UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number | 811-04852 | |||||||
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Victory Portfolios | ||||||||
(Exact name of registrant as specified in charter) | ||||||||
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4900 Tiedeman Road, 4th Floor, Brooklyn, Ohio |
| 44144 | ||||||
(Address of principal executive offices) |
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Citi Fund Services Ohio, Inc., 4400 Easton Commons, Suite 200, Columbus, Ohio 43219 | ||||||||
(Name and address of agent for service) | ||||||||
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Registrant’s telephone number, including area code: | 800-539-3863 |
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Date of fiscal year end: | October 31 |
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Date of reporting period: | October 31, 2018 |
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Item 1. Reports to Stockholders.
October 31, 2018
Annual Report
Victory Diversified Stock Fund
Victory NewBridge Large Cap Growth Fund
Victory Special Value Fund
Victory Strategic Allocation Fund
Victory INCORE Fund for Income
Victory INCORE Investment Grade Convertible Fund
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Victory Funds' shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports from the Victory Funds or from your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on www.VictoryFunds.com, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change; and you need not take any action. You may elect to receive shareholder reports and other communications from the Victory Funds or your financial intermediary electronically by notifying your financial intermediary directly or, if you are a direct investor, by calling 800-539-3863 or by sending an e-mail request to TA.Processing@FISGlobal.com.
You may elect to receive all future reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies of your reports. If you invest directly with the Victory Funds, you can call 800-539-3863 or send an e-mail request to TA.Processing@FISGlobal.com. Your election to receive reports in paper will apply to all funds held with the Victory Funds or your financial intermediary.
www.vcm.com
News, Information And Education 24 Hours A Day, 7 Days A Week
The Victory Funds site gives fund shareholders, prospective shareholders, and investment professionals a convenient way to access fund information, get guidance, and track fund performance anywhere they can access the Internet. The site includes:
• Detailed performance records
• Daily share prices
• The latest fund news
• Investment resources to help you become a better investor
• A section dedicated to investment professionals
Whether you're a potential investor searching for the fund that matches your investment philosophy, a seasoned investor interested in planning tools, or an investment professional, www.vcm.com has what you seek. Visit us anytime. We're always open.
Victory Portfolios
Table of Contents
Financial Statements | |||||||
Victory Diversified Stock Fund | |||||||
Schedule of Portfolio Investments | 23 | ||||||
Statements of Assets and Liabilities | 37 | ||||||
Statements of Operations | 41 | ||||||
Statements of Changes in Net Assets | 43-45 | ||||||
Financial Highlights | 49-54 | ||||||
Victory NewBridge Large Cap Growth Fund | |||||||
Schedule of Portfolio Investments | 26 | ||||||
Statements of Assets and Liabilities | 37 | ||||||
Statements of Operations | 41 | ||||||
Statements of Changes in Net Assets | 43-45 | ||||||
Financial Highlights | 55-59 | ||||||
Victory Special Value Fund | |||||||
Schedule of Portfolio Investments | 28 | ||||||
Statements of Assets and Liabilities | 37 | ||||||
Statements of Operations | 41 | ||||||
Statements of Changes in Net Assets | 43-45 | ||||||
Financial Highlights | 60-64 | ||||||
Victory Strategic Allocation Fund | |||||||
Schedule of Portfolio Investments | 31 | ||||||
Statements of Assets and Liabilities | 39 | ||||||
Statements of Operations | 42 | ||||||
Statements of Changes in Net Assets | 46-48 | ||||||
Financial Highlights | 65-68 | ||||||
Victory INCORE Fund for Income | |||||||
Schedule of Portfolio Investments | 32 | ||||||
Statements of Assets and Liabilities | 39 | ||||||
Statements of Operations | 42 | ||||||
Statements of Changes in Net Assets | 46-48 | ||||||
Financial Highlights | 69-74 | ||||||
Victory INCORE Investment Grade Convertible Fund | |||||||
Schedule of Portfolio Investments | 34 | ||||||
Statements of Assets and Liabilities | 39 | ||||||
Statements of Operations | 42 | ||||||
Statements of Changes in Net Assets | 46-48 | ||||||
Financial Highlights | 75-76 | ||||||
Notes to Financial Statements | 77 | ||||||
Report of Independent Registered Public Accounting Firm | 91 | ||||||
Supplemental Information | 92 | ||||||
Trustee and Officer Information | 92 | ||||||
Proxy Voting and Form N-Q Information | 95 | ||||||
Expense Examples | 95 | ||||||
Additional Federal Income Tax Information | 97 | ||||||
Privacy Policy (inside back cover) |
1
The Funds are distributed by Victory Capital Advisers, Inc. Victory Capital Management Inc. is the investment adviser to the Funds and receives fees from the Funds for performing services for the Funds.
This report is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus of the Victory Funds.
For additional information about any Victory Fund, including fees, expenses, and risks, view our prospectus online at vcm.com or call 800-539-3863. Read it carefully before you invest or send money.
The information in this annual report is based on data obtained from recognized services and sources and is believed to be reliable. Any opinions, projections, or recommendations in this report are subject to change without notice and are not intended as individual investment advice. Past investment performance of the Funds, markets or securities mentioned herein should not be considered to be indicative of future results.
• NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE
Call Victory at:
800-539-FUND (800-539-3863)
Visit our website at:
www.vcm.com
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Victory Funds Letter to Shareholders
Dear Shareholder,
Has the worm turned? That's the question that many investors may be asking. The most recent annual reporting period (for the year ended October 31, 2018) seemingly began as a continuation of the prevailing trend, rallying into year-end 2017 in what has been hailed as the longest equity bull market in history.
But in early February, the era of low volatility ended abruptly. Investors were once again re-acquainted with market turmoil as the major market indices plummeted and the CBOE Volatility Index (VIX), often referred to as the market's "fear gauge," spiked. Although this had unusual ramifications for a variety of volatility-linked investment products, the overall market upheaval was fleeting. By spring, equity markets were headed higher once again, and this upward trend continued into the fall. However, a mix of trade turmoil, rising interest rates, and increasing concerns about global growth all conspired to spook investors. As we approached the end of the Funds' annual reporting period, volatility once again spiked in October.
Despite the periodic bouts of elevated volatility, the S&P 500® Index still registered a gain of 7.35 percent for the 12 months ended October 31, 2018. Looking back, the domestic markets were merely mirroring the economy, which grew at the robust pace of 4.2 and 3.5 percent in the second and third quarters of 2018, respectively, according to the U.S. Bureau of Economic Analysis. Job growth also continued unabated throughout the past year, and even wage growth made signs of a comeback.
In response, the Federal Reserve continued its trajectory of monetary tightening, both in the form of ending its bond buying program and gradually raising short-term interest rates. It is no surprise, then, that yields on 10-year U.S. Treasuries increased over the past year and ended the reporting period near 3.2 percent, the highest level seen in quite some time.
Thus, investors have been left with the conundrum: do robust economic metrics signal more good times ahead, or does the Federal Reserve's monetary tightening pose a threat? Plus, a significant shift in U.S. trade policy has unknown consequences, and the markets loath uncertainty.
It is important to remember, however, that these cross-currents often manifest themselves in pricing dislocations. We believe this creates an environment ripe for potential alpha generation. We are confident that our Victory Capital independent investment franchises, and the Funds they manage, will be able to differentiate themselves.
On the following pages, you will find information relating to your Victory Funds investment. If you have any questions, we encourage you to contact your financial advisor. Or, if you invest with us directly, you may call (800) 539-3863, or visit our website at www.vcm.com.
4
My colleagues and I sincerely appreciate the confidence you have placed in the Victory Funds, and we value the opportunity to help meet your investment goals.
Christopher K. Dyer, CFA
President
Victory Funds
5
Victory Equity Funds (Unaudited)
Victory Diversified Stock Fund
Portfolio Holdings
As a Percentage of Total Investments
Commentary
The Victory Diversified Stock Fund (the "Fund") seeks to provide long-term growth of capital. The Fund returned -0.20% (Class A Shares at net asset value), while the S&P 500® Index benchmark (the "Index") returned 7.35% for the year ended October 31, 2018. Within the Fund, Consumer Staples and Health Care sectors delivered the strongest absolute returns, while Materials and Energy sectors were the weakest. The Fund's sector allocation was a headwind to relative performance as it was underweight in the top performing sectors in the Index (Consumer Discretionary, Technology, Health Care, Communications Services), while the Fund's exposure to higher earnings yield was also a material detractor.
Consumer Staples was the Fund's top performing sector on both an absolute and relative basis, with the Fund's holdings generating a mid-teens total return on the back of strong stock selection. The Fund's top performer was Costco Wholesale, a position entered after the stock sold off on the news that Amazon was acquiring Whole Foods. The market's negative reaction to the acquisition proved overblown, assigning little credit for the company's extremely loyal membership base, strong value proposition, ongoing improvements in its e-commerce platform, strong traffic trends and accelerating/best-in-class comparable sales.
The Technology and Consumer Discretionary sectors both generated single-digit total returns for the Fund but were the Fund's worst performing sectors on a relative basis. The headwind the Fund experienced from a value tilt was most acute in these sectors, while the Fund also experienced some challenges from industry positioning and stock selection. Within Technology, the Fund's overweight to semi-capital equipment and underweight to software and services explained a great deal of its underperformance. Within Consumer Discretionary, the Fund's underperformance was attributable to overexposure to homebuilders, which were pressured by rising rates, and underweight to Amazon.
The Fund maintains material overweight allocations to the Industrial and Finance sectors, and a more modest overweight allocation to the Energy sector. Within Industrials, the Fund's exposure is focused on trucking, railroads, construction machinery and building products. In Finance, we continue to like banks and capital markets, and recently put on exposure to consumer finance. In Energy, the Fund's exposure is to exploration and production firms as well as refiners and the large integrated oil and gas players. The Fund has current underweight allocations to the Utilities, Real Estate, Consumer Staples, Technology, Materials and Health Care sectors. Overall, the Fund currently has positive exposure to growth, earnings yield, and highly profitable companies with a smaller-cap bias.
The Fund continues to focus on companies that we believe have superior earnings growth, return on invested capital, and positive earnings/price momentum combined with a reasonable valuation over a wide spectrum of market capitalizations. We are confident that this combination of characteristics positions the Fund for strong competitive performance.
6
Victory Equity Funds (Unaudited)
Victory Diversified Stock Fund (continued)
Average Annual Total Return
Year Ended October 31, 2018
Class A | Class C | Class I | Class R | Class R6 | Class Y | ||||||||||||||||||||||||||||||||||
INCEPTION DATE | 10/28/89 | 3/1/02 | 8/31/07 | 3/26/99 | 3/3/14 | 1/28/13 | |||||||||||||||||||||||||||||||||
Net Asset Value | Maximum Offering Price | Net Asset Value | Contingent Deferred Charges | Net Asset Value | Net Asset Value | Net Asset Value | Net Asset Value | S&P 500 Index(1) | |||||||||||||||||||||||||||||||
One Year | –0.20 | % | –5.92 | % | –1.02 | % | –1.82 | % | 0.05 | % | –0.47 | % | 0.10 | % | 0.01 | % | 7.35 | % | |||||||||||||||||||||
Three Year | 6.07 | % | 4.00 | % | 5.20 | % | 5.20 | % | 6.36 | % | 5.77 | % | 6.40 | % | 6.30 | % | 11.52 | % | |||||||||||||||||||||
Five Year | 7.01 | % | 5.75 | % | 6.13 | % | 6.13 | % | 7.29 | % | 6.70 | % | N/A | 7.24 | % | 11.34 | % | ||||||||||||||||||||||
Ten Year | 9.79 | % | 9.15 | % | 8.90 | % | 8.90 | % | 10.10 | % | 9.50 | % | N/A | N/A | 13.24 | % | |||||||||||||||||||||||
Since Inception | 9.76 | % | 9.54 | % | 5.55 | % | 5.55 | % | 5.71 | % | 5.96 | % | 7.01 | % | 9.74 | % | N/A | ||||||||||||||||||||||
Expense Ratios | |||||||||||||||||||||||||||||||||||||||
Gross | 1.05% | 1.87% | 0.80% | 1.33% | 1.29% | 0.94% | |||||||||||||||||||||||||||||||||
With Applicable Waivers | 1.05% | 1.87% | 0.80% | 1.33% | 0.78% | 0.86% | |||||||||||||||||||||||||||||||||
Past performance is not indicative of future results. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month's end, please visit www.vcm.com. |
The above expense ratios are from the Fund's prospectus dated March 1, 2018. Additional information pertaining to the Fund's expense ratios as of October 31, 2018 can be found in the financial highlights.
The maximum offering price (MOP) reflects a maximum sales charge of 5.75% for Class A Shares. Class C Shares are not subject to an initial sales charge, but are subject to a deferred sales charge of 1.00% on shares redeemed within one year of purchase. NAV does not reflect sales charges.
The total return figures set forth above include all waivers of fees for various periods since inception. Without such fee waivers, the total returns would
have been lower. Some fee waivers are voluntary and may be modified or terminated at any time.
Victory Diversified Stock Fund — Growth of $10,000
(1)The S&P 500 Index is an unmanaged index comprised of 500 domestically traded common stocks, is weighted according to the market value of each common stock in the index, and includes reinvestment of dividends. This index does not include the effect of sales charges and is not representative of the Fund. It is not possible to invest directly in an index.
The graph reflects investment of growth of a hypothetical $10,000 investment in Class A Shares of the Fund. The performance of other classes of the Fund's shares will be greater than or less than the line shown based on the differences in loads and fees paid by shareholders investing in the different classes. Past performance is no guarantee of future results.
The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
7
Victory Equity Funds (Unaudited)
Victory NewBridge Large Cap Growth Fund
Portfolio Holdings
As a Percentage of Total Investments
Investment Considerations
Equity securities (stocks) are more volatile and carry more risk than other forms of investments, including investments in high grade fixed-income securities. The net asset value per share of the Victory NewBridge Large Cap Growth Fund (the "Fund") will fluctuate as the value of the securities in the portfolio changes. The securities of foreign companies acquired by the Fund tend to experience more volatility than their domestic counterparts in part because of higher political and economic risks, lack of reliable information, fluctuations in currency exchange rates and the risks that a foreign government may take over assets, restrict the ability to exchange currency or restrict the delivery of securities.
Commentary
The U.S. equity market extended 2017's better than expected gains with the Russell 1000 Growth Index (the "Index") and S&P 500® Index ("S&P 500®") increasing for the fiscal year ended October 31, 2018.
Despite a brutal October 2018, equities extended gains for another year with the Index increasing 10.71%, following last year's impressive growth of 29.71% and 23.63% for the Index and S&P 500®, respectively.
Performance for November and December 2017 continued the strong positive trend that equities exhibited throughout most of last year and was followed by one of the best Januarys on record before experiencing a significant spike in volatility in early February. The abrupt sell-off was largely driven by a higher than expected wage report combined with a sudden unwinding of a crowded short volatility trade. The episode proved to be short-lived as the market quickly recovered and marked new highs in March before encountering another bout of volatility that same month. This second wave of market volatility stemmed largely from Facebook's Cambridge Analytica scandal in late March and kept the market down until the second week of April. Yet again, equities eventually broke to the upside as changes to the U.S. tax code amplified already impressive revenue and earnings growth and investors concluded that Facebook's issues would be quickly solved. The third wave of market volatility came with Facebook's earnings report on July 25 when investors realized the problem was deeper than initially thought and the remedy management outlined would lead to lower profitability and slower growth. Facebook lost $120 billion in market capitalization that day and cast a pall on other high growth stocks which had enjoyed strong momentum for an extended period of time. As investors digested this news and re-evaluated valuations broadly, trade tensions between the U.S. and China escalated and culminated in the most volatile October since 2012.
The Fund, which had outperformed through September underperformed on a relative basis for the month of October as the stocks that sold off the most were the kind of growth stocks in which the Fund is typically invested. During that period, the disconnect between fundamentals and performance led to indiscriminate declines in solid companies with strong results and growth prospects. It also created an opportunity to add to positions in the Fund.
8
Victory Equity Funds (Unaudited)
Victory NewBridge Large Cap Growth Fund (continued)
Over the course of fiscal 2018, Consumer Discretionary was the Fund's best performing sector and provided the biggest contribution to performance with Amazon being one of the best performers as well as the biggest holding in the Fund. Other notable contributors were Ulta Beauty and newer holdings such as Burlington Stores and TAL Education, which was short-lived in the Fund but contributed meaningfully.
Health Care was the second best performing sector but did not contribute as much to overall performance because it had less than half the weight as technology, the Fund's largest sector exposure. Long-standing holdings such as Edwards Lifesciences and Zoetis were complemented by newer companies such as Abiomed, Illumina and UnitedHealth Group.
Technology, the Fund's largest sector, benefitted from strong gains in Adobe, ServiceNow and Red Hat. Many of the Fund's tech holdings experienced significant sell-offs during the month of October but the Fund retained, and even increased, positions as the fundamental outlooks remained intact.
The worst performing sectors were Materials and Consumer Staples as both sectors nominally detracting from the Fund's overall performance with Sherwin Williams and Monster Beverage being the sole holding in each sector, respectively. For the fiscal year ended October 31, 2018, the Fund returned 9.41% (Class A shares at net asset value) while the Index returned 10.71%. The Fund seeks to provide long-term capital appreciation.
Outlook
Much as we thought growth stocks would have a better year in 2017 as compared to 2016, the results were well ahead of what anyone hoped for due to globally synchronized economic growth. Global GDP far exceeded the most optimistic forecasts and equities followed in tandem. The valuation compression many growth stocks suffered relative to value stocks in 2016 set the stage for a particularly good year for growth stocks in 2017. As 2017 came to a close, the changes to the U.S. tax code continued to fuel the rise in equities in 2018. A less synchronized economic backdrop in which the U.S. economy fared quite a bit better than the rest of the world led to a commensurate delinking between U.S. and non-U.S. equities. That said, equities did encounter several episodes of volatility for the reasons stated above and investors will likely continue to focus on the dual concerns of inflation and trade policy. While both risks are noteworthy, we believe they are contained and manageable.
A review of inflation's primary components (energy, labor and capital) indicate that innovation and competition are powerful offsets to inflation. Energy prices have declined from highs set in early 2018 and despite unemployment at levels last seen immediately after World War II and Vietnam, labor costs are not rising at a rapid pace. The rising cost of capital, or an overshoot by the Fed, is what many investors fear with respect to inflation. Not far behind is the unknown impact from trade tensions and tariffs, which inherently raises the cost of goods and therefore is also inflationary.
In the interim, pro-growth policy changes, such as tax reform/cuts and deregulation, have increased investor and business confidence and contributed to positive market action earlier in the year. We remain optimistic that solid economic conditions will sustain strong corporate results, a supportive equity market and a constructive backdrop for the Fund. While a positive economic backdrop is subject to change, we believe that many of last year's and this quarter's winners will continue to report financial results that meet or exceed expectations due to company specific fundamentals. The Fund's holdings generally have strong balance sheets that we feel make them less vulnerable to rising interest rates. We also believe that the Fund's holdings have capable management teams that innovate, operate and allocate resources better than their peers.
9
Victory Equity Funds (Unaudited)
Victory NewBridge Large Cap Growth Fund (continued)
Average Annual Return
Year Ended October 31, 2018
Class A | Class C | Class I | Class R | Class Y | |||||||||||||||||||||||||||||||
INCEPTION DATE | 12/31/03 | 12/31/03 | 3/1/11 | 12/31/03 | 1/28/13 | ||||||||||||||||||||||||||||||
Net Asset Value | Maximum Offering Price | Net Asset Value | Contingent Deferred Charges | Net Asset Value | Net Asset Value | Net Asset Value | Russell 1000® Growth Index(1) | ||||||||||||||||||||||||||||
One Year | 9.41 | % | 3.15 | % | 8.47 | % | 7.81 | % | 9.74 | % | 9.06 | % | 9.75 | % | 10.71 | % | |||||||||||||||||||
Three Year | 8.64 | % | 6.52 | % | 7.80 | % | 7.80 | % | 9.08 | % | 8.29 | % | 8.98 | % | 13.67 | % | |||||||||||||||||||
Five Year | 9.46 | % | 8.16 | % | 8.58 | % | 8.58 | % | 9.85 | % | 9.08 | % | 9.77 | % | 13.43 | % | |||||||||||||||||||
Ten Year | 12.06 | % | 11.39 | % | 11.15 | % | 11.15 | % | N/A | 11.65 | % | N/A | 15.45 | % | |||||||||||||||||||||
Since Inception | 7.94 | % | 7.51 | % | 7.08 | % | 7.08 | % | 9.89 | % | 7.59 | % | 11.62 | % | N/A | ||||||||||||||||||||
Expense Ratios | |||||||||||||||||||||||||||||||||||
Gross | 1.40% | 2.27% | 1.01% | 2.83% | 1.42% | ||||||||||||||||||||||||||||||
With Applicable Waivers | 1.36% | 2.10% | 0.95% | 1.65% | 1.02% |
Past performance is not indicative of future results. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month's end, please visit www.vcm.com.
The above expense ratios are from the Fund's prospectus dated March 1, 2018, as supplemented. Additional information pertaining to the Fund's expense ratios as of October 31, 2018 can be found in the financial highlights.
The maximum offering price (MOP) reflects a maximum sales charge of 5.75% for Class A Shares. Class C Shares are not subject to an initial sales charge, but are subject to a deferred sales charge of 1.00% on shares redeemed within one year of purchase. NAV does not reflect sales charges.
The total return figures set forth above include all waivers of fees for various periods since inception. Without such fee waivers, the total returns would have been lower. Some fee waivers are voluntary and may be modified or terminated at any time.
Victory NewBridge Large Cap Growth Fund — Growth of $10,000
(1)The Russell 1000 Growth Index is an unmanaged index that measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. This index does not include the effect of sales charges and is not representative of the Fund. It is not possible to invest directly in an index.
The graph reflects investment growth of a hypothetical $10,000 investment in Class A Shares of the Fund. The performance of other classes of the Fund's shares will be greater than or less than the line shown based on the differences in loads and fees paid by shareholders investing in the different classes. Past performance is no guarantee of future results.
The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
10
Victory Equity Funds (Unaudited)
Victory Special Value Fund
Portfolio Holdings
As a Percentage of Total Investments
Commentary
The Victory Special Value Fund (the "Fund") seeks to provide long-term growth of capital and dividend income. The Fund returned -0.42% (Class A Shares at net asset value), while the S&P 500® Index benchmark (the "Index") returned 7.35% for the year ended October 31, 2018. Within the Fund, Consumer Staples and Health Care delivered the strongest absolute returns, while Materials and Energy were the weakest. The Fund's sector allocation was a headwind to relative performance as we were underweight the top performing sectors in the Index (Consumer Discretionary, Technology, Health Care, Communications Services), while our exposure to higher earnings yield was also a material detractor.
Consumer Staples was the Fund's top performing sector on both an absolute and relative basis, with the Fund's holdings generating a mid-teens total return on the back of strong stock selection. The Fund's top performer was Costco Wholesale, a position entered after the stock sold off on the news that Amazon was acquiring Whole Foods. The market's negative reaction to the acquisition proved overblown, assigning little credit for the company's extremely loyal membership base, strong value proposition, ongoing improvements in its e-commerce platform, strong traffic trends and accelerating/best-in-class comparable sales.
The Technology and Consumer Discretionary sectors both generated single-digit total returns for the Fund but were the Fund's worst performing sectors on a relative basis. The headwind the Fund experienced from a value tilt was most acute in these sectors, while the Fund also experienced some challenges from industry positioning and stock selection. Within Technology, the Fund's overweight to semi-capital equipment and underweight to software and services explained a great deal of its underperformance. Within Consumer Discretionary, the Fund's underperformance was attributable to overexposure to homebuilders, which were pressured by rising rates, and underweight to Amazon.
The Fund maintains material overweight allocations to the Industrial and Finance sectors, and a more modest overweight allocation to the Energy sector. Within Industrials, the Fund's exposure is focused on trucking, railroads, construction machinery and building products. In Finance, we continue to like banks and capital markets, and recently put on exposure to consumer finance. In Energy, the Fund's exposure is to exploration and production firms as well as refiners and the large integrated oil and gas players. The Fund has current underweight allocations to the Utilities, Real Estate, Consumer Staples, Technology, Materials and Health Care sectors. Overall, the Fund currently has positive exposure to growth, earnings yield, and highly profitable companies with a smaller-cap bias.
The Fund continues to focus on companies that we believe have superior earnings growth, return on invested capital, and positive earnings/price momentum combined with a reasonable valuation over a wide spectrum of market capitalizations. We are confident that this combination of characteristics positions the Fund for strong competitive performance.
11
Victory Equity Funds (Unaudited)
Victory Special Value Fund (continued)
Average Annual Return
Year Ended October 31, 2018
Class A | Class C | Class I | Class R | Class Y | |||||||||||||||||||||||||||||||
INCEPTION DATE | 12/3/93 | 3/1/03 | 8/31/07 | 12/21/99 | 1/28/13 | ||||||||||||||||||||||||||||||
Net Asset Value | Maximum Offering Price | Net Asset Value | Contingent Deferred Charges | Net Asset Value | Net Asset Value | Net Asset Value | S&P 500 Index(1) | ||||||||||||||||||||||||||||
One Year | –0.42 | % | –6.16 | % | –1.35 | % | –2.34 | % | –0.28 | % | –0.71 | % | –0.21 | % | 7.35 | % | |||||||||||||||||||
Three Year | 5.77 | % | 3.70 | % | 4.78 | % | 4.78 | % | 5.87 | % | 5.46 | % | 6.01 | % | 11.52 | % | |||||||||||||||||||
Five Year | 5.87 | % | 4.62 | % | 4.91 | % | 4.91 | % | 6.04 | % | 5.56 | % | 6.14 | % | 11.34 | % | |||||||||||||||||||
Ten Year | 9.52 | % | 8.87 | % | 8.51 | % | 8.51 | % | 9.78 | % | 9.17 | % | N/A | 13.24 | % | ||||||||||||||||||||
Since Inception | 8.49 | % | 8.23 | % | 7.71 | % | 7.71 | % | 3.93 | % | 7.83 | % | 8.21 | % | N/A | ||||||||||||||||||||
Expense Ratios | |||||||||||||||||||||||||||||||||||
Gross | 1.27% | 2.21% | 1.25% | 1.57% | 2.07% | ||||||||||||||||||||||||||||||
With Applicable Waivers | 1.27% | 2.20% | 1.15% | 1.57% | 1.10% |
Past performance is not indicative of future results. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month's end, please visit www.vcm.com.
The above expense ratios are from the Fund's prospectus dated March 1, 2018. Additional information pertaining to the Fund's expense ratios as of October 31, 2018 can be found in the financial highlights.
The maximum offering price (MOP) reflects a maximum sales charge of 5.75% for Class A Shares. Class C Shares are not subject to an initial sales charge, but are subject to a deferred sales charge of 1.00% on shares redeemed within one year of purchase. NAV does not reflect sales charges.
The total return figures set forth above include all waivers of fees for various periods since inception. Without such fee waivers, the total returns would have been lower. Some fee waivers are voluntary and may be modified or terminated at any time.
Victory Special Value Fund — Growth of $10,000
(1)The S&P 500 Index, an unmanaged index comprised of 500 domestically traded common stocks, is weighted according to the market value of each common stock in the index, and includes reinvestment of dividends. This index does not include the effect of sales charges and is not representative of the Fund. It is not possible to invest directly in an index.
The graph reflects investment growth of a hypothetical $10,000 investment in Class A Shares of the Fund. The performance of other classes of the Fund's shares will be greater than or less than the line shown based on the differences in loads and fees paid by shareholders investing in the different classes.
Past performance is no guarantee of future results.
The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
12
Victory Hybrid Funds (Unaudited)
Victory Strategic Allocation Fund
Portfolio Holdings
As a Percentage of Total Investments
Investment Considerations
The Victory Strategic Allocation Fund's (the "Fund") investments are subject to the following principal risks, either directly or indirectly through investment in the Underlying Funds:
• The Adviser's asset selection methodology may produce incorrect judgments about the value a particular investment or asset class and may not produce the desired results
• The value of the equity securities may decline. A company's earnings may not increase as expected.
• An Underlying Fund in which the Fund invests may not achieve its investment objective. Underlying Funds are subject to investment advisory and other expenses, which will be indirectly paid by the Fund.
• The Adviser is subject to conflicts of interest in allocating the Fund's assets among affiliated Underlying Funds (the Victory Funds), unaffiliated Underlying Funds, or a combination of both. The Adviser may have an incentive to allocate the Fund's assets to those Victory Funds for which the net advisory fees payable to the Adviser are higher than the fees payable by other Victory Funds or unaffiliated Underlying Funds.
• The Fund may be subject to the risk that its assets are invested in a particular sector or industry in the economy and as a result, the value of the Fund may be adversely impacted by events or developments affecting such sector or industry.
• The earnings and prospects of small- and mid-sized companies are more volatile than larger companies and may experience higher failure rates than larger companies.
• Interest rates may rise or the rate of inflation may increase, impacting the value of an Underlying Fund's investments in fixed income securities. A debt issuer's credit quality may be downgraded or an issuer may default. Interest rates may fluctuate due to changes in governmental fiscal policy initiatives and resulting market reaction to those initiatives.
• Over recent years, the capacity of dealers to make markets in fixed income securities has been outpaced by the growth in the size of the fixed income markets. In a rising interest rate environment or when investor redemptions from fixed income funds are higher than normal, liquidity risk may be magnified due to the increased supply in the market that would result from selling activity.
• A U.S. government agency or instrumentality may default on its obligation and the U.S. government may not provide support.
• Foreign securities could be affected by factors not present in the U.S., including expropriation, confiscation of property, and difficulties in enforcing contracts. Compared to U.S. companies, there generally is less publicly available information about foreign
13
Victory Hybrid Funds (Unaudited)
Victory Strategic Allocation Fund (continued)
companies and there may be less governmental regulation and supervision of foreign companies. Foreign securities generally experience more volatility than their domestic counterparts.
• The risks related to investing in foreign securities are generally greater with respect to securities of companies associated with emerging markets. Emerging market companies may experience more volatility than those in developed countries due to greater risks of illiquidity, increased price volatility, smaller market capitalizations, less government regulation, less extensive and less frequent accounting, financial and other reporting requirements, risk of loss resulting from problems in share registration and custody, substantial economic and political disruptions and the nationalization of foreign deposits or assets.
• The use of derivative instruments, including futures, options and credit default swap contracts, may not perfectly replicate direct investment in the security. Derivatives also entail exposure to counterparty credit risk, the risk of mispricing or improper valuation, and the risk that a small investments or small price movements can result in substantial gains or losses.
• Commodity-related risks include production risks caused by unfavorable weather, animal and plant disease, geologic and environmental factors. Commodity-related risks also include unfavorable changes in government regulation such as tariffs, embargoes or burdensome production rules and restrictions.
You may lose money by investing in the Fund. The likelihood of loss may be greater if you invest for a shorter period of time.
Fund Commentary
The Fund seeks to provide income and long-term growth of capital. For the fiscal year ended October 31, 2018, the Fund had a total return of -2.56% (Class A Shares at net asset value) underperforming its benchmark, the Custom Index (60% MSCI All Country World Index/40% Bloomberg Barclays U.S. Aggregate Bond Index) (the "Index"), which had a total return of -0.98% over the same period.
Over the fiscal year, the global capital markets were generally weak with the strong exception of the US Equity Markets, as measured by the S&P 500® Index. The U.S. Equity Markets were exceptionally strong in the area of growth-oriented stocks that have exhibited stretched valuations versus historical norms. Beyond global equity markets, global asset prices of fixed income and commodity instruments also declined over the year. Much of the decline in the global indices outside of the U.S. Equity Market can be attributed to concerns over trade wars, economic growth concerns, geo-political risk, and normalization of interest rate policy by global central banks. The U.S. Equity Markets have received support from global investor sentiment as the "safest market" given the previously noted global concerns.
The Fund was positioned throughout the year to provide more diversification by more equally weighting the U.S. and foreign equity markets when compared to the MSCI All Country World Index, which detracted from Fund performance versus the Index. The valuation of equity markets abroad appear more compelling and are coincident with an earlier stage of their respective economic growth cycle than that of the U.S. Equity Markets. This detracted from
14
Victory Hybrid Funds (Unaudited)
Victory Strategic Allocation Fund (continued)
the Fund's return as those exposures did not keep pace with the strong U.S. equity markets. The Fund continued to be positioned to exhibit less interest rate risk associated with the U.S. Treasury market versus the Index by partially substituting an equity income-oriented strategy. This contributed significantly to the Fund's performance almost offsetting approximately half of the underperformance from an overweight to Non-U.S. Equity Markets.
Despite all the global risks, the economic backdrop remains largely constructive for global equities, in our view. In Japan, corporate profits are at record highs and machinery orders have strong upside momentum. In Europe, though manufacturing came under pressure mostly due to caution surrounding tariffs, services remained supportive, and a weaker euro bodes well for exports. In the U.S., GDP growth remains robust. This is not to say risks do not remain — interest rates are rising, the Fed is tightening, trade wars may escalate, and emerging markets may continue to weigh on growth — but rather that the balance could appear to be tilted to the upside.
Although volatility has increased during 2018, we remain bullish on global equity market valuations and long-term growth prospects. We continue to focus our investments on attractive relative valuations and powerful diversification benefits that exist globally.
15
Victory Hybrid Funds (Unaudited)
Victory Strategic Allocation Fund (continued)
Average Annual Return
Year Ended October 31, 2018
Class A | Class C | Class I | Class R | ||||||||||||||||||||||||||||||||||||
INCEPTION DATE | 12/10/93 | 3/1/03 | 8/31/07 | 12/15/99 | |||||||||||||||||||||||||||||||||||
Net Asset Value | Maximum Offering Price | Net Asset Value | Contingent Deferred Charges | Net Asset Value | Net Asset Value | MSCI All Country World Index(1) | Barclays U.S. Aggregate Bond Index(2) | 60% MSCI All Country World Index/40% Barclays U.S. Aggregate Bond Index | |||||||||||||||||||||||||||||||
One Year | –2.56 | % | –8.16 | % | –3.26 | % | –4.20 | % | –2.29 | % | –2.77 | % | –0.52 | % | –2.05 | % | –0.98 | % | |||||||||||||||||||||
Three Year | 3.18 | % | 1.17 | % | 2.44 | % | 2.44 | % | 3.44 | % | 2.90 | % | 7.74 | % | 1.04 | % | 5.13 | % | |||||||||||||||||||||
Five Year | 4.61 | % | 3.38 | % | 3.86 | % | 3.86 | % | 4.87 | % | 4.32 | % | 6.15 | % | 1.83 | % | 4.54 | % | |||||||||||||||||||||
Ten Year | 7.44 | % | 6.80 | % | 6.65 | % | 6.65 | % | 7.81 | % | 7.11 | % | 9.75 | % | 3.94 | % | 7.67 | % | |||||||||||||||||||||
Since Inception | 6.56 | % | 6.31 | % | 5.47 | % | 5.47 | % | 4.76 | % | 4.19 | % | N/A | N/A | N/A | ||||||||||||||||||||||||
Expense Ratios | |||||||||||||||||||||||||||||||||||||||
Gross | 1.63% | 2.42% | 1.45% | 2.64% | |||||||||||||||||||||||||||||||||||
With Applicable Waivers | 1.24% | 1.99% | 0.99% | 1.49% |
Past performance is not indicative of future results. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month's end, please visit www.vcm.com.
The above expense ratios are from the Fund's prospectus dated March 1, 2018. Additional information pertaining to the Fund's expense ratios as of October 31, 2018 can be found in the financial highlights.
The maximum offering price (MOP) reflects a maximum sales charge of 5.75% for Class A Shares. Class C Shares are not subject to an initial sales charge, but are subject to a deferred sales charge of 1.00% on shares redeemed within one year of purchase. NAV does not reflect sales charges.
The total return figures set forth above include all waivers of fees for various periods since inception. Without such fee waivers, the total returns would have been lower. Some fee waivers are voluntary and may be modified or terminated at any time.
Victory Strategic Allocation Fund — Growth of $10,000
(1)The MSCI All Country World Index is a market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the world. It is not possible to invest directly in an index.
(2)The Barclays U.S. Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government-related and corporate securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS and CMBS (agency and nonagency). It is not possible to invest directly in an index.
The graph reflects investment growth of a hypothetical $10,000 investment in Class A Shares of the Fund. The performance of other classes of the Fund's shares will be greater than or less than the line shown based on the differences in loads and fees paid by shareholders investing in the different classes. Past performance is no guarantee of future results.
The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
16
Victory Taxable Fixed Income Fund (Unaudited)
Victory INCORE Fund for Income
Portfolio Holdings
As a Percentage of Total Investments
Investment Considerations
The return of principal in bond funds is not guaranteed. The principal value of a bond falls when interest rates rise and rises when interest rates fall. During periods of rising interest rates, the value of a bond investment is at greater risk than during periods of stable or falling rates. Bond funds have the same interest rate, inflation, reinvestment, credit and prepayment risks associated with the underlying bonds in the portfolio.
Commentary
For the fiscal year ended October 31, 2018, the Victory INCORE Fund for Income (the "Fund") (Class A Shares at net asset value) had a total return of -0.91%, underperforming the Fund's benchmark index, the Bloomberg Barclays U.S. Capital 1-5 Year U.S. Government Bond Index, which had a total return of -0.38%.
Equity markets were up on the year across the three major indices. Unlike the equity markets, most bond prices fell as yields rose. The yield curve flattened. Prices move opposite yields.
During the year, only a small sliver of the bond universe outperformed duration-neutral U.S. Treasury bonds — commercial mortgage backed securities and asset-backed securities, (2% and 1/2% of the Bloomberg Barclay's Aggregate Index, respectively). The underperformance was led by corporate bonds at (-0.49%). The mortgage market lagged similar average life U.S. Treasury bonds by (-0.23%). The U.S. Treasury market had a total return of (-1.97%). Within the mortgage market, the Federal National Mortgage Association led the Federal Home Loan Mortgage Corporation, which in turn led the Government National Mortgage Association ("GNMA"). GNMA has endured headline risk, however, GNMA has recently begun to turn the corner.
The Fund's 1% allocation to GNMA multi-family and 4% allocation to GNMA structure led performance. The Fund' 5% allocation to U.S. Treasury bonds was nearly as strong as multi-family and structure, while GNMA pools were also positive contributors to performance. Most fixed income sectors underperformed duration-neutral U.S. Treasury bonds and some by quite a large margin. The Fund's performance relative to the mortgage-backed securities market (-1.52%) and the GNMA market (-1.58%), was above average given the challenges in the market for the past 12-18 months. We may also expect a bit more of a tailwind, should the Fed reduce the pace of rate increases, given market turmoil and globally slowing economies.
The Fund's objective is to deliver a high level of current income consistent with the preservation of shareholder's capital. We seek to achieve this by investing in securities backed by the 100% full faith and credit of the U.S. government. Being a bond fund in a rising rate environment presents challenges, but generally, we believe the Fund will lose less than funds with either longer durations or greater credit exposures. Interest rates have continued to
17
Victory Taxable Fixed Income Fund (Unaudited)
Victory INCORE Fund for Income (continued)
rise, particularly in the short end of the yield curve. Given recent equity market volatility, a distinct lack of strong inflation pressures domestically and against a backdrop of slowing global growth (China and Germany in particular), we believe that it is likely that the Fed will raise rates in December 2018, then pause to see how the economy progresses given the headwinds.
18
Victory Taxable Fixed Income Fund (Unaudited)
Victory INCORE Fund for Income (continued)
Average Annual Return
Year Ended October 31, 2018
Class A | Class C | Class I | Class R | Class R6 | Class Y | ||||||||||||||||||||||||||||||||||
INCEPTION DATE | 3/26/99 | 3/1/02 | 3/1/11 | 9/16/87 | 3/4/15 | 1/28/13 | |||||||||||||||||||||||||||||||||
Net Asset Value | Maximum Offering Price | Net Asset Value | Contingent Deferred Charges | Net Asset Value | Net Asset Value | Net Asset Value | Net Asset Value | Bloomberg Barclays Capital 1-5 Year U.S. Government Bond Index(1) | |||||||||||||||||||||||||||||||
One Year | –0.91 | % | –2.94 | % | –1.69 | % | –2.63 | % | –0.64 | % | –0.79 | % | –0.52 | % | –0.61 | % | –0.38 | % | |||||||||||||||||||||
Three Year | 0.06 | % | –0.60 | % | –0.75 | % | –0.75 | % | 0.30 | % | 0.06 | % | 0.33 | % | 0.25 | % | 0.39 | % | |||||||||||||||||||||
Five Year | 0.75 | % | 0.34 | % | –0.03 | % | –0.03 | % | 1.03 | % | 0.77 | % | N/A | 0.96 | % | 0.69 | % | ||||||||||||||||||||||
Ten Year | 2.51 | % | 2.31 | % | 1.71 | % | 1.71 | % | N/A | 2.51 | % | N/A | N/A | 1.57 | % | ||||||||||||||||||||||||
Since Inception | 3.45 | % | 3.34 | % | 2.13 | % | 2.13 | % | 1.42 | % | 5.13 | % | 0.46 | % | 0.69 | % | N/A | ||||||||||||||||||||||
Expense Ratios | |||||||||||||||||||||||||||||||||||||||
Gross | 0.88% | 1.67% | 0.61% | 0.88% | 0.73% | 0.68% | |||||||||||||||||||||||||||||||||
With Applicable Waivers | 0.88% | 1.67% | 0.61% | 0.88% | 0.63% | 0.68% |
Past performance is not indicative of future results. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month's end, please visit www.vcm.com.
The above expense ratios are from the Fund's prospectus dated March 1, 2018. Additional information pertaining to the Fund's expense ratios as of October 31, 2018 can be found in the financial highlights.
The maximum offering price (MOP) figures reflect a maximum sales charge of 2.00% for Class A Shares. Class C Shares are not subject to an initial sales charge, but are subject to a deferred sales charge of 1.00% on shares redeemed within one year of purchase. NAV does not reflect sales charges.
The total return figures set forth above include all waivers of fees for various periods since inception. Without such fee waivers, the total returns would have been lower. Some fee waivers are voluntary and may be modified or terminated at any time.
Victory INCORE Fund for Income — Growth of $10,000
(1)Bloomberg Barclays Capital 1-5 Year U.S. Government Bond Index is a market-weighted index measuring the performance of Treasury and Agency securities issued by the United States Government with maturities of one to five years. The index does not include the effect of expenses of sales charges and is not representative of the Fund. It is not possible to invest directly in an index.
The graph reflects investment growth of a hypothetical $10,000 investment in Class A Shares of the Fund. The performance of other classes of the Fund's shares will be greater than or less than the line shown based on the differences in loads and fees paid by shareholders investing in the different classes. Past performance is no guarantee of future results.
The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
19
Victory Hybrid Funds (Unaudited)
Victory INCORE Investment Grade Convertible Fund
Portfolio Holdings
As a Percentage of Total Investments
For the fiscal year ended October 31, 2018, the Victory INCORE Investment Grade Convertible Fund (the "Fund") returned 1.87% (Class A Shares at net asset value) compared to the 3.88% return of the ICE BofAML Investment Grade U.S. Convertible 5% Constrained Index (VX5C) (the "Index"). The Fund seeks to provide a high level of current income together with long-term capital appreciation.
Equity and convertible markets produced positive returns, while bonds fell during the fiscal year ended October 31, 2018. Coming off a year when major stock indices returned over 20%, stocks continued to climb in 2018. The building blocks of a bull market — GDP growth, rising earnings, ample liquidity — combined with recent tax cuts, continued to fuel investor confidence early in the year. Bullish sentiment ran high early in 2018. But after a strong start to the year, which included January's 5.72% advance, the largest one-month percentage gain in the S&P 500 since March 2016, stocks reversed course, beginning their first 10% correction in recent memory. The S&P 500 dropped 10.1% from its high on January 26 to its low on February 8, as volatility returned to the market. After an extended period of relative tranquility, the CBOE Volatility Index (VIX) spiked in early February to a closing high of 37, after spending all of 2017 hovering around 11, and never reaching higher than 16 in the year. Experts disagreed on what caused the market sell-off and the spike in volatility, but fears of central bank tightening and rising interest rates likely played a role. Stocks quickly rebounded as investors realized that not much had changed fundamentally. After talk of tariffs and trade wars caused more volatility in March, stocks commenced a steady ascent that generally lasted through September. Prosperity ended in October however, as stocks narrowly missed a second 10% correction in the closing month of the fiscal year, falling 9.3% to its closing low on October 29th. This time, the sell-off was generally caused by concerns over global growth and geopolitical tension, coupled with some unexpectedly weak earnings reports. Even with two nearly 10% corrections, the S&P 500 managed to return 7.35% for the fiscal year as compared to the ICE BofAML Investment Grade Convertible Index (VXA1) return of 4.02% and Index return of 3.88%. Both stocks and convertibles easily outdistanced the negative 2.05% return of the Bloomberg Barclays Aggregate Bond Index.
In terms of the Fund's sector performance, driven by Anthem Inc., Becton Dickinson and Illumina, Health Care was the Fund's best performing sector during the year. Not all was positive in the sector however, as Bristol-Myers Squibb, hampered by uninspiring clinical drug trials, declined significantly in value. The Information Technology sector proved to be the next best performing Fund sector. Within Information Technology, software developer Red Hat became the Fund's top performer during a year that culminated with a takeover agreement by IBM in October. Chipmaker Intel provided a notable performance boost to Information Technology and the Fund as well. Information Technology also contained the worst performing convertible during the year, Lam Research, as the semi-conductor capital
20
Victory Hybrid Funds (Unaudited)
Victory INCORE Investment Grade Convertible Fund (continued)
equipment provider suffered from spending cutbacks by its major clients. The Industrials sector was the Fund's worst performing sector suffering from declines by both Stanley Black & Decker and Dycom Industries convertibles. Barely negative for the year, Consumer Discretionary was the Fund's next worst performing sector. The Utilities, Energy, Real Estate, and Financials sectors provided modestly positive contributions, while the Materials sector was modestly negative.
In managing the Fund, we strive to invest in high-quality convertibles with attractive underlying common stocks. We structure the Fund by spreading out our holdings across the three types of convertibles: 1) equity-sensitive convertibles; 2) total return, middle-of-the-road convertibles; and 3) defensive, fixed-income oriented convertibles. With this structure, we seek to provide a favorable balance between upside potential and downside exposure to equities. As of October 31, 2018, the Fund is overweight compared to its benchmark in the Health Care, Industrials, Materials, and Real Estate sectors. It is underweighted in the Financials, Consumer Discretionary, and Utilities sectors. The Fund is broadly diversified amongst individual issues, economic sectors, credits, and convertible types.
