.15% 1.95% 6.88% 2.88%
Three Years 7.35% 5.27% 6.15% 5.25%
Average Annual
Since Inception
2/3/94 6.46% 5.14% 5.52% 5.18%
Maturity Schedule
Less Than One Year 16.1%
1-5 Years 11.5%
6-10 Years 69.0%
11-20 Years 3.4%
The performance data quoted represent past performance and are not indicative
of future results. Total returns are historical and include the change in
share price and reinvestment of dividends and capital gain distributions.
Performance of the different classes of shares will vary based on the
differences in sales charges and class specific expenses paid by the
shareholders.
The performance figures provided for Class B shares includes the performance
of Class A shares of the Fund prior to the date that the Class B shares
commenced operations. Class B share performance is adjusted to reflect the
applicable contingent deferred sales charge payable by shareholders that
redeem Class B shares at the end of the time periods shown. In addition,
Class B shares are subject to an annual Rule 12b-1 fee of 0.75% of the
average daily net assets of Class B shares, and other class-specific
expenses. These Class B expenses are reflected in the performance data, but
only for the period since the Class B shares commenced operations. (Prior
performance of Class A shares has not been adjusted to reflect these expenses.)
Investment returns and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
The total return figures set forth above may reflect the waiver of a portion
of certain fees for various periods since the Fund's inception. In such
instances and without such fee waivers, the total returns would have been
lower.
Certain investors may be subject to Federal alternative minimum tax rates.
Fee waivers are voluntary and may be modified or terminated at anytime.
*Reflects total return for Class A shares at Net Asset Value, without showing
the effect of the 5.75% maximum sales charge.
<PAGE>
The Victory New York Tax-Free Fund
Victory New York Tax-Free Fund
vs. Lehman 10-Yr Muni
(Dollars in thousands)
2/28/91 9526 10000 10000
3/31/91 9608 10086 9995
4/30/91 9763 10248 10133
5/31/91 9876 10367 10209
6/30/91 9796 10283 10197
7/31/91 9957 10452 10304
8/31/91 10100 10602 10443
9/30/91 10235 10744 10604
10/31/91 10315 10827 10690
11/30/91 10275 10786 10707
12/31/91 10564 11089 10935
1/31/92 10491 11012 10958
2/29/92 10557 11081 10941
3/31/92 10586 11112 10925
4/30/92 10699 11231 11029
5/31/92 10805 11342 11158
6/30/92 10945 11489 11351
7/31/92 11418 11985 11723
8/31/92 11210 11767 11585
9/30/92 11202 11759 11681
10/31/92 11054 11603 11562
11/30/92 11320 11883 11773
12/31/92 11437 12005 11910
1/31/93 11555 12129 12111
2/28/93 11957 12551 12554
3/31/93 11858 12448 12371
4/30/93 11975 12570 12489
5/31/93 12075 12675 12532
6/30/93 12219 12827 12779
7/31/93 12292 12903 12811
8/31/93 12532 13154 13076
9/30/93 12659 13288 13237
10/31/93 12732 13365 13258
11/30/93 12608 13234 13150
12/31/93 12848 13487 13430
1/31/94 12980 13625 13595
2/28/94 12745 13378 13222
3/31/94 12380 12996 12717
4/30/94 12355 12969 12857
5/31/94 12431 13049 12960
6/30/94 12397 13014 12904
7/31/94 12550 13174 13121
8/31/94 12559 13183 13172
9/30/94 12436 13054 12994
10/31/94 12295 12906 12805
11/30/94 12072 12672 12563
12/31/94 12259 12869 12789
1/31/95 12512 13133 13120
2/28/95 12788 13423 13491
3/31/95 12896 13537 13674
4/30/95 12930 13572 13690
5/31/95 13202 13859 14124
6/30/95 13216 13873 14036
7/31/95 13304 13965 14243
8/31/95 13380 14045 14436
9/30/95 13473 14143 14529
10/31/95 13625 14302 14696
11/30/95 13778 14463 14893
12/31/95 13892 14582 14984
1/31/96 13963 14657 15135
2/29/96 13937 14630 15073
3/31/96 13749 14433 14886
4/30/96 13732 14414 14834
5/31/96 13744 14427 14792
6/30/96 13832 14520 14933
7/31/96 13973 14668 15076
8/31/96 14027 14724 15076
9/30/96 14140 14843 15231
10/31/96 14242 14950 15423
11/30/96 14400 15115 15735
12/31/96 14379 15093 15664
1/31/97 14386 15101 15725
2/28/97 14494 15215 15873
3/31/97 14368 15082 15660
4/30/97 14462 15181 15776
5/31/97 14591 15317 16000
6/30/97 14704 15435 16176
7/31/97 14985 15730 16631
8/31/97 14890 15630 16470
9/30/97 15005 15751 16679
10/31/97 15065 15813 16767
11/30/97 15121 15872 16844
12/31/97 15248 16006 17110
1/31/98 15331 16093 17300
2/28/98 15332 16094 17299
3/31/98 15364 16128 17286
4/30/98 15296 16056 17191
5/31/98 15505 16276 17484
6/30/98 15576 16351 17548
7/31/98 15614 16390 17576
8/31/98 15862 16651 17882
9/30/98 16037 16835 18149
10/31/98 15986 16780 18156
Graph reflects investment growth from end of month of fund commencement.
The Lehman Brothers 10-year Municipal Bond Index (Lehman 10 Yr Muni)
is a broad-based unmanaged index that represents the general performance
of investment-grade municipal bonds with maturities of 8-12 years.
Total Return
As of 10/31/98
NY TAX-FREE Class A NY TAX-FREE Class B
Maximum Contingent
Net Asset Offering Net Asset Deferred
Value Price Value Charges
One Year 6.12% 0.04% 4.96% .96%
Three Years 5.47% 3.42% 4.51% 3.59%
Five Years 4.65% 3.42% 3.90% 3.74%
Average Annual
Since Inception
2/11/91 6.80% 5.99% 6.30% 6.30%
Maturity Schedule
Less Than One Year 7.2%
1-5 Years 41.3%
6-10 Years 36.6%
11-20 Years 1.4%
Over 20 Years 13.5%
The Victory Ohio Municipal Bond Fund
Victory Ohio Municipal Bond Fund
vs. Lehman 10-Yr Muni
(Dollars in thousands)
5/31/90 9427 10000 10000
6/30/90 9506 10085 10094
7/31/90 9604 10188 10234
8/31/90 9532 10112 10087
9/30/90 9542 10122 10089
10/31/90 9706 10296 10311
11/30/90 9851 10450 10521
12/31/90 9880 10481 10547
1/31/91 10023 10633 10721
2/28/91 10121 10737 10813
3/31/91 10092 10706 10807
4/30/91 10219 10840 10956
5/31/91 10293 10919 11039
6/30/91 10272 10897 11025
7/31/91 10361 10991 11141
8/31/91 10481 11119 11292
9/30/91 10603 11248 11465
10/31/91 10663 11312 11558
11/30/91 10691 11341 11577
12/31/91 10943 11608 11823
1/31/92 10981 11648 11848
2/29/92 10976 11644 11830
3/31/92 10953 11619 11813
4/30/92 11035 11706 11925
5/31/92 11157 11836 12064
6/30/92 11299 11986 12273
7/31/92 11629 12336 12676
8/31/92 11492 12191 12526
9/30/92 11555 12258 12630
10/31/92 11447 12143 12501
11/30/92 11664 12373 12730
12/31/92 11792 12510 12878
1/31/93 11936 12662 13095
2/28/93 12365 13117 13575
3/31/93 12173 12913 13376
4/30/93 12343 13094 13504
5/31/93 12411 13166 13551
6/30/93 12651 13420 13818
7/31/93 12631 13400 13852
8/31/93 12893 13677 14139
9/30/93 13121 13919 14313
10/31/93 13135 13933 14336
11/30/93 12985 13774 14218
12/31/93 13282 14090 14521
1/31/94 13464 14283 14700
2/28/94 13071 13866 14297
3/31/94 12609 13376 13751
4/30/94 12677 13448 13902
5/31/94 12845 13626 14013
6/30/94 12754 13530 13953
7/31/94 12948 13735 14187
8/31/94 12989 13779 14243
9/30/94 12792 13570 14051
10/31/94 12597 13363 13845
11/30/94 12409 13164 13584
12/31/94 12691 13463 13828
1/31/95 13059 13854 14186
2/28/95 13440 14257 14588
3/31/95 13540 14363 14785
4/30/95 13562 14387 14803
5/31/95 14004 14856 15272
6/30/95 13874 14718 15177
7/31/95 13980 14830 15400
8/31/95 14175 15037 15610
9/30/95 14257 15124 15710
10/31/95 14490 15371 15890
11/30/95 14712 15607 16103
12/31/95 14942 15851 16201
1/31/96 15018 15932 16365
2/29/96 14945 15854 16298
3/31/96 14700 15594 16096
4/30/96 14663 15555 16039
5/31/96 14670 15563 15995
6/30/96 14803 15704 16146
7/31/96 14973 15883 16301
8/31/96 14977 15888 16301
9/30/96 15179 16102 16469
10/31/96 15340 16273 16677
11/30/96 15610 16559 17014
12/31/96 15588 16536 16937
1/31/97 15540 16485 17003
2/28/97 15671 16624 17163
3/31/97 15443 16383 16933
4/30/97 15551 16497 17058
5/31/97 15776 16735 17301
6/30/97 15923 16891 17491
7/31/97 16363 17358 17982
8/31/97 16167 17150 17808
9/30/97 16375 17370 18034
10/31/97 16470 17472 18130
11/30/97 16553 17559 18213
12/31/97 16815 17838 18501
1/31/98 16986 18019 18706
2/28/98 16964 17996 18704
3/31/98 16974 18006 18691
4/30/98 16863 17889 18589
5/31/98 17200 18246 18905
6/30/98 17272 18322 18974
7/31/98 17291 18343 19005
8/31/98 17604 18674 19336
9/30/98 17858 18944 19624
10/31/98 17807 18901 19631
Graph reflects investment growth from end of month of fund commencement.
The Lehman Brothers 10-Year Municipal Bond (Lehman 10-Yr Muni) Index
is a broad-based unmanaged index that represents the general performance
of investment-grade municipal bonds with maturities of 8 to 12 years.
Total Return
As of 10/31/98
Maximum
Net Asset Offering
Value Price
One Year 8.18% 1.92%
Three Years 7.13% 5.04%
Five Years 6.29% 5.04%
Average Annual
Since Inception
5/18/90 7.85% 7.10%
Maturity Schedule
Less Than One Year 4.5%
1-5 Years 12.8%
6-10 Years 68.9%
11-20 Years 11.7%
Over 20 Years 2.1%
The performance data quoted represent past performance and are not indicative
of future results. Total returns are historical and include the change in
share price and reinvestment of dividends and capital gain distributions.
Performance of the different classes of shares will vary based on the
differences in sales charges and class specific expenses paid by the
shareholders.
The performance figures provided for Class B shares includes the performance
of Class A shares of the Fund prior to the date that the Class B shares
commenced operations. Class B share performance is adjusted to reflect the
applicable contingent deferred sales charge payable by shareholders that
redeem Class B shares at the end of the time periods shown. In addition,
Class B shares are subject to an annual Rule 12b-1 fee of 0.75% of the
average daily net assets of Class B shares, and other class-specific
expenses. These Class B expenses are reflected in the performance data, but
only for the period since the Class B shares commenced operations. (Prior
performance of Class A shares has not been adjusted to reflect these
expenses.)
Investment returns and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
The total return figures set forth above may reflect the waiver of a portion
of certain fees for various periods since the Fund's inception. In such
instances and without such fee waivers, the total returns would have been
lower.
Certain investors may be subject to Federal alternative minimum tax rates.
Fee waivers are voluntary and may be modified or terminated at anytime.
<PAGE>
Introduction to Specialty Funds
THE INVESTMENT PROCESS
Specialty funds either represent an integrated investment approach combining
equity and fixed income exposure, or represent an entirely unique investment
category. Some of our specialty funds will mix their exposure in equity and
fixed income investments in order to achieve a more "balanced" or integrated
investment approach. The other specialty funds within our fund family
represent a unique investment niche or asset class. Specialty funds will
typically fall between equity and fixed income investments in terms of risk
and reward potential.
Victory Balanced Fund
The Victory Balanced Fund's objective is to seek to provide both current
income and capital appreciation for investors. The challenge of this Fund is
to find the right "balance" between common stocks and fixed income securities.
A "value" style is adhered to when to identifying stocks which are
undervalued in relation to their earnings potential. Relative value is the
primary emphasis of the fixed income investment decision process.
Victory Real Estate Fund
The Victory Real Estate Investment Fund employs a "bottom-up" portfolio
strategy and seeks to produce competitive total returns by focusing on
capital preservation and:
- - identifying undervalued securities
- - examining dividend and cash flow factors
- - evaluating a firm's business acumen
- - analyzing superior prospects for high current income and capital
appreciation.
Victory Convertible Fund
A three pronged analysis is conducted before including any security in the
Convertible Fund.
1. An equity analysis is done on the common stocks to evaluate the underlying
company's growth rates, competitive advantage and management teams.
2. A fixed income evaluation is conducted. This helps measure the volatility
of the securities under consideration and can also help predict how the
securities will react in varying interest rate environments.
3. Those securities that make it through the first two steps must then undergo
a convertible analysis to determine if they are undervalued in the current
market.
<PAGE>
VICTORY SPECIALTY FUNDS
The Victory Balanced Fund
The financial environment of 1998 was volatile. Following financial crises
overseas, there was a long anticipated market correction in the second half
of the year. In response, the Federal Reserve lowered short-term interest
rates and as result, the S&P 500 declined 10% in the fourth quarter.
The Victory Balanced Fund outperformed the Lipper Balanced Fund Index in 1998
by shifting the Fund's emphasis of industry weightings and individual stock
selection. Through the fiscal fourth quarter, the Fund continued to increase
its bond weighting which had a positive impact on performance.
The US economy appears to be entering a period of slower growth. Corporate
profits are under pressure and earnings expectations have been reduced. While
we are not expecting a recession, a significant slowdown is underway.
Therefore, we have positioned the Fund more defensively in asset allocation
and equity positions. We are underweighted in technology and basic industry.
However, the Fund maintains an overweighted position relative to the S&P 500
in the utility, energy and financial sectors. We believe these sectors will
perform well in a slower growth economy with declining interest rates.
Total Return
As of 10/31/98
BALANCED FUND Class A BALANCED FUND Class B
Maximum Contingent
Net Asset Offering Net Asset Deferred
Value Price Value Charges
One Year 14.55% 7.94% 13.27% 9.27%
Three Years 16.60% 14.33% 15.47% 14.71%
Average Annual
Since Inception
12/10/93 13.77% 12.40% 13.09% 12.84%
Victory Balanced Fund
vs. S&P 500 & Lipper Balanced
(Dollars in thousands)
12/31/93 9426 10000 10000 10000
1/31/94 9589 10173 10340 10262
2/28/94 9319 9886 10059 10052
3/31/94 9040 9591 9621 9678
4/30/94 9062 9614 9744 9704
5/31/94 9176 9735 9904 9773
6/30/94 9064 9616 9661 9599
7/31/94 9261 9825 9978 9821
8/31/94 9473 10050 10387 10063
9/30/94 9235 9797 10133 9872
10/31/94 9338 9907 10361 9907
11/30/94 9158 9716 9984 9670
12/31/94 9264 9828 10132 9751
1/31/95 9450 10026 10394 9870
2/28/95 9766 10361 10799 10157
3/31/95 9932 10536 11118 10334
4/30/95 10157 10776 11445 10524
5/31/95 10519 11159 11903 10864
6/30/95 10582 11227 12179 11059
7/31/95 10768 11424 12583 11294
8/31/95 10824 11483 12615 11382
9/30/95 11118 11795 13147 11710
10/31/95 11135 11813 13100 11681
11/30/95 11471 12169 13675 12044
12/31/95 11684 12396 13939 12233
1/31/96 11926 12652 14413 12454
2/29/96 11853 12575 14547 12460
3/31/96 12015 12747 14687 12507
4/30/96 12069 12803 14904 12590
5/31/96 12171 12912 15288 12718
6/30/96 12261 13007 15346 12760
7/31/96 12007 12738 14668 12432
8/31/96 12162 12902 14977 12628
9/30/96 12619 13387 15820 13095
10/31/96 12947 13735 16257 13373
11/30/96 13645 14475 17486 13996
12/31/96 13383 14197 17139 13825
1/31/97 13801 14641 18210 14248
2/28/97 13843 14686 18353 14300
3/31/97 13513 14335 17599 13885
4/30/97 13886 14731 18650 14302
5/31/97 14422 15300 19785 14888
6/30/97 14823 15725 20671 15372
7/31/97 15599 16549 22316 16247
8/31/97 15016 15931 21066 15731
9/30/97 15597 16546 22220 16359
10/31/97 15409 16347 21478 16061
11/30/97 15748 16707 22472 16355
12/31/97 15994 16968 22858 16596
1/31/98 16120 17102 23110 16712
2/28/98 16683 17698 24777 17376
3/31/98 17177 18223 26046 17908
4/30/98 17338 18394 26308 18032
5/31/98 17276 18328 25856 17896
6/30/98 17604 18676 26906 18220
7/31/98 17579 18649 26619 18007
8/31/98 16319 17313 22771 16461
9/30/98 17118 18160 24230 17166
10/31/98 17651 18726 26200 17809
Graph reflects investment growth from end of month of fund commencement.
The Standard & Poor's 500 Stock Index (S&P 500) is a broad-based unmanaged
index that represents the general performance of domestically traded common
stocks of mid- to large-size companies.
The Lipper Balanced Fund Index is a non-weighted index of the 30 largest
funds within the Lipper Balanced Fund (Lipper Balanced) investment category.
Asset Types
Common Stocks 53.5%
Corporate Bonds 9.6%
Commercial Paper 9.0%
U.S. Treasury Obligations 7.4%
Foreign Common Stocks 4.3%
Asset Backed Securities 3.9%
Other Assets 12.3%
The performance data quoted represent past performance and are not indicative
of future results. Total returns are historical and include the change in
share price and reinvestment of dividends and capital gain distributions.
Performance of the different classes of shares will vary based on the
differences in sales charges and class specific expenses paid by
shareholders. Class A performance with sales charge shows the effect of the
maximum 5.75% sales charge applied at the beginning of the period.
The performance figures provided for Class B shares includes the performance
of Class A shares of the Fund prior to the date that the Class B shares
commenced operations. Class B share performance is adjusted to reflect the
applicable contingent deferred sales charge payable by shareholders that
redeem Class B shares at the end of the time periods shown. In addition,
Class B shares are subject to an annual Rule 12b-1 fee of 0.75% of the
average daily net assets of Class B shares, and other class-specific
expenses. These Class B expenses are reflected in the performance data, but
only for the period since the Class B shares commenced operations. (Prior
performance of Class A shares has not been adjusted to reflect these
expenses.)
Investment returns and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
The total return figures set forth above may reflect the waiver of a portion
of certain fees for various periods since inception. In such instances and
without such waiver of fees, the total returns would have been lower.
Fee waivers are voluntary and may be modified or terminated at any time. Fund
holdings are subject to change at any time.
<PAGE>
VICTORY SPECIALTY FUNDS
The Victory Convertible Securities Fund
During the past twelve months, investing in convertible securities could
easily be categorized as one of the most trying years in recent history.
Initially, one could have concluded that the rapid rise of the major market
indices provided a very positive environment for hybrids. While this was
generally correct, it was very specifically wrong. Small and mid-cap issues,
which dominate the convertible universe, had miserable performance during the
past year. The Russell 2000 Index* of stocks declined over 19% for the
twelve-month period, ending September. As the equity markets retreated during
late summer, convertible investors were given a dose of cruel and unusual
punishment. The downside protection that was so evident during prior equity
market declines was hardly evident. This phenomenon was caused by a gapping
in credit spreads that had not been experienced in the market since the
beginning of the decade.
The Fund's conservative positioning served it relatively well for the
market's most recent setback. The lack of equity sensitive issues and the
Fund's value approach enabled it to surpass the average convertible fund
during the market's turmoil. During the past year, the sectors that provided
relatively good performance included Utilities, Consumer Cyclicals, and
Consumer Staples. The poorest performing positions of the Fund were in the
Energy, Technology, and Finance areas.
The structure of the Fund continues to be rather conservative. The conditions
of the past quarter were an opportunity to enhance positions of the
portfolio, particularly in the Technology area. We continue to believe that
the long term attractiveness of convertibles remains intact and as normal
conditions return to the market, the Fund will provide investors with a sound
risk/reward profile.
Victory Convertible Securities Fund
vs. S&P 500 & Lipper Convertible Securities Fund Index
(Dollars in thousands)
4/14/88 10000 10000 10000.00
4/30/88 10000 10123 10105.15
5/31/88 11890 10183.74 10031.92
6/30/88 10324.48 10664.41 10449.72
7/31/88 10334.51 10639.88 10333.30
8/31/88 10264.21 10262.17 10173.69
9/30/88 10325.81 10700.36 10374.61
10/31/88 10428.15 11010.67 10515.44
11/30/88 10141.61 10834.5 10385.88
12/31/88 10225.02 11027.35 10547.37
1/31/89 10487.74 11833.45 10951.08
2/28/89 10634.87 11538.8 10926.67
3/31/89 10762.71 11807.66 11012.11
4/30/89 11128.24 12420.47 11349.17
5/31/89 11558.73 12923.5 11568.87
6/30/89 11741.69 12849.84 11556.66
7/31/89 12115.25 14010.05 11992.30
8/31/89 12291.16 14284.65 12227.02
9/30/89 12247.18 14226.08 12203.55
10/31/89 12045.12 13896.03 11875.88
11/30/89 11955.32 14179.37 11994.18
12/31/89 12158.71 14519.68 12061.78
1/31/90 11858.21 13544.83 11621.44
2/28/90 11858.21 13720.91 11751.01
3/31/90 11950.67 14084.52 11913.44
4/30/90 11667.48 13733.11 11693.74
5/31/90 12069.4 15071.95 12267.39
6/30/30 12057.58 14970.21 12291.80
7/31/90 12121.66 14922.16 12212.94
8/31/90 11625.67 13573.34 11575.44
9/30/90 11250.65 12912.46 11084.41
10/31/90 10853.02 12857.45 10768.00
11/30/90 11336.2 13688.56 11257.16
12/31/90 11542.55 14070.06 11536.01
1/31/91 11822.83 14683.51 11988.55
2/28/91 12472.58 15733.38 12592.24
3/31/91 12625.46 16114.13 12775.33
4/30/91 13041.11 16152.32 12924.61
5/31/91 13391.81 16849.13 13225.05
6/30/91 13171 16077.44 12901.14
7/31/91 13513.86 16826.65 13209.09
8/31/91 13937 17225.44 13576.19
9/30/91 14254.35 16937.78 13642.85
10/31/91 14428.49 17165.42 13908.55
11/30/91 14320.92 16473.83 13556.47
12/31/91 14741.45 18357.94 14313.21
1/31/92 15100.66 18015.93 14680.31
2/28/92 15252.63 18249.23 14945.08
3/31/92 14990.13 17894.29 14762.93
4/30/92 15172.77 18419.48 14809.88
5/31/92 15425.65 18509.74 15061.50
6/30/92 15341.36 18234.31 14905.64
7/31/92 15827.03 18979.19 15299.03
8/31/92 15841.31 18590.68 15216.41
9/30/92 16084.14 18809.12 15510.28
10/31/92 15954.49 18874.01 15657.68
11/30/92 15925.48 19516.67 16046.38
12/31/92 16405.63 19756.14 16375.93
1/31/93 16765.86 19921.31 16743.97
2/28/93 17141.1 20192.83 16745.85
3/31/93 17575.76 20618.9 17293.21
4/30/93 17804.02 20120.54 17183.36
5/31/93 18154.01 20658.77 17568.30
6/30/93 18336.62 20719.3 17711.95
7/31/93 18660.47 20636.01 17818.98
8/31/93 19231.08 21418.94 18306.26
9/30/93 19308.2 21254.65 18441.46
10/31/93 19636.25 21694.41 18719.37
11/30/93 19495.66 21487.66 18552.25
12/31/93 19700.27 21747.66 18805.75
1/31/94 19910.02 22487.09 19283.64
2/28/94 19668 21876.56 19118.39
3/31/94 19199.44 20922.74 18445.22
4/30/94 18986.84 21190.97 18210.50
5/31/94 18856.01 21538.72 18186.09
6/30/94 18838.84 21010.8 18033.99
7/31/94 19071.63 21699.96 18327.86
8/31/94 19321.04 22589.65 18847.06
9/30/94 19387.3 22037.34 18696.84
10/31/94 19319.8 22532.52 18662.10
11/30/94 18644.87 21711.88 18141.02
12/31/94 18428.84 22033.87 18119.43
1/31/95 18517.36 22605.21 18286.55
2/28/95 18977.64 23486.13 18721.25
3/31/95 19509.77 24179.21 19154.07
4/30/95 20030.75 24891.29 19483.62
5/31/95 20425.98 25886.19 19905.17
6/30/95 20515.26 26487.53 20325.79
7/31/95 21062.34 27365.85 20935.12
8/31/95 21645.88 27434.54 21090.98
9/30/95 21993.28 28592.28 21411.14
10/31/95 21716.29 28490.21 21061.87
11/30/95 22454.94 29740.93 21693.74
12/31/95 22910.48 30313.74 21936.91
1/31/96 23754.76 31345.62 22328.42
2/29/96 23869.88 31636.19 22674.87
3/31/96 24216.19 31940.85 22894.56
4/30/96 24332.71 32411.65 23424.09
5/31/96 24643.42 33247.55 23804.34
6/30/96 24566.81 33374.22 23502.96
7/31/96 23877.83 31899.75 22663.60
8/31/96 24684.91 32572.52 23466.34
9/30/96 25374.64 34405.7 24212.75
10/31/96 26012.49 35354.61 24329.17
11/30/96 27009.13 38027.06 25163.83
12/31/96 27298.32 37274.13 25148.81
1/31/97 27742.71 39603.01 25899.92
2/28/97 28017.81 39913.5 25785.37
3/31/97 27547.33 38273.45 25276.50
4/30/97 27675.85 40558.38 25466.15
5/31/97 28725.48 43027.57 26675.43
6/30/97 29690.23 44955.21 27523.24
7/31/97 30948.11 48532.29 28794.48
8/31/97 30861.36 45813.52 28789.79
9/30/97 31839.55 48322.72 30072.29
10/31/97 31313.63 46708.74 29319.31
11/30/97 31401.29 48870.89 29216.04
12/31/97 31761.9 49710 29401.00
1/31/98 31666.31 50259.8 29444.18
2/28/98 32550.57 53884.53 30736.08
3/31/98 33931.55 56643.96 31686.23
4/30/98 33810.88 57213.8 31831.75
5/31/98 33038.61 56230.29 31191.44
6/30/98 33317.93 58514.37 31069.38
7/31/98 32537.42 57891.19 30496.67
8/31/98 29488.56 49521.28 26949.58
9/30/98 29762.19 52693.61 27339.22
10/31/98 30157.04 56979.71 27339.22
Graph reflects investment growth from end of month of fund commencement.
The Standard & Poor's 500 Stock Index (S&P 500) is a broad-based unmanaged
index that represents the general performance of domestically traded common
stocks of mid- to large-size companies.
Lipper Convertible Securities Fund Index invests its portfolio primarily in
convertible bonds and convertible preferred shares. Lipper Mutual Fund
Indices are equally weighted and composed of the largest mutual funds within
their respective investment objectives, adjusted for the reinvestment of
capital gains distributions and income dividends.
Total Return
As of 10/31/98
Maximum
Net Asset Offering
Value Price
One Year 3.69% -9.22%
Three Years 11.56% 9.37%
Five Years 8.96% 7.67%
Ten Years 11.20% 10.55%
Average Annual
Since Inception
4/14/88 11.03% 10.41%
Portfolio Investments
Basic Industries 11.0%
Capital Goods 5.5%
Consumer Cyclicals 16.4%
Consumer Staples 12.4%
Energy 13.0%
Financial 21.8%
Technology 11.2%
Utilities 5.4%
Other Assets 3.3%
*The Russell 2000 Index is comprised of the smallest 2,000 companies in the
Russell 3000 Index, representing approximately 11% of the Russell 3000 total
market capitalization. The Index was developed with a base value of 135.00 as
of December 31, 1986.
<PAGE>
VICTORY SPECIALTY FUNDS
The Victory Real Estate Investment Fund
After a rally at year-end 1997, the real estate securities market has been
battered throughout 1998 because of the uncertainty surrounding federal
legislation, the risks of over-building, and the bull-market's continuing
preference for the large-cap stocks. However, as the broader market became
increasingly volatile in the third quarter, investors moved into the more
defensive real estate sector. Real Estate Investment Trusts rebounded 12%
during September, relative to only a modest advance in the S&P 500.
For the year ended 10/31/98, The Victory Real Estate Investment Fund was down
11.91%*, though well ahead of the Morgan Stanley Real Estate Investment
Index, which was down 13.55%. Throughout the year, the Fund has maintained
close to a 200 basis point lead over the Index.
The Fund has maintained its defensive position relative to the industry
benchmark by focusing its investments on the stocks of companies that are
less vulnerable to the inherent risks of real estate. Therefore, the Fund has
a concentration in companies with office properties in the central business
districts of major cities where there is the least risk of overbuilding and
where the long-term leases of credit-worthy tenants provide predictable
future cash flows. The Fund also includes the stocks of companies with other
property types such as apartment buildings and regional malls in geographical
regions that have barriers to entry, such as the Northwest and Northeast.
The Fund invests for the long term with low turnover. However, constant
monitoring of the companies, their management teams, the economics of the
underlying real estate, and their respective markets will alert us to both
weaknesses and opportunities in particular stocks, property sectors or
geographical regions.
Total Return
As of 10/31/98
Maximum
Net Asset Offering
Value Price
One Year -11.91% -17.00%
Average Annual
Since Inception
4/30/97 5.15% 1.09%
Portfolio Investments
Discount Notes 16.1%
Diversified 20.9%
Apartments 6.8%
Office 30.4%
Residential 14.5%
Hotels 2.4%
Health Care 2.4%
Other Assets Net of Liabilities 6.5%
Victory Real Estate Investment Fund
vs. MSREIT Index
(Dollars in thousands)
4/30/97 9425.07 10000 10000
5/31/97 9660.7 10250 10300.45
6/30/97 10169.65 10790 10844.9
7/31/97 10744.58 11400 11139.3
8/31/97 10763.43 11420 11064.02
9/30/97 11844.07 12566.55 12109.89
10/31/97 11538.17 12241.99 11782.55
11/30/97 11681.56 12394.13 11957.31
12/31/97 11996.46 12728.24 12228.86
1/31/98 11899.48 12625.35 12054.1
2/28/98 11812.2 12532.74 11860.18
3/31/98 12096.84 12834.75 12140.8
4/30/98 11755.4 12472.48 11710.96
5/31/98 11609.07 12317.22 11608.79
6/30/98 11635.89 12345.68 11607.45
7/31/98 10877.89 11541.44 10777.67
8/31/98 9952.53 10559.63 9773.13
9/30/98 10413.05 11048.24 10379.08
10/31/98 10163 10785 10185
Graph reflects investment growth from end of month of fund commencement.
The Morgan Stanley REIT Index (MSREIT Index) is a capitalization weighted
index with dividends reinvested of the most actively traded real estate
investment trusts and is designed to be a measure of real estate equity
performance.
The index was developed with a base value of 200 as of December 31, 1994.
The performance data quoted represent past performance and are not indicative
of future results. Total returns are historical and include the change in
share price and the reinvestment of dividends and capital gain distributions,
and unless indicated show the effect of the maximum 5.75% sales charge.
Investment returns and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
Total return figures set forth above may reflect the waiver of a portion of
certain fees for various periods since the Fund's inception date. In such
cases and without such waiver of fees, the total returns would have been
lower.
Fee waivers are voluntary and may be modified or terminated at anytime.
*Reflects total return on Fund performance without showing the effect of the
5.75% maximum sales charge.
Investments in this Fund are subject to the risks related to direct
investment in real estate, such as real estate risk, regulatory risks,
concentration risk and diversification risk. By itself, the Fund does not
constitute a complete investment plan and should be considered a long-term
investment for investors who can afford to weather changes in the value of
their investment.
Fund holdings may change at any time.
<PAGE>
Introduction to the Equity Funds
THE INVESTMENT PROCESS
The Victory Equity Funds that are managed according to the diversified style
attempt to remain flexible in order to adjust to changing market conditions.
The Victory Funds that are managed according to a "value" style seek to
outperform an appropriate market benchmark while maintaining broad market
sector exposure. The approach to managing these funds is to target stocks
that are statistically inexpensive (low P/Es, low price-to-book, high-yield
stocks) and find those issues where investor sentiment is improving as
evidenced by upward earnings revisions and positive earning events.
The Victory Equity Funds that are managed according to the growth style
subscribe to the philosophy of "Growth At a Reasonable Price" (GARP). They
seek to identify stocks believed to have future return prospects greater than
the overall market.
Value Funds
EQUITY RESEARCH UNIVERSE
VALUE MANAGEMENT
Valuation Statistical Earnings
Cheapness Revisions
buy/sell decisions
VALUE FUNDS
The Victory Value Fund
The Victory Lakefront Fund
The Victory Special Value Fund
The Victory Ohio Regional Stock Fund
Diversified Funds
EQUITY RESEARCH UNIVERSE
DIVERSIFIED MANAGEMENT
Value Growth
Market Condition Assessment
buy/sell decisions
DIVERSIFIED FUNDS
The Victory Diversified Stock Fund
The Victory Stock Index Fund
Growth Funds
EQUITY RESEARCH UNIVERSE
GROWTH MANAGEMENT
Return Statistical Risk
Prospects Valuations Assessment
buy/sell decisions
GROWTH FUNDS
The Victory Growth Fund
The Victory International Growth Fund
The Victory Special Growth Fund
<PAGE>
VICTORY EQUITY FUNDS
The Victory Value Fund
Fiscal year 1998 was a difficult period for value funds. Late cycle economics
and lower interest rates drove growth stocks' earnings and valuation at the
expense of value stocks. We believe the weakness in equity prices largely
reflects a belated recognition that earnings growth for US companies is
slowing faster than originally thought. We have been concerned for a number
of months that earnings growth was likely to slow in the second half of the
year. Our concerns were centered on lower operating margins resulting from
the combination of diminished pricing power, a result of intensifying
worldwide competition, and rising labor costs. It is increasingly clear that
this is in fact the case.
The investment performance of the Fund was admirable. For the year ended
October 31, 1998 the Fund returned 20.46%. This compares with the 11.74%
return recorded by the S&P BARRA Value Index* and the 21.99% of the S&P 500
Index. Security selection was the key driver of the Fund's performance. The
Fund's overweighting in the utilities and energy sectors, both of which
outperformed the S&P 500, also helped relative performance.
It is our expectation that the market will focus on slowing earnings growth
in 1999. Therefore, we have been focusing the Fund on attractively priced
stocks of companies that are likely to grow at least as fast and with greater
consistency than the average stock in the S&P 500. Currently, we find the
energy sector and the telecommunications, insurance, computer and office
equipment groups particularly attractive. However, if the economy weakens
more than expected, the Fund's value orientation should cushion any
associated weaknesses in equity prices.
Total Return
As of 10/31/98
Maximum
Net Asset Offering
Value Price
One Year 20.46% 13.54%
Three Years 24.09% 21.67%
Average Annual
Since Inception
12/3/93 19.65% 18.21%
Portfolio Investments
Basic Industries 6.5%
Capital Goods 3.1%
Consumer Cyclicals 13.7%
Consumer Staples 17.7%
Energy 9.5%
Financial 18.2%
Technology 15.3%
Utilities 13.2%
Other Assets Net of Liabilities 2.8%
Victory Value Fund
vs. S&P 500
(Dollars in thousands)
12/31/93 9422 10000 10000
1/31/94 9729 10327 10340
2/28/94 9347 9921 10059
3/31/94 8978 9529 9621
4/30/94 9109 9669 9744
5/31/94 9325 9898 9904
6/30/94 9145 9706 9661
7/31/94 9400 9977 9978
8/31/94 9740 10338 10387
9/30/94 9461 10041 10133
10/31/94 9622 10213 10361
11/30/94 9337 9910 9984
12/31/94 9446 10026 10132
1/31/95 9680 10274 10394
2/28/95 10069 10687 10799
3/31/95 10324 10958 11118
4/30/95 10530 11176 11445
5/31/95 10941 11613 11903
6/30/95 11057 11736 12179
7/31/95 11373 12071 12583
8/31/95 11481 12186 12615
9/30/95 11875 12604 13147
10/31/95 11766 12488 13100
11/30/95 12361 13120 13675
12/31/95 12633 13408 13939
1/31/96 13032 13832 14413
2/29/96 13093 13897 14547
3/31/96 13448 14273 14687
4/30/96 13581 14415 14904
5/31/96 13797 14644 15288
6/30/96 13874 14726 15346
7/31/96 13297 14113 14668
8/31/96 13616 14452 14977
9/30/96 14264 15140 15820
10/31/96 14667 15568 16257
11/30/96 15723 16688 17486
12/31/96 15463 16412 17139
1/31/97 16147 17138 18210
2/28/97 16266 17265 18353
3/31/97 15633 16593 17599
4/30/97 16243 17240 18650
5/31/97 17266 18326 19785
6/30/97 17916 19016 20671
7/31/97 19335 20522 22316
8/31/97 18342 19468 21066
9/30/97 19297 20482 22220
10/31/97 18663 19809 21478
11/30/97 19483 20679 22472
12/31/97 19717 20927 22858
1/31/98 19919 21142 23110
2/28/98 21241 22545 24777
3/31/98 22265 23631 26046
4/30/98 22455 23834 26308
5/31/98 22074 23429 25856
6/30/98 22748 24144 26906
7/31/98 22581 23967 26619
8/31/98 19476 20671 22771
9/30/98 21071 22365 24230
10/31/98 22481 23861 26200
Graph reflects investment growth from end of month of fund commencement.
The Standard & Poor's 500 Stock Index (S&P 500) is a broad-based unmanaged
index that represents the general performance of domestically traded common
stocks of mid- to large-size companies.
The performance data quoted represent past performance and are not indicative
of future results. Total returns are historical and include the change in
share price and the reinvestment of dividends and capital gain distributions,
and unless indicated show the effect of the maximum 5.75% sales charge.
Investment returns and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
Total return figures set forth above may reflect the waiver of a portion of
certain fees for various periods since the Fund's inception date. In such
cases and without such waiver of fees, the total returns would have been
lower.
Fee waivers are voluntary and may be modified or terminated at anytime.
*The Standard & Poor's Barra Value Index is a capitalization-weighted index of
all the stocks in the Standard &Poor's 500 that have low price-to-book
ratios. The index was developed with a base value of 35 as of December 31,
1974.
<PAGE>
VICTORY EQUITY FUNDS
The Victory Lakefront Fund
The year ended October 31, 1998 was a volatile one for most equity mutual
funds, including the Victory Lakefront Fund. In the first half of the year,
the market euphoria continued at its bullish pace on the heels of low
inflation, relatively low interest rates, low unemployment, and a very
confident and active consumer. Large stocks fared particularly well in what
many perceived as an extended bull market. In this environment, the Victory
Lakefront Fund performed solidly given its large-cap orientation and its
adherence to quality holdings. The Fund's ownership of value sectors
including financial institutions, capital goods and established technology
companies served the Fund well.
In the second half of the year, despite domestic economic strength,
international economies deteriorated. As a result, the Fund's second half
performance was negatively impacted by events like the Russian bond default
and the continuing Asian economic turmoil. The sectors hit hardest were the
very ones that allowed the fund to outperform in the first half-financials,
capital goods and technology. Still, for the year ended October 31, 1998 the
Fund returned a solid 5.05%, compared to the S&P Value Index,* which was up
11.74% for the same period.
Looking forward, we expect the market to renew its upward momentum with lower
interest rates reviving growth in corporate earnings. The Fund is well
positioned to benefit from the positive environment we anticipate in 1999 as
many of its holdings are significantly undervalued relative to historical
valuations. Liquidity will remain important investment criteria, and the
Fund's large-cap style should continue to be a positive influence on
performance.
Victory Lakefront Fund
vs. S&P 500
(Dollars in thousands)
3/1/97 10000 10000 10000
3/31/97 8963.24 9519.685 9589
4/30/97 9433.97 10010.18 10162
5/31/97 10009.44 10620.81 10780
6/30/97 10273.59 10944.32 11263
7/31/97 11270.14 11959.35 12159
8/31/97 10711.37 11366.41 11478
9/30/97 11184.91 11911.45 12107
10/31/97 10729.96 11386.98 11702
11/30/97 10948.55 11618.95651 12244
12/31/97 10863.01 11773.07998 12454
1/31/98 11043.94 11742.1795 12592
2/28/98 11983.65 12741.29478 13500
3/31/98 12438.97 13257.03646 14192
4/30/98 12584.7 13380.93399 14334
5/31/98 12118.6 12885.34384 14088
6/30/98 12050.63 12845.0286 14660
7/31/98 11757.56 12503.46056 14504
8/31/98 9684.41 10298.79408 12407
9/30/98 10180.8 10861.69109 13202
10/31/98 11249.19 11962.39783 14276
Graph reflects investment growth from end of month of fund commencement.
The Standard & Poor's 500 Stock Index (S&P 500) is a broad-based unmanaged
index that represents the general performance of domestically traded common
stocks of mid- to large-size companies.
Total Return
As of 10/31/98
Maximum
Net Asset Offering
Value Price
One Year 5.05% -1.00%
Average Annual
Since Inception
3/3/97 11.38% 7.48%
Portfolio Investments
Basic Industries 6.0%
Capital Goods 3.3%
Consumer Cyclicals 12.3%
Consumer Staples 18.2%
Energy 4.9%
Financial 20.0%
Technology 25.3%
Utilities 9.8%
Other Assets Net of Liabilities 0.2%
The performance data quoted represent past performance and are not indicative
of future results. Total returns are historical and include the change in
share price and the reinvestment of dividends and capital gain distributions,
and unless indicated show the effect of the maximum 5.75% sales charge.
Investment returns and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
Total return figures set forth above may reflect the waiver of a portion of
certain fees for various periods since the Fund's inception date. In such
cases and without such waiver of fees, the total returns would have been
lower.
Fee waivers are voluntary and may be modified or terminated at anytime.
*The Standard & Poor's Barra Value Index is a capitalization-weighted index of
all the stocks in the Standard &Poor's 500 that have low price-to-book
ratios. The index was developed with a base value of 35 as of December 31,
1974.
<PAGE>
VICTORY EQUITY FUNDS
The Victory Diversified Stock Fund
Despite the extreme market volatility that was experienced in 1998, the
environment for stocks has remained positive. With inflation low, interest
rates declining, a budget surplus, lowered capital gains taxes, and positive
money flows, stocks continue to have the wind at their backs. In particular,
large capitalization equities have further benefited from their liquidity,
recognition, and momentum.
The Fund lagged the S&P 500 Index in the year ended October 31, 1998,
returning 19.60%* compared to the benchmark return of 21.99%. The main reason
for the Fund's slight underperformance has been its value driven methodology,
which caused the Fund to de-emphasize consumer staples for much of the year.
However, the Fund significantly outperformed the Lipper Growth & Income Fund
Index,** which returned 9.45%* for the same period.
The stock market correction, which took place in the third quarter, has
brought stock prices down to reasonable levels. The lowering of interest
rates by the Federal Reserve should provide a more favorable environment for
stocks in 1999. Therefore, we are actively increasing the cyclical component
of the portfolio. Additionally, the Fund will continue to seek value oriented
securities in areas that include metals, technology and basic industry,
especially paper stocks.
Total Return
As of 10/31/98
DIVERSIFIED FUND Class A DIVERSIFIED FUND Class B
Maximum Contingent
Net Asset Offering Net Asset Deferred
Value Price Value Charges
One Year 19.60% 12.74% 18.34% 14.34%
Three Years 24.85% 22.42% 23.75% 23.09%
Five Year 20.88% 19.45% 20.27% 20.17%
Average Annual
Since Inception
10/20/89 16.48% 15.72% 16.16% 16.16%
Portfolio Investments
Basic Industries 8.3%
Capital Goods 6.3%
Consumer Cyclicals 8.5%
Consumer Staples 20.9%
Energy 11.7%
Financial 15.0%
Technology 20.6%
Utilities 4.2%
Other Assets Net of Liabilities 4.5%
Victory Diversified Stock Fund
vs. S&P 500
(Dollars in thousands)
10/31/89 9429 10000 10000
11/30/89 9562 10141 10204
12/31/89 9887 10486 10449
1/31/90 9332 9897 9747
2/28/90 9447 10019 9874
3/31/90 9700 10288 10136
4/30/90 9508 10084 9883
5/31/90 10413 11044 10846
6/30/90 10371 10999 10773
7/31/90 10332 10958 10738
8/31/90 9538 10116 9768
9/30/90 9082 9633 9292
10/31/90 9024 9571 9253
11/30/90 9609 10191 9851
12/31/90 9944 10546 10125
1/31/91 10549 11188 10567
2/28/91 11243 11924 11322
3/31/91 11291 11976 11596
4/30/91 11252 11934 11624
5/31/91 11820 12536 12125
6/30/91 11077 11748 11570
7/31/91 11568 12269 12109
8/31/91 11858 12577 12396
9/30/91 11515 12213 12189
10/31/91 11505 12202 12353
11/30/91 11012 11679 11855
12/31/91 12328 13076 13211
1/31/92 12255 12998 12965
2/29/92 12412 13164 13133
3/31/92 12107 12841 12877
4/30/92 12359 13108 13255
5/31/92 12285 13030 13320
6/30/92 12136 12871 13122
7/31/92 12609 13373 13658
8/31/92 12336 13083 13378
9/30/92 12655 13421 13536
10/31/92 12834 13612 13582
11/30/92 13341 14149 14045
12/31/92 13491 14309 14217
1/31/93 13502 14321 14336
2/28/93 13578 14401 14531
3/31/93 13772 14607 14838
4/30/93 13588 14411 14479
5/31/93 13956 14802 14867
6/30/93 13909 14752 14910
7/31/93 13996 14844 14850
8/31/93 14551 15433 15414
9/30/93 14449 15325 15295
10/31/93 14635 15522 15612
11/30/93 14449 15325 15463
12/31/93 14837 15736 15650
1/31/94 15350 16280 16182
2/28/94 14837 15736 15743
3/31/94 14331 15199 15057
4/30/94 14539 15420 15250
5/31/94 14981 15889 15500
6/30/94 14629 15515 15120
7/31/94 14998 15907 15616
8/31/94 15602 16548 16256
9/30/94 15350 16280 15859
10/31/94 15709 16661 16215
11/30/94 15213 16135 15625
12/31/94 15424 16359 15856
1/31/95 15817 16776 16267
2/28/95 16477 17475 16901
3/31/95 16945 17972 17400
4/30/95 17410 18465 17913
5/31/95 18158 19258 18628
6/30/95 18396 19511 19061
7/31/95 18977 20127 19693
8/31/95 19119 20278 19743
9/30/95 19734 20930 20576
10/31/95 19407 20583 20502
11/30/95 20405 21642 21402
12/31/95 20881 22146 21815
1/31/96 21471 22772 22557
2/29/96 22014 23348 22766
3/31/96 22317 23669 22986
4/30/96 22862 24247 23324
5/31/96 23313 24726 23926
6/30/96 23111 24511 24017
7/31/96 22096 23435 22956
8/31/96 22611 23981 23440
9/30/96 23769 25209 24759
10/31/96 24677 26173 25442
11/30/96 26721 28341 27365
12/31/96 26042 27620 26824
1/31/97 27489 29155 28500
2/28/97 27436 29099 28723
3/31/97 26596 28207 27543
4/30/97 27393 29053 29187
5/31/97 29216 30987 30964
6/30/97 30167 31996 32351
7/31/97 32653 34632 34925
8/31/97 31322 33220 32969
9/30/97 33133 35141 34774
10/31/97 31535 33446 33613
11/30/97 32811 34799 35169
12/31/97 33403 35428 35773
1/31/98 33463 35491 36168
2/28/98 35916 38093 38777
3/31/98 37561 39838 40763
4/30/98 38380 40706 41173
5/31/98 36982 39223 40465
6/30/98 37947 40247 42109
7/31/98 37288 39547 41660
8/31/98 32169 34119 35637
9/30/98 34980 37100 37920
10/31/98 37765 40053 41004
Graph reflects investment growth from end of month of fund commencement.
The Standard & Poor's 500 Stock Index (S&P 500) is a broad-based unmanaged
index that represents the general performance of domestically traded common
stocks of mid- to large-size companies.
The performance data quoted represent past performance and are not
indicative of future results. Total returns are historical and include the
change in share price and reinvestment of dividends and capital gain
distributions. Performance of the different classes of shares will vary based
on the differences in sales charges and class specific expenses paid by
shareholders. Class A performance with sales charge shows the effect of the
maximum 5.75% sales charge applied at the beginning of the period.
The performance figures provided for Class B shares includes the performance
of Class A shares of the Fund prior to the date that the Class B shares
commenced operations. Class B share performance is adjusted to reflect the
applicable contingent deferred sales charge payable by shareholders that redeem
Class B shares at the end of the time periods shown. In addition, Class B
shares are subject to an annual Rule 12b-1 fee of 0.75% of the average daily
net assets of Class B shares, and other class-specific expenses. These Class B
expenses are reflected in the performance data, but only for the period since
the Class B shares commenced operations. (Prior performance of Class A shares
has not been adjusted to reflect these expenses.)
Investment returns and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
The total return figures set forth above may reflect the waiver of a portion of
certain fees for various periods since inception. In such instances and without
such waiver of fees, the total returns would have been lower.
Fee waivers are voluntary and may be modified or terminated at anytime.
*Reflects the Fund's total return without showing the effect of the 5.75%
maximum sales charge.
**Lipper Growth & Income Fund Index is a non-weighted index of the 30 largest
funds within the Lipper Growth & Income category.
<PAGE>
VICTORY EQUITY FUNDS
The Victory Stock Index Fund
The investment objective of the Victory Stock Index Fund is to replicate
the performance of the S&P 500 Index. This method of management is referred
to as passive investing.
In order to duplicate the performance of the S&P 500 Index, we follow a
full replication strategy. This involves investing in all of the stocks of
the S&P 500 Index in proportion to their company and industry sector
weighting within the Index. In addition, we invest in S&P 500 futures
contracts to minimize transaction costs, associated with security
purchases, while at the same time maintaining equity exposure in the
portfolio. We do not use futures for speculative or leveraging purposes.
The S&P 500 Index posted a total return of 21.99% for the year ended
October 31, 1998. The Victory Stock Index Fund returned 20.99%* for the
same period. Consistent with its investment objective, the Fund strives to
continue matching the performance of the S&P 500.
Victory Stock Index Fund vs. S&P 500
(Dollars in thousands)
12/31/93 9526 10000 10000
1/31/94 9839 10329 10340
2/28/94 9564 10040 10059
3/31/94 9149 9605 9621
4/30/94 9263 9725 9744
5/31/94 9406 9875 9904
6/30/94 9180 9637 9661
7/31/94 9477 9949 9978
8/31/94 9851 10342 10387
9/30/94 9611 10090 10133
10/31/94 9823 10313 10361
11/30/94 9476 9948 9984
12/31/94 9613 10092 10132
1/31/95 9856 10347 10394
2/28/95 10226 10735 10799
3/31/95 10521 11044 11118
4/30/95 10833 11373 11445
5/31/95 11253 11814 11903
6/30/95 11493 12065 12179
7/31/95 11876 12468 12583
8/31/95 11906 12498 12615
9/30/95 12389 13006 13147
10/31/95 12350 12965 13100
11/30/95 12883 13525 13675
12/31/95 13119 13773 13939
1/31/96 13564 14240 14413
2/29/96 13676 14357 14547
3/31/96 13821 14509 14687
4/30/96 14014 14711 14904
5/31/96 14349 15063 15288
6/30/96 14419 15137 15346
7/31/96 13776 14462 14668
8/31/96 14051 14751 14977
9/30/96 14827 15566 15820
10/31/96 15238 15997 16257
11/30/96 16346 17160 17486
12/31/96 16030 16828 17139
1/31/97 17010 17857 18210
2/28/97 17136 17989 18353
3/31/97 16416 17233 17599
4/30/97 17389 18255 18650
5/31/97 18447 19365 19785
6/30/97 19254 20212 20671
7/31/97 20762 21796 22316
8/31/97 19604 20580 21066
9/30/97 20669 21698 22220
10/31/97 19987 20982 21478
11/30/97 20872 21911 22472
12/31/97 21224 22281 22858
1/31/98 21462 22531 23110
2/28/98 22972 24116 24777
3/31/98 24106 25306 26046
4/30/98 24345 25557 26308
5/31/98 23912 25103 25856
6/30/98 24866 26104 26906
7/31/98 24580 25804 26619
8/31/98 21000 22046 22771
9/30/98 22378 23492 24230
10/31/98 24183 25387 26200
Graph reflects investment growth from end of month of fund commencement.
The Standard & Poor's 500 Stock Index (S&P 500) is a broad-based unmanaged
index that represents the general performance of domestically traded common
stocks of mid- to large-size companies.
Total Return
As of 10/31/98
Maximum
Net Asset Offering
Value Price
One Year 20.99% 14.06%
Three Years 25.11% 22.67%
Average Annual
Since Inception
12/3/93 21.02% 19.57%
Portfolio Investments
Basic Industries 3.8%
Capital Goods 5.2%
Consumer Cyclicals 15.1%
Consumer Staples 16.3%
Energy 5.4%
Financial 28.6%
Technology 14.4%
Utilities 9.5%
The performance data quoted represent past performance and are not indicative
of future results. Total returns are historical and include the change in share
price and the reinvestment of dividends and capital gain distributions, and
unless indicated show the effect of the maximum 5.75% sales charge. Investment
returns and principal value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost. Total return
figures set forth above may reflect the waiver of a portion of certain fees for
various periods since the Fund's inception date. In such cases and without such
waiver of fees, the total returns would have been lower.
Fee waivers are voluntary and may be modified or terminated at anytime.
*Reflects the Fund's total return without showing the effect of the 5.75%
maximum sales charge.
<PAGE>
VICTORY EQUITY FUNDS
The Victory Growth Fund
The threat of a domestic economic slowdown, volatility in world equity
markets, and a number of Asian related earnings disappointments had a
beneficial effect on Fund performance. Most companies in the Victory Growth
Fund's portfolio have proved their ability to maintain a more consistent
and less volatile earnings profile than the typical S&P 500 company. As
concerns grew about the effect that a possible slowdown in the US economy
would have on corporate profits, and as volatility in world equity markets
increased, investors flocked to high-quality, large capitalization, growth
companies, which is the major emphasis of the Fund.
The Victory Growth Fund was up 28.59%* versus the S&P 500 return of 21.99%
for the period ended October 31, 1998. There were several reasons for the
outperformance. To begin with, large capitalization growth stocks were the
favored "style" (the S&P BARRA Growth Index** was up 32.0%) for 1998. Also,
the Fund's two largest sectors, consumer staples and technology, showed
excellent relative performance and four overweighted industries: drugs,
health care, computer software and retail had excellent relative
performance. In addition, nine of the Fund's top ten holdings outperformed
the S&P 500.
Currently, the growth rate of the US economy is slowing and corporate
profits in more cyclically exposed industries are under pressure. The
flight to companies with stable and predictable earnings has led to high
valuations in consistent growth companies. As we move into 1999, the
combination of stronger economic growth and reasonable valuation, makes
cyclical growth areas such as capital goods and technology attractive.
Going into 1999, the Victory Growth Fund continues to hold overweighted
positions versus the S&P 500 in the capital goods, consumer staples and
technology sectors. Over the past several months, we have reduced slightly
our weighting in the consumer staples sector, as we have taken partial
profits in a number of the better performing drug, health care and beverage
company stocks. In addition, we increased our already overweighted position
in the technology sector, with IBM and Motorola being recent purchases. We
maintain significant underweighted positions relative to the S&P 500 in the
basic industry, energy and financial sectors.
Total Return
As of 10/31/98
Maximum
Net Asset Offering
Value Price
One Year 28.59% 21.19%
Three Years 27.77% 25.28%
Average Annual
Since Inception
12/3/93 21.41% 19.98%
Portfolio Investments
Basic Industries 3.0%
Capital Goods 9.0%
Consumer Cyclicals 12.0%
Consumer Staples 29.0%
Energy 5.0%
Financial 11.0%
Technology 20.0%
Utilities 10.0%
Other Assets Net of Liabilities 2.0%
Victory Growth Fund
vs. S&P 500
(Dollars in thousands)
12/31/93 9427 10000 10000
1/31/94 9756 10349 10340
2/28/94 9530 10110 10059
3/31/94 9094 9647 9621
4/30/94 9217 9777 9744
5/31/94 9434 10007 9904
6/30/94 9102 9655 9661
7/31/94 9357 9926 9978
8/31/94 9707 10297 10387
9/30/94 9411 9983 10133
10/31/94 9695 10285 10361
11/30/94 9439 10013 9984
12/31/94 9380 9950 10132
1/31/95 9571 10153 10394
2/28/95 9886 10487 10799
3/31/95 10097 10711 11118
4/30/95 10365 10995 11445
5/31/95 10700 11351 11903
6/30/95 10934 11599 12179
7/31/95 11251 11935 12583
8/31/95 11164 11843 12615
9/30/95 11715 12428 13147
10/31/95 11686 12397 13100
11/30/95 12157 12897 13675
12/31/95 12332 13082 13939
1/31/96 12703 13476 14413
2/29/96 12834 13614 14547
3/31/96 12954 13741 14687
4/30/96 13155 13955 14904
5/31/96 13607 14435 15288
6/30/96 13772 14609 15346
7/31/96 13278 14086 14668
8/31/96 13540 14364 14977
9/30/96 14403 15279 15820
10/31/96 14685 15578 16257
11/30/96 15834 16797 17486
12/31/96 15408 16345 17139
1/31/97 16312 17304 18210
2/28/97 16459 17460 18353
3/31/97 15677 16630 17599
4/30/97 16698 17713 18650
5/31/97 17781 18863 19785
6/30/97 18512 19638 20671
7/31/97 19817 21022 22316
8/31/97 18459 19582 21066
9/30/97 19440 20622 22220
10/31/97 18956 20108 21478
11/30/97 19934 21147 22472
12/31/97 20238 21469 22858
1/31/98 20824 22090 23110
2/28/98 22075 23418 24777
3/31/98 23090 24494 26046
4/30/98 23304 24722 26308
5/31/98 22853 24243 25856
6/30/98 24229 25702 26906
7/31/98 24263 25738 26619
8/31/98 20880 22150 22771
9/30/98 22605 23980 24230
10/31/98 24375 25858 26200
Graph reflects investment growth from end of month of fund commencement.
The Standard & Poor's 500 Stock Index (S&P 500) is a broad-based unmanaged
index that represents the general performance of domestically traded common
stocks of mid- to large-size companies.
The performance data quoted represent past performance and are not
indicative of future results. Total returns are historical and include the
change in share price and the reinvestment of dividends and capital gains
distributions, and unless indicated show the effect of the maximum 5.75%
sales charge. Investment returns and principal value will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than their
original cost. Total return figures set forth above may reflect the waiver
of a portion of certain fees for various periods since the Fund's inception
date. In such cases and without such waiver of fees, the total returns would
have been lower.
Fee waivers are voluntary and may be modified or terminated at anytime.
Fund holdings may change at any time.
*Reflects the total return of the Fund without showing the effect of of the
5.75% maximum sales charge
**The Standard &Poor's Barra Growth Index is a capitalization-weighted
index of all the stocks in the Standard &Poor's 500 that have high
price-to-book ratios. The index was developed with a base value of 35 as of
December 31, 1974.
<PAGE>
VICTORY EQUITY FUNDS
The Victory Special Value Fund
Economic growth, modest inflation and declining interest rates provided a
supportive environment for most equities during the fiscal year. This was
evidenced by the 21.99% return for the S&P 500. However, the environment
was quite different for mid-cap stocks, which peaked in the spring of 1998
and fell precipitously over the summer. As a result, 1998 looks to be the
fifth consecutive year in which the mid-caps will underperform large-caps.
The Fund lagged its benchmark, with a decline of 11.22% for the year ended
October 31, 1998, versus the S&P 400 Midcap Index return of 6.71%. The
Fund's shortfalls occurred this year when many of our "turnaround" names
were sold at low valuation levels, as the market began to discount many
small and mid-cap stocks. Also, we were overweighted in basic industry and
capital goods, because these sectors appeared attractive after a sustained
period of underperformance. However, they hurt the Fund's performance as
they lagged further in the fiscal year as cyclical stocks were punished.
Finally, a lack of exposure to the highest growth component of the Index,
Computer Software, contributed to the Fund's shortfall.
Mid-cap stocks have lagged the large-caps for five consecutive years and
now trade at historically low valuation levels. In the past, interest rate
cuts by the Federal Reserve have acted as a catalyst for improved relative
performance in the following year (8 of 10 times since 1954). The Fed's
second rate cut in October was the beginning of a Midcap Index rally of
nearly 14% through month-end versus the 9% gain for the S&P 500. As a
result, we are optimistic about the coming year. Rate cuts globally
diminish the probability for recession in 1999, and as a result, the Fund
added to its cyclical exposure including technology stocks. As a result,
the Fund remains overweighted in the Basic Industry and capital goods
sectors, and is much less underweighted in the technology sector.
Victory Special Value Fund
vs. S&P 400 Mid Cap
(Dollars in thousands)
12/31/93 9423 10000 10000
1/31/94 9652 10243 10233
2/28/94 9643 10233 10087
3/31/94 9319 9889 9620
4/30/94 9273 9841 9692
5/31/94 9365 9938 9600
6/30/94 9179 9741 9269
7/31/94 9455 10034 9583
8/31/94 9777 10376 10085
9/30/94 9610 10198 9897
10/31/94 9693 10287 10005
11/30/94 9240 9806 9553
12/31/94 9543 10127 9641
1/31/95 9580 10167 9741
2/28/95 10065 10681 10252
3/31/95 10317 10948 10430
4/30/95 10532 11176 10639
5/31/95 10737 11395 10896
6/30/95 10924 11592 11340
7/31/95 11374 12070 11931
8/31/95 11590 12299 12152
9/30/95 11683 12399 12446
10/31/95 11439 12139 12126
11/30/95 11900 12628 12656
12/31/95 12099 12840 12624
1/31/96 12254 13005 12807
2/29/96 12497 13262 13243
3/31/96 12633 13406 13401
4/30/96 13002 13798 13811
5/31/96 13051 13850 13997
6/30/96 13131 13935 13787
7/31/96 12538 13305 12855
8/31/96 13092 13894 13596
9/30/96 13571 14402 14189
10/31/96 13795 14640 14230
11/30/96 14536 15426 15032
12/31/96 14423 15306 15048
1/31/97 14736 15638 15613
2/28/97 14851 15760 15485
3/31/97 14501 15389 14825
4/30/97 14753 15656 15209
5/31/97 15989 16968 16539
6/30/97 16464 17472 17004
7/31/97 17534 18608 18687
8/31/97 17492 18563 18664
9/30/97 18252 19370 19737
10/31/97 17527 18600 18878
11/30/97 17716 18801 19158
12/31/97 18430 19559 19902
1/31/98 17919 19016 19523
2/28/98 18965 20126 21140
3/31/98 19742 20951 22094
4/30/98 19605 20806 22497
5/31/98 18991 20154 21485
6/30/98 18555 19691 21620
7/31/98 17178 18229 20782
8/31/98 14081 14944 16914
9/30/98 14682 15581 18493
10/31/98 15561 16514 20145
Graph reflects investment growth from end of month of fund commencement.
