ANNUAL REPORT
OCTOBER 31,
1999
(LOGO) (R)
Victory Funds
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Victory Funds
Risk/Reward Investment Spectrum
The Victory Funds offer a combined total of 32 money market, fixed income,
specialty and equity mutual funds for individuals and institutions.
LOW REWARD HIGH
Growth/Equity
International Growth
Small Co. Opportunity
Ohio Regional Stock
Special Value
Growth
Stock Index
Diversified Stock
Established Value
Lakefront
Value
Specialty
Real Estate Investment
Convertible Securities
Balanced
Income
Taxable
Investment Quality Bond
Government Mortgage
Fund for Income
Intermediate Income
Limited Term Income
Tax-Free
Ohio Municipal Bond
New York Tax-Free
National Municipal Bond
Money Market
Ohio Municipal Money Market
Tax-Free Money Market
Institutional Money Market
Financial Reserves
Prime Obligations
Gradison Government Reserves
Federal Money Market
U.S. Government Obligations
LOW RISK HIGH
Source: Investment Product Group, Key Asset Management.
This report is authorized for distribution only when preceded or accompanied
by a current prospectus for the appropriate Victory Fund. For more complete
information including a prospectus, which includes fees and ongoing expenses,
please call 1-800-539-FUND.(R) Please read it carefully before investing or
sending money.
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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.
12/19/99
Shareholder Letter 3
Investment Review and Outlook 4
Fund Review and Commentary
Introduction to Victory Money
Market Funds 5
Introduction to Victory Taxable
Fixed Income Funds 8
Introduction to Victory Municipal
Fixed Income Funds 14
Introduction to Victory Specialty Funds 17
Introduction to Victory Growth/Equity
Funds 21
Introduction to Financial Statements 32
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
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 66
Statements of Operations 67
Statements of Changes in Net Assets 68
Financial Highlights 69
Ohio Municipal Money Market Fund
Schedule of Investments 57
Statements of Assets and Liabilities 66
Statements of Operations 67
Statements of Changes in Net Assets 68
Financial Highlights 70
Victory Taxable Fixed Income Funds
Limited Term Income Fund
Schedule of Investments 71
Statements of Assets and Liabilities 86
Statements of Operations 87
Statements of Changes in Net Assets 88
Financial Highlights 90
Statements of Cash Flows 193
1
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TABLE OF CONTENTS
(continued)
Intermediate Income Fund
Schedule of Investments 74
Statements of Assets and Liabilities 86
Statements of Operations 87
Statements of Changes in Net Assets 88
Financial Highlights 91
Statements of Cash Flows 193
Fund for Income
Schedule of Investments 78
Statements of Assets and Liabilities 86
Statements of Operations 87
Statements of Changes in Net Assets 88
Financial Highlights 92
Government Mortgage Fund
Schedule of Investments 80
Statements of Assets and Liabilities 86
Statements of Operations 87
Statements of Changes in Net Assets 89
Financial Highlights 93
Investment Quality Bond Fund
Schedule of Investments 81
Statements of Assets and Liabilities 86
Statements of Operations 87
Statements of Changes in Net Assets 89
Financial Highlights 94
Statements of Cash Flows 193
Victory Municipal Fixed Income Funds
National Municipal Bond Fund
Schedule of Investments 95
Statements of Assets and Liabilities 108
Statements of Operations 109
Statements of Changes in Net Assets 110
Financial Highlights 111
New York Tax-Free Fund
Schedule of Investments 98
Statements of Assets and Liabilities 108
Statements of Operations 109
Statements of Changes in Net Assets 110
Financial Highlights 113
Ohio Municipal Bond Fund
Schedule of Investments 100
Statements of Assets and Liabilities 108
Statements of Operations 109
Statements of Changes in Net Assets 110
Financial Highlights 114
Victory Specialty Funds
Balanced Fund
Schedule of Investments 115
Statements of Assets and Liabilities 131
Statements of Operations 132
Statements of Changes in Net Assets 133
Financial Highlights 134
Statements of Cash Flows 193
Convertible Securities Fund
Schedule of Investments 126
Statements of Assets and Liabilities 131
Statements of Operations 132
Statements of Changes in Net Assets 133
Financial Highlights 135
Statements of Cash Flows 194
Real Estate Investment Fund
Schedule of Investments 130
Statements of Assets and Liabilities 131
Statements of Operations 132
Statements of Changes in Net Assets 133
Financial Highlights 136
Victory Equity Funds
Value Fund
Schedule of Investments 137
Statements of Assets and Liabilities 159
Statements of Operations 160
Statements of Changes in Net Assets 161
Financial Highlights 163
Statements of Cash Flows 194
Lakefront Fund
Schedule of Investments 140
Statements of Assets and Liabilities 159
Statements of Operations 160
Statements of Changes in Net Assets 161
Financial Highlights 164
Established Value Fund
Schedule of Investments 142
Statements of Assets and Liabilities 159
Statements of Operations 160
Statements of Changes in Net Assets 161
Financial Highlights 165
Diversified Stock Fund
Schedule of Investments 144
Statements of Assets and Liabilities 159
Statements of Operations 160
Statements of Changes in Net Assets 162
Financial Highlights 166
Statements of Cash Flows 194
Stock Index Fund
Schedule of Investments 147
Statements of Assets and Liabilities 159
Statements of Operations 160
Statements of Changes in Net Assets 162
Financial Highlights 168
Statements of Cash Flows 194
Growth Fund
Schedule of Investments 156
Statements of Assets and Liabilities 159
Statements of Operations 160
Statements of Changes in Net Assets 162
Financial Highlights 169
Statements of Cash Flows 195
Special Value Fund
Schedule of Investments 170
Statements of Assets and Liabilities 185
Statements of Operations 186
Statements of Changes in Net Assets 187
Financial Highlights 188
Statements of Cash Flows 195
Ohio Regional Stock Fund
Schedule of Investments 173
Statements of Assets and Liabilities 185
Statements of Operations 186
Statements of Changes in Net Assets 187
Financial Highlights 189
Statements of Cash Flows 195
Small Company Opportunity Fund
Schedule of Investments 175
Statements of Assets and Liabilities 185
Statements of Operations 186
Statements of Changes in Net Assets 187
Financial Highlights 190
Statements of Cash Flows 195
International Growth Fund
Schedule of Investments 178
Statements of Assets and Liabilities 185
Statements of Operations 186
Statements of Changes in Net Assets 187
Financial Highlights 191
Notes 196
Report of Independent Accountants 219
2
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Letter to our Shareholders
On behalf of Victory Funds, thank you for your continued support and
confidence in using Victory Funds to help realize your investment goals! I am
pleased to present the Victory Fund's Annual Report for the period ended
October 31, 1999. I hope you find this report useful, easy to read, and a
valuable tool.
At Victory Funds, we recognize that you, our valued shareholder, are the
key to our continued success. Your ongoing investor confidence has enabled
the Funds, as a whole, to grow year-after-year. Victory Funds are now 32
mutual funds strong with more than $18 billion in assets under management.
Because we believe that an informed investor is the best investor, I thought
it was important to share with you "What Makes Victory Funds Different?"
I am confident that after you review the following points of interest you
will be further reassured of your investment in Victory Funds and in
a better position to share the Victory story with your family, friends,
and business associates. So, "What Makes Victory Funds Different?"
Truth in Labeling. It's the essence of Victory Funds. Our portfolio managers
and teams are known for adhering to a fund's investment style and objective.
In simple terms, "we stick to our knitting."
A Disciplined Investment Process. Key Asset Management, the adviser to Victory
Funds, draws from over 100 years of investment management experience and
employs a structured and disciplined process of selecting securities for
Victory portfolios.
Team Approach to Investment Management. A knowledgeable team of investment
professionals backs the portfolio management of each Victory Fund. Although
each Victory Fund features one or two portfolio managers, you benefit from
a number of talented investment minds supporting their efforts.
Guidance. Victory strives to make sure you have the information you need to
make the best investment decisions. The guidance available through investment
consultants, "www.victoryfunds.com," our educational materials, and Victory
Funds Service Center (1-800-539-FUND) all come together for one purpose --
our shareholders.
Performance. The bottom-line -- results. At Victory Funds, we strive for
optimal investment returns at reasonable risk levels. We are committed to
managing the risk/return equation for Victory shareholders.
Again, thank you for choosing the Victory Funds to help you realize your
financial goals and, as always, we welcome your comments on this report.
/s/ Leigh A. Wilson
Leigh A. Wilson
President
The Victory Funds
3
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Investment Review and Outlook
The Great Beyond
Save for a couple of brief but noteworthy interruptions, U.S. stocks and
bonds have been in a bull market for more than 17 years. The domestic economy
has been growing for much of that time, and is well into the ninth year of
its current expansion. As these measures of our nation's prosperity grow ever
longer in the tooth, investors cannot help but ask just how long such good
times can continue.
Those questions grew louder in recent months, amplified by a couple of
soberingly swift and steep stock market declines. The combination of tighter
monetary policy, a weaker dollar, hints of nascent inflation, extended equity
valuations, deteriorating market breadth and Y2K-related uncertainty
overwhelmed strong underlying economic and profit trends. Even the most
ardent bulls admitted that the environment had become more challenging, while
some pessimists proclaimed the onset of a bear market.
Now, I am not in the market-timing business. Trying to predict when
the market will head south (or north) is an exercise in futility, and of
little value. On the other hand, ignoring the market's excesses and their
attendant risks is equally foolhardy. At worst, the preconditions are in
place for a more substantial market setback that could have wide-ranging and
long-lasting repercussions. At the very least, we have the recipe for
continued volatility in the months ahead. In any case, I believe a more
defensive portfolio posture is appropriate as we head into the last few weeks
of the year. Stocks with less sensitivity to the market (i.e., lower betas)
deserve greater emphasis. Within balanced accounts, fixed income securities
are relatively more appealing. Even cash warrants consideration, given the
unusually high real short-term rates available.
Yet for as uncomfortable as I am about the stock market's near-term
prospects, I am steadfastly optimistic about its longer-term potential, and I
believe that equities will remain the asset class of choice well into the new
millennium. Some period of adjustment is inevitable, and may already be
underway. But whether that adjustment takes six weeks, six months or six
quarters to unfold, I think the prospects for satisfactory equity returns
over the subsequent six years (and beyond) are favorable. While those returns
are unlikely to approach the breathtaking levels of the past several years, I
believe they will exceed most alternatives, and will increase the purchasing
power of your portfolio over time. Investors who take advantage of near-term
market turbulence to build long-term positions in good companies (both large
and small) that are temporarily out of favor should be amply rewarded for
their efforts over time.
Faced with the deafening roar of advice and analysis bombarding them
every day, it is easy to understand why investors could feel a little
overwhelmed as we head into the second millennium's home stretch. To this
cacophony, I would like to add a simple observation: investing is a marathon,
not a sprint. To excel requires stamina, constant attention to your long-term
objectives, and plain old common sense. Guessing next month's industrial
production or the following quarter's earnings per share may seem important
today, given the market's overriding emphasis on short-term performance.
However, getting the long-range picture in proper focus will prove far more
relevant tomorrow.
At the Victory Funds, our team of seasoned investment professionals has the
experience to put today's turbulent markets in perspective. We appreciate
your support, and welcome your questions and comments.
/s/ Charles G. Crane
Charles G. Crane, Chief Market Strategist
Key Asset Management
4
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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.
5
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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
In the fall of 1998 interest rates had declined in response to various
financial crises. Year-end pressures created opportunities to extend the
average maturity of the fund; it was assumed that a favorable interest rate
environment would continue into early 1999. As the year unfolded, debate
began to focus on economic strength and potential inflation. The Fed was
concerned that strong growth would have inflationary consequences. By
mid-year it became apparent that the financial crisis was a memory and the
monetary easings that took place late in the year could be reversed. It
became opportunistic to match the maturity of the funds investments with the
conclusion of the various meetings of the Federal Open Market Committee.
Under a new Fed policy it was at these meetings that monetary policy changes
would be announced. This allowed for extending the average maturity of the
portfolio between meetings to avoid intermittent reinvestment risk. While at
the same time being positioned to take advantage of any increase in rates
resulting from monetary policy decisions.
The Fed reversed two-thirds of the easing undertaken in 1998 and at the
least, a total reversal of the previous years should be expected for the
remainder of 1999. As the year draws to a close, managing the fund requires
considering both the technical and fundamental factors that will influence
the market. Technical conditions from Y2K will have the strongest influence
on the market and investment selections. The availability of liquidity in the
marketplace has been the number one concern.
For the year ended October 31, 1999, the Funds' performance was strong. This
can be attributed to timely extension investments made during the year both
in fixed and floating rate securities. In addition. Victory Prime Obligations
and Financial Reserves Fund was positioned to take advantage of the monetary
policy tightenings initiated twice during the year. This had an immediate
impact on the Funds as they were able to capture increased yield resulting
from the policy adjustments.
Looking ahead, the positive yield curve resulting from technical and
fundamental factors in the market will continue to enhance the Funds' yield
as maturing securities will be reinvested at higher yields. Though the supply
of available securities maturing before year end has diminished, the Fed has
pledged to provide adequate liquidity to the markets to soften the effect of
Y2K. In the new year attention will once again be directed toward economic
fundamentals and their impact on interest rates. We believe concern over
technical conditions in the market place will fade in importance.
As of October 31, 1999
U.S. GOVT OBLIGATIONS PRIME FINANCIAL
SELECT INVESTOR OBLIGATIONS RESERVES
Seven-Day Yield 4.45% 4.71% 4.81% 4.88%
Seven-Day Effective Yield 4.55% 4.82% 4.92% 4.99%
One Year Total Return 4.27% 4.54% 4.52% 4.62%
Past performance is not predictive of future results. Yields will fluctuate
with market conditions.
Maturity Schedule1
As of 10/31/99
Days to U.S. GOVT PRIME FINANCIAL
Maturity OBLIGATIONS OBLIGATIONS RESERVES
Less than 30 Days 74.1% 41.4% 51.5%
31 to 60 Days -- 20.8% 16.1%
61 to 90 Days 5.7% 12.5% 5.3%
Greater than 90 Days 20.2% 25.3% 27.1%
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 holdings. Fund holdings may change at any time.
6
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VICTORY MONEY MARKET FUNDS
The Victory Tax-Free Money Market Fund
The Victory Ohio Municipal Money Market Fund
Mixed economic data persisted throughout the year -- strong economy -- high
consumer confidence -- low unemployment -- low inflation. Markets intently
watched for possible Fed intervention in short term interest rates as well as
any Fed biases in rate direction.
At their June and August meetings, the Federal Reserve Open Market Committee
voted to increase the fed funds rate 25 basis points each time in attempts to
avert an overheating economy and a possible inflationary trend. As a result,
by the 4th quarter, yields on 1 year fixed rate notes had risen over 100
basis points from levels in the 1st quarter. Throughout the year, supply and
demand imbalances in the short end of the tax exempt markets also created
volatility in rates. Both events created opportunities to constructively
position the portfolios.
The Funds' performance was largely effected by the mix of fixed and variable
rate securities and timing of those purchases. 1st calendar quarter
performance lagged the Funds' municipal peer group as a result of large
inflows of cash during that period -- Victory Tax Exempt Fund net assets
increased by 43% and Victory Ohio Municipal Money Fund net assets increased
by 37%. Yields on new investments were at their lowest levels of the year.
The new cash was put to work in the shortest maturities (short rate resets)
- -- as market rates increased in 2nd/3rd quarters the Funds recovered and were
able to benefit with higher rates after Fed tightenings. 2nd and 3rd quarter
performance improved.
Year end historically creates unique opportunities in the tax exempt markets.
This year appears no different with the exception of the added challenge of
Y2K uncertainties.
Entering the 4th quarter, the markets continue to watch for Fed intervention
in short term rates. Uncertain monetary policy along with questions about how
investors preparation for Y2K will affect cash flow creates more reason to
stay short than to go long. The Funds are currently positioned at the average
maturity of its municipal peer group, as a defensive measure but will
certainly be more liquid than usual as year end nears ... just in case.
As of October 31, 1999
TAX-FREE OHIO MMMKT
Seven-Day Yield 2.76% 2.69%
Tax Equivalent Yield1 4.31% 4.71%
Seven-Day Effective Yield 2.80% 2.73%
Seven-Day Tax Equivalent
Effective Yield1 4.38% 4.78%
One Year Total Return 2.55% 2.49%
Past performance is not predictive of future results. Yields will fluctuate
with market conditions.
Maturity Schedule2
As of 10/31/99
Days to Maturity TAX-FREE OHIO MMMKT
Less than 30 Days 73.3% 73.4%
31 to 60 Days 8.2% 6.8%
61 to 90 Days 2.0% 1.3%
Greater than 90 Days 16.5% 18.5%
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 4.29%, and the
7-day effective yield and 7-day effective Tax Equivalent Yield of the
Tax-Free Fund would have been 2.38% and 4.17% 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 a Federal regular
income tax rate of 36.0%, and the rate used for the Ohio MMMKT is the
combined 36.0% Federal and 6.9% Ohio state income tax rates. Additional state
and local taxes paid on comparable taxable investments were not used to
increase Federal tax deductions. The income tax rate does not reflect the
possible effects of the Federal alternative minimum tax rate.
2 The Maturity Schedules presented may not be representative of current or
future investment holdings. Fund holdings may change at any time.
7
<PAGE>
Introduction to Taxable Fixed Income Funds
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.
FIXED INCOME SECURITIES UNIVERSE
CREDIT SCREENING PROCESS
DURATION AND MATURITY SCREEN
SHORT-TERM POOL INTERMEDIATE-TERM POOL LONG-TERM POOL
Yield Curve Shape and RELATIVE VALUE ANALYSIS
Movement Analysis Supply and Demand Scarcity; Regulatory Changes;
New Products or Securities; New Issues; Technical
Innovation; Sector Analysis; Investor Sentiment
SHORT-TERM FUND INTERMEDIATE-TERM FUNDS LONG-TERM FUNDS
The Victory Limited Term The Victory Intermediate The Victory Investment
Income Fund Income Fund Quality Bond Fund
The Victory Fund for Income
The Victory Government
Mortgage Fund
1
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 reduced
relative to the benchmark.
3
Relative Value.
The portfolio managers for the Victory Funds combine both technical research
and market experience to seek 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.
8
<PAGE>
VICTORY TAXABLE FIXED INCOME FUNDS
The Victory Limited Term Income Fund
The market environment this year has been one of rising interest rates. The
Federal Reserve raised interest rates twice this year. Inflation is moderate
but accelerating slightly over this time period. Rumors of unprecedented
corporate supply added to the uncertainly in the market. The Limited Term
Income Fund's performance was hampered slightly due to the yield curve
steepening coupled with an overweight in corporate, mortgage and asset-backed
bonds.
For the year ending October 31, 1999, the Fund returned 1.72% at NAV,
compared to the performance of its benchmark, the Lehman 1-3 yr. Treasury
Index,* which returned 2.97%. The Fund has adopted this benchmark because it
is more closely aligned with the portfolio of the Fund. The Merrill Lynch 1-3
yr. Treasury Index, the Fund's previous benchmark, returned 3.00% for the
same period.
Rumors of a heavy supply calendar in the corporate market initially put
pressure on spreads; this widening also affected the mortgage and asset
backed sectors. As the third quarter came to a close the expected supply did
not materialize. This event helped the spreads in the corporate market
rebound. This spread tightening also benefited asset-backed and mortgage
securities.
We continue to focus the portfolio with liquidity and high credit quality as
a priority. As Y2K fears subside we expect to see a more normalized bond
market in the first quarter of 2000. In anticipation of this, we will
continue to look for relative value opportunities in the corporate, mortgage
and asset-backed market.
Victory Limited Term Income Fund
vs. Merrill Lynch 1-3 Yr Treas & Lehman 1-3 Yr Gov't
Limited Limited Term Merrill
Term Class A Lynch Lehman
Class A @ NAV 1-3 Yr Treas 1-3 Yr Gov't
10/31/89 9843 10040 10000 10000
11/30/89 9926 10124 10242 10135
12/31/89 9961 10161 10283 10188
1/31/90 9958 10157 10291 10218
2/28/90 9998 10198 10339 10240
3/31/90 10013 10214 10374 10398
4/30/90 10020 10220 10395 10506
5/31/90 10181 10384 10554 10633
6/30/90 10286 10491 10665 10671
7/31/90 10417 10626 10798 10755
8/31/90 10431 10639 10830 10875
9/30/90 10492 10701 10919 10978
10/31/90 10606 10818 11039 11109
11/30/90 10733 10947 11148 11213
12/31/90 10832 11049 11283 11283
1/31/91 10935 11154 11386 11359
2/28/91 11007 11227 11454 11467
3/31/91 11067 11288 11531 11533
4/30/91 11159 11382 11640 11578
5/31/91 11237 11462 11711 11679
6/30/91 11256 11481 11758 11839
7/31/91 11352 11579 11861 11964
8/31/91 11507 11737 12023 12095
9/30/91 11636 11869 12153 12218
10/31/91 11753 11988 12284 12405
11/30/91 11881 12118 12412 12388
12/31/91 12077 12318 12601 12426
1/31/92 12023 12263 12581 12422
2/29/92 12046 12287 12625 12535
3/31/92 12011 12251 12620 12652
4/30/92 12110 12352 12736 12780
5/31/92 12241 12486 12852 12929
6/30/92 12366 12614 12983 13035
7/31/92 12536 12787 13129 13159
8/31/92 12629 12882 13244 13081
9/30/92 12764 13019 13370 13060
10/31/92 12666 12920 13290 13185
11/30/92 12613 12865 13268 13323
12/31/92 12724 12979 13394 13428
1/31/93 12875 13132 13534 13468
2/28/93 13016 13276 13649 13551
3/31/93 13020 13281 13690 13515
4/30/93 13138 13401 13775 13617
5/31/93 13118 13381 13737 13645
6/30/93 13232 13497 13838 13760
7/31/93 13251 13516 13870 13804
8/31/93 13400 13668 13991 13834
9/30/93 13457 13726 14036 13836
10/31/93 13476 13746 14064 13891
11/30/93 13441 13710 14067 13979
12/31/93 13504 13774 14119 13892
1/31/94 13606 13879 14210 13823
2/28/94 13473 13742 14119 13770
3/31/94 13343 13610 14049 13789
4/30/94 13266 13531 13999 13824
5/31/94 13272 13538 14019 13948
6/30/94 13295 13561 14060 13993
7/31/94 13432 13701 14181 13961
8/31/94 13456 13725 14231 13993
9/30/94 13379 13646 14199 13934
10/31/94 13387 13654 14231 13962
11/30/94 13304 13570 14167 14152
12/31/94 13334 13600 14200 14344
1/31/95 13498 13768 14397 14424
2/28/95 13706 13980 14595 14553
3/31/95 13779 14054 14676 14803
4/30/95 13895 14173 14807 14883
5/31/95 14186 14469 15066 14941
6/30/95 14256 14541 15147 15029
7/31/95 14294 14580 15210 15103
8/31/95 14378 14666 15300 15228
9/30/95 14448 14737 15374 15359
10/31/95 14561 14852 15504 15476
11/30/95 14700 14994 15641 15608
12/31/95 14797 15093 15761 15547
1/31/96 14925 15224 15895 15536
2/29/96 14848 15145 15828 15551
3/31/96 14797 15093 15814 15586
4/30/96 14797 15093 15827 15699
5/31/96 14819 15115 15860 15761
6/30/96 14920 15218 15974 15819
7/31/96 14960 15260 16037 15963
8/31/96 14996 15296 16091 16143
9/30/96 15131 15434 16237 16263
10/31/96 15279 15585 16420 16266
11/30/96 15387 15695 16546 16344
12/31/96 15392 15700 16546 16383
1/31/97 15444 15753 16624 16370
2/28/97 15485 15795 16662 16504
3/31/97 15466 15775 16656 16620
4/30/97 15577 15889 16792 16735
5/31/97 15660 15973 16906 16917
6/30/97 15764 16080 17023 16934
7/31/97 15916 16235 17210 17063
8/31/97 15919 16237 17226 17189
9/30/97 16033 16354 17356 17232
10/31/97 16131 16453 17485 17347
11/30/97 16180 16504 17528 17514
12/31/97 16278 16603 17648 17530
1/31/98 16422 16751 17819 17598
2/28/98 16421 16750 17834 17682
3/31/98 16485 16815 17907 17776
4/30/98 16545 16876 17991 17867
5/31/98 16638 16971 18086 17951
6/30/98 16710 17044 18180 18170
7/31/98 16770 17106 18265 18415
8/31/98 16965 17304 18495 18505
9/30/98 17211 17556 18740 18487
10/31/98 17236 17581 18832 18557
11/30/98 17192 17535 18816 18627
12/31/98 17248 17593 18882 18544
1/31/99 17301 17648 18957 18670
2/28/99 17182 17525 18864 18728
3/31/99 17288 17634 18995 18715
4/30/99 17342 17689 19056 18769
5/31/99 17309 17655 19044 18827
6/30/99 17328 17675 19104 18880
7/31/99 17366 17713 19164 19002
8/31/99 17349 17696 19220 19054
9/30/99 17476 17826 19344 19090
10/31/99 17532 17883 19396 19090
Graph reflects investment growth of a $10,000 investment, since inception.
Past performance is not predictive of future results.
The Merrill Lynch 1-3 Year Treasury Index (Merrill Lynch 1-3 Yr Treas) is an
unmanaged index, generally representative of the general performance of
short-term (1-3 year) U.S. Treasury securities. An investor cannot invest
directly in an index.
* The Lehman 1-3 year Government Index is an unmanaged index, generally
representative of U.S. Treasury and Agency securities with less than three
years to maturity. An investor cannot invest directly in an index.
Total Return
As of 10/31/99
Maximum
Net Asset Offering
Value Price
One Year 1.72% -0.36%
Three Years 4.69% 4.00%
Five Years 5.54% 5.12%
Ten Years 5.94% 5.73%
Average Annual
Since Inception
10/20/89 5.97% 5.76%
Asset Type
Corporate Bonds 19.2%
U.S. Treasury Obligations 25.4%
Asset Backed Securities 15.5%
Commercial Paper 9.4%
U.S. Gov't Mortgage Backed 25.2%
U.S. Gov't Agencies 3.5%
Other Assets 1.8%
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. Total returns
for more than one year are average annual total returns.
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. Fund
holdings are subject to change at any time.
9
<PAGE>
VICTORY TAXABLE FIXED INCOME FUNDS
The Victory Intermediate Income Fund
After a strong spring and a painful summer, the fixed income market improved
significantly during the final two months of this fiscal year. Institutional
accounts built their cash position in anticipation of a large increase in
corporate debt supply that never materialized. As a result, there was too
much cash chasing too few bonds and spreads tightened dramatically. This
tightening affected the rest of the fixed income markets as mortgages,
agencies, and asset-backed securities all outperformed corporate bonds.
For the year ended October 31, 1999, the Intermediate Income Fund ("The
Fund") outperformed (at NAV) the Lehman Intermediate Government Corp Index
return of -0.66%. In fact, the fund outperformed in three of four quarters.
An overweight in spread product as well as a focus on liquidity were the
primary determinants of the Fund's performance. Portfolio turnover reflected
active trading in the mortgage market and opportunistic use of new issuance
in the corporate market. A more substantial position in spread product,
especially corporate Yankees and mortgages, would have increased Fund
performance over the last 12 months.
Liquidity and credit quality will continue to dominate the investment
strategies of the Fund. As Y2K fears abate and we see seasonal buying in the
first quarter of 2000, we anticipate a continued albeit less dramatic
tightening of spreads. Therefore, we will continue to overweight spread
product while keeping a watchful eye on the new issue calendar.
Total Return
As of 10/31/99
Net Asset Maximum
Value Offering
Price
One Year -0.18% -5.91%
Three Years 4.85% 2.81%
Five Years 6.11% 4.87%
Average Annual
Since Inception
12/10/93 4.72% 3.67%
Asset Type
Corporate Bonds 40.5%
U.S. Treasury Obligations 15.2%
Asset Backed Securities 11.3%
U.S. Gov't Mortgage Backed 16.3%
Commercial Paper 3.9%
U.S. Gov't Agencies 11.5%
Victory Intermediate Income Fund
vs. Lehman Int Gov't/Corp
Intermediate Intermediate Income Lehman Int
Income Class A Class A @ NAV Govt/Corp
12/31/93 9407 9980 10000
1/31/94 9501 10081 10111
2/28/94 9363 9934 9962
3/31/94 9236 9799 9797
4/30/94 9164 9723 9731
5/31/94 9164 9723 9737
6/30/94 9167 9727 9738
7/31/94 9273 9838 9879
8/31/94 9285 9851 9910
9/30/94 9193 9754 9818
10/31/94 9191 9752 9817
11/30/94 9145 9703 9772
12/31/94 9181 9741 9807
1/31/95 9333 9902 9972
2/28/95 9491 10069 10179
3/31/95 9548 10130 10237
4/30/95 9656 10245 10364
5/31/95 9944 10550 10677
6/30/95 9998 10608 10749
7/31/95 9995 10604 10750
8/31/95 10086 10702 10848
9/30/95 10148 10767 10927
10/31/95 10261 10886 11048
11/30/95 10383 11017 11194
12/31/95 10469 11108 11311
1/31/96 10562 11207 11409
2/29/96 10427 11063 11275
3/31/96 10366 10998 11217
4/30/96 10315 10944 11177
5/31/96 10291 10919 11168
6/30/96 10394 11029 11287
7/31/96 10414 11049 11321
8/31/96 10412 11047 11330
9/30/96 10548 11191 11487
10/31/96 10728 11382 11690
11/30/96 10843 11504 11845
12/31/96 10789 11447 11769
1/31/97 10826 11487 11814
2/28/97 10841 11502 11837
3/31/97 10757 11413 11755
4/30/97 10878 11542 11893
5/31/97 10949 11617 11992
6/30/97 11044 11718 12102
7/31/97 11270 11957 12348
8/31/97 11200 11884 12286
9/30/97 11331 12022 12429
10/31/97 11438 12136 12566
11/30/97 11461 12161 12594
12/31/97 11550 12254 12695
1/31/98 11698 12412 12861
2/28/98 11695 12409 12851
3/31/98 11719 12434 12892
4/30/98 11776 12495 12957
5/31/98 11868 12592 13052
6/30/98 11944 12673 13135
7/31/98 11975 12706 13182
8/31/98 12181 12924 13389
9/30/98 12460 13220 13725
10/31/98 12387 13142 13712
11/30/98 12364 13118 13711
12/31/98 12417 13174 13766
1/31/99 12481 13242 13841
2/28/99 12277 13026 13638
3/31/99 12393 13149 13740
4/30/99 12420 13178 13782
5/31/99 12305 13055 13676
6/30/99 12282 13031 13685
7/31/99 12284 13034 13673
8/31/99 12275 13024 13684
9/30/99 12386 13141 13811
10/31/99 12365 13119 13847
Graph reflects investment growth of a $10,000 investment.
Past performance is not predictive of future results.
The Lehman Brothers Intermediate Government/Corporate Bond Index (Lehman Int
Gov't/Corp) is an unmanaged index, generally representative of
investment-grade corporate debt securities and U.S. Treasury and U.S.
Government Agency debt securities that mature in one to ten years. An
investor cannot invest directly in an index.
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. Total returns
for more than one year are average annual total returns.
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.
Fund holdings are subject to change at any time.
10
<PAGE>
VICTORY TAXABLE FIXED INCOME FUNDS
The Victory Fund for Income
As investors viewed with amazement the wealth being generated via stock
market gains, the past year was rather sobering for bond investors. While the
Federal Reserve and bond market participants worried about historically low
levels of unemployment, rising energy prices driving up the consumer price
index and equity investors "irrational exuberance," interest rates marched
steadily higher. The U.S. Treasury 30-year bond went from a low of 4.95% on
December 10, 1998, and closed on October 29, 1999, at 6.18%, a 123 basis
point increase. Simply put, this is not an environment that is conducive for
bond investors.
Although the Victory Fund for Income was above average versus the Lipper GNMA
Fund Average,* we realize that relative performance is of little comfort
during such a difficult year for bond investors.
But the Fund's emphasis on coupon income, which in the long run is the single
Most important factor in determining long-term performance, cushioned
investors during the back-up in interest rates. In good times and bad times,
we believe our strategy of maintaining an income focus and minimizing the
impact of mortgage refinancing, will potentially reward our shareholders with
consistent monthly dividends and consistent performance relative to the
Lipper GNMA Fund Average.*
As we approach the end of 1999 and the looming Y2K phenomenon, uncertainty
abounds as investors contemplate what will or will not occur. In general, we
are confident that Corporate America is well prepared for the transition to
the new millennium. But, the reaction in the market place could result in
unusual price behavior and a high level of volatility. In this environment,
we will remain conservatively positioned, but watchful of opportunities that
may arise due to the unique nature that history presents as we come to the
end of the 20th Century.
Victory Fund for Income
vs. Lehman Mortgage
Fund for Income Fund for Income Lehman
Class A Class A @ NAV Mortgage
10/31/89 9800 10000 10000
11/30/89 9888 10090 10108
12/31/89 9955 10158 10168
1/31/90 9846 10047 10096
2/28/90 9867 10069 10155
3/31/90 9881 10083 10179
4/30/90 9770 9969 10088
5/31/90 10298 10508 10400
6/30/90 10209 10417 10565
7/31/90 10351 10562 10749
8/31/90 10212 10420 10635
9/30/90 10291 10501 10722
10/31/90 10428 10641 10843
11/30/90 10674 10892 11071
12/31/90 10830 11051 11257
1/31/91 10970 11194 11428
2/28/91 11018 11243 11524
3/31/91 11076 11302 11602
4/30/91 11185 11413 11709
5/31/91 11246 11476 11812
6/30/91 11230 11459 11823
7/31/91 11389 11621 12022
8/31/91 11619 11856 12241
9/30/91 11806 12047 12470
10/31/91 11933 12176 12677
11/30/91 12030 12275 12768
12/31/91 12354 12606 13025
1/31/92 12152 12400 12874
2/29/92 12260 12510 12996
3/31/92 12147 12395 12913
4/30/92 12220 12469 13040
5/31/92 12458 12713 13274
6/30/92 12623 12881 13431
7/31/92 12818 13079 13545
8/31/92 12956 13221 13721
9/30/92 13095 13363 13828
10/31/92 12955 13220 13707
11/30/92 12960 13225 13749
12/31/92 13132 13399 13926
1/31/93 13350 13623 14109
2/28/93 13501 13776 14251
3/31/93 13563 13840 14338
4/30/93 13661 13940 14413
5/31/93 13678 13958 14495
6/30/93 13858 14141 14605
7/31/93 13927 14212 14664
8/31/93 14026 14312 14733
9/30/93 14049 14336 14746
10/31/93 14115 14403 14789
11/30/93 14044 14330 14759
12/31/93 14128 14416 14879
1/31/94 14278 14569 15026
2/28/94 14121 14410 14921
3/31/94 13697 13976 14533
4/30/94 13592 13870 14425
5/31/94 13617 13895 14483
6/30/94 13555 13831 14451
7/31/94 13788 14069 14740
8/31/94 13802 14084 14787
9/30/94 13584 13861 14577
10/31/94 13540 13816 14568
11/30/94 13460 13735 14523
12/31/94 13607 13884 14639
1/31/95 13890 14173 14953
2/28/95 14255 14546 15334
3/31/95 14323 14616 15406
4/30/95 14508 14804 15625
5/31/95 15017 15324 16117
6/30/95 15111 15419 16209
7/31/95 15084 15392 16237
8/31/95 15233 15544 16405
9/30/95 15384 15698 16550
10/31/95 15535 15852 16697
11/30/95 15735 16056 16887
12/31/95 15947 16273 17099
1/31/96 16037 16364 17227
2/29/96 15859 16183 17084
3/31/96 15779 16101 17022
4/30/96 15661 15981 16975
5/31/96 15605 15923 16925
6/30/96 15783 16105 17159
7/31/96 15813 16135 17222
8/31/96 15818 16140 17222
9/30/96 16049 16376 17510
10/31/96 16383 16717 17853
11/30/96 16629 16968 18109
12/31/96 16506 16843 18014
1/31/97 16588 16927 18148
2/28/97 16619 16958 18208
3/31/97 16443 16779 18036
4/30/97 16657 16997 18323
5/31/97 16833 17176 18503
6/30/97 16995 17342 18719
7/31/97 17318 17671 19071
8/31/97 17244 17596 19025
9/30/97 17465 17821 19267
10/31/97 17674 18035 19481
11/30/97 17709 18071 19545
12/31/97 17886 18251 19723
1/31/98 18085 18454 19918
2/28/98 18093 18463 19960
3/31/98 18143 18513 20044
4/30/98 18220 18592 20158
5/31/98 18354 18728 20291
6/30/98 18453 18829 20389
7/31/98 18524 18902 20493
8/31/98 18822 19206 20679
9/30/98 19135 19525 20929
10/31/98 19037 19425 20902
11/30/98 19095 19485 21007
12/31/98 19204 19595 21097
1/31/99 19254 19647 21247
2/28/99 19134 19525 21162
3/31/99 19250 19643 21304
4/30/99 19318 19712 21401
5/31/99 19223 19615 21282
6/30/99 19156 19547 21207
7/31/99 19101 19490 21063
8/31/99 19074 19463 21063
9/30/99 19319 19713 21404
10/31/99 19373 19768 21529
Graph reflects investment growth of a $10,000 investment.
Past performance is not predictive of future results.
The Lehman Brothers Mortgage-Backed Securities Index (Lehman Mortgage) is an
unmanaged index, generally representative of the general performance of fixed
rate mortgage bonds. An investor cannot invest directly in an index.
Total Return
As of 10/31/99
FUND FOR INCOME Class A FUND FOR INCOME Class G
Maximum
Net Asset Offering Net Asset
Value Price Value
One Year 1.77% -0.25% 1.83%
Three Years 5.75% 5.05% 5.77%
Five Years 7.43% 6.99% 7.44%
Ten Years 7.05% 6.83% 7.06%
Average Annual
Since Inception
9/16/87 7.75% 7.57% 7.76%
Asset Type
U.S. Gov't Mortgage Backed 84.4%
U.S. Treasury Obligations 14.7%
Other Assets 0.9%
Effective March 26, 1999, the Gradison Government Income Fund merged into the
Victory Fund for Income. For periods prior to that time, the performance
shown is that of the Gradison Government Income Fund. Performance of Class A
and Class G shares will differ due to differences in sales charge structure
and class expenses.
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. Total returns
for more than one year are average annual total returns.
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. Fund
holdings are subject to change at any time.
* The Lipper GNMA Fund Average represents the average performance of a
universe of 54 actively managed GNMA bond funds. Lipper is an independent
mutual fund performance monitor based on total returns and do not reflect
sales charges.
11
<PAGE>
VICTORY TAXABLE FIXED INCOME FUNDS
The Victory Government Mortgage Fund
The 1.38% one year return of the Victory Government Mortgage Fund (at NAV)
was in line with the Lipper mortgage fund universe* at 1.66%, but lagged the
return of the Lehman Brothers Mortgage-Backed Securities Index** at 3.00% for
the year ended October 31, 1999. Last year, we wrote that the fund would
`cautiously look to take advantage' of the compelling values then extant in
the mortgage market. That approach proved too deliberate. The cautious
approach that was so beneficial in 1998 proved to be a drag on performance
early in the year. Unlike 1998, relatively risky investments led performance
while the most liquid mortgage securities lagged. Additionally, in
restructuring the portfolio, the fund was positioned to benefit most from
falling rates and tighter spreads. The former has yet to occur and the latter
has come in fits and starts. Why?
Over the last 12 months, the markets have had a difficult time focusing on
reality for any length of time. Beginning on the 2nd calendar quarter of
1999, the brief clarity of the first quarter quickly gave way to the haze of
uncertainty that had dominated the market for the better part of a year. Once
again, a stronger than expected economy prompted the Fed to threaten and then
act to raise interest rates. While it waited for definitive action, questions
like whether, when, and by how much peppered an uncertain bond market causing
rates to rise and spreads to widen. In general, related spread sectors met
with heavy supply as issuers sought to avoid potential Y2k-related fourth
quarter liquidity problems. Additionally, the mortgage market came to grips
with the fact that prepayments were slowing and price sensitivities
(durations) were growing. Those that wrongly assumed that certain securities
had no duration were rudely awakened. They sold whatever was handy in order
to shorten their portfolio durations. In their semi-somnolent haste they let
real value get away. The combination of panic selling and generally higher
rates led to a negative 0.45% mortgage return for the quarter.
As we all know, panic tends to be a self-extinguishing phenomena. It's
exhausting. While this means that spreads should be held in check, we may be
faced with apathy for a little while longer. The issues that have affected
the broader bond market this year, liquidity and the Fed, endure. That said,
in many respects, mortgages offer greater value now than they did at the
beginning of the year. Prepayment risk is less while nominal spreads are
greater (greater reward+lower risk=greater value.) The strong housing market
means that discount securities will produce greater cashflow (reinvestable at
today's higher rates) than traditionally expected. Higher rates mean that
dollars invested in higher coupon securities will work longer for the
investor. We believe the patient investor, who gradually adds to their
mortgage exposure will likely be rewarded handsomely if and when the bond
market finally awakens for good.
Currently the Fund has a slight bias to premium securities where borrowers
have demonstrated relatively inefficient refinancing behavior. Hence, while
the Fund should perform well in a flat to rising rate environment, we believe
the Fund remains positioned to perform better in a steady bond market rally.
Total Return
As of 10/31/99
Maximum
Net Asset Offering
Value Price
One Year 1.38% -4.49%
Three Years 5.57% 3.49%
Five Years 7.11% 5.85%
Average Annual
Since Inception
5/18/90 7.45% 6.78%
Asset Type
U.S. Gov't Mortgage Backed 92.7%
When Issued Securities 0.8%
U.S. Gov't Agencies 5.9%
Other Assets 0.6%
Victory Government Mortgage
vs. Lehman Mortgage
Government Mortgage Government Mortgage Lehman
Class A Class A @ NAV Mortgage
5/18/90 9425 10000 10000
11/30/90 10120 10738 11071
12/31/90 10249 10874 11257
1/31/91 10347 10978 11428
2/28/91 10418 11054 11524
3/31/91 10458 11096 11602
4/30/91 10558 11202 11709
5/31/91 10625 11273 11812
6/30/91 10607 11254 11823
7/31/91 10722 11376 12022
8/31/91 10972 11641 12241
9/30/91 11172 11853 12470
10/31/91 11298 11987 12677
11/30/91 11462 12162 12768
12/31/91 11790 12510 13025
1/31/92 11612 12320 12874
2/29/92 11619 12328 12996
3/31/92 11542 12246 12913
4/30/92 11651 12361 13040
5/31/92 11856 12579 13274
6/30/92 12049 12784 13431
7/31/92 12316 13067 13545
8/31/92 12455 13215 13721
9/30/92 12680 13453 13828
10/31/92 12465 13225 13707
11/30/92 12356 13110 13749
12/31/92 12527 13291 13926
1/31/93 12799 13580 14109
2/28/93 13029 13824 14251
3/31/93 13065 13862 14338
4/30/93 13184 13988 14413
5/31/93 13137 13938 14495
6/30/93 13308 14120 14605
7/31/93 13322 14135 14664
8/31/93 13518 14343 14733
9/30/93 13569 14397 14746
10/31/93 13594 14423 14789
11/30/93 13522 14347 14759
12/31/93 13552 14378 14879
1/31/94 13657 14490 15026
2/28/94 13539 14364 14921
3/31/94 13230 14037 14533
4/30/94 13117 13918 14425
5/31/94 13178 13982 14483
6/30/94 13144 13946 14451
7/31/94 13378 14194 14740
8/31/94 13394 14211 14787
9/30/94 13212 14018 14577
10/31/94 13184 13988 14568
11/30/94 13165 13968 14523
12/31/94 13272 14082 14639
1/31/95 13520 14344 14953
2/28/95 13839 14683 15334
3/31/95 13879 14726 15406
4/30/95 14059 14917 15625
5/31/95 14474 15357 16117
6/30/95 14563 15452 16209
7/31/95 14575 15464 16237
8/31/95 14710 15608 16405
9/30/95 14833 15738 16550
10/31/95 14969 15882 16697
11/30/95 15117 16039 16887
12/31/95 15291 16224 17099
1/31/96 15386 16325 17227
2/29/96 15227 16156 17084
3/31/96 15167 16092 17022
4/30/96 15117 16039 16975
5/31/96 15094 16014 16925
6/30/96 15226 16155 17159
7/31/96 15289 16221 17222
8/31/96 15289 16222 17222
9/30/96 15515 16461 17510
10/31/96 15799 16763 17853
11/30/96 16015 16992 18109
12/31/96 15932 16904 18014
1/31/97 16042 17021 18148
2/28/97 16060 17040 18208
3/31/97 15922 16893 18036
4/30/97 16161 17147 18323
5/31/97 16301 17295 18503
6/30/97 16489 17495 18719
7/31/97 16804 17829 19071
8/31/97 16746 17768 19025
9/30/97 16936 17969 19267
10/31/97 17097 18140 19481
11/30/97 17167 18215 19545
12/31/97 17327 18384 19723
1/31/98 17516 18585 19918
2/28/98 17525 18594 19960
3/31/98 17597 18671 20044
4/30/98 17703 18782 20158
5/31/98 17821 18908 20291
6/30/98 17902 18994 20389
7/31/98 17958 19053 20493
8/31/98 18177 19286 20679
9/30/98 18396 19518 20929
10/31/98 18334 19452 20902
11/30/98 18419 19543 21007
12/31/98 18489 19617 21097
1/31/99 18573 19706 21247
2/28/99 18437 19562 21162
3/31/99 18554 19685 21304
4/30/99 18621 19757 21401
5/31/99 18485 19612 21282
6/30/99 18349 19468 21207
7/31/99 18281 19397 21063
8/31/99 18247 19360 21063
9/30/99 18511 19640 21404
10/31/99 18587 19721 21529
Graph reflects investment growth of a $10,000 investment.
Past performance is not predictive of future results.
** The Lehman Brothers Mortgage-Backed Securities Index (Lehman Mortgage) is
an unmanaged index, generally representative of fixed rate mortgage bonds. An
investor cannot invest directly in an index.
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. Total returns
for more than one year are average annual total returns.
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.
Fund holdings are subject to change at any time.
* The Lipper U.S. Mortgage Funds Index is an unmanaged index, generally
representative of the 30 largest funds within the Lipper U.S. Mortgage Funds
category. An investor cannot invest directly in an index.
12
<PAGE>
VICTORY TAXABLE FIXED INCOME FUNDS
The Victory Investment Quality Bond Fund
Liquidity became the Bond Market watchword throughout the year as two of the
three Federal Reserve eases in late 1998 were rescinded by October 1999. This
ebb and flow of Federal Reserve policy had a direct impact on the portfolio
and produced one of the poorest performing bond markets in history.
The Bond Market did rally early in the year with corporate bonds leading
sector performance. During the second half of the year the market tumbled,
caused by a restrictive central bank policy (two interest rate hikes), a jump
in oil prices, and Y2K driven supply pressures.
During the second half of the year performance was hampered by a modestly
longer market duration, and overweighted holdings in corporates, mortgage
backed and asset backed issues. Portfolio turnover reflected active trading
in the mortgage market and opportunistic use of new issuance in the corporate
market.
A number of current constraints in the Bond Market should ease during the
upcoming year. Quality fixed income sectors such as corporates and mortgages
should benefit from a lighter supply calender. The eventual conclusion to the
current spate of Federal Reserve interest rate increases should leave the
market attractively valued with fairer weather ahead.
Victory Investment Quality Bond Fund
vs. Lehman Aggregate
Investment Quality Investment Quality Lehman
Bond Class A Bond Class A @ NAV Aggregate
12/10/93 9425 10000 10000
1/31/94 9494 10074 10190
2/28/94 9356 9927 10013
3/31/94 9152 9710 9766
4/30/94 9079 9633 9688
5/31/94 9069 9622 9687
6/30/94 9044 9596 9665
7/31/94 9201 9762 9857
8/31/94 9196 9757 9870
9/30/94 9076 9630 9724
10/31/94 9055 9608 9716
11/30/94 9060 9613 9694
12/31/94 9142 9700 9761
1/31/95 9293 9860 9954
2/28/95 9493 10072 10191
3/31/95 9534 10115 10253
4/30/95 9664 10254 10397
5/31/95 10038 10650 10799
6/30/95 10091 10707 10878
7/31/95 10050 10663 10854
8/31/95 10166 10786 10985
9/30/95 10252 10877 11092
10/31/95 10379 11012 11236
11/30/95 10526 11168 11404
12/31/95 10665 11315 11564
1/31/96 10708 11361 11641
2/29/96 10533 11176 11439
3/31/96 10453 11091 11359
4/30/96 10383 11016 11295
5/31/96 10341 10971 11273
6/30/96 10454 11092 11424
7/31/96 10476 11115 11455
8/31/96 10441 11078 11436
9/30/96 10623 11271 11635
10/31/96 10861 11523 11893
11/30/96 11050 11724 12097
12/31/96 10927 11594 11984
1/31/97 10965 11634 12021
2/28/97 10977 11647 12051
3/31/97 10846 11507 11917
4/30/97 10991 11662 12096
5/31/97 11083 11759 12210
6/30/97 11209 11893 12355
7/31/97 11514 12217 12688
8/31/97 11397 12093 12580
9/30/97 11552 12256 12765
10/31/97 11694 12407 12951
11/30/97 11731 12447 13010
12/31/97 11851 12574 13141
1/31/98 12007 12740 13310
2/28/98 11980 12711 13300
3/31/98 12018 12751 13346
4/30/98 12077 12814 13415
5/31/98 12196 12940 13543
6/30/98 12297 13047 13657
7/31/98 12305 13055 13686
8/31/98 12513 13276 13909
9/30/98 12769 13548 14235
10/31/98 12636 13407 14160
11/30/98 12691 13465 14240
12/31/98 12740 13517 14283
1/31/99 12807 13588 14385
2/28/99 12551 13316 14134
3/31/99 12628 13398 14212
4/30/99 12668 13440 14257
5/31/99 12528 13292 14132
6/30/99 12455 13215 14087
7/31/99 12409 13166 14027
8/31/99 12377 13132 14020
9/30/99 12517 13281 14183
10/31/99 12487 13249 14235
Graph reflects investment growth of a $10,000 investment.
Past performance is not predictive of future results.
The Lehman Brothers Aggregate Bond Index (Lehman Aggregate) is an unmanaged
index, generally representative of longer-term (greater than 1 year),
investment-grade fixed-income securities. An investor cannot invest directly
in an index.
Total Return
As of 10/31/99
Maximum
Net Asset Offering
Value Price
One Year -1.18% -6.86%
Three Years 4.76% 2.71%
Five Years 6.64% 5.37%
Average Annual
Since Inception
12/10/93 4.89% 3.84%
Asset Type
Corporate Bonds 32.0%
U.S. Treasury Obligations 14.3%
Asset Backed Securities 5.8%
U.S. Gov't Mortgage Backed 39.9%
Commercial Paper 0.2%
When Issued Securities 0.3%
U.S. Gov't Agencies 6.0%
Other Assets 1.5%
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. Total returns
for more than one year are average annual total returns.
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.
Fund holdings are subject to change at any time.
13
<PAGE>
Introduction to Municipal Fixed Income Funds
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.
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 portfolio managers of the Victory Funds utilize a three-dimensional
approach to managing municipal portfolios.
1
Research.
Credit analysis of municipal securities and issuers is an on-going process.
Portfolio managers and credit analysts review over 2,000 existing issues
annually in addition to up to 500 new issues each year. Analysts review
important factors such as the structure of the offering and the financial
status of the issuing entity, as well as any underlying credit enhancements,
including insurance and letters of credit.
2
No large "Duration Bets" are taken.
Portfolios are carefully managed to keep their duration consistent with their
appropriate benchmark.
3
Relative Value.
The portfolio manager seeks to identify inefficiencies in the marketplace
that may result in an increase in the relative value of the securities both
in the portfolio and available in the market place. Differences in relative
value of municipal securities are created by factors such as geographic and
economic trends, regulatory changes, forces of supply and demand and investor
sentiment.
The portfolio management team for the Victory Municipal Funds seeks to keep
the municipal portfolios fully invested while focusing on maintaining
superior credit quality and adequate liquidity.
14
<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 year ended October 31, 1999 was not a friendly period for municipal
bonds. Barring a late fourth quarter rally, we have seen the worst
performance in municipals since the market downdraft of 1994.
The National Municipal Bond Fund continued its pattern of strong performance
versus its peer group, Lipper Intermediate Municipal Debt Funds. As of
10/31/99 the Fund Class A at NAV ranked 45 out of 132 in it's peer group for
the one year period, 2 out of 117 for the three year period and 2 out of 91
for the five year period. The Lipper rankings are based upon total returns
and do not reflect sales charges.
The Ohio Municipal Bond Fund also continued it's strong performance versus
it's peer group, Ohio Municipal Debt Funds. As of 10/31/99 the Fund Class A
at NAV ranked 4 out of 51 for the one year period, 5 out of 47 for the three
year period and 4 out of 41 for the five year period.
The New York Tax-Free Bond Fund continues to be managed for income. The
shorter duration of the Fund that has hurt it's performance in past years
ended helping it this year as the fund finished the year ending 10/31/99
ranked 1 out of 11 funds for a one year period, 7 out of 10 for the three
year period and 7 out of 7 for the five year period in its peer group Lipper
New York Insured Municipal Debt Funds.
All three funds continued to be highly concentrated in AAA insured bonds as
credit spreads remain narrow.
The Victory National Municipal Bond Fund
Victory National Municipal Bond Fund
vs. Lehman 7-Yr & 10-Yr Muni
National Muni National Muni Lehman Lehman
Class A Class A @ NAV 7-Yr Muni 10-Yr Muni
2/3/94 9425 10000 10000 10000
11/30/94 8792 9328 9691 9241
12/31/94 8953 9499 9838 9407
1/31/95 9222 9784 10022 9651
2/28/95 9419 9993 10248 9924
3/31/95 9532 10114 10354 10058
4/30/95 9544 10127 10381 10070
5/31/95 9805 10403 10658 10389
6/30/95 9793 10391 10648 10325
7/31/95 9932 10537 10783 10477
8/31/95 10054 10667 10910 10619
9/30/95 10106 10723 10952 10687
10/31/95 10250 10875 11047 10810
11/30/95 10372 11005 11169 10955
12/31/95 10535 11178 11228 11022
1/31/96 10633 11282 11337 11134
2/29/96 10652 11302 11298 11088
3/31/96 10494 11134 11189 10950
4/30/96 10471 11110 11168 10911
5/31/96 10482 11122 11152 10881
6/30/96 10542 11185 11238 10984
7/31/96 10652 11302 11331 11090
8/31/96 10640 11289 11337 11090
9/30/96 10727 11382 11439 11204
10/31/96 10846 11507 11562 11345
11/30/96 11028 11701 11755 11575
12/31/96 11004 11675 11720 11523
1/31/97 11010 11682 11762 11568
2/28/97 11109 11787 11859 11677
3/31/97 10980 11649 11706 11521
4/30/97 11058 11732 11766 11606
5/31/97 11221 11905 11915 11770
6/30/97 11342 12034 12029 11900
7/31/97 11654 12365 12308 12234
8/31/97 11529 12232 12221 12116
9/30/97 11667 12379 12350 12269
10/31/97 11725 12440 12423 12334
11/30/97 11783 12501 12467 12392
12/31/97 11968 12698 12620 12587
1/31/98 12063 12799 12753 12727
2/28/98 12093 12831 12764 12726
3/31/98 12093 12830 12764 12717
4/30/98 11999 12731 12690 12647
5/31/98 12223 12968 12877 12862
6/30/98 12273 13021 12913 12910
7/31/98 12302 13053 12955 12930
8/31/98 12516 13280 13152 13155
9/30/98 12661 13434 13322 13350
10/31/98 12681 13455 13342 13356
11/30/98 12701 13475 13378 13396
12/31/98 12722 13498 13406 13438
1/31/99 12896 13683 13602 13644
2/28/99 12816 13598 13525 13521
3/31/99 12807 13588 13520 13514
4/30/99 12846 13630 13552 13550
5/31/99 12766 13545 13486 13455
6/30/99 12576 13343 13291 13205
7/31/99 12666 13438 13381 13294
8/31/99 12646 13417 13350 13245
9/30/99 12637 13408 13400 13290
10/31/99 12555 13321 13343 13196
Graph reflects investment growth of a $10,000 investment.
Past performance is not predictive of future results.
The Lehman Brothers 7-year Muni Bond Fund Index is an unmanaged index,
generally representative of investment grade muni bonds with maturities of
6-8 years, weighted according to the total market value of each bond in the
Index. An investor cannot invest directly in an index.
The Lehman Brothers 10-year Municipal Bond Index (Lehman 10 Yr Muni) is an
unmanaged index, generally representative of investment-grade municipal bonds
with maturities of 8-12 years. An investor cannot invest directly in an
index.
Total Return
As of 10/31/99
NATIONAL MUNI Class A NATIONAL MUNI Class B
Maximum Contingent
Net Asset Offering Net Asset Deferred
Value Price Value Charges
One Year -0.99% -6.72% -2.09% -5.82%
Three Years 5.00% 2.95% 3.76% 2.82%
Five Years 6.91% 5.64% 5.83% 5.67%
Average Annual
Since Inception
2/3/94 5.12% 4.04% 4.16% 4.01%
Maturity Schedule
Less Than One Year 11.1%
1-5 Years 28.7%
6-10 Years 58.1%
11-20 Years 2.1%
Total returns are historical and include the change in share price and
reinvestment of dividends and capital gain distributions, and unless
indicated, show the effect of the maximum 5.75% sales charge for Class A
Shares and the maximum 5.50% deferred sales charge for Class B Shares. Total
returns for more than one year are average annual total returns. Performance
of the different classes of shares will vary based on the differences in
sales charges and class specific expenses paid by the shareholders.
Performance information prior to March 1, 1996, the Class B Shares inception
date, reflects the performance of Class A Shares, which has not been adjusted
for the expenses of Class B Shares.
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. Fund
holdings are subject to change at any time.
15
<PAGE>
The Victory New York Tax-Free Fund
Victory New York Tax-Free Fund
vs. Lehman 10-Yr Muni
NY Tax Free NY Tax Free Lehman
Class A Class A @ NAV 10-Yr Muni
2/11/91 9427 10000 10000
3/31/91 9415 9988 10081
4/30/91 9567 10149 10220
5/31/91 9678 10267 10297
6/30/91 9600 10184 10285
7/31/91 9757 10350 10393
8/31/91 9897 10500 10533
9/30/91 10030 10640 10694
10/31/91 10108 10722 10782
11/30/91 10069 10681 10800
12/31/91 10352 10982 11030
1/31/92 10280 10905 11053
2/29/92 10345 10974 11036
3/31/92 10373 11004 11019
4/30/92 10484 11122 11124
5/31/92 10588 11232 11254
6/30/92 10725 11377 11449
7/31/92 11189 11869 11825
8/31/92 10985 11653 11685
9/30/92 10977 11645 11782
10/31/92 10832 11491 11662
11/30/92 11093 11768 11875
12/31/92 11207 11889 12013
1/31/93 11323 12012 12216
2/28/93 11717 12429 12663
3/31/93 11620 12327 12478
4/30/93 11734 12448 12597
5/31/93 11832 12552 12641
6/30/93 11974 12702 12890
7/31/93 12045 12778 12922
8/31/93 12280 13027 13190
9/30/93 12405 13159 13353
10/31/93 12476 13235 13375
11/30/93 12354 13106 13265
12/31/93 12590 13356 13548
1/31/94 12719 13493 13714
2/28/94 12489 13248 13339
3/31/94 12132 12870 12829
4/30/94 12107 12844 12990
5/31/94 12182 12923 13074
6/30/94 12148 12887 13018
7/31/94 12298 13047 13236
8/31/94 12306 13055 13287
9/30/94 12187 12928 13108
10/31/94 12048 12781 12917
11/30/94 11829 12549 12673
12/31/94 12013 12744 12901
1/31/95 12260 13006 13235
2/28/95 12531 13293 13610
3/31/95 12637 13406 13794
4/30/95 12670 13441 13811
5/31/95 12937 13724 14248
6/30/95 12951 13739 14160
7/31/95 13037 13830 14368
8/31/95 13111 13909 14563
9/30/95 13202 14005 14656
10/31/95 13351 14163 14825
11/30/95 13501 14322 15024
12/31/95 13612 14440 15116
1/31/96 13681 14513 15269
2/29/96 13656 14487 15207
3/31/96 13472 14292 15017
4/30/96 13455 14274 14964
5/31/96 13468 14287 14922
6/30/96 13554 14378 15064
7/31/96 13692 14525 15209
8/31/96 13744 14580 15209
9/30/96 13855 14698 15365
10/31/96 13955 14804 15559
11/30/96 14109 14967 15874
12/31/96 14088 14945 15803
1/31/97 14096 14953 15865
2/28/97 14202 15066 16015
3/31/97 14078 14934 15800
4/30/97 14170 15031 15916
5/31/97 14296 15166 16142
6/30/97 14407 15283 16320
7/31/97 14682 15575 16779
8/31/97 14589 15476 16616
9/30/97 14701 15596 16827
10/31/97 14760 15658 16916
11/30/97 14815 15716 16994
12/31/97 14939 15848 17262
1/31/98 15021 15935 17454
2/28/98 15022 15936 17453
3/31/98 15053 15969 17441
4/30/98 14987 15898 17345
5/31/98 15192 16116 17639
6/30/98 15261 16190 17704
7/31/98 15298 16229 17733
8/31/98 15542 16487 18041
9/30/98 15713 16669 18309
10/31/98 15663 16615 18317
11/30/98 15722 16678 18372
12/31/98 15735 16692 18429
1/31/99 15872 16837 18711
2/28/99 15836 16799 18543
3/31/99 15836 16800 18534
4/30/99 15863 16828 18583
5/31/99 15802 16763 18453
6/30/99 15652 16604 18110
7/31/99 15679 16633 18232
8/31/99 15592 16540 18165
9/30/99 15529 16474 18226
10/31/99 15390 16326 18097
Graph reflects investment growth of a $10,000 investment.
Past performance is not predictive of future results.
The Lehman Brothers 10-year Municipal Bond Index (Lehman 10 Yr Muni) is an
unmanaged index, generally representative of investment-grade municipal bonds
with maturities of 8-12 years. An investor cannot invest directly in an
index.
Total Return
As of 10/31/99
NY TAX-FREE Class A NY TAX-FREE Class B
Maximum Contingent
Net Asset Offering Net Asset Deferred
Value Price Value Charges
One Year -1.74% -7.38% -2.70% -6.44%
Three Years 3.32% 1.29% 2.31% 1.41%
Five Years 5.02% 3.78% 4.12% 3.96%
Average Annual
Since Inception
2/11/91 5.78% 5.07% 5.23% 5.23%
Maturity Schedule
Less Than One Year 14.5%
1-5 Years 49.0%
6-10 Years 20.1%
11-20 Years 16.4%
The Victory Ohio Municipal Bond Fund
Victory Ohio Municipal Bond Fund
vs. Lehman 10-Yr Muni
Ohio Municipal Ohio Municipal Lehman
Class A Class A @ NAV 10-Yr Muni
5/18/90 9425 10000 10000
11/30/90 9879 10481 10750
12/31/90 9908 10512 10776
1/31/91 10051 10664 10954
2/28/91 10149 10768 11048
3/31/91 10120 10738 11042
4/30/91 10247 10872 11195
5/31/91 10322 10952 11279
6/30/91 10301 10929 11266
7/31/91 10389 11023 11384
8/31/91 10510 11152 11537
9/30/91 10632 11281 11714
10/31/91 10693 11345 11810
11/30/91 10720 11374 11829
12/31/91 10973 11642 12082
1/31/92 11011 11682 12107
2/29/92 11006 11678 12089
3/31/92 10982 11652 12070
4/30/92 11065 11740 12185
5/31/92 11187 11870 12328
6/30/92 11330 12021 12541
7/31/92 11660 12372 12952
8/31/92 11524 12227 12799
9/30/92 11586 12293 12906
10/31/92 11478 12178 12774
11/30/92 11696 12409 13008
12/31/92 11824 12546 13159
1/31/93 11968 12698 13381
2/28/93 12398 13155 13870
3/31/93 12206 12951 13668
4/30/93 12377 13132 13798
5/31/93 12444 13204 13846
6/30/93 12685 13459 14119
7/31/93 12666 13438 14155
8/31/93 12928 13717 14448
9/30/93 13157 13959 14626
10/31/93 13170 13973 14650
11/30/93 13020 13814 14530
12/31/93 13320 14132 14840
1/31/94 13502 14326 15022
2/28/94 13108 13908 14611
3/31/94 12645 13416 14053
4/30/94 12713 13488 14229
5/31/94 12882 13668 14321
6/30/94 12790 13571 14259
7/31/94 12985 13777 14499
8/31/94 13025 13820 14555
9/30/94 12828 13611 14358
10/31/94 12633 13403 14149
11/30/94 12444 13203 13882
12/31/94 12726 13502 14132
1/31/95 13095 13894 14498
2/28/95 13476 14298 14908
3/31/95 13576 14405 15109
4/30/95 13599 14429 15128
5/31/95 14042 14898 15607
6/30/95 13912 14761 15510
7/31/95 14018 14873 15738
8/31/95 14213 15080 15952
9/30/95 14296 15168 16054
10/31/95 14529 15415 16239
11/30/95 14751 15651 16457
12/31/95 14981 15895 16558
1/31/96 15057 15976 16725
2/29/96 14984 15898 16657
3/31/96 14739 15638 16450
4/30/96 14701 15598 16391
5/31/96 14709 15607 16345
6/30/96 14842 15748 16501
7/31/96 15012 15927 16659
8/31/96 15016 15933 16659
9/30/96 15218 16147 16831
10/31/96 15380 16318 17043
11/30/96 15650 16604 17388
12/31/96 15628 16581 17310
1/31/97 15579 16529 17378
2/28/97 15711 16669 17542
3/31/97 15483 16427 17307
4/30/97 15590 16541 17434
5/31/97 15815 16780 17681
6/30/97 15963 16937 17877
7/31/97 16404 17405 18379
8/31/97 16207 17196 18201
9/30/97 16416 17417 18431
10/31/97 16512 17519 18529
11/30/97 16595 17607 18615
12/31/97 16858 17886 18909
1/31/98 17029 18068 19118
2/28/98 17007 18044 19117
3/31/98 17017 18055 19104
4/30/98 16906 17937 18999
5/31/98 17243 18295 19321
6/30/98 17315 18372 19393
7/31/98 17335 18392 19424
8/31/98 17648 18725 19761
9/30/98 17903 18995 20055
10/31/98 17862 18952 20064
11/30/98 17924 19018 20124
12/31/98 17963 19058 20187
1/31/99 18162 19269 20496
2/28/99 18056 19158 20312
3/31/99 18058 19159 20301
4/30/99 18105 19210 20356
5/31/99 17969 19065 20213
6/30/99 17708 18789 19837
7/31/99 17770 18854 19970
8/31/99 17644 18720 19897
9/30/99 17611 18685 19964
10/31/99 17453 18518 19823
Graph reflects investment growth of a $10,000 investment.
Past performance is not predictive of future results.
The Lehman Brothers 10-year Municipal Bond Index (Lehman 10 Yr Muni) is an
unmanaged index, generally representative of investment-grade municipal bonds
with maturities of 8-12 years. An investor cannot invest directly in an
index.
Total Return
As of 10/31/99
OHIO MUNI BOND Class A OHIO MUNI BOND Class G
Maximum
Net Asset Offering Net Asset
Value Price Value
One Year -2.29% -7.88% -2.45%
Three Years 4.31% 2.26% 4.25%
Five Years 6.68% 5.42% 6.64%
Average Annual
Since Inception
5/18/90 6.73% 6.07% 6.72%
Maturity Schedule
Less Than One Year 4.7%
1-5 Years 27.3%
6-10 Years 51.7%
11-20 Years 16.3%
Total returns are historical and include the change in share price and
reinvestment of dividends and capital gain distributions, and unless
indicated, show the effect of the maximum 5.75% sales charge for Class A
Shares and the maximum 5.50% deferred sales charge for Class B Shares. Total
returns for more than one year are average annual total returns. Performance
of the different classes of shares will vary based on the differences in
sales charges and class specific expenses paid by the shareholders.
Performance information prior to March 1, 1996, the Class B Shares inception
date, reflects the performance of Class A Shares, which has not been adjusted
for the expenses of Class B Shares.
Performance for G Shares prior to March 26, 1999 reflect the performance of
Class A Shares which has not been adjusted for expenses of Class G Shares.
Performance of Class A and G Shares will differ due to differences in sales
charge structure and class 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. Fund
holdings are subject to change at any time.
16
<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 believed to be 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.
17
<PAGE>
VICTORY SPECIALTY FUNDS
The Victory Balanced Fund
Fixed Income Segment
Liquidity became the Bond Market watchword throughout the year as two of the
three Federal Reserve eases in late 1998 were rescinded by October 1999. This
ebb and flow of Federal Reserve policy had a direct impact on the portfolio
and produced one of the poorest performing bond markets in history.
The Bond Market did rally early in the year with corporate bonds leading
sector performance. During the second half of the year the market tumbled,
caused by a restrictive central bank policy (two interest rate hikes), a jump
in oil prices, and Y2K driven supply pressures.
During the second half of the year performance was hampered by a modestly
longer market duration, and overweighted holdings in corporates, mortgage
backed and asset backed issues. Portfolio turnover in the segment reflected
active trading in the mortgage market and opportunistic use of new issuance
in the corporate market.
We believe that a number of current constraints in the Bond Market should
ease during the upcoming year. Quality fixed income sectors such as
corporates and mortgages should benefit from a lighter supply calender. The
eventual conclusion to the current spate of Federal Reserve interest rate
increases should leave the market attractively valued with fairer weather
ahead.
Equity Segment
Volatility once again described the equity markets throughout 1999. The U.S.
equity market corrected in the calendar third quarter due to concerns over
rising interest rates and higher inflation. The smaller capitalization
averages continued to lag the performance of the larger capitalization
averages continuing a six year trend. Technology and energy have been the
only two sectors which have outperformed by a wide margin in 1999.
The Victory Balanced Fund underperformed the Lipper Balanced Index in
1999, 11.7% versus 12.6% for the fiscal year ended October 31, 1999. Once
again the big-cap technology names have led the growth style to outperform
the value style. Given the Fund's value orientation and the underweighting in
the technology sector, equities have underperformed the S&P 500 year to date.
We feel that value stocks, which outperformed in the second quarter but
reversed performance in the third quarter, could once again outperform as the
consumer sector of the economy slows and the Asian recovery accelerates.
The U.S. economy appears to be entering a period of slower growth. The
resurgence of inflation is not likely, but most of the decline appears to be
behind us. We no longer have the downward pressure of falling oil prices,
interest rates and a strong dollar. Equity returns are likely to trend toward
long-term averages. We have positioned the Fund to reflect this economic
scenario. The Fund remains underweighted relative to the S&P 500 in
technology and consumer staples sectors. We maintain an overweighted position
relative to the S&P 500 in the energy, basic industry, and financial sectors.
Total Return
As of 10/31/99
BALANCED FUND Class A BALANCED FUND Class B
Maximum Contingent
Net Asset Offering Net Asset Deferred
Value Price Value Charges
One Year 11.73% 5.34% 10.48% 6.48%
Three Years 15.06% 12.82% 13.69% 12.91%
Five Years 16.13% 14.75% 15.19% 15.08%
Average Annual
Since Inception
12/10/93 13.42% 12.29% 12.64% 12.55%
Portfolio Investments
Basic Industry 6.0%
Capital Goods 7.5%
Consumer Cyclicals 12.2%
Consumer Staples 15.6%
Energy 12.5%
Financial 19.5%
Technology 13.8%
Utilities 12.9%
Victory Balanced Fund
vs. S&P 500 & Lipper Balanced
Balanced Balanced Lipper
Class A Class A @ NAV S&P 500 Balanced
12/10/93 9425 10000 10000 10000
1/31/94 9623 10210 10429 10262
2/28/94 9352 9922 10116 10060
3/31/94 9073 9626 9653 9695
4/30/94 9094 9649 9764 9716
5/31/94 9209 9770 9886 9791
6/30/94 9096 9651 9621 9621
7/31/94 9294 9861 9924 9838
8/31/94 9507 10087 10297 10084
9/30/94 9268 9833 10020 9903
10/31/94 9371 9943 10229 9933
11/30/94 9190 9751 9825 9702
12/31/94 9296 9863 9945 9795
1/31/95 9483 10062 10187 9917
2/28/95 9800 10398 10554 10206
3/31/95 9966 10574 10843 10386
4/30/95 10192 10814 11146 10581
5/31/95 10555 11199 11551 10920
6/30/95 10619 11267 11797 11113
7/31/95 10805 11464 12171 11348
8/31/95 10861 11524 12168 11437
9/30/95 11156 11837 12655 11710
10/31/95 11173 11854 12592 11680
11/30/95 11509 12211 13109 12043
12/31/95 11724 12439 13338 12233
1/31/96 11966 12696 13773 12453
2/29/96 11894 12619 13869 12459
3/31/96 12056 12791 13978 12506
4/30/96 12110 12848 14166 12589
5/31/96 12213 12958 14490 12718
6/30/96 12303 13053 14522 12760
7/31/96 12048 12783 13858 12432
8/31/96 12204 12948 14119 12628
9/30/96 12662 13435 14884 13097
10/31/96 12991 13784 15273 13374
11/30/96 13692 14527 16393 13997
12/31/96 13430 14249 16041 13829
1/31/97 13848 14693 17024 14257
2/28/97 13892 14739 17125 14310
3/31/97 13560 14387 16395 13894
4/30/97 13934 14784 17353 14312
5/31/97 14472 15355 18375 14898
6/30/97 14874 15781 19167 15391
7/31/97 15654 16608 20665 16268
8/31/97 15069 15988 19478 15753
9/30/97 15651 16606 20513 16380
10/31/97 15462 16406 19806 16082
11/30/97 15803 16767 20689 16378
12/31/97 16050 17029 21015 16636
1/31/98 16176 17163 21228 16755
2/28/98 16741 17762 22723 17420
3/31/98 17237 18288 23858 17952
4/30/98 17399 18460 24075 18078
5/31/98 17336 18393 23622 17895
6/30/98 17665 18743 24553 18225
7/31/98 17640 18716 24269 18012
8/31/98 16376 17375 20730 16460
9/30/98 17178 18225 22024 17171
10/31/98 17712 18793 23792 17813
11/30/98 18287 19402 25198 18465
12/31/98 18924 20079 26619 19146
1/31/99 19230 20403 27711 19452
2/28/99 18849 19999 26816 18985
3/31/99 19205 20376 27856 19453
4/30/99 19793 21000 28913 20091
5/31/99 19500 20689 28191 19781
6/30/99 20026 21248 29726 20328
7/31/99 19628 20825 28773 19947
8/31/99 19465 20652 28593 19738
9/30/99 19161 20330 27777 19485
10/31/99 19789 20996 29514 20049
Graph reflects investment growth of a $10,000 investment.
Past performance is not predictive of future results.
The Standard & Poor's 500 Stock Index (S&P 500) is an unmanaged index,
generally representative of domestically traded common stocks of mid- to
large-size companies. An investor cannot invest directly in an index.
The Lipper Balanced Fund Index is an unmanaged index, generally representative
Of the 30 largest funds within the Lipper Balanced Fund (Lipper Balanced)
investment category. An investor cannot invest directly in an index.
Total returns are historical and include the change in share price and
reinvestment of dividends and capital gain distributions, and unless
indicated, show the effect of the maximum 5.75% sales charge for Class A
Shares and the maximum 5.50% deferred sales charge for Class B Shares. Total
returns for more than one year are average annual total returns. Performance
of the different classes of shares will vary based on the differences in
sales charges and class specific expenses paid by the shareholders.
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.
18
<PAGE>
VICTORY SPECIALTY FUNDS
The Victory Convertible Securities Fund
During the past twelve months, the components of convertible securities
registered mixed results. The stock market continued its stellar performance
but the bond market was plagued by concerns of inflation and the subsequent
rate increases by the Federal Reserve Bank. The rising trend in stock prices
did come at a price as volatility demonstrated a meaningful increase.
During the year ended October 31, 1999, the Fund recorded a return of 12.46%
despite its conservative structure as compared to its benchmark, Lipper
Convertible Security Fund Index. While equity sensitive hybrids performed
well, the Funds yield substitutes fell victim to declining bond prices. The
technology and energy issues did particularly well but the adverse impact of
rising rates negatively impacted financial as well as utility investments.
The structure of the fund continues to be rather conservative. The setback in
the market during the three months ending October presented an opportunity to
strengthen positions in the portfolio, especially in the financial area.
Convertible securities continue to be an attractive investment vehicle for
investors who wish to participate in the potential growth of the equity
market with reduced risk of the inherent volatility.
Victory Convertible Securities Fund
vs. S&P 500 & Lipper Convertible Securities
Fund Index
Convertible Lipper Convertible
Securities Securities Fund
Class A S&P500 Index
10/31/89 9425 10000 10000
11/30/89 9355 10165 10100
12/31/89 9514 10383 10157
1/31/90 9279 9669 9786
2/28/90 9279 9751 9895
3/31/90 9351 9988 10032
4/30/90 9134 9719 9847
5/31/90 9449 10613 10330
6/30/90 9439 10519 10350
7/31/90 9486 10464 10284
8/31/90 9098 9477 9747
9/30/90 8804 8992 9334
10/31/90 8501 8932 9067
11/30/90 8880 9467 9479
12/31/90 9042 9702 9714
1/31/91 9262 10105 10095
2/28/91 9771 10785 10603
3/31/91 9890 11024 10757
4/30/91 10216 11028 10883
5/31/91 10491 11453 11136
6/30/91 10318 10905 10863
7/31/91 10586 11394 11123
8/31/91 10918 11618 11432
9/30/91 11166 11396 11488
10/31/91 11301 11531 11712
11/30/91 11217 11024 11415
12/31/91 11546 12254 12052
1/31/92 11827 12011 12361
2/29/92 11946 12125 12584
3/31/92 11741 11861 12431
4/30/92 11884 12191 12471
5/31/92 12082 12203 12682
6/30/92 12016 11991 12551
7/31/92 12396 12464 12882
8/31/92 12408 12164 12813
9/30/92 12598 12275 13060
10/31/92 12497 12301 13184
11/30/92 12474 12673 13512
12/31/92 12850 12801 13789
1/31/93 13133 12892 14099
2/28/93 13426 13027 14101
3/31/93 13767 13270 14562
4/30/93 13946 12933 14469
5/31/93 14220 13227 14793
6/30/93 14363 13237 14914
7/31/93 14617 13166 15004
8/31/93 15064 13620 15415
9/30/93 15124 13484 15529
10/31/93 15381 13745 15763
11/30/93 15271 13568 15622
12/31/93 15432 13705 15835
1/31/94 15596 14150 16238
2/28/94 15406 13725 16099
3/31/94 15040 13097 15532
4/30/94 14873 13248 15334
5/31/94 14771 13412 15313
6/30/94 14757 13053 15185
7/31/94 14940 13464 15433
8/31/94 15135 13970 15870
9/30/94 15187 13594 15744
10/31/94 15134 13878 15714
11/30/94 14606 13330 15276
12/31/94 14436 13494 15257
1/31/95 14506 13821 15398
2/28/95 14866 14320 15764
3/31/95 15282 14711 16129
4/30/95 15690 15123 16406
5/31/95 16000 15672 16761
6/30/95 16070 16005 17115
7/31/95 16498 16514 17628
8/31/95 16956 16508 17760
9/30/95 17227 17170 18029
10/31/95 17010 17085 17735
11/30/95 17589 17786 18267
12/31/95 17945 18096 18472
1/31/96 18607 18687 18801
2/29/96 18697 18816 19093
3/31/96 18967 18965 19277
4/30/96 19059 19220 19726
5/31/96 19302 19659 20047
6/30/96 19241 19704 19782
7/31/96 18702 18802 19086
8/31/96 19334 19156 19763
9/30/96 19873 20194 20389
10/31/96 20373 20721 20486
11/30/96 21153 22242 21188
12/31/96 21380 21763 21175
1/31/97 21728 23098 21809
2/28/97 21943 23235 21711
3/31/97 21575 22245 21283
4/30/97 21676 23544 21429
5/31/97 22498 24930 22448
6/30/97 23253 26005 23161
7/31/97 24238 28038 24232
8/31/97 24170 26427 24227
9/30/97 24936 27832 25315
10/31/97 24524 26872 24678
11/30/97 24593 28070 24598
12/31/97 24875 28512 24753
1/31/98 24800 28801 24790
2/28/98 25493 30830 25878
3/31/98 26574 32370 26679
4/30/98 26480 32664 26803
5/31/98 25875 32049 26266
6/30/98 26094 33313 26163
7/31/98 25482 32928 25681
8/31/98 23095 28126 22692
9/30/98 23309 29882 23021
10/31/98 23618 32280 23675
11/30/98 24217 34188 24632
12/31/98 24680 36116 25452
1/31/99 25450 37597 26279
2/28/99 25193 36383 25366
3/31/99 25728 37794 25949
4/30/99 26525 39228 27173
5/31/99 26385 38249 27287
6/30/99 27224 40331 28250
7/31/99 26861 39039 28001
8/31/99 26558 38795 27751
9/30/99 25968 37687 27493
10/31/99 26561 40044 28409
Graph reflects investment growth of a $10,000 investment.