21
Victory Hybrid Funds (Unaudited)
Victory INCORE Investment Grade Convertible Fund (continued)
Average Annual Return
Year Ending October 31, 2018
Class A | Class I | ||||||||||||||||||
INCEPTION DATE | 4/14/88 | 8/31/07 | |||||||||||||||||
Net Asset Value | Maximum Offering Price | Net Asset Value | ICE BofAML Investment Grade U.S. Convertible 5% Constrained Index(1) | ||||||||||||||||
One Year | 1.87 | % | –0.18 | % | 2.16 | % | 3.88 | % | |||||||||||
Three Year | 7.79 | % | 7.05 | % | 8.21 | % | 10.24 | % | |||||||||||
Five Year | 7.64 | % | 7.21 | % | 8.09 | % | 9.77 | % | |||||||||||
Ten Year | 9.96 | % | 9.73 | % | 10.39 | % | 10.78 | % | |||||||||||
Since Inception | 7.54 | % | 7.47 | % | 5.36 | % | N/A | ||||||||||||
Expense Ratios | |||||||||||||||||||
Gross | 1.30% | 0.94% | |||||||||||||||||
With Applicable Waivers | 1.30% | 0.94% |
Past performance is not indicative of future results. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month's end, please visit www.vcm.com.
The above expense ratios are from the Fund's prospectus dated March 1, 2018, as supplemented. Additional information pertaining to the Fund's expense ratios as of October 31, 2018 can be found in the financial highlights.
The maximum offering price (MOP) figures reflect a maximum sales charge of 2.00% for Class A Shares. NAV does not reflect sales charges.
The total return figures set forth above include all waivers of fees for various periods since inception. Without such fee waivers, the total returns would have been lower. Some fee waivers are voluntary and may be modified or terminated at any time.
Victory INCORE Investment Grade Convertible Fund — Growth of $10,000
(1)ICE BofAML Investment Grade U.S. Convertible 5% Constrained Index is a market capitalization-weighted index of domestic corporate convertible securities. Bonds and preferred stocks must be convertible only to common stock, ADR's or cash equivalent and have a market value of at least $50 million. Composed of Coupon, OID, or zero coupon convertible bonds rated by Moody's and/or S&P with an average rating of Baa3/BBB- or higher. This Index does not include the effect of expenses, is not representative of any specific fund or product and cannot be invested in directly.
The graph reflects investment growth of a hypothetical $10,000 investment in Class A Shares of the Fund. The performance of other classes of the Fund's shares will be greater than or less than the line shown based on the differences in loads and fees paid by shareholders investing in the different classes. Past performance is no guarantee of future results.
The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
22
Victory Portfolios Victory Diversified Stock Fund | Schedule of Portfolio Investments October 31, 2018 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Common Stocks (98.0%) | |||||||||||
Communication Services (10.6%): | |||||||||||
Alphabet, Inc., Class C (a) | 14,895 | $ | 16,039 | ||||||||
Comcast Corp., Class A | 213,713 | 8,151 | |||||||||
Netflix, Inc. (a) | 5,595 | 1,688 | |||||||||
Nexstar Broadcasting Group, Inc., Class A (b) | 52,034 | 3,897 | |||||||||
T-Mobile US, Inc. (a) (b) | 57,174 | 3,919 | |||||||||
Verizon Communications, Inc. | 76,095 | 4,344 | |||||||||
YY, Inc., ADR (a) | 38,140 | 2,437 | |||||||||
40,475 | |||||||||||
Consumer Discretionary (9.7%): | |||||||||||
Amazon.com, Inc. (a) | 6,855 | 10,954 | |||||||||
Burlington Stores, Inc. (a) | 18,314 | 3,141 | |||||||||
D.R. Horton, Inc. | 67,184 | 2,416 | |||||||||
Dollar General Corp. | 47,153 | 5,252 | |||||||||
O'Reilly Automotive, Inc. (a) | 15,849 | 5,083 | |||||||||
Penske Automotive Group, Inc. | 80,928 | 3,592 | |||||||||
Ross Stores, Inc. | 31,342 | 3,103 | |||||||||
The Home Depot, Inc. | 21,543 | 3,789 | |||||||||
37,330 | |||||||||||
Consumer Staples (4.7%): | |||||||||||
Costco Wholesale Corp. | 8,777 | 2,007 | |||||||||
PepsiCo, Inc. | 23,715 | 2,665 | |||||||||
Sysco Corp. | 29,922 | 2,134 | |||||||||
The Procter & Gamble Co. | 45,077 | 3,997 | |||||||||
Wal-Mart Stores, Inc. | 72,335 | 7,254 | |||||||||
18,057 | |||||||||||
Energy (7.7%): | |||||||||||
Callon Petroleum Co. (a) | 186,837 | 1,863 | |||||||||
Chevron Corp. | 68,473 | 7,645 | |||||||||
EOG Resources, Inc. | 36,690 | 3,865 | |||||||||
Laredo Petroleum, Inc. (a) | 160,619 | 842 | |||||||||
Newfield Exploration Co. (a) | 194,475 | 3,928 | |||||||||
Occidental Petroleum Corp. | 46,734 | 3,134 | |||||||||
Phillips 66 | 41,935 | 4,312 | |||||||||
Valero Energy Corp. (b) | 43,733 | 3,984 | |||||||||
29,573 | |||||||||||
Financials (17.2%): | |||||||||||
Ally Financial, Inc. | 213,863 | 5,434 | |||||||||
Ameriprise Financial, Inc. | 20,545 | 2,614 | |||||||||
Athene Holding Ltd., Class A (a) | 111,273 | 5,087 | |||||||||
Bank of America Corp. | 230,556 | 6,340 | |||||||||
Berkshire Hathaway, Inc., Class B (a) | 43,045 | 8,836 | |||||||||
Cathay General Bancorp | 132,891 | 5,006 | |||||||||
E*TRADE Financial Corp. | 79,413 | 3,925 | |||||||||
Essent Group Ltd. (a) | 135,634 | 5,347 | |||||||||
FCB Financial Holdings, Inc. (a) | 77,701 | 3,040 |
See notes to financial statements.
23
Victory Portfolios Victory Diversified Stock Fund | Schedule of Portfolio Investments — continued October 31, 2018 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
JPMorgan Chase & Co. | 55,802 | $ | 6,084 | ||||||||
Northern Trust Corp. (b) | 52,821 | 4,969 | |||||||||
Regions Financial Corp. | 204,415 | 3,469 | |||||||||
TD Ameritrade Holding Corp. | 108,722 | 5,623 | |||||||||
65,774 | |||||||||||
Health Care (13.9%): | |||||||||||
AbbVie, Inc. | 82,583 | 6,429 | |||||||||
Biogen, Inc. (a) | 7,088 | 2,157 | |||||||||
Cigna Corp. | 32,227 | 6,890 | |||||||||
CVS Health Corp. | 95,486 | 6,912 | |||||||||
Innoviva, Inc. (a) | 180,342 | 2,518 | |||||||||
Johnson & Johnson | 59,113 | 8,275 | |||||||||
Merck & Co., Inc. | 51,384 | 3,782 | |||||||||
Pfizer, Inc. | 86,202 | 3,712 | |||||||||
UnitedHealth Group, Inc. | 27,626 | 7,221 | |||||||||
Universal Health Services, Inc., Class B (b) | 45,584 | 5,541 | |||||||||
53,437 | |||||||||||
Industrials (14.3%): | |||||||||||
Allison Transmission Holdings, Inc. | 127,301 | 5,612 | |||||||||
Comfort Systems USA, Inc. | 50,676 | 2,710 | |||||||||
FedEx Corp. | 11,871 | 2,616 | |||||||||
J.B. Hunt Transport Services, Inc. | 47,608 | 5,266 | |||||||||
Marten Transport Ltd. | 92,152 | 1,775 | |||||||||
Norfolk Southern Corp. | 33,121 | 5,559 | |||||||||
PACCAR, Inc. | 82,541 | 4,722 | |||||||||
Patrick Industries, Inc. (a) | 45,078 | 1,961 | |||||||||
SkyWest, Inc. | 60,239 | 3,451 | |||||||||
Union Pacific Corp. | 48,972 | 7,161 | |||||||||
United Rentals, Inc. (a) | 36,316 | 4,360 | |||||||||
United Technologies Corp. | 35,730 | 4,438 | |||||||||
Universal Forest Products, Inc. | 103,500 | 2,926 | |||||||||
XPO Logistics, Inc. (a) | 26,071 | 2,330 | |||||||||
54,887 | |||||||||||
Information Technology (19.0%): | |||||||||||
Apple, Inc. | 96,927 | 21,212 | |||||||||
Cisco Systems, Inc. | 102,838 | 4,705 | |||||||||
Entegris, Inc. | 65,477 | 1,738 | |||||||||
Intel Corp. | 115,107 | 5,396 | |||||||||
KEMET Corp. (b) | 98,339 | 2,142 | |||||||||
Mastercard, Inc., Class A | 13,592 | 2,687 | |||||||||
Microsoft Corp. | 178,116 | 19,024 | |||||||||
ON Semiconductor Corp. (a) (b) | 226,072 | 3,843 | |||||||||
PayPal Holdings, Inc. (a) | 23,031 | 1,939 | |||||||||
Visa, Inc., Class A | 20,013 | 2,759 | |||||||||
Vishay Intertechnology, Inc. (b) | 107,536 | 1,968 | |||||||||
Zebra Technologies Corp., Class A (a) | 32,670 | 5,433 | |||||||||
72,846 |
See notes to financial statements.
24
Victory Portfolios Victory Diversified Stock Fund | Schedule of Portfolio Investments — continued October 31, 2018 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Materials (0.9%): | |||||||||||
Packaging Corp. of America | 35,658 | $ | 3,274 | ||||||||
Total Common Stocks (Cost $336,088) | 375,653 | ||||||||||
Exchange-Traded Funds (1.1%) | |||||||||||
SPDR S&P 500 ETF Trust (b) | 16,009 | 4,333 | |||||||||
Total Exchange-Traded Funds (Cost $4,312) | 4,333 | ||||||||||
Collateral for Securities Loaned^ (2.5%) | |||||||||||
BlackRock Liquidity Funds TempFund, Institutional Class, 2.29% (c) | 2,407,201 | 2,407 | |||||||||
Fidelity Investments Money Market Government Portfolio, Institutional Class, 2.10% (c) | 2,596,834 | 2,597 | |||||||||
Fidelity Investments Money Market Prime Money Market Portfolio, Institutional Class, 2.23% (c) | 240,902 | 241 | |||||||||
Goldman Sachs Financial Square Prime Obligations Fund, Institutional Class, 2.31% (c) | 601,779 | 602 | |||||||||
JPMorgan Prime Money Market Fund, Capital Class, 2.28% (c) | 2,407,105 | 2,407 | |||||||||
Morgan Stanley Institutional Liquidity Prime Portfolio, Institutional Class, 2.29% (c) | 1,323,914 | 1,324 | |||||||||
Total Collateral for Securities Loaned (Cost $9,578) | 9,578 | ||||||||||
Total Investments (Cost $349,978) — 101.6% | 389,564 | ||||||||||
Liabilities in excess of other assets — (1.6)% | (6,221 | ) | |||||||||
NET ASSETS — 100.00% | $ | 383,343 |
^ Purchased with cash collateral from securities on loan.
(a) Non-income producing security.
(b) All or a portion of this security is on loan.
(c) Rate disclosed is the daily yield on October 31, 2018.
ADR — American Depositary Receipt
ETF — Exchange-Traded Fund
See notes to financial statements.
25
Victory Portfolios Victory NewBridge Large Cap Growth Fund | Schedule of Portfolio Investments October 31, 2018 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Common Stocks (98.3%) | |||||||||||
Communication Services (13.0%): | |||||||||||
Activision Blizzard, Inc. | 9,808 | $ | 677 | ||||||||
Alphabet, Inc., Class C (a) | 1,104 | 1,189 | |||||||||
Facebook, Inc., Class A (a) | 7,746 | 1,176 | |||||||||
3,042 | |||||||||||
Consumer Discretionary (22.8%): | |||||||||||
Alibaba Group Holding Ltd., ADR (a) | 3,975 | 566 | |||||||||
Amazon.com, Inc. (a) | 1,113 | 1,778 | |||||||||
Booking Holdings, Inc. (a) | 450 | 844 | |||||||||
Burlington Stores, Inc. (a) | 4,904 | 841 | |||||||||
GrubHub, Inc. (a) | 5,062 | 469 | |||||||||
Ulta Salon, Cosmetics & Fragrance, Inc. (a) | 2,961 | 813 | |||||||||
5,311 | |||||||||||
Consumer Staples (2.6%): | |||||||||||
Monster Beverage Corp. (a) | 11,668 | 617 | |||||||||
Financials (6.4%): | |||||||||||
First Republic Bank | 4,999 | 455 | |||||||||
MarketAxess Holdings, Inc. | 2,857 | 599 | |||||||||
The Charles Schwab Corp. | 9,865 | 456 | |||||||||
1,510 | |||||||||||
Health Care (24.3%): | |||||||||||
ABIOMED, Inc. (a) | 1,938 | 661 | |||||||||
Alexion Pharmaceuticals, Inc. (a) | 6,515 | 730 | |||||||||
Align Technology, Inc. (a) | 2,511 | 555 | |||||||||
Canopy Growth Corp. (a) | 4,264 | 157 | |||||||||
Edwards Lifesciences Corp. (a) | 4,752 | 702 | |||||||||
Illumina, Inc. (a) | 2,004 | 624 | |||||||||
UnitedHealth Group, Inc. | 5,003 | 1,308 | |||||||||
Zoetis, Inc. | 10,405 | 938 | |||||||||
5,675 | |||||||||||
Industrials (5.6%): | |||||||||||
CSX Corp. | 11,652 | 802 | |||||||||
XPO Logistics, Inc. (a) | 5,747 | 514 | |||||||||
1,316 | |||||||||||
Information Technology (23.6%): | |||||||||||
NVIDIA Corp. | 3,553 | 749 | |||||||||
PayPal Holdings, Inc. (a) | 8,662 | 729 | |||||||||
PTC, Inc. (a) | 6,633 | 547 | |||||||||
Red Hat, Inc. (a) | 4,122 | 708 | |||||||||
Salesforce.com, Inc. (a) | 5,098 | 700 |
See notes to financial statements.
26
Victory Portfolios Victory NewBridge Large Cap Growth Fund | Schedule of Portfolio Investments — continued October 31, 2018 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Servicenow, Inc. (a) | 3,951 | $ | 714 | ||||||||
Visa, Inc., Class A | 9,751 | 1,344 | |||||||||
5,491 | |||||||||||
Total Common Stocks (Cost $13,820) | 22,962 | ||||||||||
Total Investments (Cost $13,820) — 98.3% | 22,962 | ||||||||||
Other assets in excess of liabilities — 1.7% | 398 | ||||||||||
NET ASSETS — 100.00% | $ | 23,360 |
(a) Non-income producing security.
ADR — American Depositary Receipt
See notes to financial statements.
27
Victory Portfolios Victory Special Value Fund | Schedule of Portfolio Investments October 31, 2018 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Common Stocks (98.8%) | |||||||||||
Communication Services (10.6%): | |||||||||||
Alphabet, Inc., Class C (a) | 2,560 | $ | 2,757 | ||||||||
Comcast Corp., Class A | 36,711 | 1,400 | |||||||||
Netflix, Inc. (a) | 968 | 292 | |||||||||
Nexstar Broadcasting Group, Inc., Class A (b) | 8,855 | 663 | |||||||||
T-Mobile US, Inc. (a) | 9,776 | 670 | |||||||||
Verizon Communications, Inc. | 13,100 | 748 | |||||||||
YY, Inc., ADR (a) | 6,645 | 425 | |||||||||
6,955 | |||||||||||
Consumer Discretionary (9.8%): | |||||||||||
Amazon.com, Inc. (a) | 1,186 | 1,895 | |||||||||
Burlington Stores, Inc. (a) | 3,163 | 542 | |||||||||
D.R. Horton, Inc. | 11,612 | 418 | |||||||||
Dollar General Corp. | 8,052 | 897 | |||||||||
O'Reilly Automotive, Inc. (a) | 2,704 | 867 | |||||||||
Penske Automotive Group, Inc. | 13,976 | 620 | |||||||||
Ross Stores, Inc. | 5,352 | 530 | |||||||||
The Home Depot, Inc. | 3,710 | 653 | |||||||||
6,422 | |||||||||||
Consumer Staples (4.7%): | |||||||||||
Costco Wholesale Corp. | 1,514 | 346 | |||||||||
PepsiCo, Inc. | 4,034 | 453 | |||||||||
Sysco Corp. | 5,123 | 365 | |||||||||
The Procter & Gamble Co. | 7,689 | 682 | |||||||||
Wal-Mart Stores, Inc. | 12,339 | 1,238 | |||||||||
3,084 | |||||||||||
Energy (7.7%): | |||||||||||
Callon Petroleum Co. (a) | 31,963 | 319 | |||||||||
Chevron Corp. | 11,589 | 1,294 | |||||||||
EOG Resources, Inc. | 6,161 | 649 | |||||||||
Laredo Petroleum, Inc. (a) (b) | 27,912 | 146 | |||||||||
Newfield Exploration Co. (a) | 33,614 | 679 | |||||||||
Occidental Petroleum Corp. | 7,903 | 530 | |||||||||
Phillips 66 | 7,313 | 752 | |||||||||
Valero Energy Corp. | 7,443 | 678 | |||||||||
5,047 | |||||||||||
Financials (17.2%): | |||||||||||
Ally Financial, Inc. | 36,736 | 933 | |||||||||
Ameriprise Financial, Inc. | 3,537 | 450 | |||||||||
Athene Holding Ltd., Class A (a) | 19,233 | 879 | |||||||||
Bank of America Corp. | 39,229 | 1,080 | |||||||||
Berkshire Hathaway, Inc., Class B (a) | 7,395 | 1,518 | |||||||||
Cathay General Bancorp (b) | 22,939 | 864 | |||||||||
E*TRADE Financial Corp. | 13,647 | 674 | |||||||||
Essent Group Ltd. (a) | 22,635 | 892 | |||||||||
FCB Financial Holdings, Inc. (a) | 12,767 | 500 |
See notes to financial statements.
28
Victory Portfolios Victory Special Value Fund | Schedule of Portfolio Investments — continued October 31, 2018 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
JPMorgan Chase & Co. | 9,455 | $ | 1,031 | ||||||||
Northern Trust Corp. | 9,247 | 870 | |||||||||
Regions Financial Corp. | 35,554 | 603 | |||||||||
TD Ameritrade Holding Corp. | 18,755 | 970 | |||||||||
11,264 | |||||||||||
Health Care (14.0%): | |||||||||||
AbbVie, Inc. | 14,219 | 1,107 | |||||||||
Biogen, Inc. (a) | 1,217 | 370 | |||||||||
Cigna Corp. | 5,536 | 1,184 | |||||||||
CVS Health Corp. | 16,440 | 1,190 | |||||||||
Innoviva, Inc. (a) | 30,857 | 431 | |||||||||
Johnson & Johnson | 10,083 | 1,411 | |||||||||
Merck & Co., Inc. | 8,775 | 646 | |||||||||
Pfizer, Inc. | 14,596 | 629 | |||||||||
UnitedHealth Group, Inc. | 4,756 | 1,242 | |||||||||
Universal Health Services, Inc., Class B | 7,878 | 958 | |||||||||
9,168 | |||||||||||
Industrials (14.5%): | |||||||||||
Allison Transmission Holdings, Inc. | 23,147 | 1,020 | |||||||||
Comfort Systems USA, Inc. | 8,775 | 469 | |||||||||
FedEx Corp. | 2,053 | 453 | |||||||||
J.B. Hunt Transport Services, Inc. | 8,212 | 908 | |||||||||
Marten Transport Ltd. | 15,837 | 305 | |||||||||
Norfolk Southern Corp. | 5,690 | 955 | |||||||||
PACCAR, Inc. | 14,209 | 813 | |||||||||
Patrick Industries, Inc. (a) | 7,604 | 331 | |||||||||
SkyWest, Inc. | 10,185 | 583 | |||||||||
Union Pacific Corp. | 8,413 | 1,231 | |||||||||
United Rentals, Inc. (a) | 6,254 | 751 | |||||||||
United Technologies Corp. | 6,227 | 773 | |||||||||
Universal Forest Products, Inc. | 17,040 | 482 | |||||||||
XPO Logistics, Inc. (a) | 4,434 | 396 | |||||||||
9,470 | |||||||||||
Information Technology (19.4%): | |||||||||||
Apple, Inc. | 16,809 | 3,679 | |||||||||
Cisco Systems, Inc. | 17,631 | 807 | |||||||||
Entegris, Inc. | 11,107 | 295 | |||||||||
Intel Corp. | 19,622 | 920 | |||||||||
KEMET Corp. (b) | 16,825 | 366 | |||||||||
Mastercard, Inc., Class A | 2,340 | 463 | |||||||||
Microsoft Corp. | 31,026 | 3,314 | |||||||||
ON Semiconductor Corp. (a) | 39,612 | 673 | |||||||||
PayPal Holdings, Inc. (a) | 3,977 | 335 | |||||||||
Visa, Inc., Class A | 3,445 | 474 | |||||||||
Vishay Intertechnology, Inc. (b) | 18,451 | 338 | |||||||||
Zebra Technologies Corp., Class A (a) | 5,586 | 929 | |||||||||
12,593 |
See notes to financial statements.
29
Victory Portfolios Victory Special Value Fund | Schedule of Portfolio Investments — continued October 31, 2018 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Materials (0.9%): | |||||||||||
Packaging Corp. of America | 6,134 | $ | 563 | ||||||||
Total Common Stocks (Cost $60,175) | 64,566 | ||||||||||
Exchange-Traded Funds (0.5%) | |||||||||||
SPDR S&P 500 ETF Trust (b) | 1,293 | 350 | |||||||||
Total Exchange-Traded Funds (Cost $349) | 350 | ||||||||||
Collateral for Securities Loaned^ (2.2%) | |||||||||||
BlackRock Liquidity Funds TempFund, Institutional Class, 2.29% (c) | 364,499 | 364 | |||||||||
Fidelity Investments Money Market Government Portfolio, Institutional Class, 2.10% (c) | 393,460 | 393 | |||||||||
Fidelity Investments Money Market Prime Money Market Portfolio, Institutional Class, 2.23% (c) | 36,500 | 37 | |||||||||
Goldman Sachs Financial Square Prime Obligations Fund, Institutional Class, 2.31% (c) | 91,179 | 91 | |||||||||
JPMorgan Prime Money Market Fund, Capital Class, 2.28% (c) | 364,713 | 365 | |||||||||
Morgan Stanley Institutional Liquidity Prime Portfolio, Institutional Class, 2.29% (c) | 200,593 | 201 | |||||||||
Total Collateral for Securities Loaned (Cost $1,451) | 1,451 | ||||||||||
Total Investments (Cost $61,975) — 101.5% | 66,367 | ||||||||||
Liabilities in excess of other assets — (1.5)% | (1,011 | ) | |||||||||
NET ASSETS — 100.00% | $ | 65,356 |
^ Purchased with cash collateral from securities on loan.
(a) Non-income producing security.
(b) All or a portion of this security is on loan.
(c) Rate disclosed is the daily yield on October 31, 2018.
ADR — American Depositary Receipt
ETF — Exchange-Traded Fund
See notes to financial statements.
30
Victory Portfolios Victory Strategic Allocation Fund | Schedule of Portfolio Investments October 31, 2018 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Affiliated Exchange-Traded Funds (17.6%) | |||||||||||
VictoryShares International Volatility Wtd ETF | 63,210 | $ | 2,279 | ||||||||
VictoryShares US Multi-Factor Minimum Volatility ETF | 86,350 | 2,501 | |||||||||
VictoryShares US Small Cap Volatility Wtd ETF | 25,316 | 1,137 | |||||||||
Total Affiliated Exchange-Traded Funds (Cost $5,344) | 5,917 | ||||||||||
Affiliated Mutual Funds (80.9%) | |||||||||||
Victory Market Neutral Income Fund, Class I | 792,565 | 7,695 | |||||||||
Victory INCORE Total Return Bond Fund, Class R6 | 469,455 | 4,230 | |||||||||
Victory Integrity Discovery Fund, Class Y | 26,751 | 1,118 | |||||||||
Victory RS Global Fund, Class Y | 767,806 | 9,643 | |||||||||
Victory Sophus Emerging Markets Small Cap Fund, Class Y | 281,404 | 2,156 | |||||||||
Victory Trivalent Emerging Markets Small-Cap Fund, Class Y | 198,674 | 2,255 | |||||||||
Total Affiliated Mutual Funds (Cost $28,620) | 27,097 | ||||||||||
Total Investments (Cost $33,964) — 98.5% | 33,014 | ||||||||||
Other assets in excess of liabilities — 1.5% | 518 | ||||||||||
NET ASSETS — 100.00% | $ | 33,532 |
ETF — Exchange-Traded Fund
See notes to financial statements.
31
Victory Portfolios Victory INCORE Fund for Income | Schedule of Portfolio Investments October 31, 2018 |
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Government National Mortgage Association (94.3%) | |||||||||||
Multi-family (1.3%): | |||||||||||
Collateralized Mortgage Obligations (1.0%): | |||||||||||
Government National Mortgage Assoc. | |||||||||||
Series 2010-136, Class BH, 7.00%, 11/16/40 | $ | 659 | $ | 666 | |||||||
Series 2012-33, Class AB, 7.00%, 3/16/46 | 4,710 | 5,046 | |||||||||
Series 2012-67, Class AF, 7.00%, 4/16/44 | 411 | 415 | |||||||||
6,127 | |||||||||||
Pass-throughs (0.3%): | |||||||||||
Government National Mortgage Assoc. | |||||||||||
7.49%, 8/15/20 – 11/15/20 | 52 | 52 | |||||||||
7.50%, 8/15/21 | 33 | 34 | |||||||||
7.92%, 7/1/23 | 310 | 310 | |||||||||
8.00%, 1/15/31 – 11/15/33 | 1,219 | 1,220 | |||||||||
7.75%, 9/15/33 | 430 | 431 | |||||||||
2,047 | |||||||||||
Single Family (93.0%): | |||||||||||
Collateralized Mortgage Obligations (3.3%): | |||||||||||
Government National Mortgage Assoc. | |||||||||||
Series 1994-7, Class PQ, 6.50%, 10/16/24 | 196 | 205 | |||||||||
Series 1997-8, Class PN, 7.50%, 5/16/27 | 38 | 38 | |||||||||
Series 1999-4, Class ZB, 6.00%, 2/20/29 | 325 | 325 | |||||||||
Series 2001-10, Class PE, 6.50%, 3/16/31 | 251 | 250 | |||||||||
Series 2001-21, Class PE, 6.50%, 5/16/31 | 185 | 201 | |||||||||
Series 2002-22, Class GF, 6.50%, 3/20/32 | 41 | 42 | |||||||||
Series 2002-33, Class ZJ, 6.50%, 5/20/32 | 115 | 127 | |||||||||
Series 2002-45, Class QE, 6.50%, 6/20/32 | 75 | 83 | |||||||||
Series 2002-47, Class PG, 6.50%, 7/16/32 | 29 | 32 | |||||||||
Series 2002-47, Class ZA, 6.50%, 7/20/32 | 207 | 227 | |||||||||
Series 2005-74, Class HB, 7.50%, 9/16/35 | 20 | 22 | |||||||||
Series 2005-74, Class HC, 7.50%, 9/16/35 | 89 | 99 | |||||||||
Series 2011-166, Class NT, 7.75%, 11/20/31 (a) | 1,350 | 1,515 | |||||||||
Series 2012-106, Class JM, 7.30%, 10/20/34 (a) | 1,071 | 1,191 | |||||||||
Series 2012-30, Class WB, 7.08%, 11/20/39 (a) | 4,541 | 4,973 | |||||||||
Series 2013-190, Class KT, 8.10%, 9/20/30 (a) | 1,368 | 1,467 | |||||||||
Series 2013-51, Class BL, 6.10%, 4/20/34 (a) | 2,919 | 3,155 | |||||||||
Series 2013-64, Class KY, 6.93%, 12/20/38 (a) | 1,841 | 2,061 | |||||||||
Series 2013-70, Class KP, 7.07%, 2/20/39 (a) | 1,606 | 1,781 | |||||||||
Series 2014-69, Class W, 7.25%, 11/20/34 (a) | 226 | 251 | |||||||||
Series 2014-74, Class PT, 7.73%, 5/16/44 (a) | 414 | 461 | |||||||||
Series 2015-55, Class PT, 7.92%, 6/20/39 (a) | 1,188 | 1,292 | |||||||||
19,798 |
See notes to financial statements.
32
Victory Portfolios Victory INCORE Fund for Income | Schedule of Portfolio Investments — continued October 31, 2018 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares or Principal Amount | Value | |||||||||
Pass-throughs (89.7%): | |||||||||||
Government National Mortgage Assoc. | |||||||||||
7.75%, 11/15/20 | $ | 190 | $ | 193 | |||||||
10.50%, 12/15/20 | 5 | 5 | |||||||||
6.00%, 1/15/22 – 4/15/40 | 31,291 | 34,261 | |||||||||
7.00%, 5/20/22 – 1/15/39 | 124,268 | 139,682 | |||||||||
7.00%, 7/15/35 | 374 | 419 | |||||||||
8.00%, 6/20/22 – 4/15/38 | 53,300 | 61,165 | |||||||||
7.95%, 9/15/22 | 29 | 30 | |||||||||
7.13%, 3/15/23 – 7/15/25 | 1,313 | 1,374 | |||||||||
5.50%, 7/15/23 | 37 | 39 | |||||||||
6.50%, 8/20/23 – 7/15/39 | 172,854 | 192,113 | |||||||||
10.00%, 4/15/25 – 2/15/26 | 557 | 577 | |||||||||
9.50%, 7/15/25 | 1 | 1 | |||||||||
9.00%, 2/15/26 – 11/15/48 (b) | 3,417 | 3,882 | |||||||||
7.50%, 8/15/26 – 2/15/38 | 85,441 | 96,082 | |||||||||
6.13%, 6/20/28 – 9/20/29 | 535 | 550 | |||||||||
6.28%, 10/20/28 – 12/20/29 | 985 | 1,047 | |||||||||
6.10%, 5/20/29 – 7/20/31 | 984 | 1,034 | |||||||||
7.30%, 4/20/30 – 2/20/31 | 465 | 480 | |||||||||
6.49%, 5/20/31 – 3/20/32 | 1,341 | 1,437 | |||||||||
8.50%, 6/15/31 – 7/15/32 | 8,027 | 9,120 | |||||||||
543,491 | |||||||||||
Total Government National Mortgage Association (Cost $595,017) | 571,463 | ||||||||||
U.S. Treasury Obligations (5.8%) | |||||||||||
U.S. Treasury Bills, 2.29%, 2/14/19 (c) | 7,828 | 7,775 | |||||||||
U.S. Treasury Bonds, 8.50%, 2/15/20 (d) | 25,362 | 27,177 | |||||||||
Total U.S. Treasury Obligations (Cost $35,156) | 34,952 | ||||||||||
Investment Companies (0.0%) (e) | |||||||||||
BlackRock Liquidity Funds Fedfund Portfolio, 1.91% | 99,597 | 100 | |||||||||
Total Investment Companies (Cost $100) | 100 | ||||||||||
Total Investments (Cost $630,274) — 100.1% | 606,515 | ||||||||||
Liabilities in excess of other assets — (0.1)% | (506 | ) | |||||||||
NET ASSETS — 100.00% | $ | 606,009 |
(a) The rate for certain asset-backed and mortgage backed securities may vary based on factors relating to the pool of assets underlying the security. The rate disclosed is the rate in effect at October 31, 2018.
(b) Security purchased on a when-issued basis.
(c) Rate represents the effective yield at October 31, 2018.
(d) All or a portion of this security has been segregated as collateral for securities purchased on a when-issued basis.
(e) Amount represents less than 0.05% of net assets.
See notes to financial statements.
33
Victory Portfolios Victory INCORE Investment Grade Convertible Fund | Schedule of Portfolio Investments October 31, 2018 |
(Amounts in Thousands, Except for Shares)
Security Description | Principal Amount | Value | |||||||||
Convertible Corporate Bonds (72.3%) | |||||||||||
Consumer Discretionary (5.2%): | |||||||||||
Booking Holdings, Inc., 0.90%, 9/15/21 (a) | $ | 780 | $ | 907 | |||||||
The Priceline Group, Inc., Convertible Subordinated Notes, 0.35%, 6/15/20 | 4,455 | 6,455 | |||||||||
7,362 | |||||||||||
Financials (11.7%): | |||||||||||
Ares Capital Corp., 3.75%, 2/1/22 | 1,840 | 1,862 | |||||||||
BlackRock Capital Investment Corp., 5.00%, 6/15/22 | 4,422 | 4,348 | |||||||||
JPMorgan Chase Financial Co. LLC, 0.25%, 5/1/23 (b) | 3,120 | 2,912 | |||||||||
MGIC Investment Corp., 9.00%, 4/1/63 (b) | 1,322 | 1,765 | |||||||||
Prospect Capital Corp. | |||||||||||
5.88%, 1/15/19 | 100 | 100 | |||||||||
4.95%, 7/15/22, Callable 4/15/22 @ 100 | 3,983 | 3,904 | |||||||||
Prospect Capital Corp., Convertible Subordinated Notes, 5.88%, 1/15/19 | 1,622 | 1,627 | |||||||||
16,518 | |||||||||||
Health Care (15.0%): | |||||||||||
ALZA Corp., 7/28/20, Callable 11/26/18 @ 95.04 (c) | 2,170 | 4,186 | |||||||||
Bristol-Myers Squibb Co., Convertible Subordinated Notes, 1.83%(LIBOR03M+50bps), 9/15/23, Callable 12/10/18 @ 100 (d) (e) | 1,858 | 2,392 | |||||||||
Danaher Corp., Convertible Subordinated Notes, 1/22/21, Callable 11/26/18 @ 94.97 (a) (c) | 716 | 2,706 | |||||||||
Illumina, Inc., Convertible Subordinated Notes | |||||||||||
0.00%, 6/15/19 (g) | 1,905 | 2,403 | |||||||||
0.50%, 6/15/21 | 1,730 | 2,350 | |||||||||
WellPoint, Inc., Convertible Subordinated Notes, 2.75%, 10/15/42 | 1,894 | 7,186 | |||||||||
21,223 | |||||||||||
Industrials (4.2%): | |||||||||||
Dycom Industries, Inc., 0.75%, 9/15/21 | 1,855 | 1,877 | |||||||||
Macquarie Infrastructure | |||||||||||
2.88%, 7/15/19 | 120 | 119 | |||||||||
2.00%, 10/1/23 | 2,126 | 1,885 | |||||||||
Macquarie Infrastructure Co. LLC, Convertible Subordinated Notes, 2.88%, 7/15/19 | 2,073 | 2,056 | |||||||||
5,937 | |||||||||||
Information Technology (29.5%): | |||||||||||
Akamai Technologies, Inc., 0.13%, 5/1/25 (a) (b) | 815 | 796 | |||||||||
Citrix Systems, Inc., Convertible Subordinated Notes, 0.50%, 4/15/19 | 4,244 | 6,003 | |||||||||
Euronet Worldwide, Inc., 1.50%, 10/1/44, Callable 10/5/20 @ 100 | 1,350 | 2,065 | |||||||||
Intel Corp., Convertible Subordinated Notes, 3.25%, 8/1/39 | 3,686 | 8,445 | |||||||||
Micron Technology, Inc., Convertible Subordinated Notes, 3.00%, 11/15/43, Callable 12/10/18 @ 83.04 (e) | 454 | 591 | |||||||||
Novellus Systems, Inc., Convertible Subordinated Notes, 2.63%, 5/15/41 | 1,530 | 6,562 | |||||||||
Nvdia Corp., 1.00%, 12/1/18 | 164 | 1,721 | |||||||||
On Semiconductor Corp., 1.00%, 12/1/20 (a) | 1,050 | 1,176 | |||||||||
Palo Alto Networks, Inc., 0.75%, 7/1/23 (b) | 1,365 | 1,326 | |||||||||
Red Hat, Inc., Convertible Subordinated Notes, 0.25%, 10/1/19 | 3,975 | 9,237 | |||||||||
Western Digital Corp., 1.50%, 2/1/24 (a) (b) | 4,365 | 3,706 | |||||||||
41,628 |
See notes to financial statements.
34
Victory Portfolios Victory INCORE Investment Grade Convertible Fund | Schedule of Portfolio Investments — continued October 31, 2018 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares or Principal Amount | Value | |||||||||
Real Estate (6.7%): | |||||||||||
Spirit Realty Capital, Inc. | |||||||||||
2.88%, 5/15/19 | $ | 1,695 | $ | 1,685 | |||||||
3.75%, 5/15/21 | 3,295 | 3,285 | |||||||||
VEREIT, Inc., 3.75%, 12/15/20 (a) | 4,500 | 4,505 | |||||||||
9,475 | |||||||||||
Total Convertible Corporate Bonds (Cost $91,933) | 102,143 | ||||||||||
Convertible Preferred Stocks (25.9%) | |||||||||||
Energy (0.4%): | |||||||||||
Hess Corp., 8.00%, 2/1/19 | 7,795 | 495 | |||||||||
Financials (11.0%): | |||||||||||
AMG Capital Trust II, 5.15% | 57,874 | 3,143 | |||||||||
Bank of America Corp., Series L, 0.02% | 2,390 | 3,038 | |||||||||
New York Community Capital Trust V, 6.00% | 52,654 | 2,501 | |||||||||
Wells Fargo & Co., Series L, 7.50% | 5,479 | 6,970 | |||||||||
15,652 | |||||||||||
Health Care (0.8%): | |||||||||||
Becton, Dickinson and Co., Series A, 6.13% | 20,150 | 1,182 | |||||||||
Industrials (3.1%): | |||||||||||
Stanley Black & Decker, Inc., 5.38% | 47,505 | 4,359 | |||||||||
Real Estate (2.5%): | |||||||||||
Welltower, Inc., Series I, 6.50% | 56,645 | 3,489 | |||||||||
Utilities (8.1%): | |||||||||||
Dominion Resources, Inc., Series A, 6.75% | 94,100 | 4,513 | |||||||||
DTE Energy Co., 6.50% | 40,903 | 2,181 | |||||||||
NextEra Energy, Inc., 6.12% | 80,575 | 4,673 | |||||||||
11,367 | |||||||||||
Total Convertible Preferred Stocks (Cost $37,443) | 36,544 | ||||||||||
Collateral for Securities Loaned^ (2.0%) | |||||||||||
BlackRock Liquidity Funds TempFund, Institutional Class, 2.29% (f) | 695,499 | 695 | |||||||||
Fidelity Investments Money Market Government Portfolio, Institutional Class, 2.10% (f) | 750,667 | 751 | |||||||||
Fidelity Investments Money Market Prime Money Market Portfolio, Institutional Class, 2.23% (f) | 69,638 | 70 | |||||||||
Goldman Sachs Financial Square Prime Obligations Fund, Institutional Class, 2.31% (f) | 173,956 | 174 | |||||||||
JPMorgan Prime Money Market Fund, Capital Class, 2.28% (f) | 695,822 | 696 | |||||||||
Morgan Stanley Institutional Liquidity Prime Portfolio, Institutional Class, 2.29% (f) | 382,704 | 383 | |||||||||
Total Collateral for Securities Loaned (Cost $2,769) | 2,769 | ||||||||||
Total Investments (Cost $132,145) — 100.2% | 141,456 | ||||||||||
Liabilities in excess of other assets — (0.2)% | (317 | ) | |||||||||
NET ASSETS — 100.00% | $ | 141,139 |
See notes to financial statements.
35
Victory Portfolios Victory INCORE Investment Grade Convertible Fund | Schedule of Portfolio Investments — continued October 31, 2018 |
(Amounts in Thousands, Except for Shares)
^ Purchased with cash collateral from securities on loan.
(a) All or a portion of this security is on loan.
(b) Rule 144A security or other security that is restricted as to resale to institutional investors. The Fund's Adviser has deemed these securities to be liquid based upon procedures approved by the Board of Trustees. As of October 31, 2018, the fair value of these securities was $10,505 (thousands) and amounted to 7.4% of net assets.
(c) Continuously callable with 15 days notice.
(d) Variable or Floating-Rate Security. Rate disclosed is as of October 31, 2018.
(e) Continuously callable with 30 days notice.
(f) Rate disclosed is the daily yield on October 31, 2018.
(g) Non-income producing security.
bps — Basis points
LIBOR — London InterBank Offered Rate
LIBOR03M — 3 Month US Dollar LIBOR, rate disclosed as of October 31, 2018, based on the last reset date of the security
LLC — Limited Liability Company
See notes to financial statements.
36
Victory Portfolios | Statements of Assets and Liabilities October 31, 2018 |
(Amounts in Thousands, Except Per Share Amounts)
Victory Diversified Stock Fund | Victory NewBridge Large Cap Growth Fund | Victory Special Value Fund | |||||||||||||
ASSETS: | |||||||||||||||
Investments, at value (Cost $349,978, $13,820 and $61,975) | $ | 389,564 | (a) | $ | 22,962 | $ | 66,367 | (b) | |||||||
Cash and cash equivalents | 6,337 | 575 | 934 | ||||||||||||
Interest and dividends receivable | 241 | 2 | 42 | ||||||||||||
Receivable for capital shares issued | 20 | 110 | 10 | ||||||||||||
Receivable for investments sold | 280 | — | — | ||||||||||||
Receivable from Adviser | 2 | 6 | 9 | ||||||||||||
Prepaid expenses | 10 | — | (c) | 12 | |||||||||||
Total Assets | 396,454 | 23,655 | 67,374 | ||||||||||||
LIABILITIES: | |||||||||||||||
Payables: | |||||||||||||||
Collateral received on loaned securities | 9,578 | — | 1,451 | ||||||||||||
Investments purchased | 1,850 | 153 | 308 | ||||||||||||
Capital shares redeemed | 1,312 | 100 | 165 | ||||||||||||
Accrued expenses and other payables: | |||||||||||||||
Investment advisory fees | 221 | 16 | 43 | ||||||||||||
Administration fees | 21 | 1 | 4 | ||||||||||||
Custodian fees | 3 | — | (c) | 1 | |||||||||||
Transfer agent fees | 47 | 4 | 19 | ||||||||||||
Chief Compliance Officer fees | — | (c) | — | (c) | — | (c) | |||||||||
Trustees' fees | — | (c) | — | (c) | — | (c) | |||||||||
12b-1 fees | 46 | 2 | 10 | ||||||||||||
Other accrued expenses | 33 | 19 | 17 | ||||||||||||
Total Liabilities | 13,111 | 295 | 2,018 | ||||||||||||
NET ASSETS: | |||||||||||||||
Capital | 304,938 | 7,138 | 54,569 | ||||||||||||
Total distributable earnings/(loss) | 78,405 | 16,222 | 10,787 | ||||||||||||
Net Assets | $ | 383,343 | $ | 23,360 | $ | 65,356 | |||||||||
Net Assets | |||||||||||||||
Class A Shares | $ | 264,297 | $ | 5,546 | $ | 32,565 | |||||||||
Class C Shares | 11,586 | 3,042 | 2,145 | ||||||||||||
Class I Shares | 46,122 | 10,633 | 3,678 | ||||||||||||
Class R Shares | 54,776 | 728 | 26,532 | ||||||||||||
Class R6 Shares | 2,189 | — | — | ||||||||||||
Class Y Shares | 4,373 | 3,411 | 436 | ||||||||||||
Total | $ | 383,343 | $ | 23,360 | $ | 65,356 | |||||||||
Shares (unlimited number of shares authorized with a par value of $0.001 per share): | |||||||||||||||
Class A Shares | 14,762 | 699 | 1,248 | ||||||||||||
Class C Shares | 686 | 608 | 92 | ||||||||||||
Class I Shares | 2,581 | 1,252 | 139 | ||||||||||||
Class R Shares | 3,116 | 109 | 1,060 | ||||||||||||
Class R6 Shares | 122 | — | — | ||||||||||||
Class Y Shares | 244 | 414 | 17 | ||||||||||||
Total | 21,511 | 3,082 | 2,556 |
(continues on next page)
See notes to financial statements.
37
Victory Portfolios | Statements of Assets and Liabilities October 31, 2018 |
(Amounts in Thousands, Except Per Share Amounts) (continued)
Victory Diversified Stock Fund | Victory NewBridge Large Cap Growth Fund | Victory Special Value Fund | |||||||||||||
Net asset value, offering (except Class A Shares) and redemption price per share: (d) | |||||||||||||||
Class A Shares | $ | 17.90 | $ | 7.94 | $ | 26.10 | |||||||||
Class C Shares (e) | 16.90 | 5.00 | 23.34 | ||||||||||||
Class I Shares | 17.87 | 8.49 | 26.39 | ||||||||||||
Class R Shares | 17.58 | 6.69 | 25.02 | ||||||||||||
Class R6 Shares | 17.88 | — | — | ||||||||||||
Class Y Shares | 17.90 | 8.24 | 26.25 | ||||||||||||
Maximum Sales Charge — Class A Shares | 5.75 | % | 5.75 | % | 5.75 | % | |||||||||
Maximum offering price (100%/(100%-maximum sales charge) of net asset value adjusted to the nearest cent) per share — Class A Shares | $ | 18.99 | $ | 8.42 | $ | 27.69 |
(a) Includes $9,257 of securities on loan.
(b) Includes $1,448 of securities on loan.
(c) Rounds to less than $1.
(d) Per share amount may not recalculate due to rounding of net assets and/or shares outstanding.
(e) Redemption price per share varies by the length of time shares are held.
See notes to financial statements.