The Standard & Poor's 400 Mid-Cap Index (S&P 400 Mid Cap) is a broad-based
unmanaged index that represents the general performance of domestically
traded common stocks of mid-sized companies.
Total Return
As of 10/31/98
SPECIAL VALUE Class A SPECIAL VALUE Class B
Maximum Contingent
Net Asset Offering Net Asset Deferred
Value Price Value Charge
One Year -11.22% -16.33% -12.32% -15.57%
Three Years 10.81% 8.65% 9.63% 8.79%
Average Annual
Since Inception
12/3/93 11.42% 10.09% 10.69% 10.42%
Portfolio Investments
Basic Industries 14.4%
Capital Goods 6.0%
Consumer Cyclicals 10.7%
Consumer Staples 13.4%
Energy 5.3%
Financial 25.1%
Technology 12.4%
Utilities 10.8%
Liabilities in Excess of Other Assets 1.9%
The performance data quoted represent past performance and are not
indicative of future results. Total returns are historical and include the
change in share price and reinvestment of dividends and capital gain
distributions. Performance of the different classes of shares will vary based
on the differences in sales charges and class specific expenses paid by
shareholders. Class A performance with sales charge shows the effect of the
maximum 5.75% sales charge applied at the beginning of the period.
The performance figures provided for Class B shares includes the
performance of Class A shares of the Fund prior to the date that the
Class B shares commenced operations. Class B share
performance is adjusted to reflect the applicable contingent deferred sales
charge payable by shareholders that redeem Class B shares at the end of the
time periods shown. In addition, Class B shares are subject to an annual Rule
12b-1 fee of 0.75% of the average daily net assets of Class B shares, and other
class-specific expenses. These Class B expenses are reflected in the
performance data, but only for the period since the Class B shares commenced
operations. (Prior performance of Class A shares has not been adjusted to
reflect these expenses.)
Investment returns and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
The total return figure set forth above may reflect the waiver of a portion
of certain fees for various periods since the Fund's inception. In such
instances and without such waiver of fees, the total returns would have been
lower.
Fee waivers are voluntary and may be modified or terminated at anytime.
Fund holdings may change at any time.
<PAGE>
VICTORY EQUITY FUNDS
The Victory Ohio Regional Stock Fund
The Fund's objective is to seek capital appreciation by investing in a
diversified group of common stocks and securities that are convertible into
common stocks issued by companies whose headquarters are located in the
state of Ohio. The Ohio Regional Stock Fund has an investment style that
can be characterized as having a mid-capitalization, value orientation.
This means that we look for stocks of mainly medium sized companies that
are selling below what we think to be their fair market value.
The environment of the past twelve months was a difficult one for the Fund.
Mid-caps underperformed large-cap stocks, value stocks underperformed
growth stocks, and fears of recession impacted the prices of industrial
companies. Late last year, we added substantially to our utility position
and initiated a position in REITs. The utilities helped, the REITS hurt.
Our heavy position in Ohio Banks aided performance. We owned 6 of Ohio's 10
best performing stocks; of the 10 worst performers, we owned only 1. For
the year ended October 31, 1998, the Fund was down 3.13%,* compared to the
Bloomberg Ohio Index,** which was down 6.8%.
We are not forecasting a recession. However, many of our capital goods and
basic industry stocks seem to be discounting a severe recession; if a
severe recession does not materialize, they should do well. We would not be
surprised should these markets turn away from fixation on the high
valuation, high capitalization growth stocks. In that environment our
portfolio of mid-sized value stocks should perform well.
Total Return
As of 10/31/98
OHIO REGIONAL Class A OHIO REGIONAL Class B
Maximum Maximum
Net Asset Offering Net Asset Offering
Value Price Value Price
One Year -3.13% -8.71% -4.33% -7.81%
Three Years 15.38% 13.13% 14.08% 13.31%
Five Years 13.31% 11.97% 12.54% 12.42%
Average Annual
Since Inception
10/20/89 12.94% 12.20% 12.51% 12.51%
Portfolio Investments
Basic Industries 15.5%
Capital Goods 15.0%
Consumer Cyclicals 15.0%
Consumer Staples 9.0%
Energy 4.1%
Financial 23.9%
Technology 7.1%
Utilities 9.9%
Other Assets in Excess of Liabilities 0.5%
Victory Ohio Regional Stock Fund
vs. S&P 500
(Dollars in thousands)
10/31/89 9529 10000 10000
11/30/89 9539 10010 10204
12/31/89 9592 10065 10449
1/31/90 8863 9301 9747
2/28/90 9060 9507 9874
3/31/90 9196 9651 10136
4/30/90 8939 9380 9883
5/31/90 9514 9983 10846
6/30/90 9571 10044 10773
7/31/90 9193 9647 10738
8/31/90 7948 8340 9768
9/30/90 7134 7486 9292
10/31/90 6801 7137 9253
11/30/90 7507 7877 9851
12/31/90 7818 8204 10125
1/31/91 8669 9098 10567
2/28/91 9379 9842 11322
3/31/91 9866 10353 11596
4/30/91 10029 10524 11624
5/31/91 10681 11209 12125
6/30/91 10140 10641 11570
7/31/91 10642 11168 12109
8/31/91 10909 11447 12396
9/30/91 11143 11694 12189
10/31/91 11473 12039 12353
11/30/91 11411 11974 11855
12/31/91 12403 13015 13211
1/31/92 12851 13485 12965
2/29/92 13372 14032 13133
3/31/92 13233 13887 12877
4/30/92 12992 13634 13255
5/31/92 12930 13568 13320
6/30/92 12391 13003 13122
7/31/92 12843 13477 13658
8/31/92 12475 13091 13378
9/30/92 12517 13135 13536
10/31/92 12791 13423 13582
11/30/92 13467 14132 14045
12/31/92 13753 14432 14217
1/31/93 14083 14778 14336
2/28/93 14104 14800 14531
3/31/93 14474 15189 14838
4/30/93 14154 14853 14479
5/31/93 14602 15323 14867
6/30/93 14608 15330 14910
7/31/93 14897 15633 14850
8/31/93 15250 16003 15414
9/30/93 15465 16228 15295
10/31/93 15754 16532 15612
11/30/93 15422 16183 15463
12/31/93 16032 16823 15650
1/31/94 16567 17385 16182
2/28/94 16545 17362 15743
3/31/94 15738 16516 15057
4/30/94 16051 16844 15250
5/31/94 15828 16609 15500
6/30/94 15687 16462 15120
7/31/94 16012 16803 15616
8/31/94 16663 17485 16256
9/30/94 16433 17244 15859
10/31/94 16376 17185 16215
11/30/94 15713 16489 15625
12/31/94 16037 16829 15856
1/31/95 16168 16967 16267
2/28/95 16585 17404 16901
3/31/95 16922 17758 17400
4/30/95 17532 18398 17913
5/31/95 18249 19150 18628
6/30/95 18755 19681 19061
7/31/95 19618 20586 19693
8/31/95 19762 20737 19743
9/30/95 20002 20990 20576
10/31/95 19149 20095 20502
11/30/95 19978 20965 21402
12/31/95 20274 21276 21815
1/31/96 20212 21210 22557
2/29/96 20537 21551 22766
3/31/96 21553 22617 22986
4/30/96 21966 23051 23324
5/31/96 22429 23537 23926
6/30/96 22275 23375 24017
7/31/96 21234 22283 22956
8/31/96 21798 22875 23440
9/30/96 22694 23815 24759
10/31/96 22556 23670 25442
11/30/96 24114 25305 27365
12/31/96 24502 25712 26824
1/31/97 24976 26210 28500
2/28/97 25387 26640 28723
3/31/97 24592 25806 27543
4/30/97 24707 25928 29187
5/31/97 26853 28179 30964
6/30/97 28088 29475 32351
7/31/97 29657 31122 34925
8/31/97 29310 30757 32969
9/30/97 31302 32847 34774
10/31/97 30361 31860 33613
11/30/97 30838 32361 35169
12/31/97 31767 33336 35773
1/31/98 31144 32682 36168
2/28/98 33055 34687 38777
3/31/98 34775 36493 40763
4/30/98 34222 35913 41173
5/31/98 32890 34515 40465
6/30/98 32610 34220 42109
7/31/98 31247 32790 41660
8/31/98 26349 27651 35637
9/30/98 28001 29384 37920
10/31/98 29410 30862 41004
Graph reflects investment growth from end of month of fund commencement.
The Standard & Poor's 500 Stock Index (S&P 500) is a broad-based unmanaged
index that represents the general performance of domestically traded common
stocks of mid- to large-size companies.
The performance data quoted represent past performance and are not
indicative of future results. Total returns are historical and include the
change in share price and reinvestment of dividends and capital gain
distributions. Performance of the different classes of shares will vary based
on the differences in sales charges and class specific expenses paid by
shareholders. Class A performance with sales charge shows the effect of the
maximum 5.75% sales charge applied at the beginning of the period.
The performance figures provided for Class B shares includes the performance
of Class A shares of the Fund prior to the date that the Class B shares
commenced operations. Class B share performance is adjusted to reflect the
applicable contingent deferred sales charge payable by shareholders that redeem
Class B shares at the end of the time periods shown. In addition, Class B
shares are subject to an annual Rule 12b-1 fee of 0.75% of the average daily
net assets of Class B shares, and other class-specific expenses. These Class B
expenses are reflected in the performance data, but only for the period since
the Class B shares commenced operations. (Prior performance of Class A shares
has not been adjusted to reflect these expenses.)
Investment returns and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.The
total return figures set forth above may reflect the waiver of a portion of
certain fees for various periods since inception. In such instances and without
such waiver of fees, the total returns would have been lower.
Fee waivers are voluntary and may be modified or terminated at anytime.
*Reflects the total return on Class A shares without showing the effect of
the 5.75% maximum sales charge.
**The Bloomberg Ohio Index is a price-weighted index designed to measure
the performance of the state of Ohio's economy. The index was developed
with a base value of 100 as of December 30, 1994.
Regional Investing may involve additional risks since the companies are
located in one geographic region.
<PAGE>
VICTORY EQUITY FUNDS
The Victory International Growth Fund
Global markets in 1998 experienced extremely volatile conditions. After an
awful period from late July to early October, the European markets
recovered sharply and recouped almost 50% of their losses. The recovery can
be attributed to the decline of interest rates in the major countries and a
re-appreciation of the US dollar. With respect to emerging markets,
volatility has been especially high since August and difficult market
conditions may not be over. The Asian markets remained under pressure
during most of the year. Late in the year the focus of attention shifted
away from economic data towards economic restructuring and government
action, particularly with reference to the global banking system.
For the year, the Fund returned 5.79% on a gross basis, outperforming its
benchmark, the Morgan Stanley All-Country World Free ex-US Index**, which
returned 4.88%. The Fund has adopted this benchmark because it incorporates
emerging market exposure more appropriately than Morgan Stanley's EAFE
Index. The Morgan Stanley EAFE Index, the Fund's former benchmark, returned
9.65% for the period, largely as a result of its holdings in developed
economies. The decisions in 1997 to underweight the Southeast Asian region,
and to overweight the peripheral European markets of Spain, Italy, Portugal
and Finland, provided a significant positive impact on the Fund's
performance. In addition, exposure to emerging market countries, such as
Hungary and Greece, also contributed positively to the Fund. With respect
to sector performance, good results were obtained from our overweighted
positions in the telecom, transportation and banking sectors.
Looking into 1999, our stance is to remain underweight in Japan, but we are
looking for a more neutral position in Asia ex-Japan. The reshaping of the
European portion of the Fund has been completed. With respect to Latin
America, no changes in country allocation are anticipated.
Victory International Growth Fund
vs. MSCI EAFE & MSWI Free XUSA Index
(Dollars in thousands)
5/31/90 9429 10000 10000 10000
6/30/90 9620 10203 9912 11015
7/31/90 9883 10482 10051 11192
8/31/90 8840 9376 9075 10125
9/30/90 8267 8768 7811 8775
10/31/90 8938 9479 9028 10035
11/30/90 8900 9439 8495 9477
12/31/90 8749 9279 8633 9650
1/31/91 8983 9527 8912 9952
2/28/91 9547 10125 9867 11021
3/31/91 9234 9794 9275 10414
4/30/91 9412 9983 9366 10527
5/31/91 9274 9836 9464 10676
6/30/91 8843 9378 8769 9935
7/31/91 9092 9643 9199 10411
8/31/91 9142 9696 9012 10233
9/30/91 9360 9927 9520 10753
10/31/91 9200 9757 9655 10941
11/30/91 8970 9513 9204 10454
12/31/91 9604 10186 9680 10997
1/31/92 9543 10121 9473 10844
2/29/92 9392 9961 9134 10511
3/31/92 9069 9619 8531 9875
4/30/92 9221 9779 8571 9908
5/31/92 9634 10218 9145 10509
6/30/92 9675 10261 8712 10002
7/31/92 9291 9854 8489 9789
8/31/92 9533 10111 9021 10311
9/30/92 9493 10068 8843 10099
10/31/92 9009 9554 8379 9656
11/30/92 8958 9501 8458 9710
12/31/92 8989 9533 8502 9791
1/31/93 8968 9512 8501 9789
2/28/93 9150 9704 875 10089
3/31/93 9715 10303 952 10920
4/30/93 10653 11298 10424 11885
5/31/93 10794 11448 10644 12149
6/30/93 10532 11170 10478 12003
7/31/93 10875 11534 10845 12402
8/31/93 11702 12411 11431 13068
9/30/93 11813 12529 11173 12799
10/31/93 12035 12764 11518 13263
11/30/93 11279 11962 10511 12252
12/31/93 12217 12957 11270 13208
1/31/94 12913 13695 12223 14294
2/28/94 12903 13684 12189 14186
3/31/94 12419 13171 11664 13536
4/30/94 12701 13470 12159 13996
5/31/94 12509 13267 12089 14000
6/30/94 12610 13374 12260 14100
7/31/94 12822 13599 12378 14329
8/31/94 13155 13952 12671 14811
9/30/94 12983 13770 12272 14444
10/31/94 13437 14251 12680 14833
11/30/94 12509 13267 12071 14117
12/31/94 12549 13309 12146 14084
1/31/95 11656 12362 11680 13445
2/28/95 11571 12272 11646 13372
3/31/95 12315 13061 12373 14127
4/30/95 12655 13422 12838 14678
5/31/95 12634 13399 12685 14613
6/30/95 12931 13715 12462 14412
7/31/95 13378 14188 13238 15229
8/31/95 13165 13963 12733 14701
9/30/95 13388 14199 12982 14952
10/31/95 13101 13895 12633 14553
11/30/95 13176 13974 12985 14895
12/31/95 13517 14336 13508 15484
1/31/96 13591 14415 13563 15696
2/29/96 13591 14415 13609 15696
3/31/96 13772 14606 13898 15989
4/30/96 14176 15034 14302 16474
5/31/96 13942 14786 14039 16226
6/30/96 14059 14910 14118 16309
7/31/96 13676 14505 13705 15767
8/31/96 13666 14493 13735 15859
9/30/96 14032 14883 14100 16253
10/31/96 13841 14679 13956 16090
11/30/96 14426 15300 14511 16711
12/31/96 14368 15238 14325 16518
1/31/97 14114 14969 13823 16214
2/28/97 14169 15027 14049 16512
3/31/97 14213 15074 14100 16477
4/30/97 14323 15191 14175 16616
5/31/97 14963 15869 15097 17642
6/30/97 15558 16501 15930 18616
7/31/97 15735 16688 16188 18992
8/31/97 14820 15717 14979 17498
9/30/97 15713 16665 15818 18444
10/31/97 14676 15565 14602 16874
11/30/97 14588 15472 14453 16663
12/31/97 14702 15593 14579 16855
1/31/98 15101 16016 15246 17360
2/28/98 15957 16924 16224 18517
3/31/98 16849 17870 16724 19157
4/30/98 17131 18168 16856 19295
5/31/98 17154 18193 16774 18944
6/30/98 17009 18040 16901 18874
7/31/98 17492 18552 17073 19052
8/31/98 14879 15780 14958 16366
9/30/98 14420 15293 14499 16020
10/31/98 15526 16467 16010 17698
Graph reflects investment growth from end of month of fund commencement.
*MSCI EAFE Index -- Morgan Stanley Capital International Europe, Australia,
unmanaged index that represents the general performance of over 1,000
companies of the European, Australian and Far Eastern equity markets.
**MSWI Free XUSA Index -- All developed and emerging markets in the Morgan
Stanley universe excluding the USA, with free versions of countries where
they exist. Total of 47 countries currently included.
Total Return
As of 10/31/98
INTERNATIONAL GROWTH INTERNATIONAL GROWTH
Class A Class B
Maximum Contingent
Net Asset Offering Net Asset Deferred
Value Price Value Charges
One Year 5.79% -0.28% 4.44% .51%
Three Years 5.82% 3.76% 4.67% 3.75%
Five Years 5.23% 3.98% 4.54% 4.37%
Average Annual
Since Inception
5/18/90 6.16% 5.42% 5.75% 5.75%
Portfolio Investments
Britain 15.1%
Japan 15.0%
France 12.5%
Switzerland 9.7%
Germany 6.2%
Spain 6.1%
Netherlands 5.2%
Italy 4.8%
United States 4.2%
Ireland 2.9%
Other Assets Net of Liabilities 18.3%
The performance data quoted represent past performance and are not
indicative of future results. Total returns are historical and include the
change in share price and reinvestment of dividends and capital gain
distributions. Performance of the different classes of shares will vary based
on the differences in sales charges and class specific expenses paid by
shareholders. Class A performance with sales charge shows the effect of the
maximum 5.75% sales charge applied at the beginning of the period.
The performance figures provided for Class B shares includes the performance
of Class A shares of the Fund prior to the date that the Class B shares
commenced operations. Class B share performance is adjusted to reflect the
applicable contingent deferred sales charge payable by shareholders that redeem
Class B shares at the end of the time periods shown. In addition, Class B
shares are subject to an annual Rule 12b-1 fee of 0.75% of the average daily
net assets of Class B shares, and other class-specific expenses. These Class B
expenses are reflected in the performance data, but only for the period since
the Class B shares commenced operations. (Prior performance of Class A shares
has not been adjusted to reflect these expenses.)
Investment returns and principle value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
The total return figures set forth above may reflect the waiver of a portion
of certain fees for various periods since the Fund's inception. In such
instances and without such waiver of fees, the total returns would have been
lower.
Fee waivers are voluntary and may be modified or terminated at anytime.
International investing is subject to certain factors such as currency
exchange rate volatility, possible political, social and economic
instability, foreign taxation and differences in auditing and other
financial standards.
<PAGE>
VICTORY EQUITY FUNDS
The Victory Special Growth Fund
Small cap stocks have lagged the broader market for the past year, peaking
out in April and leading the market down, most sharply during the third
calendar quarter. Throughout the past year, as investors have been
preoccupied with fears of a global recession and credit crunch, they have
placed a counter-intuitive premium on the perceived safety and liquidity of
large cap stocks. In more typical market times, a premium is usually placed
on earnings growth. Currently, stocks with the strongest growth are selling
at the cheapest multiples. This fall, small stocks hit their lowest
valuations relative to large companies in thirty-five years.
There is no way to gild the lily; the past year was ugly for small-cap
growth stocks and the Fund lagged the Russell 2000 Growth Index.* The two
primary factors contributing to our underperformance were market
capitalization and our definite tilt towards growth. The smaller the
capitalization, generally the greater the loss.
We continue to actively trade positions, which is essential, especially in
these turbulent markets. With three catalysts for small cap outperformance
now in place: 1) superior earnings growth, 2) the lowest valuations in three
decades and 3) the imminent decline in short-term interest rates, we expect
to see a snap-back in performance similar to a coiled-spring releasing after
being severely compressed. In the meantime, we are keeping an intense focus
on the companies we own, firm in our conviction that the portfolio losses will
be recoverable in the near future.
Total Return
As of 10/31/98
Maximum
Net Asset Offering
Value Price
One Year -33.19% -37.01%
Three Years -1.18% -3.11%
Average Annual
Since Inception
1/11/94 2.79% 1.53%
Portfolio Investments
Basic Industries 1.7%
Capital Goods 0.1%
Consumer Cyclicals 19.7%
Consumer Staples 24.9%
Energy 10.2%
Financial 3.5%
Technology 27.6%
Utilities 9.4%
Other Assets Net of Liabilities 2.9%
Victory Special Growth Fund
vs. Russell 2000
(Dollars in thousands)
1/31/94 9425 10000 10000
2/28/94 9576 10160 9964
3/31/94 8944 9490 9438
4/30/94 9255 9820 9494
5/31/94 8916 9460 9387
6/30/94 8426 8940 9068
7/31/94 8615 9140 9217
8/31/94 9076 9630 9731
9/30/94 9095 9650 9699
10/31/94 9227 9790 9660
11/30/94 8869 9410 9270
12/31/94 9148 9706 9519
1/31/95 8968 9515 9399
2/28/95 9252 9816 9790
3/31/95 9629 10217 9959
4/30/95 9950 10557 10180
5/31/95 10045 10657 10355
6/30/95 10498 11138 10892
7/31/95 11168 11849 11520
8/31/95 11253 11939 11758
9/30/95 11517 12220 11968
10/31/95 11149 11829 11433
11/30/95 11621 12330 11913
12/31/95 11970 12701 12227
1/31/96 11895 12621 12214
2/29/96 12471 13232 12595
3/31/96 12660 13432 12851
4/30/96 13566 14393 13539
5/31/96 14085 14944 14072
6/30/96 13254 14063 13494
7/31/96 11942 12671 12316
8/31/96 13066 13863 13031
9/30/96 13830 14674 13540
10/31/96 13349 14163 13331
11/30/96 13717 14554 13880
12/31/96 14134 14997 14244
1/31/97 14421 15301 14529
2/28/97 12988 13780 14177
3/31/97 11950 12679 13508
4/30/97 11574 12280 13545
5/31/97 13324 14137 15052
6/30/97 13937 14787 15697
7/31/97 15024 15940 16428
8/31/97 15854 16821 16804
9/30/97 17337 18394 18033
10/31/97 16101 17083 17241
11/30/97 15162 16087 17130
12/31/97 15215 16143 17429
1/31/98 14832 15736 17154
2/28/98 15799 16763 18423
3/31/98 16328 17324 19183
4/30/98 16430 17432 19289
5/31/98 14381 15259 18250
6/30/98 15439 16381 18288
7/31/98 13346 14160 16808
8/31/98 9846 10447 13544
9/30/98 10679 11331 14604
10/31/98 10758 11414 15199
Graph reflects investment growth from end of month of fund commencement.
*The Russell 2000 Index (Russell 2000) is a broad-based unmanaged index
that represents the general performance of domestically traded common
stocks of small- to mid-sized companies.
The performance data quoted represent past performance and are not
indicative of future results. Total returns are historical and include the
change in share price and the reinvestment of dividends and capital gains
distributions, and unless indicated show the effect of the maximum 5.75%
sales charge. Investment returns and principal value will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than their
original cost. Total return figures set forth above may reflect the waiver
of a portion of certain fees for various periods since the Fund's inception
date. In such cases and without such waiver of fees, the total returns
would have been lower. Small capitalization funds typically carry
additional risks since smaller companies generally have a higher risk of
failure and, by definition, are not as well established as "blue-chip"
companies. Historically, smaller companies' stocks have experienced a greater
degree of market volatility than average.
Fee waivers are voluntary and may be modified or terminated at anytime.
<PAGE>
HOW TO READ YOUR FINANCIAL STATEMENT
This guide will assist you in extracting information from the report which is
most important to you.
The Financial Statements summarize and describe the Fund's financial
transactions. They are broken down into four different statements.
THE STATEMENT OF ASSETS AND LIABILITIES
Presents all of the assets and liabilities of each mutual Fund. This is each
individual Fund's "balance sheet" as of the date of the statement.
1. Summary of the mutual fund's assets stated at market value including
investments owned, dividends, interest and other amounts owed to each Fund by
outside parties, and other assets owned by each fund.
2. Summary of all amounts owed by each Fund including distributions declared
but not yet paid to shareholders and other amounts due to outside parties.
3. Summary of the amounts that comprise each Fund's net assets including
capital, undistributed net investment income, unrealized gains from
investments owned and realized gains from investments sold.
4. The number of shares owned by shareholders of each Fund.
5. The market worth of each mutual fund's total net assets divided by the
number of outstanding shares.
6. The net asset value per share plus sales charges.
THE STATEMENT OF OPERATIONS
Presents the results of operating activities during the period.
1. Investment income includes dividend and interest income earned from
holding investments.
2. Summary of expenses incurred by each Fund from its operations.
3. Summary of realized gains or losses from selling each Fund's investments
and the change during the period in unrealized gains or losses from holding
each Fund's investments.
4. Net change due to mutual fund operations.
<PAGE>
HOW TO READ YOUR FINANCIAL STATEMENT
The Notes to Financial Statements provide explanatory information to the
financial statements. These include information on accounting methods used by
the mutual Fund, contractual arrangements between the Fund and its service
providers, certain transactions affecting the Fund, and other general
information about the Fund.
THE STATEMENT OF CHANGES IN NET ASSETS
Presents the activity that affects the value of total net assets of each Fund
during the two most recent reporting periods.
1. See Statement of Operations.
2. Distributions declared to shareholders from net investment income or from
net realized gains during the periods. Each Fund declares distributions based
on investment income and taxable realized gains, which may differ from the
Fund's operations for financial statement purposes. Thus, distributions may
exceed net investment income or realized gains.
3. Dollar amount of mutual fund shares issued, reinvested and redeemed during
the periods. Detail of this activity pertaining to Funds with two share
classes is presented in the footnotes.
4. Compares total net assets as of the end of the current and prior periods.
5. Number of mutual fund shares issued, reinvested and redeemed during the
periods. Detail of this activity pertaining to Funds with two share classes
is presented in the footnotes.
THE FINANCIAL HIGHLIGHTS
Present changes in net asset value per share as well as certain ratios and
supplementary data for the five most recent reporting periods.
1. The table presents changes in the net asset value per share caused by the
Fund's investment activities and distributions.
2. Total return presents the historical return on an investment in the Fund
throughout the period including changes in net asset value per share and
reinvestment of dividends. The total return presented excludes sales charges.
3. Actual ratios of expenses and net investment income to average net assets
during the period.
4. Hypothetical ratios of expenses and net investment
income to average net assets during the period assuming no fee waivers or
expense reimbursements had occurred.
5. Portfolio turnover presents the rate of investment activity. Higher
turnover indicates more active investment purchases and sales.
<PAGE>
THE VICTORY PORTFOLIOS Schedule of Investments
U.S. Government Obligations Fund October 31, 1998
(Amounts in Thousands)
Principal Amortized
Security Description Amount Cost
U.S. Treasury Notes (19.6%)
5.63%, 11/30/98 (b) $ 25,000 $ 25,002
5.75%, 12/31/98 (b) 50,000 50,020
6.25%, 3/31/99 (b) 100,000 100,295
6.38%, 4/30/99 (b) 100,000 100,396
6.25%, 5/31/99 (b) 50,000 50,198
6.00%, 6/30/99 (b) 50,000 50,154
5.88%, 8/31/99 (b) 50,000 50,154
Total U.S. Treasury Notes
(Amortized Cost $426,219) 426,219
Repurchase Agreements (80.4%)
Barclays de Zoete Wedd Securities, Inc.,
5.40%, 11/2/98, (Collateralized by
$94,681 various U.S. Government
Securities, 0.00%-6.75%,
4/29/99-7/31/99, market
value -- $96,900) 95,000 95,000
Chase Securities, Inc., 5.38%,
11/2/98, (Collateralized by
$89,275 U.S. Treasury
Notes, 6.75%-8.75%,
6/30/99-2/15/01, market
value -- $96,901) 95,000 95,000
Deutsche Bank,
5.41%, 11/2/98, (Collateralized
by $91,188 U.S. Treasury Notes,
6.00%-8.00%, 8/15/99-5/15/01,
market value -- $102,000) 100,000 100,000
Donaldson-Lufkin Jenrette
Securities Corp., 5.43%,
11/2/98, (Collateralized by
$510,402 various U.S.
Government Securities,
0.00%-7.50%, 11/15/98-2/15/26,
market value -- $553,346) 542,496 542,496
Goldman Sachs Group L.P.,
5.38%, 11/2/98, (Collateralized
by $62,401 U.S. Treasury Bond,
9.25%, 2/15/16, market
value -- $91,800) 90,000 90,000
Greenwich Partners, 5.40%,
11/2/98, (Collateralized by
$95,495 U.S. Treasury Note,
7.75%, 11/30/99, market
value -- $102,001) 100,000 100,000
Harris- Nesbitt Burns Securities,
5.40%, 11/2/98, (Collateralized
by $194,734 U.S. Treasury Notes,
0.00%, 11/15/98-8/15/27, market
value -- $91,800) 90,000 90,000
Lehman Brothers, Inc., 5.45%,
11/2/98, (Collateralized by
$587,545 various U.S.
Government Securities,
5.75%-8.88%, 2/28/99-2/15/19,
market value -- $550,800) 540,000 540,000
Morgan Stanley Dean Witter, 5.38%,
11/2/98, (Collateralized by $97,680
U.S. Treasury Bill, 0.00%, 1/7/99,
market value -- $96,910) 95,000 95,000
Total Repurchase Agreements
(Cost $1,747,496) 1,747,496
Securities Purchased With Cash Collateral (3.6%)
Repurchase Agreements:
Prudential Bache Treasury
5.21%, 12/31/98
(Collateralized by $52,063
various U.S. Government
securities, 5.50%-12.75%,
10/4/02-10/1/28, market
value $53,105) 52,063 52,063
Deutsche Bank, 5.21%, 11/30/98
(Collateralized by $27,185
Aames Mortgage Trust,
6.37%, 6/15/27, Luberman's
Mutual, 8.45%, 12/1/2097,
market value $26,844) 26,063 26,062
Total Securities Purchased
With Cash Collateral (Cost $78,125) 78,125
Total Investments (Amortized Cost
$2,251,840) (a) -- 103.6% 2,251,840
Liabilities in excess of other
assets -- (3.6)% (78,816)
TOTAL NET ASSETS -- 100.0% $2,173,024
(a) Cost and value for federal income tax and financial reporting purposes
are the same.
(b) All or a portion of this security was loaned as of October 31, 1998.
See notes to financial statements.
<PAGE>
THE VICTORY PORTFOLIOS Schedule of Investments
Prime Obligations Fund October 31, 1998
(Amounts in Thousands)
Principal Amortized
Security Description Amount Cost
Bankers Acceptances (0.7%)
Toronto Dominion Bank Ltd.,
5.49%, 12/17/98 $10,267 $ 10,195
Total Bankers Acceptances
(Amortized Cost $10,195) 10,195
Certificates of Deposit (7.3%)
Bankers Trust New York,
5.70%, 3/5/99 10,000 9,997
Bankers Trust New York,
5.84%, 4/30/99 10,000 10,003
Canadian Imperial Bank of Commerce,
5.74%, 4/1/99 10,000 9,998
Deutschbank,
5.70%, 3/30/99 10,000 9,997
Harris Bank and Trust,
5.54%, 11/2/98 9,000 9,000
National Westminster,
5.74%, 4/28/99 5,000 5,000
Royal Bank of Canada,
5.70%, 6/23/99 6,000 5,999
Societe Generale,
5.25%*, 11/2/98 5,000 4,998
Societe Generale,
5.33%*, 11/2/98 25,000 24,990
Societe Generale,
5.32%*, 11/2/98 10,000 9,995
Total Certificates of Deposit
(Amortized Cost $99,977) 99,977
Commercial Paper (58.1%)
Asset Securitization Capital Corp.,
5.18%, 1/28/99 10,000 9,873
Asset Securitization Capital Corp.,
5.10%, 2/12/99 15,000 14,781
AVCO Financial Services,
5.51%, 11/16/98 17,000 16,961
AVCO Financial Services,
5.44%, 11/20/98 10,000 9,971
Brown Forman Corp.,
5.25%, 11/2/98 5,000 4,999
Brown Forman Corp.,
5.49%, 11/12/98 9,695 9,679
Brown Forman Corp.,
5.13%, 11/19/98 12,975 12,942
Cannon USA, Inc.,
5.36%, 11/6/98 40,000 39,970
Delaware Funding Corp.,
5.35%, 11/12/98 24,000 23,961
Delaware Funding Corp.,
5.50%, 11/20/98 15,000 14,959
Delaware Funding Corp.,
5.31%, 11/24/98 5,038 5,021
Delaware Funding Corp.,
5.17%, 12/15/98 10,000 9,937
Delaware Funding Corp.,
5.17%, 1/20/99 5,203 5,143
Diageo Capital PLC,
5.48%, 12/1/98 6,000 5,973
Diageo Capital PLC,
5.00%, 12/22/98 15,000 14,894
Fleet Funding Corp.,
5.51%, 11/2/98 50,000 49,991
Fleet Funding Corp.,
5.22%, 11/13/98 4,636 4,628
Fleet Funding Corp.,
5.32%, 11/24/98 10,000 9,966
Fuji Photo Co. Ltd.,
5.25%, 12/14/98 15,000 14,906
General Electric Capital Corp.,
5.75%, 11/2/98 45,000 44,992
General Electric Capital Corp.,
5.12%, 12/2/98 6,000 5,974
General Motors Acceptance Corp.,
5.13%, 12/7/98 7,000 6,964
General Motors Acceptance Corp.,
5.49%, 1/14/99 20,000 19,781
Great Lakes Chemical Corp.,
5.51%, 11/16/98 10,000 9,976
Iowa Student Loan Liquidity Corp.,
5.35%, 11/20/98 17,165 17,117
Iowa Student Loan Liquidity Corp.,
5.25%, 12/17/98 8,000 7,946
Matson Navigation Co., Inc.,
5.22%, 11/20/98 10,000 9,972
Mont Blanc Capital Corp.,
5.52%, 11/5/98 25,000 24,985
Mont Blanc Capital Corp.,
5.47%, 11/20/98 20,000 19,942
Mont Blanc Capital Corp.,
5.39%, 12/15/98 10,000 9,934
Monte Rosa Capital Corp.,
5.50%, 11/16/98 25,000 24,943
Monte Rosa Capital Corp.,
5.18%, 1/14/99 4,580 4,531
Monte Rosa Capital Corp.,
5.22%, 1/21/99 10,000 9,883
<PAGE>
Morgan Stanley Dean Witter,
5.49%, 11/13/98 25,000 24,954
Nalco Chemical Corp.,
5.49%, 11/23/98 5,000 4,984
Rabobank Finance Corp.,
5.73%, 11/2/98 20,000 19,997
Redwood Receivables Corp.,
5.18%, 12/10/98 13,796 13,719
Saloman Smith Barney,
5.10%, 12/10/98 10,000 9,945
Salomon Smith Barney,
5.52%, 11/2/98 20,000 19,997
Salomon Smith Barney,
5.51%, 11/16/98 10,000 9,977
SBC Communications, Inc.,
5.45%, 11/3/98 10,000 9,997
Sony Capital Corp.,
5.22%, 12/10/98 7,000 6,961
Sony Capital Corp.,
5.22%, 1/13/99 25,000 24,735
Southern California Edison Co.,
5.25%, 11/12/98 5,000 4,992
Southern California Edison Co.,
5.25%, 11/18/98 18,400 18,354
Texas Agricultural Finance Authority,
5.25%, 1/11/99 8,000 7,917
Toronto Dominion,
5.17%, 11/30/98 10,000 9,959
Toronto Dominion,
5.24%, 12/2/98 25,000 24,887
Transamerica Financial Corp.,
5.48%, 12/23/98 14,000 13,889
Transamerica Financial Corp.,
5.07%, 1/21/99 15,000 14,829
Weyerhauser Real Estate,
5.05%, 11/20/98 16,600 16,556
Xerox Corp.,
5.17%, 12/3/98 30,000 29,862
Xerox Corp.,
5.19%, 12/10/98 20,000 19,888
Total Commercial Paper
(Amortized Cost $801,894) 801,894
Corporate Bonds (26.7%)
Associates Corp., N.A.,
6.75%, 6/28/99 4,500 4,523
Astro Aluminum,
5.20%*, 11/5/98**,
LOC National City Bank 1,525 1,525
Baylis Group Partnership,
5.15%*, 11/4/98**,
LOC Societe Generale 2,980 2,980
Beta Finance,
4.79%*, 11/3/98 10,000 10,000
Beta Finance,
4.74%*, 11/3/98 10,000 10,000
Carelife, Inc.,
5.20%*, 11/5/98**,
LOC National City Bank 2,475 2,475
CIT Group Holdings,
5.88%, 12/15/98, MTN 8,800 8,800
Cleveland Steel Container,
5.20%*, 11/5/98**,
LOC National City Bank 1,270 1,270
Diageo Capital PLC,
7.00%, 6/15/99 7,713 7,764
Dome Corp.,
5.26%*, 11/4/98**,
LOC Societe Generale 2,820 2,820
FCC National Bank,
5.70%, 1/7/99 10,000 10,000
Ford Motor Credit Corp.,
5.63%, 12/15/98 4,020 4,019
Ford Motor Credit Corp.,
8.45%, 12/30/98, MTN 5,000 5,020
General American Life Insurance,
5.79%*, 12/31/98 45,000 44,999
General Motor Acceptance Corp.,
6.70%, 7/2/99, MTN 5,000 5,031
General Motors Acceptance Corp.,
5.95%, 12/28/98, MTN 5,000 5,003
General Motors Acceptance Corp.,
6.00%, 12/30/98, MTN 9,980 9,986
General Motors Acceptance Corp.,
8.38%, 2/3/99, MTN 5,000 5,031
General Motors Acceptance Corp.,
6.50%, 4/16/99, MTN 5,000 5,018
GMH Enterprises,
5.20%*, 11/5/98**,
LOC National City Bank 1,475 1,475
Highland Road Partners,
5.20%*, 11/5/98**,
LOC National City Bank 950 950
John Deere Capital Corp.,
6.13%, 2/5/99, MTN 4,000 4,004
John Deere Capital Corp.,
6.30%, 6/1/99 8,965 8,996
Lehman Brothers Holding, Inc.,
5.47%*, 11/12/98, MTN 10,000 10,000
<PAGE>
Lehman Brothers Holding, Inc.,
5.22%*, 11/23/98, MTN 40,000 39,999
MCMC Pob LII,
5.20%*, 11/5/98**,
LOC National City Bank 1,605 1,605
Miami Valley,
5.20%*, 11/5/98**, MTN 2,000 2,000
Morgan Guaranty Trust Co.,
5.17%*, 11/27/98 25,000 24,991
Morgan Stanley Dean Witter,
5.63%, 3/1/99 3,800 3,798
Morgan Stanley Dean Witter,
5.60%*, 12/15/98**, MTN 8,000 8,000
Norwest Financial Inc.,
6.25%, 3/15/99 2,500 2,504
Olympic Steel Corp.,
5.24%*, 11/5/98**,
LOC Fifth Third Bank 300 300
Private Export Funding Corp.,
4.45%*, 11/3/98 13,500 13,486
Reichert Limited Partnership,
5.20%*, 11/5/98**,
LOC National City Bank 2,980 2,980
Richfield Technology Associates,
5.20%*, 11/5/98**,
LOC Star Bank 4,500 4,500
RKS LLC Health Care,
5.30%*, 11/4/98**,
LOC AmSouth Bank 9,500 9,500
Salomon Smith Barney,
6.70%, 12/1/98 4,530 4,533
Salomon Smith Barney,
7.43%, 12/30/98, MTN 2,000 2,006
Salomon Smith Barney,
8.69%, 3/1/99, MTN 4,000 4,040
Salomon Smith Barney,
6.25%, 10/1/99 10,000 10,089
Sea River Maritime, Inc.,
5.37%*, 11/2/98**,
Guaranteed by Exxon Corp. 13,600 13,600
SGS Tool,
5.20%*, 11/5/98,
LOC National City 1,920 1,920
Sharp Electronics,
5.66%*, 11/4/98 3,000 3,000
Southwestern Ohio Steel,
5.24%*, 11/5/98**,
LOC Star Bank 5,000 5,000
Tell-Schipper Properties, Inc.,
5.21%*, 11/5/98**,
LOC Bank One 1,320 1,320
Transamerica Finance Corp.,
5.45%*, 1/22/99**, MTN 35,000 34,999
Zanetos Partnership Project,
5.20%*, 11/5/98**,
LOC National City Bank 2,615 2,615
Total Corporate Bonds
(Amortized Cost $368,474) 368,474
Municipal Bonds (1.2%)
Minnesota (0.2%):
Cloquet Industrial Facilities Revenue,
Potlach Corp., 5.30%*,
11/4/98, LOC Credit Suisse 2,400 2,400
Ohio (0.5%):
Cuyahoga County EDR,
Gateway Arena Project,
Series B, 5.14%*, 11/4/98**,
LOC Canadian Imperial
Bank of Commerce 7,200 7,200
Virginia (0.5%):
Industrial Developement
Authority of Bedford,
5.62%, 11/16/98,
LOC Society Generale 7,000 7,000
Total Municipal Bonds
(Amortized Cost $16,600) 16,600
U.S. Government Agencies (3.8%)
Federal Home Loan Bank (1.4%):
4.52%*, 11/3/98 20,000 19,964
Federal National Mortgage Assoc. (2.0%):
5.40%, 12/30/98,
Callable 11/2/98 @ 100 10,000 9,993
5.60%, 4/22/99, MTN 17,000 17,044
27,037
Student Loan Marketing Assoc. (0.4%):
4.38%*, 11/3/98** 5,000 4,990
Total U.S. Government Agencies
(Amortized Cost $51,991) 51,991
<PAGE>
Repurchase Agreements (2.2%)
Paine Weber, 5.40%, 11/2/98,
(Collateralized by $38,160
various U.S. Government
securities, 0.00%,
4/15/03-10/15/04, market
value -- $30,768) 30,162 30,162
Total Repurchase Agreements
(Cost $30,162) 30,162
Total Investments
(Amortized Cost $1,379,293) (a) -- 100.0% 1,379,293
Liabilities in excess of other assets -- 0.0% (580)
TOTAL NET ASSETS -- 100.0% $1,378,713
(a) Cost and value for federal income tax and financial reporting purposes
are the same.
* Variable rate securities having liquidity agreements. The interest rate,
which will change periodically, is based upon an index of market
interest rates. The rate reflected on the Schedule of Investments is
the rate in effect at October 31, 1998. The date reflects the next rate
change date.
** Put and demand features exist allowing the Fund to require repurchase
of the investment within variable time periods less than one year.
EDR -- Economic Development Revenue
LOC -- Letter of Credit
MTN -- Medium Term Note
See notes to financial statements.
<PAGE>
THE VICTORY PORTFOLIOS Schedule of Investments
Financial Reserves Fund October 31, 1998
(Amounts in Thousands)
Principal Amortized
Security Description Amount Cost
Bankers Acceptances (2.4%)
Bank of Hawaii,
5.20%, 11/18/98 $ 4,000 $ 3,990
Bank of Hawaii,
5.43%, 12/16/98 5,350 5,314
Bank of Hawaii,
5.43%, 12/17/98 9,325 9,261
Total Bankers Acceptances
(Amortized Cost $18,565) 18,565
Certificates of Deposit (7.0%)
Bankers Trust New York,
5.70%, 3/5/99 5,000 4,999
Bankers Trust New York,
5.84%, 4/30/99 6,000 6,002
Canadian Imperial Bank of Commerce,
5.74%, 4/1/99 10,000 9,998
Deutschbank,
5.70%, 3/30/99 5,000 4,999
Harris Bank and Trust,
5.54%, 11/2/98 5,000 5,000
Royal Bank of Canada,
5.70%, 6/23/99 4,000 3,999
Societe Generale,
5.33%*, 11/2/98 20,000 19,992
Total Certificates of Deposit
(Amortized Cost $54,989) 54,989
Commercial Paper (38.0%)
Asset Securitization Capital Corp.,
5.10%, 2/12/99 20,000 19,708
AVCO Financial Services,
5.44%, 11/20/98 10,000 9,971
AVCO Financial Services,
5.43%, 12/15/98 9,000 8,940
Delaware Funding Corp.,
5.35%, 11/12/98 20,000 19,967
Delaware Funding Corp.,
5.50%, 11/20/98 5,504 5,488
Delaware Funding Corp.,
5.20%, 12/1/98 5,031 5,009
Fleet Funding Corp.,
5.51%, 11/2/98 10,000 9,998
Fleet Funding Corp.,
5.22%, 11/13/98 17,000 16,970
Fleet Funding Corp.,
5.32%, 11/23/98 10,643 10,608
Fuji Photo Co., Ltd.,
5.25%, 12/14/98 10,000 9,937
General Electric Capital Corp.,
5.75%, 11/2/98 25,000 24,997
General Electric Capital Corp.,
5.50%, 11/4/98 3,100 3,099
General Electric Capital Corp.,
5.30%, 11/17/98 4,500 4,489
General Electric Capital Corp.,
5.22%, 12/17/98 3,500 3,477
General Motors Acceptance Corp.,
5.49%, 1/14/99 5,000 4,944
Great Lakes Chemical Corp.,
5.17%, 1/6/99 9,500 9,410
Iowa Student Loan Liquidity Corp.,
5.35%, 11/20/98 10,000 9,972
Iowa Student Loan Liquidity Corp.,
5.25%, 12/17/98 3,789 3,764
McCormick & Co.,
5.40%, 11/17/98 10,000 9,976
Mont Blanc Capital Corp.,
5.52%, 11/5/98 10,000 9,994
Mont Blanc Capital Corp.,
5.47%, 11/20/98 20,000 19,942
Nalco Chemical Corp.,
5.40%, 11/13/98 5,000 4,991
Rabobank Finance Corp.,
5.73%, 11/2/98 5,000 4,999
Salomon Smith Barney,
5.51%, 11/16/98 5,000 4,989
Sony Capital Corp.,
5.22%, 12/10/98 6,000 5,967
Texas Agricultural Finance Authority,
5.25%, 1/11/99 6,000 5,938
Toronto Dominion,
5.17%, 11/30/98 5,000 4,979
Toronto Dominion,
5.24%, 12/2/98 25,000 24,887
Xerox Corp.,
5.19%, 12/10/98 21,000 20,882
Total Commercial Paper
(Amortized Cost $298,292) 298,292
Corporate Bonds (39.0%)
Associates Corp., N.A.,
6.00%, 3/15/99 3,000 3,003
Associates Corp., N.A.,
6.75%, 6/28/99 3,000 3,015
<PAGE>
Austin Printing Co.,
5.20%*, 11/5/98**,
LOC Bank One 1,735 1,735
Automated Packaging System,
5.20%*, 11/5/98**,
LOC National City Bank 2,760 2,760
Bee Holdings, Inc.,
5.20%*, 11/5/98** 1,770 1,770
Beta Finance,
4.79%*, 11/3/98 10,000 10,000
Beta Finance,
4.73%*, 11/3/98 10,000 10,000
Buckeye Corrugated,
5.20%*, 11/5/98**,
LOC National City Bank 3,025 3,025
Diageo Capital PLC,
7.00%, 6/15/99 3,375 3,410
FCC National Bank,
5.70%, 1/7/99 5,000 5,000
Ford Motor Credit Corp.,
5.12%, 11/12/98 7,500 7,488
Ford Motor Credit Corp.,
5.47%, 11/24/98 7,000 6,976
Ford Motor Credit Corp.,
5.63%, 12/15/98 4,000 3,999
Ford Motor Credit Corp.,
8.00%, 1/15/99 5,000 5,022
Ford Motor Credit Corp.,
7.90%, 5/17/99, MTN 3,500 3,540
Galileo Corp.,
5.30%*, 11/4/98**,
LOC LaSalle Bank 11,300 11,300
General American Life Insurance,
5.79%*, 12/31/98 35,000 34,999
General Motors Acceptance Corp.,
6.63%, 3/22/99, MTN 2,000 2,009
General Motors Acceptance Corp.,
6.50%, 4/16/99, MTN 5,000 5,018
Hancor, Inc.,
5.20%*, 11/5/98**,
LOC National City Bank 1,050 1,050
IBM Credit Corp.,
5.69%, 3/9/99, MTN 3,000 3,000
Ivex of Delaware (Kama Project),
5.30%*, 11/5/98**,
LOC Societe Generale 6,500 6,500
John Deere Capital Corp.,
6.13%, 2/5/99, MTN 3,000 3,003
John Deere Capital Corp.,
6.30%, 6/1/99 1,500 1,505
Legendary Properties,
5.20%*, 11/5/98,
LOC National City Bank 1,400 1,400
Lehman Brothers Holding, Inc.,
5.47%*, 11/12/98, MTN 8,000 8,000
Lehman Brothers Holding, Inc.,
5.22%*, 11/23/98, MTN 22,000 22,000
Merrill Lynch,
6.38%, 6/14/99, MTN 5,000 5,018
Morgan Guaranty Trust Co.,
5.17%*, 11/27/98 15,000 14,995
Morgan Stanley Dean Witter,
7.88%, 12/15/98 11,500 11,527
Morgan Stanley Dean Witter,
5.60%*, 12/15/98**, MTN 15,000 15,000
Private Export Funding Corp.,
4.45%*, 11/3/98 2,250 2,247
Salomon Smith Barney,
5.97*, 12/1/98, MTN 5,800 5,802
Salomon Smith Barney,
8.69%, 3/1/99, MTN 3,000 3,030
Salomon Smith Barney,
6.25%, 10/1/99 6,500 6,558
Sea River Maritime, Inc.,
5.37%*, 11/2/98**,
Guaranteed by Exxon Corp. 22,600 22,600
SGS Tool Co.,
5.20%*, 11/5/98**,
LOC National City Bank 1,260 1,260
Shelbourne Realty,
5.20%*, 11/5/98**,
LOC Star Bank 6,960 6,960
Transamerica Finance Corp.,
5.60%, 11/30/98, MTN 5,000 4,998
Transamerica Finance Corp.,
5.74%, 12/9/98, MTN 3,500 3,499
Transamerica Finance Corp.,
5.45%*, 1/22/99**, MTN 30,000 30,000
Zanetos Partnership Project,
5.20%*, 11/5/98**,
LOC National City Bank 2,165 2,165
Total Corporate Bonds
(Amortized Cost $306,186) 306,186
<PAGE>
Municipal Bonds (0.6%)
Virginia (0.6%):
Industrial Development
Authority of Bedford,
5.62%, 11/16/98,
LOC Society Generale 5,000 5,000
Total Municipal Bonds
(Amortized Cost $5,000) 5,000
U.S. Government Agencies (9.8%)
Federal Home Loan Bank (1.3%):
4.52%*, 11/3/98 10,000 9,982
Federal National Mortgage Assoc. (7.0%):
5.40%, 12/30/98,
Callable 11/2/98 @ 100 10,000 9,993
5.60%, 4/22/99, MTN 10,400 10,426
4.35%*, 11/3/98 15,000 15,000
4.30%*, 11/3/98 20,000 20,001
55,420
Student Loan Marketing Assoc. (1.5%):
4.38%*, 11/3/98** 11,575 11,559
Total U.S. Government Agencies
(Amortized Cost $76,961) 76,961
Repurchase Agreements (3.1%)
Paine Weber, 5.40%, 11/2/98,
(Collateralized by $33,904
various U.S. Government
securities, 0.00%-10.35%,
2/8/04-4/15/19, market
value $24,954) 24,464 24,464
Total Repurchase Agreements
(Cost $24,464) 24,464
Total Investments
(Amortized Cost $784,457) (a) -- 99.9% 784,457
Other assets in excess of liabilities -- 0.1% 1,063
TOTAL NET ASSETS -- 100.0% $785,520
(a) Cost and value for federal income tax and financial reporting purposes
are the same.
* Variable rate securities having liquidity agreements. The interest rate,
which will change periodically, is based upon an index of market interest
rates. The rate reflected on the Schedule of Investments is the rate in
effect at October 31, 1998. The date reflects the next rate change date.
** Put and demand features exist allowing the Fund to require the repurchase
of the investment within variable time periods less than one year.
LOC -- Letter of Credit
MTN -- Medium Term Note
See notes to financial statements.
<PAGE>
<TABLE>
Statements of Assets and Liabilities
The Victory Portfolios October 31, 1998
(Amounts in Thousands, Except Per Share Amounts)
<CAPTION>
U.S. Government Prime Financial
Obligations Obligations Reserves
Fund Fund Fund
<S> <C> <C> <C>
ASSETS:
Investments, at amortized cost $ 426,219 $1,349,131 $759,993
Repurchase agreements, at cost 1,825,621 30,162 24,464
Total 2,251,840 1,379,293 784,457
Cash -- -- 1
Interest receivable 8,633 5,575 4,640
Receivable for capital shares issued -- 3 --
Prepaid expenses and other assets 16 21 6
Total Assets 2,260,489 1,384,892 789,104
LIABILITIES:
Dividends payable 8,196 5,359 3,192
Payable for return of collateral received 78,125 -- --
Accrued expenses and other payables:
Investment advisory fees 649 397 335
Administration fees 26 17 11
Shareholder service fees -- 274 --
Shareholder service fees -- Select Shares 319 -- --
Custodian fees 45 28 19
Accounting fees 2 1 1
Transfer agent fees 35 24 15
Other 68 79 11
Total Liabilities 87,465 6,179 3,584
NET ASSETS:
Capital 2,173,023 1,378,697 785,526
Undistributed (distributions in excess of) net investment income -- 16 --
Accumulated undistributed net realized gains
(losses) from investment transactions 1 -- (6)
Net Assets $2,173,024 $1,378,713 $785,520
Net Assets
Investor Shares $ 571,104 -- --
Select Shares 1,601,920 -- --
Total $2,173,024 -- --
Outstanding units of beneficial interest (shares)
Investor Shares 571,076 -- --
Select Shares 1,602,005 -- --
Total 2,173,081 1,378,696 785,418
Net asset value
Offering and redemption price per share -- $ 1.00 $ 1.00
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>
Statements of Operations
The Victory Portfolios For the Year Ended October 31, 1998
(Amounts in Thousands)
<CAPTION>
U.S. Government Prime Financial
Obligations Obligations Reserves
Fund Fund Fund
<S> <C> <C> <C>
Investment Income:
Interest income $108,781 $59,647 $44,124
Securities lending income 106 -- --
Total Income 108,887 59,647 44,124
Expenses:
Investment advisory fees 6,865 3,674 3,885
Administration fees 2,171 1,260 987
Shareholder service fees -- 2,618 --
Shareholder service fees -- Select Shares 3,633 -- --
Accounting fees 106 98 94
Custodian fees 399 221 163
Legal and audit fees 250 134 89
Trustees' fees and expenses 54 28 22
Transfer agent fees 105 77 44
Registration and filing fees 112 102 17
Printing fees 94 110 --
Other 102 30 18
Total Expenses 13,891 8,352 5,319
Expenses voluntarily reduced -- -- (123)
Net Expenses 13,891 8,352 5,196
Net Investment Income 94,996 51,295 38,928
Realized Gains from Investments:
Net realized gains (losses) from investment transactions 22 16 8
Change in net assets resulting from operations $ 95,018 $51,311 $38,936
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
The Victory Portfolios Statements of Changes in Net Assets
(Amounts in Thousands)
<CAPTION>
U.S. Government Prime Financial
Obligations Fund Obligations Fund Reserves Fund
Year Year Year Year Year Year
Ended Ended Ended Ended Ended Ended
October 31, October 31, October 31, October 31, October 31, October 31,
1998 1997 <F1> 1998 1997 1998 1997
<S> <C> <C> <C> <C> <C> <C>
From Investment Activities:
Operations:
Net investment income $ 94,996 $ 73,928 $ 51,295 $ 25,590 $ 38,928 $ 40,386
Net realized gains (losses)
from investment transactions 22 72 16 14 8 10
Change in net assets resulting
from operations 95,018 74,000 51,311 25,604 38,936 40,396
Distributions to Shareholders:
From net investment income -- -- (51,295) (25,590) (38,928) (40,213)
Investor Shares (25,238) (19,759) -- -- -- --
Select Shares (69,758) (54,089) -- -- -- --
In excess of net investment income -- (80) -- -- -- (173)
From net realized gains from
investment transactions -- -- (14) (13) -- --
Change in net assets from
distributions to shareholders (94,996) (73,928) (51,309) (25,603) (38,928) (40,386)
Capital Transactions:
Proceeds from shares issued 4,231,821 4,097,261 3,531,074 1,535,027 1,578,862 1,739,900
Dividends reinvested 57,598 30,384 46,726 22,658 2,429 2,086
Cost of shares redeemed (3,808,025) (3,793,926) (2,935,538) (1,317,256) (1,596,421) (1,709,344)
Change in net assets from
capital transactions 481,394 333,719 642,262 240,429 (15,130) 32,642
Change in net assets 481,416 333,791 642,264 240,430 (15,122) 32,652
Net Assets:
Beginning of period 1,691,608 1,357,817 736,449 496,019 800,642 767,990
End of period $ 2,173,024 $ 1,691,608 $ 1,378,713 $ 736,449 $ 785,520 $ 800,642
Share Transactions:
Issued 4,231,821 4,097,261 3,531,074 1,535,027 1,578,862 1,739,900
Reinvested 57,598 30,384 46,726 22,658 2,429 2,086
Redeemed (3,808,025) (3,793,926) (2,935,538) (1,317,256) (1,596,421) (1,709,344)
Change in shares 481,394 333,719 642,262 240,429 (15,130) 32,642
<FN>
<F1> Effective January 8, 1997, the U.S. Government Obligations Fund designated the existing shares as Select
Shares and commenced offering Investor Shares.
</FN>
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
The Victory Portfolios Financial Highlights
<CAPTION>
U.S. Government Obligations Fund
Investor Shares Select Shares
Year Period Year Year
Ended Ended Ended Ended Year Ended October 31,
October 31, October 31, October 31, October 31,
1998 1997<F2> 1998 1997<F2> 1996 1995<F3> 1994
<S> <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
Investment Activities
Net investment income 0.050 0.041 0.048 0.047 0.049 0.052 0.032
Distributions Net investment income (0.050) (0.041) (0.048) (0.047) (0.049) (0.052) (0.032)
Net Asset Value, End of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Total Return 5.12% 4.19%<F4> 4.86% 4.75% 4.96% 5.38% 3.30%
Ratios/Supplemental Data:
Net Assets, End of Period (000) $571,104 $456,133 $1,601,920 $1,235,475 $1,357,817 $964,929 $412,048
Ratio of expenses to
average net assets 0.52% 0.56%<F5> 0.77% 0.74% 0.61% 0.58% 0.63%
Ratio of net investment income
to average net assets 5.03% 4.95%<F5> 4.78% 4.75% 4.84% 5.28% 3.20%
Ratio of expenses to
average net assets<F1> <F6> <F6> <F6> <F6> <F6> 0.60% 0.80%
Ratio of net investment income
to average net assets<F1> <F6> <F6> <F6> <F6> <F6> 5.26% 3.03%
<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 January 8, 1997, the Fund designated the existing shares as Select Shares and 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 Obligations Fund.
<F4> Not annualized.
<F5> Annualized.
<F6> There were no voluntary fee reductions during the period.
</FN>
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
The Victory Portfolios Financial Highlights
<CAPTION>
Prime Obligations Fund
Year Ended October 31,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Investment Activities
Net investment income 0.049 0.048 0.047 0.051 0.035
Net realized losses from
investment transactions -- -- -- -- (0.003)
Total from Investment Activities 0.049 0.048 0.047 0.051 0.032
Distribution
Net investment income (0.049) (0.048) (0.047) (0.051) (0.035)
Capital transactions -- -- -- -- 0.003<F2>
Net Asset Value, End of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Total Return 4.98% 4.89% 4.81% 5.26% 3.57%
Ratios/Supplemental Data:
Net Assets, End of Period (000) $1,378,713 $736,449 $496,019 $456,266 $782,303
Ratio of expenses to
average net assets 0.80% 0.85% 0.87% 0.74% 0.62%
Ratio of net investment income
to average net assets 4.89% 4.79% 4.72% 5.09% 3.52%
Ratio of expenses to
average net assets* <F3> <F3> <F3> <F3> 0.79%
Ratio of net investment income
to average net assets* <F3> <F3> <F3> <F3> 3.35%
<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> During 1994, KeyCorp made a capital contribution of approximately $2,506,000 for losses realized from the disposition
of certain securities.
<F3> There were no voluntary fee reductions during the period.
</FN>
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
The Victory Portfolios Financial Highlights
<CAPTION>
Financial Reserves Fund
Year Ended October 31,
1998 1997 1996 1995<F2> 1994
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Investment Activities
Net investment income 0.050 0.049 0.049 0.054 0.035
Distributions Net investment income (0.050) (0.049) (0.049) (0.054) (0.035)
Net Asset Value, End of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Total Return 5.10% 5.04% 5.00% 5.50% 3.57%
Ratios/Supplemental Data:
Net Assets, End of Period (000) $785,520 $800,642 $767,990 $762,870 $433,266
Ratio of expenses to
average net assets 0.67% 0.67% 0.67% 0.60% 0.57%
Ratio of net investment income
to average net assets 5.01% 4.94% 4.89% 5.40% 3.48%
Ratio of expenses to
average net assets<F1> 0.68% 0.71% 0.75% 0.76% 0.73%
Ratio of net investment income
to average net assets<F1> 5.00% 4.90% 4.81% 5.24% 3.32%
<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 June 5, 1995, the Victory Financial Reserves Portfolio became the Financial Reserves Fund.
</FN>
</TABLE>
See notes to financial statements.
<PAGE>
THE VICTORY PORTFOLIOS Schedule of Investments
Tax-Free Money Market Fund October 31, 1998
(Amounts in Thousands, Except Shares)
Shares or
Principal Amortized
Security Description Amount Cost
Commercial Paper (2.1%)
Washington (2.1%):
Port Seattle,
3.25%, 11/6/98 $ 9,635 $ 9,635
Total Commercial Paper
(Amortized Cost $9,635) 9,635
Municipal Bonds (97.4%)
Alaska (0.5%):
North Slope Boro, Capital
Appreciation, Series A, GO,
0.00%, 6/30/99,
MBIA 2,550 2,490
Arizona (1.4%):
Pima County, Industrial
Development Authority, IDR,
Brush Wellman Inc. Project,
3.20%*, 11/5/98,
LOC National City Bank 1,500 1,500
Pinal County Industrial
Development Authority,
3.70%*, 11/2/98,
LOC National Westminister 4,400 4,400
State Transportation Board,
Excise Tax Revenue,
Maricopa County,
5.00%, 7/1/99, AMBAC 500 505
6,405
California (0.9%):
Higher Education, Student Loan
Revenue, 3.80%, 6/1/01 **,
LOC National Westminster 4,000 4,000
Colorado (1.7%):
Arvada IDR, Sundstrand Corp.
