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) |
| (Zip code) | ||||||
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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: | December 31 |
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Date of reporting period: | December 31, 2018 |
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Item 1. Reports to Stockholders.
December 31, 2018
Annual Report
Victory INCORE Investment Quality Bond Fund
Victory INCORE Low Duration Bond Fund
Victory High Yield Fund
Victory Tax-Exempt Fund
Victory High Income Municipal Bond Fund
Victory Floating Rate Fund
Victory Strategic Income 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 sooner than January 1, 2021 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 Victory Funds you hold directly or through 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
Shareholder Letter (unaudited) | 5 | ||||||
Fund Review and Commentary (unaudited) | 6 | ||||||
Financial Statements | |||||||
The Victory Fixed Income Funds | |||||||
Victory INCORE Investment Quality Bond Fund | |||||||
Schedule of Portfolio Investments | 29 | ||||||
Statements of Assets and Liabilities | 63 | ||||||
Statements of Operations | 66 | ||||||
Statements of Changes in Net Assets | 69-71 | ||||||
Financial Highlights | 77-80 | ||||||
Victory INCORE Low Duration Bond Fund | |||||||
Schedule of Portfolio Investments | 35 | ||||||
Statements of Assets and Liabilities | 63 | ||||||
Statements of Operations | 66 | ||||||
Statements of Changes in Net Assets | 69-71 | ||||||
Financial Highlights | 81-84 | ||||||
Victory High Yield Fund | |||||||
Schedule of Portfolio Investments | 42 | ||||||
Statements of Assets and Liabilities | 63 | ||||||
Statements of Operations | 66 | ||||||
Statements of Changes in Net Assets | 69-71 | ||||||
Financial Highlights | 85-88 | ||||||
Victory Tax-Exempt Fund | |||||||
Schedule of Portfolio Investments | 46 | ||||||
Statements of Assets and Liabilities | 64 | ||||||
Statements of Operations | 67 | ||||||
Statements of Changes in Net Assets | 72-74 | ||||||
Financial Highlights | 89-91 | ||||||
Victory High Income Municipal Bond Fund | |||||||
Schedule of Portfolio Investments | 49 | ||||||
Statements of Assets and Liabilities | 64 | ||||||
Statements of Operations | 67 | ||||||
Statements of Changes in Net Assets | 72-74 | ||||||
Financial Highlights | 92-94 | ||||||
Victory Floating Rate Fund | |||||||
Schedule of Portfolio Investments | 52 | ||||||
Statements of Assets and Liabilities | 64 | ||||||
Statements of Operations | 67 | ||||||
Statements of Changes in Net Assets | 72-74 | ||||||
Financial Highlights | 95-98 | ||||||
Victory Strategic Income Fund | |||||||
Schedule of Portfolio Investments | 58 | ||||||
Statements of Assets and Liabilities | 65 | ||||||
Statements of Operations | 68 | ||||||
Statements of Changes in Net Assets | 75-76 | ||||||
Financial Highlights | 99-102 |
1
Table of Contents (continued)
Notes to Financial Statements | 103 | ||||||
Report of Ernst & Young LLP, Independent Registered Public Accounting Firm | 120 | ||||||
Supplemental Information (unaudited) | 121 | ||||||
Trustee and Officer Information | 121 | ||||||
Proxy Voting and Form N-Q Information | 124 | ||||||
Expense Examples | 124 | ||||||
Additional Federal Income Tax Information | 126 | ||||||
Advisory Contract Approval | 127 |
2
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 www.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
3
This page is intentionally left blank.
4
Victory Funds Letter to Shareholders
Dear Shareholder,
What a difference a year makes. The year ended December 31, 2018, was marked by an abrupt return of volatility, which had largely been missing in action for years. Consider the range of highs and lows we witnessed. For the S&P 500 Index, it was a year in which we celebrated an all-time high in late summer, only to be followed by the worst December since the 2008 financial crisis. And if that wasn't enough volatility, the Dow Jones Industrial Average also registered several of its worst-ever, single-day point declines during 2018.
Through all that the S&P 500 clocked in with its first negative annual return since 2008, falling by 4.4 percent. Given the risk-off sentiment that was obvious as the year drew to a close, it's no surprise that small-cap stocks, as measured by the Russell 2000 Index, fared even worse, falling approximately 11.0 percent for the year. The challenges for equity investors were also evident around the world as the MSCI ACWI and Emerging Markets indexes declined 8.9 and 14.3 percent, respectively.
So what ushered in the renewed era of volatility and these challenging times? There were multiple culprits. For starters, trade tensions ratcheted up throughout the year as anti-global rhetoric bloomed into a series of new tariffs, which sparked concerns of a prolonged trade war with China. The Federal Reserve remained persistent in its monetary tightening, raising the benchmark interest rate four times throughout the year to a range of 2.25 to 2.5 percent. And then the year ended with a partial shutdown of the federal government. These factors conspired to elevate concerns of a possible recession here and abroad.
Yet despite the headline risks, we think it's critically important to remain focused on the data. By all accounts, the U.S. economy continued chugging along in 2018 with a real gross domestic product (GDP) rising 3.4 percent in the third quarter of 2018, the latest figures available from the Bureau of Economic Analysis. Moreover, the labor picture continues to shine with consistent monthly job growth and an unemployment rate of 3.9 percent. All this comes against a backdrop of low inflation and solid corporate earnings.
The markets, it appears, have been vacillating between the dire headlines and higher perceived risks on one hand, and the continued positive economic data on the other. Of course, no one knows where the Fed will stop raising rates, nor is there any certainty on how the trade turmoil ultimately gets resolved. For now, however, we continue to embrace our solid economic fundamentals. Moreover, we believe all of Victory Capital's independent investment franchises are well positioned to take advantage of any short-term valuation dislocations resulting from the current era of heightened volatility.
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.
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 Fixed Income Funds (Unaudited)
Victory INCORE Investment Quality Bond Fund
Portfolio Holdings
As a Percentage of Total Investments
Commentary
The Victory INCORE Investment Quality Bond Fund (the "Fund") seeks to provide a high level of current income and capital appreciation without undue risk to principal. The Fund underperformed its primary benchmark, the Bloomberg Barclays U.S. Aggregate Bond Index (the "Index"), in 2018. The Fund (Class A Shares at net asset value) returned -0.80% and the Index returned 0.01%.
The underperformance was driven largely by the allocation to high yield credit as spreads widened dramatically late in the year, as well as the underweight position in U.S. Treasuries. This was somewhat offset by positive allocation effects from securitized sectors, most notably agency mortgage-backed securities. Security selection was additive to performance in most sectors except for industrials in the corporate bond space. Duration and yield curve positioning contributed positively to relative performance.
Economic Perspective
As investors reflect on 2018, the old adage of coming in like a lion and going out like a lamb should resonate strongly. While financial markets were certainly more volatile through the first three quarters of the year, we entered the fourth quarter with equities at record highs, interest rates trending higher given the strong U.S economy and credit spreads only modestly wider on the year. Clouds of uncertainty had been slowly gathering over the markets for several months and finally unleashed a significantly higher degree of volatility across global equity and fixed income markets. The VIX index, a market estimate of future volatility, more than doubled in the fourth quarter and closed the year at 25.42, up 130% from the end of 2017. A plethora of factors contributed to the shift in sentiment in the fourth quarter; increasing concern for a policy error from the Fed, further deterioration in the U.S./China trade relationship, slowing global growth, particularly in China, political chaos in Washington and the EU and the uncertain outcome of the Brexit negotiations. Despite some positive news late in the quarter, a 90-day trade truce with China, an OPEC agreement to cut oil production and a softer tone from Fed chair Powell, equity returns ended on a negative note for the year, credit spreads continued to widen and the front end of the yield curve inverted. The S&P 500 Index was down 13.97% for the quarter and down 6.24% for the year. The ICE Bank of America Merrill Lynch U.S. Corporate Index saw its option-adjusted spread (OAS) widen 46 basis points during the quarter to end the year at 159 basis points, underperforming U.S. Treasuries by -2.84%. Perhaps one additional headwind to risk assets in 2019 will be cash as a competing asset class. Not too long-ago investors earned virtually nothing on cash balances, yet are now earning 2-2.5% with little to no duration or credit risk which may appeal to some risk averse investors should volatility remain elevated or increase. For perspective, 3-month Treasury bills now have a higher yield than the dividend yield on the S&P 500 Index.
6
Victory Fixed Income Funds (Unaudited)
Victory INCORE Investment Quality Bond Fund (continued)
Chairman Powell's comments in early October suggesting monetary policy was a 'long way from neutral' following three rate increases in 2018 incited fears of a Fed policy error and an increasing likelihood of an economic recession. Interest rates increased and equities began to fall following these comments. The subsequent spike in equity volatility, sharp decline in oil prices and lack of inflationary pressure had many speculating the Fed may signal a pause in rate increases at their November meeting. The FOMC disappointed in that regard, interest rates reversed course and equity volatility moved higher. While Powell attempted to walk those comments back a bit in late November, it was too late given the committee's apparent determination to continue raising short-term rates. Further complicating the FOMC's agenda were Powell's comments following the December rate increase that the balance sheet normalization was 'on autopilot.' The market interpreted this such that even if the Fed did slow the pace of rate increases in 2019, the shift from quantitative easing to quantitative tightening is on a preset path and the risk of policy error remains elevated. While the Fed did reduce their outlook for rate increases in 2019 from 3 to 2 moves, it was not enough to calm the financial markets. Chairman Powell again reversed course on January 4, saying the Fed would be flexible in managing the balance sheet.
The second and third quarters of 2018 were the strongest back to back growth quarters in the U.S. since 2014. Furthermore, the unemployment rate gradually declined throughout the year and wage growth broke above 3% on a year over year basis. Both the services and manufacturing sectors remained comfortably in expansionary territory and consumer and business confidence remained elevated. Combine these factors with inflation metrics near the Fed's 2% target rate and the case could be made for the FOMC to continue its gradual path of rate increases. While the data in hand was supportive of the move, the disconnect between the market and the Fed appeared to be the outlook given growing uncertainties. Complicating their decision-making process further was the increasing criticism of the rate increases, and Chair Powell specifically, from President Trump. It remains an interesting question if the Fed would have increased rates in December had that dynamic not been present. We believe the public criticism left them little choice but to raise rates and demonstrate their independence and unwillingness to bow to political pressure.
We expect economic growth to slow back towards the 2% area as the marginal benefits from fiscal stimulus (tax reform) and deregulation fade, trade uncertainty slows business investment and tighter financial conditions resulting from lower equity markets and higher interest rates impacts sentiment and spending. With that said, we do not expect to see a recession in the U.S. in 2019, but do see rising risks for 2020 if the Fed continues to raise rates on their current path and if there is not a positive resolution to the U.S. — China trade relationship soon.
Market Summary
Coming into 2018, many expected negative absolute returns in fixed income given the likelihood of higher interest rates resulting from continued monetary policy tightening. This rang true for most of the year, but as volatility spiked in the fourth quarter and bond investors pushed back forcefully against the Fed's forecast by driving yields lower, many fixed income indices posted positive returns for the year. The Bloomberg Barclays U.S. Aggregate Index generated a total return of 0.01% for 2018 after having been down 2.38% through October. Interest rates did continue to rise, but when the books closed on 2018, short term rates
7
Victory Fixed Income Funds (Unaudited)
Victory INCORE Investment Quality Bond Fund (continued)
were up two to three times those of intermediate and long-term maturities flattening the yield curve further. The spread between 2-year and 10-year Treasury notes declined to 19 basis points (0.19%) while the 2-year to 5-year spread ended the year at 2 basis points (0.02%). The spread relationship between 1-year and 5-year notes witnessed an inversion of 9 basis points, underscoring the market's view of the Fed heading for a policy error if they continue tightening monetary policy via rates and quantitative tightening.
Within the Aggregate Index, corporate bonds were the glaring underperformer for both the quarter and the year with excess returns of -3.10% and -3.15%, respectively. Credit concerns at General Electric (GE) and the large California utilities resulting from the wild fires coupled with heavy outflows from high grade bond funds pressured spreads materially wider. Additionally, fears of rating downgrades and recession added to anxiety and exacerbated the underperformance. For the year, excess returns in utilities fared the worst (-3.94%), followed by industrials (-3.34%) then financials (-2.62%). In the structured sectors, agency mortgages were the weakest performer from an excess returns perspective (-0.59%), followed by commercial mortgage backed securities (-0.39%) while asset-backed securities posted positive excess returns (0.13%). Corporate bonds were the only sector to post negative absolute returns for the year, all other primary sectors were positive lead by asset-backed securities at 1.77%. Interestingly, asset-backed securities were also the only sector to post positive excess returns for the full year. High yield credit suffered a similar year as investment grade credit, only worse. This sector posted an absolute return of -2.08% for the year and underperformed U.S. Treasuries by -3.58%.
During the period, the Fund used both long and short positions in U.S. Treasury futures and U.S. Federal Funds Futures, as well as credit default swaps. The Fund entered into these transactions to more efficiently manage the Fund's total portfolio risks, in terms of duration, curve exposure and credit quality, which would be more costly and restrictive to manage by investing directly in a selection of cash bonds or ETFs. The derivatives strategy with regards to futures contributed +22 basis points to overall performance while the credit default swap strategy contributed approximately -20 basis points for the 12 months ended December 31, 2018.
Market Positioning
Our allocation to investment grade (IG) credit declined further in the fourth quarter. Additionally, our high yield exposure ended the year well below our maximum position. Our proprietary credit momentum signal continued to reduce exposure to IG credit as the option adjusted spread (OAS) of BBB-rated corporate bonds widened significantly over the trailing three months. Given this movement in OAS, valuations are now looking more compelling relative to fundamentals, yet we remain patient and ready to add risk when appropriate. Yield curve positioning and duration will be actively managed based upon our proprietary trading signals as well as changes in the shape of the yield curve. The market's assessment of the Fed's actions/communication, as reflected by changes in the shape of the curve, will be a focal point in the coming quarters.
8
Victory Fixed Income Funds (Unaudited)
Victory INCORE Investment Quality Bond Fund (continued)
Average Annual Return
Year Ended December 31, 2018
Class A | Class C | Class R | Class Y | ||||||||||||||||||||||||||||
INCEPTION DATE | 2/16/93 | 8/7/00 | 5/15/01 | 5/12/09 | |||||||||||||||||||||||||||
Net Asset Value | Maximum Offering Price | Net Asset Value | Contingent Deferred Charges | Net Asset Value | Net Asset Value | Bloomberg Barclays U.S. Aggregate Bond Index1 | |||||||||||||||||||||||||
One Year | –0.80 | % | –2.83 | % | –1.66 | % | –2.63 | % | –1.20 | % | –0.56 | % | 0.01 | % | |||||||||||||||||
Three Year | 2.25 | % | 1.55 | % | 1.37 | % | 1.37 | % | 1.87 | % | 2.50 | % | 2.06 | % | |||||||||||||||||
Five Year | 2.32 | % | 1.91 | % | 1.42 | % | 1.42 | % | 1.92 | % | 2.51 | % | 2.52 | % | |||||||||||||||||
Ten Year | 4.02 | % | 3.81 | % | 3.18 | % | 3.18 | % | 3.61 | % | N/A | 3.48 | % | ||||||||||||||||||
Since Inception | 4.70 | % | 4.62 | % | 3.68 | % | 3.68 | % | 3.83 | % | 4.05 | % | N/A | ||||||||||||||||||
Expense Ratios | |||||||||||||||||||||||||||||||
Gross | 1.07% | 1.91% | 1.65% | 0.98% | |||||||||||||||||||||||||||
With Applicable Waivers | 0.90% | 1.77% | 1.30% | 0.66% |
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 May 1, 2018. Additional information pertaining to the Fund's expense ratios as of December 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 Investment Quality Bond Fund — Growth of $10,000
1The Bloomberg Barclays U.S. Aggregate Bond Index is generally considered to be representative of U.S. bond market activity. The Bloomberg Barclays U.S. Aggregate Bond Index is an unmanaged index that is not available for direct investment. There are no expenses associated with the index while there are expenses associated with 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.
9
Victory Fixed Income Funds (Unaudited)
Victory INCORE Low Duration Bond Fund
Portfolio Holdings
As a Percentage of Total Investments
Attribution
The INCORE Low Duration Bond Fund (the "Fund") seeks to provide a high level of current income consistent with preservation of capital. The Fund underperformed its primary benchmark, the Bloomberg Barclays U.S. Government (1-3 Year) Bond Index (the "Index"), in 2018. The Fund (Class A Shares at net asset value) returned 0.73% and the Index returned 1.58%.
Sector allocation was the largest detractor from relative performance as the spread widening in corporate bonds negatively impacted the overweight allocations to both investment grade and high yield credit. This was most pronounced in the Industrials sector. Allocations to agency mortgages and asset-backed securities were positive contributors to performance, but not enough to offset the credit underperformance. Additionally, both duration and yield curve positioning were additive to relative performance.
Economic Perspective
As investors reflect on 2018, the old adage of coming in like a lion and going out like a lamb should resonate strongly. While financial markets were certainly more volatile through the first three quarters of the year, we entered the fourth quarter with equities at record highs, interest rates trending higher given the strong U.S economy and credit spreads only modestly wider on the year. Clouds of uncertainty had been slowly gathering over the markets for several months and finally unleashed a significantly higher degree of volatility across global equity and fixed income markets. The VIX index, a market estimate of future volatility, more than doubled in the fourth quarter and closed the year at 25.42, up 130% from the end of 2017. A plethora of factors contributed to the shift in sentiment in the fourth quarter; increasing concern for a policy error from the Fed, further deterioration in the U.S./China trade relationship, slowing global growth, particularly in China, political chaos in Washington and the EU and the uncertain outcome of the Brexit negotiations. Despite some positive news late in the quarter, a 90-day trade truce with China, an OPEC agreement to cut oil production and a softer tone from Fed chair Powell, equity returns ended on a negative note for the year, credit spreads continued to widen and the front end of the yield curve inverted. The S&P 500 Index was down 13.97% for the quarter and down 6.24% for the year. The ICE Bank of America Merrill Lynch U.S. Corporate Index saw its option-adjusted spread (OAS) widen 46 basis points during the quarter to end the year at 159 basis points, underperforming U.S. Treasuries by -2.84%. Perhaps one additional headwind to risk assets in 2019 will be cash as a competing asset class. Not too long-ago investors earned virtually nothing on cash balances, yet are now earning 2-2.5% with little to no duration or credit risk which may appeal to some risk averse investors should volatility remain elevated or increase. For perspective, 3-month Treasury bills now have a higher yield than the dividend yield on the S&P 500 Index.
10
Victory Fixed Income Funds (Unaudited)
Victory INCORE Low Duration Bond Fund (continued)
Chairman Powell's comments in early October suggesting monetary policy was a 'long way from neutral' following three rate increases in 2018 incited fears of a Fed policy error and an increasing likelihood of an economic recession. Interest rates increased and equities began to fall following these comments. The subsequent spike in equity volatility, sharp decline in oil prices and lack of inflationary pressure had many speculating the Fed may signal a pause in rate increases at their November meeting. The FOMC disappointed in that regard, interest rates reversed course and equity volatility moved higher. While Powell attempted to walk those comments back a bit in late November, it was too late given the committee's apparent determination to continue raising short-term rates. Further complicating the FOMC's agenda were Powell's comments following the December rate increase that the balance sheet normalization was 'on autopilot.' The market interpreted this such that even if the Fed did slow the pace of rate increases in 2019, the shift from quantitative easing to quantitative tightening is on a preset path and the risk of policy error remains elevated. While the Fed did reduce their outlook for rate increases in 2019 from 3 to 2 moves, it was not enough to calm the financial markets. Chairman Powell again reversed course on January 4, saying the Fed would be flexible in managing the balance sheet.
The second and third quarters of 2018 were the strongest back to back growth quarters in the U.S. since 2014. Furthermore, the unemployment rate gradually declined throughout the year and wage growth broke above 3% on a year over year basis. Both the services and manufacturing sectors remained comfortably in expansionary territory and consumer and business confidence remained elevated. Combine these factors with inflation metrics near the Fed's 2% target rate and the case could be made for the FOMC to continue its gradual path of rate increases. While the data in hand was supportive of the move, the disconnect between the market and the Fed appeared to be the outlook given growing uncertainties. Complicating their decision-making process further was the increasing criticism of the rate increases, and Chair Powell specifically, from President Trump. It remains an interesting question if the Fed would have increased rates in December had that dynamic not been present. We believe the public criticism left them little choice but to raise rates and demonstrate their independence and unwillingness to bow to political pressure.
We expect economic growth to slow back towards the 2% area as the marginal benefits from fiscal stimulus (tax reform) and deregulation fade, trade uncertainty slows business investment and tighter financial conditions resulting from lower equity markets and higher interest rates impacts sentiment and spending. With that said, we do not expect to see a recession in the U.S. in 2019, but do see rising risks for 2020 if the Fed continues to raise rates on their current path and if there is not a positive resolution to the U.S. — China trade relationship soon.
Market Summary
Coming into 2018, many expected negative absolute returns in fixed income given the likelihood of higher interest rates resulting from continued monetary policy tightening. This rang true for most of the year, but as volatility spiked in the fourth quarter and bond investors pushed back forcefully against the Fed's forecast by driving yields lower, many fixed income indices posted positive returns for the year. The Bloomberg Barclays U.S. Aggregate Index generated a total return of 0.01% for 2018 after having been down 2.38% through October. Interest rates did continue to rise, but when the books closed on 2018, short term rates
11
Victory Fixed Income Funds (Unaudited)
Victory INCORE Low Duration Bond Fund (continued)
were up two to three times those of intermediate and long-term maturities flattening the yield curve further. The spread between 2-year and 10-year Treasury notes declined to 19 basis points (0.19%) while the 2-year to 5-year spread ended the year at 2 basis points (0.02%). The spread relationship between 1-year and 5-year notes witnessed an inversion of 9 basis points, underscoring the market's view of the Fed heading for a policy error if they continue tightening monetary policy via rates and quantitative tightening.
Within the Aggregate Index, corporate bonds were the glaring underperformer for both the quarter and the year with excess returns of -3.10% and -3.15%, respectively. Credit concerns at General Electric (GE) and the large California utilities resulting from the wild fires coupled with heavy outflows from high grade bond funds pressured spreads materially wider. Additionally, fears of rating downgrades and recession added to anxiety and exacerbated the underperformance. For the year, excess returns in utilities fared the worst (-3.94%), followed by industrials (-3.34%) then financials (-2.62%). In the structured sectors, agency mortgages were the weakest performer from an excess returns perspective (-0.59%), followed by commercial mortgage backed securities (-0.39%) while asset-backed securities posted positive excess returns (0.13%). Corporate bonds were the only sector to post negative absolute returns for the year, all other primary sectors were positive lead by asset-backed securities at 1.77%. Interestingly, asset-backed securities were also the only sector to post positive excess returns for the full year. High yield credit suffered a similar year as investment grade credit, only worse. This sector posted an absolute return of -2.08% for the year and underperformed U.S. Treasuries by -3.58%.
During the period, the Fund used both long and short positions in U.S. Treasury futures and U.S. Federal Funds Futures, as well as credit default swaps. The Fund entered into these transactions to more efficiently manage the Fund's total portfolio risks, in terms of duration, curve exposure and credit quality, which would be more costly and restrictive to manage by investing directly in a selection of cash bonds or ETFs. The derivatives strategy with regards to futures had a non-material impact on overall performance while the credit default swap strategy contributed approximately -20 basis points for the 12 months ended December 31, 2018.
Market Positioning
Our allocation to investment grade (IG) credit declined further in the fourth quarter, the reduction resulted in an underweight position in BBB-rated corporate bonds relative to the index. Additionally, our high yield exposure ended the year well below a maximum position in both strategies. Our proprietary credit momentum signal continued to reduce exposure to IG credit as the option adjusted spread (OAS) of BBB-rated corporate bonds widened significantly over the trailing three months. Given this movement in OAS, valuations are now looking more compelling relative to fundamentals, yet we remain patient and ready to add risk when appropriate. Yield curve positioning and duration will be actively managed based upon our proprietary trading signals as well as changes in the shape of the yield curve. The market's assessment of the Fed's actions/communication, as reflected by changes in the shape of the curve, will be a focal point in the coming quarters.
12
Victory Fixed Income Funds (Unaudited)
Victory INCORE Low Duration Bond Fund (continued)
Average Annual Return
Year Ended December 31, 2018
Class A | Class C | Class R | Class Y | ||||||||||||||||||||||||||||
INCEPTION DATE | 7/30/03 | 7/30/03 | 7/30/03 | 5/12/09 | |||||||||||||||||||||||||||
Net Asset Value | Maximum Offering Price | Net Asset Value | Contingent Deferred Charges | Net Asset Value | Net Asset Value | Bloomberg Barclays U.S. Government 1-3 Year Bond Index1 | |||||||||||||||||||||||||
One Year | 0.73 | % | –1.24 | % | –0.04 | % | –1.03 | % | 0.31 | % | 0.96 | % | 1.58 | % | |||||||||||||||||
Three Year | 1.33 | % | 0.66 | % | 0.53 | % | 0.53 | % | 0.90 | % | 1.57 | % | 0.96 | % | |||||||||||||||||
Five Year | 1.05 | % | 0.64 | % | 0.28 | % | 0.28 | % | 0.62 | % | 1.30 | % | 0.82 | % | |||||||||||||||||
Ten Year | 1.98 | % | 1.78 | % | 1.21 | % | 1.21 | % | 1.56 | % | N/A | 1.03 | % | ||||||||||||||||||
Since Inception | 2.35 | % | 2.22 | % | 1.58 | % | 1.58 | % | 1.93 | % | 2.07 | % | N/A | ||||||||||||||||||
Expense Ratios | |||||||||||||||||||||||||||||||
Gross | 0.90% | 1.65% | 1.68% | 0.65% | |||||||||||||||||||||||||||
With Applicable Waivers | 0.85% | 1.62% | 1.27% | 0.62% |
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 May 1, 2018. Additional information pertaining to the Fund's expense ratios as of December 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 Low Duration Bond Fund — Growth of $10,000
1The Bloomberg Barclays U.S. Government 1-3 Year Bond Index is generally considered to be representative of U.S. government bonds with maturities between one and three years. The Bloomberg Barclays U.S. Government 1-3 Year Bond Index is an unmanaged index that is not available for direct investment. There are no expenses associated with the index, while there are expenses associated with 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.
13
Victory Fixed Income Funds (Unaudited)
Victory High Yield Fund
Portfolio Holdings
As a Percentage of Total Investments
Fund Performance Summary
The Victory High Yield Fund (the "Fund") seeks to provide current income. Capital appreciation is a secondary objective. The Fund outperformed its benchmark, the Bloomberg Barclays U.S. Corporate High Yield Bond Index (the "Index"), in 2018. The Fund (Class A Shares at net asset value) returned 0.28% and the Index returned -2.08%.
Security selection was the chief contributor to the outperformance, with asset allocation also positive. The top contributors to performance relative to the Index were the Fund's asset allocation and security selection in Energy and its allocation to floating rate bank loans, which are not in the Index. Security selection in CCC-rated bonds was also very strong, outweighing the negative impact of an overweight there.
Security selection in Health Care detracted from relative performance, as did both asset allocation and security selection in Materials and Consumer Discretionary.
Market Review
The final months of 2018 were an all-you-can-eat banquet of worry for investors, particularly in equities and corporate bonds. Among the concerns: rising interest rates and an aging economic boom at home, slowing economies overseas, trade disputes, tumbling energy prices, dysfunction in Washington, scandals over online privacy and election meddling, and a bungling Brexit.
The concerns that shook the markets in the fourth quarter were not new and there were spikes in volatility in the first and second quarters, but a strong domestic economy and solid corporate earnings limited their impact on returns until the fourth quarter.
High Yield Market Recap
The U.S. high yield market benefitted from a favorable technical climate, solid corporate fundamentals and the relative strength of the U.S. economy throughout much of 2018. The high yield market's domestic focus also helped in a year marked by trade disputes and weakening growth overseas. But none of that was enough to stave off a dramatic reversal at the end of the year that generated an Index return of -4.5% in the fourth quarter and wiped out the Index's gains for the year.
Amid an overall market shakeup in the fourth quarter, sharply weaker oil prices and concerns about the health of some weaker investment grade companies combined to pressure the Index, which is 16% composed of energy companies. In addition, the leveraged loan market, which is also mostly below investment grade, was offering attractive yields for investors and better terms for issuers.
14
Victory Fixed Income Funds (Unaudited)
Victory High Yield Fund (continued)
For the full year, high yield corporate bonds underperformed comparable-maturity Treasuries, but still they held up far better in relation to Treasuries than investment grade corporates.
High Yield Market Outlook
We believe that the high yield market currently offers attractive yields and will continue to generate steady demand, driving spreads tighter. We expect a strong technical environment with moderating mutual fund outflows, limited new issuance and low default rates through at least the first half of 2019.
Barring any external events, we believe modest spread tightening and a catalyst in the Energy sector could provide investment opportunities in 2019. We believe that these two factors could largely offset concerns about the domestic credit cycle, though we remain vigilant for an investor pivot toward higher-quality issuers within high yield.
Portfolio Review
By the beginning of the fourth quarter, we had come to view the Energy sector as overvalued, and we reduced energy exposure from 10% to about 1% just before oil prices started to collapse in early October. This had a strong positive impact on relative performance in both the fourth quarter and the full year.
Quality sector changes within the portfolio were limited given our view that tighter spreads are making some sections of the market less attractive. We remained underweight in BB-rated bonds, which we view as most vulnerable to interest rate and duration risk. Toward the end of the year, we began to reduce our exposure to CCC-rated bonds, reflecting our view that a pivot toward higher quality will be required over the next 12-15 months.
Recognizing that leveraged loans may currently offer investors a compelling relative value, we have maintained the portfolio's exposure at 30%. We believe loans also offer a high-quality, high-yielding alternative to longer-term BB-rated bonds, which can respond particularly negatively to rising interest rates. We continue to watch for an inflection point in the relative value of bonds and loans.
We also are monitoring the energy and commodities markets for attractive re-entry points. As has long been our practice, we continue to make bottom-up assessments across sectors of potential merger and acquisition activity, asset sales, and shifts in issuers' lines of business, as these events can offer attractive total return opportunities.
15
Victory Fixed Income Funds (Unaudited)
Victory High Yield Fund (continued)
Average Annual Return
Year Ended December 31, 2018
Class A | Class C | Class R | Class Y | ||||||||||||||||||||||||||||
INCEPTION DATE | 9/1/98 | 8/7/00 | 5/15/01 | 5/12/09 | |||||||||||||||||||||||||||
Net Asset Value | Maximum Offering Price | Net Asset Value | Maximum Offering Price | Net Asset Value | Net Asset Value | Bloomberg Barclays U.S. Corporate High-Yield Bond Index1 | |||||||||||||||||||||||||
One Year | 0.28 | % | –1.67 | % | –0.43 | % | –1.37 | % | –0.07 | % | 0.52 | % | –2.08 | % | |||||||||||||||||
Three Year | 8.35 | % | 7.62 | % | 7.60 | % | 7.60 | % | 7.94 | % | 8.64 | % | 7.23 | % | |||||||||||||||||
Five Year | 3.76 | % | 3.33 | % | 3.04 | % | 3.04 | % | 3.38 | % | 4.04 | % | 3.83 | % | |||||||||||||||||
Ten Year | 9.28 | % | 9.05 | % | 8.48 | % | 8.48 | % | 8.87 | % | N/A | 11.12 | % | ||||||||||||||||||
Since Inception | 5.68 | % | 5.57 | % | 5.04 | % | 5.04 | % | 5.85 | % | 8.29 | % | N/A | ||||||||||||||||||
Expense Ratios | |||||||||||||||||||||||||||||||
Gross | 1.13% | 1.84% | 1.36% | 1.04% | |||||||||||||||||||||||||||
With Applicable Waivers | 1.00% | 1.70% | 1.35% | 0.76% |
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 May 1, 2018. Additional information pertaining to the Fund's expense ratios as of December 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 High Yield Fund — Growth of $10,000
1The Bloomberg Barclays U.S. Corporate High-Yield Bond Index is generally considered to be representative of the investable universe of the U.S.-dominated high yield debt market. The Bloomberg Barclays U.S. Corporate High-Yield Bond Index is not available for direct investment. There are no expenses associated with the index, while there are expenses associated with 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.
16
Victory Fixed Income Funds (Unaudited)
Victory Tax-Exempt Fund
Portfolio Holdings
As a Percentage of Total Investments
Fund Performance Summary
The Victory Tax-Exempt Fund (the "Fund") seeks to maximize current income exempt from federal income taxes, consistent with the preservation of capital. The Fund underperformed its benchmark, the Bloomberg Barclays Municipal Bond Index (the "Index"), in 2018. The Fund (Class A Shares at net asset value) returned 0.69%, compared with an Index return of 1.28%.
During the period, the Fund had a longer duration than the Index, meaning that its holdings were more sensitive to changes in interest rates. This was the most significant detractor from relative performance in a year of rising rates. Security selection in housing and power also detracted. Overall security selection and asset allocation both contributed positively to relative performance for the year.
Market Review
The fourth quarter of 2018 was an all-you-can-eat banquet of worry for investors, particularly in equities and corporate bonds. Among the concerns, rising interest rates and an aging economic boom at home, slowing economies overseas, trade disputes, tumbling energy prices, dysfunction in Washington, scandals over online privacy and election meddling, and a bungling Brexit.
Despite a solid U.S. economy with nearly full employment and tame inflation, major equity indexes had their worst December since the Great Depression and their worst year since the Great Recession. Double-digit declines in the fourth quarter and negative returns for the year were the rule among major domestic and global equity indexes.
In spite of increased volatility and rising yields in non-Treasury sectors, fixed income markets fared better, posting mixed but mostly positive returns for the year.
The Bloomberg Barclays High Yield Municipal Bond Index was the standout in fixed income for 2018 as Puerto Rico's long-beleaguered bonds rallied to return 36.4%.
U.S. Economic Outlook
Economic growth is expected to slow in 2019, but recent economic data indicate that the U.S. economy remains healthier than market gyrations would suggest. Without taking the impact of the current U.S. government shutdown into account, we are comfortable with consensus expectations for U.S. gross domestic product (GDP) growth around 2.6% in 2019, inflation near the U.S. Federal Reserve's (the "Fed") target of 2.0%, and unemployment around 4.0%.
Rates and Central Banks
In December, the Fed raised its benchmark interest rate for the fourth time in 2018 and the ninth time since 2015. It also indicated that there could be two more increases in 2019. The
17
Victory Fixed Income Funds (Unaudited)
Victory Tax-Exempt Fund (continued)
December increase, coming as it did during a market shakeup, seemed to shift investor focus from concern about inflation to a fear that the Fed could thwart growth or even tip the economy into recession by raising rates too aggressively. The Fed has indicated that it will continue to watch both economic and market indicators closely as it deliberates on future increases.
Although the gradual and much-anticipated interest rate increases in the U.S. demonstrate the Fed's confidence in a U.S. economy that is currently on sound footing, the direction of Fed and European Central Bank policy signal that central banks are becoming less willing and less able to suppress the kind of market volatility that marked the fourth quarter.
Municipal Market Recap
Municipal bonds, which tend to track the Treasury market, outperformed corporate bonds and numerous other non-Treasury sectors in 2018. Municipals also benefitted from tight supply and a domestic focus as investors grew anxious about overseas economies and trade issues.
Nonetheless, the investment grade municipal market faced some headwinds at various points in the year due to rising rates, uncertainty about the midterm elections, and some tax changes for institutional investors.
Supply was tight during much of the year as the market recovered from a surge of issuance that occurred in late 2017 before an overhaul of tax laws.
Municipal Outlook
We expect a seasonal increase in supply early in 2019, but not enough to change the current dynamics in the municipal market.
In addition, we believe that the tax reforms that took effect in 2018 will continue to support increased demand for tax-exempt municipals as individuals, particularly those in high-tax states, seek to offset the loss of other deductions.
Portfolio Review
Our municipal strategy throughout much of the year was a combination of risk reduction and heightened attention to select lower-rated and unrated bonds that we believed could retain or enhance their attractiveness to investors when the market turns more cautious.
Our strategy in the fourth quarter included measured increases in duration and risk as market conditions became more favorable due to limited supply and a rally in Treasuries, particularly those with longer maturities.
In keeping with our risk discipline, we did not hold Puerto Rico's bonds. Despite their strong outperformance in 2018, these bonds remain in default and do not meet our investment standards.
We continue to favor bonds from states with higher income taxes since we believe the relatively stable retail demand in these states can allow us to react quickly to rising interest rates or other negative developments in the market.
As always, we seek bonds that we believe represent a good value. Due to the number of issuers and the inherent inefficiencies in the municipal market, in-depth research remains a top priority for us.
18
Victory Fixed Income Funds (Unaudited)
Victory Tax-Exempt Fund (continued)
Average Annual Return
Year Ended December 31, 2018
Class A | Class C | Class Y | |||||||||||||||||||||||||
INCEPTION DATE | 2/16/93 | 8/7/00 | 5/12/09 | ||||||||||||||||||||||||
Net Asset Value | Maximum Offering Price | Net Asset Value | Maximum Offering Price | Net Asset Value | Bloomberg Barclays Municipal Bond Index1 | ||||||||||||||||||||||
One Year | 0.69 | % | –1.30 | % | –0.01 | % | –0.96 | % | 0.80 | % | 1.28 | % | |||||||||||||||
Three Year | 2.32 | % | 1.64 | % | 1.50 | % | 1.50 | % | 2.43 | % | 2.30 | % | |||||||||||||||
Five Year | 3.59 | % | 3.18 | % | 2.77 | % | 2.77 | % | 3.71 | % | 3.82 | % | |||||||||||||||
Ten Year | 4.34 | % | 4.13 | % | 3.52 | % | 3.52 | % | N/A | 4.85 | % | ||||||||||||||||
Since Inception | 4.50 | % | 4.42 | % | 3.72 | % | 3.72 | % | 3.96 | % | N/A | ||||||||||||||||
Expense Ratios | |||||||||||||||||||||||||||
Gross | 0.96% | 1.74% | 0.73% | ||||||||||||||||||||||||
With Applicable Waivers | 0.80% | 1.60% | 0.69% |
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 May 1, 2018. Additional information pertaining to the Fund's expense ratios as of December 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 Tax-Exempt Fund — Growth of $10,000
1The Bloomberg Barclays Municipal Bond Index is generally considered to be representative of the municipal bond market. The Bloomberg Barclays Municipal Bond Index is an unmanaged index that is not available for direct investment. 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.
19
Victory Fixed Income Funds (Unaudited)
Victory High Income Municipal Bond Fund
Portfolio Holdings
As a Percentage of Total Investments
Fund Performance Summary
The Victory High Income Municipal Bond Fund (the "Fund") seeks to provide a high current income exempt from federal income taxes with a secondary objective of capital appreciation. The Fund underperformed its primary benchmark, the Bloomberg Barclays Municipal Bond Index (the "Index"), in 2018. The Fund (Class A Shares at net asset value) returned 0.34% and the Index returned 1.28%.
The Fund also underperformed its secondary index, the Bloomberg Barclays High Yield Municipal Bond Index, which returned 4.8%. This index is composed of bonds that are unrated or rated below investment grade, whereas the Fund is primarily investment grade.
The Fund had a higher duration than the Index throughout the year, making it more sensitive to rising rates. This was the main source of the Fund's underperformance. Asset allocation and security selection had positive impacts on relative performance.
Market Review
The fourth quarter of 2018 was an all-you-can-eat banquet of worry for investors, particularly in equities and corporate bonds. Among the concerns: rising interest rates and an aging economic boom at home, slowing economies overseas, trade disputes, tumbling energy prices, dysfunction in Washington, scandals over online privacy and election meddling, and a bungling Brexit.
Despite a solid U.S. economy with nearly full employment and tame inflation, major equity indexes had their worst December since the Great Depression and their worst year since the Great Recession. Double-digit declines in the fourth quarter and negative returns for the year were the rule among major domestic and global equity indexes.
In spite of increased volatility and rising yields in non-Treasury sectors, fixed income markets fared better, posting mixed but mostly positive returns for the year.
The Bloomberg Barclays High Yield Municipal Bond Index was the standout in fixed income for 2018 as Puerto Rico's long-beleaguered bonds rallied to return 36.4%.
U.S. Economic Outlook
Economic growth is expected to slow in 2019, but recent economic data indicate that the U.S. economy remains healthier than market gyrations would suggest. Without taking the impact of the current U.S. government shutdown into account, we are comfortable with consensus expectations for U.S. gross domestic product (GDP) growth around 2.6% in 2019, inflation near the U.S. Federal Reserve's (the "Fed") target of 2.0%, and unemployment around 4.0%.
Rates and Central Banks
In December, the Fed raised its benchmark interest rate for the fourth time in 2018 and the ninth time since 2015. It also indicated that there could be two more increases in 2019. The
20
Victory Fixed Income Funds (Unaudited)
Victory High Income Municipal Bond Fund (continued)
December increase, coming as it did during a market shakeup, seemed to shift investor focus from concern about inflation to a fear that the Fed could thwart growth or even tip the economy into recession by raising rates too aggressively. The Fed has indicated that it will continue to watch both economic and market indicators closely as it deliberates on future increases.
Although the gradual and much-anticipated interest rate increases in the U.S. demonstrate the Fed's confidence in a U.S. economy that is currently on sound footing, the direction of Fed and European Central Bank policy signal that central banks are becoming less willing and less able to suppress the kind of market volatility that marked the fourth quarter.
Municipal Market Recap
Municipal bonds, which tend to track the Treasury market, outperformed corporate bonds and numerous other non-Treasury sectors in 2018. Municipals also benefitted from tight supply and a domestic focus as investors grew anxious about overseas economies and trade issues.
Nonetheless, the investment grade municipal market faced some headwinds at various points in the year due to rising rates, uncertainty about the midterm elections, and some tax changes for institutional investors.
Supply was tight during much of the year as the market recovered from a surge of issuance that occurred in late 2017 before an overhaul of tax laws.
Municipal Outlook
We expect a seasonal increase in supply early in 2019, but not enough to change the current dynamics in the municipal market.
In addition, we believe that the tax reforms that took effect in 2018 will continue to support increased demand for tax-exempt municipals as individuals, particularly those in high-tax states, seek to offset the loss of other deductions.
Portfolio Review
Our municipal strategy throughout much of the year was a combination of risk reduction and heightened attention to select lower-rated and unrated bonds that we believed could retain or enhance their attractiveness to investors when the market turns more cautious.
In the fourth quarter we increased duration and risk somewhat as market conditions became more favorable due to limited supply and a rally in Treasurys, particularly those with longer maturities.
In keeping with our risk discipline, we did not hold Puerto Rico's bonds. Despite their strong outperformance in 2018, these bonds remain in default and do not meet our investment standards.
We continue to favor bonds from states with higher income taxes since we believe the relatively stable retail demand in these states can allow us to react quickly to rising interest rates or other negative developments in the market.
As always, we seek bonds that we believe represent a good value. Due to the number of issuers and the inherent inefficiencies in the municipal market, in-depth research remains a top priority for us.
21
Victory Fixed Income Funds (Unaudited)
Victory High Income Municipal Bond Fund (continued)
Average Annual Return
Year Ended December 31, 2018
Class A | Class C | Class Y | |||||||||||||||||||||||||||||
INCEPTION DATE | 12/31/09 | 12/31/09 | 12/31/09 | ||||||||||||||||||||||||||||
Net Asset Value | Maximum Offering Price | Net Asset Value | Contingent Deferred Charges | Net Asset Value | Bloomberg Barclays Municipal Bond Index1 | Bloomberg Barclays High Yield Municipal Bond Index2 | |||||||||||||||||||||||||
One Year | 0.34 | % | –1.67 | % | –0.43 | % | –1.40 | % | 0.57 | % | 1.28 | % | 4.76 | % | |||||||||||||||||
Three Year | 2.63 | % | 1.94 | % | 1.84 | % | 1.84 | % | 2.86 | % | 2.30 | % | 5.78 | % | |||||||||||||||||
Five Year | 5.02 | % | 4.60 | % | 4.22 | % | 4.22 | % | 5.27 | % | 3.82 | % | 6.53 | % | |||||||||||||||||
Ten Year | N/A | N/A | N/A | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||
Since Inception | 4.90 | % | 4.66 | % | 4.17 | % | 4.17 | % | 5.11 | % | N/A | N/A | |||||||||||||||||||
Expense Ratios | |||||||||||||||||||||||||||||||
Gross | 0.96% | 1.73% | 0.73% | ||||||||||||||||||||||||||||
With Applicable Waivers | 0.80% | 1.57% | 0.57% |
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 May 1, 2018. Additional information pertaining to the Fund's expense ratios as of December 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 High Income Municipal Bond Fund — Growth of $10,000
1The Bloomberg Barclays Municipal Bond Index is generally considered to be representative of the municipal bond market. The Bloomberg Barclays Municipal Bond Index is an unmanaged index that is not available for direct investment.
2The Bloomberg Barclays High Yield Municipal Bond Index is generally considered to be representative of the investable universe of the U.S high-yield municipal debt market. The Bloomberg Barclays High Yield Municipal Bond Index is not available for direct investment. 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.
22
Victory Fixed Income Funds (Unaudited)
Victory Floating Rate Fund
Portfolio Holdings
As a Percentage of Total Investments
Fund Performance Summary
The Victory Floating Rate Fund (the "Fund") underperformed its primary benchmark, the S&P/LSTA U.S. Leveraged Loan Index (the "Index"), in 2018. The Fund (Class A Shares at net asset value) returned 0.43% and the Index returned 0.44%. The Fund seeks to provide a high level of current income.
During the period, security selection contributed positively to performance relative to the Index, most notably in drug makers, business equipment & services and telecommunications. Asset allocation, including an allocation to high yield bonds, which aren't in the benchmark, also contributed.
Detractors from relative performance included security selection in Health Care, Consumer Discretionary and Industrials, along with an underweight in unrated loans.
Market Review
The final months of 2018 were an all-you-can-eat banquet of worry for investors, particularly in equities and corporate bonds. Among the concerns: rising interest rates and an aging economic boom at home, slowing economies overseas, trade disputes, tumbling energy prices, dysfunction in Washington, scandals over online privacy and election meddling, and a bungling Brexit.
The concerns that shook the markets in the fourth quarter were not new — there had been spikes in volatility in the first and second quarters of the year — but a strong domestic economy and solid corporate earnings limited their impact on returns until the fourth quarter.
Leveraged Loan Market Recap
The leveraged loan market had been relatively immune to the volatility that rocked the rest of the market at times during the year, but that changed in late October when a flight by retail investors accelerated.
The Index and the Bloomberg Barclays U.S. Corporate High Yield Bond Index ended the fourth quarter as the weakest performers in fixed income, returning -3.5% and -4.5%, respectively in the quarter.
Investor concerns were triggered by articles in the financial press that focused on overly generous terms for borrowers, an expectation that short-term interest rate increases could slow, and movements in Treasury yields that many investors viewed as an indication that recession could become more likely.
Yields that reset periodically as rates rise are a key advantage of this asset class. However, with demand for loan investments outstripping supply through much of the year, the benefit of rising rates was offset somewhat as borrowers took advantage of opportunities to refinance
23
Victory Fixed Income Funds (Unaudited)
Victory Floating Rate Fund (continued)
at ever-lower rates. In addition, many borrowers chose to peg their rates to the 1-month LIBOR as rates increased.
The silver lining in the Index's fourth-quarter underperformance is that it curtailed the tendency toward increasingly generous loan terms for borrowers and brought refinancing to a near standstill.
Leveraged Loan Market Outlook
Much of the stability that typically prevails in the leveraged loan market stems from collateralized loan obligations ("CLOs"), which make up 64% of the market and are generally buy-and-hold investments for institutional investors.
CLO issuance reached a record $128 billion in 2018 and 2019 estimates range from $90 billion to $140 billion. Accordingly, we expect CLOs to continue to dampen volatility in the leveraged loan market.
In terms of rates, we expect the U.S. Federal Reserve (the "Fed") to raise the federal funds rate once or twice in 2019. We currently expect 3-month LIBOR between 3% and 3.25% by the end of 2019. These moves will of course be contingent on economic data.
As frustrating as refinancing activity was in terms of diminishing the favorable impact of rising short-term rates on leveraged loan yields, there was an offsetting benefit: it has pushed maturities further into the future, forestalling principal repayments and making interest expense increasingly manageable for borrowers.
Maturities don't begin to significantly ramp up until 2022 and, barring another credit crisis, those maturities are likely to keep being pushed even further into the future.
In our view, this is particularly important given the increasing concern throughout securities markets that the end of the credit cycle is nearing, which would lead to a spike in defaults and attendant credit losses.
The trailing-12-month loan default rate in leveraged loans was 1.6% at the end of 2018, well below the historical average of 3.0%, according to S&P Global Market Intelligence.
In summary, liquidity remains abundant, cash flow coverage of interest is ample, and maturities are a non-issue. Accordingly, we expect this favorable environment to continue into 2020.
Portfolio Review
During the fourth quarter, we continued to keep our high yield bond holdings under 10% for the second quarter in a row. The Fund was overweight in energy and metals & mining in the first quarter, but subsequently shifted to an underweight that had a positive impact on relative performance.
In navigating investment challenges, the Fund follows a high-conviction strategy. It typically has 100 to 150 holdings, compared with competitors that may have several times that number. As the current business cycle shows signs of maturing, we believe that being tightly focused on relatively few issuers gives us an advantage in carefully reviewing companies and credit agreements — and avoiding weak borrowers that may struggle when the environment turns less forgiving.
24
Victory Fixed Income Funds (Unaudited)
Victory Floating Rate Fund (continued)
Average Annual Return
Year Ended December 31, 2018
Class A | Class C | Class R | Class Y | ||||||||||||||||||||||||||||
INCEPTION DATE | 12/31/09 | 12/31/09 | 12/31/09 | 12/31/09 | |||||||||||||||||||||||||||
Net Asset Value | Maximum Offering Price | Net Asset Value | Contingent Deferred Charges | Net Asset Value | Net Asset Value | S&P\LSTA U.S. Leveraged Loan Index1 | |||||||||||||||||||||||||
One Year | 0.43 | % | –1.62 | % | –0.38 | % | –1.33 | % | –0.13 | % | 0.64 | % | 0.44 | % | |||||||||||||||||
Three Year | 5.39 | % | 4.67 | % | 4.59 | % | 4.59 | % | 4.82 | % | 5.66 | % | 4.83 | % | |||||||||||||||||
Five Year | 2.35 | % | 1.93 | % | 1.55 | % | 1.55 | % | 1.80 | % | 2.59 | % | 3.05 | % | |||||||||||||||||
Ten Year | N/A | N/A | N/A | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||
Since Inception | 3.98 | % | 3.75 | % | 3.25 | % | 3.25 | % | 3.50 | % | 4.18 | % | N/A | ||||||||||||||||||
Expense Ratios | |||||||||||||||||||||||||||||||
Gross | 1.10% | 1.87% | 2.26% | 0.88% | |||||||||||||||||||||||||||
With Applicable Waivers | 1.00% | 1.80% | 1.56% | 0.78% |
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 May 1, 2018. Additional information pertaining to the Fund's expense ratios as of December 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 Floating Rate Fund — Growth of $10,000
1The S&P/LSTA (Loan Syndications and Trading Association) U.S. Leveraged Loan Index covers more than 1,100 loan facilities and reflects the market-value-weighted performance of U.S. dollar denominated institutional leveraged loans. The S&P/LSTA U.S. Leveraged Loan Index is not available for direct investment. 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.
25
Victory Fixed Income Funds (Unaudited)
Victory Strategic Income Fund
Portfolio Holdings
As a Percentage of Total Investments
Fund Performance Summary
The Victory Strategic Income Fund (the "Fund") seeks to provide a high current income with a secondary objective of capital appreciation. The Fund returned -0.66% (Class A shares at net asset value), in 2018, underperforming its benchmark, the Bloomberg Barclays U.S. Aggregate Bond Index (the "Index"), which returned 0.01%.
During the period, the Fund's holdings in high yield bonds and credit default swaps, which are not in the Index, detracted from performance relative to the Index, as did an overweight in BBB-rated bonds, particularly those with maturities of 3- to 10-years. Treasury futures helped hedge the Fund's interest rate risk relative to the Index.
An allocation to floating rate bank loans, which are not in the Index, was a strong contributor to relative performance, as was an underweight in longer-term corporate bonds rated AAA to A. Security selection in agency mortgage-backed securities and asset-backed securities also was positive.
Market Review
The final months of 2018 were an all-you-can-eat banquet of worry for investors, particularly in equities and corporate bonds. Among the concerns: rising interest rates and an aging economic boom at home, slowing economies overseas, trade disputes, tumbling energy prices, dysfunction in Washington, scandals over online privacy and election meddling, and a bungling Brexit.
The concerns that shook the markets in the fourth quarter were not new and there were spikes in volatility in the first and second quarters, but a strong domestic economy and solid corporate earnings limited their impact on returns until the fourth quarter.
Despite a solid U.S. economy with nearly full employment and tame inflation, major equity indexes had their worst December since the Great Depression and their worst year since the Great Recession. Double-digit declines in the fourth quarter and negative returns for the year were the rule among major domestic and global equity indexes.
In spite of increased volatility and rising yields in non-Treasury sectors, fixed income markets fared better, posting mixed but mostly positive returns for the year. The 10-year Treasury returned 0.0% in 2018.
Rates and Central Banks
In December, the U. S. Federal Reserve (the "Fed") raised its benchmark interest rate for the fourth time in 2018 and the ninth time since 2015. It also indicated that there could be two more increases in 2019. The December increase, coming as it did during a market shakeup, seemed to shift investor focus from concern about inflation to a fear that the Fed
26
Victory Fixed Income Funds (Unaudited)
Victory Strategic Income Fund (continued)
could thwart growth or even tip the economy into recession by raising rates too aggressively. The Fed has indicated that it will continue to watch both economic and market indicators closely as it deliberates on future increases.
Meanwhile, the Fed's European counterpart, the European Central Bank (ECB), is proceeding with plans to stop its massive securities purchases despite slowing growth.
Although the gradual and much-anticipated interest rate increases in the U.S. demonstrate the Fed's confidence in a U.S. economy that is currently on sound footing, the direction of Fed and ECB policy signal that central banks are becoming less willing and less able to suppress the kind of market volatility that marked the fourth quarter.
Market Outlook
We believe that securities markets have entered a fundamentally more volatile phase as the credit cycle and domestic economic expansion mature while central banks take a less accommodative approach. By historical standards, higher average volatility is the more typical market environment, but the fourth quarter clearly showed that investors may not take it calmly.
Portfolio Review
Since we believe that the risks in interest rates, market volatility and credit have shifted higher, we continued to see value in positioning the Fund somewhat defensively throughout 2018.
We reduced the Fund's exposure to some of the market's traditionally riskier sectors during 2018, cutting exposure to floating rate loans and high yield, and increasing holdings in investment grade corporate bonds and asset-backed securities.
While we believe caution is warranted, we still think there are potential opportunities in asset-backed securities and more liquid, lower-volatility, shorter-duration corporate bonds.
In addition, we expect market volatility to present some attractive tactical opportunities for investors whose overall risk-conscious positioning affords them the flexibility to take advantage. We will not hesitate to purchase attractive assets that appear to us to be temporarily oversold or sell those same assets once they have reached or exceeded our fair value estimates.
As always, we believe that careful research and active portfolio management are the keys to investment success. We focus on investments that our research identifies as high quality and liquid while at the same time remaining alert to opportunities that may arise when markets turn volatile.
27
Victory Fixed Income Funds (Unaudited)
Victory Strategic Income Fund (continued)
Average Annual Return
Year Ended December 31, 2018
Class A | Class C | Class R | Class Y | ||||||||||||||||||||||||||||
INCEPTION DATE | 12/31/09 | 12/31/09 | 12/31/09 | 12/31/09 | |||||||||||||||||||||||||||
Net Asset Value | Maximum Offering Price | Net Asset Value | Contingent Deferred Charges | Net Asset Value | Net Asset Value | Bloomberg Barclays U.S. Aggregate Bond Index1 | |||||||||||||||||||||||||
One Year | –0.66 | % | –2.68 | % | –1.45 | % | –2.41 | % | –1.15 | % | –0.45 | % | 0.01 | % | |||||||||||||||||
Three Year | 3.51 | % | 2.81 | % | 2.71 | % | 2.71 | % | 3.09 | % | 3.75 | % | 2.06 | % | |||||||||||||||||
Five Year | 2.31 | % | 1.90 | % | 1.50 | % | 1.50 | % | 1.90 | % | 2.55 | % | 2.52 | % | |||||||||||||||||
Ten Year | N/A | N/A | N/A | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||
Since Inception | 3.91 | % | 3.68 | % | 3.19 | % | 3.19 | % | 3.54 | % | 4.11 | % | N/A | ||||||||||||||||||
Expense Ratios | |||||||||||||||||||||||||||||||
Gross | 1.09% | 1.91% | 1.63% | 0.97% | |||||||||||||||||||||||||||
With Applicable Waivers | 0.97% | 1.76% | 1.36% | 0.76% |
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 May 1, 2018. Additional information pertaining to the Fund's expense ratios as of December 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 Strategic Income Fund — Growth of $10,000
1The Bloomberg Barclays U.S. Aggregate Bond Index is generally considered to be representative of U.S. bond market activity. The Bloomberg Barclays U.S. Aggregate Bond Index is an unmanaged index that is not available for direct investment. There are no expenses associated with the index while there are expenses associated with 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.
28
Victory Portfolios Victory INCORE Investment Quality Bond Fund | Schedule of Portfolio Investments December 31, 2018 |
Security Description | Principal Amount | Value | |||||||||
Asset Backed Securities (2.1%) | |||||||||||
Drive Auto Receivables Trust, Series 2017-3, Class B, 2.30%, 5/17/21, Callable 7/15/20 @ 100 | $ | 64,499 | $ | 64,423 | |||||||
Drive Auto Receivables Trust, Series 2017-1, Class B, 2.36%, 3/15/21, Callable 7/15/20 @ 100 (a) | 27,888 | 27,876 | |||||||||
DT Auto Owner Trust, Series 2017-2A, Class B, 2.44%, 2/15/21, Callable 9/15/20 @ 100 (a) (b) | 60,329 | 60,291 | |||||||||
DT Auto Owner Trust, Series 2017-3A, Class B, 2.40%, 5/17/21, Callable 1/15/21 @ 100 (b) | 116,097 | 115,886 | |||||||||
Santander Drive Auto Receivables Trust, Series 2017-3, Class B, 2.19%, 3/15/22, Callable 12/15/20 @ 100 (a) | 235,000 | 233,324 | |||||||||
Santander Retail Auto Lease Trust, Series 2018-A, Class B, 3.20%, 4/20/22, Callable 3/20/21 @ 100 (a) (b) | 225,000 | 224,345 | |||||||||
Total Asset Backed Securities (Cost $728,768) | 726,145 | ||||||||||
Collateralized Mortgage Obligations (2.5%) | |||||||||||
Commercial Mortgage Trust, Series 2012-CR4, Class B, 3.70%, 10/15/45 (b) | 305,000 | 292,624 | |||||||||
GS Mortgage Securities Trust, Series 2012-GC6, Class B, 5.65%, 1/10/45 (a) (b) (c) | 250,000 | 262,232 | |||||||||
WF-RBS Commercial Mortgage Trust, Series 2012-C6, Class B, 4.70%, 4/15/45 | 300,000 | 306,851 | |||||||||
Total Collateralized Mortgage Obligations (Cost $929,064) | 861,707 | ||||||||||
Corporate Bonds (23.9%) | |||||||||||
Communication Services (2.4%): | |||||||||||
AT&T, Inc. 2.30%, 3/11/19 (a) | 500,000 | 499,200 | |||||||||
5.15%, 11/15/46, Callable 5/15/46 @ 100 (a) | 226,000 | 210,429 | |||||||||
SES Global Americas Holdings GP, 5.30%, 3/25/44 (b) | 135,000 | 116,875 | |||||||||
826,504 | |||||||||||
Consumer Discretionary (1.7%): | |||||||||||
Hasbro, Inc., 6.35%, 3/15/40 | 115,000 | 120,897 | |||||||||
Magna International, Inc., 3.63%, 6/15/24, Callable 3/15/24 @ 100 | 245,000 | 241,893 | |||||||||
NIKE, Inc., 3.88%, 11/1/45, Callable 5/1/45 @ 100 | 145,000 | 138,843 | |||||||||
Ross Stores, Inc., 3.38%, 9/15/24, Callable 6/15/24 @ 100 | 70,000 | 69,110 | |||||||||
570,743 | |||||||||||
Consumer Staples (0.8%): | |||||||||||
Estee Lauder Cos., Inc., 4.15%, 3/15/47, Callable 9/15/46 @ 100 | 52,000 | 52,080 | |||||||||
Mead Johnson Nutrition Co., 4.60%, 6/1/44, Callable 12/1/43 @ 100 (a) | 105,000 | 107,621 | |||||||||
Reynolds American, Inc., 5.70%, 8/15/35, Callable 2/15/35 @ 100 | 92,000 | 89,720 | |||||||||
249,421 | |||||||||||
Energy (1.3%): | |||||||||||
Dolphin Energy Ltd., 5.89%, 6/15/19 (b) | 65,400 | 65,815 | |||||||||
Exxon Mobil Corp., 4.11%, 3/1/46, Callable 9/1/45 @ 100 | 40,000 | 40,613 | |||||||||
Marathon Petroleum Corp. 6.50%, 3/1/41, Callable 9/1/40 @ 100 | 65,000 | 69,933 | |||||||||
5.85%, 12/15/45, Callable 6/15/45 @ 100 | 50,000 | 49,669 |
See notes to financial statements.
29
Victory Portfolios Victory INCORE Investment Quality Bond Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Principal Amount | Value | |||||||||
Statoil ASA, 3.95%, 5/15/43 | $ | 65,000 | $ | 61,898 | |||||||
Valero Energy Corp., 6.63%, 6/15/37 | 140,000 | 154,302 | |||||||||
442,230 | |||||||||||
Financials (8.7%): | |||||||||||
Aflac, Inc. 2.88%, 10/15/26, Callable 7/15/26 @ 100 | 185,000 | 172,118 | |||||||||
4.75%, 1/15/49, Callable 7/15/48 @ 100 | 30,000 | 30,612 | |||||||||
Alleghany Corp., 4.90%, 9/15/44, Callable 3/15/44 @ 100 | 89,000 | 89,373 | |||||||||
Bank of America Corp. 2.33%, (LIBOR03M+63bps), 10/1/21, Callable 10/1/20 @ 100 (d) | 130,000 | 127,205 | |||||||||
2.50%, 10/21/22, Callable 10/21/21 @ 100, MTN | 285,000 | 273,579 | |||||||||
3.25%, 10/21/27, Callable 10/21/26 @ 100 | 100,000 | 92,572 | |||||||||
BB&T Corp., 2.75%, 4/1/22, MTN, Callable 3/1/22 @ 100 | 260,000 | 255,198 | |||||||||
Cincinnati Financial Corp., 6.13%, 11/1/34 | 135,000 | 157,673 | |||||||||
Citigroup, Inc., 3.88%, (LIBOR03M+117bps), 1/24/39, Callable 1/24/38 @ 100 (d) | 100,000 | 89,413 | |||||||||
JPMorgan Chase & Co., 5.60%, 7/15/41 | 115,000 | 129,963 | |||||||||
KeyBank NA, 2.25%, 3/16/20 | 580,000 | 573,712 | |||||||||
Morgan Stanley 3.75%, 2/25/23 (a) | 300,000 | 299,478 | |||||||||
3.13%, 7/27/26, MTN | 205,000 | 188,961 | |||||||||
Newcrest Finance Pty Ltd., 5.75%, 11/15/41 (b) | 95,000 | 94,110 | |||||||||
The Goldman Sachs Group, Inc., 2.35%, 11/15/21, Callable 11/15/20 @ 100 | 115,000 | 110,797 | |||||||||
UBS Group Funding Switzerland AG, 2.95%, 9/24/20 (a) (b) | 250,000 | 247,343 | |||||||||
Wells Fargo & Co., 4.90%, 11/17/45 (a) | 80,000 | 77,921 | |||||||||
3,010,028 | |||||||||||
Health Care (2.4%): | |||||||||||
Amgen, Inc., 4.40%, 5/1/45, Callable 11/1/44 @ 100 | 70,000 | 65,586 | |||||||||
Express Scripts Holding Co., 2.25%, 6/15/19 (a) | 210,000 | 209,080 | |||||||||
Gilead Sciences, Inc. 4.40%, 12/1/21, Callable 9/1/21 @ 100 (a) | 465,000 | 479,554 | |||||||||
4.80%, 4/1/44, Callable 10/1/43 @ 100 | 70,000 | 69,889 | |||||||||
824,109 | |||||||||||
Industrials (2.4%): | |||||||||||
AerCap Ireland Capital Ltd., 3.75%, 5/15/19 (a) | 400,000 | 399,936 | |||||||||
Canadian National Railway Co., 3.20%, 8/2/46, Callable 2/2/46 @ 100 | 60,000 | 51,329 | |||||||||
Kansas City Southern, 4.95%, 8/15/45, Callable 2/15/45 @ 100 | 75,000 | 75,686 | |||||||||
Rockwell Automation, Inc., 6.25%, 12/1/37 | 60,000 | 72,319 | |||||||||
Snap-on, Inc., 4.10%, 3/1/48, Callable 9/1/47 @ 100 | 56,000 | 54,291 | |||||||||
Valmont Industries, Inc., 5.00%, 10/1/44, Callable 4/1/44 @ 100 (a) | 137,000 | 120,652 | |||||||||
774,213 | |||||||||||
Information Technology (0.8%): | |||||||||||
Apple, Inc., 4.65%, 2/23/46, Callable 8/23/45 @ 100 | 84,000 | 88,813 | |||||||||
NVIDIA Corp., 2.20%, 9/16/21, Callable 8/16/21 @ 100 | 85,000 | 83,039 | |||||||||
Texas Instruments, Inc., 4.15%, 5/15/48, Callable 11/15/47 @ 100 | 95,000 | 94,844 | |||||||||
266,696 |
See notes to financial statements.
30
Victory Portfolios Victory INCORE Investment Quality Bond Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Principal Amount | Value | |||||||||
Materials (1.8%): | |||||||||||
LyondellBasell Industries NV, 5.00%, 4/15/19, Callable 2/7/19 @ 100 (a) | $ | 490,000 | $ | 490,318 | |||||||
Rio Tinto Finance USA Ltd. 3.75%, 6/15/25, Callable 3/15/25 @ 100 | 80,000 | 80,179 | |||||||||
5.20%, 11/2/40 | 50,000 | 55,315 | |||||||||
625,812 | |||||||||||
Utilities (1.6%): | |||||||||||
Arizona Public Service Co., 2.95%, 9/15/27, Callable 6/15/27 @ 100 | 120,000 | 112,739 | |||||||||
Consolidated Edison, Inc., 6.30%, 8/15/37 | 110,000 | 134,383 | |||||||||
Iberdrola International BV 6.75%, 9/15/33 | 35,000 | 40,267 | |||||||||
6.75%, 7/15/36 (e) | 28,000 | 33,453 | |||||||||
Oklahoma G&E Co., 5.25%, 5/15/41, Callable 11/15/40 @ 100 | 105,000 | 115,615 | |||||||||
Public Service Enterprise Group, Inc., 4.00%, 6/1/44, Callable 12/1/43 @ 100 | 115,000 | 110,502 | |||||||||
546,959 | |||||||||||
Total Corporate Bonds (Cost $8,461,675) | 8,136,715 | ||||||||||
Residential Mortgage Backed Securities (1.5%) | |||||||||||
Ameriquest Mortgage Securities, Inc., Series 2003-5, Class A6, 4.16%, 4/25/33, Callable 1/25/19 @ 100 (a) (c) | 43,852 | 43,761 | |||||||||
Countrywide Home Loans, Inc., Series 2002-19, Class 1A1, 6.25%, 11/25/32, Callable 1/25/19 @ 100 | 61,764 | 61,764 | |||||||||
Credit Suisse First Boston Mortgage Securities Corp., Series 2002-HE16, Class M1, 3.83% (LIBOR01M+132bps), 10/25/32, Callable 1/25/19 @ 100 (d) | 91,851 | 91,518 | |||||||||
GSR Mortgage Loan Trust, Series 2004-10F, Class 6A1, 5.00%, 9/25/34, Callable 1/25/19 @ 100 (a) | 15,949 | 15,949 | |||||||||
JPMorgan Mortgage Trust, Series 2004-S2, Class 1A3, 4.75%, 11/25/19, Callable 5/25/19 @ 100 (a) | 12,330 | 12,303 | |||||||||
JPMorgan Mortgage Trust, Series 2016-4, Class A5, 3.50%, 10/25/46, Callable 8/25/37 @ 100 (a) (b) (c) | 133,196 | 132,368 | |||||||||
Prime Mortgage Trust, Series 2004-2, Class A3, 5.25%, 11/25/19, Callable 1/25/19 @ 100 (a) | 5,050 | 5,050 | |||||||||
Residential Funding Mortgage Securities I, Inc., Series 2005-S3, Class A1, 4.75%, 3/25/20, Callable 1/25/19 @ 100 (a) | 18,794 | 18,792 | |||||||||
Structured Asset Securities Corp., Series 2004-21XS, Class 2A6A, 5.24%, 12/25/34, Callable 1/25/19 @ 100 (a) (c) | 189 | 189 | |||||||||
Wells Fargo Mortgage Backed Securities Trust, Series 2004-Y, Class 3A1, 4.92%, 11/25/34, Callable 1/25/19 @ 100 (a) (c) | 115,810 | 115,810 | |||||||||
Wells Fargo Mortgage Backed Securities Trust, Series 2005-2, Class 2A1, 4.75%, 4/25/20, Callable 1/25/19 @ 100 (a) | 7,986 | 7,986 | |||||||||
Total Residential Mortgage Backed Securities (Cost $508,820) | 505,490 |
See notes to financial statements.
31
Victory Portfolios Victory INCORE Investment Quality Bond Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Principal Amount | Value | |||||||||
U.S. Government Mortgage Backed Agencies (63.6%) | |||||||||||
Federal Home Loan Mortgage Corp. 5.00%, 6/15/23 (a) | $ | 37,575 | $ | 38,281 | |||||||
Series 4139, Class DA, 1.25%, 12/15/27 (a) | 521,043 | 493,767 | |||||||||
Series 4395, Class PA, 2.50%, 4/15/37 (a) | 170,736 | 165,930 | |||||||||
5.50%, 6/1/38 | 55,079 | 59,373 | |||||||||
7.00%, 9/1/38 (a) | 18,346 | 20,922 | |||||||||
Series 4320, Class AP, 3.50%, 7/15/39 – 3/1/48 (a) | 1,618,315 | 1,625,074 | |||||||||
Series 3713, Class PA, 2.00%, 2/15/40 – 3/15/40 (a) | 630,607 | 611,214 | |||||||||
4.50%, 1/1/41 – 7/1/44 (a) | 669,291 | 698,372 | |||||||||
Series 4049, Class AB, 2.75%, 12/15/41 (a) | 101,954 | 101,033 | |||||||||
Series 4494, Class JA, 3.75%, 5/15/42 (a) | 350,254 | 357,639 | |||||||||
4,171,605 | |||||||||||
Federal National Mortgage Association 6.00%, 8/1/21 – 2/1/37 (a) | 272,492 | 300,317 | |||||||||
5.50%, 4/1/22 – 1/1/38 (a) | 168,371 | 180,775 | |||||||||
7.00%, 8/1/23 – 6/1/32 (a) | 25,165 | 28,248 | |||||||||
7.50%, 12/1/29 – 2/1/31 (a) | 27,196 | 30,761 | |||||||||
8.00%, 6/1/30 – 9/1/30 (a) | 18,518 | 21,272 | |||||||||
5.00%, 12/1/34 – 11/1/36 | 11,984 | 12,785 | |||||||||
4.63%, (LIBOR12M+166bps), 12/1/36 (a) (d) | 38,908 | 39,686 | |||||||||
4.50%, 12/1/38 – 5/25/40 (a) | 575,983 | 596,432 | |||||||||
Series 2013-33, Class UD, 2.50%, 4/25/39 – 12/25/47 (a) | 391,839 | 380,214 | |||||||||
Series 2013-137, Class A, 3.50%, 1/25/49 (a) (f) | 2,800,000 | 2,799,121 | |||||||||
Series 2013-137, Class A, 3.50%, 3/25/40 – 12/25/50 (a) | 3,049,128 | 3,061,219 | |||||||||
Series 2011-101, Class LA, 3.00%, 1/25/49 (a) (f) | 1,900,000 | 1,852,865 | |||||||||
Series 2011-101, Class LA, 3.00%, 10/25/40 – 1/25/49 (a) | 2,760,129 | 2,704,142 | |||||||||
Series 2013-81, Class KA, 2.75%, 9/25/42 | 379,547 | 371,093 | |||||||||
Series 2013-44, Class PB, 1.75%, 1/25/43 | 345,316 | 321,222 | |||||||||
4.00%, 1/25/49 (a) (f) | 2,100,000 | 2,140,719 | |||||||||
4.00%, 5/1/43 – 1/25/49 (a) | 2,008,607 | 2,059,366 | |||||||||
16,900,237 | |||||||||||
Government National Mortgage Association Series 2016-116, Class GA, 1.75%, 11/20/44 | 681,588 | 640,378 | |||||||||
Multi-family (0.1%): | |||||||||||
Collateralized Mortgage Obligations (0.1%): | |||||||||||
Government National Mortgage Association 6.00%, 12/15/33 (a) | 23,421 | 26,199 | |||||||||
Total U.S. Government Mortgage Backed Agencies (Cost $21,875,278) | 21,738,419 | ||||||||||
U.S. Treasury Obligations (20.7%) | |||||||||||
U.S. Treasury Bonds 2.88%, 5/15/43 (a) | 561,000 | 547,703 | |||||||||
3.00%, 2/15/48 | 1,520,000 | 1,512,008 | |||||||||
U.S. Treasury Notes 2.75%, 9/30/20 | 330,000 | 331,251 | |||||||||
2.75%, 8/31/23 | 1,626,000 | 1,644,363 | |||||||||
2.88%, 10/31/23 | 450,000 | 457,547 |
See notes to financial statements.
32
Victory Portfolios Victory INCORE Investment Quality Bond Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Shares or Principal Amount | Value | |||||||||
2.00%, 8/15/25 (a) | $ | 1,058,000 | $ | 1,020,156 | |||||||
2.75%, 2/15/28 (a) | 1,328,000 | 1,334,925 | |||||||||
2.88%, 8/15/28 | 210,000 | 213,249 | |||||||||
Total U.S. Treasury Obligations (Cost $6,822,203) | 7,061,202 | ||||||||||
Collateral for Securities Loaned^ (0.1%) | |||||||||||
BlackRock Liquidity Funds TempFund Portfolio, Institutional Class, 2.49% (g) | 6,356 | 6,356 | |||||||||
Fidelity Investments Money Market Government Portfolio, Class I, 2.28% (g) | 9,185 | 9,185 | |||||||||
Fidelity Investments Prime Money Market Portfolio, Class I, 2.46% (g) | 284 | 284 | |||||||||
Goldman Sachs Financial Square Prime Obligations Fund, Institutional Class, 2.55% (g) | 3,531 | 3,531 | |||||||||
JPMorgan Prime Money Market Fund, Capital Class, 2.49% (g) | 5,650 | 5,650 | |||||||||
Morgan Stanley Institutional Liquidity Prime Portfolio, Institutional Class, 2.58% (g) | 8,475 | 8,475 | |||||||||
Total Collateral for Securities Loaned (Cost $33,481) | 33,481 | ||||||||||
Total Investments (Cost $39,359,289) — 114.4% | 39,063,159 | ||||||||||
Liabilities in excess of other assets — (14.4)% | (4,922,979 | ) | |||||||||
NET ASSETS — 100.00% | $ | 34,140,180 |
^ Purchased with cash collateral from securities on loan.
(a) All or a portion of this security has been segregated as collateral for derivative instruments and/or securities purchased on a when-issued basis.
(b) Rule 144A security or other security that is restricted as to resale to institutional investors. The Fund's Adviser has deemed this security to be liquid based upon procedures approved by the Board of Trustees. As of December 31, 2018, the fair value of these securities was $1,611,889 and amounted to 4.7% of net assets.
(c) 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 December 31, 2018.
(d) Variable or Floating-Rate Security. Rate disclosed is as of December 31, 2018.
(e) All or a portion of this security is on loan.
(f) Security purchased on a when-issued basis.
(g) Rate disclosed is the daily yield on December 31, 2018.
bps — Basis points
LIBOR — London InterBank Offered Rate
LIBOR01M — 1 Month US Dollar LIBOR, rate disclosed as of December 31, 2018, based on the last reset date of the security
LIBOR03M — 3 Month US Dollar LIBOR, rate disclosed as of December 31, 2018, based on the last reset date of the security
LIBOR12M — 12 Month US Dollar LIBOR, rate disclosed as of December 31, 2018, based on the last reset date of the security
MTN — Medium Term Note
See notes to financial statements.
33
Victory Portfolios Victory INCORE Investment Quality Bond Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Futures Contracts Purchased
Number of Contracts | Expiration Date | Notional Amount | Value | Unrealized Appreciation (Depreciation) | |||||||||||||||||||
5-Year U.S. Treasury Note Future | 17 | 3/29/19 | $ | 1,924,481 | $ | 1,949,688 | $ | 25,207 |
Futures Contracts Sold
Number of Contracts | Expiration Date | Notional Amount | Value | Unrealized Appreciation (Depreciation) | |||||||||||||||||||
10-Year U.S. Treasury Note Future | 18 | 3/20/19 | $ | 2,163,939 | $ | 2,196,282 | $ | (32,343 | ) | ||||||||||||||
2-Year U.S.Treasury Note Future | 7 | 3/29/19 | 1,477,148 | 1,486,188 | (9,040 | ) | |||||||||||||||||
30-Year U.S. Treasury Bond Future | 6 | 3/20/19 | 841,025 | 876,000 | (34,975 | ) | |||||||||||||||||
$ | (76,358 | ) | |||||||||||||||||||||
Total unrealized appreciation | $ | 25,207 | |||||||||||||||||||||
Total unrealized depreciation | (76,358 | ) | |||||||||||||||||||||
Total net unrealized depreciation | $ | (51,151 | ) |
Centrally Cleared
Credit Default Swap Agreements — Sell Protection (a)
Underlying Instrument | Pay Fixed Deal Rate | Maturity Date | Payment Frequency | Implied Credit Spread at December 31, 2018(b) | Notional Amount(c) | Value | Premiums Paid (Received) | Unrealized Appreciation (Depreciation) | |||||||||||||||||||||||||||
CDX North America High Yield Index; Series 31 | 5.00% | 12/20/23 | Daily | 4.46% | $3,300,000 | $67,403 | $237,210 | $(169,807) |
(a) When a credit event occurs as defined under the terms of the swap agreement, the Fund as a seller of credit protection will either (i) pay to the buyer of protection an amount equal to the par value of the defaulted reference entity and take delivery of the reference entity or (ii) pay a net amount equal to the par value of the defaulted reference entity less its recovery value.
(b) Implied credit spread, represented in absolute terms, utilized in determining the value of the credit default swap agreements as of period end will serve as an indicator of the current status of the payment/performance risk and represent the likelihood or risk of default for the credit derivative. The implied credit spread of a referenced entity reflects the cost of buying/selling protection and may include payments required to be made to enter into the agreement. Generally, wider credit spreads represent a perceived deterioration of the referenced entity's credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the swap agreement.
(c) The notional amount represents the maximum potential amount the Fund could be required to pay as a seller of credit protection if a credit event occurs, as defined under the terms of the swap agreement, for each security included in the CDX North America High Yield Index.
See notes to financial statements.
34
Victory Portfolios Victory INCORE Low Duration Bond Fund | Schedule of Portfolio Investments December 31, 2018 |
Security Description | Principal Amount | Value | |||||||||
Asset Backed Securities (15.1%) | |||||||||||
American Express Credit Account Master Trust, Series 2014-1, Class B, 2.96% (LIBOR01M+50bps), 12/15/21 (a) (b) | $ | 6,400,000 | $ | 6,402,272 | |||||||
AmeriCredit Automobile Receivables Trust, Series 2016-3, Class C, 2.24%, 4/8/22, Callable 12/8/20 @ 100 (b) | 4,435,000 | 4,369,952 | |||||||||
AmeriCredit Automobile Receivables Trust, Series 2017-2, Class B, 2.40%, 5/18/22, Callable 2/18/21 @ 100 (b) | 2,715,000 | 2,684,217 | |||||||||
AmeriCredit Automobile Receivables Trust, Series 2015-3, Class D, 3.34%, 8/8/21, Callable 1/8/20 @ 100 (b) | 2,600,000 | 2,599,415 | |||||||||
AmeriCredit Automobile Receivables Trust, Series 2018-1, Class B, 3.26%, 1/18/24, Callable 1/18/22 @ 100 (b) | 3,200,000 | 3,205,126 | |||||||||
Avis Budget Rental Car Funding (AESOP) LLC, Series 2014-1, Class A, 2.46%, 7/20/20 (b) (c) | 2,000,000 | 1,994,826 | |||||||||
Chrysler Capital Auto Receivables Trust, Series 2016-BA, Class B, 2.22%, 5/16/22, Callable 4/15/21 @ 100 (b) (c) | 4,180,000 | 4,114,917 | |||||||||
Drive Auto Receivables Trust, Series 2017-AA, Class C, 2.98%, 1/18/22, Callable 8/15/20 @ 100 (b) (c) | 1,952,202 | 1,950,568 | |||||||||
Drive Auto Receivables Trust, Series 2017-1, Class B, 2.36%, 3/15/21, Callable 7/15/20 @ 100 (b) | 299,228 | 299,099 | |||||||||
Drive Auto Receivables Trust, Series 2018-2, Class B, 3.22%, 4/15/22, Callable 1/15/21 @ 100 (b) | 5,140,000 | 5,135,945 | |||||||||
DT Auto Owner Trust, Series 2017-2A, Class B, 2.44%, 2/15/21, Callable 9/15/20 @ 100 (b) (c) | 634,763 | 634,367 | |||||||||
Santander Drive Auto Receivables Trust, Series 2016-3, Class C, 2.46%, 3/15/22, Callable 10/15/20 @ 100 (b) | 6,835,000 | 6,793,498 | |||||||||
Santander Drive Auto Receivables Trust, Series 2017-3, Class B, 2.19%, 3/15/22, Callable 12/15/20 @ 100 (b) | 2,540,000 | 2,521,892 | |||||||||
Santander Drive Auto Receivables Trust, Series 2017-2, Class B, 2.21%, 10/15/21, Callable 6/15/20 @ 100 (b) | 3,125,000 | 3,116,063 | |||||||||
Santander Retail Auto Lease Trust, Series 2018-A, Class B, 3.20%, 4/20/22, Callable 3/20/21 @ 100 (b) (c) | 2,400,000 | 2,393,011 | |||||||||
World Financial Network Credit Card Master Trust, Series 2017-A, Class A, 2.12%, 3/15/24 (b) | 3,155,000 | 3,112,360 | |||||||||
Total Asset Backed Securities (Cost $51,638,217) | 51,327,528 | ||||||||||
Collateralized Mortgage Obligations (5.0%) | |||||||||||
BX Trust, Series 2017-SLCT, Class B, 3.66% (LIBOR01M+120bps), 7/15/34 (a) (b) (c) | 1,275,000 | 1,272,109 | |||||||||
BX Trust, Series 2017-APPL, Class A, 3.34% (LIBOR01M+88bps), 7/15/34 (a) (b) (c) | 1,342,105 | 1,328,742 | |||||||||
COMM Mortgage Trust, Series 2014-CR15, Class A2, 2.93%, 2/10/47 (b) | 2,339,023 | 2,338,054 | |||||||||
Galaxy CLO Ltd., Series 2017-24A, Class A, 3.56% (LIBOR03M+112bps), 1/15/31, Callable 1/15/20 @ 100 (a) (b) (c) | 2,000,000 | 1,971,700 | |||||||||
Great Wolf Trust, Series 2017-WOLF, Class A, 3.46% (LIBOR01M+85bps), 9/15/34 (a) (b) (c) | 1,500,000 | 1,484,526 | |||||||||
GS Mortgage Securities Trust, Series 2012-GC6, Class B, 5.65%, 1/10/45 (b) (c) (d) | 3,500,000 | 3,671,246 |
See notes to financial statements.
35
Victory Portfolios Victory INCORE Low Duration Bond Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Principal Amount | Value | |||||||||
Steele Creek CLO Ltd., Series 2017-1A, Class A, 3.69% (LIBOR03M+125bps), 1/15/30, Callable 1/15/20 @ 100 (a) (b) (c) | $ | 2,825,000 | $ | 2,791,052 | |||||||
Voya CLO Ltd., Series 2017-4A, Class A1, 3.57% (LIBOR03M+113bps), 10/15/30, Callable 10/15/19 @ 100 (a) (b) (c) | 2,000,000 | 1,987,800 | |||||||||
Total Collateralized Mortgage Obligations (Cost $17,165,960) | 16,845,229 | ||||||||||
Corporate Bonds (46.8%) | |||||||||||
Communication Services (2.9%): | |||||||||||
AT&T, Inc. 2.45%, 6/30/20, Callable 5/30/20 @ 100 (b) | 3,500,000 | 3,458,385 | |||||||||
3.96%, (LIBOR03M+118bps), 6/12/24 (a) | 887,000 | 858,483 | |||||||||
Electronic Arts, Inc., 3.70%, 3/1/21, Callable 2/1/21 @ 100 (b) | 4,185,000 | 4,216,806 | |||||||||
Verizon Communications Inc., 3.72%, (LIBOR03M+110bps), 5/15/25, Callable 3/15/25 @ 100 (a) (b) | 827,000 | 802,091 | |||||||||
Vodafone Group PLC, 3.43%, (LIBOR03M+99bps), 1/16/24 (a) (b) | 871,000 | 846,812 | |||||||||
10,182,577 | |||||||||||
Consumer Discretionary (3.2%): | |||||||||||
Aptiv PLC, 3.15%, 11/19/20, Callable 10/19/20 @ 100 (b) | 1,505,000 | 1,498,814 | |||||||||
Best Buy Co., Inc., 5.50%, 3/15/21, Callable 12/15/20 @ 100 (b) | 3,055,000 | 3,154,104 | |||||||||
Hasbro, Inc., 3.15%, 5/15/21, Callable 3/15/21 @ 100 (b) | 3,380,000 | 3,359,416 | |||||||||
NVR, Inc., 3.95%, 9/15/22, Callable 6/15/22 @ 100 (b) | 3,283,000 | 3,222,888 | |||||||||
11,235,222 | |||||||||||
Consumer Staples (3.1%): | |||||||||||
BAT Capital Corp., 2.30%, 8/14/20 | 3,750,000 | 3,661,725 | |||||||||
Constellation Brands, Inc., 3.21%, (LIBOR03M+70bps), 11/15/21, Callable 10/30/19 @ 100 (a) | 2,500,000 | 2,495,425 | |||||||||
Molson Coors Brewing Co., 1.45%, 7/15/19 (b) (e) | 2,063,000 | 2,040,678 | |||||||||
Pernod Ricard SA, 5.75%, 4/7/21 (b) (c) | 2,176,000 | 2,281,036 | |||||||||
10,478,864 | |||||||||||
Energy (4.2%): | |||||||||||
Enable Midstream Partner, 2.40%, 5/15/19, Callable 4/15/19 @ 100 (b) | 5,000,000 | 4,972,200 | |||||||||
LUKOIL International Finance BV, 6.13%, 11/9/20 (b) (c) | 5,185,000 | 5,341,794 | |||||||||
Marathon Petroleum Corp., 3.40%, 12/15/20, Callable 11/15/20 @ 100 (b) | 1,850,000 | 1,848,594 | |||||||||
Pioneer Natural Resource Co., 7.50%, 1/15/20 (b) | 2,085,000 | 2,165,544 | |||||||||
14,328,132 | |||||||||||
Financials (10.6%): | |||||||||||
Bank of America Corp. 2.25%, 4/21/20, MTN (b) | 2,000,000 | 1,977,580 | |||||||||
2.33%, (LIBOR03M+63bps), 10/1/21, Callable 10/1/20 @ 100 (a) | 1,391,000 | 1,361,094 | |||||||||
3.44%, (LIBOR03M+96bps), 7/23/24, Callable 7/23/23 @ 100 (a) (b) | 879,000 | 859,231 | |||||||||
Capital One Financial Corp. 2.50%, 5/12/20, Callable 4/12/20 @ 100 | 615,000 | 607,362 | |||||||||
3.45%, 4/30/21, Callable 3/30/21 @ 100 (b) | 3,500,000 | 3,491,320 | |||||||||
Citigroup, Inc. 3.84%, (LIBOR03M+107bps), 12/8/21, Callable 11/8/21 @ 100 (a) (b) | 3,500,000 | 3,496,079 | |||||||||
3.44%, (LIBOR03M+95bps), 7/24/23, Callable 7/24/22 @ 100 (a) (b) | 885,000 | 864,760 |
See notes to financial statements.
36
Victory Portfolios Victory INCORE Low Duration Bond Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Principal Amount | Value | |||||||||
HSBC Holdings PLC, 3.64%, (LIBOR03M+100bps), 5/18/24, Callable 5/18/23 @ 100 (a) (b) | $ | 875,000 | $ | 850,885 | |||||||
JPMorgan Chase & Co., 3.37%, (LIBOR03M+89bps), 7/23/24, Callable 7/23/23 @ 100 (a) (b) | 900,000 | 877,176 | |||||||||
Level 3 Financing, Inc., 5.38%, 1/15/24, Callable 2/7/19 @ 102.69 | 637,000 | 606,743 | |||||||||
Marsh & McLennan Cos., Inc., 2.35%, 3/6/20, Callable 2/6/20 @ 100 | 420,000 | 415,628 | |||||||||
Morgan Stanley, 3.81%, (LIBOR03M+122bps), 5/8/24, Callable 5/8/23 @ 100 (a) (b) | 875,000 | 861,525 | |||||||||
Newcrest Finance Pty Ltd., 4.20%, 10/1/22 (c) | 725,000 | 729,560 | |||||||||
Regions Bank, 3.37%, (LIBOR03M+50bps), 8/13/21, Callable 8/13/20 @ 100 (a) | 1,000,000 | 995,300 | |||||||||
SVB Financial Group, 5.38%, 9/15/20 (b) | 2,573,000 | 2,654,847 | |||||||||
The Goldman Sachs Group, Inc, 4.26%, (LIBOR03M+175bps), 10/28/27, Callable 10/28/26 @ 100 (a) (b) | 875,000 | 849,844 | |||||||||
The Goldman Sachs Group, Inc., 3.79%, (LIBOR03M+117bps), 11/15/21, Callable 11/15/20 @ 100 (a) (b) | 3,500,000 | 3,492,405 | |||||||||
UBS Group Funding Switzerland AG 2.95%, 9/24/20 (b) (c) | 3,825,000 | 3,784,340 | |||||||||
3.57%, (LIBOR03M+95bps), 8/15/23, Callable 8/15/22 @ 100 (a) (b) (c) | 864,000 | 841,182 | |||||||||
Unum Group, 3.00%, 5/15/21, Callable 4/15/21 @ 100 (b) | 4,000,000 | 3,943,320 | |||||||||
ZB NA, 3.50%, 8/27/21 | 1,785,000 | 1,781,644 | |||||||||
35,341,825 | |||||||||||
Health Care (4.6%): | |||||||||||
Amgen, Inc., 2.20%, 5/11/20 (b) | 3,301,000 | 3,260,365 | |||||||||
Biogen, Inc., 2.90%, 9/15/20 (b) | 3,333,000 | 3,311,702 | |||||||||
Celgene Corp., 2.88%, 2/19/21 (b) | 4,345,000 | 4,297,987 | |||||||||
Express Scripts Holding Co., 2.25%, 6/15/19 (b) | 4,057,000 | 4,039,231 | |||||||||
Halfmoon Parent, Inc., 3.33%, (LIBOR03M+89bps), 7/15/23, Callable 6/15/23 @ 100 (a) (c) | 873,000 | 859,730 | |||||||||
15,769,015 | |||||||||||
Industrials (2.6%): | |||||||||||
Acuity Brands Lighting, Inc., 6.00%, 12/15/19 (b) | 2,319,000 | 2,372,105 | |||||||||
Aercap Holdings NV, 4.63%, 10/30/20 (b) | 3,715,000 | 3,741,154 | |||||||||
IDEX Corp., 4.50%, 12/15/20, Callable 9/15/20 @ 100 (b) | 2,565,000 | 2,611,811 | |||||||||
8,725,070 | |||||||||||
Information Technology (6.6%): | |||||||||||
Broadcom Corp., 3.00%, 1/15/22, Callable 12/15/21 @ 100 | 2,631,000 | 2,529,864 | |||||||||
FLIR Systems, Inc., 3.13%, 6/15/21, Callable 5/15/21 @ 100 | 2,375,000 | 2,342,225 | |||||||||
Juniper Networks, Inc., 3.13%, 2/26/19 (b) | 7,120,000 | 7,122,136 | |||||||||
Lam Research Group, 2.80%, 6/15/21, Callable 5/15/21 @ 100 | 3,328,000 | 3,281,741 | |||||||||
NetApp, Inc. 2.00%, 9/27/19 (b) | 1,875,000 | 1,853,325 | |||||||||
3.38%, 6/15/21, Callable 4/15/21 @ 100 | 1,605,000 | 1,598,676 | |||||||||
VMware, Inc., 2.30%, 8/21/20 (b) | 3,820,000 | 3,741,117 | |||||||||
22,469,084 | |||||||||||
Materials (1.9%): | |||||||||||
Anglo American Capital PLC, 4.13%, 4/15/21 (b) (c) | 5,725,000 | 5,708,226 | |||||||||
LyondellBasell Industries NV, 6.00%, 11/15/21, Callable 8/17/21 @ 100 (e) | 800,000 | 846,744 | |||||||||
6,554,970 |
See notes to financial statements.
37
Victory Portfolios Victory INCORE Low Duration Bond Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Principal Amount | Value | |||||||||
Real Estate (3.7%): | |||||||||||
CubeSmart, LP, 4.80%, 7/15/22, Callable 4/15/22 @ 100 | $ | 3,470,000 | $ | 3,574,516 | |||||||
Healthcare Trust of America Holdings LP, 3.38%, 7/15/21, Callable 5/15/21 @ 100 (b) | 1,410,000 | 1,400,835 | |||||||||
Highwoods Realty LP, 3.20%, 6/15/21, Callable 4/15/21 @ 100 (b) | 3,130,000 | 3,102,769 | |||||||||
Ventas Realty, LP, 4.25%, 3/1/22, Callable 12/1/21 @ 100 | 2,650,000 | 2,701,516 | |||||||||
Welltower, Inc., 6.13%, 4/15/20 (b) | 1,650,000 | 1,703,246 | |||||||||
12,482,882 | |||||||||||
Utilities (3.4%): | |||||||||||
Eversource Energy, 2.50%, 3/15/21, Callable 2/15/21 @ 100 (b) | 2,900,000 | 2,849,047 | |||||||||
Exelon Corp., 3.50%, 6/1/22, Callable 5/1/22 @ 100 | 2,681,000 | 2,619,846 | |||||||||
Iberdrola Finance Ireland Ltd., 5.00%, 9/11/19 (b) (c) | 6,027,000 | 6,091,369 | |||||||||
11,560,262 | |||||||||||
Total Corporate Bonds (Cost $161,015,545) | 159,127,903 | ||||||||||
Residential Mortgage Backed Securities (6.2%) | |||||||||||
Ameriquest Mortgage Securities, Inc., Series 2003-5, Class A6, 4.16%, 4/25/33, Callable 1/25/19 @ 100 (b) (d) | 9,973 | 9,952 | |||||||||
Bear Stearns Alt-A Trust, Series 2003-3, Class 2A, 4.36%, 10/25/33, Callable 1/25/19 @ 100 (b) (d) | 1,974,228 | 1,968,554 | |||||||||
Credit Suisse First Boston Mortgage Securities Corp., Series 2003-11, Class 1A31, 5.50%, 6/25/33, Callable 1/25/19 @ 100 (b) | 174,757 | 174,757 | |||||||||
Credit Suisse First Boston Mortgage Securities Corp., Series 2003-23, Class 2A8, 4.50%, 1/15/19 (b) | 13,785 | 13,574 | |||||||||
Credit Suisse First Boston Mortgage Securities Corp., Series 2004-AR7, Class 4A1, 4.26%, 11/25/34, Callable 1/25/19 @ 100 (b) (d) | 1,912,759 | 1,900,024 | |||||||||
Credit Suisse First Boston Mortgage Securities Corp., Series 2004-5, Class 5A1, 5.00%, 8/25/19, Callable 1/25/19 @ 100 (b) | 43,186 | 43,186 | |||||||||
GSR Mortgage Loan Trust, Series 2004-15F, Class 5A1, 5.50%, 1/25/20, Callable 5/25/25 @ 100 (b) | 67,720 | 68,003 | |||||||||
JPMorgan Mortgage Trust, Series 2017-1, Class A5, 3.50%, 1/25/47, Callable 1/25/41 @ 100 (b) (c) (d) | 2,115,727 | 2,117,966 | |||||||||
JPMorgan Mortgage Trust, Series 2017-3, Class 2A2, 2.50%, 8/25/47, Callable 6/25/33 @ 100 (b) (c) (d) | 2,431,126 | 2,338,349 | |||||||||
JPMorgan Mortgage Trust, Series 2016-3, Class 1A3, 3.50%, 10/25/46, Callable 3/25/39 @ 100 (b) (c) (d) | 1,010,773 | 1,005,705 | |||||||||
JPMorgan Mortgage Trust, Series 2016-4, Class A5, 3.50%, 10/25/46, Callable 8/25/37 @ 100 (b) (c) (d) | 1,664,953 | 1,654,592 | |||||||||
JPMorgan Mortgage Trust, Series 2005-A1, Class 6T1, 4.30%, 2/25/35, Callable 1/25/19 @ 100 (b) (d) | 237,785 | 237,785 | |||||||||
JPMorgan Mortgage Trust, Series 2004-S2, Class 1A3, 4.75%, 11/25/19, Callable 5/25/19 @ 100 (b) | 22,321 | 22,273 | |||||||||
JPMorgan Mortgage Trust, Series 2004-S1, Class 1A7, 5.00%, 9/25/34, Callable 1/25/19 @ 100 (b) | 88,038 | 87,085 | |||||||||
JPMorgan Mortgage Trust, Series 2014-5, Class A11, 2.99%, 10/25/29, Callable 9/25/26 @ 100 (b) (c) (d) | 4,376,256 | 4,265,908 | |||||||||
Madison Park Funding Ltd., Series 2017-26A, Class AR, 3.71% (LIBOR03M+120bps), 7/29/30, Callable 10/29/19 @ 100 (a) (b) (c) | 2,250,000 | 2,233,283 |
See notes to financial statements.
38
Victory Portfolios Victory INCORE Low Duration Bond Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Principal Amount | Value | |||||||||
Morgan Stanley Mortgage Loan Trust, Series 2005-6AR, Class 1A1, 2.79% (LIBOR01M+28bps), 11/25/35, Callable 1/25/19 @ 100 (a) (b) | $ | 260,938 | $ | 259,699 | |||||||
Prime Mortgage Trust, Series 2004-2, Class A2, 4.75%, 11/25/19, Callable 1/25/19 @ 100 (b) | 32,903 | 32,842 | |||||||||
Prime Mortgage Trust, Series 2004-2, Class A3, 5.25%, 11/25/19, Callable 1/25/19 @ 100 (b) | 17,724 | 17,724 | |||||||||
Residential Funding Mortgage Securities I, Inc., Series 2005-S3, Class A1, 4.75%, 3/25/20, Callable 1/25/19 @ 100 (b) | 68,424 | 68,419 | |||||||||
Structured Asset Securities Corp., Series 2004-21XS, Class 2A6A, 5.24%, 12/25/34, Callable 1/25/19 @ 100 (b) (d) | 978 | 980 | |||||||||
Wells Fargo Mortgage Backed Securities Trust, Series 2004-Z, Class 2A2, 4.97%, 12/25/34, Callable 1/25/19 @ 100 (b) (d) | 488,445 | 488,445 | |||||||||
Wells Fargo Mortgage Backed Securities Trust, Series 2004-O, Class A1, 4.68%, 8/25/34, Callable 1/25/19 @ 100 (b) (d) | 672,241 | 672,241 | |||||||||
Wells Fargo Mortgage Backed Securities Trust, Series 2004-M, Class A7, 4.61%, 8/25/34, Callable 1/25/19 @ 100 (b) (d) | 1,096,102 | 1,096,102 | |||||||||
Wells Fargo Mortgage Backed Securities Trust, Series 2003-J, Class 2A1, 4.59%, 10/25/33, Callable 1/25/19 @ 100 (b) (d) | 207,219 | 207,219 | |||||||||
Wells Fargo Mortgage Backed Securities Trust, Series 2005-2, Class 2A1, 4.75%, 4/25/20, Callable 1/25/19 @ 100 (b) | 11,744 | 11,744 | |||||||||
Total Residential Mortgage Backed Securities (Cost $21,430,221) | 20,996,411 | ||||||||||
U.S. Government Mortgage Backed Agencies (9.9%) | |||||||||||
Federal Home Loan Mortgage Corp. 5.00%, 6/15/23 – 8/1/40 (b) | 1,294,973 | 1,373,465 | |||||||||
5.50%, 10/25/23 (b) | 8,619 | 8,912 | |||||||||
Series 4430, Class NG, 2.50%, 2/15/38 (b) | 2,952,156 | 2,920,709 | |||||||||
7.00%, 9/1/38 (b) | 8,806 | 10,043 | |||||||||
Series 4320, Class AP, 3.50%, 7/15/39 (b) | 1,704,258 | 1,732,548 | |||||||||
Series 3713, Class PA, 2.00%, 2/15/40 – 3/15/40 (b) | 6,731,855 | 6,524,863 | |||||||||
Series 4049, Class AB, 2.75%, 12/15/41 (b) | 1,094,889 | 1,085,001 | |||||||||
13,655,541 | |||||||||||
Federal National Mortgage Association 6.00%, 2/1/37 (b) | 1,534,468 | 1,699,501 | |||||||||
Series 2013-83, Class CA, 3.50%, 10/25/37 – 3/25/40 (b) | 4,419,929 | 4,460,219 | |||||||||
Series 2013-33, Class UD, 2.50%, 4/25/39 (b) | 2,140,899 | 2,097,641 | |||||||||
Series 2011-21, Class PA, 4.50%, 5/25/40 (b) | 4,785,478 | 4,941,464 | |||||||||
Series 2011-101, Class LA, 3.00%, 10/25/40 (b) | 1,934,401 | 1,924,912 | |||||||||
5.00%, 2/1/41 – 10/1/41 (b) | 4,679,159 | 4,965,180 | |||||||||
20,088,917 | |||||||||||
Total U.S. Government Mortgage Backed Agencies (Cost $34,582,796) | 33,744,458 | ||||||||||
U.S. Treasury Obligations (16.8%) | |||||||||||
U.S. Treasury Bills, 2.09%, 1/24/19 (f) | 21,000,000 | 20,970,766 | |||||||||
U.S. Treasury Notes 1.13%, 1/31/19 (b) | 1,429,000 | 1,427,343 | |||||||||
1.63%, 8/31/19 (b) | 6,590,000 | 6,546,768 |
See notes to financial statements.
39
Victory Portfolios Victory INCORE Low Duration Bond Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Shares or Principal Amount | Value | |||||||||
2.25%, 3/31/20 (b) | $ | 15,638,000 | $ | 15,575,411 | |||||||
2.88%, 10/15/21 | 12,424,000 | 12,555,979 | |||||||||
Total U.S. Treasury Obligations (Cost $57,035,195) | 57,076,267 | ||||||||||
Collateral for Securities Loaned^ (0.3%) | |||||||||||
BlackRock Liquidity Funds TempFund Portfolio, Institutional Class, 2.49% (g) | 184,880 | 184,880 | |||||||||
Fidelity Investments Money Market Government Portfolio, Class I, 2.28% (g) | 267,143 | 267,143 | |||||||||
Fidelity Investments Prime Money Market Portfolio, Class I, 2.46% (g) | 8,249 | 8,249 | |||||||||
Goldman Sachs Financial Square Prime Obligations Fund, Institutional Class, 2.55% (g) | 102,713 | 102,713 | |||||||||
JPMorgan Prime Money Market Fund, Capital Class, 2.49% (g) | 164,330 | 164,330 | |||||||||
Morgan Stanley Institutional Liquidity Prime Portfolio, Institutional Class, 2.58% (g) | 246,510 | 246,510 | |||||||||
Total Collateral for Securities Loaned (Cost $973,825) | 973,825 | ||||||||||
Total Investments (Cost $343,841,759) — 100.1% | 340,091,621 | ||||||||||
Liabilities in excess of other assets — (0.1)% | (190,604 | ) | |||||||||
NET ASSETS — 100.00% | $ | 339,901,017 |
^ Purchased with cash collateral from securities on loan.
(a) Variable or Floating-Rate Security. Rate disclosed is as of December 31, 2018.
(b) All or a portion of this security has been segregated as collateral for derivative instruments.
(c) Rule 144A security or other security that is restricted as to resale to institutional investors. The Fund's Adviser has deemed this security to be liquid based upon procedures approved by the Board of Trustees. As of December 31, 2018, the fair value of these securities was $64,847,904 and amounted to 19.1% of net assets.
(d) 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 December 31, 2018.
(e) All or a portion of this security is on loan.
(f) Rate represents the effective yield at December 31, 2018.
(g) Rate disclosed is the daily yield on December 31, 2018.
bps — Basis points
LIBOR — London InterBank Offered Rate
LIBOR01M — 1 Month US Dollar LIBOR, rate disclosed as of December 31, 2018, based on the last reset date of the security
LIBOR03M — 3 Month US Dollar LIBOR, rate disclosed as of December 31, 2018, based on the last reset date of the security
LLC — Limited Liability Company
LP — Limited Partnership
MTN — Medium Term Note
PLC — Public Limited Company
See notes to financial statements.
40
Victory Portfolios Victory INCORE Low Duration Bond Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Futures Contracts Purchased
Number of Contracts | Expiration Date | Notional Amount | Value | Unrealized Appreciation (Depreciation) | |||||||||||||||||||
2-Year U.S.Treasury Note Future | 265 | 3/29/19 | $ | 55,886,920 | $ | 56,262,839 | $ | 375,919 | |||||||||||||||
5-Year U.S. Treasury Note Future | 216 | 3/29/19 | 24,394,638 | 24,772,500 | 377,862 | ||||||||||||||||||
$ | 753,781 | ||||||||||||||||||||||
Total unrealized appreciation | $ | 753,781 | |||||||||||||||||||||
Total unrealized depreciation | — | ||||||||||||||||||||||
Total net unrealized appreciation | $ | 753,781 |
Centrally Cleared
Credit Default Swap Agreements — Sell Protection (a)
Underlying Instrument | Pay Fixed Deal Rate | Maturity Date | Payment Frequency | Implied Credit Spread at December 31, 2018(b) | Notional Amount(c) | Value | Premiums Paid (Received) | Unrealized Appreciation (Depreciation) | |||||||||||||||||||||||||||
CDX North America High Yield Index; Series 31 | 5.00 | % | 12/20/23 | Daily | 4.46 | % | $ | 30,400,000 | $ | 620,925 | $ | 2,194,180 | $ | (1,573,255 | ) | ||||||||||||||||||||
CDX North America Investment Grade 5 Year Index; Series 31 | 1.00 | % | 12/20/23 | Daily | 0.87 | % | 19,000,000 | 107,462 | 355,174 | (247,712 | ) | ||||||||||||||||||||||||
$ | 728,387 | $ | 2,549,354 | $ | (1,820,967 | ) |
(a) When a credit event occurs as defined under the terms of the swap agreement, the Fund as a seller of credit protection will either (i) pay to the buyer of protection an amount equal to the par value of the defaulted reference entity and take delivery of the reference entity or (ii) pay a net amount equal to the par value of the defaulted reference entity less its recovery value.
(b) Implied credit spread, represented in absolute terms, utilized in determining the value of the credit default swap agreements as of period end will serve as an indicator of the current status of the payment/performance risk and represent the likelihood or risk of default for the credit derivative. The implied credit spread of a referenced entity reflects the cost of buying/selling protection and may include payments required to be made to enter into the agreement. Generally, wider credit spreads represent a perceived deterioration of the referenced entity's credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the swap agreement.
(c) The notional amount represents the maximum potential amount the Fund could be required to pay as a seller of credit protection if a credit event occurs, as defined under the terms of the swap agreement, for each security included in the CDX North America High Yield Index or CDX North America Investment Grade 5 Year Index.
See notes to financial statements.
41
Victory Portfolios Victory High Yield Fund | Schedule of Portfolio Investments December 31, 2018 |
Security Description | Shares or Principal Amount | Value | |||||||||
Common Stocks (1.8%) | |||||||||||
Communication Services (1.3%): | |||||||||||
AMC Networks, Inc., Class A (a) (b) | 6,000 | $ | 329,280 | ||||||||
Cinemark Holdings, Inc. | 10,000 | 358,000 | |||||||||
TEGNA, Inc. | 33,000 | 358,710 | |||||||||
1,045,990 | |||||||||||
Consumer Discretionary (0.5%): | |||||||||||
Wynn Resorts Ltd. | 4,000 | 395,640 | |||||||||
Total Common Stocks (Cost $1,652,535) | 1,441,630 | ||||||||||
Senior Secured Loans (28.7%) | |||||||||||
Ai Ladder Luxembourg Subco Sarl, 1st Lien Term Loan B, 7.02% (LIBOR06M+450bps), 5/4/25 (c) | $ | 796,521 | 785,569 | ||||||||
Alphabet Holding Co., Inc., 2nd Lien Term Loan, 10.09% (LIBOR01M+775bps), 8/15/25, Callable 2/6/19 @ 101 (c) | 1,000,000 | 820,000 | |||||||||
Avaya, Inc., 1st Lien Term Loan B, 6.71% (LIBOR01M+425bps), 12/15/24, Callable 2/6/19 @ 100 (c) | 643,500 | 620,173 | |||||||||
Bass Pro Group LLC, Term Loan B, 7.34% (LIBOR01M+500bps), 12/16/23, Callable 2/6/19 @ 101 (c) | 987,500 | 942,569 | |||||||||
Caesars Resort Collection LLC, 1st Lien Term Loan B, 5.09% (LIBOR01M+275bps), 10/2/24, Callable 2/6/19 @ 100 (c) | 990,000 | 948,984 | |||||||||
CPM Holdings, Inc., 6.27% (LIBOR01M+375bps), 10/24/25 (c) | 800,000 | 783,000 | |||||||||
Crown Finance US, Inc., 1st Lien Term Loan B, 4.84% (LIBOR01M+250bps), 2/7/25, Callable 2/6/19 @ 100 (c) | 645,125 | 608,566 | |||||||||
Dayco Products LLC, 6.96% (LIBOR03M+425bps), 5/19/24, Callable 2/6/19 @ 100 (c) | 979,474 | 952,538 | |||||||||
Hertz Corp., Term Loan B1, 5.09% (LIBOR01M+275bps), 6/30/23, Callable 2/6/19 @ 100 (c) | 979,644 | 939,762 | |||||||||
Holley Purchaser, Inc., 1st Lien Term Loan, 7.51% (LIBOR03M+500bps), 10/24/25, Callable 2/6/19 @ 101 (c) | 1,000,000 | 975,000 | |||||||||
LifeScan Global Corp., 1st Lien Term Loan, 8.40% (LIBOR03M+600bps), 6/19/24, Callable 2/6/19 @ 101 (c) | 1,000,000 | 942,500 | |||||||||
Navistar, Inc., 1st Lien Term Loan B, 5.89% (LIBOR01M+350bps), 11/2/24, Callable 2/6/19 @ 100 (c) | 992,500 | 955,281 | |||||||||
Packaging Coordinators Midco, Inc., 2nd Lien Term Loan, 11.14% (LIBOR03M+875bps), 7/1/24, Callable 2/6/19 @ 100 (c) | 800,000 | 796,000 | |||||||||
PetSmart, Inc., 5.38% (LIBOR01M+300bps), 3/10/22, Callable 2/6/19 @ 100 (c) | 984,714 | 775,462 | |||||||||
Radiate Holdco LLC, 5.34% (LIBOR01M+300bps), 2/1/24, Callable 2/6/19 @ 100 (c) | 989,924 | 931,608 | |||||||||
Regionalcare Hospital Partners Holdings, Inc., 7.13% (LIBOR03M+450bps), 11/16/25 (c) | 1,250,000 | 1,182,813 | |||||||||
Reynolds Group Holdings, Inc., 1st Lien Term Loan B, 5.09% (LIBOR01M+275bps), 2/5/23, Callable 2/6/19 @ 100 (c) | 1,300,141 | 1,235,134 | |||||||||
Scientific Games International, Inc., 1st Lien Term Loan B5, 5.25% (LIBOR02M+275bps), 8/14/24, Callable 2/6/19 @ 100 (c) | 800,863 | 749,664 | |||||||||
Scientific Games International, Inc., 1st Lien Term Loan B5, 5.27% (LIBOR01M+275bps), 8/14/24, Callable 2/6/19 @ 100 (c) | 191,637 | 179,385 | |||||||||
SIWF Holdings, Inc., 10.97% (LIBOR01M+850bps), 5/26/26 (c) | 1,000,000 | 920,000 |
See notes to financial statements.
42
Victory Portfolios Victory High Yield Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Principal Amount | Value | |||||||||
Specialty Building Products Holdings LLC, 1st Lien Term Loan, 8.09% (LIBOR01M+575bps), 10/1/25, Callable 2/6/19 @ 101 (c) | $ | 1,000,000 | $ | 965,000 | |||||||
Sprint Communications, Inc., 1st Lien Term Loan B, 4.88% (LIBOR01M+250bps), 2/2/24, Callable 2/6/19 @ 100 (c) | 992,424 | 941,980 | |||||||||
Stars Group Holdings BV, 5.89% (LIBOR03M+350bps), 6/27/25 (c) | 995,000 | 959,350 | |||||||||
Tenneco, Inc., 1st Lien Term Loan B, 5.09% (LIBOR01M+275bps), 6/18/25, Callable 2/6/19 @ 101 (c) | 1,000,000 | 937,000 | |||||||||
Utz Quality Foods LLC, 2nd Lien Term Loan, 9.59% (LIBOR01M+725bps), 11/21/25, Callable 2/6/19 @ 101 (c) | 700,000 | 658,000 | |||||||||
Verscend Holding Corp., 6.84% (LIBOR01M+450bps), 8/10/25, Callable 2/6/19 @ 101 (c) | 648,375 | 625,682 | |||||||||
Windstream Services LLC / Windstream Finance Corp., 5.71% (LIBOR01M+325bps), 2/8/24, Callable 2/6/19 @ 100 (c) | 492,413 | 414,242 | |||||||||
Wynn Resorts Ltd., 1st Lien Term Loan B, 4.60% (LIBOR01M+225bps), 10/30/24, Callable 2/6/19 @ 101 (c) | 1,000,000 | 943,130 | |||||||||
Total Senior Secured Loans (Cost $24,618,081) | 23,488,392 | ||||||||||
Corporate Bonds (64.7%) | |||||||||||
Communication Services (6.5%): | |||||||||||
AMC Entertainment Holdings, Inc., 5.75%, 6/15/25, Callable 6/15/20 @ 102.88 | 1,150,000 | 1,019,659 | |||||||||
AMC Networks, Inc., 4.75%, 8/1/25, Callable 8/1/21 @ 102.38 | 1,000,000 | 914,710 | |||||||||
Cablevision Systems Corp., 5.88%, 9/15/22 (b) | 1,250,000 | 1,230,138 | |||||||||
Hughes Satellite Systems Corp., 6.63%, 8/1/26 | 1,000,000 | 918,680 | |||||||||
Telesat Canada/Telesat LLC, 8.88%, 11/15/24, Callable 11/15/19 @ 106.66 (d) | 1,000,000 | 1,040,460 | |||||||||
Windstream Services LLC / Windstream Finance Corp., 9.00%, 6/30/25, Callable 6/30/21 @ 104.5 (d) | 356,000 | 241,115 | |||||||||
5,364,762 | |||||||||||
Consumer Discretionary (8.8%): | |||||||||||
AV Homes, Inc., 6.63%, 5/15/22, Callable 5/15/19 @ 103.31 | 325,000 | 325,351 | |||||||||
Beazer Homes USA, Inc., 5.88%, 10/15/27, Callable 10/15/22 @ 102.94 (b) | 1,000,000 | 790,010 | |||||||||
Boyd Gaming Corp., 6.38%, 4/1/26, Callable 4/1/21 @ 103.19 | 1,000,000 | 965,380 | |||||||||
Delta Merger Sub, Inc., 6.00%, 9/15/26, Callable 9/15/21 @ 104.5 (b) (d) | 1,000,000 | 944,880 | |||||||||
Enterprise Development Authority/The, 12.00%, 7/15/24, Callable 7/15/21 @ 109 (d) | 1,200,000 | 1,098,983 | |||||||||
Golden Nugget, Inc., 8.75%, 10/1/25, Callable 10/1/20 @ 104.38 (d) | 1,000,000 | 959,880 | |||||||||
Party City Holdings, Inc., 6.63%, 8/1/26, Callable 8/1/21 @ 103.31 (b) (d) | 1,000,000 | 909,440 | |||||||||
Travelport Corporate Finance PLC, 6.00%, 3/15/26, Callable 3/15/21 @ 103 (d) | 340,000 | 343,057 | |||||||||
Yum! Brands, Inc., 5.35%, 11/1/43, Callable 5/1/43 @ 100 | 1,000,000 | 835,310 | |||||||||
7,172,291 | |||||||||||
Consumer Staples (6.8%): | |||||||||||
Albertsons Cos. LLC, 5.75%, 3/15/25, Callable 9/15/19 @ 104.31 | 1,000,000 | 875,000 | |||||||||
B&G Foods, Inc., 4.63%, 6/1/21, Callable 2/7/19 @ 101.16 | 1,000,000 | 977,990 | |||||||||
Cott Holdings, Inc., 5.50%, 4/1/25, Callable 4/1/20 @ 104.13 (d) | 1,000,000 | 945,410 | |||||||||
Dole Food Co., Inc., 7.25%, 6/15/25, Callable 6/15/20 @ 103.63 (d) | 1,000,000 | 900,470 | |||||||||
Post Holdings, Inc., 5.00%, 8/15/26, Callable 8/15/21 @ 102.5 (d) | 1,250,000 | 1,138,775 | |||||||||
Simmons Foods, Inc., 7.75%, 1/15/24, Callable 1/15/21 @ 103.88 (b) (d) | 670,000 | 675,119 | |||||||||
5,512,764 |
See notes to financial statements.
