UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number | 811-04852 | |||||||
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Victory Portfolios | ||||||||
(Exact name of registrant as specified in charter) | ||||||||
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4900 Tiedeman Road, 4th Floor, Brooklyn, Ohio |
| 44144 | ||||||
(Address of principal executive offices) |
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Citi Fund Services Ohio, Inc., 4400 Easton Commons, Suite 200, Columbus, Ohio 43219 | ||||||||
(Name and address of agent for service) | ||||||||
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Registrant’s telephone number, including area code: | 800-539-3863 |
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Date of fiscal year end: | December 31 |
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Date of reporting period: | December 31, 2019 |
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Item 1. Reports to Stockholders.
December 31, 2019
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 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) | 7 | ||||||
Financial Statements | |||||||
The Victory Fixed Income Funds | |||||||
Victory INCORE Investment Quality Bond Fund | |||||||
Schedule of Portfolio Investments | 27 | ||||||
Statements of Assets and Liabilities | 62 | ||||||
Statements of Operations | 65 | ||||||
Statements of Changes in Net Assets | 68-70 | ||||||
Financial Highlights | 76-77 | ||||||
Victory INCORE Low Duration Bond Fund | |||||||
Schedule of Portfolio Investments | 34 | ||||||
Statements of Assets and Liabilities | 62 | ||||||
Statements of Operations | 65 | ||||||
Statements of Changes in Net Assets | 68-70 | ||||||
Financial Highlights | 78-79 | ||||||
Victory High Yield Fund | |||||||
Schedule of Portfolio Investments | 40 | ||||||
Statements of Assets and Liabilities | 62 | ||||||
Statements of Operations | 65 | ||||||
Statements of Changes in Net Assets | 68-70 | ||||||
Financial Highlights | 80-81 | ||||||
Victory Tax-Exempt Fund | |||||||
Schedule of Portfolio Investments | 45 | ||||||
Statements of Assets and Liabilities | 63 | ||||||
Statements of Operations | 66 | ||||||
Statements of Changes in Net Assets | 71-73 | ||||||
Financial Highlights | 82-83 | ||||||
Victory High Income Municipal Bond Fund | |||||||
Schedule of Portfolio Investments | 48 | ||||||
Statements of Assets and Liabilities | 63 | ||||||
Statements of Operations | 66 | ||||||
Statements of Changes in Net Assets | 71-73 | ||||||
Financial Highlights | 84-85 | ||||||
Victory Floating Rate Fund | |||||||
Schedule of Portfolio Investments | 51 | ||||||
Statements of Assets and Liabilities | 63 | ||||||
Statements of Operations | 66 | ||||||
Statements of Changes in Net Assets | 71-73 | ||||||
Financial Highlights | 86-87 | ||||||
Victory Strategic Income Fund | |||||||
Schedule of Portfolio Investments | 56 | ||||||
Statement of Assets and Liabilities | 64 | ||||||
Statement of Operations | 67 | ||||||
Statements of Changes in Net Assets | 74-75 | ||||||
Financial Highlights | 88-89 |
1
Table of Contents (continued)
Notes to Financial Statements | 90 | ||||||
Report of Independent Registered Public Accounting Firm | 107 | ||||||
Supplemental Information (unaudited) | 108 | ||||||
Trustee and Officer Information | 108 | ||||||
Proxy Voting and Form Portfolio Holdings Information | 111 | ||||||
Expense Examples | 111 | ||||||
Additional Federal Income Tax Information | 113 | ||||||
Advisory Contract Approval | 114 |
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
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4
Victory Funds Letter to Shareholders
(Unaudited)
Dear Shareholder,
As we turn the page into a new decade, it's hard not to reflect on the fact that we have been enjoying the longest-ever bull market in U.S. equities. The run has been impressive, and despite periods of tumult and plenty of negative news, the bull market endured throughout 2019.
For the annual reporting period ended December 31, 2019, the S&P 500® Index posted impressive gains of 31.49%. This represents the greatest one-year gain since 2013 and also illustrates a swift bounce-back after a precipitous drop late in 2018. The move higher supports the notion that underlying fundamentals of U.S. companies drive performance, rather than the political rancor and headline fears that often capture the attention of investors.
Perhaps we shouldn't be surprised at the impressive performance of equities. The U.S. economy — the world's largest — remains on solid footing and has been a key driver of both domestic and international stocks. Robust job creation, near-record low unemployment, and steady consumer spending continue and offer reasons for further optimism. Meanwhile, inflation remains muted, and the Federal Reserve (the Fed) and other major global central banks have taken an accommodative stance. In fact, the Fed has cut interest rates by a total of 0.75% over three meetings last July, September and October.
The risk-on attitudes of investors, coupled with the accommodative monetary policy, had an expected impact on U.S. Treasury yields. The 10-year Treasury yield declined significantly over the course of 2019, falling from 2.66% to 1.92% at year-end. More interesting, however, was the fact that, the yield on 10-year Treasurys fell below shorter-term yields for the first time since before the 2007-2008 Global Financial Crisis. This inverted yield curve spooked investors for a spell, only to revert back to a traditional upward sloping yield curve by the end of the year.
The robust domestic economy, low interest rates, and ample liquidity from central banks provided a potent tonic for the stock market in 2019. In fact, at year-end 2019, the S&P 500® Index was approaching its highest valuation level since 1999. This reminds all of us to retain some historical context on the bull market. Many of us remember the Global Financial Crisis and, before that, the collapse of the dot-com bubble. Although those are now but a distant memory (and we are not forecasting such tumult), we should not forget that stocks don't always go up and cycles don't last forever. In other words, valuations still matter.
The key point is not to discount the risks. In addition to lofty valuations, investors need to keep apprised of trade disputes, geopolitical hotspots, a contentious U.S. election, and a host of other potential headwinds. Yet it is these very risks — these cross-currents — that may create pricing dislocations. This is an environment in which we believe our Victory Capital independent investment franchises can thrive.
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
5
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
6
Victory Fixed Income Funds (Unaudited)
Victory INCORE Investment Quality Bond Fund
Portfolio Holdings
As a Percentage of Total Investments
Commentary
Following a small dip in early October, interest rates and stocks both took a steep trip higher in Q4 concluding an impressive year for both stocks and bonds. Themes driving 2019 returns included an about face on monetary policy by the U.S. Federal Reserve, a global reach for yield driven by negative interest rate policies in Japan and Europe, a resilient U.S. consumer, and easing trade tensions.
Taking its cues from market volatility in late 2018 and early 2019, the Federal Reserve quickly changed course from their December 2018 stance of "auto-pilot" on quantitative tightening, and the need for more interest rate increases in 2019. As the yield curve inverted in Q3, the Federal Reserve responded by lowering the Federal Funds Target Rate by .75% over three meetings. In late Q3 and Q4, repurchase rate volatility inspired the Federal Reserve to end quantitative tightening and instead expand their balance sheet by purchasing $173 billion in U.S. Treasury securities, the bulk of the purchases being in U.S. Treasury bills. Chairman Powell convinced board members to cut rates enough to un-invert the yield curve, and moved them to a low-inflation, rates-lower-for-longer outlook. This policy reversal moved longer term yields lower by nearly 1% for the year, providing the bond market with strong absolute returns in 2019. Negative interest rate policies in Japan and Europe also drove international investors to the U.S. bond market in search of positive yields, and lower rates domestically inspired U.S. investors to reach for yield, providing an even greater boost to corporate bond returns relative to U.S. Treasuries.
The U.S. consumer, not surprisingly, remained confident and seemingly willing to spend. U3 (U.S. official) unemployment rate is at 3.5%, and U6 (broader measure) unemployment rate is at 6.7% and trending lower, and are both at generational lows. The percentage of U.S. workers who perceive jobs as plentiful versus those who perceive jobs as hard to get are at levels not seen since the records set in the late 1990s, and personal income grew 3.9% over the year. This confidence reflected in retail sales which grew at a 5.8% annual rate, ending the year with strong holiday sales and counterbalancing lackluster business investment due to trade tensions, and driving U.S. GDP to grow at 2.3% with inflation running at a benign 1.6%.
Progress in trade negotiations late in the year brightened the outlook for business and investment, moving markets higher at the end of the year. After months of negotiations to modify the USMCA trade deal with Canada and Mexico, the treaty was passed by the House of Representatives in December, and may be ratified by the Senate soon. Progress was also made with China as a Phase 1 trade deal was scheduled to be signed on January 15.
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. For the year ended December 31, 2019, the Fund (Class A Shares at net asset value) returned 7.49%, trailing the Bloomberg Barclays U.S. Aggregate Bond Index which returned 8.72%. The bulk of underperformance came from sector allocation in Q1, as we took a cautious stance and entered the year underweight corporate bond exposure and overweight mortgage-backed securities. Interest rate and yield curve positioning were small detractors for the year, as was credit selection.
7
Victory Fixed Income Funds (Unaudited)
Victory INCORE Investment Quality Bond Fund (continued)
Average Annual Total Return
Year Ended December 31, 2019
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 | 7.49 | % | 5.33 | % | 6.65 | % | 5.65 | % | 7.14 | % | 7.76 | % | 8.72 | % | |||||||||||||||||
Three Year | 3.38 | % | 2.70 | % | 2.52 | % | 2.52 | % | 2.98 | % | 3.63 | % | 4.03 | % | |||||||||||||||||
Five Year | 2.67 | % | 2.25 | % | 1.78 | % | 1.78 | % | 2.27 | % | 2.87 | % | 3.05 | % | |||||||||||||||||
Ten Year | 3.73 | % | 3.52 | % | 2.89 | % | 2.89 | % | 3.33 | % | 3.95 | % | 3.75 | % | |||||||||||||||||
Since Inception | 4.80 | % | 4.73 | % | 3.83 | % | 3.83 | % | 4.01 | % | 4.40 | % | N/A | ||||||||||||||||||
Expense Ratios | |||||||||||||||||||||||||||||||
Gross | 1.13% | 2.10% | 1.69% | 1.12% | |||||||||||||||||||||||||||
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, 2019. Additional information pertaining to the Fund's expense ratios as of December 31, 2019 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.
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.
8
Victory Fixed Income Funds (Unaudited)
Victory INCORE Low Duration Bond Fund
Portfolio Holdings
As a Percentage of Total Investments
Commentary
Following a small dip in early October, interest rates and stocks both took a steep trip higher in Q4 concluding an impressive year for both stocks and bonds. Themes driving 2019 returns included an about face on monetary policy by the U.S. Federal Reserve, a global reach for yield driven by negative interest rate policies in Japan and Europe, a resilient U.S. consumer, and easing trade tensions.
Taking its cues from market volatility in late 2018 and early 2019, the Federal Reserve quickly changed course from their December 2018 stance of "auto-pilot" on quantitative tightening, and the need for more interest rate increases in 2019. As the yield curve inverted in Q3, the Federal Reserve responded by lowering the Federal Funds Target Rate by .75% over three meetings. In late Q3 and Q4, repurchase rate volatility inspired the Federal Reserve to end quantitative tightening and instead expand their balance sheet by purchasing $173 billion in U.S. Treasury securities, the bulk of the purchases being in U.S. Treasury bills. Chairman Powell convinced board members to cut rates enough to un-invert the yield curve, and moved them to a low-inflation, rates-lower-for-longer outlook. This policy reversal moved longer term yields lower by nearly 1% for the year, providing the bond market with strong absolute returns in 2019. Negative interest rate policies in Japan and Europe also drove international investors to the U.S. bond market in search of positive yields, and lower rates domestically inspired U.S. investors to reach for yield, providing an even greater boost to corporate bond returns relative to U.S. Treasuries.
The U.S. consumer, not surprisingly, remained confident and seemingly willing to spend. U3 (U.S. official) unemployment rate is at 3.5%, and U6 (broader measure) unemployment rate is at 6.7% and trending lower, and are both at generational lows. The percentage of U.S. workers who perceive jobs as plentiful versus those who perceive jobs as hard to get are at levels not seen since the records set in the late 1990s, and personal income grew 3.9% over the year. This confidence reflected in retail sales which grew at a 5.8% annual rate, ending the year with strong holiday sales and counterbalancing lackluster business investment due to trade tensions, and driving U.S. GDP to grow at 2.3% with inflation running at a benign 1.6%.
Progress in trade negotiations late in the year brightened the outlook for business and investment, moving markets higher at the end of the year. After months of negotiations to modify the USMCA trade deal with Canada and Mexico, the treaty was passed by the House of Representatives in December, and may be ratified by the Senate soon. Progress was also made with China as a Phase 1 trade deal was scheduled to be signed on January 15.
The Victory INCORE Low Duration Bond Fund (the "Fund") seeks to provide a high level of current income consistent with preservation of capital. For the year ended December 31, 2019, the Fund (Class A Shares at net asset value) returned 3.51%, slightly trailing the Bloomberg Barclays U.S. Government 1-3 year Bond Index which returned 3.59%. The Fund was positioned relatively defensively early in the year, while duration and yield curve positioning were slight detractors.
9
Victory Fixed Income Funds (Unaudited)
Victory INCORE Low Duration Bond Fund (continued)
Average Annual Total Return
Year Ended December 31, 2019
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 | 3.51 | % | 1.45 | % | 2.81 | % | 1.81 | % | 3.17 | % | 3.76 | % | 3.59 | % | |||||||||||||||||
Three Year | 1.90 | % | 1.23 | % | 1.15 | % | 1.15 | % | 1.50 | % | 2.14 | % | 1.86 | % | |||||||||||||||||
Five Year | 1.60 | % | 1.20 | % | 0.83 | % | 0.83 | % | 1.19 | % | 1.84 | % | 1.40 | % | |||||||||||||||||
Ten Year | 1.75 | % | 1.54 | % | 0.99 | % | 0.99 | % | 1.34 | % | 1.98 | % | 1.25 | % | |||||||||||||||||
Since Inception | 2.42 | % | 2.30 | % | 1.65 | % | 1.65 | % | 2.01 | % | 2.23 | % | N/A | ||||||||||||||||||
Expense Ratios | |||||||||||||||||||||||||||||||
Gross | 0.90% | 1.68% | 1.87% | 0.68% | |||||||||||||||||||||||||||
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, 2019. Additional information pertaining to the Fund's expense ratios as of December 31, 2019 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.
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 Fixed Income Funds (Unaudited)
Victory High Yield Fund
Portfolio Holdings
As a Percentage of Total Investments
Performance Discussion
The Victory High Yield Fund (the "Fund") seeks to provide current income. Capital appreciation is a secondary objective. For the year ended December 31, 2019, the Bloomberg Barclays U.S. Corporate High Yield Index (the "Index") rose 14.32% while the Fund returned 14.90% (Class A Shares at net asset value).
Security selection, particularly at the lower end of the ratings scale and in gaming and pharmaceuticals, was the source of the Fund's outperformance. The Fund's underweight position in the volatile energy sector also was a key contributor to its relative performance.
Asset allocation, specifically the Fund's out-of-Index allocation to floating rate bank loans, detracted from its performance relative to the Index, as did the Fund's underweight position in BB-rated bonds and security selection in manufacturing.
Portfolio Review
We slightly decreased our exposure to floating rate loans in the second half of the year, sometimes swapping out loans to add to existing high-yield bond positions from the same issuer. Our exposure to loans remained substantial, however, as their underperformance relative to high-yield bonds created some compelling relative value opportunities.
Despite the possibility of idiosyncratic rallies in Energy, particularly in response to geopolitical events, we continued to anticipate further deterioration in what we believe is an unfavorable supply and demand dynamic for oil, and thus we remained cautious about the sector.
We continued to view valuations in the higher-quality segment of the market as unattractive. We increased the Fund's CCC-rated exposure over the course of the year given our desire to capture excess return from company-specific opportunities while remaining nimble enough to reduce exposure quickly if necessary.
Market Review
After a woeful 2018, securities markets roared back in 2019. Returns of 25% or more were commonplace among major equity indexes and returns for traditionally riskier fixed-income asset classes also broke into the double digits as the U.S. Federal Reserve (the "Fed") and other central banks around the world reassured investors and encouraged risk taking by cutting interest rates.
The rally defied a daunting array of real and potential threats at home and abroad: cooling economies and heated politics; trade disputes; volatile energy prices; Brexit drama; the impeachment of President Trump; high valuations for many asset classes; and potential early warning signs of recession in the U.S. Treasury market. While these concerns caused bursts of anxiety, investors mostly took comfort from central bank support, steady (if lackluster) economic growth, extremely low unemployment, and strong consumer spending.
11
Victory Fixed Income Funds (Unaudited)
Victory High Yield Fund (continued)
The S&P 500® Index returned 31.5% for the year, its best showing since 1997. In fixed income, the 10-year Treasury returned 8.9%.
High Yield Market Review
What a difference 12 months made. At the end of 2018, the high-yield market was unloved, with yields approaching 8.0%. It seemed unthinkable that all would be forgiven another year into one of the longest positive credit cycles in memory, but that's what happened.
The Index advanced in bursts during the year with strong rallies in January, June, and December. The January 2019 advance was a Fed-fueled rebound from a sharply oversold December 2018; the June rally was triggered by both the Fed and an improvement in the trade outlook; and December brought a potent surge for riskier assets.
Quality led the way in 2019 with each successive rating category outperforming the one below it. At a time when riskier assets generally outperformed, the underperformance of CCC-rated bonds may seem like something of an enigma. The explanation was that this category contained a high percentage of distressed and defaulting energy companies. Excluding energy and commodities, CCC-rated bonds posted a respectable 12.0% annual return.
High Yield Market Outlook
The end of 2019 presented a mirror image of the high-yield market at the end of 2018. The year's rebound brought low absolute yields, tight credit spreads, lower coupon income, and increased sensitivity to increases in interest rates. Given these Index characteristics, investors could be forgiven for wondering what could possibly go....right?
With the Index as a whole, possibly not much. But with a highly selective, deeply researched, and focused portfolio, we believe there's still plenty that could go right.
The Index ended 2019 with rich valuations. Fully two-thirds of bonds in it were trading with yields below the 5.4% mean and 41% traded to a yield below 4.0%. Contrast this with year-end 2018 when only 3.6% of the Index traded to a yield below 4.0%. We believe that selectiveness is now more important than ever, and employing a concentrated, high-conviction strategy could potentially avoid the risk of owning low-yielding "passengers" that contribute little and dilute returns.
Sector risks also underscore the importance of research and selection. The high-yield market has experienced an increase in stressed companies in Energy, Health Care, Retail, and Telecommunication, which together accounted for over 36% of the Index at year-end. Skillfully navigating or avoiding these industries could significantly distinguish portfolio returns from Index returns.
New issues are likely to present their own risks in 2020. Issuance is expected to decline from 2019 levels and a scarcity of deals could continue to produce overly generous terms for borrowers, including some unrealistic valuations at levels not seen since near the end of the previous credit cycle in 2007.
Throughout the year, our strategy continued to focus on mid- to lower-rated issues that we believed had clear catalysts for improvement. At the same time, we continued to choose certain high-quality secured loans over bonds, often from the same issuer, given loans' more attractive valuations and minimal duration risk.
12
The Victory Fixed Income Funds (Unaudited)
Victory High Yield Fund (continued)
Overall Market Outlook
We believe that while the Fed's renewed focus on supporting economic growth may bear fruit slowly for the U.S. economy, it had a meaningful impact on securities markets throughout 2019. We believe that much will continue to depend on whether investors view the Fed and its peers around the world as both committed to supporting growth and capable of doing so. We would note that a market leaning too heavily on central bank support could be fragile if the Fed proves unwilling or unable to prevent a downturn. We continue to view global growth concerns, domestic politics, trade tensions, and energy prices as key potential catalysts for shifts in risk.
As we attempt to balance the genuine benefit of current Fed policy and the minimal risk of imminent recession with the fact that the economy is decelerating and there are few obvious catalysts to boost returns, we believe it is important to take a highly selective approach rather than counting on broad-based spread tightening.
13
Victory Fixed Income Funds (Unaudited)
Victory High Yield Fund (continued)
Average Annual Total Return
Year Ended December 31, 2019
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 | Contingent Deferred Charges | Net Asset Value | Net Asset Value | Bloomberg Barclays U.S. Corporate High Yield Index1 | |||||||||||||||||||||||||
One Year | 14.90 | % | 12.54 | % | 14.24 | % | 13.24 | % | 14.48 | % | 15.25 | % | 14.32 | % | |||||||||||||||||
Three Year | 8.20 | % | 7.47 | % | 7.49 | % | 7.49 | % | 7.84 | % | 8.49 | % | 6.37 | % | |||||||||||||||||
Five Year | 6.89 | % | 6.47 | % | 6.18 | % | 6.18 | % | 6.50 | % | 7.17 | % | 6.13 | % | |||||||||||||||||
Ten Year | 7.23 | % | 7.02 | % | 6.48 | % | 6.48 | % | 6.82 | % | 7.48 | % | 7.57 | % | |||||||||||||||||
Since Inception | 6.09 | % | 5.99 | % | 5.49 | % | 5.49 | % | 6.29 | % | 8.93 | % | N/A | ||||||||||||||||||
Expense Ratios | |||||||||||||||||||||||||||||||
Gross | 1.12% | 1.84% | 1.35% | 0.97% | |||||||||||||||||||||||||||
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, 2019. Additional information pertaining to the Fund's expense ratios as of December 31, 2019 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 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 Index is not available for direct investment. There are no expenses associated with the index, while there are expenses associated with the Fund.
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.
14
Victory Fixed Income Funds (Unaudited)
Victory Tax-Exempt Fund
Portfolio Holdings
As a Percentage of Total Investments
Performance Discussion
The Victory Tax-Exempt Fund (the "Fund") seeks to maximize current income exempt from federal income taxes, consistent with the preservation of capital. For the year ended December 31, 2019, the Bloomberg Barclays Municipal Bond Index (the "Index") rose 7.54% while the Fund outperformed the benchmark Index, returning 8.82% (Class A Shares at net asset value).
Yield curve effects, asset allocation, and security selection all contributed to the Fund's outperformance of the Index. Security selection was strong in state and local general obligations and in health care.
Throughout a generally solid year for municipal bonds, we focused on longer-duration issues, while maintaining overweight exposures to Baa-rated and unrated bonds. As spreads compressed at the lower end of the ratings spectrum due to relatively tight supply and strong demand for mutual funds, this positioning had a favorable impact on performance relative to the Index.
Our positions remained substantially underweight in state general obligations and overweight in industrial bonds.
The Fund outperformed the Index in all but the second quarter, when negative security selection in lower-rated bonds, tobacco, and special tax bonds overshadowed other positive impacts. For the full year, the Fund's positioning in A-rated bonds detracted the most from its relative performance. Other detractors in 2019 included security selection in special tax and transportation and a small out-of-Index allocation to bonds rated below Baa3.
Market Review
After a woeful 2018, securities markets roared back in 2019. Returns of 25% or more were commonplace among major equity indexes and returns for traditionally riskier fixed-income asset classes also broke into the double digits as central banks around the world reassured investors and encouraged risk taking by cutting interest rates.
The rally defied a daunting array of real and potential threats at home and abroad: cooling economies and heated politics; trade disputes; volatile energy prices; Brexit drama; the impeachment of President Trump; high valuations for many asset classes; and potential early warning signs of recession in the U.S. Treasury market. While these concerns caused bursts of anxiety, investors mostly took comfort from central bank support, steady (if lackluster) economic growth, extremely low unemployment, and strong consumer spending.
The S&P 500® Index returned 31.5% for the year, its best showing since 1997. In fixed income, the 10-year Treasury returned 8.9% and the Bloomberg Barclays U.S. Aggregate Bond Index returned 8.7%. In a municipal market that enjoyed strong technical trends as well as an
15
Victory Fixed Income Funds (Unaudited)
Victory Tax-Exempt Fund (continued)
enthusiastic appetite for risk, the Bloomberg Barclays High Yield Municipal Bond Index returned 10.7%.
The market's momentum was firmly established by the potent rally in the first quarter after the U.S. Federal Reserve (the "Fed") dramatically reversed its formerly bullish tone on the U.S. economy and indicated it could soon switch from raising interest rates to cutting them, which it did three times during the year. The cuts came amid diminishing expectations for economic growth, escalating trade tensions, and a persistent inversion of the Treasury yield curve. In such inversions, which have been a reliable sign that a recession was coming within a year or two, yields on certain shorter-term Treasurys exceed yields on longer-term notes.
U.S. Economic Outlook
Despite the inversion, which has since resolved, most economists are not forecasting a recession within the year given the very low unemployment rate and generally positive, if diminished, economic momentum.
The Fed is estimating 2020 economic growth at or slightly below 2.0% and inflation slightly below its 2.0% target. Unemployment, most recently at 3.5%, is expected to remain below 4.0%.
Market Outlook
We believe that while the Fed's renewed focus on supporting economic growth may bear fruit slowly for the U.S. economy, it had a meaningful impact on securities markets throughout 2019. For the time being, investors appear wary but reassured that they will be somewhat protected by accommodative monetary policy, which helps soothe credit market volatility. We believe that much will continue to depend on whether investors view the Fed and its peers as both committed to supporting growth and capable of doing so. Relatively low rates leave central banks with less room to cut rates should they need to fight a recession.
Despite the prevailing market optimism, we believe it is important to take a disciplined approach to risk as valuations increase while the current expansion, already the longest ever, continues to age. We would note that a market leaning too heavily on central bank support could be fragile if the Fed proves unwilling or unable to prevent a downturn.
Municipal Outlook
We expect supply to remain ample in most ratings categories as issuers take advantage of steady demand and low interest rates. Individual investors dominate the municipal market, and many who live in high tax states are seeking out municipal assets to offset the loss of other tax deductions.
We continue to favor bonds from those states since we believe the relatively stable retail demand there 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.
16
Victory Fixed Income Funds (Unaudited)
Victory Tax-Exempt Fund (continued)
Average Annual Total Return
Year Ended December 31, 2019
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 | Contingent Deferred Charges | Net Asset Value | Bloomberg Barclays Municipal Bond Index1 | ||||||||||||||||||||||
One Year | 8.82 | % | 6.68 | % | 7.97 | % | 6.97 | % | 9.06 | % | 7.54 | % | |||||||||||||||
Three Year | 5.74 | % | 5.02 | % | 4.90 | % | 4.90 | % | 5.86 | % | 4.72 | % | |||||||||||||||
Five Year | 3.67 | % | 3.26 | % | 2.87 | % | 2.87 | % | 3.81 | % | 3.53 | % | |||||||||||||||
Ten Year | 4.08 | % | 3.87 | % | 3.27 | % | 3.27 | % | 4.22 | % | 4.34 | % | |||||||||||||||
Since Inception | 4.66 | % | 4.58 | % | 3.93 | % | 3.93 | % | 4.43 | % | N/A | ||||||||||||||||
Expense Ratios | |||||||||||||||||||||||||||
Gross | 0.97% | 1.78% | 0.77% | ||||||||||||||||||||||||
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, 2019. Additional information pertaining to the Fund's expense ratios as of December 31, 2019 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.
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 Fixed Income Funds (Unaudited)
Victory High Income Municipal Bond Fund
Portfolio Holdings
As a Percentage of Total Investments
Performance Discussion
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. For the year ended December 31, 2019, the Bloomberg Barclays Municipal Bond Index (the "Index") rose 7.54% while the Fund outperformed the benchmark Index, returning 8.04% (Class A Shares at net asset value).
Yield curve effects, asset allocation, and security selection all contributed to the Fund's outperformance of the Index. Security selection was strong in state and local General Obligations, Transportation, and Leasing.
Throughout a generally solid year for municipal bonds, we focused on longer-duration issues, while maintaining overweight exposures to Baa-rated and unrated bonds. As spreads compressed at the lower end of the ratings spectrum due to relatively tight supply and strong demand for mutual funds over the course of the year, this positioning had a favorable impact on performance relative to the Index.
Our positions remained substantially underweight in state general obligations and overweight in industrial and special tax bonds.
The Fund outperformed the Index in all but the second quarter, when negative security selection in A and Baa-rated bonds, Tobacco, Housing, and Health Care overshadowed other positive impacts. For the full year, the Fund's modest allocation to unrated bonds detracted the most from its relative performance. Other detractors in 2019 included both security selection and asset allocation in housing, and security selection in A-rated bonds.
In a municipal market that enjoyed strong technical trends as well as an enthusiastic appetite for risk, the Bloomberg Barclays High Yield Municipal Bond Index, which is the Fund's secondary index, returned 10.7%. That index consists mostly of bonds rated below investment grade, whereas the Fund is primarily investment grade.
Market Review
After a woeful 2018, securities markets roared back in 2019. Returns of 25% or more were commonplace among major equity indexes and returns for traditionally riskier fixed income asset classes also broke into the double digits as central banks around the world reassured investors and encouraged risk taking by cutting interest rates.
The rally defied a daunting array of real and potential threats at home and abroad: cooling economies and heated politics; trade disputes; volatile energy prices; Brexit drama; the impeachment of President Trump; high valuations for many asset classes; and potential early warning signs of recession in the U.S. Treasury market. While these concerns caused bursts of anxiety, investors mostly took comfort from central bank support, steady (if lackluster) economic growth, extremely low unemployment, and strong consumer spending.
18
Victory Fixed Income Funds (Unaudited)
Victory High Income Municipal Bond Fund (continued)
The S&P 500® Index returned 31.5% for the year, its best showing since 1997. In fixed income, the 10-year U.S. Treasury returned 8.9% and the Bloomberg Barclays U.S. Aggregate Bond Index returned 8.7%.
The market's momentum was firmly established by the potent rally in the first quarter after the U.S. Federal Reserve (the "Fed") dramatically reversed its formerly bullish tone on the U.S. economy and indicated it could soon switch from raising interest rates to cutting them, which it did three times during the year. The cuts came amid diminishing expectations for economic growth, escalating trade tensions, and a persistent inversion of the Treasury yield curve. In such inversions, which have been a reliable sign that a recession was coming within a year or two, yields on certain shorter-term Treasurys exceed yields on longer-term notes.
U.S. Economic Outlook
Despite the inversion, which has since resolved, most economists are not forecasting a recession within the year given the very low unemployment rate and generally positive, if diminished, economic momentum.
The Fed is estimating 2020 economic growth at or slightly below 2.0% and inflation slightly below its 2.0% target. Unemployment, most recently at 3.5%, is expected to remain below 4.0%.
Market Outlook
We believe that while the Fed's renewed focus on supporting economic growth may bear fruit slowly for the U.S. economy, it had a meaningful impact on securities markets throughout 2019. For the time being, investors appear wary but reassured that they will be somewhat protected by accommodative monetary policy, which helps soothe credit market volatility. We believe that much will continue to depend on whether investors view the Fed and its peers as both committed to supporting growth and capable of doing so. Relatively low rates leave central banks with less room to cut rates should they need to fight a recession.
Despite the prevailing market optimism, we believe it is important to take a disciplined approach to risk as valuations increase while the current expansion, already the longest ever, continues to age. We would note that a market leaning too heavily on central bank support could be fragile if the Fed proves unwilling or unable to prevent a downturn.
Municipal Outlook
We expect supply to remain ample in most ratings categories as issuers take advantage of steady demand and low interest rates. Individual investors dominate the municipal market, and many who live in high tax states are seeking out municipal assets to offset the loss of other tax deductions.
We continue to favor bonds from those states since we believe the relatively stable retail demand there 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.
19
Victory Fixed Income Funds (Unaudited)
Victory High Income Municipal Bond Fund (continued)
Average Annual Total Return
Year Ended December 31, 2019
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 | 8.04 | % | 5.90 | % | 7.22 | % | 6.22 | % | 8.29 | % | 7.54 | % | 10.68 | % | |||||||||||||||||
Three Year | 5.67 | % | 4.97 | % | 4.86 | % | 4.86 | % | 5.92 | % | 4.72 | % | 8.34 | % | |||||||||||||||||
Five Year | 4.06 | % | 3.65 | % | 3.27 | % | 3.27 | % | 4.30 | % | 3.53 | % | 5.93 | % | |||||||||||||||||
Ten Year | 5.21 | % | 4.99 | % | 4.47 | % | 4.47 | % | 5.42 | % | 4.34 | % | 7.15 | % | |||||||||||||||||
Since Inception | 5.21 | % | 4.99 | % | 4.47 | % | 4.47 | % | 5.42 | % | N/A | N/A | |||||||||||||||||||
Expense Ratios | |||||||||||||||||||||||||||||||
Gross | 1.02% | 1.78% | 0.78% | ||||||||||||||||||||||||||||
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, 2019. Additional information pertaining to the Fund's expense ratios as of December 31, 2019 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.
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.
20
Victory Fixed Income Funds (Unaudited)
Victory Floating Rate Fund
Portfolio Holdings
As a Percentage of Total Investments
Performance Discussion
The Victory Floating Rate Fund (the "Fund") seeks to provide a high level of current income. For the year ended December 31, 2019, the S&P/LSTA U.S. Leveraged Loan Index (the "Index") rose 8.64% while the Fund outperformed the benchmark Index, returning 9.43% (Class A Shares at net asset value).
An out-of-Index allocation to high-yield bonds and security selection, particularly in B-rated loans and pharmaceuticals, were the leading contributors to the Fund's performance relative to the Index.
Security selection in the automotive and health care sectors detracted from relative performance, as did an underweight in electronics.
Portfolio Review
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 having analysts 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.
We increased our allocation to high-yield bonds, which enhance the Fund's liquidity, to 14% from 10% over the course of the year.
Market Review
After a woeful 2018, securities markets roared back in 2019. Returns of 25% or more were commonplace among major equity indexes and returns for traditionally riskier fixed-income asset classes also broke into the double digits as the U.S. Federal Reserve (the "Fed") and other central banks around the world reassured investors and encouraged risk taking by cutting interest rates.
The rally defied a daunting array of real and potential threats at home and abroad: cooling economies and heated politics; trade disputes; volatile energy prices; Brexit drama; the impeachment of President Trump; high valuations for many asset classes; and potential early warning signs of recession in the U.S. Treasury market. While these concerns caused bursts of anxiety, investors mostly took comfort from central bank support, steady (if lackluster) economic growth, extremely low unemployment, and strong consumer spending.
The S&P 500® Index returned 31.5% for the year, its best showing since 1997. In fixed income, the 10-year U.S. Treasury returned 8.9%.
21
Victory Fixed Income Funds (Unaudited)
Victory Floating Rate Fund (continued)
Leveraged Loan Market Review
Leveraged loan issuance declined during 2019, and retail investors continued a year-long exodus from leveraged loan mutual funds, withdrawing more than $43 billion. Loans, whose rates reset as interest rates rise, are commonly viewed as a haven from rate increases, which diminished their appeal as the likelihood of interest rate increases faded.
Nevertheless, the negative impact of those outflows was more than offset by the formation of $118 billion in collateralized loan obligations ("CLOs") during the year, which accounted for 71% of the demand for new issuance. CLOs, which are long-term investments available only to institutional investors, are vehicles that package loans together and offer them to investors in tranches.
High Yield Market Outlook
Investors have been favoring highly rated, less-subordinated loans, which in turn led to an increase in repricings among those issuers, often at levels that make the economics challenging at best for CLO issuers. If current trends continue, we would expect as much as a 25% decline in CLO issuance in 2020.
The floating rates for leveraged loans normally are pegged to the London Interbank Offered Rate (LIBOR). Reflecting the Fed rate cuts during the year, three-month LIBOR ended 2019 at 1.8%, down from 2.6% at the end of the first quarter.
We nevertheless remain very positive about leveraged loans. With the 10-year U.S. Treasury yield below 2.0%, longer-duration investments offer little in the way of increased yield opportunity while geometrically increasing interest rate (duration) risk.
The real risk to loan returns lies with defaults, and we see few threats there. The Index's lagging 12-month default rate rose slightly from 1.3% in the third quarter to 1.4% at year end, still well below the 2.9% long-term average. The Fund had no defaults among its holdings, and we remain optimistic about our ability to continue avoiding them through the intensive research and monitoring that a comparatively small number of holdings affords us.
Credit metrics in the leveraged loan market, while slipping a bit this year, still have improved since 2017. In addition to manageable leverage and adequate interest coverage, scheduled maturities have been pushed well into the future.
The amount of loans maturing in the next few years, known as the maturity wall, is quite manageable for borrowers, who have been diligent about continually pushing loan maturities into the future so as not to get caught in a downdraft.
22
Victory Fixed Income Funds (Unaudited)
Victory Floating Rate Fund (continued)
Average Annual Total Return
Year Ended December 31, 2019
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 | 9.43 | % | 7.20 | % | 8.49 | % | 7.49 | % | 8.75 | % | 9.65 | % | 8.64 | % | |||||||||||||||||
Three Year | 4.47 | % | 3.76 | % | 3.62 | % | 3.62 | % | 3.83 | % | 4.69 | % | 4.35 | % | |||||||||||||||||
Five Year | 4.43 | % | 4.01 | % | 3.59 | % | 3.59 | % | 3.83 | % | 4.66 | % | 4.45 | % | |||||||||||||||||
Ten Year | 4.51 | % | 4.31 | % | 3.76 | % | 3.76 | % | 4.01 | % | 4.71 | % | 5.01 | % | |||||||||||||||||
Since Inception | 4.51 | % | 4.31 | % | 3.76 | % | 3.76 | % | 4.01 | % | 4.71 | % | N/A | ||||||||||||||||||
Expense Ratios | |||||||||||||||||||||||||||||||
Gross | 1.14% | 1.90% | 2.99% | 0.89% | |||||||||||||||||||||||||||
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, 2019. Additional information pertaining to the Fund's expense ratios as of December 31, 2019 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 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. 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.
23
Victory Fixed Income Funds (Unaudited)
Victory Strategic Income Fund
Portfolio Holdings
As a Percentage of Total Investments
Performance Discussion
The Victory Strategic Income Fund (the "Fund") seeks to provide a high current income with a secondary objective of capital appreciation. For the year ended December 31, 2019, the Bloomberg Barclays U.S. Aggregate Bond Index (the "Index") rose 8.72% while the Fund outperformed the benchmark Index, returning 9.17% (Class A Shares at net asset value).
Asset allocation was the largest contributor to the Fund's outperformance of the Index. Security selection also had a positive impact. Yield curve effects detracted from relative performance as the Fund was underweight in some outperforming long-term bonds.
The Fund's overweight position in BBB-rated corporate bonds with maturities of 3 to 10 years, which increased steadily over the first three quarters of the year and remained stable in the fourth, was the largest contributor. An out-of-Index allocation to floating rate loans during the first half of the year was also a significant contributor. Security selection and an overweight position in corporate bonds rated AAA through A also contributed.
An allocation to high yield in the second and third quarters detracted from relative performance for the year, as did the Fund's underweight position in investment-grade corporate bonds with maturities of 10 to 25 years. Security selection in mortgage-backed securities also had a modestly negative impact.
The Fund outperformed in the first half of the year, when floating rate loans contributed, and underperformed in the second half, when we believed it was prudent to reduce the Fund's exposure to credit risk despite the rally in riskier assets.
Market Review
After a woeful 2018, securities markets roared back in 2019. Returns of 25% or more were commonplace among major equity indexes and returns for traditionally riskier fixed-income asset classes also broke into the double digits as central banks around the world reassured investors and encouraged risk taking by cutting interest rates. Gains were strongest early in the year but remained robust.
The rally defied a daunting array of real and potential threats at home and abroad: cooling economies and heated politics; trade disputes; volatile energy prices; Brexit drama; the impeachment of President Trump; high valuations for many asset classes; and potential early warning signs of recession in the U.S. Treasury market. While these concerns caused bursts of anxiety, investors mostly took comfort from central bank support, steady (if lackluster) economic growth, extremely low unemployment, and strong consumer spending.
The S&P 500® Index returned 31.5% for the year, its best showing since 1997. In fixed income, the 10-year Treasury returned 8.9% in 2019.
Investors' embrace of riskier fixed-income assets was evident in the outperformance of both investment-grade and high-yield corporate debt. The corporate component of the Index,
24
Victory Fixed Income Funds (Unaudited)
Victory Strategic Income Fund (continued)
which is investment grade, returned 14.5% for the year, while the Bloomberg Barclays U.S. High Yield Index returned 14.3%.
The market's momentum was firmly established by the potent rally in the first quarter after the U.S. Federal Reserve (the "Fed") dramatically reversed its formerly bullish tone on the U.S. economy and indicated it could soon switch from raising interest rates to cutting them, which it did three times during the year. The cuts came amid diminishing expectations for economic growth, escalating trade tensions, and a persistent inversion of the U.S. Treasury yield curve. In such inversions, which have been a reliable sign that a recession was coming within a year or two, yields on certain shorter-term Treasuries exceed yields on longer-term notes.
U.S. Economic Outlook
Despite the inversion, which has since resolved, most economists are not forecasting a recession within the year given the very low unemployment rate and generally positive, if diminished, economic momentum.
The Fed is estimating 2020 economic growth at or slightly below 2.0% and inflation slightly below its 2.0% target. Unemployment, most recently at 3.5%, is expected to remain below 4.0%.
Global Outlook
Economic growth in much of the world appears to be slowing. The Organization for Economic Cooperation and Development projects world economic growth of 3% or slightly less for 2019 through 2021, the lowest rates since the 2008 financial crisis. In addition, trade-related uncertainty remains a key issue.
Investment Outlook
We believe that while the Fed's renewed focus on supporting economic growth may bear fruit slowly for the U.S. economy, it had a meaningful impact on securities markets throughout 2019. For the time being, investors appear wary but reassured that they will be somewhat protected by accommodative monetary policy, which helps soothe credit market volatility. We believe that much will continue to depend on whether investors view the Fed and its peers as both committed to supporting growth and capable of doing so. Relatively low rates leave central banks with less room to cut rates should they need to fight a recession.
However, risks appear to be growing as valuations and corporate debt levels increase while the current expansion, already the longest ever, continues to age. We would note that a market leaning too heavily on central bank support could be fragile if the Fed proves unwilling or unable to prevent a downturn. We continue to view global growth concerns, domestic politics, trade tensions, and energy prices as key potential catalysts for shifts in risk.
As we attempt to balance the genuine benefit of current Fed policy and the minimal risk of imminent recession with the fact that the economy is decelerating and there are few obvious catalysts to boost returns, we believe it is important to take a disciplined approach to risk. We are not counting on broad-based spread tightening or short-term trading. We currently see the greatest potential benefit in generating carry, which means holding investments for yield where we believe that the yield compensates well for credit risks. We currently see most of those opportunities in investment-grade bonds, including corporates, asset-backed securities, and commercial mortgage-backed securities.
25
Victory Fixed Income Funds (Unaudited)
Victory Strategic Income Fund (continued)
Average Annual Total Return
Year Ended December 31, 2019
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 | 9.17 | % | 6.97 | % | 8.26 | % | 7.26 | % | 8.79 | % | 9.35 | % | 8.72 | % | |||||||||||||||||
Three Year | 4.46 | % | 3.78 | % | 3.61 | % | 3.61 | % | 4.06 | % | 4.68 | % | 4.03 | % | |||||||||||||||||
Five Year | 3.70 | % | 3.28 | % | 2.87 | % | 2.87 | % | 3.28 | % | 3.92 | % | 3.05 | % | |||||||||||||||||
Ten Year | 4.42 | % | 4.21 | % | 3.68 | % | 3.68 | % | 4.05 | % | 4.62 | % | 3.75 | % | |||||||||||||||||
Since Inception | 4.42 | % | 4.22 | % | 3.69 | % | 3.69 | % | 4.05 | % | 4.62 | % | N/A | ||||||||||||||||||
Expense Ratios | |||||||||||||||||||||||||||||||
Gross | 1.09% | 1.97% | 1.70% | 1.06% | |||||||||||||||||||||||||||
With Applicable Waivers | 0.95% | 1.74% | 1.34% | 0.74% |
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, 2019. Additional information pertaining to the Fund's expense ratios as of December 31, 2019 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.
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.
26
Victory Portfolios Victory INCORE Investment Quality Bond Fund | Schedule of Portfolio Investments December 31, 2019 |
Security Description | Principal Amount | Value | |||||||||
Asset Backed Securities (0.0%) (a) | |||||||||||
Santander Drive Auto Receivables Trust, Series 2017-3, Class B, 2.19%, 3/15/22, Callable 8/15/21 @ 100 (b) | $ | 13,548 | $ | 13,547 | |||||||
Total Asset Backed Securities (Cost $13,547) | 13,547 | ||||||||||
Collateralized Mortgage Obligations (1.8%) | |||||||||||
GS Mortgage Securities Trust, Series 2012-GC6, Class B, 5.65%, 1/10/45 (b) (c) (d) | 250,000 | 263,891 | |||||||||
WF-RBS Commercial Mortgage Trust, Series 2012-C6, Class B, 4.70%, 4/15/45 | 300,000 | 312,481 | |||||||||
Total Collateralized Mortgage Obligations (Cost $616,261) | 576,372 | ||||||||||
Corporate Bonds (44.5%) | |||||||||||
Communication Services (2.3%): | |||||||||||
Activision Blizzard, Inc., 2.60%, 6/15/22, Callable 5/15/22 @ 100 | 55,000 | 55,673 | |||||||||
AT&T, Inc. 3.20%, 3/1/22, Callable 2/1/22 @ 100 (b) | 77,000 | 78,848 | |||||||||
4.25%, 3/1/27, Callable 12/1/26 @ 100 (b) | 110,000 | 120,735 | |||||||||
5.15%, 11/15/46, Callable 5/15/46 @ 100 (b) | 126,000 | 150,518 | |||||||||
Comcast Corp., 3.45%, 2/1/50, Callable 8/1/49 @ 100 | 70,000 | 71,873 | |||||||||
Verizon Communications, Inc. 5.15%, 9/15/23 (b) | 69,000 | 76,628 | |||||||||
3.38%, 2/15/25 (b) | 74,000 | 78,337 | |||||||||
Vodafone Group PLC, 5.25%, 5/30/48 (e) | 89,000 | 107,061 | |||||||||
739,673 | |||||||||||
Consumer Discretionary (4.6%): | |||||||||||
Best Buy Co., Inc., 4.45%, 10/1/28, Callable 7/1/28 @ 100 (b) | 97,000 | 106,406 | |||||||||
D.R. Horton, Inc., 2.50%, 10/15/24, Callable 9/15/24 @ 100 | 315,000 | 315,025 | |||||||||
General Motors Co., 4.88%, 10/2/23 (b) | 112,000 | 120,603 | |||||||||
Hasbro, Inc., 6.35%, 3/15/40 | 75,000 | 87,100 | |||||||||
Lear Corp., 5.25%, 5/15/49, Callable 11/15/48 @ 100 | 75,000 | 78,101 | |||||||||
Magna International, Inc., 3.63%, 6/15/24, Callable 3/15/24 @ 100 | 245,000 | 258,732 | |||||||||
NIKE, Inc., 3.88%, 11/1/45, Callable 5/1/45 @ 100 | 100,000 | 114,017 | |||||||||
NVR, Inc., 3.95%, 9/15/22, Callable 6/15/22 @ 100 (b) | 126,000 | 131,452 | |||||||||
Ross Stores, Inc., 3.38%, 9/15/24, Callable 6/15/24 @ 100 | 70,000 | 72,825 | |||||||||
Starbucks Corp., 3.80%, 8/15/25, Callable 6/15/25 @ 100 | 120,000 | 129,545 | |||||||||
1,413,806 | |||||||||||
Consumer Staples (3.9%): | |||||||||||
Altria Group, Inc., 4.40%, 2/14/26, Callable 12/14/25 @ 100 (b) | 125,000 | 135,730 | |||||||||
Constellation Brands, Inc., 4.65%, 11/15/28, Callable 8/15/28 @ 100 (b) | 80,000 | 89,977 | |||||||||
Estee Lauder Cos., Inc., 4.15%, 3/15/47, Callable 9/15/46 @ 100 (e) | 52,000 | 60,699 | |||||||||
Kerry Group Financial Services Unlimited Co., 3.20%, 4/9/23, Callable 1/9/23 @ 100 (c) | 200,000 | 203,566 | |||||||||
Keurig Dr Pepper, Inc. 4.06%, 5/25/23, Callable 4/25/23 @ 100 | 160,000 | 169,021 | |||||||||
5.09%, 5/25/48, Callable 11/25/47 @ 100 (e) | 40,000 | 48,343 | |||||||||
Mead Johnson Nutrition Co., 4.60%, 6/1/44, Callable 12/1/43 @ 100 (b) | 105,000 | 125,174 |
See notes to financial statements.
27
Victory Portfolios Victory INCORE Investment Quality Bond Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Principal Amount | Value | |||||||||
Reynolds American, Inc., 5.70%, 8/15/35, Callable 2/15/35 @ 100 | $ | 92,000 | $ | 106,479 | |||||||
Suntory Holdings Ltd., 2.25%, 10/16/24, Callable 9/16/24 @ 100 (c) | 200,000 | 198,792 | |||||||||
Tyson Foods, Inc., 5.10%, 9/28/48, Callable 3/28/48 @ 100 | 70,000 | 88,019 | |||||||||
1,225,800 | |||||||||||
Energy (3.8%): | |||||||||||
Canadian Natural Resources Ltd., 2.95%, 1/15/23, Callable 12/15/22 @ 100 | 65,000 | 66,286 | |||||||||
Continental Resources, 4.50%, 4/15/23, Callable 1/15/23 @ 100 (b) | 113,000 | 118,409 | |||||||||
Ecopetrol SA, 5.88%, 9/18/23 (b) | 155,000 | 172,072 | |||||||||
EQM Midstream Partners LP, 4.75%, 7/15/23, Callable 6/15/23 @ 100 | 113,000 | 113,345 | |||||||||
Exxon Mobil Corp., 4.11%, 3/1/46, Callable 9/1/45 @ 100 | 40,000 | 46,848 | |||||||||
Marathon Petroleum Corp. | |||||||||||
6.50%, 3/1/41, Callable 9/1/40 @ 100 | 65,000 | 84,424 | |||||||||
5.85%, 12/15/45, Callable 6/15/45 @ 100 | 50,000 | 57,040 | |||||||||
Occidental Petroleum Corp., 2.90%, 8/15/24, Callable 7/15/24 @ 100 | 128,000 | 130,026 | |||||||||
Plains All American Pipeline LP/PAA Finance Corp., 2.85%, 1/31/23, Callable 10/31/22 @ 100 | 120,000 | 120,978 | |||||||||
Statoil ASA, 3.95%, 5/15/43 | 20,000 | 22,287 | |||||||||
Valero Energy Corp. 4.00%, 4/1/29, Callable 1/1/29 @ 100 (b) | 91,000 | 98,132 | |||||||||
6.63%, 6/15/37 | 140,000 | 185,879 | |||||||||
1,215,726 | |||||||||||
Financials (15.1%): | |||||||||||
Aflac, Inc. 2.88%, 10/15/26, Callable 7/15/26 @ 100 | 185,000 | 190,532 | |||||||||
4.75%, 1/15/49, Callable 7/15/48 @ 100 | 20,000 | 24,393 | |||||||||
Alleghany Corp., 4.90%, 9/15/44, Callable 3/15/44 @ 100 | 89,000 | 102,873 | |||||||||
Bank of America Corp. 2.33%(LIBOR03M+63bps), 10/1/21, Callable 10/1/20 @ 100 (b) (e) (f) | 130,000 | 130,265 | |||||||||
2.50%, 10/21/22, Callable 10/21/21 @ 100, MTN | 285,000 | 287,853 | |||||||||
4.20%, 8/26/24, MTN (b) | 101,000 | 108,508 | |||||||||
3.25%, 10/21/27, Callable 10/21/26 @ 100, MTN | 100,000 | 104,395 | |||||||||
Capital One Financial Corp., 3.30%, 10/30/24, Callable 9/30/24 @ 100 (b) | 141,000 | 146,811 | |||||||||
Cincinnati Financial Corp., 6.13%, 11/1/34 | 135,000 | 184,654 | |||||||||
Citigroup, Inc. 2.75%, 4/25/22, Callable 3/25/22 @ 100 | 175,000 | 177,767 | |||||||||
3.88%, 3/26/25 | 68,000 | 71,998 | |||||||||
4.60%, 3/9/26 (b) | 36,000 | 39,613 | |||||||||
4.45%, 9/29/27 (b) | 92,000 | 101,383 | |||||||||
3.88%(LIBOR03M+117bps), 1/24/39, Callable 1/24/38 @ 100 (f) | 51,000 | 56,242 | |||||||||
Enel Finance International NV, 2.88%, 5/25/22 (c) | 200,000 | 202,474 | |||||||||
Fifth Third Bancorp, 3.65%, 1/25/24, Callable 12/25/23 @ 100 (b) | 163,000 | 171,963 | |||||||||
Ford Motor Credit Co. LLC, 4.06%, 11/1/24, Callable 10/1/24 @ 100 | 200,000 | 204,228 | |||||||||
General Motors Financial Co., Inc., 4.15%, 6/19/23, Callable 5/19/23 @ 100 | 49,000 | 51,506 | |||||||||
JPMorgan Chase & Co. 2.95%, 10/1/26, Callable 7/1/26 @ 100 | 170,000 | 175,365 | |||||||||
5.60%, 7/15/41 | 52,000 | 71,449 | |||||||||
KeyBank NA, 2.25%, 3/16/20 | 580,000 | 580,355 |
See notes to financial statements.
28
Victory Portfolios Victory INCORE Investment Quality Bond Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Principal Amount | Value | |||||||||
Morgan Stanley 4.88%, 11/1/22 (b) | $ | 144,000 | $ | 154,446 | |||||||
3.75%, 2/25/23 (b) | 300,000 | 314,102 | |||||||||
3.13%, 7/27/26, MTN | 205,000 | 211,886 | |||||||||
Newcrest Finance Pty Ltd., 5.75%, 11/15/41 (c) | 95,000 | 112,244 | |||||||||
The Goldman Sachs Group, Inc., 2.35%, 11/15/21, Callable 11/15/20 @ 100 | 115,000 | 115,388 | |||||||||
Truist Financial Corp., 2.75%, 4/1/22, MTN, Callable 3/1/22 @ 100 (e) | 260,000 | 264,519 | |||||||||
Unum Group, 4.00%, 6/15/29, Callable 3/15/29 @ 100 (e) | 92,000 | 97,037 | |||||||||
Wells Fargo & Co. 4.30%, 7/22/27, MTN | 180,000 | 197,123 | |||||||||
4.90%, 11/17/45 (b) | 80,000 | 98,017 | |||||||||
4,749,389 | |||||||||||
Health Care (3.9%): | |||||||||||
AbbVie, Inc. 2.30%, 5/14/21, Callable 4/14/21 @ 100 (b) | 152,000 | 152,550 | |||||||||
3.20%, 11/21/29, Callable 8/21/29 @ 100 (c) | 135,000 | 137,768 | |||||||||
Amgen, Inc., 4.40%, 5/1/45, Callable 11/1/44 @ 100 | 70,000 | 78,499 | |||||||||
Bristol-Myers Squibb Co., 3.40%, 7/26/29, Callable 4/26/29 @ 100 (c) | 220,000 | 235,668 | |||||||||
Gilead Sciences, Inc., 4.40%, 12/1/21, Callable 9/1/21 @ 100 (b) | 465,000 | 484,957 | |||||||||
HCA, Inc., 4.13%, 6/15/29, Callable 3/15/29 @ 100 | 91,000 | 96,661 | |||||||||
Humana, Inc., 2.90%, 12/15/22, Callable 11/15/22 @ 100 | 65,000 | 66,285 | |||||||||
1,252,388 | |||||||||||
Industrials (3.2%): | |||||||||||
Canadian National Railway Co., 3.20%, 8/2/46, Callable 2/2/46 @ 100 | 60,000 | 61,949 | |||||||||
Delta Air Lines, Inc., 3.80%, 4/19/23, Callable 3/19/23 @ 100 (e) | 130,000 | 134,935 | |||||||||
Fortive Corp., 3.15%, 6/15/26, Callable 3/15/26 @ 100 (b) | 95,000 | 97,280 | |||||||||
Hillenbrand, Inc., 4.50%, 9/15/26, Callable 7/15/26 @ 100 | 195,000 | 204,196 | |||||||||
Kansas City Southern, 4.95%, 8/15/45, Callable 2/15/45 @ 100 | 75,000 | 88,980 | |||||||||
Rockwell Automation, Inc. 3.50%, 3/1/29, Callable 12/1/28 @ 100 | 65,000 | 70,013 | |||||||||
6.25%, 12/1/37 | 60,000 | 82,205 | |||||||||
Roper Technologies, Inc., 2.95%, 9/15/29, Callable 6/15/29 @ 100 | 49,000 | 49,496 | |||||||||
Snap-on, Inc., 4.10%, 3/1/48, Callable 9/1/47 @ 100 (e) | 56,000 | 63,346 | |||||||||
Valmont Industries, Inc., 5.00%, 10/1/44, Callable 4/1/44 @ 100 (b) | 137,000 | 140,154 | |||||||||
992,554 | |||||||||||
Information Technology (2.6%): | |||||||||||
Apple, Inc., 4.65%, 2/23/46, Callable 8/23/45 @ 100 | 53,000 | 66,530 | |||||||||
Broadcom Corp., 3.00%, 1/15/22, Callable 12/15/21 @ 100 (b) | 77,000 | 78,150 | |||||||||
Lam Research Corp., 4.00%, 3/15/29, Callable 12/15/28 @ 100 (b) | 86,000 | 94,674 | |||||||||
Micron Technology, Inc., 4.19%, 2/15/27, Callable 12/15/26 @ 100 | 105,000 | 112,417 | |||||||||
NetApp, Inc., 3.25%, 12/15/22, Callable 9/15/22 @ 100 | 70,000 | 72,018 | |||||||||
NVIDIA Corp., 2.20%, 9/16/21, Callable 8/16/21 @ 100 | 85,000 | 85,392 | |||||||||
Texas Instruments, Inc., 4.15%, 5/15/48, Callable 11/15/47 @ 100 | 95,000 | 113,476 | |||||||||
Tyco Electronics Group SA, 7.13%, 10/1/37 | 34,000 | 49,973 | |||||||||
VMware, Inc., 2.95%, 8/21/22, Callable 7/21/22 @ 100 | 170,000 | 173,259 | |||||||||
845,889 |
See notes to financial statements.
29
Victory Portfolios Victory INCORE Investment Quality Bond Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Principal Amount | Value | |||||||||
Materials (1.1%): | |||||||||||
Celanese US Holdings LLC, 4.63%, 11/15/22 | $ | 100,000 | $ | 105,733 | |||||||
LYB International Finance II BV, 3.50%, 3/2/27, Callable 12/2/26 @ 100 (b) | 120,000 | 125,943 | |||||||||
Rio Tinto Finance USA Ltd. 3.75%, 6/15/25, Callable 3/15/25 @ 100 | 80,000 | 86,030 | |||||||||
5.20%, 11/2/40 | 50,000 | 65,541 | |||||||||
383,247 | |||||||||||
Real Estate (1.3%): | |||||||||||
Highwoods Realty LP, 3.63%, 1/15/23, Callable 10/15/22 @ 100 | 77,000 | 79,489 | |||||||||
Retail Properties of America, Inc., 4.00%, 3/15/25, Callable 12/15/24 @ 100 | 155,000 | 157,908 | |||||||||
Service Properties Trust, 4.35%, 10/1/24, Callable 9/1/24 @ 100 | 160,000 | 164,723 | |||||||||
402,120 | |||||||||||
Utilities (2.7%): | |||||||||||
Arizona Public Service Co., 2.95%, 9/15/27, Callable 6/15/27 @ 100 | 120,000 | 122,761 | |||||||||
Consolidated Edison, Inc., 6.30%, 8/15/37 | 110,000 | 151,527 | |||||||||
Iberdrola International BV 6.75%, 9/15/33 | 35,000 | 45,316 | |||||||||
6.75%, 7/15/36 | 28,000 | 39,101 | |||||||||
NextEra Energy Capital Holdings, Inc., 2.80%, 1/15/23, Callable 12/15/22 @ 100 | 145,000 | 147,405 | |||||||||
Oklahoma G&E Co., 5.25%, 5/15/41, Callable 11/15/40 @ 100 | 105,000 | 125,946 | |||||||||
Public Service Electric & Gas Co., 4.00%, 6/1/44, Callable 12/1/43 @ 100 | 65,000 | 70,938 | |||||||||
Vistra Operations Co. LLC, 3.70%, 1/30/27, Callable 11/30/26 @ 100 (c) | 134,000 | 133,222 | |||||||||
836,216 | |||||||||||
Total Corporate Bonds (Cost $13,578,036) | 14,056,808 | ||||||||||
Residential Mortgage Backed Securities (0.6%) | |||||||||||
Credit Suisse First Boston Mortgage Securities Corp., Series 2002-HE16, Class M1, 3.11% (LIBOR01M+132bps), 10/25/32, Callable 1/25/20 @ 100 (f) | 72,654 | 72,803 | |||||||||
JPMorgan Mortgage Trust, Series 2004-S2, Class 1A3, 4.75%, 2/25/20, Callable 1/25/20 @ 100 (b) | 6,576 | 6,604 | |||||||||
JPMorgan Mortgage Trust, Series 2016-4, Class A5, 3.50%, 10/25/46, Callable 9/25/29 @ 100 (b) (c) (d) | 103,386 | 104,861 | |||||||||
Residential Funding Mortgage Securities I, Inc., Series 2005-S3, Class A1, 4.75%, 3/25/20, Callable 1/25/20 @ 100 (b) | 1,060 | 1,060 | |||||||||
Total Residential Mortgage Backed Securities (Cost $184,019) | 185,328 | ||||||||||
U.S. Government Mortgage Backed Agencies (40.6%) | |||||||||||
Federal Home Loan Mortgage Corp. 5.00%, 6/15/23 (b) | 26,086 | 26,823 | |||||||||
Series 4139, Class DA, 1.25%, 12/15/27 (b) | 411,510 | 399,562 | |||||||||
Series 4395, Class PA, 2.50%, 4/15/37 (b) | 141,455 | 142,385 | |||||||||
5.50%, 6/1/38 | 48,655 | 54,450 | |||||||||
7.00%, 9/1/38 (b) | 10,854 | 13,052 | |||||||||
Series 4320, Class AP, 3.50%, 7/15/39 – 3/1/49 (b) | 2,130,979 | 2,218,125 |
See notes to financial statements.