Project, 3.20%*, 11/5/98,
LOC Union Bank of Switzerland 1,000 1,000
Housing Finance Authority,
3.15%*, 11/4/98, FNMA 2,060 2,060
Housing Finance Authority,
3.15%*, 11/4/98, FNMA 2,675 2,675
Pitkin County, 3.70%*, 11/2/98,
LOC First National Bank of Chicago 2,000 2,000
7,735
Connecticut (0.9%):
State GO, Series B,
4.00%, 3/15/99 4,000 4,004
District of Columbia (0.2%):
District of Columbia,
3.20%*, 11/5/98,
LOC Bank One 1,000 1,000
Florida (0.7%):
Hillsborough County, Ringhaven,
3.35%*, 11/5/98,
LOC Mellon Bank 2,500 2,500
Tallahassee Utility, Revenue,
Series B, 6.90%, 10/1/14,
Callable 10/1/99 @ 102 590 619
3,119
Georgia (2.5%):
Burke County Development,
3.05%*, 11/4/98,
LOC FGIC Credit 7,300 7,300
Paulding County, GO,
4.25%, 2/1/99 1,500 1,502
State Municipal Electric Authority,
GO of Participants, 3.50%,
11/9/98, LOC Credit Suisse 3,000 3,000
11,802
Illinois (7.0%):
Development Financial Authority,
LaSalle Project, 3.10%*, 11/4/98,
LOC American National
Bank & Trust 6,700 6,700
Development Financial Authority,
Illinois Power Co. Project,
Series C, 3.20%*, 11/4/98, MBIA 5,500 5,500
Development Financial Authority,
Kindlon Partnership Project,
3.20%*, 11/4/98,
LOC Lasalle National Bank 1,300 1,300
Development Financial Authority,
Catherine Cook School Project,
3.45%*, 11/4/98,
LOC Harris Bank & Trust 2,225 2,225
Hanover Park IDR,
Spectra-Tech, Inc. Project,
3.45%*, 11/5/98,
LOC Harris Trust & Savings Bank 1,685 1,685
Health Authority, Revolving Fund,
3.10%*, 11/4/98,
LOC First National Bank of Chicago 2,000 2,000
Health Authority,
Bensenville Home Society,
3.10%*, 11/4/98,
LOC American National
Bank & Trust 1,100 1,100
<PAGE>
Health Authority, Streeterville Corp.,
Series A, 3.10%*, 11/4/98,
LOC First National Bank
of Chicago 1,000 1,000
Health Authority,
University of Chicago,
3.70%*, 11/2/98, MBIA 1,200 1,200
Kankakee County IDR,
Ivex Corp. Project,
3.35%*, 11/5/98,
LOC Societe Generale AMT 3,500 3,500
Kendall & Kane County,
4.30%, 12/21/98,
LOC Bank One 1,000 1,001
State Development Financial
Authority, EDR, CPL/Downers
Grove Partnership,
3.68%*, 11/3/98,
LOC LaSalle National Bank 4,400 4,400
State GO,
5.13%, 12/1/98, FGIC 1,000 1,001
32,612
Indiana (7.0%):
Culver State Financial Authority,
3.10%*, 11/4/98,
LOC Chase Manhattan 1,000 1,000
Development Finance Authority,
Revenue Bond,
3.10%*, 11/4/98,
LOC NBD Bank 1,000 1,000
Elkhart, EDR,
3.75%*, 5/1/99,
LOC Bank One 875 875
Financing Authority Health Facility
Revenue, Baptist Homes of Indiana,
3.15%*, 11/5/98,
LOC Bank One 3,890 3,890
Franklin County, EDR,
Davidson Industries, Inc. Project,
Series A, 3.25%*, 11/5/98,
LOC Bank One 1,600 1,600
Greenwood, EDR,
Endress & Hauser Inc.,
Series B, 3.35%*, 11/5/98,
LOC Deutsche Bank AG 1,100 1,100
Greenwood, IDR,
Jacks Investments LLC
Project, 3.25%*, 11/5/98,
LOC Bank One AMT 2,170 2,170
Indianapolis, EDR,
White Arts, Inc. Project,
3.28%*, 11/5/98,
LOC Fifth Third Bank 4,300 4,300
Mooresville, Kendrick Memorial
Hospital Project, 3.21%*, 11/5/98,
LOC Huntington National Bank 2,800 2,800
Noblesville, Rivers Edge Apartments
Project, 3.15%*, 11/5/98,
LOC Bank One 2,995 2,995
Plymouth, EDR,
3.30%*, 11/5/98,
LOC Star Bank 5,500 5,499
Scottsburg, EDR,
Multi Color Project,
3.70%*, 11/5/98,
LOC PNC Bank 4,570 4,570
Wakarusa, EDR,
MMM-Invest Inc. Project,
3.15%*, 11/5/98,
LOC Bank One 795 795
32,594
Iowa (1.8%):
City of Urbandale,
3.50%*, 11/2/98,
Guaranteed by Principle
Mutual Life Insurance Co. 4,325 4,325
Financial Authority,
Sauer-Sundstrand Co. Project,
3.15%*, 11/4/98,
LOC Bayerische Vereinsbank 4,000 4,000
8,325
Kansas (0.5%):
Fairway, IDR,
J.C. Nichols Co., Inc.,
3.50%*, 11/2/98,
Guaranteed by Principle
Mutual Life Insurance Co. 2,300 2,300
Kentucky (6.2%):
Boone County,
Industrial Building Revenue,
Multi-Color Corp. Project,
3.70%*, 11/5/98,
LOC PNC Bank 2,975 2,975
Boone County,
Industrial Building Revenue,
Roman Catholic Diocese Project,
3.25%*, 11/5/98,
LOC Star Bank 1,350 1,350
Carroll County, IDR,
Kentucky Ladder Co. Project,
3.45%*, 11/4/98,
LOC Bankers Trust Co. 5,000 5,000
Covington Industrial Building Revenue,
J & S Co. Project,
4.10%, 12/1/98,
LOC National City Bank 160 160
<PAGE>
Dayton Industrial Building Revenue,
Woodcraft Manufacturing Co., Inc.
Project, 3.38%*, 11/5/98,
LOC Fifth Third Bank 630 630
Jefferson County,
Industrial Building Revenue,
Hamilton Printing, Inc. Project,
3.28%*, 11/5/98,
LOC Fifth Third Bank AMT 4,500 4,500
Mayfield Multi-City Lease Revenue,
3.25%*, 11/4/98,
LOC PNC Bank 10,600 10,600
Somerset, Industrial Building Revenue,
Glen Oak Lumber & Mining,
3.25%*, 11/5/98,
LOC Bank One AMT 2,505 2,505
State Rural Economic
Development Authority,
PB&S Chemical Co. Project,
Revenue Bond, 3.35%*, 11/5/98,
LOC Westdeutsche Landesbank AMT 1,200 1,200
28,920
Louisiana (2.6%):
Hammond IDR,
Eckerds Warehouse Project,
3.70%*, 11/2/98**,
LOC Union Bank of Switzerland 6,800 6,800
Public Facilities, Revenue,
Franciscan Missionaries,
4.50%, 7/1/99, LOC FSA 4,415 4,439
Public Facilities, Revenue,
Our Lady of Lourdes Regional
Medical Center, 4.70%, 2/1/99, MBIA 1,085 1,088
12,327
Maine (1.1%):
State Public Utility Financing Bank,
Public Utility Revenue,
Maine Public Service Co. Project,
3.25%*, 11/4/98,
LOC Bank of New York AMT 5,000 5,000
Michigan (4.7%):
Detroit City School District, GO,
4.50%, 7/1/99 2,500 2,514
Municipal Bond Authority, Revenue,
6.10%, 5/15/99 250 253
Plainwell Community School District,
3.85%, 8/21/99 3,100 3,101
State Strategic, Consumer Power Co.
Project, 3.70%*, 11/2/98,
LOC Canadian Imperial Bank 1,100 1,100
State Strategic, Fleet Engineers Inc.
Project, 3.25%*, 11/5/98,
LOC Comercia Bank 1,800 1,800
State Strategic, Merrill Group Project,
3.25%*, 11/5/98,
LOC Comerica Bank 4,000 4,000
State Strategic, Rospatch Corp.,
3.60%*, 11/4/98,
LOC Harris Bank & Trust AMT 1,200 1,200
State Strategic, Thermal Transfer Inc.
Project, 3.25%*, 11/5/98,
LOC Comerica Bank 3,760 3,760
Wayne County Community College,
GO, 4.00%, 4/1/99 4,000 4,004
21,732
Minnesota (0.6%):
St.Cloud Housing & Redevelopment
Authority, Webway Inc. Project,
3.30%*, 11/5/98,
LOC National City Bank 2,745 2,745
Missouri (4.1%):
Cuba Industrial Development Authority,
Imre & Carolyn Project,
3.25%*, 11/5/98,
LOC Bank One 920 920
Kansas City IDR,
Century Avenue Association,
3.80%*, 11/2/98,
LOC Bank of America 3,900 3,900
Kansas City IDR, Multifamily Housing
Revenue, J.C. Nichols Co. Project,
3.50%*, 11/2/98,
LOC Principle Mutual Life
Insurance Co. 3,600 3,600
St. Louis County Industrial
Development Authority,
Friendship Village, Series B,
3.20%*, 11/4/98,
LOC LaSalle National Bank 4,725 4,725
State Health Authority,
3.70%*, 11/2/98, MBIA 6,000 6,000
19,145
New Hampshire (0.8%):
Merrimack County,
TAN, 3.78%, 12/30/98 3,750 3,750
New York (1.1%):
New York City, Municipal Water
Finance Authority, Series A,
3.70%*, 11/2/98, FGIC 1,500 1,500
<PAGE>
New York City, Sub-Series A-10,
3.60%*, 11/2/98,
LOC Morgan Guaranty Trust 3,000 3,000
Oneida County, IDR,
Mohawk Valley, Series A,
3.85%, 2/1/99, FSA 500 500
5,000
North Carolina (4.4%):
Medical Care, Common Health
Care Facilities, 3.70%*, 11/2/98,
LOC First Union National Bank 3,400 3,400
Medical Care, Pooled Funding
Project, Series A,
3.70%*, 11/2/98,
LOC Nationsbank 17,285 17,285
20,685
Ohio (10.2%):
Ashtabula County,
Medical Center Project,
Revenue Bond,
3.15%*, 11/5/98,
LOC Bank One 3,180 3,180
Cincinnati, TAN, Series C,
4.50%, 12/1/98 6,725 6,729
Coshocton County,
Hospital Facilities Revenue,
3.15%*, 11/5/98,
LOC Bank One 3,390 3,390
Cuyahoga County IDR,
Decorp Project,
3.15%*, 11/5/98,
LOC Bank One 1,980 1,980
Erie County,
Tax and Revenue Anticipation
Notes, 4.38%, 12/31/98, GO 2,500 2,502
Franklin County Hospital Revenue,
Children's Hospital Project,
Series B, 3.25%*, 11/5/98,
LOC Bank One Columbus 9,400 9,399
Geauga County, BAN,
3.94%, 3/11/99 2,000 2,002
Huron GO, BAN,
3.94%, 2/24/99 1,842 1,843
Lebanon GO, BAN,
3.95%, 5/27/99,
Callable 12/16/98 @ 100 500 500
Marion County Hospital
Improvement Revenue,
Pooled Leasing Program,
3.15%*, 11/5/98,
LOC Bank One 2,660 2,660
Monroe, BAN,
4.05%, 6/30/99 600 601
Monroe, BAN,
4.05%, 6/30/99 400 401
St. Mary's City School District GO, BAN,
3.99%, 2/23/99 250 250
State EDR, YMCA,
3.15%*, 11/5/98,
LOC Bank One 4,560 4,560
Warren County Health
Care Facilities Revenue,
3.15%*, 11/5/98,
LOC FifthThird Bank 7,600 7,600
47,597
Oklahoma (2.1%):
County Finance Authority, IDR,
Perrine Office Project,
3.40%*, 11/13/98, FGIC 3,170 3,170
Development Financial Authority,
Seaboard Farms Project, Revenue
Bond, 3.25%*, 11/4/98,
LOC Bank of New York 5,000 5,000
Oklahoma County Finance Authority,
IDR, Hutto-Carbon Office Project,
3.40%*, 11/13/98, FGIC 1,650 1,650
9,820
Oregon (0.1%):
Tualatin Valley, Water Revenue,
4.50%, 6/1/99, FSA 400 402
Pennsylvania (2.2%):
Apollo Ridge School District,
TRAN, 4.09%, 6/30/99 1,500 1,502
Cheltenham, TRAN,
4.06%, 12/31/98 1,300 1,300
Erie County Hospital Authority,
Mercy Terrace Project,
3.15%*, 11/5/98 2,245 2,245
Monroe County Hospital Authority,
Pocono Medical Center, Series C,
3.15%*, 11/5/98,
LOC PNC Bank 1,000 1,000
Quakertown General Authority,
3.10%*, 11/10/98,
LOC PNC Bank 4,400 4,400
10,447
Tennessee (3.9%):
Johnson City Health,
3.20%*, 11/4/98,
LOC MBIA 8,000 8,000
<PAGE>
McKenzie Industrial
Development Board, IDR,
Noma Outdoor Products, Inc.,
Project, 3.25%*, 11/5/98,
LOC Wachovia Bank & Trust AMT 5,000 5,000
Memphis Shelby County,
Birmingham Steel Corp. Project,
3.30%*, 11/5/98,
LOC PNC Bank 5,000 5,000
18,000
Texas (4.9%):
Angelina & Neches River
Authority Revenue,
3.70%*, 11/2/98,
LOC Credit Suisse 7,400 7,400
Angelina & Neches River
Authority Revenue,
3.70%*, 11/2/98,
LOC Credit Suisse 3,400 3,400
Angelina & Neches River
Authority Revenue,
3.70%*, 11/2/98,
LOC Credit Suisse 5,500 5,500
Canadian River Muni Revenue,
Conjunctive Use Ground Water
Project, 4.65%, 2/15/99, AMBAC 225 226
Dallas County Utilities GO,
7.00%, 2/15/99, MBIA 250 252
Houston, Water Systems Revenue Bond,
4.75%, 12/1/98 400 400
Richardson Independent School
District GO, Series B,
6.88%, 2/15/99 3,795 3,828
San Antonio, Electric and Gas Revenue,
6.00%, 2/1/14, ESC UST 1,915 1,955
22,961
Vermont (0.5%):
State GO,
5.00%, 12/1/98, AMBAC 2,500 2,503
Virginia (3.2%):
Colonial Heights,
Philip Morris Cos. Project,
3.20%*, 11/4/98 2,600 2,600
Richmond, Philip Morris Cos. Project,
3.20%*, 11/4/98 1,700 1,700
Waynesboro, Residential Care Facility,
3.70%*, 11/2/98,
LOC First Union Bank 10,700 10,700
15,000
Washington (1.4%):
King County GO, Series C,
4.00%, 6/1/99 4,110 4,115
Port Tacoma,
4.80%, 11/1/98, AMBAC 500 500
Spokane County, Water Revenue,
7.60%, 1/1/99, ESC UST 2,000 2,012
6,627
West Virginia (1.2%):
State Hospital Finance Authority,
3.30%*, 11/4/98 5,700 5,700
Wisconsin (16.2%):
Antigo School District,
TRAN, 3.53%, 10/29/99 4,100 4,101
Appleton, IDR, Pensar Corp. Project,
3.25%*, 11/5/98,
LOC Bank One AMT 520 520
Burlington Community
Development Authority,
3.25%*, 11/5/98**,
LOC Bank One 4,500 4,500
Crandon School District,
TRAN, 3.81%, 10/5/99 1,270 1,271
Cudahy School District,
TRAN, 3.63%, 7/9/99 2,130 2,131
DC Everest Area School District,
TRAN, 3.93%, 8/26/99 2,500 2,501
East Troy School District,
TRAN, 3.69%, 10/22/99 2,400 2,401
Edgerton School District,
TRAN, 3.50%, 10/29/99 3,500 3,501
Evansville, Stoughton Trailers, Inc.,
3.25%*, 11/5/98,
LOC Bank One 5,980 5,979
Fort Atkinson,
3.30%*, 11/5/98,
LOC Bank One AMT 1,210 1,210
Freedom School District,
TRAN, 3.65%, 10/29/99 1,600 1,601
Grafton School District,
TRAN, 3.60%, 6/30/99 1,650 1,651
Greendale School District,
TRAN, 3.60%, 9/24/99 5,500 5,501
Janesville IDR,
The Lamson & Sessions Co.,
3.28%*, 11/5/98,
LOC General Electric
Capital Corp. AMT 2,800 2,800
Lake Mills School District,
TRAN, 3.93%, 9/1/99 2,300 2,301
<PAGE>
Mattoon IDR,
3.25%*, 11/5/98,
LOC Bank One 1,700 1,700
Mukwonago School District,
TRAN, 3.98%, 8/27/99 2,800 2,804
New Berlin IDR, Wenninger Project,
3.30%*, 11/5/98,
LOC Bank One AMT 1,250 1,250
New Richmond School District,
TRAN, 3.56%, 11/1/99 825 825
Oak Creek, IDR,
McAdams Graphics, Inc. Project,
3.25%*, 11/5/98,
LOC Bank One AMT 1,370 1,370
Oconomowoc School District,
TRAN, 3.60%, 9/28/99 7,000 7,003
Oshkosh IDR,
Oshkosh Architectural Project,
3.30%*, 11/5/98,
LOC Norwest Bank AMT 940 940
Palmyra Eagle School District,
TRAN, 3.73%, 10/4/99 2,100 2,103
Plymouth IDR,
Great Lakes Cheese, Inc. Project,
3.25%*, 11/5/98,
LOC Rabobank AMT 3,500 3,500
Seymour Community School,
TRAN, 3.75%, 10/4/99 3,250 3,253
Sheboygan Falls School District,
TRAN, 3.72%, 10/1/99 1,000 1,001
Slinger School District,
TRAN, 3.59%, 9/28/99 2,800 2,801
Valders School District,
TRAN, 3.75%, 9/24/99 1,700 1,701
Waukesha IDR,
Alloy Products Corp. Project,
3.25%*, 11/5/98,
LOC Bank One AMT 1,500 1,500
Winneconne Community School District,
TRAN, 3.75%, 10/25/99 1,080 1,083
74,803
Wyoming (0.8%):
Lincoln County, PacifiCorp Project,
3.60%, 11/19/98,
LOC Union Bank of Switzerland 3,900 3,900
Total Municipal Bonds
(Amortized Cost $453,450) 453,450
Investment Companies (0.3%)
Federated Tax-Free
Money Market Fund $1,393,000 $ 1,393
Total Investment Companies
(Cost $1,393) 1,393
Total Investments
(Amortized Cost $464,478) (a) -- 99.8% 464,478
Other assets in excess of liabilities -- 0.2% 1,050
TOTAL NET ASSETS -- 100.0% $465,528
(a) Cost and value for federal income tax and financial reporting purposes
are the same.
* Variable rate securities having liquidity sources through bank letters
of credit or other credit and/or liquidity agreements. The interest rate,
which will change periodically, is based upon bank prime rates or an
index of market interest rates. The rate reflected on the Schedule of
Investments is the rate in effect at October 31, 1998. The date reflects
the next rate change date.
** Put and demand features exist allowing the Fund to require the repurchase
of the investment within variable time periods less than one year.
AMBAC -- Insured by American Municipal Bond Assurance Corp.
AMT -- Alternative Minimum Tax
BAN -- Bond Anticipation Notes
EDR -- Economic Development Revenue
ESC UST -- Escrowed by U.S. Treasury Security
FGIC -- Insured by Financial Guaranty Insurance Corp.
FNMA -- Insured by Federal National Mortgage Assoc.
FSA -- Insured by Financial Security Assurance
GO -- General Obligation
IDR -- Industrial Development Revenue
LOC -- Letter of Credit
MBIA -- Insured by Municipal Bond Insurance Assoc.
TAN -- Tax Anticipation Note
TRAN -- Tax & Revenue Anticipation Note
See notes to financial statements.
<PAGE>
THE VICTORY PORTFOLIOS Schedule of Investments
Ohio Municipal Money Market Fund October 31, 1998
(Amounts in Thousands, Except Shares)
Shares or
Principal Amortized
Security Description Amount Cost
Municipal Bonds (97.3%)
Michigan (0.5%):
Monroe County Economic
Devolpment Corp., Detroit Edison,
Series CC, 3.70%*, 11/2/98,
LOC Barclays Bank PLC $ 4,000 $ 4,000
Missouri (0.6%):
State Health & Education Facilities
Authority, Washington University,
Series D, 3.70%*, 11/2/98,
SPA Morgan Guaranty Trust 4,500 4,500
New York (0.7%):
New York City, GO,
3.60%*, 11/2/98,
LOC Morgan Guaranty Trust 5,400 5,400
Ohio (95.5%):
Akron Bath Copley Township Hospital,
Visiting Nurse Services Inc. Project,
3.20%*, 11/5/98,LOC National City Bank 545 545
Akron, Sewer System Revenue,
3.70%, 12/1/98, FGIC 715 715
Ashland County, GO,
4.00%, 8/5/99 500 501
Ashland County, Jail Construction,
GO, 4.14%, 12/17/98 3,850 3,852
Ashland County, Jail Construction,
GO, 4.20%, 12/17/98 2,200 2,201
Auglaize County, G.A.
Wintzer & Son Co. Project,
3.25%*, 11/5/98,
LOC Bank One AMT 2,225 2,225
Avon, GO,
4.10%, 7/1/99 1,040 1,042
Beavercreek,
4.20%, 5/7/99 450 451
Bedford Heights, IDR,
Olympic Steel Inc. Project,
3.50%*, 11/4/98,
LOC National City Bank 1,400 1,400
Belmont County, GO,
4.17%, 11/24/98 1,900 1,900
Belmont County, GO,
3.86%, 9/9/99 1,000 1,002
Bowling Green, GO,
3.93%, 12/3/98 3,200 3,200
Bowling Green, IDR,
Lamson & Sessions Project,
3.30%*, 11/5/98,
LOC Mid American National Bank 1,580 1,580
Bowling Green, IDR,
Lamson & Sessions Project,
3.23%*, 11/5/98,
LOC General Electric Capital Corp. 2,200 2,200
Brooklyn Heights, IDR,
3.25%*, 11/5/98,
LOC Bank One AMT 360 360
Brooklyn, IDR,
Clinton Road Project, Series B,
4.10%*, 11/2/98,
LOC Bank One 485 485
Buckeye Local School District,
Delaware County, GO,
4.30%, 12/1/98, MBIA 200 200
Buckeye Local School District,
Jefferson County, GO,
4.50%, 12/1/98, AMBAC 250 250
Butler County,
Hospital Facilities Revenue,
3.18%*, 11/5/98,
LOC Fifth Third Bank 1,050 1,050
Butler County, Series C5,
3.70%*, 11/4/98 10,000 10,000
Butler County,
Wyndtree Apartments Project,
3.90%, 1/1/99**, FGIC AMT 5,000 5,000
Canton, GO,
3.50%, 7/15/99 1,525 1,525
Centerville Health Care Revenue,
Bethany Lutheran,
3.15%*, 11/4/98,
LOC PNC Bank 4,550 4,550
Cincinnati & Hamilton County Port
Authority EDR, Bethesda One Ltd.,
3.75%, 8/1/15**,
LOC Bank One 1,025 1,025
Cincinnati & Hamilton IDR,
4th Star Ltd. Partnership Project,
4.05%*, 11/2/98,
LOC PNC Bank 6,850 6,850
Clark County,
4.10%, 5/12/99 1,405 1,407
Cleveland Airport Improvement,
Series D, 3.20%*, 11/4/98,
LOC Toronto Dominion Bank AMT 1,500 1,500
Cleveland Heights, GO,
3.88%, 8/26/99 2,771 2,775
Clinton County,
3.25%*, 11/4/98,
LOC Fifth Third Bank 27,000 27,000
<PAGE>
Clinton County,
Airport Facilities Revenue,
3.15%*, 11/5/98,
LOC Wachovia Bank 6,700 6,700
Columbiana County, IDR,
C & S Land Co. Project,
3.25%*, 11/5/98,
LOC Bank One AMT 3,150 3,150
Cuyahoga County, Cleveland Clinic,
3.70%*, 11/2/98,
SPA Bank of America 5,500 5,500
Cuyahoga County, Cleveland Clinic,
Series A, 3.15%*, 11/4/98,
SPA Chase Manhattan Bank 30,265 30,266
Cuyahoga County, EDR,
Crestmont-Cleveland Partnership
Project, 3.40%*, 4/15/99,
LOC Bank One 440 440
Cuyahoga County, GO, Series D,
4.00%, 5/12/99 1,000 1,001
Cuyahoga County,
Hospital Revenue Bond,
Cleveland Clinic,
3.15%*, 11/4/98,
SPA Bank of America 1,400 1,400
Cuyahoga County, Hospital Revenue,
Series B, 3.15%*, 11/4/98,
SPA Bank Of America, AMBAC 14,300 14,300
Cuyahoga County, IDR,
Allen Group Project,
3.10%*, 11/4/98,
LOC Dresdner Bank AG AMT 2,700 2,700
Cuyahoga County, IDR,
Interstate Diesel,
3.60%*, 11/6/98,
LOC Huntington National Bank 330 330
Cuyahoga County, IDR,
Landerhaven Executive Project,
3.40%*, 11/4/98,
LOC Star Bank 2,145 2,145
Cuyahoga County, IDR,
Premier Manufacturing. Corp.
Project, 3.55%*, 11/4/98,
LOC National City Bank AMT 300 300
Cuyahoga County, IDR,
Progressive Plastics Project,
3.25%*, 11/5/98,
LOC Bank One AMT 1,510 1,510
Cuyahoga County, IDR,
Watt Printing Co. Project,
3.25%*,11/5/98,
LOC Bank One AMT 3,480 3,480
Cuyahoga County, Series A,
3.15%*, 11/4/98,
AMBAC, SPA Bank of America 2,000 2,000
Cuyahoga Falls, GO,
4.25%, 12/17/98 4,000 4,002
Cuyahoga Falls,
Hospital Facilities Revenue,
Portage Trail Care Center Project,
3.30%*, 11/5/98,
LOC Fifth Third Bank 2,200 2,200
Cuyahoga Falls,
Hospital Facilities Revenue,
Portage Trail Care Center Project,
3.30%*, 11/5/98,
LOC Provident Bank 3,100 3,100
Dayton, GO,
3.65%, 6/15/99 3,100 3,103
Deerfield Township, GO,
4.00%, 6/30/99 1,200 1,202
Deerfield Township, GO,
4.05%, 6/30/99 741 742
Delaware County, GO,
3.85%, 7/27/99 845 845
Delaware County, GO,
4.60%, 12/1/98 325 325
Dublin City School District, GO,
3.99%, 4/14/99 5,000 5,009
East Cleveland City School District,
GO, 3.88%, 4/27/99 4,310 4,321
Eastlake, GO,
4.00%, 7/28/98 500 501
Eastlake, IDR,
Astro Model Development Project,
3.25%*, 11/5/98,
LOC Bank One AMT 3,385 3,385
Erie County, GO,
4.25%, 6/1/99 1,000 1,003
Erie County, GO,
4.13%, 11/23/98 600 600
Fairfield, GO,
4.65%, 7/27/99 AMT 595 598
Fairlawn, GO,
3.90%, 1/20/99 1,600 1,601
Findlay, GO,
4.38%, 1/20/99 995 996
Fort Recovery Local School District,
4.23%, 11/24/98 1,100 1,100
Franklin County Hospital Revenue,
U.S. Health Corp., Series C,
3.10%*, 11/5/98,
LOC Morgan Guaranty Trust 5,500 5,500
<PAGE>
Franklin County Hospital,
Holy Cross Health Systems,
3.05%*, 11/5/98,
SPA Morgan Guaranty Trust 3,800 3,800
Franklin County,
Health System Revenue,
Health Care Facilities -- Wesley Glen,
3.23%*, 11/5/98,
LOC Fifth Third Bank 2,800 2,800
Franklin County,Health System Revenue,
Health Care Facilities -- Wesley Glen,
3.23%*, 11/5/98,
LOC Fifth Third Bank 980 980
Franklin County, Hospital Revenue,
National Church Residences Project,
3.30%*, 11/5/98,
LOC Fifth Third Bank 880 880
Franklin County, Hospital Revenue,
U.S. Health Corp., Series A,
3.10%*, 11/5/98,
LOC Morgan Guaranty 6,000 6,000
Franklin County, Housing Revenue,
5.20%, 1/1/99,
LOC Huntington National Bank 4,800 4,811
Franklin County, IDR,
Capitol South Community
Redevelopment, 3.95%*, 11/2/98,
LOC Huntington National Bank 3,350 3,350
Franklin County, IDR,
Jacobson Stores,
3.95%*, 11/2/98,
LOC Bank One 7,000 7,000
Franklin County, IDR,
Media Inc. Project,
4.10%*, 3/1/99,
LOC Society National Bank 1,770 1,770
Franklin County,
Jefferson Chase Apartment Project,
3.85%, 12/1/98**,
LOC Fifth Third Bank AMT 4,500 4,500
Geauga County, GO,
4.14%, 12/17/98 3,400 3,401
Geauga County, Health Care Facilities,
Heather Hill Inc. Project, Series B,
3.21%*, 11/5/98,
LOC Bank One 10,025 10,025
Geauga County, IDR,
Gold Key Processing Project,
3.45%*, 11/4/98,
LOC Fifth Third Bank AMT 1,200 1,200
Georgetown, School District,
4.19%, 12/18/98 1,200 1,200
Granville, GO,
4.11%, 5/18/99 500 501
Greene County, GO, Series D,
3.90%, 6/3/99 16,296 16,310
Greene County, Health Care,
Friends Health Care Association,
3.26%*, 11/5/98,
LOC Bank One 3,885 3,885
Grove City, IDR,
Cross Country Inns Inc.,
3.15%*, 11/5/98,
LOC Bank One 1,525 1,525
Hamilton County, EDR,
Cincinnati Performing Arts,
3.18%*, 11/5/98,
LOC Fifth Third Bank 1,300 1,300
Hamilton County, GO,
5.10%, 12/1/98 250 250
Hamilton County,
Hospital Facilities Revenue,
Beechwood Home Project,
3.20%*, 11/5/98,
LOC Star Bank 4,000 4,000
Hamilton County,
Multifamily Revenue,
Forest Ridge Apartment Project,
3.25%*, 11/5/98,
LOC PNC Bank 10,000 10,000
Hamilton County,
Multifamily Revenue,
Pleasent Run Apartments Project,
3.25%*, 11/5/98,
LOC PNC Bank AMT 1,700 1,700
Highland Heights, GO,
4.05%, 11/17/98 3,700 3,700
Huron County, IDR,
American Baler Project,
3.25%*, 11/5/98,
LOC Bank One AMT 1,925 1,925
Jackson County, GO,
3.62%, 10/14/99 1,000 1,003
Kent School District, GO,
4.15%, 12/1/98, FGIC 200 200
Kenton, GO,
3.94%, 4/8/99 1,000 1,001
Lake County, GO,
4.00%, 5/27/99 1,000 1,001
Lake County, EDR,
Lake County YMCA Project,
3.15%*, 11/5/98,
LOC Bank One 3,000 3,000
<PAGE>
Licking County, IDR,
Sunfield Inc. Project,
3.25%*, 11/5/98,
LOC Bank One AMT 1,495 1,495
Lisbon School District,
4.00%, 9/2/99 1,400 1,403
Lorain County, EDR,
Crestmont-Cleveland Partnership
Project, 3.40%, 10/15/06**,
LOC Bank One 1,040 1,040
Lorain County, IDR,
French Creek Partners,
3.30%*, 11/5/98,
LOC Bank One 900 900
Lucas County, EDR,
Maumee Valley Country Day School
Project, 3.30%*, 11/5/98,
LOC Mid American National
Bank & Trust AMT 3,900 3,900
Lucas County, Health Facilities Revenue,
Lutheran Homes Society Project,
3.10%*, 11/5/98,
LOC Bank One 4,600 4,600
Lucas County, Hospital Revenue,
Sunshine Children's Home Project,
3.20%*, 11/5/98,
LOC National City Bank 375 375
Lucas County, Hospital Revenue,
Sunshine Children's Home Project,
3.20%*, 11/5/98,
LOC National City Bank 455 455
Lucas County, IDR,
Bunting Bearings Corp. Project,
3.20%*, 11/5/98,
LOC National City Bank 1,590 1,590
Madison, School District, GO,
4.25%, 1/27/99 1,255 1,256
Mahoning County,
Healthcare Facilities Revenue,
Copeland Oaks Project,
3.15%*, 11/5/98,
LOC Bank One 2,470 2,470
Mahoning County, IDR,
Tru-Cut Die Corp. Project, Series B,
3.15%*, 11/5/98,
LOC Bank One 190 190
Mansfield, GO,
3.79%, 9/30/99 1,200 1,203
Marion County,
Hospital Improvement Revenue,
Pooled Leasing Program,
3.15%*, 11/5/98,
LOC Bank One 130 130
Marion County,
Hospital Improvement Revenue,
Pooled Leasing Program,
3.15%*, 11/5/98,
LOC Bank One 395 395
Marion County,
Hospital Improvement Revenue,
Pooled Leasing Program,
3.15%*, 11/5/98,
LOC Bank One 1,800 1,800
Marion County,
Hospital Improvement Revenue,
Pooled Leasing Program,
3.15%*, 11/5/98,
LOC Bank One 1,515 1,515
Maumee, GO,
4.15%, 7/15/99 900 902
Mayfield City School District, GO,
4.00%, 3/16/99 1,700 1,702
Medina County, GO,
3.97%, 9/1/99 445 446
Medina County, IDR,
Nationwide One 1989 Project,
3.90%, 5/1/04**,
LOC Bank One 290 290
Medina County, IDR,
Partners in Plastic Project,
3.30%*, 11/5/98,
LOC Bank One AMT 995 995
Mentor, GO,
4.80%, 12/1/98 370 370
Mentor, GO,
6.80%, 12/1/98 265 266
Monroe, GO,
3.98%, 4/7/99 3,000 3,002
Monroe, GO,
4.04%, 6/30/99 900 901
Monroe, GO,
4.20%, 6/17/99 738 739
Monroe, GO,
4.16%, 9/2/99 700 702
Montgomery County,
Healthcare Facilities Revenue,
Greater Dayton Area-MRI Project,
3.25%*, 11/4/98,
LOC Key Bank 490 490
Montgomery County, IDR,
Citywide Development Corp. Project,
3.25%*, 11/5/98,
LOC Bank One AMT 2,350 2,350
<PAGE>
Montgomery County, IDR,
Town Centers Ltd. Partner Project,
3.95%*, 11/15/98,
LOC National City Bank 1,730 1,730
Montgomery County, Solid Waste,
5.00%, 11/1/98, MBIA 1,290 1,290
Montgomery, IDR, Bethesda Two Ltd.,
3.60%*, 11/5/98,
LOC Huntington National Bank 2,725 2,725
Morrow County, GO,
3.91%, 9/8/99 3,600 3,609
Muskingum County, GO,
3.20%*, 11/5/98,
LOC Huntington National Bank 1,195 1,195
North Baltimore, School District, GO,
4.62%, 4/15/99 390 391
Northwood, GO,
4.63%, 7/29/99 1,010 1,015
Orrville, IDR, Contours Inc. Project,
3.55%*, 11/4/98,
LOC National City Bank 100 100
Orrville, IDR, Contours-Lessee Project,
3.55%*, 11/4/98,
LOC National City Bank 100 100
Ottawa Hills, GO,
3.88%, 5/12/99 4,500 4,501
Painesville, GO,
4.14%, 12/16/98 886 886
Paulding County, IDR,
Countrymark Co-op. Inc. Project,
3.30%*, 11/5/98,
LOC Fifth Third Bank 400 400
Perrysburg, GO,
4.50%, 8/19/99 2,030 2,039
Perrysburg, GO,
4.60%, 11/19/98 3,300 3,301
Pickerington, GO,
4.50%, 12/1/98, LOC AMBAC 250 250
Pickerington, GO,
4.04%, 1/22/99 3,400 3,403
Pickerington, GO,
4.18%, 7/16/99 400 400
Pike County, Hospital Facilities Revenue,
Bristol Village Project,
3.30%*, 11/5/98,
LOC Fifth Third Bank 3,180 3,180
Pike County, Hospital
Facilities Revenue,
Bristol Village Project,
3.30%*, 11/5/98,
LOC Fifth Third Bank 1,300 1,300
Reading IDR, General Tool Co.
Project, 3.28%*, 11/5/98,
LOC Provident Bank and
Bank of Montreal 5,000 5,000
Revere, School District,
4.40%, 12/10/98 940 940
Richland County, GO,
4.17%, 6/10/99 1,485 1,488
Richland County, IDR,
Mansfield Motel Partnership,
3.25%*, 11/5/98,
LOC Huntington National Bank 3,150 3,150
Rickenbacker, Port Authority Revenue,
3.15%*, 11/5/98,
LOC Bank One 3,200 3,200
Rock Hill Local School District, GO,
4.15%, 4/15/99 1,400 1,404
Rossford, GO,
4.75%, 12/17/98 1,100 1,101
Salem Hospital Revenue,
Community Hospital Project,
3.15%*, 11/4/98,
LOC Marine Bank 3,600 3,600
Scioto County, VHA Center Inc.
Capital Assets, Series C,
3.25%*, 11/4/98, AMBAC 1,410 1,410
Seneca County,
Hospital Facilities Revenue,
St. Francis Home Inc. Project,
3.15%*, 11/5/98,
LOC National City Bank 2,100 2,100
Shaker Heights, GO,
3.90%, 3/12/99 2,260 2,262
Stark County,
Health Care Facilities Revenue,
St. Joseph Hospice Project,
3.15%*, 11/5/98,
LOC Bank One 2,180 2,180
State Air Quality,
3.50%, 11/10/98, FGIC 7,000 7,000
State Air Quality Development
Authority Revenue, Pollution
Control, Cleveland Electric,
3.55%*, 11/14/97, FGIC 7,000 7,000
State Air Quality Development
Authority Revenue, Pollution
Control, Cleveland Electric,
3.55%*, 11/14/97, FGIC 6,000 6,000
State Air Quality,
3.85%, 10/1/29**,
LOC FNB Chicago 4,655 4,655
<PAGE>
State Air Quality, Series B,
3.70%*, 11/2/98,
LOC Morgan (J.P.) 1,000 1,000
State Building Authority,
7.35%, 3/1/03**,
Prerefunded 3/1/99 @ 102 2,150 2,217
State Building Authority,
Administrative Building Fund,
Series A, 4.75%, 10/1/99 1,000 1,012
State Building Authority,
State Correctional Facilities,
Series A, 5.10%, 10/1/99 1,000 1,015
State Environmental
Improvement Revenue, Newark
Group Industries Inc. Project,
3.40%*, 11/2/98,
LOC Chase Manhattan Bank 1,000 1,000
State Environmental
Improvement Revenue, Newark
Group Industries Inc. Project,
3.20%*, 11/4/98,
LOC Chase Manhattan Bank AMT 13,000 13,000
State Higher Education Facilities
Commission Revenue, Higher
Education -- Mount Vernon
Nazarene, 3.20%*, 11/5/98,
LOC National City Bank 900 900
State Higher Education Facilities
Commission Revenue, Kenyon
College, 3.15%*, 11/4/98,
SPA FNB Chicago 4,000 4,000
State Higher Education Facilities
Commission Revenue, Kenyon
College Project, 3.15%*, 11/4/98 5,900 5,900
State Higher Education Facilities
Commission Revenue, Wilmington
College Project, 3.15%*, 11/5/98,
LOC Fifth Third Bank 2,755 2,755
State Housing Finance Agency,
3.80%, 3/1/99, GNMA AMT 15,000 15,000
State Housing Finance Agency,
Multifamily Housing Revenue,
Hunters Glen Project,
3.25%*, 11/5/98,
LOC PNC Bank AMT 7,375 7,375
State IDR, Atlas Technicast Ltd. Project,
3.25%*, 11/5/98,
LOC Bank One 2,265 2,265
State IDR, Best Atlas Ltd. Project,
3.25%*, 11/5/98,
LOC Bank One 2,265 2,265
State IDR, Cincinnati Riverfront,
3.30%*, 11/5/98,
LOC PNC Bank 440 440
State Public Facilities Commission,
Higher Education Capital Facilities,
Series II-A, 5.20%, 5/1/99, AMBAC 2,000 2,014
State Public Facilities Commission,
Higher Education Capital Facilities,
Series II-B, 4.63%, 12/1/98 1,000 1,001
State Public Facilities Commission,
Mental Health Facilities, Series II-A,
4.63%, 12/1/98 500 500
State Water Development Authority,
4.10%, 12/1/98, MBIA 450 450
State Water Development Authority,
4.25%, 6/1/99 675 677
State Water Development Authority,
Cleveland Electric, Series B,
3.10%*, 11/4/98,
LOC FNB Chicago 13,000 13,000
State Water Development Authority,
PA Power Co. Project,
3.15%*, 11/4/98,
LOC FNB Chicago 5,800 5,800
State Water Development Authority,
PCR, Cleveland Electric Illumating,
Series A, 3.60%,11/10/98 1,000 1,000
State Water Development Authority,
PCR, Duquesne Light Co. Project,
3.85%, 10/1/28**,
LOC FNB Chicago 19,000 19,001
State Water Development Authority,
Philip Morris Co. Inc. Project,
3.15%*, 11/4/98 15,000 15,000
State Water Development Authority,
Timken Co. Project,
3.25%*, 11/4/98,
LOC Wachovia Bank 5,500 5,500
State Water Development Authority,
Timken Co. Project,
3.20%*, 11/4/98,
LOC Wachovia Bank 3,300 3,300
Streetboro, GO,
3.60%, 10/7/99 4,540 4,546
Student Loan Funding Corp.,
Cincinnati Student Loan Revenue,
3.30%*, 11/4/98 10,000 10,000
Student Loan Funding Corp.,
Cincinnati Student Loan Revenue,
3.30%*, 11/4/98,
LOC Bank Of America 25,000 25,000
Student Loan Funding Corp.,
Cincinnati Student Loan Revenue,
3.10%*, 11/4/98,
LOC Bank of America 11,535 11,535
<PAGE>
Summit County, GO,
4.88%, 11/19/98, AMT 5,000 5,003
Summit County, IDR,
3.25%*, 11/5/98,
LOC Bank One AMT 3,000 3,000
Summit County, IDR,
Delco Corp. Project,
3.30%*, 11/5/98,
LOC National City Bank 1,700 1,700
Summit County, IDR,
Fiocca Inc. Project,
3.23%*, 11/5/98,
LOC Fifth Third Bank 2,285 2,285
Summit County, IDR,
Forest Manufacturing Co. Project,
3.25%*, 11/5/98,
LOC Fifth Third Bank 300 300
Summit County, IDR,
Forest Manufacturing Co. Project,
3.25%*, 11/5/98,
LOC Bank One 535 535
Summit County, IDR,
GO-JO Industries Inc, Project,
3.15%*, 11/5/98,
LOC Bank One 2,265 2,265
Summit County, IDR,
L & W Manufacturing Project,
3.90%*, 10/1/06**,
LOC Bank One 205 205
Summit County, IDR,
Raymond W. King Jr. Project,
3.25%*, 11/5/98,
LOC Bank One 900 900
Summit County, IDR,
SSP Fittings Corp. Project,
3.15%*, 11/5/98,
LOC Bank One 1,575 1,575
Summit County, IDR, Texler Inc.
Project, 3.80%*, 11/4/98,
LOC Bank One 555 555
Summit County, IDR, Triscari Project,
3.95%, 9/1/03**,
LOC Bank One 315 315
Tallmadge, GO,
3.85%, 6/23/99 1,600 1,601
Tiffin, GO,
4.00%, 7/8/99 1,800 1,803
Toledo Lucas County,
3.25%, 11/23/98,
LOC Bank Of Nova Scotia 8,000 8,000
Toledo Lucas County,
3.30%*, 11/5/98,
LOC PNC Bank 2,800 2,800
Toledo Lucas County, GO,
3.25%, 11/23/98,
LOC Bank Of Nova Scotia 5,300 5,300
Toledo, IDR,
Lucas County Port Authority,
Frostbite Brands Inc. Project,
3.70%*, 11/5/98,
LOC Old Kent Bank & Trust 2,110 2,110
Tri County North Local School District,
4.20%, 7/22/99 1,500 1,505
Troy, EDR, L & CP Corp. Project,
3.90%*, 12/1/98,
LOC Societe Generale 1,685 1,685
Trumbull County, IDR,
Eliwood Engineered Casting,
3.35%*, 11/5/98,
LOC Mellon Bank 7,000 7,000
Trumbull County, IDR,
McDonald Steel Corp Project,
3.30%*, 11/5/98,
LOC PNC Bank 300 300
Union County, GO,
4.01%, 6/17/99 1,850 1,853
Upper Arlington, GO, Series A,
3.65%, 12/1/98 350 350
Vermilion, IDR,
Landover Properties Ltd.,
3.10%*, 11/5/98,
LOC Bank One 1,340 1,340
Warren County,
Health Care Facilities Revenue,
Otterbein Homes, Series B,
3.15%*, 11/5/98,
LOC Fifth Third Bank 10,000 10,000
Washington County, GO,
3.95%, 11/4/98 1,800 1,800
Wauseon, GO,
4.62%, 5/20/99 385 386
Wayne County,
Health Care Facilities Revenue,
West View Manor Project,
3.26%*, 11/5/98,
LOC Fifth Third Bank 4,940 4,940
West Clermont School District, GO,
4.25%, 4/15/99 1,400 1,403
Westerville, EDR,
American Ceramic Society,
3.45%*, 11/5/98,
LOC National City Bank 2,110 2,110
Westlake, IDR, Logan Westlake Project,
3.23%*, 11/5/98,
LOC Fifth Third Bank 1,640 1,640
<PAGE>
Williams County, GO,
4.63%, 5/13/99 310 311
Williams County, IDR,
Letts Industries Inc. Project,
3.25%*, 11/5/98,
LOC NBD Bank 3,795 3,795
Wilmington, GO,
4.26%, 12/21/98 1,200 1,201
Wood County, GO,
3.30%*, 11/5/98 4,600 4,600
Wood County, EDR,
Cast Masters Inc. Acquisition,
3.35%*, 11/5/98,
LOC Mid American National
Bank & Trust 2,515 2,515
Wood County, EDR,
Precision Aggregate II,
3.35%*, 11/5/98,
LOC Mid American National
Bank & Trust 2,460 2,460
Wood County, IDR,
Aluminite Ohio Inc. Project,
3.35%*, 11/5/98 1,750 1,750
Wooster, IDR, Allen Group Inc.,
3.25%*, 11/4/98,
LOC Dresdner Bank AG 800 800
Wynford Local School District, GO,
3.95%, 4/15/99 1,913 1,917
Wyoming City School District, GO,
4.60%, 1/13/99 15,600 15,629
717,351
Total Municipal Bonds
(Amortized Cost $731,251) 731,251
Investment Companies (2.2%)
Federated Ohio Municipal
Cash Trust Fund 16,476,400 $ 16,476
Total Investment Companies
(Cost $16,476) 16,476
Total Investments
(Amortized Cost $747,727) (a) -- 99.5% 747,727
Other assets in excess of liabilities -- 0.5% 3,816
TOTAL NET ASSETS -- 100.0% $751,543
(a) Cost and value for federal income tax and financial reporting purposes
are the same.
* Variable rate securities having liquidity agreements. The interest rate,
which will change periodically, is based upon an index of market
interest rates. The rate reflected on the Schedule of Investments is the
rate in effect at October 31, 1998.
** Put and demand features exist allowing the
Fund to require the repurchase of the investment within variable time
Periods less than one year.
AMBAC -- Insured by American Municipal Bond Assurance Corp.
AMT -- Alternative Minimum Tax Payer
EDR -- Ecomonic DevelopmentRevenue
FGIC -- Insured by Financial Guaranty Insurance Corp.
GNMA -- Insured by Government National Mortgage Assoc.
GO -- General Obligation
IDR -- Industrial Development Revenue
LOC -- Letter of Credit
MBIA -- Municipal Bond Insurance Association
SPA -- Standby Purchase Agreement
See notes to financial statements.
<PAGE>
<TABLE>
Statements of Assets and Liabilities
The Victory Portfolios October 31, 1998
(Amounts in Thousands, Except Per Share Amounts)
<CAPTION>
Ohio
Tax-Free Municipal
Money Money
Market Market
Fund Fund
<S> <C> <C>
ASSETS:
Investments, at amortized cost $464,478 $747,727
Interest and dividends receivable 2,476 5,909
Prepaid expenses and other assets 6 5
Total Assets 466,960 753,641
LIABILITIES:
Dividends payable 1,181 1,674
Accrued expenses and other payables:
Investment advisory fees 153 235
Administration fees 7 11
Shareholder service fees 53 126
Custodian fees 12 14
Accounting fees 1 1
Transfer agent fees 9 13
Other 16 24
Total Liabilities 1,432 2,098
NET ASSETS:
Capital 465,532 751,538
Accumulated undistributed net investment income -- 5
Accumulated undistributed net realized gains (losses)
from investment transactions (4) --
Net Assets $465,528 $751,543
Outstanding units of beneficial interest (shares) 465,530 751,534
Net asset value
Offering and redemption price per share $ 1.00 $ 1.00
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
Statements of Operations
The Victory Portfolios For the Year Ended October 31, 1998
(Amounts in Thousands)
<CAPTION>
Tax-Free Ohio Municipal
Money Market Money Market
Fund Fund
<S> <C> <C>
Investment Income:
Interest income $19,235 $25,814
Dividend income 315 320
Total Income 19,550 26,134
Expenses:
Investment advisory fees 1,859 3,539
Administration fees 727 918
Shareholder service fees 1,312 1,750
Accounting fees 94 97
Custodian fees 112 139
Legal and audit fees 67 87
Trustees' fees and expenses 15 21
Transfer agent fees 31 42
Registration and filing fees 31 32
Printing fees 13 16
Other 13 20
Total Expenses 4,274 6,661
Expenses voluntarily reduced (29) (1,026)
Net Expenses 4,245 5,635
Net Investment Income 15,305 20,499
Realized Gains from Investments:
Net realized gains (losses) from investment transactions (4) 5
Change in net assets resulting from operations $15,301 $20,504
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
The Victory Portfolios Statements of Changes in Net Assets
(Amounts in Thousands)
<CAPTION>
Tax-Free Ohio Municipal
Money Market Fund Money Market
Year Year Year Year
Ended Ended Ended Ended
October 31, October 31, October 31, October 31,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
From Investment Activities:
Operations:
Net investment income $ 15,305 $ 11,431 $ 20,499 $ 18,491
Net realized gains (losses) from
investment transactions (4) -- 5 --
Change in net assets resulting from operations 15,301 11,431 20,504 18,491
Distributions to Shareholders:
From net investment income (15,305) (11,431) (20,499) (18,491)
From net realized gains from investment transactions -- (3) -- --
Change in net assets from distributions to shareholders (15,305) (11,434) (20,499) (18,491)
Capital Transactions:
Proceeds from shares issued 1,226,221 578,925 $ 1,429,349 1,046,897
Dividends reinvested 8,862 5,978 16,522 14,588
Cost of shares redeemed (1,181,775) (517,472) (1,345,311) (971,638)
Change in net assets from capital transactions 53,308 67,431 100,560 89,847
Change in net assets 53,304 67,428 100,565 89,847
Net Assets:
Beginning of period 412,224 344,796 650,978 561,131
End of period $ 465,528 $ 412,224 $ 751,543 $ 650,978
Share Transactions:
Issued 1,226,221 578,925 1,429,349 1,046,897
Reinvested 8,862 5,978 16,522 14,588
Redeemed (1,181,775) (517,472) (1,345,311) (971,638)
Change in shares 53,308 67,431 100,560 89,847
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
The Victory Portfolios Financial Highlights
<CAPTION>
Tax-Free Money Market Fund
Year Ended October 31,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Investment Activities
Net investment income 0.029 0.030 0.030 0.034 0.021
Distributions
Net investment income (0.029) (0.030) (0.030) (0.034) (0.021)
Net Asset Value, End of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Total Return 2.91% 3.07% 3.04% 3.42% 2.17%
Ratios/Supplemental Data:
Net Assets, End of Period (000) $465,528 $412,224 $344,796 $307,726 $198,561
Ratio of expenses to
average net assets 0.80% 0.73% 0.78% 0.61% 0.60%
Ratio of net investment income
to average net assets 2.88% 3.03% 2.97% 3.36% 2.14%
Ratio of expenses to
average net assets<F1> 0.80% 0.74% 0.80% 0.62% 0.79%
Ratio of net investment income
to average net assets<F1> 2.88% 3.02% 2.95% 3.35% 1.95%
<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.
</FN>
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
The Victory Portfolios Financial Highlights
<CAPTION>
Ohio Municipal Money Market Fund
Two
Months
Year Ended October 31, Ended Year Ended August 31,
October 31,
1998 1997 1996 1995 1995<F2> 1994
<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 0.029 0.030 0.030 0.006 0.033 0.021
Distributions
Net investment income (0.029) (0.030) (0.030) (0.006) (0.033) (0.021)
Net Asset Value, End of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Total Return 2.94% 3.01% 3.11% 0.55%<F3> 3.33% 2.10%
Ratios/Supplemental Data:
Net Assets, End of Period (000) $751,543 $650,978 $561,131 $510,632 $502,453 $318,132
Ratio of expenses to
average net assets 0.80% 0.75% 0.67% 0.64%<F4> 0.63% 0.65%
Ratio of net investment income
to average net assets 2.90% 2.97% 3.03% 3.31%<F4> 3.33% 2.08%
Ratio of expenses to
average net assets<F1> 0.94% 0.94% 0.97% 0.92%<F4> 0.94% 0.76%
Ratio of net investment income
to average net assets<F1> 2.76% 2.78% 2.73% 3.03%<F4> 3.02% 1.97%
<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 June 5, 1995, the Victory Ohio Municipal Money Market Portfolio became the Ohio Municipal Money Market Fund.
<F3> Not annualized.
<F4> Annualized.
</FN>
</TABLE>
See notes to financial statements.
<PAGE>
THE VICTORY PORTFOLIOS Schedule of Investments
Limited Term Income Fund October 31, 1998
(Amounts in Thousands)
Principal Market
Security Description Amount Value
Asset Backed Securities (26.1%)
American Express Master Trust,
5.38%, 9/15/00 $ 2,000 $ 2,010
Caterpillar Financial Asset Trust,
Series 1997-A, Class A3,
6.45%, 5/25/03 3,000 3,090
Chase Manhattan Marine
Owner Trust,
6.14%, 1/17/05 3,000 3,062
Equicredit Home Equity Loan
Trust, Series 1996-1, Class A3,
6.19%, 12/15/10 1,000 1,007
Federal National Mortgage Assoc.,
Series 1998-46, Class PJ,
6.25%, 12/18/22, CMO 329 332
Fleetwood Credit Corp Grantor Trust,
Series 1994-B, Class A,
6.75%, 3/15/10, CMO 3,149 3,215
Fleetwood Credit Corp., Class A,
6.64%, 9/15/12 1,513 1,574
Green Tree Home Improvement
Loan Trust, Series 1997-E,
Class HEA6, 6.62%, 1/15/29 1,207 1,254
MBNA Master Credit Card Trust,
Series 1997-F, Class A,
6.60%, 11/15/04 2,000 2,122
Premier Auto Trust, Series 1998-4,
Class A3, 5.69%, 6/8/02 3,000 3,044
Premier Auto Trust, Series 1998-5,
Class A3, 5.07%, 7/8/02 500 503
Total Asset Backed Securities (Cost $20,845) 21,213
Commercial Paper (16.3%)
Associates Corp., N.A.,
5.70%, 11/2/98 13,293 13,293
Total Commercial Paper (Cost $13,293) 13,293
Corporate Bonds (29.7%)
Automobiles (3.9%):
Ford Motor Credit Corp.,
6.85%, 8/15/00 3,000 3,083
General Motors Acceptance Corp.,
Global Bond, 6.75%, 2/7/02 100 104
3,187
Brokerage Services (1.9%):
Merrill Lynch & Co., Inc.,
6.50%, 4/1/01 1,500 1,524
Chemicals -- General (3.9%):
E.I. Dupont de Nemour,
6.50%, 9/1/02 3,000 3,158
Financial Services (3.7%):
Associates Corp. N.A.,
6.00%, 6/15/00 3,000 3,030
Industrial Goods & Services (8.8%):
Burlington Resources, Inc.,
7.15%, 5/1/99 2,000 2,020
McKesson Corp.,
6.60%, 3/1/00 5,000 5,113
7,133
Retail (2.5%):
Dayton Hudson Co.,
5.95%, 6/15/10,
Callable 6/15/00 @ 100 2,000 2,025
Telecommunications (3.8%):
Ameritech Capital Funding,
6.13%, 10/15/01 3,000 3,101
Utilities -- Electric & Gas (1.2%):
Northern States Power Co.,
5.50%, 2/1/99 1,000 1,001
Total Corporate Bonds (Cost $23,669) 24,159
Securities Purchased When Issued (1.6%)
Federal Home Loan Mortgage Corp. (0.9%):
6.00%, 15 Year TBA 78 78
6.50%, 30 Year TBA 148 149
7.00%, 30 Year TBA 425 433
7.50%, 30 Year TBA 68 70
730
Federal National Mortgage Assoc. (0.7%):
6.00%, 15 Year TBA 150 150
6.50%, 15 Year TBA 74 75
6.50%, 30 Year TBA 154 155
7.00%, 15 Year TBA 16 16
8.00%, 30 Year TBA 136 141
537
Total Securities Purchased When Issued
(Cost $1,269) 1,267
<PAGE>
U.S. Government Mortgage Backed (11.4%)
Federal Home Loan Mortgage Corp. (6.5%):
6.50%, 5/1/23 2,566 2,585
8.50%, 7/1/21 869 912
9.50%, 12/1/01 1,776 1,869
5,366
Federal National Mortgage Assoc. (4.1%):
6.00%, 7/1/13-9/1/28 373 372
6.50%, 1/1/28-9/1/28 452 456
7.00%, 5/1/12-1/1/28 154 157
7.50%, 10/1/25-9/1/28 216 220
8.50%, 5/1/12-11/1/17 822 854
9.00%, 3/1/25 1,194 1,252
3,311
Government National Mortgage Assoc. (0.8%):
7.00%, 12/15/23-9/15/28 518 531
7.50%, 8/15/27-12/15/27 89 91
622
Total U.S. Government
Mortgage Backed (Cost $9,249) 9,299
U.S. Treasury Obligations (27.8%)
U.S. Treasury Notes (27.8%):
6.25%, 5/31/99 5,975 6,034
4.50%, 9/30/00 1,856 1,865
4.00%, 10/31/00 1,204 1,201
5.63%, 5/15/01 559 578
5.25%, 8/15/03 2,824 2,946
4.25%, 11/15/03 10,000 9,968
Total U.S. Treasury Obligations
(Cost $22,623) 22,592
Total Investments (Cost $90,948) (a)-- 112.9% 91,823
Liabilities in excess of other assets -- (12.9)% (10,480)
TOTAL NET ASSETS -- 100.0% $ 81,343
(a) Cost for federal income tax purposes differs from value by net unrealized
appreciation of securities as follows (amounts in thousands):
Unrealized appreciation $ 993
Unrealized depreciation (118)
Net unrealized appreciation $ 875
CMO -- Collateralized Mortgage Obligations
TBA -- To Be Announced
See notes to financial statements.
<PAGE>
THE VICTORY PORTFOLIOS Schedule of Investments
Intermediate Income Fund October 31, 1998
(Amounts in Thousands)
Principal Market
Security Description Amount Value
Asset Backed Securities (16.2%)
American Express Credit Account
Master Trust, Series 1997-1,
Class A, 6.40%, 4/15/05 $ 605 $ 625
Copelco,
6.47%, 4/20/05 3,550 3,720
Federal National Mortgage Assoc.,
Series 1988-26, Class C,
7.50%, 7/25/18, CMO 285 291
Federal National Mortgage Assoc.,
Series 1998-46, Class PJ,
6.25%, 12/18/22, CMO 1,039 1,047
Ford Credit Auto Owner Trust,
Series 1998-A, Class A3,
5.65%, 10/15/01 4,190 4,220
Green Tree Home Improvement Loan
Trust, Series 1997-E, Class HEA6,
6.62%, 1/15/29 1,821 1,892
MBNA Master Credit Card Trust,
Series 1998-D, Class A,
5.80%, 12/15/05 2,000 2,051
Nationsbank Credit Card Master
Trust, Series 1995-1, Class A,
6.45%, 4/15/03 5,215 5,395
Premier Auto Trust, Series 1997-1,
Class A4, 6.35%, 4/6/02 3,300 3,429
Railcar Trust, Series 92-1,
7.75%, 6/1/04, CMO 5,998 6,463
Residential Accredit Loans, Inc.,
Series 1998-QS7, Class CB2,
6.75%, 7/25/28, CMO 5,551 5,605
Residential Accredit Loans, Inc.,
Series 1998-QS16, Class A1,
6.50%, 11/29/28 2,525 2,542
Salomon Brothers Mortgage
Securities VII, Series 1998-AQ1,
Class A3, 6.56%, 6/25/28 3,446 3,457
Toyota Auto Receivables Guarantor
Trust, Series 1997-A, Class A,
6.45%, 4/15/02, CMO 794 803
Total Asset Backed Securities (Cost $40,699) 41,540
Commercial Paper (6.8%)
Associates Corp., N.A.,
5.70%, 11/2/98 17,383 17,383
Total Commercial Paper (Cost $17,383) 17,383
Corporate Bonds (34.7%)
Automobiles (0.4%):
Ford Motor Co.,
9.00%, 9/15/01 1,000 1,104
Beverages (3.0%):
Coca-Cola Amatil Limited,
6.50%, 9/4/03 1,700 1,715
Coca-Cola Enterprises, Inc.,
6.63%, 9/30/02 5,775 6,046
7,761
Broadcasting/Cable (0.9%):
Time Warner Inc.,
7.75%, 6/15/05 2,190 2,395
Brokerage Services (0.5%):
Salomon Smith Barney Holdings,
6.13%, 1/15/03 1,400 1,404
Chemicals -- General (0.3%):
E.I. duPont de Nemours,
6.00%, 3/6/03 775 803
Electronic & Electrical -- General (2.5%):
Motorola, Inc.,
5.80%, 10/15/08 2,520 2,520
Sony Corp.,
6.13%, 3/4/03 3,850 3,951
6,471
Electronics (1.7%):
Hitachi Credit Corp.,
5.88%, 12/28/00 4,460 4,466
Entertainment (0.7%):
Loews Corp.,
6.75%, 12/15/06 1,725 1,781
Financial Services (3.6%):
Amerus Life Holdings, Inc.,
6.95%, 6/15/05 2,700 2,670
Associates Corp., N.A.,
6.88%, 6/20/02 820 855
Associates Corp., N.A.,
6.25%, 11/1/08 1,000 1,008
EOP Operating LP,
6.75%, 2/15/08 (b) 1,430 1,337
Heller Financial,
5.88%, 11/1/00 3,230 3,250
9,120
<PAGE>
Industrial Goods & Services (4.6%):
360 Communications Co.,
7.50%, 3/1/06 4,455 4,889
John Deere Capital Corp.,
5.85%, 1/15/01 1,450 1,468
USX Corp.,
7.20%, 2/15/04 5,000 5,344
11,701
Insurance (1.9%):
Liberty Mutual,
8.20%, 5/4/07 (b) 630 719
Metropolitan Life Insurance Co.,
6.30%, 11/1/03 (b) 1,500 1,534
Prudential Insurance,
7.65%, 7/1/07 2,300 2,489
4,742
Investment Company (1.1%):
D.R. Investments,
7.10%, 5/15/02 2,750 2,908
Manufacturing -- Miscellaneous (0.8%):
Tyco International Group,
6.13%, 6/15/01 2,000 2,035
Media (0.7%):
News America, Inc.,
6.63%, 1/9/08 1,875 1,859
Oil-Integrated Companies (0.9%):
Union Oil Of Califoria,
7.20%, 5/15/05 2,230 2,403
Retail (3.7%):
Dayton Hudson Co.,
6.80%, 10/1/01 5,000 5,205
Dayton Hudson Co.,
5.95%, 6/15/10,
Callable 6/15/00 @ 100 1,975 2,000
Federated Department Stores, Inc.,
6.13%, 9/1/11,
Callable 9/1/01 @ 100 1,700 1,711
J.C. Penny & Co.,
7.60%, 4/1/07 485 530
9,446
Retail-Specialty Stores (1.3%):
AutoZone, Inc.,
6.00%, 11/1/03 3,280 3,272
Telecommunications (4.1%):
GTE Corp.,
6.36%, 4/15/06 1,590 1,662
MCI WorldCom, Inc.,
7.55%, 4/1/04 1,725 1,876
Telecommunications, Inc.,
8.25%, 1/15/03 6,300 6,969
10,507
Tobacco & Tobacco Products (0.6%):
Philip Morris Cos., Inc.,
7.00%, 7/15/05 1,470 1,545
Utilities -- Natural Gas (1.4%):
KN Energy, Inc.,
6.65%, 3/1/05 2,000 2,002
Williams Cos., Inc.,
6.20%, 8/1/02 1,465 1,511
3,513
Total Corporate Bonds (Cost $87,292) 89,236
Securities Purchased When Issued (1.9%)
Federal Home Loan Mortgage Corp. (1.1%):
6.00%, 15 Year TBA 261 262
6.50%, 30 Year TBA 458 461
7.00%, 30 Year TBA 1,445 1,472
7.50%, 30 Year TBA 486 498
2,693
Federal National Mortgage Assoc. (0.8%):
6.00%, 15 Year TBA 715 717
6.50%, 15 Year TBA 467 473
7.00%, 15 Year TBA 214 218
8.00%, 30 Year TBA 670 692
2,100
Total Securities Purchased When Issued
(Cost $4,798) 4,793
U.S. Government Agencies (2.7%)
Federal Home Loan Mortgage Corp. (1.3%):
5.75%, 4/15/08 3,140 3,256
Federal National Mortgage Assoc. (1.4%):
6.54%, 10/3/05 3,410 3,680
Total U.S. Government Agencies
(Cost $6,659) 6,936
<PAGE>
U.S. Government Mortgage Backed (10.1%)
Federal Home Loan Mortgage Corp. (1.7%):
6.00%, 2/1/11 889 893
7.50%, 9/15/20 289 289
8.50%, 6/1/12-7/1/21 3,064 3,208
4,390
Federal National Mortgage Assoc. (5.9%):
4.63%, 10/15/01 1,755 1,757
6.00%, 7/1/13-9/1/28 1,304 1,301
6.01%, 7/17/03 3,420 3,475
6.50%, 7/1/13-9/1/28 2,950 2,975
7.00%, 5/1/12-1/1/28 648 662
7.50%, 9/1/23-9/1/28 635 650
8.50%, 5/1/12-11/1/17 4,050 4,210
15,030
Government National Mortgage Assoc. (2.5%):
7.00%, 12/15/23-9/15/28 4,072 4,170
7.50%, 8/15/27-11/15/27 524 538
8.50%, 7/15/10 7 8
9.00%, 12/15/09 1,536 1,631
6,347
Total U.S. Government Mortgage Backed
(Cost $25,572) 25,767
U.S. Treasury Obligations (30.4%)
U.S. Treasury Notes (30.4%):
6.25%, 5/31/99 5,814 5,871
5.13%, 8/31/00 22,782 23,124
4.50%, 9/30/00 3,357 3,373
4.00%, 10/31/00 4,333 4,324
5.63%, 5/15/01 5,507 5,690
5.25%, 8/15/03 1,974 2,059
4.25%, 11/15/03 6,000 5,981
5.63%, 5/15/08 10,606 11,422
4.75%, 11/15/08 16,000 15,936
Total U.S. Treasury Obligations
(Cost $77,555) 77,780
Total Investments (Cost $259,958) (a) -- 102.8% 263,435
Liabilities in excess of other assets -- (2.8)% (7,168)
TOTAL NET ASSETS -- 100.0% $256,267
(a) Represents cost for financial reporting purposes and differs from cost
basis for federal income tax purposes by the amount of losses recognized
for financial reporting purposes in excess of federal income tax
reporting of approximately $60. Cost for federal income tax purposes
differs from value by net unrealized appreciation of securities as
follows (amounts in thousands):
Unrealized appreciation $3,876
Unrealized depreciation (459)
Net unrealized appreciation $3,417
(b) 144a security which is restricted as to resale to institutional
investors.