Past performance is not predictive of future results.
The Standard & Poor's 500 Stock Index (S&P 500) is an unmanaged index,
generally representative of domestically traded common stocks of mid- to
large-size companies. An investor cannot invest directly in an index.
The Lipper Convertible Securities Fund Index is an unmanaged index, generally
representative of 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. An investor
cannot invest directly in an index.
Portfolio holdings are subject to change.
Total Return
As of 10/31/99
Maximum
Net Asset Offering
Value Price
One Year 12.46% 5.96%
Three Years 9.24% 7.10%
Five Years 11.91% 10.59%
Ten Years 10.92% 10.27%
Average Annual
Since Inception
4/14/88 11.15% 10.59%
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%
19
<PAGE>
VICTORY SPECIALTY FUNDS
The Victory Real Estate Investment Fund
The Victory Real Estate Investment Fund finished the volatile past 12-month
period at 0.03%, (at NAV) outperforming the Morgan Stanley REIT (MSREIT)
Index* (-6.26%) by 629 basis points.
The REIT sector rallied in April as Warren Buffet and some large pension
funds took significant positions. Attracting these investments were the
defensive characteristics of the sector with its earnings multiple averaging
9x forward earnings versus the S&P 500 with a multiple approaching 30 times.
Although the rally was overweighted to the factory outlet stocks and
therefore allowed the MSREIT Index to perform ahead of the Victory Real
Estate Investment Fund for the quarter, we remained committed to investing in
property types with more solid fundamentals such as the office, industrial,
and apartment groups.
The Victory Real Estate Investment Fund finished the volatile 3rd quarter
down 5.23%, (at NAV) outperforming the MSREIT Index (-8.09%) by 286 basis
points. Outperformance was due to the Fund's focus on defensive stocks where
future cash flow is highly visible as particularly found in companies with
downtown office buildings. These companies own properties in
supply-constrained markets that are not vulnerable to overbuilding because of
the costly and complex processes required for new construction. And with the
strong economy, these landlords have been able to put in place long-term
leases to quality tenants at rapidly improving rental rates.
During the fiscal year, the Fund avoided some volatility through its
underweighting in hotel and retail stocks. The hotel stocks are more
closely correlated to the broader market and are experiencing some
leveling off in earnings growth in addition to the threat of oversupply
particularly in the limited service subsector. The retail stocks are
experiencing some price softening due to a potential threat to future
earnings growth as a result of the exponential growth of e-commerce
retailing.
The Fund continues to have significant holdings in the apartment
sector where supply has been held in check to produce markets generally in
equilibrium. Furthermore, this property subsector has a favorable demographic
context with rising mortgage rates reducing the possibility for home
purchases and the baby "boomlet" set to move into their 20's during the next
five years and therefore creating a demand bubble for rental apartments.
As the broader market is anticipated to be particularly volatile going into
2000, the Victory Real Estate Investment Fund is continually evolving to
provide a defensive alternative for investors. The REIT sector is a
high-yielding, value-stock sector and the objective of the Fund is to be even
more focused on capital preservation. The defensive characteristics are due
to the high dividend yield, the low earnings multiple and the high visibility
of earnings which are anticipated to grow 8.5%-10% for the next year.
Total Return
As of 10/31/99
Maximum
Net Asset Offering
Value Price
One Year 0.03% -5.70%
Average Annual
Since Inception
4/30/97 3.07% 0.66%
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 6.5%
Victory Real Estate Investment Fund
vs. MSREIT Index
Real Estate Real Estate
Investment Investment MSREIT
Class A Class A @ NAV Index
4/30/97 9425 10000 10000
5/31/97 9661 10250 10301
6/30/97 10170 10790 10845
7/31/97 10745 11400 11139
8/31/97 10763 11420 11064
9/30/97 11844 12567 12110
10/31/97 11538 12242 11783
11/30/97 11682 12394 11957
12/31/97 11996 12728 12229
1/31/98 11900 12625 12064
2/28/98 11812 12533 11860
3/31/98 12097 12835 12141
4/30/98 11755 12472 11711
5/31/98 11609 12317 11609
6/30/98 11636 12346 11608
7/31/98 10878 11541 10778
8/31/98 9953 10560 9773
9/30/98 10413 11048 10379
10/31/98 10164 10784 10186
11/30/98 10363 10995 10346
12/31/98 10265 10891 10162
1/31/99 10153 10773 9889
2/28/99 10032 10644 9726
3/31/99 10073 10688 9673
4/30/99 10951 11619 10608
5/31/99 11175 11857 10833
6/30/99 10949 11617 10632
7/31/99 10722 11376 10297
8/31/99 10670 11321 10198
9/30/99 10377 11010 9772
10/31/99 10167 10787 9548
Graph reflects investment growth of a $10,000 investment.
Past performance is not predictive of future results.
* The Morgan Stanley REIT Index (MSREIT Index) is an unmanaged index,
generally representative 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. An
investor cannot invest directly in an index.
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. Total returns
for more than one year are average annual total returns.
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.
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 are subject to change at any time.
20
<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 Cheapness Earnings Revisions
buy/sell decisions
VALUE FUNDS
The Victory Value Fund
The Victory Lakefront Fund
The Victory Established Value 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 Prospects Statistical Valuation Risk Assessment
buy/sell decisions
GROWTH FUNDS
The Victory Growth Fund
The Victory International Growth Fund
The Victory Small Company Opportunity Fund
*The Victory Stock Index Fund is not an actively managed Fund.
21
<PAGE>
VICTORY EQUITY FUNDS
The Victory Value Fund
Fiscal year 1999 was another solid year for large-capitalization equity
investors. As the year progressed, it became increasingly clear that U.S.
economic growth was not slowing and that international economic growth was
improving. Moreover, inflationary pressures remained subdued. The markets
responded enthusiastically, with particular strength in technology stocks and
other high-growth issues. Large-cap value stocks participated in the market's
strength, but not as fully as growth issues. For the 12 month period, the S&P
BARRA Value Index* returned 19.0%, versus the 25.7% return of the S&P 500.**
In light of the overall environment, we are pleased with the performance of
the Victory Value Fund. The Fund (at NAV) returned 20.02%, which was ahead of
the return of the S&P Barra Value Index, 19.0% for the 12 month period ending
October 31, 1999. Moreover, the Fund's return exceeded the 17.1% median
return of the Lipper Large-Cap Value Core Index.*** Our timely emphasis on
technology stocks early in the fiscal year, and our overweighting in energy
stocks, were two principal reasons for the Fund's solid performance.
It would be difficult to create a better economic environment for U.S.
equities in the eighth year of an economic recovery than what we foresee.
Unfortunately, the fundamentals are unlikely to improve and are more than
adequately reflected in equity prices. Moreover, in addition to the
extraneous forces that normally surround the market, we are faced with the
incremental uncertainty presented by the year 2000. Accordingly, we are
emphasizing safety and capital preservation over risk-taking. We believe our
value orientation in the large-cap world is well suited for the environment
of below average equity returns that we foresee. The lower p/e ratios and
greater dividend yields of value portfolios have historically led to relative
stability during volatile market environments and relative outperformance
during periods of market declines.
Total Return
As of 10/31/99
Maximum
Net Asset Offering
Value Price
One Year 20.02% 13.10%
Three Years 22.53% 20.12%
Five Years 22.90% 21.45%
Average Annual
Since Inception
12/3/93 19.71% 18.52%
Portfolio Investments
Basic Industry 6.5%
Capital Goods 7.6%
Consumer Cyclicals 13.6%
Consumer Staples 15.7%
Energy 9.1%
Financial 19.6%
Technology 16.4%
Utilities 11.4%
Victory Value Fund
vs. S&P 500
Value Class A Value Class A @ NAV S&P 500
12/3/93 9425 10000 10000
1/31/94 9842 10442 10429
2/28/94 9455 10031 10116
3/31/94 9081 9635 9653
4/30/94 9214 9776 9764
5/31/94 9433 10008 9886
6/30/94 9251 9815 9621
7/31/94 9508 10088 9924
8/31/94 9852 10453 10297
9/30/94 9570 10153 10020
10/31/94 9733 10327 10229
11/30/94 9445 10021 9825
12/31/94 9555 10138 9945
1/31/95 9791 10388 10187
2/28/95 10185 10806 10554
3/31/95 10443 11080 10843
4/30/95 10651 11301 11146
5/31/95 11067 11743 11551
6/30/95 11184 11867 11797
7/31/95 11503 12205 12171
8/31/95 11613 12322 12168
9/30/95 12011 12744 12655
10/31/95 11901 12627 12592
11/30/95 12503 13265 13109
12/31/95 12777 13557 13338
1/31/96 13181 13985 13773
2/29/96 13243 14051 13869
3/31/96 13602 14432 13978
4/30/96 13737 14575 14166
5/31/96 13955 14807 14490
6/30/96 14033 14889 14522
7/31/96 13449 14270 13858
8/31/96 13773 14613 14119
9/30/96 14428 15308 14884
10/31/96 14836 15741 15273
11/30/96 15903 16873 16393
12/31/96 15640 16594 16041
1/31/97 16332 17328 17024
2/28/97 16453 17456 17125
3/31/97 15812 16777 16395
4/30/97 16429 17431 17353
5/31/97 17464 18529 18375
6/30/97 18122 19227 19167
7/31/97 19556 20749 20665
8/31/97 18552 19684 19478
9/30/97 19519 20709 20513
10/31/97 18877 20029 19806
11/30/97 19707 20909 20689
12/31/97 19943 21159 21015
1/31/98 20147 21376 21228
2/28/98 21484 22795 22723
3/31/98 22519 23893 23858
4/30/98 22712 24098 24075
5/31/98 22326 23688 23622
6/30/98 23008 24412 24553
7/31/98 22839 24232 24269
8/31/98 19699 20900 20730
9/30/98 21312 22612 22024
10/31/98 22739 24126 23792
11/30/98 23933 25393 25198
12/31/98 25194 26731 26619
1/31/99 25917 27498 27711
2/28/99 25382 26930 26816
3/31/99 25901 27482 27856
4/30/99 27522 29201 28913
5/31/99 27016 28664 28191
6/30/99 28353 30083 29726
7/31/99 27369 29038 28773
8/31/99 26891 28532 28593
9/30/99 25784 27357 27777
10/31/99 27290 28955 29514
Graph reflects investment growth of a $10,000 investment.
Past performance is not predictive of future results.
** The Standard & Poor's 500 Stock Index (S&P 500) is an unmanaged index,
generally representative of domestically traded common stocks of mid- to
large-size companies. An investor cannot invest directly in an index.
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. Total returns
for more than one year are average annual total returns.
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 are subject to change at any time.
* The Standard & Poor's Barra Value Index is an unmanaged index,
generally representative 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. An investor cannot invest directly in an index.
*** The Lipper Large-Cap Value Core Index is an unmanaged index,
generally representative of the 30 largest funds within the Lipper Large-Cap
Value Core investment category. An investor cannot invest directly in an
index.
22
<PAGE>
VICTORY EQUITY FUNDS
The Victory Lakefront Fund
The Victory Lakefront Fund had an outstanding year in 1999. For the year, the
Fund returned 25.02% on a gross basis, outperforming its benchmark, the S & P
Barra Value Index,* which returned 19.0%. The Fund has adopted this benchmark
because it is more closely aligned with the portfolio of the Fund than the
Standard & Poor's 500 Stock Index (S & P 500). The S & P 500, the Fund's
former benchmark returned 25.7% for the period, due to outperformance of the
stocks of the mid- to large-size companies. The fund was able to accomplish
this outstanding performance while remaining highly tax efficient. The Fund's
turnover (a measure used to quantify the buying and selling activity of a
mutual fund over a given period) was an extraordinarily low 3% thus keeping
the level of shareholder taxable gains to a minimum.
Clearly, it was a good year to be invested in a value portfolio. In
1999, the Fund was overweighted in the traditional value sectors including
capital goods, financials, and consumer cyclicals, all of which turned in
strong performances. The portfolio's exposure to these sectors reflected our
strategic belief in the continuance of domestic economic growth with
increasing productivity and a strengthening international economy. With these
factors remaining constant through out the year, the prices of the Fund's
individual holdings in these value-oriented sectors soared. Given its value
mandate, the Fund was naturally underweighted in the top performing
technology sector but nonetheless reaped significant benefit from its lower
p/e technology holdings.
As we look to the year 2000, we think the economic dynamics described
above will remain intact benefiting the U.S. equity markets and keeping a lid
on interest rates. Also, the demand by investors for the liquidity that large
capitalization stocks provide, coupled with our belief that most of the
holdings in the Fund's portfolio remain undervalued, could prove favorable
for the Lakefront Fund.
Victory Lakefront Fund
vs. S&P 500 & S&P Barra Value
Lakefront Lakefront S&P Barra
Class A Class A @ NAV S&P 500 Value
3/3/97 9425 10000 10000 10001
3/31/97 8973 9520 9574 9659
4/30/97 9435 10011 10133 10021
5/31/97 10011 10621 10730 10650
6/30/97 10316 10945 11192 11056
7/31/97 11272 11960 12067 11941
8/31/97 10713 11367 11374 11401
9/30/97 11227 11912 11978 12069
10/31/97 10733 11387 11565 11626
11/30/97 10951 11619 12081 12069
12/31/97 11097 11774 12271 12337
1/31/98 11068 11743 12396 12185
2/28/98 12009 12742 13269 13099
3/31/98 12495 13258 13932 13762
4/30/98 12612 13381 14058 13925
5/31/98 12145 12886 13793 13729
6/30/98 12107 12846 14337 13833
7/31/98 11785 12504 14172 13533
8/31/98 9707 10299 12105 11357
9/30/98 10238 10862 12861 12048
10/31/98 11275 11963 13893 12991
11/30/98 12186 12929 14714 13668
12/31/98 12582 13350 15544 14148
1/31/99 13197 14002 16181 14434
2/28/99 12962 13753 15659 14123
3/31/99 13508 14332 16266 14551
4/30/99 14236 15105 16883 15805
5/31/99 14057 14914 16462 15526
6/30/99 14662 15557 17358 16123
7/31/99 14180 15045 16802 15627
8/31/99 14259 15128 16697 15231
9/30/99 13434 14253 16220 14635
10/31/99 14096 14955 17234 15460
Graph reflects investment growth of a $10,000 investment.
Past performance is not predictive of future results.
The Standard & Poor's 500 Stock Index (S&P 500) is an unmanaged index,
generally representative of domestically traded common stocks of mid- to
large-size companies. An investor cannot invest directly in an index.
Total Return
As of 10/31/99
Maximum
Net Asset Offering
Value Price
One Year 25.02% 17.85%
Average Annual
Since Inception
3/3/97 16.32% 13.76%
Portfolio Investments
Basic Industry 5.6%
Capital Goods 8.6%
Consumer Cyclicals 9.1%
Consumer Staples 22.1%
Energy 4.6%
Financial 18.6%
Technology 22.4%
Utilities 9.0%
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. Total returns
for more than one year are average annual total returns.
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 are subject to change at any time.
* The Standard & Poor's Barra Value Index is an unmanaged index,
generally representative 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. An investor cannot invest directly in an index.
23
<PAGE>
VICTORY EQUITY FUNDS
The Victory Established Value Fund
The stock market continued its impressive ascent over the past twelve months,
lead by the technology juggernaut. There have, however, been some bumps along
the way. The August Federal Reserve rate hike coupled with the related
economic uncertainty injected a dose of nervousness into the markets during
the third quarter. The accompanying volatility resulted in a decline of
12.17% for the S&P 500 Index* from its summer peak on July 19 through the
October 15 close. Despite the recent pull back, the popular benchmark has
advanced 12.03% the year ended October 31, 1999.
The Fund lagged the benchmark S&P 500 Index with a return of 17.63%
versus 25.7%, respectively for the one-year period ended October 31, 1999.
The shortfall in performance can be attributed to the market's strength being
generally concentrated in the largest capitalized companies within the index,
specifically the technology sector where the Fund has a relative underweight.
The Fund did outperform the benchmark through the first nine calendar months
by a margin of 5.82% to 5.36% (at NAV), however it was unable to keep pace
with the index following the third quarter as the financial sector continued
to decline under rising interest rate pressures. Certain financials continue
to exhibit attractive valuations and thus remain an overweighted sector for
the Fund.
The value-oriented methodology employed by the Fund continues to provide
benefits as evidenced by the number of holdings that have been the target of
takeovers. A total of seven companies held by the Fund have been acquired
during the fiscal year. We continue to build the portfolio around companies
that have delivered consistent earnings growth trading at discounted share
valuations. Given the narrow breadth of the market's upward move, there are a
number of opportunities that exist for the patient investor. Our value
discipline is currently focused on selective issues within several sectors
including healthcare, basic materials and communications.
Total Return
As of 10/31/99
Net Asset
Value
One Year 17.63%
Three Years 14.40%
Five Years 16.54%
Ten Years 12.80%
Average Annual
Since Inception
8/16/83 14.26%
Portfolio Investments
Basic Industry 5.6%
Capital Goods 10.5%
Consumer Cyclicals 27.1%
Consumer Staples 8.1%
Energy 1.2%
Financial 24.0%
Technology 16.3%
Utilities 7.2%
Victory Established Value Fund
vs. S&P 500
Established Value S&P 500
Class G
10/31/89 10000 10000
11/30/89 10060 10165
12/31/89 10218 10383
1/31/90 9816 9669
2/28/90 9958 9751
3/31/90 10169 9988
4/30/90 9771 9719
5/31/90 10367 10613
6/30/90 10067 10519
7/31/90 9934 10464
8/31/90 9202 9477
9/30/90 8842 8992
10/31/90 8488 8932
11/30/90 9158 9467
12/31/90 9389 9702
1/31/91 9898 10105
2/28/91 10456 10785
3/31/91 10622 11024
4/30/91 10557 11028
5/31/91 11122 11453
6/30/91 10662 10905
7/31/91 11038 11394
8/31/91 11128 11618
9/30/91 10978 11396
10/31/91 11002 11531
11/30/91 10461 11024
12/31/91 11476 12254
1/31/92 11458 12011
2/29/92 11655 12125
3/31/92 11432 11861
4/30/92 11358 12191
5/31/92 11303 12203
6/30/92 11114 11991
7/31/92 11605 12464
8/31/92 11422 12164
9/30/92 11713 12275
10/31/92 12017 12301
11/30/92 12447 12673
12/31/92 12647 12801
1/31/93 13163 12892
2/28/93 13379 13027
3/31/93 13812 13270
4/30/93 13615 12933
5/31/93 13927 13227
6/30/93 14338 13237
7/31/93 14606 13166
8/31/93 15043 13620
9/30/93 15122 13484
10/31/93 15226 13745
11/30/93 15019 13568
12/31/93 15274 13705
1/31/94 15610 14150
2/28/94 15570 13725
3/31/94 15274 13097
4/30/94 15153 13248
5/31/94 15038 13412
6/30/94 14739 13053
7/31/94 15051 13464
8/31/94 15766 13970
9/30/94 15251 13594
10/31/94 15515 13878
11/30/94 15043 13330
12/31/94 15324 13494
1/31/95 15401 13821
2/28/95 15985 14320
3/31/95 16493 14711
4/30/95 17029 15123
5/31/95 17456 15672
6/30/95 17876 16005
7/31/95 18572 16514
8/31/95 18768 16508
9/30/95 19139 17170
10/31/95 18972 17085
11/30/95 19428 17786
12/31/95 19375 18096
1/31/96 20016 18687
2/29/96 20418 18816
3/31/96 20590 18965
4/30/96 21135 19220
5/31/96 21471 19659
6/30/96 21264 19704
7/31/96 20360 18802
8/31/96 20881 19156
9/30/96 21966 20194
10/31/96 22273 20721
11/30/96 23373 22242
12/31/96 23119 21763
1/31/97 24226 23098
2/28/97 24218 23235
3/31/97 23708 22245
4/30/97 24308 23544
5/31/97 25575 24930
6/30/97 26644 26005
7/31/97 28496 28038
8/31/97 28155 26427
9/30/97 29144 27832
10/31/97 27576 26872
11/30/97 28175 28070
12/31/97 28356 28512
1/31/98 28500 28801
2/28/98 30498 30830
3/31/98 30742 32370
4/30/98 30805 32664
5/31/98 30724 32049
6/30/98 30387 33313
7/31/98 29394 32928
8/31/98 25471 28126
9/30/98 26368 29882
10/31/98 28351 32280
11/30/98 29018 34188
12/31/98 30091 36116
1/31/99 30295 37597
2/28/99 29577 36383
3/31/99 30430 37794
4/30/99 33887 39228
5/31/99 33081 38249
6/30/99 34721 40331
7/31/99 33964 39039
8/31/99 32857 38795
9/30/99 31842 37687
10/31/99 33349 40044
Graph reflects investment growth of a $10,000 investment.
Past performance is not predictive of future results.
* The Standard & Poor's 500 Stock Index (S&P 500) is an unmanaged index,
generally representative of domestically traded common stocks of mid- to
large-size companies. An investor cannot invest directly in an index.
The Gradison Established Value Fund became part of the Victory family on
April 1, 1999. Performance before that time is of the Gradison Established
Value Fund.
During the period shown, portions of the investment advisory and
shareholder servicing fees were waived. Had these waivers not been in effect,
the performance quoted would have been lower.
Total returns are historical and include the change in share price and
reinvestment of dividends and capital gains distributions, if any. Total
returns for more than one year are average annual total returns. Class G
Shares are not subject to an initial or deferred sales charge, but are
subject to an asset-based sales charge.
Investment returns and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
The total return figures set forth above may reflect the waiver of a portion
of certain fees for various periods since 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 are subject to change at any time.
24
<PAGE>
VICTORY EQUITY FUNDS
The Victory Diversified Stock Fund
After a big surge in the spring of 1999, the stock market settled into a
trading range throughout the rest of the fiscal year. The fundamental forces
of good corporate earnings, low inflation, and strong money flows have
continued to provide positive support for equities, while rising interest
rates and concerns about valuation were offsetting factors. Overall, though,
the strength of this bull market continues to be impressive, as 1999, in its
current trend, represents the ninth calendar year in a row of positive total
returns for the S&P 500.*
The Fund lagged the S&P500 Index in the year ended October 31, 1999,
returning 19.4% Class A (at NAV) compared to the benchmark return of 25.7%.
All of the underperformance took place in the last fiscal quarter. The Fund's
value driven methodology was out of favor as growth stocks outperformed value
stocks for an unprecedented sixth consecutive year.
Our expectation is that the emerging worldwide economic recovery will broaden
in the year 2000 and that the technology, energy, and basic industry sectors
will be the beneficiaries of this development. These more cyclical areas
remain the areas of emphasis. The Fund is underweighted in the financial,
utility, and consumer related industries.
Victory Diversified Stock Fund
vs. S&P 500
Diversified Diversified
Stock Stock
Class A Class A @ NAV S&P 500
10/20/89 9425 10000 10000
11/30/89 9558 10141 10165
12/31/89 9883 10486 10383
1/31/90 9328 9897 9669
2/28/90 9443 10019 9751
3/31/90 9697 10288 9988
4/30/90 9504 10084 9719
5/31/90 10409 11044 10613
6/30/90 10367 10999 10519
7/31/90 10328 10958 10464
8/31/90 9534 10116 9477
9/30/90 9078 9631 8992
10/31/90 9019 9569 8932
11/30/90 9604 10190 9467
12/31/90 9939 10545 9702
1/31/91 10543 11186 10105
2/28/91 11237 11922 10785
3/31/91 11286 11974 11024
4/30/91 11246 11932 11028
5/31/91 11814 12534 11453
6/30/91 11071 11747 10905
7/31/91 11562 12267 11394
8/31/91 11852 12575 11618
9/30/91 11509 12211 11396
10/31/91 11499 12200 11531
11/30/91 11006 11678 11024
12/31/91 12322 13074 12254
1/31/92 12249 12996 12011
2/29/92 12405 13162 12125
3/31/92 12101 12839 11861
4/30/92 12352 13105 12191
5/31/92 12279 13028 12203
6/30/92 12129 12869 11991
7/31/92 12602 13371 12464
8/31/92 12329 13081 12164
9/30/92 12648 13419 12275
10/31/92 12827 13609 12301
11/30/92 13333 14147 12673
12/31/92 13484 14307 12801
1/31/93 13495 14318 12892
2/28/93 13570 14398 13027
3/31/93 13765 14604 13270
4/30/93 13580 14409 12933
5/31/93 13949 14800 13227
6/30/93 13902 14750 13237
7/31/93 13989 14842 13166
8/31/93 14543 15431 13620
9/30/93 14441 15322 13484
10/31/93 14627 15519 13745
11/30/93 14441 15322 13568
12/31/93 14829 15734 13705
1/31/94 15341 16277 14150
2/28/94 14829 15734 13725
3/31/94 14323 15197 13097
4/30/94 14531 15418 13248
5/31/94 14973 15886 13412
6/30/94 14621 15513 13053
7/31/94 14991 15905 13464
8/31/94 15594 16546 13970
9/30/94 15341 16277 13594
10/31/94 15700 16658 13878
11/30/94 15205 16132 13330
12/31/94 15415 16356 13494
1/31/95 15808 16773 13821
2/28/95 16467 17472 14320
3/31/95 16935 17968 14711
4/30/95 17400 18462 15123
5/31/95 18148 19255 15672
6/30/95 18385 19507 16005
7/31/95 18967 20124 16514
8/31/95 19108 20274 16508
9/30/95 19722 20926 17170
10/31/95 19395 20578 17085
11/30/95 20393 21637 17786
12/31/95 20868 22141 18096
1/31/96 21457 22766 18687
2/29/96 22000 23342 18816
3/31/96 22303 23664 18965
4/30/96 22848 24242 19220
5/31/96 23299 24721 19659
6/30/96 23097 24506 19704
7/31/96 22082 23429 18802
8/31/96 22597 23976 19156
9/30/96 23754 25203 20194
10/31/96 24662 26167 20721
11/30/96 26706 28335 22242
12/31/96 26027 27615 21763
1/31/97 27474 29150 23098
2/28/97 27421 29094 23235
3/31/97 26583 28205 22245
4/30/97 27379 29050 23544
5/31/97 29202 30984 24930
6/30/97 30153 31993 26005
7/31/97 32638 34629 28038
8/31/97 31307 33216 26427
9/30/97 33160 35183 27832
10/31/97 31561 33486 26872
11/30/97 32795 34796 28070
12/31/97 33387 35424 28512
1/31/98 33447 35488 28801
2/28/98 35899 38089 30830
3/31/98 37543 39834 32370
4/30/98 38362 40702 32664
5/31/98 36964 39220 32049
6/30/98 37929 40243 33313
7/31/98 37270 39543 32928
8/31/98 32154 34115 28126
9/30/98 34963 37096 29882
10/31/98 37747 40049 32280
11/30/98 39311 41709 34188
12/31/98 41116 43624 36116
1/31/99 42518 45112 37597
2/28/99 41266 43784 36383
3/31/99 42989 45612 37794
4/30/99 46173 48990 39228
5/31/99 45546 48325 38249
6/30/99 47644 50551 40331
7/31/99 46491 49327 39039
8/31/99 45814 48609 38795
9/30/99 43358 46004 37687
10/31/99 45065 47814 40044
Graph reflects investment growth of a $10,000 investment.
Past performance is not predictive of future results.
* The Standard & Poor's 500 Stock Index (S&P 500) is an unmanaged index,
generally representative of domestically traded common stocks of mid- to
large-size companies. An investor cannot invest directly in an index.
Total Return
As of 10/31/99
DIVERSIFIED DIVERSIFIED DIVERSIFIED
FUND FUND FUND
Class A Class B Class G
Maximum Contingent
Net Asset Offering Net Asset Deferred Net Asset
Value Price Value Charges Value
One Year 19.39% 12.52% 18.24% 14.46% 19.21%
Three Years 22.26% 19.87% 20.96% 20.27% 22.19%
Five Years 23.48% 22.03% 22.61% 22.52% 23.44%
Ten Years 16.94% 16.25% 16.53% 16.53% 16.92%
Average Annual
Since Inception
10/20/89 16.77% 16.08% 16.36% 16.36% 16.75%
Portfolio Investments
Basic Industry 6.9%
Capital Goods 7.6%
Consumer Cyclicals 12.3%
Consumer Staples 20.8%
Energy 12.1%
Financial 11.7%
Technology 19.7%
Utilities 8.9%
Performance of the different classes of shares will vary based on the
differences in sales charges and class specific expenses paid by
shareholders.
During the period shown, a portion of the investment advisory
and shareholder servicing fees were waived. Had this waiver not been in
effect, the performance quoted would have been lower.
Performance for B Shares prior to March 1, 1996, and for G Shares, prior
to March 26, 1999, respective inception dates of those share classes, reflect
the performance of Class A Shares which has not been adjusted for expenses of
Class B or Class G Shares. Performance of Class A, B and G Shares will differ
due to differences in sales charge structure and class expenses.
The MOP figures reflect a maximum sales charge of 5.75% for Class A
Shares and a maximum contingent deferred sales charge (CDSC) of 5.00% for
Class B Shares.
Total returns are historical and include the change in share price and
reinvestment of dividends and capital gains distributions, if any. Total
returns for more than one year are average annual total returns.
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.
Fund holdings are subject to change at any time.
25
<PAGE>
VICTORY EQUITY FUNDS
The Victory Stock Index Fund
The investment objective of the Victory Stock Index Fund is to attempt to
Replicate the performance of the S&P 500 Index.* This method of management is
referred to as passive investing.
In an effort to duplicate the performance of the S&P 500 Index, the Fund
follows a full replication strategy. This involves investing in all of the
stocks in the S&P 500 Index in proportion to their company, industry and
sector weightings in the Index.
To manage the daily cash flows in and out of the Fund, the Fund invests
in S&P 500 Index futures contracts. The contracts are highly correlated to
changes in the S&P 500 Index. This enables the Fund to be fully exposed to
S&P price movements, while at the same time, minimizing transaction expenses
associated the stock purchases and sales. We do not use futures for
speculative or leveraging purposes.
The S&P 500 posted a total return of 25.7% for the year ended
October 31, 1999. The Victory Stock Index Fund returned was 24.91% Class A
(at NAV) for the same period. Consistent with its investment objective, the
Fund strives to match the performance of the S&P 500.
Total Return
As of 10/31/99
STOCK INDEX Class A STOCK INDEX Class G
Maximum
Net Asset Offering Net Asset
Value Price Value
One Year 24.91% 17.74% 24.85%
Three Years 25.62% 23.15% 25.60%
Five Years 25.19% 23.72% 25.18%
Average Annual
Since Inception
12/3/93 21.67% 20.46% 21.66%
Portfolio Investments
Basic Industry 3.8%
Capital Goods 7.3%
Consumer Cyclicals 14.5%
Consumer Staples 19.0%
Energy 5.9%
Financial 15.3%
Technology 22.9%
Utilities 11.3%
Victory Stock Index Fund
vs. S&P 500
Stock Index Stock Index
Class A Class A @ NAV S&P 500
12/3/93 9425 10000 10000
1/31/94 9785 10382 10429
2/28/94 9512 10092 10116
3/31/94 9099 9654 9653
4/30/94 9213 9775 9764
5/31/94 9355 9926 9886
6/30/94 9131 9687 9621
7/31/94 9426 10001 9924
8/31/94 9798 10396 10297
9/30/94 9559 10143 10020
10/31/94 9771 10367 10229
11/30/94 9425 10000 9825
12/31/94 9561 10145 9945
1/31/95 9803 10401 10187
2/28/95 10171 10791 10554
3/31/95 10464 11102 10843
4/30/95 10775 11432 11146
5/31/95 11193 11876 11551
6/30/95 11431 12129 11797
7/31/95 11812 12533 12171
8/31/95 11842 12564 12168
9/30/95 12323 13074 12655
10/31/95 12283 13033 12592
11/30/95 12814 13596 13109
12/31/95 13049 13845 13338
1/31/96 13491 14314 13773
2/29/96 13602 14432 13869
3/31/96 13746 14585 13978
4/30/96 13938 14788 14166
5/31/96 14271 15142 14490
6/30/96 14341 15215 14522
7/31/96 13701 14537 13858
8/31/96 13975 14828 14119
9/30/96 14747 15647 14884
10/31/96 15155 16080 15273
11/30/96 16258 17249 16393
12/31/96 15943 16916 16041
1/31/97 16917 17949 17024
2/28/97 17043 18083 17125
3/31/97 16327 17323 16395
4/30/97 17295 18350 17353
5/31/97 18347 19466 18375
6/30/97 19149 20317 19167
7/31/97 20649 21909 20665
8/31/97 19498 20687 19478
9/30/97 20557 21811 20513
10/31/97 19878 21091 19806
11/30/97 20758 22025 20689
12/31/97 21109 22397 21015
1/31/98 21346 22648 21228
2/28/98 22847 24241 22723
3/31/98 23975 25437 23858
4/30/98 24213 25690 24075
5/31/98 23782 25233 23622
6/30/98 24731 26240 24553
7/31/98 24447 25938 24269
8/31/98 20886 22160 20730
9/30/98 22256 23614 22024
10/31/98 24052 25519 23792
11/30/98 25462 27015 25198
12/31/98 26955 28600 26619
1/31/99 28034 29744 27711
2/28/99 27146 28802 26816
3/31/99 28223 29945 27856
4/30/99 29292 31079 28913
5/31/99 28579 30323 28191
6/30/99 30169 32009 29726
7/31/99 29211 30993 28773
8/31/99 29045 30817 28593
9/30/99 28263 29986 27777
10/31/99 30043 31875 29514
Graph reflects investment growth of a $10,000 investment.
Past performance is not predictive of future results.
* The Standard & Poor's 500 Stock Index (S&P 500) is an unmanaged index,
generally representative of domestically traded common stocks of mid- to
large-size companies. An investor cannot invest directly in an index.
During the period shown, portions of the investment advisory and shareholder
servicing fees were waived. Had these waivers not been in effect, the
performance quoted would have been lower.
Performance for G Shares prior to July 1, 1999 reflects the performance
of Class A Shares which has not been adjusted for expenses of Class G Shares.
Performance of Class A and G Shares will differ due to differences in sales
charge structure and class expenses.
The MOP figures reflect a maximum sales charge of 5.75% for Class A Shares.
Total returns are historical and include the change in share price and
reinvestment of dividends and capital gains distributions, if any. Total
returns for more than one year are average annual total returns.
Fee waivers are voluntary and may be modified or terminated at anytime.
Fund holdings are subject to change at any time.
26
<PAGE>
VICTORY EQUITY FUNDS
The Victory Growth Fund
The market environment for large-capitalization growth stocks for the year
ending October 1999 was, on balance, very favorable. The Victory Growth
Fund's two largest sectors, Consumer Staples and Technology, turned in a
mixed performance, with Consumer Staples underperforming the S&P 500* and the
Technology Sector substantially outperforming the S&P 500. In addition,
stocks in a number of other growth areas, such as, Wal-Mart, General
Electric, Home Depot, MCI Worldcom and American International Group were
outstanding performers during the fiscal year.
The Victory Growth Fund was up 24.3% (at NAV) versus the S&P 500 return of
25.7% for the 12 month period ended October 31, 1999.
The Victory Growth Fund slightly underperformed the S&P 500, as the Fund
was overweighted in the Consumer Staple Sector, an underperforming sector,
and market-weighted in Technology, an outperforming sector. The Fund ended
the fiscal year overweighted in Technology.
On balance we believe, the equity markets should continue to do reasonably
well over the coming year, with the large-capitalization stock indexes
roughly matching the low double-digit growth rate of corporate profits. The
Technology and Capital Goods Sectors should continue market leadership, as
they represent excellent plays on the recovery of the European and Asian
economies.
The Victory Growth Fund is currently overweighted relative to the
S&P 500 in the Capital Goods, Technology and the Consumer Staples Sectors.
The Capital Goods and Technology Sectors give the Fund exposure to recovering
foreign economies, while the Consumer Staple Sector gives the Fund exposure
to consistent growth companies at reasonable valuations.
We believe the Victory Growth Fund would have done better with a greater
weight in Technology and an underweight in Consumer Staples during the fiscal
year. The Fund was in the right technology stocks, Microsoft, Cisco Systems,
Intel, Sun Microsystems, Oracle, etc., but should have owned larger
positions.
Victory Growth Fund
vs. S&P 500
Growth Growth Fund
Class A Class A @ NAV S&P 500
12/3/93 9425 10000 10000
1/31/94 9789 10387 10429
2/28/94 9563 10146 10116
3/31/94 9126 9682 9653
4/30/94 9249 9813 9764
5/31/94 9466 10044 9886
6/30/94 9133 9690 9621
7/31/94 9389 9962 9924
8/31/94 9740 10334 10297
9/30/94 9443 10019 10020
10/31/94 9729 10322 10229
11/30/94 9472 10050 9825
12/31/94 9412 9986 9945
1/31/95 9604 10190 10187
2/28/95 9920 10525 10554
3/31/95 10132 10750 10843
4/30/95 10401 11035 11146
5/31/95 10737 11392 11551
6/30/95 10972 11641 11797
7/31/95 11290 11978 12171
8/31/95 11203 11886 12168
9/30/95 11755 12473 12655
10/31/95 11726 12442 12592
11/30/95 12199 12944 13109
12/31/95 12374 13129 13338
1/31/96 12747 13525 13773
2/29/96 12878 13664 13869
3/31/96 12998 13791 13978
4/30/96 13200 14005 14166
5/31/96 13654 14487 14490
6/30/96 13819 14662 14522
7/31/96 13324 14137 13858
8/31/96 13587 14416 14119
9/30/96 14452 15334 14884
10/31/96 14736 15634 15273
11/30/96 15888 16858 16393
12/31/96 15461 16404 16041
1/31/97 16368 17367 17024
2/28/97 16516 17523 17125
3/31/97 15732 16691 16395
4/30/97 16756 17778 17353
5/31/97 17843 18932 18375
6/30/97 18577 19710 19167
7/31/97 19886 21099 20665
8/31/97 18524 19654 19478
9/30/97 19508 20698 20513
10/31/97 19022 20182 19806
11/30/97 20004 21224 20689
12/31/97 20309 21547 21015
1/31/98 20897 22172 21228
2/28/98 22153 23504 22723
3/31/98 23171 24584 23858
4/30/98 23386 24812 24075
5/31/98 22933 24332 23622
6/30/98 24314 25797 24553
7/31/98 24348 25833 24269
8/31/98 20953 22232 20730
9/30/98 22684 24068 22024
10/31/98 24461 25953 23792
11/30/98 25965 27549 25198
12/31/98 27859 29559 26619
1/31/99 28893 30655 27711
2/28/99 27946 29650 26816
3/31/99 28684 30433 27856
4/30/99 29471 31268 28913
5/31/99 28536 30277 28191
6/30/99 30467 32325 29726
7/31/99 29422 31216 28773
8/31/99 29422 31216 28593
9/30/99 28474 30211 27777
10/31/99 30393 32247 29514
Graph reflects investment growth of a $10,000 investment.
Past performance is not predictive of future results.
* The Standard & Poor's 500 Stock Index (S&P 500) is an unmanaged index,
generally representative of domestically traded common stocks of mid- to
large-size companies. An investor cannot invest directly in an index.
Total Return
As of 10/31/99
Maximum
Net Asset Offering
Value Price
One Year 24.25% 17.10%
Three Years 27.29% 24.80%
Five Years 25.59% 24.12%
Average Annual
Since Inception
12/3/93 21.91% 20.70%
Portfolio Investments
Basic Industry 2.2%
Capital Goods 10.6%
Consumer Cyclicals 11.9%
Consumer Staples 25.2%
Energy 4.4%
Financial 12.3%
Technology 25.3%
Utilities 8.1%
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. Total returns
for more than one year are average annual total returns.
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 are subject to change at any time.
27
<PAGE>
VICTORY EQUITY FUNDS
The Victory Special Value Fund
Volatility summarized the market environment for mid-cap equities over the
past fiscal year. Looking back at the four quarters that comprise the fiscal
year, starting with the January 1999 quarter end, the S&P 400 Midcap Index
returned 13.1%, 5.1%, 3.6%, and -1.6% respectively. Together, these amounted
to a very competitive 21.1% return for the S&P 400 Midcap Index over the
fiscal year. Hidden in the numbers were the extreme performances of growth
stocks versus value stocks within the S&P Midcap Index, as value stocks rose
only 21.1%, compared to the 40.4% appreciation for growth stocks.
Our Fund lagged the S&P 400 Midcap Index with a return of .80% Class A
(at NAV) for the year ending October 31, 1999, although this return
approximated the performance of the value-oriented component of the index.
The Fund's underweight in Technology stocks (the best performing sector with
a 71% return) held back performance, as did poor security selection in the
Retail, Drugs, and Computer Software industries. On the plus side, the
continued valuation gap between mid-cap stocks and the more richly valued
large-cap sector resulted in takeovers of many of our holdings (eight) over
the past year.
Mid-cap stocks continue to be attractively priced versus the large-cap
sector. Areas that look particularly interesting to us at this time include
insurance, hospital management, computer services, capital goods, and oil
service stocks. We expect global economic growth to accelerate in 2000, and
are overweight in areas expected to benefit -- including Basic Industry,
Capital Goods, and Energy. We are underweighted in areas tied to the domestic
economic cycle -- namely, Consumer Cyclicals and Consumer Staples.
Total Return
As of 10/31/99
SPECIAL VALUE Class A SPECIAL VALUE Class B
Maximum Contingent
Net Asset Offering Net Asset Deferred
Value Price Value Charge
One Year 0.80% -4.98% -0.43% -4.24%
Three Years 4.38% 2.35% 3.07% 2.21%
Five Years 10.11% 8.81% 9.13% 8.99%
Average Annual
Since Inception
12/3/93 9.55% 8.46% 8.73% 8.62%
Portfolio Investments
Basic Industry 9.7%
Capital Goods 5.1%
Consumer Cyclicals 12.8%
Consumer Staples 10.7%
Energy 6.8%
Financial 21.1%
Technology 21.7%
Utilities 12.1%
Victory Special Value Fund
vs. S&P 400 Mid Cap
Special Value Special Value S&P 400
Class A Class A @ NAV Mid Cap
12/3/93 9425 10000 10000
1/31/94 9941 10547 10233
2/28/94 9931 10537 10087
3/31/94 9598 10183 9620
4/30/94 9550 10133 9692
5/31/94 9645 10233 9600
6/30/94 9454 10030 9269
7/31/94 9738 10332 9583
8/31/94 10070 10684 10085
9/30/94 9897 10501 9897
10/31/94 9983 10592 10005
11/30/94 9517 10097 9554
12/31/94 9828 10428 9642
1/31/95 9867 10469 9742
2/28/95 10366 10998 10253
3/31/95 10625 11273 10421
4/30/95 10847 11508 10640
5/31/95 11059 11733 10897
6/30/95 11250 11937 11341
7/31/95 11714 12429 11930
8/31/95 11937 12665 12153
9/30/95 12033 12767 12448
10/31/95 11781 12499 12127
11/30/95 12256 13004 12657
12/31/95 12462 13222 12626
1/31/96 12622 13392 12809
2/29/96 12872 13657 13244
3/31/96 13012 13805 13403
4/30/96 13392 14209 13812
5/31/96 13442 14262 13999
6/30/96 13525 14350 13789
7/31/96 12914 13701 12856
8/31/96 13485 14308 13597
9/30/96 13978 14831 14190
10/31/96 14209 15076 14232
11/30/96 14972 15885 15033
12/31/96 14857 15764 15050
1/31/97 15180 16106 15615
2/28/97 15299 16232 15486
3/31/97 14938 15849 14826
4/30/97 15197 16124 15211
5/31/97 16471 17476 16541
6/30/97 16960 17995 17005
7/31/97 18063 19165 18689
8/31/97 18020 19119 18666
9/30/97 18802 19949 19739
10/31/97 18056 19157 18880
11/30/97 18250 19364 19160
12/31/97 18986 20144 19904
1/31/98 18459 19585 19525
2/28/98 19536 20728 21143
3/31/98 20337 21578 22096
4/30/98 20196 21428 22500
5/31/98 19564 20757 21487
6/30/98 19114 20280 21623
7/31/98 17696 18775 20784
8/31/98 14506 15391 16915
9/30/98 15125 16048 18494
10/31/98 16030 17008 20147
11/30/98 16547 17556 21153
12/31/98 17262 18315 23708
1/31/99 16131 17115 22785
2/28/99 15295 16228 21592
3/31/99 15407 16347 22196
4/30/99 16601 17614 23946
5/31/99 16922 17954 24052
6/30/99 17531 18600 25337
7/31/99 17038 18077 24799
8/31/99 16385 17384 23950
9/30/99 15702 16660 23210
10/31/99 16159 17144 24392
Graph reflects investment growth of a $10,000 investment.
Past performance is not predictive of future results.
The Standard & Poor's 400 Mid-Cap Index (S&P 400 Mid Cap) is an unmanaged
index, generally representative of domestically traded common stocks of
mid-sized companies. An investor cannot invest directly in an index.
Performance of the different classes of shares will vary based on the
differences in sales charges and class specific expenses paid by
shareholders.
During the period shown, portions of the investment advisory
and shareholder servicing fees were waived. Had these waivers not been in
effect, the performance quoted would have been lower.
Performance for B Shares prior to March 1, 1996 reflect the performance
of Class A Shares which has not been adjusted for expenses of Class B Shares.
Performance of Class A and B Shares will differ due to differences in sales
charge structure and class expenses.
The MOP figures reflect a maximum sales charge of 5.75% for
Class A Shares and a maximum contingent deferred sales charge (CDSC) of 5.00%
for Class B Shares.
Total returns are historical and include the change in share price and
reinvestment of dividends and capital gains distributions, if any. Total
returns for more than one year are average annual total returns.
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 are subject to change at any time.
28
<PAGE>
VICTORY EQUITY FUNDS
The Victory Ohio Regional Stock Fund
Last year we wrote that the preceding twelve months were a difficult time for
the type of securities which the Ohio Fund buys. Large stocks outperformed
medium and growth stocks outperformed value. Little changed this year. The
Ohio Regional Stock Fund Class A (at NAV) declined 6.31%.* The Bloomberg Ohio
Index** (including dividends) declined 5.62% for year ended October 31, 1999.
Only 47 of 146 publicly traded companies headquartered in Ohio posted
positive stock performance in the year ended October 31, 1999. We owned 5 of
the 10 best performers, but also 3 of the 10 worst performers. One of these
three, Gibson Greetings, was bought out after year-end.
Unlike last year there appear to have been few "themes" in Ohio stock
performance in the past twelve months. In general, technology stocks did well
as did energy. Ohio is not well represented in either, but we did own Ohio's
only energy stock, and were well represented in Ohio tech stocks.
The portfolio securities in the Fund, on average, sell at a discount
valuation to both the broad market, S&P 500 and S&P Mid Capitalization
Value*** indices.
Over the past year we experienced several of our holdings acquired by
larger corporations at substantial premiums.
No Ohio company issued an initial public offering (IPO) during the past year.
To us this indicates that Ohio companies are in the eyes of their owners,
significantly undervalued.
Victory Ohio Regional Stock Fund
vs. S&P 500
Ohio Regional Ohio Regional
Class A Class A @ NAV S&P 500
10/20/89 9425 10000 10000
11/30/89 9171 9730 9910
12/31/89 9221 9783 10122
1/31/90 8520 9040 9425
2/28/90 8709 9241 9506
3/31/90 8841 9380 9736
4/30/90 8593 9117 9474
5/31/90 9146 9704 10346
6/30/90 9201 9762 10254
7/31/90 8837 9376 10200
8/31/90 7640 8106 9238
9/30/90 6857 7276 8766
10/31/90 6538 6936 8707
11/30/90 7216 7656 9229
12/31/90 7514 7973 9458
1/31/91 8333 8841 9851
2/28/91 9015 9565 10513
3/31/91 9483 10062 10747
4/30/91 9640 10228 10750
5/31/91 10267 10893 11165
6/30/91 9747 10342 10630
7/31/91 10230 10854 11107
8/31/91 10486 11125 11326
9/30/91 10711 11364 11109
10/31/91 11028 11700 11240
11/30/91 10968 11637 10747
12/31/91 11922 12649 11946
1/31/92 12352 13106 11708
2/29/92 12853 13637 11820
3/31/92 12720 13496 11562
4/30/92 12489 13250 11885
5/31/92 12428 13186 11896
6/30/92 11910 12636 11690
7/31/92 12344 13097 12150
8/31/92 11991 12722 11858
9/30/92 12031 12764 11966
10/31/92 12294 13044 11991
11/30/92 12944 13733 12354
12/31/92 13219 14025 12479
1/31/93 13536 14361 12567
2/28/93 13556 14383 12699
3/31/93 13911 14760 12936
4/30/93 13604 14434 12607
5/31/93 14034 14890 12894
6/30/93 14040 14897 12904
7/31/93 14318 15191 12835
8/31/93 14657 15551 13277
9/30/93 14863 15770 13144
10/31/93 15142 16065 13399
11/30/93 14822 15726 13226
12/31/93 15410 16350 13360
1/31/94 15924 16896 13794
2/28/94 15903 16873 13379
3/31/94 15128 16051 12767
4/30/94 15429 16370 12915
5/31/94 15214 16142 13075
6/30/94 15079 15999 12724
7/31/94 15391 16330 13125
8/31/94 16016 16993 13619
9/30/94 15795 16759 13252
10/31/94 15741 16702 13529
11/30/94 15103 16025 12994
12/31/94 15418 16359 13154
1/31/95 15544 16493 13473
2/28/95 15945 16918 13959
3/31/95 16269 17262 14341
4/30/95 16855 17884 14742
5/31/95 17545 18615 15277
6/30/95 18031 19131 15602
7/31/95 18861 20011 16098
8/31/95 18999 20158 16093
9/30/95 19230 20403 16738
10/31/95 18410 19533 16655
11/30/95 19207 20379 17338
12/31/95 19494 20683 17641
1/31/96 19434 20619 18216
2/29/96 19746 20951 18343
3/31/96 20723 21987 18488
4/30/96 21120 22409 18736
5/31/96 21566 22881 19164
6/30/96 21417 22724 19208
7/31/96 20416 21662 18329
8/31/96 20959 22237 18674
9/30/96 21819 23150 19685
10/31/96 21687 23009 20200
11/30/96 23185 24599 21682
12/31/96 23558 24995 21216
1/31/97 24014 25479 22516
2/28/97 24408 25897 22650
3/31/97 23646 25088 21685
4/30/97 23757 25206 22951
5/31/97 25820 27395 24302
6/30/97 27007 28655 25351
7/31/97 28516 30256 27332
8/31/97 28182 29902 25762
9/30/97 30098 31934 27131
10/31/97 29193 30974 26196
11/30/97 29652 31460 27364
12/31/97 30545 32408 27794
1/31/98 29946 31773 28076
2/28/98 31783 33722 30054
3/31/98 33437 35477 31555
4/30/98 32906 34913 31842
5/31/98 31625 33554 31242
6/30/98 31356 33268 32474
7/31/98 30045 31878 32099
8/31/98 25336 26881 27417
9/30/98 26924 28566 29130
10/31/98 28278 30003 31467
11/30/98 28784 30540 33328
12/31/98 30008 31838 35206
1/31/99 28537 30278 36650
2/28/99 26990 28636 35467
3/31/99 26873 28512 36843
4/30/99 29557 31360 38241
5/31/99 30100 31936 37286
6/30/99 30116 31953 39316
7/31/99 29245 31029 38056
8/31/99 28002 29709 37818
9/30/99 26432 28044 36738
10/31/99 26494 28110 39036
Graph reflects investment growth of a $10,000 investment.
Past performance is not predictive of future results.
The Standard & Poor's 500 Stock Index (S&P 500) is an unmanaged index,
generally representative of domestically traded common stocks of mid- to
large-size companies. An investor cannot invest directly in an index.
Total Return
As of 10/31/99
OHIO REGIONAL Class A OHIO REGIONAL Class B
Maximum Maximum
Net Asset Offering Net Asset Offering
Value Price Value Price
One Year -6.31% -11.69% -7.48% -10.75%
Three Years 6.90% 4.80% 5.51% 4.67%
Five Years 10.97% 9.67% 9.95% 9.81%
Ten Years 11.20% 10.55% 10.69% 10.69%
Average Annual
Since Inception
10/20/89 10.85% 10.20% 10.34% 10.34%
Portfolio Investments
Basic Industry 11.9%
Capital Goods 16.2%
Consumer Cyclicals 20.8%
Consumer Staples 6.0%
Energy 2.7%
Financial 24.5%
Technology 10.8%
Utilities 7.1%
Performance of the different classes of shares will vary based on the
differences in sales charges and class specific expenses paid by
shareholders.
During the period shown, portions of the investment advisory and
shareholder servicing fees were waived. Had these waivers not been in effect,
the performance quoted would have been lower.
Performance for B Shares prior to March 1, 1996 reflect the performance
of Class A Shares which has not been adjusted for expenses of Class B Shares.
Performance of Class A and B Shares will differ due to differences in sales
charge structure and class expenses.
The MOP figures reflect a maximum sales charge of 5.75% for Class A
Shares and a maximum contingent deferred sales charge (CDSC) of 5.00% for
Class B Shares.
Total returns are historical and include the change in share price and
reinvestment of dividends and capital gains distributions, if any. Total
returns for more than one year are average annual total returns.
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.
Fund holdings are subject to change at any time.
* Reflects the total return on Class A shares without showing the
effect of the 5.75% maximum sales charge.
** The Bloomberg Ohio Index is an unmanaged index, generally representative
of the performance of the state of Ohio's economy. The index was developed
with a base value of 100 as of December 30, 1994. An investor cannot invest
directly in an index.
*** The S&P Mid Cap Value Index is an unmanaged index, generally
representative of dividing the stocks in the S&P Mid-Cap Index according to
the price-to-book ratio. An investor cannot invest directly in an index.
Regional Investing may involve additional risks since the companies
are located in one geographic region.
29
<PAGE>
VICTORY EQUITY FUNDS
The Victory Small Company Opportunity Fund
The resilient domestic economy, now into the ninth year of its current
expansion, provided a supportive backdrop for equities during the past twelve
months. The momentum, though, remains squarely with the largest capitalized
companies within very few sectors of the market. This is evidenced by the
return of the S&P 500 Index of 25.7% versus the return of the Russell 2000
Index of 14.9% during the most recent fiscal year ended October 31, 1999.
Beyond the headlines, the poor market breadth has left most mid-cap and
small-cap stocks behind as investors focused their attention on issues with
liquidity, high earnings visibility and positive momentum.
The return of the Fund for the year ended October 31, 1999, was -3.14%
Class G versus 14.9% for the Russell 2000 Index. The underperformance is
attributable to several factors. The narrow scope of the market resulted in
the majority of the sectors and stocks within the index experiencing negative
returns for the period. Investors' insatiable appetites for internet and
telecommunications stocks resulted in significant outperformance for those
sectors of the market. The exceptional gains posted by the energy, technology
and utilities (specifically telecommunications) sectors masked the negative
performance of nearly every other sector of the market. The Fund's under
exposure to these sectors was not adequate to offset the poor performance of
its holdings in financial services, consumer cyclical and healthcare.
The Fund continues to be built around companies that have exhibited
consistent earnings growth that we believe have favorable prospects for
future growth trading at attractive valuations. This methodology sometimes
leads us to sectors that are currently out-of-favor with investors due to
macro-economic factors despite favorable company specific fundamentals.
Although short-term performance has lagged recently, our focus on companies
with compelling valuations has benefited the Fund over the long-term.
Small-cap stocks have now lagged the large-cap segment of the market
since 1994 and currently trade at their lowest relative valuation since the
inception of the Russell 2000 Index. In addition to the valuation gap,
small-cap companies have been repurchasing their shares and merger activity
continues to pick up.
Total Return
As of 10/31/99
SMALL COMPANY SMALL COMPANY
OPPORTUNITY OPPORTUNITY
Class A Class G
Maximum
Net Asset Offering Net Asset
Value Price Value
One Year -2.95% -8.53% -3.14%
Three Years 6.31% 4.23% 6.24%
Five Years 10.41% 9.11% 10.37%
Ten Years 9.75% 9.10% 9.73%
Average Annual
Since Inception
8/16/83 9.63% 9.23% 9.62%
Portfolio Investments
Basic Industry 8.2%
Capital Goods 15.2%
Consumer Cyclicals 25.2%
Consumer Staples 13.3%
Financial 21.1%
Technology 17.0%
Victory Small Company Opportunity Fund
vs. Russell 2000
Small Company
Opportunity Russell
Class G 2000
10/31/89 10000 10000
11/30/89 10297 10067
12/31/89 10257 10106
1/31/90 9558 9223
2/28/90 9628 9509
3/31/90 9907 9879
4/30/90 9537 9556
5/31/90 10093 10233
6/30/90 10093 10253
7/31/90 9824 9802
8/31/90 8748 8497
9/30/90 8082 7745
10/31/90 7784 7272
11/30/90 8489 7827
12/31/90 8918 8137
1/31/91 9570 8873
2/28/91 10329 9863
3/31/91 10723 10557
4/30/91 10580 10530
5/31/91 10942 11032
6/30/91 10556 10389
7/31/91 11007 10754
8/31/91 11211 11152
9/30/91 11473 11239
10/31/91 11764 11537
11/30/91 11262 11003
12/31/91 12121 11884
1/31/92 12815 12847
2/29/92 12914 13222
3/31/92 12640 12774
4/30/92 12548 12327
5/31/92 12575 12491
6/30/92 12125 11900
7/31/92 12512 12314
8/31/92 12456 11966
9/30/92 12401 12242
10/31/92 12686 12632
11/30/92 13310 13598
12/31/92 13856 14072
1/31/93 14311 14548
2/28/93 14079 14212
3/31/93 14303 14673
4/30/93 14000 14270
5/31/93 14143 14902
6/30/93 14477 14995
7/31/93 14616 15202
8/31/93 15023 15859
9/30/93 15496 16306
10/31/93 15626 16726
11/30/93 15063 16175
12/31/93 15390 16728
1/31/94 15516 17253
2/28/94 15524 17191
3/31/94 15022 16283
4/30/94 15365 16380
5/31/94 15456 16196
6/30/94 14848 15646
7/31/94 14951 15903
8/31/94 15756 16789
9/30/94 15585 16733
10/31/94 15448 16667
11/30/94 14969 15994
12/31/94 15055 16423
1/31/95 15210 16216
2/28/95 15573 16891
3/31/95 15634 17182
4/30/95 15988 17564
5/31/95 16326 17866
6/30/95 17003 18792
7/31/95 17886 19875
8/31/95 18216 20286
9/30/95 18572 20648
10/31/95 18242 19725
11/30/95 18972 20554
12/31/95 19084 21096
1/31/96 19156 21073
2/29/96 19695 21730
3/31/96 20010 22172
4/30/96 20909 23358
5/31/96 21273 24279
6/30/96 20747 23282
7/31/96 19535 21248
8/31/96 20615 22482
9/30/96 21029 23360
10/31/96 21094 23000
11/30/96 22513 23948
12/31/96 22799 24576
1/31/97 23471 25067
2/28/97 23580 24459
3/31/97 22503 23305
4/30/97 22967 23370
5/31/97 24440 25970
6/30/97 25712 27083
7/31/97 27351 28343
8/31/97 27495 28992
9/30/97 28948 31114
10/31/97 28784 29747
11/30/97 28888 29555
12/31/97 29908 30072
1/31/98 29598 29597
2/28/98 31477 31785
3/31/98 31959 33096
4/30/98 31982 33279
5/31/98 30916 31487
6/30/98 30761 31553
7/31/98 29014 28999
8/31/98 24382 23368
9/30/98 24621 25197
10/31/98 26117 26224
11/30/98 26859 27598
12/31/98 27835 29306
1/31/99 26705 29695
2/28/99 24925 27290
3/31/99 24901 27716
4/30/99 26969 30200
5/31/99 27330 30641
6/30/99 28460 32027
7/31/99 27366 31148
8/31/99 25875 29995
9/30/99 25310 30002
10/31/99 25298 30123
Graph reflects investment growth of a $10,000 investment.
Past performance is not predictive of future results.
The Russell 2000 Index (Russell 2000) is an unmanaged index, generally
representative of the general performance of domestically traded common
stocks of small- to mid-sized companies. An investor cannot invest directly
in an index.
Small capitalization funds typically carry additional risk since smaller
companies generally have a higher risk of failure. Effective March 29, 1999,
the Gradison Opportunity Value Fund merged into the Victory Special Growth
Fund and assumed the performance of the Gradison Opportunity Value Fund.
During the period shown, portions of the investment advisory and shareholder
servicing fees were waived. Had these waivers not been in effect, the
performance quoted would have been lower.
Performance for the period prior to March 26, 1999 is that of the
Gradison Opportunity Value Fund which has not been adjusted for the expenses
of Class A Shares. Performance of Class A and Class G Shares will differ due
to differences in sales charge structure and class expenses.
The MOP figures reflect a maximum sales charge of 5.75%.
Total returns are historical and include the change in share price and
reinvestment of dividends and capital gains distributions, if any. Total
returns for more than one year are average annual total returns.
Fee waivers are voluntary and may be modified or terminated at anytime.
Fund holdings are subject to change at any time.
The Standard & Poor's 500 Stock Index (S&P 500) is an unmanaged index,
generally representative of domestically traded common stocks of mid- to
large-size companies. An investor cannot invest directly in an index.
30
<PAGE>
VICTORY EQUITY FUNDS
The Victory International Growth Fund
International equity markets experienced numerous significant events during
the previous year: introduction of the euro, a rapid rebound in Asian equity
markets, the Yen's depreciation and European economic recovery. The Victory
International Growth Fund ("the Fund") was impacted, both positively and
negatively, by all of the above.
The Fund outperformed its benchmark, the MSCI All-Country World Free ex
U.S. Index.** The Fund's return was 29.43% Class A (at NAV) compared to the
benchmark return of 25.3% for the year ending October 31, 1999.
While the Fund outperformed on a full year basis, the first half of the
year was negatively impacted by the recovery of emerging markets, especially
in Asia, and the performance of the Japanese equity markets. The Fund was
underweight in these geographic regions and overweight in Europe.
Concurrently, the European markets were declining as a result of the weakness
in the newly introduced euro currency. During this period, the Fund
integrated the Gradison International Fund, which temporarily increased
turnover.
In the second half of the year, the Fund significantly outperformed its
benchmark. The Fund increased its weighting in Japan, especially in those
sectors deemed more growth-oriented. With continued concerns about the
direction of the Yen, the exposure to exporters was reduced. The gains in
emerging markets began to slow and a rebound in the European economy became
evident.
In the year 2000, our expectations are for a continued recovery in
Europe, as export demand and positive consumer confidence support economic
growth. In Japan, we expect the restructuring of industries to continue,
although a robust recovery is unlikely until consumers there loosen their
purse strings. We believe emerging markets will continue to improve, however,
any significant increase in U.S. interest rates may slow any recovery.
Victory International Growth Fund
vs. MSCI EAFE & MSWI Free XUSA Index
International International
Growth Growth MSCII MSWI Free
Class A Class A @ NAV EAFE XUSA Index
5/18/90 9425 10000 10000 10000
11/30/90 8958 9504 9464 8533
12/31/90 8806 9344 9618 8689
1/31/91 9041 9593 9929 8961
2/28/91 9609 10195 10993 9923
3/31/91 9294 9861 10333 9377
4/30/91 9474 10051 10435 9479
5/31/91 9334 9904 10544 9614
6/30/91 8899 9442 9769 8945
7/31/91 9151 9709 10249 9374
8/31/91 9201 9762 10041 9214
9/30/91 9420 9995 10607 9682
10/31/91 9259 9824 10757 9852
11/30/91 9028 9578 10255 9413
12/31/91 9665 10255 10785 9902
1/31/92 9604 10190 10554 9764
2/29/92 9452 10029 10177 9464
3/31/92 9127 9684 9505 8892
4/30/92 9279 9845 9550 8921
5/31/92 9696 10287 10189 9462
6/30/92 9736 10330 9706 9006
7/31/92 9350 9921 9457 8814
8/31/92 9594 10179 10051 9284
9/30/92 9553 10136 9852 9094
10/31/92 9066 9619 9335 8694
11/30/92 9015 9565 9423 8743
12/31/92 9046 9598 9472 8816
1/31/93 9026 9576 9471 8814
2/28/93 9208 9770 9757 9084
3/31/93 9777 10373 10607 9832
4/30/93 10721 11375 11614 10701
5/31/93 10863 11526 11859 10939
6/30/93 10599 11246 11674 10808
7/31/93 10944 11612 12083 11167
8/31/93 11777 12495 12735 11767
9/30/93 11889 12614 12448 11524
10/31/93 12112 12851 12832 11942
11/30/93 11350 12043 11710 11032
12/31/93 12295 13045 12556 11892
1/31/94 12995 13788 13618 12870
2/28/94 12985 13777 13580 12773
3/31/94 12498 13260 12995 12188
4/30/94 12782 13562 13546 12602
5/31/94 12589 13357 13469 12606
6/30/94 12691 13465 13659 12695
7/31/94 12904 13691 13790 12902
8/31/94 13239 14046 14117 13336
9/30/94 13066 13863 13672 13005
10/31/94 13523 14348 14127 13355
11/30/94 12589 13357 13448 12711
12/31/94 12629 13399 13533 12681
1/31/95 11731 12446 13013 12106
2/28/95 11645 12355 12975 12040
3/31/95 12394 13150 13785 12720
4/30/95 12736 13513 14303 13216
5/31/95 12714 13490 14133 13158
6/30/95 13014 13808 13885 12976
7/31/95 13463 14284 14749 13712
8/31/95 13249 14057 14187 13237
9/30/95 13474 14296 14464 13463
10/31/95 13185 13989 14075 13103
11/30/95 13260 14069 14466 13411
12/31/95 13603 14433 15049 13942
1/31/96 13678 14512 15111 14133
2/29/96 13678 14512 15162 14133
3/31/96 13860 14705 15484 14397
4/30/96 14266 15136 15934 14833
5/31/96 14031 14887 15641 14610
6/30/96 14148 15011 15729 14685
7/31/96 13763 14603 15269 14197
8/31/96 13753 14592 15303 14280
9/30/96 14122 14983 15709 14634
10/31/96 13929 14779 15549 14488
11/30/96 14518 15404 16167 15047
12/31/96 14459 15341 15959 14873
1/31/97 14204 15071 15401 14599
2/28/97 14260 15129 15653 14867
3/31/97 14304 15177 15709 14836
4/30/97 14415 15294 15793 14961
5/31/97 15059 15977 16820 15885
6/30/97 15658 16613 17748 16762
7/31/97 15835 16801 18035 17101
8/31/97 14914 15824 16688 15756
9/30/97 15813 16778 17623 16607
10/31/97 14770 15671 16268 15194
11/30/97 14681 15577 16103 15004
12/31/97 14796 15698 16243 15176
1/31/98 15197 16124 16986 15630
2/28/98 16059 17039 18076 16673
3/31/98 16957 17991 18632 17249
4/30/98 17240 18292 18780 17373
5/31/98 17264 18317 18689 17058
6/30/98 17118 18162 18830 16994
7/31/98 17604 18678 19021 17155
8/31/98 14974 15887 16665 14736
9/30/98 14512 15397 16154 14425
10/31/98 15626 16579 17838 15936
11/30/98 16609 17622 18751 16792
12/31/98 17382 18443 19491 17371
1/31/99 17346 18404 19434 17352
2/28/99 16819 17845 18970 16963
3/31/99 17272 18326 19762 17782
4/30/99 17774 18859 20563 18672
5/31/99 16966 18001 19504 17795
6/30/99 17836 18924 20265 18612
7/31/99 18350 19470 20867 19049
8/31/99 18779 19924 20943 19115
9/30/99 18999 20158 21154 19244
10/31/99 20224 21458 21946 19961
Graph reflects investment growth of a $10,000 investment.
Past performance is not predictive of future results.
* The MSCI EAFE Index--Morgan Stanley Capital International Europe,
Australia, and Far East Index (MSCI EAFE) is an unmanaged index, generally
representative of the general performance of over 1,000 companies of the
European, Australian and Far Eastern equity markets. An investor cannot
invest directly in an index.
** The MSWI Free XUSA Index is an unmanaged index, generally
representative of 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. An investor cannot invest directly
in an index.
Total Return
As of 10/31/99
INTERNATIONAL INTERNATIONAL INTERNATIONAL
GROWTH GROWTH GROWTH
Class A Class B Class G
Maximum Contingent
Net Asset Offering Net Asset Deferred Net Asset
Value Price Value Charges Value
One Year 29.43% 22.03% 27.82% 23.82% 29.20%
Three Years 13.24% 11.03% 11.80% 10.99% 13.17%
Five Years 8.38% 7.11% 7.40% 7.25% 8.34%
Average Annual
Since Inception
5/18/90 8.41% 7.73% 7.89% 7.89% 8.39%
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 18.3%
Performance of the different classes of shares will vary based on the
differences in sales charges and class specific expenses paid by
shareholders.
During the period shown, portions of the investment advisory and
shareholder servicing fees were waived. Had these waivers not been in effect,
the performance quoted would have been lower.
Performance for B Shares prior to March 1, 1996, and for G Shares, prior
to March 26, 1999, respective inception dates of those share classes, reflect
the performance of Class A Shares which has not been adjusted for expenses of
Class B or Class G Shares. Performance of Class A, B and G Shares will differ
due to differences in sales charge structure and class expenses.
The MOP figures reflect a maximum sales charge of 5.75% for Class A
Shares and a maximum contingent deferred sales charge (CDSC) of 5.00% for
Class B Shares.
Total returns are historical and include the change in share price and
reinvestment of dividends and capital gains distributions, if any. Total
returns for more than one year are average annual total returns.
Investment returns and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their
original cost. The total return figures set forth above may reflect the
waiver of a portion of certain fees for various periods since the Fund's
inception. In such instances and without such waiver of fees, the total
returns would have been lower.
Fee waivers are voluntary and may be modified or terminated at anytime.
Fund holdings are subject to change at any time.
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.
31
<PAGE>
Introduction to the Financial Statements
On the next two pages you will find a guide on "How To Read Your Victory
Financial Statement." Since financial statements are designed to provide you
with detailed information regarding the Victory Funds, we encourage you to
review the guide to ensure that you can find the information that you need.
The actual Financial Statements for the Victory Portfolios follow the
"how-to" guide. They provide comprehensive financial information for each
fund, including: a Schedule of Investments (which shows the underlying
securities), Statements of Assets and Liabilities, Statements of Operations,
Statements of Changes in Net Assets, and Financial Highlights.
We hope you find this information helpful, and the format easy-to-use.
Our goal is to present the information you need to feel comfortable with your
current investments. We welcome your feedback.
32
<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 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.
The Financial Statements summarize and describe the Fund's financial
transactions. They are broken down into four different statements.
(graphic)
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.
(graphic)
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.
33
<PAGE>
(graphic)
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.
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.
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.
(graphic)
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.
34
<PAGE>
THE VICTORY PORTFOLIOS Schedule of Investments
U.S. Government Obligations Fund October 31, 1999
(Amounts in Thousands)
Principal Amortized
Security Description Amount Cost
U.S. Treasury Notes (25.9%)
5.63%, 12/31/99 $100,000 $ 100,142
7.75%, 12/31/99 25,000 25,112
7.75%, 1/31/00 25,000 25,180
5.50%, 2/29/00 20,000 20,043
5.50%, 3/31/00 200,000 200,446
5.38%, 6/30/00 35,000 35,019
5.88%, 6/30/00 15,000 15,051
5.38%, 7/31/00 25,000 24,978
6.25%, 8/31/00 25,000 25,145
4.50%, 9/30/00 75,000 74,340
4.00%, 10/31/00 25,000 24,579
Total U.S. Treasury Notes
(Amortized Cost $570,035) 570,035
Repurchase Agreements (74.2%)
Bear Stearns,
5.25%, 11/1/99,
(Collateralized by $2,066,503
various U.S. Government
Securities, 0.00%-9.25%,
3/31/00-11/15/27,
market value -- $550,911) 540,000 540,000
Deutsche Bank,
5.24%, 11/1/99,
(Collateralized by $122,622
various U.S. Government
Securities, 0.00%,
2/15/01-2/15/04,
market value -- $102,000) 100,000 100,000
Donaldson-Lufkin Jenrette,
5.23%, 11/1/99,
(Collateralized by $230,685
various U.S. Government
Securities, 0.00%-5.50%,
8/15/11-8/15/28,
market value -- $83,549) 82,106 82,106
Goldman Sachs Group L.P.,
5.10%, 11/1/99,
(Collateralized by $82,240
various U.S. Government
Securities, 5.38%-8.88%,
7/31/00-8/15/17,
market value -- $90,587) 90,000 90,000
Greenwich Partners,
5.22%, 11/1/99,
(Collateralized by $91,850
U.S. Treasury Note,
5.63%, 9/30/01,
market value -- $91,391) $ 90,000 $ 90,000
Lehman Brothers, Inc.,
5.23%, 11/1/99,
(Collateralized by $547,163
various U.S. Government
Securities, 5.63%-8.50%,
2/15/03-2/15/20,
market value -- $541,011) 540,000 540,000
Morgan Stanley Dean Witter,
5.18%, 11/1/99,
(Collateralized by $70,496
various U.S. Government
Securities, 4.88%-9.13%,
3/31/01-5/15/18,
market value -- $88,973) 90,000 90,000
Warburg Dillon Read,
5.22%, 11/1/99,
(Collateralized by $277,542
various U.S Government
Securities, 0.00%,
8/15/13-2/15/17,
market value -- $102,002) 100,000 100,000
Total Repurchase Agreements
(Amortized Cost $1,632,106) 1,632,106
Total Investments
(Amortized Cost $2,202,141) (a) -- 100.1% 2,202,141
Liabilities in excess of other assets -- (0.1)% (2,419)
TOTAL NET ASSETS -- 100.0% $2,199,722
(a) Cost and value for federal income tax and financial reporting purposes
are the same.
See notes to financial statements.
35
<PAGE>
THE VICTORY PORTFOLIOS Schedule of Investments
Prime Obligations Fund October 31, 1999
(Amounts in Thousands)
Principal Amortized
Security Description Amount Cost
Bankers Acceptances (1.8%)
Bank of Hawaii,
5.60%, 1/26/00 $ 8,000 $ 7,893
Toronto Dominion,
5.30%, 11/1/99 25,000 25,000
Toronto Dominion,
5.00%, 11/26/99 4,742 4,726
Total Bankers Acceptances
(Amortized Cost $37,619) 37,619
Certificates of Deposit (6.8%)
ABN-AMRO
North American Bank,
5.12%, 4/28/00 10,000 9,996
Bank of America,
6.01%, 2/3/00 25,000 25,000
Bayerische Landesbank
New York,
5.12%, 3/21/00 7,000 6,994
Canadian Imperial
Bank of Commerce,
5.41%, 12/28/99 25,000 25,000
Deutsche Bank,
5.06%, 2/10/00 17,000 16,948
Dresdner Bank,
4.95%, 11/9/99 10,000 9,999
Rabobank,
5.11%, 2/18/00 10,000 9,999
Rabobank,
5.14%, 3/27/00 5,000 5,000
Rabobank, 5
.29%, 5/19/00 10,000 9,997
Royal Bank of Canada,
4.97%, 2/3/00 5,000 4,996
Societe Generale,
5.29%, 3/3/00 6,000 5,998
UBS Finance,
5.29%, 3/1/00 10,000 10,000
Total Certificates of Deposit
(Amortized Cost $139,927) 139,927
Commercial Paper (58.8%)
Abbey National,
5.35%, 12/3/99 80,000 79,619
Abbey National,
5.16%, 12/13/99 20,000 19,880
Asset Securitization
Capital Corp.,
5.33%, 11/30/99 $15,000 $ 14,936
Asset Securitization
Capital Corp.,
6.00%, 1/27/00 30,700 30,255
Asset Securitization
Capital Corp.,
6.00%, 1/28/00 20,000 19,707
Baker Hughes, Inc.,
5.33%, 11/16/99 10,000 9,978
Brown Forman Corp.,
5.30%, 11/16/99 5,965 5,952
Brown Forman Corp.,
5.90%, 2/15/00 10,000 9,826
Canada Wheat Board,
5.62%, 2/28/00 10,000 9,814
Chase Bank,
5.27%, 11/17/99 8,500 8,480
Delaware Funding Corp.,
5.35%, 12/2/99 (b) 15,000 14,931
Delaware Funding Corp.,
5.78%, 2/8/00 (b) 28,000 27,555
Delaware Funding Corp.,
5.82%, 2/22/00 (b) 20,000 19,635
Delaware Funding Corp.,
5.93%, 2/25/00 (b) 28,224 27,685
Edison Asset Securities,
5.38%, 11/22/99 (b) 55,000 54,827
Edison Asset Securities,
6.00%, 1/28/00 (b) 45,000 44,339
Fleet Funding Corp.,
5.35%, 11/18/99 (b) 35,000 34,911
Fleet Funding Corp.,
5.35%, 12/1/99 (b) 30,782 30,645
Fleet Funding Corp.,
5.79%, 2/17/00 10,000 9,826
General Electric Capital Corp.,
5.33%, 11/1/99 40,000 40,000
General Electric Capital Corp.,
5.92%, 3/21/00 30,000 29,304
Great Lakes Chemical Corp.,
5.89%, 2/15/00 20,000 19,653
Iowa Student Loan Liquidity Corp.,
5.35%, 12/6/99 27,134 26,993
JP Morgan,
5.95%, 1/20/00 50,000 49,339
McGraw Hill,
5.30%, 11/8/99 19,000 18,980
36
<PAGE>
Mont Blanc Capital Corp.,
5.38%, 11/18/99 (b) $ 9,839 $ 9,814
Mont Blanc Capital Corp.,
6.15%, 1/25/00 (b) 32,000 31,536
Mont Blanc Capital Corp.,
5.87%, 2/11/00 (b) 9,000 8,850
Monte Rosa Capital Corp.,
5.40%, 11/15/99 (b) 20,803 20,759
Monte Rosa Capital Corp.,
5.40%, 11/16/99 (b) 21,000 20,953
Monte Rosa Capital Corp.,
5.42%, 12/14/99 (b) 14,056 13,965
Monte Rosa Capital Corp.,
5.95%, 2/11/00 (b) 19,800 19,466
Pemex Capital,
5.35%, 11/15/99 25,000 24,948
Redwood Receivables Corp.,
5.38%, 11/17/99 25,000 24,940
Redwood Receivables Corp.,
5.40%, 11/18/99 20,000 19,949
Redwood Receivables Corp.,
5.33%, 11/30/99 10,000 9,957
SBC Communications, Inc.,
5.27%, 11/22/99 20,000 19,939
Sheffield Receivables,
5.38%, 11/18/99 36,010 35,919
Sigma Finance, Inc.,
5.00%, 11/15/99 15,000 14,971
Sino Chemical,
5.37%, 11/8/99 12,000 11,987
Sino Chemical,
5.39%, 12/6/99 10,500 10,445
Sony Capital Corp.,
5.80%, 1/28/00 30,000 29,575
Texas Agricultural
Finance Authority,
5.78%, 1/19/00 14,000 13,823
Toronto Dominion,
4.90%, 11/22/99 10,000 9,971
Transamerica Financial Corp.,
5.33%, 11/17/99 35,900 35,815
Transamerica Financial Corp.,
5.30%, 11/22/99 25,000 24,923
Transamerica Financial Corp.,
5.71%, 3/21/00 15,000 14,662
UBS Finance,
4.90%, 11/22/99 20,000 19,943
UBS Finance,
5.33%, 12/13/99 50,000 49,689
Weyerhauser Real Estate,
5.30%, 11/15/99 25,000 24,949
Weyerhauser Real Estate,
5.30%, 11/16/99 $18,000 $ 17,960
Weyerhauser Real Estate,
5.95, 2/4/00 15,000 14,764
Total Commercial Paper
(Amortized Cost $1,211,542) 1,211,542
Corporate Bonds (27.5%)
American General Financial Corp.,
7.13%, 12/1/99 8,915 8,929
American General Financial Corp.,
6.13%, 9/15/00 12,000 12,003
Associates Corp., N.A.,
8.25%, 12/1/99 8,120 8,138
Associates Corp., N.A.,
5.25%, 3/30/00 5,000 4,999
Beneficial Corp.,
8.35%, 12/16/99 3,000 3,012
Beta Finance,
5.94%*, 11/2/99** 10,000 10,000
CIT Group, Inc.,
6.13%, 11/15/99, MTN 4,000 4,001
CIT Group, Inc.,
5.88%, 12/9/99, MTN 14,500 14,508
Dean Witter Discover,
6.25%, 3/15/00 10,000 10,019
Dell Tin Fiber,
5.50%*, 11/3/99**,
LOC First Chicago 10,000 10,000
Dome Corp.,
5.50%*, 11/3/99**,
LOC Societe Generale 2,720 2,720
First Union National,
5.71%*, 11/1/99** 45,000 45,000
Ford Motor Credit Corp.,
7.50%, 11/19/99 5,000 5,006
General Motors Acceptance Corp.,
5.70%*, 11/9/99**, MTN 4,000 4,008
General Motors Acceptance Corp.,
5.78%*, 11/20/99**, MTN 2,000 2,004
General Motors Acceptance Corp.,
5.78%*, 11/20/99**, MTN 9,000 9,016
General Motors Acceptance Corp.,
5.90%, 3/6/00, MTN 5,000 5,000
37
<PAGE>
General Motors Acceptance Corp.,
5.85%, 4/6/00, MTN $ 5,000 $ 5,007
General Motors Acceptance Corp.,
5.93%, 5/1/00, MTN 8,000 7,991
Goldman Sachs Group,
6.05%*, 11/2/99** 10,000 10,000
Goldman Sachs Group,
5.62%*, 12/29/99** 10,000 10,008
Household Finance,
5.46%*, 12/10/99** 10,000 10,001
Household Finance,
6.00%, 5/8/00 5,000 5,005
John Deere Capital Corp.,
5.83%, 3/16/00, MTN 10,000 9,987
John Deere Capital Corp.,
5.73%, 7/13/00, MTN 10,000 9,997
Lehman Brothers Holdings, Inc.,
5.46%*, 11/22/99** 40,000 40,000
Liberty Light,
6.16%*, 11/15/99** 15,000 15,004
Merrill Lynch,
5.54%*, 11/1/99**, MTN 10,000 10,000
Merrill Lynch,
5.85%*, 11/15/99**, MTN 10,000 10,008
Morgan Stanley Dean Witter,
5.56%*, 11/1/99** 50,000 50,000
Morgan Stanley Dean Witter,
6.82%, 12/15/99 9,000 9,019
Morgan Stanley Dean Witter,
5.61%*, 12/16/99** 8,000 8,000
Morgan Stanley Dean Witter,
5.63%*, 12/27/99** 5,600 5,607
Nationsbank,
5.00%, 1/5/00 20,000 19,999
Norwest Financial, Inc.,
7.25%, 3/15/00 10,148 10,222
Philip Morris,
7.13%, 12/1/99 5,000 5,008
Richfield Technology Associates,
5.47%*, 11/4/99**,
LOC Star Bank 4,500 4,500
RKS LLC Health Care,
5.50%*, 11/3/99**,
LOC AmSouth Bank 11,500 11,500
Salomon Smith Barney, Inc.,
6.50%, 3/1/00 $14,000 $ 14,049
Sea River Maritime, Inc.,
5.40%*, 11/1/99**,
Guaranteed by Exxon Corp. 29,900 29,900
Sigma Finance, Inc.,
5.76%*, 11/2/99** 10,000 10,000
Sigma Finance, Inc.,
5.55%*, 11/5/99** 25,000 25,000
Southwestern Ohio Steel,
5.47%*, 11/4/99**,
LOC Star Bank 8,960 8,960
Tell-Schipper Properties, Inc.,
5.55%*, 11/4/99**,
LOC Bank One 1,120 1,120
Transamerica Finance Corp.,
5.05%*, 11/12/99** 7,000 7,000
Transamerica Finance Corp.,
7.70%, 3/16/00 4,000 4,035
USL Capital Corp.,
5.78%*, 12/8/99** 5,000 5,002
USL Capital Corp.,
7.54%, 12/22/99 5,000 5,017
Xerox Corp.,
9.75%, 3/15/00 7,300 7,394
Xerox Corp.,
5.32%, 3/31/00 18,000 17,997
Xerox Corp.,
5.40%, 9/11/00 5,000 4,968
Total Corporate Bonds
(Amortized Cost $565,668) 565,668
Municipal Bonds (0.3%)
Ohio (0.3%):
Cuyahoga County EDR,
Gateway Arena Project,
Series B, 5.50%*, 11/3/99**,
LOC Canadian Imperial
Bank of Commerce 6,900 6,900
Total Municipal Bonds
(Amortized Cost $6,900) 6,900
U.S. Government Agencies (0.5%)
Federal Home Loan Bank (0.5%):
5.00%, 1/5/00 10,000 10,000
Total U.S. Government Agencies
(Amortized Cost $10,000) 10,000
38
<PAGE>
Principal
Security Description Amount Cost
Repurchase Agreements (4.3%)
Donaldson-Lufkin
Jenerette Securities Corp.,
5.23%, 11/1/99,
(Collateralized by
$23,749 various
U.S. Government Securities,
0.00%-6.50%,
5/31/00-11/15/10,
market value $20,019) $20,000 $ 20,000
Lehman Brothers, Inc.,
5.23%, 11/1/99,
(Collateralized by
$30,430 U.S. Treasury Note,
5.88%, 2/15/04,
market value $30,240) 30,000 30,000
Paine Weber,
5.23%, 11/1/99,
(Collateralized by
$92,735 various
U.S. Government Securities,
5.50%-8.75%,
5/31/00-5/15/17,
market value $39,400) 38,807 38,807
Total Repurchase Agreements
(Cost $88,807) 88,807
Total Investments
(Amortized Cost $2,060,463) (a) -- 100.0% 2,060,463
Liabilities in excess of other assets -- 0.0% (424)
TOTAL NET ASSETS -- 100.0% $2,060,039
(a) Cost and value for federal income tax and financial reporting purposes
are the same.