30
Victory Portfolios Victory INCORE Investment Quality Bond Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Shares or Principal Amount | Value | |||||||||
Series 3713, Class PA, 2.00%, 2/15/40 – 3/15/40 (b) | $ | 491,101 | $ | 484,801 | |||||||
4.50%, 1/1/41 – 7/1/44 (b) | 571,260 | 619,819 | |||||||||
Series 4444, Class CH, 3.00%, 1/15/41 | 134,438 | 136,859 | |||||||||
Series 4049, Class AB, 2.75%, 12/15/41 (b) | 78,440 | 79,246 | |||||||||
Series 4494, Class JA, 3.75%, 5/15/42 (b) | 275,831 | 284,237 | |||||||||
4,459,359 | |||||||||||
Federal National Mortgage Association 6.00%, 8/1/21 – 2/1/37 (b) | 228,036 | 260,407 | |||||||||
5.50%, 4/1/22 – 1/1/38 (b) | 148,500 | 165,383 | |||||||||
7.00%, 8/1/23 – 6/1/32 (b) | 21,568 | 24,968 | |||||||||
7.50%, 12/1/29 – 2/1/31 (b) | 22,040 | 25,346 | |||||||||
8.00%, 6/1/30 – 9/1/30 (b) | 16,425 | 19,373 | |||||||||
5.00%, 12/1/34 – 3/1/40 | 82,254 | 90,815 | |||||||||
3.75%(LIBOR12M+166bps), 12/1/36 (b) (f) | 37,544 | 38,572 | |||||||||
4.50%, 12/1/38 – 5/25/40 (b) | 424,228 | 446,265 | |||||||||
Series 2013-33, Class UD, 2.50%, 4/25/39 – 12/25/47 (b) | 316,016 | 318,357 | |||||||||
Series 2013-137, Class A, 3.50%, 3/25/40 – 12/25/50 (b) | 1,431,174 | 1,480,751 | |||||||||
Series 2011-101, Class LA, 3.00%, 10/25/40 – 2/25/49 (b) | 2,549,188 | 2,606,996 | |||||||||
Series 2013-81, Class KA, 2.75%, 9/25/42 (b) | 315,193 | 319,146 | |||||||||
Series 2013-44, Class PB, 1.75%, 1/25/43 (b) | 291,634 | 284,406 | |||||||||
4.00%, 11/1/43 – 6/1/49 (b) | 1,819,528 | 1,924,657 | |||||||||
8,005,442 | |||||||||||
Government National Mortgage Association Series 2019-85, Class KG, 3.00%, 6/20/43 | 201,620 | 205,255 | |||||||||
4.50%, 10/20/49 | 124,384 | 130,738 | |||||||||
335,993 | |||||||||||
Multi-family (0.1%): | |||||||||||
Collateralized Mortgage Obligations (0.1%): | |||||||||||
Government National Mortgage Association 6.00%, 12/15/33 (b) | 20,944 | 23,727 | |||||||||
Total U.S. Government Mortgage Backed Agencies (Cost $12,644,469) | 12,824,521 | ||||||||||
U.S. Treasury Obligations (9.7%) | |||||||||||
U.S. Treasury Bills, 1.47%, 3/26/20 (g) | 1,160,000 | 1,155,938 | |||||||||
U.S. Treasury Bonds 3.00%, 2/15/48 | 200,000 | 225,469 | |||||||||
3.00%, 2/15/49 | 1,450,000 | 1,640,086 | |||||||||
U.S. Treasury Notes, 1.25%, 8/31/24 | 51,000 | 50,028 | |||||||||
Total U.S. Treasury Obligations (Cost $2,972,027) | 3,071,521 | ||||||||||
Collateral for Securities Loaned^ (2.1%) | |||||||||||
BlackRock Liquidity Funds TempFund Portfolio, Institutional Class, 1.75% (h) | 31,584 | 31,584 | |||||||||
Fidelity Investments Money Market Government Portfolio, Class I, 1.54% (h) | 174,007 | 174,007 | |||||||||
Fidelity Investments Prime Money Market Portfolio, Class I, 1.75% (h) | 5,275 | 5,275 |
See notes to financial statements.
31
Victory Portfolios Victory INCORE Investment Quality Bond Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Shares | Value | |||||||||
Goldman Sachs Financial Square Prime Obligations Fund, Institutional Class, 1.80% (h) | 105,118 | $ | 105,118 | ||||||||
JPMorgan Prime Money Market Fund, Capital Class, 1.73% (h) | 115,638 | 115,638 | |||||||||
Morgan Stanley Institutional Liquidity Prime Portfolio, Institutional Class, 1.76% (h) | 231,268 | 231,268 | |||||||||
Total Collateral for Securities Loaned (Cost $662,890) | 662,890 | ||||||||||
Total Investments (Cost $30,671,249) — 99.3% | 31,390,987 | ||||||||||
Other assets in excess of liabilities — 0.7% | 211,142 | ||||||||||
NET ASSETS — 100.00% | $ | 31,602,129 |
^ Purchased with cash collateral from securities on loan.
(a) Amount represents less than 0.05% of net assets.
(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, 2019, the fair value of these securities was $1,592,486 and amounted to 5.0% 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, 2019.
(e) All or a portion of this security is on loan.
(f) Variable or Floating-Rate Security. Rate disclosed is as of December 31, 2019.
(g) Rate represents the effective yield at December 31, 2019.
(h) Rate disclosed is the daily yield on December 31, 2019.
bps — Basis points
LIBOR — London InterBank Offered Rate
LIBOR01M — 1 Month US Dollar LIBOR, rate disclosed as of December 31, 2019, based on the last reset date of the security
LIBOR03M — 3 Month US Dollar LIBOR, rate disclosed as of December 31, 2019, based on the last reset date of the security
LIBOR12M — 12 Month US Dollar LIBOR, rate disclosed as of December 31, 2019, 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.
32
Victory Portfolios Victory INCORE Investment Quality Bond Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Futures Contracts Purchased
Number of Contracts | Expiration Date | Notional Amount | Value | Unrealized Appreciation (Depreciation) | |||||||||||||||||||
10-Year U.S. Treasury Note Future | 1 | 3/20/20 | $ | 129,363 | $ | 128,422 | $ | (941 | ) | ||||||||||||||
2-Year U.S. Treasury Note Future | 2 | 3/31/20 | 431,363 | 431,000 | (363 | ) | |||||||||||||||||
5-Year U.S. Treasury Note Future | 9 | 3/31/20 | 1,071,073 | 1,067,484 | (3,589 | ) | |||||||||||||||||
$ | (4,893 | ) | |||||||||||||||||||||
Total unrealized appreciation | $ | — | |||||||||||||||||||||
Total unrealized depreciation | (4,893 | ) | |||||||||||||||||||||
Total net unrealized appreciation (depreciation) | $ | (4,893 | ) |
Centrally Cleared
Credit Default Swap Agreements — Sell Protection (a)
Underlying Instrument* | Fixed Deal Receive Rate | Maturity Date | Payment Frequency | Implied Credit Spread at December 31, 2019 (b) | Notional Amount (c) | Value | Premiums Paid (Received) | Unrealized Appreciation (Depreciation) | |||||||||||||||||||||||||||
CDX North America High Yield Index; Series 33 | 5.00 | % | 12/20/24 | Quarterly | 2.79 | % | $ | 693,000 | $ | 66,901 | $ | 52,807 | $ | 14,094 | |||||||||||||||||||||
$ | 66,901 | $ | 52,807 | $ | 14,094 |
* As of December 31, 2019, the CDX North America High Yield Index (the "Index") included securities which had defaulted and represented 1% of the Index. Reflects the notional amount after the default of securities. Reflects the notional amount after the default of securities.
(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 Index.
See notes to financial statements.
33
Victory Portfolios Victory INCORE Low Duration Bond Fund | Schedule of Portfolio Investments December 31, 2019 |
Security Description | Principal Amount | Value | |||||||||
Asset Backed Securities (9.8%) | |||||||||||
AmeriCredit Automobile Receivables Trust, Series 2016-3, Class C, 2.24%, 4/8/22, Callable 3/8/21 @ 100 (a) | $ | 4,435,000 | $ | 4,436,134 | |||||||
AmeriCredit Automobile Receivables Trust, Series 2015-3, Class D, 3.34%, 8/8/21, Callable 2/8/20 @ 100 (a) | 2,510,298 | 2,512,886 | |||||||||
AmeriCredit Automobile Receivables Trust, Series 2017-2, Class B, 2.40%, 5/18/22, Callable 11/18/21 @ 100 (a) | 2,715,000 | 2,718,701 | |||||||||
AmeriCredit Automobile Receivables Trust, Series 2018-1, Class B, 3.26%, 1/18/24, Callable 9/18/22 @ 100 (a) | 3,200,000 | 3,247,261 | |||||||||
Chrysler Capital Auto Receivables Trust, Series 2016-BA, Class B, 2.22%, 5/16/22, Callable 7/15/21 @ 100 (a) (b) | 4,180,000 | 4,182,646 | |||||||||
Drive Auto Receivables Trust, Series 2017-AA, Class C, 2.98%, 1/18/22, Callable 3/15/21 @ 100 (a) (b) | 133,686 | 133,717 | |||||||||
Santander Drive Auto Receivables Trust, Series 2016-3, Class C, 2.46%, 3/15/22, Callable 1/15/21 @ 100 (a) | 3,136,481 | 3,139,680 | |||||||||
Santander Drive Auto Receivables Trust, Series 2017-3, Class B, 2.19%, 3/15/22, Callable 8/15/21 @ 100 (a) | 146,434 | 146,420 | |||||||||
Santander Retail Auto Lease Trust, Series 2018-A, Class B, 3.20%, 4/20/22, Callable 2/20/21 @ 100 (a) (b) | 2,400,000 | 2,418,449 | |||||||||
World Financial Network Credit Card Master Trust, Series 2017-A, Class A, 2.12%, 3/15/24 (a) | 3,155,000 | 3,154,972 | |||||||||
Total Asset Backed Securities (Cost $26,034,373) | 26,090,866 | ||||||||||
Collateralized Mortgage Obligations (3.9%) | |||||||||||
Galaxy CLO Ltd., Series 2017-24A, Class A, 3.12% (LIBOR03M+112bps), 1/15/31, Callable 1/15/20 @ 100 (a) (b) (c) | 2,000,000 | 1,985,500 | |||||||||
GS Mortgage Securities Trust, Series 2012-GC6, Class B, 5.65%, 1/10/45 (a) (b) (d) | 3,500,000 | 3,694,480 | |||||||||
Steele Creek CLO Ltd., Series 2017-1A, Class A, 3.25% (LIBOR03M+125bps), 1/15/30, Callable 1/15/20 @ 100 (a) (b) (c) | 2,825,000 | 2,815,802 | |||||||||
Voya CLO Ltd., Series 2017-4A, Class A1, 3.13% (LIBOR03M+113bps), 10/15/30, Callable 1/15/20 @ 100 (a) (b) (c) | 2,000,000 | 1,993,724 | |||||||||
Total Collateralized Mortgage Obligations (Cost $10,638,585) | 10,489,506 | ||||||||||
Corporate Bonds (43.7%) | |||||||||||
Communication Services (4.1%): | |||||||||||
Activision Blizzard, Inc., 2.60%, 6/15/22, Callable 5/15/22 @ 100 | 455,000 | 460,569 | |||||||||
AT&T, Inc. 2.45%, 6/30/20, Callable 5/30/20 @ 100 (a) | 3,500,000 | 3,509,520 | |||||||||
3.20%, 3/1/22, Callable 2/1/22 @ 100 (a) | 509,000 | 521,216 | |||||||||
4.25%, 3/1/27, Callable 12/1/26 @ 100 (a) | 514,000 | 564,161 | |||||||||
Electronic Arts, Inc., 3.70%, 3/1/21, Callable 2/1/21 @ 100 (a) | 4,185,000 | 4,261,879 | |||||||||
Verizon Communications, Inc. 5.15%, 9/15/23 (a) | 216,000 | 239,879 | |||||||||
3.38%, 2/15/25 (a) | 354,000 | 374,748 | |||||||||
3.01%(LIBOR03M+110bps), 5/15/25, Callable 3/15/25 @ 100 (a) (c) | 827,000 | 845,550 | |||||||||
10,777,522 |
See notes to financial statements.
34
Victory Portfolios Victory INCORE Low Duration Bond Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Principal Amount | Value | |||||||||
Consumer Discretionary (4.8%): | |||||||||||
Best Buy Co., Inc. 5.50%, 3/15/21, Callable 12/15/20 @ 100 (a) (e) | $ | 3,055,000 | $ | 3,150,957 | |||||||
4.45%, 10/1/28, Callable 7/1/28 @ 100 (a) | 409,000 | 448,661 | |||||||||
D.R. Horton, Inc., 4.75%, 2/15/23, Callable 11/15/22 @ 100 | 1,658,000 | 1,768,439 | |||||||||
General Motors Co., 4.88%, 10/2/23 (a) | 515,000 | 554,557 | |||||||||
Hasbro, Inc., 3.15%, 5/15/21, Callable 3/15/21 @ 100 (a) | 3,380,000 | 3,419,952 | |||||||||
NVR, Inc., 3.95%, 9/15/22, Callable 6/15/22 @ 100 (a) | 3,283,000 | 3,425,056 | |||||||||
12,767,622 | |||||||||||
Consumer Staples (2.6%): | |||||||||||
Altria Group, Inc., 4.40%, 2/14/26, Callable 12/14/25 @ 100 (a) | 620,000 | 673,221 | |||||||||
Constellation Brands, Inc. 2.61%(LIBOR03M+70bps), 11/15/21, Callable 2/10/20 @ 100 (a) (c) (e) | 2,500,000 | 2,503,676 | |||||||||
4.65%, 11/15/28, Callable 8/15/28 @ 100 (a) (e) | 375,000 | 421,766 | |||||||||
Kerry Group Financial Services Unlimited Co., 3.20%, 4/9/23, Callable 1/9/23 @ 100 (b) | 1,000,000 | 1,017,830 | |||||||||
Keurig Dr Pepper, Inc., 4.06%, 5/25/23, Callable 4/25/23 @ 100 | 1,385,000 | 1,463,086 | |||||||||
Pernod Ricard SA, 4.25%, 7/15/22 (b) | 833,000 | 876,016 | |||||||||
6,955,595 | |||||||||||
Energy (4.9%): | |||||||||||
Continental Resources, 4.50%, 4/15/23, Callable 1/15/23 @ 100 (a) | 801,000 | 839,344 | |||||||||
Ecopetrol SA, 5.88%, 9/18/23 (a) | 495,000 | 549,519 | |||||||||
EQM Midstream Partners LP, 4.75%, 7/15/23, Callable 6/15/23 @ 100 | 975,000 | 977,974 | |||||||||
LUKOIL International Finance BV, 6.13%, 11/9/20 (a) (b) | 5,185,000 | 5,355,586 | |||||||||
Marathon Petroleum Corp., 3.40%, 12/15/20, Callable 11/15/20 @ 100 (a) | 1,850,000 | 1,871,405 | |||||||||
Pioneer Natural Resource Co., 7.50%, 1/15/20 (a) | 2,085,000 | 2,088,669 | |||||||||
Plains All American Pipeline LP/PAA Finance Corp., 2.85%, 1/31/23, Callable 10/31/22 @ 100 | 1,010,000 | 1,018,232 | |||||||||
Valero Energy Corp., 4.00%, 4/1/29, Callable 1/1/29 @ 100 (a) | 382,000 | 411,937 | |||||||||
13,112,666 | |||||||||||
Financials (7.2%): | |||||||||||
Bank of America Corp. 2.25%, 4/21/20, MTN (a) (e) | 2,000,000 | 2,001,821 | |||||||||
2.33% (LIBOR03M+63bps), 10/1/21, Callable 10/1/20 @ 100 (a) (c) | 1,391,000 | 1,393,838 | |||||||||
4.20%, 8/26/24, MTN (a) | 458,000 | 492,048 | |||||||||
Capital One Financial Corp. 2.50%, 5/12/20, Callable 4/12/20 @ 100 (a) | 615,000 | 615,793 | |||||||||
3.45%, 4/30/21, Callable 3/30/21 @ 100 (a) | 3,500,000 | 3,562,825 | |||||||||
3.30%, 10/30/24, Callable 9/30/24 @ 100 (a) | 684,000 | 712,188 | |||||||||
Citigroup, Inc., 4.45%, 9/29/27 (a) | 404,000 | 445,204 | |||||||||
Enel Finance International NV, 2.88%, 5/25/22 (b) | 1,675,000 | 1,695,720 | |||||||||
Fifth Third Bancorp, 3.65%, 1/25/24, Callable 12/25/23 @ 100 (a) | 799,000 | 842,937 | |||||||||
Level 3 Financing, Inc., 5.38%, 1/15/24, Callable 2/10/20 @ 101.34 (a) | 637,000 | 646,867 | |||||||||
Marsh & McLennan Cos., Inc., 2.35%, 3/6/20, Callable 2/10/20 @ 100 (a) | 420,000 | 420,134 | |||||||||
Morgan Stanley, 4.88%, 11/1/22 (a) | 1,004,000 | 1,076,830 | |||||||||
Newcrest Finance Pty Ltd., 4.20%, 10/1/22 (a) (b) | 2,214,000 | 2,310,375 | |||||||||
ZB NA, 3.50%, 8/27/21 (a) | 1,785,000 | 1,825,466 | |||||||||
Zions Bancorp NA, 3.35%, 3/4/22, Callable 2/4/22 @ 100 (a) | 1,090,000 | 1,117,217 | |||||||||
19,159,263 |
See notes to financial statements.
35
Victory Portfolios Victory INCORE Low Duration Bond Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Principal Amount | Value | |||||||||
Health Care (4.9%): | |||||||||||
AbbVie, Inc., 2.30%, 5/14/21, Callable 4/14/21 @ 100 (a) | $ | 1,211,000 | $ | 1,215,384 | |||||||
Amgen, Inc., 2.20%, 5/11/20 (a) | 3,301,000 | 3,303,146 | |||||||||
Biogen, Inc., 2.90%, 9/15/20 (a) | 3,333,000 | 3,354,297 | |||||||||
Bristol-Myers Squibb Co., 2.88%, 2/19/21 (b) | 4,345,000 | 4,395,445 | |||||||||
Humana, Inc., 2.90%, 12/15/22, Callable 11/15/22 @ 100 | 560,000 | 571,071 | |||||||||
12,839,343 | |||||||||||
Industrials (2.3%): | |||||||||||
AerCap Ireland Capital DAC / AerCap Global Aviation Trust, 4.63%, 10/30/20 (a) | 2,065,000 | 2,106,961 | |||||||||
Delta Air Lines, Inc., 3.80%, 4/19/23, Callable 3/19/23 @ 100 (e) | 1,115,000 | 1,157,325 | |||||||||
Fortive Corp., 3.15%, 6/15/26, Callable 3/15/26 @ 100 (a) | 188,000 | 192,512 | |||||||||
IDEX Corp., 4.50%, 12/15/20, Callable 9/15/20 @ 100 (a) | 2,565,000 | 2,605,424 | |||||||||
Roper Technologies, Inc., 2.95%, 9/15/29, Callable 6/15/29 @ 100 | 391,000 | 394,961 | |||||||||
6,457,183 | |||||||||||
Information Technology (4.7%): | |||||||||||
Broadcom Corp., 3.00%, 1/15/22, Callable 12/15/21 @ 100 (a) | 988,000 | 1,002,751 | |||||||||
FLIR Systems, Inc., 3.13%, 6/15/21, Callable 5/15/21 @ 100 (a) (e) | 2,375,000 | 2,391,934 | |||||||||
Lam Research Corp., 4.00%, 3/15/29, Callable 12/15/28 @ 100 (a) | 501,000 | 551,531 | |||||||||
Lam Research Group, 2.80%, 6/15/21, Callable 5/15/21 @ 100 (a) | 3,328,000 | 3,367,836 | |||||||||
NetApp, Inc., 3.38%, 6/15/21, Callable 4/15/21 @ 100 (a) | 1,605,000 | 1,632,413 | |||||||||
VMware, Inc., 2.30%, 8/21/20 (a) (e) | 3,820,000 | 3,826,379 | |||||||||
12,772,844 | |||||||||||
Materials (2.2%): | |||||||||||
Anglo American Capital PLC, 4.13%, 4/15/21 (a) (b) | 3,525,000 | 3,599,272 | |||||||||
Celanese US Holdings LLC, 4.63%, 11/15/22 | 855,000 | 904,017 | |||||||||
LYB International Finance II BV, 3.50%, 3/2/27, Callable 12/2/26 @ 100 (a) | 548,000 | 575,137 | |||||||||
Lyondellbasell Industries NV, 6.00%, 11/15/21, Callable 8/17/21 @ 100 (a) | 800,000 | 849,704 | |||||||||
5,928,130 | |||||||||||
Real Estate (3.1%): | |||||||||||
CubeSmart, LP, 4.80%, 7/15/22, Callable 4/15/22 @ 100 (a) | 3,470,000 | 3,666,506 | |||||||||
Highwoods Realty LP, 3.20%, 6/15/21, Callable 4/15/21 @ 100 (a) | 3,130,000 | 3,170,909 | |||||||||
Piedmont Operating Partnership LP, 3.40%, 6/1/23, Callable 3/1/23 @ 100 | 1,033,000 | 1,059,548 | |||||||||
7,896,963 | |||||||||||
Utilities (2.9%): | |||||||||||
Eversource Energy, 2.50%, 3/15/21, Callable 2/15/21 @ 100 (a) | 2,900,000 | 2,914,790 | |||||||||
Exelon Corp. 3.50%, 6/1/22, Callable 5/1/22 @ 100 (a) | 2,681,000 | 2,752,073 | |||||||||
3.95%, 6/15/25, Callable 3/15/25 @ 100 (a) | 591,000 | 635,136 | |||||||||
NextEra Energy Capital Holdings, Inc., 2.80%, 1/15/23, Callable 12/15/22 @ 100 | 1,462,000 | 1,486,240 | |||||||||
7,788,239 | |||||||||||
Total Corporate Bonds (Cost $115,138,704) | 116,455,370 | ||||||||||
Residential Mortgage Backed Securities (5.5%) | |||||||||||
Bear Stearns Alt-A Trust, Series 2003-3, Class 2A, 4.34%, 10/25/33, Callable 1/25/20 @ 100 (a) (d) | 1,661,095 | 1,661,095 | |||||||||
Credit Suisse First Boston Mortgage Securities Corp., Series 2003-23, Class 2A8, 4.50%, 12/31/49 (a) | 13,567 | 14,070 |
See notes to financial statements.
36
Victory Portfolios Victory INCORE Low Duration Bond Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Principal Amount | Value | |||||||||
Credit Suisse First Boston Mortgage Securities Corp., Series 2004-AR7, Class 4A1, 4.09%, 11/25/34, Callable 1/25/20 @ 100 (a) (d) | $ | 1,308,913 | $ | 1,308,913 | |||||||
GSR Mortgage Loan Trust, Series 2004-15F, Class 5A1, 5.50%, 1/25/20, Callable 8/25/24 @ 100 (a) | 18,129 | 16,701 | |||||||||
JPMorgan Mortgage Trust, Series 2004-S2, Class 1A3, 4.75%, 2/25/20, Callable 1/25/20 @ 100 (a) | 11,905 | 11,955 | |||||||||
JPMorgan Mortgage Trust, Series 2016-4, Class A5, 3.50%, 10/25/46, Callable 9/25/29 @ 100 (a) (b) (d) | 1,292,318 | 1,310,760 | |||||||||
JPMorgan Mortgage Trust, Series 2004-S1, Class 1A7, 5.00%, 9/25/34, Callable 1/25/20 @ 100 (a) | 44,062 | 42,382 | |||||||||
JPMorgan Mortgage Trust, Series 2016-3, Class 1A3, 3.50%, 10/25/46, Callable 6/25/25 @ 100 (a) (b) (d) | 787,637 | 798,862 | |||||||||
JPMorgan Mortgage Trust, Series 2014-5, Class A11, 2.98%, 10/25/29, Callable 7/25/23 @ 100 (a) (b) (d) | 3,554,262 | 3,595,290 | |||||||||
JPMorgan Mortgage Trust, Series 2017-1, Class A5, 3.50%, 1/25/47, Callable 1/25/28 @ 100 (a) (b) (d) | 1,657,060 | 1,680,550 | |||||||||
JPMorgan Mortgage Trust, Series 2017-3, Class 2A2, 2.50%, 8/25/47, Callable 11/25/24 @ 100 (a) (b) (d) | 2,084,535 | 2,079,951 | |||||||||
Madison Park Funding Ltd., Series 2007-4A, Class AR, 3.13% (LIBOR03M+120bps), 7/29/30, Callable 1/29/20 @ 100 (a) (b) (c) | 2,250,000 | 2,248,794 | |||||||||
Residential Funding Mortgage Securities I, Inc., Series 2005-S3, Class A1, 4.75%, 3/25/20, Callable 1/25/20 @ 100 (a) | 3,861 | 3,858 | |||||||||
Total Residential Mortgage Backed Securities (Cost $14,802,996) | 14,773,181 | ||||||||||
U.S. Government Mortgage Backed Agencies (13.1%) | |||||||||||
Federal Home Loan Mortgage Corp. 5.00%, 6/15/23 – 8/1/40 (a) | 1,041,886 | 1,148,718 | |||||||||
5.50%, 10/25/23 (a) | 5,782 | 6,028 | |||||||||
Series 4430, Class NG, 2.50%, 2/15/38 (a) | 2,079,018 | 2,086,017 | |||||||||
7.00%, 9/1/38 (a) | 5,210 | 6,265 | |||||||||
Series 4320, Class AP, 3.50%, 7/15/39 (a) | 1,391,894 | 1,440,742 | |||||||||
Series 3713, Class PA, 2.00%, 2/15/40 – 4/15/44 (a) | 8,142,311 | 8,069,251 | |||||||||
Series 4444, Class CH, 3.00%, 1/15/41 | 2,464,692 | 2,509,074 | |||||||||
Series 4049, Class AB, 2.75%, 12/15/41 (a) | 842,370 | 851,022 | |||||||||
16,117,117 | |||||||||||
Federal National Mortgage Association 6.00%, 2/1/37 (a) | 1,328,175 | 1,522,707 | |||||||||
Series 2013-83, Class CA, 3.50%, 10/25/37 – 3/25/44 (a) | 5,064,075 | 5,147,120 | |||||||||
Series 2013-33, Class UD, 2.50%, 4/25/39 (a) | 1,680,625 | 1,699,165 | |||||||||
Series 2011-21, Class PA, 4.50%, 5/25/40 (a) | 3,478,622 | 3,622,084 | |||||||||
Series 2011-101, Class LA, 3.00%, 10/25/40 (a) | 1,389,454 | 1,407,659 | |||||||||
5.00%, 2/1/41 – 10/1/41 (a) | 3,818,783 | 4,210,717 | |||||||||
17,609,452 | |||||||||||
Government National Mortgage Association Series 2018-22, Class JA, 3.00%, 1/20/44 (a) | 1,172,386 | 1,186,960 | |||||||||
Total U.S. Government Mortgage Backed Agencies (Cost $34,922,698) | 34,913,529 |
See notes to financial statements.
37
Victory Portfolios Victory INCORE Low Duration Bond Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Shares or Principal Amount | Value | |||||||||
U.S. Treasury Obligations (22.7%) | |||||||||||
U.S. Treasury Bills, 1.47%, 3/26/20 (f) | $ | 9,038,000 | $ | 9,006,354 | |||||||
U.S. Treasury Notes 1.50%, 8/31/21 | 46,500,000 | 46,425,528 | |||||||||
1.50%, 8/15/22 | 5,000,000 | 4,989,453 | |||||||||
Total U.S. Treasury Obligations (Cost $60,358,251) | 60,421,335 | ||||||||||
Collateral for Securities Loaned^ (0.7%) | |||||||||||
BlackRock Liquidity Funds TempFund Portfolio, Institutional Class, 1.75% (g) | 87,128 | 87,128 | |||||||||
Fidelity Investments Money Market Government Portfolio, Class I, 1.54% (g) | 480,015 | 480,015 | |||||||||
Fidelity Investments Prime Money Market Portfolio, Class I, 1.75% (g) | 14,552 | 14,552 | |||||||||
Goldman Sachs Financial Square Prime Obligations Fund, Institutional Class, 1.80% (g) | 289,979 | 289,979 | |||||||||
JPMorgan Prime Money Market Fund, Capital Class, 1.73% (g) | 318,999 | 318,999 | |||||||||
Morgan Stanley Institutional Liquidity Prime Portfolio, Institutional Class, 1.76% (g) | 637,976 | 637,976 | |||||||||
Total Collateral for Securities Loaned (Cost $1,828,649) | 1,828,649 | ||||||||||
Total Investments (Cost $263,724,256) — 99.4% | 264,972,436 | ||||||||||
Other assets in excess of liabilities — 0.6% | 1,624,248 | ||||||||||
NET ASSETS — 100.00% | $ | 266,596,684 |
^ Purchased with cash collateral from securities on loan.
(a) All or a portion of this security has been segregated as collateral for derivative instruments.
(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, 2019, the fair value of these securities was $48,188,769 and amounted to 18.1% of net assets.
(c) Variable or Floating-Rate Security. Rate disclosed is as of December 31, 2019.
(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, 2019.
(e) All or a portion of this security is on loan.
(f) Rate represents the effective yield at December 31, 2019.
(g) Rate disclosed is the daily yield on December 31, 2019.
bps — Basis points
LIBOR — London InterBank Offered Rate
LIBOR03M — 3 Month US Dollar LIBOR, rate disclosed as of December 31, 2019, 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.
38
Victory Portfolios Victory INCORE Low Duration Bond Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Futures Contracts Purchased
Number of Contracts | Expiration Date | Notional Amount | Value | Unrealized Appreciation (Depreciation) | |||||||||||||||||||
2-Year U.S. Treasury Note Future | 415 | 3/31/20 | $ | 89,507,793 | $ | 89,432,500 | $ | (75,293 | ) |
Futures Contracts Sold
Number of Contracts | Expiration Date | Notional Amount | Value | Unrealized Appreciation (Depreciation) | |||||||||||||||||||
5-Year U.S. Treasury Note Future | 275 | 3/31/20 | $ | 32,697,056 | $ | 32,617,578 | $ | 79,478 | |||||||||||||||
Total unrealized appreciation | $ | 79,478 | |||||||||||||||||||||
Total unrealized depreciation | (75,293 | ) | |||||||||||||||||||||
Total net unrealized appreciation (depreciation) | $ | 4,185 |
Centrally Cleared
Credit Default Swap Agreements — Sell Protection (a)
Underlying Instrument* | Fixed Deal Receive Rate | Maturity Date | Payment Frequency | Implied Credit Spread at December 31, 2019 (b) | Notional Amount (c) | Value | Premiums Paid (Received) | Unrealized Appreciation (Depreciation) | |||||||||||||||||||||||||||
CDX North America High Yield Index; Series 33 | 5.00 | % | 12/20/24 | Quarterly | 2.79 | % | $ | 5,940,000 | $ | 573,441 | $ | 452,628 | $ | 120,813 | |||||||||||||||||||||
$ | 573,441 | $ | 452,628 | $ | 120,813 |
* As of December 31, 2019, the CDX North America High Yield Index (the "Index") included securities which had defaulted and represented 1% of the Index. Reflects the notional amount after the default of securities. Reflects the notional amount after the default of securities.
(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 Index.
See notes to financial statements.
39
Victory Portfolios Victory High Yield Fund | Schedule of Portfolio Investments December 31, 2019 |
Security Description | Shares or Principal Amount | Value | |||||||||
Common Stocks (0.6%) | |||||||||||
Communication Services (0.6%): | |||||||||||
AMC Networks, Inc., Class A (a) | 6,000 | $ | 237,000 | ||||||||
Cinemark Holdings, Inc. | 10,000 | 338,500 | |||||||||
TEGNA, Inc. | 33,000 | 550,770 | |||||||||
1,126,270 | |||||||||||
Total Common Stocks (Cost $1,101,256) | 1,126,270 | ||||||||||
Senior Secured Loans (22.8%) | |||||||||||
Ai Ladder Luxembourg Subco Sarl, 1st Lien Term Loan B, 6.60% (LIBOR03M+450bps), 5/4/25 (b) | $ | 782,850 | 780,893 | ||||||||
Alphabet Holding Co., Inc., 2nd Lien Term Loan, 9.45% (LIBOR01M+775bps), 8/15/25 (b) | 1,500,000 | 1,313,745 | |||||||||
Avaya, Inc., 1st Lien Term Loan B, 5.99% (LIBOR01M+425bps), 12/15/24 (b) | 583,069 | 571,117 | |||||||||
Bass Pro Group LLC, Term Loan B, 6.70% (LIBOR01M+500bps), 12/16/23 (b) | 1,972,411 | 1,965,014 | |||||||||
Clear Channel Outdoor Holdings, Inc., 5.20% (LIBOR01M+350bps), 11/25/26 (b) | 1,745,625 | 1,753,725 | |||||||||
CPM Holdings, Inc., 1st Lien Term Loan, 5.45% (LIBOR01M+375bps), 11/17/25 (b) | 792,000 | 782,496 | |||||||||
Crown Finance US, Inc., 1st Lien Term Loan B, 3.95% (LIBOR01M+225bps), 2/7/25 (b) | 2,021,983 | 2,019,213 | |||||||||
Dayco Products LLC, 6.16% (LIBOR03M+425bps), 5/19/24 (b) | 975,000 | 848,250 | |||||||||
Diamond Sports Group LLC, 5.03% (LIBOR01M+325bps), 8/24/26 (b) | 1,995,000 | 1,990,850 | |||||||||
Dynasty Acquisition Co., Inc., 6.10% (LIBOR03M+400bps), 4/6/26 (b) | 648,724 | 652,675 | |||||||||
GTT Communications, Inc., 1st Lien Term Loan B, 4.45% (LIBOR01M+275bps) (b) | 879,845 | 732,392 | |||||||||
Hertz Corp., Term Loan B1, 4.46% (LIBOR01M+275bps), 6/30/23 (b) (c) | 1,959,288 | 1,969,495 | |||||||||
Holley Purchaser, Inc., 1st Lien Term Loan, 6.93% (LIBOR03M+500bps), 10/24/25 (b) | 990,000 | 925,650 | |||||||||
II-VI, Inc., 5.21% (LIBOR03M+350bps), 9/24/26 (b) | 1,745,625 | 1,752,171 | |||||||||
Leslie's Poolmart, Inc., Term Loan B, 5.34% (LIBOR02M+350bps), 8/16/23 (b) | 989,899 | 924,318 | |||||||||
LifeScan Global Corp., 1st Lien Term Loan, 8.06% (LIBOR06M+600bps), 6/19/24 (b) | 1,893,731 | 1,798,249 | |||||||||
Navistar, Inc., 1st Lien Term Loan B, 5.24% (LIBOR01M+350bps), 11/2/24 (b) | 1,977,437 | 1,969,191 | |||||||||
Nexstar Broadcasting, Inc., 1st Lien Term Loan, 4.45% (LIBOR01M+275bps), 6/20/26 (b) | 1,750,000 | 1,758,155 | |||||||||
Packaging Coordinators Midco, Inc., 2nd Lien Term Loan, 10.86% (LIBOR03M+875bps), 7/1/24 (b) | 500,000 | 497,500 | |||||||||
Radiate Holdco LLC, 4.70% (LIBOR01M+300bps), 2/1/24 (b) | 979,849 | 982,788 | |||||||||
Reynolds Group Holdings, Inc., 1st Lien Term Loan B, 4.45% (LIBOR01M+275bps), 2/5/23 (b) | 1,783,038 | 1,787,229 | |||||||||
SIWF Holdings, Inc., 10.20% (LIBOR01M+850bps), 5/26/26 (b) | 1,000,000 | 942,500 | |||||||||
Specialty Building Products Holdings LLC, 1st Lien Term Loan, 7.45% (LIBOR01M+575bps), 10/1/25 (b) | 992,500 | 986,714 | |||||||||
Spectacle Gary Holdings LLC, 10.80% (LIBOR01M+900bps), 10/17/24 (b) (c) | 1,864,865 | 1,883,514 | |||||||||
Spectacle Gary Holdings LLC, 10/17/25 (c) (d) | 135,135 | 136,486 | |||||||||
Sprint Communications, Inc., 1st Lien Term Loan B, 4.25% (LIBOR01M+250bps), 2/2/24 (b) | 1,977,208 | 1,957,929 | |||||||||
Standard Aero, 6.10% (LIBOR03M+400bps), 4/6/26 (b) | 348,776 | 350,900 | |||||||||
Stars Group Holdings BV, 5.60% (LIBOR03M+350bps), 6/27/25 (b) | 859,126 | 865,896 |
See notes to financial statements.
40
Victory Portfolios Victory High Yield Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Principal Amount | Value | |||||||||
Station Casinos LLC, Term Loan B, 4.21% (LIBOR01M+250bps), 6/8/23 (b) | $ | 989,653 | $ | 993,404 | |||||||
Team Health Holdings, Inc., 1st Lien Term Loan B, 4.45% (LIBOR01M+275bps), 2/6/24 (b) | 1,492,327 | 1,203,652 | |||||||||
Tenneco, Inc., 1st Lien Term Loan B, 4.70% (LIBOR01M+300bps), 6/18/25 (b) | 1,984,975 | 1,937,415 | |||||||||
Univision Communications, 1st Lien Term Loan C5, 4.45% (LIBOR01M+275bps), 3/15/24 (b) | 1,972,594 | 1,945,017 | |||||||||
Total Senior Secured Loans (Cost $41,140,613) | 40,978,543 | ||||||||||
Corporate Bonds (70.7%) | |||||||||||
Communication Services (11.3%): | |||||||||||
AMC Entertainment Holdings, Inc., 6.13%, 5/15/27, Callable 5/15/22 @ 103.06 (e) | 2,000,000 | 1,828,800 | |||||||||
AMC Networks, Inc., 4.75%, 8/1/25, Callable 8/1/21 @ 102.38 (e) | 2,000,000 | 2,012,260 | |||||||||
Cablevision Systems Corp., 5.88%, 9/15/22 | 2,000,000 | 2,155,760 | |||||||||
CCO Holdings LLC/CCO Holdings Capital Corp., 5.00%, 2/1/28, Callable 8/1/22 @ 102.5 (f) | 2,000,000 | 2,097,300 | |||||||||
Consolidated Communications, Inc., 6.50%, 10/1/22, Callable 2/10/20 @ 101.63 (e) | 2,000,000 | 1,826,860 | |||||||||
Hughes Satellite Systems Corp., 6.63%, 8/1/26 (e) | 1,750,000 | 1,938,983 | |||||||||
Meredith Corp., 6.88%, 2/1/26, Callable 2/1/21 @ 103.44 (e) | 2,000,000 | 2,079,760 | |||||||||
Sirius XM Radio, Inc., 5.50%, 7/1/29, Callable 7/1/24 @ 102.75 (f) (g) | 2,000,000 | 2,164,299 | |||||||||
Telesat Canada/Telesat LLC, 6.50%, 10/15/27, Callable 10/15/22 @ 103.25 (f) | 2,000,000 | 2,081,740 | |||||||||
T-Mobile USA, Inc., 4.75%, 2/1/28, Callable 2/1/23 @ 102.38 | 2,000,000 | 2,097,620 | |||||||||
20,283,382 | |||||||||||
Consumer Discretionary (11.5%): | |||||||||||
1011778 BC ULC / New Red Finance, Inc., 4.38%, 1/15/28, Callable 11/15/22 @ 102.19 (f) | 1,780,000 | 1,793,457 | |||||||||
Beazer Homes USA, Inc., 5.88%, 10/15/27, Callable 10/15/22 @ 102.94 (e) | 2,000,000 | 2,017,880 | |||||||||
Boyd Gaming Corp., 6.38%, 4/1/26, Callable 4/1/21 @ 103.19 | 2,000,000 | 2,155,080 | |||||||||
Eldorado Resorts, Inc., 6.00%, 9/15/26, Callable 9/15/21 @ 104.5 | 1,750,000 | 1,932,490 | |||||||||
Golden Nugget, Inc., 8.75%, 10/1/25, Callable 10/1/20 @ 104.38 (f) | 1,400,000 | 1,499,190 | |||||||||
Installed Building Products, Inc., 5.75%, 2/1/28, Callable 2/1/23 @ 102.88 (f) | 1,200,000 | 1,282,452 | |||||||||
Mattel, Inc., 5.45%, 11/1/41, Callable 5/1/41 @ 100 | 2,000,000 | 1,687,400 | |||||||||
MGM Resorts International, 5.50%, 4/15/27, Callable 1/15/27 @ 100 | 2,000,000 | 2,221,199 | |||||||||
Panther BF Aggregator 2 LP/Panther Finance Co., Inc., 8.50%, 5/15/27, Callable 5/15/22 @ 104.25 (f) | 2,000,000 | 2,125,120 | |||||||||
Scientific Games International, Inc., 8.25%, 3/15/26, Callable 3/15/22 @ 104.13 (f) | 1,750,000 | 1,928,990 | |||||||||
The Enterprise Development Authority, 12.00%, 7/15/24, Callable 7/15/21 @ 109 (f) | 1,200,000 | 1,375,896 | |||||||||
Yum! Brands, Inc., 5.35%, 11/1/43, Callable 5/1/43 @ 100 | 1,000,000 | 1,000,090 | |||||||||
21,019,244 | |||||||||||
Consumer Staples (6.9%): | |||||||||||
Albertsons Cos. LLC, 5.75%, 3/15/25, Callable 2/10/20 @ 104.31 | 2,000,000 | 2,074,860 | |||||||||
Albertsons Cos., Inc./Safeway, Inc./New Albertsons LP/Albertsons LLC, 5.88%, 2/15/28, Callable 8/15/22 @ 104.41 (f) | 875,000 | 930,738 | |||||||||
B&G Foods, Inc., 5.25%, 4/1/25, Callable 4/1/20 @ 103.94 (e) | 1,750,000 | 1,803,690 | |||||||||
Cott Holdings, Inc., 5.50%, 4/1/25, Callable 4/1/20 @ 104.13 (f) (g) | 1,750,000 | 1,829,520 | |||||||||
Dole Food Co., Inc., 7.25%, 6/15/25, Callable 6/15/20 @ 103.63 (f) | 1,750,000 | 1,693,755 |
See notes to financial statements.
41
Victory Portfolios Victory High Yield Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Principal Amount | Value | |||||||||
Post Holdings, Inc., 5.00%, 8/15/26, Callable 8/15/21 @ 102.5 (f) | $ | 2,000,000 | $ | 2,119,500 | |||||||
Simmons Foods, Inc., 7.75%, 1/15/24, Callable 1/15/21 @ 103.88 (f) | 1,715,000 | 1,844,037 | |||||||||
12,296,100 | |||||||||||
Energy (0.5%): | |||||||||||
Citgo Holding, Inc., 9.25%, 8/1/24, Callable 8/1/21 @ 104.63 (f) | 875,000 | 939,759 | |||||||||
Financials (11.2%): | |||||||||||
Acrisure LLC/Acrisure Finance, Inc., 8.13%, 2/15/24, Callable 2/15/21 @ 104.06 (f) | 1,875,000 | 2,037,899 | |||||||||
AmWINS Group, Inc., 7.75%, 7/1/26, Callable 7/1/21 @ 105.81 (f) | 1,000,000 | 1,104,910 | |||||||||
BCPE Cycle Merger Sub II, Inc., 10.63%, 7/15/27, Callable 7/15/22 @ 105.31 (f) | 1,500,000 | 1,532,355 | |||||||||
Capitol Investment Merger Sub 2 LLC, 10.00%, 8/1/24, Callable 8/1/21 @ 105 (e) (f) | 1,750,000 | 1,821,015 | |||||||||
Compass Group Diversified Holdings LLC, 8.00%, 5/1/26, Callable 5/1/21 @ 104 (f) (g) | 1,000,000 | 1,084,080 | |||||||||
Downstream Development Authority of the Quapaw Tribe of Oklahoma, 10.50%, 2/15/23, Callable 2/15/20 @ 107.25 (f) | 1,000,000 | 1,050,030 | |||||||||
Eagle Holding Co. II LLC, 7.75%, 5/15/22, Callable 2/10/20 @ 101 PIK (e) (f) | 1,750,000 | 1,775,725 | |||||||||
Gray Escrow, Inc., 7.00%, 5/15/27, Callable 5/15/22 @ 105.25 (f) | 2,000,000 | 2,228,360 | |||||||||
Intelsat Jackson Holdings SA, 5.50%, 8/1/23, Callable 2/10/20 @ 101.83 | 2,000,000 | 1,716,600 | |||||||||
LABL Escrow Issuer LLC, 10.50%, 7/15/27, Callable 7/15/22 @ 105.25 (e) (f) | 1,750,000 | 1,791,598 | |||||||||
Resideo Funding, Inc., 6.13%, 11/1/26, Callable 11/1/21 @ 104.59 (e) (f) | 2,000,000 | 1,999,840 | |||||||||
Wolverine Escrow LLC, 13.13%, 11/15/27, Callable 11/15/22 @ 109.84 (e) (f) | 2,000,000 | 2,057,720 | |||||||||
20,200,132 | |||||||||||
Health Care (10.3%): | |||||||||||
Air Medical Group Holdings, Inc., 6.38%, 5/15/23, Callable 2/10/20 @ 101.59 (e) (f) | 1,750,000 | 1,558,095 | |||||||||
Avantor, Inc., 9.00%, 10/1/25, Callable 10/1/20 @ 106.75 (f) (g) | 1,000,000 | 1,119,150 | |||||||||
Bausch Health Cos., Inc., 6.13%, 4/15/25, Callable 4/15/20 @ 103.06 (f) | 2,000,000 | 2,069,580 | |||||||||
Endo Finance LLC, 6.00%, 2/1/25, Callable 2/10/20 @ 103 (f) | 2,000,000 | 1,353,980 | |||||||||
HCA, Inc., 5.38%, 2/1/25 | 2,000,000 | 2,213,760 | |||||||||
Ortho-Clinical Diagnostics, Inc., 6.63%, 5/15/22, Callable 2/10/20 @ 100 (e) (f) (g) | 1,750,000 | 1,741,915 | |||||||||
Regional Care Hospital Partners Holdings, Inc./LifePoint Health, Inc., 9.75%, 12/1/26, Callable 12/1/21 @ 104.88 (f) | 2,000,000 | 2,263,559 | |||||||||
Surgery Center Holdings, Inc., 10.00%, 4/15/27, Callable 4/15/22 @ 105 (e) (f) | 1,750,000 | 1,917,878 | |||||||||
Tenet Healthcare Corp., 6.75%, 6/15/23 (e) | 2,000,000 | 2,199,040 | |||||||||
Verscend Escrow Corp., 9.75%, 8/15/26, Callable 8/15/21 @ 104.88 (f) | 1,750,000 | 1,918,263 | |||||||||
18,355,220 | |||||||||||
Industrials (13.9%): | |||||||||||
Ahern Rentals, Inc., 7.38%, 5/15/23, Callable 2/10/20 @ 103.69 (f) | 1,750,000 | 1,389,063 | |||||||||
Algeco Global Finance 2 PLC, 10.00%, 8/15/23, Callable 2/15/20 @ 105 (e) (f) (g) | 1,750,000 | 1,734,023 | |||||||||
Apex Tool Group LLC/BC Mountain Finance, Inc., 9.00%, 2/15/23, Callable 2/10/20 @ 102 (f) | 1,750,000 | 1,568,613 | |||||||||
Aramark Services, Inc., 5.00%, 2/1/28, Callable 2/1/23 @ 102.5 (f) | 2,000,000 | 2,106,640 | |||||||||
Beacon Escrow Corp., 4.88%, 11/1/25, Callable 11/1/20 @ 102.44 (f) | 1,530,000 | 1,536,870 | |||||||||
Bombardier, Inc., 7.88%, 4/15/27, Callable 4/15/22 @ 103.94 (f) | 2,000,000 | 2,060,640 | |||||||||
Covanta Holding Corp., 5.88%, 7/1/25, Callable 7/1/20 @ 104.41 | 1,000,000 | 1,055,280 | |||||||||
Nielsen Finance LLC /Nielsen Finance Co., 5.00%, 4/15/22, Callable 2/10/20 @ 101.25 (f) | 2,000,000 | 2,010,520 |
See notes to financial statements.
42
Victory Portfolios Victory High Yield Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Shares or Principal Amount | Value | |||||||||
Pisces Midco, Inc., 8.00%, 4/15/26, Callable 4/15/21 @ 104 (e) (f) | $ | 1,750,000 | $ | 1,826,405 | |||||||
SRS Distribution, Inc., 8.25%, 7/1/26, Callable 7/1/21 @ 104.13 (e) (f) (g) | 1,750,000 | 1,807,103 | |||||||||
TransDigm, Inc., 6.50%, 7/15/24, Callable 2/10/20 @ 103.25 | 2,000,000 | 2,067,520 | |||||||||
Triumph Group, Inc., 6.25%, 9/15/24, Callable 9/15/20 @ 103.13 (f) | 1,350,000 | 1,420,389 | |||||||||
United Rentals North America, Inc., 6.50%, 12/15/26, Callable 12/15/21 @ 103.25 | 2,000,000 | 2,200,979 | |||||||||
XPO Logistics, Inc., 6.75%, 8/15/24, Callable 8/15/21 @ 103.38 (f) | 2,000,000 | 2,172,640 | |||||||||
24,956,685 | |||||||||||
Materials (5.1%): | |||||||||||
Ardagh Packaging Finance PLC/Holdings USA, Inc., 6.00%, 2/15/25, Callable 2/15/20 @ 104.5 (f) | 2,000,000 | 2,097,820 | |||||||||
Greif, Inc., 6.50%, 3/1/27, Callable 3/1/22 @ 103.25 (e) (f) | 2,000,000 | 2,164,980 | |||||||||
Intertape Polymer Group, Inc., 7.00%, 10/15/26, Callable 10/15/21 @ 103.5 (f) | 1,330,000 | 1,402,671 | |||||||||
Plastipak Holdings, Inc., 6.25%, 10/15/25, Callable 10/15/20 @ 103.13 (e) (f) | 1,990,000 | 1,714,027 | |||||||||
Titan Acquisition Ltd./Titan Co-Borrower LLC, 7.75%, 4/15/26, Callable 4/15/21 @ 103.88 (e) (f) (g) | 1,750,000 | 1,735,702 | |||||||||
9,115,200 | |||||||||||
Total Corporate Bonds (Cost $122,804,460) | 127,165,722 | ||||||||||
Collateral for Securities Loaned^ (14.5%) | |||||||||||
BlackRock Liquidity Funds TempFund Portfolio, Institutional Class, 1.75% (h) | 1,239,855 | 1,239,855 | |||||||||
Fidelity Investments Money Market Government Portfolio, Class I, 1.54% (h) | 6,830,716 | 6,830,716 | |||||||||
Fidelity Investments Prime Money Market Portfolio, Class I, 1.75% (h) | 207,086 | 207,086 | |||||||||
Goldman Sachs Financial Square Prime Obligations Fund, Institutional Class, 1.80% (h) | 4,126,459 | 4,126,459 | |||||||||
JPMorgan Prime Money Market Fund, Capital Class, 1.73% (h) | 4,539,425 | 4,539,425 | |||||||||
Morgan Stanley Institutional Liquidity Prime Portfolio, Institutional Class, 1.76% (h) | 9,078,540 | 9,078,540 | |||||||||
Total Collateral for Securities Loaned (Cost $26,022,081) | 26,022,081 | ||||||||||
Total Investments (Cost $191,068,410) — 108.6% | 195,292,616 | ||||||||||
Liabilities in excess of other assets — (8.6)% | (15,539,195 | ) | |||||||||
NET ASSETS — 100.00% | $ | 179,753,421 |
^ Purchased with cash collateral from securities on loan.
(a) Non-income producing security.
(b) Variable or Floating-Rate Security. Rate disclosed is as of December 31, 2019.
(c) Security purchased on a when-issued basis.
(d) The rates for this senior secured loan will be known on settlement date of the loan, subsequent to this report date. Senior secured loans have rates that will fluctuate over time in line with prevailing interest rates.
(e) All or a portion of this security is on loan.
(f) 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, 2019, the fair value of these securities was $86, 879, 809 and amounted to 48.3% of net assets.
See notes to financial statements.
43
Victory Portfolios Victory High Yield Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
(g) All or a portion of this security has been segregated as collateral for securities purchased on a when-issued basis.
(h) Rate disclosed is the daily yield on December 31, 2019.
bps — Basis points
LIBOR — London InterBank Offered Rate
LIBOR01M — 1 Month US Dollar LIBOR, rate disclosed as of December 31, 2019, based on the last reset date of the security
LIBOR02M — 2 Month US Dollar LIBOR, rate disclosed as of December 31, 2019, based on the last reset date of the security
LIBOR03M — 3 Month US Dollar LIBOR, rate disclosed as of December 31, 2019, based on the last reset date of the security
LIBOR06M — 6 Month US Dollar LIBOR, rate disclosed as of December 31, 2019, based on the last reset date of the security
LLC — Limited Liability Company
LP — Limited Partnership
PIK — Paid In-Kind security
PLC — Public Limited Company
ULC — Unlimited Liability Co.
See notes to financial statements.
44
Victory Portfolios Victory Tax-Exempt Fund | Schedule of Portfolio Investments December 31, 2019 |
Security Description | Principal Amount | Value | |||||||||
Municipal Bonds (96.6%) | |||||||||||
Arkansas (3.7%): | |||||||||||
Arkansas Development Finance Authority Revenue Bonds, 3.20%, 12/1/49, Continuously Callable @100 | $ | 1,500,000 | $ | 1,480,020 | |||||||
Lonoke White Public Water Authority Revenue Bonds, 3.00%, 12/1/45, Continuously Callable @100 | 1,000,000 | 988,760 | |||||||||
2,468,780 | |||||||||||
California (5.9%): | |||||||||||
California Educational Facilities Authority Revenue Bonds, 5.00%, 5/1/49 | 1,500,000 | 2,291,955 | |||||||||
Golden State Tobacco Securitization Corp. Revenue Bonds, Series A2, 5.00%, 6/1/47, Continuously Callable @100 | 1,500,000 | 1,550,625 | |||||||||
3,842,580 | |||||||||||
Connecticut (3.5%): | |||||||||||
Connecticut Health and Educational Facilities Authority Revenue Bonds, Series 2016 CT, 5.00%, 12/1/41, Continuously Callable @100 | 2,000,000 | 2,330,980 | |||||||||
Florida (5.2%): | |||||||||||
County of Broward Revenue Bonds, Series B, 1.73%, 12/1/48, Continuously Callable @100 | 1,110,000 | 1,110,000 | |||||||||
Miami-Dade County Public Facilities Revenue Refunding Bonds, Series 2015 A, 5.00%, 6/1/33, Continuously Callable @100 | 2,000,000 | 2,332,460 | |||||||||
3,442,460 | |||||||||||
Guam (1.8%): | |||||||||||
Port Authority of Guam Revenue, Series A, 5.00%, 7/1/48, Continuously Callable @100 | 1,000,000 | 1,182,680 | |||||||||
Illinois (24.9%): | |||||||||||
Chicago Board of Education General Obligation Bonds, 6.00%, 4/1/46, Continuously Callable @100 | 2,275,000 | 2,712,551 | |||||||||
Chicago General Obligation Refunding Bonds, Series A, 5.75%, 1/1/33, Continuously Callable @100 | 2,000,000 | 2,362,000 | |||||||||
Chicago Transit Authority Sales Tax Receipts Revenue Bonds, Series 2014, 5.00%, 12/1/44, Continuously Callable @100 | 2,450,000 | 2,764,653 | |||||||||
City of Chicago General Obligation Bonds | |||||||||||
Series A, 6.00%, 1/1/38, Continuously Callable @100 | 1,000,000 | 1,188,610 | |||||||||
Series A, 5.50%, 1/1/49, Continuously Callable @100 | 1,000,000 | 1,172,340 | |||||||||
City of Chicago Wastewater Transmission Revenue | |||||||||||
Series A, 5.00%, 1/1/47, Continuously Callable @100 | 1,000,000 | 1,130,130 | |||||||||
Series C, 5.00%, 1/1/34, Continuously Callable @100 | 1,000,000 | 1,123,260 | |||||||||
Illinois General Obligation Bonds, Series 2013, 5.50%, 7/1/27, Continuously Callable @100 | 2,000,000 | 2,213,460 | |||||||||
Sales Tax Securitization Corp. Revenue Bonds, Series 2018 C, 5.00%, 1/1/43, Continuously Callable @100 | 1,500,000 | 1,729,770 | |||||||||
16,396,774 | |||||||||||
Massachusetts (1.8%): | |||||||||||
University of Massachusetts Building Authority Project Revenue Bonds, Series 2014 1, 5.00%, 11/1/39, Continuously Callable @100 | 1,000,000 | 1,154,660 |
See notes to financial statements.
45
Victory Portfolios Victory Tax-Exempt Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Principal Amount | Value | |||||||||
Missouri (1.8%): | |||||||||||
Health & Educational Facilities Authority of the State of Missouri Revenue Bonds, 4.25%, 12/1/42, Continuously Callable @100 (a) | $ | 1,150,000 | $ | 1,188,836 | |||||||
New Jersey (11.3%): | |||||||||||
New Jersey Economic Development Authority Biomedical Research Facilities Revenue Bonds, Series 2016 A, 5.00%, 7/15/29, Continuously Callable @100 | 885,000 | 1,022,255 | |||||||||
New Jersey Economic Development Authority School Facilities Construction Revenue Bonds, Series 2015 WW, 5.25%, 6/15/32, Continuously Callable @100 | 3,000,000 | 3,427,919 | |||||||||
New Jersey Transportation Trust Fund Authority Revenue Bonds 5.00%, 6/15/28, Continuously Callable @100 | 1,000,000 | 1,173,790 | |||||||||
Series BB, 3.50%, 6/15/46, Continuously Callable @100 | 200,000 | 197,286 | |||||||||
Tobacco Settlement Financing Corp., Revenue Bonds, Series 2018 A, 5.00%, 6/1/46, Continuously Callable @100 | 1,500,000 | 1,703,415 | |||||||||
7,524,665 | |||||||||||
New York (14.1%): | |||||||||||
Metropolitan Transportation Authority Dedicated Tax Green Fund Revenue Bonds, Series 2016 B1, 5.00%, 11/15/56, Continuously Callable @100 | 1,545,000 | 1,837,129 | |||||||||
New York Counties Tobacco Trust II Revenue Bonds, 5.75%, 6/1/43, Continuously Callable @100 | 200,000 | 200,510 | |||||||||
New York Utility Debt Securitization Authority Revenue Bonds, Series 2013 TE, 5.00%, 12/15/41, Continuously Callable @100 | 1,500,000 | 1,699,995 | |||||||||
Port Authority of New York & New Jersey Revenue Bonds 5.00%, 10/1/30, Continuously Callable @100 | 2,000,000 | 2,157,940 | |||||||||
5.00%, 12/1/32, Continuously Callable @100 | 1,000,000 | 1,129,120 | |||||||||
TSASC, Inc. Revenue, Series A, 5.00%, 6/1/41, Continuously Callable @100 | 2,000,000 | 2,243,800 | |||||||||
9,268,494 | |||||||||||
North Carolina (5.0%): | |||||||||||
City of Charlotte, 4.00%, 6/1/49, Continuously Callable @100 | 1,670,000 | 1,866,342 | |||||||||
University of North Carolina Hill Revenue Bonds, 5.00%, 2/1/49 | 1,000,000 | 1,446,870 | |||||||||
3,313,212 | |||||||||||
Ohio (2.5%): | |||||||||||
Logan Elm Local School District General Obligation Bonds, 4.00%, 11/1/55, Continuously Callable @100 | 1,500,000 | 1,635,150 | |||||||||
Oregon (0.3%): | |||||||||||
Oregon State Lottery Revenue Bonds, Series A, 5.25%, 4/1/30, Continuously Callable @100 | 205,000 | 215,227 | |||||||||
Pennsylvania (5.5%): | |||||||||||
Pennsylvania Higher Educational Facilities Authority Revenue Bonds, Series 2010 E, 5.00%, 5/15/31, Continuously Callable @100 | 1,000,000 | 1,013,420 | |||||||||
Philadelphia School District General Obligation Bonds, Series A, 5.00%, 9/1/38, Continuously Callable @100 | 1,200,000 | 1,428,108 |
See notes to financial statements.