CMO -- Collateralized Mortgage Obligation
TBA -- To Be Announced
<PAGE>
THE VICTORY PORTFOLIOS Schedule of Investments
Fund for Income October 31, 1998
(Amounts in Thousands)
Principal Market
Security Description Amount Value
Asset Backed Securities (35.9%)
American Housing Trust, Series VIII,
Class K, 9.00%, 1/25/21, CMO $1,007 $ 1,136
Federal National Mortgage Assoc.,
Series 1988-4, Class Z,
9.25%, 3/25/18, CMO 929 982
Federal National Mortgage Assoc.,
Series 1998-46, Class PJ,
6.25%, 12/18/22, CMO 481 485
General Electric Capital
Mortgage Services, Inc.,
7.00%, 3/25/08, CMO 1,000 1,015
Green Tree Financial Corp.,
8.95%, 3/15/20, CMO 500 551
Green Tree Home Improvement
Loan Trust, Series 1997-E,
Class HEA6, 6.62%, 1/15/29 655 680
Housing Securities, Inc.,
7.25%, 4/25/08, CMO 1,517 1,583
Prudential Home Mortgage Securities,
7.00%, 1/25/08, CMO 1,022 1,050
Resolution Trust Corp.,
8.20%, 11/25/21, CMO 744 742
Salomon Brothers Mortgage
Securities VII, Series 1996-LB2,
Class A7, 7.65%, 10/25/26, CMO 654 697
Salomon Brothers Mortgage
Securities VII, Series 1998-AQ1,
Class A3, 6.56%, 6/25/28 305 306
The Money Store Home Equity Trust,
Series 1998-A, Class AF3,
6.13%, 9/15/16 750 753
The Money Store Home Equity
Trust, Series 1995-B, Class A5,
7.23%, 12/15/20 315 332
Total Asset Backed Securities (Cost $9,986) 10,312
Commercial Paper (6.0%)
Associates Corp., N.A.,
5.70%, 11/2/98 830 830
Ford Motor Credit Corp.,
5.51%, 11/2/98 900 900
Total Commercial Paper (Cost $1,730) 1,730
Securities Purchased When Issued (8.8%)
Federal Home Loan Mortgage Corp. (4.1%):
6.00%, 15 Year TBA 91 91
6.50%, 30 Year TBA 257 259
7.00%, 30 Year TBA 664 677
7.50%, 30 Year TBA 139 142
1,169
Federal National Mortgage Assoc. (2.8%):
6.00%, 15 Year TBA 552 554
8.00%, 30 Year TBA 259 267
821
Government National Mortgage Assoc. (1.9%):
6.50%, 30 Year TBA 538 544
Total Securities Purchased When Issued
(Cost $2,539) 2,534
U.S. Government Agencies (2.5%)
Federal Home Loan Bank (2.5%):
5.68%, 12/3/07 675 726
Total U.S. Government Agencies (Cost $675) 726
U.S. Government Mortgage Backed (46.4%)
Federal Home Loan Mortgage Corp. (7.6%):
6.50%, 5/1/23 410 414
8.50%, 5/1/17-7/1/21 429 450
9.50%, 12/1/01-12/1/22 1,136 1,200
10.00%, 2/1/17-9/1/19 103 111
12.00%, 10/1/10-7/1/14 9 9
2,184
Federal National Mortgage Assoc. (10.8%):
6.00%, 7/1/13-9/1/28 334 333
6.50%, 7/1/13-9/1/28 1,351 1,364
7.00%, 5/1/12-7/1/28 306 312
7.50%, 10/1/25-9/1/28 362 369
<PAGE>
8.50%, 5/1/12-11/1/17 545 568
9.50%, 11/1/19 15 16
10.00%, 5/1/13-11/1/18 62 66
12.00%, 8/1/13 11 12
13.00%, 12/1/12 33 38
3,078
Government National Mortgage Assoc. (28.0%):
7.00%, 12/15/23-9/15/28 1,711 1,752
7.50%, 12/15/23-3/15/28 1,037 1,067
8.00%, 3/15/08-10/15/27 1,857 1,923
9.00%, 10/15/09 842 896
9.50%, 8/15/17-9/20/20 702 751
10.00%, 3/15/16-8/15/25 1,400 1,520
10.25%, 3/15/19-6/15/19 58 63
10.50%, 2/15/16 13 15
11.00%, 9/20/14 61 67
8,054
Total U.S. Government Mortgage Backed
(Cost $13,139) 13,316
U.S. Treasury Obligations (2.1%)
U.S. Treasury Notes (0.1%):
5.13%, 8/31/00 23 23
U.S. Treasury Strips (2.0%):
0.00%, 8/15/20 2,000 588
Total U.S. Treasury Obligations (Cost $459) 611
Total Investments (Cost $28,528) (a) -- 101.7% 29,229
Liabilities in excess of other assets -- (1.7)% (486)
TOTAL NET ASSETS -- 100.0% $28,743
(a) Cost for federal income tax purposes differs from value by net
unrealized appreciation of securities as follows (amounts in thousands):
Unrealized appreciation $765
Unrealized depreciation (64)
Net unrealized appreciation $701
CMO -- Collateralized Mortgage Obligation
TBA -- To Be Announced
See notes to financial statements.
<PAGE>
THE VICTORY PORTFOLIOS Schedule of Investments
Government Mortgage Fund October 31, 1998
(Amounts in Thousands)
Principal Market
Security Description Amount Value
Asset Backed Securities (6.0%)
Federal Home Loan Mortgage Corp.,
Series 2030 D, Class D,
6.25%, 5/15/27, CMO $ 3,564 $ 3,590
Federal National Mortgage Assoc.,
Series 1998-46, Class PJ,
6.25%, 12/18/22, CMO 1,831 1,846
Federal National Mortgage Assoc.,
Series 1998-36, Class N,
6.00%, 6/18/25, CMO 872 843
Total Asset Backed Securities (Cost $6,219) 6,279
Discount Note (13.6%)
Federal Home Loan Bank (13.6%):
5.40%, 11/2/98 14,314 14,310
Total Discount Note (Cost $14,312) 14,310
Securities Purchased When Issued (29.8%)
Federal Home Loan Mortgage Corp. (17.2%):
6.00%, 15 Year TBA 2,349 2,359
6.50%, 30 Year TBA 2,973 2,993
7.00%, 30 Year TBA 9,642 9,826
7.50%, 30 Year TBA 2,876 2,945
18,123
Federal National Mortgage Assoc. (12.6%):
6.00%, 15 Year TBA 1,807 1,811
6.50%, 15 Year TBA 3,028 3,066
6.50%, 30 Year TBA 2,798 2,819
7.00%, 15 Year TBA 1,155 1,177
8.00%, 30 Year TBA 4,185 4,326
13,199
Total Securities Purchased When Issued
(Cost $31,372) 31,322
U.S. Government Mortgage Backed (64.5%)
Federal Home Loan Bank (3.9%):
5.68%, 12/3/07 3,825 4,114
Federal Home Loan Mortgage Corp. (1.1%):
7.00%, 3/1/28 241 245
8.50%, 5/1/17 767 806
9.50%, 8/1/21 82 86
1,137
Federal National Mortgage Assoc. (35.6%):
6.00%, 2/1/13-8/1/28 8,408 8,392
6.50%, 4/1/12-9/1/28 17,857 18,009
7.00%, 5/1/12-8/1/28 2,900 2,961
7.50%, 9/1/23-10/1/28 3,763 3,855
8.50%, 5/1/12-11/1/17 4,041 4,203
37,420
Government National Mortgage Assoc. (23.9%):
7.00%, 12/15/23-9/15/28 12,684 12,988
7.50%, 12/15/23-3/15/28 5,240 5,391
8.50%, 7/15/10-5/15/21 270 283
9.00%, 10/15/09-5/15/21 1,994 2,116
9.50%, 4/15/10-6/15/21 4,067 4,367
25,145
Total U.S. Government Mortgage Backed
(Cost $67,057) 67,816
Total Investments (Cost $118,960) (a) -- 113.9% 119,727
Liabilities in excess of other assets -- (13.9)% (14,642)
TOTAL NET ASSETS -- 100.0% $105,085
(a) Cost for federal income tax purposes differs from value by net
unrealized appreciation of securities as follows (amounts in thousands):
Unrealized appreciation $1,100
Unrealized depreciation (333)
Net unrealized appreciation $ 767
CMO -- Collateralized Mortgage Obligation
TBA -- To Be Announced
See notes to financial statements.
<PAGE>
The Victory Portfolios Schedule of Investments
Investment Quality Bond Fund October 31, 1998
(Amounts in Thousands)
Principal Market
Security Description Amount Value
Asset Backed Securities (10.6%)
American Express Credit Account
Master Trust, Series 1997-1,
Class A, 6.40%, 4/15/05 $ 1,120 $ 1,157
CIT Recreational Vehicle Trust,
Series 1998-A, Class A2,
5.92%, 3/15/07 1,520 1,532
Federal National Mortgage Assoc.,
Series 1998-46, Class PJ,
6.25%, 12/18/22, CMO 1,591 1,604
Federal National Mortgage Assoc.,
Series 1998-36, Class N, 6.00%,
6/18/25, CMO 2,260 2,186
First USA Credit Card Master Trust,
Series 1997-6, Class A,
6.42%, 3/17/05 1,785 1,846
Green Tree Financial Corp.,
Series 1997-E, Class HEA6,
6.62%, 1/15/29 1,821 1,892
MBNA Master Credit Card Trust,
Series 1998-D, Class A,
5.80%, 12/15/05 1,400 1,436
Nationsbank Credit Card
Master Trust, Series 1995-1,
Class A, 6.45%, 4/15/03 950 983
Premier Auto Trust,
Series 1998-5, Class A-3,
5.07%, 7/8/02 1,560 1,571
Residential Accredit Loans, Inc.,
Series 1998-QS7, Class CB2,
6.75%, 7/25/28 2,030 2,050
Residential Accredit Loans, Inc.,
Series 1998-QS16, Class A1,
6.50%, 11/29/28 1,725 1,736
Total Asset Backed Securities
(Cost $17,785) 17,993
Commercial Paper (9.6%)
Associates Corp. N.A.,
5.70%, 11/2/98 16,258 16,258
Total Commercial Paper (Cost $16,258) 16,258
Corporate Bonds (24.6%)
Automobiles (0.6%):
Ford Motor Co.,
9.00%, 9/15/01 1,000 1,104
Banks (2.4%):
Abbey National PLC,
6.70%, 6/29/49,
Callable 6/15/08 @ 100 2,550 2,445
Natexis Banque,
6.31*, 12/29/49,
Callable 12/12/01 @ 100 1,750 1,633
4,078
Broadcasting/Cable (0.3%):
TCI Communications, Inc.,
7.88%, 2/15/26 500 574
Electronic & Electrical -- General (1.4%):
Motorola, Inc.,
5.80%, 10/15/08 1,830 1,830
Sony Corp.,
6.13%, 3/4/03 500 513
2,343
Entertainment (0.7%):
Loews Corp.,
6.75%, 12/15/06 1,150 1,187
Environmental Control (0.7%):
Waste Management, Inc.,
7.00%, 7/15/28 1,250 1,158
Financial Services (3.4%):
Associates Corp., N.A.,
6.88%, 6/20/02 750 782
Associates Corp., N.A.,
6.95%, 11/1/18 200 202
Chrysler Financial Corp.,
5.25%, 5/4/01 900 899
Farmers Exchange Capital,
7.05%, 7/15/28, (b) 1,015 973
General Electric Capital Services,
7.50%, 8/21/35 625 748
Lumbermans Mutual,
8.30%, 12/1/37, (b) 265 274
Republic New York Corp.,
7.53%, 12/4/26,
Callable 12/4/06 @ 104 1,000 993
Transamerica Capital III,
7.63%, 11/15/37, (b) 625 662
5,533
Food Processing & Packaging (0.7%):
Nabisco, Inc.,
6.00%, 2/15/01 1,150 1,144
Governments (Foreign) (0.7%):
British Columbia,
5.38%, 10/29/08 1,150 1,140
<PAGE>
Industrial Goods & Services (3.2%):
EOP Operating LP,
6.75%, 2/15/08 1,700 1,590
Georgia-Pacific Corp.,
9.95%, 6/15/02 1,500 1,711
Owens Corning,
7.50%, 5/1/05 560 573
USX Corp.,
7.20%, 2/15/04 1,500 1,603
5,477
Insurance (1.6%):
Liberty Mutual,
8.20%, 5/4/07 (b) 630 719
Metropolitan Life Insurance Co.,
6.30%, 11/1/03 (b) 2,000 2,045
2,764
Oil-Integrated Companies (1.2%):
Amoco Corp.,
6.00%, 6/9/08 720 755
Unocal Corp.,
7.00%, 5/1/28 1,410 1,322
2,077
Publishing (1.7%):
Time Warner, Inc.,
7.75%, 6/15/05 2,200 2,407
Time Warner, Inc.,
6.95%, 1/15/28 500 501
2,908
Retail (1.4%):
Dayton Hudson,
6.65%, 8/1/28 500 489
J.C. Penny & Co.,
7.60%, 4/1/07 950 1,039
J.C. Penny & Co.,
7.63%, 3/1/97 860 894
2,422
Telecommunications (2.6%):
360 Communications Co.,
7.50%, 3/1/06 1,075 1,180
Frontier Corp.,
6.00%, 10/15/13 1,240 1,260
GTE Corp.,
6.94%, 4/15/28 755 780
Telecommunications, Inc.,
9.80%, 2/1/12 990 1,273
4,493
Tobacco & Tobacco Products (0.8%):
Philip Morris Cos., Inc.,
7.00%, 7/15/05 1,230 1,293
Transportation Services (0.6%):
CSX Corp.,
6.25%, 10/15/08 1,000 999
Utilities -- Gas (0.6%):
Williams Cos.,
6.20%, 8/1/02 1,030 1,062
Total Corporate Bonds (Cost $41,663) 41,756
Securities Purchased When Issued (10.3%)
Federal Home Loan Mortgage Corp. (6.4%):
6.00%, 15 Year TBA 1,731 1,739
6.50%, 30 Year TBA 1,760 1,772
7.00%, 30 Year TBA 5,718 5,825
7.50%, 30 Year TBA 1,561 1,599
10,935
Federal National Mortgage Assoc. (3.9%):
6.00%, 15 Year TBA 1,540 1,544
6.50%, 15 Year TBA 1,812 1,835
7.00%, 15 Year TBA 785 799
8.00%, 30 Year TBA 2,324 2,403
6,581
Total Securities Purchased When Issued
(Cost $17,528) 17,516
U.S. Government Mortgage Backed (31.4%)
Federal Home Loan Bank (1.6%):
5.13%, 9/15/03 2,660 2,690
Federal Home Loan Mortgage Corp. (2.3%):
6.25%, 5/15/27 1,649 1,660
7.00%, 3/1/28 228 233
7.50%, 4/1/07 467 478
8.50%, 6/1/12-7/1/21 1,516 1,580
9.00%, 6/1/19 0 0
3,951
<PAGE>
Federal National Mortgage Assoc. (16.3%):
4.63%, 10/15/01 1,190 1,191
4.75%, 11/14/03 1,980 1,975
6.00%, 2/1/13-8/1/28 4,863 4,851
6.50%, 7/1/13-9/1/28 10,434 10,522
6.55%, 9/12/05 3,300 3,563
7.00%, 5/1/12-1/1/28 1,286 1,312
7.50%, 10/1/25-9/1/28 2,365 2,423
8.50%, 5/1/12-11/1/17 1,826 1,899
27,736
Government National Mortgage Assoc. (11.2%):
6.50%, 7/15/23 756 765
7.00%, 12/15/23-9/15/28 10,361 10,611
7.50%, 12/15/23-2/15/28 4,325 4,451
8.50%, 7/15/10 1,777 1,875
9.00%, 2/15/17-12/15/19 1,294 1,371
19,073
Total U.S. Government Mortgage Backed
(Cost $52,836) 53,450
U.S. Treasury Securities (20.3%)
U.S. Treasury Notes (13.5%):
5.75%, 9/30/99 1,897 1,920
4.50%, 9/30/00 3,137 3,152
4.00%, 10/31/00 3,201 3,194
5.63%, 5/15/01 95 98
6.25%, 10/31/01 1,040 1,095
5.25%, 8/15/03 1,456 1,519
4.13%, 11/15/03 3,000 2,991
5.63%, 5/15/08 5,577 6,006
4.75%, 11/15/08 3,000 2,988
22,963
U.S. Treasury Bonds (6.8%):
6.13%, 11/15/27 8,046 9,070
5.50%, 8/15/28 2,310 2,431
11,501
Total U.S. Treasury Securities (Cost $34,654) 34,464
Total Investments (Cost $180,723) (a) -- 106.8% 181,437
Liabilities in excess of other assets -- (6.8)% (11,505)
TOTAL NET ASSETS -- 100.0% $169,932
(a) Represents cost for financial reporting purposes and
differs from cost basis for federal income tax purposes by the amount of
losses recognized for financial reporting purposes in excess of federal
income tax reporting of approximately $6. Cost for federal income tax
purposes differs from value by net unrealized appreciation of securities
as follows (amounts in thousands):
Unrealized appreciation $ 1,725
Unrealized depreciation (1,017)
Net unrealized appreciation $ 708
(b) 144a security which is restricted as to resale to institutional investors.
* Variable rate securities having liquidity sources through bank letters of
credit or other credit and/or liquidity agreements. The interest rate,
which will change periodically, is based upon bank prime rates or an
index of market interest rates. The rate reflected on the Schedule of
Investments is the rate in effect at October 31, 1998.
CMO -- Collateralized Mortgage Obligation
MTN -- Medium Term Note
TBA -- To Be Announced
See notes to financial statements.
<PAGE>
<TABLE>
Statements of Assets and Liabilities
The Victory Portfolios October 31, 1998
(Amounts in Thousands, Except Per Share Amounts)
<CAPTION>
Limited Investment
Term Intermediate Fund Government Quality
Income Income For Mortgage Bond
Fund Fund Income Fund Fund
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments, at value
(Cost $90,948; $259,958;
$28,528; $118,960 & $180,723) $91,823 $263,435 $29,229 $119,727 $181,437
Cash -- -- -- 1 --
Interest receivable 732 3,114 190 595 1,755
Receivable for capital shares issued -- -- 1 -- 13
Receivable from brokers for investments sold 3,847 45,878 6,077 79,679 57,364
Prepaid expenses and other assets 4 6 17 4 7
Total Assets 96,406 312,433 35,514 200,006 240,576
LIABILITIES:
Payable to brokers for investments purchased 15,018 55,969 6,707 94,836 70,453
Payable for capital shares redeemed -- 24 35 16 47
Accrued expenses and other payables:
Investment advisory fees 23 101 4 34 73
Administration fees 1 4 -- 2 3
Shareholder service fees 15 51 5 22 33
Custodian fees 4 9 6 6 10
Transfer agent fees 2 6 13 4 21
Other -- 2 1 1 4
Total Liabilities 15,063 56,166 6,771 94,921 70,644
NET ASSETS:
Capital 83,223 252,463 29,514 105,095 179,160
Undistributed net investment income 37 89 28 30 44
Net unrealized appreciation/depreciation
from investments 875 3,477 701 767 714
Accumulated undistributed net realized gains
(losses) from investment transactions (2,792) 238 (1,500) (807) (9,986)
Net Assets $81,343 $256,267 $28,743 $105,085 $169,932
Outstanding units of beneficial
interest (shares) 8,089 26,004 2,923 9,493 16,999
Net asset value
Redemption price per share $ 10.06 $ 9.85 $ 9.83 $ 11.07 $ 10.00
Maximum sales charge 2.00% 5.75% 2.00% 5.75% 5.75%
Maximum offering price per share
(100%/(100%-maximum sales charge) of
net asset value adjusted to nearest cent) $ 10.27 $ 10.45 $ 10.03 $ 11.75 $ 10.61
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
Statements of Operations
The Victory Portfolios For the Year Ended October 31, 1998
(Amounts in Thousands)
<CAPTION>
Limited Investment
Term Intermediate Fund Government Quality
Income Income For Mortgage Bond
Fund Fund Income Fund Fund
<S> <C> <C> <C> <C> <C>
Investment Income:
Interest income $4,982 $15,804 $1,740 $6,806 $11,489
Expenses:
Investment advisory fees 395 1,841 120 515 1,317
Administration fees 118 368 36 155 263
Shareholder service fees 194 608 58 247 433
Accounting fees 41 78 57 51 74
Custodian fees 22 64 26 33 58
Legal and audit fees 12 35 5 13 37
Trustees' fees and expenses 2 6 1 3 5
Transfer agent fees 10 19 36 12 51
Registration and filing fees 7 7 5 9 22
Printing fees -- -- 6 -- 16
Other 7 20 16 7 15
Total Expenses 808 3,046 366 1,045 2,291
Expenses voluntarily reduced (124) (682) (126) (134) (436)
Expenses before reimbursement
from distributor 684 2,364 240 911 1,855
Expenses reimbursed by the distributor -- -- (1) -- --
Net Expenses 684 2,364 239 911 1,855
Net Investment Income 4,298 13,440 1,501 5,895 9,634
Realized/Unrealized Gains
(losses) from Investments:
Net realized gains (losses)
from investment transactions 308 5,545 120 1,276 5,801
Change in unrealized appreciation/
depreciation from investments 538 690 (51) 50 (1,619)
Net realized/unrealized gains
(losses) from investments 846 6,235 69 1,326 4,182
Change in net assets resulting
from operations $5,144 $19,675 $1,570 $7,221 $13,816
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
The Victory Portfolios Statements of Changes in Net Assets
(Amounts in Thousands)
<CAPTION>
Limited Term Intermediate Fund For
Income Fund Income Fund Income
Year Year Year Year Year Year
Ended Ended Ended Ended Ended Ended
October 31, October 31, October 31, October 31, October 31, October 31,
1998 1997 1998 1997 1998 1997
<S> <C> <C> <C> <C> <C> <C>
From Investment Activities:
Operations:
Net investment income $ 4,298 $ 5,262 $ 13,440 $ 15,363 $ 1,501 $ 1,374
Net realized gains (losses)
from investment transactions 308 (915) 5,545 (248) 120 99
Net change in unrealized
appreciation/depreciation
from investments 538 331 690 1,664 (51) (32)
Change in net assets resulting
from operations 5,144 4,678 19,675 16,779 1,570 1,441
Distributions to Shareholders:
From net investment income (4,292) (5,310) (13,508) (15,376) (1,483) (1,362)
Change in net assets from
distributions to shareholders (4,292) (5,310) (13,508) (15,376) (1,483) (1,362)
Capital Transactions:
Proceeds from shares issued 17,938 22,820 52,810 50,003 13,503 6,619
Dividends reinvested 3,093 4,476 9,834 11,254 1,018 852
Cost of shares redeemed (22,453) (34,770) (61,385) (85,906) (7,966) (6,265)
Change in net assets from
capital transactions (1,422) (7,474) 1,259 (24,649) 6,555 1,206
Change in net assets (570) (8,106) 7,426 (23,246) 6,642 1,285
Net Assets:
Beginning of period 81,913 90,019 248,841 272,087 22,101 20,816
End of period $ 81,343 $ 81,913 $256,267 $248,841 $28,743 $22,101
Share Transactions:
Issued 1,797 2,294 5,434 5,259 1,377 678
Reinvested 311 451 1,017 1,186 104 88
Redeemed (2,256) (3,500) (6,337) (9,028) (811) (644)
Change in shares (148) (755) 114 (2,583) 670 122
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
The Victory Portfolios Statements of Changes in Net Assets
(Amounts in Thousands)
<CAPTION>
Government Investment Quality
Mortgage Fund Bond Fund
Year Year Year Year
Ended Ended Ended Ended
October 31, October 31, October 31, October 31,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
From Investment Activities:
Operations:
Net investment income $ 5,895 $ 7,147 $ 9,634 $ 9,460
Net realized gains (losses)
from investment transactions 1,276 (160) 5,801 1,537
Net change in unrealized
appreciation/depreciation
from investments 50 1,733 (1,619) 1,026
Change in net assets resulting
from operations 7,221 8,720 13,816 12,023
Distributions to Shareholders:
From net investment income (5,870) (7,064) (9,672) (9,369)
Tax return of capital -- (28) -- --
Change in net assets from distributions
to shareholders (5,870) (7,092) (9,672) (9,369)
Capital Transactions:
Proceeds from shares issued 24,330 15,588 56,066 61,463
Proceeds from shares issued in
connection with acquisition -- -- -- 18,518
Dividends reinvested 2,880 3,890 5,975 6,852
Cost of shares redeemed (27,237) (43,337) (77,260) (59,287)
Change in net assets from
capital transactions (27) (23,859) (15,219) 27,546
Change in net assets 1,324 (22,231) (11,075) 30,200
Net Assets:
Beginning of period 103,761 125,992 181,007 150,807
End of period $105,085 $103,761 $169,932 $181,007
Share Transactions:
Issued 2,201 1,442 5,665 6,404
Issued in connection with acquisition -- -- -- 1,929
Reinvested 261 361 604 715
Redeemed (2,466) (4,019) (7,790) (6,198)
Change in shares (4) (2,216) (1,521) 2,850
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
The Victory Portfolios Financial Highlights
<CAPTION>
Limited Term Income Fund
Year Ended October 31,
1998 1997 1996 1995<F2> 1994
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 9.94 $ 10.01 $ 10.15 $ 9.88 $ 10.53
Investment Activities
Net investment income 0.54 0.61 0.63 0.57 0.54
Net realized and unrealized
gains (losses) from investments 0.12 (0.07) (0.14) 0.27 (0.61)
Total from Investment Activities 0.66 0.54 0.49 0.84 (0.07)
Distributions
Net investment income (0.54) (0.61) (0.62) (0.57) (0.54)
In excess of net investment income -- -- (0.01) -- --
Net realized gains -- -- -- -- (0.04)
Total Distributions (0.54) (0.61) (0.63) (0.57) (0.58)
Net Asset Value, End of Period $ 10.06 $ 9.94 $ 10.01 $ 10.15 $ 9.88
Total Return (excludes sales charges) 6.86% 5.57% 4.94% 8.77% (0.66)%
Ratios/Supplemental Data:
Net Assets, End of Period (000) $81,343 $81,913 $90,019 $172,002 $79,150
Ratio of expenses to
average net assets 0.87% 0.85% 0.86% 0.78% 0.79%
Ratio of net investment income
to average net assets 5.44% 6.06% 5.90% 5.77% 5.29%
Ratio of expenses to
average net assets<F1> 1.02% 0.87% 0.89% 0.79% 0.97%
Ratio of net investment income
to average net assets<F1> 5.29% 6.04% 5.87% 5.76% 5.10%
Portfolio turnover 177% 139% 221% 97% 41%
<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 June 5, 1995, the Victory Short-Term Government Income Portfolio merged into the Limited Term Income
Fund. Financial highlights for the periods prior to June 5, 1995 represent the Limited Term Income Fund.
</FN>
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
The Victory Portfolios Financial Highlights
<CAPTION>
Intermediate Income Fund
December 30,
Year Ended October 31, 1993
to October 31,
1998 1997 1996 1995 1994<F2>
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 9.61 $ 9.56 $ 9.69 $ 9.25 $ 10.00
Investment Activities
Net investment income 0.53 0.56 0.56 0.60 0.52
Net realized and unrealized gains
(losses) from investments 0.24 0.05 (0.13) 0.44 (0.76)
Total from Investment Activities 0.77 0.61 0.43 1.04 (0.24)
Distributions
Net investment income (0.53) (0.56) (0.56) (0.60) (0.51)
Net Asset Value, End of Period $ 9.85 $ 9.61 $ 9.56 $ 9.69 $ 9.25
Total Return (excludes sales charges) 8.30% 6.62% 4.56% 11.65% (2.48)%<F3>
Ratios/Supplemental Data:
Net Assets, End of Period (000) $256,267 $248,841 $272,087 $163,281 $112,923
Ratio of expenses to
average net assets 0.96% 0.96% 0.94% 0.82% 0.79%<F4>
Ratio of net investment income
to average net assets 5.48% 5.87% 5.81% 6.32% 6.23%<F4>
Ratio of expenses to
average net assets<F1> 1.24% 1.09% 1.11% 1.06% 1.25%<F4>
Ratio of net investment income
to average net assets<F1> 5.20% 5.74% 5.64% 6.08% 5.77%<F4>
Portfolio turnover 318% 195% 164% 98% 55%
<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> Period from commencement of operations.
<F3> Not annualized.
<F4> Annualized.
</FN>
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
The Victory Portfolios Financial Highlights
<CAPTION>
Fund for Income
February 1,
1994 Year
Year Ended October 31, through Ended
October 31, January 31,
1998 1997 1996 1995<F4> 1994 1994
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 9.81 $ 9.77 $ 9.93 $ 9.43 $ 10.14 $ 10.57
Investment Activities
Net investment income 0.62 0.68 0.68 0.73 0.52 0.80
Net realized and unrealized
gains (losses) on investments 0.01 0.03 (0.08) 0.43 (0.71) (0.41)
Total from
Investment Activities 0.63 0.71 0.60 1.16 (0.19) 0.39
Distributions
Net investment income (0.61) (0.67) (0.68) (0.66) (0.51) (0.80)
In excess of net
investment income -- -- (0.03) -- (0.01) --
Net realized gains -- -- -- -- -- (0.02)
Tax return of capital -- -- (0.05) -- -- --
Total Distributions (0.61) (0.67) (0.76) (0.66) (0.52) (0.82)
Net Asset Value, End of Period $ 9.83 $ 9.81 $ 9.77 $ 9.93 $ 9.43 $ 10.14
Total Return (excludes sales charges) 6.60% 7.58% 6.35% 12.75% (1.99)%<F2> 3.75%
Ratios/Supplemental Data:
Net Assets, End of Period (000) $28,743 $22,101 $20,816 $22,756 $29,358 $46,632
Ratio of expenses to
average net assets 1.00% 0.99% 1.02% 1.12% 1.12%<F3> 1.13%
Ratio of net investment income
to average net assets 6.24% 6.98% 7.05% 7.62% 7.21%<F3> 7.65%
Ratio of expenses to
average net assets<F1> 1.52% 1.63% 1.73% 1.58% 1.26%<F3> <F5>
Ratio of net investment income
to average net assets<F1> 5.72% 6.34% 6.34% 7.16% 7.07%<F3> <F5>
Portfolio turnover 118% 26% 25% 35% 18% 47%
<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> Not annualized.
<F3> Annualized.
<F4> Effective June 5, 1995, the Victory Fund For Income Portfolio became the Fund For Income.
<F5> There were no voluntary fee reductions during the period.
</FN>
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
The Victory Portfolios Financial Highlights
<CAPTION>
Government Mortgage Fund
Year Ended October 31,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 10.93 $ 10.76 $ 10.86 $ 10.33 $ 11.36
Investment Activities
Net investment income 0.63 0.69 0.70 0.72 0.68
Net realized and unrealized
gains (losses) from investments 0.14 0.16 (0.12) 0.62 (1.02)
Total from Investment Activities 0.77 0.85 0.58 1.34 (0.34)
Distributions
Net investment income (0.63) (0.68) (0.67) (0.71) (0.67)
Net realized gains -- -- -- -- (0.02)
In excess of net realized gains -- -- -- (0.08) --
Tax return of capital -- <F3> (0.01) (0.02) --
Total Distributions (0.63) (0.68) (0.68) (0.81) (0.69)
Net Asset Value, End of Period $ 11.07 $ 10.93 $ 10.76 $ 10.86 $ 10.33
Total Return (excludes sales charges) 7.23% 8.22% 5.54% 13.55% (3.01)%
Ratios/Supplemental Data:
Net Assets, End of Period (000) $105,085 $103,761 $125,992 $136,103 $148,168
Ratio of expenses to
average net assets 0.88% 0.85% 0.89% 0.77% 0.76%
Ratio of net investment income
to average net assets 5.72% 6.32% 6.46% 6.81% 6.38%
Ratio of expenses to
average net assets<F1> 1.01% <F2> 0.90% 0.79% 0.96%
Ratio of net investment income
to average net assets<F1> 5.59% <F2> 6.45% 6.80% 6.18%
Portfolio turnover 296% 115% 127% 59% 132%
<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> There were no voluntary fee reductions during the period.
<F3> Amount rounds to less than $0.01.
</FN>
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
The Victory Portfolios Financial Highlights
<CAPTION>
Investment Quality Bond Fund
December 30,
Year Ended October 31, 1993
to October 31,
1998 1997<F6> 1996 1995<F5> 1994<F2>
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 9.78 $ 9.63 $ 9.76 $ 9.10 $ 10.00
Investment Activities
Net investment income 0.55 0.57 0.57 0.62 0.53
Net realized and unrealized gains
(losses) from investments 0.22 0.14 (0.13) 0.67 (0.92)
Total from Investment Activities 0.77 0.71 0.44 1.29 (0.39)
Distributions
Net investment income (0.55) (0.56) (0.56) (0.62) (0.51)
In excess of net investment income -- -- -- (0.01) --
Tax return of capital -- -- (0.01) -- --
Total Distributions (0.55) (0.56) (0.57) (0.63) (0.51)
Net Asset Value, End of Period $ 10.00 $ 9.78 $ 9.63 $ 9.76 $ 9.10
Total Return (excludes sales charges) 8.06% 7.67% 4.65% 14.63% (3.92)%<F3>
Ratios/Supplemental Data:
Net Assets, End of Period (000) $169,932 $181,007 $150,807 $125,248 $94,685
Ratio of expenses to
average net assets 1.06% 1.04% 1.01% 0.88% 0.79%<F4>
Ratio of net investment income
to average net assets 5.49% 5.90% 5.99% 6.59% 6.33%<F4>
Ratio of expenses to
average net assets<F1> 1.31% 1.17% 1.14% 1.10% 1.25%<F4>
Ratio of net investment income
to average net assets<F1> 5.24% 5.77% 5.86% 6.37% 5.87%<F4>
Portfolio turnover 492% 249% 182% 160% 90%
<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> Period from commencement of operations.
<F3> Not annualized.
<F4> Annualized.
<F5> Effective June 5, 1995, the Victory Corporate Bond Portfolio merged into the Investment Quality Bond Fund.
Financial highlights for the periods prior to June 5, 1995 represent the Investment Quality Bond Fund.
<F6> Effective June 13, 1997, the Victory Government Bond Fund merged into the Investment Quality Bond Fund.
Financial highlights for the periods prior to June 13, 1997 represent the Investment Quality Bond Fund.
</FN>
</TABLE>
See notes to financial statements.
<PAGE>
THE VICTORY PORTFOLIOS Schedule of Investments
National Municipal Bond Fund October 31, 1998
(Amounts in Thousands, Except Shares)
Shares or
Principal Market
Security Description Amount Value
Municipal Bonds (99.7%)
Alabama (4.0%):
Anniston Regional Medical Center,
Series A, 4.50%, 6/1/06, AMBAC $ 1,045 $ 1,069
Scottsboro, Series B,
5.30%, 7/1/06, FSA 100 108
Scottsboro, Series B,
5.38%, 7/1/07,
Callable 7/1/06 @ 102, FSA 400 436
State Board of Education,
Bevill State Community College,
4.88%, 9/1/08,
Callable 9/1/07 @ 102, AMBAC 100 104
State Board of Education,
Bevill State Community College,
5.13%, 9/1/11,
Callable 9/1/07 @ 102, AMBAC 250 260
1,977
Alaska (0.5%):
Anchorage, Series B, GO,
5.25%, 10/1/02, FGIC 250 264
Arizona (4.3%):
Maricopa County School District No. 79,
GO, Litchfield Elementary,
Projects of 1995-Series A,
5.00%, 7/1/03, FGIC 125 131
Maricopa County Unified School District,
No. 95, Queens Creek, GO, Series A,
5.20%, 7/1/05, AMBAC 125 134
Pima County Industrial
Development Authority,
5.00%, 4/1/04, MBIA 1,000 1,051
Pima County Unified School
District, No.6, GO,
4.38%, 7/1/08, FGIC 500 508
Pinal County School District,
Series A, GO, 5.40%, 7/1/07, FGIC 270 295
2,119
Arkansas (2.2%):
Texarkana Public Facilities Board,
Waterworks Facilities Revenue,
4.90%, 9/1/05, FGIC 570 601
Texarkana Public Facilities Board,
Waterworks Facilities Revenue,
5.13%, 9/1/09,
Callable 9/1/07 @ 100, FGIC 460 487
1,088
California (0.7%):
Arcata City Hall & Water Improvements,
Certificates of Participation,
5.30%, 1/1/21,
Callable 1/1/08 @ 102, MBIA 350 362
Colorado (5.7%):
Fort Collins Lease Certificates of
Participation, Civic Center Facilities
Project, 5.13%, 12/1/18,
Callable 12/1/08 @ 100, MBIA 750 757
State Board of Agriculture,
5.00%, 3/1/11,
Callable 3/1/07 @ 101, AMBAC 500 519
Thornton Sales & Use Tax Revenue,
4.55%, 9/1/07, AMBAC 250 258
Thornton Sales & Use Tax Revenue,
4.60%, 9/1/08, AMBAC 250 258
University of Northern Colorado,
Auxiliary Facilities System,
5.60%, 6/1/24,
Callable 6/1/07 @ 100, MBIA 1,000 1,058
2,850
Connecticut (0.5%):
State, Special Tax Obligation
Revenue Bond, Series B,
6.00%, 9/1/06 200 227
District of Columbia (3.1%):
Georgetown University Revenue,
7.15%, 4/1/21,
Callable 4/1/99 @ 102 1,500 1,553
Florida (18.6%):
Indian Trace Community Development
District, Water Management Special
Benefit Assessment,
5.00%, 5/1/09,
Callable 5/1/07 @ 101, MBIA 725 768
<PAGE>
Indian Trace Community Development
District, Water Management Special
Benefit Assessment,
5.00%, 5/1/11,
Callable 5/1/07 @ 101, MBIA 1,000 1,045
Jacksonville Electric Authority Revenue,
4.20%, 10/1/04 1,750 1,777
Orlando Utilities Commission,
Water & Electric Revenue,
5.80% 10/1/06, 150 168
Pembroke Pines Public
Improvement Revenue,
4.30%, 10/1/08, MBIA 750 761
Port Orange Water & Sewer Revenue,
4.50%, 10/1/07, AMBAC 1,175 1,198
Port Orange Water & Sewer Revenue,
4.50%, 10/1/08, AMBAC 1,235 1,251
Reedy Creek Improvement District, GO,
Series B, 4.20%, 6/1/07, MBIA 250 253
Reedy Creek Improvement District, GO,
Series B, 4.20%, 6/1/08, MBIA 450 453
Tampa Water & Sewage Revenue,
Series B, 4.25%, 10/1/08, AMBAC 1,600 1,618
9,292
Georgia (0.5%):
South Fulton Municipal Regional Jail,
5.20%, 12/1/05, MBIA 250 269
Hawaii (3.1%):
Honolulu City, GO,
6.00%, 11/1/05, MBIA 1,385 1,549
Illinois (10.5%):
Chicago Public Building Commission,
6.05%, 1/1/06,
Callable 1/1/05 @ 100, AMBAC 250 277
Cicero, Series A, GO,
5.35%, 12/1/06, AMBAC 530 574
Northlake, Tax Increment, GO,
5.00%, 12/1/04, MBIA 500 529
State Educational Facilities Authority,
Shedd Aquarium Society,
4.85%, 7/1/05, AMBAC 250 261
State Health Facilities Authority,
5.55%, 10/1/06, FGIC 1,000 1,094
State Health Facilities Authority,
5.60%, 10/1/07, FGIC 2,310 2,542
5,277
Indiana (0.6%):
Westfield Elementary School
Building Corp.,
5.00%, 7/15/01, AMBAC 280 289
Iowa (1.2%):
State Finance Authority,
Hospital Facility Revenue,
Trinity Regional Hospital Project,
5.00%, 7/1/02, FSA 550 572
Kansas (1.5%):
Haysville, Water & Wastewater Utility,
4.60%, 10/1/00, FSA 130 133
Wellington Electric Waterworks &
Sewage Utilities System,
5.20%, 5/1/23,
Callable 5/1/08 @ 100, AMBAC 600 608
741
Michigan (2.8%):
Byron Center, GO,
5.40%, 5/1/07,
Callable 5/1/05 @ 101, MBIA 15 16
Byron Center, GO,
5.40%, 5/1/07, MBIA 240 261
Grosse Ile Township School District, GO,
6.00%, 5/1/22, Callable
5/1/07 @ 100, FGIC 250 284
Leslie Public Schools, GO,
5.55%, 5/1/07,
Callable 5/1/05 @ 101, AMBAC 250 274
Municipal Bond Authority,
6.70%, 11/1/06,
Callable 11/1/04 @ 102 225 256
Municipal Bond Authority,
6.80%, 11/1/07,
Callable 11/1/04 @ 102 275 315
1,406
Minnesota (5.2%):
Southern Minnesota Municipal
Power Agency, Series A,
4.70%, 1/1/02, AMBAC-TCRS 675 695
<PAGE>
Southern Minnesota Municipal Power
Agency, Series A,
4.70%, 1/1/02, AMBAC-TCRS,
Prerefunded ETM 325 335
Southern Municipal Power Agency
Power Supply, Series A,
7.00%, 1/1/05,
Prerefunded 1/1/99 @ 102 1,500 1,540
2,570
Missouri (3.8%):
Bi State Development Agency,
St. Clair County Metrolink Extension,
Series A, 5.00%, 7/1/28,
Callable 7/1/08 @102, MBIA 500 497
Clay County Public Building Authority,
5.45%, 5/15/18,
Callable 5/15/08 @ 100, FSA 225 233
Excelsior Springs School
District Building Corp.,
6.50%, 3/1/09,
Callable 3/1/04 @ 100, FSA 500 558
West Plains Improvement Authority,
Leasehold Revenue,
5.00%, 5/1/06, MBIA 550 580
1,868
New Jersey (4.1%):
State Highway Authority,
Garden State Parkway,
7.25%, 1/1/16,
Prerefunded 1/1/99 @102 2,000 2,054
New Mexico (2.1%):
State Mortgage Finance Authority,
Single Family Mortgage
Program, Series C-3,
5.95%, 7/1/28,
Callable 1/1/07 @ 102 1,000 1,057
Ohio (8.9%):
Akron Economic Development,
4.70%, 12/1/07, MBIA 200 209
Akron Economic Development,
4.80%, 12/1/08,
Callable 12/1/07 @ 102, MBIA 700 734
Butler County Transportation
Improvement District, Series A, GO,
5.00%, 4/1/07, FSA 1,000 1,063
City Of Dublin, Series A, GO,
4.25%, 12/1/09 1,000 1,002
Kent City School District, GO,
5.15%, 12/1/05, FGIC 250 268
Kent State University,
5.00%, 5/1/05, MBIA 230 243
State Higher Educational Facilities,
John Carroll University Project,
5.25%, 4/1/07 315 337
State, Special Obligation,
Elementary and Secondary Facilities,
5.80%, 6/1/03, AMBAC 500 543
4,399
Oklahoma (3.2%):
State Capital Improvement Authority,
5.00%, 6/1/08, MBIA 1,500 1,600
Tennessee (1.1%):
Dickson, Electric and Revenue Utility,
5.00%, 9/1/03, MBIA 500 527
Texas (1.6%):
Conroe Independent School District, GO,
6.50%, 2/1/04 200 224
Keller Independent School District, GO,
6.20%, 8/15/04 200 223
State, Series A, GO,
6.00%, 10/1/08 100 115
Ysleta Independent School District, GO,
5.60%, 8/15/02 200 213
775
Washington (5.8%):
Pierce County School District,
No. 003, Puyallup, GO,
5.50%, 12/1/01, FGIC 605 638
Pierce County School District,
No.320, Sumner, GO,
5.50%, 12/1/02, MBIA 1,000 1,066
Seattle Municipal Light & Power,
6.00%, 7/1/03 200 218
Skagit County School District,
No. 103, Anacortes, GO,
4.75%, 12/1/01, FGIC 200 207
Spokane County School District, GO,
5.40%, 12/1/07, FGIC 250 274
Washington State, GO, Series R-98B,
3.70%, 1/1/99 455 456
2,859
<PAGE>
Wisconsin (4.1%):
Milwaukee Sewer District, Series A, GO,
6.70%, 10/1/02 200 222
State, Health & Educational
Facilities Authority,
5.20%, 12/15/07, MBIA 1,675 1,791
2,013
Total Municipal Bonds (Cost $47,249) 49,557
Investment Companies (5.7%)
Federated Tax-Free
Money Market Fund 1,665,971 1,666
Nuveen Tax-Exempt
Money Market Fund 1,161,148 1,161
Total Investment Companies (Cost $2,827) 2,827
Total Investments (Cost $50,076) (a) -- 105.4% 52,384
Liabilities in excess of other assets -- (5.4)% (2,700)
TOTAL NET ASSETS -- 100.0% $49,684
(a) Cost for federal income tax purposes differs from value by net unrealized
appreciation of securities as follows (amounts in thousands):
Unrealized appreciation $2,308
Unrealized depreciation (0)
Net unrealized appreciation $2,308
AMBAC -- Insured by American Municipal Bond Assurance Corp.
FGIC -- Insured by Financial Guaranty Insurance Co.
FSA -- Insured by Financial Security Assurance
GO -- General Obligation
MBIA -- Insured by Municipal Bond Insurance Assoc.
TCRS -- Transferable Custodial Receipts
See notes to financial statements.
<PAGE>
THE VICTORY PORTFOLIOS Schedule of Investments
New York Tax-Free Fund October 31, 1998
(Amounts in Thousands, Except Shares)
Shares or
Principal Market
Security Description Amount Value
New York Municipal Bonds (95.5%)
Metropolitan Transportation Authority,
Series A, 5.25%, 4/1/26,
Callable 4/1/07 @ 101, MBIA $ 750 $ 766
Metropolitan Transportation Authority,
Series A, 4.75%, 4/1/28,
Callable 4/1/08 @ 101, FGIC 250 239
Metropolitan Transportation Authority,
Transportation Facilities,
Series I, 7.00%, 7/1/09, AMBAC 250 306
Monroe-Woodbury Central School
District, GO, 5.70%, 5/15/26,
Callable 5/15/06 @ 102, MBIA 500 535
Monroe-Woodbury Central School
District, GO, 5.70%, 5/15/27,
Callable 5/15/06 @ 102, MBIA 300 321
Nassau County Industrial Development
Agency, Civic Facilities,
Hofstra University Project,
4.75%, 7/1/28, MBIA 300 287
Nassau County Industrial Development
Agency, Civic Facilities, Hofstra
University Project, 6.75%, 8/1/11,
Callable 8/1/01 @ 102, AMBAC 250 275
New York City Housing Development
Corp., Multi-Unit Mortgage,
Series A, 7.30%, 6/1/10,
Callable 6/1/01 @ 102, FHA 700 750
New York City Housing Development
Corp., Multi-Unit Mortgage,
Series A, 7.35%, 6/1/19,
Callable 6/1/01 @ 102, FHA 675 724
New York City Industrial Development
Agency, Civic Facilities, USTA
National Tennis Center
Project, 6.38%, 11/15/14,
Callable 11/15/04 @ 102, FSA 200 225
New York City Municipal Water
Finance Authority, 6.75%, 6/15/16,
Callable 6/15/01 @ 101, FGIC 325 351
New York City Municipal Water
Finance Authority, Water & Sewer
System Revenue, 6.75%, 6/15/16,
Prerefunded 6/15/01 @ 101, FGIC 325 354
New York City Transit Authority,
Transit Facilities, Livingston Plaza
Project, 7.50%, 1/1/20,
Prerefunded 1/1/00 @ 102, FSA 220 235
New York City, Cultural Resources,
Museum of Modern Art,
6.63%, 1/1/11,
Prerefunded 1/1/02 @ 102, AMBAC 680 751
New York City, Series B, GO,
7.00%, 10/1/18,
Callable 10/1/99 @ 100, FSA, ETM 300 310
New York City, Series C, GO,
7.00%, 2/1/12,
Callable 2/1/99 @ 101.5, FGIC 60 61
North Hempstead,
4.75%, 1/15/23,
Callable 1/15/08 @ 101, FGIC 750 721
Port Authority of New York &
New Jersey, 109th Series,
5.38%, 7/15/27,
Callable 1/15/07 @ 101, FSA 500 518
State Dormitory Authority,
5.25%, 7/1/22,
Callable 7/1/07 @ 101, MBIA 500 511
State Dormitory Authority,
5.75%, 7/1/26,
Callable 7/1/07 @ 102, MBIA 500 544
State Dormitory Authority,
City University, Series 2,
6.75%, 7/1/24,
Prerefunded 7/1/04 @ 102, MBIA 700 812
State Dormitory Authority,
Fordham University, GO,
5.00%, 7/1/18,
Callable 7/1/08 @ 101, MBIA 200 200
State Dormitory Authority,
Ithaca College, 6.50%, 7/1/10,
Callable 7/1/01 @ 102, MBIA 750 819
State Dormitory Authority,
Jewish Medical Center, GO,
5.00%, 7/1/25,
Callable 7/1/08 @ 101, MBIA 500 493
State Dormitory Authority,
Judicial Facilities Leases, Series B,
7.00%, 4/15/16,
Callable 4/15/01 @ 102, MBIA 225 245
State Dormitory Authority,
New York Medical College, GO,
4.75%, 7/1/27,
Callable 7/1/08 @ 101, MBIA 850 814
State Dormitory Authority,
Siena College, 5.75%, 7/1/26,
Callable 7/1/07 @ 102, MBIA 250 272
State Dormitory Authority,
St. John's University,
5.70%, 7/1/26,
Callable 7/1/06 @ 102, MBIA 700 753
State Dormitory Authority,
University of Rochester, Series A,
5.00%, 7/1/27,
Callable 7/1/08 @ 101, MBIA 250 247
<PAGE>
State Local Governmentt Assistance,
Series B, 4.88%, 4/1/20,
Callable 4/1/08 @ 101, MBIA 750 734
State Medical Care Facilities Finance
Agency, 7.38%, 8/15/19,
Prerefunded 8/15/99 @ 102, MBIA 330 348
State Medical Care Facilities Finance
Agency, 7.38%, 8/15/19,
Callable 8/15/99 @ 102, MBIA 170 178
State Medical Care Facilities Finance
Agency, North Shore University
Hospital, 7.20%, 11/1/20,
Callable 11/1/00 @ 102, MBIA 565 616
State Medical Care Facilities Finance
Agency, St. Luke's, Series B,
7.45%, 2/15/29,
Prerefunded 2/15/00 @ 102, MBIA 340 364
State Tollway Authority, Series A,
5.00%, 4/1/18,
Callable 4/1/08 @ 101 1,000 998
State Tollway Authority, Series C,
6.00%, 1/1/25,
Callable 1/1/05 @ 102, FGIC 550 619
State Urban Development Corp.,
Correctional Facilities, Series 1,
7.50%, 1/1/20,
Prerefunded 1/1/00 @ 102, FSA 400 426
State, GO,
6.75%, 8/1/18,
Callable 8/1/01 @ 102, AMBAC 370 407
State, GO,
6.75%, 8/1/19,
Callable 8/1/01 @ 102, AMBAC 325 358
Triborough Bridge & Tunnel Authority,
Series T, 7.00%, 1/1/20,
Prerefunded 1/1/01 @ 102, MBIA 900 981
Triborough Bridge & Tunnel Authority,
Special Obligation, Series B,
6.88%, 1/1/15,
Callable 1/1/01 @ 102, AMBAC 1,000 1,079
Total New York Municipal Bonds (Cost $19,195) 20,547
Investment Companies (2.9%)
Providence of New York Fund 614,936 615
Total Investment Companies (Cost $615) 615
Total Investments (Cost $19,810) (a) -- 98.4% 21,162
Other assets in excess of liabilities -- 1.6% 348
TOTAL NET ASSETS -- 100.0% $21,510
(a) Cost for federal income tax purposes differs from value by net unrealized
appreciation of securities as follows (amounts in thousands):
Unrealized appreciation $1,352
Unrealized depreciation (0)
Net unrealized appreciation $1,352
AMBAC -- Insured by American Municipal Bond Assurance Corp.
ETM -- Escrowed to Maturity
FGIC -- Financial Guaranty Insurance Co.
FHA -- Federal Housing Administration
FSA -- Insured by Financial Security Assurance
GO -- General Obligation
MBIA -- Municipal Bond Insurance Assoc.
