October 31, 2000
Annual Report
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
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
Established Value Fund
Diversified Stock Fund
Stock Index Fund
Growth Fund
Special Value Fund
Small Company Opportunity Fund
International Growth Fund
Nasdaq-100 Index(R) Fund
Victory Funds
LOGO (R)
<PAGE>
The Victory Portfolios
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 fees 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 of the Victory Funds.
NOT FDIC INSURED
Shares of the Victory Funds are not deposits or other obligations of, or
guaranteed by, any KeyCorp bank, Key Asset Management Inc., or their
affiliates, and are subject to investment risks, including possible loss of
the principal amount invested.
Victory Funds
LOGO (R)
Call Victory at:
800-539-FUND (800-539-3863)
Visit our web site at:
www.victoryfunds.com
Table of Contents
Shareholder Letter 3
Investment Review and Outlook 4
Fund Review and Commentary 6
Introduction to Victory Money Market Funds 6
Introduction to Victory Taxable Fixed Income Funds 9
Introduction to Victory Municipal Fixed Income Funds 14
Introduction to Victory Specialty Funds 17
Introduction to Victory Equity Funds 21
Introduction to the Financial Statements 32
How to Read Your Financial Statement 33
Financial Statements 35
Victory Money Market Funds
U.S. Government Obligations Fund
Schedules of Investments 35
Statements of Assets and Liabilities 42
Statements of Operations 43
Statements of Changes in Net Assets 44
Financial Highlights 45
Prime Obligations Fund
Schedules of Investments 36
Statements of Assets and Liabilities 42
Statements of Operations 43
Statements of Changes in Net Assets 44
Financial Highlights 46
Financial Reserves Fund
Schedules of Investments 39
Statements of Assets and Liabilities 42
Statements of Operations 43
Statements of Changes in Net Assets 44
Financial Highlights 47
Tax-Free Money Market Fund
Schedules of Investments 48
Statements of Assets and Liabilities 63
Statements of Operations 64
Statements of Changes in Net Assets 65
Financial Highlights 66
Ohio Municipal Money Market Fund
Schedules of Investments 55
Statements of Assets and Liabilities 63
Statements of Operations 64
Statements of Changes in Net Assets 65
Financial Highlights 67
Victory Taxable Fixed Income Funds
Limited Term Income Fund
Schedules of Investments 68
Statements of Assets and Liabilities 82
Statements of Operations 83
Statements of Changes in Net Assets 84
Financial Highlights 86
Statements of Cash Flows 174
1
<PAGE>
Table of Contents (continued)
Intermediate Income Fund
Schedules of Investments 70
Statements of Assets and Liabilities 82
Statements of Operations 83
Statements of Changes in Net Assets 84
Financial Highlights 87
Statements of Cash Flows 174
Fund for Income
Schedules of Investments 74
Statements of Assets and Liabilities 82
Statements of Operations 83
Statements of Changes in Net Assets 85
Financial Highlights 88
Investment Quality Bond Fund
Schedules of Investments 76
Statements of Assets and Liabilities 82
Statements of Operations 83
Statements of Changes in Net Assets 85
Financial Highlights 89
Statements of Cash Flows 174
Victory Municipal Fixed Income Funds
National Municipal Bond Fund
Schedules of Investments 90
Statements of Assets and Liabilities 102
Statements of Operations 103
Statements of Changes in Net Assets 104
Financial Highlights 105
New York Tax-Free Fund
Schedules of Investments 93
Statements of Assets and Liabilities 102
Statements of Operations 103
Statements of Changes in Net Assets 104
Financial Highlights 106
Ohio Municipal Bond Fund
Schedules of Investments 95
Statements of Assets and Liabilities 102
Statements of Operations 103
Statements of Changes in Net Assets 104
Financial Highlights 107
Victory Specialty Funds
Balanced Fund
Schedules of Investments 108
Statements of Assets and Liabilities 124
Statements of Operations 125
Statements of Changes in Net Assets 126
Financial Highlights 127
Statements of Cash Flows 174
Convertible Securities Fund
Schedules of Investments 118
Statements of Assets and Liabilities 124
Statements of Operations 125
Statements of Changes in Net Assets 126
Financial Highlights 128
Real Estate Investment Fund
Schedules of Investments 123
Statements of Assets and Liabilities 124
Statements of Operations 125
Statements of Changes in Net Assets 126
Financial Highlights 129
Victory Equity Funds
Value Fund
Schedules of Investments 130
Statements of Assets and Liabilities 145
Statements of Operations 146
Statements of Changes in Net Assets 147
Financial Highlights 149
Established Value Fund
Schedules of Investments 132
Statements of Assets and Liabilities 145
Statements of Operations 146
Statements of Changes in Net Assets 147
Financial Highlights 150
Diversified Stock Fund
Schedules of Investments 134
Statements of Assets and Liabilities 145
Statements of Operations 146
Statements of Changes in Net Assets 148
Financial Highlights 151-152
Statements of Cash Flows 175
Stock Index Fund
Schedules of Investments 136
Statements of Assets and Liabilities 145
Statements of Operations 146
Statements of Changes in Net Assets 148
Financial Highlights 153
Statements of Cash Flows 175
Growth Fund
Schedules of Investments 143
Statements of Assets and Liabilities 145
Statements of Operations 146
Statements of Changes in Net Assets 148
Financial Highlights 154
Special Value Fund
Schedules of Investments 155
Statements of Assets and Liabilities 167
Statements of Operations 168
Statements of Changes in Net Assets 169
Financial Highlights 170
Statements of Cash Flows 175
Small Company Opportunity Fund
Schedules of Investments 157
Statements of Assets and Liabilities 167
Statements of Operations 168
Statements of Changes in Net Assets 169
Financial Highlights 171
International Growth Fund
Schedules of Investments 159
Statements of Assets and Liabilities 167
Statements of Operations 168
Statements of Changes in Net Assets 169
Financial Highlights 172
Nasdaq-100 Index(R) Fund
Schedules of Investments 165
Statements of Assets and Liabilities 167
Statements of Operations 168
Statements of Changes in Net Assets 169
Financial Highlights 173
Notes to Financial Statements 176
Report of Independent Accountants 196
2
<PAGE>
Letter to our Shareholders
On behalf of Victory Funds, thank you for your continued support and
confidence in using Victory Funds to help meet your investment goals! We
strive on a daily basis to make sure you have the appropriate information you
need to remain confident in your choice to invest in Victory Funds. To that
end, I am pleased to present the Victory Funds Annual Report for the period
ending October 31, 2000. I hope you find this report useful, easy to read,
and a valuable tool.
The past year has been an exciting time for Victory Funds. Through the
combination of a new sales and marketing literature system, a new and
improved Internet presence, and the support of the many financial
intermediaries offering Victory Funds, we are now over 30 mutual funds strong
with more than $20 billion in assets under management.
Two of Victory Funds' core beliefs are guidance and education. We recognize
it can be a complex decision to invest in securities through mutual funds,
particularly when your hard-earned savings to fund a child's education, a new
home, or a comfortable retirement is on the line. That's why I feel it is
important for our shareholders to know "What Makes Victory Funds Different?"
I am confident that after you review the following points you will be
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. Dependability is the essence of Victory Funds. When you
entrust your money to a Victory Fund, you can rest assured that the portfolio
managers of the Funds are known for adhering to the fund's stated management
style and investment objective.
Discipline. A highly rigorous and disciplined investment process, refined
over decades by the wisdom of experienced money managers, guides the
selection of securities for Victory Funds. Key Asset Management, Inc., an
established firm with a 100-year heritage, meticulously implements this
proven process.
Teamwork. A knowledgeable team of investment professionals supports
Victory Fund portfolio managers, who have an average of 17 years of
experience.
Guidance. Victory strives to make sure you have the information you need to
make the best investment decisions. The guidance available through investment
professionals, "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 ultimate measure of your investment success is performance.
At Victory Funds, our long-term perspective leads us to pursue the optimal
return with a reasonable level of risk. We are committed to achieving
consistent, rewarding results over time.
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
Victory Funds
3
<PAGE>
Investment Review and Outlook
The Pause That Refreshes
Excluding a few brief interruptions, the U.S. equity markets have enjoyed a
bull run since August, 1982. However, in 2000, market volatility increased
and unless stocks stage a strong rally in the last month of the year, the
major equity indices will post their first year of negative returns since
1994. A confluence of factors including tighter monetary policy, rising
energy prices, a weak euro, election uncertainty, signs of a slowing economy
and decelerating corporate earnings combined to batter equity markets that
were already suffering from extended valuations.
The question on many investors' minds is if the negative returns in 2000
indicate that the longest running bull market in history is coming to an end.
We would view 2000 as a pause in the bull market rather than a sign that we
will be entering an extended bear market phase. The presentation that we have
been sharing with clients for much of 2000 was entitled "Back To Reality" and
we view this title as fairly descriptive of market conditions in 2000. A
growth at any price mentality that rewarded innovative, new ways to value
companies that had a good "story", but little (if any) earnings dominated
investor psychology for the last few years. Time-tested investment principles
such as earnings, dividends, cash flow, a solid business plan and valuation
were dismissed as old fashioned.
While emotion and greed can prevail in the short-term, fundamentals always
win out over the longer haul. Many of these one-time high flyers have seen
their stock prices cut by over 90% and we are beginning to see some
bankruptcies as well. Contrary to market hopes, this time wasn't different.
This is a painful process in the short-term and the problems of these
companies spilled over into the broader markets. However, this speculative
cleansing was necessary to maintain the market's positive prospects longer
term.
4
<PAGE>
The markets still face many obstacles as we enter 2001. Oil prices remain
high, the euro continues to struggle, valuations are still high by historical
standards, the economy is cooling and there are still some speculative
excesses that need to be deflated. Consensus earnings expectations for the
S&P 500 will likely face another round of estimate cuts to the 7.00-8.00%
area to reflect more reasonable growth expectations. Margin debt remains
high, a diminished wealth effect could slow consumer spending and the current
account deficit could present some problems for the U.S. economy if
foreigners become reluctant to fund that deficit.
Despite these obstacles and the daily avalanche of economic and market data,
we believe that it is important to step back and examine the big picture,
which still looks favorable for equities. The economy has shown clear signs
of slowing down, but a recession appears unlikely. Corporate earnings have
decelerated from unsustainable levels, but are still expected to show solid
growth. The interest rate environment has become less hostile and the Federal
Reserve has plenty of room to lower rates if needed. There are still some
pockets of overvaluation in the market, but given the solid earnings and
negative equity returns in 2000, the valuation of the market has improved.
Finally, the outlook for that great killer of financials assets, inflation,
remains fairly benign. Once we get past the peak winter usage season, energy
prices should moderate. This will allow the disinflationary forces of the
internet, mergers & acquisitions, global competition, shoppers preference for
wholesale stores and excess capacity to keep the rise in inflation fairly
well contained. In a stable to declining interest rate environment with low
inflation, history has shown that equities can perform well even if corporate
earnings advance at a slower pace.
At the Victory family of funds, our team of experienced investment
professionals is pleased that some rationality has returned to the markets.
Our investment discipline that emphasizes fundamental research and
traditional valuation metrics may seem less exciting than other investment
styles, but as we have seen in 2000, momentum is a double-edged sword. We
believe consistent, superior risk adjusted returns are exciting and the best
way to build long-term wealth and outpace inflation. We thank you for your
continued business and welcome your questions and comments in 2001.
/s/ Richard J. Nash
Richard J. Nash
Chief Market Strategist
Key Asset Management
5
<PAGE>
Introduction to
Money Market Funds
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.
CREDIT REVIEW
INTEREST RATE ENVIRONMENT
SECTOR SCREEN
TAXABLE FUND PERFORMANCE
The Victory U.S. Government
Obligations Fund
The Victory Prime
Obligations Fund
The Victory Financial
Reserves Fund
TAX-FREE FUND PERFORMANCE
The Victory Tax-Free
Money Market Fund
The Victory Ohio Municipal
Money Market Fund
6
<PAGE>
The Victory Money Market Funds
The Victory Prime Obligations Fund
The Victory U.S. Government Obligations Fund
The Victory Financial Reserves Fund
Rising short-term interest rates characterized the environment for money
markets during most of the last year. The Federal Reserve continued the
process began in June of 1999 of raising its short-term interest rate
benchmark, the Federal Funds Rate, culminating in a 50 basis point increase
in the rate up to 6.50% in May when short-term rates reached their peak.
With an economy characterized by strong consumer spending, a healthy housing
market, a tight labor market and, at times, a robust equity market, the
Federal Reserve ("Fed") believed its actions were warranted to forestall any
rise in inflation. Throughout the past year, Fed officials continuously
expressed concern that economic growth was too strong, thus putting the
markets on notice that a more restrictive monetary policy was to be expected.
These declarations and expectations of continued tightening resulted in a
positive yield curve (meaning that longer maturing securities offered a
higher yield than shorter investments).
Looking ahead, the outlook for interest rates is uncertain. The Federal
Reserve seems comfortable with the current status of monetary policy.
Economic growth has shown that what was deemed inflationary in the past;
policy makers have come to accept as real and lasting -- that is, the recent
gains in productivity. Concurrent with this acceptance is the belief that
growth potential of the economy has increased without fear of igniting
inflation. For this reason the halt in tightening should continue. At the
same time the tight labor market and, at the least, a firming in the general
level of prices, as well as strong increases in the price of oil, should
forestall any consideration of the easing of monetary policy in the immediate
future.
Since the peak in rates in May there has been a flattening of the yield curve
lessening the attractiveness of longer maturing investments. With no
expectation of a Fed induced decline in rates for the reasons stated above,
the expected course of action is to build liquidity in preparation for
year-end investment opportunities and liquidity needs.
As of October 31, 2000
U.S. GOV'T OBLIGATIONS PRIME FINANCIAL
SELECT INVESTOR OBLIGATIONS RESERVES
Seven-Day Yield 5.80% 6.04% 5.93% 6.03%
Seven-Day
Effective Yield 5.96% 6.22% 6.11% 6.21%
One Year
Total Return 5.33% 5.60% 5.67% 5.75%
Past performance is not predictive of future results. Yields will fluctuate
with market conditions.
Maturity Schedule(1)
As of October 31, 2000
Days to U.S. GOV'T PRIME FINANCIAL
Maturity OBLIGATIONS OBLIGATIONS RESERVES
Less than 30 Days 82.8% 66.3% 63.4%
31 to 60 Days 7.4% 15.4% 16.7%
61 to 90 Days -- 1.9% 3.6%
Greater than 90 Days 9.8% 16.4% 16.3%
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.
The total return 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 return would have been
lower.
7
<PAGE>
The Victory Money Market Funds
The Victory Tax-Free Money Market Fund
The Victory Ohio Muni Money Market Fund
Throughout the year ended October 31, 2000, our commitment to discipline and
investment philosophy rewarded investors as the Victory Ohio Municipal Money
Market Fund and the Victory Tax-Free Money Market Fund made every effort to
take full advantage of supply/demand in the marketplace. This was achieved
through careful positioning of the Funds (since the average maturity of the
instruments in the portfolio were relatively short), as well as our ability
to enhance the Funds' yield without taking unnecessary interest rate risk.
We believe the actions of the Fed this past year have been successful. There
is evidence the economy is slowing and inflation appears to be moderate. Our
position for the short-term is for interest rates to remain stable (or
possibly decline). If this proves true, extensions will be made in an effort
to lock in fixed rates.
We continue to maintain a close scrutiny of interest rate forecasts, economic
indicators and Fed action, and will take advantage of opportunities the
market may present in order to add value for our shareholders.
As of October 31, 2000
TAX-FREE OHIO MMMKT
Seven-Day Yield 3.66% 3.50%
Tax Equivalent Yield(1) 6.06% 6.55%
Seven-Day Effective Yield 3.73% 3.56%
Seven-Day Tax Equivalent
Effective Yield(1) 6.18% 6.67%
One Year Total Return 3.38% 3.27%
Past performance is not predictive of future results. Yields will fluctuate
with market conditions.
Maturity Schedule(2)
As of October 31, 2000
Days to Maturity TAX-FREE OHIO MMMkt
Less than 30 Days 78.5% 75.4%
31 to 60 Days 6.1% 9.9%
61 to 90 Days 2.8% 1.0%
Greater than 90 Days 12.6% 13.7%
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 39.6%, and the rate used for the Ohio MMMKT
is the combined 39.6% Federal and 7.0% 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.
The total return 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 return would have been
lower.
8
<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.
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.
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.
FIXED INCOME SECURITIES UNIVERSE
CREDIT SCREENING PROCESS
DURATION AND MATURITY SCREEN
SHORT-TERM POOL
Yield Curve Shape and
Movement Analysis
INTERMEDIATE-TERM POOL
LONG-TERM POOL
RELATIVE VALUE ANALYSIS
Supply and Demand Scarcity; Regulatory Changes;
New Products or Securities; New Issues; Technical Innovation;
Sector Analysis; Investor Sentiment
SHORT-TERM FUND
The Victory Limited Term
Income Fund
INTERMEDIATE-TERM FUNDS
The Victory Intermediate
Income Fund
The Victory Fund for Income
LONG-TERM FUNDS
The Victory Investment
Quality Bond Fund
9
<PAGE>
The Victory Taxable Fixed Income Funds
The Victory Limited Term Income Fund
For the year ended October 31, 2000, the Victory Limited Term Income Fund's
total return was 5.55% (at net asset value) compared to the total return of
6.07% of its benchmark (Merrill Lynch 1-3 Year Treasury Bond Index). The
Fund's total return was adversely affected primarily by non-treasury sector
spreads widening to their greatest levels in 10 years. During the year, the
yield advantage of the portfolio securities of the Fund over that benchmark
did not make up for the decrease in value of the Fund's securities caused by
non-treasury spread widening.
For the past year, the three primary strategies implemented for the Fund
were: (1) maintain duration neutrality (2) maintain yield curve neutrality
(3) maintain corporate, mortgage-backed and asset-backed overweight
allocations with corresponding yield advantage. We believe we were successful
in the execution of our strategy.
Our goal for the coming year is to begin the first quarter of 2001 with the
portfolio securities of the Fund having a 35 basis point yield advantage over
the benchmark, which we hope to maintain on a long-term basis (this yield
does not take into account Fund expenses or gains or losses on securities).
We anticipate duration neutrality will be maintained as well, and we continue
to look for opportunities to increase shareholder value.
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.
Fund holdings are subject to change at any time.
Victory Limited Term Income Fund
vs. Merrill Lynch 1-3 Yr Treas & Lehman 1-3 Yr Gov't
(Dollars in thousands)
Limited Limited
Term Income Term Income Merrill Lynch Lehman
Class A Class A @ NAV 1-3 Yr Treas 1-3 Yr Gov't*
10/31/90 9804 10000 10000 10000
11/30/90 9921 10119 10098 10097
12/31/90 10013 10213 10221 10216
1/31/91 10108 10310 10314 10313
2/28/91 10174 10378 10376 10379
3/31/91 10230 10434 10446 10449
4/30/91 10315 10522 10545 10549
5/31/91 10387 10595 10608 10612
6/30/91 10404 10612 10651 10652
7/31/91 10493 10703 10744 10743
8/31/91 10636 10849 10891 10889
9/30/91 10756 10971 11009 11005
10/31/91 10864 11081 11128 11124
11/30/91 10982 11202 11243 11238
12/31/91 11163 11387 11415 11409
1/31/92 11113 11336 11397 11394
2/29/92 11135 11358 11436 11428
3/31/92 11102 11324 11432 11425
4/30/92 11194 11418 11537 11529
5/31/92 11315 11541 11642 11636
6/30/92 11431 11660 11761 11754
7/31/92 11588 11820 11893 11889
8/31/92 11674 11907 11997 11985
9/30/92 11799 12035 12112 12098
10/31/92 11708 11942 12039 12029
11/30/92 11659 11892 12019 12011
12/31/92 11762 11997 12134 12122
1/31/93 11901 12139 12260 12250
2/28/93 12031 12272 12365 12348
3/31/93 12036 12276 12402 12386
4/30/93 12145 12388 12478 12462
5/31/93 12126 12369 12444 12432
6/30/93 12231 12476 12535 12525
7/31/93 12249 12494 12564 12552
8/31/93 12386 12634 12674 12657
9/30/93 12439 12688 12715 12697
10/31/93 12457 12706 12740 12725
11/30/93 12424 12673 12743 12728
12/31/93 12482 12732 12790 12779
1/31/94 12577 12829 12872 12858
2/28/94 12453 12703 12790 12779
3/31/94 12334 12581 12726 12714
4/30/94 12262 12508 12681 12666
5/31/94 12268 12514 12699 12684
6/30/94 12290 12536 12737 12715
7/31/94 12416 12664 12846 12830
8/31/94 12438 12687 12892 12872
9/30/94 12367 12614 12862 12842
10/31/94 12374 12622 12891 12872
11/30/94 12298 12544 12834 12818
12/31/94 12325 12572 12863 12842
1/31/95 12477 12727 13042 13017
2/28/95 12669 12922 13221 13194
3/31/95 12736 12991 13295 13268
4/30/95 12844 13101 13413 13386
5/31/95 13113 13375 13648 13615
6/30/95 13177 13441 13721 13688
7/31/95 13213 13477 13778 13743
8/31/95 13291 13557 13860 13826
9/30/95 13355 13622 13927 13893
10/31/95 13459 13729 14045 14009
11/30/95 13588 13860 14169 14128
12/31/95 13678 13951 14278 14234
1/31/96 13796 14072 14399 14355
2/29/96 13725 13999 14338 14299
3/31/96 13678 13952 14325 14289
4/30/96 13677 13951 14337 14303
5/31/96 13698 13972 14367 14334
6/30/96 13791 14067 14470 14439
7/31/96 13829 14105 14527 14495
8/31/96 13862 14139 14577 14549
9/30/96 13987 14266 14709 14681
10/31/96 14124 14406 14875 14847
11/30/96 14224 14508 14989 14957
12/31/96 14228 14512 14989 14960
1/31/97 14276 14562 15059 15032
2/28/97 14314 14600 15094 15068
3/31/97 14296 14582 15088 15056
4/30/97 14399 14687 15211 15179
5/31/97 14475 14765 15315 15286
6/30/97 14572 14863 15420 15391
7/31/97 14712 15007 15590 15559
8/31/97 14715 15009 15604 15574
9/30/97 14820 15117 15723 15693
10/31/97 14911 15209 15839 15809
11/30/97 14956 15256 15878 15848
12/31/97 15046 15347 15986 15955
1/31/98 15180 15484 16142 16108
2/28/98 15179 15483 16155 16122
3/31/98 15238 15543 16221 16185
4/30/98 15294 15600 16297 16263
5/31/98 15380 15687 16384 16349
6/30/98 15446 15755 16469 16432
7/31/98 15502 15812 16546 16510
8/31/98 15682 15995 16754 16711
9/30/98 15909 16228 16976 16937
10/31/98 15933 16251 17059 17020
11/30/98 15891 16209 17044 17003
12/31/98 15943 16262 17105 17067
1/31/99 15993 16313 17172 17132
2/28/99 15882 16200 17089 17055
3/31/99 15980 16300 17207 17171
4/30/99 16030 16351 17263 17224
5/31/99 15999 16319 17252 17212
6/30/99 16018 16338 17305 17262
7/31/99 16052 16373 17360 17316
8/31/99 16037 16358 17410 17364
9/30/99 16154 16477 17523 17477
10/31/99 16206 16530 17570 17524
11/30/99 16224 16549 17603 17557
12/31/99 16229 16554 17629 17573
1/31/2000 16201 16525 17622 17570
2/29/2000 16309 16636 17739 17689
3/31/2000 16402 16730 17849 17795
4/30/2000 16444 16773 17896 17840
5/31/2000 16506 16836 17969 17906
6/30/2000 16673 17007 18156 18101
7/31/2000 16772 17107 18270 18217
8/31/2000 16905 17243 18405 18355
9/30/2000 17023 17363 18538 18499
10/31/2000 17105 17447 18637 18598
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 October 31, 2000
Maximum
Net Asset Offering
Value Price
One Year 5.55% 3.42%
Three Years 4.68% 3.99%
Five Years 4.91% 4.48%
Ten Years 5.72% 5.51%
Average Annual Since Inception
10/20/89 5.93% 5.74%
10
<PAGE>
The Victory Taxable Fixed Income Funds
The Victory Intermediate Income Fund
For the year ended October 31, 2000, the Victory Intermediate Income Fund's
total return was 6.00% (Class A Shares at net asset value) compared to the
total return of 6.46% of its benchmark (Lehman Intermediate Gov't/Corp. Bond
Index). The fund's total return was adversely affected primarily by the
non-treasury sector spreads widening to their greatest levels in 10 years.
During the year, the yield of the portfolio securities of the Fund exceeded
the yield of that benchmark, but did not make up for the decrease in value of
the Fund's securities caused by non-treasury spread widening.
Consistency was the hallmark characteristic of the Fund as duration and yield
curve neutrality was maintained throughout the year. The portfolio was
overweighted in mortgage-backed and asset-backed securities during the year.
As spreads widened, we have concentrated the relative value offered by higher
quality corporate bonds.
For 2001, we are targeting a 30 basis point advantage of the yield of the
portfolio securities of the Fund over the yield of the benchmark while
continuing our commitment to maintaining duration neutrality so shareholders
may take maximum advantage of the benefits offered by the Fund (this yield
does not take into account Fund expenses or gains or losses on securities).
*Performance information prior to December 21, 1999, the Class G Shares
inception date, reflects the performance of Class A Shares, adjusted to
eliminate the effect of Class A's maximum sales charge but not adjusted to
reflect the expenses of Class G Shares. Actual Class G performance would have
been lower, because Class G Shares generally have higher expenses than Class
A Shares.
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 applicable to
Class A 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 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. Some fee waivers are voluntary and may be modified or terminated at
any time.
Fund holdings are subject to change at any time.
Victory Intermediate Income Fund
vs. Lehman Int Gov't/Corp
(Dollars in thousands)
Intermediate Intermediate
Income Income Lehman
Class A Class A @ NAV Int Govt/Corp
12/10/93 9425 10000 10000
2/28/94 9363 9934 9962
3/31/94 9236 9799 9797
4/30/94 9164 9723 9731
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 10314 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 12135 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
11/30/99 12357 13111 13864
12/31/99 12325 13077 13819
1/31/2000 12293 13043 13768
2/29/2000 12395 13151 13882
3/31/2000 12539 13304 14027
4/30/2000 12492 13254 13995
5/31/2000 12488 13250 14017
6/30/2000 12704 13479 14264
7/31/2000 12797 13577 14372
8/31/2000 12932 13720 14542
9/30/2000 13054 13850 14674
10/31/2000 13107 13906 14741
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 Return
As of October 31, 2000
INTERMEDIATE INCOME INTERMEDIATE INCOME
Class A Class G*
Maximum
Net Asset Offering Net Asset
Value Price Value
One Year 6.00% -0.11% 5.53%
Three Years 4.64% 2.59% 4.49%
Five Years 5.02% 3.78% 4.92%
Average Annual Since Inception
12/10/93 4.90% 4.00% 4.83%
11
<PAGE>
The Victory Taxable Fixed Income Funds
The Victory Fund for Income
The economic condition of the United States during the past 12 months
portrays an economy that is extremely healthy and marching forward with a
full head of steam. Despite the Federal Reserve raising the Fed Funds rate
from 5.25% to 6.50%, the U.S. economy grew approximately 5.3% for the year
ended October 31, 2000. Unemployment is only 3.9% and inflation has
accelerated from approximately 2.6% as of October 1999 to approximately 3.5%
as of October 2000. Given this environment, historically, one would expect
interest rates to rise and the bond market returns to be disappointing. But,
history does not always repeat itself. The past year has been the exception
to the rule and proved favorable for most bond investors.
Over the past year, long-term rates declined about 40 basis points, 6.2% vs.
5.8%, while intermediate rates dropped from 5.9% to 5.8%. In general, bond
market returns reflected this drop in interest rates and rewarded bond
investors.
Lehman 1 Year
Index Total Return
U.S. Government 8.04%
GNMA MBS 7.87%
U.S. Corporate Investment Grade 5.38%
High Yield -1.61%
As the table above indicates, not all bonds are created equal and over the
past year those investors who purchased the highest quality securities have
earned the best returns. The reasons for this behavior are numerous, but two
main factors come to mind:
1. The diminishing U.S. Government deficit requires less debt to be issued by
the U.S. Treasury. In fact, the surplus revenues are being used to buy back
debt and reduce the amount of debt outstanding.
2. As investors became squeamish with the volatility witnessed in the equity
markets, they began to favor securities that were not exposed to credit
risk. Although interest rates have gone down, the cost to borrow in the
corporate market has gone up. As the table shows, those investors who
favor high yield bonds have suffered negative returns over the past
12 months.
Victory Fund for Income investors have participated in a portfolio invested
only in securities guaranteed by the full faith and credit of the U.S.
Government. Additionally, the Fund's emphasis on coupon income, which in the
long run is the single most important factor in determining long-term
performance, has rewarded our shareholders with consistent monthly dividends
and consistent performance relative to the Fund's peer group. We believe a
top quality portfolio and a low-risk investment philosophy rewards our
investors with relatively stable long-term returns.
*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 applicable to
Class A Shares. 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. Some fee waivers are voluntary and may be modified or terminated at
any time.
Fund holdings are subject to change at any time.
Victory Fund for Income
vs. Lehman Mortgage
(Dollars in thousands)
Fund for Income Lehman
Class G Mortgage
10/31/90 10000 10000
11/30/90 10235 10210
12/31/90 10385 10382
1/31/91 10520 10539
2/28/91 10566 10628
3/31/91 10621 10700
4/30/91 10726 10799
5/31/91 10785 10894
6/30/91 10769 10903
7/31/91 10921 11088
8/31/91 11141 11289
9/30/91 11321 11501
10/31/91 11443 11691
11/30/91 11536 11776
12/31/91 11847 12012
1/31/92 11653 11873
2/29/92 11757 11986
3/31/92 11648 11909
4/30/92 11718 12026
5/31/92 11947 12242
6/30/92 12105 12387
7/31/92 12291 12492
8/31/92 12424 12654
9/30/92 12558 12753
10/31/92 12423 12641
11/30/92 12428 12680
12/31/92 12592 12844
1/31/93 12802 13012
2/28/93 12946 13143
3/31/93 13006 13223
4/30/93 13100 13292
5/31/93 13117 13368
6/30/93 13289 13470
7/31/93 13355 13524
8/31/93 13450 13587
9/30/93 13472 13599
10/31/93 13535 13639
11/30/93 13467 13611
12/31/93 13547 13722
1/31/94 13691 13858
2/28/94 13542 13761
3/31/94 13134 13403
4/30/94 13034 13304
5/31/94 13058 13357
6/30/94 12998 13327
7/31/94 13221 13594
8/31/94 13235 13637
9/30/94 13026 13444
10/31/94 12984 13436
11/30/94 12908 13394
12/31/94 13048 13501
1/31/95 13320 13790
2/28/95 13669 14142
3/31/95 13735 14208
4/30/95 13912 14410
5/31/95 14401 14864
6/30/95 14490 14949
7/31/95 14464 14974
8/31/95 14608 15130
9/30/95 14752 15263
10/31/95 14897 15399
11/30/95 15089 15574
12/31/95 15292 15769
1/31/96 15378 15887
2/29/96 15208 15755
3/31/96 15131 15699
4/30/96 15018 15655
5/31/96 14964 15609
6/30/96 15135 15825
7/31/96 15163 15883
8/31/96 15168 15883
9/30/96 15390 16149
10/31/96 15710 16465
11/30/96 15946 16701
12/31/96 15828 16614
1/31/97 15907 16737
2/28/97 15937 16792
3/31/97 15768 16634
4/30/97 15973 16899
5/31/97 16141 17064
6/30/97 16297 17264
7/31/97 16607 17588
8/31/97 16536 17546
9/30/97 16748 17769
10/31/97 16948 17966
11/30/97 16982 18025
12/31/97 17151 18190
1/31/98 17342 18370
2/28/98 17350 18408
3/31/98 17398 18485
4/30/98 17472 18591
5/31/98 17600 18714
6/30/98 17695 18803
7/31/98 17764 18899
8/31/98 18049 19071
9/30/98 18349 19302
10/31/98 18255 19277
11/30/98 18311 19373
12/31/98 18415 19457
1/31/99 18463 19595
2/28/99 18348 19516
3/31/99 18459 19647
4/30/99 18525 19738
5/31/99 18436 19627
6/30/99 18360 19558
7/31/99 18322 19425
8/31/99 18283 19425
9/30/99 18536 19740
10/31/99 18589 19854
11/30/99 18599 19864
12/31/99 18557 19817
1/31/2000 18454 19644
2/29/2000 18647 19872
3/31/2000 18915 20089
4/30/2000 18884 20103
5/31/2000 18914 20113
6/30/2000 19217 20543
7/31/2000 19307 20675
8/31/2000 19581 20989
9/30/2000 19735 21207
10/31/2000 19842 21360
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 October 31, 2000
FUND FOR INCOME FUND FOR INCOME
Class A* Class G*
Maximum
Net Asset Offering Net Asset
Value Price Value
One Year 6.67% 4.54% 6.74%
Three Years 5.35% 4.64% 5.40%
Five Years 5.87% 5.44% 5.90%
Ten Years 7.08% 6.86% 7.09%
Average Annual Since Inception
9/16/87 7.67% 7.50% 7.68%
12
<PAGE>
The Victory Taxable Fixed Income Funds
The Victory Investment Quality Bond Fund
For the year ended October 31, 2000, the Victory Investment Quality Bond
Fund's total return was 6.04% (Class A shares at net asset value) compared to
the total return of 7.30% of its benchmark (Lehman Brothers' Aggregate Bond
Index). The Fund's total return was adversely affected, primarily by
nontreasury sector spreads widening to their greatest levels in 10 years.
While the Fund's duration was neutral throughout the year, the yield of its
portfolio securities averaged approximately 20 basis points higher than its
benchmark (this yield does not take into account Fund expenses or gains or
losses on securities). This was accomplished partly by our overweighted
position in the corporate bond sector and, to a lesser extent, in asset
backed bonds. Currently, we continue to overweight our position in corporates
as spreads have continued to widen.
During the year, our emphasis was on incorporating higher quality corporate
bonds in the portfolio. As we look to the future, we believe spreads will
stabilize and duration neutrality will be maintained. We continue to look for
relative value opportunities to enhance total return for the benefit of our
shareholders.
*Performance information prior to December 21, 1999, the Class G Shares
inception date, reflects the performance of Class A Shares, adjusted to
eliminate the effect of Class A's maximum sales charge but not adjusted to
reflect the expenses of Class G Shares. Actual Class G performance would have
been lower, because Class G Shares generally have higher expenses than Class
A Shares.
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 applicable to
Class A 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 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. Some fee waivers are voluntary and may be modified or terminated at
any time.
Fund holdings are subject to change at any time.
Victory Investment Quality Bond Fund
vs. Lehman Aggregate
(Dollars in thousands)
Invest Invest
Quality Bond Quality Bond Lehman
Class A Class A @ NAV Aggregate
12/10/93 9425 10000 10000
2/28/94 9356 9927 10013
3/31/94 9152 9710 9766
4/30/94 9079 9633 9688
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
11/30/99 12470 13231 14234
12/31/99 12428 13186 14165
1/31/2000 12385 13141 14119
2/29/2000 12532 13297 14290
3/31/2000 12680 13454 14478
4/30/2000 12623 13393 14437
5/31/2000 12566 13333 14430
6/30/2000 12813 13595 14730
7/31/2000 12923 13711 14864
8/31/2000 13089 13888 15079
9/30/2000 13159 13961 15174
10/31/2000 13241 14049 15275
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 October 31, 2000
INVESTMENT QUALITY INVESTMENT QUALITY
BOND Class A BOND Class G*
Maximum
Net Asset Offering Net Asset
Value Price Value
One Year 6.04% -0.05% 6.28%
Three Years 4.23% 2.18% 4.31%
Five Years 4.99% 3.75% 5.04%
Average Annual Since Inception
12/10/93 5.06% 4.16% 5.09%
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.
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.
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
INTERMEDIATE-TERM FUNDS
The Victory New York
Tax-Free Fund
The Victory Ohio Municipal
Bond Fund
LONG-TERM FUND
The Victory National Municipal
Bond Fund
14
<PAGE>
The 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, 2000, was a great year for municipal bonds. Most
Municipal Funds outperformed even the S&P 500** for the first three-quarters
of 2000, an uncommon event over the last five years.
Due to the continued strength of the U.S. economy, credit ratings for
Municipal Bonds continue to improve. The number of ratings upgrades has
outpaced the number of downgrades almost every quarter throughout the past
five years. The one sector where there is continued downward pressure on
ratings is the healthcare sector. The Fund has limited exposure to this
sector and generally purchases hospital bonds that have been insured and
receive AAA ratings.
The National Municipal Bond Fund added another year to its pattern of strong
performance versus its peer group, Lipper Intermediate Municipal Debt Funds.
As of October 31, 2000 the fund ranked 6th out of 120 in its peer group for
the one-year period, 4th out of 114 for the three-year period and 3rd out of
99 for the five-year period.
The New York Tax-Free Fund continues to be managed for income. The shorter
duration of the fund that helped its performance last year ended up dampening
its upside this year as it has a shorter duration than most funds in its peer
group, Lipper New York Insured Municipal Debt Funds, and did not benefit as
much from falling interest rates.
The Ohio Municipal Bond Fund also continued to outperform most of its peer
group, Lipper Ohio Municipal Debt Funds. As of October 31, 2000 the fund
ranked 9th out of 51 for the one-year period, 2nd out of 48 for the three
year period, 4th out of 45 for the five year period and 4th out of 15 for the
ten year period.
Given more signs of a decelerating economy and benign inflation data since
their last meeting, we believe the Fed is done raising rates in 2000. In
recent speeches by Fed Chairman Greenspan and other Federal Reserve
governors, they have reiterated that demand is slowing and that energy prices
have not yet contributed to inflationary pressures. In this type of
environment, we believe the Fed could drop their inflationary bias when they
meet in November or December.
*Performance information prior to December 17, 1999, the Class G Shares
inception date, reflects the performance of Class A Shares, adjusted to
eliminate the effect of Class A's maximum sales charge but not adjusted to
reflect the expenses of Class G Shares. Actual Class G performance would have
been lower, because Class G Shares generally have higher expenses than Class
A Shares.
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. 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 the Fund's inception. In such
instances and without such fee waivers, the total returns would have been
lower. Some fee waivers are voluntary and may be modified or terminated at
anytime.
Certain investors may be subject to Federal alternative minimum tax rates.
Fund holdings are subject to change at any time.
Lipper is an independent mutual fund performance monitor whose results are
based on total return and do not reflect a sales charge.
**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-sized companies. An investor cannot invest directly in an index.
The Victory National Municipal Bond Fund
Victory National Municipal Bond Fund
vs. Lehman 7-Yr & 10-Yr Muni
(Dollars in thousands)
National Muni National Muni Lehman Lehman
Class A Class A @ NAV 7-Yr Muni 10-Yr Muni
2/3/94 9425 10000 10000 10000
3/31/94 9083 9638 9522 9355
4/30/94 9159 9718 9592 9472
5/31/94 9212 9773 9640 9533
6/30/94 9184 9744 9623 9492
7/31/94 9307 9875 9759 9651
8/31/94 9351 9922 9809 9689
9/30/94 9162 9721 9716 9558
10/31/94 8990 9538 9618 9419
11/30/94 8792 9328 9478 9241
12/31/94 8953 9499 9622 9407
1/31/95 9222 9784 9802 9651
2/28/95 9419 9993 10022 9924
3/31/95 9532 10114 10126 10058
4/30/95 9544 10127 10153 10070
5/31/95 9805 10403 10423 10389
6/30/95 9793 10391 10413 10325
7/31/95 9931 10537 10546 10477
8/31/95 10054 10667 10670 10619
9/30/95 10106 10723 10711 10687
10/31/95 10250 10875 10804 10810
11/30/95 10372 11005 10923 10955
12/31/95 10535 11178 10980 11022
1/31/96 10633 11282 11087 11134
2/29/96 10652 11302 11049 11088
3/31/96 10494 11134 10942 10950
4/30/96 10471 11110 10922 10911
5/31/96 10482 11122 10906 10881
6/30/96 10542 11185 10990 10984
7/31/96 10652 11302 11081 11090
8/31/96 10640 11289 11087 11090
9/30/96 10727 11382 11187 11204
10/31/96 10846 11507 11307 11345
11/30/96 11028 11701 11496 11575
12/31/96 11004 11675 11462 11523
1/31/97 11010 11682 11503 11568
2/28/97 11109 11787 11598 11677
3/31/97 10980 11649 11449 11521
4/30/97 11058 11732 11508 11606
5/31/97 11221 11905 11653 11770
6/30/97 11342 12034 11765 11900
7/31/97 11654 12365 12038 12234
8/31/97 11529 12232 11953 12116
9/30/97 11667 12379 12079 12269
10/31/97 11725 12440 12151 12334
11/30/97 11783 12501 12193 12392
12/31/97 11968 12698 12343 12587
1/31/98 12063 12799 12473 12727
2/28/98 12093 12831 12484 12726
3/31/98 12093 12830 12484 12717
4/30/98 11999 12731 12412 12647
5/31/98 12223 12968 12594 12862
6/30/98 12273 13021 12629 12910
7/31/98 12302 13053 12671 12930
8/31/98 12516 13280 12864 13155
9/30/98 12661 13434 13030 13350
10/31/98 12681 13455 13049 13356
11/30/98 12701 13475 13084 13396
12/31/98 12722 13498 13112 13438
1/31/99 12896 13683 13303 13644
2/28/99 12816 13598 13229 13521
3/31/99 12807 13588 13223 13514
4/30/99 12846 13630 13255 13550
5/31/99 12766 13545 13190 13455
6/30/99 12576 13343 12999 13205
7/31/99 12666 13438 13087 13294
8/31/99 12646 13417 13057 13245
9/30/99 12637 13408 13106 13290
10/31/99 12555 13321 13050 13196
11/30/99 12654 13426 13146 13340
12/31/99 12609 13378 13093 13271
1/31/2000 12563 13329 13062 13216
2/29/2000 12654 13426 13115 13320
3/31/2000 12870 13655 13302 13579
4/30/2000 12810 13591 13252 13511
5/31/2000 12777 13556 13223 13431
6/30/2000 13100 13899 13518 13796
7/31/2000 13284 14094 13688 13987
8/31/2000 13481 14303 13868 14204
9/30/2000 13421 14240 13826 14138
10/31/2000 13568 14395 13944 14283
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 October 31, 2000
NATIONAL MUNI Class A NATIONAL MUNI Class G*
Maximum
Net Asset Offering Net Asset
Value Price Value
One Year 8.07% 1.86% 7.68%
Three Years 4.99% 2.94% 4.86%
Five Years 5.77% 4.53% 5.69%
Average Annual Since Inception
2/3/94 5.55% 4.63% 5.50%
15
<PAGE>
The Victory Municipal Fixed Income Funds
The Victory New York Tax-Free Fund
Victory New York Tax-Free Fund
vs. Lehman 10-Yr Muni
(Dollars in thousands)
NY Tax-Free NY Tax-Free Lehman
Class A Class A @ NAV 10-Yr Muni
2/11/91 9427 10000 10000
2/28/91 9335 9903 10086
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
11/30/99 15508 16451 18150
12/31/99 15422 16361 18200
1/31/2000 15386 16322 18125
2/29/2000 15558 16505 18268
3/31/2000 15861 16825 18623
4/30/2000 15769 16729 18529
5/31/2000 15707 16663 18420
6/30/2000 16041 17017 18920
7/31/2000 16231 17218 19182
8/31/2000 16407 17405 19480
9/30/2000 16303 17295 19389
10/31/2000 16467 17469 19588
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 October 31, 2000
NY TAX-FREE Class A NY TAX-FREE Class G*
Maximum
Net Asset Offering Net Asset
Value Price Value
One Year 7.00% 0.85% 6.25%
Three Years 3.72% 1.70% 3.48%
Five Years 4.29% 3.06% 4.14%
Average Annual Since Inception
2/11/91 5.91% 5.27% 5.83%
The Victory Ohio Municipal Bond Fund
Victory Ohio Municipal Bond Fund
vs. Lehman 10-Yr Muni
(Dollars in thousands)
Ohio Muni Ohio Muni Lehman
Class A Class A @ NAV 10-Yr Muni
10/31/90 9425 10000 10000
11/30/90 9567 10150 10204
12/31/90 9595 10180 10229
1/31/91 9733 10327 10398
2/28/91 9828 10428 10487
3/31/91 9800 10398 10482
4/30/91 9923 10529 10626
5/31/91 9996 10605 10707
6/30/91 9975 10583 10694
7/31/91 10061 10675 10806
8/31/91 10178 10799 10952
9/30/91 10296 10924 11120
10/31/91 10355 10986 11210
11/30/91 10381 11015 11229
12/31/91 10626 11274 11468
1/31/92 10663 11313 11493
2/29/92 10658 11308 11475
3/31/92 10635 11284 11458
4/30/92 10716 11369 11567
5/31/92 10834 11495 11702
6/30/92 10971 11641 11905
7/31/92 11292 11981 12295
8/31/92 11159 11840 12150
9/30/92 11220 11905 12251
10/31/92 11115 11793 12126
11/30/92 11326 12017 12348
12/31/92 11451 12149 12491
1/31/93 11590 12297 12702
2/28/93 12007 12739 13166
3/31/93 11820 12541 12974
4/30/93 11986 12717 13098
5/31/93 12051 12786 13143
6/30/93 12284 13033 13403
7/31/93 12265 13013 13436
8/31/93 12519 13283 13715
9/30/93 12741 13518 13884
10/31/93 12754 13532 13907
11/30/93 12608 13378 13793
12/31/93 12898 13685 14087
1/31/94 13075 13873 14260
2/28/94 12694 13468 13869
3/31/94 12245 12992 13340
4/30/94 12311 13062 13507
5/31/94 12475 13236 13594
6/30/94 12386 13142 13535
7/31/94 12574 13341 13763
8/31/94 12613 13383 13816
9/30/94 12423 13181 13630
10/31/94 12233 12980 13431
11/30/94 12050 12785 13177
12/31/94 12323 13075 13414
1/31/95 12681 13454 13762
2/28/95 13050 13846 14151
3/31/95 13147 13949 14343
4/30/95 13169 13973 14360
5/31/95 13598 14427 14815
6/30/95 13473 14294 14723
7/31/95 13575 14403 14939
8/31/95 13764 14603 15142
9/30/95 13844 14688 15239
10/31/95 14069 14928 15415
11/30/95 14285 15156 15622
12/31/95 14507 15392 15717
1/31/96 14581 15471 15877
2/29/96 14510 15395 15811
3/31/96 14273 15143 15615
4/30/96 14237 15105 15560
5/31/96 14244 15113 15516
6/30/96 14373 15250 15663
7/31/96 14537 15424 15813
8/31/96 14542 15429 15814
9/30/96 14737 15636 15976
10/31/96 14893 15802 16178
11/30/96 15155 16079 16506
12/31/96 15134 16057 16432
1/31/97 15087 16007 16496
2/28/97 15214 16142 16652
3/31/97 14993 15908 16429
4/30/97 15097 16018 16550
5/31/97 15315 16250 16784
6/30/97 15459 16402 16969
7/31/97 15886 16855 17446
8/31/97 15695 16652 17277
9/30/97 15897 16867 17496
10/31/97 15990 16965 17589
11/30/97 16070 17050 17670
12/31/97 16325 17321 17949
1/31/98 16491 17497 18148
2/28/98 16469 17474 18147
3/31/98 16479 17484 18134
4/30/98 16372 17370 18035
5/31/98 16698 17717 18341
6/30/98 16768 17791 18409
7/31/98 16787 17811 18438
8/31/98 17090 18133 18759
9/30/98 17337 18395 19038
10/31/98 17298 18353 19046
11/30/98 17358 18417 19103
12/31/98 17395 18456 19162
1/31/99 17587 18660 19456
2/28/99 17486 18552 19281
3/31/99 17487 18554 19271
4/30/99 17533 18602 19323
5/31/99 17401 18463 19187
6/30/99 17149 18195 18831
7/31/99 17208 18258 18957
8/31/99 17086 18128 18887
9/30/99 17054 18095 18951
10/31/99 16901 17932 18817
11/30/99 17036 18075 19023
12/31/99 16931 17964 18924
1/31/2000 16826 17852 18846
2/29/2000 17028 18067 18994
3/31/2000 17370 18429 19364
4/30/2000 17248 18301 19267
5/31/2000 17113 18157 19152
6/30/2000 17588 18661 19673
7/31/2000 17844 18933 19945
8/31/2000 18118 19223 20254
9/30/2000 18014 19113 20161
10/31/2000 18227 19338 20367
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 October 31, 2000
OHIO MUNI BOND Class A OHIO MUNI BOND Class G**
Maximum
Net Asset Offering Net Asset
Value Price Value
One Year 7.84% 1.62% 7.89%
Three Years 4.46% 2.41% 4.42%
Five Years 5.31% 4.08% 5.29%
Ten Years 6.82% 6.19% 6.80%
Average Annual Since Inception
5/18/90 6.84% 6.24% 6.83%
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. 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 December 21, 1999 for the New York Tax-Free
Fund, the Class G Shares inception date, reflects the performance of Class A
Shares, adjusted to eliminate the effect of Class A's maximum sales charge
but not adjusted to reflect the expenses of Class G Shares. Actual Class G
performance would have been lower, because Class G Shares generally have
higher expenses than Class A Shares.
**Performance information prior to March 26, 1999 for the Ohio Municipal Bond
Fund, the Class G Shares inception date, reflects the performance of Class A
Shares, adjusted to eliminate the effect of Class A's maximum sales charge
but not adjusted to reflect the expenses of Class G Shares. Actual Class G
performance would have been lower, because Class G Shares generally have
higher expenses than Class A 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. Some fee waivers are voluntary and may be modified or terminated at
anytime.
Certain investors may be subject to Federal alternative minimum tax rates.
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 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>
The Victory Specialty Funds
The Victory Balanced Fund
As of the end of 2000 fiscal year, the Victory Balanced Fund trailed the
Lipper Balanced Fund Index by 114 basis points. The Fund's total return as of
October 31, 2000, was 6.74% (Class A Shares at net asset value) versus 7.88%
for the Index.
A 5.0% weighting in international equities negatively impacted the
performance of the equity portion of the fund as the performance of
international equities trailed both domestic equities and fixed income
securities. Performance of the fixed income portion of the Fund was also
negatively impacted by a 10 year high in the widening of non-treasury sector
spreads. The Fund maintained a fairly consistent asset allocation throughout
the year with approximately 57% to 58% in equities, 33% to 34% in fixed
income and 3% to 4% in cash.
The domestic equities are managed in a large cap value style with a focus on
increasing the overweight in the financial sectors. Currently we believe
financial stocks are attractively priced considering that the impact of
interest rate increases over the last year have already been priced into
these stocks. In addition, the insurance industry appears particularly
attractive due to current valuations and a positive turn in the pricing
cycle. We expect consolidation will play a major factor in both of these
industries over the next several years and the Fund will attempt to take
advantage of its positions in these industries.
The fixed income portion of the Fund attempted to increase the corporate
overweight as spreads have widened throughout the year. The portfolio
securities of the Fund have had a 20 to 28 basis point yield advantage over
the Lehman Aggregate Index** in the corporate bond sector that was partially
offset by an underweighting in the agency sector (this yield does not take
into account Fund expenses or gains or losses on securities). In addition,
the Fund emphasized higher quality corporate bonds as spreads widened with
sub-sector overweights in oil and underweights in telecoms.
As we move into Fiscal Year 2001, we expect spreads to stabilize or possibly
tighten -- an advantage to the Fund's fixed-income positioning -- while
maintaining yield advantage and duration neutrality. We will position the
Fund in an effort to deliver above average returns with below average risk,
thereby providing shareholders with a high quality investment that attempts
to deliver consistent returns.
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. 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 December 15, 1999, the Class G Shares
inception date, reflects the performance of Class A Shares, adjusted to
eliminate the effect of Class A's maximum sales charge but not adjusted to
reflect the expenses of Class G Shares. Actual Class G performance would have
been lower, because Class G Shares generally have higher expenses than Class
A 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 inception. In such instances and
without such waiver of fees, the total returns would have been lower. Some
fee waivers are voluntary and may be modified or terminated at any time.
Fund holdings are subject to change at any time.
**Lehman Aggregate Index is a broad-based unmanaged index that represents the
general performance of longer-term (greater than 1 year) investment-grade
fixed-income securities. An investor cannot invest directly in an index.
Victory Balanced Fund
vs. S&P 500 & Lipper Balanced
(Dollars in thousands)
Balanced Balanced Lipper
Class A Class A @ NAV S&P 500 Balanced
12/10/93 9425 10000 10000 10000
1/31/94 9623 10210 10340 10262
3/31/94 9073 9626 9621 9695
4/30/94 9094 9649 9744 9716
6/30/94 9096 9651 9661 9621
7/31/94 9294 9861 9979 9838
8/31/94 9507 10087 10388 10084
9/30/94 9268 9833 10134 9903
10/31/94 9371 9943 10361 9933
11/30/94 9190 9751 9984 9702
12/31/94 9296 9863 10132 9795
1/31/95 9483 10062 10395 9917
2/28/95 9800 10398 10800 10206
3/31/95 9966 10574 11119 10386
4/30/95 10192 10814 11446 10581
5/31/95 10555 11199 11904 10920
6/30/95 10619 11267 12180 11113
7/31/95 10805 11464 12584 11348
8/31/95 10861 11524 12616 11437
9/30/95 11156 11837 13148 11710
10/31/95 11173 11854 13101 11680
11/30/95 11509 12211 13676 12043
12/31/95 11724 12439 13940 12233
1/31/96 11966 12696 14414 12453
2/29/96 11894 12619 14548 12459
3/31/96 12056 12791 14688 12506
4/30/96 12110 12848 14904 12589
5/31/96 12213 12958 15289 12718
6/30/96 12303 13053 15347 12760
7/31/96 12048 12783 14669 12432
8/31/96 12204 12948 14978 12628
9/30/96 12662 13435 15822 13097
10/31/96 12991 13784 16258 13374
11/30/96 13692 14527 17487 13997
12/31/96 13430 14249 17140 13829
1/31/97 13848 14693 18211 14257
2/28/97 13892 14739 18354 14310
3/31/97 13560 14387 17600 13894
4/30/97 13934 14784 18650 14312
5/31/97 14472 15355 19786 14898
6/30/97 14874 15781 20674 15391
7/31/97 15654 16608 22318 16268
8/31/97 15069 15988 21067 15753
9/30/97 15651 16606 22221 16380
10/31/97 15462 16406 21479 16082
11/30/97 15803 16767 22473 16378
12/31/97 16050 17029 22859 16636
1/31/98 16176 17163 23112 16755
2/28/98 16741 17762 24779 17420
3/31/98 17237 18288 26048 17952
4/30/98 17399 18460 26309 18078
5/31/98 17336 18393 25857 17895
6/30/98 17665 18743 26908 18225
7/31/98 17640 18716 26621 18012
8/31/98 16376 17375 22778 16460
9/30/98 17178 18225 24231 17171
10/31/98 17712 18793 26202 17813
11/30/98 18287 19402 27792 18465
12/31/98 18924 20079 29391 19146
1/31/99 19230 20403 30621 19452
2/28/99 18849 19999 29669 18985
3/31/99 19205 20376 30857 19453
4/30/99 19793 21000 32051 20091
5/31/99 19500 20689 31294 19781
6/30/99 20026 21248 33034 20328
7/31/99 19628 20825 31999 19947
8/31/99 19465 20652 31841 19738
9/30/99 19161 20330 30968 19485
10/31/99 19789 20996 32928 20049
11/30/99 19878 21090 33604 20265
12/31/99 20220 21454 35576 20865
1/31/2000 19748 20953 33788 20341
2/29/2000 19418 20602 33149 20292
3/31/2000 20623 21881 36392 21486
4/30/2000 20291 21529 35297 21093
5/31/2000 20274 21511 34573 20894
6/30/2000 20328 21568 35425 21228
7/31/2000 20324 21564 34871 21170
8/31/2000 21132 22421 37037 22115
9/30/2000 20822 22092 35082 21649
10/31/2000 21124 22412 34934 21630
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 Return
As of October 31, 2000
BALANCED FUND Class A BALANCED FUND Class G*
Maximum
Net Asset Offering Net Asset
Value Price Value
One Year 6.74% 0.61% 6.72%
Three Years 10.96% 8.78% 10.95%
Five Years 13.59% 12.25% 13.58%
Average Annual Since Inception
12/10/93 12.43% 11.46% 12.42%
18
<PAGE>
The Victory Specialty Funds
The Victory Convertible Securities Fund
The Convertible Securities Fund produced significant gains over the past
year. This is particularly evident over the past 10 months, as the Fund
outperformed its peer group by a significant margin. Sectors contributing to
performance included: technology and telecom, consumer staples, energy and
utilities, and financials. Capital goods and consumer cyclicals contributed
to a lesser degree, while basic industries had a negative impact on
performance.
The conservative structure of the Fund (versus its peers) hindered
performance during the dramatic rise of the NASDAQ in 1999; however, it had
the opposite effect in 2000. The considerable underweight in the technology
and telecom sectors (roughly 35% vs. 50%) insulated the Fund from the sharp
market decline in the spring of 2000.
In addition, the relative smaller allocation to equity-sensitive convertibles
also cushioned the Fund from this market setback. Equity sensitivity (as
measured by the Fund's delta*) is approximately .55 (for the fiscal year
ending October 31, 2000) versus .75 for the convertible universe. This means
that during this period the Fund captured about 55% of the underlying equity
movement.
The correction that occurred late in the first quarter, and early in the
second quarter of 2000, did allow us to selectively add to positions within
the software and biotech industries; sectors that performed well throughout
the remainder of the year. In the latter part of the year, overweights in the
energy and financial sectors aided performance.
The Fund employs a balanced approached to the portfolio. Dedicating roughly
one third of the Fund to equity, total return and high yield alternatives
allows it to participate in a majority of the market's upside potential and
attempts to reduce the downside.
The Fund will continue to utilize the balanced, conservative structure
discussed. In addition, the Fund seeks to provide a relatively high yield
relative to its benchmark in an attempt to help performance, given a volatile
equity environment, while still allowing it to potentially participate in a
healthy degree of the upside returns.
*Delta: A measure of the relationship between an option price and the
underlying futures contract or stock price. (Definition from Dictionary of
Finance and Investment Terms, fourth edition, by John Downes and Jordan
Elliot Goodman)
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. 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 December 21, 1999, the Class G Shares
inception date, reflects the performance of Class A Shares, adjusted to
eliminate the effect of Class A's maximum sales charge but not adjusted to
reflect the expenses of Class G Shares. Actual Class G performance would
have been lower, because Class G Shares generally have higher expenses
than Class A 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 inception. In such instances and
without such waiver of fees, the total returns would have been lower. Some
fee waivers are voluntary and may be modified or terminated at any time.
Fund holdings are subject to change at any time.
Victory Convertible Securities Fund
vs. S&P 500 & Lipper Convertible Securities Fund Index
(Dollars in thousands)
Convertible Convertible
Securities Securities Lipper Conv
Class A Class A @ NAV S&P500 Securities
10/31/90 9425 10000 10000 10000
11/30/90 9845 10445 10495 10454
12/31/90 10025 10636 10756 10713
1/31/91 10268 10894 11202 11134
2/28/91 10832 11493 11956 11694
3/31/91 10965 11634 12100 11864
4/30/91 11326 12017 12225 12003
5/31/91 11631 12340 12697 12282
6/30/91 11439 12137 12089 11981
7/31/91 11737 12453 12631 12267
8/31/91 12104 12843 12880 12608
9/30/91 12380 13135 12633 12670
10/31/91 12529 13293 12782 12917
11/30/91 12436 13194 12221 12590
12/31/91 12801 13582 13585 13292
1/31/92 13113 13913 13314 13633
2/29/92 13245 14053 13442 13879
3/31/92 13017 13811 13149 13710
4/30/92 13175 13979 13515 13754
5/31/92 13395 14212 13528 13987
6/30/92 13322 14134 13294 13843
7/31/92 13744 14582 13817 14208
8/31/92 13756 14595 13485 14131
9/30/92 13967 14819 13608 14404
10/31/92 13855 14700 13637 14541
11/30/92 13830 14674 14050 14902
12/31/92 14247 15116 14192 15208
1/31/93 14560 15448 14292 15550
2/28/93 14886 15794 14441 15552
3/31/93 15264 16195 14711 16060
4/30/93 15462 16405 14337 15958
5/31/93 15766 16728 14500 16315
6/30/93 15924 16896 14674 16449
7/31/93 16206 17194 14596 16548
8/31/93 16701 17720 15099 17001
9/30/93 16768 17791 14948 17126
10/31/93 17053 18093 15238 17384
11/30/93 16931 17964 15041 17229
12/31/93 17109 18152 15193 17465
1/31/94 17291 18346 15687 17908
2/28/94 17081 18123 15215 17755
3/31/94 16674 17691 14519 17130
4/30/94 16490 17496 14687 16912
5/31/94 16376 17375 14869 16889
6/30/94 16361 17359 14470 16748
7/31/94 16563 17574 14926 17021
8/31/94 16780 17804 15488 17503
9/30/94 16838 17865 15071 17363
10/31/94 16779 17803 15385 17331
11/30/94 16193 17181 14777 16847
12/31/94 16005 16982 14959 16827
1/31/95 16082 17063 15322 16982
2/28/95 16482 17487 15875 17386
3/31/95 16943 17977 16309 17788
4/30/95 17396 18457 16765 18094
5/31/95 17739 18821 17373 18486
6/30/95 17816 18903 17743 18876
7/31/95 18292 19407 18307 19442
8/31/95 18798 19945 18301 19587
9/30/95 19099 20264 19035 19884
10/31/95 18859 20009 18940 19560
11/30/95 19500 20690 19718 20147
12/31/95 19896 21109 20061 20372
1/31/96 20629 21887 20716 20736
2/29/96 20729 21993 20859 21058
3/31/96 21029 22312 21025 21260
4/30/96 21130 22419 21307 21756
5/31/96 21400 22705 21794 22110
6/30/96 21332 22634 21843 21817
7/31/96 20734 21999 20844 21049
8/31/96 21435 22742 21236 21796
9/30/96 22033 23377 22386 22487
10/31/96 22587 23965 22971 22594
11/30/96 23452 24883 24657 23368
12/31/96 23703 25149 24127 23354
1/31/97 24089 25559 25606 24053
2/28/97 24328 25812 25758 23945
3/31/97 23920 25379 24660 23473
4/30/97 24031 25497 26100 23633
5/31/97 24943 26464 27629 24757
6/30/97 25780 27352 28830 25545
7/31/97 26872 28511 31082 26725
8/31/97 26797 28431 29297 26719
9/30/97 27646 29332 30854 27919
10/31/97 27189 28848 29790 27217
11/30/97 27265 28929 31118 27129
12/31/97 27579 29261 31608 27300
1/31/98 27496 29173 31929 27341
2/28/98 28263 29987 34178 28540
3/31/98 29462 31260 35886 29424
4/30/98 29358 31148 36229 29560
5/31/98 28687 30437 35529 28969
6/30/98 28930 30694 36931 28855
7/31/98 28252 29975 36503 28323
8/31/98 25605 27166 31188 25027
9/30/98 25842 27419 33127 25390
10/31/98 26185 27782 35785 26111
11/30/98 26849 28487 37903 27166
12/31/98 27362 29032 40037 28070
1/31/99 28215 29937 41679 28983
2/28/99 27931 29635 40334 27976
3/31/99 28524 30264 41898 28619
4/30/99 29407 31201 43488 29969
5/31/99 29253 31037 42402 30094
6/30/99 30183 32024 44711 31156
7/31/99 29780 31597 43278 30882
8/31/99 29444 31240 43007 30606
9/30/99 28791 30547 41779 30321
10/31/99 29448 31244 44392 31332
11/30/99 29597 31403 45243 32903
12/31/99 30577 32442 47855 36013
1/31/2000 30698 32570 45419 36144
2/29/2000 32339 34312 44506 39573
3/31/2000 33022 35036 48810 39906
4/30/2000 33046 35062 47307 38129
5/31/2000 33216 35243 46270 36736
6/30/2000 34897 37025 47378 38916
7/31/2000 34700 36817 46604 38037
8/31/2000 36963 39217 49432 40938
9/30/2000 36550 38779 46788 40166
10/31/2000 35506 37672 46557 38813
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 October 31, 2000
CONVERTIBLE SECURITIES CONVERTIBLE SECURITIES
Class A Class G**
Maximum
Net Asset Offering Net Asset
Value Price Value
One Year 20.57% 13.66% 20.93%
Three Years 9.30% 7.17% 9.41%
Five Years 13.49% 12.15% 13.56%
Ten Years 14.18% 13.51% 14.22%
Average Annual Since Inception
4/14/88 11.88% 11.35% 11.90%
19
<PAGE>
The Victory Specialty Funds
The Victory Real Estate Investment Fund
The Victory Real Estate Investment Fund experienced strong gains during the
volatile past 12-months ended October 31, 2000, providing a total return of
23.04% (Class A Shares at net asset value), outperforming the Morgan Stanley
REIT (RMS) Index (18.20%) by 484 basis points.
The REIT sector rallied at various times throughout the year in response to
sell-offs in the technology sector. REITs, along with utility stocks, were
seen to provide a safe haven in the midst of broader market volatility. The
low correlation with the S&P 500 appeared attractive to investors seeking to
diversify their portfolios and alter the risk/return profile.
The solid fundamentals for real estate in most property types and in most
geographic regions supports strength in the REIT sector. The demand and
supply of space are in equilibrium, except in a few pockets of traditional
overbuilding such as Texas and Florida, although continuing above-average job
growth in these regions mitigates the problem for the present. The Victory
Real Estate Investment Fund focuses on properties located in regions less
vulnerable to oversupply and less at risk in the event of a slowdown in job
creation such as the West Coast and the Northeast.
The outperformance of the Victory Real Estate Investment Fund was largely due
to the overweighting in the office sector, particularly the downtown office
market. With continued strength in the business community, demand for space
has exceeded in major markets such as New York City, San Francisco, Boston
and the Washington D.C. region. As a result of this imbalance, rental rates
have risen rapidly and spiking considerably (such as the 60% rise reported in
Silicon Valley). Companies in which the Fund is invested, such as Boston
Properties, Equity Office and Vornado, have taken the opportunity to lease up
available space at the new rates in addition to selecting only the best
credit-worthy tenants.
The Fund avoided some of the sector problems through its underweighting in
retail real estate stocks. The retail experienced some price softening due to
generally reduced consumer spending at the malls and strip shopping centers.
In addition, the bankruptcy of some movie theatre companies, often housed in
suburban malls, has negatively impacted the earnings at those malls.
Consensus Earnings or Funds from Operation (FFO) growth for the REIT sector
for the year 2000 is anticipated to be around 9%. This earnings growth
expectation is based on forecasted solid internal growth as the REITs
increase their revenues through rental rate hikes and high occupancies. In
addition, earnings are improved by cost reduction improvements aided by new
technologies being deployed at the property management level.
As the broader market is anticipated to continue its volatility going into
2001, 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, as has been proven over the past year.
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 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 applicable to
Class A Shares. Total returns for more than one year are average annual total
returns. Performance of different classes of shares will vary based on
differences in sales charges and class specific expenses paid by the
shareholders.
*Performance information prior to December 15, 1999, the Class G Shares
inception date, reflects the performance of Class A Shares, adjusted to
eliminate the effect of Class A's maximum sales charge but not adjusted to
reflect the expenses of Class G Shares. Actual Class G performance would have
been lower, because Class G Shares generally have higher expenses than Class
A 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.
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. Some 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.
Victory Real Estate Investment Fund
vs. MSREIT Index
(Dollars in thousands)
Real Estate Real Estate
Investment Investment MSREIT
Class A Class A @ NAV Index
4/30/97 9425 10000 10000
5/31/97 9661 10250 10300
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 11899 12625 12054
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 11607
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 10631
7/31/99 10722 11376 10297
8/31/99 10670 11321 10198
9/30/99 10377 11010 9771
10/31/99 10167 10787 9548
11/30/99 9905 10509 9407
12/31/99 10325 10955 9699
1/31/2000 10399 11034 9760
2/29/2000 10357 10988 9605
3/31/2000 10954 11622 9957
4/30/2000 11445 12143 10626
5/31/2000 11658 12369 10724
6/30/2000 12091 12828 10990
7/31/2000 12997 13790 11986
8/31/2000 12641 13412 11495
9/30/2000 13054 13850 11848
10/31/2000 12510 13273 11286
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 Return
As of October 31, 2000
REIT Class A REIT Class G*
Maximum
Net Asset Offering Net Asset
Value Price Value
One Year 23.04% 15.99% 22.96%
Three Years 2.73% 0.71% 2.71%
Average Annual Since Inception
4/30/97 8.42% 6.60% 8.39%
20
<PAGE>
Introduction to
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 Established Value Fund
The Victory Special Value Fund
The Victory Small Company
Opportunity 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*
*The Victory Stock Index Fund is not an actively managed 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 Nasdaq-100
Index(R) Fund*
*The Victory Nasdaq-100 Index(R) Fund is not an actively managed Fund.
21
<PAGE>
The Victory Equity Funds
The Victory Value Fund
The Fund's fiscal year began with an exceptional calendar fourth quarter of
1999 as the Standard & Poor's 500 Stock Index (S&P 500)* returned 14.90%
while the technology-laden NASDAQ Composite Index returned a staggering
48.20% and it appeared investors were in store for a sixth consecutive year
of 20 percent or greater returns. However, under the specter of inflationary
pressures and a clearly unsustainable rate of economic growth, the Federal
Open Market Committee continued its rate-tightening program begun in 1999
into 2000.
As the year progressed, the economy eventually began to show signs of
slowing. Moreover, concerns about the impact of higher energy prices and a
strengthening dollar on corporate earnings growth, in addition to questions
about the sustainability of technology spending, emerged. As a result,
volatility increased significantly and fiscal year returns for the major
equity indices were anemic relative to recent history.
In light of the sanguine market environment, we are quite pleased with the
performance of the Victory Value Fund. For the year ended October 31, 2000,
the Fund's total return was 8.33% (Class A Shares at net asset value) which
was comfortably ahead of the 6.10% return for the S&P 500 Index.
Additionally, the Fund's return over the same period exceeded the 5.92%
median return of the Lipper Large Cap Value Core Index.**
A principal reason for the Fund's outperformance during this period was the
reduction in technology exposure and increase in the weighting of the
financial sector during most of 2000. Our motivation to reduce the fund's
technology weighting and increase its financial sector exposure centered on
valuations, which were at or near all time highs for technology stocks, and
conversely, at or near all time lows for many of the financial stocks.
Additionally, we believed the expectations for many growth stocks,
specifically technology stocks, were overly optimistic.
With respect to equity selection, we continue to advocate a conservative
posture for the Fund. While we believe equity prices will rise modestly over
the near-to-intermediate term, we do not expect all ships to be lifted
equally by the tide. Accordingly, we are maintaining our bias toward the
value sectors of the market despite their recent outperformance.
We believe the financial, energy, capital goods and basic industry sectors
are attractive at present and have overweighted positions in these sectors
relative to target benchmarks. We remain underweighted in the technology
sector because of the rich valuations accorded to many technology stocks and
because we believe expectations regarding future earnings growth, in many
cases, remain unrealistic.
We are underweighted in the consumer cyclicals sector because we anticipate
consumer spending will slow. Given continued uncertainty and volatility of
the markets, we believe the Fund is ideally positioned.
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 applicable to
Class A Shares. Total returns for more than one year are average annual total
returns. Performance of different classes of shares will vary based on
differences in sales charges and class specific expenses paid by the
shareholders.
***Performance information prior to December 15, 1999, the Class G Shares
inception date, reflects the performance of Class A Shares, adjusted to
eliminate the effect of Class A's maximum sales charge but not adjusted to
reflect the expenses of Class G Shares. Actual Class G performance would
have been lower, because Class G Shares generally have higher expenses
than Class A 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.
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. Some fee waivers are voluntary and may be modified or terminated at
anytime.
Fund holdings are subject to change at any time.
**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.
Victory Value Fund
vs. S&P 500
(Dollars in thousands)
Value Fund Value Fund
Class A Class A @ NAV S&P 500
12/3/93 9425 10000 10000
1/31/94 9842 10442 10340
2/28/94 9455 10031 10059
4/30/94 9214 9776 9744
6/30/94 9251 9815 9661
7/31/94 9508 10088 9979
8/31/94 9852 10453 10388
9/30/94 9570 10153 10134
10/31/94 9733 10327 10361
11/30/94 9445 10021 9984
12/31/94 9555 10138 10132
1/31/95 9791 10388 10395
2/28/95 10185 10806 10800
3/31/95 10443 11080 11119
4/30/95 10651 11301 11446
5/31/95 11067 11742 11904
6/30/95 11184 11867 12180
7/31/95 11503 12205 12584
8/31/95 11613 12322 12616
9/30/95 12011 12744 13148
10/31/95 11901 12627 13101
11/30/95 12503 13265 13676
12/31/95 12777 13557 13940
1/31/96 13181 13985 14414
2/29/96 13243 14051 14548
3/31/96 13602 14432 14688
4/30/96 13737 14575 14904
5/31/96 13955 14807 15289
6/30/96 14033 14889 15347
7/31/96 13449 14270 14669
8/31/96 13773 14613 14978
9/30/96 14428 15308 15822
10/31/96 14836 15741 16258
11/30/96 15903 16873 17487
12/31/96 15640 16594 17140
1/31/97 16332 17328 18211
2/28/97 16453 17456 18354
3/31/97 15812 16777 17600
4/30/97 16429 17431 18650
5/31/97 17464 18529 19786
6/30/97 18122 19227 20674
7/31/97 19556 20749 22318
8/31/97 18552 19684 21067
9/30/97 19519 20709 22221
10/31/97 18877 20029 21479
11/30/97 19707 20909 22473
12/31/97 19943 21159 22859
1/31/98 20147 21376 23112
2/28/98 21484 22795 24779
3/31/98 22519 23893 26048
4/30/98 22712 24098 26309
5/31/98 22326 23688 25857
6/30/98 23008 24412 26908
7/31/98 22839 24232 26621
8/31/98 19699 20900 22778
9/30/98 21312 22612 24231
10/31/98 22739 24126 26202
11/30/98 23933 25393 27792
12/31/98 25194 26731 29391
1/31/99 25917 27498 30621
2/28/99 25382 26930 29669
3/31/99 25901 27482 30857
4/30/99 27522 29201 32051
5/31/99 27016 28664 31294
6/30/99 28353 30083 33034
7/31/99 27369 29038 31999
8/31/99 26891 28532 31841
9/30/99 25784 27357 30968
10/31/99 27290 28955 32928
11/30/99 27299 28964 33604
12/31/99 27983 29690 35576
1/31/2000 26923 28565 33788
2/29/2000 25471 27025 33149
3/31/2000 28395 30127 36392
4/30/2000 27970 29676 35297
5/31/2000 28362 30092 34573
6/30/2000 27808 29504 35425
7/31/2000 27579 29261 34871
8/31/2000 29083 30857 37037
9/30/2000 28565 30307 35082
10/31/2000 29563 31367 34934
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 October 31, 2000
VALUE Class A VALUE Class G***
Maximum
Net Asset Offering Net Asset
Value Price Value
One Year 8.33% 2.10% 8.18%
Three Years 16.13% 13.86% 16.07%
Five Years 19.96% 18.55% 19.93%
Average Annual Since Inception
12/3/93 17.99% 16.99% 17.97%
22
<PAGE>
The Victory Equity Funds
The Victory Established Value Fund
The stock market has been subjected to numerous twists and turns over the
past twelve months as investors sort out the impact of various issues,
including: a slowing economy, extreme valuations of the technology sector,
low domestic unemployment and a strong U.S. currency.
However, investors appear to be approaching the market with a more discerning
eye for value and a more skeptical view toward higher growth areas. As a
result, attention has shifted from technology and telecommunication issues,
with extreme valuations, to more reasonably valued sectors like energy,
financials, health care and utilities. Against this backdrop, the Fund
prospered relative to the broader market.
The Fund returned 11.26% (Class G Shares) for the year ended October 31,
2000, versus 6.10% for the Standard & Poor's 500 Stock Index (S&P 500).*
Performance has been driven by strong moves among the financial holdings, a
sector which is overweighted. The Fund was also overweighted in utilities,
the best performing sector for the first 10 months of the year, which
significantly enhanced returns during the period. An underweighted position
in technology also attributed to the strong performance for the Fund.
Finally, the Fund benefited from merger activity as three companies held in
the portfolio were acquired during the fiscal year, a positive by-product of
our stock selection methodology.
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.
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 for Class A
Shares. Total returns for more than one year are average annual total
returns. Performance of different classes of shares will vary based on
differences in sales charges and class specific expenses paid by the
shareholders.
**Performance information prior to May 5, 2000, the Class A Shares inception
date, reflects the performance of Class G Shares, which has not been
adjusted for the expenses of Class A 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 inception. In such instances and
without such waiver of fees, the total returns would have been lower. Some
fee waivers are voluntary and may be modified or terminated at anytime.
Fund holdings are subject to change at any time.