38
Victory Portfolios | Statements of Assets and Liabilities October 31, 2018 |
(Amounts in Thousands, Except Per Share Amounts)
Victory Strategic Allocation Fund | Victory INCORE Fund for Income | Victory INCORE Investment Grade Convertible Fund | |||||||||||||
ASSETS: | |||||||||||||||
Affiliated investments, at value (Cost $33,964, $— and $—) | $ | 33,014 | $ | — | $ | — | |||||||||
Unaffiliated investments, at value (Cost $—, $630,274 and $132,145) | — | 606,515 | 141,456 | (a) | |||||||||||
Cash and cash equivalents | 97 | 6 | 2,259 | ||||||||||||
Interest and dividends receivable | — | (b) | 3,420 | 609 | |||||||||||
Receivable for capital shares issued | 458 | 293 | 207 | ||||||||||||
Receivable for investments sold | — | 906 | 860 | ||||||||||||
Receivable from Adviser | 10 | 22 | — | ||||||||||||
Receivable from Sub-administrator | — | 13 | — | ||||||||||||
Prepaid expenses | 17 | 11 | 13 | ||||||||||||
Total Assets | 33,596 | 611,186 | 145,404 | ||||||||||||
LIABILITIES: | |||||||||||||||
Payables: | |||||||||||||||
Collateral received on loaned securities | — | — | 2,769 | ||||||||||||
Investments purchased | — | 3,885 | 1,022 | ||||||||||||
Capital shares redeemed | 27 | 847 | 322 | ||||||||||||
Accrued expenses and other payables: | |||||||||||||||
Investment advisory fees | 3 | 252 | 98 | ||||||||||||
Administration fees | 2 | 32 | 8 | ||||||||||||
Custodian fees | 5 | 5 | 1 | ||||||||||||
Transfer agent fees | 8 | 75 | 23 | ||||||||||||
Chief Compliance Officer fees | — | (b) | — | (b) | — | (b) | |||||||||
Trustees' fees | — | (b) | 1 | — | (b) | ||||||||||
12b-1 fees | 4 | 36 | 2 | ||||||||||||
Other accrued expenses | 15 | 44 | 20 | ||||||||||||
Total Liabilities | 64 | 5,177 | 4,265 | ||||||||||||
NET ASSETS: | |||||||||||||||
Capital | 34,238 | 919,704 | 128,931 | ||||||||||||
Total distributable earnings/(loss) | (706 | ) | (313,695 | ) | 12,208 | ||||||||||
Net Assets | $ | 33,532 | $ | 606,009 | $ | 141,139 | |||||||||
Net Assets | |||||||||||||||
Class A Shares | $ | 18,747 | $ | 153,574 | $ | 14,268 | |||||||||
Class C Shares | 4,445 | 31,976 | — | ||||||||||||
Class I Shares | 8,811 | 331,338 | 126,871 | ||||||||||||
Class R Shares | 1,529 | 43,405 | — | ||||||||||||
Class R6 Shares | — | 13,741 | — | ||||||||||||
Class Y Shares | — | 31,975 | — | ||||||||||||
Total | $ | 33,532 | $ | 606,009 | $ | 141,139 |
(continues on next page)
See notes to financial statements.
39
Victory Portfolios | Statements of Assets and Liabilities October 31, 2018 |
(Amounts in Thousands, Except Per Share Amounts) (continued)
Victory Strategic Allocation Fund | Victory INCORE Fund for Income | Victory INCORE Investment Grade Convertible Fund | |||||||||||||
Shares (unlimited number of shares authorized with a par value of $0.001 per share): | |||||||||||||||
Class A Shares | 1,214 | 17,943 | 880 | ||||||||||||
Class C Shares | 293 | 3,770 | — | ||||||||||||
Class I Shares | 568 | 38,737 | 7,825 | ||||||||||||
Class R Shares | 99 | 5,067 | — | ||||||||||||
Class R6 Shares | — | 1,608 | — | ||||||||||||
Class Y Shares | — | 3,736 | — | ||||||||||||
Total | 2,174 | 70,861 | 8,705 | ||||||||||||
Net asset value, offering (except Class A Shares) and redemption price per share: (c) | |||||||||||||||
Class A Shares | $ | 15.44 | $ | 8.56 | $ | 16.22 | |||||||||
Class C Shares (d) | 15.19 | 8.48 | — | ||||||||||||
Class I Shares | 15.52 | 8.55 | 16.21 | ||||||||||||
Class R Shares | 15.41 | 8.57 | — | ||||||||||||
Class R6 Shares | — | 8.55 | — | ||||||||||||
Class Y Shares | — | 8.56 | — | ||||||||||||
Maximum Sales Charge — Class A Shares | 5.75 | % | 2.00 | % | 2.00 | % | |||||||||
Maximum offering price (100%/(100%-maximum sales charge) of net asset value adjusted to the nearest cent) per share — Class A Shares | $ | 16.38 | $ | 8.73 | $ | 16.55 |
(a) Includes $2,717 of securities on loan.
(b) Rounds to less than $1.
(c) Per share amount may not recalculate due to rounding of net assets and/or shares outstanding.
(d) Redemption price per share varies by the length of time shares are held.
See notes to financial statements.
40
Victory Portfolios | Statements of Operations For the Year Ended October 31, 2018 |
(Amounts in Thousands)
Victory Diversified Stock Fund | Victory NewBridge Large Cap Growth Fund | Victory Special Value Fund | |||||||||||||
Investment Income: | |||||||||||||||
Dividends | $ | 6,171 | $ | 77 | $ | 1,081 | |||||||||
Interest | 76 | 9 | 14 | ||||||||||||
Securities lending (net of fees) | 29 | 1 | 4 | ||||||||||||
Foreign tax withholding | (14 | ) | — | (2 | ) | ||||||||||
Total Income | 6,262 | 87 | 1,097 | ||||||||||||
Expenses: | |||||||||||||||
Investment advisory fees | 2,974 | 205 | 606 | ||||||||||||
Administration fees | 271 | 16 | 48 | ||||||||||||
12b-1 fees — Class A Shares | 748 | 18 | 91 | ||||||||||||
12b-1 fees — Class C Shares | 247 | 36 | 51 | ||||||||||||
12b-1 fees — Class R Shares | 315 | 4 | 166 | ||||||||||||
Custodian fees | 19 | 2 | 4 | ||||||||||||
Transfer agent fees — Class A Shares | 158 | 7 | 40 | ||||||||||||
Transfer agent fees — Class C Shares | 24 | 4 | 8 | ||||||||||||
Transfer agent fees — Class I Shares | 18 | 7 | 4 | ||||||||||||
Transfer agent fees — Class R Shares | 46 | 1 | 51 | ||||||||||||
Transfer agent fees — Class R6 Shares | — | (a) | — | — | |||||||||||
Transfer agent fees — Class Y Shares | 7 | 1 | 1 | ||||||||||||
Trustees' fees | 37 | 2 | 7 | ||||||||||||
Chief Compliance Officer fees | 4 | — | (a) | 1 | |||||||||||
Legal and audit fees | 38 | 12 | 15 | ||||||||||||
State registration and filing fees | 89 | 74 | 68 | ||||||||||||
Interest expense on interfund lending | 1 | — | — | (a) | |||||||||||
Other expenses | 45 | 14 | 18 | ||||||||||||
Total Expenses | 5,041 | 403 | 1,179 | ||||||||||||
Expenses waived/reimbursed by Adviser | (27 | ) | (64 | ) | (102 | ) | |||||||||
Net Expenses | 5,014 | 339 | 1,077 | ||||||||||||
Net Investment Income (Loss) | 1,248 | (252 | ) | 20 | |||||||||||
Realized/Unrealized Gains (Losses) from Investment Transactions: | |||||||||||||||
Net realized gains (losses) from investment transactions | 39,245 | 7,641 | 6,484 | ||||||||||||
Net change in unrealized appreciation/depreciation on investments | (35,321 | ) | (4,523 | ) | (6,058 | ) | |||||||||
Net realized/unrealized gains (losses) on investments | 3,924 | 3,118 | 426 | ||||||||||||
Change in net assets resulting from operations | $ | 5,172 | $ | 2,866 | $ | 446 |
(a) Rounds to less than $1.
See notes to financial statements.
41
Victory Portfolios | Statements of Operations For the Year Ended October 31, 2018 |
(Amounts in Thousands)
Victory Strategic Allocation Fund | Victory INCORE Fund for Income | Victory INCORE Investment Grade Convertible Fund | |||||||||||||
Investment Income: | |||||||||||||||
Unaffiliated interest | $ | 3 | $ | 35,981 | $ | 1,763 | |||||||||
Affiliated dividends | 863 | — | — | ||||||||||||
Unaffiliated dividends | — | 3 | 2,681 | ||||||||||||
Securities lending (net of fees) | — | — | 81 | ||||||||||||
Total Income | 866 | 35,984 | 4,525 | ||||||||||||
Expenses: | |||||||||||||||
Investment advisory fees | 38 | 3,455 | 1,094 | ||||||||||||
Administration fees | 23 | 430 | 87 | ||||||||||||
12b-1 fees — Class A Shares | 46 | 450 | 83 | ||||||||||||
12b-1 fees — Class C Shares | 69 | 404 | — | ||||||||||||
12b-1 fees — Class R Shares | 9 | 125 | — | ||||||||||||
Custodian fees | — | (a) | 31 | 8 | |||||||||||
Transfer agent fees — Class A Shares | 21 | 169 | 33 | ||||||||||||
Transfer agent fees — Class C Shares | 8 | 38 | — | ||||||||||||
Transfer agent fees — Class I Shares | 10 | 189 | 74 | ||||||||||||
Transfer agent fees — Class R Shares | 2 | 28 | — | ||||||||||||
Transfer agent fees — Class R6 Shares | — | 2 | — | ||||||||||||
Transfer agent fees — Class Y Shares | — | 72 | — | ||||||||||||
Trustees' fees | 3 | 61 | 11 | ||||||||||||
Chief Compliance Officer fees | — | (a) | 7 | 1 | |||||||||||
Legal and audit fees | 2 | 46 | 20 | ||||||||||||
State registration and filing fees | 57 | 122 | 49 | ||||||||||||
Interest expense on interfund lending | — | (a) | — | — | |||||||||||
Federal taxes, interest and penalties (b) | (156 | ) | 13 | — | |||||||||||
Other expenses | 14 | 132 | 25 | ||||||||||||
Total Expenses | 146 | 5,774 | 1,485 | ||||||||||||
Expenses waived/reimbursed by Adviser | (121 | ) | (61 | ) | — | ||||||||||
Expenses waived/reimbursed by Sub-administrator | — | (13 | ) | — | |||||||||||
Expenses waived/reimbursed by former Administrator (b) | 156 | — | — | ||||||||||||
Net Expenses | 181 | 5,700 | 1,485 | ||||||||||||
Net Investment Income (Loss) | 685 | 30,284 | 3,040 | ||||||||||||
Realized/Unrealized Gains (Losses) from Investment Transactions: | |||||||||||||||
Net realized gains (losses) from affiliated securities transactions | (151 | ) | — | — | |||||||||||
Net realized gains (losses) from unaffiliated security transactions | 20 | (21,771 | ) | 4,521 | |||||||||||
Distributions of realized gains from affiliated underlying investment companies | 760 | — | — | ||||||||||||
Net change in unrealized appreciation/depreciation on affiliated investments | (2,110 | ) | — | — | |||||||||||
Net change in unrealized appreciation/depreciation on unaffiliated investments | — | (15,006 | ) | (6,291 | ) | ||||||||||
Net realized/unrealized gains (losses) on investments | (1,481 | ) | (36,777 | ) | (1,770 | ) | |||||||||
Change in net assets resulting from operations | $ | (796 | ) | $ | (6,493 | ) | $ | 1,270 |
(a) Rounds to less than $1.
(b) Reference Federal Income Taxes under Item 2 of the Notes to Financial Statements.
See notes to financial statements.
42
Victory Portfolios | Statements of Changes in Net Assets |
(Amounts in Thousands)
Victory Diversified Stock Fund | Victory NewBridge Large Cap Growth Fund | Victory Special Value Fund | |||||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | ||||||||||||||||||||||
From Investment Activities: | |||||||||||||||||||||||||||
Operations: | |||||||||||||||||||||||||||
Net investment income (loss) | $ | 1,248 | $ | 3,439 | $ | (252 | ) | $ | (280 | ) | $ | 20 | $ | 275 | |||||||||||||
Net realized gains (losses) from investment transactions | 39,245 | 114,672 | 7,641 | 13,034 | 6,484 | 7,646 | |||||||||||||||||||||
Net change in unrealized appreciation (depreciation) on investments | (35,321 | ) | 1,911 | (4,523 | ) | (6,223 | ) | (6,058 | ) | 9,665 | |||||||||||||||||
Change in net assets resulting from operations | 5,172 | 120,022 | 2,866 | 6,531 | 446 | 17,586 | |||||||||||||||||||||
Distributions to Shareholders: (a) | |||||||||||||||||||||||||||
Class A Shares | (60,154 | ) | (6,678 | ) | (2,173 | ) | (3,217 | ) | (140 | ) | (402 | ) | |||||||||||||||
Class C Shares | (7,099 | ) | (684 | ) | (1,562 | ) | (2,111 | ) | — | (20 | ) | ||||||||||||||||
Class I Shares | (14,623 | ) | (2,906 | ) | (4,022 | ) | (8,820 | ) | (48 | ) | (51 | ) | |||||||||||||||
Class R Shares | (12,733 | ) | (1,243 | ) | (334 | ) | (339 | ) | (62 | ) | (308 | ) | |||||||||||||||
Class R6 Shares | (493 | ) | (63 | ) | — | — | — | — | |||||||||||||||||||
Class Y Shares | (1,608 | ) | (257 | ) | (861 | ) | (1,161 | ) | (8 | ) | (16 | ) | |||||||||||||||
Change in net assets resulting from distributions to shareholders | (96,710 | ) | (11,831 | ) | (8,952 | ) | (15,648 | ) | (258 | ) | (797 | ) | |||||||||||||||
Change in net assets resulting from capital transactions | (24,421 | ) | (258,763 | ) | (1,618 | ) | (14,423 | ) | (18,961 | ) | (17,556 | ) | |||||||||||||||
Change in net assets | (115,959 | ) | (150,572 | ) | (7,704 | ) | (23,540 | ) | (18,773 | ) | (767 | ) | |||||||||||||||
Net Assets: | |||||||||||||||||||||||||||
Beginning of period | 499,302 | 649,874 | 31,064 | 54,604 | 84,129 | 84,896 | |||||||||||||||||||||
End of period | $ | 383,343 | $ | 499,302 | $ | 23,360 | $ | 31,064 | $ | 65,356 | $ | 84,129 |
(a) Current and prior year distributions to shareholders have been reclassified and conform to amended GAAP presentation under Regulation S-X (See Item 10 in the Notes to Financial Statements).
See notes to financial statements.
43
Victory Portfolios | Statements of Changes in Net Assets |
(Amounts in Thousands)
Victory Diversified Stock Fund | Victory NewBridge Large Cap Growth Fund | Victory Special Value Fund | |||||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | ||||||||||||||||||||||
Capital Transactions: | |||||||||||||||||||||||||||
Class A Shares | |||||||||||||||||||||||||||
Proceeds from shares issued | $ | 36,345 | $ | 24,929 | $ | 1,050 | $ | 1,321 | $ | 6,981 | $ | 2,739 | |||||||||||||||
Distributions reinvested | 53,501 | 5,995 | 1,783 | 2,478 | 112 | 323 | |||||||||||||||||||||
Cost of shares redeemed | (79,151 | ) | (135,984 | ) | (3,581 | ) | (6,253 | ) | (9,666 | ) | (12,039 | ) | |||||||||||||||
Total Class A Shares | $ | 10,695 | $ | (105,060 | ) | $ | (748 | ) | $ | (2,454 | ) | $ | (2,573 | ) | $ | (8,977 | ) | ||||||||||
Class C Shares | |||||||||||||||||||||||||||
Proceeds from shares issued | $ | 1,225 | $ | 767 | $ | 415 | $ | 487 | $ | 416 | $ | 486 | |||||||||||||||
Distributions reinvested | 6,287 | 486 | 1,401 | 1,839 | — | 15 | |||||||||||||||||||||
Cost of shares redeemed | (25,557 | ) | (23,735 | ) | (1,772 | ) | (3,146 | ) | (5,711 | ) | (2,671 | ) | |||||||||||||||
Total Class C Shares | $ | (18,045 | ) | $ | (22,482 | ) | $ | 44 | $ | (820 | ) | $ | (5,295 | ) | $ | (2,170 | ) | ||||||||||
Class I Shares | |||||||||||||||||||||||||||
Proceeds from shares issued | $ | 14,912 | $ | 23,557 | $ | 3,402 | $ | 10,200 | $ | 4,793 | $ | 505 | |||||||||||||||
Distributions reinvested | 13,845 | 2,386 | 3,551 | 5,469 | 46 | 46 | |||||||||||||||||||||
Cost of shares redeemed | (43,874 | ) | (134,934 | ) | (9,714 | ) | (25,474 | ) | (4,817 | ) | (1,611 | ) | |||||||||||||||
Total Class I Shares | $ | (15,117 | ) | $ | (108,991 | ) | $ | (2,761 | ) | $ | (9,805 | ) | $ | 22 | $ | (1,060 | ) | ||||||||||
Class R Shares | |||||||||||||||||||||||||||
Proceeds from shares issued | $ | 3,059 | $ | 3,551 | $ | 46 | $ | 53 | $ | 3,593 | $ | 4,185 | |||||||||||||||
Distributions reinvested | 12,099 | 1,178 | 334 | 339 | 56 | 276 | |||||||||||||||||||||
Cost of shares redeemed | (14,286 | ) | (21,457 | ) | (401 | ) | (181 | ) | (13,951 | ) | (9,631 | ) | |||||||||||||||
Total Class R Shares | $ | 872 | $ | (16,728 | ) | $ | (21 | ) | $ | 211 | $ | (10,302 | ) | $ | (5,170 | ) | |||||||||||
Class R6 Shares | |||||||||||||||||||||||||||
Proceeds from shares issued | $ | 185 | $ | 861 | $ | — | $ | — | $ | — | $ | — | |||||||||||||||
Distributions reinvested | 493 | 63 | — | — | — | — | |||||||||||||||||||||
Cost of shares redeemed | (448 | ) | (1,318 | ) | — | — | — | — | |||||||||||||||||||
Total Class R6 Shares | $ | 230 | $ | (394 | ) | $ | — | $ | — | $ | — | $ | — | ||||||||||||||
Class Y Shares | |||||||||||||||||||||||||||
Proceeds from shares issued | $ | 5,027 | $ | 2,918 | $ | 3,223 | $ | 1,475 | $ | 158 | $ | 567 | |||||||||||||||
Distributions reinvested | 104 | 10 | 334 | 27 | 2 | — | (a) | ||||||||||||||||||||
Cost of shares redeemed | (8,187 | ) | (8,036 | ) | (1,689 | ) | (3,057 | ) | (973 | ) | (746 | ) | |||||||||||||||
Total Class Y Shares | $ | (3,056 | ) | $ | (5,108 | ) | $ | 1,868 | $ | (1,555 | ) | $ | (813 | ) | $ | (179 | ) | ||||||||||
Change in net assets resulting from capital transactions | $ | (24,421 | ) | $ | (258,763 | ) | $ | (1,618 | ) | $ | (14,423 | ) | $ | (18,961 | ) | $ | (17,556 | ) |
(continues on next page)
See notes to financial statements.
44
Victory Portfolios | Statements of Changes in Net Assets |
(Amounts in Thousands) (continued)
Victory Diversified Stock Fund | Victory NewBridge Large Cap Growth Fund | Victory Special Value Fund | |||||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | ||||||||||||||||||||||
Share Transactions: | |||||||||||||||||||||||||||
Class A Shares | |||||||||||||||||||||||||||
Issued | 1,904 | 1,281 | 134 | 137 | 256 | 117 | |||||||||||||||||||||
Reinvested | 2,797 | 320 | 239 | 295 | 4 | 15 | |||||||||||||||||||||
Redeemed | (4,068 | ) | (7,062 | ) | (420 | ) | (601 | ) | (351 | ) | (514 | ) | |||||||||||||||
Total Class A Shares | 633 | (5,461 | ) | (47 | ) | (169 | ) | (91 | ) | (382 | ) | ||||||||||||||||
Class C Shares | |||||||||||||||||||||||||||
Issued | 67 | 43 | 81 | 67 | 17 | 23 | |||||||||||||||||||||
Reinvested | 347 | 27 | 297 | 294 | — | 1 | |||||||||||||||||||||
Redeemed | (1,433 | ) | (1,268 | ) | (324 | ) | (401 | ) | (233 | ) | (127 | ) | |||||||||||||||
Total Class C Shares | (1,019 | ) | (1,198 | ) | 54 | (40 | ) | (216 | ) | (103 | ) | ||||||||||||||||
Class I Shares | |||||||||||||||||||||||||||
Issued | 766 | 1,227 | 342 | 934 | 175 | 21 | |||||||||||||||||||||
Reinvested | 725 | 127 | 447 | 625 | 2 | 2 | |||||||||||||||||||||
Redeemed | (2,295 | ) | (7,031 | ) | (1,041 | ) | (2,438 | ) | (177 | ) | (69 | ) | |||||||||||||||
Total Class I Shares | (804 | ) | (5,677 | ) | (252 | ) | (879 | ) | — | (a) | (46 | ) | |||||||||||||||
Class R Shares | |||||||||||||||||||||||||||
Issued | 161 | 185 | 7 | 6 | 135 | 185 | |||||||||||||||||||||
Reinvested | 644 | 64 | 53 | 45 | 2 | 13 | |||||||||||||||||||||
Redeemed | (743 | ) | (1,124 | ) | (60 | ) | (21 | ) | (530 | ) | (431 | ) | |||||||||||||||
Total Class R Shares | 62 | (875 | ) | — | (a) | 30 | (393 | ) | (233 | ) | |||||||||||||||||
Class R6 Shares | |||||||||||||||||||||||||||
Issued | 9 | 45 | — | — | — | — | |||||||||||||||||||||
Reinvested | 26 | 3 | — | — | — | — | |||||||||||||||||||||
Redeemed | (23 | ) | (68 | ) | — | — | — | — | |||||||||||||||||||
Total Class R6 Shares | 12 | (20 | ) | — | — | — | — | ||||||||||||||||||||
Class Y Shares | |||||||||||||||||||||||||||
Issued | 262 | 150 | 352 | 161 | 6 | 24 | |||||||||||||||||||||
Reinvested | 5 | 1 | 43 | 3 | — | (a) | — | (a) | |||||||||||||||||||
Redeemed | (425 | ) | (410 | ) | (184 | ) | (296 | ) | (35 | ) | (32 | ) | |||||||||||||||
Total Class Y Shares | (158 | ) | (259 | ) | 211 | (132 | ) | (29 | ) | (8 | ) | ||||||||||||||||
Change in Shares | (1,274 | ) | (13,490 | ) | (34 | ) | (1,190 | ) | (729 | ) | (772 | ) |
(a) Rounds to less than 1.
See notes to financial statements.
45
Victory Portfolios | Statements of Changes in Net Assets |
(Amounts in Thousands)
Victory Strategic Allocation Fund | Victory INCORE Fund for Income | Victory INCORE Investment Grade Convertible Fund | |||||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | ||||||||||||||||||||||
From Investment Activities: | |||||||||||||||||||||||||||
Operations: | |||||||||||||||||||||||||||
Net investment income (loss) | $ | 685 | $ | 982 | $ | 30,284 | $ | 11,660 | $ | 3,040 | $ | 1,182 | |||||||||||||||
Net realized gains (losses) from affiliated and unaffiliated investment transactions | (131 | ) | (558 | ) | (21,771 | ) | (1,326 | ) | 4,521 | 4,840 | |||||||||||||||||
Distributions of realized gains from underlying investment companies | 760 | 1,885 | — | — | — | — | |||||||||||||||||||||
Net change in unrealized appreciation (depreciation) on affiliated and unaffiliated investments | (2,110 | ) | 1,661 | (15,006 | ) | (16,727 | ) | (6,291 | ) | 12,555 | |||||||||||||||||
Change in net assets resulting from operations | (796 | ) | 3,970 | (6,493 | ) | (6,393 | ) | 1,270 | 18,577 | ||||||||||||||||||
Distributions to Shareholders: (a) | |||||||||||||||||||||||||||
Class A Shares | (588 | ) | (403 | ) | (9,021 | ) | (17,071 | ) | (1,250 | ) | (562 | ) | |||||||||||||||
Class C Shares | (260 | ) | (194 | ) | (1,730 | ) | (2,700 | ) | — | — | |||||||||||||||||
Class I Shares | (431 | ) | (138 | ) | (20,880 | ) | (28,522 | ) | (4,145 | ) | (1,106 | ) | |||||||||||||||
Class R Shares | (62 | ) | (42 | ) | (2,518 | ) | (3,526 | ) | — | — | |||||||||||||||||
Class R6 Shares | — | — | (630 | ) | (446 | ) | — | — | |||||||||||||||||||
Class Y Shares | — | — | (2,374 | ) | (766 | ) | — | — | |||||||||||||||||||
Change in net assets resulting from distributions to shareholders | (1,341 | ) | (777 | ) | (37,153 | ) | (53,031 | ) | (5,395 | ) | (1,668 | ) | |||||||||||||||
Change in net assets resulting from capital transactions | 990 | 2,374 | (276,137 | ) | (135,404 | ) | 33,345 | 27,222 | |||||||||||||||||||
Change in net assets | (1,147 | ) | 5,567 | (319,783 | ) | (194,828 | ) | 29,220 | 44,131 | ||||||||||||||||||
Net Assets: | |||||||||||||||||||||||||||
Beginning of period | 34,679 | 29,112 | 925,792 | 1,120,620 | 111,919 | 67,788 | |||||||||||||||||||||
End of period | $ | 33,532 | $ | 34,679 | $ | 606,009 | $ | 925,792 | $ | 141,139 | $ | 111,919 |
(a) Current and prior year distributions to shareholders have been reclassified and conform to amended GAAP presentation under Regulation S-X (See Item 10 in the Notes to Financial Statements).
See notes to financial statements.
46
Victory Portfolios | Statements of Changes in Net Assets |
(Amounts in Thousands)
Victory Strategic Allocation Fund | Victory INCORE Fund for Income | Victory INCORE Investment Grade Convertible Fund | |||||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | ||||||||||||||||||||||
Capital Transactions: | |||||||||||||||||||||||||||
Class A Shares | |||||||||||||||||||||||||||
Proceeds from shares issued | $ | 8,204 | $ | 5,290 | $ | 37,903 | $ | 91,073 | $ | 9,823 | $ | 27,391 | |||||||||||||||
Distributions reinvested | 541 | 374 | 7,053 | 13,011 | 1,121 | 473 | |||||||||||||||||||||
Cost of shares redeemed | (3,708 | ) | (9,029 | ) | (105,462 | ) | (260,330 | ) | (28,804 | ) | (15,181 | ) | |||||||||||||||
Total Class A Shares | $ | 5,037 | $ | (3,365 | ) | $ | (60,506 | ) | $ | (156,246 | ) | $ | (17,860 | ) | $ | 12,683 | |||||||||||
Class C Shares | |||||||||||||||||||||||||||
Proceeds from shares issued | $ | 836 | $ | 1,978 | $ | 3,667 | $ | 4,087 | $ | — | $ | — | |||||||||||||||
Distributions reinvested | 242 | 175 | 1,460 | 2,123 | — | — | |||||||||||||||||||||
Cost of shares redeemed | (5,109 | ) | (3,994 | ) | (21,008 | ) | (25,217 | ) | — | — | |||||||||||||||||
Total Class C Shares | $ | (4,031 | ) | $ | (1,841 | ) | $ | (15,881 | ) | $ | (19,007 | ) | $ | — | $ | — | |||||||||||
Class I Shares | |||||||||||||||||||||||||||
Proceeds from shares issued | $ | 5,532 | $ | 8,705 | $ | 169,867 | $ | 212,835 | $ | 105,023 | $ | 47,874 | |||||||||||||||
Distributions reinvested | 417 | 137 | 16,603 | 23,961 | 3,970 | 1,058 | |||||||||||||||||||||
Cost of shares redeemed | (5,703 | ) | (1,267 | ) | (351,187 | ) | (233,287 | ) | (57,788 | ) | (34,393 | ) | |||||||||||||||
Total Class I Shares | $ | 246 | $ | 7,575 | $ | (164,717 | ) | $ | 3,509 | $ | 51,205 | $ | 14,539 | ||||||||||||||
Class R Shares | |||||||||||||||||||||||||||
Proceeds from shares issued | $ | 60 | $ | 126 | $ | 7,811 | $ | 22,557 | $ | — | $ | — | |||||||||||||||
Distributions reinvested | 55 | 38 | 2,310 | 3,173 | — | — | |||||||||||||||||||||
Cost of shares redeemed | (377 | ) | (159 | ) | (22,520 | ) | (48,146 | ) | — | — | |||||||||||||||||
Total Class R Shares | $ | (262 | ) | $ | 5 | $ | (12,399 | ) | $ | (22,416 | ) | $ | — | $ | — | ||||||||||||
Class R6 Shares | |||||||||||||||||||||||||||
Proceeds from shares issued | $ | — | $ | — | $ | 6,801 | $ | 6,678 | $ | — | $ | — | |||||||||||||||
Distributions reinvested | — | — | 630 | 446 | — | — | |||||||||||||||||||||
Cost of shares redeemed | — | — | (2,414 | ) | (3,530 | ) | — | — | |||||||||||||||||||
Total Class R6 Shares | $ | — | $ | — | $ | 5,017 | $ | 3,594 | $ | — | $ | — | |||||||||||||||
Class Y Shares | |||||||||||||||||||||||||||
Proceeds from shares issued | $ | — | $ | — | $ | 17,606 | $ | 67,393 | $ | — | $ | — | |||||||||||||||
Distributions reinvested | — | — | 1,219 | 268 | — | — | |||||||||||||||||||||
Cost of shares redeemed | — | — | (46,476 | ) | (12,499 | ) | — | — | |||||||||||||||||||
Total Class Y Shares | $ | — | $ | — | $ | (27,651 | ) | $ | 55,162 | $ | — | $ | — | ||||||||||||||
Change in net assets resulting from capital transactions | $ | 990 | $ | 2,374 | $ | (276,137 | ) | $ | (135,404 | ) | $ | 33,345 | $ | 27,222 |
(continues on next page)
See notes to financial statements.
47
Victory Portfolios | Statements of Changes in Net Assets |
(Amounts in Thousands) (continued)
Victory Strategic Allocation Fund | Victory INCORE Fund for Income | Victory INCORE Investment Grade Convertible Fund | |||||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | ||||||||||||||||||||||
Share Transactions: | |||||||||||||||||||||||||||
Class A Shares | |||||||||||||||||||||||||||
Issued | 506 | 337 | 4,291 | 9,715 | 592 | 1,912 | |||||||||||||||||||||
Reinvested | 33 | 24 | 803 | 1,398 | 69 | 32 | |||||||||||||||||||||
Redeemed | (228 | ) | (578 | ) | (11,897 | ) | (27,963 | ) | (1,780 | ) | (991 | ) | |||||||||||||||
Total Class A Shares | 311 | (217 | ) | (6,803 | ) | (16,850 | ) | (1,119 | ) | 953 | |||||||||||||||||
Class C Shares | |||||||||||||||||||||||||||
Issued | 52 | 128 | 418 | 442 | — | — | |||||||||||||||||||||
Reinvested | 15 | 11 | 168 | 230 | — | — | |||||||||||||||||||||
Redeemed | (318 | ) | (259 | ) | (2,401 | ) | (2,721 | ) | — | — | |||||||||||||||||
Total Class C Shares | (251 | ) | (120 | ) | (1,815 | ) | (2,049 | ) | — | — | |||||||||||||||||
Class I Shares | |||||||||||||||||||||||||||
Issued | 337 | 553 | 19,222 | 22,820 | 6,340 | 3,159 | |||||||||||||||||||||
Reinvested | 25 | 9 | 1,889 | 2,580 | 243 | 72 | |||||||||||||||||||||
Redeemed | (349 | ) | (81 | ) | (39,658 | ) | (24,959 | ) | (3,531 | ) | (2,355 | ) | |||||||||||||||
Total Class I Shares | 13 | 481 | (18,547 | ) | 441 | 3,052 | 876 | ||||||||||||||||||||
Class R Shares | |||||||||||||||||||||||||||
Issued | 4 | 8 | 877 | 2,385 | — | — | |||||||||||||||||||||
Reinvested | 3 | 2 | 263 | 341 | — | — | |||||||||||||||||||||
Redeemed | (23 | ) | (10 | ) | (2,539 | ) | (5,096 | ) | — | — | |||||||||||||||||
Total Class R Shares | (16 | ) | — | (a) | (1,399 | ) | (2,370 | ) | — | — | |||||||||||||||||
Class R6 Shares | |||||||||||||||||||||||||||
Issued | — | — | 773 | 714 | — | — | |||||||||||||||||||||
Reinvested | — | — | 72 | 48 | — | — | |||||||||||||||||||||
Redeemed | — | — | (274 | ) | (378 | ) | — | — | |||||||||||||||||||
Total Class R6 Shares | — | — | 571 | 384 | — | — | |||||||||||||||||||||
Class Y Shares | |||||||||||||||||||||||||||
Issued | — | — | 1,994 | 7,343 | — | — | |||||||||||||||||||||
Reinvested | — | — | 139 | 29 | — | — | |||||||||||||||||||||
Redeemed | — | — | (5,267 | ) | (1,345 | ) | — | — | |||||||||||||||||||
Total Class Y Shares | — | — | (3,134 | ) | 6,027 | — | — | ||||||||||||||||||||
Change in Shares | 57 | 144 | (31,127 | ) | (14,417 | ) | 1,933 | 1,829 |
(a) Rounds to less than 1.
See notes to financial statements.
48
Victory Portfolios | Financial Highlights |
For a Share Outstanding Throughout Each Period
Victory Diversified Stock Fund | |||||||||||||||||||||||
Class A Shares | |||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2016 | Year Ended October 31, 2015 | Year Ended October 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 22.03 | $ | 18.01 | $ | 20.80 | $ | 23.04 | $ | 21.10 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) | 0.06 | (a) | 0.13 | (a) | 0.20 | (a) | 0.15 | 0.21 | |||||||||||||||
Net realized and unrealized gains (losses) on investments | 0.17 | 4.28 | (1.04 | ) | 0.97 | 2.32 | |||||||||||||||||
Total from Investment Activities | 0.23 | 4.41 | (0.84 | ) | 1.12 | 2.53 | |||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.06 | ) | (0.17 | ) | (0.19 | ) | (0.15 | ) | (0.20 | ) | |||||||||||||
Net realized gains from investments | (4.30 | ) | (0.22 | ) | (1.76 | ) | (3.21 | ) | (0.39 | ) | |||||||||||||
Total Distributions to Shareholders | (4.36 | ) | (0.39 | ) | (1.95 | ) | (3.36 | ) | (0.59 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 17.90 | $ | 22.03 | $ | 18.01 | $ | 20.80 | $ | 23.04 | |||||||||||||
Total Return (excludes sales charge) | (0.20 | )% | 24.85 | % | (4.21 | )% | 4.85 | % | 12.13 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 264,297 | $ | 311,255 | $ | 352,748 | $ | 532,180 | $ | 810,011 | |||||||||||||
Ratio of net expenses to average net assets | 1.05 | % | 1.05 | % | 1.07 | % | 1.09 | % | 1.10 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 0.32 | % | 0.66 | % | 1.06 | % | 0.68 | % | 0.93 | % | |||||||||||||
Portfolio turnover (b) | 112 | % | 133 | %(c) | 74 | % | 74 | % | 70 | % |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
(c) Portfolio turnover increase due to a change within the portfolio holdings during the year.
See notes to financial statements.
49
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory Diversified Stock Fund | |||||||||||||||||||||||
Class C Shares | |||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2016 | Year Ended October 31, 2015 | Year Ended October 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 21.12 | $ | 17.30 | $ | 20.07 | $ | 22.38 | $ | 20.53 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) | (0.10 | )(a) | (0.02 | )(a) | 0.04 | (a) | (0.03 | ) | 0.02 | ||||||||||||||
Net realized and unrealized gains (losses) on investments | 0.18 | 4.10 | (1.00 | ) | 0.95 | 2.25 | |||||||||||||||||
Total from Investment Activities | 0.08 | 4.08 | (0.96 | ) | 0.92 | 2.27 | |||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | — | (0.04 | ) | (0.05 | ) | (0.02 | ) | (0.03 | ) | ||||||||||||||
Net realized gains from investments | (4.30 | ) | (0.22 | ) | (1.76 | ) | (3.21 | ) | (0.39 | ) | |||||||||||||
Total Distributions to Shareholders | (4.30 | ) | (0.26 | ) | (1.81 | ) | (3.23 | ) | (0.42 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 16.90 | $ | 21.12 | $ | 17.30 | $ | 20.07 | $ | 22.38 | |||||||||||||
Total Return (excludes contingent deferred sales charge) | (1.02 | )% | 23.82 | % | (5.01 | )% | 4.01 | % | 11.18 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 11,586 | $ | 36,001 | $ | 50,213 | $ | 67,997 | $ | 76,697 | |||||||||||||
Ratio of net expenses to average net assets | 1.89 | % | 1.87 | % | 1.90 | % | 1.91 | % | 1.89 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | (0.53 | )% | (0.12 | )% | 0.23 | % | (0.16 | )% | 0.13 | % | |||||||||||||
Portfolio turnover (b) | 112 | % | 133 | %(c) | 74 | % | 74 | % | 70 | % |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
(c) Portfolio turnover increase due to a change within the portfolio holdings during the year.
See notes to financial statements.
50
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory Diversified Stock Fund | |||||||||||||||||||||||
Class I Shares | |||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2016 | Year Ended October 31, 2015 | Year Ended October 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 22.00 | $ | 17.98 | $ | 20.77 | $ | 23.01 | $ | 21.08 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) | 0.11 | (a) | 0.19 | (a) | 0.24 | (a) | 0.20 | 0.27 | |||||||||||||||
Net realized and unrealized gains (losses) on investments | 0.16 | 4.27 | (1.03 | ) | 0.98 | 2.31 | |||||||||||||||||
Total from Investment Activities | 0.27 | 4.46 | (0.79 | ) | 1.18 | 2.58 | |||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.10 | ) | (0.22 | ) | (0.24 | ) | (0.21 | ) | (0.26 | ) | |||||||||||||
Net realized gains from investments | (4.30 | ) | (0.22 | ) | (1.76 | ) | (3.21 | ) | (0.39 | ) | |||||||||||||
Total Distributions to Shareholders | (4.40 | ) | (0.44 | ) | (2.00 | ) | (3.42 | ) | (0.65 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 17.87 | $ | 22.00 | $ | 17.98 | $ | 20.77 | $ | 23.01 | |||||||||||||
Total Return | 0.05 | % | 25.21 | % | (3.96 | )% | 5.16 | % | 12.39 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 46,122 | $ | 74,466 | $ | 162,923 | $ | 313,482 | $ | 362,936 | |||||||||||||
Ratio of net expenses to average net assets | 0.79 | % | 0.80 | % | 0.80 | % | 0.81 | % | 0.82 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 0.58 | % | 0.99 | % | 1.33 | % | 0.94 | % | 1.20 | % | |||||||||||||
Portfolio turnover (b) | 112 | % | 133 | %(c) | 74 | % | 74 | % | 70 | % |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
(c) Portfolio turnover increase due to a change within the portfolio holdings during the year.
See notes to financial statements.
51
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory Diversified Stock Fund | |||||||||||||||||||||||
Class R Shares | |||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2016 | Year Ended October 31, 2015 | Year Ended October 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 21.71 | $ | 17.75 | $ | 20.54 | $ | 22.79 | $ | 20.89 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) | 0.01 | (a) | 0.07 | (a) | 0.14 | (a) | 0.08 | 0.14 | |||||||||||||||
Net realized and unrealized gains (losses) on investments | 0.16 | 4.23 | (1.04 | ) | 0.97 | 2.29 | |||||||||||||||||
Total from Investment Activities | 0.17 | 4.30 | (0.90 | ) | 1.05 | 2.43 | |||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | — | (b) | (0.12 | ) | (0.13 | ) | (0.09 | ) | (0.14 | ) | |||||||||||||
Net realized gains from investments | (4.30 | ) | (0.22 | ) | (1.76 | ) | (3.21 | ) | (0.39 | ) | |||||||||||||
Total Distributions to Shareholders | (4.30 | ) | (0.34 | ) | (1.89 | ) | (3.30 | ) | (0.53 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 17.58 | $ | 21.71 | $ | 17.75 | $ | 20.54 | $ | 22.79 | |||||||||||||
Total Return | (0.47 | )% | 24.56 | % | (4.55 | )% | 4.57 | % | 11.77 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 54,776 | $ | 66,310 | $ | 69,751 | $ | 89,949 | $ | 107,486 | |||||||||||||
Ratio of net expenses to average net assets | 1.34 | % | 1.33 | % | 1.36 | % | 1.38 | % | 1.38 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 0.03 | % | 0.38 | % | 0.77 | % | 0.38 | % | 0.66 | % | |||||||||||||
Portfolio turnover (c) | 112 | % | 133 | %(d) | 74 | % | 74 | % | 70 | % |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) Amount is less than $0.005 per share.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
(d) Portfolio turnover increase due to a change within the portfolio holdings during the year.
See notes to financial statements.
52
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory Diversified Stock Fund | |||||||||||||||||||||||
Class R6 Shares | |||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2016 | Year Ended October 31, 2015 | Period Ended October 31, 2014(a) | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 22.00 | $ | 17.98 | $ | 20.77 | $ | 23.01 | $ | 21.45 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) | 0.11 | (b) | 0.18 | (b) | 0.26 | (b) | 0.19 | 0.19 | |||||||||||||||
Net realized and unrealized gains (losses) on investments | 0.17 | 4.29 | (1.05 | ) | 0.99 | 1.58 | |||||||||||||||||
Total from Investment Activities | 0.28 | 4.47 | (0.79 | ) | 1.18 | 1.77 | |||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.10 | ) | (0.23 | ) | (0.24 | ) | (0.21 | ) | (0.21 | ) | |||||||||||||
Net realized gains from investments | (4.30 | ) | (0.22 | ) | (1.76 | ) | (3.21 | ) | — | ||||||||||||||
Total Distributions to Shareholders | (4.40 | ) | (0.45 | ) | (2.00 | ) | (3.42 | ) | (0.21 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 17.88 | $ | 22.00 | $ | 17.98 | $ | 20.77 | $ | 23.01 | |||||||||||||
Total Return (c) | 0.10 | % | 25.24 | % | (3.93 | )% | 5.19 | % | 8.27 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 2,189 | $ | 2,427 | $ | 2,332 | $ | 5,447 | $ | 54 | |||||||||||||
Ratio of net expenses to average net assets (d) | 0.78 | % | 0.78 | % | 0.78 | % | 0.78 | % | 0.78 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets (d) | 0.58 | % | 0.94 | % | 1.40 | % | 0.78 | % | 1.25 | % | |||||||||||||
Ratio of gross expenses to average net assets (d) (e) | 1.21 | % | 1.29 | % | 0.92 | % | 2.01 | % | 29.23 | % | |||||||||||||
Portfolio turnover (c) (f) | 112 | % | 133 | %(g) | 74 | % | 74 | % | 70 | % |
(a) Class R6 Shares commenced operations on March 3, 2014.
(b) Per share investment income (loss) has been calculated using the average daily shares method
(c) Not annualized for periods less than one year.
(d) Annualized for periods less than one year.
(e) During the period, certain fees were reduced and/or reimbursed. If such fee reductions and/or reimbursements had not occurred, the ratios would have been as indicated
(f) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
(g) Portfolio turnover increase due to a change within the portfolio holdings during the year.
See notes to financial statements.
53
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory Diversified Stock Fund | |||||||||||||||||||||||
Class Y Shares | |||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2016 | Year Ended October 31, 2015 | Year Ended October 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 22.02 | $ | 18.00 | $ | 20.79 | $ | 23.04 | $ | 21.10 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) | 0.11 | (a) | 0.17 | (a) | 0.23 | (a) | 0.19 | 0.26 | |||||||||||||||
Net realized and unrealized gains (losses) on investments | 0.16 | 4.28 | (1.03 | ) | 0.97 | 2.32 | |||||||||||||||||
Total from Investment Activities | 0.27 | 4.45 | (0.80 | ) | 1.16 | 2.58 | |||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.09 | ) | (0.21 | ) | (0.23 | ) | (0.20 | ) | (0.25 | ) | |||||||||||||
Net realized gains from investments | (4.30 | ) | (0.22 | ) | (1.76 | ) | (3.21 | ) | (0.39 | ) | |||||||||||||
Total Distributions to Shareholders | (4.39 | ) | (0.43 | ) | (1.99 | ) | (3.41 | ) | (0.64 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 17.90 | $ | 22.02 | $ | 18.00 | $ | 20.79 | $ | 23.04 | |||||||||||||
Total Return | 0.01 | % | 25.11 | % | (4.01 | )% | 5.06 | % | 12.39 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 4,373 | $ | 8,843 | $ | 11,907 | $ | 18,526 | $ | 23,001 | |||||||||||||
Ratio of net expenses to average net assets | 0.86 | % | 0.86 | % | 0.86 | % | 0.86 | % | 0.86 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 0.54 | % | 0.88 | % | 1.27 | % | 0.90 | % | 1.17 | % | |||||||||||||
Ratio of gross expenses to average net assets (b) | 1.13 | % | 0.94 | % | 0.96 | % | 0.98 | % | 0.95 | % | |||||||||||||
Portfolio turnover (c) | 112 | % | 133 | %(d) | 74 | % | 74 | % | 70 | % |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) During the period, certain fees were reduced and/or reimbursed. If such fee reductions and/or reimbursements had not occurred, the ratios would have been as indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
(d) Portfolio turnover increase due to a change within the portfolio holdings during the year.
See notes to financial statements.
54
Victory Portfolios | Financial Highlights |
For a Share Outstanding Throughout Each Period
Victory NewBridge Large Cap Growth Fund | |||||||||||||||||||||||
Class A Shares | |||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2016 | Year Ended October 31, 2015 | Year Ended October 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 10.23 | $ | 12.79 | $ | 19.17 | $ | 19.38 | $ | 18.62 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) | (0.09 | )(a) | (0.09 | )(a) | (0.11 | )(a) | (0.20 | ) | (0.23 | ) | |||||||||||||
Net realized and unrealized gains (losses) on investments | 0.85 | 1.82 | (0.22 | ) | 1.63 | 2.66 | |||||||||||||||||
Total from Investment Activities | 0.76 | 1.73 | (0.33 | ) | 1.43 | 2.43 | |||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net realized gains from investments | (3.05 | ) | (4.29 | ) | (6.05 | ) | (1.64 | ) | (1.67 | ) | |||||||||||||
Total Distributions to Shareholders | (3.05 | ) | (4.29 | ) | (6.05 | ) | (1.64 | ) | (1.67 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 7.94 | $ | 10.23 | $ | 12.79 | $ | 19.17 | $ | 19.38 | |||||||||||||
Total Return (excludes sales charge) | 9.41 | % | 20.84 | % | (3.00 | )% | 7.86 | % | 13.58 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 5,546 | $ | 7,639 | $ | 11,700 | $ | 20,207 | $ | 27,799 | |||||||||||||
Ratio of net expenses to average net assets | 1.36 | % | 1.40 | % | 1.30 | % | 1.26 | % | 1.26 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | (1.05 | )% | (0.94 | )% | (0.79 | )% | (0.73 | )% | (0.72 | )% | |||||||||||||
Ratio of gross expenses to average net assets | 1.47 | %(b) | 1.40 | % | 1.30 | % | 1.26 | % | 1.26 | % | |||||||||||||
Portfolio turnover (c) | 41 | % | 60 | % | 52 | % | 55 | % | 47 | % |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) During the period, certain fees were reduced and/or reimbursed. If such fee reductions and/or reimbursements had not occurred, the ratios would have been as indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
See notes to financial statements.