(b) Section 4(2) commercial paper which is restricted as to resale.
* 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, 1999. 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.
39
<PAGE>
THE VICTORY PORTFOLIOS Schedule of Investments
Financial Reserves Fund October 31, 1999
(Amounts in Thousands)
Principal Amortized
Security Description Amount Cost
Bankers Acceptances (1.2%)
Toronto Dominion,
5.30%, 11/1/99 $10,000 $ 10,000
Total Bankers Acceptances
(Amortized Cost $10,000) 10,000
Certificates of Deposit (8.2%)
ABN-AMRO
North American Bank,
5.12%, 4/28/00 5,000 4,998
Bank of America,
6.01%, 2/3/00 10,000 10,000
Bayerische Landesbank
New York,
5.12%, 3/21/00 5,000 4,996
Canadian Imperial
Bank of Commerce,
5.41%, 12/28/99 10,000 9,999
Deutsche Bank,
5.32%, 12/7/99 7,000 6,963
Deutsche Bank,
5.06%, 2/10/00 10,000 9,969
Dresdner Bank,
4.95%, 11/9/99 10,000 9,999
Rabobank,
5.11%, 2/18/00 5,000 5,000
UBS Finance,
5.29%, 3/1/00 5,000 5,000
Total Certificates of Deposit
(Amortized Cost $66,924) 66,924
Commercial Paper (41.8%)
Abbey National,
5.16%, 12/13/99 10,000 9,940
Arizona Educational Loan,
5.37%, 11/15/99 5,850 5,838
Baker Hughes, Inc.,
5.33%, 11/16/99 15,000 14,967
Canada Wheat Board,
5.62%, 2/28/00 5,000 4,907
Delaware Funding Corp.,
5.78%, 2/8/00 (b) 20,406 20,082
Fleet Funding Corp.,
5.35%, 11/18/99 (b) 10,000 9,975
Fleet Funding Corp.,
5.94%, 2/15/00 (b) 25,295 24,853
General Electric Capital Corp.,
6.00%, 2/3/00 6,800 6,693
General Electric Capital Corp.,
5.92%, 3/21/00 $20,000 $ 19,537
General Motors Acceptance Corp.,
5.63%, 2/25/00 6,000 5,985
Great Lakes Chemical Corp.,
5.89%, 2/15/00 10,000 9,827
Household Finance,
5.33%, 11/1/99 17,000 17,000
Koch Industries,
5.34%, 11/1/99 20,000 20,000
Matson Navigation,
5.37%, 12/10/99 10,000 9,942
McCormick & Co.,
5.30%, 11/16/99 10,000 9,978
Mont Blanc Capital Corp.,
5.38%, 11/16/99 (b) 13,004 12,975
Mont Blanc Capital Corp.,
6.15%, 1/25/00 (b) 10,000 9,854
Monte Rosa Capital Corp.,
5.40%, 11/9/99 (b) 10,000 9,988
Pemex Capital,
5.35%, 11/15/99 22,075 22,028
SBS Communications, Inc.,
5.28%, 11/18/99 7,250 7,232
SBC Communications, Inc.,
5.27%, 11/22/99 25,000 24,923
Sheffield Receivables,
5.38%, 11/18/99 13,000 12,967
Sony Capital Corp.,
5.80%, 1/28/00 19,243 18,970
Southwest Student
Services Corp.,
5.37%, 11/15/99 7,000 6,985
Toronto Dominion,
4.90%, 11/22/99 5,000 4,986
UBS Finance,
4.90%, 11/22/99 10,000 9,971
Xerox Capital de Mexico,
5.40%, 11/29/99 11,000 10,954
Total Commercial Paper
(Amortized Cost $341,357) 341,357
Corporate Bonds (38.5%)
4-L Co. of Carmel,
5.50%*, 11/3/99**,
LOC NBD Bank 2,500 2,500
American General
Financial Corp.,
5.88%, 7/1/00 2,000 2,002
40
<PAGE>
American General
Financial Corp.,
6.78%, 7/20/00 $ 5,000 $ 5,034
American General
Financial Corp.,
6.13%, 9/15/00 8,000 8,001
Associates Corp., N.A.,
8.19%, 11/10/99, MTN 3,500 3,502
Associates Corp., N.A.,
6.13%, 11/12/99, MTN 2,800 2,801
Associates Corp., N.A.,
8.78%, 12/7/99, MTN 1,000 1,003
Associates Corp., N.A.,
6.00%, 6/15/00 5,000 4,993
Beneficial Corp.,
7.29%, 12/3/99 5,000 5,006
Beta Finance,
5.94%*, 11/2/99** 5,000 5,000
CIT Group, Inc.,
6.13%, 11/15/99, MTN 3,700 3,701
CIT Group, Inc.,
5.88%, 12/9/99, MTN 5,200 5,204
CS Manufacturing,
5.50%*, 11/3/99** 4,100 4,100
Dell Tin Fiber,
5.50%*, 11/3/99**,
LOC First Chicago 8,000 8,000
First Union National,
5.71%*, 11/1/99** 30,000 30,000
Galileo Corp.,
5.50%*, 11/3/99**,
LOC LaSalle Bank 10,700 10,700
General Motors
Acceptance Corp.,
5.51%*, 11/1/99**, MTN 6,500 6,499
General Motors
Acceptance Corp.,
5.85%, 4/6/00, MTN 5,000 5,007
Glen Oaks Real Estate,
5.50%*, 11/3/99** 6,500 6,500
Goldman Sachs Group,
6.05%*, 11/2/99** (b) 5,000 5,000
Goldman Sachs Group,
5.61%*, 12/22/99** (b) 10,000 10,001
Goldman Sachs Group,
5.62%*, 12/29/99** (b) 5,000 5,004
Household Finance,
5.46%*, 12/10/99** 5,000 5,000
Household Finance,
6.78%, 12/28/99 2,325 2,330
Household Finance,
6.81%, 5/25/00 $ 5,000 $ 5,015
IBM Credit Corp.,
5.79%, 3/20/00 1,750 1,751
IBM Credit Corp.,
8.90%, 6/20/00 5,000 5,105
IBM Credit Corp.,
6.20%, 8/28/00, MTN 1,675 1,678
Ivex Of Delaware,
Kama Project,
5.45%*, 11/4/99**,
LOC Societe Generale 6,500 6,500
John Deere Capital Corp.,
5.73%, 7/13/00, MTN 5,000 4,999
L.E. Pope Building Co., Inc.,
5.50%*, 11/4/99**,
LOC First Union Bank 100 100
Lehman Brothers Holdings, Inc.,
5.46%*, 11/22/99** 22,000 22,000
Merrill Lynch,
5.54%*, 11/1/99**, MTN 5,000 5,000
Merrill Lynch,
8.25%, 11/15/99 3,000 3,003
Merrill Lynch,
6.38%, 12/15/99 1,250 1,252
Merrill Lynch,
5.85%*, 11/15/99**, MTN 5,000 5,006
Morgan Stanley Dean Witter,
5.56%*, 11/1/99** 5,000 5,000
Morgan Stanley Dean Witter,
6.82%, 12/15/99, MTN 10,000 10,021
Morgan Stanley Dean Witter,
6.82%, 12/15/99 5,000 5,010
Morgan Stanley Dean Witter,
5.61%*, 12/16/99** 15,000 15,000
Morgan Stanley Dean Witter,
7.18%, 12/20/99 4,500 4,510
Morgan Stanley Dean Witter,
5.63%*, 12/27/99** 2,000 2,003
Nationsbank,
5.00%, 1/5/00 10,000 10,000
Sea River Maritime, Inc.,
5.40%*, 11/1/99**,
Guaranteed by Exxon Corp. 21,400 21,400
Sharp Electronics,
5.45%*, 11/4/99**,
LOC Fifth Third Bank 3,865 3,865
Sigma Finance, Inc.,
5.76%*, 11/2/99** 5,000 5,000
Sigma Finance, Inc.,
5.55%*, 11/5/99** 10,000 9,999
41
<PAGE>
Transamerica Finance Corp.,
5.05%*, 11/12/99** $ 5,000 $ 5,000
USL Capital Corp.,
8.13%, 2/15/00 5,000 5,042
William Theis & Son, Inc.,
5.50%*, 11/4/99**,
LOC First Union 100 100
Xerox Corp.,
5.32%, 3/31/00 5,000 4,999
Total Corporate Bonds
(Amortized Cost $315,246) 315,246
Municipal Bonds (1.8%)
Idaho (0.5%):
Idaho Assoc. LLC.,
5.50%*, 11/3/99**,
LOC LaSalle Bank 4,000 4,000
Kentucky (0.8%):
Maruga, Series 1999b,
5.52%*, 11/4/99**,
LOC First Star 1,365 1,365
Warren County Industrial
Development Authority,
5.46%*, 11/4/99**,
LOC National City Bank 5,000 5,000
6,365
New York (0.2%):
Rockland County,
NY Industrial
Development,
5.60%*, 11/3/99**,
LOC Mellon Bank 2,000 2,000
Pennsylvania (0.3%):
Franconia Township
Industrial Development,
5.60%*, 11/3/99**,
LOC Mellon Bank 2,765 2,765
Total Municipal Bonds
(Amortized Cost $15,130) 15,130
Repurchase Agreements (8.5%)
Donaldson-Lufkin
Jenerette Securities Corp.,
5.23%, 11/1/99,
(Collateralized by $15,378
Federal National
Mortgage Assoc.,
5.80%, 7/17/02,
market value $15,048) $15,000 $ 15,000
Lehman Brothers, Inc.,
5.23%, 11/1/99,
(Collateralized by $46,385
U.S. Treasury Strips,
0.00%, 2/15/09,
market value $25,502) 25,000 25,000
Paine Weber,
5.23%, 11/1/99,
(Collateralized by $29,600
U.S. Treasury Note,
5.50%, 5/31/00,
market value $29,600) 29,319 29,319
Total Repurchase Agreements
(Cost $69,319) 69,319
U.S. Government Agencies (0.6%)
Federal Home Loan Bank (0.6%):
5.00%, 1/5/00 5,000 5,000
Total U.S. Government Agencies
(Amortized Cost $5,000) 5,000
Total Investments
(Amortized Cost $822,976) (a) -- 100.6% 822,976
Liabilities in excess of other assets -- (0.6)% (4,524)
TOTAL NET ASSETS -- 100.0% $818,452
(a) Cost and value for federal income tax and financial reporting
purposes are the same.
(b) Section 4(2) commercial paper which is restricted as to resale.
* 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, 1999. 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.
42
<PAGE>
Statements of Assets and Liabilities
THE VICTORY PORTFOLIOS October 31, 1999
(Amounts in Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
U.S. Government Prime Financial
Obligations Obligations Reserves
Fund Fund Fund
<S> <C> <C> <C>
ASSETS:
Investments, at amortized cost $ 570,035 $1,971,656 $753,657
Repurchase agreements, at cost 1,632,106 88,807 69,319
Total Investments 2,202,141 2,060,463 822,976
Cash 1 -- --
Interest receivable 7,226 9,190 5,251
Receivable for capital shares issued -- 3 --
Prepaid expenses and other assets 36 22 102
Total Assets 2,209,404 2,069,678 828,329
LIABILITIES:
Dividends payable 8,469 8,365 3,396
Payable to brokers for investments purchased -- -- 5,985
Payable for capital shares redeemed -- -- 10
Accrued expenses and other payables:
Investment advisory fees 665 617 345
Administration fees 33 31 101
Custodian fees 37 34 14
Accounting fees 2 1 7
Transfer agent fees 27 26 10
Shareholder service fees -- 437 --
Shareholder service fees -- Select Shares 371 -- --
Other 78 128 9
Total Liabilities 9,682 9,639 9,877
NET ASSETS:
Capital 2,199,721 2,060,035 818,451
Undistributed (distributions in excess of) net investment income -- 16 1
Accumulated undistributed net realized gains
(losses) from investment transactions 1 (12) --
Net Assets $2,199,722 $2,060,039 $818,452
Net Assets
Investor Shares $ 386,264
Select Shares 1,813,458
Total $2,199,722
Outstanding units of beneficial interest (shares)
Investor Shares 386,236
Select Shares 1,813,543
Total 2,199,779 2,060,035 818,342
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.
43
<PAGE>
Statements of Operations
THE VICTORY PORTFOLIOS For the Year Ended October 31, 1999
(Amounts in Thousands)
<TABLE>
<CAPTION>
U.S. Government Prime Financial
Obligations Obligations Reserves
Fund Fund Fund
<S> <C> <C> <C>
Investment Income:
Interest income $108,083 $90,138 $43,600
Securities Lending 186 11 11
Total Income 108,269 90,149 43,611
Expenses:
Investment advisory fees 7,640 6,046 4,192
Administration fees 2,393 1,938 1,048
Shareholder service fees -- 4,319 --
Shareholder service fees -- Select Shares 4,283 -- --
Accounting fees 112 113 106
Custodian fees 433 342 176
Legal and audit fees 160 135 62
Trustees' fees and expenses 58 45 20
Transfer agent fees 112 111 38
Registration and filing fees 166 218 19
Printing fees 182 311 25
Other 91 32 18
Total Expenses 15,630 13,610 5,704
Net Investment Income 92,639 76,539 37,907
Realized Gains (Losses) from Investments:
Net realized gains (losses) from investment transactions -- (12) 7
Change in net assets resulting from operations $ 92,639 $76,527 $37,914
</TABLE>
See notes to financial statements.
44
<PAGE>
THE VICTORY PORTFOLIOS Statements of Changes in Net Assets
(Amounts in Thousands)
<TABLE>
<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,
1999 1998 1999 1998 1999 1998
<S> <C> <C> <C> <C> <C> <C>
From Investment Activities:
Operations:
Net investment income $ 92,639 $ 94,996 $ 76,539 $ 51,295 $ 37,907 $ 38,928
Net realized gains (losses)
from investment transactions -- 22 (12) 16 7 8
Change in net assets resulting
from operations 92,639 95,018 76,527 51,311 37,914 38,936
Distributions to Shareholders:
From net investment income -- -- (76,539) (51,295) (37,907) (38,928)
Investor Shares (20,842) (25,238) -- -- -- --
Select Shares (71,797) (69,758) -- -- -- --
From net realized gains from
investment transactions -- -- -- (14) -- --
Change in net assets from
distributions to shareholders (92,639) (94,996) (76,539) (51,309) (37,907) (38,928)
Capital Transactions:
Proceeds from shares issued 3,987,901 4,231,821 4,151,240 3,531,074 1,615,129 1,578,862
Dividends reinvested 60,057 57,598 71,662 46,726 2,868 2,429
Cost of shares redeemed (4,021,260) (3,808,025) (3,541,564) (2,935,538) (1,585,072) (1,596,421)
Change in net assets from
capital transactions 26,698 481,394 681,338 642,262 32,925 (15,130)
Change in net assets 26,698 481,416 681,326 642,264 32,932 (15,122)
Net Assets:
Beginning of period 2,173,024 1,691,608 1,378,713 736,449 785,520 800,642
End of period $ 2,199,722 $ 2,173,024 $ 2,060,039 $ 1,378,713 $ 818,452 $ 785,520
Share Transactions:
Issued 3,987,901 4,231,821 4,151,241 3,531,074 1,615,128 1,578,862
Reinvested 60,057 57,598 71,662 46,726 2,868 2,429
Redeemed (4,021,260) (3,808,025) (3,541,564) (2,935,538) (1,585,072) (1,596,421)
Change in shares 26,698 481,394 681,339 642,262 32,924 (15,130)
</TABLE>
See notes to financial statements.
45
<PAGE>
THE VICTORY PORTFOLIOS Financial Highlights
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
U.S. Government Obligations Fund
Investor Shares Select Shares
Year Year Period Year Year Year
Ended Ended Ended Ended Ended Ended Year Ended October 31,
October 31, October 31, October 31, October 31, October 31, October 31,
1999 1998 1997<F2> 1999 1998 1997<F2> 1996 1995<F3>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Investment Activities
Net investment
income 0.044 0.050 0.041 0.042 0.048 0.047 0.049 0.052
Distributions
Net investment
income (0.044) (0.050) (0.041) (0.042) (0.048) (0.047) (0.049) (0.052)
Net Asset Value,
End of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Total Return 4.54% 5.12% 4.19%<F4> 4.27% 4.86% 4.75% 4.96% 5.38%
Ratios/Supplemental
Data:
Net Assets,
End of Period (000) $386,264 $571,104 $456,133 $1,813,458 $1,601,920 $1,235,475 $1,357,817 $964,929
Ratio of expenses to
average net assets 0.52% 0.52% 0.56%<F5> 0.77% 0.77% 0.74% 0.61% 0.58%
Ratio of net investment
income to average
net assets 4.44% 5.03% 4.95%<F5> 4.19% 4.78% 4.75% 4.84% 5.28%
Ratio of expenses to
average net assets<F1> <F6> <F6> <F6> <F6> <F6> <F6> <F6> 0.60%
Ratio of net investment
income to average
net assets<F1> <F6> <F6> <F6> <F6> <F6> <F6> <F6> 5.26%
<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.
46
<PAGE>
THE VICTORY PORTFOLIOS Financial Highlights
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Prime Obligations Fund
Year Ended October 31,
1999 1998 1997 1996 1995
<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 0.044 0.049 0.048 0.047 0.051
Distributions
Net investment income (0.044) (0.049) (0.048) (0.047) (0.051)
Net Asset Value, End of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Total Return 4.52% 4.98% 4.89% 4.81% 5.26%
Ratios/Supplemental Data:
Net Assets, End of Period (000) $2,060,039 $1,378,713 $736,449 $496,019 $456,266
Ratio of expenses to average net assets 0.79% 0.80% 0.85% 0.87% 0.74%
Ratio of net investment income
to average net assets 4.43% 4.89% 4.79% 4.72% 5.09%
</TABLE>
See notes to financial statements.
47
<PAGE>
THE VICTORY PORTFOLIOS Financial Highlights
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Financial Reserves Fund
Year Ended October 31,
1999 1998 1997 1996 1995<F2>
<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 0.045 0.050 0.049 0.049 0.054
Distributions
Net investment income (0.045) (0.050) (0.049) (0.049) (0.054)
Net Asset Value,
End of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Total Return 4.62% 5.10% 5.04% 5.00% 5.50%
Ratios/Supplemental Data:
Net Assets, End of Period (000) $818,452 $785,520 $800,642 $767,990 $762,870
Ratio of expenses to
average net assets 0.68% 0.67% 0.67% 0.67% 0.60%
Ratio of net investment income
to average net assets 4.52% 5.01% 4.94% 4.89% 5.40%
Ratio of expenses to
average net assets<F1> <F3> 0.68% 0.71% 0.75% 0.76%
Ratio of net investment income
to average net assets<F1> <F3> 5.00% 4.90% 4.81% 5.24%
<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.
<F3> There were no voluntary fee reductions during the period.
</FN>
</TABLE>
See notes to financial statements.
48
<PAGE>
THE VICTORY PORTFOLIOS Schedule of Investments
Tax-Free Money Market Fund October 31, 1999
(Amounts in Thousands, Except Shares)
Shares or
Principal Amortized
Security Description Amount Cost
Municipal Bonds (99.3%)
Alabama (2.0%):
Montgomery Hospital,
Series C, 3.55%*, 11/3/99**,
AMBAC, SPA Mellon Bank N.A. $ 5,400 $ 5,400
Montgomery Hospital,
Series D, 3.55%*, 11/3/99**,
AMBAC, SPA Mellon Bank N.A. 2,000 2,000
Montgomery Hospital,
Series E, 3.55%*, 11/3/99**,
AMBAC, SPA Mellon Bank N.A. 4,600 4,600
Montgomery Hospital,
Series G, 3.55%*, 11/3/99**,
AMBAC, SPA Mellon Bank N.A. 1,635 1,635
13,635
Arizona (2.0%):
Maricopa County, El Paso Project,
3.55%*, 11/3/99**,
LOC Barclays Bank 11,600 11,600
Pima County,
Industrial Development
Authority, IDR, Brush
Wellman Inc. Project,
3.55%*, 11/4/99**,
LOC National City Bank 1,500 1,500
State Transportation Board,
7.00%, 7/1/00,
Prerefunded 7/1/00 @ 101 1,000 1,032
14,132
Arkansas (1.4%):
Paragould Sales and Use Tax,
5.25%, 7/1/00, AMBAC 1,205 1,219
State Development Auth.,
Police-Wireless Data,
5.00%, 6/1/00, FGIC 1,100 1,110
State Development Finance
Authority, Potlatch Corp.
Project, Series A,
3.55%*, 11/3/99**,
LOC Credit Suisse AMT 7,250 7,250
9,579
Colorado (1.2%):
Arapahoe Water & Sanitation, GO,
3.40%, 12/1/99,
LOC Banque Nationale De Paris 6,120 6,120
Housing Finance Authority,
3.50%*, 11/3/99**, FNMA 1,060 1,060
Housing Finance Authority,
3.50%*, 11/3/99**, FNMA 1,075 1,075
8,255
Delaware (0.5%):
State Economic Development,
3.55%*, 11/3/99**,
Guaranteed by Philip Morris $ 3,300 $ 3,300
District of Columbia (2.8%):
District of Columbia
Housing-Carmel,
3.60%*, 11/4/99**,
LOC Bank One 1,000 1,000
District of Columbia, GO,
4.50%, 6/1/00, MBIA 7,460 7,495
District Of Columbia, GO,
3.75%*, 11/1/99**,
LOC Bank of America 11,000 11,000
19,495
Hawaii (0.3%):
Honolulu City and County,
Series C, GO, 6.90%, 6/1/00,
LOC Morgan Guaranty Trust 2,000 2,038
Idaho (0.8%):
Nez Perce County,
Pollution Control Revenue,
3.45%*, 11/3/99**,
LOC First National
Bank of Chicago 3,000 3,000
Nez Perce County,
Pollution Control Revenue,
3.45%*, 11/4/99**,
LOC First National
Bank of Chicago 2,700 2,700
5,700
Illinois (16.9%):
Chicago, Noble State Charter,
3.55%*, 11/3/99**,
LOC First National
Bank of Chicago 2,500 2,500
Chicago, Special Facility,
3.55%*, 11/3/99**,
LOC First National
Bank of Chicago AMT 9,300 9,300
Development Financial Authority,
3.55%*, 11/2/99**,
LOC Morgan Guaranty Trust AMT 6,400 6,400
Development Financial Authority,
3.55%*, 11/2/99**,
LOC Morgan Guaranty Trust AMT 11,300 11,300
Development Financial Authority,
American Youth,
3.60%*, 11/4/99**,
LOC Bank of America 3,500 3,500
49
<PAGE>
Development Financial Authority,
Catherine Cook School Project,
3.60%*, 11/3/99**,
LOC Harris Bank & Trust $ 2,875 $ 2,875
Development Financial Authority,
Museum Contemporary Arts Project,
3.45%*, 11/3/99**,
LOC NBD Bank 19,300 19,300
East St. Louis,
3.70%*, 11/4/99**,
LOC Nationsbank 4,150 4,150
Educational Facilities, University
Pooled Funding Program,
3.45%*, 11/3/99**,
FGIC, SPA First National
Bank of Chicago 9,230 9,230
Educational Facility
Authority Revenue,
3.45%*, 11/3/99**,
LOC American National Bank 15,700 15,700
Galesburg, Knox College,
3.65%*, 11/4/99**,
LOC La Salle National Bank 5,000 5,000
Hanover Park IDR,
Spectra-Tech, Inc. Project,
3.75%*, 11/4/99**,
LOC Harris Bank & Trust AMT 1,685 1,685
Health Authority Revenue Bond,
3.55%*, 11/3/99**,
LOC First National Bank Chicago 13,700 13,700
Lombard,
3.70%*, 11/4/99**,
LOC American National
Bank & Trust AMT 1,830 1,830
Mundelein,
3.45%*, 11/3/99**,
LOC Northern Trust Co. 6,700 6,700
Savanna, IDR,
3.55%*, 11/3/99**,
LOC First National
Bank of Chicago AMT 1,000 1,000
State Development Financial
Authority, EDR, CPL/Downers
Grove Partnership,
3.75%*, 11/2/99**,
LOC LaSalle National Bank 4,400 4,400
Tinley Park, SA,
3.50%*, 11/3/99**,
LOC Old Kent Bank AMT 90 90
118,660
Indiana (10.1%):
Auburn Economic Development,
3.60%*, 11/1/99**,
LOC NBD Bank $ 2,000 $ 2,000
Educational Facility Authority
Revenue, Bethel College,
Series A, 3.45%*, 11/3/99**,
LOC NBD Bank 3,200 3,200
Elkhart, EDR,
4.10%*, 12/1/99**,
LOC Bank One 700 700
Financing Authority Health
Facility Revenue,
Baptist Homes of Indiana,
3.55%*, 11/4/99**,
LOC Bank One Indianapolis 4,665 4,665
Fort Wayne, EDR,
3.55%*, 11/3/99**,
LOC Societe Generale AMT 3,000 3,000
Greenfield Economic Development,
3.65%*, 11/4/99**,
LOC Bank One Indianapolis 915 915
Greenwood Health,
3.65*, 11/4/99**,
LOC Bank One Indianapolis 925 925
Indiana Bond Bank
Federal Program,
4.00%, 1/19/00 3,752 3,756
Indiana Bond Bank
Series 99A-2,
3.50%, 1/19/00 10,000 10,006
Indianapolis, EDR,
White Arts, Inc. Project,
3.65%*, 11/4/99**,
LOC Fifth Third Bank 4,300 4,300
Lagrande County, IDR,
3.70%*, 11/3/99**,
LOC Bank One Indianapolis AMT 2,200 2,200
Lagrande County, IDR,
3.70%*, 11/3/99**,
LOC Bank One Indianapolis AMT 2,600 2,600
Lawrence Southwark,
3.70%*, 11/4/99**,
LOC Mellon Bank 2,500 2,500
Mooresville Viking Air Tools,
3.70%*, 11/3/99**,
LOC Bank One Indiana N.A. AMT 4,190 4,190
Mooresville, Kendrick
Memorial Hospital Project,
3.57%*, 11/4/99**,
LOC Huntington Bank 2,350 2,350
50
<PAGE>
Noblesville, Rivers Edge
Apartments Project,
3.55%*, 11/4/99**,
LOC Bank One $ 2,935 $ 2,935
Orleans Industry Economic
Development,
3.70%*, 11/4/99**,
LOC Bank One Indiana N.A. AMT 4,600 4,600
Plymouth, EDR,
3.67%*, 11/4/99**,
LOC Star Bank 5,060 5,060
Richmond Friends,
3.55%*, 11/4/99**,
LOC Bank One 2,700 2,700
Seymour Spaceguard,
3.70%*, 11/3/99**,
LOC NBD Bank N.A. AMT 1,000 1,000
State Development
Financial Authority, EDR,
Dura-Crete Project,
3.70%*, 11/4/99**,
LOC Bank One AMT 3,470 3,470
State Education Wesleyan,
3.50%*, 11/3/99**,
LOC NBD Bank 2,500 2,500
Wakarusa, EDR,
MMM-Invest Inc. Project,
3.55%*, 11/4/99**,
LOC Bank One 660 660
70,232
Iowa (3.1%):
City of Urbandale,
3.45%*, 11/3/99,
Guaranteed by Principle
Mutual Life Insurance Co. 9,200 9,200
Financial Authority,
Sauer-Sundstrand Co. Project,
3.50%*, 11/3/99**,
LOC Bayerische
Vereinsbank AMT 3,830 3,830
Higher Education,
3.75%*, 11/3/99**,
LOC Norwest Bank Minnesota 2,830 2,830
Urbandale Meredith,
3.45%*, 11/3/99**,
Guaranteed by Principle
Mutual Life Insurance Co. 5,500 5,500
21,360
Kansas (1.8%):
Fairway, IDR, J.C. Nichols Co., Inc.,
3.90%*, 12/1/99,
Guaranteed by Principle
Mutual Life Insurance Co. $ 2,300 $ 2,300
Wichita, GO,
4.00%, 2/24/00 10,000 10,018
12,318
Kentucky (7.1%):
Boone County,
3.75%, 6/30/00 2,100 2,101
Boone County,
Industrial Building Revenue,
Multi-Color Corp. Project,
3.95%*, 11/4/99**,
LOC PNC Bank AMT 1,600 1,600
Carroll County, IDR,
Kentucky Ladder Co. Project,
3.80%*, 11/3/99**,
LOC Bankers Trust Co. AMT 5,000 5,000
Covington Industrial,
3.62%*, 11/4/99**,
LOC Star Bank 3,695 3,695
Dayton Industrial
Building Revenue,
Woodcraft Manufacturing
Co., Inc. Project,
3.85%*, 11/4/99**,
LOC Fifth Third Bank 610 610
Economic Development,
3.70*, 11/4/99**,
LOC Star Bank 7,440 7,440
Jefferson County,
Industrial Building Revenue,
Hamilton Printing, Inc. Project,
3.65%*, 11/4/99**,
LOC Fifth Third Bank AMT 4,500 4,500
Kenton County,
3.75%, 6/30/00 4,489 4,490
Kentucky Interlocal School,
4.0%, 6/30/00 10,000 10,032
Lexington Fayette,
3.55%*, 11/4/99**,
LOC National City Bank 3,935 3,935
Mayfield Multi-City
Lease Revenue,
3.65%*, 11/3/99**,
LOC PNC Bank 4,000 4,000
51
<PAGE>
Somerset, Industrial
Building Revenue,
Glen Oak Lumber & Mining,
3.70%*, 11/4/99**,
LOC Bank One AMT $ 2,175 $ 2,175
49,578
Louisiana (0.8%):
Jefferson,
5.00%, 12/1/99 1,165 1,166
Jefferson Parish,
3.60%*, 11/4/99**,
Guaranteed by
Sara Lee Corp. AMT 4,600 4,600
5,766
Maine (1.2%):
Health & Higher Education,
3.55%*, 11/3/99**, AMBAC,
SPA Mellon Bank N.A. 5,300 5,300
Health & Higher Education,
3.55%*, 11/3/99**, AMBAC,
SPA Mellon Bank N.A. 1,600 1,600
Maine Health & Higher Education,
4.00%, 7/1/00, MBIA 1,180 1,184
8,084
Maryland (2.0%):
Harford County,
3.65%*, 11/4/99**,
LOC Harris Trust &
Savings Bank AMT 995 995
Maryland State,
6.75%, 7/1/00,
Prerefunded 7/1/00 @ 102,
LOC UST 2,560 2,686
Montgomery,
3.45%, 11/5/99,
LOC UBS 10,500 10,500
14,181
Michigan (1.4%):
State Micron,
3.70%*, 11/3/99**,
LOC NBD Bank AMT 1,000 1,000
State Strategic,
Fleet Engineers Inc. Project,
3.70%*, 11/4/99**,
LOC Comerica Bank 1,600 1,600
State Strategic,
Merrill Group Project,
3.70%*, 11/4/99**,
LOC Comerica Bank $ 3,500 $ 3,500
State Strategic,
Thermal Transfer Inc. Project,
3.70%*, 11/4/99**,
LOC Comerica Bank 3,575 3,575
9,675
Missouri (2.1%):
Kansas City, IDR,
Multifamily Housing Revenue,
J.C. Nichols Co. Project,
3.90%*, 11/1/99**,
Guaranteed by Principle
Mutual Life Insurance Co. 3,600 3,600
State Health,
3.45%*, 11/4/99**,
LOC Morgan Guaranty Trust 10,900 10,900
14,500
Nevada (0.7%):
Reno, EDR,
Dunsirn Industries Project,
3.75%*, 11/4/99**,
LOC FirstStar Bank AMT 3,800 3,800
Washoe County, GO,
4.45%, 7/1/00, MBIA 1,000 1,006
4,806
New Hampshire (1.5%):
Higher Education,
3.55%*, 11/3/99**,
AMBAC, LOC Mellon Bank 5,300 5,300
Higher Education,
3.55%*, 11/3/99**,
AMBAC, SPA Mellon Bank N.A. 1,500 1,500
State Business APEX,
4.07%*, 11/4/99**,
LOC Huntington Bank 3,500 3,500
10,300
New Mexico (0.1%):
Albuquerque,
3.75%*, 11/4/99**,
LOC Nationsbank AMT 900 900
North Carolina (1.0%):
Medical Care,
Common Health Care Facilities,
3.60%*, 11/1/99,
LOC First Union National Bank 3,200 3,200
52
<PAGE>
Wake County,
3.60%*, 11/1/99**,
LOC First National Bank $ 1,500 $ 1,500
Wilkes County Industrial &
Pollution Control Authority,
3.70%*, 11/4/99**,
LOC Nationsbank AMT 2,200 2,200
6,900
North Dakota (0.3%):
Burleigh County Health,
5.00%, 5/1/00, MBIA 2,060 2,077
Ohio (2.6%):
Columbus Electric,
3.65%*, 11/4/99**,
LOC UBS 1,900 1,900
Cuyahoga County Ohio Hospital,
3.45%*, 11/3/99**,
SPA Bank of America 7,450 7,450
Franklin County Hospital,
3.40%*, 11/4/99**,
LOC Morgan Guaranty Trust 6,400 6,400
Northwood, GO, TRAN,
4.45%, 7/27/00 900 905
Ohio State Water Development,
3.65%, 11/17/99, AMT 600 600
State Water
Development Authority,
Pollution Control Facilities,
Cleveland Electric, Series B,
3.45%*, 11/3/99**,
LOC FNB Chicago 1,000 1,000
18,255
Oklahoma (1.8%):
County Finance Authority, IDR,
Hutto-Carbon Office Project,
3.90%*, 11/15/99**, FGIC 1,650 1,650
County Finance Authority, IDR,
Perrine Office Project,
3.90%*, 11/15/99**, FGIC 3,170 3,170
State Capital Improvements,
4.25%, 12/1/99, MBIA 7,940 7,945
12,765
Pennsylvania (3.8%):
Erie County Hospital Authority,
Mercy Terrace Project,
3.60%*, 11/4/99**,
LOC PNC Capital Markets 2,245 2,245
Erie County Prison,
6.30%, 11/1/99, MBIA $ 2,235 $ 2,235
Lancaster Hospital Luthercare,
3.57%, 11/4/99**,
LOC First National
Bank of Maryland 5,000 5,000
Pittsburgh Urban Redevelopment,
3.65%, 8/15/00, AMT 2,000 2,000
Quakertown General Authority,
3.60%*, 11/2/99**,
LOC PNC Bank 5,400 5,400
Sayre Health Care Facility,
3.50%*, 11/3/99**,
AMBAC, LOC Mellon Bank N.A. 4,800 4,800
Scranton Lackwanna Health,
5.00%, 7/1/00, MBIA 1,825 1,842
Somerset County Community
Hospital Project,
3.70%*, 11/4/99**,
LOC PNC Bank 1,800 1,800
State Higher Education,
3.10%*, 11/1/99**,
LOC PNC Bank 1,350 1,350
26,672
Rhode Island (0.2%):
State Public Building,
4.70%, 2/1/00, AMBAC 1,500 1,505
South Carolina (0.7%):
Cherokee County,
3.65%*, 11/3/99**,
LOC Nationsbank AMT 2,700 2,700
Cherokee County, GO,
5.00%, 3/1/00 1,000 1,005
State, GO,
5.75%, 8/1/00 1,025 1,042
4,747
Tennessee (3.1%):
Memphis Shelby County,
4.63%, 2/15/00, MBIA 1,250 1,254
Memphis, GO,
3.65%*, 11/3/99**,
LOC West Deutsche Bank AMT 3,100 3,100
Met Govt Nashville &
Davidson County,
3.60%*, 11/1/99**,
LOC Bank of America N.A. 2,000 2,000
Montgomery County
Public Building Authority,
3.60%*, 11/4/99**,
LOC Nationsbank 6,000 6,000
53
<PAGE>
Shelby County, GO,
4.75%, 6/1/00 $ 1,000 $ 1,008
Stewart County,
3.50%*, 11/3/99**,
LOC Toronto Dominion Bank AMT 5,000 5,000
Wilson County,
3.90%*, 11/3/99**,
LOC LaSalle National Bank AMT 3,500 3,500
21,862
Texas (8.6%):
Austin,
3.35%, 11/9/99,
LOC Morgan Guaranty Trust 10,250 10,250
Austin, GO,
4.25%, 2/1/00, MBIA 1,560 1,563
Austin, Scarborough,
3.55%*, 11/4/99**,
LOC Bank One Texas 4,235 4,235
Brazos River Authority,
3.60%*, 11/3/99**, MBIA,
SPA Bank of New York AMT 7,200 7,200
Dallas, GO,
7.50%, 2/15/00 1,365 1,381
Fort Bend, GO,
7.50%, 2/15/00 1,010 1,022
Grapevine Industrial
Development Corp.,
Trencor-Jetco, Inc.,
3.55%*, 11/3/99**,
LOC First National Bank
of Chicago AMT 7,500 7,500
State, GO,
8.30%, 12/1/99**,
Prerefunded 12/1/99 @ 100 10,275 10,320
State, GO,
8.30%, 12/1/99 8,500 8,554
Tarrant County,
5.00%, 2/15/00 2,870 2,884
Waco Texas Patriot,
3.70%*, 11/3/99**,
LOC Bank One Texas AMT 5,000 5,000
59,909
Utah (0.1%):
State, GO,
4.70%, 7/1/00, AMBAC 1,000 1,008
Vermont (1.7%):
Education & Health Buildings,
3.55%*, 11/3/99**,
AMBAC, LOC
Mellon Bank N.A. $ 5,800 $ 5,800
Education & Health Buildings,
3.55%*, 11/3/99**,
AMBAC, LOC
Mellon Bank N.A. 4,000 4,000
Education & Health Buildings,
3.55%*, 11/3/99**,
AMBAC, LOC
Mellon Bank N.A. 1,800 1,800
11,600
Virginia (3.1%):
Alexandria,
3.60%*, 11/4/99**,
LOC Bank of America N.A. 7,000 7,000
Colonial Heights,
Philip Morris Cos. Project,
3.55%*, 11/3/99**,
Guaranteed by Philip Morris 2,600 2,600
Lynchburg Industrial
Development
Authority Hospital,
3.55%*, 11/3/99**,
AMBAC, LOC
Mellon Bank N.A. 4,600 4,600
Lynchburg Industrial
Development
Authority Hospital,
3.55%*, 11/3/99**,
AMBAC, LOC
Mellon Bank N.A. 1,000 1,000
Prince George County,
3.70%*, 11/4/99**,
LOC Bank One AMT 3,645 3,645
Richmond,
Philip Morris Cos. Project,
3.55%*, 11/3/99**,
Guaranteed by Philip Morris 1,700 1,700
State Public Building,
5.70%, 8/1/00 1,000 1,016
21,561
West Virginia (1.5%):
Marshall County, IDR,
3.55%*, 11/3/99**,
LOC Harris Trust AMT 3,300 3,300
54
<PAGE>
State Hospital,
3.55%*, 11/3/99**,
AMBAC, SPA Mellon Bank $ 1,200 $ 1,200
State Hospital Finance Authority,
3.55%*, 11/3/99**,
AMBAC, LOC
Mellon Bank N.A. 5,700 5,700
10,200
Wisconsin (11.0%):
Antigo Plaspack,
4.06%, 10/30/00, AMT 4,100 4,102
Antigo Plaspack,
3.65%*, 11/3/99**,
LOC FirstStar Bank AMT 2,100 2,100
Bayside,
4.12%, 10/13/00, AMT 1,170 1,170
Beloit School District,
4.19%, 11/01/00 1,425 1,426
Brookfield Industrial Revenue,
Pillar Corp. Project, AMT,
3.70%*, 11/4/99**,
LOC Bank One Wisconsin AMT 3,250 3,250
Caledonia Industrial Development,
3.70%*, 11/4/99**,
LOC Bank One AMT 3,000 3,000
D.C. Everest Area School, GO,
3.87%, 8/24/00 5,100 5,102
Fredonia, IDR,
Capital Stampings Corp. Project,
3.70%*, 11/4/99**,
LOC Bank One AMT 2,540 2,540
Grafton School District, TRAN,
4.12%, 6/30/00 1,700 1,701
Grafton School District, TRAN,
4.10%, 9/29/00 1,700 1,701
Kenosha IDR,
Metalmen Building LLC Project,
3.70%*, 11/4/99**,
LOC Bank One
Milwaukee N.A. AMT 3,295 3,295
Lake Mills School District
Tax & Revenue,
4.00%, 9/1/00 2,300 2,301
Monroe School District, BAN,
3.55%, 12/10/99 8,500 8,500
New Richmond School
District, TRAN,
3.56%, 11/1/99 825 825
Nicolet School District,
4.08%, 10/30/00,
LOC Bank Of America 1,200 1,200
Onalaska School District,
4.08%, 10/18/00 $ 2,600 $ 2,601
Oregon, GO,
3.70%, 3/15/00 1,250 1,251
Oshkosh, IDR,
Oshkosh Architectural Project,
3.75%*, 11/4/99**,
LOC Norwest Bank AMT 805 805
Pewaukee School District, TRAN,
3.95%, 09/14/00 5,000 5,001
Port Washington Saukville,
4.14%, 10/30/00 2,350 2,351
Pulaski MLC,
3.70%*, 11/3/99**,
LOC Bank One AMT 1,500 1,500
Rock State Disposal, AMT,
3.70%*, 11/4/99**,
LOC Bank One Wisconsin AMT 1,200 1,200
Saukville Busch,
3.75%*, 11/4/99**,
LOC Bank One Wisconsin AMT 2,375 2,375
Sparta Area School District, TRAN,
3.25%, 3/1/00 5,000 5,000
State Health &
Educational Facilities,
Cedar Crest, Inc. Project,
3.55%*, 11/4/99**,
LOC Bank One 2,000 2,000
Waukesha Industrial Development,
3.70%*, 11/4/99**,
LOC Bank One Wisconsin AMT 3,800 3,800
Whitefish Bay,
4.00%, 6/21/00 2,200 2,201
Whitewater Maclean, IDR,
3.65%*, 11/3/99**,
LOC Bank of America 1,900 1,900
William Bay School
District Tax & Revenue,
4.12%, 8/25/00 1,200 1,202
Winneconne, TRAN,
4.20%, 10/25/00 1,500 1,501
76,901
Total Municipal Bonds
(Amortized Cost $692,456) 692,456
55
<PAGE>
Shares or
Principal
Security Description Amount Cost
Investment Companies (0.4%)
Federated Tax-Free
Money Market Fund 3,045,043 $ 3,045
Total Investment Companies (Cost $3,045) 3,045
Total Investments
(Amortized Cost $695,501) (a) -- 99.7% 695,501
Other assets in excess of liabilities -- 0.3% 2,132
TOTAL NET ASSETS -- 100.0% $697,633
(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, 1999. 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 -- AMBAC Indemnity Corp.
AMT -- Alternative Minimum Tax
BAN -- Bond Anticipation Note
EDR -- Economic Development Revenue
FGIC -- Insured by Financial Guaranty Insurance Corp.
FNMA -- Insured by Federal National Mortgage Association
GO -- General Obligation
IDR -- Industrial Development Revenue
LOC -- Letter of Credit
LOC UST -- Letter of Credit by U.S. Treasury Security
MBIA -- Insured by Municipal Bond Insurance Association
SPA -- Standby Purchase Agreement
TRAN -- Tax and Revenue Anticipation Note
56
<PAGE>
THE VICTORY PORTFOLIOS Schedule of Investments
Ohio Municipal Money Market Fund October 31, 1999
(Amounts in Thousands, Except Shares)
Shares or
Principal Amortized
Security Description Amount Cost
Municipal Bonds (99.7%)
Ohio (99.7%):
Akron Bath Copley
Township Hospital,
Visiting Nurse Services
Inc. Project,
3.55%*,11/4/99**,
LOC National City Bank $ 525 $ 525
Akron Special Assessment
Improvement Notes,
3.12%, 12/17/99 1,920 1,920
Ashland County,
Correctional Facility
Improvements, GO,
3.32%, 12/17/99 6,500 6,502
Ashtabula County Medical
Center Project Revenue,
Hospital & Nursing
Home Improvements,
3.55%*,11/4/99**,
LOC Bank One 3,005 3,005
Ashtabula County,
Brighton Manor Co.
Project Revenue,
Industrial Improvement,
3.70%*, 11/3/99**,
LOC Bank One AMT 2,400 2,400
Auglaize County,
G.A. Wintzer & Son
Co. Project, IDR,
3.70%*,11/4/99**,
LOC Bank One AMT 1,780 1,780
Barberton,
Sewer Improvement, GO,
3.45%, 4/20/00 2,645 2,648
Bedford Heights,
Olympic Steel Inc. Project,
3.65%*,11/3/99**,
LOC National City Bank AMT 1,200 1,200
Bellaire Local School
District, GO, BAN,
Series B, 4.17%, 2/17/00 4,038 4,045
Belmont County,
Sewer Improvement, GO, BAN,
3.51%, 11/23/99 1,850 1,850
Bluffton, GO, BAN,
3.40%, 12/1/99 1,795 1,795
Bowling Green, IDR,
Lamson & Sessions Project,
3.60%*, 11/4/99**,
LOC General Electric
Capital Corp. AMT 2,000 2,000
Bowling Green, IDR,
Lamson & Sessions Project,
3.67%*, 11/4/99**,
LOC Mid American
National Bank AMT $ 1,580 $ 1,580
Brooklyn Heights, IDR,
3.70%*, 11/4/99**,
LOC Bank One AMT 270 270
Brooklyn, IDR,
Clinton Road Project,
4.10%*, 11/1/99**,
LOC Bank One 535 535
Butler County Joint
Vocational School, GO, BAN,
3.50%, 3/1/00 4,500 4,500
Butler County,
Crystal Partners, IDR,
3.75%*, 11/4/99**,
LOC Firstar AMT 3,635 3,635
Butler County,
Hospital Facilities Revenue,
3.55%*, 11/4/99**,
LOC Fifth Third Bank 1,195 1,195
Centerville Health Care Revenue,
Bethany Lutheran,
3.60%*, 11/3/99**,
LOC PNC Bank 4,450 4,450
Cincinnati City School District,
5.50%, 12/1/99, AMBAC 1,000 1,002
Cincinnati, Bethesda One Ltd.
Partners Revenue,
3.75%, 8/1/00**,
LOC Bank One 1,065 1,065
Cincinnati, IDR, 4th Star Ltd.
Partnership Project, TAN,
3.60%*, 5/3/99**,
LOC PNC Bank 6,650 6,650
Cleveland Airport Improvement,
Series D, 3.55%*, 11/3/99**,
LOC Toronto Dominion Bank AMT 1,500 1,500
Cleveland Heights, GO, BAN,
3.82%, 8/25/00 1,035 1,036
Cleveland Income Tax Revenue,
3.50%*, 11/3/99**,
AMBAC, LOC Toronto Dominion 24,849 24,849
Clinton County Revenue,
Hospital & Nursing Home
Improvements,
3.60%*, 11/3/99**,
LOC Fifth Third Bank 27,000 27,000
57
<PAGE>
Clinton County,
Airport Facilities Revenue,
3.50%*, 11/4/99**,
LOC Wachovia Bank $ 6,800 $ 6,800
Clinton County, GO, BAN,
3.56%, 12/15/99 2,250 2,251
Clinton County,
Hospital Capital,
3.60%*, 11/3/99**,
LOC Fifth Third Bancorp 10,000 10,000
Columbiana County, IDR,
C & S Land Co. Project,
3.70%*, 11/4/99**,
LOC Bank One AMT 3,150 3,150
Columbus Electric Revenue,
Electric Lights & Power
Improvements,
3.65%*, 11/1/99**,
LOC UBS AG 1,000 1,000
Columbus Sewer Revenue,
5.70%, 6/1/00 1,330 1,348
Columbus, GO,
3.55%, 3/1/00, AMT 1,400 1,400
Coshocton County,
Memorial Hospital
Project Revenue,
3.55%*, 11/4/99**,
LOC Bank One 3,275 3,275
Crestline Village, GO, BAN,
3.60%, 4/6/00 1,236 1,237
Cuyahoga County
Hospital Revenue,
Series B, 3.45%*, 11/3/99**,
AMBAC, SPA Bank Of America 27,110 27,110
Cuyahoga County Hospitals
Revenue, Series A,
3.45%*, 11/3/99**,
AMBAC, SPA Bank of America 1,900 1,900
Cuyahoga County Hospitals,
Cleveland Clinic Project
Revenue, Series B,
3.45%*, 11/3/99**,
LOC Chase Manhattan 12,500 12,500
Cuyahoga County Hospitals,
University Hospitals Revenue,
3.50%*, 11/4/99**, AMBAC 7,400 7,400
Cuyahoga County,
Cleveland Clinic,
Series A, 3.45%*, 11/3/99**,
SPA Chase Manhattan Bank 25,965 25,965
Cuyahoga County, IDR,
Allen Group Project,
3.55%*, 11/3/99**,
LOC Dresdner Bank AG AMT 2,700 2,700
Cuyahoga County, IDR,
Crestmont-Cleveland
Partnership Project,
3.85%*, 4/15/00**,
LOC Bank One AMT $ 415 $ 415
Cuyahoga County, IDR,
Decorp Project,
3.55%*, 11/4/99**,
LOC Bank One 1,810 1,810
Cuyahoga County, IDR,
Interstate Diesel, Series B,
3.97%*, 11/5/99**,
LOC Huntington National Bank 305 305
Cuyahoga County, IDR,
Landerhaven Executive Project,
3.68%*, 11/3/99**,
LOC Star Bank 2,095 2,095
Cuyahoga County, IDR,
Progressive Plastics Project,
3.70%*, 11/4/99**,
LOC Bank One AMT 1,270 1,270
Cuyahoga County, IDR,
Watt Printing Co. Project,
3.70%*, 11/4/99**,
LOC Bank One AMT 3,040 3,040
Cuyahoga Falls,
Hospital Facilities Revenue,
Portage Trail Care
Center Project,
3.75%*, 11/4/99**,
LOC Fifth Third Bank 2,100 2,100
Cuyahoga Falls,
Hospital Facilities Revenue,
Portage Trail Care
Center Project,
3.75%*, 11/4/99**,
LOC Fifth Third Bank 3,000 3,000
Dayton, GO, BAN,
Port Airport & Marina
Improvements,
3.40%, 3/3/00 3,600 3,602
Deerfield Township, GO,
3.87%, 6/29/00 800 801
Deerfield Township, GO, TAN,
Recreational Facilities
Improvements,
3.35%, 2/3/00 1,250 1,251
Deerfield Township,
Sewer Improvement
Project, GO,
3.87%, 6/29/00 659 660
Deerfield Township,GO, BAN,
Public Improvements,
4.03%, 8/3/00 367 367
58
<PAGE>
Dover City,
Sewer System Improvements,
3.38%, 4/13/00 $ 1,200 $ 1,201
Dublin City School District,
GO, BAN, 3.74% 12/23/99 1,000 1,001
East Palestine City School District,
GO, BAN, 3.49%, 12/8/99 4,600 4,600
Eastlake, IDR, Astro Model
Development Project,
3.70%*, 11/4/99**,
LOC Bank One AMT 3,225 3,225
Erie County, GO, BAN,
4.13%, 6/1/00 1,120 1,122
Erie County, GO, BAN,
4.13%, 10/26/00 1,440 1,444
Euclid, GO, BAN,
3.70%, 7/28/00 2,055 2,058
Fairborn, GO, BAN,
3.24%, 3/23/00 1,100 1,100
Fairborn, IDR,
3.87%*, 11/4/99**,
LOC Star Bank 585 585
Fairfield County School
District, GO, TAN,
4.28%, 10/28/00 1,550 1,556
Fairfield County, BAN,
3.97%, 7/25/00, AMT 1,000 1,003
Franklin County Hospital Revenue,
Children's Hospital Project,
Series B, 3.65%*, 11/4/99**,
LOC Bank One 8,900 8,900
Franklin County Hospital Revenue,
Doctors Ohio Health, Series B,
3.57%*, 11/4/99**,
LOC National City Bank 34,000 34,001
Franklin County Hospital Revenue,
Holy Cross Health Systems,
3.40%*, 11/4/99**,
SPA Morgan Guaranty Trust 21,300 21,300
Franklin County Hospital Revenue,
National Church
Residences Project,
3.75%*, 11/4/99**,
LOC Fifth Third Bank 1,405 1,405
Franklin County Hospital Revenue,
U.S. Health Corp., Series A,
3.48%*, 11/4/99**,
LOC Morgan Guaranty 5,945 5,945
Franklin County Hospital Revenue,
U.S. Health Corp., Series C,
3.48%*, 11/4/99**,
LOC Morgan Guaranty Trust 10,480 10,479
Franklin County, Health System
Revenue, Health Care
Facilities --
Wesley Glen Inc.,
3.59%*, 11/4/99**,
LOC Fifth Third Bank $ 940 $ 940
Franklin County, Health System
Revenue, Health Care
Facilities --
Wesley Glen Inc.,
3.59%*, 11/4/99**,
LOC Fifth Third Bank 2,635 2,635
Franklin County, IDR,
Capitol South Community
Redevelopment,
4.00%*, 11/1/99**,
LOC Huntington National Bank 6,520 6,520
Franklin County, IDR,
Media Inc. Project,
3.65%*, 3/1/00**,
LOC KeyBank 1,605 1,605
Franklin County,
Jacobson Stores,
4.00%*, 11/1/99**,
LOC Bank One 6,800 6,800
Geauga County, Health Care
Facilities, Heather Hill Inc.
Project, Series B,
3.57%*, 11/4/99**,
LOC Bank One 10,025 10,025
Geauga County, IDR, Gold Key
Processing Project,
3.60%*, 11/3/99**,
LOC Fifth Third Bank AMT 1,500 1,500
Georgetown Village School District,
BAN, 3.60%, 12/1/99 1,050 1,050
Granville, GO, BAN,
3.76%, 5/16/00 500 501
Greene County, Health Care,
Friends Health
Care Association,
3.62%*, 11/4/99**,
LOC Bank One 3,885 3,885
Grove City, IDR,
Cross Country Inns Inc.,
3.55%*, 11/4/99**,
LOC Bank One 1,370 1,370
Hamilton County Hospital Revenue,
Beechwood Home Project,
3.57%*, 11/4/99**,
LOC Star Bank 3,900 3,900
Hamilton County Revenue,
Affordable Housing, Series A,
3.55%*, 11/4/99**,
LOC Bank One 3,500 3,500
Hamilton County Revenue, Childrens
Hospital Medical Center,
Series A, 3.50%*, 11/4/99**,
LOC PNC Bank 3,800 3,800
59
<PAGE>
Hamilton County Revenue,
Multifamily Housing, Pleasent
Run Apartments Project,
3.65%*, 11/4/99**,
LOC PNC Bank AMT $ 1,700 $ 1,700
Hamilton County Revenue,
Multifamily Housing, Forest
Ridge Apartment Project,
3.65%*, 11/4/99**,
LOC PNC Bank 9,900 9,900
Hamilton County, EDR,
Boys/Girls Club Inc. Project,
3.30%, 12/1/99,
LOC PNC Bank 2,700 2,700
Hamilton County, EDR,
Cincinnati Performing Arts,
3.55%*, 11/4/99**,
LOC Fifth Third Bank 1,100 1,100
Hamilton County, EDR,
Union Institute Project,
3.60%*, 11/4/99**,
LOC Bank of Montreal 2,335 2,335
Hamilton County, GO, BAN,
3.40%, 6/9/00 9,900 9,900
Highland Heights, GO, BAN,
3.25%, 11/18/99 1,500 1,500
Highland Heights, GO, BAN,
4.13%, 11/18/99 1,800 1,800
Highland Heights, GO, BAN,
3.38%, 3/16/00 2,430 2,432
Hilliard, GO, BAN,
3.85%, 7/21/00 1,500 1,504
Huron County, IDR,
American Baler Project,
3.70%*, 11/4/99**,
LOC Bank One AMT 1,775 1,775
Independence, GO, BAN,
3.24%, 5/12/00 4,600 4,601
Jackson County, GO, BAN,
4.13%, 10/12/00,
LOC Asset 1,364 1,368
Kings Local School District,
GO, BAN, 4.19%, 3/1/00 3,000 3,007
Lake County, EDR,
Lake County YMCA Project,
3.55%*, 11/4/99**,
LOC Bank One 2,860 2,860
Lake County, GO, BAN,
3.75%, 6/29/00 3,600 3,606
Lake County, GO, BAN,
4.13%, 9/14/00 1,910 1,915
Lebanon, GO, BAN,
3.91%, 7/28/00 $ 600 $ 601
Licking County, IDR,
Sunfield Inc. Project,
3.70%*, 11/4/99**,
LOC Bank One AMT 1,310 1,310
Lorain County, EDR,
Crestmont-Cleveland
Partnership Project,
3.85%*, 4/15/00**,
LOC Bank One 905 905
Lorain County, IDR,
French Creek Partners,
3.70%*, 11/4/99**,
LOC Bank One 850 850
Lucas County Hospital Revenue,
Sunshine Children's Home
Project, 3.55%*, 11/4/99**,
LOC National City Bank 400 400
Lucas County Hospital Revenue,
Sunshine Children's Home
Project, 3.55%*, 11/4/99**,
LOC National City Bank 350 350
Lucas County, EDR, Maumee Valley
Country Day School Project,
3.67%*, 5/6/99**,
LOC Mid American National
Bank & Trust AMT 3,705 3,705
Lucas County, IDR, Bunting Bearings
Corp. Project, 3.70%*, 11/4/99**,
LOC National City Bank 1,590 1,590
Lucas County, IDR, Conforming
Matrix Corp. Project,
3.72%*, 11/4/99**,
LOC Mid American
National Bank 1,360 1,360
Madison Local School District,
BAN, 3.85%, 1/12/00 10,000 10,008
Mahoning County Healthcare
Facilities Revenue,
Copeland Oaks Project,
3.55%*, 11/4/99**,
LOC Bank One 3,185 3,185
Mansfield, GO, BAN,
3.62%, 5/25/00 3,000 3,005
Mansfield, GO, BAN,
4.20%, 9/28/00 1,250 1,254
Marion County Hospital Revenue,
Pooled Leasing Program,
3.55%*, 11/4/99**, LOC Bank One 2,460 2,460
Marion County, Hospital Revenue,
Pooled Leasing Program,
3.55%*, 11/4/99**, LOC Bank One 2,475 2,475
60
<PAGE>
Marysville Local School District,
GO, BAN, 3.61%, 6/1/00 $10,000 $ 10,017
Mason, GO, BAN,
3.95%, 10/26/00 1,600 1,600
Mason, GO, BAN,
4.32%, 10/26/00 1,200 1,205
Mayfield City School District,
BAN, Series A, 3.61%, 7/6/00 1,350 1,351
Medina County, IDR,
Partners in Plastic Project,
3.75%*, 11/4/99**,
LOC Bank One AMT 995 995
Monroe County, Income
Tax Corridor 75,
3.60%*, 11/4/99**,
LOC Bank of Montreal 2,000 2,000
Monroe, GO, BAN,
4.09%, 6/1/00 700 701
Montgomery County Healthcare
Facilities Revenue, Greater
Dayton Area-MRI Project,
3.55%*, 11/3/99**, LOC KeyBank 340 340
Montgomery County, IDR, Citywide
Development Corp. Project,
3.70%*, 11/4/99**,
LOC Bank One AMT 2,275 2,275
Montgomery County, IDR, Town
Centers Ltd. Partner Project,
3.20%, 11/15/99**,
LOC National City Bank 2,255 2,255
Montgomery, IDR,
Bethesda Two Ltd.,
4.05%*, 11/5/99**, LOC
Huntington National Bank 2,635 2,635
Morrow County, GO, BAN,
4.15%, 9/7/00 3,740 3,751
Muskingum County Hospital,
Good Samaritan,
3.55%*, 11/4/99**,
LOC Bank One 945 945
Ottawa Hills, BAN,
3.31%, 11/15/99 3,200 3,200
Perrysburg, BAN,
4.30%, 8/17/00 4,045 4,064
Perrysburg, GO, BAN,
4.25%, 11/18/99 3,100 3,101
Pickerington, GO, BAN,
3.57%, 6/23/00 1,875 1,876
Pike County Hospital Facilities
Revenue, Bristol Village Project,
3.75%*, 11/4/99**,
LOC Fifth Third Bank 3,050 3,050
Pike County Hospital Facilities,
Bristol Village Project,
3.75%*, 11/4/99**,
LOC Fifth Third Bank $ 1,245 $ 1,245
Portage County, IDR, NCSP
Limited Partnership Project,
3.70%*, 11/3/99**,
LOC Bank One AMT 3,400 3,400
Reading, IDR,
General Tool Co. Project,
3.65%*, 11/4/99**,
LOC Provident Bank,
Bank of Montreal AMT 4,585 4,585
Richland County, GO,
Madison Sewer Improvements,
3.69%, 12/2/99 945 945
Richland County, IDR,
Mansfield Motel Partnership,
3.70%*, 11/4/99**, LOC
Huntington National Bank AMT 3,050 3,050
Rickenbacker,
Port Authority Revenue,
3.55%*, 11/4/99**,
LOC Bank One 3,000 3,000
Salem Hospital Revenue,
Community Hospital Project,
3.60%*, 11/3/99**, LOC PNC Bank 3,200 3,200
Sandusky, GO, BAN,
4.13%, 9/14/00 2,700 2,707
Sandusky, GO, BAN,
Capital Projects,
3.88%, 4/13/00 4,500 4,509
Scioto County Hospital Revenue,
VHA Center Inc., Capital Assets,
Series C, 3.55%*, 11/3/99**,
LOC Mellon Bank, AMBAC 3,900 3,900
Scioto County Hospital Revenue,
VHA Center Inc., Capital Assets,
Series D, 3.55%*, 11/3/99**,
LOC Mellon Bank, AMBAC 2,095 2,095
Scioto County Hospital Revenue,
VHA Center Inc., Capital Assets,
Series E, 3.55%*, 11/3/99**,
LOC Mellon Bank, AMBAC 1,985 1,985
Scioto County Hospital Revenue,
VHA Center Inc., Capital Assets,
Series G, 3.55%*, 11/3/99**,
LOC Mellon Bank, AMBAC 3,100 3,100
Seneca County Hospital Facilities
Revenue, St. Francis Home Inc.
Project, 3.50%*, 11/4/99**,
LOC National City Bank 2,000 2,000
Seven Hills, BAN,
3.42%, 5/25/00 870 870
61
<PAGE>
South Euclid, BAN,
3.32%, 4/6/00 $ 1,000 $ 1,000
South Western City School District,
GO, BAN, 4.13%, 6/13/00 4,000 4,008
Stark County,
Health Care Facilities Revenue,
St. Joseph Hospice Project,
3.55%*, 11/4/99**,
LOC Bank One 2,085 2,085
State Air Development,
3.60%*, 11/18/99**,
LOC First National
Bank of Chicago 4,655 4,655
State Air Quality Revenue,
Cleveland Electric, Series B,
3.50%, 12/8/99, FGIC 4,400 4,400
State Air Quality Revenue,
Cleveland Electric, Series B,
3.50%, 12/8/99, FGIC 7,000 7,000
State Air Quality
Revenue, Duquesne,
3.60%, 11/12/99,
LOC Toronto Dominion AMT 5,000 5,000
State Air Quality Revenue,
JMG Funding Ltd. Partnership,
Series A, 3.55%*, 11/3/99**,
LOC Societe Generale AMT 4,000 4,000
State Air Quality Revenue,
JMG Funding Ltd. Partnership,
Series B, 3.45%*, 11/3/99**,
LOC Societe Generale AMT 4,900 4,900
State Air Quality Revenue,
JMG Funding Ltd. Partnership,
Series B, 3.45%*, 11/3/99**,
LOC Societe Generale AMT 8,900 8,900
State Air Quality Revenue,
Ohio Edison Project,
Series A, 3.95%*, 8/1/00**,
LOC Canadian Imperial
Bank Of Montreal 2,000 2,000
State Air Quality
Revenue, Timken Co.,
3.45%*, 11/3/99**,
LOC NBD Bank 3,000 3,000
State Air Quality, IDR,
Ohio Edison Co. Project,
Series C, 3.75%*, 12/9/99**,
LOC Barclays Bank 9,300 9,300
State Environmental Improvement
Revenue, Newark Group
Industries Inc. Project,
3.40%*, 11/1/99**,
LOC Chase Manhattan Bank 1,000 1,000
State Higher Education Revenue,
3.55%*, 11/4/99**,
LOC Fifth Third Bank $ 2,635 $ 2,635
State Higher Education Revenue,
3.55%*, 11/4/99**,
LOC Fifth Third Bank 11,040 11,040
State Higher Education Revenue,
3.55%*, 11/4/99**,
LOC Fifth Third Bancorp 5,100 5,100
State Higher Education Revenue,
Series II, 5.10%, 12/1/99,
LOC MBIA 3,185 3,190
State Higher Education Revenue,
Mount Vernon Nazarene,
3.55%*, 11/4/99**,
LOC National City Bank 800 800
State Higher Education Revenue,
Wilmington College,
3.50%*, 11/4/99**,
LOC Fifth Third Bank 2,605 2,605
State Highway, GO, Capital
Improvements, Series C,
4.00%, 5/1/00 5,000 5,013
State Highway, GO, Capital
Improvements, Series D,
4.00%, 5/1/00 10,000 10,014
State Housing Finance Agency,
Multifamily Housing Revenue,
Hunters Glen Project,
3.65%*, 11/4/99**,
LOC PNC Bank AMT 7,340 7,340
State Housing Revenue,
Residential, Series A-2,
3.05%, 3/1/00,
LOC GNMA AMT 1,750 1,746
State Mental Health
Facilities, Series II-A,
5.63%, 12/1/99 1,500 1,503
State Public Facilities Revenue,
Higher Education Commission,
Series B, 4.50%, 11/1/99 2,500 2,500
State Public Facilities Revenue,
Higher Education Commission,
Series II-A, 4.38%, 11/1/99,
LOC MBIA 1,900 1,900
State Public Facilities Revenue,
Higher Education Commission,
Series II-A, 4.50%, 11/1/99 7,000 7,000
State Public Facilities Revenue,
Higher Education Commission,
Series II-C, 4.00%, 6/1/00,
LOC FSA 5,000 5,015
62
<PAGE>
State Special Obligation Revenue,
Elementary & Secondary
Education Capital Facilities,
Series A, 4.50%, 6/1/00 $ 1,600 $ 1,609
State Water Development,
3.75%*, 9/1/00**,
LOC Barclays Bank 13,155 13,155
State Water Development,
3.60%, 11/18/99**,
LOC First National
Bank Of Chicago 32,000 32,001
State Water Development Authority,
Cleveland Electric, Series B,
3.45%*, 11/3/99**, LOC
First National Bank Chicago 18,200 18,200
State Water Development Authority,
PA Power Co. Project,
3.50%*, 11/3/99**, LOC
First National Bank Chicago 5,800 5,800
State Water Development Authority,
Philip Morris Co. Inc. Project,
3.70%*, 11/3/99** 5,000 5,000
State Water Development Authority,
Pollution Control Facilities
Revenue, Duquesne Light Co.
Project, 3.65%, 11/17/99,
LOC Toronto Dominion Bank AMT 12,350 12,350
State Water Development Authority,
Pollution Control Facilities
Revenue, Duquesne Light Co.
Project, 3.65%, 11/17/99,
LOC Toronto Dominion Bank AMT 2,400 2,400
State Water Development Authority,
Timken Co. Project,
3.50%*, 11/3/99**,
LOC Wachovia Bank 8,000 8,000
State Water Development Authority,
Timken Co. Project,
3.50%*, 11/3/99**,
LOC Wachovia Bank 3,300 3,300
State, EDR, YMCA,
3.55%*, 11/4/99**,
LOC Bank One 4,350 4,350
State, IDR, Cincinnati Riverfront,
3.60%*, 11/4/99**,
LOC PNC Bank 440 440
Strongsville, GO, BAN,
Series 1, 3.98%, 10/19/00 1,100 1,102
Student Loan Funding Corp.
Revenue, Series A-1,
3.55%*, 11/3/99**,
SPA Bank of America AMT 21,400 21,400
Student Loan Funding Corp.,
Cincinnati Student Loan Revenue,
3.55%*, 11/3/99**,
SPA Bank of America $30,000 $ 30,000
Summit County,
3.70%*, 11/3/99**,
LOC Bank One 3,500 3,500
Summit County Hospital, Cuyuhoga
Falls General Hospital,
Series B, 3.55%*, 11/4/99**,
LOC Bank One 1,000 1,000
Summit County, IDR,
Delco Corp. Project,
3.70%*, 11/4/99**, LOC
National City Bank AMT 1,505 1,505
Summit County, IDR,
Fiocca Inc. Project,
3.60%*, 11/4/99**, LOC
Fifth Third Bank AMT 2,190 2,190
Summit County, IDR, Forest
Manufacturing Co. Project,
3.70%*, 11/4/99**,
LOC Bank One AMT 345 345
Summit County, IDR, Forest
Manufacturing Co. Project,
3.65%*, 11/4/99**, LOC
Fifth Third Bank AMT 300 300
Summit County, IDR, Forest
Manufacturing Project,
3.60%*, 11/3/99**, LOC
Fifth Third Bank AMT 1,050 1,050
Summit County, IDR, GO-JO
Industries Inc, Project,
3.55%*, 11/4/99**,
LOC Bank One 2,045 2,045
Summit County, IDR,
Raymond W. King Jr.
Project, 3.70%*, 11/4/99**,
LOC Bank One AMT 825 825
Summit County, IDR,
SSP Fittings Corp. Project,
3.55%*, 11/4/99**,
LOC Bank One 1,565 1,565
Summit County, IDR,
Texler Inc. Project,
3.55%*, 11/1/99**,
LOC Bank One AMT 525 525
Summit County, IDR,
VMS Development Project,
3.70%*, 11/4/99**,
LOC Bank One AMT 3,000 3,000
Tallmadge, GO, BAN,
3.48%, 6/22/00 1,155 1,156
63
<PAGE>
Toledo City School District,
BAN, 3.50%, 1/28/00 $ 2,126 $ 2,127
Toledo Lucas County,
3.60%*, 11/4/99**,
LOC PNC Bank 2,800 2,800
Toledo, IDR, Lucas County Port
Authority, Frostbite Brands Inc.
Project, 3.95%*, 11/4/99**,
LOC Old Kent Bank & Trust 1,975 1,975
Tri-County North Local
School District, BAN,
4.02%, 7/20/00 1,380 1,384
Troy, EDR, L & CP Corp. Project,
3.20%*, 12/1/99**,
LOC Societe Generale 1,725 1,725
Trumbull County Health
Care Facilities Revenue,
3.55%*, 11/4/99** 2,750 2,750
Trumbull County, IDR,
3.70%*, 11/4/99**,
LOC Bank One Columbus 4,145 4,145
Trumbull County, IDR,
Eliwood Engineered Casting,
3.70%*, 11/4/99**,
LOC Mellon Bank 7,000 7,000
Trumbull County, IDR,
McDonald Steel Corp Project,
3.70%*, 11/4/99**,
LOC PNC Bank 200 200
Union County, GO, BAN,
3.61%, 6/15/00 1,850 1,853
Union Township, GO, BAN,
4.01%, 6/23/00 1,950 1,957
Van Wert,
3.70%*, 11/4/99**,
LOC Bank One AMT 2,400 2,400
Vermilion, IDR,
Landover Properties Ltd.,
3.48%*, 11/4/99**,
LOC Bank One 1,170 1,170
Warren County,
Health Care Facilities Revenue,
Otterbein Homes, Series B,
3.55%*, 11/4/99**, LOC
Fifth Third Bank 685 685
Wauseon, BAN,
4.15%, 5/18/00 350 351
Wayne County,
Health Care Facilities Revenue,
West View Manor Project,
3.62%*, 11/4/99**, LOC
Fifth Third Bank 4,830 4,830
West Clermont, GO, BAN,
3.70%, 4/27/00 $ 1,300 $ 1,303
Westerville, EDR,
American Ceramic Society,
3.90%*, 11/4/99**,
LOC BancOhio National Bank 2,025 2,025
Westerville, GO, BAN,
3.10%, 12/1/99 1,010 1,010
Westlake, IDR,
Logan Westlake Project,
3.60%*, 11/4/99**, LOC
Fifth Third Bank 1,575 1,575
Williams County,
4.15%, 5/11/00 400 402
Williams County, IDR,
Letts Industries Inc. Project,
3.75%*, 11/4/99**,
LOC NBD Bank 2,855 2,855
Wood County Revenue, Facilities
Improvements-Young Men,
3.67%*, 11/4/99**, LOC
Mid American National Bank 4,440 4,440
Wood County, EDR,
Cast Masters Inc. Acquisition,
3.72%*, 11/4/99**, LOC
Mid American National
Bank & Trust AMT 2,375 2,375
Wood County, EDR,
Precision Aggregate II,
3.72%*, 11/4/99**, LOC
Mid American National
Bank & Trust AMT 2,380 2,380
Wood County, IDR,
Aluminite Ohio Inc. Project,
3.72%*, 11/4/99** 1,750 1,750
Wood County, IDR,
Principle Bus Project,
Series A, 3.65%*, 11/4/99**,
LOC Fifth Third Bancorp AMT 1,475 1,475
Woodlawn, IDR,
Southland Properties LLP
Project, 3.65%*, 11/4/99**,
LOC Bank Of Montreal AMT 1,845 1,845
Wooster, GO, BAN,
4.00%, 10/11/00 3,000 3,005
Wooster, IDR, Allen Group Inc.,
3.70%*, 11/3/99**,
LOC NBD Bank 800 800
931,412
Total Municipal Bonds (Amortized Cost $931,412) 931,412
64
<PAGE>
Shares or
Principal
Security Description Amount Cost
Investment Companies (0.0%)
Federated Ohio Municipal Cash
Trust Fund 68,298 $ 68
Total Investment Companies (Cost $68) 68
Total Investments
(Amortized Cost $931,480) (a) -- 99.7% 931,480
Other assets in excess of liabilities -- 0.3% 3,264
TOTAL NET ASSETS -- 100.0% $934,744
(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 Portfolio Investments is the
rate in effect at October 31, 1999.
** 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 Note
EDR -- Economic Development Revenue
FGIC -- Insured by Financial Guaranty Insurance Corp.
FSA -- Insured by Financial Security Assurance
GNMA -- Insured by Government National Mortgage Association
GO -- General Obligation
IDR -- Industrial Development Revenue
LOC -- Letter of Credit
MBIA -- Municipal Bond Insurance Association
SPA -- Standby Purchase Agreement
TAN -- Tax Anticipation Note
VHA -- Veterans' Housing Association
65
<PAGE>
Statements of Assets and Liabilities
THE VICTORY PORTFOLIOS October 31, 1999
(Amounts in Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Ohio
Tax-Free Municipal
Money Money
Market Market
Fund Fund
<S> <C> <C>
ASSETS:
Investments, at amortized cost $695,501 $931,480
Cash 11 --
Interest and dividends receivable 4,149 5,943
Prepaid expenses and other assets 12 15
Total Assets 699,673 937,438
LIABILITIES:
Dividends payable 1,675 2,140
Accrued expenses and other payables:
Investment advisory fees 214 312
Administration fees 12 16
Custodian fees 12 16
Accounting fees 1 1
Transfer agent fees 8 11
Shareholder service fees 99 174
Other 19 24
Total Liabilities 2,040 2,694
NET ASSETS:
Capital 697,664 934,744
Undistributed (distributions in excess of) net investment income -- 5
Accumulated undistributed net realized gains (losses)
from investment transactions (31) (5)
Net Assets $697,633 $934,744
Outstanding units of beneficial interest (shares) 697,662 934,740
Net asset value
Offering and redemption price per share $ 1.00 $ 1.00
</TABLE>
See notes to financial statements.