Victory Established Value Fund
vs. S&P 500
(Dollars in thousands)
Established Value
Class G S&P 500
10/31/90 10000 10000
11/30/90 10789 10495
12/31/90 11061 10756
1/31/91 11662 11202
2/28/91 12318 11956
3/31/91 12514 12100
4/30/91 12437 12225
5/31/91 13103 12697
6/30/91 12561 12089
7/31/91 13004 12631
8/31/91 13110 12880
9/30/91 12933 12633
10/31/91 12961 12782
11/30/91 12324 12221
12/31/91 13520 13585
1/31/92 13499 13314
2/29/92 13731 13442
3/31/92 13469 13149
4/30/92 13382 13515
5/31/92 13316 13528
6/30/92 13094 13294
7/31/92 13672 13817
8/31/92 13457 13485
9/30/92 13800 13608
10/31/92 14157 13637
11/30/92 14664 14050
12/31/92 14900 14192
1/31/93 15507 14292
2/28/93 15762 14441
3/31/93 16273 14711
4/30/93 16040 14337
5/31/93 16408 14500
6/30/93 16892 14674
7/31/93 17207 14596
8/31/93 17723 15099
9/30/93 17815 14948
10/31/93 17939 15238
11/30/93 17694 15041
12/31/93 17995 15193
1/31/94 18391 15687
2/28/94 18344 15215
3/31/94 17995 14519
4/30/94 17852 14687
5/31/94 17716 14869
6/30/94 17365 14470
7/31/94 17733 14926
8/31/94 18575 15488
9/30/94 17967 15071
10/31/94 18279 15385
11/30/94 17722 14777
12/31/94 18053 14959
1/31/95 18144 15322
2/28/95 18833 15875
3/31/95 19431 16309
4/30/95 20063 16765
5/31/95 20565 17373
6/30/95 21061 17743
7/31/95 21880 18307
8/31/95 22111 18301
9/30/95 22548 19035
10/31/95 22351 18940
11/30/95 22888 19718
12/31/95 22827 20061
1/31/96 23582 20716
2/29/96 24055 20859
3/31/96 24258 21025
4/30/96 24900 21307
5/31/96 25296 21794
6/30/96 25052 21843
7/31/96 23987 20844
8/31/96 24601 21236
9/30/96 25878 22386
10/31/96 26241 22971
11/30/96 27537 24657
12/31/96 27237 24127
1/31/97 28542 25606
2/28/97 28532 25758
3/31/97 27931 24660
4/30/97 28638 26100
5/31/97 30130 27629
6/30/97 31390 28830
7/31/97 33572 31082
8/31/97 33171 29297
9/30/97 34336 30854
10/31/97 32488 29790
11/30/97 33194 31118
12/31/97 33407 31608
1/31/98 33577 31929
2/28/98 35931 34178
3/31/98 36218 35886
4/30/98 36293 36229
5/31/98 36197 35529
6/30/98 35800 36931
7/31/98 34631 36503
8/31/98 30008 31188
9/30/98 31065 33127
10/31/98 33401 35785
11/30/98 34187 37903
12/31/98 35451 40037
1/31/99 35691 41679
2/28/99 34846 40334
3/31/99 35851 41898
4/30/99 39923 43488
5/31/99 38974 42402
6/30/99 40906 44711
7/31/99 40014 43278
8/31/99 38709 43007
9/30/99 37514 41779
10/31/99 39289 44392
11/30/99 38869 45243
12/31/99 41504 47855
1/31/2000 37950 45419
2/29/2000 35797 44506
3/31/2000 39673 48810
4/30/2000 39907 47307
5/31/2000 39959 46270
6/30/2000 37854 47378
7/31/2000 40024 46604
8/31/2000 42870 49432
9/30/2000 43260 46788
10/31/2000 43715 46557
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 October 31, 2000
ESTABLISHED VALUE ESTABLISHED VALUE
Class A** Class G
Maximum
Net Asset Offering Net Asset
Value Price Value
One Year 11.37% 4.97% 11.26%
Three Years 10.43% 13.03% 14.36%
Ten Years 15.91% 15.22% 15.89%
Average Annual Since Inception
8/16/83 14.09% 13.69% 14.08%
23
<PAGE>
The Victory Equity Funds
The Victory Diversified Stock Fund
Celebrating its 11th year anniversary in fiscal 2000, the Victory Diversified
Stock Fund maintained its excellent long-term record in a very challenging
investment environment.
Fiscal 2000 began with a sharp market rally that continued through March of
2000, when concerns over rising interest rates and inflated valuation levels
in many sectors of the market halted the advance. Volatility persisted
throughout the latter half of the year, as rising oil prices and a declining
Euro led to earnings preannouncements, and fears of a slowing economy
evolved. These factors, along with concerns over the Technology cycle, seemed
to refocus investor's mentality as stock valuations became the overriding
factor in the investment decision.
Stocks that were priced for perfection began to fall on any hint of
negativity, and value stocks outperformed growth for the first time in seven
years. The S&P Barra Value Index** returned 9.7% in the fiscal year, while
the S&P Barra Growth Index*** returned 2.1%.
The Victory Diversified Stock Fund successfully negotiated this changing
economic environment and outperformed the Standard & Poor's 500 Stock Index
(S&P 500)* considerably, providing a total return of 16.88% (Class A Shares
at net asset value) versus 6.10% for the Index. The flexible nature inherent
in the Fund was a main driver to its success, as positions were shifted
between sectors as needed to capitalize on the changing nature of the market.
Strong performance in the Financial, Consumer Staples, and Energy sectors
added to the Fund's return.
Within the Financial sector, strong emphasis was placed on the Insurance
industry. Specific Insurance holdings that boosted performance include:
American International Group, American General, and Metlife (which made its
Initial Public Offering in April, 2000). Strong representation in the Health
Care Industry also helped performance in fiscal 2000. Cardinal Health,
Biomet, and Tenet Healthcare were top performers for the Fund in this
industry.
Lastly, a double weight in the Energy sector worked very well, as rising oil
prices led to strong earnings power for these companies. The market rewarded
the Fund's oil service stocks, such as Schlumberger and Transocean Sedco
Forex, which were the first to benefit from the rising commodity price.
As we move into fiscal 2001, recent evidence of a slowing economy should
increase the likelihood that the Federal Reserve will adopt a
"neutral-to-loosening" bias toward interest rates sooner rather than later.
To capitalize on the market's anticipatory tendencies, we have added to
positions in Capital Goods, Basic Industry, and Technology sectors and
reduced positions in Consumer Cyclicals and Utilities. We have also reduced
our positions in the Energy sector, as we feel the good news of higher
earnings expectations has been priced in these stocks. We continue to focus
on companies with superior relative valuation characteristics, a compelling
catalyst for change, and low investor expectations to help mitigate our entry
point risk.
**The S&P Barra Value Index is an unmanaged index, generally representative
of all the stocks in the Standard & Poor's 500 that have lower price-to-book
ratios. An investor cannot invest directly in an index.
***The S&P Barra Growth Index is an unmanaged index, generally representative
of all the stocks in the Standard & Poor's 500 that have higher
price-to-book ratios. An investor cannot invest directly in an index.
****Performance of Class B Shares prior to March 1, 1996 and Class G Shares
prior to March 29, 1999 reflects the performance of Class A Shares,
adjusted to eliminate the effect of Class A's maximum sales charge
but not adjusted to reflect the expenses of Class B and G Shares.
Actual Class B and G performance would have been lower, because
Class B and G Shares generally have higher expenses than Class A Shares.
The maximum offering price (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. Performance
of the different classes of shares will vary based on the differences in
sales charges and class specific expenses paid by 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. Some
fee waivers are voluntary and may be modified or terminated at anytime.
Fund holdings are subject to change at any time.
Victory Diversified Stock Fund
vs. S&P 500
(Dollars in thousands)
Diversified Diversified
Stock Stock
Class A Class A @ NAV S&P 500
10/31/90 9425 10000 10000
11/30/90 10036 10649 10495
12/31/90 10386 11020 10756
1/31/91 11018 11690 11202
2/28/91 11743 12459 11956
3/31/91 11794 12513 12100
4/30/91 11752 12469 12225
5/31/91 12345 13099 12697
6/30/91 11570 12275 12089
7/31/91 12082 12819 12631
8/31/91 12386 13141 12880
9/30/91 12027 12760 12633
10/31/91 12016 12749 12782
11/30/91 11502 12203 12221
12/31/91 12876 13662 13585
1/31/92 12800 13581 13314
2/29/92 12964 13755 13442
3/31/92 12645 13417 13149
4/30/92 12908 13695 13515
5/31/92 12831 13614 13528
6/30/92 12675 13449 13294
7/31/92 13170 13973 13817
8/31/92 12884 13670 13485
9/30/92 13217 14023 13608
10/31/92 13404 14222 13637
11/30/92 13933 14783 14050
12/31/92 14091 14951 14192
1/31/93 14102 14963 14292
2/28/93 14181 15046 14441
3/31/93 14384 15262 14711
4/30/93 14192 15058 14337
5/31/93 14577 15466 14500
6/30/93 14527 15414 14674
7/31/93 14618 15510 14596
8/31/93 15198 16125 15099
9/30/93 15091 16012 14948
10/31/93 15285 16218 15238
11/30/93 15091 16012 15041
12/31/93 15496 16442 15193
1/31/94 16032 17010 15687
2/28/94 15496 16442 15215
3/31/94 14968 15881 14519
4/30/94 15186 16112 14687
5/31/94 15647 16601 14869
6/30/94 15280 16212 14470
7/31/94 15666 16621 14926
8/31/94 16296 17291 15488
9/30/94 16032 17010 15071
10/31/94 16407 17408 15385
11/30/94 15889 16859 14777
12/31/94 16109 17092 14959
1/31/95 16520 17528 15322
2/28/95 17209 18258 15875
3/31/95 17697 18777 16309
4/30/95 18184 19293 16765
5/31/95 18965 20122 17373
6/30/95 19213 20385 17743
7/31/95 19820 21029 18307
8/31/95 19969 21187 18301
9/30/95 20610 21867 19035
10/31/95 20268 21504 18940
11/30/95 21311 22611 19718
12/31/95 21807 23137 20061
1/31/96 22423 23791 20716
2/29/96 22991 24393 20859
3/31/96 23307 24729 21025
4/30/96 23876 25333 21307
5/31/96 24348 25833 21794
6/30/96 24136 25609 21843
7/31/96 23076 24484 20844
8/31/96 23614 25055 21236
9/30/96 24823 26338 22386
10/31/96 25772 27345 22971
11/30/96 27908 29610 24657
12/31/96 27199 28858 24127
1/31/97 28711 30462 25606
2/28/97 28655 30403 25758
3/31/97 27780 29474 24660
4/30/97 28612 30357 26100
5/31/97 30517 32378 27629
6/30/97 31510 33433 28830
7/31/97 34107 36187 31082
8/31/97 32716 34712 29297
9/30/97 34653 36767 30854
10/31/97 32981 34993 29790
11/30/97 34271 36362 31118
12/31/97 34890 37019 31608
1/31/98 34953 37085 31929
2/28/98 37515 39803 34178
3/31/98 39233 41627 35886
4/30/98 40089 42534 36229
5/31/98 38628 40985 35529
6/30/98 39637 42054 36931
7/31/98 38947 41323 36503
8/31/98 33601 35651 31188
9/30/98 36537 38766 33127
10/31/98 39446 41852 35785
11/30/98 41081 43586 37903
12/31/98 42967 45588 40037
1/31/99 44432 47142 41679
2/28/99 43124 45754 40334
3/31/99 44925 47665 41898
4/30/99 48251 51195 43488
5/31/99 47597 50500 42402
6/30/99 49789 52826 44711
7/31/99 48584 51547 43278
8/31/99 47876 50796 43007
9/30/99 45310 48074 41779
10/31/99 47093 49966 44392
11/30/99 48710 51681 45243
12/31/99 51972 55143 47855
1/31/2000 50309 53377 45419
2/29/2000 49877 52920 44506
3/31/2000 55084 58444 48810
4/30/2000 51911 55077 47307
5/31/2000 51911 55077 46270
6/30/2000 51541 54685 47378
7/31/2000 51079 54195 46604
8/31/2000 55179 58545 49432
9/30/2000 52945 56174 46788
10/31/2000 55042 58399 46557
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 October 31, 2000
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 16.88% 10.13% 15.63% 11.71% 16.65%
Three Years 18.62% 16.30% 17.39% 16.68% 18.48%
Five Years 22.12% 20.68% 20.97% 20.88% 22.03%
Ten Years 19.30% 18.60% 18.76% 18.76% 19.26%
Average Annual Since Inception
10/20/89 16.78% 16.15% 16.30% 16.30% 16.74%
24
<PAGE>
The Victory Equity Funds
The Victory Stock Index Fund
The investment objective of the Victory Stock Index Fund is to replicate the
performance of the Standard & Poor's 500 Stock Index (S&P 500).* 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. This method of
management is referred to as passive investing.
To manage the daily cash flows in and out of the Fund, the Fund invests in
S&P500 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 with stock purchases and sales. We do not use futures for
speculative or leveraging purposes.
The S&P 500 posted a total return of 6.10% for the year ended October 31,
2000. The Victory Stock Index Fund returned 5.38% for the same period (Class
A Shares at net asset value). Consistent with its investment objective, the
Fund strives to continue matching the performance of the S&P 500.
The performance of the Victory Stock Index Fund is expected to be lower than
that of the S&P 500 Index because of Fund expenses and, additionally, may
differ from the performance of the Index because of tracking errors, which
may be attributed to transaction expenses and market pricing associated with
cash flow activity, as well as, cash held in the portfolio.
**Performance information prior to July 1, 1999, the Class G Shares inception
date, reflects the performance of Class A Shares, adjusted to eliminate the
effect of Class A's maximum sales charge but not adjusted to reflect the
expenses of Class G Shares. Actual Class G performance would have been
lower, because Class G Shares generally have higher expenses than
Class A Shares.
The maximum offering price 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. 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. Total returns for
more than one year are average annual total returns. Performance of Class A
and G Shares will differ due to differences in sales charge structure and
class expenses. Some fee waivers are voluntary and may be modified or
terminated at anytime.
Fund holdings are subject to change at any time.
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.
Victory Stock Index Fund
vs. S&P 500
(Dollars in thousands)
Stock Index Stock Index
Class A Class A @ NAV S&P 500
12/3/93 9425 10000 10000
1/31/94 9785 10382 10340
2/28/94 9512 10092 10059
4/30/94 9213 9775 9744
6/30/94 9130 9687 9661
7/31/94 9426 10001 9979
8/31/94 9798 10396 10388
9/30/94 9559 10143 10134
10/31/94 9771 10367 10361
11/30/94 9425 10000 9984
12/31/94 9561 10145 10132
1/31/95 9803 10401 10395
2/28/95 10171 10791 10800
3/31/95 10464 11102 11119
4/30/95 10775 11432 11446
5/31/95 11193 11876 11904
6/30/95 11431 12129 12180
7/31/95 11812 12533 12584
8/31/95 11842 12564 12616
9/30/95 12323 13074 13148
10/31/95 12283 13033 13101
11/30/95 12814 13596 13676
12/31/95 13049 13845 13940
1/31/96 13491 14314 14414
2/29/96 13602 14432 14548
3/31/96 13746 14585 14688
4/30/96 13938 14788 14904
5/31/96 14271 15142 15289
6/30/96 14341 15215 15347
7/31/96 13701 14537 14669
8/31/96 13975 14828 14978
9/30/96 14747 15647 15822
10/31/96 15155 16080 16258
11/30/96 16258 17249 17487
12/31/96 15943 16916 17140
1/31/97 16917 17949 18211
2/28/97 17043 18083 18354
3/31/97 16327 17323 17600
4/30/97 17295 18350 18650
5/31/97 18347 19466 19786
6/30/97 19149 20317 20674
7/31/97 20649 21909 22318
8/31/97 19498 20687 21067
9/30/97 20557 21811 22221
10/31/97 19878 21091 21479
11/30/97 20758 22025 22473
12/31/97 21109 22397 22859
1/31/98 21346 22648 23112
2/28/98 22847 24241 24779
3/31/98 23975 25437 26048
4/30/98 24213 25690 26309
5/31/98 23782 25233 25857
6/30/98 24731 26240 26908
7/31/98 24447 25938 26621
8/31/98 20886 22160 22778
9/30/98 22256 23614 24231
10/31/98 24052 25519 26202
11/30/98 25462 27015 27792
12/31/98 26955 28600 29391
1/31/99 28034 29744 30621
2/28/99 27146 28802 29669
3/31/99 28223 29945 30857
4/30/99 29292 31079 32051
5/31/99 28579 30323 31294
6/30/99 30169 32009 33034
7/31/99 29211 30993 31999
8/31/99 29045 30817 31841
9/30/99 28263 29986 30968
10/31/99 30043 31875 32928
11/30/99 30619 32487 33604
12/31/99 32409 34386 35576
1/31/2000 30764 32641 33788
2/29/2000 30181 32022 33149
3/31/2000 33105 35125 36392
4/30/2000 32095 34053 35297
5/31/2000 31417 33333 34573
6/30/2000 32174 34136 35425
7/31/2000 31668 33599 34871
8/31/2000 33613 35663 37037
9/30/2000 31818 33759 35082
10/31/2000 31658 33589 34934
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 October 31, 2000
STOCK INDEX Class A STOCK INDEX Class G**
Maximum
Net Asset Offering Net Asset
Value Price Value
One Year 5.38% -0.68% 5.17%
Three Years 16.78% 14.50% 16.69%
Five Years 20.85% 19.43% 20.79%
Average Annual Since Inception
12/3/93 19.17% 18.15% 19.13%
25
<PAGE>
The Victory Equity Funds
The Victory Growth Fund
We began the fiscal year with a strong showing in large-capitalization growth
stocks due to the dynamic performance of the technology sector, but the
momentum was lost as rising interest rates, rising energy prices, a declining
Euro and concerns over valuation cast a long dark shadow on investor
sentiment.
In spite of these occurrences, the Victory Growth Fund performed well for the
year, slightly under-performing Standard & Poor's 500 Stock Index (S&P 500).*
The Fund achieved a total return of 5.52% (Class A shares at net asset value)
versus the S&P 500 return of 6.10% while the Barra Growth (the growth stock
portion of the S&P 500) returned a more modest 2.1% for the 12-month period
ended October 31, 2000.
The Fund was overweighted in Technology, which outperformed the market for
the fiscal year. Top performers in this sector included: Sun Microsystems
Inc., Oracle Corp. and Cisco Systems Inc. Fund performance was helped by
superior stock selection in the Energy and Financial sectors, in spite of
both sectors being underweight relative to the S&P 500. Schlumberger Ltd. and
Anadarko Petroleum were two strong performers in the Energy sector, while
Citigroup Inc., Goldman Sachs Group and American International Group
contributed to positive performance in the Financial sector. The Fund was
negatively impacted by underperformance in Bristol Myers Squibb in the
Consumer Staples sector.
As we look to the future, we believe equity markets will improve in the
current fiscal year because of continued economic growth, albeit at a
moderating pace, and benign inflation. With economic growth expected to slow
to a more sustainable level and with inflation expected to remain in check,
we would expect the Federal Reserve to adopt a neutral monetary stance in
2001. Therefore, we believe it is unlikely interest rates will increase in
the current fiscal year. In fact, they may even decrease, thereby creating an
environment that should be favorable for equities.
As of this writing the Victory Growth Fund remains overweighted in
Technology, Consumer Staples and Capital Goods, relative to the S&P 500.
These groups represent the traditional growth sectors of the market and give
the Fund its respective growth bias. The Fund continues to be opportunistic
in Technology and has raised its weighting relative to the S&P 500 over the
last fiscal year. Nortel Networks Corp., EMC Corp and JDS Uniphase Corp were
several names added in the Technology sector.
The Victory Growth Fund will continue to maintain its disciplined approach to
growth, buying stocks with solid fundamentals and reasonable valuations. In a
market with increasing volatility and growing uncertainty, we believe this
approach should bode well for the growth portfolio and in turn, our
shareholders, in the current fiscal year.
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 applicable to
Class A 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 December 15, 1999, the Class G Shares
inception date, reflects the performance of Class A Shares, adjusted to
eliminate the effect of Class A's maximum sales charge but not adjusted to
reflect the expenses of Class G Shares. Actual Class G performance would
have been lower, because Class G Shares generally have higher expenses
than Class A 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.
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. Some fee waivers are voluntary and may be modified or terminated at
anytime.
Fund holdings are subject to change at any time.
Victory Growth Fund
vs. S&P 500
(Dollars in thousands)
Growth Fund Growth Fund
Class A Class A @ NAV S&P 500
12/3/93 9425 10000 10000
1/31/94 9789 10387 10340
2/28/94 9563 10146 10059
4/30/94 9249 9813 9744
6/30/94 9133 9690 9661
7/31/94 9389 9962 9979
8/31/94 9740 10334 10388
9/30/94 9443 10019 10134
10/31/94 9729 10322 10361
11/30/94 9472 10050 9984
12/31/94 9412 9986 10132
1/31/95 9604 10190 10395
2/28/95 9920 10525 10800
3/31/95 10132 10750 11119
4/30/95 10401 11035 11446
5/31/95 10737 11392 11904
6/30/95 10972 11641 12180
7/31/95 11290 11978 12584
8/31/95 11203 11886 12616
9/30/95 11755 12473 13148
10/31/95 11726 12442 13101
11/30/95 12199 12944 13676
12/31/95 12374 13129 13940
1/31/96 12747 13525 14414
2/29/96 12878 13664 14548
3/31/96 12998 13791 14688
4/30/96 13200 14005 14904
5/31/96 13654 14487 15289
6/30/96 13819 14662 15347
7/31/96 13324 14137 14669
8/31/96 13587 14416 14978
9/30/96 14452 15334 15822
10/31/96 14736 15634 16258
11/30/96 15888 16858 17487
12/31/96 15461 16404 17140
1/31/97 16368 17367 18211
2/28/97 16516 17523 18354
3/31/97 15732 16691 17600
4/30/97 16756 17778 18650
5/31/97 17843 18932 19786
6/30/97 18576 19710 20674
7/31/97 19886 21099 22318
8/31/97 18524 19654 21067
9/30/97 19508 20698 22221
10/31/97 19022 20182 21479
11/30/97 20004 21224 22473
12/31/97 20309 21547 22859
1/31/98 20897 22172 23112
2/28/98 22153 23504 24779
3/31/98 23171 24584 26048
4/30/98 23386 24812 26309
5/31/98 22933 24332 25857
6/30/98 24314 25797 26908
7/31/98 24348 25833 26621
8/31/98 20953 22232 22778
9/30/98 22684 24068 24231
10/31/98 24461 25953 26202
11/30/98 25965 27549 27792
12/31/98 27859 29559 29391
1/31/99 28893 30655 30621
2/28/99 27946 29650 29669
3/31/99 28684 30433 30857
4/30/99 29471 31268 32051
5/31/99 28536 30277 31294
6/30/99 30467 32325 33034
7/31/99 29422 31216 31999
8/31/99 29422 31216 31841
9/30/99 28474 30211 30968
10/31/99 30393 32247 32928
11/30/99 31013 32905 33604
12/31/99 32847 34851 35576
1/31/2000 31323 33234 33788
2/29/2000 30651 32521 33149
3/31/2000 33519 35563 36392
4/30/2000 32615 34604 35297
5/31/2000 31995 33946 34573
6/30/2000 33041 35056 35425
7/31/2000 32240 34207 34871
8/31/2000 34061 36139 37037
9/30/2000 32188 34152 35082
10/31/2000 32072 34028 34934
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 October 31, 2000
GROWTH GROWTH
Class A Class G**
Maximum
Net Asset Offering Net Asset
Value Price Value
One Year 5.52% -0.55% 5.27%
Three Years 19.02% 16.69% 18.93%
Five Years 22.29% 20.85% 22.23%
Average Annual Since Inception
12/3/93 19.39% 18.37% 19.35%
26
<PAGE>
The Victory Equity Funds
The Victory Special Value Fund
We are pleased to report strong results for the mid-cap asset class and for
our Fund for the year ended October 31, 2000. After underperforming the
large-cap S&P 500* for a number of years, the S&P Midcap 400 Index** returned
31.65% during this fiscal year, compared to 6.10% for the S&P 500. Mid-cap
growth stocks continued their recent string of outperformance, gaining 43.0%
versus 21.8% for mid-cap value stocks. The year was notable for the extreme
differences in the performance between sectors, as technology, energy, and
health care sectors all appreciated by approximately 60%. This compares to
the flat or slightly negative returns of the financial, basic industry, and
consumer cyclical sectors.
The Victory Special Value Fund returned 29.94% in this fiscal year (Class A
Shares at net asset value), slightly behind the S&P Mid-cap 400 Index, but
well above the S&P Mid-cap value index.*** Our Fund slightly trailed the S&P
Mid-cap 400 Index due mainly to our underweight position in the technology
and biotechnology stocks, and our overweighted position in financial stocks.
However, our technology holdings significantly outperformed the S&P mid-cap
Technology Index, thereby contributing to our strong results. We also enjoyed
strong relative performance in many of our health care holdings, an area of
emphasis for the Fund over the past year. Specific success stories for the
Fund this year included: Forest Laboratories (+188%), Calpine Corp. (+174%),
Robert Half International (+125%), Health Management Associates (+123%),
Nabors Industries (+123%), and Sungard Data Systems (+123%).
After trailing the large-cap S&P 500 for six consecutive years, we believe
mid-cap stocks are still attractively priced despite their strong relative
performance last year. Large components of the asset class have yet to
recover from the depressed levels of the past few years, including the
financial, basic industry, and capital goods stocks.
Unlike the past year, the macroeconomic backdrop for the upcoming year
includes slowing global economic conditions. At some point, we expect
interest rates to decline and the economy to settle into a slower,
sustainable growth pace. We expect financial stocks to perform well in this
environment, though we are closely monitoring credit quality among our
holdings. Mid-cap value stocks should perform well in this scenario.
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 applicable to
Class A Shares. Total returns for more than one year are average annual total
returns. Performance of the different classes will vary based on the
differences in sales charges and class specific expenses paid by the
shareholders.
****Performance information prior to December 21, 1999, the Class G Shares
inception date, reflects the performance of Class A Shares, adjusted to
eliminate the effect of Class A's maximum sales charge but not adjusted to
reflect the expenses of Class G Shares. Actual Class G performance would
have been lower, because Class G Shares generally have higher expenses
than Class A Shares.
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. Some fee waivers are voluntary and may be modified or terminated at
any time
Fund holdings are subject to change at any time.
*Standard & Poor's 500 Stock Index (S&P 500) is an unmanaged index, generally
representative of domestically traded common stocks of mid- to large-sized
companies. An investor cannot invest directly in an index.
***The Standard & Poor's 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.
Victory Special Value Fund
vs. S&P 400 Mid Cap
(Dollars in thousands)
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
4/30/94 9550 10133 9692
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
11/30/99 16569 17579 25673
12/31/99 17045 18085 27198
1/31/2000 16510 17517 26432
2/29/2000 16235 17226 28282
3/31/2000 18800 19947 30649
4/30/2000 18734 19877 29579
5/31/2000 18617 19752 29210
6/30/2000 18039 19140 29639
7/31/2000 18628 19765 30107
8/31/2000 20396 21640 33469
9/30/2000 20577 21832 33240
10/31/2000 20996 22277 32112
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.
Total Return
As of October 31, 2000
SPECIAL VALUE SPECIAL VALUE
Class A Class G****
Maximum
Net Asset Offering Net Asset
Value Price Value
One Year 29.94% 22.46% 29.31%
Three Years 5.16% 3.10% 4.99%
Five Years 12.25% 10.93% 12.41%
Average Annual Since Inception
12/3/93 12.29% 11.33% 12.21%
27
<PAGE>
The Victory Equity Funds
The Victory Small Company Opportunity Fund
The stock market has been subjected to numerous twists and turns over the
past twelve months as investors sort out the impact of various issues,
including: a slowing economy, extreme valuations of the technology sector,
low domestic unemployment and a strong U.S. currency.
The Fund has performed extremely well recently, in the face of considerable
volatility. For the 12 months ended October 31, 2000, the Fund has returned
24.81% (Class G Shares) versus 17.41% for the Russell 2000 Index* and 17.30%
for the Russell 2000 Value Index.**
Performance has been driven by impressive moves among the Fund's financial
holdings, an overweighted sector. Similarly, strong performance from holdings
within the energy and health care sectors enhanced returns for the Fund
during the periods.
Relative to the benchmark (The Russell 2000), the Fund was under exposed in
both technology and telecommunications issues. This position helped the Fund
gain its positive performance since those sectors were among the worst
performing. Finally, the Fund continues to benefit from merger activity as
five companies held in the portfolio were acquired, resulting in a positive
by-product of our stock selection process.
**The Russell 2000 Value Index is an unmanaged index that measures the
performance of those Russell 2000 companies with lower price-to-book ratios
and lower forecasted growth values.
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.
***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.
The maximum offering price 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. Performance
of Class A and Class G Shares will differ due to differences in sales charge
structure and class expenses.
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. Some fee waivers are voluntary and may be modified or terminated at
anytime.
Fund holdings are subject to change at any time.
Victory Small Company Opportunity Fund
vs. Russell 2000 Index
(Dollars in thousands)
Small Company Russell
Opportunity 2000
Class G Index
10/31/90 10000 10000
11/30/90 10905 10762
12/31/90 11457 11189
1/31/91 12294 12201
2/28/91 13269 13562
3/31/91 13776 14517
4/30/91 13591 14480
5/31/91 14056 15170
6/30/91 13561 14286
7/31/91 14140 14787
8/31/91 14402 15335
9/30/91 14739 15455
10/31/91 15113 15864
11/30/91 14468 15130
12/31/91 15572 16341
1/31/92 16463 17666
2/29/92 16590 18181
3/31/92 16238 17565
4/30/92 16120 16950
5/31/92 16154 17175
6/30/92 15576 16363
7/31/92 16073 16933
8/31/92 16002 16455
9/30/92 15931 16834
10/31/92 16296 17369
11/30/92 17099 18698
12/31/92 17800 19350
1/31/93 18384 20005
2/28/93 18087 19543
3/31/93 18374 20177
4/30/93 17984 19623
5/31/93 18169 20491
6/30/93 18598 20619
7/31/93 18776 20904
8/31/93 19299 21807
9/30/93 19906 22422
10/31/93 20074 22999
11/30/93 19351 22242
12/31/93 19770 23003
1/31/94 19932 23724
2/28/94 19942 23638
3/31/94 19297 22390
4/30/94 19738 22523
5/31/94 19856 22270
6/30/94 19074 21514
7/31/94 19206 21868
8/31/94 20241 23086
9/30/94 20021 23009
10/31/94 19845 22918
11/30/94 19229 21993
12/31/94 19340 22583
1/31/95 19540 22299
2/28/95 20006 23226
3/31/95 20083 23626
4/30/95 20538 24151
5/31/95 20972 24567
6/30/95 21843 25841
7/31/95 22977 27330
8/31/95 23400 27895
9/30/95 23859 28393
10/31/95 23435 27123
11/30/95 24372 28263
12/31/95 24516 29009
1/31/96 24608 28977
2/29/96 25301 29881
3/31/96 25705 30489
4/30/96 26860 32119
5/31/96 27328 33385
6/30/96 26652 32014
7/31/96 25096 29218
8/31/96 26483 30914
9/30/96 27014 32123
10/31/96 27098 31627
11/30/96 28920 32931
12/31/96 29288 33794
1/31/97 30152 34469
2/28/97 30291 33633
3/31/97 28908 32046
4/30/97 29504 32136
5/31/97 31396 35711
6/30/97 33031 37241
7/31/97 35136 38974
8/31/97 35321 39866
9/30/97 37188 42784
10/31/97 36976 40905
11/30/97 37110 40640
12/31/97 38420 41351
1/31/98 38023 40698
2/28/98 40437 43707
3/31/98 41055 45510
4/30/98 41085 45762
5/31/98 39716 43297
6/30/98 39517 43388
7/31/98 37272 39876
8/31/98 31321 32133
9/30/98 31629 34647
10/31/98 33551 36060
11/30/98 34504 37950
12/31/98 35758 40298
1/31/99 34306 40833
2/28/99 32020 37526
3/31/99 31989 38112
4/30/99 34646 41527
5/31/99 35109 42134
6/30/99 36561 44039
7/31/99 35155 42831
8/31/99 33240 41246
9/30/99 32514 41255
10/31/99 32499 41422
11/30/99 33580 42963
12/31/99 35372 48863
1/31/2000 32807 48079
2/29/2000 32900 56018
3/31/2000 35789 52325
4/30/2000 36067 49176
5/31/2000 35943 46310
6/30/2000 38075 50347
7/31/2000 38322 48727
8/31/2000 41627 52445
9/30/2000 41210 50904
10/31/2000 40561 48632
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.
Total Return
As of October 31, 2000
SMALL COMPANY SMALL COMPANY
OPPORTUNITY OPPORTUNITY
Class A Class G***
Maximum
Net Asset Offering Net Asset
Value Price Value
One Year 24.95% 17.75% 24.81%
Three Years 3.24% 1.22% 3.13%
Five Years 11.66% 10.35% 11.60%
Ten Years 15.07% 14.39% 15.03%
Average Annual Since Inception
8/16/83 10.46% 10.09% 10.45%
28
<PAGE>
The Victory Equity Funds
The Victory International Growth Fund
The Victory International Growth Fund posted a total return of -6.39% (Class
A Shares at net asset value) for the one year period ended October 31, 2000,
underperforming the MSCI All Country World Free ex-U.S. Total Return Index
(MSCI Free XUSA Index), which returned -2.07% for the same period.
Underperformance was due mainly to stock selection and an overweighting in
the TMT (technology, media and telecommunications) sector which fell sharply
out of favor in mid-year. Asia-ex Japan was one of the best contributing
geographic regions in the portfolio. Other countries making a positive
contribution to the portfolio included: the United Kingdom, Sweden and South
Korea. Conversely, Canada, Japan, Latin America and the "developed and
emerging countries of Europe" detracted from the Fund's performance.
Overseas markets were buoyant from November 1999 through February 2000, with
many stock markets fueled by strength of the TMT sector. The tide turned
decidedly negative in March when TMT stocks worldwide began a dramatic plunge
as fears made the group too expensive in the face of a potential slowdown in
earnings growth. In a major reversal of fortune, the more cyclical,
old-economy stocks began to make a comeback as the new-economy stocks fell
out of favor.
In addition, a host of other negative factors continued to keep overseas
markets volatile through the end of October. These included: rising oil
prices, rising interest rates (first in the U.S. and then in Europe and
elsewhere) a slowdown in the U.S. economy, declines in many of Asia's
emerging currencies to 1998 levels and, most importantly, the continuing drop
in the value of the Euro. The latter especially hurt U.S. based investors.
Furthermore, the ongoing downturn in the tech-heavy NASDAQ Composite Index in
the U.S. generated similar volatility in Europe and Asia.
(Continued on next page)
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 applicable to
Class A 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
shareholders.
***Performance information prior to March 26, 1999, the Class G Shares
inception date, reflects the performance of Class A Shares, adjusted to
eliminate the effect of Class A's maximum sales charge but not adjusted to
reflect the expenses of Class G Shares. Actual Class G performance would
have been lower, because Class G Shares generally have higher expenses
than Class A 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 waiver of fees, the total returns would have been
lower. Some 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.
Victory International Growth Fund
vs. MSCI EAFE & MSCI Free XUSA Index
(Dollars in thousands)
International International MSCI
Growth Growth MSCII Free XUSA
Class A Class A @ NAV EAFE Index
10/31/90 9424 10000 10000 10000
11/30/90 9384 9958 9409 9444
12/31/90 9226 9789 9562 9617
1/31/91 9472 10050 9871 9917
2/28/91 10066 10681 10930 10982
3/31/91 9737 10332 10273 10378
4/30/91 9925 10531 10374 10491
5/31/91 9778 10376 10483 10640
6/30/91 9323 9893 9713 9900
7/31/91 9587 10172 10190 10375
8/31/91 9639 10228 9983 10197
9/30/91 9869 10472 10545 10716
10/31/91 9700 10293 10695 10903
11/30/91 9457 10035 10195 10418
12/31/91 10125 10744 10722 10959
1/31/92 10061 10676 10493 10806
2/29/92 9902 10507 10118 10474
3/31/92 9562 10146 9450 9841
4/30/92 9721 10315 9494 9873
5/31/92 10157 10778 10130 10473
6/30/92 10200 10823 9649 9967
7/31/92 9796 10394 9402 9755
8/31/92 10051 10665 9992 10275
9/30/92 10008 10620 9795 10064
10/31/92 9498 10078 9281 9622
11/30/92 9445 10022 9368 9676
12/31/92 9476 10056 9417 9757
1/31/93 9455 10033 9416 9755
2/28/93 9647 10236 9700 10054
3/31/93 10242 10868 10546 10882
4/30/93 11231 11918 11546 11843
5/31/93 11380 12076 11790 12107
6/30/93 11104 11782 11606 11961
7/31/93 11465 12166 12013 12359
8/31/93 12337 13091 12661 13023
9/30/93 12454 13216 12376 12755
10/31/93 12688 13464 12758 13217
11/30/93 11891 12617 11642 12210
12/31/93 12880 13667 12483 13162
1/31/94 13614 14446 13538 14244
2/28/94 13603 14434 13501 14137
3/31/94 13093 13893 12919 13489
4/30/94 13390 14209 13468 13947
5/31/94 13188 13994 13390 13952
6/30/94 13295 14107 13580 14051
7/31/94 13518 14344 13710 14279
8/31/94 13869 14717 14035 14759
9/30/94 13688 14525 13593 14394
10/31/94 14167 15033 14045 14781
11/30/94 13188 13994 13370 14068
12/31/94 13230 14039 13454 14035
1/31/95 12289 13040 12937 13398
2/28/95 12199 12945 12900 13325
3/31/95 12984 13777 13705 14078
4/30/95 13342 14157 14220 14627
5/31/95 13320 14134 14051 14562
6/30/95 13633 14467 13804 14362
7/31/95 14104 14966 14664 15176
8/31/95 13880 14728 14104 14650
9/30/95 14115 14978 14380 14900
10/31/95 13813 14657 13993 14502
11/30/95 13891 14740 14382 14843
12/31/95 14251 15121 14962 15430
1/31/96 14329 15205 15023 15642
2/29/96 14329 15205 15074 15642
3/31/96 14519 15407 15394 15934
4/30/96 14945 15859 15842 16417
5/31/96 14699 15597 15550 16170
6/30/96 14822 15728 15638 16253
7/31/96 14419 15300 15181 15712
8/31/96 14407 15288 15214 15804
9/30/96 14794 15698 15618 16197
10/31/96 14592 15484 15458 16035
11/30/96 15209 16139 16073 16653
12/31/96 15148 16073 15867 16460
1/31/97 14880 15790 15311 16158
2/28/97 14938 15851 15562 16454
3/31/97 14985 15901 15618 16420
4/30/97 15101 16024 15701 16558
5/31/97 15775 16740 16723 17581
6/30/97 16403 17406 17645 18551
7/31/97 16589 17603 17930 18927
8/31/97 15624 16579 16591 17438
9/30/97 16566 17578 17521 18380
10/31/97 15473 16419 16174 16816
11/30/97 15380 16320 16009 16605
12/31/97 15500 16448 16149 16797
1/31/98 15921 16894 16887 17299
2/28/98 16824 17852 17971 18453
3/31/98 17764 18850 18524 19091
4/30/98 18061 19165 18671 19228
5/31/98 18086 19191 18580 18879
6/30/98 17933 19029 18721 18808
7/31/98 18442 19569 18911 18987
8/31/98 15687 16645 16568 16309
9/30/98 15203 16132 16060 15965
10/31/98 16369 17370 17734 17637
11/30/98 17399 18463 18643 18585
12/31/98 18210 19323 19378 19225
1/31/99 18171 19282 19321 19204
2/28/99 17620 18696 18860 18774
3/31/99 18094 19200 19648 19681
4/30/99 18621 19758 20444 20665
5/31/99 17774 18860 19391 19695
6/30/99 18685 19827 20147 20599
7/31/99 19224 20399 20746 21082
8/31/99 19673 20875 20821 21155
9/30/99 19904 21120 21031 21299
10/31/99 21187 22482 21819 22092
11/30/99 23167 24582 22577 22975
12/31/99 25844 27423 24603 25166
1/31/2000 23854 25312 23040 23801
2/29/2000 24326 25813 23660 24444
3/31/2000 24870 26390 24577 25364
4/30/2000 23152 24567 23284 23948
5/31/2000 21964 23306 22715 23335
6/30/2000 22794 24187 23604 24329
7/31/2000 21749 23078 22614 23369
8/31/2000 22164 23519 22810 23658
9/30/2000 20761 22030 21700 22345
10/31/2000 19873 21088 21187 21635
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 MSCI 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 October 31, 2000
INT'L GROWTH INT'L GROWTH
Class A Class G***
Maximum
Net Asset Offering Net Asset
Value Price Value
One Year -6.20% -11.61% -6.55%
Three Years 8.70% 6.58% 8.50%
Five Years 7.55% 6.28% 7.43%
Ten Years 7.75% 7.11% 7.69%
Average Annual Since Inception
5/18/90 6.92% 6.32% 6.86%
29
<PAGE>
The Victory Equity Funds
The Victory International Growth Fund (Continued)
After rising almost 35% during the fiscal year, the Canadian market had a 10%
correction in the 2nd half of October. Nortel Networks (our largest position
in the portfolio) slid 25% in just one month due to its surprising
announcement of slower than expected revenue growth in the 3rd quarter,
thereby causing a major market disturbance and detracting the most from
performance in October and for the past twelve months.
Our stake in Canada grew over the year to 6% of the Fund (overweight by 2%
relative to the Index) by mid-October, in part due to the good performance of
Nortel Networks and Bombardier until their correction. In addition, we added
positions in several other companies with solid growth prospects.
An important element of our strategy during this period was to overweight the
global TMT sectors. The Fund benefited from this overweighting in the early
part of the period, when the technology group skyrocketed, however, this
overweighting led to strong underperformance -- particularly in Japan and
Europe -- as the TMT stocks fell sharply in the tumultuous months of March
and April.
In light of high global market volatility, we adopted a defensive
geographical asset allocation posture during the summer months. This marked
the period where the outlook for G4 countries began to deteriorate, at least
in the short-term, due to a supply shock and a spiking of oil prices. In
addition, the explosion in oil prices began to point to lower earnings
worldwide in the short-term.
The rise in oil prices raises the risk of earnings disappointments in Europe.
We reversed what was a moderately positive view of European equities to a
slight overweight-to-neutral tactical position.
The moderate pick-up in Japan's economy did not continue, weighed down by
on-going restructuring efforts and with high public debt and its impact on
the budget. Therefore, we decided to cut exposure in Japan from slight
overweight to a more neutral position relative to the benchmark. We also
continued to underweight global emerging markets, because of their high
sensitivity to the slower U.S. economy.
In this difficult environment, with rotations among global sectors, we
maintained exposure to only high quality growth stocks, which is consistent
with our investment style. However, growth stocks have been largely out of
favor during the volatile latter period.
Recently, given their severe correction in September, we have revisited some
of the hardware equipment manufacturers. In addition, we decreased exposure
to energy and software companies, which were enjoying good performance this
year and approaching their historic highs. We continue to underweight the
global financial sector, particularly banking.
The strategy for the remainder of this calendar year and the 1st quarter of
2001 represents a reversal from our recent cautious stance. We expect a
gradual reduction in investor's aversion to risk worldwide and are therefore
increasing some specific regional allocations.
Our outlook for the world economy is positive. We do not expect oil price
pressure to be sustainable or damaging to economic growth. We continue to
expect a drop in oil prices by the end of the winter season.
In the Euro zone, consumer and business confidence have been buoyant in
recent months. However, higher oil prices, combined with substantially
weakened Euro, will have a negative short-term effect on the economy.
Nevertheless, our medium term outlook for the European economy remains
positive. Last month, concerted intervention by central banks to support the
Euro was successful in its early stages. However, it was then badly managed
by the ECB. Ironically, since the ECB's credibility is in question, the
arguments in favor of renewed intervention are strong. Therefore, we maintain
our positive view on the Euro.
After experiencing a brutal and prolonged correction in global equity
markets, we anticipate investors will gradually return to equities, carefully
focusing on their fundamentals and valuations. After correction, conditions
are in place for a technical rebound in major markets. Valuations are even
more reasonable today and are slowly returning an appetite for risk, which
should drive the rebound in equities.
We are taking a more aggressive position with respect to our geographic
allocation increasing our overall European exposure. At the same time, we
will maintain a cautious neutral stand in Japan, where concerns about its
structural imbalances could lead to negative news flow.
In this environment, with very rapid rotations among global sectors
individual stock selection remains key. We will keep our sights set on only
high-quality companies with the ability to grow their earnings.
30
<PAGE>
The Victory Equity Funds
The Victory Nasdaq-100 Index(R) Fund
The investment goal of the Victory Nasdaq-100 Index(R) Fund is to replicate
the performance the Nasdaq-100 Index.(R)* This involves investing in all
stocks within the Nasdaq-100 Index(R) in proportion to their company,
industry and sector weighting within the Index. This method of management is
known as passive investing.
To manage the daily cash flows in and out of the Fund, the Fund invests in
Nasdaq-100(R) futures contracts. The contracts are highly correlated to
changes in the Nasdaq-100 Index(R). This enables the Fund to be fully exposed
to NASDAQ price movements, while at the same time, minimizing transaction
expenses associated with stock purchases and sales. We do not use futures for
speculative or leveraging purposes.
From the date of its inception (July 31, 2000) through the end of the fiscal
year on October 31, 2000, the Victory Nasdaq-100 Index(R) Fund returned
-7.70% (Class A Shares at net asset value) versus -9.06% for the Nasdaq-100
Index(R) and 6.10% for the S&P 500.** The Fund's outperformance of the Index
was a result of positive tracking error, which was not completely offset by
the Fund's expenses. The positive tracking error can be attributed to profits
derived from transactions in derivative securities used for asset
substitution purposes and cash held in the portfolio.
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 applicable to
Class A Shares. Performance of the different classes will vary based on the
differences in sales charges and class specific expenses paid by the
shareholders.
Investment returns and principal values will fluctuate so that an investor's
shares, when redeemed, may be worth more or less that 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. Some fee waivers are voluntary and may be modified or terminated at
any time.
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-sized companies. An investor cannot invest directly in an index.
Nasdaq-100 Index(R) Fund
vs. Nasdaq-100 Index
(Dollars in thousands)
Nasdaq-100
Index(R) Fund Nasdaq-100
Class G Index
7/31/2000 10000 10000
8/31/2000 11420 10834
9/30/2000 10020 9487
10/31/2000 9220 8721
Graph reflects investment growth of a $10,000 investment.
Past performance is not predictive of future results.
*The Nasdaq-100 Index is a modified capitalization-weighted index of the 100
largest and most active non-financial domestic and international issues
listed on the NASDAQ.
Total Return
As of October 31, 2000
NASDAQ-100 INDEX(R) NASDAQ-100 INDEX(R)
Class A Class G
Maximum
Net Asset Offering Net Asset
Value Price Value
Average Annual Since Inception
7/31/00 -7.70% -13.01% -7.80%
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 Financial Statements summarize and describe the
Fund's financial transactions. They are broken down into four different
statements.
Statements of Assets and Liabilities
Presents all of the assets and liabilities of each mutual Fund. This is each
individual Fund's "balance sheet" as of the date of the statement.
1. Summary of the mutual fund's assets stated at market value including
investments owned, dividends, interest and other amounts owed to each Fund by
outside parties, and other assets owned by each fund.
2. Summary of all amounts owed by each Fund including distributions declared
but not yet paid to shareholders and other amounts due to outside parties.
3. Summary of the amounts that comprise each Fund's net assets including
capital, undistributed net investment income, unrealized gains from
investments owned and realized gains from investments sold.
4. The number of shares owned by shareholders of each Fund.
5. The market worth of each mutual fund's total net assets divided by the
number of outstanding shares.
6. The net asset value per share plus sales charges.
Statements of Operations
Presents the results of operating activities during the period.
1. Investment income includes dividend and interest income earned from
holding investments.
2. Summary of expenses incurred by each Fund from its operations.
3. Summary of realized gains or losses from selling each Fund's investments
and the change during the period in unrealized gains or losses from holding
each Fund's investments.
4. Net change due to mutual fund operations.
33
<PAGE>
How To Read Your Financial Statement (Continued)
Statements of Changes in Net Assets
Presents the activity that affects the value of total net assets of each Fund
during the two most recent reporting periods.
1. See Statement of Operations.
2. Distributions declared to shareholders from net investment income or from
net realized gains during the periods. Each Fund declares distributions based
on investment income and taxable realized gains, which may differ from the
Fund's operations for financial statement purposes. Thus, distributions may
exceed net investment income or realized gains.
3. Dollar amount of mutual fund shares issued, reinvested and redeemed during
the periods. Detail of this activity pertaining to Funds with two share
classes is presented in the footnotes.
4. Compares total net assets as of the end of the current and prior periods.
5. Number of mutual fund shares issued, reinvested and redeemed during the
periods. Detail of this activity pertaining to Funds with two share classes
is presented in the footnotes.
Financial Highlights
Present changes in net asset value per share as well as certain ratios and
supplementary data for the five most recent reporting periods.
1. The table presents changes in the net asset value per share caused by
the Fund's investment activities and distributions
2. Total return presents the historical return on an investment in the Fund
throughout the period including changes in net asset value per share and
reinvestment of dividends. The total return presented excludes sales charges.
3. Actual ratios of expenses and net investment income to average net assets
during the period.
4. Hypothetical ratios of expenses and net investment income to average net
assets during the period assuming no fee waivers or expense reimbursements
had occurred.
5. Portfolio turnover presents the rate of investment activity. Higher
turnover indicates more active investment purchases and sales.
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.
34
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments
U.S. Government Obligations Fund October 31, 2000
(Amounts in Thousands)
Principal Amortized
Security Description Amount Cost
U.S. Treasury Obligations (18.3%)
U.S. Treasury Bill (4.2%)
6.08%, 12/7/00.......................... $100,000 $ 99,392
U.S. Treasury Notes (14.1%):
5.75%, 11/15/00......................... 25,000 24,997
4.63%, 11/30/00......................... 75,000 74,914
4.50%, 1/31/01.......................... 50,000 49,733
5.00%, 2/28/01.......................... 25,000 24,898
5.00%, 4/30/01.......................... 110,000 109,090
5.63%, 5/15/01.......................... 50,000 49,785
333,417
Total U.S. Treasury Obligations
(Amortized Cost $432,809) 432,809
Repurchase Agreement (82.1%)
Barclays Capital, Inc.,
6.55%, 11/1/00
(Collateralized by $109,660
U.S. Treasury Note,
6.63%, 6/30/01,
market value $112,200)................ 110,000 110,000
Bear Stearns,
6.58%, 11/1/00
(Collateralized by
$2,294,956 various U.S.
Treasury Bonds & Strips,
6.00%-8.75%,
5/15/17-11/15/27,
market value $607,794)................ 590,000 590,000
Deutsche Bank,
6.58%, 11/1/00
(Collateralized by
$628,269 various U.S.
Government Securities,
0.00%-6.25%,
11/15/00-8/15/05,
market value $601,800)................ 590,000 590,000
Goldman Sachs Group,
6.55%, 11/1/00
(Collateralized by
$122,170 various U.S.
Treasury Notes & Strips,
0.00%-5.88%,
11/15/04-2/15/12,
market value $112,201)................ 110,000 110,000
Principal Amortized
Security Description Amount Cost
Greenwich Partners,
6.55%, 11/1/00
(Collateralized by
$108,553 various U.S.
Treasury Notes,
4.75%-6.50%,
8/15/05-11/15/08,
market value $112,203)................ $110,000 $ 110,000
Lehman Brothers, Inc.,
6.50%, 11/1/00,
(Collateralized by
$288,803 various U.S.
Government Securites,
7.50%-10.62%,
5/15/01-11/15/24,
market value $107,883)................ 105,762 105,762
Morgan Stanley Dean Witter,
6.45%, 11/1/00
(Collateralized by
$106,890 various U.S.
Treasury Notes,
5.50%-6.63%,
12/31/00-4/30/02,
market value $108,607)................ 105,000 105,000
Salomon Smith Barney, Inc.,
6.55%, 11/1/00
(Collateralized by $94,175
U.S. Treasury Bond,
7.50%, 11/15/16,
market value $112,251)................ 110,000 110,000
Warburg Dillon Read,
6.55%, 11/1/00
(Collateralized by $207,740
U.S. Treasury Strips,
0.00%, 5/15/11,
market value $112,202)................ 110,000 110,000
Total Repurchase Agreement
(Amortized Cost $1,940,762) 1,940,762
Total Investments
(Amortized Cost $2,373,571) (a) -- 100.4% 2,373,571
Liabilities in excess of other assets -- (0.4)% (9,346)
TOTAL NET ASSETS -- 100.0% $2,364,225
(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 Schedules of Investments
Prime Obligations Fund October 31, 2000
(Amounts in Thousands)
Principal Amortized
Security Description Amount Cost
Bankers Acceptance (0.2%)
ABN-AMRO North American Bank, .......... $ 5,000 $ 4,912
6.57%, 2/5/01
Total Bankers Acceptance (Amortized Cost $4,912) 4,912
Certificates of Deposit (19.0%)
ABN-AMRO North American Bank,
6.72%, 3/2/01......................... 20,000 19,999
Bank of America,
7.34%, 5/15/01........................ 20,000 20,000
Bank One NA Illinois,
7.15%, 6/15/01........................ 15,000 14,998
Bayerische Landesbank New York,
6.60%, 3/7/01......................... 20,000 19,997
Bayerische Landesbank New York,
6.06%, 6/18/01........................ 6,000 5,968
Canadian Imperial Bank of Commerce,
7.01%, 11/22/00....................... 25,000 25,001
Canadian Imperial Bank of Commerce,
7.06%, 12/27/00....................... 10,000 10,000
Canadian Imperial Bank of Commerce,
6.87%, 8/16/01........................ 20,000 19,995
Deutsche Bank,
6.51%, 1/31/01........................ 18,000 17,998
Deutsche Bank,
6.78%, 9/11/01........................ 25,000 24,996
Dresdner Bank,
6.46%, 12/11/00....................... 12,000 11,995
Dresdner Bank,
7.18%, 6/7/01......................... 10,000 9,999
National City Bank,
6.98%, 8/2/01......................... 20,000 19,994
National Westminster Bank,
6.93%, 4/27/01........................ 20,000 19,998
Rabobank,
7.01%, 11/20/00....................... 10,000 10,001
Rabobank,
6.68%, 2/12/01........................ 20,000 19,998
Rabobank,
6.62%, 2/16/01........................ 20,000 19,997
Royal Bank of Canada,
6.55%, 12/20/00....................... 100,000 100,001
Societe Generale,
6.85%, 12/21/00....................... 20,000 20,001
Societe Generale,
6.75, 12/29/00........................ 25,000 25,000
Toronto Dominion,
6.69%, 12/27/00....................... 20,000 20,000
UBS Finance,
6.22%, 12/11/00....................... 20,000 19,992
Wachovia Bank,
6.59%. 11/15/00....................... 10,000 10,000
Total Certificates of Deposit
(Amortized Cost $485,928) 485,928
Principal Amortized
Security Description Amount Cost
Commercial Paper (52.0%)
ABB Treasury Center USA,
6.49%, 12/12/00....................... $ 50,000 $ 49,631
Baker Hughes, Inc.,
6.65%, 11/1/00 (b).................... 100,000 100,000
Bellsouth Capital Funding,
6.47%, 12/6/00........................ 10,480 10,414
Bellsouth Capital Funding,
6.47%,12/13/00........................ 28,600 28,384
Bellsouth Telecom,
6.48%,11/15/00........................ 47,000 46,881
Brown Forman Corp.,
6.50%, 11/2/00 (b).................... 10,000 9,998
Brown Forman Corp.,
6.50%, 11/3/00 (b).................... 10,000 9,996
Canadian Wheat Board,
6.43%, 3/19/01........................ 25,000 24,384
Capital Corp. Asset Securitization,
6.50%, 11/14/00 (b)................... 55,000 54,871
Corporate Asset Funding Co.,
6.49%, 12/5/00 (b).................... 20,000 19,877
CXC, Inc.,
6.50%,11/20/00 (b).................... 50,000 49,828
Delaware Funding Corp.,
6.50%,11/6/00 (b)..................... 20,121 20,103
Delaware Funding Corp.,
6.50% 11/20/00 (b).................... 25,286 25,199
Diageo Capital PLC,
6.56%, 1/16/01 (b).................... 25,000 24,654
Eastman Kodak Co.,
6.47%, 11/8/00........................ 4,200 4,195
Eastman Kodak Co.,
6.47%, 11/15/00....................... 35,000 34,912
Eastman Kodak Co.,
6.48%, 11/16/00....................... 13,015 12,980
Edison Asset Securitization,
6.50%, 11/20/00 (b)................... 102,000 101,650
Fleet Funding Corp.,
6.50%, 11/28/00 (b)................... 100,000 99,513
Fountain Square Commercial
Funding Corp.,
6.65%, 11/1/00........................ 100,108 100,109
Fuji Photo Finance,
6.62%, 1/25/01........................ 10,000 9,844
Fuji Photo Finance,
6.57%, 2/15/01........................ 20,000 19,613
Gillette Finance,
6.62%, 11/1/00........................ 27,050 27,050
Marsh USA, Inc.,
6.50%, 2/13/01........................ 25,000 24,531
McCormick & Co., Inc.,
6.62%, 11/22/00....................... 15,000 14,942
McGraw Hill,
6.49%, 11/14/00....................... 42,150 42,051
Mont Blanc Capital Corp.,
6.51%, 11/14/00....................... 26,170 26,108
See notes to financial statements.
36
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments--continued
Prime Obligations Fund October 31, 2000
(Amounts in Thousands)
Principal Amortized
Security Description Amount Cost
Redwood Receivables Corp.,
6.50%, 11/15/00 (b)................... $ 20,000 $ 19,949
Salomon Smith Barney, Inc.,
6.50%, 11/3/00........................ 75,000 74,973
Salomon Smith Barney, Inc.,
6.50%, 11/20/00....................... 25,000 24,914
SBC Communications, Inc.,
6.48%, 11/2/00........................ 30,000 29,995
SBC Communications, Inc.,
6.72%, 11/27/00....................... 15,000 14,927
Sheffield Receivables,
6.51%, 11/2/00 (b).................... 43,099 43,091
UBS Finance,
6.65%, 11/1/00........................ 100,000 100,000
Unilver Capital Corp.,
6.49%, 11/27/00....................... 25,000 24,883
Total Commercial Paper
(Amortized Cost $1,324,450) 1,324,450
Corporate Bonds (16.7%)
American Express Credit Corp.,
6.75%, 6/1/01......................... 3,320 3,320
American Manufacturing Co.,
6.65%*, 11/2/00**,
LOC Mellon Bank (c)................... 8,300 8,300
Associates Corp.,
6.70%, 5/29/01........................ 5,220 5,205
AT&T Capital Corp.,
6.25%, 5/15/01, MTN................... 4,000 3,980
Bronson Lifestyle Improvement
& Research Co.,
6.67%*, 11/2/00**,
LOC Old Kent.......................... 11,600 11,600
Capital One Funding Corp.,
6.65%*, 11/2/00**,
LOC Bank One (c)...................... 13,090 13,090
Dome Corp.,
6.70%*, 11/1/00**,
LOC First Union....................... 2,620 2,620
Ford Motor Credit Co.,
6.78%*, 11/27/00**.................... 15,660 15,671
Ford Motor Credit Co.,
5.75%, 1/25/01........................ 5,000 4,990
Ford Motor Credit Co.,
5.77%, 2/12/01, MTN................... 4,000 3,990
Ford Motor Credit Co.,
6.00%, 2/27/01, MTN................... 5,450 5,438
Ford Motor Credit Co.,
5.13%, 10/15/01....................... 5,000 4,924
General Electric Capital Corp.,
6.33%, 9/17/01, MTN................... 3,500 3,491
General Motors Acceptance Corp.,
6.91%*, 11/1/00**, MTN................ 12,000 12,008
General Motors Acceptance Corp.,
7.02%*, 11/9/00, MTN.................. 9,000 9,001
Principal Amortized
Security Description Amount Cost
General Motors Acceptance Corp.,
6.99%*, 11/20/00, MTN................. $ 2,000 $ 2,000
General Motors Acceptance Corp.,
6.99%*, 11/20/00, MTN................. 9,000 9,001
General Motors Acceptance Corp.,
6.83%*, 11/24/00**, MTN............... 10,000 10,004
General Motors Acceptance Corp.,
6.98%*, 11/27/00, MTN................. 20,000 20,001
Goldman Sachs Group, Inc.,
6.76%*, 12/14/00**, MTN............... 20,000 20,014
Household Finance,
6.45%, 3/15/01........................ 3,048 3,045
IBM Credit Corp.,
6.21%, 12/11/00, MTN.................. 15,000 14,998
IBM Credit Corp.,
5.05%, 1/22/01, MTN................... 10,000 9,959
J.P. Morgan & Co.,
6.61%*, 11/16/00**, MTN............... 25,000 25,000
John Deere Capital Corp.,
6.76%*, 1/25/01**, MTN................ 10,000 9,999
John Deere Capital Corp,
5.37%, 2/9/01, MTN.................... 7,000 6,969
John Deere Capital Corp,
6.35%, 3/15/01, MTN................... 4,000 3,995
Morgan Stanley Dean Witter,
6.77%*, 11/1/00**, MTN................ 40,000 40,000
Morgan Stanley Dean Witter,
6.77%*, 11/1/00**..................... 50,000 50,001
Morgan Stanley Dean Witter,
6.76%*, 12/15/00**, MTN............... 8,000 8,000
Nationsbank,
6.66%*, 12/11/00**, .................. 5,000 5,000
Prudential Funding,
5.89%, 4/16/01 (c).................... 4,000 3,983
Richfield Technology Associates,
6.69%*, 11/2/00**,
LOC Star Bank (c)..................... 4,440 4,440
RKS LLC Health Care,
6.70%*, 11/1/00**,
LOC AmSouth Bank (c).................. 9,300 9,300
SeaRiver Maritime, Inc.,
6.60%*, 11/1/00**,
guarantee Exxon Mobil Corp............ 28,300 28,300
Southwestern Ohio Steel,
6.69%*, 11/2/00**,
LOC Star Bank (c)..................... 7,960 7,960
Transamerica Financial Corp.,
6.77%*, 12/4/00**, MTN................ 15,000 15,000
Transamerica Financial Corp.,
5.89%, 3/5/01, MTN.................... 6,000 5,983
Walt Disney Co.,
6.38%, 3/30/01........................ 6,115 6,105
Total Corporate Bonds (Amortized Cost $426,685) 426,685
See notes to financial statements.
37
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments--continued
Prime Obligations Fund October 31, 2000
(Amounts in Thousands)
Principal Amortized
Security Description Amount Cost
Municipal Bonds (0.6%)
Arkansas (0.4%):
Union County Industrial
Development Revenue,
Del-Tin Fiber Project,
6.65%*, 11/1/00**,
LOC Bank One Chicago.................. $ 10,000 $ 10,000
Kentucky (0.2%):
Maruga Series 1999-A,
6.69%*, 11/2/00**,
LOC Fifth Third Bank (c).............. 5,620 5,620
Total Municipal Bonds (Amortized Cost $15,620) 15,620
Repurchase Agreement (8.7%)
Paine Webber,
6.60%, 11/1/00,
(Collateralized by $23,195 various
U.S. Government Securities,
0.00%-5.88%, 7/16/01-9/17/01,
market value $22,327)................. 21,888 21,888
Salomon Brothers, Inc.,
6.62%, 11/1/00,
(Collateralized by $202,314 various
U.S. Government Securities,
0.00%-8.00%, 1/5/01-7/1/30,
market value $204,001)................ 200,000 200,000
Total Repurchase Agreement
(Amortized Cost $221,888) 221,888
Principal Amortized
Security Description Amount Cost
U.S. Government Agencies (2.7%)
Federal Home Loan Bank (0.8%):
5.97%, 12/1/00.......................... $ 10,000 $ 9,998
5.13%, 4/17/01.......................... 10,000 9,923
19,921
Student Loan Marketing Assoc. (1.9%):
6.80%*, 11/7/00**, MTN.................. 25,000 24,986
6.82%*, 11/7/00**, MTN.................. 25,000 24,995
49,981
Total U.S. Government Agencies
(Amortized Cost $69,902) 69,902
Total Investments
(Amortized Cost $2,549,385) (a) -- 99.9% 2,549,385
Other assets in excess of liabilities -- 0.1% 3,630
TOTAL NET ASSETS -- 100.0% $2,553,015
(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.
(c) 144a security which is restricted as to resale to institutional
investors only.
* Variable rate securities having liquidity sources through bank letters
of 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, 2000. 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.
38
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments
Financial Reserves Fund October 31, 2000
(Amounts in Thousands)
Principal Amortized
Security Description Amount Cost
Bankers Acceptance (1.3%)
Fifth Third Bank, 6.54%, 12/7/00........ $10,000 $ 9,935
Total Bankers Acceptance
(Amortized Cost $9,935) 9,935
Certificates of Deposit (10.8%)
Bank of America,
7.32%, 5/15/01........................ 10,000 10,000
Bayerische Landesbank New York,
5.63%, 2/26/01........................ 1,000 995
Canadian Imperial Bank of Commerce,
7.01%, 11/22/00....................... 10,000 10,000
Deutsche Bank,
6.51%, 1/31/01........................ 7,000 6,999
Deutsche Bank,
6.78%, 9/11/01........................ 7,000 6,999
National City Bank,
6.98%, 8/2/01......................... 6,000 5,998
Rabobank,
7.01%, 11/20/00....................... 5,000 5,000
Rabobank,
6.62%, 2/16/01........................ 9,000 8,999
Societe Generale,
6.85%, 12/21/00....................... 5,000 5,000
Toronto Dominion,
6.69%, 12/27/00....................... 10,000 10,000
Toronto Dominion,
6.68%, 2/8/01......................... 10,000 9,999
Total Certificates of Deposit
(Amortized Cost $79,989) 79,989
Commercial Paper (40.6%)
ABB Treasury Center USA,
6.50%, 11/3/00........................ 19,300 19,293
Brown Forman Corp.,
6.50%, 11/2/00 (b).................... 10,000 9,998
Canadian Wheat Board,
6.43%, 3/19/01........................ 14,900 14,533
Corporate Asset Funding Co.,
6.49%, 12/5/00 (b).................... 10,000 9,939
Delaware Funding Corp.,
6.50%, 11/13/00 (b)................... 20,099 20,055
Eastman Kodak Co.,
6.50%, 12/4/00........................ 6,289 6,252
Edison Asset Securitization,
6.50%, 11/1/00 (b).................... 25,000 25,000
Edison Asset Securitization,
6.50%, 11/10/00 (b)................... 4,000 3,994
Fountain Square Commercial
Funding Corp.,
6.52%, 11/29/00....................... 5,089 5,063
Fuji Photo Finance,
6.62%, 1/25/01........................ 5,000 4,922
Gillette Finance,
6.62%, 11/1/00........................ 30,000 29,999
Principal Amortized
Security Description Amount Cost
Household Finance,
6.66%, 11/1/00........................ $25,000 $ 25,000
Marsh & McLennan Co., Inc.,
6.65%, 11/1/00........................ 35,000 34,999
Matson Navigation,
6.50%, 11/9/00........................ 10,000 9,986
Matson Navigation,
6.51%, 11/21/00....................... 10,000 9,964
Redwood Receivables Corp.,
6.66%, 11/1/00 (b).................... 20,622 20,622
Salomon Smith Barney, Inc.,
6.50%, 11/3/00........................ 25,000 24,991
SBC Communications, Inc.,
6.48%, 12/4/00........................ 5,300 5,269
Verizon Global Funding Corp.,
6.48%, 11/14/00....................... 20,000 19,953
Total Commercial Paper
(Amortized Cost $299,832) 299,832
Corporate Bonds (32.9%)
4-L Co. of Carmel,
6.70%*, 11/2/00**,
LOC Bank One Michigan................. 2,310 2,310
A & M Associates,
6.70%*, 11/2/00**,
LOC National City Bank................ 2,150 2,150
Acme Investments,
6.70%*, 11/2/00,
LOC National City Bank................ 2,000 2,000
AT&T Capital Corp.,
6.83%, 1/30/01, MTN................... 1,500 1,500
AT&T Capital Corp.,
6.80%, 2/1/01, MTN.................... 1,000 1,000
Beavercreek Enterprises,
6.70%*, 11/2/00**,
LOC National City Bank................ 2,500 2,500
Beneficial Corp.,
6.33%, 12/18/00, MTN.................. 5,000 5,000
BP America, Inc.,
9.38%, 11/1/00........................ 2,650 2,650
CS Manufacturing,
6.70%*, 11/1/00**,
LOC First National
Bank of Chicago (c)................... 4,100 4,100
Eastman Kodak Co.,
6.50%, 8/15/01, MTN................... 6,700 6,682
Exxon Mobil Corp.,
5.79%., 1/2/01........................ 1,101 1,100
Exxon Mobil Corp.,
8.38%., 2/12/01....................... 3,000 3,014
Ford Motor Credit Co.,
6.78%*, 8/27/01**..................... 18,350 18,364
Ford Motor Credit Co.,
7.00%, 9/25/01........................ 2,700 2,706
Ford Motor Credit Co.,
5.13%, 10/15/01....................... 3,500 3,449
See notes to financial statements.
39
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments--continued
Financial Reserves Fund October 31, 2000
(Amounts in Thousands)
Principal Amortized
Security Description Amount Cost
Galileo Corp.,
6.65%*, 11/1/00**,
LOC LaSalle Bank...................... $10,400 $ 10,400
General Electric Capital Corp.,
8.38%, 3/1/01......................... 2,000 2,009
General Motors Acceptance Corp.,
6.98%*, 11/27/00, MTN................. 10,000 10,001
General Motors Acceptance Corp.,
5.63%, 2/15/01........................ 1,325 1,319
General Motors Acceptance Corp.,
5.80%, 2/23/01, MTN................... 1,125 1,122
General Motors Acceptance Corp.,
6.08%, 5/22/01, MTN................... 3,000 2,995
Goldman Sachs Group,
6.98%*, 1/16/01** (c)................. 7,500 7,502
Goldman Sachs Group,
6.94%*, 1/25/01** (c)................. 6,500 6,502
GTE Corp.,
9.38%, 12/1/00........................ 2,000 2,004
IBM Credit Corp.,
6.21%, 12/11/00, MTN.................. 5,000 5,000
IBM Credit Corp.,
5.05%, 1/22/01, MTN................... 7,000 6,973
Ivex of Delaware, Kama Project,
6.70%*, 11/2/00**,
LOC Societe Generale.................. 6,500 6,500
J.P. Morgan & Co.,
6.61%*, 11/16/00**, MTN,
LOC National Bank of Detroit.......... 10,000 10,000
John Deere Capital Corp.,
6.08%, 12/18/00, MTN.................. 2,000 2,000
John Deere Capital Corp.,
5.35%, 10/23/01....................... 5,715 5,646
John Deere Capital Corp.,
6.76%*, 1/25/01**, MTN................ 5,000 5,000
Kellstrom Industries,
6.67%*, 11/2/00**,
LOC National City Bank................ 4,600 4,600
McClellan Ohio Ltd.,
6.74%*, 11/2/00**,
LOC Mid American Bank (c)............. 3,600 3,600
Merrill Lynch & Co.,
6.84%*, 11/1/00**, MTN................ 10,000 10,004
Morgan Stanley Dean Witter,
6.76%*, 12/15/00**,
LOC National City Bank, MTN........... 15,000 15,000
Morgan Stanley Dean Witter,
6.77%*, 11/1/00**, MTN................ 20,000 20,000
Redbank Professional Office
Building, LLC,
6.69%*, 11/2/00**,
LOC First Star (c).................... 3,215 3,215
Salomon Smith Barney Holdings, Inc.,
6.77%*, 11/1/00**, MTN................ 5,000 5,001
SeaRiver Maritime, Inc.,
6.60%*, 11/1/00**,
guarantee Exxon Mobil Corp............ 20,200 20,200
Principal Amortized
Security Description Amount Cost
Sharp Electronics,
6.69%*, 11/2/00**,
LOC Fifth Third Bank.................. $ 3,715 $ 3,715
Telesis/Autumn Leaves Ltd.,
6.69%*, 11/2/00**,
LOC Bank of America (c)............... 1,810 1,810
Tisdel Holdings, Inc.,
6.69%*, 11/2/00**,
LOC First Star (c).................... 2,600 2,600
Transamerica Financial Corp.,
6.77%*, 12/4/00**, MTN................ 8,000 8,000
Walt Disney Co.,
6.38%, 3/30/01........................ 1,165 1,161
Total Corporate Bonds
(Amortized Cost $242,404) 242,404
Municipal Bonds (6.2%)
Arkansas (1.1%):
Union County Industrial
Development Revenue,
Del-Tin Fiber Project,
6.65%*, 11/1/00**,
LOC Bank One Chicago.................. 8,000 8,000
Idaho (0.5%):
Idaho Assoc. LLC.,
6.65%*, 11/1/00**,
LOC LaSalle Bank (c).................. 3,850 3,850
Kentucky (0.9%):
Maruga, Series 1999b,
6.69%*, 11/2/00**,
LOC First Star (c).................... 1,315 1,315
Warren County Industrial
Development Authority,
6.67%*, 11/2/00**,
LOC Nationsbank....................... 5,000 5,000
6,315
Michigan (2.1%):
Genesee County,
Tax Note Series 1, GO,
6.65%*, 11/2/00**,
LOC Bank One.......................... 5,866 5,866
Kent County, GO,
6.60%*, 11/2/00**,
LOC Bank One.......................... 10,000 10,000
15,866
Mississippi (1.0%):
Mississippi Business Finance Corp.,
6.70%, 11/13/00,
guarantee BP Amoco (c)................ 7,200 7,200
New York (0.3%):
Rockland County,
NY Industrial Development Agency,
6.65%*, 11/1/00**,
LOC Mellon Bank....................... 1,900 1,900
See notes to financial statements.
40
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments--continued
Financial Reserves Fund October 31, 2000
(Amounts in Thousands)
Principal Amortized
Security Description Amount Cost
Pennsylvania (0.3%):
Franconia Township Industrial
Development Authority,
6.65%*, 11/2/00**,
LOC Mellon Bank....................... $ 2,245 $ 2,245
Total Municipal Bonds
(Amortized Cost $45,376) 45,376
Repurchase Agreement (4.7%)
Paine Webber,
6.60%, 11/1/00,
(Collateralized by $10,057
various U.S. Government Securities,
0.00%-5.88%, 9/17/01-1/15/38,
market value $9,612).................. 9,423 9,423
Salomon Brothers, Inc.,
6.62%, 11/1/00,
(Collateralized by $26,235
various U.S. Government Securities,
0.00%, 4/6/01-4/26/01,
market value $25,501)................. 25,000 25,000
Total Repurchase Agreement
(Amortized Cost $34,423) 34,423
Time Deposit (4.1%)
Suntrust Cayman, 6.63%, 11/1/00......... 30,000 30,000
Total Time Deposit (Amortized Cost $30,000) 30,000
Total Investments
(Amortized Cost $741,959) (a) -- 100.6% 741,959
Liabilities in excess of other assets -- (0.6)% (4,447)
TOTAL NET ASSETS -- 100.0% $737,512
(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.
(c) 144a security which is restricted as to resale to institutional
investors only.
* 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, 2000. 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.
GO -- General Obligation
LOC -- Letter of Credit
MTN -- Medium Term Note
See notes to financial statements.
41
<PAGE>
<TABLE>
Statements of Assets and Liabilities
The Victory Portfolios October 31, 2000
(Amounts in Thousands, Except Per Share Amounts)
<CAPTION>
U.S. Government Prime Financial
Obligations Obligations Reserves
Fund Fund Fund
<S> <C> <C> <C>
ASSETS:
Investments, at amortized cost $ 432,809 $2,327,497 $707,536
Repurchase agreements, at cost 1,940,762 221,888 34,423
Cash -- 1 --
Interest receivable 4,574 18,072 5,252
Receivable for capital shares issued -- 8 142
Prepaid expenses and other assets 16 -- 7
Total Assets 2,378,161 2,567,466 747,360
LIABILITIES:
Dividends payable 12,541 12,852 3,744
Payable to brokers for investments purchased -- -- 5,646
Accrued expenses and other payables:
Investment advisory fees 758 758 310
Administration fees 43 45 15
Custodian fees 46 47 16
Accounting fees 2 2 8
Transfer agent fees 18 20 7
Shareholder service fees -- 542 --
Shareholder service fees -- Select Shares 413 -- --
Other 115 185 102
Total Liabilities 13,936 14,451 9,848
NET ASSETS:
Capital 2,364,217 2,553,013 737,511
Undistributed net investment income 7 16 1
Accumulated undistributed net realized gains
(losses) from investment transactions 1 (14) --
Net Assets $2,364,225 $2,553,015 $737,512
Net Assets
Investor Shares $424,927 -- --
Select Shares 1,939,298 -- --
Total $2,364,225 -- --
Outstanding units of beneficial interest (shares)
Investor Shares 424,898 -- --
Select Shares 1,939,377 -- --
Total 2,364,275 2,553,012 737,403
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.
42
<PAGE>
<TABLE>
Statements of Operations
The Victory Portfolios For the Year Ended October 31, 2000
(Amounts in Thousands)
<CAPTION>
U.S. Government Prime Financial
Obligations Obligations Reserves
Fund Fund Fund
<S> <C> <C> <C>
Investment Income:
Interest income $135,613 $145,913 $48,383
Securities lending 9 -- --
Total Income 135,622 145,913 48,383
Expenses:
Investment advisory fees 7,934 8,075 3,853
Administration fees 2,477 2,517 981
Shareholder service fees -- 5,768 --
Shareholder service fees -- Select Shares 4,544 -- --
Accounting fees 131 142 109
Custodian fees 459 466 177
Legal and audit fees 196 201 71
Trustees' fees and expenses 53 52 15
Transfer agent fees 77 104 25
Registration and filing fees 36 192 112
Printing fees 156 395 7
Other 81 33 14
Total Expenses 16,144 17,945 5,364
Net Investment Income 119,478 127,968 43,019
Realized Gains (Losses) from Investments:
Net realized gains (losses) from investment transactions 7 (2) --
Change in net assets resulting from operations $119,485 $127,966 $43,019
</TABLE>
See notes to financial statements.
43
<PAGE>
<TABLE>
The Victory Portfolios Statements of Changes in Net Assets
(Amounts in Thousands)
<CAPTION>
U.S. Government Prime Financial
Obligations Fund Obligations Fund Reserves Fund
Year Year Year Year Year Year
Ended Ended Ended Ended Ended Ended
October 31, October 31, October 31, October 31, October 31, October 31,
2000 1999 2000 1999 2000 1999
<S> <C> <C> <C> <C> <C> <C>
From Investment Activities:
Operations:
Net investment income $ 119,478 $ 92,639 $ 127,968 $ 76,539 $ 43,019 $ 37,907
Net realized gains (losses) from
investment transactions 7 -- (2) (12) -- 7
Change in net assets resulting
from operations 119,485 92,639 127,966 76,527 43,019 37,914
Distributions to Shareholders:
From net investment income -- -- (127,968) (76,539) (43,019) (37,907)
Investor Shares (24,650) (20,842) -- -- -- --
Select Shares (94,828) (71,797) -- -- -- --
Change in net assets from
distributions to shareholders (119,478) (92,639) (127,968) (76,539) (43,019) (37,907)
Capital Transactions:
Proceeds from shares issued 9,958,605 3,987,901 5,695,075 4,151,240 2,707,816 1,615,129
Dividends reinvested 79,552 60,057 120,348 71,662 3,176 2,868
Cost of shares redeemed (9,873,661) (4,021,260) (5,322,445) (3,541,564) (2,791,932) (1,585,072)
Change in net assets from
capital transactions 164,496 26,698 492,978 681,338 (80,940) 32,925
Change in net assets 164,503 26,698 492,976 681,326 (80,940) 32,932
Net Assets:
Beginning of period 2,199,722 2,173,024 2,060,039 1,378,713 818,452 785,520
End of period $ 2,364,225 $ 2,199,722 $ 2,553,015 $ 2,060,039 $ 737,512 $ 818,452
Share Transactions:
Issued 9,958,605 3,987,901 5,695,075 4,151,241 2,707,816 1,615,128
Reinvested 79,552 60,057 120,348 71,662 3,176 2,868
Redeemed (9,873,661) (4,021,260) (5,322,446) (3,541,564) (2,791,931) (1,585,072)
Change in shares 164,496 26,698 492,977 681,339 (80,939) 32,924
</TABLE>
See notes to financial statements.