43
Victory Portfolios Victory High Yield Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Principal Amount | Value | |||||||||
Energy (1.8%): | |||||||||||
Diamond Offshore Drilling, Inc., 4.88%, 11/1/43, Callable 5/1/43 @ 100 | $ | 1,400,000 | $ | 781,816 | |||||||
Endeavor Energy Resources LP/EER Finance, Inc., 5.50%, 1/30/26, Callable 1/30/21 @ 104.13 (d) | 650,000 | 659,887 | |||||||||
1,441,703 | |||||||||||
Financials (6.8%): | |||||||||||
Compass Group Diversified Holdings LLC, 8.00%, 5/1/26, Callable 5/1/21 @ 104 (d) | 1,000,000 | 991,570 | |||||||||
Downstream Development Authority of the Quapaw Tribe of Oklahoma, 10.50%, 2/15/23, Callable 2/15/20 @ 105.25 (d) | 1,000,000 | 960,510 | |||||||||
Gray Escrow, Inc., 7.00%, 5/15/27, Callable 5/15/22 @ 105.25 (d) | 1,250,000 | 1,216,950 | |||||||||
Intelsat Jackson Holdings SA, 5.50%, 8/1/23, Callable 2/7/19 @ 102.75 | 1,250,000 | 1,098,725 | |||||||||
Resideo Funding, Inc., 6.13%, 11/1/26, Callable 11/1/21 @ 104.59 (d) | 1,330,000 | 1,313,402 | |||||||||
5,581,157 | |||||||||||
Health Care (12.9%): | |||||||||||
Air Medical Group Holdings, Inc., 6.38%, 5/15/23, Callable 2/7/19 @ 103.19 (d) | 1,000,000 | 845,010 | |||||||||
Avantor, Inc., 9.00%, 10/1/25, Callable 10/1/20 @ 106.75 (d) | 1,000,000 | 999,430 | |||||||||
Change Health/Finance, Inc., 5.75%, 3/1/25, Callable 3/1/20 @ 102.88 (d) | 1,000,000 | 933,880 | |||||||||
Endo Finance LLC, 6.00%, 2/1/25, Callable 2/1/20 @ 103 (d) | 1,000,000 | 717,500 | |||||||||
Polaris Intermediate Corp., 8.50%, 12/1/22, Callable 6/1/19 @ 104 (d) | 1,000,000 | 913,480 | |||||||||
Sotera Health Topco, Inc., 8.13%, 11/1/21, Callable 2/7/19 @ 101 (d) | 1,000,000 | 932,680 | |||||||||
Surgery Center Holdings, 6.75%, 7/1/25, Callable 7/1/20 @ 103.38 (b) (d) | 1,000,000 | 853,190 | |||||||||
Tenet Healthcare Corp., 8.13%, 4/1/22 | 1,250,000 | 1,251,599 | |||||||||
Valeant Pharmaceuticals International, Inc., 5.88%, 5/15/23, Callable 2/7/19 @ 102.94 (d) | 1,250,000 | 1,153,100 | |||||||||
Verscend Escrow Corp., 9.75%, 8/15/26, Callable 8/15/21 @ 104.88 (d) | 1,000,000 | 939,830 | |||||||||
Vizient, Inc., 10.38%, 3/1/24, Callable 3/1/19 @ 107.78 (d) | 1,000,000 | 1,059,360 | |||||||||
10,599,059 | |||||||||||
Industrials (15.1%): | |||||||||||
Ahern Rentals, Inc., 7.38%, 5/15/23, Callable 2/7/19 @ 105.53 (b) (d) | 1,000,000 | 800,960 | |||||||||
Algeco Global Finance 2 PLC, 10.00%, 8/15/23, Callable 2/15/20 @ 105 (b) (d) | 900,000 | 839,412 | |||||||||
Apex Tool Group LLC /BC Mountain Finance, Inc., 9.00%, 2/15/23, Callable 2/15/19 @ 102 (b) (d) | 1,000,000 | 852,230 | |||||||||
Beacon Escrow Corp., 4.88%, 11/1/25, Callable 11/1/20 @ 102.44 (b) (d) | 1,330,000 | 1,170,094 | |||||||||
Covanta Holding Corp., 5.88%, 7/1/25, Callable 7/1/20 @ 104.41 (b) | 1,000,000 | 919,920 | |||||||||
Manitowoc Foodservice, Inc., 9.50%, 2/15/24, Callable 2/15/19 @ 107.13 (b) | 800,000 | 857,208 | |||||||||
Pisces Midco, Inc., 8.00%, 4/15/26, Callable 4/15/21 @ 104 (d) | 1,000,000 | 915,000 | |||||||||
SRS Distribution, Inc., 8.25%, 7/1/26, Callable 7/1/21 @ 104.13 (b) (d) | 1,000,000 | 919,080 | |||||||||
Stevens Holding Co. Inc., 6.13%, 10/1/26, Callable 10/1/23 @ 101.53 (d) | 1,000,000 | 986,310 | |||||||||
TransDigm, Inc., 6.50%, 7/15/24, Callable 7/15/19 @ 103.25 | 1,250,000 | 1,215,813 | |||||||||
Triumph Group, Inc., 4.88%, 4/1/21, Callable 2/7/19 @ 101.22 | 1,000,000 | 892,970 | |||||||||
United Rentals, Inc., 6.50%, 12/15/26, Callable 12/15/21 @ 103.25 | 1,250,000 | 1,231,250 | |||||||||
W/S Packaging Holdings, Inc., 9.00%, 4/15/23, Callable 4/15/20 @ 104.5 (d) | 800,000 | 796,000 | |||||||||
12,396,247 | |||||||||||
Materials (6.0%): | |||||||||||
Intertape Polymer Group, Inc., 7.00%, 10/15/26, Callable 10/15/21 @ 103.5 (d) | 1,330,000 | 1,313,375 | |||||||||
Plastipak Holdings, Inc., 6.25%, 10/15/25, Callable 10/15/20 @ 103.13 (d) | 920,000 | 822,857 |
See notes to financial statements.
44
Victory Portfolios Victory High Yield Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Shares or Principal Amount | Value | |||||||||
Reynolds Group Issuer, Inc. 5.75%, 10/15/20, Callable 2/7/19 @ 100 | $ | 969,108 | $ | 966,579 | |||||||
7.00%, 7/15/24, Callable 7/15/19 @ 103.5 (b) (d) | 1,000,000 | 945,010 | |||||||||
Titan Acquisition Ltd. / Titan Co-Borrower LLC, 7.75%, 4/15/26, Callable 4/15/21 @ 103.88 (d) | 1,000,000 | 861,100 | |||||||||
4,908,921 | |||||||||||
Total Corporate Bonds (Cost $56,246,442) | 52,976,904 | ||||||||||
Collateral for Securities Loaned^ (12.7%) | |||||||||||
BlackRock Liquidity Funds TempFund Portfolio, Institutional Class, 2.49% (e) | 1,976,390 | 1,976,390 | |||||||||
Fidelity Investments Money Market Government Portfolio, Class I, 2.28% (e) | 2,855,789 | 2,855,789 | |||||||||
Fidelity Investments Prime Money Market Portfolio, Class I, 2.46% (e) | 88,187 | 88,187 | |||||||||
Goldman Sachs Financial Square Prime Obligations Fund, Institutional Class, 2.55% (e) | 1,098,007 | 1,098,007 | |||||||||
JPMorgan Prime Money Market Fund, Capital Class, 2.49% (e) | 1,756,701 | 1,756,701 | |||||||||
Morgan Stanley Institutional Liquidity Prime Portfolio, Institutional Class, 2.58% (e) | 2,635,216 | 2,635,216 | |||||||||
Total Collateral for Securities Loaned (Cost $10,410,290) | 10,410,290 | ||||||||||
Total Investments (Cost $92,927,348) — 107.9% | 88,317,216 | ||||||||||
Liabilities in excess of other assets — (7.9)% | (6,432,760 | ) | |||||||||
NET ASSETS — 100.00% | $ | 81,884,456 |
^ 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) Variable or Floating-Rate Security. Rate disclosed is as of December 31, 2018.
(d) Rule 144A security or other security that is restricted as to resale to institutional investors. The Fund's Adviser has deemed this security to be liquid based upon procedures approved by the Board of Trustees. As of December 31, 2018, the fair value of these securities was $34,908,796 and amounted to 42.6% of net assets.
(e) Rate disclosed is the daily yield on December 31, 2018.
bps — Basis points
LIBOR — London InterBank Offered Rate
LIBOR01M — 1 Month US Dollar LIBOR, rate disclosed as of December 31, 2018, based on the last reset date of the security
LIBOR02M — 2 Month US Dollar LIBOR, rate disclosed as of December 31, 2018, based on the last reset date of the security
LIBOR03M — 3 Month US Dollar LIBOR, rate disclosed as of December 31, 2018, based on the last reset date of the security
LIBOR06M — 6 Month US Dollar LIBOR, rate disclosed as of December 31, 2018, based on the last reset date of the security
LLC — Limited Liability Company
LP — Limited Partnership
PLC — Public Limited Company
See notes to financial statements.
45
Victory Portfolios Victory Tax-Exempt Fund | Schedule of Portfolio Investments December 31, 2018 |
Security Description | Principal Amount | Value | |||||||||
Municipal Bonds (97.0%) | |||||||||||
California (4.9%): | |||||||||||
California Statewide Communities Development Authority Revenue Bonds, 4.25%, 1/1/43, Continuously Callable @100 | $ | 1,000,000 | $ | 985,920 | |||||||
Golden State Tobacco Securitization Corp., Revenue Bonds, Series A2, 5.00%, 6/1/47, Continuously Callable @100 | 2,500,000 | 2,407,100 | |||||||||
3,393,020 | |||||||||||
Connecticut (3.2%): | |||||||||||
Connecticut Health and Educational Facilities Authority Revenue Bonds, Series 2016 CT, 5.00%, 12/1/41, Continuously Callable @100 | 2,000,000 | 2,210,420 | |||||||||
District of Columbia (2.4%): | |||||||||||
Metropolitan Washington Airports Authority Airport System Revenue Refunding Bonds, Series 2011C, 5.00%, 10/1/28, Continuously Callable @100 | 1,500,000 | 1,610,355 | |||||||||
Florida (3.3%): | |||||||||||
Miami-Dade County Public Facilities Revenue & Revenue Refunding Bonds, Series 2015 A, 5.00%, 6/1/33, Continuously Callable @100 | 2,000,000 | 2,222,420 | |||||||||
Guam (1.6%): | |||||||||||
Port Authority of Guam Revenue Bonds, 5.00%, 7/1/48, Continuously Callable @100 | 1,000,000 | 1,076,510 | |||||||||
Idaho (0.8%): | |||||||||||
Idaho Fish & Wildlife Foundation, Inc Revenue Bonds, 5.00%, 12/1/37, Continuously Callable @100 | 485,000 | 560,869 | |||||||||
Illinois (23.8%): | |||||||||||
Chicago Board of Education Dedicated Capital Improvement, 6.00%, 4/1/46, Continuously Callable @100 | 3,775,000 | 4,329,886 | |||||||||
Chicago General Obligation Refunding Bonds | |||||||||||
Series A, 5.75%, 1/1/33, Continuously Callable @100 | 2,000,000 | 2,188,020 | |||||||||
Series A, 6.00%, 1/1/38, Continuously Callable @100 | 1,000,000 | 1,114,370 | |||||||||
Chicago Transit Authority Sales Tax Receipts Revenue Bonds, Series 2014, 5.00%, 12/1/44, AGC, Continuously Callable @100 | 2,450,000 | 2,703,208 | |||||||||
Chicago Wastewater Transmission Revenue Bonds, Series A, 5.00%, 1/1/47, Continuously Callable @100 | 1,000,000 | 1,053,490 | |||||||||
Chicago Wastewater Transmission Revenue Refunding Bonds, Series 2008 C, 5.00%, 1/1/34, Continuously Callable @100 | 1,000,000 | 1,084,610 | |||||||||
Illinois General Obligation Bonds, Series 2013, 5.50%, 7/1/27, Continuously Callable @100 | 2,000,000 | 2,145,280 | |||||||||
Sales Tax Securitization Corp., Series 2018 C, 5.00%, 1/1/43, Continuously Callable @100 | 1,500,000 | 1,599,150 | �� | ||||||||
16,218,014 | |||||||||||
Kansas (2.3%): | |||||||||||
Kansas Development Finance Authority Hospital Revenue Bonds 5.50%, 11/15/29, Pre-refunded 11/15/19 @ 100 | 35,000 | 36,088 | |||||||||
5.50%, 11/15/29, Continuously Callable @100 | 1,465,000 | 1,505,581 | |||||||||
1,541,669 |
See notes to financial statements.
46
Victory Portfolios Victory Tax-Exempt Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Principal Amount | Value | |||||||||
Massachusetts (1.6%): | |||||||||||
University of Massachusetts Building Authority Project Revenue Bonds, Series 2014 1, 5.00%, 11/1/39, Continuously Callable @100 | $ | 1,000,000 | $ | 1,118,810 | |||||||
Missouri (2.5%): | |||||||||||
Health & Educational Facilities Authority of the State of Missouri Revenue | |||||||||||
Bonds, 4.25%, 12/1/42, Continuously Callable @100 (a) | 1,750,000 | 1,682,398 | |||||||||
New Jersey (12.5%): | |||||||||||
New Jersey Economic Development Authority Biomedical Research Facilities Bonds, Series 2016 A, 5.00%, 7/15/29, Continuously Callable @100 | 885,000 | 974,226 | |||||||||
New Jersey Economic Development Authority School Facilities Construction Bonds, Series 2015 WW, 5.25%, 6/15/32, Continuously Callable @100 | 3,000,000 | 3,236,579 | |||||||||
New Jersey Health Care Facilities Financing Authority Revenue & Refunding Bonds, Series 2015 A, 5.00%, 7/1/46, AGC, Continuously Callable @100 | 1,500,000 | 1,617,045 | |||||||||
New Jersey Transportation Trust Fund Authority, Federal Highway Reimbursement Revenue Bonds, 5.00%, 6/15/28, Continuously Callable @100 | 1,000,000 | 1,113,860 | |||||||||
Tobacco Settlement Financing Corp., Revenue Bonds, Series 2018 A, 5.00%, 6/1/46, Continuously Callable @100 | 1,500,000 | 1,560,510 | |||||||||
8,502,220 | |||||||||||
New York (13.1%): | |||||||||||
Metropolitan Transportation Authority Dedicated Tax Green Fund Bonds, Series 2016 B1, 5.00%, 11/15/56, Continuously Callable @100 | 1,545,000 | 1,754,147 | |||||||||
New York Counties Tobacco Trust II, Tobacco Settlement Pass-Through Bonds, 5.75%, 6/1/43, Continuously Callable @100 | 200,000 | 200,436 | |||||||||
New York Utility Debt Securitization Authority Restructuring Bonds, Series 2013 TE, 5.00%, 12/15/41, Continuously Callable @100 | 1,500,000 | 1,659,630 | |||||||||
Port Authority of New York & New Jersey Consolidated Bonds | |||||||||||
5.00%, 10/1/30, Continuously Callable @100 | 2,000,000 | 2,179,140 | |||||||||
5.00%, 12/1/32, Continuously Callable @100 | 1,000,000 | 1,101,740 | |||||||||
TSASC, Inc. Tobacco Settlement Bonds, Series A, 5.00%, 6/1/41, Continuously Callable @100 | 2,000,000 | 2,061,320 | |||||||||
8,956,413 | |||||||||||
Oregon (0.3%): | |||||||||||
Oregon State Lottery Revenue Bonds, Series A, 5.25%, 4/1/30, Continuously Callable @100 | 205,000 | 220,322 | |||||||||
Pennsylvania (8.1%): | |||||||||||
Franklin County Industrial Development Authority, Fixed Rate Revenue Bonds, Series 2010, 5.30%, 7/1/30, Continuously Callable @100 | 1,000,000 | 1,045,370 | |||||||||
Pennsylvania Higher Educational Facilities Authority Revenue Bonds, Series 2010 E, 5.00%, 5/15/31, Continuously Callable @100 | 1,000,000 | 1,040,790 | |||||||||
Pennsylvania Turnpike Commission Revenue Bonds, Series 2014 A, 5.00%, 12/1/44, Continuously Callable @100 | 2,000,000 | 2,166,140 | |||||||||
Philadelphia School District, General Obligation Bonds, 5.00%, 9/1/38, Continuously Callable @100 | 1,200,000 | 1,317,948 | |||||||||
5,570,248 |
See notes to financial statements.
47
Victory Portfolios Victory Tax-Exempt Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Principal Amount | Value | |||||||||
Texas (9.4%): | |||||||||||
Canadian River Municipal Water Authority, Subordinate Lien Contract Revenue Bonds, Series 2011, 5.00%, 2/15/26, Continuously Callable @100 | $ | 1,000,000 | $ | 1,062,270 | |||||||
Fort Worth International Airport Joint Revenue Bonds, Series A, 5.00%, 11/1/38, Continuously Callable @100 | 1,000,000 | 1,048,790 | |||||||||
New Hope Cultural Education Facilities Finance Corp., Revenue Bonds | |||||||||||
Series A, 5.00%, 4/1/37, Continuously Callable @100 | 1,500,000 | 1,502,220 | |||||||||
Serries A1, 5.00%, 7/1/47, Continuously Callable @102 | 500,000 | 536,205 | |||||||||
Texas Private Activity Bond Surface Transportation Corp., Revenue Bonds, Series 2009, 6.88%, 12/31/39, Continuously Callable @100 | 2,130,000 | 2,229,640 | |||||||||
6,379,125 | |||||||||||
Utah (1.5%): | |||||||||||
Utah Infrastructure Agency Revenue Bonds, Series A, 5.00%, 10/15/40, Continuously Callable @100 | 1,000,000 | 1,052,750 | |||||||||
Virginia (1.8%): | |||||||||||
Henry County Industrial Development Authority Revenue Bonds, 4.00%, 11/1/45, Continuously Callable @100 | 1,250,000 | 1,251,350 | |||||||||
Washington (3.9%): | |||||||||||
Richland Electric Utility Revenue Bonds, 5.00%, 11/1/41, Continuously Callable @100 | 2,370,000 | 2,626,908 | |||||||||
Total Municipal Bonds (Cost $64,546,693) | 66,193,821 | ||||||||||
Total Investments (Cost $64,546,693) — 97.0% | 66,193,821 | ||||||||||
Other assets in excess of liabilities — 3.0% | 2,045,163 | ||||||||||
NET ASSETS — 100.00% | $ | 68,238,984 |
(a) Rule 144A security or other security that is restricted as to resale to institutional investors. The Fund's Adviser has deemed this security to be liquid based upon procedures approved by the Board of Trustees. As of December 31, 2018, the fair value of these securities was $1,682,398 and amounted to 2.5% of net assets.
See notes to financial statements.
48
Victory Portfolios Victory High Income Municipal Bond Fund | Schedule of Portfolio Investments December 31, 2018 |
Security Description | Principal Amount | Value | |||||||||
Municipal Bonds (98.2%) | |||||||||||
Arkansas (2.1%): | |||||||||||
Conway Health Facilities Board Revenue Bonds, Series A, 4.00%, 8/1/38, Continuously Callable @100 | $ | 1,000,000 | $ | 986,640 | |||||||
California (4.2%): | |||||||||||
California Public Works Board Lease Revenue Bonds, Series 2019 I-1, 6.63%, 11/1/34, Continuously Callable @100 | 30,000 | 30,418 | |||||||||
Golden State Tobacco Securitization Corp., Revenue Bonds, Series A2, 5.00%, 6/1/47, Continuously Callable @100 | 2,000,000 | 1,925,680 | |||||||||
1,956,098 | |||||||||||
Colorado (4.2%): | |||||||||||
Regional Transportation District, Denver Transit Partners Eagle P3 Project, Series 2010, 6.00%, 1/15/34, Continuously Callable @100 | 2,000,000 | 2,003,520 | |||||||||
District of Columbia (2.5%): | |||||||||||
District of Columbia Tobacco Settlement Financing Corp., 6.50%, 5/15/33 | 1,115,000 | 1,204,668 | |||||||||
Florida (14.9%): | |||||||||||
Osceola County Expressway System Revenue Bonds, Poinciana Parkway Project, Series 2014 A, 5.38%, 10/1/47, Continuously Callable @100 | 1,500,000 | 1,625,655 | |||||||||
Sumter County Village Community Development District No. 10 Special Assessment Revenue Bonds, Series 2014, 5.75%, 5/1/31, Continuously Callable @100 | 1,335,000 | 1,506,588 | |||||||||
Sumter County Village Community Development District No. 8 Special Assessment Refunding Revenue Bonds, Series 2010, 6.13%, 5/1/39, Continuously Callable @100 | 1,890,000 | 1,943,204 | |||||||||
Sumter County Village Community Development District No. 8 Special Assessment Revenue Bonds, Series 2010, 6.13%, 5/1/40, Continuously Callable @100 | 1,960,000 | 2,014,075 | |||||||||
7,089,522 | |||||||||||
Illinois (18.2%): | |||||||||||
Chicago Board of Education Dedicated Capital Improvement, 6.00%, 4/1/46, Continuously Callable @100 | 2,500,000 | 2,867,474 | |||||||||
Chicago General Obligation Refunding Bonds Series 2015 C, 5.00%, 1/1/38, Continuously Callable @100 | 1,000,000 | 1,028,390 | |||||||||
Series A, 6.00%, 1/1/38, Continuously Callable @100 | 1,000,000 | 1,114,370 | |||||||||
Chicago O'Hare International Airport General Airport Third Lien Revenue Bonds, 5.75%, 1/1/39, Continuously Callable @100 | 240,000 | 257,002 | |||||||||
Illinois General Obligation Bonds | |||||||||||
Series June 2013, 5.50%, 7/1/25, Continuously Callable @100 | 1,000,000 | 1,077,830 | |||||||||
Series June 2013, 5.50%, 7/1/33, Continuously Callable @100 | 1,000,000 | 1,050,060 | |||||||||
Series June 2013, 5.50%, 7/1/38, Continuously Callable @100 | 1,250,000 | 1,300,913 | |||||||||
8,696,039 | |||||||||||
Kentucky (1.3%): | |||||||||||
Boone CO Kentucky Pollution Control Revenue Bonds, 1.72%, 8/1/27, Callable 2/1/19 @ 100, Sumitomo Mitsui Banking Corp. | 600,000 | 600,000 |
See notes to financial statements.
49
Victory Portfolios Victory High Income Municipal Bond Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Principal Amount | Value | |||||||||
Massachusetts (3.4%): | |||||||||||
Massachusetts Educational Financing Authority, Education Loan Revenue Bonds, Issue J Series 2011, 5.63%, 7/1/28, Continuously Callable @100 | $ | 420,000 | $ | 452,214 | |||||||
Series 2011, 5.63%, 7/1/29, Continuously Callable @100 | 845,000 | 909,795 | |||||||||
Series 2011, 5.63%, 7/1/33, Continuously Callable @100 | 215,000 | 231,463 | |||||||||
1,593,472 | |||||||||||
Missouri (3.8%): | |||||||||||
Health & Educational Facilities Authority of the State of Missouri Revenue Bonds, 4.25%, 12/1/42, Continuously Callable @100(a) | 1,900,000 | 1,826,603 | |||||||||
New Jersey (8.5%): | |||||||||||
New Jersey Economic Development Authority School Facilities Construction Bonds, Series 2015 WW, 5.25%, 6/15/32, Continuously Callable @100 | 1,000,000 | 1,078,860 | |||||||||
New Jersey Economic Development Motor Vehicle Surcharges Subordinate Revenue Bonds, Series A, 5.00%, 7/1/33, Continuously Callable @100 | 500,000 | 546,075 | |||||||||
New Jersey Higher Education Student Assistance Authority, Student Loan Revenue Bonds, Series 2011-1, 5.75%, 12/1/28, Continuously Callable @100 | 755,000 | 800,360 | |||||||||
Tobacco Settlement Financing Corp., Revenue Bonds, Series 2018 A, 5.00%, 6/1/46, Continuously Callable @100 | 1,500,000 | 1,560,510 | |||||||||
3,985,805 | |||||||||||
New York (3.4%): | |||||||||||
Port Authority of New York & New Jersey Special Project Bonds, JFK International Air Terminal LLC Project, Series 8, 6.00%, 12/1/36, Continuously Callable @100 | 1,500,000 | 1,599,240 | |||||||||
North Dakota (3.1%): | |||||||||||
Grand Forks, North Dakota Senior Housing and Nursing Facility Revenue Bonds, 5.00%, 12/1/36, Continuously Callable @100 | 1,500,000 | 1,488,000 | |||||||||
Oklahoma (2.5%): | |||||||||||
Oklahoma Development Finance Authority Continuing Care Retirement Community Revenue Refunding Bonds, Series 2012, 6.00%, 1/1/32, Continuously Callable @100 (b) | 1,885,000 | 1,172,421 | |||||||||
Oregon (1.1%): | |||||||||||
Clackamas County Hospital Facility Authority Revenue Bonds, Series A, 5.00%, 11/15/52, Continuously Callable @102 | 500,000 | 528,465 | |||||||||
Pennsylvania (4.0%): | |||||||||||
Cumberland County Municipal Authority, Diakon Lutheran Social Ministries Project Revenue Bonds, Series 2009, 6.13%, 1/1/29 | 150,000 | 150,000 | |||||||||
Dauphin County General Authority Health Systems Revenue Bonds, 6.00%, 6/1/36, Continuously Callable @100 | 230,000 | 233,846 | |||||||||
Philadelphia School District, General Obligation Bonds, Series 2015 A, 5.00%, 9/1/35, Continuously Callable @100 | 1,400,000 | 1,530,242 | |||||||||
1,914,088 | |||||||||||
South Carolina (3.6%): | |||||||||||
Lancaster County, Walnut Creek Improvement District Assessment Refunding Revenue Bonds, Series 2016 A-1, 5.00%, 12/1/37, Continuously Callable @100 | 1,675,000 | 1,713,374 |
See notes to financial statements.
50
Victory Portfolios Victory High Income Municipal Bond Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Principal Amount | Value | |||||||||
South Dakota (1.7%): | |||||||||||
Oglala Sioux Tribe, 5.00%, 10/1/22, Callable 2/7/19 @ 100 | $ | 800,000 | $ | 795,760 | |||||||
Texas (7.6%): | |||||||||||
New Hope Cultural Education Facilities Finance Corp. Revenue Bonds Series A, 5.00%, 4/1/42, Continuously Callable @100 | 1,500,000 | 1,467,495 | |||||||||
Series B, 5.00%, 7/1/47, Continuously Callable @102 | 1,000,000 | 1,014,370 | |||||||||
Texas Private Activity Bond Surface Transportation Corp. Revenue Bonds, NTE Mobility Partners Segments 3 LLC — Segments 3A & 3B Facility, Series 2013, 7.00%, 12/31/38, Continuously Callable @100 | 1,000,000 | 1,157,410 | |||||||||
3,639,275 | |||||||||||
Utah (3.8%): | |||||||||||
Utah Charter School Finance Authority Revenue Bonds, 5.00%, 4/15/37, Continuously Callable @100 | 500,000 | 546,895 | |||||||||
Utah Infrastructure Agency Revevnue Bonds, Series A, 5.38%, 10/15/40, Continuously Callable @100 | 1,150,000 | 1,249,694 | |||||||||
1,796,589 | |||||||||||
Virginia (2.1%): | |||||||||||
Henry County Industrial Development Authority Revenue Bonds, 4.00%, 11/1/45, Continuously Callable @100 | 1,000,000 | 1,001,080 | |||||||||
West Virginia (2.2%): | |||||||||||
The Country Commission of Monongalia Country, WV Special District Excise Tax Revenue, Refunding and Improvement Bonds, Series 2017 A, 5.75%, 6/1/43, Continuously Callable @100 (a) | 1,000,000 | 1,025,690 | |||||||||
Total Municipal Bonds (Cost $46,155,217) | 46,616,349 | ||||||||||
Total Investments (Cost $46,155,217) — 98.2% | 46,616,349 | ||||||||||
Other assets in excess of liabilities — 1.8% | 831,237 | ||||||||||
NET ASSETS — 100.00% | $ | 47,447,586 |
(a) Rule 144A security or other security that is restricted as to resale to institutional investors. The Fund's Adviser has deemed this security to be liquid based upon procedures approved by the Board of Trustees. As of December 31, 2018, the fair value of these securities was $2,852,293 and amounted to 6.0% of net assets.
(b) Defaulted security.
LLC — Limited Liability Company
See notes to financial statements.
51
Victory Portfolios Victory Floating Rate Fund | Schedule of Portfolio Investments December 31, 2018 |
Security Description | Principal Amount | Value | |||||||||
Senior Secured Loans (88.7%) | |||||||||||
Acrisure LLC, 1st Lien Term Loan B, 6.59% (LIBOR01M+425bps), 11/22/23, Callable 2/6/19 @ 100 (a) | $ | 6,866,009 | $ | 6,638,606 | |||||||
Admi Corp., 1st Lien Term Loan B, 5.34% (LIBOR01M+300bps), 4/30/25, Callable 2/6/19 @ 101 (a) | 7,960,000 | 7,548,706 | |||||||||
Advanced Disposal Services, Inc., 4.67% (LIBOR01W+225bps), 11/10/23, Callable 2/6/19 @ 100 (a) | 6,090,112 | 5,840,783 | |||||||||
Ai Ladder Luxembourg Subco Sarl, 1st Lien Term Loan B, 7.02% (LIBOR06M+450bps), 5/4/25 (a) | 5,973,909 | 5,891,768 | |||||||||
Alphabet Holding Co., Inc., 1st Lien Term Loan, 5.84% (LIBOR01M+350bps), 8/15/24, Callable 2/6/19 @ 100 (a) | 5,530,000 | 4,949,350 | |||||||||
Alphabet Holding Co., Inc., 2nd Lien Term Loan, 10.09% (LIBOR01M+775bps), 8/15/25, Callable 2/6/19 @ 101 (a) | 4,950,000 | 4,059,000 | |||||||||
American Renal Holdings, Inc., 5.59% (LIBOR01M+325bps), 6/15/24, Callable 2/6/19 @ 100 (a) | 7,092,000 | 6,914,701 | |||||||||
Amneal Pharmaceuticals LLC, 1st Lien Term Loan B, 5.88% (LIBOR01M+350bps), 3/23/25, Callable 2/6/19 @ 101 (a) | 7,958,151 | 7,527,057 | |||||||||
AmWINS Group, Inc., 5.27% (LIBOR01M+275bps), 1/25/24, Callable 2/6/19 @ 100 (a) | 7,840,000 | 7,477,400 | |||||||||
AppLovin Corp., 1st Lien Term Loan B, 6.19% (LIBOR01M+375bps), 8/15/25 (a) | 6,000,000 | 5,880,000 | |||||||||
Asurion LLC, 1st Lien Term Loan B7, 5.34% (LIBOR01M+300bps), 11/4/24, Callable 2/6/19 @ 100 (a) | 6,965,000 | 6,649,416 | |||||||||
Avantor, Inc., 1st Lien Term Loan, 6.57% (LIBOR03M+375bps), 9/22/24, Callable 2/6/19 @ 101 (a) | 3,766,010 | 3,640,489 | |||||||||
Avaya, Inc., 1st Lien Term Loan B, 6.71% (LIBOR01M+425bps), 12/15/24, Callable 2/6/19 @ 100 (a) | 7,425,000 | 7,155,844 | |||||||||
Bass Pro Group LLC, Term Loan B, 7.34% (LIBOR01M+500bps), 12/16/23, Callable 2/6/19 @ 101 (a) | 9,401,199 | 8,973,444 | |||||||||
Blount International, Inc., 1st Lien Term Loan B, 6.09% (LIBOR01M+375bps), 4/12/23, Callable 2/6/19 @ 101 (a) | 5,955,000 | 5,870,618 | |||||||||
Boyd Gaming Corp., 4.67% (LIBOR01W+225bps), 9/15/23, Callable 2/6/19 @ 100 (a) | 5,476,269 | 5,264,064 | |||||||||
Brand Energy & Infrastructure Services, Inc., 1st Lien Term Loan, 6.73%-6.76%% (LIBOR03M+425bps), 6/21/24, Callable 2/6/19 @ 100 (a) | 8,865,000 | 8,398,346 | |||||||||
Builders FirstSource, Inc., 5.39% (LIBOR03M+300bps), 2/29/24, Callable 2/6/19 @ 100 (a) | 7,637,500 | 7,132,890 | |||||||||
BW NHHC Holdco, Inc., 7.47% (LIBOR01M+500bps), 5/16/25 (a) | 4,975,000 | 4,850,625 | |||||||||
BW NHHC Holdco, Inc., 11.47% (LIBOR01M+900bps), 5/16/26 (a) | 3,000,000 | 2,955,000 | |||||||||
Casa Systems, Inc., 6.34% (LIBOR01M+400bps), 12/15/23, Callable 2/6/19 @ 100 (a) | 8,820,000 | 8,665,650 | |||||||||
Change Healthcare LLC, 5.09% (LIBOR01M+275bps), 3/1/24, Callable 2/6/19 @ 100 (a) | 3,751,282 | 3,549,651 | |||||||||
Chassx, Inc., 8.19% (LIBOR03M+550bps), 11/10/23, Callable 2/6/19 @ 101 (a) | 3,945,038 | 3,866,137 | |||||||||
CIBT Solutions, Inc., 1st Lien Term Loan, 6.14% (LIBOR03M+375bps), 6/1/24, Callable 2/6/19 @ 100 (a) | 5,910,000 | 5,732,700 | |||||||||
Cole-Parmer, 5.89% (LIBOR03M+350bps), 3/21/24, Callable 2/6/19 @ 100 (a) | 6,877,526 | 6,679,797 |
See notes to financial statements.
52
Victory Portfolios Victory Floating Rate Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Principal Amount | Value | |||||||||
Concentra, Inc., 1st Lien Term Loan, 5.13% (LIBOR01M+275bps), 6/1/22, Callable 2/6/19 @ 101 (a) | $ | 2,284,007 | $ | 2,181,226 | |||||||
Concrete Pumping Holdings, Inc., 8.81% (LIBOR03M+600bps), 11/14/25 (a) | 6,000,000 | 5,760,000 | |||||||||
Consolidated Communications, Inc., 1st Lien Term Loan B, 5.35% (LIBOR01M+300bps), 10/5/23, Callable 2/6/19 @ 100 (a) | 4,949,627 | 4,621,714 | |||||||||
CPM Holdings, Inc., 6.27% (LIBOR01M+375bps), 10/24/25 (a) | 3,000,000 | 2,936,250 | |||||||||
CPM Holdings, Inc., 10.77% (LIBOR01M+825bps), 10/24/26 (a) | 2,000,000 | 1,965,000 | |||||||||
Crown Finance US, Inc., 1st Lien Term Loan B, 4.84% (LIBOR01M+250bps), 2/7/25, Callable 2/6/19 @ 100 (a) | 8,932,500 | 8,426,295 | |||||||||
Dawn Acquisition LLC, 1st Lien Term Loan B, 6.55% (LIBOR03M+375bps), 10/25/25, Callable 2/6/19 @ 101 (a) (b) | 3,500,000 | 3,272,500 | |||||||||
Dayco Products LLC, 6.96% (LIBOR03M+425bps), 5/19/24, Callable 2/6/19 @ 100 (a) | 7,835,789 | 7,620,305 | |||||||||
Dole Food Co., Inc., 5.27% (LIBOR01M+275bps), 3/24/24, Callable 2/6/19 @ 100 (a) | 4,042,105 | 3,915,790 | |||||||||
Dole Food Co., Inc., 5.55% (LIBOR03M+275bps), 3/24/24, Callable 2/6/19 @ 100 (a) | 94,316 | 91,368 | |||||||||
Dole Food Co., Inc., 7.25% (PRIME+175bps), 3/24/24, Callable 2/6/19 @ 100 (a) | 2,526 | 2,447 | |||||||||
Dole Food Co., Inc., 5.26% (LIBOR01M+275bps), 3/24/24, Callable 2/6/19 @ 100 (a) | 2,021,053 | 1,957,895 | |||||||||
Eldorado Resorts, Inc., 4.75% (LIBOR02M+225bps), 3/16/24, Callable 2/6/19 @ 100 (a) | 490,745 | 468,254 | |||||||||
Eldorado Resorts, Inc., 4.81% (LIBOR01M+225bps), 3/16/24, Callable 2/6/19 @ 100 (a) | 3,777,617 | 3,604,489 | |||||||||
Engineered Machinery Holdings, Inc., 1st Lien Term Loan, 5.64% (LIBOR03M+325bps), 7/19/24, Callable 2/6/19 @ 100 (a) | 3,820,095 | 3,681,617 | |||||||||
Engineered Machinery Holdings, Inc., 2nd Lien Term Loan, 9.64% (LIBOR03M+725bps), 7/19/25, Callable 2/6/19 @ 101 (a) | 4,423,404 | 4,323,878 | |||||||||
Forterra Finance LLC, 1st Lien Term Loan, 5.34% (LIBOR01M+300bps), 10/25/23, Callable 2/6/19 @ 100 (a) | 5,984,694 | 5,384,070 | |||||||||
Gates Global LLC, 1st Lien Term Loan B2, 5.09% (LIBOR01M+275bps), 3/31/24, Callable 2/6/19 @ 100 (a) | 7,506,711 | 7,114,936 | |||||||||
Gentiva Health Services, Inc., 1st Lien Term Loan, 6.13% (LIBOR01M+375bps), 7/2/25, Callable 2/6/19 @ 100 (a) | 4,874,661 | 4,716,234 | |||||||||
Gentiva Health Services, Inc., 2nd Lien Term Loan, 9.38% (LIBOR01M+700bps), 7/2/26, Callable 2/6/19 @ 102 (a) | 2,250,000 | 2,238,750 | |||||||||
Golden Nugget, Inc., 1st Lien Term Loan, 5.28% (LIBOR03M+275bps), 10/4/23, Callable 2/6/19 @ 100 (a) | 3,693,506 | 3,545,766 | |||||||||
Golden Nugget, Inc., 1st Lien Term Loan, 5.26% (LIBOR01M+275bps), 10/4/23, Callable 2/6/19 @ 100 (a) | 2,932,469 | 2,815,171 | |||||||||
Greenway Health LLC, 6.56% (LIBOR03M+375bps), 2/16/24, Callable 2/6/19 @ 100 (a) | 5,910,000 | 5,732,700 | |||||||||
GTT Communications, Inc., 1st Lien Term Loan B, 5.09% (LIBOR01M+275bps), 6/2/25, Callable 2/6/19 @ 100 (a) | 7,960,000 | 7,475,793 | |||||||||
Gulf Finance LLC, 1st Lien Term Loan B, 7.64% (LIBOR01M+525bps), 8/25/23, Callable 2/6/19 @ 100 (a) | 5,078,425 | 3,853,255 | |||||||||
Hertz Corp., Term Loan B1, 5.09% (LIBOR01M+275bps), 6/30/23, Callable 2/6/19 @ 100 (a) | 7,738,730 | 7,423,686 |
See notes to financial statements.
53
Victory Portfolios Victory Floating Rate Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Principal Amount | Value | |||||||||
Holley Purchaser, Inc., 1st Lien Term Loan, 7.51% (LIBOR03M+500bps), 10/24/25, Callable 2/6/19 @ 101 (a) | $ | 4,400,000 | $ | 4,290,000 | |||||||
Hub International, Ltd., 1st Lien Term Loan B, 5.49% (LIBOR03M+300bps), 4/25/25, Callable 2/6/19 @ 100 (a) | 7,462,500 | 7,031,093 | |||||||||
Infor(US), Inc., 1st Lien Term Loan B6, 5.14% (LIBOR01M+275bps), 2/1/22, Callable 2/6/19 @ 100 (a) | 8,522,336 | 8,153,489 | |||||||||
Intelsat Jackson Holdings SA, 1st Lien Term Loan B3, 6.26% (LIBOR01M+375bps), 6/30/19, Callable 2/6/19 @ 100 (a) | 10,000,000 | 9,660,700 | |||||||||
Janus International Group LLC, 1st Lien Term Loan, 5.34% (LIBOR01M+300bps), 2/9/25, Callable 2/6/19 @ 100 (a) | 2,977,500 | 2,873,288 | |||||||||
Janus International Group LLC, 2nd Lien Term Loan, 10.09% (LIBOR01M+775bps), 2/9/26, Callable 2/6/19 @ 102 (a) | 2,000,000 | 1,890,000 | |||||||||
Kindred Healthcare LLC, 1st Lien Term Loan B, 7.38% (LIBOR01M+500bps), 7/2/25, Callable 2/6/19 @ 101 (a) | 5,985,000 | 5,566,050 | |||||||||
Leslie's Poolmart, Inc., Term Loan B, 5.84% (LIBOR01M+350bps), 8/16/23, Callable 2/6/19 @ 100 (a) | 6,718,634 | 6,395,334 | |||||||||
LifeScan Global Corp., 1st Lien Term Loan, 8.40% (LIBOR03M+600bps), 6/19/24, Callable 2/6/19 @ 101 (a) | 3,600,000 | 3,393,000 | |||||||||
LifeScan Global Corp., 2nd Lien Term Loan, 11.90% (LIBOR01M+950bps), 6/19/25, Callable 10/1/19 @ 102 (a) | 2,250,000 | 2,070,000 | |||||||||
Navicure, Inc., 1st Lien Term Loan, 6.09% (LIBOR01M+375bps), 11/1/24, Callable 2/6/19 @ 100 (a) | 3,960,000 | 3,836,250 | |||||||||
Navicure, Inc., 2nd Lien Term Loan, 10.02% (LIBOR01M+750bps), 11/1/25, Callable 2/6/19 @ 101 (a) | 2,500,000 | 2,437,500 | |||||||||
Navistar Financial Corp. 1st Lien Term Loan B, 6.13% (LIBOR01M+375bps), 7/25/25, Callable 1/30/19 @ 100 (a) | 6,982,500 | 6,668,288 | |||||||||
Navistar, Inc., 1st Lien Term Loan B, 5.89% (LIBOR01M+350bps), 11/2/24, Callable 2/6/19 @ 100 (a) | 7,443,750 | 7,164,609 | |||||||||
Ortho-Clinical Diagnostics SA, 1st Lien Term Loan B, 5.76% (LIBOR01M+325bps), 5/22/25, Callable 2/6/19 @ 100 (a) | 6,738,064 | 6,234,798 | |||||||||
Packaging Coordinators Midco, Inc., 2nd Lien Term Loan, 11.14% (LIBOR03M+875bps), 7/1/24, Callable 2/6/19 @ 100 (a) | 6,800,000 | 6,766,000 | |||||||||
Perspecta, Inc., 1st Lien Term Loan B, 4.59% (LIBOR01M+225bps), 4/28/25, Callable 2/6/19 @ 100 (a) | 6,467,500 | 6,241,138 | |||||||||
PetSmart, Inc., 5.38% (LIBOR01M+300bps), 3/10/22, Callable 2/6/19 @ 100 (a) | 8,112,676 | 6,388,732 | |||||||||
PharMerica Corp., 1st Lien Term Loan, 5.96% (LIBOR01M+350bps), 9/26/24, Callable 2/6/19 @ 100 (a) | 2,977,500 | 2,833,597 | |||||||||
PharMerica Corp., 2nd Lien Term Loan, 10.21% (LIBOR01M+775bps), 9/26/25, Callable 2/6/19 @ 101 (a) | 2,000,000 | 1,890,000 | |||||||||
Pisces Midco, Inc., 6.18% (LIBOR03M+375bps), 4/14/25, Callable 2/6/19 @ 101 (a) | 7,969,975 | 7,252,677 | |||||||||
Precyse Acquisition Corp., 7.02% (LIBOR01M+450bps), 10/20/22, Callable 2/6/19 @ 100 (a) | 6,757,673 | 6,436,683 | |||||||||
Radiate Holdco LLC, 5.34% (LIBOR01M+300bps), 2/1/24, Callable 2/6/19 @ 100 (a) | 7,860,000 | 7,396,967 | |||||||||
Regionalcare Hospital Partners Holdings, Inc., 7.13% (LIBOR03M+450bps), 11/16/25 (a) | 6,500,000 | 6,150,625 | |||||||||
Reynolds Group Holdings, Inc., 1st Lien Term Loan B, 5.09% (LIBOR01M+275bps), 2/5/23, Callable 2/6/19 @ 100 (a) | 6,041,214 | 5,739,153 |
See notes to financial statements.
54
Victory Portfolios Victory Floating Rate Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Principal Amount | Value | |||||||||
Robertshaw US Holding Corp., 1st Lien Term Loan, 5.88% (LIBOR01M+350bps), 2/15/25, Callable 2/6/19 @ 100 (a) | $ | 1,985,000 | $ | 1,801,388 | |||||||
Robertshaw US Holding Corp., 2nd Lien Term Loan, 10.38% (LIBOR01M+800bps), 2/15/26, Callable 2/6/19 @ 102 (a) | 4,000,000 | 3,640,000 | |||||||||
Scientific Games International, Inc., 1st Lien Term Loan B5, 5.25% (LIBOR02M+275bps), 8/14/24, Callable 2/6/19 @ 100 (a) | 4,411,816 | 4,129,769 | |||||||||
Scientific Games International, Inc., 1st Lien Term Loan B5, 5.09% (LIBOR01M+275bps), 8/14/24, Callable 2/6/19 @ 100 (a) | 1,055,693 | 988,202 | |||||||||
SIWF Holdings, Inc., 10.97% (LIBOR01M+850bps), 5/26/26 (a) | 1,500,000 | 1,380,000 | |||||||||
SIWF Holdings, Inc., 6.72% (LIBOR01M+425bps), 5/27/25 (a) | 3,980,000 | 3,858,132 | |||||||||
Specialty Building Products Holdings LLC, 1st Lien Term Loan, 8.09% (LIBOR01M+575bps), 10/1/25, Callable 2/6/19 @ 101 (a) | 7,000,000 | 6,755,000 | |||||||||
Sprint Communications, Inc., 1st Lien Term Loan B, 5.38% (LIBOR01M+300bps), 2/3/24, Callable 2/6/19 @ 101 (a) | 1,000,000 | 965,000 | |||||||||
Sprint Communications, Inc., 1st Lien Term Loan B, 4.88% (LIBOR01M+250bps), 2/2/24, Callable 2/6/19 @ 100 (a) | 4,962,121 | 4,709,897 | |||||||||
SRS Distribution, Inc., 1st Lien Term Loan B, 5.59% (LIBOR01M+325bps), 5/19/25, Callable 2/6/19 @ 100 (a) | 3,990,000 | 3,713,214 | |||||||||
StandardAero Aviation Holdings, Inc. 1st Lien Term Loan, 6.09% (LIBOR01M+375bps), 7/7/22, Callable 2/6/19 @ 100 (a) | 7,740,000 | 7,633,575 | |||||||||
Station Casinos LLC, Term Loan B, 4.85% (LIBOR01M+250bps), 6/8/23, Callable 2/6/19 @ 100 (a) | 7,689,070 | 7,365,052 | |||||||||
Sterigenics-Nordion Holdings LLC, 5.34% (LIBOR01M+300bps), 5/15/22 (a) | 7,817,878 | 7,472,563 | |||||||||
Tecomet, Inc., 1st Lien Term Loan B, 5.89% (LIBOR01M+350bps), 4/18/24, Callable 2/6/19 @ 100 (a) | 6,894,999 | 6,601,961 | |||||||||
Telesat Canada, 4.89% (LIBOR03M+250bps), 11/17/23, Callable 2/6/19 @ 101 (a) | 6,539,489 | 6,176,547 | |||||||||
Tenneco, Inc., 1st Lien Term Loan B, 5.09% (LIBOR01M+275bps), 6/18/25, Callable 2/6/19 @ 101 (a) | 6,500,000 | 6,090,500 | |||||||||
Thor Industries, Inc., 6.31% (LIBOR01M+375bps), 11/1/25 (a) (b) | 6,000,000 | 5,640,000 | |||||||||
TI Group Automotive Systems LLC, Term Loan B, 4.84% (LIBOR01M+250bps), 6/30/22, Callable 2/6/19 @ 100 (a) | 4,009,248 | 3,885,643 | |||||||||
Titan Acquisition, Ltd., 5.34% (LIBOR01M+300bps), 3/28/25 (a) | 6,947,500 | 6,336,676 | |||||||||
TKC Holdings, Inc., 2nd Lien Term Loan, 10.35% (LIBOR01M+800bps), 2/1/24, Callable 2/6/19 @ 100 (a) | 5,650,000 | 5,532,989 | |||||||||
Tribune Media Co., 1st Lien Term C, 5.34% (LIBOR01M+300bps), 1/27/24, Callable 2/6/19 @ 100 (a) | 8,055,144 | 7,890,013 | |||||||||
Tribune Media Co., Term Loan B, 5.34% (LIBOR01M+300bps), 12/27/20, Callable 2/6/19 @ 100 (a) | 646,287 | 640,632 | |||||||||
Univision Communications, 1st Lien Term Loan C5, 5.09% (LIBOR01M+275bps), 3/15/24, Callable 2/6/19 @ 100 (a) | 6,732,004 | 6,078,461 | |||||||||
US Lbm Borrower LLC, 6.28% (LIBOR03M+375bps), 8/20/22, Callable 2/6/19 @ 100 (a) | 7,866,528 | 7,312,567 | |||||||||
USI, Inc., 1st Lien Term Loan B, 5.39% (LIBOR03M+300bps), 5/16/24, Callable 2/6/19 @ 100 (a) | 8,887,500 | 8,365,360 | |||||||||
Verscend Holding Corp., 6.84% (LIBOR01M+450bps), 8/10/25, Callable 2/6/19 @ 101 (a) | 5,985,000 | 5,775,525 | |||||||||
Vertex Aerospace Services Corp., 1st Lien Term Loan B, 7.09% (LIBOR01M+475bps), 6/16/25, Callable 2/6/19 @ 100 (a) | 2,985,000 | 2,947,688 |
See notes to financial statements.
55
Victory Portfolios Victory Floating Rate Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Principal Amount | Value | |||||||||
West Corp., 1st Lien Term Loan B1, 6.03% (LIBOR03M+350bps), 10/10/24, Callable 2/6/19 @ 100 (a) | $ | 6,965,000 | $ | 6,352,637 | |||||||
Windstream Services LLC / Windstream Finance Corp., 5.71% (LIBOR01M+325bps), 2/8/24, Callable 2/6/19 @ 100 (a) | 1,984,810 | 1,669,722 | |||||||||
WP CPP Holdings LLC, 1st Lien Term Loan B, 6.28% (LIBOR03M+375bps), 4/30/25, Callable 2/6/19 @ 100 (a) | 3,990,000 | 3,845,363 | |||||||||
WP CPP Holdings LLC, 2nd Lien Term Loan, 10.28% (LIBOR03M+775bps), 4/30/26, Callable 2/6/19 @ 102 (a) | 2,000,000 | 1,957,500 | |||||||||
Wynn Resorts Ltd., 1st Lien Term Loan B, 4.60% (LIBOR01M+225bps), 10/30/24, Callable 2/6/19 @ 101 (a) | 4,250,000 | 4,008,302 | |||||||||
Total Senior Secured Loans (Cost $569,581,069) | 543,521,280 | ||||||||||
Corporate Bonds (8.9%) | |||||||||||
Communication Services (1.3%): | |||||||||||
Sprint Corp., 7.88%, 9/15/23 (c) | 6,500,000 | 6,669,065 | |||||||||
Windstream Services LLC / Windstream Finance Corp., 9.00%, 6/30/25, Callable 6/30/21 @ 104.5 (d) | 2,140,000 | 1,449,401 | |||||||||
8,118,466 | |||||||||||
Consumer Discretionary (1.5%): | |||||||||||
Enterprise Development Authority/The, 12.00%, 7/15/24, Callable 7/15/21 @ 109 (d) | 5,000,000 | 4,579,100 | |||||||||
Golden Nugget, Inc., 8.75%, 10/1/25, Callable 10/1/20 @ 104.38 (d) | 5,000,000 | 4,799,400 | |||||||||
PetSmart, Inc., 5.88%, 6/1/25, Callable 6/1/20 @ 102.94 (c) (d) | 1,000,000 | 724,790 | |||||||||
10,103,290 | |||||||||||
Financials (0.8%): | |||||||||||
Compass Group Diversified Holdings LLC, 8.00%, 5/1/26, Callable 5/1/21 @ 104 (c) (d) | 5,000,000 | 4,957,850 | |||||||||
Health Care (2.5%): | |||||||||||
Avantor, Inc., 9.00%, 10/1/25, Callable 10/1/20 @ 106.75 (c) (d) | 3,000,000 | 2,998,290 | |||||||||
Change Health/Finance, Inc., 5.75%, 3/1/25, Callable 3/1/20 @ 102.88 (d) | 3,000,000 | 2,801,640 | |||||||||
Ortho-Clinical Diagnostics, Inc., 6.63%, 5/15/22, Callable 2/7/19 @ 101.66 (c) (d) | 6,000,000 | 5,361,300 | |||||||||
Polaris Intermediate Corp., 8.50%, 12/1/22, Callable 6/1/19 @ 104 (c) (d) | 4,000,000 | 3,653,920 | |||||||||
14,815,150 | |||||||||||
Industrials (2.4%): | |||||||||||
Algeco Global Finance 2 PLC, 10.00%, 8/15/23, Callable 2/15/20 @ 105 (c) (d) | 4,000,000 | 3,730,720 | |||||||||
Apex Tool Group LLC /BC Mountain Finance, Inc., 9.00%, 2/15/23, Callable 2/15/19 @ 102 (d) | 4,000,000 | 3,408,920 | |||||||||
SRS Distribution, Inc., 8.25%, 7/1/26, Callable 7/1/21 @ 104.13 (c) (d) | 3,000,000 | 2,757,240 | |||||||||
Triumph Group, Inc., 4.88%, 4/1/21, Callable 2/7/19 @ 101.22 | 500,000 | 446,485 | |||||||||
W/S Packaging Holdings, Inc., 9.00%, 4/15/23, Callable 4/15/20 @ 104.5 (c) (d) | 3,800,000 | 3,781,000 | |||||||||
14,124,365 |
See notes to financial statements.
56
Victory Portfolios Victory Floating Rate Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Principal Amount | Value | |||||||||
Materials (0.4%): | |||||||||||
Titan Acquisition Ltd. / Titan Co-Borrower LLC, 7.75%, 4/15/26, Callable 4/15/21 @ 103.88 (c) (d) | $ | 2,500,000 | $ | 2,152,751 | |||||||
Total Corporate Bonds (Cost $57,023,315) | 54,271,872 | ||||||||||
Total Investments (Cost $626,604,384) — 97.6% | 597,793,152 | ||||||||||
Other assets in excess of liabilities — 2.4% | 14,602,067 | ||||||||||
NET ASSETS — 100.00% | $ | 612,395,218 |
(a) Variable or Floating-Rate Security. Rate disclosed is as of December 31, 2018.
(b) Security purchased on a when-issued basis.
(c) All or a portion of this security has been segregated as collateral for securities purchased on a when-issued basis.
(d) Rule 144A security or other security that is restricted as to resale to institutional investors. The Fund's Adviser has deemed this security to be liquid based upon procedures approved by the Board of Trustees. As of December 31, 2018, the fair value of these securities was $47,156,321 and amounted to 7.7% of net assets.
bps — Basis points
LIBOR — London InterBank Offered Rate
LIBOR01M — 1 Month US Dollar LIBOR, rate disclosed as of December 31, 2018, based on the last reset date of the security
LIBOR02M — 2 Month US Dollar LIBOR, rate disclosed as of December 31, 2018, based on the last reset date of the security
LIBOR01W — 1 Week US Dollar LIBOR, rate disclosed as of December 31, 2018, based on the last reset date of the security
LIBOR03M — 3 Month US Dollar LIBOR, rate disclosed as of December 31, 2018, based on the last reset date of the security
LIBOR06M — 6 Month US Dollar LIBOR, rate disclosed as of December 31, 2018, based on the last reset date of the security
LLC — Limited Liability Company
PLC — Public Limited Company
PRIME-U.S. Prime Rate
See notes to financial statements.
57
Victory Portfolios Victory Strategic Income Fund | Schedule of Portfolio Investments December 31, 2018 |
Security Description | Principal Amount | Value | |||||||||
Asset Backed Securities (12.0%) | |||||||||||
Ally Master Owner Trust, Series 2017-3, Class A1, 2.89% (LIBOR01M+43bps), 6/15/22 (a) (b) | $ | 250,000 | $ | 249,850 | |||||||
AmeriCredit Automobile, Series 2017-3, Class A3, 1.90%, 3/18/22, Callable 5/18/21 @ 100 (b) | 283,000 | 279,999 | |||||||||
Capital Automotive REIT, Series 2016-A1, Class A, 4.55%, 2/15/46 (b) (c) | 729,469 | 747,057 | |||||||||
Chase Issuance Trust, Series 2018-A1, Class A1, 2.66% (LIBOR01M+20bps), 4/17/23 (a) (b) | 500,000 | 498,417 | |||||||||
Chesapeake Funding II LLC, Series 2018-A1, Class A1, 3.04%, 4/15/30, Callable 4/15/21 @ 100 (b) (c) | 339,599 | 339,354 | |||||||||
Citibank Credit Card Issuance Trust, Series 2018-A1, Class A1, 2.49%, 1/20/23 (b) | 400,000 | 396,651 | |||||||||
Discover Card Execution Note Trust, Series 2017-A3, Class A3, 2.69% (LIBOR01M+23bps), 10/17/22 (a) | 500,000 | 499,697 | |||||||||
Focus Brands Funding LLC, Series 2017-1A, Class A2I, 3.86%, 4/30/47, Callable 4/30/20 @ 100 (b) (c) | 985,000 | 978,836 | |||||||||
Mercedes-Benz Master Owner Trust, Series 2017-BA, Class A, 2.86% (LIBOR01M+42bps), 5/16/22 (a) (c) | 500,000 | 499,505 | |||||||||
Santander Drive Auto Receivables Trust, Series 2016-3, Class C, 2.46%, 3/15/22, Callable 10/15/20 @ 100 (b) | 500,000 | 496,964 | |||||||||
Verizon Owner Trust, Series 2017-3A, Class A1A, 2.06%, 4/20/22, Callable 12/20/20 @ 100 (b) (c) | 500,000 | 494,157 | |||||||||
Verizon Owner Trust, Series 2017-3A, Class B, 2.38%, 4/20/22, Callable 12/20/20 @ 100 (b) (c) | 500,000 | 494,000 | |||||||||
Total Asset Backed Securities (Cost $6,017,453) | 5,974,487 | ||||||||||
Collateralized Mortgage Obligations (1.5%) | |||||||||||
COMM Mortgage Trust, Series 2015-PC1, Class A5, 3.90%, 7/10/50 | 250,000 | 253,327 | |||||||||
Four Times Square Trust, Series 2006-4TS, Class A, 5.40%, 12/13/28 (c) | 476,225 | 492,845 | |||||||||
Total Collateralized Mortgage Obligations (Cost $745,630) | 746,172 | ||||||||||
Senior Secured Loans (12.2%) | |||||||||||
American Renal Holdings, Inc., 5.59% (LIBOR01M+325bps), 6/15/24, Callable 2/6/19 @ 100 (a) | 780,557 | 761,043 | |||||||||
Bass Pro Group LLC, Term Loan B, 7.34% (LIBOR01M+500bps), 12/16/23, Callable 2/6/19 @ 101 (a) | 1,980,012 | 1,889,922 | |||||||||
Brand Energy & Infrastructure Services, Inc., 1st Lien Term Loan, 6.73%-6.76% (LIBOR03M+425bps), 6/21/24, Callable 2/6/19 @ 100 (a) | 977,557 | 926,098 | |||||||||
PetSmart, Inc., 5.38% (LIBOR01M+300bps), 3/10/22, Callable 2/6/19 @ 100 (a) | 974,562 | 767,468 | |||||||||
SRS Distribution, Inc., 1st Lien Term Loan B, 5.59% (LIBOR01M+325bps), 5/19/25, Callable 2/6/19 @ 100 (a) | 997,500 | 928,303 | |||||||||
Windstream Services LLC / Windstream Finance Corp., 5.71% (LIBOR01M+325bps), 2/8/24, Callable 2/6/19 @ 100 (a) | 984,826 | 828,485 | |||||||||
Total Senior Secured Loans (Cost $6,519,460) | 6,101,319 |
See notes to financial statements.
58
Victory Portfolios Victory Strategic Income Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Principal Amount | Value | |||||||||
Corporate Bonds (35.8%) | |||||||||||
Communication Services (6.2%): | |||||||||||
AT&T, Inc., 5.15%, 11/15/46, Callable 5/15/46 @ 100 (b) | $ | 500,000 | $ | 465,550 | |||||||
Charter Communications Operating LLC/Capital, 4.20%, 3/15/28, Callable 12/15/27 @ 100 (b) | 730,000 | 681,068 | |||||||||
Comcast Corp., 4.15%, 10/15/28, Callable 7/15/28 @ 100 (b) | 1,000,000 | 1,015,019 | |||||||||
Vodafone Group PLC, 4.38%, 5/30/28 (b) | 1,000,000 | 969,339 | |||||||||
3,130,976 | |||||||||||
Energy (5.5%): | |||||||||||
Cenovus Energy, Inc., 4.25%, 4/15/27, Callable 1/15/27 @ 100 (b) | 300,000 | 273,177 | |||||||||
MPLX LP, 4.50%, 7/15/23, Callable 4/15/23 @ 100 (b) | 1,000,000 | 1,011,479 | |||||||||
Sabine Pass Liquefaction LLC, 5.00%, 3/15/27, Callable 9/15/26 @ 100 (b) | 1,000,000 | 1,006,560 | |||||||||
Williams Partners LP, 4.00%, 11/15/21, Callable 8/15/21 @ 100 (b) | 500,000 | 501,550 | |||||||||
2,792,766 | |||||||||||
Financials (14.1%): | |||||||||||
American Express Credit Corp., 2.25%, 5/5/21, MTN, Callable 4/4/21 @ 100 (b) | 500,000 | 488,805 | |||||||||
Banco Santander SA, 3.13%, 2/23/23 (b) | 750,000 | 709,463 | |||||||||
BP Capital Markets PLC, 3.56%, 11/1/21 (b) | 500,000 | 503,575 | |||||||||
Citigroup, Inc., 4.07% (LIBOR03M+119bps), 4/23/29, Callable 4/23/28 @ 100 (a) (b) | 1,000,000 | 971,980 | |||||||||
Credit Suisse Group Funding Ltd., 3.45%, 4/16/21 (b) | 750,000 | 747,593 | |||||||||
E*TRADE Financial Corp., 4.50%, 6/20/28, Callable 3/20/28 @ 100 (b) | 250,000 | 245,593 | |||||||||
Goldman Sachs Group, Inc. | |||||||||||
3.20%, 2/23/23, Callable 1/23/23 @ 100 (b) | 1,000,000 | 968,269 | |||||||||
4.22%, (LIBOR03M+130bps), 5/1/29, Callable 5/1/28 @ 100 (a) (b) | 1,000,000 | 963,450 | |||||||||
Huntington Bancshares, Inc., 4.00%, 5/15/25, Callable 4/15/25 @ 100 (b) | 250,000 | 250,858 | |||||||||
John Deere Capital Corp., 3.65%, 10/12/23 (b) (d) | 500,000 | 505,895 | |||||||||
Morgan Stanley, 3.13%, 1/23/23 (b) | 500,000 | 488,790 | |||||||||
NXP BV / NXP Funding LLC, 4.88%, 3/1/24, Callable 2/1/24 @ 100 (c) | 200,000 | 201,070 | |||||||||
7,045,341 | |||||||||||
Health Care (6.1%): | |||||||||||
Bayer US Finance II LLC, 3.50%, 6/25/21, Callable 5/25/21 @ 100 (b) (c) | 1,000,000 | 994,250 | |||||||||
Becton Dickinson and Co., 3.36%, 6/6/24, Callable 4/6/24 @ 100 (b) | 350,000 | 335,101 | |||||||||
CVS Health Corp., 4.30%, 3/25/28, Callable 12/25/27 @ 100 (b) | 500,000 | 489,330 | |||||||||
Gilead Sciences, Inc., 2.55%, 9/1/20 (b) | 700,000 | 694,246 | |||||||||
Novartis Capital Corp., 2.40%, 9/21/22 | 500,000 | 488,110 | |||||||||
3,001,037 | |||||||||||
Industrials (1.5%): | |||||||||||
United Technologies Corp., 4.13%, 11/16/28, Callable 8/16/28 @ 100 | 750,000 | 743,153 | |||||||||
Information Technology (0.7%): | |||||||||||
Qualcomm, Inc., 3.25%, 5/20/27, Callable 2/20/27 @ 100 (b) | 350,000 | 325,633 |
See notes to financial statements.
59
Victory Portfolios Victory Strategic Income Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Principal Amount | Value | |||||||||
Materials (1.0%): | |||||||||||
LyondellBasell Industries NV, 5.00%, 4/15/19, Callable 2/7/19 @ 100 (b) | $ | 90,000 | $ | 90,059 | |||||||
Vale Overseas Ltd., 4.38%, 1/11/22 (b) | 395,000 | 402,240 | |||||||||
492,299 | |||||||||||
Utilities (0.7%): | |||||||||||
South Carolina Electric & Gas, 4.10%, 6/15/46, Callable 12/15/45 @ 100 (b) | 370,000 | 351,097 | |||||||||
Total Corporate Bonds (Cost $18,117,736) | 17,882,302 | ||||||||||
Residential Mortgage Backed Securities (2.0%) | |||||||||||
Bank of America Funding Corp., Series 2004-2, Class 1CB1, 5.75%, 9/20/34, Callable 5/20/24 @ 100 (b) | 97,438 | 100,476 | |||||||||
Bear Stearns Alt-A Trust, Series 2003-3, Class 2A, 4.36%, 10/25/33, Callable 1/25/19 @ 100 (b) (e) | 157,753 | 157,300 | |||||||||
Countrywide Home Loans, Inc., Series 2004-5, Class 2A9, 5.25%, 5/25/34, Callable 1/25/19 @ 100 (b) | 125,213 | 125,213 | |||||||||
Deutsche Alt-A Securities, Inc. Mortgage Loan Trust, Series 2007-AR3, Class 2A2B, 2.75% (LIBOR01M+24bps), 6/25/37, Callable 1/25/20 @ 100 (a) (b) | 127,284 | 122,709 | |||||||||
GSR Mortgage Loan Trust, Series 2004-15F, Class 5A1, 5.50%, 1/25/20, Callable 5/25/25 @ 100 (b) | 7,015 | 7,044 | |||||||||
JPMorgan Mortgage Trust, Series 2004-S2, Class 1A3, 4.75%, 11/25/19, Callable 5/25/19 @ 100 (b) | 4,364 | 4,354 | |||||||||
JPMorgan Mortgage Trust, Series 2005-A1, Class 6T1, 4.30%, 2/25/35, Callable 1/25/19 @ 100 (b) (e) | 41,965 | 41,965 | |||||||||
Prime Mortgage Trust, Series 2004-2, Class A2, 4.75%, 11/25/19, Callable 1/25/19 @ 100 (b) | 5,585 | 5,574 | |||||||||
Residential Funding Mortgage Securities I, Inc., Series 2005-S3, Class A1, 4.75%, 3/25/20, Callable 1/25/19 @ 100 (b) | 3,863 | 3,863 | |||||||||
Structured Asset Securities Corp., Series 2004-21XS, Class 2A6A, 5.24%, 12/25/34, Callable 1/25/19 @ 100 (b) (e) | 90 | 90 | |||||||||
Wells Fargo Mortgage Backed Securities Trust, Series 2004-EE, Class 2A1, 4.48%, 12/25/34, Callable 1/25/19 @ 100 (b) (e) | 89,648 | 89,648 | |||||||||
Wells Fargo Mortgage Backed Securities Trust, Series 2004-W, Class A9, 4.85%, 11/25/34, Callable 1/25/19 @ 100 (b) (e) | 79,445 | 79,445 | |||||||||
Wells Fargo Mortgage Backed Securities Trust, Series 2004-R, Class 2A1, 4.73%, 9/25/34, Callable 1/25/19 @ 100 (b) (e) | 73,310 | 73,310 | |||||||||
Wells Fargo Mortgage Backed Securities Trust, Series 2004-Y, Class 3A1, 4.92%, 11/25/34, Callable 1/25/19 @ 100 (b) (e) | 133,314 | 133,314 | |||||||||
Wells Fargo Mortgage Backed Securities Trust, Series 2005-2, Class 2A1, 4.75%, 4/25/20, Callable 1/25/19 @ 100 (b) | 5,987 | 5,987 | |||||||||
Wells Fargo Mortgage Backed Securities Trust, Series 2005-6, Class A4, 5.50%, 8/25/35, Callable 1/25/19 @ 100 (b) | 42,571 | 42,571 | |||||||||
Total Residential Mortgage Backed Securities (Cost $983,821) | 992,863 |
See notes to financial statements.
60
Victory Portfolios Victory Strategic Income Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Shares or Principal Amount | Value | |||||||||
U.S. Government Mortgage Backed Agencies (9.9%) | |||||||||||
Federal National Mortgage Association | |||||||||||
Series 2018-M1, Class A2, 3.09%, 12/25/27 | $ | 65,000 | $ | 63,111 | |||||||
3.50%, 7/1/43 – 3/1/48 (b) | 4,864,275 | 4,864,805 | |||||||||
4,927,916 | |||||||||||
Total U.S. Government Mortgage Backed Agencies (Cost $4,921,077) | 4,927,916 | ||||||||||
U.S. Treasury Obligations (23.6%) | |||||||||||
U.S. Treasury Bonds 2.75%, 11/15/47 (b) | 1,200,000 | 1,135,926 | |||||||||
3.00%, 2/15/48 | 360,000 | 358,107 | |||||||||
3.13%, 5/15/48 | 1,265,000 | 1,289,045 | |||||||||
U.S. Treasury Notes 2.38%, 1/31/23 (b) | 2,805,000 | 2,792,429 | |||||||||
2.63%, 2/28/23 (b) | 460,000 | 462,411 | |||||||||
2.88%, 11/30/23 | 3,500,000 | 3,561,487 | |||||||||
2.50%, 1/31/25 (b) | 2,150,000 | 2,141,952 | |||||||||
Total U.S. Treasury Obligations (Cost $11,611,333) | 11,741,357 | ||||||||||
Collateral for Securities Loaned^ (0.2%) | |||||||||||
BlackRock Liquidity Funds TempFund Portfolio, Institutional Class, 2.49% (f) | 21,917 | 21,917 | |||||||||
Fidelity Investments Money Market Government Portfolio, Class I, 2.28% (f) | 31,668 | 31,668 | |||||||||
Fidelity Investments Prime Money Market Portfolio, Class I, 2.46% (f) | 978 | 978 | |||||||||
Goldman Sachs Financial Square Prime Obligations Fund, Institutional Class, 2.55% (f) | 12,176 | 12,176 | |||||||||
JPMorgan Prime Money Market Fund, Capital Class, 2.49% (f) | 19,480 | 19,480 | |||||||||
Morgan Stanley Institutional Liquidity Prime Portfolio, Institutional Class, 2.58% (f) | 29,223 | 29,223 | |||||||||
Total Collateral for Securities Loaned (Cost $115,442) | 115,442 | ||||||||||
Total Investments (Cost $49,031,952) — 97.2% | 48,481,858 | ||||||||||
Other assets in excess of liabilities — 2.8% | 1,351,452 | ||||||||||
NET ASSETS — 100.00% | $ | 49,833,310 |
^ Purchased with cash collateral from securities on loan.
(a) Variable or Floating-Rate Security. Rate disclosed is as of December 31, 2018.
(b) All or a portion of this security has been segregated as collateral for derivative instruments.
(c) Rule 144A security or other security that is restricted as to resale to institutional investors. The Fund's Adviser has deemed this security to be liquid based upon procedures approved by the Board of Trustees. As of December 31, 2018, the fair value of these securities was $5,241,074 and amounted to 10.5% of net assets.
(d) All or a portion of this security is on loan.
See notes to financial statements.
61
Victory Portfolios Victory Strategic Income Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
(e) 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 December 31, 2018.
(f) Rate disclosed is the daily yield on December 31, 2018.
bps — Basis points
LIBOR — London InterBank Offered Rate
LIBOR01M — 1 Month US Dollar LIBOR, rate disclosed as of December 31, 2018, based on the last reset date of the security
LIBOR03M — 3 Month US Dollar LIBOR, rate disclosed as of December 31, 2018, based on the last reset date of the security
LLC — Limited Liability Company
LP — Limited Partnership
MTN — Medium Term Note
PLC — Public Limited Company
REIT — Real Estate Investment Trust
Futures Contracts Purchased
Number of Contracts | Expiration Date | Notional Amount | Value | Unrealized Appreciation (Depreciation) | |||||||||||||||||||
30-Year U.S. Treasury Bond Future | 29 | 3/20/19 | $ | 4,042,437 | $ | 4,234,000 | $ | 191,563 | |||||||||||||||
5-Year U.S. Treasury Note Future | 69 | 3/29/19 | 7,786,443 | 7,913,438 | 126,995 | ||||||||||||||||||
Ultra Long Term U.S. Treasury Bond Future | 4 | 3/20/19 | 609,827 | 642,625 | 32,798 | ||||||||||||||||||
$ | 351,356 |
Futures Contracts Sold
Number of Contracts | Expiration Date | Notional Amount | Value | Unrealized Appreciation (Depreciation) | |||||||||||||||||||
10-Year U.S. Treasury Note Future | 54 | 3/20/19 | $ | 6,432,970 | $ | 6,588,842 | $ | (155,872 | ) | ||||||||||||||
2-Year U.S.Treasury Note Future | 1 | 3/29/19 | 210,903 | 212,313 | (1,410 | ) | |||||||||||||||||
$ | (157,282 | ) | |||||||||||||||||||||
Total unrealized appreciation | $ | 351,356 | |||||||||||||||||||||
Total unrealized depreciation | (157,282 | ) | |||||||||||||||||||||
Total net unrealized appreciation | $ | 194,074 |
See notes to financial statements.
62
Victory Portfolios | Statements of Assets and Liabilities December 31, 2018 |
Victory INCORE Investment Quality Bond Fund | Victory INCORE Low Duration Bond Fund | Victory High Yield Fund | |||||||||||||
ASSETS: | |||||||||||||||
Investments, at value (Cost $39,359,289, $343,841,759 and $92,927,348) | $ | 39,063,159 | (a) | $ | 340,091,621 | (b) | $ | 88,317,216 | (c) | ||||||
Cash and cash equivalents | 1,110,603 | 11,679,089 | 3,027,837 | ||||||||||||
Deposits with brokers for futures contracts | 255,511 | 1,290,188 | — | ||||||||||||
Deposits with brokers for centrally cleared swap agreements | 378,293 | 2,404,388 | — | ||||||||||||
Interest and dividends receivable | 181,405 | 1,811,522 | 1,256,249 | ||||||||||||
Receivable for capital shares issued | 17,486 | 633,903 | 621,107 | ||||||||||||
Receivable for investments sold | — | — | 4,407 | ||||||||||||
Variation margin receivable on open futures contracts | 4,250 | 91,312 | — | ||||||||||||
Variation margin receivable on open swap agreements | 4,033 | 42,662 | — | ||||||||||||
Receivable from Adviser | 17,345 | 2,363 | 13,786 | ||||||||||||
Prepaid expenses | 20,688 | 20,022 | 16,115 | ||||||||||||
Total Assets | 41,052,773 | 358,067,070 | 93,256,717 | ||||||||||||
LIABILITIES: | |||||||||||||||
Payables: | |||||||||||||||
Collateral received on loaned securities | 33,481 | 973,825 | 10,410,290 | ||||||||||||
Distributions | 3,039 | 95,664 | 208,437 | ||||||||||||
Investments purchased | 6,662,836 | 5,044,922 | — | ||||||||||||
Capital shares redeemed | 153,219 | 11,777,948 | 661,690 | ||||||||||||
Variation margin on open futures contracts | 10,829 | — | — | ||||||||||||
Accrued expenses and other payables: | |||||||||||||||
Investment advisory fees | 14,573 | 127,173 | 41,486 | ||||||||||||
Administration fees | 1,791 | 17,371 | 4,237 | ||||||||||||
Custodian fees | 1,667 | 5,239 | 4,353 | ||||||||||||
Transfer agent fees | 5,947 | 35,848 | 3,202 | ||||||||||||
Chief Compliance Officer fees | 24 | 233 | 58 | ||||||||||||
Trustees' fees | 44 | 240 | 68 | ||||||||||||
12b-1 fees | 4,950 | 37,406 | 15,200 | ||||||||||||
Other accrued expenses | 20,193 | 50,184 | 23,240 | ||||||||||||
Total Liabilities | 6,912,593 | 18,166,053 | 11,372,261 | ||||||||||||
NET ASSETS: | |||||||||||||||
Capital | 35,662,294 | 375,294,280 | 94,588,006 | ||||||||||||
Total distributable earnings/(loss) | (1,522,114 | ) | (35,393,263 | ) | (12,703,550 | ) | |||||||||
Net Assets | $ | 34,140,180 | $ | 339,901,017 | $ | 81,884,456 | |||||||||
Net Assets | |||||||||||||||
Class A Shares | $ | 24,049,950 | $ | 96,209,587 | $ | 23,797,065 | |||||||||
Class C Shares | 3,633,849 | 62,103,042 | 19,432,281 | ||||||||||||
Class R Shares | 3,191,861 | 1,553,724 | 17,595,025 | ||||||||||||
Class Y Shares | 3,264,520 | 180,034,664 | 21,060,085 | ||||||||||||
Total | $ | 34,140,180 | $ | 339,901,017 | $ | 81,884,456 | |||||||||
Shares (unlimited number of shares authorized with a par value of $0.001 per share): | |||||||||||||||
Class A Shares | 2,598,503 | 9,759,511 | 3,837,658 | ||||||||||||
Class C Shares | 392,933 | 6,303,772 | 3,127,069 | ||||||||||||
Class R Shares | 344,063 | 157,657 | 2,829,914 | ||||||||||||
Class Y Shares | 353,084 | 18,257,576 | 3,412,902 | ||||||||||||
Total | 3,688,583 | 34,478,516 | 13,207,543 | ||||||||||||
Net asset value, offering (except Class A Shares) and redemption price per share: | |||||||||||||||
Class A Shares | $ | 9.26 | $ | 9.86 | $ | 6.20 | |||||||||
Class C Shares (d) | $ | 9.25 | $ | 9.85 | $ | 6.21 | |||||||||
Class R Shares | $ | 9.28 | $ | 9.86 | $ | 6.22 | |||||||||
Class Y Shares | $ | 9.25 | $ | 9.86 | $ | 6.17 | |||||||||
Maximum Sales Charge — Class A Shares | 2.00 | % | 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 | $ | 9.45 | $ | 10.06 | $ | 6.33 |
(a) Includes $32,258 of securities on loan.
(b) Includes $948,936 of securities on loan.
(c) Includes $9,950,829 of securities on loan.
(d) Redemption price per share varies by the length of time shares are held.
See notes to financial statements.
63
Victory Portfolios | Statements of Assets and Liabilities December 31, 2018 |
Victory Tax-Exempt Fund | Victory High Income Municipal Bond Fund | Victory Floating Rate Fund | |||||||||||||
ASSETS: | |||||||||||||||
Investments, at value (Cost $64,546,693, $46,155,217 and $626,604,384) | $ | 66,193,821 | $ | 46,616,349 | $ | 597,793,152 | |||||||||
Cash and cash equivalents | 1,676,767 | 353,235 | 19,483,698 | ||||||||||||
Interest and dividends receivable | 653,947 | 547,768 | 3,127,354 | ||||||||||||
Receivable for capital shares issued | 6,307 | 225,594 | 1,656,092 | ||||||||||||
Receivable for investments sold | — | — | 11,039,857 | ||||||||||||
Receivable from Adviser | 17,127 | 13,952 | 104,830 | ||||||||||||
Prepaid expenses | 17,631 | 18,259 | 29,592 | ||||||||||||
Total Assets | 68,565,600 | 47,775,157 | 633,234,575 | ||||||||||||
LIABILITIES: | |||||||||||||||
Payables: | |||||||||||||||
Distributions | 16,028 | 13,765 | 435,093 | ||||||||||||
Investments purchased | — | — | 13,412,500 | ||||||||||||
Capital shares redeemed | 241,367 | 262,707 | 6,258,467 | ||||||||||||
Accrued expenses and other payables: | |||||||||||||||
Investment advisory fees | 29,699 | 20,372 | 349,018 | ||||||||||||
Administration fees | 3,651 | 2,504 | 32,910 | ||||||||||||
Custodian fees | 1,030 | 862 | 62,577 | ||||||||||||
Transfer agent fees | 3,892 | — | 78,538 | ||||||||||||
Chief Compliance Officer fees | 50 | 34 | 448 | ||||||||||||
Trustees' fees | 67 | 53 | 414 | ||||||||||||
12b-1 fees | 11,294 | 10,386 | 107,792 | ||||||||||||
Other accrued expenses | 19,538 | 16,888 | 101,600 | ||||||||||||
Total Liabilities | 326,616 | 327,571 | 20,839,357 | ||||||||||||
NET ASSETS: | |||||||||||||||
Capital | 66,657,854 | 47,121,024 | 808,168,392 | ||||||||||||
Total distributable earnings/(loss) | 1,581,130 | 326,562 | (195,773,174 | ) | |||||||||||
Net Assets | $ | 68,238,984 | $ | 47,447,586 | $ | 612,395,218 | |||||||||
Net Assets | |||||||||||||||
Class A Shares | $ | 29,993,436 | $ | 16,483,014 | $ | 118,671,930 | |||||||||
Class C Shares | 17,985,713 | 19,281,770 | 211,461,778 | ||||||||||||
Class R Shares | — | — | 715,560 | ||||||||||||
Class Y Shares | 20,259,835 | 11,682,802 | 281,545,950 | ||||||||||||
Total | $ | 68,238,984 | $ | 47,447,586 | $ | 612,395,218 | |||||||||
Shares (unlimited number of shares authorized with a par value of $0.001 per share): | |||||||||||||||
Class A Shares | 3,167,537 | 1,586,253 | 12,998,584 | ||||||||||||
Class C Shares | 1,900,112 | 1,855,607 | 23,147,071 | ||||||||||||
Class R Shares | — | — | 78,379 | ||||||||||||
Class Y Shares | 2,140,644 | 1,124,172 | 30,818,080 | ||||||||||||
Total | 7,208,293 | 4,566,032 | 67,042,114 | ||||||||||||
Net asset value, offering (except Class A Shares) and redemption price per share: | |||||||||||||||
Class A Shares | $ | 9.47 | $ | 10.39 | $ | 9.13 | |||||||||
Class C Shares (a) | 9.47 | 10.39 | 9.14 | ||||||||||||
Class R Shares | — | — | 9.13 | ||||||||||||
Class Y Shares | 9.46 | 10.39 | 9.14 | ||||||||||||
Maximum Sales Charge — Class A Shares | 2.00 | % | 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 | $ | 9.66 | $ | 10.60 | $ | 9.32 |
(a) Redemption price per share varies by the length of time shares are held.
See notes to financial statements.
64
Victory Portfolios | Statement of Assets and Liabilities December 31, 2018 |
Victory Strategic Income Fund | |||||||
ASSETS: | |||||||
Investments, at value (Cost $49,031,952) | $ | 48,481,858 | (a) | ||||
Cash and cash equivalents | 1,127,396 | ||||||
Deposits with brokers for futures contracts | 139,960 | ||||||
Interest and dividends receivable | 304,176 | ||||||
Receivable for capital shares issued | 2,039 | ||||||
Receivable for investments sold | 6,143 | ||||||
Variation margin receivable on open futures contracts | 33,217 | ||||||
Receivable from Adviser | 10,791 | ||||||
Prepaid expenses | 21,413 | ||||||
Total Assets | 50,126,993 | ||||||
LIABILITIES: | |||||||
Payables: | |||||||
Collateral received on loaned securities | 115,442 | ||||||
Distributions | 87,815 | ||||||
Capital shares redeemed | 7,809 | ||||||
Variation margin on open futures contracts | 21,233 | ||||||
Accrued expenses and other payables: | |||||||
Investment advisory fees | 25,514 | ||||||
Administration fees | 2,609 | ||||||
Custodian fees | 3,328 | ||||||
Transfer agent fees | 159 | ||||||
Chief Compliance Officer fees | 35 | ||||||
Trustees' fees | 53 | ||||||
12b-1 fees | 8,652 | ||||||
Other accrued expenses | 21,034 | ||||||
Total Liabilities | 293,683 | ||||||
NET ASSETS: | |||||||
Capital | 52,283,056 | ||||||
Total distributable earnings/(loss) | (2,449,746 | ) | |||||
Net Assets | $ | 49,833,310 | |||||
Net Assets | |||||||
Class A Shares | $ | 32,053,782 | |||||
Class C Shares | 10,220,654 | ||||||
Class R Shares | 2,761,296 | ||||||
Class Y Shares | 4,797,578 | ||||||
Total | $ | 49,833,310 | |||||
Shares (unlimited number of shares authorized with a par value of $0.001 per share): | |||||||
Class A Shares | 3,290,000 | ||||||
Class C Shares | 1,044,245 | ||||||
Class R Shares | 281,931 | ||||||
Class Y Shares | 495,239 | ||||||
Total | 5,111,415 | ||||||
Net asset value, offering (except Class A Shares) and redemption price per share: | |||||||
Class A Shares | $ | 9.74 | |||||
Class C Shares (b) | 9.79 | ||||||
Class R Shares | 9.79 | ||||||
Class Y Shares | 9.69 | ||||||
Maximum Sales Charge — Class A Shares | 2.00 | % | |||||
Maximum offering price(100%/(100%-maximum sales charge) of net asset value adjusted to the nearest cent) per share — Class A Shares | $ | 9.94 |
(a) Includes $112,309 of securities on loan.
(b) Redemption price per share varies by the length of time shares are held.
See notes to financial statements.
65
Victory Portfolios | Statements of Operations For the Year Ended December 31, 2018 |
Victory INCORE Investment Quality Bond Fund | Victory INCORE Low Duration Bond Fund | Victory High Yield Fund | |||||||||||||
Investment Income: | |||||||||||||||
Dividends | $ | — | $ | — | $ | 29,930 | |||||||||
Interest | 1,242,366 | 9,929,970 | 4,935,894 | ||||||||||||
Securities lending (net of fees) | 654 | 11,675 | 107,055 | ||||||||||||
Total Income | 1,243,020 | 9,941,645 | 5,072,879 | ||||||||||||
Expenses: | |||||||||||||||
Investment advisory fees | 196,012 | 1,793,125 | 433,934 | ||||||||||||
Administration fees | 23,995 | 238,568 | 44,057 | ||||||||||||
12b-1 fees — Class A Shares | 68,411 | 289,470 | 56,327 | ||||||||||||
12b-1 fees — Class C Shares | 44,596 | 711,926 | 212,652 | ||||||||||||
12b-1 fees — Class R Shares | 18,662 | 8,543 | 94,785 | ||||||||||||
Custodian fees | 5,643 | 21,792 | 15,950 | ||||||||||||
Transfer agent fees | 4,471 | 47,574 | 5,048 | ||||||||||||
Transfer agent fees — Class A Shares | 31,824 | 84,731 | 13,065 | ||||||||||||
Transfer agent fees — Class C Shares | 5,219 | 67,089 | 5,580 | ||||||||||||
Transfer agent fees — Class R Shares | 6,527 | 2,751 | 5,219 | ||||||||||||
Transfer agent fees — Class Y Shares | 3,815 | 213,661 | 8,141 | ||||||||||||
Trustees' fees | 3,832 | 35,392 | 5,986 | ||||||||||||
Chief Compliance Officer fees | 305 | 3,099 | 536 | ||||||||||||
Legal and audit fees | 15,950 | 41,145 | 19,964 | ||||||||||||
State registration and filing fees | 51,746 | 61,916 | 50,638 | ||||||||||||
Interest expense on interfund lending | — | 215 | — | ||||||||||||
Other expenses | 24,088 | 65,350 | 19,445 | ||||||||||||
Recoupment of prior expenses waived/reimbursed by Adviser | — | — | 1,109 | ||||||||||||
Total Expenses | 505,096 | 3,686,347 | 992,436 | ||||||||||||
Expenses waived/reimbursed by Adviser | (107,641 | ) | (229,812 | ) | (76,868 | ) | |||||||||
Net Expenses | 397,455 | 3,456,535 | 915,568 | ||||||||||||
Net Investment Income (Loss) | 845,565 | 6,485,110 | 4,157,311 | ||||||||||||
Realized/Unrealized Gains (Losses) from Investment Transactions: | |||||||||||||||
Net realized gains (losses) from investment transactions | (736,244 | ) | (1,122,647 | ) | 762,754 | ||||||||||
Net realized gains (losses) from futures transactions | (270,031 | ) | (1,292,411 | ) | — | ||||||||||
Net realized gains (losses) from swap transactions | 120,948 | 1,563,684 | — | ||||||||||||
Net change in unrealized appreciation/depreciation on investments | (305,413 | ) | (1,773,031 | ) | (5,292,005 | ) | |||||||||
Net change in unrealized appreciation/depreciation on futures transactions | (43,848 | ) | 959,590 | — | |||||||||||
Net change in unrealized appreciation/depreciation on swap transactions | (179,340 | ) | (2,065,991 | ) | — | ||||||||||
Net realized/unrealized gains (losses) on investments | (1,413,928 | ) | (3,730,806 | ) | (4,529,251 | ) | |||||||||
Change in net assets resulting from operations | $ | (568,363 | ) | $ | 2,754,304 | $ | (371,940 | ) |
See notes to financial statements.
66
Victory Portfolios | Statements of Operations For the Year Ended December 31, 2018 |
Victory Tax-Exempt Fund | Victory High Income Municipal Bond Fund | Victory Floating Rate Fund | |||||||||||||
Investment Income: | |||||||||||||||
Interest | $ | 3,527,224 | $ | 2,863,436 | $ | 42,646,306 | |||||||||
Total Income | 3,527,224 | 2,863,436 | 42,646,306 | ||||||||||||
Expenses: | |||||||||||||||
Investment advisory fees | 394,015 | 290,871 | 4,325,545 | ||||||||||||
Administration fees | 47,197 | 35,081 | 399,970 | ||||||||||||
12b-1 fees — Class A Shares | 82,108 | 50,558 | 355,656 | ||||||||||||
12b-1 fees — Class C Shares | 223,298 | 220,062 | 2,413,934 | ||||||||||||
12b-1 fees — Class R Shares | — | — | 3,576 | ||||||||||||
Custodian fees | 3,535 | 3,621 | 218,128 | ||||||||||||
Transfer agent fees | 10,556 | 8,574 | 64,342 | ||||||||||||
Transfer agent fees — Class A Shares | 16,212 | 11,196 | 102,698 | ||||||||||||
Transfer agent fees — Class C Shares | 19,204 | 14,347 | 216,338 | ||||||||||||
Transfer agent fees — Class R Shares | — | — | 785 | ||||||||||||
Transfer agent fees — Class Y Shares | 20,333 | 7,305 | 214,309 | ||||||||||||
Trustees' fees | 7,126 | 5,665 | 54,415 | ||||||||||||
Chief Compliance Officer fees | 606 | 454 | 5,029 | ||||||||||||
Legal and audit fees | 15,456 | 14,582 | 125,705 | ||||||||||||
State registration and filing fees | 39,524 | 40,764 | 66,806 | ||||||||||||
Interest expense on line of credit | 884 | — | — | ||||||||||||
Interest expense on interfund lending | 156 | 1,939 | — | ||||||||||||
Other expenses | 16,868 | 15,951 | 166,245 | ||||||||||||
Total Expenses | 897,078 | 720,970 | 8,733,481 | ||||||||||||
Expenses waived/reimbursed by Adviser | (114,539 | ) | (121,563 | ) | (765,491 | ) | |||||||||
Net Expenses | 782,539 | 599,407 | 7,967,990 | ||||||||||||
Net Investment Income (Loss) | 2,744,685 | 2,264,029 | 34,678,316 | ||||||||||||
Realized/Unrealized Gains (Losses) from Investment Transactions: | |||||||||||||||
Net realized gains (losses) from investment transactions | 441,470 | 825,294 | (2,188,784 | ) | |||||||||||
Net change in unrealized appreciation/depreciation on investments | (2,948,214 | ) | (3,343,476 | ) | (29,992,718 | ) | |||||||||
Net realized/unrealized gains (losses) on investments | (2,506,744 | ) | (2,518,182 | ) | (32,181,502 | ) | |||||||||
Change in net assets resulting from operations | $ | 237,941 | $ | (254,153 | ) | $ | 2,496,814 |
See notes to financial statements.
67
Victory Portfolios | Statement of Operations For the Year Ended December 31, 2018 |
Victory Strategic Income Fund | |||||||
Investment Income: | |||||||
Dividends | $ | 3,098 | |||||
Interest | 2,296,330 | ||||||
Securities lending (net of fees) | 15,265 | ||||||
Total Income | 2,314,693 | ||||||
Expenses: | |||||||
Investment advisory fees | 314,968 | ||||||
Administration fees | 32,031 | ||||||
12b-1 fees — Class A Shares | 83,144 | ||||||
12b-1 fees — Class C Shares | 111,886 | ||||||
12b-1 fees — Class R Shares | 14,066 | ||||||
Custodian fees | 15,133 | ||||||
Transfer agent fees | 4,369 | ||||||
Transfer agent fees — Class A Shares | 7,537 | ||||||
Transfer agent fees — Class C Shares | 9,054 | ||||||
Transfer agent fees — Class R Shares | 637 | ||||||
Transfer agent fees — Class Y Shares | 2,585 | ||||||
Trustees' fees | 4,791 | ||||||
Chief Compliance Officer fees | 402 | ||||||
Legal and audit fees | 18,119 | ||||||
State registration and filing fees | 51,640 | ||||||
Other expenses | 15,251 | ||||||
Total Expenses | 685,613 | ||||||
Expenses waived/reimbursed by Adviser | (98,810 | ) | |||||
Net Expenses | 586,803 | ||||||
Net Investment Income (Loss) | 1,727,890 | ||||||
Realized/Unrealized Gains (Losses) from Investment Transactions: | |||||||
Net realized gains (losses) from investment transactions | (941,939 | ) | |||||
Net realized gains (losses) from futures transactions | (477,912 | ) | |||||
Net realized gains (losses) from swap transactions | (167,172 | ) | |||||
Net change in unrealized appreciation/depreciation on investments | (808,734 | ) | |||||
Net change in unrealized appreciation/depreciation on futures transactions | 178,638 | ||||||
Net realized/unrealized gains (losses) on investments | (2,217,119 | ) | |||||
Change in net assets resulting from operations | $ | (489,229 | ) |
See notes to financial statements.
68
Victory Portfolios | Statements of Changes in Net Assets |
Victory INCORE Investment Quality Bond Fund | Victory INCORE Low Duration Bond Fund | Victory High Yield Fund | |||||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2018 | Year Ended December 31, 2017 | ||||||||||||||||||||||
From Investment Activities: | |||||||||||||||||||||||||||
Operations: | |||||||||||||||||||||||||||
Net investment income (loss) | $ | 845,565 | $ | 909,777 | $ | 6,485,110 | $ | 6,834,623 | $ | 4,157,311 | $ | 4,040,436 | |||||||||||||||
Net realized gains (losses) from investment transactions | (885,327 | ) | 540,669 | (851,374 | ) | 1,594,520 | 762,754 | 1,123,076 | |||||||||||||||||||
Net change in unrealized appreciation/ depreciation on investments | (528,601 | ) | 428,182 | (2,879,432 | ) | (110,863 | ) | (5,292,005 | ) | 1,439,779 | |||||||||||||||||
Change in net assets resulting from operations | (568,363 | ) | 1,878,628 | 2,754,304 | 8,318,280 | (371,940 | ) | 6,603,291 | |||||||||||||||||||
Distributions to Shareholders: (a) | |||||||||||||||||||||||||||
Class A Shares | (736,699 | ) | (851,750 | ) | (2,446,294 | ) | (2,975,964 | ) | (1,373,046 | ) | (1,403,226 | ) | |||||||||||||||
Class C Shares | (80,797 | ) | (116,728 | ) | (961,618 | ) | (915,654 | ) | (1,141,547 | ) | (1,168,449 | ) | |||||||||||||||
Class R Shares | (85,278 | ) | (84,062 | ) | (29,001 | ) | (31,139 | ) | (1,084,151 | ) | (1,059,549 | ) | |||||||||||||||
Class Y Shares | (107,033 | ) | (137,124 | ) | (4,911,061 | ) | (5,811,142 | ) | (613,768 | ) | (361,401 | ) | |||||||||||||||
Change in net assets resulting from distributions to shareholders | (1,009,807 | ) | (1,189,664 | ) | (8,347,974 | ) | (9,733,899 | ) | (4,212,512 | ) | (3,992,625 | ) | |||||||||||||||
Change in net assets resulting from capital transactions | (10,074,855 | ) | (14,930,156 | ) | (160,010,798 | ) | (162,872,205 | ) | 17,874,778 | (7,725,222 | ) | ||||||||||||||||
Change in net assets | (11,653,025 | ) | (14,241,192 | ) | (165,604,468 | ) | (164,287,824 | ) | 13,290,326 | (5,114,556 | ) | ||||||||||||||||
Net Assets: | |||||||||||||||||||||||||||
Beginning of period | 45,793,205 | 60,034,397 | 505,505,485 | 669,793,309 | 68,594,130 | 73,708,686 | |||||||||||||||||||||
End of period | $ | 34,140,180 | $ | 45,793,205 | $ | 339,901,017 | $ | 505,505,485 | $ | 81,884,456 | $ | 68,594,130 |
(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.
69
Victory Portfolios | Statements of Changes in Net Assets |
(continued)
Victory INCORE Investment Quality Bond Fund | Victory INCORE Low Duration Bond Fund | Victory High Yield Fund | |||||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2018 | Year Ended December 31, 2017 | ||||||||||||||||||||||
Capital Transactions: | |||||||||||||||||||||||||||
Class A Shares | |||||||||||||||||||||||||||
Proceeds from shares issued | $ | 2,431,100 | $ | 2,831,599 | $ | 30,744,375 | $ | 46,832,529 | $ | 8,578,195 | $ | 1,861,235 | |||||||||||||||
Distributions reinvested | 708,767 | 815,905 | 2,128,032 | 2,686,461 | 837,993 | 887,213 | |||||||||||||||||||||
Cost of shares redeemed | (9,305,764 | ) | (13,321,140 | ) | (84,318,228 | ) | (114,718,707 | ) | (6,155,194 | ) | (7,281,276 | ) | |||||||||||||||
Total Class A Shares | $ | (6,165,897 | ) | $ | (9,673,636 | ) | $ | (51,445,821 | ) | $ | (65,199,717 | ) | $ | 3,260,994 | $ | (4,532,828 | ) | ||||||||||
Class C Shares | |||||||||||||||||||||||||||
Proceeds from shares issued | $ | 115,170 | $ | 258,405 | $ | 5,049,809 | $ | 4,237,252 | $ | 467,260 | $ | 547,795 | |||||||||||||||
Distributions reinvested | 70,118 | 104,388 | 815,577 | 767,764 | 318,084 | 360,247 | |||||||||||||||||||||
Cost of shares redeemed | (2,479,459 | ) | (3,247,616 | ) | (25,622,129 | ) | (39,487,104 | ) | (2,448,114 | ) | (1,937,517 | ) | |||||||||||||||
Total Class C Shares | $ | (2,294,171 | ) | $ | (2,884,823 | ) | $ | (19,756,743 | ) | $ | (34,482,088 | ) | $ | (1,662,770 | ) | $ | (1,029,475 | ) | |||||||||
Class R Shares | |||||||||||||||||||||||||||
Proceeds from shares issued | $ | 381,014 | $ | 744,251 | $ | 720,436 | $ | 497,363 | $ | 493,060 | $ | 400,156 | |||||||||||||||
Distributions reinvested | 84,899 | 82,168 | 27,842 | 29,528 | 147,473 | 151,626 | |||||||||||||||||||||
Cost of shares redeemed | (1,072,079 | ) | (1,419,639 | ) | (1,248,707 | ) | (1,025,220 | ) | (1,182,114 | ) | (766,727 | ) | |||||||||||||||
Total Class R Shares | $ | (606,166 | ) | $ | (593,220 | ) | $ | (500,429 | ) | $ | (498,329 | ) | $ | (541,581 | ) | $ | (214,945 | ) | |||||||||
Class Y Shares | |||||||||||||||||||||||||||
Proceeds from shares issued | $ | 669,922 | $ | 2,226,232 | $ | 89,186,215 | $ | 138,578,340 | $ | 21,430,313 | $ | 976,273 | |||||||||||||||
Distributions reinvested | 102,539 | 121,080 | 4,002,004 | 4,600,750 | 485,679 | 228,090 | |||||||||||||||||||||
Cost of shares redeemed | (1,781,082 | ) | (4,125,789 | ) | (181,496,024 | ) | (205,871,161 | ) | (5,097,857 | ) | (3,152,337 | ) | |||||||||||||||
Total Class Y Shares | $ | (1,008,621 | ) | $ | (1,778,477 | ) | $ | (88,307,805 | ) | $ | (62,692,071 | ) | $ | 16,818,135 | $ | (1,947,974 | ) | ||||||||||
Change in net assets resulting from capital transactions | $ | (10,074,855 | ) | $ | (14,930,156 | ) | $ | (160,010,798 | ) | $ | (162,872,205 | ) | $ | 17,874,778 | $ | (7,725,222 | ) |
(continues on next page)
See notes to financial statements.
70
Victory Portfolios | Statements of Changes in Net Assets |
(continued)
Victory INCORE Investment Quality Bond Fund | Victory INCORE Low Duration Bond Fund | Victory High Yield Fund | |||||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2018 | Year Ended December 31, 2017 | ||||||||||||||||||||||
Share Transactions: | |||||||||||||||||||||||||||
Class A Shares | |||||||||||||||||||||||||||
Issued | 259,560 | 295,492 | 3,106,607 | 4,664,463 | 1,324,722 | 286,825 | |||||||||||||||||||||
Reinvested | 76,253 | 85,190 | 214,752 | 267,483 | 129,433 | 136,509 | |||||||||||||||||||||
Redeemed | (1,001,548 | ) | (1,391,149 | ) | (8,500,863 | ) | (11,415,614 | ) | (946,378 | ) | (1,122,011 | ) | |||||||||||||||
Total Class A Shares | (665,735 | ) | (1,010,467 | ) | (5,179,504 | ) | (6,483,668 | ) | 507,777 | (698,677 | ) | ||||||||||||||||
Class C Shares | |||||||||||||||||||||||||||
Issued | 12,218 | 26,962 | 511,435 | 422,473 | 71,687 | 83,822 | |||||||||||||||||||||
Reinvested | 7,545 | 10,909 | 82,367 | 76,544 | 48,947 | 55,272 | |||||||||||||||||||||
Redeemed | (266,190 | ) | (339,958 | ) | (2,586,154 | ) | (3,931,543 | ) | (377,563 | ) | (297,521 | ) | |||||||||||||||
Total Class C Shares | (246,427 | ) | (302,087 | ) | (1,992,352 | ) | (3,432,526 | ) | (256,929 | ) | (158,427 | ) | |||||||||||||||
Class R Shares | |||||||||||||||||||||||||||
Issued | 40,562 | 77,547 | 72,503 | 49,538 | 75,414 | 61,669 | |||||||||||||||||||||
Reinvested | 9,118 | 8,561 | 2,811 | 2,943 | 22,696 | 23,257 | |||||||||||||||||||||
Redeemed | (115,435 | ) | (147,630 | ) | (125,706 | ) | (102,062 | ) | (184,892 | ) | (117,872 | ) | |||||||||||||||
Total Class R Shares | (65,755 | ) | (61,522 | ) | (50,392 | ) | (49,581 | ) | (86,782 | ) | (32,946 | ) | |||||||||||||||
Class Y Shares | |||||||||||||||||||||||||||
Issued | 71,550 | 233,209 | 9,003,632 | 13,783,498 | 3,334,887 | 151,429 | |||||||||||||||||||||
Reinvested | 11,041 | 12,655 | 403,649 | 457,942 | 75,911 | 35,243 | |||||||||||||||||||||
Redeemed | (190,915 | ) | (432,356 | ) | (18,291,525 | ) | (20,479,175 | ) | (795,040 | ) | (489,738 | ) | |||||||||||||||
Total Class Y Shares | (108,324 | ) | (186,492 | ) | (8,884,244 | ) | (6,237,735 | ) | 2,615,758 | (303,066 | ) | ||||||||||||||||
Change in Shares | (1,086,241 | ) | (1,560,568 | ) | (16,106,492 | ) | (16,203,510 | ) | 2,779,824 | (1,193,116 | ) |
See notes to financial statements.
71
Victory Portfolios | Statements of Changes in Net Assets |
Victory Tax-Exempt Fund | Victory High Income Municipal Bond Fund | Victory Floating Rate Fund | |||||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2018 | Year Ended December 31, 2017 | ||||||||||||||||||||||
From Investment Activities: | |||||||||||||||||||||||||||
Operations: | |||||||||||||||||||||||||||
Net investment income (loss) | $ | 2,744,685 | $ | 3,573,247 | $ | 2,264,029 | $ | 3,646,007 | $ | 34,678,316 | $ | 36,779,615 | |||||||||||||||
Net realized gains (losses) from investment transactions | 441,470 | 2,484,368 | 825,294 | 4,064,798 | (2,188,784 | ) | 2,249,383 | ||||||||||||||||||||
Net change in unrealized appreciation/ depreciation on investments | (2,948,214 | ) | 1,527,664 | (3,343,476 | ) | (371,458 | ) | (29,992,718 | ) | (11,511,519 | ) | ||||||||||||||||
Change in net assets resulting from operations | 237,941 | 7,585,279 | (254,153 | ) | 7,339,347 | 2,496,814 | 27,517,479 | ||||||||||||||||||||
Distributions to Shareholders: (a) | |||||||||||||||||||||||||||
Class A Shares | (1,674,030 | ) | (2,090,480 | ) | (833,535 | ) | (1,272,345 | ) | (7,767,897 | ) | (8,534,071 | ) | |||||||||||||||
Class C Shares | (927,398 | ) | (1,170,699 | ) | (737,053 | ) | (948,489 | ) | (11,211,612 | ) | (12,145,762 | ) | |||||||||||||||
Class R Shares | — | — | — | — | (34,879 | ) | (49,769 | ) | |||||||||||||||||||
Class Y Shares | (1,215,244 | ) | (1,441,492 | ) | (693,477 | ) | (1,423,842 | ) | (15,978,424 | ) | (16,116,919 | ) | |||||||||||||||
Change in net assets resulting from distributions to shareholders | (3,816,672 | ) | (4,702,671 | ) | (2,264,065 | ) | (3,644,676 | ) | (34,992,812 | ) | (36,846,521 | ) | |||||||||||||||
Change in net assets resulting from capital transactions | (19,692,166 | ) | (31,160,715 | ) | (27,903,721 | ) | (24,933,574 | ) | (45,765,231 | ) | (233,559,554 | ) | |||||||||||||||
Change in net assets | (23,270,897 | ) | (28,278,107 | ) | (30,421,939 | ) | (21,238,903 | ) | (78,261,229 | ) | (242,888,596 | ) | |||||||||||||||
Net Assets: | |||||||||||||||||||||||||||
Beginning of period | 91,509,881 | 119,787,988 | 77,869,525 | 99,108,428 | 690,656,447 | 933,545,043 | |||||||||||||||||||||
End of period | $ | 68,238,984 | $ | 91,509,881 | $ | 47,447,586 | $ | 77,869,525 | $ | 612,395,218 | $ | 690,656,447 |
(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.
72
Victory Portfolios | Statements of Changes in Net Assets |
(continued)
Victory Tax-Exempt Fund | Victory High Income Municipal Bond Fund | Victory Floating Rate Fund | |||||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2018 | Year Ended December 31, 2017 | ||||||||||||||||||||||
Capital Transactions: | |||||||||||||||||||||||||||
Class A Shares | |||||||||||||||||||||||||||
Proceeds from shares issued | $ | 3,746,017 | $ | 3,102,632 | $ | 1,462,753 | $ | 1,513,159 | $ | 45,834,320 | $ | 12,625,716 | |||||||||||||||
Distributions reinvested | 1,587,635 | 1,959,387 | 744,985 | 1,148,985 | 6,719,663 | 7,541,272 | |||||||||||||||||||||
Cost of shares redeemed | (11,426,401 | ) | (23,412,655 | ) | (10,719,172 | ) | (11,021,906 | ) | (75,051,508 | ) | (91,072,678 | ) | |||||||||||||||
Total Class A Shares | $ | (6,092,749 | ) | $ | (18,350,636 | ) | $ | (8,511,434 | ) | $ | (8,359,762 | ) | $ | (22,497,525 | ) | $ | (70,905,690 | ) | |||||||||
Class C Shares | |||||||||||||||||||||||||||
Proceeds from shares issued | $ | 479,938 | $ | 811,966 | $ | 599,566 | $ | 996,790 | $ | 19,574,341 | $ | 10,440,111 | |||||||||||||||
Distributions reinvested | 767,834 | 949,284 | 647,618 | 807,173 | 9,501,754 | 9,957,444 | |||||||||||||||||||||
Cost of shares redeemed | (8,753,995 | ) | (9,424,559 | ) | (6,270,846 | ) | (7,318,721 | ) | (71,921,531 | ) | (92,529,564 | ) | |||||||||||||||
Total Class C Shares | $ | (7,506,223 | ) | $ | (7,663,309 | ) | $ | (5,023,662 | ) | $ | (5,514,758 | ) | $ | (42,845,436 | ) | $ | (72,132,009 | ) | |||||||||
Class R Shares | |||||||||||||||||||||||||||
Proceeds from shares issued | $ | — | $ | — | $ | — | $ | — | $ | 218,439 | $ | 209,448 | |||||||||||||||
Distributions reinvested | — | — | — | — | 25,934 | 39,590 | |||||||||||||||||||||
Cost of shares redeemed | — | — | — | — | (408,718 | ) | (637,529 | ) | |||||||||||||||||||
Total Class R Shares | $ | — | $ | — | $ | — | $ | — | $ | (164,345 | ) | $ | (388,491 | ) | |||||||||||||
Class Y Shares | |||||||||||||||||||||||||||
Proceeds from shares issued | $ | 4,360,518 | $ | 6,773,639 | $ | 1,879,873 | $ | 5,817,166 | $ | 133,354,896 | $ | 89,018,180 | |||||||||||||||
Distributions reinvested | 1,153,505 | 1,254,269 | 657,063 | 1,310,190 | 13,787,041 | 13,612,952 | |||||||||||||||||||||
Cost of shares redeemed | (11,607,217 | ) | (13,174,678 | ) | (16,905,561 | ) | (18,186,410 | ) | (127,399,862 | ) | (192,764,496 | ) | |||||||||||||||
Total Class Y Shares | $ | (6,093,194 | ) | $ | (5,146,770 | ) | $ | (14,368,625 | ) | $ | (11,059,054 | ) | $ | 19,742,075 | $ | (90,133,364 | ) | ||||||||||
Change in net assets resulting from capital transactions | $ | (19,692,166 | ) | $ | (31,160,715 | ) | $ | (27,903,721 | ) | $ | (24,933,574 | ) | $ | (45,765,231 | ) | $ | (233,559,554 | ) |
(continues on next page)
See notes to financial statements.
73
Victory Portfolios | Statements of Changes in Net Assets |
(continued)
Victory Tax-Exempt Fund | Victory High Income Municipal Bond Fund | Victory Floating Rate Fund | |||||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2018 | Year Ended December 31, 2017 | ||||||||||||||||||||||
Share Transactions: | |||||||||||||||||||||||||||
Class A Shares | |||||||||||||||||||||||||||
Issued | 392,511 | 311,344 | 138,669 | 141,815 | 4,791,356 | 1,305,374 | |||||||||||||||||||||
Reinvested | 165,480 | 198,907 | 70,896 | 108,390 | 705,288 | 781,201 | |||||||||||||||||||||
Redeemed | (1,182,655 | ) | (2,381,069 | ) | (1,018,059 | ) | (1,038,779 | ) | (7,916,526 | ) | (9,422,219 | ) | |||||||||||||||
Total Class A Shares | (624,664 | ) | (1,870,818 | ) | (808,494 | ) | (788,574 | ) | (2,419,882 | ) | (7,335,644 | ) | |||||||||||||||
Class C Shares | |||||||||||||||||||||||||||
Issued | 49,729 | 81,943 | 57,162 | 94,105 | 2,060,999 | 1,079,352 | |||||||||||||||||||||
Reinvested | 80,097 | 96,363 | 61,664 | 76,139 | 996,600 | 1,030,772 | |||||||||||||||||||||
Redeemed | (907,537 | ) | (958,991 | ) | (597,211 | ) | (692,994 | ) | (7,539,753 | ) | (9,576,856 | ) | |||||||||||||||
Total Class C Shares | (777,711 | ) | (780,685 | ) | (478,385 | ) | (522,750 | ) | (4,482,154 | ) | (7,466,732 | ) | |||||||||||||||
Class R Shares | |||||||||||||||||||||||||||
Issued | — | — | — | — | 22,917 | 21,658 | |||||||||||||||||||||
Reinvested | — | — | — | — | 2,724 | 4,101 | |||||||||||||||||||||
Redeemed | — | — | — | — | (42,619 | ) | (66,148 | ) | |||||||||||||||||||
Total Class R Shares | — | — | — | — | (16,978 | ) | (40,389 | ) | |||||||||||||||||||
Class Y Shares | |||||||||||||||||||||||||||
Issued | 453,041 | 689,033 | 178,749 | 552,773 | 14,061,221 | 9,198,088 | |||||||||||||||||||||
Reinvested | 120,245 | 127,339 | 62,531 | 123,607 | 1,447,068 | 1,409,028 | |||||||||||||||||||||
Redeemed | (1,201,743 | ) | (1,339,687 | ) | (1,607,188 | ) | (1,722,680 | ) | (13,431,987 | ) | (19,933,369 | ) | |||||||||||||||
Total Class Y Shares | (628,457 | ) | (523,315 | ) | (1,365,908 | ) | (1,046,300 | ) | 2,076,302 | (9,326,253 | ) | ||||||||||||||||
Change in Shares | (2,030,832 | ) | (3,174,818 | ) | (2,652,787 | ) | (2,357,624 | ) | (4,842,712 | ) | (24,169,018 | ) |
See notes to financial statements.
74
Victory Portfolios | Statement of Changes in Net Assets |
Victory Strategic Income Fund | |||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | ||||||||||
From Investment Activities: | |||||||||||
Operations: | |||||||||||
Net investment income (loss) | $ | 1,727,890 | $ | 1,904,829 | |||||||
Net realized gains (losses) from investment transactions | (1,587,023 | ) | 998,362 | ||||||||
Net change in unrealized appreciation/depreciation on investments | (630,096 | ) | 105,546 | ||||||||
Change in net assets resulting from operations | (489,229 | ) | 3,008,737 | ||||||||
Distributions to Shareholders: (a) | |||||||||||
Class A Shares | (1,129,828 | ) | (1,253,807 | ) | |||||||
Class C Shares | (288,258 | ) | (317,178 | ) | |||||||
Class R Shares | (83,778 | ) | (91,356 | ) | |||||||
Class Y Shares | (191,276 | ) | (405,899 | ) | |||||||
Change in net assets resulting from distributions to shareholders | (1,693,140 | ) | (2,068,240 | ) | |||||||
Change in net assets resulting from capital transactions | (7,720,233 | ) | (4,618,608 | ) | |||||||
Change in net assets | (9,902,602 | ) | (3,678,111 | ) | |||||||
Net Assets: | |||||||||||
Beginning of period | 59,735,912 | 63,414,023 | |||||||||
End of period | $ | 49,833,310 | $ | 59,735,912 |
(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.
75
Victory Portfolios | Statement of Changes in Net Assets |
(continued)
Victory Strategic Income Fund | |||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | ||||||||||
Capital Transactions: | |||||||||||
Class A Shares | |||||||||||
Proceeds from shares issued | $ | 675,278 | $ | 754,116 | |||||||
Distributions reinvested | 198,500 | 259,436 | |||||||||
Cost of shares redeemed | (2,400,693 | ) | (3,726,856 | ) | |||||||
Total Class A Shares | $ | (1,526,915 | ) | $ | (2,713,304 | ) | |||||
Class C Shares | |||||||||||
Proceeds from shares issued | $ | 1,070,368 | $ | 1,478,406 | |||||||
Distributions reinvested | 226,185 | 249,788 | |||||||||
Cost of shares redeemed | (2,276,130 | ) | (1,778,882 | ) | |||||||
Total Class C Shares | $ | (979,577 | ) | $ | (50,688 | ) | |||||
Class R Shares | |||||||||||
Proceeds from shares issued | $ | 9,743 | $ | 17,575 | |||||||
Distributions reinvested | 13,196 | 15,654 | |||||||||
Cost of shares redeemed | (73,239 | ) | (129,893 | ) | |||||||
Total Class R Shares | $ | (50,300 | ) | $ | (96,664 | ) | |||||
Class Y Shares | |||||||||||
Proceeds from shares issued | $ | 412,952 | $ | 2,676,340 | |||||||
Distributions reinvested | 103,535 | 304,661 | |||||||||
Cost of shares redeemed | (5,679,928 | ) | (4,738,953 | ) | |||||||
Total Class Y Shares | $ | (5,163,441 | ) | $ | (1,757,952 | ) | |||||
Change in net assets resulting from capital transactions | $ | (7,720,233 | ) | $ | (4,618,608 | ) | |||||
Share Transactions: | |||||||||||
Class A Shares | |||||||||||
Issued | 67,828 | 74,635 | |||||||||
Reinvested | 20,169 | 25,689 | |||||||||
Redeemed | (244,021 | ) | (369,334 | ) | |||||||
Total Class A Shares | (156,024 | ) | (269,010 | ) | |||||||
Class C Shares | |||||||||||
Issued | 106,921 | 145,885 | |||||||||
Reinvested | 22,876 | 24,613 | |||||||||
Redeemed | (230,950 | ) | (175,535 | ) | |||||||
Total Class C Shares | (101,153 | ) | (5,037 | ) | |||||||
Class R Shares | |||||||||||
Issued | 982 | 1,738 | |||||||||
Reinvested | 1,334 | 1,542 | |||||||||
Redeemed | (7,448 | ) | (12,801 | ) | |||||||
Total Class R Shares | (5,132 | ) | (9,521 | ) | |||||||
Class Y Shares | |||||||||||
Issued | 42,123 | 267,549 | |||||||||
Reinvested | 10,562 | 30,331 | |||||||||
Redeemed | (566,546 | ) | (472,927 | ) | |||||||
Total Class Y Shares | (513,861 | ) | (175,047 | ) | |||||||
Change in Shares | (776,170 | ) | (458,615 | ) |
See notes to financial statements.
76
Victory Portfolios | Financial Highlights |
For a Share Outstanding Throughout Each Period
Victory INCORE Investment Quality Bond Fund | |||||||||||||||||||||||
Class A Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 9.59 | $ | 9.48 | $ | 9.57 | $ | 10.16 | $ | 10.01 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | 0.21 | 0.18 | 0.22 | 0.31 | 0.30 | ||||||||||||||||||
Net realized and unrealized gains (losses) on investments | (0.29 | ) | 0.16 | 0.16 | (0.38 | ) | 0.26 | ||||||||||||||||
Total from Investment Activities | (0.08 | ) | 0.34 | 0.38 | (0.07 | ) | 0.56 | ||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.25 | ) | (0.23 | ) | (0.23 | ) | (0.30 | ) | (0.30 | ) | |||||||||||||
Net realized gains from investments | — | — | (0.24 | ) | (0.22 | ) | (0.11 | ) | |||||||||||||||
Total Distributions to Shareholders | (0.25 | ) | (0.23 | ) | (0.47 | ) | (0.52 | ) | (0.41 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 9.26 | $ | 9.59 | $ | 9.48 | $ | 9.57 | $ | 10.16 | |||||||||||||
Total Return (excludes sales charge) | (0.80 | )% | 3.62 | % | 4.01 | % | (0.74 | )% | 5.67 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 24,049 | $ | 31,306 | $ | 40,510 | $ | 51,747 | $ | 73,618 | |||||||||||||
Ratio of net expenses to average net assets | 0.90 | % | 0.90 | % | 0.90 | % | 0.90 | % | 0.88 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 2.27 | % | 1.86 | % | 2.29 | % | 3.06 | % | 2.98 | % | |||||||||||||
Ratio of gross expenses to average net assets (b) | 1.13 | % | 1.07 | % | 1.14 | % | 1.07 | % | 1.05 | % | |||||||||||||
Portfolio turnover (c) | 115 | % | 70 | % | 148 | % | 73 | % | 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.
