Dear Shareholder:
The Victory Prospectus for the following Funds is being revised. This
information is important and is part of your Prospectus.
- --------------------------------------------------------------------------------
The Victory Portfolios
Balanced Fund
Convertible Securities Fund
Real Estate Investment Fund
Supplement dated June 30, 1999
To the Prospectus dated March 1, 1999
1. On pages 2, 4 and 6, in the Risk/Return Summary for each of the Funds,
add the following information at the end of the "Principal Risks"
section:
An investment in the Fund is not a deposit of KeyBank or any
of its affiliates and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government
agency.
2. On page 3, under "Risk/Return Summary - Investment Performance" for the
Balanced Fund, replace the chart on the lower left side of the page
with the chart below:
The table shows how the Balanced Fund's average annual returns for one
year, five years and since inception compare to those of a broad-based
market index and an index of mutual funds with similar investment
objectives. The figures in this table assume reinvestment of dividends
and distributions and reflect all applicable sales charges.
<TABLE>
<CAPTION>
----------------------------------------------- ----------- ------------ -------------
Average Annual Total Returns (for the Periods Past Past Since
ended December 31, 1998) One Year 5 Years Inception
(12/10/93)
<S> <C> <C> <C>
----------------------------------------------- ----------- ------------ -------------
Class A 11.10% 13.53% 13.44%
----------------------------------------------- ----------- ------------ -------------
Class B * 12.61% 14.05% 13.96%
----------------------------------------------- ----------- ------------ -------------
S&P 500 Index ** 28.58% 24.06% 23.75%
----------------------------------------------- ----------- ------------ -------------
Lipper Balanced Fund *** 15.09% 13.87% 13.42%
----------------------------------------------- ----------- ------------ -------------
</TABLE>
* 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.
** The Standard & Poor's 500 Stock Index is a
broad-based unmanaged index that represents the
general performance of domestically traded common
stocks of mid- to large-size companies.
*** The Lipper Balanced Fund Index is a non-weighted
index of the 30 largest funds within the Lipper
Balanced Fund investment category.
VF-SPEC-SUP2
<PAGE>
3. On page 5, under "Risk/Return Summary - Investment Performance" for the
Convertible Securities Fund, replace the chart on the lower left side
of the page with the chart below:
The table shows how the Convertible Securities Fund's average annual
returns for one year, five years and ten years compare to those of a
broad-based market index and an index of mutual funds with similar
investment objectives. The figures in this table assume reinvestment of
dividends and distributions and reflect all applicable sales charges.
<TABLE>
<CAPTION>
------------------------------------------------ ---------- ------------ -----------
Average Annual Total Returns (for the Periods Past Past Past 10
ended December 31, 1998) One Year 5 Years Years
<S> <C> <C> <C>
------------------------------------------------ ---------- ------------ -----------
Class A -6.48% 8.56% 11.26%
------------------------------------------------ ---------- ------------ -----------
S&P 500 Index * 28.58% 24.06% 18.89%
------------------------------------------------ ---------- ------------ -----------
Lipper Convertible Securities Fund Index ** 2.82% 9.96% 11.10%
------------------------------------------------ ---------- ------------ -----------
</TABLE>
* The Standard & Poor's 500 Stock Index is a
broad-based unmanaged index that represents the
general performance of domestically traded common
stocks of mid- to large-size companies.
** Lipper Convertible Securities Fund Index invests its
portfolio primarily in convertible bonds and
convertible preferred shares. Lipper Mutual Fund
Indices are equally weighted and composed of the
largest mutual funds within their respective
investment objectives, adjusted for the reinvestment
of capital gains distributions and income dividends.
4. On page 7, under "Risk/Return Summary - Investment Performance" for the
Real Estate Investment Fund, replace the chart on the lower left side
of the page with the chart below:
The table shows how the Real Estate Investment Fund's average
annual returns for one year and since inception compare to
those of a broad-based market index. The figures in this table
assume reinvestment of dividends and distributions and reflect
all applicable sales charges.
<TABLE>
<CAPTION>
----------------------------------------------- ----------- ------------
Average Annual Total Returns (for the Periods Past Since
ended December 31, 1998) One Year Inception
(4/30/97)
<S> <C> <C>
----------------------------------------------- ----------- ------------
Class A -19.32% 1.58%
----------------------------------------------- ----------- ------------
Morgan Stanley REIT Index * -16.90% 2.17%
----------------------------------------------- ----------- ------------
</TABLE>
* The Morgan Stanley REIT Index is a capitalization
weighted index with dividends reinvested of the most
actively traded real estate investment trusts and is
designed to be a measure of real estate equity
performance. The index was developed with a base
value of 200 as of December 31, 1994.
5. On page 11, under "Share Price," replace the second sentence in the
first paragraph with the following:
You may buy, exchange, and sell your shares on any business
day at a price that is based on the NAV that is calculated
after you place your order.
Please insert this supplement in the front of your Prospectus. If you want to
obtain more information, please call the Funds at 800-539-FUND or Gradison
McDonald at 513-579-5999 or 800-869-5999.
2
VF-SPEC-SUP2
<PAGE>
Dear Shareholder:
The Victory Lakefront Fund Prospectus is being revised. This supplement
supersedes all previously dated supplements. Please discard all other
supplements. This information is important and is part of your Prospectus.
- --------------------------------------------------------------------------------
The Victory Portfolios
Lakefront Fund
Supplement dated June 30, 1999
To the Prospectus dated March 1, 1999
1. On page 2, in the Risk/Return Summary for the Fund, add the following
information at the end of the "Principal Risks" section:
An investment in the Fund is not a deposit of KeyBank or any
of its affiliates and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government
agency.
2. On page 3, in the Risk/Return Summary, in the "Fund Expenses" section,
replace the Annual Fund Operating Expenses table and the EXAMPLE with
the following:
The Annual Fund Operating Expenses table below illustrates the net
operating expenses that you will incur as a shareholder of the Fund.