46
Victory Portfolios Victory Tax-Exempt Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Principal Amount | Value | |||||||||
School District of Philadelphia, GO, 5.00%, 9/1/44, Continuously Callable @100 | $ | 1,000,000 | $ | 1,189,380 | |||||||
3,630,908 | |||||||||||
Texas (2.4%): | |||||||||||
Canadian River Municipal Water Authority, Subordinate Lien Contract Revenue Bonds, Series 2011, 5.00%, 2/15/26, Continuously Callable @100 | 1,000,000 | 1,040,710 | |||||||||
New Hope Cultural Education Facilities Finance Corp. Revenue, 5.00%, 7/1/47, Continuously Callable @102 | 500,000 | 522,590 | |||||||||
1,563,300 | |||||||||||
Utah (1.7%): | |||||||||||
Utah Infrastructure Agency Revenue Bonds, Series A, 5.00%, 10/15/40, Continuously Callable @100 | 1,000,000 | 1,120,410 | |||||||||
Washington (4.1%): | |||||||||||
Richland Electric Utility Revenue Bonds, 5.00%, 11/1/41, Continuously Callable @100 | 2,370,000 | 2,724,244 | |||||||||
Wisconsin (1.1%): | |||||||||||
Ashwaubenon Community Development Authority, Brown County Expo Center Project Revenue Bonds, 3.00%, 6/1/44, Continuously Callable @100 | 700,000 | 704,907 | |||||||||
Total Municipal Bonds (Cost $59,183,931) | 63,708,267 | ||||||||||
Total Investments (Cost $59,183,931) — 96.6% | 63,708,267 | ||||||||||
Other assets in excess of liabilities — 3.4% | 2,260,269 | ||||||||||
NET ASSETS — 100.00% | $ | 65,968,536 |
(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, 2019, the fair value of these securities was $1,188,836 and amounted to 1.8% of net assets.
GO — General Obligation
See notes to financial statements.
47
Victory Portfolios Victory High Income Municipal Bond Fund | Schedule of Portfolio Investments December 31, 2019 |
Security Description | Principal Amount | Value | |||||||||
Municipal Bonds (95.8%) | |||||||||||
California (5.9%): | |||||||||||
California Educational Facilities Authority Revenue Bonds, 5.00%, 5/1/49 | $ | 1,000,000 | $ | 1,527,970 | |||||||
Golden State Tobacco Securitization Corp. Revenue Bonds, Series A2, 5.00%, 6/1/47, Continuously Callable @100 | 1,000,000 | 1,033,750 | |||||||||
2,561,720 | |||||||||||
Colorado (4.7%): | |||||||||||
Regional Transportation District, Denver Transit Partners Eagle P3 Project Revenue Bonds, Series 2010, 6.00%, 1/15/34, Continuously Callable @100 | 2,000,000 | 2,027,339 | |||||||||
Delaware (3.6%): | |||||||||||
The Delaware Municipal Electric Corp. Revenue Bonds, 5.00%, 10/1/44, Continuously Callable @100 | 1,290,000 | 1,557,004 | |||||||||
District of Columbia (2.4%): | |||||||||||
District of Columbia Tobacco Settlement Financing Corp. Revenue Bonds, 6.50%, 5/15/33 | 915,000 | 1,040,300 | |||||||||
Florida (16.2%): | |||||||||||
County of Broward Revenue Bonds, Series B, 1.73%, 12/1/48, Continuously Callable @100 | 600,000 | 600,000 | |||||||||
Osceola County Expressway System Revenue Bonds, Poinciana Parkway Project, Series 2014 A, 5.38%, 10/1/47, Pre-refunded 10/1/24 @ 100 | 1,000,000 | 1,191,450 | |||||||||
Sumter County Village Community Development District No. 10 Special Assessment Revenue Bonds, Series 2014, 5.75%, 5/1/31, Continuously Callable @100 | 1,325,000 | 1,459,315 | |||||||||
Sumter County Village Community Development District No. 8 Special Assessment Revenue Bonds | |||||||||||
Series 2010, 6.13%, 5/1/39, Continuously Callable @100 | 1,835,000 | 1,852,304 | |||||||||
Series 2010, 6.13%, 5/1/40, Continuously Callable @100 | 1,920,000 | 1,937,933 | |||||||||
7,041,002 | |||||||||||
Illinois (17.6%): | |||||||||||
Chicago Board of Education General Obligation Bonds, 6.00%, 4/1/46, Continuously Callable @100 | 1,500,000 | 1,788,495 | |||||||||
Chicago General Obligation Refunding Bonds, Series 2015 C, 5.00%, 1/1/38, Continuously Callable @100 | 1,000,000 | 1,106,330 | |||||||||
City of Chicago General Obligation Bonds | |||||||||||
Series A, 6.00%, 1/1/38, Continuously Callable @100 | 1,000,000 | 1,188,610 | |||||||||
Series A, 5.50%, 1/1/49, Continuously Callable @100 | 1,000,000 | 1,172,340 | |||||||||
Illinois General Obligation Bonds | |||||||||||
Series June 2013, 5.50%, 7/1/33, Continuously Callable @100 | 1,000,000 | 1,102,410 | |||||||||
Series June 2013, 5.50%, 7/1/38, Continuously Callable @100 | 1,250,000 | 1,372,038 | |||||||||
7,730,223 | |||||||||||
Indiana (0.9%): | |||||||||||
Indiana Finance Authority Revenue Bonds, 1.63%, 12/1/39, Callable 2/3/20 @ 100 | 400,000 | 400,000 |
See notes to financial statements.
48
Victory Portfolios Victory High Income Municipal Bond Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Principal Amount | Value | |||||||||
Massachusetts (2.9%): | |||||||||||
Massachusetts Educational Financing Authority, Education Loan Revenue Bonds, Issue J | |||||||||||
Series 2011, 5.63%, 7/1/28, Continuously Callable @100 | $ | 350,000 | $ | 359,793 | |||||||
Series 2011, 5.63%, 7/1/29, Continuously Callable @100 | 705,000 | 734,807 | |||||||||
Series 2011, 5.63%, 7/1/33, Continuously Callable @100 | 175,000 | 180,896 | |||||||||
1,275,496 | |||||||||||
Mississippi (2.7%): | |||||||||||
Mississippi Development Bank Revenue Bonds, 5.00%, 3/1/48, Continuously Callable @100 | 1,000,000 | 1,200,220 | |||||||||
Missouri (1.2%): | |||||||||||
Health & Educational Facilities Authority of the State of Missouri Revenue Bonds, 4.25%, 12/1/42, Continuously Callable @100 (a) | 500,000 | 516,885 | |||||||||
New Jersey (10.4%): | |||||||||||
New Jersey Economic Development Authority School Facilities Construction Revenue Bonds, Series 2015 WW, 5.25%, 6/15/32, Continuously Callable @100 | 1,000,000 | 1,142,640 | |||||||||
New Jersey Economic Development Motor Vehicle Surcharges Subordinate Revenue Bonds, Series A, 5.00%, 7/1/33, Continuously Callable @100 | 500,000 | 572,035 | |||||||||
New Jersey Higher Education Student Assistance Authority, Student Loan Revenue Bonds, Series 2011-1, 5.75%, 12/1/28, Continuously Callable @100 | 630,000 | 669,684 | |||||||||
New Jersey Transportation Trust Fund Authority Revenue Bonds, Series BB, 3.50%, 6/15/46, Continuously Callable @100 | 500,000 | 493,215 | |||||||||
Tobacco Settlement Financing Corp., Revenue Bonds, Series 2018 A, 5.00%, 6/1/46, Continuously Callable @100 | 1,500,000 | 1,703,415 | |||||||||
4,580,989 | |||||||||||
New York (0.2%): | |||||||||||
Niagara Area Development Corp. Revenue Bonds, 1.72%, 11/1/36, Callable 2/3/20 @ 100 | 100,000 | 100,000 | |||||||||
North Carolina (3.3%): | |||||||||||
University of North Carolina Hill Revenue Bonds, 5.00%, 2/1/49 | 1,000,000 | 1,446,870 | |||||||||
North Dakota (2.4%): | |||||||||||
Grand Forks, North Dakota Senior Housing and Nursing Facility Revenue Bonds, 5.00%, 12/1/36, Continuously Callable @100 | 1,000,000 | 1,057,550 | |||||||||
Ohio (2.4%): | |||||||||||
Logan Elm Local School District General Obligation Bonds, 4.00%, 11/1/55, Continuously Callable @100 | 975,000 | 1,062,848 | |||||||||
Oklahoma (0.0%): | |||||||||||
Oklahoma Development Finance Authority Continuing Care Retirement Community Revenue Bonds, Series 2012, 6.00%, 1/1/32, Continuously Callable @100 (b) | 1,885,000 | 18,533 | |||||||||
Oregon (1.3%): | |||||||||||
Clackamas County Hospital Facility Authority Revenue Bonds, Series A, 5.00%, 11/15/52, Continuously Callable @102 | 500,000 | 565,975 |
See notes to financial statements.
49
Victory Portfolios Victory High Income Municipal Bond Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Principal Amount | Value | |||||||||
South Carolina (4.0%): | |||||||||||
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 | $ | 1,756,439 | |||||||
South Dakota (1.4%): | |||||||||||
Oglala Sioux Tribe, Series 2012, 5.00%, 10/1/22, Callable 2/10/20 @ 100 (a) | 600,000 | 600,756 | |||||||||
Texas (4.8%): | |||||||||||
New Hope Cultural Education Facilities Finance Corp. Revenue, 5.00%, 7/1/47, Continuously Callable @102 | 1,000,000 | 912,170 | |||||||||
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 | 1,167,000 | |||||||||
2,079,170 | |||||||||||
Utah (4.3%): | |||||||||||
Utah Charter School Finance Authority Revenue Bonds, 5.00%, 4/15/37, Continuously Callable @100 | 500,000 | 573,505 | |||||||||
Utah Infrastructure Agency Revevnue Bonds, Series A, 5.38%, 10/15/40, Continuously Callable @100 | 1,150,000 | 1,326,778 | |||||||||
1,900,283 | |||||||||||
West Virginia (2.5%): | |||||||||||
The Country Commission of Monongalia Country, WV Special District Excise Tax Revenue Bonds, Series 2017 A, 5.75%, 6/1/43, Continuously Callable @100 (a) | 1,000,000 | 1,094,440 | |||||||||
Wisconsin (0.7%): | |||||||||||
Ashwaubenon Community Development Authority, Brown County Expo Center Project Revenue Bonds, 3.00%, 6/1/44, Continuously Callable @100 | 300,000 | 302,103 | |||||||||
Total Municipal Bonds (Cost $39,276,430) | 41,916,145 | ||||||||||
Total Investments (Cost $39,276,430) — 95.8% | 41,916,145 | ||||||||||
Other assets in excess of liabilities — 4.2% | 1,851,838 | ||||||||||
NET ASSETS — 100.00% | $ | 43,767,983 |
(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, 2019, the fair value of these securities was $2,212,081 and amounted to 5.1% of net assets.
(b) Defaulted security.
LLC — Limited Liability Company
See notes to financial statements.
50
Victory Portfolios Victory Floating Rate Fund | Schedule of Portfolio Investments December 31, 2019 |
Security Description | Principal Amount | Value | |||||||||
Senior Secured Loans (83.5%) | |||||||||||
Acrisure LLC, 1st Lien Term Loan B, 6.35% (LIBOR03M+425bps), 11/22/23 (a) | $ | 6,796,479 | $ | 6,804,976 | |||||||
Ai Ladder Luxembourg Subco Sarl, 1st Lien Term Loan B, 6.60% (LIBOR03M+450bps), 5/4/25 (a) | 5,871,373 | 5,856,695 | |||||||||
Air Medical Group Holdings, Inc., 5.95% (LIBOR01M+425bps), 3/14/25 (a) | 4,974,684 | 4,813,006 | |||||||||
Air Methods Corp, 5.60% (LIBOR03M+350bps), 4/21/24 (a) | 3,969,466 | 3,463,359 | |||||||||
Aldevron LLC, 6.19% (LIBOR03M+425bps), 9/20/26 (a) | 6,200,000 | 6,262,000 | |||||||||
Alphabet Holding Co., Inc., 1st Lien Term Loan, 5.20% (LIBOR01M+350bps), 8/15/24 (a) | 5,474,000 | 5,268,725 | |||||||||
Alphabet Holding Co., Inc., 2nd Lien Term Loan, 9.45% (LIBOR01M+775bps), 8/15/25 (a) | 4,950,000 | 4,335,359 | |||||||||
American Axle & Manufacturing, Inc., 1st Lien Term Loan B, 4.05% (LIBOR01M+225bps), 4/6/24 (a) | 5,305,538 | 5,305,538 | |||||||||
American Axle & Manufacturing, Inc., 1st Lien Term Loan B, 4.19% (LIBOR03M+225bps), 4/6/24 (a) | 1,319,089 | 1,319,089 | |||||||||
American Renal Holdings, Inc., 6.70% (LIBOR01M+500bps), 6/15/24 (a) | 5,040,305 | 4,772,110 | |||||||||
Amneal Pharmaceuticals LLC, 1st Lien Term Loan B, 5.25% (LIBOR01M+350bps), 3/23/25 (a) | 7,878,151 | 7,054,884 | |||||||||
AmWINS Group, Inc.,(LIBOR01M+275bps), 1/25/24 (a) | 5,765,082 | 5,805,437 | |||||||||
Apex Tool Group LLC, 7.20% (LIBOR01M+550bps), 8/19/24 (a) | 3,950,000 | 3,887,669 | |||||||||
AppLovin Corp., 1st Lien Term Loan B, 5.20% (LIBOR01M+350bps), 8/15/25 (a) | 5,940,000 | 5,973,442 | |||||||||
Asurion LLC, 1st Lien Term Loan B7, 4.70% (LIBOR01M+300bps), 11/4/24 (a) | 6,895,000 | 6,930,716 | |||||||||
Avaya, Inc., 1st Lien Term Loan B, 5.99% (LIBOR01M+425bps), 12/15/24 (a) | 6,727,724 | 6,589,806 | |||||||||
Bass Pro Group LLC, Term Loan B, 6.70% (LIBOR01M+500bps), 12/16/23 (a) | 8,305,997 | 8,274,850 | |||||||||
Blount International, Inc., 1st Lien Term Loan B, 5.95% (LIBOR06M+375bps), 4/12/23 (a) | 5,895,450 | 5,902,819 | |||||||||
Boyd Gaming Corp., 3.85% (LIBOR01W+225bps), 9/15/23 (a) | 1,621,315 | 1,630,994 | |||||||||
Brand Energy & Infrastructure Services, Inc., 1st Lien Term Loan, 6.18%-6.35% (LIBOR03M+425bps), 6/21/24 (a) | 5,782,673 | 5,760,987 | |||||||||
Builders FirstSource, Inc., 4.70% (LIBOR01M+300bps), 2/29/24 (a) | 866,667 | 868,365 | |||||||||
BW NHHC Holdco, Inc., 10.91% (LIBOR03M+900bps), 5/15/26 (a) | 3,000,000 | 1,920,000 | |||||||||
Calpine Corp., 4.20% (LIBOR03M+250bps), 8/12/26 (a) | 4,550,978 | 4,575,872 | |||||||||
Chassix, Inc., 7.44% (LIBOR03M+550bps), 11/10/23 (a) | 1,903,890 | 1,742,060 | |||||||||
Chassix, Inc., 7.44% (LIBOR06M+550bps), 11/10/23 (a) | 2,001,299 | 1,831,188 | |||||||||
CIBT Solutions, Inc., 1st Lien Term Loan, 5.85% (LIBOR03M+375bps), 6/1/24 (a) | 3,860,204 | 3,667,194 | |||||||||
Citgo Holding, Inc., 8.70% (LIBOR01M+700bps), 8/1/23 (a) | 5,688,000 | 5,785,151 | |||||||||
Clear Channel Outdoor Holdings, Inc., 5.20% (LIBOR01M+350bps), 11/25/26 (a) | 4,987,500 | 5,010,642 | |||||||||
Concrete Pumping Holdings, Inc., 7.70% (LIBOR01M+600bps), 11/14/25 (a) | 5,775,000 | 5,649,856 | |||||||||
Consolidated Communications, Inc., 1st Lien Term Loan B, 4.71% (LIBOR01M+300bps), 10/5/23 (a) | 4,899,254 | 4,627,737 | |||||||||
CPM Holdings, Inc., 1st Lien Term Loan, 5.45% (LIBOR01M+375bps), 11/17/25 (a) | 2,970,000 | 2,934,360 |
See notes to financial statements.
51
Victory Portfolios Victory Floating Rate Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Principal Amount | Value | |||||||||
CPM Holdings, Inc., 2nd Lien Term Loan, 9.95% (LIBOR01M+825bps), 11/16/26 (a) | $ | 2,000,000 | $ | 1,957,080 | |||||||
Crown Finance US, Inc., 1st Lien Term Loan B, 3.95% (LIBOR01M+225bps), 2/7/25 (a) | 4,759,543 | 4,753,023 | |||||||||
Dawn Acquisition LLC, 1st Lien Term Loan B, 5.85% (LIBOR03M+375bps), 10/25/25 (a) | 3,465,000 | 3,285,963 | |||||||||
Dayco Products LLC, 6.16% (LIBOR03M+425bps), 5/19/24 (a) | 7,800,000 | 6,786,000 | |||||||||
Diamond Sports Group LLC, 5.03% (LIBOR01M+325bps), 8/24/26 (a) | 6,982,500 | 6,967,976 | |||||||||
Dole Food Co., Inc., 4.45% (LIBOR01M+275bps), 3/24/24 (a) | 6,000,000 | 5,982,840 | |||||||||
Dynasty Acquisition Co., Inc., 6.10% (LIBOR03M+400bps), 4/6/26 (a) | 3,632,853 | 3,654,977 | |||||||||
Eldorado Resorts, Inc., 4.00% (LIBOR01M+225bps), 3/16/24 (a) | 2,225,080 | 2,222,989 | |||||||||
Emerald TopCo, Inc., 5.20% (LIBOR01M+350bps), 7/25/26 (a) | 4,987,500 | 5,010,891 | |||||||||
Endo International PLC, 1st Lien Term Loan B, 6.00% (LIBOR01M+425bps), 4/29/24 (a) | 4,949,239 | 4,726,523 | |||||||||
Engineered Machinery Holdings, Inc., 1st Lien Term Loan, 5.10% (LIBOR03M+300bps), 7/19/24 (a) | 3,781,509 | 3,734,240 | |||||||||
Forterra Finance LLC, 1st Lien Term Loan, 4.70% (LIBOR01M+300bps), 10/25/23 (a) | 5,922,078 | 5,782,672 | |||||||||
Gates Global LLC, 1st Lien Term Loan B2, 4.45% (LIBOR01M+275bps), 3/31/24 (a) | 7,430,694 | 7,430,694 | |||||||||
Gentiva Health Services, Inc., 1st Lien Term Loan, 5.50% (LIBOR01M+375bps), 7/2/25 (a) | 5,820,754 | 5,846,249 | |||||||||
Greenway Health LLC, 5.85% (LIBOR03M+375bps), 2/16/24 (a) | 5,850,000 | 5,206,500 | |||||||||
GTT Communications, Inc., 1st Lien Term Loan B, 4.45% (LIBOR01M+275bps), 5/31/25 (a) | 5,890,101 | 4,902,979 | |||||||||
Gulf Finance LLC, 1st Lien Term Loan B, 7.36% (LIBOR03M+525bps), 8/25/23 (a) | 4,035,252 | 3,147,497 | |||||||||
Hertz Corp., Term Loan B1, 4.46% (LIBOR01M+275bps), 6/30/23 (a) | 7,577,925 | 7,617,406 | |||||||||
Holley Purchaser, Inc., 1st Lien Term Loan, 6.93% (LIBOR03M+500bps), 10/24/25 (a) | 4,356,000 | 4,072,860 | |||||||||
Hub International, Ltd., 1st Lien Term Loan B, 4.65% (LIBOR02M+275bps), 4/25/25 (a) | 7,387,500 | 7,377,749 | |||||||||
II-VI, Inc., 5.21% (LIBOR03M+350bps), 9/24/26 (a) | 4,987,500 | 5,006,203 | |||||||||
Intelsat Jackson Holdings SA, 1st Lien Term Loan B3, 5.68% (LIBOR06M+375bps), 11/27/23 (a) | 10,000,000 | 10,008,900 | |||||||||
Janus International Group LLC, 1st Lien Term Loan, 5.45% (LIBOR01M+375bps), 2/9/25 (a) | 5,947,405 | 5,887,932 | |||||||||
Kindred Healthcare LLC, 1st Lien Term Loan B, 6.75% (LIBOR01M+500bps), 7/2/25 (a) | 5,925,000 | 5,954,625 | |||||||||
Leslie's Poolmart, Inc., Term Loan B, 5.34% (LIBOR02M+350bps), 8/16/23 (a) | 6,650,769 | 6,210,156 | |||||||||
LifeScan Global Corp., 1st Lien Term Loan, 8.06% (LIBOR06M+600bps), 6/19/24 (a) | 3,348,000 | 3,179,193 | |||||||||
LifeScan Global Corp., 2nd Lien Term Loan, 11.56% (LIBOR06M+950bps), 6/19/25 (a) | 2,250,000 | 1,933,133 | |||||||||
Men's Wearhouse, Inc. (The), 4.94% (LIBOR03M+325bps), 4/9/25 (a) | 2,000,000 | 1,593,340 | |||||||||
MHI Holdings LLC, 6.70% (LIBOR01M+500bps), 9/20/26 (a) | 7,000,000 | 6,991,250 | |||||||||
Navistar, Inc., 1st Lien Term Loan B, 5.24% (LIBOR01M+350bps), 11/2/24 (a) | 7,368,750 | 7,338,022 |
See notes to financial statements.
52
Victory Portfolios Victory Floating Rate Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Principal Amount | Value | |||||||||
NCI Building Systems, Inc., 1st Lien Term Loan B, 5.49% (LIBOR01M+375bps), 4/14/25 (a) | $ | 5,894,938 | $ | 5,874,659 | |||||||
Ortho-Clinical Diagnostics SA, 1st Lien Term Loan B, 5.31% (LIBOR03M+325bps), 5/22/25 (a) | 3,647,169 | 3,600,814 | |||||||||
Packaging Coordinators Midco, Inc., 2nd Lien Term Loan, 10.86% (LIBOR03M+875bps), 7/1/24 (a) | 4,250,000 | 4,228,750 | |||||||||
Panther BF Aggregator 2 LP, 5.30% (LIBOR01M+350bps), 4/30/26 (a) | 6,982,500 | 6,995,627 | |||||||||
Pluto Acquisition I, Inc., 6.95% (LIBOR03M+500bps), 6/18/26 (a) | 5,472,500 | 5,472,500 | |||||||||
Precyse Acquisition Corp., 6.20% (LIBOR01M+450bps), 10/20/22 (a) | 6,688,363 | 5,534,621 | |||||||||
Radiate Holdco LLC, 4.70% (LIBOR01M+300bps), 2/1/24 (a) | 7,780,000 | 7,803,340 | |||||||||
Regionalcare Hospital Partners Holdings, Inc., 6.20% (LIBOR01M+450bps), 11/16/25 (a) | 6,451,250 | 6,498,023 | |||||||||
Reynolds Group Holdings, Inc., 1st Lien Term Loan B, 4.45% (LIBOR01M+275bps), 2/5/23 (a) | 5,979,569 | 5,993,621 | |||||||||
Robertshaw US Holding Corp., 1st Lien Term Loan, 5.00% (LIBOR01M+325bps), 2/15/25 (a) | 1,965,000 | 1,778,325 | |||||||||
Robertshaw US Holding Corp., 2nd Lien Term Loan, 9.75% (LIBOR01M+800bps), 2/15/26 (a) | 4,000,000 | 3,200,000 | |||||||||
Sabert Corp., 6.25% (LIBOR01M+450bps), 11/26/26 (a) | 4,000,000 | 4,031,680 | |||||||||
SIWF Holdings, Inc., 10.20% (LIBOR01M+850bps), 5/26/26 (a) | 1,500,000 | 1,413,750 | |||||||||
SIWF Holdings, Inc., 5.95% (LIBOR01M+425bps), 5/27/25 (a) | 3,940,000 | 3,920,300 | |||||||||
Specialty Building Products Holdings LLC, 1st Lien Term Loan, 7.45% (LIBOR01M+575bps), 10/1/25 (a) | 6,947,500 | 6,906,996 | |||||||||
Spectacle Gary Holdings LLC, 10.80% (LIBOR01M+900bps), 10/17/25 (a) (b) | 405,405 | 409,459 | |||||||||
Spectacle Gary Holdings LLC, 10/17/24 (b) (c) | 5,594,595 | 5,650,541 | |||||||||
Sprint Communications, Inc., 1st Lien Term Loan B, 4.75% (LIBOR01M+300bps), 2/3/24 (a) | 5,422,557 | 5,395,444 | |||||||||
SRS Distribution, Inc., 6.20% (LIBOR01M+450bps), 5/23/25 (a) | 2,500,000 | 2,503,125 | |||||||||
SRS Distribution, Inc., 1st Lien Term Loan B, 4.95% (LIBOR01M+325bps), 5/19/25 (a) | 3,950,000 | 3,914,450 | |||||||||
Standard Aero, 6.10% (LIBOR03M+400bps), 4/6/26 (a) | 1,953,147 | 1,965,042 | |||||||||
Station Casinos LLC, Term Loan B, 4.21% (LIBOR01M+250bps), 6/8/23 (a) | 5,619,915 | 5,641,214 | |||||||||
Tailwind Smith Cooper Intermediate Corp., 10.71% (LIBOR01M+900bps), 5/28/27 (a) | 3,000,000 | 2,805,000 | |||||||||
Tailwind Smith Cooper Intermediate Corp., 6.71% (LIBOR01M+500bps), 5/28/26 (a) | 4,987,500 | 4,763,063 | |||||||||
Team Health Holdings, Inc., 1st Lien Term Loan B, 4.45% (LIBOR01M+275bps), 2/6/24 (a) | 6,471,854 | 5,219,938 | |||||||||
Tecomet, Inc., 1st Lien Term Loan B, 4.99% (LIBOR01M+325bps), 4/18/24 (a) | 6,824,999 | 6,833,530 | |||||||||
Telesat LLC, 4.63% (LIBOR01M+275bps), 11/22/26 (a) | 6,000,000 | 6,017,520 | |||||||||
Tenneco, Inc., 1st Lien Term Loan B, 4.70% (LIBOR01M+300bps), 6/18/25 (a) | 6,435,000 | 6,280,817 | |||||||||
Thor Industries, Inc., 1st Lien Term Loan B, 5.50% (LIBOR01M+375bps), 2/1/26 (a) | 3,940,601 | 3,950,452 | |||||||||
Titan Acquisition, Ltd., 4.70% (LIBOR01M+300bps), 3/28/25 (a) | 4,892,652 | 4,805,269 | |||||||||
Tortoise Borrower LLC, 5.20% (LIBOR03M+350bps), 1/31/25 (a) | 4,513,688 | 4,479,835 | |||||||||
Univision Communications, 1st Lien Term Loan C5, 4.45% (LIBOR01M+275bps), 3/15/24 (a) | 6,547,508 | 6,455,974 |
See notes to financial statements.
53
Victory Portfolios Victory Floating Rate Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Principal Amount | Value | |||||||||
US LBM Borrower LLC, 5.45% (LIBOR01M+375bps), 8/20/22 (a) | $ | 7,787,019 | $ | 7,825,954 | |||||||
US Renal Care, Inc., 6.75% (LIBOR03M+500bps), 6/14/26 (a) | 4,987,500 | 4,937,625 | |||||||||
USI, Inc., 1st Lien Term Loan B, 5.10% (LIBOR03M+300bps), 5/16/24 (a) | 5,812,767 | 5,806,954 | |||||||||
UTZ Quality Foods LLC, 1st Lien Term Loan, 5.20% (LIBOR01M+350bps), 11/14/24 (a) | 6,350,637 | 6,314,121 | |||||||||
Verscend Holding Corp., 6.20% (LIBOR01M+450bps), 8/10/25 (a) | 5,925,000 | 5,959,542 | |||||||||
Vertex Aerospace Services Corp., 1st Lien Term Loan B, 6.20% (LIBOR01M+450bps), 6/16/25 (a) | 2,955,000 | 2,964,249 | |||||||||
WP CPP Holdings LLC, 1st Lien Term Loan B, 5.68% (LIBOR03M+375bps), 4/30/25 (a) | 3,950,000 | 3,915,438 | |||||||||
WP CPP Holdings LLC, 2nd Lien Term Loan, 9.68% (LIBOR03M+775bps), 4/30/26 (a) | 2,000,000 | 1,966,260 | |||||||||
Total Senior Secured Loans (Cost $497,678,162) | 489,228,570 | ||||||||||
Corporate Bonds (13.9%) | |||||||||||
Communication Services (1.6%): | |||||||||||
AMC Entertainment Holdings, Inc., 6.13%, 5/15/27, Callable 5/15/22 @ 103.06 | 5,000,000 | 4,572,000 | |||||||||
Consolidated Communications, Inc., 6.50%, 10/1/22, Callable 2/10/20 @ 101.63 | 5,000,000 | 4,567,150 | |||||||||
9,139,150 | |||||||||||
Consumer Discretionary (3.1%): | |||||||||||
Golden Nugget, Inc., 8.75%, 10/1/25, Callable 10/1/20 @ 104.38 (d) | 5,000,000 | 5,354,250 | |||||||||
Scientific Games International, Inc., 8.25%, 3/15/26, Callable 3/15/22 @ 104.13 (d) | 6,000,000 | 6,613,680 | |||||||||
The Enterprise Development Authority, 12.00%, 7/15/24, Callable 7/15/21 @ 109 (d) | 5,000,000 | 5,732,900 | |||||||||
17,700,830 | |||||||||||
Financials (6.2%): | |||||||||||
BCPE Cycle Merger Sub II, Inc., 10.63%, 7/15/27, Callable 7/15/22 @ 105.31 (d) | 4,200,000 | 4,290,594 | |||||||||
Capitol Investment Merger Sub 2 LLC, 10.00%, 8/1/24, Callable 8/1/21 @ 105 (d) | 5,000,000 | 5,202,900 | |||||||||
Compass Group Diversified Holdings LLC, 8.00%, 5/1/26, Callable 5/1/21 @ 104 (d) (e) | 5,000,000 | 5,420,400 | |||||||||
Eagle Holding Co. II LLC, 7.75%, 5/15/22, Callable 2/10/20 @ 101 PIK (d) | 5,000,000 | 5,073,500 | |||||||||
LABL Escrow Issuer LLC, 10.50%, 7/15/27, Callable 7/15/22 @ 105.25 (d) | 6,500,000 | 6,654,505 | |||||||||
Wolverine Escrow LLC | |||||||||||
9.00%, 11/15/26, Callable 11/15/22 @ 106.75 (d) | 4,500,000 | 4,716,180 | |||||||||
13.13%, 11/15/27, Callable 11/15/22 @ 109.84 (d) | 4,750,000 | 4,887,085 | |||||||||
36,245,164 | |||||||||||
Health Care (0.8%): | |||||||||||
Endo Finance LLC, 6.00%, 2/1/25, Callable 2/10/20 @ 103 (d) | 3,000,000 | 2,030,970 | |||||||||
Ortho-Clinical Diagnostics, Inc., 6.63%, 5/15/22, Callable 2/10/20 @ 100 (d) (e) | 3,000,000 | 2,986,140 | |||||||||
5,017,110 |
See notes to financial statements.
54
Victory Portfolios Victory Floating Rate Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Principal Amount | Value | |||||||||
Industrials (1.8%): | |||||||||||
Algeco Global Finance 2 PLC, 10.00%, 8/15/23, Callable 2/15/20 @ 105 (d) (e) | $ | 4,000,000 | $ | 3,963,480 | |||||||
Apex Tool Group LLC/BC Mountain Finance, Inc., 9.00%, 2/15/23, Callable 2/10/20 @ 102 (d) | 4,000,000 | 3,585,400 | |||||||||
SRS Distribution, Inc., 8.25%, 7/1/26, Callable 7/1/21 @ 104.13 (d) (e) | 3,000,000 | 3,097,890 | |||||||||
10,646,770 | |||||||||||
Materials (0.4%): | |||||||||||
Titan Acquisition Ltd./Titan Co-Borrower LLC, 7.75%, 4/15/26, Callable 4/15/21 @ 103.88 (d) (e) | 2,500,000 | 2,479,575 | |||||||||
Total Corporate Bonds (Cost $78,118,354) | 81,228,599 | ||||||||||
Total Investments (Cost $575,796,516) — 97.4% | 570,457,169 | ||||||||||
Other assets in excess of liabilities — 2.6% | 15,430,589 | ||||||||||
NET ASSETS — 100.00% | $ | 585,887,758 |
(a) Variable or Floating-Rate Security. Rate disclosed is as of December 31, 2019.
(b) Security purchased on a when-issued basis.
(c) The rates for this senior secured loan will be known on settlement date of the loan, subsequent to this report date. Senior secured loans have rates that will fluctuate over time in line with prevailing interest rates.
(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, 2019, the fair value of these securities was $72,089,449 and amounted to 12.3% of net assets.
(e) All or a portion of this security has been segregated as collateral for securities purchased on a when-issued basis.
bps — Basis points
LIBOR — London InterBank Offered Rate
LIBOR01M — 1 Month US Dollar LIBOR, rate disclosed as of December 31, 2019, based on the last reset date of the security
LIBOR01W — 1 Week US Dollar LIBOR, rate disclosed as of December 31, 2019, based on the last reset date of the security
LIBOR02M — 2 Month US Dollar LIBOR, rate disclosed as of December 31, 2019, based on the last reset date of the security
LIBOR03M — 3 Month US Dollar LIBOR, rate disclosed as of December 31, 2019, based on the last reset date of the security
LIBOR06M — 6 Month US Dollar LIBOR, rate disclosed as of December 31, 2019, based on the last reset date of the security
LLC — Limited Liability Company
LP — Limited Partnership
PIK — Paid In-Kind
PLC — Public Limited Company
ULC — Unlimited Liability Co.
See notes to financial statements.
55
Victory Portfolios Victory Strategic Income Fund | Schedule of Portfolio Investments December 31, 2019 |
Security Description | Principal Amount | Value | |||||||||
Asset Backed Securities (9.6%) | |||||||||||
Ally Auto Receivables Trust, Series 2018-2, Class A3, 2.92%, 11/15/22, Callable 10/15/21 @ 100 | $ | 250,000 | $ | 251,537 | |||||||
AmeriCredit Automobile, Series 2017-3, Class A3, 1.90%, 3/18/22, Callable 2/18/22 @ 100 (a) | 132,803 | 132,716 | |||||||||
Applebee's Funding LLC/IHOP Funding LLC, Series 2019-1A, Class A2I, 4.19%, 6/7/49, Callable 6/5/22 @ 100 (b) | 500,000 | 506,383 | |||||||||
Capital Automotive REIT, Series 2016-A1, Class A, 4.55%, 2/15/46 (a) (b) | 717,509 | 746,375 | |||||||||
Chesapeake Funding LLC, Series 2018-A1, Class A1, 3.04%, 4/15/30 (b) | 221,290 | 223,782 | |||||||||
Enterprise Fleet Financing LLC, Series 2019-1, Class A2, 2.98%, 10/22/24 (b) | 200,000 | 201,909 | |||||||||
Focus Brands Funding LLC, Series 2017-1A, Class A2I, 3.86%, 4/30/47, Callable 4/30/20 @ 100 (a) (b) | 975,000 | 978,187 | |||||||||
Honda Auto Receivables Owner Trust, Series 2018-3, Class A3, 2.95%, 8/22/22, Callable 1/21/22 @ 100 | 200,000 | 202,011 | |||||||||
Mercedes-Benz Master Owner Trust, Series 2017-BA, Class A, 2.16% (LIBOR01M+42bps), 5/16/22 (a) (b) (c) | 500,000 | 500,308 | |||||||||
Santander Drive Auto Receivables Trust, Series 2016-3, Class C, 2.46%, 3/15/22, Callable 1/15/21 @ 100 (a) | 229,443 | 229,677 | |||||||||
Verizon Owner Trust, Series 2017-3A, Class B, 2.38%, 4/20/22, Callable 1/20/21 @ 100 (a) (b) | 500,000 | 501,242 | |||||||||
World Omni Auto Receivables Trust, Series 2017-A, Class A4, 2.24%, 6/15/23, Callable 5/15/21 @ 100 | 400,000 | 401,327 | |||||||||
Total Asset Backed Securities (Cost $4,870,888) | 4,875,454 | ||||||||||
Collateralized Mortgage Obligations (2.4%) | |||||||||||
COMM Mortgage Trust, Series 2015-PC1, Class A5, 3.90%, 7/10/50 (a) | 250,000 | 266,743 | |||||||||
Four Times Square Trust, Series 2006-4TS, Class A, 5.40%, 12/13/28 (b) | 463,797 | 473,872 | |||||||||
Hilton USA Trust, Series 2016-SFP, Class A, 2.83%, 11/5/35 (b) | 500,000 | 500,390 | |||||||||
Total Collateralized Mortgage Obligations (Cost $1,231,689) | 1,241,005 | ||||||||||
Corporate Bonds (53.7%) | |||||||||||
Communication Services (6.9%): | |||||||||||
AT&T, Inc., 4.50%, 3/9/48, Callable 9/9/47 @ 100 | 250,000 | 276,280 | |||||||||
Charter Communications Operating LLC/Capital, 4.20%, 3/15/28, Callable 12/15/27 @ 100 (a) (d) | 200,000 | 213,234 | |||||||||
Comcast Corp. | |||||||||||
4.15%, 10/15/28, Callable 7/15/28 @ 100 (a) | 850,000 | 956,972 | |||||||||
3.97%, 11/1/47, Callable 5/1/47 @ 100 | 300,000 | 330,588 | |||||||||
Verizon Communications, Inc. | |||||||||||
5.15%, 9/15/23 (a) | 500,000 | 555,275 | |||||||||
4.52%, 9/15/48 (a) | 250,000 | 299,393 | |||||||||
Vodafone Group PLC, 4.38%, 5/30/28 (a) | 800,000 | 886,728 | |||||||||
3,518,470 |
See notes to financial statements.
56
Victory Portfolios Victory Strategic Income Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Principal Amount | Value | |||||||||
Consumer Discretionary (2.6%): | |||||||||||
McDonald's Corp., 2.63%, 9/1/29, MTN, Callable 6/1/29 @ 100 (a) | $ | 530,000 | $ | 530,488 | |||||||
Target Corp., 3.50%, 7/1/24 (d) | 750,000 | 803,940 | |||||||||
1,334,428 | |||||||||||
Consumer Staples (4.1%): | |||||||||||
Anheuser-Busch InBev Worldwide, Inc. | |||||||||||
2.50%, 7/15/22 | 343,000 | 348,385 | |||||||||
4.75%, 1/23/29, Callable 10/23/28 @ 100 (a) | 450,000 | 522,202 | |||||||||
5.55%, 1/23/49, Callable 7/23/48 @ 100 | 500,000 | 649,644 | |||||||||
Bacardi Ltd., 4.70%, 5/15/28, Callable 2/15/28 @ 100 (b) | 250,000 | 272,778 | |||||||||
Constellation Brands, Inc., 4.10%, 2/15/48, Callable 8/15/47 @ 100 (a) (d) | 250,000 | 261,488 | |||||||||
2,054,497 | |||||||||||
Energy (12.2%): | |||||||||||
Boardwalk Pipelines LP, 4.80%, 5/3/29, Callable 2/3/29 @ 100 (a) | 500,000 | 532,600 | |||||||||
Cenovus Energy, Inc., 4.25%, 4/15/27, Callable 1/15/27 @ 100 (a) (d) | 300,000 | 317,538 | |||||||||
Energy Transfer Partners, 6.00%, 6/15/48, Callable 12/15/47 @ 100 (a) | 200,000 | 233,316 | |||||||||
Hess Corp., 4.30%, 4/1/27, Callable 1/1/27 @ 100 | 250,000 | 266,165 | |||||||||
Marathon Petroleum Corp., 3.80%, 4/1/28, Callable 1/1/28 @ 100 (a) | 500,000 | 525,425 | |||||||||
MPLX LP, 4.50%, 7/15/23, Callable 4/15/23 @ 100 (a) | 1,000,000 | 1,061,730 | |||||||||
Newfield Exploration Co., 5.38%, 1/1/26, Callable 10/1/25 @ 100 | 300,000 | 325,401 | |||||||||
Noble Energy, Inc., 3.85%, 1/15/28, Callable 10/15/27 @ 100 (d) | 575,000 | 606,625 | |||||||||
Occidental Petroleum Corp., 2.70%, 2/15/23, Callable 11/15/22 @ 100 | 500,000 | 503,765 | |||||||||
Rockies Express Pipeline LLC, 4.95%, 7/15/29, Callable 4/15/29 @ 100 (b) | 200,000 | 199,258 | |||||||||
Sabine Pass Liquefaction LLC, 5.00%, 3/15/27, Callable 9/15/26 @ 100 (a) | 1,000,000 | 1,102,539 | |||||||||
Williams Partners LP, 4.00%, 11/15/21, Callable 8/15/21 @ 100 (a) | 500,000 | 514,815 | |||||||||
6,189,177 | |||||||||||
Financials (11.3%): | |||||||||||
Apollo Management Holdings LP, 4.87%, 2/15/29, Callable 11/15/28 @ 100 (b) | 250,000 | 280,683 | |||||||||
Banco Santander SA, 3.13%, 2/23/23 (a) | 1,000,000 | 1,019,940 | |||||||||
Citigroup, Inc. | |||||||||||
2.90%, 12/8/21, Callable 11/8/21 @ 100 | 500,000 | 508,030 | |||||||||
4.08%(LIBOR03M+119bps), 4/23/29, Callable 4/23/28 @ 100 (a) (c) (d) | 750,000 | 822,188 | |||||||||
Credit Suisse Group AG, 3.87%(LIBOR03M+141bps), 1/12/29, Callable 1/12/28 @ 100 (a) (b) (c) | 750,000 | 801,405 | |||||||||
Jefferies GRP LLC/Capital, 4.85%, 1/15/27 | 500,000 | 551,714 | |||||||||
John Deere Capital Corp., 3.65%, 10/12/23 (a) | 500,000 | 529,670 | |||||||||
Morgan Stanley, 3.13%, 1/23/23 (a) | 750,000 | 770,917 | |||||||||
New York Life Insurance Co., 4.45%, 5/15/69, Callable 11/15/68 @ 100 (b) | 100,000 | 115,018 | |||||||||
PartnerRe Finance B LLC, 3.70%, 7/2/29, Callable 4/2/29 @ 100 (d) | 350,000 | 367,213 | |||||||||
5,766,778 | |||||||||||
Health Care (5.5%): | |||||||||||
Abbvie, Inc., 4.88%, 11/14/48, Callable 5/14/48 @ 100 | 100,000 | 115,362 | |||||||||
Becton Dickinson and Co., 3.36%, 6/6/24, Callable 4/6/24 @ 100 (a) | 850,000 | 885,148 | |||||||||
Bristol-Myers Squibb Co., 3.90%, 2/20/28, Callable 11/20/27 @ 100 (b) | 1,000,000 | 1,096,440 | |||||||||
CVS Health Corp., 3.35%, 3/9/21 (a) | 750,000 | 761,940 | |||||||||
2,858,890 |
See notes to financial statements.
57
Victory Portfolios Victory Strategic Income Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Principal Amount | Value | |||||||||
Industrials (3.7%): | |||||||||||
United Technologies Corp. | |||||||||||
3.65%, 8/16/23, Callable 7/16/23 @ 100 | $ | 500,000 | $ | 527,290 | |||||||
4.13%, 11/16/28, Callable 8/16/28 @ 100 (a) | 350,000 | 394,016 | |||||||||
4.63%, 11/16/48, Callable 5/16/48 @ 100 | 250,000 | 312,808 | |||||||||
Waste Connections, Inc., 3.50%, 5/1/29, Callable 2/1/29 @ 100 (a) | 600,000 | 635,616 | |||||||||
1,869,730 | |||||||||||
Information Technology (1.9%): | |||||||||||
Broadcom Corp., 3.63%, 1/15/24, Callable 11/15/23 @ 100 (a) | 700,000 | 724,976 | |||||||||
Fiserv, Inc., 3.80%, 10/1/23, Callable 9/1/23 @ 100 | 250,000 | 264,090 | |||||||||
989,066 | |||||||||||
Materials (2.3%): | |||||||||||
DuPont de Nemours, Inc., 4.21%, 11/15/23, Callable 10/15/23 @ 100 (a) | 500,000 | 534,765 | |||||||||
WRKCo, Inc., 4.90%, 3/15/29, Callable 12/15/28 @ 100 (a) | 600,000 | 682,776 | |||||||||
1,217,541 | |||||||||||
Real Estate (1.6%): | |||||||||||
Alexandria Real Estate Equities, Inc., 3.38%, 8/15/31, Callable 5/15/31 @ 100 | 250,000 | 260,683 | |||||||||
Simon Property Group, LP, 3.75%, 2/1/24, Callable 11/1/23 @ 100 | 500,000 | 532,415 | |||||||||
793,098 | |||||||||||
Utilities (1.6%): | |||||||||||
Avangrid, Inc., 3.80%, 6/1/29, Callable 3/1/29 @ 100 | 750,000 | 795,780 | |||||||||
Total Corporate Bonds (Cost $26,068,506) | 27,387,455 | ||||||||||
Residential Mortgage Backed Securities (0.7%) | |||||||||||
Bank of America Funding Corp., Series 2004-2, Class 1CB1, 5.75%, 9/20/34, Callable 5/20/25 @ 100 (a) | 75,373 | 79,947 | |||||||||
Bear Stearns Alt-A Trust, Series 2003-3, Class 2A, 4.34%, 10/25/33, Callable 1/25/20 @ 100 (a) (e) | 132,732 | 132,732 | |||||||||
Countrywide Home Loans, Inc., Series 2004-5, Class 2A9, 5.25%, 5/25/34, Callable 1/25/20 @ 100 (a) | 108,789 | 108,789 | |||||||||
GSR Mortgage Loan Trust, Series 2004-15F, Class 5A1, 5.50%, 1/25/20, Callable 8/25/24 @ 100 (a) | 1,878 | 1,730 | |||||||||
JPMorgan Mortgage Trust, Series 2005-A1, Class 6T1, 4.61%, 2/25/35, Callable 1/25/20 @ 100 (a) (e) | 32,975 | 32,975 | |||||||||
JPMorgan Mortgage Trust, Series 2004-S2, Class 1A3, 4.75%, 2/25/20, Callable 1/25/20 @ 100 (a) | 2,327 | 2,337 | |||||||||
Prime Mortgage Trust, Series 2004-2, Class A2, 4.75%, 2/25/20, Callable 1/25/20 @ 100 (a) | 2,267 | 2,288 | |||||||||
Residential Funding Mortgage Securities I, Inc., Series 2005-S3, Class A1, 4.75%, 3/25/20, Callable 1/25/20 @ 100 (a) | 218 | 218 | |||||||||
Total Residential Mortgage Backed Securities (Cost $361,395) | 361,016 |
See notes to financial statements.
58
Victory Portfolios Victory Strategic Income Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Principal Amount | Value | |||||||||
U.S. Government Mortgage Backed Agencies (0.3%) | |||||||||||
Federal National Mortgage Association Series 2018-M1, Class A2, 2.99%, 12/25/27 | $ | 65,000 | $ | 67,986 | |||||||
3.50%, 7/1/43 (a) | 82,551 | 86,896 | |||||||||
154,882 | |||||||||||
Total U.S. Government Mortgage Backed Agencies (Cost $146,775) | 154,882 | ||||||||||
U.S. Treasury Obligations (31.7%) | |||||||||||
U.S. Treasury Bonds 2.75%, 11/15/47 (a) | 1,200,000 | 1,290,000 | |||||||||
3.00%, 2/15/48 | 140,000 | 157,828 | |||||||||
2.25%, 8/15/49 | 175,000 | 170,297 | |||||||||
U.S. Treasury Notes | |||||||||||
1.25%, 1/31/20 | 150,000 | 149,941 | |||||||||
2.25%, 3/31/20 (a) | 400,000 | 400,594 | |||||||||
2.13%, 5/31/21 (a) | 1,000,000 | 1,007,266 | |||||||||
1.75%, 7/31/21 (a) | 900,000 | 902,180 | |||||||||
2.38%, 1/31/23 (a) | 805,000 | 823,364 | |||||||||
2.63%, 2/28/23 (a) | 460,000 | 474,267 | |||||||||
2.88%, 11/30/23 (a) | 3,000,000 | 3,138,046 | |||||||||
1.75%, 7/31/24 (a) | 1,500,000 | 1,504,922 | |||||||||
1.25%, 8/31/24 | 100,000 | 98,094 | |||||||||
2.50%, 1/31/25 (a) | 1,650,000 | 1,714,840 | |||||||||
1.88%, 7/31/26 (a) | 2,100,000 | 2,109,188 | |||||||||
1.63%, 8/15/29 (a) | 2,315,000 | 2,257,125 | |||||||||
Total U.S. Treasury Obligations (Cost $15,855,116) | 16,197,952 | ||||||||||
Collateral for Securities Loaned^ (4.9%) | |||||||||||
BlackRock Liquidity Funds TempFund Portfolio, Institutional Class, 1.75% (f) | 119,823 | 119,823 | |||||||||
Fidelity Investments Money Market Government Portfolio, Class I, 1.54% (f) | 660,138 | 660,138 | |||||||||
Fidelity Investments Prime Money Market Portfolio, Class I, 1.75% (f) | 20,013 | 20,013 | |||||||||
Goldman Sachs Financial Square Prime Obligations Fund, Institutional Class, 1.80% (f) | 398,792 | 398,792 | |||||||||
JPMorgan Prime Money Market Fund, Capital Class, 1.73% (f) | 438,702 | 438,702 | |||||||||
Morgan Stanley Institutional Liquidity Prime Portfolio, Institutional Class, 1.76% (f) | 877,374 | 877,374 | |||||||||
Total Collateral for Securities Loaned (Cost $2,514,842) | 2,514,842 | ||||||||||
Total Investments (Cost $51,049,211) — 103.3% | 52,732,606 | ||||||||||
Liabilities in excess of other assets — (3.3)% | (1,700,205 | ) | |||||||||
NET ASSETS — 100.00% | $ | 51,032,401 |
^ Purchased with cash collateral from securities on loan.
(a) All or a portion of this security has been segregated as collateral for derivative instruments.
See notes to financial statements.
59
Victory Portfolios Victory Strategic Income Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
(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, 2019, the fair value of these securities was $7,398,030 and amounted to 14.5% of net assets.
(c) Variable or Floating-Rate Security. Rate disclosed is as of December 31, 2019.
(d) All or a portion of this security is on loan.
(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, 2019.
(f) Rate disclosed is the daily yield on December 31, 2019.
bps — Basis points
LIBOR — London InterBank Offered Rate
LIBOR01M — 1 Month US Dollar LIBOR, rate disclosed as of December 31, 2019, based on the last reset date of the security
LIBOR03M — 3 Month US Dollar LIBOR, rate disclosed as of December 31, 2019, 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) | |||||||||||||||||||
2-Year U.S. Treasury Note Future | 16 | 3/31/20 | $ | 3,453,060 | $ | 3,448,000 | $ | (5,060 | ) | ||||||||||||||
30-Year U.S. Treasury Bond Future | 16 | 3/20/20 | 2,549,439 | 2,494,500 | (54,939 | ) | |||||||||||||||||
Ultra Long Term U.S. Treasury Bond Future | 11 | 3/20/20 | 2,066,259 | 1,998,219 | (68,040 | ) | |||||||||||||||||
$ | (128,039 | ) |
Futures Contracts Sold
Number of Contracts | Expiration Date | Notional Amount | Value | Unrealized Appreciation (Depreciation) | |||||||||||||||||||
10-Year U.S. Treasury Note Future | 16 | 3/20/20 | $ | 2,268,446 | $ | 2,251,250 | $ | 17,196 | |||||||||||||||
10-Year U.S. Treasury Note Future | 18 | 3/20/20 | 2,337,401 | 2,311,594 | 25,807 | ||||||||||||||||||
5-Year U.S. Treasury Note Future | 25 | 3/31/20 | 2,980,183 | 2,965,234 | 14,949 | ||||||||||||||||||
$ | 57,952 | ||||||||||||||||||||||
Total unrealized appreciation | $ | 57,952 | |||||||||||||||||||||
Total unrealized depreciation | (128,039 | ) | |||||||||||||||||||||
Total net unrealized appreciation (depreciation) | $ | (70,087 | ) |
See notes to financial statements.
60
Victory Portfolios Victory Strategic Income Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Centrally Cleared
Credit Default Swap Agreements — Buy Protection (a)
Underlying Instrument* | Fixed Deal Pay Rate | Maturity Date | Payment Frequency | Implied Credit Spread at December 31, 2019 (b) | Notional Amount (c) | Value | Premiums Paid (Received) | Unrealized Appreciation (Depreciation) | |||||||||||||||||||||||||||
CDX North America High Yield Index; Series 33 | 5.00 | % | 12/20/24 | Quarterly | 2.81 | % | $ | 841,500 | $ | (81,396 | ) | $ | (61,246 | ) | $ | (20,150 | ) | ||||||||||||||||||
$ | (81,396 | ) | $ | (61,246 | ) | $ | (20,150 | ) |
* As of December 31, 2019, the CDX North America High Yield Index (the "Index") included securities which had defaulted and represented 1% of the Index. Reflects the notional amount after the default of securities.
(a) When a credit event occurs as defined under the terms of the swap agreement, the Fund as a buyer of credit protection will either (i) receive from the seller of protection an amount equal to the par value of the defaulted reference entity and deliver the reference entity or (ii) receive 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 may receive as a buyer of credit protection if a credit event occurs, as defined under the terms of the swap agreement, for each security included in the Index.
See notes to financial statements.
61
Victory Portfolios | Statements of Assets and Liabilities December 31, 2019 |
Victory INCORE Investment Quality Bond Fund | Victory INCORE Low Duration Bond Fund | Victory High Yield Fund | |||||||||||||
ASSETS: | |||||||||||||||
Investments, at value (Cost $30,671,249, $263,724,256 and $191,068,410) | $ | 31,390,987 | (a) | $ | 264,972,436 | (b) | $ | 195,292,616 | (c) | ||||||
Cash and cash equivalents | 414,169 | 879,076 | 10,610,418 | ||||||||||||
Deposits with brokers for futures contracts | 122,538 | 935,507 | — | ||||||||||||
Deposits with brokers for swap agreements | 207,688 | 2,785,790 | — | ||||||||||||
Interest and dividends receivable | 181,280 | 1,483,981 | 2,567,550 | ||||||||||||
Receivable for capital shares issued | 62,640 | 253,711 | 674,886 | ||||||||||||
Receivable for investments sold | — | — | 39,471 | ||||||||||||
Variation margin receivable on open futures contracts | 94 | 25,899 | — | ||||||||||||
Receivable from Adviser | 24,145 | 22,843 | 65,272 | ||||||||||||
Prepaid expenses | 25,812 | 29,540 | 26,220 | ||||||||||||
Total Assets | 32,429,353 | 271,388,783 | 209,276,433 | ||||||||||||
LIABILITIES: | |||||||||||||||
Payables: | |||||||||||||||
Collateral received on loaned securities | 662,890 | 1,828,649 | 26,022,081 | ||||||||||||
Distributions | 1,419 | 88,814 | 250,349 | ||||||||||||
Investments purchased | 106,034 | — | 2,940,000 | ||||||||||||
Capital shares redeemed | 8,542 | 2,631,655 | 131,435 | ||||||||||||
Variation margin on open futures contracts | 320 | — | — | ||||||||||||
Variation margin on open swap agreements | 311 | 2,662 | — | ||||||||||||
Accrued expenses and other payables: | |||||||||||||||
Investment advisory fees | 13,510 | 104,381 | 89,269 | ||||||||||||
Administration fees | 1,521 | 13,010 | 8,559 | ||||||||||||
Custodian fees | 1,477 | 2,923 | 6,109 | ||||||||||||
Transfer agent fees | 10,181 | 60,460 | 28,969 | ||||||||||||
Compliance fees | 20 | 175 | 112 | ||||||||||||
Trustees' fees | 31 | 269 | 167 | ||||||||||||
12b-1 fees | 4,393 | 24,567 | 16,852 | ||||||||||||
Other accrued expenses | 16,575 | 34,534 | 29,110 | ||||||||||||
Total Liabilities | 827,224 | 4,792,099 | 29,523,012 | ||||||||||||
NET ASSETS: | |||||||||||||||
Capital | 31,502,478 | 297,839,680 | 182,691,602 | ||||||||||||
Total distributable earnings/(loss) | 99,651 | (31,242,996 | ) | (2,938,181 | ) | ||||||||||
Net Assets | $ | 31,602,129 | $ | 266,596,684 | $ | 179,753,421 | |||||||||
Net Assets | |||||||||||||||
Class A Shares | $ | 22,004,722 | $ | 61,971,606 | $ | 31,601,532 | |||||||||
Class C Shares | 2,823,980 | 38,969,075 | 21,163,215 | ||||||||||||
Class R Shares | 3,361,601 | 1,146,874 | 18,817,856 | ||||||||||||
Class Y Shares | 3,411,826 | 164,509,129 | 108,170,818 | ||||||||||||
Total | $ | 31,602,129 | $ | 266,596,684 | $ | 179,753,421 | |||||||||
Shares (unlimited number of shares authorized with a par value of $0.001 per share): | |||||||||||||||
Class A Shares | 2,263,245 | 6,203,113 | 4,692,682 | ||||||||||||
Class C Shares | 290,603 | 3,902,168 | 3,136,109 | ||||||||||||
Class R Shares | 344,899 | 114,813 | 2,787,130 | ||||||||||||
Class Y Shares | 351,294 | 16,460,397 | 16,144,902 | ||||||||||||
Total | 3,250,041 | 26,680,491 | 26,760,823 | ||||||||||||
Net asset value, offering (except Class A Shares) and redemption price per share: | |||||||||||||||
Class A Shares | $ | 9.72 | $ | 9.99 | $ | 6.73 | |||||||||
Class C Shares (d) | $ | 9.72 | $ | 9.99 | $ | 6.75 | |||||||||
Class R Shares | $ | 9.75 | $ | 9.99 | $ | 6.75 | |||||||||
Class Y Shares | $ | 9.71 | $ | 9.99 | $ | 6.70 | |||||||||
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 | $ | 9.92 | $ | 10.19 | $ | 6.87 |
(a) Includes $645,832 of securities on loan.
(b) Includes $1,776,595 of securities on loan.
(c) Includes $25,052,816 of securities on loan.
(d) Redemption price per share varies by the length of time shares are held.
See notes to financial statements.