66
<PAGE>
Statements of Operations
THE VICTORY PORTFOLIOS For the Year Ended October 31, 1999
(Amounts in Thousands)
<TABLE>
<CAPTION>
Ohio
Tax-Free Municipal
Money Money
Market Market
Fund Fund
<S> <C> <C>
Investment Income:
Interest income $22,541 $32,341
Dividend income 364 153
Total Income 22,905 32,494
Expenses:
Investment advisory fees 2,429 4,974
Administration fees 900 1,205
Shareholder service fees 1,735 2,487
Accounting fees 98 104
Custodian fees 145 196
Legal and audit fees 54 75
Trustees' fees and expenses 18 25
Transfer agent fees 35 44
Registration and filing fees 29 44
Printing fees 35 60
Other 12 19
Total Expenses 5,490 9,233
Expenses voluntarily reduced -- (1,109)
Net Expenses 5,490 8,124
Net Investment Income 17,415 24,370
Realized Gains (Losses) from Investments:
Net realized gains (losses) from investment transactions (27) (5)
Change in net assets resulting from operations $17,388 $24,365
</TABLE>
See notes to financial statements.
67
<PAGE>
THE VICTORY PORTFOLIOS Statements of Changes in Net Assets
(Amounts in Thousands)
<TABLE>
<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,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
From Investment Activities:
Operations:
Net investment income $ 17,415 $ 15,305 $ 24,370 $ 20,499
Net realized gains (losses) from investment transactions (27) (4) (5) 5
Change in net assets resulting from operations 17,388 15,301 24,365 20,504
Distributions to Shareholders:
From net investment income (17,415) (15,305) (24,370) (20,499)
Change in net assets from distributions to shareholders (17,415) (15,305) (24,370) (20,499)
Capital Transactions:
Proceeds from shares issued 1,771,474 1,226,221 2,178,950 1,429,349
Dividends reinvested 11,883 8,862 19,098 16,522
Cost of shares redeemed (1,551,225) (1,181,775) (2,014,842) (1,345,311)
Change in net assets from capital transactions 232,132 53,308 183,206 100,560
Change in net assets 232,105 53,304 183,201 100,565
Net Assets:
Beginning of period 465,528 412,224 751,543 650,978
End of period $ 697,633 $ 465,528 $ 934,744 $ 751,543
Share Transactions:
Issued 1,771,474 1,226,221 2,178,950 1,429,349
Reinvested 11,883 8,862 19,098 16,522
Redeemed (1,551,225) (1,181,775) (2,014,842) (1,345,311)
Change in shares 232,132 53,308 183,206 100,560
</TABLE>
See notes to financial statements.
68
<PAGE>
THE VICTORY PORTFOLIOS Financial Highlights
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Tax-Free Money Market Fund
Year Ended October 31,
1999 1998 1997 1996 1995
<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 0.025 0.029 0.030 0.030 0.034
Distributions
Net investment income (0.025) (0.029) (0.030) (0.030) (0.034)
Net Asset Value, End of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Total Return 2.55% 2.91% 3.07% 3.04% 3.42%
Ratios/Supplemental Data:
Net Assets, End of Period (000) $697,633 $465,528 $412,224 $344,796 $307,726
Ratio of expenses to
average net assets 0.79% 0.80% 0.73% 0.78% 0.61%
Ratio of net investment income
to average net assets 2.51% 2.88% 3.03% 2.97% 3.36%
Ratio of expenses to
average net assets<F1> <F2> 0.80% 0.74% 0.80% 0.62%
Ratio of net investment income
to average net assets<F1> <F2> 2.88% 3.02% 2.95% 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> There were no voluntary fee reductions during the period.
</FN>
</TABLE>
See notes to financial statements.
69
<PAGE>
THE VICTORY PORTFOLIOS Financial Highlights
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Ohio Municipal Money Market Fund
Two
Months Year
Year Ended October 31, Ended Ended
October 31, August 31,
1999 1998 1997 1996 1995 1995<F2>
<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 0.025 0.029 0.030 0.030 0.006 0.033
Distributions
Net investment income (0.025) (0.029) (0.030) (0.030) (0.006) (0.033)
Net Asset Value, End of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Total Return 2.49% 2.94% 3.01% 3.11% 0.55%<F3> 3.33%
Ratios/Supplemental Data:
Net Assets, End of Period (000) $934,744 $751,543 $650,978 $561,131 $510,632 $502,453
Ratio of expenses to average net assets 0.82% 0.80% 0.75% 0.67% 0.64%<F4> 0.63%
Ratio of net investment income to
average net assets 2.45% 2.90% 2.97% 3.03% 3.31%<F4> 3.33%
Ratio of expenses to average net assets<F1> 0.93% 0.94% 0.94% 0.97% 0.92%<F4> 0.94%
Ratio of net investment income to
average net assets<F1> 2.34% 2.76% 2.78% 2.73% 3.03%<F4> 3.02%
<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.
70
<PAGE>
THE VICTORY PORTFOLIOS Schedule of Investments
Limited Term Income Fund October 31, 1999
(Amounts in Thousands)
Principal Market
Security Description Amount Value
Asset Backed Securities (15.5%)
American Express Master Trust,
Series 1993-1, Class A,
5.38%, 9/15/00 $2,000 $ 1,987
Caterpillar Financial Asset Trust,
Series 1997-A, Class A3,
6.45%, 5/25/03 1,466 1,465
Chase Manhattan Marine
Owner Trust, Series 1997A,
Class A3, 6.14%, 1/17/05 379 375
Fleetwood Credit Corp. Grantor Trust,
Series 1994-B, Class A,
6.75%, 3/15/10 2,249 2,247
Fleetwood Credit Corp. Grantor Trust,
Series 1997-A, Class A,
6.64%, 9/15/12 1,007 1,018
Premier Auto Trust,
Series 1998-5, Class A3,
5.07%, 7/8/02 270 266
Total Asset Backed Securities (Cost $7,425) 7,358
Collateralized Mortgage Obligations (12.7%)
American Housing Trust,
Series VIII, Class K,
9.00%, 1/25/21 1,062 1,081
Equicredit Home Equity Loan Trust,
Series 1996-1, Class A3,
6.19%, 12/15/10 1,000 976
Federal Home Loan Mortgage Corp.,
Series 2152, Class AC,
7.50%, 1/15/26, CMO 723 730
Federal Home Loan Mortgage Corp.,
Series 2116, Class D,
6.00%, 7/15/26, CMO 426 372
Federal National Mortgage Assoc.,
Series 1997-49, Class B,
10.00%, 6/17/27, CMO 264 288
Federal National Mortgage Assoc.,
Series 1999-15, Class LA,
6.50%, 4/25/29, CMO 536 526
General Electric Capital
Mortgage Services, Inc.,
Series 1994-1, Class A8,
6.50%, 1/25/24 1,500 1,390
The Money Store Home Equity Trust,
Series 1998A, Class AF3,
6.13%, 9/15/16 700 683
Total Collateralized Mortgage Obligations
(Cost $6,284) 6,046
Commercial Paper (9.4%)
General Electric Capital Corp.,
5.33%, 11/1/99 $4,463 $ 4,463
Total Commercial Paper (Cost $4,463) 4,463
Corporate Bonds (19.2%)
Automobiles (1.6%):
Daimler-Chrylser North American
Holdings Corp., 6.63%, 9/21/01 390 390
General Motors Acceptance Corp.,
5.50%, 1/14/02 300 293
General Motors Acceptance Corp.,
6.75%, 2/7/02 100 100
783
Automotive Parts (2.1%):
TRW, Inc.,
6.45%, 6/15/01 (b) 1,000 993
Beverages (3.1%):
J. Seagram & Sons, Inc.,
5.79%, 4/15/01 1,500 1,478
Brokerage Services (1.5%):
Lehman Brothers, Inc.,
6.13%, 2/1/01 500 496
Lehman Brothers, Inc.,
6.63%, 4/1/04 240 233
729
Financial Services (5.4%):
American General Finance,
5.80%, 3/15/02 1,500 1,465
CIT Group, Inc.,
5.50%, 2/15/04 695 656
Citigroup, Inc.,
5.80%, 3/15/04 (c) 420 401
2,522
Software & Computer Services (2.1%):
Sun Microsystems, Inc.,
7.00%, 8/15/02 1,000 1,005
Telecommunications (3.4%):
MCI Communications Corp.,
6.13%, 4/15/02 1,500 1,473
Worldcom, Inc.,
6.13%, 8/15/01 120 119
1,592
Total Corporate Bonds (Cost $9,271) 9,102
71
<PAGE>
Foreign Bonds (0.8%)
U.S. Government Loan Trust (0.8%):
Israel Trust,
Series 1-B, 8.50%, 4/1/06 $ 356 $ 378
Total Foreign Bonds (Cost $391) 378
U.S. Government Agencies (0.8%)
Federal Home Loan Bank (0.8%):
5.88%, 9/17/01 360 358
Total U.S. Government Agencies (Cost $360) 358
U.S. Government Mortgage Backed (15.2%)
Federal Home Loan
Mortgage Corp. (6.1%):
5.75%, 7/15/03 (c) 570 558
6.00%, 4/1/26-2/1/29 219 205
6.50%, 5/1/26-4/1/29 523 503
7.00%, 7/1/28-11/1/28 119 118
7.50%, 9/1/17-3/1/29 289 290
8.00%, 10/1/28-1/1/29 64 65
8.50%, 1/1/29-5/1/29 183 189
9.50%, 12/1/01 951 994
2,922
Federal National
Mortgage Assoc. (5.5%):
5.82%, 7/19/01 760 756
6.00%,12/1/28-7/1/29 269 251
6.50%, 11/1/13-4/1/29 547 528
7.00%, 10/1/26 218 214
7.50%, 4/1/29-5/1/29 78 78
8.00%, 8/1/29-9/1/29 81 83
8.50%, 8/1/14-8/1/19 684 707
9.00%, 8/1/14-3/1/25 30 31
2,648
Government National
Mortgage Assoc. (3.6%):
7.00%, 12/15/22-4/15/28 1,624 1,601
7.50%, 4/15/29 93 93
8.50%, 2/15/29 10 11
1,705
Total U.S. Government Mortgage Backed
(Cost $7,334) 7,275
U.S. Treasury Obligations (25.4%)
U.S. Treasury Notes (25.4%):
5.38%, 6/30/00 1,544 1,543
4.63%, 11/30/00 (c) 8,143 8,055
6.38%, 8/15/02 (c) 2,189 2,216
5.75%, 4/30/03 (c) 171 170
6.00%, 8/15/04 (c) 64 64
Total U.S. Treasury Obligations (Cost $12,054) 12,048
72
<PAGE>
Securities Purchased With Cash Collateral (27.4%)
Repurchase Agreements (27.4%):
Morgan Stanley Dean Witter,
5.48%, 11/1/99
(Collateralized by $5,000
TyCo Intl. Group,
6.20%, 3/5/01,
PP&L, 7.15%, 6/25/09,
market value -- $4,968) $4,000 $ 4,000
Lehman Corp., 5.43%, 11/1/99
(Collateralized by $4,139
Housing Urban Development,
6.41%, 8/1/05,
Bravo Series 1997-1-A,
5.36%, 1/15/00,
market value -- $4,120) 4,000 4,000
Goldman Sachs Group L.P.,
5.52%, 11/1/99
(See Significant Accounting
Policies, Securities Lending in the
Notes to Financial Statements
for collateral description) 5,000 5,000
13,000
Total Securities Purchased With Cash Collateral (Cost $13,000) 13,000
Total Investments (Cost $60,582) (a) -- 126.4% 60,028
Other assets in excess of liabilities -- (26.4)% (12,540)
TOTAL NET ASSETS -- 100.0% $ 47,488
(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 depreciation of securities as follows (amounts in thousands):
Unrealized appreciation $ 41
Unrealized depreciation (655)
Net unrealized depreciation $(614)
(b) 144a security which is restricted as to resale to institutional investors.
(c) All or a portion of this security was loaned as of October 31, 1999.
See notes to financial statements.
73
<PAGE>
THE VICTORY PORTFOLIOS Schedule of Investments
Intermediate Income Fund October 31, 1999
(Amounts in Thousands, Except Shares)
Shares or
Principal Market
Security Description Amount Value
Asset Backed Securities (11.3%)
Capital Auto Receivables Asset Trust,
Series 1999-2, Class A2,
6.06%, 6/15/02 $ 940 $ 939
Citibank Credit Card Master Trust,
Series 1999-1, Class A,
5.50%, 2/15/06 1,600 1,526
Citibank Credit Card Master Trust I,
Series 1998-9, Class A,
5.30%, 1/9/06 3,200 3,021
Copelco Capital Funding Corp.,
Series 1997-A, Class A-4,
6.47%, 4/20/05 3,550 3,532
Discover Card Master Trust,
Series 1999-1, Class A,
5.30%, 8/15/04 1,140 1,110
Discover Card Master Trust,
Series 1999-2, Class A,
5.90%, 10/15/04 2,200 2,164
First USA Credit Card Master Trust,
Series 1998-9, Class A,
5.28%, 9/18/06 1,050 1,007
Ford Credit Auto Owner Trust,
Series 1998-A, Class A3,
5.65%, 10/15/01 2,936 2,924
Green Tree Financial Corp.,
Series 1999-2, Class A3,
6.08%, 12/1/30 2,260 2,187
MBNA Master Credit Card Trust,
Series 1998-D, Class A,
5.80%, 12/15/05 2,000 1,952
Premier Auto Trust,
Series 1997-1, Class A4,
6.35%, 4/6/02 3,300 3,283
Small Business Administration
Participation Certificates,
Series 1999-20D, Class 1,
6.15%, 4/1/19 1,428 1,355
Toyota Auto Receivables Guarantor
Trust, Series 1997-A, Class A,
6.45%, 4/15/02 354 354
Total Asset Backed Securities (Cost $25,931) 25,354
Collateralized Mortgage Obligations (8.2%)
Federal Home Loan Mortgage Corp.,
Series 2152, Class AC,
7.50%, 1/15/26, CMO 1,009 1,019
Federal Home Loan Mortgage Corp.,
Series 2116, Class D,
6.00%, 7/15/26, CMO 528 461
Federal National Mortgage Assoc.,
Series 1988-26, Class C,
7.50%, 7/25/18, CMO 97 97
Federal National Mortgage Assoc.,
Series 1997-49, Class B,
10.00%, 6/17/27, CMO 694 757
Federal National Mortgage Assoc.,
Series 1999-15, Class LA,
6.50%, 4/25/29, CMO 357 350
General Electric Capital Mortgage
Services, Inc., Series 1998-13,
Class A3, 6.75%, 8/25/28 2,329 2,242
General Electric Capital Mortgage
Services, Inc., Series 1997-4
Class A12, 7.50%, 5/25/27 6,000 5,869
LB Commercial Conduit Mortgage Trust,
Series 1999-C1, Class A1,
6.41%, 8/15/07 1,056 1,029
Residential Accredit Loans, Inc.,
Series 1998-QS7, Class CB2,
6.75%, 7/25/28 5,551 5,284
Residential Asset Securities Corp.,
Series 1999-KS3, Class AI4,
7.38%, 12/25/25 1,200 1,203
Total Collateralized Mortgage Obligations
(Cost $18,936) 18,311
Commercial Paper (3.9%)
General Electric Capital Corp.,
5.33%, 11/1/99 8,696 8,696
Total Commercial Paper (Cost $8,696) 8,696
Corporate Bonds (40.5%)
Aerospace/Defense (2.2%):
Raytheon Co.,
6.45%, 8/15/02 5,000 4,906
Automobiles (1.2%):
Daimler-Chrylser North American
Holdings Corp., 6.63%, 1,821 1,821
General Motors Acceptance Corp.,
5.50%, 1/14/02 930 908
2,729
Automotive Parts (0.4%):
TRW, Inc.,
6.45%, 6/15/01 (b) 1,000 993
74
<PAGE>
Banks (0.5%):
National Westminster Bank,
7.38%, 10/1/09 $ 690 $ 687
Wachovia Corp.,
6.15%, 3/15/09 505 466
1,153
Beverages (1.6%):
J. Seagram & Sons, Inc.,
5.79%, 4/15/01 360 355
J. Seagram & Sons, Inc.,
6.63%, 12/15/05 3,280 3,120
3,475
Broadcasting/Cable (1.0%):
Time Warner, Inc.,
7.75%, 6/15/05 2,190 2,245
Brokerage Services (0.2%):
Lehman Brothers Holdings,
6.00%, 2/26/01 505 501
Building Materials (0.3%):
Oakwood Homes,
7.88%, 3/1/04 1,040 723
Business & Public Services (0.4%):
Cendant Corp.,
7.75%, 12/1/03 1,010 1,001
Chemicals-General (1.1%):
E.I. Dupont Nemour,
6.88%, 10/15/09 875 867
Monsanto Co.,
5.75%, 12/1/05 1,670 1,549
2,416
Diversified (1.2%):
D.R. Investments,
7.10%, 5/15/02 2,750 2,733
Electronic & Electrical -- General (2.2%):
Endesa-Chile Nacional Electri,
7.75%, 7/15/08 1,305 1,227
Sony Corp.,
6.13%, 3/4/03 2,450 2,397
Texas Instruments, Inc.,
7.00%, 8/15/04 (b) (c) 795 787
Westinghouse,
6.88%, 9/1/03 625 613
5,024
Energy (1.4%):
KN Energy, Inc.,
6.45%, 3/1/03 370 358
KN Energy, Inc.,
6.65%, 3/1/05 2,000 1,900
Valero Energy Corp.,
7.38%, 3/15/06 (c) 1,005 966
3,224
Entertainment (0.5%):
Viacom, Inc.,
7.75%, 6/1/05 1,065 1,080
Financial Services (5.0%):
American General Finance,
5.80%, 3/15/02 565 552
Amerus Life Holdings, Inc.,
6.95%, 6/15/05 2,700 2,532
Associates Corp., N.A.,
6.25%, 11/1/08 1,000 936
Capital One Bank,
6.15%, 6/1/01 505 498
CIT Group, Inc.,
7.13%, 10/15/04 1,374 1,383
EOP Operating LP,
6.75%, 2/15/08 1,070 980
First Union Corp.,
6.63%, 7/15/05 1,640 1,589
Ford Motor Credit Company,
7.38%, 10/28/09 635 641
Household Finance Company,
5.88%, 2/1/09 2,135 1,908
11,019
Industrial Goods & Services (2.7%):
Raytheon Co.,
6.75%, 8/15/07 1,030 979
Tyco International Group,
6.13%, 6/15/01 3,316 3,274
Tyco International Group,
6.88%, 9/5/02 (b) 1,775 1,762
6,015
Insurance (1.8%):
Liberty Mutual,
8.20%, 5/4/07 630 649
Metropolitan Life Insurance Co.,
6.30%, 11/1/03 1,055 1,017
Prudential Insurance,
7.65%, 7/1/07 2,300 2,305
3,971
Oil & Gas Exploration,
Production & Services (3.1%):
Amerada Hess Corp.,
7.38% 10/01/09 2,582 2,553
75
<PAGE>
Chevron Corp.,
6.63%, 10/01/04 $ 2,060 $ 2,055
Union Oil of California,
7.20%, 5/15/05 2,230 2,205
6,813
Paper Products (0.3%):
Abitibi Consolidated, Inc.,
6.95%, 4/1/08 770 710
Real Estate (1.2%)
Cabot Industrial,
7.13%, 5/1/04 740 712
Simon Debartolo,
6.75%, 6/15/05 1,005 940
Spieker Props,
6.90%, 1/15/04 1,065 1,033
2,685
Retail (1.7%):
J.C. Penney & Co.,
7.60%, 4/1/07 345 338
Rohm & Haas Co.,
7.40%, 7/15/09 1,757 1,773
Saks, Inc.,
7.0%, 7/15/04 1,085 1,017
Wal-Mart Stores,
6.88%, 8/10/09 690 693
3,821
Special Purpose Entity (0.8%):
Duke Capital Corp.,
7.50%, 10/01/09 1,720 1,739
Steel (0.5%):
USX Corp.,
7.20%, 2/15/04 1,135 1,125
Telecommunications (4.5%):
Airtouch Communications,
7.50%, 7/15/06 1,620 1,634
GTE Corp.,
6.36%, 4/15/06 1,590 1,536
Telecommunications, Inc.,
8.25%, 1/15/03 6,300 6,537
Worldcom, Inc.,
6.13%, 8/15/01 95 94
9,801
Tobacco & Tobacco Products (0.8%):
Philip Morris Cos., Inc.,
7.00%, 7/15/05 1,070 1,023
R.J. Reynolds Tobacco Holding,
7.38%, 5/15/03 715 699
1,722
Utilities -- Electric (1.1%):
Edison International, Inc.,
6.88%, 9/15/04 1,377 1,358
Korea Electric Power,
6.38%, 12/1/03 1,265 1,197
2,555
Utilities -- Natural Gas (0.6%):
Williams Cos., Inc.,
6.20%, 8/1/02 1,465 1,430
Utilities -- Telecommunications (2.2%):
AT&T Capital Corp.,
6.25%, 5/15/01 2,315 2,298
AT&T Capital Corp.,
6.75%, 2/04/02 2,720 2,709
5,007
Total Corporate Bonds (Cost $93,483) 90,616
U.S. Government Agencies (1.3%)
Federal Home Loan Bank (1.3%):
5.92%, 8/25/08 (c) 3,000 2,835
Total U.S. Government Agencies (Cost $2,856) 2,835
U.S. Government Mortgage Backed (18.3%)
Federal Home Loan
Mortgage Corp. (4.4%):
5.75%, 7/15/03 (c) 2,660 2,606
6.00%, 4/1/13-2/1/29 1,871 1,764
6.25%, 7/15/04 (c) 1,080 1,072
6.50%, 5/1/26-4/1/29 1,725 1,659
7.00%, 7/1/28-11/1/28 920 905
7.50%, 9/1/17-3/1/29 1,070 1,073
8.00%, 10/1/28-1/1/29 295 301
8.50%, 1/1/29-5/1/29 495 513
9,893
Federal National
Mortgage Assoc. (12.5%):
5.82%, 7/19/01 2,240 2,228
6.00%, 5/15/08-7/1/29 3,296 3,141
6.50%, 8/15/04-4/1/29 (c) 6,755 6,686
6.52%, 7/11/07 (c) 2,250 2,227
6.88%, 9/10/12 4,250 4,198
7.00%, 10/1/26 913 896
7.10%, 10/18/04 (c) 3,430 3,435
7.12%, 7/3/06 (c) 2,730 2,798
7.50%, 4/1/29-5/1/29 245 245
8.00%, 8/1/29-9/1/29 495 504
76
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8.50%, 8/1/14-8/1/19 $ 1,729 $ 1,790
9.00%, 8/1/14 129 135
28,283
Government National
Mortgage Assoc. (1.4%):
7.00%, 12/15/22-8/15/28 2,635 2,598
7.50%, 4/15/29 437 439
8.50%, 9/15/28-10/15/28 106 110
3,147
Total U.S. Government Mortgage Backed
(Cost $41,920) 41,323
U.S. Treasury Obligations (15.2%)
U.S. Treasury Notes (15.2%):
5.38%, 6/30/00 (c) 9,357 9,352
4.63%, 11/30/00 (c) 7,028 6,952
6.38%, 8/15/02 (c) 7,849 7,945
5.75%, 4/30/03 (c) 1,445 1,436
6.00%, 8/15/04 (c) 7,630 7,646
6.00%, 8/15/09 750 749
Total U.S. Treasury Obligations (Cost $34,099) 34,080
Securities Purchased With Cash Collateral (16.8%)
Short Term Securities (5.7%):
AIM Short Term Prime
Money Market Fund 3,968,479 3,969
AIM Liquid Assets
Money Market Fund 8,775,364 8,775
12,744
Repurchase Agreements (11.1%):
Lehman Corp., 5.43%, 11/1/99
(Collateralized by $5,645
Housing Urban Development,
5.78%, 8/1/07,
Hallmark Cards,
0.00%, 10/15/00,
market value -- $5,154) 5,000 5,000
Merrill Lynch, 5.50%, 11/1/99
(See Significant Accounting
Policies, Securities Lending in the
Notes to Financial Statements
for collateral description) 5,000 5,000
Morgan Stanley Dean Witter,
5.48%, 11/1/99
(See Significant Accounting
Policies, Securities Lending in the
Notes to Financial Statements
for collateral description) 5,000 5,000
Nations Bank, 5.52%, 11/1/99
(Collateralized by $5,157
Cox Communications, Inc.,
6.04%, 8/15/00,
market value -- $5,150) 5,000 5,000
Goldman Sachs Group L.P.,
5.52%, 11/1/99
(Collateralized by $7,317
Mirage Resorts, Inc.,
6.75%, 8/1/07,
GTE Corp., 9.10%, 6/1/03,
Bancwest Corp.,
6.25%, 8/15/00,
market value -- $6,677) 5,000 5,000
25,000
Total Securities Purchased
With Cash Collateral (Cost $37,744) 37,744
Total Investments (Cost $263,665) (a) -- 115.5% 258,959
Other assets in excess of liabilities -- (15.5)% (34,769)
TOTAL NET ASSETS -- 100.0% $224,190
(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 $158. Cost for federal income tax purposes differs from value
by net unrealized depreciation of securities as follows (amounts in
thousands):
Unrealized appreciation $ 220
Unrealized depreciation (5,084)
Net unrealized depreciation $(4,864)
(b) 144a security which is restricted as to resale to institutional investors.
(c) All or a portion of this security was loaned as of October 31, 1999.
CMO -- Collateralized Mortgage Obligation
See notes to financial statements.
77
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THE VICTORY PORTFOLIOS Schedule of Investments
Fund for Income October 31, 1999
(Amounts in Thousands, Except Shares)
Shares or
Principal Market
Security Description Amount Value
Collateralized Mortgage Obligations (22.7%)
Government National
Mortgage Assoc.,
Series 1998-16, Class VB,
6.75%, 10/20/07 $ 3,000 $ 2,951
Government National
Mortgage Assoc.,
Series 1996-21, Class J,
7.00%, 7/16/13 2,147 2,090
Government National
Mortgage Assoc.,
Series 1999-22, Class VB,
7.00%, 11/20/14 3,000 2,940
Government National
Mortgage Assoc.,
Series 1998-19, Class DB,
8.50%, 6/20/16 1,904 1,916
Government National
Mortgage Assoc.,
Series 1994-4, Class PG,
7.50%, 8/16/19 3,000 3,021
Government National
Mortgage Assoc.,
Series 1995-8, Class B,
7.50%, 8/20/20 246 247
Government National
Mortgage Assoc.,
Series 1997-20, Class B,
9.50%, 8/20/21 1,277 1,306
Government National
Mortgage Assoc.,
Series 1998-4, Class P,
9.00%, 3/20/22 1,581 1,652
Government National
Mortgage Assoc.,
Series 1998-13, Class
DB, 9.00%, 4/20/22 1,352 1,433
Government National
Mortgage Assoc.,
Series 1996-25, Class H,
7.50%, 7/16/22 5,301 5,358
Government National
Mortgage Assoc.,
Series 1996-20, Class C,
7.50%, 5/16/23 2,000 2,021
Government National
Mortgage Assoc.,
Series 1996-11, Class PC,
7.00%, 5/20/23 3,500 3,502
Government National
Mortgage Assoc.,
Series 1999-36, Class HA,
7.50%, 6/20/23 3,000 2,967
Government National
Mortgage Assoc.,
Series 1998-12, Class GA,
9.00%, 12/20/23 2,200 2,262
Government National
Mortgage Assoc.,
Series 1997-8, Class PL,
7.00%, 1/16/25 5,000 4,884
Government National
Mortgage Assoc.,
Series 1995-7, Class CQ,
7.50%, 9/16/25 3,000 2,981
Government National
Mortgage Assoc.,
Series 1996-9, Class PE,
7.00%, 10/20/25 3,261 3,193
Government National
Mortgage Assoc.,
Series 1999-33, Class H,
7.50%, 1/20/26 2,000 1,991
Government National
Mortgage Assoc.,
Series 1999-24, Class D,
7.00%, 7/20/26 2,480 2,414
Government National
Mortgage Assoc.,
Series 1997-2, Class E,
7.50%, 2/20/27 735 721
Government National
Mortgage Assoc.,
Series 1999-6, Class AB,
8.00%, 3/16/28 2,863 2,926
Total Collateralized Mortgage Obligations
(Cost $54,115) 52,776
U.S. Government Mortgage Backed (61.7%)
Government National
Mortgage Assoc. (61.7%):
6.50%, 1/15/13-1/15/29 26,697 25,681
6.63%, 1/15/27 2,964 2,870
7.00%, 9/15/16-7/20/29 30,979 30,379
7.50%, 9/15/10-7/15/31 34,577 34,658
7.75%, 8/15/29-11/15/38 6,417 6,577
8.00%, 7/15/02-10/20/29 19,707 20,133
8.13%, 7/15/38 3,479 3,675
8.25%, 11/15/26-9/15/29 3,451 3,558
78
<PAGE>
8.50%, 3/15/05-7/15/29 $ 7,135 $ 7,418
8.75%, 3/20/17-4/15/22 2,891 3,096
9.00%, 10/15/09-8/15/25 1,846 1,940
9.50%, 10/15/02-6/15/21 1,886 2,015
10.00%, 5/15/12-8/15/25 1,469 1,595
10.25%, 6/15/19 12 13
10.50%, 2/15/16 13 14
Total U.S. Government Mortgage Backed
(Cost $146,650) 143,622
U.S. Treasury Obligations (14.7%)
U.S. Treasury Bills (0.6%):
4.55%, 11/26/99 1,305 1,301
U.S. Treasury Bonds (9.5%):
7.63%, 2/15/07 11,000 11,339
8.75%, 11/15/08 10,000 10,892
22,231
U.S. Treasury Notes (4.6%):
7.75%, 2/15/01 2,000 2,050
7.88%, 11/15/04 8,000 8,617
10,667
Total U.S. Treasury Obligations (Cost $34,867) 34,199
Investment Companies (0.1%)
Federated U.S. Treasury
Cash Reserve Fund 178,270 $ 178
Total Investment Companies (Cost $178) 178
Total Investments (Cost $235,810) (a) -- 99.2% 230,775
Other assets in excess of liabilities -- 0.8% 1,917
TOTAL NET ASSETS -- 100.0% $232,692
(a) Cost for federal income tax purposes differs from value by net
unrealized depreciation of securities as follows (amounts in thousands):
Unrealized appreciation $ 657
Unrealized depreciation (5,692)
Net unrealized depreciation $(5,035)
See notes to financial statements.
79
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THE VICTORY PORTFOLIOS Schedule of Investments
Government Mortgage Fund October 31, 1999
(Amounts in Thousands)
Principal Market
Security Description Amount Value
Collateralized Mortgage Obligations (6.5%)
Federal Home Loan Mortgage Corp.,
Series 2116, Class D,
6.00%, 7/15/26, CMO $ 1,659 $ 1,450
Federal Home Loan Mortgage Corp.,
Series 2152, Class AC,
7.50%, 1/15/26, CMO 1,817 1,833
Federal National Mortgage Assoc.,
Series 1999-28, Class ZA,
6.00%, 8/25/27, CMO 517 438
Federal National Mortgage Assoc.,
Series 1999-15, Class LA,
6.50%, 4/25/29, CMO 1,299 1,275
Federal National Mortgage Assoc.,
Series 1988-4, Class Z,
9.25%, 3/25/18, CMO 321 329
Federal National Mortgage Assoc.,
Series 1997-49, Class B,
10.00%, 6/17/27, CMO 1,065 1,161
Total Collateralized Mortgage Obligations
(Cost $6,690) 6,486
U.S. Government Agencies (5.9%)
Federal Farm Credit Bank (3.3%):
5.16%, 11/1/99 3,359 3,358
Federal Home Loan Bank (2.6%):
5.68%, 12/3/07 2,575 2,546
Total U.S. Government Agencies (Cost $5,932) 5,904
U.S. Government Mortgage Backed (87.0%)
Federal Home Loan
Mortgage Corp. (26.2%):
6.00%, 4/1/26-2/1/29 5,608 5,258
6.50%, 5/1/26-4/1/29 8,266 7,940
7.00%, 7/1/28-7/1/29 5,979 5,879
7.50%, 9/1/17-5/1/29 4,866 4,883
8.00%, 10/1/28-1/1/29 333 340
8.50%, 1/1/29-5/1/29 1,491 1,543
9.50%, 8/1/19-8/1/21 130 137
12.00%, 10/1/10 4 4
25,984
Federal National
Mortgage Assoc. (41.5%):
6.00%, 12/1/28-7/1/29 2,879 2,686
6.50%, 11/1/13-7/1/29 17,871 17,245
7.00%, 10/1/26-7/1/29 5,721 5,612
7.50%, 4/1/29-5/1/29 1,584 1,587
8.00%, 5/1/17-9/1/29 3,191 3,251
8.50%, 8/1/14-8/1/19 8,392 8,692
9.00%, 8/1/14 948 989
9.50%, 1/1/19 6 6
10.00%, 5/1/13 4 4
10.50%, 1/1/09 989 1,046
12.00%, 8/1/13 3 4
13.00%, 12/1/12 32 36
41,158
Government National
Mortgage Assoc. (19.3%):
6.50%, 1/15/26 4,607 4,438
7.00%, 12/15/22-8/15/28 10,521 10,370
7.50%, 12/15/27-4/15/29 2,671 2,679
8.00%, 3/15/08 661 675
8.50%, 7/15/10-10/15/28 891 924
9.50%, 1/15/19 85 91
19,177
Total U.S. Government Mortgage Backed
(Cost $87,238) 86,319
Total Investments (Cost $99,860) (a) -- 99.4% 98,709
Other assets in excess of liabilities -- 0.6% 617
TOTAL NET ASSETS -- 100.0% $99,326
(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 $22. Cost for federal income tax purposes differs from value by
net unrealized depreciation of securities as follows (amounts in thousands):
Unrealized appreciation $ 192
Unrealized depreciation (1,365)
Net unrealized depreciation $(1,173)
CMO -- Collateralized Mortgage Obligation
See notes to financial statements.
80
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THE VICTORY PORTFOLIOS Schedule of Investments
Investment Quality Bond Fund October 31, 1999
(Amounts in Thousands, Except Shares)
Shares or
Principal Market
Security Description Amount Value
Asset Backed Securities (5.8%)
Capital Auto Receivables Asset Trust,
Series 1999-2, Class A2,
6.06%, 6/15/02 $ 670 $ 669
CIT Recreational Vehicle Trust,
Series A-2, Class 1999-A,
5.78%, 7/15/08 1,520 1,495
First USA Credit Card Master Trust,
Series 1998-9, Class A,
5.28%, 9/18/06 670 643
First USA Credit Card Master Trust,
Series 1999-1, Class A,
5.53*%, 10/19/06 1,474 1,473
Ford Credit Auto Owner Trust,
Series 1999-C, Class A4,
6.08%, 9/16/02 990 979
MBNA Master Credit Card Trust,
Series 1998-D, Class A,
5.80%, 12/15/05 1,400 1,366
Premier Auto Trust,
Series 1998-5, Class A3,
5.07%, 7/8/02 830 819
Residential Asset Securities Corp.,
Series 1999-KS, Class A3,
7.18%, 10/1/29 780 778
Total Asset Backed Securities (Cost $8,330) 8,222
Collateralized Mortgage Obligations (10.3%)
Federal Home Loan Mortgage Corp.,
Series 2152, Class AC,
7.50%, 1/15/26 1,079 1,089
Federal Home Loan Mortgage Corp.,
Series 2116, Class D,
6.00%, 7/15/26 1,984 1,734
Federal National Mortgage Assoc.,
Series 1997-49, Class B,
10.00%, 6/17/27 1,190 1,299
Federal National Mortgage Assoc.,
Series 1999-15, Class LA,
6.50%, 4/25/29 1,046 1,026
General Electric Capital
Mortgage Services, Inc.,
Series 1997-4, Class A12,
7.50%, 5/25/27 1,340 1,311
General Electric Capital
Mortgage Services, Inc.,
Series 1998-13, Class A3,
6.75%, 8/25/28 1,512 1,456
LB Commercial Conduit Mortgage
Trust, Series 1999-C1,
Class A1, 6.41%, 8/15/07 769 750
Norwest Asset Securities Corp.,
Series 1998-10, Class A3,
6.75%, 5/25/28 2,540 2,336
Norwest Asset Securities Corp.,
Series 1998-12, Class A9,
6.75%, 6/25/28 1,728 1,586
Residential Accredit Loans, Inc.,
Series 1998-QS7, Class CB2,
6.75%, 7/25/28 2,030 1,932
Total Collateralized Mortgage Obligations
(Cost $15,121) 14,519
Commercial Paper (0.2%)
Business Credit Institutions (0.2%):
General Electric Capital Corp.,
5.33%, 11/1/99 230 230
Total Commercial Paper (Cost $230) 230
Corporate Bonds (32.0%)
Aerospace/Defense (0.9%):
Boeing Co.,
8.75%, 9/15/31 565 632
Raytheon Co.,
6.75%, 8/15/07 660 627
1,259
Automobiles (0.2%):
Ford Motor Credit Corp.,
6.70%, 7/16/04 265 262
Automotive Parts (0.4%):
TRW, Inc.,
6.45%, 6/15/01 (b) 500 496
Banks (1.2%):
Abbey National PLC,
6.70%, 6/29/49,
Callable 6/15/08 @ 100 640 583
First Union Corp.,
6.88%, 9/15/05 685 669
National Westminster Bank,
7.38%, 10/1/09 190 189
Wachovia Corp.,
6.15%, 3/15/09 300 277
1,718
Beverages (0.6%):
J Seagram & Sons,
6.25%, 12/15/01 285 281
J Seagram & Sons,
6.80%, 12/15/08 665 631
912
81
<PAGE>
Brokerage (0.7%):
Lehman Brothers,
6.00%, 2/26/01 $ 330 $ 327
Lehman Brothers,
6.63%, 4/1/04 615 596
923
Building Materials (0.5%):
Owens Corning,
7.50%, 5/1/05 715 702
Chemicals -- General (1.1%):
Great Lakes Chemical,
7.00%, 7/15/09 280 273
Rohm & Haas Co.,
7.85%, 7/15/29 (b) 1,200 1,222
1,495
Commercial Services (0.5%):
Cendant Corp.,
7.75%, 12/1/03 655 649
Electrical Services (0.4%):
Empresa Nacional Electric,
7.75%, 7/15/08 630 592
Electric Utility (0.8%):
Duke Capital Corp.,
8.00%, 10/1/19 1,200 1,192
Electronic & Electrical -- General (0.4%):
Sony Corp.,
6.13%, 3/4/03 35 34
Texas Instruments, Inc.,
7.00%, 8/15/04 (b) (c) 500 495
529
Energy (0.9%):
KN Energy, Inc.,
6.45%, 3/1/03 240 233
KN Energy, Inc.,
6.65%, 3/1/05 490 466
Valero Energy Corp.,
7.38%, 3/15/06 (c) 635 609
1,308
Financial Services (2.0%):
AT&T Capital Corp.,
6.88%, 1/16/01, MTN 475 476
Capital One Bank Corp.,
6.15%, 6/1/01 330 325
Citigroup, Inc.,
5.80%, 3/15/04 (c) 310 296
General Electric Capital Corp.,
6.33%, 9/17/01, MTN 385 384
General Electric Capital Corp.,
6.52%, 10/8/02 295 295
Household Finance Co.,
5.88%, 2/1/09 1,090 974
2,750
Food Processing & Packaging (0.8%):
Nabisco, Inc.,
6.00%, 2/15/11 1,150 1,136
Heavy Machinery (0.3%):
Deere & Co.,
6.55%, 10/1/28 470 409
Insurance (2.9%):
American General Finance,
5.80%, 3/15/02 370 362
American General Institution,
7.57%, 12/1/45 480 445
AON Capital Trust,
8.21%, 1/1/27 675 669
Conseco, Inc.,
8.50%, 10/15/02 965 969
Liberty Mutual Insurance Co.,
8.20%, 5/4/07 630 649
Metropolitan Life Insurance Co.,
6.30%, 11/1/03 1,000 964
4,058
Manufactured Housing (0.3%):
Oakwood Homes Corp.,
7.88%, 3/1/04 675 469
Media (1.6%):
Knight-Ridder, Inc.,
6.88%, 3/15/29 825 751
Time Warner, Inc.,
7.75%, 6/15/05 800 820
Viacom, Inc.,
7.75%, 6/1/05 675 684
2,255
Mining (0.5%):
Cyprus Amax Minerals, Inc.,
6.63%, 10/15/05 825 770
Oil & Gas Exploration,
Production & Services (1.0%):
Williams Co., Inc.,
6.20%, 8/1/02 1,030 1,005
82
<PAGE>
Williams Co., Inc.,
6.13%, 12/1/03 $ 450 $ 430
1,435
Oil-Integrated Companies (2.3%):
Amerada Hess Corp.,
7.79%, 10/1/29 940 929
Coastal Corp.,
6.20%, 5/15/04 465 446
Conoco, Inc.,
6.95%, 4/15/29 265 247
Phillips Petroleum Co.,
6.65%, 3/1/03 1,200 1,201
Union Oil Co. of California,
7.50%, 2/15/29 460 440
3,263
Oilfield Services & Equipment (0.4%):
Baker Hughes, Inc.,
6.88%, 1/15/29 615 558
Paper Products (1.2%):
Abitibi Consolidated, Inc.,
6.95%, 4/1/08 500 461
Abitibi Consolidated, Inc.,
8.50%, 8/1/29 475 467
Fort James Corp.,
6.63%, 9/15/04 475 460
International Paper Co.,
7.63%, 1/15/07 335 339
1,727
Pharmaceuticals (0.4%):
Johnson & Johnson,
6.95%, 9/1/29 560 545
Pipelines (0.3%):
Enron Corp.,
7.38%, 5/15/19 450 430
Radio & Television (0.3%):
Westinghouse CBS Corp.,
6.88%, 9/1/03 405 397
Real Estate Investment Trusts (2.7%):
Cabot Industrial Property LP,
7.13%, 5/1/04 310 298
Camden Property Trust,
7.00%, 4/15/04 475 458
Duke Realty LP,
7.30%, 6/30/03 570 564
EOP Operating LP,
6.75%, 2/15/08 765 701
Simon Debartolo Property Group LP,
6.75%, 6/15/05 655 612
Spieker Properties LP,
6.90%, 1/15/04 680 660
Spieker Properties LP,
7.25%, 5/1/09 530 501
3,794
Retail (2.0%):
J.C. Penney & Co.,
7.60%, 4/1/07 675 661
Lowes Companies, Inc.,
6.50%, 3/15/29 375 323
Saks, Inc.,
7.00%, 7/15/04 685 642
Saks, Inc.,
8.25%, 11/15/08 525 504
Wal-Mart Stores,
6.88%, 8/10/09 665 668
2,798
Software & Computer Services (0.7%):
Sun Microsystems, Inc.,
7.65%, 8/15/09 940 959
Steel (0.2%):
USX Corp.,
7.20%, 2/15/04 340 337
Telecommunications (1.5%):
GTE Corp.,
6.94%, 4/15/28 475 437
Sprint Capital Corp.,
6.88%, 11/15/28 475 436
Telecommunications, Inc.,
9.80%, 2/1/12 990 1,189
2,062
Telecommunications -- Equipment (0.2%):
Motorola, Inc.,
6.50%, 11/15/28 280 245
Tobacco & Tobacco Products (0.9%):
Philip Morris, Inc.,
7.00%, 7/15/05 895 855
RJ Reynolds Tobacco Co.,
7.38%, 5/15/03 465 455
1,310
83
<PAGE>
Utilities -- Electric (0.9%):
Edison International, Inc.,
6.88%, 9/15/04, $ 565 $ 557
Korea Electric Power,
6.38%, 12/1/03 820 776
1,333
Total Corporate Bonds (Cost $46,536) 45,077
U.S. Government Agencies (0.5%)
U.S. Government Loan Trust (0.5%):
Israel, Series 1-B,
8.50%, 4/1/06 667 709
Total U.S. Government Agencies (Cost $734) 709
U.S. Government Mortgage Backed (35.9%)
Federal Home Loan Mortgage Corp. (12.7%):
5.75%, 7/15/03 (c) 1,860 1,822
6.00%, 4/1/26-2/1/29 2,459 2,306
6.25%, 7/15/04 (c) 690 685
6.50%, 5/1/26-4/1/29 4,199 4,039
6.63%, 9/15/09 (c) 940 935
7.00%, 7/1/28-11/1/28 2,989 2,940
7.50%, 9/1/17-3/1/29 2,437 2,445
8.00%, 10/1/28-1/1/29 736 751
8.50%, 7/1/21-5/1/29 1,911 1,979
17,902
Federal National Mortgage Assoc. (16.0%):
6.00%, 12/1/28-7/1/29 1,284 1,198
6.25%, 5/15/29 (c) 1,181 1,087
6.50%, 8/15/04-4/1/29 7,851 7,618
6.63%, 9/15/09 1,830 1,820
7.00%, 10/1/26 2,693 2,641
7.12%, 7/3/06, MTN 1,120 1,148
7.50%, 4/1/29-5/1/29 864 866
8.00%, 8/1/29-9/1/29 1,557 1,586
8.50%, 8/1/14-8/1/19 4,103 4,248
9.00%, 8/1/14 387 404
22,616
Government National Mortgage Assoc. (7.2%):
7.00%, 12/15/22-8/15/28 7,674 7,565
7.50%, 4/15/26 1,416 1,420
8.50%, 9/15/28-2/15/29 616 640
9.00%, 2/15/17 508 532
10,157
Total U.S. Government Mortgage Backed
(Cost $51,381) 50,675
U.S. Treasury Obligations (14.3%)
U.S. Treasury Bonds (3.3%):
7.50%, 11/15/16 1,030 1,136
6.13%, 8/15/29 (c) 650 647
5.25%, 2/15/29 (c) 3,234 2,800
4,583
U.S. Treasury Notes (11.0%):
5.38%, 6/30/00 1,818 1,817
4.63%, 11/30/00 1,925 1,904
6.38%, 8/15/02 (c) 1,530 1,549
5.75%, 4/30/03 (c) 1,035 1,028
6.00%, 8/15/04 (c) 4,824 4,834
7.00%, 7/15/06 (c) 1,200 1,252
6.00%, 8/15/09 (c) 2,783 2,779
3.29%, 8/15/20 (c) 1,600 415
15,578
Total U.S. Treasury Obligations (Cost $20,237) 20,161
84
<PAGE>
Securities Purchased With Cash Collateral (13.0%)
Investment Companies (5.9%):
AIM Short Term Prime
Money Market Fund 2,576,057 $ 2,576
AIM Liquid Assets
Money Market Fund 5,696,347 5,696
8,272
Repurchase Agreements (7.1%):
Salomon Corp., 5.48%, 11/1/99
(Collateralized by $5,531
Jersey Central Power & Light,
7.50%, 5/1/23,
market value -- $5,327) 5,000 5,000
Lehman Corp., 5.43%, 11/1/99
(See Significant Accounting
Policies, Securities Lending in the
Notes to Financial Statements
for collateral description) 5,000 5,000
10,000
Total Securities Purchased
With Cash Collateral (Cost $18,272) 18,272
Total Investments (Cost $160,841) (a) -- 112.0% 157,865
Other assets in excess of liabilities -- (12.0)% (16,903)
TOTAL NET ASSETS -- 100.0% $140,962
(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 $261. Cost for federal income tax purposes differs from value
by net unrealized depreciation of securities as follows (amounts in
thousands):
Unrealized appreciation $ 228
Unrealized depreciation (3,464)
Net unrealized depreciation $(3,236)
(b) 144a security which is restricted as to resale to institutional investors.
(c) All or a portion of this security was loaned as of October 31, 1999.
CMO -- Collateralized Mortgage Obligation
MTN -- Medium Term Note
See notes to financial statements.
85
<PAGE>
Statements of Assets and Liabilities
THE VICTORY PORTFOLIOS October 31, 1999
(Amounts in Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Government Investment
Limited Term Intermediate Fund for Mortgage Quality Bond
Income Fund Income Fund Income Fund Fund
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments, at value
(Cost $47,582; $238,665;
$235,810; $99,860 & 150,841) $47,028 $233,959 $230,775 $ 98,709 $147,865
Repurchase agreements, at cost 13,000 25,000 -- -- 10,000
Total Investments 60,028 258,959 230,775 98,709 157,865
Cash -- -- -- 51 --
Interest receivable 462 3,141 2,129 624 1,718
Receivable for capital shares issued -- -- 2 -- 16
Receivable from brokers for investments sold 446 4,060 -- 13 4,089
Receivable from affiliates -- -- 9 -- --
Prepaid expenses and other assets 7 11 26 7 7
Total Assets 60,943 266,171 232,941 99,404 163,695
LIABILITIES:
Interest payable -- 35 -- -- 60
Payable to brokers for investments purchased 390 4,020 -- -- 4,106
Payable for capital shares redeemed 29 15 13 -- 172
Payable for return of collateral received 13,000 37,744 -- -- 18,272
Accrued expenses and other payables:
Investment advisory fees 19 99 85 42 60
Administration fees 1 5 2 2 3
Custodian fees 4 8 14 7 8
Accounting fees 1 1 -- 2 1
Transfer agent fees 1 5 26 3 19
Shareholder service fees -- Class A 8 45 23 20 27
Shareholder service fees -- Class G -- -- 49 -- --
Other 2 4 37 2 5
Total Liabilities 13,455 41,981 249 78 22,733
NET ASSETS:
Capital 51,958 234,034 245,144 103,722 160,421
Undistributed net investment income 51 250 192 107 186
Net unrealized appreciation/depreciation
from investments (554) (4,706) (5,035) (1,151) (2,976)
Accumulated undistributed net realized gains
(losses) from investment transactions (3,967) (5,388) (7,609) (3,352) (16,669)
Net Assets $47,488 $224,190 $232,692 $ 99,326 $140,962
Net Assets
Class A $47,488 $224,190 $ 40,270 $ 99,326 $140,962
Class G 192,422
Total $47,488 $224,190 $232,692 $ 99,326 $140,962
Outstanding units of beneficial interest (shares)
Class A 4,882 24,056 3,149 9,364 15,052
Class G 15,052
Total 4,882 24,056 18,201 9,364 15,052
Net asset value
Redemption price per share -- Class A $ 9.73 $ 9.32 $ 12.79 $ 10.61 $ 9.37
Offering price per share -- Class G $ 12.78
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) $ 9.93 $ 9.89 $ 13.05 $ 11.26 $ 9.94
</TABLE>
See notes to financial statements.
86
<PAGE>
THE VICTORY PORTFOLIOS Statements of Operations
(Amounts in Thousands)
<TABLE>
<CAPTION>
Limited Government Investment
Term Intermediate Fund for Mortgage Quality
Income Fund Income Fund Income Fund Bond Fund
Year Year Ten Months Year Year Year
Ended Ended Ended Ended Ended Ended
October 31, October 31, October 31, December 31, October 31, October 31,
1999 1999 1999<F1> 1998 1999 1999
<S> <C> <C> <C> <C> <C> <C>
Investment Income:
Interest income $ 4,570 $ 15,144 $11,622 $10,648 $ 6,855 $ 10,115
Securities lending income 20 71 -- -- -- 55
Total Income 4,590 15,215 11,622 10,648 6,855 10,170
Expenses:
Investment advisory fees 373 1,824 827 796 515 1,169
Administration fees 115 365 206 -- 154 234
Shareholder service fees -- Class A 191 608 56 60 253 388
12b-1 fees -- Class G -- -- 363 390 -- --
Accounting fees 67 100 68 -- 76 94
Custodian fees 49 87 52 29 68 87
Legal and audit fees 8 18 47 37 8 11
Trustees' fees and expenses 2 6 7 25 3 4
Transfer agent fees 9 19 83 40 12 62
Registration and filing fees 12 17 16 23 13 18
Printing fees 4 10 23 13 4 13
Other 5 16 13 13 7 11
Total Expenses 835 3,070 1,761 1,426 1,113 2,091
Expenses voluntarily reduced (98) (640) (264) (3) (97) (390)
Expenses before reimbursement
from distributor 737 2,430 1,497 1,423 1,016 1,701
Expenses reimbursed by the distributor -- -- (16) -- -- --
Net Expenses 737 2,430 1,481 1,423 1,016 1,701
Net Investment Income 3,853 12,785 10,141 9,225 5,839 8,469
Realized/Unrealized Gains
(losses) from Investments:
Net realized gains (losses)
from investment transactions (1,162) (5,275) (1,816) 226 (2,539) (6,618)
Change in unrealized appreciation/
depreciation from investments (1,429) (8,183) (7,522) 1,816 (1,918) (3,689)
Net realized/unrealized gains
(losses) from investments (2,591) (13,458) (9,338) 2,042 (4,457) (10,307)
Change in net assets resulting
from operations $ 1,262 $ (673) $ 803 $11,267 $ 1,382 $ (1,838)
<FN>
<F1> Effective March 26, 1999, the Gradison Government Income Fund merged
into the Victory Fund for Income. Statements of Operations prior to March 26,
1999 represent the Gradison Government Income Fund.
</FN>
</TABLE>
See notes to financial statements.
87
<PAGE>
THE VICTORY PORTFOLIOS Statements of Changes in Net Assets
(Amounts in Thousands)
<TABLE>
<CAPTION>
Limited Term Intermediate Fund for
Income Fund Income Fund Income
Year Year Year Year Ten Months Year Year
Ended Ended Ended Ended Ended Ended Ended
October 31, October 31, October 31, October 31, October 31, December 31, December 31,
1999 1998 1999 1998 1999<F1> 1998 1997
<S> <C> <C> <C> <C> <C> <C> <C>
From Investment Activities:
Operations:
Net investment income $ 3,853 $ 4,298 $ 12,785 $ 13,440 $ 10,141 $ 9,225 $ 9,333
Net realized gains (losses)
from investment transactions (1,162) 308 (5,275) 5,545 (1,816) 226 (62)
Net change in unrealized
appreciation/depreciation
from investments (1,429) 538 (8,183) 690 (7,522) 1,816 3,016
Change in net assets resulting
from operations 1,262 5,144 (673) 19,675 803 11,267 12,287
Distributions to Shareholders:
From net investment
income by class:
Class A (3,852) (4,292) (12,677) (13,508) (1,239) -- --
Class G -- -- -- -- (8,850) (9,113) (9,341)
From net realized gains
from investment transactions -- -- (298) -- -- -- --
Change in net assets from
distributions to shareholders (3,852) (4,292) (12,975) (13,508) (10,089) (9,113) (9,341)
Capital Transactions:
Proceeds from shares issued 13,368 17,938 48,771 52,810 103,753 52,319 31,527
Proceeds from shares issued
in connection with acquisition -- -- -- -- 33,350 -- --
Dividends reinvested 2,715 3,093 9,350 9,834 9,191 7,552 7,758
Cost of shares redeemed (47,348) (22,453) (76,550) (61,385) (64,028) (57,385) (50,033)
Change in net assets from
capital transactions (31,265) (1,422) (18,429) 1,259 82,266 2,486 (10,748)
Change in net assets (33,855) (570) (32,077) 7,426 72,980 4,640 (7,802)
Net Assets:
Beginning of period 81,343 81,913 256,267 248,841 159,712 155,072 162,874
End of period $ 47,488 $ 81,343 $224,190 $256,267 $232,692 $159,712 $155,072
Share Transactions:
Issued 1,351 1,797 5,075 5,434 8,005 3,958 2,432
Issued in connection
with acquisition -- -- -- -- 2,426 -- --
Reinvested 276 311 979 1,017 711 572 601
Redeemed (4,834) (2,256) (8,002) (6,337) (4,935) (4,338) (3,872)
Change in shares (3,207) (148) (1,948) 114 6,207 192 (839)
<FN>
<F1> Effective March 26, 1999, the Gradison Government Income Fund merged into the Victory Fund for Income.
Changes in net assets prior to March 26, 1999 represent the Gradison Government Income Fund.
</FN>
</TABLE>
See notes to financial statements.
88
<PAGE>
THE VICTORY PORTFOLIOS Statements of Changes in Net Assets
(Amounts in Thousands)
<TABLE>
<CAPTION>
Government Investment Quality
Mortgage Fund Bond Fund
Year Year Year Year
Ended Ended Ended Ended
October 31, October 31, October 31, October 31,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
From Investment Activities:
Operations:
Net investment income $ 5,839 $ 5,895 $ 8,469 $ 9,634
Net realized gains (losses) from investment transactions (2,539) 1,276 (6,618) 5,801
Net change in unrealized appreciation/depreciation
from investments (1,918) 50 (3,689) (1,619)
Change in net assets resulting from operations 1,382 7,221 (1,838) 13,816
Distributions to Shareholders:
From net investment income by class:
Class A (5,768) (5,870) (8,392) (9,672)
Change in net assets from distributions to shareholders (5,768) (5,870) (8,392) (9,672)
Capital Transactions:
Proceeds from shares issued 23,681 24,330 44,058 56,066
Dividends reinvested 3,088 2,880 5,673 5,975
Cost of shares redeemed (28,142) (27,237) (68,471) (77,260)
Change in net assets from capital transactions (1,373) (27) (18,740) (15,219)
Change in net assets (5,759) 1,324 (28,970) (11,075)
Net Assets:
Beginning of period 105,085 103,761 169,932 181,007
End of period $ 99,326 $105,085 $140,962 $169,932
Share Transactions:
Issued 2,178 2,201 4,512 5,665
Reinvested 286 261 587 604
Redeemed (2,593) (2,466) (7,036) (7,790)
Change in shares (129) (4) (1,937) (1,521)
</TABLE>
See notes to financial statements.
89
<PAGE>
THE VICTORY PORTFOLIOS Financial Highlights
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Limited Term Income Fund
Year Ended October 31,
1999 1998 1997 1996 1995<F2>
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 10.06 $ 9.94 $ 10.01 $ 10.15 $ 9.88
Investment Activities
Net investment income 0.50 0.54 0.61 0.63 0.57
Net realized and unrealized
gains (losses) from investments (0.33) 0.12 (0.07) (0.14) 0.27
Total from Investment Activities 0.17 0.66 0.54 0.49 0.84
Distributions
Net investment income (0.50) (0.54) (0.61) (0.62) (0.57)
In excess of net investment income -- -- -- (0.01) --
Net realized gains -- -- -- -- --
Total Distributions (0.50) (0.54) (0.61) (0.63) (0.57)
Net Asset Value, End of Period $ 9.73 $ 10.06 $ 9.94 $ 10.01 $ 10.15
Total Return (excludes sales charges) 1.72% 6.86% 5.57% 4.94% 8.77%
Ratios/Supplemental Data:
Net Assets, End of Period (000) $47,488 $81,343 $81,913 $90,019 $172,002
Ratio of expenses to average net assets 0.96% 0.87% 0.85% 0.86% 0.78%
Ratio of net investment income
to average net assets 5.03% 5.44% 6.06% 5.90% 5.77%
Ratio of expenses to average net assets<F1> 1.09% 1.02% 0.87% 0.89% 0.79%
Ratio of net investment income
to average net assets<F1> 4.90% 5.29% 6.04% 5.87% 5.76%
Portfolio turnover 220% 177% 139% 221% 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 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.
90
<PAGE>
THE VICTORY PORTFOLIOS Financial Highlights
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Intermediate Income Fund
Year Ended October 31,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 9.85 $ 9.61 $ 9.56 $ 9.69 $ 9.25
Investment Activities
Net investment income 0.50 0.53 0.56 0.56 0.60
Net realized and unrealized gains
(losses) from investments (0.52) 0.24 0.05 (0.13) 0.44
Total from Investment Activities (0.02) 0.77 0.61 0.43 1.04
Distributions
Net investment income (0.50) (0.53) (0.56) (0.56) (0.60)
Net realized gains (0.01) -- -- -- --
Total Distributions (0.51) (0.53) (0.56) (0.56) (0.60)
Net Asset Value, End of Period $ 9.32 $ 9.85 $ 9.61 $ 9.56 $ 9.69
Total Return (excludes sales charges) (0.18)% 8.30% 6.62% 4.56% 11.65%
Ratios/Supplemental Data:
Net Assets, End of Period (000) $224,190 $256,267 $248,841 $272,087 $163,281
Ratio of expenses to
average net assets 1.00% 0.96% 0.96% 0.94% 0.82%
Ratio of net investment income
to average net assets 5.26% 5.48% 5.87% 5.81% 6.32%
Ratio of expenses to
average net assets<F1> 1.26% 1.24% 1.09% 1.11% 1.06%
Ratio of net investment income
to average net assets<F1> 5.00% 5.20% 5.74% 5.64% 6.08%
Portfolio turnover 303% 318% 195% 164% 98%
<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.
91
<PAGE>
THE VICTORY PORTFOLIOS Financial Highlights
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Fund for Income
Class A
Shares Class G Shares
March 26, January 1,
1999 to 1999 to Year Ended December 31,
October 31, October 31,
1999<F4><F7> 1999<F4> 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 13.14 $ 13.32 $ 13.14 $ 12.88 $ 13.21 $ 12.02 $ 13.37
Investment Activities
Net investment income 0.46 0.66 0.77 0.78 0.78 0.79 0.76
Net realized and unrealized
gains (losses) on investments (0.36) (0.54) 0.17 0.26 (0.34) 1.23 (1.25)
Total from Investment Activities 0.10 0.12 0.94 1.04 0.44 2.02 (0.49)
Distributions
Net investment income (0.45) (0.66) (0.76) (0.78) (0.77) (0.79) (0.78)
In excess of net investment income -- -- -- -- -- -- (0.01)
Net realized gains -- -- -- -- -- -- (0.05)
Tax return of capital -- -- -- -- -- (0.04) (0.02)
Total Distributions (0.45) (0.66) (0.76) (0.78) (0.77) (0.83) (0.86)
Net Asset Value, End of Period $ 12.79 $ 12.78 $ 13.32 $ 13.14 $12.88 $ 13.21 $ 12.02
Total Return (excludes sales charges) 0.72%<F2> 0.94%<F2> 7.37% 8.36% 3.51% 17.20% (3.69)%
Ratios/Supplemental Data:
Net Assets, End of Period (000) $40,270 $192,422 $159,712 $155,072 $162,874 $185,434 $184,029
Ratio of expenses to
average net assets<F5> 1.00%<F3> 0.88%<F3> 0.89% 0.90% 0.90% 0.92% 0.90%
Ratio of net investment income
to average net assets<F5> 6.02%<F3> 6.12%<F3> 5.79% 6.04% 6.06% 6.19% 6.03%
Ratio of expenses to
average net assets<F1> 1.22%<F3> 1.04%<F3> 0.90% <F6> <F6> <F6> <F6>
Ratio of net investment income
to average net assets<F1> 5.80%<F3> 5.96%<F3> 5.78% <F6> <F6> <F6> <F6>
Portfolio turnover<F8> 24% 24% 36% 12% 13% 16% 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> Not annualized.
<F3> Annualized.
<F4> Effective March 26, 1999, the Gradison Government Income Fund merged
into the Victory Fund for Income. Financial highlights prior to March 26,
1999 represent the Gradison Government Income Fund.
<F5> Effective March 26, 1999, the Adviser agreed to waive its management fee
or to reimburse expenses, as allowed by law, to the extent necessary to maintain
the net operating expenses of the Class G shares of the Fund at a maximum of 0.89%
until at least April 1, 2001. The Adviser has also agreed to waive its
management fee for Class A shares to the same extent the fee is waived for
Class G shares until at least April 1, 2001.
<F6> There were no voluntary fee reductions during the period.
<F7> Period from commencement of operations.
<F8> 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.
92
<PAGE>
THE VICTORY PORTFOLIOS Financial Highlights
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Government Mortgage Fund
Year Ended October 31,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 11.07 $ 10.93 $ 10.76 $ 10.86 $ 10.33
Investment Activities
Net investment income 0.62 0.63 0.69 0.70 0.72
Net realized and unrealized
gains (losses) from investments (0.47) 0.14 0.16 (0.12) 0.62
Total from Investment Activities 0.15 0.77 0.85 0.58 1.34
Distributions
Net investment income (0.61) (0.63) (0.68) (0.67) (0.71)
In excess of net realized gains -- -- -- -- (0.08)
Tax return of capital -- -- <F3> (0.01) (0.02)
Total Distributions (0.61) (0.63) (0.68) (0.68) (0.81)
Net Asset Value, End of Period $ 10.61 $ 11.07 $ 10.93 $ 10.76 $ 10.86
Total Return (excludes sales charges) 1.38% 7.23% 8.22% 5.54% 13.55%
Ratios/Supplemental Data:
Net Assets, End of Period (000) $99,326 $105,085 $103,761 $125,992 $136,103
Ratio of expenses to
average net assets 0.99% 0.88% 0.85% 0.89% 0.77%
Ratio of net investment income
to average net assets 5.67% 5.72% 6.32% 6.46% 6.81%
Ratio of expenses to
average net assets* 1.08% 1.01% <F2> 0.90% 0.79%
Ratio of net investment income
to average net assets* 5.58% 5.59% <F2> 6.45% 6.80%
Portfolio turnover 274% 296% 115% 127% 59%
<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.
93
<PAGE>
THE VICTORY PORTFOLIOS Financial Highlights
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Investment Quality Bond Fund
Year Ended October 31,
1999 1998 1997<F3> 1996 1995<F2>
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 10.00 $ 9.78 $ 9.63 $ 9.76 $ 9.10
Investment Activities
Net investment income 0.54 0.55 0.57 0.57 0.62
Net realized and unrealized gains
(losses) from investments (0.64) 0.22 0.14 (0.13) 0.67
Total from Investment Activities (0.10) 0.71 0.44 0.77 1.29
Distributions
Net investment income (0.53) (0.55) (0.56) (0.56) (0.62)
In excess of net investment income -- -- -- -- (0.01)
Tax return of capital -- -- -- (0.01) --
Total Distributions (0.53) (0.55) (0.56) (0.57) (0.63)
Net Asset Value, End of Period $ 9.37 $ 10.00 $ 9.78 $ 9.63 $ 9.76
Total Return (excludes sales charges) (1.18)% 8.06% 7.67% 4.65% 14.63%
Ratios/Supplemental Data:
Net Assets, End of Period (000) $140,962 $169,932 $181,007 $150,807 $125,248
Ratio of expenses to
average net assets 1.09% 1.06% 1.04% 1.01% 0.88%
Ratio of net investment income
to average net assets 5.44% 5.49% 5.90% 5.99% 6.59%
Ratio of expenses to
average net assets<F1> 1.34% 1.31% 1.17% 1.14% 1.10%
Ratio of net investment income
to average net assets<F1> 5.19% 5.24% 5.77% 5.86% 6.37%
Portfolio turnover 398% 492% 249% 182% 160%
<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 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.
<F3> 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.
94
<PAGE>
THE VICTORY PORTFOLIOS Schedule of Investments
National Municipal Bond Fund October 31, 1999
(Amounts in Thousands, Except Shares)
Shares or
Principal Market
Security Description Amount Value
Municipal Bonds (101.9%)
Alabama (1.3%):
Scottsboro, Series B,
5.30%, 7/1/06, FSA $ 100 $ 102
Scottsboro, Series B,
5.38%, 7/1/07,
Callable 7/1/06 @ 102, FSA 400 410
512
Arizona (3.9%):
Maricopa County School
District, No. 79, GO,
Litchfield Elementary,
Projects of 1995-Series A,
5.00%, 7/1/03, FGIC 125 126
Maricopa County Unified
School District, No. 95,
Queens Creek, GO, Series A,
5.20%, 7/1/05, AMBAC 125 127
Pima County Industrial
Development Authority,
5.00%, 4/1/04, MBIA 1,000 1,009
Pinal County School
District, Series A, GO,
5.40%, 7/1/07, FGIC 270 276
1,538
Arkansas (1.4%):
Texarkana Public Facilities
Board, Waterworks
Facilities Revenue,
4.90%, 9/1/05, FGIC 570 572
California (1.4%):
Alhambra City Elementary
School District, Capital
Appreciation, Series A,
0.00%, 9/1/2, FSA 1,000 247
Arcata City Hall & Water
Improvements, Certificates
of Participation,
5.30%, 1/1/21,
Callable 1/1/08 @ 102, MBIA 350 322
569
Connecticut (2.8%):
State Health & Education,
Fairfield University,
Series I, 5.25%, 7/1/25,
Callable 7/1/09 @ 101, MBIA 1,000 899
State, Special Tax Obligation
Revenue Bond, Series B,
6.00%, 9/1/06 200 213
1,112
Florida (11.9%):
Gulf Breeze Revenue, Local
Government Loan, Series C,
4.80%, 12/1/15, FGIC 450 446
Lakeland Electric & Water Revenue,
Series A, 4.75%, 10/1/17,
Callable 10/01/09 @ 101, MBIA 250 217
Orlando Utilities Commission,
Water & Electric Revenue,
5.80%, 10/1/06 150 159
State Board Financial
Department, Environmental
Protection-Preservation,
4.00%, 7/1/07, FGIC 2,400 2,234
Tampa Tax Allocation,
Lee Moffit Cancer,
5.00%, 3/1/08, AMBAC 1,710 1,702
4,758
Georgia (0.6%):
South Fulton Municipal Regional Jail,
5.20%, 12/1/05, MBIA 250 256
Illinois (16.8%):
Chicago Public Building
Commission, 6.05%, 1/1/06,
Callable 1/1/05 @ 100, AMBAC 250 262
Cicero, Series A, GO,
5.35%, 12/1/06, AMBAC 530 541
Health Facilities Authority
Revenue, Revolving Fund
Pooled, Series C,
3.45%*, 8/15/15, LOC
First National Bank of Chicago 500 500
Northlake, Tax Increment, GO,
5.00%, 12/1/04, MBIA 500 506
State Development Financial
Authority Revenue, YMCA
of Metropolitan Chicago,
3.45%*, 6/1/26, LOC
Harris Trust & Savings Bank 1,500 1,500
State Health Facilities Authority,
5.55%, 10/1/06, FGIC 1,000 1,026
State Health Facilities Authority,
5.60%, 10/1/07, FGIC 2,310 2,370
6,705
95
<PAGE>
Indiana (0.7%):
Westfield Elementary School
Building Corp.,
5.00%, 7/15/01, AMBAC $ 280 $ 283
Iowa (2.0%):
Harlan Community School District,
3.40%, 6/1/00, FSA 250 249
State Finance Authority,
Hospital Facility Revenue,
Trinity Regional Hospital
Project, 5.00%, 7/1/02, FSA 550 556
805
Kansas (1.0%):
Haysville, Water & Wastewater Utility,
4.60%, 10/1/00, FSA 130 131
University of Kansas Hospital Authority,
University Health Systems,
Series A, 5.55%, 9/1/26,
Callable 9/1/09 @ 100, AMBAC 300 280
411
Michigan (3.3%):
Byron Center, GO,
5.40%, 5/1/07,
Prerefunded 5/1/05 @ 101, MBIA 240 249
Grosse Ile Township School District,
GO, 6.00%, 5/1/22,
Prerefunded 5/1/07 @ 100, FGIC 250 267
Leslie Public Schools, GO,
5.55%, 5/1/07,
Prerefunded 5/1/05 @ 101, AMBAC 250 261
Municipal Bond Authority,
6.70%, 11/1/06,
Callable 11/1/04 @ 102 225 243
Municipal Bond Authority,
6.80%, 11/1/07,
Callable 11/1/04 @ 102 275 300
1,320
Minnesota (2.5%):
Southern Minnesota Municipal
Power Agency, Series A,
4.70%, 1/1/02,
AMBAC-TCRS, ETM 325 327
Southern Minnesota Municipal
Power Agency, Series A,
4.70%, 1/1/02,
AMBAC-TCRS 675 679
1,006
Mississippi (1.0%):
Home Corp. Single Family Revenue,
Series A, 4.80%, 6/1/19,
Callable 6/1/09 @ 102,
GNMA/FNMA 400 396
Missouri (2.7%):
Excelsior Springs School
District Building Corp.,
6.50%, 3/1/09,
Callable 3/1/04 @ 100, FSA 500 532
West Plains Improvement
Authority, Leasehold Revenue,
5.00%, 5/1/06, MBIA 550 550
1,082
Nebraska (4.2%):
Education Financial Authority Revenue,
Creighton University, Series A,
3.55%, 9/1/01, AMBAC 1,710 1,683
Ohio (23.0%):
Butler County Transportation
Improvement District, Series A,
GO, 5.00%, 4/1/07, FSA 750 750
Dayton Water Systems Revenue,
4.05%, 12/1/06, FSA 1,000 935
Franklin County Development
Revenue, American
Chemical Society Project,
5.00%, 10/1/07 1,100 1,080
Franklin County Development
Revenue, American
Chemical Society Project,
5.50%, 10/1/12,
Callable 10/1/09 @ 101 1,000 974
Kent City School District, GO,
5.15%, 12/1/05, FGIC 250 255
Kent State University,
5.00%, 5/1/05, MBIA 230 232
State Building Authority,
Correctional Facilities,
4.60%, 10/1/03 1,000 1,001
State Higher Education
Facilities, John Carroll
University Project,
5.25%, 4/1/07 315 316
State Public Facilities Commission,
Higher Education Capital
Facilities, Series II,
4.5%, 11/1/07 3,250 3,098
96
<PAGE>
State Special Obligation,
Elementary and
Secondary Facilities,
5.80%, 6/1/03, AMBAC $ 500 $ 521
9,162
Oklahoma (2.9%):
State Capital Improvement Authority,
5.00%, 6/1/08, MBIA 1,150 1,148
Oregon (2.2%):
State Energy Project, GO,
Series B, 4.00%, 1/1/01 890 888
South Dakota (0.9%):
Sioux Falls Sales Tax Revenue,
4.00%, 11/15/00, AMBAC 370 370
Tennessee (1.3%):
Dickson Electric Systems Revenue,
5.00%, 9/1/03, MBIA 500 508
Texas (1.9%):
Conroe Independent School District,
GO, 6.50%, 2/1/04 200 213
Keller Independent School District,
GO, 6.20%, 8/15/04 200 214
State, Series A, GO,
6.00%, 10/1/08 100 106
Ysleta Independent School District,
GO, 5.60%, 8/15/02 200 206
739
Washington (5.8%):
Pierce County School District,
No. 003, Puyallup, GO,
5.50%, 12/1/01, FGIC 605 620
Pierce County School District,
No.320, Sumner, GO,
5.50%, 12/1/02, MBIA 1,000 1,029
Seattle Municipal Light & Power,
6.00%, 7/1/03 200 209
Skagit County School District,
No. 103, Anacortes, GO,
4.75%, 12/1/01, FGIC 200 202
Spokane County School District,
GO, 5.40%, 12/1/07, FGIC 250 256
2,316
Wisconsin (4.7%):
Milwaukee Sewer District,
Series A, GO, 6.70%, 10/1/02 200 212
State, Health & Education
Facilities Authority,
5.20%, 12/15/07, MBIA 1,675 1,674
1,886
Wyoming (1.7%):
Green River-Sweetwater
County Joint Powers
Board Revenue, Series B,
4.50%, 3/1/14, FSA 700 674
Total Municipal Bonds (Cost $40,749) 40,699
Investment Companies (3.5%)
Federated Tax-Free Money
Market Fund 1,035,679 1,036
Nuveen Tax-Exempt Money
Market Fund 341,675 342
Total Investment Companies (Cost $1,378) 1,378
Total Investments (Cost $42,127) (a) -- 105.4% 42,077
Liabilities in excess of other assets -- (5.4)% (2,145)
TOTAL NET ASSETS -- 100.0% $39,932
(a) Cost for federal income tax purposes differs from value by net
unrealized depreciation of securities as follows (amounts in thousands):
Unrealized appreciation $ 488
Unrealized depreciation (538)
Net unrealized depreciation $ (50)
* 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 October 31, 1999.
AMBAC -- AMBAC Indemnity Corp.
ETM -- Escrowed to Maturity
FGIC -- Financial Guaranty Insurance Co.
FNMA -- Federal National Mortgage Assoc.
FSA -- Insured by Financial Security Assurance
GNMA -- Government National Mortgage Assoc.
GO -- General Obligation
LOC -- Letter of Credit
MBIA -- Municipal Bond Insurance Assoc.
TCRS -- Transferable Custodial Receipts
See notes to financial statements.
97
<PAGE>
THE VICTORY PORTFOLIOS Schedule of Investments
New York Tax-Free Fund October 31, 1999
(Amounts in Thousands, Except Shares)
Shares or
Principal Market
Security Description Amount Value
New York Municipal Bonds (96.2%)
Clifton Park Water System,
5.00%, 10/1/19,
Callable 10/1/09 @ 101, FGIC $ 310 $ 271
Metropolitan Transportation
Authority, Transportation
Facilities, Series I,
7.00%, 7/1/09, AMBAC 250 282
Monroe-Woodbury Central
School District, GO,
5.70%, 5/15/26,
Callable 5/15/06 @ 102, MBIA 500 481
Monroe-Woodbury Central
School District, GO,
5.70%, 5/15/27,
Callable 5/15/06 @ 102, MBIA 300 289
Nassau County Industrial
Development Agency,
5.00%, 7/1/23,
Callable 7/1/08 @ 102, MBIA 150 130
Nassau County Industrial
Development Agency,
Civic Facilities,
Hofstra University Project,
6.75%, 8/1/11,
Prerefunded 8/1/01 @ 102, AMBAC 250 265
New York City, Series C, GO,
7.00%, 2/1/12,
Callable 2/1/00 @ 101.5, FGIC 60 60
New York City, Series B, GO,
4.00*%, 11/1/99** 500 500
New York City, Series B, GO,
7.00%, 10/1/18,
Callable 4/1/00
@ 100, FSA, ETM 300 303
New York City Cultural Resources,
5.25%, 7/1/19,
Callable 7/1/09 @ 101, AMBAC 300 273
New York City Cultural Resources,
Museum of Modern Art,
6.63%, 1/1/11,
Prerefunded 1/1/02
@ 102, AMBAC 680 724
New York City Housing Development
Corp., Multi-Unit Mortgage,
Series A, 7.30%, 6/1/10,
Callable 6/1/01 @ 102, FHA 700 738
New York City Housing Development
Corp., Multi-Unit Mortgage,
Series A, 7.35%, 6/1/19,
Callable 6/1/01 @ 102, FHA 675 712
New York City Industrial
Development Agency,
Civic Facilities, USTA
National Tennis Center
Project, 6.38%, 11/15/14,
Callable 11/15/04 @ 102, FSA 200 211
New York City Municipal Water
Finance Authority, Water &
Sewer System Revenue,
6.75%, 6/15/16,
Callable 6/15/01 @ 101, FGIC 325 338
New York City Municipal Water
Finance Authority, Water &
Sewer System Revenue,
6.75%, 6/15/16,
Prerefunded 6/15/01
@ 101, FGIC 325 341
New York City Municipal Water
Finance Authority, Water &
Sewer System Revenue,
0.00%, 6/15/19, MBIA 3,000 929
New York City Transit Authority,
Transit Facilities,
Livingston Plaza Project,
7.50%, 1/1/20,
Prerefunded 1/1/00 @ 102, FSA 220 226
North Hempstead,
4.75%, 1/15/23,
Callable 1/15/08 @ 101, FGIC 750 623
Shenectady Industrial Development
Agency, Civic Facilities,
5.38%, 12/1/19,
Callable 12/1/09 @ 102, MBIA 500 461
State, GO,
6.75%, 8/1/18,
Prerefunded 8/1/01
@ 102, AMBAC 370 393
State, GO,
6.75%, 8/1/19,
Prerefunded 8/1/01
@ 102, AMBAC 325 345
State Dormitory Authority,
0.00%, 7/1/18, MBIA 1,010 332
State Dormitory Authority,
4.75%, 8/15/19,
Callable 2/15/09 @ 101, MBIA 500 415
State Dormitory Authority,
4.75%, 5/15/24,
Callable 5/15/08 @ 101, MBIA 300 248
State Dormitory Authority,
5.75%, 7/1/26,
Callable 7/1/07 @ 102, MBIA 500 483
98
<PAGE>
State Dormitory Authority,
City University, Series 2,
6.75%, 7/1/24,
Prerefunded 7/1/04 @ 102, MBIA $ 700 $ 773
State Dormitory Authority,
Ithaca College,
6.50%, 7/1/10,
Prerefunded 7/1/01 @ 102, MBIA 750 792
State Dormitory Authority,
Judicial Facilities Leases,
Series B, 7.00%, 4/15/16,
Callable 4/15/01 @ 102, MBIA 225 237
State Local Government Assistance,
Series B, 4.88%, 4/1/20,
Callable 4/1/08 @ 101, MBIA 500 429
State Medical Care Facilities
Finance Agency,
7.38%, 8/15/19,
Callable 8/15/00 @ 101, MBIA 170 174
State Medical Care Facilities
Finance Agency, North
Shore University Hospital,
7.20%, 11/1/20,
Prerefunded 11/1/00 @ 102, MBIA 565 594
State Medical Care Facilities
Finance Agency,
St. Luke's, Series B,
7.45%, 2/15/29,
Prerefunded 2/15/00 @ 102, MBIA 340 350
State Tollway Authority,
Series C, 6.00%, 1/1/25,
Prerefunded 1/1/05 @ 102, FGIC 550 589
State Urban Development Corp.,
Correctional Facilities,
Series 1, 7.50%, 1/1/20,
Prerefunded 1/1/00 @ 102, FSA 400 410
Triborough Bridge & Tunnel
Authority, Series T,
7.00%, 1/1/20,
Prerefunded 1/1/01
@ 102, MBIA 900 946
Triborough Bridge & Tunnel
Authority, Special Obligation,
Series B, 6.88%, 1/1/15,
Callable 1/1/01 @ 102, AMBAC 1,000 1,044
Total New York Municipal Bonds (Cost $16,541) 16,711
Investment Companies (2.1%)
Providence of New York Fund 359,172 $ 359
Total Investment Companies (Cost $359) 359
Total Investments (Cost $16,900) (a) -- 98.3% 17,070
Other assets in excess of liabilities -- 1.7% 288
TOTAL NET ASSETS -- 100.0% $17,358
(a) Cost for federal income tax purposes differs from value by net
unrealized appreciation of securities as follows (amounts in thousands):
Unrealized appreciation $ 564
Unrealized depreciation (394)
Net unrealized appreciation $ 170
* 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, 1999. The date reflects the next rate change date.