See notes to financial statements
<PAGE>
THE VICTORY PORTFOLIOS Schedule of Investments
Ohio Municipal Bond Fund October 31, 1998
(Amounts in Thousands, Except Shares)
Shares or
Principal Market
Security Description Amount Value
Municipal Bonds (91.5%)
General Obligations (40.5%)
County, City & Special District (7.9%):
Akron,
4.55%, 12/1/06 $ 200 $ 207
Akron,
4.55%, 12/1/07 250 257
Akron,
4.55%, 12/1/08 300 307
Bath Township,
0.00%, 12/1/07, AMBAC 205 141
Bath Township,
0.00%, 12/1/08, AMBAC 205 134
Butler County,
5.60%, 12/1/09,
Callable 12/1/06 @ 101, AMBAC 355 391
Butler County,
5.65%, 12/1/10,
Callable 12/1/06 @ 101, AMBAC 155 171
Cuyahoga Falls,
5.25%, 12/1/17,
Callable 12/1/07 @ 102, FGIC 500 517
Madison County,
7.00%, 12/1/19,
Callable 12/1/04 @ 102, AMBAC 600 699
Maple Heights,
0.00%, 12/1/10, FSA 310 182
Monroe Falls, Series A,
6.95%, 12/1/14,
Callable 12/1/04 @ 101, AMBAC 1,000 1,154
Summit County, Series A,
4.10%, 12/01/07, FGIC 125 125
Toledo,
5.63%, 12/1/11,
Callable 12/1/06 @ 102, AMBAC 1,000 1,104
Toledo,
5.50%, 12/1/12,
Callable 12/1/07 @ 102, FGIC 1,085 1,183
6,572
Education (25.2%):
Anthony Wayne Local School District,
5.75%, 12/1/18,
Callable 12/1/05 @ 101, FGIC 1,000 1,077
Avon Local School District,
5.50%, 12/1/04, AMBAC 665 723
Avon Local School District,
5.55%, 12/1/05, AMBAC 250 274
Batavia Local School District,
7.00%, 12/1/14, MBIA 1,500 1,806
Big Walnut Local School District,
0.00%, 12/1/09, AMBAC 250 154
Brecksville-Broadview Heights City
School District, 6.50%, 12/1/16,
Callable 12/1/06 @ 102, FGIC 1,000 1,160
Canal Winchester Local School District,
4.60%, 12/1/08 FGIC 150 155
Delaware City School District,
5.75%, 12/1/20,
Callable 12/1/05 @ 101, FGIC 1,000 1,074
Forest Hills Local School District,
4.00%, 12/1/98, MBIA 165 165
Franklin City School District,
0.00%, 12/1/12, AMBAC 280 148
Franklin City School District,
0.00%, 12/1/13, AMBAC 280 140
Franklin City School District,
0.00%, 12/1/14, AMBAC 280 132
Graham Local School District,
0.00%, 12/1/11, MBIA 200 112
Graham Local School District,
0.00%, 12/1/12, MBIA 200 106
Indian Lake Local School District,
0.00%, 12/1/11, AMBAC 250 139
Indian Lake Local School District,
0.00%, 12/1/12, AMBAC 250 132
Indian Lake Local School District,
0.00%, 12/1/13, AMBAC 250 125
Indian Lake Local School District,
0.00%, 12/1/14, AMBAC 250 118
Indian Lake Local School District,
0.00%, 12/1/15, AMBAC 250 111
Indian Lake Local School District,
0.00%, 12/1/16, AMBAC 250 105
Indian Lake Local School District,
5.38% 12/1/23,
Callable 12/1/06 @ 101, FGIC 1,050 1,085
Indian Valley Local School District,
7.00%, 12/1/14,
Callable 12/1/05 @ 102, AMBAC 2,500 2,947
Lakeview Local School District,
6.95%, 12/1/19,
Callable 12/1/04 @ 102, AMBAC 1,250 1,478
Lakota Local School District,
0.00%, 12/01/08, FGIC 320 208
Liberty Benton Local School District,
0.00%, 12/1/15, AMBAC 570 253
Liberty Benton Local School District,
0.00%, 12/1/16, AMBAC 285 119
<PAGE>
McComb Local School District,
4.70%, 12/1/06, MBIA 140 147
Olentangy Local School District,
Series A, 6.25%, 12/1/14,
Callable 12/1/04 @ 102 500 551
Reynoldsburg City School District,
4.80%, 12/1/06, FGIC 235 248
Ridgemont Local School District,
0.00%, 12/1/10, AMBAC 185 109
Ridgemont Local School District,
0.00%, 12/1/11, AMBAC 185 103
Ridgemont Local School District,
0.00%, 12/1/12, AMBAC 185 98
Ridgemont Local School District,
0.00%, 12/1/13, AMBAC 185 92
Ridgemont Local School District,
0.00%, 12/1/14, AMBAC 185 87
Ripley-Union-Lewis, Local School
District, 0.00%, 12/1/06, FGIC 145 104
Ripley-Union-Lewis, Local School
District, 0.00%, 12/1/07, FGIC 245 169
Ripley-Union-Lewis, Local School
District, 0.00%, 12/1/10, FGIC 245 144
Ripley-Union-Lewis, Local School
District, 0.00%, 12/1/11, FGIC 245 137
Ripley-Union-Lewis, Local School
District, 0.00%, 12/1/12, FGIC 240 127
Ripley-Union-Lewis, Local School
District, 0.00%, 12/1/13, FGIC 240 120
Ripley-Union-Lewis, Local School
District, 0.00%, 12/1/14, FGIC 235 111
Sycamore Community School District,
0.00%, 12/1/07 360 245
Twinsburg Local School District,
5.90%, 12/1/21,
Callable 12/1/06 @ 102, FGIC 2,000 2,181
Upper Arlington City School District,
5.13%, 12/1/19,
Callable 12/1/06 @ 101, MBIA 1,250 1,258
Wadsworth City School District,
0.00%, 12/1/07, FGIC 555 380
Wadsworth City School District,
0.00%, 12/1/08, FGIC 555 361
20,818
Housing (1.3%):
Toledo Multifamily Revenue,
5.25%, 12/1/18,
Callable 12/1/08 @ 102, FGIC 1,035 1,054
Public Facilities (Convention, Sport,
Public Buildings) (2.3%):
Centerville, Capital Facilities,
5.63%, 12/1/26,
Callable 12/1/05 @ 101, MBIA 285 303
Crawford County,
Correctional Facilities,
6.75%, 12/1/19,
Callable 12/1/05 @ 101, AMBAC 1,385 1,594
1,897
Utility (Sewers, Telephone, Electric)
(3.8%):
Canton, Waterworks System,
5.75%, 12/1/10,
Callable 12/1/05 @ 102, AMBAC 500 553
Greene County Sewer System,
5.25%, 12/1/25,
Callable 12/1/08 @ 102, MBIA 250 255
Huron County Landfill Issue II,
5.40%, 12/1/07, MBIA 285 314
Huron County Landfill Issue II,
5.60%, 12/1/09,
Callable 12/1/07 @ 102, MBIA 320 358
Lucas County Metropolitan Sewer &
Water District, 5.45%, 12/1/17,
Callable 12/1/07 @ 102 505 527
Toledo, Sewer Improvements,
6.10%, 12/1/14,
Callable 12/1/04 @ 102, AMBAC 1,000 1,117
3,124
Total General Obligations 33,465
Revenue Bonds (51.0%):
Education (11.5%):
Miami University,
4.10%, 12/1/08, FGIC 500 498
Miami University,
4.20%, 12/1/09, FGIC 500 496
State Education Loan, Series A-1,
5.85%, 12/1/19,
Callable 6/1/07 @ 102, AMBAC 2,000 2,080
State Higher Educational Facility
Revenue, John Carroll University
Project, 5.05%, 4/1/04 150 158
State Higher Educational Facility
Revenue, Xavier University,
6.00%, 5/15/08,
Callable 5/15/07 @ 102, MBIA 500 570
<PAGE>
State Higher Educational Facilty
Revenue, University of Dayton,
5.40%, 12/1/22,
Callable 12/1/07 @ 101, AMBAC 1,000 1,039
Student Loan Funding Corp.,
Series A, 5.50%, 12/1/01 3,300 3,416
University of Akron, General Receipts,
5.00%, 1/1/02, AMBAC 440 457
University of Cincinnati, General
Receipts, Series AD, 5.10%, 6/1/11,
Callable 6/1/07 @ 101 350 363
University of Toledo,
4.10%, 6/1/04, FGIC 100 101
University of Toledo,
4.30%, 6/1/08, FGIC 100 101
University of Toledo,
4.25%, 6/1/07, FGIC 200 202
9,481
Hospitals, Nursing Homes
& Health Care (14.1%):
Cuyahoga County Hospital, University
Hospital Health, Series A,
5.63%, 1/15/21,
Callable 1/15/06 @ 102, MBIA 1,300 1,369
Gallia County Hospital, Holzer Medical
Center Project, 4.00%, 10/1/08 600 584
Garfield Heights, Marymont Hospital,
6.70%, 11/15/15,
Callable 11/15/02 @ 102 1,000 1,095
Lake County Hospital Facilities,
4.13%, 8/15/08, AMBAC 930 915
Lake County Hospital, Improvement
Facilities, 6.38%, 8/15/03, AMBAC 1,500 1,664
Lorain County Hospital, Catholic
Healthcare Partners, 5.50%, 9/1/27,
Callable 9/1/07 @ 102, MBIA 530 555
Lucas County Hospital, Promedica
Healthcare, 5.75%, 11/15/14,
Callable 11/15/06 @ 102, MBIA 2,000 2,183
Portage County Hospital, Robinson
Memorial, 6.50%, 11/15/03, MBIA 635 711
Portage County Hospital, Robinson
Memorial, 6.50%, 11/15/04, MBIA 675 767
Portage County Hospital, Robinson
Memorial, 6.50%, 11/15/05, MBIA 715 823
Washington County Hospital,
4.25%, 9/1/07, FSA 250 251
Washington County Hospital,
4.35%, 9/1/08, FSA 810 814
11,731
Housing (8.6%):
Cuyahoga County Multifamily
Revenue, 6.60%, 10/20/30,
Callable 10/20/05 @ 102, GNMA 2,000 2,186
Cuyahoga County Multifamily
Revenue, Water Street Assoc.,
5.60%, 6/20/08, GNMA 370 392
Cuyahoga County Multifamily
Revenue, Water Street Assoc.,
6.15%, 12/20/26,
Callable 6/20/08 @ 105, GNMA 850 923
Ohio Capital Corp., Housing
Management Revenue,
Bucyrus Estate,
5.75%, 7/1/06,
Callable 7/1/05 @ 102, MBIA 225 240
Ohio Capital Corp.,
Mutifamily Housing Revenue,
5.50%, 1/1/24,
Callable 1/1/03 @ 100, MBIA 1,235 1,244
Ohio Housing Finance Agency,
6.15%, 3/1/29,
Callable 9/1/07 @ 102, GNMA 1,495 1,599
Ohio Housing Finance Agency,
5.40%, 9/1/29,
Callable 9/1/08 @ 102, GNMA 500 504
7,088
Public Facilities (Convention, Sport,
Public Buildings) (6.5%):
Hamilton County,
4.50%, 12/1/07, MBIA 200 206
Hamilton County,
4.75%, 12/1/27,
Callable 12/1/07 @ 101, MBIA 2,000 1,915
State Building Authority,
Adult Correctional Facilities,
6.00%, 10/1/07,
Callable 10/1/03 @ 102 2,000 2,210
State Building Authority,
Sports Facilities Building,
5.00%, 10/1/07, FSA 450 480
Toledo, Lucas County Convention
Center Project, 5.50%, 10/1/10,
Callable 10/1/06 @ 102, MBIA 500 547
5,358
<PAGE>
Public Improvements (2.1%):
Deerfield Township,
4.60%, 12/1/07, AMBAC 200 208
Deerfield Township,
5.00%, 12/1/18,
Callable 12/1/08 @ 101, AMBAC 1,200 1,202
Union County,
5.00%, 12/1/18,
Callable 12/1/08 @ 101, AMBAC 300 300
1,710
Utility (Sewers, Telephone, Electric)
(8.2%):
Barberton Sewer System Revenue,
4.50%, 12/1/06, FGIC 250 259
Cleveland Public Power Systems,
Series A, 7.00%, 11/15/24,
Prerefunded 11/15/04 @ 102, MBIA 1,985 2,344
Cleveland Waterworks,
5.75%, 1/1/21,
Prerefunded 1/1/06 @ 102, MBIA 940 1,054
Cleveland Waterworks,
5.75%, 1/1/21,
Callable 1/1/06 @ 102, MBIA 10 11
Huber Heights Water Systems,
5.55%, 12/1/10,
Callable 12/1/05 @ 102, MBIA 815 890
Huber Heights Water Systems,
0.00%, 12/1/22, MBIA 275 82
Huber Heights Water Systems,
0.00%, 12/1/24, MBIA 1,095 294
Huber Heights Water Systems,
0.00%, 12/1/25, MBIA 1,070 273
Southwest Regional Water,
6.00%, 12/1/20,
Callable 12/1/05 @ 101, MBIA 500 553
Wilmington Water,
5.25%, 6/15/29,
Callable 6/15/08 @ 101, AMBAC 1,000 1,016
6,776
Total Revenue Bonds 42,144
Total Municipal Bonds (Cost $70,318) 75,609
Investment Companies (4.1%)
Federated Ohio Municipal
Cash Trust Fund 1,426,037 1,426
Fidelity Ohio Tax Free
Money Market Fund 1,992,267 1,992
Total Investment Companies (Cost $3,418) 3,418
Total Investments (Cost $73,736) (a) -- 95.6% 79,027
Other assets in excess of liabilities -- 4.4% 3,677
TOTAL NET ASSETS -- 100.0% $82,704
(a) Cost for federal income tax purposes differs from value by net unrealized
appreciation of securities as follows (amounts in thousands):
Unrealized appreciation $5,298
Unrealized depreciation (7)
Net unrealized appreciation $5,291
AMBAC -- Insured by American Municipal Bond Assurance Corp.
FGIC -- Insured by Financial Guaranty Insurance Corp.
FSA -- Insured by Financial Security Assurance
GNMA -- Insured by Government National Mortgage Assoc.
MBIA -- Insured by Municipal Bond Insurance Assoc.
See notes to financial statements.
<PAGE>
<TABLE>
Statements of Assets and Liabilities
The Victory Portfolios October 31, 1998
(Amounts in Thousands, Except Per Share Amounts)
<CAPTION>
National Municipal New York Ohio Municipal
Bond Fund Tax-Free Fund Bond Fund
<S> <C> <C> <C>
ASSETS:
Investments, at value
(Cost $50,076; $19,810 & $73,736) $52,384 $21,162 $79,027
Interest and dividends receivable 678 379 1,400
Receivable for capital shares issued 26 -- 7
Receivable from brokers for investments sold -- -- 2,345
Prepaid expenses and other assets 23 2 3
Total Assets 53,111 21,543 82,782
LIABILITIES:
Payable to brokers for investments purchased 3,367 -- --
Payable for capital shares redeemed 25 11 --
Accrued expenses and other payables:
Investment advisory fees -- 6 27
Administration fees 1 -- 1
Shareholder service fees -- -- 17
Shareholder service fees -- Class A 12 4 --
Shareholder service and 12b-1 fees -- Class B 2 2 --
Custodian fees 3 1 3
Accounting fees 1 -- --
Transfer agent fees 14 8 4
Other 2 1 26
Total Liabilities 3,427 33 78
NET ASSETS:
Capital 46,251 20,148 76,104
Undistributed net investment income 30 12 75
Net unrealized appreciation/depreciation from investments 2,308 1,352 5,291
Accumulated undistributed net realized gains
(losses) from investment transactions 1,095 (2) 1,234
Net Assets $49,684 $21,510 $82,704
Net Assets
Class A $47,296 $18,073
Class B 2,388 3,437
Total $49,684 $21,510
Outstanding units of beneficial interest (shares)
Class A 4,333 1,412
Class B 219 268
Total 4,552 1,680 6,872
Net asset value
Redemption price per share $ 12.04
Redemption price per share -- Class A $ 10.92 $ 12.80
Offering price per share -- Class B<F1> $ 10.91 $ 12.80
Maximum sales charge 5.75% 5.75% 5.75%
Maximum offering price per share
(100%/(100%-maximum sales charge) of
net asset value adjusted to nearest cent) $ 12.77
Maximum offering price per share
(100%/(100%-maximum sales charge) of
net asset value adjusted to nearest cent) -- Class A $ 11.59 $ 13.58
<FN>
<F1> Redemption price per Class B Share varies based on length of time held.
</FN>
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
Statements of Operations
The Victory Portfolios For the Year Ended October 31, 1998
(Amounts in Thousands)
<CAPTION>
National Municipal New York Ohio Municipal
Bond Fund Tax-Free Fund Bond Fund
<S> <C> <C> <C>
Investment Income:
Interest income $2,426 $1,186 $4,060
Dividend income 97 18 86
Total Income 2,523 1,204 4,146
Expenses:
Investment advisory fees 296 114 476
Administration fees 81 31 119
Shareholder service fees -- -- 184
Shareholder service fees -- Class A 121 33 --
Shareholder service fees and 12b-1 fees -- Class B 23 34 --
Accounting fees 63 52 51
Custodian fees 17 6 22
Legal and audit fees 9 6 12
Trustees' fees and expenses 2 1 2
Transfer agent fees 43 25 14
Registration and filing fees 16 8 8
Printing fees 8 4 --
Other 4 2 8
Total Expenses 683 316 896
Expenses voluntarily reduced (296) (79) (174)
Expenses before reimbursement from distributor 387 237 722
Expenses reimbursed by distributor -- (5) --
Net Expenses 387 232 722
Net Investment Income 2,136 972 3,424
Realized/Unrealized Gains (Losses) from Investments:
Net realized gains (losses) from investment
Transactions 1,227 (2) 1,285
Change in unrealized appreciation/depreciation
from investments 794 220 1,527
Net realized/unrealized gains (losses)
from investments 2,021 218 2,812
Change in net assets resulting from operations $4,157 $1,190 $6,236
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
The Victory Portfolios Statements of Changes in Net Assets
(Amounts in Thousands)
<CAPTION>
National Municipal New York Ohio Municipal
Bond Fund Tax-Free Fund Bond Fund
Year Year Year Year Year Year
Ended Ended Ended Ended Ended Ended
October 31, October 31, October 31, October 31, October 31, October 31,
1998 1997 1998 1997 1998 1997
<S> <C> <C> <C> <C> <C> <C>
From Investment Activities:
Operations:
Net investment income $ 2,136 $ 1,903 $ 972 $ 920 $ 3,424 $ 3,500
Net realized gains (losses) from
investment transactions 1,227 280 (2) 37 1,285 663
Net change in unrealized
appreciation/depreciation
from investments 794 1,209 220 15 1,527 1,203
Change in net assets resulting
from operations 4,157 3,392 1,190 972 6,236 5,366
Distributions to Shareholders:
From net investment income -- -- -- -- (3,428) (3,511)
Class A (2,055) (1,836) (839) (846) -- --
Class B (67) (68) (129) (118) -- --
In excess of net investment income -- (1) -- (10) -- --
From net realized gains from
investment transactions -- -- (35) (56) (663) --
In excess of net realized gains from
investment transactions -- -- (2) -- -- --
Change in net assets from
distributions to shareholders (2,122) (1,905) (1,005) (1,030) (4,091) (3,511)
Capital Transactions:
Proceeds from shares issued 17,480 24,696 7,095 5,155 16,324 18,452
Dividends reinvested 1,668 1,664 718 674 917 945
Cost of shares redeemed (21,492) (16,620) (4,554) (3,974) (14,725) (16,672)
Change in net assets from
capital transactions (2,344) 9,740 3,259 1,855 2,516 2,725
Change in net assets (309) 11,227 3,444 1,797 4,661 4,580
Net Assets:
Beginning of period 49,993 38,766 18,066 16,269 78,043 73,463
End of period $49,684 $49,993 $21,510 $18,066 $82,704 $78,043
Share Transactions:
Issued 1,636 2,396 557 408 1,377 1,602
Reinvested 156 162 57 53 78 82
Redeemed (1,997) (1,616) (358) (314) (1,243) (1,450)
Change in shares (205) 942 256 147 212 234
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
The Victory Portfolios Financial Highlights
<CAPTION>
National Municipal Bond Fund
Class A
Six
Year Year Year Months Year
Ended Ended Ended Ended Ended
October October October October April
31, 31, 31, 31, 30,
1998 1997 1996 1995<F5> 1995<F6>
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 10.51 $ 10.16 $ 10.06 $ 9.59 $ 9.64
Investment Activities
Net investment income 0.43 0.45 0.44 0.24 0.44
Net realized and
unrealized gains
(losses) from
investments 0.41 0.35 0.13 0.46 (0.05)
Total from
Investment
Activities 0.84 0.80 0.57 0.70 0.39
Distributions
Net investment income (0.43) (0.45) (0.44) (0.23) (0.44)
In excess of net
investment income -- -- -- -- --
In excess of net
realized gains -- -- (0.03) -- --
Total Distributions (0.43) (0.45) (0.47) (0.23) (0.44)
Net Asset Value,
End of Period $ 10.92 $ 10.51 $ 10.16 $ 10.06 $ 9.59
Total Return
(excludes sales charges) 8.15% 8.10% 5.83% 7.39%<F3> 4.21%
Ratios/Supplemental Data:
Net Assets, End of
Period (000) $47,296 $47,705 $36,958 $11,964 $5,118
Ratio of expenses to
average net assets 0.67% 0.36% 0.29% 0.02%<F4> 0.20%
Ratio of net investment
income (loss) to average
net assets 4.02% 4.43% 4.37% 5.11%<F4> 5.01%
Ratio of expenses to
average net assets<F1> 1.22% 1.27% 1.35% 2.57%<F4> 3.95%
Ratio of net investment
income to average
net assets<F1> 3.47% 3.52% 3.31% 2.56%<F4> 1.26%
Portfolio turnover<F7> 152% 154% 143% 72% 52%
<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> Effective June 5, 1995, the Victory National Municipal Bond Portfolio became the National Municipal Bond Fund.
<F6> Effective September 26, 1994, the Fund designated the existing shares as
Class A Shares and commenced offering Class B Shares.
<F7> Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
</FN>
</TABLE>
<TABLE>
<CAPTION>
National Municipal Bond Fund
Class B
Six September
Year Year Year Months 26, February 3,
Ended Ended Ended Ended 1994 to 1994 to
October October October October April April
31, 31, 31, 31, 30, 30,
1998 1997 1996 1995<F5> 1995<F6> 1994<F2>
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $10.51 $10.16 $10.07 $ 9.59 $9.53 $10.00
Investment Activities
Net investment income 0.31 0.33 0.35 0.20 0.28 0.08
Net realized and
unrealized gains
(losses) from
investments 0.41 0.34 0.13 0.47 0.05 (0.36)
Total from
Investment
Activities 0.71 0.67 0.48 0.67 0.33 (0.28)
Distributions
Net investment income (0.31) (0.32) (0.35) (0.19) (0.27) (0.08)
In excess of net
investment income -- -- (0.01) -- -- --
In excess of net
realized gains -- -- (0.03) -- -- --
Total Distributions (0.31) (0.32) (0.39) (0.19) (0.27) (0.08)
Net Asset Value,
End of Period $10.91 $10.51 $10.16 $10.07 $9.59 $ 9.64
Total Return
(excludes sales charges) 6.88% 6.74% 4.85% 6.99%<F3> 3.54%<F3> (2.82)%<F3>
Ratios/Supplemental Data:
Net Assets, End of
Period (000) $2,388 $2,288 $1,808 $ 456 $ 147 $ 494
Ratio of expenses to
average net assets 1.81% 1.60% 1.20% 0.96%<F4> (0.05)%<F4> 0.65%<F4>
Ratio of net investment
income (loss) to average
net assets 4.02% 3.18% 3.50% 4.15%<F4> 4.35%<F4> 3.15%<F4>
Ratio of expenses to
average net assets<F1> 2.34% 2.62% 2.17% 3.67%<F4> 2.63%<F4> 26.10%<F4>
Ratio of net investment
income to average
net assets<F1> 3.47% 2.16% 2.53% 1.44%<F4> 1.67%<F4> (22.30)%<F4>
Portfolio turnover<F7> 152% 154% 143% 72% 52% 13%
<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> Effective June 5, 1995, the Victory National Municipal Bond Portfolio became the National Municipal Bond Fund.
<F6> Effective September 26, 1994, the Fund designated the existing shares as
Class A Shares and commenced offering Class B Shares.
<F7> Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
</FN>
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
The Victory Portfolios Financial Highlights
<CAPTION>
New York Tax-Free Fund
Class A
January 1,
Year Ended October 31, 1994 to
October 31,
1998 1997 1996 1995<F4> 1994<F5>
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 12.68 $ 12.73 $ 12.85 $ 12.39 $ 13.54
Investment Activities
Net investment income 0.61 0.68 0.68 0.87 0.57
Net realized and
unrealized gains
(losses) from investments 0.14 0.03 (0.11) 0.42 (1.15)
Total from
investment Activities 0.75 0.71 0.57 1.29 (0.58)
Distributions
Net investment income (0.61) (0.72) (0.68) (0.83) (0.57)
In excess of net
investment income -- -- -- -- --
Net realized gains (0.02) (0.04) (0.01) -- --
Total Distributions (0.63) (0.76) (0.69) (0.83) (0.57)
Net Asset Value,
End of Period $ 12.80 $12.68 $ 12.73 $ 12.85 $ 12.39
Total Return
(excludes sales charges) 6.12% 5.77% 4.53% 10.82% (4.31)%<F2>
Ratios/Supplemental Data:
Net Assets, End of Period (000) $18,073 $15,335 $13,754 $15,374 $17,840
Ratio of expenses to
average net assets 0.94% 0.94% 0.93% 1.16% 0.91%<F3>
Ratio of net investment income
to average net assets 4.85% 5.32% 5.25% 5.50% 5.33%<F3>
Ratio of expenses to
average net assets<F1> 1.35% 1.49% 1.58% 1.96% 1.25%<F3>
Ratio of net investment income
to average net assets<F1> 4.44% 4.77% 4.60% 4.70% 4.99%<F3>
Portfolio turnover <F6> 38% 11% 0% 18% 18%
<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> Not annualized.
<F3> Annualized.
<F4> Effective June 5, 1995, the Victory New York Tax-Free Portfolio became the New York Tax-Free Fund.
<F5> Effective September 26, 1994, the Fund designated the existing shares as
Class A Shares and commenced offering Class B Shares.
<F6> Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
</FN>
</TABLE>
<TABLE>
<CAPTION>
New York Tax-Free Fund
Class B
September 26,
Year Ended October 31, 1994 to Ended
October 31, December 31,
1998 1997 1996 1995<F4> 1994<F5> 1993
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $12.69 $12.74 $12.86 $12.39 $12.62 $ 12.76
Investment Activities
Net investment income 0.49 0.57 0.57 0.85 0.07 0.70
Net realized and
unrealized gains
(losses) from investments 0.12 0.03 (0.10) 0.36 (0.23) 0.84
Total from
investment Activities 0.61 0.60 0.47 1.21 (0.16) 1.54
Distributions
Net investment income (0.48) (0.56) (0.57) (0.74) (0.07) (0.70)
In excess of net
investment income -- (0.05) (0.01) -- -- --
Net realized gains (0.02) (0.04) (0.01) -- -- (0.06)
Total Distributions (0.50) (0.65) (0.59) (0.74) (0.07) (0.76)
Net Asset Value,
End of Period $12.80 $12.69 $12.74 $12.86 $12.39 $ 13.54
Total Return
(excludes sales charges) 4.96% 4.88% 3.72% 10.18% (1.25)%<F2> 12.34%
Ratios/Supplemental Data:
Net Assets, End of Period (000) $3,437 $2,731 $2,515 $ 1,953 $ <F6> $28,530
Ratio of expenses to
average net assets 1.99% 1.82% 1.65% 2.02% 0.52%<F3> 0.87%
Ratio of net investment income
to average net assets 3.81% 4.46% 4.52% 5.94% 5.94%<F3> 5.28%
Ratio of expenses to
average net assets<F1> 2.36% 2.68% 2.34% 2.25% 0.86%<F3> 0.96%
Ratio of net investment income
to average net assets<F1> 3.44% 3.60% 3.83% 5.71% 5.60%<F3> 5.19%
Portfolio turnover <F7> 38% 11% 0% 18% 18% 12%
<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> Not annualized.
<F3> Annualized.
<F4> Effective June 5, 1995, the Victory New York Tax-Free Portfolio became the New York Tax-Free Fund.
<F5> Effective September 26, 1994, the Fund designated the existing shares as
Class A Shares and commenced offering Class B Shares.
<F6> Amount is less than $1,000.
<F7> Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
</FN>
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
The Victory Portfolios Financial Highlights
<CAPTION>
Ohio Municipal Bond Fund
Year Ended October 31,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 11.72 $ 11.43 $ 11.32 $ 10.33 $ 11.52
Investment Activities
Net investment income 0.51 0.53 0.54 0.52 0.49
Net realized and unrealized
gains (losses) from investments 0.42 0.29 0.11 1.00 (0.94)
Total from Investment Activities 0.93 0.82 0.65 1.52 (0.45)
Distributions
Net investment income (0.51) (0.53) (0.54) (0.52) (0.49)
In excess of net investment income -- -- -- (0.01) --
Net realized gains (0.10) -- -- -- (0.25)
Total Distributions (0.61) (0.53) (0.54) (0.53) (0.74)
Net Asset Value, End of Period $ 12.04 $ 11.72 $ 11.43 $ 11.32 $ 10.33
Total Return (excludes sales charges) 8.18% 7.37% 5.87% 15.03% (4.08)%
Ratios/Supplemental Data:
Net Assets, End of Period (000) $82,704 $78,043 $73,463 $60,031 $57,704
Ratio of expenses to
average net assets 0.91% 0.89% 0.89% 0.66% 0.51%
Ratio of net investment income
to average net assets 4.31% 4.60% 4.72% 4.78% 4.58%
Ratio of expenses to
average net assets<F1> 1.13% 0.99% 1.05% 0.94% 1.09%
Ratio of net investment income
to average net assets<F1> 4.09% 4.50% 4.56% 4.49% 4.01%
Portfolio turnover 95% 74% 81% 125% 53%
<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.
</FN>
</TABLE>
See notes to financial statements.
<PAGE>
THE VICTORY PORTFOLIOS Schedule of Investments
Balanced Fund October 31, 1998
(Amounts in Thousands, Except Shares)
Shares or
Principal Market
Security Description Amount Value
Commercial Paper (9.0%)
Associates Corp., N.A.,
5.70%, 11/2/98 $ 38,412 $ 38,412
Total Commercial Paper (Cost $38,412) 38,412
Common Stocks (53.5%)
Aerospace/Defense (0.5%):
AlliedSignal, Inc. 51,400 2,001
Aluminum (0.4%):
Aluminum Co. of America 21,700 1,720
Automobiles (1.0%):
Chrysler Corp. 31,000 1,492
Ford Motor Co. 14,041 762
General Motors Corp. 35,000 2,207
4,461
Banks (4.3%):
BankAmerica Corp. 54,090 3,107
First Union Corp. 60,200 3,492
Mellon Bank Corp. 22,000 1,323
Norwest Corp. (b) 90,000 3,347
U.S. Bancorp 87,000 3,176
Wells Fargo & Co. 10,500 3,884
18,329
Beverages (1.7%):
Anheuser-Busch Cos., Inc. 84,000 4,993
PepsiCo, Inc. 60,000 2,025
7,018
Chemicals -- General (0.5%):
Air Products & Chemicals, Inc. 51,000 1,925
Computers & Peripherals (3.2%):
Cisco Systems, Inc. (b) 25,500 1,607
Hewlett-Packard Co. 38,800 2,335
International Business Machines Corp. 65,000 9,648
13,590
Conglomerates (1.5%):
General Electric Co. 46,300 4,051
Textron, Inc. 33,800 2,514
6,565
Consumer Products (0.3%):
Newell Co. 27,600 1,214
Containers (0.2%):
Sonoco Products Co. 33,000 936
Cosmetics & Related (0.5%):
Avon Products, Inc. 54,200 2,151
Electrical Equipment (0.7%):
Emerson Electric Co. 42,200 2,785
Electronic & Electrical -- General (0.4%):
Motorola, Inc. 32,000 1,664
Entertainment (1.1%):
The Walt Disney Co. 59,000 1,589
Viacom, Inc., Class B (b) 53,700 3,216
4,805
Environmental Control (0.4%):
Waste Management, Inc. 41,025 1,851
Financial & Insurance (0.4%):
Lincoln National Corp. 22,000 1,669
Financial Services (1.8%):
Fannie Mae 61,200 4,334
Franklin Resources, Inc. 20,000 756
Transamerica Corp. 26,589 2,765
7,855
Food Processing & Packaging (1.4%):
ConAgra, Inc. 78,000 2,374
Sara Lee Corp. 58,000 3,462
5,836
Forest Products -- Lumber & Paper (0.3%):
Bowater, Inc. 9,000 367
Mead Corp. 28,000 886
1,253
Health Care (0.5%):
Columbia/HCA Healthcare Corp. 92,500 1,943
Insurance (0.3%):
Everest Reinsurance Holdings, Inc. 40,500 1,395
Insurance -- Multi-Line (2.1%):
Allstate Corp. 147,884 6,368
General Reinsurance Corp. 10,900 2,395
8,763
Medical Supplies (0.9%):
Biomet, Inc. 58,000 1,968
Medtronic, Inc. 28,000 1,820
3,788
Newspapers (0.4%):
Dow Jones & Co., Inc. 35,500 1,626
<PAGE>
Oil & Gas Exploration, Production
& Services (1.3%):
Anadarko Petroleum Corp. 45,000 1,524
Enron Corp. 72,600 3,830
5,354
Oil-Integrated Companies (5.2%):
Amerada Hess Corp. 22,000 1,216
Atlantic Richfield Co. 12,000 827
Chevron Corp. 72,001 5,867
Mobil Corp. 51,400 3,890
Phillips Petroleum Co. 49,600 2,145
Royal Dutch Petroleum Co.,
New York Shares 5,800 286
Texaco, Inc. 104,000 6,168
Unocal Corp. 47,000 1,595
21,994
Oilfield Services & Equipment (1.0%):
Baker Hughes, Inc. 74,600 1,646
Schlumberger, Ltd. 47,000 2,467
4,113
Paint, Varnishes, Enamels (0.2%):
Sherwin-Williams Co. 41,400 1,043
Pharmaceuticals (5.1%):
Abbott Laboratories 100,000 4,694
American Home Products Corp. 80,800 3,939
Bristol-Myers Squibb Co. 28,000 3,096
Merck & Co., Inc. 25,000 3,381
Pfizer, Inc. 62,200 6,674
21,784
Publishing (0.9%):
Time Warner, Inc. 40,500 3,759
Railroads (0.5%):
Union Pacific Corp. 46,000 2,191
Restaurants (0.5%):
McDonald's Corp. 34,000 2,274
Retail (1.2%):
Dayton Hudson Corp. 86,800 3,678
Wal-Mart Stores, Inc. 18,800 1,297
4,975
Retail -- Department Stores (1.0%):
J. C. Penney Co., Inc. 36,000 1,710
May Department Stores Co. 41,000 2,501
4,211
Retail -- Drug Stores (0.8%):
Walgreen Co. 69,600 3,389
Retail -- Specialty Stores (0.6%):
AutoZone, Inc. (b) 30,000 789
Lowe's Cos., Inc. 56,000 1,887
2,676
Semiconductors (0.6%):
Intel Corp. 29,400 2,622
Software & Computer
Services (0.9%):
Microsoft Corp. (b) 21,000 2,223
Oracle Corp. (b) 47,750 1,412
3,635
Steel (0.1%):
USX-U.S. Steel Group, Inc. 17,100 398
Telecommunications (2.2%):
ALLTEL Corp. 30,000 1,404
MCI Worldcom, Inc. (b) 144,292 7,973
9,377
Telecommunications --
Services & Equipment (0.6%):
Lucent Technologies, Inc. 32,352 2,594
Tobacco & Tobacco Products (0.7%):
Philip Morris Cos., Inc. 58,000 2,965
Utilities -- Electric (2.4%):
Consolidated Edison Co.
of New York, Inc. 37,400 1,875
DQE, Inc. 20,000 789
Duke Energy Corp. 50,000 3,234
FirstEnergy Corp. 15,000 450
PacifiCorp 80,000 1,525
Texas Utilities Co. 52,000 2,275
10,148
Utilities -- Telecommunications
(2.9%):
Ameritech Corp. 93,000 5,016
Bell Atlantic Corp. 56,000 2,975
GTE Corp. 75,500 4,431
12,422
Total Common Stocks (Cost $152,080) 227,067
<PAGE>
Foreign Common Stocks (4.3%)
Argentina (0.0%):
Banks (0.0%):
Banco Rio de la Plata, ADR 11,600 104
Total Argentina 104
Australia (0.1%):
Banks (0.0%):
National Australia Bank Ltd. 7,000 92
Leisure -- Recreation,
Gaming (0.0%):
Aristocrat Leisure Ltd. 35,000 110
Oil & Gas Exploration,
Production & Services (0.0%):
Woodside Petroleum Ltd. 10,638 56
Publishing (0.1%):
Publishing & Broadcasting Ltd. 32,000 127
Retail (0.0%):
Woolworths Ltd. 29,000 102
Telecommunications --
Services & Equipment (0.0%):
Telstra Corp. Ltd., ADR 1,950 109
Total Australia 596
Britain (0.8%):
Aerospace/Defense (0.1%):
British Aerospace 35,000 257
Banks (0.1%):
HSBC Holdings PLC 9,000 208
Lloyds TSB Group PLC 22,000 272
480
Financial Services (0.0%):
Prudential Corp. PLC 11,000 143
Insurance (0.0%):
Guardian Royal Exchange PLC 12,000 58
Leisure -- Recreation,
Gaming (0.1%):
Ladbroke Group PLC 66,000 241
Oil & Gas Exploration,
Production & Services (0.0%):
British Petroleum Co. PLC 8,200 120
Pharmaceuticals (0.2%):
Glaxo Wellcome PLC 12,500 388
SmithKline Beecham PLC 24,000 296
684
Software & Computer
Services (0.0%)"
Mysis PLC 11,500 81
Telecommunications (0.1%):
Vodafone Group PLC 20,000 267
Transportation (0.1%):
National Express Group PLC 19,000 323
Utilities -- Telecommunications
(0.1%):
British Telecommunications PLC 28,000 366
Total Britain 3,020
Canada (0.1%):
Diversified (0.0%):
Bombardier Inc., Class B 3,900 46
Oil & Gas Exploration,
Production & Services (0.1%):
Suncor Energy, Inc. 3,000 95
Publishing (0.0%):
The Thomson Corp. 1,500 37
Telecommunications (0.0%):
Northern Telecom Ltd. 1,100 47
Total Canada 225
Finland (0.1%):
Banks (0.0%):
Merita Ltd., Class A 55,497 297
Telecommunications (0.1%):
Nakia Oyj, Class A 3,700 337
Total Finland 634
France (0.6%):
Automobiles (0.1%):
PSA Peugeot Citroen 1,033 172
Valeo SA 1,810 157
329
Computers & Peripherals (0.1%):
Cap Gemini SA 1,428 215
Cosmetics & Related (0.1%):
L'OREAL 400 229
Diversified (0.1%):
Compagnie de Saint Gobain 2,350 347
Compagnie Generale des Eaux 1,500 342
689
Food Processing & Packaging (0.1%):
Groupe Danone 810 214
<PAGE>
Oil-Integrated Companies (0.1%):
Total SA, Class B 1,950 225
Retail -- Department Stores (0.0%):
Castorama Dubois 1,100 196
Pinault-Printemps-Redoute SA 800 134
330
Telecommunications (0.0%):
Alcatel 1,400 156
Total France 2,387
Germany (0.3%):
Airlines (0.0%):
Deutsche Lufthansa AG, Registered 7,500 163
Automobiles (0.1%):
Daimler-Benz AG -- New Shares (b) 2,596 204
Banks (0.1%):
HypoVereinsbank 2,500 198
Chemicals -- General (0.0%):
BASF AG 3,300 140
Insurance (0.1%):
Allianz AG 600 205
Manufacturing --
Miscellaneous (0.0%):
VEBA AG 1,500 84
Retail (0.0%):
Douglas Holding AG 2,700 155
Douglas Holding AG-New (b) 270 15
170
Software & Computer Services (0.0%):
Systeme, Anwendungen,
Produkte In Der Datenver 400 168
Total Germany 1,332
Greece (0.1%):
Banks (0.1%):
National Bank Of Greece 960 136
Telecommunications (0.0%):
Hellenic Telecommunication
Organization SA 4,444 101
Total Greece 237
Hong Kong (0.1%):
Banks (0.0%):
Hang Seng Bank 3,500 30
Newspapers (0.1%):
South China Morning Post
(Holdings) Ltd. 164,000 88
Real Estate (0.0%):
Hutchison Whampoa Ltd. 10,000 72
Utilities -- Electric (0.0%):
Beijing Datang Power
Generation Co. Ltd. (b) 95,000 29
Hong Kong Electric Holdings Ltd. 13,000 48
77
Total Hong Kong 267
Hungary (0.1%):
Oil-Integrated Companies (0.0%):
MOL Magyar Olaj-es Gazipari Rt. 2,000 45
Telecommunications (0.1%):
Magyar Tavkozlesi Rt. 6,400 172
Total Hungary 217
Ireland (0.2%):
Banks (0.1%):
Allied Irish Banks PLC 21,000 301
Building Materials (0.1%):
CRH PLC 24,000 350
Total Ireland 651
Italy (0.2%):
Banks (0.0%):
Banca di Roma (b) 21,000 37
Istituto Bancario San
Paolo di Torino SpA (b) 9,000 132
169
Financial Services (0.0%):
Istituto Mobiliare Italiano SpA 9,000 138
Utilities -- Telecommunications
(0.2%):
Telecom Italia Mobile SpA 49,000 285
Telecom Italia SpA 46,883 236
521
Total Italy 828
Japan (0.6%):
Computers & Peripherals (0.0%):
Canon Inc. 2,000 38
Cosmetics & Related (0.2%):
Kao Corp. 12,000 244
Shiseido Co. Ltd. 13,000 142
386
Diversified (0.0%):
Minebea Co. Ltd. 4,000 38
<PAGE>
Electronic & Electrical --
General (0.0%):
Matsushita Electric
Industrial Co. Ltd. 8,000 117
Sharp Corp. 5,000 38
155
Entertainment (0.0%):
Nintendo Co. Ltd. 1,000 85
Financial Services (0.2%):
Takefuji Corp. 5,000 266
Food Manufacturing (0.0%):
Q.P. Corp. 10,000 76
Health Care (0.0%):
Hoya Corp. 4,000 171
Insurance (0.0%):
Tokio Marine & Fire Insurance Co. 14,000 159
Manufacturing --
Miscellaneous (0.0%):
Mitsubishi Heavy Industries 30,000 116
Medical Equipment
& Supplies (0.2%):
Terumo Corp. 13,000 274
Paint, Varnishes, Enamels (0.0%):
Kansai Paint 15,000 34
Pharmaceuticals (0.0%):
Sankyo Co., Ltd. 4,000 90
Printing (0.0%):
Toppan Printing Co. Ltd. 15,000 154
Retail (0.0%):
Ito Yokado Co. 2,000 117
Retail -- Department Stores (0.0%):
Isetan Co. Ltd. 12,000 109
Telecommunications (0.0%):
Nippon Telephone & Telegraph 21 164
Tools (0.0%):
Makita Corp. 6,000 63
Total Italy 2,495
Malaysia (0.0%):
Automobiles (0.0%):
Oriental Holdings Berhad 42,000 31
Total Malaysia 31
Mexico (0.0%):
Building Materials (0.0%):
Cemex SA de CV 16,000 73
Total Mexico 73
Netherlands (0.2%):
Banks (0.1%):
ING Groep Financial Services N.V. 6,497 314
Food Products (0.0%):
Koninklijke Numico N.V. 1,700 67
Insurance (0.1%):
Aegon N.V. 3,015 262
Oil -- Integrated Companies (0.0%):
Royal Dutch Petroleum Co. 2,000 97
Total Netherlands 740
New Zealand (0.0%):
Fisheries (0.0%):
Sanford Ltd. 12,000 18
Household Goods -- Appliances,
Furnishings & Electronics (0.0%):
Fisher & Paykel Industries Ltd. 15,100 45
Total New Zealand 63
Norway (0.0%):
Banks (0.0%):
Den Norske Bank ASA 38,000 134
Total Norway 134
Poland (0.0%):
Utilities -- Telecommunications
(0.0%):
Softbank SA 2,200 50
Total Poland 50
Portugal (0.1%):
Banks (0.1%):
Banco Commercial Portugues, SA 7,000 219
Building Materials (0.0%):
Cimpor-Cimentos de Portugal, SGPS SA 6,000 208
Utilities -- Electric (0.0%):
Electricidade de Portugal, SA 3,000 75
Utilities -- Telecommunications
(0.0%):
Portugal Telecom, SA 2,800 133
Total Portugal 635
<PAGE>
Singapore (0.0%):
Transportation (0.0%):
Keppel Corp. Ltd. 15,000 30
Total Singapore 30
South Africa (0.0%):
Computers & Peripherals (0.0%):
DataTec Ltd. 3,500 53
Total South Africa 53
South Korea (0.0%):
Utilities -- Electric (0.0%):
Korea Electric Power Corp., ADR 6,900 88
Total South Korea 88
Spain (0.3%):
Banks (0.1%):
Banco Santander, SA 10,200 186
Corporation Bancaria de Espana, SA 15,000 327
513
Construction (0.1%):
Dragados & Construcciones, SA 10,000 297
Utilities -- Electric (0.0%):
Endesa, SA 7,000 176
Utilities -- Telecommunications
(0.1%):
Telefonica de Espana 5,863 264
Total Spain 1,250
Sweden (0.0%):
Telecommunications (0.0%):
Telefonaktiebolaget LM Ericsson,
Class B 8,800 198
Total Sweden 198
Switzerland (0.4%):
Banks (0.1%):
Credit Suisse Group, Registered 2,297 353
UBS AG, Registered 565 155
508
Food Products (0.0%):
Nestle SA, Registered 80 170
Insurance (0.1%):
Baloise Holding Ltd., Registered 270 223
Pharmaceuticals (0.2%):
Novartis AG, Registered 283 510
Roche Holding AG 25 292
802
Total Switzerland 1,703
Turkey (0.0%):
Banks (0.0%):
Yapi ve Kredi Bankasi AS GDR 3,300 38
Total Turkey 38
Total Foreign Common Stocks (Cost $15,932) 18,079
Preferred Stocks (0.0%)
Germany (0.0%):
Automobiles (0.0%):
Volkswagen AG 1,900 90
Consumer Products (0.0%):
Gardena Holding AG 3,888 75
Total Preferred Stocks (Cost $143) 165
Asset Backed Securities (3.9%)
American Express Credit Account
Master Trust, Series 1997-1,
Class A, 6.40%, 4/15/05 1,030 1,064
CIT Recreational Vehicle Trust,
Series 1998-A, Class A2,
5.92%, 3/15/07 1,420 1,431
Federal National Mortgage Association,
Series 1998-36,
Class N, 6.00%, 6/18/25 2,063 1,996
Federal National Mortgage Association,
Series 1998-46, Class PJ,
6.25%, 12/18/22, CMO 1,576 1,589
First USA Credit Card Master
Trust, Series 1997-6, Class A,
6.42%, 3/17/05 1,685 1,743
Green Tree Home Improvement Loan
Trust, Series 1997-E, Class HEA6,
6.62%, 1/15/29 1,320 1,371
MBNA Master Credit Card Trust,
Series 1998-D, Class A,
5.80%, 12/15/05 1,400 1,436
Nationsbank Credit Card Master
Trust, Series 1995-1, Class A,
6.45%, 4/15/03 910 941
Premier Auto Trust,
1998-5, Class A-3,
5.07%, 7/8/02 1,500 1,510
Residential Accredit Loans Inc.,
Series 1998-QS16, Class A1,
6.50%, 11/29/28, CMO 1,575 1,585
Residential Accredit Loans, Inc.,
Series 1998-QS7, Class CB2,
6.75%, 7/25/28 1,890 1,909
Total Asset Backed Securities (Cost $16,387) 16,575
<PAGE>
Collateralized Mortgage Obligations (0.3%)
Federal Home Loan Mortgage Corp. (0.3%):
6.25%, 5/15/27,
Series 2030, Class D 1,463 1,474
Total Collateralized Mortgage
Obligations (Cost $1,454) 1,474
Corporate Bonds (9.6%)
Automobiles (0.5%):
Chrysler Financial Corp.,
5.25%, 5/4/01 1,950 1,948
Ford Motor Co.,
9.00%, 9/15/01 100 110
2,058
Broadcasting/Cable (0.2%):
TCI Communications, Inc.,
7.88%, 2/15/26 490 563
Time Warner, Inc.,
6.95%, 1/15/28 490 491
1,054
Commercial Banking (0.7%):
Abbey National PLC,
6.70%, 6/29/49,
Callable 6/15/08 @100 1,705 1,634
Natexis Banque,
6.31%*, 12/29/49,
Callable 12/12/01 @100 1,600 1,493
3,127
Electronic & Electrical --
General (0.9%):
General Electric Capital Services,
7.50%, 8/21/35 630 754
Sony Corp.,
6.13%, 3/4/03 2,800 2,873
3,627
Entertainment (0.2%):
Loews Corp.,
6.75%, 12/15/06 875 903
Environmental Control (0.3%):
USA Waste Services,
7.00%, 7/15/28 1,245 1,153
Financial Services (0.9%):
Associates Corp., N.A.,
6.88%, 6/20/02 695 725
Farmers Exchange Capital,
7.05%, 7/15/28 880 845
Republic New York-Stop,
7.53%, 12/4/26,
Callable 12/4/06 @ 103.77 1,500 1,491
Transamerica Capital III,
7.63%, 11/15/37 800 847
3,908
Food Processing & Packaging (0.2%):
Nabisco, Inc.,
6.00%, 2/15/01 925 920
Industrial Goods & Services (2.3%):
EOP Operating LP,
6.75%, 2/15/08 2,460 2,301
Frontier Corp.,
6.00%, 10/15/03 1,210 1,230
Georgia-Pacific Corp.,
9.95%, 6/15/02 1,000 1,141
Motorola Inc.,
5.80%, 10/15/08 1,890 1,890
Owens Corning,
7.50%, 5/1/05 550 563
USX Corp.,
7.20%, 2/15/04 1,250 1,336
Williams Cos.,
6.20%, 8/1/02 1,020 1,052
9,513
Insurance (0.7%):
Liberty Mutual,
8.20%, 5/4/07 (c) 780 890
Lumbermens Mutual,
8.30%, 12/1/37 (c) 230 237
Metropolitan Life Insurance Co.,
6.30%, 11/1/03 (c) 1,800 1,841
2,968
Oil & Gas Exploration,
Production & Services (0.5%):
Amoco Corp.,
6.00%, 6/9/08 705 739
Unocal Corp.,
7.00%, 5/1/28 1,285 1,205
1,944
<PAGE>
Publishing (0.5%):
Time Warner, Inc.,
7.75%, 6/15/05 1,750 1,914
Retail (0.4%):
Dayton Hudson Corp.,
6.65%, 8/1/28 505 494
J.C. Penney & Co., Inc.,
7.63%, 9/1/97 750 781
J.C. Penny & Co., Inc.,
7.60%, 4/1/07 425 464
1,739
Telecommunications (0.8%):
360 Communications Co.,
7.50%, 3/1/06 1,405 1,542
GTE Corp.,
6.94%, 4/15/28 740 765
Telecommunications, Inc.,
9.80%, 2/1/12 920 1,182
3,489
Tobacco & Tobacco Products (0.3%):
Phillip Morris Cos. Inc,
7.00%, 7/15/05 1,180 1,240
Transportation (0.2%):
CSX Corp.,
6.25%, 10/15/08 950 949
Utilities -- Telecommunications
(0.0%):
Bell Atlantic Financial Service,
5.75%, 4/1/03,
Callable 4/1/01 @ 102.3 (c) 200 205
Total Corporate Bonds (Cost $40,656) 40,711
Foreign Government Bonds (0.3%)
Canada (0.3%):
British Columbia,
5.38%, 10/29/08 1,160 1,150
Total Foreign Government Bonds (Cost $1,155) 1,150
Securities Purchased When Issued (3.6%)
Federal Home Loan
Mortgage Corp. (2.3%):
6.00%, 15 Year TBA 1,423 1,429
6.50%, 30 Year TBA 1,561 1,571
7.00%, 30 Year TBA 5,255 5,357
7.50%, 30 Year TBA 1,308 1,339
9,696
Federal National Mortgage Assoc.
(1.3%):
6.00%, 15 Year TBA 1,651 1,655
6.50%, 15 Year TBA 1,056 1,069
7.00%, 15 Year TBA 658 670
8.00%, 30 Year TBA 2,164 2,237
5,631
Total Securities Purchased
When Issued (Cost $15,336) 15,327
U.S. Treasury Securities (7.3%)
U.S. Treasury Notes (5.1%):
5.75%, 9/30/99 1,700 1,720
4.50%, 9/30/00 1,927 1,936
4.00%, 10/31/00 3,993 3,985
5.63%, 5/15/01 482 498
6.25%, 10/31/01 1,020 1,074
5.25%, 8/15/03 1,348 1,406
4.25%, 11/15/03 4,000 3,988
5.63%, 5/15/08 4,673 5,033
19,640
U.S. Treasury Bonds (2.2%):
4.50%, 11/15/08 2,000 1,992
6.13%, 11/15/27 6,291 7,092
5.50%, 8/15/28 2,262 2,380
11,464
Total U.S. Treasury Securities
(Cost $30,354) 31,104
<PAGE>
U.S. Government Agencies (2.0%)
Federal Home Loan Bank (0.6%):
5.13%, 9/15/03 2,480 2,508
Federal National Mortgage Assoc.
(1.4%):
4.63%, 10/15/01 1,150 1,151
4.75%, 11/14/03 1,820 1,814
6.55%, 9/12/05 2,725 2,942
5,907
Total U.S. Government Agencies (Cost $8,296) 8,415
U.S. Government Mortgage Backed (9.4%)
Federal Home Loan
Mortgage Corp. (0.5%):
7.00%, 3/1/28 168 171
7.50%, 4/1/07 184 189
8.50%, 6/1/12-7/1/21 1,756 1,832
2,192
Federal National Mortgage Assoc.
(4.8%):
6.00%, 2/1/13-8/1/28 4,626 4,614
6.50%, 5/1/13-9/1/28 10,297 10,391
7.00%, 5/1/12-8/1/28 1,526 1,558
7.50%, 9/1/23-9/1/28 2,152 2,200
8.50%, 5/1/12-11/1/17 1,563 1,626
20,389
Government National Mortgage Assoc.
(4.1%):
7.00%, 12/15/23-9/15/28 10,379 10,627
7.50%, 11/15/23-2/15/28 4,298 4,424
8.50%, 7/15/10 249 263
9.00%, 915/19-11/15/16 1,906 2,023
9.50%, 7/15/09 119 127
17,464
Total U.S. Government Mortgage
Backed (Cost $39,589) 40,045
Total Investments (Cost $359,794) (a) -- 103.2% 438,524
Liabilities in excess of other assets -- (3.2)% (13,441)
TOTAL NET ASSETS -- 100.0% $425,083
(a) Represents cost for financial reporting purposes and differs primarily
from cost basis for federal income tax purposes by the amount of losses
recognized for financial reporting purposes in excess of federal income
tax reporting of approximately $314. Cost for federal income tax purposes
differs from value by net unrealized appreciation of securities as
follows (amounts in thousands):
Unrealized appreciation $86,453
Unrealized depreciation (8,037)
Net unrealized appreciation $78,416
(b) Non-income producing securities.
(c) 144a security which is restricted as to resale to institutional
investors.
* Variable rate securities having liquidity sources through bank letters of
credit or other credit and/or liquidity agreements. The interest rate,
which will change periodically, is based upon bank prime rates or an index
of market interest rates. The rate reflected on the Schedule of Investments
is the rate in effect at October 31, 1998.
ADR -- American Depository Receipt
CMO -- Collateralized Mortgage Obligation
See notes to financial statements.
<PAGE>
The Victory Portfolios Schedule of Investments
Convertible Securities Fund October 31, 1998
(Amounts in Thousands, Except Shares)
Shares or
Principal Market
Security Description Amount Value
Common Stocks (3.8%)
Banks (2.6%):
Commerce Bancorp, Inc. 17,500 $ 711
First Republic Bancorp, Inc. (b) 30,000 743
Golden State Bancorp, Inc. (b) 38,000 729
Mercantile Bancorporation, Inc. 15,000 685
2,868
Broadcasting/Cable (1.2%):
Mediaone Group Inc. 23,600 1,271
Total Common Stocks (Cost $3,036) 4,139
Commercial Paper (2.1%)
Associates Corp., N.A.,
5.70%, 11/2/98 $ 2,304 2,304
Total Commercial Paper (Cost $2,304) 2,304
Convertible Bonds (50.2%)
Automotive Parts (0.7%):
Pep Boys-Manny, Moe & Jack,
Convertible Subordinated Notes,
4.00%, 9/1/99,
Callable 11/16/98 @ 100 800 788
Broadcasting & Publishing (2.1%):
Scholastic Corp.,
Convertible Subordinated Notes,
5.00%, 8/15/05,
Callable 11/16/98 @ 100 (c) 1,000 909
Thomas Nelson, Inc.,
Convertible Subordinated Notes,
5.75%, 11/30/99,
Continuously Callable @ 103.29 (c) 1,325 1,310
2,219
Commercial Services (2.4%):
CUC International Inc.,
Convertible Subordinated Notes,
3.00%, 2/15/02,
Callable 2/15/00 @ 101.2 600 494
CUC International, Inc.,
Convertible Subordinated Notes,
3.00%, 2/15/02,
Callable 2/15/00 @ 101.2 (c) 250 206
International Technology Corp.,
Convertible Subordinated
Debentures, 8.00%, 10/1/06,
Continuously Callable @ 100 750 668
Ogden Corp., Euro-Dollar
Convertible Subordinated
Notes, 5.75%, 10/20/02 1,300 1,241
2,609
Computers & Peripherals (3.6%):
EMC Corp., Convertible Subordinated
Notes, 3.25%, 3/15/02,
Callable 3/15/00 @ 101.3 525 1,522
HMT Technology Corp.,
Convertible Subordinated Notes,
5.75%, 1/15/04,
Callable 1/20/00 @ 103.29 (c) 250 147
HMT Technology Corp.,
Convertible Subordinated Notes,
5.75%, 1/15/04,
Callable 1/20/00 @ 103.29 1,500 883
Micron Technology, Inc.,
Convertible Subordinated
Notes, 7.00%, 7/1/04,
Callable 7/3/01 @ 103 1,250 1,222
Northern Telecom Ltd.,
Convertible Subordinated
Debentures, 5.25%, 5/15/03,
Callable 5/15/99 @ 102.1 (c) 250 256
4,030
Conglomerates (1.1%):
Veterinary Centers Of America,
Convertible Subordinated
Debentures, 5.25%, 5/1/06,
Callable 5/16/99 @ 103 1,585 1,228
Electronic & Electrical --
General (0.7%):
Lam Research Corp.,
Convertible Subordinated
Notes, 5.00%, 9/1/02 250 197
Lam Research Corp.,
Convertible Subordinated
Notes, 5.00%, 9/1/02 (c) 750 592
789
Electronic Components/Instruments
(1.8%):
Analog Devices,
Convertible Subordinated Notes,
3.50%, 12/1/00,
Callable 12/1/98 @ 101.4 160 173
Atmel SA,
3.25%, 6/1/02,
Guaranteed by Atmel Corp., (c) 250 189
<PAGE>
Cymer Inc.,
Convertible Subordinated Notes,
3.50%, 8/6/04,
Callable 8/9/00 @ 106.372 1,000 664
VLSI Technology, Inc.,
Convertible Subordinated Notes,
8.25%, 10/1/05,
Callable 10/3/99 @ 102.48 1,000 878
1,904
Electronics (1.4%):
SCI Systems Inc.,
Convertible Subordinated Notes,
5.00%, 5/1/06,
Callable 5/1/99 @ 103.5 (c) 950 1,557
Environmental Services (0.4%):
Waste Management Technologies,
Convertible Subordinated Notes,
2.00%, 1/24/05,
Callable 3/15/00 @ 84.303 500 476
Financial Services (2.2%):
Bell Atlantic Financial,
4.25%, 9/15/05,
Callable 9/15/02 @ 104.242 (c) 1,600 1,586
Fort Bend Holding Corp.,
Convertible Subordinated
Debentures, 8.00%, 12/1/05,
Callable 12/1/98 @ 105.6 400 771
2,357
Gas & Electric Utility (0.9%):
Oryx Energy Co.,
Convertible Subordinated
Debentures, 7.50%, 5/15/14
Callable 5/15/99 @ 100, 1,000 986
Health Care (0.9%):
Quantum Health Resources, Inc.,
Convertible Subordinated
Debentures, 4.75%, 10/1/00,
Callable 10/1/99 @ 100.68 1,017 925
Hotels & Motels (0.8%):
Hilton Hotels Corp.,
Convertible Subordinated Notes,
5.00%, 5/15/06,
Callable 5/15/99 @ 102.86 1,000 881
Insurance (0.0%):
First Central Financial Corp.,
Convertible Subordinated
Debentures, 9.00%, 8/1/00,
Callable 11/16/98 @ 100.63 (d) 76 0
Leisure -- Recreation, Gaming (0.9%):
Family Golf Centers,
Convertible Subordinated Notes,
5.75%, 10/15/04,
Callable 10/15/00 @102.875 1,000 973
Manufacturing -- Machinery (1.9%):
MascoTech, Inc.,
Convertible Subordinated
Debentures, 4.50%, 12/15/03,
Callable 12/15/98 @ 102 1,750 1,413
Thermo Fibertek Inc.,
4.50%, 7/15/04,
Callable 7/15/00 @ 100,
Gauaranteed by Thermo Electron (c) 800 688
2,101
Medical Equipment & Supplies (1.2%):
Thermo Instruments System,
4.50%, 10/15/03,
Callable 10/15/99 @ 100 (c) 350 307
ThermoTrex Corp.,
3.25%, 11/1/07,
Callable 11/1/00 @ 100,
Guaranteed by Thermo Electron 1,220 956
1,263
Medical -- Biotechnology (2.8%):
Centocor Inc.,
Convertible Subordinated
Debentures, 4.75%, 2/15/05,
Callable 2/21/01 @ 102.714 1,250 1,324
Chiron Corp.,
Convertible Subordinated Notes,
1.90% , 11/17/00,
Callable 11/17/98 @ 95.08 750 743
Genzyme Corp.,
Convertible Subordinated Notes,
5.25%, 6/1/05,
Callable 6/10/[email protected] (c) 750 927
2,994
Medical -- Hospital Services (1.2%):
Medical Care International,
Convertible Subordinated
Debentures, 6.75%, 10/1/06,
Callable 10/1/01 @ 100 1,500 1,266
Oil & Gas Exploration,
Production & Services (1.9%):
Lomak Petroleum, Inc.,
Convertible Subordinated
Debentures, 6.00%, 2/1/07,
Callable 2/1/00 @ 104 (c) 750 480
<PAGE>
Nabors Industrial Inc.,
Convertible Subordinated Notes,
5.00%, 5/15/06,
Callable 5/15/99 @ 103.5 1,000 1,108
SEACOR SMIT, Inc.,
Convertible Subordinated Notes,
5.38%, 11/15/06,
Callable 11/24/99 @ 103.58 500 473
2,061
Oil-Integrated Companies (1.2%):
Pennzoil Co.,
Convertible Debentures,
4.90%, 8/15/08,
Callable 8/15/00 @ 104.00 1,300 1,268
Oilfield Services &
Equipment (3.3%):
Diamond Offshore Drilling, Inc.,
Convertible Subordinated Notes,
3.75%, 2/15/07,
Callable 2/22/01 @ 102.08 3,450 3,545
Pharmaceuticals (3.1%):
ALZA Corp.,
Convertible Subordinated
Debentures, 5.00%, 5/1/06,
Callable 5/1/01 @ 102.14 1,775 2,389
Atrix Labs, Inc.,
Convertible Subordinated Notes,
7.00%, 12/1/04,
Callable 12/5/00 @ 103 (c) 500 374
Cetus Corp.,
Convertible Subordinated
Debentures, 5.25%, 5/21/02,
Continuously Callable @ 100 300 303
Omnicare Inc.,
5.00%, 12/1/07,
Callable 12/6/00 @ 103.5 250 269
3,335
Precision Instruments &
Related (2.5%):
Thermo Instruments,
4.00%, 1/15/05,
Callable 1/15/01 @ 100 3,300 2,648
Primary Metal & Mineral
Production (1.1%):
Homestake Mining Co.,
Convertible Subordinated
Debenture, 5.50%, 6/23/00,
Continuously Callable @ 100 (c) 1,250 1,195
Real Estate (1.0%):
Avatar Holdings,
Convertible Subordinated Notes,
7.00%, 4/1/05,
Callable 4/6/01 @ 104 1,250 1,077
Real Estate Investment Trusts (3.3%):
Health Care Property Investors, Inc.,
Convertible Subordinated Notes,
6.00%, 11/8/00,
Callable 11/15/98 @ 100 (c) 950 888
Macerich Co.,
Convertible Subordinated Notes,
7.25%, 12/15/02,
Callable 6/15/02 @ 100 (c) 500 481
Meditrust,
Convertible Debentures,
7.50%, 3/1/01,
Callable @ 100 1,240 1,206
Rouse Co.,
Subordinated Notes,
5.75%, 7/23/02,
Continuously Callable @ 100 1,000 1,014
3,589
Retail (0.9%):
Home Depot Inc.,
Convertible Subordinated Notes,
3.25%, 10/1/01,
Callable 10/2/99 @ 100.81 375 714
Rite Aid Corp.,
Convertible Subordinated Notes,
5.25%, 9/15/02,
Callable 9/15/00 @ 102.1 200 254
968
Retail -- Department Stores (0.5%):
Saks Holdings, Inc.,
Convertible Subordinated Notes,
5.50%, 9/15/06,
Callable 9/15/99 @ 103.85 500 496
Retail -- Specialty Stores (1.0%):
Corporate Express, Inc.,
4.50%, 7/1/00,
Callable 7/1/99 @ 101.13 750 664
The Sports Authority, Inc.,
Convertible Subordinated Notes,
5.25%, 9/15/01,
Callable 9/15/99 @ 102.10 250 183
The Sports Authority, Inc.,
Convertible Subordinated Notes,
5.25%, 9/15/01,
Callable 9/15/99 @ 102.10 (c) 300 220
1,067
<PAGE>
Shipbuilding (0.6%):
Halter Marine Group, Inc.,
Convertible Subordinated Notes,
4.50%, 9/15/04,
Callable 9/15/00 @ 102.57 1,000 661
Telecommunications (1.5%):
DSC Communications Corp.,
Convertible Subordinated Notes,
7.00%, 8/1/04,
Callable 8/1/00 @ 104 (c) 750 765
DSC Communications Corp.,
Convertible Subordinated Notes,
7.00%, 8/1/04,
Callable 8/1/00 @ 104 400 409
Tele-Comm International,
Convertible Subordinated
Debentures, 4.50%, 2/15/06,
Callable 2/15/99 @ 103.15 400 394
1,568
Transportation Services (0.8%):
Offshore Logistics,
Convertible Subordinated Notes,
6.00%, 12/15/03,
Callable 12/15/99 @ 103.43 1,000 901
Utilities -- Electric (0.5%):
Potomac Electric Power,
Convertible Debentures,
7.00%, 1/15/18,
Callable 1/15/99 @ 101 500 503
Total Convertible Bonds (Cost $55,196) 54,228
Convertible Preferred Stock (40.1%)
Banks (0.5%):
Matewan Bancshares, Inc.,
7.50%, Series A,
Callable 3/15/00 @ $26.125 19,500 585
Broadcasting & Publishing (1.0%):
Houston Industries, Inc., 7.00% 13,500 1,094
Broadcasting/Cable (4.2%):
CSC Holdings, Inc., 8.50%, Series I,
Callable 11/1/99 @ $25.70 62,000 4,541
Computers & Peripherals (1.2%):
Unisys Corp., $3.75, Series A,
Callable 12/14/98 @ $50 26,000 1,318
Conglomerates (1.1%):
Corning Delaware L.P., 6.00%,
Callable 8/5/99 @ $51.50,
Guaranteed by Corning,Inc. 20,000 1,151
Containers -- Metal, Glass,
Paper, Plastic (0.4%):
Crown Cork & Seal, Co., Inc., 4.50% 15,000 451
Cosmetics & Related (0.6%):
Estee Lauder Co., 6.25%, TRACES 10,000 638
Financial Services (2.5%):
Federal Mogul Financial Trust, 7.00%,
Callable 12/6/00 @ $52.45 15,000 894
Newell Financial Trust I, 5.25%,
Callable 12/1/01 @ $51.58 4,500 238
Newell Financial Trust I, 5.25%,
Callable 12/1/01 @ $51.58 (c) 30,000 1,587
2,719
Food Products (0.8%):
Suzia Foods Corp.,
5.50%, 4/1/28,
Callable 4/1/01 @ $51.72 (c) 25,000 813
Insurance (5.4%):
American Bankers Insurance,
$3.125, Series B,
Callable 8/7/00 @ $51.88 9,000 827
Conseco Finance Trust IV,
7.00%, 2/16/01, Series F 38,000 1,631
Jefferson-Pilot Corp., 7.25% 27,700 2,714
Lincoln National Corp., 7.75% 29,800 738
5,910
Manufacturing -- Machinery (0.6%):
Case Corp., $4.50,
Callable 7/1/99 @ $51.29 12,000 688
Oil & Gas Exploration,
Production & Services (2.9%):
Belco Oil & Gas Corp., 6.50% 40,000 600
Howell Corp., $3.50 Series A,
Callable 4/23/99 @ $51 10,000 228
Weatherford International Inc.,
5.00%, 11/1/27,
Callable 11/4/00 @ $51.75 24,000 750
Western Gas Resources, Inc., $2.625,
Callable 2/16/99 @ $51.313 40,000 1,554
3,132
<PAGE>
Oil-Integrated Companies (2.5%):
Tesoro Petroleum Corp., 7.25% 11,100 169
Unocal Corp., 6.25%,
Callable 9/3/00 @ $50.00 50,000 2,494
2,663
Paint, Varnishes, Enamels (0.7%):
Cyprus Amax Minerals Co.,
$4 Series A,
Callable 12/18/98 @ $51.60 20,000 720
Paper and Forest Products (2.0%):
International Paper Co., 5.25%,
Callable 6/30/99 @ $50.00 45,000 2,121
Publishing (0.6%):
Readers Digest, $1.93,TRACES 28,500 652
Railroads (0.5%):
Felcor Lodging Trust, Inc.,
$1.95 Series A,
Calable 4/30/01 @ $25 30,000 594
Real Estate (0.9%):
Equity Office, 5.25%, Series B,
Callable 2/15/03 @ $51.167 2,000 79
Equity Residential Properties,
$2.15, Series J 32,500 865
944
Real Estate Investment
Trusts (2.2%):
Camden Property Trust,
$2.25, Series A,
Callable 4/30/01 @ $32.464 22,000 545
Rouse Co., $3.00, Series B 20,000 905
Vornado Realty Trust,
6.50%, Series A 20,000 965
2,415
Restaurants (1.1%):
Wendys Financing I,
5.00%, 9/15/26 Series A 25,000 1,225
Retail (0.8%):
K-Mart Financing, 7.75%,
Callable 6/17/99 @ $52.713 15,000 832
Steel (1.0%):
USX Capital Trust I, 6.75%,
Callable 4/1/99 @ $51.30 25,000 1,075
Telecommunications (1.0%):
AirTouch Communications, Inc.,
4.25%, Series C,
Callable 8/16/00 @ $50.00 13,200 1,057
Textile Manufacturing (0.8%):
TXI Capital Trust I,
5.50%, 6/2/28,
Callable 6/5/01 @ 50 25,000 866
Transportation Leasing &
Trucking (0.3%):
Automatic Common Exchange
Security Trust II, 6.50%,
Convertible to shares of
Republic Industries, Inc., TRACES 20,000 331
Transportation Services (3.2%):
CNF Trust I, Series A, 5.00%,
Callable 6/1/00 @ $51.5625 17,900 904
Union Pacific Capital, 6.25%,
Callable 4/10/01 @ $51.56 40,000 1,849
Union Pacific Capital, 6.25%,
Callable 4/10/01 @ $51.56 (c) 15,000 694
3,447
Utilities -- Electric (1.3%):
Citizens Utilities Trust, 5.00%,
Callable 2/1/99 @ $50.00,
Guaranteed by Citizens Utility Co. 20,000 884
El Paso Energy Capital,
4.75%, 3/31/28,
Callable 3/31/02 @ $51.43 10,000 485
1,369
Total Convertible Preferred Stock (Cost $41,943) 43,351
<PAGE>
Corporate Bonds (1.4%)
Financial Services (1.0%):
Bank Plus Corp., Senior Notes,
12.00%, 7/18/07,
Callable 11/15/05 @ 110 1,000 1,040
Insurance (0.4%):
National Reinsurance Corp.,
Senior Notes, 8.85%, 1/15/05 400 465
Total Corporate Bonds (Cost $1,511) 1,505
Preferred Stocks (1.2%)
Banks (1.2%):
California Federal Preferred Capital,
9.13%, Series A,
Callable 12/31/02 @ $26.14 20,000 513
Chevy Chase Savings Bank, 13.00%,
Callable 5/1/03 @ $27.25 25,000 775
Total Preferred Stocks (Cost $1,184) 1,288
Total Investments (Cost $105,174) (a) -- 98.8% 106,815
Other assets in excess of liabilities -- 1.2% 1,254
TOTAL NET ASSETS -- 100.0% $108,069
(a) Represents cost for financial reporting purposes and differs from cost
basis for federal income tax purposes by the amount of losses recognized
for financial reporting purposes in excess of federal income tax reporting
of approximately $102. Cost for federal income tax purposes differs from
value by net unrealized appreciation of securities as follows (amounts in
thousands):
Unrealized appreciation $ 9,750
Unrealized depreciation (8,211)
Net unrealized appreciation $ 1,539
(b) Non-income producing securities.