55
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory NewBridge Large Cap Growth Fund | |||||||||||||||||||||||
Class C Shares | |||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2016 | Year Ended October 31, 2015 | Year Ended October 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 7.59 | $ | 10.65 | $ | 17.06 | $ | 17.56 | $ | 17.15 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) | (0.10 | )(a) | (0.12 | )(a) | (0.18 | )(a) | (0.29 | ) | (0.30 | ) | |||||||||||||
Net realized and unrealized gains (losses) on investments | 0.56 | 1.35 | (0.18 | ) | 1.43 | 2.38 | |||||||||||||||||
Total from Investment Activities | 0.46 | 1.23 | (0.36 | ) | 1.14 | 2.08 | |||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net realized gains from investments | (3.05 | ) | (4.29 | ) | (6.05 | ) | (1.64 | ) | (1.67 | ) | |||||||||||||
Total Distributions to Shareholders | (3.05 | ) | (4.29 | ) | (6.05 | ) | (1.64 | ) | (1.67 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 5.00 | $ | 7.59 | $ | 10.65 | $ | 17.06 | $ | 17.56 | |||||||||||||
Total Return (excludes contingent deferred sales charge) | 8.47 | % | 20.06 | % | (3.79 | )% | 6.94 | % | 12.63 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 3,042 | $ | 4,201 | $ | 6,321 | $ | 9,389 | $ | 10,656 | |||||||||||||
Ratio of net expenses to average net assets | 2.10 | % | 2.10 | % | 2.10 | % | 2.10 | % | 2.10 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | (1.78 | )% | (1.64 | )% | (1.59 | )% | (1.58 | )% | (1.57 | )% | |||||||||||||
Ratio of gross expenses to average net assets | 2.40 | %(b) | 2.27 | %(b) | 2.15 | %(b) | 2.13 | %(b) | 2.10 | % | |||||||||||||
Portfolio turnover (c) | 41 | % | 60 | % | 52 | % | 55 | % | 47 | % |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) During the period, certain fees were reduced and/or reimbursed. If such fee reductions and/or reimbursements had not occurred, the ratios would have been as indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
See notes to financial statements.
56
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory NewBridge Large Cap Growth Fund | |||||||||||||||||||||||
Class I Shares | |||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2016 | Year Ended October 31, 2015 | Year Ended October 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 10.71 | $ | 13.13 | $ | 19.47 | $ | 19.61 | $ | 18.76 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) | (0.06 | )(a) | (0.05 | )(a) | (0.05 | )(a) | (0.26 | ) | (0.06 | ) | |||||||||||||
Net realized and unrealized gains (losses) on investments | 0.89 | 1.92 | (0.24 | ) | 1.76 | 2.58 | |||||||||||||||||
Total from Investment Activities | 0.83 | 1.87 | (0.29 | ) | 1.50 | 2.52 | |||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net realized gains from investments | (3.05 | ) | (4.29 | ) | (6.05 | ) | (1.64 | ) | (1.67 | ) | |||||||||||||
Total Distributions to Shareholders | (3.05 | ) | (4.29 | ) | (6.05 | ) | (1.64 | ) | (1.67 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 8.49 | $ | 10.71 | $ | 13.13 | $ | 19.47 | $ | 19.61 | |||||||||||||
Total Return | 9.74 | % | 21.52 | % | (2.67 | )% | 8.14 | % | 13.98 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 10,633 | $ | 16,103 | $ | 31,299 | $ | 63,569 | $ | 137,831 | |||||||||||||
Ratio of net expenses to average net assets | 0.95 | % | 0.95 | % | 0.88 | % | 0.95 | % | 0.95 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | (0.63 | )% | (0.47 | )% | (0.36 | )% | (0.41 | )% | (0.44 | )% | |||||||||||||
Ratio of gross expenses to average net assets | 1.09 | %(b) | 1.01 | %(b) | 0.88 | % | 1.04 | %(b) | 1.00 | %(b) | |||||||||||||
Portfolio turnover (c) | 41 | % | 60 | % | 52 | % | 55 | % | 47 | % |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) During the period, certain fees were reduced and/or reimbursed. If such fee reductions and/or reimbursements had not occurred, the ratios would have been as indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
See notes to financial statements.
57
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory NewBridge Large Cap Growth Fund | |||||||||||||||||||||||
Class R Shares | |||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2016 | Year Ended October 31, 2015 | Year Ended October 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 9.11 | $ | 11.88 | $ | 18.29 | $ | 18.63 | $ | 18.02 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) | (0.10 | )(a) | (0.11 | )(a) | (0.14 | )(a) | (0.22 | ) | (0.21 | ) | |||||||||||||
Net realized and unrealized gains (losses) on investments | 0.73 | 1.63 | (0.22 | ) | 1.52 | 2.49 | |||||||||||||||||
Total from Investment Activities | 0.63 | 1.52 | (0.36 | ) | 1.30 | 2.28 | |||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net realized gains from investments | (3.05 | ) | (4.29 | ) | (6.05 | ) | (1.64 | ) | (1.67 | ) | |||||||||||||
Total Distributions to Shareholders | (3.05 | ) | (4.29 | ) | (6.05 | ) | (1.64 | ) | (1.67 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 6.69 | $ | 9.11 | $ | 11.88 | $ | 18.29 | $ | 18.63 | |||||||||||||
Total Return | 9.06 | % | 20.56 | % | (3.43 | )% | 7.45 | % | 13.17 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 728 | $ | 993 | $ | 940 | $ | 808 | $ | 935 | |||||||||||||
Ratio of net expenses to average net assets | 1.65 | % | 1.65 | % | 1.65 | % | 1.65 | % | 1.65 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | (1.34 | )% | (1.21 | )% | (1.16 | )% | (1.11 | )% | (1.13 | )% | |||||||||||||
Ratio of gross expenses to average net assets (b) | 3.12 | % | 2.83 | % | 2.80 | % | 3.06 | % | 2.72 | % | |||||||||||||
Portfolio turnover (c) | 41 | % | 60 | % | 52 | % | 55 | % | 47 | % |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) During the period, certain fees were reduced and/or reimbursed. If such fee reductions and/or reimbursements had not occurred, the ratios would have been as indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
See notes to financial statements.
58
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory NewBridge Large Cap Growth Fund | |||||||||||||||||||||||
Class Y Shares | |||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2016 | Year Ended October 31, 2015 | Year Ended October 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 10.48 | $ | 12.96 | $ | 19.31 | $ | 19.47 | $ | 18.65 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) | (0.06 | )(a) | (0.06 | )(a) | (0.07 | )(a) | (0.28 | ) | (0.17 | ) | |||||||||||||
Net realized and unrealized gains (losses) on investments | 0.87 | 1.87 | (0.23 | ) | 1.76 | 2.66 | |||||||||||||||||
Total from Investment Activities | 0.81 | 1.81 | (0.30 | ) | 1.48 | 2.49 | |||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net realized gains from investments | (3.05 | ) | (4.29 | ) | (6.05 | ) | (1.64 | ) | (1.67 | ) | |||||||||||||
Total Distributions to Shareholders | (3.05 | ) | (4.29 | ) | (6.05 | ) | (1.64 | ) | (1.67 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 8.24 | $ | 10.48 | $ | 12.96 | $ | 19.31 | $ | 19.47 | |||||||||||||
Total Return | 9.75 | % | 21.30 | % | (2.76 | )% | 8.09 | % | 13.90 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 3,411 | $ | 2,128 | $ | 4,344 | $ | 12,141 | $ | 27,056 | |||||||||||||
Ratio of net expenses to average net assets | 1.02 | % | 1.02 | % | 1.02 | % | 1.02 | % | 1.02 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | (0.72 | )% | (0.55 | )% | (0.50 | )% | (0.46 | )% | (0.46 | )% | |||||||||||||
Ratio of gross expenses to average net assets (b) | 1.48 | % | 1.42 | % | 1.08 | % | 1.04 | % | 1.03 | % | |||||||||||||
Portfolio turnover (c) | 41 | % | 60 | % | 52 | % | 55 | % | 47 | % |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) During the period, certain fees were reduced and/or reimbursed. If such fee reductions and/or reimbursements had not occurred, the ratios would have been as indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
See notes to financial statements.
59
Victory Portfolios | Financial Highlights |
For a Share Outstanding Throughout Each Period
Victory Special Value Fund | |||||||||||||||||||||||
Class A Shares | |||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2016 | Year Ended October 31, 2015 | Year Ended October 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 26.31 | $ | 21.48 | $ | 22.46 | $ | 21.71 | $ | 19.98 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) | 0.05 | (a) | 0.13 | (a) | 0.20 | (a) | 0.12 | (0.03 | ) | ||||||||||||||
Net realized and unrealized gains (losses) on investments | (0.15 | )(b) | 4.95 | (1.11 | ) | 0.63 | 1.76 | ||||||||||||||||
Total from Investment Activities | (0.10 | ) | 5.08 | (0.91 | ) | 0.75 | 1.73 | ||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.11 | ) | (0.25 | ) | (0.07 | ) | — | — | |||||||||||||||
Total Distributions to Shareholders | (0.11 | ) | (0.25 | ) | (0.07 | ) | — | — | |||||||||||||||
Net Asset Value, End of Period | $ | 26.10 | $ | 26.31 | $ | 21.48 | $ | 22.46 | $ | 21.71 | |||||||||||||
Total Return (excludes sales charge) | (0.42 | )% | 23.84 | % | (4.06 | )% | 3.45 | % | 8.66 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 32,565 | $ | 35,223 | $ | 36,971 | $ | 48,913 | $ | 71,027 | |||||||||||||
Ratio of net expenses to average net assets | 1.17 | % | 1.17 | % | 1.20 | % | 1.28 | % | 1.31 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 0.19 | % | 0.53 | % | 0.93 | % | 0.52 | % | 0.01 | % | |||||||||||||
Ratio of gross expenses to average net assets | 1.27 | %(c) | 1.27 | %(c) | 1.30 | %(c) | 1.35 | %(c) | 1.31 | % | |||||||||||||
Portfolio turnover (d) | 113 | % | 135 | % | 76 | % | 137 | % | 174 | % |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) The amount shown for a share outstanding throughout the period does not accord with the change in aggregate gains and losses in the portfolio of securities during the period because of timing of sales and purchases of fund shares in relation to fluctuating market values during the period.
(c) During the period, certain fees were reduced and/or reimbursed. If such fee reductions and/or reimbursements had not occurred, the ratios would have been as indicated.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
See notes to financial statements.
60
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory Special Value Fund | |||||||||||||||||||||||
Class C Shares | |||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2016 | Year Ended October 31, 2015 | Year Ended October 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 23.66 | $ | 19.34 | $ | 20.34 | $ | 19.82 | $ | 18.41 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) | (0.18 | )(a) | (0.08 | )(a) | 0.01 | (a) | (0.10 | ) | (0.20 | ) | |||||||||||||
Net realized and unrealized gains (losses) on investments | (0.14 | )(b) | 4.45 | (1.01 | ) | 0.62 | 1.61 | ||||||||||||||||
Total from Investment Activities | (0.32 | ) | 4.37 | (1.00 | ) | 0.52 | 1.41 | ||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | — | (0.05 | ) | — | — | — | |||||||||||||||||
Total Distributions to Shareholders | — | (0.05 | ) | — | — | — | |||||||||||||||||
Net Asset Value, End of Period | $ | 23.34 | $ | 23.66 | $ | 19.34 | $ | 20.34 | $ | 19.82 | |||||||||||||
Total Return (excludes contingent deferred sales charge) | (1.35 | )% | 22.65 | % | (4.92 | )% | 2.62 | % | 7.66 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 2,145 | $ | 7,296 | $ | 7,955 | $ | 11,253 | $ | 14,970 | |||||||||||||
Ratio of net expenses to average net assets | 2.10 | % | 2.10 | % | 2.09 | % | 2.13 | % | 2.20 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | (0.75 | )% | (0.38 | )% | 0.04 | % | (0.35 | )% | (0.88 | )% | |||||||||||||
Ratio of gross expenses to average net assets | 2.27 | %(c) | 2.21 | %(c) | 2.19 | %(c) | 2.21 | %(c) | 2.20 | % | |||||||||||||
Portfolio turnover (d) | 113 | % | 135 | % | 76 | % | 137 | % | 174 | % |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) The amount shown for a share outstanding throughout the period does not accord with the change in aggregate gains and losses in the portfolio of securities during the period because of timing of sales and purchases of fund shares in relation to fluctuating market values during the period.
(c) During the period, certain fees were reduced and/or reimbursed. If such fee reductions and/or reimbursements had not occurred, the ratios would have been as indicated.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
See notes to financial statements.
61
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory Special Value Fund | |||||||||||||||||||||||
Class I Shares | |||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2016 | Year Ended October 31, 2015 | Year Ended October 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 26.62 | $ | 21.76 | $ | 22.78 | $ | 21.96 | $ | 20.16 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) | 0.09 | (a) | 0.13 | (a) | 0.23 | (a) | 0.19 | 0.01 | |||||||||||||||
Net realized and unrealized gains (losses) on investments | (0.15 | )(b) | 5.01 | (1.12 | ) | 0.63 | 1.79 | ||||||||||||||||
Total from Investment Activities | (0.06 | ) | 5.14 | (0.89 | ) | 0.82 | 1.80 | ||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.17 | ) | (0.28 | ) | (0.13 | ) | — | — | |||||||||||||||
Total Distributions to Shareholders | (0.17 | ) | (0.28 | ) | (0.13 | ) | — | — | |||||||||||||||
Net Asset Value, End of Period | $ | 26.39 | $ | 26.62 | $ | 21.76 | $ | 22.78 | $ | 21.96 | |||||||||||||
Total Return | (0.28 | )% | 23.86 | % | (3.93 | )% | 3.73 | % | 8.93 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 3,678 | $ | 3,703 | $ | 4,016 | $ | 6,285 | $ | 8,714 | |||||||||||||
Ratio of net expenses to average net assets | 1.02 | % | 1.15 | % | 1.05 | % | 1.02 | % | 1.01 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 0.31 | % | 0.56 | % | 1.07 | % | 0.78 | % | 0.30 | % | |||||||||||||
Ratio of gross expenses to average net assets | 1.16 | %(c) | 1.25 | %(c) | 1.15 | %(c) | 1.09 | %(c) | 1.01 | % | |||||||||||||
Portfolio turnover (d) | 113 | % | 135 | % | 76 | % | 137 | % | 174 | % |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) The amount shown for a share outstanding throughout the period does not accord with the change in aggregate gains and losses in the portfolio of securities during the period because of timing of sales and purchases of fund shares in relation to fluctuating market values during the period.
(c) During the period, certain fees were reduced and/or reimbursed. If such fee reductions and/or reimbursements had not occurred, the ratios would have been as indicated.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
See notes to financial statements.
62
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory Special Value Fund | |||||||||||||||||||||||
Class R Shares | |||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2016 | Year Ended October 31, 2015 | Year Ended October 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 25.24 | $ | 20.63 | $ | 21.57 | $ | 20.91 | $ | 19.30 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) | (0.03 | )(a) | 0.05 | (a) | 0.14 | (a) | 0.04 | (0.09 | ) | ||||||||||||||
Net realized and unrealized gains (losses) on investments | (0.15 | )(b) | 4.75 | (1.07 | ) | 0.62 | 1.70 | ||||||||||||||||
Total from Investment Activities | (0.18 | ) | 4.80 | (0.93 | ) | 0.66 | 1.61 | ||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.04 | ) | (0.19 | ) | (0.01 | ) | — | — | |||||||||||||||
Total Distributions to Shareholders | (0.04 | ) | (0.19 | ) | (0.01 | ) | — | — | |||||||||||||||
Net Asset Value, End of Period | $ | 25.02 | $ | 25.24 | $ | 20.63 | $ | 21.57 | $ | 20.91 | |||||||||||||
Total Return | (0.71 | )% | 23.43 | % | (4.29 | )% | 3.16 | % | 8.34 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 26,532 | $ | 36,688 | $ | 34,784 | $ | 46,357 | $ | 59,036 | |||||||||||||
Ratio of net expenses to average net assets | 1.46 | % | 1.47 | % | 1.46 | % | 1.55 | % | 1.61 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | (0.10 | )% | 0.24 | % | 0.67 | % | 0.23 | % | (0.30 | )% | |||||||||||||
Ratio of gross expenses to average net assets | 1.56 | %(c) | 1.57 | %(c) | 1.56 | %(c) | 1.63 | %(c) | 1.61 | % | |||||||||||||
Portfolio turnover (d) | 113 | % | 135 | % | 76 | % | 137 | % | 174 | % |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) The amount shown for a share outstanding throughout the period does not accord with the change in aggregate gains and losses in the portfolio of securities during the period because of timing of sales and purchases of fund shares in relation to fluctuating market values during the period.
(c) During the period, certain fees were reduced and/or reimbursed. If such fee reductions and/or reimbursements had not occurred, the ratios would have been as indicated.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
See notes to financial statements.
63
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory Special Value Fund | |||||||||||||||||||||||
Class Y Shares | |||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2016 | Year Ended October 31, 2015 | Year Ended October 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 26.47 | $ | 21.62 | $ | 22.62 | $ | 21.80 | $ | 20.01 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) | 0.12 | (a) | 0.18 | (a) | 0.26 | (a) | 0.18 | 0.05 | |||||||||||||||
Net realized and unrealized gains (losses) on investments | (0.17 | )(b) | 4.98 | (1.12 | ) | 0.64 | 1.74 | ||||||||||||||||
Total from Investment Activities | (0.05 | ) | 5.16 | (0.86 | ) | 0.82 | 1.79 | ||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.17 | ) | (0.31 | ) | (0.14 | ) | — | — | |||||||||||||||
Total Distributions to Shareholders | (0.17 | ) | (0.31 | ) | (0.14 | ) | — | — | |||||||||||||||
Net Asset Value, End of Period | $ | 26.25 | $ | 26.47 | $ | 21.62 | $ | 22.62 | $ | 21.80 | |||||||||||||
Total Return | (0.21 | )% | 24.12 | % | (3.80 | )% | 3.76 | % | 8.95 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 436 | $ | 1,219 | $ | 1,170 | $ | 1,790 | $ | 2,068 | |||||||||||||
Ratio of net expenses to average net assets | 0.97 | % | 0.93 | % | 0.93 | % | 1.00 | % | 1.03 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 0.42 | % | 0.77 | % | 1.20 | % | 0.78 | % | 0.28 | % | |||||||||||||
Ratio of gross expenses to average net assets (c) | 2.82 | % | 2.07 | % | 1.75 | % | 1.58 | % | 1.33 | % | |||||||||||||
Portfolio turnover (d) | 113 | % | 135 | % | 76 | % | 137 | % | 174 | % |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) The amount shown for a share outstanding throughout the period does not accord with the change in aggregate gains and losses in the portfolio of securities during the period because of timing of sales and purchases of fund shares in relation to fluctuating market values during the period.
(c) During the period, certain fees were reduced and/or reimbursed. If such fee reductions and/or reimbursements had not occurred, the ratios would have been as indicated.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
See notes to financial statements.
64
Victory Portfolios | Financial Highlights |
For a Share Outstanding Throughout Each Period
Victory Strategic Allocation Fund | |||||||||||||||||||||||
Class A Shares | |||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2016 | Year Ended October 31, 2015 | Year Ended October 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 16.41 | $ | 14.80 | $ | 15.10 | $ | 15.69 | $ | 14.92 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) | 0.29 | (a) | 0.50 | (a) | 0.15 | (a) | 0.14 | 0.13 | |||||||||||||||
Net realized and unrealized gains (losses) on investments | (0.68 | ) | 1.51 | (0.28 | ) | 0.57 | 1.18 | ||||||||||||||||
Total from Investment Activities | (0.39 | ) | 2.01 | (0.13 | ) | 0.71 | 1.31 | ||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.39 | ) | (0.40 | ) | (0.17 | ) | (0.30 | ) | (0.32 | ) | |||||||||||||
Net realized gains from investments | (0.19 | ) | — | — | (1.00 | ) | (0.22 | ) | |||||||||||||||
Total Distributions to Shareholders | (0.58 | ) | (0.40 | ) | (0.17 | ) | (1.30 | ) | (0.54 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 15.44 | $ | 16.41 | $ | 14.80 | $ | 15.10 | $ | 15.69 | |||||||||||||
Total Return (excludes sales charge) | (2.56 | )% | 13.72 | % | (0.87 | )% | 4.66 | % | 8.97 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 18,747 | $ | 14,820 | $ | 16,587 | $ | 10,560 | $ | 10,293 | |||||||||||||
Ratio of net expenses to average net assets (c) | 0.40 | % | 0.30 | % | 0.31 | %(b) | 1.15 | % | 1.15 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 1.77 | % | 3.19 | % | 0.99 | % | 0.82 | % | 0.92 | % | |||||||||||||
Ratio of gross expenses to average net assets (c) (d) | 0.28 | %(g) | 0.79 | % | 1.69 | % | 1.40 | % | 1.34 | % | |||||||||||||
Portfolio turnover (e) | 40 | % | 51 | % | 192 | %(f) | 72 | % | 66 | % |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) Effective with the December 30, 2015 strategy change, the Adviser began reimbursing expenses inclusive of acquired fund fees and expenses.
(c) The expense ratios exclude the impact of expenses paid by each underlying fund.
(d) During the period, certain fees were reduced and/or reimbursed. If such fee reductions and/or reimbursements had not occurred, the ratios would have been as indicated.
(e) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
(f) Portfolio turnover increased due to a change in investment strategy.
(g) The amount includes a change in accounting estimate. Without this change in accounting estimate, the gross expense ratio would have been 0.67%. Refer to Federal Income Taxes under Item 2 of the Notes to Financial Statements.
See notes to financial statements.
65
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory Strategic Allocation Fund | |||||||||||||||||||||||
Class C Shares | |||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2016 | Year Ended October 31, 2015 | Year Ended October 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 16.19 | $ | 14.65 | $ | 14.97 | $ | 15.57 | $ | 14.82 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) | 0.21 | (a) | 0.43 | (a) | 0.06 | (a) | 0.01 | 0.02 | |||||||||||||||
Net realized and unrealized gains (losses) on investments | (0.71 | ) | 1.44 | (0.29 | ) | 0.59 | 1.17 | ||||||||||||||||
Total from Investment Activities | (0.50 | ) | 1.87 | (0.23 | ) | 0.60 | 1.19 | ||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.31 | ) | (0.33 | ) | (0.09 | ) | (0.20 | ) | (0.22 | ) | |||||||||||||
Net realized gains from investments | (0.19 | ) | — | — | (1.00 | ) | (0.22 | ) | |||||||||||||||
Total Distributions to Shareholders | (0.50 | ) | (0.33 | ) | (0.09 | ) | (1.20 | ) | (0.44 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 15.19 | $ | 16.19 | $ | 14.65 | $ | 14.97 | $ | 15.57 | |||||||||||||
Total Return (excludes contingent deferred sales charge) | (3.26 | )% | 12.88 | % | (1.56 | )% | 3.92 | % | 8.16 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 4,445 | $ | 8,814 | $ | 9,724 | $ | 2,725 | $ | 2,778 | |||||||||||||
Ratio of net expenses to average net assets (b) (c) | 1.15 | % | 1.03 | % | 0.95 | % | 1.85 | % | 1.85 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 1.30 | % | 2.78 | % | 0.44 | % | 0.12 | % | 0.23 | % | |||||||||||||
Ratio of gross expenses to average net assets (c) (d) | 1.08 | %(g) | 1.58 | % | 2.65 | % | 2.36 | % | 2.14 | % | |||||||||||||
Portfolio turnover (e) | 40 | % | 51 | % | 192 | %(f) | 72 | % | 66 | % |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) Effective with the December 30, 2015 strategy change, the Adviser began reimbursing expenses inclusive of acquired fund fees and expenses.
(c) The expense ratios exclude the impact of expenses paid by each underlying fund.
(d) During the period, certain fees were reduced and/or reimbursed. If such fee reductions and/or reimbursements had not occurred, the ratios would have been as indicated.
(e) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
(f) Portfolio turnover increased due to a change in investment strategy.
(g) The amount includes a change in accounting estimate. Without this change in accounting estimate, the gross expense ratio would have been 1.54%. Refer to Federal Income Taxes under Item 2 of the Notes to Financial Statements.
See notes to financial statements.
66
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory Strategic Allocation Fund | |||||||||||||||||||||||
Class I Shares | |||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2016 | Year Ended October 31, 2015 | Year Ended October 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 16.48 | $ | 14.86 | $ | 15.16 | $ | 15.74 | $ | 14.97 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) | 0.35 | (a) | 0.55 | (a) | 0.15 | (a) | 0.29 | 0.19 | |||||||||||||||
Net realized and unrealized gains (losses) on investments | (0.70 | ) | 1.50 | (0.24 | ) | 0.47 | 1.16 | ||||||||||||||||
Total from Investment Activities | (0.35 | ) | 2.05 | (0.09 | ) | 0.76 | 1.35 | ||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.42 | ) | (0.43 | ) | (0.21 | ) | (0.34 | ) | (0.36 | ) | |||||||||||||
Net realized gains from investments | (0.19 | ) | — | — | (1.00 | ) | (0.22 | ) | |||||||||||||||
Total Distributions to Shareholders | (0.61 | ) | (0.43 | ) | (0.21 | ) | (1.34 | ) | (0.58 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 15.52 | $ | 16.48 | $ | 14.86 | $ | 15.16 | $ | 15.74 | |||||||||||||
Total Return | (2.29 | )% | 13.95 | % | (0.61 | )% | 4.96 | % | 9.20 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 8,811 | $ | 9,153 | $ | 1,099 | $ | 1,474 | $ | 318 | |||||||||||||
Ratio of net expenses to average net assets (b) (c) | 0.15 | % | 0.10 | % | 0.24 | % | 0.90 | % | 0.90 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 2.11 | % | 3.48 | % | 1.04 | % | 0.93 | % | 1.16 | % | |||||||||||||
Ratio of gross expenses to average net assets (c) (d) | 0.01 | %(g) | 0.61 | % | 2.64 | % | 4.15 | % | 4.80 | % | |||||||||||||
Portfolio turnover (e) | 40 | % | 51 | % | 192 | %(f) | 72 | % | 66 | % |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) Effective with the December 30, 2015 strategy change, the Adviser began reimbursing expenses inclusive of acquired fund fees and expenses.
(c) The expense ratios exclude the impact of expenses paid by each underlying fund.
(d) During the period, certain fees were reduced and/or reimbursed. If such fee reductions and/or reimbursements had not occurred, the ratios would have been as indicated.
(e) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
(f) Portfolio turnover increased due to a change in investment strategy.
(g) The amount includes a change in accounting estimate. Without this change in accounting estimate, the gross expense ratio would have been 0.42%. Refer to Federal Income Taxes under Item 2 of the Notes to Financial Statements.
See notes to financial statements.
67
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory Strategic Allocation Fund | |||||||||||||||||||||||
Class R Shares | |||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2016 | Year Ended October 31, 2015 | Year Ended October 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 16.38 | $ | 14.79 | $ | 15.09 | $ | 15.68 | $ | 14.90 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) | 0.27 | (a) | 0.46 | (a) | 0.09 | (a) | 0.08 | (0.21 | ) | ||||||||||||||
Net realized and unrealized gains (losses) on investments | (0.70 | ) | 1.49 | (0.26 | ) | 0.59 | 1.48 | ||||||||||||||||
Total from Investment Activities | (0.43 | ) | 1.95 | (0.17 | ) | 0.67 | 1.27 | ||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.35 | ) | (0.36 | ) | (0.13 | ) | (0.26 | ) | (0.27 | ) | |||||||||||||
Net realized gains from investments | (0.19 | ) | — | — | (1.00 | ) | (0.22 | ) | |||||||||||||||
Total Distributions to Shareholders | (0.54 | ) | (0.36 | ) | (0.13 | ) | (1.26 | ) | (0.49 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 15.41 | $ | 16.38 | $ | 14.79 | $ | 15.09 | $ | 15.68 | |||||||||||||
Total Return | (2.77 | )% | 13.36 | % | (1.14 | )% | 4.36 | % | 8.66 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 1,529 | $ | 1,892 | $ | 1,702 | $ | 1,875 | $ | 1,867 | |||||||||||||
Ratio of net expenses to average net assets (b) (c) | 0.65 | % | 0.56 | % | 0.62 | % | 1.45 | % | 1.45 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 1.63 | % | 2.96 | % | 0.58 | % | 0.52 | % | 0.71 | % | |||||||||||||
Ratio of gross expenses to average net assets (c) (d) | 1.01 | %(g) | 1.80 | % | 2.13 | % | 2.17 | % | 1.72 | % | |||||||||||||
Portfolio turnover (e) | 40 | % | 51 | % | 192 | %(f) | 72 | % | 66 | % |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) Effective with the December 30, 2015 strategy change, the Adviser began reimbursing expenses inclusive of acquired fund fees and expenses.
(c) The expense ratios exclude the impact of expenses paid by each underlying fund.
(d) During the period, certain fees were reduced and/or reimbursed. If such fee reductions and/or reimbursements had not occurred, the ratios would have been as indicated.
(e) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
(f) Portfolio turnover increased due to a change in investment strategy.
(g) The amount includes a change in accounting estimate. Without this change in accounting estimate, the gross expense ratio would have been 1.43%. Refer to Federal Income Taxes under Item 2 of the Notes to Financial Statements.
See notes to financial statements.
68
Victory Portfolios | Financial Highlights |
For a Share Outstanding Throughout Each Period
Victory INCORE Fund for Income | |||||||||||||||||||||||
Class A Shares | |||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2016 | Year Ended October 31, 2015 | Year Ended October 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 9.09 | $ | 9.63 | $ | 9.96 | $ | 10.27 | $ | 10.62 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) | 0.37 | (a) | 0.10 | (a) | 0.11 | (a) | 0.15 | 0.11 | |||||||||||||||
Net realized and unrealized gains (losses) on investments | (0.45 | ) | (0.15 | ) | 0.05 | 0.04 | 0.06 | ||||||||||||||||
Total from Investment Activities | (0.08 | ) | (0.05 | ) | 0.16 | 0.19 | 0.17 | ||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.45 | ) | (0.49 | ) | (0.49 | ) | (0.50 | ) | (0.52 | ) | |||||||||||||
Total Distributions to Shareholders | (0.45 | ) | (0.49 | ) | (0.49 | ) | (0.50 | ) | (0.52 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 8.56 | $ | 9.09 | $ | 9.63 | $ | 9.96 | $ | 10.27 | |||||||||||||
Total Return (excludes sales charge) | (0.91 | )% | (0.51 | )% | 1.62 | % | 1.90 | % | 1.69 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 153,574 | $ | 224,822 | $ | 400,740 | $ | 349,571 | $ | 338,122 | |||||||||||||
Ratio of net expenses to average net assets | 0.92 | % | 0.88 | % | 0.91 | % | 0.94 | % | 0.96 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 4.22 | % | 1.08 | % | 1.10 | % | 1.09 | % | 1.57 | % | |||||||||||||
Ratio of gross expenses to average net assets | 0.93 | %(b) | 0.88 | % | 0.91 | % | 0.94 | % | 0.96 | % | |||||||||||||
Portfolio turnover (c) | 27 | % | 30 | % | 31 | % | 44 | % | 32 | % |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) During the period, certain fees were reduced and/or reimbursed. If such fee reductions and/or reimbursements had not occurred, the ratios would have been as indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
See notes to financial statements.
69
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory INCORE Fund for Income | |||||||||||||||||||||||
Class C Shares | |||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2016 | Year Ended October 31, 2015 | Year Ended October 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 9.01 | $ | 9.56 | $ | 9.89 | $ | 10.20 | $ | 10.55 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) | 0.29 | (a) | 0.03 | (a) | 0.03 | (a) | 0.02 | 0.02 | |||||||||||||||
Net realized and unrealized gains (losses) on investments | (0.44 | ) | (0.16 | ) | 0.06 | 0.10 | 0.08 | ||||||||||||||||
Total from Investment Activities | (0.15 | ) | (0.13 | ) | 0.09 | 0.12 | 0.10 | ||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.38 | ) | (0.42 | ) | (0.42 | ) | (0.43 | ) | (0.45 | ) | |||||||||||||
Total Distributions to Shareholders | (0.38 | ) | (0.42 | ) | (0.42 | ) | (0.43 | ) | (0.45 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 8.48 | $ | 9.01 | $ | 9.56 | $ | 9.89 | $ | 10.20 | |||||||||||||
Total Return (excludes contingent deferred sales charge) | (1.69 | )% | (1.41 | )% | 0.88 | % | 1.14 | % | 0.96 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 31,976 | $ | 50,316 | $ | 72,958 | $ | 68,015 | $ | 79,353 | |||||||||||||
Ratio of net expenses to average net assets | 1.70 | % | 1.67 | % | 1.69 | % | 1.72 | % | 1.72 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 3.33 | % | 0.29 | % | 0.32 | % | 0.31 | % | 0.80 | % | |||||||||||||
Ratio of gross expenses to average net assets | 1.71 | %(b) | 1.67 | % | 1.69 | % | 1.72 | % | 1.72 | % | |||||||||||||
Portfolio turnover (c) | 27 | % | 30 | % | 31 | % | 44 | % | 32 | % |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) During the period, certain fees were reduced and/or reimbursed. If such fee reductions and/or reimbursements had not occurred, the ratios would have been as indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
See notes to financial statements.
70
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory INCORE Fund for Income | |||||||||||||||||||||||
Class I Shares | |||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2016 | Year Ended October 31, 2015 | Year Ended October 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 9.08 | $ | 9.63 | $ | 9.96 | $ | 10.26 | $ | 10.61 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) | 0.37 | (a) | 0.13 | (a) | 0.13 | (a) | 0.16 | 0.21 | |||||||||||||||
Net realized and unrealized gains (losses) on investments | (0.43 | ) | (0.16 | ) | 0.06 | 0.07 | (0.01 | ) | |||||||||||||||
Total from Investment Activities | (0.06 | ) | (0.03 | ) | 0.19 | 0.23 | 0.20 | ||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.47 | ) | (0.52 | ) | (0.52 | ) | (0.53 | ) | (0.55 | ) | |||||||||||||
Total Distributions to Shareholders | (0.47 | ) | (0.52 | ) | (0.52 | ) | (0.53 | ) | (0.55 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 8.55 | $ | 9.08 | $ | 9.63 | $ | 9.96 | $ | 10.26 | |||||||||||||
Total Return | (0.64 | )% | (0.34 | )% | 1.90 | % | 2.28 | % | 1.98 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 331,338 | $ | 520,056 | $ | 547,322 | $ | 403,879 | $ | 379,805 | |||||||||||||
Ratio of net expenses to average net assets | 0.63 | % | 0.61 | % | 0.63 | % | 0.65 | % | 0.67 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 4.21 | % | 1.34 | % | 1.37 | % | 1.37 | % | 1.85 | % | |||||||||||||
Portfolio turnover (b) | 27 | % | 30 | % | 31 | % | 44 | % | 32 | % |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
See notes to financial statements.
71
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory INCORE Fund for Income | |||||||||||||||||||||||
Class R Shares | |||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2016 | Year Ended October 31, 2015 | Year Ended October 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 9.09 | $ | 9.64 | $ | 9.97 | $ | 10.28 | $ | 10.62 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) | 0.38 | (a) | 0.10 | (a) | 0.11 | (a) | 0.11 | 0.15 | |||||||||||||||
Net realized and unrealized gains (losses) on investments | (0.45 | ) | (0.16 | ) | 0.05 | 0.08 | 0.03 | ||||||||||||||||
Total from Investment Activities | (0.07 | ) | (0.06 | ) | 0.16 | 0.19 | 0.18 | ||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.45 | ) | (0.49 | ) | (0.49 | ) | (0.50 | ) | (0.52 | ) | |||||||||||||
Total Distributions to Shareholders | (0.45 | ) | (0.49 | ) | (0.49 | ) | (0.50 | ) | (0.52 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 8.57 | $ | 9.09 | $ | 9.64 | $ | 9.97 | $ | 10.28 | |||||||||||||
Total Return | (0.79 | )% | (0.62 | )% | 1.62 | % | 1.88 | % | 1.78 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 43,405 | $ | 58,783 | $ | 85,195 | $ | 73,805 | $ | 84,368 | |||||||||||||
Ratio of net expenses to average net assets | 0.91 | % | 0.88 | % | 0.90 | % | 0.95 | % | 0.96 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 4.27 | % | 1.08 | % | 1.11 | % | 1.07 | % | 1.56 | % | |||||||||||||
Portfolio turnover (b) | 27 | % | 30 | % | 31 | % | 44 | % | 32 | % |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
See notes to financial statements.
72
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory INCORE Fund for Income | |||||||||||||||||||
Class R6 Shares | |||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2016 | Period Ended October 31, 2015(a) | ||||||||||||||||
Net Asset Value, Beginning of Period | $ | 9.07 | $ | 9.62 | $ | 9.95 | $ | 10.23 | |||||||||||
Investment Activities: | |||||||||||||||||||
Net investment income (loss) | 0.44 | (b) | 0.12 | (b) | 0.13 | (b) | 0.10 | ||||||||||||
Net realized and unrealized gains (losses) on investments | (0.49 | ) | (0.16 | ) | 0.06 | (0.03 | ) | ||||||||||||
Total from Investment Activities | (0.05 | ) | (0.04 | ) | 0.19 | 0.07 | |||||||||||||
Distributions to Shareholders: | |||||||||||||||||||
Net investment income | (0.47 | ) | (0.51 | ) | (0.52 | ) | (0.35 | ) | |||||||||||
Total Distributions to Shareholders | (0.47 | ) | (0.51 | ) | (0.52 | ) | (0.35 | ) | |||||||||||
Net Asset Value, End of Period | $ | 8.55 | $ | 9.07 | $ | 9.62 | $ | 9.95 | |||||||||||
Total Return (c) | (0.52 | )% | (0.36 | )% | 1.89 | % | 0.70 | % | |||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||
Net Assets at end of period (000) | $ | 13,741 | $ | 9,407 | $ | 6,286 | $ | 3,896 | |||||||||||
Ratio of net expenses to average net assets (d) | 0.63 | % | 0.63 | % | 0.63 | % | 0.63 | % | |||||||||||
Ratio of net investment income (loss) to average net assets (d) | 5.01 | % | 1.31 | % | 1.37 | % | 1.24 | % | |||||||||||
Ratio of gross expenses to average net assets (d) (e) | 0.69 | % | 0.73 | % | 0.97 | % | 0.99 | % | |||||||||||
Portfolio turnover (c) (f) | 27 | % | 30 | % | 31 | % | 44 | % |
(a) Class R6 Shares commenced operations on March 4, 2015.
(b) Per share net investment income (loss) has been calculated using the average daily shares method.
(c) Not annualized for periods less than one year.
(d) Annualized for periods less than one year
(e) During the period, certain fees were reduced and/or reimbursed. If such fee reductions and/or reimbursements had not occurred, the ratios would have been as indicated.
(f) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
See notes to financial statements.
73
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory INCORE Fund for Income | |||||||||||||||||||||||
Class Y Shares | |||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2016 | Year Ended October 31, 2015 | Year Ended October 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 9.08 | $ | 9.64 | $ | 9.96 | $ | 10.27 | $ | 10.62 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) | 0.37 | (a) | 0.10 | (a) | 0.13 | (a) | 0.08 | 0.12 | |||||||||||||||
Net realized and unrealized gains (losses) on investments | (0.43 | ) | (0.15 | ) | 0.06 | 0.14 | 0.08 | ||||||||||||||||
Total from Investment Activities | (0.06 | ) | (0.05 | ) | 0.19 | 0.22 | 0.20 | ||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.46 | ) | (0.51 | ) | (0.51 | ) | (0.53 | ) | (0.55 | ) | |||||||||||||
Total Distributions to Shareholders | (0.46 | ) | (0.51 | ) | (0.51 | ) | (0.53 | ) | (0.55 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 8.56 | $ | 9.08 | $ | 9.64 | $ | 9.96 | $ | 10.27 | |||||||||||||
Total Return | (0.61 | )% | (0.53 | )% | 1.92 | % | 2.12 | % | 1.94 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 31,975 | $ | 62,408 | $ | 8,119 | $ | 5,093 | $ | 7,491 | |||||||||||||
Ratio of net expenses to average net assets | 0.71 | % | 0.68 | % | 0.71 | % | 0.71 | % | 0.71 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 4.22 | % | 1.09 | % | 1.30 | % | 1.32 | % | 1.81 | % | |||||||||||||
Ratio of gross expenses to average net assets | 0.79 | %(b) | 0.68 | % | 0.89 | %(b) | 0.90 | %(b) | 0.82 | %(b) | |||||||||||||
Portfolio turnover (c) | 27 | % | 30 | % | 31 | % | 44 | % | 32 | % |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) During the period, certain fees were reduced and/or reimbursed. If such fee reductions and/or reimbursements had not occurred, the ratios would have been as indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
See notes to financial statements.
74
Victory Portfolios | Financial Highlights |
For a Share Outstanding Throughout Each Period
Victory INCORE Investment Grade Convertible Fund | |||||||||||||||||||||||
Class A Shares | |||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2016 | Year Ended October 31, 2015 | Year Ended October 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 16.53 | $ | 13.72 | $ | 14.00 | $ | 14.10 | $ | 12.70 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) | 0.30 | (a) | 0.17 | (a) | 0.11 | (a) | 0.14 | 0.08 | |||||||||||||||
Net realized and unrealized gains (losses) on investments | 0.01 | (b) | 2.89 | (0.07 | ) | 0.03 | 1.67 | ||||||||||||||||
Total from Investment Activities | 0.31 | 3.06 | 0.04 | 0.17 | 1.75 | ||||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.53 | ) | (0.25 | ) | (0.32 | ) | (0.27 | ) | (0.35 | ) | |||||||||||||
Net realized gains from investments | (0.09 | ) | — | — | — | — | |||||||||||||||||
Total Distributions to Shareholders | (0.62 | ) | (0.25 | ) | (0.32 | ) | (0.27 | ) | (0.35 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 16.22 | $ | 16.53 | $ | 13.72 | $ | 14.00 | $ | 14.10 | |||||||||||||
Total Return (excludes sales charge) | 1.87 | % | 22.57 | % | 0.29 | % | 1.21 | % | 14.03 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 14,268 | $ | 33,040 | $ | 14,350 | $ | 10,396 | $ | 6,964 | |||||||||||||
Ratio of net expenses to average net assets | 1.27 | % | 1.30 | % | 1.48 | % | 1.39 | % | 1.52 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 1.79 | % | 1.12 | % | 0.80 | % | 0.75 | % | 0.66 | % | |||||||||||||
Portfolio turnover (c) | 41 | % | 39 | % | 22 | % | 32 | % | 28 | % |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) The amount shown for a share outstanding throughout the period does not accord with the change in aggregate gains and losses in the portfolio of securities during the period because of timing of sales and purchases of fund shares in relation to fluctuating market values during the period.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
See notes to financial statements.
75
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory INCORE Investment Grade Convertible Fund | |||||||||||||||||||||||
Class I Shares | |||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2016 | Year Ended October 31, 2015 | Year Ended October 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 16.53 | $ | 13.71 | $ | 13.98 | $ | 14.09 | $ | 12.68 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) | 0.36 | (a) | 0.22 | (a) | 0.17 | (a) | 0.18 | 0.20 | |||||||||||||||
Net realized and unrealized gains (losses) on investments | (0.01 | ) | 2.90 | (0.07 | ) | 0.03 | 1.62 | ||||||||||||||||
Total from Investment Activities | 0.35 | 3.12 | 0.10 | 0.21 | 1.82 | ||||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.58 | ) | (0.30 | ) | (0.37 | ) | (0.32 | ) | (0.41 | ) | |||||||||||||
Net realized gains from investments | (0.09 | ) | — | — | — | — | |||||||||||||||||
Total Distributions to Shareholders | (0.67 | ) | (0.30 | ) | (0.37 | ) | (0.32 | ) | (0.41 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 16.21 | $ | 16.53 | $ | 13.71 | $ | 13.98 | $ | 14.09 | |||||||||||||
Total Return | 2.16 | % | 23.07 | % | 0.77 | % | 1.54 | % | 14.68 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 126,871 | $ | 78,879 | $ | 53,438 | $ | 40,024 | $ | 30,683 | |||||||||||||
Ratio of net expenses to average net assets | 0.94 | % | 0.94 | % | 0.99 | % | 1.00 | % | 1.00 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 2.17 | % | 1.47 | % | 1.26 | % | 1.14 | % | 1.17 | % | |||||||||||||
Ratio of gross expenses to average net assets | 0.94 | % | 0.94 | % | 0.99 | % | 1.01 | %(b) | 1.08 | %(b) | |||||||||||||
Portfolio turnover (c) | 41 | % | 39 | % | 22 | % | 32 | % | 28 | % |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) During the period, certain fees were reduced and/or reimbursed. If such fee reductions and/or reimbursements had not occurred, the ratios would have been as indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
See notes to financial statements.
76
Victory Portfolios | Notes to Financial Statements October 31, 2018 |
1. Organization:
Victory Portfolios (the "Trust") was organized on December 6, 1995 as a Delaware statutory trust as a successor to a company named "The Victory Portfolios," which was 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. The Trust is comprised of 42 funds and is authorized to issue an unlimited number of shares, which are units of beneficial interest with a par value of $0.001 per share. Each Fund is classified as diversified under the 1940 Act.
The accompanying financial statements are those of the following six Funds (collectively, the "Funds" and individually, a "Fund").
Funds (Legal Name) | Funds (Short Name) | Investment Share Classes Offered | |||||||||
Victory Diversified Stock Fund | Diversified Stock Fund | A, C, I, R, R6, and Y | |||||||||
Victory NewBridge Large Cap Growth Fund | NewBridge Large Cap Growth Fund | A, C, I, R and Y | |||||||||
Victory Special Value Fund | Special Value Fund | A, C, I, R and Y | |||||||||
Victory Strategic Allocation Fund | Strategic Allocation Fund | A, C, I and R | |||||||||
Victory INCORE Fund for Income | INCORE Fund for Income | A, C, I, R, R6 and Y | |||||||||
Victory INCORE Investment Grade Convertible Fund | INCORE Investment Grade Convertible Fund | A and I |
Each class of shares of a Fund has substantially identical rights and privileges except with respect to sales charges, fees paid under distribution plans, expenses allocable exclusively to each class of shares, voting rights on matters solely affecting a single class of shares, and the exchange privilege of each class of shares.