** Put and demands features exist allowing the Fund to require the repurchase
of the investment within variable time periods less than one year.
AMBAC -- AMBAC Indemnity 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.
99
<PAGE>
THE VICTORY PORTFOLIOS Schedule of Investments
Ohio Municipal Bond Fund October 31, 1999
(Amounts in Thousands, Except Shares)
Shares or
Principal Market
Security Description Amount Value
Municipal Bonds (96.2%)
General Obligations (40.1%):
County, City & Special District (10.1%):
Akron,
4.55%, 12/1/08 $ 300 $ 281
Bath Township Capital Appreciation,
Real Estate Acquisition,
0.00%, 12/1/07, AMBAC 205 136
Bath Township Capital Appreciation,
Real Estate Acquisition,
0.00%, 12/1/08, AMBAC 205 128
Butler County,
5.60%, 12/1/09,
Callable 12/1/06 @ 101, AMBAC 355 366
Butler County,
5.65%, 12/1/10,
Callable 12/1/06 @ 101, AMBAC 155 159
Cincinnati,
6.30%, 12/1/15,
Callable 6/1/05 @ 101 AMT 1,250 1,317
Columbus Tax Increment,
Easton Project,
4.88%, 12/1/24,
Callable 6/1/09 @ 101, AMBAC 1,000 846
Columbus, Series 2,
5.00%, 6/15/02 725 736
Columbus, Series 2,
5.00%, 6/15/03 1,650 1,676
Crawford County
Capital Appreciation,
0.00%, 12/1/10, AMBAC 300 164
Crawford County
Capital Appreciation,
0.00%, 12/1/13, AMBAC 500 223
Erie County,
5.63%, 10/1/19,
Callable 10/1/09 @ 100, FGIC 500 485
Lima,
5.00%, 12/1/09, FGIC 530 521
Lima,
5.30%, 12/1/12, FGIC 1,030 1,009
Madison County,
7.00%, 12/1/19,
Prerefunded 12/1/04
@ 102, AMBAC 600 674
Maple Heights Capital Appreciation,
0.00%, 12/1/07, FSA 500 332
Maple Heights Capital Appreciation,
0.00%, 12/1/08, FSA 505 316
Maple Heights Capital Appreciation,
0.00%, 12/1/10, FSA 310 172
Monroe Falls, Series A,
6.95%, 12/1/14,
Callable 12/1/04 @ 101, AMBAC 1,000 1,093
Newark Capital Appreciation,
0.00%, 12/1/16, FGIC 1,490 539
North Olmstead,
6.20%, 12/1/11, AMBAC 1,000 1,067
State Infrastructure Improvements,
5.35%, 8/1/12,
Callable 8/1/07 @ 101 1,000 995
Summit County, Series A,
6.90%, 8/1/12,
Prerefunded 8/1/03 @ 100, AMBAC 230 249
Summit County, Series A,
6.90%, 8/1/12,
Prerefunded 8/1/01 @ 102, AMBAC 255 271
Toledo,
5.63%, 12/1/11,
Callable 12/1/06 @ 102, AMBAC 1,000 1,021
Toledo,
5.50%, 12/1/12,
Callable 12/1/07 @ 102, FGIC 1,085 1,088
Warren County Special Assessment,
6.55%, 12/1/14 725 792
Westerville,
4.50%, 12/1/18,
Callable 12/1/09 @ 101 1,000 825
Westlake,
5.55%, 12/1/17,
Callable 12/1/08 @ 101 1,500 1,463
Westlake,
5.50%, 12/1/20,
Callable 12/1/08 @ 101 1,000 956
19,900
Education (22.7%):
Aurora City School District,
6.15%, 12/1/24,
Callable 12/1/09 @ 101, MBIA 500 504
Avon Local School District,
5.50%, 12/1/04, AMBAC 465 483
Avon Local School District,
5.55%, 12/1/05, AMBAC 250 260
Batavia Local School District,
7.00%, 12/1/14, MBIA 1,500 1,701
100
<PAGE>
Big Walnut Local School District,
Capital Appreciation,
0.00%, 12/1/09, AMBAC $ 250 $ 147
Brecksville-Broadview Heights
City School District,
6.50%, 12/1/16,
Callable 12/1/06 @ 102, FGIC 1,000 1,065
Brunswick City School
District Improvements,
3.30%, 12/1/99, AMBAC 300 300
Brunswick City School
District Improvements,
3.60%, 12/1/00, AMBAC 185 184
Brunswick City School
District Improvements,
3.70%, 12/1/01, AMBAC 200 198
Brunswick City School
District Improvements,
5.13% 12/1/07, FGIC 250 255
Brunswick City School
District Improvements,
6.00%, 12/1/26,
Callable 12/1/09 @ 101, FGIC 3,000 3,009
Delaware City School District,
5.75%, 12/1/20,
Callable 12/1/05 @ 101, FGIC 1,000 984
Dublin City School District,
Capital Appreciation,
0.00%, 12/1/09, MBIA 1,250 729
Edgewood City School District,
Capital Appreciation, Series A,
0.00%, 12/1/13, MBIA 1,625 724
Edgewood City School District,
Capital Appreciation, Series A,
0.00%, 12/1/15, MBIA 1,610 620
Edgewood City School District,
Series A, 4.30%, 12/1/06, MBIA 175 167
Fairfield City School District,
TCRS, 7.45%, 12/1/14, FGIC 1,000 1,184
Fostoria City School District,
Capital Appreciation,
0.00%, 12/1/10, MBIA 375 207
Franklin City School District,
Capital Appreciation,
0.00%, 12/1/12, AMBAC 280 135
Franklin City School District,
Capital Appreciation,
0.00%, 12/1/13, AMBAC 280 127
Franklin City School District,
Capital Appreciation,
0.00%, 12/1/14, AMBAC 280 119
Graham Local School District,
Capital Appreciation,
0.00%, 12/1/11, MBIA 200 103
Graham Local School District,
Capital Appreciation,
0.00%, 12/1/12, MBIA 200 97
Hamilton City School District
Improvements, Series A,
6.15%, 12/1/15 500 517
Hamilton City School District
Improvements, Series A,
6.15%, 12/1/16 600 619
Hamilton City School District
Improvements, Series A,
5.50%, 12/1/24,
Callable 12/1/09 @ 101 1,500 1,413
Hilliard Local School District,
Series A, 5.00%, 12/1/20,
Callable 12/1/06 @ 101, FGIC 1,050 925
Indian Lake Local School
District, Capital Appreciation,
Construction & Improvements,
0.00%, 12/1/11, AMBAC 250 129
Indian Lake Local School
District, Capital Appreciation,
Construction & Improvements,
0.00%, 12/1/12, AMBAC 250 121
Indian Lake Local School
District, Capital Appreciation,
Construction & Improvements,
0.00%, 12/1/13, AMBAC 250 113
Indian Lake Local School
District, Capital Appreciation,
Construction & Improvements,
0.00%, 12/1/14, AMBAC 250 106
Indian Lake Local School
District, Capital Appreciation,
Construction & Improvements,
0.00%, 12/1/15, AMBAC 250 99
Indian Lake Local School
District, Capital Appreciation,
Construction & Improvements,
0.00%, 12/1/16, AMBAC 250 93
Indian Valley Local School District,
7.00%, 12/1/14,
Callable 12/1/05 @ 102, AMBAC 2,500 2,787
Kettering City School
District Improvements,
5.25%, 12/1/22,
Callable 12/1/05 @ 101, FGIC 1,000 910
101
<PAGE>
Lakeview Local School District,
6.95%, 12/1/19,
Callable 12/1/04 @ 102, AMBAC $ 1,250 $ 1,401
Lakota Local School District,
Capital Appreciation,
0.00%, 12/1/08, FGIC 320 198
Liberty Benton Local School District,
Capital Appreciation,
0.00%, 12/1/15, AMBAC 570 224
Liberty Benton Local School
District, Capital Appreciation,
0.00%, 12/1/16, AMBAC 285 105
Madison Local School District,
5.75%,12/1/26,
Callable 12/1/09 @ 101, MBIA 5,000 4,917
Mount Vernon City School District,
7.50%, 12/1/14,
Callable 12/1/04 @ 101, FGIC 500 558
Northwest Local School District,
Capital Appreciation,
0.00%, 12/1/13, AMBAC 280 125
Northwest Local School District,
Capital Appreciation,
0.00%, 12/1/14, AMBAC 280 117
Norwalk City School District,
4.75%, 12/1/26,
Callable 12/1/09 @ 100, AMBAC 1,250 1,029
Olentangy Local School District,
Series A, 6.25%, 12/1/14,
Callable 12/1/04 @ 102 500 543
Pickerington Local School
District, Capital Appreciation,
0.00%, 12/1/12, AMBAC 870 417
Ridgemont Local School
District, Capital Appreciation,
0.00%, 12/1/10, AMBAC 185 102
Ridgemont Local School
District, Capital Appreciation,
0.00%, 12/1/11, AMBAC 185 96
Ridgemont Local School
District, Capital Appreciation,
0.00%, 12/1/12, AMBAC 185 89
Ridgemont Local School
District, Capital Appreciation,
0.00%, 12/1/13, AMBAC 185 84
Ridgemont Local School
District, Capital Appreciation,
0.00%, 12/1/14, AMBAC 185 78
Ripley-Union-Lewis,
Local School District,
Capital Appreciation,
0.00%, 12/1/06, FGIC 145 102
Ripley-Union-Lewis,
Local School District,
Capital Appreciation,
0.00%, 12/1/07, FGIC 245 163
Ripley-Union-Lewis,
Local School District,
Capital Appreciation,
0.00%, 12/1/10, FGIC 245 136
Ripley-Union-Lewis,
Local School District,
Capital Appreciation,
0.00%, 12/1/11, FGIC 245 127
Ripley-Union-Lewis,
Local School District,
Capital Appreciation,
0.00%, 12/1/12, FGIC 240 116
Ripley-Union-Lewis,
Local School District,
Capital Appreciation,
0.00%, 12/1/13, FGIC 240 109
Ripley-Union-Lewis,
Local School District,
Capital Appreciation,
0.00%, 12/1/14, FGIC 235 100
South-Western City School District,
4.75%, 12/1/19,
Callable 12/1/09 @ 100, AMBAC 1,000 849
South-Western City School District,
4.75%, 12/1/26,
Callable 12/1/09 @ 100, AMBAC 5,000 4,087
Springfield Local School District,
Capital Appreciation,
0.00%, 12/1/11, AMBAC 1,715 880
Springfield Local School District,
Capital Appreciation,
0.00%, 12/1/12, MBIA 340 162
Sycamore Community School District,
4.75%, 12/1/19,
Callable 12/1/08 @ 100, AMBAC 1,000 849
Sycamore Community School
District Improvements,
Capital Appreciation,
0.00%, 12/1/07 360 237
Tuscarawas Valley School District,
Capital Appreciation,
0.00%, 12/1/19, MBIA 580 171
102
<PAGE>
Twinsburg Local School District,
5.90%, 12/1/21,
Callable 12/1/06 @ 102, FGIC $ 2,000 $ 2,001
Upper Arlington City
School District,
5.13%, 12/1/19,
Callable 12/1/06 @ 101, MBIA 2,500 2,249
Wadsworth City School District,
0.00%, 12/1/07, FGIC 555 365
Wadsworth City School District,
0.00%, 12/1/08, FGIC 555 344
Wadsworth City School District,
Capital Appreciation,
0.00%, 12/1/11, FGIC 555 285
Wadsworth City School District,
Capital Appreciation,
0.00%, 12/1/12, FGIC 575 276
44,825
Miscellaneous (0.3%):
Belmont County Home Improvements,
3.15%, 12/1/99, MBIA 160 160
Belmont County Home Improvements,
3.65%, 12/1/01, MBIA 170 168
Belmont County Home Improvements,
3.70%, 12/1/02, MBIA 175 171
Belmont County Home Improvements,
3.80%, 12/1/03, MBIA 185 179
678
Public Facilities (Convention, Sport,
Public Buildings) (0.8%):
Crawford County,
Correctional Facilities,
6.75%, 12/1/19,
Prerefunded 12/1/04
@ 102, AMBAC 1,385 1,541
Transportation (4.9%):
Greater Cleveland Regional
Transit Authority, 5.60%, 12/1/11,
Callable 12/1/06 @ 101, FGIC 1,000 1,019
State Highway Capital Improvement,
Series D, 4.50%, 5/1/07 4,000 3,871
State Highway Capital Improvement,
Series D, 4.50%, 5/1/08 5,000 4,782
9,672
Utility (Sewers, Telephone,
Electric) (1.3%):
Avon Route 83
Sewer Improvements,
6.50%, 12/1/15 335 359
Canton, Waterworks System,
5.75%, 12/1/10,
Callable 12/1/05 @ 102, AMBAC 500 517
Huron County, Landfill Issue II,
5.40%, 12/1/07, MBIA 285 293
Huron County, Landfill Issue II,
5.60%, 12/1/09,
Callable 12/1/07 @ 102, MBIA 320 332
Toledo, Sewer Improvements,
6.10%, 12/1/14,
Callable 12/1/04 @ 102, AMBAC 1,000 1,040
2,541
Total General Obligations 79,157
Revenue Bonds (56.1%):
County, City & Special District (0.7%):
Akron Pension,
4.75%, 12/1/23,
Callable 12/1/10 @ 101, AMBAC 1,750 1,459
Education (16.4%):
Franklin County IDR, Columbus
College of Art & Design,
6.00%, 9/1/13,
Callable 9/1/00 @ 102,
LOC Bank One 1,310 1,304
State Education Loan,
Series A-1, 5.85%, 12/1/19,
Callable 6/1/07 @ 102, AMBAC AMT 1,500 1,438
State Higher Educational Facility
Revenue, Series II-A,
4.50% 11/1/08 5,900 5,550
State Higher Educational
Facility Revenue, John
Carroll University Project,
5.05%, 4/1/04 150 151
State Higher Educational
Facility Revenue, Ohio
Northern University,
3.70%, 5/1/01 250 247
State Higher Educational Facility
Revenue, Series II-A,
5.00%, 11/1/13,
Callable 11/1/08 @100 4,500 4,207
103
<PAGE>
State Higher Educational
Facility Revenue,
University of Dayton,
5.20%, 12/1/10,
Callable 12/1/07 @ 101, AMBAC $ 250 $ 249
State Higher Educational
Facility Revenue,
Wittenberg University,
3.55%, 6/1/01, AMBAC 340 336
State Higher Educational
Facility Revenue,
Xavier University,
6.00%, 5/15/08,
Callable 5/15/07 @ 102, MBIA 500 531
State Public Facilities Commission,
Higher Education Facilities,
Series II-B, 4.50%, 6/1/02, MBIA 2,500 2,505
State Public Facilities Commission,
Higher Education Facilities,
Series II-B, 4.63%, 12/1/02 3,150 3,168
State Public Facilities Commission,
Higher Education Facilities,
Series II-B, 5.00%, 11/1/03, MBIA 4,000 4,064
State Public Facilities Commission,
Higher Education Facilities,
Series II-B, 4.50%, 12/1/03 1,800 1,794
State Public Facilities Commission,
Higher Education Facilities,
Series II-B, 5.00% 11/1/04, MBIA 1,880 1,908
State Special Obligation,
Elementary & Secondary
Education Facilities, Series A,
5.00%, 6/1/07, AMBAC 2,215 2,225
State Special Obligation,
Elementary & Secondary
Education Facilities, Series B,
5.00%, 12/1/06, FSA 1,750 1,761
University of Akron,
General Receipts,
5.00%, 1/1/02, AMBAC 440 445
University of Akron,
General Receipts,
5.25%, 1/1/22,
Callable 1/1/07 @ 102, AMBAC 700 638
32,521
Hospitals, Nursing Homes
& Health Care (11.0%):
Athens County Mental Health,
Kevin Coleman Foundation,
5.90%, 3/1/09,
Callable 3/1/03 @ 102,
LOC National City Bank 545 549
Cuyahoga County Health Care
Facilities, Benjamin Rose
Institute Project, Series A,
5.30%, 12/1/25,
Prerefunded 12/1/02 @ 101,
LOC Society National Bank 500 515
Cuyahoga County Hospital, Fairview
General Hospital Project,
6.25%, 8/15/10,
Callable 2/15/03 @ 102 500 524
Cuyahoga County Hospital,
University Hospital Health,
5.00%, 1/15/01, AMBAC 1,010 1,019
Cuyahoga County Hospital,
University Hospital Health,
5.00%, 1/15/02, AMBAC 1,060 1,072
Cuyahoga County Hospital,
University Hospital Health,
4.50%, 1/15/03, AMBAC 915 913
Franklin County Hospital,
Worthington Village,
7.00%, 8/1/16,
Callable 8/1/00 @ 102, FHA 605 613
Garfield Heights, Marymont Hospital,
6.70%, 11/15/15,
Prerefunded 11/15/02 @ 102 1,000 1,081
Hamilton County Health Care
Facilities, Twin Towers,
5.75%, 10/1/08 755 762
Hamilton County Hospital Facilities,
Deaconess Hospital,
7.00%, 1/1/12,
Callable 7/1/02 @ 102 2,150 2,265
Lake County Hospital,
Improvement Facilities,
6.38%, 8/15/03, AMBAC 1,200 1,243
Lorain County Hospital, Catholic
Healthcare Partners, Series A,
4.70%, 9/1/05, AMBAC 500 493
Lorain County Hospital, Catholic
Healthcare Partners, Series A,
4.90%, 9/1/07, AMBAC 500 492
104
<PAGE>
Lucas County Hospital,
Promedica Healthcare,
5.75%, 11/15/14,
Callable 11/15/06 @ 102, MBIA $ 2,000 $ 1,979
Lucas County Hospital,
The Toledo Hospital,
5.00%, 11/15/22,
Callable 11/15/03 @ 102, MBIA 500 431
Mahoning County Hospital
Facilities, YHA Project,
Series A, 7.00%, 10/15/14,
Callable 10/15/00 @ 102,
Prerefunded 10/15/02 @ 100, MBIA 855 896
Parma Hospital Improvement,
Parma Community
General Hospital,
5.25%, 11/1/13,
Callable 11/1/08 @ 101 1,000 909
Portage County Hospital,
Robinson Memorial Hospital,
6.50%, 11/15/03, MBIA 635 679
Portage County Hospital,
Robinson Memorial Hospital,
6.50%, 11/15/04, MBIA 675 728
Portage County Hospital,
Robinson Memorial Hospital,
6.50%, 11/15/05, MBIA 715 775
Portage County Hospital,
Robinson Memorial Hospital,
5.50%, 11/15/14,
Callable 11/15/09 @ 101, AMBAC 2,000 1,931
Westlake IDR, Westbay I & II Projects,
Series A, 6.40%, 8/1/09,
Callable 12/13/99 @ 103, FNMA 1,755 1,779
21,648
Housing (8.0%):
Cuyahoga County Multifamily,
Dalebridge Apartments,
6.60%, 10/20/30,
Callable 10/20/05 @ 102,
GNMA AMT 2,000 2,086
Cuyahoga County Multifamily,
Water Street Assoc.,
5.60%, 6/20/08, GNMA AMT 370 374
Cuyahoga County Multifamily,
Water Street Assoc.,
6.15%, 12/20/26,
Callable 6/20/08 @ 105,
GNMA AMT 850 851
Franklin County Mortgage,
Briggs/Wedgewood, Series C,
5.35%, 11/20/12,
Callable 11/20/07 @ 103,
GNMA AMT 1,000 973
Greater Cincinnati Elderly
Housing Finance Corp.,
Walnut Towers, Series A,
6.90%, 8/1/25,
Callable 8/1/04 @ 102, FHA 2,020 2,094
Lucas-Northgate Housing
Development Corp.,
8.13%, 1/1/25,
Prerefunded 1/3/00 @ 102, MBIA 375 383
Montgomery County Multifamily
Housing, Creekside Villas Project,
Series A, 6.00% 9/1/31
Callable 9/1/09 @ 100, FSA AMT 5,000 4,821
Ohio Capital Corp., Housing
Management, Bucyrus Estate,
5.75%, 7/1/06,
Callable 7/1/05 @ 102, MBIA 195 199
Ohio Capital Corp., Housing
Management, Kent Gardens,
6.35%, 7/1/15,
Callable 1/1/03 @ 101, MBIA 1,000 1,022
Ohio Capital Corp., Housing
Management, Series A,
7.70%, 1/1/25,
Callable 1/1/00 @ 102, MBIA 540 552
Ohio Capital Corp., Housing
Management, Springhill
Homes, Series C,
6.50%, 7/1/24,
Callable 1/1/03 @ 103, MBIA 920 947
Ohio Housing Finance Agency,
Residential A-1, RMK,
6.15%, 3/1/29,
Callable 9/1/07 @ 102, GNMA AMT 1,475 1,488
15,790
Industrial Development (1.7%):
Broadview Heights IDR,
Royalview, Series A,
6.25%, 7/1/13,
Callable 12/13/99 @ 103, FHA 1,075 1,108
Cuyahoga County IDR,
Southwest Assoc. Project,
6.50%, 6/1/16,
Callable 12/1/04 @ 102, FHA 2,185 2,202
3,310
105
<PAGE>
Public Facilities (Convention, Sport,
Public Buildings) (5.3%):
Cuyahoga County, Gateway Economic
Development Corp., Greater
Cleveland Ohio Stadium,
6.50%, 9/15/14,
Callable 9/15/03 @ 102,
County Guaranteed AMT $ 2,300 $ 2,280
State Building Authority,
Administration Building,
Series A, 4.50%, 10/1/09 1,000 927
State Building Authority,
Administration Building,
Series A, 4.75%, 10/1/17,
Callable 10/1/08 @ 101 1,000 858
State Building Authority,
Adult Correctional Facilities,
Series A, 6.00%, 10/1/07,
Callable 10/1/03 @ 102 2,000 2,095
State Building Authority,
Adult Correctional Facilities,
Series A, 6.13%, 10/1/12,
Callable 10/1/03 @ 102 1,000 1,036
State Building Authority,
DAS Data Center Project,
Series A, 5.13%, 10/1/07 500 503
State Building Authority,
Juvenile Correctional Facilities,
Series A, 5.25%, 10/1/16,
Callable 4/1/09 @ 101 1,200 1,117
State Building Authority,
Sports Facilities Building,
Series A, 5.00%, 10/1/07, FSA 200 200
Toledo-Lucas County Lodging Tax,
Convention Center Project,
5.50%, 10/1/10,
Callable 10/1/06 @ 102, MBIA 500 510
Toledo-Lucas County Lodging Tax,
Convention Center Project,
5.70%, 10/1/15,
Callable 10/1/06 @ 102, MBIA 1,000 997
10,523
Public Improvements (3.7%):
Franklin County Development,
American Chemical
Society Project,
4.50%, 10/1/02 1,800 1,790
Franklin County Development,
American Chemical
Society Project,
4.50%, 10/1/04 1,350 1,320
Franklin County Development,
American Chemical
Society Project,
5.00%, 10/1/06 2,500 2,474
State Economic Development,
ABS Industries, Inc. Project,
6.00%, 6/1/04 AMT 500 515
State Economic Development,
Ohio Enterprise Board Fund,
Series 2, 5.60%, 6/1/02 AMT 345 351
State Economic Development,
Ohio Enterprise Board Fund,
Series 4, 6.50%, 12/1/09,
Callable 12/1/04 @ 102 AMT 815 820
7,270
Transportation (2.1%):
State Infrastructure Highway,
5.00%, 12/15/07 2,000 1,997
State Infrastructure Highway,
5.00%, 12/15/08 2,000 1,983
State Turnpike, Series B,
4.50%, 2/15/24,
Callable 8/15/08 @ 101, FGIC 200 158
4,138
Utility (Sewers, Telephone,
Electric) (7.2%):
Cleveland Public Power Systems,
Series A, 7.00%, 11/15/16,
Prerefunded 11/15/04
@ 102, MBIA 750 840
Cleveland Public Power Systems,
Series A, 7.00%, 11/15/24,
Prerefunded 11/15/04
@ 102, MBIA 1,985 2,223
Cleveland Waterworks,
5.75%, 1/1/21,
Prerefunded 1/1/06 @ 102, MBIA 940 999
Cuyahoga County Utility System,
Medical Center Co. Project,
Series B, 5.85%, 8/15/10,
Callable 8/15/05 @ 102,
MBIA AMT 1,500 1,531
Dayton Water System,
4.15%, 12/1/07, FSA 500 464
Green County Sewer System,
Governmental Enterprise,
5.13%, 12/1/20,
Callable 12/1/08 @ 102, MBIA 750 673
106
<PAGE>
Huber Heights Water Systems,
Capital Appreciation,
0.00%, 12/1/24, MBIA $ 1,000 $ 219
Huber Heights Water Systems,
Capital Appreciation,
0.00%, 12/1/25, MBIA 1,000 206
Ravenna Waterworks,
3.50%, 12/1/99, AMBAC 295 295
Ravenna Waterworks,
3.60%, 12/1/00, AMBAC 255 254
Ravenna Waterworks,
3.70%, 12/1/01, AMBAC 265 261
Ravenna Waterworks,
3.80%, 12/1/02, AMBAC 270 264
Ravenna Waterworks,
3.90%, 12/1/03, AMBAC 280 271
Southwest Regional Water,
6.00%, 12/1/20,
Callable 12/1/05 @ 101, MBIA 500 503
State Water Development
Authority, Dayton Power
& Light, Series C,
6.40%, 8/15/27,
Callable 8/15/02 @ 102 3,250 3,288
State Water Development
Authority, North Star
BHP Steel-Cargill,
6.30%, 9/1/20,
Callable 9/1/05 @ 102 AMT 1,000 995
Wilmington Water,
5.25%, 6/15/29,
Callable 6/15/08 @ 101, AMBAC 1,000 910
14,196
Total Revenue Bonds 110,855
Total Municipal Bonds (Cost $192,153) 190,012
Investment Companies (1.6%)
Federated Ohio Municipal
Cash Trust Fund 3,127,980 3,128
Total Investment Companies (Cost $3,128) 3,128
Total Investments (Cost $195,281) (a) -- 97.8% 193,140
Other assets in excess of liabilities -- 2.2% 4,302
TOTAL NET ASSETS -- 100.0% $197,442
(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 $26. Cost for federal income tax purposes differs from value by
net unrealized depreciation of securities as follows (amounts in thousands):
Unrealized appreciation $ 2,474
Unrealized depreciation (4,641)
Net unrealized depreciation $(2,167)
AMBAC -- AMBAC Indemnity Corp.
AMT -- Alternative Minimum Tax
FGIC -- Insured by Financial Guaranty Insurance Corp.
FHA -- Federal Home Association
FNMA -- Federal National Mortgage Assoc.
FSA -- Insured by Financial Security Assurance
GNMA -- -Insured by Government National Mortgage Association
IDR -- Industrial Development Revenue
LOC -- Letter of Credit
MBIA -- Insured by Municipal Bond Insurance Association
RMK -- Remarketed
See notes to financial statements.
107
<PAGE>
Statements of Assets and Liabilities
THE VICTORY PORTFOLIOS October 31, 1999
(Amounts in Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
National New York Ohio
Municipal Tax-Free Municipal
Bond Fund Fund Bond Fund
<S> <C> <C> <C>
ASSETS:
Investments, at value
(Cost $42,127; $16,900; & $195,281) $42,077 $17,070 $193,140
Interest and dividends receivable 514 311 3,163
Receivable for capital shares issued 66 -- --
Receivable from brokers for investments sold 20 -- 1,833
Receivable from Affiliates 18 2 3
Prepaid expenses and other assets 8 8 --
Total Assets 42,703 17,391 198,139
LIABILITIES:
Payable to Custodian -- -- 3
Dividends payable 15 -- 1
Payable to brokers for investments purchased 2,691 -- 500
Payable for capital shares redeemed 27 11 49
Accrued expenses and other payables:
Investment advisory fees 9 5 65
Administration fees 1 -- 4
Custodian fees 1 -- 5
Transfer agent fees 12 7 18
Shareholder service fees -- Class A 10 5 16
Shareholder service and 12b-1 fees -- Class B 2 3 --
Shareholder service and 12b-1 fees -- Class G -- -- 26
Other 3 2 10
Total Liabilities 2,771 33 697
NET ASSETS:
Capital 39,791 17,193 200,037
Undistributed net investment income 12 13 69
Net unrealized appreciation/depreciation from investments (50) 170 (2,141)
Accumulated undistributed net realized gains (losses)/
(distribution in excess) from investment transactions 179 (18) (523)
Net Assets $39,932 $17,358 $197,442
Net Assets
Class A $37,579 $14,084 $ 74,984
Class B 2,353 3,274
Class G 122,458
Total $39,932 $17,358 $197,442
Outstanding units of beneficial interest (shares)
Class A 3,694 1,175 6,750
Class B 231 273
Class G 11,039
Total 3,925 1,448 17,789
Net asset value
Redemption price per share -- Class A $ 10.17 $ 11.99 $ 11.11
Offering price per share -- Class B<F1> $ 10.17 $ 11.99
Offering and Redemption price per share -- Class G $ 11.09
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) -- Class A $ 10.79 $ 12.72 $ 11.79
<FN>
<F1> Redemption price per Class B share varies based on length of time held.
</FN>
</TABLE>
See notes to financial statements.
108
<PAGE>
Statements of Operations
THE VICTORY PORTFOLIOS For the Year Ended October 31, 1999
(Amounts in Thousands)
<TABLE>
<CAPTION>
National New York Ohio
Municipal Tax-Free Municipal
Bond Fund Fund Bond Fund
<S> <C> <C> <C>
Investment Income:
Interest income $ 2,148 $ 1,076 $ 7,750
Dividend income 72 15 154
Total Income 2,220 1,091 7,904
Expenses:
Investment advisory fees 262 104 931
Administration fees 72 28 233
Shareholder service fees -- Class A 107 32 197
Shareholder service fees and 12b-1 fees -- Class B 26 35 --
Shareholder service fees and 12b-1 fees -- Class G -- -- 182
Accounting fees 57 51 74
Custodian fees 14 6 37
Legal and audit fees 5 4 11
Trustees' fees and expenses 1 1 5
Transfer agent fees 44 26 36
Registration and filing fees 22 9 26
Printing fees 7 4 13
Other 4 2 8
Total Expenses 621 302 1,753
Expenses voluntarily reduced (179) (64) (340)
Expenses before reimbursement from distributor 442 238 1,413
Expenses reimbursed by distributor -- (20) (4)
Net Expenses 442 218 1,409
Net Investment Income 1,778 873 6,495
Realized/Unrealized Gains (Losses) from Investments:
Net realized gains (losses) from investment transactions 179 (16) (523)
Change in unrealized appreciation/depreciation
from investments (2,358) (1,182) (7,432)
Net realized/unrealized gains (losses) from investments (2,179) (1,198) (7,955)
Change in net assets resulting from operations $ (401) $ (325) $(1,460)
</TABLE>
See notes to financial statements.
109
<PAGE>
THE VICTORY PORTFOLIOS Statements of Changes in Net Assets
(Amounts in Thousands)
<TABLE>
<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,
1999 1998 1999 1998 1999 1998
<S> <C> <C> <C> <C> <C> <C>
From Investment Activities:
Operations:
Net investment income $ 1,778 $ 2,136 $ 873 $ 972 $ 6,495 $ 3,424
Net realized gains (losses) from
investment transactions 179 1,227 (16) (2) (523) 1,285
Net change in unrealized
appreciation/depreciation
from investments (2,358) 794 (1,182) 220 (7,432) 1,527
Change in net assets resulting
from operations (401) 4,157 (325) 1,190 (1,460) 6,236
Distributions to Shareholders:
From net investment income:
Class A (1,726) (2,055) (738) (839) (3,392) (3,428)
Class B (70) (67) (134) (129) -- --
Class G -- -- -- -- (3,059) --
From net realized gains from
investment transactions (1,095) -- -- (35) (711) (663)
In excess of net realized gains from
investment transactions -- -- -- (2) (574) --
Change in net assets from
distributions to shareholders (2,891) (2,122) (872) (1,005) (7,736) (4,091)
Capital Transactions:
Proceeds from shares issued 12,771 17,480 4,093 7,095 40,708 16,324
Proceeds from shares issued in
connection with acquisition -- -- -- -- 118,155 --
Dividends reinvested 2,135 1,668 583 718 4,149 917
Cost of shares redeemed (21,366) (21,492) (7,631) (4,554) (39,078) (14,725)
Change in net assets from
capital transactions (6,460) (2,344) (2,955) 3,259 123,934 2,516
Change in net assets (9,752) (309) (4,152) 3,444 114,738 4,661
Net Assets:
Beginning of period 49,684 49,993 21,510 18,066 82,704 78,043
End of period $ 39,932 $ 49,684 $17,358 $21,510 $197,442 $ 82,704
Share Transactions:
Issued 1,205 1,636 324 557 3,513 1,377
Issued in connection with acquisition -- -- -- -- 10,429 --
Reinvested 202 156 47 57 362 78
Redeemed (2,034) (1,997) (603) (358) (3,387) (1,243)
Change in shares (627) (205) (232) 256 10,917 212
</TABLE>
See notes to financial statements.
110
<PAGE>
THE VICTORY PORTFOLIOS Financial Highlights
For a Share Outstanding Throughout Each Period (Continued on Next Page)
<TABLE>
<CAPTION>
National Municipal Bond Fund
Class A
Year Year Year Year Six Months Year
Ended Ended Ended Ended Ended Ended
October 31, October 31, October 31, October 31, October 31, April 30,
1999 1998 1997 1996 1995<F4> 1995<F5>
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 10.92 $ 10.51 $ 10.16 $ 10.06 $ 9.59 $ 9.64
Investment Activities
Net investment income 0.41 0.43 0.45 0.44 0.24 0.44
Net realized and unrealized
gains (losses) from investments (0.51) 0.41 0.35 0.13 0.46 (0.05)
Total from Investment Activities (0.10) 0.84 0.80 0.57 0.70 0.39
Distributions
Net investment income (0.41) (0.43) (0.45) (0.44) (0.23) (0.44)
In excess of net realized gains -- -- -- (0.03) -- --
Net realized gains (0.24) -- -- -- -- --
Total Distributions (0.65) (0.43) (0.45) (0.47) (0.23) (0.44)
Net Asset Value, End of Period $ 10.17 $ 10.92 $ 10.51 $ 10.16 $ 10.06 $ 9.59
Total Return (excludes sales charges) (0.99)% 8.15% 8.10% 5.83% 7.39%<F2> 4.21%
Ratios/Supplemental Data:
Net Assets, End of Period (000) $37,579 $47,296 $47,705 $36,958 $11,964 $5,118
Ratio of expenses to
average net assets 0.86% 0.67% 0.36% 0.29% 0.02%<F3> 0.20%
Ratio of net investment income
(loss) to average net assets 3.80% 4.02% 4.43% 4.37% 5.11%<F3> 5.01%
Ratio of expenses to
average net assets<F1> 1.24% 1.22% 1.27% 1.35% 2.57%<F3> 3.95%
Ratio of net investment income
to average net assets<F1> 3.42% 3.47% 3.52% 3.31% 2.56%<F3> 1.26%
Portfolio turnover <F6> 127% 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> Not annualized.
<F3> Annualized.
<F4> Effective June 5, 1995, the Victory National Municipal Bond Portfolio
became the National Municipal Bond 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>
See notes to financial statements.
111
<PAGE>
THE VICTORY PORTFOLIOS Financial Highlights--continued
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
National Municipal Bond Fund
Class B
Year Year Year Year Six Months September 26,
Ended Ended Ended Ended Ended 1994 to
October 31, October 31, October 31, October 31, October 31, April 30,
1999 1998 1997 1996 1995<F4> 1995<F5>
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.91 $10.51 $10.16 $10.07 $ 9.59 $9.53
Investment Activities
Net investment income 0.27 0.31 0.33 0.35 0.20 0.28
Net realized and unrealized
gains (losses) from investments (0.49) 0.40 0.34 0.13 0.47 0.05
Total from Investment Activities (0.22) 0.71 0.67 0.48 0.67 0.33
Distributions
Net investment income (0.28) (0.31) (0.32) (0.35) (0.19) (0.27)
In excess of net investment income -- -- -- (0.01) -- --
In excess of net realized gains -- -- -- (0.03) -- --
Net realized gains (0.24) -- -- -- -- --
Total Distributions (0.52) (0.31) (0.32) (0.39) (0.19) (0.27)
Net Asset Value, End of Period $10.17 $10.91 $10.51 $10.16 $10.07 $9.59
Total Return (excludes sales charges) (2.09)% 6.88% 6.74% 4.85% 6.99%<F2> 3.54%<F2>
Ratios/Supplemental Data:
Net Assets, End of Period (000) $2,353 $2,388 $2,288 $1,808 $ 456 $ 147
Ratio of expenses to
average net assets 2.10% 1.81% 1.60% 1.20% 0.96%<F3> (0.05)%<F3>
Ratio of net investment income
(loss) to average net assets 2.55% 2.88% 3.18% 3.50% 4.15%<F3> 4.35%<F3>
Ratio of expenses to
average net assets<F1> 2.48% 2.34% 2.62% 2.17% 3.67%<F3> 2.63%<F3>
Ratio of net investment income
to average net assets<F1> 2.17% 2.35% 2.16% 2.53% 1.44%<F3> 1.67%<F3>
Portfolio turnover <F6> 127% 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> Not annualized.
<F3> Annualized.
<F4> Effective June 5, 1995, the Victory National Municipal Bond Portfolio
became the National Municipal Bond 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>
See notes to financial statements.
112
<PAGE>
THE VICTORY PORTFOLIOS Financial Highlights
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
New York Tax-Free Fund
Class A Class B
Year Ended October 31, Year Ended October 31,
1999 1998 1997 1996 1995<F2> 1999 1998 1997 1996 1995<F2>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 12.80 $ 12.68 $ 12.73 $ 12.85 $ 12.39 $12.80 $12.69 $12.74 $12.86 $12.39
Investment Activities
Net investment income 0.61 0.61 0.68 0.68 0.87 0.48 0.49 0.57 0.57 0.85
Net realized and
unrealized gains
(losses) from
investments (0.81) 0.14 0.03 (0.11) 0.42 (0.81) 0.12 0.03 (0.10) 0.36
Total from
Investment
Activities (0.20) 0.75 0.71 0.57 1.29 (0.33) 0.61 0.60 0.47 1.21
Distributions
Net investment income (0.61) (0.61) (0.72) (0.68) (0.83) (0.48) (0.48) (0.56) (0.57) (0.74)
In excess of net
investment income -- -- -- -- -- -- -- (0.05) (0.01) --
Net realized gains -- (0.02) (0.04) (0.01) -- -- (0.02) (0.04) (0.01) --
Total Distributions (0.61) (0.63) (0.76) (0.69) (0.83) (0.48) (0.50) (0.65) (0.59) (0.74)
Net Asset Value,
End of Period $ 11.99 $ 12.80 $ 12.68 $ 12.73 $ 12.85 $11.99 $12.80 $12.69 $12.74 $12.86
Total Return
(excludes sales charges) (1.74)% 6.12% 5.77% 4.53% 10.82% (2.70)% 4.96% 4.88% 3.72% 10.18%
Ratios/Supplemental Data:
Net Assets,
End of Period (000) $14,084 $18,073 $15,335 $13,754 $15,374 $3,274 $3,437 $2,731 $2,515 $1,953
Ratio of expenses to
average net assets 0.95% 0.94% 0.94% 0.93% 1.16% 2.01% 1.99% 1.82% 1.65% 2.02%
Ratio of net investment
income to average
net assets 4.82% 4.85% 5.32% 5.25% 5.50% 3.76% 3.81% 4.46% 4.52% 5.94%
Ratio of expenses to
average net assets<F1> 1.42% 1.35% 1.49% 1.58% 1.96% 2.35% 2.36% 2.68% 2.34% 2.25%
Ratio of net investment
income to average
net assets<F1> 4.35% 4.44% 4.77% 4.60% 4.70% 3.42% 3.44% 3.60% 3.83% 5.71%
Portfolio turnover <F3> 28% 38% 11% -- 18% 28% 38% 11% -- 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> Effective June 5, 1995 the Victory New York Tax-Free Portfolio became the
New York Tax-Free Fund.
<F3> 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.
113
<PAGE>
THE VICTORY PORTFOLIOS Financial Highlights
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Ohio Municipal Bond Fund
Class G
Class A Shares Shares
March 26,
1999
Year Ended October 31, through
October 31,
1999 1998 1997 1996 1995 1999<F4><F5>
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 12.04 $ 11.72 $ 11.43 $ 11.32 $ 10.33 $ 11.79
Investment Activities
Net investment income 0.49 0.51 0.53 0.54 0.52 0.28
Net realized and unrealized
gains (losses) from investments (0.75) 0.42 0.29 0.11 1.00 (0.70)
Total from Investment Activities (0.26) 0.93 0.82 0.65 1.52 (0.42)
Distributions
Net investment income (0.49) (0.51) (0.53) (0.54) (0.52) (0.28)
In excess of net investment income -- -- -- -- (0.01) --
Net realized gains (0.10) (0.10) -- -- -- --
In excess of net realized gains (0.08) -- -- -- -- --
Total Distributions (0.67) (0.61) (0.53) (0.54) (0.53) (0.28)
Net Asset Value, End of Period $ 11.11 $ 12.04 $ 11.72 $ 11.43 $ 11.32 $ 11.09
Total Return (excludes sales charges) (2.29)% 8.18% 7.37% 5.87% 15.03% (3.59)%<F2>
Ratios/Supplemental Data:
Net Assets, End of Period (000) $74,984 $82,704 $78,043 $73,463 $60,031 $122,458
Ratio of expenses to
average net assets 0.92% 0.91% 0.89% 0.89% 0.66% 0.90%<F3>
Ratio of net investment income
to average net assets 4.20% 4.31% 4.60% 4.72% 4.78% 4.18%<F3>
Ratio of expenses to
average net assets<F1> 1.14% 1.13% 0.99% 1.05% 0.94% 1.12%<F3>
Ratio of net investment income
to average net assets<F1> 3.98% 4.09% 4.50% 4.56% 4.49% 3.96%<F3>
Portfolio turnover <F6> 112% 95% 74% 81% 125% 112%
<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> Not annualized.
<F3> Annualized.
<F4> Period from commencement of operations.
<F5> Effective March 26, 1999, the Gradison Ohio Tax-Free Fund merged into the
Victory Ohio Municipal Bond Fund.
<F6> 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.
114
<PAGE>
THE VICTORY PORTFOLIOS Schedule of Investments
Balanced Fund October 31, 1999
(Amounts in Thousands, Except Shares)
Shares or
Principal Market
Security Description Amount Value
Commercial Paper (3.9%)
General Electric Capital Corp.,
5.33%, 11/1/99 $ 17,105 $ 17,105
Total Commercial Paper (Cost $17,105) 17,105
Common Stocks (52.5%)
Aerospace/Defense (0.8%):
AlliedSignal, Inc. 41,400 2,357
Boeing Co. 20,000 921
3,278
Aluminum (0.7%):
Alcoa, Inc. (d) 48,400 2,940
Automobiles (0.6%):
General Motors Corp. 35,000 2,459
Banks (4.6%):
Bank of America Corp. 54,090 3,482
First Union Corp. 86,700 3,701
Mellon Financial Corp. 148,000 5,466
National City Corp. 61,000 1,800
U.S. Bancorp (d) 30,000 1,112
Wells Fargo Co. 95,000 4,548
20,109
Beverages (0.3%):
Pepsico, Inc. 40,000 1,388
Chemicals -- General (0.6%):
Air Products & Chemicals, Inc. 71,000 1,953
Sigma-Aldrich (d) 20,000 570
2,523
Computers & Peripherals (2.7%):
Cisco Systems, Inc. (b) 56,000 4,144
Hewlett-Packard Co. 33,800 2,503
International Business Machines Corp. 51,000 5,017
11,664
Containers (0.0%):
Sonoco Products Co. 8,000 192
Cosmetics & Related (0.5%):
Avon Products (d) 69,200 2,232
Diversified (0.3%):
Berkshire Hathaway, Inc. (b) 619 1,294
Electrical Equipment (0.7%):
Emerson Electric Co. 53,200 3,195
Financial Services (2.7%):
Fannie Mae (d) 78,200 $ 5,533
Franklin Resources, Inc. 110,000 3,850
Household International, Inc. 55,000 2,454
11,837
Food Processing &
Packaging (1.5%):
Conagra, Inc. 98,000 2,554
Sara Lee Corp. 141,000 3,816
6,370
Food Products (0.7%):
General Mills, Inc. 33,000 2,877
Forest Products --
Lumber & Paper (0.5%):
Bowater, Inc. 24,000 1,260
Mead Corp. 28,000 1,008
2,268
Health Care (1.0%):
Columbia HCA Healthcare Corp. 92,500 2,232
Medtronic, Inc. 56,000 1,939
4,171
Household Goods -- Appliances,
Furnishings & Electronics (0.4%):
Newell Rubbermaid, Inc. 49,600 1,717
Industrial Goods & Services (0.3%):
Parker Hannifin Corp. 30,000 1,374
Insurance (2.5%):
Allstate Corp. 147,884 4,253
American General Corp. 15,000 1,113
Everest Reinsurance Holdings, Inc. 30,500 785
Lincoln National Corp. 75,000 3,459
Torchmark Corp. 45,000 1,403
11,013
Machinery & Equipment (0.1%):
Deere & Co. 15,000 544
Manufacturing -- Miscellaneous (2.0%):
General Electric Co. 46,300 6,277
Textron, Inc. 28,800 2,223
8,500
Media (1.8%):
Time Warner, Inc. 41,000 2,857
Viacom, Inc. (b) 107,400 4,806
7,663
115
<PAGE>
Oil & Gas Exploration,
Production & Services (1.4%):
Enron Corp. 120,200 $ 4,800
USX-Marathon Group, Inc. 40,000 1,165
5,965
Oil-Integrated Companies (5.3%):
Amerada Hess Corp. 18,000 1,033
Chevron Corp. 67,001 6,117
Mobil Corp. 48,400 4,671
Phillips Petroleum Co. 44,600 2,074
Royal Dutch Petroleum Co. 4,900 294
Texaco, Inc. 111,000 6,812
Unocal Corp. 51,000 1,760
22,761
Oilfield Services &
Equipment (1.1%):
Baker Hughes, Inc. 54,600 1,525
Schlumberger Ltd. 52,000 3,150
4,675
Paper Products (0.4%):
International Paper Co. 35,000 1,842
Pharmaceuticals (4.1%):
Abbott Laboratories (d) 75,000 3,028
American Home Products Corp. 53,800 2,811
Bristol-Myers Squibb Co. 56,000 4,302
Pfizer, Inc. 191,600 7,568
17,709
Retail (2.2%):
Dayton-Hudson Corp. 91,800 5,932
May Department Stores Co. 61,500 2,133
Wal-Mart Stores, Inc. (d) 27,600 1,565
9,630
Retail -- Drug Stores (0.6%):
Walgreen Co. (d) 109,200 2,750
Retail -- Specialty Stores (0.8%):
Autozone, Inc. (b) (d) 30,000 797
Lowe's Cos., Inc. (d) 48,000 2,640
3,437
Semiconductors (1.5%):
Altera Corp. (b) 29,000 1,410
Intel Corp. 65,800 5,096
6,506
Software & Computer
Services (1.4%):
Microsoft Corp. (b) 41,000 $ 3,795
Oracle Corp. (b) 46,625 2,218
6,013
Steel (0.1%):
USX-U.S. Steel Group, Inc. 17,100 437
Telecommunications --
Equipment (1.5%):
Lucent Technologies, Inc. 27,704 1,780
Motorola, Inc. 47,000 4,580
6,360
Tobacco & Tobacco Products (0.1%):
Philip Morris Cos., Inc. 23,000 579
Tools (0.2%):
Kennametal, Inc. 35,000 1,006
Transportation (0.8%):
Union Pacific Corp. 61,000 3,401
Utilities -- Electric (1.2%):
Consolidated Edison, Inc. 29,400 1,123
Duke Energy Corp. 50,000 2,824
FirstEnergy Corp. 15,000 391
Texas Utilities Co. 17,000 659
4,997
Utilities --
Telecommunications (4.5%):
ALLTEL Corp. 33,000 2,747
AT&T Corp. (d) 78,177 3,655
GTE Corp. 45,500 3,413
MCI Worldcom, Inc. (b) 74,292 6,375
SBC Communications, Inc. 66,856 3,405
19,595
Total Common Stocks (Cost $148,910) 227,271
Foreign Common Stocks (5.5%)
Australia (0.2%):
Banks (0.0%):
National Australia Bank 7,308 113
Beverages (0.0%):
Foster's Brewing Group Ltd. 39,000 104
Entertainment (0.2%):
Aristocrat Leisure Ltd. 38,000 364
Financial Services (0.0%):
Lend Lease Corp. Ltd. 3,000 34
116
<PAGE>
Media (0.0%):
Publishing & Broadcasting Ltd. 22,000 $ 130
Telecommunications (0.0%):
Cable & Wireless Optus Ltd. (b) 42,000 96
Utilities -- Telecommunications (0.0%):
Telstra Corp. Ltd., ADR 4,600 118
Total Australia 959
Brazil (0.0%):
Food Distributors, Supermarkets
& Wholesalers (0.0%):
Companhia Brasileira de Distribuicao
Grupo Pao de Acucar, 1,500 33
Telecommunications (0.0%):
Telecomunicacoes
Brasileiras SA, ADR 400 31
Total Brazil 64
Britain (0.9%):
Banks (0.1%):
HSBC Holdings PLC 12,347 148
Lloyds TSB Group PLC 25,945 358
506
Food Distributors, Supermarkets
& Wholesalers (0.0%):
Compass Group PLC 15,400 166
Electric Utilities (0.0%):
Energis PLC (b) 3,900 124
Media (0.1%):
Carlton Communications PLC 14,000 101
Pearson PLC 7,000 156
257
Oil & Gas Exploration,
Production & Services (0.1%):
BP Amoco PLC 58,132 563
Pharmaceuticals (0.3%):
Glaxo Wellcome PLC 11,605 342
Smithkline Beecham PLC 25,877 333
675
Retail (0.1%):
Dixons Group 7,000 124
Kingfisher PLC 12,205 133
257
Software & Computer
Services (0.0%):
Sema Group PLC 9,000 $ 117
Telecommunications (0.1%):
Vodafone AirTouch PLC 90,620 423
Utilities -- Telecommunications (0.1%):
British Telecom PLC 32,946 597
Total Britain 3,685
Canada (0.1%):
Manufacturing --
Miscellaneous (0.0%):
Bombardier, Inc. 10,900 192
Oil & Gas Exploration,
Production & Services (0.0%):
Suncor Energy, Inc. 4,000 154
Telecommunications --
Equipment (0.1%):
Nortel Networks Corp. 4,700 290
Total Canada 636
Finland (0.2%):
Banks (0.0%):
Merita Ltd. 17,097 99
Telecommunications (0.0%):
Sonera OYJ 5,100 153
Telecommunications --
Equipment (0.2%):
Nokia OYJ 3,554 407
Total Finland 659
France (0.7%):
Automobiles (0.0%):
PSA Peugeot Citroen 300 58
Automotive Parts (0.0%):
Valeo SA 1,100 79
Banks (0.1%):
Banque Nationale de Paris 1,863 164
Credit Lyonnais SA (b) 2,760 83
Societe Generale 500 109
356
Building Materials (0.0%):
Compagnie de Saint Gobain 760 132
Commercial Services (0.1%):
Vivendi 3,340 253
Computer Services (0.0%):
Cap Gemini SA 629 95
117
<PAGE>
Construction (0.0%):
Bouygues 310 $ 108
Electronic & Electrical --
General (0.0%):
Rexel 1,100 98
Food Products (0.2%):
Carrefour Supermarche 1,400 259
Promodes 100 107
366
Insurance (0.0%):
Axa 890 125
Machinery & Equipment (0.0%):
Alstom 1,800 54
Oil & Gas Exploration,
Production & Services (0.2%):
Total Fina SA 2,827 383
Retail -- Department Stores (0.0%):
Pinault-Printemps-Redoute 930 177
Semiconductors (0.1%):
STMicroelectronics N.V. 2,530 222
Telecommunications -- Equipment (0.0%):
Alcatel SA 1,160 181
Utilities -- Water (0.0%):
Suez Lyonnaise DES Eaux 640 103
Total France 2,790
Germany (0.4%):
Automobiles (0.1%):
Bayerische Motoren Werke AG 4,200 134
DaimlerChrysler AG 2,257 176
310
Banks (0.1%):
Dresdner Bank AG 3,100 159
Chemicals -- General (0.0%):
BASF AG 3,100 139
Electric Utilities (0.0%):
Veba AG 1,700 92
Insurance (0.1%):
Allianz AG 900 274
Manufacturing --
Miscellaneous (0.0%):
Siemens AG 1,500 134
Telecommunications (0.1%):
Mannesmann AG 1,600 $ 251
Total Germany 1,359
Greece (0.0%):
Banks (0.0%):
National Bank of Greece SA 1,668 119
Utilities --
Telecommunications (0.0%):
Hellenic Telecommunications
Organization SA 3,244 69
Total Greece 188
Hong Kong (0.1%):
Chemicals -- General (0.0%):
Shanghai Petrochemical Ltd. 132,000 27
Financial Services (0.1%):
Guoco Group Ltd. 43,000 115
Hutchison Whampoa Ltd. 15,000 151
266
Media (0.0%):
South China Morning Post 64,000 47
Real Estate (0.0%):
Cheung Kong 8,000 72
Sun Hung Kai Properties 8,000 65
137
Telecommunications (0.0%):
Cable & Wireless HKT Ltd. 50,111 114
Total Hong Kong 591
Hungary (0.0%):
Utilities -- Telecommunications (0.0%):
Magyar Tavkozlesi Rt, ADR 6,400 184
Matav Rt. 4,600 27
Total Hungary 211
Ireland (0.1%):
Banks (0.0%):
Allied Irish Banks PLC 15,642 196
Building Materials (0.1%):
CRH PLC 12,167 229
Telecommunications (0.0%):
Eircom PLC 7,700 32
Total Ireland 457
118
<PAGE>
Italy (0.2%):
Banks (0.0%):
Banca Commeriale Italiana 20,000 $ 120
San Paolo-IMI SpA 10,863 141
Unicredito Italiano SpA 20,000 94
355
Oil & Gas Exploration,
Production & Services (0.0%):
ENI SpA 1 0
Telecommunications (0.1%):
TIM SpA 55,000 343
Utilities --
Telecommunications (0.1%)
Telecom Italia SpA 16,000 138
Telecom Italia SpA 28,883 142
280
Total Italy 978
Japan (1.6%):
Banks (0.0%):
Sakura Bank Ltd. 10,000 86
Beverages (0.1%):
Kirin Brewery Co. Ltd. 20,000 229
Computers & Peripherals (0.1%):
Fujitsu Ltd. 9,000 271
Cosmetics & Related (0.1%):
KAO Corp. 9,000 274
Electronic & Electrical --
General (0.2%):
Murata MFG Co. Ltd. 2,000 257
Secom Co. Ltd. 4,000 428
685
Electronic Components/
Instruments (0.1%):
Sharp Corp. 16,000 255
Financial Services (0.1%):
Takefuji Corp. 2,700 349
Health Care (0.1%):
Hoya Corp. 3,000 216
Terumo 8,000 243
459
Insurance (0.0%):
Tokio Marine & Fire Insurance 16,000 209
Office Equipment & Supplies
(Non-Computer Related) (0.0%):
Ricoh Corp. Ltd. 13,000 $ 212
Pharmaceuticals (0.1%):
Sankyo Co. Ltd. 8,000 228
Takeda Chemical Industries 4,000 229
457
Retail (0.2%):
Ito-Yokado Co. Ltd. 3,000 240
Ryohin Keikaku Co. Ltd. 1,200 231
Seven-Eleven Japan 5,000 457
928
Telecommunications (0.3%):
NTT Data Corp. 28 443
NTT Mobile Communications
Network, Inc. 31 822
1,265
Telecommunications -- Equipment (0.1%):
Hikari Tsushin, Inc. 300 241
Matsushita Communication 1,000 168
409
Utilities -- Telecommunications (0.1%):
Nippon Telegraph &
Telephone Corp. 21 322
Total Japan 6,410
Malaysia (0.0%):
Automobiles (0.0%):
Oriental Holdings Berhad 42,000 91
Total Malaysia 91
Mexico (0.0%):
Financial Services (0.0%):
Grupo Financiero Banamex
Accival SA (b) 26,000 65
Retail (0.0%):
Controladora Comercial
Mexicana SA 52,000 43
Total Mexico 108
Netherlands (0.3%):
Banks (0.2%):
ING Groep NV 4,908 290
Chemicals -- General (0.0%):
Akzo Nobel 3,000 129
119
<PAGE>
Computers & Peripherals (0.0%):
CMG PLC 4,200 $ 162
Food Distributors, Supermarkets
& Wholesalers (0.0%):
Koninklijke Ahold NV 2,000 61
Insurance (0.1%):
Aegon NV 3,054 282
Oil & Gas Exploration,
Production & Services (0.0%):
Royal Dutch Petroleum Co. 2,000 119
Total Netherlands 1,043
New Zealand (0.0%):
Media (0.0%):
Sky Network Television Ltd. (b) 36,600 56
Telecommunications (0.0%)
Telecom Corp. of New Zealand Ltd. 10,000 40
Total New Zealand 96
Norway (0.0%):
Banks (0.0%):
Den Norske Bank 22,000 85
Environmental Control (0.0%):
Tomra Systems A/S 1,400 54
Total Norway 139
Poland (0.0%):
Software & Computer Services (0.0%):
Softbank SA, GDR 1,600 44
Total Poland 44
Portugal (0.0%):
Building Materials (0.0%):
Cimpor Cimentos de Portugal SA 4,100 68
Utilities --
Telecommunications (0.0%):
Portugal Telecom 1,800 80
Total Portugal 148
Singapore (0.0%):
Banks (0.0%):
Oversea-Chinese Banking Corp. 6,300 47
Electronic & Electrical --
General (0.0%):
Elec & Eltek International Ltd. 28,000 96
Financial Services (0.0%):
Keppel Corp. 15,000 41
Transportation (0.0%):
Neptune Orient Lines (b) 10,000 $ 14
Total Singapore 198
South Africa (0.0%):
Computers & Peripherals (0.0%):
Datatec Ltd. 3,500 43
Metals & Mining (0.0%):
Gold Fields Ltd. 9,000 43
Gold Fields of South Africa Ltd. 11,000 26
69
Total South Africa 112
South Korea (0.1%):
Electrical Equipment (0.1%):
Samsung Electronics, GDR 2,500 208
Steel (0.0%):
Pohang Iron & Steel Co. Ltd., ADR 2,000 67
Telecommunications (0.0%):
Korea Telecom Corp., ADR (b) 2,700 95
Total South Korea 370
Spain (0.2%):
Banks (0.1%):
Argentaria, Caja Postal y Banco
Hipotecario de Espana SA 5,000 111
Banco Santander Central
Hispano SA 20,400 211
322
Retail (0.0%):
Centros Comerciales Pryca SA 2,000 38
Utilities -- Electric (0.0%):
Endesa SA 5,000 100
Utilities --
Telecommunications (0.1%):
Telefonica SA (b) 18,297 301
Total Spain 761
Sweden (0.1%):
Insurance (0.0%):
Skandia Forsakrings AB 5,000 111
Telecommunications --
Equipment (0.1%):
Telefonaktiebolaget LM Ericsson 10,100 419
Total Sweden 530
120
<PAGE>
Switzerland (0.2%):
Banks (0.0%):
UBS AG 255 $ 74
Commercial Services (0.0%):
Adecco SA 270 164
Insurance (0.0%):
Zurich Allied AG 169 96
Pharmaceuticals (0.2%):
Novartis AG 129 193
Roche Holding AG 32 384
577
Total Switzerland 911
Taiwan (0.1%):
Electronic Equipment (0.1%):
Asustek Computer, Inc., GDR 11,072 155
Semiconductors (0.0%):
Taiwan Semiconductor
Manufacturing Co. Ltd., ADR (b) 4,060 141
Steel (0.0%):
China Steel Corp., GDR 4,200 72
Total Taiwan 368
Turkey (0.0%):
Banks (0.0%):
Yapi ve Kredi Bankasi AS, GDR 1,808 27
Total Turkey 27
Total Foreign Common Stocks
(Cost $17,834) 23,933
Preferred Stocks (0.0%)
Germany (0.0%):
Automobiles (0.0%):
Volkswagen AG 1,900 68
Consumer Products (0.0%):
Gardena Holding 2,081 31
Total Preferred Stocks (Cost $99) 99
Asset Backed Securities (2.0%)
Capital Auto Receivables Asset Trust,
Series 1999-2, Class A2, 6.06%, 6/15/02 $ 740 $ 739
CIT Recreational Vehicle,
Series 1999-A, Class A-2, 5.78%, 7/15/08 1,420 1,397
First USA Credit Card
Master Trust, Series 1998-9, Class A,
5.28%, 9/18/06 670 643
First USA Credit Card Master Trust,
Series 1999-1, Class A, 5.08%, 10/19/06 $ 1,463 $ 1,461
Ford Credit Auto Owner Trust,
Series 1999-C, Class A4, 6.08%, 9/16/02 1,070 1,058
MBNA Master Credit Card Trust,
Series 1998-D, Class A, 5.80%, 12/15/05 1,400 1,366
Premier Auto Trust, Series 1998-5,
Class A3, 5.07%, 7/8/02 800 789
Residential Asset Securities Corp.,
Series 1999-KS, Class A3, 7.18%, 10/1/29 880 878
Total Asset Backed Securities
(Cost $8,439) 8,331
Convertible Bonds (0.0%)
Banks (0.0%):
Mitsubishi Bank International Finance
Bermuda, Convertible Subordinated Notes,
3.00%, 11/30/02, Callable 11/25/02 @ 121.6 114 139
Total Convertible Bonds (Cost $134) 139
Collateralized Mortgage Obligations (3.6%)
Federal Home Loan Mortgage Corp.,
Series 2116, Class D, 6.00%, 7/15/26 1,797 1,570
Federal Home Loan Mortgage Corp., Series 2152,
Class AC, 7.50%, 1/15/26 1,461 1,475
Federal National Mortgage Assoc., Series
1997-49, Class B, 10.00%, 6/17/27 1,095 1,194
Federal National Mortgage Assoc.,
Series 1999-15, Class LA, 6.50%, 4/25/29 1,887 1,851
General Electric Capital Mortgage
Services, Inc., Series 1997-4, Class A12,
7.50%, 5/25/27 1,330 1,301
General Electric Capital Mortgage
Services, Inc., Series 1998-13,
Class A3, 6.75%, 8/25/28 1,589 1,529
121
<PAGE>
LB Commercial Conduit Mortgage Trust,
Series 1999-C1, Class A1,
6.41%, 8/15/07 $ 769 $ 750
Norwest Asset Securities Corp.,
Series 1998-10, Class A3,
6.75%, 5/25/28 2,700 2,484
Norwest Asset Securities Corp.,
Series 1998-12, Class A9,
6.75%, 6/25/28 1,814 1,665
Residential Accredit Loans, Inc.,
Series 1998-QS7, Class CB2,
6.75%, 7/25/28 1,890 1,799
Total Collateralized Mortgage
Obligations (Cost $16,229) 15,618
Corporate Bonds (11.8%)
Aerospace/Defense (0.3%):
Boeing Co., 8.75%, 9/15/31 635 710
Raytheon Co., 6.75%, 8/15/07 740 703
1,413
Automobiles (0.3%):
Daimler-Chrylser North American
Holdings Corp., 6.63%, 1,349 1,349
Automotive Parts (0.1%):
TRW, Inc., 6.45%, 6/15/01 (c) 560 556
Banks (0.3%):
First Union Corp., 6.88%, 9/15/05 635 619
National Westminster Bank, 7.38%, 10/1/09 210 209
Wachovia Corp., 6.15%, 3/15/09 320 296
1,124
Beverages (0.2%):
J. Seagram & Sons, Inc.,
6.25%, 12/15/01 300 296
J. Seagram & Sons, Inc.,
6.80%, 12/15/08 710 674
970
Building Materials (0.2%):
Owens Corning,
7.50%, 5/1/05 (d) 720 707
Chemicals -- General (0.2%):
E.I. Du Pont De Nemours,
6.88%, 10/15/09 530 525
Great Lakes Chemical,
7.00%, 7/15/09 $ 300 $ 292
817
Commercial Banking (0.1%):
Abbey National PLC,
6.70%, 6/29/49,
Callable 6/15/08 @ 100 425 387
Commercial Services (0.1%):
Cendant Corp.,
7.75%, 12/1/03 650 644
Electronic & Electrical --
General (0.0%):
Sony Corp.,
6.13%, 3/4/03 195 191
Financial Services (1.7%):
American General Institution,
7.57%, 12/1/45 555 515
Aon Capital Trust A,
8.21%, 1/1/27,
Guaranteed by Aon Corp. 700 694
AT&T Capital Corp.,
6.88%, 1/16/01 495 496
Capital One Bank,
6.15%, 6/1/01 345 340
Duke Capital Corp.,
8.00%, 10/1/19 1,330 1,320
Ford Motor Credit Co.,
6.70%, 7/16/04 295 291
Ford Motor Credit Co.,
7.38%, 10/28/09 455 460
General Electric Capital Corp.,
6.33%, 9/17/01 415 414
General Electric Capital Corp.,
6.52%, 10/8/02 320 320
Household Finance Corp.,
5.88%, 2/1/09 1,435 1,283
Lehman Brothers Holdings, Inc.,
6.00%, 2/26/01 345 342
Lehman Brothers Holdings, Inc.,
6.63%, 4/1/04 615 596
7,071
Food Processing & Packaging (0.2%):
Nabisco, Inc.,
6.00%, 2/15/01 925 913
Forest Products --
Lumber & Paper (0.4%):
Abitibi-Consolidated, Inc.,
6.95%, 4/1/08 525 484
122
<PAGE>
Abitibi-Consolidated, Inc.,
8.50%, 8/1/29 $ 515 $ 506
Fort James Corp.,
6.63%, 9/15/04 500 484
International Paper Co.,
7.63%, 1/15/07 (d) 350 354
1,828
Health Care (0.0%):
Johnson & Johnson,
6.95%, 9/1/29 200 195
Insurance (0.9%):
American General Finance,
5.80%, 3/15/02 390 381
Citigroup, Inc.,
5.80%, 3/15/04 (d) 335 320
Conseco Inc.,
8.50%, 10/15/02 1,090 1,094
Liberty Mutual Insurance,
8.20%, 5/4/07 780 803
Metropolitan Life Insurance Co.,
6.30%, 11/1/03 1,270 1,224
3,822
Machinery & Equipment (0.1%):
Deere & Co.
6.55%, 10/1/28 530 461
Manufactured Housing (0.1%):
Oakwood Homes Corp.,
7.88%, 3/1/04 670 466
Media (1.2%):
CBS Corp.,
6.88%, 9/1/03 400 392
Knight-Ridder, Inc.,
6.88%, 3/15/29 890 810
Telecommunications, Inc.,
9.80%, 2/1/12 920 1,105
Time Warner, Inc.,
7.75%, 6/15/05 1,750 1,795
Viacom, Inc.,
7.75%, 6/1/05 1,075 1,090
5,192
Mining (0.2%):
Cyprus Amax Minerals, Inc.,
6.63%, 10/15/05 975 910
Oil & Gas Exploration,
Production & Services (1.0%):
Amerada Hess Corp.,
7.79%, 10/1/29 1,065 1,053
Baker Hughes, Inc.,
6.88%, 1/15/29 615 558
Coastal Corp.,
6.20%, 5/15/04 $ 495 $ 475
Conoco, Inc.,
6.95%, 4/15/29 295 275
Phillips Petroleum,
6.65%, 3/1/03 800 800
Union Oil Co. of California,
7.50%, 2/15/29 485 464
Valero Energy Corp.,
7.38%, 3/15/06 (d) 645 620
4,245
Pipelines (0.6%):
Enron Corp.,
7.38%, 5/15/19 475 454
Kinder Morgan, Inc.,
6.45%, 3/1/03 240 233
Kinder Morgan, Inc.,
6.65%, 3/1/05 485 460
Williams Cos., Inc.,
6.20%, 8/1/02 1,020 995
Williams Cos., Inc.,
6.13%, 12/1/03 450 430
2,572
Real Estate (0.4%):
Duke Realty Ltd. Partnership,
7.30%, 6/30/03 615 608
EOP Operating LP,
6.75%, 2/15/08 1,295 1,187
1,795
Real Estate Investment Trusts (0.6%):
Cabot Industrial Property LP,
7.13%, 5/1/04 325 313
Camden Property Trust,
7.00%, 4/15/04 505 487
Simon Property Group, Inc.,
6.75%, 6/15/05 690 645
Spieker Properties LP,
6.90%, 1/15/04 725 703
Spieker Properties LP,
7.25%, 5/1/09 560 533
2,681
Retail (0.9%):
Dayton Hudson Corp.,
5.88%, 11/1/08 460 423
J.C. Penney & Co., Inc.,
7.60%, 4/1/07 300 294
Rohm & Haas Co.,
7.85%, 7/15/29 (c) 1,340 1,364
Saks, Inc.,
7.00%, 7/15/04 740 694
123
<PAGE>
Saks, Inc.,
8.25%, 11/15/08 $ 555 $ 533
Wal-Mart Stores,
6.88%, 8/10/09 725 729
4,037
Retail -- Specialty Stores (0.1%):
Lowe's Cos., Inc.,
6.50%, 3/15/29 420 361
Semiconductors (0.2%):
Motorola, Inc.,
6.50%, 11/15/28 320 280
Texas Instruments, Inc.,
7.00%, 8/15/04 (c) (d) 560 555
835
Software & Computer Services (0.2%):
Sun Microsystems, Inc.,
7.65%, 8/15/09 1,000 1,020
Steel (0.1%):
USX Corp.,
7.20%, 2/15/04 280 278
Telecommunications (0.0%):
MCI Worldcom, Inc.,
6.13%, 8/15/01 80 79
Tobacco & Tobacco Products (0.3%):
Phillip Morris Cos., Inc.,
7.00%, 7/15/05 (d) 860 822
R.J. Reynolds Tobacco Holding,
7.38%, 5/15/03 490 479
1,301
Utilities -- Electric (0.5%):
Edison International, Inc.,
6.88%, 9/15/04 635 626
Empresa Nacional Electri,
7.75%, 7/15/08 665 625
Korea Electric Power,
6.34%, 12/1/03 820 776
2,027
Utilities -- Telecommunications (0.3%):
GTE Corp.,
6.94%, 4/15/28 510 469
Sprint Capital Corp.,
6.88%, 11/15/28 720 661
1,130
Total Corporate Bonds (Cost $52,938) 51,377
U.S. Treasury Securities (7.0%)
U.S. Treasury Bonds (1.7%):
7.50%, 11/15/16 (d) $ 1,010 $ 1,114
5.25%, 2/15/29 (d) 4,464 3,864
6.13%, 8/15/29 (d) 2,200 2,191
7,169
U.S. Treasury Notes (5.1%):
5.38%, 6/30/00 (d) 3,453 3,451
4.63%, 11/30/00 (d) 6,901 6,827
6.38%, 8/15/02 (d) 1,369 1,386
5.75%, 4/30/03 (d) 647 643
6.00%, 8/15/04 (d) 5,793 5,805
7.00%, 7/15/06 (d) 1,150 1,200
6.00%, 8/15/09 (d) 3,052 3,047
22,359
U.S. Treasury Strips (0.2%):
3.29%, 8/15/20 (d) 2,700 700
Total U.S. Treasury Securities (Cost $30,328) 30,228
U.S. Government Agencies (0.2%)
U.S. Government Loan Trust (0.2%):
U.S. Government Loan Trust --
Israel, Series 1-B, 8.50%, 4/1/06 667 709
Total U.S. Government Agencies (Cost $734) 709
U.S. Government Mortgage Backed (13.0%)
Federal Home Loan
Mortgage Corp. (4.8%):
5.75%, 7/15/03 (d) 2,160 2,117
6.00%, 4/1/26-2/1/29 2,811 2,636
6.25%, 7/15/04 (d) 750 744
6.50%, 5/1/26-4/1/29 5,101 4,905
6.63%, 9/15/09 (d) 1,060 1,055
7.00%, 7/1/28-11/1/28 3,697 3,637
7.50%, 9/1/17-3/1/29 2,723 2,732
8.00%, 10/1/28-1/1/29 725 739
8.50%, 7/1/21-5/1/29 2,029 2,102
20,667
124
<PAGE>
Federal National
Mortgage Assoc. (5.7%):
6.00%, 12/1/28-7/1/29 $ 1,410 $ 1,315
6.25%, 5/15/29 (d) 1,275 1,173
6.50%, 8/15/04-4/1/29 8,770 8,502
6.63%, 9/15/09 (d) 2,000 1,990
7.00%, 10/1/26 2,949 2,894
7.12%, 7/3/06 (d) 1,180 1,210
7.50%, 4/1/29-5/1/29 894 896
8.00%, 8/1/29-9/1/29 1,699 1,731
8.50%, 8/1/14-8/1/19 4,556 4,718
9.00%, 8/1/14 458 478
24,907
Government National
Mortgage Assoc. (2.5%):
7.00%, 12/15/22-8/15/28 8,577 8,454
7.50%, 4/15/29 1,491 1,495
8.50%, 9/15/28-2/15/29 753 782
9.50%, 7/15/09 99 106
10,837
Total U.S. Government
Mortgage Backed (Cost $57,215) 56,411
Securities Purchased With Cash
Collateral (13.6%)
Investment Companies (1.1%):
AIM Short Term Prime
Money Market Fund 1,591,076 1,591
AIM Liquid Assets
Money Market Fund 3,518,292 3,518
5,109
Repurchase Agreements (12.5%):
Lehman Corp., 5.43%, 11/1/99
(Collateralized by $10,682
Housing Urban Development,
5.78%, 8/1/07, Postal Square LP,
6.50%, 6/15/22, Bravo Series 1997-1-A,
5.36%, 1/15/00, market value -- $10,303) 10,000 10,000
Merrill Lynch, 5.50%, 11/1/99 (See
Significant Accounting Policies,
Securities Lending in the Notes to
Financial Statements for collateral
description) 10,000 10,000
Morgan Stanley Dean Witter, 5.48%, 11/1/99
(Collateralized by $7,800 United News &
Media PLC, 7.75%, 7/1/09, market
value -- $7,540) 7,000 7,000
Nations Bank, 5.52%, 11/1/99 (Collateralized
by $10,407 Litton Industries, Inc.,
8.00%, 10/15/09, IMC Global, Inc., 7.30%,
1/15/28, Cox Communications, Inc., 6.04%,
8/15/00, market value -- $10,300) $ 10,000 $ 10,000
Goldman Sachs Group L.P., 5.52%, 11/1/99
(See Significant Accounting Policies,
Securities Lending in the Notes to Financial
Statements for collateral description) 7,000 7,000
Salomon Corp., 5.48%, 11/1/99 (Collateralized
by $12,019 Scotia Pacific Co. LLC,
6.55%, 1/20/07, market value -- $11,012) 10,000 10,000
54,000
Total Securities Purchased
With Cash Collateral (Cost $59,109) 59,109
Total Investments (Cost $409,074) (a) -- 113.1% 490,330
Other assets in excess of liabilities -- 13.1% (56,657)
TOTAL NET ASSETS -- 100.0% $433,673
(a) Represents cost for financial reporting purposes and differs from cost
basis for federal income tax purposes by the amount of market to market
adjustment for passive foreign investment companies and the amount of losses
recognized for financial reporting purposes in excess of federal income tax
reporting of approximately $551. Cost for federal income tax purposes differs
from value by net unrealized appreciation of securities as follows (amounts
in thousands):
Unrealized appreciation $88,061
Unrealized depreciation (7,356)
Net unrealized appreciation $80,705
(b) Non-income producing securities.
(c) 144a security which is restricted as to resale to institutional investors.
(d) All or a portion of this security was loaned as of October 31, 1999.
* 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, 1999.
ADR -- American Depository Receipt
GDR -- Global Depository Receipt
TBA -- To Be Announced
See notes to financial statements.