(c) 144a security which is restricted as to resale to institutional
investors.
(d) Security has defaulted on interest payments.
TRACES -- Trust Automatic Common Exchange Shares.
See notes to financial statements.
<PAGE>
THE VICTORY PORTFOLIOS Schedule of Investments
Real Estate Investment Fund October 31, 1998
(Amounts in Thousands, Except Shares)
Shares or
Principal Market
Security Description Amount Value
Common Stocks (82.3%)
Real Estate (0.0%):
Vornado Operating Inc. (b) 1,050 $ 7
Real Estate Investment
Trusts (80.9%):
Apartments (6.8%):
Avalonbay Communities, Inc. 35,366 1,136
Diversified (20.9%):
Captec Net Lease Realty, Inc. 20,000 253
General Growth Properties, Inc. 11,000 391
Grove Property Trust 10,000 103
JP Realty, Inc. 12,000 251
New Plan Excel Realty Trust 12,000 273
Simon Property Group, Inc. 27,000 808
The Macerich Co. 10,000 276
TrizecHahn Corp. 21,100 405
Vornado Realty Trust 21,000 707
3,467
Health Care (2.4%):
Healthcare Realty Trust, Inc. 4,259 100
Meditrust Cos. 18,000 292
392
Hotels (2.4%):
Starwood Hotels & Resorts 14,000 396
Investment Management (1.9%):
Security Capital Group Inc.,
Class B (b) 20,000 319
Office (30.4%):
Arden Realty, Inc. 10,000 216
Boston Properties, Inc. 20,000 570
Brandywine Realty Trust 31,000 554
Cornerstone Properties, Inc. 55,000 853
Cousins Properties, Inc. 7,000 200
Equity Office Properties Trust 37,000 887
Highwoods Properties, Inc. 4,000 112
Mack-Cali Realty Corp. 28,000 830
Spieker Properties, Inc. 18,000 621
TriNet Corporate Realty Trust, Inc. 8,000 230
5,073
Residential (14.5%):
Apartment Investment &
Management Co., Class A 7,350 257
Camden Property Trust 9,000 242
Equity Residential Properties Trust 21,000 882
Gables Residential Trust 18,000 474
Manufactured Home
Communities, Inc. 15,000 374
Summit Properties, Inc. 10,000 176
2,405
Retail (1.6%):
Westfield America, Inc. 15,000 258
13,446
Transportation Services (1.4%):
St. Joe Co. 10,000 239
Total Common Stocks (Cost $15,653) 13,692
U.S. Goverment Agencies (16.1%)
Federal Home Loan Bank (16.1%):
5.40%, 11/2/98 2,671 2,670
Total Discount Note (Cost $2,671) 2,670
Total Investments (Cost $18,324) (a) -- 98.4% 16,362
Other assets in excess of liabilities -- 1.6% 262
TOTAL NET ASSETS -- 100.0% $16,624
(a) Represents cost for financial reporting purposes and differs from cost
basis for federal income tax purposes by the amount of losses recognized
for financial reporting purposes in excess of federal income tax reporting
of approximately $72. Cost for federal income tax purposes differs from
value by net unrealized appreciation of securities as follows (amounts in
thousands):
Unrealized appreciation $ 123
Unrealized depreciation (2,157)
Net unrealized depreciation $(2,034)
(b) Non-income producing securities.
See notes to financial statements.
<PAGE>
<TABLE>
Statements of Assets and Liabilities
The Victory Portfolios October 31, 1998
(Amounts in Thousands, Except Per Share Amounts)
<CAPTION>
Balanced Convertible Real Estate
Fund Securities Fund Investment Fund
<S> <C> <C> <C>
ASSETS:
Investments, at value (Cost $359,794; $105,174 & $18,324) $438,524 $106,815 $16,362
Cash -- -- 1
Interest and dividends receivable 1,891 976 34
Receivable for capital shares issued 157 35 --
Receivable from brokers for investments sold 58,335 1,954 235
Reclaims receivable 25 -- --
Unamortized organization costs -- -- 14
Prepaid expenses and other assets 8 -- 5
Total Assets 498,940 109,780 16,651
LIABILITIES:
Payable for capital shares redeemed -- 1,119 --
Payable to brokers for investments purchased 73,445 479 --
Payable for organization costs -- -- 17
Accrued expenses and other payables:
Investment advisory fees 267 68 2
Administration fees 7 2 --
Shareholder service fees -- 16 1
Shareholder service fees -- Class A 83 -- --
Shareholder service and 12b-1 fees -- Class B 5 -- --
Custodian fees 24 5 3
Transfer agent fees 21 12 3
Other 5 10 1
Total Liabilities 73,857 1,711 27
NET ASSETS:
Capital 319,790 105,576 19,009
Undistributed (distributions in excess of) net investment income 112 770 146
Net unrealized appreciation/depreciation from investments 78,272 1,641 (1,962)
Net unrealized appreciation/depreciation from translation
of assets and liabilities in foreign currencies 461 -- --
Accumulated undistributed net realized gains (losses)
from investment and foreign currency transactions 26,448 82 (569)
Net Assets $425,083 $108,069 $16,624
Net Assets
Class A $418,807
Class B 6,276
Total $425,083
Outstanding units of beneficial interest (shares)
Class A 28,543
Class B 428
Total 28,971 8,842 1,631
Net asset value
Redemption price per share $ 12.22 $ 10.19
Redemption price per share -- Class A $ 14.67
Offering price per share -- Class B<F1> $ 14.68
Maximum sales charge 5.75% 5.75% 5.75%
Maximum offering price per share (100%/(100%-maximum
sales charge) of net asset value adjusted to nearest cent) $ 12.97 $ 10.81
Maximum offering price per share (100%/(100%-maximum
sales Charge) of net asset value adjusted to nearest cent) -- Class A $ 15.56
<FN>
<F1>Redemption price per Class B Share varies based on length of time held.
</FN>
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
The Victory Portfolios Statements of Operations
(Amounts in Thousands)
<CAPTION>
Convertible Real Estate
Balanced Fund Securities Fund Investment Fund
Year Eleven Months Year Year
Ended Ended Ended Ended
October 31, October 31, November 30, October 31,
1998 1998 1997 1998
<S> <C> <C> <C> <C>
Investment Income:
Interest income $11,191 $ 3,110 $ 2,555 $ 110
Dividend income 3,915 3,034 2,237 617
Foreign tax withholding (35) -- -- --
Total Income 15,071 6,144 4,792 727
Expenses:
Investment advisory fees 3,964 794 596 126
Administration fees 566 174 169 19
Shareholder service fees -- 135 58 22
Shareholder service fees -- Class A 969 -- -- --
Shareholder service fees and
12b-1 fees -- Class B 45 -- -- --
Accounting fees 134 39 10 35
Custodian fees 149 30 23 10
Legal and audit fees 56 1 130 6
Amortization of organization fees -- -- -- 4
Trustees' fees and expenses 11 4 10 --
Transfer agent fees 62 35 31 13
Registration and filing fees 21 26 15 7
Printing fees 7 22 10 1
Other 30 9 13 2
Total Expenses 6,014 1,269 1,065 245
Expenses voluntarily reduced (944) -- -- (120)
Expenses before reimbursement
from distributor 5,070 1,269 1,065 125
Expenses reimbursed by distributor -- -- -- (21)
Net Expenses 5,070 1,269 1,065 104
Net Investment Income 10,001 4,875 3,727 623
Realized/Unrealized Gains (Losses) from
Investments and Foreign Currencies:
Net realized gains (losses) from
investment transactions 27,200 111 8,742 (570)
Net realized gains (losses) from foreign
currency transactions (430) -- -- --
Change in unrealized appreciation/depreciation
from investments 13,754 (9,683) (1,161) (2,456)
Change in unrealized appreciation/depreciation
from translation of assets and liabilities in
foreign currencies 644 -- -- --
Net realized/unrealized gains (losses) from
investments and foreign currencies 41,168 (9,572) 7,581 (3,026)
Change in net assets resulting from operations $51,169 $(4,697) $11,308 $(2,403)
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
The Victory Portfolios Statements of Changes in Net Assets
(Amounts in Thousands)
<CAPTION>
Convertible Real Estate
Balanced Fund Securities Fund Investment Fund
Year Year Eleven Year Year Year Period
Ended Ended Months Ended Ended Ended Ended Ended
October 31, October 31, October 31, November 30, November 30, October 31, October 31,
1998 1997 1998<F1> 1997 1996 1998 1997<F2>
<S> <C> <C> <C> <C> <C> <C> <C>
From Investment Activities:
Operations:
Net investment income $ 10,001 $ 8,483 $ 4,875 $ 3,727 $ 3,897 $ 623 $ 79
Net realized gains
(losses) from
investment transactions 27,200 19,086 111 8,742 3,738 (570) 20
Net realized gains (losses)
from foreign currency
transactions (430) (129) -- -- -- -- --
Net change in unrealized
appreciation/depreciation
from investments 13,754 26,776 (9,683) (1,161) 6,370 (2,456) 494
Net change in unrealized
appreciation/depreciation
from translation of assets
and liabilities in foreign
currencies 644 (3) -- -- -- -- --
Change in net assets resulting
from operations 51,169 54,213 (4,697) 11,308 14,005 (2,403) 593
Distributions to Shareholders:
From net investment income -- -- (4,602) (3,806) (3,695) (496) (59)
Class A (10,007) (8,296) -- -- -- -- --
Class B (62) (30) -- -- -- -- --
In excess of net investment
income (2) -- -- -- -- -- --
From net realized gains
from investment
transactions and foreign
currencies (18,646) (8,510) (8,444) (3,737) (1,805) -- --
In excess of net realized
gains from investment
transactions -- -- -- -- -- (20) --
Change in net assets from
distributions to shareholders (28,717) (16,836) (13,046) (7,543) (5,500) (516) (59)
Capital Transactions:
Proceeds from shares issued 95,975 77,476 62,226 46,957 15,873 17,894 3,842
Dividends reinvested 25,917 14,909 9,691 6,277 4,688 132 --
Cost of shares redeemed (65,485) (58,523) (51,087) (33,495) (15,800) (2,859) --
Change in net assets from
capital transactions 56,407 33,862 20,830 19,739 4,761 15,167 3,842
Change in net assets 78,859 71,239 3,087 23,504 13,266 12,248 4,376
Net Assets:
Beginning of period 346,224 274,985 104,982 81,478 68,212 4,376 --
End of period $425,083 $346,224 $108,069 $104,982 $ 81,478 $16,624 $4,376
Share Transactions:
Issued 6,733 5,958 4,619 3,386 1,271 1,505 363
Reinvested 1,898 1,173 742 478 385 12 --
Redeemed (4,629) (4,462) (3,844) (2,551) (1,253) (249) --
Change in shares 4,002 2,669 1,517 1,313 403 1,268 363
<FN>
<F1> Effective March 23, 1998, the SBSF Convertible Securities Fund became
the Victory Convertible Securities Fund. Changes in net assets prior to March
23, 1998 represent the SBSF Convertible Securities Fund.
<F2> The Real Estate Investment Fund commenced operations on April 30, 1997.
</FN>
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
The Victory Portfolios Financial Highlights
<CAPTION>
Balanced Fund
Class A Shares Class B Shares
March 1,
Year Year Year Year Year 1996 Year December 30,
Ended Ended Ended Ended Ended through Ended 1993
October October October October October October October to October
31, 31, 31, 31, 31, 31, 31, 31,
1998 1997 1996<F5> 1998 1997 1996<F5> 1995 1994<F2>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period $ 13.87 $ 12.33 $ 11.01 $13.88 $12.34 $11.51 $ 9.62 $ 10.00
Investment Activities
Net investment income 0.37 0.36 0.36 0.21 0.19 0.14 0.41 0.33
Net realized and
unrealized gains
(losses) from
investments and
foreign currencies 1.54 1.90 1.39 1.54 1.89 0.85 1.40 (0.39)
Total from Investment
Activities 1.91 2.26 1.75 1.75 2.08 0.99 1.81 (0.06)
Distributions
Net investment income (0.37) (0.35) (0.36) (0.21) (0.17) (0.14) (0.41) (0.32)
In excess of net
investment income -- -- -- -- -- (0.02) (0.01) 0.00
Net realized gains (0.74) (0.37) (0.07) (0.74) (0.37) -- -- 0.00
Total Distributions (1.11) (0.72) (0.43) (0.95) (0.54) (0.16) (0.42) (0.32)
Net Asset Value, End of Period $ 14.67 $ 13.87 $ 12.33 $14.68 $13.88 $12.34 $ 11.01 $ 9.62
Total Return (excludes sales
charges) 14.55% 19.02% 16.27% 13.27% 17.43% 15.73%<F6> 19.24% (0.57)%<F3>
Ratios/Supplemental Data:
Net Assets, End of Period (000) $418,807 $342,933 $273,553 $6,276 $3,291 $1,432 $201,073 $127,285
Ratio of expenses to
average net assets 1.27% 1.25% 1.27% 2.43% 2.56% 2.46%<F4> 0.98% 0.87%<F4>
Ratio of net investment income
to average net assets 2.54% 2.69% 3.14% 1.36% 1.36% 1.78%<F4> 4.05% 3.97%<F4>
Ratio of expenses to
average net assets<F1> 1.50% 1.36% 1.43% 2.67% 2.95% 2.67%<F4> 1.36% 1.49%<F4>
Ratio of net investment income
to average net assets<F1> 2.31% 2.58% 2.98% 1.12% 0.97% 1.57%<F4> 3.67% 3.35%<F4>
Portfolio turnover<F7> 231% 109% 80% 231% 109% 80% 69% 118%
<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> Period from commencement of operations.
<F3> Not annualized.
<F4> Annualized.
<F5> Effective March 1, 1996, the Fund designated the existing shares as
Class A Shares and commenced offering Class B Shares.
<F6> Represents total return for the Fund for the period November 1, 1995
through February 29, 1996 plus total return for Class B Shares for the period
March 1, 1996 through October 31, 1996. The total return for the Class B
Shares for the period from March 1, 1996 through October 31, 1996 was 8.72%.
<F7> Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
</FN>
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
The Victory Portfolios Financial Highlights
<CAPTION>
Convertible Securities Fund
Eleven Months
Ended Year Ended November 30,
October 31,
1998<F1> 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 14.33 $ 13.55 $ 12.16 $ 11.05 $ 12.48 $ 10.98
Investment Activities
Net investment income 0.58 0.62 0.65 0.60 0.61 0.57
Net realized and unrealized
gains (losses)from investments (1.08) 1.43 1.68 1.50 (1.12) 1.79
Total from Investment Activities (0.50) 2.05 2.33 2.10 (0.51) 2.36
Distributions
Net investment income (0.54) (0.65) (0.62) (0.61) (0.61) (0.57)
Net realized gains (1.07) (0.62) (0.32) (0.38) (0.31) (0.29)
Total Distributions (1.61) (1.27) (0.94) (0.99) (0.92) (0.86)
Net Asset Value, End of Period $ 12.22 $ 14.33 $ 13.55 $ 12.16 $ 11.05 $ 12.48
Total Return (excludes sales charges) (3.69)%<F2> 16.26% 20.28% 20.43% (4.36)% 22.42%
Ratios/Supplementary Data:
Net Assets at end of period (000) $108,069 $104,982 $ 81,478 $ 68,212 $ 58,845 $ 64,537
Ratio of expenses to
average net assets 1.20%<F3> 1.34% 1.31% 1.31% 1.30% 1.24%
Ratio of net investment income
to average net assets 4.60%<F3> 4.75% 5.17% 5.36% 5.20% 4.75%
Portfolio Turnover 77% 77% 40% 52% 49% 30%
<FN>
<F1> Effective March 23, 1998, the SBSF Convertible Securities Fund became the Victory Convertible Securities Fund.
Financial highlights prior to March 23, 1998 represent the SBSF Convertible Securities Fund.
<F2> Not annualized.
<F3> Annualized.
<F4> There were no waivers during the period.
</FN>
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
The Victory Portfolios Financial Highlights
<CAPTION>
Real Estate
Investment Fund
Period
Year Ended Ended
October 31, October 31,
1998 1997<F2>
<S> <C> <C>
Net Asset Value, Beginning of Period $ 12.07 $10.00
Investment Activities
Net investment income 0.50 0.23
Net realized and unrealized gains (losses)
from investments (1.90) 2.01
Total from Investment Activities (1.40) 2.24
Distributions
Net investment income (0.44) (0.17)
Net realized gains (0.04) --
Total Distributions (0.48) (0.17)
Net Asset Value, End of Period $ 10.19 $12.07
Total Return (excludes sales charges) (11.91)% 22.42%<F3>
Ratios/Supplemental Data:
Net Assets, End of Period (000) $16,624 $4,376
Ratio of expenses to
average net assets 0.83% 0.00%<F4>
Ratio of net investment income
to average net assets 4.95% 5.11%<F4>
Ratio of expenses to
average net assets<F1> 1.95% 2.93%<F4>
Ratio of net investment income
to average net assets<F1> 3.83% 2.18%<F4>
Portfolio turnover 53% 21%
<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> The Real Estate Investment Fund commenced operations on April 30, 1997.
<F3> Not annualized.
<F4> Annualized.
</FN>
</TABLE>
See notes to financial statements.
<PAGE>
THE VICTORY PORTFOLIOS Schedule of Investments
Value Fund October 31, 1998
(Amounts in Thousands, Except Shares)
Shares or
Principal Market
Security Description Amount Value
Commercial Paper (2.0%)
Associates Corp. N.A.,
5.70%, 11/2/98 $ 10,469 $ 10,469
Total Commercial Paper (Cost $10,469) 10,469
Common Stocks (97.5%)
Aerospace/Defense (1.4%):
AlliedSignal, Inc. 103,840 4,043
Boeing Co. 92,000 3,450
7,493
Aluminum (0.7%):
Aluminum Co. of America 43,500 3,447
Automobiles (1.7%):
Chrysler Corp. 103,200 4,966
General Motors Corp. 60,000 3,784
8,750
Banks (8.6%):
BankAmerica Corp. 190,675 10,951
First Union Corp. 157,200 9,117
Mellon Bank Corp. 45,600 2,742
Norwest Corp. (b) 170,800 6,352
U.S. Bancorp (c) 221,500 8,085
Wells Fargo & Co. 20,300 7,511
44,758
Beverages (1.7%):
Anheuser-Busch Co., Inc. 147,900 8,791
Chemicals -- General (1.4%):
Air Products & Chemicals, Inc. 134,000 5,058
RPM, Inc. 125,000 2,102
7,160
Computers & Peripherals (5.5%):
Cisco Systems, Inc. (b) 77,750 4,898
Hewlett-Packard Co. 70,000 4,213
International Business
Machines Corp. 129,600 19,238
28,349
Conglomerates (0.8%):
Textron, Inc. 57,400 4,269
Consumer Products (0.3%):
Colgate-Palmolive Co. 17,100 1,511
Containers (1.2%):
Newell Co. 91,200 4,013
Sonoco Products Co. 71,500 2,029
6,042
Cosmetics & Related (1.5%):
Avon Products, Inc. 195,900 7,775
Electrical Equipment (3.1%):
Emerson Electric Co. 92,400 6,098
General Electric Co. 112,700 9,862
15,960
Electronic & Electrical --
General (0.7%):
Millipore Corp. (c) 149,901 3,691
Entertainment (2.0%):
Hasbro, Inc. (c) 159,200 5,582
The Walt Disney Co. (c) 184,700 4,975
10,557
Environmental Control (0.9%):
Waste Management, Inc. (c) 106,450 4,804
Financial Services (4.1%):
Fannie Mae 190,100 13,461
Franklin Resources, Inc. 159,300 6,024
Household International, Inc. 53,500 1,956
21,441
Food Processing &
Packaging (2.5%):
ConAgra, Inc. 190,600 5,801
Sara Lee Corp. 115,800 6,912
12,713
Forest Products --
Lumber & Paper (0.7%):
Bowater, Inc. 36,000 1,469
Mead Corp. (c) 67,000 2,119
3,588
Health Care (1.1%):
Columbia/HCA Healthcare Corp. 278,800 5,855
Insurance -- Multi-Line (5.4%):
Allstate Corp. 312,900 13,474
Everest Reinsurance Holdings, Inc. 100,069 3,446
Lincoln National Corp. 81,300 6,169
Transamerica Corp. 45,298 4,711
27,800
<PAGE>
Insurance -- Property, Casualty,
Health (0.4%):
American General Corp. (c) 28,900 1,980
Medical Supplies (2.1%):
Biomet, Inc. 102,499 3,479
Medtronic, Inc. (b)(c) 109,900 7,143
10,622
Oil & Gas Exploration,
Production & Services (1.4%):
Anadarko Petroleum Corp. (c) 49,400 1,673
USX -- Marathon Group 171,700 5,613
7,286
Oil-Integrated Companies (7.4%):
Amerada Hess Corp. (c) 91,701 5,066
Chevron Corp. 131,950 10,754
Mobil Corp. 85,400 6,464
Texaco, Inc. 194,900 11,560
Unocal Corp. 129,000 4,378
38,222
Oilfield Services &
Equipment (0.7%):
Baker Hughes, Inc. 89,050 1,965
Schlumberger Ltd. 31,600 1,659
3,624
Pharmaceuticals (7.6%):
Abbott Laboratories 126,800 5,952
American Home Products Corp. 146,000 7,118
Bristol-Myers Squibb Co. 56,600 6,258
Merck & Co., Inc. 18,100 2,448
Pfizer, Inc. 154,200 16,547
Schering-Plough Corp. 10,200 1,049
39,372
Radio & Television (2.3%):
Cox Communications, Inc.,
Class A (b)(c) 51,500 2,826
Viacom, Inc., Class B (b)(c) 147,400 8,826
11,652
Railroads (1.4%):
Union Pacific Corp. (c) 146,900 6,996
Restaurants (0.9%):
McDonald's Corp. 66,050 4,417
Retail (1.8%):
Dayton Hudson Corp. 220,000 9,323
Retail -- Department Stores (1.0%):
May Department Stores Co. 84,200 5,136
Retail -- Drug Stores (1.0%):
Walgreen Co. 110,000 5,356
Retail -- Specialty Stores (1.5%):
AutoZone, Inc. (b)(c) 122,200 3,215
Lowe's Cos., Inc. 132,200 4,454
7,669
Semiconductors (2.9%):
Intel Corp. 104,900 9,355
LSI Logic Corp. (b) 128,600 1,945
Motorola, Inc. 73,800 3,838
15,138
Software & Computer
Services (3.9%):
Automatic Data Processing, Inc. 22,000 1,712
Microsoft Corp. (b) 97,900 10,365
Oracle Corp. (b) 274,800 8,124
20,201
Steel (0.3%):
USX -- U.S. Steel Group, Inc. 73,500 1,709
Telecommunications --
Equipment (0.9%):
Lucent Technologies, Inc. (c) 56,300 4,515
Tobacco & Tobacco
Products (1.5%):
Philip Morris Cos., Inc. 148,850 7,610
Utilities -- Electric (3.7%):
CINergy Corp. 42,000 1,449
Duke Energy Corp. 84,500 5,466
FirstEnergy Corp. 53,000 1,590
PacifiCorp 260,200 4,960
Texas Utilities Co. 124,600 5,451
18,916
Utilities -- Gas (1.0%):
Enron Corp. 100,800 5,317
<PAGE>
Utilities -- Telecommunications
(8.5%):
ALLTEL Corp. 112,800 5,280
Ameritech Corp. 223,950 12,079
Bell Atlantic Corp. (c) 107,800 5,727
GTE Corp. 95,100 5,581
MCI Worldcom, Inc. (b) 286,092 15,806
44,473
Total Common Stocks (Cost $350,357) 504,288
Securities Purchased With Cash Collateral (9.5%)
Short Term Securities (2.8%):
General American Funding
Agreement, 5.89%, 11/6/98 10,000 10,000
AIM Short Term Prime Obligations
Money Market Fund 410 410
AIM Liquid Assets
Money Market Fund 3,920 3,920
14,330
Repurchase Agreements (6.7%):
Lehman Brothers, Inc.,
5.41%, 11/2/98
(See Significant Accounting
Policies, Securities Lending
in the Notes to Financial
Statements for collateral
description) 10,000 10,000
Goldman, Sachs Group L.P.,
5.32%, 11/2/98
(Collateralized by $6,891
Countrywide, 6.57%, 3/16/05,
GMAC, 7.05%, 4/23/02,
market value $7,230) 5,000 5,000
Prudential Bache Corp.,
5.27%, 11/2/98
(Collateralized by $10,300
Heller Financial, 2.78%, 7/15/24,
market value $10,300) 10,000 10,000
Morgan Stanley Dean Witter,
5.31%, 11/2/98
(Collateralized by $10,495
Harcourt General, Inc.,
7.30%, 8/1/2097, Duty Free
International, 7.00%, 1/15/04,
market value $11,037) 10,000 10,000
35,000
Total Securities Purchased With
Cash Collateral (Cost $49,330) 49,330
Total Investments (Cost $410,156) (a) -- 109.0% 564,087
Other assets in excess of liabilities -- (9.0%) (46,774)
TOTAL NET ASSETS -- 100.0% $517,313
(a) Represents cost for financial reporting purposes and differs from cost
basis for federal income tax purposes by the amount of losses recognized
for financial reporting purposes in excess of federal income tax reporting
of approximately $27. Cost for federal income tax purposes differs from
value by net unrealized appreciation of securities as follows
(amounts in thousands):
Unrealized appreciation $174,464
Unrealized depreciation (20,560)
Net unrealized appreciation $153,904
(b) Non-income producing securities.
(c) All or a portion of this security was loaned as of October 31, 1998.
See notes to financial statements.
<PAGE>
THE VICTORY PORTFOLIOS Schedule of Investments
Lakefront Fund October 31, 1998
(Amounts in Thousands, Except Shares)
Market
Security Description Shares Value
Common Stocks (96.4%)
Aerospace/Defense (3.3%):
Boeing Co. 346 $ 13
United Technologies Corp. 255 24
37
Airlines (0.9%):
Delta Air Lines, Inc. 95 10
Apparel -- Footwear (0.7%):
Reebok International Ltd. (b) 474 8
Automobiles (2.2%):
Ford Motor Co. 258 14
General Motors Corp. 175 11
25
Banks (8.0%):
Bankers Trust New York Corp. 205 13
Chase Manhattan Corp. 610 34
Golden State Bancorp, Inc. (b) 860 17
Mellon Bank Corp. 160 10
National City Corp. 250 16
90
Brokerage Services (1.6%):
Paine Webber Group, Inc. 547 18
Building Materials (0.8%):
Armstrong World Industries, Inc. 145 9
Computers & Peripherals (10.8%):
Diebold, Inc. 695 22
Hewlett-Packard Co. 408 25
International Business
Machines Corp. 273 40
Sun Microsystems, Inc. (b) 450 26
Western Digital Corp. (b) 900 9
122
Cosmetics & Related (4.8%):
Avon Products, Inc. 720 28
Colgate-Palmolive Co. 291 26
54
Electronic & Electrical --
General (1.6%):
AMP, Inc. 145 6
Johnson Controls, Inc. 212 12
18
Entertainment (1.6%):
Walt Disney Co. 660 18
Financial Services (5.9%):
American Express Co. 286 25
Associates First Capital Corp. 148 10
Citigroup, Inc. 640 31
66
Health Care (2.6%):
C.R. Bard, Inc. 441 19
Tenet Healthcare Corp. (b) 350 10
29
Heavy Machinery (3.3%):
Caterpillar Tractor, Inc. 356 16
Cummins Engine Co., Inc. 205 7
Deere & Co. 407 14
37
Insurance -- Multi-Line (1.1%):
CIGNA Corp. 160 12
Medical -- Biotechnology (1.5%):
Amgen, Inc. (b) 215 17
Metals (2.0%):
Reynolds Metal Co. 365 22
Oil & Gas Exploration,
Production & Services (3.7%):
Mobil Corp. 283 21
Texaco, Inc. 353 21
42
Oilfield Services & Equipment (1.2%):
Schlumberger, Ltd. 255 13
Packaging (1.4%):
Crown Cork & Seal Co., Inc. 490 16
Pharmaceuticals (14.1%):
American Home Products Corp. 350 17
Bristol-Myers Squibb Co. 292 32
Merck & Co., Inc. 165 22
Pharmacia & Upjohn Co. 605 32
Schering-Plough Corp. 531 56
159
Retail (3.0%):
K-Mart Corp. (b) 2,410 34
Rubber & Rubber Products (0.9%):
M.A. Hanna Co. 683 10
<PAGE>
Semiconductors (8.5%):
Intel Corp. 487 44
Rockwell International Corp. 370 15
Texas Instruments, Inc. 570 36
95
Software & Computer Services (1.1%):
Computer Associates International, Inc. 317 12
Utilities -- Electric (3.9%):
American Electric Power Co. 250 12
Duke Energy Corp. 300 20
Wisconsin Energy Corp 395 12
44
Utilities -- Natural Gas (4.0%):
Columbia Energy Group 352 20
Williams Cos., Inc. 910 25
45
Utilities -- Telecommunications
(1.9%):
Cincinnati Bell, Inc. 335 9
GTE Corp. 210 12
21
Total Common Stocks (Cost $1,012) 1,083
Investment Companies (3.4%)
AIM Treasury Money Market Fund 37,505 38
Total Investment Companies (Cost $38) 38
Total Investments (Cost $1,050) (a) -- 99.8% 1,121
Other assets in excess of liabilities -- 0.2% 2
TOTAL NET ASSETS -- 100.0% $1,123
(a) Cost for federal income tax purposes differs from value by net unrealized
appreciation of securities as follows
(amounts in thousands):
Unrealized appreciation $ 173
Unrealized depreciation (102)
Net unrealized appreciation $ 71
(b) Non-income producing securities.
See notes to financial statements.
<PAGE>
THE VICTORY PORTFOLIOS Schedule of Investments
Diversified Stock Fund October 31, 1998
(Amounts in Thousands, Except Shares)
Shares or
Principal Market
Security Description Amount Value
Commercial Paper (5.0%)
Associates Corp., N.A.,
5.70%, 11/2/98 $ 49,295 $ 49,295
Total Commercial Paper (Cost $49,295) 49,295
Common Stocks (95.5%)
Adhesives (1.0%):
Avery Dennison Corp. 230,000 9,531
Aerospace/Defense (2.6%):
AlliedSignal, Inc. (c) 372,200 14,493
Boeing Co. 300,000 11,250
25,743
Aluminum (1.7%):
Aluminum Co. of America (c) 212,000 16,801
Banks (7.6%):
BankAmerica Corp. 225,000 12,923
First Union Corp. 190,000 11,020
Mellon Bank Corp. 219,000 13,167
Norwest Corp. (b)(c) 415,200 15,440
PNC Bank Corp. 445,000 22,250
74,800
Beverages (3.1%):
Anheuser-Busch Co., Inc. 225,000 13,373
Coca-Cola Co. 150,000 10,144
PepsiCo, Inc. 200,000 6,750
30,267
Chemicals -- General (1.3%):
Nalco Chemical Co. 208,600 6,454
RPM, Inc. 402,187 6,761
13,215
Computers & Peripherals (7.5%):
Compaq Computer Corp. (c) 550,000 17,393
Electronic Data Systems Corp. 420,000 17,088
Gateway 2000, Inc. (b)(c) 225,000 12,558
Hewlett-Packard Co. 155,000 9,329
International Business
Machines Corp. 30,200 4,483
Seagate Technology, Inc. (b) 500,000 13,188
74,039
Conglomerates (2.6%):
Canadian Pacific, Ltd. 513,600 11,621
Corning, Inc. (c) 159,261 5,783
Textron, Inc. 105,000 7,809
25,213
Consumer Products (1.0%):
Newell Co. 225,000 9,900
Containers -- Metal, Glass,
Paper, Plastic (0.5%):
Sonoco Products Co. 173,800 4,932
Cosmetics & Related (1.4%):
Avon Products, Inc. 340,000 13,494
Electronic & Electrical --
General (3.4%):
AMP, Inc. 187,010 7,679
General Electric Co. 50,000 4,375
Motorola, Inc. 150,000 7,800
Thomas & Betts Corp. 170,000 7,597
Vishay Intertechnology, Inc. (b) 374,015 5,657
33,108
Financial Services (1.0%):
Citigroup, Inc. 210,000 9,883
Food Processing &
Packaging (3.1%):
Kellogg Co. 200,000 6,600
Quaker Oats Co. 225,000 13,289
Ralston Purina Group (c) 317,580 10,599
30,488
Forest Products --
Lumber & Paper (2.3%):
Bowater, Inc. (c) 383,400 15,647
International Paper Co. 158,400 7,356
23,003
Health Care (1.8%):
Columbia HCA Healthcare Corp. (c) 700,000 14,700
Tenet Healthcare Corp. (b) 125,000 3,492
18,192
Hotels & Motels (0.6%):
Mirage Resorts, Inc. (b) 340,000 5,759
<PAGE>
Insurance -- Multi-Line (4.4%):
American International
Group, Inc. (c) 282,037 24,044
General Reinsurance Corp. 30,500 6,700
Lincoln National Corp. 116,500 8,839
Partner Reinsurance Ltd. 100,500 3,995
43,578
Insurance -- Property, Casualty,
Health (0.8%):
Everest Reinsurance Holdings, Inc. 228,500 7,869
Investment Company (0.7%):
Tele-communications TCI Ventures
Group, Class A (b)(c) 374,710 6,979
Machine Tools (1.1%):
Kennametal, Inc. 512,000 10,624
Machinery -- Diversfied (1.3%):
Thermo Electron (b) 643,300 12,826
Media (1.5%):
News Corp. ADR 536,900 14,664
Medical Supplies (1.0%):
Biomet, Inc. 294,967 10,010
Medical -- Biotechnology (0.5%):
Amgen, Inc. (b) 65,000 5,107
Metals (1.0%):
Reynolds Metal Co. 158,600 9,506
Oil & Gas Exploration,
Production & Services (5.5%):
Anadarko Petroleum Corp. 80,000 2,710
Conoco, Inc., Class A (b) 427,100 10,624
Enron Corp. 460,700 24,302
Noble Affiliates, Inc. 69,200 2,266
Texaco, Inc. 131,000 7,770
USX -- Marathon Group 200,000 6,538
54,210
Oil-Integrated Companies (3.0%):
Atlantic Richfield Co. 135,800 9,353
Phillips Petroleum Co. (c) 100,000 4,325
Unocal Corp. 480,000 16,290
29,968
Oilfield Services & Equipment (3.2%):
Baker Hughes, Inc. 560,000 12,355
Halliburton Co. 200,600 7,209
Schlumberger, Ltd. 220,000 11,550
31,114
Packaging (1.3%):
Crown Cork & Seal Co., Inc. (c) 400,000 12,750
Pharmaceuticals (6.9%):
American Home Products Corp. 651,000 31,736
Merck & Co., Inc. 40,000 5,410
Pfizer, Inc. 180,000 19,316
SmithKline Beecham PLC ADR 180,000 11,475
67,937
Radio & Television (3.1%):
Chancellor Media Corp. (b) 185,000 7,099
Tele-Communications, Inc.,
Class A (b) 545,645 22,986
30,085
Railroads (0.5%):
Union Pacific Corp. 96,778 4,609
Real Estate Investment
Trusts (0.5%):
Office (0.3%):
Cousins Properties, Inc. 100,000 2,863
Warehouse (0.2%):
ProLogis Trust 108,333 2,363
5,226
Retail (1.9%):
AutoZone, Inc. (b)(c) 415,000 10,920
OfficeMax, Inc. (b) 847,000 7,729
18,649
Semiconductors (3.0%):
Applied Materials, Inc. (b) 200,600 6,958
Intel Corp. 50,000 4,459
Texas Instruments, Inc. 290,000 18,543
29,960
Software & Computer
Services (4.1%):
Computer Associates
International, Inc. 250,000 9,844
First Data Corp. 400,000 10,600
Networks Associates, Inc. (b)(c) 220,000 9,350
Oracle Systems Corp. (b) 360,000 10,642
40,436
Tobacco & Tobacco
Products (3.5%):
Philip Morris Cos., Inc. 510,000 26,074
UST, Inc. 232,000 7,888
33,962
<PAGE>
Utilities -- Electric (2.1%):
CINergy Corp. 346,700 11,962
Southern Co. 304,300 8,577
20,539
Utilities -- Telecommunications
(2.1%):
Ameritech Corp. 57,200 3,085
GTE Corp. 178,500 10,476
MCI Worldcom Inc. (b) 127,804 7,061
20,622
Total Common Stocks (Cost $813,196) 939,598
Securities Purchased With Cash Collateral (17.6%)
Short Term Securities (4.9%):
General American Funding
Agreement, 5.89%, 11/6/98 35,000 35,000
AIM Short Term Prime Obligations
Money Market Fund 1,284 1,284
AIM Liquid Assets
Money Market Fund 12,271 12,271
48,555
Repurchase Agreements (12.7%):
Lehman Brothers, Inc.,
5.41%, 11/2/98
(See Significant Accounting
Policies, Securities Lending
in the Notes to Financial
Statements for collateral
description) 20,000 20,000
Goldman Sachs Group L.P.,
5.32%, 11/2/98
(See Significant Accounting
Policies, Securities Lending
in the Notes to Financial
Statements for collateral
description) 20,000 20,000
Prudential Bache Corp.,
5.27%, 11/2/98
(See Significant Accounting
Policies, Securities Lending
in the Notes to Financial
Statements for collateral
description) 40,000 40,000
Salomon Corp.,
5.30%, 11/2/98
(Collateralized by $21,850
GMAC, 5.38%, 11/2/98,
Household Finance,
5.79%, 11/4/98,
market value $21,800) 20,000 20,000
Morgan Stanley Dean Witter,
5.31%, 11/2/98
(See Significant Accounting
Policies, Securities Lending
in the Notes to Financial
Statements for collateral
description) 25,000 25,000
125,000
Total Securities Purchased With
Cash Collateral (Cost $173,555) 173,555
Total Investments
(Cost $1,036,046) (a) -- 118.1% 1,162,448
Liabilities in excess of other assets -- (18.1)% (178,328)
TOTAL NET ASSETS -- 100.0% $ 984,120
(a) Represents cost for financial reporting purposes and differs from cost
basis for federal income tax purposes by the amount of losses recognized
for financial reporting purposes in excess of federal income tax reporting
of approximately $327. Cost for federal income tax purposes differs from
value by net unrealized appreciation of securities as follows
(amounts in thousands):
Unrealized appreciation $ 163,336
Unrealized depreciation (37,261)
Net unrealized appreciation $ 126,075
(b) Non-income producing securities.
(c) All or a portion of this security was loaned as of October 31, 1998.
ADR -- American Depository Receipts
See notes to financial statements.
<PAGE>
THE VICTORY PORTFOLIOS Schedule of Investments
Stock Index Fund October 31, 1998
(Amounts in Thousands, Except Shares)
Shares or
Principal Market
Security Description Amount Value
Commercial Paper (23.5%)
Financial Services (16.3%):
Associates Corp. N.A.,
5.70%, 11/2/98 $102,156 $102,156
Machine -- Diversfied (2.4%):
Deere & Co.,
5.09%, 11/10/98 15,000 15,000
Retail (4.8%):
Redwood Receivables,
5.38%, 11/2/98 15,000 14,998
Sears Roebuck Acceptance Corp.,
5.15%, 11/3/98 15,000 15,000
29,998
Total Commercial Paper (Cost $147,154) 147,154
Common Stocks (74.8%)
Advertising (0.1%):
Interpublic Group of Cos., Inc. 7,186 420
Omnicom 8,997 445
865
Aerospace/Defense (1.2%):
AlliedSignal, Inc. 29,799 1,160
B.F. Goodrich Co. 3,931 142
Boeing Co. 53,571 2,010
General Dynamics Corp. 6,704 397
Lockheed Martin Corp. 10,410 1,159
Northrop Grumman Corp. 3,666 292
Raytheon Co -- Class A 1 0
Raytheon Co -- Class B 18,005 1,045
United Technologies Corp. 12,138 1,156
7,361
Agriculture (0.1%):
Pioneer Hi-Bred International, Inc. 12,800 358
Airlines (0.3%):
AMR Corp. Delaware (b) 9,676 649
Delta Air Lines, Inc. 3,991 421
Southwest Airlines Co. 17,812 377
U.S. Airways Group, Inc. (b) 4,995 283
1,730
Aluminum (0.2%):
Alcan Aluminum Ltd. 12,077 306
Aluminum Co. of America 9,914 785
Reynolds Metal Co. 3,803 228
1,319
Apparel (0.0%):
Reebok Internnational Ltd. (b) 3,015 50
Russell Corp. 1,878 46
96
Apparel -- Footwear (0.2%):
Fruit of the Loom, Inc., Class A (b) 3,778 58
Liz Claiborne, Inc. 3,471 102
Nike, Inc., Class B 15,242 665
VF Corp. 6,424 269
1,094
Automobiles (1.2%):
Chrysler Corp. 34,336 1,652
Ford Motor Co. 64,272 3,488
General Motors Corp. 34,731 2,190
Navistar International Corp. (b) 3,596 75
PACCAR, Inc. 4,160 181
7,586
Automotive Parts (0.2%):
Cummins Engine Co., Inc. 2,089 71
Dana Corp. 8,715 364
Genuine Parts Co. 9,445 298
ITT Industries, Inc. 6,299 225
TRW, Inc. 6,502 371
1,329
Banks (4.9%):
Bank of New York Co. 39,606 1,250
Bank One Corp. 62,051 3,033
BankAmerica Corp. 92,207 5,295
Bankers Trust New York Corp. 5,107 321
BB & T Corp. 15,216 543
Chase Manhattan Corp. 45,394 2,579
Comerica, Inc. 8,285 534
First Union Corp. 51,358 2,979
Huntington Bancshares, Inc. 11,251 323
J.P. Morgan & Co., Inc. 9,369 883
KeyCorp 23,312 707
MBNA Corp. 39,901 910
Mellon Bank Corp. 13,784 829
Mercantile Bancorporation, Inc. 8,106 370
National City Corp. 17,533 1,128
Norwest Corp. (b) 40,626 1,511
PNC Bank Corp. 16,032 802
Regions Financial Corp. 11,330 419
Republic New York Corp. 5,740 240
<PAGE>
SunTrust Banks, Inc. 11,057 771
Synovus Financial Corp. 13,983 324
U.S. Bancorp 39,355 1,436
Union Planters Corp. 6,670 310
Wachovia Corp. 10,936 994
Wells Fargo & Co. 4,486 1,660
30,151
Banks -- Money Centers
Regional (0.5%):
BankBoston Corp. 15,596 574
Fleet Financial Group, Inc. 30,096 1,202
Northern Trust Corp. 5,949 439
State Street Corp. 8,530 532
Summit Bancorp 9,202 349
3,096
Banks -- Outside Money
Center (0.2%):
Fifth Third Bancorp 14,259 945
Providian Financial Corp. 5,063 402
1,347
Beverages (2.3%):
Anheuser-Busch Co., Inc. 25,571 1,520
Brown-Forman Corp., Class B 3,609 245
Coca Cola Enterprises, Inc. 20,150 727
Coca-Cola Co. 130,815 8,846
Coors (Adolph) Co. 1,917 96
PepsiCo, Inc. 78,159 2,638
Seagram Co. Ltd. 18,341 603
14,675
Broadcasting/Cable (0.2%):
Tele-Communications, Inc.,
Class A (b) 27,744 1,169
Brokerage Services (0.6%):
Merrill Lynch & Co., Inc. 18,505 1,096
Morgan Stanley, Dean Witter & Co. 31,063 2,012
Schwab (Charles) Corp. 14,128 677
3,785
Building Materials (0.2%):
Armstrong World Industries, Inc. 2,146 133
Centex Corp. 3,136 105
Fleetwood Enterprises, Inc. 1,867 60
Kaufman & Broad Home Corp. 2,127 61
Masco Corp. 18,008 507
Owens Corning 2,831 103
Pulte Corp. 2,326 60
1,029
Chemicals -- General (1.4%):
Air Products & Chemicals, Inc. 12,294 464
Dow Chemical Co. 11,933 1,117
E.I. Du Pont de Nemours Co. 60,037 3,452
Eastman Chemical Co. 4,196 247
Englehard Corp. 7,714 162
FMC Corp. (b) 1,824 93
Great Lakes Chemical Corp. 3,138 131
Hercules, Inc. 5,028 167
Mallinckrodt, Inc. 3,882 111
Monsanto Co. 31,898 1,296
Nalco Chemical Co. 3,473 107
PPG Industries, Inc. 9,392 537
Praxair, Inc. 8,367 337
Rohm & Haas Co. 9,447 319
Sigma-Aldrich Corp. 5,361 166
Union Carbide Corp. 7,154 275
W.R. Grace & Co. (b) 4,045 70
9,051
Chemicals -- Specialty (0.0%):
Morton International, Inc. 6,909 172
Commercial Services (0.2%):
Cendant Corp. (b) 45,501 521
Ecolab, Inc. 6,894 206
Paychex Inc. 8,450 420
1,147
Computers & Peripherals (4.6%):
3Com Corp. (b) 19,027 686
Apple Computer, Inc. (b) 7,148 265
Cabletron Systems, Inc. (b) 8,748 100
Cisco Systems, Inc. (b) 82,438 5,194
Compaq Computer Corp. 88,646 2,803
Computer Sciences Corp. 8,332 440
Data General Corp. (b) 2,588 44
Dell Computer, Inc. (b) 67,176 4,408
EMC Corp. (b) 26,542 1,709
Gateway 2000, Inc. (b) 8,294 463
Hewlett-Packard Co. 55,166 3,320
<PAGE>
International Business
Machines Corp. 49,459 7,342
Seagate Technology, Inc. (b) 12,875 340
Silicon Graphics, Inc. (b) 9,982 112
Sun Microsystems, Inc. (b) 20,073 1,169
Unisys Corp. (b) 13,526 360
28,755
Conglomerates (0.5%):
Corning, Inc. 12,312 447
Crane Co. 3,603 104
Minnesota Mining & Manufacturing Co. 21,399 1,712
National Service Industries, Inc. 2,196 79
Tenneco, Inc. 9,035 274
Textron, Inc. 8,704 647
3,263
Construction (0.0%):
Fluor Corp. 4,141 161
Foster Wheeler Corp. 2,138 34
195
Consumer Products (1.4%):
American Greetings Corp., Class A 3,793 152
Clorox Co. 5,555 607
Colgate-Palmolive Co. 15,686 1,386
Fortune Brands, Inc. 9,204 304
Jostens, Inc. 1,933 44
Procter & Gamble Co. 71,158 6,325
Rubbermaid, Inc. 7,964 264
9,082
Containers (0.2%):
Ball Corp. 1,585 67
Bemis, Inc. 2,811 104
Crown Cork & Seal, Inc. 6,615 211
Newell Co. 8,637 380
Owens-Illinois, Inc. (b) 8,265 253
Sealed Air Corp. (b) 4,389 156
Stone Container Corp. (b) 5,564 53
Tupperware Corp. 3,026 47
1,271
Cosmetics & Related (0.6%):
Alberto Culver Co. 2,905 77
Avon Products, Inc. 13,934 553
Gillette Co. 59,532 2,676
International Flavor & Fragance, Inc. 5,726 214
3,520
Diversified (0.3%):
Tyco International Ltd. 34,218 2,119
Electrical Equipment (2.7%):
Emerson Electric Co. 23,401 1,544
General Electric Co. 172,601 15,103
Johnson Controls, Inc. 4,531 255
Thomas & Betts Corp. 3,030 135
17,037
Electronic & Electrical --
General (0.6%):
Advanced Micro Devices, Inc. (b) 7,603 172
AMP, Inc. 11,617 477
Andrew Corp. (b) 4,537 74
EG&G, Inc. 2,458 62
Harris Corp. 4,278 150
Honeywell, Inc. 6,662 532
KLA-Tencor Corp. (b) 4,629 171
Millipore Corp. 2,323 57
National Semiconductor Corp. (b) 8,685 110
Parker-Hannifin Corp. 5,876 210
Rockwell International Corp. 10,145 417
Tandy Corp. 5,351 265
Tektronix, Inc. 2,630 47
Texas Instruments, Inc. 20,648 1,320
4,064
Entertainment (0.6%):
Brunswick Corp. 5,304 103
Harrah's Entertainment, Inc. (b) 5,406 76
Hasbro, Inc. 6,931 243
King World Productions, Inc. (b) 3,897 102
Loews Corp. 6,082 571
The Walt Disney Co. 108,710 2,929
4,024
Environmental Control (0.2%):
Waste Management, Inc. 30,350 1,370
Financial & Insurance (0.1%):
MBIA, Inc. 5,286 323
Financial Services (3.2%):
American Express Co. 24,201 2,138
Associates First Capital Corp. 18,386 1,296
Bear Stearns Cos., Inc. 6,070 217
Capital One Financial Corp. 3,485 355
Citigroup, Inc. 121,382 5,712
Countrywide Credit Industries, Inc. 5,893 255
<PAGE>
Equifax, Inc. 7,824 303
Freddie Mac 36,011 2,071
Fannie Mae 54,966 3,891
First Data Corp. 23,710 628
Franklin Resources, Inc. 13,448 509
Golden West Financial
Corp., Delaware 3,046 276
Household International, Inc. 26,167 957
Lehman Brothers Holding, Inc. 6,246 237
SLM Holding Corp. 8,875 356
Washington Mutual, Inc. 31,443 1,177
20,378
Food Distributors (0.5%):
Albertsons, Inc. 13,050 725
American Stores Co. 14,609 476
Great Atlantic & Pacific Tea, Inc. 1,989 47
Kroger Co. (b) 13,585 754
SUPERVALU, Inc. 6,464 155
Sysco Corp. 17,944 483
Winn-Dixie Stores, Inc. 7,898 268
2,908
Food Processing & Packaging (1.5%):
Archer-Daniels-Midland Co. 31,802 531
Bestfoods 15,236 830
Campbell Soup Co. 23,848 1,272
ConAgra, Inc. 25,833 786
General Mills, Inc. 8,174 601
H.J. Heinz Co. 19,212 1,117
Hershey Foods Corp. 7,626 517
Kellogg Co. 21,639 714
Quaker Oats Co. 7,185 424
Ralston-Ralston Purina Group 16,568 553
Sara Lee Corp. 24,802 1,481
Wm. Wrigley Jr. Co. 6,158 498
9,324
Forest Products --
Lumber & Paper (0.7%):
Boise Cascade Corp. 2,974 83
Champion International Corp. 5,090 163
Fort James Corp. 11,727 473
Georgia Pacific Corp. 4,916 254
International Paper Co. 16,289 756
Kimberly-Clark Corp. 29,068 1,403
Louisiana Pacific Corp. 5,826 103
Mead Corp. 5,538 175
Potlatch Corp. 1,507 55
Temple-Inland, Inc. 2,956 144
Union Camp Corp. 3,633 156
Westvaco Corp. 5,369 132
Weyerhauser Co. 10,550 494
Willamette Industries, Inc. 5,936 184
4,575
Funeral Services (0.1%):
Service Corp. International 13,611 485
Health Care (0.2%):
Columbia/HCA Healthcare Corp. 34,205 718
HCR Manor Care, Inc. (b) 5,585 182
Humana, Inc. (b) 8,818 167
1,067
Heavy Machinery (0.3%):
Case Corp. 3,957 87
Caterpillar Tractor, Inc. 19,330 871
Deere & Co. 12,948 458
Harnischfeger Industries, Inc. 2,485 23
Ingersoll Rand Co. 8,761 442
McDermott International, Inc. 3,166 93
1,974
Hotels & Motels (0.1%):
Hilton Hotels Corp. 13,866 278
Marriott International, Class A 13,282 357
Mirage Resorts, Inc. (b) 9,569 162
797
Household Goods -- Appliances,
Furnishings & Electronics (0.5%):
Maytag Corp. 4,827 239
Unilever N.V. 33,981 2,557
Whirlpool Corp. 4,057 208
3,004
Industrial Goods & Services (0.1%):
Aeroquip-Vickers, Inc. 1,454 46
Dover Corp. 11,791 374
W.W. Grainger, Inc. 5,214 240
660
Insurance (0.1%):
Cincinnati Financial Corp. 8,872 331
Progressive Corp. 3,904 575
906
<PAGE>
Insurance -- Life (0.1%):
Jefferson Pilot Corp. 5,583 339
Insurance -- Multi-Line (2.2%):
Aetna, Inc. 7,653 571
Allstate Corp. 43,912 1,891
American International Group, Inc. 55,647 4,745
Aon Corp. 8,940 554
CIGNA Corp. 11,266 822
Conseco, Inc. 16,544 574
General Reinsurance Corp. 3,967 872
Hartford Financial
Services Group, Inc. 12,338 655
Lincoln National Corp. 5,370 407
Marsh & McLennan Cos., Inc. 13,537 751
MGIC Investment Corp. 6,029 235
Provident Cos., Inc. 7,170 208
Safeco Corp. 7,534 326
SunAmerica, Inc. 10,973 774
Torchmark Corp. 7,449 326
Transamerica Corp. 3,355 349
14,060
Insurance -- Property, Casualty,
Health (0.4%):
American General Corp. 13,399 918
Chubb Corp. 8,818 542
St. Paul Cos., Inc. 12,568 416
UNUM Corp. 7,314 325
2,201
Machine Tools (0.0%):
Milacron Inc. 2,090 41
SPX Corp. (b) 1 0
41
Manufacturing --
Capital Goods (0.2%):
Cooper Industries, Inc. 6,123 270
Illinois Tool Works, Inc. 13,275 851
1,121
Manufacturing --
Consumer Goods (0.1%):
Eaton Corp. 3,763 255
Mattel, Inc. 15,543 557
812
Manufacturing --
Miscellaneous (0.2%):
Briggs & Stratton Corp. 1,282 60
CBS Corp. 38,019 1,063
NACCO Industries, Inc. 415 38
Pall Corp. 6,530 165
Thermo Electron Corp. (b) 8,791 175
1,501
Media (0.2%):
Media One Group, Inc. (b) 32,278 1,366
Medical Services (0.2%):
HEALTHSOUTH Corp. (b) 22,381 271
Tenet Healthcare Corp. (b) 16,344 457
United Healthcare Corp. 10,315 449
1,177
Medical Supplies (0.8%):
Alza Corp., Class A (b) 4,611 221
Bausch & Lomb, Inc. 2,962 123
Baxter International, Inc. 15,157 908
Becton Dickinson & Co. 13,160 554
Biomet, Inc. 5,948 202
Boston Scientific Corp. (b) 10,426 568
C.R. Bard, Inc. 2,979 127
Guidant Corp. 7,958 609
Medtronic, Inc. 24,911 1,620
St. Jude Medical, Inc. (b) 4,431 125
5,057
Medical -- Information
Systems (0.1%):
IMS Health, Inc. 8,819 586
Medical -- Wholesale Drug
Distribution (0.1%):
Cardinal Health, Inc. 7,075 669
Metals -- Fabrication (0.0%):
Phelps Dodge Corp. 3,065 177
Timken Co. 3,318 59
236
Mining (0.0%):
Asarco, Inc. 2,119 45
Cyprus Amax Minerals Co. 4,939 61
Inco Ltd. 8,826 95
201
<PAGE>
Newspapers (0.4%):
Dow Jones & Co., Inc. 4,993 229
Gannett Co., Inc. 15,101 934
Knight-Ridder, Inc. 4,171 212
New York Times Co., Class A 10,074 285
Times Mirror Co., Class A 4,571 253
Tribune Co. 6,466 373
2,286
Office Equipment & Supplies
(Non-Computer Related) (0.5%):
Avery Dennison Corp. 6,240 259
Deluxe Corp. 4,246 137
IKON Office Solutions, Inc. 7,196 68
Moore Corp. Ltd. 4,718 53
Pitney Bowes, Inc. 14,541 801
Xerox Corp. 17,410 1,687
3,005
Oil & Gas Exploration,
Production & Services (0.6%):
Anadarko Petroleum Corp. 6,354 215
Apache Corp. 5,248 149
Ashland, Inc. 4,057 195
Burlington Resource, Inc. 9,410 388
Coastal Corp. 11,240 396
Columbia Gas System, Inc. 4,438 257
Helmerich & Payne, Inc. 2,625 63
Kerr-McGee Corp. 2,579 103
Occidental Petroleum Corp. 18,736 372
Oneok, Inc. 1,634 56
Oryx Energy Co. (b) 5,684 80
Pennzoil Co. 2,545 91
Rowan Cos., Inc. (b) 4,502 66
Sun Co., Inc. 4,910 168
Union Pacific Resources Group, Inc. 13,349 174
USX -- Marathon Group 15,389 503
Williams Cos., Inc. 22,566 618
3,894
Oil-Integrated Companies (4.4%):
Amerada Hess Corp. 4,834 267
Amoco Corp. 50,566 2,838
Atlantic Richfield Co. 17,040 1,174
Chevron Corp. 34,700 2,828
Exxon Corp. 129,359 9,217
Mobil Corp. 41,443 3,137
Phillips Petroleum Co. 13,753 595
Royal Dutch Petroleum Co., 113,693 5,599
Texaco, Inc. 28,393 1,684
Unocal Corp. 12,829 435
27,774
Oilfield Services &
Equipment (0.4%):
Baker Hughes, Inc. 16,863 372
Halliburton Co. 23,284 837
Schlumberger Ltd. 28,907 1,517
2,726
Paint, Varnishes, Enamels (0.0%):
Sherwin-Williams Co. 9,183 231
Pharmaceuticals (8.0%):
Abbott Laboratories 81,650 3,832
Allergan, Inc. 3,453 216
American Home Products Corp. 69,826 3,404
Amgen, Inc. (b) 13,422 1,054
Bristol-Myers Squibb Co. 52,738 5,831
Eli Lilly & Co. 58,416 4,728
Johnson & Johnson, Inc. 71,311 5,812
Merck & Co., Inc. 63,166 8,542
Pfizer, Inc. 69,334 7,440
Pharmacia & Upjohn, Inc. 26,912 1,425
Schering-Plough Corp. 38,956 4,008
Warner-Lambert Co. 43,550 3,413
49,705
Photography (0.2%):
Eastman Kodak Co. 17,144 1,329
Polaroid Corp. 2,343 62
1,391
Pollution Control Services
& Equipment (0.1%):
Browning-Ferris Industries, Inc. 9,183 325
Precision Instruments
& Related (0.0%):
Perkin-Elmer Corp. 2,643 223
<PAGE>
Primary Metal & Mineral
Production (0.2%):
Barrick Gold Corp. 19,779 422
Battle Mountain Gold Co. 12,147 66
Freeport-McMoRan
Copper & Gold, Inc., Class B 9,568 118
Homestake Mining Co. 11,191 133
Newmont Mining Corp. 8,890 189
Placer Dome, Inc. 13,260 209
1,137
Publishing (0.7%):
Dun & Bradstreet 9,049 257
McGraw-Hill Cos., Inc. 5,283 475
Meredith Corp. 2,843 105
R.R. Donnelley & Sons Co. 7,336 316
Time Warner, Inc. 31,767 2,949
4,102
Radio & Television (0.4%):
Clear Channel Communications, Inc. (b) 13,146 599
Comcast Corp., Class A Special Shares 19,587 967
Viacom, Inc., Class B (b) 18,939 1,134
2,700
Railroads (0.4%):
Burlington Northern Santa Fe 25,051 773
CSX Corp. 11,606 456
Norfolk Southern Corp. 20,147 664
Union Pacific Corp. 13,131 625
2,518
Restaurants (0.5%):
Darden Restaurants, Inc. 7,356 121
McDonald's Corp. 36,273 2,427
Tricon Global Restaurants (b) 8,052 350
Wendy's International, Inc. 6,724 141
3,039
Retail (1.9%):
Costco Cos., Inc. (b) 11,476 651
Dayton Hudson Corp. 23,294 987
Dollar General Corp. 9,806 234
Fred Meyer, Inc. (b) 8,180 436
K-Mart Corp. (b) 26,111 369
Kohl Corp. (b) 8,380 401
Staples Inc. (b) 14,420 470
Venator Group, Inc. (b) 7,214 61
Wal-Mart Stores, Inc. 118,604 8,184
11,793
Retail -- Department Stores (0.5%):
Consolidated Stores Corp. (b) 5,757 95
Dillard's, Inc., Class A 5,873 182
Federated Department Stores, Inc. (b) 11,163 429
Harcourt General, Inc. 3,719 181
J.C. Penney Co., Inc. 13,448 639
May Department Stores Co. 12,219 745
Nordstrom, Inc. 7,848 214
Sears, Roebuck & Co. 20,859 938
3,423
Retail -- Drug Stores (0.5%):
CVS Corp. 20,684 945
Longs Drug Stores Corp. 2,043 80
Rite Aid Corp. 13,678 543
Walgreen Co. 26,342 1,282
2,850
Retail -- Specialty Stores (1.1%):
AutoZone, Inc. (b) 8,131 214
Circuit City Stores, Inc. 5,344 193
Gap, Inc. 20,822 1,252
Home Depot, Inc. 77,904 3,390
Limited, Inc. 12,068 309
Lowe's Cos., Inc. 18,610 627
Pep Boys -- Manny, Moe & Jack 3,348 52
TJX Cos., Inc. 16,794 318
Toys "R" Us, Inc. (b) 13,854 271
6,626
Rubber & Rubber Products (0.1%):
Cooper Tire & Rubber Co. 4,118 68
Goodyear Tire & Rubber Co. 8,342 450
518
Semiconductors (1.7%):
Applied Materials, Inc. (b) 19,467 675
Intel Corp. 89,101 7,947
LSI Logic Corp. (b) 7,463 113
Micron Technology, Inc. (b) 11,262 428
Motorola, Inc. 31,687 1,648
10,811
<PAGE>
Software & Computer
Services (3.5%):
Adobe Systems, Inc. 3,552 132
Ascend Communications, Inc. (b) 11,450 552
Autodesk, Inc. 2,496 78
Automatic Data Processing, Inc. 15,987 1,244
BMC Software, Inc. (b) 11,120 534
Ceridian Corp. (b) 3,866 222
Computer Associates
International, Inc. 29,798 1,173
Electronic Data Systems Corp. 26,115 1,063
HBO & Co. 22,832 599
Microsoft Corp. (b) 130,679 13,836
Novell, Inc. (b) 18,761 279
Oracle Corp. (b) 51,603 1,526
Parametric Technology Corp. (b) 14,414 240
Peoplesoft, Inc. (b) 11,680 247
Shared Medical Systems Corp. 1,360 68
21,793
Steel (0.1%):
Allegheny Teledyne, Inc. 10,475 216
Armco, Inc. (b) 5,688 27
Bethlehem Steel Corp. (b) 6,912 62
Nucor Corp. 4,689 212
USX-U.S. Steel Group, Inc. 4,655 108
Worthington Industries, Inc. 5,141 70
695
Tax Return Preparation (0.0%):
H&R Block, Inc. 5,317 238
Telecommunications (0.3%):
Frontier Corp. 9,051 272
Nextel Communications (b) 15,139 274
Northern Telecom Ltd. 34,633 1,483
Scientific-Atlanta, Inc. 4,151 62
2,091
Telecommunications --
Equipment (1.0%):
General Instrument Corp. (b) 8,001 206
Lucent Technologies, Inc. (c) 69,764 5,594
Tellabs, Inc. (b) 10,254 564
6,364
Textile Manufacturing (0.0%):
Springs Industries, Inc., Class A 965 34
Tobacco & Tobacco
Products (1.2%):
Philip Morris Cos., Inc. 129,033 6,597
RJR Nabisco Holdings Corp. 17,225 492
UST, Inc. 9,880 336
7,425
Tools & Hardware
Manufacturing (0.1%):
Black & Decker Corp. 4,897 253
Snap-on, Inc. 3,118 110
Stanley Works 4,660 140
503
Transportation (0.1%):
FDX Corp. (b) 7,818 411
Transportation Leasing
& Trucking (0.0%):
Ryder Systems, Inc. 3,849 95
Transportation Services (0.0%):
Laidlaw, Inc. 17,528 165
Utilities -- Electric (1.9%):
Ameren Corp. 7,229 289
American Electric Power Co. 10,115 495
Carolina Power & Light Co. 8,051 369
Central & South West Corp. 11,255 313
CINergy Corp. 8,447 291
Consolidated Edison Co.
of New York, Inc. 12,379 620
Detroit Edison Co. 7,663 327
Dominion Resources, Inc. 10,405 481
Duke Energy Corp. 19,177 1,241
Edison International 18,801 496
Entergy Corp. 13,118 377
FirstEnergy Corp. 12,570 377
FPL Group, Inc. 9,573 599
Houston Industries, Inc. 15,719 488
Niagara Mohawk Power Corp. (b) 9,940 145
Northern States Power Co. 8,018 216
PacifiCorp 15,796 301
Peco Energy Co. 11,797 456
PG&E Corp. 20,296 618
PP&L Resources, Inc. 7,847 213
Public Service Enterprise Group 12,288 467
Raychem Corp. 4,448 136
<PAGE>
Southern Co. 37,058 1,045
Texas Utilities Co. 14,801 648
The AES Corp. (b) 9,080 372
Unicom Corp. 11,510 434
11,814
Utilities -- Electric & Gas (0.1%):
Baltimore Gas & Electric Co. 7,921 249
GPU, Inc. 6,750 291
540
Utilities -- Gas (0.3%):
Consolidated Natural Gas Co. 5,056 267
Eastern Enterprises 1,196 49
Enron Corp. 17,430 919
NICOR, Inc. 2,536 107
Peoples Energy Corp. 1,895 70
Sempra Energy 12,728 331
Sonat, Inc. 5,792 176
1,919
Utilities -- Telecommunications
(5.9%):
AirTouch Communications, Inc. (b) 30,464 1,706
ALLTEL Corp. 14,545 681
Ameritech Corp. 58,492 3,155
AT&T Corp. 95,821 5,964
Bell Atlantic Corp. 82,374 4,376
BellSouth Corp. 52,220 4,168
GTE Corp. 51,127 3,001
MCI Worldcom, Inc. (b) 94,222 5,206
SBC Communications, Inc. 103,730 4,804
Sprint Corp. 22,781 1,748
U. S. West, Inc. 26,606 1,527
36,336
Total Common Stocks (Cost $315,169) 469,328
U.S. Treasury Bills (1.4%)
5.00%, 12/17/98 (c) 9,110 9,069
Total U.S. Treasury Bills (Cost $9,058) 9,069
Total Investments (Cost $471,381) (a) -- 99.7% 625,551
Other assets in excess of liabilities -- 0.3% 1,596
TOTAL NET ASSETS -- 100.0% $627,147
(a) Represents cost for financial reporting purposes and differs from cost
basis for federal income tax purposes by the amount of losses recognized
for financial reporting purposes in excess of federal income tax reporting
of approximately $686. Cost for federal income tax purposes differs from
value by net unrealized appreciation of securities as follows
(amounts in thousands):
Unrealized appreciation $181,611
Unrealized depreciation (14,790)
Net unrealized appreciation $166,821
(b) Non-income producing securities.
