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PricewaterhouseCoopers LLP
100 East Broad Street
Suite 2100
Columbus OH 43215-3671
Telephone (614) 225 8700
Facsimile (614) 224 1044
INDEPENDENT ACCOUNTANTS' REPORT
To the Trustees of The Victory Portfolios
We have examined management's assertion about The Victory Portfolios'
(comprising the U.S. Government Obligations Fund, the Prime Obligations Fund,
the Financial Reserves Fund, the Institutional Money Market Fund, the Tax-Free
Money Market Fund, the Ohio Municipal Money Market Fund, the Federal Money
Market Fund, the Limited Term Income Bond Fund, the Intermediate Income Fund,
the Investment Quality Bond Fund, the Government Mortgage Income Fund, the Fund
for Income, the National Municipal Bond Fund, the New York Tax-Free Fund, the
Ohio Municipal Bond Fund, the Balanced Fund, the Stock Index Fund, the
Diversified Stock Fund, the Value Fund, the Growth Fund, the Special Value Fund,
the Ohio Regional Stock Fund, the International Growth Fund, the Lakefront Fund,
the Real Estate Investment Fund, the Convertible Securities Fund, the LifeChoice
Growth Investor Fund, the LifeChoice Moderate Investor Fund, the LifeChoice
Conservative Investor Fund, the Established Value Fund, the Small Company
Opportunity Fund and the Gradison Government Reserves Fund) compliance with the
requirements of subsections (b) and (c) of Rule 17f-2 under the Investment
Company Act of 1940 as of July 16, 1999, included in the accompanying Management
Statement Regarding Compliance with Certain Provisions of the Investment Company
Act of 1940. Management is responsible for The Victory Portfolios' compliance
with those requirements. Our responsibility is to express an opinion on
management's assertion about The Victory Portfolios' compliance based on our
examination.
Our examination was made in accordance with standards established by the
American Institute of Certified Public Accountants and, accordingly, included
examining, on a test basis, evidence about The Victory Portfolios' compliance
with those requirements and performing such other procedures as we considered
necessary in the circumstances. Included among our procedures were the following
tests performed as of July 16, 1999, with respect to securities of The Victory
Portfolios:
- Count and inspection of all securities located in the vault of
Key Trust Company of Ohio, N.A. in Cleveland, Ohio, without
prior notice to management;
- Confirmation, or other procedures as we considered necessary,
of all securities held in book entry form by the Federal
Reserve Bank of Cleveland, Depository Trust Company, Bank of
New York, Morgan Stanley Trust Company or Chase Bank;
- Confirmation, or other procedures as we considered necessary,
of all securities out for transfer with brokers;
- Confirmation, or other procedures as we considered necessary,
of all repurchase agreements with brokers/banks and agreement
of underlying collateral with Key Trust Company of Ohio,
N.A.'s records;
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- Confirmation, or other procedures as we considered necessary,
of all mutual fund investments with transfer agents; and
- Reconciliation of all such securities to the books and records
of The Victory Portfolios and Key Trust Company of Ohio, N.A.
We believe that our examination provides a reasonable basis for our opinion. Our
examination does not provide a legal determination on The Victory Portfolios'
compliance with specified requirements.
In our opinion, management's assertion that The Victory Portfolios were in
compliance with the requirements of subsections (b) and (c) of Rule 17f-2 of the
Investment Company Act of 1940 as of July 16, 1999, with respect to securities
reflected in the investment accounts of The Victory Portfolios is fairly stated,
in all material respects.
This report is intended solely for the information and use of management of The
Victory Portfolios and the Securities and Exchange Commission and should not be
used for any other purpose.
/s/ PricewaterhouseCoopers LLP
August 23, 1999
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MANAGEMENT STATEMENT REGARDING COMPLIANCE WITH CERTAIN PROVISIONS
OF THE INVESTMENT COMPANY ACT OF 1940
We, as members of management of The Victory Portfolios (comprising the U.S.
Government Obligations Fund, the Prime Obligations Fund, the Financial Reserves
Fund, the Institutional Money Market Fund, the Tax-Free Money Market Fund, the
Ohio Municipal Money Market Fund, the Federal Money Market Fund, the Limited
Term Income Bond Fund, the Intermediate Income Fund, the Investment Quality Bond
Fund, the Government Mortgage Income Fund, the Fund for Income, the National
Municipal Bond Fund, the New York Tax-Free Fund, the Ohio Municipal Bond Fund,
the Balanced Fund, the Stock Index Fund, the Diversified Stock Fund, the Value
Fund, the Growth Fund, the Special Value Fund, the Ohio Regional Stock Fund, the
International Growth Fund, the Lakefront Fund, the Real Estate Investment Fund,
the Convertible Securities Fund, the LifeChoice Growth Investor Fund, the
LifeChoice Moderate Investor Fund, the LifeChoice Conservative Investor Fund,
the Established Value Fund, the Small Company Opportunity Fund and the Gradison
Government Reserves Fund) are responsible for complying with the requirements of
subsections (b) and (c) of Rule 17f-2, "Custody of Investments by Registered
Management Investment Companies," of the Investment Company Act of 1940. We are
also responsible for establishing and maintaining effective internal controls
over compliance with those requirements. We have performed an evaluation of The
Victory Portfolios' compliance with the requirements of subsections (b) and (c)
of Rule 17f-2 as of July 16, 1999. Based on this evaluation, we assert that The
Victory Portfolios were in compliance with the provisions of subsections (b) and
(c) of Rule 17f-2 of the Investment Company Act of 1940 as of July 16, 1999,
with respect to securities reflected in the investment accounts of The Victory
Portfolios.
The Victory Portfolios