62
Victory Portfolios | Statements of Assets and Liabilities December 31, 2019 |
Victory Tax-Exempt Fund | Victory High Income Municipal Bond Fund | Victory Floating Rate Fund | |||||||||||||
ASSETS: | |||||||||||||||
Investments, at value (Cost $59,183,931, $39,276,430 and $575,796,516) | $ | 63,708,267 | $ | 41,916,145 | $ | 570,457,169 | |||||||||
Cash and cash equivalents | 1,770,340 | 1,396,726 | 18,627,227 | ||||||||||||
Interest and dividends receivable | 588,217 | 484,911 | 3,491,373 | ||||||||||||
Receivable for capital shares issued | 93,312 | 96,151 | 982,647 | ||||||||||||
Receivable for investments sold | — | — | 1,097,035 | ||||||||||||
Receivable from Adviser | 24,727 | 29,930 | 136,781 | ||||||||||||
Prepaid expenses | 22,485 | 21,414 | 39,637 | ||||||||||||
Total Assets | 66,207,348 | 43,945,277 | 594,831,869 | ||||||||||||
LIABILITIES: | |||||||||||||||
Payables: | |||||||||||||||
Distributions | 11,449 | 10,552 | 333,868 | ||||||||||||
Investments purchased | — | — | 5,820,000 | ||||||||||||
Capital shares redeemed | 157,003 | 114,709 | 2,124,220 | ||||||||||||
Accrued expenses and other payables: | |||||||||||||||
Investment advisory fees | 28,659 | 18,504 | 322,421 | ||||||||||||
Administration fees | 3,233 | 2,083 | 27,873 | ||||||||||||
Custodian fees | 632 | 720 | 43,021 | ||||||||||||
Transfer agent fees | 12,482 | 7,013 | 105,181 | ||||||||||||
Compliance fees | 42 | 28 | 389 | ||||||||||||
Trustees' fees | 64 | 43 | 664 | ||||||||||||
12b-1 fees | 8,438 | 8,102 | 81,789 | ||||||||||||
Other accrued expenses | 16,810 | 15,540 | 84,685 | ||||||||||||
Total Liabilities | 238,812 | 177,294 | 8,944,111 | ||||||||||||
NET ASSETS: | |||||||||||||||
Capital | 61,744,692 | 41,866,572 | 762,300,289 | ||||||||||||
Total distributable earnings/(loss) | 4,223,844 | 1,901,411 | (176,412,531 | ) | |||||||||||
Net Assets | $ | 65,968,536 | $ | 43,767,983 | $ | 585,887,758 | |||||||||
Net Assets | |||||||||||||||
Class A Shares | $ | 30,250,307 | $ | 19,153,384 | $ | 146,583,573 | |||||||||
Class C Shares | 11,259,386 | 13,995,043 | 149,053,785 | ||||||||||||
Class R Shares | — | — | 454,541 | ||||||||||||
Class Y Shares | 24,458,843 | 10,619,556 | 289,795,859 | ||||||||||||
Total | $ | 65,968,536 | $ | 43,767,983 | $ | 585,887,758 | |||||||||
Shares (unlimited number of shares authorized with a par value of $0.001 per share): | |||||||||||||||
Class A Shares | 3,074,010 | 1,781,427 | 15,561,483 | ||||||||||||
Class C Shares | 1,144,619 | 1,301,731 | 15,818,789 | ||||||||||||
Class R Shares | — | — | 48,285 | ||||||||||||
Class Y Shares | 2,486,669 | 987,725 | 30,742,802 | ||||||||||||
Total | 6,705,298 | 4,070,883 | 62,171,359 | ||||||||||||
Net asset value, offering (except Class A Shares) and redemption price per share: | |||||||||||||||
Class A Shares | $ | 9.84 | $ | 10.75 | $ | 9.42 | |||||||||
Class C Shares (a) | $ | 9.84 | $ | 10.75 | $ | 9.42 | |||||||||
Class R Shares | — | — | $ | 9.41 | |||||||||||
Class Y Shares | $ | 9.84 | $ | 10.75 | $ | 9.43 | |||||||||
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 | $ | 10.04 | $ | 10.97 | $ | 9.61 |
(a) Redemption price per share varies by the length of time shares are held.
See notes to financial statements.
63
Victory Portfolios | Statement of Assets and Liabilities December 31, 2019 |
Victory Strategic Income Fund | |||||||
ASSETS: | |||||||
Investments, at value (Cost $51,049,211) | $ | 52,732,606 | (a) | ||||
Cash and cash equivalents | 322,955 | ||||||
Deposits with brokers for futures contracts | 139,960 | ||||||
Deposits with brokers for swap agreements | 59,198 | ||||||
Interest and dividends receivable | 425,510 | ||||||
Receivable for capital shares issued | 249 | ||||||
Variation margin receivable on open futures contracts | 6,055 | ||||||
Variation margin receivable on open swap agreements | 551 | ||||||
Receivable from Adviser | 24,486 | ||||||
Prepaid expenses | 25,376 | ||||||
Total Assets | 53,736,946 | ||||||
LIABILITIES: | |||||||
Payables: | |||||||
Collateral received on loaned securities | 2,514,842 | ||||||
Distributions | 54,932 | ||||||
Capital shares redeemed | 55,842 | ||||||
Variation margin on open futures contracts | 18,219 | ||||||
Accrued expenses and other payables: | |||||||
Investment advisory fees | 26,088 | ||||||
Administration fees | 2,455 | ||||||
Custodian fees | 2,060 | ||||||
Transfer agent fees | 3,613 | ||||||
Compliance fees | 33 | ||||||
Trustees' fees | 50 | ||||||
12b-1 fees | 8,353 | ||||||
Other accrued expenses | 18,058 | ||||||
Total Liabilities | 2,704,545 | ||||||
NET ASSETS: | |||||||
Capital | 50,344,999 | ||||||
Total distributable earnings/(loss) | 687,402 | ||||||
Net Assets | $ | 51,032,401 | |||||
Net Assets | |||||||
Class A Shares | $ | 33,766,765 | |||||
Class C Shares | 9,126,405 | ||||||
Class R Shares | 2,865,510 | ||||||
Class Y Shares | 5,273,721 | ||||||
Total | $ | 51,032,401 | |||||
Shares (unlimited number of shares authorized with a par value of $0.001 per share): | |||||||
Class A Shares | 3,261,229 | ||||||
Class C Shares | 877,327 | ||||||
Class R Shares | 275,286 | ||||||
Class Y Shares | 512,269 | ||||||
Total | 4,926,111 | ||||||
Net asset value, offering (except Class A Shares) and redemption price per share: | |||||||
Class A Shares | $ | 10.35 | |||||
Class C Shares (b) | 10.40 | ||||||
Class R Shares | 10.41 | ||||||
Class Y Shares | 10.29 | ||||||
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 | $ | 10.56 |
(a) Includes $2,429,241 of securities on loan.
(b) Redemption price per share varies by the length of time shares are held.
See notes to financial statements.
64
Victory Portfolios | Statements of Operations For the Year Ended December 31, 2019 |
Victory INCORE Investment Quality Bond Fund | Victory INCORE Low Duration Bond Fund | Victory High Yield Fund | |||||||||||||
Investment Income: | |||||||||||||||
Dividends | $ | — | $ | — | $ | 37,840 | |||||||||
Interest | 998,711 | 8,090,948 | 9,411,791 | ||||||||||||
Securities lending (net of fees) | 371 | 1,690 | 68,751 | ||||||||||||
Total Income | 999,082 | 8,092,638 | 9,518,382 | ||||||||||||
Expenses: | |||||||||||||||
Investment advisory fees | 164,964 | 1,322,878 | 849,361 | ||||||||||||
Administration fees | 20,178 | 180,036 | 85,984 | ||||||||||||
12b-1 fees — Class A Shares | 58,036 | 188,944 | 74,752 | ||||||||||||
12b-1 fees — Class C Shares | 32,465 | 492,962 | 203,554 | ||||||||||||
12b-1 fees — Class R Shares | 16,431 | 6,670 | 92,334 | ||||||||||||
Custodian fees | 9,319 | 19,131 | 30,215 | ||||||||||||
Transfer agent fees | 4,470 | 47,578 | 5,047 | ||||||||||||
Transfer agent fees — Class A Shares | 39,422 | 75,982 | 23,205 | ||||||||||||
Transfer agent fees — Class C Shares | 3,591 | 47,452 | 5,509 | ||||||||||||
Transfer agent fees — Class R Shares | 6,313 | 2,651 | 4,073 | ||||||||||||
Transfer agent fees — Class Y Shares | 3,814 | 178,540 | 106,416 | ||||||||||||
Trustees' fees | 4,054 | 26,588 | 11,185 | ||||||||||||
Compliance fees | 264 | 2,380 | 1,062 | ||||||||||||
Legal and audit fees | 12,950 | 32,290 | 22,833 | ||||||||||||
State registration and filing fees | 56,382 | 66,609 | 64,813 | ||||||||||||
Interest expense on Interfund lending | — | 24 | — | ||||||||||||
Other expenses | 25,403 | 56,732 | 46,798 | ||||||||||||
Total Expenses | 458,056 | 2,747,447 | 1,627,141 | ||||||||||||
Expenses waived/reimbursed by Adviser | (127,606 | ) | (251,581 | ) | (181,413 | ) | |||||||||
Net Expenses | 330,450 | 2,495,866 | 1,445,728 | ||||||||||||
Net Investment Income (Loss) | 668,632 | 5,596,772 | 8,072,654 | ||||||||||||
Realized/Unrealized Gains (Losses) from Investments: | |||||||||||||||
Net realized gains (losses) from investment securities | 792,252 | 616,840 | 928,393 | ||||||||||||
Net realized gains (losses) from futures contracts | (76,271 | ) | 311,974 | — | |||||||||||
Net realized gains (losses) from swap agreements | (257,113 | ) | (2,483,152 | ) | — | ||||||||||
Net change in unrealized appreciation/depreciation on investment securities | 1,015,868 | 4,998,316 | 8,834,338 | ||||||||||||
Net change in unrealized appreciation/depreciation on futures contracts | 46,258 | (749,596 | ) | — | |||||||||||
Net change in unrealized appreciation/depreciation on swap agreements | 183,902 | 1,941,780 | — | ||||||||||||
Net realized/unrealized gains (losses) on investments | 1,704,896 | 4,636,162 | 9,762,731 | ||||||||||||
Change in net assets resulting from operations | $ | 2,373,528 | $ | 10,232,934 | $ | 17,835,385 |
See notes to financial statements.
65
Victory Portfolios | Statements of Operations For the Year Ended December 31, 2019 |
Victory Tax-Exempt Fund | Victory High Income Municipal Bond Fund | Victory Floating Rate Fund | |||||||||||||
Investment Income: | |||||||||||||||
Interest | $ | 2,601,661 | $ | 1,865,349 | $ | 41,407,398 | |||||||||
Total Income | 2,601,661 | 1,865,349 | 41,407,398 | ||||||||||||
Expenses: | |||||||||||||||
Investment advisory fees | 338,877 | 226,231 | 3,909,540 | ||||||||||||
Administration fees | 41,448 | 27,678 | 368,035 | ||||||||||||
12b-1 fees — Class A Shares | 79,357 | 45,026 | 338,902 | ||||||||||||
12b-1 fees — Class C Shares | 146,319 | 161,004 | 1,812,283 | ||||||||||||
12b-1 fees — Class R Shares | — | — | 2,823 | ||||||||||||
Custodian fees | 4,738 | 5,770 | 244,410 | ||||||||||||
Transfer agent fees | 10,558 | 8,575 | 64,342 | ||||||||||||
Transfer agent fees — Class A Shares | 23,234 | 13,885 | 117,701 | ||||||||||||
Transfer agent fees — Class C Shares | 10,987 | 11,234 | 165,675 | ||||||||||||
Transfer agent fees — Class R Shares | — | — | 765 | ||||||||||||
Transfer agent fees — Class Y Shares | 23,709 | 7,103 | 262,895 | ||||||||||||
Trustees' fees | 6,955 | 5,126 | 52,589 | ||||||||||||
Compliance fees | 540 | 363 | 4,848 | ||||||||||||
Legal and audit fees | 13,931 | 12,357 | 90,377 | ||||||||||||
State registration and filing fees | 45,440 | 48,067 | 81,992 | ||||||||||||
Interest expense on Interfund lending | 78 | 11 | 283 | ||||||||||||
Other expenses | 22,364 | 20,147 | 164,702 | ||||||||||||
Total Expenses | 768,535 | 592,577 | 7,682,162 | ||||||||||||
Expenses waived/reimbursed by Adviser | (132,065 | ) | (132,417 | ) | (841,458 | ) | |||||||||
Net Expenses | 636,470 | 460,160 | 6,840,704 | ||||||||||||
Net Investment Income (Loss) | 1,965,191 | 1,405,189 | 34,566,694 | ||||||||||||
Realized/Unrealized Gains (Losses) from Investments: | |||||||||||||||
Net realized gains (losses) from investment securities | 930,963 | (123,953 | ) | (3,969,624 | ) | ||||||||||
Net change in unrealized appreciation/depreciation on investment securities | 2,797,481 | 2,151,260 | 23,471,885 | ||||||||||||
Net realized/unrealized gains (losses) on investments | 3,728,444 | 2,027,307 | 19,502,261 | ||||||||||||
Change in net assets resulting from operations | $ | 5,693,635 | $ | 3,432,496 | $ | 54,068,955 |
See notes to financial statements.
66
Victory Portfolios | Statement of Operations For the Year Ended December 31, 2019 |
Victory Strategic Income Fund | |||||||
Investment Income: | |||||||
Dividends | $ | 74,941 | |||||
Interest | 1,731,765 | ||||||
Securities lending (net of fees) | 3,976 | ||||||
Total Income | 1,810,682 | ||||||
Expenses: | |||||||
Investment advisory fees | 304,848 | ||||||
Administration fees | 31,046 | ||||||
12b-1 fees — Class A Shares | 83,516 | ||||||
12b-1 fees — Class C Shares | 96,489 | ||||||
12b-1 fees — Class R Shares | 14,073 | ||||||
Custodian fees | 12,959 | ||||||
Transfer agent fees | 4,371 | ||||||
Transfer agent fees — Class A Shares | 8,634 | ||||||
Transfer agent fees — Class C Shares | 5,576 | ||||||
Transfer agent fees — Class R Shares | 543 | ||||||
Transfer agent fees — Class Y Shares | 2,444 | ||||||
Trustees' fees | 5,460 | ||||||
Compliance fees | 404 | ||||||
Legal and audit fees | 15,305 | ||||||
State registration and filing fees | 61,228 | ||||||
Other expenses | 22,711 | ||||||
Total Expenses | 669,607 | ||||||
Expenses waived/reimbursed by Adviser | (110,089 | ) | |||||
Net Expenses | 559,518 | ||||||
Net Investment Income (Loss) | 1,251,164 | ||||||
Realized/Unrealized Gains (Losses) from Investments: | |||||||
Net realized gains (losses) from investment securities | 1,058,577 | ||||||
Net realized gains (losses) from futures contracts | 147,348 | ||||||
Net realized gains (losses) from swap agreements | (44,859 | ) | |||||
Net change in unrealized appreciation/depreciation on investment securities | 2,233,489 | ||||||
Net change in unrealized appreciation/depreciation on futures contracts | (264,161 | ) | |||||
Net change in unrealized appreciation/depreciation on swap agreements | (20,150 | ) | |||||
Net realized/unrealized gains (losses) on investments | 3,110,244 | ||||||
Change in net assets resulting from operations | $ | 4,361,408 |
See notes to financial statements.
67
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, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2019 | Year Ended December 31, 2018 | ||||||||||||||||||||||
From Investment Activities: | |||||||||||||||||||||||||||
Operations: | |||||||||||||||||||||||||||
Net investment income (loss) | $ | 668,632 | $ | 845,565 | $ | 5,596,772 | $ | 6,485,110 | $ | 8,072,654 | $ | 4,157,311 | |||||||||||||||
Net realized gains (losses) from investments | 458,868 | (885,327 | ) | (1,554,338 | ) | (851,374 | ) | 928,393 | 762,754 | ||||||||||||||||||
Net change in unrealized appreciation/ depreciation on investments | 1,246,028 | (528,601 | ) | 6,190,500 | (2,879,432 | ) | 8,834,338 | (5,292,005 | ) | ||||||||||||||||||
Change in net assets resulting from operations | 2,373,528 | (568,363 | ) | 10,232,934 | 2,754,304 | 17,835,385 | (371,940 | ) | |||||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||||||
Class A Shares | (553,387 | ) | (736,699 | ) | (1,562,354 | ) | (2,446,294 | ) | (1,707,779 | ) | (1,373,046 | ) | |||||||||||||||
Class C Shares | (48,455 | ) | (80,797 | ) | (645,910 | ) | (961,618 | ) | (1,017,743 | ) | (1,141,547 | ) | |||||||||||||||
Class R Shares | (64,516 | ) | (85,278 | ) | (22,128 | ) | (29,001 | ) | (991,828 | ) | (1,084,151 | ) | |||||||||||||||
Class Y Shares | (85,405 | ) | (107,033 | ) | (3,852,275 | ) | (4,911,061 | ) | (4,352,666 | ) | (613,768 | ) | |||||||||||||||
From return of capital: | |||||||||||||||||||||||||||
Class A Shares | — | — | (54,402 | ) | — | — | — | ||||||||||||||||||||
Class C Shares | — | — | (22,491 | ) | — | — | — | ||||||||||||||||||||
Class R Shares | — | — | (770 | ) | — | — | — | ||||||||||||||||||||
Class Y Shares | — | — | (134,138 | ) | — | — | — | ||||||||||||||||||||
Change in net assets resulting from distributions to shareholders | (751,763 | ) | (1,009,807 | ) | (6,294,468 | ) | (8,347,974 | ) | (8,070,016 | ) | (4,212,512 | ) | |||||||||||||||
Change in net assets resulting from capital transactions | (4,159,816 | ) | (10,074,855 | ) | (77,242,799 | ) | (160,010,798 | ) | 88,103,596 | 17,874,778 | |||||||||||||||||
Change in net assets | (2,538,051 | ) | (11,653,025 | ) | (73,304,333 | ) | (165,604,468 | ) | 97,868,965 | 13,290,326 | |||||||||||||||||
Net Assets: | |||||||||||||||||||||||||||
Beginning of period | 34,140,180 | 45,793,205 | 339,901,017 | 505,505,485 | 81,884,456 | 68,594,130 | |||||||||||||||||||||
End of period | $ | 31,602,129 | $ | 34,140,180 | $ | 266,596,684 | $ | 339,901,017 | $ | 179,753,421 | $ | 81,884,456 |
(continues on next page)
See notes to financial statements.
68
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, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2019 | Year Ended December 31, 2018 | ||||||||||||||||||||||
Capital Transactions: | |||||||||||||||||||||||||||
Class A Shares | |||||||||||||||||||||||||||
Proceeds from shares issued | $ | 2,390,006 | $ | 2,431,100 | $ | 26,923,927 | $ | 30,744,375 | $ | 14,316,080 | $ | 8,578,195 | |||||||||||||||
Distributions reinvested | 541,439 | 708,767 | 1,496,239 | 2,128,032 | 1,089,701 | 837,993 | |||||||||||||||||||||
Cost of shares redeemed | (6,120,937 | ) | (9,305,764 | ) | (63,661,715 | ) | (84,318,228 | ) | (9,825,415 | ) | (6,155,194 | ) | |||||||||||||||
Total Class A Shares | $ | (3,189,492 | ) | $ | (6,165,897 | ) | $ | (35,241,549 | ) | $ | (51,445,821 | ) | $ | 5,580,366 | $ | 3,260,994 | |||||||||||
Class C Shares | |||||||||||||||||||||||||||
Proceeds from shares issued | $ | 143,899 | $ | 115,170 | $ | 1,733,369 | $ | 5,049,809 | $ | 2,217,726 | $ | 467,260 | |||||||||||||||
Distributions reinvested | 40,736 | 70,118 | 555,049 | 815,577 | 243,448 | 318,084 | |||||||||||||||||||||
Cost of shares redeemed | (1,154,650 | ) | (2,479,459 | ) | (26,142,779 | ) | (25,622,129 | ) | (2,392,678 | ) | (2,448,114 | ) | |||||||||||||||
Total Class C Shares | $ | (970,015 | ) | $ | (2,294,171 | ) | $ | (23,854,361 | ) | $ | (19,756,743 | ) | $ | 68,496 | $ | (1,662,770 | ) | ||||||||||
Class R Shares | |||||||||||||||||||||||||||
Proceeds from shares issued | $ | 254,810 | $ | 381,014 | $ | 166,661 | $ | 720,436 | $ | 201,511 | $ | 493,060 | |||||||||||||||
Distributions reinvested | 64,470 | 84,899 | 21,886 | 27,842 | 104,219 | 147,473 | |||||||||||||||||||||
Cost of shares redeemed | (310,418 | ) | (1,072,079 | ) | (614,563 | ) | (1,248,707 | ) | (584,834 | ) | (1,182,114 | ) | |||||||||||||||
Total Class R Shares | $ | 8,862 | $ | (606,166 | ) | $ | (426,016 | ) | $ | (500,429 | ) | $ | (279,104 | ) | $ | (541,581 | ) | ||||||||||
Class Y Shares | |||||||||||||||||||||||||||
Proceeds from shares issued | $ | 1,073,428 | $ | 669,922 | $ | 79,871,959 | $ | 89,186,215 | $ | 109,042,788 | $ | 21,430,313 | |||||||||||||||
Distributions reinvested | 83,285 | 102,539 | 3,209,388 | 4,002,004 | 3,905,005 | 485,679 | |||||||||||||||||||||
Cost of shares redeemed | (1,165,884 | ) | (1,781,082 | ) | (100,802,220 | ) | (181,496,024 | ) | (30,213,955 | ) | (5,097,857 | ) | |||||||||||||||
Total Class Y Shares | $ | (9,171 | ) | $ | (1,008,621 | ) | $ | (17,720,873 | ) | $ | (88,307,805 | ) | $ | 82,733,838 | $ | 16,818,135 | |||||||||||
Change in net assets resulting from capital transactions | $ | (4,159,816 | ) | $ | (10,074,855 | ) | $ | (77,242,799 | ) | $ | (160,010,798 | ) | $ | 88,103,596 | $ | 17,874,778 |
(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, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2019 | Year Ended December 31, 2018 | ||||||||||||||||||||||
Share Transactions: | |||||||||||||||||||||||||||
Class A Shares | |||||||||||||||||||||||||||
Issued | 250,126 | 259,560 | 2,713,126 | 3,106,607 | 2,178,302 | 1,324,722 | |||||||||||||||||||||
Reinvested | 56,710 | 76,253 | 150,473 | 214,752 | 165,464 | 129,433 | |||||||||||||||||||||
Redeemed | (642,094 | ) | (1,001,548 | ) | (6,419,997 | ) | (8,500,863 | ) | (1,488,742 | ) | (946,378 | ) | |||||||||||||||
Total Class A Shares | (335,258 | ) | (665,735 | ) | (3,556,398 | ) | (5,179,504 | ) | 855,024 | 507,777 | |||||||||||||||||
Class C Shares | |||||||||||||||||||||||||||
Issued | 14,963 | 12,218 | 174,135 | 511,435 | 336,209 | 71,687 | |||||||||||||||||||||
Reinvested | 4,274 | 7,545 | 55,850 | 82,367 | 36,921 | 48,947 | |||||||||||||||||||||
Redeemed | (121,567 | ) | (266,190 | ) | (2,631,589 | ) | (2,586,154 | ) | (364,090 | ) | (377,563 | ) | |||||||||||||||
Total Class C Shares | (102,330 | ) | (246,427 | ) | (2,401,604 | ) | (1,992,352 | ) | 9,040 | (256,929 | ) | ||||||||||||||||
Class R Shares | |||||||||||||||||||||||||||
Issued | 26,637 | 40,562 | 16,756 | 72,503 | 30,796 | 75,414 | |||||||||||||||||||||
Reinvested | 6,730 | 9,118 | 2,201 | 2,811 | 15,810 | 22,696 | |||||||||||||||||||||
Redeemed | (32,531 | ) | (115,435 | ) | (61,801 | ) | (125,706 | ) | (89,390 | ) | (184,892 | ) | |||||||||||||||
Total Class R Shares | 836 | (65,755 | ) | (42,844 | ) | (50,392 | ) | (42,784 | ) | (86,782 | ) | ||||||||||||||||
Class Y Shares | |||||||||||||||||||||||||||
Issued | 111,553 | 71,550 | 8,030,344 | 9,003,632 | 16,745,403 | 3,334,887 | |||||||||||||||||||||
Reinvested | 8,725 | 11,041 | 322,449 | 403,649 | 594,277 | 75,911 | |||||||||||||||||||||
Redeemed | (122,068 | ) | (190,915 | ) | (10,149,972 | ) | (18,291,525 | ) | (4,607,680 | ) | (795,040 | ) | |||||||||||||||
Total Class Y Shares | (1,790 | ) | (108,324 | ) | (1,797,179 | ) | (8,884,244 | ) | 12,732,000 | 2,615,758 | |||||||||||||||||
Change in Shares | (438,542 | ) | (1,086,241 | ) | (7,798,025 | ) | (16,106,492 | ) | 13,553,280 | 2,779,824 |
See notes to financial statements.
70
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, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2019 | Year Ended December 31, 2018 | ||||||||||||||||||||||
From Investment Activities: | |||||||||||||||||||||||||||
Operations: | |||||||||||||||||||||||||||
Net investment income (loss) | $ | 1,965,191 | $ | 2,744,685 | $ | 1,405,189 | $ | 2,264,029 | $ | 34,566,694 | $ | 34,678,316 | |||||||||||||||
Net realized gains (losses) from investments | 930,963 | 441,470 | (123,953 | ) | 825,294 | (3,969,624 | ) | (2,188,784 | ) | ||||||||||||||||||
Net change in unrealized appreciation/ depreciation on investments | 2,797,481 | (2,948,214 | ) | 2,151,260 | (3,343,476 | ) | 23,471,885 | (29,992,718 | ) | ||||||||||||||||||
Change in net assets resulting from operations | 5,693,635 | 237,941 | 3,432,496 | (254,153 | ) | 54,068,955 | 2,496,814 | ||||||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||||||
Class A Shares | (1,464,845 | ) | (1,674,030 | ) | (787,699 | ) | (833,535 | ) | (8,004,025 | ) | (7,767,897 | ) | |||||||||||||||
Class C Shares | (531,783 | ) | (927,398 | ) | (562,857 | ) | (737,053 | ) | (9,318,078 | ) | (11,211,612 | ) | |||||||||||||||
Class R Shares | — | — | — | — | (30,409 | ) | (34,879 | ) | |||||||||||||||||||
Class Y Shares | (1,054,293 | ) | (1,215,244 | ) | (507,091 | ) | (693,477 | ) | (17,355,800 | ) | (15,978,424 | ) | |||||||||||||||
Change in net assets resulting from distributions to shareholders | (3,050,921 | ) | (3,816,672 | ) | (1,857,647 | ) | (2,264,065 | ) | (34,708,312 | ) | (34,992,812 | ) | |||||||||||||||
Change in net assets resulting from capital transactions | (4,913,162 | ) | (19,692,166 | ) | (5,254,452 | ) | (27,903,721 | ) | (45,868,103 | ) | (45,765,231 | ) | |||||||||||||||
Change in net assets | (2,270,448 | ) | (23,270,897 | ) | (3,679,603 | ) | (30,421,939 | ) | (26,507,460 | ) | (78,261,229 | ) | |||||||||||||||
Net Assets: | |||||||||||||||||||||||||||
Beginning of period | 68,238,984 | 91,509,881 | 47,447,586 | 77,869,525 | 612,395,218 | 690,656,447 | |||||||||||||||||||||
End of period | $ | 65,968,536 | $ | 68,238,984 | $ | 43,767,983 | $ | 47,447,586 | $ | 585,887,758 | $ | 612,395,218 |
(continues on next page)
See notes to financial statements.
71
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, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2019 | Year Ended December 31, 2018 | ||||||||||||||||||||||
Capital Transactions: | |||||||||||||||||||||||||||
Class A Shares | |||||||||||||||||||||||||||
Proceeds from shares issued | $ | 4,695,710 | $ | 3,746,017 | $ | 4,547,178 | $ | 1,462,753 | $ | 70,076,253 | $ | 45,834,320 | |||||||||||||||
Distributions reinvested | 1,392,860 | 1,587,635 | 711,497 | 744,985 | 7,183,990 | 6,719,663 | |||||||||||||||||||||
Cost of shares redeemed | (7,042,732 | ) | (11,426,401 | ) | (3,153,534 | ) | (10,719,172 | ) | (53,129,272 | ) | (75,051,508 | ) | |||||||||||||||
Total Class A Shares | $ | (954,162 | ) | $ | (6,092,749 | ) | $ | 2,105,141 | $ | (8,511,434 | ) | $ | 24,130,971 | $ | (22,497,525 | ) | |||||||||||
Class C Shares | |||||||||||||||||||||||||||
Proceeds from shares issued | $ | 452,375 | $ | 479,938 | $ | 641,769 | $ | 599,566 | $ | 7,693,670 | $ | 19,574,341 | |||||||||||||||
Distributions reinvested | 442,740 | 767,834 | 493,333 | 647,618 | 7,766,719 | 9,501,754 | |||||||||||||||||||||
Cost of shares redeemed | (8,300,227 | ) | (8,753,995 | ) | (7,042,158 | ) | (6,270,846 | ) | (84,302,278 | ) | (71,921,531 | ) | |||||||||||||||
Total Class C Shares | $ | (7,405,112 | ) | $ | (7,506,223 | ) | $ | (5,907,056 | ) | $ | (5,023,662 | ) | $ | (68,841,889 | ) | $ | (42,845,436 | ) | |||||||||
Class R Shares | |||||||||||||||||||||||||||
Proceeds from shares issued | $ | — | $ | — | $ | — | $ | — | $ | 111,430 | $ | 218,439 | |||||||||||||||
Distributions reinvested | — | — | — | — | 22,324 | 25,934 | |||||||||||||||||||||
Cost of shares redeemed | — | — | — | — | (414,932 | ) | (408,718 | ) | |||||||||||||||||||
Total Class R Shares | $ | — | $ | — | $ | — | $ | — | $ | (281,178 | ) | $ | (164,345 | ) | |||||||||||||
Class Y Shares | |||||||||||||||||||||||||||
Proceeds from shares issued | $ | 6,261,814 | $ | 4,360,518 | $ | 1,046,792 | $ | 1,879,873 | $ | 127,457,843 | $ | 133,354,896 | |||||||||||||||
Distributions reinvested | 1,026,770 | 1,153,505 | 489,689 | 657,063 | 14,917,921 | 13,787,041 | |||||||||||||||||||||
Cost of shares redeemed | (3,842,472 | ) | (11,607,217 | ) | (2,989,018 | ) | (16,905,561 | ) | (143,251,771 | ) | (127,399,862 | ) | |||||||||||||||
Total Class Y Shares | $ | 3,446,112 | $ | (6,093,194 | ) | $ | (1,452,537 | ) | $ | (14,368,625 | ) | $ | (876,007 | ) | $ | 19,742,075 | |||||||||||
Change in net assets resulting from capital transactions | $ | (4,913,162 | ) | $ | (19,692,166 | ) | $ | (5,254,452 | ) | $ | (27,903,721 | ) | $ | (45,868,103 | ) | $ | (45,765,231 | ) |
(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, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2019 | Year Ended December 31, 2018 | ||||||||||||||||||||||
Share Transactions: | |||||||||||||||||||||||||||
Class A Shares | |||||||||||||||||||||||||||
Issued | 478,144 | 392,511 | 425,557 | 138,669 | 7,475,434 | 4,791,356 | |||||||||||||||||||||
Reinvested | 141,785 | 165,480 | 66,390 | 70,896 | 767,211 | 705,288 | |||||||||||||||||||||
Redeemed | (713,456 | ) | (1,182,655 | ) | (296,773 | ) | (1,018,059 | ) | (5,679,746 | ) | (7,916,526 | ) | |||||||||||||||
Total Class A Shares | (93,527 | ) | (624,664 | ) | 195,174 | (808,494 | ) | 2,562,899 | (2,419,882 | ) | |||||||||||||||||
Class C Shares | |||||||||||||||||||||||||||
Issued | 45,850 | 49,729 | 59,871 | 57,162 | 821,505 | 2,060,999 | |||||||||||||||||||||
Reinvested | 45,183 | 80,097 | 46,148 | 61,664 | 828,359 | 996,600 | |||||||||||||||||||||
Redeemed | (846,526 | ) | (907,537 | ) | (659,895 | ) | (597,211 | ) | (8,978,146 | ) | (7,539,753 | ) | |||||||||||||||
Total Class C Shares | (755,493 | ) | (777,711 | ) | (553,876 | ) | (478,385 | ) | (7,328,282 | ) | (4,482,154 | ) | |||||||||||||||
Class R Shares | |||||||||||||||||||||||||||
Issued | — | — | — | — | 11,901 | 22,917 | |||||||||||||||||||||
Reinvested | — | — | — | — | 2,385 | 2,724 | |||||||||||||||||||||
Redeemed | — | — | — | — | (44,380 | ) | (42,619 | ) | |||||||||||||||||||
Total Class R Shares | — | — | — | — | (30,094 | ) | (16,978 | ) | |||||||||||||||||||
Class Y Shares | |||||||||||||||||||||||||||
Issued | 633,656 | 453,041 | 98,269 | 178,749 | 13,621,991 | 14,061,221 | |||||||||||||||||||||
Reinvested | 104,534 | 120,245 | 45,760 | 62,531 | 1,591,749 | 1,447,068 | |||||||||||||||||||||
Redeemed | (392,165 | ) | (1,201,743 | ) | (280,476 | ) | (1,607,188 | ) | (15,289,018 | ) | (13,431,987 | ) | |||||||||||||||
Total Class Y Shares | 346,025 | (628,457 | ) | (136,447 | ) | (1,365,908 | ) | (75,278 | ) | 2,076,302 | |||||||||||||||||
Change in Shares | (502,995 | ) | (2,030,832 | ) | (495,149 | ) | (2,652,787 | ) | (4,870,755 | ) | (4,842,712 | ) |
See notes to financial statements.
73
Victory Portfolios | Statements of Changes in Net Assets |
Victory Strategic Income Fund | |||||||||||
Year Ended December 31, 2019 | Year Ended December 31, 2018 | ||||||||||
From Investment Activities: | |||||||||||
Operations: | |||||||||||
Net investment income (loss) | $ | 1,251,164 | $ | 1,727,890 | |||||||
Net realized gains (losses) from investments | 1,161,066 | (1,587,023 | ) | ||||||||
Net change in unrealized appreciation/depreciation on investments | 1,949,178 | (630,096 | ) | ||||||||
Change in net assets resulting from operations | 4,361,408 | (489,229 | ) | ||||||||
Distributions to Shareholders: | |||||||||||
Class A Shares | (852,988 | ) | (1,129,828 | ) | |||||||
Class C Shares | (173,876 | ) | (288,258 | ) | |||||||
Class R Shares | (60,881 | ) | (83,778 | ) | |||||||
Class Y Shares | (136,515 | ) | (191,276 | ) | |||||||
From return of capital: | |||||||||||
Class A Shares | (50,329 | ) | — | ||||||||
Class C Shares | (10,259 | ) | — | ||||||||
Class R Shares | (3,592 | ) | — | ||||||||
Class Y Shares | (8,055 | ) | — | ||||||||
Change in net assets resulting from distributions to shareholders | (1,296,495 | ) | (1,693,140 | ) | |||||||
Change in net assets resulting from capital transactions | (1,865,822 | ) | (7,720,233 | ) | |||||||
Change in net assets | 1,199,091 | (9,902,602 | ) | ||||||||
Net Assets: | |||||||||||
Beginning of period | 49,833,310 | 59,735,912 | |||||||||
End of period | $ | 51,032,401 | $ | 49,833,310 |
(continues on next page)
See notes to financial statements.
74
Victory Portfolios | Statements of Changes in Net Assets |
(continued)
Victory Strategic Income Fund | |||||||||||
Year Ended December 31, 2019 | Year Ended December 31, 2018 | ||||||||||
Capital Transactions: | |||||||||||
Class A Shares | |||||||||||
Proceeds from shares issued | $ | 1,094,391 | $ | 675,278 | |||||||
Distributions reinvested | 139,804 | 198,500 | |||||||||
Cost of shares redeemed | (1,529,524 | ) | (2,400,693 | ) | |||||||
Total Class A Shares | $ | (295,329 | ) | $ | (1,526,915 | ) | |||||
Class C Shares | |||||||||||
Proceeds from shares issued | $ | 332,247 | $ | 1,070,368 | |||||||
Distributions reinvested | 137,629 | 226,185 | |||||||||
Cost of shares redeemed | (2,160,161 | ) | (2,276,130 | ) | |||||||
Total Class C Shares | $ | (1,690,285 | ) | $ | (979,577 | ) | |||||
Class R Shares | |||||||||||
Proceeds from shares issued | $ | 8,929 | $ | 9,743 | |||||||
Distributions reinvested | 8,376 | 13,196 | |||||||||
Cost of shares redeemed | (82,802 | ) | (73,239 | ) | |||||||
Total Class R Shares | $ | (65,497 | ) | $ | (50,300 | ) | |||||
Class Y Shares | |||||||||||
Proceeds from shares issued | $ | 638,486 | $ | 412,952 | |||||||
Distributions reinvested | 71,237 | 103,535 | |||||||||
Cost of shares redeemed | (524,434 | ) | (5,679,928 | ) | |||||||
Total Class Y Shares | $ | 185,289 | $ | (5,163,441 | ) | ||||||
Change in net assets resulting from capital transactions | $ | (1,865,822 | ) | $ | (7,720,233 | ) | |||||
Share Transactions: | |||||||||||
Class A Shares | |||||||||||
Issued | 107,366 | 67,828 | |||||||||
Reinvested | 13,743 | 20,169 | |||||||||
Redeemed | (149,880 | ) | (244,021 | ) | |||||||
Total Class A Shares | (28,771 | ) | (156,024 | ) | |||||||
Class C Shares | |||||||||||
Issued | 32,731 | 106,921 | |||||||||
Reinvested | 13,502 | 22,876 | |||||||||
Redeemed | (213,151 | ) | (230,950 | ) | |||||||
Total Class C Shares | (166,918 | ) | (101,153 | ) | |||||||
Class R Shares | |||||||||||
Issued | 880 | 982 | |||||||||
Reinvested | 820 | 1,334 | |||||||||
Redeemed | (8,345 | ) | (7,448 | ) | |||||||
Total Class R Shares | (6,645 | ) | (5,132 | ) | |||||||
Class Y Shares | |||||||||||
Issued | 62,449 | 42,123 | |||||||||
Reinvested | 7,040 | 10,562 | |||||||||
Redeemed | (52,459 | ) | (566,546 | ) | |||||||
Total Class Y Shares | 17,030 | (513,861 | ) | ||||||||
Change in Shares | (185,304 | ) | (776,170 | ) |
See notes to financial statements.
75
Victory Portfolios | Financial Highlights |
For a Share Outstanding Throughout Each Period
Investment Activities | Distributions to Shareholders From | ||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(a) | Net Realized and Unrealized Gains (Losses) on Investments | Total from Investment Activities | Net Investment Income | Net Realized Gains from Investments | ||||||||||||||||||||||
Victory INCORE Investment Quality Bond Fund | |||||||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 9.26 | 0.20 | 0.49 | 0.69 | (0.23 | ) | — | |||||||||||||||||||
Year Ended 12/31/18 | $ | 9.59 | 0.21 | (0.29 | ) | (0.08 | ) | (0.25 | ) | — | |||||||||||||||||
Year Ended 12/31/17 | $ | 9.48 | 0.18 | 0.16 | 0.34 | (0.23 | ) | — | |||||||||||||||||||
Year Ended 12/31/16 | $ | 9.57 | 0.22 | 0.16 | 0.38 | (0.23 | ) | (0.24 | ) | ||||||||||||||||||
Year Ended 12/31/15 | $ | 10.16 | 0.31 | (0.38 | ) | (0.07 | ) | (0.30 | ) | (0.22 | ) | ||||||||||||||||
Class C | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 9.25 | 0.12 | 0.49 | 0.61 | (0.14 | ) | — | |||||||||||||||||||
Year Ended 12/31/18 | $ | 9.58 | 0.13 | (0.29 | ) | (0.16 | ) | (0.17 | ) | — | |||||||||||||||||
Year Ended 12/31/17 | $ | 9.47 | 0.10 | 0.16 | 0.26 | (0.15 | ) | — | |||||||||||||||||||
Year Ended 12/31/16 | $ | 9.56 | 0.14 | 0.16 | 0.30 | (0.15 | ) | (0.24 | ) | ||||||||||||||||||
Year Ended 12/31/15 | $ | 10.16 | 0.22 | (0.38 | ) | (0.16 | ) | (0.22 | ) | (0.22 | ) | ||||||||||||||||
Class R | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 9.28 | 0.16 | 0.50 | 0.66 | (0.19 | ) | — | |||||||||||||||||||
Year Ended 12/31/18 | $ | 9.61 | 0.18 | (0.30 | ) | (0.12 | ) | (0.21 | ) | — | |||||||||||||||||
Year Ended 12/31/17 | $ | 9.50 | 0.14 | 0.16 | 0.30 | (0.19 | ) | — | |||||||||||||||||||
Year Ended 12/31/16 | $ | 9.58 | 0.19 | 0.17 | 0.36 | (0.20 | ) | (0.24 | ) | ||||||||||||||||||
Year Ended 12/31/15 | $ | 10.18 | 0.27 | (0.39 | ) | (0.12 | ) | (0.26 | ) | (0.22 | ) | ||||||||||||||||
Class Y | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 9.25 | 0.22 | 0.49 | 0.71 | (0.25 | ) | — | |||||||||||||||||||
Year Ended 12/31/18 | $ | 9.58 | 0.23 | (0.29 | ) | (0.06 | ) | (0.27 | ) | — | |||||||||||||||||
Year Ended 12/31/17 | $ | 9.47 | 0.20 | 0.16 | 0.36 | (0.25 | ) | — | |||||||||||||||||||
Year Ended 12/31/16 | $ | 9.56 | 0.25 | 0.16 | 0.41 | (0.26 | ) | (0.24 | ) | ||||||||||||||||||
Year Ended 12/31/15 | $ | 10.17 | 0.32 | (0.39 | ) | (0.07 | ) | (0.32 | ) | (0.22 | ) |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
See notes to financial statements.
76
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Ratios to Average Net Assets | Supplemental Data | ||||||||||||||||||||||||||||||||||
Total Distributions | Net Asset Value, End of Period | Total Return (Excludes Sales Charge) | Net Expenses | Net Investment Income (Loss) | Gross Expenses | Net Assets, End of Period (000's) | Portfolio Turnover(b) | ||||||||||||||||||||||||||||
Victory INCORE Investment Quality Bond Fund | |||||||||||||||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | (0.23 | ) | $ | 9.72 | 7.49 | % | 0.90 | % | 2.13 | % | 1.23 | % | $ | 22,004 | 92 | % | |||||||||||||||||||
Year Ended 12/31/18 | (0.25 | ) | $ | 9.26 | (0.80 | )% | 0.90 | % | 2.27 | % | 1.13 | % | $ | 24,049 | 115 | % | |||||||||||||||||||
Year Ended 12/31/17 | (0.23 | ) | $ | 9.59 | 3.62 | % | 0.90 | % | 1.86 | % | 1.07 | % | $ | 31,306 | 70 | % | |||||||||||||||||||
Year Ended 12/31/16 | (0.47 | ) | $ | 9.48 | 4.01 | % | 0.90 | % | 2.29 | % | 1.14 | % | $ | 40,510 | 148 | % | |||||||||||||||||||
Year Ended 12/31/15 | (0.52 | ) | $ | 9.57 | (0.74 | )% | 0.90 | % | 3.06 | % | 1.07 | % | $ | 51,747 | 73 | % | |||||||||||||||||||
Class C | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | (0.14 | ) | $ | 9.72 | 6.65 | % | 1.77 | % | 1.28 | % | 2.23 | % | $ | 2,824 | 92 | % | |||||||||||||||||||
Year Ended 12/31/18 | (0.17 | ) | $ | 9.25 | (1.66 | )% | 1.77 | % | 1.42 | % | 2.10 | % | $ | 3,634 | 115 | % | |||||||||||||||||||
Year Ended 12/31/17 | (0.15 | ) | $ | 9.58 | 2.74 | % | 1.77 | % | 0.99 | % | 1.91 | % | $ | 6,127 | 70 | % | |||||||||||||||||||
Year Ended 12/31/16 | (0.39 | ) | $ | 9.47 | 3.11 | % | 1.77 | % | 1.42 | % | 1.92 | % | $ | 8,915 | 148 | % | |||||||||||||||||||
Year Ended 12/31/15 | (0.44 | ) | $ | 9.56 | (1.70 | )% | 1.77 | % | 2.19 | % | 1.85 | % | $ | 10,510 | 73 | % | |||||||||||||||||||
Class R | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | (0.19 | ) | $ | 9.75 | 7.14 | % | 1.30 | % | 1.71 | % | 1.83 | % | $ | 3,362 | 92 | % | |||||||||||||||||||
Year Ended 12/31/18 | (0.21 | ) | $ | 9.28 | (1.20 | )% | 1.30 | % | 1.88 | % | 1.69 | % | $ | 3,192 | 115 | % | |||||||||||||||||||
Year Ended 12/31/17 | (0.19 | ) | $ | 9.61 | 3.16 | % | 1.30 | % | 1.44 | % | 1.65 | % | $ | 3,940 | 70 | % | |||||||||||||||||||
Year Ended 12/31/16 | (0.44 | ) | $ | 9.50 | 3.71 | % | 1.30 | % | 1.90 | % | 1.44 | % | $ | 4,477 | 148 | % | |||||||||||||||||||
Year Ended 12/31/15 | (0.48 | ) | $ | 9.58 | (1.24 | )% | 1.30 | % | 2.65 | % | 1.45 | % | $ | 5,568 | 73 | % | |||||||||||||||||||
Class Y | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | (0.25 | ) | $ | 9.71 | 7.76 | % | 0.66 | % | 2.35 | % | 1.24 | % | $ | 3,412 | 92 | % | |||||||||||||||||||
Year Ended 12/31/18 | (0.27 | ) | $ | 9.25 | (0.56 | )% | 0.66 | % | 2.51 | % | 1.12 | % | $ | 3,265 | 115 | % | |||||||||||||||||||
Year Ended 12/31/17 | (0.25 | ) | $ | 9.58 | 3.87 | % | 0.66 | % | 2.09 | % | 0.98 | % | $ | 4,421 | 70 | % | |||||||||||||||||||
Year Ended 12/31/16 | (0.50 | ) | $ | 9.47 | 4.26 | % | 0.66 | % | 2.53 | % | 0.94 | % | $ | 6,133 | 148 | % | |||||||||||||||||||
Year Ended 12/31/15 | (0.54 | ) | $ | 9.56 | (0.73 | )% | 0.66 | % | 3.19 | % | 0.86 | % | $ | 5,557 | 73 | % |
See notes to financial statements.
77
Victory Portfolios | Financial Highlights |
For a Share Outstanding Throughout Each Period
Investment Activities | Distributions to Shareholders From | ||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(a) | Net Realized and Unrealized Gains (Losses) on Investments | Total from Investment Activities | Net Investment Income | Return of Capital | Total Distributions | |||||||||||||||||||||||||
Victory INCORE Low Duration Bond Fund | |||||||||||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 9.86 | 0.19 | 0.15 | 0.34 | (0.20 | ) | (0.01 | ) | (0.21 | ) | ||||||||||||||||||||
Year Ended 12/31/18 | $ | 9.99 | 0.16 | (0.08 | ) | 0.08 | (0.21 | ) | — | (0.21 | ) | ||||||||||||||||||||
Year Ended 12/31/17 | $ | 10.03 | 0.12 | 0.02 | 0.14 | (0.18 | ) | — | (0.18 | ) | |||||||||||||||||||||
Year Ended 12/31/16 | $ | 9.95 | 0.12 | 0.06 | 0.18 | (0.10 | ) | — | (0.10 | ) | |||||||||||||||||||||
Year Ended 12/31/15 | $ | 10.03 | 0.14 | (0.09 | ) | 0.05 | (0.13 | ) | — | (0.13 | ) | ||||||||||||||||||||
Class C | |||||||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 9.85 | 0.12 | 0.16 | 0.28 | (0.14 | ) | — | (c) | (0.14 | ) | ||||||||||||||||||||
Year Ended 12/31/18 | $ | 9.99 | 0.09 | (0.09 | ) | — | (c) | (0.14 | ) | — | (0.14 | ) | |||||||||||||||||||
Year Ended 12/31/17 | $ | 10.02 | 0.04 | 0.03 | 0.07 | (0.10 | ) | — | (0.10 | ) | |||||||||||||||||||||
Year Ended 12/31/16 | $ | 9.95 | 0.04 | 0.05 | 0.09 | (0.02 | ) | — | (0.02 | ) | |||||||||||||||||||||
Year Ended 12/31/15 | $ | 10.03 | 0.06 | (0.08 | ) | (0.02 | ) | (0.06 | ) | — | (0.06 | ) | |||||||||||||||||||
Class R | |||||||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 9.86 | 0.15 | 0.15 | 0.30 | (0.16 | ) | (0.01 | ) | (0.17 | ) | ||||||||||||||||||||
Year Ended 12/31/18 | $ | 9.99 | 0.12 | (0.08 | ) | 0.04 | (0.17 | ) | — | (0.17 | ) | ||||||||||||||||||||
Year Ended 12/31/17 | $ | 10.02 | 0.08 | 0.03 | 0.11 | (0.14 | ) | — | (0.14 | ) | |||||||||||||||||||||
Year Ended 12/31/16 | $ | 9.95 | 0.08 | 0.05 | 0.13 | (0.06 | ) | — | (0.06 | ) | |||||||||||||||||||||
Year Ended 12/31/15 | $ | 10.03 | 0.10 | (0.09 | ) | 0.01 | (0.09 | ) | — | (0.09 | ) | ||||||||||||||||||||
Class Y | |||||||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 9.86 | 0.21 | 0.16 | 0.37 | (0.23 | ) | (0.01 | ) | (0.24 | ) | ||||||||||||||||||||
Year Ended 12/31/18 | $ | 10.00 | 0.19 | (0.10 | ) | 0.09 | (0.23 | ) | — | (0.23 | ) | ||||||||||||||||||||
Year Ended 12/31/17 | $ | 10.03 | 0.15 | 0.02 | 0.17 | (0.20 | ) | — | (0.20 | ) | |||||||||||||||||||||
Year Ended 12/31/16 | $ | 9.95 | 0.14 | 0.06 | 0.20 | (0.12 | ) | — | (0.12 | ) | |||||||||||||||||||||
Year Ended 12/31/15 | $ | 10.03 | 0.16 | (0.08 | ) | 0.08 | (0.16 | ) | — | (0.16 | ) |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
(c) 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)
See notes to financial statements.
78
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Ratios to Average Net Assets | Supplemental Data | ||||||||||||||||||||||||||||||||||
Capital Contribution from Prior Custodian, Net (See Note 8) | Net Asset Value, End of Period | Total Return (Excludes Sales Charge) | Net Expenses | Net Investment Income | Gross Expenses | Net Assets, End of Period (000's) | Portfolio Turnover(b) | ||||||||||||||||||||||||||||
Victory INCORE Low Duration Bond Fund | |||||||||||||||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | — | $ | 9.99 | 3.51 | % | 0.85 | % | 1.93 | % | 0.95 | % | $ | 61,972 | 50 | % | ||||||||||||||||||||
Year Ended 12/31/18 | — | $ | 9.86 | 0.73 | % | 0.85 | % | 1.66 | % | 0.90 | % | $ | 96,210 | 45 | % | ||||||||||||||||||||
Year Ended 12/31/17 | — | $ | 9.99 | 1.47 | % | 0.85 | % | 1.21 | % | 0.90 | % | $ | 149,287 | 62 | % | ||||||||||||||||||||
Year Ended 12/31/16 | — | (c) | $ | 10.03 | 1.80 | %(d) | 0.85 | % | 1.21 | % | 0.89 | % | $ | 214,825 | 49 | % | |||||||||||||||||||
Year Ended 12/31/15 | — | $ | 9.95 | 0.52 | % | 0.84 | % | 1.38 | % | 0.85 | % | $ | 314,347 | 36 | % | ||||||||||||||||||||
Class C | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | — | $ | 9.99 | 2.81 | % | 1.62 | % | 1.17 | % | 1.70 | % | $ | 38,969 | 50 | % | ||||||||||||||||||||
Year Ended 12/31/18 | — | $ | 9.85 | (0.04 | )% | 1.62 | % | 0.88 | % | 1.68 | % | $ | 62,103 | 45 | % | ||||||||||||||||||||
Year Ended 12/31/17 | — | $ | 9.99 | 0.70 | % | 1.62 | % | 0.44 | % | 1.65 | % | $ | 82,847 | 62 | % | ||||||||||||||||||||
Year Ended 12/31/16 | — | (c) | $ | 10.02 | 0.94 | %(d) | 1.62 | % | 0.44 | % | 1.65 | % | $ | 117,544 | 49 | % | |||||||||||||||||||
Year Ended 12/31/15 | — | $ | 9.95 | (0.20 | )% | 1.61 | % | 0.62 | % | 1.62 | % | $ | 154,056 | 36 | % | ||||||||||||||||||||
Class R | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | — | $ | 9.99 | 3.17 | % | 1.27 | % | 1.50 | % | 2.13 | % | $ | 1,147 | 50 | % | ||||||||||||||||||||
Year Ended 12/31/18 | — | $ | 9.86 | 0.31 | % | 1.27 | % | 1.20 | % | 1.87 | % | $ | 1,554 | 45 | % | ||||||||||||||||||||
Year Ended 12/31/17 | — | $ | 9.99 | 1.05 | % | 1.27 | % | 0.79 | % | 1.68 | % | $ | 2,078 | 62 | % | ||||||||||||||||||||
Year Ended 12/31/16 | — | (c) | $ | 10.02 | 1.33 | %(d) | 1.23 | % | 0.83 | % | 1.25 | % | $ | 2,583 | 49 | % | |||||||||||||||||||
Year Ended 12/31/15 | — | $ | 9.95 | 0.12 | % | 1.26 | % | 0.96 | % | 1.27 | % | $ | 3,925 | 36 | % | ||||||||||||||||||||
Class Y | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | — | $ | 9.99 | 3.76 | % | 0.62 | % | 2.12 | % | 0.69 | % | $ | 164,509 | 50 | % | ||||||||||||||||||||
Year Ended 12/31/18 | — | $ | 9.86 | 0.96 | % | 0.62 | % | 1.87 | % | 0.68 | % | $ | 180,034 | 45 | % | ||||||||||||||||||||
Year Ended 12/31/17 | — | $ | 10.00 | 1.71 | % | 0.62 | % | 1.44 | % | 0.65 | % | $ | 271,294 | 62 | % | ||||||||||||||||||||
Year Ended 12/31/16 | — | (c) | $ | 10.03 | 2.04 | %(d) | 0.60 | % | 1.42 | % | 0.63 | % | $ | 334,841 | 49 | % | |||||||||||||||||||
Year Ended 12/31/15 | — | $ | 9.95 | 0.74 | % | 0.61 | % | 1.60 | % | 0.62 | % | $ | 367,112 | 36 | % |
See notes to financial statements.
79
Victory Portfolios | Financial Highlights |
For a Share Outstanding Throughout Each Period
Investment Activities | Distributions to Shareholders From | ||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(a) | Net Realized and Unrealized Gains (Losses) on Investments | Total from Investment Activities | Net Investment Income | Total Distributions | ||||||||||||||||||||||
Victory High Yield Fund | |||||||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 6.20 | 0.37 | 0.54 | 0.91 | (0.38 | ) | (0.38 | ) | ||||||||||||||||||
Year Ended 12/31/18 | $ | 6.57 | 0.39 | (0.37 | ) | 0.02 | (0.39 | ) | (0.39 | ) | |||||||||||||||||
Year Ended 12/31/17 | $ | 6.34 | 0.39 | 0.22 | 0.61 | (0.38 | ) | (0.38 | ) | ||||||||||||||||||
Year Ended 12/31/16 | $ | 5.85 | 0.38 | 0.49 | 0.87 | (0.38 | ) | (0.38 | ) | ||||||||||||||||||
Year Ended 12/31/15 | $ | 6.52 | 0.40 | (0.67 | ) | (0.27 | ) | (0.40 | ) | (0.40 | ) | ||||||||||||||||
Class C | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 6.21 | 0.33 | 0.54 | 0.87 | (0.33 | ) | (0.33 | ) | ||||||||||||||||||
Year Ended 12/31/18 | $ | 6.58 | 0.34 | (0.36 | ) | (0.02 | ) | (0.35 | ) | (0.35 | ) | ||||||||||||||||
Year Ended 12/31/17 | $ | 6.35 | 0.34 | 0.23 | 0.57 | (0.34 | ) | (0.34 | ) | ||||||||||||||||||
Year Ended 12/31/16 | $ | 5.86 | 0.34 | 0.49 | 0.83 | (0.34 | ) | (0.34 | ) | ||||||||||||||||||
Year Ended 12/31/15 | $ | 6.53 | 0.35 | (0.67 | ) | (0.32 | ) | (0.35 | ) | (0.35 | ) | ||||||||||||||||
Class R | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 6.22 | 0.35 | 0.53 | 0.88 | (0.35 | ) | (0.35 | ) | ||||||||||||||||||
Year Ended 12/31/18 | $ | 6.59 | 0.37 | (0.37 | ) | — | (c) | (0.37 | ) | (0.37 | ) | ||||||||||||||||
Year Ended 12/31/17 | $ | 6.35 | 0.37 | 0.23 | 0.60 | (0.36 | ) | (0.36 | ) | ||||||||||||||||||
Year Ended 12/31/16 | $ | 5.87 | 0.36 | 0.48 | 0.84 | (0.36 | ) | (0.36 | ) | ||||||||||||||||||
Year Ended 12/31/15 | $ | 6.54 | 0.37 | (0.66 | ) | (0.29 | ) | (0.38 | ) | (0.38 | ) | ||||||||||||||||
Class Y | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 6.17 | 0.39 | 0.53 | 0.92 | (0.39 | ) | (0.39 | ) | ||||||||||||||||||
Year Ended 12/31/18 | $ | 6.54 | 0.41 | (0.37 | ) | 0.04 | (0.41 | ) | (0.41 | ) | |||||||||||||||||
Year Ended 12/31/17 | $ | 6.31 | 0.40 | 0.23 | 0.63 | (0.40 | ) | (0.40 | ) | ||||||||||||||||||
Year Ended 12/31/16 | $ | 5.82 | 0.39 | 0.49 | 0.88 | (0.39 | ) | (0.39 | ) | ||||||||||||||||||
Year Ended 12/31/15 | $ | 6.49 | 0.41 | (0.67 | ) | (0.26 | ) | (0.41 | ) | (0.41 | ) |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
(c) Amount is less than $0.005 per share.
See notes to financial statements.