77
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory INCORE Investment Quality Bond Fund | |||||||||||||||||||||||
Class C Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 9.58 | $ | 9.47 | $ | 9.56 | $ | 10.16 | $ | 10.01 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | 0.13 | 0.10 | 0.14 | 0.22 | 0.22 | ||||||||||||||||||
Net realized and unrealized gains (losses) on investments | (0.29 | ) | 0.16 | 0.16 | (0.38 | ) | 0.26 | ||||||||||||||||
Total from Investment Activities | (0.16 | ) | 0.26 | 0.30 | (0.16 | ) | 0.48 | ||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.17 | ) | (0.15 | ) | (0.15 | ) | (0.22 | ) | (0.22 | ) | |||||||||||||
Net realized gains from investments | — | — | (0.24 | ) | (0.22 | ) | (0.11 | ) | |||||||||||||||
Total Distributions to Shareholders | (0.17 | ) | (0.15 | ) | (0.39 | ) | (0.44 | ) | (0.33 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 9.25 | $ | 9.58 | $ | 9.47 | $ | 9.56 | $ | 10.16 | |||||||||||||
Total Return (excludes contingent deferred sales charge) | (1.66 | )% | 2.74 | % | 3.11 | % | (1.70 | )% | 4.81 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 3,634 | $ | 6,127 | $ | 8,915 | $ | 10,510 | $ | 15,377 | |||||||||||||
Ratio of net expenses to average net assets | 1.77 | % | 1.77 | % | 1.77 | % | 1.77 | % | 1.71 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 1.42 | % | 0.99 | % | 1.42 | % | 2.19 | % | 2.16 | % | |||||||||||||
Ratio of gross expenses to average net assets (b) | 2.10 | % | 1.91 | % | 1.92 | % | 1.85 | % | 1.88 | % | |||||||||||||
Portfolio turnover (c) | 115 | % | 70 | % | 148 | % | 73 | % | 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.
78
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory INCORE Investment Quality Bond Fund | |||||||||||||||||||||||
Class R Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 9.61 | $ | 9.50 | $ | 9.58 | $ | 10.18 | $ | 10.02 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | 0.18 | 0.14 | 0.19 | 0.27 | 0.26 | ||||||||||||||||||
Net realized and unrealized gains (losses) on investments | (0.30 | ) | 0.16 | 0.17 | (0.39 | ) | 0.27 | ||||||||||||||||
Total from Investment Activities | (0.12 | ) | 0.30 | 0.36 | (0.12 | ) | 0.53 | ||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.21 | ) | (0.19 | ) | (0.20 | ) | (0.26 | ) | (0.26 | ) | |||||||||||||
Net realized gains from investments | — | — | (0.24 | ) | (0.22 | ) | (0.11 | ) | |||||||||||||||
Total Distributions to Shareholders | (0.21 | ) | (0.19 | ) | (0.44 | ) | (0.48 | ) | (0.37 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 9.28 | $ | 9.61 | $ | 9.50 | $ | 9.58 | $ | 10.18 | |||||||||||||
Total Return | (1.20 | )% | 3.16 | % | 3.71 | % | (1.24 | )% | 5.36 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 3,192 | $ | 3,940 | $ | 4,477 | $ | 5,568 | $ | 7,821 | |||||||||||||
Ratio of net expenses to average net assets | 1.30 | % | 1.30 | % | 1.30 | % | 1.30 | % | 1.28 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 1.88 | % | 1.44 | % | 1.90 | % | 2.65 | % | 2.57 | % | |||||||||||||
Ratio of gross expenses to average net assets (b) | 1.69 | % | 1.65 | % | 1.44 | % | 1.45 | % | 1.46 | % | |||||||||||||
Portfolio turnover (c) | 115 | % | 70 | % | 148 | % | 73 | % | 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.
79
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory INCORE Investment Quality Bond Fund | |||||||||||||||||||||||
Class Y Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 9.58 | $ | 9.47 | $ | 9.56 | $ | 10.17 | $ | 10.02 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | 0.23 | 0.20 | 0.25 | 0.32 | 0.33 | ||||||||||||||||||
Net realized and unrealized gains (losses) on investments | (0.29 | ) | 0.16 | 0.16 | (0.39 | ) | 0.26 | ||||||||||||||||
Total from Investment Activities | (0.06 | ) | 0.36 | 0.41 | (0.07 | ) | 0.59 | ||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.27 | ) | (0.25 | ) | (0.26 | ) | (0.32 | ) | (0.33 | ) | |||||||||||||
Net realized gains from investments | — | — | (0.24 | ) | (0.22 | ) | (0.11 | ) | |||||||||||||||
Total Distributions to Shareholders | (0.27 | ) | (0.25 | ) | (0.50 | ) | (0.54 | ) | (0.44 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 9.25 | $ | 9.58 | $ | 9.47 | $ | 9.56 | $ | 10.17 | |||||||||||||
Total Return | (0.56 | )% | 3.87 | % | 4.26 | % | (0.73 | )% | 5.91 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 3,265 | $ | 4,421 | $ | 6,133 | $ | 5,557 | $ | 33,519 | |||||||||||||
Ratio of net expenses to average net assets | 0.66 | % | 0.66 | % | 0.66 | % | 0.66 | % | 0.66 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 2.51 | % | 2.09 | % | 2.53 | % | 3.19 | % | 3.20 | % | |||||||||||||
Ratio of gross expenses to average net assets (b) | 1.12 | % | 0.98 | % | 0.94 | % | 0.86 | % | 0.78 | % | |||||||||||||
Portfolio turnover (c) | 115 | % | 70 | % | 148 | % | 73 | % | 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.
80
Victory Portfolios | Financial Highlights |
For a Share Outstanding Throughout Each Period
Victory INCORE Low Duration Bond Fund | |||||||||||||||||||||||
Class A Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 9.99 | $ | 10.03 | $ | 9.95 | $ | 10.03 | $ | 10.13 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | 0.16 | 0.12 | 0.12 | 0.14 | 0.18 | ||||||||||||||||||
Net realized and unrealized gains (losses) on investments | (0.08 | ) | 0.02 | 0.06 | (0.09 | ) | (0.10 | ) | |||||||||||||||
Total from Investment Activities | 0.08 | 0.14 | 0.18 | 0.05 | 0.08 | ||||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.21 | ) | (0.18 | ) | (0.10 | ) | (0.13 | ) | (0.18 | ) | |||||||||||||
Total Distributions to Shareholders | (0.21 | ) | (0.18 | ) | (0.10 | ) | (0.13 | ) | (0.18 | ) | |||||||||||||
Capital Contributions from Prior Custodian, Net (See Note 8) | — | — | — | (b) | — | — | |||||||||||||||||
Net Asset Value, End of Period | $ | 9.86 | $ | 9.99 | $ | 10.03 | $ | 9.95 | $ | 10.03 | |||||||||||||
Total Return (excludes sales charge) | 0.73 | % | 1.47 | % | 1.80 | %(c) | 0.52 | % | 0.74 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 96,210 | $ | 149,287 | $ | 214,825 | $ | 314,347 | $ | 373,706 | |||||||||||||
Ratio of net expenses to average net assets | 0.85 | % | 0.85 | % | 0.85 | % | 0.84 | % | 0.90 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 1.66 | % | 1.21 | % | 1.21 | % | 1.38 | % | 1.75 | % | |||||||||||||
Ratio of gross expenses to average net assets (d) | 0.90 | % | 0.90 | % | 0.89 | % | 0.85 | % | 0.90 | % | |||||||||||||
Portfolio turnover (e) | 45 | % | 62 | % | 49 | % | 36 | % | 38 | % |
(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) The Fund received monies related to a nonrecurring refund from the prior Custodian. The corresponding impact to the total return was less than 0.005% for the period shown. (See Note 8)
(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.
See notes to financial statements.
81
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory INCORE Low Duration Bond Fund | |||||||||||||||||||||||
Class C Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 9.99 | $ | 10.02 | $ | 9.95 | $ | 10.03 | $ | 10.13 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | 0.09 | 0.04 | 0.04 | 0.06 | 0.10 | ||||||||||||||||||
Net realized and unrealized gains (losses) on investments | (0.09 | ) | 0.03 | 0.05 | (0.08 | ) | (0.10 | ) | |||||||||||||||
Total from Investment Activities | — | (b) | 0.07 | 0.09 | (0.02 | ) | — | (b) | |||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.14 | ) | (0.10 | ) | (0.02 | ) | (0.06 | ) | (0.10 | ) | |||||||||||||
Total Distributions to Shareholders | (0.14 | ) | (0.10 | ) | (0.02 | ) | (0.06 | ) | (0.10 | ) | |||||||||||||
Capital Contributions from Prior Custodian, Net (See Note 8) | — | — | — | (b) | — | — | |||||||||||||||||
Net Asset Value, End of Period | $ | 9.85 | $ | 9.99 | $ | 10.02 | $ | 9.95 | $ | 10.03 | |||||||||||||
Total Return (excludes contingent deferred sales charge) | (0.04 | )% | 0.70 | % | 0.94 | %(c) | (0.20 | )% | — | %(d) | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 62,103 | $ | 82,847 | $ | 117,544 | $ | 154,056 | $ | 191,970 | |||||||||||||
Ratio of net expenses to average net assets | 1.62 | % | 1.62 | % | 1.62 | % | 1.61 | % | 1.64 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 0.88 | % | 0.44 | % | 0.44 | % | 0.62 | % | 1.00 | % | |||||||||||||
Ratio of gross expenses to average net assets (e) | 1.68 | % | 1.65 | % | 1.65 | % | 1.62 | % | 1.64 | % | |||||||||||||
Portfolio turnover (f) | 45 | % | 62 | % | 49 | % | 36 | % | 38 | % |
(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) The Fund received monies related to a nonrecurring refund from the prior Custodian. The corresponding impact to the total return was less than 0.005% for the period shown. (See Note 8)
(d) Amount is less than 0.005%.
(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.
82
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory INCORE Low Duration Bond Fund | |||||||||||||||||||||||
Class R Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 9.99 | $ | 10.02 | $ | 9.95 | $ | 10.03 | $ | 10.13 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | 0.12 | 0.08 | 0.08 | 0.10 | 0.13 | ||||||||||||||||||
Net realized and unrealized gains (losses) on investments | (0.08 | ) | 0.03 | 0.05 | (0.09 | ) | (0.10 | ) | |||||||||||||||
Total from Investment Activities | 0.04 | 0.11 | 0.13 | 0.01 | 0.03 | ||||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.17 | ) | (0.14 | ) | (0.06 | ) | (0.09 | ) | (0.13 | ) | |||||||||||||
Total Distributions to Shareholders | (0.17 | ) | (0.14 | ) | (0.06 | ) | (0.09 | ) | (0.13 | ) | |||||||||||||
Capital Contributions from Prior Custodian, Net (See Note 8) | — | — | — | (b) | — | — | |||||||||||||||||
Net Asset Value, End of Period | $ | 9.86 | $ | 9.99 | $ | 10.02 | $ | 9.95 | $ | 10.03 | |||||||||||||
Total Return | 0.31 | % | 1.05 | % | 1.33 | %(c) | 0.12 | % | 0.31 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 1,554 | $ | 2,078 | $ | 2,583 | $ | 3,925 | $ | 5,001 | |||||||||||||
Ratio of net expenses to average net assets | 1.27 | % | 1.27 | % | 1.23 | % | 1.26 | % | 1.33 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 1.20 | % | 0.79 | % | 0.83 | % | 0.96 | % | 1.31 | % | |||||||||||||
Ratio of gross expenses to average net assets (d) | 1.87 | % | 1.68 | % | 1.25 | % | 1.27 | % | 1.33 | % | |||||||||||||
Portfolio turnover (e) | 45 | % | 62 | % | 49 | % | 36 | % | 38 | % |
(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) The Fund received monies related to a nonrecurring refund from the prior Custodian. The corresponding impact to the total return was less than 0.005% for the period shown. (See Note 8)
(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.
See notes to financial statements.
83
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory INCORE Low Duration Bond Fund | |||||||||||||||||||||||
Class Y Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 10.00 | $ | 10.03 | $ | 9.95 | $ | 10.03 | $ | 10.13 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | 0.19 | 0.15 | 0.14 | 0.16 | 0.20 | ||||||||||||||||||
Net realized and unrealized gains (losses) on investments | (0.10 | ) | 0.02 | 0.06 | (0.08 | ) | (0.10 | ) | |||||||||||||||
Total from Investment Activities | 0.09 | 0.17 | 0.20 | 0.08 | 0.10 | ||||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.23 | ) | (0.20 | ) | (0.12 | ) | (0.16 | ) | (0.20 | ) | |||||||||||||
Total Distributions to Shareholders | (0.23 | ) | (0.20 | ) | (0.12 | ) | (0.16 | ) | (0.20 | ) | |||||||||||||
Capital Contributions from Prior Custodian, Net (See Note 8) | — | — | — | (b) | — | — | |||||||||||||||||
Net Asset Value, End of Period | $ | 9.86 | $ | 10.00 | $ | 10.03 | $ | 9.95 | $ | 10.03 | |||||||||||||
Total Return | 0.96 | % | 1.71 | % | 2.04 | %(c) | 0.74 | % | 1.04 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 180,034 | $ | 271,294 | $ | 334,841 | $ | 367,112 | $ | 407,382 | |||||||||||||
Ratio of net expenses to average net assets | 0.62 | % | 0.62 | % | 0.60 | % | 0.61 | % | 0.61 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 1.87 | % | 1.44 | % | 1.42 | % | 1.60 | % | 2.02 | % | |||||||||||||
Ratio of gross expenses to average net assets (d) | 0.68 | % | 0.65 | % | 0.63 | % | 0.62 | % | 0.61 | % | |||||||||||||
Portfolio turnover (e) | 45 | % | 62 | % | 49 | % | 36 | % | 38 | % |
(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) The Fund received monies related to a nonrecurring refund from the prior Custodian. The corresponding impact to the total return was less than 0.005% for the period shown. (See Note 8)
(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.
See notes to financial statements.
84
Victory Portfolios | Financial Highlights |
For a Share Outstanding Throughout Each Period
Victory High Yield Fund | |||||||||||||||||||||||
Class A Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 6.57 | $ | 6.34 | $ | 5.85 | $ | 6.52 | $ | 7.31 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | 0.39 | 0.39 | 0.38 | 0.40 | 0.41 | ||||||||||||||||||
Net realized and unrealized gains (losses) on investments | (0.37 | ) | 0.22 | 0.49 | (0.67 | ) | (0.47 | ) | |||||||||||||||
Total from Investment Activities | 0.02 | 0.61 | 0.87 | (0.27 | ) | (0.06 | ) | ||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.39 | ) | (0.38 | ) | (0.38 | ) | (0.40 | ) | (0.41 | ) | |||||||||||||
Net realized gains from investments | — | — | — | — | (0.32 | ) | |||||||||||||||||
Total Distributions to Shareholders | (0.39 | ) | (0.38 | ) | (0.38 | ) | (0.40 | ) | (0.73 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 6.20 | $ | 6.57 | $ | 6.34 | $ | 5.85 | $ | 6.52 | |||||||||||||
Total Return (excludes sales charge) | 0.28 | % | 9.93 | % | 15.40 | % | (4.51 | )% | (1.01 | )% | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 23,797 | $ | 21,882 | $ | 25,530 | $ | 26,608 | $ | 34,339 | |||||||||||||
Ratio of net expenses to average net assets | 1.00 | % | 1.00 | % | 1.00 | % | 1.00 | % | 0.98 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 6.01 | % | 5.99 | % | 6.32 | % | 6.16 | % | 5.52 | % | |||||||||||||
Ratio of gross expenses to average net assets (b) | 1.12 | % | 1.13 | % | 1.18 | % | 1.16 | % | 1.16 | % | |||||||||||||
Portfolio turnover (c) | 87 | % | 174 | % | 165 | % | 151 | % | 221 | % |
(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.
85
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory High Yield Fund | |||||||||||||||||||||||
Class C Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 6.58 | $ | 6.35 | $ | 5.86 | $ | 6.53 | $ | 7.32 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | 0.34 | 0.34 | 0.34 | 0.35 | 0.36 | ||||||||||||||||||
Net realized and unrealized gains (losses) on investments | (0.36 | ) | 0.23 | 0.49 | (0.67 | ) | (0.47 | ) | |||||||||||||||
Total from Investment Activities | (0.02 | ) | 0.57 | 0.83 | (0.32 | ) | (0.11 | ) | |||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.35 | ) | (0.34 | ) | (0.34 | ) | (0.35 | ) | (0.36 | ) | |||||||||||||
Net realized gains from investments | — | — | — | — | (0.32 | ) | |||||||||||||||||
Total Distributions to Shareholders | (0.35 | ) | (0.34 | ) | (0.34 | ) | (0.35 | ) | (0.68 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 6.21 | $ | 6.58 | $ | 6.35 | $ | 5.86 | $ | 6.53 | |||||||||||||
Total Return (excludes contingent deferred sales charge) | (0.43 | )% | 9.19 | % | 14.58 | % | (5.16 | )% | (1.70 | )% | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 19,432 | $ | 22,283 | $ | 22,498 | $ | 22,138 | $ | 27,780 | |||||||||||||
Ratio of net expenses to average net assets | 1.70 | % | 1.70 | % | 1.70 | % | 1.70 | % | 1.70 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 5.29 | % | 5.27 | % | 5.61 | % | 5.47 | % | 4.85 | % | |||||||||||||
Ratio of gross expenses to average net assets (b) | 1.84 | % | 1.84 | % | 1.91 | % | 1.90 | % | 1.90 | % | |||||||||||||
Portfolio turnover (c) | 87 | % | 174 | % | 165 | % | 151 | % | 221 | % |
(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.
86
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory High Yield Fund | |||||||||||||||||||||||
Class R Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 6.59 | $ | 6.35 | $ | 5.87 | $ | 6.54 | $ | 7.33 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | 0.37 | 0.37 | 0.36 | 0.37 | 0.38 | ||||||||||||||||||
Net realized and unrealized gains (losses) on investments | (0.37 | ) | 0.23 | 0.48 | (0.66 | ) | (0.47 | ) | |||||||||||||||
Total from Investment Activities | — | (b) | 0.60 | 0.84 | (0.29 | ) | (0.09 | ) | |||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.37 | ) | (0.36 | ) | (0.36 | ) | (0.38 | ) | (0.38 | ) | |||||||||||||
Net realized gains from investments | — | — | — | — | (0.32 | ) | |||||||||||||||||
Total Distributions to Shareholders | (0.37 | ) | (0.36 | ) | (0.36 | ) | (0.38 | ) | (0.70 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 6.22 | $ | 6.59 | $ | 6.35 | $ | 5.87 | $ | 6.54 | |||||||||||||
Total Return | (0.07 | )% | 9.64 | % | 14.78 | % | (4.82 | )% | (1.35 | )% | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 17,595 | $ | 19,217 | $ | 18,742 | $ | 18,042 | $ | 21,109 | |||||||||||||
Ratio of net expenses to average net assets | 1.35 | % | 1.35 | % | 1.35 | % | 1.35 | % | 1.35 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 5.64 | % | 5.61 | % | 5.96 | % | 5.82 | % | 5.20 | % | |||||||||||||
Ratio of gross expenses to average net assets (c) | 1.35 | % | 1.36 | % | 1.45 | % | 1.51 | % | 1.52 | % | |||||||||||||
Portfolio turnover (d) | 87 | % | 174 | % | 165 | % | 151 | % | 221 | % |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) Amounts is less than $0.005 per share.
(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.
87
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory High Yield Fund | |||||||||||||||||||||||
Class Y Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 6.54 | $ | 6.31 | $ | 5.82 | $ | 6.49 | $ | 7.27 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | 0.41 | 0.40 | 0.39 | 0.41 | 0.44 | ||||||||||||||||||
Net realized and unrealized gains (losses) on investments | (0.37 | ) | 0.23 | 0.49 | (0.67 | ) | (0.48 | ) | |||||||||||||||
Total from Investment Activities | 0.04 | 0.63 | 0.88 | (0.26 | ) | (0.04 | ) | ||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.41 | ) | (0.40 | ) | (0.39 | ) | (0.41 | ) | (0.42 | ) | |||||||||||||
Net realized gains from investments | — | — | — | — | (0.32 | ) | |||||||||||||||||
Total Distributions to Shareholders | (0.41 | ) | (0.40 | ) | (0.39 | ) | (0.41 | ) | (0.74 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 6.17 | $ | 6.54 | $ | 6.31 | $ | 5.82 | $ | 6.49 | |||||||||||||
Total Return | 0.52 | % | 10.24 | % | 15.72 | % | (4.34 | )% | (0.63 | )% | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 21,060 | $ | 5,213 | $ | 6,938 | $ | 6,047 | $ | 13,830 | |||||||||||||
Ratio of net expenses to average net assets | 0.76 | % | 0.76 | % | 0.76 | % | 0.76 | % | 0.76 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 6.32 | % | 6.27 | % | 6.54 | % | 6.36 | % | 5.90 | % | |||||||||||||
Ratio of gross expenses to average net assets (b) | 0.97 | % | 1.04 | % | 1.00 | % | 0.95 | % | 0.90 | % | |||||||||||||
Portfolio turnover (c) | 87 | % | 174 | % | 165 | % | 151 | % | 221 | % |
(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.
88
Victory Portfolios | Financial Highlights |
For a Share Outstanding Throughout Each Period
Victory Tax-Exempt Fund | |||||||||||||||||||||||
Class A Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 9.91 | $ | 9.65 | $ | 10.53 | $ | 10.83 | $ | 10.30 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | 0.36 | 0.36 | 0.35 | 0.35 | 0.33 | ||||||||||||||||||
Net realized and unrealized gains (losses) on investments | (0.30 | ) | 0.39 | (0.49 | ) | (0.05 | ) | 0.53 | |||||||||||||||
Total from Investment Activities | 0.06 | 0.75 | (0.14 | ) | 0.30 | 0.86 | |||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.36 | ) | (0.37 | ) | (0.35 | ) | (0.35 | ) | (0.33 | ) | |||||||||||||
Net realized gains from investments | (0.14 | ) | (0.12 | ) | (0.39 | ) | (0.25 | ) | — | ||||||||||||||
Total Distributions to Shareholders | (0.50 | ) | (0.49 | ) | (0.74 | ) | (0.60 | ) | (0.33 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 9.47 | $ | 9.91 | $ | 9.65 | $ | 10.53 | $ | 10.83 | |||||||||||||
Total Return (excludes sales charge) | 0.69 | % | 7.89 | % | (1.40 | )% | 2.76 | % | 8.39 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 29,993 | $ | 37,570 | $ | 54,658 | $ | 90,301 | $ | 102,716 | |||||||||||||
Ratio of net expenses to average net assets | 0.80 | % | 0.80 | % | 0.80 | % | 0.80 | % | 0.80 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 3.68 | % | 3.70 | % | 3.30 | % | 3.22 | % | 3.05 | % | |||||||||||||
Ratio of gross expenses to average net assets (b) | 0.97 | % | 0.96 | % | 0.95 | % | 0.93 | % | 0.96 | % | |||||||||||||
Portfolio turnover (c) | 42 | % | 84 | % | 39 | % | 39 | % | 14 | % |
(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.
89
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory Tax-Exempt Fund | |||||||||||||||||||||||
Class C Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 9.90 | $ | 9.65 | $ | 10.53 | $ | 10.82 | $ | 10.30 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | 0.28 | 0.29 | 0.26 | 0.26 | 0.24 | ||||||||||||||||||
Net realized and unrealized gains (losses) on investments | (0.29 | ) | 0.37 | (0.48 | ) | (0.04 | ) | 0.52 | |||||||||||||||
Total from Investment Activities | (0.01 | ) | 0.66 | (0.22 | ) | 0.22 | 0.76 | ||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.28 | ) | (0.29 | ) | (0.27 | ) | (0.26 | ) | (0.24 | ) | |||||||||||||
Net realized gains from investments | (0.14 | ) | (0.12 | ) | (0.39 | ) | (0.25 | ) | — | ||||||||||||||
Total Distributions to Shareholders | (0.42 | ) | (0.41 | ) | (0.66 | ) | (0.51 | ) | (0.24 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 9.47 | $ | 9.90 | $ | 9.65 | $ | 10.53 | $ | 10.82 | |||||||||||||
Total Return (excludes contingent deferred sales charge) | (0.01 | )% | 6.92 | % | (2.19 | )% | 2.04 | % | 7.44 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 17,986 | $ | 26,520 | $ | 33,369 | $ | 43,404 | $ | 53,042 | |||||||||||||
Ratio of net expenses to average net assets | 1.60 | % | 1.60 | % | 1.60 | % | 1.60 | % | 1.60 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 2.88 | % | 2.89 | % | 2.51 | % | 2.43 | % | 2.26 | % | |||||||||||||
Ratio of gross expenses to average net assets (b) | 1.78 | % | 1.74 | % | 1.71 | % | 1.70 | % | 1.72 | % | |||||||||||||
Portfolio turnover (c) | 42 | % | 84 | % | 39 | % | 39 | % | 14 | % |
(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.
90
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory Tax-Exempt Fund | |||||||||||||||||||||||
Class Y Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 9.90 | $ | 9.65 | $ | 10.52 | $ | 10.82 | $ | 10.29 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | 0.37 | 0.37 | 0.36 | 0.36 | 0.34 | ||||||||||||||||||
Net realized and unrealized gains (losses) on investments | (0.30 | ) | 0.38 | (0.48 | ) | (0.05 | ) | 0.53 | |||||||||||||||
Total from Investment Activities | 0.07 | 0.75 | (0.12 | ) | 0.31 | 0.87 | |||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.37 | ) | (0.38 | ) | (0.36 | ) | (0.36 | ) | (0.34 | ) | |||||||||||||
Net realized gains from investments | (0.14 | ) | (0.12 | ) | (0.39 | ) | (0.25 | ) | — | ||||||||||||||
Total Distributions to Shareholders | (0.51 | ) | (0.50 | ) | (0.75 | ) | (0.61 | ) | (0.34 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 9.46 | $ | 9.90 | $ | 9.65 | $ | 10.52 | $ | 10.82 | |||||||||||||
Total Return | 0.80 | % | 7.90 | % | (1.20 | )% | 2.87 | % | 8.53 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 20,260 | $ | 27,420 | $ | 31,762 | $ | 52,012 | $ | 75,047 | |||||||||||||
Ratio of net expenses to average net assets | 0.69 | % | 0.69 | % | 0.69 | % | 0.69 | % | 0.69 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 3.79 | % | 3.80 | % | 3.41 | % | 3.33 | % | 3.18 | % | |||||||||||||
Ratio of gross expenses to average net assets (b) | 0.77 | % | 0.73 | % | 0.71 | % | 0.71 | % | 0.69 | % | |||||||||||||
Portfolio turnover (c) | 42 | % | 84 | % | 39 | % | 39 | % | 14 | % |
(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.
91
Victory Portfolios | Financial Highlights |
For a Share Outstanding Throughout Each Period
Victory High Income Municipal Bond Fund | |||||||||||||||||||||||
Class A Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 10.79 | $ | 10.35 | $ | 10.89 | $ | 10.84 | $ | 10.00 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | 0.43 | 0.46 | 0.44 | 0.43 | 0.45 | ||||||||||||||||||
Net realized and unrealized gains (losses) on investments | (0.40 | ) | 0.44 | (0.54 | ) | 0.05 | 0.84 | ||||||||||||||||
Total from Investment Activities | 0.03 | 0.90 | (0.10 | ) | 0.48 | 1.29 | |||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.43 | ) | (0.46 | ) | (0.44 | ) | (0.43 | ) | (0.45 | ) | |||||||||||||
Total Distributions to Shareholders | (0.43 | ) | (0.46 | ) | (0.44 | ) | (0.43 | ) | (0.45 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 10.39 | $ | 10.79 | $ | 10.35 | $ | 10.89 | $ | 10.84 | |||||||||||||
Total Return (excludes sales charge) | 0.34 | % | 8.85 | % | (1.04 | )% | 4.51 | % | 13.09 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 16,483 | $ | 25,831 | $ | 32,943 | $ | 48,485 | $ | 50,341 | |||||||||||||
Ratio of net expenses to average net assets | 0.80 | % | 0.80 | % | 0.80 | % | 0.80 | % | 0.78 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 4.13 | % | 4.31 | % | 4.02 | % | 3.96 | % | 4.26 | % | |||||||||||||
Ratio of gross expenses to average net assets (b) | 1.02 | % | 0.96 | % | 0.96 | % | 0.95 | % | 1.02 | % | |||||||||||||
Portfolio turnover (c) | 48 | % | 66 | % | 49 | % | 53 | % | 25 | % |
(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.
92
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory High Income Municipal Bond Fund | |||||||||||||||||||||||
Class C Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 10.79 | $ | 10.35 | $ | 10.89 | $ | 10.84 | $ | 10.00 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | 0.35 | 0.38 | 0.36 | 0.35 | 0.37 | ||||||||||||||||||
Net realized and unrealized gains (losses) on investments | (0.40 | ) | 0.44 | (0.54 | ) | 0.05 | 0.84 | ||||||||||||||||
Total from Investment Activities | (0.05 | ) | 0.82 | (0.18 | ) | 0.40 | 1.21 | ||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.35 | ) | (0.38 | ) | (0.36 | ) | (0.35 | ) | (0.37 | ) | |||||||||||||
Total Distributions to Shareholders | (0.35 | ) | (0.38 | ) | (0.36 | ) | (0.35 | ) | (0.37 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 10.39 | $ | 10.79 | $ | 10.35 | $ | 10.89 | $ | 10.84 | |||||||||||||
Total Return (excludes contingent deferred sales charge) | (0.43 | )% | 8.01 | % | (1.79 | )% | 3.71 | % | 12.22 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 19,282 | $ | 25,175 | $ | 29,563 | $ | 36,190 | $ | 35,996 | |||||||||||||
Ratio of net expenses to average net assets | 1.57 | % | 1.57 | % | 1.57 | % | 1.57 | % | 1.55 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 3.35 | % | 3.54 | % | 3.26 | % | 3.19 | % | 3.50 | % | |||||||||||||
Ratio of gross expenses to average net assets (b) | 1.78 | % | 1.73 | % | 1.73 | % | 1.73 | % | 1.77 | % | |||||||||||||
Portfolio turnover (c) | 48 | % | 66 | % | 49 | % | 53 | % | 25 | % |
(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.
93
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory High Income Municipal Bond Fund | |||||||||||||||||||||||
Class Y Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 10.79 | $ | 10.35 | $ | 10.89 | $ | 10.84 | $ | 10.00 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | 0.46 | 0.48 | 0.47 | 0.45 | 0.47 | ||||||||||||||||||
Net realized and unrealized gains (losses) on investments | (0.40 | ) | 0.44 | (0.54 | ) | 0.05 | 0.84 | ||||||||||||||||
Total from Investment Activities | 0.06 | 0.92 | (0.07 | ) | 0.50 | 1.31 | |||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.46 | ) | (0.48 | ) | (0.47 | ) | (0.45 | ) | (0.47 | ) | |||||||||||||
Total Distributions to Shareholders | (0.46 | ) | (0.48 | ) | (0.47 | ) | (0.45 | ) | (0.47 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 10.39 | $ | 10.79 | $ | 10.35 | $ | 10.89 | $ | 10.84 | |||||||||||||
Total Return | 0.57 | % | 9.10 | % | (0.81 | )% | 4.75 | % | 13.37 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 11,683 | $ | 26,864 | $ | 36,603 | $ | 43,024 | $ | 34,630 | |||||||||||||
Ratio of net expenses to average net assets | 0.57 | % | 0.57 | % | 0.57 | % | 0.57 | % | 0.54 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 4.36 | % | 4.55 | % | 4.26 | % | 4.18 | % | 4.49 | % | |||||||||||||
Ratio of gross expenses to average net assets (b) | 0.78 | % | 0.73 | % | 0.72 | % | 0.73 | % | 0.73 | % | |||||||||||||
Portfolio turnover (c) | 48 | % | 66 | % | 49 | % | 53 | % | 25 | % |
(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.
94
Victory Portfolios | Financial Highlights |
For a Share Outstanding Throughout Each Period
Victory Floating Rate Fund | |||||||||||||||||||||||
Class A Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 9.60 | $ | 9.71 | $ | 9.08 | $ | 9.82 | $ | 10.34 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | 0.52 | 0.46 | 0.46 | 0.46 | 0.42 | ||||||||||||||||||
Net realized and unrealized gains (losses) on investments | (0.47 | ) | (0.10 | ) | 0.63 | (0.74 | ) | (0.52 | ) | ||||||||||||||
Total from Investment Activities | 0.05 | 0.36 | 1.09 | (0.28 | ) | (0.10 | ) | ||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.52 | ) | (0.47 | ) | (0.46 | ) | (0.46 | ) | (0.42 | ) | |||||||||||||
Total Distributions to Shareholders | (0.52 | ) | (0.47 | ) | (0.46 | ) | (0.46 | ) | (0.42 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 9.13 | $ | 9.60 | $ | 9.71 | $ | 9.08 | $ | 9.82 | |||||||||||||
Total Return (excludes sales charge) | 0.43 | % | 3.76 | % | 12.35 | % | (3.03 | )% | (1.09 | )% | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 118,672 | $ | 148,060 | $ | 221,022 | $ | 227,240 | $ | 335,081 | |||||||||||||
Ratio of net expenses to average net assets | 1.00 | % | 1.00 | % | 1.00 | % | 1.00 | % | 0.99 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 5.41 | % | 4.76 | % | 4.95 | % | 4.71 | % | 4.02 | % | |||||||||||||
Ratio of gross expenses to average net assets (b) | 1.14 | % | 1.10 | % | 1.11 | % | 1.06 | % | 1.08 | % | |||||||||||||
Portfolio turnover (c) | 48 | % | 57 | % | 56 | % | 29 | % | 39 | % |
(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.
95
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory Floating Rate Fund | |||||||||||||||||||||||
Class C Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 9.61 | $ | 9.72 | $ | 9.08 | $ | 9.83 | $ | 10.34 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | 0.44 | 0.38 | 0.39 | 0.38 | 0.34 | ||||||||||||||||||
Net realized and unrealized gains (losses) on investments | (0.47 | ) | (0.10 | ) | 0.64 | (0.75 | ) | (0.51 | ) | ||||||||||||||
Total from Investment Activities | (0.03 | ) | 0.28 | 1.03 | (0.37 | ) | (0.17 | ) | |||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.44 | ) | (0.39 | ) | (0.39 | ) | (0.38 | ) | (0.34 | ) | |||||||||||||
Total Distributions to Shareholders | (0.44 | ) | (0.39 | ) | (0.39 | ) | (0.38 | ) | (0.34 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 9.14 | $ | 9.61 | $ | 9.72 | $ | 9.08 | $ | 9.83 | |||||||||||||
Total Return (excludes contingent deferred sales charge) | (0.38 | )% | 2.93 | % | 11.57 | % | (3.91 | )% | (1.76 | )% | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 211,462 | $ | 265,486 | $ | 341,169 | $ | 399,361 | $ | 585,818 | |||||||||||||
Ratio of net expenses to average net assets | 1.80 | % | 1.80 | % | 1.80 | % | 1.80 | % | 1.79 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 4.60 | % | 3.97 | % | 4.18 | % | 3.92 | % | 3.28 | % | |||||||||||||
Ratio of gross expenses to average net assets (b) | 1.90 | % | 1.87 | % | 1.89 | % | 1.85 | % | 1.85 | % | |||||||||||||
Portfolio turnover (c) | 48 | % | 57 | % | 56 | % | 29 | % | 39 | % |
(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.
96
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory Floating Rate Fund | |||||||||||||||||||||||
Class R Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 9.60 | $ | 9.72 | $ | 9.08 | $ | 9.83 | $ | 10.34 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | 0.46 | 0.41 | 0.42 | 0.41 | 0.36 | ||||||||||||||||||
Net realized and unrealized gains (losses) on investments | (0.46 | ) | (0.12 | ) | 0.63 | (0.75 | ) | (0.51 | ) | ||||||||||||||
Total from Investment Activities | — | (b) | 0.29 | 1.05 | (0.34 | ) | (0.15 | ) | |||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.47 | ) | (0.41 | ) | (0.41 | ) | (0.41 | ) | (0.36 | ) | |||||||||||||
Total Distributions to Shareholders | (0.47 | ) | (0.41 | ) | (0.41 | ) | (0.41 | ) | (0.36 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 9.13 | $ | 9.60 | $ | 9.72 | $ | 9.08 | $ | 9.83 | |||||||||||||
Total Return | (0.13 | )% | 3.07 | % | 11.88 | % | (3.62 | )% | (1.50 | )% | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 716 | $ | 916 | $ | 1,319 | $ | 1,920 | $ | 2,340 | |||||||||||||
Ratio of net expenses to average net assets | 1.56 | % | 1.56 | % | 1.53 | % | 1.52 | % | 1.55 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 4.84 | % | 4.20 | % | 4.48 | % | 4.22 | % | 3.52 | % | |||||||||||||
Ratio of gross expenses to average net assets (c) | 2.99 | % | 2.26 | % | 1.53 | % | 1.52 | % | 1.58 | % | |||||||||||||
Portfolio turnover (d) | 48 | % | 57 | % | 56 | % | 29 | % | 39 | % |
(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) 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.
97
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory Floating Rate Fund | |||||||||||||||||||||||
Class Y Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 9.61 | $ | 9.72 | $ | 9.08 | $ | 9.83 | $ | 10.34 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | 0.54 | 0.48 | 0.49 | 0.48 | 0.44 | ||||||||||||||||||
Net realized and unrealized gains (losses) on investments | (0.47 | ) | (0.10 | ) | 0.63 | (0.75 | ) | (0.51 | ) | ||||||||||||||
Total from Investment Activities | 0.07 | 0.38 | 1.12 | (0.27 | ) | (0.07 | ) | ||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.54 | ) | (0.49 | ) | (0.48 | ) | (0.48 | ) | (0.44 | ) | |||||||||||||
Total Distributions to Shareholders | (0.54 | ) | (0.49 | ) | (0.48 | ) | (0.48 | ) | (0.44 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 9.14 | $ | 9.61 | $ | 9.72 | $ | 9.08 | $ | 9.83 | |||||||||||||
Total Return | 0.64 | % | 3.98 | % | 12.71 | % | (2.91 | )% | (0.75 | )% | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 281,545 | $ | 276,195 | $ | 370,035 | $ | 471,827 | $ | 927,644 | |||||||||||||
Ratio of net expenses to average net assets | 0.78 | % | 0.78 | % | 0.78 | % | 0.78 | % | 0.77 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 5.64 | % | 4.99 | % | 5.21 | % | 4.91 | % | 4.31 | % | |||||||||||||
Ratio of gross expenses to average net assets (b) | 0.89 | % | 0.88 | % | 0.88 | % | 0.84 | % | 0.82 | % | |||||||||||||
Portfolio turnover (c) | 48 | % | 57 | % | 56 | % | 29 | % | 39 | % |
(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.
98
Victory Portfolios | Financial Highlights |
For a Share Outstanding Throughout Each Period
Victory Strategic Income Fund | |||||||||||||||||||||||
Class A Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 10.14 | $ | 9.99 | $ | 9.68 | $ | 10.10 | $ | 10.33 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | 0.34 | 0.33 | 0.23 | 0.31 | 0.31 | ||||||||||||||||||
Net realized and unrealized gains (losses) on investments | (0.41 | ) | 0.17 | 0.36 | (0.40 | ) | (0.10 | ) | |||||||||||||||
Total from Investment Activities | (0.07 | ) | 0.50 | 0.59 | (0.09 | ) | 0.21 | ||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.33 | ) | (0.35 | ) | (0.27 | ) | (0.32 | ) | (0.33 | ) | |||||||||||||
Net realized gains from investments | — | — | — | (0.01 | ) | (0.11 | ) | ||||||||||||||||
Return of capital | — | — | (0.01 | ) | — | — | |||||||||||||||||
Total Distributions to Shareholders | (0.33 | ) | (0.35 | ) | (0.28 | ) | (0.33 | ) | (0.44 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 9.74 | $ | 10.14 | $ | 9.99 | $ | 9.68 | $ | 10.10 | |||||||||||||
Total Return (excludes sales charge) | (0.66 | )% | 5.12 | % | 6.20 | % | (0.93 | )% | 2.03 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 32,053 | $ | 34,957 | $ | 37,121 | $ | 37,845 | $ | 48,790 | |||||||||||||
Ratio of net expenses to average net assets | 0.95 | % | 0.95 | % | 0.95 | % | 0.95 | % | 0.92 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 3.46 | % | 3.24 | % | 2.28 | % | 3.05 | % | 3.08 | % | |||||||||||||
Ratio of gross expenses to average net assets (b) | 1.09 | % | 1.07 | % | 1.17 | % | 1.16 | % | 1.14 | % | |||||||||||||
Portfolio turnover (c) | 115 | % | 138 | % | 79 | % | 41 | % | 87 | % |
(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.
99
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory Strategic Income Fund | |||||||||||||||||||||||
Class C Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 10.19 | $ | 10.04 | $ | 9.72 | $ | 10.15 | $ | 10.38 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | 0.26 | 0.25 | 0.15 | 0.23 | 0.24 | ||||||||||||||||||
Net realized and unrealized gains (losses) on investments | (0.41 | ) | 0.17 | 0.38 | (0.40 | ) | (0.11 | ) | |||||||||||||||
Total from Investment Activities | (0.15 | ) | 0.42 | 0.53 | (0.17 | ) | 0.13 | ||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.25 | ) | (0.27 | ) | (0.20 | ) | (0.25 | ) | (0.25 | ) | |||||||||||||
Net realized gains from investments | — | — | — | (0.01 | ) | (0.11 | ) | ||||||||||||||||
Return of capital | — | — | (0.01 | ) | — | — | |||||||||||||||||
Total Distributions to Shareholders | (0.25 | ) | (0.27 | ) | (0.21 | ) | (0.26 | ) | (0.36 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 9.79 | $ | 10.19 | $ | 10.04 | $ | 9.72 | $ | 10.15 | |||||||||||||
Total Return (excludes contingent deferred sales charge) | (1.45 | )% | 4.27 | % | 5.46 | % | (1.79 | )% | 1.23 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 10,221 | $ | 11,671 | $ | 11,547 | $ | 12,940 | $ | 12,974 | |||||||||||||
Ratio of net expenses to average net assets | 1.74 | % | 1.74 | % | 1.74 | % | 1.74 | % | 1.70 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 2.65 | % | 2.44 | % | 1.49 | % | 2.25 | % | 2.29 | % | |||||||||||||
Ratio of gross expenses to average net assets (b) | 1.97 | % | 1.89 | % | 2.00 | % | 1.97 | % | 1.96 | % | |||||||||||||
Portfolio turnover (c) | 115 | % | 138 | % | 79 | % | 41 | % | 87 | % |
(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.
100
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory Strategic Income Fund | |||||||||||||||||||||||
Class R Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 10.20 | $ | 10.04 | $ | 9.73 | $ | 10.16 | $ | 10.38 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | 0.30 | 0.29 | 0.19 | 0.27 | 0.28 | ||||||||||||||||||
Net realized and unrealized gains (losses) on investments | (0.42 | ) | 0.18 | 0.37 | (0.40 | ) | (0.10 | ) | |||||||||||||||
Total from Investment Activities | (0.12 | ) | 0.47 | 0.56 | (0.13 | ) | 0.18 | ||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.29 | ) | (0.31 | ) | (0.24 | ) | (0.29 | ) | (0.29 | ) | |||||||||||||
Net realized gains from investments | — | — | — | (0.01 | ) | (0.11 | ) | ||||||||||||||||
Return of capital | — | — | (0.01 | ) | — | — | |||||||||||||||||
Total Distributions to Shareholders | (0.29 | ) | (0.31 | ) | (0.25 | ) | (0.30 | ) | (0.40 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 9.79 | $ | 10.20 | $ | 10.04 | $ | 9.73 | $ | 10.16 | |||||||||||||
Total Return | (1.15 | )% | 4.78 | % | 5.77 | % | (1.39 | )% | 1.72 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 2,761 | $ | 2,927 | $ | 2,979 | $ | 3,338 | $ | 3,661 | |||||||||||||
Ratio of net expenses to average net assets | 1.34 | % | 1.34 | % | 1.34 | % | 1.34 | % | 1.31 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 3.05 | % | 2.83 | % | 1.89 | % | 2.64 | % | 2.69 | % | |||||||||||||
Ratio of gross expenses to average net assets (b) | 1.70 | % | 1.61 | % | 1.53 | % | 1.58 | % | 1.57 | % | |||||||||||||
Portfolio turnover (c) | 115 | % | 138 | % | 79 | % | 41 | % | 87 | % |
(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.
101
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory Strategic Income Fund | |||||||||||||||||||||||
Class Y Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 10.09 | $ | 9.94 | $ | 9.63 | $ | 10.05 | $ | 10.27 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | 0.36 | 0.35 | 0.25 | 0.32 | 0.36 | ||||||||||||||||||
Net realized and unrealized gains (losses) on investments | (0.41 | ) | 0.18 | 0.36 | (0.39 | ) | (0.12 | ) | |||||||||||||||
Total from Investment Activities | (0.05 | ) | 0.53 | 0.61 | (0.07 | ) | 0.24 | ||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.35 | ) | (0.38 | ) | (0.29 | ) | (0.34 | ) | (0.35 | ) | |||||||||||||
Net realized gains from investments | — | — | — | (0.01 | ) | (0.11 | ) | ||||||||||||||||
Return of capital | — | — | (0.01 | ) | — | — | |||||||||||||||||
Total Distributions to Shareholders | (0.35 | ) | (0.38 | ) | (0.30 | ) | (0.35 | ) | (0.46 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 9.69 | $ | 10.09 | $ | 9.94 | $ | 9.63 | $ | 10.05 | |||||||||||||
Total Return | (0.45 | )% | 5.38 | % | 6.45 | % | (0.74 | )% | 2.34 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 4,798 | $ | 10,180 | $ | 11,768 | $ | 13,217 | $ | 18,035 | |||||||||||||
Ratio of net expenses to average net assets | 0.74 | % | 0.74 | % | 0.74 | % | 0.74 | % | 0.71 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 3.72 | % | 3.46 | % | 2.50 | % | 3.24 | % | 3.28 | % | |||||||||||||
Ratio of gross expenses to average net assets (b) | 1.06 | % | 0.95 | % | 0.99 | % | 0.98 | % | 0.87 | % | |||||||||||||
Portfolio turnover (c) | 115 | % | 138 | % | 79 | % | 41 | % | 87 | % |
(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.
102
Victory Portfolios | Notes to Financial Statements December 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 seven Funds (collectively, the "Funds" and individually, a "Fund").
Funds (Legal Name) | Funds (Short Name) | Investment Share Classes Offered | |||||||||
Victory INCORE Investment Quality Bond Fund | Investment Quality Bond Fund | Classes A, C, R and Y | |||||||||
Victory INCORE Low Duration Bond Fund | Low Duration Bond Fund | Classes A, C, R and Y | |||||||||
Victory High Yield Fund | High Yield Fund | Classes A, C, R and Y | |||||||||
Victory Tax-Exempt Fund | Tax-Exempt Fund | Classes A, C and Y | |||||||||
Victory High Income Municipal Bond Fund | High Income Municipal Bond Fund | Classes A, C and Y | |||||||||
Victory Floating Rate Fund | Floating Rate Fund | Classes A, C, R and Y | |||||||||
Victory Strategic Income Fund | Strategic Income Fund | Classes A, C, R and Y |
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.)
103
Victory Portfolios | Notes to Financial Statements — continued December 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.
Futures contracts are valued at the settlement price established each day by the board of trade or an exchange on which they are traded. These valuations are typically categorized as Level 1 in the fair value hierarchy.
Swap agreements are valued at the mean between the current bid and ask prices. These valuations are typically categorized as Level 2 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 December 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:
LEVEL 1 — Quoted Prices | LEVEL 2 — Other Significant Observable Inputs | Total | |||||||||||||||||||||||||
Investments in Securities | Other Financial Investments^ | Investments in Securities | Other Financial Investments^ | Investments in Securities | Other Financial Investments^ | ||||||||||||||||||||||
INCORE Investment Quality Bond Fund | |||||||||||||||||||||||||||
Asset Backed Securities | $ | — | $ | — | $ | 726,145 | $ | — | $ | 726,145 | $ | — | |||||||||||||||
Collateralized Mortgage Obligations | — | — | 861,707 | — | 861,707 | — | |||||||||||||||||||||
Corporate Bonds | — | — | 8,136,715 | — | 8,136,715 | — | |||||||||||||||||||||
Residential Mortgage Backed Securities | — | — | 505,490 | — | 505,490 | — | |||||||||||||||||||||
U.S. Government Mortgage Backed Agencies | — | — | 21,738,419 | — | 21,738,419 | — | |||||||||||||||||||||
U.S. Treasury Obligations | — | — | 7,061,202 | — | 7,061,202 | — | |||||||||||||||||||||
Collateral for Securities Loaned | 33,481 | — | — | — | 33,481 | — | |||||||||||||||||||||
Futures Contracts | — | (51,151 | ) | — | — | — | (51,151 | ) | |||||||||||||||||||
Credit Default Swap Agreements | — | — | — | (169,807 | ) | — | (169,807 | ) | |||||||||||||||||||
Total | 33,481 | (51,151 | ) | 39,029,678 | (169,807 | ) | 39,063,159 | (220,958 | ) |
104
Victory Portfolios | Notes to Financial Statements — continued December 31, 2018 |
LEVEL 1 — Quoted Prices | LEVEL 2 — Other Significant Observable Inputs | Total | |||||||||||||||||||||||||
Investments in Securities | Other Financial Investments^ | Investments in Securities | Other Financial Investments^ | Investments in Securities | Other Financial Investments^ | ||||||||||||||||||||||
INCORE Low Duration Bond Fund | |||||||||||||||||||||||||||
Asset Backed Securities | $ | — | $ | — | $ | 51,327,528 | $ | — | $ | 51,327,528 | $ | — | |||||||||||||||
Collateralized Mortgage Obligations | — | — | 16,845,229 | — | 16,845,229 | — | |||||||||||||||||||||
Corporate Bonds | — | — | 159,127,903 | — | 159,127,903 | — | |||||||||||||||||||||
Residential Mortgage Backed Securities | — | — | 20,996,411 | — | 20,996,411 | — | |||||||||||||||||||||
U.S. Government Mortgage Backed Agencies | — | — | 33,744,458 | — | 33,744,458 | — | |||||||||||||||||||||
U.S. Treasury Obligations | — | — | 57,076,267 | — | 57,076,267 | — | |||||||||||||||||||||
Collateral for Securities Loaned | 973,825 | — | — | — | 973,825 | — | |||||||||||||||||||||
Futures Contracts | — | 753,781 | — | — | — | 753,781 | |||||||||||||||||||||
Credit Default Swap Agreements | — | — | — | (1,820,967 | ) | — | (1,820,967 | ) | |||||||||||||||||||
Total | 973,825 | 753,781 | 339,117,796 | (1,820,967 | ) | 340,091,621 | (1,067,186 | ) | |||||||||||||||||||
High Yield Fund | |||||||||||||||||||||||||||
Common Stocks | 1,441,630 | — | — | — | 1,441,630 | — | |||||||||||||||||||||
Senior Secured Loans | — | — | 23,488,392 | — | 23,488,392 | — | |||||||||||||||||||||
Corporate Bonds | — | — | 52,976,904 | — | 52,976,904 | — | |||||||||||||||||||||
Collateral for Securities Loaned | 10,410,290 | — | — | — | 10,410,290 | — | |||||||||||||||||||||
Total | 11,851,920 | — | 76,465,296 | — | 88,317,216 | — | |||||||||||||||||||||
Tax-Exempt Fund | |||||||||||||||||||||||||||
Municipal Bonds | — | — | 66,193,821 | — | 66,193,821 | — | |||||||||||||||||||||
Total | — | — | 66,193,821 | — | 66,193,821 | — | |||||||||||||||||||||
High Income Municipal Bond Fund | |||||||||||||||||||||||||||
Municipal Bonds | — | — | 46,616,349 | — | 46,616,349 | — | |||||||||||||||||||||
Total | — | — | 46,616,349 | — | 46,616,349 | — | |||||||||||||||||||||
Floating Rate Fund | |||||||||||||||||||||||||||
Senior Secured Loans | — | — | 543,521,280 | — | 543,521,280 | — | |||||||||||||||||||||
Corporate Bonds | — | — | 54,271,872 | — | 54,271,872 | — | |||||||||||||||||||||
Total | — | — | 597,793,152 | — | 597,793,152 | — | |||||||||||||||||||||
Strategic Income Fund | |||||||||||||||||||||||||||
Asset Backed Securities | — | — | 5,974,487 | — | 5,974,487 | — | |||||||||||||||||||||
Collateralized Mortgage Obligations | — | — | 746,172 | — | 746,172 | — | |||||||||||||||||||||
Senior Secured Loans | — | — | 6,101,319 | — | 6,101,319 | — | |||||||||||||||||||||
Corporate Bonds | — | — | 17,882,302 | — | 17,882,302 | — | |||||||||||||||||||||
Residential Mortgage Backed Securities | — | — | 992,863 | — | 992,863 | — | |||||||||||||||||||||
U.S. Government Mortgage Backed Agencies | — | — | 4,927,916 | — | 4,927,916 | — | |||||||||||||||||||||
U.S. Treasury Obligations | — | — | 11,741,357 | — | 11,741,357 | — | |||||||||||||||||||||
Collateral for Securities Loaned | 115,442 | — | — | — | 115,442 | — | |||||||||||||||||||||
Futures Contracts | — | 194,074 | — | — | — | 194,074 | |||||||||||||||||||||
Total | 115,442 | 194,074 | 48,366,416 | — | 48,481,858 | 194,074 |
^ Other Financial investments include any derivative instruments not reflected in the Schedule of Portfolio Investments as investment securities, such as futures contracts and swap agreements. These investments are generally recorded in the financial statements at the unrealized gain or loss on the investment.
105
Victory Portfolios | Notes to Financial Statements — continued December 31, 2018 |
For the year ended December 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. As of December 31, 2018, the Funds had outstanding when-issued purchase commitments covered by the segregated assets as identified in the Schedules of Portfolio Investments.
Municipal Obligations:
The values of municipal obligations can fluctuate and may be affected by adverse tax, legislative, or political changes, and by financial developments affecting municipal issuers. Payment of municipal obligations may depend on a relatively limited source of revenue, resulting in greater credit risk. Future changes in federal tax laws or the activity of an issuer may adversely affect the tax-exempt status of municipal obligations.
Mortgage- and Asset-Backed Securities:
The values of some mortgage-related or asset-backed securities may be particularly sensitive to changes in prevailing interest rates. Early repayment of principal on some mortgage-related securities may expose a Fund to a lower rate of return upon reinvestment of principal. The values of mortgage and asset-backed securities depend in part on the credit quality and adequacy of the underlying assets or collateral and may fluctuate in response to the market's perception of these factors as well as current and future repayment rates. Some mortgage-backed securities are backed by the full faith and credit of the U.S. government (e.g., mortgage-backed securities issued by the Government National Mortgage Association, commonly known as "Ginnie Mae"), while other mortgage-backed securities (e.g., mortgage-backed securities issued by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation, commonly known as "Fannie Mae" and "Freddie Mac"), are backed only by the credit of the government entity issuing them. In addition, some mortgage-backed securities are issued by private entities and, as such, are not guaranteed by the U.S. government or any agency or instrumentality of the U.S. government.
Loans:
Floating rate loans in which a Fund invest are primarily "senior" loans. Senior floating rate loans typically hold a senior position in the capital structure of the borrower, are typically secured by specific collateral, and have a claim on the assets and/or stock of the borrower that is senior to that held by subordinated debtholders and stockholders of the borrower. While these protections may reduce risk, these investments still present significant credit risk. A significant portion of a Fund's floating rate investments may be issued in connection with highly leveraged transactions such as leveraged buyouts, leveraged recapitalization loans, and other types of acquisition financing. Obligations in these types of transactions are subject to greater credit risk (including default and bankruptcy) than many other investments and may be, or become, illiquid. See the note below regarding below investment grade securities.
A Fund may purchase second lien loans (secured loans with a claim on collateral subordinate to a senior lender's claim on such collateral), fixed rate loans, unsecured loans, and other debt obligations.
106
Victory Portfolios | Notes to Financial Statements — continued December 31, 2018 |
Transactions in loans often settle on a delayed basis, and a Fund may not receive the proceeds from the sale of a loan or pay for a loan purchase for a substantial period of time after entering into the transactions.
Below Investment Grade Securities:
Certain Funds may invest in below investment grade securities (i.e. lower-quality, "junk" debt), which are subject to various risks. Lower-quality debt is considered to be speculative because it is less certain that the issuer will be able to pay interest or repay the principal than in the case of investment grade debt. These securities can involve a substantially greater risk of default than higher-rated securities, and their values can decline significantly over short periods of time. Lower-quality debt securities tend to be more sensitive to adverse news about their issuers, the market and the economy in general, than higher-quality debt securities.
The market for these securities can be less liquid, especially during periods of recession or general market decline.
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.
Derivative Instruments:
Futures Contracts:
The Funds may enter into contracts for the future delivery of securities or foreign currencies and futures contracts based on a specific security, class of securities, foreign currency or an index, and purchase or sell options on any such futures contracts. A futures contract on a securities index is an agreement obligating either party to pay, and entitling the other party to receive, while the contract is outstanding, cash payments based on the level of a specified securities index. No physical delivery of the underlying asset is made. A Fund may enter into futures contracts in an effort to hedge against market risks. The acquisition of put and call options on futures contracts will give the Fund the right (but not the obligation), for a specified price, to sell or to purchase the underlying futures contract, upon exercise of the option, at any time during the option period. Futures transactions involve brokerage costs and require the Fund to segregate assets to cover contracts that would require it to purchase securities or currencies. A good faith margin deposit, known as initial margin, of cash or government securities with a broker or custodian is required to initiate and maintain open positions in futures contracts. Subsequent payments, known as variation margin, are made or received by the Fund based on the change in the market value of the position and are recorded as unrealized appreciation or depreciation until the contract is closed out, at which time the gain or loss is realized. A Fund may lose the expected benefit of futures transactions if interest rates, exchange rates or securities prices change in an unanticipated manner. Such unanticipated changes may also result in lower overall performance than if the Fund had not entered into any futures transactions. In addition, the value of a Fund's futures positions may not prove to be perfectly or even highly correlated with the value of its portfolio securities or foreign currencies, limiting a Fund's ability to hedge effectively against interest rate, exchange rate and/or market risk and giving rise to additional risks. There is no assurance of liquidity in the secondary market for purposes of closing out futures positions. The collateral held by the Funds is presented on the Statements of Assets and Liabilities under Deposits with brokers for futures contracts.
As of December 31, 2018, the Funds entered into Futures Contracts primarily for the strategy of hedging or other purposes, including but not limited to, providing liquidity and equitizing cash.
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Victory Portfolios | Notes to Financial Statements — continued December 31, 2018 |
Credit Derivatives:
The Funds may enter into credit derivatives, including centrally-cleared credit default swaps on individual obligations or credit indices. The Funds may use these investments (i) as alternatives to direct long or short investment in a particular security or securities, (ii) to adjust a Fund's asset allocation or risk exposure, or (iii) for hedging purposes. The use by a Fund of credit default swaps may have the effect of creating a short position in a security. Credit derivatives can create investment leverage and may create additional investment risks that may subject a Fund to greater volatility than investments in more traditional securities, as described in the Funds' Statement of Additional Information.
Credit default swap ("CDS") agreements on credit indices involve one party making a stream of payments (referred to as the buyer of protection) to another party (the seller of protection) in exchange for the right to receive a specified return in the event of a write-down, principal shortfall, interest shortfall or default of all or part of the referenced entities comprising the credit index. A credit index is a basket of credit instruments or exposures designed to be representative of a specific sector of the credit market as a whole. These indices are made up of reference credits that are judged by a poll of dealers to be the most liquid entities in the CDS.
The counterparty risk for cleared swap agreements is generally lower than uncleared over-the-counter swap agreements because generally a clearing organization becomes substituted for each counterparty to a cleared swap agreement and, in effect, guarantees each party's performance under the contract as each party to a trade looks only to the clearing organization for performance of financial obligations. However, there can be no assurance that the clearing organization, or its members, will satisfy its obligations to the Funds.
The Funds may enter into CDS agreements either as a buyer or seller. The Funds may buy protection under a CDS to attempt to mitigate the risk of default or credit quality deterioration in one or more individual holdings or in a segment of the fixed income securities market. The Funds may sell protection under a CDS in an attempt to gain exposure to an underlying issuer's credit quality characteristics without investing directly in that issuer. For swaps entered with an individual counterparty, the Funds bear the risk of loss of the uncollateralized amount expected to be received under a CDS agreement in the event of the default or bankruptcy of the counterparty. CDS agreements are generally valued at a price at which the counterparty to such agreement would terminate the agreement. The Funds may also enter into cleared swaps.
Upon entering into a cleared CDS, the Funds may be required to deposit with the broker an amount of cash or cash equivalents in the range of approximately 3% to 6% of the notional amount for CDS on high yield debt issuers (this amount is subject to change by the clearing organization that clears the trade). This amount, known as "initial margin," is in the nature of a performance bond or good faith deposit on the CDS and is returned to the Funds upon termination of the CDS, assuming all contractual obligations have been satisfied. Subsequent payments, known as "variation margin," to and from the broker will be made daily as the price of the CDS fluctuates, making the long and short positions in the CDS contract more or less valuable, a process known as "marking-to-market." The premium (discount) payments are built into the daily price of the CDS and thus are amortized through the variation margin. The variation margin payment also includes the daily portion of the periodic payment stream.
The maximum potential amount of future payments (undiscounted) that the Fund as a seller of protection could be required to make under a CDS agreement equals the notional amount of the agreement. Notional amounts of each individual CDS agreement outstanding as of period end for which a Fund is the seller of protection are disclosed in the Schedule of Portfolio Investments. These potential amounts would be partially offset by any recovery values of the respective referenced obligations, upfront payments received upon entering into the agreement, periodic interest payments, or net amounts received from the settlement of buy protection CDS agreements entered into by the Funds for the same referenced entity or entities.
During the year ended December 31, 2018, the INCORE Investment Quality Bond Fund, INCORE Low Duration Bond Fund and Strategic Income Fund entered into centrally cleared CDS agreements primarily for the strategy of asset allocation and risk exposure management.
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Victory Portfolios | Notes to Financial Statements — continued December 31, 2018 |
Summary of Derivative Instruments:
The following table summarizes the fair values of derivative instruments on the Statements of Assets and Liabilities, categorized by risk exposure, as of December 31, 2018:
Assets | Liabilities | ||||||||||||||
Variation Margin Receivable on Open Futures Contracts* | Variation Margin Payable on Open Futures Contracts* | Variation Margin Payable on Centrally Cleared Swap Agreements* | |||||||||||||
Credit Risk Exposure: | |||||||||||||||
INCORE Investment Quality Bond Fund | $ | — | $ | — | $ | 169,807 | |||||||||
INCORE Low Duration Bond Fund | — | — | 1,820,967 | ||||||||||||
Interest Rate Risk Exposure: | |||||||||||||||
INCORE Investment Quality Bond Fund | 25,207 | 76,358 | — | ||||||||||||
INCORE Low Duration Bond Fund | 753,781 | — | — | ||||||||||||
Strategic Income Fund | 351,356 | 157,282 | — |
* Includes cumulative appreciation (depreciation) of futures contracts and centrally cleared swap agreements as reported on the Schedules of Portfolio Investments. Only current day's variation margin for both futures contracts and centrally cleared swap agreements are reported within the Statements of Assets and Liabilities.
The following table presents the effect of derivative instruments on the Statements of Operations, categorized by risk exposure, for the year ended December 31, 2018:
Net Realized Gains (Losses) on Derivatives Recognized as a Result from Operations | Net Change in Unrealized Appreciation/Depreciation on Derivatives Recognized as a Result of Operations | ||||||||||||||||||
Net Realized Gains (Losses) from Futures Contracts | Net Realized Gains (Losses) from Swap Transactions | Net Change in Unrealized Appreciation/ Depreciation on Futures Contracts | Net Change in Unrealized Appreciation/ Depreciation on Swap Transactions | ||||||||||||||||
Credit Risk Exposure: | |||||||||||||||||||
INCORE Investment Quality Bond Fund | $ | — | $ | 120,948 | $ | — | $ | (179,340 | ) | ||||||||||
INCORE Low Duration Bond Fund | — | 1,563,684 | — | (2,065,991 | ) | ||||||||||||||
Strategic Income Fund | — | (167,172 | ) | — | — | ||||||||||||||
Interest Rate Risk Exposure: | |||||||||||||||||||
INCORE Investment Quality Bond Fund | (270,031 | ) | — | (43,848 | ) | — | |||||||||||||
INCORE Low Duration Bond Fund | (1,292,411 | ) | — | 959,590 | — | ||||||||||||||
Strategic Income Fund | (477,912 | ) | — | 178,638 | — |
All open derivative positions at year end are reflected in each respective Fund's Schedule of Portfolio Investments. With the exception of the Strategic Income Fund, the underlying face value of open derivative positions relative to each Fund's net assets at period end is generally representative of the notional amount of open positions to net assets throughout the year. The associated volume of derivative positions in the Strategic Income Fund was 24% based on average value amounts relative to net assets during the year ended December 31, 2018.
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Victory Portfolios | Notes to Financial Statements — continued December 31, 2018 |
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.
Certain Funds may receive other income from investment in loan assignments and/or unfunded commitments, including amendment fees, consent fees, and commitment fees. These fees are recorded as income when received by the Fund. These amounts are included in Interest Income in the Statements of Operations.
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 is a summary of the Funds' securities lending transactions which are subject to offset under the MSLA as of December 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 | <30 Days | Between 30 & 90 days | >90 Days | Net Amount | ||||||||||||||||||||||
INCORE Investment Quality Bond Fund | $ | 32,258 | $ | 33,481 | $ | — | $ | — | $ | — | $ | 1,223 | |||||||||||||||
INCORE Low Duration Bond Fund | 948,936 | 973,825 | — | — | — | 24,889 | |||||||||||||||||||||
High Yield Fund | 9,950,829 | 10,410,290 | — | — | — | 459,461 | |||||||||||||||||||||
Strategic Income Fund | 112,309 | 115,442 | — | — | — | 3,133 |
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Victory Portfolios | Notes to Financial Statements — continued December 31, 2018 |
Foreign Currency Translations:
The accounting records of the Funds are maintained in U.S. dollars. Investment securities and other assets and liabilities of a Fund denominated in a foreign currency are translated into U.S. dollars at current exchange rates. Purchases and sales of securities, income receipts and expense payments are translated into U.S. dollars at the exchange rates on the date of the transactions. The Funds do not isolate the portion of the results of operations resulting from changes in foreign exchange rates on investments from fluctuations arising from changes in market prices of securities held. Such fluctuations are disclosed as net change in unrealized appreciation/depreciation on investments and foreign currency translations on the Statements of Operations. Any realized gains or losses from these fluctuations are disclosed as net realized gains or losses from investment transactions and foreign currency translations on the Statements of Operations.
Foreign Taxes:
The Funds may be subject to foreign taxes related to foreign income received (a portion of which may be reclaimable), capital gains on the sale of securities, and certain foreign currency transactions. All foreign taxes are recorded in accordance with the applicable regulations and rates that exist in the foreign jurisdictions in which the Funds invest.
Dividends to Shareholders:
Dividends from net investment income, if any, are declared and paid monthly for the Funds. 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 (e.g., net operating loss, distribution reclassifications, and deemed distribution due to shareholder redemptions), 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.
As of December 31, 2018, on the Statements of Assets and Liabilities, as a result of permanent book-to-tax differences, reclassification adjustments were as follows:
Total distributable earnings/(loss) | Capital | ||||||||||
High Yield Fund | $ | 6 | $ | (6 | ) | ||||||
Strategic Income Fund | 376 | (376 | ) |
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 December 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.
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Victory Portfolios | Notes to Financial Statements — continued December 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 December 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 December 31, 2018 were as follows:
Purchases (excluding U.S. Government Securities) | Sales (excluding U.S. Government Securities) | Purchases of U.S. Government Securities | Sales of U.S. Government Securities | ||||||||||||||||
INCORE Investment Quality Bond Fund | $ | 7,657,248 | $ | 24,060,950 | $ | 35,720,505 | $ | 29,798,036 | |||||||||||
INCORE Low Duration Bond Fund | 98,436,529 | 240,981,423 | 67,461,519 | 67,849,595 | |||||||||||||||
High Yield Fund | 77,314,549 | 59,795,903 | — | — | |||||||||||||||
Tax-Exempt Fund | 33,785,997 | 56,523,213 | — | — | |||||||||||||||
High Income Municipal Bond Fund | 27,280,599 | 54,465,771 | — | — | |||||||||||||||
Floating Rate Fund | 314,115,616 | 361,038,566 | — | — | |||||||||||||||
Strategic Income Fund | 26,154,401 | 48,805,660 | 30,309,270 | 14,645,479 |
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.
VCM has entered into a Sub-Advisory Agreement with Park Avenue Institutional Advisers LLC ("Park Avenue"). Park Avenue is responsible for providing day-to-day investment advisory services to the Funds, subject to the oversight of the Board of Trustees of the Trust. Sub-investment advisory fees are paid by VCM to Park Avenue and do not represent a separate or additional expense to the Funds.
Under the terms of the Investment Advisory Agreement, 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.
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Victory Portfolios | Notes to Financial Statements — continued December 31, 2018 |
Flat Rate | |||||||
INCORE Investment Quality Bond Fund | 0.50 | % | |||||
INCORE Low Duration Bond Fund* | 0.45 | % | |||||
High Yield Fund | 0.60 | % | |||||
Tax-Exempt Fund | 0.50 | % | |||||
High Income Municipal Bond Fund | 0.50 | % | |||||
Floating Rate Fund | 0.65 | % | |||||
Strategic Income Fund | 0.60 | % |
* A voluntary investment advisory fee percentage of 0.42% was in effect from September 1, 2015 through December 31, 2018.
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 pays 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 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 Class A Shares of the Funds. For the fiscal year ended December 31, 2018, the Distributor received approximately $32,970 from commissions earned on sales of Class A Shares of the Funds.
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Victory Portfolios | Notes to Financial Statements — continued December 31, 2018 |
The Adviser has entered into expense limitation agreements with certain Funds. Under the terms of the agreements, the Adviser has agreed to waive fees or reimburse certain expenses 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 limits. As of December 31, 2018, the expense limits (excluding voluntary waivers) are as follows:
In effect January 1, 2018 until April 30, 2019 | |||||||||||||||||||
Class A Shares | Class C Shares | Class R Shares | Class Y Shares | ||||||||||||||||
INCORE Investment Quality Bond Fund | 0.90 | % | 1.77 | % | 1.30 | % | 0.66 | % | |||||||||||
INCORE Low Duration Bond Fund | 0.85 | % | 1.62 | % | 1.27 | % | 0.62 | % | |||||||||||
High Yield Fund | 1.00 | % | 1.70 | % | 1.35 | % | 0.76 | % | |||||||||||
Tax-Exempt Fund | 0.80 | % | 1.60 | % | N/A | 0.69 | % | ||||||||||||
High Income Municipal Bond Fund | 0.80 | % | 1.57 | % | N/A | 0.57 | % | ||||||||||||
Floating Rate Fund | 1.00 | % | 1.80 | % | 1.56 | % | 0.78 | % | |||||||||||
Strategic Income Fund | 0.95 | % | 1.74 | % | 1.34 | % | 0.74 | % |
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 the 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 December 31, 2018, the following amounts are available to be repaid to the Adviser.
Expires 12/31/19 | Expires 12/31/20 | Expires 12/31/21 | Total | ||||||||||||||||
INCORE Investment Quality Bond Fund | $ | 60,680 | $ | 102,291 | $ | 107,641 | $ | 270,612 | |||||||||||
INCORE Low Duration Bond Fund | 119,520 | 217,933 | 110,273 | 447,726 | |||||||||||||||
High Yield Fund | 40,274 | 80,774 | 76,868 | 197,916 | |||||||||||||||
Tax-Exempt Fund | 70,950 | 122,100 | 114,539 | 307,589 | |||||||||||||||
High Income Municipal Bond Fund | 86,281 | 139,397 | 121,563 | 347,241 | |||||||||||||||
Floating Rate Fund | 368,104 | 718,769 | 765,491 | 1,852,364 | |||||||||||||||
Strategic Income Fund | 71,800 | 90,313 | 98,810 | 260,923 |
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. The Adviser voluntarily waived $119,539 for the year ended December 31, 2018 for the INCORE Low Duration Bond Fund.
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.
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Victory Portfolios | Notes to Financial Statements — continued December 31, 2018 |
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 Funds will be 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, 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 Floating Rate Fund 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 current 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 December 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 December 31, 2018 were as follows:
Amount Outstanding at December 31, 2018 | Average Borrowing* | Days Borrowings Outstanding | Average Interest Rate* | Maximum Borrowing During the Period | |||||||||||||||||||
Tax-Exempt Fund | $ | — | $ | 1,300,000 | 8 | 3.10 | % | $ | 1,800,000 |
* For the year ended December 31, 2018, based on the number of days borrowings were outstanding.
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.
115
Victory Portfolios | Notes to Financial Statements — continued December 31, 2018 |
The average borrowing and lending for the days outstanding and average interest rate for each Fund during the year ended December 31, 2018 were as follows:
Borrower or Lender | Amount Outstanding at December 31, 2018 | Average Borrowing* | Days Borrowing Outstanding | Average Interest Rate* | Maximum Borrowing During the Period | ||||||||||||||||||||||
INCORE Low Duration Bond Fund | Borrower | $ | — | $ | 3,283,000 | 1 | 2.35 | % | $ | 3,283,000 | |||||||||||||||||
Tax-Exempt Fund | Borrower | — | 763,750 | 4 | 2.05 | % | 1,189,000 | ||||||||||||||||||||
High Income Municipal Bond Fund | Borrower | — | 2,183,857 | 14 | 2.28 | % | 2,772,000 |
* For the year ended December 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):
Year Ended December 31, 2018 | |||||||||||||||||||||||
Distributions paid from | |||||||||||||||||||||||
Ordinary Income | Net Long-Term Capital Gains | Total Taxable Distributions | Tax-Exempt Distributions | Total Distributions Paid | |||||||||||||||||||
INCORE Investment Quality Bond Fund | $ | 1,009,807 | $ | — | $ | 1,009,807 | $ | — | $ | 1,009,807 | |||||||||||||
INCORE Low Duration Bond Fund | 8,347,974 | — | 8,347,974 | — | 8,347,974 | ||||||||||||||||||
High Yield Fund | 4,212,512 | — | 4,212,512 | — | 4,212,512 | ||||||||||||||||||
Tax-Exempt Fund | 2,988 | 1,051,617 | 1,054,605 | 2,762,067 | 3,816,672 | ||||||||||||||||||
High Income Municipal Bond Fund | 6,002 | — | 6,002 | 2,258,063 | 2,264,065 | ||||||||||||||||||
Floating Rate Fund | 34,992,812 | — | 34,992,812 | — | 34,992,812 | ||||||||||||||||||
Strategic Income Fund | 1,686,254 | — | 1,686,254 | — | 1,686,254 | ||||||||||||||||||
Year Ended December 31, 2017 | |||||||||||||||||||||||
Distributions paid from | |||||||||||||||||||||||
Ordinary Income | Net Long-Term Capital Gains | Total Taxable Distributions | Tax-Exempt Distributions | Total Distributions Paid | |||||||||||||||||||
INCORE Investment Quality Bond Fund | $ | 1,190,617 | $ | — | $ | 1,190,617 | $ | — | $ | 1,190,617 | |||||||||||||
INCORE Low Duration Bond Fund | 9,778,838 | — | 9,778,838 | — | 9,778,838 | ||||||||||||||||||
High Yield Fund | 3,992,625 | — | 3,992,625 | — | 3,992,625 | ||||||||||||||||||
Tax-Exempt Fund | 9,671 | 1,131,359 | 1,141,030 | 3,561,641 | 4,702,671 | ||||||||||||||||||
High Income Municipal Bond Fund | 40,100 | — | 40,100 | 3,604,576 | 3,644,676 | ||||||||||||||||||
Floating Rate Fund | 36,846,521 | — | 36,846,521 | — | 36,846,521 | ||||||||||||||||||
Strategic Income Fund | 2,091,036 | — | 2,091,036 | — | 2,091,036 |
116
Victory Portfolios | Notes to Financial Statements — continued December 31, 2018 |
As of the tax year ended December 31, 2018, the components of accumulated earnings (deficit) on a tax basis were as follows:
Undistributed Ordinary Income | Undistributed Tax Exempt Income | Distributions Payable | Accumulated Earnings | Accumulated Capital and Other Losses | Qualified Late-Year Losses* | Unrealized Appreciation (Depreciation)** | Other Temporary Differences | Total Accumulated Earnings (Deficit) | |||||||||||||||||||||||||||||||
INCORE Investment Quality Bond Fund | $ | — | $ | — | $ | — | $ | — | $ | (1,019,493 | ) | $ | (35,955 | ) | $ | (466,666 | ) | $ | — | $ | (1,522,114 | ) | |||||||||||||||||
INCORE Low Duration Bond Fund | — | — | — | — | (30,840,950 | ) | (767,668 | ) | (3,784,645 | ) | — | (35,393,263 | ) | ||||||||||||||||||||||||||
High Yield Fund | 8,238 | — | — | 8,238 | (8,100,130 | ) | — | (4,611,658 | ) | — | (12,703,550 | ) | |||||||||||||||||||||||||||
Tax-Exempt Fund | — | — | — | — | — | (65,998 | ) | 1,647,128 | — | 1,581,130 | |||||||||||||||||||||||||||||
High Income Municipal Bond Fund | — | 208,029 | — | 208,029 | (262,516 | ) | — | 404,593 | (23,544 | ) | 326,562 | ||||||||||||||||||||||||||||
Floating Rate Fund | 223,120 | — | — | 223,120 | (167,157,322 | ) | — | (28,815,091 | ) | (23,881 | ) | (195,773,174 | ) | ||||||||||||||||||||||||||
Strategic Income Fund | — | — | (87,028 | ) | (87,028 | ) | (1,788,731 | ) | — | (550,443 | ) | (23,544 | ) | (2,449,746 | ) |
* Qualified Late-year Losses above are comprised of post-October capital losses and post-October 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 December 31, 2018, the following Funds had net capital loss carryforwards ("CLCFs") as summarized in the table below.
Short-Term Amount | Long-Term Amount | Total | |||||||||||||
INCORE Investment Quality Bond Fund | $ | 371,133 | $ | 648,360 | $ | 1,019,493 | |||||||||
INCORE Low Duration Bond Fund | 11,656,488 | 19,184,462 | 30,840,950 | ||||||||||||
High Yield Fund | 2,393,087 | 5,707,043 | 8,100,130 | ||||||||||||
High Income Municipal Bond Fund | 262,516 | — | 262,516 | ||||||||||||
Floating Rate Fund | 25,973,092 | 141,184,230 | 167,157,322 | ||||||||||||
Strategic Income Fund | 555,761 | 1,232,970 | 1,788,731 |
During the tax year ended December 31, 2018, the High Yield Fund and High Income Municipal Bond Fund utilized $753,142, and $825,294, respectively, of CLCFs.
At December 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:
Cost of Investments for Federal Tax Purposes | Gross Unrealized Appreciation | Gross Unrealized Depreciation | Net Unrealized Appreciation (Depreciation) | ||||||||||||||||
INCORE Investment Quality Bond Fund | $ | 39,426,218 | $ | 471,729 | $ | (834,788 | ) | $ | (363,059 | ) | |||||||||
INCORE Low Duration Bond Fund | 343,876,266 | 1,189,319 | (4,973,964 | ) | (3,784,645 | ) | |||||||||||||
High Yield Fund | 92,928,874 | 1,800,818 | (6,412,476 | ) | (4,611,658 | ) | |||||||||||||
Tax-Exempt Fund | 64,546,693 | 4,658,692 | (3,011,564 | ) | 1,647,128 | ||||||||||||||
High Income Municipal Bond Fund | 46,211,756 | 3,830,763 | (3,426,170 | ) | 404,593 | ||||||||||||||
Floating Rate Fund | 626,608,243 | 9,397,578 | (38,212,669 | ) | (28,815,091 | ) | |||||||||||||
Strategic Income Fund | 49,032,301 | 712,637 | (1,263,080 | ) | (550,443 | ) |
117
Victory Portfolios | Notes to Financial Statements — continued December 31, 2018 |
8. Capital Contribution from Prior Custodian:
During 2016, certain Funds received notification from their prior custodian, State Street Bank and Trust ("State Street"), concerning issues related to billing on certain categories of expenses during the approximately 16-year period from 1998 through October 31, 2014. The over-billing primarily related to categories of expenses that involved an allocation of general costs among multiple clients.
State Street paid the refunded amounts during January 2017. Based on billing information received during 2016 from State Street and an analysis of any expense limitation agreements that were in place during the period of the activities in question, including the application of any recoupment provisions in such agreements, the Adviser received a portion of the refund.
The portion of the refund retained by the Funds was accounted for as a capital contribution and is reflected on the Financial Highlights as "Capital Contribution from Prior Custodian, Net".
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 December 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 | ||||||||||
High Yield Fund | Guardian Life Insurance | 44.2 | % | ||||||||
Floating Rate Fund | Morgan Stanley | 25.2 | % | ||||||||
Strategic Income Fund | Guardian Life Insurance | 68.6 | % |
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 December 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 December 31, 2018.
118
Victory Portfolios | Notes to Financial Statements — continued December 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 December 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 December 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 December 31, 2017 from net investment income and net realized gains in the Funds were as follows:
INCORE Investment Quality Bond Fund | INCORE Low Duration Bond Fund | High Yield Fund | Tax- Exempt Fund | High Income Municipal Bond Fund | Floating Rate Fund | Strategic Income Fund | |||||||||||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||||||||||
From net investment income: | |||||||||||||||||||||||||||||||
Class A Shares | $ | (851,750 | ) | $ | (2,975,964 | ) | $ | (1,403,226 | ) | $ | (1,618,136 | ) | $ | (1,272,345 | ) | $ | (8,534,071 | ) | $ | (1,253,807 | ) | ||||||||||
Class C Shares | (116,728 | ) | (915,654 | ) | (1,168,449 | ) | (846,088 | ) | (948,489 | ) | (12,145,762 | ) | (317,178 | ) | |||||||||||||||||
Class R Shares | (84,062 | ) | (31,139 | ) | (1,059,549 | ) | — | — | (49,769 | ) | (91,356 | ) | |||||||||||||||||||
Class Y Shares | (137,124 | ) | (5,811,142 | ) | (361,401 | ) | (1,107,087 | ) | (1,423,842 | ) | (16,116,919 | ) | (405,899 | ) | |||||||||||||||||
From net realized gains: | |||||||||||||||||||||||||||||||
Class A Shares | $ | — | $ | — | $ | — | $ | (472,344 | ) | $ | — | $ | — | $ | — | ||||||||||||||||
Class C Shares | — | — | — | (324,611 | ) | — | — | — | |||||||||||||||||||||||
Class R Shares | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Class Y Shares | — | — | — | (334,405 | ) | — | — | — |
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.
119
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of the Victory INCORE Investment Quality Bond Fund, Victory INCORE Low Duration Bond Fund, Victory High Yield Fund, Victory Tax-Exempt Fund, Victory High Income Municipal Bond Fund, Victory Floating Rate Fund, and Victory Strategic Income Fund
Opinion on the Financial Statements
We have audited the accompanying statements of assets and liabilities of Victory INCORE Investment Quality Bond Fund, Victory INCORE Low Duration Bond Fund, Victory High Yield Fund, Victory Tax-Exempt Fund, Victory High Income Municipal Bond Fund, Victory Floating Rate Fund, and Victory Strategic Income Fund (collectively referred to as the "Funds") (seven of the funds constituting the Victory Portfolios (the "Trust")) including the portfolios of investments, as of December 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 three 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 (seven of the funds constituting the Trust) at December 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 three years in the period then ended, in conformity with U.S. generally accepted accounting principles.
The financial highlights of the Funds for the periods presented through December 31, 2015, were audited by other auditors whose report dated February 22, 2016, expressed an unqualified opinion on those financial highlights.
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 December 31, 2018, by correspondence with the custodian, transfer agent, 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
February 26, 2019
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Victory Portfolios | Supplemental Information December 31, 2018 |
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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 Funds Complex. Each Trustee's address is c/o Victory Portfolios, 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, 75 | Trustee | July 2016 | Retired. | Trustee, RS Investment Trust and RS Variable Products Trust (November 2011-July 2016). |
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Victory Portfolios | Supplemental Information — continued December 31, 2018 |
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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-July 2016). | |||||||||||||||
Leigh A. Wilson, 74 | 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 December 31, 2018 |
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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, 57 | 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, 45 | 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, 65 | 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 December 31, 2018 |
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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 the Funds 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 expects to file a complete list of Schedules of Portfolio Investments with the SEC for the first and third quarter of each fiscal year on Form N-PORT beginning March 1, 2019. Prior to that date, the Trust has filed 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-PORT and 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 July 1, 2018 through December 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.
Beginning Account Value 7/1/18 | Actual Ending Account Value 12/31/18 | Hypothetical Ending Account Value 12/31/18 | Actual Expenses Paid During Period 7/1/18- 12/31/18* | Hypothetical Expenses Paid During Period 7/1/18- 12/31/18* | Annualized Expense Ratio During Period 7/1/18- 12/31/18 | ||||||||||||||||||||||
INCORE Investment Quality Bond Fund | |||||||||||||||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 1,008.50 | $ | 1,020.67 | $ | 4.56 | $ | 4.58 | 0.90 | % | |||||||||||||||
Class C Shares | 1,000.00 | 1,004.10 | 1,016.28 | 8.94 | 9.00 | 1.77 | % | ||||||||||||||||||||
Class R Shares | 1,000.00 | 1,006.40 | 1,018.65 | 6.57 | 6.61 | 1.30 | % | ||||||||||||||||||||
Class Y Shares | 1,000.00 | 1,009.80 | 1,021.88 | 3.34 | 3.36 | 0.66 | % |
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Victory Portfolios | Supplemental Information — continued December 31, 2018 |
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Beginning Account Value 7/1/18 | Actual Ending Account Value 12/31/18 | Hypothetical Ending Account Value 12/31/18 | Actual Expenses Paid During Period 7/1/18- 12/31/18* | Hypothetical Expenses Paid During Period 7/1/18- 12/31/18* | Annualized Expense Ratio During Period 7/1/18- 12/31/18 | ||||||||||||||||||||||
INCORE Low Duration Bond Fund | |||||||||||||||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 1,005.40 | $ | 1,020.92 | $ | 4.30 | $ | 4.33 | 0.85 | % | |||||||||||||||
Class C Shares | 1,000.00 | 1,001.50 | 1,017.04 | 8.17 | 8.24 | 1.62 | % | ||||||||||||||||||||
Class R Shares | 1,000.00 | 1,003.30 | 1,018.80 | 6.41 | 6.46 | 1.27 | % | ||||||||||||||||||||
Class Y Shares | 1,000.00 | 1,006.60 | 1,022.08 | 3.14 | 3.16 | 0.62 | % | ||||||||||||||||||||
High Yield Fund | |||||||||||||||||||||||||||
Class A Shares | 1,000.00 | 986.70 | 1,020.16 | 5.01 | 5.09 | 1.00 | % | ||||||||||||||||||||
Class C Shares | 1,000.00 | 981.80 | 1,016.64 | 8.49 | 8.64 | 1.70 | % | ||||||||||||||||||||
Class R Shares | 1,000.00 | 985.00 | 1,018.35 | 6.80 | 6.92 | 1.36 | % | ||||||||||||||||||||
Class Y Shares | 1,000.00 | 987.90 | 1,021.37 | 3.81 | 3.87 | 0.76 | % | ||||||||||||||||||||
Tax-Exempt Fund | |||||||||||||||||||||||||||
Class A Shares | 1,000.00 | 1,006.90 | 1,021.17 | 4.05 | 4.08 | 0.80 | % | ||||||||||||||||||||
Class C Shares | 1,000.00 | 1,002.90 | 1,017.14 | 8.08 | 8.13 | 1.60 | % | ||||||||||||||||||||
Class Y Shares | 1,000.00 | 1,006.40 | 1,021.73 | 3.49 | 3.52 | 0.69 | % | ||||||||||||||||||||
High Income Municipal Bond Fund | |||||||||||||||||||||||||||
Class A Shares | 1,000.00 | 1,001.00 | 1,021.17 | 4.03 | 4.08 | 0.80 | % | ||||||||||||||||||||
Class C Shares | 1,000.00 | 997.10 | 1,017.29 | 7.90 | 7.98 | 1.57 | % | ||||||||||||||||||||
Class Y Shares | 1,000.00 | 1,002.10 | 1,022.33 | 2.88 | 2.91 | 0.57 | % | ||||||||||||||||||||
Floating Rate Fund | |||||||||||||||||||||||||||
Class A Shares | 1,000.00 | 985.40 | 1,020.16 | 5.00 | 5.09 | 1.00 | % | ||||||||||||||||||||
Class C Shares | 1,000.00 | 981.50 | 1,016.13 | 8.99 | 9.15 | 1.80 | % | ||||||||||||||||||||
Class R Shares | 1,000.00 | 982.70 | 1,017.34 | 7.80 | 7.93 | 1.56 | % | ||||||||||||||||||||
Class Y Shares | 1,000.00 | 986.60 | 1,021.27 | 3.91 | 3.97 | 0.78 | % | ||||||||||||||||||||
Strategic Income Fund | |||||||||||||||||||||||||||
Class A Shares | 1,000.00 | 1,006.30 | 1,020.42 | 4.80 | 4.84 | 0.95 | % | ||||||||||||||||||||
Class C Shares | 1,000.00 | 1,002.20 | 1,016.43 | 8.78 | �� | 8.84 | 1.74 | % | |||||||||||||||||||
Class R Shares | 1,000.00 | 1,003.20 | 1,018.45 | 6.77 | 6.82 | 1.34 | % | ||||||||||||||||||||
Class Y Shares | 1,000.00 | 1,007.50 | 1,021.48 | 3.74 | 3.77 | 0.74 | % |
* 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).
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Additional Federal Income Tax Information
For the year ended December 31, 2018, the Funds paid qualified dividend income for the purposes of reduce individual federal income tax rates of:
Amount | |||||||
High Yield Fund | 1 | % |
Dividends qualified for corporate dividends received deductions of:
Amount | |||||||
High Yield Fund | 1 | % |
For the year ended December 31, 2018, the Funds designated tax-exempt income distributions:
Amount | |||||||
Tax-Exempt Fund | $ | 2,988 |
For the year ended December 31, 2018, the following Funds designated long-term capital gain distributions:
Amount | |||||||
Tax-Exempt Fund | $ | 1,051,617 |
126
Victory Portfolios | Supplemental Information — continued December 31, 2018 |
(Unaudited)
Considerations of the Board in Continuing the Investment Advisory Agreement (the "Agreement")
The Board approved the Agreement on behalf of each of the Funds at a meeting, which was called for that purpose, on December 5, 2018. The Board also considered information relating to the Funds and the Agreement provided throughout the year and, more specifically, at a meeting on October 23, 2018. The Board noted that prior to each Fund's reorganization on July 29, 2016, each Fund was managed by RS Investment Management Co. LLC, which was acquired by the Adviser on July 29, 2016. In considering whether to approve the Agreement, the Board requested, and the Adviser provided, information that the Board believed to be reasonably necessary to reach its conclusions. The Board, including the Independent Trustees, evaluated this information along with other information obtained throughout the year and was advised by legal counsel to the Funds and by independent legal counsel to the Independent Trustees. In addition, in 2017 the Independent Trustees, through their counsel, retained an independent consultant to assist with a review of the overall process for conducting the annual review of these advisory arrangements. The Board considered each Fund's advisory fee, expense ratio and investment performance as significant factors in determining whether the Agreement should be continued. In considering whether the compensation paid to the Adviser was fair and reasonable, the Board also evaluated, among other things, the following factors:
• The requirements of the Funds for the services provided by the Adviser;
• The nature, quality and extent of the services provided and expected to be provided;
• The performance of the Funds as compared to comparable funds;
• The fees payable for the services and whether the fee arrangements provided for economies of scale that would benefit Fund shareholders as the Funds grow;
• Whether the fee would be sufficient to enable the Adviser to attract and retain experienced personnel and continue to provide quality services to the Funds;
• Fees paid by other clients of the Adviser whose accounts are managed in a similar investment style and any differences in the services provided to the other clients compared to those provided to the Funds;
• Total expenses of each Fund, taking into consideration any distribution or shareholder servicing fees;
• Management's commitment to operating the Funds at competitive expense levels;
• The profitability of the Adviser (as reflected by comparing fees earned against an estimate of the Adviser's costs) with respect to the Adviser's relationship with the Funds;
• Research and other service benefits received by the Adviser obtained through payment of client commissions for securities transactions;
• Other benefits received by the Adviser, and its affiliates, including revenues paid to the Adviser, or its affiliates, by the Funds for administration and fund accounting services, and distribution;
• The capabilities and financial condition of the Adviser;
• Current economic and industry trends; and
• The historical relationship between each Fund and the Adviser.
The Board reviewed each Fund's current management fee, comprised of the advisory fee plus the administrative services fee paid to the Adviser, in the context of the Adviser's profitability of each Fund individually. In addition, the Board compared each Fund's gross management fee and total operating expense ratio on a net and gross basis, taking into consideration any distribution or shareholder servicing fees, with the median gross management fee and median expense ratio of a universe of comparable mutual funds compiled by an independent consultant, FUSE Research Network, LLC ("FUSE"), and a peer group of funds with similar investment strategies selected by FUSE from the universe. The Board reviewed the factors and methodology used by FUSE in the selection of each Fund's peer group, including FUSE's selection of a broad universe of funds using the standard Retail Morningstar Categories, the more specific universe of comparable funds, and peer groups of funds with comparable investment strategies and asset levels, among other factors. The Board also reviewed any changes to FUSE's methodology as compared to the prior year, including as a result of input from the Adviser, if any. With respect to certain Funds, the Board also reviewed fees and other information related to the Adviser's management of similarly managed institutional or private accounts, and the differences in the services provided to the other accounts. The Board noted that none of the advisory fee arrangements for
127
Victory Portfolios | Supplemental Information — continued December 31, 2018 |
(Unaudited)
the Funds included breakpoints, which are generally viewed as a method by which the investment adviser shares any economies of scale with a fund as a fund grows. The Board also considered the Adviser's commitment to limit expenses as discussed in more detail below.
The Board found that the gross annual management fee paid by each Fund was within the range of management fees paid by each Fund's respective peer group. The Board also found that each Fund's Class A net annual expense ratio, taking into account any shareholder servicing or distribution fees, was reasonable as compared with each Fund's respective peer group. The Board considered the Adviser's contractual agreement with each Fund to waive its fees and reimburse expenses of certain classes for a specified period of time, as described in the Fund's prospectus.
The Board reviewed each Fund's performance over one-, three-, five- and ten-year periods (as applicable) against the performance of the Fund's selected peer group and benchmark index. The Board recognized that the performance of the Fund and the peer group funds are net of expenses, while the performance of the benchmark index is gross returns. The Board considered the additional resources that the Adviser has committed to enhance portfolio analysis, compliance and trading systems. The Board noted that, following each Fund's reorganization, each Fund, with the exception of the INCORE Low Duration Bond Fund and INCORE Investment Quality Bond Fund, is managed by substantially the same investment management team that managed the comparable predecessor fund.
With respect to the High Yield Fund, the Tax-Exempt Fund, the High Income Municipal Bond Fund, the Floating Rate Fund and the Strategic Income Fund, the Board considered the relative roles and responsibilities of the Adviser and each Fund's sub-adviser and noted that, among other things: (1) the sub-advisory fees for the Fund would be paid by the Adviser and, therefore, would not be a direct expense of the Fund; and (2) the Adviser would supervise the sub-adviser.
The Board reviewed various other specific factors with respect to each Fund, as described below. In their deliberations, the Trustees did not rank the importance of any particular information or factor considered and each Trustee may have attributed different weights to various factors.
INCORE Investment Quality Bond Fund
The Board compared the Fund's Class A performance for the one-, three-, five- and ten-year periods ended June 30, 2018, to that of the median performance of the peer group and benchmark index for the same periods and considered the fact that the Fund outperformed the benchmark index for the one-, five and ten-year periods, underperformed the benchmark index for the three-year period, matched the peer group for the one-year period, and outperformed the peer group for the three-, five- and ten-year periods.
The Board noted that the Adviser's INCORE investment management team replaced the predecessor fund's investment sub-adviser as portfolio managers for the Fund upon completion of the Fund's reorganization.
Having considered, among other things: (1) the Fund's management fee compared to comparable mutual funds; (2) the Fund's total expense ratio compared to comparable mutual funds; (3) that the Adviser's willingness to limit the expenses of certain classes for a period of time would provide stability to the Fund's expenses for those share classes during that period; and (4) the Fund's performance during the periods reviewed, the Board concluded that the Agreement continued to be in the best interests of the Fund's shareholders.
INCORE Low Duration Bond Fund
The Board compared the Fund's Class A performance for the one-, three-, five- and ten-year periods ended June 30, 2018, to that of the median performance of the peer group and benchmark index for the same periods and considered the fact that the Fund outperformed the benchmark index for all of the periods reviewed, and underperformed the peer group for all of the periods reviewed with the exception of the one-year period.
The Board noted that the Adviser's INCORE investment management team replaced the predecessor fund's investment sub-adviser as portfolio managers for the Fund upon completion of the Fund's reorganization.
Having considered, among other things: (1) the Fund's management fee compared to comparable mutual funds; (2) the Fund's total expense ratio compared to comparable mutual funds; (3) that the Adviser's willingness to limit the expenses of certain classes for a period of time would provide stability to the Fund's expenses for those share classes during that period; and (4) the Fund's performance during the periods reviewed, the Board concluded that the Agreement continued to be in the best interests of the Fund's shareholders.
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Victory Portfolios | Supplemental Information — continued December 31, 2018 |
(Unaudited)
High Yield Fund
The Board compared the Fund's Class A performance for the one-, three-, five- and ten-year periods ended June 30, 2018, to that of the median performance of the peer group and benchmark index for the same periods and considered the fact that the Fund outperformed the benchmark index for the one- and three-year periods and the peer group for all of the periods reviewed, and underperformed the benchmark index for the five- and ten-year periods.
Having considered, among other things: (1) the Fund's management fee compared to comparable mutual funds; (2) the Fund's total expense ratio compared to comparable mutual funds; (3) that the Adviser's willingness to limit the expenses of certain classes for a period of time would provide stability to the Fund's expenses for those share classes during that period; and (4) the Fund's performance during the periods reviewed, the Board concluded that the Agreement continued to be in the best interests of the Fund's shareholders.
Tax-Exempt Fund
The Board compared the Fund's Class A performance for the one-, three-, five- and ten-year periods ended June 30, 2018, to that of the median performance of the peer group and benchmark index for the same periods and considered the fact that the Fund outperformed both the benchmark index and the peer group for the one- and three-year periods, and underperformed both the benchmark index and the peer group for the five- and ten-year periods.
Having considered, among other things: (1) the Fund's management fee compared to comparable mutual funds; (2) the Fund's total expense ratio compared to comparable mutual funds; (3) that the Adviser's willingness to limit the expenses of certain classes for a period of time would provide stability to the Fund's expenses for those share classes during that period; and (4) the Fund's performance during the recent periods reviewed, the Board concluded that the Agreement continued to be in the best interests of the Fund's shareholders.
High Income Municipal Bond Fund
Noting that the Fund commenced operations in 2009, the Board compared the Fund's Class A performance for the one-, three- and five-year periods ended June 30, 2018, to that of the median performance of the peer group and benchmark index for the same periods and considered the fact that the Fund outperformed the benchmark index for all periods reviewed, outperformed the peer group for the one-year period, but underperformed the peer group for the other periods reviewed.
Having considered, among other things: (1) the Fund's management fee compared to comparable mutual funds; (2) the Fund's total expense ratio compared to comparable mutual funds; (3) that the Adviser's willingness to limit the expenses of certain classes for a period of time would provide stability to the Fund's expenses for those share classes during that period; and (4) the Fund's performance during the periods reviewed, the Board concluded that the Agreement continued to be in the best interests of the Fund's shareholders.
Floating Rate Fund
Noting that the Fund commenced operations in 2009, the Board compared the Fund's Class A performance for the one-, three- and five-year periods ended June 30, 2018, to that of the median performance of the peer group and benchmark index for the same periods and considered the fact that the Fund outperformed the peer group for all periods reviewed and underperformed the benchmark index for all of the periods reviewed.
Having considered, among other things: (1) the Fund's management fee compared to comparable mutual funds; (2) the Fund's total expense ratio compared to comparable mutual funds; (3) that the Adviser's willingness to limit the expenses of certain classes for a period of time would provide stability to the Fund's expenses for those share classes during that period; and (4) the Fund's performance during the periods reviewed, the Board concluded that the Agreement continued to be in the best interests of the Fund's shareholders.
Strategic Income Fund
Noting that the Fund commenced operations in 2009, the Board compared the Fund's Class A performance for the one-, three- and five-year periods ended June 30, 2018, to that of the median performance of the peer group and benchmark index for the same periods and considered the fact that the Fund outperformed the benchmark index for all of the periods reviewed and underperformed the peer group for all of the periods reviewed, with the exception of the one-year period.
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Victory Portfolios | Supplemental Information — continued December 31, 2018 |
(Unaudited)
Having considered, among other things: (1) the Fund's management fee compared to comparable mutual funds; (2) the Fund's total expense ratio compared to comparable mutual funds; (3) that the Adviser's willingness to limit the expenses of certain classes for a period of time would provide stability to the Fund's expenses for those share classes during that period; and (4) the Fund's performance during the periods reviewed, the Board concluded that the Agreement continued to be in the best interests of the Fund's shareholders.
Conclusion
Based on its review of the information requested and provided, and following extended discussions, the Board determined that the Agreement, on behalf of the Funds discussed above, was consistent with the best interests of each Fund and its shareholders, and the Board unanimously approved the Agreement, on behalf of each Fund, for an additional annual period on the basis of the foregoing review and discussions and the following considerations, among others:
• The fairness and reasonableness of the investment advisory fee payable to the Adviser under the Agreement in light of the investment advisory services provided, the costs of these services, the profitability of the Adviser's relationship with the Fund and the comparability of the fee paid to the fees paid by other investment companies;
• The nature, quality and extent of the investment advisory services provided by the Adviser;
• The Adviser's entrepreneurial commitment to the management of the Funds and the creation of a broad-based family of funds, which could entail a substantial commitment of the Adviser's resources to the successful operation of the Funds;
• The Adviser's representations regarding its staffing and capabilities to manage the Funds, including the retention of personnel with relevant portfolio management experience;
• The Adviser's efforts to enhance investment results by, among other things, developing quality portfolio management teams; and
• The overall high quality of the personnel, operations, financial condition, investment management capabilities, methodologies and performance of the Adviser.
Considerations of the Board in Approving the Park Avenue Investment Sub-Advisory Agreement
The Board approved the investment sub-advisory agreement between the Adviser and Park Avenue Institutional Advisers LLC (the "Sub-Adviser") on behalf of each of the High Yield Fund, Tax Exempt Fund, High Income Municipal Bond Fund, Floating Rate Fund and Strategic Income Fund (the "Sub-Advisory Agreement") at a meeting, which was called for that purpose, on December 5, 2018. The Board also considered information relating to the Funds and the Sub-Advisory Agreement provided throughout the year and, more specifically, at a meeting on October 23, 2018. The Board noted that prior to each Fund's reorganization on July 29, 2016, each Fund was managed by RS Investment Management Co. LLC, which was acquired by the Adviser on July 29, 2016, and sub-advised by the Sub-Adviser. In considering whether to approve the Sub-Advisory Agreement, the Board requested, and the Sub-Adviser provided, information that the Board believed to be reasonably necessary to reach its conclusions. The Board, including the Independent Trustees, evaluated this information along with other information obtained throughout the year and was advised by legal counsel to the Funds and by independent legal counsel to the Independent Trustees. In addition, in 2017 the Independent Trustees, through their counsel, retained an independent consultant to assist with a review of the overall process for conducting the annual review of these advisory arrangements. The Board reviewed numerous factors with respect to each Fund including the Sub-Adviser's history as sub-adviser for each predecessor fund and the services to be provided by the Sub-Adviser as the sub-adviser.
In considering whether the compensation paid to the Sub-Adviser was fair and reasonable, the Board also evaluated, among other things, the following factors:
• The requirements of each Fund for the services provided by the Sub-Adviser;
• The nature, quality and extent of the services provided and expected to be provided;
• The fees payable for the services and whether the fee arrangements provided for economies of scale that could benefit Fund shareholders as the Funds grow;
• Representations by the Adviser that the sub-advisory fee for each Fund is within the range of fees agreed to in the market for similar services;
130
Victory Portfolios | Supplemental Information — continued December 31, 2018 |
(Unaudited)
• Whether the fee would be sufficient to enable the Sub-Adviser to attract and retain experienced personnel and continue to provide quality services to the Funds;
• Management's commitment to operating the Fund at competitive expense levels;
• Research and other service benefits received by the Sub-Adviser obtained through payment of client commissions for securities transactions;
• Other benefits received by the Sub-Adviser as a result of its sub-advisory relationship with the Funds;
• The capabilities and financial condition of the Sub-Adviser;
• The nature, quality and extent of the oversight and compliance services provided by the Adviser;
• The historical relationship between the predecessor funds and the Sub-Adviser; and
• Current economic and industry trends.
The Board considered the Adviser's contractual agreement with each Fund to waive its fees and reimburse expenses of certain classes for a specified period of time, as described in the Fund's prospectus. The Board recognized that because the sub-advisory fees are paid by the Adviser, any arrangement by the Sub-Adviser to reduce its fee as a Fund grows would have no direct impact on the Fund or its shareholders. The Board considered the relative roles and responsibilities of the Adviser and the Sub-Adviser and the Adviser's representation that the fees to be paid to the Sub-Adviser are within the range of sub-advisory fees paid to other sub-advisers for similar services.
The Board considered each Fund's total operating expense ratio on a net and gross basis as compared with a universe of comparable mutual funds compiled by an independent consultant, FUSE Research Network, LLC ("FUSE"), and a peer group of funds with similar investment strategies selected by FUSE from the universe. The Board reviewed the factors and methodology used by FUSE in the selection of each Fund's peer group, including FUSE's selection of a broad universe of funds using the standard Retail Morningstar Categories, the more specific universe of comparable funds, and peer groups of funds with comparable investment strategies and assets levels, among other factors. The Board also reviewed any changes to FUSE's methodology as compared to the prior year, including as a result of input from the Adviser, if any.
The Board reviewed each Fund's performance over one-, three-, five- and ten-year periods (as applicable) against the performance of the Fund's selected peer group and benchmark index. The Board recognized that the performance of the Fund and peer group funds are net of expenses, while the performance of the benchmark index is gross returns. The Board noted that, following each Fund's reorganization, each Fund is managed by substantially the same investment management team that managed the comparable predecessor fund.
The Board reviewed various other specific factors with respect to each Fund, as described below. In their deliberations, the Trustees did not rank the importance of any particular information or factor considered and each Trustee may have attributed different weights to various factors.
High Yield Fund
The Board believed that the High Yield Fund's gross annual management fee was reasonable as compared to the median gross management fee charged to the funds in the Fund's peer group. The Board concluded that the Fund's Class A net annual expense ratio was reasonable as compared to the median expense ratio for the peer group. The Board then compared the Fund's Class A performance for the one-, three-, five- and ten-year periods ended June 30, 2018, to that of the median performance of the peer group and benchmark index for the same periods and considered the fact that the Fund outperformed the benchmark index for the one- and three-year periods and the peer group for all of the periods reviewed, and underperformed the benchmark index for the five- and ten-year periods.
Tax-Exempt Fund
The Board believed that the Tax-Exempt Fund's gross annual management fee was reasonable as compared to the median gross management fee charged to the funds in the Fund's peer group. The Board concluded that the Fund's Class A net annual expense ratio was reasonable as compared to the median expense ratio for the peer group. The Board then compared the Fund's Class A performance for the one-, three-, five- and ten-year periods ended June 30, 2018, to that of the median performance of the peer group and benchmark index for the same periods and considered the fact that the Fund outperformed both the benchmark index and the peer group for
131
Victory Portfolios | Supplemental Information — continued December 31, 2018 |
(Unaudited)
the one- and three-year periods, and underperformed both the benchmark index and the peer group for the five- and ten-year periods.
High Income Municipal Bond Fund
The Board believed that the High Income Municipal Bond Fund's gross annual management fee was reasonable as compared to the median gross management fee charged to the funds in the Fund's peer group. The Board concluded that the Fund's Class A net annual expense ratio was reasonable as compared to the median expense ratio for the peer group. Noting that the Fund commenced operations in 2009, the Board then compared the Fund's Class A performance for the one-, three- and five-year periods ended June 30, 2018, to that of the median performance of the peer group and benchmark index for the same periods and considered the fact that the Fund outperformed the benchmark index for all periods reviewed, and underperformed the peer group for all of the periods reviewed, with the exception of the one-year period.
Floating Rate Fund
The Board believed that the Floating Rate Fund's gross annual management fee was reasonable as compared to the median gross management fee charged to the funds in the Fund's peer group. The Board concluded that the Fund's Class A net annual expense ratio was reasonable as compared to the median expense ratio for the peer group. Noting that the Fund commenced operations in 2009, the Board then compared the Fund's Class A performance for the one-, three- and five-year periods ended June 30, 2018, to that of the median performance of the peer group and benchmark index for the same periods and considered the fact that the Fund outperformed the peer group for all periods reviewed and underperformed the benchmark index for all of the periods reviewed.
Strategic Income Fund
The Board believed that the Strategic Income Fund's gross annual management fee was reasonable as compared to the median gross management fee charged to the funds in the Fund's peer group. The Board concluded that the Fund's Class A net annual expense ratio was reasonable as compared to the median expense ratio for the peer group. Noting that the Fund commenced operations in 2009, the Board then compared the Fund's Class A performance for the one-, three- and five-year periods ended June 30, 2018, to that of the median performance of the peer group and benchmark index for the same periods and considered the fact that the Fund outperformed the benchmark index for all of the periods reviewed and underperformed the peer group for all of the periods reviewed, with the exception of the one-year period.
Based on its review of the information requested and provided, and following extended discussions, the Board concluded, among other things, that the Sub-Advisory Agreement, with respect to each of the Funds discussed above, was consistent with the best interests of the Fund and its shareholders and unanimously approved the Sub-Advisory Agreement (including the fees to be charged for services thereunder), on the basis of the foregoing review and discussions and the following considerations, among others:
• The fairness and reasonableness of the investment advisory fee payable to the Sub-Adviser under the Sub-Advisory Agreement in light of the investment advisory services provided, the costs of these services and the estimated profitability of the Sub-Adviser's relationship with each Fund;
• The nature, quality and extent of the investment advisory services provided by the portfolio management team of the Sub-Adviser, which have resulted in each Fund achieving its stated investment objective;
• The Sub-Adviser's representations regarding its staffing and capabilities to manage the Funds; and
• The overall high quality of the personnel, operations, financial condition, investment management capabilities, methodologies and performance of the Sub-Adviser.
132
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) |
VPRSFIF-AR (12/18)
December 31, 2018
Annual Report
Victory RS Small Cap Growth Fund
Victory RS Select Growth Fund
Victory RS Mid Cap Growth Fund
Victory RS Growth Fund
Victory RS Science and Technology Fund
Victory RS Small Cap Equity 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 sooner than January 1, 2021 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 Victory Funds you hold directly or through your financial intermediary.
www.vcm.com
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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
Shareholder Letter (unaudited) | 3 | ||||||
Fund Review and Commentary (unaudited) | 4 | ||||||
Financial Statements | |||||||
The Victory Growth Funds | |||||||
Victory RS Small Cap Growth Fund | |||||||
Schedule of Portfolio Investments | 26 | ||||||
Statements of Assets and Liabilities | 44 | ||||||
Statements of Operations | 46 | ||||||
Statements of Changes in Net Assets | 48-50 | ||||||
Financial Highlights | 54-58 | ||||||
Victory RS Select Growth Fund | |||||||
Schedule of Portfolio Investments | 29 | ||||||
Statements of Assets and Liabilities | 44 | ||||||
Statements of Operations | 46 | ||||||
Statements of Changes in Net Assets | 48-50 | ||||||
Financial Highlights | 59-63 | ||||||
Victory RS Mid Cap Growth Fund | |||||||
Schedule of Portfolio Investments | 32 | ||||||
Statements of Assets and Liabilities | 44 | ||||||
Statements of Operations | 46 | ||||||
Statements of Changes in Net Assets | 48-50 | ||||||
Financial Highlights | 64-68 | ||||||
Victory RS Growth Fund | |||||||
Schedule of Portfolio Investments | 35 | ||||||
Statements of Assets and Liabilities | 45 | ||||||
Statements of Operations | 47 | ||||||
Statements of Changes in Net Assets | 51-53 | ||||||
Financial Highlights | 69-72 | ||||||
Victory RS Science and Technology Fund | |||||||
Schedule of Portfolio Investments | 37 | ||||||
Statements of Assets and Liabilities | 45 | ||||||
Statements of Operations | 47 | ||||||
Statements of Changes in Net Assets | 51-53 | ||||||
Financial Highlights | 73-76 | ||||||
Victory RS Small Cap Equity Fund | |||||||
Schedule of Portfolio Investments | 41 | ||||||
Statements of Assets and Liabilities | 45 | ||||||
Statements of Operations | 47 | ||||||
Statements of Changes in Net Assets | 51-53 | ||||||
Financial Highlights | 77-80 | ||||||
Notes to Financial Statements | 81 | ||||||
Report of Ernst & Young LLP, Independent Registered Public Accounting Firm | 92 | ||||||
Supplemental Information (unaudited) | 93 | ||||||
Trustee and Officer Information | 93 | ||||||
Proxy Voting and Form N-Q Information | 96 | ||||||
Expense Examples | 96 | ||||||
Additional Federal Income Tax Information | 98 | ||||||
Advisory Contract Approval | 99 |
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 www.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
Victory Funds Letter to Shareholders
Dear Shareholder,
What a difference a year makes. The year ended December 31, 2018, was marked by an abrupt return of volatility, which had largely been missing in action for years. Consider the range of highs and lows we witnessed. For the S&P 500 Index, it was a year in which we celebrated an all-time high in late summer, only to be followed by the worst December since the 2008 financial crisis. And if that wasn't enough volatility, the Dow Jones Industrial Average also registered several of its worst-ever, single-day point declines during 2018.
Through all that the S&P 500 clocked in with its first negative annual return since 2008, falling by 4.4 percent. Given the risk-off sentiment that was obvious as the year drew to a close, it's no surprise that small-cap stocks, as measured by the Russell 2000 Index, fared even worse, falling approximately 11.0 percent for the year. The challenges for equity investors were also evident around the world as the MSCI ACWI and Emerging Markets indexes declined 8.9 and 14.3 percent, respectively.
So what ushered in the renewed era of volatility and these challenging times? There were multiple culprits. For starters, trade tensions ratcheted up throughout the year as anti-global rhetoric bloomed into a series of new tariffs, which sparked concerns of a prolonged trade war with China. The Federal Reserve remained persistent in its monetary tightening, raising the benchmark interest rate four times throughout the year to a range of 2.25 to 2.5 percent. And then the year ended with a partial shutdown of the federal government. These factors conspired to elevate concerns of a possible recession here and abroad.
Yet despite the headline risks, we think it's critically important to remain focused on the data. By all accounts, the U.S. economy continued chugging along in 2018 with a real gross domestic product (GDP) rising 3.4 percent in the third quarter of 2018, the latest figures available from the Bureau of Economic Analysis. Moreover, the labor picture continues to shine with consistent monthly job growth and an unemployment rate of 3.9 percent. All this comes against a backdrop of low inflation and solid corporate earnings.
The markets, it appears, have been vacillating between the dire headlines and higher perceived risks on one hand, and the continued positive economic data on the other. Of course, no one knows where the Fed will stop raising rates, nor is there any certainty on how the trade turmoil ultimately gets resolved. For now, however, we continue to embrace our solid economic fundamentals. Moreover, we believe all of Victory Capital's independent investment franchises are well positioned to take advantage of any short-term valuation dislocations resulting from the current era of heightened volatility.
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.
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
3
Victory RS Growth Funds (Unaudited)
Victory RS Small Cap Growth Fund
Portfolio Holdings
As a Percentage of Total Investments
Market Overview
U.S. equity markets delivered mixed performance throughout 2018, as the S&P 500® Index failed to deliver its tenth straight year of positive returns after a strong first nine months of the year. U.S. stocks underperformed despite continued resilience in the U.S. economy and record earnings, supported by a strong job market and the largest corporate tax reform in decades.
The year began on a positive note with strong performance in January before volatility emerged in February, dampening strong investor sentiment and ending the S&P 500's record run of 15 straight months of positive performance. The market rebounded in the second and third quarters, despite the continued uncertainty surrounding trade tariffs and a flattening yield curve, largely driven by fundamentals. Fundamentals continued to be supported by the strength of the U.S. economy (highlighted by 4.2% growth in the second quarter — the highest growth since Q3 2014, according to the Bureau of Economic Analysis). U.S. stocks declined sharply in the fourth quarter, as growth-oriented stocks in the Russell 3000® Growth Index returned -16.33%, the seventh largest quarterly decline since the 1979 inception of the index, ending the record run of twelve consecutive quarters of positive returns for the index.
Large-cap stocks outperformed mid- and small-cap stocks during the year, as measured by the Russell family of indices, a continued trend from 2017, while growth-oriented investments outperformed value as investors favored the strong fundamentals of growth stocks. Growth stocks as measured by the Russell 3000® Growth Index have now outperformed value stocks as measured by the Russell 3000® Value Index over 1, 3, 5, 10, and 15 years.
Performance Update
The Victory RS Small Cap Growth Fund (the "Fund") seeks to provide long-term capital growth. The Fund outperformed its primary benchmark, the Russell 2000 Growth Index (the "Index"), in 2018. The Fund (Class A Shares at net asset value) returned -8.97% and the Index returned -9.31%.
Portfolio Review
Within the Information Technology sector, contributors included RingCentral, a provider of software-as-a-service solutions for businesses to support modern communications. RingCentral's outperformance was driven by strong execution, as the company reported revenue up 32% year-over-year with improved gross margins, leading to earnings that grew 46% year-over-year in the most recent quarter and easily beat expectations. Our outlook for the company remains strong, driven by their continued march upmarket to the larger enterprise market and by the company's attractive anticipated growth rate.
Information Technology holding SendGrid, a cloud-based platform that provides various tools to businesses (including developers and marketers) to reach their customers using email,
4
Victory RS Growth Funds (Unaudited)
Victory RS Small Cap Growth Fund (continued)
was also a strong contributor to performance. SendGrid has been a holding since the company's IPO, at which time RS Investments was a top three owner of the company. SendGrid rallied sharply after it was announced in mid-October that the company would be acquired by Twilio in an all-stock deal. The stock initially rallied approximately 15% on the announcement and we continued to hold the position given we already had a positive view of Twilio, owning it in our mid-cap growth strategy. This further benefitted performance as Twilio was a strong performer throughout the remainder of the quarter given the all-stock nature of the SendGrid acquisition.
Stock selection within the Financial Services sector was also additive to performance, due in large part to an investment in Euronet Worldwide, a payment and transaction processing company that provides distribution solutions to financial institutions, retailers, service providers, and individual consumers worldwide. Euronet owns and operates the largest ATM network in Europe and has a large presence in Asia, operating almost 20,000 ATMs in total. The stock performed well in 2018, driven by a 29% increase in operating income as the company continued to execute.
Within the Health Care sector, the largest detractor was biotechnology holding Vital Therapies, a biotechnology company that was initially developing a cell-based treatment for acute liver failure, a condition that affects 30,000 patients in the United States. We initially purchased the stock given the potential treatment of patients with a wide range of progressive liver disease, providing a more cost-effective and safer alternative to liver transplants. Unfortunately, in early September the company ran into its final roadblock — failing to meet primary or secondary endpoints in a trial to determine significant improvement in overall survival rates, leading the company to believe their ELAD system would not be approved in the United States and European Union.