The Fund pays these expenses from its assets.
Annual Fund Operating Expenses Class A
---------------------------------------------------------------- -----------
Management Fees 1.00%
---------------------------------------------------------------- -----------
Distribution (12b-1) Fees 0.00%
---------------------------------------------------------------- -----------
Other Expenses /1/ 5.45%
---------------------------------------------------------------- -----------
Total Fund Operating Expenses 6.45%
----
---------------------------------------------------------------- -----------
Fee Waiver and Expense Reimbursement (4.95%)
---------------------------------------------------------------- -----------
Net Expenses /2/ 1.50%
====
----------------------------------------------------------------
/1/ Includes a shareholder servicing fee of 0.25%.
/2/ The Adviser has agreed to waive its management fee
and/or to reimburse expenses, as allowed by law, to
the extent necessary to maintain the Fund's annual
net operating expenses at a maximum of 1.50% until at
least February 29, 2000, and at a maximum of 2.00%
from March 1, 2000 to February 28, 2009.
<PAGE>
EXAMPLE
The following Example is designed to help you compare the cost of
investing in the Fund with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund for the time
periods shown and then sell all of your shares at the end of those
periods. The Example also assumes that your investment has a 5% return
each year and that the Fund's operating expenses equal 1.50% until
February 29, 2000, and 2.00% from March 1, 2000 to February 28, 2009.
Although your actual costs may be higher or lower, based on these
assumptions your costs would be*:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A $710 $1,123 $1,556 $2,777
- --------------------------------------------------------------------------------------------------
</TABLE>
* This Example assumes purchase of shares at the maximum sales charge.
The sales charge is waived for certain investors (see page 9 of the
Prospectus). For shares purchased at net asset value, without any sales
charge, under the same assumptions as set forth in the Example, the
respective 1 year, 3 year, 5 year, and 10 year costs would be $153,
$581, $1,040, and $2,336.
3. On page 3, under "Risk/Return Summary - Investment Performance,"
replace the chart on the lower left side of the page with the chart
below:
The table shows how the Fund's average annual returns for one year and
since inception compare to those of a broad-based market index. The
figures in this table assume reinvestment of dividends and
distributions and reflect all applicable sales charges.
<TABLE>
<CAPTION>
----------------------------------------------- ----------- ------------
Average Annual Total Returns (for the Periods Past Since
ended December 31, 1998) One Year Inception
(3/3/97)
----------------------------------------------- ----------- ------------
<S> <C> <C>
Class A 6.84% 13.37%
----------------------------------------------- ----------- ------------
S&P 500 Index * 28.58% 29.74%
----------------------------------------------- ----------- ------------
</TABLE>
* The Standard & Poor's 500 Stock Index is a
broad-based unmanaged index that represents the
general performance of domestically traded common
stocks of mid- to large-size companies.
4. On page 5, under "Share Price," replace the second sentence in the first
paragraph with the following:
You may buy, exchange, and sell your shares on any
business day at a price that is based on the NAV that is
calculated after you place your order.
5. On page 5, in the "Dividends, Distributions, and Taxes" section, replace
the first sentence of the last paragraph with the following information:
Ordinarily, the Fund declares and pays dividends quarterly.
Please insert this Supplement in the front of your Prospectus. If you want to
obtain more information, please call the Fund at 800-539-FUND or Gradison
McDonald at 513-579-5999 or 800-869-5999.
2
VF-VLFT-SUP3
<PAGE>
Dear Shareholder:
The Victory Prospectus for the following Funds is being revised. This supplement
supersedes all previously dated supplements. Please discard all other
supplements. This information is important and is part of your Prospectus.
- --------------------------------------------------------------------------------
The Victory Portfolios
Limited Term Income Fund
Intermediate Income Fund
Government Mortgage Fund
Investment Quality Bond Fund
Supplement dated June 30, 1999
To the Prospectus dated March 1, 1999
1. On page 3, under "Risk/Return Summary - Investment Performance" for the
Limited Term Income Fund, replace the chart on the lower left side of
the page with the chart below:
The table shows how the Limited Term Income Fund's average annual
returns for one year, five years and since inception compare to those
of two broad-based market indices. The figures in this table assume
reinvestment of dividends and distributions and reflect all applicable
sales charges.
<TABLE>
<CAPTION>
----------------------------------------------- ----------- ------------ ------------
Average Annual Total Returns (for the Periods Past Past Since
ended December 31, 1998) One Year 5 Years Inception
(10/20/89)
<S> <C> <C> <C>
----------------------------------------------- ----------- ------------ ------------
Class A 3.87% 4.60% 6.11%
----------------------------------------------- ----------- ------------ ------------
Merrill Lynch 1-3 Yr. Treasury Index * 7.00% 5.99% 7.13%
----------------------------------------------- ----------- ------------ ------------
Lehman 1-3 Yr. Gov't Index ** 6.97% 5.96% 7.09%
----------------------------------------------- ----------- ------------ ------------
* The Merrill Lynch 1-3 Year Treasury Index is a
broad-based unmanaged index that represents the
general performance of short-term (1-3 year) U.S.
Treasury securities.
** The Lehman Brothers 1-3 Year Government Index is an
unmanaged index comprised of U.S. Government Agency
debt securities that mature in one to three years.
2. On page 5, under "Risk/Return Summary - Investment Performance" for the
Intermediate Income Fund, replace the chart on the lower left side of
the page with the chart below:
The table shows how the Intermediate Income Fund's average annual
returns for one year, five years and since inception compare to those
of a broad-based market index. The figures in this table assume
reinvestment of dividends and distributions and reflect all applicable
sales charges.