80
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Ratios to Average Net Assets | Supplemental Data | ||||||||||||||||||||||||||||||
Net Asset Value, End of Period | Total Return (Excludes Sales Charge) | Net Expenses | Net Investment Income | Gross Expenses | Net Assets, End of Period (000's) | Portfolio Turnover(b) | |||||||||||||||||||||||||
Victory High Yield Fund | |||||||||||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 6.73 | 14.90 | % | 1.00 | % | 5.70 | % | 1.12 | % | $ | 31,602 | 87 | % | |||||||||||||||||
Year Ended 12/31/18 | $ | 6.20 | 0.28 | % | 1.00 | % | 6.01 | % | 1.12 | % | $ | 23,797 | 87 | % | |||||||||||||||||
Year Ended 12/31/17 | $ | 6.57 | 9.93 | % | 1.00 | % | 5.99 | % | 1.13 | % | $ | 21,882 | 174 | % | |||||||||||||||||
Year Ended 12/31/16 | $ | 6.34 | 15.40 | % | 1.00 | % | 6.32 | % | 1.18 | % | $ | 25,530 | 165 | % | |||||||||||||||||
Year Ended 12/31/15 | $ | 5.85 | (4.51 | )% | 1.00 | % | 6.16 | % | 1.16 | % | $ | 26,608 | 151 | % | |||||||||||||||||
Class C | |||||||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 6.75 | 14.24 | % | 1.70 | % | 5.00 | % | 1.82 | % | $ | 21,163 | 87 | % | |||||||||||||||||
Year Ended 12/31/18 | $ | 6.21 | (0.43 | )% | 1.70 | % | 5.29 | % | 1.84 | % | $ | 19,432 | 87 | % | |||||||||||||||||
Year Ended 12/31/17 | $ | 6.58 | 9.19 | % | 1.70 | % | 5.27 | % | 1.84 | % | $ | 22,283 | 174 | % | |||||||||||||||||
Year Ended 12/31/16 | $ | 6.35 | 14.58 | % | 1.70 | % | 5.61 | % | 1.91 | % | $ | 22,498 | 165 | % | |||||||||||||||||
Year Ended 12/31/15 | $ | 5.86 | (5.16 | )% | 1.70 | % | 5.47 | % | 1.90 | % | $ | 22,138 | 151 | % | |||||||||||||||||
Class R | |||||||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 6.75 | 14.48 | % | 1.33 | % | 5.37 | % | 1.33 | % | $ | 18,818 | 87 | % | |||||||||||||||||
Year Ended 12/31/18 | $ | 6.22 | (0.07 | )% | 1.35 | % | 5.64 | % | 1.35 | % | $ | 17,595 | 87 | % | |||||||||||||||||
Year Ended 12/31/17 | $ | 6.59 | 9.64 | % | 1.35 | % | 5.61 | % | 1.36 | % | $ | 19,217 | 174 | % | |||||||||||||||||
Year Ended 12/31/16 | $ | 6.35 | 14.78 | % | 1.35 | % | 5.96 | % | 1.45 | % | $ | 18,742 | 165 | % | |||||||||||||||||
Year Ended 12/31/15 | $ | 5.87 | (4.82 | )% | 1.35 | % | 5.82 | % | 1.51 | % | $ | 18,042 | 151 | % | |||||||||||||||||
Class Y | |||||||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 6.70 | 15.25 | % | 0.76 | % | 5.96 | % | 0.92 | % | $ | 108,171 | 87 | % | |||||||||||||||||
Year Ended 12/31/18 | $ | 6.17 | 0.52 | % | 0.76 | % | 6.32 | % | 0.97 | % | $ | 21,060 | 87 | % | |||||||||||||||||
Year Ended 12/31/17 | $ | 6.54 | 10.24 | % | 0.76 | % | 6.27 | % | 1.04 | % | $ | 5,213 | 174 | % | |||||||||||||||||
Year Ended 12/31/16 | $ | 6.31 | 15.72 | % | 0.76 | % | 6.54 | % | 1.00 | % | $ | 6,938 | 165 | % | |||||||||||||||||
Year Ended 12/31/15 | $ | 5.82 | (4.34 | )% | 0.76 | % | 6.36 | % | 0.95 | % | $ | 6,047 | 151 | % |
See notes to financial statements.
81
Victory Portfolios | Financial Highlights |
For a Share Outstanding Throughout Each Period
Investment Activities | Distributions to Shareholders From | ||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(a) | Net Realized and Unrealized Gains (Losses) on Investments | Total from Investment Activities | Net Investment Income | Net Realized Gains from Investments | ||||||||||||||||||||||
Victory Tax-Exempt Fund | |||||||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 9.47 | 0.30 | 0.53 | 0.83 | (0.34 | ) | (0.12 | ) | ||||||||||||||||||
Year Ended 12/31/18 | $ | 9.91 | 0.36 | (0.30 | ) | 0.06 | (0.36 | ) | (0.14 | ) | |||||||||||||||||
Year Ended 12/31/17 | $ | 9.65 | 0.36 | 0.39 | 0.75 | (0.37 | ) | (0.12 | ) | ||||||||||||||||||
Year Ended 12/31/16 | $ | 10.53 | 0.35 | (0.49 | ) | (0.14 | ) | (0.35 | ) | (0.39 | ) | ||||||||||||||||
Year Ended 12/31/15 | $ | 10.83 | 0.35 | (0.05 | ) | 0.30 | (0.35 | ) | (0.25 | ) | |||||||||||||||||
Class C | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 9.47 | 0.23 | 0.52 | 0.75 | (0.26 | ) | (0.12 | ) | ||||||||||||||||||
Year Ended 12/31/18 | $ | 9.90 | 0.28 | (0.29 | ) | (0.01 | ) | (0.28 | ) | (0.14 | ) | ||||||||||||||||
Year Ended 12/31/17 | $ | 9.65 | 0.29 | 0.37 | 0.66 | (0.29 | ) | (0.12 | ) | ||||||||||||||||||
Year Ended 12/31/16 | $ | 10.53 | 0.26 | (0.48 | ) | (0.22 | ) | (0.27 | ) | (0.39 | ) | ||||||||||||||||
Year Ended 12/31/15 | $ | 10.82 | 0.26 | (0.04 | ) | 0.22 | (0.26 | ) | (0.25 | ) | |||||||||||||||||
Class Y | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 9.46 | 0.30 | 0.55 | 0.85 | (0.35 | ) | (0.12 | ) | ||||||||||||||||||
Year Ended 12/31/18 | $ | 9.90 | 0.37 | (0.30 | ) | 0.07 | (0.37 | ) | (0.14 | ) | |||||||||||||||||
Year Ended 12/31/17 | $ | 9.65 | 0.37 | 0.38 | 0.75 | (0.38 | ) | (0.12 | ) | ||||||||||||||||||
Year Ended 12/31/16 | $ | 10.52 | 0.36 | (0.48 | ) | (0.12 | ) | (0.36 | ) | (0.39 | ) | ||||||||||||||||
Year Ended 12/31/15 | $ | 10.82 | 0.36 | (0.05 | ) | 0.31 | (0.36 | ) | (0.25 | ) |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
See notes to financial statements.
82
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Ratios to Average Net Assets | Supplemental Data | ||||||||||||||||||||||||||||||||||
Total Distributions | Net Asset Value, End of Period | Total Return (Excludes Sales Charge) | Net Expenses | Net Investment Income | Gross Expenses | Net Assets, End of Period (000's) | Portfolio Turnover(b) | ||||||||||||||||||||||||||||
Victory Tax-Exempt Fund | |||||||||||||||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | (0.46 | ) | $ | 9.84 | 8.82 | % | 0.80 | % | 3.04 | % | 1.02 | % | $ | 30,251 | 64 | % | |||||||||||||||||||
Year Ended 12/31/18 | (0.50 | ) | $ | 9.47 | 0.69 | % | 0.80 | % | 3.68 | % | 0.97 | % | $ | 29,993 | 42 | % | |||||||||||||||||||
Year Ended 12/31/17 | (0.49 | ) | $ | 9.91 | 7.89 | % | 0.80 | % | 3.70 | % | 0.96 | % | $ | 37,570 | 84 | % | |||||||||||||||||||
Year Ended 12/31/16 | (0.74 | ) | $ | 9.65 | (1.40 | )% | 0.80 | % | 3.30 | % | 0.95 | % | $ | 54,658 | 39 | % | |||||||||||||||||||
Year Ended 12/31/15 | (0.60 | ) | $ | 10.53 | 2.76 | % | 0.80 | % | 3.22 | % | 0.93 | % | $ | 90,301 | 39 | % | |||||||||||||||||||
Class C | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | (0.38 | ) | $ | 9.84 | 7.97 | % | 1.60 | % | 2.34 | % | 1.82 | % | $ | 11,259 | 64 | % | |||||||||||||||||||
Year Ended 12/31/18 | (0.42 | ) | $ | 9.47 | (0.01 | )% | 1.60 | % | 2.88 | % | 1.78 | % | $ | 17,986 | 42 | % | |||||||||||||||||||
Year Ended 12/31/17 | (0.41 | ) | $ | 9.90 | 6.92 | % | 1.60 | % | 2.89 | % | 1.74 | % | $ | 26,520 | 84 | % | |||||||||||||||||||
Year Ended 12/31/16 | (0.66 | ) | $ | 9.65 | (2.19 | )% | 1.60 | % | 2.51 | % | 1.71 | % | $ | 33,369 | 39 | % | |||||||||||||||||||
Year Ended 12/31/15 | (0.51 | ) | $ | 10.53 | 2.04 | % | 1.60 | % | 2.43 | % | 1.70 | % | $ | 43,404 | 39 | % | |||||||||||||||||||
Class Y | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | (0.47 | ) | $ | 9.84 | 9.06 | % | 0.69 | % | 3.07 | % | 0.83 | % | $ | 24,459 | 64 | % | |||||||||||||||||||
Year Ended 12/31/18 | (0.51 | ) | $ | 9.46 | 0.80 | % | 0.69 | % | 3.79 | % | 0.77 | % | $ | 20,260 | 42 | % | |||||||||||||||||||
Year Ended 12/31/17 | (0.50 | ) | $ | 9.90 | 7.90 | % | 0.69 | % | 3.80 | % | 0.73 | % | $ | 27,420 | 84 | % | |||||||||||||||||||
Year Ended 12/31/16 | (0.75 | ) | $ | 9.65 | (1.20 | )% | 0.69 | % | 3.41 | % | 0.71 | % | $ | 31,762 | 39 | % | |||||||||||||||||||
Year Ended 12/31/15 | (0.61 | ) | $ | 10.52 | 2.87 | % | 0.69 | % | 3.33 | % | 0.71 | % | $ | 52,012 | 39 | % |
See notes to financial statements.
83
Victory Portfolios | Financial Highlights |
For a Share Outstanding Throughout Each Period
Investment Activities | Distributions to Shareholders From | ||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(a) | Net Realized and Unrealized Gains (Losses) on Investments | Total from Investment Activities | Net Investment Income | Net Realized Gains from Investments | ||||||||||||||||||||||
Victory High Income Municipal Bond Fund | |||||||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 10.39 | 0.35 | 0.47 | 0.82 | (0.40 | ) | (0.06 | ) | ||||||||||||||||||
Year Ended 12/31/18 | $ | 10.79 | 0.43 | (0.40 | ) | 0.03 | (0.43 | ) | — | ||||||||||||||||||
Year Ended 12/31/17 | $ | 10.35 | 0.46 | 0.44 | 0.90 | (0.46 | ) | — | |||||||||||||||||||
Year Ended 12/31/16 | $ | 10.89 | 0.44 | (0.54 | ) | (0.10 | ) | (0.44 | ) | — | |||||||||||||||||
Year Ended 12/31/15 | $ | 10.84 | 0.43 | 0.05 | 0.48 | (0.43 | ) | — | |||||||||||||||||||
Class C | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 10.39 | 0.28 | 0.46 | 0.74 | (0.32 | ) | (0.06 | ) | ||||||||||||||||||
Year Ended 12/31/18 | $ | 10.79 | 0.35 | (0.40 | ) | (0.05 | ) | (0.35 | ) | — | |||||||||||||||||
Year Ended 12/31/17 | $ | 10.35 | 0.38 | 0.44 | 0.82 | (0.38 | ) | — | |||||||||||||||||||
Year Ended 12/31/16 | $ | 10.89 | 0.36 | (0.54 | ) | (0.18 | ) | (0.36 | ) | — | |||||||||||||||||
Year Ended 12/31/15 | $ | 10.84 | 0.35 | 0.05 | 0.40 | (0.35 | ) | — | |||||||||||||||||||
Class Y | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 10.39 | 0.38 | 0.47 | 0.85 | (0.43 | ) | (0.06 | ) | ||||||||||||||||||
Year Ended 12/31/18 | $ | 10.79 | 0.46 | (0.40 | ) | 0.06 | (0.46 | ) | — | ||||||||||||||||||
Year Ended 12/31/17 | $ | 10.35 | 0.48 | 0.44 | 0.92 | (0.48 | ) | — | |||||||||||||||||||
Year Ended 12/31/16 | $ | 10.89 | 0.47 | (0.54 | ) | (0.07 | ) | (0.47 | ) | — | |||||||||||||||||
Year Ended 12/31/15 | $ | 10.84 | 0.45 | 0.05 | 0.50 | (0.45 | ) | — |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
See notes to financial statements.
84
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Ratios to Average Net Assets | Supplemental Data | ||||||||||||||||||||||||||||||||||
Total Distributions | Net Asset Value, End of Period | Total Return (Excludes Sales Charge) | Net Expenses | Net Investment Income (Loss) | Gross Expenses | Net Assets, End of Period (000's) | Portfolio Turnover(b) | ||||||||||||||||||||||||||||
Victory High Income Municipal Bond Fund | |||||||||||||||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | (0.46 | ) | $ | 10.75 | 8.04 | % | 0.80 | % | 3.27 | % | 1.09 | % | $ | 19,153 | 49 | % | |||||||||||||||||||
Year Ended 12/31/18 | (0.43 | ) | $ | 10.39 | 0.34 | % | 0.80 | % | 4.13 | % | 1.02 | % | $ | 16,483 | 48 | % | |||||||||||||||||||
Year Ended 12/31/17 | (0.46 | ) | $ | 10.79 | 8.85 | % | 0.80 | % | 4.31 | % | 0.96 | % | $ | 25,831 | 66 | % | |||||||||||||||||||
Year Ended 12/31/16 | (0.44 | ) | $ | 10.35 | (1.04 | )% | 0.80 | % | 4.02 | % | 0.96 | % | $ | 32,943 | 49 | % | |||||||||||||||||||
Year Ended 12/31/15 | (0.43 | ) | $ | 10.89 | 4.51 | % | 0.80 | % | 3.96 | % | 0.95 | % | $ | 48,485 | 53 | % | |||||||||||||||||||
Class C | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | (0.38 | ) | $ | 10.75 | 7.22 | % | 1.57 | % | 2.61 | % | 1.85 | % | $ | 13,995 | 49 | % | |||||||||||||||||||
Year Ended 12/31/18 | (0.35 | ) | $ | 10.39 | (0.43 | )% | 1.57 | % | 3.35 | % | 1.78 | % | $ | 19,282 | 48 | % | |||||||||||||||||||
Year Ended 12/31/17 | (0.38 | ) | $ | 10.79 | 8.01 | % | 1.57 | % | 3.54 | % | 1.73 | % | $ | 25,175 | 66 | % | |||||||||||||||||||
Year Ended 12/31/16 | (0.36 | ) | $ | 10.35 | (1.79 | )% | 1.57 | % | 3.26 | % | 1.73 | % | $ | 29,563 | 49 | % | |||||||||||||||||||
Year Ended 12/31/15 | (0.35 | ) | $ | 10.89 | 3.71 | % | 1.57 | % | 3.19 | % | 1.73 | % | $ | 36,190 | 53 | % | |||||||||||||||||||
Class Y | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | (0.49 | ) | $ | 10.75 | 8.29 | % | 0.57 | % | 3.56 | % | 0.88 | % | $ | 10,620 | 49 | % | |||||||||||||||||||
Year Ended 12/31/18 | (0.46 | ) | $ | 10.39 | 0.57 | % | 0.57 | % | 4.36 | % | 0.78 | % | $ | 11,683 | 48 | % | |||||||||||||||||||
Year Ended 12/31/17 | (0.48 | ) | $ | 10.79 | 9.10 | % | 0.57 | % | 4.55 | % | 0.73 | % | $ | 26,864 | 66 | % | |||||||||||||||||||
Year Ended 12/31/16 | (0.47 | ) | $ | 10.35 | (0.81 | )% | 0.57 | % | 4.26 | % | 0.72 | % | $ | 36,603 | 49 | % | |||||||||||||||||||
Year Ended 12/31/15 | (0.45 | ) | $ | 10.89 | 4.75 | % | 0.57 | % | 4.18 | % | 0.73 | % | $ | 43,024 | 53 | % |
See notes to financial statements.
85
Victory Portfolios | Financial Highlights |
For a Share Outstanding Throughout Each Period
Investment Activities | Distributions to Shareholders From | ||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(a) | Net Realized and Unrealized Gains (Losses) on Investments | Total from Investment Activities | Net Investment Income | Total Distributions | ||||||||||||||||||||||
Victory Floating Rate Fund | |||||||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 9.13 | 0.55 | 0.29 | 0.84 | (0.55 | ) | (0.55 | ) | ||||||||||||||||||
Year Ended 12/31/18 | $ | 9.60 | 0.52 | (0.47 | ) | 0.05 | (0.52 | ) | (0.52 | ) | |||||||||||||||||
Year Ended 12/31/17 | $ | 9.71 | 0.46 | (0.10 | ) | 0.36 | (0.47 | ) | (0.47 | ) | |||||||||||||||||
Year Ended 12/31/16 | $ | 9.08 | 0.46 | 0.63 | 1.09 | (0.46 | ) | (0.46 | ) | ||||||||||||||||||
Year Ended 12/31/15 | $ | 9.82 | 0.46 | (0.74 | ) | (0.28 | ) | (0.46 | ) | (0.46 | ) | ||||||||||||||||
Class C | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 9.14 | 0.48 | 0.28 | 0.76 | (0.48 | ) | (0.48 | ) | ||||||||||||||||||
Year Ended 12/31/18 | $ | 9.61 | 0.44 | (0.47 | ) | (0.03 | ) | (0.44 | ) | (0.44 | ) | ||||||||||||||||
Year Ended 12/31/17 | $ | 9.72 | 0.38 | (0.10 | ) | 0.28 | (0.39 | ) | (0.39 | ) | |||||||||||||||||
Year Ended 12/31/16 | $ | 9.08 | 0.39 | 0.64 | 1.03 | (0.39 | ) | (0.39 | ) | ||||||||||||||||||
Year Ended 12/31/15 | $ | 9.83 | 0.38 | (0.75 | ) | (0.37 | ) | (0.38 | ) | (0.38 | ) | ||||||||||||||||
Class R | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 9.13 | 0.50 | 0.28 | 0.78 | (0.50 | ) | (0.50 | ) | ||||||||||||||||||
Year Ended 12/31/18 | $ | 9.60 | 0.46 | (0.46 | ) | — | (c) | (0.47 | ) | (0.47 | ) | ||||||||||||||||
Year Ended 12/31/17 | $ | 9.72 | 0.41 | (0.12 | ) | 0.29 | (0.41 | ) | (0.41 | ) | |||||||||||||||||
Year Ended 12/31/16 | $ | 9.08 | 0.42 | 0.63 | 1.05 | (0.41 | ) | (0.41 | ) | ||||||||||||||||||
Year Ended 12/31/15 | $ | 9.83 | 0.41 | (0.75 | ) | (0.34 | ) | (0.41 | ) | (0.41 | ) | ||||||||||||||||
Class Y | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 9.14 | 0.57 | 0.29 | 0.86 | (0.57 | ) | (0.57 | ) | ||||||||||||||||||
Year Ended 12/31/18 | $ | 9.61 | 0.54 | (0.47 | ) | 0.07 | (0.54 | ) | (0.54 | ) | |||||||||||||||||
Year Ended 12/31/17 | $ | 9.72 | 0.48 | (0.10 | ) | 0.38 | (0.49 | ) | (0.49 | ) | |||||||||||||||||
Year Ended 12/31/16 | $ | 9.08 | 0.49 | 0.63 | 1.12 | (0.48 | ) | (0.48 | ) | ||||||||||||||||||
Year Ended 12/31/15 | $ | 9.83 | 0.48 | (0.75 | ) | (0.27 | ) | (0.48 | ) | (0.48 | ) |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
(c) Amount is less than $0.005 per share.
See notes to financial statements.
86
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Ratios to Average Net Assets | Supplemental Data | ||||||||||||||||||||||||||||||
Net Asset Value, End of Period | Total Return (Excludes Sales Charge) | Net Expenses | Net Investment Income (Loss) | Gross Expenses | Net Assets, End of Period (000's) | Portfolio Turnover(b) | |||||||||||||||||||||||||
Victory Floating Rate Fund | |||||||||||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 9.42 | 9.43 | % | 1.00 | % | 5.89 | % | 1.17 | % | $ | 146,584 | 35 | % | |||||||||||||||||
Year Ended 12/31/18 | $ | 9.13 | 0.43 | % | 1.00 | % | 5.41 | % | 1.14 | % | $ | 118,672 | 48 | % | |||||||||||||||||
Year Ended 12/31/17 | $ | 9.60 | 3.76 | % | 1.00 | % | 4.76 | % | 1.10 | % | $ | 148,060 | 57 | % | |||||||||||||||||
Year Ended 12/31/16 | $ | 9.71 | 12.35 | % | 1.00 | % | 4.95 | % | 1.11 | % | $ | 221,022 | 56 | % | |||||||||||||||||
Year Ended 12/31/15 | $ | 9.08 | (3.03 | )% | 1.00 | % | 4.71 | % | 1.06 | % | $ | 227,240 | 29 | % | |||||||||||||||||
Class C | |||||||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 9.42 | 8.49 | % | 1.80 | % | 5.08 | % | 1.92 | % | $ | 149,054 | 35 | % | |||||||||||||||||
Year Ended 12/31/18 | $ | 9.14 | (0.38 | )% | 1.80 | % | 4.60 | % | 1.90 | % | $ | 211,462 | 48 | % | |||||||||||||||||
Year Ended 12/31/17 | $ | 9.61 | 2.93 | % | 1.80 | % | 3.97 | % | 1.87 | % | $ | 265,486 | 57 | % | |||||||||||||||||
Year Ended 12/31/16 | $ | 9.72 | 11.57 | % | 1.80 | % | 4.18 | % | 1.89 | % | $ | 341,169 | 56 | % | |||||||||||||||||
Year Ended 12/31/15 | $ | 9.08 | (3.91 | )% | 1.80 | % | 3.92 | % | 1.85 | % | $ | 399,361 | 29 | % | |||||||||||||||||
Class R | |||||||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 9.41 | 8.75 | % | 1.56 | % | 5.34 | % | 3.73 | % | $ | 455 | 35 | % | |||||||||||||||||
Year Ended 12/31/18 | $ | 9.13 | (0.13 | )% | 1.56 | % | 4.84 | % | 2.99 | % | $ | 716 | 48 | % | |||||||||||||||||
Year Ended 12/31/17 | $ | 9.60 | 3.07 | % | 1.56 | % | 4.20 | % | 2.26 | % | $ | 916 | 57 | % | |||||||||||||||||
Year Ended 12/31/16 | $ | 9.72 | 11.88 | % | 1.53 | % | 4.48 | % | 1.53 | % | $ | 1,319 | 56 | % | |||||||||||||||||
Year Ended 12/31/15 | $ | 9.08 | (3.62 | )% | 1.52 | % | 4.22 | % | 1.52 | % | $ | 1,920 | 29 | % | |||||||||||||||||
Class Y | |||||||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 9.43 | 9.65 | % | 0.78 | % | 6.10 | % | 0.92 | % | $ | 289,796 | 35 | % | |||||||||||||||||
Year Ended 12/31/18 | $ | 9.14 | 0.64 | % | 0.78 | % | 5.64 | % | 0.89 | % | $ | 281,545 | 48 | % | |||||||||||||||||
Year Ended 12/31/17 | $ | 9.61 | 3.98 | % | 0.78 | % | 4.99 | % | 0.88 | % | $ | 276,195 | 57 | % | |||||||||||||||||
Year Ended 12/31/16 | $ | 9.72 | 12.71 | % | 0.78 | % | 5.21 | % | 0.88 | % | $ | 370,035 | 56 | % | |||||||||||||||||
Year Ended 12/31/15 | $ | 9.08 | (2.91 | )% | 0.78 | % | 4.91 | % | 0.84 | % | $ | 471,827 | 29 | % |
See notes to financial statements.
87
Victory Portfolios | Financial Highlights |
For a Share Outstanding Throughout Each Period
Investment Activities | Distributions to Shareholders From | ||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(a) | Net Realized and Unrealized Gains (Losses) on Investments | Total from Investment Activities | Net Investment Income | Net Realized Gains from Investments | Return of Capital | |||||||||||||||||||||||||
Victory Strategic Income Fund | |||||||||||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 9.74 | 0.27 | 0.61 | 0.88 | (0.25 | ) | — | (0.02 | ) | |||||||||||||||||||||
Year Ended 12/31/18 | $ | 10.14 | 0.34 | (0.41 | ) | (0.07 | ) | (0.33 | ) | — | — | ||||||||||||||||||||
Year Ended 12/31/17 | $ | 9.99 | 0.33 | 0.17 | 0.50 | (0.35 | ) | — | — | ||||||||||||||||||||||
Year Ended 12/31/16 | $ | 9.68 | 0.23 | 0.36 | 0.59 | (0.27 | ) | — | (0.01 | ) | |||||||||||||||||||||
Year Ended 12/31/15 | $ | 10.10 | 0.31 | (0.40 | ) | (0.09 | ) | (0.32 | ) | (0.01 | ) | — | |||||||||||||||||||
Class C | |||||||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 9.79 | 0.19 | 0.61 | 0.80 | (0.18 | ) | — | (0.01 | ) | |||||||||||||||||||||
Year Ended 12/31/18 | $ | 10.19 | 0.26 | (0.41 | ) | (0.15 | ) | (0.25 | ) | — | — | ||||||||||||||||||||
Year Ended 12/31/17 | $ | 10.04 | 0.25 | 0.17 | 0.42 | (0.27 | ) | — | — | ||||||||||||||||||||||
Year Ended 12/31/16 | $ | 9.72 | 0.15 | 0.38 | 0.53 | (0.20 | ) | — | (0.01 | ) | |||||||||||||||||||||
Year Ended 12/31/15 | $ | 10.15 | 0.23 | (0.40 | ) | (0.17 | ) | (0.25 | ) | (0.01 | ) | — | |||||||||||||||||||
Class R | |||||||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 9.79 | 0.23 | 0.62 | 0.85 | (0.22 | ) | — | (0.01 | ) | |||||||||||||||||||||
Year Ended 12/31/18 | $ | 10.20 | 0.30 | (0.42 | ) | (0.12 | ) | (0.29 | ) | — | — | ||||||||||||||||||||
Year Ended 12/31/17 | $ | 10.04 | 0.29 | 0.18 | 0.47 | (0.31 | ) | — | — | ||||||||||||||||||||||
Year Ended 12/31/16 | $ | 9.73 | 0.19 | 0.37 | 0.56 | (0.24 | ) | — | (0.01 | ) | |||||||||||||||||||||
Year Ended 12/31/15 | $ | 10.16 | 0.27 | (0.40 | ) | (0.13 | ) | (0.29 | ) | (0.01 | ) | — | |||||||||||||||||||
Class Y | |||||||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 9.69 | 0.29 | 0.61 | 0.90 | (0.28 | ) | — | (0.02 | ) | |||||||||||||||||||||
Year Ended 12/31/18 | $ | 10.09 | 0.36 | (0.41 | ) | (0.05 | ) | (0.35 | ) | — | — | ||||||||||||||||||||
Year Ended 12/31/17 | $ | 9.94 | 0.35 | 0.18 | 0.53 | (0.38 | ) | — | — | ||||||||||||||||||||||
Year Ended 12/31/16 | $ | 9.63 | 0.25 | 0.36 | 0.61 | (0.29 | ) | — | (0.01 | ) | |||||||||||||||||||||
Year Ended 12/31/15 | $ | 10.05 | 0.32 | (0.39 | ) | (0.07 | ) | (0.34 | ) | (0.01 | ) | — |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
See notes to financial statements.
88
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Ratios to Average Net Assets | Supplemental Data | ||||||||||||||||||||||||||||||||||
Total Distributions | Net Asset Value, End of Period | Total Return (Excludes Sales Charge) | Net Expenses | Net Investment Income (Loss) | Gross Expenses | Net Assets, End of Period (000's) | Portfolio Turnover(b) | ||||||||||||||||||||||||||||
Victory Strategic Income Fund | |||||||||||||||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | (0.27 | ) | $ | 10.35 | 9.17 | % | 0.95 | % | 2.61 | % | 1.11 | % | $ | 33,767 | 106 | % | |||||||||||||||||||
Year Ended 12/31/18 | (0.33 | ) | $ | 9.74 | (0.66 | )% | 0.95 | % | 3.46 | % | 1.09 | % | $ | 32,053 | 115 | % | |||||||||||||||||||
Year Ended 12/31/17 | (0.35 | ) | $ | 10.14 | 5.12 | % | 0.95 | % | 3.24 | % | 1.07 | % | $ | 34,957 | 138 | % | |||||||||||||||||||
Year Ended 12/31/16 | (0.28 | ) | $ | 9.99 | 6.20 | % | 0.95 | % | 2.28 | % | 1.17 | % | $ | 37,121 | 79 | % | |||||||||||||||||||
Year Ended 12/31/15 | (0.33 | ) | $ | 9.68 | (0.93 | )% | 0.95 | % | 3.05 | % | 1.16 | % | $ | 37,845 | 41 | % | |||||||||||||||||||
Class C | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | (0.19 | ) | $ | 10.40 | 8.26 | % | 1.74 | % | 1.83 | % | 2.00 | % | $ | 9,126 | 106 | % | |||||||||||||||||||
Year Ended 12/31/18 | (0.25 | ) | $ | 9.79 | (1.45 | )% | 1.74 | % | 2.65 | % | 1.97 | % | $ | 10,221 | 115 | % | |||||||||||||||||||
Year Ended 12/31/17 | (0.27 | ) | $ | 10.19 | 4.27 | % | 1.74 | % | 2.44 | % | 1.89 | % | $ | 11,671 | 138 | % | |||||||||||||||||||
Year Ended 12/31/16 | (0.21 | ) | $ | 10.04 | 5.46 | % | 1.74 | % | 1.49 | % | 2.00 | % | $ | 11,547 | 79 | % | |||||||||||||||||||
Year Ended 12/31/15 | (0.26 | ) | $ | 9.72 | (1.79 | )% | 1.74 | % | 2.25 | % | 1.97 | % | $ | 12,940 | 41 | % | |||||||||||||||||||
Class R | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | (0.23 | ) | $ | 10.41 | 8.79 | % | 1.34 | % | 2.21 | % | 1.77 | % | $ | 2,866 | 106 | % | |||||||||||||||||||
Year Ended 12/31/18 | (0.29 | ) | $ | 9.79 | (1.15 | )% | 1.34 | % | 3.05 | % | 1.70 | % | $ | 2,761 | 115 | % | |||||||||||||||||||
Year Ended 12/31/17 | (0.31 | ) | $ | 10.20 | 4.78 | % | 1.34 | % | 2.83 | % | 1.61 | % | $ | 2,927 | 138 | % | |||||||||||||||||||
Year Ended 12/31/16 | (0.25 | ) | $ | 10.04 | 5.77 | % | 1.34 | % | 1.89 | % | 1.53 | % | $ | 2,979 | 79 | % | |||||||||||||||||||
Year Ended 12/31/15 | (0.30 | ) | $ | 9.73 | (1.39 | )% | 1.34 | % | 2.64 | % | 1.58 | % | $ | 3,338 | 41 | % | |||||||||||||||||||
Class Y | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | (0.30 | ) | $ | 10.29 | 9.35 | % | 0.74 | % | 2.83 | % | 1.11 | % | $ | 5,274 | 106 | % | |||||||||||||||||||
Year Ended 12/31/18 | (0.35 | ) | $ | 9.69 | (0.45 | )% | 0.74 | % | 3.72 | % | 1.06 | % | $ | 4,798 | 115 | % | |||||||||||||||||||
Year Ended 12/31/17 | (0.38 | ) | $ | 10.09 | 5.38 | % | 0.74 | % | 3.46 | % | 0.95 | % | $ | 10,180 | 138 | % | |||||||||||||||||||
Year Ended 12/31/16 | (0.30 | ) | $ | 9.94 | 6.45 | % | 0.74 | % | 2.50 | % | 0.99 | % | $ | 11,768 | 79 | % | |||||||||||||||||||
Year Ended 12/31/15 | (0.35 | ) | $ | 9.63 | (0.74 | )% | 0.74 | % | 3.24 | % | 0.98 | % | $ | 13,217 | 41 | % |
(b) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
See notes to financial statements.
89
Victory Portfolios | Notes to Financial Statements December 31, 2019 |
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 | INCORE Investment Quality Bond Fund | Classes A, C, R and Y | |||||||||
Victory INCORE Low Duration Bond Fund | INCORE 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
90
Victory Portfolios | Notes to Financial Statements — continued December 31, 2019 |
• Level 2 — other significant observable inputs (including quoted prices for similar securities or interest rates applicable to those securities, etc.)
• Level 3 — significant unobservable inputs (including the Funds' own assumptions in determining the fair value of investments)
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The inputs or methodologies used for valuation techniques are not necessarily an indication of the risk associated with entering into those investments.
Portfolio securities listed or traded on securities exchanges, including 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, 2019, 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 | LEVEL 2 | Total | |||||||||||||
INCORE Investment Quality Bond Fund | |||||||||||||||
Asset Backed Securities | $ | — | $ | 13,547 | $ | 13,547 | |||||||||
Collateralized Mortgage Obligations | — | 576,372 | 576,372 | ||||||||||||
Corporate Bonds | — | 14,056,808 | 14,056,808 | ||||||||||||
Residential Mortgage Backed Securities | — | 185,328 | 185,328 | ||||||||||||
U.S. Government Mortgage Backed Agencies | — | 12,824,521 | 12,824,521 | ||||||||||||
U.S. Treasury Obligations | — | 3,071,521 | 3,071,521 | ||||||||||||
Collateral for Securities Loaned | 662,890 | — | 662,890 | ||||||||||||
Total | $ | 662,890 | $ | 30,728,097 | $ | 31,390,987 | |||||||||
Other Financial Instruments^: | |||||||||||||||
Assets: | |||||||||||||||
Credit Default Swap Agreements | $ | — | $ | 14,094 | $ | 14,094 | |||||||||
Liabilities: | |||||||||||||||
Futures Contracts | (4,893 | ) | — | (4,893 | ) | ||||||||||
Total | $ | (4,893 | ) | $ | 14,094 | $ | 9,201 |
91
Victory Portfolios | Notes to Financial Statements — continued December 31, 2019 |
LEVEL 1 | LEVEL 2 | Total | |||||||||||||
INCORE Low Duration Bond Fund | |||||||||||||||
Asset Backed Securities | $ | — | $ | 26,090,866 | $ | 26,090,866 | |||||||||
Collateralized Mortgage Obligations | — | 10,489,506 | 10,489,506 | ||||||||||||
Corporate Bonds | — | 116,455,370 | 116,455,370 | ||||||||||||
Residential Mortgage Backed Securities | — | 14,773,181 | 14,773,181 | ||||||||||||
U.S. Government Mortgage Backed Agencies | — | 34,913,529 | 34,913,529 | ||||||||||||
U.S. Treasury Obligations | — | 60,421,335 | 60,421,335 | ||||||||||||
Collateral for Securities Loaned | 1,828,649 | — | 1,828,649 | ||||||||||||
Total | $ | 1,828,649 | $ | 263,143,787 | $ | 264,972,436 | |||||||||
Other Financial Instruments^: | |||||||||||||||
Assets: | |||||||||||||||
Futures Contracts | $ | 79,478 | $ | — | $ | 79,478 | |||||||||
Credit Default Swap Agreements | — | 120,813 | 120,813 | ||||||||||||
Liabilities: | |||||||||||||||
Futures Contracts | (75,293 | ) | — | (75,293 | ) | ||||||||||
Total | $ | 4,185 | $ | 120,813 | $ | 124,998 | |||||||||
High Yield Fund | |||||||||||||||
Common Stocks | $ | 1,126,270 | $ | — | $ | 1,126,270 | |||||||||
Senior Secured Loans | — | 40,978,543 | 40,978,543 | ||||||||||||
Corporate Bonds | — | 127,165,723 | 127,165,723 | ||||||||||||
Collateral for Securities Loaned | 26,022,080 | — | 26,022,080 | ||||||||||||
Total | $ | 27,148,350 | $ | 168,144,266 | $ | 195,292,616 | |||||||||
Tax-Exempt Fund | |||||||||||||||
Municipal Bonds | $ | — | $ | 63,708,267 | $ | 63,708,267 | |||||||||
Total | $ | — | $ | 63,708,267 | $ | 63,708,267 | |||||||||
High Income Municipal Bond Fund | |||||||||||||||
Municipal Bonds | $ | — | $ | 41,916,145 | $ | 41,916,145 | |||||||||
Total | $ | — | $ | 41,916,145 | $ | 41,916,145 | |||||||||
Floating Rate Fund | |||||||||||||||
Senior Secured Loans | $ | — | $ | 489,228,570 | $ | 489,228,570 | |||||||||
Corporate Bonds | — | 81,228,599 | 81,228,599 | ||||||||||||
Total | $ | — | $ | 570,457,169 | $ | 570,457,169 | |||||||||
Strategic Income Fund | |||||||||||||||
Asset Backed Securities | $ | — | $ | 4,875,454 | $ | 4,875,454 | |||||||||
Collateralized Mortgage Obligations | — | 1,241,005 | 1,241,005 | ||||||||||||
Corporate Bonds | — | 27,387,455 | 27,387,455 | ||||||||||||
Residential Mortgage Backed Securities | — | 361,016 | 361,016 | ||||||||||||
U.S. Government Mortgage Backed Agencies | — | 154,882 | 154,882 | ||||||||||||
U.S. Treasury Obligations | — | 16,197,952 | 16,197,952 | ||||||||||||
Collateral for Securities Loaned | 2,514,842 | — | 2,514,842 | ||||||||||||
Total | $ | 2,514,842 | $ | 50,217,764 | $ | 52,732,606 | |||||||||
Other Financial Instruments^: | |||||||||||||||
Assets: | |||||||||||||||
Futures Contracts | $ | 57,952 | $ | — | $ | 57,952 | |||||||||
Liabilities: | |||||||||||||||
Futures Contracts | (128,039 | ) | — | (128,039 | ) | ||||||||||
Credit Default Swap Agreements | — | (20,150 | ) | (20,150 | ) | ||||||||||
Total | $ | (70,087 | ) | $ | (20,150 | ) | $ | (90,237 | ) |
92
Victory Portfolios | Notes to Financial Statements — continued December 31, 2019 |
^ Futures Contracts and Credit Default Swap Agreements are valued at the unrealized appreciation (depreciation) on the investment.
For the year ended December 31, 2019, 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 and the segregated assets are 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-Related 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", respectively), 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.
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Victory Portfolios | Notes to Financial Statements — continued December 31, 2019 |
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.
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 broker for futures contracts. During the year ended December 31, 2019, 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.
94
Victory Portfolios | Notes to Financial Statements — continued December 31, 2019 |
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.
Centrally cleared 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 centrally 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 Schedules 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.
95
Victory Portfolios | Notes to Financial Statements — continued December 31, 2019 |
During the year ended December 31, 2019, 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.
Offsetting of Financial Assets and Derivatives Assets:
The Funds are subject to various Master Netting Arrangements, which govern the terms of certain transactions with select counterparties. The Master Netting Arrangements allow the Funds to close out and net total exposure to a counterparty in the event of a default with respect to all the transactions governed under a single agreement with a counterparty. The Master Netting Arrangements also specify collateral posting arrangements at pre-arranged exposure levels. Under the Master Netting Arrangements, collateral is routinely transferred if the total net exposure to certain transactions (net of existing collateral already in place) governed under the relevant Master Netting Arrangement with a counterparty in a given account exceeds a specified threshold depending on the counterparty and the type of Master Netting Arrangement.
The table below, as of December 31, 2019, discloses both gross information and net information about instruments and transactions eligible for offset in the Statements of Assets and Liabilities and instruments and transactions that are subject to an agreement similar to a master netting agreement as well as amounts related to collateral held at clearing brokers and counterparties.
Gross Amounts of Recognized Assets | Gross Amounts Available for Offset | Net Amounts Presented in the Statements of Assets and Liabilities | Cash Collateral Received | Net Amount | |||||||||||||||||||
INCORE Investment Quality Bond Fund | |||||||||||||||||||||||
Futures Contracts — Goldman Sachs & Co. | $ | 94 | $ | — | $ | 94 | $ | — | $ | 94 | |||||||||||||
INCORE Low Duration Bond Fund | |||||||||||||||||||||||
Futures Contracts — Goldman Sachs & Co. | 25,899 | — | 25,899 | — | 25,899 | ||||||||||||||||||
Strategic Income Fund | |||||||||||||||||||||||
Futures Contracts — Goldman Sachs & Co. | 6,055 | — | 6,055 | — | 6,055 | ||||||||||||||||||
Gross Amounts of Recognized Liabilities | Gross Amounts Available for Offset | Net Amounts Presented in the Statements of Assets and Liabilities | Cash Collateral Pledged* | Net Amount | |||||||||||||||||||
INCORE Investment Quality Bond Fund | |||||||||||||||||||||||
Futures Contracts — Goldman Sachs & Co. | $ | 320 | $ | — | $ | 320 | $ | (320 | ) | $ | — | ||||||||||||
Strategic Income Fund | |||||||||||||||||||||||
Futures Contracts — Goldman Sachs & Co. | 18,219 | — | 18,219 | (18,219 | ) | — | �� |
* Cash collateral pledged may be in excess of the amounts shown in the table. The total cash collateral pledged by each Fund is disclosed in the Statements of Assets and Liabilities.
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Victory Portfolios | Notes to Financial Statements — continued December 31, 2019 |
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, 2019:
Assets | Liabilities | ||||||||||||||||||
Variation Margin Receivable on Open Futures Contracts* | Variation Margin Receivable on Swap Agreements* | Variation Margin Payable on Open Futures Contracts* | Variation Margin Payable on Swap Agreements* | ||||||||||||||||
Credit Risk Exposure: | |||||||||||||||||||
INCORE Investment Quality Bond Fund | $ | — | $ | 14,094 | $ | — | $ | — | |||||||||||
INCORE Low Duration Bond Fund | — | 120,813 | — | — | |||||||||||||||
Strategic Income Fund | — | — | — | 20,150 | |||||||||||||||
Interest Rate Risk Exposure: | |||||||||||||||||||
INCORE Investment Quality Bond Fund | — | — | 4,893 | — | |||||||||||||||
INCORE Low Duration Bond Fund | 79,478 | — | 75,293 | — | |||||||||||||||
Strategic Income Fund | 57,952 | — | 128,039 | — |
* Includes cumulative appreciation/depreciation of futures contracts and credit default swap agreements as reported on the Schedules of Portfolio Investments. Only current day's variation margin for both futures contracts and credit default 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, 2019:
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 Agreements | Net Change in Unrealized Appreciation/ Depreciation on Futures Contracts | Net Change in Unrealized Appreciation/ Depreciation on Swap Agreements | ||||||||||||||||
Credit Risk Exposure: | |||||||||||||||||||
INCORE Investment Quality Bond Fund | $ | — | $ | (257,113 | ) | $ | — | $ | 183,902 | ||||||||||
INCORE Low Duration Bond Fund | — | (2,483,152 | ) | — | 1,941,780 | ||||||||||||||
Strategic Income Fund | — | (44,859 | ) | — | (20,150 | ) | |||||||||||||
Interest Rate Risk Exposure: | |||||||||||||||||||
INCORE Investment Quality Bond Fund | (76,271 | ) | — | 46,258 | — | ||||||||||||||
INCORE Low Duration Bond Fund | 311,974 | — | (749,596 | ) | — | ||||||||||||||
Strategic Income Fund | 147,348 | — | (264,161 | ) | — |
All open derivative positions at year end are reflected in each respective Fund's Schedule of Portfolio Investments. The underlying face value of open derivative positions relative to each Fund's net assets at year end is generally representative of the notional amount of open positions to net assets throughout the year.
97
Victory Portfolios | Notes to Financial Statements — continued December 31, 2019 |
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 determined on the basis of coupon interest accrued using the effective interst method which adjusts, 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. Paydown gains or losses on applicable securities, if any, are recorded as components of Interest income on the Statements of Operations.
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, primarily open-end investment companies, 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. During the time portfolio securities are on loan, the borrower will pay the Funds any dividends or interest paid on such securities plus any fee negotiated between the parties to the lending agreement. The Funds also earn a return from the collateral. The Funds pay the Agent various fees in connection with the investment of cash collateral and fees based on the investment income received from securities lending activities. Securities lending income (net of these fees) 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, 2019. 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.
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Victory Portfolios | Notes to Financial Statements — continued December 31, 2019 |
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 | $ | 645,832 | $ | 645,832 | $ | — | $ | — | $ | — | $ | — | |||||||||||||||
INCORE Low Duration Bond Fund | 1,776,595 | 1,776,595 | — | — | — | — | |||||||||||||||||||||
High Yield Fund | 25,052,816 | 25,052,816 | — | — | — | — | |||||||||||||||||||||
Strategic Income Fund | 2,429,241 | 2,429,241 | — | — | — | — |
* Collateral received in excess of the market value of securities on loan is not presented in this table. The total cash collateral received by each Fund is disclosed in the Statements of Assets and Liabilities.
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 investment securities and foreign currency translations on the Statements of Operations. Any realized gains or losses from these fluctuations are disclosed as net realized gains (losses) from investment securities 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.
Distributions 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 (collectively distributions to shareholders) 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 and distribution reclassification), 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, 2019 on the Statements of Assets and Liabilities, there were no permanent book-to-tax difference reclassification adjustments.
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Victory Portfolios | Notes to Financial Statements — continued December 31, 2019 |
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., all open tax years 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.
Cross-Trade Transactions:
Pursuant to Rule 17a-7 under the 1940 Act, the Funds may engage in cross-trades, which are 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, 2019, 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, 2019 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 | $ | 14,668,928 | $ | 10,953,087 | $ | 13,478,303 | $ | 21,489,558 | |||||||||||
INCORE Low Duration Bond Fund | 55,848,354 | 139,815,387 | 73,509,311 | 56,335,884 | |||||||||||||||
High Yield Fund | 199,381,250 | 118,063,021 | — | — | |||||||||||||||
Tax-Exempt Fund | 43,148,594 | 48,986,486 | — | — | |||||||||||||||
High Income Municipal Bond Fund | 21,899,534 | 27,200,992 | — | — | |||||||||||||||
Floating Rate Fund | 205,914,847 | 253,645,973 | — | — | |||||||||||||||
Strategic Income Fund | 42,184,941 | 42,811,282 | 10,015,086 | 11,342,811 |
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
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Victory Portfolios | Notes to Financial Statements — continued December 31, 2019 |
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 (with the exception of the INCORE Investment Quality Bond Fund and the INCORE Low Duration Bond Fund), 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.
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 | % |
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 "Victory Funds Complex"), 0.05% of the average daily net assets above $15 billion to $30 billion of the Victory Funds Complex and 0.04% of the average daily net assets over $30 billion of the Victory Funds Complex.
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. The Funds in the Victory Funds Complex, in 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
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Victory Portfolios | Notes to Financial Statements — continued December 31, 2019 |
Funds. The distribution and service fees paid to the Distributor may be used by the Distributor to pay for activities primarily intended to result in the sale of Class A, Class R or Class C Shares of the Funds.
In addition, the Distributor is entitled to receive commissions on sales of the Class A Shares of the Funds. For the year ended December 31, 2019, the Distributor received approximately $19,571 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 amounts 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, 2019, the expense limits (excluding voluntary waivers) are as follows:
In effect January 1, 2019 until April 30, 2020 | |||||||||||||||||||
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, 2019, the following amounts are available to be repaid to the Adviser:
Expires December 31, 2020 | Expires December 31, 2021 | Expires December 31, 2022 | Total | ||||||||||||||||
INCORE Investment Quality Bond Fund | $ | 102,291 | $ | 107,641 | $ | 127,606 | $ | 337,538 | |||||||||||
INCORE Low Duration Bond Fund | 217,933 | 110,273 | 163,391 | 491,597 | |||||||||||||||
High Yield Fund | 80,774 | 76,868 | 181,413 | 339,055 | |||||||||||||||
Tax-Exempt Fund | 122,100 | 114,539 | 132,065 | 368,704 | |||||||||||||||
High Income Municipal Bond Fund | 139,397 | 121,563 | 132,417 | 393,377 | |||||||||||||||
Floating Rate Fund | 718,769 | 765,491 | 841,458 | 2,325,718 | |||||||||||||||
Strategic Income Fund | 90,313 | 98,810 | 110,089 | 299,212 |
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 $88,190 for the year ended December 31, 2019 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 Counsel.
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
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Victory Portfolios | Notes to Financial Statements — continued December 31, 2019 |
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:
For the year ended December 31, 2019, the Victory Funds Complex participated in a short-term, demand note "Line of Credit" with Citibank. Under the agreements with Citibank, for the period January 1, 2019 to June 30, 2019, the Victory Funds Complex could borrow up to $250 million, of which $100 million was committed and $150 million was uncommitted. Effective July 1, 2019, the agreement was amended to include the USAA Mutual Funds Complex (another series of mutual funds managed by the Adviser) and has a new termination date of June 29, 2020. Under this amended agreement, the Victory Funds Complex and USAA Mutual Funds Complex, combined, may borrow up to $600 million, of which $300 million is committed and $300 million is uncommitted. $40 million of the Line of Credit is reserved for use by the Victory Floating Rate Fund (herein, the "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. With the agreement in effect for the period January 1, 2019 to June 30, 2019, Citibank received an annual commitment fee of 0.15% on $100 million for providing the Line of Credit. For the period July 1, 2019 to December 31, 2019, Citibank received an annual commitment fee of 0.15% on $300 million for providing the Line of Credit. For the year ended December 31, 2019, Citibank earned approximately $300 thousand in commitment fees from the combined Victory Funds Complex and USAA Mutual Funds Complex. Each fund in the Victory Funds Complex and the USAA Mutual Funds Complex pays a pro-rata portion of the commitment fees plus any interest (one month LIBOR plus one percent) on amounts borrowed. Interest charged to the Fund during the period, if applicable, is presented on the Statement of Operations under Line of credit fees.
The Funds did not utilize the Line of Credit during the year ended December 31, 2019.
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. As a Borrower, interest charged to each Fund during the period, if applicable, is presented on the Statements of Operations under Interfund lending fees. As a Lender, interest earned by each Fund during the period, if applicable, is presented on the Statements of Operations under Income on interfund lending.
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Victory Portfolios | Notes to Financial Statements — continued December 31, 2019 |
The average borrowing and lending for the days outstanding and average interest rate for each Fund during the year ended December 31, 2019 were as follows:
Fund | Borrower or Lender | Amount Outstanding at December 31, 2019 | Average Borrowing* | Days Borrowing Outstanding | Average Interest Rate* | Maximum Borrowing During the Period | |||||||||||||||||||||
INCORE Low Duration Bond Fund | Borrower | $ | — | $ | 289,000 | 1 | 2.98 | % | $ | 289,000 | |||||||||||||||||
Tax-Exempt Fund | Borrower | — | 240,750 | 4 | 2.93 | % | 300,000 | ||||||||||||||||||||
High Income Municipal Bond Fund | Borrower | — | 136,000 | 1 | 2.95 | % | 136,000 | ||||||||||||||||||||
Floating Rate Fund | Borrower | — | 3,442,000 | 1 | 3.00 | % | 3,442,000 |
* For the year ended December 31, 2019, 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, 2019 | |||||||||||||||||||||||||||
Distributions paid from | |||||||||||||||||||||||||||
Ordinary Income | Net Long-Term Capital Gains | Total Taxable Distributions | Return of Capital | Tax-Exempt Distributions | Total Distributions Paid | ||||||||||||||||||||||
INCORE Investment Quality Bond Fund | $ | 729,886 | $ | — | $ | 729,886 | $ | — | $ | — | $ | 729,886 | |||||||||||||||
INCORE Low Duration Bond Fund | 5,542,176 | — | 5,542,176 | 211,801 | — | 5,753,977 | |||||||||||||||||||||
High Yield Fund | 8,070,016 | — | 8,070,016 | — | — | 8,070,016 | |||||||||||||||||||||
Tax-Exempt Fund | 423,874 | 390,747 | 814,621 | — | 2,236,300 | 3,050,921 | |||||||||||||||||||||
High Income Municipal Bond Fund | 2,711 | 253,174 | 255,885 | — | 1,601,762 | 1,857,647 | |||||||||||||||||||||
Floating Rate Fund | 34,708,312 | — | 34,708,312 | — | — | 34,708,312 | |||||||||||||||||||||
Strategic Income Fund | 1,237,315 | — | 1,237,315 | 72,235 | — | 1,309,550 |
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 |
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Victory Portfolios | Notes to Financial Statements — continued December 31, 2019 |
As of the tax year ended December 31, 2019, the components of accumulated earnings (deficit) on a tax basis were as follows:
Undistributed Ordinary Income | Undistributed Tax Exempt Income | Distributions Payable | Accumulated Earnings (Deficit) | Accumulated Capital and Other Losses | Qualified Late-Year Losses* | Unrealized Appreciation (Depreciation)** | Other Temporary Differences | Total Accumulated Earnings (Deficit) | |||||||||||||||||||||||||||||||
INCORE Investment Quality Bond Fund | $ | — | $ | — | $ | (21,877 | ) | $ | (21,877 | ) | $ | (580,846 | ) | $ | — | $ | 702,374 | $ | — | $ | 99,651 | ||||||||||||||||||
INCORE Low Duration Bond Fund | — | — | (540,491 | ) | (540,491 | ) | (31,939,385 | ) | — | 1,236,880 | — | (31,242,996 | ) | ||||||||||||||||||||||||||
High Yield Fund | 8,157 | — | — | 8,157 | (7,171,624 | ) | — | 4,225,286 | — | (2,938,181 | ) | ||||||||||||||||||||||||||||
Tax-Exempt Fund | 12,439 | — | — | 12,439 | — | — | 4,211,405 | — | 4,223,844 | ||||||||||||||||||||||||||||||
High Income Municipal Bond Fund | — | 147,380 | — | 147,380 | — | (640,563 | ) | 2,414,101 | (19,507 | ) | 1,901,411 | ||||||||||||||||||||||||||||
Floating Rate Fund | 125,477 | — | — | 125,477 | (171,171,939 | ) | — | (5,346,225 | ) | (19,844 | ) | (176,412,531 | ) | ||||||||||||||||||||||||||
Strategic Income Fund | — | — | (73,971 | ) | (73,971 | ) | (902,515 | ) | — | 1,683,395 | (19,507 | ) | 687,402 |
* Qualified late-year losses are comprised of post-October capital losses incurred after October 31 and certain late-year ordinary losses. Late-year ordinary losses represent ordinary losses incurred after December 31 and specified losses incurred after October 31. 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, 2019, 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 | $ | — | $ | 580,846 | $ | 580,846 | |||||||||
INCORE Low Duration Bond Fund | 12,232,919 | 19,706,466 | 31,939,385 | ||||||||||||
High Yield Fund | 1,231,844 | 5,939,780 | 7,171,624 | ||||||||||||
Floating Rate Fund | 26,576,093 | 144,595,846 | 171,171,939 | ||||||||||||
Strategic Income Fund | — | 902,515 | 902,515 |
During the most recent tax year ended December 31, 2019, the INCORE Investment Quality Bond Fund, High Yield Fund, High Income Municipal Bond Fund and Strategic Income Fund utilized $438,646, $928,506, $262,516 and $886,217, respectively, of CLCFs.
As of December 31, 2019, 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 | $ | 30,688,613 | $ | 802,410 | $ | (100,036 | ) | $ | 702,374 | ||||||||||
INCORE Low Duration Bond Fund | 263,735,556 | 1,628,632 | (391,752 | ) | 1,236,880 | ||||||||||||||
High Yield Fund | 191,067,330 | 6,050,966 | (1,825,680 | ) | 4,225,286 | ||||||||||||||
Tax-Exempt Fund | 59,496,862 | 4,218,915 | (7,510 | ) | 4,211,405 | ||||||||||||||
High Income Municipal Bond Fund | 39,502,044 | 2,628,060 | (213,959 | ) | 2,414,101 | ||||||||||||||
Floating Rate Fund | 575,803,394 | 6,425,165 | (11,771,390 | ) | (5,346,225 | ) | |||||||||||||
Strategic Income Fund | 51,049,211 | 1,814,611 | (131,216 | ) | 1,683,395 |
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Victory Portfolios | Notes to Financial Statements — continued December 31, 2019 |
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, 2019, the shareholder listed below held more than 25% of the shares outstanding of the Fund and may be deemed to control this Fund.
Shareholder | Percent | ||||||||||
Strategic Income Fund | Guardian Life Insurance | 71.1 | % |
10. Recent Accounting Pronouncements:
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. The Funds have adopted and applied ASU 2017-08 on a modified retrospective basis through a cumulative-effect adjustment as of the beginning of the period of adoption.
The adoption of ASU 2017-08 had no material impact (except for the Funds listed in the table below) on information presented in the financial statements. As a result of the adoption of ASU 2017-08, as of January 1, 2019, the accumulated net unrealized appreciation on investments was increased and accumulated net investment income was reduced by the amounts below. The adoption of ASU 2017-08 had no impact on beginning net assets, or any prior period information presented in the financial statements.
Tax-Exempt Fund | $ | 140,195 | |||||
High Income Municipal Bond Fund | 45,702 |
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.
106
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Trustees of Victory Portfolios
Opinion on the Financial Statements
We have audited the accompanying statements of assets and liabilities, including the schedules of portfolio investments, 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 (the "Funds"), each a series of Victory Portfolios, as of December 31, 2019, the related statements of operations and changes in net assets, including the related notes, and the financial highlights for the year then ended (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 as of December 31, 2019, the results of their operations, the changes in their net assets, and their financial highlights for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
The Funds' financial statements and financial highlights for the three years ended December 31, 2018, were audited by other auditors whose report dated February 26, 2019 and the Funds' financial highlights for the year ended December 31, 2015, were audited by other auditors whose report dated February 22, 2016, expressed unqualified opinions on those financial statements and financial highlights.
Basis for Opinion
These financial statements are the responsibility of the Funds' management. Our responsibility is to express an opinion on the Funds' financial statements based on our audit. 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 Funds 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 audit 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.
Our audit 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, 2019, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers or counterparties were not received. Our audit 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 audit provides a reasonable basis for our opinion.
We have served as the auditor of one or more of the investment companies advised by Victory Capital Management, Inc. since 2015.
COHEN & COMPANY, LTD.
Cleveland, Ohio
February 25, 2020
107
Victory Portfolios | Supplemental Information December 31, 2019 |
(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 and 26 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, 68 | Trustee | May 2005 | Consultant (since 2006). | Chair and Trustee, Turner Funds (December 2016-December 2017). | |||||||||||||||
Nigel D. T. Andrews, 72 | 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, 68* | Trustee | May 2005 | Retired (since 2015); Consultant, The Henlee Group, LLC (consulting) (2005-2015). | None. | |||||||||||||||
Dennis M. Bushe, 76 | 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, 2019 |
(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, 65 | Trustee | February 2011 | Chief Investment Officer, Tufts University (since 2002). | None. | |||||||||||||||
John L. Kelly, 66 | Trustee | February 2015 | Partner, McCarvill Capital Partners (September 2016- September 2017); Advisor, Endgate Commodities LLC (January 2016-April 2016); Managing Partner, Endgate Commodities LLC (August 2014-January 2016); Chief Operating Officer, Liquidnet Holdings, Inc. (December 2011-July 2014). | Director, Caledonia Mining Corporation (since May 2012). | |||||||||||||||
David L. Meyer, 62* | Trustee | December 2008 | Retired. | None. | |||||||||||||||
Gloria S. Nelund, 58 | 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, 75 | Chair and Trustee | November 1994 | Private Investor. | Chair (since 2013), Caledonia Mining Corporation. | |||||||||||||||
Interested Trustee. | |||||||||||||||||||
David C. Brown, 47** | 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). | USAA Mutual Funds Trust. |
* 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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(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, 58 | President | February 2006* | Director of Mutual Fund Administration, the Adviser. | ||||||||||||
Scott A. Stahorsky, 50 | Vice President | December 2014 | Manager, Fund Administration, the Adviser (since 2015); Senior Analyst, Fund Administration, the Adviser (prior to 2015). | ||||||||||||
Erin G. Wagner, 46 | Secretary | December 2014 | Associate General Counsel, the Adviser (since 2013). | ||||||||||||
Allan Shaer, 54 | 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, 35 | 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, 46 | Chief Compliance Officer | July 2017 | Chief Compliance Officer (since 2013) and Chief Risk Officer (2009-2017), the Adviser. | ||||||||||||
Chuck Booth, 59 | 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, 66 | Assistant Secretary | December 1997 | Partner, Shearman & Sterling LLP (since 2018); Partner, Morrison & Foerster LLP (2011-January 2018). |
* On December 3, 2014, Mr. Dyer resigned as Secretary of the Trust and accepted the position of President.
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(Unaudited)
Proxy Voting and Portfolio Holdings Information
Proxy Voting:
Information regarding the policies and procedures 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 files 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. Prior to the implementation of Form N-PORT, the Trust 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, 2019 through December 31, 2019.