(c) Serves as collateral for futures contracts.
Number Market
Contracts Value
Futures Contracts
S&P 500 Index,
face amount $143,878
expiring December 18, 1998 569 $157,215
Total Futures Contracts
(Cost $143,878) $157,215
See notes to financial statements.
<PAGE>
THE VICTORY PORTFOLIOS Schedule of Investments
Growth Fund October 31, 1998
(Amounts in Thousands, Except Shares)
Shares or
Principal Market
Security Description Amount Value
Commercial Paper (1.8%)
Associates Corp. N.A.,
5.70%, 11/2/98 $ 4,929 $ 4,929
Total Commercial Paper (Cost $4,929) 4,929
Common Stocks (98.0%)
Aerospace/Defense (2.3%):
AlliedSignal, Inc. 85,500 3,329
United Technologies Corp. 30,300 2,886
6,215
Airlines (0.3%):
Southwest Airlines Co. 31,800 674
Banks (5.4%):
BankAmerica Corp. 46,001 2,642
First Union Corp. 69,700 4,043
U.S. Bancorp 71,400 2,606
Wells Fargo & Co. 14,550 5,383
14,674
Beverages (3.4%):
Anheuser-Busch Co., Inc. 59,500 3,537
Coca-Cola Co. 65,900 4,456
PepsiCo, Inc. 34,500 1,164
9,157
Broadcasting/Cable (0.5%):
Tele-Communications, Inc.,
Class A (b) 34,500 1,453
Chemicals -- General (1.8%):
Air Products & Chemicals, Inc. 79,200 2,990
E.I. Du Pont de Nemours Co. 34,700 1,995
4,985
Computers & Peripherals (8.3%):
3Com Corp. (b) 45,000 1,623
Cisco Systems, Inc. (b) 105,000 6,615
Compaq Computer Corp. 116,300 3,678
Hewlett-Packard Co. 22,500 1,354
International Business
Machines Corp. 49,500 7,348
Sun Microsystems, Inc. (b) 25,100 1,462
22,080
Conglomerates (1.0%):
Textron, Inc. 36,000 2,678
Consumer Products (2.8%):
Colgate-Palmolive Co. 29,100 2,572
Procter & Gamble Co. 55,800 4,959
7,531
Containers (1.6%):
Newell Co. 66,500 2,926
Sonoco Products Co. 48,000 1,362
4,288
Cosmetics & Related (0.8%):
Avon Products, Inc. 56,500 2,242
Electrical Equipment (6.4%):
Emerson Electric Co. 89,300 5,894
General Electric Co. 128,000 11,200
17,094
Environmental Control (0.5%):
Waste Management, Inc. 30,100 1,358
Financial Services (2.4%):
Fannie Mae 72,600 5,141
Franklin Resources, Inc. 37,300 1,410
6,551
Food Processing &
Packaging (4.6%):
Bestfoods 61,300 3,341
ConAgra, Inc. 108,500 3,302
General Mills, Inc. 38,500 2,830
Sara Lee Corp. 48,700 2,907
12,380
Forest Products --
Lumber & Paper (0.5%):
Mead Corp. 44,000 1,392
Health Care (0.4%):
Health Management Assoc., Inc.,
Class A (b) 67,000 1,193
Household Goods -- Appliances,
Furnishings & Electronics (0.6%):
Unilever N.V. 23,100 1,738
Insurance -- Multi-Line (3.0%):
American International Group, Inc. 81,000 6,906
Everest Reinsurance Holdings, Inc. 31,400 1,081
7,987
Medical Supplies (1.8%):
Biomet, Inc. 39,500 1,341
Medtronic, Inc. (b) 55,500 3,607
4,948
<PAGE>
Newspapers (0.7%):
Gannett Co., Inc. 29,000 1,794
Oil & Gas Exploration,
Production & Services (0.9%):
Anadarko Petroleum Corp. 32,000 1,084
Conoco Inc., Class A (b) 29,400 731
USX -- Marathon Group 21,200 693
2,508
Oil-Integrated Companies (3.1%):
Chevron Corp. 29,500 2,404
Mobil Corp. 59,400 4,497
Texaco, Inc. 25,500 1,512
8,413
Oilfield Services &
Equipment (1.1%):
Schlumberger Ltd. 57,900 3,040
Pharmaceuticals (14.6%):
Abbott Laboratories 139,000 6,524
American Home Products Corp. 103,500 5,046
Bristol-Myers Squibb Co. 34,200 3,781
Eli Lilly & Co. 36,600 2,962
Johnson & Johnson, Inc. 63,600 5,183
Merck & Co., Inc. 24,600 3,327
Pfizer, Inc. 61,300 6,579
Schering-Plough Corp. 39,300 4,043
Warner-Lambert Co. 22,300 1,748
39,193
Publishing (0.9%):
Time Warner, Inc. 26,500 2,460
Radio & Television (1.0%):
Viacom, Inc., Class B (b) 43,300 2,593
Retail (3.1%):
Dayton Hudson Corp. 79,500 3,369
Wal-Mart Stores, Inc. 72,500 5,002
8,371
Retail -- Drug Stores (1.2%):
Walgreen Co. 68,000 3,311
Retail -- Specialty Stores (2.8%):
AutoZone, Inc. (b) 40,000 1,053
Home Depot, Inc. 132,400 5,759
OfficeMax, Inc. (b) 76,600 699
7,511
Semiconductors (3.0%):
Applied Materials, Inc. (b) 27,600 957
Intel Corp. 65,000 5,798
Motorola, Inc. 23,200 1,206
7,961
Software & Computer
Services (6.0%):
Automatic Data Processing, Inc. 60,000 4,669
Microsoft Corp. (b) 77,100 8,162
Oracle Corp. (b) 106,000 3,134
15,965
Telecommunications --
Equipment (1.4%):
Lucent Technologies, Inc. 48,000 3,849
Tobacco & Tobacco
Products (1.6%):
Philip Morris Cos., Inc. 85,100 4,351
Utilities -- Gas (1.0%):
Enron Corp. 53,500 2,822
Utilities -- Telecommunications
(7.2%):
AirTouch Communications, Inc. (b) 28,500 1,596
Ameritech Corp. 59,500 3,209
GTE Corp. 30,000 1,761
MCI Worldcom, Inc. (b) 160,770 8,883
SBC Communications, Inc. 81,500 3,774
19,223
Total Common Stocks (Cost $165,260) 263,983
Total Investments (Cost $170,189) (a) -- 99.8% 268,912
Other assets in excess of liabilities -- 0.2% 564
TOTAL NET ASSETS -- 100.0% $269,476
(a) Represents cost for financial reporting purposes and differs from cost
basis for federal income tax purposes by the amount of losses recognized
for financial reporting purposes in excess of federal income tax reporting
of approximately $15. Cost for federal income tax purposes differs from
value by net unrealized appreciation of securities as follows
(amounts in thousands):
Unrealized appreciation $102,337
Unrealized depreciation (3,629)
Net unrealized appreciation $ 98,708
(b) Non-income producing securities.
See notes to financial statements.
<PAGE>
<TABLE>
Statements of Assets and Liabilities
The Victory Portfolios October 31, 1998
(Amounts in Thousands, Except Per Share Amounts)
<CAPTION>
Diversified Stock
Value Lakefront Stock Index Growth
Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments, at value
(Cost 375,156; $1,050; $911,046;
$471,381 & $170,189) $529,087 $1,121 $1,037,448 $625,551 $268,912
Repurchase agreements at amortized cost 35,000 -- 125,000 -- --
Total 564,087 1,121 1,162,448 625,551 268,912
Cash -- -- 2 -- --
Interest and dividends receivable 516 1 734 561 163
Receivable for capital shares issued 20 -- 213 103 1,257
Receivable from brokers for investments sold 2,522 -- 17,438 26 172
Net variation margin on open futures contracts -- -- -- 1,238 --
Unamortized organization costs -- 21 -- -- --
Prepaid expenses and other assets 7 6 14 7 4
Total Assets 567,152 1,149 1,180,849 627,486 270,508
LIABILITIES:
Payable for capital shares redeemed -- -- 92 -- --
Payable to brokers for investments purchased -- -- 22,196 42 780
Payable for return of collateral received 49,330 -- 173,555 -- --
Payable for organization cost -- 21 -- -- --
Accrued expenses and other payables:
Investment advisory fees 380 -- 437 234 181
Administration fees 8 -- 13 -- 4
Shareholder service fees 94 -- -- -- 48
Shareholder service fees -- Class A -- -- 167 -- --
Shareholder service and 12b-1 fees -- Class B -- -- 39 -- --
Custodian fees 10 1 20 33 7
Accounting fees 1 1 1 2 --
Transfer agent fees 11 3 160 22 8
Other 5 -- 49 6 4
Total Liabilities 49,839 26 196,729 339 1,032
NET ASSETS:
Capital 277,276 907 659,150 411,170 148,512
Undistributed (distributions in excess of)
net investment income -- 1 86 1,044 (4)
Net unrealized appreciation/depreciation
from investments 153,931 71 126,402 167,507 98,723
Accumulated undistributed net realized gains
from investment transactions 86,106 144 198,482 47,426 22,245
Net Assets $517,313 $1,123 $ 984,120 $627,147 $269,476
Net Assets
Class A $ 933,158
Class B 50,962
Total $ 984,120
Outstanding units of beneficial interest (shares)
Class A 49,507
Class B 2,740
Total 27,506 98 52,247 29,827 12,466
Net asset value
Redemption price per share $ 18.81 $11.52 $ 21.03 $ 21.62
Redemption price per share -- Class A $ 18.85
Offering and redemption price per
share -- Class B<F1> $ 18.60
Maximum sales charge 5.75% 5.75% 5.75% 5.75% 5.75%
Maximum offering price per share
(100%/(100%-maximum sales charge) of
net asset value adjusted to nearest cent) $ 19.96 $12.22 $ 22.31 $ 22.94
Maximum offering price per share
(100%/(100%-maximum sales charge) of
net asset value adjusted to nearest cent) -- Class A $ 20.00
<FN>
<F1> Redemption price per Class B Share varies based on length of time held.
</FN>
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
Statements of Operations
The Victory Portfolios For the Year Ended October 31, 1998
(Amounts in Thousands)
<CAPTION>
Value Lakefront Diversified Stock Index Growth
<S> <C> <C> <C> <C> <C>
Investment Income:
Interest income $ 519 $ -- $ 1,987 $ 6,969 $ 188
Dividend income 9,053 18 13,260 6,956 2,565
Securities lending income 53 -- 250 -- --
Foreign tax withholding (13) -- (8) (31) (1)
Total Income 9,612 18 15,489 13,894 2,752
Expenses:
Investment advisory fees 5,119 13 6,062 3,480 2,242
Administration fees 704 2 1,143 783 336
Shareholder service fees 1,270 2 -- -- 552
Shareholder service fees -- Class A -- -- 2,057 -- --
Shareholder service fees and 12b-1 fees -- Class B -- -- 417 -- --
Accounting fees 92 35 149 153 63
Custodian fees 105 4 188 164 54
Legal and audit fees 69 4 164 101 30
Amortization of organization costs -- 6 -- -- --
Trustees' fees and expenses 12 -- 32 17 10
Transfer agent fees 35 9 480 65 24
Registration and filing fees 12 3 65 49 10
Printing fees -- 3 128 16 1
Other 40 -- 67 36 16
Total Expenses 7,458 81 10,952 4,864 3,338
Expenses voluntarily reduced (613) (6) (1,023) (1,581) (305)
Expenses before reimbursement
from distributor 6,845 75 9,929 3,283 3,033
Expenses reimbursed by distributor -- (71) -- -- --
Net Expenses 6,845 4 9,929 3,283 3,033
Net Investment Income (Loss) 2,767 14 5,560 10,611 (281)
Realized/Unrealized Gains (Losses) from
Investments and Foreign Currencies:
Net realized gains (losses) from
investment transactions 86,242 145 198,757 47,395 22,291
Change in unrealized appreciation/
depreciation from investments 3,941 (71) (25,092) 51,833 31,511
Net realized/unrealized gains (losses) from
investments and foreign currencies 90,183 74 173,665 99,228 53,802
Change in net assets resulting from operations $92,950 $ 88 $179,225 $109,839 $53,521
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
The Victory Portfolios Statements of Changes in Net Assets
(Amounts in Thousands)
<CAPTION>
Value Lakefront Diversified
Fund Fund Stock Fund
Year Year Year Period Year Year
Ended Ended Ended Ended Ended Ended
October 31, October 31, October 31, October 31, October 31, October 31,
1998 1997 1998 1997<F1> 1998 1997
<S> <C> <C> <C> <C> <C> <C>
From Investment Activities:
Operations:
Net investment income $ 2,767 $ 4,081 $ 14 $ 12 $ 5,560 $ 6,546
Net realized gains/(losses)
from investment transactions 86,242 39,027 145 20 198,757 90,018
Net change in unrealized
appreciation/depreciation
from investments 3,941 60,140 (71) 142 (25,092) 68,082
Change in net assets resulting
from operations 92,950 103,248 88 174 179,225 164,646
Distributions to Shareholders:
From net investment income (2,951) (4,329) (15) (10) -- --
Class A -- -- (5,598) (6,667)
Class B -- -- -- -- -- --
In excess of net investment income -- -- -- -- -- (47)
From net realized gains from
investment transactions (39,042) (17,674) (21) -- (90,033) (67,736)
Change in net assets from
distributions to shareholders (41,993) (22,003) (36) (10) (95,631) (74,450)
Capital Transactions:
Proceeds from shares issued 61,756 102,144 69 1,089 272,765 446,487
Proceeds from shares issued in
connection with acquisition -- -- -- -- 86,317 --
Dividends reinvested 38,868 9,573 18 5 73,238 72,928
Cost of shares redeemed (106,315) (102,998) (271) (3) (324,262) (396,524)
Change in net assets from
capital transactions (5,691) 8,719 (184) 1,091 108,058 122,891
Change in net assets 45,266 89,964 (132) 1,255 191,652 213,087
Net Assets:
Beginning of period 472,047 382,083 1,255 -- 792,468 579,381
End of period $ 517,313 $ 472,047 $1,123 $1,255 $ 984,120 $ 792,468
Share Transactions:
Issued 3,424 6,399 6 111 16,693 26,479
Issued in connection with acquisition -- -- -- -- 4,725 --
Reinvested 2,383 652 1 -- 4,406 4,886
Redeemed (5,953) (6,344) (21) -- (18,215) (23,505)
Change in shares (146) 707 (14) 111 7,609 7,860
<FN>
<F1> The Lakefront Fund commenced operations on March 3, 1997.
</FN>
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
The Victory Portfolios Statements of Changes in Net Assets
(Amounts in Thousands)
<CAPTION>
Stock Index Growth
Fund Fund
Year Year Year Year
Ended Ended Ended Ended
October 31, October 31, October 31, October 31,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
From Investment Activities:
Operations:
Net investment income (loss) $ 10,611 $ 6,644 $ (281) $ 326
Net realized gains/(losses)
from investment transactions 47,395 31,506 22,291 12,914
Net change in unrealized
appreciation/depreciation
from investments 51,833 57,624 31,511 28,590
Change in net assets resulting
from operations 109,839 95,774 53,521 41,830
Distributions to Shareholders:
From net investment income (10,250) (6,516) -- (380)
In excess of net investment income -- -- (48) (28)
From net realized gains from
investment transactions (27,890) (6,553) (12,887) (6,303)
Change in net assets from
distributions to shareholders (38,140) (13,069) (12,935) (6,711)
Capital Transactions:
Proceeds from shares issued 188,176 164,875 72,169 50,795
Proceeds from shares issued in
connection with acquisition 46,866 -- -- --
Dividends reinvested 37,415 12,031 11,125 5,917
Cost of shares redeemed (182,024) (71,720) (39,937) (54,051)
Change in net assets from
capital transactions 90,433 105,186 43,357 2,661
Change in net assets 162,132 187,891 83,943 37,780
Net Assets:
Beginning of period 465,015 277,124 185,533 147,753
End of period $ 627,147 $465,015 $269,476 $185,533
Share Transactions:
Issued 9,549 9,543 3,548 2,949
Issued in connection with acquisition 2,272 -- -- --
Reinvested 2,000 741 635 398
Redeemed (8,801) (4,140) (2,017) (3,188)
Change in shares 5,020 6,144 2,166 159
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
The Victory Portfolios Financial Highlights
<CAPTION>
Value Fund
Year Year Year Year December 3,
Ended Ended Ended Ended 1993
October 31, October 31, October 31, October 31, to October 31,
1998 1997 1996 1995<F5> 1994<F2>
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 17.07 $ 14.18 $ 11.87 $ 10.13 $ 10.00
Investment Activities
Net investment income 0.09 0.15 0.20 0.27 0.21
Net realized and unrealized
gains (losses) from investments 3.16 3.57 2.65 1.92 0.11
Total from Investment Activities 3.25 3.72 2.85 2.19 0.32
Distributions
Net investment income (0.10) (0.16) (0.20) (0.27) (0.19)
In excess of net investment income -- -- -- (0.01) --
Net realized gains (1.41) (0.67) (0.34) (0.17) --
Total Distributions (1.51) (0.83) (0.54) (0.45) (0.19)
Net Asset Value, End of Period $ 18.81 $ 17.07 $ 14.18 $ 11.87 $ 10.13
Total Return (excludes sales charges) 20.46% 27.24% 24.66% 22.28% 3.27%<F3>
Ratios/Supplemental Data:
Net Assets, End of Period (000) $517,313 $472,047 $382,083 $295,871 $188,184
Ratio of expenses to
average net assets 1.34% 1.32% 1.33% 0.99% 0.92%<F4>
Ratio of net investment income
to average net assets 0.54% 0.93% 1.56% 2.55% 2.32%<F4>
Ratio of expenses to
average net assets<F1> 1.46% <F6> 1.35% 1.30% 1.48%<F4>
Ratio of net investment income
to average net assets<F1> 0.42% <F6> 1.54% 2.24% 1.76%<F4>
Portfolio turnover 40% 25% 28% 23% 39%
<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> Period from commencement of operations.
<F3> Not annualized.
<F4> Annualized.
<F5> Effective June 5, 1995, the Victory Equity Income Portfolio merged into the Value Fund.
Financial highlights for the periods prior to June 5, 1995 represent the Value Fund.
<F6> There were no voluntary fee reductions during the period.
</FN>
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
The Victory Portfolios Financial Highlights
<CAPTION>
Lakefront Fund
March 3, 1997
Year Ended to
October 31, October 31,
1998 1997<F2>
<S> <C> <C>
Net Asset Value, Beginning of Period $11.29 $10.00
Investment Activities
Net investment income 0.13 0.12
Net realized and unrealized gains (losses)
from investments 0.43 1.27
Total from Investment Activities 0.56 1.39
Distributions
Net investment income (0.14) (0.10)
Net realized gains (0.19) --
Total Distributions (0.33) (0.10)
Net Asset Value, End of Period $11.52 $11.29
Total Return (excludes sales charges) 5.05% 13.87%<F3>
Ratios/Supplemental Data:
Net Assets, End of Period (000) $1,123 $1,255
Ratio of expenses to
average net assets 0.32% 0.00%<F4>
Ratio of net investment income
to average net assets 1.14% 1.67%<F4>
Ratio of expenses to
average net assets<F1> 6.45% 7.27%<F4>
Ratio of net investment income
to average net assets<F1> (4.99)% (5.60)%<F4>
Portfolio turnover 36% 36%
<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.
</FN>
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
The Victory Portfolios Financial Highlights
<CAPTION>
Diversified Stock Fund
Class A Shares Class B Shares
March 1,
Year Year Year Year Year 1996 Year Ended
Ended Ended Ended Ended Ended to October 31,
October 31, October 31, October 31, October 31, October 31, October 31,
1998<F6> 1997 1996<F2> 1998<F6> 1997 1996<F2> 1995 1994
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 17.76 $ 15.75 $ 13.62 $ 17.62 $ 15.71 $14.18 $ 12.68 $ 13.39
Investment Activities
Net investment income (loss) 0.11 0.16 0.20 (0.08) (0.06) 0.07 0.27 0.25
Net realized and unrealized
gains (losses)
from investments 3.07 3.84 3.21 (3.04) 3.85 1.57 2.33 0.64
Total from
Investment Activities 3.18 4.00 3.41 2.96 3.79 1.64 2.60 0.89
Distributions
Net investment income (0.11) (0.16) (0.19) -- -- (0.07) (0.27) (0.23)
In excess of net
investment income -- -- -- -- (0.05) (0.04) (0.01) --
Net realized gains (1.98) (1.83) (1.09) (1.98) (1.83) -- (1.38) (1.37)
Total Distributions (2.09) (1.99) (1.28) (1.98) (1.88) (0.11) (1.66) (1.60)
Net Asset Value, End of Period $ 18.85 $ 17.76 $ 15.75 $ 18.60 $ 17.62 $15.71 $ 13.62 $ 12.68
Total Return
(excludes sales charges) 19.60% 27.96% 27.16% 18.34% 26.48% 26.61%<F3> 23.54% 7.39%
Ratios/Supplemental Data:
Net Assets, End of Period (000) $933,158 $762,270 $571,153 $50,962 $30,198 $8,228 $409,549 $263,227
Ratio of expenses to
average net assets 1.02% 1.03% 1.05% 2.08% 2.19% 2.07%<F4> 0.92% 0.89%
Ratio of net investment income
to average net assets 0.64% 0.97% 1.40% (0.42)% (0.29)% 0.11%<F4> 2.11% 2.06%
Ratio of expenses to
average net assets<F1> 1.13% <F5> 1.08% 2.18% <F5> 2.08%<F4> 0.95% 1.10%
Ratio of net investment income
to average net assets<F1> 0.53% <F5> 1.37% (0.52)% <F5> 0.10%<F4> 2.07% 1.86%
Portfolio turnover<F7> 84% 63% 94% 84% 63% 94% 75% 104%
<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 March 1, 1996, the Fund designated the existing shares as Class A Shares and commenced offering Class B Shares.
<F3> Represents total return for the Fund for the period November 1, 1995 through February 29, 1996 plus total return for Class B
Shares for the Period March 1, 1996 through October 31, 1996. The total return for the Class B shares for the period from
March 1, 1996 through October 31, 1996 was 11.62%.
<F4> Annualized.
<F5> There were no voluntary fee reductions during the period.
<F6> Effective March 16, 1998, the SBSF Fund merged into the Victory Diversified Stock Fund Class A.
Financial highlights for the period prior to March 16, 1998 represent the Victory Diversified Stock Fund.
<F7> Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of
shares issued.
</FN>
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
The Victory Portfolios Financial Highlights
<CAPTION>
Stock Index Fund
December 3,
Year Ended October 31, 1993
to October 31,
1998(d) 1997 1996 1995 1994<F2>
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 18.75 $ 14.85 $ 12.50 $ 10.18 $ 10.00
Investment Activities
Net investment income 0.37 0.29 0.28 0.27 0.20
Net realized and unrealized gains
(losses) from investments 3.37 4.23 2.58 2.31 0.16
Total from Investment Activities 3.74 4.52 2.86 2.58 0.36
Distributions
Net investment income (0.36) (0.29) (0.28) (0.26) (0.18)
Net realized gains (1.10) (0.33) (0.23) -- --
Total Distributions (1.46) (0.62) (0.51) (0.26) (0.18)
Net Asset Value, End of Period $ 21.03 $ 18.75 $ 14.85 $ 12.50 $ 10.18
Total Return (excludes sales charges) 20.99% 31.16% 23.38% 25.72% 3.66%<F3>
Ratios/Supplemental Data:
Net Assets, End of Period (000) $627,147 $465,015 $277,124 $160,822 $89,686
Ratio of expenses to
average net assets 0.57% 0.56% 0.57% 0.55% 0.58%<F4>
Ratio of net investment income
to average net assets 1.83% 1.74% 2.14% 2.53% 2.35%<F4>
Ratio of expenses to
average net assets<F1> 0.84% 0.86% 0.89% 0.87% 1.10%<F4>
Ratio of net investment income
to average net assets<F1> 1.56% 1.44% 1.82% 2.21% 1.82%<F4>
Portfolio turnover 8% 11% 4% 12% 1%
<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> Period from commencement of operations.
<F3> Not annualized.
<F4> Annualized.
<F5> Effective March 16, 1998, the Key Stock Index Fund merged into the Victory Stock Index Fund.
Financial highlights for the period prior to March 16, 1998 represent the Victory Stock Index Fund.
</FN>
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
The Victory Portfolios Financial Highlights
<CAPTION>
Growth Fund
December 3,
Year Ended October 31, 1993
to October 31,
1998 1997 1996 1995<F6> 1994<F2><F3>
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 18.01 $ 14.57 $ 12.15 $ 10.23 $ 10.00
Investment Activities
Net investment income (loss) (0.03) 0.03 0.08 0.11 0.10
Net realized and unrealized
gains (losses) on investments 4.88 4.07 2.93 1.97 0.22
Total from Investment Activities 4.85 4.10 3.01 2.08 0.32
Distributions
Net investment income -- (0.04) (0.08) (0.11) (0.09)
Net realized gains (1.24) (0.62) (0.51) (0.05) --
Total Distributions (1.24) (0.66) (0.59) (0.16) (0.09)
Net Asset Value, End of Period $ 21.62 $ 18.01 $ 14.57 $ 12.15 $ 10.23
Total Return (excludes sales charges) 28.59% 29.08% 25.66% 20.54% 3.22%<F4>
Ratios/Supplemental Data:
Net Assets, End of Period (000) $269,476 $185,533 $147,753 $108,253 $66,921
Ratio of expenses to
average net assets 1.35% 1.34% 1.33% 1.07% 0.94%<F5>
Ratio of net investment income
to average net assets (0.13)% 0.19% 0.64% 1.00% 1.10%<F5>
Ratio of expenses to
average net assets<F1> 1.49% <F7> 1.39% 1.42% 1.51%<F5>
Ratio of net investment income
to average net assets<F1> (0.27)% <F7> 0.58% 0.65% 0.52%<F5>
Portfolio turnover 29% 21% 27% 107% 28%
<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> Period from commencement of operations.
<F3> Effective March 17, 1994, the Society Earnings Momentum Fund merged into the Growth Fund.
Financial highlights for the period prior to March 17, 1994 represent the Growth Fund.
<F4> Not annualized.
<F5> Annualized.
<F6> Effective June 5, 1995, the Victory Equity Portfolio merged into the Growth Fund.
Financial highlights for the periods prior to June 5, 1995 represent the Growth Fund.
<F7> There were no voluntary fee reductions during the period.
</FN>
</TABLE>
See notes to financial statements.
<PAGE>
THE VICTORY PORTFOLIOS Schedule of Investments
Special Value Fund October 31, 1998
(Amounts in Thousands, Except Shares)
Shares or
Principal Market
Security Description Amount Value
Commercial Paper (2.8%)
Associates Corp., N.A.,
5.70%, 11/2/98 $ 9,874 $ 9,874
Total Commercial Paper (Cost $9,874) 9,874
Common Stocks (98.1%)
Aerospace/Defense (2.6%):
Cordant Technologies, Inc. 72,600 2,954
GenCorp, Inc. (c) 273,742 6,056
9,010
Automotive Parts (1.4%):
Dana Corp. 53,713 2,246
Superior Industries
International, Inc. 107,020 2,802
5,048
Banks (8.3%):
First Security Corp. 290,877 5,945
First Star Corp. 144,201 8,183
First Tennessee National Corp. 143,200 4,538
North Fork Bancorporation, Inc. 126,000 2,504
SouthTrust Corp. (c) 110,001 4,015
Summit Bancorp 97,800 3,710
28,895
Building Materials (0.5%):
Hussmann International, Inc. 107,511 1,673
Chemicals -- General (1.9%):
Nalco Chemical Co. 70,499 2,181
RPM, Inc. 189,575 3,188
WD-40 Co. 53,900 1,428
6,797
Commercial Services (1.3%):
Pittston Brink's Group 155,000 4,611
Computers & Peripherals (3.2%):
Diebold, Inc. 112,101 3,496
Quantum Corp. (b)(c) 292,100 5,112
Storage Technology Corp. (b) 80,000 2,675
11,283
Conglomerates (2.0%):
Mark IV Industries, Inc. 166,650 2,562
Whitman Corp. 200,900 4,307
6,869
Consumer Products (1.1%):
Newell Co. (c) 84,000 3,696
Containers -- Metal, Glass,
Paper, Plastic (2.9%):
Owens-Illinois, Inc. (b)(c) 232,092 7,094
Sonoco Products Co. 108,880 3,089
10,183
Electronic & Electrical --
General (3.8%):
Arrow Electronics, Inc. (b)(c) 102,300 2,231
Harris Corp. 100,100 3,510
Vishay Intertechnology, Inc. (b) 495,597 7,496
13,237
Electronics (1.1%):
SCI Systems Incorporated (b) 97,078 3,835
Financial Services (3.3%):
A. G. Edwards, Inc. 55,600 1,922
Heller Financial, Inc. 202,742 4,866
Transamerica Corp. 46,999 4,887
11,675
Food Distributors, Supermarkets
& Wholesalers (1.2%):
Hannaford Brothers Co. 98,000 4,294
Food Processing &
Packaging (2.0%):
Interstate Bakeries Corp. (c) 136,999 3,434
McCormick & Co., Inc.
(non-voting shares) 111,600 3,466
6,900
Forest Products --
Lumber & Paper (1.8%):
Bowater, Inc. 154,200 6,293
Gas Utility (1.3%):
KeySpan Energy (c) 149,850 4,477
Health Care (0.6%):
Steris Corp. (b) 97,100 2,233
Hospital & Nursing Equipment
& Supplies (1.1%):
Hillenbrand Industries, Inc. (c) 64,099 3,794
Household Goods -- Appliances,
Furnishings & Electronics (2.2%):
Premark International, Inc. (c) 245,010 7,764
<PAGE>
Insurance (3.0%):
American Financial Group, Inc. 52,300 1,834
Amerin Corp. (b) 17,359 371
Horace Mann Educators Corp. 144,700 4,142
TIG Holdings, Inc. 114,500 1,596
Transatlantic Holdings, Inc. (c) 31,050 2,422
10,365
Insurance -- Property, Casualty,
Health (2.2%):
Everest Reinsurance Holdings, Inc. 220,700 7,600
Leisure -- Recreation,
Gaming (1.5%):
International Game Technology 239,200 5,397
Machine Tools (1.7%):
Kaydon Corp. 38,975 1,369
Kennametal, Inc. 223,800 4,644
6,013
Manufacturing --
Miscellaneous (1.8%):
Briggs & Stratton Corp. (c) 47,700 2,242
Pentair, Inc. 109,106 4,105
6,347
Medical Services (2.1%):
Quorum Health Group, Inc. (b) 499,599 7,244
Medical Supplies (1.6%):
Biomet, Inc. 162,501 5,515
Oil & Gas Exploration,
Production & Services (3.6%):
Anadarko Petroleum Corp. 145,600 4,932
Barrett Resources Corp. (b) 122,400 2,884
BJ Services Co. (b) 50,000 1,022
Nabors Industries, Inc. (b)(c) 78,128 1,445
Transocean Offshore, Inc. 62,019 2,291
12,574
Oil Marketing & Refining (1.2%):
Tosco Corp. (c) 151,999 4,265
Oilfield Services &
Equipment (0.5%):
Baker Hughes, Inc. (c) 79,600 1,756
Packaging (0.4%):
Crown Cork & Seal Co., Inc. 46,500 1,482
Pharmaceuticals (2.1%):
Mylan Laboratories (c) 209,500 7,215
Primary Metal & Mineral
Production (0.8%):
Minerals Technologies, Inc. 63,600 2,898
Radio & Television (1.5%):
Capstar Broadcasting Corp.,
Class A (b) 300,000 5,213
Real Estate (0.0%):
Merry Land Properties, Inc. (b) 4,030 20
Real Estate Investment
Trusts (4.5%):
Health Care (0.7%):
Meditrust Cos. 145,529 2,365
Office (2.2%):
Kilroy Realty Corp. 151,400 3,359
Mack-Cali Realty Corp. 154,700 4,583
7,942
Residential (1.6%):
Equity Residential
Properties Trust (c) 130,318 5,473
Total Real Estate Investment Trusts 15,780
Retail (3.6%):
AutoZone, Inc. (b)(c) 190,100 5,002
OfficeMax, Inc. (b) 830,499 7,578
12,580
Retail -- Specialty Stores (0.5%):
Heilig-Myers Co. 207,151 1,592
Savings & Loans (0.4%):
Charter One Financial, Inc. (c) 49,999 1,372
Semiconductors (0.3%):
LSI Logic Corp. (b) 77,800 1,177
Software & Computer
Services (1.4%):
Networks Associates, Inc. (b)(c) 112,119 4,765
Steel (1.2%):
Carpenter Technology Corp. 90,300 3,166
Worthington Industries, Inc. 75,370 1,022
4,188
Tax Return Preparation (2.1%):
H&R Block, Inc. (c) 160,899 7,210
Textile Manufacturing (2.5%):
Shaw Industries Inc. 94,874 1,648
Warnaco Group, Inc., Class A (c) 276,700 7,074
8,722
<PAGE>
Tobacco & Tobacco
Products (1.6%):
UST, Inc. 159,900 5,437
Transportation Leasing &
Trucking (2.9%):
CNF Transportation, Inc. 111,814 3,382
GATX Corp. 198,901 6,862
10,244
Utilities -- Electric (8.5%):
CINergy Corp. 159,800 5,513
DPL, Inc. 178,665 3,383
DQE, Inc. (c) 89,200 3,518
Florida Progress Corp. 80,000 3,355
New Century Energies, Inc. (c) 149,400 7,219
SCANA Corp. (c) 188,500 6,374
29,362
Utilities -- Telecommunications
(1.0%):
Century Telephone Enterprises, Inc. 58,800 3,341
Total Common Stocks (Cost $315,816) 342,241
Securities Purchased With Cash Collateral (12.8%)
Short Term Securities (7.1%):
General American Funding
Agreement, 5.89%, 11/6/98 15,000 15,000
AIM Short Term Prime Obligations
Money Market Fund 909 909
AIM Liquid Assets
Money Market Fund 8,684 8684
24,593
Repurchase Agreements (5.7%):
Lehman Brothers, Inc.,
5.41%, 11/2/98
(Collateralized by $12,375
Structured Assoc., 6.13% 6/30/30,
market value $5,151) 5,000 5,000
Goldman Sachs Group L.P.,
5.32%, 11/2/98
(Collateralized by $6,000
Illinois Bell, 5.80%, 2/1/04,
Allegheny Ludlem, 6.95%,
12/15/25, market value $6,221) 5,000 5,000
Prudential Bache Corp.,
5.27%, 11/2/98
(Collateralized by $5,150
Heller Financial, 2.78%,7/15/24
markey value $5,150) 5,000 5,000
Morgan Stanley Dean Witter,
5.31%, 11/2/98
(Collateralized by $5,100
Cox Communications,
6.95%, 1/15/28,
market value $5,205) 5,000 5,000
20,000
Total Securities Purchased With
Cash Collateral (Cost $44,593) 44,593
Total Investments (Cost $370,283) (a) -- 113.7% 396,708
Liabilities in excess of other assets -- (13.7)% (47,810)
TOTAL NET ASSETS -- 100.0% $348,898
(a) Represents cost for financial reporting purposes and differs from cost
basis for federal income tax purposes by the amount of losses recognized
for financial reporting purposes in excess of federal income tax
reporting of approximately$23. Cost for federal income tax purposes
differs from value by net unrealized appreciation of securities as follows
(amounts in thousands):
Unrealized appreciation $ 56,010
Unrealized depreciation (29,608)
Net unrealized appreciation $ 26,402
(b) Non-income producing securities.
(c) All or a portion of this security was loaned as of October 31, 1998
See notes to financial statements.
<PAGE>
THE VICTORY PORTFOLIOS Schedule of Investments
Ohio Regional Stock Fund October 31, 1998
(Amounts in Thousands, Except Shares)
Market
Security Description Shares Value
Common Stocks (99.5%)
Agriculture & Livestock (0.5%):
Andersons, Inc. 20,000 $ 210
Airlines (2.5%):
Comair Holdings, Inc. 33,000 1,085
Amusement & Recreation
Services (1.2%):
Cedar Fair L.P. 20,000 496
Automotive Parts (4.2%):
Dana Corp. 22,000 920
TRW, Inc. 15,000 854
1,774
Banks (14.9%):
BancFirst Ohio Corp. 16,000 476
Charter One Financial, Inc. 39,300 1,077
FirstMerit Corp. 33,000 875
Huntington Bancshares, Inc. 10,000 288
Mahoning National Bancorp 5,100 176
National City Corp. 14,000 900
Park National Corp. 5,000 495
Provident Financial Group, Inc. 18,000 694
Second Bancorp, Inc. 4,470 111
Star Banc Corp. 17,000 1,285
6,377
Building Materials (2.0%):
Holophane Corp. (b) 5,000 107
Owens Corning 20,000 726
833
Chemicals -- General (4.7%):
A. Schulman, Inc. 12,500 248
Ferro Corp. 15,000 383
Lubrizol Corp. 7,000 195
OM Group, Inc. 15,000 489
RPM, Inc. 40,000 673
1,988
Computers & Peripherals (2.6%):
Diebold, Inc. 35,000 1,092
Conglomerates (3.7%):
Lancaster Colony Corp. 30,500 915
Myers Industries, Inc. 21,780 523
Park-Ohio Holdings Corp. (b) 10,000 147
1,585
Consumer Products (3.2%):
American Greetings Corp., Class A 13,000 522
Gibson Greetings, Inc. (b) 19,000 198
Rubbermaid, Inc. 20,000 664
1,384
Electronic & Electrical --
General (2.3%):
Parker-Hannifin Corp. 17,000 608
Pioneer-Standard Electronics, Inc. 43,000 384
992
Electronics (0.8%):
Keithley Instruments, Inc. 65,000 353
Engineering, Industrial
Construction (0.3%):
Corrpro Cos., Inc. (b) 12,500 134
Food Distributors (1.8%):
Kroger Co. (b) 14,000 777
Food Processing &
Packaging (0.6%):
Chiquita Brands International, Inc. 14,000 149
J.M. Smucker Co., Class A 5,000 110
259
Forest Products --
Lumber & Paper (1.5%):
Mead Corp. 20,000 633
Health Care (4.6%):
Gliatech, Inc. (b) 10,000 194
Invacare Corp. 36,000 810
Omnicare, Inc. 28,000 968
1,972
Insurance (7.5%):
Cincinnati Financial Corp. 9,450 353
Ohio Casualty Corp. 18,000 680
Progressive Corp. 9,000 1,324
State Auto Financial Corp. 61,000 862
3,219
<PAGE>
Machine Tools (2.5%):
Lincoln Electric Holding Inc. 32,000 703
Milacron Inc. 17,000 329
Monarch Machine Tool Co. 5,000 33
1,065
Manufacturing --
Capital Goods (4.7%):
Commercial Intertech Corp. 18,000 321
Gorman-Rupp Co. 39,000 663
Gradall Industries, Inc. (b) 10,000 146
Robbins & Myers, Inc. 14,000 331
Thor Industries, Inc. 25,000 556
2,017
Manufacturing --
Miscellaneous (1.6%):
Essef Corp. (b) 43,200 672
Media (3.0%):
Jacor Communications, Inc. (b) 6,000 330
Scripps (E.W.) Co., Class A 21,000 929
1,259
Metals -- Fabrication (2.4%):
Amcast Industrial Corp. 15,000 257
Brush Wellman, Inc. 8,000 136
RTI International Metals (b) 10,000 149
Timken Co. 28,000 498
1,040
Mining (0.9%):
Cleveland-Cliffs, Inc. 5,500 219
Oglebay Norton Co. 6,000 155
374
Oil & Gas Exploration,
Production & Services (4.1%):
USX -- Marathon Group 53,000 1,732
Paint, Varnishes, Enamels (1.7%):
Sherwin-Williams Co. 28,000 705
Real Estate Investment
Trusts (1.5%):
Developers Divers Realty 16,000 302
Health Care REIT, Inc. 14,000 317
619
Restaurants (1.1%):
Bob Evans Farms, Inc. 10,000 197
Wendy's International, Inc. 13,000 273
470
Retail -- Specialty Stores (2.3%):
Jo-Ann Stores, Inc., Class A (b) 10,000 180
Jo-Ann Stores, Inc., Class B (b) 10,000 155
Limited, Inc. 15,000 384
OfficeMax, Inc. (b) 20,000 183
Value City Department Stores,
Inc. (b) 10,000 92
994
Rubber & Rubber Products (2.2%):
Cooper Tire & Rubber Co. 18,000 299
Goodyear Tire & Rubber Co. 12,000 647
946
Software & Computer
Services (1.4%):
Reynolds & Reynolds Co., Class A 33,000 594
Steel (1.3%):
Cold Metal Products, Inc. (b) 7,000 22
Shiloh Industries, Inc. (b) 25,000 406
Worthington Industries, Inc. 10,000 136
564
Utilities -- Electric (7.8%):
American Electric Power Co. 25,000 1,222
CINergy Corp. 25,000 863
DPL, Inc. 64,500 1,221
3,306
Utilities -- Telecommunications
(2.1%):
Cincinnati Bell, Inc. 35,000 908
Total Common Stocks (Cost $21,402) 42,428
Total Investments (Cost $21,402) (a) -- 99.5% 42,428
Other assets in excess of liabilities -- 0.5% 226
TOTAL NET ASSETS -- 100.0% $42,654
(a) Cost for federal income tax purposes differs from value by net unrealized
appreciation of securities as follows (amounts in thousands):
Unrealized appreciation $21,683
Unrealized depreciation (657)
Net unrealized appreciation $21,026
(b) Non-income producing securities.
See notes to financial statements.
<PAGE>
THE VICTORY PORTFOLIOS Schedule of Investments
International Growth Fund October 31, 1998
(Amounts in Thousands, Except Shares)
Shares or
Principal Market
Security Description Amount Value
Commercial Paper (4.2%)
United States (4.2%):
Financial Services (4.2%):
Associates Corp., N.A.,
5.70%, 11/2/98 $ 5,673 $ 5,673
Total Commercial Paper (Cost $5,673) 5,673
Common Stocks (95.3%)
Argentina (0.4%):
Banks (0.4%):
Banco Rio de la Plata SA, ADR 60,000 540
Total Argentina 540
Australia (2.4%):
Banks (0.3%):
National Australia Bank Ltd. 32,500 429
Leisure -- Recreation,
Gaming (0.6%):
Aristocrat Leisure Ltd. 225,000 707
Multimedia (0.3%):
News Corp. Ltd. 62,900 428
Oil & Gas Exploration,
Production & Services (0.1%):
Woodside Petroleum Ltd. 17,278 91
Publishing (0.4%):
Publishing & Broadcasting Ltd. 150,000 593
Retail (0.4%):
Woolworths Ltd. 144,000 504
Utilities -- Telecommunications
(0.3%):
Telstra Corp., ADR 8,000 448
Total Australia 3,200
Brazil (0.6%):
Utilities -- Telecommunications
(0.6%):
Telecomunicacoes Brasileiras-
Telebras SA, ADR (b) 10,900 828
Total Brazil 828
Britain (15.1%):
Aerospace/Defense (1.4%):
British Aerospace PLC 253,580 1,888
Banks (1.2%):
Lloyds TSB Group PLC 127,500 1,578
Computers & Peripherals (0.5%):
Misys PLC 105,600 737
Insurance (0.8%):
Prudential Corp. PLC 84,000 1,101
Leisure -- Recreation,
Gaming (0.7%):
Ladbroke Group PLC 250,000 914
Oil & Gas Exploration,
Production & Services (1.0%):
British Petroleum Co. PLC 88,000 1,299
Pharmaceuticals (3.8%):
Glaxo Wellcome PLC 89,300 2,771
SmithKline Beecham PLC 186,671 2,302
5,073
Retail (0.7%):
Kingfisher PLC 112,000 977
Telecommunications (1.8%):
Vodafone Group PLC 182,000 2,431
Transportation (1.3%):
National Express Group PLC 100,000 1,700
Utilities -- Telecommunications
(1.9%):
British Telecommunications PLC 198,200 2,592
Total Britain 20,290
Canada (2.3%):
Diversified (0.4%):
Bombadier, Inc., Class B 48,000 566
Mining (0.2%):
Franco-Nevada Mining Corp. Ltd. 12,000 231
Oil-Integrated Companies (0.8%):
Suncor Energy, Inc. 37,000 1,172
Publishing (0.3%):
Thomson Corp. 14,000 344
Telecommunications (0.6%):
Northern Telecom Ltd. 19,000 813
Total Canada 3,126
Finland (1.7%):
Telecommunications (1.7%):
Nokia Oyj, Class A 24,856 2,262
Total Finland 2,262
France (12.5%):
Automobiles (1.6%):
PSA Peugeot Citroen 7,293 1,217
Valeo SA 10,850 939
2,156
<PAGE>
Computers & Peripherals (1.2%):
Cap Gemini SA 10,697 1,607
Cosmetics & Related (1.3%):
L'OREAL 2,950 1,686
Diversified (2.7%):
Compagnie de Saint Gobain 8,950 1,324
Vivendi 10,590 2,417
3,741
Electronic & Electrical --
General (0.7%):
Legrand SA 3,680 938
Food Processing &
Packaging (1.1%):
Groupe Danone 5,400 1,428
Oil-Integrated Companies (1.0%):
Total SA, Class B 11,850 1,367
Retail -- Department Stores (1.2%):
Pinault-Printemps-Redoute SA 9,935 1,663
Retail -- Specialty Stores (1.0%):
Castorama Dubois 7,300 1,302
Telecommunications (0.7%):
Alcatel 8,000 891
Total France 16,779
Germany (6.2%):
Automobiles (1.7%):
Daimler-Benz AG (b) 22,158 1,726
Volkswagen AG 10,800 507
2,233
Banks (1.0%):
HypoVereinsbank 18 1,389
Cosmetics & Related (1.0%):
Douglas Holding AG 22,500 1,290
Douglas Holding AG-New (b) 1,450 81
1,371
Insurance (1.1%):
Allianz AG, Registered 4,450 1,526
Software & Computer
Services (1.1%):
SAP AG 3,600 1,511
Utilities -- Electric (0.3%):
Veba AG 6,280 351
Total Germany 8,381
Greece (1.0%):
Commercial Banking (0.8%):
National Bank of Greece 7,700 1,094
Telecommunications (0.2%):
STET Hellas
Telecommunications SA (b) 11,500 302
Total Greece 1,396
Hong Kong (2.2%):
Banks (0.4%):
Hang Seng Bank 22,200 192
HSBC Holdings PLC 18,400 422
614
Conglomerates (0.2%):
Citic Pacific Ltd. 105,000 258
Construction (0.2%):
New World Infrastructure Ltd. (b) 170,000 243
Diversified (0.1%):
Hutchison Whampoa Ltd. 23,000 165
Financial Services (0.1%):
Guoco Group Ltd. (b) 85,000 89
Newspapers (0.2%):
South China Morning Post
(Holdings) Ltd. 386,000 207
Real Estate (0.7%):
Cheung Kong (Holdings) Ltd. 48,000 328
Henderson Land Development Co. Ltd. 40,000 197
Sun Hung Kai Properties Ltd. 61,000 424
Wharf Holdings Ltd. 78,000 124
1,073
Utilities -- Electric (0.3%):
Beijing Datang Power
Generation Co. Ltd. 915,000 284
Hong Kong Electric Holdings Ltd. 27,000 99
383
Total Hong Kong 3,032
Hungary (0.5%):
Utilities -- Telecommunications
(0.5%):
Matav Rt. 140,000 725
Total Hungary 725
<PAGE>
Ireland (2.9%):
Banks (1.2%):
Allied Irish Banks PLC 116,000 1,661
Construction (1.7%):
CRH PLC 153,000 2,232
Total Ireland 3,893
Italy (4.8%):
Banks (1.5%):
Banca di Roma (b) 510,000 890
Istituto Bancario San Paolo di
Torino SpA (b) 81,000 1,192
2,082
Financial Services (0.4%):
Istituto Mobiliare Italiano SpA 35,500 546
Utilities -- Telecommunications
(2.9%):
Telecom Italia Mobile SpA 352,000 2,045
Telecom Italia SpA 367,139 1,851
3,896
Total Italy 6,524
Japan (15.0%):
Chemicals -- General (0.1%):
Sekisui Chemical Co., Ltd. 28,000 153
Computers & Peripherals (0.3%):
Canon, Inc. 10,000 189
Nidec Corp. 3,000 273
462
Construction (0.3%):
Sekisui House Ltd. 35,000 349
Cosmetics & Related (1.7%):
Kao Corp. 60,000 1,215
Shiseido Co. Ltd. 90,000 986
2,201
Electronic & Electrical --
General (1.1%):
Makita Corp. 59,000 623
Minebea Co. Ltd. 30,000 282
Sharp Corp. 70,000 529
1,434
Entertainment (0.4%):
Nintendo Co. Ltd. 7,000 592
Financial Services (0.8%):
Takefuji Corp. 20,000 1,066
Food Manufacturing (0.3%):
Q.P. Corp. 60,000 458
Health & Personal Care (0.3%):
Hoya Corp. 10,000 428
Insurance (0.8%):
Tokio Marine & Fire Insurance Co. 100,000 1,137
Manufacturing --
Miscellaneous (0.3%):
Mitsubishi Heavy Industries Ltd. 100,000 386
Medical Equipment (1.7%):
Terumo Corp. 100,000 2,103
Paint, Varnishes & Enamels (0.2%):
Kansai Paint 100,000 227
Pharmaceuticals (1.0%):
Sankyo Co., Ltd. 30,000 678
Takeda Chemical Industries 20,000 650
1,328
Printing (0.4%):
Toppan Printing Co. Ltd. 55,000 564
Retail (1.1%):
Ito-Yokado Co., Ltd. 20,000 1,167
Seven-Eleven Japan Co., Ltd. 5,000 380
1,547
Retail -- Department Stores (1.4%):
Isetan Co. Ltd. 40,000 363
Marui Co. Ltd. 90,000 1,568
1,931
Security Services (0.3%):
Secom Co., Ltd. 6,000 445
Telecommunications -- Equipment
(1.2%):
NTT Mobile Communications Network, Inc. 44 1,590
Utilities -- Electric (0.3%):
Tokyo Electric Power 14,700 372
Utilities -- Telecommunications
(1.0%):
Nippon Telegraph & Telephone 100 782
NTT Data Corp. 120 508
1,290
Total Japan 20,063
<PAGE>
Malaysia (0.1%):
Automobiles (0.1%):
Oriental Holdings Berhad 275,000 201
Total Malaysia 201
Mexico (0.5%):
Building Materials (0.3%):
Cemex SA de CV 95,000 436
Financial Services (0.2%):
Grupo Financiero Banamex Accival,
SA de CV, Class B 290,000 292
Total Mexico 728
Netherlands (5.2%):
Banks (1.8%):
ING Groep N.V. 49,600 2,401
Food & Dairy Products (0.7%):
Koninklijke Numico N.V. 23,600 929
Insurance (0.7%):
Aegon N.V. 10,624 922
Oil-Integrated Companies (2.0%):
Royal Dutch Petroleum Co. 39,900 1,926
Royal Dutch Petroleum Co. ADR 17,500 862
2,788
Total Netherlands 7,040
New Zealand (0.4%):
Fisheries (0.1%):
Sanford Ltd. 53,200 82
Household Goods -- Appliances,
Furnishings & Electronics (0.3%):
Fisher & Paykel Industries Ltd. 146,000 433
Total New Zealand 515
Norway (0.4%):
Banks (0.4%):
Den Norske Bank ASA 170,000 597
Total Norway 597
Poland (0.3%):
Electronic & Electrical --
General (0.1%):
Electrim Spolka Akcyjna SA 13,000 155
Software & Computer
Services (0.2%):
Softbank SA GDR 12,000 272
Total Poland 427
Portugal (1.1%):
Utilities -- Electric (0.4%):
Electricidade de Portugal SA 24,000 604
Utilities -- Telecommunications
(0.7%):
Portugal Telecom SA, Registered 19,100 906
Total Portugal 1,510
Singapore (0.5%):
Real Estate (0.2%):
City Developments Ltd. 57,000 207
Shipbuilding (0.3%):
Keppel Corp. 210,000 420
Total Singapore 627
South Africa (0.7%):
Software & Computer
Services (0.7%):
DataTec Ltd. 60,250 913
Total South Africa 913
South Korea (0.4%):
Electronic & Electrical --
General (0.1%):
Samsung Electronics GDR 8,550 179
Utilities -- Electric (0.3%):
Korea Electric Power Corp. ADR 26,700 340
Total South Korea 519
Spain (6.1%):
Banks (2.0%):
Corporacion Bancaria
de Espana SA 122,400 2,658
Construction (1.7%):
Dragados & Construcciones SA 75,000 2,230
Utilities -- Electric (0.9%):
Endesa SA 48,400 1,218
Utilities -- Telecommunications (1.5%):
Telefonica de Espana 45,818 2,065
Total Spain 8,171
Sweden (1.1%):
Telecommunications (1.1%):
Telefonaktiebolaget LM Ericsson,
Class B 68,475 1,542
Total Sweden 1,542
Switzerland (9.7%):
Banks (1.6%):
Credit Suisse Group, Registered 6,600 1,015
UBS AG, Registered 4,030 1,106
2,121
Food Processing & Packaging (1.5%):
Nestle SA, Registered 940 1,999
<PAGE>
Insurance (1.6%):
Zurich Allied AG (b) 3,650 2,218
Pharmaceuticals (5.0%):
Novartis AG, Registered 1,955 3,524
Roche Holding AG 270 3,150
6,674
Total Switzerland 13,012
Thailand (0.3%):
Banks (0.3%):
Krung Thai Bank Pub Co Ltd 1,250,000 459
Total Thailand 459
Turkey (0.1%):
Banks (0.1%):
Yapi ve Kredi Bankasi AS GDR 16,450 188
Total Turkey 188
United Kingdom (0.8%):
Catering (0.8%):
Compass Group PLC 102,200 1,032
Total United Kingdom 1,032
Total Common Stocks (Cost $116,334) 128,520
Convertible Bonds (1.3%)
Banks (0.7%):
Mitsubishi Bank International
Finance Bermuda,
3.00%, 11/30/02 943 943
Financial Services (0.6%):
Bell Atlantic Financial Services,
5.75%, 4/1/03,
Convertible into shares of
Telecom New Zealand 750 769
Total Convertible Bonds (Cost $1,693) 1,712
Total Investments (Cost $123,700) (a) -- 100.8% 135,905
Liabilities in excess of other assets -- (0.8)% (1,062)
TOTAL NET ASSETS -- 100.0% $134,843
(a) Represents cost for financial reporting purposes and differs primarily
from cost basis for federal income tax purposes by the amount of losses
recognized for financial reporting purposes in excess of federal income
tax reporting of approximately $488. Cost for federal income tax purposes
differs from value by net unrealized appreciation of securities as
follows (amounts in thousands):
Unrealized appreciation $18,499
Unrealized depreciation (6,782)
Net unrealized appreciation $11,717
(b) Non-income producing securities.
ADR -- American Depository Receipts
GDR -- Global Depository Receipts
At October 31, 1998, the Fund's open forward foreign currency contracts were
as follows:
Unrealized
Delivery Contract Market Appreciation/
Currency Date Value Value Depreciation
Short
Contracts:
Australian
Dollar 11/2/98 $ 552 $ 560 $(8)
Hong Kong
Dollar 11/6/98 180 180 (0)
Total Short
Contracts $ 732 $ 740 $(8)
Long
Contracts:
British
Pound 11/2/98 $ 175 $ 175 $ 0
Canadian
Dollar 11/2/98 989 984 (5)
Hong Kong
Dollar 11/2/98 322 322 0
Thailand
Baht 11/3/98 496 495 (1)
Total Long
Contracts $1,982 $1,976 $(6)
See notes to financial statements.