----------------------------------------------- ----------- ------------ ------------
Average Annual Total Returns (for the Periods Past Past Since
ended December 31, 1998) One Year 5 Years Inception
(12/10/93)
----------------------------------------------- ----------- ------------ ------------
Class A 1.29% 4.46% 4.37%
----------------------------------------------- ----------- ------------ ------------
Lehman Int Gov't/Corp Bond Index * 8.44% 6.59% 6.60%
----------------------------------------------- ----------- ------------ ------------
</TABLE>
* The Lehman Brothers Intermediate Government/Corporate
Bond Index is an unmanaged index comprised of
investment-grade corporate debt securities and U.S.
Treasury and U.S. Government Agency debt securities
that mature in one to ten years.
VF-TXFI-SUP2
<PAGE>
3. On page 7, under "Risk/Return Summary - Investment Performance" for the
Government Mortgage Fund, replace the chart on the lower left side of
the page with the chart below:
The table shows how the Government Mortgage Fund's average annual
returns for one year, five years and since inception compare to those
of a broad-based market index. The figures in this table assume
reinvestment of dividends and distributions and reflect all applicable
sales charges.
<TABLE>
<CAPTION>
----------------------------------------------- ----------- ------------ -------------
Average Annual Total Returns (for the Periods Past Past Since
ended December 31, 1998) One Year 5 Years Inception
(5/18/90)
<S> <C> <C> <C>
----------------------------------------------- ----------- ------------ -------------
Class A .57% 5.16% 7.39%
----------------------------------------------- ----------- ------------ -------------
Lehman Mortgage-Backed Index * 6.96% 7.23% 8.90%
----------------------------------------------- ----------- ------------ -------------
* The Lehman Brothers Mortgage-Backed Securities Index
is a broad-based unmanaged index that represents the
general performance of fixed rate mortgage bonds.
4. On page 9, under "Risk/Return Summary - Investment Performance" for the
Investment Quality Bond Fund, replace the chart on the lower left side
of the page with the chart below:
The table shows how the Investment Quality Bond Fund's average annual
returns for one year, five years and since inception compare to those
of a broad-based market index. The figures in this table assume
reinvestment of dividends and distributions and reflect all applicable
sales charges.
----------------------------------------------- ----------- ------------ -------------
Average Annual Total Returns (for the Periods Past Past Since
ended December 31, 1998) One Year 5 Years Inception
(12/10/93)
----------------------------------------------- ----------- ------------ -------------
Class A 1.30% 5.04% 4.91%
----------------------------------------------- ----------- ------------ -------------
Lehman Aggregate Index * 8.69% 7.27% 7.32%
----------------------------------------------- ----------- ------------ -------------
</TABLE>
* The Lehman Brothers Aggregate Bond Index is a
broad-based unmanaged index that represents the
general performance of longer-term (greater than 1
year), investment-grade fixed-income securities.
5. On page 13, under "Share Price," replace the second sentence in the first
paragraph with the following:
You may buy, exchange, and sell your shares on any business
day at a price that is based on the NAV that is calculated
after you place your order.
6. On page 23, in the "Portfolio Management" section, please replace the
second paragraph with the following:
Matthew D. Meyer is the Portfolio Manager of the Intermediate
Income Fund, a position he has held since May 1, 1999. He has
been a Senior Portfolio Manager and Director in the Taxable
Fixed Income Group of KAM since January 25, 1999. Prior to
this position, he was employed by McDonald & Company as a
First Vice President, Senior Mortgage-Backed Securities Trader
since 1995. Prior to this position, he was a Mortgage-Backed
and Agency Securities Trader with First Tennessee National
Corporation from February 1993 to December 1995. He has been
in the fixed income securities business since 1987.
Please insert this Supplement in the front of your Prospectus. If you want to
obtain more information, please call the Funds at 800-539-FUND or Gradison
McDonald at 513-579-5999 or 800-869-5999.
2
VF-TXFI-SUP2
<PAGE>
Dear Shareholder:
The Victory Prospectus for the following Funds is being revised. This supplement
supersedes all previously dated supplements. Please discard all other
supplements. This information is important and is part of your Prospectus.
- --------------------------------------------------------------------------------
The Victory Portfolios
National Municipal Bond Fund
New York Tax-Free Fund
Ohio Municipal Bond Fund
Supplement dated June 30, 1999
To the Prospectus dated March 1, 1999
1. On the cover of the Prospectus, delete the word "Bond" from New York
Tax-Free Fund.
2. On page 3 under "Fees and Expenses" delete the third paragraph and replace
it with the following:
On March 5, 1999, shareholders of Gradison Ohio Tax-Free Income Fund
approved the reorganization of their funds into Class G Shares of the
Victory Ohio Municipal Bond Fund. As a result, the Ohio Municipal Bond
Fund began offering Class G Shares. The Gradison Division of McDonald
Investments Inc., an affiliate of Key Asset Management Inc. (Gradison
McDonald), will provide services to the shareholders of the Class G
Shares of the fund. Fees and expenses associated with Class G Shares
are discussed below. Class G Shares are available only through certain
broker-dealers.
3. On pages 4, 6, and 8, in the Risk/Return Summary for each of the Funds, add
the following information at the end of the "Principal Risks" sections:
An investment in the Fund is not a deposit of KeyBank or any of its
affiliates and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
4. On page 5, under "Risk/Return Summary - Investment Performance" for the
National Municipal Bond Fund, replace the chart on the lower left side of
the page with the chart below:
The table shows how the National Municipal Bond Fund's average annual
returns for one year and since inception compare to those of two
broad-based market indices. The figures in this table assume
reinvestment of dividends and distributions and reflect all applicable
sales charges.