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 7/1/19 | Actual Ending Account Value 12/31/19 | Hypothetical Ending Account Value 12/31/19 | Actual Expenses Paid During Period 7/1/19- 12/31/19* | Hypothetical Expenses Paid During Period 7/1/19- 12/31/19* | Annualized Expense Ratio During Period 7/1/19- 12/31/19 | ||||||||||||||||||||||
INCORE Investment Quality Bond Fund | |||||||||||||||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 1,025.50 | $ | 1,020.67 | $ | 4.59 | $ | 4.58 | 0.90 | % | |||||||||||||||
Class C Shares | 1,000.00 | 1,022.00 | 1,016.28 | 9.02 | 9.00 | 1.77 | % | ||||||||||||||||||||
Class R Shares | 1,000.00 | 1,024.40 | 1,018.65 | 6.63 | 6.61 | 1.30 | % | ||||||||||||||||||||
Class Y Shares | 1,000.00 | 1,026.80 | 1,021.88 | 3.37 | 3.36 | 0.66 | % |
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Beginning Account Value 7/1/19 | Actual Ending Account Value 12/31/19 | Hypothetical Ending Account Value 12/31/19 | Actual Expenses Paid During Period 7/1/19- 12/31/19* | Hypothetical Expenses Paid During Period 7/1/19- 12/31/19* | Annualized Expense Ratio During Period 7/1/19- 12/31/19 | ||||||||||||||||||||||
INCORE Low Duration Bond Fund | |||||||||||||||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 1,011.90 | $ | 1,020.92 | $ | 4.31 | $ | 4.33 | 0.85 | % | |||||||||||||||
Class C Shares | 1,000.00 | 1,007.80 | 1,017.04 | 8.20 | 8.24 | 1.62 | % | ||||||||||||||||||||
Class R Shares | 1,000.00 | 1,009.60 | 1,018.80 | 6.43 | 6.46 | 1.27 | % | ||||||||||||||||||||
Class Y Shares | 1,000.00 | 1,012.10 | 1,022.08 | 3.14 | 3.16 | 0.62 | % | ||||||||||||||||||||
High Yield Fund | |||||||||||||||||||||||||||
Class A Shares | 1,000.00 | 1,052.10 | 1,020.16 | 5.17 | 5.09 | 1.00 | % | ||||||||||||||||||||
Class C Shares | 1,000.00 | 1,048.30 | 1,016.64 | 8.78 | 8.64 | 1.70 | % | ||||||||||||||||||||
Class R Shares | 1,000.00 | 1,050.30 | 1,018.55 | 6.82 | 6.72 | 1.32 | % | ||||||||||||||||||||
Class Y Shares | 1,000.00 | 1,053.60 | 1,021.37 | 3.93 | 3.87 | 0.76 | % | ||||||||||||||||||||
Tax-Exempt Fund | |||||||||||||||||||||||||||
Class A Shares | 1,000.00 | 1,031.30 | 1,021.17 | 4.10 | 4.08 | 0.80 | % | ||||||||||||||||||||
Class C Shares | 1,000.00 | 1,027.10 | 1,017.14 | 8.18 | 8.13 | 1.60 | % | ||||||||||||||||||||
Class Y Shares | 1,000.00 | 1,031.80 | 1,021.73 | 3.53 | 3.52 | 0.69 | % | ||||||||||||||||||||
High Income Municipal Bond Fund | |||||||||||||||||||||||||||
Class A Shares | 1,000.00 | 1,026.40 | 1,021.17 | 4.09 | 4.08 | 0.80 | % | ||||||||||||||||||||
Class C Shares | 1,000.00 | 1,022.50 | 1,017.29 | 8.00 | 7.98 | 1.57 | % | ||||||||||||||||||||
Class Y Shares | 1,000.00 | 1,027.60 | 1,022.33 | 2.91 | 2.91 | 0.57 | % | ||||||||||||||||||||
Floating Rate Fund | |||||||||||||||||||||||||||
Class A Shares | 1,000.00 | 1,033.10 | 1,020.16 | 5.12 | 5.09 | 1.00 | % | ||||||||||||||||||||
Class C Shares | 1,000.00 | 1,028.30 | 1,016.13 | 9.20 | 9.15 | 1.80 | % | ||||||||||||||||||||
Class R Shares | 1,000.00 | 1,029.50 | 1,017.34 | 7.98 | 7.93 | 1.56 | % | ||||||||||||||||||||
Class Y Shares | 1,000.00 | 1,035.20 | 1,021.27 | 4.00 | 3.97 | 0.78 | % | ||||||||||||||||||||
Strategic Income Fund | |||||||||||||||||||||||||||
Class A Shares | 1,000.00 | 1,020.50 | 1,020.42 | 4.84 | 4.84 | 0.95 | % | ||||||||||||||||||||
Class C Shares | 1,000.00 | 1,016.00 | 1,016.43 | 8.84 | 8.84 | 1.74 | % | ||||||||||||||||||||
Class R Shares | 1,000.00 | 1,019.20 | 1,018.45 | 6.82 | 6.82 | 1.34 | % | ||||||||||||||||||||
Class Y Shares | 1,000.00 | 1,021.80 | 1,021.48 | 3.77 | 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, 2019, the Funds designated tax-exempt income distributions:
Amount | |||||||
Tax-Exempt Fund | $ | 2,236,300 | |||||
High Income Municipal Bond Fund | 1,601,762 |
For the year ended December 31, 2019, the Funds designated short-term capital gain distributions:
Amount | |||||||
Tax-Exempt Fund | $ | 422,592 |
For the year ended December 31, 2019, the following Funds designated long-term capital gain distributions:
Amount | |||||||
Tax-Exempt Fund | $ | 390,747 | |||||
High Income Municipal Bond Fund | 253,174 |
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Considerations of the Board in Continuing the Investment Advisory Agreements
The Board approved the advisory agreement with the Adviser, on behalf of each of the Funds (the "Agreement"), and the 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 an in-person meeting, which was called for that purpose, on December 4, 2019. The Board also considered information relating to the Funds and both the Agreement and the Sub-Advisory Agreement provided throughout the year and, more specifically, at a meeting on October 22, 2019. 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. The Board also noted that upon completion of the reorganization of the INCORE Investment Quality Bond Fund and the INCORE Low Duration Bond Fund, the Sub-Adviser was replaced by the Adviser's INCORE investment management team. In considering whether to approve the Agreement, the Board requested, and the Adviser or 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, which also serves as 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 the Funds' advisory arrangements.
The Board considered each Fund's advisory fee, expense ratio and investment performance as significant factors in determining whether the Agreement and the Sub-Advisory Agreement should be continued. 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. 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;
• The 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;
• The 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.
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(Unaudited)
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;
• 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;
• 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 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 with respect to 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, and a peer group of funds with similar investment strategies selected by that independent consultant from the universe of comparable funds. The Board reviewed the factors and methodology used by the independent consultant in the selection of each Fund's peer group, including the independent consultant's selection of a broad universe of funds, 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 the independent consultant's methodology as compared to the prior year, including those resulting from the Adviser's input, 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 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 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 also considered the Adviser's commitment to limit expenses as discussed in more detail below, and would consider breakpoints at a future time if a Fund's assets were to grow significantly.
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 reflects gross returns. The Board considered the additional resources that the Adviser has
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Victory Portfolios | Supplemental Information — continued December 31, 2019 |
(Unaudited)
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, Tax-Exempt Fund, High Income Municipal Bond Fund, Floating Rate Fund and Strategic Income Fund, the Board considered the relative roles and responsibilities of the Adviser and the 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 also considered 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 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, 2019, 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 the one-, three- and five-year periods, outperformed the benchmark index for the ten-year period, and outperformed the peer group median for all of the periods reviewed, with the exception of the one-year period. The Board discussed with the Adviser how market conditions affected the Fund during periods of underperformance given the Fund's investment strategy and fee and expense profile.
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; (4) the transition of the investment team following the reorganization; and (5) 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, 2019, 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, with the exception of the one-year period, and underperformed the peer group median for all of the 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 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; (4) the transition of the investment team following the reorganization; and (5) 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.
High Yield Fund
The Board compared the Fund's Class A performance for the one-, three-, five- and ten-year periods ended June 30, 2019, 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 median 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
116
Victory Portfolios | Supplemental Information — continued December 31, 2019 |
(Unaudited)
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, 2019, 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 the one-, five- and ten-year periods, outperformed the benchmark index for the three-year period, outperformed the peer group median for the one- and three-year periods, matched the peer group median for the five-year period, and underperformed the peer group median 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 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, 2019, 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 three- and five-year periods, underperformed the benchmark index for the one-year period, and underperformed the peer group median for all of the periods reviewed. The Board discussed with the Adviser how market conditions affected the Fund during periods of underperformance given the Fund's investment strategy and fee and expense profile.
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, 2019, 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, with the exception of the five-year period, and outperformed the peer group median 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, 2019, 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, with the exception of the one-year period, and outperformed the peer group median for all of the periods reviewed, with the exception of the three-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
117
Victory Portfolios | Supplemental Information — continued December 31, 2019 |
(Unaudited)
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.
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 High Yield Fund, Tax Exempt Fund, High Income Municipal Bond Fund, Floating Rate Fund and Strategic Income Fund, was consistent with the best interests of each 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.
118
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 (12/19)
December 31, 2019
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 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) | 5 | ||||||
Financial Statements | |||||||
The Victory Growth Funds | |||||||
Victory RS Small Cap Growth Fund | |||||||
Schedule of Portfolio Investments | 29 | ||||||
Statements of Assets and Liabilities | 47 | ||||||
Statements of Operations | 49 | ||||||
Statements of Changes in Net Assets | 51-53 | ||||||
Financial Highlights | 58-59 | ||||||
Victory RS Select Growth Fund | |||||||
Schedule of Portfolio Investments | 32 | ||||||
Statements of Assets and Liabilities | 47 | ||||||
Statements of Operations | 49 | ||||||
Statements of Changes in Net Assets | 51-53 | ||||||
Financial Highlights | 60-61 | ||||||
Victory RS Mid Cap Growth Fund | |||||||
Schedule of Portfolio Investments | 35 | ||||||
Statements of Assets and Liabilities | 47 | ||||||
Statements of Operations | 49 | ||||||
Statements of Changes in Net Assets | 51-53 | ||||||
Financial Highlights | 62-63 | ||||||
Victory RS Growth Fund | |||||||
Schedule of Portfolio Investments | 38 | ||||||
Statements of Assets and Liabilities | 48 | ||||||
Statements of Operations | 50 | ||||||
Statements of Changes in Net Assets | 54-56 | ||||||
Financial Highlights | 64-65 | ||||||
Victory RS Science and Technology Fund | |||||||
Schedule of Portfolio Investments | 40 | ||||||
Statements of Assets and Liabilities | 48 | ||||||
Statements of Operations | 50 | ||||||
Statements of Changes in Net Assets | 54-56 | ||||||
Financial Highlights | 66-67 | ||||||
Victory RS Small Cap Equity Fund | |||||||
Schedule of Portfolio Investments | 44 | ||||||
Statements of Assets and Liabilities | 48 | ||||||
Statements of Operations | 50 | ||||||
Statements of Changes in Net Assets | 54-56 | ||||||
Financial Highlights | 68-69 | ||||||
Notes to Financial Statements | 70 | ||||||
Report of Independent Registered Public Accounting Firm | 81 | ||||||
Supplemental Information (unaudited) | 82 | ||||||
Trustee and Officer Information | 82 | ||||||
Proxy Voting and Portfolio Holdings 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
(Unaudited)
Dear Shareholder,
As we turn the page into a new decade, it's hard not to reflect on the fact that we have been enjoying the longest-ever bull market in U.S. equities. The run has been impressive, and despite periods of tumult and plenty of negative news, the bull market endured throughout 2019.
For the annual reporting period ended December 31, 2019, the S&P 500® Index posted impressive gains of 31.49%. This represents the greatest one-year gain since 2013 and also illustrates a swift bounce-back after a precipitous drop late in 2018. The move higher supports the notion that underlying fundamentals of U.S. companies drive performance, rather than the political rancor and headline fears that often capture the attention of investors.
Perhaps we shouldn't be surprised at the impressive performance of equities. The U.S. economy — the world's largest — remains on solid footing and has been a key driver of both domestic and international stocks. Robust job creation, near-record low unemployment, and steady consumer spending continue and offer reasons for further optimism. Meanwhile, inflation remains muted, and the Federal Reserve (the Fed) and other major global central banks have taken an accommodative stance. In fact, the Fed has cut interest rates by a total of 0.75% over three meetings last July, September and October.
The risk-on attitudes of investors, coupled with the accommodative monetary policy, had an expected impact on U.S. Treasury yields. The 10-year Treasury yield declined significantly over the course of 2019, falling from 2.66% to 1.92% at year-end. More interesting, however, was the fact that, the yield on 10-year Treasurys fell below shorter-term yields for the first time since before the 2007-2008 Global Financial Crisis. This inverted yield curve spooked investors for a spell, only to revert back to a traditional upward sloping yield curve by the end of the year.
The robust domestic economy, low interest rates, and ample liquidity from central banks provided a potent tonic for the stock market in 2019. In fact, at year-end 2019, the S&P 500® Index was approaching its highest valuation level since 1999. This reminds all of us to retain some historical context on the bull market. Many of us remember the Global Financial Crisis and, before that, the collapse of the dot-com bubble. Although those are now but a distant memory (and we are not forecasting such tumult), we should not forget that stocks don't always go up and cycles don't last forever. In other words, valuations still matter.
The key point is not to discount the risks. In addition to lofty valuations, investors need to keep apprised of trade disputes, geopolitical hotspots, a contentious U.S. election, and a host of other potential headwinds. Yet it is these very risks — these cross-currents — that may create pricing dislocations. This is an environment in which we believe our Victory Capital independent investment franchises can thrive.
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
3
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
4
Victory RS Growth Funds (Unaudited)
Victory RS Small Cap Growth Fund
Portfolio Holdings
As a Percentage of Total Investments
Performance Update
The Victory RS Small Cap Growth Fund (the "Fund") seeks to provide long-term capital appreciation. The Fund returned 37.91% (Class A Shares at net asset value) for the year ended December 31, 2019, outperforming its benchmark, the Russell 2000® Growth Index (the "Index"), which returned 28.48%.
Market Overview
U.S. equity markets delivered solid performance across styles throughout 2019, as the S&P 500® Index delivered its 10th year of positive returns in the last 11 years. U.S. stocks rebounded from a challenging 2018, driven by resilience in the U.S. economy and renewed risk-taking among investors and supported by a strong job market and more accommodative monetary policy.
The year began on a positive note, with strong performance in the first half of the year before volatility emerged in the third quarter, dampening the strong investor sentiment and causing some investors to wonder whether 2018's challenging second half of the year would repeat. The market rebounded sharply in the fourth quarter (despite a challenging environment for corporate earnings, given higher input costs) on improved prospects for global growth in 2020. Top-line sales growth continued to be supported by the strength of the U.S. economy, which helped fuel the best annual performance for U.S. stocks (as represented by the Russell 3000® Index) since 2013.
Large-cap stocks outperformed mid- and small-cap stocks during the year, as measured by the Russell family of indices, a continued trend experienced in both 2017 and 2018, 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, 15, and even 30 years.
Portfolio Review
Within the Technology sector, contributors to the Fund's performance included RingCentral, Inc. (RingCentral), a provider of software-as-a-service solutions for businesses to support modern communications. We initially purchased the stock in early 2014 given the thesis that RingCentral operates in a huge, approximately $50 billion global market (with approximately $15 billion in the United States alone) that was only 10% penetrated by cloud offerings. The company has executed very well due to their industry-leading technology driven by a large research and development budget which, combined with aggressive marketing, has allowed the company to take market share. In the most recent quarter, RingCentral announced a commercial agreement with Avaya Holdings Corp. (Avaya), a global leader in communications, where RingCentral would become the exclusive provider of unified communications as a service (UCaaS) solutions to Avaya in a strategic partnership that would provide RingCentral access to Avaya's installed base of 100 million customers for a new RingCentral product on
5
Victory RS Growth Funds (Unaudited)
Victory RS Small Cap Growth Fund (continued)
Avaya's Cloud Office. We expect this deal to accelerate RingCentral's global expansion, as well as to become an important channel for RingCentral for years to come.
Technology holding Coupa Software Incorporated (Coupa) was another strong contributor to the Fund's performance in 2019. Coupa is a cloud-based platform that allows organizations to automate purchase, invoice, and expense management. We originally purchased the stock given the tailwinds associated with the shift by corporations toward solutions that can be easily scaled, the company's intuitive consumer-friendly interface that leads to greater adoption, and pricing that allows for better targeting. Coupa performed exceptionally well in 2019, driven by the company's ability to move up market, which has driven improved unit economics and strong demand for the company's Coupa pay modules that allow customers to directly pay invoices. Given the success of the holding, we did sell the position from the Fund for market cap reasons.
Stock selection within the Financial Services sector also added to the Fund's performance, due in large part to an investment in eHealth, Inc. (eHealth), a private health insurance exchange for individuals, families, and small businesses. We originally purchased eHealth given its leadership in a growing marketplace that we felt was protected by high barriers given the rigorous approval process required in the healthcare insurance marketplace. eHealth performed exceptionally well throughout the year, easily beating expectations for agent count and sponsor commission revenue, which helped drive market expectations higher.
Within the Health Care sector, the largest detractor to Fund performance was biotechnology holding Ligand Pharmaceuticals Incorporated (Ligand), a biotechnology company with a unique business approach that provides diversified exposure to a range of promising drugs under development by other biotech and pharmaceutical companies. Ligand was dragged lower in part by a bearish report by short-seller Citron, Inc. (published in January) that made the case that Ligand's pipeline of drugs was not as robust as investors thought. We reviewed their analysis and came away unimpressed. In fact, less than two months after the report that put a $35 price target on the company, Ligand sold their Promacta assets (one of their many drugs) to Royalty Pharma for $827 million, which provided cash of $40 per share (higher than the short seller price target alone). Following this news of the asset sale (which Ligand outlined would be used to acquire new assets and repurchase shares), we were surprised that the stock did not respond positively, but we believe in the fundamentals of the company and business model; thus, we continue to hold the position at a more attractive valuation.
Financial Services holding Green Dot Corporation (Green Dot) also detracted from Fund performance in 2019. Green Dot is a bank and financial technology company that provides prepaid cards, debit cards, checking accounts, and consumer cash processing services. We initially purchased the stock given the strong leadership team, market leadership position within several channels, strong cash flows, and merger and acquisition opportunities. In the most recent calendar year, the company was weighed down by poor execution and the unexpected announcement during the first quarter that technology and marketing investment would be much higher than anticipated. We were fortunate to use that as an opportunity to exit the position, as the company continued to disappoint the remainder of the year, falling another 35% following their second quarter results.
6
Victory RS Growth Funds (Unaudited)
Victory RS Small Cap Growth Fund (continued)
Technology holding Mercury Systems, Inc. (Mercury) also proved to be disappointing in 2019. Mercury is a leading provider of secure and mission-critical processing subsystems across several defense platforms for the U.S. Department of Defense and prime contractors. We initially purchased the stock given the strong commercial model the company applies to the defense electronic industry, wherein they fund research and development themselves rather than being funded directly by the government, which leads to higher margins for finished goods. Despite solid execution in recent quarters, the stock has been weighed down by their heavy investment in manufacturing, as capital expenditure was expected to be up 90% year-over-year to modernize their West Coast facilities, pushing expected earnings below Street forecasts. We believe the decision to invest in their business makes sense; thus, we continued to hold the position.
Outlook
We view the outsized outperformance of the market over the past year, which followed a tumultuous 2018 calendar year, as noise, preferring to focus on how our investments perform relative to the fundamental anchor points that track the progress of our long-term growth stories. Instead of fearing these periods, we prefer to use this heightened volatility to take gains in investments where we believe price action has exceeded fundamentals, to initiate new investments at attractive prices, and add to some of our favorite investments. We believe that this environment works to our strength as stock pickers as we work to uncover companies with high-quality growth stories at valuations that are attractive relative to the broader market.
Overall, we expect the market to benefit from an accommodative U.S. Federal Reserve that is once again in easing mode, and our continued base case is that there will be a constructive resolution to ongoing trade disputes. The relative strength in both the U.S. economy and labor market, the impact of lower projected inflation, and expectations of future monetary policy, have reinforced our view that earnings for growth stocks will remain attractive. It is our view that the U.S. equity market can continue to rise given strong U.S. growth, as reflected in gross domestic product increasing 2.1% year-over-year in the most recent quarter, the 12th consecutive quarterly period of greater than 2% year-over-year growth. All this supports our constructive outlook for U.S. small-cap growth stocks.
7
Victory RS Growth Funds (Unaudited)
Victory RS Small Cap Growth Fund (continued)
Average Annual Total Return
Year Ended December 31, 2019
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 | 37.91 | % | 29.98 | % | 36.88 | % | 35.88 | % | 37.28 | % | 38.38 | % | 38.29 | % | 28.48 | % | |||||||||||||||||||
Three Year | 19.77 | % | 17.43 | % | 18.87 | % | 18.87 | % | 19.22 | % | N/A | 20.10 | % | 12.49 | % | ||||||||||||||||||||
Five Year | 11.65 | % | 10.33 | % | 10.81 | % | 10.81 | % | 11.20 | % | N/A | 11.95 | % | 9.34 | % | ||||||||||||||||||||
Ten Year | 15.02 | % | 14.34 | % | 14.00 | % | 14.00 | % | 14.48 | % | N/A | 15.36 | % | 13.01 | % | ||||||||||||||||||||
Since Inception | 13.46 | % | 13.25 | % | 9.02 | % | 9.02 | % | 10.09 | % | 16.82 | % | 10.77 | % | N/A | ||||||||||||||||||||
Expense Ratios | |||||||||||||||||||||||||||||||||||
Gross | 1.45% | 2.26% | 1.87% | 1.10% | 1.15% | ||||||||||||||||||||||||||||||
With Applicable Waivers | 1.40% | 2.16% | 1.86% | 1.06% | 1.13% |
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, 2019. Additional information pertaining to the Fund's expense ratios as of December 31, 2019 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.
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.
8
Victory RS Growth Funds (Unaudited)
Victory RS Select Growth Fund
Portfolio Holdings
As a Percentage of Total Investments
Performance Update
The Victory RS Select Growth Fund (the "Fund") seeks to provide long-term capital appreciation. The Fund returned 32.29% (Class A Shares at net asset value) for the year ended December 31, 2019, slightly underperforming its benchmark, the Russell 2500® Growth Index (the "Index"), which returned 32.65%.
Market Overview
U.S. equity markets delivered solid performance across styles throughout 2019, as the S&P 500® Index delivered its 10th year of positive returns in the last 11 years. U.S. stocks rebounded from a challenging 2018, driven by resilience in the U.S. economy and renewed risk-taking among investors and supported by a strong job market and more accommodative monetary policy.
The year began on a positive note, with strong performance in the first half of the year before volatility emerged in the third quarter, dampening the strong investor sentiment and causing some investors to wonder whether 2018's challenging second half of the year would repeat. The market rebounded sharply in the fourth quarter (despite a challenging environment for corporate earnings, given higher input costs) on improved prospects for global growth in 2020. Top-line sales growth continued to be supported by the strength of the U.S. economy, which helped fuel the best annual performance for U.S. stocks (as represented by the Russell 3000® Index) since 2013.
Large-cap stocks outperformed mid- and small-cap stocks during the year, as measured by the Russell family of indices, a continued trend experienced in both 2017 and 2018, 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, 15, and even 30 years.
Portfolio Review
Within the Technology sector, contributors included RingCentral, Inc. (RingCentral), a provider of software-as-a-service solutions for businesses to support modern communications. We initially purchased the stock in early 2014 given the thesis that RingCentral operates in a huge, approximately $50 billion global market (with approximately $15 billion in the United States alone) that was only 10% penetrated by cloud offerings. The company has executed very well due to their industry-leading technology driven by a large research and development budget which, combined with aggressive marketing, has allowed the company to take market share. In the most recent quarter, RingCentral announced a commercial agreement with Avaya Holdings Corp. (Avaya), a global leader in communications, where RingCentral would become the exclusive provider of unified communications as a service (UCaaS) solutions to Avaya in a strategic partnership that would provide RingCentral access to Avaya's installed base of 100 million customers for a new RingCentral product on Avaya's
9
Victory RS Growth Funds (Unaudited)
Victory RS Select Growth Fund (continued)
Cloud Office. We expect this deal to accelerate RingCentral's global expansion, as well as to become an important channel for RingCentral for years to come.
Stock selection within the Financial Services sector also added to the Fund's performance, due in large part to an investment in Euronet Worldwide, Inc. (Euronet), 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 2019, driven by a 29% increase in operating income as the company continued to execute.
Within the Financial Services sector, another driver of relative Fund performance was Consumer Finance and Credit Services holding, Fair Isaac Corporation, which develops analytic, software, and data management products and services that enable businesses to automate, enhance, and connect decisions. The stock was initially purchased given the thesis that the company's highly defensive business model (composed of four core products that are industry standards in their respective markets) provided stability while the company had multiple opportunities to grow earnings given recent product development and merger and acquisition opportunities. The stock performed very well on earnings that outpaced expectations on the revenue side, as well as producing the largest earnings-per-share beat in years, powered by strong demand for the services.
Within the Health Care sector, the largest area of relative underperformance was within Pharmaceuticals & Biotechnology, driven in part by holding GW Pharmaceuticals PLC (GW Pharma). GW Pharma is a biopharmaceutical company focused on discovering, developing, and commercializing cannabinoid prescription medicines using botanical extracts derived from the cannabis plant. GW Pharma underperformed following a short report that questioned the efficacy and safety of their treatment of epilepsy and potential for softer sales when early adopters of the drug fade. We took a hard look at the underlying analysis in the report and came away unimpressed given the lack of supporting data, as well as the non-medical view that CBD poses a danger to users.
Within the Health Care sector, the largest detractor was biotechnology holding Ligand Pharmaceuticals Incorporated (Ligand), a biotechnology company with a unique business approach that provides diversified exposure to a range of promising drugs under development by other biotech and pharmaceutical companies. Ligand was dragged lower in part by a bearish report by short-seller Citron, Inc. (published in January) that made the case that Ligand's pipeline of drugs was not as robust as investors thought. We reviewed their analysis and came away unimpressed. In fact, less than two months after the report that put a $35 price target on the company, Ligand sold their Promacta assets (one of their many drugs) to Royalty Pharma for $827 million, which provided cash of $40 per share (higher than the short seller price target alone) and which will push cash on their balance sheet to $60 per share. Following this news of the asset sale, which Ligand outlined would be used to acquire new assets and repurchase shares, we were surprised that the stock did not respond positively given this price was higher than the value the Street had put to the drug. Given we continue to believe in the fundamentals of the company and business model, we continue to hold the position at a more attractive valuation.
Financial Services holding Green Dot Corporation (Green Dot) also detracted from Fund performance in 2019. Green Dot is a bank and financial technology company that provides
10
Victory RS Growth Funds (Unaudited)
Victory RS Select Growth Fund (continued)
prepaid cards, debit cards, checking accounts, and consumer cash processing services. We initially purchased the stock given the strong leadership team, market leadership position within a number of channels, strong cash flows, and merger and acquisition opportunities. In the most recent calendar year, the company was weighed down by poor execution and the unexpected announcement during the first quarter that technology and marketing investment would be much higher than anticipated. We were fortunate to use that as a signal to exit the position, as the company continued to disappoint the remainder of the year, falling another 35% following the announcement of their second quarter results.
Technology holding Mercury Systems, Inc. (Mercury) also proved to be disappointing in 2019. Mercury is a leading provider of secure and mission-critical processing subsystems across several defense platforms for the U.S. Department of Defense and prime contractors. We initially purchased the stock given the strong commercial model the company applies to the defense electronic industry, wherein they fund research and development themselves rather than being funded directly by the government, which leads to higher margins for finished goods. Despite solid execution in recent quarters, the stock has been weighed down by their heavy investment in manufacturing, as capital expenditure was expected to be up 90% year-over-year to modernize their West Coast facilities, pushing expected earnings below Street forecasts. We believe the decision to invest in their business makes sense; thus, we continued to hold the position.
Outlook
We view the outsized outperformance of the market over the past year, which followed a tumultuous 2018 calendar year, as noise, preferring to focus on how our investments perform relative to the fundamental anchor points that track the progress of our long-term growth stories. Instead of fearing these periods, we prefer to use this heightened volatility to take gains in investments where we believe price action has exceeded fundamentals and to initiate new investments at attractive prices and add to some of our favorite investments. We believe that this environment works to our strength as stock pickers as we work to uncover companies with high-quality growth stories at valuations that are attractive relative to the broader market.
Overall, we expect the market to benefit from an accommodative U.S. Federal Reserve that is once again in easing mode, and our continued base case is that there will be a constructive resolution to ongoing trade disputes. The relative strength in both the U.S. economy and labor market, the impact of lower projected inflation, and expectations of future monetary policy, have reinforced our view that earnings for growth stocks will remain attractive. It is our view that the U.S. equity market can continue to rise given strong U.S. growth, as reflected in gross domestic product increasing 2.1% year-over-year in the most recent quarter, the 12th consecutive quarterly period of greater than 2% year-over-year growth. All this supports our constructive outlook for U.S. smaller-cap growth stocks.
11
Victory RS Growth Funds (Unaudited)
Victory RS Select Growth Fund (continued)
Average Annual Total Return
Year Ended December 31, 2019
Class A | Class C | Class R | Class R6 | Class Y | |||||||||||||||||||||||||||||||||||
INCEPTION DATE | 8/1/96 | 11/15/07 | 2/12/07 | 11/15/16 | 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 2500® Growth Index1 | Russell 2000® Growth Index2 | |||||||||||||||||||||||||||||||
One Year | 32.29 | % | 24.67 | % | 31.28 | % | 30.28 | % | 31.63 | % | 32.76 | % | 32.66 | % | 32.65 | % | 28.48 | % | |||||||||||||||||||||
Three Year | 12.85 | % | 10.64 | % | 11.96 | % | 11.96 | % | 12.28 | % | 13.23 | % | 13.14 | % | 15.17 | % | 12.49 | % | |||||||||||||||||||||
Five Year | 8.87 | % | 7.59 | % | 8.02 | % | 8.02 | % | 8.34 | % | N/A | 9.16 | % | 10.84 | % | 9.34 | % | ||||||||||||||||||||||
Ten Year | 13.35 | % | 12.68 | % | 12.41 | % | 12.41 | % | 12.69 | % | N/A | 13.68 | % | 14.01 | % | 13.01 | % | ||||||||||||||||||||||
Since Inception | 11.06 | % | 10.78 | % | 7.94 | % | 7.94 | % | 8.51 | % | 13.42 | % | 15.55 | % | N/A | N/A | |||||||||||||||||||||||
Expense Ratios | |||||||||||||||||||||||||||||||||||||||
Gross | 1.50% | 2.25% | 3.60% | 6.33% | 1.21% | ||||||||||||||||||||||||||||||||||
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, 2019. Additional information pertaining to the Fund's expense ratios as of December 31, 2019 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 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.
2The 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.
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 Growth Funds (Unaudited)
Victory RS Mid Cap Growth Fund
Portfolio Holdings
As a Percentage of Total Investments
Performance Update
The Victory RS Mid Cap Growth Fund (the "Fund") seeks to provide long-term capital appreciation. The Fund returned 28.06% (Class A Shares at net asset value) for the year ended December 31, 2019, underperforming its benchmark, the Russell Midcap® Growth Index (the "Index"), which returned 35.47%.
Market Overview
U.S. equity markets delivered solid performance across styles throughout 2019, as the S&P 500® Index delivered its 10th year of positive returns in the last 11 years. U.S. stocks rebounded from a challenging 2018, driven by resilience in the U.S. economy and renewed risk-taking among investors and supported by a strong job market and more accommodative monetary policy.
The year began on a positive note, with strong performance in the first half of the year before volatility emerged in the third quarter, dampening the strong investor sentiment and causing some investors to wonder whether 2018's challenging second half of the year would repeat. The market rebounded sharply in the fourth quarter (despite a challenging environment for corporate earnings, given higher input costs) on improved prospects for global growth in 2020. Top-line sales growth continued to be supported by the strength of the U.S. economy, which helped fuel the best annual performance for U.S. stocks (as represented by the Russell 3000® Index) since 2013.
Large-cap stocks outperformed mid- and small-cap stocks during the year, as measured by the Russell family of indices, a continued trend experienced in both 2017 and 2018, 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, 15, and even 30 years.
Portfolio Review
Stock selection within the Financial Services sector added to Fund performance, due in large part to an investment in Euronet Worldwide, Inc. (Euronet), 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 2019, driven by a 29% increase in operating income as the company continued to execute.
Within the Financial Services sector, another driver of the Fund's relative performance was Consumer Finance and Credit Services holding, Fair Isaac Corporation, which develops analytic, software, and data management products and services that enable businesses to automate, enhance, and connect decisions. The stock was initially purchased given the thesis that the company's highly defensive business model (composed of four core products that
13
Victory RS Growth Funds (Unaudited)
Victory RS Mid Cap Growth Fund (continued)
are industry standards in their respective markets) provided stability while the company had multiple opportunities to grow earnings given recent product development and merger and acquisition opportunities. The stock performed very well on earnings that outpaced expectations on the revenue side, as well as producing the largest earnings-per-share beat in years, powered by strong demand for the services.
While the Technology sector was a drag on Fund performance, RingCentral, Inc. (RingCentral) helped offset a portion of the performance. RingCentral is a provider of software-as-a-service solutions for businesses to support modern communications. We initially purchased the stock in early 2014 given the thesis that RingCentral operates in a huge, approximately $50 billion global market (with approximately $15 billion in the United States alone) that was only 10% penetrated by cloud offerings. The company has executed very well due to their industry-leading technology, driven by a large research and development budget which, combined with aggressive marketing, has allowed the company to take market share. In the most recent quarter, RingCentral announced a commercial agreement with Avaya Holdings Corp. (Avaya), a global leader in communications, where RingCentral would become the exclusive provider of unified communications as a service (UCaaS) solutions to Avaya in a strategic partnership that would provide RingCentral access to Avaya's installed base of 100 million customers for a new RingCentral product on Avaya's Cloud Office. We expect this deal to accelerate RingCentral's global expansion, as well as to become an important channel for RingCentral for years to come.
Within the Health Care sector, the largest area of relative underperformance to the Fund was within Pharmaceuticals & Biotechnology, driven in part by holding Sage Therapeutics, Inc. (Sage). Sage is a clinical-stage biopharmaceutical company that develops and commercializes novel medicines to treat central nervous system disorders. Sage sold off sharply in the fourth quarter following disappointing results of the company's trial for their SAGE-217 drug. The trial did show underlying data that points to the likelihood that the drug works, but appears to have been a trial that was poorly run. Specific details supporting that view were that the SAGE-217 drug worked with statistical significance through 12 days (which was shorter than the 15 days being tested) and through the whole 15-day trial when participants showing no trace of taking the drug (yet were supposed to have taken the drug) were eliminated. As a result, we think the decline in the stock was too severe for what we view as a setback, rather than the failure, for the drug.
Within the Health Care sector, another driver of relative underperformance to the Fund was within Pharmaceuticals & Biotechnology holding GW Pharmaceuticals PLC (GW Pharma). GW Pharma is a biopharmaceutical company focused on discovering, developing, and commercializing cannabinoid prescription medicines using botanical extracts derived from the cannabis plant. GW Pharma underperformed following a short report that questioned the efficacy and safety of their treatment for epilepsy and the potential for softer sales when early adopters of the drug fade. We took a hard look at the underlying analysis in the report and came away unimpressed given the lack of supporting data, as well as the non-medical view that CBD poses a danger to users. As a result, we continue to hold the position.
Within the Technology sector, a material driver of relative Fund underperformance was Information Technology holding Twilio Inc. (Twilio). Twilio provides a cloud communications platform that enables developers to build, scale, and operate communications within software applications. We purchased Twilio given the company's leadership position in an area that is
14
Victory RS Growth Funds (Unaudited)
Victory RS Mid Cap Growth Fund (continued)
poised to benefit materially from the generational shift in customer communication given the company's next-generation products that are poised to disrupt existing players such as Cisco Systems, Inc. The stock became challenged in the third quarter as its chief financial officer noted that net expansion rates were bound to decline given the law of large numbers, which was followed by a lower than expected guide in the fourth quarter hampered by a $5 million credit that was issued to a handful of customers that were incorrectly billed in the past. This credit caused revenues to miss expectations and created the view that sales had decelerated more than to miss expectations and created the view that sales had decelerated more than expected, which could be a problem given that the valuation for the stock is at a high premium. Our view is that earnings will come in materially higher than the conservative guide; thus, we continue to hold the position.
Outlook
We view the outsized outperformance of the market over the past year, which followed a tumultuous 2018 calendar year, as noise, preferring to focus on how our investments perform relative to the fundamental anchor points that track the progress of our long-term growth stories. Instead of fearing these periods, we prefer to use this heightened volatility to take gains in investments where we believe price action has exceeded fundamentals, to initiate new investments at attractive prices, and add to some of our favorite investments. We believe that this environment works to our strength as stock pickers as we work to uncover companies with high-quality growth stories at valuations that are attractive relative to the broader market.
Overall, we expect the market to benefit from an accommodative U.S. Federal Reserve that is once again in easing mode, and our continued base case is that there will be a constructive resolution to ongoing trade disputes. The relative strength in both the U.S. economy and labor market, the impact of lower projected inflation, and expectations of future monetary policy, have reinforced our view that earnings for growth stocks will remain attractive. It is our view that the U.S. equity market can continue to rise given strong U.S. growth, as reflected in gross domestic product increasing 2.1% year-over-year in the most recent quarter, the 12th consecutive quarterly period of greater than 2% year-over-year growth. All this supports our constructive outlook for U.S. mid-cap growth stocks.
15
Victory RS Growth Funds (Unaudited)
Victory RS Mid Cap Growth Fund (continued)
Average Annual Total Return
Year Ended December 31, 2019
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 | Contingent Deferred Charges | Net Asset Value | Net Asset Value | Net Asset Value | Russell Midcap® Growth Index1 | ||||||||||||||||||||||||||||
One Year | 28.06 | % | 20.68 | % | 26.90 | % | 25.90 | % | 27.36 | % | 28.40 | % | 28.36 | % | 35.47 | % | |||||||||||||||||||
Three Year | 12.76 | % | 10.56 | % | 11.74 | % | 11.74 | % | 12.10 | % | 13.06 | % | 13.04 | % | 17.36 | % | |||||||||||||||||||
Five Year | 8.70 | % | 7.42 | % | 7.72 | % | 7.72 | % | 8.09 | % | N/A | 8.98 | % | 11.60 | % | ||||||||||||||||||||
Ten Year | 13.01 | % | 12.34 | % | 11.97 | % | 11.97 | % | 12.39 | % | N/A | 13.29 | % | 14.24 | % | ||||||||||||||||||||
Since Inception | 9.56 | % | 9.29 | % | 5.88 | % | 5.88 | % | 6.82 | % | 13.50 | % | 7.53 | % | N/A | ||||||||||||||||||||
Expense Ratios | |||||||||||||||||||||||||||||||||||
Gross | 1.34% | 2.12% | 2.68% | 1.32% | 1.05% | ||||||||||||||||||||||||||||||
With Applicable Waivers | 1.20% | 2.11% | 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, 2019. Additional information pertaining to the Fund's expense ratios as of December 31, 2019 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 Midcap® 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.
16
Victory RS Growth Funds (Unaudited)
Victory RS Growth Fund
Portfolio Holdings
As a Percentage of Total Investments
Performance Update
The Victory RS Growth Fund (the "Fund") seeks to provide long-term capital growth. For the year ended December 31, 2019, the Russell 1000® Growth Index (the "Index") rose 36.39% while the Fund was outperformed by the benchmark Index, returning 29.83% (Class A Shares at net asset value).
Market Overview
U.S. equity markets delivered solid performance across styles throughout 2019, as the S&P 500® Index delivered its 10th year of positive returns in the last 11 years. U.S. stocks rebounded from a challenging 2018, driven by resilience in the U.S. economy and renewed risk-taking among investors and supported by a strong job market and more accommodative monetary policy.
The year began on a positive note, with strong performance in the first half of the year before volatility emerged in the third quarter, dampening the strong investor sentiment and causing some investors to wonder whether 2018's challenging second half of the year would repeat. The market rebounded sharply in the fourth quarter (despite a challenging environment for corporate earnings, given higher input costs) on improved prospects for global growth in 2020. Top-line sales growth continued to be supported by the strength of the U.S. economy, which helped fuel the best annual performance for U.S. stocks (as represented by the Russell 3000® Index) since 2013.
Large-cap stocks outperformed mid- and small-cap stocks during the year, as measured by the Russell family of indices, a continued trend experienced in both 2017 and 2018, 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, 15, and even 30 years.
Portfolio Review
Within the Technology sector, a material driver of the Fund's relative underperformance was Information Technology holding Twilio Inc. (Twilio). Twilio provides a cloud communications platform that enables developers to build, scale, and operate communications within software applications. We purchased Twilio given the company's leadership position in an area that is poised to benefit materially from the generational shift in customer communication given the company's next-generation products that are poised to disrupt existing players such as Cisco. The stock became challenged in the third quarter as its chief financial officer noted that net expansion rates were bound to decline given the law of large numbers, which was followed by a lower-than-expected guide in the fourth quarter hampered by a $5 million credit that was issued to a handful of customers that were incorrectly billed in the past. This credit caused revenues to miss expectations and created the view that sales had decelerated more than expected, which could be a problem
17
Victory RS Growth Funds (Unaudited)
Victory RS Growth Fund (continued)
given that the valuation for the stock is at a high premium. Our view is that earnings will come in materially higher than the conservative guide; thus, we continue to hold the position.
Within the Health Care sector, the largest area of the Fund's relative underperformance was within Pharmaceuticals & Biotechnology, driven in part by holding Sage Therapeutics, Inc. (Sage). Sage is a clinical-stage biopharmaceutical company that develops and commercializes novel medicines to treat central nervous system disorders. Sage sold off sharply in the fourth quarter following disappointing results of the company's trial for their SAGE-217 drug. The trial did show underlying data that points to the likelihood that the drug works, but appears to have been a trial that was poorly run. Specific details supporting that view were that the SAGE-217 drug worked with statistical significance through 12 days (which was shorter than the 15 days being tested) and through the whole 15-day trial when participants showing no trace of taking the drug (yet were supposed to have taken the drug) were eliminated. As a result, we think the decline in the stock was too severe for what we view as a setback, rather than the failure, for the drug.
Another Health Care detractor was holding bluebird bio, Inc. ("bluebird"), which 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. Early in 2019, 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 performance underwhelmed throughout the year, in part driven by investor uncertainty as the company was unable to share further results of trials the company has launched in partnership with Celgene, and by a company-induced messaging misstep during a sell-side trip. As the company approached year-end, the stock did rebound on news of successful trials related to different programs, though the stock's reaction has been muted relative to initial expectations given the perceived competition of other drugs. Despite the more-challenging-than-expected year, we remain confident in the company's future.
The Consumer Discretionary sector was the largest driver of positive performance within the Fund, led by the strong performance of Leisure holding Chipotle Mexican Grill, Inc. (Chipotle). Chipotle is an operator of Chipotle Mexican Grill restaurants in the United States and abroad. Chipotle rallied sharply on strong results that exceeded the high expectations the company had coming into the year due to stronger-than-expected comparison sales, wider margins, and earnings that beat expectations, which provided investors with the confirmation that the company would once again be a growth story while expanding margins. We continued to hold the position given the view that earnings will continue to grow through 2020, providing incremental upside.
Another positive contributor to the Fund's performance was in the Consumer Discretionary sector in holding Ferrari NV (Ferrari), a leading global luxury brand focused on the design, engineering, production, and sale of luxury performance cars. Ferrari initially was purchased given their leading brand based on low-volume production that drives the reputation of exclusivity and scarcity, which has resulted in the company creating a long visible waitlist, allowing for optimized production and high margins despite the low volume. We also viewed emerging markets as underpenetrated, given rising levels of affluence. The company performed very well throughout 2019, driven by outsized earnings results from strong top-line sales growth, wider margins, and higher earnings. Ferrari has several new models
18
Victory RS Growth Funds (Unaudited)
Victory RS Growth Fund (continued)
in the pipeline that we believe will drive further margin expansion; thus, we continue to believe in the company's future.
Within the Materials & Processing sector, the largest driver of Fund positive performance was Building Materials-holding Ingersoll-Rand PLC (Ingersoll-Rand), which designs, manufactures, sells, and services industrial and commercial products. We purchased the stock given the company's leading HVAC position, a market that we find attractive given favorable demographics, the trend toward urbanization, and concentration among large players. Ingersoll-Rand performed well in the year following the announcement it would merge its industrial business with a competitor in a tax-free transaction, leaving the HVAC business, which was valued at a large discount to peers. We continue to find the outlook for the company at attractive valuations favorable; thus, we continue to hold the position.
Outlook
We view the outsized positive performance of the market over the past year, which followed a tumultuous 2018 calendar year, as noise, preferring to focus on how our investments perform relative to the fundamental anchor points that track the progress of our long-term growth stories. Instead of fearing these periods, we prefer to use this heightened volatility to take gains in investments where we believe price action has exceeded fundamentals, to initiate new investments at attractive prices, and add to some of our favorite investments. We believe that this environment works to our strength as stock pickers as we work to uncover companies with high-quality growth stories at valuations that are attractive relative to the broader market.
Overall, we expect the market to benefit from an accommodative U.S. Federal Reserve that is once again in easing mode, and our continued base case is that there will be a constructive resolution to ongoing trade disputes. The relative strength in both the U.S. economy and labor market, the impact of lower projected inflation, and expectations of future monetary policy, have reinforced our view that earnings for growth stocks will remain attractive. It is our view that the U.S. equity market can continue to rise given strong U.S. growth, as reflected in gross domestic product increasing 2.1% year-over-year in the most recent quarter, the 12th consecutive quarterly period of greater than 2% year-over-year growth. All this supports our constructive outlook for U.S. small-cap growth stocks.
19
Victory RS Growth Funds (Unaudited)
Victory RS Growth Fund (continued)
Average Annual Total Return
Year Ended December 31, 2019
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 | Contingent Deferred Charges | Net Asset Value | Net Asset Value | Russell 1000® Growth Index1 | |||||||||||||||||||||||||
One Year | 29.83 | % | 22.37 | % | 28.74 | % | 27.74 | % | 29.08 | % | 30.18 | % | 36.39 | % | |||||||||||||||||
Three Year | 16.82 | % | 14.54 | % | 15.82 | % | 15.82 | % | 16.09 | % | 17.11 | % | 20.49 | % | |||||||||||||||||
Five Year | 11.03 | % | 9.73 | % | 10.11 | % | 10.11 | % | 10.36 | % | 11.32 | % | 14.63 | % | |||||||||||||||||
Ten Year | 13.11 | % | 12.44 | % | 12.04 | % | 12.04 | % | 12.43 | % | 13.40 | % | 15.22 | % | |||||||||||||||||
Since Inception | 10.19 | % | 9.96 | % | 7.01 | % | 7.01 | % | 7.84 | % | 8.63 | % | N/A | ||||||||||||||||||
Expense Ratios | |||||||||||||||||||||||||||||||
Gross | 1.19% | 2.20% | 3.49% | 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, 2019. Additional information pertaining to the Fund's expense ratios as of December 31, 2019 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.
20
Victory RS Growth Funds (Unaudited)
Victory RS Science and Technology Fund
Portfolio Holdings
As a Percentage of Total Investments
Performance Update
The Victory RS Science and Technology Fund (the "Fund") seeks to provide long-term capital growth. The Fund (Class A Shares at net asset value) returned 39.32% for the year ended December 31, 2019, underperforming the 42.68% return by the S&P North American Technology Sector Index (the "Index"), while outperforming the 31.49% return by the broader S&P 500® Index.
Market Overview
U.S. equity markets delivered solid performance across styles throughout 2019, as the S&P 500® Index delivered its 10th year of positive returns in the last 11 years. U.S. stocks rebounded from a challenging 2018, driven by resilience in the U.S. economy and renewed risk-taking among investors and supported by a strong job market and more accommodative monetary policy.
The year began on a positive note, with strong performance in the first half of the year before volatility emerged in the third quarter, dampening the strong investor sentiment and causing some investors to wonder whether 2018's challenging second half of the year would repeat. The market rebounded sharply in the fourth quarter (despite a challenging environment for corporate earnings, given higher input costs) on improved prospects for global growth in 2020. Top-line sales growth continued to be supported by the strength of the U.S. economy, which helped fuel the best annual performance for U.S. stocks (as represented by the Russell 3000® Index) since 2013.
Large-cap stocks outperformed mid- and small-cap stocks during the year, as measured by the Russell family of indices, a continued trend experienced in both 2017 and 2018, 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, 15, and even 30 years.
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 bluebird bio, Inc. (bluebird), which 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. Early in 2019, 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 performance
21
Victory RS Growth Funds (Unaudited)
Victory RS Science and Technology Fund (continued)
underwhelmed throughout the year, in part driven by investor uncertainty as the company was unable to share further results of trials the company has launched in partnership with Celgene, and by a company-induced messaging misstep during a sell-side trip. As the company approached year-end, the stock did rebound on news of successful trials related to different programs, though the stock's reaction has been muted relative to initial expectations given the perceived competition of other drugs. Despite the more-challenging-than-expected year, we remain confident in the company's future.
Within the Health Care sector, another driver of the Fund's relative underperformance within Pharmaceuticals & Biotechnology was holding GW Pharmaceuticals PLC (GW Pharma). GW Pharma is a biopharmaceutical company focused on discovering, developing, and commercializing cannabinoid prescription medicines using botanical extracts derived from the cannabis plant. GW Pharma underperformed following a short report that questioned the efficacy and safety of their treatment for epilepsy and the potential for softer sales when early adopters of the drug fade. We took a hard look at the underlying analysis in the report and came away unimpressed given the lack of supporting data, as well as the non-medical view that CBD poses a danger to users. As a result, we continue to hold the position.
Within the Technology sector, a material driver of relative underperformance was Information Technology holding Twilio Inc. (Twilio), which provides a cloud communications platform that enables developers to build, scale, and operate communications within software applications. We purchased Twilio given the company's leadership position in an area that is poised to benefit materially from the generational shift in customer communication given the company's next-generation products that are poised to disrupt existing players such as Cisco Systems, Inc. The stock became challenged in the third quarter as its chief financial officer noted that net expansion rates were bound to decline given the law of large numbers, which was followed by a lower-than-expected guide in the fourth quarter hampered by a $5 million credit that was issued to a handful of customers that were incorrectly billed in the past. This credit offset caused revenues to miss expectations and created the view that sales had decelerated more than expected, which could be a problem given that the valuation for the stock is at a high premium. Our view is that earnings will come in materially higher than the conservative guide; thus, we continue to hold the position.
Within the Technology sector, the top contributor to the Fund's performance was RingCentral, Inc. (RingCentral), a provider of software-as-a-service solutions for businesses to support modern communications. We initially purchased the stock in early 2014 given the thesis that RingCentral operates in a huge, approximately $50 billion global market (with approximately $15 billion in the United States alone) that was only 10% penetrated by cloud offerings. The company has executed very well due to their industry-leading technology, driven by a large research and development budget which, combined with aggressive marketing, has allowed the company to take market share. In the most recent quarter, RingCentral announced a commercial agreement with Avaya Holdings Corp. (Avaya), a global leader in communications, where RingCentral would become the exclusive provider of unified communications as a service (UCaaS) solutions to Avaya in a strategic partnership that would provide RingCentral access to Avaya's installed base of 100 million customers for a new RingCentral product on Avaya's Cloud Office. We expect this deal to accelerate RingCentral's global expansion, as well as to become an important channel for RingCentral for years to come.
22
Victory RS Growth Funds (Unaudited)
Victory RS Science and Technology Fund (continued)
Technology holding Coupa Software Incorporated (Coupa) was another strong contributor to the Fund's performance in 2019. Coupa is a cloud-based platform that allows organizations to automate purchase, invoice, and expense management. We originally purchased the stock given the tailwinds associated with the shift by corporations toward solutions that can be easily scaled, the company's intuitive consumer-friendly interface that leads to greater adoption, and pricing that allows for better targeting. Coupa performed exceptionally well in 2019, driven by the company's ability to move up market, which has driven improved unit economics and strong demand for the company's Coupa pay modules that allow customers to directly pay invoices. Given organic growth of approximately 40% in the most recent quarter, we believe the company is only at the early stage of taking market share.
Within Health Care, a top performer within the Pharmaceuticals & Biotechnology industry was our holding in Audentes Therapeutics, Inc. (Audentes). The stock rallied sharply near year-end when Astellas Pharma Inc. and Audentes announced that they entered into a definitive agreement for Astellas to acquire Audentes at a price of $60 per share in cash, which represents a total equity value of approximately $3 billion — more than a 100% premium to its closing price. We owned Audentes given the company's strong progress and consistent management execution on their AT132 gene therapy treatment for X-linked myotubular myopathy (XLMTM), a serious, life-threatening, rare neuromuscular disease that is characterized by extreme muscle weakness, respiratory failure, and early death. A biologics license application (BLA) filing for AT132 in the United States is expected in mid-2020 following dosing of four additional patients in a pivotal expansion cohort.
Outlook
We view the outsized outperformance of the market over the past year, which followed a tumultuous 2018 calendar year, as noise, preferring to focus on how our investments perform relative to the fundamental anchor points that track the progress of our long-term growth stories. Instead of fearing these periods, we prefer to use this heightened volatility to take gains in investments where we believe price action has exceeded fundamentals and to initiate new investments at attractive prices and add to some of our favorite investments. We believe that this environment works to our strength as stock pickers as we work to uncover companies with high-quality growth stories at valuations that are attractive relative to the broader market.
Overall, we expect the market to benefit from an accommodative U.S. Federal Reserve that is once again in easing mode, and our continued base case is that there will be a constructive resolution to ongoing trade disputes. The relative strength in both the U.S. economy and labor market, the impact of lower projected inflation, and expectations of future monetary policy, have reinforced our view that earnings for growth stocks will remain attractive. It is our view that the U.S. equity market can continue to rise given strong U.S. growth, as reflected in gross domestic product increasing 2.1% year-over-year in the most recent quarter, the 12th consecutive quarterly period of greater than 2% year-over-year growth. All this supports our constructive outlook for U.S. Science and Technology stocks.
23
Victory RS Growth Funds (Unaudited)
Victory RS Science and Technology Fund (continued)
Average Annual Total Return
Year Ended December 31, 2019
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 Sector Index1 | S&P 500® Index2 | ||||||||||||||||||||||||||||
One Year | 39.32 | % | 31.30 | % | 38.27 | % | 37.27 | % | 38.73 | % | 39.66 | % | 42.68 | % | 31.49 | % | |||||||||||||||||||
Three Year | 26.03 | % | 23.56 | % | 25.05 | % | 25.05 | % | 25.45 | % | 26.33 | % | 26.46 | % | 15.27 | % | |||||||||||||||||||
Five Year | 19.26 | % | 17.85 | % | 18.32 | % | 18.32 | % | 18.73 | % | 19.53 | % | 20.34 | % | 11.70 | % | |||||||||||||||||||
Ten Year | 16.99 | % | 16.30 | % | 16.05 | % | 16.05 | % | 16.41 | % | 17.30 | % | 17.55 | % | 13.56 | % | |||||||||||||||||||
Since Inception | 11.35 | % | 11.08 | % | 12.10 | % | 12.10 | % | 12.87 | % | 13.46 | % | N/A | N/A | |||||||||||||||||||||
Expense Ratios | |||||||||||||||||||||||||||||||||||
Gross | 1.47% | 2.31% | 2.75% | 1.25% | |||||||||||||||||||||||||||||||
With Applicable Waivers | 1.47% | 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, 2019. Additional information pertaining to the Fund's expense ratios as of December 31, 2019 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.
24
Victory RS Growth Funds (Unaudited)
Victory RS Small Cap Equity Fund
Portfolio Holdings
As a Percentage of Total Investments
Performance Update
The Victory RS Small Cap Equity Fund (the "Fund") seeks to provide long-term capital appreciation. The Fund returned 38.49% (Class A Shares at net asset value) in 2019, outperforming its benchmark, the Russell 2000® Growth Index (the "Index"), which returned 28.48%.
Market Overview
U.S. equity markets delivered solid performance across styles throughout 2019, as the S&P 500® Index delivered its 10th year of positive returns in the last 11 years. U.S. stocks rebounded from a challenging 2018, driven by resilience in the U.S. economy and renewed risk-taking among investors and supported by a strong job market and more accommodative monetary policy.
The year began on a positive note, with strong performance in the first half of the year before volatility emerged in the third quarter, dampening the strong investor sentiment and causing some investors to wonder whether 2018's challenging second half of the year would repeat. The market rebounded sharply in the fourth quarter (despite a challenging environment for corporate earnings, given higher input costs) on improved prospects for global growth in 2020. Top-line sales growth continued to be supported by the strength of the U.S. economy, which helped fuel the best annual performance for U.S. stocks (as represented by the Russell 3000® Index) since 2013.
Large-cap stocks outperformed mid- and small-cap stocks during the year, as measured by the Russell family of indices, a continued trend experienced in both 2017 and 2018, 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, 15, and even 30 years.
Portfolio Review
Within the Technology sector, contributors to the Fund's performance included RingCentral, Inc. (RingCentral), a provider of software-as-a-service solutions for businesses to support modern communications. We initially purchased the stock in early 2014 given the thesis that RingCentral operates in a huge, approximately $50 billion global market (with approximately $15 billion in the United States alone) that was only 10% penetrated by cloud offerings. The company has executed very well due to their industry-leading technology driven by a large research and development budget which, combined with aggressive marketing, has allowed the company to take market share. In the most recent quarter, RingCentral announced a commercial agreement with Avaya Holdings Corp. (Avaya), a global leader in communications, where RingCentral would become the exclusive provider of unified communications as a service (UCaaS) solutions to Avaya in a strategic partnership that would provide RingCentral
25
Victory RS Growth Funds (Unaudited)
Victory RS Small Cap Equity Fund (continued)
access to Avaya's installed base of 100 million customers for a new RingCentral product on Avaya's Cloud Office. We expect this deal to accelerate RingCentral's global expansion, as well as to become an important channel for RingCentral for years to come.
Technology holding Coupa Software Incorporated (Coupa) was another strong contributor to the Fund's performance in 2019. Coupa is a cloud-based platform that allows organizations to automate purchase, invoice, and expense management. We originally purchased the stock given the tailwinds associated with the shift by corporations toward solutions that can be easily scaled, the company's intuitive consumer-friendly interface that leads to greater adoption, and pricing that allows for better targeting. Coupa performed exceptionally well in 2019, driven by the company's ability to move up market, which has driven improved unit economics and strong demand for the company's Coupa pay modules that allow customers to directly pay invoices. Given the success of the holding, we did sell the position from the Fund for market cap reasons.
Stock selection within the Financial Services sector also added to the Fund's performance, due in large part to an investment in eHealth, Inc. (eHealth), a private health insurance exchange for individuals, families, and small businesses. We originally purchased eHealth given its leadership in a growing marketplace that we felt was protected by high barriers given the rigorous approval process required in the healthcare insurance marketplace. eHealth performed exceptionally well throughout the year, easily beating expectations for agent count and sponsor commission revenue, which helped drive market expectations higher.
Within the Health Care sector, the largest detractor to Fund performance was biotechnology holding Ligand Pharmaceuticals Incorporated (Ligand), a biotechnology company with a unique business approach that provides diversified exposure to a range of promising drugs under development by other biotech and pharmaceutical companies. Ligand was dragged lower in part by a bearish report by short-seller Citron, Inc. (published in January) that made the case that Ligand's pipeline of drugs was not as robust as investors thought. We reviewed their analysis and came away unimpressed. In fact, less than two months after the report that put a $35 price target on the company, Ligand sold their Promacta assets (one of their many drugs) to Royalty Pharma for $827 million, which provided cash of $40 per share (higher than the short seller price target alone). Following this news of the asset sale (which Ligand outlined would be used to acquire new assets and repurchase shares), we were surprised that the stock did not respond positively, but we believe in the fundamentals of the company and business model; thus, we continue to hold the position at a more attractive valuation.
Financial Services holding Green Dot Corporation (Green Dot) also detracted from Fund performance in 2019. Green Dot is a bank and financial technology company that provides prepaid cards, debit cards, checking accounts, and consumer cash processing services. We initially purchased the stock given the strong leadership team, market leadership position within several channels, strong cash flows, and merger and acquisition opportunities. In the most recent calendar year, the company was weighed down by poor execution and the unexpected announcement during the first quarter that technology and marketing investment would be much higher than anticipated. We were fortunate to use that as an opportunity to exit the position, as the company continued to disappoint the remainder of the year, falling another 35% following their second quarter results.