44
<PAGE>
<TABLE>
The Victory Portfolios Financial Highlights
For a Share Outstanding Throughout Each Period
<CAPTION>
U.S. Government Obligations Fund
Investor Shares Select Shares
Year Year Year Period Year Year Year Year Year
Ended Ended Ended Ended Ended Ended Ended Ended Ended
October 31, October 31, October 31, October 31, October 31, October 31, October 31, October 31, October 31,
2000 1999 1998 1997<F1> 2000 1999 1998 1997<F1> 1996
<S> <C> <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 $ 1.000
Investment
Activities
Net
investment
income 0.055 0.044 0.050 0.041 0.052 0.042 0.048 0.047 0.049
Distributions
Net
investment
income (0.055) (0.044) (0.050) (0.041) (0.052) (0.042) (0.048) (0.047) (0.049)
Net Asset Value,
End of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Total Return 5.60% 4.54% 5.12% 4.19%<F2> 5.33% 4.27% 4.86% 4.75% 4.96%
Ratios/
Supplemental
Data:
Net Assets,
End of Period
(000) $424,927 $386,264 $571,104 $456,133 $1,939,298 $1,813,458 $1,601,920 $1,235,475 $1,357,817
Ratio of
expenses to
average net
assets 0.51% 0.52% 0.52% 0.56%<F3> 0.76% 0.77% 0.77% 0.74% 0.61%
Ratio of net
investment
income
to average
net assets 5.49% 4.44% 5.03% 4.95%<F3> 5.22% 4.19% 4.78% 4.75% 4.84%
<FN>
<F1> Effective January 8, 1997, the Fund designated the existing shares as
Select Shares and commenced offering Investor Shares.
<F2> Not annualized.
<F3> Annualized.
</FN>
</TABLE>
See notes to financial statements.
45
<PAGE>
<TABLE>
The Victory Portfolios Financial Highlights
For a Share Outstanding Throughout Each Period
<CAPTION>
Prime Obligations Fund
Year Year Year Year Year
Ended Ended Ended Ended Ended
October 31, October 31, October 31, October 31, October 31,
2000 1999 1998 1997 1996
<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 0.055 0.044 0.049 0.048 0.047
Total from Investment Activities 0.055 0.044 0.049 0.048 0.047
Distributions
Net investment income (0.055) (0.044) (0.049) (0.048) (0.047)
Net Asset Value, End of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Total Return 5.67% 4.52% 4.98% 4.89% 4.81%
Ratios/Supplemental Data:
Net Assets, End of Period (000) $2,553,015 $2,060,039 $1,378,713 $736,449 $496,019
Ratio of expenses to
average net assets 0.78% 0.79% 0.80% 0.85% 0.87%
Ratio of net investment income
to average net assets 5.55% 4.43% 4.89% 4.79% 4.72%
</TABLE>
See notes to financial statements.
46
<PAGE>
<TABLE>
The Victory Portfolios Financial Highlights
For a Share Outstanding Throughout Each Period
<CAPTION>
Financial Reserves Fund
Year Year Year Year Year
Ended Ended Ended Ended Ended
October 31, October 31, October 31, October 31, October 31,
2000 1999 1998 1997 1996
<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 0.056 0.045 0.050 0.049 0.049
Distributions
Net investment income (0.056) (0.045) (0.050) (0.049) (0.049)
Net Asset Value, End of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Total Return 5.75% 4.62% 5.10% 5.04% 5.00%
Ratios/Supplemental Data:
Net Assets, End of Period (000) $737,512 $818,452 $785,520 $800,642 $767,990
Ratio of expenses to
average net assets 0.70% 0.68% 0.67% 0.67% 0.67%
Ratio of net investment income
to average net assets 5.58% 4.52% 5.01% 4.94% 4.89%
Ratio of expenses to
average net assets<F1> <F2> <F2> 0.68% 0.71% 0.75%
Ratio of net investment income
to average net assets<F1> <F2> <F2> 5.00% 4.90% 4.81%
<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.
47
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments
Tax-Free Money Market Fund October 31, 2000
(Amounts in Thousands)
Principal Amortized
Security Description Amount Cost
Municipal Bonds (100.0%)
Alabama (3.3%):
Montgomery Hospital,
Series C, 4.40%*, 11/1/00**,
AMBAC, SPA Mellon Bank, N.A........... $ 5,800 $ 5,800
Montgomery Hospital,
Series D, 4.40%*, 11/1/00**,
AMBAC, SPA Mellon Bank, N.A........... 5,000 5,000
Montgomery Hospital,
Series E, 4.40%*, 11/1/00**,
AMBAC, SPA Mellon Bank, N.A........... 4,600 4,600
Montgomery Hospital,
Series G, 4.40%*, 11/1/00**,
AMBAC, SPA Mellon Bank, N.A........... 1,635 1,635
Montgomery Hospital,
Series H, 4.40%*, 11/1/00**,
AMBAC, SPA Mellon Bank, N.A........... 4,900 4,900
21,935
Arizona (0.5%):
Maricopa County, Public Service Co.,
Series B, 4.60%*, 11/1/00**........... 2,200 2,200
Pima County,
Industrial Development Authority,
IDR, Brush Wellman, Inc. Project,
4.45%*, 11/2/00**,
LOC National City Bank................ 1,500 1,500
3,700
Colorado (1.4%):
Denver City,
Multi-Family Housing Revenue,
Ogden Residences Project,
4.70%*, 11/1/00**,
LOC LaSalle National Bank............. 9,470 9,470
Dist of Columbia (1.1%):
District of Columbia
Housing- Carmel,
4.40%*, 11/2/00**,
LOC Bank One.......................... 1,000 1,000
District of Columbia,
American Red Cross,
4.30%, 12/7/00,
LOC Bank One.......................... 6,400 6,400
7,400
Florida (0.8%):
Finance Commission,
4.30%, 2/23/01,
LOC First Union National Bank......... 5,700 5,700
Georgia (2.7%):
Burke County, GO,
4.30%, 11/17/00,
AMBAC, SPA Rabobank................... 7,000 7,000
Principal Amortized
Security Description Amount Cost
Cartersville Development
Authority Revenue,
Thrall Car Manufacturing
Co. Project,
4.50%*, 11/1/00**,
LOC Harris Bank & Trust............... $ 2,500 $ 2,500
Cobb County & Marietta
Water Authority Revenue,
4.60% 11/1/00......................... 3,000 3,000
Hall County School District, GO,
5.00%, 11/1/00........................ 1,230 1,230
Marietta Multifamily Housing
Authority Revenue,
Wood Pointe Apartments,
4.40%*, 11/1/00**,
LOC First Union National Bank......... 4,300 4,300
18,030
Idaho (1.4%):
Nez Perce County,
Pollution Control Revenue,
4.40%*, 11/2/00**,
LOC Bank One N.A...................... 1,000 1,000
State Health Facilities,
St. Luke's Medical Center,
4.60%*, 11/1/00**,
FSA, SPA Bayerische................... 8,400 8,400
9,400
Illinois (9.3%):
Chicago, Noble Street Charter,
4.50%*, 11/1/00**,
LOC Bank One N.A...................... 2,500 2,500
Development Financial Authority,
Industrial Steel
Construction Inc. Project,
4.65%*, 11/2/00**,
LOC American National
Bank & Trust AMT...................... 4,210 4,210
Development Financial Authority,
LaSalle Foundation Project,
4.40%*, 11/1/00**,
LOC American National Bank & Trust.... 5,900 5,900
Development Financial Authority,
Surgipath Medical Industries Project,
4.65%*, 11/1/00**,
LOC American National Bank & Trust.... 1,500 1,500
East St. Louis Tax Increment,
Public Library Project,
4.45*, 11/2/00**,
LOC Bank Of America................... 3,870 3,870
Educational Facility Authority Revenue,
Cultural Pooled Financing,
4.45%*, 11/1/00,
LOC American National Bank & Trust.... 11,005 11,005
Galesburg, Knox College Project,
4.44%*, 11/2/00**,
LOC LaSalle National Bank............. 5,000 5,000
See notes to financial statements.
48
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments--continued
Tax-Free Money Market Fund October 31, 2000
(Amounts in Thousands)
Principal Amortized
Security Description Amount Cost
Hanover Park IDR,
Spectra-Tech, Inc. Project,
4.65%*, 11/2/00**,
LOC Harris Bank & Trust AMT........... $ 1,505 $ 1,505
Havana IDR,
Maclean Forge LP Project,
4.55%*, 11/2/00**,
LOC Bank Of America AMT............... 2,400 2,400
Iroquois County, IDR,
Swissland Packing Co. Project,
4.65%*, 11/2/00**,
LOC American National Bank & Trust.... 3,200 3,200
Kendall & Kane County,
Community United School
District, No. 115,
4.99%, 1/11/00........................ 2,000 2,002
Lake County, IDR,
Northpointe Associates LLC Project,
4.50%*, 11/1/00**,
LOC Northern Trust.................... 6,000 6,000
Lombard,
4.65%*, 11/2/00**,
LOC American National
Bank & Trust AMT...................... 1,830 1,830
Savanna, IDR,
Metform Corp. Project, Series B,
4.40%*, 11/1/00**,
LOC Bank One N.A...................... 2,000 2,000
Savanna, IDR,
Metform Corp. Project,
Series C,
4.50%*, 11/1/00**,
LOC Bank One N.A. AMT................. 1,000 1,000
State Development Financial
Authority, EDR,
CPL/Downers Grove Partnership,
4.90%*, 11/1/00**,
LOC LaSalle National Bank............. 4,400 4,400
State Health Facilities,
Methodist Medical Center,
4.50%, 11/15/00, MBIA................. 2,180 2,180
Yorkville, IDR,
Wheaton & Co. Inc. Project,
4.65%*, 11/2/00**,
LOC American National
Bank & Trust AMT...................... 1,800 1,800
62,302
Indiana (10.6%):
Auburn Economic Development,
4.40%*, 11/1/00**,
LOC Bank One Michigan AMT............. 2,000 2,000
Bedford, EDR,
White River Lodge LP. Project, Series A,
4.50%*, 11/2/00**, FHLB............... 1,725 1,725
Principal Amortized
Security Description Amount Cost
Elkhart County, EDR,
Hinsdale Farms Ltd.Project,
4.65%*, 11/2/00**,
LOC American National Bank............ $ 3,120 $ 3,120
Financing Authority Health
Facility Revenue,
Baptist Homes of Indiana,
4.44%*, 11/2/00**,
LOC Bank One N.A...................... 4,350 4,350
Fort Wayne EDR,
PHD Inc. Project,
4.50%*, 11/1/00**,
LOC Bank One N.A...................... 3,000 3,000
Fort Wayne, EDR,
4.65%*, 11/1/00**,
LOC Bank One N.A...................... 3,200 3,200
Indianapolis Resource Recovery Revenue,
Ogden Martin Systems Inc. Project,
6.00%, 12/1/00, AMBAC................. 3,315 3,319
Indianapolis, EDR,
White Arts, Inc. Project,
4.55%*, 11/2/00**,
LOC Fifth Third Bank.................. 4,300 4,300
Lagrande County, EDR,
LA West Inc. Project,
4.65%*, 11/1/00**,
LOC Bank One N.A. AMT................. 2,100 2,100
Lawrence Southwark,
4.50%*, 11/2/00**,
LOC Mellon Bank N.A. AMT.............. 1,830 1,830
Madison, EDR,
Arvin Sango, Inc. Project,
4.50%*, 11/1/00**,
LOC Bank One N.A...................... 8,200 8,200
Mooresville Viking Air Tools,
4.65%*, 11/1/00**,
LOC Bank One N.A...................... 3,860 3,860
Noblesville,
Rivers Edge Apartments Project,
4.50%*, 11/2/00**,
LOC Bank One N.A...................... 2,870 2,870
Orleans Industry Economic Development,
4.65%*, 11/2/00**,
LOC Bank One N.A. AMT................. 4,300 4,300
Plymouth, EDR,
4.55%*, 11/2/00**,
LOC Firstar Bank...................... 4,600 4,600
Seymour, EDR,
Spaceguard, Inc. Project,
4.65%*, 11/1/00**,
LOC Bank One Michigan................. 1,115 1,115
State Development Financial
Authority, EDR,
4.65%*, 11/2/00**,
LOC American National
Bank & Trust AMT...................... 2,600 2,600
See notes to financial statements.
49
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments--continued
Tax-Free Money Market Fund October 31, 2000
(Amounts in Thousands)
Principal Amortized
Security Description Amount Cost
State Development Financial
Authority, EDR,
Daubert VCI Inc. Project,
4.50%*, 11/2/00**,
LOC Bank One N.A...................... $ 4,500 $ 4,500
State Education Wesleyan,
4.50%*, 11/1/00**,
LOC Bank One Michigan................. 3,500 3,500
State Educational Facilities
Authority Revenue,
Wabash, Series B,
4.85%, 5/3/01......................... 4,000 4,007
State Educational Facility
Authority Revenue,
Bethel College, Series A,
4.40%*, 11/1/00**,
LOC Bank One Michigan................. 3,000 3,000
71,496
Kentucky (7.2%):
Association of County Advance
Revenue/Cash Flow Borrowing,
5.00%, 6/29/01........................ 20,000 20,064
Boone County,
Industrial Building Revenue,
Multi-Color Corp. Project,
4.50*, 11/2/00**,
LOC PNC Bank AMT...................... 925 925
Cambell County, IDR,
Hospital Imaging Co., Inc. Project,
4.45%*, 11/3/00**,
LOC Fifth Third Bank.................. 3,800 3,800
Covington,
Industrial Building Revenue,
St. Charles Center Inc.,
4.50%*, 11/2/00**,
LOC First Star Bank................... 3,495 3,495
Dayton Industrial Building Revenue,
Woodcraft Manufacturing
Co., Inc. Project,
4.75%*,11/2/00**,
LOC Fifth Third Bank.................. 590 590
Economic Development Financial
Authority Hospital Facilities Revenue,
4.45%*, 11/1/00**, MBIA,
SPA National City Bank................ 7,100 7,100
Economic Development
Financing Authority,
4.65%*, 11/2/00**,
LOC Firstar Bank...................... 3,300 3,300
Lexington Fayette Urban County
Government Industrial
Building Revenue,
4.45%*, 11/2/00**,
LOC National City Bank................ 3,805 3,805
Principal Amortized
Security Description Amount Cost
Mayfield Multi-City Lease Revenue,
4.50%*, 11/1/00**,
LOC PNC Bank.......................... $ 3,400 $ 3,400
Somerset, Industrial Building Revenue,
Glen Oak Lumber & Mining,
4.65%*, 11/2/00**,
LOC Bank One Wisconsin AMT............ 1,845 1,845
48,324
Louisiana (1.5%):
New Orleans, IDR,
Multifamily Housing Revenue,
3700 Orleans LLC project,
4.51%*, 11/2/00**, FNMA............... 10,000 10,000
Maine (1.0%):
State Health & Higher Educational
Facility Authority Revenue,
VHA New England Inc., Series F,
4.40%*, 11/1/00**, AMBAC,
SPA Mellon Bank N.A................... 5,300 5,300
State Health & Higher Educational
Facility Authority Revenue,
VHA New England Inc., Series G,
4.40%*, 11/1/00**, AMBAC,
SPA Mellon Bank N.A................... 1,600 1,600
6,900
Maryland (2.0%):
Hartford County,
4.55%*, 11/2/00**,
LOC Harris Bank & Trust AMT........... 1,725 1,725
State Health and Higher
Education Facilities Revenue,
4.40%*, 11/1/00**,
LOC Bank One N.A...................... 11,500 11,500
13,225
Michigan (6.1%):
Jackson Public School
State Aid Note,
5.00%, 7/3/01,
LOC Comerica Bank..................... 5,000 5,013
Lawrence-Fort Harrison Industrial
Reuse Authority Tax
Increment Revenue,
4.45%*, 11/3/00**,
LOC Fifth Third Bank.................. 5,000 5,000
State Micron,
4.65%*, 11/1/00**,
LOC Bank One Michigan................. 1,000 1,000
State Strategic FD Limited
Obligation Revenue International
Sales Project,
4.65%*, 11/1/00**,
LOC Bank One
Michigan AMT.......................... 2,000 2,000
See notes to financial statements.
50
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments--continued
Tax-Free Money Market Fund October 31, 2000
(Amounts in Thousands)
Principal Amortized
Security Description Amount Cost
State Strategic
FD Limited Obligation Revenue
International Sales Project,
4.65%*, 11/1/00**,
LOC Bank One Michigan AMT............. $ 2,000 $ 2,000
State Strategic FD Limited Obligation
Revenue International Sales Project,
4.65%*, 11/1/00**,
LOC Bank One Michigan AMT............. 1,200 1,200
State Strategic Fund Pollution Control,
Consumers Power Project,
4.65%*, 11/1/00**, AMBAC.............. 8,300 8,300
State Strategic Fund,
Limited Obligation Revenue
International Sales Project,
4.65%*, 11/1/00**,
LOC Bank One Michigan AMT............. 2,800 2,800
State Strategic,
Fleet Engineers Inc. Project,
4.55%*, 11/2/00**,
LOC Comerica Bank AMT................. 1,400 1,400
State Strategic,
J&L Holding LLC Project,
4.65%*, 11/2/00**,
LOC Bank One Michigan................. 5,085 5,085
State Strategic,
Thermal Transfer Inc. Project,
4.55%, 11/2/00**,
LOC Comerica Bank AMT................. 3,265 3,265
State, GO,
6.50%, 12/1/00........................ 1,700 1,703
Wayne County Community College, GO,
4.75%, 4/2/01......................... 2,000 2,002
40,768
Minnesota (0.9%):
Hubbard County Solid Waste
Disposal Revenue,
4.50%*, 11/1/00**,
LOC Wachovia Bank AMT................. 4,000 4,000
St. Paul Housing and Redevelopment
Authority Revenue,
4.70%, 12/1/15,
LOC Norwest Bank...................... 1,980 1,981
5,981
Mississippi (2.3%):
Jackson County Port Facility Revenue,
Chevron USA Project,
4.60%*, 11/1/00**..................... 15,300 15,300
Missouri (6.1%):
Boone County Hospital Revenue,
4.40%*, 11/2/00**,
LOC Firstar Bank...................... 6,500 6,500
St. Charles County Industrial
Development Revenue Cedar Ridge,
4.44%*, 11/1/00**,
LOC Bank One N.A...................... 13,425 13,425
Principal Amortized
Security Description Amount Cost
State Health & Education
Facilities Authority,
Washington University, Series D,
4.60%*, 11/1/00**,
LOC Morgan Guaranty Trust............. $ 3,400 $ 3,400
State Health & Educational Facilities,
4.60%*, 11/1/00**,
LOC Morgan Guaranty Trust............. 1,800 1,800
State Health and Education
Facilities Revenue,
4.60%*, 11/1/00**..................... 2,500 2,500
State Health Authority,
4.60%*, 11/1/00**,
MBIA, SPA Chase Manhattan Bank........ 13,500 13,500
41,125
Nevada (0.7%):
Reno Hospital,
St. Mary's Regional Medical Center,
4.65%*, 11/1/00**, MBIA,
SPA ABN Ambro Bank N.V................ 2,000 2,000
Reno, EDR,
4.70%*, 11/2/00**,
LOC Firstar Bank AMT.................. 2,885 2,885
4,885
New Hampshire (1.5%):
Higher Education,
4.40%*, 11/1/00**, AMBAC,
SPA Mellon Bank N.A................... 1,500 1,500
Higher Educational & Health
Facilities Authority Revenue,
4.40%*, 11/1/00**, AMBAC,
SPA Mellon Bank N.A................... 5,300 5,300
State Business APEX
Telecommunications Project,
4.63%*, 11/2/00**,
LOC Huntington Bank................... 3,380 3,380
10,180
North Carolina (0.3%):
Wilkes County Industrial & Pollution
Control Authority,
4.50%*, 11/2/00**,
LOC Bank Of America AMT............... 2,200 2,200
Ohio (10.1%):
Akron Special Assignment,
4.36%, 12/15/00....................... 2,000 2,001
Canton City School District, GO,
4.63%, 12/15/00....................... 10,000 10,004
Cuyahoga County Hospitals,
Cleveland Clinic, Series C,
4.40%*, 11/1/00**,
LOC Bank of America................... 4,500 4,500
Cuyahoga County Hospitals,
Cleveland Clinic, Series D,
4.60%*, 11/1/00**,
LOC Bank of America................... 1,800 1,800
See notes to financial statements.
51
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments--continued
Tax-Free Money Market Fund October 31, 2000
(Amounts in Thousands)
Principal Amortized
Security Description Amount Cost
Franklin County Hospital Revenue,
Series B,
4.40%*, 11/2/00**,
LOC National City Bank................ $23,800 $ 23,801
Heath City School District,
4.99%, 11/21/00....................... 8,125 8,128
Lake County Local School District,
4.50%, 12/14/00....................... 1,650 1,651
Licking Heights Local School District,
4.83%, 12/21/00....................... 7,000 7,004
Mansfield BAN,
4.82%, 5/3/01......................... 2,500 2,504
Massilion,
4.51%, 1/12/01........................ 4,150 4,152
Richland County,
4.32%, 11/30/00....................... 1,437 1,437
Seneca County,
4.36%, 12/7/00........................ 1,150 1,150
68,132
Oklahoma (1.0%):
Creek County Industrial
Authority Revenue,
4.80%*, 12/1/00**,
LOC Bank One N.A...................... 1,575 1,575
State, IDR,
School of the Plains Project,
4.40%*, 11/2/00**,
LOC Bank of America................... 4,080 4,080
Tulsa, GO,
6.00%, 12/1/00........................ 1,040 1,041
6,696
Pennsylvania (2.6%):
College Township Industrial
Development Authority Revenue,
4.40%*, 11/1/00**,
LOC Bank One N.A...................... 4,500 4,500
Emmaus General Authority Revenue,
4.35%*, 11/1/00**,
LOC Goldman Sachs..................... 4,700 4,700
Erie County Hospital Authority,
Mercy Terrace Project,
4.40%*, 11/2/00**,
LOC PNC Bank.......................... 2,145 2,145
Lehigh County General Purpose
Authority Revenues,
4.60%*, 11/1/00**, MBIA,
SPA First Union Bank.................. 3,200 3,200
Lehigh County, GO,
4.60%*, 11/1/00**, AMBAC,
SPA Chase Manhattan Bank.............. 2,700 2,700
17,245
South Carolina (0.4%):
Public Services, GO,
4.25%, 1/17/01........................ 2,600 2,600
Principal Amortized
Security Description Amount Cost
Tennessee (3.6%):
Memphis Shelby County,
Birmingham Steel Corp. Project,
4.50%*, 11/2/00**,
LOC PNC Bank.......................... $ 9,000 $ 9,000
Montgomery County Public
Building Authority,
4.35%*, 11/2/00**,
LOC Bank Of America................... 3,000 3,000
Shelby County Health Education,
4.30%, 2/14/01,
LOC Bank of America................... 5,000 5,000
Shelby Memorial Hospital,
4.25%, 3/14/01,
LOC Bank of America................... 7,000 7,000
24,000
Texas (4.5%):
Brazos River Authority,
4.75%*, 11/1/00**, MBIA,
SPA Bank of New York.................. 10,000 10,000
Carroll Independent School District,
5.00%, 8/15/32**, PSF-GTD,
SPA Wesdeutsche Landesbank............ 10,000 10,016
Fort Worth Financial Authority,
4.35%, 11/9/00,
LOC Westdeutsche Landesbank........... 5,800 5,800
Gulf Coast Waste Disposal,
Amoco Oil Co. Project
4.75%*, 11/1/00**..................... 3,600 3,600
State Financing Authority,
5.70%, 2/1/01, AMBAC.................. 1,000 1,003
30,419
Vermont (2.1%):
Education & Health Buildings,
4.40%*, 11/1/00**, AMBAC,
SPA Mellon Bank N.A................... 1,800 1,800
Education & Health Buildings,
4.40%*, 11/1/00**, AMBAC,
SPA Mellon Bank N.A................... 4,000 4,000
Education & Health Buildings,
4.40%*, 11/1/00**, AMBAC,
SPA Mellon Bank N.A................... 8,300 8,300
14,100
Virginia (1.4%):
Capital Region Facility Revenue,
4.50%*, 11/2/00**,
LOC First Union AMT................... 3,100 3,100
Lynchburg Industrial Development
Authority Hospital,
4.40%*, 11/1/00**, AMBAC,
SPA Mellon Bank N.A................... 1,000 1,000
Lynchburg Industrial Development
Authority Hospital,
4.40%*, 11/1/00**, AMBAC,
SPA Mellon Bank N.A................... 5,600 5,600
9,700
See notes to financial statements.
52
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments--continued
Tax-Free Money Market Fund October 31, 2000
(Amounts in Thousands)
Principal Amortized
Security Description Amount Cost
Washington (0.7%):
Tacoma Revenue 1A,
4.30%, 2/7/01,
LOC Bank of America................... $ 5,000 $ 4,999
West Virginia (1.6%):
State Hospital Finance Authority,
4.40%*, 11/1/00**, AMBAC,
SPA Mellon Bank N.A................... 5,700 5,700
State Hospital Financial Authority
Hospital Revenue,
4.40%*, 11/1/00**, AMBAC,
SPA Mellon Bank N.A................... 5,300 5,300
11,000
Wisconsin (11.3%):
Antigo Plaspack IDR,
4.60%*, 11/1/00**,
LOC Firstar Bank AMT.................. 2,100 2,100
Antigo School District, TRAN,
4.75%, 10/30/01....................... 2,000 2,003
Beaver Dam Industrial
Development Revenue,
4.65%*,11/1/00**,
LOC Bank One Wisconsin AMT............ 2,000 2,000
Beloit School District,
4.19%, 11/01/00....................... 1,425 1,425
Burlington Community
Development Authority
Industrial Development Revenue,
4.65%*, 11/2/00**,
LOC Bank One Wisconsin AMT............ 4,500 4,500
Caledonia Quick Cable, IDR,
4.65%*, 11/2/00**,
LOC Bank One Wisconsin AMT............ 3,000 3,000
Campbell County, IDR,
Skipperliner Industries Project,
4.60%*, 11/1/00**,
LOC Firstar Bank...................... 4,895 4,895
Clinton Community School District, TRAN,
4.85%, 8/30/01........................ 1,150 1,151
Cook County,
7.25%, 11/1/00, MBIA.................. 3,000 3,060
Dodgeland School District,
5.20%, 4/1/01......................... 5,465 5,465
Fitchburg, IDR,
4.65%*, 11/2/00**,
LOC Bank One Wisconsin AMT............ 2,200 2,200
Germantown, IDR,
4.60%*, 11/1/00**,
LOC Firstar Bank...................... 1,200 1,200
Grafton School District, TRAN,
4.75%, 6/29/01........................ 1,800 1,802
Grafton School District, TRAN,
4.68%, 9/28/01........................ 1,800 1,801
Principal Amortized
Security Description Amount Cost
Industrial Development Revenue Bond,
4.50%*, 11/2/00**,
LOC Firstar Bank AMT.................. $ 1,485 $ 1,485
Industrial Development Revenue Bond,
4.50%*, 11/2/00**,
LOC Firstar Bank...................... 1,595 1,595
Industrial Development Revenue Bond,
4.50%*, 11/2/00**,
LOC Firstar Bank AMT.................. 1,800 1,800
Industrial Development Revenue Bond,
4.50%*, 11/2/00**,
LOC Firstar Bank AMT.................. 1,880 1,880
Jefferson School District, TRAN,
4.78%, 9/10/01........................ 950 951
Kenosha Industrial Development Revenue
Metalmen Building Project,
4.65%*, 11/2/00**,
LOC Bank One Wisconsin AMT............ 3,135 3,135
Kenosha Industrial Development Revenue
Metalmen Building Project,
4.65%*, 11/1/00**,
LOC Bank One Wisconsin AMT............ 2,375 2,375
Luxemburg-Casco School District, TRAN,
4.70%, 10/19/01....................... 2,200 2,202
Manawa School District, TRAN,
4.76%, 8/24/01........................ 1,700 1,701
Monroe School District, TRAN,
4.75%, 10/16/01....................... 5,240 5,246
New Lisbon School District, TRAN,
4.83%, 8/24/01........................ 1,100 1,101
New Richmond School District, TRAN,
4.20%, 11/1/00........................ 2,500 2,500
Pulaski Industrial Development Revenue,
4.65%*, 11/1/00**,
LOC Bank One Wisconsin AMT............ 1,470 1,470
Rock All-State Disposal Project, IDR,
4.65%*, 11/2/00**,
LOC Bank One Wisconsin AMT............ 1,200 1,200
Saukville Busch,
4.45%*, 11/2/00**,
LOC Bank One Wisconsin AMT............ 2,375 2,375
Sturgeon Bay School District, TRAN,
5.00%, 10/29/01....................... 1,200 1,203
Valders Area School District, TRAN,
4.67%, 9/21/01........................ 1,500 1,501
Waukesha, IDR,
4.65%*, 11/2/00**,
LOC Bank One Wisconsin AMT............ 3,600 3,600
West de Pere School District, TRAN,
5.00%, 10/29/01....................... 1,793 1,799
75,721
Total Municipal Bonds (Amortized Cost $672,933) 672,933
See notes to financial statements.
53
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments--continued
Tax-Free Money Market Fund October 31, 2000
(Amounts in Thousands, Except Shares)
Amortized
Cost/Market
Security Description Shares Value
Investment Companies (0.0%)
Federated Tax-Free Money Market Fund.... 70,282 $ 70
Total Investment Companies (Cost $70) 70
Total Investments
(Amortized Cost $673,003) (a) -- 100.0% 673,003
Other assets in excess of liabilities -- 0.0% 2,321
TOTAL NET ASSETS -- 100.0% $675,324
(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, 2000. 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
FHLB -- Insured by Federal Home Loan Bank
FNMA -- Insured by Federal National Mortgage Association
FSA -- Insured by Financial Security Assurance
GO -- General Obligation
IDR -- Industrial Development Revenue
LOC -- Letter of Credit
MBIA -- Insured by Municipal Bond Insurance Association
SPA -- Standby Purchase Agreement
TRAN -- Tax and Revenue Anticipation Note
See notes to financial statements.
54
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments
Ohio Municipal Money Market Fund October 31, 2000
(Amounts in Thousands)
Principal Amortized
Security Description Amount Cost
Ohio Municipal Bonds (99.6%)
Anthony Wayne Local School District,
GO, BAN, 4.61%, 12/21/00.............. $ 5,000 $ 5,002
Ashland County Jail Construction,
GO, 4.28%, 11/30/00................... 2,100 2,100
Ashtabula County Medical Center
Project Revenue, Hospital & Nursing
Home Improvements,
4.44%*, 11/2/00**,
LOC Bank One.......................... 2,790 2,790
Ashtabula County, Brighton Manor Co.
Project Revenue,
Industrial Improvement,
4.65%*, 11/1/00**,
LOC Bank One AMT...................... 2,500 2,500
Athens County Port Authority,
Ohio Inc. Project,
4.45%*, 11/2/00**,
LOC First Union Bank.................. 4,000 4,000
Athens, GO, BAN,
4.72%, 7/24/01........................ 1,200 1,202
Auglaize County,
G.A. Wintzer & Son Co. Project, IDR,
4.65%*, 11/2/00**,
LOC Bank One AMT...................... 1,335 1,335
Barberton, GO,
4.60%, 4/19/01........................ 2,600 2,602
Bedford Heights,
Olympic Steel Inc. Project,
4.50%*, 11/1/00**,
LOC National
City Bank AMT........................ 1,050 1,050
Bellefontaine, GO, BAN,
5.01%, 8/2/01......................... 1,900 1,904
Bowling Green, IDR,
Lamson & Sessions Project,
4.50%*, 11/2/00**,
LOC Chase Manhattan Bank AMT.......... 1,800 1,800
Bowling Green, IDR,
Lamson & Sessions Project,
4.57%*, 11/2/00**,
LOC Mid American National
Bank AMT.............................. 1,630 1,630
Brooklyn, GO, BAN,
4.65%, 8/30/01........................ 2,525 2,529
Brooklyn, IDR,
Clinton Road Project,
4.85%*, 11/1/00**,
LOC Bank One.......................... 510 510
Bryan, GO, BAN,
4.15%, 12/14/00....................... 4,888 4,888
Buckeye Local School District, GO, BAN,
5.13%, 11/16/00...................... 6,000 6,001
Principal Amortized
Security Description Amount Cost
Butler County, Crystal Partners, IDR,
4.70%*, 11/2/00**,
LOC Firstar AMT....................... $ 3,225 $ 3,225
Butler County,
Hospital Facilities Revenue,
4.45%*, 11/2/00**,
LOC Fifth Third Bank.................. 1,525 1,525
Canal Winchester Local
School District, GO, BAN,
4.91%, 2/22/01........................ 2,100 2,103
Canton City School District, GO,
4.63%, 12/15/00....................... 14,706 14,712
Canton, GO, BAN,
4.80%, 12/5/00........................ 2,025 2,025
Centerville Health Care Revenue,
Bethany Lutheran,
4.40%*, 11/1/00**,
LOC PNC Bank.......................... 4,350 4,350
Cincinnati City School District,
Series C, TAN,
5.25%, 12/1/00, AMBAC................. 3,325 3,328
Cincinnati,
Bethesda One Ltd. Partners Revenue,
4.60%*, 8/1/01**,
LOC Bank One.......................... 4,655 4,655
Cincinnati, IDR, 4th Star Ltd.
Partnership Project, TAN,
4.75%*, 11/1/00**,
LOC PNC Bank.......................... 6,250 6,250
Cleveland Airport Improvement,
Series D,
4.35%*, 11/1/00**,
LOC Toronto Dominion Bank AMT......... 1,400 1,400
Cleveland Heights, GO, BAN,
4.55%, 4/27/01........................ 1,000 1,001
Cleveland Heights, GO, BAN,
4.45%, 8/24/01........................ 1,853 1,854
Clinton County Revenue,
Hospital & Nursing
Home Improvements,
4.45%*, 11/1/00**,
LOC Fifth Third Bank.................. 27,000 27,000
Clinton County,
Airport Facilities Revenue,
4.35%*, 11/2/00**,
LOC Wachovia Bank..................... 6,800 6,800
Clinton County, GO, BAN,
5.24%, 5/17/01........................ 1,900 1,903
Clinton County, Hospital Capital,
4.45%*, 11/1/00**,
LOC Fifth Third Bank.................. 23,600 23,600
Columbiana County, IDR,
C & S Land Co. Project, 4.65%*, 11/2/00**,
LOC Bank One AMT...................... 2,920 2,920
See notes to financial statements.
55
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments--continued
Ohio Municipal Money Market Fund October 31, 2000
(Amounts in Thousands)
Principal Amortized
Security Description Amount Cost
Columbus, GO, Series 1,
4.20%*, 11/2/00**,
SPA Westdeutshe Landesbank............ $ 500 $ 500
Conneaut Area City School District,
GO, BAN,
5.13%, 2/15/01........................ 2,200 2,204
Coshocton County Health Care Revenue,
Hartville Homes Inc. Project,
4.50%*, 11/2/00**,
LOC Bank One.......................... 3,060 3,060
Coshocton County, Memorial Hospital
Project Revenue,
4.50%*, 11/2/00**,
LOC Bank One.......................... 3,155 3,155
Coshocton County, Memorial Hospital
Project Revenue,
4.40%*, 11/2/00**,
LOC Bank One.......................... 8,000 8,000
Crestline Village, GO, BAN,
4.72%, 4/5/01......................... 1,176 1,178
Cuyahoga County Health Care
Facilities Revenue,
Applewood Centers Inc. Project,
4.45%*, 11/3/00**,
LOC Fifth Third Bank.................. 2,250 2,250
Cuyahoga County Health Care
Facilities Revenue,
Judson Retirement Community Project,
4.40%*, 11/2/00**,
LOC National City Bank................ 9,585 9,585
Cuyahoga County Hospital Revenue,
Cleveland Clinic Foundation,
Series A, 4.40%*, 11/1/00**,
LOC Chase Manhatten Bank.............. 24,625 24,625
Cuyahoga County Hospital Revenue,
Cleveland Clinic Foundation,
Series A, 4.30%*, 11/1/00**,
LOC Morgan Guaranty Trust............. 2,500 2,500
Cuyahoga County Hospital Revenue,
Cleveland Clinic Foundation,
Series B, 4.40%*, 11/1/00**,
AMBAC, SPA Bank of America............ 10,800 10,800
Cuyahoga County Hospitals Revenue,
Series A, 4.40%*, 11/1/00**,
AMBAC, SPA Bank of America............ 2,800 2,800
Cuyahoga County Hospitals,
Cleveland Clinic Project Revenue,
Series B, 4.40%*, 11/1/00**,
LOC Chase Manhattan Bank.............. 12,200 12,200
Cuyahoga County Hospitals,
Cleveland Clinic,
Series C, 4.40%*, 11/1/00**,
LOC Bank of America................... 2,850 2,850
Cuyahoga County Hospitals,
University Hospital Cleveland,
4.55%*, 11/1/00**,
LOC Chase Manhattan Bank.............. 6,250 6,250
Principal Amortized
Security Description Amount Cost
Cuyahoga County Hospitals,
University Hospital Revenue,
Series D, 4.40%*, 11/2/00**,
AMBAC, SPA Chase Manhattan Bank....... $ 7,400 $ 7,400
Cuyahoga County,
Continuing Care Facilities Revenue,
4.40%*, 11/2/00**,
LOC Lasalle National Bank............. 7,500 7,500
Cuyahoga County, EDR,
Crestmont-Cleveland
Partnership Project,
4.85%*, 4/15/01**,
LOC Bank One AMT...................... 360 360
Cuyahoga County, IDR,
Allen Group Inc. Project,
4.40%*, 11/1/00**,
LOC Dresdner Bank AG AMT.............. 2,600 2,600
Cuyahoga County, IDR,
Decorp Project,
4.50%*, 11/2/00**,
LOC Bank One.......................... 1,630 1,630
Cuyahoga County, IDR,
Horizon Activities Centers Project,
4.45%*, 11/2/00**,
LOC Firststar......................... 1,180 1,180
Cuyahoga County, IDR,
Landerhaven Executive Project,
4.53%*, 11/1/00**,
LOC Firststar......................... 1,995 1,995
Cuyahoga County, IDR,
Progressive Plastics Project,
4.65%*, 11/2/00**,
LOC Bank One AMT...................... 1,180 1,180
Cuyahoga County, IDR,
Watt Printing Co. Project,
4.55%*, 11/2/00**,
LOC National City Bank AMT............ 2,810 2,810
Cuyahoga Falls,
Hospital Facilities Revenue,
Portage Trail Care Center Project,
4.48%*, 11/2/00**,
LOC Fifth Third Bank.................. 2,000 2,000
Cuyahoga Falls,
Hospital Facilities Revenue,
Portage Trail Care Center Project,
4.48%*, 11/2/00**,
LOC Fifth Third Bank.................. 2,900 2,900
Deerfield Township,
Equipment Acquisition, GO,
4.43%, 12/7/00........................ 1,000 1,000
Deerfield Township, GO,
Public Utilities,
4.47%, 12/7/00........................ 500 500
Deerfield Township, GO, TAN,
4.67%, 2/1/01......................... 1,000 1,001
Deerfield Township,
Park Land Acquistion Project, GO,
5.23%, 6/28/01........................ 400 401
See notes to financial statements.
56
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments--continued
Ohio Municipal Money Market Fund October 31, 2000
(Amounts in Thousands)
Principal Amortized
Security Description Amount Cost
Deerfield Township,
Sewer Improvement Project, GO,
5.19%, 6/28/01........................ $ 576 $ 577
Deleware, GO, BAN,
5.15%, 6/20/01........................ 1,145 1,147
Delhi Township, GO, BAN,
4.68%, 10/1/01........................ 4,650 4,659
East Palestine City School District,
GO, BAN,
4.59%, 10/4/01........................ 5,050 5,052
Euclid, GO, BAN,
4.75%, 7/26/01........................ 2,860 2,865
Fairborn, EDR,
4.77%*, 11/2/00**,
LOC Firststar......................... 495 495
Fairfield City School District, GO, TAN,
4.90%, 10/25/01....................... 1,150 1,154
Fairfield County, GO, BAN,
4.54%, 1/25/01 AMT.................... 930 930
Fairfield County, GO, BAN,
4.87%, 7/11/01........................ 2,150 2,155
Fairfield County, GO, BAN,
5.13%, 7/24/01........................ 1,000 1,003
Fairfield, IDR,
Prestige Display Project,
4.65%*, 11/1/00**,
LOC Bank One AMT...................... 6,485 6,485
Fayette County, GO, BAN,
4.80%, 7/17/01........................ 1,800 1,802
Franklin County Health Care
Facilities Revenue,
Wexner Heritage House Project,
4.43%*, 11/2/00**,
LOC Hunington National Bank........... 1,900 1,900
Franklin County Hospital Revenue,
Children's Hospital Project,
Series B, 4.54%*, 11/2/00**,
LOC Bank One.......................... 8,800 8,800
Franklin County Hospital Revenue,
Series B, 4.40%*, 11/2/00**,
LOC National City Bank................ 9,655 9,655
Franklin County Hospital Revenue,
U.S. Health Corp.,
Series A, 4.35%*, 11/2/00**,
LOC Morgan Guaranty Trust............. 5,885 5,885
Franklin County Hospital Revenue,
U.S. Health Corp.,
Series C, 4.35%*, 11/2/00**,
LOC Morgan Guaranty Trust............. 9,810 9,810
Franklin County, Health Care
Facilities Revenue,
4.45%*, 11/2/00**,
LOC National City Bank................ 2,275 2,275
Franklin County, IDR,
ALCO Standard Corp. Project,
4.40%*, 11/2/00**,
LOC Bank of America................... 1,500 1,500
Principal Amortized
Security Description Amount Cost
Franklin County, IDR,
Capitol South Community
Redevelopment,
4.75%*, 11/1/00**,
LOC Huntington National Bank.......... $ 5,920 $ 5,920
Franklin County, IDR,
Media Inc. Project,
4.85%*, 3/1/01**,
LOC KeyBank AMT....................... 1,425 1,425
Franklin County,
Jacobson Stores,
4.75%*, 11/1/00**,
LOC Bank One.......................... 6,600 6,600
Geauga County,
Health Care Facilities,
Heather Hill Inc. Project,
Series B, 4.43%*, 11/2/00**,
LOC Bank One.......................... 10,025 10,025
Geauga County, IDR,
Gold Key Processing Ltd. Project,
4.70%*, 11/1/00**,
LOC Fifth Third Bank AMT.............. 2,860 2,860
Green, GO, BAN,
4.95%, 10/25/01....................... 915 918
Greene County Health Care,
Friends Health Care Association,
4.48%*, 11/2/00**,
LOC Bank One.......................... 3,885 3,885
Grove City Revenue,
Multifamily Housing,
Regency Arms Apartments Project,
4.45%*, 11/2/00**,
LOC FNMA AMT.......................... 2,750 2,750
Grove City, EDR,
Cross Country Inns, Inc.,
4.50%*, 11/2/00**,
LOC Bank One.......................... 1,205 1,205
Hamilton County Health Care
Facilities Revenue,
Ronald McDonald House Project,
4.45%*, 11/3/00**,
LOC Fifth Third Bank.................. 3,740 3,740
Hamilton County Hospital
Facilities Revenue,
Health Alliance Greater Cincinnati,
Series F, 4.35%*, 11/1/00**, MBIA,
LOC Credit Suisse First Boston........ 6,650 6,650
Hamilton County Hospital Revenue,
Beechwood Home Project,
4.45%*, 11/2/00**,
LOC Firstar........................... 3,850 3,850
Hamilton County Hospital Revenue,
Drake Center Inc.,
Series A, 4.40%*, 11/2/00**,
LOC Firstar........................... 15,320 15,320
See notes to financial statements.
57
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments--continued
Ohio Municipal Money Market Fund October 31, 2000
(Amounts in Thousands)
Principal Amortized
Security Description Amount Cost
Hamilton County Revenue,
Affordable Housing,
Series A, 4.44%*, 11/2/00**,
LOC Bank One.......................... $ 3,500 $ 3,500
Hamilton County Revenue,
Childrens Hospital Medical Center,
4.45%*, 11/2/00**,
LOC Chase Manhattan Bank.............. 9,600 9,600
Hamilton County Revenue,
Childrens Hospital Medical Center,
Series A, 4.42%*, 11/2/00**,
LOC PNC Bank.......................... 3,800 3,800
Hamilton County Revenue,
Mulitfamily Housing,
Pleasent Run Apartments Project,
4.45%*, 11/2/00**,
LOC PNC Bank AMT...................... 1,700 1,700
Hamilton County Revenue,
Multifamily Housing,
Forest Ridge Apartment Project,
4.45%*, 11/2/00**,
LOC PNC Bank.......................... 9,800 9,800
Hamilton County, EDR,
Boys/Girls Club Inc. Project,
4.40%*, 11/2/00**,
LOC PNC Bank.......................... 2,700 2,700
Hamilton County, EDR,
Cincinnati Performing Arts,
4.45%*, 11/2/00**,
LOC Fifth Third Bank.................. 1,100 1,100
Hamilton County, EDR,
Union Institute Project,
4.50%*, 11/2/00**,
LOC Bank of Montreal.................. 2,195 2,195
Hamilton, GO, BAN,
5.00%, 6/7/01......................... 6,400 6,400
Hamilton, GO, BAN,
5.27%, 6/7/01......................... 1,440 1,443
Hamilton, GO, BAN,
5.27%, 6/7/01......................... 1,985 1,989
Hamilton, Series I, GO, BAN,
4.49%, 10/18/01....................... 1,695 1,696
Hamilton, Series V, GO, BAN,
4.49%, 10/18/01....................... 1,015 1,015
Hancock County, GO, BAN,
5.00%, 11/21/00....................... 1,012 1,013
Hilliard, GO, BAN,
4.95%, 7/20/01........................ 1,000 1,003
Hilliard, IDR, National Sign,
4.65%*, 11/1/00**,
LOC Bank One AMT...................... 3,400 3,400
Huber Heights, BAN,
4.25%, 11/1/00........................ 726 726
Huber Heights, GO, BAN,
4.75%, 8/2/01......................... 1,200 1,202
Principal Amortized
Security Description Amount Cost
Huron County, IDR,
American Baler Project,
4.65%*, 11/2/00**,
LOC Bank One AMT...................... $ 1,625 $ 1,625
Jackson County, GO, BAN,
4.75%, 11/1/00........................ 9,900 9,900
Lake County, BAN,
4.75%, 10/25/01....................... 1,620 1,625
Lake County, EDR,
Lake County YMCA Project,
4.50%*, 11/2/00**,
LOC Bank One.......................... 2,710 2,710
Lake County, GO, BAN,
4.75%, 10/3/01........................ 1,925 1,930
Lakewood, Series A, GO, BAN,
4.75%, 12/1/00........................ 2,870 2,871
Lebanon, GO, BAN,
4.96%, 7/27/01........................ 480 481
Licking Heights Local School District,
4.83%, 12/21/00....................... 10,000 10,006
Lorain County, EDR,
Crestmont-Cleveland
Partnership Project,
4.65%*, 4/15/01**,
LOC Bank One.......................... 765 765
Loveland, GO, BAN,
4.63%, 9/7/01......................... 2,400 2,404
Lowellville Local School
District, GO, BAN,
4.75%, 12/14/00....................... 1,050 1,050
Lucas County, EDR,
Maumee Valley Country
Day School Project,
4.57%*, 11/2/00**,
LOC Mid American National
Bank AMT.............................. 3,500 3,500
Lucas County, IDR,
American Capital Properties,
4.55%*, 11/2/00**,
LOC National City Bank AMT............ 3,405 3,405
Lucas County, IDR,
Bunting Bearings Corp. Project,
4.55%*, 11/2/00**,
LOC National City Bank................ 1,525 1,525
Lucas County, IDR,
Conforming Matrix Corp. Project,
4.62%*, 11/2/00**,
LOC Mid American National Bank........ 1,320 1,320
Mahoning County Healthcare
Facilities Revenue,
Copeland Oaks Project,
4.44%*, 11/2/00**,
LOC Bank One.......................... 3,685 3,685
Mansfield, GO, BAN,
5.16%, 5/24/01........................ 3,000 3,004
Mansfield, GO, BAN,
Series B, 4.85%, 5/24/01.............. 1,250 1,253
See notes to financial statements.
58
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments--continued
Ohio Municipal Money Market Fund October 31, 2000
(Amounts in Thousands)
Principal Amortized
Security Description Amount Cost
Marion County,
Hospital Revenue,
Pooled Leasing Program,
4.44%*, 11/2/00**,
LOC Bank One.......................... $ 2,365 $ 2,365
Marion County, Hospital Revenue,
Pooled Leasing Program,
4.44%*, 11/2/00**,
LOC Bank One.......................... 1,960 1,960
Marion County, IDR,
Semco Inc. Project,
4.53%*, 11/2/00**,
LOC Huntington National Bank.......... 1,000 1,000
Marysville Exempt Village
School District, GO, BAN,
4.79%, 3/20/01........................ 5,700 5,712
Marysville, GO,
7.20%, 12/1/10, AMBAC................. 1,000 1,022
Mason, GO, BAN,
4.21%, 11/9/00........................ 1,000 1,000
Massillon, GO, BAN,
5.31%, 1/12/01........................ 2,000 2,002
Massillon, GO, BAN,
5.07%, 4/12/01........................ 1,000 1,003
Mayfield City School District,
GO, BAN, Series A,
4.68%, 7/3/01......................... 1,215 1,216
Mayfield, BAN,
4.48%, 9/20/01........................ 4,250 4,251
Medina County Housing Revenue,
The Oaks at Medina Project,
Series B, 4.44%*, 11/2/00**,
LOC Bank One.......................... 7,700 7,700
Medina, BAN,
4.75%, 7/12/01........................ 4,100 4,107
Monroe County,
Income Tax Corridor 75,
4.50%*, 11/2/00**,
LOC Bank of Montreal.................. 2,000 2,000
Montgomery County Healthcare
Facilities Revenue,
Greater Dayton Area-MRI Project,
4.45%*, 11/1/00**,
LOC KeyBank........................... 175 175
Montgomery County, IDR,
Citywide Development Corp. Project,
4.65%*, 11/2/00**,
LOC Bank One AMT...................... 2,190 2,190
Montgomery County, IDR,
Town Centers Ltd. Partner Project,
4.60%*, 11/15/00**,
LOC National City Bank................ 2,270 2,270
Montgomery, IDR,
Bethesda Two Ltd.,
4.83%*, 11/3/00**,
LOC Huntington National Bank.......... 2,535 2,535
Morrow County, GO, BAN,
4.82%, 9/6/01......................... 3,895 3,905
Principal Amortized
Security Description Amount Cost
Mt. Gilead Exempt Village
School District, GO, BAN,
4.48%, 12/20/00....................... $ 5,000 $ 5,002
New Albany, GO, BAN,
4.49%, 12/21/00....................... 2,080 2,081
Niles City School District, GO, BAN,
5.08%, 1/16/01........................ 5,787 5,793
Nordonia Hills Local Schools, GO, BAN,
5.06%, 3/20/01........................ 1,500 1,503
Nordonia Hills Local Schools, GO, BAN,
Series A, 4.75%, 3/20/01.............. 7,500 7,513
Northwood, GO, BAN,
5.45%, 7/26/01........................ 800 804
Perrysburg, GO, BAN,
4.45%, 11/16/00....................... 2,250 2,250
Perrysburg, GO, BAN,
5.05%, 8/16/01........................ 1,000 1,004
Portage County, IDR, NCSP
Limited Partnership Project,
4.65%*, 11/1/00**,
LOC Bank One AMT...................... 3,400 3,400
Reading, IDR,
General Tool Co. Project,
4.55%*, 11/2/00**,
LOC Bank of Montreal AMT.............. 4,150 4,150
Richland County, GO,
4.85%, 5/10/01........................ 500 501
Richland County, IDR,
Mansfield Motel Partnership,
4.65%*, 11/2/00**,
LOC Huntington National Bank AMT...... 2,950 2,950
Rickenbacker,
Port Authority Revenue,
4.50%*, 11/2/00**,
LOC Bank One.......................... 2,800 2,800
Salem Hospital Revenue,
Community Hospital Project,
4.40%*, 11/1/00**,
LOC PNC Bank.......................... 2,800 2,800
Scioto County Hospital Revenue,
VHA Center Inc., Capital Assets,
Series C, 4.40%*, 11/1/00**, AMBAC,
LOC Mellon Bank....................... 5,025 5,025
Scioto County Hospital Revenue,
VHA Center Inc., Capital Assets,
Series D, 4.40%*, 11/1/00**, AMBAC,
LOC Mellon Bank....................... 2,845 2,845
Scioto County Hospital Revenue,
VHA Center Inc., Capital Assets,
Series E, 4.40%*, 11/1/00**, AMBAC,
LOC Mellon Bank....................... 3,075 3,075
Scioto County Hospital Revenue,
VHA Center Inc., Capital Assets,
Series G, 4.40%*, 11/1/00**, AMBAC,
LOC Mellon Bank....................... 3,500 3,500
See notes to financial statements.
59
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments--continued
Ohio Municipal Money Market Fund October 31, 2000
(Amounts in Thousands)
Principal Amortized
Security Description Amount Cost
Seneca County Hospital Facilities Revenue,
St. Francis Home Inc. Project,
4.40%*, 11/2/00**,
LOC National City Bank................ $ 1,900 $ 1,900
South Euclid,
Lyndhurst City School District, GO,
4.55%, 2/8/01......................... 2,650 2,652
South Western City School District,
GO, BAN,
5.13%, 12/8/00........................ 3,500 3,502
State Air Quality Development Authority,
Cincinnati Gas & Electric,
Series B, 4.60%*, 11/1/00**,
LOC Canadian Imperial Bank
of Commerce........................... 4,900 4,900
State Air Quality Development Authority,
JMG Funding Ltd. Partnership,
Series B, 4.30%*, 11/1/00**,
LOC Societe Generale AMT.............. 2,900 2,900
State Air Quality Development Authority,
Pollution Control Facilities Revenue,
Duquesne Light Co. Project,
Series A, 4.50%*, 11/1/00**,
AMBAC, SPA Bank of New York........... 10,750 10,750
State Air Quality Development Authority,
Pollution Control Facilities Revenue,
Duquesne Light Co. Project,
Series C, 4.40%*, 11/1/00**,
AMBAC, SPA Bank of New York........... 4,655 4,655
State Air Quality Revenue,
Timken Co.,
4.40%*, 11/1/00**,
LOC Bank One.......................... 3,000 3,000
State Enviromental
Improvement Revenue,
U.S. Steel Corp. Project,
4.55%*, 11/1/00**,
LOC PNC Bank.......................... 1,000 1,000
State Environmental
Improvement Revenue,
Newark Group Industries
Inc. Project,
4.50%*, 11/2/00**,
LOC Chase Manhattan Bank AMT.......... 4,700 4,700
State Higher Education Revenue,
4.50%*, 11/2/00**,
LOC Fifth Third Bank.................. 2,525 2,525
State Higher Education Revenue,
4.50%*, 11/2/00**,
LOC Fifth Third Bank.................. 10,490 10,490
State Higher Education Revenue,
4.50%*, 11/2/00**,
LOC Fifth Third Bank.................. 3,400 3,400
State Higher Education Revenue,
4.50%*, 11/2/00**,
LOC Fifth Third Bank.................. 5,000 5,000
Principal Amortized
Security Description Amount Cost
State Higher Education Revenue,
Wilmington College,
4.50%*, 11/2/00**,
LOC Fifth Third Bank.................. $ 2,445 $ 2,445
State Housing Finance Agency,
Residential,
Series A-3, 4.25%, 3/1/01,
LOC Bayerishe AMT..................... 5,000 5,000
State Infrastucture Improvements,
Series B, GO, 4.50%, 2/1/01........... 750 750
State Revenue,
Major New Infrastructure-1,
4.75%, 12/15/00....................... 2,000 2,001
State Solid Waste Revenue,
BP Exploration & Oil Project,
4.75%*, 11/1/00**,
BP Amoco AMT.......................... 2,900 2,900
State University,
Series B2, 4.35%*, 11/1/00**,
Ohio State University................. 8,400 8,400
State Water Development
Authority Revenue,
Series A, 4.50%*, 11/2/00**,
LOC National City Bank................ 7,100 7,100
State Water Development Authority,
Mead Corp. Revenue,
4.55%*, 11/1/00**,
LOC Bank of America................... 420 420
State Water Development Authority,
PA Power Co. Project,
4.45%*, 11/1/00**,
LOC Bank One.......................... 5,800 5,800
State Water Development Authority,
Pollution Control Facilities Revenue,
Duquesne Light Co.,
Series A, 4.50%*, 11/1/00**,
AMBAC, SPA Bank of New York........... 15,400 15,400
State Water Development Authority,
Pollution Control Facilities Revenue,
Duquesne Light Co.,
Series B, 4.45%*, 11/1/00**,
AMBAC, SPA Bank of New York........... 5,000 5,000
State Water Development Authority,
Pollution Control Facilities Revenue,
Duquesne Light Co.,
Series C, 4.35%*, 11/1/00**,
AMBAC, SPA Bank of New York........... 10,000 10,000
State Water Development Authority,
Pollution Control Facilities Revenue,
Edison Co. Project,
Series B, 4.70%*, 11/1/00**,
LOC Barclays Bank..................... 7,600 7,600
State Water Development Authority,
Timken Co. Project,
4.35%*, 11/1/00**,
LOC Wachovia Bank..................... 8,000 8,000
See notes to financial statements.
60
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments--continued
Ohio Municipal Money Market Fund October 31, 2000
(Amounts in Thousands)
Principal Amortized
Security Description Amount Cost
State Water Development Authority,
Timken Co. Project,
4.45%*, 11/1/00**,
LOC Wachovia Bank..................... $ 13,500 $ 13,500
State, EDR, YMCA,
4.50%*, 11/2/00**,
LOC Bank One.......................... 4,130 4,130
Struthers City School District, GO, BAN,
4.85%, 11/30/00....................... 4,321 4,322
Summit County Hospital,
Cuyuhoga Falls General Hospital,
Series B, 4.45%*, 11/2/00**,
LOC Bank One.......................... 1,675 1,675
Summit County Port Authority,
ASC Industries Inc. Project,
4.65%*, 11/1/00**,
LOC Bank One.......................... 3,500 3,500
Summit County, IDR,
Atlas Steel Project,
4.55%*, 11/2/00**,
LOC National City Bank AMT............ 3,500 3,500
Summit County, IDR,
Delco Corp. Project,
4.55%*, 11/2/00**,
LOC National City Bank AMT............ 1,315 1,315
Summit County, IDR,
Fiocca Inc. Project,
4.50%*, 11/2/00**,
LOC Fifth Third Bank AMT.............. 2,095 2,095
Summit County, IDR,
GO-JO Industries Inc, Project,
4.50%*, 11/2/00**,
LOC Bank One.......................... 1,750 1,750
Summit County, IDR,
Rogers Industrial Products Project,
4.75%*, 11/1/00**,
LOC Fifth Third Bank AMT.............. 935 935
Summit County, IDR,
SSP Fittings Corp. Project,
4.50%*, 11/2/00**,
LOC Bank One.......................... 1,465 1,465
Summit County, IDR,
Summit Plastic Co. Project,
4.55%*, 11/2/00**,
LOC National City Bank AMT............ 2,250 2,250
Summit County, IDR,
VMS Development Project,
4.65%*, 11/2/00**,
LOC Bank One AMT...................... 2,815 2,815
Tallmadge, GO,
4.70%, 8/9/01......................... 2,270 2,273
Teays Valley Local School
District, GO, BAN,
Series A, 5.13%, 11/14/00............. 4,975 4,976
Teays Valley Local School
District, GO, BAN,
Series B, 5.00%, 11/14/00............. 3,500 3,501
Principal Amortized
Security Description Amount Cost
Toledo, IDR,
Lucas County Port Authority,
Frostbite Brands Inc. Project,
4.90%*, 11/2/00**,
LOC Old Kent Bank..................... $ 2,690 $ 2,690
Toledo, Lucas County,
4.43%*, 11/2/00**,
LOC Wells Fargo Bank.................. 2,800 2,800
Tri-County North Local School
District, GO, BAN,
4.97%, 7/19/01........................ 1,255 1,259
Trumbull County Health Care
Facilities Revenue,
4.45%*, 11/2/00**,
LOC National City Bank................ 3,750 3,750
Trumbull County, IDR,
4.65%*, 11/2/00**,
LOC Bank One.......................... 3,875 3,875
Trumbull County, IDR,
Eliwood Engineered Casting,
4.50%*, 11/2/00**,
LOC Mellon Bank....................... 7,000 7,000
Twinsburg, IDR,
United Stationers Supply Co,
4.75%*, 11/1/00**,
LOC PNC Bank AMT...................... 1,200 1,200
Union County, GO,
5.21%, 6/14/01........................ 2,100 2,103
Union Scioto Local School
District, GO, BAN,
4.90%, 12/8/00........................ 1,100 1,101
Van Wert,
4.65%*, 11/2/00**,
LOC Bank One AMT...................... 2,400 2,400
Warren County, IDR,
Lindsey Steel Processing,
4.45%*, 11/2/00**,
LOC Firstar AMT....................... 2,800 2,800
Washington, GO, BAN,
4.38%, 12/21/00....................... 600 600
Waterville, BAN,
4.35%, 3/7/01......................... 1,825 1,825
Wayne County,
Health Care Facilities Revenue,
West View Manor Project,
4.48%*, 11/2/00**,
LOC Fifth Third Bank.................. 4,710 4,710
West Clermont Local School
District, GO, BAN,
5.00%, 4/26/01........................ 1,200 1,203
Westerville, EDR,
American Ceramic Society,
4.68%*, 11/2/00**,
LOC National City Bank................ 1,930 1,930
Westlake, IDR,
Logan Westlake Project,
4.50%*, 11/2/00**,
LOC Fifth Third Bank.................. 1,510 1,510
See notes to financial statements.
61
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments--continued
Ohio Municipal Money Market Fund October 31, 2000
(Amounts in Thousands, Except Shares)
Principal Amortized
Security Description Amount Cost
Williams County, IDR,
Letts Industries Inc. Project,
4.50%*, 11/2/00**,
LOC Comerica.......................... $ 2,100 $ 2,100
Wood County Revenue,
Facilities Improvements-Young Men,
4.57%*, 11/2/00**,
LOC Mid American National Bank........ 4,270 4,270
Wood County, EDR,
Cast Masters Inc. Acquisition,
4.62%*, 11/2/00**,
LOC National City Bank AMT............ 2,230 2,230
Wood County, EDR,
Hammill Manufacturing Co. Project,
4.57%*, 11/2/00**,
LOC Mid American Bank AMT............. 2,000 2,000
Wood County, EDR,
Precision Aggregate II,
4.62%*, 11/2/00**,
LOC Mid American National
Bank AMT.............................. 2,295 2,295
Wood County, EDR,
Toledo Electrical,
4.52%*, 11/2/00**,
LOC Mid American National Bank........ 1,960 1,960
Wood County, IDR,
Aluminite Ohio Inc. Project,
4.62%*, 11/2/00**,
LOC Mid American National Bank........ 1,690 1,690
Wood County, IDR,
Principle Bus Project,
Series A, 4.55%*, 11/2/00**,
LOC Fifth Third Bank AMT.............. 2,495 2,495
Woodlawn, IDR,
Southland Properties LLP Project,
4.55%*, 11/2/00**,
LOC Bank of Montreal AMT.............. 1,680 1,680
Total Ohio Municipal Bonds (Amortized Cost $880,623) 880,623
Amortized
Cost/Market
Security Description Shares Value
Investment Companies (0.0%)
Ohio (0.0%):
Federated Ohio Municipal Cash Trust..... 158,868 $ 159
Total Investment Companies (Cost $159) 159
Total Investments
(Amortized Cost $880,782) (a) -- 99.6% 880,782
Other assets in excess of liabilities -- 0.4% 3,587
TOTAL NET ASSETS -- 100.0% $884,369
(a) Cost and value for federal income tax and financial reporting purposes
are the same.
* Variable rate securities having liquidity agreements. The interest rate,
which will change periodically, is based upon an index of market
interest rates. The rate reflected on the Schedule of Investments is the
rate in effect at October 31, 2000.
** 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
FNMA -- Insured by Federal 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 -- Volunteer Hospital of America
See notes to financial statements.
62
<PAGE>
<TABLE>
Statements of Assets and Liabilities
The Victory Portfolios October 31, 2000
(Amounts in Thousands, Except Per Share Amounts)
<CAPTION>
Tax-Free Ohio Municipal
Money Market Money Market
Fund Fund
<S> <C> <C>
ASSETS:
Investments, at amortized cost $673,003 $880,782
Interest and dividends receivable 4,758 6,890
Prepaid expenses and other assets 5 4
Total Assets 677,766 887,676
LIABILITIES:
Dividends payable 2,095 2,684
Accrued expenses and other payables:
Investment advisory fees 200 380
Administration fees 15 18
Custodian fees 13 16
Accounting fees 1 2
Transfer agent fees 6 8
Shareholder service fees 89 164
Other 23 35
Total Liabilities 2,442 3,307
NET ASSETS:
Capital 675,426 884,369
Undistributed net investment income -- 5
Accumulated undistributed net realized gains (losses) from investment transactions (102) (5)
Net Assets $675,324 $884,369
Outstanding units of beneficial interest (shares) 675,424 884,365
Net asset value
Offering and redemption price per share $ 1.00 $ 1.00
</TABLE>
See notes to financial statements.
63
<PAGE>
<TABLE>
Statements of Operations
The Victory Portfolios For the Year Ended October 31, 2000
(Amounts in Thousands)
<CAPTION>
Tax-Free Ohio Municipal
Money Market Money Market
Fund Fund
<S> <C> <C>
Investment Income:
Interest income $29,652 $39,618
Dividend income 43 89
Total Income 29,695 39,707
Expenses:
Investment advisory fees 2,528 4,849
Administration fees 932 1,180
Shareholder service fees 1,805 2,424
Accounting fees 104 117
Custodian fees 149 191
Legal and audit fees 60 105
Trustees' fees and expenses 16 23
Transfer agent fees 27 35
Registration and filing fees 70 59
Printing fees 41 61
Other 13 14
Total Expenses 5,745 9,058
Expenses voluntarily reduced -- (581)
Net Expenses 5,745 8,477
Net Investment Income 23,950 31,230
Realized Gains (Losses) from Investments:
Net realized gains (losses) from investment transactions (71) --
Change in net assets resulting from operations $23,879 $31,230
</TABLE>
See notes to financial statements.
64
<PAGE>
<TABLE>
The Victory Portfolios Statements of Changes in Net Assets
(Amounts in Thousands)
<CAPTION>
Tax-Free Ohio Municipal
Money Market Fund Money Market
Year Year Year Year
Ended Ended Ended Ended
October 31, October 31, October 31, October 31,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
From Investment Activities:
Operations:
Net investment income $ 23,950 $ 17,415 $ 31,230 $ 24,370
Net realized gains (losses) from investment transactions (71) (27) -- (5)
Change in net assets resulting from operations 23,879 17,388 31,230 24,365
Distributions to Shareholders:
From net investment income (23,950) (17,415) (31,230) (24,370)
Change in net assets from distributions to shareholders (23,950) (17,415) (31,230) (24,370)
Capital Transactions:
Proceeds from shares issued 1,794,580 1,771,474 2,094,648 2,178,950
Dividends reinvested 17,484 11,883 24,631 19,098
Cost of shares redeemed (1,834,302) (1,551,225) (2,169,654) (2,014,842)
Change in net assets from capital transactions (22,238) 232,132 (50,375) 183,206
Change in net assets (22,309) 232,105 (50,375) 183,201
Net Assets:
Beginning of period 697,633 465,528 934,744 751,543
End of period $ 675,324 $ 697,633 $ 884,369 $ 934,744
Share Transactions:
Issued 1,794,580 1,771,474 2,094,648 2,178,950
Reinvested 17,484 11,883 24,631 19,098
Redeemed (1,834,302) (1,551,225) (2,169,654) (2,014,842)
Change in shares (22,238) 232,132 (50,375) 183,206
</TABLE>
See notes to financial statements.
65
<PAGE>
<TABLE>
The Victory Portfolios Financial Highlights
For a Share Outstanding Throughout Each Period
<CAPTION>
Tax-Free Money Market Fund
Year Year Year Year Year
Ended Ended Ended Ended Ended
October 31, October 31, October 31, October 31, October 31,
2000 1999 1998 1997 1996
<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 0.033 0.025 0.029 0.030 0.030
Distributions
Net investment income (0.033) (0.025) (0.029) (0.030) (0.030)
Net Asset Value, End of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Total Return 3.38% 2.55% 2.91% 3.07% 3.04%
Ratios/Supplemental Data:
Net Assets, End of Period (000) $675,324 $697,633 $465,528 $412,224 $344,796
Ratio of expenses to
average net assets 0.80% 0.79% 0.80% 0.73% 0.78%
Ratio of net investment income
to average net assets 3.32% 2.51% 2.88% 3.03% 2.97%
Ratio of expenses to
average net assets<F1> <F2> <F2> 0.80% 0.74% 0.80%
Ratio of net investment income
to average net assets<F1> <F2> <F2> 2.88% 3.02% 2.95%
<FN>
<F1> During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
<F2> There were no voluntary fee reductions during the period.
</FN>
</TABLE>
See notes to financial statements.
66
<PAGE>
<TABLE>
The Victory Portfolios Financial Highlights
For a Share Outstanding Throughout Each Period
<CAPTION>
Ohio Municipal Money Market Fund
Year Year Year Year Year
Ended Ended Ended Ended Ended
October 31, October 31, October 31, October 31, October 31,
2000 1999 1998 1997 1996
<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 0.032 0.025 0.029 0.030 0.030
Distributions
Net investment income (0.032) (0.025) (0.029) (0.030) (0.030)
Net Asset Value, End of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Total Return 3.27% 2.49% 2.94% 3.01% 3.11%
Ratios/Supplemental Data:
Net Assets, End of Period (000) $884,369 $934,744 $751,543 $650,978 $561,131
Ratio of expenses to
average net assets 0.87% 0.82% 0.80% 0.75% 0.67%
Ratio of net investment income
to average net assets 3.22% 2.45% 2.90% 2.97% 3.03%
Ratio of expenses to
average net assets<F1> 0.93% 0.93% 0.94% 0.94% 0.97%
Ratio of net investment income
to average net assets<F1> 3.16% 2.34% 2.76% 2.78% 2.73%
<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.
67
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments
Limited Term Income Fund October 31, 2000
(Amounts in Thousands)
Principal Market
Security Description Amount Value
Asset Backed Securities (10.1%)
American Express Credit
Account Master Trust,
6.76%, 4/15/08........................ $ 131 $ 131
Copelco Capital Funding Corp.,
7.12%, 8/18/03........................ 300 302
Equicredit Home Equity Loan Trust,
Series 1996-1, Class A3,
6.19%, 12/15/10....................... 392 391
Fleetwood Credit Corp. Grantor Trust,
Series 1994-B, Class A,
6.75%, 3/15/10........................ 1,676 1,669
Fleetwood Credit Corp. Grantor Trust,
Series 1997-A, Class A,
6.64%, 9/15/12........................ 740 736
The Money Store Home Equity Trust,
Series 1998A, Class AF3,
6.13%, 9/15/16........................ 158 157
U.S. Government Loan Trust -- Israel,
Series 1-B, 8.50%, 4/1/06............. 323 346
Total Asset Backed Securities (Cost $3,778) 3,732
Collateralized Mortgage Obligations (2.4%)
American Housing Trust, Series VIII,
Class K, 9.00%, 1/25/21............... 884 901
Total Collateralized Mortgage Obligations (Cost $940) 901
Commercial Paper (1.1%)
Household Finance, 6.66%, 11/1/00....... 396 396
Total Commercial Paper (Cost $396) 396
Corporate Bonds (22.9%)
Automobiles (1.1%):
General Motors Acceptance Corp.,
5.50%, 1/14/02........................ 300 295
General Motors Acceptance Corp.,
6.75%, 2/7/02......................... 100 100
395
Beverages (4.0%):
J. Seagram & Sons, Inc.,
6.25%, 12/15/01....................... 1,500 1,491
Financial Services (5.6%):
CIT Group, Inc.,
7.38%, 3/15/03........................ 95 95
General Electric Capital Corp.,
7.50%, 6/5/03......................... 500 510
Heller Financial, Inc.,
6.44%, 10/6/02........................ 700 690
Household Finance Corp.,
6.88%, 3/1/03......................... 700 696
Merrill Lynch,
7.18%, 2/11/03, MTN................... 90 90
2,081
Principal Market
Security Description Amount Value
Food Processing & Packaging (2.7%):
Unilever Capital Corp.,
6.75, 11/1/03......................... $ 1,000 $ 995
Insurance -- Life (4.1%):
American General Finance,
7.45%, 1/15/05, MTN................... 1,485 1,504
Oil-Integrated Companies (1.6%):
Atlantic Richfield,
5.55%, 4/15/03........................ 620 606
Software & Computer Services (2.7%):
Sun Microsystems, Inc.,
7.00%, 8/15/02........................ 1,000 999
Telecommunications (1.1%):
WorldCom, Inc.,
7.88%, 5/15/03........................ 385 392
Total Corporate Bonds (Cost $8,383) 8,463
U.S. Government Agencies (18.2%)
Federal Farm Credit Bank (0.8%):
6.63%, 2/1/02 (b)....................... 300 300
Federal Home Loan Bank (11.1%):
5.13%, 9/15/03.......................... 2,145 2,072
6.00%, 11/15/01......................... 840 835
7.13%, 5/22/01.......................... 1,200 1,203
4,110
Federal Home Loan Mortgage
Corp. (2.3%):
6.63%, 8/15/02.......................... 400 401
7.38%, 5/15/03.......................... 448 458
859
Federal National
Mortgage Association (4.0%):
6.75%, 8/15/02.......................... 1,000 1,005
7.55%, 4/22/02.......................... 465 472
..................................... 1,477
Total U.S. Government Agencies (Cost $6,680) 6,746
U.S. Government Mortgage Backed (6.0%)
Federal Home Loan Mortgage Corp. (1.4%):
6.00%, 2/1/13-4/1/26.................... 130 125
7.50%, 3/1/29........................... 39 39
9.50%, 12/1/01.......................... 342 350
514
Federal National Mortgage
Association (4.0%):
7.00%, 10/1/26-6/1/28................... 38 37
8.00%, 11/1/19-2/1/30................... 100 101
8.50%, 11/1/17-1/1/30................... 160 164
9.50%, 10/1/21.......................... 356 370
10.00%, 11/1/13......................... 451 478
11.00%, 11/1/13......................... 316 342
1,492
See notes to financial statements.
68
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments -- continued
Limited Term Income Fund October 31, 2000
(Amounts in Thousands, Except Shares)
Shares or
Principal Market
Security Description Amount Value
Government National Mortgage
Assoc. (0.6%):
7.00%, 12/15/23-12/15/25................ $ 97 $ 97
9.00%, 11/15/17......................... 114 117
214
Total U.S. Government Mortgage Backed (Cost $ 2,229) 2,220
U.S. Treasury Obligations (38.2%)
U.S. Treasury Notes (38.2%):
5.75%, 4/30/03 (b)...................... 2,088 2,080
5.88%, 10/31/01-2/15/04 (b)............. 6,010 5,988
6.38%, 8/15/02 (b)...................... 5,777 5,812
6.75%, 5/15/05 (b)...................... 221 229
Total U.S. Treasury Obligations (Cost $14,058) 14,109
Securities Purchased With Cash Collateral (21.7%)
Investment Companies (4.0%):
AIM Short Term Prime Obligations Fund... 3,619 4
AIM Liquid Assets Portfolio............. 567,436 568
Merrimac Cash Fund...................... 914,090 914
1,486
Time Deposits (1.5%):
PNC Bank, 6.56%, 11/1/00................ $ 274 274
National City Bank, 6.50%, 11/1/00...... 274 274
548
Repurchase Agreements (16.2%):
First Union, 6.78%, 11/1/00
(Collateralized by $1,610
Excel Realty Trust,
6.88%, 10/15/04,
market value $1,545).................. 1,500 1,500
Goldman Sachs, 6.71%, 11/1/00
(Collateralized by $2,500
Telefonica Europe, 8.25%, 9/15/30,
market value $2,570).................. 1,500 1,500
Principal Market
Security Description Amount Value
Merrill Lynch, 6.75%, 11/1/00
(Collateralized by $1,560
Long Island Savings Bank,
7.00%, 6/13/02, Elan Finance,
0.00%, 12/14/18,
market value $1,547).................. $ 1,500 $ 1,500
Morgan Stanley Dean Witter,
6.73%, 11/1/00
(Collateralized by $1,632
BHP Finance, 6.42%, 3/1/26,
market value $1,617).................. 1,500 1,500
6,000
Total Securities Purchased
With Cash Collateral (Cost $8,034) 8,034
Total Investments (Cost $44,498) (a) -- 120.6% 44,601
Other liabilities in excess of assets -- (20.6)% (7,614)
TOTAL NET ASSETS -- 100.0% $36,987
(a) Represents cost for financial reporting purposes and differs from cost
basis for federal income tax purposes by the amount of losses recognized
for financial reporting purposes in excess of federal income tax
reporting of approximately $6. Cost for federal income tax purposes
differs from value by net unrealized appreciation of securities as
follows (amounts in thousands):
Unrealized appreciation $ 217
Unrealized depreciation (120)
Net unrealized appreciation $ 97
(b) All or a portion of this security was loaned as of October 31, 2000.
MTN -- Medium Term Note
See notes to financial statements.