125
<PAGE>
THE VICTORY PORTFOLIOS Schedule of Investments
Convertible Securities Fund October 31, 1999
(Amounts in Thousands, Except Shares)
Shares or
Principal Market
Security Description Amount Value
Commercial Paper (1.9%)
General Electric Capital Corp.,
5.33%, 11/1/99 $ 1,508 $ 1,508
Total Commercial Paper
(Cost $1,508) 1,508
Common Stocks (3.6%)
Banks (0.5%):
BB & T Corp. 11,000 400
Machinery -- Diversified (0.9%):
Case Corp. 14,000 742
Media (2.2%):
Cablevision Systems Corp. (b) 25,059 1,693
Total Common Stocks (Cost $1,392) 2,835
Convertible Bonds (52.4%)
Aerospace/Defense (0.2%):
Kaman Corp.,
Convertible Subordinated Notes,
6.00%, 3/15/12,
Continuously Callable @ 100 $ 150 $ 137
Automotive Parts (2.0%):
Magna International, Inc.,
Convertible Subordinated Notes,
5.00%, 10/15/02,
Continuously Callable @ 100 1,600 1,556
Building Materials (0.4%):
Lennar Corp.,
Convertible Subordinated Notes,
0.00%, 7/29/18,
Callable 7/29/03 @ 56.23 750 295
Circuits (1.4%):
Level One Communications,
Convertible Subordinated Notes,
4.00%, 9/1/04,
Callable 9/7/00 @ 102.29 425 1,093
Commercial Services (1.7%):
CUC International, Inc.,
Convertible Subordinated Notes,
3.00%, 2/15/02,
Callable 2/15/00 @ 101.2 1,000 898
Quintiles Transnational,
Convertible Subordinated Notes,
4.25%, 5/31/00,
Continuously Callable @ 101.06 500 483
1,381
Computers & Peripherals (0.7%):
Data General Corp.,
Convertible Subordinated Notes,
6.00%, 5/15/04,
Callable 5/18/00 @ 103.43 $ 525 $ 580
Conglomerates (1.5%):
Ogden Corp.,
Euro-dollar Convertible
Subordinated Notes Debentures,
6.00%, 6/1/02,
Continuously Callable @ 100 1,500 1,200
Drugs (1.0%):
Inhale Therapeutic,
Convertible Subordinated Notes,
6.75%,10/13/06,
Callable 10/3/02 @ 103.38 750 762
Electronic Components/
Instruments (3.5%):
Atmel SA,
Convertible Subordinated Notes,
3.25%, 6/01/02,
Callable 8/9/00 @ 106.37 1,000 1,307
Cymer, Inc.,
Convertible Subordinated Notes,
3.50%, 8/6/04,
Callable 8/9/00 @ 106.37 1,000 1,002
Lam Research Corp.,
Convertible Subordinated Notes,
5.00%, 9/1/02 500 574
2,883
Financial Services (0.7%):
Bell Atlantic Financial,
Convertible Subordinated Notes,
4.25%, 9/15/05,
Callable 9/15/02 @ 104.24 (c) 500 527
Hazardous Waste Disposal (0.8%):
OHM, Convertible
Subordinated Debentures,
8.00%, 10/1/06,
Continuously Callable @ 100 735 668
Health Care (1.2%):
Quantum Health Resources, Inc.,
Convertible Subordinated Notes,
4.75%, 10/1/00,
Continuously Callable @ 100.68 1,017 946
Health Care -- Animal (1.3%):
Veterinary Centers of America,
Convertible Subordinated Notes,
5.25%, 5/1/06,
Continuously Callable @ 103 1,585 1,068
126
<PAGE>
Industrial Goods & Services (1.1%):
Robbins & Myers,
Convertible Subordinated Notes,
6.50%, 9/1/03,
Callable 9/1/00 @ 102.17 $ 1,000 $ 846
Insurance (0.5%):
Loews Corp.,
Convertible Subordinated Notes,
3.13%, 9/15/07,
Callable 9/15/02 @ 101.56 500 416
Internet Service Provider (0.6%):
Mindspring,
Convertible Subordinated Notes,
5.00%, 4/15/06,
Callable 4/15/02 @ 102.86 500 480
Manufacturing -- Machinery (5.7%):
MascoTech, Inc.,
Convertible Subordinated Notes,
4.50%, 12/15/03,
Callable 12/15/99 @ 101.5 2,000 1,560
Thermo Fibertek, Inc.,
Convertible Subordinated Notes,
4.50%, 7/15/04,
Callable 7/15/00 @ 100 (c) 3,600 3,055
4,615
Medical Equipment
& Supplies (0.4%):
Thermo Instruments System,
Convertible Subordinated Notes,
4.50%, 10/15/03,
Callable 7/15/00 @ 100 (c) 350 287
Medical Services (2.0%):
Alpharma, Inc.,
Convertible Subordinated Notes,
3.00%, 6/1/06,
Callable 6/16/02 @ 112.671 500 594
Sepracor, Inc.,
Convertible Subordinated Notes,
7.00%, 12/15/05,
Callable 12/20/01 @ 104 1,000 965
1,559
Medical -- Biotechnology (3.6%):
Centocor, Inc.,
Convertible Subordinated Notes,
4.75%, 2/15/05,
Callable 2/21/01 @ 102.714 1,000 1,464
Chiron Corp.,
Convertible Subordinated Notes,
1.90% , 11/17/00,
Callable 11/17/99 @ 97.485 (c) 500 540
Genzyme Corp.,
Convertible Subordinated Notes,
5.25%, 6/1/05,
Callable 6/10/01 @ 102.63 $ 750 $ 875
2,879
Medical -- Hospital Services (1.6%):
Medical Care International,
Convertible Subordinated
Debentures,
6.75%, 10/1/06,
Callable 10/1/01 @ 100 1,500 1,260
Oil & Gas Exploration, Production &
Services (2.9%):
Devon Energy,
Convertible Subordinated Notes,
4.90%, 8/15/08,
Callable 8/15/00 @ 104 1,100 1,098
Devon Energy,
Convertible Subordinated Notes,
4.95%, 8/15/08,
Callable 9/15/02 @ 104.24 300 300
Kerr-Mcgee Corp.,
Convertible Subordinated Notes,
7.50%, 5/15/14,
Continuously Callable @ 100 1,000 949
2,347
Oil -- Integrated Companies (1.1%):
Texaco Capital,
Convertible Subordinated Notes,
3.50%, 8/5/04,
Continuously Callable @ 100 890 877
Oilfield Services
& Equipment (1.9%):
Diamond Offshore Drilling, Inc.,
Convertible Subordinated Notes,
3.75%, 2/15/07,
Callable 2/22/01 @ 102.08 900 921
Seacor Holdings, Inc.,
Convertible Subordinated Notes,
5.38%, 11/15/06,
Callable 11/24/99 @ 103.58 650 592
1,513
Pharmaceuticals (1.2%):
Alza Corp.,
Convertible Subordinated
Debentures,
5.00%, 5/1/06,
Callable 5/1/01 @ 102.14 780 938
127
<PAGE>
Primary Metal & Mineral Production (1.5%):
Homestake Mining Co.,
Convertible Subordinated
Debentures,
5.50%, 6/23/00,
Continuously Callable @ 100 $ 1,250 $ 1,213
Publishing (1.2%):
Scholastic Corp.,
Convertible Subordinated Notes,
5.00%, 8/15/05,
Continuously Callable @ 100 (c) 1,000 938
Real Estate (1.4%):
Avatar Holdings,
Convertible Subordinated Notes,
7.00%, 4/1/05,
Callable 4/6/01 @ 104 1,250 1,091
Real Estate Investment
Trusts (3.5%):
Health Care Property Investors, Inc.,
Convertible Subordinated Notes,
6.00%, 11/8/00 (c) 950 914
HRPT Properties,
Convertible Subordinated Notes,
7.50%, 10/1/03,
Continuously Callable @ 100 315 287
Macerich Co.,
Convertible Subordinated Notes,
7.25%, 12/15/02,
Callable 6/15/02 @ 100 500 423
Meditrust,
Convertible Subordinated
Debentures,
7.50%, 3/1/01 1,240 1,140
2,764
Retail (0.9%):
Amazon.Com, Inc.,
Convertible Subordinated Notes,
4.75%, 2/1/09,
Callable 2/6/02 @ 103.325 650 687
Retail -- Specialty Stores (0.7%):
Michaels Stores, Inc.,
Convertible Subordinated Notes,
6.75%, 1/15/03,
Callable 1/15/99 @ 102.62 500 519
Software & Computer
Services (1.0%):
Arbor Software,
Convertible Subordinated Notes,
4.50%, 3/15/05,
Callable 3/20/01 @ 102.57 500 377
Doubleclick,
Convertible Subordinated Notes,
4.75%, 3/15/06,
Callable 3/15/03 @ 102.036 $ 250 $ 459
836
Technology -- Software (0.8%):
Siebel Systems,
Convertible Subordinated Notes,
5.50%, 9/15/06,
Callable 9/15/02 @ 103.14 (c) 500 664
Telecommunications --
Equipment (0.9%):
Nextel Communications,
Convertible Subordinates Notes,
4.75%, 7/1/07,
Callable 7/6/02 @ 102.714 (c) 380 735
Transportation Services (1.5%):
Offshore Logistics,
Convertible Subordinated Notes,
6.00%, 12/15/03,
Callable 12/15/99 @ 103.43 1,500 1,234
Total Convertible Bonds (Cost $40,818) 41,794
Convertible Preferred Stock (39.4%)
Aerospace (0.4%):
Coltec Capital Trust 8,000 290
Banks (2.1%):
Bank United 20,000 1,015
CNB Capital Trust I 18,375 634
1,649
Building Materials (2.3%):
Texas Industries, Inc. 50,000 1,801
Cosmetics & Related (1.3%):
Estee Lauder Co. 11,500 1,024
Energy (0.5%):
CMS Energy Corp. 10,000 385
Foods (0.4%):
Suiza Capital Trust (c) 10,000 354
Insurance (7.1%):
Jefferson-Pilot Corp. 26,400 2,824
Lincoln National Corp. 25,000 627
Philadelphia Consolidated
Holding Corp. 140,000 1,006
St. Paul Capital Corp. 20,000 1,160
5,617
128
<PAGE>
Media (3.3%):
Adelphia Communications,
Series D 2,500 $ 427
Mediaone Group, Inc. 21,100 2,194
2,621
Metals (0.4%):
Cyprus Amax Minerals Co.,
Series A 6,800 355
Oil-Integrated Companies (2.7%):
Unocal Corp. 41,000 2,117
Oilfield Services
& Equipment (1.1%):
EVI, Inc. 24,000 882
Paper and Forest Products (2.6%):
International Paper Co. 40,000 2,100
Pipelines (1.7%):
Western Gas Resources, Inc. 41,000 1,353
Publishing (0.4%):
Tribune Co. 1,000 135
Tribune Co. 10,000 174
309
Railroads (2.7%):
Union Pacific Capital 10,000 481
Union Pacific Capital 35,000 1,693
2,174
Real Estate Investment
Trusts (2.2%):
Equity Office,
Series B 24,700 917
Equity Residential Properties,
Series J 32,500 841
1,758
Restaurants (1.0%):
Wendys Financing I, Series A 15,000 795
Telecommunications (2.4%):
IXC Communications 5,000 215
TCI Pacific Communications, Inc. 5,705 1,699
1,914
Utilities -- Electric (4.8%):
Calpine Capital Trust (b) 20,000 1,192
Citizens Utilities Trust (b) 20,000 1,003
Houston Industries, Inc. 9,000 $ 1,033
Utilicorp United (b) 25,000 634
3,862
Total Convertible Preferred Stock
(Cost $28,977) 31,360
Corporate Bonds (1.6%)
Financial Services (1.1%):
Bank Plus Corp., Senior Notes,
12.00%, 7/18/07,
Callable 11/15/05 @ 110 $ 1,000 860
Insurance (0.5%):
National Reinsurance Corp.,
Senior Notes,
8.85%, 1/15/05 400 432
Total Corporate Bonds (Cost $1,510) 1,292
Preferred Stocks (1.5%)
Banks (1.5%):
California Federal Preferred
Capital, Series A 20,000 445
Chevy Chase Savings Bank 25,000 756
Total Preferred Stocks (Cost $1,184) 1,201
Total Investments (Cost $75,389) (a) -- 100.4% 79,990
Liabilities in excess of other assets -- (0.4)% (335)
TOTAL NET ASSETS -- 100.0% $ 79,655
(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 $4. Cost for federal income tax purposes differs from value by
net unrealized appreciation of securities as follows (amounts in thousands):
Unrealized appreciation $ 7,705
Unrealized depreciation (3,108)
Net unrealized appreciation $ 4,597
(b) Non-income producing securities.
(c) 144a security which is restricted as to resale to institutional investors.
See notes to financial statements.
129
<PAGE>
THE VICTORY PORTFOLIOS Schedule of Investments
Real Estate Investment Fund October 31, 1999
(Amounts in Thousands, Except Shares)
Shares or
Principal Market
Security Description Amount Value
Common Stocks (83.3%)
Real Estate Investment
Trusts (83.3%):
Apartments (19.7%):
Apartment Investment
& Management Co. 13,000 $ 317
Avalonbay Communities, Inc. 15,366 497
Charles E. Smith Residential
Realty, Inc. 18,000 612
Equity Residential
Properties Trust 20,000 836
Home Properties of NY, Inc. 20,000 533
2,795
Diversified (7.5%):
First Union Real Estate Equity
& Mortgage Investments 16,000 82
TrizecHahn Corp. 36,100 667
Vornado Realty Trust 10,000 317
1,066
Industrial (7.6%):
AMB Property Corp. 35,000 696
ProLogis Trust 20,000 386
1,082
Office (27.4%):
Boston Properties, Inc. 26,000 775
Brandywine Realty Trust 10,000 168
Cornerstone Properties, Inc. 46,000 670
Cousins Properties, Inc. 7,000 222
Equity Office Properties Trust 42,000 929
Highwoods Properties, Inc. 29,000 701
Mack-Cali Realty Corp. 10,000 258
SL Green Realty Corp. 10,000 182
3,905
Real Estate Development (2.1%):
Catellus Dev Corp. (b) 25,000 294
Residential (2.5%):
Manufactured Home
Communities, Inc. 15,000 350
Retail (16.5%):
Security Capital Group Inc.,
Class B (b) 65,000 $ 894
Simon Property Group, Inc. 27,000 623
Westfield America, Inc. 60,000 825
2,342
Total Common Stocks (Cost $13,153) 11,834
U.S. Government Agencies (16.7%)
Federal Farm Credit
Bank (16.7%):
5.16%, 11/1/99 $ 2,366 2,366
Total U.S. Government Agencies (Cost $2,366) 2,366
Total Investments (Cost $15,519) (a) -- 100.0% 14,200
Other assets in excess of liabilities -- 0.0% 5
TOTAL NET ASSETS -- 100.0% $ 14,205
(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 $5. Cost for federal income tax purposes differs from value by
net unrealized depreciation of securities as follows (amounts in thousands):
Unrealized appreciation $ 96
Unrealized depreciation (1,420)
Net unrealized depreciation $ (1,324)
(b) Non-income producing securities.
See notes to financial statements.
130
<PAGE>
Statements of Assets and Liabilities
The Victory Portfolios October 31, 1999
(Amounts in Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Real
Convertible Estate
Balanced Securities Investment
Fund Fund Fund
<S> <C> <C> <C>
ASSETS:
Investments, at value (Cost $355,074;
$75,389 & $15,519) $436,330 $79,990 $14,200
Repurchase agreements, at cost 54,000 -- --
Total Investments 490,330 79,990 14,200
Interest and dividends receivable 2,298 743 20
Receivable for capital shares issued 41 -- --
Receivable from brokers for investments sold 5,029 -- --
Reclaims receivable 24 -- --
Unamortized organization costs -- -- 10
Prepaid expenses and other assets 15 3 4
Total Assets 497,737 80,736 14,234
LIABILITIES:
Dividends Payable 38 -- --
Payable for capital shares redeemed 151 -- --
Payable to brokers for investments purchased 4,333 1,000 --
Payable for return of collateral received 59,109 -- --
Payable for organization costs -- -- 17
Accrued expenses and other payables:
Investment advisory fees 287 50 5
Administration fees 8 2 --
Custodian fees 17 2 1
Accounting fees 1 1 1
Transfer agent fees 18 11 3
Shareholder service fees -- Class A 83 8 --
Shareholder service and 12b-1 fees -- Class B 9 -- --
Other 10 7 2
Total Liabilities 64,064 1,081 29
NET ASSETS:
Capital 315,326 70,829 17,313
Undistributed net investment income 374 361 113
Net unrealized appreciation/depreciation from investments 80,792 4,601 (1,319)
Net unrealized appreciation/depreciation from translation
of assets and liabilities in foreign currencies 461 -- --
Accumulated undistributed net realized gains (losses) from
investment transactions and foreign currency transactions 36,720 3,864 (1,902)
Net Assets $433,673 $79,655 $14,205
Net Assets
Class A $422,586
Class B 11,087
Total $433,673
Outstanding units of beneficial interest (shares)
Class A 27,987
Class B 734
Total 28,721 6,134 1,465
Net asset value
Redemption price per share -- Class A $ 15.10 $ 12.99 $ 9.70
Offering price per share -- Class B<F1> 15.10
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) -- Class A $ 16.02 $ 13.78 $ 10.29
<FN>
<F1> Redemption price per Class B share varies based on length of time held.
</FN>
</TABLE>
See notes to financial statements.
131
<PAGE>
Statements of Operations
The Victory Portfolios For the Year Ended October 31, 1999
(Amounts in Thousands)
<TABLE>
<CAPTION>
Real
Convertible Estate
Balanced Securities Investment
Fund Fund Fund
<S> <C> <C> <C>
Investment Income:
Interest income $11,225 $ 3,043 $ 126
Dividend income 4,173 2,672 837
Securities Lending 79 14 --
Foreign tax withholding (52) -- (1)
Total Income 15,425 5,729 962
Expenses:
Investment advisory fees 4,488 696 158
Administration fees 629 139 24
Shareholder service fees -- Class A 1,096 142 35
Shareholder service fees and 12b-1 fees -- Class B 92 -- --
Accounting fees 156 45 36
Custodian fees 177 32 11
Legal and audit fees 33 8 4
Amortization of organization fees -- -- 4
Trustees' fees and expenses 12 3 --
Transfer agent fees 74 35 10
Registration and filing fees 38 30 18
Printing fees 21 11 1
Other 25 7 1
Total Expenses 6,841 1,148 302
Expenses voluntarily reduced (1,041) -- (118)
Net Expenses 5,800 1,148 184
Net Investment Income 9,625 4,581 778
Realized/Unrealized Gains (Losses) from
Investments and Foreign Currencies:
Net realized gains (losses) from
investment transactions 37,076 3,994 (1,371)
Net realized gains (losses) from foreign
currency transactions (164) -- --
Change in unrealized appreciation/depreciation
from investments 2,520 2,960 643
Net realized/unrealized gains (losses) from
investments and foreign currencies 39,432 6,954 (728)
Change in net assets resulting from operations $49,057 $11,535 $ 50
</TABLE>
See notes to financial statements.
132
<PAGE>
The Victory Portfolios Statements of Changes in Net Assets
(Amounts in Thousands)
<TABLE>
<CAPTION>
Convertible Real Estate
Balanced Fund Securities Fund Investment Fund
Year Year Year Eleven Year Year Year
Ended Ended Ended MonthsEnded Ended Ended Ended
October 31, October 31, October 31, October 31, November 30, October 31, October 31,
1999 1998 1999 1998<F1> 1997 1999 1998
<S> <C> <C> <C> <C> <C> <C> <C>
From Investment Activities:
Operations:
Net investment income $ 9,625 $ 10,001 $ 4,581 $ 4,875 $ 3,727 $ 778 $ 623
Net realized gains (losses) from
investment transactions 37,076 27,200 3,994 111 8,742 (1,371) (570)
Net realized gains (losses) from
foreign currency transactions (164) (430) -- -- -- -- --
Net change in unrealized
appreciation/depreciation
from investments 2,520 13,754 2,960 (9,683) (1,161) 643 (2,456)
Net change in unrealized
appreciation/depreciation
from translation of
assets and liabilities in
foreign currencies -- 644 -- -- -- -- --
Change in net assets resulting
from operations 49,057 51,169 11,535 (4,697) 11,308 50 (2,403)
Distributions to Shareholders:
From net investment income:
Class A (9,181) (10,007) (4,990) (4,602) (3,806) (783) (496)
Class B (97) (62) -- -- -- -- --
In excess of net investment income -- (2) -- -- -- -- --
From net realized gains
from investment transactions
and foreign currencies (26,725) (18,646) (212) (8,444) (3,737) -- --
In excess of net realized gains
from investment transactions -- -- -- -- -- -- (20)
Change in net assets from
distributions to shareholders (36,003) (28,717) (5,202) (13,046) (7,543) (783) (516)
Capital Transactions:
Proceeds from shares issued 59,910 95,975 21,933 62,226 46,957 5,022 17,894
Dividends reinvested 32,955 25,917 3,658 9,691 6,277 285 132
Cost of shares redeemed (97,329) (65,485) (60,338) (51,087) (33,495) (6,993) (2,859)
Change in net assets from
capital transactions (4,464) 56,407 (34,747) 20,830 19,739 (1,686) 15,167
Change in net assets 8,590 78,859 (28,414) 3,087 23,504 (2,419) 12,248
Net Assets:
Beginning of period 425,083 346,224 108,069 104,982 81,478 16,624 4,376
End of period $433,673 $425,083 $ 79,655 $108,069 $104,982 $14,205 $16,624
Share Transactions:
Issued 4,001 6,733 1,691 4,619 3,386 489 1,505
Reinvested 2,247 1,898 287 742 478 28 12
Redeemed (6,498) (4,629) (4,686) (3,844) (2,551) (683) (249)
Change in shares (250) 4,002 (2,708) 1,517 1,313 (166) 1,268
<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
</FN>
</TABLE>
See notes to financial statements.
133
<PAGE>
The Victory Portfolios Financial Highlights
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Balanced Fund
Class A Shares
Year Year Year Year
Ended Ended Ended Ended
October 31, October 31, October 31, October 31,
1999 1998 1997 1996<F3>
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 14.67 $ 13.87 $ 12.33 $ 11.01
Investment Activities
Net investment income 0.32 0.37 0.36 0.36
Net realized and unrealized gains (losses)
from investments and foreign currencies 1.34 1.54 1.90 1.39
Total from Investment Activities 1.66 1.91 2.26 1.75
Distributions
Net investment income (0.31) (0.37) (0.35) (0.36)
In excess of net investment income -- -- -- --
Net realized gains (0.92) (0.74) (0.37) (0.07)
Total Distributions (1.23) (1.11) (0.72) (0.43)
Net Asset Value, End of Period $ 15.10 $ 14.67 $ 13.87 $ 12.33
Total Return (excludes sales charges) 11.73% 14.55% 19.02% 16.27%
Ratios/Supplemental Data:
Net Assets, End of Period (000) $422,586 $418,807 $342,933 $273,553
Ratio of expenses to average net assets 1.27% 1.27% 1.25% 1.27%
Ratio of net investment income to
average net assets 2.13% 2.54% 2.69% 3.14%
Ratio of expenses to average net assets<F1> 1.50% 1.50% 1.36% 1.43%
Ratio of net investment income to
average net assets<F1> 1.90% 2.31% 2.58% 2.98%
Portfolio turnover <F5> 177% 231% 109% 80%
<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> Annualized.
<F3> Effective March 1, 1996, the Fund designated the existing shares as Class A Shares and commenced
offering Class B Shares.
<F4> 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%.
<F5> 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>
Balanced Fund
Class B Shares
March 1,
Year Year Year 1996 Year
Ended Ended Ended through Ended
October 31, October 31, October 31, October 31, October 31,
1999 1998 1997 1996<F3> 1995
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 14.68 $13.88 $12.34 $11.51 $ 9.62
Investment Activities
Net investment income 0.16 0.21 0.19 0.14 0.41
Net realized and unrealized gains (losses)
from investments and foreign currencies 1.34 1.54 1.89 0.85 1.40
Total from Investment Activities 1.50 1.75 2.08 0.99 1.81)
Distributions
Net investment income (0.16) (0.21) (0.17) (0.14) (0.41)
In excess of net investment income -- -- -- (0.02) (0.01)
Net realized gains (0.92) (0.74) (0.37) -- --
Total Distributions (1.08) (0.95) (0.54) (0.16) (0.42)
Net Asset Value, End of Period $ 15.10 $14.68 $13.88 $12.34 $ 11.01
Total Return (excludes sales charges) 10.48% 13.27% 17.43% 15.73%<F4> 19.24%
Ratios/Supplemental Data:
Net Assets, End of Period (000) $11,087 $6,276 $3,291 $1,432 $201,073
Ratio of expenses to average net assets 2.38% 2.43% 2.56% 2.46%<F2> 0.98%
Ratio of net investment income to
average net assets 1.03% 1.36% 1.36% 1.78%<F2> 4.05%
Ratio of expenses to average net assets<F1> 2.61% 2.67% 2.95% 2.67%<F2> 1.36%
Ratio of net investment income to
average net assets<F1> 0.80% 1.12% 0.97% 1.57%<F2> 3.67%
Portfolio turnover <F5> 177% 231% 109% 80% 69%
<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> Annualized.
<F3> Effective March 1, 1996, the Fund designated the existing shares as Class A Shares and commenced
offering Class B Shares.
<F4> 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%.
<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.
134
<PAGE>
The Victory Portfolios Financial Highlights
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Convertible Securities Fund
Eleven
Year Months
Ended Ended
October 31, October 31, Year Ended November 30,
1999 1998<F1> 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 12.22 $ 14.33 $ 13.55 $ 12.16 $ 11.05 $ 12.48
Investment Activities
Net investment income 0.67 0.58 0.62 0.65 0.60 0.61
Net realized and unrealized gains
(losses) from investments 0.83 (1.08) 1.43 1.68 1.50 (1.12)
Total from Investment Activities 1.50 (0.50) 2.05 2.33 2.10 (0.51)
Distributions
Net investment income (0.70) (0.54) (0.65) (0.62) (0.61) (0.61)
Net realized gains (0.03) (1.07) (0.62) (0.32) (0.38) (0.31)
Total Distributions (0.73) (1.61) (1.27) (0.94) (0.99) (0.92)
Net Asset Value, End of Period $ 12.99 $ 12.22 $ 14.33 $ 13.55 $ 12.16 $ 11.05
Total Return (excludes sales charges) 12.46% (3.69)%<F2> 16.26% 20.28% 20.43% (4.36)%
Ratios/Supplementary Data:
Net Assets at end of period (000) $79,655 $108,069 $104,982 $81,478 $68,212 $58,845
Ratio of expenses to
average net assets 1.24% 1.20%<F3> 1.34% 1.31% 1.31% 1.30%
Ratio of net investment income
to average net assets 4.94% 4.60%<F3> 4.75% 5.17% 5.36% 5.20%
Portfolio Turnover 73% 77% 77% 40% 52% 49%
<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.
</FN>
</TABLE>
See notes to financial statements.
135
<PAGE>
The Victory Portfolios Financial Highlights
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Real Estate
Investment Fund
Year Year Period
Ended Ended Ended
October 31, October 31, October 31,
1999 1998 1997<F2>
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $ 10.19 $ 12.07 $10.00
Investment Activities
Net investment income 0.52 0.50 0.23
Net realized and unrealized gains (losses)
from investments (0.50) (1.90) 2.01
Total from Investment Activities 0.02 (1.40) 2.24
Distributions
Net investment income (0.51) (0.44) (0.17)
Net realized gains -- (0.04) --
Total Distributions (0.51) (0.48) (0.17)
Net Asset Value, End of Period $ 9.70 $ 10.19 $12.07
Total Return (excludes sales charges) 0.03% (11.91)% 22.42%<F3>
Ratios/Supplemental Data:
Net Assets, End of Period (000) $14,205 $16,624 $4,376
Ratio of expenses to
average net assets 1.16% 0.83% 0.00%<F4>
Ratio of net investment income
to average net assets 4.92% 4.95% 5.11%<F4>
Ratio of expenses to
average net assets<F1> 1.91% 1.95% 2.93%<F4>
Ratio of net investment income
to average net assets<F1> 4.17% 3.83% 2.18%<F4>
Portfolio turnover 62% 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.
136
<PAGE>
THE VICTORY PORTFOLIOS Schedule of Investments
Value Fund October 31, 1999
(Amounts in Thousands, Except Shares)
Shares or
Principal Market
Security Description Amount Value
Commercial Paper (2.5%)
Business Credit Institutions (2.5%):
General Electric Capital Corp.,
5.33%, 11/1/99 $ 15,133 $ 15,133
Total Commercial Paper (Cost $15,133) 15,133
Common Stocks (98.0%)
Aerospace/Defense (2.2%):
AlliedSignal, Inc. 103,840 5,912
Boeing Co. 164,000 7,555
13,467
Aluminum (1.0%):
Alcoa, Inc. (c) 105,100 6,385
Automobiles (1.3%):
General Motors Corp. 117,000 8,219
Banks (8.2%):
Bank of America Corp. (c) 165,174 10,633
First Union Corp. 228,200 9,741
Mellon Financial Corp. 311,400 11,502
National City Corp. 237,300 7,000
Wells Fargo Co. 222,000 10,628
49,504
Chemicals -- General (2.4%):
Air Products & Chemicals, Inc. 174,000 4,785
Eastman Chemical Co. 100,801 3,887
RPM, Inc. 104,000 1,242
Sigma-Aldrich (c) 166,000 4,731
14,645
Computers & Peripherals (5.5%):
Cisco Systems, Inc. (b) 133,000 9,842
Electronic Data Systems 109,700 6,417
Hewlett-Packard Co. 62,900 4,659
International Business
Machines Corp. 129,900 12,779
33,697
Conglomerates (0.8%):
Textron, Inc. 60,400 4,662
Containers (1.0%):
Newell Rubbermaid, Inc. (c) 132,600 4,591
Sonoco Products Co. 61,500 1,476
6,067
Cosmetics & Related (1.2%):
Avon Products, Inc. (c) 232,500 $ 7,498
Electrical Equipment (0.9%):
Emerson Electric Co. 95,600 5,742
Electronic & Electrical -- General (2.5%):
General Electric Co. 112,700 15,278
Electronics (0.9%):
Parker-Hannifin Corp. (c) 122,800 5,626
Financial Services (5.8%):
Fannie Mae 232,500 16,449
Franklin Resources, Inc. 289,300 10,126
Household International, Inc. 203,400 9,077
35,652
Food Distributors (0.2%):
Albertsons, Inc. 40,400 1,467
Food Processing &
Packaging (3.7%):
ConAgra, Inc. 278,600 7,261
General Mills, Inc. 79,000 6,888
Sara Lee Corp. 312,700 8,462
22,611
Forest Products --
Lumber & Paper (1.3%):
Bowater, Inc. 36,000 1,890
International Paper Co. 50,300 2,647
Mead Corp. (c) 93,000 3,348
7,885
Health Care (2.1%):
Columbia/HCA Healthcare Corp. 278,800 6,726
Medtronic, Inc. (c) 170,800 5,914
12,640
Heavy Machinery (0.5%):
Deere & Co. 91,300 3,310
Insurance (0.8%):
American General Corp.(c) 38,599 2,863
Protective Life Corp. 51,200 1,853
4,716
Insurance -- Multi-Line (4.5%):
Allstate Corp. 399,300 11,481
American International Group 32,500 3,345
Lincoln National Corp. 162,600 7,500
Torchmark Corp. 167,000 5,208
27,534
137
<PAGE>
Media (1.7%):
Viacom, Inc., Class B (b) 229,600 $ 10,275
Metals -- Fabrication (0.9%):
Kennametal, Inc. 184,709 5,310
Newspapers (2.3%):
Gannett Co., Inc. 182,948 14,110
Oil & Gas Exploration,
Production & Services (0.7%):
Amerada Hess Corp. 49,501 2,840
Anadarko Petroleum Corp. 45,415 1,399
4,239
Oil-Integrated Companies (7.3%):
Chevron Corp. 150,250 13,719
Mobil Corp. 86,800 8,376
Texaco, Inc. 199,110 12,220
Unocal Corp. (c) 102,200 3,526
USX-Marathon Group, Inc. 228,000 6,641
44,482
Oilfield Services & Equipment (0.9%):
Baker Hughes, Inc. 89,050 2,488
Schlumberger Ltd. (c) 53,300 3,228
5,716
Pharmaceuticals (7.9%):
Abbott Laboratories (c) 237,100 9,573
American Home Products Corp. 152,900 7,989
Bristol-Myers Squibb Co. 113,200 8,695
Merck & Co., Inc. 24,000 1,910
Pfizer, Inc. 503,200 19,875
48,042
Radio & Television (0.3%):
Cox Communications, Inc.,
Class A (b) (c) 44,800 2,036
Railroads (1.1%):
Union Pacific Corp. 119,900 6,684
Retail (2.3%):
Dayton Hudson Corp. 215,500 13,927
Retail -- Department Stores (0.7%):
May Department Stores Co. (c) 126,300 4,381
Retail -- Drug Stores (0.9%):
Walgreen Co. (c) 220,000 $ 5,541
Retail -- Specialty Stores (2.0%):
AutoZone, Inc. (b) (c) 177,300 4,710
Lowe's Cos. 132,200 7,271
11,981
Semiconductors (3.0%):
Altera Corp. (b) 76,800 3,734
Intel Corp. 186,800 14,466
18,200
Software & Computer
Services (3.4%):
Automatic Data Processing (c) 44,000 2,120
First Data Corp. 70,600 3,226
Microsoft Corp. (b) 87,500 8,099
Oracle Corp. (b) 148,600 7,068
20,513
Steel (0.3%):
USX-U.S. Steel Group, Inc. 73,500 1,879
Telecommunications --
Equipment (3.0%):
Lucent Technologies, Inc. 63,900 4,106
Motorola, Inc. 148,600 14,479
18,585
Tobacco & Tobacco
Products (0.5%):
Philip Morris Cos., Inc. 123,850 3,119
Toys (0.8%):
Hasbro, Inc. 238,800 4,925
Utilities -- Electric (2.9%):
Duke Energy Corp. 107,000 6,046
FirstEnergy Corp. 113,000 2,945
Texas Utilities Co. 84,600 3,278
Unicom Corp. (c) 147,100 5,636
17,905
Utilities -- Gas (1.1%):
Enron Corp. 160,772 6,421
138
<PAGE>
Utilities -- Telecommunications (7.2%):
Alltel Corp. 94,400 $ 7,859
AT&T Corp. (c) 45,300 2,118
Centurytel, Inc. 128,799 5,208
GTE Corp. 92,300 6,923
MCI Worldcom, Inc. (b) 139,192 11,944
SBC Communications, Inc. 197,337 10,052
44,104
Total Common Stocks (Cost $415,394) 598,980
Securities Purchased With Cash
Collateral (7.8%)
Investment Companies (2.3%):
AIM Short Term Prime
Money Market Fund 4,335,300 4,335
AIM Liquid Assets
Money Market Fund 9,586,502 9,587
13,922
Repurchase Agreements (5.5%):
Prudential Corp.,
5.49%, 11/1/99
(Collateralized by $5,212
FMC, 0.00%, 3/9/00,
market value -- $5,101) $ 5,000 5,000
Merrill Lynch, 5.50%, 11/1/99
(Collateralized by $8,880
JDN Realty Corp.,
0.00%, 3/31/13,
Illinova Corp.,
6.46%, 10/1/02,
Waste Management, Inc.,
7.13%, 10/1/07,
market value -- $8,242) 8,000 8,000
Morgan Stanley Dean Witter,
5.48%, 11/1/99
(Collateralized by $9,700
J.C.Penney Co.,
7.40%, 4/1/37,
PP&L, 7.05%, 6/25/09,
market value -- $9,601) 8,000 8,000
Nations Bank, 5.52%, 11/1/99
(Collateralized by $8,260
Cox Communications, Inc.,
6.04%, 8/15/00, Conseco, Inc.,
9.00%, 10/15/06,
market value -- $8,240) $ 8,000 $ 8,000
Goldman Sachs Group L.P.,
5.52%, 11/1/99
(Collateralized by $4,352
Mutual Life Ins. Co.,
0.00%, 8/15/24,
GTE Corp., 9.10%, 6/1/03,
market value -- $5,691) 5,000 5,000
34,000
Total Securities Purchased
With Cash Collateral (Cost $47,922) 47,922
Total Investments (Cost $478,449) (a) -- 108.3% 662,035
Liabilities in excess of other assets -- (8.3)% (50,552)
TOTAL NET ASSETS -- 100.0% $611,483
(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 $199,340
Unrealized depreciation (15,781)
Net unrealized appreciation $183,559
(b) Non-income producing securities.
(c) All or a portion of the security was loaned as of October 31, 1999
See notes to financial statements.
139
<PAGE>
THE VICTORY PORTFOLIOS Schedule of Investments
Lakefront Fund October 31, 1999
(Amounts in Thousands, Except Shares)
Market
Security Description Shares Value
Common Stocks (98.3%)
Aerospace/Defense (4.2%):
AlliedSignal, Inc. 285 $ 16
Boeing Co. 406 19
United Technologies Corp. 575 35
70
Airlines (0.8%):
Delta Air Lines, Inc. 230 13
Automobiles (1.9%):
Ford Motor Co. 313 18
General Motors Corp. 205 14
32
Automotive Parts (2.2%):
Delphi Automotive Systems 897 15
Federal-Mogul Corp. 850 21
36
Banks (5.6%):
Chase Manhattan Corp. 720 63
Mellon Financial Corp. 380 14
National City Corp. 540 16
93
Beverages (1.6%):
Pepsico, Inc. 750 26
Brokerage Services (1.4%):
Paine Webber Group, Inc. 560 23
Building Materials (0.4%):
Armstrong World Industries, Inc. 165 6
Chemicals -- General (2.0%):
E.I. Du Pont de Nemours 520 34
Computers & Peripherals (10.7%):
Diebold, Inc. 880 23
Hewlett-Packard Co. 533 39
International Business Machines Corp. 420 42
Sun Microsystems, Inc. (b) 675 72
176
Cosmetics & Related (4.0%):
Avon Products, Inc. 795 26
Colgate-Palmolive Co. 667 40
66
Diversified (1.1%):
Tyco International Ltd. 486 $ 19
Electronic & Electrical --
General (2.8%):
General Electric Co. 240 32
Johnson Controls, Inc. 242 15
47
Entertainment (1.2%):
Walt Disney Co. 775 20
Financial Services (8.8%):
American Express Co. 421 65
Associates First Capital Corp. 346 13
Citigroup, Inc. 1,273 68
146
Health Care (2.1%):
C.R. Bard, Inc. 486 26
Tenet Healthcare Corp. (b) 465 9
35
Heavy Machinery (3.0%):
Caterpillar, Inc. 350 20
Cummins Engine, Inc. 240 12
Deere & Co. 477 17
49
Insurance -- Multi-Line (2.3%):
Allstate Corp. 765 22
CIGNA Corp. 215 16
38
Machinery -- Diversified (1.3%):
Rockwell International Corp. 425 21
Medical Supplies (1.1%):
Becton Dickinson & Co. 765 19
Metals (1.5%):
Reynolds Metal Co. 415 25
Oil-Integrated Companies (3.4%):
Mobil Corp. 325 31
Texaco, Inc. 408 25
56
Oilfield Services & Equipment (1.1%):
Schlumberger Ltd. 300 18
Packaging (0.8%):
Crown Cork & Seal Co., Inc. 565 14
140
<PAGE>
Pharmaceuticals (10.6%):
American Home Products Corp. 405 $ 21
Bristol-Myers Squibb Co. 590 46
Merck & Co., Inc. 445 35
Pharmacia & Upjohn, Inc. 675 36
Schering-Plough Corp. 722 37
175
Restaurants (1.4%):
Tricon Global Restaurants, Inc. (b) 600 24
Retail (1.6%):
K Mart Corp. (b) 2,700 27
Rubber & Rubber Products (0.4%):
M.A. Hanna Co. 683 7
Savings & Loans (1.2%):
Golden State Bancorp, Inc. (b) 950 20
Semiconductors (7.8%):
Intel Corp. 730 57
Texas Instruments, Inc. 820 73
130
Software & Computer
Services (1.2%):
Computer Associates International, Inc. 362 20
Utilities -- Electric (3.4%):
American Electric Power Co. 320 11
Duke Energy Corp. 370 21
Texas Utilities Co. 650 25
57
Utilities -- Natural Gas (2.3%):
Williams Cos., Inc. 1,025 $ 38
Utilities -- Telecommunications
(3.1%):
AT&T Corp. 550 25
Cincinnati Bell, Inc. (b) 415 9
GTE Corp. 235 18
52
Total Common Stocks (Cost $1,349) 1,632
Investment Companies (1.9%)
AIM Treasury Money Market Fund 32,419 32
Total Investment Companies (Cost $32) 32
Total Investments (Cost $1,381) (a) -- 100.2% 1,664
Liabilities in excess of other assets -- (0.2)% (3)
TOTAL NET ASSETS -- 100.0% $1,661
(a) Cost for federal income tax purposes differs from value by net unrealized
appreciation of securities as follows (amounts in thousands):
Unrealized appreciation $ 396
Unrealized depreciation (113)
Net unrealized appreciation $ 283
(b) Non-income producing securities.
See notes to financial statements.
141
<PAGE>
THE VICTORY PORTFOLIOS Schedule of Investments
Established Value Fund October 31, 1999
(Amounts in Thousands, Except Shares)
Shares or
Principal Market
Security Description Amount Value
Commercial Paper (1.9%)
General Electric Capital Corp.,
5.33%, 11/1/99 $ 9,116 $ 9,116
Total Commercial Paper (Cost $9,116) 9,116
Common Stocks (98.0%)
Aerospace/Defense (3.3%):
B.F. Goodrich Co. 180,000 4,264
Boeing Co. 140,000 6,449
Litton Industries, Inc. (b) 105,000 4,928
15,641
Airlines (1.1%):
Southwest Airlines Co. 300,000 5,044
Beverages (2.1%):
Adolph Coors Co. 175,000 9,713
Brokerage Services (3.0%):
Morgan Stanley Dean Witter 70,000 7,722
Paine Webber Group, Inc. 160,000 6,520
14,242
Building Materials (2.6%):
Armstrong World Industries, Inc. 100,000 3,738
Centex Corp. 160,000 4,290
Pulte Corp. 200,000 4,025
12,053
Chemicals (2.0%):
Air Products & Chemicals, Inc. 180,000 4,950
Englehard Corp. 255,000 4,494
9,444
Computers & Peripherals (7.9%):
Computer Sciences Corp. (b) 115,000 7,899
Sun Microsystems, Inc. (b) 275,000 29,099
36,998
Conglomerates (3.0%):
Crane Co. 210,000 4,292
Textron, Inc. 125,000 9,648
13,940
Consumer Products (1.7%):
Fortune Brands, Inc. 220,000 7,796
Electronic & Electrical -- General (3.9%):
Honeywell, Inc. 90,000 $ 9,489
Johnson Controls, Inc. 148,000 8,991
18,480
Entertainment (0.9%):
Brunswick Corp. 190,000 4,299
Financial & Insurance (2.6%):
AMBAC Financial Group, Inc. 110,000 6,573
MBIA, Inc. 100,000 5,706
12,279
Financial Services (14.1%):
Citigroup, Inc. 337,500 18,267
Countrywide Credit Industries, Inc. 150,000 5,091
Fannie Mae 95,000 6,721
Household International, Inc. 450,000 20,081
Providian Financial Corp. 150,000 16,350
66,510
Food Distributors, Supermarkets
& Wholesalers (2.5%):
Albertsons, Inc. 201,600 7,321
SUPERVALU, Inc. 200,000 4,200
11,521
Food Products (0.9%):
Earthgrains Co. 180,000 4,106
Forest Products --
Lumber & Paper (1.1%):
Georgia Pacific Corp. 130,000 5,159
Health Care (1.0%):
WellPoint Health Networks (b) 80,000 4,640
Heavy Machinery (1.8%):
Ingersoll Rand Co. 165,000 8,621
Household Goods -- Appliances,
Furnishings & Electronics (3.9%):
Premark International, Inc. 185,000 10,129
Whirlpool Corp. 115,000 8,014
18,143
Insurance -- Multi-Line (4.4%):
Aegon NV 100,538 9,243
CIGNA Corp. 93,000 6,952
Hartford Financial Services
Group, Inc. 84,000 4,352
20,547
142
<PAGE>
Insurance -- Property, Casualty,
Health (0.8%):
UnumProvident Corp. 109,500 $ 3,607
Leisure -- Recreation,
Gaming (2.3%):
Royal Caribbean Cruises Ltd. 200,000 10,613
Machine Tools (0.6%):
Milacron, Inc. 178,500 2,934
Manufacturing --
Miscellaneous (2.1%):
Cooper Industries, Inc. 118,000 5,081
Trinity Industries 160,000 4,770
9,851
Newspapers (1.6%):
Gannett Co., Inc. 97,000 7,481
Oil & Gas Exploration,
Production & Services (5.6%):
Coastal Corp. 290,000 12,217
El Paso Energy Corp. 200,000 8,200
Transocean Offshore, Inc. 210,000 5,709
26,126
Paint, Varnishes, Enamels (1.1%):
Sherwin-Williams Co. 225,000 5,034
Restaurants (2.5%):
Brinker International, Inc. (b) 250,000 5,828
Wendy's International, Inc. 254,000 6,064
11,892
Retail (4.4%):
Dayton Hudson Corp. 250,000 16,156
K-Mart Corp. (b) 450,000 4,528
20,684
Retail -- Department Stores (1.0%):
Federated Department Stores (b) 110,000 $ 4,696
Retail -- Specialty Stores (1.6%):
Lowe's Cos., Inc. 140,000 7,700
Staffing (0.8%):
Interim Services, Inc. (b) 218,000 3,583
Telecommunications (4.7%):
Qualcomm, Inc. (b) 100,000 22,275
Tools & Hardware
Manufacturing (1.1%):
Black & Decker Corp. 125,000 5,375
Transportation (1.3%):
FDX Corp. (b) 145,000 6,244
Utilities -- Electric (1.3%):
Duke Energy Corp. 105,000 5,933
Utilities -- Telecommunications
(1.4%):
SBC Communications, Inc. 130,000 6,622
Total Common Stocks (Cost $293,743) 459,826
Total Investments (Cost $302,859) (a) -- 99.9% 468,942
Other assets in excess of liabilities -- 0.1% 346
TOTAL NET ASSETS -- 100.0% $469,288
(a) Cost for federal income tax purposes differs from value by net unrealized
appreciation of securities as follows (amounts in thousands):
Unrealized appreciation $188,160
Unrealized depreciation (22,077)
Net unrealized appreciation $166,083
(b) Non-income producing securities.
See notes to financial statements.
143
<PAGE>
THE VICTORY PORTFOLIOS Schedule of Investments
Diversified Stock Fund October 31, 1999
(Amounts in Thousands, Except Shares)
Shares or
Principal Market
Security Description Amount Value
Commercial Paper (1.4%)
General Electric Capital Corp.,
5.33%, 11/1/99 $ 16,443 $ 16,443
Total Commercial Paper (Cost $16,443) 16,443
Common Stocks (99.3%)
Aerospace/Defense (2.9%):
Boeing Co. 440,000 20,267
Raytheon Co., Class B 441,600 12,862
33,129
Aluminum (1.8%):
Alcoa, Inc. (c) 330,000 20,048
Banks (0.8%):
First Union Corp. 225,000 9,605
Biotechnology (2.3%):
Chiron Corp. (b) (c) 500,000 14,281
Genentech, Inc. (b) 82,000 11,952
26,233
Cable Television (2.3%):
Comcast Corp., Class A
Special Shares (c) 630,000 26,539
Chemicals -- General (0.1%):
RPM, Inc. 120,187 1,435
Commercial Services (0.5%):
McKesson HBOC, Inc. 280,000 5,618
Computers & Peripherals (7.1%):
Dell Computer Corp. (b) 350,000 14,044
Diebold, Inc. 365,000 9,581
Electronic Data Systems Corp. 190,000 11,115
Hewlett-Packard Co. 180,000 13,331
International Business
Machines Corp. 190,400 18,731
Seagate Technology, Inc. (b) 475,000 13,983
80,785
Conglomerates (1.5%):
Berkshire Hathaway, Inc., Class B (b) 4,202 8,782
Textron, Inc. 100,000 7,719
16,501
Containers (2.2%):
Newell Rubbermaid, Inc. 730,000 25,276
Cosmetics & Related (2.6%):
Avon Products, Inc. (c) 555,000 $ 17,899
Gillette Co. (c) 325,000 11,761
29,660
Diversified (1.3%):
Tyco International Ltd. 364,882 14,572
Electronic & Electrical --
General (1.7%):
Thermo Electron Corp. (b) 550,000 7,425
Vishay Intertechnology, Inc. (b) 467,518 11,425
18,850
Entertainment (1.5%):
Walt Disney Co. (c) 650,000 17,144
Financial Services (4.5%):
Citigroup, Inc. (c) 72,500 3,924
Franklin Resources, Inc. 325,000 11,375
Goldman Sachs Group, Inc. 236,918 16,821
MBNA Corp. 680,000 18,785
50,905
Food Processing &
Packaging (2.8%):
ConAgra, Inc. 210,000 5,473
Quaker Oats Co. (c) 212,300 14,861
Ralston Purina Group 377,580 11,870
32,204
Forest Products --
Lumber & Paper (4.4%):
Bowater, Inc. (c) 383,400 20,129
International Paper Co. (c) 564,100 29,685
49,814
Health Care (1.3%):
Columbia HCA Healthcare Corp. 275,000 6,634
Tenet Healthcare Corp. (b) 404,800 7,869
14,503
Heavy Machinery (4.0%):
Caterpillar, Inc. (c) 250,000 13,813
Deere & Co. (c) 440,000 15,949
Ingersoll -- Rand Co. 290,000 15,153
44,915
Insurance (1.6%):
Progressive Corp. (c) 200,400 18,550
144
<PAGE>
Insurance -- Multi-Line (2.7%):
American International Group, Inc. 176,296 $ 18,147
Lincoln National Corp. 263,000 12,131
30,278
Insurance -- Property, Casualty,
Health (1.2%):
Everest Reinsurance Holdings 228,500 5,884
UnumProvident Corp. (c) 233,000 7,674
13,558
Internet Software (0.8%):
Yahoo, Inc. (b) (c) 50,000 8,953
Media (2.2%):
News Corp. Ltd. ADR (c) 846,900 25,089
Medical Supplies (0.8%):
Biomet, Inc. 294,967 8,886
Metals (0.5%):
Reynolds Metal Co. 98,600 5,959
Metals -- Fabrication (0.9%):
Kennametal, Inc. (c) 372,000 10,695
Oil & Gas Exploration,
Production & Services (1.7%):
Anadarko Petroleum Corp. 224,696 6,923
Helmerich & Payne 216,000 5,144
Noble Affiliates, Inc. 270,000 6,834
18,901
Oil-Integrated Companies (7.3%):
Exxon Corp. 30,000 2,222
Mobil Corp. 30,000 2,895
Texaco, Inc. 696,000 42,717
Unocal Corp. 420,000 14,490
USX-Marathon Group, Inc. 690,000 20,096
82,420
Oilfield Services & Equipment (3.1%):
Baker Hughes, Inc. 280,000 7,823
Halliburton Co. 270,600 10,198
Schlumberger Ltd. (c) 284,000 17,199
35,220
Pharmaceuticals (10.3%):
Abbott Laboratories (c) 525,000 $ 21,197
American Home Products Corp. 516,000 26,961
Merck & Co., Inc. 105,000 8,354
Pfizer, Inc. 810,000 31,995
Smithkline Beecham PLC ADR (c) 450,000 28,800
117,307
Radio & Television (2.6%):
AMFM, Inc. (b) (c) 190,000 13,300
AT&T Corp. -- Liberty Media,
Class A (b) 389,698 15,466
28,766
Retail (1.4%):
Autozone, Inc. (b) (c) 160,000 4,250
Saks, Inc. (b) 650,000 11,172
15,422
Semiconductors (3.1%):
Altera Corp. (b) 325,000 15,803
Intel Corp. (c) 250,000 19,360
35,163
Software & Computer Services (1.4%):
Computer Associates
International, Inc. (c) 75,000 4,238
Networks Associates, Inc. (b) (c) 325,000 5,952
Oracle Corp. (b) 125,000 5,945
16,135
Telecommunications -- Equipment (2.5%):
Motorola, Inc. (c) 295,000 28,744
Transportation (0.7%):
Canadian Pacific, Ltd. 338,600 7,978
Utilities -- Natural Gas (1.6%):
Enron Corp. 451,400 18,028
145
<PAGE>
Utilities -- Telecommunications
(7.3%):
AT&T Corp. (c) 687,151 $ 32,124
CenturyTel, Inc. 348,400 14,088
MCI Worldcom, Inc. (b) 247,804 21,265
Qwest Communications
International (b) (c) 425,000 15,300
82,777
Total Common Stocks (Cost $979,049) 1,126,565
Securities Purchased With Cash Collateral (16.9%)
Investment Companies (0.6%):
AIM Short Term Prime
Money Market Fund 2,027,117 2,027
AIM Liquid Assets
Money Market Fund 4,482,494 4,483
6,510
Repurchase Agreements (16.3%):
Lehman Corp., 5.43%, 11/1/99
(See Significant Accounting
Policies, Securities Lending in the
Notes to Financial Statements
for collateral description) $ 15,000 15,000
Prudential Corp., 5.53%, 11/1/99
(Collateralized by $15,343
Hydro-Quebec, 6.52%, 2/23/06,
Farmer Mac, 7.57%, 7/17/00, FMC,
0.00%, 12/17/99,
market value -- $15,300) 15,000 15,000
Prudential Corp., 5.49%, 11/1/99
(Collateralized by $15,472
Goldman Sachs Group LP,
6.65%, 8/1/03,
FMC, 0.00%, 12/17/99,
market value -- $15,300) 15,000 15,000
Merrill Lynch, 5.50%, 11/1/99 (See
Significant Accounting Policies,
Securities Lending in the Notes
to Financial Statements for collateral
description) 20,000 20,000
Morgan Stanley Dean Witter, 5.48%,
11/1/99 (See Significant Accounting
Policies, Securities Lending in the
Notes to Financial Statements for
collateral description) $ 35,000 $ 35,000
Nations Bank, 5.52%, 11/1/99
(See Significant Accounting Policies,
Securities Lending in the Notes to
Financial Statements for
collateral description) 30,000 30,000
Goldman Sachs Group L.P., 5.52%, 11/1/99
((See Significant Accounting Policies,
Securities Lending in the Notes to
Financial Statements for collateral
description) 25,000 25,000
Salomon Corp., 5.48%, 11/1/99
(Collateralized by $33,009 Chase
Manhattan Corp., 7.25%, 6/1/07,
market value -- $33,892) 30,000 30,000
185,000
Total Securities Purchased
With Cash Collateral (Cost $191,510) 191,510
Total Investments (Cost
$1,187,002) (a) -- 117.6% 1,334,518
Liabilities in excess of other assets --
(17.6)% (199,803)
TOTAL NET ASSETS -- 100.0% $1,134,715
(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 $1,143. Cost for federal income tax purposes differs from value
by net unrealized appreciation of securities as follows (amounts in
thousands):
Unrealized appreciation $188,512
Unrealized depreciation (42,139)
Net unrealized appreciation $146,373
(b) Non-income producing securities.
(c) All or a portion of this security was loaned as of October 31, 1999.
ADR -- American Depository Receipts
See notes to financial statements.
146
<PAGE>
THE VICTORY PORTFOLIOS Schedule of Investments
Stock Index Fund October 31, 1999
(Amounts in Thousands, Except Shares)
Shares or
Principal Market
Security Description Amount Value
Commercial Paper (11.3%)
Business Credit Institutions (11.3%):
General Electric Capital Corp.,
5.33%, 11/1/99 $ 73,444 $ 73,444
Sears Roebuck Acceptance Corp.,
6.21%, 1/26/00 25,000 25,000
Total Commercial Paper (Cost $98,444) 98,444
Common Stocks (87.7%)
Advertising (0.2%):
Interpublic Group of Cos., Inc. 18,990 771
Omnicom 11,966 1,053
1,824
Aerospace/Defense (1.1%):
AlliedSignal, Inc. 37,101 2,112
B.F. Goodrich Co. 7,415 176
Boeing Co. 64,762 2,983
General Dynamics Corp. 13,448 746
Lockheed Martin Corp. (d) 26,642 533
Northrop Grumman Corp. 4,656 255
Raytheon Co., Class B 22,768 663
United Technologies Corp. 32,477 1,965
9,433
Airlines (0.2%):
AMR Corp. (b) (d) 10,150 645
Delta Air Lines, Inc. (d) 9,462 515
Southwest Airlines Co. 34,008 572
U.S. Airways Group, Inc. (b) 4,827 135
1,867
Aluminum (0.3%):
Alcan Aluminum Ltd. (d) 15,231 502
Alcoa, Inc. (d) 24,724 1,502
Reynolds Metal Co. 4,240 256
2,260
Apparel (0.1%):
Liz Claiborne, Inc. (d) 4,141 166
Russell Corp. 2,248 34
VF Corp. 8,016 241
441
Apparel -- Footwear (0.1%):
Nike, Inc., Class B 18,981 1,072
Reebok International Ltd. (b) 3,799 37
1,109
Automobiles (0.9%):
Ford Motor Co. (d) 81,573 $ 4,477
General Motors Corp. 43,436 3,051
Navistar International Corp. (b) 4,456 186
PACCAR, Inc. (d) 5,244 247
7,961
Automotive Parts (0.2%):
Dana Corp. 11,214 332
Delphi Automotive Systems 38,097 625
TRW, Inc. 8,132 349
1,306
Banks (5.7%):
AmSouth Bankcorp 26,535 683
Bank of America Corp. 116,476 7,499
Bank of New York Co., Inc. 49,580 2,076
Bank One Corp. (d) 79,079 2,970
BB & T Corp. 21,546 784
Chase Manhattan Corp. 56,127 4,904
Comerica, Inc. 10,556 627
Fifth Third Bancorp (d) 20,367 1,503
First Union Corp. 64,505 2,754
Firstar Corp. 66,998 1,968
Fleet Boston Corp. 62,148 2,711
Huntington Bancshares, Inc. 15,530 460
J.P. Morgan & Co., Inc. (d) 11,838 1,549
KeyCorp 30,258 845
Mellon Financial Corp. 34,672 1,281
National City Corp. 41,680 1,230
Northern Trust Corp. 7,542 728
PNC Bank Corp. 20,539 1,225
Regions Financial Corp. 15,138 455
Republic New York Corp. 7,107 449
SouthTrust Corp. 11,305 452
State Street Corp. 10,883 828
Summit Bancorp 11,939 413
SunTrust Banks, Inc. 21,725 1,590
Synovus Financial Corp. (d) 18,313 393
U.S. Bancorp (d) 49,332 1,828
Union Planters Corp. (d) 9,636 429
Wachovia Corp. (d) 13,636 1,176
Wells Fargo Co. (d) 111,206 5,325
49,135
147
<PAGE>
Beverages (2.1%):
Anheuser-Busch Cos., Inc. (d) 31,523 $ 2,264
Brown-Forman Corp., Class B 4,629 312
Coca Cola Enterprises, Inc. (d) 28,678 733
Coca-Cola Co. 166,494 9,824
Coors (Adolph) Co. 2,469 137
PepsiCo, Inc. 98,603 3,420
Seagram Co. Ltd. (d) 29,161 1,440
18,130
Bio-Technology (0.5%):
Amgen, Inc. (b) 34,386 2,742
Monsanto Co. (d) 42,730 1,645
4,387
Brokerage Services (1.0%):
Merrill Lynch & Co., Inc. 24,918 1,956
Morgan Stanley, Dean Witter
& Co. (d) 38,473 4,244
Schwab (Charles) Corp. (d) 55,158 2,148
8,348
Building Materials (0.2%):
Armstrong World Industries, Inc. (d) 2,682 100
Centex Corp. 3,984 107
Fleetwood Enterprises, Inc. (d) 2,248 49
Kaufman & Broad Home Corp. 3,237 65
Masco Corp. (d) 29,867 910
Owens Corning 3,704 76
Pulte Corp. 2,923 59
Vulcan Materials Co. (d) 6,770 280
1,646
Chemicals -- General (1.1%):
Air Products & Chemicals, Inc. 15,493 426
Ashland, Inc. 4,867 161
Dow Chemical Co. (d) 14,839 1,754
E.I. Du Pont de Nemours Co. 70,375 4,534
Eastman Chemical Co. 5,320 205
Englehard Corp. 8,463 149
Great Lakes Chemical Corp. 3,963 141
Hercules, Inc. (d) 7,145 172
Nalco Chemical Co. 4,447 235
Praxair, Inc. 10,747 502
Rohm & Haas Co. 14,686 562
Sigma-Aldrich Corp. 6,792 194
Union Carbide Corp. 8,979 $ 548
W.R. Grace & Co. (b) 4,798 72
9,655
Commercial Services (0.2%):
Cendant Corp. (b) 48,571 801
Ecolab, Inc. 8,759 296
McKesson HBOC, Inc. (d) 18,966 381
Paychex, Inc. 16,617 654
2,132
Computers & Peripherals (7.1%):
3Com Corp. (b) 24,113 699
Adaptec, Inc. (b) 6,805 306
Apple Computer, Inc. (b) (d) 10,848 869
Cabletron Systems, Inc. (b) 11,741 194
Ceridian Corp. (b) 9,755 214
Cisco Systems, Inc. (b) 219,213 16,223
Compaq Computer Corp. (d) 114,629 2,178
Computer Sciences Corp. (b) (d) 10,788 741
Dell Computer Corp. (b) 171,351 6,876
Electronic Data Systems 33,256 1,945
EMC Corp. (b) (d) 68,331 4,988
Gateway, Inc. (b) (d) 21,152 1,397
Hewlett-Packard Co. 68,305 5,059
International Business
Machines Corp. 121,984 12,001
Lexmark International Group, Inc. (b) 8,665 676
Network Appliance, Inc. (b) 4,961 367
Seagate Technology, Inc. (b) 15,047 443
Silicon Graphics, Inc. (b) 12,754 99
Sun Microsystems, Inc. (b) (d) 52,180 5,522
Unisys Corp. (b) 20,633 500
61,297
Construction (0.0%):
Fluor Corp. 5,120 204
Foster Wheeler Corp. 2,724 31
235
Consumer Products (1.6%):
American Greetings Corp., Class A 4,553 118
Clorox Co. 15,944 653
Colgate-Palmolive Co. 39,310 2,378
Fortune Brands, Inc. 11,220 398
Jostens, Inc. (d) 2,323 49
148
<PAGE>
Newell Rubbermaid, Inc. (d) 19,037 $ 659
Procter & Gamble Co. (d) 89,579 9,394
Tupperware Corp. 3,880 77
13,726
Containers (0.1%):
Ball Corp. 2,070 83
Bemis, Inc. 3,535 124
Crown Cork & Seal, Inc. 8,249 197
Owens-Illinois, Inc. (b) (d) 10,530 252
Sealed Air Corp. (b) (d) 5,620 312
968
Cosmetics & Related (0.7%):
Alberto Culver Co. 3,805 90
Avon Products, Inc. (d) 17,585 567
Gillette Co. 73,160 2,647
International Flavor & Fragance, Inc. 7,135 273
Kimberly-Clark Corp. 35,971 2,271
5,848
Distribution/Wholesale (0.2%):
Costco Wholesale Corp. (b) 14,840 1,192
Genuine Parts Co. (d) 12,098 315
1,507
Electrical Equipment (0.2%):
Emerson Electric Co. 29,299 1,760
Electronic & Electrical -- General (4.1%):
General Electric Co. 221,178 29,983
Tandy Corp. 13,032 820
Texas Instruments, Inc. 52,966 4,754
35,557
Electronics (0.5%):
Analog Devices (b) 11,810 627
Honeywell, Inc. 8,595 906
Johnson Controls, Inc. 5,711 347
Millipore Corp. 3,035 97
Parker-Hannifin Corp. (d) 7,310 335
PE Corp. -- PE Biosystems Group 6,892 447
PerkinElmer, Inc. (d) 3,054 125
Solectron Corp. (b) (d) 18,195 1,369
Tektronix, Inc. 3,133 106
Thermo Electron Corp. (b) 10,631 144
Thomas & Betts Corp. 3,819 171
4,674
Entertainment (0.5%):
Brunswick Corp. 6,212 $ 141
King World Productions, Inc. (b) 4,774 185
The Walt Disney Co. (d) 139,060 3,667
3,993
Environmental Control (0.1%):
Allied Waste Industries, Inc. (b) 12,720 134
Waste Management, Inc. 41,755 767
901
Financial & Insurance (0.0%):
MBIA, Inc. 6,722 384
Financial Services (4.0%):
American Express Co. 30,294 4,665
Associates First Capital Corp. 49,094 1,792
Bear Stearns Companies, Inc. 7,867 335
Capital One Financial Corp. 13,344 707
Citigroup, Inc. 227,725 12,326
Countrywide Credit Industries, Inc. 7,618 259
Deluxe Corp. 5,112 144
Equifax, Inc. (d) 9,693 262
Fannie Mae 69,114 4,890
Franklin Resources, Inc. 17,020 596
Freddie Mac 46,875 2,534
Household International, Inc. (d) 32,273 1,440
Lehman Brothers Holding, Inc. (d) 8,082 596
MBNA Corp. 54,063 1,493
Paine Webber Group, Inc. (d) 9,816 400
Price (T. Rowe) Associates 8,185 291
Providian Financial Corp. 9,561 1,042
SLM Holding Corp. 10,850 531
34,303
Food Distributors (0.6%):
Albertsons, Inc. 28,345 1,029
Great Atlantic & Pacific Tea, Inc. 2,574 74
Kroger Co. (b) (d) 55,929 1,164
Safeway, Inc. (b) (d) 34,409 1,215
SUPERVALU, Inc. 9,365 197
Sysco Corp. 22,331 858
Winn-Dixie Stores, Inc. (d) 10,041 272
4,809
149
<PAGE>
Food Processing &
Packaging (1.6%):
Archer Daniels Midland Co. (d) 41,638 $ 513
Bestfoods 18,808 1,105
Campbell Soup Co. (d) 29,275 1,317
ConAgra, Inc. 32,919 858
General Mills, Inc. 10,326 900
H.J. Heinz Co. (d) 24,167 1,154
Hershey Foods Corp. 9,440 477
Kellogg Co. (d) 27,371 1,090
Nabisco Group Holdings Corp. 21,946 281
Quaker Oats Co. 9,021 631
Ralston-Ralston Purina Group 21,808 686
Sara Lee Corp. 60,920 1,649
Unilever N.V 38,540 2,569
Wm. Wrigley Jr. Co. 7,852 628
13,858
Forest Products --
Lumber & Paper (0.6%):
Boise Cascade Corp. 3,848 137
Champion International Corp. (d) 6,468 374
Fort James Corp. 14,915 392
Georgia Pacific Corp. (d) 11,597 460
International Paper Co. 27,888 1,468
Louisiana Pacific Corp. 7,242 92
Mead Corp. 6,872 247
Potlatch Corp. 1,955 82
Temple-Inland, Inc. 3,747 218
Westvaco Corp. 6,768 201
Weyerhauser Co. (d) 13,554 809
Willamette Industries, Inc. 7,522 313
4,793
Funeral Services (0.0%):
Service Corp. International 18,376 176
Health Care (0.5%):
Columbia/HCA Healthcare Corp. 38,046 918
Humana, Inc. (b) 11,322 78
Mallinckrodt, Inc. 4,797 163
Manor Care, Inc. (b) (d) 7,223 114
Medtronic, Inc. (d) 79,130 2,739
Wellpoint Health Networks (b) 4,436 257
4,269
Heavy Machinery (0.3%):
Case Corp. 5,247 $ 278
Caterpillar Tractor, Inc. (d) 23,974 1,324
Deere & Co. 15,757 571
Ingersoll Rand Co. 11,132 582
McDermott International, Inc. 3,959 72
2,827
Hotels & Motels (0.1%):
Harrah's Entertainment, Inc. (b) 8,623 250
Hilton Hotels Corp. (d) 17,193 159
Marriott International, Inc., Class A 16,775 564
Mirage Resorts, Inc. (b) 13,432 196
1,169
Household Goods -- Appliances,
Furnishings & Electronics (0.1%):
Leggett & Platt, Inc. 13,245 294
Maytag Corp. 5,884 236
Whirlpool Corp. 5,056 352
882
Insurance -- Multi-Line (2.7%):
Aetna, Inc. (d) 9,526 479
Aflac, Inc. (d) 17,926 916
Allstate Corp. 53,832 1,548
American General Corp. (d) 16,797 1,246
American International Group 104,392 10,745
AON Corp. (d) 17,307 614
CIGNA Corp. 13,426 1,004
Cincinnati Financial Corp. 11,156 400
Conseco, Inc. 22,053 536
Hartford Financial Services
Group, Inc. 15,239 790
Jefferson Pilot Corp. 7,128 535
Lincoln National Corp. 13,406 618
Loews Corp. (d) 7,253 514
Marsh & McLennan Cos., Inc. 17,785 1,406
MGIC Investment Corp. (d) 7,347 439
Progressive Corp. 4,925 456
Safeco Corp. (d) 8,869 244
Torchmark Corp. 9,010 281
UnumProvident Corp. 16,082 530
23,301
150
<PAGE>
Insurance -- Property, Casualty, Health (0.1%):
Chubb Corp. 11,883 $ 652
St. Paul Cos., Inc. 15,288 489
1,141
Leisure -- Recreation, Gaming (0.2%):
Carnival Corp. 41,359 1,840
Machine -- Diversified (0.4%):
Applied Materials, Inc. (b) (d) 25,315 2,273
Briggs & Stratton Corp. 1,543 90
Cummins Engine Co., Inc. 2,851 145
Dover Corp. 14,053 598
NACCO Industries, Inc. 551 26
Rockwell International Corp. (d) 12,864 623
3,755
Manufacturing --
Capital Goods (0.2%):
Cooper Industries, Inc. 6,349 273
Illinois Tool Works, Inc. (d) 16,922 1,240
1,513
Manufacturing -- Miscellaneous (1.3%):
Corning, Inc. (d) 16,489 1,296
Crane Co. (d) 4,594 94
Danaher Corp. 9,586 463
Eaton Corp. (d) 4,851 365
FMC Corp. (b) 2,145 87
ITT Industries, Inc. 5,898 202
Minnesota Mining &
Manufacturing Co. (d) 27,203 2,586
National Service Industries, Inc. 2,770 89
Pall Corp. 8,368 184
PPG Industries, Inc. 11,736 711
Tenneco, Inc. 11,490 184
Textron, Inc. 10,126 782
Tyco International Ltd. (d) 112,828 4,506
11,549
Media (1.3%):
Knight-Ridder, Inc. (d) 5,463 347
Media One Group, Inc. (b) (d) 40,911 2,907
Time Warner, Inc. (d) 87,216 6,078
Viacom, Inc., Class B (b) (d) 46,974 2,102
11,434
Medical Services (0.1%):
Healthsouth Corp. (b) 28,020 $ 161
Tenet Healthcare Corp. (b) 20,980 408
United Healthcare Corp. 11,698 605
1,174
Medical Supplies (0.5%):
Bausch & Lomb, Inc. 3,854 208
Baxter International, Inc. 19,631 1,274
Becton Dickinson & Co. 16,872 428
Biomet, Inc. 7,596 229
Boston Scientific Corp. (b) 27,887 561
C.R. Bard, Inc. 3,472 187
Guidant Corp. 20,413 1,008
St. Jude Medical, Inc. (b) 5,666 155
4,050
Medical -- Information
Systems (0.1%):
IMS Health, Inc. 21,093 612
Metals -- Fabrication (0.0%):
Timken Co. 4,151 74
Worthington Industries, Inc. 6,186 103
177
Mining (0.1%):
Barrick Gold Corp. 26,295 482
Homestake Mining Co. 17,580 147
Newmont Mining Corp. 11,311 248
877
Newspapers (0.4%):
Dow Jones & Co., Inc. 6,120 376
Gannett, Inc. (d) 18,907 1,458
New York Times Co., Class A (d) 11,740 473
Times Mirror Co., Class A 3,951 285
Tribune Co. 16,014 961
3,553
Office Equipment & Supplies
(Non-Computer Related) (0.4%):
Avery Dennison Corp. 7,683 480
IKON Office Solutions, Inc. (d) 10,046 69
Office Depot, Inc. (b) 25,273 314
Pitney Bowes, Inc. 18,042 822
Staples, Inc. (b) 31,342 695
Xerox Corp. (d) 44,680 1,252
3,632
151
<PAGE>
Oil & Gas Exploration,
Production & Services (0.8%):
Amerada Hess Corp. 6,106 $ 350
Anadarko Petroleum Corp. 8,592 265
Apache Corp. (d) 7,678 299
Burlington Resource, Inc. 11,982 418
Coastal Corp. 14,405 607
Columbia Energy Group 5,530 359
Consolidated Natural Gas Co. 6,468 414
Enron Corp. 48,133 1,923
Helmerich & Payne, Inc. 3,321 79
Kerr-McGee Corp. (d) 5,836 314
Occidental Petroleum Corp. 23,511 536
Oneok, Inc. 2,137 62
Rowan Cos., Inc. (b) 5,598 87
Tosco Corp. (d) 10,235 259
Union Pacific Resources Group, Inc. 16,984 246
Williams Cos., Inc. 29,277 1,099
7,317
Oil-Integrated Companies (4.3%):
Atlantic Richfield Co. 21,752 2,027
Chevron Corp. 44,277 4,043
Conoco, Inc., Class B 42,286 1,147
Exxon Corp. 163,702 12,125
Mobil Corp. 52,802 5,096
Phillips Petroleum Co. 17,060 793
Royal Dutch Petroleum Co. 144,587 8,667
Sunoco, Inc. 6,111 147
Texaco, Inc. 37,270 2,287
Unocal Corp. 16,361 564
USX-Marathon Group, Inc. 20,853 607
37,503
Oilfield Services &
Equipment (0.5%):
Baker Hughes, Inc. 22,174 619
Halliburton Co. 29,768 1,122
Schlumberger Ltd. 36,958 2,239
3,980
Paint, Varnishes, Enamels (0.0%):
Sherwin-Williams Co. 11,413 255
Pharmaceuticals (8.0%):
Abbott Laboratories (d) 102,581 4,142
Allergan, Inc. (d) 4,499 483
Alza Corp., Class A (b) 6,811 292
American Home Products Corp. 88,106 4,604
Bristol-Myers Squibb Co. 133,918 $ 10,287
Cardinal Health, Inc. (d) 18,408 794
Eli Lilly & Co. 73,687 5,075
Johnson & Johnson, Inc. (d) 90,654 9,496
Merck & Co., Inc. 158,155 12,582
Pfizer, Inc. 261,283 10,321
Pharmacia & Upjohn, Inc. 34,164 1,843
Schering-Plough Corp. 99,006 4,901
Warner-Lambert Co. 57,633 4,600
Watson Pharmaceuticals, Inc. (b) (d) 6,462 205
69,625
Photography (0.2%):
Eastman Kodak Co. 21,341 1,471
Polaroid Corp. (d) 2,944 66
1,537
Pipelines (0.1%):
El Paso Energy Corp. (d) 15,106 619
Primary Metal & Mineral
Production (0.1%):
Asarco, Inc. 2,659 78
Freeport-McMoRan Copper
& Gold, Inc., Class B 11,044 184
Inco Ltd. (d) 12,970 263
Phelps Dodge Corp. (d) 6,024 340
Placer Dome, Inc. (d) 21,990 267
1,132
Publishing (0.2%):
Dun & Bradstreet 10,857 319
McGraw-Hill Cos., Inc. (d) 13,270 791
Meredith Corp. 3,504 125
R.R. Donnelley & Sons Co. 8,609 209
1,444
Radio & Television (0.7%):
CBS Corp. (b) (d) 47,516 2,319
Clear Channel
Communications, Inc. (b) (d) 22,766 1,830
Comcast Corp., Class A Special Shares 50,534 2,129
6,278
Railroads (0.4%):
Burlington Northern Santa Fe 31,348 1,000
CSX Corp. 14,687 602
Norfolk Southern Corp. 25,671 627
Union Pacific Corp. 16,738 933
3,162
152
<PAGE>
Restaurants (0.5%):
Darden Restaurants, Inc. 8,909 $ 170
McDonald's Corp. 91,345 3,767
Tricon Global Restaurants (b) 10,373 417
Wendy's International, Inc. 8,189 196
4,550
Retail (2.4%):
Bed Bath & Beyond, Inc. (b) (d) 9,420 314
Best Buy, Inc. (b) (d) 13,742 764
Dayton Hudson Corp. 29,810 1,926
Dollar General Corp. (d) 15,148 400
K-Mart Corp. (b) (d) 33,289 335
Wal-Mart Stores, Inc. (d) 300,066 17,009
20,748
Retail -- Department Stores (0.5%):
Consolidated Stores Corp. (b) (d) 7,397 135
Dillard's, Inc., Class A 7,178 135
Federated Department
Stores, Inc. (b) (d) 14,064 600
Harcourt General, Inc. 4,804 185
J.C. Penney Co., Inc. (d) 17,805 452
Kohls Corp. (b) 10,993 823
May Department Stores Co. 22,576 783
Neiman Marcus Group Inc. (b) -- --
Nordstrom, Inc. 9,458 236
Sears, Roebuck & Co. (d) 25,649 723
4,072
Retail -- Drug Stores (0.4%):
CVS Corp. 26,406 1,147
Longs Drug Stores Corp. 2,612 71
Rite Aid Corp. (d) 17,491 153
Walgreen Co. 67,669 1,705
3,076
Retail -- Specialty Stores (1.5%):
AutoZone, Inc. (b) (d) 10,086 268
Circuit City Stores, Inc. 13,546 578
Home Depot, Inc. 99,999 7,550
Limited, Inc. (d) 14,402 592
Lowe's Cos., Inc. (d) 25,720 1,415
Pep Boys -- Manny, Moe & Jack 3,553 44
The Gap, Inc. 57,819 2,147
TJX Cos., Inc. 21,421 581
Toys "R" Us, Inc. (b) 16,695 236
13,411
Rubber & Rubber Products (0.1%):
Cooper Tire & Rubber Co. 5,123 $ 86
Goodyear Tire & Rubber Co. (d) 10,539 436
522
Savings & Loans (0.2%):
Golden West Financial Corp. 3,709 414
Washington Mutual, Inc. 39,048 1,404
1,818
Semiconductors (2.3%):
Advanced Micro Devices, Inc. (b) (d) 9,903 196
Intel Corp. 223,054 17,272
KLA-Tencor Corp. (b) 5,956 472
LSI Logic Corp. (b) (d) 9,938 529
Micron Technology, Inc. (b) 16,917 1,206
National Semiconductor Corp. (b) 11,349 340
20,015
Software & Computer
Services (6.3%):
Adobe Systems, Inc. 8,222 575
America Online, Inc. (b) 74,716 9,690
Autodesk, Inc. 4,002 75
Automatic Data Processing (d) 41,721 2,010
BMC Software, Inc. (b) (d) 16,133 1,036
Computer Associates
International, Inc. 36,209 2,046
Compuware Corp. (b) (d) 24,079 670
First Data Corp. 28,929 1,322
Microsoft Corp. (b) 344,146 31,854
Novell, Inc. (b) 22,588 453
Oracle Corp. (b) 97,062 4,617
Parametric Technology Corp. (b) (d) 18,156 346
Peoplesoft, Inc. (b) (d) 16,402 246
Shared Medical Systems Corp. 1,801 68
55,008
Steel (0.1%):
Allegheny Teledyne, Inc. 12,846 195
Bethlehem Steel Corp. (b) 8,816 61
Nucor Corp. 5,879 305
USX-U.S. Steel Group, Inc. 5,927 152
713
Tax Return Services (0.0%):
H&R Block, Inc. 6,567 280
153
<PAGE>
Telecommunications (0.7%):
Global Crossing Ltd. (b) 51,330 $ 1,777
Nextel Communications, Inc. (b) (d) 22,359 1,927
Sprint Corp. (PCS Group) (b) (d) 29,655 2,460
6,164
Telecommunications -- Equipment (3.3%):
ADC Telecommunications, Inc. (b) 10,085 481
Andrew Corp. (b) 5,532 71
Comverse Technology, Inc. (b) 4,685 532
General Instrument Corp. (b) 11,662 628
Harris Corp. 5,363 120
Lucent Technologies, Inc. (d) 206,600 13,273
Motorola, Inc. (d) 40,942 3,989
Nortel Networks Corp. (d) 89,492 5,543
Qualcomm, Inc. (b) 10,825 2,411
Scientific-Atlanta, Inc. 5,157 295
Tellabs, Inc. (b) 26,401 1,670
29,013
Textile Manufacturing (0.0%):
Springs Industries, Inc., Class A 1,206 48
Tobacco & Tobacco
Products (0.5%):
Philip Morris Cos., Inc. 161,163 4,059
UST, Inc. 11,740 325
4,384
Tools & Hardware
Manufacturing (0.1%):
Black & Decker Corp. (d) 5,897 254
Milacron, Inc. 2,502 41
Snap-on, Inc. 4,404 134
Stanley Works (d) 5,957 165
W.W. Grainger, Inc. (d) 6,340 268
862
Toys (0.1%):
Hasbro, Inc. 13,178 272
Mattel, Inc. (d) 28,336 379
651
Transportation (0.1%):
FDX Corp. (b) 20,096 865
Kansas City Southern
Industries, Inc. (d) 7,455 354
1,219
Transportation Leasing
&Trucking (0.0%):
Ryder Systems, Inc. 4,744 $ 101
Transportation Services (0.0%):
Laidlaw, Inc. 22,306 137
Utilities -- Electric (1.8%):
Ameren Corp. 9,271 351
American Electric Power Co. (d) 13,021 449
Carolina Power & Light Co. 10,744 371
Central & South West Corp. 14,365 319
CINergy Corp. 10,734 303
CMS Energy Corp. 7,927 292
Consolidated Edison Co. of
New York, Inc. (d) 14,903 569
Constellation Energy Group, Inc. 10,105 310
Detroit Edison Co. 9,784 325
Dominion Resources, Inc. 12,970 624
Duke Energy Corp. 24,607 1,391
Edison International 23,458 695
Entergy Corp. 16,671 499
FirstEnergy Corp. 15,776 411
Florida Progress Corp. (d) 6,622 303
FPL Group, Inc. 12,086 608
GPU, Inc. 8,492 288
New Century Energies, Inc. 7,766 253
Niagara Mohawk Holdings, Inc. (b) 12,616 200
Northern States Power Co. 10,378 223
PacifiCorp 20,088 414
Peco Energy Co. 12,582 480
PG&E Corp. 25,915 594
Pinnacle West Capital Corp. 5,740 212
PP&L Resources, Inc. 10,654 288
Public Service Enterprise Group 14,834 587
Reliant Energy, Inc. (d) 19,946 544
Southern Co. 46,064 1,225
Texas Utilities Co. 18,638 722
The AES Corp. (b) (d) 13,898 784
Unicom Corp. (d) 14,675 562
15,196
154
<PAGE>
Utilities -- Gas (0.1%):
Eastern Enterprises 1,810 $ 93
NICOR, Inc. 3,152 122
Peoples Energy Corp. 2,374 90
Sempra Energy 16,223 331
636
Utilities -- Telecommunications
(6.8%):
Alltel Corp. 20,613 1,716
AT&T Corp. (d) 215,480 10,074
Bell Atlantic Corp. (d) 104,698 6,799
BellSouth Corp. (d) 127,129 5,721
CenturyTel, Inc. 9,413 381
GTE Corp. 66,140 4,961
MCI Worldcom, Inc. (b) 126,301 10,837
SBC Communications, Inc. 230,237 11,727
Sprint Corp. (FON Group) 58,448 4,343
U. S. West, Inc. 34,024 2,078
58,637
Total Common Stocks (Cost $483,164) 760,291
U.S. Treasury Bills (0.8%)
4.38%, 12/16/99 (c) 6,900 6,862
Total U.S. Treasury Bills (Cost $6,861) 6,862
Securities Purchased With Cash
Collateral (14.0%)
Investment Companies (3.6%):
AIM Short Term Prime
Money Market Fund 9,830,018 9,830
AIM Liquid Assets
Money Market Fund 21,736,787 21,737
31,567
Repurchase Agreements (10.4%):
Lehman Corp., 5.43%, 11/1/99
(Collateralized by $31,470
Restructured Asset Securities,
0.00%, 7/17/00,
FNMA, 8.50%, 9/1/11,
market value -- $20,531) $ 20,000 20,000
Morgan Stanley Dean Witter,
5.48%, 11/1/99
(See Significant Accounting
Policies, Securities Lending in the
Notes to Financial Statements
for collateral description) 20,000 20,000
Nations Bank, 5.52%, 11/1/99 (See
Significant Accounting Policies,
Securities Lending in the Notes
to Financial Statements for
collateral description) $ 20,000 $ 20,000
Goldman Sachs Group L.P., 5.52%,
11/1/99 (See Significant Accounting
Policies, Securities Lending in the
Notes to Financial Statements for
collateral description) 15,000 15,000
Salomon Corp., 5.48%, 11/1/99
(Collateralized by $16,663 Chase
Manhattan Corp., 7.25%, 6/1/07,
market value -- $17,109) 15,000 15,000
90,000
Total Securities Purchased
With Cash Collateral (Cost $121,567) 121,567
Total Investments (Cost $710,036) (a) -- 113.8% 987,164
Other assets in excess of liabilities -- (13.8)% (119,547)
TOTAL NET ASSETS -- 100.0% $ 867,617
(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 $770. Cost for federal income tax purposes differs from value
by net unrealized appreciation of securities as follows (amounts in
thousands):
Unrealized appreciation $299,911
Unrealized depreciation (21,751)
Net unrealized appreciation $278,160
(b) Non-income producing securities.