Under the Trust's organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Funds. In addition, in the normal course of business, the Funds enter into contracts with their vendors and others that provide for general indemnifications. The Funds' maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Funds. However, based on experience, the Funds expect that risk of loss to be remote.
2. 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 accounting principles generally accepted in the United States of America ("GAAP"). The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent 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. The Funds follow the specialized accounting and reporting requirements under GAAP that are applicable to investment companies.
Investment Valuation:
The Funds record investments at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The valuation techniques described below maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value. The inputs used for valuing the Funds' investments are summarized in the three broad levels listed below:
• Level 1 — quoted prices in active markets for identical securities
• Level 2 — other significant observable inputs (including quoted prices for similar securities or interest rates applicable to those securities, etc.)
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Victory Portfolios | Notes to Financial Statements — continued October 31, 2018 |
• Level 3 — significant unobservable inputs (including the Funds' own assumptions in determining the fair value of investments)
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The inputs or methodologies used for valuation techniques are not necessarily an indication of the risk associated with entering into those investments.
Portfolio securities listed or traded on securities exchanges, including exchange-traded funds ("ETFs"), American Depositary Receipts ("ADRs") and Rights, are valued at the closing price on the exchange or system where the security is principally traded, if available, or at the Nasdaq Official Closing Price. If there have been no sales for that day on the exchange or system, then a security is valued at the last available bid quotation on the exchange or system where the security is principally traded. In each of these situations, valuations are typically categorized as Level 1 in the fair value hierarchy.
Investments in open-end investment companies are valued at net asset value. These valuations are typically categorized as Level 1 in the fair value hierarchy.
Debt securities of United States ("U.S.") issuers (other than short-term investments maturing in 60 days or less), including corporate and municipal securities, are valued on the basis of bid valuations provided by dealers or an independent pricing service approved by the Trust's Board of Trustees (the "Board"). Short-term investments maturing in 60 days or less may be valued at amortized cost, which approximates market value. Under the amortized cost method, premium or discount, if any, is amortized or accreted, respectively, on a constant basis to the maturity of the security. In each of these situations, valuations are typically categorized as Level 2 in the fair value hierarchy.
Investments for which there are no such quotations, or for which quotations do not appear reliable, are valued at fair value in accordance with procedures established by and under the general supervision and responsibility of the Board. These valuations are typically categorized as Level 2 or Level 3 in the fair value hierarchy, based on the observability of inputs used to determine the fair value.
A summary of the valuations as of October 31, 2018, based upon the three levels defined above, is included in the table below while the breakdown, by category, of investments is disclosed in the Schedules of Portfolio Investments (in thousands):
LEVEL 1 — Quoted Prices | LEVEL 2 — Other Significant Observable Inputs | Total | |||||||||||||
Investments in Securities | Investments in Securities | Investments in Securities | |||||||||||||
Diversified Stock Fund | |||||||||||||||
Common Stocks | $ | 375,653 | $ | — | $ | 375,653 | |||||||||
Exchange-Traded Funds | 4,333 | — | 4,333 | ||||||||||||
Collateral for Securities Loaned | 9,578 | — | 9,578 | ||||||||||||
Total | 389,564 | — | 389,564 | ||||||||||||
NewBridge Large Cap Growth Fund | |||||||||||||||
Common Stocks | 22,962 | — | 22,962 | ||||||||||||
Total | 22,962 | — | 22,962 | ||||||||||||
Special Value Fund | |||||||||||||||
Common Stocks | 64,566 | — | 64,566 | ||||||||||||
Exchange-Traded Funds | 350 | — | 350 | ||||||||||||
Collateral for Securities Loaned | 1,451 | — | 1,451 | ||||||||||||
Total | 66,367 | — | 66,367 |
78
Victory Portfolios | Notes to Financial Statements — continued October 31, 2018 |
LEVEL 1 — Quoted Prices | LEVEL 2 — Other Significant Observable Inputs | Total | |||||||||||||
Investments in Securities | Investments in Securities | Investments in Securities | |||||||||||||
Strategic Allocation Fund | |||||||||||||||
Affiliated Exchange-Traded Funds | $ | 5,917 | $ | — | $ | 5,917 | |||||||||
Affiliated Mutual Funds | 27,097 | — | 27,097 | ||||||||||||
Total | 33,014 | — | 33,014 | ||||||||||||
INCORE Fund for Income | |||||||||||||||
Government National Mortgage Association | — | 571,463 | 571,463 | ||||||||||||
U.S. Treasury Obligations | — | 34,952 | 34,952 | ||||||||||||
Investment Companies | 100 | — | 100 | ||||||||||||
Total | 100 | 606,415 | 606,515 | ||||||||||||
INCORE Investment Grade Convertible Fund | |||||||||||||||
Convertible Corporate Bonds | — | 102,143 | 102,143 | ||||||||||||
Convertible Preferred Stocks | 33,401 | 3,143 | 36,544 | ||||||||||||
Collateral for Securities Loaned | 2,769 | — | 2,769 | ||||||||||||
Total | $ | 36,170 | $ | 105,286 | $ | 141,456 |
For the year ended October 31, 2018, there were no Level 3 investments for which significant unobservable inputs were used to determine fair value.
Securities Purchased on a When-Issued Basis:
The Funds may purchase securities on a when-issued basis. When-issued securities are securities purchased for delivery beyond normal settlement periods 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/or marketable securities at least equal in value to commitments for when-issued securities. If a Fund owns when-issued securities, these values are included in "Payable for investments purchased" on the accompanying Statements of Assets and Liabilities.
Real Estate Investment Trusts ("REITs"):
The Funds may invest in REITs which report information on the source of their distributions annually. REITs are pooled investment vehicles that invest primarily in income-producing real estate or real estate related loans or interests (such as mortgages). Certain distributions received from REITs during the year are recorded as realized gains or return of capital as estimated by the Funds or when such information becomes known.
Investment Companies:
Exchange-Traded Funds:
The Funds may invest in ETFs. ETFs are a type of index fund, the shares of which are bought and sold on a securities exchange. An ETF trades like common stock and represents a fixed portfolio of securities designed to track the performance and dividend yield of a particular domestic or foreign market index. A Fund may purchase shares of an ETF to temporarily gain exposure to a portion of the U.S. or a
79
Victory Portfolios | Notes to Financial Statements — continued October 31, 2018 |
foreign market while awaiting purchase of underlying securities. The risks of owning an ETF generally reflect the risks of owning the underlying securities they are designed to track, although the lack of liquidity of an ETF could result in it being more volatile. Additionally, ETFs have fees and expenses that reduce their value.
Open-End Funds:
The Funds may invest in portfolios of open-end investment companies. These investment companies value securities in their portfolios for which market quotations are readily available at their market values (generally the last reported sale price) and all other securities and assets at their fair value by the methods established by the board of directors of the underlying funds.
Investment Transactions and Related Income:
Changes in holdings of investments are accounted for no later than one business day following the trade date. For financial reporting purposes, however, investment transactions are accounted for on trade date on the last business day of the reporting period. Interest income is recognized on an accrual basis and includes, where applicable, the amortization of premiums or accretion of discounts. Dividend income is recorded on the ex-dividend date. 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.
Withholding taxes on interest, dividends and gains as a result of certain investments in ADRs by the Funds have been provided for in accordance with each investment's applicable country's tax rules and rates.
Securities Lending:
The Trust has entered into a Master Securities Lending Agreement ("MSLA") with Citibank, N.A. ("Citibank" or the "Agent"). Under the terms of the MSLA, the Funds may lend securities to certain broker-dealers and banks in exchange for collateral in the amount of at least 102% of the value of U.S. securities loaned or at least 105% of the value of non-U.S. securities loaned, marked-to-market daily. Any collateral shortfalls associated with increases in the valuation of the securities loaned are adjusted the next business day. The collateral can be received in the form of cash collateral and/or non-cash collateral. Non-cash collateral can include U.S. Government Securities, letters of credit and certificates of deposit. The cash collateral is invested in short-term instruments or cash equivalents as noted in the Funds' Schedules of Portfolio Investments. The Trust does not have effective control of the non-cash collateral and therefore it is not disclosed in the Funds' Schedules of Portfolio Investments. The Funds continue to benefit from interest or dividends on the securities loaned and may also earn a return from the collateral. The Funds pay various fees in connection with the investment of cash collateral. The Funds pay the Agent fees based on the investment income received from securities lending activities. Securities lending income is disclosed on the Statements of Operations. Although risk is mitigated by the collateral, the Funds could experience a delay in recovering their securities and possible loss of income or value if the borrower fails to return them.
Securities lending transactions are entered into by a Fund under the MSLA, which permits the Fund, under certain circumstances such as an event of default, to offset amounts payable by the Fund to the same counterparty against amounts receivable from the counterparty to create a net payment due to or from the Fund.
The following table (in thousands) is a summary of the Funds' securities lending transactions which are subject to offset under the MSLA as of October 31, 2018. These transactions are accounted for as secured borrowings with an overnight and continuous contractual maturity for cash collateral, and greater than overnight and continuous contractual maturity for non-cash collateral.
80
Victory Portfolios | Notes to Financial Statements — continued October 31, 2018 |
Gross Amount of Recognized Assets (Value of | Value of Cash | Value of Non-cash Collateral Received by Maturity | |||||||||||||||||||||||||
Securities on Loan) | Collateral Received | <30 Days | Between 30 & 90 Days | >90 Days | Net Amount | ||||||||||||||||||||||
Diversified Stock Fund | $ | 9,257 | $ | 9,578 | $ | — | $ | — | $ | — | $ | 321 | |||||||||||||||
Special Value Fund | 1,448 | 1,451 | — | — | — | 3 | |||||||||||||||||||||
INCORE Investment Grade Convertible Fund | 2,717 | 2,769 | — | — | — | 52 |
Dividends to Shareholders:
Dividends from net investment income, if any, are declared and paid monthly for the INCORE Fund for Income and Strategic Allocation Fund. Dividends from net investment income, if any, are declared and paid quarterly for the Diversified Stock Fund and INCORE Investment Grade Convertible Fund. Dividends from net investment income, if any, are declared and paid annually for the NewBridge Large Cap Growth Fund and Special Value Fund. Distributable net realized gains, if any, are declared and distributed at least annually from each Fund.
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 GAAP. To the extent these "book/tax" differences are permanent in nature (i.e., that they result from other than timing of recognition — "temporary difference"), such amounts are reclassified within the components of net assets based on their federal tax-basis treatment; temporary differences (e.g., wash sales) do not require reclassification. To the extent dividends and distributions 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 may be reclassified as an offset to capital on the accompanying Statements of Assets and Liabilities.
Federal Income Taxes:
It is the policy of each Fund to 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 gains sufficient to relieve it from all, or substantially all, federal income taxes. Accordingly, no provision for federal income taxes is required in the financial statements. The Funds have a tax year end of October 31.
Management of the Funds has reviewed tax positions taken in tax years that remain subject to examination by all major tax jurisdictions, including federal (i.e., the last four tax year ends and the interim tax period since then). Management believes that there is no tax liability resulting from unrecognized tax benefits related to uncertain tax positions taken.
During the year ended October 31, 2018, the Strategic Allocation Fund paid the IRS $68,418 related to interest and penalties from a deficiency dividend. This liability to the IRS was assumed through the Strategic Allocation Fund's acquisition of the Compass EMP Multi-Asset Balance Fund ("Balanced Fund") in a merger transaction dated July 22, 2016. During its year ended November 30, 2012, the Balanced Fund inadvertently failed to distribute to its shareholders its undistributed ordinary taxable income from its tax year ended November 30, 2011. The interest and penalties on the deficiency dividend was originally estimated to be $224,411, which the Balanced Fund accrued during its year ended November 30, 2013. The interest and penalties of $224,411 were reimbursed by the Balanced Fund's former Administrator, Gemini Fund Services, LLC ("Gemini") and accrued during the year ended November 30, 2013. The resulting difference from the estimated interest and penalties to the final amount paid to the IRS is $155,993. This change in accounting estimate is recognized in the Strategic Allocation Fund's Statements of Operations, "Federal taxes, interest and penalties" for the year ended October 31, 2018. The resulting change in accounting estimate had no impact to the Fund's net assets or results of operations, as the liability for the interest and penalties paid to the IRS were reimbursed by Gemini.
81
Victory Portfolios | Notes to Financial Statements — continued October 31, 2018 |
Allocations:
Expenses directly attributable to a Fund are charged to the Fund, while expenses which are attributable to more than one fund in the Trust, or jointly with an affiliated trust, are allocated among the respective funds in the Trust and/or affiliated trust based upon net assets or another appropriate basis.
Income, expenses (other than class-specific expenses such as transfer agent fees, state registration fees, printing and 12b-1 fees), and realized and unrealized gains or losses on investments are allocated to each class of shares based on its relative net assets on the date income is earned or expenses and realized and unrealized gains and losses are incurred.
Affiliated Securities Transactions:
Pursuant to Rule 17a-7 under the 1940 Act, the Funds may engage in securities transactions with affiliated investment companies and advisory accounts managed by the Adviser and any applicable sub-adviser. Any such purchase or sale transaction must be effected without brokerage commission or other remuneration, except for customary transfer fees. The transaction must be effected at the current market price, which is either the security's last sale price on an exchange or, if there are no transactions in the security that day, at the average of the highest bid and lowest asked price. For the year ended October 31, 2018, the Funds did not engage in any Rule 17a-7 transactions under the 1940 Act.
3. Purchases and Sales of Securities:
Purchases and sales of securities (excluding securities maturing less than one year from acquisition) for the year ended October 31, 2018 were as follows (in thousands):
Purchases (excluding U.S. Government Securities) | Sales (excluding U.S. Government Securities) | Purchases of U.S. Government Securities | Sales of U.S. Government Securities | ||||||||||||||||
Diversified Stock Fund | $ | 502,994 | $ | 623,594 | $ | — | $ | — | |||||||||||
NewBridge Large Cap Growth Fund | 10,942 | 21,898 | — | — | |||||||||||||||
Special Value Fund | 89,605 | 108,548 | — | — | |||||||||||||||
Strategic Allocation Fund | 15,649 | 15,119 | — | — | |||||||||||||||
INCORE Fund for Income | — | — | 190,911 | 446,916 | |||||||||||||||
INCORE Investment Grade Convertible Fund | 87,575 | 52,089 | — | — |
4. Fees and Transactions with Affiliates and Related Parties:
Investment advisory services are provided to the Funds by Victory Capital Management Inc. ("VCM" or the "Adviser"), a New York corporation registered as an investment adviser with the Securities and Exchange Commission ("SEC"). The Adviser is a wholly-owned indirect subsidiary of Victory Capital Holdings, Inc., a publicly traded Delaware corporation and a wholly-owned direct subsidiary of Victory Capital Operating, LLC.
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 each Fund. The rates at which the Adviser is paid by each Fund are included in the table below. The Adviser may use its resources to assist with the Funds' distribution and marketing expenses.
Flat Rate | |||||||
Strategic Allocation Fund | 0.10 | % | |||||
Adviser Fee Tier Rate | |||||||
Diversified Stock Fund | |||||||
Up to $800 million | 0.65 | % | |||||
$800 million — $2.4 billion | 0.60 | % | |||||
Over $2.4 billion | 0.55 | % |
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Victory Portfolios | Notes to Financial Statements — continued October 31, 2018 |
Adviser Fee Tier Rate | |||||||
NewBridge Large Cap Growth Fund | |||||||
Up to $400 million | 0.75 | % | |||||
$400 million — $800 million | 0.65 | % | |||||
Over $800 million | 0.60 | % | |||||
Special Value Fund | |||||||
Up to $400 million | 0.75 | % | |||||
$400 million — $800 million | 0.65 | % | |||||
Over $800 million | 0.60 | % | |||||
INCORE Fund for Income | |||||||
Up to $400 million | 0.50 | % | |||||
$400 million — $800 million | 0.45 | % | |||||
Over $800 million | 0.40 | % | |||||
INCORE Investment Grade Convertible Fund | |||||||
Up to $400 million | 0.75 | % | |||||
$400 million — $800 million | 0.65 | % | |||||
Over $800 million | 0.60 | % |
VCM also serves as the Funds' administrator and fund accountant. Under an Administration and Fund Accounting Agreement, VCM is paid for its services an annual fee at a rate of 0.08% of the first $15 billion in average daily net assets of the Trust, Victory Variable Insurance Funds and Victory Portfolios II (collectively, the "Trusts"), 0.05% of the average daily net assets above $15 billion to $30 billion of the Trusts and 0.04% of the average daily net assets over $30 billion of the Trusts.
Citi Fund Services Ohio, Inc. ("Citi"), an affiliate of Citibank, N.A., acts as sub-administrator and sub-fund accountant to the Funds pursuant to a Sub-Administration and Sub-Fund Accounting Services Agreement between VCM and Citi. VCM pays Citi a fee for providing these services. The Trust reimburses VCM and Citi for all of their reasonable out-of-pocket expenses incurred in providing these services.
FIS Investor Services, LLC ("FIS") serves as the Funds' transfer agent. Under the Transfer Agent Agreement, the Trust pays FIS a fee for its services and reimburses FIS for all of their reasonable out-of-pocket expenses incurred in providing these services.
The Chief Compliance Officer ("CCO") is an employee of the Adviser, which pays the compensation of the CCO and his support staff. The Trust has entered into an Agreement to provide compliance services with the Adviser, pursuant to which the Adviser furnishes its compliance personnel, including the services of the CCO, and other resources reasonably necessary to provide the Trust with compliance oversight services related to the design, administration and oversight of a compliance program for the Trust in accordance with Rule 38a-1 under the 1940 Act. Funds in the Trust, Victory Variable Insurance Funds, Victory Institutional Funds and Victory Portfolios II (collectively, the "Victory Funds Complex"), in the aggregate, compensate the Adviser for these services.
The Victory Funds Complex pay an annual retainer to each Independent Trustee, plus an additional annual retainer to the Chairman of the Board. The aggregate amount of the fees and expenses of the Independent Trustees are allocated amongst all the funds in the Victory Funds Complex and are presented in the Statements of Operations.
Shearman & Sterling LLP provides legal services to the Trust.
Victory Capital Advisers, Inc. (the "Distributor"), an affiliate of the Adviser, serves as distributor for the continuous offering of the shares of the Funds pursuant to a Distribution Agreement between the Distributor and the Trust. Pursuant to the Distribution and Service Plans adopted in accordance with Rule 12b-1 under the 1940 Act, the Distributor may receive a monthly distribution and service fee, at an annual rate of up to 0.25% of the average daily net assets of Class A Shares, at an annual rate of up to 0.50% of the average daily net assets of Class R Shares of the Funds, except for INCORE Fund for Income, and 1.00% of the average daily net assets of Class C Shares of the Funds. The Distributor may receive a monthly distribution and service fee at an annual rate of up to 0.25% of the average daily net
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Victory Portfolios | Notes to Financial Statements — continued October 31, 2018 |
assets of Class R Shares of INCORE Fund for Income. The distribution and service fees paid to the Distributor may be used by the Distributor to pay for activities primarily intended to result in the sale of Class A, Class R or Class C Shares of the Funds.
In addition, the Distributor is entitled to receive commissions on sales of the Class A Shares of the Funds. For the year ended October 31, 2018, the Distributor received approximately $29 thousand from commissions earned on sales of Class A Shares of the Funds.
The Adviser has entered into expense limitation agreements with certain Funds. Under the terms of the agreements, to the extent that ordinary operating expenses incurred by certain classes of a Fund in any fiscal year exceed the expense limit for such classes of the Fund, such excess amount will be the liability of the Adviser. Interest, taxes, brokerage commissions, other expenditures which are capitalized in accordance with GAAP, and other extraordinary expenses not incurred in the ordinary course of a Fund's business are excluded from the expense limitation agreement. As of October 31, 2018, the expense limits (excluding voluntary waivers) are as follows:
In effect November 1, 2017 until February 28, 2019 | |||||||||||||||||||||||||||
Class A Shares | Class C Shares | Class I Shares | Class R Shares | Class R6 Shares | Class Y Shares | ||||||||||||||||||||||
Diversified Stock Fund | N/A | N/A | N/A | N/A | 0.78 | % | 0.86 | % | |||||||||||||||||||
NewBridge Large Cap Growth Fund | 1.36 | % | 2.10 | % | 0.95 | % | 1.65 | % | N/A | 1.02 | % | ||||||||||||||||
Special Value Fund | N/A | 2.20 | % | 1.15 | %(a) | N/A | N/A | 1.10 | %(a) | ||||||||||||||||||
Strategic Allocation Fund | 0.40 | % | 1.15 | % | 0.15 | % | 0.65 | % | N/A | N/A | |||||||||||||||||
INCORE Fund for Income | N/A | N/A | N/A | N/A | 0.63 | % | 0.71 | % | |||||||||||||||||||
INCORE Investment Grade Convertible Fund | N/A(a) | N/A | N/A(a) | N/A | N/A | N/A |
(a) In effect from March 1, 2018 until at least February 28, 2019
Was in effect from November 1, 2017 until February 28, 2018 | |||||||||||||||||||||||||||
Class A Shares | Class C Shares | Class I Shares | Class R Shares | Class R6 Shares | Class Y Shares | ||||||||||||||||||||||
Special Value Fund | N/A | 2.20 | % | N/A | N/A | N/A | 1.03 | % | |||||||||||||||||||
INCORE Investment Grade Convertible Fund | 1.39 | % | N/A | 1.00 | % | N/A | N/A | N/A |
The Funds have agreed to repay fees and expenses that were waived or reimbursed by the Adviser for a period up to three fiscal years after such waiver or reimbursement was made to the extent such payments or repayments would not cause the expenses of a class to exceed the original expense limitation in place at time of the waiver or reimbursement or any expense limitation agreement in place at the time of repayment. As of November 11, 2010, the Strategic Allocation Fund is no longer subject to repaying waived or reimbursed fees to the Adviser. Amounts repaid to the Adviser during the year, if any, are reflected on the Statements of Operations as "Recoupment of prior expenses waived/reimbursed by Adviser."
As of October 31, 2018, the following amounts are available to be repaid to the Adviser (in thousands):
Expires 10/31/19 | Expires 10/31/20 | Expires 10/31/21 | Total | ||||||||||||||||
Diversified Stock Fund | $ | 23 | $ | 20 | $ | 27 | $ | 70 | |||||||||||
NewBridge Large Cap Growth Fund | 19 | 43 | 64 | 126 | |||||||||||||||
Special Value Fund | 10 | 12 | 21 | 43 | |||||||||||||||
INCORE Fund for Income | 29 | 8 | 42 | 79 |
Voluntary waivers and reimbursements applicable to the Funds are not available to be recouped at a future time. For the year ended October 31, 2018, the Adviser and/or Citi voluntarily waived $81 thousand and $32 thousand in the Special Value Fund and INCORE Fund for Income Fund, respectively, to maintain more competitive expense ratios.
Certain officers and/or interested trustees of the Funds are also officers and/or employees of the Adviser, Administrator, Fund Accountant, Sub-Administrator, Sub-Fund Accountant and Legal.
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Victory Portfolios | Notes to Financial Statements — continued October 31, 2018 |
5. Risks:
Each Fund may be subject to other risks in addition to these identified risks.
An investment in the Funds' shares represents an indirect investment in the securities owned by the Funds, some of which will be traded on a national securities exchange or in the over-the-counter markets. The value of the securities in which the Funds invest, like other market investments, may move up or down, sometimes rapidly and unpredictably. The value of the securities in which the Funds invest may affect the value of the Funds' shares. An investment in the Funds' shares at any point in time may be worth less than the original investment, even after taking into account the reinvestment of the Funds' distributions.
The Funds will be subject to credit risk with respect to the amount each expects to receive from counterparties for financial instruments entered into by the Funds. The Funds may be negatively impacted if a counterparty becomes bankrupt or otherwise fails to perform its obligations due to financial difficulties. The Funds may experience significant delays in obtaining any recovery in bankruptcy or other reorganization proceeding and the Funds may obtain only limited recovery or may obtain no recovery in such circumstances. The Funds typically enter into transactions with counterparties whose credit ratings are investment grade, as determined by a nationally recognized statistical rating organization or, if unrated, judged by the Adviser to be of comparable quality.
The INCORE Fund for Income and INCORE Convertible Bond Fund are subject to credit and interest rate risk with respect to fixed income securities. Credit risk refers to the ability of an issuer to make timely payments of interest and principal. Interest rates may rise or the rate of inflation may increase, impacting the value of investments in fixed income securities. A debt issuers' credit quality may be downgraded or an issuer may default. Interest rates may fluctuate due to changes in governmental fiscal policy initiatives and resulting market reaction to those initiatives.
6. Borrowing and Interfund Lending:
Line of Credit:
The Victory Funds Complex participates in a short-term, demand note "Line of Credit" agreement with Citibank. Under the agreement with Citibank as of July 28, 2017, the Victory Funds Complex may borrow up to $250 million, of which $100 million is committed and $150 million is uncommitted. $40 million of the Line of Credit is reserved for use by the Victory Floating Rate Fund, another series of the Victory Funds Complex, with that Fund paying the related commitment fees for that amount. The purpose of the agreement is to meet temporary or emergency cash needs, including redemption requests that might otherwise require the untimely disposition of securities. The agreement was amended on July 27, 2018 with a new termination date of July 26, 2019. Citibank receives an annual commitment fee of 0.15% on $100 million for providing the Line of Credit. For the year ended October 31, 2018, Citibank earned approximately $150 thousand in commitment fees from the Victory Funds Complex. Each fund in the Victory Funds Complex pays a pro-rata portion of the commitment fees plus any interest on amounts borrowed. Interest accrued by each Fund during the period is presented on the Statements of Operations under Interest expense on line of credit.
The average loans for the days outstanding and average interest rate for each Fund during the year ended October 31, 2018 were as follows (in thousands):
Amount Outstanding at October 31, 2018 | Average Borrowing* | Days Borrowings Outstanding | Average Interest Rate | Maximum Borrowing During the Period | |||||||||||||||||||
Diversified Stock Fund | $ | — | $ | 1,500 | 1 | 2.29 | % | $ | 1,500 |
* For the year ended October 31, 2018, based on the number of days borrowings were outstanding.
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Victory Portfolios | Notes to Financial Statements — continued October 31, 2018 |
Interfund Lending:
The Trust and Adviser rely on an exemptive order granted by the SEC in March 2017 (the "Order"), permitting the establishment and operation of an Interfund Lending Facility (the "Facility"). The Facility allows each Fund to directly lend and borrow money to or from any other Victory Fund relying upon the Order at rates beneficial to both the borrowing and lending funds. Advances under the Facility are allowed for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities, and are subject to each Fund's borrowing restrictions. The interfund loan rate is determined, as specified in the Order, by averaging the current repurchase agreement rate and the current bank loan rate. Interest accrued by each Fund during the period is presented on the Statements of Operations under Interest expense on interfund lending.
The average borrowing and lending for the days outstanding and average interest rate for each Fund during the year ended October 31, 2018 were as follows (in thousands):
Borrower or Lender | Amount Outstanding at October 31, 2018 | Average Borrowing* | Days Borrowing Outstanding | Average Interest Rate | Maximum Borrowing During the Period | ||||||||||||||||||||||
Diversified Stock Fund | Borrower | $ | — | $ | 2,572 | 4 | 2.02 | % | $ | 8,232 | |||||||||||||||||
Special Value Fund | Borrower | — | 654 | 2 | 1.96 | % | 716 | ||||||||||||||||||||
Strategic Allocation Fund | Borrower | — | 127 | 5 | 2.59 | % | 243 |
* For the year ended October 31, 2018, based on the number of days borrowings were outstanding.
7. Federal Income Tax Information:
The tax character of distributions paid during the tax years ended, as noted below, were as follows (total distributions paid may differ from the Statements of Changes in Net Assets because, for tax purposes, dividends are recognized when actually paid) (in thousands):
Year Ended October 31, 2018 | |||||||||||||||||||
Distributions paid from | |||||||||||||||||||
Ordinary Income | Net Long-Term Capital Gains | Total Taxable Distributions | Total Distributions Paid | ||||||||||||||||
Diversified Stock Fund | $ | 33,530 | $ | 63,180 | $ | 96,710 | $ | 96,710 | |||||||||||
NewBridge Large Cap Growth Fund | — | 8,952 | 8,952 | 8,952 | |||||||||||||||
Special Value Fund | 258 | — | 258 | 258 | |||||||||||||||
Strategic Allocation Fund | 893 | 448 | 1,341 | 1,341 | |||||||||||||||
INCORE Fund for Income | 37,153 | — | 37,153 | 37,153 | |||||||||||||||
INCORE Investment Grade Convertible Fund | 4,734 | 661 | 5,395 | 5,395 | |||||||||||||||
Year Ended October 31, 2017 | |||||||||||||||||||
Distributions paid from | |||||||||||||||||||
Ordinary Income | Net Long-Term Capital Gains | Total Taxable Distributions | Total Distributions Paid | ||||||||||||||||
Diversified Stock Fund | $ | 4,738 | $ | 7,093 | $ | 11,831 | $ | 11,831 | |||||||||||
NewBridge Large Cap Growth Fund | — | 15,648 | 15,648 | 15,648 | |||||||||||||||
Special Value Fund | 797 | — | 797 | 797 | |||||||||||||||
Strategic Allocation Fund | 777 | — | 777 | 777 | |||||||||||||||
INCORE Fund for Income | 53,031 | — | 53,031 | 53,031 | |||||||||||||||
INCORE Investment Grade Convertible Fund | 1,668 | — | 1,668 | 1,668 |
86
Victory Portfolios | Notes to Financial Statements — continued October 31, 2018 |
As of the tax year ended October 31, 2018, the components of accumulated earnings (deficit) on a tax basis were as follows (in thousands):
Undistributed Ordinary Income | Undistributed Long-Term Capital Gains | Accumulated Earnings | Accumulated Capital and Other Losses | Qualified Late-Year Losses* | Unrealized Appreciation (Depreciation)** | Total Accumulated Earnings (Deficit) | |||||||||||||||||||||||||
Diversified Stock Fund | $ | 24,662 | $ | 14,832 | $ | 39,494 | $ | — | $ | — | $ | 39,037 | $ | 78,531 | |||||||||||||||||
NewBridge Large Cap Growth Fund | 29 | 7,117 | 7,146 | — | — | 9,080 | 16,226 | ||||||||||||||||||||||||
Special Value Fund | 3,951 | 2,620 | 6,571 | — | — | 4,247 | 10,818 | ||||||||||||||||||||||||
Strategic Allocation Fund | — | 255 | 255 | — | — | (958 | ) | (703 | ) | ||||||||||||||||||||||
INCORE Fund for Income | 2,927 | — | 2,927 | (251,767 | ) | — | (64,827 | ) | (313,667 | ) | |||||||||||||||||||||
INCORE Investment Grade Convertible Fund | 1,090 | 4,018 | 5,108 | — | — | 7,101 | 12,209 |
* Qualified late-year losses are comprised of post-October capital losses incurred after October 31, 2018, and certain late-year ordinary losses. Late-year ordinary losses represent ordinary losses incurred after December 31, 2018 and specified losses incurred after October 31, 2018. These losses are deemed to arise on the first day of the Fund's next taxable year.
** The difference between the book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to tax deferral of losses on wash sales.
As of the tax year ended October 31, 2018, the following Funds had net capital loss carryforwards ("CLCFs") as summarized in the tables below. CLCFs subject to expiration are applied as short-term capital loss regardless of whether the originating capital loss was short-term or long-term. CLCFs that are not subject to expiration are applied as either short-term or long-term depending on the originating capital loss and must be utilized before those that are subject to expiration.
CLCFs subject to expiration (in thousands):
Expiration Year | |||||||||||
2019 | Total | ||||||||||
INCORE Fund for Income | $ | 10,878 | $ | 10,878 |
During the tax year ended October 31, 2018, the INCORE Fund for Income utilized $3,563 (in thousands) of capital loss carryforwards.
CLCFs not subject to expiration (in thousands):
Short-Term Amount | Long-Term Amount | Total | |||||||||||||
INCORE Fund for Income | $ | 91,980 | $ | 148,909 | $ | 240,889 |
At October 31, 2018, the cost basis for federal income tax purposes, gross unrealized appreciation, gross unrealized depreciation and net unrealized appreciation (depreciation) for investments were as follows (in thousands):
Cost of Investments for Federal Tax Purposes | Gross Unrealized Appreciation | Gross Unrealized Depreciation | Net Unrealized Appreciation (Depreciation) | ||||||||||||||||
Diversified Stock Fund | $ | 350,527 | $ | 58,367 | $ | (19,330 | ) | $ | 39,037 | ||||||||||
NewBridge Large Cap Growth Fund | 13,882 | 9,742 | (662 | ) | 9,080 | ||||||||||||||
Special Value Fund | 62,120 | 7,720 | (3,473 | ) | 4,247 | ||||||||||||||
Strategic Allocation Fund | 33,972 | 903 | (1,861 | ) | (958 | ) | |||||||||||||
INCORE Fund for Income | 671,342 | 1,693 | (66,520 | ) | (64,827 | ) | |||||||||||||
INCORE Investment Grade Convertible Fund | 134,355 | 13,404 | (6,303 | ) | 7,101 |
87
Victory Portfolios | Notes to Financial Statements — continued October 31, 2018 |
As of October 31, 2018 on the Statements of Assets and Liabilities, as a result of permanent book-to-tax difference, reclassification adjustments were as follows (in thousands):
Accumulated Net Investment Income (Loss)* | Accumulated Net Realized Gains (Losses)* | Capital | |||||||||||||
Diversified Stock Fund | $ | 12 | $ | (12 | ) | $ | — | ||||||||
NewBridge Large Cap Growth Fund | 497 | (497 | ) | — | |||||||||||
Strategic Allocation Fund | 3 | (361 | ) | 358 | |||||||||||
INCORE Fund for Income | 8,072 | (4,497 | ) | (3,575 | ) | ||||||||||
INCORE Investment Grade Convertible Fund | 507 | (507 | ) | — |
* These components of capital are presented together as "Total distributable earnings/(loss)" on the Statement of Assets and Liabilities.
8. Affiliated Funds:
The term "affiliated company" includes funds which are managed by VCM which are affiliates of the Funds. Transactions during the year ended October 31, 2018 with funds which are affiliates were as follows (in thousands):
Fair Value 10/31/2017 | Purchases at Cost | Proceeds from Sales | Net Realized Gain (Loss) | Net Change in Unrealized Appreciation/ Depreciation | Fair Value 10/31/2018 | Dividend Income | |||||||||||||||||||||||||
Strategic Allocation Fund | |||||||||||||||||||||||||||||||
Victory INCORE Total Return Bond Fund, Class R6 | $ | 4,082 | $ | 989 | $ | (567 | ) | $ | (29 | ) | $ | (245 | ) | $ | 4,230 | $ | 161 | ||||||||||||||
Victory Expedition Emerging Markets Small Cap Fund, Class I | 1,806 | 925 | (2,643 | ) | 60 | (148 | ) | — | 34 | ||||||||||||||||||||||
Victory Integrity Discovery Fund, Class Y | 1,099 | 366 | (267 | ) | 97 | (177 | ) | 1,118 | 45 | ||||||||||||||||||||||
VictoryShares International Volatility Wtd ETF | 1,989 | 793 | (249 | ) | 5 | (259 | ) | 2,279 | 66 | ||||||||||||||||||||||
Victory Trivalent Emerging Markets Small-Cap Fund, Class Y | — | 3,200 | (199 | ) | (29 | ) | (717 | ) | 2,255 | — | |||||||||||||||||||||
Victory Sophus Emerging Markets Small Cap Fund, Class Y | — | 3,201 | (200 | ) | (37 | ) | (808 | ) | 2,156 | — | |||||||||||||||||||||
VictoryShares US Small Cap Volatility Wtd ETF | 1,121 | 242 | (225 | ) | 34 | (35 | ) | 1,137 | 14 | ||||||||||||||||||||||
VictoryShares Emerging Market Volatility Wtd Index ETF | 2,120 | 479 | (2,685 | ) | 356 | (270 | ) | — | 73 | ||||||||||||||||||||||
Victory CEMP Long/Short Strategy Fund, Class I | 2,203 | 661 | (2,863 | ) | 251 | (252 | ) | — | 57 | ||||||||||||||||||||||
Victory CEMP Commodity Volatility Wtd Index Strategy Fund, Class I | 2,140 | 84 | (2,131 | ) | (237 | ) | 144 | — | 84 | ||||||||||||||||||||||
Victory RS Global Fund, Class Y | 9,178 | 1,989 | (1,976 | ) | 119 | 333 | 9,643 | — | |||||||||||||||||||||||
VictoryShares US Multi-Factor Minimum Volatility ETF | 1,955 | 671 | (403 | ) | 30 | 248 | 2,501 | 56 |
88
Victory Portfolios | Notes to Financial Statements — continued October 31, 2018 |
Victory Market Neutral Income Fund, Class I | 7,038 | 2,062 | (1,470 | ) | (11 | ) | 76 | 7,695 | 273 | ||||||||||||||||||||||
Total | $ | 34,731 | $ | 15,662 | $ | (15,878 | ) | $ | 609 | $ | (2,110 | ) | $ | 33,014 | $ | 863 |
9. Fund Ownership:
Ownership of more than 25% of the voting securities of a fund creates presumptions of control of the fund, under section 2(a)(9) of the 1940 Act. As of October 31, 2018, the shareholders listed below held more than 25% of the shares outstanding of the Funds and may be deemed to control those Funds.
Shareholder | Percent | ||||||||||
Special Value Fund | Hartford Life Insurance Company | 32.4 | % | ||||||||
INCORE Investment Grade Convertible Fund | Morgan Stanley Smith Barney LLC | 36.8 | % |
10. Recent Accounting Pronouncements:
In October 2016, the SEC released its Final Rules on Investment Company Reporting Modernization (the "Rules"). The Rules which introduced two new regulatory reporting forms for investment companies — Form N-PORT and Form N-CEN — also contain amendments to Regulation S-X which require standardized, enhanced disclosures about derivatives in investment company financial statements. The Regulation S-X amendments had a compliance date of August 1, 2017, and are reflected in this report. The Funds' compliance date for Form N-PORT was June 1, 2018, and the Funds will make their initial filing with the SEC on Form N-PORT for the period ending March 31, 2019. Effective with the period ended June 30, 2018, the Funds were required to maintain, and make available to the SEC upon request, the information required to be included in Form N-PORT. Form N-PORT will replace Form N-Q filings effective with the requirement to file the Form N-PORT with the SEC for the period ending March 31, 2019. The Funds' compliance date for Form N-CEN was June 1, 2018, and the Funds will make their initial filing on Form N-CEN for the period ended October 31, 2018. Form N-CEN will replace Form N-SAR filings. The Funds' adoption of these amendments has no effect on the net assets or results of operations.
In March 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2017-08 "Premium Amortization on Purchased Callable Debt Securities" ("ASU 2017-08"), which shortens the premium amortization period for purchased non-contingently callable debt securities. ASU 2017-08 specifies that the premium amortization period ends at the earliest call date, for purchased non-contingently callable debt securities. ASU 2017-08 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Management does not believe that adoption of ASU 2017-08 will materially impact the Funds' financial statements.
In August 2018, the FASB issued ASU No. 2018-13, "Fair Value Measurements" ("ASU 2018-13"). This update makes certain removals from, changes to and additions to existing disclosure requirements for fair value measurements. ASU 2018-13 does not change fair value measurements already required or permitted by existing standards. ASU 2018-13 is effective for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. As permitted, the Funds have early adopted ASU 2018-13 with the financial statements prepared as of October 31, 2018.
In August 2018, the SEC adopted amendments to certain financial statement disclosure requirements to conform them to GAAP for investment companies. These amendments made certain disclosure requirements effective under Regulation S-X. The Funds' adoption of these amendments, effective with the financial statements prepared as of October 31, 2018 had no effect on the Funds' net assets or results of operations. As a result of adopting these amendments, the distributions to shareholders in the October 31, 2017 Statements of Changes in Net Assets presented herein have been reclassified to conform to the current year presentation, which includes all distributions to each class of shareholders,
89
Victory Portfolios | Notes to Financial Statements — continued October 31, 2018 |
other than tax basis return of capital distributions, in one line item per share class. Distributions to shareholders for the year ended October 31, 2017 from net investment income and net realized gains in the Funds were as follows:
Diversified Stock Fund | NewBridge Large Cap Growth Fund | Special Value Fund | Strategic Allocation Fund | INCORE Fund for Income | INCORE Investment Grade Convertible Fund | ||||||||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||||||
From net investment income: | |||||||||||||||||||||||||||
Class A Shares | $ | (2,827 | ) | $ | — | $ | (402 | ) | $ | (403 | ) | $ | (17,071 | ) | $ | (562 | ) | ||||||||||
Class C Shares | (102 | ) | — | (20 | ) | (194 | ) | (2,700 | ) | — | |||||||||||||||||
Class I Shares | (1,267 | ) | — | (51 | ) | (138 | ) | (28,522 | ) | (1,106 | ) | ||||||||||||||||
Class R Shares | (435 | ) | — | (308 | ) | (42 | ) | (3,526 | ) | — | |||||||||||||||||
Class R6 Shares | (29 | ) | — | — | — | (446 | ) | — | |||||||||||||||||||
Class Y Shares | (119 | ) | — | (16 | ) | — | (766 | ) | — | ||||||||||||||||||
Diversified Stock Fund | NewBridge Large Cap Growth Fund | Special Value Fund | Strategic Allocation Fund | INCORE Fund for Income | INCORE Investment Grade Convertible Fund | ||||||||||||||||||||||
From net realized gains: | |||||||||||||||||||||||||||
Class A Shares | $ | (3,851 | ) | $ | (3,217 | ) | $ | — | $ | — | $ | — | $ | — | |||||||||||||
Class C Shares | (582 | ) | (2,111 | ) | — | — | — | — | |||||||||||||||||||
Class I Shares | (1,639 | ) | (8,820 | ) | — | — | — | — | |||||||||||||||||||
Class R Shares | (808 | ) | (339 | ) | — | — | — | — | |||||||||||||||||||
Class R6 Shares | (34 | ) | — | — | — | — | — | ||||||||||||||||||||
Class Y Shares | (138 | ) | (1,161 | ) | — | — | — | — |
11. Subsequent Events:
The Funds have evaluated the need for additional disclosures or adjustments resulting from subsequent events through the date these financial statements were issued. Based on this evaluation, there were no subsequent events to report that would have a material impact on the Funds' financial statements.
90
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of the Victory Diversified Stock Fund, Victory NewBridge Large Cap Growth Fund, Victory Special Value Fund, Victory Strategic Allocation Fund, Victory INCORE Fund for Income, and Victory INCORE Investment Grade Convertible Fund
Opinion on the Financial Statements
We have audited the accompanying statements of assets and liabilities of Victory Diversified Stock Fund, Victory NewBridge Large Cap Growth Fund, Victory Special Value Fund, Victory Strategic Allocation Fund, Victory INCORE Fund for Income, and Victory INCORE Investment Grade Convertible Fund (the Funds) (six of the funds constituting the Victory Portfolios (the "Trust") including the portfolios of investments, as of October 31, 2018, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Funds (six of the funds constituting the Trust) at October 31, 2018, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended and their financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Trust's management. Our responsibility is to express an opinion on each of the Funds' financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust's internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2018, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Victory Capital's investment companies since 1995.
Cincinnati, Ohio
December 21, 2018
91
Victory Portfolios | Supplemental Information October 31, 2018 |
(Unaudited)
Trustee and Officer Information Board of Trustees:
Overall responsibility for management of the Trust rests with the Board. The Trust is managed by the Board in accordance with the laws of the State of Delaware. There are currently ten Trustees, nine of whom are not "interested persons" of the Trust within the meaning of that term under the 1940 Act ("Independent Trustees") and one of whom is an "interested person" of the Trust within the meaning of that term under the 1940 Act ("Interested Trustee"). The Trustees, in turn, elect the officers of the Trust to actively supervise its day-to-day operations.
The following tables list the Trustees, their ages, position with the Trust, commencement of service, principal occupations during the past five years and any directorships of other investment companies or companies whose securities are registered under the Securities Exchange Act of 1934, as amended, or who file reports under that Act. Each Trustee oversees 42 portfolios in the Trust, nine portfolios in Victory Variable Insurance Funds, one portfolio in Victory Institutional Funds and 20 portfolios in Victory Portfolios II, each a registered investment company that, together with the Trust, comprise the Victory Fund Complex. Each Trustee's address is c/o Victory Portfolios Funds, 4900 Tiedeman Road, 4th Floor, Brooklyn, Ohio 44144. Each Trustee has an indefinite term.
Name and Age | Position Held with the Trust | Date Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Independent Trustees. | |||||||||||||||||||
David Brooks Adcock, 67 | Trustee | May 2005 | Consultant (since 2006). | Chair and Trustee, Turner Funds (December 2016-December 2017). | |||||||||||||||
Nigel D. T. Andrews, 71 | Vice Chair and Trustee | August 2002 | Retired. | Director, TCG BDC II, Inc. (since 2017); Director, TCG BDC I, Inc. (formerly Carlyle GMS Finance, Inc.) (since 2012); Director, Old Mutual US Asset Management (2002-2014). | |||||||||||||||
E. Lee Beard, 67* | Trustee | May 2005 | Retired (since 2015); Consultant, The Henlee Group, LLC (consulting) (2005-2015). | None. | |||||||||||||||
Dennis M. Bushe, 74 | Trustee | July 2016 | Retired. | Trustee, RS Investment Trust and RS Variable Products Trust (November 2011 to July 2016). |
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Victory Portfolios | Supplemental Information — continued October 31, 2018 |
(Unaudited)
Name and Age | Position Held with the Trust | Date Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Sally M. Dungan, 64 | Trustee | February 2011 | Chief Investment Officer, Tufts University (since 2002). | None. | |||||||||||||||
John L. Kelly, 65 | Trustee | February 2015 | Partner, McCarvill Capital Partners (September 2016-September 2017); Advisor (January 2016-April 2016) and Managing Partner (August 2014-January 2016), Endgate Commodities LLC; Chief Operating Officer, Liquidnet Holdings, Inc. (2011-2014). | Director, Caledonia Mining Corporation (since May 2012). | |||||||||||||||
David L. Meyer, 61* | Trustee | December 2008 | Retired. | None. | |||||||||||||||
Gloria S. Nelund, 57 | Trustee | July 2016 | Chair, CEO and Co-Founder of TriLinc Global, LLC, an investment firm. | TriLinc Global Impact Fund, LLC (since 2012); Trustee, RS Investment Trust and RS Variable Products Trust (November 2007 to July 2016). | |||||||||||||||
Leigh A. Wilson, 73 | Chair and Trustee | November 1994 | Private Investor. | Chair (since 2013), Caledonia Mining Corporation. | |||||||||||||||
Interested Trustee. | |||||||||||||||||||
David C. Brown, 46** | Trustee | May 2008 | Chairman and Chief Executive Officer (since 2013), Co-Chief Executive Officer (2011-2013), the Adviser; Chairman and Chief Executive Officer, Victory Capital Holdings, Inc. (since 2013). | None. |
* The Board has designated Mr. Meyer and Ms. Beard as its Audit Committee Financial Experts.