<TABLE>
<CAPTION>
----------------------------------------------- ----------- ------------
Average Annual Total Returns (for the Periods Past Since
ended December 31, 1998) One Year Inception
(2/3/94)
----------------------------------------------- ----------- ------------
<S> <C> <C>
Class A .19% 5.03%
----------------------------------------------- ----------- ------------
Class B * 1.07% 5.03%
----------------------------------------------- ----------- ------------
Lehman 7 Year Municipal Bond Index ** 6.22% 5.72%
----------------------------------------------- ----------- ------------
Lehman 10 Year Municipal Bond Index *** 6.76% 6.19%
----------------------------------------------- ----------- ------------
</TABLE>
* 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.
** The Lehman Brothers 7-year Municipal Bond Index is an
unmanaged index comprised of investment grade muni
bonds with maturities of 6-8 years, weighted
according to the total market value of each bond in
the Index.
*** The Lehman Brothers 10-year Municipal Bond Index is a
broad-based unmanaged index that represents the
general performance of investment-grade municipal
bonds with maturities of 8-12 years.
VF-TEFI-SUP2
<PAGE>
5. On page 7, under "Risk/Return Summary - Investment Performance" for the New
York Tax-Free Fund, replace the chart on the lower left side of the page
with the chart below:
The table shows how the New York Tax-Free Fund's average annual returns for
one year, five years and since inception compare to those of a broad-based
market index. The figures in this table assume reinvestment of dividends and
distributions and reflect all applicable sales charges.
<TABLE>
<CAPTION>
----------------------------------------------- ----------- ------------ ------------
Average Annual Total Returns (for the Periods Past Past Since
ended December 31, 1998) One Year 5 Years Inception
(2/11/91)
----------------------------------------------- ----------- ------------ ------------
<S> <C> <C> <C>
Class A -.76% 3.32% 5.92%
----------------------------------------------- ----------- ------------ ------------
Class B * .18% 3.61% 6.20%
----------------------------------------------- ----------- ------------ ------------
Lehman 10 Year Municipal Bond Index ** 6.76% 6.35% 8.02%
----------------------------------------------- ----------- ------------ ------------
</TABLE>
* 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.
** The Lehman Brothers 10-year Municipal Bond Index is a
broad-based unmanaged index that represents the
general performance of investment-grade municipal
bonds with maturities of 8-12 years.
6. On page 9, in the Risk/Return Summary for the Ohio Municipal Bond Fund, add
the following information under "Fund Expenses."
<TABLE>
<CAPTION>
<S> <C> <C>
Shareholder Transaction Expenses
(paid directly from your investment)* Class G
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) NONE
---------------------------------------------------------------------- -----------------
Maximum Sales Charge Imposed On Reinvested Dividends NONE
---------------------------------------------------------------------- -----------------
Deferred Sales Charge NONE
---------------------------------------------------------------------- -----------------
Redemption Fees NONE
------------------------------------------------------------------ ---- ----------------
Exchange Fees NONE
</TABLE>
* You may be charged additional fees if you buy, exchange, or
sell shares through a broker or agent.
The Annual Fund Operating Expenses table below illustrates the
net operating expenses that you will incur as a shareholder in
Class G Shares of the Ohio Municipal Bond Fund. The Ohio
Municipal Bond Fund pays these expenses from its assets.
<TABLE>
<CAPTION>
<S> <C> <C>
Annual Fund Operating Expenses Class G
Management Fees 0.60%
------------------------------------------------------------ -------------------------
Distribution (12b-1) Fees 0.25%
------------------------------------------------------------ -------------------------
Other Expenses 0.27%
----
------------------------------------------------------------ -------------------------
Total Fund Operating Expenses 1.12%
------------------------------------------------------------ -------------------------
Fee Waiver (0.21%)
----
------------------------------------------------------------ -------------------------
Net Expenses /1/ 0.91%
=====
</TABLE>
/1/ The expenses shown are based on historical expenses of the
Ohio Municipal Bond Fund adjusted to reflect current
expenses. 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 at
a maximum of 0.91% until at least April 1, 2001.
2
VF-TEFI-SUP2
<PAGE>
EXAMPLE
The following Example is designed to help you compare the cost
of investing in Class G Shares of the Ohio Municipal Bond Fund
with the cost of investing in other mutual funds. The Example
assumes that you invest $10,000 in the Ohio Municipal Bond
Fund for the time periods shown and then redeem all of your
shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that the
Ohio Municipal Bond Fund's operating expenses remain the
same.* Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Class G $93 $313 $575 $1,324
</TABLE>
* This Example assumes that Total Annual Fund Operating
Expenses will equal 0.91% until April 1, 2001 and will
equal 1.12% thereafter.
7. On page 9, under "Risk/Return Summary - Investment Performance" for the Ohio
Municipal Bond Fund, replace the chart on the lower left side of the page
with the chart below:
The table shows how the Ohio Municipal Bond Fund's average annual
returns for one year, five years and since inception compare to those
of a broad-based market index. The figures in this table assume
reinvestment of dividends and distributions and reflect all applicable
sales charges.
<TABLE>
<CAPTION>
----------------------------------------------- ----------- ------------ ------------
Average Annual Total Returns (for the Periods Past Past Since
ended December 31, 1998) * One Year 5 Years Inception
(5/18/90)
<S> <C> <C> <C> <C>
----------------------------------------------- ----------- ------------ ------------
Class A
----------------------------------------------- ----------- ------------ ------------
Lehman 10 Yr. Municipal Bond Index ** 6.76% 6.35% 8.43%
----------------------------------------------- ----------- ------------ ------------
</TABLE>
* The Ohio Municipal Bond Fund did not offer Class G Shares
prior to March 29, 1999.
** The Lehman Brothers 10-year Municipal Bond Index is a
broad-based unmanaged index that represents the general
performance of investment-grade municipal bonds with
maturities of 8-12 years.
8. On page 12, under "Share Price," replace the second sentence in the first
paragraph with the following:
You may buy, exchange, and sell your shares on any business day at
a price that is based on the NAV that is calculated after you
place your order.