(c) Serves as collateral for futures contracts.
Number of Market
Contracts Value
S&P 500 Index,
face amount $104,165
expiring December 16, 1999 308 $105,967
Total Futures Contracts (Cost $104,165) $105,967
(d) All or a portion of the security was loaned as of October 31, 1999
See notes to financial statements.
155
<PAGE>
THE VICTORY PORTFOLIOS Schedule of Investments
Growth Fund October 31, 1999
(Amounts in Thousands, Except Shares)
Shares or
Principal Market
Security Description Amount Value
Commercial Paper (1.3%)
Business Credit Institutions (1.3%):
General Electric Capital Corp.,
5.33%, 11/1/99 $5,560 $5,560
Total Commercial Paper (Cost $5,560) 5,560
Common Stocks (99.3%)
Aerospace/Defense (3.3%):
AlliedSignal, Inc. 75,800 4,316
Boeing Co. 93,000 4,284
United Technologies Corp. 86,900 5,257
13,857
Banks (4.8%):
Bank of America Corp. 74,600 4,802
Mellon Financial Corp. 174,000 6,427
Wells Fargo Co. 187,200 8,963
20,192
Beverages (2.3%):
Anheuser-Busch Cos., Inc. 45,700 3,282
Coca-Cola Co. 37,900 2,236
Pepsico, Inc. 115,300 3,999
9,517
Chemicals -- General (1.1%):
Air Products & Chemicals, Inc. 53,200 1,463
E.I. Du Pont de Nemours 24,898 1,604
Sigma-Aldrich 60,200 1,716
4,783
Computers & Peripherals (8.2%):
Cisco Systems, Inc. (b) 178,700 13,225
Dell Computer Corp. (b) 66,800 2,680
Hewlett-Packard Co. 35,800 2,651
International Business
Machines Corp. 108,300 10,654
Sun Microsystems, Inc. (b) 46,200 4,889
34,099
Conglomerates (1.0%):
Textron, Inc. 56,600 4,369
Consumer Products (2.9%):
Colgate-Palmolive Co. 87,000 $ 5,264
Procter & Gamble Co. (c) 66,700 6,995
12,259
Containers (0.7%):
Newell Rubbermaid, Inc. 79,000 2,735
Cosmetics & Related (0.5%):
Avon Products, Inc. 68,200 2,199
Diversified (0.4%):
Tyco International Ltd. 42,200 1,685
Electrical Equipment (1.3%):
Emerson Electric Co. 92,900 5,580
Electronic & Electrical -- General (4.8%):
General Electric Co. 146,600 19,873
Financial Services (4.3%):
Citigroup, Inc. 152,300 8,243
Fannie Mae 90,000 6,368
Goldman Sachs Group, Inc. 45,400 3,223
17,834
Food Processing &
Packaging (2.4%):
Bestfoods 57,200 3,361
General Mills, Inc. 77,700 6,774
10,135
Forest Products --
Lumber & Paper (1.0%):
International Paper Co. 32,700 1,721
Mead Corp. 68,300 2,459
4,180
Health Care (4.9%):
Cardinal Health, Inc. (c) 29,100 1,255
Columbia/HCA Healthcare Corp. 134,000 3,233
Johnson & Johnson, Inc. 84,600 8,862
Medtronic, Inc. 145,800 5,048
McKesson HBOC, Inc. 102,000 2,046
20,444
Insurance -- Multi-Line (3.1%):
American International Group 124,875 12,854
Manufacturing --
Capital Goods (0.7%):
Cooper Industries, Inc. 69,000 2,971
156
<PAGE>
Media (2.1%):
Time Warner, Inc. (c) 66,000 $ 4,599
Viacom, Inc., Class B (b) 95,600 4,278
8,877
Newspapers (1.7%):
Gannett Co., Inc. 93,000 7,173
Oil & Gas Exploration,
Production & Services (0.4%):
Anadarko Petroleum Corp. 50,300 1,550
Oil-Integrated Companies (2.9%):
Chevron Corp. 23,000 2,100
Conoco, Inc., Class A (c) 61,300 1,682
Conoco, Inc., Class B 69,035 1,873
Mobil Corp. 65,200 6,291
11,946
Oilfield Services &
Equipment (1.1%):
Schlumberger Ltd. 77,300 4,681
Pharmaceuticals (11.5%):
Abbott Laboratories (c) 147,500 5,955
American Home Products Corp. 84,200 4,399
Bristol-Myers Squibb Co. 107,500 8,258
Eli Lilly & Co. 33,400 2,300
Merck & Co., Inc. 73,500 5,848
Pfizer, Inc. 343,100 13,553
Schering-Plough Corp. 154,500 7,649
47,962
Retail (4.1%):
Dayton Hudson Corp. 106,600 6,889
Wal-Mart Stores, Inc. (c) 181,000 10,260
17,149
Retail -- Drug Stores (1.1%):
Walgreen Co. 174,500 4,395
Retail -- Specialty Stores (2.2%):
Home Depot, Inc. 121,600 $ 9,181
Semiconductors (3.7%):
Altera Corp. (b) 62,800 3,054
Applied Materials, Inc. (b) (c) 22,600 2,030
Intel Corp. 135,400 10,485
15,569
Software & Computer
Services (8.4%):
Automatic Data Processing 150,000 7,228
Electronic Data Systems 87,900 5,142
Microsoft Corp. (b) 185,500 17,170
Oracle Corp. (b) 113,300 5,389
34,929
Telecommunications -- Equipment (3.8%):
Lucent Technologies, Inc. 125,800 8,083
Motorola, Inc. 78,100 7,610
15,693
Tobacco & Tobacco
Products (0.5%):
Philip Morris Cos., Inc. 77,500 1,952
Utilities -- Gas (1.1%):
Enron Corp. 117,900 4,709
Utilities -- Telecommunications
(7.0%):
AT&T Corp. (c) 45,400 2,122
GTE Corp. 68,100 5,108
MCI Worldcom, Inc. (b) 106,500 9,139
SBC Communications, Inc. 249,324 12,700
29,069
Total Common Stocks (Cost $267,337) 414,401
157
<PAGE>
Securities Purchased With Cash Collateral (7.7%)
Repurchase Agreements (7.7%):
Merrill Lynch, 5.50%, 11/1/99
(Collateralized by $5,215
Illinova Corp., 6.46%, 10/1/02,
market value -- $5,151) 5,000 $ 5,000
Morgan Stanley Dean Witter,
5.48%, 11/1/99 (Collateralized by
$11,000 ICI Wilmington, 8.75%, 5/1/01,
PP&L, 7.15%, 6/25/09,
market value -- $11,661) 10,000 10,000
Salomon Corp., 5.48%, 11/1/99
(Collateralized by $9,615
Ford Holdings, Inc.,
9.30%, 3/1/30,
market value -- $11,346) 10,000 10,000
Goldman Sachs Group L.P.,
5.52%, 11/1/99
(Collateralized by $9,541
Mid American Energy Co.,
6.50%, 12/17/01,
Heller Financial, Inc.,
6.44%, 10/6/02,
market value -- $9,573) 7,000 7,000
32,000
Total Securities Purchased
With Cash Collateral (Cost $32,000) 32,000
Total Investments (Cost $304,897) (a) -- 108.3% 451,961
Liabilities in excess of other assets -- (8.3)% (34,544)
TOTAL NET ASSETS -- 100.0% $417,417
(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 $106. Cost for federal income tax purposes differs from value
by net unrealized appreciation of securities as follows (amounts in
thousands):
Unrealized appreciation $151,917
Unrealized depreciation (4,959)
Net unrealized appreciation $146,958
(b) Non-income producing securities.
(c) All or a portion of this security was loaned as of October 31, 1999.
See notes to financial statements.
158
<PAGE>
Statements of Assets and Liabilities
The Victory Portfolios October 31, 1999
(Amounts in Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Established Diversified Stock
Value Lakefront Value Stock Index Growth
Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments, at value (Cost $444,449; $1,381;
$302,859; $1,002,002; $620,036 & $272,897) $628,035 $1,664 $468,942 $1,149,518 $897,164 $419,961
Repurchase agreements, at cost 34,000 -- -- 185,000 90,000 32,000
Total Investments 662,035 1,664 468,942 1,334,518 987,164 451,961
Cash -- -- -- 18 -- --
Interest and dividends receivable 613 2 219 727 684 294
Receivable for capital shares issued 22 -- 32 643 101 51
Receivable from brokers for investments sold 1,165 -- 754 5,242 -- 857
Reclaims Receivable -- -- -- -- 9 --
Receivable for net variation margin
on open futures contracts -- -- -- -- 2,037 --
Unamortized organization costs -- 14 -- -- -- --
Prepaid expenses and other assets 13 9 25 21 24 10
Total Assets 663,848 1,689 469,972 1,341,169 990,019 453,173
LIABILITIES:
Payable to Custodian -- -- -- -- 214 2
Payable for capital shares redeemed -- -- 183 421 44 24
Payable to brokers for investments purchased 3,811 -- -- 13,423 153 3,302
Payable for organization cost -- 25 -- -- -- --
Payable for return of collateral received 47,922 -- -- 191,510 121,567 32,000
Accrued expenses and other payables:
Investment advisory fees 477 1 157 566 359 312
Administration fees 11 -- 3 18 -- 8
Custodian fees 10 -- 15 19 16 9
Accounting fees 1 -- 2 1 2 1
Transfer agent fees 8 2 69 174 28 11
Shareholder service fees -- Class A 112 -- -- 182 -- 78
Shareholder service and 12b-1 fees
-- Class B -- -- -- 57 -- --
12b-1 fees -- Class G -- -- 222 41 -- --
Other 13 -- 33 42 19 9
Total Liabilities 52,365 28 684 206,454 122,402 35,756
NET ASSETS:
Capital 357,386 1,330 247,619 811,289 561,519 249,554
Undistributed net investment income (loss) -- -- -- -- 889 --
Net unrealized appreciation/depreciation
from investments and futures 183,586 283 166,083 147,516 278,930 147,064
Accumulated undistributed net realized gains
from investment transactions and futures 70,511 48 55,586 175,910 26,279 20,799
Net Assets $611,483 $1,661 $469,288 $1,134,715 $867,617 $417,417
Net Assets
Class A $ 957,001 $858,235
Class B 71,122
Class G $469,288 106,592 9,382
Total $469,288 $1,134,715 $867,617
Outstanding units of beneficial interest (shares)
Class A 53,282 36,589
Class B 4,053
Class G 13,678 5,938 400
Total 32,453 132 13,678 63,273 36,989 16,891
Net asset value
Redemption price per share -- Class A $ 18.84 $12.58 $ 17.96 $ 23.46 $ 24.71
Offering and redemption price per
share -- Class B<F1> $ 17.55
Redemption price per share -- Class G $ 34.31 $ 17.95 $ 23.46
Maximum sales charge 5.75% 5.75% N/A 5.75% 5.75% 5.75%
Maximum offering price per share
(100%/(100%-maximum sales charge) of
net asset value adjusted to nearest
cent) -- Class A $ 19.99 $13.35 $ 19.06 $ 24.89 $ 26.22
<FN>
<F1> Redemption price per Class B Share varies based on length of time held.
</FN>
</TABLE>
See notes to financial statements.
159
<PAGE>
The Victory Portfolios Statements of Operations
(Amounts in Thousands)
<TABLE>
<CAPTION>
Diversified Stock
Value Lakefront Established Stock Index Growth
Fund Fund Value Fund Fund Fund Fund
Seven
Year Year Months Year Year Year Year
Ended Ended Ended Ended Ended Ended Ended
October 31, October 31, October 31, March 31, October 31, October 31, October 31,
1999 1999 1999<F1> 1999 1999 1999 1999
<S> <C> <C> <C> <C> <C> <C> <C>
Investment Income:
Interest income $ 467 $ -- $ 378 $ 4,890 $ 1,691 $ 5,644 $ 263
Dividend income 8,892 22 2,868 5,523 13,935 8,872 3,956
Securities Lending 56 -- -- -- 215 73 32
Foreign tax withholding -- -- -- -- (94) (85) (23)
Total Income 9,415 22 3,246 10,413 15,747 14,504 4,228
Expenses:
Investment advisory fees 5,877 14 1,471 2,631 7,362 4,690 3,541
Administration fees 794 2 391 -- 1,343 992 514
Shareholder service fees 1,464 2 -- -- 2,322 -- 879
Shareholder service fees and
12b-1 fees -- Class B -- -- -- -- 662 -- --
12b-1 fees -- Class G -- -- 1,439 2,511 283 4 --
Accounting fees 97 35 54 82 159 156 79
Custodian fees 118 2 60 21 234 182 84
Legal and audit fees 44 4 47 17 121 65 28
Amortization of organization costs -- 6 -- -- -- -- --
Trustees' fees and expenses 15 -- 3 9 30 20 9
Transfer agent fees 37 8 115 337 582 98 52
Registration and filing fees 14 15 5 22 58 38 26
Printing fees 15 5 56 10 89 24 20
Other 36 -- 6 14 74 46 18
Total Expenses 8,511 93 3,647 5,654 13,319 6,315 5,250
Expenses voluntarily reduced (281) (7) (419) -- (506) (1,833) (280)
Expenses Before
Reimbursement
from Distributor 8,230 86 3,228 5,654 12,813 4,482 4,970
Expenses Reimbursed
by Distributor -- (71) (65) -- (2) (12) --
Net Expenses 8,230 15 3,163 5,654 12,811 4,470 4,970
Net Investment Income (Loss) 1,185 7 83 4,759 2,936 10,034 (742)
Realized/Unrealized Gains
(Losses) from Investments
and Futures:
Net realized gains (losses) from
investment transactions and futures 70,672 50 30,682 41,202 176,486 40,302 20,812
Change in unrealized
appreciation/depreciation from
investments and futures 29,655 212 14,949 (54,160) 21,114 111,423 48,341
Net realized/unrealized gains (losses)
from investments and futures 100,327 262 45,631 (12,958) 197,600 151,725 69,153
Change in net assets resulting
from operations $101,512 $269 $45,714 $ (8,199) $200,536 $161,759 $68,411
<FN>
<F1> Effective April 1, 1999, the Gradison Established Value Fund became the
Victory Established Value Fund. Statements of operations prior to April 1,
1999 represent the Gradison Established Value Fund.
</FN>
</TABLE>
See notes to financial statements.
160
<PAGE>
The Victory Portfolios Statements of Changes in Net Assets
(Amounts in Thousands)
<TABLE>
<CAPTION>
Value Lakefront Established Value
Fund Fund Fund
Year Year Year Year Seven Months Year Year
Ended Ended Ended Ended Ended Ended Ended
October 31, October 31, October 31, October 31, October 31, March 31, March 31,
1999 1998 1999 1998 1999<F1> 1999 1998
<S> <C> <C> <C> <C> <C> <C> <C>
From Investment Activities:
Operations:
Net investment income $ 1,185 $ 2,767 $ 7 $ 14 $ 83 $ 4,759 $ 7,303
Net realized gains/(losses)
from investment
transactions 70,672 86,242 50 145 30,682 41,202 41,231
Net change in unrealized
appreciation/depreciation
from investments 29,655 3,941 212 (71) 14,949 (54,160) 79,581
Change in net assets resulting
from operations 101,512 92,950 269 88 45,714 (8,199) 128,115
Distributions to Shareholders:
From net investment
income by class:
Class A (1,320) (2,951) (9) (15) -- -- --
Class G -- -- -- -- (485) (4,946) (7,489)
From net realized gains from
investment transactions (86,132) (39,042) (145) (21) -- (30,865) (39,694)
Change in net assets from
distributions to shareholders (87,452) (41,993) (154) (36) (485) (35,811) (47,183)
Capital Transactions:
Proceeds from shares issued 117,771 61,756 434 69 32,462 315,787 177,661
Dividends reinvested 81,419 38,868 65 18 484 34,887 46,071
Cost of shares redeemed (119,080) (106,315) (76) (271) (87,871) (394,935) (167,135)
Change in net assets from
capital transactions 80,110 (5,691) 423 (184) (54,925) (44,261) 56,597
Change in net assets 94,170 45,266 538 (132) (9,696) (88,271) 137,529
Net Assets:
Beginning of period 517,313 472,047 1,123 1,255 478,984 567,255 429,726
End of period $ 611,483 $ 517,313 $1,661 $1,123 $ 469,288 $ 478,984 $ 567,255
Share Transactions:
Issued 6,393 3,424 34 6 943 10,251 5,537
Reinvested 5,077 2,383 6 1 15 1,130 1,494
Redeemed (6,523) (5,953) (6) (21) (2,562) (12,812) (5,225)
Change in shares 4,947 (146) 34 (14) (1,604) (1,431) 1,806
<FN>
<F1> For the period April 1, 1999 through October 31, 1999.
</FN>
</TABLE>
See notes to financial statements.
161
<PAGE>
The Victory Portfolios Statements of Changes in Net Assets
(Amounts in Thousands)
<TABLE>
<CAPTION>
Diversified Stock Stock Index Growth
Fund Fund 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,
1999 1998 1999 1998 1999 1998
<S> <C> <C> <C> <C> <C> <C>
From Investment Activities:
Operations:
Net investment income $ 2,936 $ 5,560 $ 10,034 $ 10,611 $ (742) $ (281)
Net realized gains/(losses)
from investment
transactionsand futures 176,486 198,757 40,302 47,395 20,812 22,291
Net change in unrealized
appreciation/depreciation
from investments
and futures 21,114 (25,092) 111,423 51,833 48,341 31,511
Change in net assets resulting
from operations 200,536 179,225 161,759 109,839 68,411 53,521
Distributions to Shareholders:
From net investment income
by class:
Class A (3,340) (5,598) (10,232) (10,250) -- --
Class G (4) -- (17) -- -- --
In excess of net
investment income -- -- -- -- -- (48)
From net realized gains from
investment transactions (198,727) (90,033) (61,389) (27,890) (22,258) (12,887)
Change in net assets from
distributions to shareholders (202,071) (95,631) (71,638) (38,140) (22,258) (12,935)
Capital Transactions:
Proceeds from shares issued 327,346 272,765 195,289 188,176 152,381 72,169
Proceeds from shares issued
in connection
with acquisition 60,016 86,317 -- 46,866 -- --
Dividends reinvested 168,060 73,238 65,410 37,415 18,991 11,125
Cost of shares redeemed (403,292) (324,262) (110,350) (182,024) (69,584) (39,937)
Change in net assets from
capital transactions 152,130 108,058 150,349 90,433 101,788 43,357
Change in net assets 150,595 191,652 240,470 162,132 147,941 83,943
Net Assets:
Beginning of period 984,120 792,468 627,147 465,015 269,476 185,533
End of period $1,134,715 $ 984,120 $ 867,617 $ 627,147 $417,417 $269,476
Share Transactions:
Issued 18,534 16,693 8,819 9,549 6,438 3,548
Issued in connection
with acquisition 4,456 4,725 -- 2,272 -- --
Reinvested 10,957 4,406 3,319 2,000 936 635
Redeemed (22,921) (18,215) (4,976) (8,801) (2,949) (2,017)
Change in shares 11,026 7,609 7,162 5,020 4,425 2,166
</TABLE>
See notes to financial statements.
162
<PAGE>
The Victory Portfolios Financial Highlights
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Value Fund
Year Year Year Year Year
Ended Ended Ended Ended Ended
October 31, October 31, October 31, October 31, October 31,
1999 1998 1997 1996 1995<F2>
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 18.81 $ 17.07 $ 14.18 $ 11.87 $ 10.13
Investment Activities
Net investment income 0.04 0.09 0.15 0.20 0.27
Net realized and unrealized
gains (losses) from investments 3.16 3.16 3.57 2.65 1.92
Total from Investment Activities 3.20 3.25 3.72 2.85 2.19
Distributions
Net investment income (0.04) (0.10) (0.16) (0.20) (0.27)
In excess of net investment income -- -- -- -- (0.01)
Net realized gains (3.13) (1.41) (0.67) (0.34) (0.17)
Total Distributions (3.17) (1.51) (0.83) (0.54) (0.45)
Net Asset Value, End of Period $ 18.84 $ 18.81 $ 17.07 $ 14.18 $ 11.87
Total Return (excludes sales charges) 20.02% 20.46% 27.24% 24.66% 22.28%
Ratios/Supplemental Data:
Net Assets, End of Period (000) $611,483 $517,313 $472,047 $382,083 $295,871
Ratio of expenses to
average net assets 1.40% 1.34% 1.32% 1.33% 0.99%
Ratio of net investment income
to average net assets 0.20% 0.54% 0.93% 1.56% 2.55%
Ratio of expenses to
average net assets<F1> 1.45% 1.46% <F3> 1.35% 1.30%
Ratio of net investment income
to average net assets<F1> 0.15% 0.42% <F3> 1.54% 2.24%
Portfolio turnover 36% 40% 25% 28% 23%
<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 Equity Income Portfolio merged into the
Value Fund. Financial highlights for the periods prior to June 5, 1995
represent the Value Fund.
<F3> There were no voluntary fee reductions during the period.
</FN>
</TABLE>
See notes to financial statements.
163
<PAGE>
The Victory Portfolios Financial Highlights
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Lakefront Fund
Year Year March 3, 1997
Ended Ended through
October 31, October 31, October 31,
1999 1998 1997<F2>
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $11.52 $11.29 $10.00
Investment Activities
Net investment income 0.07 0.13 0.12
Net realized and unrealized gains (losses)
from investments 2.51 0.43 1.27
Total from Investment Activities 2.58 0.56 1.39
Distributions
Net investment income (0.08) (0.14) (0.10)
Net realized gains (1.44) (0.19) --
Total Distributions (1.52) (0.33) (0.10)
Net Asset Value, End of Period $12.58 $11.52 $11.29
Total Return (excludes sales charges) 25.02% 5.05% 13.87%<F3>
Ratios/Supplemental Data:
Net Assets, End of Period (000) $1,661 $1,123 $1,255
Ratio of expenses to average net assets 1.10% 0.32% 0.00%<F4>
Ratio of net investment income to average net assets 0.51% 1.14% 1.67%<F4>
Ratio of expenses to average net assets<F1> 6.79% 6.45% 7.27%<F4>
Ratio of net investment income to average net assets<F1> (5.18)% (4.99)% (5.60)%<F4>
Portfolio turnover 23% 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.
164
<PAGE>
The Victory Portfolios Financial Highlights
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Established Value Fund
April 1, 1999 Year Year Year Year 11 Months
to Ended Ended Ended Ended Ended
October 31, March 31, March 31, March 31, March 31, March 31,
1999<F2> 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 31.34 $ 33.94 $ 28.83 $ 27.57 $ 23.38 $ 22.52
Investment Activities
Net investment income (loss) 0.02 0.29 0.46 0.44 0.44 0.38
Net realized and unrealized gains
(losses) from investments 2.98 (0.71) 7.70 3.62 5.19 1.52
Total from Investment Activities 3.00 (0.42) 8.16 4.06 5.63 1.90
Distributions
Net investment income (0.03) (0.30) (0.48) (0.45) (0.43) (0.37)
Net realized gains -- (1.88) (2.57) (2.35) (1.01) (0.66)
Total Distributions (0.03) (2.18) (3.05) (2.80) (1.44) (1.03)
Net Asset Value, End of Period $ 34.31 $ 31.34 $ 33.94 $ 28.83 $ 27.57 $ 23.39
Total Return 9.59%<F3> (1.01)% 29.67% 15.14% 24.84% 8.85%<F3>
Ratios/Supplemental Data:
Net Assets, End of Period (000) $469,288 $478,984 $567,255 $429,726 $366,417 $277,370
Ratio of expenses to average net assets <F5> 1.10%<F4> 1.09% 1.10% 1.12% 1.15% 1.20%<F4>
Ratio of net investment income
to average net assets <F5> 0.03%<F4> 0.92% 1.44% 1.57% 1.70% 1.87%<F4>
Ratio of expenses to average net assets<F1> 1.27%<F4> <F6> <F6> <F6> <F6> <F6>
Ratio of net investment income
to average net assets<F1> (0.14)%<F4> <F6> <F6> <F6> <F6> <F6>
Portfolio turnover 11% 37% 20% 31% 18% 24%
<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 April 1, 1999, the Gradison Established Value Fund became the Victory Established Value Fund. Financial
highlights prior to April 1, 1999 represent the Gradison Established Value Fund.
<F3> Not annualized.
<F4> Annualized.
<F5> On April 1, 1999, the adviser agreed to waive its management fee or to reimburse expenses, as allowed by law,
to the extent necessary to maintain the net operating expenses of the Class G shares of the Fund at a maximum of 1.10% until
at least April 1, 2001.
<F6> There were no fee reductions during the period.
</FN>
</TABLE>
See notes to financial statements.
165
<PAGE>
The Victory Portfolios Financial Highlights
For a Share Outstanding Throughout Each Period (Continued on Next Page)
<TABLE>
<CAPTION>
Diversified Stock Fund
Class A Shares
Year Year Year Year
Ended Ended Ended Ended
October 31, October 31, October 31, October 31,
1999 1998<F6> 1997 1996<F2>
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 18.85 $ 17.76 $ 15.75 $ 13.62
Investment Activities
Net investment income (loss) 0.06 0.11 0.16 0.20
Net realized and unrealized
gains (losses) from investments 2.92 3.07 3.84 3.21
Total from Investment Activities 2.98 3.18 4.00 3.41
Distributions
Net investment income (0.06) (0.11) (0.16) (0.19)
In excess of net investment income -- -- -- --
Net realized gains (3.81) (1.98) (1.83) (1.09)
Total Distributions (3.87) (2.09) (1.99) (1.28)
Net Asset Value, End of Period $ 17.96 $ 18.85 $ 17.76 $ 15.75
Total Return (excludes sales charges) 19.39% 19.60% 27.96% 27.16%
Ratios/Supplemental Data
Net Assets, End of Period (000) $957,001 $933,158 $762,270 $571,153
Ratio of expenses to
average net assets 1.06% 1.02% 1.03% 1.05%
Ratio of net investment income (loss)
to average net assets 0.34% 0.64% 0.97% 1.40%
Ratio of expenses to
average net assets<F1> 1.10% 1.13% <F5> 1.08%
Ratio of net investment income (loss)
to average net assets<F1> 0.30% 0.53% <F5> 1.37%
Portfolio turnover <F7> 83% 84% 63% 94%
<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. 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>
<TABLE>
<CAPTION>
Diversified Stock Fund
Class B Shares
March 1,
Year Year Year 1996
Ended Ended Ended through
October 31, October 31, October 31, October 31,
1999 1998<F6> 1997 1996<F2>
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 18.60 $ 17.62 $ 15.71 $14.18
Investment Activities
Net investment income (loss) (0.08) (0.08) (0.06) 0.07
Net realized and unrealized
gains (losses) from investments 2.84 3.04 3.85 1.57
Total from Investment Activities 2.76 2.96 3.79 1.64
Distributions
Net investment income -- -- -- (0.07)
In excess of net investment income -- -- (0.05) (0.04)
Net realized gains (3.81) (1.98) (1.83) --
Total Distributions (3.81) (1.98) (1.88) (0.11)
Net Asset Value, End of Period $ 17.55 $ 18.60 $ 17.62 $15.71
Total Return (excludes sales charges) 18.24% 18.34% 26.48% 26.61%<F3>
Ratios/Supplemental Data
Net Assets, End of Period (000) $71,122 $50,962 $30,198 $8,228
Ratio of expenses to
average net assets 2.06% 2.08% 2.19% 2.07%<F4>
Ratio of net investment income (loss)
to average net assets (0.68)% (0.42)% (0.29)% 0.11%<F4>
Ratio of expenses to
average net assets<F1> 2.10% 2.18% <F5> 2.08%<F4>
Ratio of net investment income (loss)
to average net assets<F1> (0.72)% (0.52)% <F5> 0.10%<F4>
Portfolio turnover <F7> 83% 84% 63% 94%
<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. 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.
166
<PAGE>
The Victory Portfolios Financial Highlights--continued
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Diversified Stock Fund
Class G Shares
Year March 26, 1999
Ended through
October 31, October 31,
1995 1999<F4><F5>
<S> <C> <C>
Net Asset Value, Beginning of Period $ 12.68 $ 17.14
Investment Activities
Net investment income (loss) 0.27 (0.01)
Net realized and unrealized gains (losses) from investments 2.33 0.82
Total from Investment Activities 2.60 0.81
Distributions
Net investment income (0.27) --
In excess of net investment income (0.01) --
Net realized gains (1.38) --
Total Distributions (1.66) --
Net Asset Value, End of Period $ 13.62 $ 17.95
Total Return (excludes sales charges) 23.54% 4.73%<F3>
Ratios/Supplemental Data
Net Assets, End of Period (000) $409,549 $106,592
Ratio of expenses to average net assets 0.92% 1.35%<F2>
Ratio of net investment income (loss) to average net assets 2.11% (0.07)%<F2>
Ratio of expenses to average net assets<F1> 0.95% 1.38%<F2>
Ratio of net investment income (loss) to average net assets<F1> 2.07% (0.10)%<F2>
Portfolio turnover <F6> 75% 83%
<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> Annualized.
<F3> Not Annualized.
<F4> Period from commencement of operations.
<F5> Effective March 26, 1999, the Gradison Growth and Income Fund merged into the Victory
Diversified Stock Fund.
<F6> 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.
167
<PAGE>
The Victory Portfolios Financial Highlights
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Stock Index Fund
Class G Shares
Class A Shares July 2, 1999
through
Year Ended October 31, October 31,
1999 1998<F5> 1997 1996 1995 1999<F2>
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 21.03 $ 18.75 $ 14.85 $ 12.50 $ 10.18 $23.96
Investment Activities
Net investment income 0.28 0.37 0.29 0.28 0.27 0.06
Net realized and unrealized gains
(losses) from investments 4.47 3.37 4.23 2.58 2.31 (0.50)
Total from Investment Activities 4.75 3.74 4.52 2.86 2.58 (0.44)
Distributions
Net investment income (0.29) (0.36) (0.29) (0.28) (0.26) (0.06)
Net realized gains (2.03) (1.10) (0.33) (0.23) -- --
Total Distributions (2.32) (1.46) (0.62) (0.51) (0.26) (0.06)
Net Asset Value, End of Period $ 23.46 $ 21.03 $ 18.75 $ 14.85 $ 12.50 $23.46
Total Return (excludes sales charges) 24.91% 20.99% 31.16% 23.38% 25.72% (1.83)%<F3>
Ratios/Supplemental Data:
Net Assets, End of Period (000) $858,235 $627,147 $465,015 $277,124 $160,822 $9,382
Ratio of expenses to
average net assets 0.58% 0.57% 0.56% 0.57% 0.55% 0.80%<F4>
Ratio of net investment income
to average net assets 1.28% 1.83% 1.74% 2.14% 2.53% 0.85%<F4>
Ratio of expenses to
average net assets<F1> 0.81% 0.84% 0.86% 0.89% 0.87% 1.02%<F4>
Ratio of net investment income
to average net assets<F1> 1.05% 1.56% 1.44% 1.82% 2.21% 0.63%<F4>
Portfolio turnover <F6> 3% 8% 11% 4% 12% 3%
<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.
<F6> 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.
168
<PAGE>
The Victory Portfolios Financial Highlights
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Growth Fund
Year Ended October 31,
1999 1998 1997 1996 1995<F2>
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 21.62 $ 18.01 $ 14.57 $ 12.15 $ 10.23
Investment Activities
Net investment income (loss) (0.04) (0.03) 0.03 0.08 0.11
Net realized and unrealized
gains (losses) on investments 4.90 4.88 4.07 2.93 1.97
Total from Investment Activities 4.86 4.85 4.10 3.01 2.08
Distributions
Net investment income -- -- (0.04) (0.08) (0.11)
Net realized gains (1.77) (1.24) (0.62) (0.51) (0.05)
Total Distributions (1.77) (1.24) (0.66) (0.59) (0.16)
Net Asset Value, End of Period $ 24.71 $ 21.62 $ 18.01 $ 14.57 $ 12.15
Total Return (excludes sales charges) 24.25% 28.59% 29.08% 25.66% 20.54%
Ratios/Supplemental Data:
Net Assets, End of Period (000) $417,417 $269,476 $185,533 $147,753 $108,253
Ratio of expenses to
average net assets 1.41% 1.35% 1.34% 1.33% 1.07%
Ratio of net investment income (loss)
to average net assets (0.21)% (0.13)% 0.19% 0.64% 1.00%
Ratio of expenses to
average net assets<F1> 1.49% 1.49% <F3> 1.39% 1.42%
Ratio of net investment income (loss)
to average net assets<F1> (0.29)% (0.27)% <F3> 0.58% 0.65%
Portfolio turnover 33% 29% 21% 27% 107%
<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 Equity Portfolio merged into the Growth Fund. Financial
highlights for the periods prior to June 5, 1995 represent the Growth Fund.
<F3> There were no voluntary fee reductions during the period.
</FN>
</TABLE>
See notes to financial statements.
169
<PAGE>
THE VICTORY PORTFOLIOS Schedule of Investments
Special Value Fund October 31, 1999
(Amounts in Thousands, Except Shares)
Shares or
Principal Market
Security Description Amount Value
Commercial Paper (4.0%)
General Electric Capital Corp.,
5.33%, 11/1/99 $ 9,387 $ 9,387
Total Commercial Paper (Cost $9,387) 9,387
Common Stocks (97.4%)
Aerospace/Defense (1.5%):
Cordant Technologies, Inc. 77,958 2,432
Gencorp, Inc. 99,100 1,127
3,559
Automotive Parts (1.4%):
Dana Corp. 33,800 999
Superior Industries International 84,720 2,261
3,260
Banks (6.9%):
First Security Corp. 152,199 3,900
First Tennessee National Corp. 94,900 3,227
Mercantile Bankshares Corp. 81,600 2,938
North Fork Bancorporation 115,000 2,379
Southtrust Corp. 85,301 3,412
15,856
Building Materials (0.6%):
Martin Marietta Materials (c) 37,274 1,451
Omnova Solutions, Inc. 9,733 68
1,519
Chemicals (1.7%):
CK Witco Corp. 38,193 358
Minerals Technologies, Inc. 37,500 1,617
Solutia, Inc. (c) 117,000 2,011
3,986
Commercial Services (0.1%):
Quintiles Transnational Corp. (b) (c) 16,500 306
Computers & Peripherals (2.5%):
Diebold, Inc. 114,102 2,995
SunGard Data Systems, Inc. (b) 119,500 2,920
5,915
Containers (1.0%):
Newell Rubbermaid, Inc. (c) 70,400 2,438
Electrical Equipment (1.0%):
American Power Conversion (b) 105,999 2,378
Electronic & Electrical -- General (5.2%):
Arrow Electronics, Inc. (b) 140,400 $ 3,062
Vishay Intertechnology, Inc. (b) 367,000 8,969
12,031
Electronics (1.2%):
SCI Systems, Inc. (b) 54,878 2,709
Financial & Insurance (1.3%):
AMBAC Financial Group, Inc. 50,000 2,988
Financial Services (1.7%):
Heller Financial, Inc. 172,100 4,087
Food Processing &
Packaging (3.2%):
Interstate Bakeries Corp. (c) 153,498 3,108
McCormick & Co., Inc.
(non-voting shares) 90,900 2,852
Universal Foods Corp. 84,000 1,607
7,567
Forest Products --
Lumber & Paper (3.0%):
Bowater, Inc. 58,700 3,082
Consolidated Papers, Inc. 48,000 1,503
Willamette Industries, Inc. 56,200 2,336
6,921
Health Care (1.8%):
Health Management Assoc., Inc.,
Class A (b) 317,000 2,813
Steris Corp. (b) 105,699 1,407
4,220
Identification System (1.2%):
Symbol Technologies, Inc. 71,700 2,850
Insurance (3.0%):
Horace Mann Educators (c) 136,800 3,856
The PMI Group, Inc. 61,474 3,189
7,045
Insurance -- Multi-Line (2.4%):
Protective Life Corp. 154,484 5,590
Insurance -- Property,
Casualty, Health (1.3%):
Everest Reinsurance Holdings 115,400 2,972
Leisure -- Recreation,
Gaming (2.1%):
International Game Technology (c) 124,500 2,319
Mandalay Resort Group (b) 144,000 2,682
5,001
170
<PAGE>
Manufacturing -- Miscellaneous (2.1%):
Briggs & Stratton 18,500 $ 1,081
Pentair, Inc. 99,606 3,748
4,829
Medical Services (0.7%):
Quorum Health Group, Inc. (b) 200,413 1,603
Medical Supplies (1.4%):
Biomet, Inc. 104,726 3,155
Metals -- Fabrication (2.2%):
Kennametal, Inc. 180,300 5,184
Newspapers (1.0%):
A.H. Belo Corp. 114,340 2,330
Office Equipment & Supplies
(Non-Computer Related) (0.2%):
HON Industries (c) 18,311 359
Oil & Gas Exploration,
Production & Services (5.2%):
Anadarko Petroleum Corp. 115,200 3,551
Barrett Resources Corp. (b) 48,099 1,614
BJ Services Co. (b) (c) 97,099 3,332
Nabors Industries, Inc. (b) (c) 74,900 1,699
Transocean Offshore, Inc. 74,418 2,023
12,219
Oil Marketing & Refining (1.4%):
Tosco Corp. (c) 127,999 3,240
Pharmaceuticals (2.3%):
Forest Laboratories, Inc. (b) 52,000 2,386
Mylan Laboratories 167,800 3,009
5,395
Pipelines (1.0%):
Questar Corp. 128,900 2,320
Radio & Television (1.2%):
AMFM, Inc. (b) (c) 40,424 2,830
Real Estate Investment
Trusts (3.1%):
Equity Residential Properties
Trust (c) 75,400 3,153
Kilroy Realty Corp. 80,700 1,548
Mack-Cali Realty Corp. 94,900 2,444
7,145
Retail (2.9%):
Autozone, Inc. (b) 129,900 $ 3,450
Saks, Inc. (b) 198,400 3,410
6,860
Savings & Loans (1.1%):
Charter One Financial, Inc. (c) 99,855 2,453
Semiconductors (4.8%):
Altera Corp. (b) 125,600 6,108
LSI Logic Corp. (b) (c) 43,900 2,335
Xilinx, Inc. (b) 34,700 2,728
11,171
Shipbuilding (1.4%):
Newport News Shipbuilding 106,300 3,229
Software & Computer
Services (2.6%):
Fiserv, Inc. (b) 75,450 2,415
Keane, Inc. (b) (c) 81,500 1,915
Networks Associates, Inc. (b) 97,919 1,793
6,123
Staffing (0.5%):
Robert Half International, Inc. (b) 46,000 1,245
Steel (0.9%):
AK Steel Holding Corp. 121,300 2,100
Textile Manufacturing (2.2%):
Shaw Industries, Inc. 158,574 2,448
Warnaco Group, Inc., Class A (c) 192,800 2,747
5,195
Tobacco & Tobacco
Products (0.9%):
UST, Inc. 79,400 2,198
Transportation Leasing
& Trucking (3.3%):
CNF Transportation, Inc. 153,113 5,062
GATX Corp. 79,702 2,645
7,707
Utilities -- Electric (6.7%):
DPL, Inc. 153,065 3,100
DQE, Inc. (c) 81,300 3,247
Florida Progress Corp. (c) 46,100 2,112
New Century Energies, Inc. 106,600 3,471
SCANA Corp. 142,100 3,535
15,465
171
<PAGE>
Utilities -- Natural Gas (2.7%):
Keyspan Corp. 136,750 $ 3,846
Utilicorp United, Inc. 115,000 2,487
6,333
Utilities -- Telecommunications
(1.5%):
CenturyTel, Inc. 86,880 3,513
Total Common Stocks (Cost $211,007) 227,399
Securities Purchased With Cash Collateral (10.6%)
Investment Companies (0.8%):
AIM Short Term Prime
Money Market Fund 567,547 568
AIM Liquid Assets
Money Market Fund 1,254,998 1,255
1,823
Repurchase Agreements (9.8%):
Prudential Corp., 5.49%, 11/1/99
(Collateralized by $5,205
FMC, 0.00%, 3/9/00,
FHLB, 0.00%, 1/28/04,
market value -- $5,102) $ 5,000 5,000
Lehman Corp., 5.43%, 11/1/99
(Collateralized by $5,250
ACLC Business Loan Receivables,
6.52%, 8/15/20,
market value -- $5,154) 5,000 5,000
Morgan Stanley Dean Witter,
5.48%, 11/1/99
(Collateralized by $3,800
Amoco Argentina,
6.63%, 9/15/05,
market value -- $3,725) 3,000 3,000
Nations Bank, 5.52%, 11/1/99
(Collateralized by $5,190
Conseco, Inc., 8.50%, 10/15/02,
Conseco, Inc., 9.00%, 10/15/06,
Compania Telecom Chile,
7.63%, 7/15/06,
market value -- $5,150) $ 5,000 $ 5,000
Goldman Sachs Group L.P.,
5.52%, 11/1/99
(Collateralized by $5,154
Mutual Life Ins. Co.,
0.00%, 8/15/24,
Capitol Records, Inc.,
8.38%, 8/15/09,
market value -- $6,497) 5,000 5,000
23,000
Total Securities Purchased
With Cash Collateral (Cost $24,823) 24,823
Total Investments (Cost $245,217) (a) -- 112.0% 261,609
Liabilities in excess
of other assets -- (12.0)% (28,006)
TOTAL NET ASSETS -- 100.0% $ 233,603
(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 $773. Cost for federal income tax purposes differs from value
by net unrealized appreciation of securities as follows (amounts in
thousands):
Unrealized appreciation $ 33,558
Unrealized depreciation (17,939)
Net unrealized appreciation $ 15,619
(b) Non-income producing securities.
(c) All or a portion of this security was loaned as of October 31, 1999.
See notes to financial statements.
172
<PAGE>
THE VICTORY PORTFOLIOS Schedule of Investments
Ohio Regional Stock Fund October 31, 1999
(Amounts in Thousands, Except Shares)
Market
Security Description Shares Value
Common Stocks (100.6%)
Agriculture & Livestock (0.7%):
Andersons, Inc. 20,000 $ 159
Airlines (1.5%):
Comair Holdings, Inc. 16,000 369
Amusement & Recreation
Services (1.6%):
Cedar Fair L.P. 20,000 399
Automotive Parts (2.1%):
Dana Corp. 17,000 503
Banks (14.2%):
BancFirst Ohio Corp. 14,000 310
Charter One Financial, Inc. 18,165 446
FirstMerit Corp. 16,000 423
Huntington Bancshares, Inc. 11,000 326
National City Corp. 20,000 590
Park National Corp. 5,000 495
Provident Financial Group, Inc. 17,500 751
Second Bancorp, Inc. 4,470 114
United Community Financial Corp. 1,000 10
3,465
Building Materials (1.3%):
Owens Corning 15,000 308
Chemicals -- General (5.5%):
A. Schulman, Inc. 17,500 272
Ferro Corp. 10,000 204
OM Group, Inc. 15,000 563
RPM, Inc. 25,000 298
1,337
Commercial Services (2.4%):
Convergys Corp. (b) 30,000 587
Computers & Peripherals (2.7%):
Diebold, Inc. 25,000 656
Conglomerates (4.1%):
Lancaster Colony Corp. 21,000 734
Myers Industries, Inc. 18,000 253
987
Consumer Products (1.6%):
American Greetings Corp., Class A 11,000 285
Gibson Greetings, Inc. (b) 21,000 102
387
Electronic & Electrical -- General (0.8%):
Pioneer-Standard Electronics, Inc. 15,000 $ 196
Electronics (6.0%):
Keithley Instruments, Inc. 35,000 556
Parker-Hannifin Corp. 19,400 888
1,444
Engineering, Industrial
Construction (0.4%):
Corrpro Cos., Inc. (b) 12,500 86
Food Distributors (1.3%):
Kroger Co. (b) 15,000 312
Food Processing &
Packaging (0.4%):
J.M. Smucker Co., Class A 5,000 99
Forest Products --
Lumber & Paper (1.5%):
Mead Corp. 10,000 360
Health Care (3.2%):
Gliatech, Inc. (b) 10,500 86
Invacare Corp. 25,000 521
Omnicare, Inc. 16,000 148
Steris Corp. (b) 2,000 27
782
Insurance (4.3%):
Ohio Casualty Corp. 29,000 484
State Auto Financial Corp. 48,000 552
1,036
Insurance -- Multi-Line (3.7%):
Cincinnati Financial Corp. 9,450 338
Progressive Corp. 6,000 556
894
Machine Tools (2.3%):
Genesis Worldwide, Inc. 5,000 28
Lincoln Electric Holding, Inc. 24,000 537
565
Manufacturing --
Capital Goods (5.5%):
Commercial Intertech Corp. 16,000 203
Gorman-Rupp Co. 25,000 378
Robbins & Myers, Inc. 14,000 227
Thor Industries, Inc. 21,000 530
1,338
173
<PAGE>
Manufacturing -- Miscellaneous (0.6%):
Eaton Corp. 2,000 $ 151
Media (2.9%):
Scripps (E.W.) Co., Class A 15,000 693
Metals -- Fabrication (2.0%):
Brush Wellman, Inc. 4,000 53
RTI International Metals (b) 10,000 73
Timken Co. 12,000 215
Worthington Industries, Inc. 8,000 133
474
Mining (1.5%):
Cleveland-Cliffs, Inc. 5,500 164
Oglebay Norton Co. 10,000 195
359
Oil-Integrated Companies (2.6%):
USX-Marathon Group, Inc. 22,000 641
Paint, Varnishes, Enamels (1.8%):
Sherwin-Williams Co. 20,000 448
Real Estate Investment
Trusts (2.0%):
Developers Divers Realty 16,000 228
Health Care REIT, Inc. 14,000 250
478
Restaurants (1.7%):
Bob Evans Farms, Inc. 9,000 124
Wendy's International, Inc. 12,000 286
410
Retail (0.1%):
Too, Inc. (b) 2,000 32
Retail -- Specialty Stores (4.3%):
Jo-Ann Stores Inc., Class A (b) 8,000 112
Jo-Ann Stores Inc., Class B (b) 8,000 102
Limited, Inc. 14,000 575
OfficeMax, Inc. (b) 20,000 101
Value City Department
Stores, Inc. (b) 10,000 154
1,044
Rubber & Rubber Products (2.4%):
Cooper Tire & Rubber Co. 13,000 $ 219
Goodyear Tire & Rubber Co. 9,000 371
590
Software & Computer
Services (2.5%):
Reynolds & Reynolds Co., Class A 33,000 600
Steel (1.0%):
Shiloh Industries, Inc. (b) 25,000 234
Tools & Hardware
Manufacturing (1.1%):
Milacron, Inc. 17,000 279
Utilities -- Electric (4.9%):
CINergy Corp. 16,000 452
DPL, Inc. 36,000 729
1,181
Utilities -- Telecommunications
(2.1%):
Cincinnati Bell, Inc. (b) 25,000 520
Total Common Stocks (Cost $13,652) 24,403
Total Investments (Cost $13,652) (a) -- 100.6% 24,403
Liabilities in excess of other assets -- (0.6)% (140)
TOTAL NET ASSETS -- 100.0% $ 24,263
(a) Cost for federal income tax purposes differs from value by net
unrealized appreciation of securities as follows (amounts in thousands):
Unrealized appreciation $ 12,044
Unrealized depreciation (1,293)
Net unrealized appreciation $ 10,751
(b) Non-income producing securities.
See notes to financial statements.
174
<PAGE>
THE VICTORY PORTFOLIOS Schedule of Investments
Small Company Opportunity Fund October 31, 1999
(Amounts in Thousands, Except Shares)
Shares or
Principal Market
Security Description Amount Value
Commercial Paper (2.1%)
General Electric Capital Corp.,
5.33%, 11/1/99 $ 3,227 $ 3,227
Total Commercial Paper (Cost $3,227) 3,227
Common Stocks (97.4%)
Aerospace/Defense (1.5%):
Triumph Group, Inc. (b) 95,000 2,286
Airlines (1.5%):
Comair Holdings, Inc. 100,000 2,308
Apparel (2.2%):
Gildan Activewear, Inc., Class A (b) (c) 100,000 1,906
UniFirst Corp. (c) 124,000 1,519
3,425
Apparel -- Footwear (2.3%):
Timberland Co. (b) (c) 74,000 3,654
Automotive Parts (3.2%):
Borg-Warner Automotive, Inc. 25,000 988
Tower Automotive, Inc. (b) (c) 100,000 1,631
Wynn's International, Inc. 151,000 2,350
4,969
Banks (7.8%):
Chittenden Corp. 78,000 2,407
HUBCO, Inc. (c) 70,000 2,201
M & T Bank Corp. 4,000 1,982
Mercantile Bankshares Corp. 60,000 2,160
Provident Bankshares Corp. 85,200 1,834
Provident Financial Group 38,000 1,632
12,216
Building Materials (2.9%):
Florida Rock Industries, Inc. 20,000 675
NCI Building Systems, Inc. (b) 94,000 1,486
Southdown, Inc. 48,000 2,319
4,480
Chemicals (2.5%):
Cambrex Corp. 100,000 3,025
Ferro Corp. 45,000 917
3,942
Commercial Services (4.9%):
ABM Industries, Inc. 112,000 2,674
Mail-Well, Inc. (b) (c) 315,000 4,213
NCO Group, Inc. (b) (c) 20,000 848
7,735
Computers & Peripherals (4.0%):
Affiliated Computer
Services, Inc. (b) (c) 70,000 $ 2,660
Computer Network
Technology Corp. (b) 100,000 1,606
InterVoice-Brite, Inc. (b) 130,000 1,609
National Computer Systems, Inc. (c) 12,500 473
6,348
Construction & Housing (3.4%):
Coachmen Industries, Inc. (c) 112,000 1,645
D.R. Horton, Inc. (c) 82,000 969
MDC Holdings, Inc. 49,000 766
Thor Industries, Inc. 45,000 1,136
Toll Brothers, Inc. (b) 50,000 875
5,391
Distribution/Wholesale (4.6%):
Advanced Marketing Services 125,000 2,422
Hughes Supply, Inc. 108,000 2,342
Savoir Technology Group, Inc. (b) (c) 264,000 1,221
Watsco, Inc. 120,000 1,215
7,200
Electronic & Electrical --
General (4.6%):
CTS Corp. 75,000 4,242
Jabil Circuit, Inc. (b) 3,000 157
LSI Industries, Inc. 119,000 2,863
7,262
Electronic Components/
Instruments (3.8%):
C&D Technologies, Inc. 100,000 3,213
Technitrol, Inc. 75,000 2,728
5,941
Engineering, Industrial
Construction (1.2%):
URS Corp. (b) (c) 106,000 1,908
Environmental Control (0.1%):
Tetra Tech, Inc. (b) 8,250 131
Financial Services (5.0%):
AmeriCredit Corp. (b) 155,000 2,692
DVI, Inc. (b) 135,000 1,823
Old Kent Financial Corp. (c) 44,100 1,797
Raymond James Financial Corp. 5,000 101
TCF Financial Corp. (c) 50,000 1,475
7,888
175
<PAGE>
Food Products (2.5%):
Michael Foods, Inc. 83,000 $ 2,116
Pilgrims Pride Corp., Class A 8,200 57
Pilgrims Pride Corp., Class B 16,400 148
Smithfield Foods Inc (b) (c) 71,200 1,620
3,941
Health Care (5.1%):
Cooper Cos., Inc. 105,000 2,624
Hanger Orthopedic Group, Inc. (b) 149,000 1,835
Healthsouth Corp. (b) 60,000 345
Prime Medical Services, Inc. (b) 102,000 1,007
Universal Health Services, Inc. (b) 76,000 2,232
8,043
Home Furnishings (0.4%):
Furniture Brands International,
Inc. (b) 34,500 668
Insurance -- Multi-Line (3.3%):
Fremont General Corp. 134,000 1,156
HCC Insurance Holdings, Inc. 127,000 1,429
Protective Life Corp. 69,700 2,522
5,107
Machinery -- Diversified (3.7%):
Esterline Technologies Corp. (b) 125,000 1,718
Gehl Co. (b) 90,000 1,553
Thomas Industries, Inc. 70,000 1,251
United Dominion Industries Ltd. 62,000 1,314
5,836
Metals -- Fabrication (4.0%):
Mueller Industries, Inc. (b) 100,000 3,194
Reliance Steel & Aluminum 120,000 2,520
Transtechnology Corp. 66,600 641
6,355
Pharmaceuticals (2.8%):
Alpharma, Inc., Class A (c) 40,000 1,408
Barr Laboratories, Inc. (b) (c) 20,000 606
Medicis Pharmaceutical, Class A (b) 69,500 2,120
Pharmaceutical Product
Development, Inc. (b) (c) 20,000 201
4,335
Real Estate Investment
Trusts (1.0%):
National Golf Properties, Inc. 75,000 $ 1,603
Restaurants (1.4%):
O'Charley's, Inc. (b) 140,000 2,144
Retail (2.8%):
BJ's Wholesale Club, Inc. (b) 125,000 3,852
World Fuel Services Corp. 70,000 621
4,473
Retail -- Drug Stores (0.3%):
Duane Reade, Inc. (b) (c) 20,000 538
Savings & Loans (4.7%):
Andover Bancorp, Inc. 85,000 2,486
ITLA Capital Corp. (b) 150,000 2,269
Roslyn Bancorp, Inc. 135,300 2,621
7,376
Software & Computer Services (2.8%):
BindView Development Corp. (b) (c) 50,000 1,500
Keane, Inc. (b) (c) 75,000 1,762
Progress Software Corp. (b) 35,000 1,173
4,435
Staffing (1.0%):
On Assignment, Inc. (b) 20,000 575
Personnel Group of
America, Inc. (b) (c) 150,000 1,003
1,578
Telecommunications -- Equipment (0.7%):
Anaren Microwave, Inc. (b) (c) 31,000 1,062
Tools & Hardware
Manufacturing (1.4%):
Applied Power, Inc., Class A 75,000 2,180
Transportation Leasing
& Trucking (4.0%):
Forward Air Corp. (b) 150,000 4,415
USFreightways Corp. 40,000 1,813
6,228
Total Common Stocks (Cost $128,362) 152,986
176
<PAGE>
Securities Purchased With Cash
Collateral (10.2%)
Investment Companies (5.1%):
AIM Short Term Prime
Money Market Fund 2,516,185 $ 2,516
AIM Liquid Assets Money
Market Fund 5,563,955 5,564
8,080
Repurchase Agreements (5.1%):
Merrill Lynch, 5.50%, 11/1/99
(Collateralized by $2,090
Illinova Corp., 6.46%, 10/1/02
market value -- $2,064) $ 2,000 2,000
Morgan Stanley Dean Witter,
5.48%, 11/1/99 (Collateralized by
$2,800 J.C.Penney Co., 6.90%, 8/15/26,
PP&L, 7.05%, 6/25/09,
market value -- $2,773) 2,000 2,000
Lehman Corp., 5.43%, 11/1/99
(Collateralized by $4,267
FNMA, 6.00%, 2/1/29,
FNMA, 8.50%, 9/1/11,
market value -- $2,041) 2,000 2,000
Goldman Sachs Group L.P.,
5.52%, 11/1/99
(See Significant Accounting
Policies, Securities Lending in the
Notes to Financial Statements
for collateral description) 2,000 2,000
8,000
Total Securities Purchased
With Cash Collateral (Cost $16,080) 16,080
Total Investments (Cost $147,669) (a) -- 109.7% 172,293
Other assets in excess of liabilities -- (9.7)% (15,279)
TOTAL NET ASSETS -- 100.0% $ 157,014
(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 $9. Cost for federal income tax purposes differs from value by
net unrealized appreciation of securities as follows (amounts in thousands):
Unrealized appreciation $ 40,447
Unrealized depreciation (15,832)
Net unrealized appreciation $ 24,615
(b) Non-income producing securities.
(c) All or a portion of the security was on loan as of October 31, 1999
See notes to financial statements.
177
<PAGE>
THE VICTORY PORTFOLIOS Schedule of Investments
International Growth Fund October 31, 1999
(Amounts in Thousands, Except Shares)
Shares or
Principal Market
Security Description Amount Value
Commercial Paper (1.8%)
United States (1.8%):
Business Credit
Institutions (1.8%):
General Electric Capital Corp.,
5.33%, 11/1/99 $ 3,404 $ 3,404
Total Commercial Paper (Cost $3,404) 3,404
Common Stocks (97.2%)
Australia (2.1%):
Airlines (0.2%):
Qantas Airways Ltd. 95,500 304
Banks (0.2%):
Macquarie Bank Ltd. 15,912 233
Westpac Banking Corp. 32,700 210
443
Beverages (0.2%):
Foster's Brewing Group Ltd. 109,550 291
Financial Services (0.2%):
Lend Lease Corp., Ltd. 33,600 386
Manufacturing -- Diversified (0.1%):
Pacifica Group Ltd. 77,000 248
Metals & Mining (0.3%):
Capral Aluminum Ltd. 184,000 226
Pasminco Ltd. (b) 342,500 327
553
Mining (0.1%):
WMC Ltd. 58,000 249
Oil & Gas Exploration,
Production & Services (0.1%):
Woodside Petroleum Ltd. 31,000 187
Retail (0.2%):
Coles Myer Ltd. 59,000 293
Steel (0.3%):
Smorgon Steel Group Ltd. 407,230 550
Utilities -- Telecommunications
(0.2%):
Telstra Corp. Ltd., ADR 16,000 411
Total Australia 3,915
Brazil (0.6%):
Electric Utility (0.1%):
CIA Paranese de Energia, ADR 25,000 166
Food Distributors, Supermarkets
& Wholesalers (0.1%):
Companhia Brasileira
de Distribuicao Grupo
Pao de Acucar 10,000 $ 219
Steel (0.2%):
Usinas Sider de Minas, ADR 100,000 363
Utilities -- Telecommunications
(0.2%):
Telecomunicacoes Brasileiras
SA, ADR 6,000 --
Telecomunicacoes Brasileiras-Telebras
SA, ADR (b) 4,500 351
Total Brazil 1,099
Britain (15.2%):
Aerospace/Defense (0.1%):
British Aerospace PLC 31,619 185
Banks (2.2%):
Barclays PLC 45,300 1,388
Lloyds TSB Group PLC 92,850 2,661
4,049
Building Materials (0.5%):
CRH PLC 46,000 867
Catering (0.8%):
Compass Group PLC 134,475 1,445
Computers & Peripherals (0.7%):
Sema Group PLC 98,000 1,277
Electric Utility (0.4%):
Energis PLC (b) 25,300 806
Manufacturing --
Miscellaneous (0.3%):
Smiths Industries PLC 46,100 621
Newspapers (0.5%):
Pearson PLC 42,385 945
Oil & Gas Exploration,
Production & Services (2.2%):
British Petroleum Co. PLC 30,380 4,175
Pharmaceuticals (3.0%):
Glaxo Wellcome PLC 00,980 2,977
Smithkline Beecham PLC 91,700 2,466
5,443
Radio & Television (0.4%):
Carlton Communications PLC 110,591 796
178
<PAGE>
Retail (0.8%):
Dixons Group PLC 31,700 $ 561
Kingfisher PLC 92,000 1,005
1,566
Telecommunications (1.5%):
Vodafone Airtouch PLC 610,740 2,846
Utilities -- Telecommunications
(1.8%):
British Telecommunications PLC 186,969 3,389
Total Britain 28,410
Canada (2.8%):
Diversified (0.7%):
Bombadier, Inc., Class B 70,000 1,235
Mining (0.1%):
Franco-Nevada Mining Corp. Ltd. 12,000 223
Oil & Gas Exploration,
Production & Services (0.8%):
Suncor Energy, Inc. 36,500 1,405
Telecommunications (1.2%):
Nortel Networks Corp. 38,000 2,339
Total Canada 5,202
Chile (0.3%):
Banks (0.1%):
Banco de Edwards, ADR 14,000 205
Chemicals -- Specialty (0.2%):
Sociedad Quimica y Minera
de Chile SA 7,700 223
Utilities -- Electric (0.0%):
Endesa, ADR 3,192 41
Enersis SA, ADR 1,965 44
85
Total Chile 513
Finland (2.2%):
Software & Computer
Services (0.3%):
Tietoenator OYJ, Class B 16,100 558
Telecommunication Services (0.6%):
Sonera OYJ 36,290 1,089
Telecommunications -- Equipment (1.3%):
Nokia OYJ, Class A 21,595 2,470
Total Finland 4,117
France (10.7%):
Automobile Parts (0.3%):
Valeo SA 7,200 517
Automobiles (0.5%):
PSA Peugeot Citroen 4,550 $ 873
Banks (1.3%):
Banque Nationale de Paris 13,810 1,212
Credit Lyonnais SA (b) 14,950 452
Societe Generale 4,400 957
2,621
Beverages (0.1%):
LVMH Moet-Hennessy Louis Vuitton 572 173
Commercial Services (0.6%):
Vivendi 13,690 1,037
Computers & Peripherals (0.4%):
Cap Gemini SA 4,480 678
Construction (0.4%):
Bouygues 2,215 771
Electronic & Electrical -- General (0.9%):
Legrand SA 2,730 653
Rexel 10,625 949
1,602
Food -- Retail (1.5%):
Carrefour Supermarche 10,740 1,987
Promodes 740 793
2,780
Insurance (0.5%):
AXA SA 6,450 909
Machinery & Engineering (0.7%):
Alstom 13,810 418
Schneider Electric SA 11,850 816
1,234
Oil & Gas Exploration,
Production & Services (1.5%):
Total Fina SA, Class B 22,533 3,042
Retail -- Department Stores (0.6%):
Pinault-Printemps-Redoute SA 5,680 1,082
Telecommunications -- Equipment (0.8%):
Alcatel SA 9,968 1,556
Utilities -- Water (0.6%):
Suez-Lyonnaise De Eaux 6,870 1,108
Total France 19,983
179
<PAGE>
Germany (7.3%):
Automobiles (1.2%):
Bayerische Motoren Werke AG 29,600 $ 942
DaimlerChrysler AG 10,720 834
Volkswagen AG 2,000 118
Volkswagen AG, Preferred 10,800 383
2,277
Banks (1.7%):
Dresdner Bank AG (Registered) 36,730 1,881
HypoVereinsbank 18,800 1,233
3,114
Chemicals -- General (0.5%):
BASF AG 20,600 926
Electric Utility (0.3%):
Veba AG 11,650 629
Insurance (1.2%):
Allianz AG, Registered 7,106 2,162
Manufacturing --
Miscellaneous (0.9%):
Siemens AG, Registered 17,965 1,612
Retail (0.4%):
Douglas Holding AG 16,990 771
Software & Computer
Services (0.5%):
SAP AG 1,800 668
SAP AG, Preferred 590 260
928
Telecommunications (0.6%):
Mannesmann AG 7,685 1,208
Total Germany 13,627
Greece (0.6%):
Banks (0.1%):
Alpha Credit Bank 1,440 110
EFG Eurobank 480 21
Ergo Bank SA 40 4
135
Commercial Banking (0.3%):
National Bank of Greece SA 3,901 279
National Bank of Greece SA, ADR 14,000 193
472
Telecommunications (0.1%):
STET Hellas Telecommunications
SA (b) 11,000 237
Transportation (0.0%):
Minoan Lines 3,000 $ 93
Utilities -- Telecommunications
(0.1%):
Hellenic Telecommunications
Organization SA 9,000 191
Total Greece 1,128
Hong Kong (2.6%):
Banks (0.2%):
Hang Seng Bank 41,400 450
Chemicals -- General (0.1%):
Yizheng Chemical Fibre Co. (b) 468,000 128
Diversified (0.8%):
First Pacific Co. 152,000 88
Guoco Group Ltd. 234,000 626
Hutchison Whampoa Ltd. 70,000 703
Swire Pacific Ltd. 31,500 156
1,573
Financial Services (0.2%):
JCG Holdings Ltd. 518,000 282
Gas & Electric Utility (0.1%):
Hong Kong & China Gas 156,000 207
Mining (0.1%):
Yanzhou Coal Mining Co. 376,000 125
Petrochemicals (0.1%):
Shanghai Petrochemical Ltd. 914,000 187
Real Estate (0.5%):
Cheung Kong Holdings Ltd. 55,000 499
Sun Hung Kai Properties Ltd. 49,000 396
895
Retail -- Specialty Stores (0.1%):
Giordano International Ltd. 242,000 257
Telecommunications (0.2%):
Cable & Wireless HKT Ltd. 176,400 403
Telecommunications -- Equipment (0.1%):
China Telecom Ltd. (b) 80,000 274
Utilities -- Electric (0.1%):
Shandong International Power
Dev Co-H (b) 784,000 125
Total Hong Kong 4,906
180
<PAGE>
Hungary (0.3%):
Utilities -- Telecommunications
(0.3%):
Matav Rt 83,000 $ 483
Total Hungary 483
Ireland (0.3%):
Building Materials (0.3%):
CRH PLC 23,380 441
Financial Services (0.0%):
Irish Life & Permanent PLC 7,119 73
Total Ireland 514
Israel (0.1%):
Investment Company (0.0%):
Koor Industries Ltd. 880 73
Telecommunications --
Equipment (0.1%):
ECI Telecom Ltd., ADR 4,800 140
Partner Communications, ADR 3,750 58
198
Total Israel 271
Italy (4.0%):
Banks (1.0%):
Banca Commerciale Italiana 120,400 724
Credito Italiano SPA 257,000 1,202
1,926
Building Materials (0.0%):
Italcementi SPA 17,200 80
Financial Services (0.5%):
San Paolo-IMI SPA 73,013 945
Insurance (0.7%):
Alleanza Assicurazion SPA 14,850 151
Assicurazioni Generali 34,520 1,107
Istituto Nazionale delle Assicurazioni 38,000 115
1,373
Utilities -- Telecommunications
(1.8%):
Tecnost SPA (b) 34,446 66
Telecom Italia Mobile SPA 301,000 1,880
Telecom Italia SPA 70,000 604
Telecom Italia SPA-RNC 136,639 671
3,221
Total Italy 7,545
Japan (25.9%):
Automobiles (0.7%):
Toyota Motor Corp. 36,000 $ 1,245
Banks (1.7%):
Bank of Tokyo-Mitsubishi Ltd. 21,000 348
Industrial Bank Of Japan 211,000 2,851
3,199
Brewery (1.1%):
Kirin Brewery Co. Ltd. 178,000 2,037
Chemicals -- General (0.9%):
Shin-Etsu Chemical Co. 39,000 1,607
Computers & Peripherals (0.9%):
Fujitsu Ltd. 57,000 1,715
Construction (1.2%):
Nippon Comsys Corp. 38,000 743
Sekisui House Ltd. 136,000 1,471
2,214
Cosmetics & Related (0.7%):
KAO Corp. 41,000 1,249
Electronic & Electrical --
General (5.1%):
Fanuc 26,200 2,033
Mabuchi Motor 10,000 1,476
Murata Manufacturing Co. Ltd. 20,000 2,567
Secom 18,000 1,928
Sharp Corp. 110,000 1,750
9,754
Financial Services (0.5%):
Takefuji Corp. 7,000 906
Health & Personal Care (0.5%):
Terumo 30,000 911
Insurance (0.7%):
Tokio Marine & Fire Insurance Co. 105,000 1,373
Pharmaceuticals (1.0%):
Sankyo Co. Ltd. 35,000 996
Takeda Chemical Industries 15,000 861
1,857
Retail (3.6%):
Ito-Yokado Co. Ltd. 22,000 1,758
Ryohin Keikaku Ltd. 9,100 1,749
Seven-Eleven Japan Co. Ltd. 36,000 3,295
6,802
181
<PAGE>
Telecommunications -- Equipment (2.6%):
Hikari Tsushin, Inc. 2,900 $ 2,331
Matsushita Communications
Industries 15,000 2,519
4,850
Utilities -- Telecommunications (4.7%):
Nippon Telegraph & Telephone Corp. 154 2,361
NTT Data Corp. 152 2,403
NTT Mobile Communications
Network, Inc. 150 3,982
8,746
Total Japan 48,465
Malaysia (0.3%):
Automobiles (0.3%):
Oriental Holdings Berhad 275,000 597
Total Malaysia 597
Mexico (0.7%):
Conglomerates (0.2%):
Alfa SA de CV, Class A 55,250 210
Grupo Carso SA (b) 50,000 209
419
Financial Services (0.3%):
Grupo Financiero Banamex Accival
SA, Class B (b) 200,000 498
Retail (0.2%):
Controladora Comercial
Mexicana SA 428,500 353
Total Mexico 1,270
Netherlands (6.5%):
Banks (0.5%):
ING Groep NV 17,350 1,023
Chemicals -- General (0.5%):
Akzo Nobel NV 23,240 1,000
Commercial Services (0.3%):
Randstad Holding NV 10,610 538
Computers & Peripherals (0.5%):
CMG PLC 22,800 879
Financial Services (0.5%):
Fortis (NL) 29,465 1,014
Food & Dairy Products (0.3%):
Numico NV 12,800 521
Food Distributors, Supermarkets
& Wholesalers (0.4%):
Koninklijke Ahold NV 27,353 $ 839
Food Products (0.4%):
Unilever NV 11,150 738
Insurance (1.0%):
Aegon NV 20,039 1,848
Newspapers (0.4%):
VNU NV 19,710 666
Oil & Gas Exploration,
Production & Services (1.5%):
Royal Dutch Petroleum Co. 37,025 2,212
Royal Dutch Petroleum Co., ADR 8,385 503
2,715
Semiconductors (0.2%):
STMicroelectronics NV 4,470 392
Telecommunications -- Equipment (0.0%):
Royal KPN NV 1,278 66
Total Netherlands 12,239
New Zealand (0.1%):
Newspapers (0.0%):
Independent Newspapers Ltd. 13,600 55
Telecommunications (0.1%):
Telecom Corp. of New Zealand Ltd. 48,650 196
Total New Zealand 251
Norway (0.3%):
Environmental Control (0.3%):
Tomra Systems 17,000 650
Total Norway 650
Philippines (0.1%):
Banks (0.1%):
Bank of Phillippine Islands 57,500 152
Total Philippines 152
Poland (0.1%):
Electronic Components/
Instruments (0.1%):
Electrim SA (b) 11,400 99
Software & Computer
Services (0.0%):
Softbank SA 3,930 110
Total Poland 209
182
<PAGE>
Portugal (0.2%):
Banks (0.2%):
Banco Commercial Portugues 4,072 $ 114
Building Materials (0.0%):
Cimpor-Cimentos de Portugal, SGPS SA 5,536 92
Food Distributors, Supermarkets
& Wholesalers (0.0%):
Jeronimo Martins, SGPS SA 1,895 53
Retail (0.0%):
Sonae Investimentos, SGPS SA 2,040 68
Total Portugal 327
Singapore (1.0%):
Airlines (0.2%):
Singapore Airlines Ltd. 42,000 444
Banks (0.1%):
Overseas-Chinese Banking Corp. 30,450 229
Conglomerates (0.2%):
Keppel Corp. 105,000 285
Electronics (0.2%):
Natsteel Electronics Ltd. 136,000 531
Real Estate (0.1%):
City Developments Ltd. 27,000 140
Transportation (0.2%):
Neptune Orient Lines (b) 202,218 293
Total Singapore 1,922
South Africa (0.8%):
Banks (0.1%):
ABSA Group Ltd. 50,000 204
Computers & Peripherals (0.3%):
Datatec Ltd. 45,250 562
Mining (0.4%):
Gold Fields of South Africa Ltd. 330,000 773
Total South Africa 1,539
South Korea (1.3%):
Electronic & Electrical --
General (0.7%):
Samsung Electronics, GDR (c) 16,246 1,349
Telecommunications --
Equipment (0.4%):
Korea Telecom, ADR (b) 20,290 715
Utilities -- Electric (0.2%):
Korea Electric Power Corp., ADR 24,150 380
Total South Korea 2,444
Spain (3.2%):
Banks (1.1%):
Banco Bilbao Vizcaya SA 9,900 $ 133
Banco Santander Central
Hispano SA 166,010 1,723
Corporacion Bancaria
de Espana SA 8,000 177
2,033
Retail (0.2%):
Centros Comerciales Pryca SA 22,756 427
Utilities -- Electric (0.5%):
Endesa SA 46,790 936
Utilities -- Telecommunications
(1.4%):
Telefonica SA (b) 156,261 2,569
Total Spain 5,965
Sweden (2.2%):
Insurance (0.7%):
Skandia Forsakrings AB 59,000 1,311
Telecommunications --
Equipment (1.5%):
Telefonaktiebolaget LM Ericsson,
Class B 68,425 2,840
Total Sweden 4,151
Switzerland (4.2%):
Banks (0.8%):
Credit Suisse Group, Registered 4,624 889
UBS AG, Registered 1,900 553
1,442
Commercial Services (0.6%):
Adecco SA Registered Shares 1,960 1,189
Food Processing &
Packaging (0.6%):
Nestle SA, Registered Shares 595 1,148
Insurance (0.4%):
Zurich Allied AG 1,418 803
Pharmaceuticals (1.8%):
Novartis AG, Registered 955 1,429
Roche Holding AG 159 1,909
3,338
Total Switzerland 7,920
Taiwan (0.6%):
Computers & Peripherals (0.0%):
Asustek Computer Inc., GDR (c) 64 1
183
<PAGE>
Semiconductors (0.3%):
Taiwan Semiconductor, ADR (b) 16,404 $ 568
Textile Manufacturing (0.3%):
Far Eastern Textile, GDR 38,700 557
Transportation -- Marine (0.0%):
Evergreen Marine Corp., GDR 3,056 33
Total Taiwan 1,159
Thailand (0.2%):
Financial Services (0.1%):
ABN Amro Asia Securities PCL (b) 54,100 129
Telecommunications --
Equipment (0.1%):
Advanced Information Services (b) 13,400 156
Total Thailand 285
Turkey (0.4%):
Banks (0.2%):
Akbank TAS 4,766,012 74
Finansbank AS (b) 20,000,000 74
Turkiye Garanti Bankasi AS (b) 17,720,500 152
Yapi ve Kredi Bankasi AS 4,947,738 72
372
Diversified (0.1%):
Sabanci Holding AS 5,000,000 148
Home Furnishings (0.1%):
Vestel Elektronik Sanayi (b) 1,200,000 147
Total Turkey 667
Total Common Stocks (Cost $144,912) 181,925
Convertible Bonds (0.6%)
Banks (0.6%):
Mitsubishi Bank International Finance
Bermuda, 3.00%, 11/30/02 $ 943 1,137
Total Convertible Bonds (Cost $943) 1,137
Foreign Bond (0.1%)
Italy (0.1%):
Utilities -- Telecommunications (0.1%):
Tecnost International $ 166,489 $ 179
Total Italy 179
Total Foreign Bond (Cost $139) 179
Total Investments (Cost $149,398) (a) -- 99.7% 186,645
Other assets in excess of liabilities -- 0.3% 509
TOTAL NET ASSETS -- 100.0% $ 187,154
(a) Represents cost for financial reporting purposes and differs from cost
basis for federal income tax purposes by the amount of market to market
adjustments for passive foreign investment companies and the amount of losses
recognized for financial reporting purposes in excess of federal income tax
reporting of approximately $717. Cost for federal income tax purposes differs
from value by net unrealized appreciation of securities as follows (amounts
in thousands):
Unrealized appreciation $ 40,387
Unrealized depreciation (3,870)
Net unrealized appreciation $ 36,517
(b) Non-income producing securities.
(c) 144a security which is restricted as to the resale to institutional
investors.
ADR -- American Depository Receipts
GDR -- Global Depository Receipts
At October 31, 1999, the Fund's open forward foreign currency contracts were
as follows:
Unrealized
Delivery Contract Market Appreciation/
Currency Date Value Value Depreciation
Long Contracts:
Australian Dollar 11/1/99 $ 893 $ 880 $(13)
Hong Kong
Dollar 11/1/99 164 164 0
Total Long
Contracts $1,057 $1,044 $(13)
See notes to financial statements.
184
<PAGE>
Statements of Assets and Liabilities
The Victory Portfolios October 31, 1999
(Amounts in Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Special Ohio Regional Small Company International
Value Stock Opportunity Growth
Fund Fund Fund Fund
<S> <C> <C> <C> <C>
ASSETS:
Investments, at value (Cost $222,217;
$13,652; $139,669 & $149,398) $238,609 $24,403 $164,293 $186,645
Repurchase agreements, at cost 23,000 -- 8,000 --
Total Investments 261,609 24,403 172,293 186,645
Cash -- -- -- 870
Foreign currency (cost $1,327) -- -- -- 1,329
Interest and dividends receivable 221 33 99 142
Receivable from affiliates 1 1 2 20
Receivable for capital shares issued 4 -- 36 5
Receivable from brokers for investments sold 2,462 7 1,209 --
Reclaims receivable -- -- -- 229
Prepaid expenses and other assets 41 6 37 38
Total Assets 264,338 24,450 173,676 189,278
LIABILITIES:
Payable to Custodian -- 150 -- --
Payable for capital shares redeemed 41 -- 348 23
Payable to brokers for investments purchased 5,552 -- -- 1,767
Payable for forward currency contracts purchased -- -- -- 13
Payable for return of collateral received 24,823 -- 16,080 --
Accrued expenses and other payables:
Investment advisory fees 174 14 74 196
Administration fees 37 -- 1 4
Custodian fees 7 2 10 48
Accounting fees -- 1 4 --
Transfer agent fees 38 11 71 50
Shareholder service fees -- Class A 43 5 13 8
Shareholder service and 12b-1 fees -- Class B 1 1 -- --
12b-1 fees -- Class G -- -- 52 15
Other 19 3 9 --
Total Liabilities 30,735 187 16,662 2,124
NET ASSETS:
Capital 204,886 5,025 139,264 129,544
Undistributed accumulated net investment income (loss) 57 11 -- (555)
Net unrealized appreciation/depreciation from investments 16,392 10,751 24,624 34,367
Net unrealized appreciation/depreciation
from translation of assets and liabilities
in foreign currencies -- -- -- 2,872
Accumulated undistributed net realized gains
(losses) from investment transactions 12,268 8,476 (6,874) 20,926
Net Assets $233,603 $24,263 $157,014 $187,154
Net Assets
Class A $232,272 $23,529 $ 51,599 $149,193
Class B 1,331 734 639
Class G 105,415 37,322
Total $233,603 $24,263 $157,014 $187,154
Outstanding units of beneficial interest (shares)
Class A 17,740 1,384 2,448 9,038
Class B 104 44 40
Class G 5,011 2,265
Total 17,844 1,428 7,459 11,343
Net asset value
Redemption price per share -- Class A $ 13.09 $ 17.00 $ 21.08 $ 16.51
Offering and redemption price per share -- Class B<F1> $ 12.75 $ 16.60 $ 15.83
Redemption price per share -- Class G $ 21.04 $ 16.48
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) -- Class A $ 13.89 $ 18.04 $ 22.37 $ 17.52
<FN>
<F1> Redemption price per Class B Share varies based on length of time held.