Producer durables also proved to be a challenging sector in 2018, driven by underperforming holdings H&E Equipment Services, Inc. and Altra Industrial Motion Corp. H&E operates as an integrated equipment services company and rents, sells, and provides parts and support services for hi-lift or aerial work platform equipment, cranes, and earth moving equipment. Altra designs, produces, and markets mechanical power transmission components worldwide. Both companies were under significant pressure in the most recent quarter over concerns of a renewed industrial recession. H&E's underperformance was driven by concerns that earnings represented a cyclical peak and was further impacted by the replacement of the company's CEO. We sold the position given the increased uncertainty and a lack of a clear path forward for the company. Altra, on the other hand, showed signs of life despite the underperformance, beating earnings expectations with non-GAAP income growth of more than 30% year-over-year. Given the company's attractive valuation and acquisition of Fortive's Automation and Specialty business, which we feel will be transformative, we continued to hold the position.
Outlook
The abrupt market sell-off at the end the year and strong earnings generated by U.S. corporations have driven valuations to among the cheapest levels seen in decades, as reflected by forward price-to-earnings ratios. Given our optimistic outlook for U.S. economic growth and corporate earnings against the expected backdrop of positive employment trends
5
Victory RS Growth Funds (Unaudited)
Victory RS Small Cap Growth Fund (continued)
and moderate inflation, stocks appear very attractive to us. We acknowledge the potential headwinds from a less accommodative Federal Reserve (Fed), political turmoil that recently led to a government shutdown, and the impact of retaliatory tariffs from China and our other trade partners, but we would note that the U.S. economy is still expected to grow at a high rate, while U.S. interest rates are likely to remain low relative to history even with additional Fed tightening. As a result, we believe the current environment remains supportive of small-cap growth stocks, though we remain committed to careful stock selection and disciplined risk management as we seek to identify well-managed, well-capitalized small-cap growth companies that in our view will be able to grow their revenues and tap new market opportunities regardless of the economic backdrop.
6
Victory RS Growth Funds (Unaudited)
Victory RS Small Cap Growth Fund (continued)
Average Annual Return
Year Ended December 31, 2018
Class A | Class C | Class R | Class R6 | Class Y | |||||||||||||||||||||||||||||||
INCEPTION DATE | 11/30/87 | 9/6/07 | 1/22/07 | 7/12/17 | 5/1/07 | ||||||||||||||||||||||||||||||
Net Asset Value | Maximum Offering Price | Net Asset Value | Contingent Deferred Charges | Net Asset Value | Net Asset Value | Net Asset Value | Russell 2000 Growth Index1 | ||||||||||||||||||||||||||||
One Year | –8.97 | % | –14.21 | % | –9.66 | % | –10.39 | % | –9.39 | % | –8.66 | % | –8.72 | % | –9.31 | % | |||||||||||||||||||
Three Year | 7.92 | % | 5.81 | % | 7.11 | % | 7.11 | % | 7.48 | % | N/A | 8.21 | % | 7.24 | % | ||||||||||||||||||||
Five Year | 6.59 | % | 5.33 | % | 5.78 | % | 5.78 | % | 6.16 | % | N/A | 6.88 | % | 5.13 | % | ||||||||||||||||||||
Ten Year | 15.81 | % | 15.12 | % | 14.71 | % | 14.71 | % | 15.22 | % | N/A | 16.16 | % | 13.52 | % | ||||||||||||||||||||
Since Inception | 12.75 | % | 12.54 | % | 6.85 | % | 6.85 | % | 8.07 | % | 4.14 | % | 8.69 | % | N/A | ||||||||||||||||||||
Expense Ratios | |||||||||||||||||||||||||||||||||||
Gross | 1.45% | 2.24% | 1.95% | 1.42% | 1.18% | ||||||||||||||||||||||||||||||
With Applicable Waivers | 1.41% | 2.17% | 1.87% | 1.07% | 1.14% |
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 May 1, 2018. Additional information pertaining to the Fund's expense ratios as of December 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. 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 RS Small Cap Growth Fund — Growth of $10,000
1The Russell 2000® Growth Index is an unmanaged market-capitalization-weighted index that measures the performance of those companies in the Russell 2000® Index with higher price-to-book ratios and higher forecasted growth values. (The Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000® Index, which consists of the 3,000 largest U.S. companies based on total market capitalization.) Index results assume the reinvestment of dividends paid on the stocks constituting the index. You may not invest in the index, and, unlike the Fund, the index does not incur fees and expenses. 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 RS Growth Funds (Unaudited)
Victory RS Select Growth Fund
Portfolio Holdings
As a Percentage of Total Investments
Market Overview
U.S. equity markets delivered mixed performance throughout 2018, as the S&P 500® Index failed to deliver its tenth straight year of positive returns after a strong first nine months of the year. U.S. stocks underperformed despite continued resilience in the U.S. economy and record earnings, supported by a strong job market and the largest corporate tax reform in decades.
The year began on a positive note with strong performance in January before volatility emerged in February, dampening strong investor sentiment and ending the S&P 500's record run of 15 straight months of positive performance. The market rebounded in the second and third quarters, despite the continued uncertainty surrounding trade tariffs and a flattening yield curve, largely driven by fundamentals. Fundamentals continued to be supported by the strength of the U.S. economy (highlighted by 4.2% growth in the second quarter — the highest growth since Q3 2014, according to the Bureau of Economic Analysis). U.S. stocks declined sharply in the fourth quarter, as growth-oriented stocks in the Russell 3000® Growth Index returned -16.33%, the seventh largest quarterly decline since the 1979 inception of the index, ending the record run of twelve consecutive quarters of positive returns for the index.
Large-cap stocks outperformed mid- and small-cap stocks during the year, as measured by the Russell family of indices, a continued trend from 2017, while growth-oriented investments outperformed value as investors favored the strong fundamentals of growth stocks. Growth stocks as measured by the Russell 3000® Growth Index have now outperformed value stocks as measured by the Russell 3000® Value Index over 1, 3, 5, 10, and 15 years.
Performance Update
The Victory RS Select Growth Fund (the "Fund") seeks to provide long-term capital growth. The Fund (Class A Shares at net asset value) returned -7.23% for the twelve-month period ended December 31, 2018, outperforming the Russell 2500TM Growth Index and the Russell 2000® Growth Index, which returned -7.47% and -9.31%, respectively.
Portfolio Review
Within the Health Care sector, biotechnology was a significant contributor due to holding Ligand Pharmaceuticals, Inc. Ligand's stock performed relatively well in 2018 compared to the broader biotechnology universe as investors discovered the company's unique business approach that provides diversified exposure to a range of promising drugs under development by other biotech and pharmaceutical companies. We continue to think highly of Ligand's business model and hold the position given the strong metrics for several of its partnership drugs, including GlaxoSmithKline's anemia treatment Promacta and Amgen's cancer drug Kyprolis.
Health Care holding Veeva Systems, a provider of enterprise applications, multichannel platform, customer relationships, and content management solutions, was also a strong contributor in 2018. Veeva is positioned as the third most preferred Life Sciences software
8
Victory RS Growth Funds (Unaudited)
Victory RS Select Growth Fund (continued)
vendor (behind Oracle and SAP) and has material expansion opportunities with the goal to become the cloud platform for the life sciences industry. Veeva performed well throughout 2018, highlighted by earnings and sales growth that beat expectations in the most recent quarter, with earnings up more than 80% year-over-year.
Trex Company, Inc., the world's largest manufacturer of wood-alternative decking and railing products, led positive performance within materials & processing stock selection. We continue to hold the stock given increased expectations for consumer spending on decks and the strength of the remodeling market, the huge runway for market share gains for composite decking from wood, the dominant brand Trex has in the composite decking space, and a July 2017 acquisition of a nonresidential railing company that we believe can drive further synergies. Trex was a positive, albeit volatile, contributor throughout 2018, driven by strong earnings growth that exceeded expectations.
Industrials proved to be a challenging sector in 2018, driven by underperformance in holdings Herc Holdings, Inc. and Knight-Swift Transportation. Herc Holdings operates as an equipment rental supplier, while Knight-Swift acts as a truckload transportation and logistics services company. Both companies were under significant pressure in 2018 over concerns of a renewed industrial recession. Despite Herc's strong fundamental performance during the first three quarters of the year, highlighted by a 14% increase in EBITDA year-over-year, the market sold the stock in the fourth quarter on fears that earnings represented a cyclical peak. Knight-Swift also underperformed in the most recent quarter despite improved guidance by management. Given the challenging macro environment and the belief that earnings may have peaked this cycle, we moved on from both positions.
LogMeIn, a provider of a portfolio of cloud-based communication and collaboration, identity and access, and customer engagement and support solutions, was a negative contributor to technology performance. In recent years LogMeIn grew their underlying business beyond the core collaboration product GoToMeeting, but has been punished in recent quarters given that GoToMeeting itself, which is now about 25% – 33% of their business, saw a decline in its renewal rate earlier this year after asking customers to pay one year in advance (vs. monthly). This decision allowed a competitor, Zoom, to aggressively target and attract these customers as they came up for annual renewal. The impact of the competition resulted in reduced guidance for their top-line revenue and EBITDA figures; thus, after owning the stock successfully for almost five years, we sold the position.
Outlook
The abrupt market sell-off at the end the year and strong earnings generated by U.S. corporations have driven valuations to among the cheapest levels seen in decades, as reflected by forward price-to-earnings ratios. Given our optimistic outlook for U.S. economic growth and corporate earnings against the expected backdrop of positive employment trends and moderate inflation, stocks appear very attractive to us. We acknowledge the potential headwinds from a less accommodative Federal Reserve (Fed), political turmoil that recently led to a government shutdown, and the impact of retaliatory tariffs from China and our other trade partners, but we would note that the U.S. economy is still expected to grow at a high rate, while U.S. interest rates are likely to remain low relative to history even with additional Fed tightening. As a result, we believe the current environment remains supportive of small- and mid-cap growth stocks, though we remain committed to careful stock selection and disciplined risk management as we seek to identify well-managed, well-capitalized growth companies that in our view will be able to grow their revenues and tap new market opportunities regardless of the economic backdrop.
9
Victory RS Growth Funds (Unaudited)
Victory RS Select Growth Fund (continued)
Average Annual Return
Year Ended December 31, 2018
Class A | Class C | Class R | Class R6 | Class Y | |||||||||||||||||||||||||||||||||||
INCEPTION DATE | 8/1/96 | 11/15/07 | 2/12/07 | 11/14/16 | 5/1/09 | ||||||||||||||||||||||||||||||||||
Net Asset Value | Maximum Offering Price | Net Asset Value | Contingent Deferred Charges | Net Asset Value | Net Asset Value | Net Asset Value | Russell 2000 Growth Index1 | Russell 2500 Growth Index2 | |||||||||||||||||||||||||||||||
One Year | –7.23 | % | –12.57 | % | –7.98 | % | –8.56 | % | –7.70 | % | –6.92 | % | –7.02 | % | –9.31 | % | –7.47 | % | |||||||||||||||||||||
Three Year | 5.09 | % | 3.03 | % | 4.27 | % | 4.27 | % | 4.59 | % | N/A | 5.36 | % | 7.24 | % | 8.11 | % | ||||||||||||||||||||||
Five Year | 3.18 | % | 1.97 | % | 2.38 | % | 2.38 | % | 2.71 | % | N/A | 3.45 | % | 5.13 | % | 6.19 | % | ||||||||||||||||||||||
Ten Year | 14.59 | % | 13.91 | % | 13.55 | % | 13.55 | % | 13.81 | % | N/A | N/A | 13.52 | % | 14.76 | % | |||||||||||||||||||||||
Since Inception | 10.20 | % | 9.90 | % | 6.06 | % | 6.06 | % | 6.76 | % | 5.34 | % | 13.92 | % | N/A | N/A | |||||||||||||||||||||||
Expense Ratios | |||||||||||||||||||||||||||||||||||||||
Gross | 1.49% | 2.24% | 2.90% | 27.47% | 1.20% | ||||||||||||||||||||||||||||||||||
With Applicable Waivers | 1.40% | 2.18% | 1.91% | 1.06% | 1.14% |
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 May 1, 2018. Additional information pertaining to the Fund's expense ratios as of December 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. 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 RS Select Growth Fund — Growth of $10,000
1The Russell 2000® Growth Index is an unmanaged market-capitalization-weighted index that measures the performance of those companies in the Russell 2000® Index with higher price-to-book ratios and higher forecasted growth values. (The Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000® Index, which consists of the 3,000 largest U.S. companies based on total market capitalization.) Index results assume the reinvestment of dividends paid on the stocks constituting the index. You may not invest in the index, and, unlike the Fund, the index does not incur fees and expenses.
2The Russell 2500TM Growth Index is an unmanaged market-capitalization-weighted index that measures the performance of those companies in the Russell 2500TM Index with higher price-to-book ratios and higher forecasted growth values. (The Russell 2500TM Index measures the performance of the 2,500 smallest companies in the Russell 3000® Index, which consists of the 3,000 largest U.S. companies based on total market capitalization.) Index results assume the reinvestment of dividends paid on the stocks constituting the index. 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.
10
Victory RS Growth Funds (Unaudited)
Victory RS Mid Cap Growth Fund
Portfolio Holdings
As a Percentage of Total Investments
Market Overview
U.S. equity markets delivered mixed performance throughout 2018, as the S&P 500® Index failed to deliver its tenth straight year of positive returns after a strong first nine months of the year. U.S. stocks underperformed despite continued resilience in the U.S. economy and record earnings, supported by a strong job market and the largest corporate tax reform in decades.
The year began on a positive note with strong performance in January before volatility emerged in February, dampening strong investor sentiment and ending the S&P 500's record run of 15 straight months of positive performance. The market rebounded in the second and third quarters, despite the continued uncertainty surrounding trade tariffs and a flattening yield curve, largely driven by fundamentals. Fundamentals continued to be supported by the strength of the U.S. economy (highlighted by 4.2% growth in the second quarter — the highest growth since Q3 2014, according to the Bureau of Economic Analysis). U.S. stocks declined sharply in the fourth quarter, as growth-oriented stocks in the Russell 3000® Growth Index returned -16.33%, the seventh largest quarterly decline since the 1979 inception of the index, ending the record run of twelve consecutive quarters of positive returns for the index.
Large-cap stocks outperformed mid- and small-cap stocks during the year, as measured by the Russell family of indices, a continued trend from 2017, while growth-oriented investments outperformed value as investors favored the strong fundamentals of growth stocks. Growth stocks as measured by the Russell 3000® Growth Index have now outperformed value stocks as measured by the Russell 3000® Value Index over 1, 3, 5, 10, and 15 years.
Performance Update
The Victory RS Mid Cap Growth Fund (the "Fund") seeks to provide long-term capital growth. The Fund underperformed its primary benchmark, the Russell Mid Cap® Growth Index (the "Index"), in 2018. The Fund (Class A Shares at net asset value) returned -7.37% and the Index returned -4.75%.
Portfolio Review
Industrials proved to be a challenging sector in 2018, driven by underperformance in holdings United Rentals, Inc. and Knight-Swift Transportation. United Rentals operates as an equipment rental supplier, while Knight-Swift acts as a truckload transportation and logistics services company. Both companies were under significant pressure in the most recent quarter over concerns of a renewed industrial recession. Despite strong fundamental performance and execution by United Rentals, highlighted by third quarter income up materially from the same period a year ago, the market sold the stock given fears these earnings represented a cyclical peak. Knight-Swift also underperformed in the most recent quarter despite improved guidance by management. Given the challenging macro environment and the belief that earnings may soften going forward, we sold both positions.
11
Victory RS Growth Funds (Unaudited)
Victory RS Mid Cap Growth Fund (continued)
LKQ Corporation, an auto parts distributor, was a negative contributor within the Consumer Discretionary sector. We owned the stock given our view that expected revenue acceleration would allow margins to widen due to operational leverage, driving earnings. The thesis did not play out as expected — revenue came in as expected, but margins narrowed as the company had execution issues across business lines and the integration of a recent acquisition failed to lead to expected synergies.
Within the Health Care sector, the largest driver of outperformance in 2018 was biotechnology holding Illumina, Inc. Illumina is the leader in the Next-Generation Sequencing (NGS) market, providing gene sequencing and array-based solutions for genetic analyses. We own Illumina given their unquestioned leadership in the NGS market, as well as the opportunity to expand through new platforms to address an ever-changing landscape of customer needs and diagnostics as sequencing has made its way into clinical applications. The stock performed exceptionally well, as margins have expanded despite the high level of investment Illumina has placed in research and development.
Within the Consumer Staples sector, the largest driver of outperformance in 2018 was beverage holding Keurig Dr Pepper Inc. Keurig is a manufacturer and distributor of nonalcoholic beverages, including coffee, hot cocoa, teas, and other beverages in K-Cup, Vue, Rivo, K-Carafe, and K-Mug pods. We initially purchased Keurig given the strong growth potential of the Keurig coffee business, which we expected to grow up to 20% per year once issues holding back growth, including cost per pod, were addressed, while the combined Keurig and Dr Pepper company appeared to be a platform that could compete well in the traditional beverage industry. The stock performed well in the quarter on earnings growth that beat already strong guidance as the company continues to execute their business plan.
Performance was also aided by financial services holding Euronet Worldwide, a payment and transaction processing and distribution solutions provider to financial institutions, retailers, service providers, and individual consumers worldwide. We owned Euronet given the company's high recurring revenue and high margin business, largely derived by transaction fees that operate under long-term contracts. The stock performed very well in 2018. In October the company meaningfully increased 2019 estimates given a rule change regarding Visa-enabled machines that will allow Euronet to offer a wider range of services to customers, increasing the revenue potential for existing machines.
Outlook
The abrupt market sell-off at the end the year and strong earnings generated by U.S. corporations have driven valuations to among the cheapest levels seen in decades, as reflected by forward price-to-earnings ratios. Given our optimistic outlook for U.S. economic growth and corporate earnings against the expected backdrop of positive employment trends and moderate inflation, stocks appear very attractive to us. We acknowledge the potential headwinds from a less accommodative Federal Reserve (Fed), political turmoil that recently led to a government shutdown, and the impact of retaliatory tariffs from China and our other trade partners, but we would note that the U.S. economy is still expected to grow at a high rate, while U.S. interest rates are likely to remain low relative to history even with additional Fed tightening. As a result, we believe the current environment remains supportive of mid-cap growth stocks, though we remain committed to careful stock selection and disciplined risk management as we seek to identify well-managed, well-capitalized growth companies that in our view will be able to grow their revenues and tap new market opportunities regardless of the economic backdrop.
12
Victory RS Growth Funds (Unaudited)
Victory RS Mid Cap Growth Fund (continued)
Average Annual Return
Year Ended December 31, 2018
Class A | Class C | Class R | Class R6 | Class Y | |||||||||||||||||||||||||||||||
INCEPTION DATE | 7/12/95 | 5/21/07 | 12/4/06 | 11/15/16 | 5/1/07 | ||||||||||||||||||||||||||||||
Net Asset Value | Maximum Offering Price | Net Asset Value | Maximum Offering Price | Net Asset Value | Net Asset Value | Net Asset Value | Russell Mid Cap Growth Index1 | ||||||||||||||||||||||||||||
One Year | –7.37 | % | –12.69 | % | –8.23 | % | –8.98 | % | –7.99 | % | –7.15 | % | –7.15 | % | –4.75 | % | |||||||||||||||||||
Three Year | 5.57 | % | 3.50 | % | 4.62 | % | 4.62 | % | 4.95 | % | N/A | 5.83 | % | 8.59 | % | ||||||||||||||||||||
Five Year | 4.86 | % | 3.62 | % | 3.95 | % | 3.95 | % | 4.29 | % | N/A | 5.13 | % | 7.42 | % | ||||||||||||||||||||
Ten Year | 13.96 | % | 13.30 | % | 12.85 | % | 12.85 | % | 13.31 | % | N/A | 14.26 | % | 15.12 | % | ||||||||||||||||||||
Since Inception | 8.83 | % | 8.55 | % | 4.24 | % | 4.24 | % | 5.28 | % | 7.11 | % | 5.91 | % | N/A | ||||||||||||||||||||
Expense Ratios | |||||||||||||||||||||||||||||||||||
Gross | 1.29% | 2.10% | 2.43% | 2.26% | 1.06% | ||||||||||||||||||||||||||||||
With Applicable Waivers | 1.20% | 2.10% | 1.80% | 0.94% | 0.95% |
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 May 1, 2018. Additional information pertaining to the Fund's expense ratios as of December 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. 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 RS Mid Cap Growth Fund — Growth of $10,000
1The Russell Mid Cap® Growth Index is an unmanaged market-capitalization-weighted index that measures the performance of those companies in the Russell Midcap® Index with higher price-to-book ratios and higher forecasted growth values. (The Russell Midcap® Index measures the performance of the 800 smallest companies in the Russell 1000® Index, which consists of the 1,000 largest U.S. companies based on total market capitalization.) Index results assume the reinvestment of dividends paid on the stocks constituting the index. 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.
13
Victory RS Growth Funds (Unaudited)
Victory RS Growth Fund
Portfolio Holdings
As a Percentage of Total Investments
Market Overview
U.S. equity markets delivered mixed performance throughout 2018, as the S&P 500® Index failed to deliver its tenth straight year of positive returns after a strong first nine months of the year. U.S. stocks underperformed despite continued resilience in the U.S. economy and record earnings, supported by a strong job market and the largest corporate tax reform in decades.
The year began on a positive note with strong performance in January before volatility emerged in February, dampening strong investor sentiment and ending the S&P 500's record run of 15 straight months of positive performance. The market rebounded in the second and third quarters, despite the continued uncertainty surrounding trade tariffs and a flattening yield curve, largely driven by fundamentals. Fundamentals continued to be supported by the strength of the U.S. economy (highlighted by 4.2% growth in the second quarter — the highest growth since Q3 2014, according to the Bureau of Economic Analysis). U.S. stocks declined sharply in the fourth quarter, as growth-oriented stocks in the Russell 3000® Growth Index returned -16.33%, the seventh largest quarterly decline since the 1979 inception of the index, ending the record run of twelve consecutive quarters of positive returns for the index.
Large-cap stocks outperformed mid- and small-cap stocks during the year, as measured by the Russell family of indices, a continued trend from 2017, while growth-oriented investments outperformed value as investors favored the strong fundamentals of growth stocks. Growth stocks as measured by the Russell 3000® Growth Index have now outperformed value stocks as measured by the Russell 3000® Value Index over 1, 3, 5, 10, and 15 years.
Performance Update
The Victory RS Growth Fund (the "Fund") seeks to provide long-term capital growth. The Fund (Class A Shares at net asset value) returned -6.81% for the twelve-month period ended December 31, 2018, underperforming the Russell 1000 Growth Index (the "Index"), which returned -1.51%.
Portfolio Review
Within the Communication Services sector, the largest driver of relative underperformance was Activision Blizzard, Inc., which publishes popular video games such as Call of Duty and Destiny across multiple media platforms. Our investment reflects the opportunity we see in the electronic gaming market, an area where consumers have shown a willingness to spend money on video games and digital entertainment. The underperformance in the most recent period was driven by weak revenue attributed to the poor debut of Destiny 2: Forsaken, which launched in early September, and declining revenue in their mobile business. Despite these challenges, the company experienced net income growth in the most recent quarter of 38% year-over-year, driven by record sales of World of Warcraft. As a result, we continued to
14
Victory RS Growth Funds (Unaudited)
Victory RS Growth Fund (continued)
hold the position at year-end, albeit at a smaller position size given our reduced growth expectations for the company.
Within the Health Care sector, global biotechnology holding Celgene Corporation was the top detractor from Fund performance. Celgene underperformed in 2018 as the company faced continued headwinds in their attempt to broaden the approved use of several existing drugs. Given that the company's path forward became less clear and concern over the company's balance sheet issues given increased levels of debt, we sold the position in the second quarter.
Another Health Care sector detractor was Holding Bluebird Bio, Inc. Bluebird is a biotechnology company that uses an HIV-1 virus, Lentivirus, as a means to modify genes and correct a patient's abnormal stem cells. Bluebird shared strong results in a number of trials, including their phase 1 therapy study of the treatment of late-stage relapsed multiple myeloma, which provided us with confidence that the company may only be at the early stage of their potential. Unfortunately, Bluebird's stock price was pulled lower along with the broader Health Care sector, yet we remain confident in the company's future.
Within the Consumer Staples sector, the largest contributor in 2018 was beverage holding Keurig Dr Pepper Inc. Keurig is a manufacturer and distributor of nonalcoholic beverages, including coffee, hot cocoa, teas, and other beverages in K-Cup, Vue, Rivo, K-Carafe, and K-Mug pods. We initially purchased Keurig given the strong growth potential of the Keurig coffee business, which we expected to grow up to 20% per year once issues holding back growth, including cost per pod, were addressed, while the combined Keurig and Dr Pepper company appeared to be a platform that could compete well in the traditional beverage industry. The stock performed well during the year on strong earnings growth that beat already strong guidance as the company continues to execute their business plan.
There were a number of positive performers within the Health Care sector, including biotechnology holding Illumina, Inc. Illumina is the leader in the Next-Generation Sequencing (NGS) market, providing gene sequencing and array-based solutions for genetic analyses. We own Illumina given their unquestioned leadership in the NGS market, as well as the opportunity to expand through new platforms to address an ever-changing landscape of customer needs and diagnostics as sequencing has made its way into clinical applications. The stock performed exceptionally well, as margins have expanded despite the high level of investment Illumina has placed in research and development.
Intuitive Surgical, a designer, manufacturer, and marketer of surgical systems, was another strong performer within the Health Care sector. We initially purchased Intuitive due to their leadership position in the robotic surgery market and their updated product cycle, which introduced a new system that offered improved logistics and performance for their customers, as well as the growth potential for the business to expand without limit to more procedures. The stock performed well in 2018 on strong fundamentals, highlighted by the recent posting of a 20% year-over-year increase in procedures using its robotic-surgery systems, which represents the best growth rate for their systems in more than three years.
Outlook
The abrupt market sell-off at the end the year and strong earnings generated by U.S. corporations have driven valuations to among the cheapest levels seen in decades, as
15
Victory RS Growth Funds (Unaudited)
Victory RS Growth Fund (continued)
reflected by forward price-to-earnings ratios. Given our optimistic outlook for U.S. economic growth and corporate earnings against the expected backdrop of positive employment trends and moderate inflation, stocks appear very attractive to us. We acknowledge the potential headwinds from a less accommodative Federal Reserve (Fed), political turmoil that recently led to a government shutdown, and the impact of retaliatory tariffs from China and our other trade partners, but we would note that the U.S. economy is still expected to grow at a high rate, while U.S. interest rates are likely to remain low relative to history even with additional Fed tightening. As a result, we believe the current environment remains supportive of large-cap growth stocks, though we remain committed to careful stock selection and disciplined risk management as we seek to identify well-managed, well-capitalized growth companies that in our view will be able to grow their revenues and tap new market opportunities regardless of the economic backdrop.
16
Victory RS Growth Funds (Unaudited)
Victory RS Growth Fund (continued)
Average Annual Return
Year Ended December 31, 2018
Class A | Class C | Class R | Class Y | ||||||||||||||||||||||||||||
INCEPTION DATE | 5/12/92 | 6/30/07 | 11/27/06 | 5/1/07 | |||||||||||||||||||||||||||
Net Asset Value | Maximum Offering Price | Net Asset Value | Maximum Offering Price | Net Asset Value | Net Asset Value | Russell 1000 Growth Index1 | |||||||||||||||||||||||||
One Year | –6.81 | % | –12.18 | % | –7.56 | % | –8.33 | % | –7.41 | % | –6.56 | % | –1.51 | % | |||||||||||||||||
Three Year | 7.74 | % | 5.63 | % | 6.84 | % | 6.84 | % | 7.08 | % | 8.02 | % | 11.15 | % | |||||||||||||||||
Five Year | 7.41 | % | 6.14 | % | 6.52 | % | 6.52 | % | 6.76 | % | 7.70 | % | 10.40 | % | |||||||||||||||||
Ten Year | 13.25 | % | 12.58 | % | 12.09 | % | 12.09 | % | 12.57 | % | 13.51 | % | 15.29 | % | |||||||||||||||||
Since Inception | 9.52 | % | 9.28 | % | 5.30 | % | 5.30 | % | 6.25 | % | 6.96 | % | N/A | ||||||||||||||||||
Expense Ratios | |||||||||||||||||||||||||||||||
Gross | 1.20% | 2.10% | 2.72% | 0.97% | |||||||||||||||||||||||||||
With Applicable Waivers | 1.10% | 1.93% | 1.71% | 0.83% |
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 May 1, 2018. Additional information pertaining to the Fund's expense ratios as of December 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. 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 RS Growth Fund — Growth of $10,000
1The Russell 1000 Growth Index is a market capitalization-weighted index, meaning that the largest companies constitute the largest percentages in the index and will affect performance more than the smallest index members. 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.
17
Victory RS Growth Funds (Unaudited)
Victory RS Science and Technology Fund
Portfolio Holdings
As a Percentage of Total Investments
Market Overview
U.S. equity markets delivered mixed performance throughout 2018, as the S&P 500® Index failed to deliver its tenth straight year of positive returns after a strong first nine months of the year. U.S. stocks underperformed despite continued resilience in the U.S. economy and record earnings, supported by a strong job market and the largest corporate tax reform in decades.
The year began on a positive note with strong performance in January before volatility emerged in February, dampening strong investor sentiment and ending the S&P 500's record run of 15 straight months of positive performance. The market rebounded in the second and third quarters, despite the continued uncertainty surrounding trade tariffs and a flattening yield curve, largely driven by fundamentals. Fundamentals continued to be supported by the strength of the U.S. economy (highlighted by 4.2% growth in the second quarter — the highest growth since Q3 2014, according to the Bureau of Economic Analysis). U.S. stocks declined sharply in the fourth quarter, as growth-oriented stocks in the Russell 3000® Growth Index returned -16.33%, the seventh largest quarterly decline since the 1979 inception of the index, ending the record run of twelve consecutive quarters of positive returns for the index.
Large-cap stocks outperformed mid- and small-cap stocks during the year, as measured by the Russell family of indices, a continued trend from 2017, while growth-oriented investments outperformed value as investors favored the strong fundamentals of growth stocks. Growth stocks as measured by the Russell 3000® Growth Index have now outperformed value stocks as measured by the Russell 3000® Value Index over 1, 3, 5, 10, and 15 years.
Fund Performance Overview
The Victory RS Science and Technology Fund (the "Fund") seeks to provide long-term capital growth. The Fund underperformed its primary benchmark, the S&P North American Technology Sector Index (the "Index"), in 2018. The Fund (Class A Shares at net asset value) returned -0.73% and the Index returned 2.88%.
Portfolio Review
The Fund's multi-cap approach to science- and technology-driven stocks led to relative underperformance during the year, as smaller-cap holdings underperformed their larger-cap counterparts and health care oriented companies underperformed more traditional technology oriented companies. This included biotechnology holding Vital Therapies, a company that was initially developing a cell-based treatment for acute liver failure, a condition that affects 30,000 patients in the United States. We initially purchased the stock given the potential treatment of patients with a wide range of advancement of liver disease, and the belief that Vital Therapies' treatment could provide a more cost-effective and safe
18
Victory RS Growth Funds (Unaudited)
Victory RS Science and Technology Fund (continued)
alternative to liver transplants. Unfortunately, in early September the company ran into its final roadblock, failing to meet primary or secondary endpoints in a trial to determine significant improvement in overall survival rates, leading the company to believe their ELAD system would not be approved in the United States and European Union.
Another Health Care detractor was holding Bluebird Bio, Inc. Bluebird is a biotechnology company that uses an HIV-1 virus, Lentivirus, as a means to modify genes and correct a patient's abnormal stem cells. Bluebird shared strong results in a number of trials, including their phase 1 therapy study of the treatment of late-stage relapsed multiple myeloma, which provided us with confidence that the company may only be at the early stage of their potential. Unfortunately, Bluebird's stock price was pulled lower along with the broader biotechnology sector despite our continued belief in the company's future.
LogMeIn, a provider of a portfolio of cloud-based communication and collaboration, identity and access, and customer engagement and support solutions, was a negative contributor to technology performance. In recent years LogMeIn grew their underlying business beyond the core collaboration product GoToMeeting. However, its stock has been punished in recent quarters given that GoToMeeting itself, which is now about 25% – 33% of LogMeIn's business, saw a decline in its renewal rate earlier this year following the encouragement for customers to pay one year in advance (vs. monthly). This decision allowed a competitor, Zoom, to aggressively target and attract these customers as they came up for annual renewal. The impact of the competition resulted in reduced guidance for their top-line revenue and EBITDA figures; thus, after owning the stock successfully for almost five years, we sold the position during the period.
Within the Information Technology sector, contributors included RingCentral, a provider of software-as-a-service solutions for businesses to support modern communications. RingCentral's outperformance was driven by strong execution, as the company reported revenue up 32% year-over-year with improved gross margins, leading to earnings that grew 46% year-over-year in the most recent quarter and easily beat expectations. Our outlook for the company remains strong, driven by their continued march upmarket to the larger enterprise market and by the company's attractive anticipated growth rate.
Information Technology holding SendGrid, a cloud-based platform that provides various tools to businesses (including developers and marketers) to reach their customers using email, was also a strong contributor to performance. SendGrid has been a holding since the company's IPO. SendGrid rallied sharply after it was announced in mid-October that the company would be acquired by Twilio in an all-stock deal. The stock initially rallied about 15% on the announcement, and we continued to hold the position given we already had a positive view of Twilio. This further benefitted performance as Twilio was a strong performer throughout the remainder of the quarter and the all-stock nature of the SendGrid acquisition.
Health Care holding Veeva Systems, a provider of enterprise applications, multichannel platform, customer relationships, and content management solutions, was a positive contributor in 2018. Veeva is positioned as the third most preferred Life Sciences software vendor (behind Oracle and SAP) and has material expansion opportunities with the goal to become the cloud platform for the life sciences industry. Veeva performed well throughout 2018, highlighted by earnings and sales growth that beat expectations in the most recent quarter, with earnings up more than 80% year-over-year.
19
Victory RS Growth Funds (Unaudited)
Victory RS Science and Technology Fund (continued)
Outlook
The abrupt market sell-off at the end the year and strong earnings generated by U.S. corporations have driven valuations to among the cheapest levels seen in decades, as reflected by forward price-to-earnings ratios. Given our optimistic outlook for U.S. economic growth and corporate earnings against the expected backdrop of positive employment trends and moderate inflation, stocks appear very attractive to us. We acknowledge the potential headwinds from a less accommodative Federal Reserve (Fed), political turmoil that recently led to a government shutdown, and the impact of retaliatory tariffs from China and our other trade partners, but we would note that the U.S. economy is still expected to grow at a high rate, while U.S. interest rates are likely to remain low relative to history even with additional Fed tightening. As a result, we believe the current environment remains supportive of large-cap growth stocks, though we remain committed to careful stock selection and disciplined risk management as we seek to identify well-managed, well-capitalized growth companies that in our view will be able to grow their revenues and tap new market opportunities regardless of the economic backdrop.
20
Victory RS Growth Funds (Unaudited)
Victory RS Science and Technology Fund (continued)
Average Annual Return
Year Ended December 31, 2018
Class A | Class C | Class R | Class Y | ||||||||||||||||||||||||||||||||
INCEPTION DATE | 11/15/95 | 5/2/07 | 1/19/07 | 5/1/07 | |||||||||||||||||||||||||||||||
Net Asset Value | Maximum Offering Price | Net Asset Value | Contingent Deferred Charges | Net Asset Value | Net Asset Value | S&P North American Technology Sector1 | S&P 500 Index2 | ||||||||||||||||||||||||||||
One Year | –0.73 | % | –6.45 | % | –1.58 | % | –2.39 | % | –1.20 | % | –0.51 | % | 2.88 | % | –4.38 | % | |||||||||||||||||||
Three Year | 17.81 | % | 15.50 | % | 16.87 | % | 16.87 | % | 17.30 | % | 18.09 | % | 17.20 | % | 9.26 | % | |||||||||||||||||||
Five Year | 12.75 | % | 11.43 | % | 11.85 | % | 11.85 | % | 12.24 | % | 13.04 | % | 15.32 | % | 8.49 | % | |||||||||||||||||||
Ten Year | 19.70 | % | 18.99 | % | 18.66 | % | 18.66 | % | 19.07 | % | 20.04 | % | 19.14 | % | 13.12 | % | |||||||||||||||||||
Since Inception | 10.28 | % | 10.00 | % | 10.10 | % | 10.10 | % | 10.94 | % | 11.46 | % | N/A | N/A | |||||||||||||||||||||
Expense Ratios | |||||||||||||||||||||||||||||||||||
Gross | 1.49% | 2.31% | 2.54% | 1.26% | |||||||||||||||||||||||||||||||
With Applicable Waivers | 1.49% | 2.28% | 1.93% | 1.24% |
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 May 1, 2018. Additional information pertaining to the Fund's expense ratios as of December 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. 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 RS Science and Technology Fund — Growth of $10,000
1The S&P North American Technology Sector Index is a modified capitalization-weighted index based on a universe of technology-related stocks. Since inception return for the S&P North American Technology Sector Index reflects, for periods after August 29, 1996, the reinvestment of dividends paid on the securities constituting the index; for periods through August 29, 1996, index return does not reflect the reinvestment of dividends. It is not possible to invest directly in an index.
2The 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.
21
Victory RS Growth Funds (Unaudited)
Victory RS Small Cap Equity Fund
Portfolio Holdings
As a Percentage of Total Investments
Market Overview
U.S. equity markets delivered mixed performance throughout 2018, as the S&P 500® Index failed to deliver its tenth straight year of positive returns after a strong first nine months of the year. U.S. stocks underperformed despite continued resilience in the U.S. economy and record earnings, supported by a strong job market and the largest corporate tax reform in decades.
The year began on a positive note with strong performance in January before volatility emerged in February, dampening strong investor sentiment and ending the S&P 500's record run of 15 straight months of positive performance. The market rebounded in the second and third quarters, despite the continued uncertainty surrounding trade tariffs and a flattening yield curve, largely driven by fundamentals. Fundamentals continued to be supported by the strength of the U.S. economy (highlighted by 4.2% growth in the second quarter — the highest growth since Q3 2014, according to the Bureau of Economic Analysis). U.S. stocks declined sharply in the fourth quarter, as growth-oriented stocks in the Russell 3000® Growth Index returned -16.33%, the seventh largest quarterly decline since the 1979 inception of the index, ending the record run of twelve consecutive quarters of positive returns for the index.
Large-cap stocks outperformed mid- and small-cap stocks during the year, as measured by the Russell family of indices, a continued trend from 2017, while growth-oriented investments outperformed value as investors favored the strong fundamentals of growth stocks. Growth stocks as measured by the Russell 3000® Growth Index have now outperformed value stocks as measured by the Russell 3000® Value Index over 1, 3, 5, 10, and 15 years.
Performance Update
The Victory RS Small Cap Equity Fund (the "Fund") seeks to provide long-term capital growth. The Fund underperformed its primary benchmark, the Russell 2000 Growth Index (the "Index"), in 2018. The Fund (Class A Shares at net asset value) returned -8.39% and the Index returned -9.31%.
Portfolio Review
Within the Information Technology sector, contributors included RingCentral, a provider of software-as-a-service solutions for businesses to support modern communications. RingCentral's outperformance was driven by strong execution, as the company reported revenue up 32% year-over-year with improved gross margins, leading to earnings that grew 46% year-over-year in the most recent quarter and easily beat expectations. Our outlook for the company remains strong, driven by their continued march upmarket to the larger enterprise market and by the company's attractive anticipated growth rate.
22
Victory RS Growth Funds (Unaudited)
Victory RS Small Cap Equity Fund (continued)
Information Technology holding SendGrid, a cloud-based platform that provides various tools to businesses (including developers and marketers) to reach their customers using email, was also a strong contributor to performance. SendGrid has been a holding since the company's IPO, at which time RS Investments was a top three owner of the company. SendGrid rallied sharply after it was announced in mid-October that the company would be acquired by Twilio in an all-stock deal. The stock initially rallied approximately 15% on the announcement and we continued to hold the position given we already had a positive view of Twilio, owning it in our mid-cap growth strategy. This further benefitted performance as Twilio was a strong performer throughout the remainder of the quarter given the all-stock nature of the SendGrid acquisition.
Stock selection within the Financials sector was also additive to performance, due in large part to an investment in Euronet Worldwide, a payment and transaction processing company that provides distribution solutions to financial institutions, retailers, service providers, and individual consumers worldwide. Euronet owns and operates the largest ATM network in Europe and has a large presence in Asia, operating almost 20,000 ATMs in total. The stock performed well in 2018, driven by a 29% increase in operating income as the company continued to execute.
Within the Health Care sector, the largest detractor was biotechnology holding Vital Therapies, a biotechnology company that was initially developing a cell-based treatment for acute liver failure, a condition that affects 30,000 patients in the United States. We initially purchased the stock given the potential treatment of patients with a wide range of progressive liver disease, providing a more cost-effective and safer alternative to liver transplants. Unfortunately, in early September the company ran into its final roadblock — failing to meet primary or secondary endpoints in a trial to determine significant improvement in overall survival rates, leading the company to believe their ELAD system would not be approved in the United States and European Union.
Industrials also proved to be a challenging sector in 2018, driven by underperforming holdings H&E Equipment Services, Inc. and Altra Industrial Motion Corp. H&E operates as an integrated equipment services company and rents, sells, and provides parts and support services for hi-lift or aerial work platform equipment, cranes, and earth moving equipment. Altra designs, produces, and markets mechanical power transmission components worldwide. Both companies were under significant pressure in the most recent quarter over concerns of a renewed industrial recession. H&E's underperformance was driven by concerns that earnings represented a cyclical peak and was further impacted by the replacement of the company's CEO. We sold the position given the increased uncertainty and a lack of a clear path forward for the company. Altra, on the other hand, showed signs of life despite the underperformance, beating earnings expectations with non-GAAP income growth of more than 30% year-over-year. Given the company's attractive valuation and acquisition of Fortive's Automation and Specialty business, which we feel will be transformative, we continued to hold the position.
Outlook
The abrupt market sell-off at the end the year and strong earnings generated by U.S. corporations have driven valuations to among the cheapest levels seen in decades, as
23
Victory RS Growth Funds (Unaudited)
Victory RS Small Cap Equity Fund (continued)
reflected by forward price-to-earnings ratios. Given our optimistic outlook for U.S. economic growth and corporate earnings against the expected backdrop of positive employment trends and moderate inflation, stocks appear very attractive to us. We acknowledge the potential headwinds from a less accommodative Federal Reserve (Fed), political turmoil that recently led to a government shutdown, and the impact of retaliatory tariffs from China and our other trade partners, but we would note that the U.S. economy is still expected to grow at a high rate, while U.S. interest rates are likely to remain low relative to history even with additional Fed tightening. As a result, we believe the current environment remains supportive of small-cap growth stocks, though we remain committed to careful stock selection and disciplined risk management as we seek to identify well-managed, well-capitalized small-cap growth companies that in our view will be able to grow their revenues and tap new market opportunities regardless of the economic backdrop.
24
Victory RS Growth Funds (Unaudited)
Victory RS Small Cap Equity Fund (continued)
Average Annual Return
Year Ended December 31, 2018
Class A | Class C | Class R | Class Y | ||||||||||||||||||||||||||||
INCEPTION DATE | 5/1/97 | 8/7/00 | 5/15/01 | 5/1/07 | |||||||||||||||||||||||||||
Net Asset Value | Maximum Offering Price | Net Asset Value | Contingent Deferred Charges | Net Asset Value | Net Asset Value | Russell 2000 Growth Index1 | |||||||||||||||||||||||||
One Year | –8.39 | % | –13.65 | % | –9.23 | % | –9.69 | % | –8.92 | % | –8.23 | % | –9.31 | % | |||||||||||||||||
Three Year | 8.45 | % | 6.32 | % | 7.50 | % | 7.50 | % | 7.94 | % | 8.71 | % | 7.24 | % | |||||||||||||||||
Five Year | 7.13 | % | 5.87 | % | 6.22 | % | 6.22 | % | 6.66 | % | 7.27 | % | 5.13 | % | |||||||||||||||||
Ten Year | 15.25 | % | 14.57 | % | 14.25 | % | 14.25 | % | 14.82 | % | 15.43 | % | 13.52 | % | |||||||||||||||||
Since Inception | 9.48 | % | 9.18 | % | 6.22 | % | 6.22 | % | 8.44 | % | 8.58 | % | N/A | ||||||||||||||||||
Expense Ratios | |||||||||||||||||||||||||||||||
Gross | 1.25% | 3.87% | 1.97% | 1.34% | |||||||||||||||||||||||||||
With Applicable Waivers | 1.25% | 2.10% | 1.75% | 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 May 1, 2018. Additional information pertaining to the Fund's expense ratios as of December 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. 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 RS Small Cap Equity Fund — Growth of $10,000
1The Russell 2000® Growth Index is an unmanaged market-capitalization-weighted index that measures the performance of those companies in the Russell 2000® Index with higher price-to-book ratios and higher forecasted growth values. (The Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000® Index, which consists of the 3,000 largest U.S. companies based on total market capitalization.) Index results assume the reinvestment of dividends paid on the stocks constituting the index. You may not invest in the index, and, unlike the Fund, the index does not incur fees and expenses. 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.
25
Victory Portfolios Victory RS Small Cap Growth Fund | Schedule of Portfolio Investments December 31, 2018 |
Security Description | Shares | Value | |||||||||
Common Stocks (99.0%) | |||||||||||
Consumer Discretionary (15.9%): | |||||||||||
Arco Platform Ltd., ADR, Class A (a) | 469,720 | $ | 10,390,206 | ||||||||
At Home Group, Inc. (a) (b) | 653,280 | 12,190,205 | |||||||||
Dave & Buster's Entertainment, Inc. (b) | 488,800 | 21,780,928 | |||||||||
Dineequity, Inc. (b) | 393,860 | 26,522,532 | |||||||||
Eldorado Resorts, Inc. (a) (b) | 643,880 | 23,314,895 | |||||||||
Grand Canyon Education, Inc. (a) | 107,034 | 10,290,249 | |||||||||
Monro Muffler Brake, Inc. (b) | 326,190 | 22,425,562 | |||||||||
National Vision Holdings, Inc. (a) | 559,050 | 15,748,439 | |||||||||
Ollie's Bargain Outlet Holdings, Inc. (a) | 256,626 | 17,068,195 | |||||||||
Planet Fitness, Inc., Class A (a) | 579,830 | 31,090,485 | |||||||||
Red Rock Resorts, Inc., Class A (b) | 605,220 | 12,292,018 | |||||||||
Steven Madden Ltd. | 669,307 | 20,253,230 | |||||||||
Strategic Education, Inc. | 96,740 | 10,972,250 | |||||||||
Weight Watchers International, Inc. (a) | 241,650 | 9,315,608 | |||||||||
Wingstop, Inc. (b) | 170,460 | 10,941,827 | |||||||||
254,596,629 | |||||||||||
Consumer Staples (4.3%): | |||||||||||
Freshpet, Inc. (a) | 536,300 | 17,247,408 | |||||||||
Nomad Foods Ltd., ADR (a) | 1,792,100 | 29,963,912 | |||||||||
Sprouts Farmers Markets, Inc. (a) (b) | 881,570 | 20,725,711 | |||||||||
67,937,031 | |||||||||||
Electronic Equipment, Instruments & Components (1.7%): | |||||||||||
II-VI, Inc. (a) (b) | 261,780 | 8,497,379 | |||||||||
Littelfuse, Inc. (b) | 107,936 | 18,508,865 | |||||||||
27,006,244 | |||||||||||
Energy (2.1%): | |||||||||||
Matador Resources Co. (a) (b) | 337,110 | 5,235,318 | |||||||||
Newpark Resources, Inc. (a) (b) | 3,637,840 | 24,991,961 | |||||||||
SRC Energy, Inc. (a) | 717,260 | 3,371,122 | |||||||||
33,598,401 | |||||||||||
Financials (7.3%): | |||||||||||
eHealth, Inc. (a) | 466,340 | 17,916,783 | |||||||||
Firstcash, Inc. | 274,830 | 19,883,951 | |||||||||
Green Dot Corp. (a) | 328,380 | 26,112,777 | |||||||||
Kemper Corp. | 332,810 | 22,091,927 | |||||||||
LendingTree, Inc. (a) (b) | 58,570 | 12,860,215 | |||||||||
Primerica, Inc. | 100,039 | 9,774,811 | |||||||||
Webster Financial Corp. | 167,430 | 8,252,625 | |||||||||
116,893,089 | |||||||||||
Health Care (23.3%): | |||||||||||
Aimmune Therapeutics, Inc. (a) (b) | 493,250 | 11,798,540 | |||||||||
Amicus Therapeutics, Inc. (a) (b) | 1,542,835 | 14,780,359 | |||||||||
Apellis Pharmaceuticals, Inc. (a) | 677,460 | 8,935,697 | |||||||||
Aptinyx, Inc. (a) | 340,100 | 5,625,254 |
See notes to financial statements.
26
Victory Portfolios Victory RS Small Cap Growth Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Shares | Value | |||||||||
Assembly Biosciences, Inc. (a) | 248,869 | $ | 5,629,417 | ||||||||
Audentes Therapeutics, Inc. (a) | 443,187 | 9,448,747 | |||||||||
Bluebird Bio, Inc. (a) (b) | 146,519 | 14,534,685 | |||||||||
Blueprint Medicines Corp. (a) | 251,348 | 13,550,171 | |||||||||
Celyad SA, ADR (a) (b) | 335,111 | 6,085,616 | |||||||||
Cytomx Therapeutics, Inc. (a) | 480,510 | 7,255,701 | |||||||||
Equillium, Inc. (a) | 627,880 | 5,123,501 | |||||||||
Exact Sciences Corp. (a) | 219,270 | 13,835,937 | |||||||||
Fate Therapeutics, Inc. (a) | 553,020 | 7,095,247 | |||||||||
Glaukos Corp. (a) (b) | 227,770 | 12,793,841 | |||||||||
Globus Medical, Inc., Class A (a) | 490,060 | 21,209,797 | |||||||||
GW Pharmaceuticals PLC, ADR (a) (b) | 115,047 | 11,204,427 | |||||||||
Hanger, Inc. (a) | 578,600 | 10,964,470 | |||||||||
HealthEquity, Inc. (a) (b) | 242,850 | 14,486,003 | |||||||||
Immunomedics, Inc. (a) (b) | 969,570 | 13,835,764 | |||||||||
Insulet Corp. (a) (b) | 218,800 | 17,355,216 | |||||||||
Iovance Biotherapeutics, Inc. (a) (b) | 1,506,775 | 13,334,959 | |||||||||
Irhythm Technologies, Inc. (a) | 152,400 | 10,588,752 | |||||||||
Kura Oncology, Inc. (a) | 825,700 | 11,592,828 | |||||||||
Ligand Pharmaceuticals, Inc., Class B (a) (b) | 128,305 | 17,410,989 | |||||||||
Loxo Oncology, Inc. (a) | 139,783 | 19,579,404 | |||||||||
Masimo Corp. (a) | 293,480 | 31,510,947 | |||||||||
Penumbra, Inc. (a) (b) | 103,900 | 12,696,580 | |||||||||
Sage Therapeutics, Inc. (a) | 112,880 | 10,812,775 | |||||||||
Teladoc, Inc. (a) (b) | 374,917 | 18,584,636 | |||||||||
371,660,260 | |||||||||||
Industrials (13.0%): | |||||||||||
Advanced Disposal Services, Inc. (a) | 755,690 | 18,091,219 | |||||||||
Altra Industrial Motion Corp. | 645,810 | 16,242,122 | |||||||||
Axon Enterprise, Inc. (a) (b) | 478,340 | 20,927,375 | |||||||||
Azul SA, ADR (a) | 890,280 | 24,651,854 | |||||||||
Harsco Corp. (a) | 1,222,340 | 24,275,672 | |||||||||
Kennametal, Inc. | 856,340 | 28,498,995 | |||||||||
Proto Labs, Inc. (a) | 150,540 | 16,979,407 | |||||||||
Saia, Inc. (a) | 194,020 | 10,830,196 | |||||||||
Simpson Manufacturing Co., Inc. | 449,540 | 24,333,600 | |||||||||
Siteone Landscape Supply, Inc. (a) (b) | 395,590 | 21,864,259 | |||||||||
206,694,699 | |||||||||||
IT Services (8.9%): | |||||||||||
Euronet Worldwide, Inc. (a) (b) | 403,666 | 41,327,326 | |||||||||
Evo Payments, Inc. (a) (b) | 440,890 | 10,876,756 | |||||||||
InterXion Holding NV, ADR (a) | 515,113 | 27,898,520 | |||||||||
WEX, Inc. (a) | 59,670 | 8,357,380 | |||||||||
Wix.com Ltd., ADR (a) | 364,510 | 32,929,833 | |||||||||
WNS Holdings Ltd., ADR (a) | 506,887 | 20,914,158 | |||||||||
142,303,973 | |||||||||||
Materials (4.2%): | |||||||||||
Allegheny Technologies, Inc. (a) (b) | 1,125,430 | 24,500,611 | |||||||||
Ashland Global Holdings, Inc. | 343,540 | 24,377,599 |
See notes to financial statements.
27
Victory Portfolios Victory RS Small Cap Growth Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Shares | Value | |||||||||
Ferro Corp. (a) | 1,197,808 | $ | 18,781,629 | ||||||||
67,659,839 | |||||||||||
Semiconductors & Semiconductor Equipment (4.0%): | |||||||||||
Cypress Semiconductor Corp. (b) | 566,260 | 7,202,827 | |||||||||
MKS Instruments, Inc. | 208,560 | 13,475,062 | |||||||||
Monolithic Power Systems, Inc. | 110,041 | 12,792,266 | |||||||||
Silicon Laboratories, Inc. (a) | 167,830 | 13,226,682 | |||||||||
Versum Materials, Inc. | 629,569 | 17,451,653 | |||||||||
64,148,490 | |||||||||||
Software (13.5%): | |||||||||||
Cornerstone OnDemand, Inc. (a) | 694,238 | 35,010,422 | |||||||||
Coupa Software, Inc. (a) | 360,800 | 22,679,888 | |||||||||
Envestnet, Inc. (a) (b) | 400,676 | 19,709,252 | |||||||||
Mindbody, Inc. (a) (b) | 885,740 | 32,240,936 | |||||||||
Q2 Holdings, Inc. (a) | 440,450 | 21,824,298 | |||||||||
RingCentral, Inc., Class A (a) | 575,478 | 47,442,406 | |||||||||
SendGrid, Inc. (a) | 900,220 | 38,862,497 | |||||||||
217,769,699 | |||||||||||
Technology Hardware, Storage & Peripherals (0.8%): | |||||||||||
Pure Storage, Inc. (a) | 834,940 | 13,425,835 | |||||||||
Total Common Stocks (Cost $1,458,198,809) | 1,583,694,189 | ||||||||||
Collateral for Securities Loaned^ (11.2%) | |||||||||||
BlackRock Liquidity Funds TempFund Portfolio, Institutional Class, 2.49% (c) | 34,178,282 | 34,178,282 | |||||||||
Fidelity Investments Money Market Government Portfolio, Class I, 2.28% (c) | 49,385,975 | 49,385,975 | |||||||||
Fidelity Investments Prime Money Market Portfolio, Class I, 2.46% (c) | 1,525,050 | 1,525,050 | |||||||||
Goldman Sachs Financial Square Prime Obligations Fund, Institutional Class, 2.55% (c) | 18,988,145 | 18,988,145 | |||||||||
JPMorgan Prime Money Market Fund, Capital Class, 2.49% (c) | 30,379,134 | 30,379,134 | |||||||||
Morgan Stanley Institutional Liquidity Prime Portfolio, Institutional Class, 2.58% (c) | 45,571,548 | 45,571,548 | |||||||||
Total Collateral for Securities Loaned (Cost $180,028,134) | 180,028,134 | ||||||||||
Total Investments (Cost $1,638,226,943) — 110.2% | 1,763,722,323 | ||||||||||
Liabilities in excess of other assets — (10.2)% | (163,085,278 | ) | |||||||||
NET ASSETS — 100.00% | $ | 1,600,637,045 |
^ 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 December 31, 2018.
ADR — American Depositary Receipt
PLC — Public Limited Company
See notes to financial statements.
28
Victory Portfolios Victory RS Select Growth Fund | Schedule of Portfolio Investments December 31, 2018 |
Security Description | Shares | Value | |||||||||
Common Stocks (101.9%) | |||||||||||
Communication Services (7.2%): | |||||||||||
Boingo Wireless, Inc. (a) (b) | 247,380 | $ | 5,088,607 | ||||||||
InterActive Corp. (a) | 32,090 | 5,873,754 | |||||||||
Take-Two Interactive Software, Inc. (a) | 41,900 | 4,313,186 | |||||||||
Yelp, Inc. (a) | 71,190 | 2,490,938 | |||||||||
17,766,485 | |||||||||||
Communications Equipment (2.7%): | |||||||||||
Ciena Corp. (a) | 60,940 | 2,066,475 | |||||||||
Viavi Solutions, Inc. (a) | 467,020 | 4,693,551 | |||||||||
6,760,026 | |||||||||||
Consumer Discretionary (13.2%): | |||||||||||
At Home Group, Inc. (a) (b) | 117,700 | 2,196,282 | |||||||||
Bright Horizons Family Solutions, Inc. (a) | 42,130 | 4,695,388 | |||||||||
Brunswick Corp. | 71,520 | 3,322,104 | |||||||||
Domino's Pizza, Inc. | 15,880 | 3,938,081 | |||||||||
Hasbro, Inc. (b) | 34,020 | 2,764,125 | |||||||||
Hilton Grand Vacations, Inc. (a) | 103,580 | 2,733,476 | |||||||||
Strategic Education, Inc. | 39,990 | 4,535,666 | |||||||||
Vail Resorts, Inc. | 29,100 | 6,134,863 | |||||||||
Wingstop, Inc. (b) | 36,160 | 2,321,110 | |||||||||
32,641,095 | |||||||||||
Consumer Staples (4.0%): | |||||||||||
Sprouts Farmers Markets, Inc. (a) | 177,560 | 4,174,436 | |||||||||
The Simply Good Foods Co. (a) | 301,170 | 5,692,113 | |||||||||
9,866,549 | |||||||||||
Electronic Equipment, Instruments & Components (3.5%): | |||||||||||
II-VI, Inc. (a) | 94,360 | 3,062,926 | |||||||||
Littelfuse, Inc. | 22,371 | 3,836,179 | |||||||||
Trimble Navigation Ltd. (a) | 52,290 | 1,720,864 | |||||||||
8,619,969 | |||||||||||
Energy (1.2%): | |||||||||||
Diamondback Energy, Inc. | 32,326 | 2,996,620 | |||||||||
Financials (5.2%): | |||||||||||
Firstcash, Inc. | 52,480 | 3,796,928 | |||||||||
Green Dot Corp. (a) | 78,540 | 6,245,501 | |||||||||
LendingTree, Inc. (a) (b) | 12,310 | 2,702,907 | |||||||||
12,745,336 | |||||||||||
Health Care (19.1%): | |||||||||||
Dexcom, Inc. (a) | 41,310 | 4,948,938 | |||||||||
Globus Medical, Inc., Class A (a) | 71,280 | 3,084,998 | |||||||||
HealthEquity, Inc. (a) | 58,550 | 3,492,508 | |||||||||
Ligand Pharmaceuticals, Inc., Class B (a) (b) | 52,890 | 7,177,173 | |||||||||
Masimo Corp. (a) | 47,520 | 5,102,222 | |||||||||
Neurocrine Biosciences, Inc. (a) | 66,140 | 4,723,057 |
See notes to financial statements.
29
Victory Portfolios Victory RS Select Growth Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Shares | Value | |||||||||
Teladoc, Inc. (a) (b) | 55,970 | $ | 2,774,433 | ||||||||
The Cooper Co., Inc. | 22,410 | 5,703,345 | |||||||||
Veeva Systems, Inc. (a) | 56,640 | 5,059,085 | |||||||||
West Pharmaceutical Services, Inc. | 53,206 | 5,215,784 | |||||||||
47,281,543 | |||||||||||
Industrials (18.8%): | |||||||||||
Azul SA, ADR (a) | 185,730 | 5,142,864 | |||||||||
Clean Harbors, Inc. (a) | 77,530 | 3,826,106 | |||||||||
Forward Air Corp. | 47,130 | 2,585,081 | |||||||||
HEICO Corp., Class A | 68,883 | 4,339,629 | |||||||||
Hexcel Corp. | 75,622 | 4,336,165 | |||||||||
KAR Auction Services, Inc. | 85,640 | 4,086,740 | |||||||||
Kennametal, Inc. (b) | 147,720 | 4,916,122 | |||||||||
Siteone Landscape Supply, Inc. (a) (b) | 71,390 | 3,945,725 | |||||||||
Teledyne Technologies, Inc. (a) | 22,230 | 4,603,167 | |||||||||
TransUnion | 87,660 | 4,979,088 | |||||||||
Trex Co., Inc. (a) | 64,260 | 3,814,474 | |||||||||
46,575,161 | |||||||||||
IT Services (12.4%): | |||||||||||
Black Knight, Inc. (a) | 149,439 | 6,733,721 | |||||||||
Euronet Worldwide, Inc. (a) | 91,262 | 9,343,403 | |||||||||
GoDaddy, Inc., Class A (a) | 83,757 | 5,496,134 | |||||||||
InterXion Holding NV, ADR (a) | 85,140 | 4,611,182 | |||||||||
WEX, Inc. (a) | 34,070 | 4,771,844 | |||||||||
30,956,284 | |||||||||||
Materials (2.0%): | |||||||||||
Ashland Global Holdings, Inc. | 68,910 | 4,889,854 | |||||||||
Semiconductors & Semiconductor Equipment (4.7%): | |||||||||||
Cypress Semiconductor Corp. (b) | 255,460 | 3,249,451 | |||||||||
MKS Instruments, Inc. | 34,480 | 2,227,753 | |||||||||
Monolithic Power Systems, Inc. | 33,045 | 3,841,481 | |||||||||
Versum Materials, Inc. | 88,350 | 2,449,062 | |||||||||
11,767,747 | |||||||||||
Software (7.9%): | |||||||||||
Fair Isaac Corp. (a) | 16,760 | 3,134,120 | |||||||||
Paycom Software, Inc. (a) (b) | 25,175 | 3,082,679 | |||||||||
RingCentral, Inc., Class A (a) | 84,200 | 6,941,447 | |||||||||
The Ultimate Software Group, Inc. (a) | 25,724 | 6,299,036 | |||||||||
19,457,282 | |||||||||||
Total Common Stocks (Cost $212,427,377) | 252,323,951 |
See notes to financial statements.
30
Victory Portfolios Victory RS Select Growth Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Shares | Value | |||||||||
Collateral for Securities Loaned^ (7.6%) | |||||||||||
BlackRock Liquidity Funds TempFund Portfolio, Institutional Class, 2.49% (c) | 3,592,452 | $ | 3,592,452 | ||||||||
Fidelity Investments Money Market Government Portfolio, Class I, 2.28% (c) | 5,190,921 | 5,190,921 | |||||||||
Fidelity Investments Prime Money Market Portfolio, Class I, 2.46% (c) | 160,297 | 160,297 | |||||||||
Goldman Sachs Financial Square Prime Obligations Fund, Institutional Class, 2.55% (c) | 1,995,829 | 1,995,829 | |||||||||
JPMorgan Prime Money Market Fund, Capital Class, 2.49% (c) | 3,193,127 | 3,193,127 | |||||||||
Morgan Stanley Institutional Liquidity Prime Portfolio, Institutional Class, 2.58% (c) | 4,789,988 | 4,789,988 | |||||||||
Total Collateral for Securities Loaned (Cost $18,922,614) | 18,922,614 | ||||||||||
Total Investments (Cost $231,349,991) — 109.5% | 271,246,565 | ||||||||||
Liabilities in excess of other assets — (9.5)% | (23,463,445 | ) | |||||||||
NET ASSETS — 100.00% | $ | 247,783,120 |
^ 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 December 31, 2018.
ADR — American Depositary Receipt
See notes to financial statements.
31
Victory Portfolios Victory RS Mid Cap Growth Fund | Schedule of Portfolio Investments December 31, 2018 |
Security Description | Shares | Value | |||||||||
Common Stocks (99.5%) | |||||||||||
Communication Services (5.5%): | |||||||||||
Activision Blizzard, Inc. | 49,850 | $ | 2,321,515 | ||||||||
InterActive Corp. (a) | 44,410 | 8,128,806 | |||||||||
Take-Two Interactive Software, Inc. (a) | 49,520 | 5,097,588 | |||||||||
Yelp, Inc. (a) | 88,010 | 3,079,470 | |||||||||
18,627,379 | |||||||||||
Consumer Discretionary (15.9%): | |||||||||||
Brunswick Corp. | 61,500 | 2,856,675 | |||||||||
Burlington Stores, Inc. (a) | 33,620 | 5,468,965 | |||||||||
Chipotle Mexican Grill, Inc. (a) | 15,300 | 6,606,387 | |||||||||
Ferrari NV, ADR | 41,750 | 4,151,620 | |||||||||
Hasbro, Inc. (b) | 44,030 | 3,577,438 | |||||||||
Hilton Worldwide Holdings, Inc. | 86,090 | 6,181,262 | |||||||||
O'Reilly Automotive, Inc. (a) | 20,150 | 6,938,250 | |||||||||
Tiffany & Co. | 42,780 | 3,444,218 | |||||||||
Ulta Salon, Cosmetics & Fragrance, Inc. (a) | 17,130 | 4,194,109 | |||||||||
Under Armour, Inc., Class C (a) | 249,620 | 4,036,355 | |||||||||
Vail Resorts, Inc. | 32,400 | 6,830,568 | |||||||||
54,285,847 | |||||||||||
Consumer Staples (4.0%): | |||||||||||
Keurig Dr Pepper, Inc. | 227,690 | 5,837,972 | |||||||||
Post Holdings, Inc. (a) | 86,460 | 7,706,180 | |||||||||
13,544,152 | |||||||||||
Electronic Equipment, Instruments & Components (0.9%): | |||||||||||
Trimble Navigation Ltd. (a) | 96,730 | 3,183,384 | |||||||||
Energy (1.5%): | |||||||||||
Concho Resources, Inc. (a) | 20,055 | 2,061,453 | |||||||||
Diamondback Energy, Inc. | 34,380 | 3,187,026 | |||||||||
5,248,479 | |||||||||||
Financials (3.8%): | |||||||||||
Kemper Corp. | 81,630 | 5,418,599 | |||||||||
SVB Financial Group (a) | 13,090 | 2,486,053 | |||||||||
The Progressive Corp. | 85,150 | 5,137,100 | |||||||||
13,041,752 | |||||||||||
Health Care (15.3%): | |||||||||||
Align Technology, Inc. (a) | 15,920 | 3,334,126 | |||||||||
BeiGene Ltd., ADR (a) (b) | 25,510 | 3,578,033 | |||||||||
Bluebird Bio, Inc. (a) (b) | 29,880 | 2,964,096 | |||||||||
Dexcom, Inc. (a) | 41,350 | 4,953,730 | |||||||||
Edwards Lifesciences Corp. (a) | 29,680 | 4,546,086 | |||||||||
Exact Sciences Corp. (a) | 59,590 | 3,760,128 | |||||||||
Illumina, Inc. (a) | 18,670 | 5,599,693 | |||||||||
Intuitive Surgical, Inc. (a) | 9,480 | 4,540,162 | |||||||||
Neurocrine Biosciences, Inc. (a) | 34,170 | 2,440,080 | |||||||||
Sage Therapeutics, Inc. (a) | 30,050 | 2,878,490 |
See notes to financial statements.
32
Victory Portfolios Victory RS Mid Cap Growth Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Shares | Value | |||||||||
The Cooper Co., Inc. | 28,180 | $ | 7,171,809 | ||||||||
WellCare Health Plans, Inc. (a) | 28,920 | 6,827,723 | |||||||||
52,594,156 | |||||||||||
Industrials (14.7%): | |||||||||||
Clean Harbors, Inc. (a) | 105,570 | 5,209,880 | |||||||||
HEICO Corp., Class A | 55,430 | 3,492,090 | |||||||||
Hexcel Corp. | 100,900 | 5,785,606 | |||||||||
KAR Auction Services, Inc. | 110,110 | 5,254,449 | |||||||||
Parker-Hannifin Corp. | 34,430 | 5,134,890 | |||||||||
Rockwell Automation, Inc. | 26,560 | 3,996,749 | |||||||||
Roper Technologies, Inc. | 15,870 | 4,229,672 | |||||||||
Teledyne Technologies, Inc. (a) | 29,600 | 6,129,272 | |||||||||
TransUnion | 116,680 | 6,627,424 | |||||||||
Verisk Analytics, Inc., Class A (a) | 38,620 | 4,211,125 | |||||||||
50,071,157 | |||||||||||
IT Services (18.1%): | |||||||||||
Black Knight, Inc. (a) | 196,524 | 8,855,371 | |||||||||
Euronet Worldwide, Inc. (a) | 120,451 | 12,331,774 | |||||||||
Global Payments, Inc. | 39,060 | 4,028,258 | |||||||||
GoDaddy, Inc., Class A (a) | 69,700 | 4,573,714 | |||||||||
Okta, Inc. (a) | 49,490 | 3,157,462 | |||||||||
Total System Services, Inc. | 81,220 | 6,602,374 | |||||||||
Twilio, Inc. (a) (b) | 80,320 | 7,172,576 | |||||||||
WEX, Inc. (a) | 38,520 | 5,395,111 | |||||||||
Wix.com Ltd., ADR (a) | 69,330 | 6,263,272 | |||||||||
Worldpay, Inc. (a) | 44,070 | 3,368,270 | |||||||||
61,748,182 | |||||||||||
Materials (2.7%): | |||||||||||
Allegheny Technologies, Inc. (a) (b) | 206,510 | 4,495,723 | |||||||||
Celanese Corp., Series A | 53,400 | 4,804,398 | |||||||||
9,300,121 | |||||||||||
Semiconductors & Semiconductor Equipment (6.3%): | |||||||||||
Lam Research Corp. | 30,020 | 4,087,823 | |||||||||
Marvell Technology Group Ltd., ADR | 459,590 | 7,440,762 | |||||||||
Maxim Integrated Products, Inc. | 66,200 | 3,366,270 | |||||||||
Microchip Technology, Inc. | 37,460 | 2,694,123 | |||||||||
Xilinx, Inc. | 47,140 | 4,014,914 | |||||||||
21,603,892 | |||||||||||
Software (10.8%): | |||||||||||
Dropbox, Inc. (a) | 281,960 | 5,760,443 | |||||||||
Nutanix, Inc., Class A (a) | 92,040 | 3,827,944 | |||||||||
Proofpoint, Inc. (a) | 50,750 | 4,253,358 | |||||||||
ServiceNow, Inc. (a) | 55,750 | 9,926,287 | |||||||||
The Ultimate Software Group, Inc. (a) | 25,140 | 6,156,032 | |||||||||
Zendesk, Inc. (a) | 117,470 | 6,856,723 | |||||||||
36,780,787 | |||||||||||
Total Common Stocks (Cost $338,704,119) | 340,029,288 |
See notes to financial statements.
33
Victory Portfolios Victory RS Mid Cap Growth Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Shares | Value | |||||||||
Collateral for Securities Loaned^ (3.3%) | |||||||||||
BlackRock Liquidity Funds TempFund Portfolio, Institutional Class, 2.49% (c) | 2,107,654 | $ | 2,107,654 | ||||||||
Fidelity Investments Money Market Government Portfolio, Class I, 2.28% (c) | 3,045,458 | 3,045,458 | |||||||||
Fidelity Investments Prime Money Market Portfolio, Class I, 2.46% (c) | 94,044 | 94,044 | |||||||||
Goldman Sachs Financial Square Prime Obligations Fund, Institutional Class, 2.55% (c) | 1,170,932 | 1,170,932 | |||||||||
JPMorgan Prime Money Market Fund, Capital Class, 2.49% (c) | 1,873,374 | 1,873,374 | |||||||||
Morgan Stanley Institutional Liquidity Prime Portfolio, Institutional Class, 2.58% (c) | 2,810,236 | 2,810,236 | |||||||||
Total Collateral for Securities Loaned (Cost $11,101,698) | 11,101,698 | ||||||||||
Total Investments (Cost $349,805,817) — 102.8% | 351,130,986 | ||||||||||
Liabilities in excess of other assets — (2.8)% | (9,661,864 | ) | |||||||||
NET ASSETS — 100.00% | $ | 341,469,122 |
^ 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 December 31, 2018.
ADR — American Depositary Receipt |
See notes to financial statements.
34
Victory Portfolios Victory RS Growth Fund | Schedule of Portfolio Investments December 31, 2018 |
Security Description | Shares | Value | |||||||||
Common Stocks (99.1%) | |||||||||||
Communication Services (14.2%): | |||||||||||
Activision Blizzard, Inc. | 47,160 | $ | 2,196,241 | ||||||||
Alphabet, Inc., Class C (a) | 10,471 | 10,843,872 | |||||||||
Facebook, Inc., Class A (a) | 59,640 | 7,818,208 | |||||||||
InterActive Corp. (a) | 27,190 | 4,976,858 | |||||||||
Netflix, Inc. (a) | 20,200 | 5,406,732 | |||||||||
31,241,911 | |||||||||||
Consumer Discretionary (19.6%): | |||||||||||
Amazon.com, Inc. (a) | 11,470 | 17,227,596 | |||||||||
Chipotle Mexican Grill, Inc. (a) | 11,450 | 4,943,996 | |||||||||
Ferrari NV, ADR | 35,200 | 3,500,288 | |||||||||
Hilton Worldwide Holdings, Inc. | 84,080 | 6,036,944 | |||||||||
The Home Depot, Inc. | 30,985 | 5,323,843 | |||||||||
Tiffany & Co. | 35,120 | 2,827,511 | |||||||||
Vail Resorts, Inc. | 15,410 | 3,248,736 | |||||||||
43,108,914 | |||||||||||
Consumer Staples (5.8%): | |||||||||||
Keurig Dr Pepper, Inc. | 195,390 | 5,009,800 | |||||||||
Post Holdings, Inc. (a) | 85,280 | 7,601,006 | |||||||||
12,610,806 | |||||||||||
Energy (1.1%): | |||||||||||
EOG Resources, Inc. | 26,775 | 2,335,048 | |||||||||
Financials (4.2%): | |||||||||||
SVB Financial Group (a) | 12,270 | 2,330,318 | |||||||||
The Progressive Corp. | 114,470 | 6,905,975 | |||||||||
9,236,293 | |||||||||||
Health Care (17.3%): | |||||||||||
BeiGene Ltd., ADR (a) | 11,320 | 1,587,743 | |||||||||
Bluebird Bio, Inc. (a) (b) | 23,130 | 2,294,496 | |||||||||
Edwards Lifesciences Corp. (a) | 21,190 | 3,245,672 | |||||||||
Eli Lilly & Co. | 74,190 | 8,585,267 | |||||||||
Illumina, Inc. (a) | 21,020 | 6,304,529 | |||||||||
Intuitive Surgical, Inc. (a) | 8,630 | 4,133,080 | |||||||||
Neurocrine Biosciences, Inc. (a) | 29,870 | 2,133,017 | |||||||||
Sage Therapeutics, Inc. (a) | 15,410 | 1,476,124 | |||||||||
UnitedHealth Group, Inc. | 32,220 | 8,026,646 | |||||||||
37,786,574 | |||||||||||
Industrials (6.6%): | |||||||||||
Parker-Hannifin Corp. | 31,330 | 4,672,556 | |||||||||
Roper Technologies, Inc. | 11,040 | 2,942,381 | |||||||||
The Boeing Co. | 21,930 | 7,072,425 | |||||||||
14,687,362 |
See notes to financial statements.
35
Victory Portfolios Victory RS Growth Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Shares | Value | |||||||||
IT Services (9.6%): | |||||||||||
PayPal Holdings, Inc. (a) | 84,390 | $ | 7,096,355 | ||||||||
Visa, Inc., Class A | 105,997 | 13,985,244 | |||||||||
21,081,599 | |||||||||||
Materials (4.3%): | |||||||||||
DowDuPont, Inc. | 70,630 | 3,777,292 | |||||||||
Ecolab, Inc. | 38,320 | 5,646,452 | |||||||||
9,423,744 | |||||||||||
Semiconductors & Semiconductor Equipment (3.6%): | |||||||||||
Lam Research Corp. | 18,870 | 2,569,528 | |||||||||
Marvell Technology Group Ltd., ADR | 157,360 | 2,547,658 | |||||||||
Xilinx, Inc. | 32,750 | 2,789,317 | |||||||||
7,906,503 | |||||||||||
Software (8.2%): | |||||||||||
Salesforce.com, Inc. (a) | 79,380 | 10,872,679 | |||||||||
ServiceNow, Inc. (a) | 39,660 | 7,061,463 | |||||||||
17,934,142 | |||||||||||
Technology Hardware, Storage & Peripherals (4.6%): | |||||||||||
Apple, Inc. | 64,297 | 10,142,209 | |||||||||
Total Common Stocks (Cost $171,458,438) | 217,495,105 | ||||||||||
Collateral for Securities Loaned^ (1.0%) | |||||||||||
BlackRock Liquidity Funds TempFund Portfolio, Institutional Class, 2.49% (c) | 431,901 | 431,901 | |||||||||
Fidelity Investments Money Market Government Portfolio, Class I, 2.28% (c) | 624,077 | 624,077 | |||||||||
Fidelity Investments Prime Money Market Portfolio, Class I, 2.46% (c) | 19,272 | 19,272 | |||||||||
Goldman Sachs Financial Square Prime Obligations Fund, Institutional Class, 2.55% (c) | 239,948 | 239,948 | |||||||||
JPMorgan Prime Money Market Fund, Capital Class, 2.49% (c) | 383,892 | 383,892 | |||||||||
Morgan Stanley Institutional Liquidity Prime Portfolio, Institutional Class, 2.58% (c) | 575,875 | 575,875 | |||||||||
Total Collateral for Securities Loaned (Cost $2,274,965) | 2,274,965 | ||||||||||
Total Investments (Cost $173,733,403) — 100.1% | 219,770,070 | ||||||||||
Liabilities in excess of other assets — (0.1)% | (168,489 | ) | |||||||||
NET ASSETS — 100.00% | $ | 219,601,581 |
^ 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 December 31, 2018.
ADR — American Depositary Receipt
See notes to financial statements.
36
Victory Portfolios Victory RS Science and Technology Fund | Schedule of Portfolio Investments December 31, 2018 |
Security Description | Shares | Value | |||||||||
Common Stocks (100.9%) | |||||||||||
Biotechnology (29.7%): | |||||||||||
Adverum Biotechnologies, Inc. (a) | 102,010 | $ | 321,332 | ||||||||
Aimmune Therapeutics, Inc. (a) (b) | 65,260 | 1,561,019 | |||||||||
Albireo Pharma, Inc. (a) | 34,750 | 852,418 | |||||||||
Allakos, Inc. (a) (b) | 11,940 | 624,104 | |||||||||
Alpine Immune Sciences, Inc. (a) | 66,827 | 245,923 | |||||||||
Amicus Therapeutics, Inc. (a) (b) | 270,230 | 2,588,802 | |||||||||
Apellis Pharmaceuticals, Inc. (a) | 117,793 | 1,553,690 | |||||||||
Aptinyx, Inc. (a) | 44,960 | 743,638 | |||||||||
Ascendis Pharma A/S, ADR (a) | 10,670 | 668,476 | |||||||||
Audentes Therapeutics, Inc. (a) | 58,950 | 1,256,814 | |||||||||
Autolus Therapeutics PLC, ADR (a) (b) | 20,450 | 671,578 | |||||||||
BeiGene Ltd., ADR (a) (b) | 16,520 | 2,317,095 | |||||||||
BioMarin Pharmaceutical, Inc. (a) | 29,650 | 2,524,697 | |||||||||
Bluebird Bio, Inc. (a) (b) | 30,880 | 3,063,295 | |||||||||
Blueprint Medicines Corp. (a) | 23,950 | 1,291,145 | |||||||||
Celyad SA, ADR (a) (b) | 59,250 | 1,075,980 | |||||||||
Chimerix, Inc. (a) | 219,350 | 563,730 | |||||||||
Crinetics Pharmaceuticals, Inc. (a) (b) | 25,840 | 774,942 | |||||||||
CRISPR Therapeutics AG, ADR (a) (b) | 16,150 | 461,406 | |||||||||
Cytomx Therapeutics, Inc. (a) | 46,930 | 708,643 | |||||||||
Editas Medicine, Inc. (a) | 29,820 | 678,405 | |||||||||
Eidos Therapeutics, Inc. (a) (b) | 100,700 | 1,385,632 | |||||||||
Equillium, Inc. (a) | 82,180 | 670,589 | |||||||||
Evlo Biosciences, Inc. (a) (b) | 38,470 | 500,495 | |||||||||
Fate Therapeutics, Inc. (a) (b) | 198,400 | 2,545,471 | |||||||||
Galapagos NV, ADR (a) | 14,970 | 1,373,348 | |||||||||
Gritstone Oncology, Inc. (a) (b) | 35,530 | 548,939 | |||||||||
Halozyme Therapeutics, Inc. (a) | 53,410 | 781,388 | |||||||||
Homology Medicines, Inc. (a) (b) | 37,530 | 839,171 | |||||||||
Immunomedics, Inc. (a) (b) | 79,950 | 1,140,887 | |||||||||
Invitae Corp. (a) | 105,675 | 1,168,766 | |||||||||
Iovance Biotherapeutics, Inc. (a) (b) | 246,250 | 2,179,313 | |||||||||
Kezar Life Sciences, Inc. (a) (b) | 102,966 | 2,429,997 | |||||||||
Kiniksa Pharmaceuticals Ltd., Class A (a) (b) | 41,240 | 1,158,432 | |||||||||
Kura Oncology, Inc. (a) | 159,170 | 2,234,747 | |||||||||
Ligand Pharmaceuticals, Inc., Class B (a) | 6,870 | 932,259 | |||||||||
Loxo Oncology, Inc. (a) | 23,980 | 3,358,878 | |||||||||
MacroGenics, Inc. (a) (b) | 45,380 | 576,326 | |||||||||
Madrigal Pharmaceuticals, Inc. (a) (b) | 6,116 | 689,396 | |||||||||
Neurocrine Biosciences, Inc. (a) | 7,960 | 568,424 | |||||||||
REGENXBIO, Inc. (a) | 21,360 | 896,052 | |||||||||
Replimune Group, Inc. (a) | 54,370 | 543,700 | |||||||||
Sage Therapeutics, Inc. (a) | 24,230 | 2,320,991 | |||||||||
Scholar Rock Holding Corp. (a) (b) | 30,570 | 702,193 | |||||||||
Surface Oncology, Inc. (a) | 231,780 | 982,747 | |||||||||
Tocagen, Inc. (a) | 45,120 | 370,435 | |||||||||
Twist Bioscience Corp. (a) | 71,470 | 1,650,242 | |||||||||
Veracyte, Inc. (a) | 221,200 | 2,782,695 |
See notes to financial statements.
37
Victory Portfolios Victory RS Science and Technology Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Shares | Value | |||||||||
Xencor, Inc. (a) | 40,530 | $ | 1,465,565 | ||||||||
61,344,210 | |||||||||||
Communication Services (11.5%): | |||||||||||
Activision Blizzard, Inc. | 48,930 | 2,278,670 | |||||||||
ANGI Homeservices, Inc., Class A (a) (b) | 105,770 | 1,699,724 | |||||||||
Boingo Wireless, Inc. (a) (b) | 83,230 | 1,712,041 | |||||||||
Facebook, Inc., Class A (a) | 46,600 | 6,108,794 | |||||||||
Match Group, Inc. | 53,600 | 2,292,472 | |||||||||
Netflix, Inc. (a) | 14,390 | 3,851,627 | |||||||||
Take-Two Interactive Software, Inc. (a) | 21,990 | 2,263,651 | |||||||||
Yelp, Inc. (a) | 100,130 | 3,503,549 | |||||||||
23,710,528 | |||||||||||
Communications Equipment (3.5%): | |||||||||||
Ciena Corp. (a) | 53,170 | 1,802,995 | |||||||||
Quantenna Communications, Inc. (a) | 154,050 | 2,210,618 | |||||||||
Viavi Solutions, Inc. (a) | 317,340 | 3,189,266 | |||||||||
7,202,879 | |||||||||||
Consumer Discretionary (5.6%): | |||||||||||
Amazon.com, Inc. (a) | 5,780 | 8,681,387 | |||||||||
Arco Platform Ltd., ADR, Class A (a) | 54,150 | 1,197,798 | |||||||||
Waitr Holdings, Inc. (a) | 149,440 | 1,666,256 | |||||||||
11,545,441 | |||||||||||
Electronic Equipment, Instruments & Components (0.6%): | |||||||||||
II-VI, Inc. (a) | 37,120 | 1,204,915 | |||||||||
Health Care Equipment & Supplies (1.2%): | |||||||||||
Cryoport, Inc. (a) (b) | 114,900 | 1,267,347 | |||||||||
Quotient, Ltd. (a) (b) | 200,000 | 1,224,000 | |||||||||
2,491,347 | |||||||||||
Health Care Technology (1.4%): | |||||||||||
Veeva Systems, Inc. (a) | 32,950 | 2,943,094 | |||||||||
IT Services (3.2%): | |||||||||||
GoDaddy, Inc., Class A (a) | 48,670 | 3,193,725 | |||||||||
Wix.com Ltd., ADR (a) | 38,880 | 3,512,419 | |||||||||
6,706,144 | |||||||||||
Life Sciences Tools & Services (2.3%): | |||||||||||
Codexis, Inc. (a) (b) | 96,170 | 1,606,039 | |||||||||
Illumina, Inc. (a) | 7,500 | 2,249,475 | |||||||||
Neogenomics, Inc. (a) | 77,550 | 977,906 | |||||||||
4,833,420 | |||||||||||
Pharmaceuticals (2.2%): | |||||||||||
Aclaris Therapeutics, Inc. (a) | 34,015 | 251,371 | |||||||||
Assembly Biosciences, Inc. (a) | 46,310 | 1,047,532 | |||||||||
GW Pharmaceuticals PLC, ADR (a) | 16,120 | 1,569,927 |
See notes to financial statements.
38
Victory Portfolios Victory RS Science and Technology Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Shares | Value | |||||||||
KemPharm, Inc. (a) | 118,410 | $ | 210,770 | ||||||||
MyoKardia, Inc. (a) | 27,390 | 1,338,275 | |||||||||
4,417,875 | |||||||||||
Semiconductors & Semiconductor Equipment (16.4%): | |||||||||||
Advanced Micro Devices, Inc. (a) | 58,980 | 1,088,771 | |||||||||
Cohu, Inc. (b) | 149,840 | 2,407,929 | |||||||||
Cypress Semiconductor Corp. (b) | 203,480 | 2,588,266 | |||||||||
Lam Research Corp. | 19,750 | 2,689,357 | |||||||||
Lattice Semiconductor Corp. (a) | 731,260 | 5,060,318 | |||||||||
Marvell Technology Group Ltd., ADR | 336,810 | 5,452,954 | |||||||||
MaxLinear, Inc., Class A (a) (b) | 127,300 | 2,240,480 | |||||||||
Mellanox Technologies Ltd., ADR (a) | 22,170 | 2,048,065 | |||||||||
MKS Instruments, Inc. | 27,090 | 1,750,285 | |||||||||
Monolithic Power Systems, Inc. | 21,170 | 2,461,013 | |||||||||
Semtech Corp. (a) | 53,180 | 2,439,367 | |||||||||
Tower Semiconductor Ltd., ADR (a) | 125,641 | 1,851,948 | |||||||||
Ultra Clean Holdings, Inc. (a) | 213,780 | 1,810,717 | |||||||||
33,889,470 | |||||||||||
Software (20.7%): | |||||||||||
Cornerstone OnDemand, Inc. (a) | 88,510 | 4,463,559 | |||||||||
Coupa Software, Inc. (a) | 41,620 | 2,616,233 | |||||||||
Dropbox, Inc. (a) | 120,680 | 2,465,492 | |||||||||
LogMeIn, Inc. | 24,630 | 2,009,069 | |||||||||
Mindbody, Inc. (a) (b) | 67,190 | 2,445,716 | |||||||||
Nutanix, Inc., Class A (a) | 92,890 | 3,863,295 | |||||||||
Paycom Software, Inc. (a) | 22,750 | 2,785,738 | |||||||||
Proofpoint, Inc. (a) | 30,409 | 2,548,578 | |||||||||
RingCentral, Inc., Class A (a) | 110,380 | 9,099,728 | |||||||||
SendGrid, Inc. (a) | 75,290 | 3,250,269 | |||||||||
ServiceNow, Inc. (a) | 13,180 | 2,346,699 | |||||||||
The Ultimate Software Group, Inc. (a) | 7,510 | 1,838,974 | |||||||||
Zendesk, Inc. (a) | 49,920 | 2,913,830 | |||||||||
42,647,180 | |||||||||||
Technology Hardware, Storage & Peripherals (2.6%): | |||||||||||
Cray, Inc. (a) | 147,400 | 3,182,366 | |||||||||
Pure Storage, Inc. (a) (b) | 129,900 | 2,088,792 | |||||||||
5,271,158 | |||||||||||
Total Common Stocks (Cost $176,641,176) | 208,207,661 |
See notes to financial statements.
39
Victory Portfolios Victory RS Science and Technology Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Shares | Value | |||||||||
Collateral for Securities Loaned^ (11.7%) | |||||||||||
BlackRock Liquidity Funds TempFund Portfolio, Institutional Class, 2.49% (c) | 4,570,433 | $ | 4,570,433 | ||||||||
Fidelity Investments Money Market Government Portfolio, Class I, 2.28% (c) | 6,604,055 | 6,604,055 | |||||||||
Fidelity Investments Prime Money Market Portfolio, Class I, 2.46% (c) | 203,935 | 203,935 | |||||||||
Goldman Sachs Financial Square Prime Obligations Fund, Institutional Class, 2.55% (c) | 2,539,157 | 2,539,157 | |||||||||
JPMorgan Prime Money Market Fund, Capital Class, 2.49% (c) | 4,062,398 | 4,062,398 | |||||||||
Morgan Stanley Institutional Liquidity Prime Portfolio, Institutional Class, 2.58% (c) | 6,093,978 | 6,093,978 | |||||||||
Total Collateral for Securities Loaned (Cost $24,073,956) | 24,073,956 | ||||||||||
Total Investments (Cost $200,715,132) — 112.6% | 232,281,617 | ||||||||||
Liabilities in excess of other assets — (12.6)% | (25,933,540 | ) | |||||||||
NET ASSETS — 100.00% | $ | 206,348,077 |
^ 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 December 31, 2018.
ADR — American Depositary Receipt
PLC — Public Limited Company
See notes to financial statements.
40
Victory Portfolios Victory RS Small Cap Equity Fund | Schedule of Portfolio Investments December 31, 2018 |
Security Description | Shares | Value | |||||||||
Common Stocks (99.4%) | |||||||||||
Consumer Discretionary (16.1%): | |||||||||||
Arco Platform Ltd., ADR, Class A (a) | 16,843 | $ | 372,567 | ||||||||
At Home Group, Inc. (a) (b) | 23,550 | 439,443 | |||||||||
Dave & Buster's Entertainment, Inc. | 17,660 | 786,930 | |||||||||
Dineequity, Inc. | 14,220 | 957,575 | |||||||||
Eldorado Resorts, Inc. (a) (b) | 23,020 | 833,554 | |||||||||
Grand Canyon Education, Inc. (a) | 3,861 | 371,197 | |||||||||
Monro Muffler Brake, Inc. | 11,900 | 818,125 | |||||||||
National Vision Holdings, Inc. (a) | 20,154 | 567,738 | |||||||||
Ollie's Bargain Outlet Holdings, Inc. (a) | 9,271 | 616,614 | |||||||||
Planet Fitness, Inc., Class A (a) | 20,620 | 1,105,644 | |||||||||
Red Rock Resorts, Inc., Class A (b) | 21,752 | 441,783 | |||||||||
Steven Madden Ltd. | 24,059 | 728,025 | |||||||||
Strategic Education, Inc. | 3,500 | 396,970 | |||||||||
Weight Watchers International, Inc. (a) | 8,620 | 332,301 | |||||||||
Wingstop, Inc. (b) | 6,140 | 394,127 | |||||||||
9,162,593 | |||||||||||
Consumer Staples (4.3%): | |||||||||||
Freshpet, Inc. (a) (b) | 19,160 | 616,186 | |||||||||
Nomad Foods Ltd., ADR (a) | 64,720 | 1,082,118 | |||||||||
Sprouts Farmers Markets, Inc. (a) (b) | 31,730 | 745,972 | |||||||||
2,444,276 | |||||||||||
Electronic Equipment, Instruments & Components (1.7%): | |||||||||||
II-VI, Inc. (a) | 9,380 | 304,475 | |||||||||
Littelfuse, Inc. | 3,877 | 664,828 | |||||||||
969,303 | |||||||||||
Energy (2.1%): | |||||||||||
Matador Resources Co. (a) (b) | 12,110 | 188,068 | |||||||||
Newpark Resources, Inc. (a) (b) | 129,900 | 892,413 | |||||||||
SRC Energy, Inc. (a) | 25,900 | 121,730 | |||||||||
1,202,211 | |||||||||||
Financials (7.3%): | |||||||||||
eHealth, Inc. (a) | 16,460 | 632,393 | |||||||||
Firstcash, Inc. | 9,910 | 716,989 | |||||||||
Green Dot Corp. (a) | 11,850 | 942,312 | |||||||||
Kemper Corp. | 11,940 | 792,577 | |||||||||
LendingTree, Inc. (a) (b) | 2,120 | 465,488 | |||||||||
Primerica, Inc. | 3,580 | 349,802 | |||||||||
Webster Financial Corp. | 6,040 | 297,712 | |||||||||
4,197,273 | |||||||||||
Health Care (23.2%): | |||||||||||
Aimmune Therapeutics, Inc. (a) (b) | 17,780 | 425,298 | |||||||||
Amicus Therapeutics, Inc. (a) (b) | 55,544 | 532,112 | |||||||||
Apellis Pharmaceuticals, Inc. (a) | 24,260 | 319,989 | |||||||||
Aptinyx, Inc. (a) (b) | 12,159 | 201,110 |
See notes to financial statements.
41
Victory Portfolios Victory RS Small Cap Equity Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Shares | Value | |||||||||
Assembly Biosciences, Inc. (a) | 8,940 | $ | 202,223 | ||||||||
Audentes Therapeutics, Inc. (a) | 16,000 | 341,120 | |||||||||
Bluebird Bio, Inc. (a) (b) | 5,267 | 522,486 | |||||||||
Blueprint Medicines Corp. (a) | 9,078 | 489,395 | |||||||||
Celyad SA, ADR (a) (b) | 10,676 | 193,876 | |||||||||
Cytomx Therapeutics, Inc. (a) | 17,200 | 259,720 | |||||||||
Equillium, Inc. (a) | 22,428 | 183,012 | |||||||||
Exact Sciences Corp. (a) | 7,812 | 492,937 | |||||||||
Fate Therapeutics, Inc. (a) (b) | 19,900 | 255,317 | |||||||||
Glaukos Corp. (a) | 8,050 | 452,169 | |||||||||
Globus Medical, Inc., Class A (a) | 17,640 | 763,459 | |||||||||
GW Pharmaceuticals PLC, ADR (a) | 4,150 | 404,169 | |||||||||
Hanger, Inc. (a) | 20,570 | 389,802 | |||||||||
HealthEquity, Inc. (a) | 8,900 | 530,885 | |||||||||
Immunomedics, Inc. (a) (b) | 34,660 | 494,598 | |||||||||
Insulet Corp. (a) (b) | 7,800 | 618,696 | |||||||||
Iovance Biotherapeutics, Inc. (a) (b) | 55,621 | 492,246 | |||||||||
Irhythm Technologies, Inc. (a) | 4,090 | 284,173 | |||||||||
Kura Oncology, Inc. (a) | 29,670 | 416,567 | |||||||||
Ligand Pharmaceuticals, Inc., Class B (a) (b) | 4,597 | 623,813 | |||||||||
Loxo Oncology, Inc. (a) | 5,026 | 703,992 | |||||||||
Masimo Corp. (a) | 10,635 | 1,141,880 | |||||||||
Penumbra, Inc. (a) (b) | 3,740 | 457,028 | |||||||||
Sage Therapeutics, Inc. (a) | 4,027 | 385,746 | |||||||||
Teladoc, Inc. (a) (b) | 13,790 | 683,570 | |||||||||
13,261,388 | |||||||||||
Industrials (12.9%): | |||||||||||
Advanced Disposal Services, Inc. (a) | 27,200 | 651,168 | |||||||||
Altra Industrial Motion Corp. | 23,000 | 578,450 | |||||||||
Axon Enterprise, Inc. (a) | 17,097 | 747,994 | |||||||||
Azul SA, ADR (a) | 31,480 | 871,681 | |||||||||
Harsco Corp. (a) | 44,020 | 874,237 | |||||||||
Kennametal, Inc. | 31,470 | 1,047,321 | |||||||||
Proto Labs, Inc. (a) | 5,440 | 613,578 | |||||||||
Saia, Inc. (a) | 6,980 | 389,624 | |||||||||
Simpson Manufacturing Co., Inc. | 16,180 | 875,823 | |||||||||
Siteone Landscape Supply, Inc. (a) (b) | 14,110 | 779,860 | |||||||||
7,429,736 | |||||||||||
IT Services (9.0%): | |||||||||||
Euronet Worldwide, Inc. (a) | 14,517 | 1,486,251 | |||||||||
Evo Payments, Inc. (a) | 15,900 | 392,253 | |||||||||
InterXion Holding NV, ADR (a) | 18,914 | 1,024,382 | |||||||||
WEX, Inc. (a) | 2,106 | 294,966 | |||||||||
Wix.com Ltd., ADR (a) (b) | 13,240 | 1,196,102 | |||||||||
WNS Holdings Ltd., ADR (a) | 18,238 | 752,500 | |||||||||
5,146,454 |
See notes to financial statements.
42
Victory Portfolios Victory RS Small Cap Equity Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Shares | Value | |||||||||
Materials (4.2%): | |||||||||||
Allegheny Technologies, Inc. (a) (b) | 40,460 | $ | 880,814 | ||||||||
Ashland Global Holdings, Inc. | 12,500 | 887,000 | |||||||||
Ferro Corp. (a) | 43,160 | 676,749 | |||||||||
2,444,563 | |||||||||||
Semiconductors & Semiconductor Equipment (4.0%): | |||||||||||
Cypress Semiconductor Corp. (b) | 20,200 | 256,944 | |||||||||
MKS Instruments, Inc. | 7,540 | 487,159 | |||||||||
Monolithic Power Systems, Inc. | 3,958 | 460,118 | |||||||||
Silicon Laboratories, Inc. (a) (b) | 6,040 | 476,012 | |||||||||
Versum Materials, Inc. | 22,810 | 632,294 | |||||||||
2,312,527 | |||||||||||
Software (13.8%): | |||||||||||
Cornerstone OnDemand, Inc. (a) | 24,912 | 1,256,312 | |||||||||
Coupa Software, Inc. (a) | 13,040 | 819,694 | |||||||||
Envestnet, Inc. (a) (b) | 14,460 | 711,287 | |||||||||
Mindbody, Inc. (a) | 32,570 | 1,185,548 | |||||||||
Q2 Holdings, Inc. (a) | 15,840 | 784,872 | |||||||||
RingCentral, Inc., Class A (a) | 20,779 | 1,713,020 | |||||||||
SendGrid, Inc. (a) | 33,010 | 1,425,042 | |||||||||
7,895,775 | |||||||||||
Technology Hardware, Storage & Peripherals (0.8%): | |||||||||||
Pure Storage, Inc. (a) | 30,090 | 483,847 | |||||||||
Total Common Stocks (Cost $55,594,757) | 56,949,946 | ||||||||||
Collateral for Securities Loaned^ (12.2%) | |||||||||||
BlackRock Liquidity Funds TempFund Portfolio, Institutional Class, 2.49% (c) | 1,325,660 | 1,325,660 | |||||||||
Fidelity Investments Money Market Government Portfolio, Class I, 2.28% (c) | 1,915,515 | 1,915,515 | |||||||||
Fidelity Investments Prime Money Market Portfolio, Class I, 2.46% (c) | 59,151 | 59,151 | |||||||||
Goldman Sachs Financial Square Prime Obligations Fund, Institutional Class, 2.55% (c) | 736,486 | 736,486 | |||||||||
JPMorgan Prime Money Market Fund, Capital Class, 2.49% (c) | 1,178,304 | 1,178,304 | |||||||||
Morgan Stanley Institutional Liquidity Prime Portfolio, Institutional Class, 2.58% (c) | 1,767,566 | 1,767,566 | |||||||||
Total Collateral for Securities Loaned (Cost $6,982,682) | 6,982,682 | ||||||||||
Total Investments (Cost $62,577,439) — 111.6% | 63,932,628 | ||||||||||
Liabilities in excess of other assets — (11.6)% | (6,645,147 | ) | |||||||||
NET ASSETS — 100.00% | $ | 57,287,481 |
^ 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 December 31, 2018.
ADR — American Depositary Receipt
PLC — Public Limited Company
See notes to financial statements.
43
Victory Portfolios | Statements of Assets and Liabilities December 31, 2018 |
Victory RS Small Cap Growth Fund | Victory RS Select Growth Fund | Victory RS Mid Cap Growth Fund | |||||||||||||
ASSETS: | |||||||||||||||
Investments, at value (Cost $1,638,226,943, $231,349,991 and $349,805,817) | $ | 1,763,722,323 | (a) | $ | 271,246,565 | (b) | $ | 351,130,986 | (c) | ||||||
Cash and cash equivalents | 5,908,459 | 257 | 4,592,818 | ||||||||||||
Interest and dividends receivable | 684,597 | 128,974 | 163,155 | ||||||||||||
Receivable for capital shares issued | 21,830,228 | 323,225 | 673,541 | ||||||||||||
Receivable for investments sold | 49,260 | 1,644,850 | — | ||||||||||||
Receivable from Adviser | 146,863 | 43,528 | 93,468 | ||||||||||||
Prepaid expenses | 35,709 | 7,660 | 24,165 | ||||||||||||
Total Assets | 1,792,377,439 | 273,395,059 | 356,678,133 | ||||||||||||
LIABILITIES: | |||||||||||||||
Payables: | |||||||||||||||
Collateral received on loaned securities | 180,028,134 | 18,922,614 | 11,101,698 | ||||||||||||
Affiliated interfund lending | — | 1,239,000 | — | ||||||||||||
Investments purchased | 881,247 | 695,739 | — | ||||||||||||
Capital shares redeemed | 8,709,286 | 4,363,464 | 3,692,737 | ||||||||||||
Accrued expenses and other payables: | |||||||||||||||
Investment advisory fees | 1,367,624 | 247,649 | 260,262 | ||||||||||||
Administration fees | 88,217 | 15,170 | 18,644 | ||||||||||||
Custodian fees | 42,762 | 4,191 | 4,806 | ||||||||||||
Transfer agent fees | 401,878 | 59,414 | 79,210 | ||||||||||||
Chief Compliance Officer fees | 1,277 | 226 | 270 | ||||||||||||
Trustees' fees | 1,388 | 233 | 221 | ||||||||||||
12b-1 fees | 60,652 | 25,411 | 16,125 | ||||||||||||
Other accrued expenses | 157,929 | 38,828 | 35,038 | ||||||||||||
Total Liabilities | 191,740,394 | 25,611,939 | 15,209,011 | ||||||||||||
NET ASSETS: | |||||||||||||||
Capital | 1,496,775,366 | 192,537,769 | 353,778,934 | ||||||||||||
Total distributable earnings/(loss) | 103,861,679 | 55,245,351 | (12,309,812 | ) | |||||||||||
Net Assets | $ | 1,600,637,045 | $ | 247,783,120 | $ | 341,469,122 | |||||||||
Net Assets | |||||||||||||||
Class A Shares | $ | 499,350,133 | $ | 94,393,211 | $ | 75,450,853 | |||||||||
Class C Shares | 13,601,533 | 31,753,961 | 18,072,379 | ||||||||||||
Class R Shares | 7,285,101 | 701,444 | 1,144,307 | ||||||||||||
Class R6 Shares | 113,288,133 | 238,612 | 3,793,140 | ||||||||||||
Class Y Shares | 967,112,145 | 120,695,892 | 243,008,443 | ||||||||||||
Total | $ | 1,600,637,045 | $ | 247,783,120 | $ | 341,469,122 | |||||||||
Shares (unlimited number of shares authorized with a par value of $0.001 per share): | |||||||||||||||
Class A Shares | 8,170,975 | 3,259,606 | 3,780,736 | ||||||||||||
Class C Shares | 260,625 | 1,332,957 | 1,038,751 | ||||||||||||
Class R Shares | 130,388 | 29,033 | 62,480 | ||||||||||||
Class R6 Shares | 1,774,777 | 7,824 | 182,889 | ||||||||||||
Class Y Shares | 15,169,972 | 3,968,453 | 11,724,196 | ||||||||||||
Total | 25,506,737 | 8,597,873 | 16,789,052 | ||||||||||||
Net asset value, offering (except Class A Shares) and redemption price per share: | |||||||||||||||
Class A Shares | $ | 61.11 | $ | 28.96 | $ | 19.96 | |||||||||
Class C Shares (d) | 52.19 | 23.82 | 17.40 | ||||||||||||
Class R Shares | 55.87 | 24.16 | 18.31 | ||||||||||||
Class R6 Shares | 63.83 | 30.50 | 20.74 | ||||||||||||
Class Y Shares | 63.75 | 30.41 | 20.73 | ||||||||||||
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 | $ | 64.84 | $ | 30.73 | $ | 21.18 |
(a) Includes $175,964,919 of securities on loan.
(b) Includes $18,600,698 of securities on loan.
(c) Includes $11,047,085 of securities on loan.
(d) Redemption price per share varies by the length of time shares are held.
See notes to financial statements.
44
Victory Portfolios | Statements of Assets and Liabilities December 31, 2018 |
Victory RS Growth Fund | Victory RS Science and Technology Fund | Victory RS Small Cap Equity Fund | |||||||||||||
ASSETS: | |||||||||||||||
Investments, at value (Cost $173,733,403, $200,715,132 and $62,577,439) | $ | 219,770,070 | (a) | $ | 232,281,617 | (b) | $ | 63,932,628 | (c) | ||||||
Cash and cash equivalents | 2,401,075 | 787,334 | 723,576 | ||||||||||||
Interest and dividends receivable | 79,438 | 78,966 | 24,805 | ||||||||||||
Receivable for capital shares issued | 136,939 | 265,998 | 103,744 | ||||||||||||
Receivable for investments sold | — | 9,417 | 1,243 | ||||||||||||
Receivable from Adviser | 47,586 | 4,424 | 4,963 | ||||||||||||
Prepaid expenses | — | 6,075 | 8,215 | ||||||||||||
Total Assets | 222,435,108 | 233,433,831 | 64,799,174 | ||||||||||||
LIABILITIES: | |||||||||||||||
Payables: | |||||||||||||||
Collateral received on loaned securities | 2,274,965 | 24,073,956 | 6,982,682 | ||||||||||||
Investments purchased | — | — | 31,957 | ||||||||||||
Capital shares redeemed | 321,631 | 2,721,114 | 422,993 | ||||||||||||
Accrued expenses and other payables: | |||||||||||||||
Investment advisory fees | 143,689 | 184,102 | 38,191 | ||||||||||||
Administration fees | 11,751 | 11,268 | 3,124 | ||||||||||||
Custodian fees | 3,009 | 3,460 | 1,096 | ||||||||||||
Transfer agent fees | 23,791 | 43,063 | 8,645 | ||||||||||||
Chief Compliance Officer fees | 167 | 164 | 45 | ||||||||||||
Trustees' fees | 170 | 160 | 63 | ||||||||||||
12b-1 fees | 22,263 | 20,369 | 6,279 | ||||||||||||
Other accrued expenses | 32,091 | 28,098 | 16,618 | ||||||||||||
Total Liabilities | 2,833,527 | 27,085,754 | 7,511,693 | ||||||||||||
NET ASSETS: | |||||||||||||||
Capital | 174,194,742 | 176,233,516 | 51,985,447 | ||||||||||||
Total distributable earnings/(loss) | 45,406,839 | 30,114,561 | 5,302,034 | ||||||||||||
Net Assets | $ | 219,601,581 | $ | 206,348,077 | $ | 57,287,481 | |||||||||
Net Assets | |||||||||||||||
Class A Shares | $ | 188,220,168 | $ | 140,389,286 | $ | 51,619,117 | |||||||||
Class C Shares | 4,409,172 | 11,857,392 | 615,591 | ||||||||||||
Class R Shares | 515,584 | 706,626 | 2,302,623 | ||||||||||||
Class Y Shares | 26,456,657 | 53,394,773 | 2,750,150 | ||||||||||||
Total | $ | 219,601,581 | $ | 206,348,077 | $ | 57,287,481 | |||||||||
Shares (unlimited number of shares authorized with a par value of $0.001 per share): | |||||||||||||||
Class A Shares | 11,477,249 | 7,655,235 | 3,979,521 | ||||||||||||
Class C Shares | 320,669 | 823,262 | 139,840 | ||||||||||||
Class R Shares | 34,361 | 44,996 | 223,026 | ||||||||||||
Class Y Shares | 1,552,562 | 2,707,824 | 207,003 | ||||||||||||
Total | 13,384,841 | 11,231,317 | 4,549,390 | ||||||||||||
Net asset value, offering (except Class A Shares) and redemption price per share: | |||||||||||||||
Class A Shares | $ | 16.40 | $ | 18.34 | $ | 12.97 | |||||||||
Class C Shares (d) | 13.75 | 14.40 | 4.40 | ||||||||||||
Class R Shares | 15.00 | 15.70 | 10.32 | ||||||||||||
Class Y Shares | 17.04 | 19.72 | 13.29 | ||||||||||||
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 | $ | 17.40 | $ | 19.46 | $ | 13.76 |
(a) Includes $2,271,482 of securities on loan.
(b) Includes $23,911,417 of securities on loan.
(c) Includes $6,967,455 of securities on loan.
(d) Redemption price per share varies by the length of time shares are held.
See notes to financial statements.
45
Victory Portfolios | Statements of Operations For the Year Ended December 31, 2018 |
Victory RS Small Cap Growth Fund | Victory RS Select Growth Fund | Victory RS Mid Cap Growth Fund | |||||||||||||
Investment Income: | |||||||||||||||
Dividends | $ | 6,683,264 | $ | 1,956,715 | $ | 2,400,739 | |||||||||
Interest | 695,682 | 90,450 | 79,840 | ||||||||||||
Securities lending (net of fees) | 1,534,738 | 91,079 | 51,472 | ||||||||||||
Total Income | 8,913,684 | 2,138,244 | 2,532,051 | ||||||||||||
Expenses: | |||||||||||||||
Investment advisory fees | 18,523,660 | 3,935,176 | 3,176,341 | ||||||||||||
Administration fees | 1,172,517 | 236,115 | 224,490 | ||||||||||||
12b-1 fees — Class A Shares | 1,566,643 | 356,454 | 247,221 | ||||||||||||
12b-1 fees — Class C Shares | 158,024 | 490,407 | 224,652 | ||||||||||||
12b-1 fees — Class R Shares | 46,514 | 4,990 | 8,071 | ||||||||||||
Custodian fees | 130,977 | 18,016 | 18,166 | ||||||||||||
Transfer agent fees | 124,366 | 36,719 | 26,473 | ||||||||||||
Transfer agent fees — Class A Shares | 891,708 | 185,124 | 124,786 | ||||||||||||
Transfer agent fees — Class C Shares | 16,561 | 51,224 | 20,564 | ||||||||||||
Transfer agent fees — Class R Shares | 14,069 | 4,380 | 4,247 | ||||||||||||
Transfer agent fees — Class R6 Shares | 6,549 | 76 | 120 | ||||||||||||
Transfer agent fees — Class Y Shares | 1,186,653 | 187,424 | 193,762 | ||||||||||||
Trustees' fees | 149,917 | 33,851 | 30,610 | ||||||||||||
Chief Compliance Officer fees | 14,549 | 3,028 | 2,849 | ||||||||||||
Legal and audit fees | 155,220 | 36,629 | 32,418 | ||||||||||||
State registration and filing fees | 135,821 | 75,590 | 84,332 | ||||||||||||
Interest expense on interfund lending | 5,023 | 3,593 | 10,737 | ||||||||||||
Other expenses | 188,915 | 46,476 | 43,358 | ||||||||||||
Total Expenses | 24,487,686 | 5,705,272 | 4,473,197 | ||||||||||||
Expenses waived/reimbursed by Adviser | (578,670 | ) | (334,454 | ) | (394,372 | ) | |||||||||
Net Expenses | 23,909,016 | 5,370,818 | 4,078,825 | ||||||||||||
Net Investment Income (Loss) | (14,995,332 | ) | (3,232,574 | ) | (1,546,774 | ) | |||||||||
Realized/Unrealized Gains (Losses) from Investment Transactions: | |||||||||||||||
Net realized gains (losses) from investment transactions | 252,184,350 | 77,904,223 | 40,686,227 | ||||||||||||
Net change in unrealized appreciation/depreciation on investments | (419,205,443 | ) | (91,949,344 | ) | (75,203,742 | ) | |||||||||
Net realized/unrealized gains (losses) on investments | (167,021,093 | ) | (14,045,121 | ) | (34,517,515 | ) | |||||||||
Change in net assets resulting from operations | $ | (182,016,425 | ) | $ | (17,277,695 | ) | $ | (36,064,289 | ) |
See notes to financial statements.
46
Victory Portfolios | Statements of Operations For the Year Ended December 31, 2018 |
Victory RS Growth Fund | Victory RS Science and Technology Fund | Victory RS Small Cap Equity Fund | |||||||||||||
Investment Income: | |||||||||||||||
Dividends | $ | 2,070,599 | $ | 418,455 | $ | 253,463 | |||||||||
Interest | 78,405 | 106,895 | 20,086 | ||||||||||||
Securities lending (net of fees) | 9,262 | 350,939 | 47,310 | ||||||||||||
Total Income | 2,158,266 | 876,289 | 320,859 | ||||||||||||
Expenses: | |||||||||||||||
Investment advisory fees | 1,967,210 | 2,341,484 | 552,798 | ||||||||||||
Administration fees | 157,771 | 141,438 | 44,786 | ||||||||||||
12b-1 fees — Class A Shares | 559,336 | 413,866 | 168,265 | ||||||||||||
12b-1 fees — Class C Shares | 64,811 | 127,604 | 4,826 | ||||||||||||
12b-1 fees — Class R Shares | 4,311 | 8,743 | 17,995 | ||||||||||||
Custodian fees | 11,413 | 13,218 | 4,709 | ||||||||||||
Transfer agent fees | 16,929 | 9,373 | 3,833 | ||||||||||||
Transfer agent fees — Class A Shares | 183,656 | 167,715 | 47,433 | ||||||||||||
Transfer agent fees — Class C Shares | 5,747 | 9,934 | 331 | ||||||||||||
Transfer agent fees — Class R Shares | 2,544 | 4,414 | 6,633 | ||||||||||||
Transfer agent fees — Class Y Shares | 20,878 | 60,149 | 1,656 | ||||||||||||
Trustees' fees | 21,221 | 17,890 | 6,432 | ||||||||||||
Chief Compliance Officer fees | 1,980 | 1,736 | 557 | ||||||||||||
Legal and audit fees | 28,455 | 26,398 | 15,444 | ||||||||||||
State registration and filing fees | 68,533 | 70,251 | 56,250 | ||||||||||||
Interest expense on line of credit | 70 | — | — | ||||||||||||
Interest expense on interfund lending | 24 | 2,375 | 13 | ||||||||||||
Other expenses | 27,269 | 39,135 | 12,426 | ||||||||||||
Recoupment of prior expenses waived/ reimbursed by Adviser | — | 6,758 | — | ||||||||||||
Total Expenses | 3,142,158 | 3,462,481 | 944,387 | ||||||||||||
Expenses waived/reimbursed by Adviser | (283,325 | ) | (25,649 | ) | (28,246 | ) | |||||||||
Net Expenses | 2,858,833 | 3,436,832 | 916,141 | ||||||||||||
Net Investment Income (Loss) | (700,567 | ) | (2,560,543 | ) | (595,282 | ) | |||||||||
Realized/Unrealized Gains (Losses) from Investment Transactions: | |||||||||||||||
Net realized gains (losses) from investment transactions | 28,910,507 | 29,219,309 | 14,361,115 | ||||||||||||
Net change in unrealized appreciation/depreciation on investments | (43,461,446 | ) | (35,986,495 | ) | (18,554,821 | ) | |||||||||
Net realized/unrealized gains (losses) on investments | (14,550,939 | ) | (6,767,186 | ) | (4,193,706 | ) | |||||||||
Change in net assets resulting from operations | $ | (15,251,506 | ) | $ | (9,327,729 | ) | $ | (4,788,988 | ) |
See notes to financial statements.
47
Victory Portfolios | Statements of Changes in Net Assets |
Victory RS Small Cap Growth Fund | Victory RS Select Growth Fund | Victory RS Mid Cap Growth Fund | |||||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2018 | Year Ended December 31, 2017 | ||||||||||||||||||||||
From Investment Activities: | |||||||||||||||||||||||||||
Operations: | |||||||||||||||||||||||||||
Net investment income (loss) | $ | (14,995,332 | ) | $ | (15,059,481 | ) | $ | (3,232,574 | ) | $ | (3,994,055 | ) | $ | (1,546,774 | ) | $ | (1,594,930 | ) | |||||||||
Net realized gains (losses) from investment transactions | 252,184,350 | 475,862,680 | 77,904,223 | 71,609,721 | 40,686,227 | 31,949,511 | |||||||||||||||||||||
Net change in unrealized appreciation/ depreciation on investments | (419,205,443 | ) | 140,791,987 | (91,949,344 | ) | 9,320,604 | (75,203,742 | ) | 52,556,387 | ||||||||||||||||||
Change in net assets resulting from operations | (182,016,425 | ) | 601,595,186 | (17,277,695 | ) | 76,936,270 | (36,064,289 | ) | 82,910,968 | ||||||||||||||||||
Distributions to Shareholders: (a) | |||||||||||||||||||||||||||
Class A Shares | (86,181,961 | ) | (51,979,281 | ) | (32,610,434 | ) | (19,166,693 | ) | (12,442,159 | ) | — | ||||||||||||||||
Class C Shares | (2,657,586 | ) | (1,398,397 | ) | (13,368,504 | ) | (7,474,242 | ) | (3,176,582 | ) | — | ||||||||||||||||
Class R Shares | (1,376,192 | ) | (690,275 | ) | (276,329 | ) | (181,019 | ) | (212,737 | ) | — | ||||||||||||||||
Class R6 Shares | (14,758,716 | ) | (662,464 | ) | (72,946 | ) | (18,825 | ) | (572,379 | ) | — | ||||||||||||||||
Class Y Shares | (169,651,115 | ) | (139,921,555 | ) | (42,950,796 | ) | (31,006,290 | ) | (38,217,832 | ) | — | ||||||||||||||||
From return of capital: | |||||||||||||||||||||||||||
Class A Shares | — | — | — | — | (467,768 | ) | — | ||||||||||||||||||||
Class C Shares | — | — | — | — | (119,425 | ) | — | ||||||||||||||||||||
Class R Shares | — | — | — | — | (7,998 | ) | — | ||||||||||||||||||||
Class R6 Shares | — | — | — | — | (21,519 | ) | — | ||||||||||||||||||||
Class Y Shares | — | — | — | — | (1,436,814 | ) | — | ||||||||||||||||||||
Change in net assets resulting from distributions to shareholders | (274,625,570 | ) | (194,651,972 | ) | (89,279,009 | ) | (57,847,069 | ) | (56,675,213 | ) | — | ||||||||||||||||
Change in net assets resulting from capital transactions | 353,743,296 | (582,607,616 | ) | (90,253,951 | ) | (98,622,177 | ) | (11,193,976 | ) | (63,665,136 | ) | ||||||||||||||||
Change in net assets | (102,898,699 | ) | (175,664,402 | ) | (196,810,655 | ) | (79,532,976 | ) | (103,933,478 | ) | 19,245,832 | ||||||||||||||||
Net Assets: | |||||||||||||||||||||||||||
Beginning of period | 1,703,535,744 | 1,879,200,146 | 444,593,775 | 524,126,751 | 445,402,600 | 426,156,768 | |||||||||||||||||||||
End of period | $ | 1,600,637,045 | $ | 1,703,535,744 | $ | 247,783,120 | $ | 444,593,775 | $ | 341,469,122 | $ | 445,402,600 |
(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.