9. On page 15, under "Choosing a Share Class," delete the second sentence in
the first paragraph and replace it with: "The Ohio Municipal Bond Fund also
offers Class G Shares which have no front-end sales charge." Add the
following information to facilitate the comparison of Class G Shares of the
Ohio Municipal Bond Fund to its Class A Shares:
Class G
-------
o No front-end sales charge. All your money goes to work for you
right away.
o No deferred sales charge.
o Lower annual expenses than Class A Shares.
o No automatic conversion to Class A Shares.
o Class G Shares are sold only by certain broker-dealers.
3
VF-TEFI-SUP2
<PAGE>
10. On page 24, under "Distribution Plan," add the following after the second
paragraph:
Victory has also adopted a Rule 12b-1 Distribution and Service Plan
for Class G Shares of the Ohio Municipal Bond Fund, under which these
shares will pay to the Distributor a monthly service fee at an annual
rate of 0.25% of the average daily net assets of the Fund. The service
fee is paid to securities broker-dealers or other financial
intermediaries for providing personal services to shareholders of the
Ohio Municipal Bond Fund, including responding 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 Ohio Municipal
Bond Fund may enter into agreements with various shareholder servicing
agents, including KeyCorp and its affiliates, and with other financial
institutions that provide such services.
11. Throughout the Prospectus add the following where appropriate: "To obtain
additional information call Gradison McDonald at 513-579-5999 or
800-869-5999 or write Gradison McDonald, 580 Walnut Street, Cincinnati, OH
45202."
Please insert this Supplement in the front of your Prospectus. If you want to
obtain more information, please call the Funds at 800-539-FUND or Gradison
McDonald at 513-579-5999 or 800-869-5999.
4
VF-TEFI-SUP2
<PAGE>
Dear Shareholder:
The Victory Prospectus for the following Funds is being revised. This supplement
supersedes all previously dated supplements. Please discard all other
supplements. This information is important and is part of your Prospectus.
- --------------------------------------------------------------------------------
The Victory Portfolios
Value Fund
Diversified Stock Fund
Stock Index Fund
Growth Fund
Special Value Fund
Ohio Regional Stock Fund
International Growth Fund
Supplement dated July 1, 1999
To the Prospectus dated March 1, 1999
1. On page 3, under "Fees and Expenses," delete the third paragraph and replace
it with the following:
On March 5, 1999, shareholders of Gradison Growth and Income Fund and
Gradison International Fund approved the reorganization of their funds
into Class G Shares of the Victory Diversified Stock Fund and Victory
International Growth Fund. As a result, the Diversified Stock Fund and
the International Growth Fund began offering Class G Shares. The
Gradison Division of McDonald Investments Inc., an affiliate of Key
Asset Management Inc. (Gradison McDonald), will provide services to the
shareholders of the Class G Shares of these funds. Fees and expenses
associated with Class G Shares are discussed below. Class G Shares are
available only through certain broker-dealers.
2. On pages 4, 6, 8, 10, 12, 14 and 16, in the Risk/Return Summary for each of
the Funds, add the following information at the end of the "Principal Risks"
section:
An investment in the Fund is not a deposit of KeyBank or any of its
affiliates and is not insured or guaranteed by the Federal Deposit
Insurance Coporation or any other government agency.
3. On page 5, under "Risk/Return Summary - Investment Performance" for the
Value Fund, replace the chart on the lower left side of the page with the
chart below:
The table shows how the Value Fund's average annual returns for one year,
five years and since inception compare to those of a broad-based market
index. The figures shown in this table assume reinvestment of dividends and
distributions and reflect all applicable sales charges.
<TABLE>
<CAPTION>
----------------------------------------------- ----------- ------------ ------------
Average Annual Total Returns (for the Periods Past Past Since
ended December 31, 1998) One Year 5 Years Inception
(12/3/93)
----------------------------------------------- ----------- ------------ ------------
<S> <C> <C> <C>
Class A 19.07% 20.02% 19.96%
----------------------------------------------- ----------- ------------ ------------
S &P 500 Index * 28.58% 24.06% 23.75%
----------------------------------------------- ----------- ------------ ------------
</TABLE>
* The Standard & Poor's 500 Stock Index is broad-based
unmanaged index that represents the general
performance of domestically traded common stocks of
mid- to large-size companies.
VF-EQTY-SUP2
<PAGE>
4. On page 7, in the Risk/Return Summary for the Diversified Stock Fund, add
the following information under "Fund Expenses."
<TABLE>
<CAPTION>
Shareholder Transaction Expenses
(paid directly from your investment)* Class G
Maximum Sales Charge Imposed on Purchases
<S> <C> <C>
(as a percentage of offering price) NONE
---------------------------------------------------------------------- -----------------
Maximum Sales Charge Imposed On Reinvested Dividends NONE
---------------------------------------------------------------------- -----------------
Deferred Sales Charge NONE
---------------------------------------------------------------------- -----------------
Redemption Fees NONE
---------------------------------------------------------------------- -----------------
Exchange Fees NONE
</TABLE>
* You may be charged additional fees if you buy, exchange,
or sell shares through a broker or agent.
The Annual Fund Operating Expenses table below illustrates the
net operating expenses that you will incur as a shareholder in
Class G Shares of the Diversified Stock Fund.
The Diversified Stock Fund pays these expenses from its
assets.