** Mr. Brown is an "Interested Person" by reason of his relationship with the Adviser.
The Statement of Additional Information includes additional information about the Trustees of the Trust and is available, without charge, by calling 800-539-3863.
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Victory Portfolios | Supplemental Information — continued October 31, 2018 |
(Unaudited)
Officers:
The officers of the Trust, their ages, commencement of service and their principal occupations during the past five years, are detailed in the following table. Each officer serves until the earlier of his or her resignation, removal, retirement, death, or the election of a successor. The mailing address of each officer of the Trust is 4900 Tiedeman Road, 4th Floor, Brooklyn, Ohio 44144. The officers of the Trust receive no compensation directly from the Trust for performing the duties of their offices.
Name and Age | Position with the Trust | Date Commenced Service | Principal Occupation During Past 5 Years | ||||||||||||
Christopher K. Dyer, 56 | President | February 2006* | Director of Mutual Fund Administration, the Adviser. | ||||||||||||
Scott A. Stahorsky, 49 | Vice President | December 2014 | Manager, Fund Administration, the Adviser (since 2015); Senior Analyst, Fund Administration, the Adviser (prior to 2015). | ||||||||||||
Erin G. Wagner, 44 | Secretary | December 2014 | Associate General Counsel, the Adviser (since 2013). | ||||||||||||
Allan Shaer, 53 | Treasurer | May 2017 | Senior Vice President, Financial Administration, Citi Fund Services Ohio, Inc. (since 2016); Vice President, Mutual Fund Administration, JP Morgan Chase (2011-2016). | ||||||||||||
Christopher A. Ponte, 34 | Assistant Treasurer | December 2017 | Manager, Fund Administration, the Adviser (since 2017); Senior Analyst, Fund Administration, the Adviser (prior to 2017); Chief Financial Officer, Victory Capital Advisers, Inc. (since 2018). | ||||||||||||
Colin Kinney, 45 | Chief Compliance Officer | July 2017 | Chief Compliance Officer (since 2013) and Chief Risk Officer (2009-2017), the Adviser. | ||||||||||||
Chuck Booth, 58 | Anti-Money Laundering Compliance Officer and Identity Theft Officer | May 2015 | Director, Regulatory Administration and CCO Support Services, Citi Fund Services Ohio, Inc. | ||||||||||||
Jay G. Baris, 64 | Assistant Secretary | December 1997 | Partner, Shearman & Sterling LLP (since 2018); Partner, Morrison & Foerster LLP (2011-2017). |
* On December 3, 2014, Mr. Dyer resigned as Secretary of the Trust and accepted the position of President.
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Victory Portfolios | Supplemental Information — continued October 31, 2018 |
(Unaudited)
Proxy Voting and Form N-Q Information
Proxy Voting:
Information regarding the policies and procedures that each Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, by calling 800-539-3863. The information is also included in the Funds' Statement of Additional Information, which is available on the SEC's website at www.sec.gov.
Information relating to how each Fund voted proxies relating to portfolio securities held during the most recent twelve months ended June 30 is available on the SEC's website at www.sec.gov.
Availability of Schedules of Portfolio Investments:
The Trust files a complete list of Schedules of Portfolio Investments with the SEC for the first and third quarters of each fiscal year on Form N-Q. Forms N-Q are available on the SEC's website at www.sec.gov.
Expense Examples
As a shareholder of the Funds, you may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchases; and (2) ongoing costs, including management fees, distribution and service (12b-1) fees, and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds.
These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period from May 1, 2018 through October 31, 2018.
The Actual Expense figures in the table below provide information about actual account values and actual expenses. You may use the information below, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled "Actual Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
The Hypothetical Expense figures in the table below provide information about hypothetical account values and hypothetical expenses based on each Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare this 5% hypothetical example with the 5% hypothetical examples that appear in shareholder reports of other funds.
Please note the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
95
Victory Portfolios | Supplemental Information — continued October 31, 2018 |
(Unaudited)
Beginning Account Value 5/1/18 | Actual Ending Account Value 10/31/18 | Hypothetical Ending Account Value 10/31/18 | Actual Expenses Paid During Period 5/1/18- 10/31/18* | Hypothetical Expenses Paid During Period 5/1/18- 10/31/18* | Annualized Expense Ratio During Period 5/1/18- 10/31/18 | ||||||||||||||||||||||
Diversified Stock Fund | |||||||||||||||||||||||||||
Class A | $ | 1,000.00 | $ | 973.20 | $ | 1,019.91 | $ | 5.22 | $ | 5.35 | 1.05 | % | |||||||||||||||
Class C | 1,000.00 | 969.00 | 1,015.48 | 9.58 | 9.80 | 1.93 | % | ||||||||||||||||||||
Class I | 1,000.00 | 974.90 | 1,021.27 | 3.88 | 3.97 | 0.78 | % | ||||||||||||||||||||
Class R | 1,000.00 | 971.90 | 1,018.50 | 6.61 | 6.77 | 1.33 | % | ||||||||||||||||||||
Class R6 | 1,000.00 | 975.10 | 1,021.27 | 3.88 | 3.97 | 0.78 | % | ||||||||||||||||||||
Class Y | 1,000.00 | 974.60 | 1,020.87 | 4.28 | 4.38 | 0.86 | % | ||||||||||||||||||||
NewBridge Large Cap Growth Fund | |||||||||||||||||||||||||||
Class A | 1,000.00 | 998.70 | 1,018.35 | 6.85 | 6.92 | 1.36 | % | ||||||||||||||||||||
Class C | 1,000.00 | 996.00 | 1,014.62 | 10.57 | 10.66 | 2.10 | % | ||||||||||||||||||||
Class I | 1,000.00 | 1,001.20 | 1,020.42 | 4.79 | 4.84 | 0.95 | % | ||||||||||||||||||||
Class R | 1,000.00 | 997.00 | 1,016.89 | 8.31 | 8.39 | 1.65 | % | ||||||||||||||||||||
Class Y | 1,000.00 | 1,001.20 | 1,020.06 | 5.15 | 5.19 | 1.02 | % | ||||||||||||||||||||
Special Value Fund | |||||||||||||||||||||||||||
Class A | 1,000.00 | 973.20 | 1,019.31 | 5.82 | 5.96 | 1.17 | % | ||||||||||||||||||||
Class C | 1,000.00 | 968.10 | 1,014.27 | 10.76 | 11.02 | 2.17 | % | ||||||||||||||||||||
Class I | 1,000.00 | 973.40 | 1,019.66 | 5.47 | 5.60 | 1.10 | % | ||||||||||||||||||||
Class R | 1,000.00 | 971.30 | 1,017.80 | 7.30 | 7.48 | 1.47 | % | ||||||||||||||||||||
Class Y | 1,000.00 | 974.00 | 1,020.16 | 4.98 | 5.09 | 1.00 | % | ||||||||||||||||||||
Strategic Allocation Fund | |||||||||||||||||||||||||||
Class A | 1,000.00 | 959.00 | 1,023.19 | 1.98 | 2.04 | 0.40 | % | ||||||||||||||||||||
Class C | 1,000.00 | 955.30 | 1,019.41 | 5.67 | 5.85 | 1.15 | % | ||||||||||||||||||||
Class I | 1,000.00 | 960.40 | 1,024.45 | 0.74 | 0.77 | 0.15 | % | ||||||||||||||||||||
Class R | 1,000.00 | 957.70 | 1,021.93 | 3.21 | 3.31 | 0.65 | % | ||||||||||||||||||||
INCORE Fund for Income | |||||||||||||||||||||||||||
Class A | 1,000.00 | 986.80 | 1,020.72 | 4.46 | 4.53 | 0.89 | % | ||||||||||||||||||||
Class C | 1,000.00 | 998.20 | 1,016.59 | 8.61 | 8.69 | 1.71 | % | ||||||||||||||||||||
Class I | 1,000.00 | 1,003.70 | 1,022.03 | 3.18 | 3.21 | 0.63 | % | ||||||||||||||||||||
Class R | 1,000.00 | 1,003.50 | 1,020.62 | 4.60 | 4.63 | 0.91 | % | ||||||||||||||||||||
Class R6 | 1,000.00 | 1,004.90 | 1,022.03 | 3.18 | 3.21 | 0.63 | % | ||||||||||||||||||||
Class Y | 1,000.00 | 1,004.40 | 1,021.63 | 3.59 | 3.62 | 0.71 | % | ||||||||||||||||||||
INCORE Investment Grade Convertible Fund | |||||||||||||||||||||||||||
Class A | 1,000.00 | 989.60 | 1,018.80 | 6.37 | 6.46 | 1.27 | % | ||||||||||||||||||||
Class I | 1,000.00 | 991.20 | 1,020.37 | 4.82 | 4.89 | 0.96 | % |
* Expenses are equal to the average account value multiplied by the Fund's annualized expense ratio multiplied by 184/365 (the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year).
96
Victory Portfolios | Supplemental Information — continued October 31, 2018 |
(Unaudited)
Additional Federal Income Tax Information
For the year ended October 31, 2018, the Funds paid qualified dividend income for the purposes of reduced individual federal income tax rates of:
Amount | |||||||
Diversified Stock Fund | 21 | % | |||||
Special Value Fund | 100 | % | |||||
Strategic Allocation Fund | 53 | % |
Dividends qualified for corporate dividends received deductions of:
Amount | |||||||
Diversified Stock Fund | 18 | % | |||||
Special Value Fund | 100 | % | |||||
Strategic Allocation Fund | 36 | % |
For the year ended October 31, 2018, the Funds designated short-term capital gain distributions (in thousands):
Amount | |||||||
Diversified Stock Fund | $ | 32,287 |
For the year ended October 31, 2018, the following Funds designated long-term capital gain distributions (in thousands):
Amount | |||||||
Diversified Stock Fund | $ | 63,181 | |||||
NewBridge Large Cap Growth Fund | 8,952 | ||||||
Strategic Allocation Fund | 448 | ||||||
INCORE Investment Grade Convertible Fund | 661 |
97
Privacy Policy
Protecting the Privacy of Information
The Trust respects your right to privacy. We also know that you expect us to conduct and process your business in an accurate and efficient manner. To do so, we must collect and maintain certain personal information about you. This is the information we collect from you on applications or other forms, and from the transactions you make with us or third parties. It may include your name, address, social security number, account transactions and balances, and information about investment goals and risk tolerance.
We do not disclose any information about you or about former customers to anyone except as permitted or required by law. Specifically, we may disclose the information we collect to companies that perform services on our behalf, such as the transfer agent that processes shareholder accounts and printers and mailers that assist us in the distribution of investor materials. We may also disclose this information to companies that perform marketing services on our behalf. This allows us to continue to offer you Victory investment products and services that meet your investing needs, and to effect transactions that you request or authorize. These companies will use this information only in connection with the services for which we hired them. They are not permitted to use or share this information for any other purpose.
To protect your personal information internally, we permit access only by authorized employees and maintain physical, electronic and procedural safeguards to guard your personal information.*
* You may have received communications regarding information about privacy policies from other financial institutions which gave you the opportunity to "opt-out" of certain information sharing with companies which are not affiliated with that financial institution. The Trust does not share information with other companies for purposes of marketing solicitations for products other than the Trust. Therefore, the Trust does not provide opt-out options to their shareholders.
Victory Funds
P.O. Box 182593
Columbus, Ohio 43218-2593
Visit our website at: | Call Victory at: | ||||||
www.vcm.com | 800-539-FUND (800-539-3863) |
VP-AR (10/18)
October 31, 2018
Annual Report
Victory Sycamore Established Value Fund
Victory Sycamore Small Company Opportunity Fund
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Victory Funds' shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports from the Victory Funds or from your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on www.VictoryFunds.com, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change; and you need not take any action. You may elect to receive shareholder reports and other communications from the Victory Funds or your financial intermediary electronically by notifying your financial intermediary directly or, if you are a direct investor, by calling 800-539-3863 or by sending an e-mail request to TA.Processing@FISGlobal.com.
You may elect to receive all future reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies of your reports. If you invest directly with the Victory Funds, you can call 800-539-3863 or send an e-mail request to TA.Processing@FISGlobal.com. Your election to receive reports in paper will apply to all funds held with the Victory Funds or your financial intermediary.
www.vcm.com
News, Information And Education 24 Hours A Day, 7 Days A Week
The Victory Funds site gives fund shareholders, prospective shareholders, and investment professionals a convenient way to access fund information, get guidance, and track fund performance anywhere they can access the Internet. The site includes:
• Detailed performance records
• Daily share prices
• The latest fund news
• Investment resources to help you become a better investor
• A section dedicated to investment professionals
Whether you're a potential investor searching for the fund that matches your investment philosophy, a seasoned investor interested in planning tools, or an investment professional, www.vcm.com has what you seek. Visit us anytime. We're always open.
Victory Portfolios
Table of Contents
Financial Statements | |||||||
Victory Sycamore Established Value Fund | |||||||
Schedule of Portfolio Investments | 12 | ||||||
Statement of Assets and Liabilities | 19-20 | ||||||
Statement of Operations | 21 | ||||||
Statements of Changes in Net Assets | 22-24 | ||||||
Financial Highlights | 25-30 | ||||||
Victory Sycamore Small Company Opportunity Fund | |||||||
Schedule of Portfolio Investments | 15 | ||||||
Statement of Assets and Liabilities | 19-20 | ||||||
Statement of Operations | 21 | ||||||
Statements of Changes in Net Assets | 22-24 | ||||||
Financial Highlights | 31-35 | ||||||
Notes to Financial Statements | 36 | ||||||
Report of Independent Registered Public Accounting Firm | 46 | ||||||
Supplemental Information | 47 | ||||||
Trustee and Officer Information | 47 | ||||||
Proxy Voting and Form N-Q Information | 50 | ||||||
Expense Examples | 50 | ||||||
Additional Federal Income Tax Information | 52 | ||||||
Privacy Policy (inside back cover) |
1
The Funds are distributed by Victory Capital Advisers, Inc. Victory Capital Management Inc. is the investment adviser to the Funds and receives fees from the Funds for performing services for the Funds.
This report is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus of the Victory Funds.
For additional information about any Victory Fund, including fees, expenses, and risks, view our prospectus online at vcm.com or call 800-539-3863. Read it carefully before you invest or send money.
The information in this annual report is based on data obtained from recognized services and sources and is believed to be reliable. Any opinions, projections, or recommendations in this report are subject to change without notice and are not intended as individual investment advice. Past investment performance of the Funds, markets or securities mentioned herein should not be considered to be indicative of future results.
• NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE
Call Victory at:
800-539-FUND (800-539-3863)
Visit our website at:
www.vcm.com
2
This page is intentionally left blank.
3
Victory Funds Letter to Shareholders
Dear Shareholder,
Has the worm turned? That's the question that many investors may be asking. The most recent annual reporting period (for the year ended October 31, 2018) seemingly began as a continuation of the prevailing trend, rallying into year-end 2017 in what has been hailed as the longest equity bull market in history.
But in early February, the era of low volatility ended abruptly. Investors were once again re-acquainted with market turmoil as the major market indices plummeted and the CBOE Volatility Index (VIX), often referred to as the market's "fear gauge," spiked. Although this had unusual ramifications for a variety of volatility-linked investment products, the overall market upheaval was fleeting. By spring, equity markets were headed higher once again, and this upward trend continued into the fall. However, a mix of trade turmoil, rising interest rates, and increasing concerns about global growth all conspired to spook investors. As we approached the end of the Funds' annual reporting period, volatility once again spiked in October.
Despite the periodic bouts of elevated volatility, the S&P 500® Index still registered a gain of 7.35 percent for the 12 months ended October 31, 2018. Looking back, the domestic markets were merely mirroring the economy, which grew at the robust pace of 4.2 and 3.5 percent in the second and third quarters of 2018, respectively, according to the U.S. Bureau of Economic Analysis. Job growth also continued unabated throughout the past year, and even wage growth made signs of a comeback.
In response, the Federal Reserve continued its trajectory of monetary tightening, both in the form of ending its bond buying program and gradually raising short-term interest rates. It is no surprise, then, that yields on 10-year U.S. Treasuries increased over the past year and ended the reporting period near 3.2 percent, the highest level seen in quite some time.
Thus, investors have been left with the conundrum: do robust economic metrics signal more good times ahead, or does the Federal Reserve's monetary tightening pose a threat? Plus, a significant shift in U.S. trade policy has unknown consequences, and the markets loath uncertainty.
It is important to remember, however, that these cross-currents often manifest themselves in pricing dislocations. We believe this creates an environment ripe for potential alpha generation. We are confident that our Victory Capital independent investment franchises, and the Funds they manage, will be able to differentiate themselves.
On the following pages, you will find information relating to your Victory Funds investment. If you have any questions, we encourage you to contact your financial advisor. Or, if you invest with us directly, you may call (800) 539-3863, or visit our website at www.vcm.com.
4
My colleagues and I sincerely appreciate the confidence you have placed in the Victory Funds, and we value the opportunity to help meet your investment goals.
Christopher K. Dyer, CFA
President,
Victory Funds
5
Victory Equity Funds (Unaudited)
Victory Sycamore Established Value Fund
Portfolio Holdings
As a Percentage of Total Investments
Investment Considerations
Equity securities (stocks) are more volatile and carry more risk than other forms of investments, including investments in high-grade fixed-income securities. Mid-capitalization stocks typically carry additional risk, as smaller companies generally have a higher risk of failure and, historically, their stocks have experienced a greater degree of volatility. The net asset value per share of the Victory Sycamore Established Value Fund (the "Fund") will fluctuate as the value of the securities in its portfolio changes.
Commentary
After an uncanny calm in the markets in 2017, volatility returned with a vengeance to start the new year. In February, the market experienced its worst decline since early 2016. Fear of a global slowdown was the culprit in 2016. However, reasons for the February sell-off were arguably more benign. There was speculation that wage inflation in a tight labor market led to the first bout of volatility. Then, later in the first quarter, a combination of factors jolted investor sentiment. Talk of a "trade war" injected a level of uncertainty into the market. Additionally, anxiety over Big Tech being in the regulatory crosshairs was another likely catalyst.
Escalation in trade rhetoric witnessed a thematic trade unfold in the market during the second quarter. Investors favored domestically oriented companies that are less likely to be impacted by an ensuing trade dispute. With economic data suggesting that the U.S. economy is still on solid footing, the Fed continued the path toward normalization by raising the federal funds rate. The Fed's hawkish tilt, coupled with a murky picture abroad, helped the U.S. dollar sustain its rally. Uncertainty surrounding the outcome of the trade spat and political developments in Europe curbed investors' appetite for risk, which helped lift the dollar against other world currencies. The changing narrative inflicted pain on emerging markets and commodities while at the same time boosted demand for smaller U.S.-based companies, which generally have less exposure to overseas markets.
Resiliency of the U.S. equity market continued into the third quarter. Major U.S. equity indices shrugged off mounting concerns over trade, the possibility of contagion from emerging markets, a less accommodative Fed, and a political spectacle in Washington to end the quarter well into positive territory. The S&P 500® Index posted its biggest quarterly gain in almost five years with the S&P 500® Index advancing 11 out of the last 12 quarters. The market was buoyed by a favorable fundamental narrative, which continued to boost equity returns. Solid earnings aided by late-cycle stimulus as well as capital return by U.S. companies helped drive the market higher.
The month of October saw a reversal from previous months as the possibility for slowing growth weighed on market sentiment. Consequently, the S&P 500® Index posted its worst monthly return since September 2011. As the impact from fiscal stimulus fades and the
6
Victory Equity Funds (Unaudited)
Victory Sycamore Established Value Fund (continued)
potential for rising rates and tariffs to filter through the economy increases, it remains to be seen how the ongoing expansion will fare in such an environment.
The Fund seeks to provide long-term capital growth by investing primarily in common stocks. The Fund (Class A Shares at net asset value) outperformed the benchmark Russell Mid Cap® Value Index (the "Index") for the fiscal year ended October 31, 2018, with the Fund returning 2.01% versus a 0.16% return for the Index.
The Fund's outperformance relative to the Index was driven by both stock selection and sector weighting, with selection having a larger impact on performance. Sector weighting is a by-product of our bottom-up security selection process and not a result of top-down tactical decisions. Specifically, stock selection in the Health Care, Energy, Information Technology, and Real Estate sectors contributed positively to return. An underweight in Real Estate relative to the Index was also beneficial. Conversely, stock selection in the Information Technology, Energy and Industrials sectors detracted from performance. An overweight in Information Technology — one of the top-performing sectors for the period — partially offset the negative impact from selection.
HCA Healthcare (HCA) was the top contributor for the period. The public hospital operator benefited from improved utilization which resulted in management raising guidance for the year. Shares of Tiffany & Co. (TIF) advanced as the luxury retailer continued to post strong results. Sales across most regions and categories were robust, which also resulted in management raising guidance for the full year. Motorola Solutions (MSI) was another top contributor. The company reported results throughout the year that were ahead of consensus expectations. Favorable results were driven by solid demand for the company's products and services as well as synergies from a recent acquisition.
Flex Ltd. (FLEX) was the top detractor for the period. In October, the company announced plans to terminate a contract with Nike. The termination of the contract was disappointing considering the company has invested a significant amount of time and capital in the project. Shares of Owens Corning (OC) depreciated throughout the year given decelerating growth outlook for roofing supplies in addition to headwinds from rising input costs. Cimarex Energy (XEC) shares were under pressure for most of the year given that the company has exposure to the Permian Basin. Despite boasting an attractive growth profile and pristine balance sheet, Cimarex Energy's (XEC) stock price has underwhelmed for most of this year. We believe that the stock price has been punished given the company's disproportionate exposure to the Permian Basin, which has weighed on investor sentiment due to ongoing fears of inadequate takeaway capacity.
7
Victory Equity Funds (Unaudited)
Victory Sycamore Established Value Fund (continued)
Average Annual Return
Year Ended October 31, 2018
Class A | Class C | Class I | Class R | Class R6 | Class Y | ||||||||||||||||||||||||||||||||||
INCEPTION DATE | 5/5/00 | 3/1/16 | 3/1/10 | 8/16/83 | 3/4/14 | 1/28/13 | |||||||||||||||||||||||||||||||||
Net Asset Value | Maximum Offering Price | Net Asset Value | Contingent Deferred Charges | Net Asset Value | Net Asset Value | Net Asset Value | Net Asset Value | Russell MidCap® Value Index(1) | |||||||||||||||||||||||||||||||
One Year | 2.01 | % | –3.86 | % | 1.19 | % | 0.20 | % | 2.30 | % | 1.80 | % | 2.34 | % | 2.27 | % | 0.16 | % | |||||||||||||||||||||
Three Year | 9.04 | % | 6.90 | % | N/A | N/A | 9.35 | % | 8.82 | % | 9.42 | % | 9.33 | % | 8.15 | % | |||||||||||||||||||||||
Five Year | 10.22 | % | 8.92 | % | N/A | N/A | 10.57 | % | 10.01 | % | N/A | 10.47 | % | 8.11 | % | ||||||||||||||||||||||||
Ten Year | 14.12 | % | 13.45 | % | N/A | N/A | N/A | 13.93 | % | N/A | N/A | 13.35 | % | ||||||||||||||||||||||||||
Since Inception | 9.78 | % | 9.43 | % | 12.94 | % | 12.94 | % | 12.77 | % | 11.59 | % | 9.90 | % | 12.38 | % | N/A | ||||||||||||||||||||||
Expense Ratios | |||||||||||||||||||||||||||||||||||||||
Gross | 0.90% | 1.70% | 0.62% | 1.10% | 0.54% | 0.60% | |||||||||||||||||||||||||||||||||
With Applicable Waivers | 0.90% | 1.70% | 0.62% | 1.10% | 0.54% | 0.60% | |||||||||||||||||||||||||||||||||
Past performance is not indicative of future results. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month's end, please visit www.vcm.com. |
The above expense ratios are from the Fund's prospectus dated March 1, 2018. Additional information pertaining to the Fund's expense ratios as of October 31, 2018 can be found in the financial highlights.
The maximum offering price (MOP) reflects a maximum sales charge of 5.75% for Class A Shares. Class C Shares are not subject to an initial sales charge, but are subject to a deferred sales charge of 1.00% on shares redeemed within one year of purchase. NAV does not reflect sales charges.
The total return figures set forth above include all waivers of fees for various periods since inception. Without such fee waivers, the total returns would
have been lower. Some fee waivers are voluntary and may be modified or terminated at any time.
Victory Sycamore Established Value Fund — Growth of $10,000
(1)The Russell MidCap Value Index is an unmanaged Index made up of medium and medium/small companies in the Russell 1000 Index chosen for their value orientation. This Index does not include the effect of expenses, is not representative of any specific fund or product and cannot be invested in directly.
The graph reflects investment growth of a hypothetical $10,000 investment in Class A Shares of the Fund. The performance of other classes of the Fund's shares will be greater than or less than the line shown based on the differences in loads and fees paid by shareholders investing in the different classes. Past performance is no guarantee of future results.
The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
8
Victory Equity Funds (Unaudited)
Victory Sycamore Small Company Opportunity Fund
Portfolio Holdings
As a Percentage of Total Investments
Investment Considerations
Equity securities (stocks) are more volatile and carry more risk than other forms of investments, including investments in high-grade fixed-income securities. Small-capitalization stocks typically carry additional risk, as smaller companies generally have a higher risk of failure and, historically, their stocks have experienced a greater degree of volatility. The net asset value per share of the Victory Sycamore Small Company Opportunity Fund (the "Fund") will fluctuate as the value of the securities in its portfolio changes.
Commentary
After an uncanny calm in the markets in 2017, volatility returned with a vengeance to start the new year. In February, the market experienced its worst decline since early 2016. Fear of a global slowdown was the culprit in 2016. However, reasons for the February sell-off were arguably more benign. There was speculation that wage inflation in a tight labor market led to the first bout of volatility. Then, later in the first quarter, a combination of factors jolted investor sentiment. Talk of a "trade war" injected a level of uncertainty into the market. Additionally, anxiety over Big Tech being in the regulatory crosshairs was another likely catalyst.
Escalation in trade rhetoric witnessed a thematic trade unfold in the market during the second quarter. Investors favored domestically-oriented companies that are less likely to be impacted by an ensuing trade dispute. With economic data suggesting that the U.S. economy is still on solid footing, the U.S. Federal Reserve Bank (the "Fed") continued the path toward normalization by raising the federal funds rate. The Fed's hawkish tilt, coupled with a murky picture abroad, helped the U.S. dollar sustain its rally. Uncertainty surrounding the outcome of the trade spat and political developments in Europe curbed investors' appetite for risk, which helped lift the dollar against other world currencies. The changing narrative inflicted pain on emerging markets and commodities while at the same time boosted demand for smaller U.S.-based companies, which generally have less exposure to overseas markets.
Resiliency of the U.S. equity market continued into the third quarter. Major U.S. equity indices shrugged off mounting concerns over trade, the possibility of contagion from emerging markets, a less accommodative Fed, and a political spectacle in Washington to end the quarter well into positive territory. The S&P 500® Index posted its biggest quarterly gain in almost five years with the S&P 500® Index advancing 11 out of the last 12 quarters. The market was buoyed by a favorable fundamental narrative, which continued to boost equity returns. Solid earnings aided by late-cycle stimulus as well as capital return by U.S. companies helped drive the market higher.
9
Victory Equity Funds (Unaudited)
Victory Sycamore Small Company Opportunity Fund (continued)
The month of October saw a reversal from previous months as the possibility for slowing growth weighed on market sentiment. Consequently, the S&P 500® Index posted its worst monthly return since September 2011. As the impact from fiscal stimulus fades and the potential for rising rates and tariffs to filter through the economy increases, it remains to be seen how the ongoing expansion will fare in such an environment.
The Fund seeks to provide capital appreciation. The Fund (Class A Shares at net asset value) outperformed its benchmark index, the Russell 2000® Value Index (the "Index") for the fiscal year ended October 31, 2018, with the Fund returning 0.17% versus a -0.59% return for the Index.
The Fund's outperformance relative to the Index was driven by both stock selection and sector weighting, with selection having a larger impact on performance. Sector weighting is a by-product of our bottom-up security selection process and not a result of top-down tactical decisions. Specifically, stock selection in the Health Care, Energy, Information Technology, and Real Estate sectors contributed positively to return. An underweight in both Energy and Real Estate was also beneficial. The positive impact from selection in the top-performing sector, Health Care, was partially offset by the underweight. Conversely, stock selection in Financials, Materials, and Industrials detracted from relative return. Additionally, an overweight in Materials — the worst-performing sector for the period — also had a negative impact on the Fund's performance.
Refiner Delek US Holdings (DK) was the top contributor for the period. Better capture rates and lower capital expenditure aided Delek in delivering solid results. Management also increased the dividend and announced a share buyback during the period, a move welcomed by investors. Molina Healthcare (MOH), which provides healthcare services under the Medicaid and Medicare programs and through the state insurance marketplace, was also a top contributor. Molina consistently beat earnings expectations during the year, driven by internal improvements under new management. Shares were rewarded by investors given the solid execution. Shares of Haemonetics Corp. (HAE), a company focused on blood management solutions, appreciated higher following management's announcement of a strategic restructuring program with the objective of improving operational performance and reducing cost to free up resources to invest in accelerated growth. Investors welcomed the initiative.
Networking and communications company ADTRAN, Inc. (ADTN) was a top detractor. Shares were under pressure for most of the period given consecutive quarters of disappointing results. The revenue shortfall was attributed to weakness at key customers, slower ramp of the domestic Connect American Fund spending, and unfavorable mix shift. Two additional top detractors were holdings within Financials, Eagle Bancorp. (EGBN) and South State Corp. (SSB). Banks have been under pressure given that rising rates has not necessarily translated into higher net income margins. This sentiment towards banks has also weighed on share prices.
10
Victory Equity Funds (Unaudited)
Victory Sycamore Small Company Opportunity Fund (continued)
Average Annual Return
Year Ended October 31, 2018
Class A | Class I | Class R | Class R6 | Class Y | |||||||||||||||||||||||||||
INCEPTION DATE | 3/26/99 | 8/31/07 | 8/16/83 | 12/14/15 | 1/28/13 | ||||||||||||||||||||||||||
Net Asset Value | Maximum Offering Price | Net Asset Value | Net Asset Value | Net Asset Value | Net Asset Value | Russell 2000® Value Index(1) | |||||||||||||||||||||||||
One Year | 0.17 | % | –5.59 | % | 0.49 | % | –0.06 | % | 0.52 | % | 0.33 | % | –0.59 | % | |||||||||||||||||
Three Year | 11.40 | % | 9.23 | % | 11.76 | % | 11.15 | % | N/A | 11.53 | % | 10.52 | % | ||||||||||||||||||
Five Year | 9.85 | % | 8.55 | % | 10.21 | % | 9.59 | % | N/A | 9.99 | % | 7.18 | % | ||||||||||||||||||
Ten Year | 13.22 | % | 12.55 | % | 13.63 | % | 12.99 | % | N/A | N/A | 10.95 | % | |||||||||||||||||||
Since Inception | 10.13 | % | 9.80 | % | 8.94 | % | 9.81 | % | 13.65 | % | 11.66 | % | N/A | ||||||||||||||||||
Expense Ratios | |||||||||||||||||||||||||||||||
Gross | 1.23% | 0.90% | 1.45% | 0.90% | 1.25% | ||||||||||||||||||||||||||
With Applicable Waivers | 1.23% | 0.90% | 1.45% | 0.90% | 1.15% |
Past performance is not indicative of future results. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month's end, please visit www.vcm.com.
The above expense ratios are from the Fund's prospectus dated March 1, 2018. Additional information pertaining to the Fund's expense ratios as of October 31, 2018 can be found in the financial highlights.
The maximum offering price (MOP) figures reflect a maximum sales charge of 5.75% for Class A Shares. NAV does not reflect sales charges.
The total return figures set forth above include all waivers of fees for various periods since inception. Without such fee waivers, the total returns would have been lower. Some fee waivers are voluntary and may be modified or terminated at any time.
Victory Sycamore Small Company Opportunity Fund — Growth of $10,000
(1)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. These indicies do not include the effect of sales charges, are not representative of the Fund and it is not possible to invest directly in an index.
The graph reflects investment growth of a hypothetical $10,000 investment in Class A Shares of the Fund. The performance of other classes of the Fund's shares will be greater than or less than the line shown based on the differences in loads and fees paid by shareholders investing in the different classes. Past performance is no guarantee of future results.
The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
11
Victory Portfolios Victory Sycamore Established Value Fund | Schedule of Portfolio Investments October 31, 2018 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Common Stocks (96.5%) | |||||||||||
Communication Services (4.2%): | |||||||||||
CBS Corp., Class B | 2,600,600 | $ | 149,145 | ||||||||
Cinemark Holdings, Inc. (a) | 4,805,325 | 199,757 | |||||||||
The Interpublic Group of Co., Inc. | 4,636,800 | 107,388 | |||||||||
456,290 | |||||||||||
Consumer Discretionary (8.9%): | |||||||||||
AutoNation, Inc. (a) (b) | 3,917,352 | 158,574 | |||||||||
BorgWarner, Inc. | 3,626,325 | 142,913 | |||||||||
Carter's, Inc. | 1,839,375 | 176,543 | |||||||||
Darden Restaurants, Inc. (a) | 1,294,975 | 137,980 | |||||||||
Hasbro, Inc. (a) | 2,392,375 | 219,405 | |||||||||
Yum! Brands, Inc. | 1,382,775 | 125,017 | |||||||||
960,432 | |||||||||||
Consumer Staples (7.9%): | |||||||||||
Archer-Daniels-Midland Co. | 5,649,800 | 266,953 | |||||||||
Hormel Foods Corp. (a) | 3,431,100 | 149,733 | |||||||||
Ingredion, Inc. | 1,586,750 | 160,547 | |||||||||
Sysco Corp. | 2,004,300 | 142,967 | |||||||||
The Kroger Co. | 4,503,925 | 134,037 | |||||||||
854,237 | |||||||||||
Energy (5.0%): | |||||||||||
Cimarex Energy Co. (a) | 1,922,075 | 152,747 | |||||||||
Devon Energy Corp. (a) | 5,218,475 | 169,079 | |||||||||
Parsley Energy, Inc., Class A (b) | 5,060,125 | 118,508 | |||||||||
PDC Energy, Inc. (b) | 2,347,250 | 99,641 | |||||||||
539,975 | |||||||||||
Financials (19.7%): | |||||||||||
Aflac, Inc. | 3,692,800 | 159,049 | |||||||||
Alleghany Corp. | 419,200 | 251,806 | |||||||||
American Financial Group, Inc. | 1,105,654 | 110,599 | |||||||||
Arthur J. Gallagher & Co. | 2,416,850 | 178,871 | |||||||||
Citizens Financial Group, Inc. (a) | 2,205,925 | 82,391 | |||||||||
E*TRADE Financial Corp. | 2,818,725 | 139,301 | |||||||||
FNF Group | 3,888,975 | 130,086 | |||||||||
Markel Corp. (b) | 149,400 | 163,330 | |||||||||
Prosperity Bancshares, Inc. (a) | 1,737,425 | 112,985 | |||||||||
SunTrust Banks, Inc. | 3,998,100 | 250,521 | |||||||||
The Allstate Corp. | 1,768,575 | 169,288 | |||||||||
The Travelers Co., Inc. | 1,220,075 | 152,668 | |||||||||
W.R. Berkley Corp. | 2,742,425 | 208,150 | |||||||||
2,109,045 | |||||||||||
Health Care (6.2%): | |||||||||||
AmerisourceBergen Corp. | 1,225,175 | 107,815 | |||||||||
Hologic, Inc. (a) (b) | 2,676,675 | 104,364 | |||||||||
Perrigo Co. PLC (a) | 2,231,250 | 156,857 |
See notes to financial statements.
12
Victory Portfolios Victory Sycamore Established Value Fund | Schedule of Portfolio Investments — continued October 31, 2018 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Quest Diagnostics, Inc. | 2,033,175 | $ | 191,342 | ||||||||
STERIS PLC (a) | 1,011,300 | 110,545 | |||||||||
670,923 | |||||||||||
Industrials (12.9%): | |||||||||||
AGCO Corp. (a) | 2,746,968 | 153,940 | |||||||||
Colfax Corp. (a) (b) | 3,488,400 | 97,780 | |||||||||
Hubbell, Inc. | 821,400 | 83,536 | |||||||||
Ingersoll-Rand PLC | 1,115,750 | 107,045 | |||||||||
Landstar System, Inc. | 1,324,200 | 132,539 | |||||||||
Owens Corning, Inc. | 2,286,050 | 108,062 | |||||||||
PACCAR, Inc. | 624,400 | 35,722 | |||||||||
Parker-Hannifin Corp. | 960,500 | 145,641 | |||||||||
Quanta Services, Inc. (b) | 4,963,900 | 154,874 | |||||||||
Republic Services, Inc., Class A | 1,650,400 | 119,951 | |||||||||
Textron, Inc. | 3,549,850 | 190,378 | |||||||||
Xylem, Inc. | 950,400 | 62,327 | |||||||||
1,391,795 | |||||||||||
Information Technology (15.2%): | |||||||||||
ARRIS International PLC (b) | 4,290,800 | 106,712 | |||||||||
Black Knight, Inc. (b) | 2,770,246 | 135,105 | |||||||||
Coherent, Inc. (a) (b) | 621,675 | 76,553 | |||||||||
DXC Technology Co. | 1,837,943 | 133,857 | |||||||||
Fidelity National Information Services, Inc. (a) | 1,683,200 | 175,221 | |||||||||
Flextronics International Ltd. (b) | 12,491,200 | 98,181 | |||||||||
Hewlett Packard Enterprises Co. | 7,870,819 | 120,030 | |||||||||
Keysight Technologies, Inc. (b) | 1,842,200 | 105,153 | |||||||||
Leidos Holdings, Inc. | 1,711,375 | 110,863 | |||||||||
MAXIMUS, Inc. | 2,244,950 | 145,854 | |||||||||
Motorola Solutions, Inc. | 1,385,525 | 169,810 | |||||||||
Nuance Communications, Inc. (b) | 9,848,400 | 171,264 | |||||||||
Synopsys, Inc. (b) | 965,800 | 86,468 | |||||||||
1,635,071 | |||||||||||
Materials (6.8%): | |||||||||||
AptarGroup, Inc. (a) | 1,163,175 | 118,597 | |||||||||
Celanese Corp., Series A | 814,575 | 78,965 | |||||||||
Eastman Chemical Co. | 2,272,200 | 178,026 | |||||||||
Packaging Corp. of America | 1,337,875 | 122,831 | |||||||||
Reliance Steel & Aluminum Co. | 3,002,921 | 236,991 | |||||||||
735,410 | |||||||||||
Real Estate (6.1%): | |||||||||||
Healthcare Trust of America, Inc. | 6,712,700 | 176,276 | |||||||||
Lamar Advertising Co. | 2,492,900 | 182,779 | |||||||||
National Retail Properties, Inc. | 6,278,275 | 293,509 | |||||||||
652,564 |
See notes to financial statements.
13
Victory Portfolios Victory Sycamore Established Value Fund | Schedule of Portfolio Investments — continued October 31, 2018 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Utilities (3.6%): | |||||||||||
Alliant Energy Corp. | 2,724,100 | $ | 117,082 | ||||||||
DTE Energy Co. (a) | 1,200,800 | 134,970 | |||||||||
Xcel Energy, Inc. (a) | 2,826,650 | 138,534 | |||||||||
390,586 | |||||||||||
Total Common Stocks (Cost $9,390,421) | 10,396,328 | ||||||||||
Exchange-Traded Funds (1.5%) | |||||||||||
iShares Russell Midcap Value Index ETF (a) | 1,896,800 | 158,781 | |||||||||
Total Exchange-Traded Funds (Cost $133,210) | 158,781 | ||||||||||
Collateral for Securities Loaned^ (3.6%) | |||||||||||
BlackRock Liquidity Funds TempFund, Institutional Class, 2.29% (c) | 97,971,408 | 97,971 | |||||||||
Fidelity Investments Money Market Government Portfolio, Institutional Class, 2.10% (c) | 105,689,500 | 105,690 | |||||||||
Fidelity Investments Money Market Prime Money Market Portfolio, Institutional Class, 2.23% (c) | 9,804,534 | 9,805 | |||||||||
Goldman Sachs Financial Square Prime Obligations Fund, Institutional Class, 2.31% (c) | 24,491,995 | 24,492 | |||||||||
JPMorgan Prime Money Market Fund, Capital Class, 2.28% (c) | 97,967,491 | 97,967 | |||||||||
Morgan Stanley Institutional Liquidity Prime Portfolio, Institutional Class, 2.29% (c) | 53,882,389 | 53,882 | |||||||||
Total Collateral for Securities Loaned (Cost $389,807) | 389,807 | ||||||||||
Total Investments (Cost $9,913,438) — 101.6% | 10,944,916 | ||||||||||
Liabilities in excess of other assets — (1.6)% | (169,354 | ) | |||||||||
NET ASSETS — 100.00% | $ | 10,775,562 |
^ Purchased with cash collateral from securities on loan.
(a) All or a portion of this security is on loan.
(b) Non-income producing security.
(c) Rate disclosed is the daily yield on October 31, 2018.
ETF — Exchange-Traded Fund
PLC — Public Limited Company
See notes to financial statements.
14
Victory Portfolios Victory Sycamore Small Company Opportunity Fund | Schedule of Portfolio Investments October 31, 2018 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Common Stocks (94.4%) | |||||||||||
Banks (11.0%): | |||||||||||
Associated Banc-Corp. (a) | 2,656,934 | $ | 61,588 | ||||||||
Bank of Hawaii Corp. (a) | 842,275 | 66,067 | |||||||||
BOK Financial Corp. | 205,865 | 17,649 | |||||||||
Columbia Banking System, Inc. | 1,362,300 | 50,528 | |||||||||
Eagle Bancorp, Inc. (b) | 1,055,150 | 51,882 | |||||||||
Independent Bank Corp. | 611,521 | 47,974 | |||||||||
Lakeland Financial Corp. | 793,450 | 34,142 | |||||||||
Pinnacle Financial Partners, Inc. (a) | 1,184,975 | 61,974 | |||||||||
South State Corp. | 939,800 | 63,596 | |||||||||
Sterling BanCorp (a) | 2,469,250 | 44,397 | |||||||||
UMB Financial Corp. | 1,034,700 | 66,066 | |||||||||
565,863 | |||||||||||
Capital Markets (0.7%): | |||||||||||
Virtus Investment Partners, Inc. | 337,650 | 33,542 | |||||||||
Communication Services (1.3%): | |||||||||||
The E.W. Scripps Co., Class A (a) (d) | 4,011,875 | 67,480 | |||||||||
Consumer Discretionary (9.8%): | |||||||||||
Asbury Automotive Group, Inc. (b) | 592,475 | 38,570 | |||||||||
Choice Hotels International, Inc. (a) | 948,075 | 69,589 | |||||||||
Churchill Downs, Inc. | 65,900 | 16,449 | |||||||||
Core-Mark Holding Co., Inc. | 1,182,800 | 45,431 | |||||||||
Culp, Inc. (d) | 1,344,995 | 31,137 | |||||||||
Dunkin' Brands Group, Inc. (a) | 748,875 | 54,338 | |||||||||
Helen of Troy Ltd. (a) (b) | 332,975 | 41,329 | |||||||||
Penske Automotive Group, Inc. | 1,500,575 | 66,596 | |||||||||
Sothebys Holdings, Inc., Class A (a) (b) | 160,028 | 6,721 | |||||||||
Steven Madden Ltd. | 1,081,062 | 33,805 | |||||||||
Unifi, Inc. (b) (d) | 1,302,900 | 29,823 | |||||||||
Wolverine World Wide, Inc. | 1,963,643 | 69,062 | |||||||||
502,850 | |||||||||||
Consumer Staples (5.9%): | |||||||||||
Casey's General Stores, Inc. | 414,300 | 52,247 | |||||||||
Flowers Foods, Inc. | 968,475 | 18,701 | |||||||||
Performance Food Group Co. (b) | 2,598,607 | 76,191 | |||||||||
Sanderson Farms, Inc. (a) | 849,775 | 83,610 | |||||||||
The Andersons, Inc. (d) | 2,039,982 | 73,439 | |||||||||
304,188 | |||||||||||
Energy (3.2%): | |||||||||||
Helix Energy Solutions Group, Inc. (a) (b) | 5,856,495 | 49,897 | |||||||||
SRC Energy, Inc. (a) (b) | 7,312,050 | 51,769 | |||||||||
Unit Corp. (b) (d) | 2,750,700 | 63,624 | |||||||||
165,290 |
See notes to financial statements.