26
Victory RS Growth Funds (Unaudited)
Victory RS Small Cap Equity Fund (continued)
Technology holding Mercury Systems, Inc. (Mercury) also proved to be disappointing in 2019. Mercury is a leading provider of secure and mission-critical processing subsystems across several defense platforms for the U.S. Department of Defense and prime contractors. We initially purchased the stock given the strong commercial model the company applies to the defense electronic industry, wherein they fund research and development themselves rather than being funded directly by the government, which leads to higher margins for finished goods. Despite solid execution in recent quarters, the stock has been weighed down by their heavy investment in manufacturing, as capital expenditure was expected to be up 90% year-over-year to modernize their West Coast facilities, pushing expected earnings below Street forecasts. We believe the decision to invest in their business makes sense; thus, we continued to hold the position.
Outlook
We view the outsized outperformance of the market over the past year, which followed a tumultuous 2018 calendar year, as noise, preferring to focus on how our investments perform relative to the fundamental anchor points that track the progress of our long-term growth stories. Instead of fearing these periods, we prefer to use this heightened volatility to take gains in investments where we believe price action has exceeded fundamentals, to initiate new investments at attractive prices, and add to some of our favorite investments. We believe that this environment works to our strength as stock pickers as we work to uncover companies with high-quality growth stories at valuations that are attractive relative to the broader market.
Overall, we expect the market to benefit from an accommodative U.S. Federal Reserve that is once again in easing mode, and our continued base case is that there will be a constructive resolution to ongoing trade disputes. The relative strength in both the U.S. economy and labor market, the impact of lower projected inflation, and expectations of future monetary policy, have reinforced our view that earnings for growth stocks will remain attractive. It is our view that the U.S. equity market can continue to rise given strong U.S. growth, as reflected in gross domestic product increasing 2.1% year-over-year in the most recent quarter, the 12th consecutive quarterly period of greater than 2% year-over-year growth. All this supports our constructive outlook for U.S. small-cap growth stocks.
27
Victory RS Growth Funds (Unaudited)
Victory RS Small Cap Equity Fund (continued)
Average Annual Total Return
Year Ended December 31, 2019
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 | 38.49 | % | 30.53 | % | 37.26 | % | 36.32 | % | 37.91 | % | 38.69 | % | 28.48 | % | |||||||||||||||||
Three Year | 20.40 | % | 18.04 | % | 19.32 | % | 19.32 | % | 19.79 | % | 20.59 | % | 12.49 | % | |||||||||||||||||
Five Year | 12.18 | % | 10.86 | % | 11.23 | % | 11.23 | % | 11.68 | % | 12.28 | % | 9.34 | % | |||||||||||||||||
Ten Year | 15.40 | % | 14.72 | % | 14.40 | % | 14.40 | % | 14.95 | % | 15.59 | % | 13.01 | % | |||||||||||||||||
Since Inception | 10.62 | % | 10.33 | % | 7.63 | % | 7.63 | % | 9.84 | % | 10.69 | % | N/A | ||||||||||||||||||
Expense Ratios | |||||||||||||||||||||||||||||||
Gross | 1.22% | 4.24% | 1.88% | 1.68% | |||||||||||||||||||||||||||
With Applicable Waivers | 1.22% | 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, 2019. Additional information pertaining to the Fund's expense ratios as of December 31, 2019 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.
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 RS Small Cap Growth Fund | Schedule of Portfolio Investments December 31, 2019 |
Security Description | Shares | Value | |||||||||
Common Stocks (98.2%) | |||||||||||
Biotechnology (17.7%): | |||||||||||
Aimmune Therapeutics, Inc. (a) (b) | 977,930 | $ | 32,731,317 | ||||||||
Amicus Therapeutics, Inc. (a) | 2,138,645 | 20,830,402 | |||||||||
Apellis Pharmaceuticals, Inc. (a) (b) | 929,520 | 28,461,902 | |||||||||
Arena Pharmaceuticals, Inc. (a) (b) | 375,850 | 17,071,107 | |||||||||
Ascendis Pharma A/S (a) | 212,790 | 29,603,345 | |||||||||
bluebird bio, Inc. (a) (b) | 384,389 | 33,730,135 | |||||||||
Blueprint Medicines Corp. (a) | 261,418 | 20,942,196 | |||||||||
Celyad SA (a) (b) (c) | 428,091 | 4,460,708 | |||||||||
CytomX Therapeutics, Inc., Class A (a) | 1,230,300 | 10,223,793 | |||||||||
Epizyme, Inc. (a) (b) | 1,316,010 | 32,373,846 | |||||||||
Equillium, Inc. (a) (c) | 802,820 | 2,713,532 | |||||||||
Fate Therapeutics, Inc. (a) (b) | 1,799,180 | 35,209,953 | |||||||||
Gossamer Bio, Inc. (a) (b) | 644,000 | 10,065,720 | |||||||||
Immunomedics, Inc. (a) (b) | 961,460 | 20,344,494 | |||||||||
Invitae Corp. (a) (b) | 1,218,710 | 19,657,792 | |||||||||
Iovance Biotherapeutics, Inc. (a) (b) | 1,150,135 | 31,835,737 | |||||||||
Kura Oncology, Inc. (a) | 954,580 | 13,125,475 | |||||||||
Mirati Therapeutics, Inc. (a) (b) | 203,750 | 26,255,225 | |||||||||
Myovant Sciences Ltd. (a) (b) | 1,171,960 | 18,188,819 | |||||||||
407,825,498 | |||||||||||
Communication Services (2.4%): | |||||||||||
Bandwidth, Inc., Class A (a) (b) | 428,040 | 27,415,962 | |||||||||
Cardlytics, Inc. (a) (b) | 190,270 | 11,960,372 | |||||||||
QuinStreet, Inc. (a) (b) | 992,390 | 15,193,491 | |||||||||
54,569,825 | |||||||||||
Consumer Discretionary (11.8%): | |||||||||||
Aaron's, Inc. | 266,820 | 15,238,090 | |||||||||
Arco Platform Ltd., ADR, Class A (a) | 715,980 | 31,646,316 | |||||||||
Dine Brands Global, Inc. (b) | 318,990 | 26,642,045 | |||||||||
Eldorado Resorts, Inc. (a) (b) | 571,470 | 34,082,471 | |||||||||
Frontdoor, Inc. (a) | 425,150 | 20,160,613 | |||||||||
Monro, Inc (b) | 361,400 | 28,261,480 | |||||||||
Planet Fitness, Inc., Class A (a) | 379,900 | 28,370,932 | |||||||||
Regis Corp. (a) (b) | 795,710 | 14,219,338 | |||||||||
Skyline Champion Corp. (a) | 381,690 | 12,099,573 | |||||||||
Steven Madden Ltd. | 381,487 | 16,407,756 | |||||||||
Strategic Education, Inc. | 271,170 | 43,088,913 | |||||||||
270,217,527 | |||||||||||
Consumer Staples (4.9%): | |||||||||||
BellRing Brands, Inc., Class A (a) | 603,070 | 12,839,360 | |||||||||
BJ's Wholesale Club Holdings, Inc. (a) (b) | 972,370 | 22,111,694 | |||||||||
Freshpet, Inc. (a) | 282,960 | 16,720,106 | |||||||||
Hostess Brands, Inc. (a) | 2,062,740 | 29,992,240 | |||||||||
Nomad Foods Ltd. (a) | 1,289,620 | 28,848,799 | |||||||||
110,512,199 |
See notes to financial statements.
29
Victory Portfolios Victory RS Small Cap Growth Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Shares | Value | |||||||||
Energy (0.7%): | |||||||||||
Newpark Resources, Inc. (a) (b) | 2,629,580 | $ | 16,487,467 | ||||||||
Financials (6.3%): | |||||||||||
eHealth, Inc. (a) (b) | 220,100 | 21,147,208 | |||||||||
Essent Group Ltd. | 698,670 | 36,323,854 | |||||||||
FirstCash, Inc., Class A | 515,170 | 41,538,157 | |||||||||
LendingTree, Inc. (a) (b) | 80,110 | 24,308,578 | |||||||||
Western Alliance Bancorp | 353,450 | 20,146,650 | |||||||||
143,464,447 | |||||||||||
Health Care Equipment & Supplies (4.7%): | |||||||||||
Cryoport, Inc. (a) (b) | 956,210 | 15,739,217 | |||||||||
Irhythm Technologies, Inc. (a) (b) | 295,520 | 20,121,957 | |||||||||
Masimo Corp. (a) (b) | 168,020 | 26,557,241 | |||||||||
Nevro Corp. (a) (b) | 236,810 | 27,834,647 | |||||||||
Silk Road Medical, Inc. (a) (b) | 430,680 | 17,390,858 | |||||||||
107,643,920 | |||||||||||
Health Care Providers & Services (4.0%): | |||||||||||
Hanger, Inc. (a) | 889,850 | 24,568,759 | |||||||||
HealthEquity, Inc. (a) | 336,860 | 24,951,220 | |||||||||
LHC Group, Inc. (a) (b) | 302,740 | 41,705,462 | |||||||||
91,225,441 | |||||||||||
Health Care Technology (2.0%): | |||||||||||
Health Catalyst, Inc. (a) (b) | 521,620 | 18,100,214 | |||||||||
Inspire Medical System, Inc. (a) (b) | 367,210 | 27,250,654 | |||||||||
45,350,868 | |||||||||||
Industrials (16.4%): | |||||||||||
Albany International Corp. | 409,180 | 31,064,946 | |||||||||
Armstrong World Industries, Inc. (b) | 215,240 | 20,226,103 | |||||||||
Axon Enterprise, Inc. (a) (b) | 422,750 | 30,979,120 | |||||||||
Azul SA, ADR (a) | 910,660 | 38,976,248 | |||||||||
ESCO Technologies, Inc. | 361,510 | 33,439,675 | |||||||||
FTI Consulting, Inc. (a) | 195,490 | 21,632,923 | |||||||||
Generac Holdings, Inc. (a) | 313,250 | 31,509,818 | |||||||||
Mercury Systems, Inc. (a) (b) | 521,840 | 36,064,362 | |||||||||
Simpson Manufacturing Co., Inc. | 224,350 | 17,999,601 | |||||||||
Siteone Landscape Supply, Inc. (a) (b) | 486,420 | 44,093,973 | |||||||||
SPX Corp. (a) | 199,800 | 10,165,824 | |||||||||
Trex Co., Inc. (a) (b) | 264,300 | 23,755,283 | |||||||||
Watts Water Technologies, Inc., Class A | 369,930 | 36,904,216 | |||||||||
376,812,092 | |||||||||||
Information Technology (24.8%): | |||||||||||
ACI Worldwide, Inc. (a) (b) | 1,268,880 | 48,071,519 | |||||||||
Advanced Energy Industries, Inc. (a) (b) | 588,740 | 41,918,288 | |||||||||
Cabot Microelectronics Corp. (b) | 237,610 | 34,291,875 | |||||||||
Cornerstone OnDemand, Inc. (a) (b) | 700,928 | 41,039,334 | |||||||||
Envestnet, Inc. (a) | 285,696 | 19,893,012 | |||||||||
Everbridge, Inc. (a) (b) | 458,000 | 35,760,640 |
See notes to financial statements.
30
Victory Portfolios Victory RS Small Cap Growth Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Shares | Value | |||||||||
Evo Payments, Inc. (a) | 1,262,850 | $ | 33,351,869 | ||||||||
Inphi Corp. (a) | 97,410 | 7,210,288 | |||||||||
Itron, Inc. (a) | 432,090 | 36,273,955 | |||||||||
Lattice Semiconductor Corp. (a) (b) | 1,057,470 | 20,239,976 | |||||||||
Littelfuse, Inc. | 96,966 | 18,549,596 | |||||||||
Liveramp Holdings, Inc. (a) (b) | 485,200 | 23,323,564 | |||||||||
MACOM Technology Solutions Holdings, Inc. (a) (b) | 467,060 | 12,423,796 | |||||||||
Monolithic Power Systems, Inc. | 57,191 | 10,181,142 | |||||||||
Q2 Holdings, Inc. (a) (b) | 226,320 | 18,350,026 | |||||||||
Silicon Laboratories, Inc. (a) (b) | 321,310 | 37,265,534 | |||||||||
Varonis Systems, Inc. (a) (b) | 673,560 | 52,342,348 | |||||||||
Wix.com Ltd., ADR (a) | 350,670 | 42,914,995 | |||||||||
WNS Holdings Ltd., ADR (a) | 492,227 | 32,560,816 | |||||||||
565,962,573 | |||||||||||
Materials (1.1%): | |||||||||||
Ingevity Corp. (a) | 276,990 | 24,203,386 | |||||||||
Pharmaceuticals (1.4%): | |||||||||||
Assembly Biosciences, Inc. (a) | 464,270 | 9,498,964 | |||||||||
GW Pharmaceuticals PLC, ADR (a) (b) | 218,537 | 22,850,229 | |||||||||
32,349,193 | |||||||||||
Total Common Stocks (Cost $1,848,490,476) | 2,246,624,436 | ||||||||||
Collateral for Securities Loaned^ (12.6%) | |||||||||||
BlackRock Liquidity Funds TempFund Portfolio, Institutional Class, 1.75% (d) | 13,696,062 | 13,696,062 | |||||||||
Fidelity Investments Money Market Government Portfolio, Class I, 1.54% (d) | 75,455,501 | 75,455,501 | |||||||||
Fidelity Investments Prime Money Market Portfolio, Class I, 1.75% (d) | 2,287,575 | 2,287,575 | |||||||||
Goldman Sachs Financial Square Prime Obligations Fund, Institutional Class, 1.80% (d) | 45,582,924 | 45,582,924 | |||||||||
JPMorgan Prime Money Market Fund, Capital Class, 1.73% (d) | 50,144,749 | 50,144,749 | |||||||||
Morgan Stanley Institutional Liquidity Prime Portfolio, Institutional Class, 1.76% (d) | 100,286,078 | 100,286,078 | |||||||||
Total Collateral for Securities Loaned (Cost $287,452,889) | 287,452,889 | ||||||||||
Total Investments (Cost $2,135,943,365) — 110.8% | 2,534,077,325 | ||||||||||
Liabilities in excess of other assets — (10.8)% | (246,939,107 | ) | |||||||||
NET ASSETS — 100.00% | $ | 2,287,138,218 |
^ 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) The Fund's Adviser has deemed this security to be illiquid based upon procedures approved by the Board of Trustees. As of December 31, 2019, illiquid securities were 0.3% of the Fund's net assets.
(d) Rate disclosed is the daily yield on December 31, 2019.
ADR — American Depositary Receipt
PLC — Public Limited Company
See notes to financial statements.
31
Victory Portfolios Victory RS Select Growth Fund | Schedule of Portfolio Investments December 31, 2019 |
Security Description | Shares | Value | |||||||||
Common Stocks (99.3%) | |||||||||||
Communication Services (2.6%): | |||||||||||
Boingo Wireless, Inc. (a) (b) | 242,730 | $ | 2,657,894 | ||||||||
Live Nation Entertainment, Inc. (a) | 43,590 | 3,115,377 | |||||||||
5,773,271 | |||||||||||
Communications Equipment (0.8%): | |||||||||||
Viavi Solutions, Inc. (a) | 122,340 | 1,835,100 | |||||||||
Consumer Discretionary (11.8%): | |||||||||||
Bright Horizons Family Solutions, Inc. (a) | 32,540 | 4,890,437 | |||||||||
Burlington Stores, Inc. (a) | 15,040 | 3,429,571 | |||||||||
Churchill Downs, Inc. (b) | 17,130 | 2,350,236 | |||||||||
Frontdoor, Inc. (a) | 48,710 | 2,309,828 | |||||||||
Planet Fitness, Inc., Class A (a) | 56,630 | 4,229,128 | |||||||||
Strategic Education, Inc. | 28,190 | 4,479,391 | |||||||||
Vail Resorts, Inc. (b) | 17,740 | 4,254,585 | |||||||||
25,943,176 | |||||||||||
Consumer Staples (3.6%): | |||||||||||
Hostess Brands, Inc. (a) | 300,670 | 4,371,742 | |||||||||
Post Holdings, Inc. (a) | 33,080 | 3,609,028 | |||||||||
7,980,770 | |||||||||||
Electronic Equipment, Instruments & Components (2.6%): | |||||||||||
Littelfuse, Inc. | 13,671 | 2,615,262 | |||||||||
Rogers Corp. (a) (b) | 25,770 | 3,214,292 | |||||||||
5,829,554 | |||||||||||
Energy (0.8%): | |||||||||||
Diamondback Energy, Inc. | 18,556 | 1,723,110 | |||||||||
Financials (4.1%): | |||||||||||
LendingTree, Inc. (a) (b) | 10,670 | 3,237,705 | |||||||||
LPL Financial Holdings, Inc. | 31,050 | 2,864,363 | |||||||||
Western Alliance Bancorp | 49,760 | 2,836,320 | |||||||||
8,938,388 | |||||||||||
Health Care (24.7%): | |||||||||||
Encompass Health Corp. | 25,180 | 1,744,219 | |||||||||
Exact Sciences Corp. (a) | 63,180 | 5,842,886 | |||||||||
GW Pharmaceuticals PLC, ADR (a) (b) | 43,490 | 4,547,314 | |||||||||
HealthEquity, Inc. (a) | 42,520 | 3,149,456 | |||||||||
Horizon Therapeutics PLC (a) | 172,950 | 6,260,790 | |||||||||
Insulet Corp. (a) (b) | 19,360 | 3,314,432 | |||||||||
LHC Group, Inc. (a) | 26,490 | 3,649,262 | |||||||||
Ligand Pharmaceuticals, Inc. (a) (b) | 44,280 | 4,617,961 | |||||||||
Masimo Corp. (a) | 24,730 | 3,908,824 | |||||||||
Neurocrine Biosciences, Inc. (a) | 58,950 | 6,336,536 | |||||||||
The Cooper Co., Inc. (b) | 15,110 | 4,854,691 | |||||||||
Veeva Systems, Inc., Class A (a) | 24,420 | 3,434,917 | |||||||||
West Pharmaceutical Services, Inc. | 17,896 | 2,690,306 | |||||||||
54,351,594 |
See notes to financial statements.
32
Victory Portfolios Victory RS Select Growth Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Shares | Value | |||||||||
Industrials (19.8%): | |||||||||||
Alamo Group, Inc. | 20,450 | $ | 2,567,498 | ||||||||
Armstrong World Industries, Inc. | 22,650 | 2,128,421 | |||||||||
Azul SA, ADR (a) | 117,790 | 5,041,412 | |||||||||
Clean Harbors, Inc. (a) | 31,970 | 2,741,427 | |||||||||
Forward Air Corp. | 56,780 | 3,971,761 | |||||||||
FTI Consulting, Inc. (a) | 24,370 | 2,696,784 | |||||||||
HEICO Corp., Class A | 37,843 | 3,388,084 | |||||||||
Hexcel Corp. | 42,962 | 3,149,544 | |||||||||
IDEX Corp. | 23,650 | 4,067,800 | |||||||||
Mercury Systems, Inc. (a) | 60,830 | 4,203,962 | |||||||||
MSA Safety, Inc. (b) | 17,360 | 2,193,610 | |||||||||
Siteone Landscape Supply, Inc. (a) (b) | 41,780 | 3,787,357 | |||||||||
Teledyne Technologies, Inc. (a) | 3,160 | 1,095,066 | |||||||||
Trex Co., Inc. (a) | 30,430 | 2,735,048 | |||||||||
43,767,774 | |||||||||||
IT Services (7.8%): | |||||||||||
Black Knight, Inc. (a) | 89,049 | 5,741,880 | |||||||||
Euronet Worldwide, Inc. (a) | 48,692 | 7,671,911 | |||||||||
GoDaddy, Inc., Class A (a) | 56,677 | 3,849,502 | |||||||||
17,263,293 | |||||||||||
Semiconductors & Semiconductor Equipment (5.0%): | |||||||||||
Entegris, Inc. | 26,340 | 1,319,371 | |||||||||
MKS Instruments, Inc. | 29,440 | 3,238,694 | |||||||||
Monolithic Power Systems, Inc. | 20,275 | 3,609,356 | |||||||||
Silicon Laboratories, Inc. (a) | 24,500 | 2,841,510 | |||||||||
11,008,931 | |||||||||||
Software (15.7%): | |||||||||||
ACI Worldwide, Inc. (a) | 147,570 | 5,590,689 | |||||||||
Coupa Software, Inc. (a) (b) | 30,380 | 4,443,075 | |||||||||
DocuSign, Inc., Class A (a) | 57,070 | 4,229,458 | |||||||||
Fair Isaac Corp. (a) | 12,290 | 4,604,817 | |||||||||
Paycom Software, Inc. (a) | 17,645 | 4,671,690 | |||||||||
Proofpoint, Inc. (a) | 24,160 | 2,773,085 | |||||||||
RingCentral, Inc., Class A (a) | 47,630 | 8,033,752 | |||||||||
34,346,566 | |||||||||||
Total Common Stocks (Cost $159,081,482) | 218,761,527 | ||||||||||
Collateral for Securities Loaned^ (8.3%) | |||||||||||
BlackRock Liquidity Funds TempFund Portfolio, Institutional Class, 1.75% (c) | 867,320 | 867,320 | |||||||||
Fidelity Investments Money Market Government Portfolio, Class I, 1.54% (c) | 4,778,311 | 4,778,311 | |||||||||
Fidelity Investments Prime Money Market Portfolio, Class I, 1.75% (c) | 144,863 | 144,863 | |||||||||
Goldman Sachs Financial Square Prime Obligations Fund, Institutional Class, 1.80% (c) | 2,886,594 | 2,886,594 |
See notes to financial statements.
33
Victory Portfolios Victory RS Select Growth Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Shares | Value | |||||||||
JPMorgan Prime Money Market Fund, Capital Class, 1.73% (c) | 3,175,477 | $ | 3,175,477 | ||||||||
Morgan Stanley Institutional Liquidity Prime Portfolio, Institutional Class, 1.76% (c) | 6,350,737 | 6,350,737 | |||||||||
Total Collateral for Securities Loaned (Cost $18,203,302) | 18,203,302 | ||||||||||
Total Investments (Cost $177,284,784) — 107.6% | 236,964,829 | ||||||||||
Liabilities in excess of other assets — (7.6)% | (16,800,318 | ) | |||||||||
NET ASSETS — 100.00% | $ | 220,164,511 |
^ 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, 2019.
ADR — American Depositary Receipt
PLC — Public Limited Company
See notes to financial statements.
34
Victory Portfolios Victory RS Mid Cap Growth Fund | Schedule of Portfolio Investments December 31, 2019 |
Security Description | Shares | Value | |||||||||
Common Stocks (99.2%) | |||||||||||
Communication Services (5.1%): | |||||||||||
Live Nation Entertainment, Inc. (a) | 166,840 | $ | 11,924,055 | ||||||||
Take-Two Interactive Software, Inc. (a) | 63,470 | 7,770,632 | |||||||||
Twitter, Inc. (a) | 209,830 | 6,725,052 | |||||||||
26,419,739 | |||||||||||
Consumer Discretionary (12.8%): | |||||||||||
Burlington Stores, Inc. (a) | 24,560 | 5,600,417 | |||||||||
Dollar General Corp. | 62,760 | 9,789,305 | |||||||||
Eldorado Resorts, Inc. (a) (b) | 75,370 | 4,495,067 | |||||||||
Grand Canyon Education, Inc. (a) | 77,880 | 7,460,125 | |||||||||
Hasbro, Inc. | 84,860 | 8,962,065 | |||||||||
Hilton Worldwide Holdings, Inc. | 85,630 | 9,497,223 | |||||||||
O'Reilly Automotive, Inc. (a) | 18,340 | 8,037,689 | |||||||||
Tractor Supply Co. | 59,560 | 5,565,286 | |||||||||
Vail Resorts, Inc. (b) | 31,330 | 7,513,874 | |||||||||
66,921,051 | |||||||||||
Consumer Staples (4.3%): | |||||||||||
Church & Dwight Co., Inc. | 94,570 | 6,652,054 | |||||||||
Post Holdings, Inc. (a) | 82,830 | 9,036,753 | |||||||||
Tyson Foods, Inc., Class A | 74,360 | 6,769,734 | |||||||||
22,458,541 | |||||||||||
Electronic Equipment, Instruments & Components (3.0%): | |||||||||||
Amphenol Corp., Class A | 59,720 | 6,463,495 | |||||||||
Keysight Technologies, Inc. (a) | 32,760 | 3,362,159 | |||||||||
Trimble, Inc. (a) | 137,200 | 5,719,868 | |||||||||
15,545,522 | |||||||||||
Energy (0.9%): | |||||||||||
Diamondback Energy, Inc. | 51,350 | 4,768,361 | |||||||||
Financials (3.4%): | |||||||||||
LendingTree, Inc. (a) (b) | 15,970 | 4,845,937 | |||||||||
LPL Financial Holdings, Inc. | 72,200 | 6,660,450 | |||||||||
MSCI, Inc. | 25,430 | 6,565,517 | |||||||||
18,071,904 | |||||||||||
Health Care (16.3%): | |||||||||||
10x Genomics, Inc., Class A (a) (b) | 46,750 | 3,564,688 | |||||||||
Ascendis Pharma A/S (a) | 16,430 | 2,285,742 | |||||||||
bluebird bio, Inc. (a) (b) | 55,280 | 4,850,820 | |||||||||
Dexcom, Inc. (a) | 33,160 | 7,253,418 | |||||||||
Encompass Health Corp. (b) | 57,780 | 4,002,421 | |||||||||
Exact Sciences Corp. (a) | 91,360 | 8,448,973 | |||||||||
GW Pharmaceuticals PLC, ADR (a) (b) | 35,360 | 3,697,242 | |||||||||
Horizon Therapeutics PLC (a) (b) | 72,930 | 2,640,066 | |||||||||
Insulet Corp. (a) (b) | 37,370 | 6,397,744 | |||||||||
Intuitive Surgical, Inc. (a) | 10,000 | 5,911,500 | |||||||||
IQVIA Holdings, Inc. (a) | 62,030 | 9,584,255 |
See notes to financial statements.
35
Victory Portfolios Victory RS Mid Cap Growth Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Shares | Value | |||||||||
Neurocrine Biosciences, Inc. (a) | 33,950 | $ | 3,649,286 | ||||||||
Sage Therapeutics, Inc. (a) (b) | 48,960 | 3,534,422 | |||||||||
The Cooper Co., Inc. | 29,670 | 9,532,675 | |||||||||
Veeva Systems, Inc., Class A (a) | 26,100 | 3,671,226 | |||||||||
WellCare Health Plans, Inc. (a) | 18,700 | 6,174,927 | |||||||||
85,199,405 | |||||||||||
Industrials (17.6%): | |||||||||||
AMETEK, Inc. | 74,020 | 7,382,755 | |||||||||
Clean Harbors, Inc. (a) | 59,410 | 5,094,408 | |||||||||
HEICO Corp., Class A | 91,170 | 8,162,450 | |||||||||
Hexcel Corp. | 100,900 | 7,396,979 | |||||||||
IDEX Corp. | 48,660 | 8,369,520 | |||||||||
IHS Markit Ltd. (a) | 64,160 | 4,834,456 | |||||||||
Ingersoll-Rand PLC | 86,150 | 11,451,058 | |||||||||
L3Harris Technologies, Inc. | 38,700 | 7,657,569 | |||||||||
Roper Technologies, Inc. | 21,100 | 7,474,253 | |||||||||
Teledyne Technologies, Inc. (a) | 10,280 | 3,562,431 | |||||||||
TransUnion | 86,310 | 7,388,999 | |||||||||
Verisk Analytics, Inc., Class A | 34,290 | 5,120,869 | |||||||||
Woodward, Inc. | 65,360 | 7,741,238 | |||||||||
91,636,985 | |||||||||||
IT Services (15.0%): | |||||||||||
Black Knight, Inc. (a) | 164,464 | 10,604,639 | |||||||||
Euronet Worldwide, Inc. (a) | 113,511 | 17,884,792 | |||||||||
FleetCor Technologies, Inc. (a) | 21,070 | 6,062,260 | |||||||||
Global Payments, Inc. | 83,853 | 15,308,203 | |||||||||
GoDaddy, Inc., Class A (a) (b) | 97,990 | 6,655,481 | |||||||||
Okta, Inc. (a) | 52,210 | 6,023,468 | |||||||||
Twilio, Inc., Class A (a) (b) | 77,800 | 7,646,184 | |||||||||
Wix.com Ltd., ADR (a) (b) | 59,810 | 7,319,548 | |||||||||
77,504,575 | |||||||||||
Semiconductors & Semiconductor Equipment (8.3%): | |||||||||||
KLA Corp. | 42,920 | 7,647,056 | |||||||||
Lam Research Corp. | 33,570 | 9,815,868 | |||||||||
Marvell Technology Group Ltd. | 398,240 | 10,577,254 | |||||||||
Microchip Technology, Inc. (b) | 78,450 | 8,215,284 | |||||||||
Monolithic Power Systems, Inc. | 36,880 | 6,565,378 | |||||||||
42,820,840 | |||||||||||
Software (12.5%): | |||||||||||
DocuSign, Inc., Class A (a) | 108,480 | 8,039,453 | |||||||||
Dropbox, Inc. (a) | 434,090 | 7,774,552 | |||||||||
Fair Isaac Corp. (a) | 28,270 | 10,592,203 | |||||||||
Paycom Software, Inc. (a) | 14,260 | 3,775,478 | |||||||||
Proofpoint, Inc. (a) | 75,650 | 8,683,106 | |||||||||
RingCentral, Inc., Class A (a) | 104,180 | 17,572,040 |
See notes to financial statements.
36
Victory Portfolios Victory RS Mid Cap Growth Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Shares | Value | |||||||||
ServiceNow, Inc. (a) | 19,240 | $ | 5,431,837 | ||||||||
Zendesk, Inc. (a) | 33,300 | 2,551,779 | |||||||||
64,420,448 | |||||||||||
Total Common Stocks (Cost $419,194,608) | 515,767,371 | ||||||||||
Collateral for Securities Loaned^ (8.0%) | |||||||||||
BlackRock Liquidity Funds TempFund Portfolio, Institutional Class, 1.75% (c) | 1,992,570 | 1,992,570 | |||||||||
Fidelity Investments Money Market Government Portfolio, Class I, 1.54% (c) | 10,977,637 | 10,977,637 | |||||||||
Fidelity Investments Prime Money Market Portfolio, Class I, 1.75% (c) | 332,808 | 332,808 | |||||||||
Goldman Sachs Financial Square Prime Obligations Fund, Institutional Class, 1.80% (c) | 6,631,628 | 6,631,628 | |||||||||
JPMorgan Prime Money Market Fund, Capital Class, 1.73% (c) | 7,295,304 | 7,295,304 | |||||||||
Morgan Stanley Institutional Liquidity Prime Portfolio, Institutional Class, 1.76% (c) | 14,590,110 | 14,590,110 | |||||||||
Total Collateral for Securities Loaned (Cost $41,820,057) | 41,820,057 | ||||||||||
Total Investments (Cost $461,014,665) — 107.2% | 557,587,428 | ||||||||||
Liabilities in excess of other assets — (7.2)% | (37,599,429 | ) | |||||||||
NET ASSETS — 100.00% | $ | 519,987,999 |
^ 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, 2019.
ADR — American Depositary Receipt
PLC — Public Limited Company
See notes to financial statements.
37
Victory Portfolios Victory RS Growth Fund | Schedule of Portfolio Investments December 31, 2019 |
Security Description | Shares | Value | |||||||||
Common Stocks (99.9%) | |||||||||||
Communication Services (11.7%): | |||||||||||
Alphabet, Inc., Class C (a) | 8,011 | $ | 10,710,867 | ||||||||
Facebook, Inc., Class A (a) | 61,320 | 12,585,930 | |||||||||
The Walt Disney Co. | 26,820 | 3,878,977 | |||||||||
Twitter, Inc. (a) | 101,280 | 3,246,024 | |||||||||
30,421,798 | |||||||||||
Consumer Discretionary (11.5%): | |||||||||||
Amazon.com, Inc. (a) | 4,340 | 8,019,626 | |||||||||
Hilton Worldwide Holdings, Inc. | 43,990 | 4,878,931 | |||||||||
Nike, Inc., Class B | 40,790 | 4,132,435 | |||||||||
The Home Depot, Inc. | 17,945 | 3,918,829 | |||||||||
The TJX Cos., Inc. | 93,680 | 5,720,101 | |||||||||
Vail Resorts, Inc. (b) | 12,920 | 3,098,604 | |||||||||
29,768,526 | |||||||||||
Consumer Staples (2.9%): | |||||||||||
Church & Dwight Co., Inc. | 58,280 | 4,099,415 | |||||||||
Tyson Foods, Inc., Class A | 36,640 | 3,335,706 | |||||||||
7,435,121 | |||||||||||
Electronic Equipment, Instruments & Components (1.3%): | |||||||||||
Amphenol Corp., Class A | 31,030 | 3,358,377 | |||||||||
Energy (0.5%): | |||||||||||
EOG Resources, Inc. | 14,605 | 1,223,315 | |||||||||
Health Care (15.4%): | |||||||||||
bluebird bio. Inc. (a) (b) | 30,280 | 2,657,070 | |||||||||
Bristol-Myers Squibb Co. | 107,170 | 6,879,242 | |||||||||
Exact Sciences Corp. (a) | 39,060 | 3,612,269 | |||||||||
Intuitive Surgical, Inc. (a) | 7,310 | 4,321,306 | |||||||||
IQVIA Holdings, Inc. (a) | 31,030 | 4,794,445 | |||||||||
Merck & Co., Inc. | 64,910 | 5,903,565 | |||||||||
Sage Therapeutics, Inc. (a) | 25,770 | 1,860,336 | |||||||||
The Cooper Co., Inc. | 9,910 | 3,183,984 | |||||||||
UnitedHealth Group, Inc. | 11,850 | 3,483,663 | |||||||||
Vertex Pharmaceuticals, Inc. (a) | 16,240 | 3,555,748 | |||||||||
40,251,628 | |||||||||||
Industrials (12.4%): | |||||||||||
AMETEK, Inc. | 40,030 | 3,992,592 | |||||||||
IHS Markit Ltd. (a) | 43,050 | 3,243,818 | |||||||||
Ingersoll-Rand PLC | 79,380 | 10,551,190 | |||||||||
L3Harris Technologies, Inc. | 25,760 | 5,097,131 | |||||||||
Roper Technologies, Inc. | 11,670 | 4,133,864 | |||||||||
Woodward, Inc. | 43,610 | 5,165,168 | |||||||||
32,183,763 |
See notes to financial statements.
38
Victory Portfolios Victory RS Growth Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Shares | Value | |||||||||
IT Services (13.3%): | |||||||||||
Black Knight, Inc. (a) | 90,420 | $ | 5,830,282 | ||||||||
Euronet Worldwide, Inc. (a) | 51,270 | 8,078,101 | |||||||||
PayPal Holdings, Inc. (a) | 31,350 | 3,391,130 | |||||||||
Twilio, Inc., Class A (a) (b) | 52,020 | 5,112,526 | |||||||||
Visa, Inc., Class A | 64,837 | 12,182,871 | |||||||||
34,594,910 | |||||||||||
Semiconductors & Semiconductor Equipment (8.1%): | |||||||||||
Broadcom, Inc. | 6,470 | 2,044,649 | |||||||||
KLA Corp. | 14,700 | 2,619,099 | |||||||||
Lam Research Corp. | 12,820 | 3,748,568 | |||||||||
Marvell Technology Group Ltd. | 164,620 | 4,372,307 | |||||||||
Microchip Technology, Inc. (b) | 26,290 | 2,753,089 | |||||||||
NVIDIA Corp. | 22,980 | 5,407,194 | |||||||||
20,944,906 | |||||||||||
Software (16.7%): | |||||||||||
Fair Isaac Corp. (a) | 17,710 | 6,635,583 | |||||||||
Microsoft Corp. | 150,490 | 23,732,272 | |||||||||
Salesforce.com, Inc. (a) | 39,780 | 6,469,819 | |||||||||
ServiceNow, Inc. (a) | 14,810 | 4,181,159 | |||||||||
Workday, Inc., Class A (a) | 14,990 | 2,465,106 | |||||||||
43,483,939 | |||||||||||
Technology Hardware, Storage & Peripherals (6.1%): | |||||||||||
Apple, Inc. | 54,037 | 15,867,965 | |||||||||
Total Common Stocks (Cost $181,489,172) | 259,534,248 | ||||||||||
Collateral for Securities Loaned^ (3.4%) | |||||||||||
BlackRock Liquidity Funds TempFund Portfolio, Institutional Class, 1.75% (c) | 415,009 | 415,009 | |||||||||
Fidelity Investments Money Market Government Portfolio, Class I, 1.54% (c) | 2,286,404 | 2,286,404 | |||||||||
Fidelity Investments Prime Money Market Portfolio, Class I, 1.75% (c) | 69,317 | 69,317 | |||||||||
Goldman Sachs Financial Square Prime Obligations Fund, Institutional Class, 1.80% (c) | 1,381,225 | 1,381,225 | |||||||||
JPMorgan Prime Money Market Fund, Capital Class, 1.73% (c) | 1,519,454 | 1,519,454 | |||||||||
Morgan Stanley Institutional Liquidity Prime Portfolio, Institutional Class, 1.76% (c) | 3,038,804 | 3,038,804 | |||||||||
Total Collateral for Securities Loaned (Cost $8,710,213) | 8,710,213 | ||||||||||
Total Investments (Cost $190,199,385) — 103.3% | 268,244,461 | ||||||||||
Liabilities in excess of other assets — (3.3)% | (8,590,076 | ) | |||||||||
NET ASSETS — 100.00% | $ | 259,654,385 |
^ 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, 2019.
PLC — Public Limited Company
See notes to financial statements.
39
Victory Portfolios Victory RS Science and Technology Fund | Schedule of Portfolio Investments December 31, 2019 |
Security Description | Shares | Value | |||||||||
Common Stocks (98.9%) | |||||||||||
Biotechnology (26.8%): | |||||||||||
Adverum Biotechnologies, Inc. (a) | 149,500 | $ | 1,722,240 | ||||||||
Aimmune Therapeutics, Inc. (a) (b) | 91,290 | 3,055,476 | |||||||||
Albireo Pharma, Inc. (a) | 26,110 | 663,716 | |||||||||
Allakos, Inc. (a) (b) | 14,500 | 1,382,720 | |||||||||
Amicus Therapeutics, Inc. (a) | 80,090 | 780,077 | |||||||||
Apellis Pharmaceuticals, Inc. (a) | 118,843 | 3,638,973 | |||||||||
Arena Pharmaceuticals, Inc. (a) | 21,820 | 991,064 | |||||||||
Ascendis Pharma A/S (a) | 14,620 | 2,033,934 | |||||||||
Athenex, Inc. (a) (b) | 48,670 | 743,191 | |||||||||
Atreca, Inc., Class A (a) (b) | 45,565 | 704,891 | |||||||||
Autolus Therapeutics PLC (a) (b) | 42,440 | 560,208 | |||||||||
Avrobio, Inc. (a) | 72,870 | 1,466,873 | |||||||||
BeiGene Ltd. (a) (b) | 7,160 | 1,186,842 | |||||||||
Bicycle Therapeutics Ltd. (a) | 68,270 | 643,786 | |||||||||
bluebird bio, Inc. (a) (b) | 87,190 | 7,650,922 | |||||||||
Blueprint Medicines Corp. (a) (b) | 22,460 | 1,799,271 | |||||||||
Botanix Pharmaceuticals Ltd. (a) | 6,100,441 | 350,967 | |||||||||
Bridgebio Pharma, Inc. (a) (b) | 44,940 | 1,575,147 | |||||||||
Celyad SA (a) | 54,300 | 565,806 | |||||||||
Centogene NV (a) | 55,910 | 563,014 | |||||||||
Crinetics Pharmaceuticals, Inc. (a) (b) | 34,768 | 872,329 | |||||||||
CytomX Therapeutics, Inc., Class A (a) | 138,990 | 1,155,007 | |||||||||
Dermtech, Inc. (a) (c) (d) | 307,693 | 3,720,002 | |||||||||
Editas Medicine, Inc. (a) (b) | 31,240 | 925,016 | |||||||||
Eidos Therapeutics, Inc. (a) | 29,320 | 1,682,675 | |||||||||
Epizyme, Inc. (a) | 82,840 | 2,037,864 | |||||||||
Equillium, Inc. (a) (d) | 227,190 | 767,902 | |||||||||
Evelo Biosciences, Inc., Class B (a) (b) | 28,499 | 115,706 | |||||||||
Exact Sciences Corp. (a) | 23,280 | 2,152,934 | |||||||||
Fate Therapeutics, Inc. (a) | 219,810 | 4,301,681 | |||||||||
Gossamer Bio, Inc. (a) | 37,580 | 587,375 | |||||||||
Gritstone Oncology, Inc. (a) (b) | 135,608 | 1,216,404 | |||||||||
Homology Medicines, Inc. (a) (b) | 58,210 | 1,204,947 | |||||||||
Invitae Corp. (a) (b) | 61,065 | 984,978 | |||||||||
Iovance Biotherapeutics, Inc. (a) (b) | 84,630 | 2,342,558 | |||||||||
Kalvista Pharmaceuticals, Inc. (a) (b) | 58,313 | 1,038,555 | |||||||||
Kezar Life Sciences, Inc. (a) | 259,066 | 1,038,855 | |||||||||
Kura Oncology, Inc. (a) | 143,020 | 1,966,525 | |||||||||
MacroGenics, Inc. (a) | 49,400 | 537,472 | |||||||||
Matinas BioPharma Holdings, Inc. (a) (b) | 773,050 | 1,754,824 | |||||||||
Mirati Therapeutics, Inc. (a) | 15,950 | 2,055,317 | |||||||||
Myovant Sciences Ltd. (a) | 100,920 | 1,566,279 | |||||||||
Neurocrine Biosciences, Inc. (a) | 7,050 | 757,805 | |||||||||
Precision BioSciences, Inc. (a) (b) | 123,410 | 1,714,165 | |||||||||
Replimune Group, Inc. (a) | 63,140 | 906,059 | |||||||||
Sage Therapeutics, Inc. (a) (b) | 22,790 | 1,645,210 | |||||||||
Scholar Rock Holding Corp. (a) (b) | 47,280 | 623,150 | |||||||||
SpringWorks Therapeutics, Inc. (a) (b) | 26,350 | 1,014,212 |
See notes to financial statements.
40
Victory Portfolios Victory RS Science and Technology Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Shares | Value | |||||||||
Stoke Therapeutics, Inc. (a) (b) | 29,310 | $ | 830,059 | ||||||||
Surface Oncology, Inc. (a) | 220,900 | 415,292 | |||||||||
Turning Point Therapeutics, Inc. (a) (b) | 17,960 | 1,118,728 | |||||||||
Twist Bioscience Corp. (a) (b) | 61,010 | 1,281,210 | |||||||||
Zymeworks, Inc. (a) | 48,190 | 2,190,717 | |||||||||
78,600,930 | |||||||||||
Communication Services (9.2%): | |||||||||||
Boingo Wireless, Inc. (a) (b) | 306,650 | 3,357,818 | |||||||||
Facebook, Inc., Class A (a) | 53,880 | 11,058,870 | |||||||||
Match Group, Inc. (a) (b) | 39,770 | 3,265,515 | |||||||||
Netflix, Inc. (a) | 13,680 | 4,426,437 | |||||||||
Take-Two Interactive Software, Inc. (a) | 20,790 | 2,545,320 | |||||||||
Twitter, Inc. (a) | 69,800 | 2,237,090 | |||||||||
26,891,050 | |||||||||||
Communications Equipment (2.3%): | |||||||||||
Lumentum Holdings, Inc. (a) | 46,750 | 3,707,275 | |||||||||
Viavi Solutions, Inc. (a) | 206,170 | 3,092,550 | |||||||||
6,799,825 | |||||||||||
Consumer Discretionary (2.3%): | |||||||||||
Amazon.com, Inc. (a) | 2,310 | 4,268,510 | |||||||||
Arco Platform Ltd., ADR, Class A (a) | 51,210 | 2,263,482 | |||||||||
6,531,992 | |||||||||||
Electronic Equipment, Instruments & Components (3.3%): | |||||||||||
Airgain, Inc. (a) | 94,458 | 1,009,756 | |||||||||
Fabrinet (a) | 57,710 | 3,741,916 | |||||||||
Keysight Technologies, Inc. (a) | 24,400 | 2,504,172 | |||||||||
Rogers Corp. (a) | 18,470 | 2,303,763 | |||||||||
9,559,607 | |||||||||||
Financials (0.7%): | |||||||||||
LendingTree, Inc. (a) (b) | 6,500 | 1,972,360 | |||||||||
Health Care Equipment & Supplies (1.4%): | |||||||||||
Cryoport, Inc. (a) (b) | 171,043 | 2,815,368 | |||||||||
Quotient Ltd. (a) (b) | 121,440 | 1,154,894 | |||||||||
3,970,262 | |||||||||||
Health Care Providers & Services (0.7%): | |||||||||||
Exagen, Inc. (a) (b) | 84,182 | 2,138,223 | |||||||||
Health Care Technology (0.9%): | |||||||||||
Veeva Systems, Inc., Class A (a) | 18,510 | 2,603,617 | |||||||||
IT Services (8.9%): | |||||||||||
Euronet Worldwide, Inc. (a) | 27,270 | 4,296,661 | |||||||||
Global Payments, Inc. | 16,090 | 2,937,390 | |||||||||
GoDaddy, Inc., Class A (a) | 46,030 | 3,126,358 | |||||||||
Twilio, Inc., Class A (a) (b) | 42,220 | 4,149,382 | |||||||||
Visa, Inc., Class A | 30,310 | 5,695,249 | |||||||||
Wix.com Ltd., ADR (a) | 46,980 | 5,749,412 | |||||||||
25,954,452 |
See notes to financial statements.
41
Victory Portfolios Victory RS Science and Technology Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Shares | Value | |||||||||
Life Sciences Tools & Services (2.3%): | |||||||||||
10x Genomics, Inc., Class A (a) (b) | 28,960 | $ | 2,208,200 | ||||||||
Adaptive Biotechnologies Corp. (a) (b) | 21,550 | 644,776 | |||||||||
Illumina, Inc. (a) | 7,450 | 2,471,463 | |||||||||
NeoGenomics, Inc. (a) | 52,150 | 1,525,388 | |||||||||
6,849,827 | |||||||||||
Pharmaceuticals (1.7%): | |||||||||||
Assembly Biosciences, Inc. (a) | 94,660 | 1,936,743 | |||||||||
GW Pharmaceuticals PLC, ADR (a) (b) | 17,470 | 1,826,663 | |||||||||
Kaleido Biosciences, Inc. (a) (b) | 48,180 | 241,864 | |||||||||
MyoKardia, Inc. (a) (b) | 14,290 | 1,041,527 | |||||||||
5,046,797 | |||||||||||
Semiconductors & Semiconductor Equipment (16.3%): | |||||||||||
Cohu, Inc. | 219,260 | 5,010,091 | |||||||||
Inphi Corp. (a) | 18,150 | 1,343,463 | |||||||||
KLA Corp. | 15,540 | 2,768,762 | |||||||||
Lam Research Corp. | 18,690 | 5,464,956 | |||||||||
Lattice Semiconductor Corp. (a) | 189,530 | 3,627,604 | |||||||||
MACOM Technology Solutions Holdings, Inc. (a) (b) | 178,350 | 4,744,110 | |||||||||
Marvell Technology Group Ltd. | 242,710 | 6,446,378 | |||||||||
MKS Instruments, Inc. | 35,430 | 3,897,654 | |||||||||
Monolithic Power Systems, Inc. | 20,030 | 3,565,741 | |||||||||
NVIDIA Corp. | 14,960 | 3,520,088 | |||||||||
Semtech Corp. (a) | 21,120 | 1,117,248 | |||||||||
Skyworks Solutions, Inc. | 38,450 | 4,647,836 | |||||||||
Ultra Clean Holdings, Inc. (a) (b) | 63,900 | 1,499,733 | |||||||||
47,653,664 | |||||||||||
Software (22.1%): | |||||||||||
Anaplan, Inc. (a) | 23,570 | 1,235,068 | |||||||||
Cornerstone OnDemand, Inc. (a) | 83,710 | 4,901,221 | |||||||||
Coupa Software, Inc. (a) | 25,500 | 3,729,375 | |||||||||
DocuSign, Inc., Class A (a) | 53,400 | 3,957,474 | |||||||||
Domo, Inc. (a) (b) | 108,100 | 2,347,932 | |||||||||
Dropbox, Inc. (a) | 148,810 | 2,665,187 | |||||||||
Fair Isaac Corp. (a) | 7,760 | 2,907,517 | |||||||||
Microsoft Corp. | 77,760 | 12,262,750 | |||||||||
Paycom Software, Inc. (a) | 18,670 | 4,943,069 | |||||||||
Proofpoint, Inc. (a) | 28,749 | 3,299,810 | |||||||||
RingCentral, Inc., Class A (a) | 65,710 | 11,083,306 | |||||||||
ServiceNow, Inc. (a) | 18,840 | 5,318,909 | |||||||||
Varonis Systems, Inc. (a) | 41,550 | 3,228,851 | |||||||||
Zendesk, Inc. (a) (b) | 37,060 | 2,839,908 | |||||||||
64,720,377 | |||||||||||
Total Common Stocks (Cost $209,717,790) | 289,292,983 |
See notes to financial statements.
42
Victory Portfolios Victory RS Science and Technology Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Shares | Value | |||||||||
Collateral for Securities Loaned^ (15.0%) | |||||||||||
BlackRock Liquidity Funds TempFund Portfolio, Institutional Class, 1.75% (e) | 2,086,115 | $ | 2,086,115 | ||||||||
Fidelity Investments Money Market Government Portfolio, Class I, 1.54% (e) | 11,493,003 | 11,493,003 | |||||||||
Fidelity Investments Prime Money Market Portfolio, Class I, 1.75% (e) | 348,432 | 348,432 | |||||||||
Goldman Sachs Financial Square Prime Obligations Fund, Institutional Class, 1.80% (e) | 6,942,962 | 6,942,962 | |||||||||
JPMorgan Prime Money Market Fund, Capital Class, 1.73% (e) | 7,637,796 | 7,637,796 | |||||||||
Morgan Stanley Institutional Liquidity Prime Portfolio, Institutional Class, 1.76% (e) | 15,275,072 | 15,275,072 | |||||||||
Total Collateral for Securities Loaned (Cost $43,783,380) | 43,783,380 | ||||||||||
Total Investments (Cost $253,501,170) — 113.9% | 333,076,363 | ||||||||||
Liabilities in excess of other assets — (13.9)% | (40,751,373 | ) | |||||||||
NET ASSETS — 100.00% | $ | 292,324,990 |
^ 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) Security was fair valued based upon procedures approved by the Board of Trustees and represents 1.3% of the Fund's net assets as of December 31, 2019. (See Note 2)
(d) The Fund's Adviser has deemed this security to be illiquid based upon procedures approved by the Board of Trustees. As of December 31, 2019, illiquid securities were 1.5% of the Fund's net assets.
(e) Rate disclosed is the daily yield on December 31, 2019.
ADR — American Depositary Receipt
PLC — Public Limited Company |
See notes to financial statements.
43
Victory Portfolios Victory RS Small Cap Equity Fund | Schedule of Portfolio Investments December 31, 2019 |
Security Description | Shares | Value | |||||||||
Common Stocks (98.0%) | |||||||||||
Biotechnology (17.7%): | |||||||||||
Aimmune Therapeutics, Inc. (a) | 29,760 | $ | 996,067 | ||||||||
Amicus Therapeutics, Inc. (a) | 65,324 | 636,256 | |||||||||
Apellis Pharmaceuticals, Inc. (a) | 28,280 | 865,934 | |||||||||
Arena Pharmaceuticals, Inc. (a) | 11,400 | 517,788 | |||||||||
Ascendis Pharma A/S (a) | 6,440 | 895,933 | |||||||||
bluebird bio, Inc. (a) (b) | 11,687 | 1,025,534 | |||||||||
Blueprint Medicines Corp. (a) | 7,918 | 634,311 | |||||||||
Celyad SA (a) | 11,896 | 123,956 | |||||||||
CytomX Therapeutics, Inc., Class A (a) | 37,890 | 314,866 | |||||||||
Epizyme, Inc. (a) | 40,160 | 987,936 | |||||||||
Equillium, Inc. (a) (c) | 26,448 | 89,394 | |||||||||
Fate Therapeutics, Inc. (a) | 54,900 | 1,074,393 | |||||||||
Gossamer Bio, Inc. (a) | 20,110 | 314,319 | |||||||||
Immunomedics, Inc. (a) | 29,100 | 615,756 | |||||||||
Invitae Corp. (a) (b) | 37,230 | 600,520 | |||||||||
Iovance Biotherapeutics, Inc. (a) | 35,111 | 971,872 | |||||||||
Kura Oncology, Inc. (a) | 29,050 | 399,438 | |||||||||
Mirati Therapeutics, Inc. (a) (b) | 6,140 | 791,200 | |||||||||
Myovant Sciences Ltd. (a) | 35,600 | 552,512 | |||||||||
12,407,985 | |||||||||||
Communication Services (2.4%): | |||||||||||
Bandwidth, Inc., Class A (a) | 13,060 | 836,493 | |||||||||
Cardlytics, Inc. (a) | 5,770 | 362,702 | |||||||||
QuinStreet, Inc. (a) | 30,327 | 464,306 | |||||||||
1,663,501 | |||||||||||
Consumer Discretionary (11.8%): | |||||||||||
Aaron's, Inc. (b) | 8,130 | 464,304 | |||||||||
Arco Platform Ltd., ADR, Class A (a) | 21,983 | 971,649 | |||||||||
Dine Brands Global, Inc. (b) | 9,650 | 805,968 | |||||||||
Eldorado Resorts, Inc. (a) (b) | 17,580 | 1,048,471 | |||||||||
Frontdoor, Inc. (a) | 12,960 | 614,563 | |||||||||
Monro, Inc | 11,050 | 864,110 | |||||||||
Planet Fitness, Inc., Class A (a) | 11,770 | 878,984 | |||||||||
Regis Corp. (a) (b) | 24,080 | 430,310 | |||||||||
Skyline Champion Corp. (a) (b) | 11,690 | 370,573 | |||||||||
Steven Madden Ltd. | 11,659 | 501,454 | |||||||||
Strategic Education, Inc. | 8,220 | 1,306,158 | |||||||||
8,256,544 | |||||||||||
Consumer Staples (4.9%): | |||||||||||
BellRing Brands, Inc., Class A (a) | 18,400 | 391,736 | |||||||||
BJ's Wholesale Club Holdings, Inc. (a) | 29,700 | 675,378 | |||||||||
Freshpet, Inc. (a) | 8,770 | 518,219 | |||||||||
Hostess Brands, Inc. (a) | 63,070 | 917,038 | |||||||||
Nomad Foods Ltd. (a) | 39,440 | 882,273 | |||||||||
3,384,644 |
See notes to financial statements.
44
Victory Portfolios Victory RS Small Cap Equity Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Shares | Value | |||||||||
Energy (0.7%): | |||||||||||
Newpark Resources, Inc. (a) (b) | 80,250 | $ | 503,168 | ||||||||
Financials (6.2%): | |||||||||||
eHealth, Inc. (a) | 6,711 | 644,793 | |||||||||
Essent Group Ltd. | 21,340 | 1,109,467 | |||||||||
FirstCash, Inc., Class A | 15,760 | 1,270,729 | |||||||||
LendingTree, Inc. (a) (b) | 2,400 | 728,256 | |||||||||
Western Alliance Bancorp (b) | 10,710 | 610,470 | |||||||||
4,363,715 | |||||||||||
Health Care Equipment & Supplies (4.7%): | |||||||||||
Cryoport, Inc. (a) (b) | 29,040 | 477,998 | |||||||||
Irhythm Technologies, Inc. (a) (b) | 9,130 | 621,662 | |||||||||
Masimo Corp. (a) | 5,085 | 803,735 | |||||||||
Nevro Corp. (a) (b) | 7,170 | 842,762 | |||||||||
Silk Road Medical, Inc. (a) | 13,170 | 531,805 | |||||||||
3,277,962 | |||||||||||
Health Care Providers & Services (4.0%): | |||||||||||
Hanger, Inc. (a) | 27,420 | 757,066 | |||||||||
HealthEquity, Inc. (a) | 10,330 | 765,143 | |||||||||
LHC Group, Inc. (a) | 9,200 | 1,267,392 | |||||||||
2,789,601 | |||||||||||
Health Care Technology (2.0%): | |||||||||||
Health Catalyst, Inc. (a) (b) | 15,986 | 554,714 | |||||||||
Inspire Medical System, Inc. (a) | 11,230 | 833,379 | |||||||||
1,388,093 | |||||||||||
Industrials (16.3%): | |||||||||||
Albany International Corp. | 12,390 | 940,649 | |||||||||
Armstrong World Industries, Inc. | 6,510 | 611,745 | |||||||||
Axon Enterprise, Inc. (a) | 12,917 | 946,558 | |||||||||
Azul SA, ADR (a) (b) | 27,790 | 1,189,412 | |||||||||
ESCO Technologies, Inc. | 10,940 | 1,011,950 | |||||||||
FTI Consulting, Inc. (a) | 5,900 | 652,894 | |||||||||
Generac Holdings, Inc. (a) | 9,510 | 956,611 | |||||||||
Mercury Systems, Inc. (a) | 15,940 | 1,101,613 | |||||||||
Simpson Manufacturing Co., Inc. | 6,840 | 548,773 | |||||||||
Siteone Landscape Supply, Inc. (a) | 14,770 | 1,338,901 | |||||||||
SPX Corp. (a) | 6,080 | 309,350 | |||||||||
Trex Co., Inc. (a) | 8,040 | 722,635 | |||||||||
Watts Water Technologies, Inc., Class A | 11,250 | 1,122,299 | |||||||||
11,453,390 | |||||||||||
Information Technology (24.8%): | |||||||||||
ACI Worldwide, Inc. (a) | 38,580 | 1,461,603 | |||||||||
Advanced Energy Industries, Inc. (a) | 17,980 | 1,280,175 | |||||||||
Cabot Microelectronics Corp. | 7,180 | 1,036,218 | |||||||||
Cornerstone OnDemand, Inc. (a) | 21,452 | 1,256,015 | |||||||||
Envestnet, Inc. (a) | 8,760 | 609,959 | |||||||||
Everbridge, Inc. (a) (b) | 13,970 | 1,090,778 |
See notes to financial statements.
45
Victory Portfolios Victory RS Small Cap Equity Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Shares | Value | |||||||||
Evo Payments, Inc. (a) | 38,510 | $ | 1,017,049 | ||||||||
Inphi Corp. (a) | 3,010 | 222,800 | |||||||||
Itron, Inc. (a) | 13,100 | 1,099,745 | |||||||||
Lattice Semiconductor Corp. (a) | 32,030 | 613,054 | |||||||||
Littelfuse, Inc. | 2,907 | 556,109 | |||||||||
Liveramp Holdings, Inc. (a) (b) | 14,842 | 713,455 | |||||||||
MACOM Technology Solutions Holdings, Inc. (a) | 14,300 | 380,380 | |||||||||
Monolithic Power Systems, Inc. | 1,738 | 309,399 | |||||||||
Q2 Holdings, Inc. (a) (b) | 6,890 | 558,641 | |||||||||
Silicon Laboratories, Inc. (a) | 9,820 | 1,138,923 | |||||||||
Varonis Systems, Inc. (a) | 20,530 | 1,595,385 | |||||||||
Wix.com Ltd., ADR (a) | 10,760 | 1,316,809 | |||||||||
WNS Holdings Ltd., ADR (a) | 15,358 | 1,015,932 | |||||||||
17,272,429 | |||||||||||
Materials (1.1%): | |||||||||||
Ingevity Corp. (a) | 8,470 | 740,109 | |||||||||
Pharmaceuticals (1.4%): | |||||||||||
Assembly Biosciences, Inc. (a) | 14,310 | 292,783 | |||||||||
GW Pharmaceuticals PLC, ADR (a) (b) | 6,600 | 690,096 | |||||||||
982,879 | |||||||||||
Total Common Stocks (Cost $57,851,385) | 68,484,020 | ||||||||||
Collateral for Securities Loaned^ (9.6%) | |||||||||||
BlackRock Liquidity Funds TempFund Portfolio, Institutional Class, 1.75% (d) | 319,322 | 319,322 | |||||||||
Fidelity Investments Money Market Government Portfolio, Class I, 1.54% (d) | 1,759,236 | 1,759,236 | |||||||||
Fidelity Investments Prime Money Market Portfolio, Class I, 1.75% (d) | 53,335 | 53,335 | |||||||||
Goldman Sachs Financial Square Prime Obligations Fund, Institutional Class, 1.80% (d) | 1,062,761 | 1,062,761 | |||||||||
JPMorgan Prime Money Market Fund, Capital Class, 1.73% (d) | 1,169,119 | 1,169,119 | |||||||||
Morgan Stanley Institutional Liquidity Prime Portfolio, Institutional Class, 1.76% (d) | 2,338,159 | 2,338,159 | |||||||||
Total Collateral for Securities Loaned (Cost $6,701,932) | 6,701,932 | ||||||||||
Total Investments (Cost $64,553,317) — 107.6% | 75,185,952 | ||||||||||
Liabilities in excess of other assets — (7.6)% | (5,312,548 | ) | |||||||||
NET ASSETS — 100.00% | $ | 69,873,404 |
^ 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) The Fund's Adviser has deemed this security to be illiquid based upon procedures approved by the Board of Trustees. As of December 31, 2019, illiquid securities were 0.1% of the Fund's net assets.