<TABLE>
<CAPTION>
<S> <C> <C>
Annual Fund Operating Expenses Class G
Management Fees 0.65%
------------------------------------------------------------ -------------------------
Distribution (12b-1) Fees 0.50%
------------------------------------------------------------ -------------------------
Other Expenses 0.37%
----
------------------------------------------------------------ -------------------------
Total Fund Operating Expenses 1.52%
------------------------------------------------------------ -------------------------
Fee Waiver (0.08%)
----
------------------------------------------------------------ -------------------------
Net Expenses /1/ 1.44%
====
</TABLE>
/1/ The expenses shown are based on historical expenses of the
Fund adjusted to reflect current expenses. Key Asset
Management Inc., each Fund's investment adviser (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 total operating expenses at
a maximum of 1.44% until at least April 1, 2001.
EXAMPLE
The following Example is designed to help you compare the cost
of investing in Class G Shares of the Diversified Stock Fund
with the cost of investing in other mutual funds. The Example
assumes that you invest $10,000 in the Diversified Stock Fund
for the time periods shown and then redeem all of your shares
at the end of those periods. The Example also assumes that
your investment has a 5% return each year and that the
Diversified Stock Fund's operating expenses remain the same.*
Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Class G $147 $464 $813 $1,799
</TABLE>
* This Example assumes that Total Annual Fund Operating
Expenses will equal 1.44% until April 1, 2001 and will
equal 1.52% thereafter.
2
VF-EQTY-SUP2
<PAGE>
5. On page 7, under "Risk/Return Summary - Investment Performance" for the
Diversified Stock Fund, replace the chart on the lower left side of the page
with the chart below:
The table shows how the Diversified Stock Fund's average annual returns
for one year, five years and since inception compare to those of a
broad-based market index. The figures shown in this table assume
reinvestment of dividends and distributions and reflect all applicable
sales charges.
<TABLE>
<CAPTION>
----------------------------------------------- ----------- ------------ ------------
Average Annual Total Returns (for the Periods Past Past Since
ended December 31, 1998) * One Year 5 Years Inception
(10/20/89)
----------------------------------------------- ----------- ------------ ------------
<S> <C> <C> <C>
Class A 16.08% 21.18% 16.49%
----------------------------------------------- ----------- ------------ ------------
Class B ** 17.95% 21.86% 16.90%
----------------------------------------------- ----------- ------------ ------------
S&P 500 Index *** 28.58% 24.06% 17.63%
----------------------------------------------- ----------- ------------ ------------
</TABLE>
* The Diversified Stock Fund did not offer Class G
Shares prior to March 29, 1999.
** 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.
*** The Standard & Poor's 500 Stock Index is a
broad-based unmanaged index that represents the
general performance of domestically traded common
stocks of mid- to large-size companies.
6. On page 9, in the Risk/Return Summary for the Stock Index Fund, replace the
"Fund Expenses" section with the following information:
<TABLE>
<CAPTION>
Shareholder Transaction Expenses
(paid directly from your investment)* Class A Class G
<S> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 5.75% NONE
---------------------------------------------------------------------- ----------------- -----------------
Maximum Sales Charge Imposed On Reinvested Dividends NONE NONE
---------------------------------------------------------------------- ----------------- -----------------
Deferred Sales Charge NONE** NONE
---------------------------------------------------------------------- ----------------- -----------------
Redemption Fees NONE NONE
---------------------------------------------------------------------- ----------------- -----------------
Exchange Fees NONE NONE
</TABLE>
* You may be charged additional fees if you buy, exchange,
or sell shares through a broker or agent.
** Except for investments of $1 million or more. See
"Investing with Victory -- Calculation of Sales Charges --
Class A."
The Annual Fund Operating Expenses table below illustrates the
operating expenses that you will incur as a shareholder of the
Stock Index Fund. The Fund pays these expenses from its
assets.
<TABLE>
<CAPTION>
Annual Fund Operating Expenses Class A Class G /1/
<S> <C> <C>
Management Fees 0.60% 0.60%
------------------------------------------------------------ ----------------- ----------------
Distribution (12b-1) Fees 0.00% 0.00%
------------------------------------------------------------ ----------------- ----------------
Other Expenses 0.24% 0.49% /2/
----- -----
------------------------------------------------------------ ----------------- ----------------
Total Fund Operating Expenses 0.84% /3/ 1.09% /4/
</TABLE>
/1/ The estimated Class G expenses for the fiscal year ending
October 31, 1999 are based on historical expenses of
Class A Shares of the Stock Index Fund.
/2/ Includes a shareholder servicing fee of 0.25%.
/3/ For the fiscal year ended October 31, 1998, the Adviser
waived a portion of its fee so that the Stock Index
Fund's net operating expenses equaled 0.57% for Class A
Shares. This waiver is currently in effect, but the
Adviser may terminate it at any time.
/4/ For the fiscal year ending October 31, 1999, the Adviser
anticipates that it will voluntarily waive its fees so
that the net operating expenses of Class G Shares of the
Stock Index Fund will equal 0.82%. The Adviser may
terminate this waiver at any time.
3
VF-EQTY-SUP2
<PAGE>
EXAMPLE
The following Example is designed to help you compare the cost
of investing in the Stock Index Fund with the cost of
investing in other mutual funds. The Example assumes that you
invest $10,000 in the Stock Index Fund for the time periods
shown and then redeem all of your shares at the end of those
periods. The Example also assumes that your investment has a
5% return each year and that the Stock Index Fund's operating
expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would
be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Class A $656 $828 $1,014 $1,553
Class G $111 $347 $601 $1,329
</TABLE>
7. On page 9, under "Risk/Return Summary - Investment Performance" for the
Stock Index Fund, replace the chart on the lower left side of the page with
the chart below:
The table shows how the Stock Index Fund's average annual returns for
one year, five years and since inception compare to those of a
broad-based market index. The figures shown in this table assume
reinvestment of dividends and distributions and reflect all applicable
sales charges.