15
Victory Portfolios Victory Sycamore Small Company Opportunity Fund | Schedule of Portfolio Investments — continued October 31, 2018 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Health Care (3.0%): | |||||||||||
AMN Healthcare Services, Inc. (a) (b) | 142,125 | $ | 7,194 | ||||||||
AngioDynamics, Inc. (b) | 1,336,325 | 27,301 | |||||||||
Avanos Medical, Inc., Class I (a) (b) | 861,750 | 48,775 | |||||||||
Hanger, Inc. (b) | 1,103,675 | 20,595 | |||||||||
Molina Healthcare, Inc. (b) | 178,275 | 22,600 | |||||||||
NuVasive, Inc. (b) | 453,150 | 25,453 | |||||||||
151,918 | |||||||||||
Industrials (20.5%): | |||||||||||
ABM Industries, Inc. (a) | 1,130,325 | 34,757 | |||||||||
Aerojet Rocketdyne Holdings, Inc. (a) (b) | 1,123,975 | 39,699 | |||||||||
Alamo Group, Inc. (d) | 639,350 | 54,805 | |||||||||
Applied Industrial Technologies, Inc. | 556,700 | 36,592 | |||||||||
AZZ, Inc. | 473,150 | 20,984 | |||||||||
Carlisle Cos., Inc. (a) | 624,109 | 60,283 | |||||||||
Crane Co. | 714,450 | 62,185 | |||||||||
EMCOR Group, Inc. | 1,089,075 | 77,303 | |||||||||
Encore Wire Corp. | 1,003,988 | 44,376 | |||||||||
Esterline Technologies Corp. (b) | 245,750 | 28,841 | |||||||||
Forward Air Corp. | 720,700 | 43,235 | |||||||||
FTI Consulting, Inc. (a) (b) | 497,025 | 34,349 | |||||||||
Granite Construction, Inc. (a) | 1,090,415 | 49,854 | |||||||||
Marten Transport Ltd. | 1,511,425 | 29,110 | |||||||||
Milacron Holdings Corp. (b) | 2,208,325 | 30,917 | |||||||||
Mueller Industries, Inc. | 1,121,000 | 27,296 | |||||||||
MYR Group, Inc. (b) (d) | 1,252,363 | 41,816 | |||||||||
TriMas Corp. (b) | 1,835,000 | 54,041 | |||||||||
UniFirst Corp. | 439,000 | 65,543 | |||||||||
Universal Forest Products, Inc. | 1,856,275 | 52,477 | |||||||||
Viad Corp. | 922,425 | 44,175 | |||||||||
Watts Water Technologies, Inc., Class A (a) | 737,100 | 51,634 | |||||||||
Werner Enterprises, Inc. (a) | 1,105,050 | 35,572 | |||||||||
Woodward, Inc. | 459,200 | 33,815 | |||||||||
1,053,659 | |||||||||||
Information Technology (9.3%): | |||||||||||
ADTRAN, Inc. (d) | 2,591,600 | 34,831 | |||||||||
Anixter International, Inc. (b) | 1,052,100 | 69,112 | |||||||||
Electronics For Imaging, Inc. (a) (b) | 1,386,100 | 42,207 | |||||||||
Littelfuse, Inc. (a) | 119,600 | 21,667 | |||||||||
LogMeIn, Inc. | 455,775 | 39,251 | |||||||||
ManTech International Corp., Class A | 952,075 | 54,535 | |||||||||
MAXIMUS, Inc. | 1,075,025 | 69,845 | |||||||||
Mesa Laboratories, Inc. (a) | 86,714 | 15,842 | |||||||||
MicroStrategy, Inc., Class A (b) | 311,600 | 39,252 | |||||||||
Nice Ltd., ADR (a) (b) | 420,025 | 44,498 | |||||||||
Sykes Enterprises, Inc. (b) | 1,464,900 | 44,928 | |||||||||
475,968 |
See notes to financial statements.
16
Victory Portfolios Victory Sycamore Small Company Opportunity Fund | Schedule of Portfolio Investments — continued October 31, 2018 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Insurance (13.5%): | |||||||||||
American Financial Group, Inc. | 354,553 | $ | 35,466 | ||||||||
AMERISAFE, Inc. | 886,675 | 57,714 | |||||||||
Axis Capital Holdings Ltd. (a) | 1,083,625 | 60,455 | |||||||||
Brown & Brown, Inc. | 2,336,024 | 65,829 | |||||||||
FBL Financial Group, Inc., Class A | 563,785 | 38,890 | |||||||||
First American Financial Corp. | 1,428,300 | 63,317 | |||||||||
Hanover Insurance Group, Inc. | 583,050 | 64,940 | |||||||||
Horace Mann Educators Corp. | 1,782,750 | 70,026 | |||||||||
Kinsale Capital Group, Inc. | 197,427 | 11,788 | |||||||||
ProAssurance Corp. (a) | 1,559,375 | 68,488 | |||||||||
Renaissancere Holdings Ltd. (a) | 489,200 | 59,761 | |||||||||
State Auto Financial Corp. | 1,137,400 | 36,158 | |||||||||
White Mountains Insurance Group Ltd. (a) | 67,575 | 59,917 | |||||||||
692,749 | |||||||||||
Materials (8.8%): | |||||||||||
Cabot Corp. | 895,608 | 43,598 | |||||||||
Graphic Packaging Holding Co. (a) | 899,325 | 9,902 | |||||||||
Kaiser Aluminum Corp. | 505,925 | 48,250 | |||||||||
Minerals Technologies, Inc. | 913,925 | 50,037 | |||||||||
Orion Engineered Carbons SA | 1,955,525 | 50,472 | |||||||||
PolyOne Corp. | 1,100,550 | 35,559 | |||||||||
Sensient Technologies Corp. (a) | 774,625 | 50,242 | |||||||||
Sonoco Products Co. | 991,725 | 54,128 | |||||||||
Valvoline, Inc. (a) | 2,667,025 | 53,128 | |||||||||
Worthington Industries, Inc. (a) | 1,298,164 | 54,367 | |||||||||
449,683 | |||||||||||
Real Estate (4.7%): | |||||||||||
American Assets Trust, Inc. | 1,517,500 | 58,211 | |||||||||
Healthcare Realty Trust, Inc. | 2,205,375 | 61,442 | |||||||||
LTC Properties, Inc. (a) | 1,155,175 | 49,407 | |||||||||
Washington Real Estate Investment Trust | 2,534,150 | 70,627 | |||||||||
239,687 | |||||||||||
Utilities (2.7%): | |||||||||||
ALLETE, Inc. | 593,800 | 43,941 | |||||||||
MGE Energy, Inc. | 528,500 | 33,021 | |||||||||
NorthWestern Corp. (a) | 450,275 | 26,458 | |||||||||
ONE Gas, Inc. | 430,300 | 33,955 | |||||||||
137,375 | |||||||||||
Total Common Stocks (Cost $4,384,733) | 4,840,252 | ||||||||||
Exchange-Traded Funds (1.4%) | |||||||||||
iShares Russell 2000 Value Index Fund ETF (a) | 612,100 | 74,156 | |||||||||
Total Exchange-Traded Funds (Cost $71,592) | 74,156 |
See notes to financial statements.
17
Victory Portfolios Victory Sycamore Small Company Opportunity Fund | Schedule of Portfolio Investments — continued October 31, 2018 |
(Amounts in Thousands, Except for Shares)
Security Description | Shares | Value | |||||||||
Collateral for Securities Loaned^ (6.3%) | |||||||||||
BlackRock Liquidity Funds TempFund, Institutional Class, 2.29% (c) | 81,275,212 | $ | 81,275 | ||||||||
Fidelity Investments Money Market Government Portfolio, Institutional Class, 2.10% (c) | 87,677,871 | 87,678 | |||||||||
Fidelity Investments Money Market Prime Money Market Portfolio, Institutional Class, 2.23% (c) | 8,133,655 | 8,134 | |||||||||
Goldman Sachs Financial Square Prime Obligations Fund, Institutional Class, 2.31% (c) | 20,318,092 | 20,318 | |||||||||
JPMorgan Prime Money Market Fund, Capital Class, 2.28% (c) | 81,271,962 | 81,272 | |||||||||
Morgan Stanley Institutional Liquidity Prime Portfolio, Institutional Class, 2.29% (c) | 44,699,803 | 44,700 | |||||||||
Total Collateral for Securities Loaned (Cost $323,377) | 323,377 | ||||||||||
Total Investments (Cost $4,779,702) — 102.1% | 5,237,785 | ||||||||||
Liabilities in excess of other assets — (2.1)% | (109,320 | ) | |||||||||
NET ASSETS — 100.00% | $ | 5,128,465 |
^ Purchased with cash collateral from securities on loan.
(a) All or a portion of this security is on loan.
(b) Non-income producing security.
(c) Rate disclosed is the daily yield on October 31, 2018.
(d) Affiliated security (See Note 8)
ADR — American Depositary Receipt
ETF — Exchange-Traded Fund
See notes to financial statements.
18
Victory Portfolios | Statements of Assets and Liabilities October 31, 2018 |
(Amounts in Thousands, Except Per Share Amounts)
Victory Sycamore Established Value Fund | Victory Sycamore Small Company Opportunity Fund | ||||||||||
ASSETS: | |||||||||||
Affiliated investments, at value (Cost $— and $400,278) | $ | — | $ | 396,955 | |||||||
Unaffiliated investments, at value (Cost $9,913,438 and $4,379,424) | 10,944,916 | (a) | 4,840,830 | (b) | |||||||
Cash and cash equivalents | 244,208 | 241,158 | |||||||||
Interest and dividends receivable | 10,202 | 1,881 | |||||||||
Receivable from affiliate on interfund lending | 592 | — | |||||||||
Receivable for capital shares issued | 11,351 | 5,180 | |||||||||
Receivable for investments sold | 5,394 | 13,499 | |||||||||
Prepaid expenses | 69 | 11 | |||||||||
Total Assets | 11,216,732 | 5,499,514 | |||||||||
LIABILITIES: | |||||||||||
Payables: | |||||||||||
Collateral received on loaned securities | 389,807 | 323,377 | |||||||||
Investments purchased | 29,535 | 34,034 | |||||||||
Capital shares redeemed | 14,948 | 8,771 | |||||||||
Accrued expenses and other payables: | |||||||||||
Investment advisory fees | 4,270 | 3,420 | |||||||||
Administration fees | 580 | 277 | |||||||||
Custodian fees | 84 | 40 | |||||||||
Transfer agent fees | 893 | 614 | |||||||||
Chief Compliance Officer fees | 7 | 3 | |||||||||
Trustees' fees | 11 | 5 | |||||||||
12b-1 fees | 462 | 118 | |||||||||
Other accrued expenses | 573 | 390 | |||||||||
Total Liabilities | 441,170 | 371,049 | |||||||||
NET ASSETS: | |||||||||||
Capital | 8,918,899 | 4,102,294 | |||||||||
Total distributable earnings/(loss) | 1,856,663 | 1,026,171 | |||||||||
Net Assets | $ | 10,775,562 | $ | 5,128,465 | |||||||
Net Assets | |||||||||||
Class A Shares | $ | 2,008,143 | $ | 486,622 | |||||||
Class C Shares | 90,128 | — | |||||||||
Class I Shares | 3,509,093 | 4,127,411 | |||||||||
Class R Shares | 897,277 | 286,480 | |||||||||
Class R6 Shares | 3,822,378 | 195,360 | |||||||||
Class Y Shares | 448,543 | 32,592 | |||||||||
Total | $ | 10,775,562 | $ | 5,128,465 | |||||||
Shares (unlimited number of shares authorized with a par value of $0.001 per share): | |||||||||||
Class A Shares | 50,817 | 10,600 | |||||||||
Class C Shares | 2,329 | — | |||||||||
Class I Shares | 88,735 | 88,890 | |||||||||
Class R Shares | 22,991 | 6,642 | |||||||||
Class R6 Shares | 96,641 | 4,213 | |||||||||
Class Y Shares | 11,344 | 707 | |||||||||
Total | 272,857 | 111,052 |
(continues on next page)
See notes to financial statements.
19
Victory Portfolios | Statements of Assets and Liabilities October 31, 2018 |
(Amounts in Thousands, Except Per Share Amounts) (continued)
Victory Sycamore Established Value Fund | Victory Sycamore Small Company Opportunity Fund | ||||||||||
Net asset value, offering (except Class A Shares) and redemption price per share: (c) | |||||||||||
Class A Shares | $ | 39.52 | $ | 45.91 | |||||||
Class C Shares (d) | 38.69 | — | |||||||||
Class I Shares | 39.55 | 46.43 | |||||||||
Class R Shares | 39.03 | 43.13 | |||||||||
Class R6 Shares | 39.55 | 46.38 | |||||||||
Class Y Shares | 39.54 | 46.13 | |||||||||
Maximum Sales Charge — Class A Shares | 5.75 | % | 5.75 | % | |||||||
Maximum offering price (100%/(100%-maximum sales charge) of net asset value adjusted to the nearest cent) per share — Class A Shares | $ | 41.93 | $ | 48.71 |
(a) Includes $382,275 of securities on loan.
(b) Includes $312,181 of securities on loan.
(c) Per share amount may not recalculate due to rounding of net assets and/or shares outstanding.
(d) Redemption price per share varies by the length of time shares are held.
See notes to financial statements.
20
Victory Portfolios | Statements of Operations For the Year Ended October 31, 2018 |
(Amounts in Thousands)
Victory Sycamore Established Value Fund | Victory Sycamore Small Company Opportunity Fund | ||||||||||
Investment Income: | |||||||||||
Unaffiliated interest | $ | 4,053 | $ | 2,731 | |||||||
Affiliated dividends | — | 3,552 | |||||||||
Unaffiliated dividends | 187,256 | 80,564 | |||||||||
Interfund lending | 18 | 1 | |||||||||
Securities lending (net of fees) | 2,488 | 227 | |||||||||
Foreign tax withholding | — | (244 | ) | ||||||||
Total Income | 193,815 | 86,831 | |||||||||
Expenses: | |||||||||||
Investment advisory fees | 50,308 | 40,092 | |||||||||
Administration fees | 6,602 | 3,137 | |||||||||
12b-1 fees — Class A Shares | 5,674 | 1,428 | |||||||||
12b-1 fees — Class C Shares | 1,011 | — | |||||||||
12b-1 fees — Class R Shares | 5,028 | 1,609 | |||||||||
Custodian fees | 480 | 249 | |||||||||
Transfer agent fees — Class A Shares | 2,374 | 695 | |||||||||
Transfer agent fees — Class C Shares | 118 | — | |||||||||
Transfer agent fees — Class I Shares | 2,124 | 924 | |||||||||
Transfer agent fees — Class R Shares | 582 | 301 | |||||||||
Transfer agent fees — Class R6 Shares | 604 | 3 | |||||||||
Transfer agent fees — Class Y Shares | 292 | 56 | |||||||||
Trustees' fees | 886 | 416 | |||||||||
Chief Compliance Officer fees | 104 | 49 | |||||||||
Legal and audit fees | 489 | 245 | |||||||||
State registration and filing fees | 425 | 250 | |||||||||
Other expenses | 1,269 | 846 | |||||||||
Total Expenses | 78,370 | 50,300 | |||||||||
Net Investment Income (Loss) | 115,445 | 36,531 | |||||||||
Realized/Unrealized Gains (Losses) from Investment Transactions: | |||||||||||
Net realized gains (losses) from affiliated securities transactions | — | (457 | ) | ||||||||
Net realized gains (losses) from unaffiliated investment transactions | 836,605 | 565,289 | |||||||||
Net change in unrealized appreciation/depreciation on affiliated investments | — | (41,508 | ) | ||||||||
Net change in unrealized appreciation/depreciation on unaffiliated investments | (717,844 | ) | (544,578 | ) | |||||||
Net realized/unrealized gains (losses) on investments | 118,761 | (21,254 | ) | ||||||||
Change in net assets resulting from operations | $ | 234,206 | $ | 15,277 |
See notes to financial statements.
21
Victory Portfolios | Statements of Change in Net Assets |
(Amounts in Thousands)
Victory Sycamore Established Value Fund | Victory Sycamore Small Company Opportunity Fund | ||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | ||||||||||||||||
From Investment Activities: | |||||||||||||||||||
Operations: | |||||||||||||||||||
Net investment income (loss) | $ | 115,445 | $ | 62,576 | $ | 36,531 | $ | 20,188 | |||||||||||
Net realized gains (losses) from affiliated and unaffiliated investment transactions | 836,605 | 260,031 | 564,832 | 261,687 | |||||||||||||||
Net change in unrealized appreciation (depreciation) on affiliated and unaffiliated investments | (717,844 | ) | 1,113,529 | (586,086 | ) | 711,901 | |||||||||||||
Change in net assets resulting from operations | 234,206 | 1,436,136 | 15,277 | 993,776 | |||||||||||||||
Distributions to Shareholders: (a) | |||||||||||||||||||
Class A Shares | (75,454 | ) | (33,472 | ) | (30,027 | ) | (28,035 | ) | |||||||||||
Class C Shares | (2,641 | ) | (471 | ) | — | — | |||||||||||||
Class I Shares | (186,691 | ) | (66,249 | ) | (216,065 | ) | (138,769 | ) | |||||||||||
Class R Shares | (31,232 | ) | (12,255 | ) | (17,144 | ) | (16,361 | ) | |||||||||||
Class R6 Shares | (59,772 | ) | (13,858 | ) | (4,823 | ) | (1,342 | ) | |||||||||||
Class Y Shares | (15,681 | ) | (2,142 | ) | (1,762 | ) | (7,244 | ) | |||||||||||
Change in net assets resulting from distributions to shareholders | (371,471 | ) | (128,447 | ) | (269,821 | ) | (191,751 | ) | |||||||||||
Change in net assets resulting from capital transactions | 354,771 | 3,605,168 | 321,072 | 836,771 | |||||||||||||||
Change in net assets | 217,506 | 4,912,857 | 66,528 | 1,638,796 | |||||||||||||||
Net Assets: | |||||||||||||||||||
Beginning of period | 10,558,056 | 5,645,199 | 5,061,937 | 3,423,141 | |||||||||||||||
End of period | $ | 10,775,562 | $ | 10,558,056 | $ | 5,128,465 | $ | 5,061,937 |
(a) Current and prior year distributions to shareholders have been reclassified and conform to amended GAAP presentation under Regulation S-X (See Item 10 in the Notes to Financial Statements).
(continues on next page)
See notes to financial statements.
22
Victory Portfolios | Statements of Change in Net Assets |
(Amounts in Thousands) (continued)
Victory Sycamore Established Value Fund | Victory Sycamore Small Company Opportunity Fund | ||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | ||||||||||||||||
Capital Transactions: | |||||||||||||||||||
Class A Shares | |||||||||||||||||||
Proceeds from shares issued | $ | 391,843 | $ | 1,307,436 | $ | 118,885 | $ | 196,916 | |||||||||||
Distributions reinvested | 62,087 | 27,426 | 24,644 | 23,261 | |||||||||||||||
Cost of shares redeemed | (815,800 | ) | (1,047,620 | ) | (236,724 | ) | (257,608 | ) | |||||||||||
Total Class A Shares | $ | (361,870 | ) | $ | 287,242 | $ | (93,195 | ) | $ | (37,431 | ) | ||||||||
Class C Shares | |||||||||||||||||||
Proceeds from shares issued | $ | 7,132 | $ | 74,953 | — | — | |||||||||||||
Distributions reinvested | 2,424 | 425 | — | — | |||||||||||||||
Cost of shares redeemed | (20,048 | ) | (8,552 | ) | — | — | |||||||||||||
Total Class C Shares | $ | (10,492 | ) | $ | 66,826 | — | — | ||||||||||||
Class I Shares | |||||||||||||||||||
Proceeds from shares issued | $ | 1,395,898 | $ | 3,022,978 | $ | 993,338 | $ | 1,576,181 | |||||||||||
Distributions reinvested | 169,868 | 59,775 | 200,613 | 126,175 | |||||||||||||||
Cost of shares redeemed | (3,383,407 | ) | (1,038,403 | ) | (866,339 | ) | (731,527 | ) | |||||||||||
Total Class I Shares | $ | (1,817,641 | ) | $ | 2,044,350 | $ | 327,612 | $ | 970,829 | ||||||||||
Class R Shares | |||||||||||||||||||
Proceeds from shares issued | $ | 153,972 | $ | 361,598 | $ | 37,214 | $ | 72,532 | |||||||||||
Distributions reinvested | 29,591 | 11,593 | 16,163 | 15,426 | |||||||||||||||
Cost of shares redeemed | (284,445 | ) | (302,995 | ) | (85,267 | ) | (117,366 | ) | |||||||||||
Total Class R Shares | $ | (100,882 | ) | $ | 70,196 | $ | (31,890 | ) | $ | (29,408 | ) | ||||||||
Class R6 Shares | |||||||||||||||||||
Proceeds from shares issued | $ | 3,025,909 | $ | 904,213 | $ | 147,778 | $ | 67,380 | |||||||||||
Distributions reinvested | 58,065 | 13,807 | 4,823 | 1,342 | |||||||||||||||
Cost of shares redeemed | (404,289 | ) | (191,985 | ) | (32,850 | ) | (13,821 | ) | |||||||||||
Total Class R6 Shares | $ | 2,679,685 | $ | 726,035 | $ | 119,751 | $ | 54,901 | |||||||||||
Class Y Shares | |||||||||||||||||||
Proceeds from shares issued | $ | 229,752 | $ | 484,975 | $ | 4,999 | $ | 30,263 | |||||||||||
Distributions reinvested | 13,058 | 1,392 | 517 | 172 | |||||||||||||||
Cost of shares redeemed | (276,839 | ) | (75,848 | ) | (6,722 | ) | (152,555 | ) | |||||||||||
Total Class Y Shares | $ | (34,029 | ) | $ | 410,519 | $ | (1,206 | ) | $ | (122,120 | ) | ||||||||
Change in net assets resulting from capital transactions | $ | 354,771 | $ | 3,605,168 | $ | 321,072 | $ | 836,771 |
(continues on next page)
See notes to financial statements.
23
Victory Portfolios | Statements of Change in Net Assets |
(Amounts in Thousands) (continued)
Victory Sycamore Established Value Fund | Victory Sycamore Small Company Opportunity Fund | ||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2018 | Year Ended October 31, 2017 | ||||||||||||||||
Share Transactions: | |||||||||||||||||||
Class A Shares | |||||||||||||||||||
Issued | 9,528 | 35,112 | 2,480 | 4,433 | |||||||||||||||
Reinvested | 1,524 | 746 | 524 | 526 | |||||||||||||||
Redeemed | (19,865 | ) | (27,554 | ) | (4,924 | ) | (5,763 | ) | |||||||||||
Total Class A Shares | (8,813 | ) | 8,304 | (1,920 | ) | (804 | ) | ||||||||||||
Class C Shares | |||||||||||||||||||
Issued | 178 | 2,049 | — | — | |||||||||||||||
Reinvested | 61 | 12 | — | — | |||||||||||||||
Redeemed | (498 | ) | (229 | ) | — | — | |||||||||||||
Total Class C Shares | (259 | ) | 1,832 | — | — | ||||||||||||||
Class I Shares | |||||||||||||||||||
Issued | 33,958 | 80,778 | 20,357 | 35,017 | |||||||||||||||
Reinvested | 4,167 | 1,613 | 4,219 | 2,832 | |||||||||||||||
Redeemed | (80,850 | ) | (27,487 | ) | (17,803 | ) | (16,264 | ) | |||||||||||
Total Class I Shares | (42,725 | ) | 54,904 | 6,773 | 21,585 | ||||||||||||||
Class R Shares | |||||||||||||||||||
Issued | 3,819 | 9,792 | 819 | 1,724 | |||||||||||||||
Reinvested | 736 | 320 | 366 | 369 | |||||||||||||||
Redeemed | (6,994 | ) | (8,146 | ) | (1,887 | ) | (2,800 | ) | |||||||||||
Total Class R Shares | (2,439 | ) | 1,966 | (702 | ) | (707 | ) | ||||||||||||
Class R6 Shares | |||||||||||||||||||
Issued | 72,178 | 23,979 | 3,032 | 1,504 | |||||||||||||||
Reinvested | 1,413 | 371 | 102 | 30 | |||||||||||||||
Redeemed | (9,777 | ) | (5,076 | ) | (673 | ) | (307 | ) | |||||||||||
Total Class R6 Shares | 63,814 | 19,274 | 2,461 | 1,227 | |||||||||||||||
Class Y Shares | |||||||||||||||||||
Issued | 5,577 | 12,592 | 103 | 666 | |||||||||||||||
Reinvested | 320 | 37 | 11 | 4 | |||||||||||||||
Redeemed | (6,717 | ) | (1,964 | ) | (140 | ) | (3,478 | ) | |||||||||||
Total Class Y Shares | (820 | ) | 10,665 | (26 | ) | (2,808 | ) | ||||||||||||
Change in Shares | 8,758 | 96,945 | 6,586 | 18,493 |
See notes to financial statements.
24
Victory Portfolios | Financial Highlights |
For a Share Outstanding Throughout Each Period
Victory Sycamore Established Value Fund | |||||||||||||||||||||||
Class A Shares | |||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2016 | Year Ended October 31, 2015 | Year Ended October 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 40.01 | $ | 33.82 | $ | 35.55 | $ | 37.01 | $ | 34.89 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) | 0.35 | (a) | 0.22 | (a) | 0.23 | (a) | 0.44 | 0.23 | |||||||||||||||
Net realized and unrealized gains (losses) on investments | 0.48 | 6.53 | 1.50 | 3.07 | 4.44 | ||||||||||||||||||
Total from Investment Activities | 0.83 | 6.75 | 1.73 | 3.51 | 4.67 | ||||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.33 | ) | (0.21 | ) | (0.22 | ) | (0.41 | ) | (0.22 | ) | |||||||||||||
Net realized gains from investments | (0.99 | ) | (0.35 | ) | (3.24 | ) | (4.56 | ) | (2.33 | ) | |||||||||||||
Total Distributions to Shareholders | (1.32 | ) | (0.56 | ) | (3.46 | ) | (4.97 | ) | (2.55 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 39.52 | $ | 40.01 | $ | 33.82 | $ | 35.55 | $ | 37.01 | |||||||||||||
Total Return (excludes sales charge) | 2.01 | % | 20.12 | % | 5.80 | % | 10.08 | % | 13.97 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 2,008,143 | $ | 2,386,049 | $ | 1,735,974 | $ | 1,076,956 | $ | 958,992 | |||||||||||||
Ratio of net expenses to average net assets | 0.89 | % | 0.90 | % | 0.95 | % | 0.99 | % | 1.04 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 0.85 | % | 0.58 | % | 0.69 | % | 1.21 | % | 0.63 | % | |||||||||||||
Portfolio turnover (b) | 36 | % | 32 | % | 40 | % | 58 | % | 51 | % |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
See notes to financial statements.
25
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory Sycamore Established Value Fund | |||||||||||||||
Class C Shares | |||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Period Ended October 31, 2016(a) | |||||||||||||
Net Asset Value, Beginning of Period | $ | 39.22 | $ | 33.26 | $ | 29.08 | |||||||||
Investment Activities: | |||||||||||||||
Net investment income (loss) (b) | 0.03 | (0.09 | ) | (0.09 | ) | ||||||||||
Net realized and unrealized gains (losses) on investments | 0.46 | 6.44 | 4.37 | ||||||||||||
Total from Investment Activities | 0.49 | 6.35 | 4.28 | ||||||||||||
Distributions to Shareholders: | |||||||||||||||
Net investment income | (0.03 | ) | (0.04 | ) | (0.10 | ) | |||||||||
Net realized gains from investments | (0.99 | ) | (0.35 | ) | — | ||||||||||
Total Distributions to Shareholders | (1.02 | ) | (0.39 | ) | (0.10 | ) | |||||||||
Net Asset Value, End of Period | $ | 38.69 | $ | 39.22 | $ | 33.26 | |||||||||
Total Return (excludes contingent deferred sales charge) (c) | 1.19 | % | 19.20 | % | 14.75 | % | |||||||||
Ratios/Supplemental Data: | |||||||||||||||
Net Assets at end of period (000) | $ | 90,128 | $ | 101,506 | $ | 25,146 | |||||||||
Ratio of net expenses to average net assets (d) | 1.68 | % | 1.70 | % | 1.80 | % | |||||||||
Ratio of net investment income (loss) to average net assets (d) | 0.07 | % | (0.24 | )% | (0.40 | )% | |||||||||
Portfolio turnover (c) (e) | 36 | % | 32 | % | 40 | % |
(a) Class C Shares commenced operations on March 1, 2016.
(b) Per share net investment income (loss) has been calculated using the average daily shares method.
(c) Not annualized for periods less than one year.
(d) Annualized for periods less than one year.
(e) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
See notes to financial statements.
26
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory Sycamore Established Value Fund | |||||||||||||||||||||||
Class I Shares | |||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2016 | Year Ended October 31, 2015 | Year Ended October 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 40.04 | $ | 33.83 | $ | 35.56 | $ | 37.01 | $ | 34.89 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) | 0.47 | (a) | 0.32 | (a) | 0.30 | (a) | 0.56 | 0.35 | |||||||||||||||
Net realized and unrealized gains (losses) on investments | 0.48 | 6.56 | 1.52 | 3.08 | 4.44 | ||||||||||||||||||
Total from Investment Activities | 0.95 | 6.88 | 1.82 | 3.64 | 4.79 | ||||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.45 | ) | (0.32 | ) | (0.31 | ) | (0.53 | ) | (0.34 | ) | |||||||||||||
Net realized gains from investments | (0.99 | ) | (0.35 | ) | (3.24 | ) | (4.56 | ) | (2.33 | ) | |||||||||||||
Total Distributions to Shareholders | (1.44 | ) | (0.67 | ) | (3.55 | ) | (5.09 | ) | (2.67 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 39.55 | $ | 40.04 | $ | 33.83 | $ | 35.56 | $ | 37.01 | |||||||||||||
Total Return | 2.30 | % | 20.50 | % | 6.08 | % | 10.51 | % | 14.38 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 3,509,093 | $ | 5,263,053 | $ | 2,590,122 | $ | 761,549 | $ | 529,882 | |||||||||||||
Ratio of net expenses to average net assets | 0.59 | % | 0.62 | % | 0.69 | % | 0.63 | % | 0.66 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 1.14 | % | 0.85 | % | 0.91 | % | 1.55 | % | 0.99 | % | |||||||||||||
Portfolio turnover (b) | 36 | % | 32 | % | 40 | % | 58 | % | 51 | % |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
See notes to financial statements.
27
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory Sycamore Established Value Fund | |||||||||||||||||||||||
Class R Shares | |||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2016 | Year Ended October 31, 2015 | Year Ended October 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 39.54 | $ | 33.43 | $ | 35.18 | $ | 36.67 | $ | 34.60 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) | 0.26 | (a) | 0.14 | (a) | 0.17 | (a) | 0.38 | 0.16 | |||||||||||||||
Net realized and unrealized gains (losses) on investments | 0.48 | 6.46 | 1.48 | 3.04 | 4.40 | ||||||||||||||||||
Total from Investment Activities | 0.74 | 6.60 | 1.65 | 3.42 | 4.56 | ||||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.26 | ) | (0.14 | ) | (0.16 | ) | (0.35 | ) | (0.16 | ) | |||||||||||||
Net realized gains from investments | (0.99 | ) | (0.35 | ) | (3.24 | ) | (4.56 | ) | (2.33 | ) | |||||||||||||
Total Distributions to Shareholders | (1.25 | ) | (0.49 | ) | (3.40 | ) | (4.91 | ) | (2.49 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 39.03 | $ | 39.54 | $ | 33.43 | $ | 35.18 | $ | 36.67 | |||||||||||||
Total Return | 1.80 | % | 19.89 | % | 5.60 | % | 9.91 | % | 13.76 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 897,277 | $ | 1,005,561 | $ | 784,442 | $ | 705,436 | $ | 675,421 | |||||||||||||
Ratio of net expenses to average net assets | 1.10 | % | 1.10 | % | 1.13 | % | 1.16 | % | 1.20 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 0.65 | % | 0.38 | % | 0.54 | % | 1.05 | % | 0.46 | % | |||||||||||||
Portfolio turnover (b) | 36 | % | 32 | % | 40 | % | 58 | % | 51 | % |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
See notes to financial statements.
28
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory Sycamore Established Value Fund | |||||||||||||||||||||||
Class R6 Shares | |||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2016 | Year Ended October 31, 2015 | Period Ended October 31, 2014(a) | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 40.05 | $ | 33.85 | $ | 35.56 | $ | 37.02 | $ | 34.74 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) | 0.49 | (b) | 0.35 | (b) | 0.31 | (b) | 0.55 | 0.20 | |||||||||||||||
Net realized and unrealized gains (losses) on investments | 0.48 | 6.54 | 1.55 | 3.08 | 2.33 | ||||||||||||||||||
Total from Investment Activities | 0.97 | 6.89 | 1.86 | 3.63 | 2.53 | ||||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.48 | ) | (0.34 | ) | (0.33 | ) | (0.53 | ) | (0.25 | ) | |||||||||||||
Net realized gains from investments | (0.99 | ) | (0.35 | ) | (3.24 | ) | (4.56 | ) | — | ||||||||||||||
Total Distributions to Shareholders | (1.47 | ) | (0.69 | ) | (3.57 | ) | (5.09 | ) | (0.25 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 39.55 | $ | 40.05 | $ | 33.85 | $ | 35.56 | $ | 37.02 | |||||||||||||
Total Return (c) | 2.34 | % | 20.54 | % | 6.20 | % | 10.48 | % | 7.30 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 3,822,378 | $ | 1,314,843 | $ | 458,750 | $ | 52,450 | $ | 24,880 | |||||||||||||
Ratio of net expenses to average net assets (d) | 0.57 | % | 0.54 | % | 0.59 | % | 0.63 | % | 0.64 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets (d) | 1.19 | % | 0.91 | % | 0.93 | % | 1.47 | % | 0.66 | % | |||||||||||||
Ratio of gross expenses to average net assets (d) | 0.57 | % | 0.54 | % | 0.59 | % | 0.65 | %(e) | 0.91 | %(e) | |||||||||||||
Portfolio turnover (c) (f) | 36 | % | 32 | % | 40 | % | 58 | % | 51 | % |
(a) Class R6 Shares commenced operations on March 4, 2014.
(b) Per share net investment income (loss) has been calculated using the average daily shares method.
(c) Not annualized for periods less than one year.
(d) Annualized for periods less than one year.
(e) During the period, certain fees were reduced and/or reimbursed. If such fee reductions and/or reimbursements had not occurred, the ratios would have been as indicated.
(f) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
See notes to financial statements.
29
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory Sycamore Established Value Fund | |||||||||||||||||||||||
Class Y Shares | |||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2016 | Year Ended October 31, 2015 | Year Ended October 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 40.04 | $ | 33.83 | $ | 35.56 | $ | 37.02 | $ | 34.90 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) | 0.46 | (a) | 0.31 | (a) | 0.28 | (a) | 0.49 | 0.30 | |||||||||||||||
Net realized and unrealized gains (losses) on investments | 0.48 | 6.57 | 1.53 | 3.08 | 4.44 | ||||||||||||||||||
Total from Investment Activities | 0.94 | 6.88 | 1.81 | 3.57 | 4.74 | ||||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.45 | ) | (0.32 | ) | (0.30 | ) | (0.47 | ) | (0.29 | ) | |||||||||||||
Net realized gains from investments | (0.99 | ) | (0.35 | ) | (3.24 | ) | (4.56 | ) | (2.33 | ) | |||||||||||||
Total Distributions to Shareholders | (1.44 | ) | (0.67 | ) | (3.54 | ) | (5.03 | ) | (2.62 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 39.54 | $ | 40.04 | $ | 33.83 | $ | 35.56 | $ | 37.02 | |||||||||||||
Total Return | 2.27 | % | 20.51 | % | 6.03 | % | 10.27 | % | 14.19 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 448,543 | $ | 487,044 | $ | 50,765 | $ | 10,200 | $ | 7,516 | |||||||||||||
Ratio of net expenses to average net assets | 0.62 | % | 0.60 | % | 0.72 | % | 0.83 | % | 0.83 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 1.13 | % | 0.81 | % | 0.85 | % | 1.36 | % | 0.83 | % | |||||||||||||
Ratio of gross expenses to average net assets | 0.62 | % | 0.60 | % | 0.72 | % | 0.94 | %(b) | 0.87 | %(b) | |||||||||||||
Portfolio turnover (c) | 36 | % | 32 | % | 40 | % | 58 | % | 51 | % |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) During the period, certain fees were reduced and/or reimbursed. If such fee reductions and/or reimbursements had not occurred, the ratios would have been as indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
See notes to financial statements.
30
Victory Portfolios | Financial Highlights |
For a Share Outstanding Throughout Each Period
Victory Sycamore Small Company Opportunity Fund | |||||||||||||||||||||||
Class A Shares | |||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2016 | Year Ended October 31, 2015 | Year Ended October 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 48.23 | $ | 39.74 | $ | 40.01 | $ | 42.01 | $ | 40.29 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) | 0.22 | (a) | 0.11 | (a) | 0.10 | (a) | 0.03 | 0.02 | |||||||||||||||
Net realized and unrealized gains (losses) on investments | (0.09 | ) | 10.44 | 3.05 | 1.60 | 4.40 | |||||||||||||||||
Total from Investment Activities | 0.13 | 10.55 | 3.15 | 1.63 | 4.42 | ||||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.21 | ) | (0.12 | ) | (0.05 | ) | — | (0.01 | ) | ||||||||||||||
Net realized gains from investments | (2.24 | ) | (1.94 | ) | (3.37 | ) | (3.63 | ) | (2.69 | ) | |||||||||||||
Total Distributions to Shareholders | (2.45 | ) | (2.06 | ) | (3.42 | ) | (3.63 | ) | (2.70 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 45.91 | $ | 48.23 | $ | 39.74 | $ | 40.01 | $ | 42.01 | |||||||||||||
Total Return (excludes sales charge) | 0.17 | % | 27.02 | % | 8.66 | % | 3.94 | % | 11.29 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 486,622 | $ | 603,851 | $ | 529,545 | $ | 437,280 | $ | 467,936 | |||||||||||||
Ratio of net expenses to average net assets | 1.22 | % | 1.23 | % | 1.26 | % | 1.30 | % | 1.31 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 0.46 | % | 0.25 | % | 0.25 | % | 0.08 | % | 0.06 | % | |||||||||||||
Portfolio turnover (b) | 43 | % | 36 | % | 59 | % | 53 | % | 47 | % |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
See notes to financial statements.
31
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory Sycamore Small Company Opportunity Fund | |||||||||||||||||||||||
Class I Shares | |||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2016 | Year Ended October 31, 2015 | Year Ended October 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 48.75 | $ | 40.12 | $ | 40.37 | $ | 42.31 | $ | 40.56 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) | 0.37 | (a) | 0.25 | (a) | 0.21 | (a) | 0.16 | 0.16 | |||||||||||||||
Net realized and unrealized gains (losses) on investments | (0.09 | ) | 10.55 | 3.08 | 1.62 | 4.43 | |||||||||||||||||
Total from Investment Activities | 0.28 | 10.80 | 3.29 | 1.78 | 4.59 | ||||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.36 | ) | (0.23 | ) | (0.17 | ) | (0.09 | ) | (0.15 | ) | |||||||||||||
Net realized gains from investments | (2.24 | ) | (1.94 | ) | (3.37 | ) | (3.63 | ) | (2.69 | ) | |||||||||||||
Total Distributions to Shareholders | (2.60 | ) | (2.17 | ) | (3.54 | ) | (3.72 | ) | (2.84 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 46.43 | $ | 48.75 | $ | 40.12 | $ | 40.37 | $ | 42.31 | |||||||||||||
Total Return | 0.49 | % | 27.44 | % | 8.99 | % | 4.30 | % | 11.66 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 4,127,411 | $ | 4,003,419 | $ | 2,428,803 | $ | 2,049,885 | $ | 1,568,121 | |||||||||||||
Ratio of net expenses to average net assets | 0.88 | % | 0.90 | % | 0.96 | % | 0.96 | % | 0.98 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 0.76 | % | 0.56 | % | 0.56 | % | 0.40 | % | 0.37 | % | |||||||||||||
Portfolio turnover (b) | 43 | % | 36 | % | 59 | % | 53 | % | 47 | % |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
See notes to financial statements.
32
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory Sycamore Small Company Opportunity Fund | |||||||||||||||||||||||
Class R Shares | |||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2016 | Year Ended October 31, 2015 | Year Ended October 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 45.47 | $ | 37.59 | $ | 38.06 | $ | 40.21 | $ | 38.77 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) | 0.10 | (a) | 0.01 | (a) | 0.02 | (a) | (0.05 | ) | (0.09 | ) | |||||||||||||
Net realized and unrealized gains (losses) on investments | (0.08 | ) | 9.86 | 2.88 | 1.53 | 4.22 | |||||||||||||||||
Total from Investment Activities | 0.02 | 9.87 | 2.90 | 1.48 | 4.13 | ||||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.12 | ) | (0.05 | ) | — | — | — | ||||||||||||||||
Net realized gains from investments | (2.24 | ) | (1.94 | ) | (3.37 | ) | (3.63 | ) | (2.69 | ) | |||||||||||||
Total Distributions to Shareholders | (2.36 | ) | (1.99 | ) | (3.37 | ) | (3.63 | ) | (2.69 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 43.13 | $ | 45.47 | $ | 37.59 | $ | 38.06 | $ | 40.21 | |||||||||||||
Total Return | (0.06 | )% | 26.73 | % | 8.42 | % | 3.73 | % | 10.97 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 286,480 | $ | 333,944 | $ | 302,652 | $ | 274,917 | $ | 298,601 | |||||||||||||
Ratio of net expenses to average net assets | 1.44 | % | 1.45 | % | 1.48 | % | 1.52 | % | 1.58 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 0.23 | % | 0.03 | % | 0.05 | % | (0.13 | )% | (0.22 | )% | |||||||||||||
Portfolio turnover (b) | 43 | % | 36 | % | 59 | % | 53 | % | 47 | % |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
See notes to financial statements.
33
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory Sycamore Small Company Opportunity Fund | |||||||||||||||
Class R6 Shares | |||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Period Ended October 31, 2016(a) | |||||||||||||
Net Asset Value, Beginning of Period | $ | 48.69 | $ | 40.08 | $ | 38.97 | |||||||||
Investment Activities: | |||||||||||||||
Net investment income (loss) (b) | 0.30 | 0.21 | 0.13 | ||||||||||||
Net realized and unrealized gains (losses) on investments | (0.00 | )(c) | 10.58 | 4.54 | |||||||||||
Total from Investment Activities | 0.30 | 10.79 | 4.67 | ||||||||||||
Distributions to Shareholders: | |||||||||||||||
Net investment income | (0.37 | ) | (0.24 | ) | (0.19 | ) | |||||||||
Net realized gains from investments | (2.24 | ) | (1.94 | ) | (3.37 | ) | |||||||||
Total Distributions to Shareholders | (2.61 | ) | (2.18 | ) | (3.56 | ) | |||||||||
Net Asset Value, End of Period | $ | 46.38 | $ | 48.69 | $ | 40.08 | |||||||||
Total Return (d) | 0.52 | % | 27.44 | % | 12.86 | % | |||||||||
Ratios/Supplemental Data: | |||||||||||||||
Net Assets at end of period (000) | $ | 195,360 | $ | 85,307 | $ | 21,044 | |||||||||
Ratio of net expenses to average net assets (e) | 0.87 | % | 0.90 | % | 0.98 | % | |||||||||
Ratio of net investment income (loss) to average net assets (e) | 0.62 | % | 0.46 | % | 0.39 | % | |||||||||
Ratio of gross expenses to average net assets (e) | 0.87 | % | 0.90 | % | 1.12 | %(f) | |||||||||
Portfolio turnover (d) (g) | 43 | % | 36 | % | 59 | % |
(a) Class R6 Shares commenced operations on December 15, 2015.
(b) Per share net investment income (loss) has been calculated using the average daily shares method.
(c) Rounds to less than $0.005.
(d) Not annualized for periods less than one year.
(e) Annualized for periods less than one year.
(f) During the period, certain fees were reduced and/or reimbursed. If such fee reductions and/or reimbursements had not occurred, the ratios would have been as indicated.
(g) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
See notes to financial statements.
34
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory Sycamore Small Company Opportunity Fund | |||||||||||||||||||||||
Class Y Shares | |||||||||||||||||||||||
Year Ended October 31, 2018 | Year Ended October 31, 2017 | Year Ended October 31, 2016 | Year Ended October 31, 2015 | Year Ended October 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 48.33 | $ | 39.84 | $ | 40.10 | $ | 42.06 | $ | 40.36 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) | 0.29 | (a) | 0.20 | (a) | 0.13 | (a) | 0.10 | 0.12 | |||||||||||||||
Net realized and unrealized gains (losses) on investments | (0.09 | ) | 10.40 | 3.07 | 1.59 | 4.36 | |||||||||||||||||
Total from Investment Activities | 0.20 | 10.60 | 3.20 | 1.69 | 4.48 | ||||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.16 | ) | (0.17 | ) | (0.09 | ) | (0.02 | ) | (0.09 | ) | |||||||||||||
Net realized gains from investments | (2.24 | ) | (1.94 | ) | (3.37 | ) | (3.63 | ) | (2.69 | ) | |||||||||||||
Total Distributions to Shareholders | (2.40 | ) | (2.11 | ) | (3.46 | ) | (3.65 | ) | (2.78 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 46.13 | $ | 48.33 | $ | 39.84 | $ | 40.10 | $ | 42.06 | |||||||||||||
Total Return | 0.33 | % | 27.10 | % | 8.79 | % | 4.10 | % | 11.45 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 32,592 | $ | 35,416 | $ | 141,097 | $ | 76,761 | $ | 88,387 | |||||||||||||
Ratio of net expenses to average net assets | 1.06 | % | 1.15 | % | 1.15 | % | 1.15 | % | 1.15 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 0.61 | % | 0.45 | % | 0.34 | % | 0.23 | % | 0.06 | % | |||||||||||||
Ratio of gross expenses to average net assets | 1.06 | % | 1.25 | %(b) | 1.39 | %(b) | 1.33 | %(b) | 1.18 | %(b) | |||||||||||||
Portfolio turnover (c) | 43 | % | 36 | % | 59 | % | 53 | % | 47 | % |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) During the period, certain fees were reduced and/or reimbursed. If such fee reductions and/or reimbursements had not occurred, the ratios would have been as indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
See notes to financial statements.
35
Victory Portfolios | Notes to Financial Statements October 31, 2018 |
1. Organization:
Victory Portfolios (the "Trust") was organized on December 6, 1995 as a Delaware statutory trust as a successor to a company named "The Victory Portfolios," which was 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. The Trust is comprised of 42 funds and is authorized to issue an unlimited number of shares, which are units of beneficial interest with a par value of $0.001 per share. Each Fund is classified as diversified under the 1940 Act.
The accompanying financial statements are those of the following two Funds (collectively, the "Funds" and individually, a "Fund").
Funds (Legal Name) | Funds (Short Name) | Investment Share Classes Offered | |||||||||
Victory Sycamore Established Value Fund | Sycamore Established Value Fund* | A, C, I, R, R6 and Y | |||||||||
Victory Sycamore Small Company Opportunity Fund | Sycamore Small Company Opportunity Fund | A, I, R, R6 and Y |
* The Sycamore Established Value Fund is generally closed to new investors. The Fund will continue to be available for investment (by direct purchase or exchange) by only: existing shareholders, investors that purchase shares through certain intermediaries, retirement plans that purchase shares through certain record keepers, and current and retired Fund trustees, officers, employees of Victory Capital Management Inc. and affiliated providers, and their family members.