69
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments
Intermediate Income Fund October 31, 2000
(Amounts in Thousands)
Principal Market
Security Description Amount Value
Asset Backed Securities (8.1%)
American Express Credit
Account Master Trust,
Series 2000-5, Class A,
6.76%*, 11/15/00**....................$ 655 $ 655
CIT Equipment Collateral,
Series 2000-2, Class A4,
6.93%, 7/20/11........................ 970 958
Copelco Capital Funding Corp.,
Series 2000-A, Class A3,
7.12%, 8/18/03........................ 940 945
Daimler Chrysler Auto Trust,
Series 2000-C, Class A3,
6.82%, 9/6/04......................... 1,611 1,617
Discover Card Master Trust,
Series 1999-1, Class A,
5.30%, 8/15/04........................ 1,140 1,118
Discover Card Master Trust,
Series 1999-2, Class A,
5.90%, 10/15/04....................... 2,200 2,172
Green Tree Financial Corp.,
Series 1999-2, Class A3,
6.08%, 12/1/30........................ 2,260 2,164
MBNA Master Credit Card Trust,
Series 1998-D, Class A,
5.80%, 12/15/05....................... 2,000 1,958
MBNA Master Credit Card Trust,
Series 1999-M, Class A,
6.60%, 4/16/07........................ 1,380 1,374
Peco Energy Transition Trust,
Series 2000-A, Class A2,
7.30%, 9/1/04......................... 1,320 1,326
Residential Asset Securities Corp.,
Series 1999-KS3, Class A4,
7.38%, 12/25/25....................... 1,200 1,202
Total Asset Backed Securities (Cost $15,667) 15,489
Collateralized Mortgage Obligations (0.5%)
Federal National Mortgage Assoc.,
Series 1988-26, Class C,
7.50%, 7/25/18........................ 23 23
LB Commercial Conduit Mortgage Trust,
Series 1999-C1, Class A1,
6.41%, 8/15/07........................ 1,010 991
Total Collateralized Mortgage Obligations (Cost $1,012) 1,014
Commercial Paper (0.8%)
Household Finance,
6.66%, 11/1/00........................ 1,477 1,477
Total Commercial Paper (Cost $1,477) 1,477
Principal Market
Security Description Amount Value
Corporate Bonds (44.0%)
Aerospace/Defense (2.1%):
Lockheed Martin Corp.,
7.95%, 12/1/05........................$ 2,000 $ 2,055
Raytheon Co.,
6.75%, 8/15/07........................ 2,080 1,997
4,052
Aluminum (0.3%):
Alcoa, Inc., 7.25%, 8/1/05.............. 647 654
Automobiles (0.5%):
General Motors Acceptance Corp.,
5.50%, 1/14/02........................ 930 916
Banks (2.4%):
Bank of America Corp.,
7.80%, 2/15/10........................ 1,420 1,443
Bank One Corp.,
7.88%, 8/1/10......................... 925 932
Suntrust Banks, Inc.,
7.75%, 5/1/10......................... 920 927
Ubs Preferred Funding Trust 1,
8.62%, 10/1/49........................ 1,340 1,353
4,655
Banks -- Money Centers Regional (0.5%):
Royal Bank of Scotland,
9.12%, 3/31/49........................ 875 915
Beverages (0.4%):
J. Seagram & Sons, Inc.,
6.25%, 12/15/01....................... 770 765
Broadcasting/Cable (0.6%):
Cox Communications, Inc., 6.88%, ....... 1,078 1,058
Chemicals -- General (0.5%):
Dow Chemical Co.,
7.00%, 8/15/05........................ 930 932
Consumer Products --
Miscellaneous (1.4%):
Unilever Capital Corp.,
6.75, 11/1/03......................... 870 866
Unilever Capital Corp.,
7.13%, 11/1/10........................ 1,835 1,814
2,680
Cosmetics & Toiletries (1.4%):
Avon Products, Inc.,
7.15%, 11/15/09....................... 2,854 2,740
Diversified (1.4%):
D.R. Investments,
7.10%, 5/15/02 (b).................... 2,750 2,729
Electronic & Electrical -- General (0.6%):
Texas Instruments, Inc.,
7.00%, 8/15/04........................ 1,230 1,233
See notes to financial statements.
70
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments -- continued
Intermediate Income Fund October 31, 2000
(Amounts in Thousands)
Principal Market
Security Description Amount Value
Financial Services (9.9%):
Amerus Life Holdings, Inc.,
6.95%, 6/15/05........................$ 2,700 $ 2,532
AT&T Capital Corp.,
6.60%, 5/15/05, MTN................... 915 854
Boeing Capital Corp.,
7.10%, 9/27/05........................ 1,220 1,225
CIT Group, Inc.,
7.38%, 3/15/03........................ 450 451
Citigroup Inc.,
7.25%, 10/1/10........................ 2,515 2,497
DaimlerChrysler Financial
Services North America LLC,
5.69%, 11/15/01, MTN.................. 1,495 1,480
Ford Motor Credit Corp.,
7.24%, 2/15/04........................ 1,500 1,507
General Electric Capital Corp.,
6.33%, 9/17/01, MTN................... 815 813
General Electric Capital Corp.,
7.50%, 6/5/03......................... 2,400 2,448
General Electric Capital Corp.,
7.50%, 5/15/05........................ 890 910
Heller Financial, Inc.,
7.88%, 5/15/03........................ 655 661
Household Finance Corp.,
8.00%, 5/9/05......................... 1,590 1,626
Merrill Lynch,
7.18%, 2/11/03, MTN................... 240 241
Morgan Stanley Dean Witter,
7.13%, 1/15/03........................ 1,135 1,142
Morgan Stanley Dean Witter,
7.75%, 6/15/05........................ 475 485
18,872
Insurance (2.6%):
Allstate Corp.,
7.20%, 12/1/09........................ 650 636
American General Finance,
7.45%, 1/15/05, MTN................... 565 572
American General Finance,
7.50%, 8/11/10........................ 900 899
Liberty Mutual Insurance Co.,
8.20%, 5/4/07 (b)..................... 630 627
Prudential Insurance,
7.65%, 7/1/07 (b)..................... 2,300 2,274
5,008
Manufacturing/Diversified (0.8%):
Honeywell International, Inc.,
6.88%, 10/3/05........................ 1,613 1,613
Manufacturing -- Consumer Goods (0.7%):
Tyco International Group,
6.88%, 9/5/02......................... 1,330 1,327
Media (0.9%:)
Viacom, Inc., 7.75%, 6/1/05............. 605 618
Viacom, Inc., 7.70%, 7/30/10............ 993 1,011
1,629
Principal Market
Security Description Amount Value
Oil & Gas Exploration,
Production & Services (3.5%):
Amerada Hess Corp.,
7.38% 10/1/09.........................$ 2,504 $ 2,502
Union Oil Co. of California,
7.20%, 5/15/05........................ 2,230 2,227
Union Pacific Resources Group, Inc.,
7.00%, 10/15/06....................... 1,935 1,894
6,623
Oil-Integrated Companies (1.2%):
Coastal Corp., 7.75%, 6/15/10........... 2,280 2,309
Paper Products (0.8%):
Abitibi Consolidated, Inc.,
8.55%, 2/1/10......................... 1,590 1,578
Pipelines (1.7%):
Kinder Morgan Energy Partners, LP,
8.00%, 3/15/05........................ 1,570 1,609
Kinder Morgan, Inc.,
6.45%, 11/30/01....................... 1,633 1,621
3,230
Real Estate (0.3%):
EOP Operating LP,
8.38%, 3/15/06........................ 610 630
Real Estate Investment Trusts (0.4%):
Cabot Industrial Property LP,
7.13%, 5/1/04......................... 740 725
Retail (0.8%):
Target Corp., 7.50%, 8/15/10............ 1,070 1,063
Wal-Mart Stores, 6.88%, 8/10/09......... 490 487
1,550
Retail -- Specialty Stores (1.1%):
Lowes Cos., Inc., 8.25%, 6/1/10......... 1,952 2,025
Telecommunications (1.6%):
GTE Corp., 6.36%, 4/15/06............... 1,590 1,528
WorldCom, Inc., 7.88%, 5/15/03.......... 1,420 1,445
2,973
Telecommunications --
Services & Equipment (0.6%):
Vodafone Airtouch Plc.,
7.75%, 2/15/10 ....................... 1,205 1,228
Tobacco & Tobacco Products (0.2%):
R.J. Reynolds Tobacco Holding,
7.38%, 5/15/03........................ 390 372
Utilities -- Electric (1.5%):
Duke Energy Corp.,
7.38%, 3/1/10......................... 1,720 1,722
Korea Electric Power,
6.38%, 12/1/03........................ 1,265 1,203
2,925
Utilities -- Natural Gas (0.6%):
Williams Cos., Inc.,
6.63%, 11/15/04....................... 1,165 1,140
See notes to financial statements.
71
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments -- continued
Intermediate Income Fund October 31, 2000
(Amounts in Thousands, Except Shares)
Principal Market
Security Description Amount Value
Utilities -- Telecommunications (2.7%):
Sprint Capital Corp.,
7.63%, 6/10/02, MTN...................$ 2,422 $ 2,440
Telefonica Europe BV,
7.75%, 9/15/10........................ 2,754 2,768
..................................... 5,208
Total Corporate Bonds (Cost $84,248) 84,294
U.S. Government Agencies (23.7%)
Business Services (0.6%):
United Mexican States,
8.50%, 2/1/06......................... 660 648
United Mexican States,
9.88%, 2/1/10......................... 475 494
1,142
Federal Farm Credit Bank (1.5%):
6.63%, 2/1/02........................... 2,945 2,949
Federal Home Loan Bank (0.7%):
7.13%, 5/22/01.......................... 1,300 1,303
Federal Home Loan Mortgage
Corp. (9.0%):
6.63%, 8/15/02 (c)...................... 2,070 2,075
7.38%, 5/15/03.......................... 2,700 2,758
5.00%, 1/15/04 (c)...................... 2,518 2,412
7.00%, 7/15/05.......................... 2,990 3,046
7.00%, 3/15/10.......................... 3,709 3,784
6.88%, 9/15/10.......................... 3,091 3,130
17,205
Federal National Mortgage
Association (11.2%):
5.63%, 3/15/01 (c)...................... 2,412 2,403
5.38%, 3/15/02.......................... 1,672 1,647
7.55%, 4/22/02.......................... 1,375 1,395
6.75%, 8/15/02.......................... 1,354 1,361
5.78%, 5/7/04 (c)....................... 3,050 2,970
7.00%, 7/15/05 (c)...................... 2,101 2,140
7.30%, 7/19/05 (c)...................... 3,230 3,241
6.63%, 10/15/07 (c)..................... 3,220 3,232
7.25%, 1/15/10.......................... 2,972 3,080
21,469
Small Business Administration (0.7%):
Small Business Administration
Participation Certificates,
Series 1999-20D, Class 1,
6.15%, 4/1/19......................... 1,361 1,287
Total U.S. Government Agencies (Cost $45,087) 45,355
Shares or
Principal Market
Security Description Amount Value
U.S. Government Mortgage Backed (4.5%)
Federal Home Loan Mortgage
Corp. (1.0%):
6.00%, 2/1/13-4/1/26.................... $ 1,307 $ 1,252
6.50%, 1/1/29........................... 423 407
7.00%, 10/1/28.......................... 18 18
7.50%, 4/1/28-3/1/29.................... 228 228
1,905
Federal National Mortgage
Association (2.9%):
6.00%, 12/1/28.......................... 34 32
6.50%, 7/1/28-9/1/28.................... 69 67
7.00%, 10/1/26.......................... 155 152
7.50%, 2/1/29-1/1/30.................... 363 362
8.00%, 11/1/19-2/1/30................... 792 802
8.50%, 8/1/19-1/1/30.................... 819 836
9.50%, 10/1/21.......................... 688 714
10.00%, 11/1/13......................... 1,400 1,485
10.50%, 11/1/13......................... 439 475
11.00%, 11/1/13......................... 605 655
5,580
Government National Mortgage
Assoc. (0.6%):
6.50%, 7/15/28.......................... 68 66
7.00%, 9/15/23-4/15/28.................. 598 593
7.50%, 4/15/29.......................... 178 178
9.00%, 11/15/17......................... 353 365
1,202
Total U.S. Government Mortgage Backed (Cost $8,701) 8,687
U.S. Treasury Obligations (16.9%)
U.S. Treasury Notes (16.9%):
5.88%, 10/31/01 (c)..................... 2,936 2,923
6.38%, 8/15/02 (c)...................... 13,484 13,568
5.75%, 4/30/03 (c)...................... 4,876 4,857
5.88%, 11/15/04 (c)..................... 3,450 3,451
6.75%, 5/15/05.......................... 600 622
7.00%, 7/15/06 (c)...................... 4,874 5,138
5.75%, 8/15/10.......................... 1,710 1,708
Total U.S. Treasury Obligations (Cost $32,125) 32,267
Securities Purchased With Cash Collateral (15.3%)
Investment Companies (2.8%):
AIM Short Term Prime Obligations Fund... 13,147 13
AIM Liquid Assets Portfolio............. 2,061,131 2,061
Merrimac Cash Fund...................... 3,320,301 3,321
5,395
Time Deposits (1.0%):
PNC Bank, 6.56%, 11/1/00................$ 996 996
National City Bank, 6.50%, 11/1/00 996 996
1,992
See notes to financial statements.
72
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments -- continued
Intermediate Income Fund October 31, 2000
(Amounts in Thousands)
Principal Market
Security Description Amount Value
Repurchase Agreements (11.5%):
First Union, 6.78%, 11/1/00
(Collateralized by $4,272
Highwoods/Forsyth, 7.00%, 12/1/06,
market value $4,120)..................$ 4,000 $ 4,000
Goldman Sachs, 6.71%, 11/1/00
(Collateralized by $7,567
various Corporate Bonds,
5.13%-8.70%, 11/15/01-7/31/97,
market value $6,788).................. 4,000 4,000
Lehman Brothers, 6.68%, 11/1/00
(Collateralized by $5,150
various Corporate Bonds,
0.00%-8.05%, 4/16/01-10/15/30,
market value $5,154).................. 5,000 5,000
Merrill Lynch, 6.75%, 11/1/00
(Collateralized by $5,790
various Corporate Bonds,
0.00%-8.18%, 3/15/03-1/30/37,
market value $5,150).................. 5,000 5,000
Morgan Stanley Dean Witter,
6.73%, 11/1/00
(Collateralized by $4,133
Lehman Brothers, 8.25%, 6/15/07,
market value $4,218) 4,000 4,000
22,000
Total Securities Purchased
With Cash Collateral (Cost $29,387) 29,387
Total Investments (Cost $217,704) (a) -- 113.8% 217,970
Other liabilities in excess of assets -- (13.8)% (26,484)
TOTAL NET ASSETS -- 100.0% $191,486
(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 $18. Cost for federal income tax purposes
differs from value by net unrealized appreciation of securities as
follows (amounts in thousands):
Unrealized appreciation $ 1,530
Unrealized depreciation (1,282)
Net unrealized appreciation $ 248
(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, 2000.
* 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, 2000.
** Put and demand features exist allowing the Fund to require the repurchase
of the investment within variable time periods less than one year.
MTN -- Medium Term Note
See notes to financial statements.
73
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments
Fund for Income October 31, 2000
(Amounts in Thousands)
Principal Market
Security Description Amount Value
Collateralized Mortgage Obligations (17.1%)
Government National Mortgage
Assoc. (17.1%):
Government National Mortgage Assoc.,
Series 1996-21, Class J,
7.00%, 7/16/13 ....................... $ 2,147 $ 2,074
Government National Mortgage Assoc.,
Series 1999-22, Class VB,
7.00%, 11/20/14....................... 3,000 2,927
Government National Mortgage Assoc.,
Series 1999-47, Class VD,
8.00%, 12/30/29....................... 4,000 4,072
Government National Mortgage Assoc.,
Series 1998-19, Class DB,
8.50%, 6/20/16........................ 1,257 1,267
Government National Mortgage Assoc.,
Series 1997-18, Class HA,
9.50%, 7/20/21 ....................... 571 587
Government National Mortgage Assoc.,
Series 1997-20, Class B,
9.50%, 8/20/21 ....................... 942 970
Government National Mortgage Assoc.,
Series 1998-4, Class P,
9.00%, 3/20/22 ....................... 1,291 1,331
Government National Mortgage Assoc., ...
Series 1998-13, Class DB,
9.00%, 4/20/22........................ 1,117 1,155
Government National Mortgage Assoc.,
Series 1999-36, Class HA,
7.50%, 6/20/23........................ 1,765 1,755
Government National Mortgage Assoc.,
Series 1998-12, Class GA,
9.00%, 12/20/23....................... 1,789 1,845
Government National Mortgage Assoc.,
Series 1998-25, Class AP,
8.50%, 2/20/24........................ 795 817
Government National Mortgage Assoc.,
Series 1996-9, Class PE,
7.00%, 10/20/25 ...................... 3,261 3,160
Government National Mortgage Assoc.,
Series 1999-24, Class D,
7.00%, 7/20/26........................ 2,480 2,391
Government National Mortgage Assoc.,
Series 2000-6, Class BC,
8.00%, 9/20/26........................ 5,000 5,108
Government National Mortgage Assoc.,
Series 2000-13, Class HA,
8.00%, 10/16/26....................... 5,080 5,170
Government National Mortgage Assoc.,
Series 1997-2, Class E,
7.50%, 2/20/27........................ 735 726
Principal Market
Security Description Amount Value
Government National Mortgage Assoc.,
Series 2000-24, Class AE,
7.50%, 8/20/27........................ $ 5,000 $ 4,961
Government National Mortgage Assoc.,
Series 1999-6, Class AB,
8.00%, 3/16/28 ....................... 2,561 2,604
Government National Mortgage Assoc.,
Series 2000-26, Class ZY,
7.50%, 1/20/30........................ 3,019 2,869
Total Collateralized Mortgage Obligations
(Cost $46,352) 45,789
U.S. Government Mortgage Backed (75.4%)
Government National Mortgage
Assoc. (75.4%):
6.50%, 11/15/23-4/15/29................. 42,749 41,489
6.63%, 1/15/27.......................... 2,926 2,861
7.00%, 9/15/16-7/20/29.................. 40,437 39,990
7.50%, 8/15/09-7/15/31.................. 41,125 41,295
7.75%, 8/15/29-11/15/38................. 8,453 8,630
8.00%, 7/15/02-3/15/35.................. 19,927 20,322
8.13%, 7/15/38.......................... 3,467 3,585
8.25%, 12/20/19-4/15/30................. 11,234 11,540
8.34%, 6/15/35.......................... 4,825 5,087
8.50%, 3/15/05-7/15/29.................. 9,702 9,947
8.62%, 5/15/35.......................... 1,076 1,154
8.75%, 3/20/17-4/15/22.................. 2,825 2,913
9.00%, 9/15/06-6/20/30.................. 10,227 10,542
9.50%, 10/15/02-6/15/21................. 1,449 1,503
10.00%, 5/15/12-8/15/25................. 1,104 1,165
10.50%, 2/15/16......................... 13 14
Total U.S. Government Mortgage Backed
(Cost $203,468) 202,037
U.S. Treasury Obligations (6.7%)
U.S. Treasury Bill (0.0%):
5.98%, 11/24/00......................... 50 50
U.S. Treasury Bonds (5.9%):
8.75%, 11/15/08......................... 10,520 11,291
12.00%, 8/15/13......................... 1,000 1,368
11.75%, 11/15/14........................ 2,250 3,141
15,800
U.S. Treasury Notes (0.8%):
7.88%, 11/15/04......................... 2,000 2,141
Total U.S. Treasury Obligations (Cost $18,227) 17,991
See notes to financial statements.
74
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments -- continued
Fund for Income October 31, 2000
(Amounts in Thousands, Except Shares)
Market
Security Description Shares Value
Investment Companies (0.1%)
Federated U.S. Treasury
Cash Reserve Fund..................... 325,043 $ 325
Total Investment Companies (Cost $325) 325
Total Investments (Cost $268,372) (a) -- 99.3% 266,142
Other assets in excess of liabilities -- 0.7% 1,952
TOTAL NET ASSETS -- 100.0% $268,094
(a) Cost for federal income tax purposes differs from value by net
unrealized depreciation of securities as follows (amounts in
thousands):
Unrealized appreciation $ 1,559
Unrealized depreciation (3,789)
Net unrealized depreciation $(2,230)
See notes to financial statements.
75
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments
Investment Quality Bond Fund October 31, 2000
(Amounts in Thousands)
Principal Market
Security Description Amount Value
Asset Backed Securities (5.3%)
American Express Credit
Account Master Trust,
Series 2000-5, Class A,
6.76%*, 11/15/00**....................$ 348 $ 348
CIT Equipment Collateral,
Series 2000-2, Class A4,
6.93%, 7/20/11........................ 200 198
Copelco Capital Funding Corp.,
Series 2000-A, Class A3,
7.12%, 8/18/03........................ 300 302
Ford Credit Auto Owner Trust,
Series 2000-F,
6.56%, 5/15/04........................ 1,120 1,116
MBNA Master Credit Card Trust,
Series 1998-D, Class A,
5.80%, 12/15/05....................... 1,400 1,370
MBNA Master Credit Card Trust 2000-I
Class A, 6.90%, 1/15/08............... 710 714
MBNA Master Credit Card Trust,
Series 2000-A, Class C,
7.90%, 7/16/07........................ 430 436
Peco Energy Transition Trust,
Series 2000-A, Class A2,
7.30%, 9/1/04......................... 780 784
Residential Asset Securities Corp.,
Series 1999-KS, Class A3,
7.18%, 10/1/29........................ 680 680
Total Asset Backed Securities (Cost $5,964) 5,948
Collateralized Mortgage Obligations (0.6%)
LB Commercial Conduit Mortgage Trust,
Series 1999-C1, Class A1,
6.41%, 8/15/07........................ 736 722
Total Collateralized Mortgage Obligations (Cost $721) 722
Commercial Paper (1.2%)
Household Finance, 6.66%, 11/1/00....... 1,330 1,330
Total Commercial Paper (Cost $1,330) 1,330
Convertible Bonds (6.8%)
Advertising (0.1%):
Young & Rubicam, Inc.,
Convertible Subordinated Notes,
3.00%, 1/15/05,
Callable 1/20/03 @ 101.2 (c).......... 110 110
Advertising Agencies (0.4%):
Interpublic Group of Cos., Inc.,
1.87%, 6/1/06,
Callable 6/5/02 @ 89.667 (c).......... 120 113
Principal Market
Security Description Amount Value
Omnicom Group, Inc.,
Convertible Subordinated Notes,
4.25%, 1/3/07,
Callable 12/29/00 @ 108.32 (c)........$ 50 $ 143
Omnicom Group, Inc.,
Convertible Subordinated Notes,
2.25%, 1/6/13,
Callable 12/31/01 @ 112.84............ 80 148
404
Automotive Parts (0.2%):
Magna International, Inc.,
Convertible Subordinated Notes,
5.00%, 10/15/02,
Continuously Callable @ 100 (c)....... 100 97
Magna International, Inc.,
Convertible Subordinated Notes,
4.88%, 2/15/05,
Callable 2/16/01 @ 100 (b)............ 125 110
207
Banks (0.1%):
Credit Suisse First Boston,
Convertible Subordinated Notes,
2.25%, 3/16/04,
Callable 3/16/01 @ 100................ 100 97
Biotechnology (0.2%):
Centocor, Inc.,
Convertible Subordinated Notes,
4.75%, 2/15/05,
Callable 2/21/01 @ 102.71 (c)......... 135 168
Broadcasting & Publishing (0.3%):
Clear Channel Communications, Inc.,
Convertible Subordinated Notes,
1.50%, 12/1/02........................ 245 232
Clear Channel Communications, Inc.,
Convertible Subordinated Notes,
2.63%, 4/1/03,
Callable 4/1/01 @ 101.5 (c)........... 135 150
382
Broadcasting/Cable (0.2%):
Cox Communication, Inc.,
Convertible Subordinated Notes,
3.00%, 3/14/30,
Callable 3/17/04 @ 100.00............. 360 263
Commercial Services (0.1%):
CUC International, Inc.,
Convertible Subordinated Notes,
3.00%, 2/15/02,
Callable 11/24/00 @ 101.2............. 130 120
Computers & Peripherals (0.2%)
Hewlett Packard Co.,
Convertible Subordinated Notes,
0.00%, 10/14/17,
Callable 11/8/00 @ 58.48.............. 280 197
See notes to financial statements.
76
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments -- continued
Investment Quality Bond Fund October 31, 2000
(Amounts in Thousands)
Principal Market
Security Description Amount Value
Conglomerates (0.0%):
Ogden Corp.,
Euro-dollar Convertible
Subordinated Notes Debentures,
5.75%, 10/20/02,
Continuously Callable @ 100...........$ 10 $ 9
Cosmetics & Toiletries (0.1%):
Avon Products, Inc.,
Convertible Subordinated Notes,
0.00%, 7/12/20,
Callable 7/12/03 @ 53.174 (b) (c)..... 130 67
Distribution/Wholesale (0.1%):
Costco Wholesale Corp.,
Convertible Subordinated Notes,
0.00%, 8/19/17,
Callable 8/19/02 @ 59.42.............. 180 158
Electronic Components --
Instruments (0.2%):
Noram Energy,
Convertible Subordinated Notes,
6.00%, 3/15/12,
Continuously Callable @ 100........... 20 17
SCI Systems, Inc.,
Convertible Subordinated Notes,
3.00%, 3/15/07,
Callable 3/20/03 @ 101.71 (c)......... 225 234
251
Financial Services (0.0%):
Elan Finance Corp. Ltd.,
Convertible Subordinated Notes,
0.00%, 12/14/18,
Callable 12/14/03 @ 61.66 (c)......... 30 23
Insurance -- Property, Casualty, &
Health (0.2%):
American International Group, Inc.,
Convertible Subordinated Notes,
0.50%, 5/15/07,
Callable 5/15/03 @ 100................ 40 46
Loews Corp.,
Convertible Subordinated Notes,
3.13%, 9/15/07,
Callable 9/15/02 @ 101.56............. 250 205
USF&G Corp.,
Convertible Subordinated Notes,
0.00%, 3/3/09,
Callable 11/24/00 @ 69.15............. 15 13
264
Manufacturing -- Machinery (0.0%):
Thermo Fibertek, Inc.,
Convertible Subordinated Notes,
4.50%, 7/15/04,
Callable 11/27/00 @ 100 .............. 35 31
Principal Market
Security Description Amount Value
Manufacturing -- Miscellaneous (0.3%):
PerkinElmer, Inc.,
Convertible Subordinated Notes,
0.00%, 8/7/20,
Callable 8/7/03 @ 55.44...............$ 400 $ 305
Medical Equipment & Supplies (0.1%):
Thermo Instruments System,
Convertible Subordinated Notes,
4.50%, 10/15/03,
Callable 11/27/00 @ 100 (b) (c)....... 80 74
Medical -- Hospital Services (0.1%):
Healthcare Management Associates, Inc.,
Convertible Subordinated Notes,
0.25%, 8/16/20,
Callable 8/16/03 @ 100 (b)............ 145 103
Newspapers (0.1%):
Times Mirror Co.,
Convertible Subordinated Notes,
0.00%, 4/15/17,
Callable 4/15/02 @ 49.45 (c).......... 100 59
Office Equipment & Supplies (0.0%):
Xerox Corp.,
Convertible Subordinated Notes,
0.57%, 4/21/18,
Callable 4/21/03 @ 64.89.............. 80 32
Oil & Gas Exploration, Production
& Services (0.9%):
Anadarko Petroleum Corp.,
Convertible Subordinated Notes,
0.00%, 3/7/20,
Callable 3/7/03 @ 55.44 (c)........... 235 189
Devon Energy Corp.,
Convertible Subordinated Notes,
4.90%, 8/15/08,
Callable 11/24/00 @ 104 (c)........... 200 187
Devon Energy Corp.,
Convertible Subordinated Notes,
4.95%, 8/15/08,
Callable 11/24/00 @ 104 .............. 195 183
Kerr-McGee Corp.,
Convertible Subordinated Notes,
5.25%, 2/15/10,
Callable 2/15/05 @ 100 (c)............ 200 246
Kerr-Mcgee Corp.,
Convertible Subordinated Notes,
7.50%, 5/15/14,
Continuously Callable @ 100........... 180 177
Nabors Industries, Inc.,
Convertible Subordinated Notes,
0.00%, 6/20/20,
Callable 6/20/03 @ 65.55 (c).......... 180 125
Transocean Sedco Forex, Inc.,
Convertible Subordinated Notes,
0.00%, 5/24/20,
Callable 5/24/03 @ 62.86.............. 100 60
1,167
See notes to financial statements.
77
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments -- continued
Investment Quality Bond Fund October 31, 2000
(Amounts in Thousands)
Principal Market
Security Description Amount Value
Oil-Integrated Companies (0.2%):
Sunoco, Inc.,
Convertible Subordinated Notes,
6.75%, 6/15/12,
Continuously Callable @ 100...........$ 60 $ 51
Texaco Capital,
Convertible Subordinated Notes,
3.50%, 8/5/04,
Continuously Callable @ 100........... 140 133
184
Oilfield Services & Equipment (0.2%):
Baker Hughes, Inc.,
Convertible Subordinated Notes,
0.00% 5/5/08,
Callable 12/18/00 @ 75.76 (c)......... 250 196
Pharmaceuticals (0.2%):
Allergan, Inc.,
Convertible Subordinated Notes,
0.00%, 11/1/20,
Callable 11/1/03 @ 65.55 ............. 90 58
Alza Corp.,
Convertible Subordinated Notes,
0.00%, 7/28/20,
Callable 7/28/03 @ 60.28 (b) (c)...... 170 112
Teva Pharmaceutical Industries Ltd.,
Convertible Subordinated Notes,
1.50%, 10/15/05,
Callable 10/15/03 @ 100.38 (b)........ 70 70
240
Publishing (0.1%):
Scholastic Corp.,
Convertible Subordinated Notes,
5.00%, 8/15/05,
Continuously Callable @ 100 (b)....... 80 89
Real Estate (0.1%):
EOP Operating LP,
Convertible Subordinated Notes,
7.25%, 11/15/08,
Callable 11/15/04 @ 100 (b) (c)....... 100 100
Real Estate Investment Trust (0.1%):
Federal Real Estate Trust,
Convertible Subordinated Notes,
5.25%, 10/28/03,
Continuously Callable @ 100........... 70 63
Real Estate Investment Trusts (0.3%):
Health Care Property Investors, Inc.,
Convertible Subordinated Notes,
6.00%, 11/8/00 (b).................... 340 340
Semiconductors (0.6%):
Analog Devices, Inc.,
Convertible Subordinated Notes,
4.75%, 10/1/05,
Callable 10/1/03 @ 101.9 (b).......... 170 160
Principal Market
Security Description Amount Value
Burr-Brown Corp.,
Convertible Subordinated Notes,
4.25%, 2/15/07,
Callable 2/20/03 @ 102.43 (c).........$ 180 $ 250
Solectron Corp.,
Convertible Subordinated Notes,
0.00%, 1/27/19,
Callable 5/8/03 @ 62.86 (c)........... 180 131
Solectron Corp.,
Convertible Subordinated Notes,
0.00%, 5/8/20,
Callable 5/8/03 @ 62.86............... 180 121
662
Software & Computer Services (0.4%):
Automatic Data Processing, Inc.,
Convertible Subordinated Notes,
0.00%, 2/20/12,
Callable 12/18/00 @ 56.05 (c)......... 40 69
Softkey International,
Convertible Subordinated Notes,
5.50%, 11/1/00........................ 374 373
442
Telecommunications (0.2%):
US Cellular Corp.,
Convertible Subordinated Notes,
0.00%, 6/15/15,
Callable 12/18/00 @ 41.2.............. 330 198
Telecommunications Equipment (0.1%):
Motorola, Inc.,
Convertible Subordinated Notes,
0.00%, 9/27/13,
Callable 12/1/00 @ 75.06.............. 125 110
Telecommunications --
Services & Equipment (0.2%):
Bell Atlantic Financial,
Convertible Subordinated Notes,
5.75%, 4/1/03,
Callable 4/1/01 @ 102.3............... 40 39
Bell Atlantic Financial,
Convertible Subordinated Notes,
5.75%, 4/1/03,
Callable 4/1/01 @ 102.3 .............. 50 48
Bell Atlantic Financial,
Convertible Subordinated Notes,
4.25%, 9/15/05,
Callable 9/15/02 @ 104.24 (b)......... 160 178
265
Transportation Services (0.2%):
United Parcel Service, Inc.,
Convertible Subordinated Notes,
1.75%, 9/27/07,
Callable 9/27/03 @ 100 (c)............ 165 180
Total Convertible Bonds (Cost $7,583) 7,560
See notes to financial statements.
78
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments -- continued
Investment Quality Bond Fund October 31, 2000
(Amounts in Thousands)
Principal Market
Security Description Amount Value
Corporate Bonds (28.4%)
Aerospace/Defense (1.7%):
Lockheed Martin Corp.,
8.20%, 12/1/09 (c)....................$ 400 $ 420
Raytheon Co.,
6.75%, 8/15/07........................ 1,135 1,090
United Technology Corp.,
7.50%, 9/15/29........................ 440 432
1,942
Banks (3.0%):
Bank of America Corp.,
7.80%, 2/15/10 (c).................... 655 666
Bank One Corp.,
7.88%, 8/1/10 (c)..................... 600 605
First Union Capital,
7.95%, 11/15/29....................... 265 237
Suntrust Banks, Inc.,
7.75%, 5/1/10......................... 545 549
UBS Preferred Funding Trust 1,
8.62%, 12/29/49 (c)................... 1,305 1,317
3,374
Banks -- Money Centers Regional (0.8%):
Korea Development Bank,
6.50%, 11/15/02....................... 365 355
Royal Bank of Scotland,
9.12%, 3/31/49........................ 520 544
899
Beverages (0.3%):
J. Seagram & Sons, Inc.,
6.25%, 12/15/01....................... 285 283
Broadcasting/Cable (0.3%):
Cox Communications, Inc., 6.88%, ....... 285 280
Chemicals -- General (0.5%):
Dow Chemical Co., 7.00%, 8/15/05 (c).... 520 521
Consumer Products --
Miscellaneous (0.5%):
Unilever Capital Corp.,
7.13%, 11/1/10 (c).................... 605 598
Cosmetics & Toiletries (0.5%):
Avon Products, Inc.,
7.15%, 11/15/09 (c)................... 550 528
Electronic & Electrical -- General (0.6%):
Texas Instruments, Inc.,
7.00%, 8/15/04........................ 640 642
Financial Services (5.4%):
AT&T Capital Corp.,
6.60%, 5/15/05, MTN................... 540 504
CIT Group, Inc.,
7.38%, 3/15/03 (c).................... 460 461
Citigroup Capital II,
7.75%, 12/1/36 (c).................... 280 252
Principal Market
Security Description Amount Value
DaimlerChrysler Financial Corp.
North America LLC,
5.69%, 11/15/01, MTN..................$ 890 $ 881
Ford Motor Credit Corp.,
7.24%, 2/15/04........................ 885 889
General Electric Capital Corp.,
7.50%, 6/5/03......................... 530 541
General Electric Capital Corp.,
7.50%, 5/15/05 (c).................... 530 542
Heller Financial, Inc.,
7.88%, 5/15/03........................ 390 394
Household Finance Corp.,
8.00%, 5/9/05 (c)..................... 940 961
Morgan Stanley Dean Witter,
7.13%, 1/15/03 (c).................... 335 337
Morgan Stanley Dean Witter,
7.75%, 6/15/05........................ 280 286
6,048
Heavy Machinery (0.3%):
Deere & Co.,
6.55%, 10/1/28........................ 370 310
Insurance (2.0%):
Allstate Corp.,
7.20%, 12/1/09 (c).................... 410 401
American General Finance,
7.45%, 1/15/05, MTN .................. 270 273
American General Finance,
7.50%, 8/11/10 (c) ................... 505 504
AON Capital Trust,
8.21%, 1/1/27 (c)..................... 550 503
Liberty Mutual Insurance Co.,
8.20%, 5/4/07 (b)..................... 530 528
2,209
Manufacturing/Diversified (0.6%):
Honeywell International, Inc.,
6.88%, 10/3/05........................ 720 720
Manufacturing -- Consumer Goods (0.3%):
Tyco International Group,
6.88%, 9/5/02......................... 360 359
Media (1.1%):
Time Warner, Inc.,
7.25%, 10/15/17 (c)................... 405 381
Viacom, Inc.,
7.75%, 6/1/05 (c)..................... 285 291
Viacom, Inc.,
7.70%, 7/30/10 (c).................... 565 575
1,247
Oil & Gas Exploration, Production
& Services (0.6%):
Pemex Finance Ltd.,
9.03%, 2/15/11 (b).................... 355 372
Union Pacific Resources Group, Inc.,
7.00%, 10/15/06....................... 325 318
690
See notes to financial statements.
79
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments -- continued
Investment Quality Bond Fund October 31, 2000
(Amounts in Thousands)
Principal Market
Security Description Amount Value
Oil-Integrated Companies (1.0%):
Amerada Hess Corp.,
7.88%, 10/1/29 (c)....................$ 570 $ 572
Conoco, Inc.,
6.95%, 4/15/29........................ 595 553
1,125
Oilfield Services & Equipment (0.4%):
Baker Hughes, Inc.,
6.88%, 1/15/29........................ 465 426
Pipelines (1.6%):
Enron Corp.,
7.38%, 5/15/19........................ 450 435
Kinder Morgan Energy Partners, LP,
8.00%, 3/15/05........................ 900 922
Kinder Morgan, Inc.,
6.45%, 11/30/01....................... 435 432
1,789
Real Estate (0.3%):
EOP Operating LP,
8.38%, 3/15/06........................ 345 356
Real Estate Investment Trusts (0.2%):
Cabot Industrial Property LP,
7.13%, 5/1/04......................... 210 206
Retail (0.4%)
Target Corp.,
7.50%, 8/15/10 (c).................... 415 412
Retail -- Specialty Stores (0.5%):
Lowes Cos., Inc.,
8.25%, 6/1/10......................... 565 586
Software & Computer Services (0.8%):
Sun Microsystems, Inc.,
7.35%, 8/15/04........................ 365 368
Sun Microsystems, Inc.,
7.65%, 8/15/09........................ 515 521
889
Telecommunications (1.7%):
GTE Corp., 6.84%, 4/15/18 (c)........... 855 781
Telefonica Europe, 8.25%, 9/15/30 (c)... 545 560
WorldCom, Inc., 7.88%, 5/15/03 (c)...... 605 616
1,957
Telecommunications -- Equipment (0.3%):
Marconi Corp., 8.38%, 9/15/30........... 390 371
Telecommunications --
Services & Equipment (0.4%):
Vodafone Airtouch Plc.,
7.75%, 2/15/10 (b) (c) ............... 435 443
Tobacco & Tobacco Products (0.2%):
R.J. Reynolds Tobacco Holding,
7.38%, 5/15/03........................ 255 244
Utilities -- Electric (1.1%):
Duke Energy Corp.,
7.38%, 3/1/10 ........................ 410 411
Principal Market
Security Description Amount Value
Korea Electric Power,
6.38%, 12/1/03 (c)....................$ 570 $ 542
Potomac Electric Power,
5.00%, 9/1/02......................... 310 295
1,248
Utilities -- Natural Gas (0.4%):
Williams Cos., Inc.,
6.63%, 11/15/04....................... 420 411
Utilities -- Telecommunications (0.6%):
Sprint Capital Corp.,
7.63%, 6/10/02, MTN................... 640 645
Total Corporate Bonds (Cost $31,652) 31,758
U.S. Government Agencies (3.8%)
Business Services (0.2%):
United Mexican States,
9.88%, 2/1/10 (c)..................... 265 276
Federal Home Loan Mortgage
Corp. (0.2%):
5.00%, 1/15/04 (c)...................... 257 246
Federal National Mortgage
Association (2.8%):
7.00%, 7/15/05 ......................... 351 358
6.63%, 10/15/07 (c)..................... 755 758
7.25%, 1/15/10 (c)...................... 1,895 1,963
3,079
U.S. Government Loan Trust (0.6%):
Israel, Series 1-B, 8.50%, 4/1/06....... 605 649
Total U.S. Government Agencies (Cost $4,263) 4,250
U.S. Government Mortgage Backed (36.0%)
Federal Home Loan Mortgage
Corp. (13.0%):
6.00%, 2/1/13-1/1/29.................... 5,247 5,004
6.25%, 9/15/23.......................... 429 422
6.43%, 1/28/14.......................... 755 688
6.50%, 5/1/26-7/1/29.................... 3,559 3,433
6.63%, 9/15/09 (c)...................... 736 730
6.75%, 3/15/31 (c)...................... 735 736
7.00%, 10/1/28-1/1/30................... 2,496 2,453
7.50%, 4/1/28-8/1/30.................... 784 784
8.50%, 7/1/21-4/1/29.................... 287 295
14,545
Federal National Mortgage
Association (16.4%):
6.00%, 10/1/23-7/1/29................... 2,396 2,266
6.50%, 3/1/18-3/1/29.................... 2,945 2,839
7.00%, 6/1/15-10/1/26 (c)............... 2,675 2,648
7.13%, 6/15/10 (c)...................... 665 686
7.25%, 5/15/30 (c)...................... 660 698
7.50%, 3/1/27-1/1/30.................... 2,128 2,126
8.00%, 6/1/12-3/1/30.................... 2,592 2,625
8.50%, 8/1/19-11/1/19................... 1,777 1,815
10.00%, 11/1/13......................... 1,615 1,714
See notes to financial statements.
80
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments -- continued
Investment Quality Bond Fund October 31, 2000
(Amounts in Thousands, Except Shares)
Shares or
Principal Market
Security Description Amount Value
10.50%, 11/1/13.........................$ 142 $ 153
11.00%, 11/1/13......................... 792 858
18,428
Government National Mortgage
Assoc. (6.6%):
6.50%, 7/15/28.......................... 660 639
7.00%, 11/15/23-4/15/28................. 3,563 3,525
7.50%, 4/15/29.......................... 504 506
8.00%, 8/20/25-2/20/27.................. 615 621
9.00%, 2/15/17-11/15/17................. 972 1,004
9.50%, 7/15/25.......................... 1,022 1,063
7,358
Total U.S. Government Mortgage Backed (Cost $40,364) 40,331
U.S. Treasury Obligations (16.8%)
U.S. Treasury Bonds (6.5%):
10.63%, 8/15/15 (c)..................... 800 1,159
7.50%, 11/15/16 (c)..................... 1,130 1,302
8.75%, 8/15/20 (c)...................... 1,330 1,747
8.00%, 11/15/21 (c)..................... 377 466
7.13%, 2/15/23 (c)...................... 740 842
6.13%, 8/15/29 (c)...................... 1,162 1,203
6.25%, 5/15/30 ......................... 500 533
7,252
U.S. Treasury Notes (9.5%):
5.88%, 10/31/01 (c)..................... 1,684 1,677
6.38%, 8/15/02.......................... 1,920 1,932
5.75%, 4/30/03 (c)...................... 2,078 2,070
5.88%, 11/15/04......................... 1,267 1,267
6.75%, 5/15/05 (c)...................... 938 972
7.00%, 7/15/06 (c)...................... 677 714
5.75%, 8/15/10 (c)...................... 2,020 2,018
10,650
U.S. Treasury Strips (0.8%):
0.00%, 11/15/21......................... 3,000 858
Total U.S. Treasury Obligations (Cost $18,626) 18,760
Securities Purchased With Cash Collateral (28.5%)
Investment Companies (5.1%):
AIM Short Term Prime Obligations Fund... 14,048 14
AIM Liquid Assets Portfolio............. 2,202,479 2,203
Merrimac Cash Fund...................... 3,548,000 3,548
5,765
Time Deposits (1.9%):
PNC Bank, 6.56%, 11/1/00................$ 1,064 1,064
National City Bank, 6.50%, 11/1/00...... 1,064 1,064
2,128
Repurchase Agreements (21.5%):
First Union, 6.78%, 11/1/00
(Collateralized by $5,450
Mack-Cali Realty, 7.25%, 3/15/09
market value $5,150).................. 5,000 5,000
Principal Market
Security Description Amount Value
Goldman Sachs, 6.71%, 11/1/00
(Collateralized by $7,233
various Corporate Bonds,
5.29%-8.38%,
7/15/02-9/1/48,
market value $7,155)..................$ 5,000 $ 5,000
Lehman Brothers, 6.68%, 11/1/00
(Collateralized by $5,195
El Paso Energy, 8.05%, 10/15/30,
Newbury, 0.00%, 2/14/01,
market value $5,152).................. 5,000 5,000
Merrill Lynch, 6.75%, 11/1/00
(Collateralized by $3,891
various Corporate Bonds,
6.30%-10.00%,
1/18/01-1/15/21,
market value $4,122).................. 4,000 4,000
Morgan Stanley Dean Witter,
6.73%, 11/1/00
(Collateralized by $5,167
Lehman Brothers, 8.25%, 6/15/07,
market value $5,272).................. 5,000 5,000
24,000
Total Securities Purchased
With Cash Collateral (Cost $31,893) 31,893
Total Investments (Cost $142,396) (a) -- 127.4% 142,552
Other liabilities in excess of assets -- (27.4)% (30,694)
TOTAL NET ASSETS -- 100.0% $111,858
(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 $46. Cost for federal income tax purposes
differs from value by net unrealized appreciation of securities as
follows (amounts in thousands):
Unrealized appreciation $1,089
Unrealized depreciation (979)
Net unrealized appreciation $ 110
(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, 2000.
* 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, 2000.
** Put and demand features exist allowing the Fund to require the repurchase
of the investment within variable time periods less than one year.
MTN -- Medium Term Note
See notes to financial statements.
81
<PAGE>
<TABLE>
Statements of Assets and Liabilities
The Victory Portfolios October 31, 2000
(Amounts in Thousands, Except Per Share Amounts)
<CAPTION>
Limited
Term Intermediate Investment
Income Income Fund for Quality
Fund Fund Income Bond Fund
<S> <C> <C> <C> <C>
ASSETS:
Investments, at value (Cost $38,498; $195,704;
$268,372; & $118,396) $38,601 $195,970 $266,142 $118,552
Repurchase agreements, at cost 6,000 22,000 -- 24,000
Interest receivable 395 2,980 2,202 1,310
Receivable for capital shares issued -- -- 1 28
Receivable from brokers for investments sold 129 886 -- 679
Receivable from affiliates 4 18 25 6
Prepaid expenses and other assets 7 16 93 17
Total Assets 45,136 221,870 268,463 144,592
LIABILITIES:
Payable to brokers for investments purchased 85 849 -- 710
Payable for capital shares redeemed -- 3 40 21
Payable for return of collateral received 8,034 29,387 -- 31,893
Accrued expenses and other payables:
Investment advisory fees 15 85 118 56
Administration fees 1 5 17 3
Custodian fees 4 8 15 7
Accounting fees 1 -- 4 --
Transfer agent fees -- 5 15 17
Shareholder service fees -- Class A 6 39 39 20
12B-1 -- Class G -- -- 111 --
Other 3 3 10 7
Total Liabilities 8,149 30,384 369 32,734
NET ASSETS:
Capital 41,581 201,948 286,477 132,371
Undistributed net investment income 72 191 77 55
Net unrealized appreciation/depreciation from investments 103 266 (2,230) 156
Accumulated undistributed net realized gains
(losses) from investment transactions (4,769) (10,919) (16,230) (20,724)
Net Assets $36,987 $191,486 $268,094 $111,858
Net Assets
Class A $36,987 $190,945 $124,131 $111,448
Class G -- 541 143,963 410
Total $36,987 $191,486 $268,094 $111,858
Outstanding units of beneficial interest (shares)
Class A 3,809 20,530 9,724 11,964
Class G -- 58 11,275 44
Total 3,809 20,588 20,999 12,008
Net asset value
Redemption price per share -- Class A $ 9.71 $ 9.30 $ 12.77 $ 9.32
Offering price per share -- Class G -- 9.26 12.77 9.34
Maximum sales charge -- Class A 2.00% 5.75% 2.00% 5.75%
Maximum offering price per share
(100%/(100%-maximum sales charge) of
net asset value adjusted to nearest cent) -- Class A $ 9.91 $ 9.87 $ 13.03 $ 9.89
</TABLE>
See notes to financial statements.
82
<PAGE>
<TABLE>
Statements of Operations
The Victory Portfolios For the Year Ended October 31, 2000
(Amounts in Thousands)
<CAPTION>
Limited
Term Intermediate Fund Investment
Income Income for Quality
Fund Fund Income Bond Fund
<S> <C> <C> <C> <C>
Investment Income:
Interest income $2,643 $13,591 $17,841 $ 8,386
Securities lending income 12 122 -- 60
Total Income 2,655 13,713 17,841 8,446
Expenses:
Investment advisory fees 207 1,498 1,198 887
Administration fees 62 300 360 177
Shareholder service fees -- Class A 103 498 199 294
12b-1 fees -- Class G -- 1 397 --
Accounting fees 47 86 91 80
Custodian fees 29 70 88 68
Legal and audit fees 5 20 55 12
Trustees' fees and expenses 1 5 3 3
Transfer agent fees 8 19 50 56
Registration and filing fees 12 19 49 16
Printing fees 2 5 50 16
Other 4 13 13 11
Total Expenses 480 2,534 2,553 1,620
Expenses voluntarily reduced (17) (460) (302) (268)
Expenses before reimbursement from distributor 463 2,074 2,251 1,352
Expenses reimbursed by the distributor (77) (242) (49) (120)
Net Expenses 386 1,832 2,202 1,232
Net Investment Income 2,269 11,881 15,639 7,214
Realized/Unrealized Gains (losses) from Investments:
Net realized gains (losses) from investment transactions (757) (5,472) (3,004) (3,996)
Change in unrealized appreciation/depreciation from investments 657 4,972 4,593 3,132
Net realized/unrealized gains (losses) from investments (100) (500) 1,589 (864)
Change in net assets resulting from operations $2,169 $11,381 $17,228 $ 6,350
</TABLE>
See notes to financial statements.
83
<PAGE>
<TABLE>
The Victory Portfolios Statements of Changes in Net Assets
(Amounts in Thousands)
<CAPTION>
Limited Term Intermediate
Income Fund Income Fund
Year Year Year Year
Ended Ended Ended Ended
October 31, October 31, October 31, October 31,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
From Investment Activities:
Operations:
Net investment income $ 2,269 $ 3,853 $ 11,881 $ 12,785
Net realized gains (losses) from investment transactions (757) (1,162) (5,472) (5,275)
Net change in unrealized appreciation/depreciation
from investments 657 (1,429) 4,972 (8,183)
Change in net assets resulting from operations 2,169 1,262 11,381 (673)
Distributions to Shareholders:
From net investment income by class:
Class A (2,293) (3,852) (11,978) (12,677)
Class G -- -- (16) --
From net realized gains from investment transactions -- -- -- (298)
Change in net assets from distributions to shareholders (2,293) (3,852) (11,994) (12,975)
Capital Transactions:
Proceeds from shares issued 4,327 13,368 37,736 48,771
Dividends reinvested 1,139 2,715 8,079 9,350
Cost of shares redeemed (15,843) (47,348) (77,906) (76,550)
Change in net assets from capital transactions (10,377) (31,265) (32,091) (18,429)
Change in net assets (10,501) (33,855) (32,704) (32,077)
Net Assets:
Beginning of period 47,488 81,343 224,190 256,267
End of period $ 36,987 $ 47,488 $191,486 $224,190
Share Transactions:
Issued 447 1,351 4,094 5,075
Reinvested 118 276 878 979
Redeemed (1,638) (4,834) (8,440) (8,002)
Change in shares (1,073) (3,207) (3,468) (1,948)
</TABLE>
See notes to financial statements.
84
<PAGE>
<TABLE>
The Victory Portfolios Statements of Changes in Net Assets
(Amounts in Thousands)
<CAPTION>
Fund for Investment Quality
Income Bond Fund
Ten
Year Months Year Year Year
Ended Ended Ended Ended Ended
October 31, October 31, October 31, October 31, October 31,
2000 1999<F1> 1998 2000 1999
<S> <C> <C> <C> <C> <C>
From Investment Activities:
Operations:
Net investment income $ 15,639 $ 10,141 $ 9,225 $ 7,214 $ 8,469
Net realized gains (losses) from
investment transactions (3,004) (1,816) 226 (3,996) (6,618)
Net change in unrealized appreciation/
depreciation from investments 4,593 (7,522) 1,816 3,132 (3,689)
Change in net assets resulting
from operations 17,228 803 11,267 6,350 (1,838)
Distributions to Shareholders:
From net investment income by class:
Class A (5,348) (1,239) -- (7,388) (8,392)
Class G (10,406) (8,850) (9,113) (12) --
In excess of net investment income
Class A -- -- -- (4) --
Class G -- -- -- --<F2> --
Change in net assets from distributions
to shareholders (15,754) (10,089) (9,113) (7,404) (8,392)
Capital Transactions:
Proceeds from shares issued 412,391 103,753 52,319 21,642 44,058
Proceeds from shares issued
in connection with acquisition -- 33,350 -- -- --
Proceeds from shares issued
in connection with merger 81,753 -- -- -- --
Dividends reinvested 56,816 9,191 7,552 4,713 5,673
Cost of shares redeemed (517,032) (64,028) (57,385) (54,405) (68,471)
Change in net assets from capital transactions 33,928 82,266 2,486 (28,050) (18,740)
Change in net assets 35,402 72,980 4,640 (29,104) (28,970)
Net Assets:
Beginning of period 232,692 159,712 155,072 140,962 169,932
End of period $ 268,094 $232,692 $159,712 $111,858 $140,962
Share Transactions:
Issued 5,312 8,005 3,958 2,342 4,512
Issued in connection with acquisition -- 2,426 -- -- --
Issued in connection with merger 6,578 -- -- -- --
Reinvested 1,044 711 572 511 587
Redeemed (10,136) (4,935) (4,338) (5,897) (7,036)
Change in shares 2,798 6,207 192 (3,044) (1,937)
<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.
<F2> Rounds to less than $1,000.
</FN>
</TABLE>
See notes to financial statements.
85
<PAGE>
<TABLE>
The Victory Portfolios Financial Highlights
For a Share Outstanding Throughout Each Period
<CAPTION>
Limited Term Income Fund
Year Year Year Year Year
Ended Ended Ended Ended Ended
October 31, October 31, October 31, October 31, October 31,
2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 9.73 $ 10.06 $ 9.94 $ 10.01 $ 10.15
Investment Activities
Net investment income 0.54 0.50 0.54 0.61 0.63
Net realized and unrealized gains
(losses) from investments (0.02) (0.33) 0.12 (0.07) (0.14)
Total from Investment Activities 0.52 0.17 0.66 0.54 0.49
Distributions
Net investment income (0.54) (0.50) (0.54) (0.61) (0.62)
In excess of net investment income -- -- -- -- (0.01)
Total Distributions (0.54) (0.50) (0.54) (0.61) (0.63)
Net Asset Value, End of Period $ 9.71 $ 9.73 $ 10.06 $ 9.94 $ 10.01
Total Return (excludes sales charges) 5.55% 1.72% 6.86% 5.57% 4.94%
Ratios/Supplemental Data:
Net Assets, End of Period (000) $36,987 $47,488 $81,343 $81,913 $90,019
Ratio of expenses to
average net assets <F2> 0.93% 0.96% 0.87% 0.85% 0.86%
Ratio of net investment income
to average net assets <F2> 5.49% 5.03% 5.44% 6.06% 5.90%
Ratio of expenses to
average net assets <F1> 1.16% 1.09% 1.02% 0.87% 0.89%
Ratio of net investment income
to average net assets <F1> 5.26% 4.90% 5.29% 6.04% 5.87%
Portfolio turnover 162% 220% 177% 139% 221%
<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 December 15, 1999, the advisor 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 Fund at a maximum of .90% until at
least February 28, 2001.
</FN>
</TABLE>
See notes to financial statements.
86
<PAGE>
<TABLE>
The Victory Portfolios Financial Highlights
For a Share Outstanding Throughout Each Period
<CAPTION>
Intermediate Income Fund
Class G
Class A Shares Shares
December 21,
Year Year Year Year Year 1999
Ended Ended Ended Ended Ended through
October 31, October 31, October 31, October 31, October 31, October 31,
2000 1999 1998 1997 1996 2000<F2>
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 9.32 $ 9.85 $ 9.61 $ 9.56 $ 9.69 $ 9.25
Investment Activities
Net investment income 0.56 0.50 0.53 0.56 0.56 0.50
Net realized and unrealized gains
(losses) from investments (0.02) (0.52) 0.24 0.05 (0.13) 0.02
Total from Investment Activities 0.54 (0.02) 0.77 0.61 0.43 0.52
Distributions
Net investment income (0.56) (0.50) (0.53) (0.56) (0.56) (0.51)
Net realized gains -- (0.01) -- -- -- --
Total Distributions (0.56) (0.51) (0.53) (0.56) (0.56) (0.51)
Net Asset Value, End of Period $ 9.30 $ 9.32 $ 9.85 $ 9.61 $ 9.56 $ 9.26
Total Return (excludes sales charges) 6.00% (0.18)% 8.30% 6.62% 4.56% 5.82%<F3>
Ratios/Supplemental Data:
Net Assets, End of Period (000) $190,945 $224,190 $256,267 $248,841 $272,087 $ 541
Ratio of expenses to
average net assets <F6> 0.92% 1.00% 0.96% 0.96% 0.94% 1.00%<F4>
Ratio of net investment income
to average net assets <F6> 5.95% 5.26% 5.48% 5.87% 5.81% 5.95%<F4>
Ratio of expenses to
average net assets <F1> 1.27% 1.26% 1.24% 1.09% 1.11% 5.06%<F4>
Ratio of net investment income
to average net assets <F1> 5.60% 5.00% 5.20% 5.74% 5.64% 1.89%<F4>
Portfolio turnover <F5> 278% 303% 318% 195% 164% 278%
<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> Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
<F6> On December 15, 1999, the advisor 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 Class A Shares and Class G Shares of the Fund
at a maximum of 0.90% and 1.00%, respectively, until at least February 28,
2001.
</FN>
</TABLE>
See notes to financial statements.
87
<PAGE>
<TABLE>
The Victory Portfolios Financial Highlights
For a Share Outstanding Throughout Each Period
<CAPTION>
Fund for Income
Class A Shares Class G Shares
March 26, January 1,
Year 1999 Year 1999 Year Year Year Year
Ended to Ended to Ended Ended Ended Ended
October 31, October 31, October 31, October 31, December 31, December 31, December 31, December 31,
2000 1999<F4><F7> 2000 1999<F4> 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 12.79 $ 13.14 $ 12.78 $ 13.32 $ 13.14 $ 12.88 $ 13.21 $ 12.02
Investment Activities
Net investment income 0.81 0.46 0.84 0.66 0.77 0.78 0.78 0.79
Net realized
and unrealized
gains (losses)
on investments --<F9> (0.36) (0.01) (0.54) 0.17 0.26 (0.34) 1.23
Total from
Investment
Activities 0.81 0.10 0.83 0.12 0.94 1.04 0.44 2.02
Distributions
Net investment income (0.83) (0.45) (0.84) (0.66) (0.76) (0.78) (0.77) (0.79)
Tax return of capital -- -- -- -- -- -- -- (0.04)
Total Distributions (0.83) (0.45) (0.84) (0.66) (0.76) (0.78) (0.77) (0.83)
Net Asset Value,
End of Period $ 12.77 $ 12.79 $ 12.77 $ 12.78 $ 13.32 $ 13.14 $ 12.88 $ 13.21
Total Return
(excludes sales charges) 6.67% 0.72%<F2> 6.74% 0.94%<F2> 7.37% 8.36% 3.51% 17.20%
Ratios/Supplemental Data:
Net Assets,
End of Period (000) $124,131 $40,270 $143,963 $192,422 $159,712 $155,072 $162,874 $185,434
Ratio of expenses to
average net assets <F5> 0.97% 1.00%<F3> 0.89% 0.88%<F3> 0.89% 0.90% 0.90% 0.92%
Ratio of net
investment income to
average net assets <F5> 6.48% 6.02%<F3> 6.55% 6.12%<F3> 5.79% 6.04% 6.06% 6.19%
Ratio of expenses to
average net assets <F1> 1.09% 1.22%<F3> 1.04% 1.04%<F3> 0.90% <F6> <F6> <F6>
Ratio of net investment
income to average net
assets <F1> 6.36% 5.80%<F3> 6.40% 5.96%<F3> 5.78% <F6> <F6> <F6>
Portfolio turnover <F8> 25% 24% 25% 24% 36% 12% 13% 16%
<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. Effective February 28, 2000,
the Adviser has also agreed to waive its management fee for Class A shares to
the extent necessary to maintain the net operating expenses of the Fund at a
maximum of 1.00% until at least February 28, 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.
<F9> Less than $.01 per share.
</FN>
</TABLE>
See notes to financial statements.
88
<PAGE>
<TABLE>
The Victory Portfolios Financial Highlights
For a Share Outstanding Throughout Each Period
<CAPTION>
Investment Quality Bond Fund
Class G
Class A Shares Shares
December 21,
Year Year Year Year Year 1999
Ended Ended Ended Ended Ended through
October 31, October 31, October 31, October 31, October 31, October 31,
2000 1999 1998 1997<F2> 1996 2000<F7>
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 9.37 $ 10.00 $ 9.78 $ 9.63 $ 9.76 $ 9.27
Investment Activities
Net investment income 0.57 0.54 0.55 0.57 0.57 0.53
Net realized and unrealized gains
(losses) from investments (0.04) (0.64) 0.22 0.14 (0.13) 0.08
Total from Investment Activities 0.53 (0.10) 0.77 0.71 0.44 0.61
Distributions
Net investment income (0.58) (0.53) (0.55) (0.56) (0.56) (0.54)
In excess of net investment income --<F8> -- -- -- -- --<F8>
Tax return of capital -- -- -- -- (0.01) --
Total Distributions (0.58) (0.53) (0.55) (0.56) (0.57) (0.54)
Net Asset Value, End of Period $ 9.32 $ 9.37 $ 10.00 $ 9.78 $ 9.63 $ 9.34
Total Return (excludes sales charges) 6.04% (1.18)% 8.06% 7.67% 4.65% 6.77%<F3>
Ratios/Supplemental Data:
Net Assets, End of Period (000) $111,448 $140,962 $169,932 $181,007 $150,807 $ 410
Ratio of expenses to
average net assets <F6> 1.04% 1.09% 1.06% 1.04% 1.01% 1.10%<F4>
Ratio of net investment income
to average net assets <F6> 6.10% 5.44% 5.49% 5.90% 5.99% 6.01%<F4>
Ratio of expenses to
average net assets <F1> 1.36% 1.34% 1.31% 1.17% 1.14% 6.24%<F4>
Ratio of net investment income
to average net assets <F1> 5.78% 5.19% 5.24% 5.77% 5.86% 0.87%<F4>
Portfolio turnover <F5> 304% 398% 492% 249% 182% 304%
<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 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.
<F3> Not annualized.
<F4> Annualized.
<F5> Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
<F6> Effective December 15,1999, 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 A Shares and Class G Shares
of the Fund at a maximum of 1.10% until at least February 28, 2001.
<F7> Period from commencement of operations.
<F8> Less than $.01 per share.
</FN>
</TABLE>
See notes to financial statements.
89
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments
National Municipal Bond Fund October 31, 2000
(Amounts in Thousands)
Principal Market
Security Description Amount Value
Municipal Bonds (110.4%)
Alabama (2.7%):
Phoenix School Warrants, GO,
5.65%, 8/1/21,
Callable 8/1/10 @ 102, AMBAC.......... $ 1,000 $ 1,006
Alaska (5.3%):
Valdez Marine Term Revenue,
Exxon Pipeline Co. Project,
4.60%*,11/1/00**,
Callable 11/1/00 @ 100................ 2,000 2,000
Arkansas (6.8%):
Little Rock School District,
Series B, GO,
5.50%, 2/1/30,
Callable 2/1/10 @100, FSA............. 2,000 1,980
Paragould Water Sewer
& Electric Revenue,
5.65%, 12/1/25,
Callable 12/1/10 @ 100, AMBAC (b)..... 580 581
2,561
California (3.4%):
A B C School District,
Capital Appreciation,
Series B, GO,
0.00%, 8/1/24, FGIC................... 500 131
California Poly Pomona
Fundation Inc. Revenue,
5.50%, 2/1/25, MBIA................... 400 403
Fullerton University Foundation,
Series A, 5.50%, 7/1/10, MBIA......... 100 107
State, GO,
4.00%, 9/1/07......................... 500 490
Union Elementary School District,
Capital Appreciation,
Series A, GO,
0.00%, 9/1/24, FGIC................... 620 162
1,293
Florida (11.7%):
Lakeland Electric & Water,
Series A,
4.75%, 10/1/17,
Callable 10/1/09 @ 101, MBIA.......... 250 230
Orange County Tourist Development Tax,
5.00%, 10/1/09, AMBAC................. 500 510
Pinellas County Capital Improvement,
4.75%, 1/1/10, FGIC................... 3,675 3,672
4,412
Principal Market
Security Description Amount Value
Georgia (3.4%):
Augusta Water & Sewer,
5.25%, 10/1/30,
Callable 10/1/10 @ 101, FSA........... $ 300 $ 287
Henry County, Water & Sewage Authority,
5.63%, 2/1/25,
Callable 2/1/10 @ 101, FGIC........... 1,000 1,005
1,292
Illinois (6.9%):
State Development Financial
Authority Pollution Control,
Amoco Oil Co. Project,
4.60%*, 11/1/00**..................... 1,200 1,200
State Educational Facilities Authority,
Robert Morris College,
5.80%, 6/1/30,
Callable 12/1/07 @ 100, MBIA.......... 1,000 1,005
State Educational Facility Authority,
DePaul University,
5.50%, 10/1/20,
Callable 10/1/10 @101, AMBAC.......... 400 397
2,602
Maine (4.0%):
Westbrook, GO,
5.75%, 10/1/19,
Callable 10/1/10 @ 101, AMBAC......... 715 740
Westbrook, GO,
5.75%, 10/1/20,
Callable 10/1/10 @ 101, AMBAC......... 730 755
1,495
Michigan (9.6%):
Municipal Bond Authority,
6.80%, 11/1/07,
Callable 11/1/04 @ 102................ 275 297
Muskegon Heights Water System,
Series A,
5.63%, 11/1/25,
Callable 11/1/10 @ 100, MBIA.......... 320 321
Muskegon Heights Water System,
Series A,
5.63%, 11/1/30,
Callable 11/1/10 @ 100, MBIA.......... 1,000 1,000
State Strategic Fund Pollution Control,
Consumers Power Project,
4.90%*, 11/1/00**, AMBAC.............. 2,000 2,000
3,618
Minnesota (1.3%):
St. Cloud Health Care,
St. Cloud Hospital Obligation Group,
Series A,
5.75%, 5/1/26,
Callable 5/1/10 @ 101, FSA............ 500 503
See notes to financial statements.
90
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments--continued
National Municipal Bond Fund October 31, 2000
(Amounts in Thousands)
Principal Market
Security Description Amount Value
Missouri (1.4%):
Excelsior Springs School District
Building Corp.,
6.50%, 3/1/09,
Callable 3/1/04 @ 100, FSA............ $ 500 $ 528
New Mexico (8.0%)
Hurley Pollution Control, Updates --
Kennecott Santa Fe,
4.60%*, 11/1/00**,
Callable 11/1/00 @ 100................ 3,000 3,000
New York (7.6%):
Albany Municipal Water
Financing Authority,
Water & Sewer Systems,
Capital Appreciation, Series A,
0.00%, 12/1/22, FGIC.................. 500 145
State Dormitory Authority,
University of Rochester, Series A,
5.00%, 7/1/23,
Callable 7/1/08 @ 101, MBIA........... 1,000 921
State Energy Research & Development
Authority on Pollution Control,
Niagara Mohawk Power Corp., Series C,
4.60%*, 11/1/00**,
LOC: Bank One N.A..................... 1,800 1,800
2,866
North Carolina (2.7%):
Mecklenburg County,
Public Improvements, Series D, GO,
4.75%, 4/1/05......................... 1,000 1,010
Ohio (12.2%):
Alliance School District,
Classroom Facilities, GO,
5.00%, 12/1/00, AMBAC................. 195 195
Alliance School District,
Classroom Facilities, GO,
5.00%, 12/1/07, AMBAC................. 355 363
Dayton Water Systems,
4.05%, 12/1/06, FSA................... 500 478
Franklin County Development,
American Chemical Society Project,
5.50%, 10/1/12,
Callable 10/1/09 @ 101................ 400 405
Hamilton County Sewer
System Improvements,
Metropolitan Sewer District, Series A,
5.75%, 12/1/25,
Callable 6/1/10 @ 101, MBIA........... 450 457
Harrison, GO,
5.40%, 12/1/09, FGIC.................. 150 158
Harrison, GO,
5.45%, 12/1/10, FGIC.................. 150 158
Principal Market
Security Description Amount Value
Harrison, GO,
5.90%, 12/01/18,
Callable 12/1/10 @ 100, FGIC.......... $ 250 $ 261
McDonald School District, GO,
6.00%, 12/1/22,
Callable 12/1/10 @ 100, AMBAC......... 1,000 1,052
State Special Obligation,
Elementary and Secondary
School Facilities, Series A,
5.80%, 6/1/03, AMBAC.................. 500 516
Toledo Limited Tax,
Street Improvements, GO,
5.00%, 12/1/10, FGIC.................. 505 514
4,557
Oklahoma (14.8%):
State Development Finance Authority,
Pooled Hospital Association, Series A,
5.60%, 6/1/20,
Callable 12/1/10 @ 101, AMBAC......... 750 746
State Development Finance Authority,
Pooled Hospital Association, Series A,
5.70%, 6/1/30,
Callable 12/1/10 @ 101, AMBAC......... 1,750 1,730
Tulsa County Independent School
District Number 001,
Combined Purpose, Series B, GO,
5.00%, 8/1/04, AMBAC.................. 3,000 3,049
5,525
Pennsylvania (2.0%):
Allegheny County Sanitation Authority,
5.50%, 12/1/30,
Callable 12/1/10 @ 101, MBIA.......... 250 246
Erie School District, GO,
5.80%, 9/1/29,
Callable 9/1/10 @100, AMBAC........... 250 254
Mountaintop Area JT Sanitation Authority,
5.65%, 12/15/30,
Callable 12/15/10 @ 100, MBIA......... 250 249
749
South Carolina (1.3%):
University of South Carolina, Series A,
5.75%, 6/1/30,
Callable 6/1/20 @ 100, FGIC .......... 500 506
South Dakota (1.0%):
Sioux Falls Sales Tax,
Recreational Facility Improvements,
4.00%, 11/15/00, AMBAC................ 370 370
Texas (1.4%):
Red River Education Financing,
Hockaday School Project,
5.50%, 5/15/20,
Callable 5/15/10 @ 100................ 520 510
See notes to financial statements.
91
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments--continued
National Municipal Bond Fund October 31, 2000
(Amounts in Thousands, Except Shares)
Shares or
Principal Market
Security Description Amount Value
Washington (1.6%):
Spokane County Airport and
Marine Improvements,
4.90%, 10/1/08........................ $ 400 $ 403
University of Washington,
Student Facilities Fee,
5.00%, 6/1/10, FSA.................... 200 201
604
Wisconsin (1.3%):
Keil Promissory Notes, GO,
4.80%, 11/1/07, FGIC.................. 500 501
Total Municipal Bonds (Cost $40,933) 41,508
Investment Companies (6.0%)
Federated Tax-Free
Money Market Fund..................... 2,157,848 2,158
Nuveen Tax-Exempt
Money Market Fund..................... 115,718 116
Total Investment Companies (Cost $2,274) 2,274
Total Investments (Cost $43,207) (a) -- 116.4% 43,782
Liabilities in excess of other assets -- (16.4)% (6,157)
TOTAL NET ASSETS -- 100.0% $37,625
(a) Cost for federal income tax purposes differs from value by net
unrealized appreciation of securities as follows (amounts in thousands):
Unrealized appreciation $615
Unrealized depreciation (40)
Net unrealized appreciation $575
(b) Represents security purchased on a when-issued basis. At October 31,
2000, total cost of investments purchased on a when-issued basis was $581.
* 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, 2000.
** Put and demand features allowing the Fund to require the repurchase of
the investment within variable time periods less than one year.
AMBAC -- AMBAC Indemnity Corp.
FGIC -- Financial Guaranty Insurance Co.
FSA -- Insured by Financial Security Assurance
GO -- General Obligation
LOC -- Letter of Credit
MBIA -- Municipal Bond Insurance Assoc.
See notes to financial statements.
92
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments
New York Tax-Free Fund October 31, 2000
(Amounts in Thousands)
Principal Market
Security Description Amount Value
New York Municipal Bonds (96.9%)
Albany Municipal Water Finance Authority,
Water & Sewer System Revenue,
0.00%, 12/1/18, FGIC.................. $ 1,000 $ 370
Albany Municipal Water Finance Authority,
Water & Sewer System Revenue,
0.00%, 12/1/19, FGIC.................. 1,000 349
Albany Municipal Water Finance Authority,
Water & Sewer System Revenue,
0.00%, 12/1/21, FGIC.................. 1,000 308
Catskill New York Central School District,
5.13%, 6/15/16,
Callable 6/15/09 @ 101, FGIC.......... 300 294
Clifton Park Water System,
5.00%, 10/1/19,
Callable 10/1/09 @ 101, FGIC.......... 310 291
Metropolitan Transportation Authority,
Transportation Facilities, Series I,
7.00%, 7/1/09, AMBAC.................. 250 290
Nassau County Industrial Development
Agency, 5.00%, 7/1/23,
Callable 7/1/08 @ 102, MBIA........... 150 138
Nassau County Industrial Development
Agency, Civic Facilities, Hofstra
University Project, 6.75%, 8/1/11,
Prerefunded 8/1/01 @ 102, AMBAC....... 250 259
New York City Cultural Resources,
Museum of Modern Art,
6.63%, 1/1/11,
Prerefunded 1/1/02 @ 102, AMBAC....... 680 711
New York City Housing Development Corp.,
Multi-Unit Mortgage, Series A,
7.30%, 6/1/10,
Callable 6/1/01 @ 102, FHA............ 700 723
New York City Housing Development Corp.,
Multi-Unit Mortgage, Series A,
7.35%, 6/1/19,
Callable 6/1/01 @ 102, FHA............ 675 697
New York City Industrial Development
Agency, Civic Facilities,
USTA National Tennis Center Project,
6.38%, 11/15/14,
Callable 11/15/04 @ 102, FSA.......... 200 214
New York City Municipal Water Finance
Authority, Water & Sewer System
Revenue, 6.75%, 6/15/16,
Callable 6/15/01 @ 101, FGIC.......... 325 332
New York City Municipal Water Finance
Authority, Water & Sewer System
Revenue, 6.75%, 6/15/16,
Prerefunded 6/15/01 @ 101, FGIC....... 325 333
New York City Municipal Water Finance
Authority, Water & Sewer System
Revenue, 0.00%, 6/15/19, MBIA......... 3,000 1,068
New York City, Series B, GO,
7.00%, 10/1/18,
Callable 4/1/01 @ 100, FSA............ 300 303
Principal Market
Security Description Amount Value
New York City, Series C, GO,
7.00%, 2/1/12,
Callable 2/1/01 @ 100, FGIC........... $ 60 $ 60
North Hempstead,
4.75%, 1/15/23,
Callable 1/15/08 @ 101, FGIC.......... 750 663
Rome New York City School District, GO,
5.50%, 6/15/18,
Callable 6/15/09 @ 101, FSA........... 335 337
State Dormitory Authority,
0.00%, 7/1/18, MBIA .................. 1,010 381
State Dormitory Authority,
4.75%, 8/15/19,
Callable 2/15/09 @ 101, MBIA.......... 500 449
State Dormitory Authority,
4.75%, 5/15/24,
Callable 5/15/08 @ 101, MBIA.......... 300 263
State Dormitory Authority,
City University, Series 2,
6.75%, 7/1/24,
Prerefunded 7/1/04 @ 102, MBIA........ 700 767
State Dormitory Authority, Ithaca College,
6.50%, 7/1/10,
Prerefunded 7/1/01 @ 102, MBIA........ 750 776
State Dormitory Authority,
Judicial Facilities Leases, Series B,
7.00%, 4/15/16,
Callable 4/15/01 @ 102, MBIA.......... 225 232
State Local Government Assistance,
Series B, 4.88%, 4/1/20,
Callable 4/1/08 @ 101, MBIA........... 500 454
State Medical Care Facilities Finance Agency,
7.38%, 8/15/19,
Callable 11/27/00 @ 101, MBIA......... 145 147
State Medical Care Facilities Finance
Agency, North Shore University Hospital,
7.20%, 11/1/20,
Prerefunded 11/1/00 @ 102, MBIA....... 565 576
State Tollway Authority, Series C,
6.00%, 1/1/25,
Prerefunded 1/1/05 @ 102, FGIC........ 550 592
State, GO,
6.75%, 8/1/18,
Prerefunded 8/1/01 @ 102, AMBAC....... 370 384
State, GO,
6.75%, 8/1/19,
Prerefunded 8/1/01 @ 102, AMBAC....... 325 337
Triborough Bridge & Tunnel Authority,
Series T, 7.00%, 1/1/20,
Prerefunded 1/1/01 @ 102, MBIA ....... 900 922
Triborough Bridge & Tunnel Authority,
Special Obligation, Series B,
6.88%, 1/1/15,
Callable 1/1/01 @ 102, AMBAC.......... 1,000 1,023
Webster New York Central School District,
5.13%, 6/15/16,
Callable 6/15/09 @ 101, FGIC.......... 300 295
See notes to financial statements.
93
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments--continued
New York Tax-Free Fund October 31, 2000
(Amounts in Thousands, Except Shares)
Shares or
Principal Market
Security Description Amount Value
Yonkers New York,
5.25%, 10/1/19,
Callable 10/1/10 @ 101, FGIC.......... $ 500 $ 485
Total New York Municipal Bonds (Cost $15,377) 15,823
Investment Companies (1.6%)
Providence of New York Fund............. 261,839 262
Total Investment Companies (Cost $262) 262
Total Investments (Cost $15,639) (a) -- 98.5% 16,085
Other assets in excess of liabilities -- 1.5% 251
TOTAL NET ASSETS -- 100.0% $16,336
(a) Cost for federal income tax purposes differs from value by net
unrealized appreciation of securities as follows (amounts in thousands):
Unrealized appreciation $544
Unrealized depreciation (98)
Net unrealized appreciation $446
AMBAC -- AMBAC Indemnity Corp.
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.