<PAGE>
THE VICTORY PORTFOLIOS Schedule of Investments
Special Growth Fund October 31, 1998
(Amounts in Thousands, Except Shares)
Shares or
Principal Market
Security Description Amount Value
Commercial Paper (1.8%)
Associates Corp. N.A.,
5.70%, 11/2/98 $ 1,431 $ 1,431
Total Commercial Paper (Cost $1,431) 1,431
Common Stocks (97.0%)
Airlines (1.7%):
SkyWest, Inc. 55,000 1,403
Apparel (2.1%):
Gerber Children's Wear, Inc. (b) 80,000 680
Gildan Activewear, Inc. --
Class A (b) 150,000 994
1,674
Apparel-Footwear (2.3%):
Bebe Stores, Inc. (b) 66,500 1,064
Gadzooks, Inc. (b) 100,000 819
1,883
Beverages (1.0%):
Hansen Natural Corp. (b) 150,000 792
Bio-Technology (1.9%):
Incyte Pharmaceuticals, Inc. (b) 50,000 1,525
Commercial Services (2.9%):
Convergys Corp. (b) 50,000 697
NCO Group (b) 26,000 819
Pharmaceutical Product
Development, Inc. (b) 30,000 810
2,326
Computers & Peripherals (8.1%):
Computer Network
Technology Corp. (b) 140,000 796
Digital River, Inc. (b) 60,000 660
Documentum, Inc. (b) 25,000 850
Entrust Technologies, Inc. (b) 60,000 998
Intervoice, Inc. (b) 50,000 1,424
Kronos, Inc. (b) 25,000 900
National Computer Systems, Inc. 35,000 980
6,608
Consulting (1.1%):
Tetra Tech, Inc. (b) 43,750 889
Electronic & Electrical --
General (3.0%):
SIPEX Corp. (b) 50,000 1,388
TAVA Technologies, Inc. (b) 175,000 1,039
2,427
Electronic Components/Instruments
(3.1%):
Encore Wire Corp. (b) 64,000 712
Energy Conversion Devices (b) 55,000 416
Jabil Circuit, Inc. (b) 30,000 1,389
2,517
Financial Services (2.7%):
Knight/Trimark Group, Inc. (b) 100,000 813
TeleBanc Financial Corp. (b) 75,000 1,368
2,181
Food Products (1.2%):
Horizon Organic Holding Corp. (b) 80,000 1,010
Health Care (5.8%):
ADAC Laboratiories (b) 50,000 1,482
Capital Senior Living Corp. (b) 80,000 940
Osteotech, Inc. (b) 50,000 1,259
Renal Care Group, Inc. (b) 35,000 1,019
4,700
Landscaping (1.0%):
LandCARE USA, Inc. (b) 100,000 800
Leisure -- Recreation,
Gaming (4.6%):
AMC Entertainment, Inc. (b) 86,300 1,251
Anchor Gaming (b) 20,000 1,018
Family Golf Centers, Inc. (b) 70,000 1,474
3,743
Medical -- Biotechnology (2.2%):
Martek Biosciences Corp. (b) 140,000 1,085
Matritech, Inc. (b) 300,000 731
1,816
Medical -- Information Systems
(1.3%):
Dendrite International, Inc. (b) 50,000 1,031
Metals -- Nonferrous (0.0%):
International Precious
Metals Corp. (b) 450,000 23
Oil & Gas Exploration,
Production & Services (6.6%):
Atwood Oceanics, Inc. (b) 29,700 835
BJ Services Co. (b) 60,000 1,226
<PAGE>
Eagle Geophysical, Inc. (b) 91,000 620
Evergreen Resources, Inc. (b) 40,000 905
Newfield Exploration Co. (b) 35,000 851
Stone Energy Corp. (b) 30,000 964
5,401
Oil & Gas Transmission (1.0%):
Barr Laboratories, Inc. (b) 25,000 855
Oilfield Services &
Equipment (2.6%):
Superior Energy Services, Inc. (b) 175,000 705
Varco International, Inc. (b) 75,000 811
Venture Seismic Ltd. (b) 200,000 575
2,091
Pharmaceuticals (7.5%):
Agouron Pharmaceuticals, Inc. (b) 40,000 1,550
Alpharma, Inc., Class A 50,000 1,384
Balance Bar Co. (b) 100,000 975
DUSA Pharmaceuticals, Inc. (b) 140,000 718
Immune Response Corp. (b 125,000 1,531
6,158
Real Estate (0.8%):
Realty Information Group, Inc. (b) 80,000 670
Retail (4.2%):
Delia's, Inc. (b) 150,000 1,256
Duane Reade, Inc. (b) 30,000 1,159
White Cap Industries, Inc. (b) 100,000 1,050
3,465
Retail -- Specialty Stores (2.4%):
Garden Ridge Corp. (b) 100,000 813
Tweeter Home Entertainment (b) 80,000 1,120
1,933
Security Services (2.1%):
Kroll -- O'Gara Co. (b) 70,000 1,724
Semiconductors (3.1%):
Semtech Corp. (b) 55,000 1,309
Transwitch Corp. (b) 50,000 1,219
2,528
Software & Computer
Services (10.3%):
Bindview Developement Corp. (b) 55,000 990
Broadvision, Inc. (b) 50,000 750
General Magic, Inc. (b) 175,000 1,006
Inso Corp. (b) 60,000 1,148
Inspire Insurance Solutions (b) 70,000 1,749
InterVU, Inc. (b) 90,000 731
Progress Software Corp. (b) 40,000 1,043
Visio Corp. (b) 40,000 1,065
8,482
Staffing (1.0%):
On Assignment, Inc. (b) 25,000 850
Telecommunications (9.4%):
Advanced Fibre
Communications, Inc. (b) 80,000 775
Amdocs Ltd. (b) 70,000 910
Geotel Communications Corp. (b) 50,000 1,300
International FiberCom, Inc. (b) 170,000 1,296
IXC Communications, Inc. (b) 40,000 1,550
Tekelec (b) 60,000 1,076
Terayon Communication
Systems, Inc. (b) 70,000 840
7,747
Total Common Stocks (Cost $90,623) 79,252
Rights & Warrants (0.1%)
Engineering, Industrial
Construction (0.0%):
Morrison Knudsen Corp.,
Expire 3/11/03 158 1
Industrial Goods & Services (0.1%):
Energy Conversion Devices,
Expire 7/31/01 55,000 55
Total Rights & Warrants (Cost $0) 56
Total Investments (Cost $92,054) (a) -- 98.9% 80,739
Other assets in excess of liabilities -- 1.1% 860
TOTAL NET ASSETS -- 100.0% $81,599
(a) Represents cost for financial reporting purposes and differs from cost
basis for federal income tax purposes by the amount of losses recognized
for financial reporting purposes in excess of federal income tax reporting
of approximately $233. Cost for federal income tax purposes differs from
value by net unrealized appreciation of securities as follows
(amounts in thousands):
Unrealized appreciation $ 6,352
Unrealized depreciation (18,080)
Net unrealized depreciation $(11,548)
(b) Non-income producing securities.
See notes to financial statements.
<PAGE>
<TABLE>
Statements of Assets and Liabilities
The Victory Portfolios October 31, 1998
(Amounts in Thousands, Except Per Share Amounts)
<CAPTION>
Special Ohio Regional International Special
Value Stock Growth Growth
Fund Fund Fund Fund
<S> <C> <C> <C> <C>
ASSETS:
Investments, at value
(Cost $350,283; $21,402; $123,700 & $92,054) $376,708 $42,428 $135,905 $ 80,739
Repurchase agreements at amortized cost 20,000 -- -- --
Total 396,708 42,428 135,905 80,739
Foreign currency (cost $1) -- -- 1 --
Interest and dividends receivable 553 44 221 --
Receivable for capital shares issued 16 1 12 14
Receivable from brokers for investments sold 4,268 407 832 993
Reclaims receivable -- -- 236 --
Other 10 4 10 2
Total Assets 401,555 42,884 137,217 81,748
LIABILITIES:
Payable to Custodian -- 117 -- --
Payable for capital shares redeemed 45 1 23 2
Payable to brokers for investments purchased 7,629 63 2,157 64
Payable for return of collateral received 44,593 -- -- --
Payable for forward currency contracts -- -- 15 --
Accrued expenses and other payables:
Investment advisory fees 250 22 109 55
Administration fees 5 1 2 1
Shareholder service fees -- -- -- 9
Shareholder service fees -- Class A 63 7 25 --
Shareholder service and 12b-1 fees -- Class B 1 1 -- --
Custodian fees 10 2 25 7
Transfer agent fees 47 14 13 8
Other 14 2 5 3
Total Liabilities 52,657 230 2,374 149
NET ASSETS:
Capital 308,087 16,631 118,339 102,960
Undistributed (distributions in excess of)
net investment income 372 7 (134) (1)
Net unrealized appreciation/depreciation
from investments 26,425 21,026 9,325 (11,315)
Net unrealized appreciation/depreciation
from translation of assets and liabilities
in foreign currencies -- -- 2,878 --
Accumulated undistributed net realized gains (losses)
from investment and foreign currency transactions 14,014 4,990 4,435 (10,045)
Net Assets $348,898 $42,654 $134,843 $ 81,599
Net Assets
Class A $346,962 $41,653 $134,491
Class B 1,936 1,001 352
Total $348,898 $42,654 $134,843
Outstanding units of beneficial interest (shares)
Class A 25,433 2,016 10,196
Class B 145 49 27
Total 25,578 2,065 10,223 8,537
Net asset value
Redemption price per share $ 9.56
Redemption price per share -- Class A $ 13.64 $ 20.67 $ 13.19
Offering and redemption price per
share -- Class B<F1> $ 13.38 $ 20.30 $ 12.82
Maximum sales charge 5.75% 5.75% 5.75% 5.75%
Maximum offering price per share (100%/(100%-maximum
sales charge) of net asset value adjusted to
nearest cent) $ 10.14
Maximum offering price per share
(100%/(100%-maximum sales charge) of
net asset value adjusted to nearest cent) -- Class A $ 14.47 $ 21.93 $ 13.99
<FN>
<F1> Redemption price per Class B Share varies based on length of time held.
</FN>
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
Statements of Operations
The Victory Portfolios For the Year Ended October 31, 1998
(Amounts in Thousands)
<CAPTION>
Special Value Ohio Regional International Special Growth
Fund Stock Fund Growth Fund Fund
<S> <C> <C> <C> <C>
Investment Income:
Interest income $ 645 $ 45 $ 300 $ 384
Dividend income 7,602 1,015 2,390 35
Securities lending income 101 -- -- --
Foreign tax withholding (17) -- (210) --
Total Income 8,331 1,060 2,480 419
Expenses:
Investment advisory fees 4,259 395 1,206 1,068
Administration fees 601 79 164 160
Shareholder service fees -- -- -- 256
Shareholder service fees -- Class A 1,044 124 262 --
Shareholder service fees and 12b-1 fees -- Class B 21 10 3 --
Accounting fees 98 49 67 41
Custodian fees 98 17 198 42
Legal and audit fees 60 9 43 18
Trustees' fees and expenses 12 2 3 4
Transfer agent fees 149 39 37 21
Registration and filing fees 40 10 10 17
Printing fees 30 6 9 --
Other 34 4 8 9
Total Expenses 6,446 744 2,010 1,636
Expenses voluntarily reduced (444) (61) (123) (148)
Expenses before reimbursement from distributor 6,002 683 1,887 1,488
Expenses reimbursed by distributor (6) (9) (9) --
Net Expenses 5,996 674 1,878 1,488
Net Investment Income (Loss) 2,335 386 602 (1,069)
Realized/Unrealized Gains (Losses) from
Investments and Foreign Currencies:
Net realized gains (losses) from
investment transactions 14,148 4,989 8,282 (9,933)
Net realized (loss) from foreign
currency transactions -- -- (4,180) --
Net change in unrealized appreciation/depreciation
from investments (63,870) (6,979) (563) (28,091)
Change in unrealized appreciation/depreciation
from translation of assets and liabilities in
foreign currencies -- -- 3,830 --
Net realized/unrealized gains (losses)
from investments and foreign currencies: (49,722) (1,990) 7,369 (38,024)
Change in net assets resulting from operations $(47,387) $(1,604) $ 7,971 $(39,093)
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
The Victory Portfolios Statements of Changes in Net Assets
(Amounts in Thousands)
<CAPTION>
Special Value Ohio Regional International Special
Fund Stock Fund Growth Fund Growth Fund
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
October 31, October 31, October 31, October 31, October 31, October 31, October 31, October 31,
1998 1997 1998 1997 1998 1997 1998 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C>
From Investment Activities:
Operations:
Net investment
income (loss) $ 2,335 $ 2,293 $ 386 $ 329 $ 602 $ 750 $ (1,069) $ (859)
Net realized
gains/(losses)
from investment
transactions 14,148 31,722 4,989 4,782 8,282 5,879 (9,933) 12,119
Net realized (losses)
from foreign currency
transactions (4,180) (752) -- --
Net change in unrealized
appreciation/
depreciation
from investments (63,870) 47,587 (6,979) 9,508 (563) 1,684 (28,091) 6,482
Net change in
unrealized
appreciation/
depreciation from
translation of assets
and liabilities in
foreign currencies -- -- -- -- 3,830 -- -- --
Change in net assets
resulting from operations (47,387) 81,602 (1,604) 14,619 7,971 7,561 (39,093) 17,742
Distributions to Shareholders:
From net investment
income -- --
Class A (2,264) (2,649) (380) (335) (431) (128)
Class B -- -- -- -- -- --
In excess of net
investment income -- (1) -- (3) -- -- -- --
From net realized gains
from investment and
foreign currency
transactions (31,840) (19,845) (4,773) (869) (5,849) (4,172) (11,370) (4,070)
Change in net assets from
distributions to
shareholders (34,104) (22,495) (5,153) (1,207) (6,280) (4,300) (11,370) (4,070)
Capital Transactions:
Proceeds from
shares issued 97,620 121,506 9,121 8,397 191,985 32,867 38,979 42,610
Proceeds from
shares issued
in connection
with acquisition -- -- -- -- -- -- 35,309 --
Dividends reinvested 28,316 18,750 3,575 877 4,034 2,596 8,448 3,006
Cost of shares redeemed (117,227) (67,529) (17,693) (13,898) (169,240) (53,986) (55,239) (42,560)
Change in net assets from
capital transactions 8,709 72,727 (4,997) (4,624) 26,779 (18,523) 27,497 3,056
Change in net assets (72,782) 131,834 (11,754) 8,788 28,470 (15,262) (22,966) 16,728
Net Assets:
Beginning of period 421,680 289,846 54,408 45,620 106,373 121,635 104,565 87,837
End of period $ 348,898 $421,680 $ 42,654 $ 54,408 $ 134,843 $106,373 $ 81,599 $104,565
Share Transactions:
Issued 6,190 7,849 399 402 14,295 2,433 3,663 2,812
Issued in connection
with acquisition -- -- -- -- -- -- 2,481 --
Reinvested 1,813 1,359 163 45 325 202 659 216
Redeemed (7,706) (4,404) (807) (678) (12,387) (3,996) (4,686) (2,819)
Change in shares 297 4,804 (245) (231) 2,233 (1,361) 2,117 209
</TABLE>
<PAGE>
<TABLE>
The Victory Portfolios Financial Highlights
<CAPTION>
Special Value Fund
Class A Shares Class B Shares
March 1,
Year Year Year Year Year 1996 Year December 3,
Ended Ended Ended Ended Ended through Ended 1993 to
October 31, October 31, October 31, October 31, October 31, October 31, October 31, October 31,
1998 1997 1996<F5> 1998 1997 1996<F5> 1995 1994<F2>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 16.68 $ 14.15 $ 12.15 $ 16.49 $14.09 $12.89 $ 10.49 $ 10.00
Investment Activities
Net investment
income (loss) 0.09 0.10 0.12 (0.08) (0.04) 0.01 0.15 0.11
Net realized and
unrealized gains
(losses) on
investments (1.79) 3.50 2.33 (1.78) 3.41 1.23 1.71 0.48
Total from
Investment
Activities (1.70) 3.60 2.45 (1.86) 3.37 1.24 1.86 0.59
Distributions
Net investment income (0.09) (0.12) (0.11) -- -- (0.01) (0.15) (0.10)
In excess of net
investment income -- -- -- -- (0.02) (0.03) -- --
Net realized gains (1.25) (0.95) (0.34) (1.25) (0.95) -- (0.05) --
Total Distributions (1.34) (1.07) (0.45) (1.25) (0.97) (0.04) (0.20) (0.10)
Net Asset Value,
End of Period $ 13.64 $ 16.68 $ 14.15 $ 13.38 $16.49 $14.09 $ 12.15 $ 10.49
Total Return
(excludes sales charges) (11.22)% 27.05% 20.60% (12.32)% 25.41% 19.80%<F6> 18.01% 5.92%<F3>
Ratios/Supplemental Data:
Net Assets, End
of Period (000) $346,962 $420,020 $289,460 $ 1,936 $1,660 $ 386 $194,700 $118,600
Ratio of expenses to
average net assets 1.40% 1.37% 1.37% 2.65% 2.66% 2.51%<F4> 1.04% 1.00%<F4>
Ratio of net investment
income (loss) to average
net assets 0.56% 0.65% 0.88% (0.68)% (0.62)% (0.31)%<F4> 1.35% 1.23%<F4>
Ratio of expenses to
average net assets<F1> 1.51% <F8> 1.40% 3.02% 3.63% 3.75%<F4> 1.30% 1.49%<F4>
Ratio of net investment
income (loss) to average
net assets<F1> 0.45% <F8> 0.85% (1.05)% (1.59)% (1.55)%<F4> 1.09% 0.74%<F4>
Portfolio turnover <F7> 44% 39% 55% 44% 39% 55% 39% 18%
<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> Effective March 1, 1996, the Fund designated the existing shares as Class A Shares and commenced offering Class B Shares.
<F6> Represents total return for the Fund for the period November 1, 1995 through February 29, 1996 plus total return for Class B
Shares for the Period March 1, 1996 through October 31, 1996. The total return for the Class B shares for the period from
March 1, 1996 through October 31, 1996 was 9.66%.
<F7> Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares
issued.
<F8> There were no voluntary fee reductions during the period.
</FN>
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
The Victory Portfolios Financial Highlights
<CAPTION>
Ohio Regional Stock Fund
Class A Shares Class B Shares
March 1,
Year Year Year Year Year 1996 Year Ended
Ended Ended Ended, Ended Ended to October 31,
October 31, October 31, October 31, October 31, October 31, October 31,
1998 1997 1996<F1> 1998 1997 1996<F2> 1995 1994
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 23.56 $ 17.95 $ 15.94 $23.28 $17.87 $16.43 $ 14.56 $ 14.69
Investment Activities
Net investment
income (loss) 0.18 0.14 0.14 (0.11) (0.14) (0.03) 0.17 0.18
Net realized and
unrealized gains
(losses) from
investments (0.80) 5.96 2.62 (0.77) 5.90 1.51 2.13 0.39
Total from
Investment
Activities (0.62) 6.10 2.76 (0.88) 5.76 1.48 2.30 0.57
Distributions
Net investment income (0.17) (0.14) (0.14) -- -- -- (0.17) (0.17)
In excess of net
investment income -- -- -- -- -- (0.04) (0.01) --
Net realized gains (2.10) (0.35) (0.36) (2.10) (0.35) -- (0.65) (0.53)
In excess of net
realized gains -- -- (0.25) -- -- -- (0.09) --
Total Distributions (2.27) (0.49) (0.75) (2.10) (0.35) (0.04) (0.92) (0.70)
Net Asset Value,
End of Period $ 20.67 $ 23.56 $ 17.95 $20.30 $23.28 $17.87 $ 15.94 $ 14.56
Total Return
(excludes sales charges) (3.13)% 34.61% 17.79% (4.33)% 32.71% 16.95%<F3> 16.93% 3.96%
Ratios/Supplemental Data:
Net Assets,
End of Period (000) $41,653 $53,703 $45,294 $1,001 $ 705 $ 326 $39,048 $33,965
Ratio of expenses to
average net assets 1.26% 1.26% 1.39% 2.52% 2.65% 2.61%<F4> 1.20% 1.04%
Ratio of net investment
income (loss) to average
net assets 0.76% 0.67% 0.79% (0.54)% (0.76)% (0.60)%<F4> 1.13% 1.27%
Ratio of expenses to
average net assets<F1> 1.37% 1.26% 1.40% 3.59% 4.25% 3.50%<F4> 1.24% 1.27%
Ratio of net investment
Income (loss) to average
net assets<F1> 0.65% 0.67% 0.78% (1.61)% (2.36)% (1.49)%<F4> 1.09% 1.04%
Portfolio turnover <F5> 6% 8% 6% 6% 8% 6% 11% 14%
<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> Effective March 1, 1996, the Fund designated the existing shares as Class A Shares and commenced offering
Class B Shares.
<F3> Represents total return for the Fund for the period November 1, 1995 through February 29, 1996 plus total return for
Class B Shares for the period March 1, 1996 through October 31, 1996. The total return for the Class B shares for the
period from March 1, 1996 through October 31, 1996 was 9.03%.
<F4> Annualized.
<F5> Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes
of shares issued.
</FN>
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
The Victory Portfolios Financial Highlights
<CAPTION>
International Growth Fund
Class A Shares Class B Shares
March 1,
Year Year Year Year Year 1996
Ended Ended, Ended Ended Ended to
October 31, October 31, October 31, October 31, October 31, October 31, Year Ended October 31,
1998 1997 1996<F3> 1998 1997 1996<F3> 1995<F4> 1994
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 13.31 $ 13.01 $ 12.33 $13.07 $12.93 $12.79 $ 13.32 $ 11.93
Investment Activities
Net investment
income (loss) 0.07<F2> 0.09 0.08 (0.13) (0.06) -- 0.05 (0.01)
Net realized and
unrealized gains (losses)
from investments and
foreign currencies 0.65 0.67 0.62 0.66 0.65 0.14 (0.42) 1.40
Total from
Investment Activities 0.72 0.76 0.70 0.53 0.59 0.14 (0.37) 1.39
Distributions
Net investment income (0.06) (0.01) (0.02) -- -- -- -- --
Net realized gains (0.78) (0.45) -- (0.78) (0.45) -- (0.55) --
Tax return of capital -- -- -- -- -- -- (0.07) --
Total Distributions (0.84) (0.46) (0.02) (0.78) (0.45) -- (0.62) --
Net Asset Value,
End of Period $ 13.19 $ 13.31 $ 13.01 $12.82 $13.07 $12.93 $ 12.33 $ 13.32
Total Return
(excludes sales charges) 5.79% 6.04% 5.65% 4.44% 4.68% 4.89%<F5> (2.50)% 11.65%
Ratios/Supplemental Data:
Net Assets, End of Period (000) $134,491 $106,189 $121,517 $ 352 $ 184 $ 118 $106,477 $81,307
Ratio of expenses to
average net assets 1.71% 1.69% 1.73% 2.98% 3.07% 2.91%<F6> 1.53% 1.48%
Ratio of net investment
income (loss)to
average net assets 0.55% 0.63% 0.64% (0.80)% (0.68)% (0.10)% <F6> 0.75% (0.51)%
Ratio of expenses to
average net assets<F1> 1.82% 1.69% 1.75% 6.44% 10.01% 6.46%<F6> 1.65% 1.83%
Ratio of net investment
income (loss) to
average net assets<F1> 0.44% 0.63% 0.62% (4.26)% (7.62)% (3.65<F6> 0.63% (0.86)%
Portfolio turnover <F7> 86% 116% 178% 86% 116% 178% 68% 51%
<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> Calculated using average shares for the period.
<F3> Effective March 1, 1996, the Fund designated the existing shares as Class A Shares and commenced offering Class B Shares.
<F4> Effective June 5, 1995, the Victory Foreign Markets Portfolio merged into the International Growth Fund.
Financial highlights for the periods prior to June 5, 1995 represent the International Growth Portfolio.
<F5> Represents total return for the Fund for the period November 1, 1995 through February 29, 1996 plus total return for
Class B Shares for the period March 1, 1996 through October 31, 1996. The total return for the Class B shares for the
period from March 1, 1996 through October 31, 1996 was 1.11%.
<F6> Annualized.
<F7> Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes
of shares issued.
</FN>
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
The Victory Portfolios Financial Highlights
<CAPTION>
Special Growth Fund
Six Months Year January 11,
Ended Ended 1994 to
Year Ended October 31, October 31, April 30, April 30,
1998<F7> 1997 1996 1995<F5> 1995 1994<F2>
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 16.29 $ 14.14 $ 11.81 $ 10.54 $ 9.82 $ 10.00
Investment Activities
Net investment income (loss) (0.13) (0.13) (0.07) -- 0.02 (0.01)
Net realized and unrealized
gains (losses) on investments (4.83) 2.93 2.40 1.27 0.72 (0.17)
Total from Investment Activities (4.96) 2.80 2.33 1.27 0.74 (0.18)
Distributions
Net investment income -- -- -- -- (0.02) --
Net realized gains (1.75) (0.65) -- -- -- --
In excess of net realized gains (0.02) -- -- -- -- --
Total Distributions (1.77) (0.65) -- -- (0.02) --
Net Asset Value, End of Period $ 9.56 $ 16.29 $ 14.14 $ 11.81 $ 10.54 $ 9.82
Total Return (excludes sales charges) (33.19)% 20.62% 19.73% 12.05%<F3> 7.51% (1.80)%<F3>
Ratios/Supplemental Data:
Net Assets, End of Period (000) $81,599 $104,565 $87,837 $54,335 $20,796 $30,867
Ratio of expenses to
average net assets 1.39% 1.38% 1.47% 0.65%<F4> 1.04% 0.82%<F4>
Ratio of net investment income (loss)
to average net assets (1.00)% (0.93)% (0.62)% (0.13)%<F4> 0.17% (0.27)%<F4>
Ratio of expenses to
average net assets<F1> 1.53% <F6> 1.51% 1.40%<F4> 1.35% 1.47%<F4>
Ratio of net investment loss
to average net assets<F1> (1.14)% <F6> (0.66)% (0.88)%<F4> (0.14)% (0.92)%<F4>
Portfolio turnover 254% 195% 152% 54% 102% 61%
<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> Period from commencement of operations.
<F3> Not annualized.
<F4> Annualized.
<F5> Effective June 5, 1995, the Victory Aggressive Growth Portfolio merged into the Special Growth Fund.
Financial highlights for the periods prior to June 5, 1995 represent the Aggressive Growth Portfolio.
<F6> There were no voluntary fee reductions during the period.
<F7> Effective March 16, 1998, the SBSF Capital Growth Fund merged into the Victory Special Growth Fund.
Financial highlights for the periods prior to March 16, 1998 represent the Victory Special Growth Fund.
</FN>
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
Statements of Cash Flows
The Victory Portfolios For the Year Ended October 31, 1998
(Amounts in Thousands)
<CAPTION>
U.S. Goverment Diversified Special
Obligations Value Stock Value
Fund Fund Fund Fund
<S> <C> <C> <C> <C>
Increase (decrease) in cash
Cash Flows from Operating Activities:
Net investment income $ 94,996 $ 2,767 $ 5,560 $ 2,335
Adjustments to reconcile net investment
income to net cash used in operating
activities:
Purchase of investment securities (381,845,139) (2,464,797) (9,674,678) (2,947,262)
Proceeds from disposition of
investment securities 381,363,489 2,509,638 9,655,680 2,969,760
Increase in investments purchased with
cash collateral from securities lending (78,125) (49,330) (173,555) (44,593)
Increase (decrease) in dividends
and interest receivable (3,014) 91 (1) (109)
Increase in payable for return of collateral
received from securities lending 78,125 49,330 173,555 44,593
Increase (decrease) in accrued expenses 223 5 172 (80)
Net amortization/accretion from investments 1,554 -- -- --
Net cash provided by (used in)
operating activities (387,891) 47,704 (13,267) 24,644
Cash Flows from Financing Activities:
Proceeds from shares issued 4,231,821 61,736 359,871 98,331
Payment on shares redeemed (3,808,025) (106,315) (324,209) (117,187)
Cash distributions paid (35,905) (3,125) (22,393) (5,788)
Net cash provided by (used in)
financing activities 387,891 (47,704) 13,269 (24,644)
Increase (decrease) in cash -- -- 2 --
Cash:
Beginning balance -- -- -- --
Ending balance $ -- $ -- $ 2 $ --
Non-cash financing activities not included herein consist of reinvestment of dividends from net investment income and
distributions of net realized capital gains of $57,598, $38,868, $73,238, and $28,317.
</TABLE>
See notes to financial statements.
<PAGE>
Notes to Financial Statements
The Victory Portfolios October 31, 1998
1. Organization:
The Victory Portfolios (collectively, the "Trust" and individually, a "Fund")
was organized on December 6, 1995 as a successor to a company of the same
name organized as a Massachusetts business trust on February 5, 1986. The
Trust is registered under the Investment Company Act of 1940, as amended,
(the "1940 Act") as an open-end investment company established as a Delaware
business trust. The Trust is authorized to issue an unlimited number of
shares, which are units of beneficial interest with a par value of $0.001.
The Trust presently offers shares of 30 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, Convertible Securities 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
("REI") 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 provide 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
stability of principal. The Limited Term Income Fund seeks to provide income
consistent with limited fluctuation of principal. The Intermediate Income
Fund and the 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 Convertible Securities Fund seeks to
provide a high level of current income together with long-term capital
appreciation. 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
and the Special Value Fund seek 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
REI Fund seeks to provide total return through investments in real
estate-related securities.
<PAGE>
2. Reorganization
The Trust entered an Agreement and Plan of Reorganization with The SBSF
Funds, Inc. d/b/a Key Mutual Funds pursuant to which all of the assets and
liabilities of each Key Mutual Fund transferred to a Fund of the Victory
Portfolios in exchange for shares of the corresponding Fund. The SBSF Fund
transferred its assets and liabilities to the Victory Diversified Stock Fund.
The Key Stock Index Fund transferred its assets and liabilities to the
Victory Stock Index Fund. The SBSF Capital Growth Fund transferred its assets
and liabilities to the Victory Special Growth Fund. The SBSF Convertible
Securities Fund transferred its assets and liabilities to the Victory
Convertible Securities Fund. The reorganization, which qualified as a
tax-free exchange for federal income tax purposes, was completed on March 16,
1998 for the Victory Diversified Stock, Victory Stock Index, and Victory
Special Growth funds and March 23, 1998 for the Victory Convertible
Securities Fund, following approval by shareholders of SBSF Funds, Inc. d/b/a
Key Mutual Funds at a special shareholder meeting held on March 6, 1998. The
following is a summary of shares outstanding, net assets, net asset value per
share and unrealized appreciation immediately before and after the
reorganization:
<TABLE>
<CAPTION>
Before Reorganization After Reorganization
SBSF Victory Victory
Convertible Convertible Convertible
Securities Securities Securities
Fund Fund Fund
<S> <C> <C> <C>
Shares (000) 8,557 -- 8,557
Net Assets (000) $120,143 -- $120,143
Net Asset Value 14.04 -- 14.04
Unrealized appreciation (000) 15,775 -- 15,775
</TABLE>
<TABLE>
<CAPTION>
Before Reorganization After Reorganization
Victory Victory
Diversified Diversified
SBSF Stock Stock
Fund Fund Fund
<S> <C> <C> <C>
Shares (000) 5,825 49,641 54,366
Net Assets (000) $86,317 $865,943<F1> $952,260<F1>
Net Asset Value 14.82 18.27<F1> 18.27<F1>
Unrealized appreciation (000) 24,319 215,899 240,218
<FN>
<F1> Class A
</FN>
</TABLE>
<TABLE>
<CAPTION>
Before Reorganization After Reorganization
Key Victory Victory
Stock Index Stock Index Stock Index
Fund Fund Fund
<S> <C> <C> <C>
Shares (000) 3,286 28,599 30,871
Net Assets (000) $46,866 $589,611 $636,477
Net Asset Value 14.26 20.62 20.62
Unrealized appreciation (000) 8,966 183,832 192,798
</TABLE>
<TABLE>
Before Reorganization After Reorganization
SBSF Victory Victory
Capital Growth Special Growth Special Growth
Fund Fund Fund
<S> <C> <C> <C>
Shares (000) 3,454 7,340 9,821
Net Assets (000) $35,309 $104,465 $139,774
Net Asset Value 10.22 14.23 14.23
Unrealized appreciation (000) 4,227 15,458 19,685
</TABLE>
On June 13, 1997, the Investment Quality Bond Fund acquired all the net
assets of the Government Bond Fund pursuant to a plan of reorganization
approved by the Government Bond shareholders on May 16, 1997. The acquisition
was accomplished by a tax-free exchange of 1,929,000 shares of the Investment
Quality Bond Fund (valued at $18,518,000) for the 1,801,000 Class A shares
and the 136,000 Class B shares of the Government Bond outstanding on June 13,
1997. The Government Bond Fund's net assets at that date ($18,518,000),
including $53,000 of unrealized appreciation, were combined with those of the
Investment Quality Bond Fund ($149,462,000).
<PAGE>
3. Significant Accounting Policies:
The following is a summary of significant accounting policies followed by the
Trust in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles (GAAP). 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.
Investments 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, Convertible Securities 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 REI Fund (collectively "the variable net asset value funds")
are valued at their market values determined on the basis of the latest
available bid prices in the principal market (closing sales prices if the
principal market is an exchange) in which such securities are normally traded
or on the basis of valuation procedures approved by the Board of Trustees.
Investments in investment companies are valued at their respective net asset
values as reported by such companies. The differences between the cost and
market values of investments held by the variable net asset value funds are
reflected as either unrealized appreciation or depreciation.
Securities Transactions and Related Income:
Securities transactions are accounted for on the date the security is
purchased or sold (trade date). Interest income is recognized on the accrual
basis and includes, where applicable, the pro rata amortization of premium or
accretion of discount. Dividend income is recorded on the ex-dividend date,
net of foreign taxes withheld. Gains or losses realized on sales of
securities are determined by comparing the identified cost of the security
lot sold with the net sales proceeds.
Foreign Currency Translation:
The accounting records of the Trust are maintained in U.S. dollars.
Investment securities and other assets and liabilities of the Balanced Fund
and the International Growth Fund denominated in a foreign currency are
translated into U.S. dollars at current exchange rates. Purchases and sales
of securities, income receipts and expense payments are translated into U.S.
dollars at the exchange rate on the dates of the transactions.
The Trust isolates that portion of the results of operations resulting from
changes in foreign exchange rates from those resulting from changes in market
prices of securities held.
Realized foreign exchange gains or losses arise from sales and maturities of
securities, sales of foreign currencies, currency exchange fluctuations
between the trade and settlement dates of securities transactions, and the
difference between the amount of assets and liabilities recorded and the U.S.
dollar equivalent of the amounts actually received or paid. Net unrealized
foreign exchange gains and losses arise from changes in the value of assets
and liabilities, including investments in securities, resulting from changes
in currency exchange rates.
<PAGE>
Repurchase Agreements:
Each Fund may acquire repurchase agreements from financial institutions such
as banks and broker-dealers which the Trust's investment adviser deems
creditworthy under guidelines approved by the Board of Trustees, subject to
the seller's agreement to repurchase such securities at a mutually
agreed-upon date and price. The repurchase price generally equals the price
paid by a Fund plus interest negotiated on the basis of current short-term
rates, which may be more or less than the rate on the underlying securities.
The seller, under a repurchase agreement, is required to maintain the value
of collateral held pursuant to the agreement at not less than the repurchase
price (including accrued interest). Securities subject to repurchase
agreements are held by the Trust's 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 Balanced Fund, Stock Index Fund, Diversified Stock Fund, Value Fund,
Growth Fund, Special Value Fund, Special Growth Fund, Ohio Regional Stock
Fund, International Growth Fund, and Lakefront Fund may enter into contracts
for the future delivery of securities or foreign currencies and futures
contracts based on a specific security, class of securities, foreign currency
or an index, purchase or sell options on any such futures contracts and
engage in related closing transactions. A futures contract on a securities
index is an agreement obligating either party to pay, and entitling the other
party to receive, while the contract is outstanding, cash payments based on
the level of a specified securities index. The Trust may enter into futures
contracts in an effort to hedge against market risks. The acquisition of put
and call options on futures contracts will give the Trust the right (but not
the obligation), for a specified price, to sell or to purchase the underlying
futures contract, upon exercise of the option, at any time during the option
period. Futures transactions involve brokerage costs and require the Trust to
segregate assets to cover contracts that would require it to purchase
securities or currencies. A Fund may lose the expected benefit of futures
transactions if interest rates, exchange rates or securities prices change in
an unanticipated manner. Such unanticipated changes may also result in lower
overall performance than if the Fund had not entered into any futures
transactions. In addition, the value of a Fund's futures positions may not
prove to be perfectly or even highly correlated with the value of its
portfolio securities or foreign currencies, limiting a Fund's ability to
hedge effectively against interest rate, exchange rate and/or market risk and
giving rise to additional risks. There is no assurance of liquidity in the
secondary market for purposes of closing out futures positions.
Securities Purchased on a When-Issued Basis:
Each Fund may purchase securities on a "when-issued" basis. When-issued
securities are securities purchased for delivery beyond the normal settlement
date at a stated price and/or yield, thereby involving the risk that the
price and/or yield obtained may be more or less than those available in the
market when delivery takes place. At the time a Fund makes the commitment to
purchase a security on a when-issued basis, the Fund records the transaction
and reflects the value of the security in determining net asset value. No
interest accrues to the Fund until the transaction settles and payment takes
place. Normally, the settlement date occurs within one month of the purchase.
A segregated account is established and the Fund maintains cash and
marketable securities at least equal in value to commitments for when-issued
securities. As of October 31, 1998, the Funds had outstanding "when issued"
purchase commitments, with a corresponding amount of assets segregated, as
follows (amounts in thousands):
<TABLE>
<CAPTION>
<S> <C> <C>
Limited Term $ 2,129 (2.6% of net assets)
Intermediate Income 12,037 (4.7% of net assets)
Fund for Income 3,791 (13.2% of net assets)
Government Mortgage 56,937 (54.2% of net assets)
Investment Quality 36,155 (21.3% of net assets)
Balanced 33,779 (7.9% of net assets)
</TABLE>
These amounts are included in amounts payable for investments purchased on
the accompanying statements of assets and liabilities.
<PAGE>
Securities Lending:
The U.S. Government Obligations Fund, Prime Obligations Fund, Financial
Reserves Fund, Tax-Free Money Market Fund, Ohio Municipal Money Market Fund,
Limited Term Income Fund, Intermediate Income Fund, Investment Quality Bond
Fund, Government Mortgage Fund, Fund for Income, Convertible Securities 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 REI Fund may, from time to
time, lend securities from their portfolio to broker-dealers, banks,
financial institutions and other institutional borrowers approved by the
Board of Trustees. The Trust will limit its securities lending activity to 33
1/3% of the total assets of each Fund. Key Trust Company of Ohio, N.A. ("Key
Trust"), an affiliate of the Adviser, serves as the lending agent for the
Trust pursuant to a Securities Lending Agency Agreement (the "Lending
Agreement"). Under guidelines established by the Board of Trustees, Key Trust
must maintain the loan collateral at all times in an amount equal to at least
100% of the current market value of the loaned securities in the form of cash
or U.S. Government obligations, to secure the return of the loaned
securities. Key Trust, at the direction of the Adviser, may invest the cash
collateral in short-term debt instruments that the Adviser has determined
present minimal credit risks. There is a risk of delay in receiving
collateral or in receiving the securities loaned or even a loss of rights in
the collateral should the borrower of the securities fail financially. By
lending its securities, a Fund can increase its income by continuing to
receive interest or dividends on the loaned securities as well as investing
the cash collateral in short-term U.S. Government securities, repurchase
agreements, or other short term securities . The cash collateral, or
short-term investments purchased with such collateral, are recorded as assets
of the Funds, offset by a corresponding liability to return all collateral as
cash at the termination of the loan. In addition, the short-term securities
purchased with cash collateral are included in the accompanying Schedules of
Investments. Fixed income securities received as collateral are not recorded
as an asset or liability of the Trust because the lending Fund does not have
effective control of such securities. Loans are subject to termination by the
Trust or the borrower at any time. In accordance with GAAP, a statement of
cash flows is presented if a Fund recorded borrowing assets exceeding 10% of
average net assets during the year. Under this guideline, a statement of cash
flows is presented for U.S. Government Obligations Fund, Diversified Stock
Fund, Special Value Fund, and Value Fund. The following Funds had securities
with the following market values on loan as of October 31, 1998 (amounts in
thousands):
<TABLE>
<CAPTION>
Market Value
of Loaned Securities
<S> <C>
U.S. Government Obligations Fund $ 75,022
Value Fund 48,868
Diversified Stock Fund 175,186
Special Value Fund 44,543
</TABLE>
The loaned securities were fully collateralized by cash, and short-term
securities purchased with such cash collateral, as of October 31, 1998.
As disclosed in the Schedule of Investments the Victory Value Fund invested
cash collateral in a Lehman Brothers Repurchase Agreement with an interest
rate of 5.41% and a maturity date of 11/2/98 which was collateralized by the
following securities (amounts in thousands):
<TABLE>
<CAPTION>
Principal Description Market Value
<S> <C> <C>
$ 1,045 Energy Group, 7.55%, 10/15/27 $ 1,045.00
5,300 Hilton Hotels Corp., 7.00%, 7/15/04 5,155.00
4,005 MCI Worldcom, Inc., 6.13%, 8/15/01 4,108.00
$10,308.00
</TABLE>
As disclosed in the Schedule of Investments the Victory Diversified Stock
Fund invested cash collateral in a Lehman Brothers Repurchase Agreement with
an interest rate of 5.41% and a maturity date of 11/2/98 which was
collateralized by the following securities (amounts in thousands):
<TABLE>
<CAPTION>
Principal Description Market Value
<S> <C> <C>
$ 5,000 Celulosa Arauco, 7.00%, 12/15/07 $ 3,883.00
955 Energy Group, 7.55%, 10/15/27 955.00
4,300 Hilton Hotels Corp., 7.95%, 4/15/07 4,295.00
8,000 Northwest Airlines, 7.25%, 7/2/14 8,411.00
3,000 Waste Management Inc., 6.13%, 7/15/11 3,058.00
$20,629.00
</TABLE>
<PAGE>
As disclosed in the Schedule of Investments the Victory Diversified Stock
Fund invested cash collateral in a Goldman Sachs Repurchase Agreement with an
interest rate of 5.32% and a maturity date of 11/2/98 which was
collateralized by the following securities (amounts in thousands):
<TABLE>
<CAPTION>
Principal Description Market Value
<S> <C> <C>
$ 1,563 BankAmerica Corp., 10.00%, 2/1/03 $ 1,856.00
1,200 Citigroup, Inc., 6.13%, 6/15/00 1,216.00
3,526 Countrywide Home Loan, 6.57%, 3/16/05 3,629.00
100 Enron Oil & Gas, 6.50%, 12/1/07 103.00
263 Fleet Financial Group Inc., 9.00%, 12/1/01 301.00
117 Ford Motor Credit Corp., 9.11%, 12/30/01 124.00
5,373 GMAC, 7.05%, 4/23/02 5,681.00
250 Heller Financial, 8.01%, 4/14/99 249.00
1,150 Interamer Development Bank, 8.88%, 6/1/09 1,531.00
1,000 NationsBank Capital Trust III, 5.90%, 1/15/27 970.00
645 New Century Energies, 6.24%, 11/27/98 626.00
315 PNC Bank N.A., 7.88%, 4/15/05 342.00
1,774 Swiss Bank Corp. -- New York, 7.25%, 9/1/06 1,892.00
350 Trans-Canada Pipelines, 6.77%, 4/30/02 363.00
1,795 Wal-Mart Stores, Inc., 6.13%, 10/1/99 1,822.00
$20,705.00
</TABLE>
As disclosed in the Schedule of Investments the Victory Diversified Stock
Fund invested cash collateral in a Prudential Bache Repurchase Agreement with
an interest rate of 5.27% and a maturity date of 11/2/98 which was
collateralized by the following securities (amounts in thousands):
<TABLE>
<CAPTION>
Principal Description Market Value
<S> <C> <C>
$19,273 Aames Mortgage Trust, Series 1997-B, Class B1A, 6.37%, 6/15/27 $17,973.00
10,300 Heller Financial, 8.01%, 4/14/99 10,300.00
12,000 Lubermen's Mutual Casualty, 8.45%, 12/1/2097 12,927.00
$41,200.00
</TABLE>
As disclosed in the Schedule of Investments the Victory Diversified Stock
Fund invested cash collateral in a Morgan Stanley Dean Witter Repurchase
Agreement with an interest rate of 5.31% and a maturity date of 11/2/98 which
was collateralized by the following securities (amounts in thousands):
<TABLE>
<CAPTION>
Principal Description Market Value
<S> <C> <C>
$25,000 Aerco Ltd., Series 1A, Class A1, 5.47%, 7/15/23 $25,000.00
1,000 Dean Witter Discover, 6.88%, 3/1/03 1,039.00
1,000 New York Telephone Co., 6.00%, 4/15/08 1,034.00
$27,073.00
</TABLE>
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 Convertible Securities 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 REI 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.
<PAGE>
The amounts of dividends from net investment income and distributions from
net realized gains are determined in accordance with federal income tax
regulations, which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the components of net assets based on their federal
tax-basis treatment; temporary differences do not require reclassification.
Dividends and distributions to shareholders which exceed net investment
income and realized capital gains for financial reporting purposes but not
for tax purposes are reported as dividends in excess of net investment income
or distributions in excess of net realized gains. To the extent they exceed
net investment income and net realized gains for tax purposes, they are
reported as distributions of capital. Net investment losses incurred by a
Fund are reclassified to capital in the accompanying statements of assets and
liabilities.
Federal Income Taxes:
It is the policy of each Fund to qualify or continue to qualify as a
regulated investment company by complying with the provisions available to
certain investment companies, as defined in applicable sections of the
Internal Revenue Code, and to make distributions of net investment income and
net realized capital gains sufficient to relieve it from all, or
substantially all, federal income taxes.
Other:
Expenses that are directly related to one of the Funds are charged directly
to that Fund. Other operating expenses of the Trust are prorated to each Fund
on the basis of relative net assets or other appropriate basis. Fees paid
under a Fund's shareholder servicing or distribution plans are borne by the
specific class of shares to which they apply.
All expenses in connection with the Lakefront Fund's and the REI Fund's
organization and registration under the 1940 Act and the Securities Act of
1933 were paid by those Funds. Such expenses are being amortized over a
period of 60 months commencing with the respective inception dates.
4. Purchases and Sales of Securities:
Purchases (excluding securities acquired through the reorganization described
in Note 2 -- Reorganization above) and sales of securities (excluding
short-term securities) for the period ended October 31, 1998 were as follows
(amounts in thousands):
<TABLE>
<CAPTION>
Purchases Sales
<S> <C> <C>
Limited Term Income Fund $126,274 $123,340
Intermediate Income Fund 756,611 763,365
Fund for Income 34,048 27,308
Government Mortgage Fund 299,519 297,477
Investment Quality Bond Fund 829,983 867,231
National Municipal Bond Fund 76,654 75,909
New York Tax-Free Fund 10,370 7,634
Ohio Municipal Bond Fund 72,843 76,110
Balanced Fund 877,822 865,692
Convertible Securities Fund 97,568 86,251
REI Fund 18,485 5,581
Value Fund 197,823 242,823
Lakefront Fund 446 684
Diversified Stock Fund 740,298 816,177
Stock Index Fund 35,811 101,195
Growth Fund 92,107 64,200
Special Value Fund 179,057 189,481
Ohio Regional Stock Fund 2,924 11,760
International Growth Fund 112,440 91,528
Special Growth Fund 250,250 259,389
</TABLE>
Purchases and sales of securities (excluding short-term securities) for the
Convertible Securities Fund for the year ended November 30, 1997 were $72,625
and $59,134, respectively.
<PAGE>
5. Related Party Transactions:
Investment advisory services are provided to 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 Inc., Spears, Benzak, Salomon & Farrell, Inc. ("SBSF"), Society
Asset Management, Inc. and Applied Technology Investment, Inc. Pursuant to
the terms of the reorganization, the subsidiaries identified above were
merged into SBSF and SBSF then changed its name to Key Asset Management Inc.
Lakefront Capital Investors, Inc. serves as a sub-adviser for the Lakefront
Fund, and, effective May 15, 1998, Indocam International Investment Services,
S.A. serves as a sub-adviser for the International Growth 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. The Adviser, and not the Trust, pays sub-advisory fees as applicable.
KeyTrust Company of Ohio, serving as custodian for all of the Funds, receives
custodian fees in addition to reimbursement of actual out-of-pocket expenses
incurred.
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" or the "Distributor," as
applicable), an indirect, wholly owned subsidiary of The BISYS Group, Inc.
("BISYS") serves as the administrator and distributor to the Trust. Certain
officers of the Trust are affiliated with BISYS. Such officers receive no
direct payments or fees from the Trust for serving as officers.
Under the terms of the administration agreement, effective October 1, 1997,
the Administrator's fee is computed at the annual rate of 0.15% of each
Fund's average daily net assets up to $300 million, 0.12% of each Fund's
average daily net assets between $300 million and $600 million, and 0.10% of
each Fund's average daily net assets greater than $600 million. Under a
Sub-Administration agreement, BISYS pays the Adviser a fee of up to 0.05% of
each Fund's average daily net assets to perform certain of the administrative
duties for the Funds. Prior to October 1, 1997, the Administrator's fee was
computed at the annual rate of 0.15% of each Fund's average daily net assets,
except the Convertible Securities Fund, for which the fee was 0.25% of net
assets up to $50 million and 0.15% of net assets over $50 million. Pursuant
to the Trust's 12b-1 Plan, the Distributor may receive distribution services
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, the New York Tax-Free
Fund, the Balanced Fund, the Diversified Stock Fund, the Special Value Fund,
the Ohio Regional Stock Fund and the International Growth Fund. In addition,
the Distributor is entitled to receive commissions on sales of shares of the
variable net asset value funds. For the year ended October 31, 1998, the
Distributor received approximately $1,989,000 from commissions earned on
sales of shares of the variable net asset value funds, a portion of which the
Distributor reallowed to dealers of the Funds' shares including approximately
$1,934,000 to affiliates of the Funds.
During the year ended October 31, 1998, the Trust retained BISYS Fund
Services and, for the Convertible Securities Fund during the year ended
October 31, 1997, SBSF, to serve as Mutual Fund Accountant. The Trust pays a
fee for these services based on a percentage of average daily net assets
under the terms of its Fund Accounting Agreement.
Fees may be voluntarily reduced or reimbursed to assist the Trust in
maintaining competitive expense ratios.
<PAGE>
Additional information regarding related party transactions is as follows for
the period ended October 31, 1998:
<TABLE>
<CAPTION>
Investment Administration
Advisory Fees Fees
Percentage
of Average Voluntary Voluntary
Daily Fee Fee
Net Assets Reductions Reductions
(000) (000)
<S> <C> <C> <C>
U.S. Government Obligations Fund 0.35% $ -- $ --
Prime Obligations Fund 0.35% -- --
Financial Reserves Fund 0.50% 123 --
Tax-Free Money Market Fund 0.35% 29 --
Ohio Municipal Money Market Fund 0.50% 1,026 --
Limited Term Income Fund 0.50% 124 --
Intermediate Income Fund 0.75% 682 --
Fund for Income 0.50% 104 22
Government Mortgage Fund 0.50% 134 --
Investment Quality Bond Fund 0.75% 436 --
National Municipal Bond Fund 0.55% 296 --
New York Tax-Free Fund 0.55% 60 19
Ohio Municipal Bond Fund 0.60% 174 --
Balanced Fund 1.00% 944 --
Convertible Securities 0.75% -- --
Real Estate Investment Fund 1.00% 112 8
Value Fund 1.00% 613 --
Lakefront Fund 1.00% 6 --
Diversified Stock Fund 0.65% 1,023 --
Stock Index Fund 0.60% 798 783
Growth Fund 1.00% 305 --
Special Value Fund 1.00% 444 --
Ohio Regional Stock Fund 0.75% 61 --
International Growth Fund 1.10% 123 --
Special Growth Fund 1.00% 148 --
</TABLE>
Additional information regarding related party transactions is as follows for
the year ended November 30, 1997:
<TABLE>
<CAPTION>
Investment Administration
Advisory Fees Fees
Percentage
of Average Voluntary Voluntary
Daily Fee Fee
Net Assets Reductions Reductions
(000) (000)
<S> <C> <C> <C>
Convertible Securities Fund 0.75% -- $4
</TABLE>
<PAGE>
6. Capital Share Transactions:
Capital share transactions for those Funds with multiple share classes were
as follows (amounts in thousands):
<TABLE>
<CAPTION>
U.S. Government
Obligations Fund
Year Year
Ended Ended
October 31, October 31,
1998 1997
<S> <C> <C>
Capital and Share Transactions:
Investor Shares:
Proceeds from shares issued 1,048,740 1,096,594
Dividends reinvested 22 9
Cost of shares redeemed (933,795) (640,492)
Total 114,967 456,111
Select Shares:
Proceeds from shares issued 3,183,081 3,000,667
Dividends reinvested 57,576 30,375
Cost of shares redeemed (2,874,230) (3,153,434)
Total 366,427 (122,392)
</TABLE>
<TABLE>
<CAPTION>
National Municipal
Bond Fund New York Tax-Free Fund
Year Year Year Year
Ended Ended Ended Ended
October 31, October 31, October 31, October 31,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Capital Transactions:
Class A Shares:
Proceeds from shares issued $ 16,834 $ 24,151 $ 5,992 $ 4,570
Dividends reinvested 1,607 1,600 596 559
Cost of shares redeemed (20,804) (16,416) (4,006) (3,498)
Total $ (2,363) $ 9,335 $ 2,582 $ 1,631
Class B Shares:
Proceeds from shares issued $ 646 $ 545 $ 1,103 $ 585
Dividends reinvested 61 64 122 115
Cost of shares redeemed (688) (204) (548) (476)
Total $ 19 $ 405 $ 677 $ 224
Share Transactions:
Class A Shares:
Issued 1,576 2,343 470 362
Reinvested 150 156 47 44
Redeemed (1,932) (1,596) (315) (277)
Total (206) 903 202 129
Class B Shares:
Issued 60 53 87 46
Reinvested 6 6 10 9
Redeemed (65) (20) (43) (37)
Total 1 39 54 18
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Balanced Fund Diversified Stock Fund Special Value Fund
Year Year Year Year Year Year
Ended Ended Ended Ended Ended Ended
October 31, October 31, October 31, October 31, October 31, October 31,
1998 1997 1998 1997 1998 1997
<S> <C> <C> <C> <C> <C> <C>
Capital Transactions:
Class A Shares:
Proceeds from shares issued $ 93,069 $ 75,657 $ 339,630 $ 426,586 $ 96,571 $ 120,389
Dividends reinvested 25,674 14,836 69,826 71,806 28,184 18,714
Cost of shares redeemed (65,050) (58,208) (319,480) (394,709) (116,764) (67,494)
Total $ 53,693 $ 32,285 $ 89,976 $ 103,683 $ 7,991 $ 71,609
Class B Shares:
Proceeds from shares issued $ 2,906 $ 1,819 $ 19,452 $ 19,901 $ 1,049 $ 1,117
Dividends reinvested 243 73 3,412 1,122 132 36
Cost of shares redeemed (435) (315) (4,782) (1,815) (463) (35)
Total $ 2,714 $ 1,577 $ 18,082 $ 19,208 $ 718 $ 1,118
Share Transactions:
Class A Shares:
Issued 6,530 5,819 20,330 25,259 6,124 7,776
Reinvested 1,880 1,167 4,198 4,810 1,804 1,357
Redeemed (4,599) (4,438) (17,944) (23,399) (7,676) (4,402)
Total 3,811 2,548 6,584 6,670 252 4,731
Class B Shares:
Issued 203 139 1,088 1,220 66 73
Reinvested 18 6 208 76 9 2
Redeemed (30) (24) (271) (106) (30) (2)
Total 191 121 1,025 1,190 45 73
</TABLE>
<TABLE>
<CAPTION>
Ohio Regional International
Stock Fund Growth Fund
Year Year Year Year
Ended Ended Ended Ended
October 31, October 31, October 31, October 31,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Class A Shares:
Proceeds from shares issued $ 8,735 $ 8,156 $ 191,799 $ 32,789
Dividends reinvested 3,503 869 4,023 2,590
Cost of shares redeemed (17,668) (13,887) (169,227) (53,968)
Total $ (5,430) $ (4,862) $ 26,595 $(18,589)
Class B Shares:
Proceeds from shares issued $ 386 $ 241 $ 186 $ 78
Dividends reinvested 72 8 11 6
Cost of shares redeemed (25) (11) (13) (18)
Total $ 433 $ 238 $ 184 $ 66
Share Transactions:
Class A Shares:
Issued 382 390 14,282 2,427
Reinvested 160 45 324 201
Redeemed (806) (678) (12,386) (3,995)
Total (264) (243) 2,220 (1,367)
Class B Shares:
Issued 17 12 13 6
Reinvested 3 -- 1 1
Redeemed (1) -- (1) (1)
Total 19 12 13 6
</TABLE>
<PAGE>
7. Concentration of Credit Risk:
The Ohio Municipal Money Market Fund, New York Tax-Free Fund, and Ohio
Municipal Bond Fund invest primarily in municipal 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 companies
domiciled in Ohio. These Funds are more susceptible to economic and
political factors which might adversely affect municipalities and
companies within those states than are other types of funds which are not
geographically concentrated to the same extent.
8. Federal Income Tax Information (Unaudited):
For the taxable year ended October 31, 1998, a portion of income dividends
paid by the Funds qualify for the dividends received deduction available
to corporations:
<TABLE>
<CAPTION>
Qualified
Dividend
Income
<S> <C>
Convertible Securities Fund 51.09%
Balanced Fund 26.31%
Value Fund 100.00%
Lakefront Fund 26.16%
Diversified Stock Fund 26.66%
Stock Index Fund 50.17%
Growth Fund 100.00%
Special Value Fund 80.18%
Ohio Regional Stock Fund 100.00%
Special Growth Fund 4.24%
</TABLE>
Exempt-interest dividends are as follows for the year ended October 31, 1998:
<TABLE>
<S> <C>
Tax Free Money Market Fund $15,206
Ohio Municipal Money Market Fund 20,500
National Municipal Bond Fund 2,113
New York Tax-Free Bond Fund 960
Ohio Municipal Bond Fund 3,385
</TABLE>
During the year ended October 31, 1998, the following Funds paid long-term
capital gain distributions (amounts in thousands):
<TABLE>
<S> <C>
New York Tax-Free Bond Fund $ 11
Ohio Municipal Bond Fund 101
Balanced Fund 16,880
Convertible Securities Fund 7,242
Value Fund 38,504
Diversified Stock Fund 49,162
Stock Index Fund 23,104
Growth Fund 12,702
Special Value Fund 26,264
Ohio Regional Stock Fund 4,743
International Growth Fund 5,856
Special Growth Fund 6,847
</TABLE>
<PAGE>
As of October 31, 1998, for Federal income tax purposes, the following Funds
have capital loss carryforwards available to offset future capital gains, if
any (amounts in thousands):
<TABLE>
<CAPTION>
Amount Expires
<S> <C> <C>
Financial Reserves Money Market $ 5 2001
Tax Free Money Market 4 2006
Limited Term Income Fund 1,335 2002
Limited Term Income Fund 553 2003
Limited Term Income Fund 906 2004
Fund for Income 585 2001
Fund for Income 588 2002
Fund for Income 328 2003
Government Mortgage Fund 698 2002
Government Mortgage Fund 109 2005
Investment Quality Bond Fund 3,961 2002
Real Estate Investment Fund 497 2006
Special Growth Fund 9,811 2006
</TABLE>
As of October 31, 1998, the following Fund has additional capital loss
carryforwards subject to limitations on availability to offset future capital
gains, if any, as the successor of a merger with the Government Bond Fund
(amounts in thousands):
<TABLE>
<CAPTION>
Amount Expires
<S> <C> <C>
Investment Quality Bond Fund $2,498 2001
Investment Quality Bond Fund 2,760 2002
Investment Quality Bond Fund 755 2003
Investment Quality Bond Fund 6 2004
</TABLE>
9. Voting Results of Special Meeting of Shareholders
International Growth Fund
At a Special Meeting of Shareholders (the "Meeting") of the International
Growth Fund (the "Fund"), a separate series of The Victory Portfolios, called
on May 15, 1998 pursuant to notice given to all shareholders of record on
March 20, 1998, the Investment Advisory Agreement between The Victory
Portfolios, on behalf of the Fund, and the current adviser to the Fund, Key
Asset Management, Inc. ("KAM") was revised such that KAM will employ a
"Manager of Managers" structure for the Fund. This action was approved by the
shareholders of the Fund voting together in the aggregate:
Votes for: 6,402,822
Votes against: 4,809
Abstained: 63,973
Shares not voted: 1,270,003
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Trustees of
The Victory Portfolios:
In our opinion, the accompanying statements of assets and liabilities,
including the schedules of investments, and the related statements of
operations and changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of The Victory
Portfolios (comprising, respectively, the U.S. Government Obligations Fund,
Prime Obligations Fund, Financial Reserves Fund, Tax-free Money Market Fund,
Ohio Municipal Money Market Fund, Limited Term Income Fund, Intermediate
Income Fund, Fund For Income, Government Mortgage Fund, Investment Quality
Bond Fund, National Municipal Bond Fund, New York Tax-free Fund, Ohio
Municipal Bond Fund, Balanced Fund, Convertible Securities Fund, Real Estate
Investment Fund, Value Fund, Lakefront Fund, Diversified Stock Fund, Stock
Index Fund, Growth Fund, Special Value Fund, Ohio Regional Stock Fund,
International Growth Fund, and Special Growth Fund) at October 31, 1998, the
results of operations, the changes in net assets, and the financial
highlights for each of the periods presented in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as ifinancial statementsi) are the
responsibility of the Funds' management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation and verification by examination of
securities at October 31, 1998 by correspondence with the custodian and
brokers, provide a reasonable basis for the opinion expressed above. The
Financial Reserves Fund's financial highlights for the year ended October 31,
1994 were audited by other auditors, whose report dated December 2, 1994
expressed an unqualified opinion on those financial highlights. The Ohio
Municipal Money Market Fund's financial highlights for the year ended August
31, 1994 were audited by other auditors, whose report dated October 7, 1994
expressed an unqualified opinion on those financial highlights. The Fund for
Income's financial highlights for the nine months ended October 31, 1994 and
for the year ended January 31, 1994 were audited by other auditors, whose
reports dated December 2, 1994 and February 28, 1994, respectively, expressed
unqualified opinions on those financial highlights. The National Municipal
Bond Fund's financial highlights for each of the two years in the period
ended April 30, 1995 were audited by other auditors, whose report dated June
20, 1995 expressed an unqualified opinion on those financial highlights. The
New York Tax-free Fund's financial highlights for the ten months ended
October 31, 1994 and the year ended December 31, 1993 were audited by other
auditors, whose reports dated December 2, 1994 and January 31, 1994,
respectively, expressed an unqualified opinion on those financial highlights.
The Special Growth Fund's financial highlights for the each of the two years
in the period ended April 30, 1995 were audited by other auditors, whose
report dated June 20, 1995 expressed an unqualified opinion on those
financial highlights.
PricewaterhouseCoopers LLP
Columbus, Ohio
December 11, 1998
<PAGE>
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<PAGE>
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