<TABLE>
<CAPTION>
----------------------------------------------- ----------- ------------ ------------
Average Annual Total Returns (for the Periods Past Past Since
ended December 31, 1998) * One Year 5 Years Inception
(12/3/93)
----------------------------------------------- ----------- ------------ ------------
<S> <C> <C> <C>
Class A 20.36% 21.81% 21.57%
----------------------------------------------- ----------- ------------ ------------
S&P 500 Index ** 28.58% 24.06% 23.75%
----------------------------------------------- ----------- ------------ ------------
</TABLE>
* The Stock Index Fund did not offer Class G Shares prior
to June 30, 1999.
** The Standard & Poor's 500 Stock Index is a broad-based
unmanaged index that represents the general performance
of domestically traded common stocks of mid- to
large-size companies.
8. On page 11, under "Risk/Return Summary - Investment Performance" for the
Growth Fund, replace the chart on the lower left side of the page with the
chart below:
The table shows how the Growth Fund's average annual returns for one
year, five years and since inception compare to those of a broad-based
market index. The figures shown in this table assume reinvestment of
dividends and distributions and reflect all applicable sales charges.
<TABLE>
<CAPTION>
----------------------------------------------- ----------- ------------ ------------
Average Annual Total Returns (for the Periods Past Past Since
ended December 31, 1998) One Year 5 Years Inception
(12/3/93)
----------------------------------------------- ----------- ------------ ------------
<S> <C> <C> <C>
Class A 29.26% 22.66% 22.36%
----------------------------------------------- ----------- ------------ ------------
S&P 500 Index * 28.58% 24.06% 23.75%
----------------------------------------------- ----------- ------------ ------------
</TABLE>
* The Standard & Poor's 500 Stock Index is a broad-based
unmanaged index that represents the general performance of
domestically traded common stocks of mid- to large-size
companies.
4
VF-EQTY-SUP2
<PAGE>
9. On page 13, under "Risk/Return Summary - Investment Performance" for the
Special Value Fund, replace the chart on the lower left side of the page
with the chart below:
The table shows how the Special Value Fund's average annual returns for
one year, five years and since inception compare to those of a
broad-based market index. The figures shown in this table assume
reinvestment of dividends and distributions and reflect all applicable
sales charges.
<TABLE>
<CAPTION>
----------------------------------------------- ----------- ------------ -------------
Average Annual Total Returns (for the Periods Past Past Since
ended December 31, 1998) One Year 5 Years Inception
(12/3/93)
----------------------------------------------- ----------- ------------ -------------
<S> <C> <C> <C>
Class A -14.31% 10.88% 11.35%
----------------------------------------------- ----------- ------------ -------------
Class B * -13.63% 11.31% 11.77%
----------------------------------------------- ----------- ------------ -------------
S&P 400 Mid-Cap Index ** 19.11% 18.84% 17.21%
----------------------------------------------- ----------- ------------ -------------
</TABLE>
* 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.
** The Standard & Poor's 400 Mid-Cap Index is a
broad-based unmanaged index that represents the
general performance of domestically traded common
stocks of mid-sized companies.
10. On page 15, under "Risk/Return Summary - Investment Performance" for the
Ohio Regional Stock Fund, replace the chart for on the lower left side of
the page with the chart below:
The table shows how the Ohio Regional Stock Fund's average annual
returns for one year, five years and since inception compare to those
of two broad-based market indices. The figures shown in this table
assume reinvestment of dividends and distributions and reflect all
applicable sales charges.
<TABLE>
<CAPTION>
---------------------------------------- ------------- --------------- ---------------
Average Annual Total Returns Past Past Since
(for the Periods ended December 31, One Year 5 Years Inception
1998) (10/20/89)
---------------------------------------- ------------- --------------- ---------------
<S> <C> <C> <C>
Class A -7.41% 12.91% 12.69%
---------------------------------------- ------------- --------------- ---------------
Class B * -6.42% 13.32% 12.98%
---------------------------------------- ------------- --------------- ---------------
S&P 500 Index ** 28.58% 24.06% 17.63%
---------------------------------------- ------------- --------------- ---------------
S&P 400 Mid-Cap Index *** 19.11% 18.84% 17.26%
---------------------------------------- ------------- --------------- ---------------
</TABLE>
* 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.
** The Standard & Poor's 500 Stock Index is a
broad-based unmanaged index that represents the
general performance of domestically traded common
stocks of mid- to large-size companies.
*** The Standard & Poor's 400 Mid-Cap Index is a
broad-based unmanaged index that represents the
general performance of domestically traded common
stocks of mid-sized companies.
11. On page 17, under "Risk/Return Summary - Investment Performance" for the
International Growth Fund, replace the chart on the lower left side of the
page with the chart below:
The table shows how the International Growth Fund's average annual
returns for one year, five years and since inception compare to those
of a broad-based market index. The figures shown in this table assume
reinvestment of dividends and distributions and reflect all applicable
sales charges.
<TABLE>
<CAPTION>
----------------------------------------------- ----------- ------------ --------------
Average Annual Total Returns (for the Periods Past Past Since
ended December 31, 1998) * One Year 5 Years Inception
(5/18/90)
----------------------------------------------- ----------- ------------ --------------
<S> <C> <C> <C>
Class A 10.76% 5.91% 6.62%
----------------------------------------------- ----------- ------------ --------------
Class B ** 12.09% 6.27% 6.92%
----------------------------------------------- ----------- ------------ --------------
Morgan Stanley All-Country World Free XUSA
Index *** 14.46% 7.80% 6.30%
----------------------------------------------- ----------- ------------ --------------
</TABLE>
* The International Growth Fund did not offer Class G
Shares prior to March 29, 1999.
** Performance information prior to March 1, 1996, the
Class B Shares' inception date, reflect the
performance of Class A Shares, which has not been
adjusted for the expenses of Class B Shares.
*** The MSWI Free XUSA Index is a widely recognized
unmanaged index of common stock prices with country
weightings of international companies.