94
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments
Ohio Municipal Bond Fund October 31, 2000
(Amounts in Thousands)
Principal Market
Security Description Amount Value
Ohio Municipal Bonds (98.4%)
General Obligations (55.4%):
Business & Public Services (0.1%):
Mt Vernon Knox County
Public Library District,
5.15%, 12/1/09........................ $ 220 $ 227
County, City & Special District (6.0%):
Bath Township Capital Appreciation,
Real Estate Acquisition,
0.00%, 12/1/07, AMBAC................. 205 145
Bath Township Capital Appreciation,
Real Estate Acquisition,
0.00%, 12/1/08, AMBAC................. 205 138
Butler County,
5.60%, 12/1/09,
Callable 12/1/06 @ 101, AMBAC......... 180 190
Cincinnati,
6.30%, 12/1/15,
Callable 6/1/05 @ 101 AMT............. 1,250 1,320
Columbus Tax Increment,
Easton Project,
4.88%, 12/1/24,
Callable 6/1/09 @ 101, AMBAC.......... 1,000 902
Crawford County Capital Appreciation,
0.00%, 12/1/10, AMBAC................. 300 179
Crawford County Capital Appreciation,
0.00%, 12/1/13, AMBAC................. 500 248
Erie County,
5.50% 10/1/20,
Callable 10/1/10 @ 100, FGIC.......... 450 449
Madison County,
7.00%, 12/1/19,
Prerefunded 12/1/04 @ 102, AMBAC...... 600 666
Maple Heights Capital Appreciation,
0.00%, 12/1/07, FSA................... 500 355
Maple Heights Capital Appreciation,
0.00%, 12/1/08, FSA................... 505 340
Maple Heights Capital Appreciation,
0.00%, 12/1/10, FSA................... 310 187
Monroe Falls,
Series A, 6.95%, 12/1/14,
Callable 12/1/04 @ 101, AMBAC......... 1,000 1,088
Newark Capital Appreciation,
0.00%, 12/1/16, FGIC.................. 1,490 618
Scioto County,
5.70%, 12/1/20,
Callable 6/1/10 @101, AMBAC........... 400 408
Summit County,
Series A, 6.90%, 8/1/12,
Prerefunded 8/1/01 @ 102, AMBAC....... 255 265
Summit County,
Series A, 6.90%, 8/1/12,
Prerefunded 8/1/03 @ 100, AMBAC....... 230 244
Warren County Special Assesment,
6.55%, 12/1/14........................ 725 817
Principal Market
Security Description Amount Value
Westerville,
4.50%, 12/1/18,
Callable 12/1/09 @ 101................ $ 1,000 $ 873
Xenia,
5.75%, 6/1/20,
Callable 6/1/10 @ 101, FGIC........... 880 900
10,332
Education (41.3%):
Alliance City School District,
0.00%, 12/1/08 AMBAC.................. 380 252
Alliance City School District,
0.00%, 12/1/09 AMBAC.................. 385 242
Alliance City School District,
0.00%, 12/1/10 AMBAC.................. 395 234
Alliance City School District,
0.00%, 12/1/11 AMBAC.................. 405 226
Anthony Wayne Local School District,
5.75%, 12/1/30,
Callable 12/1/10 @ 101, FSA........... 2,215 2,242
Avon Local School District,
5.50%, 12/1/04, AMBAC................. 465 483
Avon Local School District,
5.55%, 12/1/05, AMBAC................. 250 262
Barnesville Village School District,
5.75%, 12/1/22,
Callable 12/1/10 @ 101................ 500 508
Batavia Local School District,
7.00%, 12/1/14, MBIA.................. 1,500 1,692
Big Walnut Local School District,
Capital Appreciation,
0.00%, 12/1/09, AMBAC................. 250 160
Brecksville-Broadview Heights
City School District,
6.50%, 12/1/16,
Callable 12/1/06 @ 102, FGIC.......... 1,000 1,098
Brunswick City School
District Improvements,
3.60%, 12/1/00, AMBAC................. 185 185
Brunswick City School
District Improvements,
3.70%, 12/1/01, AMBAC................. 200 198
Brunswick City School
District Improvements,
6.00%, 12/1/26,
Callable 12/1/09 @ 101, FGIC.......... 500 522
Buckeye Local School District,
5.50%, 12/1/25,
Callable 12/1/10 @ 100, FGIC.......... 600 597
Cambridge City School District,
5.70% 12/1/20,
Callable 12/1/10 @ 100................ 1,555 1,585
Cambridge City School District,
5.75%, 12/1/22,
Callable 12/1/10 @ 100, FSA........... 1,000 1,020
Campbell City School District,
5.75%, 12/1/22,
Callable 12/1/10 @ 100, FSA........... 1,000 1,017
See notes to financial statements.
95
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments--continued
Ohio Municipal Bond Fund October 31, 2000
(Amounts in Thousands)
Principal Market
Security Description Amount Value
Cardinal Local School District,
5.80%, 12/1/25,
Callable 12/1/10 @ 100................ $ 2,000 $ 2,045
Dublin City School District,
Capital Appreciation,
0.00%, 12/1/09, MBIA.................. 1,250 798
East Holmes Local School District,
6.13% 12/1/20,
Callable 12/1/10 @ 102, FGIC.......... 500 532
Edgewood City School District,
Capital Appreciation,
Series A, 0.00%, 12/1/13, MBIA........ 1,625 815
Edgewood City School District,
Capital Appreciation,
Series A, 0.00%, 12/1/15, MBIA........ 1,610 713
Fairfield City School District, TCRS,
7.45%, 12/1/14, FGIC.................. 1,000 1,220
Fostoria City School District,
Capital Appreciation,
0.00%, 12/1/10, MBIA.................. 375 223
Franklin City School District,
Capital Appreciation,
0.00%, 12/1/12, AMBAC................. 280 150
Franklin City School District,
Capital Appreciation,
0.00%, 12/1/13, AMBAC................. 280 141
Franklin City School District,
Capital Appreciation,
0.00%, 12/1/14, AMBAC................. 280 132
Graham Local School District,
Capital Appreciation,
0.00%, 12/1/11, MBIA.................. 200 114
Graham Local School District,
Capital Appreciation,
0.00%, 12/1/12, MBIA.................. 200 107
Hamilton City School
District Improvements,
Series A, 6.15%, 12/1/15.............. 500 551
Hamilton City School
District Improvements,
Series A, 6.15%, 12/1/16.............. 600 660
Heath City School District,
4.35%, 12/1/01, FGIC.................. 100 100
Heath City School District,
4.80%, 12/1/09, FGIC.................. 300 302
Heath City School District,
4.85%, 12/1/10, FGIC.................. 400 403
Hilliard Local School District, Series A,
Series A, 5.00%, 12/1/20,
Callable 12/1/06 @ 101, FGIC.......... 1,050 989
Hilliard School District,
0.00%, 12/1/16........................ 3,720 1,550
Hilliard School District,
0.00%, 12/1/17, FGIC.................. 3,720 1,453
Hilliard School District,
0.00% 12/1/19, FGIC................... 2,000 688
Principal Market
Security Description Amount Value
Indian Lake Local School District,
Capital Appreciation,
Construction & Improvements,
0.00%, 12/1/11, AMBAC................. $ 250 $ 142
Indian Lake Local School District,
Capital Appreciation,
Construction & Improvements,
0.00%, 12/1/12, AMBAC................. 250 134
Indian Lake Local School District,
Capital Appreciation,
Construction & Improvements,
0.00%, 12/1/13, AMBAC................. 250 125
Indian Lake Local School District,
Capital Appreciation,
Construction & Improvements,
0.00%, 12/1/14, AMBAC................. 250 118
Indian Lake Local School District,
Capital Appreciation,
Construction & Improvements,
0.00%, 12/1/15, AMBAC................. 250 110
Indian Lake Local School District,
Capital Appreciation,
Construction & Improvements,
0.00%, 12/1/16, AMBAC................. 250 103
Indian Valley Local School District,
7.00%, 12/1/14,
Callable 12/1/05 @ 102, AMBAC ........ 2,500 2,776
Jackson Local School District,
5.63%, 12/1/25,
Callable 12/1/10 @100, FSA............ 1,500 1,506
Lake Local School District,
5.75%, 12/1/26,
Callable 12/1/10 @ 100, FGIC.......... 5,540 5,621
Lakeview Local School District,
6.95%, 12/1/19,
Callable 12/1/04 @ 102, AMBAC......... 1,250 1,385
Lakota Local School District,
Capital Appreciation,
0.00%, 12/1/08, FGIC.................. 320 215
Liberty Benton Local School District,
Capital Appreciation,
0.00%, 12/1/15, AMBAC................. 570 251
Liberty Benton Local School District,
Capital Appreciation,
0.00%, 12/1/16, AMBAC................. 285 118
Lima City School District,
5.20%, 12/1/06, AMBAC................. 255 264
Lima City School District,
5.00%, 12/1/07, AMBAC................. 405 413
Lima City School District,
5.00%, 12/1/08, AMBAC................. 400 408
Lima City School District,
5.00%, 12/1/09, AMBAC................. 400 407
Lima City School District,
0.00%, 12/1/10 AMBAC.................. 305 179
Lima City School District,
0.00%, 12/1/11 AMBAC.................. 305 168
See notes to financial statements.
96
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments--continued
Ohio Municipal Bond Fund October 31, 2000
(Amounts in Thousands)
Principal Market
Security Description Amount Value
Lima City School District,
0.00%, 12/1/12 AMBAC.................. $ 520 $ 271
Lima City School District,
0.00%, 12/1/12 AMBAC.................. 305 158
Lima City School District,
0.00%, 12/1/13 AMBAC.................. 520 253
Lima City School District,
0.00%, 12/1/14 AMBAC.................. 520 237
Lima City School District,
5.50%, 12/1/22,
Callable 12/1/10 @ 102, AMBAC......... 1,000 991
Lima City School District,
5.60%, 12/1/22,
Callable 12/1/10 @ 101, FSA........... 1,235 1,247
Lima City School District,
6.00%, 12/1/22,
Callable 12/1/10 @ 102, AMBAC......... 2,000 2,105
Marion Local School District,
5.75%, 12/1/22,
Callable 12/1/10 @101, MBIA........... 230 234
Marysville Village School District,
0.00%, 12/1/13, AMBAC................. 555 279
Marysville Village School District,
0.00%, 12/1/16, MBIA.................. 500 207
Marysville Village School District,
0.00%, 12/1/17, AMBAC................. 955 373
Marysville Village School District,
6.00%, 12/1/24,
Callable @ 101 12/1/10, AMBAC......... 725 759
Morgan Local School District,
Capital Appreciation,
0.00%, 12/1/13........................ 200 100
Morgan Local School District,
Capital Appreciation,
0.00%, 12/1/16........................ 220 97
Mount Vernon City School District,
7.50%, 12/1/14,
Callable 12/1/04 @ 101, FGIC.......... 500 553
New Miami Local School District,
0.00%, 12/1/11, FSA................... 115 66
New Miami Local School District,
0.00%, 12/1/12, FSA................... 120 64
New Miami Local School District,
0.00%, 12/1/13, FSA................... 120 60
New Miami Local School District,
0.00%, 12/1/14, FSA................... 120 56
Newcomerstown Exempt Villiage
School Facilities,
6.25%, 12/1/23,
Callable 12/1/10 @ 102, MBIA.......... 900 964
Northeastern Local School District,
5.80%, 12/1/26,
Callable 12/1/10 @ 101, .............. 1,500 1,531
Northwest Local School District,
Capital Appreciation,
0.00%, 12/1/13, AMBAC................. 280 139
Principal Market
Security Description Amount Value
Northwest Local School District,
Capital Appreciation,
0.00%, 12/1/14, AMBAC................. $ 280 $ 130
Norwalk City School District,
4.75%, 12/1/26,
Callable 12/1/09 @ 100, AMBAC......... 1,250 1,091
Olentangy Local School District,
5.63%, 12/1/27,
Callable 12/1/10 @ 100, FSA........... 2,000 2,005
Olentangy Local School District,
Series A, 6.25%, 12/1/14,
Callable 12/1/04 @ 102................ 500 540
Pickerington Local School District,
Capital Appreciation,
0.00%, 12/1/12, AMBAC................. 870 460
Ridgemont Local School District,
Capital Appreciation,
0.00%, 12/1/10, AMBAC................. 185 112
Ridgemont Local School District,
Capital Appreciation,
0.00%, 12/1/11, AMBAC................. 185 105
Ridgemont Local School District,
Capital Appreciation,
0.00%, 12/1/12, AMBAC................. 185 99
Ridgemont Local School District,
Capital Appreciation,
0.00%, 12/1/13, AMBAC................. 185 93
Ridgemont Local School District,
Capital Appreciation,
0.00%, 12/1/14, AMBAC................. 185 87
Ripley-Union-Lewis,
Local School District,
Capital Appreciation,
0.00%, 12/1/06, FGIC.................. 145 108
Ripley-Union-Lewis,
Local School District,
Capital Appreciation,
0.00%, 12/1/07, FGIC.................. 245 174
Ripley-Union-Lewis,
Local School District,
Capital Appreciation,
0.00%, 12/1/10, FGIC.................. 245 148
Ripley-Union-Lewis,
Local School District,
Capital Appreciation,
0.00%, 12/1/11, FGIC.................. 245 140
Ripley-Union-Lewis,
Local School District,
Capital Appreciation,
0.00%, 12/1/12, FGIC.................. 240 129
Ripley-Union-Lewis,
Local School District,
Capital Appreciation,
0.00%, 12/1/13, FGIC.................. 240 120
Ripley-Union-Lewis,
Local School District,
Capital Appreciation,
0.00%, 12/1/14, FGIC.................. 235 111
See notes to financial statements.
97
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments--continued
Ohio Municipal Bond Fund October 31, 2000
(Amounts in Thousands)
Principal Market
Security Description Amount Value
Riverside Local School District,
Capital Appreciation,
0.00%,12/1/11, MBIA................... $ 145 $ 81
Riverside Local School District,
Capital Appretiation,
0.00%, 12/1/12, MBIA.................. 145 76
Scioto Valley Local School District,
5.65%, 12/1/22,
Callable 12/1/10 @ 101, FGIC.......... 1,000 1,009
South-Western City School District,
4.75%, 12/1/19,
Callable 12/1/09 @ 100, AMBAC......... 1,000 902
South-Western City School District,
4.75%, 12/1/26,
Callable 12/1/09 @ 100, AMBAC......... 5,000 4,367
Springfield Local School District,
Capital Appreciation,
0.00%, 12/1/11, AMBAC................. 1,715 977
Springfield Local School District,
Capital Appreciation,
0.00%, 12/1/12, MBIA.................. 340 182
State Higher Education,
5.00%, 2/1/07......................... 3,000 3,063
Sycamore Community School District,
4.75%, 12/1/19,
Callable 12/1/08 @ 100, AMBAC......... 1,000 897
Sycamore Community School
District Improvements,
Capital Appreciation,
0.00%, 12/1/07........................ 360 254
Tuscarawas Valley School District,
Capital Appreciation,
0.00%, 12/1/19, ...................... 580 196
Wadsworth City School District,
0.00%, 12/1/07, FGIC.................. 555 392
Wadsworth City School District,
0.00%, 12/1/08, FGIC.................. 555 372
Wadsworth City School District,
0.00%, 12/1/10, FGIC.................. 105 64
Wadsworth City School District,
0.00%, 12/1/11, FGIC.................. 105 60
Wadsworth City School District,
0.00%, 12/1/16, FGIC.................. 105 56
Wadsworth City School District,
Capital Appreciation,
0.00%, 12/1/11, FGIC.................. 555 313
Wadsworth City School District,
Capital Appreciation,
0.00%, 12/1/12, FGIC.................. 575 305
70,614
Housing (0.3%):
Belmont County Home Improvements,
3.65%, 12/1/01, MBIA.................. 170 168
Belmont County Home Improvements,
3.70%, 12/1/02, MBIA.................. 175 171
Principal Market
Security Description Amount Value
Belmont County Home Improvements,
3.80%, 12/1/03, MBIA.................. $ 185 $ 180
519
Public Facilities (Convention, Sport,
Public Buildings) (1.0%):
Athens Recreation Facilities,
4.75%, 12/1/08, FGIC.................. 200 201
Crawford County, Correctional Facilities,
6.75%, 12/1/19,
Prerefunded 12/1/04 @ 102, AMBAC...... 1,385 1,526
1,727
Public Improvements (2.3%):
Lorain Urban Renewal,
5.50%, 12/1/20,
Callable 12/1/10 @ 100, MBIA.......... 300 301
Lorain Urban Development,
5.70%, 12/1/28,
Callable 12/1/10 @ 100, MBIA.......... 1,000 1,010
Toledo Limited Tax-Street Improvment,
5.35%, 12/1/15,
Callable 12/1/10 @ 101, FGIC.......... 2,525 2,548
3,859
Transportation (2.9%):
State Highway Capital Improvement,
Series D, 4.50%, 5/1/08............... 5,000 4,941
Utility (Sewers, Telephone,
Electric) (1.5%):
Avon Route 83 Sewer Improvements,
6.50%, 12/1/15........................ 335 372
Canton, Waterworks System,
5.75%, 12/1/10,
Callable 12/1/05 @ 102, AMBAC......... 500 529
Huron County, Landfill Issue II,
5.40%, 12/1/07, MBIA.................. 285 299
Huron County, Landfill Issue II,
5.60%, 12/1/09,
Callable 12/1/07 @ 102, MBIA.......... 320 341
Toledo, Sewer Improvements,
6.10%, 12/1/14,
Callable 12/1/04 @ 102, AMBAC......... 1,000 1,063
2,604
Total General Obligations (Cost $92,850) 94,823
Revenue Bonds (43.0%):
County, City & Special District (2.4%):
Akron Pension,
4.75%, 12/1/23,
Callable 12/1/10 @ 101, AMBAC......... 1,500 1,313
Hamilton County Sales Tax Revenue,
5.25%, 12/1/32,
Callable 12/1/10 @ 100, AMBAC......... 3,000 2,840
4,153
See notes to financial statements.
98
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments--continued
Ohio Municipal Bond Fund October 31, 2000
(Amounts in Thousands)
Principal Market
Security Description Amount Value
Education (10.1%):
Franklin County IDR,
Columbus College of Art & Design,
6.00%, 9/1/13, Callable 9/1/01 @ 102,
LOC Bank One.......................... $ 1,310 $ 1,317
State Higher Education
Facility Revenue,
Oberlin College,
5.00%, 10/1/29,
Callable 10/1/09 @101 ................ 2,800 2,519
State Higher Educational
Facility Revenue,
Series II-A, 4.50%, 11/1/08........... 5,000 4,942
State Higher Educational
Facility Revenue,
Ohio Northern University,
3.70%, 5/1/01......................... 250 248
State Higher Educational
Facility Revenue,
Series II-A, 5.00%, 11/1/13,
Callable 11/1/08 @100................. 500 496
State Higher Educational
Facility Revenue,
University of Dayton,
4.75%, 12/1/10, AMBAC................. 300 299
State Higher Educational
Facility Revenue,
University Of Dayton,
5.50% 12/1/30,
Callable 12/1/10 @ 101, AMBAC......... 2,000 1,971
State Higher Educational
Facility Revenue,
Wittenberg University,
3.55%, 6/1/01, AMBAC.................. 340 338
State Higher Educational
Facility Revenue,
Xavier University, 6.00%, 5/15/08,
Callable 5/15/07 @ 102, MBIA.......... 500 541
State Special Obligation,
Elementary & Secondary
Education Facilities,
Series B, 5.00%, 12/1/06, FSA......... 1,550 1,583
State Special Obligation,
Elementary & Secondary
Education Facilities,
Series A, 5.00%, 6/1/07, AMBAC........ 1,100 1,124
State University General Receipts,
5.75%, 12/1/24,
Callable 12/1/09 @ 101................ 1,250 1,271
University of Akron General Receipts,
5.00%, 1/1/02, AMBAC.................. 440 443
17,092
Principal Market
Security Description Amount Value
Hospitals, Nursing Homes
& Health Care (7.3%):
Athens County Mental Health,
Kevin Coleman Foundation,
5.90%, 3/1/09,
Callable 3/1/03 @ 102,
LOC National City Bank................ $ 545 $ 556
Cuyahoga County Hospital,
Fairview General Hospital Project,
6.25%, 8/15/10,
Callable 2/15/03 @ 102................ 500 523
Cuyahoga County Hospital,
University Hospital Health,
5.00%, 1/15/02, AMBAC................. 1,060 1,067
Hamilton County Hospital Facilities,
Deaconess Hospital,
7.00%, 1/1/12,
Callable 7/1/02 @ 102................. 2,150 2,242
Lake County Hospital,
Improvement Facilities,
6.38%, 8/15/03, AMBAC................. 900 926
Lucas County Hospital Revenue,
5.00%, 11/15/22,
Callable 11/15/03 @ 102, MBIA......... 405 371
Lucas County Hospital Revenue,
5.00%, 11/15/22,
Callable 11/15/03 @ 102, MBIA......... 95 98
Lucas County Hospital,
5.75%, 11/15/14,
Callable 11/15/06 @ 102, MBIA......... 1,785 1,860
Mahoning County Hospital Facilities,
YHA Project,
Series A, 7.00%, 10/15/14,
Prerefunded 10/15/02 @ 100, MBIA...... 855 896
Portage County Hospital,
Robinson Memorial Hospital,
6.50%, 11/15/03, MBIA................. 635 671
Portage County Hospital,
Robinson Memorial Hospital,
6.50%, 11/15/04, MBIA................. 675 723
Portage County Hospital,
Robinson Memorial Hospital,
6.50%, 11/15/05, MBIA................. 715 776
Westlake IDR,
Westbay I & II Projects,
Series A, 6.40%, 8/1/09,
Callable 11/1/00 @ 102, FNMA.......... 1,755 1,762
12,471
Housing (5.4%):
Cuyahoga County Multifamily,
Dalebridge Apartments,
6.60%, 10/20/30,
Callable 10/20/05 @ 102, GNMA AMT..... 2,000 2,049
See notes to financial statements.
99
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments--continued
Ohio Municipal Bond Fund October 31, 2000
(Amounts in Thousands)
Principal Market
Security Description Amount Value
Cuyahoga County Multifamily,
Water Street Assoc.,
5.60%, 6/20/08, GNMA AMT.............. $ 370 $ 374
Greater Cincinnati Elderly
Housing Finance Corp.,
Walnut Towers,
Series A, 6.90%, 8/1/25,
Callable 8/1/04 @ 102, FHA............ 2,020 2,086
Ohio Capital Corp.,
Housing Management,
Bucyrus Estate,
5.75%, 7/1/06,
Callable 7/1/05 @ 102, MBIA........... 170 173
Ohio Capital Corp.,
Housing Management,
Kent Gardens,
6.35%, 7/1/15,
Callable 1/1/03 @ 101, MBIA........... 1,000 1,019
Ohio Capital Corp.,
Housing Management,
Springhill Homes,
Series C, 6.50%, 7/1/24,
Callable 1/1/03 @ 103, MBIA........... 920 943
Ohio Housing Finance Agency,
Residential, Series A-1,
5.70%, 9/1/09, GNMA AMT............... 1,000 1,042
Ohio Housing Finance Agency,
Residential A-1, 6.35%, 9/1/31,
Callable 9/1/09 @ 100, GNMA........... 1,500 1,549
9,235
Industrial Development (0.6%):
Broadview Heights IDR,
Royalview,
Series A, 6.25%, 7/1/13,
Callable 11/1/00 @ 102, FHA........... 1,075 1,097
Public Facilities (Convention, Sport,
Public Buildings) (5.1%):
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 2,330
Hamilton County Sales Tax,
5.00%, 12/1/27,
Callable 6/1/08 @ 101, MBIA........... 2,500 2,281
State Building Authority,
Administration Building,
Series A, 4.75%, 10/1/17,
Callable 10/1/08 @ 101................ 1,000 919
State Building Authority,
Adult Correctional Facilities,
Series A, 6.00%, 10/1/07,
Callable 10/1/03 @ 102................ 2,000 2,109
Principal Market
Security Description Amount Value
State Building Authority,
Adult Correctional Facilities,
Series A, 6.13%, 10/1/12,
Callable 10/1/03 @ 102................ $ 1,000 $ 1,056
8,695
Public Improvements (2.8%):
Franklin County Development,
American Chemical Society Project,
4.50%, 10/1/02........................ 1,300 1,300
Franklin County Development,
American Chemical Society Project,
4.50%, 10/1/04........................ 650 648
Franklin County Development,
American Chemical Society Project,
5.00%, 10/1/06........................ 1,350 1,356
State Economic Development,
ABS Industries, Inc. Project,
6.00%, 6/1/04 AMT..................... 410 419
State Economic Development,
Ohio Enterprise Board Fund,
Series 2, 5.60%, 6/1/02 AMT........... 240 243
State Economic Development,
Ohio Enterprise Board Fund,
Series 4, 6.50%, 12/1/09,
Callable 12/1/04 @ 102 AMT............ 815 819
4,785
Transportation (0.7%):
State Infrastructure Highway,
5.00%, 12/15/07....................... 1,175 1,201
Utilities -- Water (1.2%):
Akron Waterworks Revenue,
5.63%, 12/1/20,
Callable 6/1/10 @ 100, AMBAC.......... 1,250 1,262
Avon Lake Water System Revenue,
5.50%, 10/1/17,
Callable 10/1/10 @ 100, AMBAC......... 420 424
Avon Lake Water System Revenue,
5.50%, 10/1/18,
Callable 10/1/10 @ 100, AMBAC......... 445 447
2,133
Utility (Sewers, Telephone,
Electric) (7.4%):
Akron Sewer System Revenue,
4.95%, 12/1/10, AMBAC................. 300 303
Cleveland Public Power Systems,
Series A, 7.00%, 11/15/16,
Prerefunded 11/15/04 @ 102, MBIA...... 340 377
Cleveland Public Power Systems,
Series A, 7.00%, 11/15/16,
Prerefunded 11/15/04 @ 102, MBIA...... 410 454
Cleveland Public Power Systems,
Series A, 7.00%, 11/15/24,
Prerefunded 11/15/04 @ 102, MBIA...... 1,985 2,198
Cleveland Waterworks,
5.75%, 1/1/21,
Prerefunded 1/1/06 @ 102, MBIA........ 940 1,004
See notes to financial statements.
100
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments--continued
Ohio Municipal Bond Fund October 31, 2000
(Amounts in Thousands, Except Shares)
Principal Market
Security Description Amount Value
Cuyahoga County Utility System,
Medical Center Co. Project,
Series B, 5.85%, 8/15/10,
Callable 8/15/05 @ 102, MBIA AMT...... $ 1,500 $ 1,572
Hamilton County Sewer
Systems Revenue,
6.00, 12/1/05, FGIC................... 1,080 1,152
Huber Heights Water Systems,
Capital Appreciation,
0.00%, 12/1/24, MBIA.................. 1,000 253
Huber Heights Water Systems,
Capital Appreciation,
0.00%, 12/1/25, MBIA.................. 1,000 238
Ravenna Waterworks,
3.60%, 12/1/00, AMBAC................. 255 255
Ravenna Waterworks,
3.70%, 12/1/01, AMBAC................. 265 262
Ravenna Waterworks,
3.80%, 12/1/02, AMBAC................. 270 264
Ravenna Waterworks,
3.90%, 12/1/03, AMBAC................. 280 271
State Water Development Authority,
Dayton Power & Light,
Series C, 6.40%, 8/15/27,
Callable 8/15/02 @ 102................ 3,250 3,301
Wilmington Water,
5.25%, 6/15/29,
Callable 6/15/08 @ 101, AMBAC......... 750 708
12,612
Total Revenue Bonds (Cost $72,251) 73,474
Total Ohio Municipal Bonds (Cost $165,101) 168,297
Shares or
Principal Market
Security Description Amount Value
Investment Companies (0.5%)
Federated Ohio Municipal Cash Trust .... 781,307 $ 781
Total Investment Companies (Cost $781) 781
Total Investments (Cost $165,882) (a) -- 98.9% 169,078
Other assets in excess of liabilities -- 1.1% 1,916
TOTAL NET ASSETS -- 100.0% $170,994
(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 appreciation of securities as follows (amount in
thousands):
Unrealized appreciation $ 4,353
Unrealized depreciation (1,183)
Net unrealized appreciation $ 3,170
AMBAC -- AMBAC Indemnity Corp.
AMT -- Alternative Minimum Tax
FGIC -- Insured by Financial Guaranty Insurance Corp.
FHA -- Federal Home Association
FNMA -- Federal National Mortgage Association
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
See notes to financial statements.
101
<PAGE>
<TABLE>
Statements of Assets and Liabilities
The Victory Portfolios October 31, 2000
(Amounts in Thousands, Except Per Share Amounts)
<CAPTION>
National Ohio
Municipal New York Municipal
Bond Tax-Free Bond
Fund Fund Fund
<S> <C> <C> <C>
ASSETS:
Investments, at value (Cost $43,207; $15,639; & $165,882) $43,782 $16,085 $169,078
Interest and dividends receivable 352 257 2,849
Receivable for capital shares issued 50 -- --
Receivable from brokers for investments sold 2,555 -- 2,032
Receivable from affiliates 18 4 7
Prepaid expenses and other assets 9 13 --
Total Assets 46,766 16,359 173,966
LIABILITIES:
Payable to brokers for investments purchased 9,105 -- 2,836
Payable for capital shares redeemed -- 2 2
Accrued expenses and other payables:
Investment advisory fees 10 5 57
Administration fees 1 -- 4
Custodian fees 3 1 5
Transfer agent fees 11 7 6
Shareholder service fees -- Class A 8 5 13
12b-1 fees -- Class G -- -- 23
Other 3 3 26
Total Liabilities 9,141 23 2,972
NET ASSETS:
Capital 36,262 15,938 168,443
Undistributed net investment income 26 1 90
Net unrealized appreciation/depreciation from investments 575 446 3,196
Accumulated undistributed net realized gains (losses)
from investment transactions 762 (49) (735)
Net Assets $37,625 $16,336 $170,994
Net Assets
Class A $36,516 $14,082 $64,414
Class G 1,109 2,254 106,580
Total $37,625 $16,336 $170,994
Outstanding units of beneficial interest (shares)
Class A 3,472 1,157 5,625
Class G 105 186 9,322
Total 3,577 1,343 14,947
Net asset value
Redemption price per share -- Class A $ 10.52 $ 12.17 $ 11.45
Offering and Redemption price per share -- Class G $ 10.52 $ 12.11 $ 11.43
Maximum sales charge -- Class 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 $ 11.16 $ 12.91 $ 12.15
</TABLE>
See notes to financial statements.
102
<PAGE>
<TABLE>
Statements of Operations
The Victory Portfolios For the Year Ended October 31, 2000
(Amounts in Thousands)
<CAPTION>
National Ohio
Municipal New York Municipal
Bond Tax-Free Bond
Fund Fund Fund
<S> <C> <C> <C>
Investment Income:
Interest income $1,768 $ 948 $ 9,516
Dividend income 85 11 194
Total Income 1,853 959 9,710
Expenses:
Investment advisory fees 204 87 1,066
Administration fees 56 24 266
Shareholder service fees -- Class A 86 33 161
Shareholder service fees and 12b-1 fees -- Class B 7 10 --
12b-1 fees -- Class G 1 1 278
Accounting fees 57 52 84
Custodian fees 18 8 45
Legal and audit fees 5 3 42
Trustees' fees and expenses 1 -- 5
Transfer agent fees 43 30 21
Registration and filing fees 25 12 27
Printing fees 11 6 16
Other 4 2 15
Total Expenses 518 268 2,026
Expenses voluntarily reduced (106) (50) (368)
Expenses before reimbursement from distributor 412 218 1,658
Expenses reimbursed by distributor (11) (49) (18)
Net Expenses 401 169 1,640
Net Investment Income 1,452 790 8,070
Realized/Unrealized Gains (Losses) from Investments:
Net realized gains (losses) from investment transactions 762 (31) (212)
Change in unrealized appreciation/depreciation from investments 625 276 5,337
Net realized/unrealized gains (losses) from investments 1,387 245 5,125
Change in net assets resulting from operations $2,839 $1,035 $13,195
</TABLE>
See notes to financial statements.
103
<PAGE>
<TABLE>
The Victory Portfolios Statements of Changes in Net Assets
(Amounts in Thousands)
<CAPTION>
National Municipal New York Ohio Municipal
Bond Fund Tax-Free Fund Bond Fund
Year Year Year Year Year Year
Ended Ended Ended Ended Ended Ended
October 31, October 31, October 31, October 31, October 31, October 31,
2000 1999 2000 1999 2000 1999
<S> <C> <C> <C> <C> <C> <C>
From Investment Activities:
Operations:
Net investment income $ 1,452 $ 1,778 $ 790 $ 873 $ 8,070 $ 6,495
Net realized gains (losses) from
investment transactions 762 179 (31) (16) (212) (523)
Net change in unrealized appreciation/
depreciation from investments 625 (2,358) 276 (1,182) 5,337 (7,432)
Change in net assets resulting
from operations 2,839 (401) 1,035 (325) 13,195 (1,460)
Distributions to Shareholders:
From net investment income:
Class A (1,405) (1,726) (728) (738) (2,984) (3,392)
Class B (20) (70) (43) (134) -- --
Class G (13) -- (31) -- (5,065) (3,059)
From net realized gains from
investment transactions (179) (1,095) -- -- -- (711)
In excess of net realized gains from
investment transactions -- -- -- -- -- (574)
Change in net assets from distributions
to shareholders (1,617) (2,891) (802) (872) (8,049) (7,736)
Capital Transactions:
Proceeds from shares issued 14,698 12,771 3,516 4,093 22,493 40,708
Proceeds from shares issued
in connection with acquisition -- -- -- -- -- 118,155
Proceeds from shares exchanged
from Class B 2,150 -- 3,065 -- -- --
Dividends reinvested 1,083 2,135 516 583 5,671 4,149
Cost of shares redeemed (19,310) (21,366) (5,287) (7,631) (59,758) (39,078)
Cost of shares exchanged to Class A (2,150) -- (3,065) -- -- --
Change in net assets from
capital transactions (3,529) (6,460) (1,255) (2,955) (31,594) 123,934
Change in net assets (2,307) (9,752) (1,022) (4,152) (26,448) 114,738
Net Assets:
Beginning of period 39,932 49,684 17,358 21,510 197,442 82,704
End of period $ 37,625 $ 39,932 $16,336 $17,358 $170,994 $197,442
Share Transactions:
Issued 1,435 1,205 292 324 2,001 3,513
Issued in connection with acquisition -- -- -- -- -- 10,429
Issued in connection with exchange
from Class B 214 -- 258 -- -- --
Reinvested 106 202 43 47 508 362
Redeemed (1,889) (2,034) (440) (603) (5,351) (3,387)
Redeemed in connection with exchange
to Class A (214) -- (258) -- -- --
Change in shares (348) (627) (105) (232) (2,842) 10,917
</TABLE>
See notes to financial statements.
104
<PAGE>
<TABLE>
The Victory Portfolios Financial Highlights
For a Share Outstanding Throughout Each Period
<CAPTION>
National Municipal Bond Fund
Class A Shares Class G Shares
December 17,
Year Year Year Year Year 1999
Ended Ended Ended Ended Ended through
October 31, October 31, October 31, October 31, October 31, October 31,
2000 1999 1998 1997 1996 2000<F5>
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 10.17 $ 10.92 $ 10.51 $ 10.16 $ 10.06 $10.13
Investment Activities
Net investment income 0.40 0.41 0.43 0.45 0.44 0.32
Net realized and
unrealized gains
(losses) from investments 0.40 (0.51) 0.41 0.35 0.13 0.40
Total from Investment
Activities 0.80 (0.10) 0.84 0.80 0.57 0.72
Distributions
Net investment income (0.40) (0.41) (0.43) (0.45) (0.44) (0.33)
Net realized gains (0.05) (0.24) -- -- -- --
In excess of net
realized gains -- -- -- -- (0.03) --
Total Distributions (0.45) (0.65) (0.43) (0.45) (0.47) (0.33)
Net Asset Value, End of Period $ 10.52 $ 10.17 $ 10.92 $ 10.51 $ 10.16 $10.52
Total Return (excludes
sales charges) 8.07% (0.99)% 8.15% 8.10% 5.83% 7.26%<F2>
Ratios/Supplemental Data:
Net Assets, End of Period (000) $36,516 $37,579 $47,296 $47,705 $36,958 $1,109
Ratio of expenses to
average net assets 1.04% 0.86% 0.67% 0.36% 0.29% 1.48%<F3>
Ratio of net investment income
to average net assets 3.93% 3.80% 4.02% 4.43% 4.37% 3.42%<F3>
Ratio of expenses to
average net assets<F1> 1.33% 1.24% 1.22% 1.27% 1.35% 4.85%<F3>
Ratio of net investment income
to average net assets<F1> 3.64% 3.42% 3.47% 3.52% 3.31% 0.05%<F3>
Portfolio turnover<F4> 270% 127% 152% 154% 143% 270%
<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> Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
<F5> Period from commencement of operations.
</FN>
</TABLE>
See notes to financial statements.
105
<PAGE>
<TABLE>
The Victory Portfolios Financial Highlights
For a Share Outstanding Throughout Each Period
<CAPTION>
New York Tax-Free Fund
Class A Shares Class G Shares
December 21,
Year Year Year Year Year 1999
Ended Ended Ended Ended Ended through
October 31, October 31, October 31, October 31, October 31, October 31,
2000 1999 1998 1997 1996 2000<F5>
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 11.99 $ 12.80 $ 12.68 $ 12.73 $ 12.85 $11.94
Investment Activities
Net investment income 0.61 0.61 0.61 0.68 0.68 0.52
Net realized and unrealized
gains (losses) from
investments 0.19 (0.81) 0.14 0.03 (0.11) 0.20
Total from Investment
Activities 0.80 (0.20) 0.75 0.71 0.57 0.72
Distributions
Net investment income (0.62) (0.61) (0.61) (0.72) (0.68) (0.55)
Net realized gains -- -- (0.02) (0.04) (0.01) --
Total Distributions (0.62) (0.61) (0.63) (0.76) (0.69) (0.55)
Net Asset Value, End of Period $ 12.17 $ 11.99 $ 12.80 $ 12.68 $ 12.73 $12.11
Total Return (excludes
sales charges) 7.00% (1.74)% 6.12% 5.77% 4.53% 6.16%<F2>
Ratios/Supplemental Data:
Net Assets, End of Period (000) $14,082 $14,084 $18,073 $15,335 $13,754 $2,254
Ratio of expenses to
average net assets 0.98% 0.95% 0.94% 0.94% 0.93% 1.54%<F3>
Ratio of net investment income
to average net assets 5.08% 4.82% 4.85% 5.32% 5.25% 4.42%<F3>
Ratio of expenses to
average net assets<F1> 1.60% 1.42% 1.35% 1.49% 1.58% 2.96%<F3>
Ratio of net investment income
to average net assets<F1> 4.46% 4.35% 4.44% 4.77% 4.60% 3.00%<F3>
Portfolio turnover<F4> 26% 28% 38% 11% -- 26%
<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> Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
<F5> Period from commencement of operations.
</FN>
</TABLE>
See notes to financial statements.
106
<PAGE>
<TABLE>
The Victory Portfolios Financial Highlights
For a Share Outstanding Throughout Each Period
<CAPTION>
Ohio Municipal Bond Fund
Class A Class G
Shares Shares
March 26,
Year Year Year Year Year Year 1999
Ended Ended Ended Ended Ended Ended Through
October 31, October 31, October 31, October 31, October 31, October 31, October 31,
2000 1999 1998 1997 1996 2000 1999<F4><F5>
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 11.11 $ 12.04 $ 11.72 $ 11.43 $ 11.32 $ 11.09 $ 11.79
Investment Activities
Net investment income 0.51 0.49 0.51 0.53 0.54 0.51 0.28
Net realized and
unrealized gains
(losses) from investments 0.34 (0.75) 0.42 0.29 0.11 0.34 (0.70)
Total from
Investment Activities 0.85 (0.26) 0.93 0.82 0.65 0.85 (0.42)
Distributions
Net investment income (0.51) (0.49) (0.51) (0.53) (0.54) (0.51) (0.28)
Net realized gains -- (0.10) (0.10) -- -- -- --
In excess of net
realized gains -- (0.08) -- -- -- -- --
Total Distributions (0.51) (0.67) (0.61) (0.53) (0.54) (0.51) (0.28)
Net Asset Value, End of Period $ 11.45 $ 11.11 $ 12.04 $ 11.72 $ 11.43 $ 11.43 $ 11.09
Total Return (excludes
sales charges) 7.84% (2.29)% 8.18% 7.37% 5.87% 7.89% (3.59)%<F2>
Ratios/Supplemental Data:
Net Assets, End of Period (000) $64,414 $74,984 $82,704 $78,043 $73,463 $106,580 $122,458
Ratio of expenses to
average net assets<F7> 0.94% 0.92% 0.91% 0.89% 0.89% 0.91% 0.90%<F3>
Ratio of net investment income
to average net assets<F7> 4.52% 4.20% 4.31% 4.60% 4.72% 4.56% 4.18%<F3>
Ratio of expenses to
average net assets<F1> 1.15% 1.14% 1.13% 0.99% 1.05% 1.13% 1.12%<F3>
Ratio of net investment income
to average net assets<F1> 4.31% 3.98% 4.09% 4.50% 4.56% 4.34% 3.96%<F3>
Portfolio turnover<F6> 69% 112% 95% 74% 81% 69% 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.
<F7> On December 15, 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 Class G shares of the fund at a maximum of .91%
until at least April 1, 2001.
</FN>
</TABLE>
See notes to financial statements.
107
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments
Balanced Fund October 31, 2000
(Amounts in Thousands, Except Shares)
Shares or
Principal Market
Security Description Amount Value
Commercial Paper (3.4%)
Household Finance, 6.66%, 11/1/00....... $ 13,941 $ 13,941
Total Commercial Paper (Cost $13,941) 13,941
Common Stocks (57.7%)
Aerospace/Defense (1.3%):
Boeing Co............................... 40,000 2,713
United Technologies Corp................ 40,000 2,792
5,505
Aluminum (0.6%):
Alcoa, Inc.............................. 81,800 2,347
Automotive Parts (0.4%):
TRW, Inc................................ 35,000 1,470
Banks (5.2%):
Bank of America Corp.................... 87,090 4,186
First Union Corp........................ 21,700 658
Mellon Financial Corp................... 158,000 7,623
Suntrust Banks, Inc..................... 90,000 4,393
Wells Fargo Co.......................... 105,000 4,863
21,723
Chemical -- Specialty (0.4%):
Eastman Chemical ....................... 15,000 643
Sigma-Aldrich (d)....................... 31,000 1,108
1,751
Computers & Peripherals (2.7%):
Cisco Systems, Inc. (b) (d)............. 69,000 3,717
Hewlett-Packard Co...................... 69,600 3,232
International Business Machines Corp.... 44,000 4,334
11,283
Cosmetics & Related (0.8%):
Avon Products (d)....................... 65,200 3,162
Electrical Equipment (0.5%):
Emerson Electric Co. (d)................ 28,200 2,071
Financial Services (5.7%):
Citigroup, Inc. (d)..................... 118,333 6,227
Fannie Mae.............................. 93,200 7,177
Franklin Resources, Inc. (d)............ 82,000 3,513
Household International, Inc............ 80,000 4,025
Morgan Stanley Dean Witter & Co......... 39,000 3,132
24,074
Food Processing & Packaging (1.2%):
Conagra, Inc. (d)....................... 68,000 1,454
Sara Lee Corp........................... 161,000 3,471
4,925
Food Products (0.9%):
General Mills, Inc...................... 91,000 3,799
Health Care (0.7%):
Medtronic, Inc.......................... 55,000 2,987
Market
Security Description Shares Value
Household Goods -- Appliances,
Furnishings & Electronics (0.3%):
Newell Rubbermaid, Inc.................. 54,600 $ 1,048
Industrial Goods & Services (0.4%):
Parker Hannifin Corp. (d)............... 35,000 1,448
Insurance (2.4%):
American General Corp................... 29,000 2,335
Chubb Corp.............................. 20,500 1,731
Lincoln National Corp................... 62,000 2,999
Protective Life Corp. (d)............... 15,000 347
Torchmark Corp. (d)..................... 80,000 2,665
10,077
Insurance -- Multi-Line (2.1%):
Allstate Corp. (d)...................... 82,884 3,336
American International Group, Inc....... 29,500 2,891
St Paul Companies, Inc.................. 45,000 2,306
8,533
Internet Service Provider (0.1%):
America Online, Inc. (b)................ 10,000 504
Machinery & Equipment (0.1%):
Deere & Co. (d)......................... 15,000 552
Manufacturing -- Miscellaneous (3.1%):
General Electric Co..................... 138,900 7,613
Honeywell International, Inc. (d)....... 67,400 3,627
Textron, Inc............................ 28,800 1,453
12,693
Media (2.0%):
Time Warner, Inc. (d)................... 31,000 2,353
Viacom, Inc............................. 107,400 6,109
8,462
Medical Services -- Hospital Management
& Nursing Homes (0.9%):
HCA -- The Healthcare Company........... 92,500 3,694
Oil & Gas Exploration,
Production & Services (3.7%):
Anadarko Petroleum Corp. (d)............ 25,000 1,601
Enron Corp.............................. 55,200 4,530
Exxon Mobil Corp........................ 73,895 6,590
Transocean Sedco Forex, Inc. (d)........ 10,067 534
USX-Marathon Group, Inc................. 80,000 2,175
15,430
Oil-Integrated Companies (2.8%):
Amerada Hess Corp....................... 18,000 1,116
Chevron Corp............................ 57,001 4,682
Texaco, Inc. (d)........................ 66,000 3,898
Unocal Corp............................. 51,000 1,740
11,436
Oilfield Services & Equipment (1.4%):
Baker Hughes, Inc. (d).................. 54,600 1,877
Schlumberger Ltd. (d)................... 49,000 3,730
5,607
See notes to financial statements.
108
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments -- continued
Balanced Fund October 31, 2000
(Amounts in Thousands, Except Shares)
Market
Security Description Shares Value
Paper Products (0.3%):
International Paper Co. (d)............. 35,000 $ 1,282
Pharmaceuticals (4.6%):
Abbott Laboratories..................... 95,000 5,017
American Home Products Corp............. 53,800 3,416
Bristol-Myers Squibb Co................. 41,000 2,498
Pfizer, Inc............................. 164,600 7,109
Schering-Plough Corp. (d)............... 20,000 1,034
19,074
Pipelines (0.5%):
El Paso Energy Corp. (d)................ 35,000 2,194
Retail (1.3%):
May Department Stores Co................ 44,500 1,168
Target Corp............................. 148,600 4,105
5,273
Retail -- Drug Stores (0.2%):
Walgreen Co. (d)........................ 20,200 922
Retail -- Specialty Stores (0.6%):
Autozone, Inc. (b) (d).................. 30,000 804
Lowe's Cos., Inc........................ 33,000 1,508
2,312
Semiconductors (1.9%):
Intel Corp. (d)......................... 115,600 5,182
LSI Logic Corp. (b) (d)................. 80,000 2,630
7,812
Software & Computer Services (1.6%):
Electronic Data Systems................. 30,000 1,408
Microsoft Corp. (b)..................... 63,000 4,339
Parametric Technology Corp. (b)......... 60,000 739
6,486
Telecommunication Services (0.7%)
Verizon Communications (d).............. 48,310 2,793
Telecommunications --
Equipment (1.8%):
Motorola, Inc........................... 169,000 4,214
Nortel Networks Corp.................... 15,000 683
Tellabs, Inc. (b) (d)................... 52,000 2,597
7,494
Transportation (0.5%):
Union Pacific Corp. (d)................. 44,000 2,063
Utilities -- Electric (1.0%):
Constellation Energy Group, Inc......... 25,000 1,042
Duke Energy Corp........................ 35,000 3,026
4,068
Utilities -- Telecommunications (3.0%):
ALLTEL Corp. (d)........................ 53,000 3,415
AT&T Corp............................... 78,177 1,813
SBC Communications, Inc................. 76,856 4,434
WorldCom, Inc. (b)...................... 113,938 2,706
12,368
Total Common Stocks (Cost $170,371) 238,722
Market
Security Description Shares Value
Foreign Common Stocks (5.1%)
Australia (0.2%):
Airlines (0.0%):
Qantas Airways Ltd...................... 11,900 $ 24
Banks (0.0%):
National Australia Bank................. 1,600 22
Westpac Banking Corp.................... 10,100 69
91
Beverages (0.0%):
Foster's Brewing Group Ltd.............. 15,100 34
Entertainment (0.1%):
Aristocrat Leisure Ltd.................. 38,700 121
Financial Services (0.0%):
Lend Lease Corp. Ltd.................... 4,900 57
Media (0.1%):
News Corp. Ltd.......................... 5,303 55
Publishing & Broadcasting Ltd........... 6,400 44
99
Mining (0.0%):
BHP Ltd................................. 4,100 40
Multimedia (0.0%):
News Corporation Ltd.................... 4,104 37
Oil & Gas Exploration,
Production & Services (0.0%):
Woodside Petroleum Ltd.................. 6,300 46
Software & Computer
Services (0.0%):
Securenet Ltd. (b)...................... 2,700 12
Steel (0.0%):
OneSteel Ltd. (b)....................... 1,025 0
Utilities -- Telecommunications (0.0%):
Telstra Corp. Ltd., ADR................. 3,729 62
Total Australia 623
Belgium (0.0%):
Pharmaceuticals (0.0%):
UCB SA.................................. 1,960 70
Total Belgium 70
Brazil (0.1%):
Commercial Banking (0.0%):
Unibanco, ADR........................... 2,100 53
Food Distributors, Supermarkets
& Wholesalers (0.0%):
Companhia Brasileira de Distribuicao
Grupo Pao de Acucar, ADR.............. 2,200 78
Textile Products (0.0%):
Far Eastern Textile Co. Ltd., GDR (c)... 4,000 33
Utilities -- Electric (0.0%):
CIA Paranaense De Energia-Copel......... 7,500 68
See notes to financial statements.
109
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments -- continued
Balanced Fund October 31, 2000
(Amounts in Thousands, Except Shares)
Market
Security Description Shares Value
Utilities --
Telecommunications (0.1%):
Telecominicacoes de Sao Paulo SA, ADR... 1,000 $ 14
Telecomunicacoes Brasileiras SA, ADR.... 1,200 88
102
Total Brazil 334
Britain (0.9%):
Advertising (0.0%):
WPP Group PLC........................... 11,200 150
Banks (0.1%):
Barclays Bank PLC....................... 4,850 139
HSBC Holdings PLC....................... 10,814 155
Royal Bank of Scotland Group PLC........ 2,400 54
Standard Chartered PLC.................. 3,980 57
405
Food Products (0.0%):
Tesco PLC............................... 28,900 110
Gas & Electric Utility (0.0%):
Centrica................................ 53,300 184
Household Products (0.0%):
Reckitt Benckiser PLC................... 5,000 66
Media (0.0%):
Pearson PLC............................. 7,327 197
Oil & Gas Exploration,
Production & Services (0.2%):
BP Amoco PLC............................ 58,469 497
Pharmaceuticals (0.2%):
Glaxo Wellcome PLC...................... 10,233 295
Smithkline Beecham PLC.................. 16,217 210
505
Retail (0.0%):
Dixons Group PLC........................ 11,224 33
Software & Computer Services (0.0%):
Sema Group PLC.......................... 8,000 101
Telecommunications (0.3%):
Vodafone AirTouch PLC................... 156,164 652
Telecommunications --
Equipment (0.0%):
Marconi PLC (b)......................... 5,440 69
Utilities -- Telecommunications (0.1%):
British Telecom PLC..................... 10,209 119
Cable & Wireless........................ 7,010 100
219
Total Britain 3,188
Canada (0.3%):
Insurance (0.0%):
Sun Life Financial Services of
Canada, Inc. (b)...................... 4,400 90
Manufacturing -- Miscellaneous (0.2%):
Bombardier, Inc......................... 35,800 562
Market
Security Description Shares Value
Oil & Gas Exploration,
Production & Services (0.0%):
Suncor Energy, Inc...................... 8,700 $ 169
Telecommunications --
Equipment (0.1%):
Nortel Networks Corp.................... 11,004 498
Total Canada 1,319
Chile (0.0%):
Utilities -- Electric (0.0%):
Endesa (Chile), ADR..................... 3,000 32
Total Chile 32
Denmark (0.0%):
Telecommunications (0.0%):
Tele Danmark, Series B.................. 1,800 85
Total Denmark 85
Finland (0.1%):
Banks (0.0%):
Nordic Baltic Holding AB................ 26,278 198
Telecommunications --
Equipment (0.1%):
Nokia Oyj -- Class A.................... 9,096 374
Total Finland 572
France (0.7%):
Automotive (0.0%):
Renault SA.............................. 2,200 109
Commercial Services (0.1%):
Vivendi SA.............................. 2,880 207
Computer Services (0.0%):
Cap Gemini SA........................... 879 140
Electronic & Electrical --
General (0.0%):
Rexel SA................................ 630 44
Schneider SA............................ 530 34
78
Electronic Components --
Instruments (0.0%):
Thomson Multimedia (b).................. 2,520 115
Food Distributors (0.0%):
Economiques du Casino
Guichard Parrachon.................... 960 84
Food Products (0.2%):
Carrefour Supermarche................... 3,220 216
Insurance (0.0%):
AXA..................................... 590 78
Oil & Gas Exploration,
Production & Services (0.2%):
Coflexip Stena Offshore................. 310 36
Total Fina Elf SA....................... 2,434 349
385
Pharmaceuticals (0.0%):
Aventis SA.............................. 1,770 128
See notes to financial statements.
110
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments--continued
Balanced Fund October 31, 2000
(Amounts in Thousands, Except Shares)
Market
Security Description Shares Value
Retail -- Department Stores (0.0%):
Pinault-Printemps-Redoute............... 1,100 $ 196
Semiconductors (0.0%):
STMicroelectronics NV................... 3,890 196
Telecommunication Equipment (0.2%):
Alcatel SA.............................. 5,570 339
Utilities -- Telecommunications (0.0%):
France Telecom SA....................... 1,480 155
Total France 2,426
Germany (0.3%):
Automotive (0.0%):
Volkswagen AG........................... 1,600 80
Banks (0.0%):
Deutsche Bank AG........................ 1,200 99
Chemicals -- General (0.0%):
BASF AG................................. 1,230 48
Insurance (0.2%):
Allianz AG.............................. 820 278
Muenchener Rueckversicherungs-AG
(Registered).......................... 500 155
433
Manufacturing -- Miscellaneous (0.1%):
Siemens AG.............................. 1,700 216
Manufacturing -- Diversified (0.0%):
Veba AG................................. 2,500 127
Software & Computer Services (0.0%):
SAP AG.................................. 1,150 188
Telecommunications (0.0%):
Deutsche Telekom........................ 2,630 95
Total Germany 1,286
Greece (0.0%):
Banks (0.0%):
Alpha Credit Bank....................... 1,000 37
National Bank of Greece SA.............. 1,095 41
78
Utilities -- Telecommunications (0.0%):
Hellenic Telecommunication
Organization SA....................... 1,876 33
Total Greece 111
Hong Kong (0.2%):
Banks (0.2%):
HSBC Holdings PLC....................... 15,438 215
Commercial Banking (0.0%):
Hang Seng Bank.......................... 4,800 56
Financial Services (0.0%):
Guoco Group Ltd......................... 21,000 53
Hutchison Whampoa Ltd................... 11 136
189
Market
Security Description Shares Value
Real Estate (0.0%):
Cheung Kong............................. 5,000 $ 55
Sun Hung Kai Properties................. 9,000 75
130
Telecommunications (0.0%):
China Mobile (Hong Kong) Ltd. (b)....... 9,000 58
China Unicom (b)........................ 4,000 8
China Unicom, ADR (b)................... 15 0
Pacific Century Cyberworks (b).......... 37,457 29
95
Television (0.0%):
Television Broadcasts Ltd............... 4,000 22
Total Hong Kong 707
Hungary (0.0%):
Utilities -- Telecommunications (0.0%):
Matav Rt., ADR.......................... 2,000 47
Total Hungary 47
India (0.0%):
Applications Software (0.0%)
Silverline Technologies Ltd., ADR (b)... 2,900 43
Total India 43
Ireland (0.0%):
Building Materials (0.0%):
CRH PLC................................. 9,567 146
Total Ireland 146
Israel (0.0%):
Banks (0.0%):
Bank Leumi Le-Israel.................... 17,000 33
Telecommunications (0.0%):
Hellenic Telecommunication, ADR......... 1,200 11
Total Israel 44
Italy (0.2%):
Banks (0.0%):
San Paolo-IMI SpA....................... 6,400 104
Insurance -- Multi-Line (0.1%):
Assicurazioni Generali.................. 6,050 198
Oil & Gas Exploration,
Production & Services (0.0%):
ENI SpA................................. 16,001 87
Telecommunications (0.1%):
TIM SpA................................. 20,700 176
Utilities -- Telecommunications (0.0%):
Telecom Italia SpA...................... 9,100 105
Total Italy 670
Japan (1.2%):
Automotive (0.2%):
Nissan Motor Co. Ltd. (b)............... 9,000 62
Toyota Motor Corp....................... 7,800 311
373
See notes to financial statements.
111
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments -- continued
Balanced Fund October 31, 2000
(Amounts in Thousands, Except Shares)
Market
Security Description Shares Value
Banks (0.1%):
Bank of Tokyo-Mitsubishi Ltd............ 9,000 $ 108
Sakura Bank Ltd......................... 4,000 29
Sumitomo Bank Ltd....................... 7,000 85
222
Beverages (0.0%):
Kirin Brewery Co. Ltd................... 10,000 104
Building Materials (0.0%):
Asahi Glass Co. Ltd..................... 5,000 51
Chemicals -- General (0.0%):
Kaneka Corp............................. 9,000 87
Shin-Etsu Chemical Co................... 2,000 82
169
Computers & Peripherals (0.0%):
Fujitsu Ltd............................. 7,000 125
Cosmetics & Related (0.1%):
KAO Corp................................ 9,000 270
Electronic & Electrical -- General (0.4%):
Canon, Inc.............................. 3,000 119
Fanuc Ltd............................... 1,400 126
Furukawa Electric Co. Ltd............... 1,000 26
Matsushita Electric Industrial Co....... 3,000 87
Murata Manufacturing Co. Ltd............ 1,000 120
NEC Corp................................ 2,000 38
Ricoh Corp. Ltd......................... 10,000 154
Sanyo Electric Co. Ltd.................. 9,000 68
Secom Co. Ltd........................... 1,500 107
Sony Corp............................... 1,700 136
TDK Corp................................ 700 71
Toshiba Corp............................ 8,000 57
1,109
Engineering (0.0%):
Nippon Comsys Corp...................... 5,000 96
Financial Services (0.0%):
Daiwa Securities Group, Inc............. 4,000 44
Nomura Securities Co. Ltd............... 4,000 85
129
Health Care (0.0%):
Hoya Corp............................... 2,000 165
Machinery & Equipment (0.0%):
Daifuku Co. Ltd......................... 4,000 33
Makino Milling Machine Co............... 14,000 98
131
Machinery -- Electrical (0.0%):
SMC Corp................................ 600 85
Paper and Forest Products (0.0%):
Hokuetsu Paper Mills Ltd................ 6,000 42
Pharmaceuticals (0.2%):
Taisho Pharmaceutical Co. Ltd........... 3,000 86
Takeda Chemical Industries.............. 3,000 198
Yamanouchi Pharmaceutical Co. Ltd....... 1,000 45
329
Market
Security Description Shares Value
Railroads (0.0%):
East Japan Railway Co................... 11 $ 63
Real Estate (0.0%):
Mitsui Fudosan.......................... 4,000 48
Retail (0.0%):
Fast Retailing Co. Ltd.................. 300 74
Retail -- Department Stores (0.0%):
Marui Co. Ltd........................... 4,000 59
Semiconductors (0.0%):
Rohm Co. Ltd............................ 500 126
Telecommunications (0.1%):
NTT Data Corp........................... 8 62
NTT Docomo, Inc......................... 7 173
235
Television (0.0%):
Fuji Television Network, Inc............ 8 88
Tokyo Broadcasting System............... 1,000 39
127
Utilities -- Electric (0.0%):
Sumitomo Electric Industries Ltd........ 4,000 74
Tokyo Electric Power Co................. 3,700 90
164
Utilities -- Telecommunications (0.1%):
Nippon Telegraph & Telephone Corp....... 29 264
Total Japan 4,560
Korea (0.0%):
Electronic Components/
Instruments (0.0%):
Samsung Electronics, GDR (c)............ 770 56
Telecommunications (0.0%):
Korea Telecom Corp., ADR................ 1,000 37
Utilities -- Electric (0.0%)
Korea Electric Power Corp., ADR......... 2,600 32
Total Korea 125
Malaysia (0.0%):
Automotive (0.0%):
Oriental Holdings Berhad................ 67,200 81
Total Malaysia 81
Mexico (0.1%):
Financial Services (0.1%):
Grupo Financiero Bancomer -- Class O (b) 161,000 98
Retail (0.0%):
Controladora Comercial Mexicana SA...... 47,900 54
Telecommunications (0.0%):
Telefonos De Mexico SA, Series L........ 28,000 76
Total Mexico 228
Netherlands (0.4%):
Banks (0.2%):
ING Groep NV............................ 3,645 250
See notes to financial statements.
112
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments -- continued
Balanced Fund October 31, 2000
(Amounts in Thousands, Except Shares)
Market
Security Description Shares Value
Chemicals -- General (0.0%):
Akzo Nobel.............................. 3,100 $ 141
Electronic Components/
Instruments (0.0%):
Koninklijke Philips Electronics NV...... 3,296 129
Financial Services (0.0%):
Fortis (NL) NV.......................... 4,929 150
Food & Dairy Products (0.0%):
Numico NV............................... 1,670 78
Food Products (0.0%):
Unilever NV-CVA......................... 1,710 86
Food Retailer (0.0%):
Koninklijke Ahold NV.................... 6,100 177
Insurance -- Multi-Line (0.0%):
Aegon NV................................ 3,508 139
Oil & Gas Exploration,
Production & Services (0.2%):
Royal Dutch Petroleum Co................ 7,900 470
Publishing (0.0%):
VNU NV.................................. 2,451 115
Total Netherlands 1,735
New Zealand (0.0%):
Airline Services (0.0%):
Auckland International Airport Ltd...... 18,800 21
Oil & Gas Exploration,
Production & Services (0.0%):
Fletcher Challenge Energy............... 7,400 24
Total New Zealand 45
Norway (0.0%):
Banks (0.0%):
Den Norske Bank......................... 10,400 45
Environmental Control (0.0%):
Tomra Systems ASA....................... 3,300 132
Total Norway 177
Poland (0.0%):
Manufacturing -- Miscellaneous (0.0%):
Polski Koncern Naftowy Orlen............ 4,000 15
Total Poland 15
Russia (0.0%):
Oil & Gas Exploration,
Production & Services (0.0%):
Lukoil-Holding, ADR..................... 300 16
OAO Gazprom, ADR........................ 4,400 36
Total Russia 52
Singapore (0.0%):
Airlines (0.0%):
Singapore Airlines Ltd.................. 6,000 60
Market
Security Description Shares Value
Banks (0.0%):
DBS Group Holdings Ltd.................. 2,000 $ 24
Oversea-Chinese Banking Corp............ 6,900 44
68
Total Singapore 128
South Africa (0.0%):
Banks (0.0%):
ABSA Group Ltd.......................... 14,000 48
Computers & Peripherals (0.0%):
Datatec Ltd. (b)........................ 5,400 34
Holding Companies -- Diversified (0.0%):
Remgro Ltd. (b)......................... 5,800 35
Metals & Mining (0.0%):
Anglo American Platinum Corp............ 800 30
Total South Africa 147
Spain (0.1%):
Banks (0.0%):
Banco Bilbao Vizcaya SA................. 10,110 134
Banco Santander Central Hispano SA...... 10,520 102
236
Utilities -- Electric (0.0%):
Endesa SA............................... 4,600 75
Utilities -- Telecommunications (0.1%):
Telefonica SA (b)....................... 11,262 215
Total Spain 526
Sweden (0.1%):
Insurance (0.0%):
Skandia Forsakrings AB.................. 8,260 140
Telecommunication Equipment (0.1%):
Telefonaktiebolaget LM Ericsson......... 20,230 268
Total Sweden 408
Switzerland (0.2%):
Banks (0.0%):
Credit Suisse Group..................... 720 135
Commercial Services (0.0%):
Adecco SA............................... 130 90
Engineering Services (0.0%):
ABB Ltd................................. 680 60
Food Products (0.0%):
Nestle SA, (Registered)................. 50 104
Insurance -- Multi-Line (0.0%):
Zurich Financial Services AG............ 90 44
Pharmaceuticals (0.2%):
Novartis AG............................. 196 296
Roche Holding AG........................ 17 155
451
Retail (0.0%):
Compagnie Financiere Richemont.......... 0 56
Total Switzerland 940
See notes to financial statements.
113
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments -- continued
Balanced Fund October 31, 2000
(Amounts in Thousands, Except Shares)
Shares or
Principal Market
Security Description Amount Value
Taiwan (0.0%):
Semiconductors (0.0%):
Taiwan Semiconductor Manufacturing
Co. Ltd., ADR (b)..................... 1,696 $ 38
Total Taiwan 38
Turkey (0.0%):
Banks (0.0%):
Yapi ve Kredi Bankasi AS, GDR (b)....... 2,078 18
Total Turkey 18
Total Foreign Common Stocks (Cost $19,054) 20,926
Preferred Stocks (0.0%)
Germany (0.0%):
Medical Services -- Hospital
Management & Nursing Homes (0.0%):
Fresenius AG-Preferred.................. 480 118
Total Preferred Stocks (Cost $90) 118
Asset Backed Securities (2.0%)
American Express Credit Account
Master Trust, Series 2000-5,
Class A, 6.76*, 11/15/00**............ $ 472 472
CIT Equipment Collateral,
Series 2000-2, Class A4,
6.93%, 7/20/11........................ 1,325 1,308
Copelco Capital Funding Corp.,
Series 2000-A, Class A3,
7.12%, 8/18/03........................ 740 744
Ford Credit Auto Owner Trust,
Series 2000-F, Class A2,
6.56%, 5/15/04........................ 1,295 1,291
MBNA Master Credit Card Trust,
Series 1998-D, Class A,
5.80%, 12/15/05....................... 1,400 1,371
MBNA Master Credit Card Trust,
Series 2000-A, Class C,
7.90%, 7/16/07........................ 545 553
MBNA Master Credit Card Trust,
Series 2000-I Class A,
6.90%, 1/15/08........................ 906 911
Peco Energy Transition Trust,
Series 2000-A, Class A2,
7.30%, 9/1/04......................... 900 904
Residential Asset Securities Corp.,
Series 1999-KS, Class A3,
7.18%, 10/1/29........................ 780 780
Total Asset Backed Securities (Cost $8,359) 8,334
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............. 114 118
Total Convertible Bonds (Cost $134) 118
Principal Market
Security Description Amount Value
Collateralized Mortgage Obligations (0.7%)
Federal Home Loan Mortgage Corp.
REMIC, Series 2050, Class AB,
6.25%, 9/15/23........................ $ 872 $ 858
Federal Home Loan Mortgage Corp.
REMIC, Series 2163, Class B,
6.00%, 6/15/27........................ 1,179 1,125
LB Commericial Conduit Mortgage Trust,
Series 1999-C1, Class A1,
6.41%, 8/15/07........................ 736 722
Total Collateralized Mortgage Obligations (Cost $2,706) 2,705
Corporate Bonds (10.1%)
Aerospace/Defense (0.6%):
Lockheed Martin Corp.,
8.20%, 12/1/09 (d).................... 465 488
Raytheon Co., 6.75%, 8/15/07............ 1,475 1,416
United Technology Corp.,
7.50%, 9/15/29........................ 595 585
2,489
Banks (0.8%):
Banc One Corp., 7.88%, 8/1/10........... 1,120 1,129
Bank of America Corp.,
7.80%, 2/15/10........................ 1,075 1,092
First Union Capital II,
7.95%, 11/15/29....................... 345 309
SunTrust Banks, Inc.,
7.75%, 5/1/10......................... 660 665
3,195
Beverages (0.1%):
J. Seagram & Sons, Inc.,
6.25%, 12/15/01....................... 300 298
Chemicals (0.2%):
Dow Chemical Co.,
7.00%, 8/15/05 (d).................... 645 647
Commercial Banking (0.3%):
Korea Development Bank,
6.50%, 11/15/02....................... 535 521
Royal Bank of Scotland,
9.12%, 3/31/49........................ 645 675
1,196
Computer -- Peripherals (0.3%):
Sun Microsystems, Inc.,
7.35%, 8/15/04........................ 535 539
Sun Microsystems, Inc.,
7.65%, 8/15/09 (d).................... 800 809
1,348
Consumer Products --
Miscellaneous (0.2%):
Unilever Capital Corp.,
7.13%, 11/1/10 (d).................... 865 855
Cosmetics/Toiletries (0.2%):
Avon Products, 7.15%, 11/15/09.......... 745 715
See notes to financial statements.
114
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments -- continued
Balanced Fund October 31, 2000
(Amounts in Thousands)
Principal Market
Security Description Amount Value
Electronics and Electrical (0.2%):
Texas Instruments, Inc.,
7.00%, 8/15/04........................ $ 905 $ 907
Financial Services (2.3%):
AT&T Capital Corp.,
6.60%, 5/15/05........................ 620 579
CITGroup, Inc.,
7.38%, 3/15/03 (d).................... 650 652
Citigroup Capital II,
7.75%, 12/1/36 (d).................... 320 288
DaimlerChrysler Financial
Services North America LLC,
5.69%, 11/15/01....................... 1,025 1,015
Ford Motor Credit Co.,
7.24%, 2/15/04........................ 1,045 1,050
General Electric Capital Corp.,
7.50%, 6/5/03......................... 640 653
General Electric Capital Corp.,
7.50%, 5/15/05 (d).................... 610 624
Heller Financial, Inc.,
7.88%, 5/15/03 (d).................... 445 449
Household Finance Corp.,
8.00%, 5/9/05 (d)..................... 1,085 1,109
Merrill Lynch & Co.,
7.18%, 2/11/03........................ 120 120
Morgan Stanley Dean Witter,
7.13%, 1/15/03 (d).................... 960 966
Morgan Stanley Dean Witter,
7.75%, 6/15/05 (d).................... 335 342
UBS Preferred Funding Trust I,
8.62%, 10/1/49,
Callable 10/1/10 @ 100 (d)............ 1,785 1,803
9,650
Industrial Goods & Services (0.1%):
Tyco International Group,
6.88%, 9/5/02......................... 410 409
Insurance (0.7%):
Allstate Corp., 7.20%, 12/1/09.......... 475 465
American General Finance,
7.45%, 1/15/05........................ 390 395
American General Finance,
7.50%, 8/11/10 (d).................... 620 619
Aon Capital Trust A, 8.21%, 1/1/27 (d).. 695 635
Liberty Mutual Insurance,
8.20%, 5/4/07......................... 780 776
2,890
Investment Companies (0.0%):
Barclays Bank NY, 7.40%, 12/15/09....... 50 50
Machinery/Equipment (0.1%):
Deere & Co., 6.55%, 10/1/28............. 530 444
Manufacturing / Diversified (0.2%):
Honeywell International, Inc.,
6.88%, 10/3/05 (d).................... 975 975
Principal Market
Security Description Amount Value
Media (0.5%):
Time Warner, Inc., 7.25%, 10/15/17...... $ 500 $ 470
Viacom, Inc., 7.75%, 6/1/05 (d)......... 610 623
Viacom, Inc., 7.90%, 7/30/10 (d)........ 790 805
1,898
Oil & Gas -- Exploration & Production (0.7%):
Amerada Hess Corp., 7.79%, 10/1/29...... 725 727
Conoco, Inc., 6.95%, 4/15/29 (d)........ 805 748
Enron Corp., 7.38%, 5/15/19............. 475 459
Pemex Finance Ltd., 9.03%, 2/15/11 (c).. 585 612
Union Pacific Resources Group,
7.00%, 10/15/06 (d)................... 400 392
2,938
Oil Equipment & Services (0.1%):
Baker Hughes, Inc., 6.88%, 1/15/29...... 615 563
Pipelines (0.6%):
Kinder Morgan Energy Partners LP,
8.00%, 3/15/05........................ 1,105 1,133
Kinder Morgan, Inc., 6.45%, 11/30/01.... 500 496
Williams Cos., 6.63%, 11/15/04.......... 805 788
2,417
Real Estate (0.2%):
Cabot Industrial Property LP,
7.13%, 5/1/04......................... 325 319
EOP Operating LP, 8.38%, 3/15/06........ 430 443
762
Retail (0.1%):
Target Corp., 7.80%, 8/15/10 (d)........ 500 497
Retail -- Specialty Stores (0.2%):
Lowe's Cos., Inc., 8.25%, 6/1/10........ 650 674
Telecommunications (0.1%):
Vodafone Airtouch PLC,
7.75%, 2/15/10 (c) (d)................ 540 550
Telecommunications Equipment (0.1%):
Marconi Corp. PLC, 8.38%, 9/15/30....... 525 500
Telecommunications -- Services &
Equipment (0.3%):
Cox Communications, Inc.,
6.88%, 6/15/05........................ 335 329
Verizon Communications,
6.84%, 4/15/18 (d).................... 980 895
1,224
Tobacco and Tobacco Products (0.1%):
R.J. Reynolds Tobacco,
7.38%, 5/15/03........................ 270 258
Utilities -- Electric (0.3%):
Duke Energy Corp., 7.38%, 3/1/10........ 565 566
Korea Electric Power,
6.34%, 12/1/03 (d).................... 820 780
1,346
See notes to financial statements.
115
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments -- continued
Balanced Fund October 31, 2000
(Amounts in Thousands, Except Shares)
Principal Market
Security Description Amount Value
Utilities -- Telephone (0.5%):
Sprint Capital Corp,
7.63%, 6/10/02........................ $ 755 $ 760
Telefonica Europe BV,
8.25%, 9/15/30 (d).................... 675 694
WorldCom, Inc., 7.88%, 5/15/03 (d)...... 695 707
2,161
Total Corporate Bonds (Cost $41,727) 41,856
U.S. Treasury Securities (6.1%)
U. S. Treasury Strips (0.2%):
3.30%, 11/15/21 (d)..................... 3,542 1,013
U.S. Treasury Bonds (2.3%):
10.63%, 8/15/15 (d)..................... 949 1,375
7.50%, 11/15/16 (d)..................... 1,010 1,163
8.75%, 8/15/20 (d)...................... 1,883 2,475
8.00%, 11/15/21 (d)..................... 1,262 1,561
7.13%, 2/15/23 (d)...................... 570 648
6.13%, 8/15/29 (d)...................... 1,300 1,346
6.25%, 5/15/30 (d)...................... 836 890
9,458
U.S. Treasury Notes (3.6%):
5.88%, 10/31/01 (d)..................... 2,216 2,206
6.38%, 8/15/02 (d)...................... 3,133 3,152
5.75%, 4/30/03 (d)...................... 1,930 1,922
5.88%, 11/15/04 (d)..................... 1,694 1,695
6.75%, 5/15/05 (d)...................... 513 532
7.00%, 7/15/06 (d)...................... 1,670 1,760
6.62%, 5/15/07 (d)...................... 919 957
5.75% 8/15/10 (d)....................... 2,589 2,587
14,811
Total U.S. Treasury Securities (Cost $24,890) 25,282
U.S. Government Agencies (0.2%)
Business & Public Services (0.1%):
United Mexican States,
9.88%, 2/1/10 (d)..................... 335 348
U.S. Government Loan Trust (0.1%):
U.S. Government Loan Trust -- Israel,
Series 1-B, 8.50%, 4/1/06............. 605 649
Total U.S. Government Agencies (Cost $1,031) 997
Principal Market
Security Description Amount Value
U.S. Government Mortgage Backed (14.2%)
Federal Home Loan
Mortgage Corp. (4.9%):
5.00%, 1/15/04 (d)...................... $ 2,129 $ 2,040
6.00%, 2/1/13-1/1/29.................... 5,357 5,106
6.43%, 1/28/14.......................... 1,020 930
6.50%, 5/1/26-7/1/29.................... 5,094 4,913
6.63%, 9/15/09 (d)...................... 1,068 1,060
6.75%, 3/15/31 (d)...................... 1,098 1,099
7.00%, 10/1/28-11/1/30.................. 3,426 3,363
7.50%, 4/1/28-11/1/29................... 977 976
8.00%, 1/1/29........................... 378 383
8.50%, 7/1/21-4/1/29.................... 410 421
20,291
Federal National Mortgage
Association (7.2%):
6.00%, 10/1/23-7/1/29................... 3,325 3,146
6.50%, 3/1/18-3/1/29.................... 3,655 3,525
6.63%, 10/15/07 (d)..................... 1,020 1,024
7.00%, 7/15/05-10/1/26 ................. 3,839 3,815
7.13%, 6/15/10 (d)...................... 925 954
7.25%, 1/15/10-5/15/30.................. 3,443 3,587
7.50%, 3/1/27-1/1/30.................... 2,595 2,592
8.00%, 6/1/12-3/1/30.................... 4,554 4,618
8.50%, 11/1/17-1/1/30................... 2,060 2,104
9.50%, 10/1/21.......................... 263 273
10.00%, 11/1/13......................... 1,503 1,593
10.50%, 11/1/13......................... 836 904
11.00%, 11/1/13......................... 1,216 1,317
29,452
Government National Mortgage
Assoc. (2.1%):
6.50%, 7/15/28.......................... 778 753
7.00%, 9/15/23-4/15/28.................. 4,646 4,594
7.50%, 11/15/28-4/15/29................. 636 639
8.00%, 8/20/25-2/20/27.................. 675 682
9.00%, 11/15/17......................... 799 826
9.50%, 7/15/09-7/15/25.................. 1,297 1,348
8,842
Total U.S. Government Mortgage Backed
(Cost $58,514) 58,585
See notes to financial statements.
116
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments -- continued
Balanced Fund October 31, 2000
(Amounts in Thousands, Except Shares)
Shares or
Principal Market
Security Description Amount Value
Securities Purchased With Cash Collateral (20.3%)
Investment Companies (3.4%):
AIM Short Term Prime Obligations Fund... 34,310 $ 34
AIM Liquid Assets Portfolio............. 5,379,186 5,379
Merrimac Cash Fund...................... 8,665,396 8,665
14,078
Time Deposits (1.2%):
PNC Bank, 6.56%, 11/1/00................$ 2,600 2,600
National City Bank, 6.50%, 11/1/00...... 2,600 2,600
5,200
Repurchase Agreements (15.7%):
First Union, 6.78%, 11/1/00
(Collateralized by $13,293
HRPT Properties, 8.88%, 8/1/10,
Gables Realty, 6.80%, 3/15/05,
market value $13,390)................. 13,000 13,000
Goldman Sachs, 6.71%, 11/1/00
(Collateralized by $15,630
various Corporate Bonds,
5.75%-9.75%,
4/15/04-9/15/48,
market value $15,069)................. 13,000 13,000
Lehman Brothers,
6.78%, 11/1/00
(Collateralized by 324,612 shares
of various Equity Securities,
market value $13,671)................. 13,000 13,000
Merrill Lynch, 6.75%, 11/1/00
(Collateralized by $12,969
various Corporate Bonds,
0.00%-7.00%,
3/15/02-12/14/18,
market value $13,392)................. 13,000 13,000
Morgan Stanley Dean Witter,
6.73%, 11/1/00 (Collateralized
by $14,792 Conoco Inc.,
6.95%, 4/15/29, BHP
Finance, 6.42%, 3/1/26,
market value $13,833)................. 13,000 13,000
65,000
Total Securities Purchased
With Cash Collateral (Cost $84,278) 84,278
Total Investments (Cost $425,095) (a) -- 119.8% 495,862
Other liabilities in excess of assets -- (19.8)% (82,115)
TOTAL NET ASSETS -- 100.0% $413,747
(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 $189. Cost for federal income tax
purposes differs from value by net unrealized appreciation of securities
as follows (amounts in thousands):
Unrealized appreciation $ 82,744
Unrealized depreciation (12,166)
Net unrealized appreciation $ 70,578
(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, 2000.