48
Victory Portfolios | Statements of Changes in Net Assets |
(continued)
Victory RS Small Cap Growth Fund | Victory RS Select Growth Fund | Victory RS Mid Cap Growth Fund | |||||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2018 | Year Ended December 31, 2017 | ||||||||||||||||||||||
Capital Transactions: | |||||||||||||||||||||||||||
Class A Shares | |||||||||||||||||||||||||||
Proceeds from shares issued | $ | 105,278,656 | $ | 68,607,881 | $ | 14,046,816 | $ | 12,794,002 | $ | 8,751,587 | $ | 27,239,168 | |||||||||||||||
Distributions reinvested | 82,149,195 | 49,372,130 | 31,279,068 | 18,348,046 | 12,442,557 | — | |||||||||||||||||||||
Cost of shares redeemed | (126,357,303 | ) | (134,202,144 | ) | (58,561,445 | ) | (60,178,865 | ) | (35,922,137 | ) | (185,499,130 | ) | |||||||||||||||
Total Class A Shares | $ | 61,070,548 | $ | (16,222,133 | ) | $ | (13,235,561 | ) | $ | (29,036,817 | ) | $ | (14,727,993 | ) | $ | (158,259,962 | ) | ||||||||||
Class C Shares | |||||||||||||||||||||||||||
Proceeds from shares issued | $ | 8,087,931 | $ | 1,033,799 | $ | 3,457,448 | $ | 2,757,248 | $ | 2,830,669 | $ | 2,068,738 | |||||||||||||||
Distributions reinvested | 2,345,566 | 1,201,107 | 12,670,417 | 6,949,911 | 2,550,620 | — | |||||||||||||||||||||
Cost of shares redeemed | (5,957,121 | ) | (4,271,975 | ) | (19,496,179 | ) | (23,560,380 | ) | (5,849,733 | ) | (7,732,712 | ) | |||||||||||||||
Total Class C Shares | $ | 4,476,376 | $ | (2,037,069 | ) | $ | (3,368,314 | ) | $ | (13,853,221 | ) | $ | (468,444 | ) | $ | (5,663,974 | ) | ||||||||||
Class R Shares | |||||||||||||||||||||||||||
Proceeds from shares issued | $ | 6,973,887 | $ | 2,364,474 | $ | 461,702 | $ | 515,966 | $ | 266,779 | $ | 199,723 | |||||||||||||||
Distributions reinvested | 1,376,192 | 690,275 | 123,655 | 71,655 | 220,735 | — | |||||||||||||||||||||
Cost of shares redeemed | (6,397,173 | ) | (1,984,120 | ) | (577,116 | ) | (1,046,651 | ) | (708,430 | ) | (288,199 | ) | |||||||||||||||
Total Class R Shares | $ | 1,952,906 | $ | 1,070,629 | $ | 8,241 | $ | (459,030 | ) | $ | (220,916 | ) | $ | (88,476 | ) | ||||||||||||
Class R6 Shares | |||||||||||||||||||||||||||
Proceeds from shares issued | $ | 124,843,919 | $ | 25,546,617 | $ | 117,936 | $ | 88,323 | $ | 2,219,318 | $ | 1,802,840 | |||||||||||||||
Distributions reinvested | 14,369,574 | 662,464 | 72,946 | 18,825 | 593,898 | — | |||||||||||||||||||||
Cost of shares redeemed | (19,320,964 | ) | (1,185,236 | ) | (1,210 | ) | — | (99,947 | ) | (9,180 | ) | ||||||||||||||||
Total Class R6 Shares | $ | 119,892,529 | $ | 25,023,845 | $ | 189,672 | $ | 107,148 | $ | 2,713,269 | $ | 1,793,660 | |||||||||||||||
Class Y Shares | |||||||||||||||||||||||||||
Proceeds from shares issued | $ | 416,879,341 | $ | 355,563,216 | $ | 28,684,557 | $ | 42,855,011 | $ | 227,492,113 | $ | 177,263,802 | |||||||||||||||
Distributions reinvested | 148,024,895 | 134,559,639 | 39,382,125 | 28,405,490 | 38,045,473 | — | |||||||||||||||||||||
Cost of shares redeemed | (398,553,299 | ) | (1,080,565,743 | ) | (141,914,671 | ) | (126,640,758 | ) | (264,027,478 | ) | (78,710,186 | ) | |||||||||||||||
Total Class Y Shares | $ | 166,350,937 | $ | (590,442,888 | ) | $ | (73,847,989 | ) | $ | (55,380,257 | ) | $ | 1,510,108 | $ | 98,553,616 | ||||||||||||
Change in net assets resulting from capital transactions | $ | 353,743,296 | $ | (582,607,616 | ) | $ | (90,253,951 | ) | $ | (98,622,177 | ) | $ | (11,193,976 | ) | $ | (63,665,136 | ) |
(continues on next page)
See notes to financial statements.
49
Victory Portfolios | Statements of Changes in Net Assets |
(continued)
Victory RS Small Cap Growth Fund | Victory RS Select Growth Fund | Victory RS Mid Cap Growth Fund | |||||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2018 | Year Ended December 31, 2017 | ||||||||||||||||||||||
Share Transactions: | |||||||||||||||||||||||||||
Class A Shares | |||||||||||||||||||||||||||
Issued | $ | 1,200,807 | $ | 898,907 | $ | 302,025 | $ | 266,308 | $ | 348,050 | $ | 1,178,614 | |||||||||||||||
Reinvested | 1,356,269 | 649,625 | 1,097,126 | 396,800 | 629,047 | — | |||||||||||||||||||||
Redeemed | (1,490,844 | ) | (1,811,083 | ) | (1,344,789 | ) | (1,250,714 | ) | (1,397,550 | ) | (7,817,745 | ) | |||||||||||||||
Total Class A Shares | 1,066,232 | (262,551 | ) | 54,362 | (587,606 | ) | (420,453 | ) | (6,639,131 | ) | |||||||||||||||||
Class C Shares | |||||||||||||||||||||||||||
Issued | 110,706 | 15,059 | 96,266 | 63,931 | 145,805 | 98,514 | |||||||||||||||||||||
Reinvested | 45,334 | 17,778 | 540,086 | 169,510 | 147,862 | — | |||||||||||||||||||||
Redeemed | (85,559 | ) | (63,729 | ) | (558,364 | ) | (539,624 | ) | (256,898 | ) | (366,911 | ) | |||||||||||||||
Total Class C Shares | 70,481 | (30,892 | ) | 77,988 | (306,183 | ) | 36,769 | (268,397 | ) | ||||||||||||||||||
Class R Shares | |||||||||||||||||||||||||||
Issued | 82,863 | 33,057 | 13,459 | 11,914 | 10,366 | 9,093 | |||||||||||||||||||||
Reinvested | 24,845 | 9,692 | 5,198 | 1,737 | 12,162 | — | |||||||||||||||||||||
Redeemed | (79,211 | ) | (28,013 | ) | (14,324 | ) | (24,059 | ) | (29,842 | ) | (13,262 | ) | |||||||||||||||
Total Class R Shares | 28,497 | 14,736 | 4,333 | (10,408 | ) | (7,314 | ) | (4,169 | ) | ||||||||||||||||||
Class R6 Shares | |||||||||||||||||||||||||||
Issued | 1,459,295 | 311,689 | 2,231 | 1,687 | 77,219 | 77,929 | |||||||||||||||||||||
Reinvested | 227,151 | 7,921 | 2,430 | 394 | 28,900 | — | |||||||||||||||||||||
Redeemed | (217,059 | ) | (14,220 | ) | (24 | ) | — | (3,537 | ) | (371 | ) | ||||||||||||||||
Total Class R6 Shares | 1,469,387 | 305,390 | 4,637 | 2,081 | 102,582 | 77,558 | |||||||||||||||||||||
Class Y Shares | |||||||||||||||||||||||||||
Issued | 4,671,397 | 4,621,156 | 606,709 | 870,381 | 8,077,236 | 7,235,933 | |||||||||||||||||||||
Reinvested | 2,342,907 | 1,731,408 | 1,315,368 | 595,628 | 1,852,263 | — | |||||||||||||||||||||
Redeemed | (4,774,238 | ) | (13,989,414 | ) | (3,107,726 | ) | (2,551,259 | ) | (9,888,828 | ) | (3,267,979 | ) | |||||||||||||||
Total Class Y Shares | 2,240,066 | (7,636,850 | ) | (1,185,649 | ) | (1,085,250 | ) | 40,671 | 3,967,954 | ||||||||||||||||||
Change in Shares | 4,874,663 | (7,610,167 | ) | (1,044,329 | ) | (1,987,366 | ) | (247,745 | ) | (2,866,185 | ) |
See notes to financial statements.
50
Victory Portfolios | Statements of Changes in Net Assets |
Victory RS Growth Fund | Victory RS Science and Technology Fund | Victory RS Small Cap Equity Fund | |||||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2018 | Year Ended December 31, 2017 | ||||||||||||||||||||||
From Investment Activities: | |||||||||||||||||||||||||||
Operations: | |||||||||||||||||||||||||||
Net investment income (loss) | $ | (700,567 | ) | $ | (226,537 | ) | $ | (2,560,543 | ) | $ | (2,010,100 | ) | $ | (595,282 | ) | $ | (568,164 | ) | |||||||||
Net realized gains (losses) from investment transactions | 28,910,507 | 21,223,743 | 29,219,309 | 30,267,179 | 14,361,115 | 11,338,570 | |||||||||||||||||||||
Net change in unrealized appreciation/ depreciation on investments | (43,461,446 | ) | 45,536,185 | (35,986,495 | ) | 32,448,835 | (18,554,821 | ) | 9,907,721 | ||||||||||||||||||
Change in net assets resulting from operations | (15,251,506 | ) | 66,533,391 | (9,327,729 | ) | 60,705,914 | (4,788,988 | ) | 20,678,127 | ||||||||||||||||||
Distributions to Shareholders: (a) | |||||||||||||||||||||||||||
Class A Shares | (27,566,639 | ) | (10,776,472 | ) | (20,359,029 | ) | (21,685,805 | ) | (13,226,281 | ) | (3,143,304 | ) | |||||||||||||||
Class C Shares | (842,729 | ) | (392,949 | ) | (2,120,416 | ) | (2,079,352 | ) | (209,470 | ) | (47,723 | ) | |||||||||||||||
Class R Shares | (107,275 | ) | (43,485 | ) | (192,779 | ) | (278,523 | ) | (780,300 | ) | (187,965 | ) | |||||||||||||||
Class Y Shares | (3,780,962 | ) | (1,451,934 | ) | (7,184,754 | ) | (4,622,430 | ) | (533,247 | ) | (302,697 | ) | |||||||||||||||
Change in net assets resulting from distributions to shareholders | (32,297,605 | ) | (12,664,840 | ) | (29,856,978 | ) | (28,666,110 | ) | (14,749,298 | ) | (3,681,689 | ) | |||||||||||||||
Change in net assets resulting from capital transactions | 10,800,103 | (22,086,756 | ) | 53,948,216 | 23,443,993 | 999,823 | 1,556,442 | ||||||||||||||||||||
Change in net assets | (36,749,008 | ) | 31,781,795 | 14,763,509 | 55,483,797 | (18,538,463 | ) | 18,552,880 | |||||||||||||||||||
Net Assets: | |||||||||||||||||||||||||||
Beginning of period | 256,350,589 | 224,568,794 | 191,584,568 | 136,100,771 | 75,825,944 | 57,273,064 | |||||||||||||||||||||
End of period | $ | 219,601,581 | $ | 256,350,589 | $ | 206,348,077 | $ | 191,584,568 | $ | 57,287,481 | $ | 75,825,944 |
(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.
51
Victory Portfolios | Statements of Changes in Net Assets |
(continued)
Victory RS Growth Fund | Victory RS Science and Technology Fund | Victory RS Small Cap Equity Fund | |||||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2018 | Year Ended December 31, 2017 | ||||||||||||||||||||||
Capital Transactions: | |||||||||||||||||||||||||||
Class A Shares | |||||||||||||||||||||||||||
Proceeds from shares issued | $ | 6,647,316 | $ | 6,079,169 | $ | 45,799,664 | $ | 20,793,071 | $ | 2,996,513 | $ | 3,700,782 | |||||||||||||||
Distributions reinvested | 26,853,288 | 10,508,652 | 19,428,046 | 21,027,140 | 13,049,204 | 3,104,349 | |||||||||||||||||||||
Cost of shares redeemed | (22,877,989 | ) | (34,048,087 | ) | (47,927,603 | ) | (25,387,510 | ) | (12,380,756 | ) | (8,905,490 | ) | |||||||||||||||
Total Class A Shares | $ | 10,622,615 | $ | (17,460,266 | ) | $ | 17,300,107 | $ | 16,432,701 | $ | 3,664,961 | $ | (2,100,359 | ) | |||||||||||||
Class C Shares | |||||||||||||||||||||||||||
Proceeds from shares issued | $ | 890,775 | $ | 744,039 | $ | 3,866,344 | $ | 946,759 | $ | 528,709 | $ | 45,855 | |||||||||||||||
Distributions reinvested | 689,704 | 322,627 | 1,929,817 | 1,841,237 | 209,470 | 47,051 | |||||||||||||||||||||
Cost of shares redeemed | (2,955,385 | ) | (4,271,007 | ) | (3,343,244 | ) | (3,300,552 | ) | (395,878 | ) | (65,480 | ) | |||||||||||||||
Total Class C Shares | $ | (1,374,906 | ) | $ | (3,204,341 | ) | $ | 2,452,917 | $ | (512,556 | ) | $ | 342,301 | $ | 27,426 | ||||||||||||
Class R Shares | |||||||||||||||||||||||||||
Proceeds from shares issued | $ | 160,857 | $ | 199,868 | $ | 227,735 | $ | 231,685 | $ | 378,935 | $ | 403,870 | |||||||||||||||
Distributions reinvested | 107,275 | 43,485 | 192,779 | 278,523 | 780,300 | 187,965 | |||||||||||||||||||||
Cost of shares redeemed | (421,435 | ) | (687,634 | ) | (1,256,857 | ) | (501,293 | ) | (1,202,751 | ) | (1,007,770 | ) | |||||||||||||||
Total Class R Shares | $ | (153,303 | ) | $ | (444,281 | ) | $ | (836,343 | ) | $ | 8,915 | $ | (43,516 | ) | $ | (415,935 | ) | ||||||||||
Class Y Shares | |||||||||||||||||||||||||||
Proceeds from shares issued | $ | 3,514,242 | $ | 7,534,466 | $ | 67,459,196 | $ | 13,145,394 | $ | 1,935,138 | $ | 4,530,016 | |||||||||||||||
Distributions reinvested | 3,588,161 | 1,315,590 | 6,895,347 | 4,113,118 | 530,782 | 287,256 | |||||||||||||||||||||
Cost of shares redeemed | (5,396,706 | ) | (9,827,924 | ) | (39,323,008 | ) | (9,743,579 | ) | (5,429,843 | ) | (771,962 | ) | |||||||||||||||
Total Class Y Shares | $ | 1,705,697 | $ | (977,868 | ) | $ | 35,031,535 | $ | 7,514,933 | $ | (2,963,923 | ) | $ | 4,045,310 | |||||||||||||
Change in net assets resulting from capital transactions | $ | 10,800,103 | $ | (22,086,756 | ) | $ | 53,948,216 | $ | 23,443,993 | $ | 999,823 | $ | 1,556,442 |
(continues on next page)
See notes to financial statements.
52
Victory Portfolios | Statements of Changes in Net Assets |
(continued)
Victory RS Growth Fund | Victory RS Science and Technology Fund | Victory RS Small Cap Equity Fund | |||||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2018 | Year Ended December 31, 2017 | ||||||||||||||||||||||
Share Transactions: | |||||||||||||||||||||||||||
Class A Shares | |||||||||||||||||||||||||||
Issued | 310,179 | 318,962 | 1,863,602 | 966,693 | 147,464 | 215,116 | |||||||||||||||||||||
Reinvested | 1,650,479 | 508,155 | 1,077,540 | 983,956 | 1,016,293 | 164,338 | |||||||||||||||||||||
Redeemed | (1,077,534 | ) | (1,782,555 | ) | (2,057,895 | ) | (1,184,710 | ) | (654,258 | ) | (522,845 | ) | |||||||||||||||
Total Class A Shares | 883,124 | (955,438 | ) | 883,247 | 765,939 | 509,499 | (143,391 | ) | |||||||||||||||||||
Class C Shares | |||||||||||||||||||||||||||
Issued | 53,479 | 43,982 | 206,957 | 51,487 | 77,353 | 5,111 | |||||||||||||||||||||
Reinvested | 50,531 | 17,963 | 136,190 | 104,794 | 48,044 | 4,891 | |||||||||||||||||||||
Redeemed | (172,906 | ) | (257,070 | ) | (187,012 | ) | (179,801 | ) | (40,999 | ) | (7,470 | ) | |||||||||||||||
Total Class C Shares | (68,896 | ) | (195,125 | ) | 156,135 | (23,520 | ) | 84,398 | 2,532 | ||||||||||||||||||
Class R Shares | |||||||||||||||||||||||||||
Issued | 7,993 | 11,331 | 10,724 | 12,309 | 22,190 | 28,179 | |||||||||||||||||||||
Reinvested | 7,205 | 2,253 | 12,486 | 14,799 | 76,350 | 11,682 | |||||||||||||||||||||
Redeemed | (24,044 | ) | (38,454 | ) | (67,986 | ) | (25,622 | ) | (85,841 | ) | (67,107 | ) | |||||||||||||||
Total Class R Shares | (8,846 | ) | (24,870 | ) | (44,776 | ) | 1,486 | 12,699 | (27,246 | ) | |||||||||||||||||
Class Y Shares | |||||||||||||||||||||||||||
Issued | 161,376 | 399,493 | 2,542,760 | 597,609 | 109,862 | 238,255 | |||||||||||||||||||||
Reinvested | 212,192 | 61,736 | 355,614 | 181,275 | 40,364 | 14,953 | |||||||||||||||||||||
Redeemed | (248,627 | ) | (521,271 | ) | (1,590,202 | ) | (431,893 | ) | (276,436 | ) | (45,406 | ) | |||||||||||||||
Total Class Y Shares | 124,941 | (60,042 | ) | 1,308,172 | 346,991 | (126,210 | ) | 207,802 | |||||||||||||||||||
Change in Shares | 930,323 | (1,235,475 | ) | 2,302,778 | 1,090,896 | 480,386 | 39,697 |
See notes to financial statements.
53
Victory Portfolios | Financial Highlights |
For a Share Outstanding Throughout Each Period
Victory RS Small Cap Growth Fund | |||||||||||||||||||||||
Class A Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 80.96 | $ | 65.31 | $ | 64.73 | $ | 65.53 | $ | 63.68 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | (0.83 | ) | (0.75 | ) | (0.55 | ) | (0.74 | ) | (0.71 | ) | |||||||||||||
Net realized and unrealized gains (losses) on investments | (6.54 | ) | 24.13 | 1.13 | 0.80 | 6.64 | |||||||||||||||||
Total from Investment Activities | (7.37 | ) | 23.38 | 0.58 | 0.06 | 5.93 | |||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | — | — | — | — | (0.57 | ) | |||||||||||||||||
Net realized gains from investments | (12.48 | ) | (7.73 | ) | — | (0.86 | ) | (3.51 | ) | ||||||||||||||
Total Distributions to Shareholders | (12.48 | ) | (7.73 | ) | — | (0.86 | ) | (4.08 | ) | ||||||||||||||
Net Asset Value, End of Period | $ | 61.11 | $ | 80.96 | $ | 65.31 | $ | 64.73 | $ | 65.53 | |||||||||||||
Total Return (excludes sales charge) | (8.97 | )% | 36.86 | % | 0.90 | % | 0.08 | % | 9.36 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 499,350 | $ | 575,227 | $ | 481,125 | $ | 767,304 | $ | 618,656 | |||||||||||||
Ratio of net expenses to average net assets | 1.40 | % | 1.40 | % | 1.40 | % | 1.40 | % | 1.38 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | (0.94 | )% | (1.00 | )% | (0.92 | )% | (1.07 | )% | (1.12 | )% | |||||||||||||
Ratio of gross expenses to average net assets (b) | 1.45 | % | 1.44 | % | 1.45 | % | 1.41 | % | 1.42 | % | |||||||||||||
Portfolio turnover (c) | 86 | % | 107 | % | 91 | % | 94 | % | 104 | % |
(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.
54
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory RS Small Cap Growth Fund | |||||||||||||||||||||||
Class C Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 71.70 | $ | 58.97 | $ | 58.90 | $ | 60.15 | $ | 58.84 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | (1.31 | ) | (1.18 | ) | (0.90 | ) | (1.15 | ) | (1.09 | ) | |||||||||||||
Net realized and unrealized gains (losses) on investments | (5.72 | ) | 21.64 | 0.97 | 0.76 | 6.08 | |||||||||||||||||
Total from Investment Activities | (7.03 | ) | 20.46 | 0.07 | (0.39 | ) | 4.99 | ||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | — | — | — | — | (0.17 | ) | |||||||||||||||||
Net realized gains from investments | (12.48 | ) | (7.73 | ) | — | (0.86 | ) | (3.51 | ) | ||||||||||||||
Total Distributions to Shareholders | (12.48 | ) | (7.73 | ) | — | (0.86 | ) | (3.68 | ) | ||||||||||||||
Net Asset Value, End of Period | $ | 52.19 | $ | 71.70 | $ | 58.97 | $ | 58.90 | $ | 60.15 | |||||||||||||
Total Return (excludes contingent deferred sales charge) | (9.66 | )% | 35.84 | % | 0.12 | % | (0.67 | )% | 8.52 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 13,602 | $ | 13,633 | $ | 13,035 | $ | 20,878 | $ | 11,792 | |||||||||||||
Ratio of net expenses to average net assets | 2.16 | % | 2.16 | % | 2.16 | % | 2.16 | % | 2.15 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | (1.71 | )% | (1.75 | )% | (1.67 | )% | (1.67 | )% | (1.88 | )% | |||||||||||||
Ratio of gross expenses to average net assets (b) | 2.26 | % | 2.23 | % | 2.22 | % | 2.22 | % | 2.29 | % | |||||||||||||
Portfolio turnover (c) | 86 | % | 107 | % | 91 | % | 94 | % | 104 | % |
(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 RS Small Cap Growth Fund | |||||||||||||||||||||||
Class R Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 75.55 | $ | 61.63 | $ | 61.27 | $ | 62.28 | $ | 60.77 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | (1.15 | ) | (1.04 | ) | (0.68 | ) | (0.93 | ) | (0.94 | ) | |||||||||||||
Net realized and unrealized gains (losses) on investments | (6.05 | ) | 22.69 | 1.04 | 0.78 | 6.29 | |||||||||||||||||
Total from Investment Activities | (7.20 | ) | 21.65 | 0.36 | (0.15 | ) | 5.35 | ||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | — | — | — | — | (0.33 | ) | |||||||||||||||||
Net realized gains from investments | (12.48 | ) | (7.73 | ) | — | (0.86 | ) | (3.51 | ) | ||||||||||||||
Total Distributions to Shareholders | (12.48 | ) | (7.73 | ) | — | (0.86 | ) | (3.84 | ) | ||||||||||||||
Net Asset Value, End of Period | $ | 55.87 | $ | 75.55 | $ | 61.63 | $ | 61.27 | $ | 62.28 | |||||||||||||
Total Return | (9.39 | )% | 36.24 | % | 0.59 | % | (0.26 | )% | 8.86 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 7,285 | $ | 7,698 | $ | 5,371 | $ | 5,241 | $ | 2,621 | |||||||||||||
Ratio of net expenses to average net assets | 1.86 | % | 1.86 | % | 1.70 | % | 1.75 | % | 1.84 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | (1.40 | )% | (1.46 | )% | (1.20 | )% | (1.41 | )% | (1.58 | )% | |||||||||||||
Ratio of gross expenses to average net assets (b) | 1.87 | % | 1.94 | % | 1.70 | % | 1.75 | % | 1.88 | % | |||||||||||||
Portfolio turnover (c) | 86 | % | 107 | % | 91 | % | 94 | % | 104 | % |
(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 RS Small Cap Growth Fund | |||||||||||
Class R6 Shares | |||||||||||
Year Ended December 31, 2018 | Period Ended December 31, 2017(a) | ||||||||||
Net Asset Value, Beginning of Period | $ | 83.67 | $ | 79.23 | |||||||
Investment Activities: | |||||||||||
Net investment income (loss) (b) | (0.58 | ) | (0.41 | ) | |||||||
Net realized and unrealized gains (losses) on investments | (6.78 | ) | 12.58 | ||||||||
Total from Investment Activities | (7.36 | ) | 12.17 | ||||||||
Distributions to Shareholders: | |||||||||||
Net realized gains from investments | (12.48 | ) | (7.73 | ) | |||||||
Total Distributions to Shareholders | (12.48 | ) | (7.73 | ) | |||||||
Net Asset Value, End of Period | $ | 63.83 | $ | 83.67 | |||||||
Total Return (c) | (8.66 | )% | 16.23 | % | |||||||
Ratios/Supplemental Data: | |||||||||||
Net Assets at end of period (000) | $ | 113,288 | $ | 25,551 | |||||||
Ratio of net expenses to average net assets (d) | 1.06 | % | 1.06 | % | |||||||
Ratio of net investment income (loss) to average net assets (d) | (0.64 | )% | (1.03 | )% | |||||||
Ratio of gross expenses to average net assets (d) (e) | 1.10 | % | 1.41 | % | |||||||
Portfolio turnover (c) (f) | 86 | % | 107 | % |
(a) Class R6 Shares commenced operations on July 12, 2017.
(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.
57
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory RS Small Cap Growth Fund | |||||||||||||||||||||||
Class Y Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 83.64 | $ | 67.08 | $ | 66.32 | $ | 67.04 | $ | 65.06 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | (0.61 | ) | (0.53 | ) | (0.39 | ) | (0.56 | ) | (0.54 | ) | |||||||||||||
Net realized and unrealized gains (losses) on investments | (6.80 | ) | 24.82 | 1.16 | 0.81 | 6.79 | |||||||||||||||||
Total from Investment Activities | (7.41 | ) | 24.29 | 0.77 | 0.25 | 6.25 | |||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | — | — | (0.01 | ) | (0.11 | ) | (0.76 | ) | |||||||||||||||
Net realized gains from investments | (12.48 | ) | (7.73 | ) | — | (0.86 | ) | (3.51 | ) | ||||||||||||||
Total Distributions to Shareholders | (12.48 | ) | (7.73 | ) | (0.01 | ) | (0.97 | ) | (4.27 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 63.75 | $ | 83.64 | $ | 67.08 | $ | 66.32 | $ | 67.04 | |||||||||||||
Total Return | (8.72 | )% | 37.23 | % | 1.16 | % | 0.36 | % | 9.65 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 967,112 | $ | 1,081,427 | $ | 1,379,669 | $ | 1,576,927 | $ | 504,974 | |||||||||||||
Ratio of net expenses to average net assets | 1.13 | % | 1.13 | % | 1.13 | % | 1.13 | % | 1.11 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | (0.67 | )% | (0.68 | )% | (0.64 | )% | (0.79 | )% | (0.84 | )% | |||||||||||||
Ratio of gross expenses to average net assets (b) | 1.15 | % | 1.17 | % | 1.21 | % | 1.18 | % | 1.13 | % | |||||||||||||
Portfolio turnover (c) | 86 | % | 107 | % | 91 | % | 94 | % | 104 | % |
(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 |
For a Share Outstanding Throughout Each Period
Victory RS Select Growth Fund | |||||||||||||||||||||||
Class A Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 46.03 | $ | 45.04 | $ | 43.54 | $ | 47.80 | $ | 49.57 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | (0.42 | ) | (0.43 | ) | (0.32 | ) | (0.41 | ) | (0.52 | ) | |||||||||||||
Net realized and unrealized gains (losses) on investments | (3.12 | ) | 8.16 | 3.30 | 0.24 | 1.08 | |||||||||||||||||
Total from Investment Activities | (3.54 | ) | 7.73 | 2.98 | (0.17 | ) | 0.56 | ||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net realized gains from investments | (13.53 | ) | (6.74 | ) | (1.48 | ) | (4.09 | ) | (2.33 | ) | |||||||||||||
Total Distributions to Shareholders | (13.53 | ) | (6.74 | ) | (1.48 | ) | (4.09 | ) | (2.33 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 28.96 | $ | 46.03 | $ | 45.04 | $ | 43.54 | $ | 47.80 | |||||||||||||
Total Return (excludes sales charge) | (7.23 | )% | 17.10 | % | 6.85 | % | (0.38 | )% | 1.16 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 94,393 | $ | 147,531 | $ | 170,825 | $ | 238 | $ | 284,499 | |||||||||||||
Ratio of net expenses to average net assets | 1.40 | % | 1.40 | % | 1.40 | % | 1.40 | % | 1.38 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | (0.86 | )% | (0.88 | )% | (0.74 | )% | (0.84 | )% | (1.08 | )% | |||||||||||||
Ratio of gross expenses to average net assets (b) | 1.50 | % | 1.49 | % | 1.47 | % | 1.44 | % | 1.43 | % | |||||||||||||
Portfolio turnover (c) | 79 | % | 69 | % | 89 | % | 86 | % | 96 | % |
(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 — continued |
For a Share Outstanding Throughout Each Period
Victory RS Select Growth Fund | |||||||||||||||||||||||
Class C Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 40.80 | $ | 40.89 | $ | 39.97 | $ | 44.57 | $ | 46.73 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | (0.70 | ) | (0.73 | ) | (0.60 | ) | (0.74 | ) | (0.83 | ) | |||||||||||||
Net realized and unrealized gains (losses) on investments | (2.75 | ) | 7.38 | 3.00 | 0.23 | 1.00 | |||||||||||||||||
Total from Investment Activities | (3.45 | ) | 6.65 | 2.40 | (0.51 | ) | 0.17 | ||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net realized gains from investments | (13.53 | ) | (6.74 | ) | (1.48 | ) | (4.09 | ) | (2.33 | ) | |||||||||||||
Total Distributions to Shareholders | (13.53 | ) | (6.74 | ) | (1.48 | ) | (4.09 | ) | (2.33 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 23.82 | $ | 40.80 | $ | 40.89 | $ | 39.97 | $ | 44.57 | |||||||||||||
Total Return (excludes contingent deferred sales charge) | (7.98 | )% | 16.19 | % | 6.04 | % | (1.17 | )% | 0.39 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 31,754 | $ | 51,208 | $ | 63,841 | $ | 83 | $ | 86,025 | |||||||||||||
Ratio of net expenses to average net assets | 2.18 | % | 2.18 | % | 2.18 | % | 2.18 | % | 2.16 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | (1.64 | )% | (1.66 | )% | (1.52 | )% | (1.62 | )% | (1.85 | )% | |||||||||||||
Ratio of gross expenses to average net assets (b) | 2.25 | % | 2.24 | % | 2.23 | % | 2.20 | % | 2.25 | % | |||||||||||||
Portfolio turnover (c) | 79 | % | 69 | % | 89 | % | 86 | % | 96 | % |
(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.
60
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory RS Select Growth Fund | |||||||||||||||||||||||
Class R Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 41.06 | $ | 41.00 | $ | 39.93 | $ | 44.40 | $ | 46.38 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | (0.59 | ) | (0.61 | ) | (0.46 | ) | (0.59 | ) | (0.71 | ) | |||||||||||||
Net realized and unrealized gains (losses) on investments | (2.78 | ) | 7.41 | 3.01 | 0.21 | 1.06 | |||||||||||||||||
Total from Investment Activities | (3.37 | ) | 6.80 | 2.55 | (0.38 | ) | — | ||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net realized gains from investments | (13.53 | ) | (6.74 | ) | (1.48 | ) | (4.09 | ) | (2.33 | ) | |||||||||||||
Total Distributions to Shareholders | (13.53 | ) | (6.74 | ) | (1.48 | ) | (4.09 | ) | (2.33 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 24.16 | $ | 41.06 | $ | 41.00 | $ | 39.93 | $ | 44.40 | |||||||||||||
Total Return | (7.70 | )% | 16.51 | % | 6.39 | % | (0.88 | )% | 0.78 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 701 | $ | 1,014 | $ | 1,440 | $ | 2 | $ | 1,239 | |||||||||||||
Ratio of net expenses to average net assets | 1.91 | % | 1.91 | % | 1.82 | % | 1.90 | % | 1.89 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | (1.38 | )% | (1.39 | )% | (1.17 | )% | (1.30 | )% | (1.57 | )% | |||||||||||||
Ratio of gross expenses to average net assets (b) | 3.60 | % | 2.90 | % | 1.82 | % | 1.90 | % | 1.97 | % | |||||||||||||
Portfolio turnover (c) | 79 | % | 69 | % | 89 | % | 86 | % | 96 | % |
(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.
61
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory RS Select Growth Fund | |||||||||||||||
Class R6 Shares | |||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Period Ended December 31, 2016(a) | |||||||||||||
Net Asset Value, Beginning of Period | $ | 47.53 | $ | 46.16 | $ | 46.65 | |||||||||
Investment Activities: | |||||||||||||||
Net investment income (loss) (b) | (0.29 | ) | (0.28 | ) | (0.03 | ) | |||||||||
Net realized and unrealized gains (losses) on investments | (3.21 | ) | 8.39 | 1.02 | |||||||||||
Total from Investment Activities | (3.50 | ) | 8.11 | 0.99 | |||||||||||
Distributions to Shareholders: | |||||||||||||||
Net realized gains from investments | (13.53 | ) | (6.74 | ) | (1.48 | ) | |||||||||
Total Distributions to Shareholders | (13.53 | ) | (6.74 | ) | (1.48 | ) | |||||||||
Net Asset Value, End of Period | $ | 30.50 | $ | 47.53 | $ | 46.16 | |||||||||
Total Return (c) | (6.92 | )% | 17.48 | % | 2.15 | % | |||||||||
Ratios/Supplemental Data: | |||||||||||||||
Net Assets at end of period (000) | $ | 239 | $ | 151 | $ | 51 | |||||||||
Ratio of net expenses to average net assets (d) | 1.06 | % | 1.06 | % | 1.06 | % | |||||||||
Ratio of net investment income (loss) to average net assets (d) | (0.59 | )% | (0.55 | )% | (0.43 | )% | |||||||||
Ratio of gross expenses to average net assets (d) (e) | 6.33 | % | 27.47 | % | 26.37 | % | |||||||||
Portfolio turnover (c) (f) | 79 | % | 69 | % | 89 | % |
(a) Class R6 Shares commenced operations on November 15, 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) 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.
62
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory RS Select Growth Fund | |||||||||||||||||||||||
Class Y Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 47.47 | $ | 46.15 | $ | 44.47 | $ | 48.61 | $ | 50.24 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | (0.30 | ) | (0.31 | ) | (0.21 | ) | (0.29 | ) | (0.39 | ) | |||||||||||||
Net realized and unrealized gains (losses) on investments | (3.23 | ) | 8.37 | 3.37 | 0.24 | 1.09 | |||||||||||||||||
Total from Investment Activities | (3.53 | ) | 8.06 | 3.16 | (0.05 | ) | 0.70 | ||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net realized gains from investments | (13.53 | ) | (6.74 | ) | (1.48 | ) | (4.09 | ) | (2.33 | ) | |||||||||||||
Total Distributions to Shareholders | (13.53 | ) | (6.74 | ) | (1.48 | ) | (4.09 | ) | (2.33 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 30.41 | $ | 47.47 | $ | 46.15 | $ | 44.47 | $ | 48.61 | |||||||||||||
Total Return | (7.02 | )% | 17.40 | % | 7.13 | % | (0.12 | )% | 1.42 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 120,696 | $ | 244,689 | $ | 287,970 | $ | 403 | $ | 474,596 | |||||||||||||
Ratio of net expenses to average net assets | 1.14 | % | 1.14 | % | 1.14 | % | 1.14 | % | 1.12 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | (0.59 | )% | (0.62 | )% | (0.49 | )% | (0.58 | )% | (0.81 | )% | |||||||||||||
Ratio of gross expenses to average net assets (b) | 1.21 | % | 1.20 | % | 1.20 | % | 1.18 | % | 1.18 | % | |||||||||||||
Portfolio turnover (c) | 79 | % | 69 | % | 89 | % | 86 | % | 96 | % |
(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.
63
Victory Portfolios | Financial Highlights |
For a Share Outstanding Throughout Each Period
Victory RS Mid Cap Growth Fund | |||||||||||||||||||||||
Class A Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 25.77 | $ | 21.32 | $ | 20.29 | $ | 20.14 | $ | 18.83 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | (0.14 | ) | (0.10 | ) | (0.07 | ) | (0.08 | ) | (0.15 | ) | |||||||||||||
Net realized and unrealized gains (losses) on investments | (1.79 | ) | 4.55 | 1.10 | 0.23 | 1.46 | |||||||||||||||||
Total from Investment Activities | (1.93 | ) | 4.45 | 1.03 | 0.15 | 1.31 | |||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net realized gains from investments | (3.00 | ) | — | — | — | — | |||||||||||||||||
Return of capital | (0.88 | ) | — | — | — | — | |||||||||||||||||
Total Distributions to Shareholders | (3.88 | ) | — | — | — | — | |||||||||||||||||
Net Asset Value, End of Period | $ | 19.96 | $ | 25.77 | $ | 21.32 | $ | 20.29 | $ | 20.14 | |||||||||||||
Total Return (excludes sales charge) | (7.37 | )% | 20.87 | % | 5.08 | % | 0.74 | % | 6.96 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 75,451 | $ | 108,271 | $ | 231,056 | $ | 196,437 | $ | 104,407 | |||||||||||||
Ratio of net expenses to average net assets | 1.20 | % | 1.20 | % | 1.20 | % | 1.23 | % | 1.29 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | (0.53 | )% | (0.44 | )% | (0.35 | )% | (0.39 | )% | (0.81 | )% | |||||||||||||
Ratio of gross expenses to average net assets (b) | 1.34 | % | 1.29 | % | 1.27 | % | 1.31 | % | 1.38 | % | |||||||||||||
Portfolio turnover (c) | 126 | % | 86 | % | 138 | % | 120 | % | 154 | % |
(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.
64
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory RS Mid Cap Growth Fund | |||||||||||||||||||||||
Class C Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 23.22 | $ | 19.38 | $ | 18.61 | $ | 18.64 | $ | 17.56 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | (0.35 | ) | (0.28 | ) | (0.23 | ) | (0.25 | ) | (0.28 | ) | |||||||||||||
Net realized and unrealized gains (losses) on investments | (1.59 | ) | 4.12 | 1.00 | 0.22 | 1.36 | |||||||||||||||||
Total from Investment Activities | (1.94 | ) | 3.84 | 0.77 | (0.03 | ) | 1.08 | ||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net realized gains from investments | (3.65 | ) | — | — | — | — | |||||||||||||||||
Return of capital | (0.23 | ) | — | — | — | — | |||||||||||||||||
Total Distributions to Shareholders | (3.88 | ) | — | — | — | — | |||||||||||||||||
Net Asset Value, End of Period | $ | 17.40 | $ | 23.22 | $ | 19.38 | $ | 18.61 | $ | 18.64 | |||||||||||||
Total Return (excludes contingent deferred sales charge) | (8.23 | )% | 19.81 | % | 4.14 | % | (0.16 | )% | 6.15 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 18,072 | $ | 23,264 | $ | 24,618 | $ | 26,793 | $ | 13,040 | |||||||||||||
Ratio of net expenses to average net assets | 2.11 | % | 2.10 | % | 2.11 | % | 2.11 | % | 2.10 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | (1.44 | )% | (1.33 | )% | (1.25 | )% | (1.30 | )% | (1.61 | )% | |||||||||||||
Ratio of gross expenses to average net assets (b) | 2.12 | % | 2.10 | % | 2.11 | % | 2.11 | % | 2.22 | % | |||||||||||||
Portfolio turnover (c) | 126 | % | 86 | % | 138 | % | 120 | % | 154 | % |
(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.
65
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory RS Mid Cap Growth Fund | |||||||||||||||||||||||
Class R Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 24.14 | $ | 20.09 | $ | 19.22 | $ | 19.18 | $ | 18.01 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | (0.29 | ) | (0.23 | ) | (0.16 | ) | (0.18 | ) | (0.24 | ) | |||||||||||||
Net realized and unrealized gains (losses) on investments | (1.66 | ) | 4.28 | 1.03 | 0.22 | 1.41 | |||||||||||||||||
Total from Investment Activities | (1.95 | ) | 4.05 | 0.87 | 0.04 | 1.17 | |||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net realized gains from investments | (3.86 | ) | — | — | — | — | |||||||||||||||||
Return of capital | (0.02 | ) | — | — | — | — | |||||||||||||||||
Total Distributions to Shareholders | (3.88 | ) | — | — | — | — | |||||||||||||||||
Net Asset Value, End of Period | $ | 18.31 | $ | 24.14 | $ | 20.09 | $ | 19.22 | $ | 19.18 | |||||||||||||
Total Return | (7.99 | )% | 20.21 | % | 4.53 | % | 0.21 | % | 6.50 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 1,144 | $ | 1,685 | $ | 1,486 | $ | 1,740 | $ | 1,681 | |||||||||||||
Ratio of net expenses to average net assets | 1.80 | % | 1.80 | % | 1.69 | % | 1.74 | % | 1.79 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | (1.13 | )% | (1.03 | )% | (0.84 | )% | (0.93 | )% | (1.31 | )% | |||||||||||||
Ratio of gross expenses to average net assets (b) | 2.68 | % | 2.43 | % | 1.69 | % | 1.74 | % | 1.85 | % | |||||||||||||
Portfolio turnover (c) | 126 | % | 86 | % | 138 | % | 120 | % | 154 | % |
(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.
66
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory RS Mid Cap Growth Fund | |||||||||||||||
Class R6 Shares | |||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Period Ended December 31, 2016(a) | |||||||||||||
Net Asset Value, Beginning of Period | $ | 26.55 | $ | 21.90 | $ | 21.30 | |||||||||
Investment Activities: | |||||||||||||||
Net investment income (loss) (b) | (0.07 | ) | (0.04 | ) | — | (c) | |||||||||
Net realized and unrealized gains (losses) on investments | (1.86 | ) | 4.69 | 0.60 | |||||||||||
Total from Investment Activities | (1.93 | ) | 4.65 | 0.60 | |||||||||||
Distributions to Shareholders: | |||||||||||||||
Net realized gains from investments | (3.84 | ) | — | — | |||||||||||
Return of capital | (0.04 | ) | — | — | |||||||||||
Total Distributions to Shareholders | (3.88 | ) | — | — | |||||||||||
Net Asset Value, End of Period | $ | 20.74 | $ | 26.55 | $ | 21.90 | |||||||||
Total Return (d) | (7.15 | )% | 21.23 | % | 2.82 | % | |||||||||
Ratios/Supplemental Data: | |||||||||||||||
Net Assets at end of period (000) | $ | 3,793 | $ | 2,132 | $ | 60 | |||||||||
Ratio of net expenses to average net assets (e) | 0.94 | % | 0.94 | % | 0.94 | % | |||||||||
Ratio of net investment income (loss) to average net assets (e) | (0.26 | )% | (0.17 | )% | (0.02 | )% | |||||||||
Ratio of gross expenses to average net assets (e) (f) | 1.32 | % | 2.26 | % | 25.90 | % | |||||||||
Portfolio turnover (d) (g) | 126 | % | 86 | % | 138 | % |
(a) Class R6 Shares commenced operations on November 15, 2016.
(b) Per share net investment income (loss) has been calculated using the average daily shares method.
(c) Amount is less than $0.005 per share.
(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.
67
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory RS Mid Cap Growth Fund | |||||||||||||||||||||||
Class Y Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 26.54 | $ | 21.90 | $ | 20.79 | $ | 20.58 | $ | 19.19 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | (0.08 | ) | (0.04 | ) | (0.02 | ) | (0.03 | ) | (0.10 | ) | |||||||||||||
Net realized and unrealized gains (losses) on investments | (1.85 | ) | 4.68 | 1.13 | 0.24 | 1.49 | |||||||||||||||||
Total from Investment Activities | (1.93 | ) | 4.64 | 1.11 | 0.21 | 1.39 | |||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net realized gains from investments | (1.17 | ) | — | — | — | — | |||||||||||||||||
Return of capital | (2.71 | ) | — | — | — | — | |||||||||||||||||
Total Distributions to Shareholders | (3.88 | ) | — | — | — | — | |||||||||||||||||
Net Asset Value, End of Period | $ | 20.73 | $ | 26.54 | $ | 21.90 | $ | 20.79 | $ | 20.58 | |||||||||||||
Total Return | (7.15 | )% | 21.19 | % | 5.34 | % | 1.02 | % | 7.24 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 243,009 | $ | 310,050 | $ | 168,936 | $ | 173,629 | $ | 73,672 | |||||||||||||
Ratio of net expenses to average net assets | 0.95 | % | 0.95 | % | 0.95 | % | 0.97 | % | 1.04 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | (0.27 | )% | (0.18 | )% | (0.10 | )% | (0.15 | )% | (0.53 | )% | |||||||||||||
Ratio of gross expenses to average net assets (b) | 1.05 | % | 1.06 | % | 1.05 | % | 1.08 | % | 1.11 | % | |||||||||||||
Portfolio turnover (c) | 126 | % | 86 | % | 138 | % | 120 | % | 154 | % |
(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.
68
Victory Portfolios | Financial Highlights |
For a Share Outstanding Throughout Each Period
Victory RS Growth Fund | |||||||||||||||||||||||
Class A Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 20.60 | $ | 16.44 | $ | 17.49 | $ | 18.01 | $ | 19.33 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) | (0.06 | )(a) | (0.02 | )(a) | (0.02 | )(a) | (0.03 | )(a) | (0.07 | ) | |||||||||||||
Net realized and unrealized gains (losses) on investments | (1.36 | ) | 5.24 | 0.36 | 0.74 | 2.02 | |||||||||||||||||
Total from Investment Activities | (1.42 | ) | 5.22 | 0.34 | 0.71 | 1.95 | |||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net realized gains from investments | (2.78 | ) | (1.06 | ) | (1.39 | ) | (1.23 | ) | (3.27 | ) | |||||||||||||
Total Distributions to Shareholders | (2.78 | ) | (1.06 | ) | (1.39 | ) | (1.23 | ) | (3.27 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 16.40 | $ | 20.60 | $ | 16.44 | $ | 17.49 | $ | 18.01 | |||||||||||||
Total Return (excludes sales charge) | (6.81 | )% | 31.75 | % | 1.86 | % | 3.94 | % | 9.98 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 188,220 | $ | 218,238 | $ | 189,921 | $ | 204,027 | $ | 210,508 | |||||||||||||
Ratio of net expenses to average net assets | 1.10 | % | 1.10 | % | 1.10 | % | 1.10 | % | 1.14 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | (0.28 | )% | (0.09 | )% | (0.09 | )% | (0.18 | )% | (0.39 | )% | |||||||||||||
Ratio of gross expenses to average net assets (b) | 1.19 | % | 1.20 | % | 1.20 | % | 1.19 | % | 1.21 | % | |||||||||||||
Portfolio turnover (c) | 87 | % | 74 | % | 123 | % | 105 | % | 136 | % |
(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 RS Growth Fund | |||||||||||||||||||||||
Class C Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 17.90 | $ | 14.51 | $ | 15.73 | $ | 16.45 | $ | 18.06 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) | (0.21 | )(a) | (0.15 | )(a) | (0.14 | )(a) | (0.17 | )(a) | (0.15 | ) | |||||||||||||
Net realized and unrealized gains (losses) on investments | (1.16 | ) | 4.60 | 0.31 | 0.68 | 1.81 | |||||||||||||||||
Total from Investment Activities | (1.37 | ) | 4.45 | 0.17 | 0.51 | 1.66 | |||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net realized gains from investments | (2.78 | ) | (1.06 | ) | (1.39 | ) | (1.23 | ) | (3.27 | ) | |||||||||||||
Total Distributions to Shareholders | (2.78 | ) | (1.06 | ) | (1.39 | ) | (1.23 | ) | (3.27 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 13.75 | $ | 17.90 | $ | 14.51 | $ | 15.73 | $ | 16.45 | |||||||||||||
Total Return (excludes contingent deferred sales charge) | (7.56 | )% | 30.57 | % | 1.05 | % | 3.09 | % | 9.07 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 4,409 | $ | 6,974 | $ | 8,487 | $ | 11,553 | $ | 13,300 | |||||||||||||
Ratio of net expenses to average net assets | 1.93 | % | 1.93 | % | 1.93 | % | 1.93 | % | 1.97 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | (1.10 | )% | (0.92 | )% | (0.93 | )% | (1.02 | )% | (1.21 | )% | |||||||||||||
Ratio of gross expenses to average net assets (b) | 2.20 | % | 2.10 | % | 2.06 | % | 2.02 | % | 2.06 | % | |||||||||||||
Portfolio turnover (c) | 87 | % | 74 | % | 123 | % | 105 | % | 136 | % |
(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 RS Growth Fund | |||||||||||||||||||||||
Class R Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 19.22 | $ | 15.49 | $ | 16.65 | $ | 17.31 | $ | 18.80 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) | (0.18 | )(a) | (0.13 | )(a) | (0.11 | )(a) | (0.14 | )(a) | (0.17 | ) | |||||||||||||
Net realized and unrealized gains (losses) on investments | (1.26 | ) | 4.92 | 0.34 | 0.71 | 1.95 | |||||||||||||||||
Total from Investment Activities | (1.44 | ) | 4.79 | 0.23 | 0.57 | 1.78 | |||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net realized gains from investments | (2.78 | ) | (1.06 | ) | (1.39 | ) | (1.23 | ) | (3.27 | ) | |||||||||||||
Total Distributions to Shareholders | (2.78 | ) | (1.06 | ) | (1.39 | ) | (1.23 | ) | (3.27 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 15.00 | $ | 19.22 | $ | 15.49 | $ | 16.65 | $ | 17.31 | |||||||||||||
Total Return | (7.41 | )% | 30.92 | % | 1.29 | % | 3.28 | % | 9.36 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 516 | $ | 830 | $ | 1,054 | $ | 979 | $ | 1,249 | |||||||||||||
Ratio of net expenses to average net assets | 1.71 | % | 1.71 | % | 1.71 | % | 1.71 | % | 1.71 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | (0.88 | )% | (0.70 | )% | (0.69 | )% | (0.80 | )% | (0.97 | )% | |||||||||||||
Ratio of gross expenses to average net assets (b) | 3.49 | % | 2.72 | % | 1.77 | % | 1.79 | % | 1.81 | % | |||||||||||||
Portfolio turnover (c) | 87 | % | 74 | % | 123 | % | 105 | % | 136 | % |
(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.
71
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory RS Growth Fund | |||||||||||||||||||||||
Class Y Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 21.23 | $ | 16.88 | $ | 17.87 | $ | 18.33 | $ | 19.56 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) | — | (a)(b) | 0.03 | (a) | 0.03 | (a) | 0.02 | (a) | (0.04 | ) | |||||||||||||
Net realized and unrealized gains (losses) on investments | (1.41 | ) | 5.38 | 0.37 | 0.75 | 2.08 | |||||||||||||||||
Total from Investment Activities | (1.41 | ) | 5.41 | 0.40 | 0.77 | 2.04 | |||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net realized gains from investments | (2.78 | ) | (1.06 | ) | (1.39 | ) | (1.23 | ) | (3.27 | ) | |||||||||||||
Total Distributions to Shareholders | (2.78 | ) | (1.06 | ) | (1.39 | ) | (1.23 | ) | (3.27 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 17.04 | $ | 21.23 | $ | 16.88 | $ | 17.87 | $ | 18.33 | |||||||||||||
Total Return | (6.56 | )% | 32.05 | % | 2.16 | % | 4.20 | % | 10.33 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 26,457 | $ | 30,309 | $ | 25,107 | $ | 38,301 | $ | 37,757 | |||||||||||||
Ratio of net expenses to average net assets | 0.83 | % | 0.83 | % | 0.83 | % | 0.83 | % | 0.86 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | (0.01 | )% | 0.17 | % | 0.17 | % | 0.10 | % | (0.10 | )% | |||||||||||||
Ratio of gross expenses to average net assets (c) | 0.97 | % | 0.97 | % | 0.95 | % | 0.95 | % | 0.91 | % | |||||||||||||
Portfolio turnover (d) | 87 | % | 74 | % | 123 | % | 105 | % | 136 | % |
(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) 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.
72
Victory Portfolios | Financial Highlights |
For a Share Outstanding Throughout Each Period
Victory RS Science and Technology Fund | |||||||||||||||||||||||
Class A Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 21.56 | $ | 17.49 | $ | 17.35 | $ | 18.13 | $ | 20.38 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | (0.27 | ) | (0.25 | ) | (0.22 | ) | (0.19 | ) | (0.24 | ) | |||||||||||||
Net realized and unrealized gains (losses) on investments | 0.06 | (b) | 8.04 | 2.64 | 1.26 | 1.30 | |||||||||||||||||
Total from Investment Activities | (0.21 | ) | 7.79 | 2.42 | 1.07 | 1.06 | |||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net realized gains from investments | (3.01 | ) | (3.72 | ) | (2.28 | ) | (1.85 | ) | (3.31 | ) | |||||||||||||
Total Distributions to Shareholders | (3.01 | ) | (3.72 | ) | (2.28 | ) | (1.85 | ) | (3.31 | ) | |||||||||||||
Capital Contributions from Prior Custodian, Net (See Note 8) | — | — | — | (c) | — | — | |||||||||||||||||
Net Asset Value, End of Period | $ | 18.34 | $ | 21.56 | $ | 17.49 | $ | 17.35 | $ | 18.13 | |||||||||||||
Total Return (excludes sales charge) | (0.73 | )% | 44.74 | % | 13.80 | %(d) | 5.89 | % | 5.26 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 140,389 | $ | 146,002 | $ | 105,041 | $ | 109,201 | $ | 134,534 | |||||||||||||
Ratio of net expenses to average net assets | 1.47 | % | 1.49 | % | 1.51 | % | 1.49 | % | 1.51 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | (1.10 | )% | (1.18 | )% | (1.24 | )% | (1.01 | )% | (1.21 | )% | |||||||||||||
Ratio of gross expenses to average net assets (e) | 1.47 | % | 1.49 | % | 1.52 | % | 1.49 | % | 1.51 | % | |||||||||||||
Portfolio turnover (f) | 83 | % | 89 | % | 114 | % | 119 | % | 146 | % |
(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 net assets resulting from operations during the period because of the timing of sales and purchases of fund shares in relation to fluctuating market values during the period.
(c) Amount is less than $0.005 per share.
(d) The Fund received monies related to a nonrecurring refund from the prior Custodian. The corresponding impact to the total return was less than 0.005% for the period shown. (See Note 8)
(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 RS Science and Technology Fund | |||||||||||||||||||||||
Class C Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 17.73 | $ | 14.96 | $ | 15.25 | $ | 16.27 | $ | 18.77 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | (0.38 | ) | (0.36 | ) | (0.31 | ) | (0.29 | ) | (0.37 | ) | |||||||||||||
Net realized and unrealized gains (losses) on investments | 0.06 | (b) | 6.85 | 2.30 | 1.12 | 1.18 | |||||||||||||||||
Total from Investment Activities | (0.32 | ) | 6.49 | 1.99 | 0.83 | 0.81 | |||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net realized gains from investments | (3.01 | ) | (3.72 | ) | (2.28 | ) | (1.85 | ) | (3.31 | ) | |||||||||||||
Total Distributions to Shareholders | (3.01 | ) | (3.72 | ) | (2.28 | ) | (1.85 | ) | (3.31 | ) | |||||||||||||
Capital Contributions from Prior Custodian, Net (See Note 8) | — | — | — | (c) | — | — | |||||||||||||||||
Net Asset Value, End of Period | $ | 14.40 | $ | 17.73 | $ | 14.96 | $ | 15.25 | $ | 16.27 | |||||||||||||
Total Return (excludes contingent deferred sales charge) | (1.58 | )% | 43.70 | % | 12.87 | %(d) | 5.08 | % | 4.38 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 11,857 | $ | 11,831 | $ | 10,332 | $ | 11,160 | $ | 12,745 | |||||||||||||
Ratio of net expenses to average net assets | 2.28 | % | 2.28 | % | 2.32 | % | 2.28 | % | 2.36 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | (1.91 | )% | (1.97 | )% | (2.05 | )% | (1.79 | )% | (2.06 | )% | |||||||||||||
Ratio of gross expenses to average net assets (e) | 2.31 | % | 2.31 | % | 2.32 | % | 2.28 | % | 2.36 | % | |||||||||||||
Portfolio turnover (f) | 83 | % | 89 | % | 114 | % | 119 | % | 146 | % |
(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 net assets resulting from operations during the period because of the timing of sales and purchases of fund shares in relation to fluctuating market values during the period.
(c) Amount is less than $0.005 per share.
(d) The Fund received monies related to a nonrecurring refund from the prior Custodian. The corresponding impact to the total return was less than 0.005% for the period shown. (See Note 8)
(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.
74
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory RS Science and Technology Fund | |||||||||||||||||||||||
Class R Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 18.99 | $ | 15.78 | $ | 15.91 | $ | 16.85 | $ | 19.26 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | (0.33 | ) | (0.31 | ) | (0.26 | ) | (0.25 | ) | (0.32 | ) | |||||||||||||
Net realized and unrealized gains (losses) on investments | 0.05 | (b) | 7.24 | 2.41 | 1.16 | 1.22 | |||||||||||||||||
Total from Investment Activities | (0.28 | ) | 6.93 | 2.15 | 0.91 | 0.90 | |||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net realized gains from investments | (3.01 | ) | (3.72 | ) | (2.28 | ) | (1.85 | ) | (3.31 | ) | |||||||||||||
Total Distributions to Shareholders | (3.01 | ) | (3.72 | ) | (2.28 | ) | (1.85 | ) | (3.31 | ) | |||||||||||||
Capital Contributions from Prior Custodian, Net (See Note 8) | — | — | — | (c) | — | — | |||||||||||||||||
Net Asset Value, End of Period | $ | 15.70 | $ | 18.99 | $ | 15.78 | $ | 15.91 | $ | 16.85 | |||||||||||||
Total Return | (1.20 | )% | 44.05 | % | 13.41 | %(d) | 5.38 | % | 4.74 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 707 | $ | 1,705 | $ | 1,394 | $ | 1,281 | $ | 1,367 | |||||||||||||
Ratio of net expenses to average net assets | 1.93 | % | 1.93 | % | 1.91 | % | 1.93 | % | 2.03 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | (1.56 | )% | (1.62 | )% | (1.63 | )% | (1.45 | )% | (1.73 | )% | |||||||||||||
Ratio of gross expenses to average net assets (e) | 2.75 | % | 2.54 | % | 1.91 | % | 1.93 | % | 2.03 | % | |||||||||||||
Portfolio turnover (f) | 83 | % | 89 | % | 114 | % | 119 | % | 146 | % |
(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 net assets resulting from operations during the period because of the timing of sales and purchases of fund shares in relation to fluctuating market values during the period.
(c) Amount is less than $0.005 per share.
(d) The Fund received monies related to a nonrecurring refund from the prior Custodian. The corresponding impact to the total return was less than 0.005% for the period shown. (See Note 8)
(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.
75
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory RS Science and Technology Fund | |||||||||||||||||||||||
Class Y Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 22.90 | $ | 18.37 | $ | 18.08 | $ | 18.78 | $ | 20.93 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | (0.22 | ) | (0.21 | ) | (0.18 | ) | (0.14 | ) | (0.19 | ) | |||||||||||||
Net realized and unrealized gains (losses) on investments | 0.05 | (b) | 8.46 | 2.75 | 1.29 | 1.35 | |||||||||||||||||
Total from Investment Activities | (0.17 | ) | 8.25 | 2.57 | 1.15 | 1.16 | |||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net realized gains from investments | (3.01 | ) | (3.72 | ) | (2.28 | ) | (1.85 | ) | (3.31 | ) | |||||||||||||
Total Distributions to Shareholders | (3.01 | ) | (3.72 | ) | (2.28 | ) | (1.85 | ) | (3.31 | ) | |||||||||||||
Capital Contributions from Prior Custodian, Net (See Note 8) | — | — | — | (c) | — | — | |||||||||||||||||
Net Asset Value, End of Period | $ | 19.72 | $ | 22.90 | $ | 18.37 | $ | 18.08 | $ | 18.78 | |||||||||||||
Total Return | (0.51 | )% | 45.11 | % | 14.07 | %(d) | 6.11 | % | 5.61 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 53,395 | $ | 32,047 | $ | 19,335 | $ | 27,416 | $ | 48,368 | |||||||||||||
Ratio of net expenses to average net assets | 1.24 | % | 1.24 | % | 1.28 | % | 1.24 | % | 1.22 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | (0.85 | )% | (0.92 | )% | (1.01 | )% | (0.74 | )% | (0.91 | )% | |||||||||||||
Ratio of gross expenses to average net assets (e) | 1.25 | % | 1.26 | % | 1.29 | % | 1.24 | % | 1.22 | % | |||||||||||||
Portfolio turnover (f) | 83 | % | 89 | % | 114 | % | 119 | % | 146 | % |
(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 net assets resulting from operations during the period because of the timing of sales and purchases of fund shares in relation to fluctuating market values during the period.
(c) Amount is less than $0.005 per share.
(d) The Fund received monies related to a nonrecurring refund from the prior Custodian. The corresponding impact to the total return was less than 0.005% for the period shown. (See Note 8)
(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.
76
Victory Portfolios | Financial Highlights |
For a Share Outstanding Throughout Each Period
Victory RS Small Cap Equity Fund | |||||||||||||||||||||||
Class A Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 18.88 | $ | 14.41 | $ | 14.24 | $ | 19.81 | $ | 21.46 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | (0.16 | ) | (0.14 | ) | (0.12 | ) | (0.20 | ) | (0.21 | ) | |||||||||||||
Net realized and unrealized gains (losses) on investments | (1.47 | ) | 5.55 | 0.28 | 0.38 | 2.32 | |||||||||||||||||
Total from Investment Activities | (1.63 | ) | 5.41 | 0.16 | 0.18 | 2.11 | |||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net realized gains from investments | (4.28 | ) | (0.94 | ) | — | (5.75 | ) | (3.76 | ) | ||||||||||||||
Total Distributions to Shareholders | (4.28 | ) | (0.94 | ) | — | (5.75 | ) | (3.76 | ) | ||||||||||||||
Capital Contributions from Prior Custodian, Net (See Note 8) | — | — | 0.01 | — | — | ||||||||||||||||||
Net Asset Value, End of Period | $ | 12.97 | $ | 18.88 | $ | 14.41 | $ | 14.24 | $ | 19.81 | |||||||||||||
Total Return (excludes sales charge) | (8.39 | )% | 37.57 | % | 1.19 | %(b) | 0.61 | % | 10.00 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 51,619 | $ | 65,514 | $ | 52,075 | $ | 65 | $ | 68,785 | |||||||||||||
Ratio of net expenses to average net assets | 1.22 | % | 1.25 | % | 1.35 | % | 1.30 | % | 1.27 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | (0.78 | )% | (0.84 | )% | (0.88 | )% | 0.97 | % | (0.99 | )% | |||||||||||||
Ratio of gross expenses to average net assets (c) | 1.22 | % | 1.25 | % | 1.36 | % | 1.30 | % | 1.27 | % | |||||||||||||
Portfolio turnover (d) | 77 | % | 79 | % | 86 | % | 98 | % | 93 | % |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) The Fund received monies related to a nonrecurring refund from the prior Custodian. The corresponding impact to the total return was 0.05% for the period shown. (See Note 8)
(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.
77
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory RS Small Cap Equity Fund | |||||||||||||||||||||||
Class C Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 9.61 | $ | 7.74 | $ | 7.71 | $ | 13.42 | $ | 15.79 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | (0.17 | ) | (0.15 | ) | (0.12 | ) | (0.25 | ) | (0.29 | ) | |||||||||||||
Net realized and unrealized gains (losses) on investments | (0.76 | ) | 2.96 | 0.14 | 0.29 | 1.68 | |||||||||||||||||
Total from Investment Activities | (0.93 | ) | 2.81 | 0.02 | 0.04 | 1.39 | |||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net realized gains from investments | (4.28 | ) | (0.94 | ) | — | (5.75 | ) | (3.76 | ) | ||||||||||||||
Total Distributions to Shareholders | (4.28 | ) | (0.94 | ) | — | (5.75 | ) | (3.76 | ) | ||||||||||||||
Capital Contributions from Prior Custodian, Net (See Note 8) | — | — | 0.01 | — | — | ||||||||||||||||||
Net Asset Value, End of Period | $ | 4.40 | $ | 9.61 | $ | 7.74 | $ | 7.71 | $ | 13.42 | |||||||||||||
Total Return (excludes contingent deferred sales charge) | (9.23 | )% | 36.34 | % | 0.39 | %(b) | (0.17 | )% | 9.02 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 616 | $ | 533 | $ | 410 | $ | 1 | $ | 593 | |||||||||||||
Ratio of net expenses to average net assets | 2.10 | % | 2.10 | % | 2.10 | % | 2.10 | % | 2.15 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | (1.71 | )% | (1.69 | )% | (1.64 | )% | 1.77 | % | (1.90 | )% | |||||||||||||
Ratio of gross expenses to average net assets (c) | 4.24 | % | 3.87 | % | 3.14 | % | 2.39 | % | 2.37 | % | |||||||||||||
Portfolio turnover (d) | 77 | % | 79 | % | 86 | % | 98 | % | 93 | % |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) The Fund received monies related to a nonrecurring refund from the prior Custodian. The corresponding impact to the total return was 0.05% for the period shown. (See Note 8)
(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.
78
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory RS Small Cap Equity Fund | |||||||||||||||||||||||
Class R Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 16.08 | $ | 12.44 | $ | 12.33 | $ | 17.99 | $ | 19.88 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | (0.23 | ) | (0.20 | ) | (0.14 | ) | (0.26 | ) | (0.27 | ) | |||||||||||||
Net realized and unrealized gains (losses) on investments | (1.25 | ) | 4.78 | 0.24 | 0.35 | 2.14 | |||||||||||||||||
Total from Investment Activities | (1.48 | ) | 4.58 | 0.10 | 0.09 | 1.87 | |||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net realized gains from investments | (4.28 | ) | (0.94 | ) | — | (5.75 | ) | (3.76 | ) | ||||||||||||||
Total Distributions to Shareholders | (4.28 | ) | (0.94 | ) | — | (5.75 | ) | (3.76 | ) | ||||||||||||||
Capital Contributions from Prior Custodian, Net (See Note 8) | — | — | 0.01 | — | — | ||||||||||||||||||
Net Asset Value, End of Period | $ | 10.32 | $ | 16.08 | $ | 12.44 | $ | 12.33 | $ | 17.99 | |||||||||||||
Total Return | (8.92 | )% | 36.84 | % | 0.89 | %(b) | 0.16 | % | 9.58 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 2,303 | $ | 3,381 | $ | 2,954 | $ | 3,662 | $ | 4,455 | |||||||||||||
Ratio of net expenses to average net assets | 1.75 | % | 1.75 | % | 1.70 | % | 1.71 | % | 1.67 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | (1.30 | )% | (1.34 | )% | (1.24 | )% | (1.39 | )% | (1.39 | )% | |||||||||||||
Ratio of gross expenses to average net assets (c) | 1.88 | % | 1.97 | % | 1.70 | % | 1.71 | % | 1.71 | % | |||||||||||||
Portfolio turnover (d) | 77 | % | 79 | % | 86 | % | 98 | % | 93 | % |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) The Fund received monies related to a nonrecurring refund from the prior Custodian. The corresponding impact to the total return was 0.05% for the period shown. (See Note 8)
(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.
79
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory RS Small Cap Equity Fund | |||||||||||||||||||||||
Class Y Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 19.20 | $ | 14.62 | $ | 14.39 | $ | 20.04 | $ | 21.60 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | (0.14 | ) | (0.14 | ) | (0.08 | ) | (0.16 | ) | (0.16 | ) | |||||||||||||
Net realized and unrealized gains (losses) on investments | (1.49 | ) | 5.66 | 0.30 | 0.26 | 2.36 | |||||||||||||||||
Total from Investment Activities | (1.63 | ) | 5.52 | 0.22 | 0.10 | 2.20 | |||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net realized gains from investments | (4.28 | ) | (0.94 | ) | — | (5.75 | ) | (3.76 | ) | ||||||||||||||
Total Distributions to Shareholders | (4.28 | ) | (0.94 | ) | — | (5.75 | ) | (3.76 | ) | ||||||||||||||
Capital Contributions from Prior Custodian, Net (See Note 8) | — | — | 0.01 | — | — | ||||||||||||||||||
Net Asset Value, End of Period | $ | 13.29 | $ | 19.20 | $ | 14.62 | $ | 14.39 | $ | 20.04 | |||||||||||||
Total Return | (8.23 | )% | 37.78 | % | 1.60 | %(b) | 0.18 | % | 10.35 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 2,750 | $ | 6,398 | $ | 1,834 | $ | 3,804 | $ | 48,597 | |||||||||||||
Ratio of net expenses to average net assets | 1.10 | % | 1.10 | % | 1.10 | % | 1.07 | % | 1.01 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | (0.69 | )% | (0.78 | )% | (0.64 | )% | (0.76 | )% | (0.74 | )% | |||||||||||||
Ratio of gross expenses to average net assets (c) | 1.68 | % | 1.34 | % | 1.24 | % | 1.07 | % | 1.01 | % | |||||||||||||
Portfolio turnover (d) | 77 | % | 79 | % | 86 | % | 98 | % | 93 | % |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) The Fund received monies related to a nonrecurring refund from the prior Custodian. The corresponding impact to the total return was 0.05% for the period shown. (See Note 8)
(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.
80
Victory Portfolios | Notes to Financial Statements December 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 RS Small Cap Growth Fund | RS Small Cap Growth Fund | Classes A, C, R, R6 and Y | |||||||||
Victory RS Select Growth Fund | RS Select Growth Fund | Classes A, C, R, R6 and Y | |||||||||
Victory RS Mid Cap Growth Fund | RS Mid Cap Growth Fund | Classes A, C, R, R6 and Y | |||||||||
Victory RS Growth Fund | RS Growth Fund | Classes A, C, R and Y | |||||||||
Victory RS Science and Technology Fund | RS Science and Technology Fund | Classes A, C, R and Y | |||||||||
Victory RS Small Cap Equity Fund | RS Small Cap Equity Fund | Classes A, C, R and Y |
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.)
81
Victory Portfolios | Notes to Financial Statements — continued December 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 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 December 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:
LEVEL 1 — Quoted Prices | Total | ||||||||||
Investments in Securities | Investments in Securities | ||||||||||
RS Small Cap Growth Fund | |||||||||||
Common Stocks | $ | 1,583,694,189 | $ | 1,583,694,189 | |||||||
Collateral for Securities Loaned | 180,028,134 | 180,028,134 | |||||||||
Total | 1,763,722,323 | 1,763,722,323 | |||||||||
RS Select Growth Fund | |||||||||||
Common Stocks | 252,323,951 | 252,323,951 | |||||||||
Collateral for Securities Loaned | 18,922,614 | 18,922,614 | |||||||||
Total | 271,246,565 | 271,246,565 | |||||||||
RS Mid Cap Growth Fund | |||||||||||
Common Stocks | 340,029,288 | 340,029,288 | |||||||||
Collateral for Securities Loaned | 11,101,698 | 11,101,698 | |||||||||
Total | 351,130,986 | 351,130,986 | |||||||||
RS Growth Fund | |||||||||||
Common Stocks | 217,495,105 | 217,495,105 | |||||||||
Collateral for Securities Loaned | 2,274,965 | 2,274,965 | |||||||||
Total | 219,770,070 | 219,770,070 | |||||||||
RS Science and Technology Fund | |||||||||||
Common Stocks | 208,207,661 | 208,207,661 | |||||||||
Collateral for Securities Loaned | 24,073,956 | 24,073,956 | |||||||||
Total | 232,281,617 | 232,281,617 | |||||||||
RS Small Cap Equity Fund | |||||||||||
Common Stocks | 56,949,946 | 56,949,946 | |||||||||
Collateral for Securities Loaned | 6,982,682 | 6,982,682 | |||||||||
Total | 63,932,628 | 63,932,628 |
For the year ended December 31, 2018, there were no Level 3 investments for which significant unobservable inputs were used to determine fair value.
82
Victory Portfolios | Notes to Financial Statements — continued December 31, 2018 |
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 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 is a summary of the Funds' securities lending transactions which are subject to offset under the MSLA as of December 31, 2018. These transactions are accounted for as secured
83
Victory Portfolios | Notes to Financial Statements — continued December 31, 2018 |
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 | <30 Days | Between 30 & 90 days | >90 Days | Net Amount | ||||||||||||||||||||||
RS Small Cap Growth Fund | $ | 175,964,919 | $ | 180,028,134 | $ | — | $ | — | $ | — | $ | 4,063,215 | |||||||||||||||
RS Select Growth Fund | 18,600,698 | 18,922,614 | — | — | — | 321,916 | |||||||||||||||||||||
RS Mid Cap Growth Fund | 11,047,085 | 11,101,698 | — | — | — | 54,613 | |||||||||||||||||||||
RS Growth Fund | 2,271,482 | 2,274,965 | — | — | — | 3,483 | |||||||||||||||||||||
RS Science and Technology Fund | 23,911,417 | 24,073,956 | — | — | — | 162,539 | |||||||||||||||||||||
RS Small Cap Equity Fund | 6,967,455 | 6,982,682 | — | — | — | 15,227 |
Dividends to Shareholders:
Dividends from net investment income, if any, are declared and paid annually for the Funds. 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 (e.g., net operating loss, distribution reclassification, and deemed distribution due to shareholder redemptions), 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.
As of December 31, 2018, on the Statements of Assets and Liabilities, as a result of permanent book-to-tax differences, reclassification adjustments were as follows:
Total Distributable Earnings/(Loss) | Capital | ||||||||||
RS Small Cap Growth Fund | $ | (14,104,405 | ) | $ | 14,104,405 | ||||||
RS Select Growth Fund | (2,826,985 | ) | 2,826,985 | ||||||||
RS Mid Cap Growth Fund | 2,072,691 | (2,072,691 | ) | ||||||||
RS Growth Fund | (938,074 | ) | 938,074 | ||||||||
RS Science and Technology Fund | (1,390,969 | ) | 1,390,969 | ||||||||
RS Small Cap Equity Fund | (627,660 | ) | 627,660 |
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 December 31.
84
Victory Portfolios | Notes to Financial Statements — continued December 31, 2018 |
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.
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 December 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 December 31, 2018 were as follows:
Purchases (excluding U.S. Government Securities) | Sales (excluding U.S. Government Securities) | ||||||||||
RS Small Cap Growth Fund | $ | 1,669,370,360 | $ | 1,612,427,789 | |||||||
RS Select Growth Fund | 302,381,276 | 474,148,880 | |||||||||
RS Mid Cap Growth Fund | 470,250,886 | 540,115,678 | |||||||||
RS Growth Fund | 222,353,110 | 244,134,656 | |||||||||
RS Science and Technology Fund | 210,554,139 | 186,297,343 | |||||||||
RS Small Cap Equity Fund | 55,501,347 | 69,744,765 |
For the year ended December 31, 2018, there were no purchases or sales of U.S. Government Securities.
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 Agreement, 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
85
Victory Portfolios | Notes to Financial Statements — continued December 31, 2018 |
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 Rate | |||||||
RS Small Cap Growth Fund | 0.95 | % | |||||
RS Select Growth Fund | 1.00 | % | |||||
RS Mid Cap Growth Fund | 0.85 | % | |||||
RS Growth Fund | 0.75 | % | |||||
RS Science and Technology Fund | 1.00 | % | |||||
RS Small Cap Equity Fund | 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.
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 pays 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 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 Class A Shares of the Funds. For the fiscal year ended December 31, 2018, the Distributor received approximately $70,775 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, the Adviser has agreed to waive fees or reimburse certain expenses 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,
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Victory Portfolios | Notes to Financial Statements — continued December 31, 2018 |
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 limits. As of December 31, 2018, the expense limits (excluding voluntary waivers) are as follows:
In effect January 1, 2018 until April 30, 2019 | |||||||||||||||||||||||
Class A Shares | Class C Shares | Class R Shares | Class R6 Shares | Class Y Shares | |||||||||||||||||||
RS Small Cap Growth Fund | 1.40 | % | 2.16 | % | 1.86 | % | 1.06 | % | 1.13 | % | |||||||||||||
RS Select Growth Fund | 1.40 | % | 2.18 | % | 1.91 | % | 1.06 | % | 1.14 | % | |||||||||||||
RS Mid Cap Growth Fund | 1.20 | % | 2.11 | % | 1.80 | % | 0.94 | % | 0.95 | % | |||||||||||||
RS Growth Fund | 1.10 | % | 1.93 | % | 1.71 | % | N/A | 0.83 | % | ||||||||||||||
RS Science and Technology Fund | 1.49 | % | 2.28 | % | 1.93 | % | N/A | 1.24 | % | ||||||||||||||
RS Small Cap Equity Fund | 1.35 | % | 2.10 | % | 1.75 | % | N/A | 1.10 | % |
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 the 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 December 31, 2018, the following amounts are available to be repaid to the Adviser.
Expires 12/31/19 | Expires 12/31/20 | Expires 12/31/21 | Total | ||||||||||||||||
RS Small Cap Growth Fund | $ | 542,236 | $ | 745,744 | $ | 578,670 | $ | 1,866,650 | |||||||||||
RS Select Growth Fund | 93,780 | 384,612 | 334,454 | 812,846 | |||||||||||||||
RS Mid Cap Growth Fund | 138,565 | 419,215 | 394,372 | 952,152 | |||||||||||||||
RS Growth Fund | 111,652 | 278,667 | 283,325 | 673,644 | |||||||||||||||
RS Science and Technology Fund | 2,744 | 18,803 | 25,649 | 47,196 | |||||||||||||||
RS Small Cap Equity Fund | — | 22,386 | 28,246 | 50,632 |
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 December 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.
87
Victory Portfolios | Notes to Financial Statements — continued December 31, 2018 |
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, 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 current 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 December 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 December 31, 2018 were as follows:
Fund | Amount Outstanding at December 31, 2018 | Average Borrowings* | Days Outstanding | Average Rate* | Maximum Borrowing During the Period | ||||||||||||||||||
RS Growth Fund | $ | — | $ | 1,000,000 | 1 | 2.55 | % | $ | 1,000,000 |
* For the year ended December 31, 2018, based on the number of days borrowings were outstanding.
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 December 31, 2018 were as follows:
Borrower or Lender | Amount Outstanding at December 31, 2018 | Average Borrowing* | Days Borrowing Outstanding | Average Interest Rate* | Maximum Borrowing During the Period | ||||||||||||||||||||||
RS Small Cap Growth Fund | Borrower | $ | — | $ | 15,439,500 | 4 | 2.95 | % | $ | 18,290,000 | |||||||||||||||||
RS Select Growth Fund | Borrower | (1,239,000 | ) | 6,193,143 | 7 | 2.92 | % | 11,113,000 | |||||||||||||||||||
RS Mid Cap Growth Fund | Borrower | — | 8,362,944 | 18 | 2.58 | % | 21,665,000 | ||||||||||||||||||||
RS Growth Fund | Borrower | — | 104,000 | 3 | 2.77 | % | 104,000 | ||||||||||||||||||||
RS Science and Technology Fund | Borrower | — | 1,834,882 | 17 | 2.77 | % | 3,038,000 | ||||||||||||||||||||
RS Small Cap Equity Fund | Borrower | — | 187,000 | 1 | 2.53 | % | 187,000 |
* For the year ended December 31, 2018, based on the number of days borrowings were outstanding.
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Victory Portfolios | Notes to Financial Statements — continued December 31, 2018 |
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):
Year Ended December 31, 2018 | |||||||||||||||||||||||
Distributions paid from | |||||||||||||||||||||||
Ordinary Income | Net Long-Term Capital Gains | Total Taxable Distributions | Return of Capital | Total Distributions Paid | |||||||||||||||||||
RS Small Cap Growth Fund | $ | — | $ | 274,625,570 | $ | 274,625,570 | $ | — | $ | 274,625,570 | |||||||||||||
RS Select Growth Fund | — | 89,279,009 | 89,279,009 | — | 89,279,009 | ||||||||||||||||||
RS Mid Cap Growth Fund | 10,276,039 | 44,345,651 | 54,621,690 | 2,053,523 | 56,675,213 | ||||||||||||||||||
RS Growth Fund | 3,016,021 | 29,281,404 | 32,297,425 | — | 32,297,425 | ||||||||||||||||||
RS Science and Technology Fund | 4,628,756 | 25,228,222 | 29,856,978 | — | 29,856,978 | ||||||||||||||||||
RS Small Cap Equity Fund | — | 14,749,298 | 14,749,298 | — | 14,749,298 |
Year Ended December 31, 2017 | |||||||||||||||||||
Distributions paid from | |||||||||||||||||||
Ordinary Income | Net Long-Term Capital Gains | Total Taxable Distributions | Total Distributions Paid | ||||||||||||||||
RS Small Cap Growth Fund | $ | — | $ | 194,651,972 | $ | 194,651,972 | $ | 194,651,972 | |||||||||||
RS Select Growth Fund | — | 57,847,069 | 57,847,069 | 57,847,069 | |||||||||||||||
RS Growth Fund | 1,743,634 | 10,921,206 | 12,664,840 | 12,664,840 | |||||||||||||||
RS Science and Technology Fund | 9,363,273 | 19,302,837 | 28,666,110 | 28,666,110 | |||||||||||||||
RS Small Cap Equity Fund | — | 3,681,689 | 3,681,689 | 3,681,689 |
As of the tax year ended December 31, 2018, the components of accumulated earnings (deficit) on a tax basis were as follows:
Undistributed Long-Term Capital Gains | Accumulated Earnings | Qualified Late-Year Losses* | Unrealized Appreciation (Depreciation)** | Total Accumulated Earnings (Deficit) | |||||||||||||||||||
RS Small Cap Growth Fund | $ | 21,363,027 | $ | 21,363,027 | $ | (14,562,518 | ) | $ | 97,061,170 | $ | 103,861,679 | ||||||||||||
RS Select Growth Fund | 18,679,766 | 18,679,766 | — | 36,565,585 | 55,245,351 | ||||||||||||||||||
RS Mid Cap Growth Fund | — | — | (8,062,913 | ) | (4,246,899 | ) | (12,309,812 | ) | |||||||||||||||
RS Growth Fund | 2,309,407 | 2,309,407 | (2,306,359 | ) | 45,403,791 | 45,406,839 | |||||||||||||||||
RS Science and Technology Fund | — | — | — | 30,114,561 | 30,114,561 | ||||||||||||||||||
RS Small Cap Equity Fund | 4,729,181 | 4,729,181 | (146,718 | ) | 719,571 | 5,302,034 |
*Qualified Late-year Losses above are comprised of post-October capital losses and post-October 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.
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Victory Portfolios | Notes to Financial Statements — continued December 31, 2018 |
At December 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:
Cost of Investments for Federal Tax Purposes | Gross Unrealized Appreciation | Gross Unrealized Depreciation | Net Unrealized Appreciation (Depreciation) | ||||||||||||||||
RS Small Cap Growth Fund | $ | 1,666,661,153 | $ | 297,916,347 | $ | (200,855,177 | ) | $ | 97,061,170 | ||||||||||
RS Select Growth Fund | 234,680,980 | 59,257,313 | (22,691,728 | ) | 36,565,585 | ||||||||||||||
RS Mid Cap Growth Fund | 355,377,885 | 27,776,223 | (32,023,122 | ) | (4,246,899 | ) | |||||||||||||
RS Growth Fund | 174,366,279 | 54,760,501 | (9,356,710 | ) | 45,403,791 | ||||||||||||||
RS Science and Technology Fund | 202,167,056 | 53,909,007 | (23,794,446 | ) | 30,114,561 | ||||||||||||||
RS Small Cap Equity Fund | 63,213,057 | 7,956,869 | (7,237,298 | ) | 719,571 |
8. Capital Contribution from Prior Custodian:
During 2016, certain Funds received notification from their prior custodian, State Street Bank and Trust ("State Street"), concerning issues related to billing on certain categories of expenses during the approximately 16-year period from 1998 through October 31, 2014. The over-billing primarily related to categories of expenses that involved an allocation of general costs among multiple clients.
State Street paid the refunded amounts during January 2017. Based on billing information received during 2016 from State Street and an analysis of any expense limitation agreements that were in place during the period of the activities in question, including the application of any recoupment provisions in such agreements, the Adviser received a portion of the refund.
The portion of the refund retained by the Funds was accounted for as a capital contribution and is reflected on the Financial Highlights as "Capital Contribution from Prior Custodian, Net".
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 December 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 | ||||||||||
RS Mid Cap Growth Fund | Pershing LLC | 37.07 | % |
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 December 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 Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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
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Victory Portfolios | Notes to Financial Statements — continued December 31, 2018 |
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 December 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 December 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 December 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 December 31, 2017 from net investment income and net realized gains in the Funds were as follows:
From net realized gains: | RS Small Cap Growth Fund | RS Select Growth Fund | RS Growth Fund | RS Science and Technology Fund | RS Small Cap Equity Fund | ||||||||||||||||||
Class A Shares | $ | (51,979,281 | ) | $ | (19,166,693 | ) | $ | (10,776,472 | ) | $ | (21,685,805 | ) | $ | (3,143,304 | ) | ||||||||
Class C Shares | (1,398,397 | ) | (7,474,242 | ) | (392,949 | ) | (2,079,352 | ) | (47,723 | ) | |||||||||||||
Class R Shares | (690,275 | ) | (181,019 | ) | (43,485 | ) | (278,523 | ) | (187,965 | ) | |||||||||||||
Class R6 Shares (a) | (662,464 | ) | (18,825 | ) | — | — | — | ||||||||||||||||
Class Y Shares | (139,921,555 | ) | (31,006,290 | ) | (1,451,934 | ) | (4,622,430 | ) | (302,697 | ) |
(a) Victory RS Small Cap Growth Fund, Class R6 Shares, commenced operations on July 12, 2017. Victory RS Select Growth Fund and Victory RS Mid Cap Growth Fund, Class R6 Shares, commenced operations on November 15, 2016.
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.
91
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of the Victory RS Small Cap Growth Fund, Victory RS Select Growth Fund, Victory RS Mid Cap Growth Fund, Victory RS Growth Fund, Victory RS Science and Technology Fund, and Victory RS Small Cap Equity Fund
Opinion on the Financial Statements
We have audited the accompanying statements of assets and liabilities of Victory RS Small Cap Growth Fund, Victory RS Select Growth Fund, Victory RS Mid Cap Growth Fund, Victory RS Growth Fund, Victory RS Science and Technology Fund, and Victory RS Small Cap Equity Fund (collectively referred to as the "Funds") (six of the funds constituting the Victory Portfolios (the "Trust")) including the portfolios of investments, as of December 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 three 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 December 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 three years in the period then ended, in conformity with U.S. generally accepted accounting principles.
The financial highlights of the Funds for the periods presented through December 31, 2015, were audited by other auditors whose report dated February 22, 2016, expressed an unqualified opinion on those financial highlights.
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 December 31, 2018, by correspondence with the custodian, transfer agent, 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
February 26, 2019
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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 Funds Complex. Each Trustee's address is c/o Victory Portfolios, 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, 75 | Trustee | July 2016 | Retired. | Trustee, RS Investment Trust and RS Variable Products Trust (November 2011-July 2016). |
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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-July 2016). | |||||||||||||||
Leigh A. Wilson, 74 | 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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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, 57 | 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, 45 | 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, 65 | 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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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 the Funds 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 expects to file a complete list of Schedules of Portfolio Investments with the SEC for the first and third quarter of each fiscal year on Form N-PORT beginning March 1, 2019. Prior to that date, the Trust has filed 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-PORT and 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 July 1, 2018 through December 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.
Beginning Account Value 7/1/18 | Actual Ending Account Value 12/31/18 | Hypothetical Ending Account Value 12/31/18 | Actual Expenses Paid During Period 7/1/18- 12/31/18* | Hypothetical Expenses Paid During Period 7/1/18- 12/31/18* | Annualized Expense Ratio During Period 7/1/18- 12/31/18 | ||||||||||||||||||||||
RS Small Cap Growth Fund | |||||||||||||||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 808.80 | $ | 1,018.15 | $ | 6.38 | $ | 7.12 | 1.40 | % | |||||||||||||||
Class C Shares | 1,000.00 | 805.80 | 1,014.32 | 9.83 | 10.97 | 2.16 | % | ||||||||||||||||||||
Class R Shares | 1,000.00 | 806.80 | 1,015.78 | 8.52 | 9.50 | 1.87 | % | ||||||||||||||||||||
Class R6 Shares | 1,000.00 | 810.20 | 1,019.86 | 4.84 | 5.40 | 1.06 | % | ||||||||||||||||||||
Class Y Shares | 1,000.00 | 809.90 | 1,019.51 | 5.15 | 5.75 | 1.13 | % |
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Beginning Account Value 7/1/18 | Actual Ending Account Value 12/31/18 | Hypothetical Ending Account Value 12/31/18 | Actual Expenses Paid During Period 7/1/18- 12/31/18* | Hypothetical Expenses Paid During Period 7/1/18- 12/31/18* | Annualized Expense Ratio During Period 7/1/18- 12/31/18 | ||||||||||||||||||||||
RS Select Growth Fund | |||||||||||||||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 857.30 | $ | 1,018.15 | $ | 6.55 | $ | 7.12 | 1.40 | % | |||||||||||||||
Class C Shares | 1,000.00 | 853.90 | 1,014.22 | 10.19 | 11.07 | 2.18 | % | ||||||||||||||||||||
Class R Shares | 1,000.00 | 855.10 | 1,015.58 | 8.93 | 9.70 | 1.91 | % | ||||||||||||||||||||
Class R6 Shares | 1,000.00 | 858.70 | 1,019.86 | 4.97 | 5.40 | 1.06 | % | ||||||||||||||||||||
Class Y Shares | 1,000.00 | 858.30 | 1,019.46 | 5.34 | 5.80 | 1.14 | % | ||||||||||||||||||||
RS Mid Cap Growth Fund | |||||||||||||||||||||||||||
Class A Shares | 1,000.00 | 874.10 | 1,019.16 | 5.67 | 6.11 | 1.20 | % | ||||||||||||||||||||
Class C Shares | 1,000.00 | 869.80 | 1,014.57 | 9.94 | 10.71 | 2.11 | % | ||||||||||||||||||||
Class R Shares | 1,000.00 | 871.00 | 1,016.13 | 8.49 | 9.15 | 1.80 | % | ||||||||||||||||||||
Class R6 Shares | 1,000.00 | 875.10 | 1,020.47 | 4.44 | 4.79 | 0.94 | % | ||||||||||||||||||||
Class Y Shares | 1,000.00 | 875.10 | �� | 1,020.42 | 4.49 | 4.84 | 0.95 | % | |||||||||||||||||||
RS Growth Fund | |||||||||||||||||||||||||||
Class A Shares | 1,000.00 | 865.60 | 1,019.66 | 5.17 | 5.60 | 1.10 | % | ||||||||||||||||||||
Class C Shares | 1,000.00 | 861.80 | 1,015.48 | 9.06 | 9.80 | 1.93 | % | ||||||||||||||||||||
Class R Shares | 1,000.00 | 862.60 | 1,016.59 | 8.03 | 8.69 | 1.71 | % | ||||||||||||||||||||
Class Y Shares | 1,000.00 | 866.60 | 1,021.02 | 3.91 | 4.23 | 0.83 | % | ||||||||||||||||||||
RS Science and Technology Fund | |||||||||||||||||||||||||||
Class A Shares | 1,000.00 | 841.70 | 1,017.69 | 6.92 | 7.58 | 1.49 | % | ||||||||||||||||||||
Class C Shares | 1,000.00 | 837.80 | 1,013.71 | 10.56 | 11.57 | 2.28 | % | ||||||||||||||||||||
Class R Shares | 1,000.00 | 839.50 | 1,015.48 | 8.95 | 9.80 | 1.93 | % | ||||||||||||||||||||
Class Y Shares | 1,000.00 | 842.60 | 1,018.90 | 5.81 | 6.36 | 1.25 | % | ||||||||||||||||||||
RS Small Cap Equity Fund | |||||||||||||||||||||||||||
Class A Shares | 1,000.00 | 812.10 | 1,019.06 | 5.57 | 6.21 | 1.22 | % | ||||||||||||||||||||
Class C Shares | 1,000.00 | 808.40 | 1,014.62 | 9.57 | 10.66 | 2.10 | % | ||||||||||||||||||||
Class R Shares | 1,000.00 | 809.60 | 1,016.38 | 7.98 | 8.89 | 1.75 | % | ||||||||||||||||||||
Class Y Shares | 1,000.00 | 813.10 | 1,019.66 | 5.03 | 5.60 | 1.10 | % |
* 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).
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Additional Federal Income Tax Information
For the year ended December 31, 2018, the Funds paid qualified dividend income for the purposes of reduce individual federal income tax rates of:
Amount | |||||||
RS Mid Cap Growth Fund | 22 | % | |||||
RS Growth Fund | 86 | % | |||||
RS Science and Technology Fund | 1 | % |
Dividends qualified for corporate diviends received deductions of:
Amount | |||||||
RS Mid Cap Growth Fund | 23 | % | |||||
RS Growth Fund | 89 | % | |||||
RS Science and Technology Fund | 1 | % |
For the year ended December 31, 2018, the Funds designated short-term capital gain distributions:
Amount | |||||||
RS Mid Cap Growth Fund | $ | 10,276,039 | |||||
RS Growth Fund | 3,016,201 | ||||||
RS Science and Technology Fund | 4,628,756 |
For the year ended December 31, 2018, the following Funds designated long-term capital gain distributions:
Amount | |||||||
RS Small Cap Growth Fund | $ | 288,729,975 | |||||
RS Select Growth Fund | 95,376,245 | ||||||
RS Mid Cap Growth Fund | 44,345,651 | ||||||
RS Growth Fund | 30,219,478 | ||||||
RS Science and Technology Fund | 26,619,191 | ||||||
RS Small Cap Equity Fund | 15,376,958 |
98
Victory Portfolios | Supplemental Information — continued December 31, 2018 |
(Unaudited)
Considerations of the Board in Continuing the Investment Advisory Agreement (the "Agreement")
The Board approved the Agreement on behalf of each of the Funds at a meeting, which was called for that purpose, on December 5, 2018. The Board also considered information relating to the Funds and the Agreement provided throughout the year and, more specifically, at a meeting on October 23, 2018. The Board noted that prior to each Fund's reorganization on July 29, 2016, each Fund was managed by RS Investment Management Co. LLC, which was acquired by the Adviser on July 29, 2016. In considering whether to approve the Agreement, the Board requested, and the Adviser provided, information that the Board believed to be reasonably necessary to reach its conclusions. The Board, including the Independent Trustees, evaluated this information along with other information obtained throughout the year and was advised by legal counsel to the Funds and by independent legal counsel to the Independent Trustees. In addition, in 2017 the Independent Trustees, through their counsel, retained an independent consultant to assist with a review of the overall process for conducting the annual review of these advisory arrangements. The Board considered each Fund's advisory fee, expense ratio and investment performance as significant factors in determining whether the Agreement should be continued. In considering whether the compensation paid to the Adviser was fair and reasonable, the Board also evaluated, among other things, the following factors:
• The requirements of the Funds for the services provided by the Adviser;
• The nature, quality and extent of the services provided and expected to be provided;
• The performance of the Funds as compared to comparable funds;
• The fees payable for the services and whether the fee arrangements provided for economies of scale that would benefit Fund shareholders as the Funds grow
• Whether the fee would be sufficient to enable the Adviser to attract and retain experienced personnel and continue to provide quality services to the Funds;
• Fees paid by other clients of the Adviser whose accounts are managed in a similar investment style and any differences in the services provided to the other clients compared to those provided to the Funds;
• Total expenses of each Fund, taking into consideration any distribution or shareholder servicing fees;
• Management's commitment to operating the Funds at competitive expense levels;
• The profitability of the Adviser (as reflected by comparing fees earned against an estimate of the Adviser's costs) with respect to the Adviser's relationship with the Funds;
• Research and other service benefits received by the Adviser obtained through payment of client commissions for securities transactions;
• Other benefits received by the Adviser, and its affiliates, including revenues paid to the Adviser, or its affiliates, by the Funds for administration and fund accounting services, and distribution;
• The capabilities and financial condition of the Adviser;
• Current economic and industry trends; and
• The historical relationship between each Fund and the Adviser.
The Board reviewed each Fund's current management fee, comprised of the advisory fee plus the administrative services fee paid to the Adviser, in the context of the Adviser's profitability of each Fund individually. In addition, the Board compared each Fund's gross management fee and total operating expense ratio on a net and gross basis, taking into consideration any distribution or shareholder servicing fees, with the median gross management fee and median expense ratio of a universe of comparable mutual funds compiled by an independent consultant, FUSE Research Network, LLC ("FUSE"), and a peer group of funds with similar investment strategies selected by FUSE from the universe. The Board reviewed the factors and methodology used by FUSE in the selection of each Fund's peer group, including FUSE's selection of a broad universe of funds using the standard Retail Morningstar Categories, the more specific universe of comparable funds, and peer groups of funds with comparable investment strategies and asset levels, among other factors. The Board also reviewed any changes to FUSE's methodology as compared to the prior year, including as a result of input from the Adviser, if any. With respect to certain Funds, the Board also reviewed fees and other information related to the Adviser's management of similarly managed institutional or private accounts, and the differences
99
Victory Portfolios | Supplemental Information — continued December 31, 2018 |
(Unaudited)
in the services provided to the other accounts. The Board noted that none of the advisory fee arrangements for the Funds included breakpoints, which are generally viewed as a method by which the investment adviser shares any economies of scale with a fund as a fund grows. The Board also considered the Adviser's commitment to limit expenses as discussed in more detail below.
The Board found that the gross annual management fee paid by each Fund was within the range of management fees paid by each Fund's respective peer group. The Board also found that each Fund's Class A net annual expense ratio, taking into account any shareholder servicing or distribution fees, was reasonable as compared with each Fund's respective peer group. The Board considered the Adviser's contractual agreement with each Fund to waive its fees and reimburse expenses of certain classes for a specified period of time, as described in the Fund's prospectus.
The Board reviewed each Fund's performance over one-, three-, five- and ten-year periods (as applicable) against the performance of the Fund's selected peer group and benchmark index. The Board recognized that the performance of the Fund and the peer group funds are net of expenses, while the performance of the benchmark index is gross returns. The Board considered the additional resources that the Adviser has committed to enhance portfolio analysis, compliance and trading systems. The Board noted that, following each Fund's reorganization, each Fund is managed by substantially the same investment management team that managed the comparable predecessor fund.
The Board reviewed various other specific factors with respect to each Fund, as described below. In their deliberations, the Trustees did not rank the importance of any particular information or factor considered and each Trustee may have attributed different weights to various factors.
RS Small Cap Growth Fund
The Board compared the Fund's Class A performance for the one-, three-, five- and ten-year periods ended June 30, 2018, to that of the median performance of the peer group and benchmark index for the same periods and considered the fact that the Fund outperformed both the benchmark index and the peer group for all of the periods reviewed.
Having considered, among other things: (1) the Fund's management fee compared to comparable mutual funds; (2) the Fund's total expense ratio compared to comparable mutual funds; (3) that the Adviser's willingness to limit the expenses of certain classes for a period of time would provide stability to the Fund's expenses for those share classes during that period; and (4) the Fund's performance during the periods reviewed, the Board concluded that the Agreement continued to be in the best interests of the Fund's shareholders.
RS Select Growth Fund
The Board compared the Fund's Class A performance for the one-, three-, five- and ten-year periods ended June 30, 2018, to that of the median performance of the peer group and benchmark index for the same periods and considered the fact that the Fund underperformed the benchmark index for all of the periods reviewed and the peer group for all of the periods reviewed except the 10-year period. The Board brought the Fund's underperformance to management's attention and discussed with the Adviser any steps that had been or could be taken to enhance performance in the future.
Having considered, among other things: (1) the Fund's management fee compared to comparable mutual funds; (2) the Fund's total expense ratio compared to comparable mutual funds; (3) that the Adviser's willingness to limit the expenses of certain classes for a period of time would provide stability to the Fund's expenses for those share classes during that period; and (4) the Fund's performance during the periods reviewed, the Board concluded that the Agreement continued to be in the best interests of the Fund's shareholders.
RS Mid Cap Growth Fund
The Board compared the Fund's Class A performance for the one-, three-, five- and ten-year periods ended June 30, 2018, to that of the median performance of the peer group and benchmark index for the same periods and considered the fact that the Fund underperformed the benchmark index for all of the periods reviewed and the peer group for the one-, three- and ten-year periods, and outperformed the peer group for the five-year period. The Board brought the Fund's underperformance to management's attention and discussed with the Adviser any steps that had been or could be taken to enhance performance in the future.
100
Victory Portfolios | Supplemental Information — continued December 31, 2018 |
(Unaudited)
Having considered, among other things: (1) the Fund's management fee compared to comparable mutual funds; (2) the Fund's total expense ratio compared to comparable mutual funds; (3) that the Adviser's willingness to limit the expenses of certain classes for a period of time would provide stability to the Fund's expenses for those share classes during that period; and (4) the Fund's performance during the periods reviewed, the Board concluded that the Agreement continued to be in the best interests of the Fund's shareholders.
RS Growth Fund
The Board compared the Fund's Class A performance for the one-, three-, five- and ten-year periods ended June 30, 2018, to that of the median performance of the peer group and benchmark index for the same periods and considered the fact that the Fund underperformed the benchmark index for all of the periods reviewed, outperformed the peer group for the one-, three- and five-year periods, and underperformed the peer group for the ten-year period.
Having considered, among other things: (1) the Fund's management fee compared to comparable mutual funds; (2) the Fund's total expense ratio compared to comparable mutual funds; (3) that the Adviser's willingness to limit the expenses of certain classes for a period of time would provide stability to the Fund's expenses for those share classes during that period; and (4) the Fund's performance during the periods reviewed, the Board concluded that the Agreement continued to be in the best interests of the Fund's shareholders.
RS Science and Technology Fund
The Board compared the Fund's Class A performance for the one-, three-, five- and ten-year periods ended June 30, 2018, to that of the median performance of the peer group and benchmark index for the same periods and considered the fact that the Fund outperformed both the benchmark index and the peer group for all of the periods reviewed.
Having considered, among other things: (1) the Fund's management fee compared to comparable mutual funds; (2) the Fund's total expense ratio compared to comparable mutual funds; (3) that the Adviser's willingness to limit the expenses of certain classes for a period of time would provide stability to the Fund's expenses for those share classes during that period; and (4) the Fund's performance during the periods reviewed, the Board concluded that the Agreement continued to be in the best interests of the Fund's shareholders.
RS Small Cap Equity Fund
The Board compared the Fund's Class A performance for the one-, three-, five- and ten-year periods ended June 30, 2018, to that of the median performance of the peer group and benchmark index for the same periods and considered the fact that the Fund outperformed both the benchmark index and the peer group for all of the periods reviewed.
Having considered, among other things: (1) the Fund's management fee compared to comparable mutual funds; (2) the Fund's total expense ratio compared to comparable mutual funds; (3) that the Adviser's willingness to limit the expenses of certain classes for a period of time would provide stability to the Fund's expenses for those share classes during that period; and (4) the Fund's performance during the periods reviewed, the Board concluded that the Agreement continued to be in the best interests of the Fund's shareholders.
Conclusion
Based on its review of the information requested and provided, and following extended discussions, the Board determined that the Agreement, on behalf of the Funds discussed above, was consistent with the best interests of each Fund and its shareholders, and the Board unanimously approved the Agreement, on behalf of each Fund, for an additional annual period on the basis of the foregoing review and discussions and the following considerations, among others:
• The fairness and reasonableness of the investment advisory fee payable to the Adviser under the Agreement in light of the investment advisory services provided, the costs of these services, the profitability of the Adviser's relationship with the Fund and the comparability of the fee paid to the fees paid by other investment companies;
• The nature, quality and extent of the investment advisory services provided by the Adviser;
101
Victory Portfolios | Supplemental Information — continued December 31, 2018 |
(Unaudited)
• The Adviser's entrepreneurial commitment to the management of the Funds and the creation of a broad-based family of funds, which could entail a substantial commitment of the Adviser's resources to the successful operation of the Funds;
• The Adviser's representations regarding its staffing and capabilities to manage the Funds, including the retention of personnel with relevant portfolio management experience;
• The Adviser's efforts to enhance investment results by, among other things, developing quality portfolio management teams; and
• The overall high quality of the personnel, operations, financial condition, investment management capabilities, methodologies and performance of the Adviser.
102
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) |
VPRSGF-AR (12/18)
December 31, 2018
Annual Report
Victory RS International Fund
Victory RS Global Fund
Victory Sophus Emerging Markets Fund
Victory Sophus Emerging Markets Small Cap 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 sooner than January 1, 2021 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 Victory Funds you hold directly or through 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
Shareholder Letter (unaudited) | 3 | ||||||
Fund Review and Commentary (unaudited) | 4 | ||||||
Financial Statements | |||||||
The Victory International Funds | |||||||
Victory RS International Fund | |||||||
Schedule of Portfolio Investments | 19 | ||||||
Statements of Assets and Liabilities | 43 | ||||||
Statements of Operations | 46 | ||||||
Statements of Changes in Net Assets | 48-49 | ||||||
Financial Highlights | 53-56 | ||||||
Victory RS Global Fund | |||||||
Schedule of Portfolio Investments | 24 | ||||||
Statements of Assets and Liabilities | 43 | ||||||
Statements of Operations | 46 | ||||||
Statements of Changes in Net Assets | 48-49 | ||||||
Financial Highlights | 57-60 | ||||||
Victory Sophus Emerging Markets Fund | |||||||
Schedule of Portfolio Investments | 29 | ||||||
Statements of Assets and Liabilities | 44-45 | ||||||
Statements of Operations | 47 | ||||||
Statements of Changes in Net Assets | 50-52 | ||||||
Financial Highlights | 61-65 | ||||||
Victory Sophus Emerging Markets Small Cap Fund | |||||||
Schedule of Portfolio Investments | 36 | ||||||
Statements of Assets and Liabilities | 44-45 | ||||||
Statements of Operations | 47 | ||||||
Statements of Changes in Net Assets | 50-52 | ||||||
Financial Highlights | 66-68 | ||||||
Notes to Financial Statements | 69 | ||||||
Report of Ernst & Young LLP, Independent Registered Public Accounting Firm | 81 | ||||||
Supplemental Information (unaudited) | 82 | ||||||
Trustee and Officer Information | 82 | ||||||
Proxy Voting and Form N-Q Information | 85 | ||||||
Expense Examples | 85 | ||||||
Additional Federal Income Tax Information | 87 | ||||||
Advisory Contract Approval | 88 |
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 www.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
Victory Funds Letter to Shareholders
Dear Shareholder,
What a difference a year makes. The year ended December 31, 2018, was marked by an abrupt return of volatility, which had largely been missing in action for years. Consider the range of highs and lows we witnessed. For the S&P 500 Index, it was a year in which we celebrated an all-time high in late summer, only to be followed by the worst December since the 2008 financial crisis. And if that wasn't enough volatility, the Dow Jones Industrial Average also registered several of its worst-ever, single-day point declines during 2018.
Through all that the S&P 500 clocked in with its first negative annual return since 2008, falling by 4.4 percent. Given the risk-off sentiment that was obvious as the year drew to a close, it's no surprise that small-cap stocks, as measured by the Russell 2000 Index, fared even worse, falling approximately 11.0 percent for the year. The challenges for equity investors were also evident around the world as the MSCI ACWI and Emerging Markets indexes declined 8.9 and 14.3 percent, respectively.
So what ushered in the renewed era of volatility and these challenging times? There were multiple culprits. For starters, trade tensions ratcheted up throughout the year as anti-global rhetoric bloomed into a series of new tariffs, which sparked concerns of a prolonged trade war with China. The Federal Reserve remained persistent in its monetary tightening, raising the benchmark interest rate four times throughout the year to a range of 2.25 to 2.5 percent. And then the year ended with a partial shutdown of the federal government. These factors conspired to elevate concerns of a possible recession here and abroad.
Yet despite the headline risks, we think it's critically important to remain focused on the data. By all accounts, the U.S. economy continued chugging along in 2018 with a real gross domestic product (GDP) rising 3.4 percent in the third quarter of 2018, the latest figures available from the Bureau of Economic Analysis. Moreover, the labor picture continues to shine with consistent monthly job growth and an unemployment rate of 3.9 percent. All this comes against a backdrop of low inflation and solid corporate earnings.
The markets, it appears, have been vacillating between the dire headlines and higher perceived risks on one hand, and the continued positive economic data on the other. Of course, no one knows where the Fed will stop raising rates, nor is there any certainty on how the trade turmoil ultimately gets resolved. For now, however, we continue to embrace our solid economic fundamentals. Moreover, we believe all of Victory Capital's independent investment franchises are well positioned to take advantage of any short-term valuation dislocations resulting from the current era of heightened volatility.
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.
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
3
Victory RS International Funds (Unaudited)
Victory RS International Fund
Portfolio Holdings
As a Percentage of Total Investments
Market Overview
If ever the market lived up to its roller-coaster reputation, 2018 was the year. January saw an acceleration of prior year positive trends as international equities surged to post-recession highs, only to give it all back in February on the back of a spike in volatility not seen since August 2015. Trading hinted at weakness through the summer before plunging in the fall. All in, as measured by the MSCI EAFE Index (net) (the "Index"), international equities finished the year down over 13%.
Identifying the precise catalyst for the market's change of heart is always difficult. The impact on the global economy from heightened tensions surrounding U.S./China trade negotiations have been mostly to blame. In the U.S., rising interest rates driven by a hawkish Federal Reserve, a tax cut hangover resulting in a larger fiscal deficit, and a partial federal government shutdown have raised investors' anxiety. The data itself has been mixed, if not supportive. However, the U.S. Treasury 2- to 5-year yield curve has inverted, suggesting the historically long current economic expansion may be coming to an end. At a minimum, investors are reminded that the recent era of easy money, low inflation, and steady growth, may be as good as it gets.
In China, domestic consumption has softened as seen by an unprecedented fifth straight month of negative passenger car sales. Investments are muted as well, driven by lack of funds in the public sector and extreme caution in the private sector. Exports appear most at risk having slowed dramatically in December with the potential to cause significant dislocations in the employment market should tariffs on goods into the U.S. rise to 25% as threatened by the current administration.
Adding to the dim view of global growth is Europe where a swath of concerns has bubbled to the surface. Chief among these are the status of Brexit and whether the Irish border remains open, rising populism in France due to a backlash against President Macron's tax policies, as well as Italy's budget crisis.
QVS Factor Performance
In this section, we offer insight into the factors driving market performance from a quantitative point of view. The team's proprietary QVS Model (i.e. Quality, Value and Sentiment, scours the globe, screening over 10,000 companies looking for the best investment opportunities. It is designed to identify companies that have the potential to consistently create shareholder value, are reasonably valued and exhibit favorable market sentiment. We continually use this quantitative model to help us focus our resources and fundamental research on those companies with the highest probability of outperformance.
In 2018, all factors contributed positively to performance though Quality was the standout. We define quality companies as those able to demonstrate operating and management excellence, as well as superior capital allocation, so it came as no surprise to see this factor continue to perform. We continually use this quantitative model to help us focus our resources
4
Victory RS International Funds (Unaudited)
Victory RS International Fund (continued)
and fundamental research on those companies with the highest probability of outperformance.
Performance Update
The Victory RS International Fund (the "Fund") seeks to provide long-term capital appreciation. The Fund was down -10.65% (Class A Shares at net asset value), for the twelve-month period ended December 31, 2018, outperforming its benchmark, the MSCI EAFE Index (net), which decreased -13.79%.
Portfolio Review
Strong results in the Consumer Staples sector were led by Royal Unibrew A/S. Royal Unibrew, a Scandinavian beverage distributor, as a continued and improving product mix led to market share gains in craft and specialty beers. In addition, revenue and earnings outlooks for Royal Unibrew got a boost due to the acquisition of Etablissements Geyer Frères, a French craft lemonade producer that focuses on organically sourced local products. The acquisition should establish a niche platform in France similar to their Italian operations.
Wolters Kluwer, an information and software solutions company based in the Netherlands, also positively contributed to the portfolio. The company's organic sales growth bested consensus estimates for the first half of the year, headlined by its Legal & Regulatory, Tax & Accounting, and Governance, Risk & Compliance segments. Wolters also declared stock buyback transactions in September, as part of the three-year buyback program originally announced in 2016. This program was subsequently expanded to include additional repurchases intended to mitigate dilution caused by non-core divestments made in 2017 and early 2018. The program also includes repurchases made to offset annual incentive share issuance and included similar events in both 2016 and 2017.
On the downside, both Wynn Macau and Melexis NV detracted from the portfolio's overall performance. Wynn Macau, a hotel and casino resort operator, grew gaming revenue 3% year-over-year, but that fell below most estimates of approximately 5% year-over-year. Moving forward, expectations for higher single digit growth should be aided by pent-up demand for the opening of several new VIP junket rooms in many of its casinos.
Melexis, which designs, develops, tests and markets advanced semiconductor devices, fell on fears of sector consolidation news, supply chain hiccups, and BMW's profit warning, which in combination, created the perfect storm for Melexis' share price. After the recent underperformance compared to its peers, the company's multiples are now in line with sector averages. Melexis used to trade at a premium as they are concentrating on the fast-growing automotive semiconductor market which is expected to continue growing faster than both the automotive industry and the overall semiconductor market.
Outlook
We expect market volatility to continue in 2019 and will remain vigilant when constructing the portfolio, maintaining our sector and region neutrality. Making correct macro allocation calls can be immensely challenging, therefore, we do not forecast regional performance. In our view, stock selection and strong risk management protocols can be far more impactful to fund performance than allocation.
5
Victory RS International Funds (Unaudited)
Victory RS International Fund (continued)
Investment Philosophy
The Fund is guided by our philosophy that positive investment outcomes can be attained through the use of a data-driven discipline in conjunction with a bottom-up approach to investing. Our proprietary research methodology, combined with a set of industry standard and team-generated global risk factors, seeks to capture information inefficiencies in the global equity markets. Our goal is to provide a consistent, diversified return stream over full market cycles while managing portfolio volatility.
6
Victory RS International Funds (Unaudited)
Victory RS International Fund (continued)
Average Annual Return
Year Ended December 31, 2018
Class A | Class C | Class R | Class Y | ||||||||||||||||||||||||||||
INCEPTION DATE | 2/16/93 | 8/7/00 | 5/15/01 | 3/10/09 | |||||||||||||||||||||||||||
Net Asset Value | Maximum Offering Price | Net Asset Value | Maximum Offering Price | Net Asset Value | Net Asset Value | MSCI EAFE Index (Net)1 | |||||||||||||||||||||||||
One Year | –10.65 | % | –15.79 | % | –11.24 | % | –12.12 | % | –10.85 | % | –10.38 | % | –13.79 | % | |||||||||||||||||
Three Year | 4.65 | % | 2.60 | % | 3.92 | % | 3.92 | % | 4.34 | % | 4.94 | % | 2.87 | % | |||||||||||||||||
Five Year | 1.67 | % | 0.47 | % | 0.83 | % | 0.83 | % | 1.29 | % | 1.94 | % | 0.53 | % | |||||||||||||||||
Ten Year | 7.23 | % | 6.60 | % | 6.35 | % | 6.35 | % | 6.82 | % | N/A | 6.32 | % | ||||||||||||||||||
Since Inception | 5.41 | % | 5.16 | % | 1.39 | % | 1.39 | % | 3.29 | % | 10.24 | % | N/A | ||||||||||||||||||
Expense Ratios | |||||||||||||||||||||||||||||||
Gross | 1.81% | 3.26% | 2.48% | 1.85% | |||||||||||||||||||||||||||
With Applicable Waivers | 1.13% | 1.88% | 1.38% | 0.88% |
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 May 1, 2018. Additional information pertaining to the Fund's expense ratios as of December 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. 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 RS International Fund — Growth of $10,000
1The MSCI EAFE Index (Net) (Europe, Australasia, and Far East) is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. and Canada. The index reflects the reinvestment of dividends paid on the stocks constituting the index net of withholding taxes. You may not invest in the index and, unlike the Fund, the index does not incur fees or expenses. 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 RS International Funds (Unaudited)
Victory RS Global Fund
Portfolio Holdings
As a Percentage of Total Investments
Market Overview
If ever the market lived up to its rollercoaster reputation, 2018 was the year. January saw an acceleration of prior year positive trends as global equities surged to all-time highs, only to give it all back in February on the back of a spike in volatility not seen since August 2015. Trading remained range-bound through summer before plunging in the fall. All in, as measured by the MSCI All Country World Index (net), global equities finished the year down 9.42%.
Identifying the precise catalyst for the market's change of heart is always difficult. The impact on the global economy from heightened tensions surrounding U.S./China trade negotiations have been mostly to blame. In the U.S., rising interest rates driven by a hawkish Federal Reserve Bank, a tax cut hangover resulting in a larger fiscal deficit, and a partial federal government shutdown have raised investors' anxiety. The data itself has been mixed, if not supportive. However, the U.S. 2- to 5-year yield curve has inverted, suggesting the historically long current economic expansion may be coming to an end. At a minimum, investors are reminded that the recent era of easy money, low inflation, and steady growth may be as good as it gets.
In China, domestic consumption has softened as seen by an unprecedented fifth straight month of negative passenger car sales. Investments are muted as well, driven by a lack of funds in the public sector and extreme caution in the private sector. Exports appear most at risk having slowed dramatically in December with the potential to cause significant dislocations in the employment market should tariffs on goods into the U.S. rise to 25% as threatened by the current administration.
Adding to the dim view of global growth is Europe where a swath of concerns has bubbled to the surface. Chief among these are the status of Brexit and whether the Irish border remains open, rising populism in France due to a backlash against President Macron's tax policies, as well as Italy's budget crisis.
QVS Factor Performance
In this section, we offer insight into the factors driving market performance from a quantitative point of view. The team's proprietary QVS ("Quality, Value and Sentiment") Model, scours the globe, screening over 10,000 companies looking for the best investment opportunities. It is designed to identify companies that have the potential to consistently create shareholder value, are reasonably valued and exhibit favorable market sentiment. We continually use this quantitative model to help us focus our resources and fundamental research on those companies with the highest probability of outperformance.
In 2018, all factors contributed positively to performance though Quality was the standout. We define quality companies as those able to demonstrate operating and management excellence, as well as superior capital allocation, so it came as no surprise to see this factor
8
Victory RS International Funds (Unaudited)
Victory RS Global Fund (continued)
continue to perform. We continually use this quantitative model to help us focus our resources and fundamental research on those companies with the highest probability of outperformance.
Performance Update
The Victory RS Global Fund (the "Fund") seeks to provide long-term capital appreciation. The Fund was down -5.45% (Class A Shares at net asset value) for the twelve-month period ended December 31, 2018, outperforming its benchmark, the MSCI All Country World Index (Net), which decreased -9.42%.