</FN>
</TABLE>
See notes to financial statements.
185
<PAGE>
The Victory Portfolios Statements of Operations
(Amounts in Thousands)
<TABLE>
<CAPTION>
Ohio
Special Regional Small Company International
Value Stock Opportunity Growth
Fund Fund Fund Fund
Seven
Year Year Months Year Year
Ended Ended Ended Ended Ended
October 31, October 31, October 31, March 31, October 31,
1999 1999 1999<F1> 1999 1999
<S> <C> <C> <C> <C> <C>
Investment Income:
Interest income $ 213 $ 5 $ 112 $ 1,539 $ 273
Dividend income 5,224 775 837 1,060 2,186
Securities Lending 48 4 11 -- --
Foreign tax withholding -- -- -- -- (168)
Total Income 5,485 784 960 2,599 2,291
Expenses:
Investment advisory fees 2,838 255 649 935 1,733
Administration fees 422 51 161 2 236
Shareholder service fees -- Class A 701 80 90 1 321
Shareholder service fees and
12b-1 fees -- Class B 17 9 -- -- 5
12b-1 fees -- Class G -- -- 353 759 101
Accounting fees 82 46 43 41 77
Custodian fees 85 17 28 22 314
Legal and audit fees 22 5 23 17 25
Trustees' fees and expenses 8 1 3 8 4
Transfer agent fees 126 39 77 155 132
Registration and filing fees 31 14 16 30 35
Printing fees 16 3 26 7 10
Other 21 3 4 3 3
Total Expenses 4,369 523 1,473 1,980 2,996
Expenses voluntarily reduced by advisor (284) (29) (199) (3) (160)
Expenses before reimbursement
from distributor 4,085 494 1,274 1,977 2,836
Expenses reimbursed by distributor (14) (10) (3) -- (28)
Net Expenses 4,071 484 1,271 1,977 2,808
Net Investment Income (Loss) 1,414 300 (311) 622 (517)
Realized/Unrealized Gains (Losses)
from Investments and Foreign Currencies:
Net realized gains (losses)
from investment transactions 12,285 8,475 1,814 (7,458) 21,931
Net realized gains (losses)
from foreign currency transactions -- -- -- -- (443)
Net change in unrealized
appreciation/depreciation from investments (10,033) (10,275) 2,716 (37,144) 25,042
Change in unrealized appreciation/depreciation
from translation of assets and liabilities in
foreign currencies -- -- -- -- (6)
Net realized/unrealized gains (losses)
from investments and foreign currencies: 2,252 (1,800) 4,530 (44,602) 46,524
Change in net assets resulting from operations $ 3,666 $ (1,500) $4,219 $(43,980) $46,007
<FN>
<F1> Effective March 26, 1999, the Gradison Opportunity Value Fund merged
into the Victory Special Growth Fund. Concurrent with the merger the Fund was
renamed Victory Small Company Opportunity Fund. Statements of operations prior
to March 26, 1999 represent the Gradison Opportunity Value Fund.
</FN>
</TABLE>
See notes to financial statements.
186
<PAGE>
The Victory Portfolios Statements of Changes in Net Assets
(Amounts in Thousands)
<TABLE>
<CAPTION>
Special Value Ohio Regional
Fund Stock Fund
Year Ended Year Ended Year Ended Year Ended
October 31, October 31, October 31, October 31,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
From Investment Activities:
Operations:
Net investment income (loss) $ 1,414 $ 2,335 $ 300 $ 386
Net realized gains/(losses) from
investment transactions 12,285 14,148 8,475 4,989
Net realized (losses) from foreign
currency transactions -- -- -- --
Net change in unrealized
appreciation/depreciation
from investments (10,033) (63,870) (10,275) (6,979)
Net change in unrealized
appreciation/depreciation
from translation of assets and
liabilities in foreign currencies -- -- -- --
Change in net assets resulting
from operations 3,666 (47,387) (1,500) (1,604)
Distributions to Shareholders:
From net investment income
Class A (1,724) (2,264) (295) (380)
Class G -- -- -- --
From net realized gains from
investment transactions (14,036) (31,840) (4,990) (4,773)
Change in net assets from
distributions to shareholders (15,760) (34,104) (5,285) (5,153)
Capital Transactions:
Proceeds from shares issued 38,223 97,620 3,704 9,121
Proceeds from shares issued
in connection with acquisition -- -- -- --
Dividends reinvested 13,171 28,316 3,610 3,575
Cost of shares redeemed (154,595) (117,227) (18,920) (17,693)
Change in net assets from
capital transactions (103,201) 8,709 (11,606) (4,997)
Change in net assets (115,295) (72,782) (18,391) (11,754)
Net Assets:
Beginning of period 348,898 421,680 42,654 54,408
End of period $ 233,603 $ 348,898 $ 24,263 $ 42,654
Share Transactions:
Issued 2,803 6,190 201 399
Issued in connection with acquisition -- -- -- --
Reinvested 993 1,813 193 163
Redeemed (11,530) (7,706) (1,031) (807)
Change in shares (7,734) 297 (637) (245)
<FN>
<F1> For the period April 1, 1999 through October 31, 1999.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Small Company International
Opportunity Fund Growth Fund
Period
Ended Year Ended Year Ended Year Ended Year Ended
October 31, March 31, March 31, October 31, October 31,
1999<F1> 1999 1998 1999 1998
<S> <C> <C> <C> <C> <C>
From Investment Activities:
Operations:
Net investment income (loss) $ (311) $ 622 $ 1,228 $ (517) $ 602
Net realized gains/(losses) from
investment transactions 1,814 (7,458) 20,508 21,931 8,282
Net realized (losses) from foreign
currency transactions -- -- -- (443) (4,180)
Net change in unrealized
appreciation/depreciation
from investments 2,716 (37,144) 26,918 25,042 (563)
Net change in unrealized
appreciation/depreciation
from translation of assets and
liabilities in foreign currencies -- -- -- (6) 3,830
Change in net assets resulting
from operations 4,219 (43,980) 48,654 46,007 7,971
Distributions to Shareholders:
From net investment income
Class A -- -- -- -- (431)
Class G -- (890) (1,401) -- --
From net realized gains from
investment transactions -- (6,817) (18,568) (4,776) (5,849)
Change in net assets from
distributions to shareholders -- (7,707) (19,969) (4,776) (6,280)
Capital Transactions:
Proceeds from shares issued 33,493 163,831 97,739 151,295 191,985
Proceeds from shares issued
in connection with acquisition -- 70,516 -- 29,076 --
Dividends reinvested -- 7,587 19,731 3,192 4,034
Cost of shares redeemed (71,046) (175,583) (84,922) (172,483) (169,240)
Change in net assets from
capital transactions (37,553) 66,351 32,548 11,080 26,779
Change in net assets (33,334) 14,664 61,233 52,311 28,470
Net Assets:
Beginning of period 190,348 175,684 114,451 134,843 106,373
End of period $157,014 $ 190,348 $175,684 $ 187,154 $ 134,843
Share Transactions:
Issued 1,512 6,944 3,748 10,645 14,295
Issued in connection with acquisition -- 3,124 -- 2,363 --
Reinvested -- 305 797 228 325
Redeemed (3,245) (7,479) (3,273) (12,116) (12,387)
Change in shares (1,733) 2,894 1,272 1,120 2,233
<FN>
<F1> For the period April 1, 1999 through October 31, 1999.
</FN>
</TABLE>
See notes to financial statements.
187
<PAGE>
The Victory Portfolios Financial Highlights
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Special Value Fund
Class A Shares
Year Year Year Year
Ended Ended Ended Ended
October 31, October 31, October 31, October 31,
1999 1998 1997 1996<F3>
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 13.64 $ 16.68 $ 14.15 $ 12.15
Investment Activities
Net investment income (loss) 0.07 0.09 0.10 0.12
Net realized and unrealized
gains (losses) on investments 0.04 (1.79) 3.50 2.33
Total from Investment Activities 0.11 (1.70) 3.60 2.45
Distributions
Net investment income (0.08) (0.09) (0.12) (0.11)
In excess of net investment income -- -- -- --
Net realized gains (0.58) (1.25) (0.95) (0.34)
Total Distributions (0.66) (1.34) (1.07) (0.45)
Net Asset Value, End of Period $ 13.09 $ 13.64 $ 16.68 $ 14.15
Total Return (excludes sales charges) 0.80% (11.22)% 27.05% 20.60%
Ratios/Supplemental Data:
Net Assets, End of Period (000) $232,272 $346,962 $420,020 $289,460
Ratio of expenses to
average net assets 1.43% 1.40% 1.37% 1.37%
Ratio of net investment income (loss)
to average net assets 0.51% 0.56% 0.65% 0.88%
Ratio of expenses to
average net assets<F1> 1.53% 1.51% <F6> 1.40%
Ratio of net investment income (loss)
to average net assets<F1> 0.41% 0.45% <F6> 0.85%
Portfolio turnover <F5> 43% 44% 39% 55%
<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> Annualized.
<F3> Effective March 1, 1996, the Fund designated the existing shares as Class A Shares and commenced
offering Class B Shares.
<F4> 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%.
<F5> Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between
the classes of shares issued.
<F6> There were no voluntary fee reductions during the period.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Special Value Fund
Class B Shares
March 1,
Year Year Year 1996 Year
Ended Ended Ended through Ended
October 31, October 31, October 31, October 31, October 31,
1999 1998 1997 1996<F3> 1995
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $13.38 $16.49 $14.09 $12.89 $ 10.49
Investment Activities
Net investment income (loss) (0.18) (0.08) (0.04) 0.01 0.15
Net realized and unrealized
gains (losses) on investments 0.13 (1.78) 3.41 1.23 1.71
Total from Investment Activities (0.05) (1.86) 3.37 1.24 1.86
Distributions
Net investment income -- -- -- (0.01) (0.15)
In excess of net investment income -- -- (0.02) (0.03) --
Net realized gains (0.58) (1.25) (0.95) -- (0.05)
Total Distributions (0.58) (1.25) (0.97) (0.04) (0.20)
Net Asset Value, End of Period $12.75 $13.38 $16.49 $14.09 $ 12.15
Total Return (excludes sales charges) (0.43)% (12.32)% 25.41% 19.80%<F4> 18.01%
Ratios/Supplemental Data:
Net Assets, End of Period (000) $1,331 $1,936 $1,660 $ 386 $194,700
Ratio of expenses to
average net assets 2.68% 2.65% 2.66% 2.51%<F2> 1.04%
Ratio of net investment income (loss)
to average net assets (0.74)% (0.68)% (0.62)% (0.31)%<F2> 1.35%
Ratio of expenses to
average net assets<F1> 3.60% 3.02% 3.63% 3.75%<F2> 1.30%
Ratio of net investment income (loss)
to average net assets<F1> (1.66)% (1.05)% (1.59)% (1.55)%<F2> 1.09%
Portfolio turnover <F5> 43% 44% 39% 55% 39%
<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> Annualized.
<F3> Effective March 1, 1996, the Fund designated the existing shares as Class A Shares and commenced
offering Class B Shares.
<F4> 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%.
<F5> Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between
the classes of shares issued.
<F6> There were no voluntary fee reductions during the period.
</FN>
</TABLE>
See notes to financial statements.
188
<PAGE>
The Victory Portfolios Financial Highlights
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Ohio Regional Stock Fund
Class A Shares
Year Year Year Year
Ended Ended Ended Ended
October 31, October 31, October 31, October 31,
1999 1998 1997 1996<F2>
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 20.67 $ 23.56 $ 17.95 $ 15.94
Investment Activities
Net investment income (loss) 0.18 0.18 0.14 0.14
Net realized and unrealized
gains (losses) from investments (1.26) (0.80) 5.96 2.62
Total from Investment Activities (1.08) (0.62) 6.10 2.76
Distributions
Net investment income (0.17) (0.17) (0.14) (0.14)
In excess of net investment income -- -- -- --
Net realized gains (2.42) (2.10) (0.35) (0.36)
In excess of net realized gains -- -- -- (0.25)
Total Distributions (2.59) (2.27) (0.49) (0.75)
Net Asset Value, End of Period $ 17.00 $ 20.67 $ 23.56 $ 17.95
Total Return (excludes sales charges) (6.31)% (3.13)% 34.61% 17.79%
Ratios/Supplemental Data:
Net Assets, End of Period (000) $23,529 $41,653 $53,703 $45,294
Ratio of expenses to
average net assets 1.39% 1.26% 1.26% 1.39%
Ratio of net investment income (loss)
to average net assets 0.92% 0.76% 0.67% 0.79%
Ratio of expenses to
average net assets<F1> 1.48% 1.37% 1.26% 1.40%
Ratio of net investment income
(loss) to average net assets<F1> 0.83% 0.65% 0.67% 0.78%
Portfolio turnover <F5> 2% 6% 8% 6%
<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>
<TABLE>
<CAPTION>
Ohio Regional Stock Fund
Class B Shares
March 1,
Year Year Year 1996 Year
Ended Ended Ended through Ended
October 31, October 31, October 31, October 31, October 31,
1999 1998 1997 1996<F2> 1995
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $20.30 $23.28 $17.87 $16.43 $ 14.56
Investment Activities
Net investment income (loss) (0.10) (0.11) (0.14) (0.03) 0.17
Net realized and unrealized
gains (losses) from investments (1.18) (0.77) 5.90 1.51 2.13
Total from Investment Activities (1.28) (0.88) 5.76 1.48 2.30
Distributions
Net investment income -- -- -- -- (0.17)
In excess of net investment income -- -- -- (0.04) (0.01)
Net realized gains (2.42) (2.10) (0.35) -- (0.65)
In excess of net realized gains -- -- -- -- (0.09)
Total Distributions (2.42) (2.10) (0.35) (0.04) (0.92)
Net Asset Value, End of Period $16.60 $20.30 $23.28 $17.87 $ 15.94
Total Return (excludes sales charges) (7.48)% (4.33)% 32.71% 16.95%<F3> 16.93%
Ratios/Supplemental Data:
Net Assets, End of Period (000) $ 734 $1,001 $ 705 $ 326 $39,048
Ratio of expenses to
average net assets 2.64% 2.52% 2.65% 2.61%<F4> 1.20%
Ratio of net investment income (loss)
to average net assets (0.34)% (0.54)% (0.76)% (0.60)%<F4> 1.13%
Ratio of expenses to
average net assets<F1> 3.76% 3.59% 4.25% 3.50%<F4> 1.24%
Ratio of net investment income
(loss) to average net assets<F1> (1.46)% (1.61)% (2.36)% (1.49)%<F4> 1.09%
Portfolio turnover <F5> 2% 6% 8% 6% 11%
<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.
189
<PAGE>
The Victory Portfolios Financial Highlights
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Small Company Opportunity Fund
Class A Class G Shares
April 1, March 26, April 1,
1999 to 1999 to 1999 to
October 31, March 31, October 31,
1999 1999<F2><F3> 1999
<S> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 20.71 $ 20.23 $ 20.71
Investment Activities
Net investment income (0.01) -- (0.06)
Net realized and
unrealized gains
(losses) on investments 0.38 0.48 0.39
Total from Investment
Activities 0.37 0.48 0.33
Distributions
Net investment income -- -- --
In excess of net
realized gains -- -- --
Net realized gains -- -- --
Total Distributions -- -- --
Net Asset Value,
End of Period $ 21.08 $ 20.71 $ 21.04
Total Return
(excludes sales charges) 1.79%<F5> 2.37%<F5> 1.59%<F5>
Ratios/Supplemental Data:
Net Assets, End of Period (000) $51,599 $64,587 $105,415
Ratio of expenses to
average net assets <F4> 0.98%<F6> 0.98%<F6> 1.29%<F6>
Ratio of net investment income
(loss) to average net assets <F4> 0.09%<F6> 1.50%<F6> 0.39%<F6>
Ratio of expenses to
average net assets<F1> 1.17%<F6> 1.19%<F6> 1.47%<F6>
Ratio of net investment income
(loss) to average net assets<F1> (0.28)%<F6> 1.29%<F6> (0.58)%<F6>
Portfolio turnover <F7> 16% 30% 16%
<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 26, 1999, the Gradison Opportunity Value Fund merged into the Victory Special Growth
Fund. Concurrent with the merger the Fund was renamed Victory Small Company Opportunity Fund. Financial
highlights prior to March 26, 1999 represent the Gradison Opportunity Value Fund.
<F4> Effective March 26, 1999, the Adviser agreed to waive its management fee or to reimburse expenses, as
allowed by law, to the extent necessary to maintain the net operating expenses of the Class G shares of
the Fund at a maximum of 1.30% until at least April 1, 2001. The Adviser has also agreed to waive its
management fee for Class A shares to the same extent the fee is waived for Class G shares until at least
April 1, 2001.
<F5> Not annualized
<F6> Annualized
<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 fee reductions during the period.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Small Company Opportunity Fund
Class G Shares
11 Months Year
Ended Ended
Year Ended March 31, March 31, April 30,
1999<F3> 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 27.89 $ 22.77 $ 22.26 $ 18.10 $ 18.35 $ 17.55
Investment Activities
Net investment income 0.10 0.23 0.20 0.19 0.13 0.08
Net realized and
unrealized gains
(losses) on investments (6.06) 8.72 2.52 4.73 0.18 1.59
Total from Investment
Activities (5.96) 8.95 2.72 4.92 0.31 1.67
Distributions
Net investment income (0.14) (0.27) (0.17) (0.18) (0.12) (0.07)
In excess of net
realized gains -- -- -- -- -- --
Net realized gains (1.08) (3.56) (2.04) (0.58) (0.44) (0.80)
Total Distributions (1.22) (3.83) (2.21) (0.76) (0.56) (0.87)
Net Asset Value,
End of Period $ 20.71 $ 27.89 $ 22.77 $ 22.26 $ 18.10 $ 18.35
Total Return
(excludes sales charges) (22.08)% 42.02% 12.46% 28.00% 1.75%<F5> 9.75%
Ratios/Supplemental Data:
Net Assets, End of Period (000) $125,761 $175,684 $114,451 $102,979 $84,738 $83,297
Ratio of expenses to
average net assets <F4> 1.30% 1.31% 1.36% 1.41% 1.37%<F6> 1.38%
Ratio of net investment income
(loss) to average net assets <F4> 0.41% 0.86% 0.90% 0.95% 0.84%<F6> 0.47%
Ratio of expenses to
average net assets<F1> 1.30%<F8> <F8> <F8> <F8> <F8> <F8>
Ratio of net investment income
(loss) to average net assets<F1> 0.41%<F8> <F8> <F8> <F8> <F8> <F8>
Portfolio turnover <F7> 30% 42% 35% 24% 32% 40%
<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 26, 1999, the Gradison Opportunity Value Fund merged into the Victory Special Growth
Fund. Concurrent with the merger the Fund was renamed Victory Small Company Opportunity Fund. Financial
highlights prior to March 26, 1999 represent the Gradison Opportunity Value Fund.
<F4> Effective March 26, 1999, the Adviser agreed to waive its management fee or to reimburse expenses, as
allowed by law, to the extent necessary to maintain the net operating expenses of the Class G shares of
the Fund at a maximum of 1.30% until at least April 1, 2001. The Adviser has also agreed to waive its
management fee for Class A shares to the same extent the fee is waived for Class G shares until at least
April 1, 2001.
<F5> Not annualized
<F6> Annualized
<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 fee reductions during the period.
</FN>
</TABLE>
See notes to financial statements.
190
<PAGE>
The Victory Portfolios Financial Highlights
For a Share Outstanding Throughout Each Period (Continued on Next Page)
<TABLE>
<CAPTION>
International Growth Fund
Class A Shares
Year Year Year Year
Ended Ended Ended Ended
October 31, October 31, October 31, October 31,
1999 1998 1997 1996<F3>
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 13.19 $ 13.31 $ 13.01 $ 12.33
Investment Activities
Net investment income (loss) (0.05) 0.07<F2> 0.09 0.08
Net realized and unrealized
gains (losses) from investments
and foreign currencies 3.85 0.65 0.67 0.62
Total from Investment
Activities 3.80 0.72 0.76 0.70
Distributions
Net investment income -- (0.06) (0.01) (0.02)
Net realized gains (0.48) (0.78) (0.45) --
Tax return of capital -- -- -- --
Total Distributions (0.48) (0.84) (0.46) (0.02)
Net Asset Value, End of Period $ 16.51 $ 13.19 $ 13.31 $ 13.01
Total Return
(excludes sales charges) 29.43% 5.79% 6.04% 5.65%
Ratios/Supplemental Data:
Net Assets, End of Period (000) $149,193 $134,491 $106,189 $121,517
Ratio of expenses to average net assets 1.75% 1.71% 1.69% 1.73%
Ratio of net investment income (loss) to
average net assets (0.32)% 0.55% 0.63% 0.64%
Ratio of expenses to
average net assets<F1> 1.88% 1.82% 1.69% 1.75%
Ratio of net investment income (loss)
to average net assets<F1> (.45)% 0.44% 0.63% 0.62%
Portfolio turnover <F6> 106% 86% 116% 178%
<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> 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%.
<F5> Annualized.
<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>
International Growth Fund
Class B Shares
March 1,
Year Year Year 1996
Ended Ended Ended through
October 31, October 31, October 31, October 31,
1999 1998 1997 1996<F3>
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $12.82 $13.07 $12.93 $12.79
Investment Activities
Net investment income (loss) (0.14) (0.13) (0.06) --
Net realized and unrealized
gains (losses) from investments
and foreign currencies 3.63 0.66 0.65 0.14
Total from Investment
Activities 3.49 0.53 0.59 0.14
Distributions
Net investment income -- -- -- --
Net realized gains (0.48) (0.78) (0.45) --
Tax return of capital -- -- -- --
Total Distributions (0.48) (0.78) (0.45) --
Net Asset Value, End of Period $15.83 $12.82 $13.07 $12.93
Total Return
(excludes sales charges) 27.82% 4.44% 4.68% 4.89%<F4>
Ratios/Supplemental Data:
Net Assets, End of Period (000) $ 639 $ 352 $ 184 $ 118
Ratio of expenses to average net assets 3.03% 2.98% 3.07% 2.91%<F5>
Ratio of net investment income (loss) to
average net assets (1.53)% (0.80)% (0.68)% (0.10)%<F5>
Ratio of expenses to
average net assets<F1> 5.75% 6.44% 10.01% 6.46%<F5>
Ratio of net investment income (loss)
to average net assets<F1> (4.25)% (4.26)% (7.62)% (3.65)%<F5>
Portfolio turnover <F6> 106% 86% 116% 178%
<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> 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%.
<F5> Annualized.
<F6> 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.
191
<PAGE>
The Victory Portfolios Financial Highlights--continued
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
International Growth Fund
Class G Shares
Year March 26, 1999
Ended through
October 31, October 31,
1995<F2> 1999<F3><F4>
<S> <C> <C>
Net Asset Value, Beginning of Period $ 13.32 $ 13.73
Investment Activities
Net investment income (loss) 0.05 (0.03)
Net realized andunrealized gains
(losses) from investments and foreign currencies (0.42) 2.78
Total from Investment Activities (0.37) 2.75
Distributions
Net investmentincome -- --
Net realized gains (0.55) --
Tax return of capital (0.07) --
Total Distributions (0.62) --
Net Asset Value, End of Period $ 12.33 $ 16.48
Total Return (excludes sales charges) (2.50)% 20.03%<F5>
Ratios/Supplemental Data:
Net Assets, End of Period (000) $106,477 $37,322
Ratio of expenses to
average net assets 1.53% 2.00%<F6>
Ratio of net investment income (loss)
to average net assets 0.75% (1.79)%<F6>
Ratio of expenses to average net assets<F1> 1.65% 2.24%<F6>
Ratio of net investment income (loss)
to average net assets<F1> 0.63% (2.03)%<F6>
Portfolio turnover <F7> 68% 106%
<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 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.
<F3> Period from commencement of operations.
<F4> Effective March 26, 1999, the Gradison International Fund merged into the Victory
International Growth Fund.
<F5> Not Annualized.
<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.
192
<PAGE>
Statements of Cash Flows
The Victory Portfolios For the Year Ended October 31, 1999
(Amounts in Thousands)
<TABLE>
<CAPTION>
Limited Term Intermediate Investment
Income Income Quality Bond Balanced
Fund Fund Fund Fund
<S> <C> <C> <C> <C>
Increase (decrease) in cash
Cash Flows from Operating Activities:
Net Investment Income $ 3,853 $ 12,785 $ 8,469 $ 9,625
Adjustments to reconcile net investment
income to net cash provided by
operating activities:
Purchases of investment securities (1,178,627) (1,978,141) (1,480,098) (4,645,855)
Proceeds from disposition of
investments securities 1,209,604 1,996,772 1,498,592 4,676,833
Increase in investments purchased with
cash collateral from securities lending (13,000) (37,744) (18,272) (59,109)
Increase (decrease) in dividends,
interest, and other receivables 270 (27) 37 (406)
Increase in payable for return of collateral
received from securities lending 13,000 37,744 18,272 59,109
Increase (decrease) in accrued expenses
and other payables (12) 24 39 14
Net amortization/accretion from investments -- -- (29) (49)
Net cash provided by operating activities 35,088 31,413 27,010 40,162
Cash Flows from Financing Activities:
Proceeds from shares issued 13,368 48,771 44,055 60,026
Cost of shares redeemed (47,319) (76,559) (68,346) (97,178)
Cash distributions paid (1,137) (3,625) (2,719) (3,010)
Net cash used in financing activities (35,088) (31,413) (27,010) (40,162)
Increase (decrease) in cash -- -- -- --
Cash:
Beginning balance -- -- -- --
Ending Balance $ -- $ -- $ -- $ --
Non-cash financing activities not included herein consist of reinvestment of dividends from net investment
income and distributions of net realized capital gains of $2,715, $9,350, $5,673, and $32,955.
</TABLE>
See notes to financial statements.
193
<PAGE>
Statements of Cash Flows
The Victory Portfolios For the Year Ended October 31, 1999
(Amounts in Thousands)
<TABLE>
<CAPTION>
Convertible Diversified Stock
Securities Value Stock Index
Fund Fund Fund Fund
<S> <C> <C> <C> <C>
Increase (decrease) in cash
Cash Flows from Operating Activities:
Net Investment Income $ 4,581 $ 1,185 $ 2,936 $ 10,034
Adjustments to reconcile net investment
income to net cash provided by
operating activities:
Purchases of investment securities (383,737) (2,502,112) (9,223,883) (25,984,133)
Proceeds from disposition of
investments securities 420,348 2,508,251 9,270,791 25,896,331
Increase in investments purchased with
cash collateral from securities lending -- (1,408) (17,955) (121,567)
Increase (decrease) in dividends,
interest, and other receivables 233 (97) 7 (934)
Increase in payable for return of collateral
received from securities lending -- 1,408 17,955 121,567
Increase (decrease) in accrued expenses
and other payables (36) 117 207 327
Net amortization/accretion from investments (356) -- -- (382)
Net cash provided by (used in) operating activities 41,033 7,344 50,058 (78,757)
Cash Flows from Financing Activities:
Proceeds from shares issued 21,968 117,769 389,065 195,291
Cost of shares redeemed (61,457) (119,080) (405,278) (110,306)
Cash distributions paid (1,544) (6,033) (33,829) (6,228)
Net cash (used in) provided by financing activities (41,033) (7,344) (50,042) 78,757
Increase (decrease) in cash -- -- 16 --
Cash:
Beginning balance -- -- 2 --
Ending Balance $ -- $ -- $ 18 $ --
Non-cash financing activities not included herein consist of reinvestment of dividends from net investment
income and distributions of net realized capital gains of $3,658, $81,419, $168,242, and $ 65,410.
</TABLE>
See notes to financial statements.
194
<PAGE>
Statements of Cash Flows
The Victory Portfolios For the Year Ended October 31, 1999
(Amounts in Thousands)
<TABLE>
<CAPTION>
Ohio Small
Special Regional Company
Growth Value Stock Opportunity
Fund Fund Fund Fund
<S> <C> <C> <C> <C>
Increase (decrease) in cash
Cash Flows from Operating Activities:
Net Investment Income $ (742) $ 1,414 $ 300 $ (311)
Adjustments to reconcile net investment
income to net cash provided by
operating activities:
Purchases of investment securities (1,483,325) (1,170,453) (28,821) (574,765)
Proceeds from disposition of
investments securities 1,403,266 1,287,763 45,383 611,915
Increase in investments purchased with
cash collateral from securities lending (32,000) 19,770 -- (16,080)
Increase (decrease) in dividends,
interest, and other receivables (131) 331 10 (21)
Increase in payable for return of collateral
received from securities lending 32,000 (19,770) -- 16,080
Increase (decrease) in accrued expenses
and other payables 172 (102) 19 100
Net amortization/accretion from investments -- -- -- --
Net cash (used in) provided by operating activities (80,760) 118,953 16,891 36,918
Cash Flows from Financing Activities:
Proceeds from shares issued 153,587 38,235 3,705 33,506
Cost of shares redeemed (69,560) (154,599) (18,921) (70,702)
Cash distributions paid (3,267) (2,589) (1,675) --
Net cash provided by (used in) financing activities 80,760 (118,953) (16,891) (37,196)
Increase (decrease) in cash -- -- -- (278)
Cash:
Beginning balance -- -- -- 278
Ending Balance $ -- $ -- $ -- $ --
Non-cash financing activities not included herein consist of reinvestment of dividends from net investment
income and distributions of net realized capital gains of $18,991, $13,171, $3,610, and $0.
</TABLE>
See notes to financial statements.
195
<PAGE>
Notes to Financial Statements
The Victory Portfolios October 31, 1999
1. Organization:
The Victory Portfolios (the "Trust") 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 currently offers shares of 32 active
funds. The accompanying financial statements and financial highlights are
those 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, 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 ("REI")
Fund, Value Fund, Lakefront Fund, Established Value Fund, Diversified Stock
Fund, Stock Index Fund, Growth Fund, Special Value Fund, Ohio Regional Stock
Fund, Small Company Opportunity Fund (previously the Special Growth Fund),
and the International Growth Fund, (collectively, the "Funds").
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, Special Value Fund and Ohio Regional
Stock Fund are authorized to issue two classes of shares: Class A Shares and
Class B Shares. The Fund for Income, Ohio Municipal Bond Fund, Stock Index
and Small Company Opportunity Fund are authorized to issue two classes of
shares: Class A Shares and Class G Shares. The Diversified Stock Fund and
International Growth Fund are authorized to issue three classes of shares:
Class A Shares, Class B Shares and Class G Shares. The Established Value Fund
is authorized to issue Class G Shares. Each class of shares in a Fund has
substantially identical rights and privileges except with respect to sales
charges, 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 Fund for Income seeks to provide a high level of current income
consistent with preservation of shareholders' capital. The Government
Mortgage Fund seeks to provide a high level of current income consistent with
safety of principal. The National Municipal Bond Fund seeks to provide a high
level of current interest income exempt from federal income tax, as is
consistent with the preservation of capital. The New York Tax-Free Fund seeks
to provide a high level of current income exempt from federal, New York
State, and New York City income taxes, consistent with the preservation of
shareholders' capital. The Ohio Municipal Bond Fund seeks to produce a high
level of current interest income which is exempt from both federal income tax
and Ohio personal income tax. The Balanced Fund seeks to provide income and
long-term growth of capital. The Convertible Securities Fund seeks to provide
a high level of current income together with long-term capital appreciation.
The REI Fund seeks to provide total return through investments in real
estate-related securities. The Value Fund and the Special Value Fund seek to
provide long-term growth of capital and dividend income. The Lakefront Fund
seeks to provide long-term growth of capital and income. The Established
Value Fund seeks to obtain long-term capital growth by investing primarily in
common stocks. The Diversified Stock Fund and the Growth Fund seek to provide
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 Ohio Regional Stock Fund
Fund and the Small Company Opportunity seek to provide capital appreciation.
The International Growth Fund seeks to provide capital growth consistent with
reasonable investment risk.
2. Reorganizations:
The Trust entered an Agreement and Plan of Reorganization and Termination
(the "Agreement") with the Gradison Custodian Trust, the Gradison-McDonald
Municipal Custodian Trust and the Gradison Growth Trust (collectively, the
"Gradison Trusts"). Each Gradison Trust was registered as an open-end
investment management company under the 1940 Act. Pursuant to the Agreement,
all of the assets and liabilities of the Gradison Government Income Fund,
Gradison Ohio Tax-Free Income Fund, Gradison Growth and Income Fund, Gradison
Established Value Fund, Gradison International Fund and the Gradison
Opportunity Value Fund (collectively, the "Gradison Funds") were transferred
individually to separate Funds of the Trust in exchange for Class G shares, a
new class of shares issued in connection with the reorganization, of the
corresponding Fund. The Gradison Government Income Fund transferred its
assets and liabilities to the Victory Fund for Income. The Gradison Ohio
Tax-Free Income Fund transferred its assets and liabilities to the Victory
Ohio Municipal Bond Fund. The Gradison Growth and Income Fund transferred its
assets and liabilities to the Victory Diversified Stock Fund. The Gradison
Established Value Fund transferred its assets and liabilities to the Victory
Established Value Fund. The Gradison International Fund transferred its
assets and liabilities to the Victory International Growth Fund. The Gradison
Opportunity Value Fund transferred its assets and liabilities to the Victory
Special Growth Fund. Concurrent with the reorganization, the Victory Special
Growth Fund was renamed the Victory Small Company Opportunity Fund.
Immediately prior to these transfers, the Victory Fund for Income and Victory
Small Company Opportunity Fund
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each effected a reverse stock split to adjust the net asset value per share
to equal the net asset value per share of the Gradison Government Income Fund
and the Gradison Opportunity Value Fund, respectively. The reorganization,
which qualified as a tax-free exchange for federal income tax purposes, was
completed on March 26, 1999 for the Victory Fund for Income, Victory Ohio
Municipal Bond Fund, Victory Diversified Stock Fund, Victory International
Growth Fund and the Victory Small Company Opportunity Fund, and on April 1,
1999 for the Victory Established Value Fund (the "Effective Date(s) of the
Reorganization"), following approval by shareholders of the Gradison Funds at
a special shareholder meeting held on March 5, 1999.
For accounting purposes as a result of the reorganization, the historical
basis of assets and liabilities of the Victory Fund for Income, Victory Ohio
Municipal Bond Fund, Victory Diversified Stock Fund, Victory Established
Value Fund, Victory International Growth Fund and Victory Small Company
Opportunity Fund is that of the Gradison Government Income Fund, Victory Ohio
Municipal Bond Fund, Victory Diversified Stock Fund, Gradison Established
Value Fund, Victory International Growth Fund and Gradison Opportunity Value
Fund, respectively.
The following is a summary of shares outstanding, net assets, net asset value
per share and net unrealized appreciation immediately before and after the
reorganization:
Before After
Reorganization Reorganization
Gradison Victory Victory
Government Fund Fund
Income for for
Fund Income Income
Class A Shares (000) -- 3,314 2,426
Class G Shares (000) -- -- 12,352
Total Shares (000) 12,352 3,314 14,778
Class A Shares (000) -- $31,894 $ 31,894
Class G Shares (000) -- -- 162,313
Total Net Assets (000) $162,313 $31,894 $194,207
Net Asset Value $ 13.14 -- --
Class A Shares -- $ 9.62 $ 13.14
Class G Shares -- -- $ 13.14
Unrealized Appreciation/
(Depreciation) (000) $ 440 $ (190) $ 250
Before After
Reorganization Reorganization
Gradison Victory Victory
Ohio Ohio Ohio
Tax-Free Municipal Municipal
Fund Bond Fund Bond Fund
Class A Shares (000) -- 7,059 7,059
Class G Shares (000) -- -- 10,429
Total Shares (000) 8,885 7,059 17,488
Class A Shares (000) -- $83,257 $ 83,257
Class G Shares (000) -- -- 122,932
Total Net Assets (000) $122,932 $83,257 $206,189
Net Asset Value $ 13.84 -- --
Class A Shares -- $ 11.79 $ 11.79
Class G Shares -- $ 11.79
Unrealized
Appreciation (000) $ 4,805 $ 4,677 $ 9,482
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Before After
Reorganization Reorganization
Gradison Victory Victory
Growth & Diversified Diversified
Income Stock Stock
Fund Fund Fund
Class A Shares (000) -- 58,119 58,119
Class B Shares (000) -- 3,883 3,883
Class G Shares (000) -- -- 4,456
Total Shares (000) 2,620 62,002 66,458
Class A Shares (000) -- $ 996,070 $ 996,070
Class B Shares (000) -- 65,343 65,343
Class G Shares (000) -- -- 76,373
Total Net Assets (000) $76,373 $1,061,413 $1,137,786
Net Asset Value $ 29.15 -- --
Class A Shares -- $ 17.14 $ 17.14
Class B Shares -- 16.83 $ 16.83
Class G Shares -- -- $ 17.14
Unrealized Appreciation (000) $16,342 $ 156,843 $ 173,185
Before After
Reorganization Reorganization
Gradison Victory Victory
Established Established Established
Value Value Value
Fund Fund Fund
Class G Shares (000) -- N/A 15,233
Total Shares (000) 15,233 15,233
Class G Shares (000) -- N/A $479,568
Total Net Assets (000) $479,568 $479,568
Net Asset Value $ 31.48 N/A --
Class G Shares -- $ 31.48
Unrealized Appreciation (000) $153,283 N/A $153,283
Before After
Reorganization Reorganization
Gradison Victory Victory
International International International
Fund Growth Fund Growth Fund
Class A Shares (000) -- 9,551 9,551
Class B Shares (000) -- 39 39
Class G Shares (000) -- -- 2,363
Total Shares (000) 1,848 9,590 11,953
Class A Shares (000) -- $131,095 $131,095
Class B Shares (000) -- 515 515
Class G Shares (000) -- -- 32,440
Total Net Assets (000) $32,440 $131,610 $164,050
Net Asset Value $ 17.56 -- --
Class A Shares -- $ 13.73 $ 13.73
Class B Shares -- 13.26 $ 13.26
Class G Shares -- -- $ 13.73
Unrealized
Appreciation (000) $ 3,364 $ 17,987 $ 21,351
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Before After
Reorganization Reorganization
Gradison Victory Victory
Opportunity Special Small Company
Value Growth Opportunity
Fund Fund Fund
Class A Shares (000) -- 5,824 3,124
Class G Shares (000) -- -- 6,003
Total Shares (000) 6,003 5,824 9,127
Class A Shares (000) -- $63,184 $ 63,184
Class G Shares (000) -- -- 121,427
Total Net Assets (000) $121,427 $63,184 $184,611
Net Asset Value $ 20.23 -- --
Class A Shares -- $ 10.85 $ 20.23
Class G Shares -- -- $ 20.23
Unrealized Appreciation/
(Depreciation) (000) $ 20,262 $(2,393) $ 17,869
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:
Before After
Reorganization Reorganization
SBSF Victory Victory
Convertible Convertible Convertible
Securities Securities Securities
Fund Fund Fund
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
Before After
Reorganization Reorganization
Victory Victory
Diversified Diversified
SBSF Stock Stock
Fund Fund Fund
Shares (000) 5,825 49,641 54,366
Net Assets (000) $86,317 $865,943* $952,260*
Net Asset Value 14.82 18.27* 18.27*
Unrealized appreciation (000) 24,319 215,899 240,218
* Class A
Before After
Reorganization Reorganization
Key Victory Victory
Stock Index Stock Index Stock Index
Fund Fund Fund
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
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Before After
Reorganization Reorganization
SBSF Victory Victory
Capital Special Special
Growth Growth Growth
Fund Fund Fund
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
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, Established Value Fund,
Special Value Fund, Small Company Opportunity 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.
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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, Established Value Fund, Special Value Fund, Small Company
Opportunity 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. These amounts are included in amounts payable for investments
purchased on the accompanying statements of assets and liabilities.
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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, Small Company Opportunity Fund, Ohio Regional Stock
Fund, International Growth Fund, Lakefront Fund, Established Value 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 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, is 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 the 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 collateral assets exceeding 10% of average net assets during the
year. Under this guideline, a statement of cash flows is presented for
Limited Term Income Fund, Intermediate Income Fund, Investment Quality Bond
Fund, Balanced Fund, Convertible Securities Fund, Value Fund, Diversified
Stock Fund, Stock Index Fund, Growth Fund, Special Value Fund, Ohio Regional
Stock Fund and Small Company Opportunity Fund. The following Funds had
securities with the following market values on loan as of October 31, 1999
(amounts in thousands):
Market Value
of Loaned Securities
Limited Term Income Fund $ 4,748
Intermediate Income Fund 37,215
Investment Quality Bond Fund 18,098
Balanced Fund 58,585
Value Fund 47,660
Diversified Stock Fund 190,609
Stock Index Fund 120,680
Growth Fund 28,346
Special Value Fund 24,371
Small Company Opportunity Fund 16,072
The loaned securities were fully collateralized by cash, and short-term
securities purchased with such cash collateral, as of October 31, 1999.
As disclosed in the Schedule of Investments the Victory Limited Term Income
Fund invested cash collateral in a Goldman Sachs Repurchase Agreement with an
interest rate of 5.52% and a maturity date of 11/1/99 which was
collateralized by the following securities (amounts in thousands):
Principal Description Market Value
$ 51 GTE Corp., 9.10%, 6/1/03 $ 56
2,231 Lockheed Martin Corp., 7.70%, 6/15/08 2,278
1,948 Mutual Life Ins. Co., 0.00%, 8/15/24 2,578
750 Sun Microsystems, Inc., 7.65%, 8/15/09 747
8 Vastar Resources, 8.75%, 2/1/05 9
$5,668
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As disclosed in the Schedule of Investments the Victory Intermediate Income
Fund invested cash collateral in a Morgan Stanley Dean Witter Repurchase
Agreement with an interest rate of 5.48% and a maturity date of 11/1/99 which
was collateralized by the following securities (amounts in thousands):
Principal Description Market Value
$1,000 AMR Corp., 9.88%, 6/15/20 $1,149
1,210 Coastal Corp., 6.20%, 5/15/04 1,190
3,000 J.C.Penney Co., 7.40%, 4/1/37 2,950
1,500 Morgan St. Dean Witter, 6.01%, 6/29/04 1,425
$6,714
As disclosed in the Schedule of Investments the Victory Intermediate Income
Fund invested cash collateral in a Merrill Lynch Repurchase Agreement with an
interest rate of 5.50% and a maturity date of 11/1/99 which was
collateralized by the following securities (amounts in thousands):
Principal Description Market Value
$ 8 Allied Corp., 0.00%, 8/1/01 $ 7
3 Allied Corp., 0.00%, 8/1/07 2
50 Beneficial Corp., 7.18%, 12/20/99 50
147 Compania Intl. Tele., 10.38%, 8/1/04 147
1,964 Petroleos Mexicanos, 9.28%, 7/15/05 1,885
3,005 Union Oil Co. of CA, 7.70%, 4/21/05 3,060
$5,151
As disclosed in the Schedule of Investments the Victory Investment Quality
Bond Fund invested cash collateral in a Lehman Brothers Repurchase Agreement
with an interest rate of 5.43% and a maturity date of 11/1/99 which was
collateralized by the following securities (amounts in thousands):
Principal Description Market Value
$ 278 Canadian National Rail, 0.00%, 5/15/00 $ 276
250 Dow Chemical, 5.97%, 1/15/09 226
2,460 Housing Urban Development, 6.36%, 8/1/04 2,432
2,180 Housing Urban Development, 6.41%, 8/1/05 2,149
23 Placer Dome, Inc., 7.75%, 12/15/99 23
47 Southwestern Bell, 7.00%, 1/1/00 46
$5,152
As disclosed in the Schedule of Investments the Victory Balanced Fund
invested cash collateral in a Goldman Sachs Repurchase Agreement with an
interest rate of 5.52% and a maturity date of 11/1/99 which was
collateralized by the following securities (amounts in thousands):
Principal Description Market Value
$2,000 Federated Dept. Stores, 7.00%, 2/15/28 $1,793
5,203 GATX Capital Corp., 6.21%, 7/26/00 5,183
47 GTE Corp., 9.10%, 6/1/03 52
1,245 J.C.Penney Co., 6.38%, 9/15/00 1,249
1,741 Solutia, Inc., 6.50% 10/15/02 1,697
$9,974
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As disclosed in the Schedule of Investments the Victory Balanced Fund
invested cash collateral in a Merrill Lynch Repurchase Agreement with an
interest rate of 5.50% and a maturity date of 11/1/99 which was
collateralized by the following securities (amounts in thousands):
Principal Description Market Value
$2,000 AMR Corp., 9.82%, 10/25/11 $ 2,268
526 CIA Intl Telecommunications, 8.85%, 8/1/04 463
900 CIA Intl Telecommunications, 10.38%, 8/1/04 684
350 Colonial Realty LP, 7.05%, 12/15/03 336
2,000 Delta Air Lines, 6.65%, 3/15/04 1,931
10 Kroger Co., 7.65%, 4/15/07 10
20 Mediaone Group, Inc., 7.03%, 4/10/02 20
20 Polaroid Corp., 7.25%, 1/15/07 17
1,020 Tenet Healthcare Corp., 8.63%, 12/1/03 984
1,995 Union Oil Co. of CA, 7.70%, 4/21/05 2,032
1,253 Waste Management, Inc., 7.00%, 5/15/05 1,080
570 Waste Management, Inc. 7.13%, 10/1/07 477
$10,302
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 5.43% and a maturity date of 11/1/99 which was
collateralized by the following securities (amounts in thousands):
Principal Description Market Value
$ 5,250 ACLC Business Loan Receivables,
6.52%, 8/15/20 $ 5,154
4,175 J.C.Penney Co., 6.13%, 11/15/03 3,995
90 Newfoundland Corp., 9.00%, 10/15/21 101
6,129 Solectron Corp., 0.00%, 1/27/19 3,647
122 Texas Utilities, 7.46%, 1/1/15 120
20 USX Corp., 6.65%, 2/1/06 19
2,200 USX Corp., 9.13%, 1/15/13 2,422
$15,458
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 5.48% and a maturity date of 11/1/99 which
was collateralized by the following securities (amounts in thousands):
Principal Description Market Value
$ 5,125 Comdisco Inc., 6.50%, 6/15/00 $ 5,241
10,000 Lockheed Martin Corp., 6.50% 4/15/03 9,812
6,890 Seagate Technology Inc., 7.13%, 3/1/04 6,503
16,000 Time Warner, Inc., 6.85%, 1/15/26 16,109
$37,665
204
<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 5.52% and a maturity date of 11/1/99 which was
collateralized by the following securities (amounts in thousands):
Principal Description Market Value
$2,050 China Development Bank, 8.25%, 5/15/09 $ 2,020
100 Delphi Auto Systems Corp., 6.50%, 5/1/09 95
6,162 Mutual Life Ins. Co., 0.00%, 8/15/24 8,157
5,000 Nabisco, Inc., 6.13%, 2/1/03 4,872
3,509 Raytheon Co., 6.75%, 3/15/18 3,105
1,910 Solutia, Inc., 6.50%, 10/15/02 1,862
1,500 Supervalue, Inc., 7.63%, 9/15/04 1,492
2,507 Swedish Export, 0.00%, 2/24/00 1,871
2,920 Unova, Inc., 6.88%, 3/15/05 2,807
9 Vastar Resources, 8.75%, 2/1/05 10
$26,291
As disclosed in the Schedule of Investments the Victory Diversified Stock
Fund invested cash collateral in a Merrill Lynch Repurchase Agreement with an
interest rate of 5.50% and a maturity date of 11/1/99 which was
collateralized by the following securities (amounts in thousands):
Principal Description Market Value
$ 239 Bank of China, 8.25%, 3/15/14 $ 196
5 Conseco, Inc., 8.13%, 2/15/03 5
7 CUC Intl., Inc., 3.00%, 2/15/02 6
75 CUC Intl., Inc., 3.00%, 2/15/02 75
570 Fremont General Corp., 7.88%, 3/17/09 561
72 Georgia-Pacific Corp., 7.38%, 12/1/25 66
10,850 Illinova Corp., 6.46%, 10/1/02 10,718
40 Kinder Morgan, Inc., 7.25%, 3/1/28 36
25 MCN Investment Corp., 6.32%, 2/1/03 24
10 Occidental Petroleum, 10.13%, 11/15/01 11
1 Occidental Petroleum, 7.65%, 2/15/06 1
148 Occidental Petroleum, 10.13%, 9/15/09 167
1,375 Occidental Petroleum, 11.13%, 8/1/10 1,678
33 Office Depot, Inc., 0.00%, 11/1/08 22
1,465 Pennzoil-Quaker State, 6.75%, 4/1/09 1,360
108 Reliant Energy, Inc., 6.00%, 3/15/12 97
397 Republic Services, Inc., 7.13%, 5/15/09 360
438 Royal Caribbean Cruises, 7.50%, 10/15/27 393
926 Solectron Corp., 0.00%, 1/27/19 551
62 Time Warner, Inc., 8.18%, 8/15/07 65
48 Time Warner, Inc., 6.88%, 6/15/18 44
1,547 Time Warner, Inc., 9.15%, 2/1/23 1,727
125 Time Warner, Inc., 6.63%, 5/15/29 109
166 Turner Broadcasting, 7.40%, 2/1/04 167
200 USX Corp., 6.65%, 2/1/06 191
77 USX Corp., 9.38%, 2/15/12 85
225 Wellpoint Health Ntwk, 0.00%, 7/2/19 129
1,825 Williams Cos. Inc., 7.63%, 7/15/19 1,759
$20,603
205
<PAGE>
As disclosed in the Schedule of Investments the Victory Diversified Stock
Fund invested cash collateral in a Nations Bank Repurchase Agreement with an
interest rate of 5.52% and a maturity date of 11/1/99 which was
collateralized by the following securities (amounts in thousands):
Principal Description Market Value
$ 5,000 Amerada Hess Corp., 7.88%, 10/1/29 $ 4,894
5,000 Amvescap PLC, 6.38%, 5/15/03 4,954
10,500 Boston Scientific, 6.63%, 3/15/05 9,791
5,000 Cable & Wire Optus Fin Pty, 8.13%, 6/15/09 5,042
2,500 Commonwealth Edison, 6.95%, 7/15/18 2,328
4,028 Compania Telecom Chile, 7.63%, 7/15/06 3,891
$30,900
As disclosed in the Schedule of Investments the Victory Stock Index Fund
invested cash collateral in a Morgan Stanley Dean Witter Repurchase Agreement
with an interest rate of 5.48% and a maturity date of 11/1/99 which was
collateralized by the following securities (amounts in thousands):
Principal Description Market Value
$2,340 Associates Corp. NA, 5.96%, 5/15/37 $ 2,406
9,000 J.C.Penney Co., 6.90%, 8/15/26 8,896
2,200 PP&L, 7.05%, 6/25/09 2,189
2,000 PP&L, 7.15%, 6/25/09 1,986
6,000 United News & Media PLC, 7.75%, 7/1/09 5,800
$21,277
As disclosed in the Schedule of Investments the Victory Stock Index Fund
invested cash collateral in a Goldman Sachs Repurchase Agreement with an
interest rate of 5.52% and a maturity date of 11/1/99 which was
collateralized by the following securities (amounts in thousands):
Principal Description Market Value
$ 8 AMR Corp., 9.50%, 5/15/01 $ 8
1,020 Dana Corp., 7.00%, 3/1/29 913
1,000 GATX Capital Corp., 6.50%, 11/1/00 1,027
1,500 General Am. Transportation, 8.06%, 7/21/03 1,587
67 GTE Corp., 9.10%, 6/1/03 74
6,010 HSB Capital, 5.91%, 7/15/27 5,648
2,719 Lockheed Martin Corp., 7.25%, 5/15/06 2,742
364 Quebec Province, 5.75%, 2/15/09 334
3,322 Solutia, Inc., 6.72%, 10/15/37 3,168
$15,501
As disclosed in the Schedule of Investments the Victory Stock Index Fund
invested cash collateral in a Nations Bank Repurchase Agreement with an
interest rate of 5.52% and a maturity date of 11/1/99 which was
collateralized by the following securities (amounts in thousands):
Principal Description Market Value
$4,000 AES Corp., 8.70%, 10/15/09 $ 3,988
1,500 AES Corp., 9.38%, 10/15/29 1,501
6,458 Litton Industries, Inc., 8.00%, 10/15/09 6,462
6,000 Raytheon Co., 6.30%, 3/15/05 5,701
3,136 Republic Services, Inc., 7.13%, 5/15/09 2,948
$20,600
206
<PAGE>
As disclosed in the Schedule of Investments the Victory Small Company
Opportunity Fund invested cash collateral in a Goldman Sachs Repurchase
Agreement with an interest rate of 5.52% and a maturity date of 11/1/99 which
was collateralized by the following securities (amounts in thousands):
Principal Description Market Value
$2,165 BF Goodrich Co., 7.50%, 4/15/08 $2,122
400 Enron Corp., 7.13%, 5/15/07 401
1,500 Finova Capital Corp., 6.15%, 3/31/03 1,464
600 TyCo Intl. Group, 6.25%, 6/15/13 590
$4,577
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, Established Value Fund,
Special Value Fund, Small Company Opportunity 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.
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 as an offset 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.
Costs incurred in connection with the organization of the Funds are being
amortized on a straight-line basis over a period not to exceed sixty months
from the date the Funds commenced operations. Organization costs were paid by
the Distributor on behalf of the REI Fund and the Lakefront Fund and are
being amortized over a five year period with a corresponding payable from the
Funds to the Distributor to repay such costs at the conclusion of the
amortization period.
207
<PAGE>
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, 1999 were as follows
(amounts in thousands):
Purchases Sales
Limited Term Income Fund $143,509 $ 163,436
Intermediate Income Fund 691,063 715,687
Fund for Income 87,558 47,338
Government Mortgage Fund 272,135 278,134
Investment Quality Bond Fund 602,182 612,254
National Municipal Bond Fund 56,612 61,624
New York Tax-Free Fund 4,930 7,607
Ohio Municipal Bond Fund 172,709 166,904
Balanced Fund 771,679 759,436
Convertible Securities Fund 59,946 94,064
REI Fund 8,116 9,246
Value Fund 204,991 210,626
Lakefront Fund 585 299
Diversified Stock Fund 903,431 1,052,901
Stock Index Fund 183,848 21,307
Growth Fund 194,949 113,594
Established Value Fund 53,966 104,473
Special Value Fund 118,698 231,066
Ohio Regional Stock Fund 751 16,591
International Growth Fund 171,311 162,777
Small Company Opportunity Fund 28,721 57,910
5. Related Party Transactions:
Investment advisory services are provided to all the Funds by Key Asset
Management Inc. ("the Adviser"), a wholly owned subsidiary of KeyCorp.
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, Fund for Income
(Class G Shares), Ohio Municipal Bond Fund (Class G Shares), Diversified
Stock Fund (Class G Shares), Stock Index Fund (Class A Shares), Established
Value Fund (Class G Shares), Small Company Opportunity Fund (Class G Shares),
and International Growth Fund (Class G Shares). 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 and,
during the period October 23, 1998 through the Effective Dates of the
Reorganizations, as distributor for the Gradison Trusts. 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, 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. 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. Pursuant to
the Trust's 12b-1 Plan, the Distributor may receive a monthly service fee at
an annual rate of 0.25% of the average daily net assets of the Class G shares
of the Fund for Income, Ohio Municipal Bond Fund, Diversified Stock Fund,
Established Value Fund, Small Company Opportunity Fund and the International
Growth Fund. The service fee is paid to securities broker dealers or other
financial intermediaries for providing personal services to shareholders of
the Funds, including responding
208
<PAGE>
to inquiries, providing information to shareholders about their Fund
accounts, establishing and maintaining accounts and records, processing
dividend and distribution payments, arranging for bank wires, assisting in
transactions, and changing account information. The Distributor may also
receive a fee for general distribution services and for its assistance in
selling Class G shares of the Funds. This fee is computed and paid at an
annual rate of 0.25% of the average daily net assets of the Class G shares of
the Fund for Income, Ohio Municipal Bond Fund, Diversified Stock Fund,
Established Value Fund, Small Company Opportunity 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,
1999, the Distributor received approximately $2,031,000 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 $1,970,000 to affiliates of the Funds. BISYS also serves the
Funds and, during the period March 1, 1999 through the Effective Dates of the
Reorganization, served the Gradison Funds, as Mutual Fund Accountant and
receives a fee for these services under the terms of a fund accounting
agreement.
Fees may be voluntarily reduced or reimbursed to assist the Funds in
maintaining competitive expense ratios. The Adviser has agreed to waive its
management fee or to reimburse expenses, as allowed by law, to the extent
necessary to maintain the net operating expenses of the Class G shares of the
Fund for Income, the Ohio Municipal Bond Fund, the Diversified Stock Fund,
the Established Value Fund, the International Growth Fund and the Small
Company Opportunity Fund at a maximum of 0.89%, 0.91%, 1.44%, 1.10%, 2.00%
and 1.30% of average daily net assets, respectively, until at least April 1,
2001. Further, the Adviser has agreed to waive its management fee for Class A
and Class B shares, as applicable, of those Funds to the same extent the fee
is waived for Class G shares of the corresponding Fund until at least April
1, 2001. Effective May 3, 1999, the Adviser has agreed to waive its
management fee or to reimburse expenses, as allowed by law, to the extent
necessary to maintain the net operating expenses of the Lakefront Fund to
1.50% of average daily net assets, until at least February 29, 2000 and to
2.00% until at least February 28, 2009.
Additional information regarding related party transactions is as follows for
the year ended October 31, 1999:
Investment Advisory Administration
Fees Fees
Maximum
Percentage
of Average Voluntary Voluntary
Daily Fee Fee
Net Assets Reductions Reductions
(000) (000)
U.S. Government Obligations Fund 0.35% -- --
Prime Obligations Fund 0.35% -- --
Financial Reserves Fund 0.50% -- --
Tax-Free Money Market Fund 0.35% -- --
Ohio Municipal Money Market Fund 0.50% 1,109 --
Limited Term Income Fund 0.50% 98 --
Intermediate Income Fund 0.75% 640 --
Fund for Income 0.50% 128 136
Government Mortgage Fund 0.50% 97 --
Investment Quality Bond Fund 0.75% 390 --
National Municipal Bond Fund 0.55% 179 --
New York Tax-Free Fund 0.55% 47 17
Ohio Municipal Bond Fund 0.60% 340 --
Balanced Fund 1.00% 1,041 --
Convertible Securities Fund 0.75% -- --
Real Estate Investment Fund 1.00% 118 --
Value Fund 1.00% 281 --
Established Value Fund 0.65% 246 173
Lakefront Fund 1.00% 7 --
Diversified Stock Fund 0.65% 506 --
Stock Index Fund 0.60% 842 991
Growth Fund 1.00% 280 --
Special Value Fund 1.00% 284 --
Ohio Regional Stock Fund 0.75% 29 --
Small Company Opportunity Fund 1.00% 95 104
International Growth Fund 1.10% 160 --
209
<PAGE>
The Trust and KeyCorp entered into an agreement (the "Put Agreement") dated
August 13, 1999 which provided the Trust the right to require KeyCorp to
purchase certain General American Life Insurance Company ("GALIC") securities
held by the Prime Obligations Fund, the Financial Reserves Fund and another
fund within the Trust, on or before October 15, 1999. On August 23, 1999 and
October 1, 1999, approximately $5.5 million and $49.5 million par value and
$4 million and $36 million par value of GALIC securities, respectively, were
sold by the Prime Obligations Fund and the Financial Reserves Fund at par in
connection with the terms of the acquisition of GALIC by an unaffiliated
external party. Accordingly, the Put Agreement expired on October 15, 1999
without any transactions described therein having been exercised.
Prior to the Effective Dates of the Reorganization, investment advisory
services were provided to the Gradison Funds by McDonald & Company
Securities, Inc. ("McDonald"), pursuant to investment advisory agreements
between the Gradison Funds and McDonald under substantially the same terms as
the Funds' investment advisory agreement described above, except that the
Gradison International Fund paid McDonald a fee computed and accrued daily
and paid monthly based upon the daily net assets of that fund at the annual
rate of 1.00% on the first $100 million, 0.90% on the next $150 million,
0.80% of the next $250 million and 0.75% of net assets in excess of $500
million for acting as its investment adviser. Blairlogie Capital Management
("Blairlogie") served as sub-advisor to the Gradison International Fund prior
to the Effective Date of the Reorganization. Transfer agent services,
including dividend disbursing, fund accounting services and administrative
services were provided by McDonald prior to the Effective Dates of the
Reorganization, pursuant to the terms of Transfer Agency, Accounting Services
and Administrative Services agreements between certain of the Gradison Funds
and McDonald. Under the terms of those agreements, the Gradison Established
Value Fund, the Gradison Growth & Income Fund, the Gradison Opportunity Value
Fund and the Gradison International Fund paid McDonald a monthly fee for
transfer agent and administrative services at an annual rate of $18.50 per
shareholder non-zero balance account and $5.00 per closed shareholder
account, as defined, plus out-of-pocket costs for statement paper, statement
and reply envelopes and reply postage. The Gradison Ohio Tax-Free Income Fund
paid $23.00 per shareholder non-zero balance account and $5.00 per closed
shareholder account, as defined, plus out-of-pocket costs for statement
paper, statement and reply envelopes and reply postage. Under the terms of a
Data Processing Agreement with McDonald, the Gradison Government Income Fund
paid McDonald a monthly fee at an annual rate of $8.25 per shareholder
non-zero balance account for data processing services provided to that fund.
The Gradison Established Value, Gradison Growth & Income, Gradison
Opportunity Value and Gradison International Funds paid fund accounting fees
to McDonald under substantially the same terms as the Funds. Under the terms
of an Expense Reimbursement Agreement, McDonald agreed to reimburse expenses
to the Gradison Growth & Income and Gradison International Funds to the
extent such expenses exceeded 1.50% and 2.00% of average daily net assets,
respectively, prior to the Effective Dates of the Reorganization. Prior to
the Effective Dates of the Reorganization, officers of the Gradison Funds
were also officers of McDonald.
6. Capital Share Transactions:
Capital share transactions for those Funds with multiple share classes were
as follows (amounts in thousands):
U.S. Government Obligations Fund
Year Year
Ended Ended
October 31, October 31,
1999 1998
Capital and Share Transactions:
Investor Shares:
Proceeds from shares issued 901,949 1,048,740
Dividends reinvested 21 22
Cost of shares redeemed (1,086,810) (933,795)
Total (184,840) 114,967
Select Shares:
Proceeds from shares issued 3,085,952 3,183,081
Dividends reinvested 60,036 57,576
Cost of shares redeemed (2,934,450) (2,874,230)
Total 211,538 366,427
210
<PAGE>
<TABLE>
<CAPTION>
Fund For Income National Municipal Bond Fund
Ten Months Year Year Year
Ended Ended Ended Ended
October 31, December 31, October 31, October 31,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Capital Transactions:
Class A Shares:
Proceeds from shares issued $ 16,785 -- $ 11,987 $ 16,834
Proceeds from shares issued in
connection with acquisition 33,350 -- -- --
Dividends reinvested 821 -- 2,014 1,607
Cost of shares redeemed (8,309) -- (20,612) (20,804)
Total $ 42,647 -- $ (6,611) $ (2,363)
Class B Shares:
Proceeds from shares issued -- -- $ 784 $ 646
Dividends reinvested -- -- 121 61
Cost of shares redeemed -- -- (754) (688)
Total -- -- $ 151 $ 19
Class G Shares:
Proceeds from shares issued $ 86,968 $ 52,319 -- --
Dividends reinvested 8,370 7,552 -- --
Cost of shares redeemed (55,719) (57,385) -- --
Total $ 39,619 $ 2,486 -- --
Share Transactions:
Class A Shares:
Issued 1,301 -- 1,132 1,576
Issued in connection
with acquisition 2,426 -- -- --
Reinvested 64 -- 191 150
Redeemed (642) -- (1,962) (1,932)
Total 3,149 -- (639) (206)
Class B Shares:
Issued -- -- 73 60
Reinvested -- -- 11 6
Redeemed -- -- (72) (65)
Total -- -- 12 1
Class G Shares:
Issued 6,704 3,958 -- --
Reinvested 647 572 -- --
Redeemed (4,293) (4,338) -- --
Total 3,058 192 -- --
</TABLE>
211
<PAGE>
<TABLE>
<CAPTION>
New York Tax-Free Fund Ohio Municipal Bond Fund Balanced 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,
1999 1998 1999 1998 1999 1998
<S> <C> <C> <C> <C> <C> <C>
Capital Transactions:
Class A Shares:
Proceeds from shares issued $ 3,414 $ 5,992 $ 15,845 $ 16,324 $ 54,573 $ 93,069
Dividends reinvested 466 596 1,118 917 32,438 25,674
Cost of shares redeemed (6,902) (4,006) (18,208) (14,725) (96,089) (65,050)
Total $(3,022) $ 2,582 $ (1,245) $ 2,516 $ (9,078) $ 53,693
Class B Shares:
Proceeds from shares issued $ 679 $ 1,103 -- -- $ 5,337 $ 2,906
Dividends reinvested 117 122 -- -- 517 243
Cost of shares redeemed (729) (548) -- -- (1,240) (435)
Total $ 67 $ 677 -- -- $ 4,614 $ 2,714
Class G Shares:
Proceeds from shares issued -- -- $ 24,863 -- -- --
Proceeds from shares issued
in connection with acquisition -- -- 118,155 -- -- --
Dividends reinvested -- -- 3,031 -- -- --
Cost of shares redeemed -- -- (20,870) -- -- --
Total -- -- $125,179 -- -- --
Share Transactions:
Class A Shares:
Issued 270 470 1,351 1,377 3,646 6,530
Reinvested 37 47 96 78 2,212 1,880
Redeemed (544) (315) (1,569) (1,243) (6,414) (4,599)
Total (237) 202 (122) 212 (556) 3,811
Class B Shares:
Issued 54 87 -- -- 355 203
Reinvested 10 10 -- -- 35 18
Redeemed (59) (43) -- -- (84) (30)
Total 5 54 -- -- 306 191
Class G Shares:
Issued -- -- 2,162 -- -- --
Issued in connection
with acquisition -- -- 10,429 -- -- --
Reinvested -- -- 266 -- -- --
Redeemed -- -- (1,818) -- -- --
Total -- -- 11,039 -- -- --
</TABLE>
212
<PAGE>
<TABLE>
<CAPTION>
Diversified Stock Fund Stock Index 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,
1999 1998 1999 1998 1999 1998
<S> <C> <C> <C> <C> <C> <C>
Capital Transactions:
Class A Shares:
Proceeds from shares issued $ 268,453 $ 253,313 $ 185,881 $ 188,176 $ 38,026 $ 96,571
Proceeds from shares issued
in connection with acquisition -- $ 86,317 -- $ 46,866 -- --
Dividends reinvested 157,657 69,826 65,393 37,415 13,093 28,184
Cost of shares redeemed (382,001) (319,480) (110,122) (182,024) (153,798) (116,764)
Total $ 44,109 $ 89,976 $ 141,152 $ 90,433 $(102,679) $ 7,991
Class B Shares:
Proceeds from shares issued $ 17,642 $ 19,452 -- -- $ 197 $ 1,049
Dividends reinvested 10,399 3,412 -- -- 78 132
Cost of shares redeemed (7,181) (4,782) -- -- (797) (463)
Total $ 20,860 $ 18,082 -- -- $ (522) $ 718
Class G Shares:
Proceeds from shares issued $ 41,251 -- $ 9,408 -- -- --
Proceeds from shares issued
in connection with acquisition 60,016 -- -- -- -- --
Dividends reinvested 4 -- 17 -- -- --
Cost of shares redeemed (14,110) -- (228) -- -- --
Total $ 87,161 -- $ 9,197 -- -- --
Share Transactions:
Class A Shares:
Issued 15,244 15,605 8,410 9,549 2,788 6,124
Issued in connection
with acquisition -- 4,725 -- 2,272 -- --
Reinvested 10,267 4,198 3,318 2,000 987 1,804
Redeemed (21,736) (17,944) (4,966) (8,801) (11,468) (7,676)
Total 3,775 6,584 6,762 5,020 (7,693) 252
Class B Shares:
Issued 1,040 1,088 -- -- 15 66
Reinvested 690 208 -- -- 6 9
Redeemed (417) (271) -- -- (62) (30)
Total 1,313 1,025 -- -- (41) 45
Class G Shares:
Issued 2,250 -- 409 -- -- --
Issued in connection
with acquisition 4,456 -- -- -- -- --
Reinvested -- -- 1 -- -- --
Redeemed (768) -- (10) -- -- --
Total 5,938 -- 400 -- -- --
</TABLE>
213
<PAGE>
<TABLE>
<CAPTION>
Ohio Regional Small Company International
Stock Fund Opportunity Fund Growth Fund
Year Year Seven Months Year Year Year
Ended Ended Ended Ended Ended Ended
October 31, October 31, October 31, March 31, October 31, October 31,
1999 1998 1999 1999 1999 1998
<S> <C> <C> <C> <C> <C> <C>
Capital Transactions:
Class A Shares:
Proceeds from shares issued $ 3,687 $ 8,735 $ 10,585 $ 71,034 $ 148,118 $ 191,799
Dividends reinvested 3,491 3,503 -- -- 3,177 4,023
Cost of shares redeemed (18,698) (17,668) (24,871) (609) (167,989) (169,227)
Total $(11,520) $ (5,430) $(14,286) $ 70,425 $ (16,694) $ 26,595
Class B Shares:
Proceeds from shares issued $ 17 $ 386 -- -- $ 213 $ 186
Dividends reinvested 119 72 -- -- 15 11
Cost of shares redeemed (222) (25) -- -- (51) (13)
Total $ (86) $ 433 -- -- $ 177 $ 184
Class G Shares:
Proceeds from shares issued -- -- $ 22,908 $ 92,797 $ 2,964 --
Proceeds from shares issued
in connection with acquisition -- -- -- 70,516 29,076 --
Dividends reinvested -- -- -- 7,587 -- --
Cost of shares redeemed -- -- (46,175) (174,974) (4,443) --
Total -- -- $(23,267) $ (4,074) $ 27,597 --
Share Transactions:
Class A Shares:
Issued 200 382 476 3,150 10,428 14,282
Reinvested 186 160 -- -- 227 324
Redeemed (1,018) (806) (1,147) (30) (11,813) (12,386)
Total (632) (264) (671) 3,120 (1,158) 2,220
Class B Shares:
Issued 1 17 -- -- 16 13
Reinvested 7 3 -- -- 1 1
Redeemed (13) (1) -- -- (4) (1)
Total (5) 19 -- -- 13 13
Class G Shares:
Issued -- -- 1,036 3,794 201 --
Issued in connection
with acquisition -- -- -- 3,124 2,363 --
Reinvested -- -- -- 305 -- --
Redeemed -- -- (2,098) (7,449) (299) --
Total -- -- (1,062) (226) 2,265 --
</TABLE>
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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, 1999, a portion of income dividends
paid by the Funds qualify for the dividends received deduction available to
corporations:
Qualified Dividend Income
Balanced Fund 36.21%
Convertible Securities Fund 37.94%
Value Fund 100.00%
Lakefront Fund 42.30%
Established Value Fund 39.83%
Diversified Stock Fund 44.95%
Stock Index Fund 45.39%
Special Value Fund 100.00%
Ohio Regional Stock Fund 100.00%
Exempt-interest dividends are as follows for the year ended October 31, 1999
(amounts in thousands):
Tax-Free Money Market Fund $16,862
Ohio Municipal Money Market Fund 23,878
National Municipal Bond Fund 1,758
New York Tax-Free Bond Fund 871
Ohio Municipal Bond Fund 6,426
During the year ended October 31, 1999, the following Funds paid long-term
capital gain distributions (amounts in thousands):
Intermediate Income Fund $ 298
National Municipal Bond Fund 317
Ohio Municipal Bond Fund 218
Balanced Fund 23,694
Convertible Securities Fund 213
Value Fund 85,590
Lakefront Fund 107
Diversified Stock Fund 177,828
Stock Index Fund 58,555
Growth Fund 22,258
Special Value Fund 14,036
Ohio Regional Stock Fund 4,990
International Growth Fund 4,776
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<PAGE>
As of October 31, 1999, for Federal income tax purposes, the following Funds
have capital loss carryforwards available to offset future capital gains, if
any (amounts in thousands):
Amount Expires
Prime Obligations Fund $ 11 2007
Tax-Free Money Market Fund 4 2006
Tax-Free Money Market Fund 27 2007
Ohio Municipal Money Market Fund 5 2007
Limited Term Income Fund 1,335 2002
Limited Term Income Fund 553 2003
Limited Term Income Fund 906 2005
Limited Term Income Fund 1,116 2007
Intermediate Income Fund 5,229 2007
Fund for Income 585 2001
Fund for Income 5,491 2002
Fund for Income 864 2003
Fund for Income 62 2004
Fund for Income 606 2007
Government Mortgage Fund 698 2002
Government Mortgage Fund 109 2005
Government Mortgage Fund 2,523 2007
Investment Quality Bond Fund 3,961 2002
Investment Quality Bond Fund 6,428 2007
New York Tax-Free Bond Fund 2 2006
New York Tax-Free Bond Fund 16 2007
Ohio Municipal Bond Fund 497 2007
Real Estate Investment Fund 497 2006
Real Estate Investment Fund 1,400 2007
Small Company Opportunity Fund* 6,164 2006
Small Company Opportunity Fund 701 2007
* This loss cannot be used to offset future gains attributable to unrealized
appreciation of securities held by the Gradison Opportunity Value Fund at the
time of the merger.
As of October 31, 1999, 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):
Amount Expires
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
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<PAGE>
9. Voting Results of a Special Meeting of the Gradison Fund Shareholders
(Unaudited):
A Special Meeting of Shareholders of the Gradison Funds was held on March 5,
1999. At the meeting, shareholders voted on the following matters with the
following results as indicated below:
Proposal 1
To approve an Agreement and Plan of Reorganization and Termination pursuant
to which the Gradison Funds will transfer all of their assets and liabilities
solely in exchange (the "Exchange") for Class G Shares of the corresponding
Victory Fund, as described above, under Reorganizations. The Gradison
Government Income Fund will distribute Class G shares of the Victory Fund for
Income received in the Exchange to its shareholders in an amount equal in net
asset value to the shares of the Gradison Government Income Fund held by such
shareholders as of the date of the Exchange, after which the Gradison
Government Income Fund will be terminated. The Gradison Ohio Tax-Free Income
Fund will distribute Class G shares of the Victory Ohio Municipal Bond Fund
received in the Exchange to its shareholders in an amount equal in net asset
value to the shares of the Gradison Ohio Income Tax-Free Fund held by such
shareholders as of the date of the Exchange, after which the Gradison Ohio
Tax-Free Income Fund will be terminated. The Gradison Growth & Income Fund
will distribute Class G shares of the Victory Diversified Stock Fund received
in the Exchange to its shareholders in an amount equal in net asset value to
the shares of the Gradison Growth & Income Fund held by such shareholders as
of the date of the Exchange, after which the Gradison Growth & Income Fund
will be terminated. The Gradison Established Value Fund will distribute Class
G shares of the Victory Established Value Fund received in the Exchange to
its shareholders in an amount equal in net asset value to the shares of the
Gradison Established Value Fund held by such shareholders as of the date of
the Exchange, after which the Gradison Established Value Fund will be
terminated. The Gradison International Fund will distribute Class G shares of
the Victory International Growth Fund received in the Exchange to its
shareholders in an amount equal in net asset value to the shares of the
Gradison International Fund held by such shareholders as of the date of the
Exchange, after which the Gradison International Fund will be terminated. The
Gradison Opportunity Value Fund will distribute Class G shares of the Victory
Small Company Opportunity Fund received in the Exchange to its shareholders
in an amount equal in net asset value to the shares of the Gradison
Opportunity Value Fund held by such shareholders as of the date of the
Exchange, after which the Gradison Opportunity Value Fund will be terminated.
For Against Abstain
Gradison Government Income Fund 6,214,681 77,025 298,638
Gradison Ohio Tax-Free Income Fund 5,030,214 86,171 564,500
Gradison Growth & Income Fund 1,221,905 21,962 91,427
Gradison Established Value Fund 9,150,642 220,771 392,960
Gradison International Fund 968,785 19,521 127,248
Gradison Opportunity Value Fund 3,401,280 146,661 165,906
Proposal 2
To approve a new Investment Advisory Agreement between each respective
Gradison Trust, on behalf of each of the Gradison Funds, and McDonald
Investments, Inc. because the merger of McDonald's corporate parent with
KeyCorp caused the previous agreement to terminate.
For Against Abstain
Gradison Government Income Fund 6,226,902 84,278 281,293
Gradison Ohio Tax-Free Income Fund 5,230,950 48,062 401,873
Gradison Growth & Income Fund 1,221,805 20,081 93,408
Gradison Established Value Fund 9,013,177 209,306 393,279
Gradison International Fund 970,690 19,848 125,017
Gradison Opportunity Value Fund 3,384,334 156,140 166,780
Proposal 3
To approve a new Investment Sub-Advisory Agreement between the McDonald
Investments Inc. and Blairlogie Capital Management because the merger of
McDonald's corporate parent with KeyCorp and the unrelated sale of a
controlling interest in Blairlogie caused the previous agreement to
terminate.
For Against Abstain
Gradison International Fund 1,071,189 18,670 25,696
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<PAGE>
10. Subsequent Events:
At a meeting held on December 1, 1999, the Board of Directors of the Trust
approved the transfer of all the assets and liabilities of The Ohio Regional
Stock Fund and The Government Mortgage Fund (collectively, the "Transferor
Funds") into The Established Value Fund and The Fund For Income
(collectively, the "Survivor Funds"), respectively. All Class A Shares and
Class B Shares of the Transferor Funds will be transferred into Class A
Shares of the respective Survivor Funds. Additionally, the Board of Directors
of the Trust approved the transfer of all the assets and liabilities of Class
B Shares into existing Class A Shares for The Balanced Fund, The Special
Value Fund, The National Municipal Bond Fund, The New York Tax-Free Fund and
The Ohio Municipal Bond Fund. These transfers are expected to occur during
the second quarter of the calendar year 2000.
As of December 1, 1999, The Value Fund, The Growth Fund, The Convertible
Securities Fund, The Real Estate Investment Fund, The Intermediate Income
Fund, The Investment Quality Bond Fund, The Balanced Fund, The Special Value
Fund, The National Municipal Bond Fund and The New York Tax-Free Fund were
authorized to issue an additional class of shares: Class G Shares. As of
December 15, 1999, the Trust will discontinue the sale of Class B Shares
except for Diversified Stock Fund, and except for certain transactions of
existing shareholders prior to the transfer of Class B assets and liabilities
into Class A Shares as described above.
Distributions of short-term and long-term capital gains were declared and
paid November 19, 1999 to shareholders of record on November 18, 1999, as
follows:
Short-Term Long-Term
Capital Capital
Gain Gain Total
(per share) (per share) (per share)
National Municipal Bond Fund $0.0447 $0.0017 $0.0464
Balanced Fund -- 1.2264 1.2264
Convertible Securities Fund 0.2774 0.3565 0.6339
Value Fund -- 2.1480 2.1480
Lakefront Fund -- 0.3624 0.3624
Established Value Fund 1.0806 3.0214 4.1020
Diversified Stock Fund 0.7819 2.0478 2.8297
Stock Index Fund 0.2642 0.5155 0.7797
Growth Fund -- 1.2349 1.2349
Special Value Fund 0.1600 0.5889 0.7489
Ohio Regional Stock Fund 0.0289 6.1190 6.1479
International Growth Fund 0.2405 1.5961 1.8366
218
<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, Established Value Fund,
Diversified Stock Fund, Stock Index Fund, Growth Fund, Special Value Fund,
Ohio Regional Stock Fund, Small Company Opportunity Fund, and International
Growth Fund) at October 31, 1999, the results of each of their operations for
the period then ended, the changes in each of their net assets for the
periods presented, 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
"financial statements") 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,
1999 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above. The Fund for Income's financial
statements for the year ended December 31, 1998 and its financial highlights
for each of the years in the period ended December 31,1998 were audited by
other auditors, whose report dated January 28, 1999, expressed an unqualified
opinion on those financial statements and financial highlights. The National
Municipal Bond Fund's financial highlights for the year ended April 30, 1995
were audited by other auditors, whose report dated June 20, 1995 expressed an
unqualified opinion on those financial highlights. The Established Value Fund
and the Small Company Opportunity Funds' financial statements and financial
highlights for each of the periods presented through March 31, 1999 were
audited by other auditors, whose report dated April 28, 1999 expressed an
unqualified opinion on those financial statements and financial highlights.
PricewaterhouseCoopers LLP
Columbus, Ohio
December 16, 1999
219
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<PAGE>
Bulk Rate
U.S. Postage
PAID
Cleveland, OH
Permit No. 1535
(LOGO) (R)
Victory Funds
Call Victory at:
800-539-FUND (800-539-3863)
Visit our web site at:
www.victoryfunds.com
PRINTED ON RECYCLED PAPER AR/VP-001 10/99