* 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, 2000.
** Put and demand features exist allowing the Fund to require the repurchase
of the investment within variable time periods less than one year.
ADR -- American Depository Receipt
GDR -- Global Depository Receipt
At October 31, 2000, the Fund's open forward foreign currency contracts were
as follows:
Unrealized
Delivery Contract Market Appreciation/
Currency Date Value Value Depreciation
Short Contracts:
Euro 11/2/00 $ 1 $ 1 $0
Total Short
Contracts $ 1 $ 1 $0
Long Contracts:
British Pound 11/3/00 $23 $23 $0
Total Long
Contracts $23 $23 $0
See notes to financial statements.
117
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments
Convertible Securities Fund October 31, 2000
(Amounts in Thousands)
Principal Market
Security Description Amount Value
Convertible Bonds (61.2%)
Advertising (0.9%):
Getty Images, Inc.,
Convertible Subordinated Notes,
5.00%, 3/15/07,
Callable 3/20/03 @ 102.86............. $ 500 $ 363
Young & Rubicam, Inc.,
Convertible Subordinated Notes,
3.00%, 1/15/05,
Callable 1/20/03 @ 101.2.............. 500 501
864
Automotive Parts (0.8%):
Magna International, Inc.,
Convertible Subordinated Notes,
5.00%, 10/15/02,
Continuously Callable @ 100........... 800 783
Biotechnology (5.1%):
Centocor, Inc.,
Convertible Subordinated Notes,
4.75%, 2/15/05,
Callable 2/21/01 @ 102.71............. 800 997
Genzyme Corp.,
Convertible Subordinated Notes,
5.25%, 6/1/05,
Callable 6/10/01 @ 102.63............. 750 1,434
Human Genome Sciences, Inc.,
Convertible Subordinated Notes,
3.75%, 3/15/07,
Callable 3/21/03 @ 101.88............. 200 194
Human Genome Sciences, Inc.,
Convertible Subordinated Notes,
3.75%, 3/15/07,
Callable 3/21/03 @ 101.88 (b)......... 500 485
Inhale Therapeutic Systems, Inc.,
Convertible Subordinated Notes,
3.50%, 10/17/07 (b)................... 500 546
Invitrogen Corp.,
Convertible Subordinated Notes,
5.50%, 3/1/07,
Callable 3/1/03 @ 103.14.............. 1,100 1,239
4,895
Broadcasting & Publishing (1.7%):
Clear Channel Communications, Inc.,
Convertible Subordinated Notes,
1.50%, 12/1/02........................ 850 804
Clear Channel Communications, Inc.,
Convertible Subordinated Notes,
2.63%, 4/1/03,
Callable 4/1/01 @ 101.5............... 775 860
1,664
Broadcasting/Cable (1.1%):
Liberty Media Corp.,
Convertible Subordinated Notes,
4.00%, 11/15/29,
Callable 11/15/03 @ 100............... 200 204
Principal Market
Security Description Amount Value
Liberty Media Group,
Convertible Subordinated Notes,
4.00%, 11/15/29,
Callable 11/15/03 @ 100 (b)........... $ 800 $ 815
1,019
Commercial Services (0.9%):
CUC International, Inc.,
Convertible Subordinated Notes,
3.00%, 2/15/02,
Callable 11/24/00 @ 101.2............. 900 831
Computers & Peripherals (0.9%):
Affiliated Computer Services, Inc.,
Convertible Subordinated Notes,
4.00%, 3/15/05,
Callable 3/15/02 @ 101.71............. 330 463
Hewlett Packard Co.,
Convertible Subordinated Notes,
0.00%, 10/14/17,
Callable 11/8/00 @ 58.48.............. 550 387
850
Conglomerates (1.3%):
Ogden Corp.,
Euro-dollar Convertible
Subordinated Notes Debentures,
6.00%, 6/1/02,
Continuously Callable @ 100........... 1,500 1,290
Cosmetics & Toiletries (0.4%):
Avon Products, Inc.,
Convertible Subordinated Notes,
0.00%, 7/12/20,
Callable 7/12/03 @ 53.17 (b).......... 745 382
Electronic & Electrical -- General (0.5%):
Celestica, Inc.,
Convertible Subordinated Notes,
0.00%, 8/1/20,
Callable 8/1/05 @100.................. 1,000 508
Electronic Components/
Instruments (2.5%):
Cymer, Inc.,
Convertible Subordinated Notes,
3.50%, 8/6/04,
Callable 2/6/01 @ 105.61.............. 750 688
SCI Systems, Inc.,
Convertible Subordinated Notes,
3.00%, 3/15/07,
Callable 3/20/03 @ 101.71............. 1,660 1,720
2,408
Insurance -- Property, Casualty,
Health (0.6%):
American International Group, Inc.,
Convertible Subordinated Notes,
0.50%, 5/15/07,
Callable 5/15/03 @ 100................ 500 571
See notes to financial statements.
118
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments -- continued
Convertible Securities Fund October 31, 2000
(Amounts in Thousands)
Principal Market
Security Description Amount Value
Internet Service Provider (1.5%):
Exodus Communications, Inc.,
Convertible Subordinated Notes,
4.75%, 7/15/08,
Callable 1/15/04 @ 102.51............. $ 1,250 $ 1,425
Internet Services/Software (1.2%):
Akamai Technologies, Inc.,
Convertible Subordinated Notes,
5.50%, 7/1/07,
Callable 7/3/03 @ 103.14 (b).......... 700 496
At Home Corp.,
Convertible Subordinated Notes,
4.75%, 12/15/06,
Callable 12/20/02 @ 102.71............ 1,000 618
1,114
Manufacturing -- Machinery (1.4%):
MascoTech, Inc.,
Convertible Subordinated Notes,
4.50%, 12/15/03,
Callable 6/12/00 @ 101.5.............. 255 165
Thermo Fibertek, Inc.,
Convertible Subordinated Notes,
4.50%, 7/15/04,
Callable 11/27/00 @ 100 (b)........... 1,400 1,225
1,390
Medical Equipment & Supplies (0.3%):
Thermo Instruments System,
Convertible Subordinated Notes,
4.50%, 10/15/03,
Callable 11/27/00 @ 100 (b)........... 350 326
Medical -- Hospital Services (1.4%):
Healthcare Management
Associates, Inc.,
Convertible Subordinated Notes,
0.25%, 8/16/20,
Callable 8/16/03 @ 100 (b)............ 800 569
Medical Care International,
Convertible Subordinated Notes,
6.75%, 10/1/06,
Callable 12/14/00 @ 100............... 800 748
1,317
Oil & Gas Exploration,
Production & Services (3.7%):
Devon Energy Corp.,
Convertible Subordinated Notes,
4.90%, 8/15/08,
Callable 11/24/00 @ 104............... 1,700 1,587
Devon Energy,
Convertible Subordinated Notes,
4.95%, 8/15/08,
Callable 11/24/00 @ 104............... 300 282
Kerr-McGee Corp.,
Convertible Subordinated Notes,
5.25%, 2/15/10,
Callable 2/15/05 @ 100................ 675 827
Principal Market
Security Description Amount Value
Kerr-McGee Corp.,
Convertible Subordinated Notes,
7.50%, 5/15/14,
Continuously Callable @ 100........... $ 947 $ 929
3,625
Oil-Integrated Companies (1.2%):
Texaco Capital,
Convertible Subordinated Notes,
3.50%, 8/5/04,
Continuously Callable @ 100........... 1,250 1,187
Oilfield Services & Equipment (1.9%):
Diamond Offshore Drilling, Inc.,
Convertible Subordinated Notes,
3.75%, 2/15/07,
Callable 2/22/01 @ 102.08............. 1,000 1,019
Seacor Holdings, Inc.,
Convertible Subordinated Notes,
5.38%, 11/15/06,
Callable 11/24/99 @ 103.58............ 800 812
1,831
Pharmaceuticals (4.6%):
Allergan, Inc.,
Convertible Subordinated Notes,
0.00%, 11/1/20,
Callable 11/1/03 @ 65.55 (b).......... 580 371
Alpharma, Inc.,
Convertible Subordinated Notes,
3.00%, 6/1/06, (b).................... 200 263
Alpharma, Inc.,
Convertible Subordinated Notes,
3.00%, 6/1/06, (b).................... 500 658
Alza Corp.,
Convertible Subordinated Notes,
0.00%, 7/28/20,
Callable 7/28/03 @ 60.28 (b).......... 250 166
Elan Finance Corp. Ltd.,
Convertible Subordinated Notes,
0.00%, 12/14/18,
Callable 12/14/03 @ 61.66............. 500 384
Sepracor, Inc.,
Convertible Subordinated Notes,
7.00%, 12/15/05,
Callable 12/20/01 @ 104............... 900 1,147
Teva Pharmaceutical Industries Ltd.,
Convertible Subordinated Notes,
1.50%, 10/15/05,
Callable 10/15/03 @ 100.38 (b)........ 850 844
Vertex Pharmaceuticals, Inc.,
Convertible Subordinated Notes,
5.00%, 9/19/07, (b)................... 500 603
4,436
See notes to financial statements.
119
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments -- continued
Convertible Securities Fund October 31, 2000
(Amounts in Thousands)
Principal Market
Security Description Amount Value
Publishing (1.0%):
Scholastic Corp.,
Convertible Subordinated Notes,
5.00%, 8/15/05,
Continuously Callable @ 100 (b)....... $ 870 $ 964
Real Estate (2.0%)
Avatar Holdings,
Convertible Subordinated Notes,
7.00%, 4/1/05,
Callable 4/6/01 @ 104................. 1,250 1,091
EOP Operating LP,
Covertible Subordinated Notes,
7.25%, 11/15/08,
Callable 11/15/04 @ 100 (b)........... 800 799
1,890
Real Estate Investment Trusts (1.3%):
HRPT Properties,
Convertible Subordinated Notes,
7.50%, 10/1/03,
Continuously Callable @ 100........... 350 309
Macerich Co.,
Convertible Subordinated Notes,
7.25%, 12/15/02,
Callable 6/15/02 @ 100................ 500 435
Meditrust,
Convertible Subordinated Notes,
7.50%, 3/1/01......................... 500 478
1,222
Retail -- Specialty Stores (0.7%):
Loews Corporation,
Convertible Subordinated Notes,
3.13%, 9/15/07,
Callable 9/15/02 @ 101.56............. 800 662
Semiconductors (8.5%):
Analog Devices, Inc.,
Convertible Subordinated Notes,
4.75%, 10/1/05,
Callable 10/1/03 @ 101.9 (b).......... 1,400 1,315
Burr-Brown Corp.,
Convertible Subordinated Notes,
4.25%, 2/15/07,
Callable 2/20/03 @ 102.43............. 760 1,060
Conexant Systems,
Convertible Subordinated Notes,
4.00%, 2/1/07......................... 1,000 604
Conexant Systems, Inc.,
Convertible Subordinated Notes,
4.00%, 2/1/07,
Callable 2/6/03 @ 102.29 (b).......... 500 302
Cypress Semiconductor Corp.,
Convertible Subordinated Notes,
4.00%, 2/1/05,
Callable 2/5/03 @ 101................. 900 959
Principal Market
Security Description Amount Value
International Rectifier Corp.,
Convertible Subordinated Notes,
4.25%, 7/15/07,
Callable 7/18/03 @ 102.43 (b)......... $ 250 $ 212
LSI Logic Corp.,
Convertible Subordinated Notes,
4.25%, 3/15/04,
Callable 3/20/02 @ 101.70............. 400 850
LSI Logic Corp.,
Convertible Subordinated Notes,
4.00%, 2/15/05,
Callable 2/20/03 @ 101.60............. 850 710
Solectron Corp.,
Convertible Subordinated Notes,
0.00%, 5/8/20,
Callable 5/8/03 @ 62.86............... 600 435
Solectron Corp.,
Convertible Subordinated Notes,
0.00%, 5/8/20,
Callable 5/8/03 @ 62.86............... 2,780 1,865
8,312
Software & Computer Services (6.7%):
Arbor Software,
Convertible Subordinated Notes,
4.50%, 3/15/05,
Callable 3/20/01 @ 102.57............. 500 359
ASM Lithography Holding N. V.,
Convertible Subordinated Notes,
4.25%, 11/30/04,
Callable 12/5/02 @ 101.7 (b).......... 500 505
Mercury Interactive Corp.,
Convertible Subordinated Notes,
4.75%, 7/1/07,
Callable 7/1/03 @ 100 (b)............. 1,000 1,161
NVIDIA Corp.,
Convertible Subordinated Notes,
4.75%, 10/15/07,
Callable 10/20/03 @ 102.71............ 250 228
Rational Software Corp.,
Convertible Subordinated Notes,
5.00%, 2/1/07,
Callable 2/5/03 @ 102.86 (b).......... 1,000 1,822
Rational Software Corp.,
Convertible Subordinated Notes,
5.00%, 2/1/07,
Callable 2/5/03 @ 102.86.............. 200 365
Siebel Systems,
Convertible Subordinated Notes,
5.50%, 9/15/06,
Callable 9/15/02 @ 103.14 (b)......... 350 1,638
Siebel Systems,
Convertible Subordinated Notes,
5.50%, 9/15/06,
Callable 9/15/02 @ 103.14............. 100 468
See notes to financial statements.
120
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments -- continued
Convertible Securities Fund October 31, 2000
(Amounts in Thousands, Except Shares)
Principal Market
Security Description Amount Value
Softkey International,
Convertible Subordinated Notes,
5.50%, 11/1/00........................ $ 35 $ 35
6,581
Telecommunications -- Satellite (1.1%):
EchoStar Communications Corp.,
Convertible Subordinated Notes,
4.88%, 1/1/07,
Callable 1/1/03 @ 102.79.............. 900 1,051
Telecommunications --
Equipment (2.2%):
CommScope, Inc.
Convertible Subordinated Notes,
4.00%, 12/15/06,
Callable 12/15/02 @ 102.29............ 900 765
CommScope, Inc.,
Convertible Subordinated Notes,
4.00%, 12/15/06,
Callable 12/15/02 @ 102.29 (b)........ 600 510
Efficient Networks, Inc.,
Convertible Subordinated Notes.,
5.00%, 3/15/05,
Callable 3/20/03 @ 101.25 (b)......... 1,300 853
2,128
Telecommunications --
Services & Equipment (1.5%):
Bell Atlantic Financial,
Convertible Subordinated Notes,
4.25%, 9/15/05,
Callable 9/15/02 @ 104.24 (b)......... 500 557
Nextel Communications,
Convertible Subordinated Notes,
5.25%, 1/15/10,
Callable 1/18/03 @ 103.5.............. 250 207
Nextel Communications, Inc.,
Convertible Subordinated Notes,
5.25%, 1/15/10,
Callable 1/18/03 @ 103.5 (b).......... 800 662
1,426
Transportation Services (2.3%):
Offshore Logistics, Inc.,
Convertible Subordinated Notes,
6.00%, 12/15/03,
Callable 6/12/00 @ 103.43............. 1,500 1,433
United Parcel Service, Inc.,
Convertible Subordinated Notes,
1.75%, 9/27/07,
Callable 9/27/03 @ 100................ 750 818
2,251
Total Convertible Bonds (Cost $56,139) 59,203
Market
Security Description Shares Value
Convertible Preferred Stock (35.7%)
Aerospace & Military Technology (0.6%):
Coltec Capital Trust.................... 13,000 $ 618
Banks (3.3%):
Bank United............................. 30,000 2,032
CNB Capital Trust I..................... 33,700 1,188
3,220
Building Materials (0.9%):
Texas Industries, Inc................... 34,500 858
Cosmetics & Toiletries (1.6%):
Estee Lauder Co......................... 18,000 1,539
Financial Services (0.8%):
Lehman Brothers Holdings................ 17,500 731
Food Products (1.0%):
Suiza Capital Trust..................... 25,000 941
Household Goods -- Appliances,
Furnishings & Electronics (0.7%):
Newell Financial Trust I................ 20,000 640
Insurance (3.6%):
Metlife Capital Trust I................. 21,450 1,879
Philadelphia Consolidated
Holding Corp.......................... 162,000 1,579
3,458
Insurance -- Property, Casualty,
Health (1.3%):
Ace Ltd................................. 15,500 1,252
Media (0.7%):
MediaOne Group, Inc..................... 7,100 660
Oil-Integrated Companies (2.1%):
Unocal Corp............................. 44,000 2,079
Oilfield Services & Equipment (1.9%):
EVI, Inc................................ 43,000 1,876
Paper and Forest Products (1.1%):
International Paper Co.................. 24,700 1,071
Paper/Forest Products (0.8%):
Georgia-Pacific Group................... 24,000 770
Pipelines (1.2%):
Western Gas Resources, Inc.............. 34,200 1,201
Publishing (1.1%):
Tribune Co., 2.00%...................... 10,000 1,112
Railroads (1.9%):
Union Pacific Capital................... 5,000 225
Union Pacific Capital (b)............... 35,000 1,575
1,800
Real Estate Investment Trusts (1.6%):
Equity Office, Series B................. 19,500 867
Simon Property Group, Inc., Series B.... 9,500 653
1,520
See notes to financial statements.
121
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments -- continued
Convertible Securities Fund October 31, 2000
(Amounts in Thousands, Except Shares)
Shares or
Principal Market
Security Description Amount Value
Restaurants (2.1%):
Wendys Financing I, Series A............ 40,500 $ 1,985
Retail (0.6%):
K-Mart Financing........................ 18,100 560
Steel (1.2%):
USX Capital Trust I..................... 35,000 1,155
Telecommunications (1.8%):
Broadwing, Inc.......................... 28,000 1,362
Williams Communications (b)............. 10,000 400
1,762
Utilities -- Electric (3.8%):
Calpine Capital III (b)................. 31,000 1,697
El Paso Energy Capital Trust I.......... 21,100 1,656
SEI Trust............................... 7,000 426
3,779
Total Convertible Preferred Stock (Cost $29,350) 34,587
Preferred Stocks (0.5%)
Diversified Finance (0.5%):
Harris Preferred Capital, Series A...... 20,630 447
Total Preferred Stocks (Cost $3,054) 447
Commercial Paper (1.1%)
Household Finance, 6.66%, 11/1/00....... $ 1,078 1,078
Total Commercial Paper (Cost $1,078) 1,078
Total Investments (Cost $89,621) (a) -- 98.5% 95,315
Other assets in excess of liabilities -- 1.5% 1,423
TOTAL NET ASSETS -- 100.0% $96,738
(a) Cost for federal income tax purposes differs from value by net unrealized
appreciation of securities as follows (amounts in thousands):
Unrealized appreciation $10,261
Unrealized depreciation (4,567)
Net unrealized appreciation $ 5,694
(b) 144a security which is restricted as to resale to institutional
investors.
See notes to financial statements.
122
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments
Real Estate Investment Fund October 31, 2000
(Amounts in Thousands, Except Shares)
Market
Security Description Shares Value
Common Stocks (96.7%)
Real Estate Development (4.0%):
St. Joe Co.............................. 14,000 $ 283
TrizecHahn Corp......................... 18,100 270
553
Real Estate Investment Trusts (91.9%):
Apartments (31.0%):
Avalonbay Communities, Inc.............. 18,366 844
BRE Properties, Inc..................... 5,000 158
Charles E. Smith Residential
Realty, Inc........................... 16,000 704
Equity Residential Properties Trust..... 19,000 894
Gables Residential Trust................ 20,000 510
Home Properties of NY, Inc.............. 25,000 680
Post Properties, Inc.................... 10,000 349
Summit Properties, Inc.................. 7,500 180
4,319
Diversified (10.6%):
Cousins Properties, Inc................. 10,500 273
Security Capital Group, Inc.,
Class B (b)........................... 25,000 477
Vornado Realty Trust.................... 21,000 731
1,481
Hotels/Motels (2.1%):
Starwood Hotels & Resorts
Worldwide, Inc........................ 10,000 296
Industrial Development (12.0%):
AMB Property Corp....................... 40,000 940
Cabot Industrial Trust.................. 16,700 315
ProLogis Trust.......................... 20,000 420
1,675
Office (36.2%):
AmeriVest Properties, Inc............... 73,500 312
Arden Realty, Inc....................... 21,000 504
Boston Properties, Inc.................. 26,000 1,053
Brandywine Realty Trust................. 30,000 574
Equity Office Properties Trust.......... 32,000 964
Mack-Cali Realty Corp................... 20,000 543
SL Green Realty Corp.................... 10,000 268
Spieker Properties, Inc................. 15,000 831
5,049
Transportation (0.8%):
Florida East Coast Industries, Inc.,
Class B............................... 3,234 110
Total Common Stocks (Cost $12,103) 13,483
Shares or
Principal Market
Security Description Amount Value
Preferred Stocks (2.5%)
Apartment Investment &
Management Co......................... 13,000 $ 342
Total Preferred Stocks (Cost $336) 342
Warrants (0.0%)
Real Estate Investment Trusts (0.0%):
Office (0.0%):
AmeriVest Properties, Inc............... 10,000 0
Total Warrants (Cost $0) 0
U.S. Government Agencies (2.7%)
Federal National Mortgage
Association (2.7%)
6.45%, 11/1/00........................ $ 374 374
Total U.S. Government Agencies (Cost $374) 374
Total Investments (Cost $12,813) (a) -- 101.9% 14,199
Liabilities in excess of other assets -- (1.9)% (260)
TOTAL NET ASSETS -- 100.0% $13,939
(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 $144. Cost for federal income tax purposes
differs from value by net unrealized appreciation of securities as
follows (amounts in thousands):
Unrealized appreciation $1,743
Unrealized depreciation (213)
Net unrealized appreciation $1,530
(b) Non-income producing securities.
See notes to financial statements.
123
<PAGE>
<TABLE>
Statements of Assets and Liabilities
The Victory Portfolios October 31, 2000
(Amounts in Thousands, Except Per Share Amounts)
<CAPTION>
Convertible Real Estate
Balanced Securities Investment
Fund Fund Fund
<S> <C> <C> <C>
ASSETS:
Investments, at value (Cost $360,095; $89,621 & $12,813) $430,862 $95,315 $14,199
Repurchase agreements, at cost 65,000 -- --
Cash -- 20 1
Foreign currency (cost $4) 4 -- --
Interest and dividends receivable 1,968 646 10
Receivable for capital shares issued -- 71 16
Receivable from brokers for investments sold 2,789 1,346 --
Reclaims receivable 25 -- --
Receivable from affiliates 5 1 4
Unamortized organization costs -- -- 6
Prepaid expenses and other assets 17 12 11
Total Assets 500,670 97,411 14,247
LIABILITIES:
Payable for capital shares redeemed 12 1 --
Payable to brokers for investments purchased 2,214 590 275
Payable for return of collateral received 84,278 -- --
Payable for organization costs -- -- 17
Accrued expenses and other payables:
Investment advisory fees 273 61 7
Administration fees 9 2 --
Custodian fees 24 4 2
Accounting fees 1 -- --
Transfer agent fees 20 11 4
Shareholder service fees -- Class A 84 -- 1
Other 8 4 2
Total Liabilities 86,923 673 308
NET ASSETS:
Capital 316,154 80,238 14,633
Undistributed (distribution in excess of) net investment income (23) 156 217
Net unrealized appreciation/depreciation from investments 70,304 5,694 1,386
Net unrealized appreciation/depreciation from translation of assets
and liabilities in foreign currencies 460 -- --
Accumulated undistributed net realized gains (losses) from
investment transactions and foreign currency transactions 26,852 10,650 (2,297)
Net Assets $413,747 $96,738 $13,939
Net Assets
Class A $412,606 $96,451 $13,864
Class G 1,141 287 75
Total $413,747 $96,738 $13,939
Outstanding units of beneficial interest (shares)
Class A 28,507 6,752 1,206
Class G 79 20 7
Total 28,586 6,772 1,213
Net asset value
Redemption price per share -- Class A $ 14.47 $ 14.29 $ 11.49
Offering price per share -- Class G $ 14.49 $ 14.34 $ 11.49
Maximum sales charge -- Class 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 $ 15.35 $ 15.16 $ 12.19
</TABLE>
See notes to financial statements.
124
<PAGE>
<TABLE>
Statements of Operations
The Victory Portfolios For the Year Ended October 31, 2000
(Amounts in Thousands)
<CAPTION>
Real
Convertible Estate
Balanced Securities Investment
Fund Fund Fund
<S> <C> <C> <C>
Investment Income:
Interest income $ 11,379 $2,568 $ 108
Dividend income 3,719 1,877 801
Securities lending 103 -- --
Foreign tax withholding (27) -- --
Total Income 15,174 4,445 909
Expenses:
Investment advisory fees 3,450 634 118
Administration fees 591 127 22
Shareholder service fees -- Class A 1,028 137 32
Shareholder service fees and 12b-1 fees -- Class B 55 -- --
12b-1 fees -- Class G 3 -- --
Accounting fees 154 49 41
Custodian fees 189 29 11
Legal and audit fees 43 9 3
Amortization of organization fees -- -- 4
Trustees' fees and expenses 10 2 --
Transfer agent fees 100 37 15
Registration and filing fees 29 15 17
Printing fees 26 12 2
Other 26 7 1
Total Expenses 5,704 1,058 266
Expenses voluntarily reduced (107) -- (52)
Expenses before reimbursement from distributor 5,597 1,058 214
Expenses reimbursed by distributor (222) (10) (13)
Net Expenses 5,375 1,048 201
Net Investment Income 9,799 3,397 708
Realized/Unrealized Gains (Losses) from Investments
and Foreign Currencies:
Net realized gains (losses) from investment transactions 27,595 10,653 (468)
Net realized gains (losses) from foreign currency transactions (95) -- --
Change in unrealized appreciation/depreciation from investments (10,488) 1,093 2,705
Change in unrealized appreciation/depreciation from translation of
assets and liabilities in foreign currencies (1) -- --
Net realized/unrealized gains (losses) from investments and
foreign currencies 17,011 11,746 2,237
Change in net assets resulting from operations $ 26,810 $15,143 $2,945
</TABLE>
See notes to financial statements.
125
<PAGE>
<TABLE>
The Victory Portfolios Statements of Changes in Net Assets
(Amounts in Thousands)
<CAPTION>
Balanced Convertible Real Estate
Fund Securities Fund Investment 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,
2000 1999 2000 1999 2000 1999
<S> <C> <C> <C> <C> <C> <C>
From Investment Activities:
Operations:
Net investment income $ 9,799 $ 9,625 $ 3,397 $ 4,581 $ 708 $ 778
Net realized gains
(losses) from
investment transactions 27,595 37,076 10,653 3,994 (468) (1,371)
Net realized gains
(losses) from
foreign currency transactions (95) (164) -- -- -- --
Net change in unrealized
appreciation/depreciation
from investments (10,488) 2,520 1,093 2,960 2,705 643
Net change in unrealized
appreciation/depreciation
from translation of assets
and liabilities in foreign
currencies (1) -- -- -- -- --
Change in net assets resulting
from operations 26,810 49,057 15,143 11,535 2,945 50
Distributions to Shareholders:
From net investment income:
Class A (10,075) (9,181) (3,599) (4,990) (530) (783)
Class B (86) (97) -- -- -- --
Class G (12) -- (3) -- (1) --
In excess of net
investment income:
Class A (159) -- -- -- -- --
Class B (1) -- -- -- -- --
Class G --<F1> -- -- -- -- --
From net realized gains from
investment transactions and
foreign currencies (37,231) (26,725) (3,867) (212) -- --
Change in net assets from
distributions to shareholders (47,564) (36,003) (7,469) (5,202) (531) (783)
Capital Transactions:
Proceeds from shares issued 97,717 59,910 39,119 21,933 4,207 5,022
Proceeds from shares exchanged
from Class B 10,624 -- -- -- -- --
Dividends reinvested 41,639 32,955 5,152 3,658 221 285
Cost of shares redeemed (138,528) (97,329) (34,862) (60,338) (7,108) (6,993)
Cost of shares exchanged
to Class A (10,624) -- -- -- -- --
Change in net assets from
capital transactions 828 (4,464) 9,409 (34,747) (2,680) (1,686)
Change in net assets (19,926) 8,590 17,083 (28,414) (266) (2,419)
Net Assets:
Beginning of period 433,673 425,083 79,655 108,069 14,205 16,624
End of period $ 413,747 $433,673 $ 96,738 $ 79,655 $13,939 $14,205
Share Transactions:
Issued 6,794 4,001 2,822 1,691 395 489
Issued in connection
with exchange
from Class B 762 -- -- -- -- --
Reinvested 2,945 2,247 394 287 21 28
Redeemed (9,874) (6,498) (2,578) (4,686) (668) (683)
Redeemed in connection
with exchange
to Class A (762) -- -- -- -- --
Change in shares (135) (250) 638 (2,708) (252) (166)
<FN>
<F1> Rounds to less than $1,000.
</FN>
</TABLE>
See notes to financial statements.
126
<PAGE>
<TABLE>
The Victory Portfolios Financial Highlights
For a Share Outstanding Throughout Each Period
<CAPTION>
Balanced Fund
Class A Shares Class G Shares
December 15,
Year Year Year Year Year 1999
Ended Ended Ended Ended Ended through
October 31, October 31, October 31, October 31, October 31, October 31,
2000 1999 1998 1997 1996 2000<F6>
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 15.10 $ 14.67 $ 13.87 $ 12.33 $ 11.01 $13.92
Investment Activities
Net investment income 0.33 0.32 0.37 0.36 0.36 0.30
Net realized and
unrealized gains
(losses) from investments
and foreign currencies 0.62 1.34 1.54 1.90 1.39 0.57
Total from
Investment Activities 0.95 1.66 1.91 2.26 1.75 0.87
Distributions
Net investment income (0.34) (0.31) (0.37) (0.35) (0.36) (0.30)
In excess of net
investment income (0.01) -- -- -- -- --<F4>
Net realized gains (1.23) (0.92) (0.74) (0.37) (0.07) --
Total Distributions (1.58) (1.23) (1.11) (0.72) (0.43) (0.30)
Net Asset Value, End of Period $ 14.47 $ 15.10 $ 14.67 $ 13.87 $ 12.33 $14.49
Total Return
(excludes sales charges) 6.74% 11.73% 14.55% 19.02% 16.27% 6.32%<F2>
Ratios/Supplemental Data:
Net Assets, End of Period (000) $412,606 $422,586 $418,807 $342,933 $273,553 $1,141
Ratio of expenses to
average net assets <F7> 1.27% 1.27% 1.27% 1.25% 1.27% 1.57%<F3>
Ratio of net investment income
to average net assets <F7> 2.36% 2.13% 2.54% 2.69% 3.14% 2.04%<F3>
Ratio of expenses to
average net assets<F1> 1.35% 1.50% 1.50% 1.36% 1.43% 3.95%<F3>
Ratio of net investment income
to average net assets<F1> 2.28% 1.90% 2.31% 2.58% 2.98% (0.34)%<F3>
Portfolio turnover <F5> 140% 177% 231% 109% 80% 140%
<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> Less than $0.01 per share.
<F5> Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
<F6> Period from commencement of operations.
<F7> On December 15, 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 Class G shares of the fund at a
maximum of 1.55% until at least February 28, 2001.
</FN>
</TABLE>
See notes to financial statements.
127
<PAGE>
<TABLE>
The Victory Portfolios Financial Highlights
For a Share Outstanding Throughout Each Period
<CAPTION>
Convertible Securities Fund
Class G
Class A Shares Shares
Eleven December 21,
Year Year Months 1999
Ended Ended Ended Year Ended through
October 31, October 31, October 31, November 30, October 31,
2000 1999 1998<F2> 1997 1996 1995 2000<F5>
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 12.99 $ 12.22 $ 14.33 $ 13.55 $ 12.16 $ 11.05 $12.56
Investment Activities
Net investment income 0.54 0.67 0.58 0.62 0.65 0.60 0.54
Net realized and
unrealized gains
(losses) from
investments 1.97 0.83 (1.08) 1.43 1.68 1.50 1.82
Total from
Investment
Activities 2.51 1.50 (0.50) 2.05 2.33 2.10 2.36
Distributions
Net investment income (0.58) (0.70) (0.54) (0.65) (0.62) (0.61) (0.58)
Net realized gains (0.63) (0.03) (1.07) (0.62) (0.32) (0.38) --
Total Distributions (1.21) (0.73) (1.61) (1.27) (0.94) (0.99) (0.58)
Net Asset Value,
End of Period $ 14.29 $ 12.99 $ 12.22 $ 14.33 $ 13.55 $ 12.16 $14.34
Total Return
(excludes sales charges) 20.57% 12.46% (3.69)%<F3> 16.26% 20.28% 20.43% 19.07%<F3>
Ratios/Supplementary Data:
Net Assets at end
of period (000) $96,451 $79,655 $108,069 $104,982 $81,478 $68,212 $ 287
Ratio of expenses to
average net assets <F7> 1.24% 1.24% 1.20%<F4> 1.34% 1.31% 1.31% 1.55%<F4>
Ratio of net
investment income
to average net assets <F7> 4.01% 4.94% 4.60%<F4> 4.75% 5.17% 5.36% 3.18%<F4>
Ratio of expenses to
average net assets<F1> 1.24% <F6> <F6> <F6> <F6> <F6> 13.40%<F4>
Ratio of net
investment income
to average net assets<F1> 4.01% <F6> <F6> <F6> <F6> <F6> (8.67)%<F4>
Portfolio Turnover <F8> 95% 73% 77% 77% 40% 52% 95%
<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 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.
<F3> Not annualized.
<F4> Annualized.
<F5> Period from commencement of operations.
<F6> There were no voluntary fee reductions during the period.
<F7> On December 15, 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 A and Class G shares of
the fund at a maximum of 1.24% and 1.55%, respectively, until at least
February 28, 2001.
<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.
128
<PAGE>
<TABLE>
The Victory Portfolios Financial Highlights
For a Share Outstanding Throughout Each Period
<CAPTION>
Real Estate Investment Fund
Class G
Class A Shares Shares
December 15,
Year Year Year Period 1999
Ended Ended Ended Ended through
October 31, October 31, October 31, October 31, October 31,
2000 1999 1998 1997<F2> 2000<F3>
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 9.70 $ 10.19 $ 12.07 $10.00 $ 9.18
Investment Activities
Net investment income 0.57 0.52 0.50 0.23 0.46
Net realized and unrealized gains
(losses) from investments 1.63 (0.50) (1.90) 2.01 2.25
Total from Investment Activities 2.20 0.02 (1.40) 2.24 2.71
Distributions
Net investment income (0.41) (0.51) (0.44) (0.17) (0.40)
Net realized gains -- -- (0.04) -- --
Total Distributions (0.41) (0.51) (0.48) (0.17) (0.40)
Net Asset Value, End of Period $ 11.49 $ 9.70 $ 10.19 $12.07 $11.49
Total Return (excludes sales charges) 23.04% 0.03% (11.91)% 22.42%<F4> 29.92%<F4>
Ratios/Supplemental Data:
Net Assets, End of Period (000) $13,864 $14,205 $16,624 $4,376 $ 75
Ratio of expenses to
average net assets <F6> 1.40% 1.16% 0.83% 0.00%<F5> 1.65%<F5>
Ratio of net investment income
to average net assets <F6> 4.92% 4.92% 4.95% 5.11%<F5> 4.40%<F5>
Ratio of expenses to
average net assets<F1> 1.77% 1.91% 1.95% 2.93%<F5> 31.78%<F5>
Ratio of net investment income
to average net assets<F1> 4.55% 4.17% 3.83% 2.18%<F5> (25.73)%<F5>
Portfolio turnover <F7> 73% 62% 53% 21% 73%
<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> Period from commencement of operations.
<F4> Not annualized.
<F5> Annualized.
<F6> On December 15, 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 A and Class G shares of
the fund at a maximum of 1.40% and 1.65%, respectively, until at least
February 28, 2001.
<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.
129
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments
Value Fund October 31, 2000
(Amounts in Thousands, Except Shares)
Shares or
Principal Market
Security Description Amount Value
Commercial Paper (0.9%)
Household Finance, 6.66%, 11/1/00....... $ 5,141 $ 5,141
Total Commercial Paper (Cost $5,141) 5,141
Common Stocks (99.1%)
Advertising (0.6%):
Interpublic Group of Cos., Inc. (c)..... 73,900 3,173
Aerospace/Defense (5.0%):
Boeing Co............................... 104,300 7,073
Honeywell International, Inc............ 222,340 11,964
United Technologies Corp................ 134,400 9,383
28,420
Aluminum (0.8%):
Alcoa, Inc.............................. 153,500 4,404
Banks (9.3%):
Bank of America Corp.................... 216,674 10,414
First Union Corp........................ 198,500 6,017
Mellon Financial Corp................... 327,400 15,797
SunTrust Banks, Inc..................... 212,900 10,392
Wells Fargo Co.......................... 222,000 10,281
52,901
Brokerage Services (1.3%):
Morgan Stanley Dean Witter & Co. ....... 93,400 7,501
Chemicals -- General (1.6%):
E.I. Du Pont de Nemours................. 81,800 3,712
Eastman Chemical Co..................... 54,901 2,354
Sigma-Aldrich Corp...................... 76,401 2,731
8,797
Computers & Peripherals (5.4%):
Cisco Systems, Inc. (b) (c)............. 158,100 8,518
Dell Computer Corp. (b)................. 129,900 3,832
Electronic Data Systems Corp............ 62,700 2,943
Hewlett-Packard Co...................... 125,800 5,842
International Business Machines Corp.... 95,200 9,377
30,512
Consumer Products (0.5%):
Newell Rubbermaid, Inc.................. 152,500 2,926
Cosmetics & Toiletries (1.8%):
Avon Products, Inc. (c)................. 149,900 7,270
Kimberly-Clark Corp..................... 47,500 3,135
10,405
Electrical Equipment (1.0%):
Emerson Electric Co..................... 77,600 5,699
Electronic & Electrical --
General (2.4%):
General Electric Co..................... 243,300 13,336
Electronics (1.1%):
Johnson Controls, Inc. (c).............. 52,365 3,122
Parker-Hannifin Corp.................... 74,800 3,095
6,217
Market
Security Description Shares Value
Financial Services (7.6%):
Citigroup, Inc. (c)..................... 268,866 $ 14,149
Fannie Mae (c).......................... 213,000 16,401
Household International, Inc............ 249,600 12,558
43,108
Food Processing & Packaging (2.9%):
General Mills, Inc...................... 193,600 8,083
Sara Lee Corp........................... 390,100 8,411
16,494
Forest Products --
Lumber & Paper (1.3%):
Bowater, Inc............................ 60,600 3,281
Mead Corp............................... 93,000 2,691
Westvaco Corp........................... 55,700 1,587
7,559
Health Care (2.3%):
HCA -- The Healthcare Co. (c)........... 162,100 6,474
Medtronic, Inc.......................... 122,400 6,648
13,122
Heavy Machinery (0.5%):
Deere & Co.............................. 73,700 2,713
Insurance -- Multi-Line (4.3%):
American General Corp. (c).............. 84,399 6,794
American International Group, Inc....... 121,300 11,888
Torchmark Corp.......................... 167,000 5,563
24,245
Insurance -- Property,
Casualty, Health (2.0%):
Chubb Corp.............................. 65,900 5,564
St. Paul Cos., Inc...................... 112,899 5,787
11,351
Manufacturing -- Diversified (0.5%):
Textron, Inc............................ 61,400 3,097
Media (0.9%):
Viacom, Inc., Class B (b)............... 89,600 5,096
Newspapers (1.5%):
Gannett Co., Inc........................ 147,948 8,581
Oil & Gas Exploration,
Production & Services (2.3%):
Amerada Hess Corp....................... 39,501 2,449
Anadarko Petroleum Corp. (c)............ 20,415 1,308
Enron Corp.............................. 52,972 4,347
Transocean Sedco Forex, Inc. (c)........ 89,018 4,718
12,822
Oil-Integrated Companies (6.6%):
Chevron Corp............................ 123,250 10,122
Exxon Mobil Corp........................ 114,589 10,219
Texaco, Inc............................. 127,810 7,549
Unocal Corp............................. 102,200 3,488
USX-Marathon Group, Inc................. 227,600 6,188
37,566
See notes to financial statements.
130
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments--continued
Value Fund October 31, 2000
(Amounts in Thousands, Except Shares)
Market
Security Description Shares Value
Oilfield Services & Equipment (1.1%):
Baker Hughes, Inc. (c).................. 45,350 $ 1,559
Schlumberger Ltd........................ 60,300 4,590
6,149
Pharmaceuticals (7.1%):
Abbott Laboratories..................... 180,300 9,522
American Home Products Corp............. 135,800 8,623
Bristol-Myers Squibb Co................. 102,700 6,258
Pfizer, Inc............................. 363,400 15,695
40,098
Pipelines (1.2%):
El Paso Energy Corp. (c)................ 105,400 6,607
Railroads (0.8%):
Union Pacific Corp. (c)................. 99,400 4,659
Restaurants (0.9%):
Wendy's International, Inc.............. 223,350 4,858
Retail (1.7%):
Target Corp............................. 346,800 9,580
Retail -- Specialty Stores (1.8%):
AutoZone, Inc. (b) (c).................. 117,300 3,145
Lowe's Cos., Inc........................ 156,500 7,150
10,295
Semiconductors (2.6%):
Intel Corp.............................. 189,100 8,477
LSI Logic Corp. (b)..................... 198,651 6,531
15,008
Software & Computer Services (3.6%):
America Online, Inc. (b)................ 87,200 4,397
Compuware Corp. (b)..................... 122,800 967
Microsoft Corp. (b)..................... 168,600 11,613
Parametric Technology Corp. (b)......... 268,749 3,309
20,286
Telecommunications -- Equipment (3.5%):
Avaya, Inc. (b)......................... 4,150 56
Lucent Technologies, Inc................ 82,600 1,926
Motorola, Inc........................... 402,699 10,042
Nortel Networks Corp., ADR (c).......... 48,400 2,202
Tellabs, Inc. (b)....................... 114,000 5,693
19,919
Tobacco & Tobacco Products (0.8%):
Philip Morris Cos., Inc................. 128,850 4,719
Utilities -- Electric (2.7%):
Constellation Energy Group, Inc......... 67,499 2,814
Duke Energy Corp........................ 81,400 7,036
Exelon Corp............................. 89,250 5,366
15,216
Utilities -- Telecommunications (7.8%):
Alltel Corp............................. 149,900 9,659
CenturyTel, Inc......................... 128,799 4,959
SBC Communications, Inc................. 204,637 11,804
Verizon Communications (c).............. 195,556 11,306
WorldCom, Inc. (b)...................... 281,588 6,688
44,416
Total Common Stocks (Cost $418,246) 561,855
Shares or
Principal Market
Security Description Amount Value
Securities Purchased With Cash Collateral(9.5%)
Investment Companies (2.3%):
AIM Short Term Prime Obligations Fund... 31,647 $ 31
AIM Liquid Assets Portfolio............. 4,961,713 4,961
Merrimac Cash Fund...................... 7,992,885 7,993
12,985
Time Deposits (0.8%):
PNC Bank, 6.56%, 11/1/00................ $ 2,398 2,398
National City Bank, 6.50%, 11/1/00...... 2,398 2,398
4,796
Repurchase Agreements (6.4%):
First Union, 6.78%, 11/1/00
(Collateralized by $6,510
Mack-Cali Realty, 7.25%, 3/15/09,
MBNA, 6.30%, 12/15/05,
market value $6,180).................. 6,000 6,000
Goldman Sachs, 6.71%, 11/1/00
(Collateralized by $8,572
various Corporate Bonds,
5.15%-9.38, 8/27/01-2/15/26,
market value $8,651).................. 6,000 6,000
Lehman Brothers, 6.78%, 11/1/00
(Collateralized by 91,655 shares
of various Equity Securities,
market value $6,356).................. 6,000 6,000
Merrill Lynch, 6.75%, 11/1/00
(Collateralized by $7,465
Delta Airlines, 6.65%, 3/15/04,
Elan Finance, 0.00%, 12/14/18,
market value $6,184).................. 6,000 6,000
Morgan Stanley Dean Witter,
6.73%, 11/1/00
(Collateralized by $6,430 First Union,
7.05%, 8/1/05, market value $6,447)... 6,000 6,000
Prudential-Bache, 6.75%, 11/1/00
(Collateralized by $6,180 Rabobank,
6.58%, 10/24/01, market value $6,180). 6,000 6,000
36,000
Total Securities Purchased
With Cash Collateral (Cost $53,781) 53,781
Total Investments (Cost $477,168) (a) -- 109.5% 620,777
Other liabilities in excess of assets -- (9.5)% (53,743)
TOTAL NET ASSETS -- 100.0% $567,034
(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 $170,785
Unrealized depreciation (27,203)
Net unrealized appreciation $143,582
(b) Non-income producing securities.
(c) All or a portion of the security was loaned as of October 31, 2000.
ADR -- American Depository Receipts
See notes to financial statements.
131
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments
Established Value Fund October 31, 2000
(Amounts in Thousands, Except Shares)
Shares or
Principal Market
Security Description Amount Value
Commercial Paper (6.2%)
Household Finance, 6.66%, 11/1/00....... $ 25,748 $ 25,748
Total Commercial Paper (Cost $25,748) 25,748
Common Stocks (93.9%)
Aerospace/Defense (2.1%):
Boeing Co. (c).......................... 129,000 8,748
Airlines (1.7%):
Southwest Airlines Co. (c) ............. 250,000 7,125
Apparel (0.9%):
Jones Apparel Group, Inc. (b)........... 135,000 3,755
Automotive Parts (1.1%):
Borg-Warner Automotive, Inc. (c)........ 112,000 4,228
Dana Corp. (c).......................... 7,000 155
Eaton Corp.............................. 2,000 136
4,519
Banks (0.8%):
FirstMerit Corp......................... 11,000 251
Provident Financial Group, Inc.......... 105,000 3,176
3,427
Beverages (2.7%):
Coors (Adolph) Co. (c).................. 175,000 11,145
Brokerage Services (5.0%):
A. G. Edwards, Inc. (c)................. 102,000 5,177
Donaldson, Lufkin & Jenrette, Inc....... 60,000 5,389
Morgan Stanley Dean Witter & Co. (c).... 125,000 10,038
20,604
Building Materials (1.6%):
Pulte Corp.............................. 200,000 6,663
Chemicals -- General (1.3%):
Englehard Corp.......................... 255,000 5,323
Ferro Corp.............................. 10,000 205
5,528
Commercial Services (0.1%):
Convergys Corp. (b) (c)................. 8,000 349
Computers & Peripherals (7.0%):
Computer Sciences Corp. (b) (c)......... 100,000 6,300
Sun Microsystems, Inc. (b).............. 200,000 22,175
28,475
Computers -- Integrated Systems (0.1%):
Diebold, Inc............................ 20,000 520
Conglomerates (0.1%):
Lancaster Colony Corp................... 10,000 236
Market
Security Description Shares Value
Electronics (2.2%):
Johnson Controls, Inc. (c).............. 148,000 $ 8,824
Parker-Hannifin Corp. (c)............... 2,529 105
8,929
Financial & Insurance (3.9%):
AMBAC Financial Group, Inc. (c) ........ 110,000 8,779
PMI Group, Inc.......................... 100,000 7,388
16,167
Financial Services (13.7%):
Citigroup, Inc. (c)..................... 333,333 17,541
Household International, Inc............ 300,000 15,093
Paine Webber Group, Inc................. 150,000 10,688
Providian Financial Corp. (c)........... 125,000 13,000
56,322
Food Distributors, Supermarkets
& Wholesalers (0.7%):
SUPERVALU, Inc.......................... 200,000 3,075
Forest Products --
Lumber & Paper (0.0%):
Mead Corp. (c).......................... 5,000 145
Health Care (1.9%):
Wellpoint Health Networks (b)........... 68,000 7,952
Heavy Machinery (1.5%):
Ingersoll -- Rand Co. (c)............... 165,000 6,229
Insurance -- Multi-Line (6.8%):
Aegon NV................................ 170,000 6,864
CIGNA Corp.............................. 93,000 11,340
Hartford Financial Services Group, Inc.. 84,000 6,253
Jefferson-Pilot Corp.................... 50,000 3,438
27,895
Manufacturing -- Capital Goods (2.0%):
Illinois Tool Works, Inc. (c)........... 149,498 8,306
Manufacturing -- Diversified (1.5%):
Textron, Inc............................ 125,000 6,305
Media (0.1%):
Scripps (E.W.) Co., Class A (c)......... 8,000 468
Medical Supplies (3.1%):
Baxter International, Inc............... 85,000 6,987
Edwards Lifesciences International (b).. 17,000 228
Sybron International Corp. (b) (c)...... 5,000 5,816
13,031
Oil & Gas Exploration,
Production & Services (4.4%):
Coastal Corp............................ 150,000 11,315
Occidental Petroleum Corp............... 150,000 2,981
Ultramar Diamond Shamrock Corp.......... 150,000 3,938
18,234
See notes to financial statements.
132
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments--continued
Established Value Fund October 31, 2000
(Amounts in Thousands, Except Shares)
Market
Security Description Shares Value
Oil-Integrated Companies (1.5%):
Chevron Corp............................ 75,000 $ 6,159
USX-Marathon Group, Inc................. 10,000 272
6,431
Pipelines (3.0%):
El Paso Energy Corp. (c)................ 200,000 12,538
Real Estate Investment Trusts (1.0%):
Duke-Weeks Realty Corp.................. 175,000 4,145
Restaurants (3.5%):
Brinker International, Inc. (b) (c)..... 225,000 8,831
Wendy's International, Inc. (c)......... 254,000 5,525
14,356
Retail (2.0%):
Target Corp............................. 300,000 8,288
Retail -- Specialty Stores (1.4%):
Limited, Inc. (c)....................... 8,000 202
Lowe's Cos., Inc. (c)................... 125,000 5,711
5,913
Savings & Loans (1.5%):
Charter One Financial, Inc.............. 18,023 413
Dime Bancorp, Inc....................... 240,000 5,865
6,278
Semiconductors (0.9%):
Lam Research Corp. (b).................. 200,000 3,875
Software & Computer Services (4.5%):
First Data Corp......................... 105,000 5,263
Fiserv, Inc. (b) (c).................... 150,000 7,865
Fortune Brands, Inc..................... 180,000 5,299
Reynolds & Reynolds Co., Class A........ 10,000 179
18,606
Telecommunications (1.0%):
Telephone & Data Systems, Inc........... 40,000 4,220
Telecommunications --
Equipment (0.9%):
Qualcomm, Inc. (b)...................... 60,000 3,907
Tools & Hardware Manufacturing (1.1%):
Black & Decker Corp..................... 125,000 4,703
Utilities -- Electric (5.3%):
Duke Energy Corp. (c)................... 100,000 8,644
Energy East Corp........................ 190,000 3,836
Exelon Corp............................. 160,000 9,619
22,099
Total Common Stocks (Cost $207,634) 389,511
Shares or
Principal Market
Security Description Amount Value
Securities Purchased With Cash Collateral (9.3%)
Investment Companies (1.3%):
AIM Short Term Prime Obligations Fund... 13,261 $ 13
AIM Liquid Assets Portfolio............. 2,079,160 2,079
Merrimac Cash Fund...................... 3,349,344 3,349
5,441
Time Deposits (0.5%):
PNC Bank, 6.56%, 11/1/00................ $ 1,005 1,005
National City Bank, 6.50%, 11/1/00...... 1,005 1,005
2,010
Repurchase Agreements (7.5%):
First Union, 6.78%, 11/1/00
(Collateralized by $5,362
Mack-Cali Realty, 7.25%, 3/15/09,
Highwoods/Forsyth, 7.00%, 12/1/06,
market value $5,150).................. 5,000 5,000
Goldman Sachs, 6.71%, 11/1/00
(Collateralized by $9,788
various Corporate Bonds,
6.25%-9.98%,
6/21/04-2/15/47,
market value $9,884).................. 7,000 7,000
Lehman Brothers, 6.78%, 11/1/00
(Collateralized by 120,394 shares
of various Equity Securities,
market value $5,304).................. 5,000 5,000
Merrill Lynch, 6.75%, 11/1/00
(Collateralized by $8,235
various Corporate Bonds,
7.15%-9.12%,
5/15/05-4/15/28,
market value $7,215).................. 7,000 7,000
Morgan Stanley Dean Witter,
6.73%, 11/1/00
(Collateralized by $7,279
Deutsche Telekom, 7.75%, 6/15/05,
market value $7,420).................. 7,000 7,000
31,000
Total Securities Purchased
With Cash Collateral (Cost $38,451) 38,451
Total Investments (Cost $271,833) (a) -- 109.4% 453,710
Liabilities in excess of other assets -- (9.4)% (38,752)
TOTAL NET ASSETS -- 100.0% $414,958
(a) Cost for federal income tax purposes differs from value by net
unrealized appreciation of securities as follows (amounts in thousands):
Unrealized appreciation $183,119
Unrealized depreciation (1,242)
Net unrealized appreciation $181,877
(b) Non-income producing securities.
(c) All or a portion of the security was loaned as of October 31, 2000.
See notes to financial statements.
133
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments
Diversified Stock Fund October 31, 2000
(Amounts in Thousands, Except Shares)
Shares or
Principal Market
Security Description Amount Value
Commercial Paper (0.3%)
Household Finance, 6.66%, 11/1/00....... $ 3,915 $ 3,915
Total Commercial Paper (Cost $3,915) 3,915
Common Stocks (99.7%)
Aerospace/Defense (5.1%):
Honeywell International, Inc............ 675,000 36,323
Raytheon Co., Class B (c)............... 721,600 24,670
60,993
Aluminum (2.2%):
Alcoa, Inc.............................. 919,032 26,365
Automotive Parts (2.4%):
Eaton Corp.............................. 190,000 12,932
TRW, Inc................................ 390,000 16,380
29,312
Banks (4.0%):
Bank of America Corp.................... 400,000 19,225
Mellon Financial Corp................... 600,000 28,950
48,175
Biotechnology (1.4%):
Chiron Corp. (b) (c).................... 400,000 17,325
Computers & Peripherals (6.3%):
Cisco Systems, Inc. (b)................. 50,000 2,694
Dell Computer Corp. (b) (c)............. 475,000 14,013
International Business Machines Corp.... 500,400 49,289
Unisys Corp. (b)........................ 800,000 10,200
76,196
Cosmetics & Toiletries (2.8%):
Avon Products, Inc. (c)................. 375,000 18,188
Kimberly-Clark Corp..................... 240,000 15,840
34,028
Electronics (2.6%):
Parker-Hannifin Corp.................... 400,000 16,550
Thermo Electron Corp. (b)............... 495,000 14,355
30,905
Entertainment (0.5%):
Walt Disney Co. (c)..................... 175,000 6,267
Financial Services (5.3%):
Citigroup, Inc. (c)..................... 403,333 21,225
Franklin Resources, Inc. (c)............ 315,000 13,495
MBNA Corp............................... 780,000 29,299
64,019
Food Processing & Packaging (1.4%):
Quaker Oats Co. (c)..................... 212,300 17,316
Forest Products --
Lumber & Paper (1.1%):
Bowater, Inc............................ 251,800 13,629
Health Care (2.5%):
HCA -- The Healthcare Co. (c)........... 350,000 13,978
Medtronic, Inc.......................... 300,000 16,294
30,272
Market
Security Description Shares Value
Heavy Machinery (5.2%):
Caterpillar, Inc........................ 725,000 $ 25,420
Deere & Co.............................. 392,900 14,464
Ingersoll -- Rand Co. (c)............... 600,000 22,650
62,534
Insurance -- Multi-Line (8.1%):
American General Corp................... 255,000 20,528
American International Group, Inc. (c).. 264,444 25,915
Lincoln National Corp................... 125,000 6,047
MetLife, Inc. (b) (c)................... 995,000 27,486
Progressive Corp. (c)................... 170,400 16,742
96,718
Insurance -- Property, Casualty,
Health (2.1%):
Chubb Corp.............................. 145,000 12,243
St. Paul Cos., Inc. (c)................. 250,000 12,813
25,056
Manufacturing -- Diversified (1.0%):
Textron, Inc............................ 240,000 12,105
Medical Services (1.0%):
Tenet Healthcare Corp. (b).............. 304,800 11,982
Medical Supplies (1.2%):
Biomet, Inc............................. 401,450 14,527
Metals -- Fabrication (0.9%):
Kennametal, Inc. (c).................... 362,000 10,634
Oil & Gas Exploration,
Production & Services (3.0%):
Enron Corp.............................. 36,400 2,987
Noble Affiliates, Inc. (c).............. 446,500 16,381
Transocean Sedco Forex, Inc. (c)........ 314,982 16,694
36,062
Oil-Integrated Companies (1.0%):
Unocal Corp............................. 190,000 6,484
USX-Marathon Group, Inc................. 220,000 5,981
12,465
Oilfield Services & Equipment (2.7%):
Halliburton Co. (c)..................... 200,600 7,435
Schlumberger Ltd........................ 324,000 24,664
32,099
Pharmaceuticals (7.3%):
Abbott Laboratories..................... 220,000 11,619
American Home Products Corp............. 140,000 8,890
Bristol-Myers Squibb Co................. 275,000 16,758
Cardinal Health, Inc. (c)............... 200,000 18,950
Smithkline Beecham PLC, ADR............. 485,000 31,615
87,832
Radio & Television (0.5%):
AT&T Corp. -- Liberty Media,
Class A (b) (c) 349,396 6,289
Retail (1.7%):
Target Corp............................. 750,000 20,719
Retail -- Specialty Stores (1.3%):
Lowe's Cos., Inc........................ 338,500 15,465
See notes to financial statements.
134
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments--continued
Diversified Stock Fund October 31, 2000
(Amounts in Thousands, Except Shares)
Shares or
Principal Market
Security Description Amount Value
Semiconductors (4.1%):
Intel Corp. (c)......................... 540,000 $ 24,207
LSI Logic Corp. (b)..................... 750,600 24,676
48,883
Software & Computer Services (10.3%):
America Online, Inc. (b)................ 800,000 40,344
Microsoft Corp. (b)..................... 661,200 45,539
Parametric Technology Corp. (b)......... 1,700,000 20,931
SunGard Data Systems, Inc. (b) (c)...... 300,000 15,338
122,152
Telecommunications -- Equipment (6.1%):
General Motors, Class H (b) (c)......... 140,000 4,536
Motorola, Inc. (c)...................... 2,250,000 56,109
Nortel Networks Corp., ADR.............. 275,000 12,513
73,158
Utilities -- Electric (2.1%):
Duke Energy Corp. (c)................... 175,000 15,127
FPL Group, Inc. (c)..................... 150,000 9,900
25,027
Utilities -- Telecommunications (2.5%):
AT&T Corp............................... 537,151 12,456
CenturyTel, Inc......................... 198,400 7,638
WorldCom, Inc. (b) (c).................. 399,206 9,481
29,575
Total Common Stocks (Cost $1,041,309) 1,198,084
Securities Purchased With Cash Collateral (15.3%)
Investment Companies (0.7%):
AIM Short Term Prime Obligations Fund... 21,241 21
AIM Liquid Assets Portfolio............. 3,330,177 3,330
Merrimac Cash Fund...................... 5,364,624 5,365
8,716
Time Deposits (0.3%):
PNC Bank, 6.56%, 11/1/00................ $ 1,610 1,610
National City Bank, 6.50%, 11/1/00...... 1,609 1,609
3,219
Repurchase Agreements (14.3%):
Deutsche Bank, 6.69%, 11/1/00
(Collateralized by $20,480
various Corporate Bonds,
7.00%-8.20%, 10/15/04-6/15/28,
market value $20,600)................. 20,000 20,000
First Union, 6.78%, 11/1/00
(Collateralized by $20,724
HRPT Properties,
8.63%, 10/1/10,
Excel Realty Trust,
6.88%, 10/15/04,
market value $20,600)................. 20,000 20,000
Principal Market
Security Description Amount Value
Goldman Sachs, 6.71%, 11/1/00
(Collateralized by $24,858
Zurich Capital Trust,
8.38%, 6/1/37,
Royal & Sun Alliance,
8.95%, 10/15/29,
market value $24,619)................. $ 20,000 $ 20,000
Lehman Brothers, 6.78%, 11/1/00
(Collateralized by 739,745 shares
of various Equity Securities,
market value $17,884)................. 17,000 17,000
Merrill Lynch, 6.75%, 11/1/00
(Collateralized by $36,767
various Corporate Bonds,
0.00%-10.13%, 6/1/03-7/1/23,
market value $30,904)................. 30,000 30,000
Morgan Stanley Dean Witter,
6.73%, 11/1/00
(Collateralized by $20,301
Weyerhaeuser, 8.50%, 1/15/25,
Lehman Brothers, 8.25%, 6/15/07
market value $21,694)................. 20,000 20,000
Prudential-Bache, 6.75%, 11/1/00
(Collateralized by $20,570
Rabobank, 6.58%, 10/24/01,
Household Finance,
5.30%, 6/17/05,
market value $20,600)................. 20,000 20,000
Salomon Smith Barney,
6.71%, 11/1/00
(Collateralized by $31,284
various Corporate Bonds,
6.60%-8.20%,
3/15/07-6/30/31,
market value $29,296)................. 25,000 25,000
172,000
Total Securities Purchased
With Cash Collateral (Cost $183,935) 183,935
Total Investments (Cost $1,229,159) (a) -- 115.3% 1,385,934
Other liabilities in excess of assets -- (15.3)% (183,542)
TOTAL NET ASSETS -- 100.0% $1,202,392
(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 $1,644. Cost for federal income tax purposes
differs from value by net unrealized appreciation of securities as
follows (amounts in thousands):
Unrealized appreciation $235,692
Unrealized depreciation (80,561)
Net unrealized appreciation $155,131
(b) Non-income producing securities.
(c) All or a portion of this security was loaned as of October 31, 2000.
ADR -- American Depository Receipts
See notes to financial statements.
135
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments
Stock Index Fund October 31, 2000
(Amounts in Thousands, Except Shares)
Market
Security Description Shares Value
Common Stocks (98.1%)
Advertising (0.2%):
Interpublic Group of Cos., Inc.......... 21,193 $ 910
Omnicom (d)............................. 12,231 1,128
2,038
Aerospace/Defense (2.4%):
B.F. Goodrich Co........................ 6,987 286
Boeing Co. (d).......................... 61,783 4,190
General Dynamics Corp................... 13,665 978
Honeywell International, Inc............ 216,259 11,637
Lockheed Martin Corp.................... 29,395 1,054
Northrop Grumman Corp................... 4,936 415
Raytheon Co., Class B (d)............... 23,413 800
United Technologies Corp................ 32,238 2,251
21,611
Airlines (0.2%):
AMR Corp. (b)........................... 10,325 338
Delta Air Lines, Inc.................... 8,434 399
Southwest Airlines Co................... 34,330 978
U.S. Airways Group, Inc. (b)............ 4,617 174
1,889
Aluminum (0.3%):
Alcan Aluminum Ltd...................... 23,061 728
Alcoa, Inc.............................. 59,632 1,711
2,439
Apparel (0.0%):
Liz Claiborne, Inc. (d)................. 3,667 156
Russell Corp............................ 2,244 36
VF Corp. (d)............................ 7,883 215
407
Apparel/Footwear (0.1%):
Nike, Inc., Class B (d)................. 18,575 742
Reebok International Ltd. (b)........... 3,911 84
826
Automotive (0.7%):
Ford Motor Co........................... 130,349 3,405
General Motors Corp..................... 36,940 2,295
Navistar International Corp. (b)........ 4,077 135
PACCAR, Inc............................. 5,269 222
6,057
Automotive Parts (0.2%):
Dana Corp............................... 10,279 228
Delphi Automotive Systems............... 38,557 604
Eaton Corp.............................. 5,018 342
Genuine Parts Co........................ 12,047 257
TRW, Inc. (d)........................... 8,546 359
Visteon Corp. (d)....................... 9,006 159
1,949
Banks (5.0%):
AmSouth Bankcorp........................ 25,939 362
Bank of America Corp.................... 113,114 5,437
Bank of New York Co., Inc............... 50,834 2,926
Bank One Corp........................... 79,574 2,904
BB & T Corp............................. 27,537 878
Chase Manhattan Corp. (d)............... 90,112 4,100
Comerica, Inc........................... 10,775 650
Market
Security Description Shares Value
Fifth Third Bancorp (d)................. 32,020 $ 1,645
First Union Corp. (d)................... 67,819 2,056
Firstar Corp............................ 65,981 1,299
FleetBoston Financial Corp.............. 62,139 2,361
Huntington Bancshares, Inc.............. 17,306 249
J.P. Morgan & Co., Inc. (d)............. 10,951 1,812
KeyCorp................................. 29,645 732
Mellon Financial Corp................... 33,615 1,622
National City Corp...................... 41,822 894
Northern Trust Corp..................... 15,277 1,304
Old Kent Financial Corp................. 9,429 261
PNC Bank Corp........................... 19,899 1,331
Regions Financial Corp. (d)............. 15,069 355
SouthTrust Corp......................... 11,584 375
State Street Corp....................... 11,098 1,384
Summit Bancorp.......................... 11,976 449
SunTrust Banks, Inc..................... 20,527 1,002
Synovus Financial Corp.................. 19,563 422
U.S. Bancorp............................ 51,355 1,242
Union Planters Corp..................... 9,278 314
Wachovia Corp........................... 13,996 756
Wells Fargo Co. (d)..................... 113,365 5,250
44,372
Beverages (2.3%):
Anheuser-Busch Cos., Inc. (d)........... 62,375 2,854
Brown-Forman Corp., Class B (d)......... 4,727 288
Coca Cola Enterprises, Inc. (d)......... 28,804 529
Coca-Cola Co. (d)....................... 170,556 10,297
Coors (Adolph) Co. (d).................. 2,543 162
Pepsico, Inc. (d)....................... 99,367 4,813
Seagram Co. Ltd......................... 30,055 1,717
20,660
Biotechnology (0.6%):
Amgen, Inc. (b) (d)..................... 70,804 4,102
Biogen, Inc. (b)........................ 10,189 613
MedImmune, Inc. (b)..................... 14,448 945
5,660
Brokerage Services (1.7%):
Lehman Brothers Holdings, Inc. (d)...... 16,718 1,078
Merrill Lynch & Co., Inc. (d)........... 55,314 3,872
Morgan Stanley Dean Witter & Co......... 77,473 6,223
Schwab (Charles) Corp. (d).............. 95,067 3,339
Stilwell Financial, Inc................. 15,463 693
15,205
Building Materials (0.1%):
Armstrong Holdings, Inc................. 2,788 8
Centex Corp............................. 4,051 150
Kaufman & Broad Home Corp............... 3,320 99
Masco Corp. (d)......................... 31,475 587
Pulte Corp.............................. 2,780 93
Vulcan Materials Co. (d)................ 6,950 292
1,229
Chemicals -- General (0.9%):
Air Products & Chemicals, Inc........... 15,790 589
Ashland, Inc. (d)....................... 4,816 158
Dow Chemical Co. (d).................... 46,701 1,431
E.I. Du Pont de Nemours................. 71,790 3,258
Eastman Chemical Co..................... 5,295 227
Englehard Corp.......................... 8,797 184
See notes to financial statements.
136
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments--continued
Stock Index Fund October 31, 2000
(Amounts in Thousands, Except Shares)
Market
Security Description Shares Value
Great Lakes Chemical Corp. (d).......... 3,596 $ 120
Hercules, Inc. (d)...................... 7,395 135
PPG Industries, Inc..................... 11,977 534
Praxair, Inc............................ 10,884 405
Rohm & Haas Co. (d)..................... 14,912 448
Sigma-Aldrich Corp...................... 5,550 198
Union Carbide Corp...................... 9,289 399
W.R. Grace & Co. (b).................... 4,617 18
8,104
Commercial Services (0.4%):
Cendant Corp. (b)....................... 50,005 600
Convergys Corp. (b)..................... 10,599 462
Ecolab, Inc. (d)........................ 8,816 345
Paychex, Inc............................ 25,627 1,453
Quintiles Transnational Corp. (b)....... 7,958 111
Moodys, Inc............................. 11,157 294
3,265
Computers & Peripherals (10.2%):
Adaptec, Inc. (b)....................... 6,828 108
Apple Computer, Inc. (b)................ 22,376 438
Cabletron Systems, Inc. (b)............. 12,683 344
Ceridian Corp. (b)...................... 9,995 250
Cisco Systems, Inc. (b) (d)............. 488,647 26,325
Compaq Computer Corp.................... 117,059 3,560
Computer Sciences Corp. (b)............. 11,576 729
Dell Computer Corp. (b)................. 178,143 5,255
Electronic Data Systems Corp. (d)....... 32,121 1,508
EMC Corp. (b)........................... 150,137 13,372
Gateway, Inc. (b) (d)................... 22,188 1,145
Hewlett-Packard Co...................... 137,336 6,378
International Business
Machines Corp......................... 121,240 11,942
Lexmark International Group, Inc. (b)... 8,777 360
NCR Corp. (b) (d)....................... 6,614 285
Network Appliance, Inc. (b)............. 21,512 2,560
Seagate Technology, Inc. (b) (d)........ 15,769 1,102
Palm, Inc. (b).......................... 38,902 2,084
Sun Microsystems, Inc. (b).............. 109,237 12,112
Unisys Corp. (b)........................ 21,553 275
90,132
Conglomerates (0.0%):
Fortune Brands, Inc..................... 10,805 318
Construction (0.0%):
Fluor Corp. (d)......................... 5,211 182
Consulting Services (0.0%):
Sapient Corp. (b) (d)................... 8,173 291
Consumer Products (1.1%):
American Greetings Corp., Class A....... 4,436 81
Clorox Co. (d).......................... 16,163 721
Colgate-Palmolive Co. (d)............... 39,550 2,324
Newell Rubbermaid, Inc. (d)............. 18,356 352
Procter & Gamble Co. (d)................ 90,059 6,434
Tupperware Corp......................... 3,982 68
9,980
Containers & Packaging (0.1%):
Ball Corp............................... 2,004 70
Bemis, Inc.............................. 3,664 95
Crown Cork & Seal Co., Inc.............. 8,673 79
Owens-Illinois, Inc. (b) (d)............ 10,055 60
Market
Security Description Shares Value
Pactiv Corp. (b)........................ 11,669 $ 123
Sealed Air Corp. (b) (d)................ 5,772 277
704
Cosmetics & Toiletries (0.7%):
Alberto Culver Co. (d).................. 3,848 129
Avon Products, Inc. (d)................. 16,349 793
Gillette Co. (d)........................ 72,494 2,528
International Flavor & Fragance, Inc.... 6,879 115
Kimberly-Clark Corp..................... 37,057 2,446
6,011
Distribution/Wholesale (0.1%):
Costco Wholesale Corp. (b) (d).......... 30,778 1,127
Electrical Equipment (0.3%):
Emerson Electric Co..................... 29,414 2,160
W.W. Grainger, Inc...................... 6,467 207
Power-One, Inc. (b)..................... 5,030 357
2,724
Electronic & Electrical --
General (3.8%):
General Electric Co..................... 512,026 28,066
Texas Instruments, Inc.................. 119,021 5,839
33,905
Electronics (1.6%):
American Power Conversion (b)........... 13,395 173
Analog Devices (b) (d).................. 24,461 1,590
JDS Uniphase Corp. (b) (d).............. 64,446 5,248
Johnson Controls, Inc................... 5,914 353
Millipore Corp.......................... 3,188 167
Molex, Inc. (d)......................... 13,508 729
Parker-Hannifin Corp.................... 7,708 319
PE Corp.--PE Biosystems Group........... 14,344 1,678
PerkinElmer, Inc. (d)................... 3,396 406
Sanmina Corp. (b) (d)................... 10,425 1,192
Solectron Corp. (b) (d)................. 41,418 1,823
Tektronix, Inc.......................... 3,310 236
Thermo Electron Corp. (b)............... 11,941 346
Thomas & Betts Corp. (d)................ 3,999 60
14,320
Entertainment (0.6%):
Brunswick Corp.......................... 6,011 117
Walt Disney Co. (d)..................... 143,543 5,140
5,257
Environmental Control (0.1%):
Allied Waste Industries, Inc. (b)....... 13,550 125
Waste Management, Inc................... 42,802 856
981
Financial & Insurance (0.1%):
MBIA, Inc............................... 6,765 492
Financial Services (4.7%):
American Express Co. (d)................ 91,711 5,503
Associates First Capital Corp........... 50,157 1,862
Bear Stearns Companies, Inc. (d)........ 7,412 449
Capital One Financial Corp.............. 13,514 853
CIT Group, Inc. (The) (d)............... 18,071 315
Citigroup, Inc.......................... 309,774 16,303
Countrywide Credit Industries, Inc. (d). 7,862 294
Deluxe Corp............................. 4,980 112
See notes to financial statements.
137
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments--continued
Stock Index Fund October 31, 2000
(Amounts in Thousands, Except Shares)
Market
Security Description Shares Value
Equifax, Inc. (d)....................... 9,734 $ 336
Fannie Mae.............................. 69,367 5,341
Federal Home Loan Mortgage Corp. (d).... 47,863 2,872
Franklin Resources, Inc. (d)............ 16,770 718
H&R Block, Inc.......................... 6,265 224
Household International, Inc............ 32,525 1,636
MBNA Corp............................... 58,652 2,203
Paine Webber Group, Inc................. 10,175 725
Price (T. Rowe) Associates.............. 8,353 391
Providian Financial Corp. (d)........... 9,832 1,023
USA Education, Inc. (d)................. 10,688 597
41,757
Food Distributors, Supermarkets
& Wholesalers (0.6%):
Albertsons, Inc......................... 29,140 690
Kroger Co. (b) (d)...................... 56,869 1,283
Safeway, Inc. (b) (d)................... 34,230 1,872
SUPERVALU, Inc.......................... 9,111 140
Sysco Corp. (d)......................... 22,943 1,197
Winn-Dixie Stores, Inc. (d)............. 9,697 187
5,369
Food Processing & Packaging (1.2%):
Archer-Daniels-Midland Co............... 43,537 479
Campbell Soup Co. (d)................... 28,997 848
ConAgra, Inc. (d)....................... 36,706 785
General Mills, Inc...................... 19,652 820
H.J. Heinz Co........................... 23,924 1,003
Hershey Foods Corp. (d)................. 9,415 511
Kellogg Co.............................. 27,932 709
Nabisco Group Holdings Corp............. 22,472 649
Quaker Oats Co. (d)..................... 9,129 745
Ralston-Ralston Purina Group............ 21,138 513
Sara Lee Corp. (d)...................... 59,876 1,291
Unilever NV............................. 39,358 1,999
Wm. Wrigley Jr. Co. (d)................. 7,826 620
10,972
Forest Products -- Lumber
& Paper (0.4%):
Boise Cascade Corp. (d)................. 3,948 113
Fort James Corp......................... 14,096 464
Georgia Pacific Corp. (d)............... 11,743 316
International Paper Co.(d).............. 33,289 1,219
Louisiana Pacific Corp.................. 7,174 61
Mead Corp. (d).......................... 7,063 204
Potlatch Corp. (d)...................... 1,956 66
Temple-Inland, Inc. (d)................. 3,511 157
Westvaco Corp........................... 6,937 198
Weyerhauser Co.......................... 15,163 712
Willamette Industries, Inc.............. 7,520 273
3,783
Health Care (0.8%):
HCA -- The Healthcare Company........... 38,427 1,535
Humana, Inc. (b)........................ 11,428 139
Manor Care, Inc. (b).................... 7,040 117
McKesson HBOC, Inc...................... 19,563 549
Medtronic, Inc.......................... 82,492 4,480
Wellpoint Health Networks (b)........... 4,321 505
7,325
Market
Security Description Shares Value
Heavy Machinery (0.2%):
Caterpillar, Inc........................ 23,806 $ 835
Deere & Co.............................. 16,145 594
Ingersoll--Rand Co. (d)................. 11,094 419
McDermott International, Inc............ 4,150 40
1,888
Hotels & Motels (0.1%):
Hilton Hotels Corp...................... 25,374 241
Marriott International, Inc., Class A 16,530 670
911
Household Goods -- Appliances,
Furnishings & Electronics (0.1%):
Leggett & Platt, Inc.................... 13,536 221
Maytag Corp............................. 5,340 153
Whirlpool Corp.......................... 4,911 214
588
Insurance -- Multi-Line (3.5%):
Aetna, Inc.............................. 9,728 562
Aflac, Inc.............................. 18,259 1,334
Allstate Corp........................... 50,558 2,035
American General Corp................... 17,391 1,400
American International Group, Inc. (d).. 159,325 15,614
Aon Corp. (d)........................... 17,559 728
CIGNA Corp.............................. 10,852 1,323
Cincinnati Financial Corp............... 11,083 407
Conseco, Inc............................ 22,399 155
Hartford Financial Services Group, Inc.. 15,445 1,150
Jefferson-Pilot Corp.................... 7,096 488
Lincoln National Corp................... 13,135 635
Loews Corp.............................. 6,790 617
Marsh & McLennan Cos., Inc.............. 18,683 2,443
MGIC Investment Corp. (d)............... 7,322 499
Progressive Corp. (d)................... 5,044 496
Safeco Corp............................. 8,788 213
Torchmark Corp.......................... 8,782 293
UnumProvident Corp...................... 16,571 468
30,860
Insurance -- Property, Casualty,
Health (0.2%):
Chubb Corp.............................. 12,033 1,016
St. Paul Cos., Inc. (d)................. 15,380 788
1,804
Internet Service Provider (1.2%):
America Online, Inc. (b)................ 158,986 8,017
Yahoo, Inc. (b) (d)..................... 37,826 2,218
10,235
Leisure -- Recreation, Gaming (0.1%):
Carnival Corp. (d)...................... 40,585 1,007
Harrah's Entertainment, Inc. (b)........ 8,035 230
1,237
Machine -- Diversified (0.5%):
Applied Materials, Inc. (b) (d)......... 55,854 2,968
Briggs & Stratton Corp.................. 1,487 53
Cummins Engine, Inc..................... 2,863 97
Dover Corp.............................. 13,984 593
Rockwell International Corp............. 12,745 501
4,212
See notes to financial statements.