Each class of shares of a Fund has substantially identical rights and privileges except with respect to sales charges, fees paid under distribution plans, expenses allocable exclusively to each class of shares, voting rights on matters solely affecting a single class of shares, and the exchange privilege of each class of shares.
Under the Trust's organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Funds. In addition, in the normal course of business, the Funds enter into contracts with their vendors and others that provide for general indemnifications. The Funds' maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Funds. However, based on experience, the Funds expect that risk of loss to be remote.
2. 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 accounting principles generally accepted in the United States of America ("GAAP"). The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent 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. The Funds follow the specialized accounting and reporting requirements under GAAP that are applicable to investment companies.
Investment Valuation:
The Funds record investments at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The valuation techniques described below maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value. The inputs used for valuing the Funds' investments are summarized in the three broad levels listed below:
• Level 1 — quoted prices in active markets for identical securities
36
Victory Portfolios | Notes to Financial Statements — continued October 31, 2018 |
• Level 2 — other significant observable inputs (including quoted prices for similar securities or interest rates applicable to those securities, etc.)
• Level 3 — significant unobservable inputs (including the Funds' own assumptions in determining the fair value of investments)
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The inputs or methodologies used for valuation techniques are not necessarily an indication of the risk associated with entering into those investments.
Portfolio securities listed or traded on securities exchanges, including exchange-traded funds ("ETFs"), American Depositary Receipts ("ADRs") and Rights, are valued at the closing price on the exchange or system where the security is principally traded, if available, or at the Nasdaq Official Closing Price. If there have been no sales for that day on the exchange or system, then a security is valued at the last available bid quotation on the exchange or system where the security is principally traded. In each of these situations, valuations are typically categorized as Level 1 in the fair value hierarchy.
Investments in open-end investment companies are valued at net asset value. These valuations are typically categorized as Level 1 in the fair value hierarchy.
Investments for which there are no such quotations, or for which quotations do not appear reliable, are valued at fair value in accordance with procedures established by and under the general supervision and responsibility of the Trust's Board of Trustees (the "Board"). These valuations are typically categorized as Level 2 or Level 3 in the fair value hierarchy, based on the observability of inputs used to determine the fair value.
A summary of the valuations as of October 31, 2018, based upon the three levels defined above, is included in the table below while the breakdown, by category, of affiliated and unaffiliated investments is disclosed in the Schedules of Portfolio Investments (in thousands):
LEVEL 1 — Quoted Prices | Total | ||||||||||
Investments in Securities | Investments in Securities | ||||||||||
Sycamore Established Value Fund | |||||||||||
Common Stocks | $ | 10,396,328 | $ | 10,396,328 | |||||||
Exchange-Traded Funds | 158,781 | 158,781 | |||||||||
Collateral for Securities Loaned | 389,807 | 389,807 | |||||||||
Total | 10,944,916 | 10,944,916 | |||||||||
Sycamore Small Company Opportunity Fund | |||||||||||
Common Stocks | 4,840,252 | 4,840,252 | |||||||||
Exchange-Traded Funds | 74,156 | 74,156 | |||||||||
Collateral for Securities Loaned | 323,377 | 323,377 | |||||||||
Total | $ | 5,237,785 | $ | 5,237,785 |
For the year ended October 31, 2018, there were no Level 2 or 3 investments for which significant unobservable inputs were used to determine fair value.
Real Estate Investment Trusts ("REITs"):
The Funds may invest in REITs which report information on the source of their distributions annually. REITs are pooled investment vehicles that invest primarily in income-producing real estate or real estate related loans or interests (such as mortgages). Certain distributions received from REITs during the year are recorded as realized gains or return of capital as estimated by the Funds or when such information becomes known.
37
Victory Portfolios | Notes to Financial Statements — continued October 31, 2018 |
Investment Companies:
Exchange-Traded Funds:
The Funds may invest in ETFs. ETFs are a type of index fund, the shares of which are bought and sold on a securities exchange. An ETF trades like common stock and represents a fixed portfolio of securities designed to track the performance and dividend yield of a particular domestic or foreign market index. A Fund may purchase shares of an ETF to temporarily gain exposure to a portion of the U.S. or a foreign market while awaiting purchase of underlying securities. The risks of owning an ETF generally reflect the risks of owning the underlying securities they are designed to track, although the lack of liquidity of an ETF could result in it being more volatile. Additionally, ETFs have fees and expenses that reduce their value.
Open-End Funds:
The Funds may invest in portfolios of open-end investment companies. These investment companies value securities in their portfolios for which market quotations are readily available at their market values (generally the last reported sale price) and all other securities and assets at their fair value by the methods established by the board of directors of the underlying funds.
Investment Transactions and Related Income:
Changes in holdings of investments are accounted for no later than one business day following the trade date. For financial reporting purposes, however, investment transactions are accounted for on trade date on the last business day of the reporting period. Interest income is recognized on an accrual basis and includes, where applicable, the amortization of premium or accretion of discount. Dividend income is recorded on the ex-dividend date. 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.
Withholding taxes on interest, dividends and gains as a result of certain investments in ADRs by the Funds have been provided for in accordance with each investment's applicable country's tax rules and rates.
Securities Lending:
The Trust has entered into a Master Securities Lending Agreement ("MSLA") with Citibank, N.A. ("Citibank" or the "Agent"). Under the terms of the MSLA, the Funds may lend securities to certain broker-dealers and banks in exchange for collateral in the amount of at least 102% of the value of U.S. securities loaned or at least 105% of the value of non-U.S. securities loaned, marked-to-market daily. Any collateral shortfalls associated with increases in the valuation of the securities loaned are adjusted the next business day. The collateral can be received in the form of cash collateral and/or non-cash collateral. Non-cash collateral can include U.S. Government Securities, letters of credit and certificates of deposit. The cash collateral is invested in short-term instruments or cash equivalents as noted in the Funds' Schedules of Portfolio Investments. The Trust does not have effective control of the non-cash collateral and therefore it is not disclosed in the Funds' Schedules of Portfolio Investments. The Funds continue to benefit from interest or dividends on the securities loaned and may also earn a return from the collateral. The Funds pay various fees in connection with the investment of cash collateral. The Funds pay the Agent fees based on the investment income received from securities lending activities. Securities lending income is disclosed on the Statements of Operations. Although risk is mitigated by the collateral, the Funds could experience a delay in recovering their securities and possible loss of income or value if the borrower fails to return them.
Securities lending transactions are entered into by a Fund under the MSLA, which permits the Fund, under certain circumstances such as an event of default, to offset amounts payable by the Fund to the same counterparty against amounts receivable from the counterparty to create a net payment due to or from the Fund.
38
Victory Portfolios | Notes to Financial Statements — continued October 31, 2018 |
The following table (in thousands) is a summary of the Funds' securities lending transactions which are subject to offset under the MSLA as of October 31, 2018. These transactions are accounted for as secured borrowings with an overnight and continuous contractual maturity for cash collateral, and greater than overnight and continuous contractual maturity for non-cash collateral.
Gross Amount of Recognized Assets (Value of | Value of Cash | Value of Non-cash Collateral Received by Maturity | |||||||||||||||||||||||||
Securities on Loan) | Collateral Received | <30Days | Between 30 & 90 Days | >90 Days | Net Amount | ||||||||||||||||||||||
Sycamore Established Value Fund | $ | 382,275 | $ | 389,807 | $ | — | $ | — | $ | — | $ | 7,532 | |||||||||||||||
Sycamore Small Company Opportunity Fund | 312,181 | 323,377 | — | — | — | 11,196 |
Dividends to Shareholders:
Dividends from net investment income, if any, are declared and paid quarterly for the Sycamore Established Value Fund. Dividends from net investment income, if any, are declared and paid annually for the Sycamore Small Company Opportunity Fund. Distributable net realized gains, if any, are declared and distributed at least annually from each Fund.
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 GAAP. To the extent these "book/tax" differences are permanent in nature (i.e., that they result from other than timing of recognition — "temporary difference"), such amounts are reclassified within the components of net assets based on their federal tax-basis treatment; temporary differences (e.g., wash sales) do not require reclassification. To the extent dividends and distributions 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 may be reclassified as an offset to capital on the accompanying Statements of Assets and Liabilities.
Federal Income Taxes:
It is the policy of each Fund to 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 gains sufficient to relieve it from all, or substantially all, federal income taxes. Accordingly, no provision for federal income taxes is required in the financial statements. The Funds have a tax year end of October 31.
Management of the Funds has reviewed tax positions taken in tax years that remain subject to examination by all major tax jurisdictions, including federal (i.e., the last four tax year ends and the interim tax period since then). Management believes that there is no tax liability resulting from unrecognized tax benefits related to uncertain tax positions taken.
Allocations:
Expenses directly attributable to a Fund are charged to the Fund, while expenses which are attributable to more than one fund in the Trust, or jointly with an affiliated trust, are allocated among the respective funds in the Trust and/or affiliated trust based upon net assets or another appropriate basis.
Income, expenses (other than class-specific expenses such as transfer agent fees, state registration fees, printing and 12b-1 fees), and realized and unrealized gains or losses on investments are allocated to each class of shares based on its relative net assets on the date income is earned or expenses and realized and unrealized gains and losses are incurred.
39
Victory Portfolios | Notes to Financial Statements — continued October 31, 2018 |
Affiliated Securities Transactions:
Pursuant to Rule 17a-7 under the 1940 Act, the Funds may engage in securities transactions with affiliated investment companies and advisory accounts managed by the Adviser and any applicable sub-adviser. Any such purchase or sale transaction must be effected without brokerage commission or other remuneration, except for customary transfer fees. The transaction must be effected at the current market price, which is either the security's last sale price on an exchange or, if there are no transactions in the security that day, at the average of the highest bid and lowest asked price. For the year ended October 31, 2018, the Funds did not engage in any Rule 17a-7 transactions under the 1940 Act.
3. Purchases and Sales of Securities:
Purchases and sales of securities (excluding securities maturing less than one year from acquisition) for the year ended October 31, 2018 were as follows (in thousands):
Purchases | Sales | ||||||||||
Sycamore Established Value Fund | $ | 4,069,998 | $ | 3,875,662 | |||||||
Sycamore Small Company Opportunity Fund | 2,241,545 | 2,143,040 |
There were no purchases and sales of U.S. Government Securities during the year ended October 31, 2018.
4. Fees and Transactions with Affiliates and Related Parties:
Investment advisory services are provided to the Funds by Victory Capital Management Inc. ("VCM" or the "Adviser"), a New York corporation registered as an investment adviser with the Securities and Exchange Commission ("SEC"). The Adviser is a wholly-owned indirect subsidiary of Victory Capital Holdings, Inc., a publicly traded Delaware corporation and a wholly-owned direct subsidiary of Victory Capital Operating, LLC.
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 each Fund. The rates at which the Adviser is paid by each Fund are included in the table below. The Adviser may use its resources to assist with the Funds' distribution and marketing expenses.
Adviser Fee Tier Rate | |||||||
Sycamore Established Value Fund | |||||||
Up to $100 million | 0.65 | % | |||||
$100 million — $200 million | 0.55 | % | |||||
Over $200 million | 0.45 | % | |||||
Sycamore Small Company Opportunity Fund | |||||||
Up to $500 million | 0.85 | % | |||||
Over $500 million | 0.75 | % |
VCM also serves as the Funds' administrator and fund accountant. Under an Administration and Fund Accounting Agreement, VCM is paid for its services an annual fee at a rate of 0.08% of the first $15 billion in average daily net assets of the Trust, Victory Variable Insurance Funds and Victory Portfolios II (collectively, the "Trusts"), 0.05% of the average daily net assets above $15 billion to $30 billion of the Trusts and 0.04% of the average daily net assets over $30 billion of the Trusts.
Citi Fund Services Ohio, Inc. ("Citi"), an affiliate of Citibank, N.A., acts as sub-administrator and sub-fund accountant to the Funds pursuant to a Sub-Administration and Sub-Fund Accounting Services Agreement between VCM and Citi. VCM pays Citi a fee for providing these services. The Trust reimburses VCM and Citi for all of their reasonable out-of-pocket expenses incurred in providing these services.
40
Victory Portfolios | Notes to Financial Statements — continued October 31, 2018 |
FIS Investor Services, LLC ("FIS") serves as the Funds' transfer agent. Under the Transfer Agent Agreement, the Trust pays FIS a fee for its services and reimburses FIS for all of their reasonable out-of-pocket expenses incurred in providing these services.
The Chief Compliance Officer ("CCO") is an employee of the Adviser, which pays the compensation of the CCO and his support staff. The Trust has entered into an Agreement to provide compliance services with the Adviser, pursuant to which the Adviser furnishes its compliance personnel, including the services of the CCO, and other resources reasonably necessary to provide the Trust with compliance oversight services related to the design, administration and oversight of a compliance program for the Trust in accordance with Rule 38a-1 under the 1940 Act. Funds in the Trust, Victory Variable Insurance Funds, Victory Institutional Funds and Victory Portfolios II (collectively, the "Victory Funds Complex"), in the aggregate, compensate the Adviser for these services.
The Victory Funds Complex pay an annual retainer to each Independent Trustee, plus an additional annual retainer to the Chairman of the Board. The aggregate amount of the fees and expenses of the Independent Trustees are allocated amongst all the funds in the Victory Funds Complex and are presented in the Statements of Operations.
Shearman & Sterling LLP provides legal services to the Trust.
Victory Capital Advisers, Inc. (the "Distributor"), an affiliate of the Adviser, serves as distributor for the continuous offering of the shares of the Funds pursuant to a Distribution Agreement between the Distributor and the Trust. Pursuant to the Distribution and Service Plans adopted in accordance with Rule 12b-1 under the 1940 Act, the Distributor may receive a monthly distribution and service fee, at an annual rate of up to 0.25% of the average daily net assets of Class A Shares, at an annual rate of up to 0.50% of the average daily net assets of Class R Shares of the Funds, and 1.00% of the average daily net assets of Class C Shares of the Funds. The distribution and service fees paid to the Distributor may be used by the Distributor to pay for activities primarily intended to result in the sale of Class A, Class R or Class C Shares of the Funds.
In addition, the Distributor is entitled to receive commissions on sales of the Class A Shares of the Funds. For the year ended October 31, 2018, the Distributor received approximately $136 thousand from commissions earned on sales of Class A Shares of the Funds.
The Adviser has entered into expense limitation agreements with the Funds. Under the terms of the agreements, to the extent that ordinary operating expenses incurred by certain classes of a Fund in any fiscal year exceed the expense limit for such classes of the Fund, such excess amount will be the liability of the Adviser. Interest, taxes, brokerage commissions, other expenditures which are capitalized in accordance with GAAP, and other extraordinary expenses not incurred in the ordinary course of a Fund's business are excluded from the expense limitation agreement. As of October 31, 2018, the expense limits (excluding voluntary waivers) are as follows:
In effect November 1, 2017 until February 28, 2019 | |||||||||||||||||||||||||||
Class A Shares | Class C Shares | Class I Shares | Class R Shares | Class R6 Shares | Class Y Shares | ||||||||||||||||||||||
Sycamore Established Value Fund | N/A | 1.84 | % | N/A | N/A | N/A | N/A | ||||||||||||||||||||
Sycamore Small Company Opportunity Fund | N/A | N/A | N/A | N/A | N/A(a) | 1.15 | % |
(a) In effect from March 1, 2018 until February 28, 2019.
Was in effect from November 1, 2017 until February 28, 2018 | |||||||||||||||||||||||||||
Class A Shares | Class C Shares | Class I Shares | Class R Shares | Class R6 Shares | Class Y Shares | ||||||||||||||||||||||
Sycamore Small Company Opportunity Fund | N/A | N/A | N/A | N/A | 0.98 | % | 1.15 | % |
The Funds have agreed to repay fees and expenses that were waived or reimbursed by the Adviser for a period up to three fiscal years after such waiver or reimbursement was made to the extent such
41
Victory Portfolios | Notes to Financial Statements — continued October 31, 2018 |
payments or repayments would not cause the expenses of a class to exceed the original expense limitation in place at time of the waiver or reimbursement or any expense limitation agreement in place at the time of repayment. Amounts repaid to the Adviser during the year, if any, are reflected on the Statements of Operations as "Recoupment of prior expenses waived/reimbursed by Adviser."
As of October 31, 2018, the following amounts are available to be repaid to the Adviser (in thousands):
Expires 10/31/19 | Expires 10/31/20 | Expires 10/31/21 | Total | ||||||||||||||||
Sycamore Small Company Opportunity Fund | $ | 231 | $ | 79 | $ | — | $ | 310 |
The Adviser may voluntarily waive or reimburse additional fees to assist the Funds in maintaining competitive expense ratios. Voluntary waivers and reimbursements applicable to the Funds are not available to be recouped at a future time. There were no voluntary waivers or reimbursements for the year ended October 31, 2018.
Certain officers and/or interested trustees of the Funds are also officers and/or employees of the Adviser, Administrator, Fund Accountant, Sub-Administrator, Sub-Fund Accountant, and Legal.
5. Risks:
Each Fund may be subject to other risks in addition to these identified risks.
An investment in the Funds' shares represents an indirect investment in the securities owned by the Funds, some of which will be traded on a national securities exchange or in the over-the-counter markets. The value of the securities in which the Funds invest, like other market investments, may move up or down, sometimes rapidly and unpredictably. The value of the securities in which the Funds invest may affect the value of the Funds' shares. An investment in the Funds' shares at any point in time may be worth less than the original investment, even after taking into account the reinvestment of the Funds' distributions.
The Funds will be subject to credit risk with respect to the amount each expects to receive from counterparties for financial instruments entered into by the Funds. The Funds may be negatively impacted if a counterparty becomes bankrupt or otherwise fails to perform its obligations due to financial difficulties. The Funds may experience significant delays in obtaining any recovery in bankruptcy or other reorganization proceeding and the Funds may obtain only limited recovery or may obtain no recovery in such circumstances. The Funds typically enter into transactions with counterparties whose credit ratings are investment grade, as determined by a nationally recognized statistical rating organization or, if unrated, judged by the Adviser to be of comparable quality.
6. Borrowing and Interfund Lending
Line of Credit:
The Victory Funds Complex participates in a short-term, demand note "Line of Credit" agreement with Citibank. Under the agreement with Citibank as of July 28, 2017, the Victory Funds Complex may borrow up to $250 million, of which $100 million is committed and $150 million is uncommitted. $40 million of the Line of Credit is reserved for use by the Victory Floating Rate Fund, another series of the Victory Funds Complex, with that Fund paying the related commitment fees for that amount. The purpose of the agreement is to meet temporary or emergency cash needs, including redemption requests that might otherwise require the untimely disposition of securities. The agreement was amended on July 27, 2018 with a new termination date of July 26, 2019. Citibank receives an annual commitment fee of 0.15% on $100 million for providing the Line of Credit. For the year ended October 31, 2018, Citibank earned approximately $150 thousand in commitment fees from the Victory Funds Complex. Each fund in the Victory Funds Complex pays a pro-rata portion of the commitment fees plus any interest on amounts borrowed. Interest accrued by each Fund during the period is presented on the Statements of Operations under Interest expense on line of credit.
The Funds did not utilize or participate in the Line of Credit during the year ended October 31, 2018.
42
Victory Portfolios | Notes to Financial Statements — continued October 31, 2018 |
Interfund Lending:
The Trust and Adviser rely on an exemptive order granted by the SEC in March 2017 (the "Order"), permitting the establishment and operation of an Interfund Lending Facility (the "Facility"). The Facility allows each Fund to directly lend and borrow money to or from any other Victory Fund relying upon the Order at rates beneficial to both the borrowing and lending funds. Advances under the Facility are allowed for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities, and are subject to each Fund's borrowing restrictions. The interfund loan rate is determined, as specified in the Order, by averaging the current repurchase agreement rate and the current bank loan rate. Interest accrued by each Fund during the period is presented on the Statements of Operations under Interest expense on interfund lending.
The average borrowing and lending for the days outstanding and average interest rate for each Fund during the year ended October 31, 2018 were as follows (in thousands):
Borrower or Lender | Amount Outstanding at October 31, 2018 | Average Lending* | Days Lending Outstanding | Average Interest Rate | Maximum Lending During the Period | ||||||||||||||||||||||
Sycamore Established Value Fund | Lender | $ | 592 | $ | 3,189 | 89 | 2.34 | % | $ | 23,256 | |||||||||||||||||
Sycamore Small Company Opportunity Fund | Lender | — | 1,133 | 12 | 2.02 | % | 3,881 |
* For the year ended October 31, 2018, based on the number of days borrowings were outstanding.
7. Federal Income Tax Information:
The tax character of distributions paid during the tax years ended, as noted below, were as follows (total distributions paid may differ from the Statements of Changes in Net Assets because, for tax purposes, dividends are recognized when actually paid) (in thousands):
Year Ended October 31, 2018 | |||||||||||||||||||
Distributions paid from | |||||||||||||||||||
Ordinary Income | Net Long-Term Capital Gains | Total Taxable Distributions | Total Distributions Paid | ||||||||||||||||
Sycamore Established Value Fund | $ | 169,596 | $ | 201,875 | $ | 371,471 | $ | 371,471 | |||||||||||
Sycamore Small Company Opportunity Fund | 79,382 | 190,439 | 269,821 | 269,821 | |||||||||||||||
Year Ended October 31, 2017 | |||||||||||||||||||
Distributions paid from | |||||||||||||||||||
Ordinary Income | Net Long-Term Capital Gains | Total Taxable Distributions | Total Distributions Paid | ||||||||||||||||
Sycamore Established Value Fund | $ | 61,437 | $ | 67,010 | $ | 128,447 | $ | 128,447 | |||||||||||
Sycamore Small Company Opportunity Fund | 62,305 | 129,446 | 191,751 | 191,751 |
43
Victory Portfolios | Notes to Financial Statements — continued October 31, 2018 |
As of the tax year ended October 31, 2018, the components of accumulated earnings (deficit) on a tax basis were as follows (in thousands):
Undistributed Ordinary Income | Undistributed Long-Term Capital Gains | Accumulated Earnings | Accumulated Capital and Other Losses | Qualified Late-Year Losses* | Unrealized Appreciation (Depreciation)** | Total Accumulated Earnings (Deficit) | |||||||||||||||||||||||||
Sycamore Established Value Fund | $ | 81,366 | $ | 756,970 | $ | 838,335 | $ | — | $ | — | $ | 1,018,353 | $ | 1,856,688 | |||||||||||||||||
Sycamore Small Company Opportunity Fund | 121,106 | 454,532 | 575,637 | — | — | 450,560 | 1,026,197 |
* Qualified late-year losses are comprised of post-October capital losses incurred after October 31, 2018, and certain late-year ordinary losses. Late-year ordinary losses represent ordinary losses incurred after December 31, 2018 and specified losses incurred after October 31, 2018. These losses are deemed to arise on the first day of the Fund's next taxable year.
** The difference between the book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to tax deferral of losses on wash sales.
At October 31, 2018, the cost basis for federal income tax purposes, gross unrealized appreciation, gross unrealized depreciation and net unrealized appreciation (depreciation) for investments were as follows (in thousands):
Cost of Investments for Federal Tax Purposes | Gross Unrealized Appreciation | Gross Unrealized Depreciation | Net Unrealized Appreciation (Depreciation) | ||||||||||||||||
Sycamore Established Value Fund | $ | 9,926,563 | $ | 1,477,417 | $ | (459,064 | ) | $ | 1,018,353 | ||||||||||
Sycamore Small Company Opportunity Fund | 4,787,225 | 684,639 | (234,079 | ) | 450,560 |
As of October 31, 2018 on the Statements of Assets and Liabilities, as a result of permanent book-to-tax difference, reclassification adjustments were as follows (in thousands):
Accumulated Net Investment Income (Loss)* | Accumulated Net Realized Gains (Losses)* | Capital | |||||||||||||
Sycamore Established Value Fund | $ | 2,031 | $ | (2,031 | ) | $ | — | ||||||||
Sycamore Small Company Opportunity Fund | 620 | (620 | ) | — |
* These components of capital are presented together as "Total distributable earnings/(loss)" on the Statement of Assets and Liabilities.
8. Affiliated Securities:
An affiliated security is a security in which the Fund has ownership of at least 5% of the security's outstanding voting shares or a fund managed by VCM. Transactions in affiliated securities during the year ended October 31, 2018 were as follows:
Fair Value 10/31/2017 | Purchases at Cost | Proceeds from Sales | Net Realized Gain (Loss) | Net Change in Unrealized Appreciation/ Depreciation | Fair Value 10/31/2018 | Dividend Income | |||||||||||||||||||||||||
Sycamore Small Company Opportunity Fund | |||||||||||||||||||||||||||||||
ADTRAN, Inc. | $ | 54,683 | $ | — | $ | — | $ | — | $ | (19,852 | ) | $ | 34,831 | $ | 933 | ||||||||||||||||
Alamo Group, Inc. | 42,426 | 23,217 | (1,399 | ) | 702 | (10,141 | ) | 54,805 | 222 | ||||||||||||||||||||||
The Andersons, Inc. | 78,891 | 9,172 | (14,216 | ) | (1,159 | ) | 751 | 73,439 | 1,474 | ||||||||||||||||||||||
Culp, Inc. | 28,327 | 12,582 | — | — | (9,772 | ) | 31,137 | 422 | |||||||||||||||||||||||
MYR Group, Inc. | 14,987 | 25,825 | — | — | 1,004 | 41,816 | — | ||||||||||||||||||||||||
The E.W. Scripps Co., Class A | 47,794 | 17,172 | — | — | 2,514 | 67,480 | 501 | ||||||||||||||||||||||||
Unifi, Inc. | 33,840 | 13,223 | — | — | (17,240 | ) | 29,823 | — | |||||||||||||||||||||||
Unit Corp. | 37,889 | 14,507 | — | — | 11,228 | 63,624 | — | ||||||||||||||||||||||||
Total | $ | 338,837 | $ | 115,698 | $ | (15,615 | ) | $ | (457 | ) | $ | (41,508 | ) | $ | 396,955 | $ | 3,552 |
44
Victory Portfolios | Notes to Financial Statements — continued October 31, 2018 |
9. Recent Accounting Pronouncements:
In October 2016, the SEC released its Final Rules on Investment Company Reporting Modernization (the "Rules"). The Rules which introduced two new regulatory reporting forms for investment companies — Form N-PORT and Form N-CEN — also contain amendments to Regulation S-X which require standardized, enhanced disclosures about derivatives in investment company financial statements. The Regulation S-X amendments had a compliance date of August 1, 2017, and are reflected in this report. The Funds' compliance date for Form N-PORT was June 1, 2018, and the Funds will make their initial filing with the SEC on Form N-PORT for the period ending March 31, 2019. Effective with the period ended June 30, 2018, the Funds were required to maintain, and make available to the SEC upon request, the information required to be included in Form N-PORT. Form N-PORT will replace Form N-Q filings effective with the requirement to file the Form N-PORT with the SEC for the period ending March 31, 2019. The Funds' compliance date for Form N-CEN was June 1, 2018, and the Funds will make their initial filing on Form N-CEN for the period ended October 31, 2018. Form N-CEN will replace Form N-SAR filings. The Funds' adoption of these amendments has no effect on the net assets or results of operations.
In August 2018, the FASB issued ASU No. 2018-13, "Fair Value Measurements" ("ASU 2018-13"). This update makes certain removals from, changes to and additions to existing disclosure requirements for fair value measurements. ASU 2018-13 does not change fair value measurements already required or permitted by existing standards. ASU 2018-13 is effective for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. As permitted, the Funds have early adopted ASU 2018-13 with the financial statements prepared as of October 31, 2018.
In August 2018, the SEC adopted amendments to certain financial statement disclosure requirements to conform them to GAAP for investment companies. These amendments made certain disclosure requirements effective under Regulation S-X. The Funds' adoption of these amendments, effective with the financial statements prepared as of October 31, 2018 had no effect on the Funds' net assets or results of operations. As a result of adopting these amendments, the distributions to shareholders in the October 31, 2017 Statements of Changes in Net Assets presented herein have been reclassified to conform to the current year presentation, which includes all distributions to each class of shareholders, other than tax basis return of capital distributions, in one line item per share class. Distributions to shareholders for the year ended October 31, 2017 from net investment income and net realized gains in the Funds were as follows:
Sycamore Established Value Fund | Sycamore Small Company Opportunity Fund | ||||||||||
Distributions to Shareholders: | |||||||||||
From net investment income: | |||||||||||
Class A Shares | $ | (13,470 | ) | $ | (1,612 | ) | |||||
Class C Shares | (56 | ) | — | ||||||||
Class I Shares | (35,454 | ) | (14,803 | ) | |||||||
Class R Shares | (3,632 | ) | (410 | ) | |||||||
Class R6 Shares | (8,005 | ) | (147 | ) | |||||||
Class Y Shares | (1,541 | ) | (589 | ) | |||||||
From net realized gains: | |||||||||||
Class A Shares | $ | (20,002 | ) | $ | (26,423 | ) | |||||
Class C Shares | (415 | ) | — | ||||||||
Class I Shares | (30,795 | ) | (123,966 | ) | |||||||
Class R Shares | (8,623 | ) | (15,951 | ) | |||||||
Class R6 Shares | (5,853 | ) | (1,195 | ) | |||||||
Class Y Shares | (601 | ) | (6,655 | ) |
10. Subsequent Events:
The Funds have evaluated the need for additional disclosures or adjustments resulting from subsequent events through the date these financial statements were issued. Based on this evaluation, there were no subsequent events to report that would have a material impact on the Funds' financial statements.
45
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of the Victory Sycamore Established Value Fund and Victory Sycamore Small Company Opportunity Fund
Opinion on the Financial Statements
We have audited the accompanying statements of assets and liabilities of Victory Sycamore Established Value Fund and Victory Sycamore Small Company Opportunity Fund (the Funds) (two of the funds constituting the Victory Portfolios (the "Trust")) including the portfolios of investments, as of October 31, 2018, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Funds (two of the funds constituting the Trust) at October 31, 2018, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended and their financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Trust's management. Our responsibility is to express an opinion on each of the Funds' financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust's internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2018, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Victory Capital's investment companies since 1995.
Cincinnati, Ohio
December 21, 2018
46
Victory Portfolios | Supplemental Information October 31, 2018 |
(Unaudited)
Trustee and Officer Information Board of Trustees:
Overall responsibility for management of the Trust rests with the Board. The Trust is managed by the Board in accordance with the laws of the State of Delaware. There are currently ten Trustees, nine of whom are not "interested persons" of the Trust within the meaning of that term under the 1940 Act ("Independent Trustees") and one of whom is an "interested person" of the Trust within the meaning of that term under the 1940 Act ("Interested Trustee"). The Trustees, in turn, elect the officers of the Trust to actively supervise its day-to-day operations.
The following tables list the Trustees, their ages, position with the Trust, commencement of service, principal occupations during the past five years and any directorships of other investment companies or companies whose securities are registered under the Securities Exchange Act of 1934, as amended, or who file reports under that Act. Each Trustee oversees 42 portfolios in the Trust, nine portfolios in Victory Variable Insurance Funds, one portfolio in Victory Institutional Funds and 20 portfolios in Victory Portfolios II, each a registered investment company that, together with the Trust, comprise the Victory Fund Complex. Each Trustee's address is c/o Victory Portfolios Funds, 4900 Tiedeman Road, 4th Floor, Brooklyn, Ohio 44144. Each Trustee has an indefinite term.
Name and Age | Position Held with the Trust | Date Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Independent Trustees. | |||||||||||||||||||
David Brooks Adcock, 67 | Trustee | May 2005 | Consultant (since 2006). | Chair and Trustee, Turner Funds (December 2016-December 2017). | |||||||||||||||
Nigel D. T. Andrews, 71 | Vice Chair and Trustee | August 2002 | Retired. | Director, TCG BDC II, Inc. (since 2017); Director, TCG BDC I, Inc. (formerly Carlyle GMS Finance, Inc.) (since 2012); Director, Old Mutual US Asset Management (2002-2014). | |||||||||||||||
E. Lee Beard, 67* | Trustee | May 2005 | Retired (since 2015); Consultant, The Henlee Group, LLC (consulting) (2005-2015). | None. | |||||||||||||||
Dennis M. Bushe, 74 | Trustee | July 2016 | Retired. | Trustee, RS Investment Trust and RS Variable Products Trust (November 2011 to July 2016). |
47
Victory Portfolios | Supplemental Information — continued October 31, 2018 |
(Unaudited)
Name and Age | Position Held with the Trust | Date Commenced Service | Principal Occupation During Past 5 Years | Other Directorships Held During Past 5 Years | |||||||||||||||
Sally M. Dungan, 64 | Trustee | February 2011 | Chief Investment Officer, Tufts University (since 2002). | None. | |||||||||||||||
John L. Kelly, 65 | Trustee | February 2015 | Partner, McCarvill Capital Partners (September 2016- September 2017); Advisor (January 2016-April 2016) and Managing Partner (August 2014-January 2016), Endgate Commodities LLC; Chief Operating Officer, Liquidnet Holdings, Inc. (2011-2014). | Director, Caledonia Mining Corporation (since May 2012). | |||||||||||||||
David L. Meyer, 61* | Trustee | December 2008 | Retired. | None. | |||||||||||||||
Gloria S. Nelund, 57 | Trustee | July 2016 | Chair, CEO and Co-Founder of TriLinc Global, LLC, an investment firm. | TriLinc Global Impact Fund, LLC (since 2012); Trustee, RS Investment Trust and RS Variable Products Trust (November 2007 to July 2016). | |||||||||||||||
Leigh A. Wilson, 73 | Chair and Trustee | November 1994 | Private Investor. | Chair (since 2013), Caledonia Mining Corporation. | |||||||||||||||
Interested Trustee. | |||||||||||||||||||
David C. Brown, 46** | Trustee | May 2008 | Chairman and Chief Executive Officer (since 2013), Co-Chief Executive Officer (2011-2013), the Adviser; Chairman and Chief Executive Officer, Victory Capital Holdings, Inc. (since 2013). | None. |
* The Board has designated Mr. Meyer and Ms. Beard as its Audit Committee Financial Experts.
** Mr. Brown is an "Interested Person" by reason of his relationship with the Adviser.
The Statement of Additional Information includes additional information about the Trustees of the Trust and is available, without charge, by calling 800-539-3863.
48
Victory Portfolios | Supplemental Information — continued October 31, 2018 |
(Unaudited)
Officers:
The officers of the Trust, their ages, commencement of service and their principal occupations during the past five years, are detailed in the following table. Each officer serves until the earlier of his or her resignation, removal, retirement, death, or the election of a successor. The mailing address of each officer of the Trust is 4900 Tiedeman Road, 4th Floor, Brooklyn, Ohio 44144. The officers of the Trust receive no compensation directly from the Trust for performing the duties of their offices.
Name and Age | Position with the Trust | Date Commenced Service | Principal Occupation During Past 5 Years | ||||||||||||
Christopher K. Dyer, 56 | President | February 2006* | Director of Mutual Fund Administration, the Adviser. | ||||||||||||
Scott A. Stahorsky, 49 | Vice President | December 2014 | Manager, Fund Administration, the Adviser (since 2015); Senior Analyst, Fund Administration, the Adviser (prior to 2015). | ||||||||||||
Erin G. Wagner, 44 | Secretary | December 2014 | Associate General Counsel, the Adviser (since 2013). | ||||||||||||
Allan Shaer, 53 | Treasurer | May 2017 | Senior Vice President, Financial Administration, Citi Fund Services Ohio, Inc. (since 2016); Vice President, Mutual Fund Administration, JP Morgan Chase (2011-2016). | ||||||||||||
Christopher A. Ponte, 34 | Assistant Treasurer | December 2017 | Manager, Fund Administration, the Adviser (since 2017); Senior Analyst, Fund Administration, the Adviser (prior to 2017); Chief Financial Officer, Victory Capital Advisers, Inc. (since 2018). | ||||||||||||
Colin Kinney, 45 | Chief Compliance Officer | July 2017 | Chief Compliance Officer (since 2013) and Chief Risk Officer (2009-2017), the Adviser. | ||||||||||||
Chuck Booth, 58 | Anti-Money Laundering Compliance Officer and Identity Theft Officer | May 2015 | Director, Regulatory Administration and CCO Support Services, Citi Fund Services Ohio, Inc. | ||||||||||||
Jay G. Baris, 64 | Assistant Secretary | December 1997 | Partner, Shearman & Sterling LLP (since 2018); Partner, Morrison & Foerster LLP (2011-2017). |
* On December 3, 2014, Mr. Dyer resigned as Secretary of the Trust and accepted the position of President.
49
Victory Portfolios | Supplemental Information — continued October 31, 2018 |
(Unaudited)
Proxy Voting and Form N-Q Information
Proxy Voting:
Information regarding the policies and procedures that each Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, by calling 800-539-3863. The information is also included in the Funds' Statement of Additional Information, which is available on the SEC's website at www.sec.gov.
Information relating to how each Fund voted proxies relating to portfolio securities held during the most recent twelve months ended June 30 is available on the SEC's website at www.sec.gov.
Availability of Schedules of Portfolio Investments:
The Trust files a complete list of Schedules of Portfolio Investments with the SEC for the first and third quarters of each fiscal year on Form N-Q. Forms N-Q are available on the SEC's website at www.sec.gov.
Expense Examples
As a shareholder of the Funds, you may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchases; and (2) ongoing costs, including management fees, distribution and service (12b-1) fees, and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds.
These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period from May 1, 2018 through October 31, 2018.
The Actual Expense figures in the table below provide information about actual account values and actual expenses. You may use the information below, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled "Actual Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
The Hypothetical Expense figures in the table below provide information about hypothetical account values and hypothetical expenses based on each Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare this 5% hypothetical example with the 5% hypothetical examples that appear in shareholder reports of other funds.
Please note the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
50
Victory Portfolios | Supplemental Information — continued October 31, 2018 |
(Unaudited)
Beginning Account Value 5/1/18 | Actual Ending Account Value 10/31/18 | Hypothetical Ending Account Value 10/31/18 | Actual Expenses Paid During Period 5/1/18- 10/31/18* | Hypothetical Expenses Paid During Period 5/1/18- 10/31/18* | Annualized Expense Ratio During Period 5/1/18- 10/31/18 | ||||||||||||||||||||||
Sycamore Established Value Fund | |||||||||||||||||||||||||||
Class A | $ | 1,000.00 | $ | 986.80 | $ | 1,020.72 | $ | 4.46 | $ | 4.53 | 0.89 | % | |||||||||||||||
Class C | 1,000.00 | 982.80 | 1,016.74 | 8.40 | 8.54 | 1.68 | % | ||||||||||||||||||||
Class I | 1,000.00 | 988.20 | 1,022.23 | 2.96 | 3.01 | 0.59 | % | ||||||||||||||||||||
Class R | 1,000.00 | 985.70 | 1,019.66 | 5.51 | 5.60 | 1.10 | % | ||||||||||||||||||||
Class R6 | 1,000.00 | 988.30 | 1,022.28 | 2.91 | 2.96 | 0.58 | % | ||||||||||||||||||||
Class Y | 1,000.00 | 987.90 | 1,022.03 | 3.16 | 3.21 | 0.63 | % | ||||||||||||||||||||
Sycamore Small Company Opportunity Fund | |||||||||||||||||||||||||||
Class A | 1,000.00 | 983.70 | 1,019.06 | 6.10 | 6.21 | 1.22 | % | ||||||||||||||||||||
Class I | 1,000.00 | 985.40 | 1,020.82 | 4.35 | 4.43 | 0.87 | % | ||||||||||||||||||||
Class R | 1,000.00 | 982.70 | 1,017.95 | 7.20 | 7.32 | 1.44 | % | ||||||||||||||||||||
Class R6 | 1,000.00 | 985.60 | 1,020.77 | 4.40 | 4.48 | 0.88 | % | ||||||||||||||||||||
Class Y | 1,000.00 | 985.10 | 1,020.32 | 4.85 | 4.94 | 0.97 | % |
* Expenses are equal to the average account value multiplied by the Fund's annualized expense ratio multiplied by 184/365 (the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year).
51
Victory Portfolios | Supplemental Information — continued October 31, 2018 |
(Unaudited)
Additional Federal Income Tax Information
For the year ended October 31, 2018, the Funds paid qualified dividend income for the purposes of reduced individual federal income tax rates of:
Amount | |||||||
Sycamore Established Value Fund | 89 | % | |||||
Sycamore Small Company Opportunity Fund | 67 | % |
Dividends qualified for corporate dividends received deductions of:
Amount | |||||||
Sycamore Established Value Fund | 86 | % | |||||
Sycamore Small Company Opportunity Fund | 73 | % |
For the year ended October 31, 2018, the Funds designated short-term capital gain distributions (in thousands):
Amount | |||||||
Sycamore Established Value Fund | $ | 60,572 | |||||
Sycamore Small Company Opportunity Fund | 44,514 |
For the year ended October 31, 2018, the Funds designated long-term capital gain distributions (in thousands):
Amount | |||||||
Sycamore Established Value Fund | $ | 201,875 | |||||
Sycamore Small Company Opportunity Fund | 190,439 |
52
Privacy Policy
Protecting the Privacy of Information
The Trust respects your right to privacy. We also know that you expect us to conduct and process your business in an accurate and efficient manner. To do so, we must collect and maintain certain personal information about you. This is the information we collect from you on applications or other forms, and from the transactions you make with us or third parties. It may include your name, address, social security number, account transactions and balances, and information about investment goals and risk tolerance.
We do not disclose any information about you or about former customers to anyone except as permitted or required by law. Specifically, we may disclose the information we collect to companies that perform services on our behalf, such as the transfer agent that processes shareholder accounts and printers and mailers that assist us in the distribution of investor materials. We may also disclose this information to companies that perform marketing services on our behalf. This allows us to continue to offer you Victory investment products and services that meet your investing needs, and to effect transactions that you request or authorize. These companies will use this information only in connection with the services for which we hired them. They are not permitted to use or share this information for any other purpose.
To protect your personal information internally, we permit access only by authorized employees and maintain physical, electronic and procedural safeguards to guard your personal information.*
* You may have received communications regarding information about privacy policies from other financial institutions which gave you the opportunity to "opt-out" of certain information sharing with companies which are not affiliated with that financial institution. The Trust does not share information with other companies for purposes of marketing solicitations for products other than the Trust. Therefore, the Trust does not provide opt-out options to their shareholders.
Victory Funds
P.O. Box 182593
Columbus, Ohio 43218-2593
Visit our website at: | Call Victory at: | ||||||
www.vcm.com | 800-539-FUND (800-539-3863) |
VP-SMF-AR (10/18)
Item 2. Code of Ethics.
(a) The registrant has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. This code of ethics in included as an Exhibit.
(b) During the period covered by the report, with respect to the registrant’s code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions; there have been no amendments to, nor any waivers granted from, a provision that relates to any element of the code of ethics definition enumerated in paragraph (b) of this Item 2.
Item 3. Audit Committee Financial Expert.
(a)(1) The registrant’s board of directors has determined that the registrant has at least one audit committee financial expert serving on its audit committee.
(a)(2) The audit committee financial experts are David L. Meyer and E. Lee Beard, who are “independent” for purposes of this Item 3 of Form N-CSR.
Item 4. Principal Accountant Fees and Services.
|
| 2017 |
| 2018 |
| ||
(a) Audit Fees (1) |
| $ | 163,255 |
| $ | 123,600 |
|
(b) Audit-Related Fees (2) |
| 0 |
| 0 |
| ||
(c) Tax Fees (3) |
| 57,992 |
| 52,780 |
| ||
(d) All Other Fees (4) |
| 0 |
| 0 |
| ||
(1) Audit fees include amounts related to the audit of the Registrant’s annual financial statements and services normally provided by the accountant in connection with statutory and regulatory filings. Audit fees billed were for professional
services provided by Ernst & Young LLP for audit compliance, audit advice and audit planning.
(2) Represents the fee for assurance and related services by Ernst & Young LLP reasonably related to the performance of the audit of the Registrant’s financial statements that was not reported under (a) of this item.
(3) Represents the aggregate tax fee billed for professional services rendered by Ernst & Young LLP for tax compliance, tax advice, international tax fee transactions and tax planning. Such tax services included the review of income and excise tax returns for the Registrant.
(4) For the fiscal years ended October 31, 2018 and October 31, 2017, there were no fees billed for professional services rendered by Ernst & Young LLP to the Registrant, other than the services reported in (a) through (c) of this item.
Tax fees for 2017 and 2018 are for recurring tax fees for the preparation of the federal and state tax returns and procedures performed relating to the Registrant’s analysis of complex securities.
(e)(1) The Registrant’s Audit Committee must pre-approve non-audit services to be provided by the principal accountant and the fees charged with these services. The Committee may delegate authority to one or more Committee members to pre-approve these services, subject to subsequent review and approval by the Committee.
(e)(2) There were no services performed under Rule 2.01 (c)(7)(i)(C).
(f) Not applicable.
(g)
2017 |
| $ | 283,159 |
|
2018 |
| $ | 133,280 |
|
(h) The Registrant’s Audit Committee has evaluated the non-audit services that the principal accountant provided to the Registrant’s investment adviser (and the adviser’s relevant affiliated), which services the Committee did not pre-approve, and has concluded that the provision of those services was compatible with maintaining the accountant’s independence.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Investments.
(a) Not applicable.
(b) Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 11. Controls and Procedures.
(a) The registrant’s principal executive officer and principal financial officer have concluded, based on their evaluation of the registrant’s disclosure controls and procedures as conducted within 90 days of the filing date of this report, that these disclosure controls and procedures are adequately designed and are operating effectively to ensure that information required to be disclosed by the registrant on Form N-CSR is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.
(b) There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940 (17 CFR 270.30a-3(d)) that occurred during the period covered by this report that have materially affected or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
(a)(1) Not applicable.
(a)(2) Not applicable.
(a)(3) Not applicable.
(a)(4) Not applicable.
(b) Not applicable.
Item 13. Exhibits.
(a)(1) The code of ethics that is the subject of the disclosure required by Item 2 is attached hereto.
(a)(2) Certifications pursuant to Rule 30a-2(a) are attached hereto.
(a)(3) Not applicable.
(b) Certifications pursuant to Rule 30a-2(b) are furnished herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) | Victory Portfolios |
| |||
|
|
| |||
By (Signature and Title)* | /s/ Allan Shaer |
| |||
| Allan Shaer, Principal Financial Officer |
| |||
Date | January 2, 2019 |
| |||
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By (Signature and Title)* | /s/ Christopher K. Dyer |
| |
| Christopher K. Dyer, Principal Executive Officer |
| |
Date | January 2, 2019 |
| |
|
|
| |
|
|
| |
By (Signature and Title)* | /s/ Allan Shaer |
| |
| Allan Shaer, Principal Financial Officer |
| |
Date | January 2, 2019 |
| |