Portfolio Review
The Fund's performance, as compared to the Index, was assisted by stock selection in several different sectors. In Health Care, Eli Lilly, was a principal contributor. A leading pharmaceutical company, Eli Lilly that operates in two market segments, Human Pharmaceutical Products and Animal Health, was in steady recovery mode after last year's underperformance. Increased optimism and performance in both the diabetes and non-diabetes parts of the business helped, as positive progress in these areas held ground against the competition. Additionally, Lilly's tender offer to acquire all outstanding shares of common stock of ARMO BioSciences, Inc. in 2018, added promising clinical immunotherapy assets to Lilly's oncology portfolio. Recently launched migraine-fighting Emgality, along with other newly-developed medications, continued to drive revenue growth expectations. Current long-term growth outlooks for the company are being motivated by more conservative views of competitive diabetes and immunology indications.
TJX, a leading retail and off-price apparel and home fashion products company in the Consumer Discretionary sector, continues to show positive momentum and was an additional positive contributor. Despite the strength in the shares year-to-date (up approximately 20%), the shares continue to remain attractively priced and offer long-term upside potential for investors. Given the firm's leading position as an off-price retailer, coupled with its ability to manage multiple formats across varying geographies, the company remains in a strong position and has renewed its long-term commitment to return cash to shareholders.
MasterCard, an information technology company that engages in the Financials industry, enjoys multiple drivers of growth. Secular shifts in e-commerce are helping to pave the way in shifts to electronic payments, growing demand for fraud protection, and personal consumption expenditures — which, even in times of recession, all continue to provide tailwinds for the growth trajectory of MasterCard. MasterCard, like last year, enjoyed positive performance for 2018, and was the single largest relative contributor to the portfolio for the year.
On the downside, underperformance in the Materials sector, was led by the largest detractor of the portfolio, Chemours Co. Chemours, a U.S.-based chemicals company, produces products such as Teflon and Freon, as well as other market-defining products. Despite order trends that held up well in North America and Southeast Asia, the slowing of such trends in China were draining. Fortunately, above-GDP growth building on favorable regulatory trends and low-cost positions in oligopolistic markets should be a helpful recipe for multiple expansion moving forward for Chemours, as should recession fears that continue to abate.
9
Victory RS International Funds (Unaudited)
Victory RS Global Fund (continued)
Celgene Corp., an integrated biopharmaceutical company, announced the departure of its president and chief operating officer in 2018. Recently, investors have gone through a number of disappointments related to the immunology franchise of its business, including poor Otezla sales and lower guidance. A number of enrollment delays and setbacks have led to disappointed shareholders and poor stock performance over the past year.
Arkema SA, a chemicals producer, also had lackluster results stemming from the backdrop of macro headwinds and profit warnings from some cyclical chemical names. Trends seen in the latter part of the year, which promoted cautious order patterns from customers (notably due to volatile raw materials), have led Arkema itself to manage inventories more tightly, most notably in downstream acrylics. Moving forward, Arkema aims for an overall resilience of the business within a volatile macro context and will continue to lean on a greater contribution from the specialty business (currently forecasted at 2% EBITDA growth in 2019).
Outlook
We expect market volatility to continue in 2019 and will remain vigilant when constructing the portfolio, maintaining our sector and region neutrality. Making correct macro allocation calls can be immensely challenging; therefore, we do not forecast regional performance. In our view, stock selection and strong risk management protocols can be far more impactful to fund performance than allocation.
Investment Philosophy
The Fund is guided by our philosophy that positive investment outcomes can be attained through the use of a data-driven discipline in conjunction with a bottom-up approach to investing. Our proprietary research methodology, combined with a set of industry standard and team-generated global risk factors, seeks to capture information inefficiencies in the global equity markets. Our goal is to provide a consistent, diversified return stream over full market cycles while managing portfolio volatility.
10
Victory RS International Funds (Unaudited)
Victory RS Global Fund (continued)
Average Annual Return
Year Ended December 31, 2018
Class A | Class C | Class R | Class Y | ||||||||||||||||||||||||||||
INCEPTION DATE | 5/16/11 | 5/16/11 | 5/16/11 | 5/16/11 | |||||||||||||||||||||||||||
Net Asset Value | Maximum Offering Price | Net Asset Value | Contingent Deferred Charges | Net Asset Value | Net Asset Value | MSCI All Country World Index (Net)1 | |||||||||||||||||||||||||
One Year | –5.45 | % | –10.90 | % | –6.20 | % | –7.10 | % | –5.68 | % | –5.17 | % | –9.42 | % | |||||||||||||||||
Three Year | 7.88 | % | 5.76 | % | 7.05 | % | 7.05 | % | 15.18 | % | 8.18 | % | 6.60 | % | |||||||||||||||||
Five Year | 6.39 | % | 5.14 | % | 5.56 | % | 5.56 | % | 10.46 | % | 6.69 | % | 4.26 | % | |||||||||||||||||
Ten Year | N/A | N/A | N/A | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||
Since Inception | 8.17 | % | 7.34 | % | 7.36 | % | 7.36 | % | 10.75 | % | 8.52 | % | N/A | ||||||||||||||||||
Expense Ratios | |||||||||||||||||||||||||||||||
Gross | 1.96% | 3.06% | 2.82% | 1.38% | |||||||||||||||||||||||||||
With Applicable Waivers | 0.91% | 1.66% | 1.16% | 0.66% |
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 supplement dated May 1, 2018 (supplemented June 1, 2018). Additional information pertaining to the Fund's expense ratios as of December 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. 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.
11
Victory RS International Funds (Unaudited)
Victory RS Global Fund (continued)
Victory RS Global Fund — Growth of $10,000
1A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the world. The MSCI ACWI (Net) is maintained by Morgan Stanley Capital International, and is comprised of stocks from both developed and emerging markets. The index reflects the reinvestment of dividends paid on the stocks constituting the index net of withholding taxes. 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.
12
Victory RS International Funds (Unaudited)
Victory Sophus Emerging Markets Fund
Portfolio Holdings
As a Percentage of Total Investments
Market Overview
The year opened up strong with persistent and pervasive growth around the globe pushing equities higher and contributing to a strong risk on mode. However, as we got further into the year, a stronger U.S. dollar, a more hawkish Federal Reserve with the yield on the U.S. 10-year Treasury bond eclipsing 3%, the U.S./China trade war escalation, the Turkish and Argentinian currency crises causing fear of contagion across emerging markets, and concerns of slowing growth in China all contributed to a rapid and deep sell-off in emerging markets equities in the middle of the year. Slowing global growth fears grew as it became apparent that the economic growth in the U.S. was not translating globally. These fears escalated with the heightening of the U.S./China trade war mid-year. Global equities experienced a major risk-off episode in October with the worst sell-off since 2012, with emerging markets underperforming. China was among the biggest influencers of the direction of emerging markets for the month as soft macro data, including lower manufacturing and GDP numbers, appeared to confirm fears of an economic slowdown there. Supportive measures announced by the Chinese government and central bank officials, such as a cut in the reserve requirement ratio and the proposal of personal tax cuts, did very little to alleviate these concerns. Rising interest rates, with the yield on the 10-year U.S. Treasury bond hitting the highest point since 2011, and the continued strength in the U.S. dollar also continued to weigh on the asset class. A rally in late November and in to December on growing optimism of a trade deal, and a more dovish Fed helped emerging markets equities recover some, but not all, of their losses.
Performance Update
The Victory Sophus Emerging Markets Fund (the "Fund") seeks to provide long-term capital appreciation. The Fund was down 19.08% (Class A shares without sales charge) versus the MSCI Emerging Market Index (net), which was down 14.58%.
Portfolio Review
By sectors, the largest detractor from performance was stock selection in Diversified Financial Services. The largest contributor to relative performance was stock selection in Consumer Staples. By country, the largest detractor was stock selection in South Korea. The largest contributor was stock selection in Brazil.
Outlook
2018 was a difficult year in emerging markets, to say the least. There was no shortage of headwinds for the asset class, including a stronger dollar. However, there is much to be optimistic about emerging markets for 2019. For starters, we expect the U.S. dollar to weaken, after rising 4.40% in 2018. We see the issues that boosted the dollar last year, namely stronger economic growth in the U.S. and higher interest rates, moderating in 2019 as fiscal stimulus measures have essentially played themselves out. Yet, a weaker dollar is not the only reason
13
Victory RS International Funds (Unaudited)
Victory Sophus Emerging Markets Fund (continued)
for our optimism. We believe the media attention about China's growth declining and the "loss of confidence" by the consumer is overblown. While recent retail sales figures are down, excluding autos, retail sales have been stable, while growth in the consumption of services is skyrocketing. Regarding the U.S./China trade dispute, as of this writing the trade truce that was agreed upon at the G20 meetings in December is ongoing (until March 1, 2019), and it appears the negotiations are moving in a favorable direction. While it is difficult to predict the ultimate outcome of the negotiations, even a partial resolution, or at least a stabilization of tariffs, would be viewed favorably by the markets.
Fundamentals continue to be positive across emerging markets, with country balance sheets still in relatively good shape. Corporate earnings growth continues to be healthy, as we are looking for 10% – 12% for 2019 and is expected to eclipse earnings growth in the U.S. where the favorable impacts of the tax changes are rolling off. The emerging markets economic growth premium over developed markets contracted in 2018, but we expect that to widen again in 2019. Furthermore, valuations across emerging markets are attractive and roughly 15% below the mean, with the cyclically adjusted price to earnings ratio at roughly 30% below its historical average — a level last seen in late 2016. Finally, the secular trends in emerging markets remain intact with improving demographics and a rising middle class. All of this makes for a compelling reason to own emerging markets as part of a well-diversified portfolio. We continue to find attractive opportunities with the characteristics we seek — superior earnings growth at attractive valuations with revisions as the catalyst.
14
Victory RS International Funds (Unaudited)
Victory Sophus Emerging Markets Fund (continued)
Average Annual Return
Year Ended December 31, 2018
Class A | Class C | Class R | Class R6 | Class Y | |||||||||||||||||||||||||||||||
INCEPTION DATE | 5/1/97 | 8/7/00 | 5/15/01 | 11/15/16 | 3/10/09 | ||||||||||||||||||||||||||||||
Net Asset Value | Maximum Offering Price | Net Asset Value | Contingent Deferred Charges | Net Asset Value | Net Asset Value | Net Asset Value | MSCI Emerging Markets Index (Net)1 | ||||||||||||||||||||||||||||
One Year | –19.08 | % | –23.72 | % | –19.75 | % | –20.51 | % | –19.24 | % | –18.73 | % | –18.77 | % | –14.58 | % | |||||||||||||||||||
Three Year | 8.31 | % | 6.19 | % | 7.44 | % | 7.44 | % | 8.06 | % | N/A | 8.69 | % | 9.25 | % | ||||||||||||||||||||
Five Year | 1.31 | % | 0.11 | % | 0.49 | % | 0.49 | % | 1.04 | % | N/A | 1.65 | % | 1.65 | % | ||||||||||||||||||||
Ten Year | 7.57 | % | 6.93 | % | 6.73 | % | 6.73 | % | 7.24 | % | N/A | N/A | 8.02 | % | |||||||||||||||||||||
Since Inception | 6.49 | % | 6.20 | % | 6.48 | % | 6.48 | % | 8.60 | % | 8.15 | % | 9.28 | % | N/A | ||||||||||||||||||||
Expense Ratios | |||||||||||||||||||||||||||||||||||
Gross | 1.66% | 2.46% | 2.00% | 1.39% | 1.33% | ||||||||||||||||||||||||||||||
With Applicable Waivers | 1.34% | 2.14% | 1.58% | 0.89% | 0.99% |
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 supplement dated May 1, 2018 (supplemented June 29, 2018). Additional information pertaining to the Fund's expense ratios as of December 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. 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 Sophus Emerging Markets Fund — Growth of $10,000
1The MSCI Emerging Markets Index (Net) is a free float-adjusted market capitalization index that is designed to measure equity performance of emerging markets. The index reflects the reinvestment of dividends paid on the stocks constituting the index net of withholding taxes. You may not invest in the index and, unlike the Fund, the index does not incur fees or expenses. 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.
15
Victory RS International Funds (Unaudited)
Victory Sophus Emerging Markets Small Cap Fund
Portfolio Holdings
As a Percentage of Total Investments
Market Overview
The year opened up strong with persistent and pervasive growth around the globe pushing equities higher and contributing to a strong risk on mode. However, as we got further into the year, a stronger U.S. dollar, a more hawkish Federal Reserve with the yield on the U.S. 10-year Treasury bond eclipsing 3%, the U.S./China trade war escalation, the Turkish and Argentinian currency crises causing fear of contagion across emerging markets, and concerns of slowing growth in China all contributed to a rapid and deep sell-off in emerging markets equities in the middle of the year. Slowing global growth fears grew as it became apparent that the economic growth in the U.S. was not translating globally. These fears escalated with the heightening of the U.S./China trade war mid-year. Global equities experienced a major risk-off episode in October with the worst sell-off since 2012, with emerging markets underperforming. China was among the biggest influencers of the direction of emerging markets for the month as soft macro data, including lower manufacturing and GDP numbers, appeared to confirm fears of an economic slowdown there. Supportive measures announced by the Chinese government and central bank officials, such as a cut in the reserve requirement ratio and the proposal of personal tax cuts, did very little to alleviate these concerns. Rising interest rates, with the yield on the 10-year U.S. Treasury bond hitting the highest point since 2011, and the continued strength in the U.S. dollar also continued to weigh on the asset class. A rally in late November and in to December on growing optimism of a trade deal, and a more dovish Fed helped emerging markets equities recover some, but not all, of their losses.
Performance Update
The Victory Sophus Emerging Markets Small Cap Fund (the "Fund") seeks to provide long-term capital appreciation. The Fund was down 21.76% (Class A shares at net asset value) versus the MSCI Emerging Market Small Cap Index (net), which was down 18.59%.
Portfolio Review
The largest detractor from relative performance in the quarter was stock selection in the Consumer Discretionary sector. The largest contributor was stock selection in the Consumer Staples sector. On a country basis, the largest detractor was stock selection in South Korea. The largest contributor in the quarter was stock selection in China. Overall, consistent with our bottom-up process, stock selection had the largest impact on performance for the period versus country/sector allocation.
Outlook
2018 was a difficult year in emerging markets, to say the least. There was no shortage of headwinds for the asset class, including a stronger dollar. However, there is much to be optimistic about emerging markets for 2019. For starters, we expect the U.S. dollar to weaken, after rising 4.40% in 2018. We see the issues that boosted the dollar last year, namely stronger
16
Victory RS International Funds (Unaudited)
Victory Sophus Emerging Markets Small Cap Fund (continued)
economic growth in the U.S. and higher interest rates, moderating in 2019 as fiscal stimulus measures have essentially played themselves out. Yet, a weaker dollar is not the only reason for our optimism. We believe the media attention about China's growth declining and the "loss of confidence" by the consumer is overblown. While recent retail sales figures are down, excluding autos, retail sales have been stable, while growth in the consumption of services is skyrocketing. Regarding the U.S./China trade dispute, as of this writing the trade truce that was agreed upon at the G20 meetings in December is ongoing (until March 1, 2019), and it appears the negotiations are moving in a favorable direction. While it is difficult to predict the ultimate outcome of the negotiations, even a partial resolution, or at least a stabilization of tariffs, would be viewed favorably by the markets.
Fundamentals continue to be positive across emerging markets, with country balance sheets still in relatively good shape. Corporate earnings growth continues to be healthy, as we are looking for 10% – 12% for 2019 and is expected to eclipse earnings growth in the U.S. where the favorable impacts of the tax changes are rolling off. The emerging markets economic growth premium over developed markets contracted in 2018, but we expect that to widen again in 2019. Furthermore, valuations across emerging markets are attractive and roughly 15% below the mean, with the cyclically adjusted price to earnings ratio at roughly 30% below its historical average — a level last seen in late 2016. Finally, the secular trends in emerging markets remain intact with improving demographics and a rising middle class. All of this makes for a compelling reason to own emerging markets as part of a well-diversified portfolio. We continue to find attractive opportunities with the characteristics we seek — superior earnings growth at attractive valuations with revisions as the catalyst.
17
Victory RS International Funds (Unaudited)
Victory Sophus Emerging Markets Small Cap Fund (continued)
Average Annual Return
Year Ended December 31, 2018
Class A | Class C | Class Y | |||||||||||||||||||||||||
INCEPTION DATE | 1/31/14 | 1/31/14 | 1/31/14 | ||||||||||||||||||||||||
Net Asset Value | Maximum Offering Price | Net Asset Value | Maximum Offering Price | Net Asset Value | MSCI Emerging Markets Small Cap Index (Net)1 | ||||||||||||||||||||||
One Year | –21.76 | % | –26.27 | % | –22.31 | % | –22.89 | % | –21.57 | % | –18.59 | % | |||||||||||||||
Three Year | 3.92 | % | 1.89 | % | 2.45 | % | 2.45 | % | 4.18 | % | 3.68 | % | |||||||||||||||
Five Year | N/A | N/A | N/A | N/A | N/A | N/A | |||||||||||||||||||||
Ten Year | N/A | N/A | N/A | N/A | N/A | N/A | |||||||||||||||||||||
Since Inception | 1.72 | % | 0.50 | % | 0.56 | % | 0.56 | % | 2.03 | % | N/A | ||||||||||||||||
Expense Ratios | |||||||||||||||||||||||||||
Gross | 3.03% | 32.43% | 2.22% | ||||||||||||||||||||||||
With Applicable Waivers | 1.84% | 2.59% | 1.59% |
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 May 1, 2018. Additional information pertaining to the Fund's expense ratios as of December 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. 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 Sophus Emerging Markets Small Cap Fund — Growth of $10,000
1The MSCI Emerging Markets Small Cap Index (Net) is a free float-adjusted market capitalization index that is designed to measure equity performance of small-capitalization companies in emerging markets countries. The index reflects the reinvestment of dividends paid on the stocks constituting the index net of withholding taxes. 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.
18
Victory Portfolios Victory RS International Fund | Schedule of Portfolio Investments December 31, 2018 |
Security Description | Shares | Fair Value(a) | |||||||||
Common Stocks (95.1%) | |||||||||||
Australia (7.2%): | |||||||||||
Financials (1.8%): | |||||||||||
Macquarie Group Ltd. | 5,764 | $ | 441,406 | ||||||||
Health Care (1.5%): | |||||||||||
CSL Ltd. | 2,749 | 358,992 | |||||||||
Materials (1.9%): | |||||||||||
BHP Billiton Ltd. | 19,158 | 462,971 | |||||||||
Real Estate (2.0%): | |||||||||||
Scentre Group | 174,713 | 480,214 | |||||||||
1,743,583 | |||||||||||
Belgium (0.5%): | |||||||||||
Information Technology (0.5%): | |||||||||||
Melexis NV | 2,137 | 124,348 | |||||||||
China (0.6%): | |||||||||||
Communication Services (0.6%): | |||||||||||
Tencent Holdings Ltd. | 3,600 | 144,298 | |||||||||
Denmark (1.2%): | |||||||||||
Consumer Staples (1.2%): | |||||||||||
Royal Unibrew A/S | 4,092 | 282,785 | |||||||||
France (7.8%): | |||||||||||
Consumer Discretionary (2.8%): | |||||||||||
Cie Generale des Etablissements Michelin | 3,054 | 300,555 | |||||||||
LVMH Moet Hennessy Louis Vuitton SA | 1,332 | 389,924 | |||||||||
690,479 | |||||||||||
Energy (1.3%): | |||||||||||
Total SA | 5,796 | 305,669 | |||||||||
Financials (1.6%): | |||||||||||
AXA SA | 18,275 | 394,356 | |||||||||
Information Technology (1.5%): | |||||||||||
Cap Gemini SA | 3,605 | 358,522 | |||||||||
Materials (0.6%): | |||||||||||
Arkema SA | 1,708 | 146,609 | |||||||||
1,895,635 | |||||||||||
Germany (7.7%): | |||||||||||
Financials (2.0%): | |||||||||||
Allianz SE | 2,390 | 480,218 | |||||||||
Health Care (0.7%): | |||||||||||
Bayer AG | 2,362 | 164,252 | |||||||||
Industrials (2.2%): | |||||||||||
Siemens AG | 2,775 | 309,652 | |||||||||
Washtec AG | 3,165 | 219,004 | |||||||||
528,656 |
See notes to financial statements.
19
Victory Portfolios Victory RS International Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Shares | Fair Value(a) | |||||||||
Information Technology (1.4%): | |||||||||||
SAP SE | 3,588 | $ | 356,059 | ||||||||
Real Estate (1.4%): | |||||||||||
Vonovia SE | 7,570 | 341,201 | |||||||||
1,870,386 | |||||||||||
Hong Kong (2.9%): | |||||||||||
Financials (1.3%): | |||||||||||
AIA Group Ltd. | 28,400 | 235,929 | |||||||||
BOC Hong Kong Holdings Ltd. | 23,500 | 87,231 | |||||||||
323,160 | |||||||||||
Real Estate (1.2%): | |||||||||||
CK Asset Holdings Ltd. | 40,000 | 292,682 | |||||||||
Utilities (0.4%): | |||||||||||
HK Electric Investments & HK Electric Investments Ltd. | 91,000 | 91,723 | |||||||||
707,565 | |||||||||||
Ireland (1.3%): | |||||||||||
Industrials (1.3%): | |||||||||||
Experian PLC | 12,967 | 314,297 | |||||||||
Italy (3.5%): | |||||||||||
Financials (0.8%): | |||||||||||
Banca Generali SpA | 9,861 | 204,975 | |||||||||
Health Care (0.7%): | |||||||||||
Recordati SpA | 4,900 | 169,665 | |||||||||
Utilities (2.0%): | |||||||||||
Enel SpA | 82,501 | 478,213 | |||||||||
852,853 | |||||||||||
Japan (21.5%): | |||||||||||
Communication Services (0.6%): | |||||||||||
Nippon Telegraph & Telephone Corp. | 3,400 | 138,737 | |||||||||
Consumer Discretionary (4.5%): | |||||||||||
Hikari Tsushin, Inc. | 1,300 | 203,225 | |||||||||
Toyota Motor Corp. | 11,900 | 688,945 | |||||||||
United Arrows Ltd. | 6,000 | 191,210 | |||||||||
1,083,380 | |||||||||||
Consumer Staples (0.6%): | |||||||||||
Matsumotokiyoshi Holdings Co. Ltd. | 5,000 | 153,755 | |||||||||
Financials (2.8%): | |||||||||||
Jafco Co. Ltd. | 4,800 | 152,077 | |||||||||
Mitsubishi UFJ Financial Group, Inc. | 58,600 | 287,628 | |||||||||
Tokio Marine Holdings, Inc. | 5,200 | 247,079 | |||||||||
686,784 |
See notes to financial statements.
20
Victory Portfolios Victory RS International Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Shares | Fair Value(a) | |||||||||
Health Care (2.8%): | |||||||||||
Hoya Corp. | 5,300 | $ | 319,634 | ||||||||
Shionogi & Co. Ltd. | 6,100 | 348,208 | |||||||||
667,842 | |||||||||||
Industrials (5.8%): | |||||||||||
EN-Japan, Inc. | 5,600 | 173,368 | |||||||||
Fuji Electric Co. Ltd. | 9,500 | 279,837 | |||||||||
Hitachi Construction Machinery Co. Ltd. | 7,800 | 182,554 | |||||||||
ITOCHU Corp. | 9,000 | 152,866 | |||||||||
Kyowa Exeo Corp. | 9,600 | 224,817 | |||||||||
Okuma Corp. | 2,600 | 123,776 | |||||||||
Sanwa Holdings Corp. | 22,500 | 255,498 | |||||||||
1,392,716 | |||||||||||
Information Technology (1.7%): | |||||||||||
Fujitsu Ltd. | 2,500 | 155,862 | |||||||||
Oracle Corp. Japan | 3,100 | 196,808 | |||||||||
Ulvac, Inc. | 2,400 | 69,297 | |||||||||
421,967 | |||||||||||
Materials (0.5%): | |||||||||||
DIC Corp. (b) | 4,200 | 128,510 | |||||||||
Real Estate (1.0%): | |||||||||||
Sumitomo Realty & Development | 6,300 | 230,666 | |||||||||
Utilities (1.2%): | |||||||||||
Chubu Electric Power Co., Inc. | 19,900 | 282,806 | |||||||||
5,187,163 | |||||||||||
Macau (0.8%): | |||||||||||
Consumer Discretionary (0.8%): | |||||||||||
Wynn Macau Ltd. | 86,400 | 188,093 | |||||||||
Netherlands (5.2%): | |||||||||||
Communication Services (2.1%): | |||||||||||
Koninklijke KPN NV | 173,266 | 506,041 | |||||||||
Financials (1.2%): | |||||||||||
ING Groep NV | 26,993 | 290,313 | |||||||||
Industrials (1.9%): | |||||||||||
Wolters Kluwer NV | 7,827 | 460,221 | |||||||||
1,256,575 | |||||||||||
Norway (1.7%): | |||||||||||
Energy (0.5%): | |||||||||||
Aker BP ASA | 5,215 | 131,576 | |||||||||
Financials (1.2%): | |||||||||||
SpareBank 1 SMN | 29,059 | 283,617 | |||||||||
415,193 |
See notes to financial statements.
21
Victory Portfolios Victory RS International Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Shares | Fair Value(a) | |||||||||
Russian Federation (0.5%): | |||||||||||
Materials (0.5%): | |||||||||||
Evraz PLC | 20,179 | $ | 123,547 | ||||||||
Spain (2.4%): | |||||||||||
Communication Services (1.6%): | |||||||||||
Telefonica SA | 44,575 | 375,155 | |||||||||
Financials (0.8%): | |||||||||||
Banco Santander SA | 44,020 | 199,867 | |||||||||
575,022 | |||||||||||
Sweden (2.7%): | |||||||||||
Industrials (2.7%): | |||||||||||
Atlas Copco AB, Class B | 22,060 | 483,639 | |||||||||
Epiroc AB, Class B (c) | 18,365 | 164,022 | |||||||||
647,661 | |||||||||||
Switzerland (9.2%): | |||||||||||
Consumer Staples (2.8%): | |||||||||||
Nestle SA, Registered Shares | 8,277 | 672,058 | |||||||||
Financials (0.9%): | |||||||||||
UBS Group AG, Registered Shares | 17,589 | 219,481 | |||||||||
Health Care (5.5%): | |||||||||||
Novartis AG | 7,365 | 631,027 | |||||||||
Roche Holding AG | 2,798 | 694,911 | |||||||||
1,325,938 | |||||||||||
2,217,477 | |||||||||||
United Kingdom (18.4%): | |||||||||||
Consumer Discretionary (0.5%): | |||||||||||
Next PLC | 2,440 | 124,218 | |||||||||
Consumer Staples (4.9%): | |||||||||||
Britvic PLC | 28,941 | 294,714 | |||||||||
Diageo PLC | 11,860 | 423,745 | |||||||||
Unilever PLC | 8,882 | 466,259 | |||||||||
1,184,718 | |||||||||||
Energy (3.2%): | |||||||||||
BP PLC | 57,548 | 363,745 | |||||||||
Royal Dutch Shell PLC, Class A | 13,986 | 411,584 | |||||||||
775,329 | |||||||||||
Financials (4.0%): | |||||||||||
Close Brothers Group PLC | 16,287 | 298,855 | |||||||||
HSBC Holdings PLC | 44,934 | 370,637 | |||||||||
Legal & General Group PLC | 97,697 | 287,807 | |||||||||
957,299 | |||||||||||
Health Care (1.3%): | |||||||||||
Smith & Nephew PLC | 16,775 | 313,958 |
See notes to financial statements.
22
Victory Portfolios Victory RS International Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Shares | Fair Value(a) | |||||||||
Industrials (1.5%): | |||||||||||
RELX PLC | 17,745 | $ | 365,853 | ||||||||
Materials (3.0%): | |||||||||||
Croda International PLC | 4,471 | 266,971 | |||||||||
Rio Tinto PLC | 9,681 | 463,576 | |||||||||
730,547 | |||||||||||
4,451,922 | |||||||||||
Total Common Stocks (Cost $22,998,260) | 22,998,403 | ||||||||||
Preferred Stocks (1.6%) | |||||||||||
Japan (1.6%): | |||||||||||
Consumer Staples (1.6%): | |||||||||||
Ito En Ltd. | 17,300 | 379,889 | |||||||||
Total Preferred Stocks (Cost $292,938) | 379,889 | ||||||||||
Exchange-Traded Funds (1.3%) | |||||||||||
United States (1.3%): | |||||||||||
iShares MSCI EAFE ETF | 5,265 | 309,477 | |||||||||
Total Exchange-Traded Funds (Cost $349,279) | 309,477 | ||||||||||
Total Investments (Cost $23,640,477) — 98.0% | 23,687,769 | ||||||||||
Other assets in excess of liabilities — 2.0% | 495,164 | ||||||||||
NET ASSETS — 100.00% | $ | 24,182,933 |
(a) All securities, except those traded on exchanges in the United States, were fair valued at December 31, 2018. See Note 2 for further information.
(b) All or a portion of this security is on loan.
(c) Non-income producing security.
ETF — Exchange-Traded Fund
PLC — Public Limited Company
See notes to financial statements.
23
Victory Portfolios Victory RS Global Fund | Schedule of Portfolio Investments December 31, 2018 |
Security Description | Shares | Fair Value(a) | |||||||||
Common Stocks (95.7%) | |||||||||||
Australia (2.4%): | |||||||||||
Financials (1.1%): | |||||||||||
Macquarie Group Ltd. | 5,068 | $ | 388,106 | ||||||||
Health Care (1.3%): | |||||||||||
CSL Ltd. | 3,488 | 455,499 | |||||||||
843,605 | |||||||||||
Belgium (0.3%): | |||||||||||
Information Technology (0.3%): | |||||||||||
Melexis NV | 1,879 | 109,336 | |||||||||
Bermuda (0.4%): | |||||||||||
Industrials (0.4%): | |||||||||||
Triton International, Ltd./Ber | 4,879 | 151,591 | |||||||||
China (2.6%): | |||||||||||
Communication Services (1.0%): | |||||||||||
Tencent Holdings Ltd. | 9,100 | 364,754 | |||||||||
Consumer Staples (0.7%): | |||||||||||
Foshan Haitan Flavouring | 22,141 | 222,993 | |||||||||
Financials (0.9%): | |||||||||||
Industrial & Commercial Bank of China Ltd. | 455,000 | 323,644 | |||||||||
911,391 | |||||||||||
Denmark (0.6%): | |||||||||||
Consumer Staples (0.6%): | |||||||||||
Royal Unibrew A/S | 3,327 | 229,918 | |||||||||
France (3.5%): | |||||||||||
Consumer Discretionary (1.5%): | |||||||||||
Cie Generale des Etablissements Michelin | 2,422 | 238,357 | |||||||||
LVMH Moet Hennessy Louis Vuitton SA | 978 | 286,296 | |||||||||
524,653 | |||||||||||
Energy (0.8%): | |||||||||||
Total SA | 5,714 | 301,345 | |||||||||
Financials (0.7%): | |||||||||||
BNP Paribas SA | 5,523 | 249,389 | |||||||||
Materials (0.5%): | |||||||||||
Arkema SA | 2,083 | 178,797 | |||||||||
1,254,184 | |||||||||||
Germany (1.4%): | |||||||||||
Financials (0.9%): | |||||||||||
Hannover Rueck SE | 2,283 | 307,638 | |||||||||
Industrials (0.5%): | |||||||||||
Washtec AG | 2,841 | 196,585 | |||||||||
504,223 |
See notes to financial statements.
24
Victory Portfolios Victory RS Global Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Shares | Fair Value(a) | |||||||||
Hong Kong (1.1%): | |||||||||||
Energy (1.1%): | |||||||||||
CNOOC Ltd. | 257,957 | $ | 397,362 | ||||||||
India (1.0%): | |||||||||||
Consumer Staples (1.0%): | |||||||||||
Nestle India Ltd. | 2,339 | 371,165 | |||||||||
Indonesia (0.7%): | |||||||||||
Communication Services (0.7%): | |||||||||||
PT Telekomunikasi Indonesia Persero TBK | 893,600 | 233,698 | |||||||||
Ireland (1.7%): | |||||||||||
Industrials (1.7%): | |||||||||||
Eaton Corp. PLC, ADR | 8,613 | 591,369 | |||||||||
Italy (2.9%): | |||||||||||
Financials (0.7%): | |||||||||||
Banca Generali SpA | 13,035 | 270,951 | |||||||||
Health Care (0.9%): | |||||||||||
Recordati SpA | 8,891 | 307,855 | |||||||||
Utilities (1.3%): | |||||||||||
Enel SpA | 79,432 | 460,424 | |||||||||
1,039,230 | |||||||||||
Japan (7.9%): | |||||||||||
Consumer Discretionary (2.3%): | |||||||||||
Hikari Tsushin, Inc. | 1,300 | 203,226 | |||||||||
Toyota Motor Corp. | 7,600 | 439,998 | |||||||||
United Arrows Ltd. | 5,700 | 181,649 | |||||||||
824,873 | |||||||||||
Financials (1.3%): | |||||||||||
Jafco Co. Ltd. | 3,900 | 123,562 | |||||||||
Resona Holdings, Inc. | 72,796 | 349,213 | |||||||||
472,775 | |||||||||||
Health Care (1.7%): | |||||||||||
As One Corp. | 4,479 | 306,619 | |||||||||
Hoya Corp. | 5,100 | 307,572 | |||||||||
614,191 | |||||||||||
Industrials (1.8%): | |||||||||||
EN-Japan, Inc. | 3,800 | 117,643 | |||||||||
Hitachi Construction Machinery Co. Ltd. | 8,500 | 198,938 | |||||||||
Kyowa Exeo Corp. | 7,300 | 170,954 | |||||||||
Okuma Corp. | 2,800 | 133,297 | |||||||||
620,832 | |||||||||||
Information Technology (0.2%): | |||||||||||
Ulvac, Inc. | 2,300 | 66,410 |
See notes to financial statements.
25
Victory Portfolios Victory RS Global Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Shares | Fair Value(a) | |||||||||
Materials (0.6%): | |||||||||||
DIC Corp. | 6,200 | $ | 189,705 | ||||||||
2,788,786 | |||||||||||
Korea, Republic Of (0.9%): | |||||||||||
Information Technology (0.9%): | |||||||||||
Samsung Electronics Co. Ltd. | 9,707 | 337,948 | |||||||||
Macau (0.7%): | |||||||||||
Consumer Discretionary (0.7%): | |||||||||||
Wynn Macau Ltd. | 112,000 | 243,824 | |||||||||
Mexico (0.7%): | |||||||||||
Industrials (0.7%): | |||||||||||
Promotora y Operadora de Infraestructura SAB de CV | 26,424 | 253,013 | |||||||||
Netherlands (1.0%): | |||||||||||
Industrials (1.0%): | |||||||||||
Wolters Kluwer NV | 6,072 | 357,029 | |||||||||
Norway (1.7%): | |||||||||||
Energy (0.6%): | |||||||||||
Aker BP ASA | 8,797 | 221,950 | |||||||||
Financials (1.1%): | |||||||||||
SpareBank 1 SMN | 37,887 | 369,779 | |||||||||
591,729 | |||||||||||
Russian Federation (0.6%): | |||||||||||
Materials (0.6%): | |||||||||||
Evraz PLC | 32,134 | 196,742 | |||||||||
Singapore (0.9%): | |||||||||||
Financials (0.9%): | |||||||||||
Singapore Exchange Ltd. | 64,000 | 335,498 | |||||||||
Sweden (2.0%): | |||||||||||
Industrials (2.0%): | |||||||||||
Atlas Copco AB, Class B | 16,268 | 356,656 | |||||||||
Epiroc AB, Class B (b) | 23,264 | 207,777 | |||||||||
Nolato AB | 3,124 | 129,373 | |||||||||
693,806 | |||||||||||
Switzerland (1.9%): | |||||||||||
Health Care (1.9%): | |||||||||||
Roche Holding AG | 2,745 | 681,748 | |||||||||
Taiwan (0.4%): | |||||||||||
Financials (0.4%): | |||||||||||
Cathay Financial Holding Co. Ltd. | 91,000 | 139,310 | |||||||||
United Kingdom (7.7%): | |||||||||||
Consumer Discretionary (0.5%): | |||||||||||
Next PLC | 2,996 | 152,524 |
See notes to financial statements.
26
Victory Portfolios Victory RS Global Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Shares | Fair Value(a) | |||||||||
Consumer Staples (2.6%): | |||||||||||
Britvic PLC | 31,118 | $ | 316,883 | ||||||||
Diageo PLC | 6,868 | 245,386 | |||||||||
Unilever PLC | 6,791 | 356,492 | |||||||||
918,761 | |||||||||||
Financials (1.2%): | |||||||||||
Close Brothers Group PLC | 12,238 | 224,558 | |||||||||
HSBC Holdings PLC | 25,371 | 209,272 | |||||||||
433,830 | |||||||||||
Industrials (1.1%): | |||||||||||
RELX PLC | 19,398 | 399,933 | |||||||||
Materials (2.0%): | |||||||||||
Croda International PLC | 4,539 | 271,032 | |||||||||
Rio Tinto PLC | 9,250 | 442,937 | |||||||||
713,969 | |||||||||||
Utilities (0.3%): | |||||||||||
Severn Trent PLC | 4,258 | 98,688 | |||||||||
2,717,705 | |||||||||||
United States (50.7%): | |||||||||||
Communication Services (5.1%): | |||||||||||
Alphabet, Inc., Class C (b) | 613 | 634,829 | |||||||||
Facebook, Inc., Class A (b) | 3,703 | 485,426 | |||||||||
Verizon Communications, Inc. | 12,530 | 704,437 | |||||||||
1,824,692 | |||||||||||
Consumer Discretionary (5.8%): | |||||||||||
Amazon.com, Inc. (b) | 499 | 749,483 | |||||||||
McDonald's Corp. | 2,878 | 511,046 | |||||||||
Ross Stores, Inc. | 5,133 | 427,066 | |||||||||
The TJX Co., Inc. | 8,409 | 376,219 | |||||||||
2,063,814 | |||||||||||
Consumer Staples (3.5%): | |||||||||||
Colgate-Palmolive Co. | 9,247 | 550,382 | |||||||||
PepsiCo, Inc. | 6,236 | 688,953 | |||||||||
1,239,335 | |||||||||||
Energy (2.7%): | |||||||||||
ConocoPhillips | 7,621 | 475,169 | |||||||||
Phillips 66 | 5,479 | 472,016 | |||||||||
947,185 | |||||||||||
Financials (8.3%): | |||||||||||
Bank of America Corp. | 15,539 | 382,881 | |||||||||
CME Group, Inc. | 2,215 | 416,686 | |||||||||
JPMorgan Chase & Co. | 6,777 | 661,570 | |||||||||
MSCI, Inc. | 3,563 | 525,293 | |||||||||
The PNC Financial Services Group, Inc. | 4,535 | 530,187 | |||||||||
The Progressive Corp. | 7,075 | 426,835 | |||||||||
2,943,452 |
See notes to financial statements.
27
Victory Portfolios Victory RS Global Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Shares | Fair Value(a) | |||||||||
Health Care (7.3%): | |||||||||||
Amgen, Inc. | 2,898 | $ | 564,154 | ||||||||
Celgene Corp. (b) | 3,887 | 249,118 | |||||||||
CVS Health Corp. | 5,225 | 342,342 | |||||||||
Eli Lilly & Co. | 5,650 | 653,818 | |||||||||
Johnson & Johnson | 6,053 | 781,139 | |||||||||
2,590,571 | |||||||||||
Industrials (3.5%): | |||||||||||
3M Co. | 3,487 | 664,413 | |||||||||
HD Supply Holdings, Inc. (b) | 6,840 | 256,637 | |||||||||
Honeywell International, Inc. | 2,302 | 304,140 | |||||||||
1,225,190 | |||||||||||
Information Technology (11.8%): | |||||||||||
Apple, Inc. | 4,740 | 747,687 | |||||||||
Cisco Systems, Inc. | 16,205 | 702,163 | |||||||||
Mastercard, Inc., Class A | 4,867 | 918,159 | |||||||||
Microsoft Corp. | 13,073 | 1,327,825 | |||||||||
Texas Instruments, Inc. | 5,414 | 511,623 | |||||||||
4,207,457 | |||||||||||
Real Estate (1.1%): | |||||||||||
Liberty Property Trust | 9,447 | 395,640 | |||||||||
Utilities (1.6%): | |||||||||||
MGE Energy, Inc. | 9,609 | 576,156 | |||||||||
18,013,492 | |||||||||||
Total Common Stocks (Cost $29,610,156) | 33,987,702 | ||||||||||
Preferred Stocks (0.7%) | |||||||||||
Brazil (0.7%): | |||||||||||
Financials (0.7%): | |||||||||||
Itau Unibanco Holding S.A. | 28,815 | 263,749 | |||||||||
Total Preferred Stocks (Cost $174,713) | 263,749 | ||||||||||
Exchange-Traded Funds (0.1%) | |||||||||||
United States (0.1%): | |||||||||||
iShares MSCI ACWI ETF | 517 | 33,171 | |||||||||
Total Exchange-Traded Funds (Cost $35,063) | 33,171 | ||||||||||
Total Investments (Cost $29,819,932) — 96.5% | 34,284,622 | ||||||||||
Other assets in excess of liabilities — 3.5% | 1,232,539 | ||||||||||
NET ASSETS — 100.00% | $ | 35,517,161 |
(a) All securities, except those traded on exchanges in the United States (including ADRs), Bermuda and Mexico were fair valued at December 31, 2018. See Note 2 for further information.
(b) Non-income producing security.
ADR — American Depositary Receipt
ETF — Exchange-Traded Fund
PLC — Public Limited Company
See notes to financial statements.
28
Victory Portfolios Victory Sophus Emerging Markets Fund | Schedule of Portfolio Investments December 31, 2018 |
Security Description | Shares | Fair Value(a) | |||||||||
Common Stocks (94.5%) | |||||||||||
Australia (0.6%): | |||||||||||
Materials (0.6%): | |||||||||||
BHP Billiton Ltd., ADR (b) | 36,352 | $ | 1,755,438 | ||||||||
Brazil (7.5%): | |||||||||||
Communication Services (0.5%): | |||||||||||
TIM Participacoes SA | 450,200 | 1,375,366 | |||||||||
Consumer Discretionary (2.0%): | |||||||||||
Construtora Tenda SA | 192,000 | 1,587,872 | |||||||||
Lojas Renner SA | 235,000 | 2,564,077 | |||||||||
Tupy SA | 308,000 | 1,597,897 | |||||||||
5,749,846 | |||||||||||
Energy (1.4%): | |||||||||||
Petroleo Brasileiro SA, ADR | 293,985 | 3,824,745 | |||||||||
Financials (1.4%): | |||||||||||
Banco Bradesco SA, ADR | 411,850 | 4,073,196 | |||||||||
Health Care (0.6%): | |||||||||||
Odontoprev SA | 490,800 | 1,739,019 | |||||||||
Materials (0.9%): | |||||||||||
Vale SA, ADR | 193,852 | 2,556,908 | |||||||||
Real Estate (0.7%): | |||||||||||
Multiplan Empreendimentos Imobiliarios SA | 325,100 | 2,037,337 | |||||||||
21,356,417 | |||||||||||
Chile (0.4%): | |||||||||||
Energy (0.4%): | |||||||||||
Empresas COPEC SA | 99,437 | 1,197,503 | |||||||||
China (23.1%): | |||||||||||
Communication Services (7.3%): | |||||||||||
Autohome, Inc., ADR (b) | 13,504 | 1,056,418 | |||||||||
Baidu, Inc., ADR (c) | 14,902 | 2,363,457 | |||||||||
NetEase, Inc., ADR | 7,194 | 1,693,252 | |||||||||
Tencent Holdings Ltd. | 397,815 | 15,945,583 | |||||||||
21,058,710 | |||||||||||
Consumer Discretionary (3.7%): | |||||||||||
Alibaba Group Holding Ltd., ADR (c) | 68,026 | 9,324,324 | |||||||||
JNBY Design Ltd. (b) | 827,500 | 1,159,853 | |||||||||
10,484,177 | |||||||||||
Consumer Staples (1.6%): | |||||||||||
Ausnutria Dairy Corp. Ltd. (b) | 1,318,000 | 1,479,982 | |||||||||
Chlitina Holding Ltd. | 156,000 | 1,305,754 | |||||||||
Want Want China Holdings Ltd. | 2,798,000 | 1,957,800 | |||||||||
4,743,536 |
See notes to financial statements.
29
Victory Portfolios Victory Sophus Emerging Markets Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Shares | Fair Value(a) | |||||||||
Energy (0.7%): | |||||||||||
PetroChina Co. Ltd. | 3,328,000 | $ | 2,065,144 | ||||||||
Financials (6.4%): | |||||||||||
China Construction Bank Corp. | 9,174,857 | 7,513,342 | |||||||||
Industrial & Commercial Bank of China Ltd. | 7,125,000 | 5,068,051 | |||||||||
Ping An Insurance Group Co. of China Ltd. (b) | 656,000 | 5,787,612 | |||||||||
18,369,005 | |||||||||||
Health Care (0.3%): | |||||||||||
3SBio, Inc. (d) | 664,500 | 849,565 | |||||||||
Industrials (1.4%): | |||||||||||
China Railway Construction Corp. Ltd. | 2,805,500 | 3,896,998 | |||||||||
Materials (1.0%): | |||||||||||
Anhui Conch Cement Co. Ltd. | 603,000 | 2,916,157 | |||||||||
Utilities (0.7%): | |||||||||||
ENN Energy Holdings Ltd. | 221,000 | 1,964,322 | |||||||||
66,347,614 | |||||||||||
Greece (0.8%): | |||||||||||
Communication Services (0.5%): | |||||||||||
Hellenic Telecommunications Organization SA | 125,401 | 1,368,054 | |||||||||
Industrials (0.3%): | |||||||||||
Mytilineos Holdings SA | 94,199 | 784,811 | |||||||||
2,152,865 | |||||||||||
Hong Kong (7.7%): | |||||||||||
Communication Services (1.3%): | |||||||||||
China Mobile Ltd. | 371,500 | 3,595,085 | |||||||||
Consumer Discretionary (1.0%): | |||||||||||
Pacific Textiles Holdings | 1,653,000 | 1,469,132 | |||||||||
Xinyi Glass Holdings Ltd. | 1,292,000 | 1,427,300 | |||||||||
2,896,432 | |||||||||||
Energy (1.2%): | |||||||||||
CNOOC Ltd. | 2,145,000 | 3,304,204 | |||||||||
Health Care (0.4%): | |||||||||||
CSPC Pharmaceutical Group Ltd. (b) | 860,000 | 1,234,584 | |||||||||
Industrials (1.1%): | |||||||||||
NWS Holdings Ltd. | 1,528,000 | 3,137,752 | |||||||||
Information Technology (0.3%): | |||||||||||
Kingboard Laminates Holdings Ltd. | 1,139,000 | 940,923 | |||||||||
Real Estate (2.4%): | |||||||||||
China Resources Land Ltd. | 576,000 | 2,215,825 | |||||||||
Shimao Property Holdings Ltd. | 1,724,000 | 4,592,016 | |||||||||
6,807,841 | |||||||||||
21,916,821 |
See notes to financial statements.
30
Victory Portfolios Victory Sophus Emerging Markets Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Shares | Fair Value(a) | |||||||||
Hungary (0.6%): | |||||||||||
Financials (0.6%): | |||||||||||
OTP Bank Public Co. Ltd. | 41,826 | $ | 1,691,699 | ||||||||
India (8.5%): | |||||||||||
Consumer Discretionary (0.7%): | |||||||||||
Mahindra & Mahindra Ltd. | 164,717 | 1,895,454 | |||||||||
Consumer Staples (0.8%): | |||||||||||
Nestle India Ltd. | 15,035 | 2,385,833 | |||||||||
Energy (1.5%): | |||||||||||
Reliance Industries Ltd. | 271,129 | 4,351,832 | |||||||||
Financials (1.0%): | |||||||||||
Cholamandalam Investment and Finance Co. Ltd. | 48,914 | 882,079 | |||||||||
Indusind Bank Ltd. | 89,686 | 2,053,826 | |||||||||
2,935,905 | |||||||||||
Industrials (1.4%): | |||||||||||
Larsen & Toubro Ltd. | 188,004 | 3,869,222 | |||||||||
Information Technology (1.8%): | |||||||||||
HCL Technologies Ltd. | 144,364 | 1,995,088 | |||||||||
Infosys Technologies, ADR | 327,251 | 3,115,430 | |||||||||
5,110,518 | |||||||||||
Materials (0.6%): | |||||||||||
Tata Steel Ltd. | 223,136 | 1,663,974 | |||||||||
Utilities (0.7%): | |||||||||||
Mahanagar Gas Ltd. | 164,558 | 2,129,759 | |||||||||
24,342,497 | |||||||||||
Indonesia (2.9%): | |||||||||||
Consumer Discretionary (1.0%): | |||||||||||
PT Astra International TBK | 2,689,600 | 1,541,385 | |||||||||
PT Sri Rejeki Isman TBK | 53,451,100 | 1,335,537 | |||||||||
2,876,922 | |||||||||||
Consumer Staples (0.6%): | |||||||||||
PT Indofood CBP Sukses Makmur TBK | 2,396,700 | 1,744,470 | |||||||||
Financials (1.3%): | |||||||||||
PT Bank Negara Indonesia Persero TBK | 6,043,800 | 3,708,463 | |||||||||
8,329,855 | |||||||||||
Korea, Republic Of (13.2%): | |||||||||||
Communication Services (0.5%): | |||||||||||
LG Uplus Corp. | 91,839 | 1,451,571 | |||||||||
Consumer Discretionary (2.8%): | |||||||||||
Fila Korea Ltd. | 53,924 | 2,604,870 | |||||||||
Hotel Shilla Co. Ltd. | 25,471 | 1,747,267 | |||||||||
LG Electronics, Inc. | 38,958 | 2,184,697 | |||||||||
Youngone Corp. | 43,959 | 1,514,071 | |||||||||
8,050,905 |
See notes to financial statements.
31
Victory Portfolios Victory Sophus Emerging Markets Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Shares | Fair Value(a) | |||||||||
Consumer Staples (0.4%): | |||||||||||
Neopharm Co. Ltd. (c) | 29,074 | $ | 1,174,922 | ||||||||
Energy (0.5%): | |||||||||||
SK Innovation Co. Ltd. | 9,776 | 1,569,329 | |||||||||
Financials (2.1%): | |||||||||||
Hana Financial Group, Inc. | 69,822 | �� | 2,271,013 | ||||||||
KB Financial Group, Inc. | 89,905 | 3,750,887 | |||||||||
6,021,900 | |||||||||||
Industrials (1.6%): | |||||||||||
Doosan Infracore Co. Ltd. (b) (c) | 266,330 | 1,814,625 | |||||||||
Samsung Engineering Co., Ltd. (c) | 166,915 | 2,636,239 | |||||||||
4,450,864 | |||||||||||
Information Technology (5.3%): | |||||||||||
Samsung Electro-Mechanics Co. Ltd. (b) | 13,872 | 1,293,287 | |||||||||
Samsung Electronics Co. Ltd. | 400,054 | 13,927,815 | |||||||||
15,221,102 | |||||||||||
37,940,593 | |||||||||||
Malaysia (1.0%): | |||||||||||
Financials (0.5%): | |||||||||||
Ammb Holdings Berhad | 1,370,300 | 1,437,399 | |||||||||
Industrials (0.5%): | |||||||||||
Malaysia Airports Holdings Berhad | 732,600 | 1,484,902 | |||||||||
2,922,301 | |||||||||||
Mexico (1.7%): | |||||||||||
Consumer Discretionary (0.2%): | |||||||||||
El Puerto de Liverpool Sab de CV | 79,813 | 512,526 | |||||||||
Financials (1.1%): | |||||||||||
Banco del Bajio SA (d) | 390,924 | 763,432 | |||||||||
Grupo Financiero Banorte SAB de CV | 495,628 | 2,416,110 | |||||||||
3,179,542 | |||||||||||
Materials (0.4%): | |||||||||||
Alpek SAB de CV (c) | 986,183 | 1,207,143 | |||||||||
4,899,211 | |||||||||||
Philippines (0.4%): | |||||||||||
Financials (0.4%): | |||||||||||
Metro Pacific Investments Co. | 13,178,000 | 1,159,892 | |||||||||
Poland (0.4%): | |||||||||||
Financials (0.4%): | |||||||||||
Bank Pekao SA | 42,329 | 1,234,878 | |||||||||
Russian Federation (3.7%): | |||||||||||
Energy (1.9%): | |||||||||||
LUKOIL PJSC, ADR | 77,098 | 5,511,929 | |||||||||
5,511,929 |
See notes to financial statements.
32
Victory Portfolios Victory Sophus Emerging Markets Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Shares | Fair Value(a) | |||||||||
Financials (0.6%): | |||||||||||
Sberbank of Russia PJSC, ADR | 165,080 | $ | 1,808,971 | ||||||||
1,808,971 | |||||||||||
Materials (0.5%): | |||||||||||
ALROSA AO | 952,300 | 1,345,174 | |||||||||
Utilities (0.7%): | |||||||||||
Inter RAO UES PJSC | 34,687,000 | 1,930,749 | |||||||||
10,596,823 | |||||||||||
Saudi Arabia (0.7%): | |||||||||||
Financials (0.7%): | |||||||||||
Al Rajhi Bank | 89,963 | 2,096,639 | |||||||||
South Africa (6.6%): | |||||||||||
Communication Services (1.5%): | |||||||||||
Naspers Ltd. | 21,619 | 4,339,458 | |||||||||
Consumer Discretionary (0.5%): | |||||||||||
The Foschini Group Ltd. | 125,776 | 1,456,159 | |||||||||
Consumer Staples (0.7%): | |||||||||||
The SPAR Group Ltd. | 129,979 | 1,877,316 | |||||||||
Financials (2.8%): | |||||||||||
Absa Group Ltd. | 321,840 | 3,621,393 | |||||||||
Capitec Bank Holdings Ltd. | 30,201 | 2,346,322 | |||||||||
Nedbank Group Ltd. | 112,205 | 2,145,456 | |||||||||
8,113,171 | |||||||||||
Materials (0.5%): | |||||||||||
AngloGold Ashanti, Ltd. | 119,907 | 1,527,130 | |||||||||
Real Estate (0.6%): | |||||||||||
Growthpoint Properties, Ltd. | 1,017,795 | 1,658,585 | |||||||||
18,971,819 | |||||||||||
Taiwan (10.2%): | |||||||||||
Consumer Staples (0.7%): | |||||||||||
TCI Co. Ltd. | 115,749 | 1,947,804 | |||||||||
Financials (2.3%): | |||||||||||
CTBC Financial Holding Co. Ltd. | 5,900,000 | 3,880,755 | |||||||||
Yuanta Financial Holding Co. Ltd. | 5,604,000 | 2,817,392 | |||||||||
6,698,147 | |||||||||||
Industrials (0.5%): | |||||||||||
Far Eastern New Century Corp. | 1,712,000 | 1,554,814 | |||||||||
Information Technology (5.9%): | |||||||||||
Chipbond Technology Corp. | 806,000 | 1,618,475 | |||||||||
Elite Material Co. Ltd. | 341,000 | 729,423 | |||||||||
Largan Precision Co. Ltd. | 18,000 | 1,878,271 | |||||||||
Taiwan Semiconductor Manufacturing Co. Ltd. | 1,744,998 | 12,671,250 | |||||||||
16,897,419 |
See notes to financial statements.
33
Victory Portfolios Victory Sophus Emerging Markets Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Shares | Fair Value(a) | |||||||||
Materials (0.8%): | |||||||||||
Formosa Plastics Corp. | 652,000 | $ | 2,143,189 | ||||||||
29,241,373 | |||||||||||
Thailand (3.2%): | |||||||||||
Energy (0.8%): | |||||||||||
PTT Exploration & Production | 675,300 | 2,343,723 | |||||||||
Financials (1.3%): | |||||||||||
Bangkok Bank PCL | 386,500 | 2,412,360 | |||||||||
TMB Bank Public Corp. | 16,146,700 | 1,091,985 | |||||||||
3,504,345 | |||||||||||
Health Care (0.6%): | |||||||||||
Bumrungrad Hospital PCL | 295,600 | 1,701,645 | |||||||||
Materials (0.5%): | |||||||||||
Indorama Ventures | 873,800 | 1,458,318 | |||||||||
9,008,031 | |||||||||||
Turkey (0.0%): (e) | |||||||||||
Consumer Discretionary (0.0%): (e) | |||||||||||
Yatas Yatak ve Yorgan Sanayi ve Ticaret AS (c) | 1 | 1 | |||||||||
United Arab Emirates (0.8%): | |||||||||||
Financials (0.8%): | |||||||||||
National Bank of Abu Dhabi PJSC | 603,756 | 2,317,788 | |||||||||
United Kingdom (0.5%): | |||||||||||
Materials (0.5%): | |||||||||||
Anglo American PLC | 64,735 | 1,447,297 | |||||||||
Total Common Stocks (Cost $277,068,908) | 270,927,355 | ||||||||||
Preferred Stocks (2.4%) | |||||||||||
Brazil (2.4%): | |||||||||||
Financials (2.0%): | |||||||||||
Itau Unibanco Holding S.A. | 625,800 | 5,728,066 | |||||||||
Industrials (0.4%): | |||||||||||
Randon SA Implementos e Participacoes | 510,600 | 1,219,261 | |||||||||
6,947,327 | |||||||||||
Total Preferred Stocks (Cost $6,088,233) | 6,947,327 | ||||||||||
Collateral for Securities Loaned^ (1.8%) | |||||||||||
United States (1.8%): | |||||||||||
BlackRock Liquidity Funds TempFund Portfolio, Institutional Class, 2.49% (f) | 966,527 | 966,527 | |||||||||
Fidelity Investments Money Market Government Portfolio, Class I, 2.28% (f) | 1,396,586 | 1,396,586 | |||||||||
Fidelity Investments Prime Money Market Portfolio, Class I, 2.46% (f) | 43,127 | 43,127 | |||||||||
Goldman Sachs Financial Square Prime Obligations Fund, Institutional Class, 2.55% (f) | 536,966 | 536,966 |
See notes to financial statements.
34
Victory Portfolios Victory Sophus Emerging Markets Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Shares | Fair Value(a) | |||||||||
JPMorgan Prime Money Market Fund, Capital Class, 2.49% (f) | 859,091 | $ | 859,091 | ||||||||
Morgan Stanley Institutional Liquidity Prime Portfolio, Institutional Class, 2.58% (f) | 1,288,718 | 1,288,718 | |||||||||
Total Collateral for Securities Loaned (Cost $5,091,015) | 5,091,015 | ||||||||||
Total Investments (Cost $288,248,156) — 98.7% | 282,965,697 | ||||||||||
Other assets in excess of liabilities — 1.3% | 3,863,108 | ||||||||||
NET ASSETS — 100.00% | $ | 286,828,805 |
^ Purchased with cash collateral from securities on loan.
(a) All securities, except those traded on exchanges in the United States (including ADRs) and Mexico were fair valued at December 31, 2018. See Note 2 for further information.
(b) All or a portion of this security is on loan.
(c) Non-income producing security.
(d) Rule 144A security or other security that is restricted as to resale to institutional investors. The Fund's Adviser has deemed this security to be liquid based upon procedures approved by the Board of Trustees. As of December 31, 2018, the fair value of these securities was $1,612,997 and amounted to 0.6% of net assets.
(e) Amount represents less than 0.05% of net assets.
(f) Rate disclosed is the daily yield on December 31, 2018.
ADR — American Depositary Receipt
PCL — Public Company Limited
PLC — Public Limited Company
See notes to financial statements.
35
Victory Portfolios Victory Sophus Emerging Markets Small Cap Fund | Schedule of Portfolio Investments December 31, 2018 |
Security Description | Shares | Fair Value(a) | |||||||||
Common Stocks (99.9%) | |||||||||||
Brazil (6.3%): | |||||||||||
Consumer Discretionary (3.3%): | |||||||||||
Arezzo Industria E Comercio SA | 3,700 | $ | 52,540 | ||||||||
Construtora Tenda SA | 6,100 | 50,448 | |||||||||
Tupy SA | 7,500 | 38,910 | |||||||||
141,898 | |||||||||||
Financials (1.2%): | |||||||||||
Banco ABC Brasil SA | 11,800 | 51,367 | |||||||||
Materials (0.9%): | |||||||||||
Bradespar SA | 5,100 | 41,678 | |||||||||
Real Estate (0.9%): | |||||||||||
Iguatemi EMP de Shopping | 3,600 | 38,609 | |||||||||
273,552 | |||||||||||
Chile (1.6%): | |||||||||||
Energy (0.8%): | |||||||||||
Geopark Ltd. (b) | 2,497 | 34,509 | |||||||||
Materials (0.8%): | |||||||||||
Capital SA | 3,721 | 32,648 | |||||||||
67,157 | |||||||||||
China (10.3%): | |||||||||||
Consumer Discretionary (0.6%): | |||||||||||
JNBY Design Ltd. (c) | 19,000 | 26,631 | |||||||||
Consumer Staples (3.3%): | |||||||||||
Ausnutria Dairy Corp. Ltd. (c) | 47,000 | 52,776 | |||||||||
Chlitina Holding Ltd. | 6,000 | 50,221 | |||||||||
Tianyun International Holdings Ltd. | 272,000 | 38,914 | |||||||||
141,911 | |||||||||||
Health Care (1.2%): | |||||||||||
Livzon Pharmaceutical Group, Inc. | 7,600 | 22,040 | |||||||||
Luye Pharma Group Ltd. (c) (d) | 46,000 | 32,018 | |||||||||
54,058 | |||||||||||
Industrials (0.8%): | |||||||||||
Shenzhen Expressway Co. Ltd., Class H | 30,000 | 33,070 | |||||||||
Information Technology (0.7%): | |||||||||||
Chinasoft International Ltd. (c) | 58,000 | 28,879 | |||||||||
Materials (2.1%): | |||||||||||
China Bluechemical, Ltd., Class H | 98,000 | 30,791 | |||||||||
China Oriental Group Co., Ltd. | 46,000 | 27,420 | |||||||||
West China Cement Ltd. | 242,000 | 32,824 | |||||||||
91,035 |
See notes to financial statements.
36
Victory Portfolios Victory Sophus Emerging Markets Small Cap Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Shares | Fair Value(a) | |||||||||
Real Estate (1.2%): | |||||||||||
China Sce Property Holdings (c) | 144,000 | $ | 52,489 | ||||||||
Utilities (0.4%): | |||||||||||
China Tian Lun Gas Holdings Ltd. | 23,500 | 19,371 | |||||||||
447,444 | |||||||||||
Greece (2.3%): | |||||||||||
Industrials (1.2%): | |||||||||||
Mytilineos Holdings SA | 5,930 | 49,405 | |||||||||
Utilities (1.1%): | |||||||||||
Terna Energy SA | 7,558 | 48,408 | |||||||||
97,813 | |||||||||||
Hong Kong (3.6%): | |||||||||||
Communication Services (1.1%): | |||||||||||
Citic Telecom International Holdings Ltd. | 134,000 | 47,028 | |||||||||
Consumer Discretionary (0.8%): | |||||||||||
Pacific Textiles Holdings | 39,000 | 34,662 | |||||||||
Information Technology (0.7%): | |||||||||||
Kingboard Laminates Holdings Ltd. | 38,500 | 31,805 | |||||||||
Real Estate (1.0%): | |||||||||||
Yuexiu Property Co. Ltd. | 228,000 | 41,903 | |||||||||
155,398 | |||||||||||
India (16.5%): | |||||||||||
Consumer Discretionary (1.5%): | |||||||||||
V-Mart Retail Ltd. | 1,768 | 65,551 | |||||||||
Financials (1.8%): | |||||||||||
Cholamandalam Investment and Finance Co. Ltd. | 1,816 | 32,748 | |||||||||
Manappuram Finance Ltd. | 34,481 | 45,903 | |||||||||
78,651 | |||||||||||
Health Care (1.4%): | |||||||||||
Jubilant Life Sciences Ltd. | 6,130 | 62,352 | |||||||||
Industrials (3.8%): | |||||||||||
Escorts Ltd. | 6,126 | 61,906 | |||||||||
L&T Technology Services Ltd. (d) | 2,045 | 50,011 | |||||||||
NRB Bearings Ltd. | 18,296 | 54,389 | |||||||||
166,306 | |||||||||||
Information Technology (2.2%): | |||||||||||
NIIT Technologies Ltd. | 2,578 | 42,429 | |||||||||
RP- SG Business Process Services (b) (e) (f) | 681 | 4,728 | |||||||||
RP- SG Retail Ltd. (b) (e) (f) | 2,044 | 4,730 | |||||||||
Zensar Technologies Ltd. | 12,650 | 42,031 | |||||||||
93,918 |
See notes to financial statements.
37
Victory Portfolios Victory Sophus Emerging Markets Small Cap Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Shares | Fair Value(a) | |||||||||
Materials (3.7%): | |||||||||||
Heidelberg Cement India Ltd. | 24,938 | $ | 53,929 | ||||||||
Meghmani Organics Ltd. | 41,634 | 35,800 | |||||||||
Phillips Carbon Black Ltd. | 14,945 | 44,206 | |||||||||
West Coast Paper Mills Ltd. | 5,473 | 24,243 | |||||||||
158,178 | |||||||||||
Utilities (2.1%): | |||||||||||
CESC Ltd. | 3,783 | 36,183 | |||||||||
Mahanagar Gas Ltd. | 4,140 | 53,581 | |||||||||
89,764 | |||||||||||
714,720 | |||||||||||
Indonesia (2.3%): | |||||||||||
Consumer Discretionary (2.3%): | |||||||||||
PT Mitra Adiperkasa TBK | 1,000,000 | 55,926 | |||||||||
PT Sri Rejeki Isman TBK | 1,673,200 | 41,807 | |||||||||
97,733 | |||||||||||
Korea, Republic Of (17.0%): | |||||||||||
Consumer Discretionary (3.7%): | |||||||||||
Fila Korea Ltd. | 1,316 | 63,571 | |||||||||
Hotel Shilla Co. Ltd. | 562 | 38,552 | |||||||||
Youngone Corp. | 1,667 | 57,416 | |||||||||
159,539 | |||||||||||
Consumer Staples (0.8%): | |||||||||||
Neopharm Co. Ltd. (b) | 919 | 37,138 | |||||||||
Financials (0.5%): | |||||||||||
DGB Financial Group, Inc. | 3,091 | 23,028 | |||||||||
Health Care (3.6%): | |||||||||||
Caregen Co. Ltd. | 547 | 34,886 | |||||||||
Dong-A ST Co. Ltd. (b) | 352 | 32,979 | |||||||||
I-Sens, Inc. | 2,026 | 40,857 | |||||||||
Rayence Co. Ltd. | 3,134 | 46,147 | |||||||||
154,869 | |||||||||||
Industrials (3.3%): | |||||||||||
Doosan Infracore Co. Ltd. (b) | 8,740 | 59,549 | |||||||||
NICE Information Service Co. Ltd. | 4,423 | 43,366 | |||||||||
Samsung Engineering Co., Ltd. (b) | 2,520 | 39,801 | |||||||||
142,716 | |||||||||||
Information Technology (4.1%): | |||||||||||
DuzonBizon Co. Ltd. | 1,133 | 52,803 | |||||||||
KoMiCo Ltd. | 1,589 | 30,502 | |||||||||
Partron Co. Ltd. | 5,121 | 37,633 | |||||||||
SFA Engineering Corp. | 644 | 20,005 | |||||||||
Tokai Carbon Korea Co. Ltd. (b) | 991 | 35,948 | |||||||||
176,891 |
See notes to financial statements.
38
Victory Portfolios Victory Sophus Emerging Markets Small Cap Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Shares | Fair Value(a) | |||||||||
Materials (1.0%): | |||||||||||
Hansol Chemical Co. Ltd. | 643 | $ | 44,677 | ||||||||
738,858 | |||||||||||
Malaysia (2.2%): | |||||||||||
Financials (1.0%): | |||||||||||
RHB Capital Berhad | 35,300 | 45,166 | |||||||||
Industrials (1.2%): | |||||||||||
Malaysia Airports Holdings Berhad | 25,700 | 52,091 | |||||||||
97,257 | |||||||||||
Mexico (3.2%): | |||||||||||
Financials (1.6%): | |||||||||||
Banco del Bajio SA (d) | 20,618 | 40,265 | |||||||||
Credito Real Sab de CV | 30,218 | 27,176 | |||||||||
67,441 | |||||||||||
Materials (0.7%): | |||||||||||
Alpek SAB de CV (b) | 24,496 | 29,984 | |||||||||
Real Estate (0.9%): | |||||||||||
Macquarie Mexico Real Estate Management SA de CV (d) | 43,175 | 38,873 | |||||||||
136,298 | |||||||||||
Peru (2.1%): | |||||||||||
Financials (1.1%): | |||||||||||
Intercorp Financial Services, Inc. | 1,190 | 49,980 | |||||||||
Industrials (1.0%): | |||||||||||
Ferreycorp Saa | 56,825 | 42,855 | |||||||||
92,835 | |||||||||||
Philippines (1.4%): | |||||||||||
Consumer Discretionary (0.7%): | |||||||||||
Bloomberry Resorts Corp. | 173,800 | 31,081 | |||||||||
Financials (0.7%): | |||||||||||
Metro Pacific Investments Co. | 355,000 | 31,246 | |||||||||
62,327 | |||||||||||
Russian Federation (0.8%): | |||||||||||
Financials (0.8%): | |||||||||||
Bank St Petersburg PJSC | 53,468 | 34,109 | |||||||||
Singapore (0.9%): | |||||||||||
Communication Services (0.9%): | |||||||||||
IGG, Inc. | 28,000 | 38,400 | |||||||||
South Africa (5.7%): | |||||||||||
Consumer Discretionary (0.8%): | |||||||||||
The Foschini Group Ltd. | 2,954 | 34,200 |
See notes to financial statements.
39
Victory Portfolios Victory Sophus Emerging Markets Small Cap Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Shares | Fair Value(a) | |||||||||
Consumer Staples (2.1%): | |||||||||||
Clover Industries Ltd. | 38,895 | $ | 49,175 | ||||||||
The SPAR Group Ltd. | 2,805 | 40,513 | |||||||||
89,688 | |||||||||||
Materials (1.8%): | |||||||||||
African Rainbow Minerals Ltd. | 5,138 | 50,945 | |||||||||
AngloGold Ashanti, Ltd. | 2,304 | 29,344 | |||||||||
80,289 | |||||||||||
Real Estate (1.0%): | |||||||||||
Vukile Property Fund Ltd. | 30,301 | 42,094 | |||||||||
246,271 | |||||||||||
Switzerland (0.9%): | |||||||||||
Materials (0.9%): | |||||||||||
Ferrexpo PLC | 15,613 | 38,731 | |||||||||
Taiwan (19.0%): | |||||||||||
Communication Services (0.5%): | |||||||||||
Samebest Co. Ltd. | 5,000 | 22,143 | |||||||||
Consumer Discretionary (2.9%): | |||||||||||
Power Wind Health Industry, Inc. | 6,000 | 30,862 | |||||||||
Poya Co. Ltd. | 4,000 | 41,219 | |||||||||
Topkey Corp. | 15,000 | 51,632 | |||||||||
123,713 | |||||||||||
Consumer Staples (1.2%): | |||||||||||
TCI Co. Ltd. | 3,229 | 54,337 | |||||||||
Financials (1.2%): | |||||||||||
Chailease Holding Co. Ltd. | 16,000 | 50,468 | |||||||||
Health Care (1.1%): | |||||||||||
Bioteque Corp. | 16,000 | 49,308 | |||||||||
Industrials (3.4%): | |||||||||||
Sinmag Equipment Corp. | 10,383 | 37,714 | |||||||||
United Integrated Services Co. Ltd. | 20,000 | 58,390 | |||||||||
Xxentria Technology Material | 23,000 | 50,008 | |||||||||
146,112 | |||||||||||
Information Technology (7.7%): | |||||||||||
ASMedia Technology, Inc. | 3,000 | 48,612 | |||||||||
Chipbond Technology Corp. | 30,000 | 60,241 | |||||||||
Elite Material Co. Ltd. | 19,000 | 40,642 | |||||||||
First Hi-Tec Enterprise Co. Ltd. | 23,000 | 28,757 | |||||||||
Flexium Interconnect, Inc. | 13,000 | 31,544 | |||||||||
Getac Technology Corp. | 23,000 | 30,006 | |||||||||
Parade Technologies Ltd. | 4,000 | 56,264 | |||||||||
Sino-American Silicon Products, Inc. | 20,000 | 39,784 | |||||||||
335,850 |
See notes to financial statements.
40
Victory Portfolios Victory Sophus Emerging Markets Small Cap Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Shares | Fair Value(a) | |||||||||
Materials (1.0%): | |||||||||||
Shinkong Synthetic Fibers Corp. | 114,000 | $ | 42,733 | ||||||||
824,664 | |||||||||||
Thailand (3.2%): | |||||||||||
Consumer Discretionary (0.6%): | |||||||||||
Somboon Advance Technology PCL | 59,600 | 28,019 | |||||||||
Consumer Staples (0.9%): | |||||||||||
Haad Thip PCL | 87,100 | 37,256 | |||||||||
Financials (1.7%): | |||||||||||
Kiatnakin Bank PCL | 21,000 | 42,770 | |||||||||
TMB Bank Public Corp. | 460,400 | 31,136 | |||||||||
73,906 | |||||||||||
139,181 | |||||||||||
Turkey (0.6%): | |||||||||||
Consumer Discretionary (0.6%): | |||||||||||
Kordsa Teknik Tekstil AS | 14,424 | 26,688 | |||||||||
Yatas Yatak ve Yorgan Sanayi ve Ticaret AS (b) | — | 1 | |||||||||
26,689 | |||||||||||
Total Common Stocks (Cost $4,533,823) | 4,329,437 | ||||||||||
Preferred Stocks (1.1%) | |||||||||||
Brazil (1.1%): | |||||||||||
Industrials (1.1%): | |||||||||||
Randon SA Implementos e Participacoes | 20,600 | 49,191 | |||||||||
Total Preferred Stocks (Cost $40,180) | 49,191 | ||||||||||
Collateral for Securities Loaned^ (1.0%) | |||||||||||
United States (1.0%): | |||||||||||
BlackRock Liquidity Funds TempFund Portfolio, Institutional Class, 2.49% (g) | 7,974 | 7,974 | |||||||||
Fidelity Investments Money Market Government Portfolio, Class I, 2.28% (g) | 11,523 | 11,523 | |||||||||
Fidelity Investments Prime Money Market Portfolio, Class I, 2.46% (g) | 356 | 356 | |||||||||
Goldman Sachs Financial Square Prime Obligations Fund, Institutional Class, 2.55% (g) | 4,430 | 4,430 | |||||||||
JPMorgan Prime Money Market Fund, Capital Class, 2.49% (g) | 7,088 | 7,088 | |||||||||
Morgan Stanley Institutional Liquidity Prime Portfolio, Institutional Class, 2.58% (g) | 10,633 | 10,633 | |||||||||
Total Collateral for Securities Loaned (Cost $42,004) | 42,004 | ||||||||||
Total Investments (Cost $4,616,007) — 102.0% | 4,420,632 | ||||||||||
Liabilities in excess of other assets — (2.0)% | (84,752 | ) | |||||||||
NET ASSETS — 100.00% | $ | 4,335,880 |
^ Purchased with cash collateral from securities on loan.
(a) All securities, except those traded on exchanges in the United States, Chile, Mexico Peru and Turkey were fair valued at December 31, 2018. See Note 2 for further information.
See notes to financial statements.
41
Victory Portfolios Victory Sophus Emerging Markets Small Cap Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
(b) Non-income producing security.
(c) All or a portion of this security is on loan.
(d) Rule 144A security or other security that is restricted as to resale to institutional investors. The Fund's Adviser has deemed this security to be liquid based upon procedures approved by the Board of Trustees. As of December 31, 2018, the fair value of these securities was $161,167 and amounted to 3.7% of net assets.
(e) Security was fair valued based upon procedures approved by the Board of Trustees and represents 0.2% of the Fund's net assets as of December 31, 2018. (See Note 2)
(f) The Fund's Adviser has deemed this security to be illiquid based upon procedures approved by the Board of Trustees. As of December 31, 2018, illiquid securities were 0.2% of the Fund's net assets.
(g) Rate disclosed is the daily yield on December 31, 2018.
PCL — Public Company Limited
PLC — Public Limited Company
See notes to financial statements.
42
Victory Portfolios | Statements of Assets and Liabilities December 31, 2018 |
Victory RS International Fund | Victory RS Global Fund | ||||||||||
ASSETS: | |||||||||||
Investments, at value (Cost $23,640,477 and $29,819,932) | $ | 23,687,769 | (a) | $ | 34,284,622 | ||||||
Cash and cash equivalents | 467,858 | 416,292 | |||||||||
Interest and dividends receivable | 20,994 | 37,834 | |||||||||
Receivable for capital shares issued | 86,163 | 785,917 | |||||||||
Reclaims receivable | 82,475 | 40,482 | |||||||||
Receivable from Adviser | 26,346 | 42,898 | |||||||||
Prepaid expenses | 14,793 | 14,828 | |||||||||
Total Assets | 24,386,398 | 35,622,873 | |||||||||
LIABILITIES: | |||||||||||
Payables: | |||||||||||
Capital shares redeemed | 152,772 | 35,190 | |||||||||
Accrued foreign capital gains taxes | — | 10,295 | |||||||||
Accrued expenses and other payables: | |||||||||||
Investment advisory fees | 16,632 | 23,620 | |||||||||
Administration fees | 1,274 | 1,808 | |||||||||
Custodian fees | 4,627 | 3,447 | |||||||||
Transfer agent fees | 7,046 | 6,663 | |||||||||
Chief Compliance Officer fees | 18 | 25 | |||||||||
Trustees' fees | 37 | 42 | |||||||||
12b-1 fees | 2,418 | 2,013 | |||||||||
Other accrued expenses | 18,641 | 22,609 | |||||||||
Total Liabilities | 203,465 | 105,712 | |||||||||
NET ASSETS: | |||||||||||
Capital | 24,018,055 | 31,423,471 | |||||||||
Total distributable earnings/(loss) | 164,878 | 4,093,690 | |||||||||
Net Assets | $ | 24,182,933 | $ | 35,517,161 | |||||||
Net Assets | |||||||||||
Class A Shares | $ | 15,716,034 | $ | 5,694,504 | |||||||
Class C Shares | 702,075 | 2,357,813 | |||||||||
Class R Shares | 1,785,558 | 1,920,103 | |||||||||
Class Y Shares | 5,979,266 | 25,544,741 | |||||||||
Total | $ | 24,182,933 | $ | 35,517,161 | |||||||
Shares (unlimited number of shares authorized with a par value of $0.001 per share): | |||||||||||
Class A Shares | 1,478,252 | 493,989 | |||||||||
Class C Shares | 90,524 | 211,009 | |||||||||
Class R Shares | 179,518 | 133,601 | |||||||||
Class Y Shares | 571,304 | 2,237,494 | |||||||||
Total | 2,319,598 | 3,076,093 | |||||||||
Net asset value, offering (except Class A Shares) and redemption price per share: | |||||||||||
Class A Shares | $ | 10.63 | $ | 11.53 | |||||||
Class C Shares (b) | 7.76 | 11.17 | |||||||||
Class R Shares | 9.95 | 14.37 | |||||||||
Class Y Shares | 10.47 | 11.42 | |||||||||
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 | $ | 11.28 | $ | 12.23 |
(a) Includes $127,225 of securities on loan.
(b) Redemption price per share varies by the length of time shares are held.
See notes to financial statements.
43
Victory Portfolios | Statements of Assets and Liabilities December 31, 2018 |
Victory Sophus Emerging Markets Fund | Victory Sophus Emerging Markets Small Cap Fund | ||||||||||
ASSETS: | |||||||||||
Investments, at value (Cost $288,248,156 and $4,616,007) | $ | 282,965,697 | (a) | $ | 4,420,632 | (b) | |||||
Foreign currency, at value (Cost $291,948 and $37,102) | 293,234 | 37,632 | |||||||||
Cash and cash equivalents | 6,212,517 | — | |||||||||
Interest and dividends receivable | 899,126 | 10,623 | |||||||||
Receivable for capital shares issued | 7,034,452 | — | |||||||||
Receivable for investments sold | 1,215,635 | 15,074 | |||||||||
Reclaims receivable | 2,587 | 424 | |||||||||
Receivable from Adviser | 177,843 | 25,560 | |||||||||
Prepaid expenses | 15,564 | 24,207 | |||||||||
Total Assets | 298,816,655 | 4,534,152 | |||||||||
LIABILITIES: | |||||||||||
Payables: | |||||||||||
Collateral received on loaned securities | 5,091,015 | 42,004 | |||||||||
Custodian | — | 36,763 | |||||||||
Investments purchased | 3,946,172 | 80,457 | |||||||||
Capital shares redeemed | 2,493,935 | — | |||||||||
Accrued foreign capital gains taxes | 15,750 | 2 | |||||||||
Accrued expenses and other payables: | |||||||||||
Investment advisory fees | 238,560 | 3,963 | |||||||||
Administration fees | 14,657 | 195 | |||||||||
Custodian fees | 55,443 | 8,778 | |||||||||
Transfer agent fees | 60,198 | — | |||||||||
Chief Compliance Officer fees | 202 | 2 | |||||||||
Trustees' fees | 200 | 21 | |||||||||
12b-1 fees | 13,342 | 84 | |||||||||
Other accrued expenses | 58,376 | 26,003 | |||||||||
Total Liabilities | 11,987,850 | 198,272 | |||||||||
NET ASSETS: | |||||||||||
Capital | 306,755,847 | 4,712,630 | |||||||||
Total distributable earnings/(loss) | (19,927,042 | ) | (376,750 | ) | |||||||
Net Assets | $ | 286,828,805 | $ | 4,335,880 | |||||||
Net Assets | |||||||||||
Class A Shares | $ | 56,822,649 | $ | 334,150 | |||||||
Class C Shares | 10,140,646 | 112,442 | |||||||||
Class R Shares | 12,504,978 | — | |||||||||
Class R6 Shares | 29,228,002 | — | |||||||||
Class Y Shares | 178,132,530 | 3,889,288 | |||||||||
Total | $ | 286,828,805 | $ | 4,335,880 | |||||||
Shares (unlimited number of shares authorized with a par value of $0.001 per share): | |||||||||||
Class A Shares | 3,256,372 | 55,020 | |||||||||
Class C Shares | 776,298 | 20,342 | |||||||||
Class R Shares | 764,047 | — | |||||||||
Class R6 Shares | 1,652,738 | — | |||||||||
Class Y Shares | 10,158,423 | 642,549 | |||||||||
Total | 16,607,878 | 717,911 |
(continues on next page)
See notes to financial statements.
44
Victory Portfolios | Statements of Assets and Liabilities December 31, 2018 |
(continued)
Victory Sophus Emerging Markets Fund | Victory Sophus Emerging Markets Small Cap Fund | ||||||||||
Net asset value, offering (except Class A Shares) and redemption price per share: | |||||||||||
Class A Shares | $ | 17.45 | $ | 6.07 | |||||||
Class C Shares (c) | 13.06 | 5.53 | |||||||||
Class R Shares | 16.37 | — | |||||||||
Class R6 Shares | 17.68 | — | |||||||||
Class Y Shares | 17.54 | 6.05 | |||||||||
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 | $ | 18.51 | $ | 6.44 |
(a) Includes $5,736,308 of securities on loan.
(b) Includes $113,840 of securities on loan.
(c) Redemption price per share varies by the length of time shares are held.
See notes to financial statements.
45
Victory Portfolios | Statements of Operations For the Year Ended December 31, 2018 |
Victory RS International Fund | Victory RS Global Fund | ||||||||||
Investment Income: | |||||||||||
Dividends | $ | 835,471 | $ | 900,957 | |||||||
Interest | 6,575 | 7,953 | |||||||||
Securities lending (net of fees) | 3,773 | 2,323 | |||||||||
Foreign tax withholding | (86,041 | ) | (59,814 | ) | |||||||
Total Income | 759,778 | 851,419 | |||||||||
Expenses: | |||||||||||
Investment advisory fees | 198,708 | 273,414 | |||||||||
Administration fees | 15,475 | 20,711 | |||||||||
12b-1 fees — Class A Shares | 43,293 | 9,613 | |||||||||
12b-1 fees — Class C Shares | 8,702 | 24,214 | |||||||||
12b-1 fees — Class R Shares | 11,853 | 9,080 | |||||||||
Custodian fees | 14,666 | 16,387 | |||||||||
Transfer agent fees | 1,621 | 1,887 | |||||||||
Transfer agent fees — Class A Shares | 30,398 | 5,877 | |||||||||
Transfer agent fees — Class C Shares | 1,135 | 2,056 | |||||||||
Transfer agent fees — Class R Shares | 4,891 | 3,805 | |||||||||
Transfer agent fees — Class Y Shares | 4,856 | 23,876 | |||||||||
Trustees' fees | 2,455 | 3,023 | |||||||||
Chief Compliance Officer fees | 185 | 255 | |||||||||
Legal and audit fees | 12,270 | 20,334 | |||||||||
State registration and filing fees | 57,932 | 50,843 | |||||||||
Interest expense on interfund lending | 16 | 37 | |||||||||
Other expenses | 25,969 | 21,368 | |||||||||
Total Expenses | 434,425 | 486,780 | |||||||||
Expenses waived/reimbursed by Adviser | (152,046 | ) | (205,996 | ) | |||||||
Net Expenses | 282,379 | 280,784 | |||||||||
Net Investment Income (Loss) | 477,399 | 570,635 | |||||||||
Realized/Unrealized Gains (Losses) from Investment Transactions: | |||||||||||
Net realized gains (losses) from investment transactions and foreign currency translations | 1,177,830 | 860,931 | |||||||||
Net change in unrealized appreciation/depreciation on investments and foreign currency translations | (4,529,981 | ) | (3,474,816 | ) | |||||||
Net realized/unrealized gains (losses) on investments | (3,352,151 | ) | (2,613,885 | ) | |||||||
Change in net assets resulting from operations | $ | (2,874,752 | ) | $ | (2,043,250 | ) |
See notes to financial statements.
46
Victory Portfolios | Statements of Operations For the Year Ended December 31, 2018 |
Victory Sophus Emerging Markets Fund | Victory Sophus Emerging Markets Small Cap Fund | ||||||||||
Investment Income: | |||||||||||
Dividends | $ | 8,202,427 | $ | 139,616 | |||||||
Interest | 76,653 | 1,408 | |||||||||
Securities lending (net of fees) | 56,486 | 2,483 | |||||||||
Foreign tax withholding | (835,090 | ) | (14,920 | ) | |||||||
Total Income | 7,500,476 | 128,587 | |||||||||
Expenses: | |||||||||||
Investment advisory fees | 2,929,181 | 66,683 | |||||||||
Accounting fees | 21,750 | 14,536 | |||||||||
Administration fees | 175,623 | 3,554 | |||||||||
12b-1 fees — Class A Shares | 183,006 | 1,467 | |||||||||
12b-1 fees — Class C Shares | 140,748 | 1,197 | |||||||||
12b-1 fees — Class R Shares | 83,686 | — | |||||||||
Custodian fees | 216,403 | 44,266 | |||||||||
Transfer agent fees | 11,312 | 1,416 | |||||||||
Transfer agent fees — Class A Shares | 105,583 | 1,099 | |||||||||
Transfer agent fees — Class C Shares | 17,257 | 116 | |||||||||
Transfer agent fees — Class R Shares | 28,275 | — | |||||||||
Transfer agent fees — Class R6 Shares | 704 | — | |||||||||
Transfer agent fees — Class Y Shares | 143,137 | 3,634 | |||||||||
Trustees' fees | 22,597 | 957 | |||||||||
Chief Compliance Officer fees | 2,165 | 39 | |||||||||
Legal and audit fees | 41,011 | 35,231 | |||||||||
State registration and filing fees | 78,027 | 39,356 | |||||||||
Interest expense on line of credit | — | 529 | |||||||||
Interest expense on interfund lending | 3,582 | 358 | |||||||||
Other expenses | 73,846 | 12,426 | |||||||||
Total Expenses | 4,277,893 | 226,864 | |||||||||
Expenses waived/reimbursed by Adviser | (879,454 | ) | (143,951 | ) | |||||||
Net Expenses | 3,398,439 | 82,913 | |||||||||
Net Investment Income (Loss) | 4,102,037 | 45,674 | |||||||||
Realized/Unrealized Gains (Losses) from Investment Transactions: | |||||||||||
Net realized gains (losses) from investment transactions and foreign currency translations | (14,539,496 | ) | 226,109 | ||||||||
Foreign taxes on realized gains | (277,354 | ) | (19,468 | ) | |||||||
Net change in unrealized appreciation/depreciation on investments and foreign currency translations | (57,146,396 | ) | (1,418,532 | ) | |||||||
Net change in accrued foreign taxes on unrealized gains | 103,782 | 4,881 | |||||||||
Net realized/unrealized gains (losses) on investments | (71,859,464 | ) | (1,207,010 | ) | |||||||
Change in net assets resulting from operations | $ | (67,757,427 | ) | $ | (1,161,336 | ) |
See notes to financial statements.
47
Victory Portfolios | Statements of Changes in Net Assets |
Victory RS International Fund | Victory RS Global Fund | ||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2018 | Year Ended December 31, 2017 | ||||||||||||||||
From Investment Activities: | |||||||||||||||||||
Operations: | |||||||||||||||||||
Net investment income (loss) | $ | 477,399 | $ | 401,339 | $ | 570,635 | $ | 405,880 | |||||||||||
Net realized gains (losses) from investment transactions | 1,177,830 | 1,791,820 | 860,931 | 2,548,077 | |||||||||||||||
Net change in unrealized appreciation (depreciation) on investments | (4,529,981 | ) | 3,271,207 | (3,474,816 | ) | 3,951,915 | |||||||||||||
Change in net assets resulting from operations | (2,874,752 | ) | 5,464,366 | (2,043,250 | ) | 6,905,872 | |||||||||||||
Distributions to Shareholders: (a) | |||||||||||||||||||
Class A Shares | (284,566 | ) | (307,863 | ) | (235,004 | ) | (543,276 | ) | |||||||||||
Class C Shares | (11,666 | ) | (15,363 | ) | (90,683 | ) | (156,755 | ) | |||||||||||
Class R Shares | (31,806 | ) | (37,846 | ) | (63,429 | ) | (67,741 | ) | |||||||||||
Class Y Shares | (123,500 | ) | (60,563 | ) | (1,171,457 | ) | (2,464,785 | ) | |||||||||||
From return of capital: | |||||||||||||||||||
Class A Shares | — | — | — | (24,057 | ) | ||||||||||||||
Class C Shares | — | — | — | (15,460 | ) | ||||||||||||||
Class R Shares | — | — | — | (9,829 | ) | ||||||||||||||
Class Y Shares | — | — | — | (172,663 | ) | ||||||||||||||
Change in net assets resulting from distributions to shareholders | (451,538 | ) | (421,635 | ) | (1,560,573 | ) | (3,454,566 | ) | |||||||||||
Change in net assets resulting from capital transactions | 2,287,100 | (2,752,912 | ) | 6,560,242 | (168,624 | ) | |||||||||||||
Change in net assets | (1,039,190 | ) | 2,289,819 | 2,956,419 | 3,282,682 | ||||||||||||||
Net Assets: | |||||||||||||||||||
Beginning of period | 25,222,123 | 22,932,304 | 32,560,742 | 29,278,060 | |||||||||||||||
End of period | $ | 24,182,933 | $ | 25,222,123 | $ | 35,517,161 | $ | 32,560,742 |
(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.
48
Victory Portfolios | Statements of Changes in Net Assets |
Victory RS International Fund | Victory RS Global Fund | ||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2018 | Year Ended December 31, 2017 | ||||||||||||||||
Capital Transactions: | |||||||||||||||||||
Class A Shares | |||||||||||||||||||
Proceeds from shares issued | $ | 2,288,447 | $ | 1,345,259 | $ | 3,860,237 | $ | 1,476,336 | |||||||||||
Distributions reinvested | 281,572 | 303,958 | 234,677 | 299,166 | |||||||||||||||
Cost of shares redeemed | (3,237,246 | ) | (3,555,832 | ) | (1,373,547 | ) | (4,335,139 | ) | |||||||||||
Total Class A Shares | $ | (667,227 | ) | $ | (1,906,615 | ) | $ | 2,721,367 | $ | (2,559,637 | ) | ||||||||
Class C Shares | |||||||||||||||||||
Proceeds from shares issued | $ | 194,402 | $ | 226,561 | $ | 971,122 | $ | 883,436 | |||||||||||
Distributions reinvested | 11,611 | 15,271 | 85,530 | 160,643 | |||||||||||||||
Cost of shares redeemed | (465,668 | ) | (651,693 | ) | (594,065 | ) | (336,156 | ) | |||||||||||
Total Class C Shares | $ | (259,655 | ) | $ | (409,861 | ) | $ | 462,587 | $ | 707,923 | |||||||||
Class R Shares | |||||||||||||||||||
Proceeds from shares issued | $ | 223,517 | $ | 284,156 | $ | 1,047,820 | $ | 2,569,832 | |||||||||||
Distributions reinvested | 31,806 | 37,846 | 63,412 | 77,532 | |||||||||||||||
Cost of shares redeemed | (706,064 | ) | (580,176 | ) | (1,274,358 | ) | (10,029,938 | ) | |||||||||||
Total Class R Shares | $ | (450,741 | ) | $ | (258,174 | ) | $ | (163,126 | ) | $ | (7,382,574 | ) | |||||||
Class Y Shares | |||||||||||||||||||
Proceeds from shares issued | $ | 4,390,231 | $ | 969,642 | $ | 9,260,102 | $ | 22,829,087 | |||||||||||
Distributions reinvested | 120,168 | 59,974 | 1,155,690 | 1,560,504 | |||||||||||||||
Cost of shares redeemed | (845,676 | ) | (1,207,878 | ) | (6,876,378 | ) | (15,323,927 | ) | |||||||||||
Total Class Y Shares | $ | 3,664,723 | $ | (178,262 | ) | $ | 3,539,414 | $ | 9,065,664 | ||||||||||
Change in net assets resulting from capital transactions | $ | 2,287,100 | $ | (2,752,912 | ) | $ | 6,560,242 | $ | (168,624 | ) | |||||||||
Share Transactions: | |||||||||||||||||||
Class A Shares | |||||||||||||||||||
Issued | 195,662 | 120,481 | 307,527 | 120,545 | |||||||||||||||
Reinvested | 26,639 | 25,183 | 20,347 | 24,663 | |||||||||||||||
Redeemed | (271,037 | ) | (325,652 | ) | (105,006 | ) | (354,909 | ) | |||||||||||
Total Class A Shares | (48,736 | ) | (179,988 | ) | 222,868 | (209,701 | ) | ||||||||||||
Class C Shares | |||||||||||||||||||
Issued | 23,020 | 27,427 | 76,188 | 73,426 | |||||||||||||||
Reinvested | 1,506 | 1,725 | 7,669 | 13,614 | |||||||||||||||
Redeemed | (53,829 | ) | (78,607 | ) | (47,913 | ) | (27,946 | ) | |||||||||||
Total Class C Shares | (29,303 | ) | (49,455 | ) | 35,944 | 59,094 | |||||||||||||
Class R Shares | |||||||||||||||||||
Issued | 20,065 | 27,454 | 63,257 | 170,015 | |||||||||||||||
Reinvested | 3,216 | 3,349 | 4,422 | 5,165 | |||||||||||||||
Redeemed | (65,948 | ) | (55,683 | ) | (78,778 | ) | (706,954 | ) | |||||||||||
Total Class R Shares | (42,667 | ) | (24,880 | ) | (11,099 | ) | (531,774 | ) | |||||||||||
Class Y Shares | |||||||||||||||||||
Issued | 373,965 | 92,834 | 722,761 | 1,869,856 | |||||||||||||||
Reinvested | 11,555 | 5,048 | 101,047 | 129,913 | |||||||||||||||
Redeemed | (75,831 | ) | (107,225 | ) | (538,364 | ) | (1,264,469 | ) | |||||||||||
Total Class Y Shares | 309,689 | (9,343 | ) | 285,444 | 735,300 | ||||||||||||||
Change in Shares | 188,983 | (263,666 | ) | 533,157 | 52,919 |
See notes to financial statements.
49
Victory Portfolios | Statements of Changes in Net Assets |
Victory Sophus Emerging Markets Fund | Victory Sophus Emerging Markets Small Cap Fund | ||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2018 | Year Ended December 31, 2017 | ||||||||||||||||
From Investment Activities: | |||||||||||||||||||
Operations: | |||||||||||||||||||
Net investment income (loss) | $ | 4,102,037 | $ | 1,686,452 | $ | 45,674 | $ | 259,221 | |||||||||||
Net realized gains (losses) from investment transactions | (14,816,850 | ) | 30,635,213 | 206,641 | 6,453,418 | ||||||||||||||
Net change in unrealized appreciation (depreciation) on investments | (57,042,614 | ) | 32,531,177 | (1,413,651 | ) | 730,976 | |||||||||||||
Change in net assets resulting from operations | (67,757,427 | ) | 64,852,842 | (1,161,336 | ) | 7,443,615 | |||||||||||||
Distributions to Shareholders: (a) | |||||||||||||||||||
Class A Shares | (2,404,521 | ) | (594,980 | ) | (77,275 | ) | (842,366 | ) | |||||||||||
Class C Shares | (487,115 | ) | (68,358 | ) | (28,802 | ) | (23,925 | ) | |||||||||||
Class R Shares | (557,638 | ) | (98,067 | ) | — | — | |||||||||||||
Class R6 Shares | (1,290,095 | ) | (210,158 | ) | — | — | |||||||||||||
Class Y Shares | (7,886,236 | ) | (1,012,266 | ) | (697,233 | ) | (4,435,661 | ) | |||||||||||
Change in net assets resulting from distributions to shareholders | (12,625,605 | ) | (1,983,829 | ) | (803,310 | ) | (5,301,952 | ) | |||||||||||
Change in net assets resulting from capital transactions | 137,334,265 | 16,704,818 | (938,856 | ) | (14,739,226 | ) | |||||||||||||
Change in net assets | 56,951,233 | 79,573,831 | (2,903,502 | ) | (12,597,563 | ) | |||||||||||||
Net Assets: | |||||||||||||||||||
Beginning of period | 229,877,572 | 150,303,741 | 7,239,382 | 19,836,945 | |||||||||||||||
End of period | $ | 286,828,805 | $ | 229,877,572 | $ | 4,335,880 | $ | 7,239,382 |
(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.
50
Victory Portfolios | Statements of Changes in Net Assets |
Victory Sophus Emerging Markets Fund | Victory Sophus Emerging Markets Small Cap Fund | ||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2018 | Year Ended December 31, 2017 | ||||||||||||||||
Capital Transactions: | |||||||||||||||||||
Class A Shares | |||||||||||||||||||
Proceeds from shares issued | $ | 33,865,822 | $ | 20,837,049 | $ | 292,487 | $ | 1,276,676 | |||||||||||
Distributions reinvested | 2,332,176 | 584,720 | 77,275 | 357,781 | |||||||||||||||
Cost of shares redeemed | (39,120,936 | ) | (30,515,779 | ) | (1,300,280 | ) | (2,905,000 | ) | |||||||||||
Total Class A Shares | $ | (2,922,938 | ) | $ | (9,094,010 | ) | $ | (930,518 | ) | $ | (1,270,543 | ) | |||||||
Class C Shares | |||||||||||||||||||
Proceeds from shares issued | $ | 2,799,033 | $ | 1,966,975 | $ | 115,563 | $ | 72,090 | |||||||||||
Distributions reinvested | 472,508 | 65,677 | 24,961 | 16,457 | |||||||||||||||
Cost of shares redeemed | (5,728,052 | ) | (3,118,915 | ) | (64,924 | ) | (3,538 | ) | |||||||||||
Total Class C Shares | $ | (2,456,511 | ) | $ | (1,086,263 | ) | $ | 75,600 | $ | 85,009 | |||||||||
Class R Shares | |||||||||||||||||||
Proceeds from shares issued | $ | 3,155,291 | $ | 2,791,073 | — | — | |||||||||||||
Distributions reinvested | 555,098 | 97,665 | — | — | |||||||||||||||
Cost of shares redeemed | (5,171,495 | ) | (6,899,965 | ) | — | — | |||||||||||||
Total Class R Shares | $ | (1,461,106 | ) | $ | (4,011,227 | ) | — | — | |||||||||||
Class R6 Shares | |||||||||||||||||||
Proceeds from shares issued | $ | 19,872,256 | $ | 17,691,890 | — | — | |||||||||||||
Distributions reinvested | 1,290,095 | 210,158 | — | — | |||||||||||||||
Cost of shares redeemed | (4,453,645 | ) | (2,432,331 | ) | — | — | |||||||||||||
Total Class R6 Shares | $ | 16,708,706 | $ | 15,469,717 | — | — | |||||||||||||
Class Y Shares | |||||||||||||||||||
Proceeds from shares issued | $ | 220,978,809 | $ | 59,171,528 | $ | 5,720,498 | $ | 907,791 | |||||||||||
Distributions reinvested | 7,831,210 | 982,783 | 697,233 | 164,526 | |||||||||||||||
Cost of shares redeemed | (101,343,905 | ) | (44,727,710 | ) | (6,501,669 | ) | (14,626,009 | ) | |||||||||||
Total Class Y Shares | $ | 127,466,114 | $ | 15,426,601 | $ | (83,938 | ) | $ | (13,553,692 | ) | |||||||||
Change in net assets resulting from capital transactions | $ | 137,334,265 | $ | 16,704,818 | $ | (938,856 | ) | $ | (14,739,226 | ) |
(continues on next page)
See notes to financial statements.
51
Victory Portfolios | Statements of Changes in Net Assets |
(continued)
Victory Sophus Emerging Markets Fund | Victory Sophus Emerging Markets Small Cap Fund | ||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2018 | Year Ended December 31, 2017 | ||||||||||||||||
Share Transactions: | |||||||||||||||||||
Class A Shares | |||||||||||||||||||
Issued | 1,521,048 | 1,030,403 | 28,462 | 108,129 | |||||||||||||||
Reinvested | 134,716 | 26,315 | 12,922 | 34,350 | |||||||||||||||
Redeemed | (1,795,173 | ) | (1,527,262 | ) | (130,028 | ) | (260,693 | ) | |||||||||||
Total Class A Shares | (139,409 | ) | (470,544 | ) | (88,644 | ) | (118,214 | ) | |||||||||||
Class C Shares | |||||||||||||||||||
Issued | 165,816 | 129,894 | 12,466 | 6,492 | |||||||||||||||
Reinvested | 36,742 | 3,899 | 4,588 | 1,705 | |||||||||||||||
Redeemed | (354,786 | ) | (213,961 | ) | (7,100 | ) | (328 | ) | |||||||||||
Total Class C Shares | (152,228 | ) | (80,168 | ) | 9,954 | 7,869 | |||||||||||||
Class R Shares | |||||||||||||||||||
Issued | 152,588 | 152,502 | — | — | |||||||||||||||
Reinvested | 34,252 | 4,675 | — | — | |||||||||||||||
Redeemed | (266,765 | ) | (372,484 | ) | — | — | |||||||||||||
Total Class R Shares | (79,925 | ) | (215,307 | ) | — | — | |||||||||||||
Class R6 Shares | |||||||||||||||||||
Issued | 957,135 | 924,676 | — | — | |||||||||||||||
Reinvested | 73,315 | 9,340 | — | — | |||||||||||||||
Redeemed | (200,408 | ) | (115,292 | ) | — | — | |||||||||||||
Total Class R6 Shares | 830,042 | 818,724 | — | — | |||||||||||||||
Class Y Shares | |||||||||||||||||||
Issued | 10,283,738 | 2,896,397 | 632,138 | 85,217 | |||||||||||||||
Reinvested | 448,845 | 44,012 | 116,985 | 15,771 | |||||||||||||||
Redeemed | (5,031,804 | ) | (2,238,279 | ) | (670,562 | ) | (1,307,165 | ) | |||||||||||
Total Class Y Shares | 5,700,779 | 702,130 | 78,561 | (1,206,177 | ) | ||||||||||||||
Change in Shares | 6,159,259 | 754,835 | (129 | ) | (1,316,522 | ) |
See notes to financial statements.
52
Victory Portfolios | Financial Highlights |
For a Share Outstanding Throughout Each Period
Victory RS International Fund | |||||||||||||||||||||||
Class A Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 12.12 | $ | 9.84 | $ | 9.78 | $ | 9.87 | $ | 13.24 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | 0.23 | 0.19 | 0.16 | 0.15 | 0.23 | ||||||||||||||||||
Net realized and unrealized gains (losses) on investments | (1.52 | ) | 2.29 | (0.07 | ) | (0.09 | ) | (0.98 | ) | ||||||||||||||
Total from Investment Activities | (1.29 | ) | 2.48 | 0.09 | 0.06 | (0.75 | ) | ||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.20 | ) | (0.20 | ) | (0.17 | ) | (0.15 | ) | (0.21 | ) | |||||||||||||
Net realized gains from investments | — | — | — | — | (2.41 | ) | |||||||||||||||||
Total Distributions to Shareholders | (0.20 | ) | (0.20 | ) | (0.17 | ) | (0.15 | ) | (2.62 | ) | |||||||||||||
Capital Contributions from Prior Custodian, Net (See Note 8) | — | — | 0.14 | — | — | ||||||||||||||||||
Net Asset Value, End of Period | $ | 10.63 | $ | 12.12 | $ | 9.84 | $ | 9.78 | $ | 9.87 | |||||||||||||
Total Return (excludes sales charge) | (10.65 | )% | 25.26 | % | 2.41 | %(b) | 0.64 | % | (5.80 | )% | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 15,716 | $ | 18,512 | $ | 16,799 | $ | 19,416 | $ | 22,388 | |||||||||||||
Ratio of net expenses to average net assets | 1.13 | % | 1.20 | % | 1.40 | % | 1.40 | % | 1.40 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 1.97 | % | 1.66 | % | 1.64 | % | 1.49 | % | 1.74 | % | |||||||||||||
Ratio of gross expenses to average net assets (c) | 1.61 | % | 1.81 | % | 1.95 | % | 1.89 | % | 1.81 | % | |||||||||||||
Portfolio turnover (d) | 52 | % | 60 | % | 103 | % | 117 | % | 186 | % |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) The Fund received monies related to a nonrecurring refund from the prior Custodian. The corresponding impact to the total return was 1.45% for the period shown. (See Note 8)
(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.
53
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory RS International Fund | |||||||||||||||||||||||
Class C Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 8.89 | $ | 7.26 | $ | 7.26 | $ | 7.36 | $ | 10.62 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | 0.11 | 0.08 | 0.07 | 0.05 | 0.06 | ||||||||||||||||||
Net realized and unrealized gains (losses) on investments | (1.11 | ) | 1.68 | (0.08 | ) | (0.07 | ) | (0.78 | ) | ||||||||||||||
Total from Investment Activities | (1.00 | ) | 1.76 | (0.01 | ) | (0.02 | ) | (0.72 | ) | ||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.13 | ) | (0.13 | ) | (0.13 | ) | (0.08 | ) | (0.13 | ) | |||||||||||||
Net realized gains from investments | — | — | — | — | (2.41 | ) | |||||||||||||||||
Total Distributions to Shareholders | (0.13 | ) | (0.13 | ) | (0.13 | ) | (0.08 | ) | (2.54 | ) | |||||||||||||
Capital Contributions from Prior Custodian, Net (See Note 8) | — | — | 0.14 | — | — | ||||||||||||||||||
Net Asset Value, End of Period | $ | 7.76 | $ | 8.89 | $ | 7.26 | $ | 7.26 | $ | 7.36 | |||||||||||||
Total Return (excludes contingent deferred sales charge) | (11.24 | )% | 24.25 | % | 1.77 | %(b) | (0.27 | )% | (6.90 | )% | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 702 | $ | 1,066 | $ | 1,228 | $ | 1,969 | $ | 2,418 | |||||||||||||
Ratio of net expenses to average net assets | 1.88 | % | 1.95 | % | 2.15 | % | 2.27 | % | 2.55 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 1.23 | % | 0.92 | % | 0.97 | % | 0.65 | % | 0.54 | % | |||||||||||||
Ratio of gross expenses to average net assets (c) | 3.52 | % | 3.26 | % | 3.05 | % | 2.82 | % | 2.75 | % | |||||||||||||
Portfolio turnover (d) | 52 | % | 60 | % | 103 | % | 117 | % | 186 | % |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) The Fund received monies related to a nonrecurring refund from the prior Custodian. The corresponding impact to the total return was 1.45% for the period shown. (See Note 8)
(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.
54
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory RS International Fund | |||||||||||||||||||||||
Class R Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 11.35 | $ | 9.23 | $ | 9.18 | $ | 9.27 | $ | 12.63 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | 0.19 | 0.15 | 0.11 | 0.11 | 0.15 | ||||||||||||||||||
Net realized and unrealized gains (losses) on investments | (1.42 | ) | 2.14 | (0.06 | ) | (0.09 | ) | (0.94 | ) | ||||||||||||||
Total from Investment Activities | (1.23 | ) | 2.29 | 0.05 | 0.02 | (0.79 | ) | ||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.17 | ) | (0.17 | ) | (0.14 | ) | (0.11 | ) | (0.16 | ) | |||||||||||||
Net realized gains from investments | — | — | — | — | (2.41 | ) | |||||||||||||||||
Total Distributions to Shareholders | (0.17 | ) | (0.17 | ) | (0.14 | ) | (0.11 | ) | (2.57 | ) | |||||||||||||
Capital Contributions from Prior Custodian, Net (See Note 8) | — | — | 0.14 | — | — | ||||||||||||||||||
Net Asset Value, End of Period | $ | 9.95 | $ | 11.35 | $ | 9.23 | $ | 9.18 | $ | 9.27 | |||||||||||||
Total Return | (10.85 | )% | 24.85 | % | 2.06 | %(b) | 0.22 | % | (6.37 | )% | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 1,786 | $ | 2,522 | $ | 2,279 | $ | 2,707 | $ | 3,403 | |||||||||||||
Ratio of net expenses to average net assets | 1.38 | % | 1.48 | % | 1.80 | % | 1.86 | % | 1.96 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 1.73 | % | 1.39 | % | 1.26 | % | 1.10 | % | 1.20 | % | |||||||||||||
Ratio of gross expenses to average net assets (c) | 2.31 | % | 2.48 | % | 2.29 | % | 2.28 | % | 2.19 | % | |||||||||||||
Portfolio turnover (d) | 52 | % | 60 | % | 103 | % | 117 | % | 186 | % |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) The Fund received monies related to a nonrecurring refund from the prior Custodian. The corresponding impact to the total return was 1.45% for the period shown. (See Note 8)
(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.
55
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory RS International Fund | |||||||||||||||||||||||
Class Y Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 11.93 | $ | 9.69 | $ | 9.62 | $ | 9.70 | $ | 13.08 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | 0.23 | 0.22 | 0.18 | 0.18 | 0.25 | ||||||||||||||||||
Net realized and unrealized gains (losses) on investments | (1.47 | ) | 2.26 | (0.06 | ) | (0.09 | ) | (0.96 | ) | ||||||||||||||
Total from Investment Activities | (1.24 | ) | 2.48 | 0.12 | 0.09 | (0.71 | ) | ||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.22 | ) | (0.24 | ) | (0.19 | ) | (0.17 | ) | (0.26 | ) | |||||||||||||
Net realized gains from investments | — | — | — | — | (2.41 | ) | |||||||||||||||||
Total Distributions to Shareholders | (0.22 | ) | (0.24 | ) | (0.19 | ) | (0.17 | ) | (2.67 | ) | |||||||||||||
Capital Contributions from Prior Custodian, Net (See Note 8) | — | — | 0.14 | — | — | ||||||||||||||||||
Net Asset Value, End of Period | $ | 10.47 | $ | 11.93 | $ | 9.69 | $ | 9.62 | $ | 9.70 | |||||||||||||
Total Return | (10.38 | )% | 25.56 | % | 2.69 | %(b) | 0.92 | % | (5.60 | )% | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 5,979 | $ | 3,122 | $ | 2,626 | $ | 3,904 | $ | 4,221 | |||||||||||||
Ratio of net expenses to average net assets | 0.88 | % | 0.94 | % | 1.15 | % | 1.15 | % | 1.15 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 1.97 | % | 1.98 | % | 1.93 | % | 1.76 | % | 1.95 | % | |||||||||||||
Ratio of gross expenses to average net assets (c) | 1.62 | % | 1.85 | % | 1.80 | % | 1.75 | % | 1.51 | % | |||||||||||||
Portfolio turnover (d) | 52 | % | 60 | % | 103 | % | 117 | % | 186 | % |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) The Fund received monies related to a nonrecurring refund from the prior Custodian. The corresponding impact to the total return was 1.45% for the period shown. (See Note 8)
(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.
56
Victory Portfolios | Financial Highlights |
For a Share Outstanding Throughout Each Period
Victory RS Global Fund | |||||||||||||||||||||||
Class A Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 12.75 | $ | 11.16 | $ | 11.56 | $ | 11.56 | $ | 11.65 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | 0.20 | 0.15 | 0.13 | 0.11 | 0.10 | ||||||||||||||||||
Net realized and unrealized gains (losses) on investments | (0.90 | ) | 2.53 | 0.65 | 0.32 | 0.45 | |||||||||||||||||
Total from Investment Activities | (0.70 | ) | 2.68 | 0.78 | 0.43 | 0.55 | |||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.16 | ) | — | (0.03 | ) | (0.11 | ) | (0.08 | ) | ||||||||||||||
Net realized gains from investments | (0.36 | ) | (1.00 | ) | (1.15 | ) | (0.32 | ) | (0.56 | ) | |||||||||||||
Return of Capital | — | (0.09 | ) | — | — | — | |||||||||||||||||
Total Distributions to Shareholders | (0.52 | ) | (1.09 | ) | (1.18 | ) | (0.43 | ) | (0.64 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 11.53 | $ | 12.75 | $ | 11.16 | $ | 11.56 | $ | 11.56 | |||||||||||||
Total Return (excludes sales charge) | (5.45 | )% | 24.48 | % | 6.67 | % | 3.68 | % | 4.70 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 5,695 | $ | 3,456 | $ | 5,366 | $ | 13,857 | $ | 13,015 | |||||||||||||
Ratio of net expenses to average net assets | 0.94 | % | 1.17 | % | 1.40 | % | 1.36 | % | 1.40 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 1.51 | % | 1.24 | % | 1.12 | % | 0.90 | % | 0.85 | % | |||||||||||||
Ratio of gross expenses to average net assets (b) | 1.75 | % | 1.90 | % | 1.71 | % | 1.57 | % | 1.63 | % | |||||||||||||
Portfolio turnover (c) | 58 | % | 187 | % | 184 | % | 90 | % | 130 | % |
(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 RS Global Fund | |||||||||||||||||||||||
Class C Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 12.38 | $ | 10.95 | $ | 11.42 | $ | 11.43 | $ | 11.54 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | 0.10 | 0.05 | 0.05 | 0.01 | 0.01 | ||||||||||||||||||
Net realized and unrealized gains (losses) on investments | (0.87 | ) | 2.47 | 0.63 | 0.32 | 0.44 | |||||||||||||||||
Total from Investment Activities | (0.77 | ) | 2.52 | 0.68 | 0.33 | 0.45 | |||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.08 | ) | — | — | (0.02 | ) | — | ||||||||||||||||
Net realized gains from investments | (0.36 | ) | (1.00 | ) | (1.15 | ) | (0.32 | ) | (0.56 | ) | |||||||||||||
Return of Capital | — | (0.09 | ) | — | — | — | |||||||||||||||||
Total Distributions to Shareholders | (0.44 | ) | (1.09 | ) | (1.15 | ) | (0.34 | ) | (0.56 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 11.17 | $ | 12.38 | $ | 10.95 | $ | 11.42 | $ | 11.43 | |||||||||||||
Total Return (excludes contingent deferred sales charge) | (6.20 | )% | 23.47 | % | 5.92 | % | 2.85 | % | 3.87 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 2,358 | $ | 2,167 | $ | 1,270 | $ | 7,367 | $ | 6,538 | |||||||||||||
Ratio of net expenses to average net assets | 1.70 | % | 1.91 | % | 2.16 | % | 2.17 | % | 2.17 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 0.79 | % | 0.41 | % | 0.41 | % | 0.11 | % | 0.10 | % | |||||||||||||
Ratio of gross expenses to average net assets (b) | 2.59 | % | 3.00 | % | 2.44 | % | 2.38 | % | 2.43 | % | |||||||||||||
Portfolio turnover (c) | 58 | % | 187 | % | 184 | % | 90 | % | 130 | % |
(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 RS Global Fund | |||||||||||||||||||||||
Class R Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 15.76 | $ | 13.62 | $ | 11.50 | $ | 11.50 | $ | 11.59 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | 0.20 | 0.05 | 0.09 | 0.06 | 0.06 | ||||||||||||||||||
Net realized and unrealized gains (losses) on investments | (1.10 | ) | 3.18 | 3.43 | 0.32 | 0.44 | |||||||||||||||||
Total from Investment Activities | (0.90 | ) | 3.23 | 3.52 | 0.38 | 0.50 | |||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.13 | ) | — | (0.25 | ) | (0.06 | ) | (0.03 | ) | ||||||||||||||
Net realized gains from investments | (0.36 | ) | (1.00 | ) | (1.15 | ) | (0.32 | ) | (0.56 | ) | |||||||||||||
Return of Capital | — | (0.09 | ) | — | — | — | |||||||||||||||||
Total Distributions to Shareholders | (0.49 | ) | (1.09 | ) | (1.40 | ) | (0.38 | ) | (0.59 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 14.37 | $ | 15.76 | $ | 13.62 | $ | 11.50 | $ | 11.50 | |||||||||||||
Total Return | (5.68 | )% | 24.09 | % | 30.57 | %(b) | 3.23 | % | 4.25 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 1,920 | $ | 2,281 | $ | 9,213 | $ | 5,265 | $ | 5,272 | |||||||||||||
Ratio of net expenses to average net assets | 1.20 | % | 1.61 | % | 1.68 | % | 1.78 | % | 1.80 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 1.25 | % | 0.38 | % | 0.74 | % | 0.50 | % | 0.47 | % | |||||||||||||
Ratio of gross expenses to average net assets (c) | 2.34 | % | 2.76 | % | 1.81 | % | 2.00 | % | 2.04 | % | |||||||||||||
Portfolio turnover (d) | 58 | % | 187 | % | 184 | % | 90 | % | 130 | % |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) During the period, the share class recognized certain expense reimbursements and due to the fluctuation in average net assets during the same period the total return reflected is significantly higher than the other share classes of the Fund. The total return would have been 6.39% had the expense reimbursements not occurred.
(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.
59
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory RS Global Fund | |||||||||||||||||||||||
Class Y Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 12.63 | $ | 11.04 | $ | 11.60 | $ | 11.59 | $ | 11.67 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | 0.23 | 0.18 | 0.15 | 0.15 | 0.14 | ||||||||||||||||||
Net realized and unrealized gains (losses) on investments | (0.89 | ) | 2.50 | 0.67 | 0.31 | 0.45 | |||||||||||||||||
Total from Investment Activities | (0.66 | ) | 2.68 | 0.82 | 0.46 | 0.59 | |||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.19 | ) | — | (0.23 | ) | (0.13 | ) | (0.11 | ) | ||||||||||||||
Net realized gains from investments | (0.36 | ) | (1.00 | ) | (1.15 | ) | (0.32 | ) | (0.56 | ) | |||||||||||||
Return of Capital | — | (0.09 | ) | — | — | — | |||||||||||||||||
Total Distributions to Shareholders | (0.55 | ) | (1.09 | ) | (1.38 | ) | (0.45 | ) | (0.67 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 11.42 | $ | 12.63 | $ | 11.04 | $ | 11.60 | $ | 11.59 | |||||||||||||
Total Return | (5.17 | )% | 24.75 | % | 7.01 | % | 3.96 | % | 5.04 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 25,544 | $ | 24,657 | $ | 13,430 | $ | 15,871 | $ | 15,334 | |||||||||||||
Ratio of net expenses to average net assets | 0.70 | % | 0.88 | % | 1.09 | % | 1.09 | % | 1.09 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 1.80 | % | 1.44 | % | 1.30 | % | 1.21 | % | 1.17 | % | |||||||||||||
Ratio of gross expenses to average net assets (b) | 1.20 | % | 1.32 | % | 1.36 | % | 1.36 | % | 1.33 | % | |||||||||||||
Portfolio turnover (c) | 58 | % | 187 | % | 184 | % | 90 | % | 130 | % |
(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.