138
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments--continued
Stock Index Fund October 31, 2000
(Amounts in Thousands, Except Shares)
Market
Security Description Shares Value
Manufacturing -- Capital Goods (0.2%):
Cooper Industries, Inc.................. 6,419 $ 246
Illinois Tool Works, Inc................ 20,784 1,154
1,400
Manufacturing -- Miscellaneous (1.8%):
Corning, Inc. (d)....................... 60,732 4,647
Crane Co................................ 4,188 110
Danaher Corp. (d)....................... 9,761 616
FMC Corp. (b) (d)....................... 2,096 159
ITT Industries, Inc..................... 6,054 197
Minnesota Mining & Manufacturing Co..... 27,219 2,630
National Service Industries, Inc. (d)... 2,810 57
Pall Corp. (d).......................... 8,496 183
Textron, Inc............................ 9,875 498
Tyco International Ltd.................. 120,365 6,823
15,920
Media (1.5%):
Time Warner, Inc........................ 91,129 6,917
Viacom, Inc., Class B (b)............... 104,431 5,940
Knight-Ridder, Inc. (d)................. 5,209 262
13,119
Medical Services (0.2%):
Tenet Healthcare Corp. (b).............. 21,680 852
Unitedhealth Group, Inc. (d)............ 11,064 1,210
2,062
Medical Supplies (0.5%):
Bausch & Lomb, Inc...................... 3,663 141
Baxter International, Inc............... 20,119 1,653
Becton Dickinson & Co. (d).............. 17,436 584
Biomet, Inc............................. 12,229 443
Boston Scientific Corp. (b)............. 27,985 446
C.R. Bard, Inc.......................... 3,497 146
Guidant Corp. (b) (d)................... 21,131 1,119
St. Jude Medical, Inc. (b).............. 5,795 319
4,851
Medical -- Information Systems (0.1%):
IMS Health, Inc......................... 20,464 483
Metals-Fabrication (0.0%):
Timken Co............................... 4,171 59
Worthington Industries, Inc............. 5,906 56
115
Mining (0.1%):
Barrick Gold Corp....................... 27,250 364
Homestake Mining Co..................... 18,117 75
Newmont Mining Corp..................... 11,574 157
596
Primary Metal & Mineral
Production (0.0%):
Placer Dome, Inc........................ 22,551 183
Motorcycle (0.1%):
Harley-Davidson, Inc. (d)............... 20,834 1,004
Newspapers (0.3%)
Gannett Co., Inc........................ 18,154 1,052
New York Times Co., Class A (d)......... 11,498 423
Tribune Co. (d)......................... 21,222 787
2,262
Market
Security Description Shares Value
Office Equipment & Supplies
(Non-Computer Related) (0.2%):
Avery Dennison Corp..................... 7,681 $ 388
Office Depot, Inc. (b).................. 21,048 175
Pitney Bowes, Inc....................... 17,578 522
Staples, Inc. (b)....................... 31,268 446
Xerox Corp.............................. 45,911 387
1,918
Oil & Gas Exploration, Production
& Services (1.2%):
Amerada Hess Corp....................... 6,204 385
Anadarko Petroleum Corp. (d)............ 16,738 1,072
Apache Corp............................. 8,410 465
Burlington Resource, Inc. (d)........... 14,841 534
Coastal Corp............................ 14,770 1,114
Devon Energy Corp. (d).................. 8,784 443
Enron Corp.............................. 50,880 4,174
Kerr-McGee Corp. (d).................... 6,488 424
Nabors Industries, Inc. (b) (d)......... 9,445 481
Occidental Petroleum Corp............... 25,400 505
Oneok, Inc.............................. 2,018 80
Rowan Cos., Inc. (b).................... 6,493 164
Tosco Corp. (d)......................... 9,954 285
Transocean Sedco Forex, Inc. (d)........ 14,500 769
10,895
Oil-Integrated Companies (4.5%):
Chevron Corp............................ 44,941 3,691
Conoco, Inc., Class B .................. 42,883 1,166
Exxon Mobil Corp. (d)................... 239,891 21,394
Phillips Petroleum Co................... 17,543 1,083
Royal Dutch Petroleum Co................ 147,652 8,767
Sunoco, Inc............................. 5,997 180
Texaco, Inc............................. 37,959 2,242
Unocal Corp............................. 16,723 571
USX-Marathon Group, Inc................. 21,489 584
39,678
Oilfield Services & Equipment (0.6%):
Baker Hughes, Inc. (d).................. 22,771 783
Halliburton Co. (d)..................... 30,678 1,137
Schlumberger Ltd. (d)................... 39,250 2,988
4,908
Paint, Varnishes, Enamels (0.0%):
Sherwin-Williams Co..................... 11,202 243
Pharmaceuticals (9.5%):
Abbott Laboratories..................... 106,725 5,636
Allergan, Inc........................... 9,045 760
Alza Corp., Class A (b) (d)............. 7,955 644
American Home Products Corp............. 89,767 5,700
Bristol-Myers Squibb Co................. 135,328 8,247
Cardinal Health, Inc. (d)............... 19,135 1,813
Eli Lilly & Co. (d)..................... 77,775 6,951
Johnson & Johnson, Inc.................. 95,736 8,820
King Pharmaceuticals, Inc. (b) (d)...... 11,780 528
Merck & Co., Inc. (d)................... 158,411 14,247
Pfizer, Inc. (d)........................ 434,752 18,777
Pharmacia Corp. (d)..................... 89,360 4,915
Schering-Plough Corp. (d)............... 100,873 5,214
Watson Pharmaceuticals, Inc. (b) (d).... 7,039 440
82,692
See notes to financial statements.
139
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments--continued
Stock Index Fund October 31, 2000
(Amounts in Thousands, Except Shares)
Market
Security Description Shares Value
Photography (0.1%):
Eastman Kodak Co........................ 21,202 $ 952
Polaroid Corp. (d)...................... 3,098 31
983
Physical Therapy (0.0%):
Healthsouth Corp. (b)................... 26,554 319
Pipelines (0.3%):
El Paso Energy Corp. (d)................ 15,991 1,002
Williams Cos., Inc...................... 30,489 1,275
2,277
Primary Metal & Mineral
Production (0.1%):
Freeport-McMoRan Copper
& Gold, Inc., Class B (b)............. 10,528 84
Inco Ltd. (b) (d)....................... 12,513 193
Phelps Dodge Corp....................... 5,420 253
530
Publishing (0.2%):
Dow Jones & Co., Inc.................... 6,018 354
Harcourt General, Inc................... 5,035 282
McGraw-Hill Cos., Inc................... 13,407 862
Meredith Corp........................... 3,497 111
R.R. Donnelley & Sons Co. (d)........... 8,394 180
1,789
Radio & Television (0.6%):
Clear Channel Communications,
Inc. (b) (d).......................... 40,325 2,422
Comcast Corp.,
Class A Special Shares (b)............ 62,299 2,539
4,961
Railroads (0.3%):
Burlington Northern/Santa Fe, Inc....... 27,836 739
CSX Corp................................ 15,063 381
Norfolk Southern Corp................... 26,399 373
Union Pacific Corp. (d)................. 17,067 801
2,294
Restaurants (0.5%):
Darden Restaurants, Inc................. 8,414 189
McDonald's Corp......................... 90,942 2,819
Starbucks Corp. (b) (d)................. 12,881 576
Tricon Global Restaurants (b)........... 10,044 301
Wendy's International, Inc.............. 7,816 170
4,055
Retail (1.9%):
Best Buy Co., Inc. (b) (d).............. 14,237 715
Dollar General Corp..................... 22,629 351
K-Mart Corp. (b)........................ 33,058 196
Target Corp............................. 62,661 1,731
Wal-Mart Stores, Inc. (d)............... 307,544 13,954
16,947
Retail -- Department Stores (0.4%):
Consolidated Stores Corp. (b)........... 7,669 91
Dillard's, Inc., Class A (d)............ 6,444 68
Federated Department Stores,
Inc. (b) (d).......................... 14,319 466
J.C. Penney Co., Inc.................... 18,006 210
Kohls Corp. (b) (d)..................... 22,700 1,230
Market
Security Description Shares Value
May Department Stores Co................ 20,380 $ 535
Nordstrom, Inc.......................... 8,967 147
Sears, Roebuck & Co. (d)................ 23,608 702
3,449
Retail -- Drug Stores (0.5%):
CVS Corp. (d)........................... 26,900 1,424
Longs Drug Stores Corp.................. 2,601 57
Walgreen Co. (d)........................ 69,545 3,173
4,654
Retail -- Specialty Stores (1.5%):
AutoZone, Inc. (b) (d).................. 8,776 235
Bed Bath & Beyond, Inc. (b) (d)......... 19,465 502
Circuit City Stores, Inc................ 14,136 187
Gap, Inc. (d)........................... 58,536 1,512
Home Depot, Inc......................... 159,469 6,858
Limited, Inc. (d)....................... 29,718 750
Lowe's Cos., Inc........................ 26,351 1,204
Radioshack Corp......................... 12,788 762
Tiffany & Co. (d)....................... 9,998 427
TJX Cos., Inc. (d)...................... 20,142 549
Toys "R" Us, Inc. (b) (d)............... 14,350 247
13,233
Rubber & Rubber Products (0.0%):
Cooper Tire & Rubber Co................. 4,996 55
Goodyear Tire & Rubber Co. (d).......... 10,770 199
254
Savings & Loans (0.3%):
Charter One Financial, Inc.............. 14,460 332
Golden West Financial Corp.............. 10,878 610
Washington Mutual, Inc. (d)............. 37,106 1,632
2,574
Semiconductors (3.9%):
Advanced Micro Devices, Inc. (b) (d).... 21,449 485
Altera Corp. (b) (d).................... 27,473 1,125
Broadcom Corp., Class A (b)............. 15,290 3,400
Conexant Systems, Inc. (b).............. 15,688 413
Intel Corp.............................. 462,315 20,724
KLA-Tencor Corp. (b).................... 12,807 433
Linear Technology Corp. (d)............. 21,420 1,383
LSI Logic Corp. (b) (d)................. 21,361 702
Maxim Integrated Products, Inc. (b)..... 19,464 1,291
Micron Technology, Inc. (b)............. 38,885 1,351
National Semiconductor Corp. (b)........ 12,229 318
Novellus Systems (b) (d)................ 9,026 370
Teradyne, Inc. (b) (d).................. 11,938 373
Xilinx, Inc. (b)........................ 22,627 1,639
34,007
Software & Computer Services (6.1%):
Adobe Systems, Inc...................... 16,490 1,254
Autodesk, Inc........................... 3,966 88
Automatic Data Processing, Inc.......... 43,188 2,821
BMC Software, Inc. (b) (d).............. 16,995 345
Citrix Systems, Inc. (b)................ 12,788 283
Computer Associates International, Inc.. 40,693 1,297
Compuware Corp. (b)..................... 25,125 198
First Data Corp......................... 27,917 1,399
Mercury Interactive Corp. (b) (d)....... 5,500 611
Microsoft Corp. (b)..................... 362,360 24,959
See notes to financial statements.
140
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments--continued
Stock Index Fund October 31, 2000
(Amounts in Thousands, Except Shares)
Market
Security Description Shares Value
Novell, Inc. (b)........................ 22,364 $ 201
Oracle Corp. (b) (d).................... 387,660 12,793
Parametric Technology Corp. (b)......... 18,748 231
Peoplesoft, Inc. (b) (d)................ 19,257 840
Siebel Systems, Inc. (b) (d)............ 28,688 3,010
VERITAS Software Corp. (b) (d).......... 27,680 3,903
54,233
Steel (0.0%):
Allegheny Technologies, Inc............. 5,600 113
Bethlehem Steel Corp. (b)............... 9,111 26
Nucor Corp. (d)......................... 5,587 195
USX-U.S. Steel Group, Inc............... 6,099 97
431
Telecommunications (1.1%):
Sprint Corp. (PCS Group) (b) (d)........ 63,917 2,437
Global Crossing Ltd. (b) (d)............ 60,631 1,432
Qwest Communications
International (b) (d)................. 114,360 5,561
9,430
Telecommunications -- Equipment (3.2%):
Agilent Technologies, Inc. (b) (d)...... 31,194 1,445
ADC Telecommunications, Inc. (b)........ 53,311 1,140
Andrew Corp. (b)........................ 5,587 147
Avaya, Inc. (b)......................... 19,162 257
Comverse Technology, Inc. (b) (d)....... 10,743 1,201
Lucent Technologies, Inc................ 229,953 5,361
Motorola, Inc........................... 150,154 3,744
Nortel Networks Corp., ADR (d).......... 205,683 9,359
Qualcomm, Inc. (b)...................... 51,303 3,340
Scientific-Atlanta, Inc................. 10,966 750
Tellabs, Inc. (b) (d)................... 28,236 1,410
28,154
Textile Products (0.0%):
Springs Industries, Inc., Class A (d)... 1,236 29
Tobacco & Tobacco Products (0.7%):
Philip Morris Cos., Inc. (d)............ 155,072 5,680
UST, Inc. (d)........................... 11,179 282
5,962
Tools & Hardware Manufacturing (0.1%):
Black & Decker Corp..................... 5,734 216
Snap-on, Inc............................ 4,041 103
Stanley Works (d)....................... 5,939 158
477
Toys (0.1%):
Hasbro, Inc............................. 11,865 128
Mattel, Inc. (d)........................ 29,350 379
507
Transportation Services (0.1%):
Fedex Corp. (b)......................... 19,617 919
Travel Services (0.0%):
Sabre Holdings Corp..................... 8,889 297
Market
Security Description Shares Value
Trucking & Leasing (0.0%):
Ryder Systems, Inc...................... 4,104 $ 81
Utilities -- Electric (2.2%)
AES Corp. (b) (d)....................... 31,453 1,776
Ameren Corp. (d)........................ 9,449 376
American Electric Power Co. (d)......... 22,172 920
C P & L Energy, Inc. (d)................ 10,991 443
CINergy Corp............................ 10,944 335
CMS Energy Corp. (d).................... 8,365 226
Consolidated Edison Co. of New York,
Inc. (d) ............................. 14,597 514
Constellation Energy Group, Inc......... 10,310 430
Detroit Edison Co. (d).................. 9,822 355
Dominion Resources, Inc................. 16,381 976
Duke Energy Corp. (d)................... 25,348 2,190
Dynergy, Inc. (d)....................... 21,545 998
Edison International.................... 22,435 536
Entergy Corp............................ 15,348 588
Exelon Corp............................. 22,280 1,340
FirstEnergy Corp........................ 15,742 407
Florida Progress Corp................... 6,790 361
FPL Group, Inc.......................... 12,239 808
General Public Utilities Corp........... 8,351 276
Niagara Mohawk Holdings, Inc. (b)....... 11,045 177
PG&E Corp............................... 26,562 716
Pinnacle West Capital Corp.............. 5,834 253
PPL Corp................................ 9,960 410
Public Service Enterprise Group......... 14,763 613
Reliant Energy, Inc. (d)................ 20,243 836
Southern Co. (d)........................ 44,664 1,312
TXU Corp. (d)........................... 18,183 674
Xcel Energy, Inc. (d)................... 23,360 597
19,443
Utilities -- Natural Gas (0.2%):
Columbia Energy Group................... 5,476 393
Eastern Enterprises..................... 1,873 121
Keyspan Corp. (d)....................... 9,245 325
NICOR, Inc.............................. 3,161 112
Peoples Energy Corp..................... 2,437 84
Sempra Energy........................... 14,056 291
1,326
Utilities -- Telecommunications (5.0%):
Alltel Corp............................. 21,726 1,400
AT&T Corp............................... 258,639 5,997
BellSouth Corp.......................... 129,047 6,235
CenturyTel, Inc......................... 9,677 373
SBC Communications, Inc. (d)............ 233,400 13,465
Sprint Corp. (FON Group)................ 60,916 1,553
Verizon Communications (d).............. 187,157 10,820
WorldCom, Inc. (b)...................... 197,822 4,698
44,541
Wireless Communications (0.5%):
Nextel Communications, Inc.,
Class A (b) (d)....................... 52,426 2,015
Total Common Stocks (Cost $563,654) 865,576
See notes to financial statements.
141
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments--continued
Stock Index Fund October 31, 2000
(Amounts in Thousands, Except Shares)
Shares or
Principal Market
Security Description Amount Value
Commercial Paper (1.6%)
Household Finance, 6.66%, 11/1/00..... $ 13,786 $ 13,786
Total Commercial Paper (Cost $13,786) 13,786
U.S. Treasury Bills (0.3%)
6.01%, 12/14/00 (c)..................... 3,000 2,978
Total U.S. Treasury Bills (Cost $2,978) 2,978
Securities Purchased With Cash
Collateral (18.1%)
Investment Companies (1.4%):
AIM Short Term Prime Obligations Fund... 30,892 31
AIM Liquid Assets Portfolio............. 4,843,275 4,843
Merrimac Cash Fund...................... 7,802,091 7,802
12,676
Time Deposits (0.5%):
PNC Bank, 6.56%, 11/1/00................ $ 2,341 2,341
National City Bank, 6.50%, 11/1/00...... 2,341 2,341
4,682
Repurchase Agreements (16.2%):
Deutsche Bank,
6.69%, 11/1/00
(Collateralized by $21,603
Masco Corp., 6.13%, 9/15/03,
Tyco International Group,
7.00%, 6/15/28,
market value $20,600)................. 20,000 20,000
First Union,
6.78%, 11/1/00
(Collateralized by $15,926
Gables Realty, 6.80%, 3/15/05,
market value $15,450)................. 15,000 15,000
Goldman Sachs,
6.71%, 11/1/00
(Collateralized by $23,508
various Corporate Bonds,
0.01%-9.25%,
11/15/01-6/1/37,
market value $23,228)................. 20,000 20,000
Lehman Brothers,
6.78%, 11/1/00
(Collateralized by 614,500 shares
of various Equity Securities,
market value $24,405)................. 23,000 23,000
Merrill Lynch, 6.75%, 11/1/00
(Collateralized by $23,025
various Corporate Bonds,
6.40%-10.50%,
5/15/04-5/1/13,
market value $20,601)................. 20,000 20,000
Morgan Stanley Dean Witter,
6.73%, 11/1/00
(Collateralized by $20,769
various Corporate Bonds,
6.13%-10.61%,
6/15/01-1/15/30,
market value $20,753)................. 20,000 20,000
Principal Market
Security Description Amount Value
Salomon Smith Barney, 6.71%, 11/1/00
(Collateralized by $33,477
various Corporate Bonds,
5.73%-8.95%,
1/15/03-6/1/37,
market value $34,544)................. $ 25,000 $ 25,000
143,000
Total Securities Purchased With
Cash Collateral (Cost $160,358) 160,358
Total Investments (Cost $740,776) (a) -- 118.1% 1,042,698
Other liabilities in excess of assets -- (18.1)% (159,958)
TOTAL NET ASSETS -- 100.0% $882,740
(a) Represents cost for financial reporting purposes and differs from cost
basis for federal income tax purposes by the amount of the losses
recognized for financial reporting purposes in excess of federal income
tax reporting of approximately $6,464. Cost for federal income tax
purposes differs from value by net unrealized appreciation of securities
as follows (amounts in thousands):
Unrealized appreciation $354,396
Unrealized depreciation (59,175)
Net unrealized appreciation $295,221
(b) Non-income producing securities.
(c) Serves as collateral for futures contracts.
Number of Market
Contracts Value
Futures Contracts
S & P 500 Index,
face amount $16,799
expiring December 14, 2000............ 46 $16,562
Total Futures (Cost $16,799) $16,562
(d) All or portion of this security was loaned as of October 31, 2000.
See notes to financial statements.
142
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments
Growth Fund October 31, 2000
(Amounts in Thousands, Except Shares)
Market
Security Description Shares Value
Common Stocks (100.1%)
Aerospace/Defense (4.2%):
Boeing Co............................... 102,500 $ 6,951
Honeywell International, Inc............ 100,300 5,397
United Technologies Corp................ 70,000 4,887
17,235
Banks (3.3%):
Mellon Financial Corp................... 151,200 7,295
Wells Fargo Co.......................... 133,000 6,160
13,455
Beverages (2.2%):
Anheuser-Busch Cos., Inc. (c)........... 50,800 2,324
Pepsico, Inc. (c)....................... 139,400 6,752
9,076
Biotechnology (0.8%):
Amgen, Inc. (b) (c) .................... 53,600 3,105
Chemicals -- General (1.1%):
E.I. Du Pont de Nemours (c) ............ 102,700 4,660
Commercial Services (0.5%):
Convergys Corp. (b)..................... 49,600 2,161
Computers & Peripherals (12.2%):
Cisco Systems, Inc. (b)................. 305,000 16,432
Dell Computer Corp. (b)................. 216,200 6,378
Hewlett-Packard Co. (c)................. 84,000 3,901
International Business Machines Corp.... 121,800 11,997
Sun Microsystems, Inc. (b).............. 99,900 11,076
49,784
Consumer Products (0.9%):
Colgate-Palmolive Co. (c)............... 63,000 3,702
Cosmetics & Toiletries (0.8%):
Kimberly-Clark Corp..................... 51,600 3,406
Electrical Equipment (1.2%):
Emerson Electric Co. (c)................ 65,200 4,788
Electronic & Electrical --
General (4.8%):
General Electric Co..................... 355,500 19,486
Electronics (0.6%):
JDS Uniphase Corp. (b).................. 27,700 2,256
Financial Services (5.3%):
Citigroup, Inc.......................... 178,133 9,375
Fannie Mae.............................. 75,600 5,821
Goldman Sachs Group, Inc. (c)........... 20,900 2,086
MBNA Corp............................... 112,300 4,218
21,500
Health Care (0.8%):
Medtronic, Inc.......................... 62,900 3,416
Insurance -- Multi-Line (3.2%):
American International Group, Inc....... 133,200 13,054
Manufacturing/Diversified (0.9%):
Tyco International Ltd.................. 64,200 3,639
Market
Security Description Shares Value
Media (2.5%):
Time Warner, Inc........................ 70,000 $ 5,314
Viacom, Inc., Class B (b)............... 85,300 4,851
10,165
Oil & Gas Exploration,
Production & Services (2.0%):
Anadarko Petroleum Corp. (c)............ 54,400 3,484
Enron Corp.............................. 40,900 3,356
Transocean Sedco Forex, Inc. (c)........ 21,600 1,145
7,985
Oil-Integrated Companies (2.8%):
Chevron Corp............................ 34,100 2,800
Exxon Mobil Corp........................ 99,300 8,857
11,657
Oilfield Services & Equipment (1.4%):
Schlumberger Ltd........................ 74,600 5,679
Pharmaceuticals (15.8%):
Abbott Laboratories..................... 67,900 3,586
American Home Products Corp............. 113,600 7,214
Bristol-Myers Squibb Co................. 96,700 5,893
Cardinal Health, Inc. (c)............... 71,400 6,765
Eli Lilly & Co. (c)..................... 40,000 3,575
Johnson & Johnson, Inc.................. 93,700 8,632
Merck & Co., Inc........................ 102,100 9,183
Pfizer, Inc............................. 332,100 14,342
Schering-Plough Corp. (c)............... 113,700 5,877
65,067
Retail (3.4%):
Target Corp............................. 173,400 4,790
Wal-Mart Stores, Inc.................... 201,200 9,130
13,920
Retail -- Drug Stores (1.1%):
Walgreen Co. (c)........................ 97,200 4,435
Retail -- Specialty Stores (1.8%):
Home Depot, Inc......................... 174,100 7,486
Semiconductors (4.8%):
Altera Corp. (b) (c).................... 74,200 3,038
Intel Corp.............................. 294,000 13,179
Xilinx, Inc. (b) (c).................... 44,900 3,252
19,469
Software & Computer Services (12.5%):
America Online, Inc. (b)................ 139,600 7,040
Automatic Data Processing, Inc.......... 107,300 7,008
EMC Corp. (b)........................... 100,700 8,969
Microsoft Corp. (b)..................... 229,700 15,820
Oracle Corp. (b)........................ 219,000 7,227
Parametric Technology Corp. (b)......... 207,100 2,550
VERITAS Software Corp. (b) (c).......... 20,300 2,863
51,477
See notes to financial statements.
143
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments--continued
Growth Fund October 31, 2000
(Amounts in Thousands, Except Shares)
Shares or
Principal Market
Security Description Amount Value
Telecommunications -- Equipment (4.7%):
ADC Telecommunications, Inc. (b)........ 52,500 $ 1,122
Comverse Technology, Inc. (b) (c)....... 24,500 2,738
Motorola, Inc........................... 135,900 3,389
Nortel Networks Corp., ADR (c).......... 163,400 7,435
Qualcomm, Inc. (b)...................... 20,800 1,354
Tellabs, Inc. (b)....................... 62,500 3,121
19,159
Utilities -- Telecommunications (4.5%):
SBC Communications, Inc................. 180,300 10,401
Verizon Communications.................. 50,300 2,908
WorldCom, Inc. (b) (c).................. 216,100 5,132
18,441
Total Common Stocks (Cost $269,518) 409,663
Securities Purchased With Cash
Collateral (12.1%)
Investment Companies (0.8%):
AIM Short Term Prime Obligations Fund... 7,786 8
AIM Liquid Assets Portfolio............. 1,220,742 1,221
Merrimac Cash Fund...................... 1,966,509 1,966
3,195
Time Deposits (0.3%):
PNC Bank, 6.56%, 11/1/00................ $ 590 590
National City Bank, 6.50%, 11/1/00...... 590 590
1,180
Repurchase Agreements (11.0%):
First Union, 6.78%, 11/1/00
(Collateralized by $9,242
MBNA, 6.30%, 12/15/05,
HRPT Properties, 8.88%, 8/1/10
market value $9,270).................. 9,000 9,000
Goldman Sachs, 6.71%, 11/1/00
(Collateralized by $10,836
various Corporate Bonds,
5.50%-8.70%,
2/15/04-5/1/30,
market value $10,456)................. 9,000 9,000
Principal Market
Security Description Amount Value
Lehman Brothers,
6.78%, 11/1/00
(Collateralized by 170,507 shares
of various Equity Securities,
market value $9,460).................. $ 9,000 $ 9,000
Merrill Lynch,
6.75%, 11/1/00
(Collateralized by $9,904
Delta Airlines, 6.65%, 3/15/04,
and various Corporate Bonds,
6.13%-10.13%,
11/15/01-2/15/29,
market value $9,274).................. 9,000 9,000
Morgan Stanley Dean Witter,
6.73%, 11/1/00
(Collateralized by $9,792
BHP Finance, 6.42%, 3/1/26,
market value $9,703).................. 9,000 9,000
45,000
Total Securities Purchased
With Cash Collateral (Cost $49,375) 49,375
Total Investments (Cost $318,893) (a) -- 112.2% 459,038
Liabilities in excess of other assets -- (12.2)% (49,630)
TOTAL NET ASSETS -- 100.0% $409,408
(a) Represents cost for financial reporting purposes and differs from cost
basis for federal income tax purposes by the amount of the losses
recognized for financial reporting purposes in excess of federal income
tax reporting of approximately $452. Cost for federal income tax
purposes differs from value by net unrealized appreciation of securities
as follows (amounts in thousands):
Unrealized appreciation $159,123
Unrealized depreciation (19,430)
Net unrealized appreciation $139,693
(b) Non-income producing securities.
(c) All or portion of this security was loaned as of October 31, 2000.
ADR -- American Depository Receipts
See notes to financial statements.
144
<PAGE>
<TABLE>
Statements of Assets and Liabilities
The Victory Portfolios October 31, 2000
(Amounts in Thousands, Except Per Share Amounts)
<CAPTION>
Established Diversified Stock
Value Value Stock Index Growth
Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments, at value (Cost $441,168; $240,833;
$1,057,159; $597,776 & $273,893) $584,777 $422,710 $1,213,934 $899,698 $414,038
Repurchase agreements at amortized cost 36,000 31,000 172,000 143,000 45,000
Interest and dividends receivable 493 63 940 598 169
Receivable from affiliates 22 1 -- 4 18
Receivable for capital shares issued 3 -- 128 26 7
Receivable from brokers for investments sold -- -- 15,026 -- 3,258
Receivable for net variation margin on open
futures contracts -- -- -- 347 --
Prepaid expenses and other assets 12 61 2 1 11
Total Assets 621,307 453,835 1,402,030 1,043,674 462,501
LIABILITIES:
Payable to custodian -- -- 9 -- 302
Payable for capital shares redeemed 1 -- 289 105 2
Payable to brokers for investments purchased -- -- 14,201 -- 3,033
Payable for return of collateral received 53,781 38,451 183,935 160,358 49,375
Accrued expenses and other payables:
Investment advisory fees 343 108 627 372 254
Administration fees 12 4 21 -- 9
Custodian fees 9 6 19 42 9
Accounting fees 1 1 1 -- 1
Transfer agent fees 11 8 182 31 23
Shareholder service fees -- Class A 105 4 163 -- 77
Shareholder service and 12b-1 fees -- Class B -- -- 72 -- --
12b-1 fees -- Class G 1 286 52 4 3
Other 9 9 67 22 5
Total Liabilities 54,273 38,877 199,638 160,934 53,093
NET ASSETS:
Capital 343,214 201,811 876,469 566,932 237,235
Undistributed net investment income -- -- -- 400 --
Net unrealized appreciation/depreciation
from investments and futures 143,609 181,877 156,775 301,685 140,145
Accumulated undistributed net realized gains
from investment transactions and futures 80,211 31,270 169,148 13,723 32,028
Net Assets $567,034 $414,958 $1,202,392 $882,740 $409,408
Net Assets
Class A $564,111 $ 15,005 $ 993,383 $854,203 $400,813
Class B -- -- 72,178 -- --
Class G 2,923 399,953 136,831 28,537 8,595
Total $567,034 $414,958 $1,202,392 $882,740 $409,408
Outstanding units of beneficial interest (shares)
Class A 31,228 446 55,640 36,009 16,141
Class B -- -- 4,194 -- --
Class G 162 11,892 7,676 1,203 347
Total 31,390 12,338 67,510 37,212 16,488
Net asset value
Redemption price per share
Redemption price per share -- Class A $ 18.06 $ 33.65 $ 17.85 $ 23.72 $ 24.83
Offering and redemption price per share -- Class B $ 17.21
Redemption price per share -- Class G $ 18.06 $ 33.63 $ 17.83 $ 23.72 $ 24.77
Maximum sales charge -- Class A 5.75% 5.75% 5.75% 5.75% 5.75%
Maximum offering price per share (100%/
(100%-maximum sales charge) of net
asset value adjusted to nearest cent) -- Class A $ 19.16 $ 35.70 $ 18.94 $ 25.17 $ 26.34
</TABLE>
See notes to financial statements.
145
<PAGE>
<TABLE>
Statements of Operations
The Victory Portfolios For the Year Ended October 31, 2000
(Amounts in Thousands)
<CAPTION>
Established Diversified Stock
Value Value Stock Index Growth
Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C>
Investment Income:
Interest income $ 323 $ 600 $ 731 $ 3,456 $ 149
Dividend income 9,136 4,884 14,119 9,761 3,703
Securities lending 35 8 169 136 33
Foreign tax withholding -- (8) (2) (17) --
Total Income 9,494 5,484 15,017 13,336 3,885
Expenses:
Investment advisory fees 4,422 2,197 7,582 5,463 3,373
Administration fees 768 596 1,376 1,121 609
Shareholder service fees 1,404 14 2,228 -- 1,062
Shareholder service fees and 12b-1 fees -- Class B -- -- 728 -- --
12b-1 -- Class G 8 2,080 621 55 24
Accounting fees 100 82 145 173 93
Custodian fees 117 87 245 261 98
Legal and audit fees 53 76 123 88 39
Trustees' fees and expenses 12 8 27 21 10
Transfer agent fees 49 16 701 124 95
Registration and filing fees 41 39 57 73 46
Printing fees 7 90 162 25 16
Other 42 18 86 66 30
Total Expenses 7,023 5,303 14,081 7,470 5,495
Expenses voluntarily reduced (25) (631) (181) (1,978) (32)
Expenses Before Reimbursement from Distributor 6,998 4,672 13,900 5,492 5,463
Expenses Reimbursed by Distributor (289) (24) -- (30) (152)
Net Expenses 6,709 4,648 13,900 5,462 5,311
Net Investment Income (Loss) 2,785 836 1,117 7,874 (1,426)
Realized/Unrealized Gains (Losses)
from Investments and Futures:
Net realized gains (losses) from
investment transactions and futures 80,280 31,357 170,617 16,295 32,131
Change in unrealized appreciation/depreciation
from investments and futures (39,977) 10,276 9,259 22,755 (6,919)
Net realized/unrealized gains (losses)
from investments and futures 40,303 41,633 179,876 39,050 25,212
Change in net assets resulting from operations $ 43,088 $42,469 $180,993 $46,924 $23,786
</TABLE>
See notes to financial statements.
146
<PAGE>
<TABLE>
The Victory Portfolios Statements of Changes in Net Assets
(Amounts in Thousands)
<CAPTION>
Value Established
Fund Value Fund
Seven
Year Year Year Months Year
Ended Ended Ended Ended Ended
October 31, October 31, October 31, October 31, March 31,
2000 1999 2000 1999<F1> 1999
<S> <C> <C> <C> <C> <C>
From Investment Activities:
Operations:
Net investment income $ 2,785 $ 1,185 $ 836 $ 83 $ 4,759
Net realized gains (losses) from
investment transactions 80,280 70,672 31,357 30,682 41,202
Net change in unrealized
appreciation/depreciation
from investments (39,977) 29,655 10,276 14,949 (54,160)
Change in net assets
resulting from operations 43,088 101,512 42,469 45,714 (8,199)
Distributions to Shareholders:
From net investment income by class:
Class A (2,780) (1,320) (23) -- --
Class B -- -- -- -- --
Class G (5) -- (814) (485) (4,946)
In excess of net investment income
Class A (37) -- (3) -- --
Class B -- -- -- -- --
Class G --<F2> -- (100) -- --
From net realized gains from
investment transactions (70,536) (86,132) (55,587) -- (30,865)
Change in net assets from
distributions to shareholders (73,358) (87,452) (56,527) (485) (35,811)
Capital Transactions:
Proceeds from shares issued 97,134 117,771 153,527 32,462 315,787
Proceeds issued in connection with merger -- -- 10,261 -- --
Dividends reinvested 66,758 81,419 82,686 484 34,887
Cost of shares redeemed (178,071) (119,080) (286,746) (87,871) (394,935)
Change in net assets from
capital transactions (14,179) 80,110 (40,272) (54,925) (44,261)
Change in net assets (44,449) 94,170 (54,330) (9,696) (88,271)
Net Assets:
Beginning of period 611,483 517,313 469,288 478,984 567,255
End of period $ 567,034 $ 611,483 $ 414,958 $469,288 $ 478,984
Share Transactions:
Issued 5,568 6,393 1,384 943 10,251
Issued in connection with merger -- -- 336 -- --
Reinvested 3,868 5,077 1,825 15 1,130
Redeemed (10,499) (6,523) (4,885) (2,562) (12,812)
Change in shares (1,063) 4,947 (1,340) (1,604) (1,431)
<FN>
<F1> For the period April 1, 1999 through October 31, 1999.
<F2> Rounds to less than $1,000.
</FN>
</TABLE>
See notes to financial statements.
147
<PAGE>
<TABLE>
The Victory Portfolios Statements of Changes in Net Assets
(Amounts in Thousands)
<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,
2000 1999 2000 1999 2000 1999
<S> <C> <C> <C> <C> <C> <C>
From Investment Activities:
Operations:
Net investment income $ 1,117 $ 2,936 $ 7,874 $ 10,034 $ (1,426) $ (742)
Net realized gains (losses) from
investment transactions and futures 170,617 176,486 16,295 40,302 32,131 20,812
Net change in unrealized
appreciation/depreciation
from investments and futures 9,259 21,114 22,755 111,423 (6,919) 48,341
Change in net assets
resulting from operations 180,993 200,536 46,924 161,759 23,786 68,411
Distributions to Shareholders:
From net investment income by class:
Class A (1,116) (3,340) (8,211) (10,232) -- --
Class B -- (4) -- (17) -- --
Class G (1) -- (152) -- -- --
In excess of net investment income
Class A (321) -- -- -- -- --
Class G --<F1> -- -- -- -- --
From net realized gains from
investment transactions (177,058) (198,727) (28,851) (61,389) (20,902) (22,258)
Change in net assets from
distributions to shareholders (178,496) (202,071) (37,214) (71,638) (20,902) (22,258)
Capital Transactions:
Proceeds from shares issued 335,844 327,346 130,857 195,289 83,781 152,381
Proceeds from shares issued
in connection with acquisition -- 60,016 -- -- -- --
Dividends reinvested 155,125 168,060 34,219 65,410 18,008 18,991
Cost of shares redeemed (425,789) (403,292) (159,663) (110,350) (112,682) (69,584)
Change in net assets from
capital transactions 65,180 152,130 5,413 150,349 (10,893) 101,788
Change in net assets 67,677 150,595 15,123 240,470 (8,009) 147,941
Net Assets:
Beginning of period 1,134,715 984,120 867,617 627,147 417,417 269,476
End of period $1,202,392 $1,134,715 $882,740 $867,617 $ 409,408 $417,417
Share Transactions:
Issued 19,873 18,534 5,476 8,819 3,355 6,438
Issued in connection with acquisition -- 4,456 -- -- -- --
Reinvested 9,569 10,957 1,432 3,319 731 936
Redeemed (25,205) (22,921) (6,685) (4,976) (4,489) (2,949)
Change in shares 4,237 11,026 223 7,162 (403) 4,425
<FN>
<F1> Rounds to less than $1,000.
</FN>
</TABLE>
See notes to financial statements.
148
<PAGE>
<TABLE>
The Victory Portfolios Financial Highlights
For a Share Outstanding Throughout Each Period
<CAPTION>
Value Fund
Class A Shares Class G Shares
December 15,
Year Year Year Year Year 1999
Ended Ended Ended Ended Ended through
October 31, October 31, October 31, October 31, October 31, October 31,
2000 1999 1998 1997 1996 2000<F2>
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 18.84 $ 18.81 $ 17.07 $ 14.18 $ 11.87 $16.73
Investment Activities
Net investment income 0.09 0.04 0.09 0.15 0.20 0.04
Net realized and unrealized gains
(losses) from investments 1.37 3.16 3.16 3.57 2.65 1.35
Total from Investment Activities 1.46 3.20 3.25 3.72 2.85 1.39
Distributions
Net investment income (0.09) (0.04) (0.10) (0.16) (0.20) (0.06)
In excess of net investment income --<F8> -- -- -- -- --<F8>
Net realized gains (2.15) (3.13) (1.41) (0.67) (0.34) --
Total Distributions (2.24) (3.17) (1.51) (0.83) (0.54) (0.06)
Net Asset Value, End of Period $ 18.06 $ 18.84 $ 18.81 $ 17.07 $ 14.18 $18.06
Total Return (excludes sales charges) 8.33% 20.02% 20.46% 27.24% 24.66% 8.34%<F6>
Ratios/Supplemental Data:
Net Assets, End of Period (000) $564,111 $611,483 $517,313 $472,047 $382,083 $2,923
Ratio of expenses to
average net assets<F4> 1.19% 1.40% 1.34% 1.32% 1.33% 1.44%<F7>
Ratio of net investment income
to average net assets<F4> 0.49% 0.20% 0.54% 0.93% 1.56% 0.14%<F7>
Ratio of expenses to
average net assets<F1> 1.24% 1.45% 1.46% <F3> 1.35% 2.27%<F7>
Ratio of net investment income
to average net assets<F1> 0.44% 0.15% 0.42% <F3> 1.54% (0.69)%<F7>
Portfolio turnover<F5> 34% 36% 40% 25% 28% 34%
<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> There were no voluntary fee reductions during the period.
<F4> Effective February 28, 2000, 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 1.45% until at least February 28, 2001.
<F5> Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
<F6> Not annualized.
<F7> Annualized.
<F8> Less than $0.01 per share.
</FN>
</TABLE>
See notes to financial statements.
149
<PAGE>
<TABLE>
The Victory Portfolios Financial Highlights
For a Share Outstanding Throughout Each Period
<CAPTION>
Established Value Fund
Class A Class G Shares
Shares
May 5, April 1,
2000 Year 1999 Year Year Year Year
Through Ended to Ended Ended Ended Ended
October 31, October 31, October 31, March 31, March 31, March 31, March 31,
2000<F7> 2000 1999<F2> 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 30.54 $ 34.31 $ 31.34 $ 33.94 $ 28.83 $ 27.57 $ 23.39
Investment Activities
Net investment
income (loss) 0.07 0.06 0.02 0.29 0.46 0.44 0.44
Net realized and
unrealized gains
(losses) from
investments 3.11 3.43 2.98 (0.71) 7.70 3.62 5.18
Total from
Investment
Activities 3.18 3.49 3.00 (0.42) 8.16 4.06 5.62
Distributions
Net investment income (0.06) (0.06) (0.03) (0.30) (0.48) (0.45) (0.43)
In excess of net
investment income (0.01) (0.01) -- -- -- -- --
Net realized gains -- (4.10) -- (1.88) (2.57) (2.35) (1.01)
Total Distributions (0.07) (4.17) (0.03) (2.18) (3.05) (2.80) (1.44)
Net Asset Value,
End of Period $ 33.65 $ 33.63 $ 34.31 $ 31.34 $ 33.94 $ 28.83 $ 27.57
Total Return
(excludes sales charges) 10.44%<F3> 11.26% 9.59%<F3> (1.01)% 29.67% 15.14% 24.84%
Ratios/Supplemental Data:
Net Assets,
End of Period (000) $15,005 $399,953 $469,288 $478,984 $567,255 $429,726 $366,417
Ratio of expenses to
average net assets<F5> 0.87%<F4> 1.10% 1.10%<F4> 1.09% 1.10% 1.12% 1.15%
Ratio of net
investment income
to average net assets<F5> 0.43%<F4> 0.20% 0.03%<F4> 0.92% 1.44% 1.57% 1.70%
Ratio of expenses to
average net assets<F1> 1.46%<F4> 1.26% 1.27%<F4> <F6> <F6> <F6> <F6>
Ratio of net investment income
to average net assets<F1> (0.16)%<F4> 0.04% (0.14)%<F4> <F6> <F6> <F6> <F6>
Portfolio turnover<F8> 28% 28% 11% 37% 20% 31% 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 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. Additionally, effective February 28,
2000, the adviser also 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 A Shares of the Fund at a maximum of 0.88%
until at least February 28, 2001.
<F6> There were no 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.
150
<PAGE>
<TABLE>
The Victory Portfolios Financial Highlights
For a Share Outstanding Throughout Each Period (Continued on Next Page)
<CAPTION>
Diversified Stock Fund
Class A Shares
Year Year Year Year Year
Ended Ended Ended Ended Ended
October 31, October 31, October 31, October 31, October 31,
2000 1999 1998<F5> 1997 1996<F2>
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 17.96 $ 18.85 $ 17.76 $ 15.75 $ 13.62
Investment Activities
Net investment income (loss) 0.03 0.06 0.11 0.16 0.20
Net realized and unrealized gains
(losses) from investments 2.71 2.92 3.07 3.84 3.21
Total from Investment Activities 2.74 2.98 3.18 4.00 3.41
Distributions
Net investment income (0.02) (0.06) (0.11) (0.16) (0.19)
Net realized gains (2.83) (3.81) (1.98) (1.83) (1.09)
Total Distributions (2.85) (3.87) (2.09) (1.99) (1.28)
Net Asset Value, End of Period $ 17.85 $ 17.96 $ 18.85 $ 17.76 $ 15.75
Total Return (excludes sales charges) 16.88% 19.39% 19.60% 27.96% 27.16%
Ratios/Supplemental Data:
Net Assets, End of Period (000) $993,383 $957,001 $933,158 $762,270 $571,153
Ratio of expenses to average net assets 1.10% 1.06% 1.02% 1.03% 1.05%
Ratio of net investment income (loss)
to average net assets 0.19% 0.34% 0.64% 0.97% 1.40%
Ratio of expenses to average net assets<F1> 1.11% 1.10% 1.13% <F4> 1.08%
Ratio of net investment income (loss)
to average net assets<F1> 0.18% 0.30% 0.53% <F4> 1.37%
Portfolio turnover<F3> 94% 83% 84% 63% 94%
<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> Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
<F4> There were no voluntary waivers druing the period.
<F5> 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.
</FN>
</TABLE>
See notes to financial statements.
151
<PAGE>
<TABLE>
The Victory Portfolios Financial Highlights--continued
For a Share Outstanding Throughout Each Period
<CAPTION>
Diversified Stock Fund
Class B Shares Class G Shares
March 1, March 26,
Year Year Year Year 1996 Year 1999
Ended Ended Ended Ended through Ended through
October 31, October 31, October 31, October 31, October 31, October 31, October 31,
2000 1999 1998<F6> 1997 1996<F2> 2000 1999<F8><F9>
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 17.55 $ 18.60 $ 17.62 $ 15.71 $14.18 $ 17.95 $ 17.14
Investment Activities
Net investment income (loss) (0.15) (0.08) (0.08) (0.06) 0.07 (0.01) (0.01)
Net realized and unrealized gains
(losses) from investments 2.64 2.84 3.04 3.85 1.57 2.72 0.82
Total from Investment Activities 2.49 2.76 2.96 3.79 1.64 2.71 0.81
Distributions
Net investment income -- -- -- -- (0.07) --<F10> --
In excess of net investment income -- -- -- (0.05) (0.04) -- --
Net realized gains (2.83) (3.81) (1.98) (1.83) -- (2.83) --
Total Distributions (2.83) (3.81) (1.98) (1.88) (0.11) (2.83) --
Net Asset Value, End of Period $ 17.21 $ 17.55 $ 18.60 $ 17.62 $15.71 $ 17.83 $ 17.95
Total Return (excludes sales charges) 15.63% 18.24% 18.34% 26.48% 26.61%<F11> 16.65% 4.73%<F3>
Ratios/Supplemental Data:
Net Assets, End of Period (000) $72,178 $71,122 $50,962 $30,198 $8,228 $136,831 $106,592
Ratio of expenses to average net assets 2.20% 2.06% 2.08% 2.19% 2.07%<F4> 1.33% 1.35%<F4>
Ratio of net investment income (loss)
to average net assets (0.91)% (0.68)% (0.42)% (0.29)% 0.11%<F4> (0.05)% (0.07)%<F4>
Ratio of expenses
to average net assets<F1> 2.21% 2.10% 2.18% <F5> 2.08%<F4> 1.35% 1.38%<F4>
Ratio of net investment income (loss)
to average net assets<F1> (0.92)% (0.72)% (0.52)% <F5> 0.10%<F4> (0.07)% (0.10)%<F4>
Portfolio turnover<F7> 94% 83% 84% 63% 94% 94% 83%
<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> Not annualized.
<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.
<F8> Period from commencement of operations.
<F9> Effective March 26, 1999, the Gradison Growth and Income Fund merged
into the Victory Diversified Stock Fund.
<F10> Less than $0.01 per share.
<F11> 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%.
</FN>
</TABLE>
See notes to financial statements.
152
<PAGE>
<TABLE>
The Victory Portfolios Financial Highlights
For a Share Outstanding Throughout Each Period
<CAPTION>
Stock Index Fund
Class A Shares Class G Shares
July 2,
Year Year Year Year Year Year 1999
Ended Ended Ended Ended Ended Ended Through
October 31, October 31, October 31, October 31, October 31, October 31, October 31,
2000 1999 1998<F5> 1997 1996 2000 1999<F2>
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 23.46 $ 21.03 $ 18.75 $ 14.85 $ 12.50 $ 23.46 $23.96
Investment Activities
Net investment income 0.21 0.28 0.37 0.29 0.28 0.15 0.06
Net realized and
unrealized gains
(losses) from
investments 1.05 4.47 3.37 4.23 2.58 1.06 (0.50)
Total from
Investment
Activities 1.26 4.75 3.74 4.52 2.86 1.21 (0.44)
Distributions
Net investment income (0.22) (0.29) (0.36) (0.29) (0.28) (0.17) (0.06)
Net realized gains (0.78) (2.03) (1.10) (0.33) (0.23) (0.78) --
Total Distributions (1.00) (2.32) (1.46) (0.62) (0.51) (0.95) (0.06)
Net Asset Value, End of Period $ 23.72 $ 23.46 $ 21.03 $ 18.75 $ 14.85 $ 23.72 $23.46
Total Return
(excludes sales charges) 5.38% 24.91% 20.99% 31.16% 23.38% 5.17% (1.83)%<F3>
Ratios/Supplemental Data:
Net Assets,
End of Period (000) $854,203 $858,235 $627,147 $465,015 $277,124 $28,537 $9,382
Ratio of expenses to
average net assets<F7> 0.59% 0.58% 0.57% 0.56% 0.57% 0.82% 0.80%<F4>
Ratio of net investment income
to average net assets<F7> 0.87% 1.28% 1.83% 1.74% 2.14% 0.59% 0.85%<F4>
Ratio of expenses to
average net assets<F1> 0.81% 0.81% 0.84% 0.86% 0.89% 1.18% 1.02%<F4>
Ratio of net investment income
to average net assets<F2> 0.65% 1.05% 1.56% 1.44% 1.82% 0.23% 0.63%<F4>
Portfolio turnover<F6> 11% 3% 8% 11% 4% 11% 3%
<FN>
<F1> During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
<F2> Period from commencement of operations.
<F3> Not annualized.
<F4> Annualized.
<F5> Effective March 16,1998, the Key Stock Index Fund merged into the Victory
Stock Index Fund. Financial highlights for the perioid 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.
<F7> Effective February 28, 2000, 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 Class G Shares of the Fund at a
maximum of 0.82% until at least February 28, 2001.
</FN>
</TABLE>
See notes to financial statements.
153
<PAGE>
<TABLE>
The Victory Portfolios Financial Highlights
For a Share Outstanding Throughout Each Period
<CAPTION>
Growth Fund
Class A Shares Class G Shares
December 15,
Year Year Year Year Year 1999
Ended Ended Ended Ended Ended through
October 31, October 31, October 31, October 31, October 31, October 31,
2000 1999 1998 1997 1996 2000<F3>
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 24.71 $ 21.62 $ 18.01 $ 14.57 $ 12.15 $24.53
Investment Activities
Net investment income (loss) (0.09) (0.04) (0.03) 0.03 0.08 (0.09)
Net realized and unrealized gains
(losses) on investments 1.44 4.90 4.88 4.07 2.93 0.33
Total from
Investment Activities 1.35 4.86 4.85 4.10 3.01 0.24
Distributions
Net investment income -- -- -- (0.04) (0.08) --
Net realized gains (1.23) (1.77) (1.24) (0.62) (0.51) --
Total Distributions (1.23) (1.77) (1.24) (0.66) (0.59) --
Net Asset Value, End of Period $ 24.83 $ 24.71 $ 21.62 $ 18.01 $ 14.57 $24.77
Total Return (excludes sales charges) 5.52% 24.25% 28.59% 29.08% 25.66% .98%<F7>
Ratios/Supplemental Data:
Net Assets, End of Period (000) $400,813 $417,417 $269,476 $185,533 $147,753 $8,595
Ratio of expenses to
average net assets<F5> 1.22% 1.41% 1.35% 1.34% 1.33% 1.45%<F6>
Ratio of net investment income (loss)
to average net assets<F5> (0.33)% (0.21)% (0.13)% 0.19% 0.64% (0.63)%<F6>
Ratio of expenses to
average net assets<F1> 1.25% 1.49% 1.49% <F2> 1.39% 1.76%<F6>
Ratio of net investment income (loss)
to average net assets<F1> (0.36)% (0.29)% (0.27)% <F2> 0.58% (0.94)%<F6>
Portfolio turnover<F4> 34% 33% 29% 21% 27% 34%
<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> There were no voluntary fee reductions during the period.
<F3> Period from commencement of operations.
<F4> Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
<F5> Effective December 15, 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 Class A and Class G Shares of the Fund
at a maximum of 1.20% and 1.45%, respectively, until at least February 28,
2001.
<F6> Annualized.
<F7> Not Annualized.
</FN>
</TABLE>
See notes to financial statements.
154
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments
Special Value Fund October 31, 2000
(Amounts in Thousands, Except Shares)
Shares or
Principal Market
Security Description Amount Value
Commercial Paper (3.8%)
Household Finance, 6.66%, 11/1/00....... $ 8,159 $ 8,159
Total Commercial Paper (Cost $8,159) 8,159
Common Stocks (96.6%)
Automotive Parts (2.1%):
Borg-Warner Automotive, Inc............. 51,000 1,925
Lear Corp. (b).......................... 96,000 2,616
4,541
Banks (6.7%):
City National Corp...................... 69,001 2,372
Marshall & Ilsley Corp.................. 66,000 2,991
Mercantile Bankshares Corp.............. 74,600 2,807
North Fork Bancorporation............... 155,000 3,130
SouthTrust Corp......................... 92,301 2,988
14,288
Biotechnology (1.8%):
Chiron Corp. (b) (c).................... 48,400 2,097
Incyte Genomics, Inc. (b)............... 50,000 1,831
3,928
Building Materials (1.5%):
Martin Marietta Materials (c)........... 81,024 3,111
Chemicals (1.8%):
Lubrizol Corp. (c)...................... 53,000 1,149
Minerals Technologies, Inc.............. 34,500 1,080
Solutia, Inc............................ 126,154 1,609
3,838
Commercial Services (0.5%):
Quanta Services, Inc. (b)............... 34,000 1,056
Computers -- Integrated Systems (2.1%):
Diebold, Inc............................ 172,102 4,475
Electronic & Electrical -- General (2.8%):
Arrow Electronics, Inc. (b) (c)......... 34,250 1,096
Vishay Intertechnology, Inc. (b)........ 162,312 4,869
5,965
Electronics (5.2%):
Parker-Hannifin Corp.................... 82,900 3,430
SCI Systems, Inc. (b) (c)............... 181,756 7,815
11,245
Financial & Insurance (4.8%):
AMBAC Financial Group, Inc.............. 74,200 5,922
PMI Group, Inc.......................... 58,974 4,357
10,279
Financial Services (1.0%):
Heller Financial, Inc................... 73,100 2,138
Food Processing & Packaging (3.7%):
Dean Foods Co........................... 81,000 2,592
McCormick & Co., Inc. (non-voting)...... 94,900 3,007
Universal Foods Corp.................... 115,600 2,283
7,882
Market
Security Description Shares Value
Forest Products --
Lumber & Paper (1.2%):
Bowater, Inc............................ 49,200 $ 2,663
Health Care (5.3%):
Health Management Assoc., Inc.,
Class A (b) (c)....................... 266,299 5,277
Omnicare, Inc........................... 269,797 4,721
Steris Corp. (b)........................ 84,699 1,270
11,268
Identification System (1.1%):
Symbol Technologies, Inc. (c)........... 52,050 2,365
Insurance -- Multi-Line (1.6%):
Horace Mann Educators Corp.............. 113,800 1,913
Protective Life Corp. (c)............... 69,284 1,602
3,515
Leisure -- Recreation, Gaming (0.3%):
Mandalay Resort Group (b) (c)........... 35,000 728
Manufacturing -- Miscellaneous (1.9%):
Pentair, Inc. (c)....................... 138,606 4,132
Medical Supplies (2.2%):
Biomet, Inc............................. 60,589 2,193
Sybron International Corp. (b).......... 100,999 2,499
4,692
Metals -- Fabrication (2.3%):
Kennametal, Inc......................... 169,190 4,970
Newspapers (2.0%):
A.H. Belo Corp.......................... 218,700 4,196
Oil & Gas Exploration,
Production & Services (4.2%):
Anadarko Petroleum Corp. (c)............ 31,867 2,041
BJ Services Co. (b)..................... 57,599 3,020
Nabors Industries, Inc. (b) (c)......... 31,900 1,624
Transocean Sedco Forex, Inc. (c)........ 43,418 2,301
8,986
Oil Marketing & Refining (1.3%):
Murphy Oil Corp. (c).................... 27,400 1,587
Tosco Corp. (c)......................... 42,999 1,231
2,818
Pharmaceuticals (1.2%):
Forest Laboratories, Inc. (b) (c)....... 11,500 1,524
Mylan Laboratories (c).................. 38,800 1,086
2,610
Pipelines (1.6%):
Questar Corp............................ 124,900 3,380
Publishing (1.5%):
Readers Digest Association, Inc. (c).... 90,300 3,313
Radio & Television (0.9%):
Hispanic Broadcasting Corp. (b)......... 61,000 1,906
Real Estate Investment Trusts (1.9%):
Equity Residential Properties Trust (c). 52,400 2,466
Kilroy Realty Corp...................... 58,200 1,517
3,983
See notes to financial statements.
155
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments--continued
Special Value Fund October 31, 2000
(Amounts in Thousands, Except Shares)
Market
Security Description Shares Value
Retail (1.0%):
American Eagle Outfitters (b) (c)....... 63,000 $ 2,170
Retail -- Specialty Stores (1.1%):
TJX Cos., Inc........................... 89,000 2,425
Savings & Loans (0.7%):
Charter One Financial, Inc.............. 64,947 1,490
Semiconductors (1.1%):
Atmel Corp. (b) (c)..................... 154,000 2,300
Software & Computer Services (9.6%):
Cadence Design Systems, Inc. (b) (c).... 214,998 5,523
Fiserv, Inc. (b)........................ 15,450 810
Intuit, Inc. (b) (c).................... 27,000 1,659
Networks Associates, Inc. (b)........... 147,428 2,838
Parametric Technology Corp. (b)......... 188,000 2,315
SunGard Data Systems, Inc. (b).......... 144,500 7,388
20,533
Staffing (0.3%):
Robert Half International, Inc. (b)..... 20,882 637
Steel (0.8%):
AK Steel Holding Corp................... 180,300 1,668
Tobacco & Tobacco Products (0.4%):
UST, Inc. (c)........................... 35,400 894
Trucking & Leasing (1.5%):
CNF Transportation, Inc................. 52,214 1,393
GATX Corp............................... 43,702 1,839
3,232
Utilities -- Electric (5.8%):
Calpine Corp. (b) (c)................... 21,800 1,721
DPL, Inc................................ 89,151 2,530
DQE, Inc................................ 77,300 2,701
Florida Progress Corp................... 42,600 2,266
SCANA Corp.............................. 83,358 2,209
Southern Energy, Inc. (b) (c)........... 40,000 1,090
12,517
Utilities -- Natural Gas (5.1%):
Keyspan Corp. (c)....................... 130,750 4,601
MCN Energy Group, Inc................... 95,000 2,339
Utilicorp United, Inc. (c).............. 153,000 4,064
11,004
Utilities -- Telecommunications (3.7%):
Broadwing, Inc. (b)..................... 173,000 4,887
CenturyTel, Inc......................... 79,680 3,068
7,955
Wireless Communications (1.0%):
Nextel Partners, Inc., Class A (b)...... 84,600 2,073
Total Common Stocks Cost ($170,078) 207,169
Shares or
Principal Market
Security Description Amount Value
Securities Purchased With Cash Collateral (24.4%)
Investment Companies (4.2%):
AIM Short Term Prime Obligations Fund... 22,042 $ 22
AIM Liquid Assets Portfolio............. 3,455,725 3,456
Merrimac Cash Fund...................... 5,566,870 5,567
9,045
Time Deposits (1.6%):
PNC Bank, 6.56%, 11/1/00................ $ 1,670 $ 1,670
National City Bank, 6.50%, 11/1/00...... 1,670 1,670
3,340
Repurchase Agreements (18.6%):
First Union, 6.78%, 11/1/00
(Collateralized by $8,248
MBNA, 6.30%, 12/15/05,
market value $8,240).................. 8,000 8,000
Goldman Sachs, 6.71%, 11/1/00
(Collateralized by $13,036
various Corporate Bonds,
4.94%-9.25%,
6/8/01-6/1/37,
market value $13,337)................. 9,000 9,000
Lehman Brothers, 6.78%, 11/1/00
(Collateralized by 340,013 shares
of various Equity Securities,
market value $8,424).................. 8,000 8,000
Morgan Stanley Dean Witter, 6.73%, 11/1/00
(Collateralized by $9,849
Barnett Capital, 0.01%, 2/1/27,
market value $9,360).................. 9,000 9,000
Prudential-Bache, 6.75%, 11/1/00
(Collateralized by $6,180
Rabobank, 6.58%, 10/24/01,
market value $6,180).................. 6,000 6,000
40,000
Total Securities Purchased
With Cash Collateral (Cost $52,385) 52,385
Total Investments (Cost $230,622) (a) -- 124.8% 267,713
Liabilities in excess of other assets -- (24.8)% (53,287)
TOTAL NET ASSETS -- 100.0% $214,426
(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 $2,193. Cost for federal
income tax purposes differs from value by net unrealized
appreciation of securities as follows (amounts in thousands):
Unrealized appreciation $42,229
Unrealized depreciation (7,331)
Net unrealized appreciation $34,898
(b) Non-income producing securities.
(c) All or a portion of this security was loaned as of October 31, 2000.
See notes to financial statements.
156
<PAGE>
THE VICTORY PORTFOLIOS Schedule of Investments
Small Company Opportunity Fund October 31, 2000
(Amounts in Thousands, Except Shares)
Market
Security Description Shares Value
Commercial Paper (5.0%)
Household Finance, 6.66%, 11/1/00 $ 6,257 $ 6,257
Total Commercial Paper (Cost $6,257) 6,257
Common Stocks (94.9%)
Aerospace/Defense (1.5%):
Triumph Group, Inc. (b) 55,000 1,870
Aerospace/Defense Equipment (0.6%):
Curtiss-Wright Corp. 16,425 774
Airlines (0.7%):
Mesaba Holdings, Inc. (b) 83,000 897
Apparel (1.8%):
Gildan Activewear, Inc., Class A (b) (c) 65,000 2,259
Apparel/Footwear (3.3%):
Timberland Co. (b) 80,000 4,130
Applications Software (0.9%):
Progress Software Corp. (b) 70,000 1,107
Automotive Parts (0.8%):
Borg-Warner Automotive, Inc. (c) 25,000 944
Banks (8.6%):
Chittenden Corp. 70,000 1,859
GBC Bancorp 30,000 956
Greater Bay Bancorp (c) 24,400 795
HUBCO, Inc. 67,100 1,501
M & T Bank Corp. 25,000 1,255
Mercantile Bankshares Corp. 57,000 2,144
Old Kent Financial Corp. 37,800 1,047
Provident Financial Group, Inc. (c) 38,000 1,150
10,707
Building Materials (9.8%):
ABM Industries, Inc. (c) 91,000 2,541
D.R. Horton, Inc. (c) 87,200 1,613
Dycom Industries, Inc. (b) (c) 40,000 1,505
Genlyte Group, Inc. (b) 55,000 1,423
LSI Industries, Inc. 85,000 1,594
NCI Building Systems, Inc. (b) 65,000 1,012
Southdown, Inc. 35,000 2,481
12,169
Chemicals (1.3%):
Cambrex Corp. (c) 40,000 1,598
Commercial Services (0.4%):
NCO Group, Inc. (b) 20,000 438
Computers & Peripherals (1.8%):
Affiliated Computer
Services, Inc. (b) (c) 40,000 2,228
Consulting Services (1.1%):
Maximus, Inc. (b) 54,900 1,348
Data Processing/Management (1.1%):
Group 1 Software, Inc. (b) 60,110 1,383
Distribution/Wholesale (2.9%):
Advanced Marketing Services, Inc........ 125,000 $ 2,250
United Stationers, Inc. (b)............. 40,000 1,203
Watsco, Inc............................. 18,200 171
3,624
Electronic & Electrical -- General (1.4%):
CTS Corp................................ 40,000 1,718
Electronic Components/
Instruments (7.5%):
APW Ltd. (b) (c)........................ 60,000 2,771
C&D Technologies, Inc................... 70,000 4,139
Technitrol, Inc......................... 21,000 2,328
9,238
Financial & Insurance (1.2%):
Triad Guaranty, Inc. (b)................ 50,000 1,453
Financial Services (4.1%):
AmeriCredit Corp. (b)................... 110,000 2,957
DVI, Inc. (b)........................... 88,000 1,474
Southwest Securities Group, Inc. (c).... 21,000 593
5,024
Food Products (1.6%):
Michael Foods, Inc...................... 74,000 1,993
Human Resources (1.6%):
On Assignment, Inc. (b)................. 80,000 2,015
Insurance -- Multi-Line (1.2%):
Protective Life Corp. (c)............... 63,000 1,457
Machine -- Diversified (1.0%):
Thomas Industries, Inc.................. 60,000 1,260
Medical -- Hospital Services (4.2%):
Universal Health Services, Inc. (b)..... 50,000 4,194
Zebra Technologies Corp., Class A (b)... 22,000 964
5,158
Medical Equipment & Supplies (1.9%):
Cooper Cos., Inc........................ 65,000 2,324
Medical -- Drugs (5.1%):
Alpharma, Inc., Class A (c)............. 30,000 1,164
Barr Laboratories, Inc. (b) (c)......... 40,000 2,525
Medicis Pharmaceutical, Class A (b)..... 36,000 2,651
6,340
Metals -- Fabrication (1.4%):
Mueller Industries, Inc. (b)............ 75,000 1,748
Networking Products (1.4%):
Anixter International, Inc. (b)......... 30,000 728
Cable Design Technologies Corp. (b)..... 45,000 1,037
1,765
Oil & Gas Exploration,
Production & Services (3.3%):
Cross Timbers Oil Co.................... 60,000 1,129
Houston Exploration Co. (b)............. 39,900 898
Noble Affiliates, Inc................... 28,000 1,027
Vintage Petroleum, Inc. (c)............. 47,000 993
4,047
See notes to financial statements.
157
<PAGE>
THE VICTORY PORTFOLIOS Schedule of Investments--continued
Small Company Opportunity Fund October 31, 2000
(Amounts in Thousands, Except Shares)
Shares or
Principal Market
Security Description Amount Value
Physical Therapy (0.8%):
Rehabcare Group, Inc. (b)............... 23,000 $ 993
Real Estate Investment Trusts (3.6%):
Amli Residential Properties Trust....... 50,000 1,156
Bedford Property Investors, Inc......... 60,000 1,181
Cousins Properties, Inc................. 25,500 663
National Golf Properties, Inc........... 75,000 1,491
4,491
Restaurants (1.4%):
O'Charley's, Inc. (b)................... 120,000 1,755
Retail -- Discount (1.5%):
BJ's Wholesale Club, Inc. (b) (c)....... 55,000 1,812
Retail -- Specialty Stores (1.0%):
Barnes & Nobles, Inc. (b)............... 64,000 1,208
Savings & Loans (6.1%):
Andover Bancorp, Inc.................... 50,000 1,500
Downey Financial Corp................... 19,000 907
ITLA Capital Corp. (b).................. 130,000 1,893
PFF Bancorp, Inc........................ 60,000 1,110
Roslyn Bancorp, Inc..................... 100,000 2,169
7,579
Semiconductors (1.2%):
Actel Corp. (b)......................... 23,000 842
General Semiconductor, Inc. (b) (c)..... 55,000 629
1,471
Steel Producers (1.4%):
Reliance Steel & Aluminum Co............ 75,000 1,781
Telecommunications -- Equipment (1.5%):
Anaren Microwave, Inc. (b).............. 18,000 1,872
Trucking & Leasing (2.9%):
Forward Air Corp. (b)................... 64,000 2,632
US Freightways Corp..................... 35,000 901
3,533
Total Common Stocks (Cost $78,875) 117,511
Securities Purchased With Cash Collateral (14.8%)
Investment Companies (2.0%):
AIM Short Term Prime Obligations Fund... 5,978 6
AIM Liquid Assets Portfolio............. 937,290 937
Merrimac Cash Fund...................... 1,509,891 1,510
2,453
Time Deposits (0.7%):
PNC Bank, 6.56%, 11/1/00................ $ 453 453
National City Bank, 6.50%, 11/1/00...... 453 453
906
Principal Market
Security Description Amount Value
Repurchase Agreements (12.1%):
First Union, 6.78%, 11/1/00
(Collateralized by $3,212
Highwoods/Forsyth, 7.00%, 12/1/06,
Excel Realty Trust, 6.88%, 10/15/04,
market value $3,090).................. $ 3,000 $ 3,000
Goldman Sachs, 6.71%, 11/1/00
(Collateralized by $5,551
various Corporate Bonds,
6.38%-8.70%,
6/15/05-5/1/30,
market value $5,414).................. 3,000 3,000
Lehman Brothers, 6.78%, 11/1/00
(Collateralized by 138,475 shares
of various Equity Securities,
market value $3,207).................. 3,000 3,000
Merrill Lynch, 6.75%, 11/1/00
(Collateralized by $3,358
various Corporate Bonds,
0.00%-9.38%,
11/15/05-2/1/30,
market value $3,095).................. 3,000 3,000
Morgan Stanley Dean Witter,
6.73%, 11/1/00
(Collateralized by $3,221
Lehman Brothers, 7.88%, 8/15/10,
market value $3,205).................. 3,000 3,000
15,000
Total Securities Purchased
With Cash Collateral (Cost $18,359) 18,359
Total Investments (Cost $103,491) (a) -- 114.7% 142,127
Other liabilities in excess of assets -- (14.7)% (18,183)
TOTAL NET ASSETS -- 100.0% $123,944
(a) Cost for federal income tax purposes differs from value by net
unrealized appreciation of securities as follows (amounts in
thousands):
Unrealized appreciation $42,952
Unrealized depreciation (4,316)
Net unrealized appreciation $38,636
(b) Non-income producing securities.
(c) All or a portion of the security was on loan as of October 31, 2000
See notes to financial statements.
158
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments
International Growth Fund October 31, 2000
(Amounts in Thousands, Except Shares)
Commercial Paper (5.7%)
United States (5.7%):
Household Finance Corp.,
6.66%, 11/1/00........................ $ 10,007 $ 10,007
Total Commercial Paper (Cost $10,007) 10,007
Common Stocks (93.0%)
Argentina (0.1%):
Diversified (0.1%):
PC Holdings SA, Class B................. 92,000 132
Total Argentina 132
Australia (1.6%):
Banks (0.4%):
National Australia Bank Ltd............. 22,200 308
Westpac Banking Corp.................... 53,749 366
674
Financial Services (0.1%):
Lend Lease Corp. Ltd.................... 16,372 192
Health Care (0.0%):
Gradipore Ltd. (b)...................... 22,835 61
Insurance -- Multi-Line (0.1%):
AMP Ltd................................. 15,550 140
Mining (0.2%):
Broken Hill Proprietary Ltd............. 32,026 310
Multimedia (0.3%):
News Corp. Ltd.......................... 21,189 222
News Corp. Ltd., Preferred.............. 33,200 297
519
Oil & Gas Exploration,
Production & Services (0.1%):
Woodside Petroleum Ltd.................. 23,200 170
Pharmaceuticals (0.1%):
FH Faulding & Co. Ltd................... 42,500 225
Software & Computer Services (0.1%):
Securenet Ltd. (b)...................... 22,000 95
Steel (0.0%):
Onesteel Ltd. (b)....................... 8,007 4
Utilities -- Telecommunications (0.2%):
Telstra Corp. Ltd....................... 120,431 393
Total Australia 2,783
Belgium (0.4%):
Pharmaceuticals (0.4%):
UCB SA.................................. 18,460 657
Total Belgium 657
Brazil (1.3%):
Commercial Banking (0.2%):
Unibanco, GDR........................... 17,000 429
Food Distributors,
Supermarkets & Wholesalers (0.4%):
Companhia Brasileira de Distribuicao
Grupo Pao de Acucar, ADR.............. 18,000 641
Market
Security Description Shares Value
Utilities -- Electric (0.3%):
CIA Paranese de Energia, ADR............ 61,000 $ 553
Utilities -- Telecommunications (0.4%):
Telecomunicacoes
Brasileiras SA, ADR .................. 6,000 0
Telecomunicacoes
Brasileiras-Telebras SA, ADR.......... 9,800 718
718
Total Brazil 2,341
Britain (16.1%):
Advertising (0.5%):
WPP Group PLC........................... 62,650 843
Banks (2.9%):
Barclays PLC............................ 36,300 1,038
HSBC Holdings PLC....................... 177,500 2,531
Royal Bank of Scotland Group PLC........ 42,850 964
Standard Chartered PLC.................. 32,650 472
5,005
Building Materials (0.4%):
CRH PLC................................. 46,700 714
Computers & Peripherals (0.5%):
Sema Group PLC.......................... 63,300 802
Food Distributors, Supermarkets
& Wholesalers (0.9%):
Tesco PLC............................... 404,000 1,543
Household Products (0.4%):
Reckitt Benckiser PLC................... 53,300 701
Newspapers (1.0%):
Pearson PLC............................. 65,299 1,758
Oil & Gas Exploration,
Production & Services (3.0%):
British Petroleum Co. PLC............... 454,959 3,862
Centrica PLC............................ 467,178 1,617
5,479
Pharmaceuticals (2.2%):
Glaxo Wellcome PLC...................... 76,500 2,201
Smithkline Beecham PLC.................. 125,681 1,626
3,827
Telecommunications (2.9%):
Vodafone Airtouch PLC................... 1,227,798 5,122
Telecommunications -- Equipment (0.5%):
Marconi PLC (b)......................... 67,000 846
Utilities -- Telecommunications (0.9%):
British Telecommunications PLC.......... 69,640 818
Cable & Wireless PLC.................... 50,640 719
1,537
Total Britain 28,177
Canada (6.1%):
Diversified (2.6%):
Bombadier, Inc., Class B................ 289,000 4,532
Insurance -- Multi-Line (0.5%):
Sun Life Financial Services (b)......... 40,000 825
See notes to financial statements.
159
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments--continued
International Growth Fund October 31, 2000
(Amounts in Thousands, Except Shares)
Market
Security Description Shares Value
Oil & Gas Exploration,
Production & Services (0.8%):
Suncor Energy, Inc...................... 73,000 $ 1,422
Telecommunications -- Equipment (2.2%):
Nortel Networks Corp.................... 86,000 3,891
Total Canada 10,670
Chile (0.2%):
Utilities -- Electric (0.2%):
Endesa, ADR............................. 34,000 357
Total Chile 357
Denmark (0.4%):
Telecommunications (0.4%):
Tele Danmark AS......................... 15,370 726
Total Denmark 726
Finland (2.4%):
Commercial Banking (0.9%):
Nordic Baltic Holding, FDR.............. 204,162 1,540
Telecommunications -- Equipment (1.5%):
Nokia OYJ............................... 64,755 2,662
Total Finland 4,202
France (11.1%):
Automotive (0.5%):
Renault SA.............................. 17,730 881
Beverages (0.1%):
Louis Vuitton Moet Hennessy............. 2,860 208
Commercial Services (1.0%):
Vivendi................................. 25,265 1,814
Computers & Peripherals (0.6%):
Cap Gemini SA........................... 6,970 1,111
Electronic & Electrical -- General (0.9%):
Rexel................................... 6,800 473
Thomson Multimedia...................... 22,600 1,034
1,507
Food -- Retail (1.4%):
Carrefour Supermarche................... 25,370 1,701
Economiques du Casino Guichard
Perrachon SA.......................... 7,660 668
2,369
Insurance (0.3%):
AXA SA.................................. 4,441 587
Machinery & Engineering (0.3%):
Schneider Electric SA................... 8,425 548
Oil & Gas Exploration,
Production & Services (1.6%):
Total Fina SA, Class B.................. 19,130 2,734
Pharmaceuticals (0.6%):
Aventis SA.............................. 15,519 1,118
Retail -- Department Stores (0.9%):
Pinault-Printemps-Redoute SA............ 9,026 1,609
Market
Security Description Shares Value
Semiconductors (0.8%):
STMicroelectronics NV................... 27,020 $ 1,362
Telecommunications -- Equipment (1.5%):
Alcatel................................. 42,330 2,580
Utilities -- Telecommunications (0.6%):
France Telecom SA....................... 10,220 1,067
Total France 19,495
Germany (6.3%):
Automotive (0.4%):
Volkswagen AG........................... 15,370 767
Banks (0.4%):
Deutsche Bank AG, Registered............ 9,000 729
Insurance (2.1%):
Allianz AG, Registered.................. 6,900 2,342
Muenchner Rueckver AG................... 3,943 1,243
3,585
Manufacturing -- Miscellaneous (1.4%):
Siemens AG, Registered.................. 10,140 1,290
Veba AG................................. 19,998 1,015
2,305
Medical Equipment & Supplies (0.5%):
Fresenius AG, Preferred................. 3,550 874
Software & Computer Services (1.1%):
SAP AG.................................. 9,754 1,595
SAP AG, Preferred....................... 1,770 358
1,953
Telecommunications (0.4%):
Deutsche Telekom AG..................... 20,270 729
Total Germany 10,942
Greece (0.5%):
Banks (0.2%):
Alpha Credit Bank....................... 7,750 286
Beverages (0.1%):
Hellenic Bottling Co. SA................ 22,000 300
Utilities -- Telecommunications (0.2%):
Hellenic Telecommunications
Organization SA, ADR.................. 34,000 298
Total Greece 884
Hong Kong (1.8%):
Banks (0.3%):
Hang Seng Bank.......................... 41,400 487
Broadcasting & Television (0.1%):
Television Broadcasts Ltd............... 34,000 186
Diversified (0.6%):
Guoco Group Ltd......................... 62,000 155
Hutchison Whampoa Ltd................... 54,000 671
826
Investment Company (0.1%):
HSBC Holdings PLC....................... 14,800 206
See notes to financial statements.
160
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments--continued
International Growth Fund October 31, 2000
(Amounts in Thousands, Except Shares)
Market
Security Description Shares Value
Petrochemicals (0.0%):
Shanghai Petrochemical Ltd.............. 458,000 $ 46
Printing (0.0%):
Next Media Ltd. (b)..................... 816,000 41
Real Estate (0.3%):
Cheung Kong Holdings Ltd................ 13,000 144
Sun Hung Kai Properties Ltd............. 39,000 322
466
Retail (0.1%):
Giordano International Ltd.............. 368,000 216
Telecommunications (0.3%):
China Mobile Ltd. (b)................... 70,000 451
China Unicom Ltd. (b)................... 32,000 64
Pacific Century Cyberworks Ltd. (b)..... 98,181 76
591
Utilities -- Electric (0.0%):
Shandong International Power Dev. Co.-H. 392,000 61
Total Hong Kong 3,126
Hungary (0.1%):
Utilities -- Telecommunications (0.1%):
Matav Rt................................ 43,000 191
Total Hungary 191
India (0.2%):
Software & Computer Services (0.2%):
Silverline Technologies Ltd., ADR (b)... 24,200 360
Total India 360
Ireland (0.2%):
Building Materials (0.2%):
CRH PLC................................. 23,380 354
Total Ireland 354
Israel (0.4%):
Banks (0.3%):
Bank Leumi-Le Israel.................... 220,000 432
Software & Computer Services (0.1%):
Magic Software Enterprises Ltd. (b)..... 34,000 198
Total Israel 630
Italy (2.9%):
Financial Services (0.4%):
San Paolo-IMI SPA....................... 48,550 786
Insurance (1.1%):
Assicurazioni Generali.................. 57,965 1,904
Oil-Integrated Companies (0.4%):
ENI SPA................................. 141,000 763
Utilities -- Telecommunications (1.0%):
Telecom Italia Mobile SPA............... 112,900 958
Telecom Italia SPA...................... 64,778 750
1,708
Total Italy 5,161
Market
Security Description Shares Value
Japan (20.2%):
Automotive (1.7%):
Nissan Motor Co. Ltd. (b)............... 110,000 $ 755
Toyota Motor Corp....................... 56,000 2,236
2,991
Banks (1.2%):
Bank of Tokyo-Mitsubishi Ltd............ 86,000 1,031
The Sakura Bank Ltd..................... 40,000 291
The Sumitomo Bank Ltd................... 67,000 813
2,135
Brewery (0.5%):
Kirin Brewery Co. Ltd................... 82,000 855
Broadcasting & Television (0.4%):
Fuji Television Network, Inc............ 60 659
Brokerage Services (0.5%):
Nomura Securities Co. Ltd............... 40,000 848
Building Materials (0.3%):
Asahi Glass Co. Ltd..................... 53,000 544
Chemical -- Specialty (0.6%):
Kaneka Corp............................. 101,000 981
Chemicals -- General (0.6%):
Nitto Denko Corp........................ 24,000 811
Shin-Etsu Chemical Co................... 6,000 246
1,057
Computers & Peripherals (0.5%):
Fujitsu Ltd............................. 49,000 872
Construction (0.4%):
Nippon Comsys Corp...................... 38,000 731
Cosmetics & Related (0.8%):
KAO Corp................................ 45,000 1,348
Electronic & Electrical -- General (4.6%):
Canon, Inc.............................. 26,000 1,031
Fanuc................................... 11,000 987
Matsushita Electric Industrial Co. Ltd.. 57,000 1,656
Murata Manufacturing Co. Ltd............ 6,000 718
NEC Corp................................ 24,000 457
Ricoh Co. Ltd........................... 41,000 631
Sanyo Electric Co. Ltd.................. 32,000 243
Secom................................... 7,500 534
Sony Corp............................... 14,200 1,134
TDK Corp................................ 3,000 302
Toshiba Corp............................ 68,000 486
8,179
Financial Services (0.4%):
Daiwa Securities Group, Inc............. 29,000 321
Orix Corp............................... 3,000 315
636
Machinery & Equipment (0.6%):
Daifuku Co. Ltd......................... 43,000 354
Makino Milling Machine Co............... 110,000 771
1,125
See notes to financial statements.