12. On page 17, in the Risk/Return Summary for the International Growth Fund,
add the following information under "Fund Expenses."
<TABLE>
<CAPTION>
Shareholder Transaction Expenses
(paid directly from your investment)* Class G
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) NONE
---------------------------------------------------------------------- -----------------
Maximum Sales Charge Imposed On Reinvested Dividends NONE
---------------------------------------------------------------------- -----------------
Deferred Sales Charge NONE
---------------------------------------------------------------------- -----------------
Redemption Fees NONE
---------------------------------------------------------------------- -----------------
Exchange Fees NONE
</TABLE>
* You may be charged additional fees if you buy, exchange,
or sell shares through a broker or agent.
5
VF-EQTY-SUP2
<PAGE>
The Annual Fund Operating Expenses table below illustrates the
net operating expenses that you will incur as a shareholder in
Class G Shares of the International Growth Fund. The
International Growth Fund pays these expenses from its assets.
<TABLE>
<CAPTION>
Annual Fund Operating Expenses Class G
<S> <C>
Management Fees 1.10%
------------------------------------------------------------ -------------------------
Distribution (12b-1) Fees 0.50%
------------------------------------------------------------ -------------------------
Other Expenses 0.47%
----
------------------------------------------------------------ -------------------------
Total Fund Operating Expenses 2.07%
------------------------------------------------------------ -------------------------
Fee Waiver (0.07%)
------------------------------------------------------------ -------------------------
Net Expenses /1/ 2.00%
=====
</TABLE>
/1/ The expenses shown are estimated based on historical
expenses of the International Growth Fund adjusted to
reflect current expenses. 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 total
operating expenses at a maximum of 2.00% until at least
April 1, 2001.
EXAMPLE
The following Example is designed to help you compare the cost
of investing in Class G Shares of the International Growth
Fund with the cost of investing in other mutual funds. The
Example assumes that you invest $10,000 in the International
Growth Fund for the time periods shown and then redeem all of
your shares at the end of those periods. The Example also
assumes that your investment has a 5% return each year and
that the International Growth Fund's operating expenses remain
the same.* Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Class G $203 $635 $1,100 $2,389
</TABLE>
* This Example assumes that Total Annual Fund Operating
Expenses will equal 2.00% until April 1, 2001 and will
equal 2.07% thereafter.
6
VF-EQTY-SUP2
<PAGE>
13. On page 22, under "Share Price," replace the second sentence in the first
paragraph with the following:
You may buy, exchange, and sell your shares on any business
day at a price that is based on the NAV that is calculated after
you place your order.
14. On page 25 under "Choosing a Share Class," delete the second sentence in the
first paragraph and replace it with:
"The Diversified Stock Fund, Stock Index Fund, and International Growth
Fund also offer Class G Shares which have no front-end sales charge."
Add the following information to facilitate the comparison of Class G
Shares of these Funds to their respective Class A and/or Class B
Shares:
Class G
-------
o No front-end sales charge. All your money goes to work for you
right away.
o No deferred sales charge.
o Lower annual expenses than Class B Shares.
o Higher annual expenses than Class A Shares.
o No automatic conversion to Class A Shares.
o Class G Shares are sold only by certain broker-dealers.
15. On page 33, under "Portfolio Management," delete Barbara A. Myers' name and
biographical information from the paragraph regarding the portfolio managers
of the Special Value Fund.
16. On page 33, under "Portfolio Management," delete Theresa Hemmi's name and
biographical information paragraph regarding the portfolio manager for the
Stock Index Fund, and add the following:
Ernest C. Pelaia is the Portfolio Manager of the Stock Index Fund, a
position he has held since July 1999. He is a Portfolio Manager, and
has been with KAM since July 1991 as an Analyst, Trader, Investment
Officer and most recently Assistant Vice President of Funds Management.
17. On page 35, under "Shareholder Servicing Plan," please add the following
paragraph at the end of the section:
Pursuant to the Shareholder Servicing Plan described above, Class G
Shares of the Stock Index Fund also will pay to shareholder servicing
agents a monthly service fee at an annual rate of 0.25% of the average
daily net assets of Class G Shares of the Stock Index Fund.
18. On page 35, under "Distribution Plan," please insert the following between
the first and second paragraphs:
Victory also has adopted a Rule 12b-1 Distribution and Service Plan for
Class G Shares of the Diversified Stock Fund and International Growth
Fund, under which these shares will pay to the Distributor a monthly
service fee at an annual rate of 0.25% of the average daily net assets
of each Fund. The service fee is paid to securities broker-dealers or
other financial intermediaries for providing personal services to
shareholders of these Funds, including responding 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. Each Fund may enter
into agreements with various shareholder servicing agents, including
KeyCorp and its affiliates, and with other financial institutions that
provide such services.
7
VF-EQTY-SUP2
<PAGE>
Under the Class G Rule 12b-1 Distribution and Service Plan, Class G
Shares of the Diversified Stock Fund and International Growth Fund also
annually pay the Distributor a monthly distribution fee in an
additional amount of up to 0.25% of each Fund's average daily net
assets. The distribution fee is paid to the Distributor for general
distribution services and for selling Class G Shares of these Funds.
The Distributor makes payments to agents who provide these services.
Victory has adopted a separate Rule 12b-1 Distribution and Service Plan
for Class G shares of the Stock Index Fund. Class G Shares of the Stock
Index Fund do not pay expenses under this plan.
19. Throughout the Prospectus add the following where appropriate: "To obtain
additional information, call Gradison McDonald at 513-579-5999 or
800-869-5999 or write Gradison McDonald, 580 Walnut Street, Cincinnati, OH
45202."
Please insert this Supplement in the front of your Prospectus. If you want to
obtain more information, please call the Funds at 800-539-FUND or Gradison
McDonald at 513-579-5999 or 800-869-5999.
8
VF-EQTY-SUP2