60
Victory Portfolios | Financial Highlights |
For a Share Outstanding Throughout Each Period
Victory Sophus Emerging Markets Fund | |||||||||||||||||||||||
Class A Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 22.52 | $ | 15.98 | $ | 14.60 | $ | 17.22 | $ | 19.34 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | 0.24 | 0.16 | 0.11 | 0.10 | 0.12 | ||||||||||||||||||
Net realized and unrealized gains (losses) on investments | (4.54 | ) | 6.55 | 1.38 | (2.33 | ) | (0.82 | ) | |||||||||||||||
Total from Investment Activities | (4.30 | ) | 6.71 | 1.49 | (2.23 | ) | (0.70 | ) | |||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.13 | ) | (0.17 | ) | (0.15 | ) | — | (0.17 | ) | ||||||||||||||
Net realized gains from investments | (0.64 | ) | — | — | (0.39 | ) | (1.25 | ) | |||||||||||||||
Total Distributions to Shareholders | (0.77 | ) | (0.17 | ) | (0.15 | ) | (0.39 | ) | (1.42 | ) | |||||||||||||
Capital Contributions from Prior Custodian, Net (See Note 8) | — | — | 0.04 | — | — | ||||||||||||||||||
Net Asset Value, End of Period | $ | 17.45 | $ | 22.52 | $ | 15.98 | $ | 14.60 | $ | 17.22 | |||||||||||||
Total Return (excludes sales charge) | (19.08 | )% | 42.08 | % | 10.50 | %(b) | (12.94 | )% | (3.54 | )% | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 56,823 | $ | 76,485 | $ | 61,767 | $ | 74,837 | $ | 123,778 | |||||||||||||
Ratio of net expenses to average net assets | 1.34 | % | 1.54 | % | 1.65 | % | 1.57 | % | 1.65 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 1.11 | % | 0.80 | % | 0.73 | % | 0.60 | % | 0.62 | % | |||||||||||||
Ratio of gross expenses to average net assets (c) | 1.61 | % | 1.66 | % | 1.67 | % | 1.57 | % | 1.69 | % | |||||||||||||
Portfolio turnover (d) | 118 | % | 113 | % | 120 | % | 111 | % | 138 | % |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) The Fund received monies related to a nonrecurring refund from the prior Custodian. The corresponding impact to the total return was 1.45% for the period shown. (See Note 8)
(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 Sophus Emerging Markets Fund | |||||||||||||||||||||||
Class C Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 17.07 | $ | 12.17 | $ | 11.20 | $ | 13.43 | $ | 15.43 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | 0.05 | — | (b) | (0.01 | ) | (0.02 | ) | (0.03 | ) | ||||||||||||||
Net realized and unrealized gains (losses) on investments | (3.42 | ) | 4.97 | 1.05 | (1.82 | ) | (0.64 | ) | |||||||||||||||
Total from Investment Activities | (3.37 | ) | 4.97 | 1.04 | (1.84 | ) | (0.67 | ) | |||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | — | (b) | (0.07 | ) | (0.11 | ) | — | (0.08 | ) | ||||||||||||||
Net realized gains from investments | (0.64 | ) | — | — | (0.39 | ) | (1.25 | ) | |||||||||||||||
Total Distributions to Shareholders | (0.64 | ) | (0.07 | ) | (0.11 | ) | (0.39 | ) | (1.33 | ) | |||||||||||||
Capital Contributions from Prior Custodian, Net (See Note 8) | — | — | 0.04 | — | — | ||||||||||||||||||
Net Asset Value, End of Period | $ | 13.06 | $ | 17.07 | $ | 12.17 | $ | 11.20 | $ | 13.43 | |||||||||||||
Total Return (excludes contingent deferred sales charge) | (19.75 | )% | 40.96 | % | 9.62 | %(c) | (13.68 | )% | (4.25 | )% | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 10,141 | $ | 15,854 | $ | 12,273 | $ | 15,096 | $ | 21,416 | |||||||||||||
Ratio of net expenses to average net assets | 2.14 | % | 2.34 | % | 2.45 | % | 2.38 | % | 2.45 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 0.31 | % | — | %(d) | (0.09 | )% | (0.19 | )% | (0.18 | )% | |||||||||||||
Ratio of gross expenses to average net assets (e) | 2.40 | % | 2.46 | % | 2.48 | % | 2.38 | % | 2.45 | % | |||||||||||||
Portfolio turnover (f) | 118 | % | 113 | % | 120 | % | 111 | % | 138 | % |
(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) The Fund received monies related to a nonrecurring refund from the prior Custodian. The corresponding impact to the total return was 1.45% for the period shown. (See Note 8)
(d) Amount is less than 0.005%.
(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.
62
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory Sophus Emerging Markets Fund | |||||||||||||||||||||||
Class R Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 21.18 | $ | 15.03 | $ | 13.76 | $ | 16.31 | $ | 18.44 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | 0.18 | 0.09 | 0.07 | 0.05 | 0.07 | ||||||||||||||||||
Net realized and unrealized gains (losses) on investments | (4.26 | ) | 6.17 | 1.30 | (2.21 | ) | (0.79 | ) | |||||||||||||||
Total from Investment Activities | (4.08 | ) | 6.26 | 1.37 | (2.16 | ) | (0.72 | ) | |||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.09 | ) | (0.11 | ) | (0.14 | ) | — | (0.16 | ) | ||||||||||||||
Net realized gains from investments | (0.64 | ) | — | — | (0.39 | ) | (1.25 | ) | |||||||||||||||
Total Distributions to Shareholders | (0.73 | ) | (0.11 | ) | (0.14 | ) | (0.39 | ) | (1.41 | ) | |||||||||||||
Capital Contributions from Prior Custodian, Net (See Note 8) | — | — | 0.04 | — | — | ||||||||||||||||||
Net Asset Value, End of Period | $ | 16.37 | $ | 21.18 | $ | 15.03 | $ | 13.76 | $ | 16.31 | |||||||||||||
Total Return | (19.24 | )% | 41.69 | % | 10.26 | %(b) | (13.23 | )% | (3.81 | )% | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 12,505 | $ | 17,875 | $ | 15,923 | $ | 18,648 | $ | 24,143 | |||||||||||||
Ratio of net expenses to average net assets | 1.58 | % | 1.83 | % | 1.87 | % | 1.87 | % | 1.94 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 0.89 | % | 0.50 | % | 0.50 | % | 0.33 | % | 0.36 | % | |||||||||||||
Ratio of gross expenses to average net assets (c) | 1.91 | % | 2.00 | % | 1.87 | % | 1.87 | % | 1.94 | % | |||||||||||||
Portfolio turnover (d) | 118 | % | 113 | % | 120 | % | 111 | % | 138 | % |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) The Fund received monies related to a nonrecurring refund from the prior Custodian. The corresponding impact to the total return was 1.45% for the period shown. (See Note 8)
(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 Sophus Emerging Markets Fund | |||||||||||||||
Class R6 Shares | |||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Period Ended December 31, 2016(a) | |||||||||||||
Net Asset Value, Beginning of Period | $ | 22.81 | $ | 16.16 | $ | 15.91 | |||||||||
Investment Activities: | |||||||||||||||
Net investment income (loss) (b) | 0.34 | 0.34 | 0.04 | ||||||||||||
Net realized and unrealized gains (losses) on investments | (4.62 | ) | 6.57 | 0.25 | |||||||||||
Total from Investment Activities | (4.28 | ) | 6.91 | 0.29 | |||||||||||
Distributions to Shareholders: | |||||||||||||||
Net investment income | (0.21 | ) | (0.26 | ) | (0.04 | ) | |||||||||
Net realized gains from investments | (0.64 | ) | — | — | |||||||||||
Total Distributions to Shareholders | (0.85 | ) | (0.26 | ) | (0.04 | ) | |||||||||
Net Asset Value, End of Period | $ | 17.68 | $ | 22.81 | $ | 16.16 | |||||||||
Total Return (c) | (18.73 | )% | 42.77 | % | 1.81 | % | |||||||||
Ratios/Supplemental Data: | |||||||||||||||
Net Assets at end of period (000) | $ | 29,228 | $ | 18,762 | $ | 64 | |||||||||
Ratio of net expenses to average net assets (d) | 0.89 | % | 1.03 | % | 1.16 | % | |||||||||
Ratio of net investment income (loss) to average net assets (d) | 1.59 | % | 1.66 | % | 1.79 | % | |||||||||
Ratio of gross expenses to average net assets (d) (e) | 1.24 | % | 1.39 | % | 21.70 | % | |||||||||
Portfolio turnover (c) (f) | 118 | % | 113 | % | 120 | % |
(a) Class R6 Shares commenced operations on November 15, 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) 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.
64
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory Sophus Emerging Markets Fund | |||||||||||||||||||||||
Class Y Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 22.64 | $ | 16.05 | $ | 14.61 | $ | 17.22 | $ | 19.38 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | 0.35 | 0.21 | 0.18 | 0.15 | 0.20 | ||||||||||||||||||
Net realized and unrealized gains (losses) on investments | (4.61 | ) | 6.62 | 1.37 | (2.34 | ) | (0.83 | ) | |||||||||||||||
Total from Investment Activities | (4.26 | ) | 6.83 | 1.55 | (2.19 | ) | (0.63 | ) | |||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.20 | ) | (0.24 | ) | (0.15 | ) | (0.03 | ) | (0.28 | ) | |||||||||||||
Net realized gains from investments | (0.64 | ) | — | — | (0.39 | ) | (1.25 | ) | |||||||||||||||
Total Distributions to Shareholders | (0.84 | ) | (0.24 | ) | (0.15 | ) | (0.42 | ) | (1.53 | ) | |||||||||||||
Capital Contributions from Prior Custodian, Net (See Note 8) | — | — | 0.04 | — | — | ||||||||||||||||||
Net Asset Value, End of Period | $ | 17.54 | $ | 22.64 | $ | 16.05 | $ | 14.61 | $ | 17.22 | |||||||||||||
Total Return | (18.77 | )% | 42.59 | % | 10.86 | %(b) | (12.73 | )% | (3.18 | )% | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 178,132 | $ | 100,902 | $ | 60,277 | $ | 98,634 | $ | 124,357 | |||||||||||||
Ratio of net expenses to average net assets | 0.99 | % | 1.18 | % | 1.32 | % | 1.30 | % | 1.31 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 1.64 | % | 1.07 | % | 1.17 | % | 0.89 | % | 1.03 | % | |||||||||||||
Ratio of gross expenses to average net assets (c) | 1.30 | % | 1.33 | % | 1.38 | % | 1.30 | % | 1.31 | % | |||||||||||||
Portfolio turnover (d) | 118 | % | 113 | % | 120 | % | 111 | % | 138 | % |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) The Fund received monies related to a nonrecurring refund from the prior Custodian. The corresponding impact to the total return was 1.45% for the period shown. (See Note 8)
(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.
65
Victory Portfolios | Financial Highlights |
For a Share Outstanding Throughout Each Period
Victory Sophus Emerging Markets Small Cap Fund | |||||||||||||||||||||||
Class A Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Period Ended December 31, 2014(a) | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 10.13 | $ | 9.75 | $ | 9.69 | $ | 10.31 | $ | 10.00 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (b) | 0.04 | 0.12 | 0.04 | 0.01 | 0.03 | ||||||||||||||||||
Net realized and unrealized gains (losses) on investments | (2.27 | ) | 3.86 | 0.02 | (0.63 | ) | 0.28 | ||||||||||||||||
Total from Investment Activities | (2.23 | ) | 3.98 | 0.06 | (0.62 | ) | 0.31 | ||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | — | (0.12 | ) | — | — | — | |||||||||||||||||
Net realized gains from investments | (1.83 | ) | (3.48 | ) | — | — | — | ||||||||||||||||
Total Distributions to Shareholders | (1.83 | ) | (3.60 | ) | — | — | — | ||||||||||||||||
Net Asset Value, End of Period | $ | 6.07 | $ | 10.13 | $ | 9.75 | $ | 9.69 | $ | 10.31 | |||||||||||||
Total Return (excludes sales charge) (c) | (21.76 | )% | 42.55 | % | 0.62 | % | (6.01 | )% | 3.10 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 334 | $ | 1,456 | $ | 2,552 | $ | 5,083 | $ | 6,808 | |||||||||||||
Ratio of net expenses to average net assets (d) | 1.75 | % | 1.75 | % | 1.75 | % | 1.92 | % | 1.88 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets (d) | 0.39 | % | 1.07 | % | 0.44 | % | 0.08 | % | 0.30 | % | |||||||||||||
Ratio of gross expenses to average net assets (d) (e) | 5.77 | % | 2.94 | % | 2.29 | % | 2.44 | % | 2.29 | % | |||||||||||||
Portfolio turnover (c) (f) | 200 | % | 227 | %(g) | 141 | % | 107 | % | 110 | % |
(a) Class A Shares commenced operations on January 31, 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.
(g) Portfolio turnover increased due to change within portfolio holdings during the year.
See notes to financial statements.
66
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory Sophus Emerging Markets Small Cap Fund | |||||||||||||||||||||||
Class C Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Period Ended December 31, 2014(a) | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 9.51 | $ | 9.34 | $ | 9.56 | $ | 10.23 | $ | 10.00 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (b) | 0.01 | (0.02 | ) | (0.02 | ) | (0.05 | ) | (0.04 | ) | ||||||||||||||
Net realized and unrealized gains (losses) on investments | (2.16 | ) | 3.75 | (0.20 | ) | (0.62 | ) | 0.27 | |||||||||||||||
Total from Investment Activities | (2.15 | ) | 3.73 | (0.22 | ) | (0.67 | ) | 0.23 | |||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | — | (0.08 | ) | — | — | — | |||||||||||||||||
Net realized gains from investments | (1.83 | ) | (3.48 | ) | — | — | — | ||||||||||||||||
Total Distributions to Shareholders | (1.83 | ) | (3.56 | ) | — | — | — | ||||||||||||||||
Net Asset Value, End of Period | $ | 5.53 | $ | 9.51 | $ | 9.34 | $ | 9.56 | $ | 10.23 | |||||||||||||
Total Return (excludes contingent deferred sales charge) (c) | (22.31 | )% | 41.68 | % | (2.30 | )% | (6.55 | )% | 2.30 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 112 | $ | 99 | $ | 24 | $ | 2,617 | $ | 2,586 | |||||||||||||
Ratio of net expenses to average net assets (d) | 2.51 | % | 2.50 | % | 2.50 | % | 2.54 | % | 2.69 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets (d) | 0.11 | % | (0.21 | )% | (0.18 | )% | (0.50 | )% | (0.43 | )% | |||||||||||||
Ratio of gross expenses to average net assets (d) (e) | 13.96 | % | 32.34 | % | 3.12 | % | 3.05 | % | 3.10 | % | |||||||||||||
Portfolio turnover (c) (f) | 200 | % | 227 | %(g) | 141 | % | 107 | % | 110 | % |
(a) Class C Shares commenced operations on January 31, 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.
(g) Portfolio turnover increased due to change within portfolio holdings during the year.
See notes to financial statements.
67
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory Sophus Emerging Markets Small Cap Fund | |||||||||||||||||||||||
Class Y Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Period Ended December 31, 2014(a) | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 10.08 | $ | 9.75 | $ | 9.74 | $ | 10.32 | $ | 10.00 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (b) | 0.09 | 0.15 | 0.06 | 0.06 | 0.08 | ||||||||||||||||||
Net realized and unrealized gains (losses) on investments | (2.29 | ) | 3.87 | 0.02 | (0.64 | ) | 0.26 | ||||||||||||||||
Total from Investment Activities | (2.20 | ) | 4.02 | 0.08 | (0.58 | ) | 0.34 | ||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | — | (0.21 | ) | (0.07 | ) | — | (0.02 | ) | |||||||||||||||
Net realized gains from investments | (1.83 | ) | (3.48 | ) | — | — | — | ||||||||||||||||
Return of Capital | — | — | — | — | — | (c) | |||||||||||||||||
Total Distributions to Shareholders | (1.83 | ) | (3.69 | ) | (0.07 | ) | — | (0.02 | ) | ||||||||||||||
Net Asset Value, End of Period | $ | 6.05 | $ | 10.08 | $ | 9.75 | $ | 9.74 | $ | 10.32 | |||||||||||||
Total Return (d) | (21.57 | )% | 43.02 | % | 0.79 | % | (5.62 | )% | 3.45 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 3,890 | $ | 5,685 | $ | 17,261 | $ | 17,581 | $ | 18,440 | |||||||||||||
Ratio of net expenses to average net assets (e) | 1.51 | % | 1.50 | % | 1.50 | % | 1.50 | % | 1.50 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets (e) | 0.94 | % | 1.32 | % | 0.62 | % | 0.53 | % | 0.76 | % | |||||||||||||
Ratio of gross expenses to average net assets (e) (f) | 3.82 | % | 2.13 | % | 1.98 | % | 2.01 | % | 1.91 | % | |||||||||||||
Portfolio turnover (d) (g) | 200 | % | 227 | %(h) | 141 | % | 107 | % | 110 | % |
(a) Class Y Shares commenced operations on January 31, 2014.
(b) Per share net investment income (loss) has been calculated using the average daily shares method.
(c) Amount is less than $0.005 per share.
(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.
(h) Portfolio turnover increased due to change within portfolio holdings during the year.
See notes to financial statements.
68
Victory Portfolios | Notes to Financial Statements December 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 four Funds (collectively, the "Funds" and individually, a "Fund").
Funds (Legal Name) | Funds (Short Name) | Investment Share Classes Offered | |||||||||
Victory RS International Fund | RS International Fund | Classes A, C, R and Y | |||||||||
Victory RS Global Fund | RS Global Fund | Classes A, C, R and Y | |||||||||
Victory Sophus Emerging Markets Fund | Sophus Emerging Markets Fund | Classes A, C, R, R6 and Y | |||||||||
Victory Sophus Emerging Markets Small Cap Fund | Sophus Emerging Markets Small Cap Fund | Classes A, C and Y |
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.)
• Level 3 — significant unobservable inputs (including the Funds' own assumptions in determining the fair value of investments)
69
Victory Portfolios | Notes to Financial Statements — continued December 31, 2018 |
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 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.
In accordance with procedures adopted by the Board, fair value pricing may be used if events materially affecting the value of foreign securities occur between the time the exchange on which they are traded closes and the time the Funds' net asset values are calculated. The Funds use a systematic valuation model, provided daily by an independent third party to fair value their international equity securities. These valuations are considered as Level 2 in the fair value hierarchy.
A summary of the valuations as of December 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:
LEVEL 1 — Quoted Prices | LEVEL 2 — Other Significant Observable Inputs | Total | |||||||||||||
Investments in Securities | Investments in Securities | Investments in Securities | |||||||||||||
RS International Fund | |||||||||||||||
Common Stocks | $ | — | $ | 22,998,403 | $ | 22,998,403 | |||||||||
Preferred Stocks | — | 379,889 | 379,889 | ||||||||||||
Exchange-Traded Funds | 309,477 | — | 309,477 | ||||||||||||
Total | 309,477 | 23,378,292 | 23,687,769 | ||||||||||||
RS Global Fund | |||||||||||||||
Common Stocks | 19,009,464 | (a) | 14,978,238 | 33,987,702 | |||||||||||
Preferred Stocks | — | 263,749 | 263,749 | ||||||||||||
Exchange-Traded Funds | 33,171 | — | 33,171 | ||||||||||||
Total | 19,042,635 | 15,241,987 | 34,284,622 | ||||||||||||
Sophus Emerging Markets Fund | |||||||||||||||
Common Stocks | 38,538,918 | (b) | 232,388,437 | 270,927,355 | |||||||||||
Preferred Stocks | — | 6,947,327 | 6,947,327 | ||||||||||||
Collateral for Securities Loaned | 5,091,015 | — | 5,091,015 | ||||||||||||
Total | 43,629,933 | 239,335,764 | 282,965,697 | ||||||||||||
Sophus Emerging Markets Small Cap Fund | |||||||||||||||
Common Stocks | 263,642 | (c) | 4,065,795 | 4,329,437 | |||||||||||
Preferred Stocks | — | 49,191 | 49,191 | ||||||||||||
Collateral for Securities Loaned | 42,004 | — | 42,004 | ||||||||||||
Total | 305,646 | 4,114,986 | 4,420,632 |
(a) All securities categorized as United States (including ADRs), Bermuda and Mexico.
(b) All securities categorized as Mexico and ADRs.
(c) All securities categorized as Chile, Mexico, Peru and Turkey.
70
Victory Portfolios | Notes to Financial Statements — continued December 31, 2018 |
For the year ended December 31, 2018, there were no Level 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.
Foreign Exchange Currency Contracts:
The Funds may enter into foreign exchange currency contracts to convert U.S. dollars to and from various foreign currencies. A foreign exchange currency contract is an obligation by a Fund to purchase or sell a specific currency at a future date at a price (in U.S. dollars) set at the time of the contract. The Funds do not engage in "cross-currency" foreign exchange contracts (i.e., contracts to purchase or sell one foreign currency in exchange for another foreign currency). The Funds' foreign exchange currency contracts might be considered spot contracts (typically a contract of one week or less) or forward contracts (typically a contract term over one week). A spot contract is entered into for purposes of hedging against foreign currency fluctuations relating to a specific portfolio transaction, such as the delay between a security transaction trade date and settlement date. Forward contracts are entered into for purposes of hedging portfolio holdings or concentrations of such holdings. Each foreign exchange currency contract is adjusted daily by the prevailing spot or forward rate of the underlying currency, and any appreciation or depreciation is recorded for financial statement purposes as unrealized until the contract settlement date, at which time the Fund records realized gains or losses equal to the difference between the value of a contract at the time it was opened and the value at the time it was closed. A Fund could be exposed to risk if a counterparty is unable to meet the terms of a foreign exchange currency contract or if the value of the foreign currency changes unfavorably. In addition, the use of foreign exchange currency contracts does not eliminate fluctuations in the underlying prices of the securities. As of December 31, 2018, the Funds had no open forward foreign exchange currency contracts.
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
71
Victory Portfolios | Notes to Financial Statements — continued December 31, 2018 |
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 is a summary of the Funds' securities lending transactions which are subject to offset under the MSLA as of December 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 | <30 Days | Between 30 & 90 Days | >90 Days | Net Amount | ||||||||||||||||||||||
RS International Fund | $ | 127,225 | $ | — | $ | — | $ | — | $ | 312,294 | $ | 185,069 | |||||||||||||||
Sophus Emerging Markets Fund | 5,736,308 | 5,091,015 | — | 3,636 | 881,939 | 240,282 | |||||||||||||||||||||
Sophus Emerging Markets Small Cap Fund | 113,840 | 42,004 | 47,072 | 31,512 | 242 | 6,990 |
Foreign Currency Translations:
The accounting records of the Funds are maintained in U.S. dollars. Investment securities and other assets and liabilities of a Fund denominated in a foreign currency are translated into U.S. dollars at current exchange rates. Purchases and sales of securities, income receipts and expense payments are translated into U.S. dollars at the exchange rates on the date of the transactions. The Funds do not isolate the portion of the results of operations resulting from changes in foreign exchange rates on investments from fluctuations arising from changes in market prices of securities held. Such fluctuations are disclosed as net change in unrealized appreciation/depreciation on investments and foreign currency translations on the Statements of Operations. Any realized gains or losses from these fluctuations are disclosed as net realized gains or losses from investment transactions and foreign currency translations on the Statements of Operations.
Foreign Taxes:
The Funds may be subject to foreign taxes related to foreign income received (a portion of which may be reclaimable), capital gains on the sale of securities, and certain foreign currency transactions. All foreign taxes are recorded in accordance with the applicable regulations and rates that exist in the foreign jurisdictions in which the Funds invest.
Dividends to Shareholders:
Dividends from net investment income, if any, are declared and paid annually for the Funds. 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 (e.g., net operating loss, distribution reclassification, and deemed distribution due to shareholder redemptions), 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.
72
Victory Portfolios | Notes to Financial Statements — continued December 31, 2018 |
Net investment losses incurred by a Fund may be reclassified as an offset to capital on the accompanying Statements of Assets and Liabilities.
As of December 31, 2018, on the Statements of Assets and Liabilities, there were no reclassification adjustments as a result of permanent book-to-class differences.
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 December 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.
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 December 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 December 31, 2018 were as follows:
Purchases (excluding U.S. Government Securities) | Sales (excluding U.S. Government Securities) | ||||||||||
RS International Fund | $ | 14,732,135 | $ | 12,558,758 | |||||||
RS Global Fund | 24,936,121 | 19,264,991 | |||||||||
Sophus Emerging Markets Fund | 459,599,403 | 335,920,968 | |||||||||
Sophus Emerging Markets Small Cap Fund | 10,592,953 | 12,051,039 |
For the year ended December 31, 2018, there were no purchases or sales of U.S. Government Securities.
73
Victory Portfolios | Notes to Financial Statements — continued December 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 Agreement, 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 | |||||||
RS International Fund | 0.80 | % | |||||
RS Global Fund | 0.80 | % | |||||
Sophus Emerging Markets Fund | 1.00 | % | |||||
Sophus Emerging Markets Small Cap Fund | 1.25 | % |
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 pays 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 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
74
Victory Portfolios | Notes to Financial Statements — continued December 31, 2018 |
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 Class A Shares of the Funds. For the fiscal year ended December 31, 2018, the Distributor received approximately $20,576 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, the Adviser has agreed to waive fees or reimburse certain expenses 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 limits. As of December 31, 2018, the expense limits (excluding voluntary waivers) are as follows:
In effect January 1, 2018 until April 30, 2019 | |||||||||||||||||||||||
Class A Shares | Class C Shares | Class R Shares | Class R6 Shares | Class Y Shares | |||||||||||||||||||
RS International Fund | 1.13 | % | 1.88 | % | 1.38 | % | N/A | 0.88 | % | ||||||||||||||
RS Global Fund | 0.85 | %(a) | 1.60 | %(a) | 1.10 | %(a) | N/A | 0.60 | %(a) | ||||||||||||||
Sophus Emerging Markets Fund | 1.34 | %(b) | 2.14 | %(b) | 1.58 | %(b) | 0.89 | %(b) | 0.99 | %(b) | |||||||||||||
Sophus Emerging Markets Small Cap Fund | 1.75 | % | 2.50 | % | N/A | N/A | 1.50 | % | |||||||||||||||
Was in effect from January 1, 2018 until May 31, 2018 | |||||||||||||||||||||||
Class A Shares | Class C Shares | Class R Shares | Class R6 Shares | Class Y Shares | |||||||||||||||||||
RS Global Fund | 1.09 | % | 1.84 | % | 1.34 | % | N/A | 0.84 | % |
(a) In effect from June 1, 2018 until at least April 30, 2019.
(b) In effect until July 31, 2019.
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 the 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 December 31, 2018, the following amounts are available to be repaid to the Adviser.
Expires 12/31/19 | Expires 12/31/20 | Expires 12/31/21 | Total | ||||||||||||||||
RS International Fund | $ | 54,419 | $ | 178,334 | $ | 152,046 | $ | 384,799 | |||||||||||
RS Global Fund | 40,586 | 181,379 | 205,996 | 427,961 | |||||||||||||||
Sophus Emerging Markets Fund | 54,398 | 287,244 | 879,454 | 1,221,096 | |||||||||||||||
Sophus Emerging Markets Small Cap Fund | 41,003 | 157,277 | 143,951 | 342,231 |
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 December 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.
75
Victory Portfolios | Notes to Financial Statements — continued December 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.
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, 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 current 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 December 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 December 31, 2018 were as follows:
Amount Outstanding at December 31, 2018 | Average Borrowing* | Days Borrowings Outstanding | Average Interest Rate* | Maximum Borrowing During the Period | |||||||||||||||||||
Sophus Emerging Markets Small Cap Fund | $ | — | $ | 663,636 | 11 | 2.67 | % | $ | 900,000 |
* For the year ended December 31, 2018, based on the number of days borrowings were outstanding.
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
76
Victory Portfolios | Notes to Financial Statements — continued December 31, 2018 |
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 December 31, 2018 were as follows:
Borrower or Lender | Amount Outstanding at December 31, 2018 | Average Borrowing* | Days Borrowing Outstanding | Average Interest Rate* | Maximum Borrowing During the Period | ||||||||||||||||||||||
RS International Fund | Borrower | $ | — | $ | 87,000 | 3 | 2.19 | % | $ | 87,000 | |||||||||||||||||
RS Global Fund | Borrower | — | 202,000 | 3 | 2.19 | % | 202,000 | ||||||||||||||||||||
Sophus Emerging Markets Fund | Borrower | — | 3,609,786 | 14 | 2.64 | % | 7,534,000 | ||||||||||||||||||||
Sophus Emerging Markets Small Cap Fund | Borrower | — | 300,882 | 17 | 2.57 | % | 608,000 |
* For the year ended December 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):
Year Ended December 31, 2018 | |||||||||||||||||||
Distributions paid from | |||||||||||||||||||
Ordinary Income | Net Long-Term Capital Gains | Total Taxable Distributions | Total Distributions Paid | ||||||||||||||||
RS International Fund | $ | 451,538 | $ | — | $ | 451,538 | $ | 451,538 | |||||||||||
RS Global Fund | 710,732 | 849,841 | 1,560,573 | 1,560,573 | |||||||||||||||
Sophus Emerging Markets Fund | 2,823,595 | 9,802,010 | 12,625,605 | 12,625,605 | |||||||||||||||
Sophus Emerging Markets Small Cap Fund | 328,246 | 475,064 | 803,310 | 803,310 |
Year Ended December 31, 2017 | |||||||||||||||||||||||
Distributions paid from | |||||||||||||||||||||||
Ordinary Income | Net Long-Term Capital Gains | Total Taxable Distributions | Return of Capital | Total Distributions Paid | |||||||||||||||||||
RS International Fund | $ | 421,635 | $ | — | $ | 421,635 | $ | — | $ | 421,635 | |||||||||||||
RS Global Fund | 2,099,092 | 1,133,465 | 3,232,557 | 222,009 | 3,454,566 | ||||||||||||||||||
Sophus Emerging Markets Fund | 1,983,829 | — | 1,983,829 | — | 1,983,829 | ||||||||||||||||||
Sophus Emerging Markets Small Cap Fund | 2,808,292 | 2,493,660 | 5,301,952 | — | 5,301,952 |
77
Victory Portfolios | Notes to Financial Statements — continued December 31, 2018 |
As of the tax year ended December 31, 2018, the components of accumulated earnings (deficit) on a tax basis were as follows:
Undistributed Ordinary Income | Undistributed Long-Term Capital Gains | Accumulated Earnings | Accumulated Capital and Other Losses | Total Qualified Late-Year Losses* | Unrealized Appreciation (Depreciation)** | Accumulated Earnings (Deficit) | |||||||||||||||||||||||||
RS International Fund | $ | 422,959 | $ | 149,059 | $ | 572,018 | $ | — | $ | — | $ | (407,140 | ) | $ | 164,878 | ||||||||||||||||
RS Global Fund | 128 | — | 128 | — | (30,258 | ) | 4,123,820 | 4,093,690 | |||||||||||||||||||||||
Sophus Emerging Markets Fund | 121,264 | — | 121,264 | (12,387,465 | ) | — | (7,660,841 | ) | (19,927,042 | ) | |||||||||||||||||||||
Sophus Emerging Markets Small Cap Fund | 20,628 | — | 20,628 | — | (174,531 | ) | (222,847 | ) | (376,750 | ) |
* Qualified Late-year Losses above are comprised of post-October capital losses and post-October 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 and mark to market adjustments on passive foreign investment companies.
As of the tax year ended December 31, 2018, the following Funds had net capital loss carryforwards ("CLCFs") as summarized in the table below:
Short-Term Amount | Long-Term Amount | Total | |||||||||||||
Sophus Emerging Markets Fund | $ | 12,387,465 | $ | — | $ | 12,387,465 |
During the tax year ended December 31, 2018, the RS International Fund utilized $1,020,470 of CLCFs.
At December 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:
Cost of Investments for Federal Tax Purposes | Gross Unrealized Appreciation | Gross Unrealized Depreciation | Net Unrealized Appreciation (Depreciation) | ||||||||||||||||
RS International Fund | $ | 24,093,264 | $ | 4,632,289 | $ | (5,037,784 | ) | $ | (405,495 | ) | |||||||||
RS Global Fund | 30,149,525 | 7,932,081 | (3,796,984 | ) | 4,135,097 | ||||||||||||||
Sophus Emerging Markets Fund | 290,616,755 | 54,120,134 | (61,771,192 | ) | (7,651,058 | ) | |||||||||||||
Sophus Emerging Markets Small Cap Fund | 4,643,647 | 1,277,638 | (1,500,653 | ) | (223,015 | ) |
8. Capital Contribution from Prior Custodian:
During 2016, certain Funds received notification from their prior custodian, State Street Bank and Trust ("State Street"), concerning issues related to billing on certain categories of expenses during the approximately 16-year period from 1998 through October 31, 2014. The over-billing primarily related to categories of expenses that involved an allocation of general costs among multiple clients.
State Street paid the refunded amounts during January 2017. Based on billing information received during 2016 from State Street and an analysis of any expense limitation agreements that were in place during the period of the activities in question, including the application of any recoupment provisions in such agreements, the Adviser received a portion of the refund.
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Victory Portfolios | Notes to Financial Statements — continued December 31, 2018 |
The portion of the refund retained by the Funds was accounted for as a capital contribution and is reflected on the Financial Highlights as "Capital Contribution from Prior Custodian, Net".
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 December 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 | ||||||||||
Sophus Emerging Markets Small Cap Fund | Gerlach Nominee And Co. LLC | 47.2 | % | ||||||||
Sophus Emerging Markets Small Cap Fund | UBS Financial Services Inc. | 39.9 | % |
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 December 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 Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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 December 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 December 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 December 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 December 31, 2017 from net investment income and net realized gains in the Funds were as follows:
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Victory Portfolios | Notes to Financial Statements — continued December 31, 2018 |
RS International Fund | RS Global Fund | Sophus Emerging Markets Fund | Sophus Emerging Markets Small Cap Fund | ||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||
From net investment income: | |||||||||||||||||||
Class A Shares | $ | (307,863 | ) | $ | — | $ | (594,980 | ) | $ | (17,106 | ) | ||||||||
Class C Shares | (15,363 | ) | — | (68,358 | ) | (797 | ) | ||||||||||||
Class R Shares | (37,846 | ) | — | (98,067 | ) | — | |||||||||||||
Class R6 Shares | — | — | (210,158 | ) | — | ||||||||||||||
Class Y Shares | (60,563 | ) | — | (1,012,266 | ) | (118,026 | ) | ||||||||||||
From net realized gains: | |||||||||||||||||||
Class A Shares | $ | — | $ | (543,276 | ) | $ | — | $ | (825,260 | ) | |||||||||
Class C Shares | — | (156,755 | ) | — | (23,128 | ) | |||||||||||||
Class R Shares | — | (67,741 | ) | — | — | ||||||||||||||
Class Y Shares | — | (2,464,785 | ) | — | (4,317,635 | ) |
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.
80
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of the Victory RS International Fund, Victory RS Global Fund, Victory Sophus Emerging Markets Fund, and Victory Sophus Emerging Markets Small Cap Fund
Opinion on the Financial Statements
We have audited the accompanying statements of assets and liabilities of Victory RS International Fund, Victory RS Global Fund, Victory Sophus Emerging Markets Fund, and Victory Sophus Emerging Markets Small Cap Fund (collectively referred to as the "Funds") (four of the funds constituting the Victory Portfolios (the "Trust")) including the portfolios of investments, as of December 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 three 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 (four of the funds constituting the Trust) at December 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 three years in the period then ended, in conformity with U.S. generally accepted accounting principles.
The financial highlights of the Funds for the periods presented through December 31, 2015, were audited by other auditors whose report dated February 22, 2016, expressed an unqualified opinion on those financial highlights.
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 December 31, 2018, by correspondence with the custodian, transfer agent, 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
February 26, 2019
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Victory Portfolios | Supplemental Information December 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 Funds Complex. Each Trustee's address is c/o Victory Portfolios, 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. |
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Victory Portfolios | Supplemental Information — continued December 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 | |||||||||||||||
Dennis M. Bushe, 75 | Trustee | July 2016 | Retired. | Trustee, RS Investment Trust and RS Variable Products Trust (November 2011-July 2016). | |||||||||||||||
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-July 2016). | |||||||||||||||
Leigh A. Wilson, 74 | 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 December 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, 57 | 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, 45 | 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, 65 | 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.
84
Victory Portfolios | Supplemental Information — continued December 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 the Funds 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 expects to file a complete list of Schedules of Portfolio Investments with the SEC for the first and third quarter of each fiscal year on Form N-PORT beginning March 1, 2019. Prior to that date, the Trust has filed 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-PORT and 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 July 1, 2018 through December 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.
Beginning Account Value 7/1/18 | Actual Ending Account Value 12/31/18 | Hypothetical Ending Account Value 12/31/18 | Actual Expenses Paid During Period 7/1/18- 12/31/18* | Hypothetical Expenses Paid During Period 7/1/18- 12/31/18* | Annualized Expense Ratio During Period 7/1/18- 12/31/18 | ||||||||||||||||||||||
RS International Fund | |||||||||||||||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 907.00 | $ | 1,019.51 | $ | 5.43 | $ | 5.75 | 1.13 | % | |||||||||||||||
Class C Shares | 1,000.00 | 903.80 | 1,015.73 | 9.02 | 9.55 | 1.88 | % | ||||||||||||||||||||
Class R Shares | 1,000.00 | 905.90 | 1,018.25 | 6.63 | 7.02 | 1.38 | % | ||||||||||||||||||||
Class Y Shares | 1,000.00 | 908.40 | 1,020.77 | 4.23 | 4.48 | 0.88 | % |
85
Victory Portfolios | Supplemental Information — continued December 31, 2018 |
(Unaudited)
Beginning Account Value 7/1/18 | Actual Ending Account Value 12/31/18 | Hypothetical Ending Account Value 12/31/18 | Actual Expenses Paid During Period 7/1/18- 12/31/18* | Hypothetical Expenses Paid During Period 7/1/18- 12/31/18* | Annualized Expense Ratio During Period 7/1/18- 12/31/18 | ||||||||||||||||||||||
RS Global Fund | |||||||||||||||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 928.70 | $ | 1,020.92 | $ | 4.13 | $ | 4.33 | 0.85 | % | |||||||||||||||
Class C Shares | 1,000.00 | 924.60 | 1,017.14 | 7.76 | 8.13 | 1.60 | % | ||||||||||||||||||||
Class R Shares | 1,000.00 | 927.30 | 1,019.66 | 5.34 | 5.60 | 1.10 | % | ||||||||||||||||||||
Class Y Shares | 1,000.00 | 929.90 | 1,022.18 | 2.92 | 3.06 | 0.60 | % | ||||||||||||||||||||
Sophus Emerging Markets Fund | |||||||||||||||||||||||||||
Class A Shares | 1,000.00 | 848.80 | 1,018.45 | 6.24 | 6.82 | 1.34 | % | ||||||||||||||||||||
Class C Shares | 1,000.00 | 845.10 | 1,014.42 | 9.95 | 10.87 | 2.14 | % | ||||||||||||||||||||
Class R Shares | 1,000.00 | 848.10 | 1,017.24 | 7.36 | 8.03 | 1.58 | % | ||||||||||||||||||||
Class R6 Shares | 1,000.00 | 850.80 | 1,020.72 | 4.15 | 4.53 | 0.89 | % | ||||||||||||||||||||
Class Y Shares | 1,000.00 | 850.70 | 1,020.21 | 4.62 | 5.04 | 0.99 | % | ||||||||||||||||||||
Sophus Emerging Markets Small Cap Fund | |||||||||||||||||||||||||||
Class A Shares | 1,000.00 | 833.40 | 1,016.33 | 8.13 | 8.94 | 1.76 | % | ||||||||||||||||||||
Class C Shares | 1,000.00 | 831.10 | 1,012.55 | 11.58 | 12.73 | 2.51 | % | ||||||||||||||||||||
Class Y Shares | 1,000.00 | 833.90 | 1,017.59 | 6.98 | 7.68 | 1.51 | % |
* 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).
86
Victory Portfolios | Supplemental Information — continued December 31, 2018 |
(Unaudited)
Additional Federal Income Tax Information
For the year ended December 31, 2018, the Funds paid qualified dividend income for the purposes of reduce individual federal income tax rates of:
Amount | |||||||
RS International Fund | 85 | % | |||||
RS Global Fund | 100 | % | |||||
Sophus Emerging Markets Fund | 100 | % | |||||
Sophus Emerging Markets Small Cap Fund | 12 | % |
Dividends qualified for corporate dividends received deductions of:
Amount | |||||||
RS Global Fund | 43 | % |
For the year ended December 31, 2018, the Funds designated short-term capital gain distributions in the amount of:
Amount | |||||||
RS Global Fund | $ | 178,495 | |||||
Sophus Emerging Markets Small Cap Fund | 328,245 |
For the year ended December 31, 2018, the following Funds designated long-term capital gain distributions in the amount of:
Amount | |||||||
RS Global Fund | $ | 849,841 | |||||
Sophus Emerging Markets Fund | 9,802,010 | ||||||
Sophus Emerging Markets Small Cap Fund | 475,064 |
The following Funds intend to elect to pass through to shareholders the income tax credit for taxes paid to foreign countries. Foreign source income and foreign tax expense per outstanding share on December 31, 2018 were as follows:
Foreign Source Income | Foreign Tax Expense | ||||||||||
RS International Fund | 0.32 | 0.12 | |||||||||
Sophus Emerging Markets Fund | 0.03 | 0.01 | |||||||||
Sophus Emerging Markets Small Cap Fund | 0.22 | 0.11 |
87
Victory Portfolios | Supplemental Information — continued December 31, 2018 |
(Unaudited)
Considerations of the Board in Continuing the Investment Advisory Agreement (the "Agreement")
The Board approved the Agreement on behalf of each of the Funds at a meeting, which was called for that purpose, on December 5, 2018. The Board also considered information relating to the Funds and the Agreement provided throughout the year and, more specifically, at a meeting on October 23, 2018. The Board noted that prior to each Fund's reorganization on July 29, 2016, each Fund was managed by RS Investment Management Co. LLC, which was acquired by the Adviser on July 29, 2016. In considering whether to approve the Agreement, the Board requested, and the Adviser provided, information that the Board believed to be reasonably necessary to reach its conclusions. The Board, including the Independent Trustees, evaluated this information along with other information obtained throughout the year and was advised by legal counsel to the Funds and by independent legal counsel to the Independent Trustees. In addition, in 2017 the Independent Trustees, through their counsel, retained an independent consultant to assist with a review of the overall process for conducting the annual review of these advisory arrangements. The Board considered each Fund's advisory fee, expense ratio and investment performance as significant factors in determining whether the Agreement should be continued. In considering whether the compensation paid to the Adviser was fair and reasonable, the Board also evaluated, among other things, the following factors:
• The requirements of the Funds for the services provided by the Adviser;
• The nature, quality and extent of the services provided and expected to be provided;
• The performance of the Funds as compared to comparable funds;
• The fees payable for the services and whether the fee arrangements provided for economies of scale that would benefit Fund shareholders as the Funds grow;
• Whether the fee would be sufficient to enable the Adviser to attract and retain experienced personnel and continue to provide quality services to the Funds;
• Fees paid by other clients of the Adviser whose accounts are managed in a similar investment style and any differences in the services provided to the other clients compared to those provided to the Funds;
• Total expenses of each Fund, taking into consideration any distribution or shareholder servicing fees;
• Management's commitment to operating the Funds at competitive expense levels;
• The profitability of the Adviser (as reflected by comparing fees earned against an estimate of the Adviser's costs) with respect to the Adviser's relationship with the Funds;
• Research and other service benefits received by the Adviser obtained through payment of client commissions for securities transactions;
• Other benefits received by the Adviser, and its affiliates, including revenues paid to the Adviser, or its affiliates, by the Funds for administration and fund accounting services, and distribution;
• The capabilities and financial condition of the Adviser;
• Current economic and industry trends; and
• The historical relationship between each Fund and the Adviser.
The Board reviewed each Fund's current management fee, comprised of the advisory fee plus the administrative services fee paid to the Adviser, in the context of the Adviser's profitability of each Fund individually. In addition, the Board compared each Fund's gross management fee and total operating expense ratio on a net and gross basis, taking into consideration any distribution or shareholder servicing fees, with the median gross management fee and median expense ratio of a universe of comparable mutual funds compiled by an independent consultant, FUSE Research Network, LLC ("FUSE"), and a peer group of funds with similar investment strategies selected by FUSE from the universe. The Board reviewed the factors and methodology used by FUSE in the selection of each Fund's peer group, including FUSE's selection of a broad universe of funds using the standard Retail Morningstar Categories, the more specific universe of comparable funds, and peer groups of funds with comparable investment strategies and asset levels, among other factors. The Board also reviewed any changes to FUSE's methodology as compared to the prior year, including as a result of input from the Adviser, if any. With respect to certain Funds, the Board also reviewed fees and other information
88
Victory Portfolios | Supplemental Information — continued December 31, 2018 |
(Unaudited)
related to the Adviser's management of similarly managed institutional or private accounts, and the differences in the services provided to the other accounts. The Board noted that none of the advisory fee arrangements for the Funds included breakpoints, which are generally viewed as a method by which the investment adviser shares any economies of scale with a fund as a fund grows. The Board also considered the Adviser's commitment to limit expenses as discussed in more detail below.
The Board found that the gross annual management fee paid by each Fund was within the range of management fees paid by each Fund's respective peer group. The Board also found that each Fund's Class A net annual expense ratio, taking into account any shareholder servicing or distribution fees, was reasonable as compared with each Fund's respective peer group. The Board considered the Adviser's contractual agreement with each Fund to waive its fees and reimburse expenses of certain classes for a specified period of time, as described in the Fund's prospectus.
The Board reviewed each Fund's performance over one-, three-, five- and ten-year periods (as applicable) against the performance of the Fund's selected peer group and benchmark index. The Board recognized that the performance of the Fund and the peer group funds are net of expenses, while the performance of the benchmark index is gross returns. The Board considered the additional resources that the Adviser has committed to enhance portfolio analysis, compliance and trading systems. The Board noted that, following each Fund's reorganization, each Fund is managed by substantially the same investment management team that managed the comparable predecessor fund.
The Board reviewed various other specific factors with respect to each Fund, as described below. In their deliberations, the Trustees did not rank the importance of any particular information or factor considered and each Trustee may have attributed different weights to various factors.
RS International Fund
The Board compared the Fund's Class A performance for the one-, three-, five- and ten-year periods ended June 30, 2018, to that of the median performance of the peer group and benchmark index for the same periods and considered the fact that the Fund outperformed both the benchmark index and the peer group for all periods reviewed.
Having considered, among other things: (1) the Fund's management fee compared to comparable mutual funds; (2) the Fund's total expense ratio compared to comparable mutual funds; (3) that the Adviser's willingness to limit the expenses of certain classes for a period of time would provide stability to the Fund's expenses for those share classes during that period; and (4) the Fund's performance during the periods reviewed, the Board concluded that the Agreement continued to be in the best interests of the Fund's shareholders.
RS Global Fund
Noting that the Fund commenced operations in 2011, the Board compared the Fund's Class A performance for the one-, three- and five-year periods ended June 30, 2018, to that of the median performance of the peer group and benchmark index for the same periods and considered the fact that the Fund outperformed both the benchmark index and the peer group for all periods reviewed.
Having considered, among other things: (1) the Fund's management compared to comparable mutual funds; (2) the Fund's total expense ratio compared to comparable mutual funds; (3) that the Adviser's willingness to limit the expenses of certain classes for a period of time would provide stability to the Fund's expenses for those share classes during that period; and (4) the Fund's performance during the periods reviewed, the Board concluded that the Agreement continued to be in the best interests of the Fund's shareholders.
Sophus Emerging Markets Fund
The Board compared the Fund's Class A performance for the one-, three- and five-year periods ended June 30, 2018, to that of the median performance of the peer group and benchmark index for the same periods and considered the fact that the Fund outperformed the benchmark index for the one-, three- and five-year periods, underperformed the benchmark index for the ten-year period, and outperformed the peer group for all periods reviewed.
89
Victory Portfolios | Supplemental Information — continued December 31, 2018 |
(Unaudited)
Having considered, among other things: (1) the Fund's management fee compared to comparable mutual funds; (2) the Fund's total expense ratio compared to comparable mutual funds; (3) that the Adviser's willingness to limit the expenses of certain classes for a period of time would provide stability to the Fund's expenses for those share classes during that period; and (4) the Fund's performance during the periods reviewed, the Board concluded that the Agreement continued to be in the best interests of the Fund's shareholders.
Sophus Emerging Markets Small Cap Fund
Noting that the Fund commenced operations in 2014, the Board compared the Fund's Class A performance for the one- and three-year periods ended June 30, 2018, to that of the median performance of the peer group and benchmark index for the same periods and considered the fact that the Fund outperformed both the benchmark index and the peer group for both of the periods reviewed.
Having considered, among other things: (1) the Fund's management fee compared to comparable mutual funds; (2) the Fund's total expense ratio compared to comparable mutual funds; (3) that the Adviser's willingness to limit the expenses of certain classes for a period of time would provide stability to the Fund's expenses for those share classes during that period; and (4) the Fund's performance during the periods reviewed, the Board concluded that the Agreement continued to be in the best interests of the Fund's shareholders.
Conclusion
Based on its review of the information requested and provided, and following extended discussions, the Board determined that the Agreement, on behalf of the Funds discussed above, was consistent with the best interests of each Fund and its shareholders, and the Board unanimously approved the Agreement, on behalf of each Fund, for an additional annual period on the basis of the foregoing review and discussions and the following considerations, among others:
• The fairness and reasonableness of the investment advisory fee payable to the Adviser under the Agreement in light of the investment advisory services provided, the costs of these services, the profitability of the Adviser's relationship with the Fund and the comparability of the fee paid to the fees paid by other investment companies;
• The nature, quality and extent of the investment advisory services provided by the Adviser;
• The Adviser's entrepreneurial commitment to the management of the Funds and the creation of a broad-based family of funds, which could entail a substantial commitment of the Adviser's resources to the successful operation of the Funds;
• The Adviser's representations regarding its staffing and capabilities to manage the Funds, including the retention of personnel with relevant portfolio management experience;
• The Adviser's efforts to enhance investment results by, among other things, developing quality portfolio management teams; and
• The overall high quality of the personnel, operations, financial condition, investment management capabilities, methodologies and performance of the Adviser.
90
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) |
VPRSIF-AR (12/18)
December 31, 2018
Annual Report
Victory RS Partners Fund
Victory RS Value Fund
Victory RS Large Cap Alpha Fund
Victory RS Investors Fund
Victory Global Natural Resources 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 sooner than January 1, 2021 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 Victory Funds you hold directly or through 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
Shareholder Letter (unaudited) | 3 | ||||||
Fund Review and Commentary (unaudited) | 4 | ||||||
Financial Statements | |||||||
The Victory Value Funds | |||||||
Victory RS Partners Fund | |||||||
Schedule of Portfolio Investments | 23 | ||||||
Statements of Assets and Liabilities | 34 | ||||||
Statements of Operations | 36 | ||||||
Statements of Changes in Net Assets | 38-40 | ||||||
Financial Highlights | 44-46 | ||||||
Victory RS Value Fund | |||||||
Schedule of Portfolio Investments | 26 | ||||||
Statements of Assets and Liabilities | 34 | ||||||
Statements of Operations | 36 | ||||||
Statements of Changes in Net Assets | 38-40 | ||||||
Financial Highlights | 47-50 | ||||||
Victory RS Large Cap Alpha Fund | |||||||
Schedule of Portfolio Investments | 29 | ||||||
Statements of Assets and Liabilities | 34 | ||||||
Statements of Operations | 36 | ||||||
Statements of Changes in Net Assets | 38-40 | ||||||
Financial Highlights | 51-54 | ||||||
Victory RS Investors Fund | |||||||
Schedule of Portfolio Investments | 31 | ||||||
Statements of Assets and Liabilities | 35 | ||||||
Statements of Operations | 37 | ||||||
Statements of Changes in Net Assets | 41-43 | ||||||
Financial Highlights | 55-58 | ||||||
Victory Global Natural Resources Fund | |||||||
Schedule of Portfolio Investments | 33 | ||||||
Statements of Assets and Liabilities | 35 | ||||||
Statements of Operations | 37 | ||||||
Statements of Changes in Net Assets | 41-43 | ||||||
Financial Highlights | 59-62 | ||||||
Notes to Financial Statements | 63 | ||||||
Report of Ernst & Young LLP, Independent Registered Public Accounting Firm | 75 | ||||||
Supplemental Information (unaudited) | 76 | ||||||
Trustee and Officer Information | 76 | ||||||
Proxy Voting and Form N-Q Information | 79 | ||||||
Expense Examples | 79 | ||||||
Additional Federal Income Tax Information | 81 | ||||||
Advisory Contract Approval | 82 |
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 www.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
Victory Funds Letter to Shareholders
Dear Shareholder,
What a difference a year makes. The year ended December 31, 2018, was marked by an abrupt return of volatility, which had largely been missing in action for years. Consider the range of highs and lows we witnessed. For the S&P 500 Index, it was a year in which we celebrated an all-time high in late summer, only to be followed by the worst December since the 2008 financial crisis. And if that wasn't enough volatility, the Dow Jones Industrial Average also registered several of its worst-ever, single-day point declines during 2018.
Through all that the S&P 500 clocked in with its first negative annual return since 2008, falling by 4.4 percent. Given the risk-off sentiment that was obvious as the year drew to a close, it's no surprise that small-cap stocks, as measured by the Russell 2000 Index, fared even worse, falling approximately 11.0 percent for the year. The challenges for equity investors were also evident around the world as the MSCI ACWI and Emerging Markets indexes declined 8.9 and 14.3 percent, respectively.
So what ushered in the renewed era of volatility and these challenging times? There were multiple culprits. For starters, trade tensions ratcheted up throughout the year as anti-global rhetoric bloomed into a series of new tariffs, which sparked concerns of a prolonged trade war with China. The Federal Reserve remained persistent in its monetary tightening, raising the benchmark interest rate four times throughout the year to a range of 2.25 to 2.5 percent. And then the year ended with a partial shutdown of the federal government. These factors conspired to elevate concerns of a possible recession here and abroad.
Yet despite the headline risks, we think it's critically important to remain focused on the data. By all accounts, the U.S. economy continued chugging along in 2018 with a real gross domestic product (GDP) rising 3.4 percent in the third quarter of 2018, the latest figures available from the Bureau of Economic Analysis. Moreover, the labor picture continues to shine with consistent monthly job growth and an unemployment rate of 3.9 percent. All this comes against a backdrop of low inflation and solid corporate earnings.
The markets, it appears, have been vacillating between the dire headlines and higher perceived risks on one hand, and the continued positive economic data on the other. Of course, no one knows where the Fed will stop raising rates, nor is there any certainty on how the trade turmoil ultimately gets resolved. For now, however, we continue to embrace our solid economic fundamentals. Moreover, we believe all of Victory Capital's independent investment franchises are well positioned to take advantage of any short-term valuation dislocations resulting from the current era of heightened volatility.
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.
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
3
Victory RS Value Funds (Unaudited)
Victory RS Partners Fund
Portfolio Holdings
As a Percentage of Total Investments
Market Overview
It would be an understatement to characterize 2018 as a volatile year for the equity market. Consider the range of highs and lows we witnessed. For the S&P 500® Index, it was a year in which we enjoyed an all-time high but also suffered the worst December since the 2008 financial crisis. And if that wasn't enough, we also saw the worst single-day point decline in the history of the Dow Jones Industrial Average. Through all that volatility, the S&P 500 Index ultimately registered its first negative annual return (-4.4%) since the financial crisis. Small-caps performed worse than large-caps in a risk-off environment as the Russell 2000® Index fell approximately 11% for the year. A number of concerns, including trade tensions with China, rising interest rates, a government shutdown, and rising concerns of a possible recession, were all culprits that created a jittery market.
The year started off in a sharp contrast to how it ended. The S&P 500 Index returned nearly 6% in January, followed by a sharp spike in volatility in February that culminated with the biggest single-day decline (over 1100 points) in the Dow's history. In the second and third quarters, the equity market performed well thanks to modest inflation, strong GDP data, and robust corporate earnings growth, with the S&P 500 Index hitting an all-time high in late September. But as the trade tension rhetoric ratcheted up, investors' sentiment turned decidedly negative. Coupled with concerns of slowing global economic growth and continued Federal Reserve tightening, valuation multiples were compressed as investors assigned a higher discount rate to equities to account for increased risk on the horizon. This resulted in a dramatic 20% drawdown in the S&P 500 Index and a 26% drawdown in the Russell 2000 Index from peak to trough late in the year. The sell-off was broad-based, with nine out of 11 sectors posting negative returns, while Health Care and Utilities had slight positive returns for the year. In addition, almost every global asset class sold off. The MSCI Emerging Markets Index was down 9.7% and the MSCI World ex USA Index declined approximately 10%. Commodities were no exception, as WTI crude fell nearly 25% for the year. As investors rotated into safe havens, the 10-year Treasury yield declined by approximately 60 bps in the fourth quarter to approximately 2.6% at year-end. High-yield credit spreads also widened by nearly 200 bps in the fourth quarter.
While 2018 was a challenging year in the equity market, valuations have become more reasonable, and the equity risk premium has moved up to the upper end of the recent decade.
Performance Update and Review
The Victory RS Partners Fund (the "Fund") seeks to provide long-term capital appreciation. For the twelve-month period ended December 31, 2018, the Fund (Class A at net asset value) delivered a -12.04% absolute return, outperforming the Russell 2000® Value Index (the "Index"), which returned -12.86%. The Fund beat the Index through strong stock selection in multiple industries.
4
Victory RS Value Funds (Unaudited)
Victory RS Partners Fund (continued)
The largest contributions to the Fund's outperformance relative to the Index came from Euronet Worldwide and Validus Holdings. Euronet is a financial technology company that manages international ATMs, provides money transfer services, and facilitates mobile gift-card and other prepaid services. Shares significantly outperformed in 2018 because of continued execution into growth markets as well as abating concerns regarding increased regulatory issues. The Fund also benefited from the ownership of Validus Holdings (VR), the (re)insurer that was formed after Hurricane Katrina. Validus share price rose materially after the announcement that American International Group (AIG) intended to purchase the company for a significant premium above its book value.
Across sectors, the best performance came from Information Technology, Industrials, and Real Estate. Across all three sectors, our "lose less" approach payed off as our names with higher quality balance sheets and more consistent cash flow generation materially outperformed the broader sectors. The sector outperformance was driven almost entirely by stock selection. Names such as Equity Commonwealth (EQC), CommVault (CVLT), Euronet (EEFT), and Azul (AZUL) all posted solid positive absolute returns in a down market.
Despite solid stock selection, not all the Fund's holdings or sectors were positive contributors relative to the Index. Federated Investors (FII), the money market and mutual fund manager, had negative absolute and relative performance and was a poor selection for the year. The company made an acquisition of a United Kingdom based money manager, which did not appear to be the best use of the significant cash position on its balance sheet. In addition, as with most money managers, the firm saw pressure on asset levels as a result of lower equity markets, which lowered cash flow generation. The underperformance in Federated was the sole cause of the underperformance in the Banks sector for the year.
Outlook
As we enter our tenth year of economic expansion, a period of consistent underlying factors for equity investing, conditions are beginning to shift. Interest rates and the regulatory cycles have reached an inflection point, placing countervailing forces on the economy and markets. As for now, the U.S. economy remains quite robust and continues to be a global leader.
Energy prices remain significantly below peak levels, despite declining inventories worldwide. Natural gas prices have materially lagged oil prices. This stimulates consumer spending and confidence in the long run for the U.S. and for non-oil-producing countries abroad. In the U.S. we enjoy the competitive advantage of a long-term supply of abundant cheap natural gas.
Interest rates have moved off of their historically low levels, and now the question is which direction they will move from here. Ultimately, higher rates are a reflection of better economic performance and some inflation; however, the continued improvement is much more questionable, as the benefits from corporate tax reform have already been embedded in the economy. As with most things, the pendulum rarely stops in the middle, and the risk of the Federal Reserve tightening too much or too fast is a possibility that is gaining greater interest. Although we believe we are late in the economic cycle, the odds of an imminent recession without an unlikely full-blown trade war or some anomalistic event seem low.
We remain watchful of corporations continuing to lever their balance sheets, although some of this has been offset by strong free cash flow generation. The corporate tax cuts and the inducement to repatriate foreign cash holdings are fueling optimism and should drive higher
5
Victory RS Value Funds (Unaudited)
Victory RS Partners Fund (continued)
employment, M&A activity, and capital returns such as buybacks and dividends. However, the U.S. Treasury 10-year/2-year rate spread stands at a mere 16 bps. This is the lowest level spread we have seen since August 2007 and well below the 10-year average of 176 bps. With the Federal Reserve seemingly motivated to raise rates further, we are mindful of the possibility of an inverted yield curve. Although not perfect, an inverted yield curve has proven a fairly reliable indicator of an economic slowdown in the past.
In our estimation equity valuations remain at historically high levels, in the eighth decile on trailing operating earnings. We feel we are in the later stages of a bull market, although nothing is certain. Equities look most reasonable when comparing earnings yields to U.S. Treasuries or even corporate bond yields. In any case, we believe the values inherent in the Fund's holdings as measured by our focus on improving return on invested capital (ROIC) and strong balance sheets should make them attractive to other investors and possibly acquirers over time. Meanwhile, we believe equities are the superior asset allocation alternative to bonds over the longer term.
6
Victory RS Value Funds (Unaudited)
Victory RS Partners Fund (continued)
Average Annual Return
Year Ended December 31, 2018
Class A | Class R | Class Y | |||||||||||||||||||||
INCEPTION DATE | 7/12/95 | 10/31/06 | 5/1/07 | ||||||||||||||||||||
Net Asset Value | Maximum Offering Price | Net Asset Value | Net Asset Value | Russell 2000 Value Index1 | |||||||||||||||||||
One Year | –12.04 | % | –17.09 | % | –12.39 | % | –11.77 | % | –12.86 | % | |||||||||||||
Three Year | 7.61 | % | 5.51 | % | 7.22 | % | 7.95 | % | 7.37 | % | |||||||||||||
Five Year | 1.35 | % | 0.16 | % | 0.98 | % | 1.67 | % | 3.61 | % | |||||||||||||
Ten Year | 11.92 | % | 11.26 | % | 11.48 | % | 12.28 | % | 10.40 | % | |||||||||||||
Since Inception | 10.38 | % | 10.11 | % | 5.02 | % | 4.91 | % | N/A | ||||||||||||||
Expense Ratios | |||||||||||||||||||||||
Gross | 1.50% | 2.28% | 1.21% | ||||||||||||||||||||
With Applicable Waivers | 1.45% | 1.81% | 1.12% |
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 May 1, 2018. Additional information pertaining to the Fund's expense ratios as of December 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 RS Partners Fund — Growth of $10,000
1The Russell 2000® Value Index is an unmanaged market-capitalization-weighted index that measures the performance of those companies in the Russell 2000® Index with lower price-to-book ratios and lower forecasted growth values. (The Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000® Index, which consists of the 3,000 largest U.S. companies based on total market capitalization.) Index results assume the reinvestment of dividends paid on the stocks constituting the index. 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 RS Value Funds (Unaudited)
Victory RS Value Fund
Portfolio Holdings
As a Percentage of Total Investments
Market Overview
It would be an understatement to characterize 2018 as a volatile year for the equity market. Consider the range of highs and lows we witnessed. For the S&P 500® Index, it was a year in which we enjoyed an all-time high but also suffered the worst December since the 2008 financial crisis. And if that wasn't enough, we also saw the worst single-day point decline in the history of the Dow Jones Industrial Average. Through all that volatility, the S&P 500 Index ultimately registered its first negative annual return (-4.4%) since the financial crisis. Small-caps performed worse than large-caps in a risk-off environment as the Russell 2000® Index fell approximately 11% for the year. A number of concerns, including trade tensions with China, rising interest rates, a government shutdown, and rising concerns of a possible recession, were all culprits that created a jittery market.
The year started off in a sharp contrast to how it ended. The S&P 500 Index returned nearly 6% in January, followed by a sharp spike in volatility in February that culminated with the biggest single-day decline (over 1100 points) in the Dow's history. In the second and third quarters, the equity market performed well thanks to modest inflation, strong GDP data, and robust corporate earnings growth, with the S&P 500 Index hitting an all-time high in late September. But as the trade tension rhetoric ratcheted up, investors' sentiment turned decidedly negative. Coupled with concerns of slowing global economic growth and continued Federal Reserve tightening, valuation multiples were compressed as investors assigned a higher discount rate to equities to account for increased risk on the horizon. This resulted in a dramatic 20% drawdown in the S&P 500 Index and a 26% drawdown in the Russell 2000 Index from peak to trough late in the year. The sell-off was broad-based, with nine out of 11 sectors posting negative returns, while Health Care and Utilities had slight positive returns for the year. In addition, almost every global asset class sold off. The MSCI Emerging Markets Index was down 9.7% and the MSCI World ex USA Index declined approximately 10%. Commodities were no exception, as WTI crude fell nearly 25% for the year. As investors rotated into safe havens, the 10-year Treasury yield declined by approximately 60 bps in the fourth quarter to approximately 2.6% at year-end. High-yield credit spreads also widened by nearly 200 bps in the fourth quarter.
While 2018 was a challenging year in the equity market, valuations have become more reasonable, and the equity risk premium has moved up to the upper end of the recent decade.
Performance Update and Review
The Victory RS Value Fund (the "Fund") seeks to provide long-term capital appreciation. For the twelve-month period ended December 31, 2018, the Fund (Class A at net asset value) delivered a -10.75% absolute return, outperforming the Russell Midcap® Value Index, which returned -12.29%.
8
Victory RS Value Funds (Unaudited)
Victory RS Value Fund (continued)
Solid stock selection in the Consumer Staples and Information Technology sectors contributed positively to the portfolio. In particular, financial technology company Euronet Worldwide (ticker: EEFT) was up over 20% for the year as concerns over additional regulations abated and the company continued to deliver excellent financial results. Also, Consumer Staples company Post Holdings (ticker: POST) was up 13% as the company announced intentions to unlock value in two segments of their portfolio via announced spin-offs. Another notable performer in the Fund was can manufacturer Ball Corp. (ticker: BLL; +20%), which began to show progress from their acquisition of Rexam.
We reduced our position sizes in both POST and BLL during the year as their stock prices increased. However, we increased our position size in EEFT because in October we learned that the earnings power of the company is expected to significantly accelerate, thanks to Visa enabling profitable currency conversion transactions on all of EEFT's ATMs beginning in 2019.
Contributing negatively to the Fund was negative stock selection in the Consumer Discretionary sector. The worst performer was LKQ Corp. (ticker: LKQ), a provider of refurbished collision replacement parts for the auto industry. The stock declined over 40% as slightly slower than expected earnings growth was met with a draconian contraction in the company's valuation. The other notable underperformer in the Fund was AIG, which declined over 35% due to large hurricane and wildfire losses in the second half of the year. We increased our position sizes in both LKQ and AIG because we believe the market has overreacted.
Outlook
As we enter our tenth year of economic expansion, a period of consistent underlying factors for equity investing, conditions are beginning to shift. Interest rates and the regulatory cycles have reached an inflection point, placing countervailing forces on the economy and markets. As for now, the U.S. economy remains quite robust and continues to be a global leader.
Energy prices remain significantly below peak levels, despite declining inventories worldwide. Natural gas prices have materially lagged oil prices. This stimulates consumer spending and confidence in the long run for the U.S. and for non-oil-producing countries abroad. In the U.S. we enjoy the competitive advantage of a long-term supply of abundant cheap natural gas.
Interest rates have moved off of their historically low levels, and now the question is which direction they will move from here. Ultimately, higher rates are a reflection of better economic performance and some inflation; however, the continued improvement is much more questionable, as the benefits from corporate tax reform have already been embedded in the economy. As with most things, the pendulum rarely stops in the middle, and the risk of the Federal Reserve tightening too much or too fast is a possibility that is gaining greater interest. Although we believe we are late in the economic cycle, the odds of an imminent recession without an unlikely full-blown trade war or some anomalistic event seem low.
We remain watchful of corporations continuing to lever their balance sheets, although some of this has been offset by strong free cash flow generation. The corporate tax cuts and the inducement to repatriate foreign cash holdings are fueling optimism and should drive higher employment, M&A activity, and capital returns such as buybacks and dividends. However, the U.S. Treasury 10-year/2-year rate spread stands at a mere 16 bps. This is the lowest
9
Victory RS Value Funds (Unaudited)
Victory RS Value Fund (continued)
level spread we have seen since August 2007 and well below the 10-year average of 176 bps. With the Federal Reserve seemingly motivated to raise rates further, we are mindful of the possibility of an inverted yield curve. Although not perfect, an inverted yield curve has proven a fairly reliable indicator of an economic slowdown in the past.
In our estimation equity valuations remain at historically high levels, in the eighth decile on trailing operating earnings. We feel we are in the later stages of a bull market, although nothing is certain. Equities look most reasonable when comparing earnings yields to U.S. Treasuries or even corporate bond yields. In any case, we believe the values inherent in the Fund's holdings as measured by our focus on improving return on invested capital (ROIC) and strong balance sheets should make them attractive to other investors and possibly acquirers over time. Meanwhile, we believe equities are the superior asset allocation alternative to bonds over the longer term.
10
Victory RS Value Funds (Unaudited)
Victory RS Value Fund (continued)
Average Annual Return
Year Ended December 31, 2018
Class A | Class C | Class R | Class Y | ||||||||||||||||||||||||||||
INCEPTION DATE | 6/30/93 | 5/1/07 | 12/4/06 | 5/1/07 | |||||||||||||||||||||||||||
Net Asset Value | Maximum Offering Price | Net Asset Value | Contingent Deferred Charges | Net Asset Value | Net Asset Value | Russell Midcap Value Index1 | |||||||||||||||||||||||||
One Year | –10.75 | % | –15.88 | % | –11.41 | % | –12.17 | % | –11.12 | % | –10.54 | % | –12.29 | % | |||||||||||||||||
Three Year | 5.14 | % | 3.08 | % | 4.34 | % | 4.34 | % | 4.71 | % | 5.38 | % | 6.06 | % | |||||||||||||||||
Five Year | 4.01 | % | 2.78 | % | 3.21 | % | 3.21 | % | 3.58 | % | 4.24 | % | 5.44 | % | |||||||||||||||||
Ten Year | 11.38 | % | 10.72 | % | 10.54 | % | 10.54 | % | 10.94 | % | 11.67 | % | 13.03 | % | |||||||||||||||||
Since Inception | 7.00 | % | 6.75 | % | 3.43 | % | 3.43 | % | 4.46 | % | 4.49 | % | N/A | ||||||||||||||||||
Expense Ratios | |||||||||||||||||||||||||||||||
Gross | 1.33% | 2.08% | 2.29% | 1.06% | |||||||||||||||||||||||||||
With Applicable Waivers | 1.30% | 2.07% | 1.69% | 1.06% |
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 May 1, 2018. Additional information pertaining to the Fund's expense ratios as of December 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. 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 RS Value Fund — Growth of $10,000
1The Russell Midcap® Value Index is an unmanaged market-capitalization-weighted index that measures the performance of those companies in the Russell Midcap® Index with lower price-to book ratios and lower forecasted growth values. (The Russell Midcap® Index measures the performance of the 800 smallest companies in the Russell 1000® Index, which consists of the 1,000 largest U.S. companies based on total market capitalization.) Index results assume the reinvestment of dividends paid on the stocks constituting the index. 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.
11
Victory RS Value Funds (Unaudited)
Victory RS Large Cap Alpha Fund
Portfolio Holdings
As a Percentage of Total Investments
Market Overview
It would be an understatement to characterize 2018 as a volatile year for the equity market. Consider the range of highs and lows we witnessed. For the S&P 500® Index, it was a year in which we enjoyed an all-time high but also suffered the worst December since the 2008 financial crisis. And if that wasn't enough, we also saw the worst single-day point decline in the history of the Dow Jones Industrial Average. Through all that volatility, the S&P 500 Index ultimately registered its first negative annual return (-4.4%) since the financial crisis. Small-caps performed worse than large-caps in a risk-off environment as the Russell 2000® Index fell approximately 11% for the year. A number of concerns, including trade tensions with China, rising interest rates, a government shutdown, and rising concerns of a possible recession, were all culprits that created a jittery market.
The year started off in a sharp contrast to how it ended. The S&P 500 Index returned nearly 6% in January, followed by a sharp spike in volatility in February that culminated with the biggest single-day decline (over 1100 points) in the Dow's history. In the second and third quarters, the equity market performed well thanks to modest inflation, strong GDP data, and robust corporate earnings growth, with the S&P 500 Index hitting an all-time high in late September. But as the trade tension rhetoric ratcheted up, investors' sentiment turned decidedly negative. Coupled with concerns of slowing global economic growth and continued Federal Reserve tightening, valuation multiples were compressed as investors assigned a higher discount rate to equities to account for increased risk on the horizon. This resulted in a dramatic 20% drawdown in the S&P 500 Index and a 26% drawdown in the Russell 2000 Index from peak to trough late in the year. The sell-off was broad-based, with nine out of 11 sectors posting negative returns, while Health Care and Utilities had slight positive returns for the year. In addition, almost every global asset class sold off. The MSCI Emerging Markets Index was down 9.7% and the MSCI World ex USA Index declined approximately 10%. Commodities were no exception, as WTI crude fell nearly 25% for the year. As investors rotated into safe havens, the 10-year Treasury yield declined by approximately 60 bps in the fourth quarter to approximately 2.6% at year-end. High-yield credit spreads also widened by nearly 200 bps in the fourth quarter.
While 2018 was a challenging year in the equity market, valuations have become more reasonable, and the equity risk premium has moved up to the upper end of the recent decade.
Performance Update and Review
The Victory RS Large Cap Alpha Fund (the "Fund") seeks to provide long-term capital appreciation. For the twelve-month period ended December 31, 2018, the Fund (Class A at net asset value) delivered a -9.31% absolute return, underperforming the Russell 1000® Value Index, which returned -8.27%.
12
Victory RS Value Funds (Unaudited)
Victory RS Large Cap Alpha Fund (continued)
Solid stock selection in the Materials, Information Technology, and Consumer Staples sectors contributed positively to the portfolio. In particular, can manufacturer Ball Corp. (ticker: BLL; +23%) began to show progress from their acquisition of Rexam. Also, Visa (V), a global payments network operator, returned 16% on the back of strong operational momentum and improving sales and profitability. Another notable performer in the Fund was Consumer Staples company Post Holdings (ticker: POST), which returned 13% as the company announced intentions to unlock value in two segments of their portfolio via announced spin-offs. We reduced our position sizes in both POST and BLL during the year as their stock prices increased.
Contributing negatively to the Fund was negative stock selection in the Health Care and Consumer Discretionary sectors. Within Health Care, the negative selection effect was in part because of stocks we owned, such as Allergan (AGN). A global specialty pharmaceutical company, AGN returned -17% as financial results and worries over competition from new generic drug entrants competing against one of its key products weighed on the shares' valuation. Not owning a number of large-capitalization, branded pharmaceutical and tools companies also hurt our relative performance in the Health Care sector.
Selection also lagged in the Consumer Discretionary sector. The worst performer was LKQ Corp. (ticker: LKQ), a provider of refurbished collision replacement parts for the auto industry. The stock declined over 40% as slightly slower than expected earnings growth was met with a draconian contraction in the company's valuation.
We added to our Allergan and LKQ positions during the year as their valuations became more compelling.
Outlook
As we enter our tenth year of economic expansion, a period of consistent underlying factors for equity investing, conditions are beginning to shift. Interest rates and the regulatory cycles have reached an inflection point, placing countervailing forces on the economy and markets. As for now, the U.S. economy remains quite robust and continues to be a global leader.
Energy prices remain significantly below peak levels, despite declining inventories worldwide. Natural gas prices have materially lagged oil prices. This stimulates consumer spending and confidence in the long run for the U.S. and for non-oil-producing countries abroad. In the U.S. we enjoy the competitive advantage of a long-term supply of abundant cheap natural gas.
Interest rates have moved off of their historically low levels, and now the question is which direction they will move from here. Ultimately, higher rates are a reflection of better economic performance and some inflation; however, the continued improvement is much more questionable, as the benefits from corporate tax reform have already been embedded in the economy. As with most things, the pendulum rarely stops in the middle, and the risk of the Federal Reserve tightening too much or too fast is a possibility that is gaining greater interest. Although we believe we are late in the economic cycle, the odds of an imminent recession without an unlikely full-blown trade war or some anomalistic event seem low.
We remain watchful of corporations continuing to lever their balance sheets, although some of this has been offset by strong free cash flow generation. The corporate tax cuts and the inducement to repatriate foreign cash holdings are fueling optimism and should drive higher
13
Victory RS Value Funds (Unaudited)
Victory RS Large Cap Alpha Fund (continued)
employment, M&A activity, and capital returns such as buybacks and dividends. However, the U.S. Treasury 10-year/2-year rate spread stands at a mere 16 bps. This is the lowest level spread we have seen since August 2007 and well below the 10-year average of 176 bps. With the Federal Reserve seemingly motivated to raise rates further, we are mindful of the possibility of an inverted yield curve. Although not perfect, an inverted yield curve has proven a fairly reliable indicator of an economic slowdown in the past.
In our estimation equity valuations remain at historically high levels, in the eighth decile on trailing operating earnings. We feel we are in the later stages of a bull market, although nothing is certain. Equities look most reasonable when comparing earnings yields to U.S. Treasuries or even corporate bond yields. In any case, we believe the values inherent in the Fund's holdings as measured by our focus on improving return on invested capital (ROIC) and strong balance sheets should make them attractive to other investors and possibly acquirers over time. Meanwhile, we believe equities are the superior asset allocation alternative to bonds over the longer term.
14
Victory RS Value Funds (Unaudited)
Victory RS Large Cap Alpha Fund (continued)
Average Annual Return
Year Ended December 31, 2018
Class A | Class C | Class R | Class Y | ||||||||||||||||||||||||||||||||
INCEPTION DATE | 6/1/72 | 8/7/00 | 5/15/01 | 5/1/07 | |||||||||||||||||||||||||||||||
Net Asset Value | Maximum Offering Price | Net Asset Value | Maximum Offering Price | Net Asset Value | Net Asset Value | Russell 1000 Value Index1 | S&P 500 Index2 | ||||||||||||||||||||||||||||
One Year | –9.31 | % | –14.52 | % | –10.03 | % | –10.75 | % | –9.63 | % | –9.11 | % | –8.27 | % | –4.38 | % | |||||||||||||||||||
Three Year | 5.25 | % | 3.20 | % | 4.41 | % | 4.41 | % | 4.88 | % | 5.47 | % | 6.95 | % | 9.26 | % | |||||||||||||||||||
Five Year | 5.25 | % | 4.01 | % | 4.41 | % | 4.41 | % | 4.87 | % | 5.48 | % | 5.95 | % | 8.49 | % | |||||||||||||||||||
Ten Year | 10.66 | % | 10.00 | % | 9.79 | % | 9.79 | % | 10.24 | % | 10.93 | % | 11.18 | % | 13.12 | % | |||||||||||||||||||
Since Inception | 11.32 | % | 11.17 | % | 1.89 | % | 1.89 | % | 4.71 | % | 6.66 | % | N/A | N/A | |||||||||||||||||||||
Expense Ratios | |||||||||||||||||||||||||||||||||||
Gross | 0.94% | 1.71% | 1.42% | 0.72% | |||||||||||||||||||||||||||||||
With Applicable Waivers | 0.89% | 1.69% | 1.26% | 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 May 1, 2018. Additional information pertaining to the Fund's expense ratios as of December 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. 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 RS Large Cap Alpha — Growth of $10,000
1The Russell 1000® Value Index is an unmanaged market-capitalization-weighted index that measures the performance of those companies in the Russell 1000® Index (which consists of the 1,000 largest U.S. companies based on total market capitalization) with lower price-to-book ratios and lower forecasted growth values. Index results assume the reinvestment of dividends paid on stocks constituting the index. It is not possible to invest directly in an Index.
2The 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.
15
Victory RS Value Funds (Unaudited)
Victory RS Investors Fund
Portfolio Holdings
As a Percentage of Total Investments
Market Overview
It would be an understatement to characterize 2018 as a volatile year for the equity market. Consider the range of highs and lows we witnessed. For the S&P 500® Index, it was a year in which we enjoyed an all-time high but also suffered the worst December since the 2008 financial crisis. And if that wasn't enough, we also saw the worst single-day point decline in the history of the Dow Jones Industrial Average. Through all that volatility, the S&P 500 Index ultimately registered its first negative annual return (-4.4%) since the financial crisis. Small-caps performed worse than large-caps in a risk-off environment as the Russell 2000® Index fell approximately 11% for the year. A number of concerns, including trade tensions with China, rising interest rates, a government shutdown, and rising concerns of a possible recession, were all culprits that created a jittery market.
The year started off in a sharp contrast to how it ended. The S&P 500 Index returned nearly 6% in January, followed by a sharp spike in volatility in February that culminated with the biggest single-day decline (over 1100 points) in the Dow's history. In the second and third quarters, the equity market performed well thanks to modest inflation, strong GDP data, and robust corporate earnings growth, with the S&P 500 Index hitting an all-time high in late September. But as the trade tension rhetoric ratcheted up, investors' sentiment turned decidedly negative. Coupled with concerns of slowing global economic growth and continued Federal Reserve tightening, valuation multiples were compressed as investors assigned a higher discount rate to equities to account for increased risk on the horizon. This resulted in a dramatic 20% drawdown in the S&P 500 Index and a 26% drawdown in the Russell 2000 Index from peak to trough late in the year. The sell-off was broad-based, with nine out of 11 sectors posting negative returns, while Health Care and Utilities had slight positive returns for the year. In addition, almost every global asset class sold off. The MSCI Emerging Markets Index was down 9.7% and the MSCI World ex USA Index declined approximately 10%. Commodities were no exception, as WTI crude fell nearly 25% for the year. As investors rotated into safe havens, the 10-year Treasury yield declined by approximately 60 bps in the fourth quarter to approximately 2.6% at year-end. High-yield credit spreads also widened by nearly 200 bps in the fourth quarter.
While 2018 was a challenging year in the equity market, valuations have become more reasonable, and the equity risk premium has moved up to the upper end of the recent decade.
Performance Update and Review
The Victory RS Investors Fund (the "Fund") seeks to provide long-term capital appreciation. For the twelve-month period ended December 31, 2018, the Fund (Class A at net asset value) delivered a -9.36% absolute return, slightly underperforming the Russell 3000® Value Index, which returned -8.58%.
16
Victory RS Value Funds (Unaudited)
Victory RS Investors Fund (continued)
Solid stock selection in the Information Technology and Consumer Staples sectors contributed positively to the portfolio. In particular, software company CommVault Systems (ticker: CVLT) achieved an in-portfolio return of over 30% for 2018 as an activist-led campaign for strategic change at the company was rewarded in the marketplace; we exited the position during the first half of the year as shares approached our intrinsic value assessment. Euronet Worldwide (ticker: EEFT) was up over 20% for the year as concerns over additional regulations abated and the company continued to deliver excellent financial results. Also, Consumer Staples company Post Holdings (ticker: POST) was up over 20% as the company announced intentions to unlock value in two segments of their portfolio via announced spin-offs.
Other notable performers in the Fund included can manufacturer Ball Corp. (ticker: BLL; +30%), which began to show progress from its acquisition of Rexam, and upstream oil and gas producer Energen (ticker: EGN; +25%), which agreed to be acquired by Diamondback Energy.
Contributing negatively to the Fund was an underperformance in the Health Care sector. Specifically, our lack of exposure to the mega-cap pharmaceutical area hurt our relative performance, while our specialty pharmaceutical holding Allergan (ticker: AGN) was down over 15% as concerns about delayed growth initiatives contracted the stock's multiple. Also, Consumer Discretionary holding LKQ Corp. (ticker: LKQ), a provider of refurbished collision replacement parts for the auto industry, was down roughly 40% as slightly slower than expected earnings growth was met with a draconian contraction in the company's valuation. In both instances we added to our existing positions, and they now represent two of our top holdings.
Other notable underperformers in the Fund for the year include Facebook (ticker: FB; -25%), which underperformed due to increased concerns around regulatory scrutiny and associated expense growth, and company Federated Investors (ticker: FII; -32%), which reported weaker than expected financial results. We added to our position in Facebook toward the end of 2018, as we remain enthusiastic about the company's long-term prospects, while we exited our position in Federated in the first half of 2018.
Outlook
As we enter our tenth year of economic expansion, a period of consistent underlying factors for equity investing, conditions are beginning to shift. Interest rates and the regulatory cycles have reached an inflection point, placing countervailing forces on the economy and markets. As for now, the U.S. economy remains quite robust and continues to be a global leader.
Energy prices remain significantly below peak levels, despite declining inventories worldwide. Natural gas prices have materially lagged oil prices. This stimulates consumer spending and confidence in the long run for the U.S. and for non-oil-producing countries abroad. In the U.S. we enjoy the competitive advantage of a long-term supply of abundant cheap natural gas.
Interest rates have moved off of their historically low levels, and now the question is which direction they will move from here. Ultimately, higher rates are a reflection of better economic performance and some inflation; however, the continued improvement is much more questionable, as the benefits from corporate tax reform have already been embedded in the economy. As with most things, the pendulum rarely stops in the middle, and the risk
17
Victory RS Value Funds (Unaudited)
Victory RS Investors Fund (continued)
of the Federal Reserve tightening too much or too fast is a possibility that is gaining greater interest. Although we believe we are late in the economic cycle, the odds of an imminent recession without an unlikely full-blown trade war or some anomalistic event seem low.
We remain watchful of corporations continuing to lever their balance sheets, although some of this has been offset by strong free cash flow generation. The corporate tax cuts and the inducement to repatriate foreign cash holdings are fueling optimism and should drive higher employment, M&A activity, and capital returns such as buybacks and dividends. However, the U.S. Treasury 10-year/2-year rate spread stands at a mere 16 bps. This is the lowest level spread we have seen since August 2007 and well below the 10-year average of 176 bps. With the Federal Reserve seemingly motivated to raise rates further, we are mindful of the possibility of an inverted yield curve. Although not perfect, an inverted yield curve has proven a fairly reliable indicator of an economic slowdown in the past.
In our estimation equity valuations remain at historically high levels, in the eighth decile on trailing operating earnings. We feel we are in the later stages of a bull market, although nothing is certain. Equities look most reasonable when comparing earnings yields to U.S. Treasuries or even corporate bond yields. In any case, we believe the values inherent in the Fund's holdings as measured by our focus on improving return on invested capital (ROIC) and strong balance sheets should make them attractive to other investors and possibly acquirers over time. Meanwhile, we believe equities are the superior asset allocation alternative to bonds over the longer term.
18
Victory RS Value Funds (Unaudited)
Victory RS Investors Fund (continued)
Average Annual Return
Year Ended December 31, 2018
Class A | Class C | Class R | Class Y | ||||||||||||||||||||||||||||
INCEPTION DATE | 11/15/05 | 7/24/07 | 1/3/07 | 5/1/07 | |||||||||||||||||||||||||||
Net Asset Value | Maximum Offering Price | Net Asset Value | Maximum Offering Price | Net Asset Value | Net Asset Value | Russell 3000 Value Index1 | |||||||||||||||||||||||||
One Year | –9.36 | % | –14.60 | % | –10.08 | % | –10.83 | % | –9.91 | % | –9.06 | % | –8.58 | % | |||||||||||||||||
Three Year | 5.02 | % | 2.96 | % | 4.24 | % | 4.24 | % | 4.41 | % | 5.32 | % | 7.01 | % | |||||||||||||||||
Five Year | 3.01 | % | 1.80 | % | 2.24 | % | 2.24 | % | 2.44 | % | 3.30 | % | 5.77 | % | |||||||||||||||||
Ten Year | 13.95 | % | 13.28 | % | 12.75 | % | 12.75 | % | 13.35 | % | 14.21 | % | 11.12 | % | |||||||||||||||||
Since Inception | 6.45 | % | 5.97 | % | 4.03 | % | 4.03 | % | 4.64 | % | 5.03 | % | N/A | ||||||||||||||||||
Expense Ratios | |||||||||||||||||||||||||||||||
Gross | 1.54% | 2.35% | 2.72% | 1.25% | |||||||||||||||||||||||||||
With Applicable Waivers | 1.33% | 2.07% | 1.95% | 1.05% |
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 May 1, 2018. Additional information pertaining to the Fund's expense ratios as of December 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. 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 RS Investors Fund — Growth of $10,000
1The Russell 3000® Value Index measures the performance of those Russell 3000® Index companies with lower price-to-book ratios and lower forecasted growth values. The stocks in this index are also members of either the Russell 1000® Value or the Russell 2000® Value indexes. Index results assume the reinvestment of dividends paid on the stocks constituting the index. 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.
19
Victory RS Value Funds (Unaudited)
Victory Global Natural Resources Fund
Portfolio Holdings
As a Percentage of Total Investments
The Victory Global Natural Resources Fund (the "Fund") underperformed its primary benchmark, MSCI World Commodity Producers Index (net) (the "Index), in 2018. The Fund (Class A Shares at net asset value) returned -45.81% and the Index returned -13.89%. The Fund seeks to provide long-term capital appreciation.
Most of this underperformance occurred in the last half of the year, with first, Base Metals and then the Energy Sector, succumbing to demand and related macro-economic concerns. All the major segments in the Global Natural Resource Fund generated negative returns, reflecting broad weakness across the natural resource equity and commodity complex. Relative underperformance of the Fund versus the Index was driven largely by stock selection in North American oil and North American natural gas, as well as Copper exposures.
Performance
Much of the year's underperformance occurred in the 4th quarter. As unapologetic value investors, we focus on identifying "advantaged1 producers" of a given commodity, and then acquiring ownership stakes when the purchase price is protected by the value of the current reserves and future expected returns are generated by the compounding of economic value. Typically, investment opportunities arise from controversy, and coming out of the 2014/2015 down cycle, we believed the most glaring areas of controversy were in smaller, upstream companies that had Tier I acreage but also more levered balance sheets. With commodity fundamentals and balance sheets improving, and the portfolio trading at a 35-45% discount to proved NAV, we were aggressive in taking advantage of the valuation disconnect, concentrating the portfolio while also getting more pro-cyclical. This paid off in 2016, and in 2017 we continued the process, selling non-exchange traded positions like Calpine Corporation and Sociedad Quimica y Minera de Chiles to strategic buyers, and monetizing larger-cap outperformers like Concho Resources and Cabot Oil & Gas to continue to reinvest in the existing positions where we saw business fundamentals continuing to improve and valuations remaining attractive.
In retrospect, making incremental portfolio decisions which resulted in increased beta and reduced commodity diversification was a poor decision given the risk-intolerant nature of the fourth quarter, and the calendar year. It is clear that the twin pillars of our process, valuation and asset quality, did not matter much in 2018, and performance suffered.
Portfolio Positioning
The dislocation between stock prices and asset values that reached extremes in 2018 has been unusually severe and persistent. In our opinion, this reflects the combination of
1Advantaged natural resource companies or "advantaged assets" are the low-cost producers of a given commodity that the investment team believes offer a competitive advantage in for the form of achieving higher returns on capital relative to their cost of capital and the returns of other producers.
20
Victory RS Value Funds (Unaudited)
Victory Global Natural Resources Fund (continued)
unreasonably depressed commodity price expectations and investor fatigue coupled with the increasing influence of non-fundamental trading strategies in the public equity market which results in liquidity shocks that impact valuations, particularly for smaller cap stocks. The short and violent pivot that occurred in the 4th quarter of 2018 around macro, monetary and geopolitical risks created a difficult backdrop for a concentrated, upstream natural resource portfolio.
Taking a step back, however, it's clear that that the intrinsic value of the portfolio remains intact, and the trajectory for future value creation is unchanged. Commodity supply fundamentals are more constructive today than they were prior to the "commodity super-cycle" of the 2000s. Spare capacity is extremely limited across most commodities, inventories are either at or below normal levels and discoveries of new resources are at all-time lows. The complacency that exists around commodity prices does not reflect underlying fundamentals, but rather the recent performance of commodities and the simple, yet unrealistic expectation that the cyclical decline in supply costs will continue. As the most productive areas of mature basins are drilled up, higher cost sources of supply will be needed to balance the market. Higher energy costs and the secular decline in reserve grades will continue to push supply costs higher across most metals as well.
While concerns around the pace of demand growth likely will remain elevated in the current environment, current commodity prices are insufficient to balance the commodity markets, even under the backdrop of a slowing global economy. Furthermore, commodity price expectations reflected in public equity valuations are lower. The outlook for commodity price-related beta is quite positive, in our view.
The valuation opportunity is also unique. In our experience, it is highly unusual for advantaged, well-capitalized natural resource companies to trade below the value of their proved reserves at the futures strip2, especially when they own some of the best undeveloped acreage and projects and when commodity fundamentals are actually improving. Yet, at the end of the year, we estimate that the stocks in the portfolio were trading at a 50% discount to NAV using the strip, and as much as a 60% discount using a $60 oil/$3 gas/$3 copper price deck.
In summary, despite the volatility in the 4th quarter, commodity fundamentals are relatively positive. For many commodities, capital is still scarce outside of private equity, demand growth is stable, inventories are falling, and spare capacity is dangerously low. Depletion will push prices back to the marginal cost of supply, if a supply shock doesn't. Over time, rising supply costs and maturing geology will drive the prices of many commodities higher, not lower. In the meantime, our portfolio companies have and will continue to create value through the redeployment of capital into high-return projects. Due to heightened levels of uncertainty and a general lack of liquidity, the markets do not appear to be discounting these eventualities. As a result, we have built an increasingly concentrated portfolio of companies that own what we believe to be some of the highest-return natural resource projects in the world across an array of commodities. We look forward to monetizing these positions going forward and crystallizing the intrinsic value for our investment partners.
We thank you, as always, for your patience and support.
2A futures strip is the sale or purchase of futures contracts in sequential delivery months in a single security.
21
Victory RS Value Funds (Unaudited)
Victory Global Natural Resources Fund (continued)
Average Annual Return
Year Ended December 31, 2018
Class A | Class C | Class R | Class Y | ||||||||||||||||||||||||||||||||||||
INCEPTION DATE | 11/15/95 | 5/1/07 | 12/4/06 | 5/1/07 | |||||||||||||||||||||||||||||||||||
Net Asset Value | Maximum Offering Price | Net Asset Value | Contingent Deferred Charges | Net Asset Value | Net Asset Value | MSCI World Commodity Producers Index (Net)1 | S&P North American Natural Resources Sector Index2 | S&P 500 Index3 | |||||||||||||||||||||||||||||||
One Year | –45.81 | % | –48.93 | % | –46.26 | % | –46.79 | % | –46.01 | % | –45.63 | % | –13.89 | % | –21.07 | % | –4.38 | % | |||||||||||||||||||||
Three Year | –5.71 | % | –7.56 | % | –6.46 | % | –6.46 | % | –6.03 | % | –5.39 | % | 8.13 | % | 1.50 | % | 9.26 | % | |||||||||||||||||||||
Five Year | –16.75 | % | –17.73 | % | –17.40 | % | –17.40 | % | –17.03 | % | –16.47 | % | –3.85 | % | –6.50 | % | 8.49 | % | |||||||||||||||||||||
Ten Year | –3.06 | % | –3.63 | % | –3.81 | % | –3.81 | % | –3.44 | % | –2.74 | % | 2.34 | % | 2.99 | % | 13.12 | % | |||||||||||||||||||||
Since Inception | 3.33 | % | 3.06 | % | –7.33 | % | –7.33 | % | –6.11 | % | –6.29 | % | N/A | N/A | N/A | ||||||||||||||||||||||||
Expense Ratios | |||||||||||||||||||||||||||||||||||||||
Gross | 1.55% | 2.35% | 2.20% | 1.19% | |||||||||||||||||||||||||||||||||||
With Applicable Waivers | 1.48% | 2.28% | 1.86% | 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 May 1, 2018. Additional information pertaining to the Fund's expense ratios as of December 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. 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 Global Natural Resources Fund — Growth of $10,000
1The MSCI World Commodity Producers Index (Net)® is an equity-based index designed to reflect the performance related to commodity producers stocks. The index is a free float-adjusted market-capitalization-weighted index composed of commodity producer companies based on the Global Industry Classification Standard (GICS®). The index reflects the reinvestment of dividends paid on the stocks constituting the index net of withholding taxes. It is not possible to invest directly in an Index.
2The S&P North American Natural Resources Sector IndexTM is a modified capitalization-weighted index designed as a benchmark for U.S.-traded securities in the natural resources sector. The index includes companies involved in the following categories: extractive industries, energy companies, owners and operators of timber tracts, forestry services, producers of pulp and paper, and owners of plantations. Index results assume the reinvestment of dividends paid on the stocks constituting the index. It is not possible to invest directly in an Index.
3The 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.
22
Victory Portfolios Victory RS Partners Fund | Schedule of Portfolio Investments December 31, 2018 |
Security Description | Shares | Value | |||||||||
Common Stocks (98.8%) | |||||||||||
Banks (9.0%): | |||||||||||
Associated Banc-Corp. (a) | 431,317 | $ | 8,535,762 | ||||||||
Chemical Financial Corp. | 122,205 | 4,473,925 | |||||||||
Columbia Banking System, Inc. | 112,026 | 4,065,424 | |||||||||
First Hawaiian, Inc. | 244,950 | 5,513,825 | |||||||||
Synovus Financial Corp. | 204,079 | 6,528,487 | |||||||||
UMB Financial Corp. (a) | 66,782 | �� | 4,071,699 | ||||||||
Union Bankshares Corp. (a) | 207,660 | 5,862,242 | |||||||||
39,051,364 | |||||||||||
Capital Markets (1.5%): | |||||||||||
Federated Investors, Inc., Class B | 114,840 | 3,049,002 | |||||||||
Moelis & Co., Class A | 94,600 | 3,252,348 | |||||||||
6,301,350 | |||||||||||
Consumer Discretionary (7.4%): | |||||||||||
Liberty Expedia Holdings, Inc., Class A (b) | 450,637 | 17,624,413 | |||||||||
Penske Automotive Group, Inc. | 246,501 | 9,938,920 | |||||||||
Qurate Retail, Inc. (b) | 217,078 | 4,237,363 | |||||||||
31,800,696 | |||||||||||
Consumer Staples (3.8%): | |||||||||||
Hostess Brands, Inc. (a) (b) | 828,641 | 9,065,333 | |||||||||
Nomad Foods Ltd., ADR (b) | 130,620 | 2,183,966 | |||||||||
Performance Food Group Co. (b) | 153,435 | 4,951,347 | |||||||||
16,200,646 | |||||||||||
Energy (6.1%): | |||||||||||
Extraction Oil & Gas, Inc. (a) (b) | 463,710 | 1,989,316 | |||||||||
Gulfport Energy Corp. (b) | 452,860 | 2,966,233 | |||||||||
Kosmos Energy Ltd. (a) (b) | 1,482,347 | 6,033,152 | |||||||||
Magnolia Oil & Gas Corp. (a) (b) | 384,990 | 4,315,738 | |||||||||
Peyto Exploration & Development Corp. (a) | 880,780 | 4,568,441 | |||||||||
RPC, Inc. (a) | 393,670 | 3,885,523 | |||||||||
SRC Energy, Inc. (b) | 466,420 | 2,192,174 | |||||||||
25,950,577 | |||||||||||
Health Care (2.7%): | |||||||||||
Allscripts Healthcare Solutions, Inc. (b) | 392,600 | 3,784,664 | |||||||||
NuVasive, Inc. (b) | 154,300 | 7,647,108 | |||||||||
11,431,772 | |||||||||||
Industrials (9.7%): | |||||||||||
Advanced Disposal Services, Inc. (b) | 295,883 | 7,083,439 | |||||||||
Atkore International Group, Inc. (b) | 430,260 | 8,536,359 | |||||||||
Azul SA, ADR (b) | 126,429 | 3,500,819 | |||||||||
Regal Beloit Corp. | 92,948 | 6,511,007 | |||||||||
Rexnord Corp. (b) | 124,930 | 2,867,144 |
See notes to financial statements.
23
Victory Portfolios Victory RS Partners Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Shares | Value | |||||||||
Rush Enterprises, Inc., Class A | 145,230 | $ | 5,007,530 | ||||||||
SkyWest, Inc. | 124,300 | 5,527,621 | |||||||||
Timken Co. | 57,350 | 2,140,302 | |||||||||
41,174,221 | |||||||||||
Information Technology (19.6%): | |||||||||||
Belden, Inc. (a) | 202,169 | 8,444,599 | |||||||||
CommVault Systems, Inc. (b) | 238,003 | 14,063,597 | |||||||||
Cray, Inc. (b) | 686,620 | 14,824,125 | |||||||||
Euronet Worldwide, Inc. (a) (b) | 170,280 | 17,433,266 | |||||||||
NCR Corp. (b) | 426,320 | 9,839,466 | |||||||||
Verint Systems, Inc. (b) | 448,200 | 18,963,342 | |||||||||
83,568,395 | |||||||||||
Insurance (18.1%): | |||||||||||
Axis Capital Holdings Ltd., ADR | 285,740 | 14,755,614 | |||||||||
Hanover Insurance Group, Inc. | 87,500 | 10,217,375 | |||||||||
Mercury General Corp. (a) | 254,070 | 13,137,960 | |||||||||
Primerica, Inc. | 97,363 | 9,513,339 | |||||||||
Torchmark Corp. | 169,080 | 12,601,532 | |||||||||
United Fire Group, Inc. (a) | 120,460 | 6,679,507 | |||||||||
White Mountains Insurance Group Ltd., ADR | 12,480 | 10,703,971 | |||||||||
77,609,298 | |||||||||||
Materials (6.1%): | |||||||||||
Commercial Metals Co. | 271,778 | 4,353,884 | |||||||||
Crown Holdings, Inc. (a) (b) | 300,060 | 12,473,494 | |||||||||
Platform Specialty Products Corp. (b) | 21,910 | 226,330 | |||||||||
Sensient Technologies Corp. (a) | 39,310 | 2,195,464 | |||||||||
Summit Materials, Inc., Class A (b) | 553,397 | 6,862,123 | |||||||||
26,111,295 | |||||||||||
Mortgage Real Estate Investment Trusts (1.3%): | |||||||||||
Redwood Trust, Inc. | 373,730 | 5,632,111 | |||||||||
Real Estate (6.3%): | |||||||||||
Equity Commonwealth | 535,081 | 16,057,781 | |||||||||
Spirit Realty Capital, Inc. | 212,216 | 7,480,614 | |||||||||
Terreno Realty Corp. | 95,910 | 3,373,155 | |||||||||
26,911,550 | |||||||||||
Thrifts & Mortgage Finance (2.4%): | |||||||||||
Beneficial Bancorp, Inc. | 130,460 | 1,864,273 | |||||||||
Kearny Financial Corp. (a) | 380,630 | 4,879,677 | |||||||||
TFS Financial Corp. | 206,590 | 3,332,297 | |||||||||
10,076,247 | |||||||||||
Utilities (4.8%): | |||||||||||
Black Hills Corp. (a) | 147,575 | 9,264,758 | |||||||||
El Paso Electric Co. | 25,570 | 1,281,824 |
See notes to financial statements.
24
Victory Portfolios Victory RS Partners Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Shares | Value | |||||||||
NorthWestern Corp. | 59,040 | $ | 3,509,338 | ||||||||
South Jersey Industries, Inc. (a) | 236,060 | 6,562,468 | |||||||||
20,618,388 | |||||||||||
Total Common Stocks (Cost $415,235,624) | 422,437,910 | ||||||||||
Preferred Stocks (0.3%) | |||||||||||
Health Care (0.3%): | |||||||||||
WellDoc, Inc. (c) (d) | 1,587,483 | 1,165,689 | |||||||||
Total Preferred Stock (Cost $1,942,920) | 1,165,689 | ||||||||||
Collateral for Securities Loaned^ (7.2%) | |||||||||||
BlackRock Liquidity Funds TempFund Portfolio, Institutional Class, 2.49% (e) | 5,869,200 | 5,869,200 | |||||||||
Fidelity Investments Money Market Government Portfolio, Class I, 2.28% (e) | 8,480,711 | 8,480,711 | |||||||||
Fidelity Investments Prime Money Market Portfolio, Class I, 2.46% (e) | 261,886 | 261,886 | |||||||||
Goldman Sachs Financial Square Prime Obligations Fund, Institutional Class, 2.55% (e) | 3,260,703 | 3,260,703 | |||||||||
JPMorgan Prime Money Market Fund, Capital Class, 2.49% (e) | 5,216,798 | 5,216,798 | |||||||||
Morgan Stanley Institutional Liquidity Prime Portfolio, Institutional Class, 2.58% (e) | 7,825,686 | 7,825,686 | |||||||||
Total Collateral for Securities Loaned (Cost $30,914,984) | 30,914,984 | ||||||||||
Total Investments (Cost $448,093,528) — 106.3% | 454,518,583 | ||||||||||
Liabilities in excess of other assets — (6.3)% | (26,880,043 | ) | |||||||||
NET ASSETS — 100.00% | $ | 427,638,540 |
^ 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) The Fund's Adviser has deemed this security to be illiquid based upon procedures approved by the Board of Trustees. As of December 31, 2018, illiquid securities were 0.3% of the Fund's net assets.
(d) Security was fair valued based upon procedures approved by the Board of Trustees and represents 0.3% of the Fund's net assets as of December 31, 2018. This security is classified as Level 3 within the fair value hierarchy. (See Note 2)
(e) Rate disclosed is the daily yield on December 31, 2018.
ADR — American Depositary Receipt
See notes to financial statements.
25
Victory Portfolios Victory RS Value Fund | Schedule of Portfolio Investments December 31, 2018 |
Security Description | Shares | Value | |||||||||
Common Stocks (100.0%) | |||||||||||
Consumer Discretionary (11.5%): | |||||||||||
Aramark | 384,305 | $ | 11,133,316 | ||||||||
Expedia, Inc. | 123,080 | 13,864,962 | |||||||||
LKQ Corp. (a) | 543,840 | 12,905,323 | |||||||||
Qurate Retail, Inc. (a) | 162,570 | 3,173,366 | |||||||||
41,076,967 | |||||||||||
Consumer Staples (3.0%): | |||||||||||
Hostess Brands, Inc. (a) | 156,090 | 1,707,625 | |||||||||
Keurig Dr Pepper, Inc. (b) | 139,990 | 3,589,344 | |||||||||
Post Holdings, Inc. (a) | 61,680 | 5,497,538 | |||||||||
10,794,507 | |||||||||||
Energy (8.9%): | |||||||||||
Devon Energy Corp. | 151,223 | 3,408,566 | |||||||||
Diamondback Energy, Inc. | 54,390 | 5,041,953 | |||||||||
EQT Corp. | 342,980 | 6,478,892 | |||||||||
Equitrans Midstream Corp. (a) | 189,775 | 3,799,296 | |||||||||
Magnolia Oil & Gas Corp. (a) | 332,800 | 3,730,688 | |||||||||
Noble Energy, Inc. | 119,305 | 2,238,162 | |||||||||
Range Resources Corp. (b) | 287,730 | 2,753,576 | |||||||||
RPC, Inc. (b) | 438,090 | 4,323,948 | |||||||||
31,775,081 | |||||||||||
Financials (22.8%): | |||||||||||
American International Group, Inc. | 305,900 | 12,055,519 | |||||||||
Brown & Brown, Inc. | 347,970 | 9,590,053 | |||||||||
Comerica, Inc. | 132,493 | 9,100,945 | |||||||||
E*TRADE Financial Corp. | 243,600 | 10,689,168 | |||||||||
First American Financial Corp. | 76,030 | 3,393,979 | |||||||||
Hartford Financial Services Group, Inc. | 127,680 | 5,675,376 | |||||||||
KeyCorp | 498,480 | 7,367,534 | |||||||||
RenaissanceRe Holdings Ltd., ADR (b) | 102,170 | 13,660,129 | |||||||||
Voya Financial, Inc. | 237,570 | 9,536,060 | |||||||||
81,068,763 | |||||||||||
Health Care (8.4%): | |||||||||||
Allergan PLC | 97,990 | 13,097,343 | |||||||||
NuVasive, Inc. (a) | 65,680 | 3,255,101 | |||||||||
Quest Diagnostics, Inc. | 56,220 | 4,681,439 | |||||||||
Zimmer Biomet Holdings, Inc. | 85,670 | 8,885,692 | |||||||||
29,919,575 | |||||||||||
Industrials (5.9%): | |||||||||||
Azul SA, ADR (a) | 117,040 | 3,240,838 | |||||||||
Crane Co. | 91,950 | 6,636,951 |
See notes to financial statements.
26
Victory Portfolios Victory RS Value Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Shares | Value | |||||||||
Sensata Technologies Holding PLC, ADR (a) | 124,880 | $ | 5,599,619 | ||||||||
Timken Co. (b) | 146,390 | 5,463,275 | |||||||||
20,940,683 | |||||||||||
Information Technology (15.3%): | |||||||||||
Belden, Inc. (b) | 95,500 | 3,989,035 | |||||||||
Cognizant Technology Solutions Corp., Class A | 114,581 | 7,273,602 | |||||||||
Euronet Worldwide, Inc. (a) (b) | 128,163 | 13,121,328 | |||||||||
FleetCor Technologies, Inc. (a) | 49,790 | 9,246,999 | |||||||||
NCR Corp. (a) | 377,040 | 8,702,083 | |||||||||
Verint Systems, Inc. (a) | 293,580 | 12,421,370 | |||||||||
54,754,417 | |||||||||||
Materials (7.7%): | |||||||||||
Ball Corp. | 39,160 | 1,800,577 | |||||||||
Crown Holdings, Inc. (a) (b) | 208,620 | 8,672,333 | |||||||||
Freeport-McMoRan, Inc. | 310,390 | 3,200,121 | |||||||||
Sealed Air Corp. (b) | 265,550 | 9,251,762 | |||||||||
Summit Materials, Inc., Class A (a) | 381,190 | 4,726,756 | |||||||||
27,651,549 | |||||||||||
Real Estate (9.3%): | |||||||||||
Equity Commonwealth | 300,313 | 9,012,394 | |||||||||
Healthcare Trust of America, Inc. | 113,020 | 2,860,536 | |||||||||
Invitation Homes, Inc. | 443,580 | 8,907,087 | |||||||||
MGM Growth Properties LLC, Series A (b) | 203,530 | 5,375,227 | |||||||||
Spirit Realty Capital, Inc. | 186,998 | 6,591,680 | |||||||||
32,746,924 | |||||||||||
Utilities (7.2%): | |||||||||||
AES Corp. | 250,950 | 3,628,737 | |||||||||
Atmos Energy Corp. | 38,009 | 3,524,193 | |||||||||
DTE Energy Co. | 38,705 | 4,269,162 | |||||||||
FirstEnergy Corp. (b) | 135,510 | 5,088,400 | |||||||||
WEC Energy Group, Inc. | 64,635 | 4,476,620 | |||||||||
Xcel Energy, Inc. | 94,425 | 4,652,320 | |||||||||
25,639,432 | |||||||||||
Total Common Stocks (Cost $363,553,987) | 356,367,898 |
See notes to financial statements.
27
Victory Portfolios Victory RS Value Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Shares | Value | |||||||||
Collateral for Securities Loaned^ (6.9%) | |||||||||||
BlackRock Liquidity Funds TempFund Portfolio, Institutional Class, 2.49% (c) | 4,686,691 | $ | 4,686,691 | ||||||||
Fidelity Investments Money Market Government Portfolio, Class I, 2.28% (c) | 6,772,043 | 6,772,043 | |||||||||
Fidelity Investments Prime Money Market Portfolio, Class I, 2.46% (c) | 209,122 | 209,122 | |||||||||
Goldman Sachs Financial Square Prime Obligations Fund, Institutional Class, 2.55% (c) | 2,603,746 | 2,603,746 | |||||||||
JPMorgan Prime Money Market Fund, Capital Class, 2.49% (c) | 4,165,733 | 4,165,733 | |||||||||
Morgan Stanley Institutional Liquidity Prime Portfolio, Institutional Class, 2.58% (c) | 6,248,990 | 6,248,990 | |||||||||
Total Collateral for Securities Loaned (Cost $24,686,325) | 24,686,325 | ||||||||||
Total Investments (Cost $388,240,312) — 106.9% | 381,054,223 | ||||||||||
Liabilities in excess of other assets — (6.9)% | (24,534,261 | ) | |||||||||
NET ASSETS — 100.00% | $ | 356,519,962 |
^ 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 December 31, 2018.
ADR — American Depositary Receipt
LLC — Limited Liability Company
PLC — Public Limited Company
See notes to financial statements.
28
Victory Portfolios Victory RS Large Cap Alpha Fund | Schedule of Portfolio Investments December 31, 2018 |
Security Description | Shares | Value | |||||||||
Common Stocks (99.4%) | |||||||||||
Communication Services (8.2%): | |||||||||||
Alphabet, Inc., Class A (a) | 17,400 | $ | 18,182,304 | ||||||||
Facebook, Inc., Class A (a) | 166,270 | 21,796,334 | |||||||||
39,978,638 | |||||||||||
Consumer Discretionary (6.9%): | |||||||||||
Aramark | 442,290 | 12,813,141 | |||||||||
Booking Holdings, Inc. (a) | 5,920 | 10,196,726 | |||||||||
LKQ Corp. (a) (b) | 442,210 | 10,493,643 | |||||||||
33,503,510 | |||||||||||
Consumer Staples (7.6%): | |||||||||||
Keurig Dr Pepper, Inc. | 116,790 | 2,994,496 | |||||||||
Mondelez International, Inc., Class A | 465,740 | 18,643,572 | |||||||||
Post Holdings, Inc. (a) | 24,470 | 2,181,011 | |||||||||
The Kraft Heinz Co. | 307,720 | 13,244,269 | |||||||||
37,063,348 | |||||||||||
Energy (12.0%): | |||||||||||
Chevron Corp. | 124,005 | 13,490,503 | |||||||||
Devon Energy Corp. | 254,598 | 5,738,639 | |||||||||
Diamondback Energy, Inc. | 71,920 | 6,666,984 | |||||||||
Enterprise Products Partners LP | 548,230 | 13,480,976 | |||||||||
EQT Corp. | 449,050 | 8,482,555 | |||||||||
Equitrans Midstream Corp. (a) | 179,767 | 3,598,935 | |||||||||
Helmerich & Payne, Inc. | 65,720 | 3,150,617 | |||||||||
Noble Energy, Inc. | 183,684 | 3,445,912 | |||||||||
58,055,121 | |||||||||||
Financials (23.5%): | |||||||||||
Aflac, Inc. | 288,900 | 13,162,284 | |||||||||
American International Group, Inc. | 134,400 | 5,296,704 | |||||||||
Brown & Brown, Inc. | 568,530 | 15,668,688 | |||||||||
Cincinnati Financial Corp. (b) | 165,810 | 12,837,010 | |||||||||
Citigroup, Inc. | 325,420 | 16,941,364 | |||||||||
E*TRADE Financial Corp. | 160,410 | 7,038,791 | |||||||||
Hartford Financial Services Group, Inc. | 251,320 | 11,171,174 | |||||||||
The PNC Financial Services Group, Inc. | 100,950 | 11,802,065 | |||||||||
U.S. Bancorp | 211,620 | 9,671,034 | |||||||||
Wells Fargo & Co. | 221,520 | 10,207,642 | |||||||||
113,796,756 | |||||||||||
Health Care (13.9%): | |||||||||||
Allergan PLC | 129,814 | 17,350,939 | |||||||||
AstraZeneca PLC, ADR | 146,964 | 5,581,693 | |||||||||
CVS Health Corp. | 258,195 | 16,916,937 | |||||||||
Quest Diagnostics, Inc. | 72,520 | 6,038,740 | |||||||||
UnitedHealth Group, Inc. | 40,415 | 10,068,185 | |||||||||
Zimmer Biomet Holdings, Inc. | 112,390 | 11,657,091 | |||||||||
67,613,585 |
See notes to financial statements.
29
Victory Portfolios Victory RS Large Cap Alpha Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Shares | Value | |||||||||
Industrials (5.6%): | |||||||||||
Eaton Corp. PLC, ADR | 146,540 | $ | 10,061,436 | ||||||||
Sensata Technologies Holding PLC, ADR (a) (b) | 209,550 | 9,396,222 | |||||||||
Union Pacific Corp. | 54,210 | 7,493,448 | |||||||||
26,951,106 | |||||||||||
Information Technology (8.4%): | |||||||||||
Cognizant Technology Solutions Corp., Class A | 152,147 | 9,658,292 | |||||||||
FleetCor Technologies, Inc. (a) | 57,840 | 10,742,045 | |||||||||
Visa, Inc., Class A | 156,220 | 20,611,666 | |||||||||
41,012,003 | |||||||||||
Materials (4.7%): | |||||||||||
Ball Corp. | 97,920 | 4,502,362 | |||||||||
Freeport-McMoRan, Inc. | 550,630 | 5,676,995 | |||||||||
Sealed Air Corp. | 354,580 | 12,353,567 | |||||||||
22,532,924 | |||||||||||
Real Estate (4.6%): | |||||||||||
Equity Commonwealth | 375,130 | 11,257,652 | |||||||||
Invitation Homes, Inc. | 547,790 | 10,999,623 | |||||||||
22,257,275 | |||||||||||
Utilities (4.0%): | |||||||||||
Duke Energy Corp. | 126,480 | 10,915,224 | |||||||||
Exelon Corp. | 189,510 | 8,546,901 | |||||||||
19,462,125 | |||||||||||
Total Common Stocks (Cost $476,947,997) | 482,226,391 | ||||||||||
Collateral for Securities Loaned^ (1.8%) | |||||||||||
BlackRock Liquidity Funds TempFund Portfolio, Institutional Class, 2.49% (c) | 1,692,075 | 1,692,075 | |||||||||
Fidelity Investments Money Market Government Portfolio, Class I, 2.28% (c) | 2,444,967 | 2,444,967 | |||||||||
Fidelity Investments Prime Money Market Portfolio, Class I, 2.46% (c) | 75,501 | 75,501 | |||||||||
Goldman Sachs Financial Square Prime Obligations Fund, Institutional Class, 2.55% (c) | 940,052 | 940,052 | |||||||||
JPMorgan Prime Money Market Fund, Capital Class, 2.49% (c) | 1,503,989 | 1,503,989 | |||||||||
Morgan Stanley Institutional Liquidity Prime Portfolio, Institutional Class, 2.58% (c) | 2,256,125 | 2,256,125 | |||||||||
Total Collateral for Securities Loaned (Cost $8,912,709) | 8,912,709 | ||||||||||
Total Investments (Cost $485,860,706) — 101.2% | 491,139,100 | ||||||||||
Liabilities in excess of other assets — (1.2)% | (5,702,344 | ) | |||||||||
NET ASSETS — 100.00% | $ | 485,436,756 |
^ 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 December 31, 2018.
ADR — American Depositary Receipt
LP — Limited Partnership
PLC — Public Limited Company
See notes to financial statements.