161
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments--continued
International Growth Fund October 31, 2000
(Amounts in Thousands, Except Shares)
Market
Security Description Shares Value
Machinery -- Electrical (0.4%):
SMC Corp................................ 5,000 $ 707
Medical Supplies (0.1%):
Hoya Corp............................... 3,000 248
Paper and Forest Products (0.4%):
Hokuetsu Paper Mills Ltd................ 46,000 321
Rengo Co. Ltd........................... 70,000 330
651
Pharmaceuticals (1.6%):
Taisho Pharmaceutical Co. Ltd........... 25,000 719
Takeda Chemical Industries.............. 25,000 1,646
Yamanouchi Pharmaceutical Co. Ltd....... 11,000 498
2,863
Photography (0.1%):
Fuji Photo Film Co. Ltd................. 6,000 223
Real Estate (0.1%):
Mitsui Fudosan Co. Ltd.................. 18,000 218
Retail (0.4%):
Fast Retailing Co. Ltd.................. 2,200 541
Ryohin Keikaku Ltd...................... 2,000 101
642
Retail -- Department Stores (0.3%):
Marui Co. Ltd........................... 35,000 516
Semiconductors (0.6%):
Rohm Co. Ltd............................ 4,000 1,008
Steel (0.3%):
Hitachi Metals Ltd...................... 62,000 474
Television (0.2%):
Tokyo Broadcasting System, Inc.......... 7,000 274
Transportation (0.4%):
East Japan Railway Co................... 118 678
Utilities -- Electric (0.4%):
Tokyo Electric Power Co., Inc........... 27,000 655
Utilities -- Telecommunications (1.3%):
Nippon Telegraph & Telephone Corp....... 193 1,755
NTT Data Corp........................... 24 187
NTT Mobile Communications
Network, Inc.......................... 13 320
2,262
Wire & Cable Products (0.5%):
Sumitomo Electric Industries Ltd........ 34,000 627
The Furukawa Electric Co. Ltd........... 10,000 263
890
Total Japan 35,270
Malaysia (0.4%):
Automotive (0.3%):
Oriental Holdings Berhad................ 440,000 533
Commercial Banking (0.0%):
AMMB Holdings Berhad.................... 12,000 13
Market
Security Description Shares Value
Entertainment (0.0%):
Resorts World Behard.................... 24,000 $ 42
Telecommunications (0.1%):
Telekom Malaysia........................ 50,000 154
Total Malaysia 742
Mexico (0.8%):
Financial Services (0.3%):
Grupo Financiero Bancomer, Class O (b).. 770,000 475
Retail (0.2%):
Controladora Comercial Mexicana SA...... 380,000 425
Telecommunications -- Equipment (0.3%):
Telefonos De Mexico SA, Series L........ 215,000 580
Total Mexico 1,480
Netherlands (7.4%):
Banks (0.8%):
ING Groep NV............................ 20,900 1,434
Chemicals -- General (0.6%):
Akzo Nobel NV........................... 24,802 1,128
Electronic
Components/Instruments (0.5%):
Philips Electronics NV.................. 22,890 899
Financial Services (0.6%):
Fortis NV............................... 36,570 1,116
Food & Dairy Products (0.7%):
Numico NV............................... 24,900 1,163
Food Products (0.3%):
Unilever NV............................. 9,400 471
Food -- Retail (0.9%):
Koninklijke Ahold NV.................... 51,560 1,495
Insurance (0.5%):
Aegon NV................................ 24,200 960
Newspapers (0.5%):
VNU NV.................................. 20,300 955
Oil & Gas Exploration,
Production & Services (2.0%):
Royal Dutch Petroleum Co................ 56,202 3,329
Total Netherlands 12,950
New Zealand (0.3%):
Airline Servicing (0.0%):
Auckland International Airport Ltd...... 145,300 164
Household Goods -- Appliances,
Furnishings & Electronics (0.1%):
Fisher & Paykel Industries Ltd.......... 37,000 106
Oil & Gas Exploration,
Production & Services (0.1%):
Fletcher Challenge Energy............... 28,970 95
Telecommunications (0.1%):
Telecom Corp. of New Zealand Ltd........ 72,836 161
Total New Zealand 526
See notes to financial statements.
162
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments--continued
International Growth Fund October 31, 2000
(Amounts in Thousands, Except Shares)
Market
Security Description Shares Value
Norway (0.5%):
Environmental Control (0.5%):
Tomra Systems ASA....................... 23,950 $ 961
Total Norway 961
Philippines (0.0%):
Banks (0.0%):
Bank of Phillippine Islands............. 71,875 74
Total Philippines 74
Poland (0.1%):
Oil-Integrated Companies (0.1%):
Polski Koncern Naftowy.................. 23,000 88
Total Poland 88
Russia (0.2%):
Oil & Gas Transmission (0.1%):
OAO Gazprom, ADR........................ 22,000 178
Oil-Integrated Companies (0.1%):
Lukoil Holding, ADR..................... 2,100 112
Total Russia 290
Singapore (0.8%):
Airlines (0.1%):
Singapore Airlines Ltd.................. 22,000 221
Banks (0.4%):
DBS Group Holdings Ltd.................. 14,000 165
Overseas-Chinese Banking Corp........... 56,450 360
525
Engineering (0.1%):
Singapore Technologies Engineering Ltd.. 128,000 206
Medical Services -- Hospital
Management & Nursing Homes (0.0%):
Parkway Holdings........................ 33,000 68
Real Estate (0.1%):
City Developments Ltd................... 27,000 125
Transportation (0.1%):
Neptune Orient Lines (b)................ 182,218 154
SMRT Corp. Ltd. (b)..................... 200,000 79
233
Total Singapore 1,378
South Africa (0.8%):
Banks (0.2%):
ABSA Group Ltd.......................... 106,000 360
Computers & Peripherals (0.2%):
Datatec Ltd. (b)........................ 52,000 327
Diversified (0.2%):
Remgro Ltd. (b)......................... 63,000 385
Mining (0.2%):
Anglo American Platinum Corp............ 11,000 413
Total South Africa 1,485
Market
Security Description Shares Value
South Korea (0.4%):
Electronic & Electrical -- General (0.1%):
Samsung Electronics, GDR................ 3,880 $ 286
Samsung Electronics, GDR (c)............ 270 20
306
Telecommunications -- Equipment (0.2%):
Korea Telecom, ADR...................... 7,600 280
Utilities -- Electric (0.1%):
Korea Electric Power Corp., ADR......... 12,150 148
Total South Korea 734
Spain (2.0%):
Banks (0.8%):
Banco Bilbao Vizcaya SA................. 54,560 726
Banco Santander Central Hispano SA...... 66,110 640
1,366
Utilities -- Electric (0.4%):
Empresa Nacional de Electricidad SA..... 37,700 614
Utilities -- Telecommunications (0.8%):
Telefonica SA (b)....................... 81,400 1,550
Total Spain 3,530
Sweden (1.7%):
Insurance (0.6%):
Skandia Forsakrings AB.................. 64,758 1,095
Telecommunications -- Equipment (1.1%):
Ericsson AB............................. 143,575 1,906
Total Sweden 3,001
Switzerland (4.4%):
Banks (0.6%):
Credit Suisse Group, Registered......... 5,915 1,109
Commercial Services (0.4%):
Adecco SA, Registered................... 975 674
Engineering (0.3%):
ABB Ltd................................. 5,458 485
Food Processing & Packaging (0.4%):
Nestle SA, Registered................... 318 659
Insurance -- Multi-Line (0.4%):
Zurich Financial Services AG............ 1,400 677
Pharmaceuticals (1.9%):
Novartis AG, Registered................. 1,470 2,229
Roche Holding AG........................ 122 1,114
3,343
Retail (0.4%):
Compagnie Financiere Richemont AG....... 265 737
Total Switzerland 7,684
See notes to financial statements.
163
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments--continued
International Growth Fund October 31, 2000
(Amounts in Thousands, Except Shares)
Market
Security Description Shares Value
Taiwan (0.5%):
Computers & Peripherals (0.1%):
Asustek Computer, Inc., GDR (c)......... 26,171 $ 130
Semiconductors (0.1%):
Taiwan Semiconductor, ADR (b)........... 10,497 238
Steel -- Producers (0.1%):
China Steel Corp., ADR (c).............. 7,620 88
Textile Manufacturing (0.2%):
Far Eastern Textile, GDR (b) (c)........ 43,286 351
Total Taiwan 807
Thailand (0.0%):
Financial Services (0.0%):
ABN Amro Asia Securities PCL............ 54,100 23
Total Thailand 23
Turkey (0.3%):
Banks (0.1%):
Yapi ve Kredi Bankasi AS (b)............14,300,272 124
Diversified (0.0%):
Koc Holding AS.......................... 2,300,000 146
Home Furnishings (0.1%):
Vestel Elektronik Sanayi (b)............ 560,000 115
Investment Company (0.1%):
Dogan Yayin Holding (b).................11,000,000 143
Total Turkey 528
United States (0.1%):
Medical Equipment & Supplies (0.1%):
Resmed, Inc., GDR (b)................... 47,700 128
Total United States 128
Total Common Stocks (Cost $156,670) 162,867
Principal Market
Security Description Amount Value
Convertible Bonds (0.6%)
Banks (0.6%):
Mitsubishi Bank International Finance
Bermuda, 3.00%, 11/30/02.............. $ 943 $ 976
Total Convertible Bonds (Cost $943) 976
Total Investments (Cost $167,620) (a) -- 99.3% 173,850
Other assets in excess of liabilities -- 0.7% 1,159
TOTAL NET ASSETS -- 100.0% $175,009
(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 $1,767.
Cost for federal income tax purposes differs from value by net
unrealized appreciation of securities as follows (amounts in
thousands):
Unrealized appreciation $18,903
Unrealized depreciation (14,441)
Net unrealized appreciation $ 4,462
(b) Non-income producing securities.
(c) 144A security which is restricted as to the resale to institutional
investors.
ADR -- American Depository Receipts
FDR -- Federal Depository Receipts
GDR -- Global Depository Receipts
At October 31, 2000, the Fund's open forward foreign currency contracts were
as follows:
Unrealized
Delivery Contract Market Appreciation/
Currency Date Value Value Depreciation
Short Contracts:
British Pound 11/3/00 $326 $325 $1
Euro 11/2/00 3 3 0
Total Short
Contracts $329 $328 $1
Long Contracts:
British Pound 11/3/00 $ 98 $ 98 $0
Total Long
Contracts $ 98 $ 98 $0
See notes to financial statements.
164
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments
Nasdaq-100 Index(R) October 31, 2000
(Amounts in Thousands, Except Shares)
Shares or
Principal Market
Security Description Amount Value
Commercial Paper (25.1%)
General Electric Capital Corp.,
6.64%, 11/1/00........................ $1,000 $1,000
Household Finance, 6.66%, 11/1/00....... 836 836
Total Commercial Paper (Cost $1,836) 1,836
Common Stocks (81.0%)
Airlines (0.1%):
Northwest Airlines Corp., Class A (b)... 200 6
Automobiles (0.1%):
PACCAR, Inc............................. 246 10
Biotechnology (4.0%):
Amgen, Inc. (b)......................... 1,381 80
Biogen, Inc. (b)........................ 524 32
Chiron Corp. (b)........................ 729 32
Genzyme Corp. (b)....................... 306 22
Immunex Corp. (b)....................... 1,986 84
MedImmune, Inc. (b)..................... 646 42
292
Chemicals -- General (0.1%):
Sigma-Aldrich Corp...................... 243 9
Commercial Services (1.6%):
Cintas Corp............................. 580 27
Concord EFS, Inc. (b)................... 694 29
Paychex, Inc............................ 1,018 58
Quintiles Transnational Corp. (b)....... 465 6
120
Computers & Peripherals (12.5%):
3Com Corp. (b).......................... 512 9
Adaptec, Inc. (b)....................... 242 4
Apple Computer, Inc. (b)................ 1,309 26
Cisco Systems, Inc. (b)................. 8,138 438
Dell Computer Corp. (b)................. 2,749 81
Network Appliance, Inc. (b)............. 933 111
Sun Microsystems, Inc. (b).............. 2,215 246
915
Distribution/Wholesale (0.3%):
Costco Wholesale Corp. (b).............. 678 25
Educational Services (0.1%):
Apollo Group, Inc. (b).................. 201 8
Electronic & Electrical --
General (1.2%):
Gemstar-TV Guide International, Inc. (b) 1,237 85
Electronics (4.2%):
American Power Conversion (b)........... 735 10
JDS Uniphase Corp. (b).................. 2,845 231
Molex, Inc.............................. 277 15
Sanmina Corp. (b)....................... 464 53
309
Forest Products --
Lumber & Paper (0.1%):
Smurfit-Stone Container Corp. (b)....... 689 9
Market
Security Description Shares Value
Health Care (0.0%):
PacifiCare Health Systems, Inc. (b)..... 90 $ 1
Internet Business Services (1.8%):
Ariba, Inc. (b)......................... 673 86
CMGI, Inc. (b).......................... 909 15
eBay, Inc. (b).......................... 569 29
130
Internet Content (0.2%):
CNET Networks, Inc. (b)................. 434 14
Internet Service Provider (0.8%):
At Home Corp., Series A (b)............. 836 9
Terra Networks, S.A..................... 157 4
Yahoo, Inc. (b)......................... 758 44
57
Internet Services/Software (1.8%):
Amazon.Com, Inc. (b).................... 677 25
BroadVision, Inc. (b)................... 830 25
RealNetworks, Inc. (b).................. 422 9
VereSign, Inc. (b)...................... 526 69
128
Machine -- Diversified (0.9%):
Applied Materials, Inc. (b)............. 1,208 64
Medical Supplies (0.3%):
Biomet, Inc............................. 689 25
Networking Products (1.8%):
Juniper Networks, Inc. (b).............. 656 128
Office Equipment & Supplies
(Non-Computer Related) (0.2%):
Staples, Inc. (b)....................... 900 13
Office furniture (0.1%):
Herman Miller, Inc...................... 175 5
Radio & Television (1.1%):
Adelphia Communications Corp.,
Class A (b)........................... 376 12
Comcast Corp.,
Class A Special Shares (b)............ 1,237 51
USA Networks, Inc. (b).................. 992 20
83
Restaurants (0.5%):
Starbucks Corp. (b)..................... 745 33
Retail -- Discount (0.2%):
Dollar Tree Stores, Inc. (b)............ 275 11
Retail -- Specialty Stores (0.4%):
Bed Bath & Beyond, Inc. (b)............. 1,097 28
Semiconductors (14.6%):
Altera Corp. (b)........................ 1,618 66
Applied Micro Circuits Corp. (b)........ 822 63
Atmel Corp. (b)......................... 973 15
Broadcom Corp., Class A (b)............. 300 67
Conexant Systems, Inc. (b).............. 706 19
Intel Corp.............................. 7,613 340
KLA-Tencor Corp. (b).................... 649 22
See notes to financial statements.
165
<PAGE>
THE VICTORY PORTFOLIOS Schedules of Investments--continued
Nasdaq-100 Index(R) October 31, 2000
(Amounts in Thousands, Except Shares)
Market
Security Description Shares Value
Linear Technology Corp.................. 1,208 $ 78
Maxim Integrated Products, Inc. (b)..... 1,143 76
Microchip Technology, Inc. (b).......... 286 9
PMC-Sierra, Inc. (b).................... 501 84
QLogic Corp. (b)........................ 264 26
RF Micro Devices, Inc. (b).............. 524 10
SDL, Inc. (b)........................... 254 66
Vitesse Semiconductor Corp. (b)......... 559 39
Xilinx, Inc. (b)........................ 1,252 90
1,070
Software & Computer Services (18.5%):
Adobe Systems, Inc...................... 675 51
BMC Software, Inc. (b).................. 538 11
Citrix Systems, Inc. (b)................ 635 14
Compuware Corp. (b)..................... 645 5
Electronic Arts, Inc. (b)............... 375 19
Fiserv, Inc. (b)........................ 442 23
I2 Technologies, Inc. (b)............... 605 103
Intuit, Inc. (b)........................ 734 45
Legato Systems, Inc. (b)................ 271 2
Microsoft Corp. (b)..................... 5,856 403
Networks Associates, Inc. (b)........... 414 8
Novell, Inc. (b)........................ 1,133 10
Oracle Corp. (b)........................ 7,573 250
Parametric Technology Corp. (b)......... 1,075 13
Peoplesoft, Inc. (b).................... 1,132 49
Siebel Systems, Inc. (b)................ 1,524 160
Synopsys, Inc. (b)...................... 229 8
VERITAS Software Corp. (b).............. 1,309 185
1,359
Telecommunications -- Satellite (0.7%):
Echostar Communications Corp.,
Class A (b)........................... 692 32
PanAmSat Corp. (b)...................... 581 19
51
Telecommunications -- Equipment (5.7%):
ADC Telecommunications, Inc. (b)........ 2,913 62
Comverse Technology, Inc. (b)........... 489 55
Metromedia Fiber Network, Inc. (b)...... 1,512 29
Qualcomm, Inc. (b)...................... 2,878 187
Telefonaktiebolaget LM Ericsson AB...... 3,421 47
Tellabs, Inc. (b)....................... 674 34
414
Telecommunications --
Services & Equipment (3.1%):
CIENA Corp. (b)......................... 970 102
Global Crossing Ltd. (b)................ 2,743 65
Level 3 Communications, Inc. (b)........ 733 35
McLeodUSA, Inc. (b)..................... 1,353 26
228
Shares or
Principal Market
Security Description Amount Value
Utilities -- Telecommunications (1.3%):
WorldCom, Inc. (b)...................... 2,978 $ 70
XO Communications, Inc. (b)............. 789 27
97
Wireless Communications (2.7%):
Nextel Communications, Inc., Class A (b) 2,692 104
VoiceStream Wireless Corp. (b).......... 709 93
197
Total Common Stocks (Cost $6,443) 5,924
Depositary Receipts (4.5%)
Nasdaq-100 Shares (b)................... 4,002 327
Total Depositary Receipts (Cost $322) 327
U.S. Treasury Bills (3.0%)
6.01%, 12/14/00 (c)..................... $ 220 218
Total U.S. Treasury Bills (Cost $218) 218
Total Investments (Cost $8,819) (a) -- 113.6% 8,305
Liabilities in excess of other assets -- (13.6)% (997)
TOTAL NET ASSETS -- 100.0% $7,308
(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 $47. Cost for federal income
tax purposes differs from value by net unrealized depreciation of
securities as follows (amounts in thousands):
Unrealized appreciation $ 210
Unrealized depreciation (760)
Net unrealized depreciation $(550)
(b) Non-income producing securities
(c) Serves as collateral for futures contracts
Number of Market
Contracts Value
Nasdaq 100 Index,
face amount expiring 3 $990
December 14, 2000
Total Futures Contracts (Cost $979) $990
See notes to financial statements.
166
<PAGE>
<TABLE>
Statements of Assets and Liabilities
The Victory Portfolios October 31, 2000
(Amounts in Thousands, Except Per Share Amounts)
<CAPTION>
Small Nasdaq-
Special Company International 100
Value Opportunity Growth Index(R)
Fund Fund Fund Fund
<S> <C> <C> <C> <C>
ASSETS:
Investments, at value (Cost $190,622; $88,491;
$167,620, & $8,819) $227,713 $127,127 $173,850 $8,305
Repurchase agreements at amortized cost 40,000 15,000 -- --
Cash -- -- -- 20
Interest and dividends receivable 148 73 121 --
Receivable from affiliates 1 2 22 8
Receivable for capital shares issued -- -- 6 3
Receivable from brokers for investments sold 1,660 262 3,521 69
Receivable for net variation margin on open futures contracts -- -- -- 58
Receivable for foreign exchange contracts -- -- 1 --
Reclaims receivable -- -- 206 --
Prepaid expenses and other assets 9 63 11 23
Total Assets 269,531 142,527 177,738 8,486
LIABILITIES:
Payable for capital shares redeemed -- -- 5 --
Payable to brokers for investments purchased 2,452 4 2,309 1163
Payable to custodian -- -- 101 --
Payable for return of collateral received 52,385 18,359 -- --
Accrued expenses and other payables:
Investment advisory fees 138 65 206 --
Administration fees 5 1 4 --
Custodian fees 8 1 37 4
Accounting fees 2 4 -- --
Transfer agent fees 26 32 27 6
Shareholder service fees -- Class A 40 10 10 --
Shareholder service and 12b-1 fees -- Class G -- 88 15 2
Other 49 19 15 3
Total Liabilities 55,105 18,583 2,729 1,178
NET ASSETS:
Capital 146,134 84,101 149,447 8,020
Accumulated net investment income (losses) 40 -- (114) 11
Net unrealized appreciation/depreciation
from investments and futures 37,091 38,636 3,352 (503)
Net unrealized appreciation/depreciation from translation
of assets and liabilities in foreign currencies -- -- 2,848 --
Accumulated undistributed net realized gains (losses)
from investment, futures and foreign currency transactions 31,161 1,207 19,476 (220)
Net Assets $214,426 $123,944 $175,009 $7,308
Net Assets
Class A $214,293 $ 28,545 $139,389 $3,132
Class G 133 95,399 35,620 4,176
Total $214,426 $123,944 $175,009 $7,308
Outstanding units of beneficial interest (shares)
Class A 13,377 1,084 10,043 339
Class G 8 3,632 2,581 453
Total 13,385 4,716 12,624 792
Net asset value
Redemption price per share -- Class A $ 16.02 $ 26.34 $ 13.88 $ 9.23
Redemption price per share -- Class G $ 15.97 $ 26.26 $ 13.80 $ 9.22
Maximum sales charge -- Class A 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 $ 17.00 $ 27.95 $ 14.73 $ 9.79
</TABLE>
See notes to financial statements.
167
<PAGE>
<TABLE>
Statements of Operations
The Victory Portfolios For the Year Ended October 31, 2000
(Amounts in Thousands)
<CAPTION>
Small Nasdaq-
Special Company International 100
Value Opportunity Growth Index(R)
Fund Fund Fund Fund<F1>
<S> <C> <C> <C> <C>
Investment Income:
Interest income $ 377 $ 162 $ 557 $ 17
Dividend income 3,242 1,093 3,095 --
Securities lending 39 25 -- --
Foreign tax withholding -- (2) (287) --
Total Income 3,658 1,278 3,365 17
Expenses:
Investment advisory fees 1,705 793 2,301 6
Administration fees 309 189 314 2
Shareholder service fees -- Class A 511 72 410 --
Shareholder service fees and 12b-1 fees -- Class B 4 -- 2 --
Shareholder service fees and 12b-1 fees -- Class G -- 484 207 2
Accounting fees 77 53 90 10
Custodian fees 72 31 412 4
Legal and audit fees 23 18 22 1
Trustees' fees and expenses 5 -- 16 --
Transfer agent fees 79 23 87 6
Registration and filing fees 60 38 33 7
Printing fees 8 17 7 1
Other 16 8 14 1
Total Expenses 2,869 1,726 3,915 40
Expenses voluntarily reduced by advisor (28) (131) (114) (8)
Expenses before reimbursement from distributor 2,841 1,595 3,801 32
Expenses reimbursed by distributor (104) -- (7) (24)
Net Expenses 2,737 1,595 3,794 8
Net Investment Income (Loss) 921 (317) (429) 9
Realized/Unrealized Gains (Losses)
from Investments and Foreign Currencies:
Net realized gains (losses) from
investment transactions and futures 31,954 13,667 20,223 (220)
Net realized gains (loss) from foreign currency transactions -- -- (846) --
Net change in unrealized appreciation/depreciation
from investments and futures 20,699 14,012 (31,015) (503)
Net change in unrealized appreciation/depreciation from
translation of assets and liabilities in foreign currencies -- -- (24) --
Net realized/unrealized gains (losses)
from investments, futures and foreign currencies: 52,653 27,679 (11,662) (723)
Change in net assets resulting from operations $53,574 $27,362 $(12,091) $(714)
<FN>
<F1> Period August 1, 2000 (commencement of operations) through October 31, 2000.
</FN>
</TABLE>
See notes to financial statements.
168
<PAGE>
<TABLE>
The Victory Portfolios Statements of Changes in Net Assets
(Amounts in Thousands)
<CAPTION>
Small Nasdaq-
Special Company International 100
Value Opportunity Growth Index(R)
Fund Fund Fund Fund
Year Year Year Period Year Year Year Period
Ended Ended Ended Ended Ended Ended Ended Ended
October 31, October 31, October 31, October 31, March 31, October 31, October 31, October 31,
2000 1999 2000 1999<F1> 1999 2000 1999 2000<F2>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
From Investment Activities:
Operations:
Net investment
income (loss) $ 921 $ 1,414 $ (317) $ (311) $ 622 $ (429) $ (517) $ 9
Net realized
gains (losses)
from investment
transactions 31,954 12,285 13,667 1,814 (7,458) 20,223 21,931 (220)
Net realized (losses)
from foreign
currency
transactions -- -- -- -- -- (846) (443) --
Net change in
unrealized
appreciation/
depreciation
from investments 20,699 (10,033) 14,012 2,716 (37,144) (31,015) 25,042 (503)
Net change in
unrealized
appreciation/
depreciation from
translation
of assets
and liabilities in
foreign currencies -- -- -- -- -- (24) (6) --
Change in net assets
resulting from operations 53,574 3,666 27,362 4,219 (43,980) (12,091) 46,007 (714)
Distributions to Shareholders:
From net investment income
Class A (960) (1,724) -- -- -- -- -- --
Class G -- -- -- -- (890) -- -- --
From net
realized gains
from investment
transactions (13,039) (14,036) -- -- (6,817) (21,077) (4,776) --
Change in net assets
from distributions
to shareholders (13,999) (15,760) -- -- (7,707) (21,077) (4,776) --
Capital Transactions:
Proceeds from
shares issued 39,291 38,223 36,364 33,493 163,831 193,143 151,295 8,262
Proceeds from
shares exchanged
from Class B 1,190 -- -- -- -- 938 -- --
Proceeds from
shares issued
in connection
with acquisition -- -- -- -- 70,516 -- 29,076 --
Dividends reinvested 11,605 13,171 -- -- 7,587 13,954 3,192 --
Cost of shares redeemed (109,648) (154,595) (96,796) (71,046) (175,583) (186,074) (172,483) (240)
Cost of shares
exchanged
to Class A (1,190) -- (938) -- --
Change in net assets
from capital transactions (58,752) (103,201) (60,432) (37,553) 66,351 21,023 11,080 8,022
Change in net assets (19,177) (115,295) (33,070) (33,334) 14,664 (12,145) 52,311 7,308
Net Assets:
Beginning of period 233,603 348,898 157,014 190,348 175,684 187,154 134,843 --
End of period $ 214,426 $ 233,603 $123,944 $157,014 $ 190,348 $ 175,009 $ 187,154 $7,308
Share Transactions:
Issued 2,749 2,803 1,553 1,512 6,944 12,169 10,645 816
Issued in
connection with
exchange from
Class B 98 55 -- --
Issued in connection
with acquisition -- -- -- -- 3,124 -- 2,363 --
Reinvested 878 993 -- -- 305 880 228 --
Redeemed (8,083) (11,530) (4,296) (3,245) (7,479) (11,765) (12,116) (24)
Redeemed in
connection with
exchange to
Class A (101) (58) -- --
Change in shares (4,459) (7,734) (2,743) (1,733) 2,894 1,281 1,120 792
<FN>
<F1> For the period April 1, 1999 through October 31, 1999.
<F2> For the period August 1, 2000 (commencement of operations) to October 31, 2000.
</FN>
</TABLE>
See notes to financial statements.
169
<PAGE>
<TABLE>
The Victory Portfolios Financial Highlights
For a Share Outstanding Throughout Each Period
<CAPTION>
Special Value Fund
Class G
Class A Shares Shares
December 21,
Year Year Year Year Year 1999
Ended Ended Ended Ended Ended through
October 31, October 31, October31, October 31, October 31, October 31,
2000 1999 1998 1997 1996 2000<F4>
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 13.09 $ 13.64 $ 16.68 $ 14.15 $ 12.15 $12.48
Investment Activities
Net investment income (loss) 0.06 0.07 0.09 0.10 0.12 0.02
Net realized and
unrealized gains
(losses) on investments 3.68 0.04 (1.79) 3.50 2.33 3.51
Total from
Investment Activities 3.74 0.11 (1.70) 3.60 2.45 3.53
Distributions
Net investment income (0.06) (0.08) (0.09) (0.12) (0.11) (0.04)
Net realized gains (0.75) (0.58) (1.25) (0.95) (0.34) --
Total Distributions (0.81) (0.66) (1.34) (1.07) (0.45) (0.04)
Net Asset Value, End of Period $ 16.02 $ 13.09 $ 13.64 $ 16.68 $ 14.15 $15.97
Total Return (excludes
sales charges) 29.94% 0.80% (11.22)% 27.05% 20.60% 28.34%<F2>
Ratios/Supplemental Data:
Net Assets, End of Period (000) $214,293 $232,272 $346,962 $420,020 $289,460 $ 133
Ratio of expenses to
average net assets<F7> 1.32% 1.43% 1.40% 1.37% 1.37% 1.59%<F3>
Ratio of net investment income
(loss) to average net assets<F7> 0.43% 0.51% 0.56% 0.65% 0.88% 0.08%<F3>
Ratio of expenses to
average net assets<F1> 1.38% 1.53% 1.51% <F6> 1.40% 23.11%<F3>
Ratio of net investment income
(loss) to average net assets<F1> 0.37% 0.41% 0.45% <F6> 0.85% (21.44)%<F3>
Portfolio turnover<F5> 65% 43% 44% 39% 55% 65%
<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> Period from commencement of operations.
<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.
<F7> Effective February 28, 2000, 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 1.60% until at least February 28, 2001.
</FN>
</TABLE>
See notes to financial statements.
170
<PAGE>
<TABLE>
The Victory Portfolios Financial Highlights
For a Share Outstanding Throughout Each Period
<CAPTION>
Small Company Opportunity Fund
Class A Shares Class G Shares
April 1, March 26, April 1,
Year 1999 1999 Year 1999 Year Year Year Year
Ended to to Ended to Ended Ended Ended Ended
October 31, October 31, March 31, October 31, October 31, March 31, March 31, March 31, March 31,
2000 1999 1999<F2><F3> 2000 1999 1999<F3> 1998 1997 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset
Value,
Beginning
of Period $ 21.08 $ 20.71 $ 20.23 $ 21.04 $ 20.71 $ 27.89 $ 22.77 $ 22.26 $ 18.10
Investment
Activities
Net
investment
income
(loss) (0.03) (0.01) -- (0.08) (0.06) 0.10 0.23 0.20 0.19
Net realized
and
unrealized
gains
(losses) on
investments 5.29 0.38 0.48 5.30 0.39 (6.06) 8.72 2.52 4.73
Total from
Investment
Activities 5.26 0.37 0.48 5.22 0.33 (5.96) 8.95 2.72 4.92
Distributions
Net
investment
income -- -- -- -- -- (0.14) (0.27) (0.17) (0.18)
Net
realized
gains -- -- -- -- -- (1.08) (3.56) (2.04) (0.58)
Total
Distri-
butions -- -- -- -- -- (1.22) (3.83) (2.21) (0.76)
Net Asset
Value,
End of
Period $ 26.34 $ 21.08 $ 20.71 $ 26.26 $ 21.04 $ 20.71 $ 27.89 $ 22.77 $ 22.26
Total Return
(excludes
sales
charges) 24.95% 1.79%<F5> 2.37%<F5> 24.81% 1.59%<F5> (22.08)% 42.02% 12.46% 28.00%
Ratios/
Supplemental
Data:
Net Assets,
End of
Period (000) $28,545 $51,599 $64,587 $95,399 $105,415 $125,761 $175,684 $114,451 $102,979
Ratio of expenses
to average
net assets<F4> 1.15% 0.98%<F6> 0.98%<F6> 1.30% 1.29%<F6> 1.30% 1.31% 1.36% 1.41%
Ratio of net
investment
income (loss)
to average
net assets<F4> (0.14)% 0.09%<F6> 1.50%<F6> (0.29)% 0.39%<F6> 0.41% 0.86% 0.90% 0.95%
Ratio of expenses
to average
net assets<F1> 1.25% 1.17%<F6> 1.19%<F6> 1.40% 1.47%<F6> <F8> <F8> <F8> <F8>
Ratio of net
investment
income
(loss) to
average net
assets<F1> (0.24)% (0.28)%<F6> 1.29%<F6> (0.39)% (0.58)%<F6> <F8> <F8> <F8> <F8>
Portfolio
turnover<F7> 28% 16% 30% 28% 16% 30% 42% 35% 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> 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 February 28, 2000, 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.
<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.
171
<PAGE>
<TABLE>
The Victory Portfolios Financial Highlights
For a Share Outstanding Throughout Each Period
<CAPTION>
International Growth Fund
Class A Shares Class G Shares
March 26,
Year Year Year Year Year Year 1999
Ended Ended Ended Ended Ended Ended through
October 31, October 31, October 31, October 31, October 31, October 31, October 31,
2000 1999 1998 1997 1996 2000 1999<F3><F8>
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 16.51 $ 13.19 $ 13.31 $ 13.01 $ 12.33 $ 16.48 $ 13.73
Investment Activities
Net investment income (loss) (0.03) (0.05) 0.07<F2> 0.09 0.08 (0.05) (0.03)
Net realized and
unrealized gains
(losses) from
investments and
foreign currencies (0.76) 3.85 0.65 0.67 0.62 (0.79) 2.78
Total from
Investment Activities (0.79) 3.80 0.72 0.76 0.70 (0.84) 2.75
Distributions
Net investment income -- -- (0.06) (0.01) (0.02) -- --
Net realized gains (1.84) (0.48) (0.78) (0.45) -- (1.84) --
Tax return of capital -- -- -- -- -- -- --
Total Distributions (1.84) (0.48) (0.84) (0.46) (0.02) (1.84) --
Net Asset Value, End of Period $ 13.88 $ 16.51 $ 13.19 $ 13.31 $ 13.01 $ 13.80 $ 16.48
Total Return
(excludes sales charges) (6.20)% 29.43% 5.79% 6.04% 5.65% (6.55)% 20.03%<F4>
Ratios/Supplemental Data:
Net Assets, End of Period (000) $139,389 $149,193 $134,491 $106,189 $121,517 $35,620 $37,322
Ratio of expenses to
average net assets<F6> 1.77% 1.75% 1.71% 1.69% 1.73% 2.00% 2.00%<F5>
Ratio of net investment income
(loss) to average net assets<F6> (0.17)% (0.32)% 0.55% 0.63% 0.64% (0.39)% (1.79)%<F5>
Ratio of expenses to
average net assets<F1> 1.82% 1.88% 1.82% 1.69% 1.75% 2.06% 2.24%<F5>
Ratio of net investment
income (loss)
to average net assets<F1> (0.22)% (0.45)% 0.44% 0.63% 0.62% (0.45)% (2.03)%<F5>
Portfolio turnover<F7> 91% 106% 86% 116% 178% 91% 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> Calculated using average shares for the period.
<F3> Effective March 26, 1999, the Gradison International Fund merged into
the Victory International Growth Fund.
<F4> Not annualized.
<F5> Annualized.
<F6> Effective December 15, 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 2.00% until at least April 1, 2001.
<F7> Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
<F8> Period from commencement of operations.
</FN>
</TABLE>
See notes to financial statements.
172
<PAGE>
<TABLE>
The Victory Portfolios Financial Highlights
For a Share Outstanding Throughout Each Period
<CAPTION>
Nasdaq-100 Index(R) Fund
Class A Shares Class G Shares
August 1, August 1,
1999 1999
through through
October 31, October 31,
2000<F3> 2000<F3>
<S> <C> <C>
Net Asset Value, Beginning of Period $10.00 $10.00
Investment Activities
Net investment income (loss) 0.02<F2> 0.02<F2>
Net realized and unrealized gains (losses) from investments (0.79) (0.80)
Total from Investment Activities (0.77) (0.78)
Net Asset Value, End of Period $ 9.23 $ 9.22
Total Return (excludes sales charges) (7.70)%<F4> (7.80)%<F4>
Ratios/Supplemental Data:
Net Assets, End of Period (000) $3,132 $4,176
Ratio of expenses to average net assets<F6> 0.60%<F5> 0.80%<F5>
Ratio of net investment income to average net assets<F6> 0.98%<F5> 0.74%<F5>
Ratio of expenses to average net assets<F1> 3.88%<F5> 3.46%<F5>
Ratio of net investment income (loss) to average net assets<F1> (2.30)%<F5> (1.92)%<F5>
Portfolio turnover<F7> 1.17% 1.17%
<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> Period from commencement of operations.
<F4> Not annualized.
<F5> Annualized.
<F6> Effective August 1, 2000 has contractually agreed to waive its
management fees and to reimburse expenses, as allowed by law, to the
extent necessary to maintain the net operating expenses of Class A
Shares and Class G Shares of the Fund at a maximum of 0.60% and 0.80%,
respectively, for at least one year from the commencement of the Fund's
operations.
<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.
173
<PAGE>
<TABLE>
Statements of Cash Flows
The Victory Portfolios For the Year Ended October 31, 2000
(Amounts in Thousands)
<CAPTION>
Limited Investment
Term Intermediate Quality
Income Income Bond Balanced
Fund Fund Fund Fund
<S> <C> <C> <C> <C>
Increase (decrease) in cash
Cash Flows from Operating Activities:
Net Investment Income $ 2,269 $ 11,881 $ 7,214 $ 9,799
Adjustments to reconcile net investment income
to net cash provided by operating activities:
Purchases of investment securities (394,280) (1,016,147) (551,167) (4,771,143)
Proceeds from disposition of investments securities 404,652 1,048,282 579,347 4,808,018
Decrease (increase) in investments purchased with
cash collateral from securities lending 4,966 8,357 (13,621) (25,169)
Decrease (increase) in dividends, interest, and other receivables 63 138 392 235
(Decrease) increase in payable for return of
collateral received from securities lending (4,966) (8,357) 13,621 25,169
Increase (decrease) in accrued expenses and other payables (6) (57) (73) 31
Net amortization/accretion from investments -- -- (96) (106)
Net cash provided by operating activities 12,698 44,097 35,617 46,834
Cash Flows from Financing Activities:
Proceeds from shares issued 4,327 37,736 21,630 108,382
Cost of shares redeemed (15,871) (77,918) (54,556) (149,291)
Cash distributions paid (1,154) (3,915) (2,691) (5,925)
Net cash used in financing activities (12,698) (44,097) (35,617) (46,834)
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 $1,139, $8,079, $4,713 and $41,639.
</TABLE>
See notes to financial statements.
174
<PAGE>
<TABLE>
Statements of Cash Flows
The Victory Portfolios For the Year Ended October 31, 2000
(Amounts in Thousands)
<CAPTION>
Diversified Stock Special
Stock Index Value
Fund Fund Fund
<S> <C> <C> <C>
Increase (decrease) in cash
Cash Flows from Operating Activities:
Net Investment Income $ 1,117 $ 7,874 $ 921
Adjustments to reconcile net investment income
to net cash provided by operating activities:
Purchases of investment securities (4,073,433) (10,506,616) (1,678,952)
Proceeds from disposition of investments securities 4,185,312 10,529,415 1,750,765
(Increase) decrease in investments purchased with
cash collateral from securities lending 7,575 (38,791) (159,112)
(Increase) decrease in dividends, interest, and other receivables (194) 1,795 105
Increase (decrease) in payable for return of collateral received
from securities lending (7,575) 38,791 159,112
Increase (decrease) in accrued expenses and other payables 113 (168) (51)
Net amortization/accretion from investments -- (265) --
Net cash provided by operating activities 112,915 32,035 72,788
Cash Flows from Financing Activities:
Proceeds from shares issued 336,359 130,684 40,485
Cost of shares redeemed (425,921) (159,724) (110,879)
Cash distributions paid (23,371) (2,995) (2,394)
Net cash used in provided by financing activities (112,933) (32,035) (72,788)
Increase (decrease) in cash (18) -- --
Cash:
Beginning balance 18 -- --
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 $155,125, $34,219, and $11,605.
</TABLE>
See notes to financial statements.
175
<PAGE>
Notes to Financial Statements
The Victory Portfolios October 31, 2000
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 30 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, 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,
Established Value Fund, Diversified Stock Fund, Stock Index Fund, Growth
Fund, Special Value Fund, Small Company Opportunity Fund, International
Growth Fund, and the Nasdaq-100 Index(R) Fund, (collectively, the
"Funds").
The U.S. Government Obligations Fund is authorized to issue two classes
of shares: Investor Shares and Select Shares. The Intermediate Income
Fund, Fund for Income, 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, Established Value, Stock Index Fund, Growth Fund, Special Value
Fund, Small Company Opportunity Fund, International Growth Fund, and the
Nasdaq-100 Index(R) Fund are authorized to issue two classes of shares:
Class A Shares and Class G Shares. The Diversified Stock Fund is
authorized to issue three classes of shares: Class A Shares, Class B
Shares, and Class G shares. Each class of shares in a Fund has
substantially identical rights and privileges except with respect to
sales charges, fee 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 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 Value Fund and the Special Value Fund seek to
provide long-term growth of capital and dividend 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 Small Company Opportunity Fund seeks to provide capital
appreciation. The International Growth Fund seeks to provide capital
growth consistent with reasonable investment risk. The Nasdaq-100
Index(R) Fund seeks to provide long-term capital appreciation by
attempting to match the investment performance on the Nasdaq-100
Index(R).
2. Reorganizations:
On December 1, 1999, the Board of Directors of the Trust approved the
conversion and transfer of all the assets and liabilities represented by
Class B Shares into additional Class A Shares for the Special Value
Fund, the National Municipal Bond Fund, the New York Tax-Free Fund, and
the Ohio Municipal Bond Fund, which was completed on February 25, 2000.
Additionally, the Board of Directors of the Trust also approved the
conversion and transfer of all the assets and liabilities represented by
Class B Shares into additional Class A Shares for the Balanced Fund.
This transfer was completed on May 5, 2000.
Continued
176
<PAGE>
Notes to Financial Statements--continued
The Victory Portfolios October 31, 2000
The Trust also entered an Agreement and Plan of Reorganization and
Termination ("the Reorganization") pursuant to which the asset and
liabilities of the Class A Shares and Class B Shares of the Ohio
Regional Stock Fund and the Government Mortgage Fund were transferred
into the Class A Shares of the Established Value Fund and the Fund for
Income, respectively. The Reorganization qualified as a tax-free
exchange for Federal Income tax purposes and was completed on May 5,
2000, following approval by shareholders at the shareholder meeting held
on December 1, 1999. The following is a summary of shares outstanding,
net assets, net asset value per share and net unrealized appreciation
(depreciation) immediately before and after the Reorganization (amounts
in thousands):
<TABLE>
<CAPTION>
Before After
Transfer Transfer
Victory Victory Victory
Ohio Established Established
Regional Value Value
Stock Fund Fund Fund
<S> <C> <C> <C>
Class A Shares (000)........................................................ 1,864 336
Class G Shares (000)........................................................ -- 13,449 13,449
Total Shares (000).......................................................... 1,864 13,449 13,785
Class A Net Assets (000).................................................... $10,261 $ 10,261
Class G Net Assets (000).................................................... -- $410,389 $410,389
Total Net Assets (000)...................................................... $10,261 $410,389 $420,650
Net Asset Value.............................................................
Class A Shares.............................................................. $ 5.50 $ 30.54
Class G Shares ............................................................. -- $ 30.52 $ 30.52
Unrealized Appreciation (000) .............................................. $ 5,518 $101,050 $106,568
</TABLE>
<TABLE>
<CAPTION>
Before After
Transfer Transfer
Victory Victory Victory
Government Fund Fund
Mortgage for for
Fund Income Income
<S> <C> <C> <C>
Class A Shares (000)........................................................ 7,961 3,122 9,699
Class G Shares (000)........................................................ -- 12,552 12,552
Total Shares (000).......................................................... 7,961 15,674 22,251
Class A Net Assets (000).................................................... 81,753 $ 38,807 $120,541
Class G Net Assets (000).................................................... -- 156,035 $156,035
Total Net Assets (000)...................................................... $81,753 $194,842 $276,576
Net Asset Value.............................................................
Class A Shares.............................................................. $ 10.27 $ 12.43 $ 12.43
Class G Shares.............................................................. -- $ 12.43 $ 12.43
Unrealized Appreciation/(Depreciation) (000)................................ $(1,788) $ (8,962) $(10,750)
</TABLE>
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.
Continued
177
<PAGE>
Notes to Financial Statements--continued
The Victory Portfolios October 31, 2000
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
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:
<TABLE>
<CAPTION>
Before After
Reorganization Reorganization
Gradison Victory Victory
Government Fund Fund
Income for for
Fund Income Income
<S> <C> <C> <C>
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
</TABLE>
<TABLE>
<CAPTION>
Before After
Reorganization Reorganization
Gradison Victory Victory
Ohio Ohio Ohio
Tax-Free Municipal Municipal
Fund Bond Fund Bond Fund
<S> <C> <C> <C>
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
</TABLE>
Continued
178
<PAGE>
Notes to Financial Statements--continued
The Victory Portfolios October 31, 2000
<TABLE>
<CAPTION>
Before After
Reorganization Reorganization
Gradison Victory Victory
Growth & Diversified Diversified
Income Stock Stock
Fund Fund Fund
<S> <C> <C> <C>
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
</TABLE>
<TABLE>
<CAPTION>
Before After
Reorganization Reorganization
Gradison Victory Victory
Established Established Established
Value Value Value
Fund Fund Fund
<S> <C> <C> <C>
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
</TABLE>
<TABLE>
<CAPTION>
Before After
Reorganization Reorganization
Gradison Victory Victory
International International International
Fund Growth Fund Growth Fund
<S> <C> <C> <C>
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
</TABLE>
Continued
179
<PAGE>
Notes to Financial Statements--continued
The Victory Portfolios October 31, 2000
<TABLE>
<CAPTION>
Before After
Reorganization Reorganization
Gradison Victory Victory
Opportunity Special Small Company
Value Growth Opportunity
Fund Fund Fund
<S> <C> <C> <C>
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
</TABLE>
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,
Fund for Income, Investment Quality Bond Fund, National Municipal Bond
Fund, New York Tax-Free Fund, Ohio Municipal Bond Fund, Balanced Fund,
Convertible Securities Fund, REI Fund, Value Fund, Established Value
Fund, Stock Index Fund, Growth Fund, Special Value Fund, Small Company
Opportunity Fund, Diversified Stock Fund, Value Fund, Growth Fund,
Established Value Fund, International Growth Fund and the Nasdaq-100
Index(R) 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.
Continued
180
<PAGE>
Notes to Financial Statements--continued
The Victory Portfolios October 31, 2000
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.
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, Value Fund, Established Value Fund, Diversified Stock
Fund, Stock Index Fund, Growth Fund, Special Value Fund, Small Company
Opportunity Fund, International Growth Fund and Nasdaq-100 Index(R) 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.
Continued
181
<PAGE>
Notes to Financial Statements--continued
The Victory Portfolios October 31, 2000
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, Fund for
Income, Investment Quality Bond Fund, Balanced Fund, Convertible
Securities Fund, REI Fund, Value Fund, Established Value Fund,
Diversified Stock Fund, Stock Index Fund, Growth Fund, Special Value
Fund, Small Company Opportunity Fund, International Growth Fund and the
Nasdaq-100 Index(R) 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, Diversified Stock Fund, Stock Index
Fund, and Special Value fund. The following Funds had securities with
the following market values on loan as of October 31, 2000 (amounts in
thousands):
<TABLE>
<CAPTION>
Market Value
of Loaned Securities
<S> <C>
Limited Term Income Fund................................................ $ 7,730
Intermediate Income Fund................................................ 28,550
Investment Quality Bond Fund............................................ 31,110
Balanced Fund........................................................... 83,266
Established Value Fund.................................................. 39,333
Value Fund.............................................................. 54,409
Diversified Stock Fund.................................................. 183,277
Stock Index Fund........................................................ 161,438
Growth Fund............................................................. 48,468
Special Value Fund...................................................... 52,263
Small Company Opportunity Fund.......................................... 18,008
</TABLE>
Dividends to Shareholders:
Dividends from net investment income are declared daily and paid monthly
for the money market funds. Dividends from net investment income are
declared and paid quarterly for the Convertible Securities Fund, REI
Fund, Value Fund, Established Value Fund, Diversified Stock Fund, Stock
Index Fund, Growth Fund, Special Value Fund, Small Company Opportunity
Fund, International Growth Fund and the Nasdaq-100 Index(R) Fund.
Dividends from net investment income are declared and paid monthly for
the Limited Term Income Fund, Intermediate Income Fund, Fund for Income,
Investment Quality Bond Fund, 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.
Continued
182
<PAGE>
Notes to Financial Statements--continued
The Victory Portfolios October 31, 2000
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.
Under the provisions of Statement of Position (SOP) 98-5, "Reporting on
the Costs of Start-Up Activities", costs associated with organizing a
portfolio which commences operations subsequent to June 30, 1998 must be
expensed as incurred and may not be amortized over future periods.
Accordingly, costs incurred in connection with the organization of the
Nasdaq-100 Index(R) Fund, which commenced operations on August 1, 2000,
were paid by the adviser. Costs incurred in connection with the
organization of the Funds prior to June 30, 1998 are being amortized on
a straight-line basis over a period not to exceed sixty months from the
date the Funds commenced operations. Additionally, organization costs
were paid by the Distributor on behalf of the REI 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.
4. Purchases and Sales of Securities:
Purchases and sales of securities (excluding short-term securities) for
the fiscal year ended October 31, 2000 were as follows (amounts in
thousands):
<TABLE>
<CAPTION>
Purchases Sales
<S> <C> <C>
Limited Term Income Fund........................................ $ 62,251 $ 68,894
Intermediate Income Fund........................................ 530,288 534,981
Fund for Income................................................. 60,189 104,503
Investment Quality Bond Fund.................................... 354,943 383,604
National Municipal Bond Fund.................................... 97,059 100,669
New York Tax-Free Fund.......................................... 4,058 5,302
Ohio Municipal Bond Fund........................................ 118,988 145,892
Balanced Fund................................................... 561,065 558,074
Convertible Securities Fund..................................... 86,614 78,477
REI Fund........................................................ 9,142 9,388
Value Fund...................................................... 192,030 269,459
Established Value Fund.......................................... 116,862 233,510
Diversified Stock Fund.......................................... 1,077,293 1,177,168
Stock Index Fund................................................ 159,838 90,423
Growth Fund..................................................... 147,290 177,241
Special Value Fund.............................................. 131,949 204,804
Small Company Opportunity Fund.................................. 34,629 97,764
International Growth Fund....................................... 179,456 184,998
Nasdaq-100 Index(R) Fund........................................ 6,493 39
</TABLE>
Continued
183
<PAGE>
Notes to Financial Statements--continued
The Victory Portfolios October 31, 2000
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.
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 Class A Shares of all the Funds, except
the Stock Index Fund and the Financial Reserves Fund, the Class B Shares
for the Diversified Stock Fund and the Select Shares of the U.S.
Government Obligations Fund. As such, Key and its affiliates provide
support services to their clients who are shareholders, which may
include establishing and maintaining accounts and records, processing
dividend and distribution payments, providing account information,
assisting in processing of purchase, exchange and redemption requests,
and assisting shareholders in changing dividend options, account
designations and addresses. For providing such services, Key and its
affiliates may receive a fee of up to 0.25% of the average daily net
assets of the Funds serviced.
BISYS Fund Services (the "Administrator" or the "Distributor," as
applicable), an indirect, wholly owned subsidiary of The BISYS Group,
Inc. ("BISYS") serves as the administrator and distributor to the Trust
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 Diversified
Stock 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 Intermediate Income Fund,
Fund for Income, Investment Quality Bond Fund, National Municipal Bond
Fund, New York Tax Free Bond, Ohio Municipal Bond Fund, the Balanced
Fund, Convertible Securities Fund, Real Estate Investment Fund, Value
Fund, Established Value Fund, Diversified Stock Fund, Growth Fund,
Special 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 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
Balanced Fund, Convertible Securities Fund, Real Estate Investment Fund,
Value Fund, Established Value Fund, Diversified Stock Fund, Growth Fund,
Special 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 period ended
October 31, 2000, the Distributor received approximately $512,000 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 $494,000 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.
Continued
184
<PAGE>
Notes to Financial Statements--continued
The Victory Portfolios October 31, 2000
Fees may be voluntarily reduced or reimbursed to assist the funds in
maintaining competitive expense ratios. The Advisor 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, Ohio Municipal Bond Fund, Established
Value Fund, Small Company Opportunity Fund and the International Growth
Fund at a maximum of .89%, .91%, 1.10%, 1.30%, and 2.00% 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. Additionally, the Advisor 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 Limited Term Income Fund
(Class A), Intermediate Income Fund (Class A shares), Intermediate
Income Fund (Class G shares), Fund for Income (Class A Shares),
Investment Quality Bond Fund (Class A Shares), Investment Quality Bond
Fund (Class G shares), Balanced Fund (Class G shares), Convertible
Securities Fund (Class A Shares), Convertible Securities Fund (Class G
shares), REI Fund (Class A Shares), REI Fund (Class G shares), Value
Fund (Class G shares), Established Value Fund (Class A Shares), Stock
Index Fund (Class G shares), Growth Fund (Class A Shares), Growth Fund
(Class G Shares), Special Value (Class G Shares) at a maximum of .90%,
.90%, 1.00%, 1.00%, 1.10%, 1.10%, 1.55%, 1.24%, 1.55%, 1.40%, 1.65%,
1.45%, .88%, 82%, 1.20%, 1.45% and 1.60% of average daily net assets,
respectively, until at least February 28, 2001. Effective July 31, 2000,
the Adviser has also agreed to waive its management fee and to reimburse
expenses, as allowed by law, to the extent necessary to maintain the net
operating expenses of Class A and Class G Shares of the Nasdaq-100
Index(R) Fund at a maximum of .60% and .80%, respectively, for at least
one year from the commencement of operations, August 1, 2000.
Additional information regarding related party transactions is as
follows for the period ended October 31, 2000:
<TABLE>
<CAPTION>
Investment
Advisory Administration
Fees Fees
Maximum
Percentage
of Average Voluntary Voluntary
Daily Fee Fee
Net Assets Reductions Reductions
(000) (000)
<S> <C> <C> <C>
U.S. Government Obligations Fund............................................... 0.35% -- --
Prime Obligations Fund......................................................... 0.35% -- --
Financial Reserves Fund........................................................ 0.50% -- --
Tax-Free Money Market Fund..................................................... 0.35% -- --
Ohio Municipal Money Market Fund............................................... 0.50% $581 --
Limited Term Income Fund....................................................... 0.50% 17 --
Intermediate Income Fund....................................................... 0.75% 460 --
Fund for Income................................................................ 0.50% 71 $ 231
Investment Quality Bond Fund................................................... 0.75% 268 --
National Municipal Bond Fund................................................... 0.55% 106 --
New York Tax-Free Fund......................................................... 0.55% 36 14
Ohio Municipal Bond Fund....................................................... 0.60% 368 --
Balanced Fund.................................................................. 0.80% 107 --
Convertible Securities Fund.................................................... 0.75% -- --
Real Estate Investment Fund.................................................... 0.80% 52 --
Value Fund..................................................................... 0.75% 25 --
Established Value Fund......................................................... 0.65% 260 371
Diversified Stock Fund......................................................... 0.65% 110 71
Stock Index Fund............................................................... 0.60% 858 1,120
Growth Fund.................................................................... 0.75% 32 --
Special Value Fund............................................................. 0.80% 28 --
Small Company Opportunity Fund................................................. 0.65% 9 122
International Growth Fund...................................................... 1.10% 114 --
Nasdaq-100 Index(R) Fund....................................................... 0.60% 6 2
</TABLE>
Continued
185
<PAGE>
Notes to Financial Statements--continued
The Victory Portfolios October 31, 2000
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):
<TABLE>
<CAPTION>
U.S. Government Obligations Fund
Year Year
Ended Ended
October 31, October 31,
2000 1999
<S> <C> <C>
Capital and Share Transactions:
Investor Shares:
Proceeds from shares issued.............................................................. $ 3,548,349 $ 901,949
Dividends reinvested..................................................................... 41 21
Cost of shares redeemed.................................................................. (3,509,728) (1,086,810)
Total.................................................................................... $ 38,662 $ (184,840)
Select Shares:
Proceeds from shares issued.............................................................. 6,410,256 3,085,952
Dividends reinvested..................................................................... 79,511 60,036
Cost of shares redeemed.................................................................. (6,363,933) (2,934,450)
Total.................................................................................... 125,834 211,538
</TABLE>
Continued
186
<PAGE>
Notes to Financial Statements--continued
The Victory Portfolios October 31, 2000
<TABLE>
<CAPTION>
Intermediate Investment
Income Quality
Fund Fund for Income Bond Fund
Year Year Ten Months Year
Ended Ended Ended Ended
October 31, October 31, October 31, October 31,
2000 2000 1999 2000
<S> <C> <C> <C> <C>
Capital Transactions:
Class A Shares:
Proceeds from shares issued....................................... $ 37,218 $ 372,534 $ 16,785 $ 21,253
Proceeds from shares issued in connection with acquisition........ -- -- 33,350 --
Proceeds from shares issued in connection with merger............. -- 81,753 -- --
Dividends reinvested.............................................. 8,064 46,704 821 4,701
Cost of shares redeemed........................................... (77,904) (419,208) (8,309) (54,405)
Total............................................................. $(32,622) $ 81,783 $ 42,647 $(28,451)
Class G Shares:
Proceeds from shares issued....................................... $ 518 $ 39,857 $ 86,968 $ 389
Dividends reinvested.............................................. 15 10,112 8,370 12
Cost of shares redeemed........................................... (2) (97,824) (55,719) --
Total............................................................. $ 531 $ (47,855) $ 39,619 $ 401
Share Transactions:
Class A Shares:
Issued............................................................ 4,037 2,168 1,301 2,299
Issued in connection with acquisition............................. -- -- 2,426 --
Issued in connection with merger.................................. -- 6,578 -- --
Reinvested........................................................ 877 244 64 510
Redeemed.......................................................... (8,440) (2,415) (642) (5,897)
Total............................................................. (3,526) 6,575 3,149 (3,088)
Class G Shares:
Issued............................................................ 57 3,144 6,704 43
Reinvested........................................................ 1 800 647 1
Redeemed.......................................................... -- (7,721) (4,293) --
Total............................................................. 58 (3,777) 3,058 44
</TABLE>
Continued
187
<PAGE>
Notes to Financial Statements--continued
The Victory Portfolios October 31, 2000
<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,
2000 1999 2000 1999 2000 1999
<S> <C> <C> <C> <C> <C> <C>
Capital Transactions:
Class A Shares:
Proceeds from shares issued........... $ 12,751 $ 11,987 $ 1,104 $ 3,414 $ 10,057 $ 15,845
Proceeds from shares exchanged
from Class B........................ 2,150 -- 3,065 -- -- --
Dividends reinvested.................. 1,042 2,014 446 466 669 1,118
Cost of shares redeemed............... (18,231) (20,612) (4,863) (6,902) (23,146) (18,208)
Total................................. $ (2,288) $ (6,611) $ (248) $(3,022) $(12,420) $ (1,245)
Class B Shares:
Proceeds from shares issued........... $ 35 $ 784 $ 53 $ 679 -- --
Dividends reinvested.................. 28 121 38 117 -- --
Cost of shares redeemed............... (240) (754) (274) (729) -- --
Cost of shares exchanged to Class A... (2,150) -- (3,065) -- -- --
Total................................. $ (2,327) $ 151 $(3,248) $ 67 -- --
Class G Shares:
Proceeds from shares issued........... $ 1,912 -- $ 2,359 -- $ 12,436 $ 24,863
Proceeds from shares issued in
connection with acquisition......... -- -- -- -- -- 118,155
Dividends reinvested.................. 13 -- 32 -- 5,002 3,031
Cost of shares redeemed............... (839) -- (150) -- (36,612) (20,870)
Total................................. $ 1,086 -- $ 2,241 -- $(19,174) $125,179
Share Transactions:
Class A Shares:
Issued................................ 1,245 1,132 92 270 892 1,351
Issued in connection with
exchange from Class B............... 214 -- 258 -- -- --
Reinvested............................ 102 191 37 37 60 96
Redeemed.............................. (1,783) (1,962) (405) (544) (2,077) (1,569)
Total................................. (222) (639) (18) (237) (1,125) (122)
Class B Shares:
Issued................................ 3 73 5 54 -- --
Reinvested............................ 3 11 3 10 -- --
Redeemed.............................. (23) (72) (23) (59) -- --
Redeemed in connection with
exchange to Class A................. (214) -- (258) -- -- --
Total................................. (231) 12 (273) 5 -- --
Class G Shares:
Issued................................ 187 -- 195 -- 1,109 2,162
Issued in connection with
acquisition......................... -- -- -- -- -- 10,429
Reinvested............................ 1 -- 3 -- 448 266
Redeemed.............................. (83) -- (12) -- (3,274) (1,818)
Total................................. 105 -- 186 -- (1,717) 11,039
</TABLE>
Continued
188
<PAGE>
Notes to Financial Statements--continued
The Victory Portfolios October 31, 2000
<TABLE>
<CAPTION>
Real
Convertible Estate
Balanced Securities Investment
Fund Fund Fund
Year Year Year Year
Ended Ended Ended Ended
October 31, October 31, October 31, October 31,
2000 1999 2000 2000
<S> <C> <C> <C> <C>
Capital Transactions:
Class A Shares:
Proceeds from shares issued....................................... $ 95,825 $ 54,573 $ 38,835 $ 4,136
Proceeds from shares exchanged from Class B....................... 10,624 -- -- --
Dividends reinvested.............................................. 40,658 32,438 5,149 220
Cost of shares redeemed........................................... (137,170) (96,089) (34,855) (7,106)
Total............................................................. $ 9,937 $ (9,078) $ 9,129 $(2,750)
Class B Shares:
Proceeds from shares issued....................................... $ 678 $ 5,337 -- --
Dividends reinvested.............................................. 968 517 -- --
Cost of shares redeemed........................................... (1,239) (1,240) -- --
Cost of shares exchanged to Class A............................... (10,624) -- -- --
Total............................................................. $ (10,217) $ 4,614 -- --
Class G Shares:
Proceeds from shares issued....................................... $ 1,214 -- $ 284 $ 71
Dividends reinvested.............................................. 13 -- 3 1
Cost of shares redeemed........................................... (119) -- (7) (2)
Total............................................................. $ 1,108 -- $ 280 $ 70
Share Transactions:
Class A Shares:
Issued............................................................ 6,658 3,646 2,802 388
Issued in connection with exchange from Class B................... 762 -- -- --
Reinvested........................................................ 2,876 2,212 394 21
Redeemed.......................................................... (9,776) (6,414) (2,578) (668)
Total............................................................. 520 (556) 618 (259)
Class B Shares:
Issued............................................................ 48 355 -- --
Reinvested........................................................ 68 35 -- --
Redeemed.......................................................... (89) (84) -- --
Redeemed in connection with exchange to Class A................... (761) -- -- --
Total............................................................. (734) 306 -- --
Class G Shares:
Issued............................................................ 87 -- 20 7
Reinvested........................................................ 1 -- -- --
Redeemed.......................................................... (9) -- -- --
Total............................................................. 79 -- 20 7
</TABLE>
Continued
189
<PAGE>
Notes to Financial Statements--continued
The Victory Portfolios October 31, 2000
<TABLE>
<CAPTION>
Established Diversified
Value Value Stock
Fund Fund Fund
Year Year Year Year
Ended Ended Ended Ended
October 31, October 31, October 31, October 31,
2000 2000 2000 1999
<S> <C> <C> <C> <C>
Capital Transactions:
Class A Shares:
Proceeds from shares issued........................................ $ 93,765 $ 505 $ 286,249 $ 268,453
Proceeds from shares issued in connection with merger.............. -- 10,261 -- --
Dividends reinvested............................................... 66,753 24 127,351 157,657
Cost of shares redeemed............................................ (177,438) (1,686) (378,602) (382,001)
Total.............................................................. $ (16,920) $ 9,104 $ 34,998 $ 44,109
Class B Shares:
Proceeds from shares issued........................................ -- -- $ 1,148 $ 17,642
Dividends reinvested............................................... -- -- 11,082 10,399
Cost of shares redeemed............................................ -- -- (10,389) (7,181)
Total.............................................................. -- -- $ 1,841 $ 20,860
Class G Shares:
Proceeds from shares issued........................................ $ 3,369 $ 153,022 $ 48,447 $ 41,251
Proceeds from shares issued in connection with acquisition......... -- -- -- 60,016
Dividends reinvested............................................... 5 82,662 16,692 4
Cost of shares redeemed............................................ (633) (285,060) (36,798) (14,110)
Total.............................................................. $ 2,741 $ (49,376) $ 28,341 $ 87,161
Share Transactions:
Class A Shares:
Issued............................................................. 5,368 163 16,930 15,244
Issued in connection with the merger............................... -- 336 -- --
Reinvested......................................................... 3,868 1 7,839 10,267
Redeemed........................................................... (10,461) (54) (22,411) (21,736)
Total.............................................................. (1,225) 446 2,358 3,775
Class B Shares:
Issued............................................................. -- -- 70 1,040
Reinvested......................................................... -- -- 701 690
Redeemed........................................................... -- -- (630) (417)
Total.............................................................. -- -- 141 1,313
Class G Shares:
Issued............................................................. 200 1,221 2,873 2,250
Issued in connection with acquisition.............................. -- -- -- 4,456
Reinvested......................................................... -- 1,824 1,029 --
Redeemed........................................................... (38) (4,831) (2,164) (768)
Total.............................................................. 162 (1,786) 1,738 5,938
</TABLE>
Continued
190
<PAGE>
Notes to Financial Statements--continued
The Victory Portfolios October 31, 2000
<TABLE>
<CAPTION>
Growth
Stock Index Fund Fund Special Value Fund
Year Year Year Year Year
Ended Ended Ended Ended Ended
October 31, October 31, October 31, October 31, October 31,
2000 1999 2000 2000 1999
<S> <C> <C> <C> <C> <C>
Capital Transactions:
Class A Shares:
Proceeds from shares issued......................... $ 106,197 $ 185,881 $ 74,014 $ 39,091 $ 38,026
Proceeds from shares exchanged from Class B......... -- -- -- 1,190 --
Dividends reinvested................................ 33,687 65,393 18,008 11,532 13,093
Cost of shares redeemed............................. (153,602) (110,122) (111,583) (109,454) (153,798)
Total............................................... $ (13,718) $ 141,152 $ (19,561) $ (57,641) $(102,679)
Class B Shares:
Proceeds from shares issued......................... -- -- -- $ 27 $ 197
Dividends reinvested................................ -- -- -- 73 78
Cost of shares exchanged to Class A................. -- -- -- (1,190) --
Cost of shares redeemed............................. -- -- -- (141) (797)
Total............................................... -- -- -- $ (1,231) $ (522)
Class G Shares:
Proceeds from shares issued......................... $ 24,660 $ 9,408 $ 9,767 $ 173 --
Dividends reinvested................................ 532 17 -- -- --
Cost of shares redeemed............................. (6,061) (228) (1,099) (53) --
Total............................................... $ 19,131 $ 9,197 $ 8,668 $ 120 --
Share Transactions:
Class A Shares:
Issued.............................................. 4,442 8,410 2,964 2,735 2,788
Issued in connection with exchange from Class B..... -- -- -- 98 --
Reinvested.......................................... 1,410 3,318 731 872 987
Redeemed............................................ (6,432) (4,966) (4,445) (8,068) (11,468)
Total............................................... (580) 6,762 (750) (4,363) (7,693)
Class B Shares:
Issued.............................................. -- -- -- 2 15
Reinvested.......................................... -- -- -- 6 6
Redeemed............................................ -- -- -- (11) (62)
Redeemed in connection with exchange to Class A..... -- -- -- (101) --
Total............................................... -- -- -- (104) (41)
Class G Shares:
Issued.............................................. 1,034 409 391 12 --
Reinvested.......................................... 22 1 -- -- --
Redeemed............................................ (253) (10) (44) (4) --
Total............................................... 803 400 347 (8) --
</TABLE>
Continued
191
<PAGE>
Notes to Financial Statements--continued
The Victory Portfolios October 31, 2000
<TABLE>
<CAPTION>
Small Company International Nasdaq-100
Opportunity Growth Index(R)
Fund Fund Fund
For the
Year Year Year Year Period
Ended Ended Ended Ended Ended
October 31, October 31, October 31, October 31, October 31,
2000 1999 2000 1999 2000<F1>
<S> <C> <C> <C> <C> <C>
Capital Transactions:
Class A Shares:
Proceeds from shares issued.......................... $ 13,639 $ 10,585 $ 183,621 $ 148,118 $3,555
Proceeds from shares exchanged from Class B.......... -- -- 938 -- --
Dividends reinvested................................. -- -- 9,736 3,177 --
Cost of shares redeemed.............................. (42,872) (24,871) (177,811) (167,989) (136)
Total................................................ $(29,233) $(14,286) $ 16,484 $ (16,694) $3,419
Class B Shares:
Proceeds from shares issued.......................... -- -- $ 209 $ 213 --
Dividends reinvested................................. -- -- 72 15 --
Cost of shares exchanged to Class A.................. -- -- (938) -- --
Cost of shares redeemed.............................. -- -- (13) (51) --
Total................................................ -- -- $ (670) $ 177 --
Class G Shares:
Proceeds from shares issued.......................... $ 22,725 $ 22,908 $ 9,313 $ 2,964 $4,707
Dividends reinvested................................. -- -- 4,146 29,076 --
Cost of shares redeemed.............................. (53,924) (46,175) (8,250) (4,443) (104)
Total................................................ $(31,199) $(23,267) $ 5,209 $ 27,597 $4,603
Share Transactions:
Class A Shares:
Issued............................................... 560 476 11,588 10,428 352
Issued in connection with exchange from Class B...... -- -- 55 -- --
Reinvested........................................... -- -- 613 227 --
Redeemed............................................. (1,924) (1,147) (11,251) (11,813) (13)
Total................................................ (1,364) (671) 1,005 (1,158) 339
Class B Shares:
Issued............................................... -- -- 14 16 --
Reinvested........................................... -- -- 5 1 --
Redeemed in connection with exchange to Class A...... -- -- (58) -- --
Redeemed............................................. -- -- (1) (4) --
Total................................................ -- -- (40) 13 --
Class G Shares:
Issued............................................... 993 1,036 567 201 464
Reinvested........................................... -- -- 262 2,363 --
Redeemed............................................. (2,372) (2,098) (513) (299) (11)
Total................................................ (1,379) (1,062) 316 2,265 453
<FN>
<F1> For the period August 1, 1999 (commencement of operations) through
October 31, 2000.
</FN>
</TABLE>
Continued
192
<PAGE>
Notes to Financial Statements--continued
The Victory Portfolios October 31, 2000
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. 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, 2000, a portion of income
dividends paid by the following funds qualify for the dividends received
deduction available to corporations:
Qualified
Dividend
Income
Balanced Fund..................................... 35.88%
Convertible Securities Fund....................... 27.47%
Value Fund........................................ 100.00%
Established Value Fund............................ 21.46%
Diversified Stock Fund............................ 26.58%
Stock Index Fund.................................. 25.37%
Special Value Fund................................ 85.32%
Exempt-interest dividends are as follows for the year ended October 31,
2000 (amounts in thousands):
Tax-Free Money Market Fund........................ $23,530
Ohio Municipal Money Market Fund.................. 30,681
National Municipal Bond Fund...................... 1,433
New York Tax-Free Bond Fund....................... 802
Ohio Municipal Bond Fund.......................... 8,038
During the year ended October 31, 2000, the following funds paid
long-term capital gain distributions (amounts in thousands):
National Municipal Bond Fund...................... $ 7
Balanced Fund..................................... 37,377
Convertible Securities Fund....................... 2,175
Value Fund........................................ 70,573
Established Value Fund............................ 40,944
Diversified Stock Fund............................ 128,135
Stock Index Fund.................................. 19,074
Growth Fund....................................... 20,903
Special Value Fund................................ 10,253
International Growth Fund......................... 18,317
Continued
193
<PAGE>
Notes to Financial Statements--continued
The Victory Portfolios October 31, 2000
As of October 31, 2000, 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............................. $ 12 2007
Prime Obligations Fund............................. 2 2008
Tax-Free Money Market Fund......................... 4 2006
Tax-Free Money Market Fund......................... 27 2007
Tax-Free Money Market Fund......................... 71 2008
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........................... 1116 2007
Limited Term Income Fund........................... 856 2008
Intermediate Income Fund........................... 5,229 2007
Intermediate Income Fund........................... 5,671 2008
Investment Quality Bond Fund....................... 3,961 2002
Investment Quality Bond Fund....................... 6,428 2007
Investment Quality Bond Fund....................... 4,270 2008
Fund for Income.................................... 585 2001
Fund for Income.................................... 5,491 2002
Fund for Income.................................... 864 2003
Fund for Income.................................... 62 2004
Fund for Income.................................... 605 2007
Fund for Income.................................... 3,017 2008
New York Tax-Free Bond Fund........................ 2 2006
New York Tax-Free Bond Fund........................ 16 2007
New York Tax-Free Bond Fund........................ 31 2008
Ohio Municipal Bond Fund........................... 497 2007
Ohio Municipal Bond Fund........................... 212 2008
Real Estate Investment Fund........................ 497 2006
Real Estate Investment Fund........................ 1,400 2007
Real Estate Investment Fund........................ 360 2008
Small Company Opportunity Fund*.................... 5,362 2006
Nasdaq-100 Index(R) Fund........................... 174 2008
*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, 2000, the following funds have additional capital loss
carryforwards, subject to any applicable limitations on availability, to
offset future capital gains, if any, as the successor of a merger with
the Government Bond Fund and Government Mortgage Fund, respectively
(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
Fund for Income.................................... 698 2001
Fund for Income.................................... 109 2004
Fund for Income.................................... 2,523 2006
Fund for Income.................................... 2,278 2007
Continued
194
<PAGE>
Notes to Financial Statements--continued
The Victory Portfolios October 31, 2000
9. Subsequent Events:
Distributions of short-term and long-term capital gains were paid on
November 17, 2000 to shareholders of record on November 16, 2000, as
follows:
<TABLE>
<CAPTION>
Short-Term Long-Term
Capital Gain Capital Gain Total
(per share) (per share) (per share)
<S> <C> <C> <C>
National Muncipal Bond Fund........................................... $0.1785 $0.0243 $0.2028
Balanced Fund......................................................... -- 0.9466 0.9466
Convertible Securities Fund........................................... 0.7154 0.8097 1.5251
Value Fund............................................................ -- 2.5635 2.5635
Established Value Fund................................................ 0.6421 1.911 2.5531
Diversified Stock Fund................................................ 0.4376 1.9951 2.4327
Stock Index Fund...................................................... 0.0302 0.5126 0.5428
Growth Fund........................................................... -- 1.3393 1.3393
Special Value Fund.................................................... 0.4933 1.941 2.4343
Small Company Opportunity Fund........................................ -- 1.372 1.372
International Growth Fund............................................. -- 1.6794 1.6794
</TABLE>
In November 2000 the American Institute of Certified Public Accountants
(AICPA) issued a revised version of the AICPA Audit and Accounting Guide
for Investment Companies (the Guide). The revised version of the Guide
is effective for financial statements issued for fiscal years beginning
after December 15, 2000. One of the new provisions in the Guide requires
investment companies to amortize premiums and accrete discounts on fixed
income securities. The Fund cuurently does not amortize premiums or
accrete discounts in all cases. Upon adoption, the Fund will be required
to record a cumulative effect adjustment to conform with accounting
principles generally accepted in the United States of America. The
effect of this adjustment will be to either increase or decrease net
investment income with an offsetting decrease or increase on unrealized
appreciation (depreciation) of securities. This adjustment will,
therefore, have no effect on the net assets of the Fund. At this time,
the Fund has not completed its analysis of the impact of this accounting
change.
195
<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 of 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, 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, Established Value Fund, Diversified Stock Fund, Stock Index Fund,
Growth Fund, Special Value Fund, Small Company Opportunity Fund,
International Growth Fund, and Nasdaq-100 Index(R) Fund) (hereafter referred
to as the Funds) at October 31, 2000, 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 accounting principles generally accepted in the
United States of America. 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 auditing standards generally accepted
in the United States of America, 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, 2000, by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion. 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 Established Value Fund and the Small
Company Opportunity Fund's 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 18, 2000
196
<PAGE>
This page is intentionally left blank.
197
<PAGE>
This page is intentionally left blank.
198
<PAGE>
This page is intentionally left blank.
199
<PAGE>
This page is intentionally left blank.
200
<PAGE>
The Victory Funds
127 Public Square
OH-01-27-1612
Cleveland, Ohio 44114
PRSRT STD
U.S. POSTAGE
PAID
Cleveland, OH
Permit No. 1535
Victory Funds
(LOGO) (R)
Call Victory at:
800-539-FUND (800-539-3863)
Visit our web site at:
www.victoryfunds.com
AR/VP-001 12/00