30
Victory Portfolios Victory RS Investors Fund | Schedule of Portfolio Investments December 31, 2018 |
Security Description | Shares | Value | |||||||||
Common Stocks (100.2%) | |||||||||||
Banks (6.7%): | |||||||||||
Associated Banc-Corp. | 56,690 | $ | 1,121,895 | ||||||||
Comerica, Inc. | 20,910 | 1,436,308 | |||||||||
2,558,203 | |||||||||||
Capital Markets (3.3%): | |||||||||||
E*TRADE Financial Corp. | 28,495 | 1,250,361 | |||||||||
Communication Services (9.3%): | |||||||||||
Alphabet, Inc., Class A (a) | 1,612 | 1,684,476 | |||||||||
Facebook, Inc., Class A (a) | 14,440 | 1,892,939 | |||||||||
3,577,415 | |||||||||||
Consumer Discretionary (10.1%): | |||||||||||
Liberty Expedia Holdings, Inc., Class A (a) | 47,730 | 1,866,720 | |||||||||
LKQ Corp. (a) | 83,740 | 1,987,150 | |||||||||
3,853,870 | |||||||||||
Consumer Staples (6.5%): | |||||||||||
Mondelez International, Inc., Class A | 35,500 | 1,421,065 | |||||||||
The Kraft Heinz Co. | 25,140 | 1,082,026 | |||||||||
2,503,091 | |||||||||||
Energy (10.2%): | |||||||||||
Diamondback Energy, Inc. | 12,311 | 1,141,230 | |||||||||
EQT Corp. | 66,400 | 1,254,295 | |||||||||
Equitrans Midstream Corp. (a) | 36,232 | 725,365 | |||||||||
Noble Energy, Inc. | 44,672 | 838,047 | |||||||||
3,958,937 | |||||||||||
Health Care (10.3%): | |||||||||||
Allergan PLC | 12,123 | 1,620,360 | |||||||||
Allscripts Healthcare Solutions, Inc. (a) | 71,000 | 684,440 | |||||||||
CVS Health Corp. | 25,170 | 1,649,138 | |||||||||
3,953,938 | |||||||||||
Information Technology (12.8%): | |||||||||||
Euronet Worldwide, Inc. (a) | 15,100 | 1,545,938 | |||||||||
NCR Corp. (a) | 55,490 | 1,280,709 | |||||||||
Verint Systems, Inc. (a) | 49,850 | 2,109,154 | |||||||||
4,935,801 | |||||||||||
Insurance (16.5%): | |||||||||||
American International Group, Inc. | 28,200 | 1,111,362 | |||||||||
Brown & Brown, Inc. | 61,750 | 1,701,830 | |||||||||
Mercury General Corp. (b) | 27,960 | 1,445,812 | |||||||||
RenaissanceRe Holdings Ltd., ADR | 15,730 | 2,103,101 | |||||||||
6,362,105 |
See notes to financial statements.
31
Victory Portfolios Victory RS Investors Fund | Schedule of Portfolio Investments — continued December 31, 2018 |
Security Description | Shares | Value | |||||||||
Materials (7.0%): | |||||||||||
Crown Holdings, Inc. (a) | 33,950 | $ | 1,411,302 | ||||||||
Sealed Air Corp. | 36,760 | 1,280,718 | |||||||||
2,692,020 | |||||||||||
Real Estate (4.9%): | |||||||||||
Equity Commonwealth | 63,120 | 1,894,231 | |||||||||
Thrifts & Mortgage Finance (2.6%): | |||||||||||
Essent Group Ltd. (a) | 28,990 | 990,878 | |||||||||
Total Common Stocks (Cost $39,480,077) | 38,530,850 | ||||||||||
Collateral for Securities Loaned^ (0.4%) | |||||||||||
BlackRock Liquidity Funds TempFund Portfolio, Institutional Class, 2.49% (c) | 27,643 | 27,643 | |||||||||
Fidelity Investments Money Market Government Portfolio, Class I, 2.28% (c) | 39,942 | 39,942 | |||||||||
Fidelity Investments Prime Money Market Portfolio, Class I, 2.46% (c) | 1,234 | 1,234 | |||||||||
Goldman Sachs Financial Square Prime Obligations Fund, Institutional Class, 2.55% (c) | 15,357 | 15,357 | |||||||||
JPMorgan Prime Money Market Fund, Capital Class, 2.49% (c) | 24,570 | 24,570 | |||||||||
Morgan Stanley Institutional Liquidity Prime Portfolio, Institutional Class, 2.58% (c) | 36,857 | 36,857 | |||||||||
Total Collateral for Securities Loaned (Cost $145,603) | 145,603 | ||||||||||
Total Investments (Cost $39,625,680) — 100.6% | 38,676,453 | ||||||||||
Liabilities in excess of other assets — (0.6)% | (212,546 | ) | |||||||||
NET ASSETS — 100.00% | $ | 38,463,907 |
^ 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 December 31, 2018.
ADR — American Depositary Receipt
PLC — Public Limited Company
See notes to financial statements.
32
Victory Portfolios Victory Global Natural Resources Fund | Schedule of Portfolio Investments December 31, 2018 |
Security Description | Shares | Value | |||||||||
Common Stocks (95.7%) | |||||||||||
Energy Equipment & Services (2.0%): | |||||||||||
Covia Holdings Corp. (a) (b) | 2,685,271 | $ | 9,183,627 | ||||||||
Metals & Mining (28.5%): | |||||||||||
First Quantum Minerals Ltd. (b) | 5,510,736 | 44,570,348 | |||||||||
Taseko Mines Ltd. (a) | 637,231 | 301,410 | |||||||||
Turquoise Hill Resources Ltd. (a) | 53,287,437 | 87,924,271 | |||||||||
132,796,029 | |||||||||||
Oil, Gas & Consumable Fuels (65.2%): | |||||||||||
Antero Resources Corp. (a) | 3,075,876 | 28,882,476 | |||||||||
Centennial Resource Development, Inc. (a) (b) | 1,984,793 | 21,872,419 | |||||||||
Concho Resources, Inc. (a) | 219,180 | 22,529,512 | |||||||||
EOG Resources, Inc. | 83,540 | 7,285,523 | |||||||||
EQT Corp. (b) | 921,301 | 17,403,376 | |||||||||
Kosmos Energy Ltd. (a) | 1,324,940 | 5,392,506 | |||||||||
Laredo Petroleum, Inc. (a) | 6,144,486 | 22,243,039 | |||||||||
Noble Energy, Inc. | 1,212,744 | 22,751,077 | |||||||||
Peyto Exploration & Development Corp. | 4,058,325 | 21,049,774 | |||||||||
Range Resources Corp. | 7,515,345 | 71,921,852 | |||||||||
SRC Energy, Inc. (a) | 4,854,814 | 22,817,626 | |||||||||
Tourmaline Oil Corp. | 1,326,739 | 16,504,050 | |||||||||
Whitecap Resources, Inc. | 7,202,896 | 22,954,284 | |||||||||
303,607,514 | |||||||||||
Total Common Stocks (Cost $833,951,007) | 445,587,170 | ||||||||||
Collateral for Securities Loaned^ (7.0%) | |||||||||||
BlackRock Liquidity Funds TempFund Portfolio, Institutional Class, 2.49% (c) | 6,193,133 | 6,193,133 | |||||||||
Fidelity Investments Money Market Government Portfolio, Class I, 2.28% (c) | 8,948,779 | 8,948,779 | |||||||||
Fidelity Investments Prime Money Market Portfolio, Class I, 2.46% (c) | 276,340 | 276,340 | |||||||||
Goldman Sachs Financial Square Prime Obligations Fund, Institutional Class, 2.55% (c) | 3,440,668 | 3,440,668 | |||||||||
JPMorgan Prime Money Market Fund, Capital Class, 2.49% (c) | 5,504,724 | 5,504,724 | |||||||||
Morgan Stanley Institutional Liquidity Prime Portfolio, Institutional Class, 2.58% (c) | 8,257,602 | 8,257,602 | |||||||||
Total Collateral for Securities Loaned (Cost $32,621,246) | 32,621,246 | ||||||||||
Total Investments (Cost $866,572,253) — 102.7% | 478,208,416 | ||||||||||
Liabilities in excess of other assets — (2.7)% | (12,767,465 | ) | |||||||||
NET ASSETS — 100.00% | $ | 465,440,951 |
^ 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 December 31, 2018.
See notes to financial statements.
33
Victory Portfolios | Statements of Assets and Liabilities December 31, 2018 |
Victory RS Partners Fund | Victory RS Value Fund | Victory RS Large Cap Alpha Fund | |||||||||||||
ASSETS: | |||||||||||||||
Investments, at value (Cost $448,093,528, $388,240,312 and $485,860,706) | $ | 454,518,583 | (a) | $ | 381,054,223 | (b) | $ | 491,139,100 | (c) | ||||||
Cash and cash equivalents | 3,822,939 | 1,264,585 | 4,942,313 | ||||||||||||
Interest and dividends receivable | 438,349 | 470,702 | 350,130 | ||||||||||||
Receivable for capital shares issued | 1,340,394 | 805,195 | 130,392 | ||||||||||||
Receivable for investments sold | 3,249,885 | 4,344,252 | 385,023 | ||||||||||||
Receivable from Adviser | 44,072 | — | 41,082 | ||||||||||||
Prepaid expenses | 10,106 | 6,265 | 13,196 | ||||||||||||
Total Assets | 463,424,328 | 387,945,222 | 497,001,236 | ||||||||||||
LIABILITIES: | |||||||||||||||
Payables: | |||||||||||||||
Collateral received on loaned securities | 30,914,984 | 24,686,325 | 8,912,709 | ||||||||||||
Investments purchased | 1,264,183 | 3,418,187 | 469,175 | ||||||||||||
Capital shares redeemed | 3,054,120 | 2,796,903 | 1,782,358 | ||||||||||||
To Adviser | — | 68,505 | — | ||||||||||||
Accrued expenses and other payables: | |||||||||||||||
Investment advisory fees | 387,422 | 278,869 | 215,823 | ||||||||||||
Administration fees | 23,772 | 20,120 | 26,478 | ||||||||||||
Custodian fees | 11,325 | 11,825 | 6,304 | ||||||||||||
Transfer agent fees | 52,591 | 70,922 | 49,201 | ||||||||||||
Chief Compliance Officer fees | 340 | 286 | 375 | ||||||||||||
Trustees' fees | 330 | 281 | 357 | ||||||||||||
12b-1 fees | 19,559 | 24,123 | 57,190 | ||||||||||||
Other accrued expenses | 57,162 | 48,914 | 44,510 | ||||||||||||
Total Liabilities | 35,785,788 | 31,425,260 | 11,564,480 | ||||||||||||
NET ASSETS: | |||||||||||||||
Capital | 415,343,504 | 362,866,578 | 471,883,047 | ||||||||||||
Total distributable earnings/(loss) | 12,295,036 | (6,346,616 | ) | 13,553,709 | |||||||||||
Net Assets | $ | 427,638,540 | $ | 356,519,962 | $ | 485,436,756 | |||||||||
Net Assets | |||||||||||||||
Class A Shares | $ | 175,723,461 | $ | 179,535,085 | $ | 439,035,001 | |||||||||
Class C Shares | — | 9,428,410 | 18,226,783 | ||||||||||||
Class R Shares | 1,207,460 | 1,018,574 | 6,347,830 | ||||||||||||
Class Y Shares | 250,707,619 | 166,537,893 | 21,827,142 | ||||||||||||
Total | $ | 427,638,540 | $ | 356,519,962 | $ | 485,436,756 | |||||||||
Shares (unlimited number of shares authorized with a par value of $0.001 per share): | |||||||||||||||
Class A Shares | 8,506,517 | 8,853,191 | 10,402,665 | ||||||||||||
Class C Shares | — | 521,613 | 509,398 | ||||||||||||
Class R Shares | 64,262 | 52,899 | 151,117 | ||||||||||||
Class Y Shares | 11,425,740 | 8,018,862 | 519,582 | ||||||||||||
Total | 19,996,519 | 17,446,565 | 11,582,762 | ||||||||||||
Net asset value, offering (except Class A Shares) and redemption price per share: | |||||||||||||||
Class A Shares | $ | 20.66 | $ | 20.28 | $ | 42.20 | |||||||||
Class C Shares (d) | — | 18.08 | 35.78 | ||||||||||||
Class R Shares | 18.79 | 19.26 | 42.01 | ||||||||||||
Class Y Shares | 21.94 | 20.77 | 42.01 | ||||||||||||
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 | $ | 21.92 | $ | 21.52 | $ | 44.77 |
(a) Includes $30,436,849 of securities on loan.
(b) Includes $25,999,403 of securities on loan.
(c) Includes $8,787,547 of securities on loan.
(d) Redemption price per share varies by the length of time shares are held.
See notes to financial statements.
34
Victory Portfolios | Statements of Assets and Liabilities December 31, 2018 |
Victory RS Investors Fund | Victory Global Natural Resources Fund | ||||||||||
ASSETS: | |||||||||||
Investments, at value (Cost $39,625,680 and $866,572,253) | $ | 38,676,453 | (a) | $ | 478,208,416 | (b) | |||||
Foreign currency, at value (Cost $— and $302) | — | 302 | |||||||||
Cash and cash equivalents | 380,410 | 11,519,426 | |||||||||
Interest and dividends receivable | 23,657 | 691,865 | |||||||||
Receivable for capital shares issued | 51,483 | 2,985,779 | |||||||||
Receivable for investments sold | — | 16,321,597 | |||||||||
Receivable from Adviser | 22,785 | 38,570 | |||||||||
Prepaid expenses | 2,536 | 4,735 | |||||||||
Total Assets | 39,157,324 | 509,770,690 | |||||||||
LIABILITIES: | |||||||||||
Payables: | |||||||||||
Collateral received on loaned securities | 145,603 | 32,621,246 | |||||||||
Investments purchased | — | 3,782,404 | |||||||||
Capital shares redeemed | 479,532 | 7,217,378 | |||||||||
Accrued expenses and other payables: | |||||||||||
Investment advisory fees | 35,209 | 479,600 | |||||||||
Administration fees | 2,161 | 29,594 | |||||||||
Custodian fees | 803 | 16,863 | |||||||||
Transfer agent fees | 8,469 | 85,212 | |||||||||
Chief Compliance Officer fees | 31 | 436 | |||||||||
Trustees' fees | 49 | 503 | |||||||||
12b-1 fees | 5,102 | 10,660 | |||||||||
Other accrued expenses | 16,458 | 85,843 | |||||||||
Total Liabilities | 693,417 | 44,329,739 | |||||||||
NET ASSETS: | |||||||||||
Capital | 39,541,522 | 2,304,754,602 | |||||||||
Total distributable earnings/(loss) | (1,077,615 | ) | (1,839,313,651 | ) | |||||||
Net Assets | $ | 38,463,907 | $ | 465,440,951 | |||||||
Net Assets | |||||||||||
Class A Shares | $ | 15,682,292 | $ | 64,000,764 | |||||||
Class C Shares | 7,281,807 | 6,938,844 | |||||||||
Class R Shares | 830,849 | 920,100 | |||||||||
Class Y Shares | 14,668,959 | 393,581,243 | |||||||||
Total | $ | 38,463,907 | $ | 465,440,951 | |||||||
Shares (unlimited number of shares authorized with a par value of $0.001 per share): | |||||||||||
Class A Shares | 1,468,700 | 4,976,270 | |||||||||
Class C Shares | 764,082 | 596,515 | |||||||||
Class R Shares | 86,019 | 75,528 | |||||||||
Class Y Shares | 1,341,324 | 29,416,361 | |||||||||
Total | 3,660,125 | 35,064,674 | |||||||||
Net asset value, offering (except Class A Shares) and redemption price per share: | |||||||||||
Class A Shares | $ | 10.68 | $ | 12.86 | |||||||
Class C Shares (c) | 9.53 | 11.63 | |||||||||
Class R Shares | 9.66 | 12.18 | |||||||||
Class Y Shares | 10.94 | 13.38 | |||||||||
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 | $ | 11.33 | $ | 13.64 |
(a) Includes $144,788 of securities on loan.
(b) Includes $31,975,542 of securities on loan.
(c) Redemption price per share varies by the length of time shares are held.
See notes to financial statements.
35
Victory Portfolios | Statements of Operations For the Year Ended December 31, 2018 |
Victory RS Partners Fund | Victory RS Value Fund | Victory RS Large Cap Alpha Fund | |||||||||||||
Investment Income: | |||||||||||||||
Dividends | $ | 8,495,959 | $ | 6,812,746 | $ | 9,476,647 | |||||||||
Interest | 240,636 | 192,498 | 183,553 | ||||||||||||
Securities lending (net of fees) | 119,740 | 123,095 | 43,474 | ||||||||||||
Foreign tax withholding | (59,774 | ) | — | — | |||||||||||
Total Income | 8,796,561 | 7,128,339 | 9,703,674 | ||||||||||||
Expenses: | |||||||||||||||
Investment advisory fees | 5,527,471 | 3,925,846 | 2,934,901 | ||||||||||||
Administration fees | 331,935 | 271,101 | 352,279 | ||||||||||||
12b-1 fees — Class A Shares | 579,851 | 556,987 | 1,308,577 | ||||||||||||
12b-1 fees — Class C Shares | — | 138,086 | 251,750 | ||||||||||||
12b-1 fees — Class R Shares | 9,873 | 7,307 | 46,414 | ||||||||||||
Custodian fees | 37,150 | 35,886 | 26,817 | ||||||||||||
Transfer agent fees | 52,228 | 38,522 | 38,391 | ||||||||||||
Transfer agent fees — Class A Shares | 338,045 | 275,125 | 399,925 | ||||||||||||
Transfer agent fees — Class C Shares | — | 11,988 | 24,603 | ||||||||||||
Transfer agent fees — Class R Shares | 3,903 | 3,929 | 16,523 | ||||||||||||
Transfer agent fees — Class Y Shares | 218,162 | 107,669 | 25,265 | ||||||||||||
Trustees' fees | 46,164 | 38,565 | 47,888 | ||||||||||||
Chief Compliance Officer fees | 4,220 | 3,524 | 4,461 | ||||||||||||
Legal and audit fees | 49,345 | 41,406 | 48,834 | ||||||||||||
State registration and filing fees | 53,587 | 75,410 | 64,565 | ||||||||||||
Interest expense on interfund lending | — | 104 | — | ||||||||||||
Other expenses | 97,796 | 73,674 | 40,321 | ||||||||||||
Recoupment of prior expenses waived/reimbursed by Adviser | — | 84,808 | — | ||||||||||||
Total Expenses | 7,349,730 | 5,689,937 | 5,631,514 | ||||||||||||
Expenses waived/reimbursed by Adviser | (386,406 | ) | (116,096 | ) | (236,137 | ) | |||||||||
Net Expenses | 6,963,324 | 5,573,841 | 5,395,377 | ||||||||||||
Net Investment Income (Loss) | 1,833,237 | 1,554,498 | 4,308,297 | ||||||||||||
Realized/Unrealized Gains (Losses) from Investment Transactions: | |||||||||||||||
Net realized gains (losses) from investment transactions and foreign currency translations | 86,121,266 | 47,724,006 | 81,827,397 | ||||||||||||
Net change in unrealized appreciation/depreciation on investments and foreign currency translations | (147,254,191 | ) | (93,914,909 | ) | (135,809,861 | ) | |||||||||
Net realized/unrealized gains (losses) on investments | (61,132,925 | ) | (46,190,903 | ) | (53,982,464 | ) | |||||||||
Change in net assets resulting from operations | $ | (59,299,688 | ) | $ | (44,636,405 | ) | $ | (49,674,167 | ) |
See notes to financial statements.
36
Victory Portfolios | Statements of Operations For the Year Ended December 31, 2018 |
Victory RS Investors Fund | Victory Global Natural Resources Fund | ||||||||||
Investment Income: | |||||||||||
Dividends | $ | 618,452 | $ | 9,084,629 | |||||||
Interest | 17,958 | 956,826 | |||||||||
Securities lending (net of fees) | 5,264 | 388,332 | |||||||||
Foreign tax withholding | — | (907,986 | ) | ||||||||
Total Income | 641,674 | 9,521,801 | |||||||||
Expenses: | |||||||||||
Investment advisory fees | 509,151 | 11,145,706 | |||||||||
Administration fees | 30,492 | 664,433 | |||||||||
12b-1 fees — Class A Shares | 47,425 | 476,649 | |||||||||
12b-1 fees — Class C Shares | 96,228 | 150,916 | |||||||||
12b-1 fees — Class R Shares | 6,322 | 10,551 | |||||||||
Custodian fees | 1,711 | 69,537 | |||||||||
Transfer agent fees | 6,417 | 122,848 | |||||||||
Transfer agent fees — Class A Shares | 22,164 | 323,007 | |||||||||
Transfer agent fees — Class C Shares | 10,654 | 24,211 | |||||||||
Transfer agent fees — Class R Shares | 2,559 | 3,342 | |||||||||
Transfer agent fees — Class Y Shares | 27,644 | 773,724 | |||||||||
Trustees' fees | 4,779 | 100,891 | |||||||||
Chief Compliance Officer fees | 394 | 8,761 | |||||||||
Legal and audit fees | 14,488 | 86,760 | |||||||||
State registration and filing fees | 65,809 | 95,134 | |||||||||
Other expenses | 14,186 | 120,512 | |||||||||
Total Expenses | 860,423 | 14,176,982 | |||||||||
Expenses waived/reimbursed by Adviser | (163,946 | ) | (577,205 | ) | |||||||
Net Expenses | 696,477 | 13,599,777 | |||||||||
Net Investment Income (Loss) | (54,803 | ) | (4,077,976 | ) | |||||||
Realized/Unrealized Gains (Losses) from Investment Transactions: | |||||||||||
Net realized gains (losses) from investment transactions and foreign currency translations | 5,799,863 | (170,835,093 | ) | ||||||||
Net realized gains (losses) from redemptions in-kind | — | (23,095,139 | ) | ||||||||
Net change in unrealized appreciation/depreciation on investments and foreign currency translations | (9,808,027 | ) | (289,417,818 | ) | |||||||
Net realized/unrealized gains (losses) on investments | (4,008,164 | ) | (483,348,050 | ) | |||||||
Change in net assets resulting from operations | $ | (4,062,967 | ) | $ | (487,426,026 | ) |
See notes to financial statements.
37
Victory Portfolios | Statements of Changes in Net Assets |
Victory RS Partners Fund | Victory RS Value Fund | Victory RS Large Cap Alpha Fund | |||||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2018 | Year Ended December 31, 2017 | ||||||||||||||||||||||
From Investment Activities: | |||||||||||||||||||||||||||
Operations: | |||||||||||||||||||||||||||
Net investment income (loss) | $ | 1,833,237 | $ | (2,666,762 | ) | $ | 1,554,498 | $ | 674,698 | $ | 4,308,297 | $ | 3,870,090 | ||||||||||||||
Net realized gains (losses) from investment transactions | 86,121,266 | 95,849,751 | 47,724,006 | 91,362,245 | 81,827,397 | 63,181,719 | |||||||||||||||||||||
Net change in unrealized appreciation/ depreciation on investments | (147,254,191 | ) | (1,930,817 | ) | (93,914,909 | ) | (6,815,039 | ) | (135,809,861 | ) | 33,189,053 | ||||||||||||||||
Change in net assets resulting from operations | (59,299,688 | ) | 91,252,172 | (44,636,405 | ) | 85,221,904 | (49,674,167 | ) | 100,240,862 | ||||||||||||||||||
Distributions to Shareholders: (a) | |||||||||||||||||||||||||||
Class A Shares | (35,773,137 | ) | (50,359,167 | ) | (24,922,768 | ) | (49,282,558 | ) | (80,490,381 | ) | (42,010,927 | ) | |||||||||||||||
Class C Shares | — | — | (1,375,886 | ) | (3,813,181 | ) | (3,700,952 | ) | (2,617,170 | ) | |||||||||||||||||
Class R Shares | (270,891 | ) | (440,838 | ) | (162,838 | ) | (338,056 | ) | (1,216,665 | ) | (793,543 | ) | |||||||||||||||
Class Y Shares | (49,823,881 | ) | (65,199,804 | ) | (24,215,948 | ) | (50,501,977 | ) | (4,333,722 | ) | (2,711,327 | ) | |||||||||||||||
Change in net assets resulting from distributions to shareholders | (85,867,909 | ) | (115,999,809 | ) | (50,677,440 | ) | (103,935,772 | ) | (89,741,720 | ) | (48,132,967 | ) | |||||||||||||||
Change in net assets resulting from capital transactions | (37,433,612 | ) | (124,431,017 | ) | (54,228,953 | ) | (26,633,183 | ) | 10,452,685 | (31,573,989 | ) | ||||||||||||||||
Change in net assets | (182,601,209 | ) | (149,178,654 | ) | (149,542,798 | ) | (45,347,051 | ) | (128,963,202 | ) | 20,533,906 | ||||||||||||||||
Net Assets: | |||||||||||||||||||||||||||
Beginning of period | 610,239,749 | 759,418,403 | 506,062,760 | 551,409,811 | 614,399,958 | 593,866,052 | |||||||||||||||||||||
End of period | $ | 427,638,540 | $ | 610,239,749 | $ | 356,519,962 | $ | 506,062,760 | $ | 485,436,756 | $ | 614,399,958 |
(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.
38
Victory Portfolios | Statements of Changes in Net Assets |
(continued)
Victory RS Partners Fund | Victory RS Value Fund | Victory RS Large Cap Alpha Fund | |||||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2018 | Year Ended December 31, 2017 | ||||||||||||||||||||||
Capital Transactions: | |||||||||||||||||||||||||||
Class A Shares | |||||||||||||||||||||||||||
Proceeds from shares issued | $ | 10,542,694 | $ | 27,816,168 | $ | 14,150,821 | $ | 15,791,674 | $ | 20,740,364 | $ | 17,381,089 | |||||||||||||||
Distributions reinvested | 35,117,192 | 49,467,795 | 24,219,793 | 47,583,328 | 77,994,848 | 40,852,487 | |||||||||||||||||||||
Cost of shares redeemed | (68,463,235 | ) | (187,960,196 | ) | (51,805,118 | ) | (83,696,511 | ) | (75,131,993 | ) | (86,332,344 | ) | |||||||||||||||
Total Class A Shares | $ | (22,803,349 | ) | $ | (110,676,233 | ) | $ | (13,434,504 | ) | $ | (20,321,509 | ) | $ | 23,603,219 | $ | (28,098,768 | ) | ||||||||||
Class C Shares | |||||||||||||||||||||||||||
Proceeds from shares issued | $ | — | $ | — | $ | 1,342,072 | $ | 856,132 | $ | 2,049,875 | $ | 1,727,822 | |||||||||||||||
Distributions reinvested | — | — | 1,333,779 | 3,617,282 | 3,453,415 | 2,463,458 | |||||||||||||||||||||
Cost of shares redeemed | — | — | (7,541,603 | ) | (6,543,062 | ) | (11,400,448 | ) | (5,288,644 | ) | |||||||||||||||||
Total Class C Shares | $ | — | $ | — | $ | (4,865,752 | ) | $ | (2,069,648 | ) | $ | (5,897,158 | ) | $ | (1,097,364 | ) | |||||||||||
Class R Shares | |||||||||||||||||||||||||||
Proceeds from shares issued | $ | 250,543 | $ | 458,817 | $ | 214,961 | $ | 228,630 | $ | 1,047,801 | $ | 1,980,973 | |||||||||||||||
Distributions reinvested | 270,891 | 440,838 | 162,838 | 338,056 | 1,210,626 | 769,813 | |||||||||||||||||||||
Cost of shares redeemed | (1,018,596 | ) | (1,085,034 | ) | (669,866 | ) | (535,254 | ) | (4,210,175 | ) | (4,096,155 | ) | |||||||||||||||
Total Class R Shares | $ | (497,162 | ) | $ | (185,379 | ) | $ | (292,067 | ) | $ | 31,432 | $ | (1,951,748 | ) | $ | (1,345,369 | ) | ||||||||||
Class Y Shares | |||||||||||||||||||||||||||
Proceeds from shares issued | $ | 33,627,569 | $ | 138,140,587 | $ | 17,137,847 | $ | 34,306,548 | $ | 6,642,092 | $ | 11,952,380 | |||||||||||||||
Distributions reinvested | 49,499,526 | 64,075,032 | 23,672,512 | 48,632,714 | 4,119,726 | 2,311,482 | |||||||||||||||||||||
Cost of shares redeemed | (97,260,196 | ) | (215,785,024 | ) | (76,446,989 | ) | (87,212,720 | ) | (16,063,446 | ) | (15,296,350 | ) | |||||||||||||||
Total Class Y Shares | $ | (14,133,101 | ) | $ | (13,569,405 | ) | $ | (35,636,630 | ) | $ | (4,273,458 | ) | $ | (5,301,628 | ) | $ | (1,032,488 | ) | |||||||||
Change in net assets resulting from capital transactions | $ | (37,433,612 | ) | $ | (124,431,017 | ) | $ | (54,228,953 | ) | $ | (26,633,183 | ) | $ | 10,452,685 | $ | (31,573,989 | ) |
(continues on next page)
See notes to financial statements.
39
Victory Portfolios | Statements of Changes in Net Assets |
(continued)
Victory RS Partners Fund | Victory RS Value Fund | Victory RS Large Cap Alpha Fund | |||||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2018 | Year Ended December 31, 2017 | ||||||||||||||||||||||
Share Transactions: | |||||||||||||||||||||||||||
Class A Shares | |||||||||||||||||||||||||||
Issued | 370,388 | 857,483 | 539,942 | 524,665 | 364,209 | 312,670 | |||||||||||||||||||||
Reinvested | 1,683,464 | 1,683,722 | 1,176,725 | 1,820,975 | 1,825,583 | 724,203 | |||||||||||||||||||||
Redeemed | (2,415,797 | ) | (5,664,163 | ) | (2,021,000 | ) | (2,816,929 | ) | (1,340,333 | ) | (1,560,715 | ) | |||||||||||||||
Total Class A Shares | (361,945 | ) | (3,122,958 | ) | (304,333 | ) | (471,289 | ) | 849,459 | (523,842 | ) | ||||||||||||||||
Class C Shares | |||||||||||||||||||||||||||
Issued | — | — | 60,727 | 31,786 | 43,140 | 35,274 | |||||||||||||||||||||
Reinvested | — | — | 73,124 | 152,886 | 96,062 | 49,940 | |||||||||||||||||||||
Redeemed | — | — | (324,233 | ) | (239,348 | ) | (231,269 | ) | (106,918 | ) | |||||||||||||||||
Total Class C Shares | — | — | (190,382 | ) | (54,676 | ) | (92,067 | ) | (21,704 | ) | |||||||||||||||||
Class R Shares | |||||||||||||||||||||||||||
Issued | 9,314 | 14,827 | 8,571 | 7,830 | 18,584 | 36,154 | |||||||||||||||||||||
Reinvested | 14,325 | 16,178 | 8,359 | 13,549 | 28,596 | 13,710 | |||||||||||||||||||||
Redeemed | (39,384 | ) | (33,182 | ) | (28,882 | ) | (18,308 | ) | (77,609 | ) | (73,440 | ) | |||||||||||||||
Total Class R Shares | (15,745 | ) | (2,177 | ) | (11,952 | ) | 3,071 | (30,429 | ) | (23,576 | ) | ||||||||||||||||
Class Y Shares | |||||||||||||||||||||||||||
Issued | 1,142,322 | 4,029,215 | 656,480 | 1,152,281 | 115,708 | 217,438 | |||||||||||||||||||||
Reinvested | 2,227,155 | 2,077,660 | 1,119,999 | 1,817,340 | 96,691 | 41,059 | |||||||||||||||||||||
Redeemed | (3,323,588 | ) | (6,276,480 | ) | (3,005,028 | ) | (2,905,983 | ) | (289,399 | ) | (278,284 | ) | |||||||||||||||
Total Class Y Shares | 45,889 | (169,605 | ) | (1,228,549 | ) | 63,638 | (77,000 | ) | (19,787 | ) | |||||||||||||||||
Change in Shares | (331,801 | ) | (3,294,740 | ) | (1,735,216 | ) | (459,256 | ) | 649,963 | (588,909 | ) |
See notes to financial statements.
40
Victory Portfolios | Statements of Changes in Net Assets |
Victory RS Investors Fund | Victory Global Natural Resources Fund | ||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2018 | Year Ended December 31, 2017 | ||||||||||||||||
From Investment Activities: | |||||||||||||||||||
Operations: | |||||||||||||||||||
Net investment income (loss) | $ | (54,803 | ) | $ | (168,319 | ) | $ | (4,077,976 | ) | $ | (10,674,097 | ) | |||||||
Net realized gains (losses) from investment transactions | 5,799,863 | 16,847,020 | (193,930,232 | ) | (111,929,288 | ) | |||||||||||||
Net change in unrealized appreciation /depreciation on investments | (9,808,027 | ) | (4,331,652 | ) | (289,417,818 | ) | 132,782,374 | ||||||||||||
Change in net assets resulting from operations | (4,062,967 | ) | 12,347,049 | (487,426,026 | ) | 10,178,989 | |||||||||||||
Distributions to Shareholders: (a) | |||||||||||||||||||
Class A Shares | (2,453,812 | ) | (2,732,575 | ) | — | — | |||||||||||||
Class C Shares | (1,248,830 | ) | (1,649,923 | ) | — | — | |||||||||||||
Class R Shares | (139,602 | ) | (187,011 | ) | — | — | |||||||||||||
Class Y Shares | (2,365,022 | ) | (5,262,110 | ) | — | — | |||||||||||||
Change in net assets resulting from distributions to shareholders | (6,207,266 | ) | (9,831,619 | ) | — | — | |||||||||||||
Change in net assets resulting from capital transactions | (11,344,224 | ) | (36,302,592 | ) | (458,989,878 | ) | (479,524,465 | ) | |||||||||||
Change in net assets | (21,614,457 | ) | (33,787,162 | ) | (946,415,904 | ) | (469,345,476 | ) | |||||||||||
Net Assets: | |||||||||||||||||||
Beginning of period | 60,078,364 | 93,865,526 | 1,411,856,855 | 1,881,202,331 | |||||||||||||||
End of period | $ | 38,463,907 | $ | 60,078,364 | $ | 465,440,951 | $ | 1,411,856,855 |
(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.
41
Victory Portfolios | Statements of Changes in Net Assets |
(continued)
Victory RS Investors Fund | Victory Global Natural Resources Fund | ||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2018 | Year Ended December 31, 2017 | ||||||||||||||||
Capital Transactions: | |||||||||||||||||||
Class A Shares | |||||||||||||||||||
Proceeds from shares issued | $ | 1,692,860 | $ | 950,600 | $ | 41,141,199 | $ | 43,819,672 | |||||||||||
Distributions reinvested | 2,382,350 | 2,613,392 | — | — | |||||||||||||||
Cost of shares redeemed | (4,704,359 | ) | (11,890,167 | ) | (168,408,240 | ) | (326,648,803 | ) | |||||||||||
Total Class A Shares | $ | (629,149 | ) | $ | (8,326,175 | ) | $ | (127,267,041 | ) | $ | (282,829,131 | ) | |||||||
Class C Shares | |||||||||||||||||||
Proceeds from shares issued | $ | 474,091 | $ | 692,749 | $ | 577,051 | $ | 1,115,478 | |||||||||||
Distributions reinvested | 1,055,957 | 1,406,731 | — | — | |||||||||||||||
Cost of shares redeemed | (3,353,594 | ) | (5,632,510 | ) | (7,085,345 | ) | (11,146,974 | ) | |||||||||||
Total Class C Shares | $ | (1,823,546 | ) | $ | (3,533,030 | ) | $ | (6,508,294 | ) | $ | (10,031,496 | ) | |||||||
Class R Shares | |||||||||||||||||||
Proceeds from shares issued | $ | 110,635 | $ | 353,328 | $ | 562,850 | $ | 573,574 | |||||||||||
Distributions reinvested | 139,602 | 187,011 | — | — | |||||||||||||||
Cost of shares redeemed | (577,298 | ) | (484,294 | ) | (1,061,738 | ) | (2,799,009 | ) | |||||||||||
Total Class R Shares | $ | (327,061 | ) | $ | 56,045 | $ | (498,888 | ) | $ | (2,225,435 | ) | ||||||||
Class Y Shares | |||||||||||||||||||
Proceeds from shares issued | $ | 2,756,651 | $ | 7,489,738 | $ | 264,889,815 | $ | 259,295,341 | |||||||||||
Distributions reinvested | 2,290,072 | 3,173,837 | — | — | |||||||||||||||
Cost of shares redeemed | (13,611,191 | ) | (35,163,007 | ) | (526,709,948 | ) | (443,733,744 | ) | |||||||||||
Cost of shares redeemed in-kind | — | — | (62,895,522 | ) | — | ||||||||||||||
Total Class Y Shares | $ | (8,564,468 | ) | $ | (24,499,432 | ) | $ | (324,715,655 | ) | $ | (184,438,403 | ) | |||||||
Change in net assets resulting from capital transactions | $ | (11,344,224 | ) | $ | (36,302,592 | ) | $ | (458,989,878 | ) | $ | (479,524,465 | ) |
(continues on next page)
See notes to financial statements.
42
Victory Portfolios | Statements of Changes in Net Assets |
(continued)
Victory RS Investors Fund | Victory Global Natural Resources Fund | ||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2018 | Year Ended December 31, 2017 | ||||||||||||||||
Share Transactions: | |||||||||||||||||||
Class A Shares | |||||||||||||||||||
Issued | 121,865 | 66,635 | 1,809,584 | 1,875,836 | |||||||||||||||
Reinvested | 219,774 | 185,542 | — | — | |||||||||||||||
Redeemed | (346,502 | ) | (831,562 | ) | (7,892,823 | ) | (14,049,152 | ) | |||||||||||
Total Class A Shares | (4,863 | ) | (579,385 | ) | (6,083,239 | ) | (12,173,316 | ) | |||||||||||
Class C Shares | |||||||||||||||||||
Issued | 42,948 | 53,033 | 30,147 | 52,334 | |||||||||||||||
Reinvested | 109,086 | 108,732 | — | — | |||||||||||||||
Redeemed | (266,960 | ) | (423,002 | ) | (377,893 | ) | (534,322 | ) | |||||||||||
Total Class C Shares | (114,926 | ) | (261,237 | ) | (347,746 | ) | (481,988 | ) | |||||||||||
Class R Shares | |||||||||||||||||||
Issued | 8,825 | 26,464 | 28,741 | 25,907 | |||||||||||||||
Reinvested | 14,231 | 14,318 | — | — | |||||||||||||||
Redeemed | (44,650 | ) | (35,596 | ) | (61,437 | ) | (123,330 | ) | |||||||||||
Total Class R Shares | (21,594 | ) | 5,186 | (32,696 | ) | (97,423 | ) | ||||||||||||
Class Y Shares | |||||||||||||||||||
Issued | 202,137 | 518,463 | 11,961,924 | 10,892,838 | |||||||||||||||
Reinvested | 206,346 | 221,600 | — | — | |||||||||||||||
Redeemed | (991,078 | ) | (2,434,445 | ) | (25,719,904 | ) | (18,659,862 | ) | |||||||||||
Redeemed in-kind | — | — | (2,611,940 | ) | — | ||||||||||||||
Total Class Y Shares | (582,595 | ) | (1,694,382 | ) | (16,369,920 | ) | (7,767,024 | ) | |||||||||||
Change in Shares | (723,978 | ) | (2,529,818 | ) | (22,833,601 | ) | (20,519,751 | ) |
See notes to financial statements.
43
Victory Portfolios | Financial Highlights |
For a Share Outstanding Throughout Each Period
Victory RS Partners Fund | |||||||||||||||||||||||
Class A Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 29.21 | $ | 31.58 | $ | 26.89 | $ | 31.08 | $ | 40.09 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | 0.04 | (0.25 | ) | (0.12 | ) | (0.11 | ) | (0.14 | ) | ||||||||||||||
Net realized and unrealized gains (losses) on investments | (3.52 | ) | 4.78 | 6.59 | (3.22 | ) | (1.52 | ) | |||||||||||||||
Total from Investment Activities | (3.48 | ) | 4.53 | 6.47 | (3.33 | ) | (1.66 | ) | |||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.08 | ) | — | — | — | — | |||||||||||||||||
Net realized gains from investments | (4.99 | ) | (6.90 | ) | (1.78 | ) | (0.86 | ) | (7.35 | ) | |||||||||||||
Total Distributions to Shareholders | (5.07 | ) | (6.90 | ) | (1.78 | ) | (0.86 | ) | (7.35 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 20.66 | $ | 29.21 | $ | 31.58 | $ | 26.89 | $ | 31.08 | |||||||||||||
Total Return (excludes sales charge) | (12.04 | )% | 14.21 | % | 24.04 | % | (10.74 | )% | (3.85 | )% | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 175,723 | $ | 259,050 | $ | 378,695 | $ | 475,722 | $ | 827,108 | |||||||||||||
Ratio of net expenses to average net assets | 1.45 | % | 1.45 | % | 1.45 | % | 1.42 | % | 1.45 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 0.14 | % | (0.75 | )% | (0.44 | )% | (0.35 | )% | (0.35 | )% | |||||||||||||
Ratio of gross expenses to average net assets (b) | 1.52 | % | 1.50 | % | 1.53 | % | 1.42 | % | 1.55 | % | |||||||||||||
Portfolio turnover (c) | 62 | % | 38 | % | 60 | % | 42 | % | 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.
44
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory RS Partners Fund | |||||||||||||||||||||||
Class R Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 27.09 | $ | 29.84 | $ | 25.57 | $ | 29.72 | $ | 38.82 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | (0.04 | ) | (0.44 | ) | (0.21 | ) | (0.21 | ) | (0.25 | ) | |||||||||||||
Net realized and unrealized gains (losses) on investments | (3.27 | ) | 4.59 | 6.26 | (3.08 | ) | (1.50 | ) | |||||||||||||||
Total from Investment Activities | (3.31 | ) | 4.15 | 6.05 | (3.29 | ) | (1.75 | ) | |||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net realized gains from investments | (4.99 | ) | (6.90 | ) | (1.78 | ) | (0.86 | ) | (7.35 | ) | |||||||||||||
Total Distributions to Shareholders | (4.99 | ) | (6.90 | ) | (1.78 | ) | (0.86 | ) | (7.35 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 18.79 | $ | 27.09 | $ | 29.84 | $ | 25.57 | $ | 29.72 | |||||||||||||
Total Return | (12.39 | )% | 13.81 | % | 23.64 | % | (11.09 | )% | (4.21 | )% | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 1,207 | $ | 2,168 | $ | 2,452 | $ | 2,365 | $ | 4,321 | |||||||||||||
Ratio of net expenses to average net assets | 1.81 | % | 1.81 | % | 1.81 | % | 1.81 | % | 1.80 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | (0.16 | )% | (1.40 | )% | (0.78 | )% | (0.74 | )% | (0.66 | )% | |||||||||||||
Ratio of gross expenses to average net assets (b) | 2.37 | % | 2.28 | % | 1.81 | % | 1.81 | % | 1.88 | % | |||||||||||||
Portfolio turnover (c) | 62 | % | 38 | % | 60 | % | 42 | % | 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.
45
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory RS Partners Fund | |||||||||||||||||||||||
Class Y Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 30.67 | $ | 32.75 | $ | 27.75 | $ | 31.95 | $ | 40.86 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | 0.14 | (0.04 | ) | (0.03 | ) | (0.02 | ) | 0.01 | |||||||||||||||
Net realized and unrealized gains (losses) on investments | (3.71 | ) | 4.86 | 6.81 | (3.32 | ) | (1.57 | ) | |||||||||||||||
Total from Investment Activities | (3.57 | ) | 4.82 | 6.78 | (3.34 | ) | (1.56 | ) | |||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.17 | ) | — | — | — | — | |||||||||||||||||
Net realized gains from investments | (4.99 | ) | (6.90 | ) | (1.78 | ) | (0.86 | ) | (7.35 | ) | |||||||||||||
Total Distributions to Shareholders | (5.16 | ) | (6.90 | ) | (1.78 | ) | (0.86 | ) | (7.35 | ) | |||||||||||||
Net Asset Value, End of Period | $ | 21.94 | $ | 30.67 | $ | 32.75 | $ | 27.75 | $ | 31.95 | |||||||||||||
Total Return | (11.77 | )% | 14.59 | % | 24.41 | % | (10.47 | )% | (3.53 | )% | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 250,709 | $ | 349,022 | $ | 378,271 | $ | 542,595 | $ | 903,833 | |||||||||||||
Ratio of net expenses to average net assets | 1.12 | % | 1.12 | % | 1.12 | % | 1.12 | % | 1.11 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 0.48 | % | (0.11 | )% | (0.11 | )% | (0.05 | )% | 0.04 | % | |||||||||||||
Ratio of gross expenses to average net assets (b) | 1.19 | % | 1.21 | % | 1.22 | % | 1.18 | % | 1.18 | % | |||||||||||||
Portfolio turnover (c) | 62 | % | 38 | % | 60 | % | 42 | % | 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.
46
Victory Portfolios | Financial Highlights |
For a Share Outstanding Throughout Each Period
Victory RS Value Fund | |||||||||||||||||||||||
Class A Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 26.21 | $ | 27.94 | $ | 28.33 | $ | 33.04 | $ | 34.76 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | 0.06 | 0.03 | — | (b) | (0.08 | ) | 0.25 | ||||||||||||||||
Net realized and unrealized gains (losses) on investments | (2.85 | ) | 4.80 | 3.09 | (1.98 | ) | 3.71 | ||||||||||||||||
Total from Investment Activities | (2.79 | ) | 4.83 | 3.09 | (2.06 | ) | 3.96 | ||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.14 | ) | (0.04 | ) | (0.13 | ) | — | (b) | (0.36 | ) | |||||||||||||
Net realized gains from investments | (3.00 | ) | (6.52 | ) | (3.35 | ) | (2.65 | ) | (5.32 | ) | |||||||||||||
Total Distributions to Shareholders | (3.14 | ) | (6.56 | ) | (3.48 | ) | (2.65 | ) | (5.68 | ) | |||||||||||||
Capital Contributions from Prior Custodian, Net (See Note 8) | — | — | — | (b) | — | — | |||||||||||||||||
Net Asset Value, End of Period | $ | 20.28 | $ | 26.21 | $ | 27.94 | $ | 28.33 | $ | 33.04 | |||||||||||||
Total Return (excludes sales charge) | (10.75 | )% | 17.41 | % | 10.92 | %(c) | (6.18 | )% | 11.60 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 179,535 | $ | 239,994 | $ | 268,979 | $ | 352,205 | $ | 432,082 | |||||||||||||
Ratio of net expenses to average net assets | 1.30 | % | 1.30 | % | 1.30 | % | 1.26 | % | 1.29 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 0.24 | % | 0.09 | % | (0.01 | )% | (0.24 | )% | 0.71 | % | |||||||||||||
Ratio of gross expenses to average net assets (d) | 1.34 | % | 1.33 | % | 1.35 | % | 1.26 | % | 1.35 | % | |||||||||||||
Portfolio turnover (e) | 65 | % | 64 | % | 67 | % | 55 | % | 56 | % |
(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) The Fund received monies related to a nonrecurring refund from the prior Custodian. The corresponding impact to the total return was less than 0.005% for the period shown. (See Note 8)
(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.
See notes to financial statements.
47
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory RS Value Fund | |||||||||||||||||||||||
Class C Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 23.76 | $ | 26.01 | $ | 26.69 | $ | 31.54 | $ | 33.47 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | (0.13 | ) | (0.08 | ) | (0.21 | ) | (0.32 | ) | — | (b) | |||||||||||||
Net realized and unrealized gains (losses) on investments | (2.55 | ) | 4.35 | 2.88 | (1.88 | ) | 3.52 | ||||||||||||||||
Total from Investment Activities | (2.68 | ) | 4.27 | 2.67 | (2.20 | ) | 3.52 | ||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | — | — | — | — | (0.13 | ) | |||||||||||||||||
Net realized gains from investments | (3.00 | ) | (6.52 | ) | (3.35 | ) | (2.65 | ) | (5.32 | ) | |||||||||||||
Total Distributions to Shareholders | (3.00 | ) | (6.52 | ) | (3.35 | ) | (2.65 | ) | (5.45 | ) | |||||||||||||
Capital Contributions from Prior Custodian, Net (See Note 8) | — | — | — | (b) | — | — | |||||||||||||||||
Net Asset Value, End of Period | $ | 18.08 | $ | 23.76 | $ | 26.01 | $ | 26.69 | $ | 31.54 | |||||||||||||
Total Return (excludes contingent deferred sales charge) | (11.41 | )% | 16.53 | % | 10.01 | %(c) | (6.92 | )% | 10.75 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 9,428 | $ | 16,916 | $ | 19,943 | $ | 24,714 | $ | 30,568 | |||||||||||||
Ratio of net expenses to average net assets | 2.07 | % | 2.07 | % | 2.07 | % | 2.04 | % | 2.06 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | (0.54 | )% | (0.30 | )% | (0.78 | )% | (1.03 | )% | — | %(d) | |||||||||||||
Ratio of gross expenses to average net assets (e) | 2.14 | % | 2.08 | % | 2.13 | % | 2.04 | % | 2.11 | % | |||||||||||||
Portfolio turnover (f) | 65 | % | 64 | % | 67 | % | 55 | % | 56 | % |
(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) The Fund received monies related to a nonrecurring refund from the prior Custodian. The corresponding impact to the total return was less than 0.005% for the period shown. (See Note 8)
(d) Amount is less than 0.005%.
(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.
48
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory RS Value Fund | |||||||||||||||||||||||
Class R Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 25.06 | $ | 27.03 | $ | 27.51 | $ | 32.29 | $ | 34.15 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | (0.03 | ) | (0.03 | ) | (0.09 | ) | (0.21 | ) | 0.13 | ||||||||||||||
Net realized and unrealized gains (losses) on investments | (2.72 | ) | 4.58 | 2.96 | (1.92 | ) | 3.60 | ||||||||||||||||
Total from Investment Activities | (2.75 | ) | 4.55 | 2.87 | (2.13 | ) | 3.73 | ||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.05 | ) | — | — | — | (0.27 | ) | ||||||||||||||||
Net realized gains from investments | (3.00 | ) | (6.52 | ) | (3.35 | ) | (2.65 | ) | (5.32 | ) | |||||||||||||
Total Distributions to Shareholders | (3.05 | ) | (6.52 | ) | (3.35 | ) | (2.65 | ) | (5.59 | ) | |||||||||||||
Capital Contributions from Prior Custodian, Net (See Note 8) | — | — | — | (b) | — | — | |||||||||||||||||
Net Asset Value, End of Period | $ | 19.26 | $ | 25.06 | $ | 27.03 | $ | 27.51 | $ | 32.29 | |||||||||||||
Total Return | (11.12 | )% | 16.95 | % | 10.45 | %(c) | (6.54 | )% | 11.15 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 1,019 | $ | 1,625 | $ | 1,670 | $ | 3,456 | $ | 4,412 | |||||||||||||
Ratio of net expenses to average net assets | 1.69 | % | 1.69 | % | 1.69 | % | 1.65 | % | 1.69 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | (0.11 | )% | (0.11 | )% | (0.34 | )% | (0.64 | )% | 0.37 | % | |||||||||||||
Ratio of gross expenses to average net assets (d) | 2.82 | % | 2.29 | % | 1.80 | % | 1.65 | % | 1.73 | % | |||||||||||||
Portfolio turnover (e) | 65 | % | 64 | % | 67 | % | 55 | % | 56 | % |
(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) The Fund received monies related to a nonrecurring refund from the prior Custodian. The corresponding impact to the total return was less than 0.005% for the period shown. (See Note 8)
(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.
See notes to financial statements.
49
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory RS Value Fund | |||||||||||||||||||||||
Class Y Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 26.77 | $ | 28.40 | $ | 28.57 | $ | 33.23 | $ | 34.99 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | 0.13 | 0.06 | 0.08 | (0.02 | ) | 0.38 | |||||||||||||||||
Net realized and unrealized gains (losses) on investments | (2.92 | ) | 4.94 | 3.10 | (1.99 | ) | 3.69 | ||||||||||||||||
Total from Investment Activities | (2.79 | ) | 5.00 | 3.18 | (2.01 | ) | 4.07 | ||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.21 | ) | (0.11 | ) | — | — | (0.51 | ) | |||||||||||||||
Net realized gains from investments | (3.00 | ) | (6.52 | ) | (3.35 | ) | (2.65 | ) | (5.32 | ) | |||||||||||||
Total Distributions to Shareholders | (3.21 | ) | (6.63 | ) | (3.35 | ) | (2.65 | ) | (5.83 | ) | |||||||||||||
Capital Contributions from Prior Custodian, Net (See Note 8) | — | — | — | (b) | — | — | |||||||||||||||||
Net Asset Value, End of Period | $ | 20.77 | $ | 26.77 | $ | 28.40 | $ | 28.57 | $ | 33.23 | |||||||||||||
Total Return | (10.54 | )% | 17.71 | % | 11.14 | %(c) | (5.99 | )% | 11.85 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 166,538 | $ | 247,528 | $ | 260,818 | $ | 724,715 | $ | 821,479 | |||||||||||||
Ratio of net expenses to average net assets | 1.06 | % | 1.06 | % | 1.06 | % | 1.06 | % | 1.05 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 0.49 | % | 0.20 | % | 0.26 | % | (0.05 | )% | 1.05 | % | |||||||||||||
Ratio of gross expenses to average net assets (d) | 1.06 | % | 1.06 | % | 1.19 | % | 1.11 | % | 1.11 | % | |||||||||||||
Portfolio turnover (e) | 65 | % | 64 | % | 67 | % | 55 | % | 56 | % |
(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) The Fund received monies related to a nonrecurring refund from the prior Custodian. The corresponding impact to the total return was less than 0.005% for the period shown. (See Note 8)
(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.
See notes to financial statements.
50
Victory Portfolios | Financial Highlights |
For a Share Outstanding Throughout Each Period
Victory RS Large Cap Alpha Fund | |||||||||||||||||||||||
Class A Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 56.61 | $ | 51.86 | $ | 50.98 | $ | 59.25 | $ | 59.06 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | 0.44 | 0.38 | 0.40 | 0.50 | 0.55 | ||||||||||||||||||
Net realized and unrealized gains (losses) on investments | (5.67 | ) | 9.10 | 4.01 | (1.74 | ) | 7.13 | ||||||||||||||||
Total from Investment Activities | (5.23 | ) | 9.48 | 4.41 | (1.24 | ) | 7.68 | ||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.38 | ) | — | (b) | (0.42 | ) | (0.57 | ) | (0.55 | ) | |||||||||||||
Net realized gains from investments | (8.80 | ) | (4.73 | ) | (3.12 | ) | (6.46 | ) | (6.94 | ) | |||||||||||||
Total Distributions to Shareholders | (9.18 | ) | (4.73 | ) | (3.54 | ) | (7.03 | ) | (7.49 | ) | |||||||||||||
Capital Contributions from Prior Custodian, Net (See Note 8) | — | — | 0.01 | — | — | ||||||||||||||||||
Net Asset Value, End of Period | $ | 42.20 | $ | 56.61 | $ | 51.86 | $ | 50.98 | $ | 59.25 | |||||||||||||
Total Return (excludes sales charge) | (9.31 | )% | 18.32 | % | 8.67 | %(c) | (2.03 | )% | 13.08 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 439,035 | $ | 540,762 | $ | 522,593 | $ | 556,204 | $ | 630,654 | |||||||||||||
Ratio of net expenses to average net assets | 0.89 | % | 0.89 | % | 0.89 | % | 0.89 | % | 0.92 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 0.77 | % | 0.68 | % | 0.79 | % | 0.86 | % | 0.89 | % | |||||||||||||
Ratio of gross expenses to average net assets (d) | 0.93 | % | 0.94 | % | 0.92 | % | 0.89 | % | 0.92 | % | |||||||||||||
Portfolio turnover (e) | 59 | % | 55 | % | 79 | % | 39 | % | 60 | % |
(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) The Fund received monies related to a nonrecurring refund from the prior Custodian. The corresponding impact to the total return was less than 0.01% for the period shown. (See Note 8)
(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.
See notes to financial statements.
51
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory RS Large Cap Alpha Fund | |||||||||||||||||||||||
Class C Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 49.50 | $ | 46.22 | $ | 45.80 | $ | 53.96 | $ | 54.43 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | (0.03 | ) | (0.04 | ) | — | (b) | 0.03 | 0.04 | |||||||||||||||
Net realized and unrealized gains (losses) on investments | (4.89 | ) | 8.05 | 3.57 | (1.58 | ) | 6.53 | ||||||||||||||||
Total from Investment Activities | (4.92 | ) | 8.01 | 3.57 | (1.55 | ) | 6.57 | ||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | — | (b) | — | (0.04 | ) | (0.15 | ) | (0.10 | ) | ||||||||||||||
Net realized gains from investments | (8.80 | ) | (4.73 | ) | (3.12 | ) | (6.46 | ) | (6.94 | ) | |||||||||||||
Total Distributions to Shareholders | (8.80 | ) | (4.73 | ) | (3.16 | ) | (6.61 | ) | (7.04 | ) | |||||||||||||
Capital Contributions from Prior Custodian, Net (See Note 8) | — | — | 0.01 | — | — | ||||||||||||||||||
Net Asset Value, End of Period | $ | 35.78 | $ | 49.50 | $ | 46.22 | $ | 45.80 | $ | 53.96 | |||||||||||||
Total Return (excludes contingent deferred sales charge) | (10.03 | )% | 17.36 | % | 7.80 | %(c) | (2.80 | )% | 12.15 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 18,227 | $ | 29,771 | $ | 28,801 | $ | 33,608 | $ | 36,868 | |||||||||||||
Ratio of net expenses to average net assets | 1.69 | % | 1.69 | % | 1.69 | % | 1.69 | % | 1.73 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | (0.06 | )% | (0.08 | )% | (0.01 | )% | 0.06 | % | 0.08 | % | |||||||||||||
Ratio of gross expenses to average net assets (d) | 1.75 | % | 1.71 | % | 1.71 | % | 1.69 | % | 1.73 | % | |||||||||||||
Portfolio turnover (e) | 59 | % | 55 | % | 79 | % | 39 | % | 60 | % |
(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) The Fund received monies related to a nonrecurring refund from the prior Custodian. The corresponding impact to the total return was less than 0.01% for the period shown. (See Note 8)
(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.
See notes to financial statements.
52
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory RS Large Cap Alpha Fund | |||||||||||||||||||||||
Class R Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 56.35 | $ | 51.83 | $ | 50.93 | $ | 59.15 | $ | 58.97 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | 0.22 | 0.18 | 0.23 | 0.29 | 0.31 | ||||||||||||||||||
Net realized and unrealized gains (losses) on investments | (5.61 | ) | 9.07 | 3.99 | (1.74 | ) | 7.09 | ||||||||||||||||
Total from Investment Activities | (5.39 | ) | 9.25 | 4.22 | (1.45 | ) | 7.40 | ||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.15 | ) | — | (0.21 | ) | (0.31 | ) | (0.28 | ) | ||||||||||||||
Net realized gains from investments | (8.80 | ) | (4.73 | ) | (3.12 | ) | (6.46 | ) | (6.94 | ) | |||||||||||||
Total Distributions to Shareholders | (8.95 | ) | (4.73 | ) | (3.33 | ) | (6.77 | ) | (7.22 | ) | |||||||||||||
Capital Contributions from Prior Custodian, Net (See Note 8) | — | — | 0.01 | — | — | ||||||||||||||||||
Net Asset Value, End of Period | $ | 42.01 | $ | 56.35 | $ | 51.83 | $ | 50.93 | $ | 59.15 | |||||||||||||
Total Return | (9.63 | )% | 17.87 | % | 8.30 | %(b) | (2.38 | )% | 12.62 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 6,348 | $ | 10,229 | $ | 10,631 | $ | 12,402 | $ | 16,458 | |||||||||||||
Ratio of net expenses to average net assets | 1.26 | % | 1.26 | % | 1.23 | % | 1.26 | % | 1.31 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 0.38 | % | 0.33 | % | 0.45 | % | 0.49 | % | 0.50 | % | |||||||||||||
Ratio of gross expenses to average net assets (c) | 1.40 | % | 1.42 | % | 1.23 | % | 1.26 | % | 1.31 | % | |||||||||||||
Portfolio turnover (d) | 59 | % | 55 | % | 79 | % | 39 | % | 60 | % |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) The Fund received monies related to a nonrecurring refund from the prior Custodian. The corresponding impact to the total return was less than 0.01% for the period shown. (See Note 8)
(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.
53
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory RS Large Cap Alpha Fund | |||||||||||||||||||||||
Class Y Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 56.38 | $ | 51.66 | $ | 50.82 | $ | 59.08 | $ | 58.92 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | 0.55 | 0.49 | 0.51 | 0.62 | 0.71 | ||||||||||||||||||
Net realized and unrealized gains (losses) on investments | (5.64 | ) | 9.07 | 4.00 | (1.74 | ) | 7.10 | ||||||||||||||||
Total from Investment Activities | (5.09 | ) | 9.56 | 4.51 | (1.12 | ) | 7.81 | ||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | (0.48 | ) | (0.11 | ) | (0.56 | ) | (0.68 | ) | (0.71 | ) | |||||||||||||
Net realized gains from investments | (8.80 | ) | (4.73 | ) | (3.12 | ) | (6.46 | ) | (6.94 | ) | |||||||||||||
Total Distributions to Shareholders | (9.28 | ) | (4.84 | ) | (3.68 | ) | (7.14 | ) | (7.65 | ) | |||||||||||||
Capital Contributions from Prior Custodian, Net (See Note 8) | — | — | 0.01 | — | — | ||||||||||||||||||
Net Asset Value, End of Period | $ | 42.01 | $ | 56.38 | $ | 51.66 | $ | 50.82 | $ | 59.08 | |||||||||||||
Total Return | (9.11 | )% | 18.56 | % | 8.89 | %(b) | (1.82 | )% | 13.34 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 21,827 | $ | 33,638 | $ | 31,840 | $ | 31,662 | $ | 189,850 | |||||||||||||
Ratio of net expenses to average net assets | 0.68 | % | 0.68 | % | 0.68 | % | 0.68 | % | 0.66 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 0.96 | % | 0.88 | % | 1.00 | % | 1.05 | % | 1.16 | % | |||||||||||||
Ratio of gross expenses to average net assets (c) | 0.75 | % | 0.72 | % | 0.69 | % | 0.68 | % | 0.66 | % | |||||||||||||
Portfolio turnover (d) | 59 | % | 55 | % | 79 | % | 39 | % | 60 | % |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) The Fund received monies related to a nonrecurring refund from the prior Custodian. The corresponding impact to the total return was less than 0.01% for the period shown. (See Note 8)
(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.
54
Victory Portfolios | Financial Highlights |
For a Share Outstanding Throughout Each Period
Victory RS Investors Fund | |||||||||||||||||||||||
Class A Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 13.86 | $ | 13.65 | $ | 12.42 | $ | 12.95 | $ | 13.02 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | — | (b) | (0.03 | ) | — | (b) | (0.04 | ) | 0.14 | ||||||||||||||
Net realized and unrealized gains (losses) on investments | (1.27 | ) | 2.23 | 1.23 | (0.49 | ) | 0.42 | ||||||||||||||||
Total from Investment Activities | (1.27 | ) | 2.20 | 1.23 | (0.53 | ) | 0.56 | ||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | — | — | — | — | (0.12 | ) | |||||||||||||||||
Net realized gains from investments | (1.91 | ) | (1.99 | ) | — | — | (0.51 | ) | |||||||||||||||
Total Distributions to Shareholders | (1.91 | ) | (1.99 | ) | — | — | (0.63 | ) | |||||||||||||||
Net Asset Value, End of Period | $ | 10.68 | $ | 13.86 | $ | 13.65 | $ | 12.42 | $ | 12.95 | |||||||||||||
Total Return (excludes sales charge) | (9.36 | )% | 16.28 | % | 9.90 | % | (4.09 | )% | 4.39 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 15,682 | $ | 20,419 | $ | 28,022 | $ | 41,556 | $ | 67,364 | |||||||||||||
Ratio of net expenses to average net assets | 1.33 | % | 1.33 | % | 1.33 | % | 1.33 | % | 1.32 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | (0.03 | )% | (0.24 | )% | 0.02 | % | (0.28 | )% | 1.04 | % | |||||||||||||
Ratio of gross expenses to average net assets (c) | 1.58 | % | 1.54 | % | 1.56 | % | 1.51 | % | 1.52 | % | |||||||||||||
Portfolio turnover (d) | 56 | % | 80 | % | 92 | % | 50 | % | 83 | % |
(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) 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.
55
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory RS Investors Fund | |||||||||||||||||||||||
Class C Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 12.68 | $ | 12.73 | $ | 11.67 | $ | 12.26 | $ | 12.40 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | (0.10 | ) | (0.19 | ) | (0.09 | ) | (0.12 | ) | 0.02 | ||||||||||||||
Net realized and unrealized gains (losses) on investments | (1.14 | ) | 2.13 | 1.15 | (0.47 | ) | 0.42 | ||||||||||||||||
Total from Investment Activities | (1.24 | ) | 1.94 | 1.06 | (0.59 | ) | 0.44 | ||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | — | — | — | — | (0.07 | ) | |||||||||||||||||
Net realized gains from investments | (1.91 | ) | (1.99 | ) | — | — | (0.51 | ) | |||||||||||||||
Total Distributions to Shareholders | (1.91 | ) | (1.99 | ) | — | — | (0.58 | ) | |||||||||||||||
Net Asset Value, End of Period | $ | 9.53 | $ | 12.68 | $ | 12.73 | $ | 11.67 | $ | 12.26 | |||||||||||||
Total Return (excludes contingent deferred sales charge) | (10.08 | )% | 15.48 | % | 9.08 | % | (4.81 | )% | 3.63 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 7,282 | $ | 11,149 | $ | 14,517 | $ | 21,654 | $ | 31,819 | |||||||||||||
Ratio of net expenses to average net assets | 2.07 | % | 2.07 | % | 2.07 | % | 2.07 | % | 2.07 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | (0.82 | )% | (1.42 | )% | (0.72 | )% | (1.01 | )% | 0.18 | % | |||||||||||||
Ratio of gross expenses to average net assets (b) | 2.44 | % | 2.35 | % | 2.35 | % | 2.29 | % | 2.29 | % | |||||||||||||
Portfolio turnover (c) | 56 | % | 80 | % | 92 | % | 50 | % | 83 | % |
(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 RS Investors Fund | |||||||||||||||||||||||
Class R Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 12.81 | $ | 12.83 | $ | 11.73 | $ | 12.30 | $ | 12.43 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | (0.08 | ) | (0.17 | ) | (0.06 | ) | (0.09 | ) | 0.06 | ||||||||||||||
Net realized and unrealized gains (losses) on investments | (1.16 | ) | 2.14 | 1.16 | (0.48 | ) | 0.42 | ||||||||||||||||
Total from Investment Activities | (1.24 | ) | 1.97 | 1.10 | (0.57 | ) | 0.48 | ||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | — | — | — | — | (0.10 | ) | |||||||||||||||||
Net realized gains from investments | (1.91 | ) | (1.99 | ) | — | — | (0.51 | ) | |||||||||||||||
Total Distributions to Shareholders | (1.91 | ) | (1.99 | ) | — | — | (0.61 | ) | |||||||||||||||
Net Asset Value, End of Period | $ | 9.66 | $ | 12.81 | $ | 12.83 | $ | 11.73 | $ | 12.30 | |||||||||||||
Total Return | (9.91 | )% | 15.50 | % | 9.38 | % | (4.63 | )% | 3.90 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 831 | $ | 1,379 | $ | 1,314 | $ | 1,771 | $ | 2,077 | |||||||||||||
Ratio of net expenses to average net assets | 1.95 | % | 1.95 | % | 1.92 | % | 1.84 | % | 1.91 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | (0.64 | )% | (1.27 | )% | (0.50 | )% | (0.78 | )% | 0.47 | % | |||||||||||||
Ratio of gross expenses to average net assets (b) | 3.15 | % | 2.72 | % | 1.92 | % | 1.90 | % | 1.97 | % | |||||||||||||
Portfolio turnover (c) | 56 | % | 80 | % | 92 | % | 50 | % | 83 | % |
(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 RS Investors Fund | |||||||||||||||||||||||
Class Y Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 14.10 | $ | 13.82 | $ | 12.55 | $ | 13.05 | $ | 13.12 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | 0.03 | 0.03 | 0.04 | — | 0.20 | ||||||||||||||||||
Net realized and unrealized gains (losses) on investments | (1.28 | ) | 2.24 | 1.24 | (0.50 | ) | 0.41 | ||||||||||||||||
Total from Investment Activities | (1.25 | ) | 2.27 | 1.28 | (0.50 | ) | 0.61 | ||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | — | — | (0.01 | ) | — | (0.17 | ) | ||||||||||||||||
Net realized gains from investments | (1.91 | ) | (1.99 | ) | — | — | (0.51 | ) | |||||||||||||||
Total Distributions to Shareholders | (1.91 | ) | (1.99 | ) | (0.01 | ) | — | (0.68 | ) | ||||||||||||||
Net Asset Value, End of Period | $ | 10.94 | $ | 14.10 | $ | 13.82 | $ | 12.55 | $ | 13.05 | |||||||||||||
Total Return | (9.06 | )% | 16.59 | % | 10.17 | % | (3.83 | )% | 4.72 | % | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 14,669 | $ | 27,131 | $ | 50,013 | $ | 80,290 | $ | 142,623 | |||||||||||||
Ratio of net expenses to average net assets | 1.05 | % | 1.05 | % | 1.05 | % | 1.05 | % | 1.05 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | 0.18 | % | 0.19 | % | 0.28 | % | (0.01 | )% | 1.49 | % | |||||||||||||
Ratio of gross expenses to average net assets (b) | 1.37 | % | 1.25 | % | 1.24 | % | 1.21 | % | 1.17 | % | |||||||||||||
Portfolio turnover (c) | 56 | % | 80 | % | 92 | % | 50 | % | 83 | % |
(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 |
For a Share Outstanding Throughout Each Period
Victory Global Natural Resources Fund | |||||||||||||||||||||||
Class A Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 23.73 | $ | 23.49 | $ | 15.34 | $ | 24.81 | $ | 35.02 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | (0.14 | ) | (0.22 | ) | (0.10 | ) | (0.11 | ) | (0.04 | ) | |||||||||||||
Net realized and unrealized gains (losses) on investments | (10.73 | ) | 0.46 | 8.25 | (9.36 | ) | (7.97 | ) | |||||||||||||||
Total from Investment Activities | (10.87 | ) | 0.24 | 8.15 | (9.47 | ) | (8.01 | ) | |||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | — | — | — | — | (0.01 | ) | |||||||||||||||||
Net realized gains from investments | — | — | — | — | (2.19 | ) | |||||||||||||||||
Total Distributions to Shareholders | — | — | — | — | (2.20 | ) | |||||||||||||||||
Capital Contributions from Prior Custodian, Net (See Note 8) | — | — | — | (b) | — | — | |||||||||||||||||
Net Asset Value, End of Period | $ | 12.86 | $ | 23.73 | $ | 23.49 | $ | 15.34 | $ | 24.81 | |||||||||||||
Total Return (excludes sales charge) | (45.81 | )% | 1.02 | % | 53.13 | %(c) | (38.17 | )% | (22.84 | )% | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 64,001 | $ | 262,455 | $ | 545,778 | $ | 332,598 | $ | 620,030 | |||||||||||||
Ratio of net expenses to average net assets | 1.48 | % | 1.48 | % | 1.48 | % | 1.45 | % | 1.47 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | (0.65 | )% | (0.93 | )% | (0.51 | )% | (0.52 | )% | (0.10 | )% | |||||||||||||
Ratio of gross expenses to average net assets (d) | 1.54 | % | 1.55 | % | 1.48 | % | 1.45 | % | 1.48 | % | |||||||||||||
Portfolio turnover (e) | 26 | % | 57 | %(f) | 29 | % | 33 | % | 34 | % |
(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) The Fund received monies related to a nonrecurring refund from the prior Custodian. The corresponding impact to the total return was less than 0.005% for the period shown. (See Note 8)
(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 change within the portfolio holdings during the year.
See notes to financial statements.
59
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory Global Natural Resources Fund | |||||||||||||||||||||||
Class C Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 21.63 | $ | 21.59 | $ | 14.21 | $ | 23.17 | $ | 33.14 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | (0.28 | ) | (0.36 | ) | (0.24 | ) | (0.27 | ) | (0.29 | ) | |||||||||||||
Net realized and unrealized gains (losses) on investments | (9.72 | ) | 0.40 | 7.62 | (8.69 | ) | (7.48 | ) | |||||||||||||||
Total from Investment Activities | (10.00 | ) | 0.04 | 7.38 | (8.96 | ) | (7.77 | ) | |||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | — | — | — | — | (0.01 | ) | |||||||||||||||||
Net realized gains from investments | — | — | — | — | (2.19 | ) | |||||||||||||||||
Total Distributions to Shareholders | — | — | — | — | (2.20 | ) | |||||||||||||||||
Capital Contributions from Prior Custodian, Net (See Note 8) | — | — | — | (b) | — | — | |||||||||||||||||
Net Asset Value, End of Period | $ | 11.63 | $ | 21.63 | $ | 21.59 | $ | 14.21 | $ | 23.17 | |||||||||||||
Total Return (excludes contingent deferred sales charge) | (46.26 | )% | 0.23 | % | 51.94 | %(c) | (38.67 | )% | (23.41 | )% | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 6,939 | $ | 20,428 | $ | 30,789 | $ | 26,501 | $ | 63,193 | |||||||||||||
Ratio of net expenses to average net assets | 2.28 | % | 2.28 | % | 2.28 | % | 2.25 | % | 2.23 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | (1.42 | )% | (1.72 | )% | (1.32 | )% | (1.33 | )% | (0.86 | )% | |||||||||||||
Ratio of gross expenses to average net assets (d) | 2.38 | % | 2.35 | % | 2.31 | % | 2.25 | % | 2.24 | % | |||||||||||||
Portfolio turnover (e) | 26 | % | 57 | %(f) | 29 | % | 33 | % | 34 | % |
(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) The Fund received monies related to a nonrecurring refund from the prior Custodian. The corresponding impact to the total return was less than 0.005% for the period shown. (See Note 8)
(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 change within the portfolio holdings during the year.
See notes to financial statements.
60
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory Global Natural Resources Fund | |||||||||||||||||||||||
Class R Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 22.56 | $ | 22.42 | $ | 14.68 | $ | 23.82 | $ | 33.86 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | (0.20 | ) | (0.29 | ) | (0.15 | ) | (0.18 | ) | (0.16 | ) | |||||||||||||
Net realized and unrealized gains (losses) on investments | (10.18 | ) | 0.43 | 7.89 | (8.96 | ) | (7.68 | ) | |||||||||||||||
Total from Investment Activities | (10.38 | ) | 0.14 | 7.74 | (9.14 | ) | (7.84 | ) | |||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | — | — | — | — | (0.01 | ) | |||||||||||||||||
Net realized gains from investments | — | — | — | — | (2.19 | ) | |||||||||||||||||
Total Distributions to Shareholders | — | — | — | — | (2.20 | ) | |||||||||||||||||
Capital Contributions from Prior Custodian, Net (See Note 8) | — | — | — | (b) | — | — | |||||||||||||||||
Net Asset Value, End of Period | $ | 12.18 | $ | 22.56 | $ | 22.42 | $ | 14.68 | $ | 23.82 | |||||||||||||
Total Return | (46.01 | )% | 0.62 | % | 52.72 | %(c) | (38.37 | )% | (23.12 | )% | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 920 | $ | 2,442 | $ | 4,611 | $ | 3,427 | $ | 4,929 | |||||||||||||
Ratio of net expenses to average net assets | 1.86 | % | 1.86 | % | 1.74 | % | 1.78 | % | 1.84 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | (0.99 | )% | (1.31 | )% | (0.80 | )% | (0.85 | )% | (0.47 | )% | |||||||||||||
Ratio of gross expenses to average net assets (d) | 2.50 | % | 2.20 | % | 1.74 | % | 1.78 | % | 1.85 | % | |||||||||||||
Portfolio turnover (e) | 26 | % | 57 | %(f) | 29 | % | 33 | % | 34 | % |
(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) The Fund received monies related to a nonrecurring refund from the prior Custodian. The corresponding impact to the total return was less than 0.005% for the period shown. (See Note 8)
(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 change within the portfolio holdings during the year.
See notes to financial statements.
61
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Victory Global Natural Resources Fund | |||||||||||||||||||||||
Class Y Shares | |||||||||||||||||||||||
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 24.60 | $ | 24.28 | $ | 15.80 | $ | 25.48 | $ | 35.76 | |||||||||||||
Investment Activities: | |||||||||||||||||||||||
Net investment income (loss) (a) | (0.06 | ) | (0.14 | ) | (0.04 | ) | (0.05 | ) | 0.09 | ||||||||||||||
Net realized and unrealized gains (losses) on investments | (11.16 | ) | 0.46 | 8.52 | (9.63 | ) | (8.17 | ) | |||||||||||||||
Total from Investment Activities | (11.22 | ) | 0.32 | 8.48 | (9.68 | ) | (8.08 | ) | |||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||
Net investment income | — | — | — | — | (0.01 | ) | |||||||||||||||||
Net realized gains from investments | — | — | — | — | (2.19 | ) | |||||||||||||||||
Total Distributions to Shareholders | — | — | — | — | (2.20 | ) | |||||||||||||||||
Capital Contributions from Prior Custodian, Net (See Note 8) | — | — | — | (b) | — | — | |||||||||||||||||
Net Asset Value, End of Period | $ | 13.38 | $ | 24.60 | $ | 24.28 | $ | 15.80 | $ | 25.48 | |||||||||||||
Total Return | (45.63 | )% | 1.36 | % | 53.67 | %(c) | (37.99 | )% | (22.56 | )% | |||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||
Net Assets at end of period (000) | $ | 393,581 | $ | 1,126,533 | $ | 1,300,024 | $ | 1,174,590 | $ | 2,230,527 | |||||||||||||
Ratio of net expenses to average net assets | 1.15 | % | 1.15 | % | 1.15 | % | 1.14 | % | 1.13 | % | |||||||||||||
Ratio of net investment income (loss) to average net assets | (0.29 | )% | (0.58 | )% | (0.19 | )% | (0.21 | )% | 0.24 | % | |||||||||||||
Ratio of gross expenses to average net assets (d) | 1.20 | % | 1.19 | % | 1.17 | % | 1.14 | % | 1.14 | % | |||||||||||||
Portfolio turnover (e) | 26 | % | 57 | %(f) | 29 | % | 33 | % | 34 | % |
(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) The Fund received monies related to a nonrecurring refund from the prior Custodian. The corresponding impact to the total return was less than 0.005% for the period shown. (See Note 8)
(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 change within the portfolio holdings during the year.
See notes to financial statements.
62
Victory Portfolios | Notes to Financial Statements December 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 five Funds (collectively, the "Funds" and individually, a "Fund").
Funds (Legal Name) | Funds (Short Name) | Investment Share Classes Offered | |||||||||
Victory RS Partners Fund | RS Partners Fund | Classes A, R and Y | |||||||||
Victory RS Value Fund | RS Value Fund | Classes A, C, R and Y | |||||||||
Victory RS Large Cap Alpha Fund | RS Large Cap Alpha Fund | Classes A, C, R and Y | |||||||||
Victory RS Investors Fund | RS Investors Fund | Classes A, C, R and Y | |||||||||
Victory Global Natural Resources Fund | Global Natural Resources Fund | Classes A, C, R and Y |
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.)
• Level 3 — significant unobservable inputs (including the Funds' own assumptions in determining the fair value of investments)
63
Victory Portfolios | Notes to Financial Statements — continued December 31, 2018 |
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 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 December 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:
LEVEL 1 — Quoted Prices | LEVEL 3 — Other Significant Unobservable Inputs | Total | |||||||||||||
Investments in Securities | Investments in Securities | Investments in Securities | |||||||||||||
RS Partners Fund | |||||||||||||||
Common Stocks | $ | 422,437,910 | $ | — | $ | 422,437,910 | |||||||||
Preferred Stocks | — | 1,165,689 | 1,165,689 | ||||||||||||
Collateral for Securities Loaned | 30,914,984 | — | 30,914,984 | ||||||||||||
Total | 453,352,894 | 1,165,689 | 454,518,583 | ||||||||||||
RS Value Fund | |||||||||||||||
Common Stocks | 356,367,898 | — | 356,367,898 | ||||||||||||
Collateral for Securities Loaned | 24,686,325 | — | 24,686,325 | ||||||||||||
Total | 381,054,223 | — | 381,054,223 | ||||||||||||
RS Large Cap Alpha Fund | |||||||||||||||
Common Stocks | 482,226,391 | — | 482,226,391 | ||||||||||||
Collateral for Securities Loaned | 8,912,709 | — | 8,912,709 | ||||||||||||
Total | 491,139,100 | — | 491,139,100 | ||||||||||||
RS Investors Fund | |||||||||||||||
Common Stocks | 38,530,850 | — | 38,530,850 | ||||||||||||
Collateral for Securities Loaned | 145,603 | — | 145,603 | ||||||||||||
Total | 38,676,453 | — | 38,676,453 | ||||||||||||
Global Natural Resources Fund | |||||||||||||||
Common Stocks | 445,587,170 | — | 445,587,170 | ||||||||||||
Collateral for Securities Loaned | 32,621,246 | — | 32,621,246 | ||||||||||||
Total | 478,208,416 | — | 478,208,416 |
64
Victory Portfolios | Notes to Financial Statements — continued December 31, 2018 |
The following is a reconciliation of assets in which significant unobservable inputs (Level 3) were used in determining fair value:
Investment in Securities | RS Partners Fund | ||||||
Balance as of December 31, 2017 | $ | 1,942,920 | |||||
Accrued discount (premium) | — | ||||||
Realized Gain (Loss) | — | ||||||
Change in Unrealized Appreciation/Depreciation | (777,231 | ) | |||||
Purchases | — | ||||||
Sales Proceeds | — | ||||||
Transfers into Level 3 | — | ||||||
Transfers out of Level 3 | — | ||||||
Balance as of December 31, 2018 | $ | 1,165,689 |
The following is a summary of quantitative information about Level 3 Fair Value Measurements:
RS Partners Fund | Fair Value as of December 31, 2018* | Valuation Techniques | Unobservable Input | Input Values | Impact to valuation from an increase to input | ||||||||||||||||||
Preferred Stocks | $ | 1,165,689 | Market | Premium / Discount | Market Transactions | Any change to the premium or discount would result in direct and proportional changes in the fair value of the security. |
* Level 3 securities are typically valued by the Adviser, pursuant to fair valuation procedures approved by the Board of Trustees. The appropriateness of fair values for these securities is monitored on an ongoing basis, by the Adviser, which may include back testing, results of vendor due diligence, audited financial information, unchanged price review and consideration of market and/or sector events.
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.
Foreign Exchange Currency Contracts:
The Funds may enter into foreign exchange currency contracts to convert U.S. dollars to and from various foreign currencies. A foreign exchange currency contract is an obligation by a Fund to purchase or sell a specific currency at a future date at a price (in U.S. dollars) set at the time of the contract. The Funds do not engage in "cross-currency" foreign exchange contracts (i.e., contracts to purchase or sell one foreign currency in exchange for another foreign currency). The Funds' foreign exchange currency contracts might be considered spot contracts (typically a contract of one week or less) or forward contracts (typically a contract term over one week). A spot contract is entered into for purposes of hedging against foreign currency fluctuations relating to a specific portfolio transaction, such as the delay between a security transaction trade date and settlement date. Forward contracts are entered into for purposes of hedging portfolio holdings or concentrations of such holdings. Each foreign
65
Victory Portfolios | Notes to Financial Statements — continued December 31, 2018 |
exchange currency contract is adjusted daily by the prevailing spot or forward rate of the underlying currency, and any appreciation or depreciation is recorded for financial statement purposes as unrealized until the contract settlement date, at which time the Fund records realized gains or losses equal to the difference between the value of a contract at the time it was opened and the value at the time it was closed. A Fund could be exposed to risk if a counterparty is unable to meet the terms of a foreign exchange currency contract or if the value of the foreign currency changes unfavorably. In addition, the use of foreign exchange currency contracts does not eliminate fluctuations in the underlying prices of the securities. As of December 31, 2018, the Funds had no open forward foreign exchange currency contracts.
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 is a summary of the Funds' securities lending transactions which are subject to offset under the MSLA as of December 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.
66
Victory Portfolios | Notes to Financial Statements — continued December 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 | Between 30 &90 days | >90 Days | Net Amount | |||||||||||||||||||
RS Partners Fund | $ | 30,436,849 | $ | 30,914,984 | $ | — | $ | — | $ | 478,135 | |||||||||||||
RS Value Fund | 25,999,403 | 24,686,325 | 545,458 | 1,318,061 | 550,441 | ||||||||||||||||||
RS Large Cap Alpha Fund | 8,787,547 | 8,912,709 | — | — | 125,162 | ||||||||||||||||||
RS Investors Fund | 144,788 | 145,603 | — | — | 815 | ||||||||||||||||||
Global Natural Resources Fund | 31,975,542 | 32,621,246 | — | — | 645,704 |
Dividends to Shareholders:
Dividends from net investment income, if any, are declared and paid annually for the Funds. 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 (e.g., tax treatment of in-kind redemptions net operating loss, distribution reclassification, and deemed distribution due to shareholder redemptions), 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.
As of December 31, 2018, on the Statements of Assets and Liabilities, as a result of permanent book-to-tax differences, reclassification adjustments were as follows:
Total Distributable Earnings/(Loss) | Capital | ||||||||||
RS Partners Fund | $ | (5,759,482 | ) | $ | 5,759,482 | ||||||
RS Value Fund | (3,245,047 | ) | 3,245,047 | ||||||||
RS Large Cap Alpha Fund | (4,154,562 | ) | 4,154,562 | ||||||||
RS Investors Fund | (568,306 | ) | 568,306 | ||||||||
Global Natural Resources Fund | 28,575,064 | (28,575,064 | ) |
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 December 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.
67
Victory Portfolios | Notes to Financial Statements — continued December 31, 2018 |
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 December 31, 2018, the Funds did not engage in any Rule 17a-7 transactions under the 1940 Act.
In-Kind Redemptions:
During the year, the Global Natural Resources Fund transferred securities in exchange for redemption of Fund shares (in-kind redemptions). For the fiscal year ended December 31, 2018, the fair value of the transferred securities was $60.4 million and the realized loss resulting from the in-kind redemptions was $23.1 million.
3. Purchases and Sales of Securities:
Purchases and sales of securities (excluding securities maturing less than one year from acquisition) for the year ended December 31, 2018 were as follows:
Purchases (excluding U.S. Government Securities) | Sales (excluding U.S. Government Securities) | ||||||||||
RS Partners Fund | $ | 332,688,599 | $ | 445,407,913 | |||||||
RS Value Fund | 291,552,263 | 387,254,538 | |||||||||
RS Large Cap Alpha Fund | 337,403,321 | 407,451,474 | |||||||||
RS Investors Fund | 27,846,680 | 44,071,333 | |||||||||
Global Natural Resources Fund | 261,940,100 | 571,384,899 |
For the year ended December 31, 2018, there were no purchases or sales of U.S. Government Securities.
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.
VCM has entered into a Sub-Advisory Agreement with SailingStone Capital Partners LLC ("SailingStone"). SailingStone is responsible for providing day-to-day investment advisory services to the Global Natural Resources Fund, subject to the oversight of the Board of Trustees of the Trust. Sub-investment advisory fees are paid by VCM to SailingStone do not represent a separate or additional expense to the Funds.
Under the terms of the Investment Advisory Agreement, 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.
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Victory Portfolios | Notes to Financial Statements — continued December 31, 2018 |
Adviser Fee Rate | |||||||
RS Partners Fund | 1.00 | % | |||||
RS Value Fund | 0.85 | % | |||||
RS Large Cap Alpha Fund | 0.50 | % | |||||
RS Investors Fund | 1.00 | % | |||||
Global Natural Resources Fund | 1.00 | % |
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 pays 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 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 Class A Shares of the Funds. For the fiscal year ended December 31, 2018, the Distributor received approximately $28,530 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, the Adviser has agreed to waive fees or reimburse certain expenses 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,
69
Victory Portfolios | Notes to Financial Statements — continued December 31, 2018 |
and other extraordinary expenses not incurred in the ordinary course of a Fund's business are excluded from the expense limits. As of December 31, 2018, the expense limits (excluding voluntary waivers) are as follows:
In effect January 1, 2018 until April 30, 2019 | |||||||||||||||||||
Class A Shares | Class C Shares | Class R Shares | Class Y Shares | ||||||||||||||||
RS Partners Fund | 1.45 | % | N/A | 1.81 | % | 1.12 | % | ||||||||||||
RS Value Fund | 1.30 | % | 2.07 | % | 1.69 | % | 1.06 | % | |||||||||||
RS Large Cap Alpha Fund | 0.89 | % | 1.69 | % | 1.26 | % | 0.68 | % | |||||||||||
RS Investors Fund | 1.33 | % | 2.07 | % | 1.95 | % | 1.05 | % | |||||||||||
Global Natural Resources Fund | 1.48 | % | 2.28 | % | 1.86 | % | 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 payments or repayments would not cause the expenses of a class to exceed the original expense limitation in place at the 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 December 31, 2018, the following amounts are available to be repaid to the Adviser.
Expires 12/31/19 | Expires 12/31/20 | Expires 12/31/21 | Total | ||||||||||||||||
RS Partners Fund | $ | 243,315 | $ | 487,905 | $ | 386,406 | $ | 1,117,626 | |||||||||||
RS Value Fund | 210,691 | 94,907 | 116,096 | 421,694 | |||||||||||||||
RS Large Cap Alpha Fund | 137,276 | 283,005 | 236,137 | 656,418 | |||||||||||||||
RS Investors Fund | 86,542 | 179,335 | 163,946 | 429,823 | |||||||||||||||
Global Natural Resources Fund | 118,930 | 697,524 | 577,205 | 1,393,659 |
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 December 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.
70
Victory Portfolios | Notes to Financial Statements — continued December 31, 2018 |
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, 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 current 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 December 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.
As of December 31, 2018, the Funds had no loans outstanding with Citibank.
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 December 31, 2018 were as follows:
Borrower or Lender | Amount Outstanding at December 31, 2018 | Average Borrowing* | Days Borrowing Outstanding | Average Interest Rate* | Maximum Borrowing During the Period | ||||||||||||||||||||||
RS Value Fund | Borrower | $ | — | $ | 1,251,000 | 1 | 3.02 | % | $ | 1,251,000 |
* For the year ended December 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):
Year Ended December 31, 2018 | |||||||||||||||||||
Distributions paid from | |||||||||||||||||||
Ordinary Income | Net Long-Term Capital Gains | Total Taxable Distributions | Total Distributions Paid | ||||||||||||||||
RS Partners Fund | $ | 21,072,795 | $ | 64,795,114 | $ | 85,867,909 | $ | 85,867,909 | |||||||||||
RS Value Fund | 17,224,429 | 33,453,011 | 50,677,440 | 50,677,440 | |||||||||||||||
RS Large Cap Alpha Fund | 11,094,267 | 78,647,453 | 89,741,720 | 89,741,720 | |||||||||||||||
RS Investors Fund | 1,664,202 | 4,543,064 | 6,207,266 | 6,207,266 |
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Victory Portfolios | Notes to Financial Statements — continued December 31, 2018 |
Year Ended December 31, 2017 | |||||||||||||||||||
Distributions paid from | |||||||||||||||||||
Ordinary Income | Net Long-Term Capital Gains | Total Taxable Distributions | Total Distributions Paid | ||||||||||||||||
RS Partners Fund | $ | 27,885,158 | $ | 88,114,651 | $ | 115,999,809 | $ | 115,999,809 | |||||||||||
RS Value Fund | 22,401,444 | 81,534,328 | 103,935,772 | 103,935,772 | |||||||||||||||
RS Large Cap Alpha Fund | 5,230,241 | 42,902,726 | 48,132,967 | 48,132,967 | |||||||||||||||
RS Investors Fund | 2,473,494 | 7,358,125 | 9,831,619 | 9,831,619 |
As of the tax year ended December 31, 2018, the components of accumulated earnings (deficit) on a tax basis were as follows:
Undistributed Ordinary Income | Undistributed Long-Term Capital Gains | Accumulated Earnings | Accumulated Capital and Other Losses | Unrealized Appreciation (Depreciation)* | Total Accumulated Earnings (Deficit) | ||||||||||||||||||||||
RS Partners Fund | $ | — | $ | 6,637,062 | $ | 6,637,062 | $ | — | $ | 5,657,974 | $ | 12,295,036 | |||||||||||||||
RS Value Fund | — | 956,773 | 956,773 | — | (7,303,389 | ) | (6,346,616 | ) | |||||||||||||||||||
RS Large Cap Alpha Fund | 1,805,721 | 5,706,806 | 7,512,527 | — | 6,041,182 | 13,553,709 | |||||||||||||||||||||
RS Investors Fund | — | 108,057 | 108,057 | — | (1,185,672 | ) | (1,077,615 | ) | |||||||||||||||||||
Global Natural Resources Fund | — | — | — | (1,350,964,403 | ) | (488,349,248 | ) | (1,839,313,651 | ) |
* 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 December 31, 2018, the following Funds had net capital loss carryforwards ("CLCFs") as summarized in the table below:
Short-Term Amount | Long-Term Amount | Total | |||||||||||||
Global Natural Resources Fund | $ | — | $ | 1,350,964,403 | $ | 1,350,964,403 |
At December 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:
Cost of Investments for Federal Tax Purposes | Gross Unrealized Appreciation | Gross Unrealized Depreciation | Net Unrealized Appreciation (Depreciation) | ||||||||||||||||
RS Partners Fund | $ | 448,860,626 | $ | 44,885,594 | $ | (39,227,637 | ) | $ | 5,657,957 | ||||||||||
RS Value Fund | 388,357,612 | 31,294,438 | (38,597,827 | ) | (7,303,389 | ) | |||||||||||||
RS Large Cap Alpha Fund | 485,097,918 | 55,011,925 | (48,970,743 | ) | 6,041,182 | ||||||||||||||
RS Investors Fund | 39,862,125 | 3,341,929 | (4,527,601 | ) | (1,185,672 | ) | |||||||||||||
Global Natural Resources Fund | 966,561,536 | 25,353,523 | (513,706,643 | ) | (488,353,120 | ) |
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Victory Portfolios | Notes to Financial Statements — continued December 31, 2018 |
8. Capital Contribution from Prior Custodian:
During 2016, certain Funds received notification from their prior custodian, State Street Bank and Trust ("State Street"), concerning issues related to billing on certain categories of expenses during the approximately 16-year period from 1998 through October 31, 2014. The over-billing primarily related to categories of expenses that involved an allocation of general costs among multiple clients.
State Street paid the refunded amounts during January 2017. Based on billing information received during 2016 from State Street and an analysis of any expense limitation agreements that were in place during the period of the activities in question, including the application of any recoupment provisions in such agreements, the Adviser received a portion of the refund.
The portion of the refund retained by the Funds was accounted for as a capital contribution and is reflected on the Financial Highlights as "Capital Contribution from Prior Custodian, Net".
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 December 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 | ||||||||||
RS Partners Fund | National Financial Services LLC | 28.0 | % |
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 December 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 Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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 December 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 December 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 December 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.
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Victory Portfolios | Notes to Financial Statements — continued December 31, 2018 |
Distributions to shareholders for the year ended December 31, 2017 from net investment income and net realized gains in the Funds were as follows:
RS Partners Fund | RS Value Fund | RS Large Cap Alpha Fund | RS Investors Fund | ||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||
From net investment income: | |||||||||||||||||||
Class A Shares | $ | — | $ | (370,126 | ) | $ | (39,112 | ) | $ | — | |||||||||
Class C Shares | — | — | — | — | |||||||||||||||
Class R Shares | — | — | — | — | |||||||||||||||
Class Y Shares | — | (981,896 | ) | (67,960 | ) | — | |||||||||||||
From net realized gains: | |||||||||||||||||||
Class A Shares | $ | (50,359,167 | ) | $ | (48,912,432 | ) | $ | (41,971,815 | ) | $ | (2,732,575 | ) | |||||||
Class C Shares | — | (3,813,181 | ) | (2,617,170 | ) | (1,649,923 | ) | ||||||||||||
Class R Shares | (440,838 | ) | (338,056 | ) | (793,543 | ) | (187,011 | ) | |||||||||||
Class Y Shares | (65,199,804 | ) | (49,520,081 | ) | (2,643,367 | ) | (5,262,110 | ) |
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.
74
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of the Victory RS Partners Fund, Victory RS Value Fund, Victory RS Large Cap Alpha Fund, Victory RS Investors Fund, and Victory Global Natural Resources Fund
Opinion on the Financial Statements
We have audited the accompanying statements of assets and liabilities of Victory RS Partners Fund, Victory RS Value Fund, Victory RS Large Cap Alpha Fund, Victory RS Investors Fund, and Victory Global Natural Resources Fund (collectively referred to as the "Funds") (five of the funds constituting the Victory Portfolios (the "Trust")) including the portfolios of investments, as of December 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 three 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 (five of the funds constituting the Trust) at December 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 three years in the period then ended, in conformity with U.S. generally accepted accounting principles.
The financial highlights of the Funds for the periods presented through December 31, 2015, were audited by other auditors whose report dated February 22, 2016, expressed an unqualified opinion on those financial highlights.
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 December 31, 2018, by correspondence with the custodian, transfer agent, 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
February 26, 2019
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Victory Portfolios | Supplemental Information December 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 Funds Complex. Each Trustee's address is c/o Victory Portfolios, 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, 75 | Trustee | July 2016 | Retired. | Trustee, RS Investment Trust and RS Variable Products Trust (November 2011-July 2016). |
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Victory Portfolios | Supplemental Information — continued December 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-July 2016). | |||||||||||||||
Leigh A. Wilson, 74 | 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 December 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, 57 | 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, 45 | 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, 65 | 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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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 the Funds 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 expects to file a complete list of Schedules of Portfolio Investments with the SEC for the first and third quarter of each fiscal year on Form N-PORT beginning March 1, 2019. Prior to that date, the Trust has filed 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-PORT and 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 July 1, 2018 through December 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.
Beginning Account Value 7/1/18 | Actual Ending Account Value 12/31/18 | Hypothetical Ending Account Value 12/31/18 | Actual Expenses Paid During Period 7/1/18- 12/31/18* | Hypothetical Expenses Paid During Period 7/1/18- 12/31/18* | Annualized Expense Ratio During Period 7/1/18- 12/31/18 | ||||||||||||||||||||||
RS Partners Fund | |||||||||||||||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 878.70 | $ | 1,017.90 | $ | 6.87 | $ | 7.38 | 1.45 | % | |||||||||||||||
Class R Shares | 1,000.00 | 877.10 | 1,016.08 | 8.56 | 9.20 | 1.81 | % | ||||||||||||||||||||
Class Y Shares | 1,000.00 | 880.00 | 1,019.56 | 5.31 | 5.70 | 1.12 | % |
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Beginning Account Value 7/1/18 | Actual Ending Account Value 12/31/18 | Hypothetical Ending Account Value 12/31/18 | Actual Expenses Paid During Period 7/1/18- 12/31/18* | Hypothetical Expenses Paid During Period 7/1/18- 12/31/18* | Annualized Expense Ratio During Period 7/1/18- 12/31/18 | ||||||||||||||||||||||
RS Value Fund | |||||||||||||||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 897.60 | $ | 1,018.65 | $ | 6.22 | $ | 6.61 | 1.30 | % | |||||||||||||||
Class C Shares | 1,000.00 | 894.20 | 1,014.77 | 9.88 | 10.51 | 2.07 | % | ||||||||||||||||||||
Class R Shares | 1,000.00 | 895.60 | 1,016.69 | 8.07 | 8.59 | 1.69 | % | ||||||||||||||||||||
Class Y Shares | 1,000.00 | 898.30 | 1,019.66 | 5.26 | 5.60 | 1.10 | % | ||||||||||||||||||||
RS Large Cap Alpha Fund | |||||||||||||||||||||||||||
Class A Shares | 1,000.00 | 898.30 | 1,020.72 | 4.26 | 4.53 | 0.89 | % | ||||||||||||||||||||
Class C Shares | 1,000.00 | 894.70 | 1,016.69 | 8.07 | 8.59 | 1.69 | % | ||||||||||||||||||||
Class R Shares | 1,000.00 | 896.80 | 1,018.85 | 6.02 | 6.41 | 1.26 | % | ||||||||||||||||||||
Class Y Shares | 1,000.00 | 899.30 | 1,021.78 | 3.26 | 3.47 | 0.68 | % | ||||||||||||||||||||
RS Investors Fund | |||||||||||||||||||||||||||
Class A Shares | 1,000.00 | 897.90 | 1,018.50 | 6.36 | 6.77 | 1.33 | % | ||||||||||||||||||||
Class C Shares | 1,000.00 | 894.30 | 1,014.77 | 9.88 | 10.51 | 2.07 | % | ||||||||||||||||||||
Class R Shares | 1,000.00 | 894.70 | 1,015.38 | 9.31 | 9.91 | 1.95 | % | ||||||||||||||||||||
Class Y Shares | 1,000.00 | 899.20 | 1,019.91 | 5.03 | 5.35 | 1.05 | % | ||||||||||||||||||||
Global Natural Resources Fund | |||||||||||||||||||||||||||
Class A Shares | 1,000.00 | 549.60 | 1,017.74 | 5.78 | 7.53 | 1.48 | % | ||||||||||||||||||||
Class C Shares | 1,000.00 | 547.30 | 1,013.71 | 8.89 | 11.57 | 2.28 | % | ||||||||||||||||||||
Class R Shares | 1,000.00 | 548.40 | 1,015.83 | 7.26 | 9.45 | 1.86 | % | ||||||||||||||||||||
Class Y Shares | 1,000.00 | 550.60 | 1,019.41 | 4.49 | 5.85 | 1.15 | % |
* 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).
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Additional Federal Income Tax Information
For the year ended December 31, 2018, the Funds paid qualified dividend income for the purposes of reduced individual federal income tax rates of:
Amount | |||||||
RS Partners Fund | 26 | % | |||||
RS Value Fund | 33 | % | |||||
RS Large Cap Alpha Fund | 71 | % | |||||
RS Investors Fund | 29 | % |
Dividends qualified for corporate dividends received deductions of:
Amount | |||||||
RS Partners Fund | 26 | % | |||||
RS Value Fund | 33 | % | |||||
RS Large Cap Alpha Fund | 34 | % | |||||
RS Investors Fund | 25 | % |
For the year ended December 31, 2018, the Funds designated short-term capital gain distributions in the amount of:
Amount | |||||||
RS Partners Fund | $ | 19,263,528 | |||||
RS Value Fund | 15,515,145 | ||||||
RS Large Cap Alpha Fund | 5,304,651 | ||||||
RS Investors Fund | 1,825,506 |
For the year ended December 31, 2018, the Funds designated long-term capital gain distributions in the amount of:
Amount | |||||||
RS Partners Fund | $ | 70,554,595 | |||||
RS Value Fund | 36,698,060 | ||||||
RS Large Cap Alpha Fund | 82,802,421 | ||||||
RS Investors Fund | 4,950,066 |
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Victory Portfolios | Supplemental Information — continued December 31, 2018 |
(Unaudited)
Considerations of the Board in Continuing the Investment Advisory Agreement (the "Agreement")
The Board approved the Agreement on behalf of each of the Funds at a meeting, which was called for that purpose, on December 5, 2018. The Board also considered information relating to the Funds and the Agreement provided throughout the year and, more specifically, at a meeting on October 23, 2018. The Board noted that prior to each Fund's reorganization on July 29, 2016, each Fund was managed by RS Investment Management Co. LLC, which was acquired by the Adviser on July 29, 2016. In considering whether to approve the Agreement, the Board requested, and the Adviser provided, information that the Board believed to be reasonably necessary to reach its conclusions. The Board, including the Independent Trustees, evaluated this information along with other information obtained throughout the year and was advised by legal counsel to the Funds and by independent legal counsel to the Independent Trustees. In addition, in 2017 the Independent Trustees, through their counsel, retained an independent consultant to assist with a review of the overall process for conducting the annual review of these advisory arrangements. The Board considered each Fund's advisory fee, expense ratio and investment performance as significant factors in determining whether the Agreement should be continued. In considering whether the compensation paid to the Adviser was fair and reasonable, the Board also evaluated, among other things, the following factors:
• The requirements of the Funds for the services provided by the Adviser;
• The nature, quality and extent of the services provided and expected to be provided;
• The performance of the Funds as compared to comparable funds;
• The fees payable for the services and whether the fee arrangements provided for economies of scale that would benefit Fund shareholders as the Funds grow;
• Whether the fee would be sufficient to enable the Adviser to attract and retain experienced personnel and continue to provide quality services to the Funds;
• Fees paid by other clients of the Adviser whose accounts are managed in a similar investment style and any differences in the services provided to the other clients compared to those provided to the Funds;
• Total expenses of each Fund, taking into consideration any distribution or shareholder servicing fees;
• Management's commitment to operating the Funds at competitive expense levels;
• The profitability of the Adviser (as reflected by comparing fees earned against an estimate of the Adviser's costs) with respect to the Adviser's relationship with the Funds;
• Research and other service benefits received by the Adviser obtained through payment of client commissions for securities transactions;
• Other benefits received by the Adviser, and its affiliates, including revenues paid to the Adviser, or its affiliates, by the Funds for administration and fund accounting services, and distribution;
• The capabilities and financial condition of the Adviser;
• Current economic and industry trends; and
• The historical relationship between each Fund and the Adviser.
The Board reviewed each Fund's current management fee, comprised of the advisory fee plus the administrative services fee paid to the Adviser, in the context of the Adviser's profitability of each Fund individually. In addition, the Board compared each Fund's gross management fee and total operating expense ratio on a net and gross basis, taking into consideration any distribution or shareholder servicing fees, with the median gross management fee and median expense ratio of a universe of comparable mutual funds compiled by an independent consultant, FUSE Research Network, LLC ("FUSE"), and a peer group of funds with similar investment strategies selected by FUSE from the universe. The Board reviewed the factors and methodology used by FUSE in the selection of each Fund's peer group, including FUSE's selection of a broad universe of funds using the standard Retail Morningstar Categories, the more specific universe of comparable funds, and peer groups of funds with comparable investment strategies and asset levels, among other factors. The Board also reviewed any changes to FUSE's methodology as compared to the prior year, including as a result of input from the Adviser, if any. With respect to certain Funds, the Board also reviewed fees and other information
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(Unaudited)
related to the Adviser's management of similarly managed institutional or private accounts, and the differences in the services provided to the other accounts. The Board noted that none of the advisory fee arrangements for the Funds included breakpoints, which are generally viewed as a method by which the investment adviser shares any economies of scale with a fund as a fund grows. The Board also considered the Adviser's commitment to limit expenses as discussed in more detail below.
The Board found that the gross annual management fee paid by each Fund was within the range of management fees paid by each Fund's respective peer group. The Board also found that each Fund's Class A net annual expense ratio, taking into account any shareholder servicing or distribution fees, was reasonable as compared with each Fund's respective peer group. The Board considered the Adviser's contractual agreement with each Fund to waive its fees and reimburse expenses of certain classes for a specified period of time, as described in the Fund's prospectus.
The Board reviewed each Fund's performance over one-, three-, five- and ten-year periods (as applicable) against the performance of the Fund's selected peer group and benchmark index. The Board recognized that the performance of the Fund and the peer group funds are net of expenses, while the performance of the benchmark index is gross returns. The Board considered the additional resources that the Adviser has committed to enhance portfolio analysis, compliance and trading systems. The Board noted that, following each Fund's reorganization, each Fund is managed by substantially the same investment management team that managed the comparable predecessor fund.
With respect to the Global Natural Resources Fund, the Board considered the relative roles and responsibilities of the Adviser and the Fund's sub-adviser and noted that, among other things: (1) the sub-advisory fees for the Fund would be paid by the Adviser and, therefore, would not be a direct expense of the Fund; and (2) the Adviser would supervise the sub-adviser.
The Board reviewed various other specific factors with respect to each Fund, as described below. In their deliberations, the Trustees did not rank the importance of any particular information or factor considered and each Trustee may have attributed different weights to various factors.
RS Partners Fund
The Board compared the Fund's Class A performance for the one-, three-, five- and ten-year periods ended June 30, 2018, to that of the median performance of the peer group and benchmark index for the same periods and considered the fact that the Fund underperformed the benchmark index for all of the periods reviewed, matched the peer group for the three-year period, and underperformed the peer group for the one-, five- and ten-year periods. The Board brought the Fund's underperformance to management's attention and discussed with the Adviser any steps that had been or could be taken to enhance performance in the future.
Having considered, among other things: (1) the Fund's management fee compared to comparable mutual funds; (2) the Fund's total expense ratio compared to comparable mutual funds; (3) that the Adviser's willingness to limit the expenses of certain classes for a period of time would provide stability to the Fund's expenses for those share classes during that period; and (4) the Fund's performance during the periods reviewed, the Board concluded that the Agreement continued to be in the best interests of the Fund's shareholders.
RS Value Fund
The Board compared the Fund's Class A performance for the one-, three-, five- and ten-year periods ended June 30, 2018, to that of the median performance of the peer group and benchmark index for the same periods and considered the fact that the Fund outperformed the benchmark index for the one-year period, underperformed the benchmark index for the three-, five- and ten-year periods, matched the peer group for the five-year period and underperformed the peer group for the one, three- and ten-year periods. The Board brought the Fund's underperformance to management's attention and discussed with the Adviser any steps that had been or could be taken to enhance performance in the future.
Having considered, among other things: (1) the Fund's management fee compared to comparable mutual funds; (2) the Fund's total expense ratio compared to comparable mutual funds; (3) that the Adviser's willingness to limit the expenses of certain classes for a period of time would provide stability to the Fund's expenses for those share classes during that period; and (4) the Fund's performance during the periods reviewed, the Board concluded that the Agreement continued to be in the best interests of the Fund's shareholders.
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RS Large Cap Alpha Fund
The Board compared the Fund's Class A performance for the one-, three-, five- and ten-year periods ended June 30, 2018, to that of the median performance of the peer group and benchmark index for the same periods and considered the fact that the Fund outperformed the benchmark index for the one-, five- and ten-year periods, underperformed the benchmark index for the three-year period, and underperformed the peer group for each of the periods reviewed other than the one-year period. The Board brought the Fund's underperformance to management's attention and discussed with the Adviser any steps that had been or could be taken to enhance performance in the future.
Having considered, among other things: (1) the Fund's management fee compared to comparable mutual funds; (2) the Fund's total expense ratio compared to comparable mutual fund; (3) that the Adviser's willingness to limit the expenses of certain classes for a period of time would provide stability to the Fund's expenses for those share classes during that period; and (4) the Fund's performance during the periods reviewed, the Board concluded that the Agreement continued to be in the best interests of the Fund's shareholders.
RS Investors Fund
The Board compared the Fund's Class A performance for the one-, three-, five- and ten-year periods ended June 30, 2018, to that of the median performance of the peer group and benchmark index for the same periods and considered the fact that the Fund outperformed the benchmark index for the one-year period, and underperformed the peer group for the one-year period and both the benchmark index and the peer group for all other periods reviewed. The Board brought the Fund's underperformance to management's attention and discussed with the Adviser any steps that had been or could be taken to enhance performance in the future.
Having considered, among other things: (1) the Fund's management fee compared to comparable mutual funds; (2) the Fund's total expense ratio compared to comparable mutual fund; (3) that the Adviser's willingness to limit the expenses of certain classes for a period of time would provide stability to the Fund's expenses for those share classes during that period; and (4) the Fund's performance during the periods reviewed, the Board concluded that the Agreement continued to be in the best interests of the Fund's shareholders.
Global Natural Resources Fund
The Board compared the Fund's Class A performance for the one-, three-, five- and ten-year periods ended June 30, 2018, to that of the median performance of the peer group and benchmark index for the same periods and considered the fact that the Fund underperformed both the benchmark index and the peer group for all periods reviewed. The Board discussed the Fund's investment strategy with the Adviser, and noted that the Fund performed in line with management's expectations.
Having considered, among other things: (1) the Fund's management fee compared to comparable mutual funds; (2) the Fund's total expense ratio compared to comparable mutual funds; (3) that the Adviser's willingness to limit the expenses of certain classes for a period of time would provide stability to the Fund's expenses for those share classes during that period; and (4) the Fund's performance during the periods reviewed, the Board concluded that the Agreement continued to be in the best interests of the Fund's shareholders.
Conclusion
Based on its review of the information requested and provided, and following extended discussions, the Board determined that the Agreement, on behalf of the Funds discussed above, was consistent with the best interests of each Fund and its shareholders, and the Board unanimously approved the Agreement, on behalf of each Fund, for an additional annual period on the basis of the foregoing review and discussions and the following considerations, among others:
• The fairness and reasonableness of the investment advisory fee payable to the Adviser under the Agreement in light of the investment advisory services provided, the costs of these services, the profitability of the Adviser's relationship with the Fund and the comparability of the fee paid to the fees paid by other investment companies;
• The nature, quality and extent of the investment advisory services provided by the Adviser;
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(Unaudited)
• The Adviser's entrepreneurial commitment to the management of the Funds and the creation of a broad-based family of funds, which could entail a substantial commitment of the Adviser's resources to the successful operation of the Funds;
• The Adviser's representations regarding its staffing and capabilities to manage the Funds, including the retention of personnel with relevant portfolio management experience;
• The Adviser's efforts to enhance investment results by, among other things, developing quality portfolio management teams; and
• The overall high quality of the personnel, operations, financial condition, investment management capabilities, methodologies and performance of the Adviser.
Considerations of the Board in Approving the SailingStone Investment Sub-Advisory Agreement
The Board approved the investment sub-advisory agreement between the Adviser and SailingStone Capital Partners LLC (the "Sub-Adviser") (the "Sub-Advisory Agreement") on behalf of the Global Natural Resources Fund at a meeting, which was called for that purpose, on December 5, 2018. The Board also considered information relating to the Funds and the Sub-Advisory Agreement provided throughout the year and, more specifically, at a meeting on October 23, 2018. The Board noted that prior to the Fund's reorganization on July 29, 2016, the Fund was managed by RS Investment Management Co. LLC, which was acquired by the Adviser on July 29, 2016, and sub-advised by the Sub-Adviser. In considering whether to approve the Sub-Advisory Agreement, the Board requested, and the Sub-Adviser provided, information that the Board believed to be reasonably necessary to reach its conclusions. The Board, including the Independent Trustees, evaluated this information along with other information obtained throughout the year and was advised by legal counsel to the Fund and by independent legal counsel to the Independent Trustees. In addition, in 2017 the Independent Trustees, through their counsel, retained an independent consultant to assist with a review of the overall process for conducting the annual review of these advisory arrangements. The Board reviewed numerous factors with respect to the Fund including the Sub-Adviser's history as sub-adviser for the predecessor fund and the services to be provided by the Sub-Adviser as the sub-adviser.
In considering whether the compensation paid to the Sub-Adviser was fair and reasonable, the Board also evaluated, among other things, the following factors:
• The requirements of the Fund for the services provided by the Sub-Adviser;
• The nature, quality and extent of the services provided and expected to be provided;
• The fees payable for the services and whether the fee arrangements provided for economies of scale that could benefit Fund shareholders as the Fund grows;
• Representations by the Adviser that the sub-advisory fee for the Fund is within the range of fees agreed to in the market for similar services;
• Whether the fee would be sufficient to enable the Sub-Adviser to attract and retain experienced personnel and continue to provide quality services to the Fund;
• Management's commitment to operating the Fund at competitive expense levels;
• Research and other service benefits received by the Sub-Adviser obtained through payment of client commissions for securities transactions;
• Other benefits received by the Sub-Adviser as a result of its sub-advisory relationship with the Fund;
• The capabilities and financial condition of the Sub-Adviser;
• The nature, quality and extent of the oversight and compliance services provided by the Adviser;
• The historical relationship between the predecessor fund and the Sub-Adviser; and
• Current economic and industry trends.
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The Board considered the Adviser's contractual agreement with each Fund to waive its fees and reimburse expenses of certain classes for a specified period of time, as described in the Fund's prospectus. The Board recognized that because the sub-advisory fees are paid by the Adviser, any arrangement by the Sub-Adviser to reduce its fee as the Fund grows would have no direct impact on the Fund or its shareholders. The Board considered the relative roles and responsibilities of the Adviser and the Sub-Adviser and the Adviser's representation that the fees to be paid to the Sub-Adviser are within the range of sub-advisory fees paid to other sub-advisers for similar services.
The Board considered the Fund's total operating expense ratio on a net and gross basis as compared with a universe of comparable mutual funds compiled by an independent consultant, FUSE Research Network, LLC ("FUSE"), and a peer group of funds with similar investment strategies selected by FUSE from the universe. The Board reviewed the factors and methodology used by FUSE in the selection of each Fund's peer group, including FUSE's selection of a broad universe of funds using the standard Retail Morningstar Categories, the more specific universe of comparable funds, and peer groups of funds with comparable investment strategies and asset levels, among other factors. The Board also reviewed any changes to FUSE's methodology as compared to the prior year, including as a result of input from the Adviser, if any.
The Board reviewed the Fund's performance over one-, three-, five- and ten-year periods against the performance of the Fund's selected peer group and benchmark index. The Board recognized that the performance of the Fund and peer group funds are net of expenses, while the performance of the benchmark index is gross returns. The Board noted that, following the Fund's reorganization, the Fund is managed by substantially the same investment management team that managed the comparable predecessor fund.
The Board reviewed various other specific factors with respect to the Fund. In their deliberations, the Trustees did not rank the importance of any particular information or factor considered and each Trustee may have attributed different weights to various factors.
Global Natural Resources Fund
The Board believed that the Global Natural Resources Fund's gross annual management fee was reasonable as compared to the median gross management fee charged to the funds in the Fund's peer group. The Board concluded that the Fund's Class A net annual expense ratio was reasonable as compared to the median expense ratio for the peer group. The Board then compared the Fund's Class A performance for the one-, three-, five- and ten-year periods ended June 30, 2018, to that of the median performance of the peer group and benchmark index for the same periods and considered the fact that the Fund underperformed both the benchmark index and the peer group for all periods reviewed.
Based on its review of the information requested and provided, and following extended discussions, the Board concluded, among other things, that the Sub-Advisory Agreement, with respect to the Fund, was consistent with the best interests of the Fund and its shareholders and unanimously approved the Sub-Advisory Agreement (including the fees to be charged for services thereunder), on the basis of the foregoing review and discussions and the following considerations, among others:
• The fairness and reasonableness of the investment advisory fee payable to the Sub-Adviser under the Sub-Advisory Agreement in light of the investment advisory services provided, the costs of these services and the estimated profitability of the Sub-Adviser's relationship with the Fund;
• The nature, quality and extent of the investment advisory services provided by the portfolio management team of the Sub-Adviser, which have resulted in the Fund achieving its stated investment objective;
• The Sub-Adviser's representations regarding its staffing and capabilities to manage the Fund; and
• The overall high quality of the personnel, operations, financial condition, investment management capabilities, methodologies and performance of the Sub-Adviser.
86
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) |
VPRSVF-AR (12/18)
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.
|
| 2018 |
| 2017 |
| ||
(a) Audit Fees (1) |
| $ | 391,472 |
| $ | 395,520 |
|
(b) Audit-Related Fees (2) |
| 0 |
| 0 |
| ||
(c) Tax Fees (3) |
| 106,480 |
| 108,027 |
| ||
(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 December 31, 2018 and December 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 2018 and 2017 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)
2018 |
| $ | 133,280 |
|
2017 |
| $ | 273,979 |
|
(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.
(a)(4) Change in the registrant’s independent public accountant is attached hereto.
(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 | March 7, 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 | March 7, 2019 |
| |
|
|
| |
|
|
| |
By (Signature and Title)* | /s/ Allan Shaer |
| |
| Allan Shaer, Principal Financial Officer |
| |
Date | March 7, 2019 |
| |