(d) Rate disclosed is the daily yield on December 31, 2019.
ADR — American Depositary Receipt
PLC — Public Limited Company
See notes to financial statements.
46
Victory Portfolios | Statements of Assets and Liabilities December 31, 2019 |
Victory RS Small Cap Growth Fund | Victory RS Select Growth Fund | Victory RS Mid Cap Growth Fund | |||||||||||||
ASSETS: | |||||||||||||||
Investments, at value (Cost $2,135,943,365, $177,284,784 and $461,014,665) | $ | 2,534,077,325 | (a) | $ | 236,964,829 | (b) | $ | 557,587,428 | (c) | ||||||
Cash and cash equivalents | 58,613,141 | 2,188,142 | 9,203,675 | ||||||||||||
Interest and dividends receivable | 612,864 | 58,697 | 173,917 | ||||||||||||
Receivable for capital shares issued | 1,189,300 | 14,479 | 553,491 | ||||||||||||
Receivable for investments sold | 11,997,174 | — | — | ||||||||||||
Receivable from Adviser | 84,169 | 30,359 | 151,090 | ||||||||||||
Prepaid expenses | 45,674 | 7,412 | 17,645 | ||||||||||||
Total Assets | 2,606,619,647 | 239,263,918 | 567,687,246 | ||||||||||||
LIABILITIES: | |||||||||||||||
Payables: | |||||||||||||||
Collateral received on loaned securities | 287,452,889 | 18,203,302 | 41,820,057 | ||||||||||||
Investments purchased | 21,492,517 | 1,888 | 5,055,862 | ||||||||||||
Capital shares redeemed | 7,964,010 | 586,158 | 249,677 | ||||||||||||
Accrued expenses and other payables: | |||||||||||||||
Investment advisory fees | 1,833,365 | 189,483 | 369,963 | ||||||||||||
Administration fees | 109,920 | 10,537 | 24,636 | ||||||||||||
Custodian fees | 18,701 | 2,216 | 3,545 | ||||||||||||
Transfer agent fees | 383,670 | 58,853 | 112,593 | ||||||||||||
Compliance fees | 1,577 | 150 | 340 | ||||||||||||
Trustees' fees | 2,375 | 224 | 514 | ||||||||||||
12b-1 fees | 84,868 | 22,748 | 18,147 | ||||||||||||
Other accrued expenses | 137,537 | 23,848 | 43,913 | ||||||||||||
Total Liabilities | 319,481,429 | 19,099,407 | 47,699,247 | ||||||||||||
NET ASSETS: | |||||||||||||||
Capital | 1,751,848,641 | 126,075,802 | 431,063,460 | ||||||||||||
Total distributable earnings/(loss) | 535,289,577 | 94,088,709 | 88,924,539 | ||||||||||||
Net Assets | $ | 2,287,138,218 | $ | 220,164,511 | $ | 519,987,999 | |||||||||
Net Assets | |||||||||||||||
Class A Shares | $ | 687,425,423 | $ | 97,337,034 | $ | 82,888,054 | |||||||||
Class C Shares | 18,581,277 | 26,987,747 | 20,266,038 | ||||||||||||
Class R Shares | 8,012,353 | 604,214 | 926,783 | ||||||||||||
Class R6 Shares | 441,471,344 | 302,224 | 20,320,724 | ||||||||||||
Class Y Shares | 1,131,647,821 | 94,933,292 | 395,586,400 | ||||||||||||
Total | $ | 2,287,138,218 | $ | 220,164,511 | $ | 519,987,999 | |||||||||
Shares (unlimited number of shares authorized with a par value of $0.001 per share): | |||||||||||||||
Class A Shares | 8,905,780 | 2,878,558 | 3,242,802 | ||||||||||||
Class C Shares | 288,783 | 1,007,975 | 917,780 | ||||||||||||
Class R Shares | 115,103 | 22,130 | 39,746 | ||||||||||||
Class R6 Shares | 5,434,024 | 8,398 | 762,935 | ||||||||||||
Class Y Shares | 13,959,792 | 2,648,585 | 14,864,379 | ||||||||||||
Total | 28,703,482 | 6,565,646 | 19,827,642 | ||||||||||||
Net asset value, offering (except Class A Shares) and redemption price per share: | |||||||||||||||
Class A Shares | $ | 77.19 | $ | 33.81 | $ | 25.56 | |||||||||
Class C Shares (d) | $ | 64.34 | $ | 26.77 | $ | 22.08 | |||||||||
Class R Shares | $ | 69.61 | $ | 27.30 | $ | 23.32 | |||||||||
Class R6 Shares | $ | 81.24 | $ | 35.99 | $ | 26.63 | |||||||||
Class Y Shares | $ | 81.06 | $ | 35.84 | $ | 26.61 | |||||||||
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 | $ | 81.90 | $ | 35.87 | $ | 27.12 |
(a) Includes $282,651,462 of securities on loan.
(b) Includes $17,892,270 of securities on loan.
(c) Includes $41,104,262 of securities on loan.
(d) Redemption price per share varies by the length of time shares are held.
See notes to financial statements.
47
Victory Portfolios | Statements of Assets and Liabilities December 31, 2019 |
Victory RS Growth Fund | Victory RS Science and Technology Fund | Victory RS Small Cap Equity Fund | |||||||||||||
ASSETS: | |||||||||||||||
Investments, at value (Cost $190,199,385, $253,501,170 and $64,553,317) | $ | 268,244,461 | (a) | $ | 333,076,363 | (b) | $ | 75,185,952 | (c) | ||||||
Cash and cash equivalents | 721,776 | 3,978,265 | 1,789,138 | ||||||||||||
Interest and dividends receivable | 132,537 | 78,504 | 18,791 | ||||||||||||
Receivable for capital shares issued | 16,999 | 57,367 | 1,661 | ||||||||||||
Receivable for investments sold | — | — | 365,639 | ||||||||||||
Receivable from Adviser | 47,422 | 12,223 | 5,714 | ||||||||||||
Prepaid expenses | 2,298 | 2,509 | 10,031 | ||||||||||||
Total Assets | 269,165,493 | 337,205,231 | 77,376,926 | ||||||||||||
LIABILITIES: | |||||||||||||||
Payables: | |||||||||||||||
Collateral received on loaned securities | 8,710,213 | 43,783,380 | 6,701,932 | ||||||||||||
Investments purchased | 343,451 | — | 655,806 | ||||||||||||
Capital shares redeemed | 182,555 | 735,412 | 63,714 | ||||||||||||
Accrued expenses and other payables: | |||||||||||||||
Investment advisory fees | 163,390 | 243,450 | 44,170 | ||||||||||||
Administration fees | 12,355 | 13,842 | 3,342 | ||||||||||||
Custodian fees | 2,567 | 2,523 | 817 | ||||||||||||
Transfer agent fees | 35,180 | 50,744 | 12,695 | ||||||||||||
Compliance fees | 172 | 195 | 48 | ||||||||||||
Trustees' fees | 252 | 279 | 69 | ||||||||||||
12b-1 fees | 26,391 | 28,043 | 7,753 | ||||||||||||
Other accrued expenses | 34,582 | 22,373 | 13,176 | ||||||||||||
Total Liabilities | 9,511,108 | 44,880,241 | 7,503,522 | ||||||||||||
NET ASSETS: | |||||||||||||||
Capital | 176,880,231 | 210,829,482 | 51,609,821 | ||||||||||||
Total distributable earnings/(loss) | 82,774,154 | 81,495,508 | 18,263,583 | ||||||||||||
Net Assets | $ | 259,654,385 | $ | 292,324,990 | $ | 69,873,404 | |||||||||
Net Assets | |||||||||||||||
Class A Shares | $ | 223,503,471 | $ | 199,591,423 | $ | 63,246,531 | |||||||||
Class C Shares | 4,240,456 | 14,054,327 | 477,780 | ||||||||||||
Class R Shares | 437,787 | 681,142 | 2,874,014 | ||||||||||||
Class Y Shares | 31,472,671 | 77,998,098 | 3,275,079 | ||||||||||||
Total | $ | 259,654,385 | $ | 292,324,990 | $ | 69,873,404 | |||||||||
Shares (unlimited number of shares authorized with a par value of $0.001 per share): | |||||||||||||||
Class A Shares | 11,627,988 | 8,539,126 | 3,940,222 | ||||||||||||
Class C Shares | 271,239 | 792,699 | 115,568 | ||||||||||||
Class R Shares | 25,317 | 34,744 | 233,349 | ||||||||||||
Class Y Shares | 1,564,806 | 3,075,488 | 198,266 | ||||||||||||
Total | 13,489,350 | 12,442,057 | 4,487,405 | ||||||||||||
Net asset value, offering (except Class A Shares) and redemption price per share: | |||||||||||||||
Class A Shares | $ | 19.22 | $ | 23.37 | $ | 16.05 | |||||||||
Class C Shares (d) | $ | 15.63 | $ | 17.73 | $ | 4.13 | |||||||||
Class R Shares | $ | 17.29 | $ | 19.60 | $ | 12.32 | |||||||||
Class Y Shares | $ | 20.11 | $ | 25.36 | $ | 16.52 | |||||||||
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 | $ | 20.39 | $ | 24.80 | $ | 17.03 |
(a) Includes $8,542,261 of securities on loan.
(b) Includes $42,842,734 of securities on loan.
(c) Includes $6,595,967 of securities on loan.
(d) Redemption price per share varies by the length of time shares are held.
See notes to financial statements.
48
Victory Portfolios | Statements of Operations For the Year Ended December 31, 2019 |
Victory RS Small Cap Growth Fund | Victory RS Select Growth Fund | Victory RS Mid Cap Growth Fund | |||||||||||||
Investment Income: | |||||||||||||||
Dividends | $ | 5,618,314 | $ | 748,880 | $ | 2,247,254 | |||||||||
Interest | 1,128,697 | 60,889 | 160,328 | ||||||||||||
Securities lending (net of fees) | 473,501 | 32,080 | 48,492 | ||||||||||||
Foreign tax withholding | — | — | (11,216 | ) | |||||||||||
Total Income | 7,220,512 | 841,849 | 2,444,858 | ||||||||||||
Expenses: | |||||||||||||||
Investment advisory fees | 19,954,137 | 2,475,686 | 3,983,958 | ||||||||||||
Administration fees | 1,282,035 | 151,660 | 285,533 | ||||||||||||
12b-1 fees — Class A Shares | 1,613,232 | 256,474 | 218,578 | ||||||||||||
12b-1 fees — Class C Shares | 172,393 | 314,267 | 209,235 | ||||||||||||
12b-1 fees — Class R Shares | 43,378 | 3,780 | 5,265 | ||||||||||||
Custodian fees | 78,756 | 13,407 | 22,566 | ||||||||||||
Transfer agent fees | 124,372 | 36,714 | 26,473 | ||||||||||||
Transfer agent fees — Class A Shares | 877,887 | 131,062 | 118,590 | ||||||||||||
Transfer agent fees — Class C Shares | 19,649 | 35,603 | 19,011 | ||||||||||||
Transfer agent fees — Class R Shares | 15,740 | 3,898 | 3,706 | ||||||||||||
Transfer agent fees — Class R6 Shares | 8,243 | 106 | 201 | ||||||||||||
Transfer agent fees — Class Y Shares | 1,109,237 | 106,072 | 440,497 | ||||||||||||
Trustees' fees | 169,819 | 24,225 | 37,772 | ||||||||||||
Compliance fees | 16,546 | 2,038 | 3,647 | ||||||||||||
Legal and audit fees | 166,063 | 25,940 | 46,051 | ||||||||||||
State registration and filing fees | 148,957 | 82,509 | 104,100 | ||||||||||||
Interfund lending fees | — | 1,818 | — | ||||||||||||
Other expenses | 235,743 | 42,357 | 82,804 | ||||||||||||
Total Expenses | 26,036,187 | 3,707,616 | 5,607,987 | ||||||||||||
Expenses waived/reimbursed by Adviser | (506,151 | ) | (285,457 | ) | (681,628 | ) | |||||||||
Net Expenses | 25,530,036 | 3,422,159 | 4,926,359 | ||||||||||||
Net Investment Income (Loss) | (18,309,524 | ) | (2,580,310 | ) | (2,481,501 | ) | |||||||||
Realized/Unrealized Gains (Losses) from Investments: | |||||||||||||||
Net realized gains (losses) from investment securities | 374,740,043 | 54,394,565 | 5,937,106 | ||||||||||||
Net change in unrealized appreciation/depreciation on investment securities | 272,638,580 | 19,783,471 | 95,247,594 | ||||||||||||
Net realized/unrealized gains (losses) on investments | 647,378,623 | 74,178,036 | 101,184,700 | ||||||||||||
Change in net assets resulting from operations | $ | 629,069,099 | $ | 71,597,726 | $ | 98,703,199 |
See notes to financial statements.
49
Victory Portfolios | Statements of Operations For the Year Ended December 31, 2019 |
Victory RS Growth Fund | Victory RS Science and Technology Fund | Victory RS Small Cap Equity Fund | |||||||||||||
Investment Income: | |||||||||||||||
Dividends | $ | 2,234,904 | $ | 471,563 | $ | 180,839 | |||||||||
Interest | 66,517 | 141,417 | 28,658 | ||||||||||||
Securities lending (net of fees) | 71,287 | 310,166 | 17,303 | ||||||||||||
Foreign tax withholding | (9,156 | ) | — | — | |||||||||||
Total Income | 2,363,552 | 923,146 | 226,800 | ||||||||||||
Expenses: | |||||||||||||||
Investment advisory fees | 1,888,914 | 2,660,462 | 508,486 | ||||||||||||
Administration fees | 153,912 | 162,368 | 41,431 | ||||||||||||
12b-1 fees — Class A Shares | 541,321 | 449,683 | 152,494 | ||||||||||||
12b-1 fees — Class C Shares | 46,951 | 136,564 | 6,139 | ||||||||||||
12b-1 fees — Class R Shares | 2,437 | 3,750 | 13,427 | ||||||||||||
Custodian fees | 14,297 | 16,930 | 5,042 | ||||||||||||
Transfer agent fees | 16,928 | 9,369 | 3,830 | ||||||||||||
Transfer agent fees — Class A Shares | 173,432 | 197,689 | 61,948 | ||||||||||||
Transfer agent fees — Class C Shares | 5,039 | 13,919 | 489 | ||||||||||||
Transfer agent fees — Class R Shares | 2,644 | 3,208 | 4,745 | ||||||||||||
Transfer agent fees — Class Y Shares | 20,068 | 83,565 | 1,375 | ||||||||||||
Trustees' fees | 21,918 | 22,570 | 6,893 | ||||||||||||
Compliance fees | 1,996 | 2,088 | 540 | ||||||||||||
Legal and audit fees | 25,930 | 27,395 | 12,329 | ||||||||||||
State registration and filing fees | 72,555 | 85,908 | 61,818 | ||||||||||||
Interfund lending fees | 74 | — | — | ||||||||||||
Other expenses | 31,949 | 52,802 | 19,222 | ||||||||||||
Total Expenses | 3,020,365 | 3,928,270 | 900,208 | ||||||||||||
Expenses waived/reimbursed by Adviser | (288,176 | ) | (41,114 | ) | (30,362 | ) | |||||||||
Net Expenses | 2,732,189 | 3,887,156 | 869,846 | ||||||||||||
Net Investment Income (Loss) | (368,637 | ) | (2,964,010 | ) | (643,046 | ) | |||||||||
Realized/Unrealized Gains (Losses) from Investments: | |||||||||||||||
Net realized gains (losses) from investment securities | 32,101,114 | 36,408,035 | 12,548,237 | ||||||||||||
Net change in unrealized appreciation/depreciation on investment securities | 32,008,409 | 48,008,708 | 9,277,446 | ||||||||||||
Net realized/unrealized gains (losses) on investments | 64,109,523 | 84,416,743 | 21,825,683 | ||||||||||||
Change in net assets resulting from operations | $ | 63,740,886 | $ | 81,452,733 | $ | 21,182,637 |
See notes to financial statements.
50
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, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2019 | Year Ended December 31, 2018 | ||||||||||||||||||||||
From Investment Activities: | |||||||||||||||||||||||||||
Operations: | |||||||||||||||||||||||||||
Net investment income (loss) | $ | (18,309,524 | ) | $ | (14,995,332 | ) | $ | (2,580,310 | ) | $ | (3,232,574 | ) | $ | (2,481,501 | ) | $ | (1,546,774 | ) | |||||||||
Net realized gains (losses) from investments | 374,740,043 | 252,184,350 | 54,394,565 | 77,904,223 | 5,937,106 | 40,686,227 | |||||||||||||||||||||
Net change in unrealized appreciation/ depreciation on investments | 272,638,580 | (419,205,443 | ) | 19,783,471 | (91,949,344 | ) | 95,247,594 | (75,203,742 | ) | ||||||||||||||||||
Change in net assets resulting from operations | 629,069,099 | (182,016,425 | ) | 71,597,726 | (17,277,695 | ) | 98,703,199 | (36,064,289 | ) | ||||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||||||
Class A Shares | (57,940,117 | ) | (86,181,961 | ) | (11,607,770 | ) | (32,610,434 | ) | — | (12,442,159 | ) | ||||||||||||||||
Class C Shares | (1,811,529 | ) | (2,657,586 | ) | (3,987,456 | ) | (13,368,504 | ) | — | (3,176,582 | ) | ||||||||||||||||
Class R Shares | (725,922 | ) | (1,376,192 | ) | (83,853 | ) | (276,329 | ) | — | (212,737 | ) | ||||||||||||||||
Class R6 Shares | (35,271,765 | ) | (14,758,716 | ) | (33,206 | ) | (72,946 | ) | — | (572,379 | ) | ||||||||||||||||
Class Y Shares | (91,533,905 | ) | (169,651,115 | ) | (10,834,909 | ) | (42,950,796 | ) | — | (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 | (187,283,238 | ) | (274,625,570 | ) | (26,547,194 | ) | (89,279,009 | ) | — | (56,675,213 | ) | ||||||||||||||||
Change in net assets resulting from capital transactions | 244,715,312 | 353,743,296 | (72,669,141 | ) | (90,253,951 | ) | 79,815,678 | (11,193,976 | ) | ||||||||||||||||||
Change in net assets | 686,501,173 | (102,898,699 | ) | (27,618,609 | ) | (196,810,655 | ) | 178,518,877 | (103,933,478 | ) | |||||||||||||||||
Net Assets: | |||||||||||||||||||||||||||
Beginning of period | 1,600,637,045 | 1,703,535,744 | 247,783,120 | 444,593,775 | 341,469,122 | 445,402,600 | |||||||||||||||||||||
End of period | $ | 2,287,138,218 | $ | 1,600,637,045 | $ | 220,164,511 | $ | 247,783,120 | $ | 519,987,999 | $ | 341,469,122 |
(Continues on next page)
See notes to financial statements.
51
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, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2019 | Year Ended December 31, 2018 | ||||||||||||||||||||||
Capital Transactions: | |||||||||||||||||||||||||||
Class A Shares | |||||||||||||||||||||||||||
Proceeds from shares issued | $ | 142,955,975 | $ | 105,278,656 | $ | 8,995,981 | $ | 14,046,816 | $ | 7,679,624 | $ | 8,751,587 | |||||||||||||||
Distributions reinvested | 56,001,065 | 82,149,195 | 11,220,690 | 31,279,068 | — | 12,442,557 | |||||||||||||||||||||
Cost of shares redeemed | (144,757,608 | ) | (126,357,303 | ) | (34,103,074 | ) | (58,561,445 | ) | (20,994,420 | ) | (35,922,137 | ) | |||||||||||||||
Total Class A Shares | $ | 54,199,432 | $ | 61,070,548 | $ | (13,886,403 | ) | $ | (13,235,561 | ) | $ | (13,314,796 | ) | $ | (14,727,993 | ) | |||||||||||
Class C Shares | |||||||||||||||||||||||||||
Proceeds from shares issued | $ | 4,638,000 | $ | 8,087,931 | $ | 1,172,611 | $ | 3,457,448 | $ | 1,091,058 | $ | 2,830,669 | |||||||||||||||
Distributions reinvested | 1,567,471 | 2,345,566 | 3,691,152 | 12,670,417 | — | 2,550,620 | |||||||||||||||||||||
Cost of shares redeemed | (4,534,786 | ) | (5,957,121 | ) | (14,429,238 | ) | (19,496,179 | ) | (3,720,853 | ) | (5,849,733 | ) | |||||||||||||||
Total Class C Shares | $ | 1,670,685 | $ | 4,476,376 | $ | (9,565,475 | ) | $ | (3,368,314 | ) | $ | (2,629,795 | ) | $ | (468,444 | ) | |||||||||||
Class R Shares | |||||||||||||||||||||||||||
Proceeds from shares issued | $ | 3,104,717 | $ | 6,973,887 | $ | 229,179 | $ | 461,702 | $ | 109,581 | $ | 266,779 | |||||||||||||||
Distributions reinvested | 725,922 | 1,376,192 | 43,116 | 123,655 | — | 220,735 | |||||||||||||||||||||
Cost of shares redeemed | (4,973,375 | ) | (6,397,173 | ) | (503,698 | ) | (577,116 | ) | (621,978 | ) | (708,430 | ) | |||||||||||||||
Total Class R Shares | $ | (1,142,736 | ) | $ | 1,952,906 | $ | (231,403 | ) | $ | 8,241 | $ | (512,397 | ) | $ | (220,916 | ) | |||||||||||
Class R6 Shares | |||||||||||||||||||||||||||
Proceeds from shares issued | $ | 329,155,802 | $ | 124,843,919 | $ | 16,248 | $ | 117,936 | $ | 16,219,140 | $ | 2,219,318 | |||||||||||||||
Distributions reinvested | 24,270,509 | 14,369,574 | 33,206 | 72,946 | — | 593,898 | |||||||||||||||||||||
Cost of shares redeemed | (61,983,716 | ) | (19,320,964 | ) | (27,077 | ) | (1,210 | ) | (1,352,556 | ) | (99,947 | ) | |||||||||||||||
Total Class R6 Shares | $ | 291,442,595 | $ | 119,892,529 | $ | 22,377 | $ | 189,672 | $ | 14,866,584 | $ | 2,713,269 | |||||||||||||||
Class Y Shares | |||||||||||||||||||||||||||
Proceeds from shares issued | $ | 289,704,953 | $ | 416,879,341 | $ | 18,878,964 | $ | 28,684,557 | $ | 205,621,682 | $ | 227,492,113 | |||||||||||||||
Distributions reinvested | 84,364,967 | 148,024,895 | 9,975,034 | 39,382,125 | — | 38,045,473 | |||||||||||||||||||||
Cost of shares redeemed | (475,524,584 | ) | (398,553,299 | ) | (77,862,235 | ) | (141,914,671 | ) | (124,215,600 | ) | (264,027,478 | ) | |||||||||||||||
Total Class Y Shares | $ | (101,454,664 | ) | $ | 166,350,937 | $ | (49,008,237 | ) | $ | (73,847,989 | ) | $ | 81,406,082 | $ | 1,510,108 | ||||||||||||
Change in net assets resulting from capital transactions | $ | 244,715,312 | $ | 353,743,296 | $ | (72,669,141 | ) | $ | (90,253,951 | ) | $ | 79,815,678 | $ | (11,193,976 | ) |
(continues on next page)
See notes to financial statements.
52
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, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2019 | Year Ended December 31, 2018 | ||||||||||||||||||||||
Share Transactions: | |||||||||||||||||||||||||||
Class A Shares | |||||||||||||||||||||||||||
Issued | 1,896,687 | 1,200,807 | 262,448 | 302,025 | 313,448 | 348,050 | |||||||||||||||||||||
Reinvested | 739,093 | 1,356,269 | 334,946 | 1,097,126 | — | 629,047 | |||||||||||||||||||||
Redeemed | (1,900,975 | ) | (1,490,844 | ) | (978,442 | ) | (1,344,789 | ) | (851,382 | ) | (1,397,550 | ) | |||||||||||||||
Total Class A Shares | 734,805 | 1,066,232 | (381,048 | ) | 54,362 | (537,934 | ) | (420,453 | ) | ||||||||||||||||||
Class C Shares | |||||||||||||||||||||||||||
Issued | 73,386 | 110,706 | 42,508 | 96,266 | 52,282 | 145,805 | |||||||||||||||||||||
Reinvested | 24,810 | 45,334 | 139,131 | 540,086 | — | 147,862 | |||||||||||||||||||||
Redeemed | (70,038 | ) | (85,559 | ) | (506,621 | ) | (558,364 | ) | (173,253 | ) | (256,898 | ) | |||||||||||||||
Total Class C Shares | 28,158 | 70,481 | (324,982 | ) | 77,988 | (120,971 | ) | 36,769 | |||||||||||||||||||
Class R Shares | |||||||||||||||||||||||||||
Issued | 44,878 | 82,863 | 8,420 | 13,459 | 4,976 | 10,366 | |||||||||||||||||||||
Reinvested | 10,621 | 24,845 | 1,594 | 5,198 | — | 12,162 | |||||||||||||||||||||
Redeemed | (70,784 | ) | (79,211 | ) | (16,917 | ) | (14,324 | ) | (27,710 | ) | (29,842 | ) | |||||||||||||||
Total Class R Shares | (15,285 | ) | 28,497 | (6,903 | ) | 4,333 | (22,734 | ) | (7,314 | ) | |||||||||||||||||
Class R6 Shares | |||||||||||||||||||||||||||
Issued | 4,132,995 | 1,459,295 | 430 | 2,231 | 631,514 | 77,219 | |||||||||||||||||||||
Reinvested | 304,371 | 227,151 | 931 | 2,430 | — | 28,900 | |||||||||||||||||||||
Redeemed | (778,119 | ) | (217,059 | ) | (787 | ) | (24 | ) | (51,468 | ) | (3,537 | ) | |||||||||||||||
Total Class R6 Shares | 3,659,247 | 1,469,387 | 574 | 4,637 | 580,046 | 102,582 | |||||||||||||||||||||
Class Y Shares | |||||||||||||||||||||||||||
Issued | 3,695,019 | 4,671,397 | 523,309 | 606,709 | 8,112,643 | 8,077,236 | |||||||||||||||||||||
Reinvested | 1,060,261 | 2,342,907 | 280,987 | 1,315,368 | — | 1,852,263 | |||||||||||||||||||||
Redeemed | (5,965,460 | ) | (4,774,238 | ) | (2,124,164 | ) | (3,107,726 | ) | (4,972,460 | ) | (9,888,828 | ) | |||||||||||||||
Total Class Y Shares | (1,210,180 | ) | 2,240,066 | (1,319,868 | ) | (1,185,649 | ) | 3,140,183 | 40,671 | ||||||||||||||||||
Change in Shares | 3,196,745 | 4,874,663 | (2,032,227 | ) | (1,044,329 | ) | 3,038,590 | (247,745 | ) |
See notes to financial statements.
53
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, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2019 | Year Ended December 31, 2018 | ||||||||||||||||||||||
From Investment Activities: | |||||||||||||||||||||||||||
Operations: | |||||||||||||||||||||||||||
Net investment income (loss) | $ | (368,637 | ) | $ | (700,567 | ) | $ | (2,964,010 | ) | $ | (2,560,543 | ) | $ | (643,046 | ) | $ | (595,282 | ) | |||||||||
Net realized gains (losses) from investments | 32,101,114 | 28,910,507 | 36,408,035 | 29,219,309 | 12,548,237 | 14,361,115 | |||||||||||||||||||||
Net change in unrealized appreciation/ depreciation on investments | 32,008,409 | (43,461,446 | ) | 48,008,708 | (35,986,495 | ) | 9,277,446 | (18,554,821 | ) | ||||||||||||||||||
Change in net assets resulting from operations | 63,740,886 | (15,251,506 | ) | 81,452,733 | (9,327,729 | ) | 21,182,637 | (4,788,988 | ) | ||||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||||||
Class A Shares | (21,706,016 | ) | (27,566,639 | ) | (16,847,930 | ) | (20,359,029 | ) | (6,685,748 | ) | (13,226,281 | ) | |||||||||||||||
Class C Shares | (511,609 | ) | (842,729 | ) | (1,507,003 | ) | (2,120,416 | ) | (183,966 | ) | (209,470 | ) | |||||||||||||||
Class R Shares | (45,536 | ) | (107,275 | ) | (65,870 | ) | (192,779 | ) | (383,511 | ) | (780,300 | ) | |||||||||||||||
Class Y Shares | (2,901,012 | ) | (3,780,962 | ) | (6,017,832 | ) | (7,184,754 | ) | (338,729 | ) | (533,247 | ) | |||||||||||||||
Change in net assets resulting from distributions to shareholders | (25,164,173 | ) | (32,297,605 | ) | (24,438,635 | ) | (29,856,978 | ) | (7,591,954 | ) | (14,749,298 | ) | |||||||||||||||
Change in net assets resulting from capital transactions | 1,476,091 | 10,800,103 | 28,962,815 | 53,948,216 | (1,004,760 | ) | 999,823 | ||||||||||||||||||||
Change in net assets | 40,052,804 | (36,749,008 | ) | 85,976,913 | 14,763,509 | 12,585,923 | (18,538,463 | ) | |||||||||||||||||||
Net Assets: | |||||||||||||||||||||||||||
Beginning of period | 219,601,581 | 256,350,589 | 206,348,077 | 191,584,568 | 57,287,481 | 75,825,944 | |||||||||||||||||||||
End of period | $ | 259,654,385 | $ | 219,601,581 | $ | 292,324,990 | $ | 206,348,077 | $ | 69,873,404 | $ | 57,287,481 |
(Continues on next page)
See notes to financial statements.
54
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, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2019 | Year Ended December 31, 2018 | ||||||||||||||||||||||
Capital Transactions: | |||||||||||||||||||||||||||
Class A Shares | |||||||||||||||||||||||||||
Proceeds from shares issued | $ | 5,052,289 | $ | 6,647,316 | $ | 37,207,174 | $ | 45,799,664 | $ | 2,379,117 | $ | 2,996,513 | |||||||||||||||
Distributions reinvested | 21,131,656 | 26,853,288 | 16,058,001 | 19,428,046 | 6,575,672 | 13,049,204 | |||||||||||||||||||||
Cost of shares redeemed | (23,856,360 | ) | (22,877,989 | ) | (32,975,335 | ) | (47,927,603 | ) | (9,742,633 | ) | (12,380,756 | ) | |||||||||||||||
Total Class A Shares | $ | 2,327,585 | $ | 10,622,615 | $ | 20,289,840 | $ | 17,300,107 | $ | (787,844 | ) | $ | 3,664,961 | ||||||||||||||
Class C Shares | |||||||||||||||||||||||||||
Proceeds from shares issued | $ | 279,641 | $ | 890,775 | $ | 2,713,477 | $ | 3,866,344 | $ | 68,990 | $ | 528,709 | |||||||||||||||
Distributions reinvested | 421,834 | 689,704 | 1,377,592 | 1,929,817 | 183,966 | 209,470 | |||||||||||||||||||||
Cost of shares redeemed | (1,524,992 | ) | (2,955,385 | ) | (4,658,036 | ) | (3,343,244 | ) | (411,685 | ) | (395,878 | ) | |||||||||||||||
Total Class C Shares | $ | (823,517 | ) | $ | (1,374,906 | ) | $ | (566,967 | ) | $ | 2,452,917 | $ | (158,729 | ) | $ | 342,301 | |||||||||||
Class R Shares | |||||||||||||||||||||||||||
Proceeds from shares issued | $ | 55,535 | $ | 160,857 | $ | 178,010 | $ | 227,735 | $ | 211,495 | $ | 378,935 | |||||||||||||||
Distributions reinvested | 45,536 | 107,275 | 65,870 | 192,779 | 383,511 | 780,300 | |||||||||||||||||||||
Cost of shares redeemed | (255,531 | ) | (421,435 | ) | (447,000 | ) | (1,256,857 | ) | (468,593 | ) | (1,202,751 | ) | |||||||||||||||
Total Class R Shares | $ | (154,460 | ) | $ | (153,303 | ) | $ | (203,120 | ) | $ | (836,343 | ) | $ | 126,413 | $ | (43,516 | ) | ||||||||||
Class Y Shares | |||||||||||||||||||||||||||
Proceeds from shares issued | $ | 3,050,227 | $ | 3,514,242 | $ | 38,822,411 | $ | 67,459,196 | $ | 1,004,953 | $ | 1,935,138 | |||||||||||||||
Distributions reinvested | 2,783,706 | 3,588,161 | 5,687,567 | 6,895,347 | 338,056 | 530,782 | |||||||||||||||||||||
Cost of shares redeemed | (5,707,450 | ) | (5,396,706 | ) | (35,066,916 | ) | (39,323,008 | ) | (1,527,609 | ) | (5,429,843 | ) | |||||||||||||||
Total Class Y Shares | $ | 126,483 | $ | 1,705,697 | $ | 9,443,062 | $ | 35,031,535 | $ | (184,600 | ) | $ | (2,963,923 | ) | |||||||||||||
Change in net assets resulting from capital transactions | $ | 1,476,091 | $ | 10,800,103 | $ | 28,962,815 | $ | 53,948,216 | $ | (1,004,760 | ) | $ | 999,823 |
(continues on next page)
See notes to financial statements.
55
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, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2019 | Year Ended December 31, 2018 | ||||||||||||||||||||||
Share Transactions: | |||||||||||||||||||||||||||
Class A Shares | |||||||||||||||||||||||||||
Issued | 255,580 | 310,179 | 1,623,445 | 1,863,602 | 147,134 | 147,464 | |||||||||||||||||||||
Reinvested | 1,113,364 | 1,650,479 | 701,529 | 1,077,540 | 417,238 | 1,016,293 | |||||||||||||||||||||
Redeemed | (1,218,205 | ) | (1,077,534 | ) | (1,441,083 | ) | (2,057,895 | ) | (603,671 | ) | (654,258 | ) | |||||||||||||||
Total Class A Shares | 150,739 | 883,124 | 883,891 | 883,247 | (39,299 | ) | 509,499 | ||||||||||||||||||||
Class C Shares | |||||||||||||||||||||||||||
Issued | 17,290 | 53,479 | 150,655 | 206,957 | 12,495 | 77,353 | |||||||||||||||||||||
Reinvested | 27,321 | 50,531 | 79,309 | 136,190 | 45,312 | 48,044 | |||||||||||||||||||||
Redeemed | (94,041 | ) | (172,906 | ) | (260,527 | ) | (187,012 | ) | (82,079 | ) | (40,999 | ) | |||||||||||||||
Total Class C Shares | (49,430 | ) | (68,896 | ) | (30,563 | ) | 156,135 | (24,272 | ) | 84,398 | |||||||||||||||||
Class R Shares | |||||||||||||||||||||||||||
Issued | 3,130 | 7,993 | 9,259 | 10,724 | 16,640 | 22,190 | |||||||||||||||||||||
Reinvested | 2,666 | 7,205 | 3,431 | 12,486 | 31,721 | 76,350 | |||||||||||||||||||||
Redeemed | (14,840 | ) | (24,044 | ) | (22,942 | ) | (67,986 | ) | (38,038 | ) | (85,841 | ) | |||||||||||||||
Total Class R Shares | (9,044 | ) | (8,846 | ) | (10,252 | ) | (44,776 | ) | 10,323 | 12,699 | |||||||||||||||||
Class Y Shares | |||||||||||||||||||||||||||
Issued | 148,829 | 161,376 | 1,584,545 | 2,542,760 | 60,144 | 109,862 | |||||||||||||||||||||
Reinvested | 140,237 | 212,192 | 229,060 | 355,614 | 20,842 | 40,364 | |||||||||||||||||||||
Redeemed | (276,822 | ) | (248,627 | ) | (1,445,941 | ) | (1,590,202 | ) | (89,723 | ) | (276,436 | ) | |||||||||||||||
Total Class Y Shares | 12,244 | 124,941 | 367,664 | 1,308,172 | (8,737 | ) | (126,210 | ) | |||||||||||||||||||
Change in Shares | 104,509 | 930,323 | 1,210,740 | 2,302,778 | (61,985 | ) | 480,386 |
See notes to financial statements.
56
This page is intentionally left blank.
57
Victory Portfolios | Financial Highlights |
For a Share Outstanding Throughout Each Period
Investment Activities | Distributions to Shareholders From | ||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(a) | Net Realized and Unrealized Gains (Losses) on Investments | Total from Investment Activities | Net Investment Income | Net Realized Gains from Investments | ||||||||||||||||||||||
Victory RS Small Cap Growth Fund | |||||||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 61.11 | (0.80 | ) | 23.84 | 23.04 | — | (6.96 | ) | ||||||||||||||||||
Year Ended 12/31/18 | $ | 80.96 | (0.83 | ) | (6.54 | ) | (7.37 | ) | — | (12.48 | ) | ||||||||||||||||
Year Ended 12/31/17 | $ | 65.31 | (0.75 | ) | 24.13 | 23.38 | — | (7.73 | ) | ||||||||||||||||||
Year Ended 12/31/16 | $ | 64.73 | (0.55 | ) | 1.13 | 0.58 | — | — | |||||||||||||||||||
Year Ended 12/31/15 | $ | 65.53 | (0.74 | ) | 0.80 | 0.06 | — | (0.86 | ) | ||||||||||||||||||
Class C | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 52.19 | (1.17 | ) | 20.28 | 19.11 | — | (6.96 | ) | ||||||||||||||||||
Year Ended 12/31/18 | $ | 71.70 | (1.31 | ) | (5.72 | ) | (7.03 | ) | — | (12.48 | ) | ||||||||||||||||
Year Ended 12/31/17 | $ | 58.97 | (1.18 | ) | 21.64 | 20.46 | — | (7.73 | ) | ||||||||||||||||||
Year Ended 12/31/16 | $ | 58.90 | (0.90 | ) | 0.97 | 0.07 | — | — | |||||||||||||||||||
Year Ended 12/31/15 | $ | 60.15 | (1.15 | ) | 0.76 | (0.39 | ) | — | (0.86 | ) | |||||||||||||||||
Class R | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 55.87 | (1.05 | ) | 21.75 | 20.70 | — | (6.96 | ) | ||||||||||||||||||
Year Ended 12/31/18 | $ | 75.55 | (1.15 | ) | (6.05 | ) | (7.20 | ) | — | (12.48 | ) | ||||||||||||||||
Year Ended 12/31/17 | $ | 61.63 | (1.04 | ) | 22.69 | 21.65 | — | (7.73 | ) | ||||||||||||||||||
Year Ended 12/31/16 | $ | 61.27 | (0.68 | ) | 1.04 | 0.36 | — | — | |||||||||||||||||||
Year Ended 12/31/15 | $ | 62.28 | (0.93 | ) | 0.78 | (0.15 | ) | — | (0.86 | ) | |||||||||||||||||
Class R6 | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 63.83 | (0.58 | ) | 24.95 | 24.37 | — | (6.96 | ) | ||||||||||||||||||
Year Ended 12/31/18 | $ | 83.67 | (0.58 | ) | (6.78 | ) | (7.36 | ) | — | (12.48 | ) | ||||||||||||||||
7/12/17(c) through 12/31/17 | $ | 79.23 | (0.41 | ) | 12.58 | 12.17 | — | (7.73 | ) | ||||||||||||||||||
Class Y | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 63.75 | (0.62 | ) | 24.89 | 24.27 | — | (6.96 | ) | ||||||||||||||||||
Year Ended 12/31/18 | $ | 83.64 | (0.61 | ) | (6.80 | ) | (7.41 | ) | — | (12.48 | ) | ||||||||||||||||
Year Ended 12/31/17 | $ | 67.08 | (0.53 | ) | 24.82 | 24.29 | — | (7.73 | ) | ||||||||||||||||||
Year Ended 12/31/16 | $ | 66.32 | (0.39 | ) | 1.16 | 0.77 | (0.01 | ) | — | ||||||||||||||||||
Year Ended 12/31/15 | $ | 67.04 | (0.56 | ) | 0.81 | 0.25 | (0.11 | ) | (0.86 | ) |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
(c) Commencement of operations.
(d) Not annualized for periods less than one year.
(e) Annualized for periods less than one year.
See notes to financial statements.
58
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Ratios to Average Net Assets | Supplemental Data | ||||||||||||||||||||||||||||||||||
Total Distributions | Net Asset Value, End of Period | Total Return (Excludes Sales Charge) | Net Expenses | Net Investment Income (Loss) | Gross Expenses | Net Assets, End of Period (000's) | Portfolio Turnover(b) | ||||||||||||||||||||||||||||
Victory RS Small Cap Growth Fund | |||||||||||||||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | (6.96 | ) | $ | 77.19 | 37.91 | % | 1.40 | % | (1.06 | )% | 1.44 | % | $ | 687,425 | 100 | % | |||||||||||||||||||
Year Ended 12/31/18 | (12.48 | ) | $ | 61.11 | (8.97 | )% | 1.40 | % | (0.94 | )% | 1.45 | % | $ | 499,350 | 86 | % | |||||||||||||||||||
Year Ended 12/31/17 | (7.73 | ) | $ | 80.96 | 36.86 | % | 1.40 | % | (1.00 | )% | 1.44 | % | $ | 575,227 | 107 | % | |||||||||||||||||||
Year Ended 12/31/16 | — | $ | 65.31 | 0.90 | % | 1.40 | % | (0.92 | )% | 1.45 | % | $ | 481,125 | 91 | % | ||||||||||||||||||||
Year Ended 12/31/15 | (0.86 | ) | $ | 64.73 | 0.08 | % | 1.40 | % | (1.07 | )% | 1.41 | % | $ | 767,304 | 94 | % | |||||||||||||||||||
Class C | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | (6.96 | ) | $ | 64.34 | 36.88 | % | 2.16 | % | (1.82 | )% | 2.27 | % | $ | 18,581 | 100 | % | |||||||||||||||||||
Year Ended 12/31/18 | (12.48 | ) | $ | 52.19 | (9.66 | )% | 2.16 | % | (1.71 | )% | 2.26 | % | $ | 13,602 | 86 | % | |||||||||||||||||||
Year Ended 12/31/17 | (7.73 | ) | $ | 71.70 | 35.84 | % | 2.16 | % | (1.75 | )% | 2.23 | % | $ | 13,633 | 107 | % | |||||||||||||||||||
Year Ended 12/31/16 | — | $ | 58.97 | 0.12 | % | 2.16 | % | (1.67 | )% | 2.22 | % | $ | 13,035 | 91 | % | ||||||||||||||||||||
Year Ended 12/31/15 | (0.86 | ) | $ | 58.90 | (0.67 | )% | 2.16 | % | (1.67 | )% | 2.22 | % | $ | 20,878 | 94 | % | |||||||||||||||||||
Class R | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | (6.96 | ) | $ | 69.61 | 37.28 | % | 1.86 | % | (1.52 | )% | 1.93 | % | $ | 8,012 | 100 | % | |||||||||||||||||||
Year Ended 12/31/18 | (12.48 | ) | $ | 55.87 | (9.39 | )% | 1.86 | % | (1.40 | )% | 1.87 | % | $ | 7,285 | 86 | % | |||||||||||||||||||
Year Ended 12/31/17 | (7.73 | ) | $ | 75.55 | 36.24 | % | 1.86 | % | (1.46 | )% | 1.94 | % | $ | 7,698 | 107 | % | |||||||||||||||||||
Year Ended 12/31/16 | — | $ | 61.63 | 0.59 | % | 1.70 | % | (1.20 | )% | 1.70 | % | $ | 5,371 | 91 | % | ||||||||||||||||||||
Year Ended 12/31/15 | (0.86 | ) | $ | 61.27 | (0.26 | )% | 1.75 | % | (1.41 | )% | 1.75 | % | $ | 5,241 | 94 | % | |||||||||||||||||||
Class R6 | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | (6.96 | ) | $ | 81.24 | 38.38 | % | 1.06 | % | (0.72 | )% | 1.06 | % | $ | 441,471 | 100 | % | |||||||||||||||||||
Year Ended 12/31/18 | (12.48 | ) | $ | 63.83 | (8.66 | )% | 1.06 | % | (0.64 | )% | 1.10 | % | $ | 113,288 | 86 | % | |||||||||||||||||||
7/12/17(c) through 12/31/17 | (7.73 | ) | $ | 83.67 | 16.23 | %(d) | 1.06 | %(e) | (1.03 | )%(e) | 1.41 | %(e) | $ | 25,551 | 107 | %(d) | |||||||||||||||||||
Class Y | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | (6.96 | ) | $ | 81.06 | 38.29 | % | 1.13 | % | (0.79 | )% | 1.15 | % | $ | 1,131,648 | 100 | % | |||||||||||||||||||
Year Ended 12/31/18 | (12.48 | ) | $ | 63.75 | (8.72 | )% | 1.13 | % | (0.67 | )% | 1.15 | % | $ | 967,112 | 86 | % | |||||||||||||||||||
Year Ended 12/31/17 | (7.73 | ) | $ | 83.64 | 37.23 | % | 1.13 | % | (0.68 | )% | 1.17 | % | $ | 1,081,427 | 107 | % | |||||||||||||||||||
Year Ended 12/31/16 | (0.01 | ) | $ | 67.08 | 1.16 | % | 1.13 | % | (0.64 | )% | 1.21 | % | $ | 1,379,669 | 91 | % | |||||||||||||||||||
Year Ended 12/31/15 | (0.97 | ) | $ | 66.32 | 0.36 | % | 1.13 | % | (0.79 | )% | 1.18 | % | $ | 1,576,927 | 94 | % |
See notes to financial statements.
59
Victory Portfolios | Financial Highlights |
For a Share Outstanding Throughout Each Period
Investment Activities | Distributions to Shareholders From | ||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(a) | Net Realized and Unrealized Gains (Losses) on Investments | Total from Investment Activities | Net Realized Gains from Investments | Total Distributions | ||||||||||||||||||||||
Victory RS Select Growth Fund | |||||||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 28.96 | (0.37 | ) | 9.68 | 9.31 | (4.46 | ) | (4.46 | ) | |||||||||||||||||
Year Ended 12/31/18 | $ | 46.03 | (0.42 | ) | (3.12 | ) | (3.54 | ) | (13.53 | ) | (13.53 | ) | |||||||||||||||
Year Ended 12/31/17 | $ | 45.04 | (0.43 | ) | 8.16 | 7.73 | (6.74 | ) | (6.74 | ) | |||||||||||||||||
Year Ended 12/31/16 | $ | 43.54 | (0.32 | ) | 3.30 | 2.98 | (1.48 | ) | (1.48 | ) | |||||||||||||||||
Year Ended 12/31/15 | $ | 47.80 | (0.41 | ) | 0.24 | (0.17 | ) | (4.09 | ) | (4.09 | ) | ||||||||||||||||
Class C | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 23.82 | (0.53 | ) | 7.94 | 7.41 | (4.46 | ) | (4.46 | ) | |||||||||||||||||
Year Ended 12/31/18 | $ | 40.80 | (0.70 | ) | (2.75 | ) | (3.45 | ) | (13.53 | ) | (13.53 | ) | |||||||||||||||
Year Ended 12/31/17 | $ | 40.89 | (0.73 | ) | 7.38 | 6.65 | (6.74 | ) | (6.74 | ) | |||||||||||||||||
Year Ended 12/31/16 | $ | 39.97 | (0.60 | ) | 3.00 | 2.40 | (1.48 | ) | (1.48 | ) | |||||||||||||||||
Year Ended 12/31/15 | $ | 44.57 | (0.74 | ) | 0.23 | (0.51 | ) | (4.09 | ) | (4.09 | ) | ||||||||||||||||
Class R | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 24.16 | (0.45 | ) | 8.05 | 7.60 | (4.46 | ) | (4.46 | ) | |||||||||||||||||
Year Ended 12/31/18 | $ | 41.06 | (0.59 | ) | (2.78 | ) | (3.37 | ) | (13.53 | ) | (13.53 | ) | |||||||||||||||
Year Ended 12/31/17 | $ | 41.00 | (0.61 | ) | 7.41 | 6.80 | (6.74 | ) | (6.74 | ) | |||||||||||||||||
Year Ended 12/31/16 | $ | 39.93 | (0.46 | ) | 3.01 | 2.55 | (1.48 | ) | (1.48 | ) | |||||||||||||||||
Year Ended 12/31/15 | $ | 44.40 | (0.59 | ) | 0.21 | (0.38 | ) | (4.09 | ) | (4.09 | ) | ||||||||||||||||
Class R6 | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 30.50 | (0.27 | ) | 10.22 | 9.95 | (4.46 | ) | (4.46 | ) | |||||||||||||||||
Year Ended 12/31/18 | $ | 47.53 | (0.29 | ) | (3.21 | ) | (3.50 | ) | (13.53 | ) | (13.53 | ) | |||||||||||||||
Year Ended 12/31/17 | $ | 46.16 | (0.28 | ) | 8.39 | 8.11 | (6.74 | ) | (6.74 | ) | |||||||||||||||||
11/15/16(c) through 12/31/16 | $ | 46.65 | (0.03 | ) | 1.02 | 0.99 | (1.48 | ) | (1.48 | ) | |||||||||||||||||
Class Y | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 30.41 | (0.29 | ) | 10.18 | 9.89 | (4.46 | ) | (4.46 | ) | |||||||||||||||||
Year Ended 12/31/18 | $ | 47.47 | (0.30 | ) | (3.23 | ) | (3.53 | ) | (13.53 | ) | (13.53 | ) | |||||||||||||||
Year Ended 12/31/17 | $ | 46.15 | (0.31 | ) | 8.37 | 8.06 | (6.74 | ) | (6.74 | ) | |||||||||||||||||
Year Ended 12/31/16 | $ | 44.47 | (0.21 | ) | 3.37 | 3.16 | (1.48 | ) | (1.48 | ) | |||||||||||||||||
Year Ended 12/31/15 | $ | 48.61 | (0.29 | ) | 0.24 | (0.05 | ) | (4.09 | ) | (4.09 | ) |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
(c) Commencement of operations.
(d) Not annualized for periods less than one year.
(e) Annualized for periods less than one year.
See notes to financial statements.
60
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Ratios to Average Net Assets | Supplemental Data | ||||||||||||||||||||||||||||||
Net Asset Value, End of Period | Total Return (Excludes Sales Charge) | Net Expenses | Net Investment Income (Loss) | Gross Expenses | Net Assets, End of Period (000's) | Portfolio Turnover(b) | |||||||||||||||||||||||||
Victory RS Select Growth Fund | |||||||||||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 33.81 | 32.29 | % | 1.40 | % | (1.06 | )% | 1.52 | % | $ | 97,337 | 74 | % | |||||||||||||||||
Year Ended 12/31/18 | $ | 28.96 | (7.23 | )% | 1.40 | % | (0.86 | )% | 1.50 | % | $ | 94,393 | 79 | % | |||||||||||||||||
Year Ended 12/31/17 | $ | 46.03 | 17.10 | % | 1.40 | % | (0.88 | )% | 1.49 | % | $ | 147,531 | 69 | % | |||||||||||||||||
Year Ended 12/31/16 | $ | 45.04 | 6.85 | % | 1.40 | % | (0.74 | )% | 1.47 | % | $ | 170,825 | 89 | % | |||||||||||||||||
Year Ended 12/31/15 | $ | 43.54 | (0.38 | )% | 1.40 | % | (0.84 | )% | 1.44 | % | $ | 238 | 86 | % | |||||||||||||||||
Class C | |||||||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 26.77 | 31.28 | % | 2.18 | % | (1.84 | )% | 2.30 | % | $ | 26,988 | 74 | % | |||||||||||||||||
Year Ended 12/31/18 | $ | 23.82 | (7.98 | )% | 2.18 | % | (1.64 | )% | 2.25 | % | $ | 31,754 | 79 | % | |||||||||||||||||
Year Ended 12/31/17 | $ | 40.80 | 16.19 | % | 2.18 | % | (1.66 | )% | 2.24 | % | $ | 51,208 | 69 | % | |||||||||||||||||
Year Ended 12/31/16 | $ | 40.89 | 6.04 | % | 2.18 | % | (1.52 | )% | 2.23 | % | $ | 63,841 | 89 | % | |||||||||||||||||
Year Ended 12/31/15 | $ | 39.97 | (1.17 | )% | 2.18 | % | (1.62 | )% | 2.20 | % | $ | 83 | 86 | % | |||||||||||||||||
Class R | |||||||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 27.30 | 31.63 | % | 1.91 | % | (1.57 | )% | 4.35 | % | $ | 604 | 74 | % | |||||||||||||||||
Year Ended 12/31/18 | $ | 24.16 | (7.70 | )% | 1.91 | % | (1.38 | )% | 3.60 | % | $ | 701 | 79 | % | |||||||||||||||||
Year Ended 12/31/17 | $ | 41.06 | 16.51 | % | 1.91 | % | (1.39 | )% | 2.90 | % | $ | 1,014 | 69 | % | |||||||||||||||||
Year Ended 12/31/16 | $ | 41.00 | 6.39 | % | 1.82 | % | (1.17 | )% | 1.82 | % | $ | 1,440 | 89 | % | |||||||||||||||||
Year Ended 12/31/15 | $ | 39.93 | (0.88 | )% | 1.90 | % | (1.30 | )% | 1.90 | % | $ | 2 | 86 | % | |||||||||||||||||
Class R6 | |||||||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 35.99 | 32.76 | % | 1.06 | % | (0.72 | )% | 5.46 | % | $ | 302 | 74 | % | |||||||||||||||||
Year Ended 12/31/18 | $ | 30.50 | (6.92 | )% | 1.06 | % | (0.59 | )% | 6.33 | % | $ | 239 | 79 | % | |||||||||||||||||
Year Ended 12/31/17 | $ | 47.53 | 17.48 | % | 1.06 | % | (0.55 | )% | 27.47 | % | $ | 151 | 69 | % | |||||||||||||||||
11/15/16(c) through 12/31/16 | $ | 46.16 | 2.15 | %(d) | 1.06 | %(e) | (0.43 | )%(e) | 26.37 | %(e) | $ | 51 | 89 | %(d) | |||||||||||||||||
Class Y | |||||||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 35.84 | 32.66 | % | 1.14 | % | (0.80 | )% | 1.23 | % | $ | 94,933 | 74 | % | |||||||||||||||||
Year Ended 12/31/18 | $ | 30.41 | (7.02 | )% | 1.14 | % | (0.59 | )% | 1.21 | % | $ | 120,696 | 79 | % | |||||||||||||||||
Year Ended 12/31/17 | $ | 47.47 | 17.40 | % | 1.14 | % | (0.62 | )% | 1.20 | % | $ | 244,689 | 69 | % | |||||||||||||||||
Year Ended 12/31/16 | $ | 46.15 | 7.13 | % | 1.14 | % | (0.49 | )% | 1.20 | % | $ | 287,970 | 89 | % | |||||||||||||||||
Year Ended 12/31/15 | $ | 44.47 | (0.12 | )% | 1.14 | % | (0.58 | )% | 1.18 | % | $ | 403 | 86 | % |
See notes to financial statements.
61
Victory Portfolios | Financial Highlights |
For a Share Outstanding Throughout Each Period
Investment Activities | Distributions to Shareholders From | ||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(a) | Net Realized and Unrealized Gains (Losses) on Investments | Total from Investment Activities | Net Realized Gains from Investments | Return of Capital | ||||||||||||||||||||||
Victory RS Mid Cap Growth Fund | |||||||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 19.96 | (0.17 | ) | 5.77 | 5.60 | — | — | |||||||||||||||||||
Year Ended 12/31/18 | $ | 25.77 | (0.14 | ) | (1.79 | ) | (1.93 | ) | (3.00 | ) | (0.88 | ) | |||||||||||||||
Year Ended 12/31/17 | $ | 21.32 | (0.10 | ) | 4.55 | 4.45 | — | — | |||||||||||||||||||
Year Ended 12/31/16 | $ | 20.29 | (0.07 | ) | 1.10 | 1.03 | — | — | |||||||||||||||||||
Year Ended 12/31/15 | $ | 20.14 | (0.08 | ) | 0.23 | 0.15 | — | — | |||||||||||||||||||
Class C | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 17.40 | (0.34 | ) | 5.02 | 4.68 | — | — | |||||||||||||||||||
Year Ended 12/31/18 | $ | 23.22 | (0.35 | ) | (1.59 | ) | (1.94 | ) | (3.65 | ) | (0.23 | ) | |||||||||||||||
Year Ended 12/31/17 | $ | 19.38 | (0.28 | ) | 4.12 | 3.84 | — | — | |||||||||||||||||||
Year Ended 12/31/16 | $ | 18.61 | (0.23 | ) | 1.00 | 0.77 | — | — | |||||||||||||||||||
Year Ended 12/31/15 | $ | 18.64 | (0.25 | ) | 0.22 | (0.03 | ) | — | — | ||||||||||||||||||
Class R | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 18.31 | (0.28 | ) | 5.29 | 5.01 | — | — | |||||||||||||||||||
Year Ended 12/31/18 | $ | 24.14 | (0.29 | ) | (1.66 | ) | (1.95 | ) | (3.86 | ) | (0.02 | ) | |||||||||||||||
Year Ended 12/31/17 | $ | 20.09 | (0.23 | ) | 4.28 | 4.05 | — | — | |||||||||||||||||||
Year Ended 12/31/16 | $ | 19.22 | (0.16 | ) | 1.03 | 0.87 | — | — | |||||||||||||||||||
Year Ended 12/31/15 | $ | 19.18 | (0.18 | ) | 0.22 | 0.04 | — | — | |||||||||||||||||||
Class R6 | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 20.74 | (0.11 | ) | 6.00 | 5.89 | — | — | |||||||||||||||||||
Year Ended 12/31/18 | $ | 26.55 | (0.07 | ) | (1.86 | ) | (1.93 | ) | (3.84 | ) | (0.04 | ) | |||||||||||||||
Year Ended 12/31/17 | $ | 21.90 | (0.04 | ) | 4.69 | 4.65 | — | — | |||||||||||||||||||
11/15/16(c) through 12/31/16 | $ | 21.30 | — | (d) | 0.60 | 0.60 | — | — | |||||||||||||||||||
Class Y | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 20.73 | (0.11 | ) | 5.99 | 5.88 | — | — | |||||||||||||||||||
Year Ended 12/31/18 | $ | 26.54 | (0.08 | ) | (1.85 | ) | (1.93 | ) | (1.17 | ) | (2.71 | ) | |||||||||||||||
Year Ended 12/31/17 | $ | 21.90 | (0.04 | ) | 4.68 | 4.64 | — | — | |||||||||||||||||||
Year Ended 12/31/16 | $ | 20.79 | (0.02 | ) | 1.13 | 1.11 | — | — | |||||||||||||||||||
Year Ended 12/31/15 | $ | 20.58 | (0.03 | ) | 0.24 | 0.21 | — | — |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
(c) Commencement of operations.
(d) Amount is less than $0.005.
(e) Not annualized for periods less than one year.
(f) Annualized for periods less than one year.
See notes to financial statements.
62
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Ratios to Average Net Assets | Supplemental Data | ||||||||||||||||||||||||||||||||||
Total Distributions | Net Asset Value, End of Period | Total Return (Excludes Sales Charge) | Net Expenses | Net Investment Income (Loss) | Gross Expenses | Net Assets, End of Period (000's) | Portfolio Turnover(b) | ||||||||||||||||||||||||||||
Victory RS Mid Cap Growth Fund | |||||||||||||||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | — | $ | 25.56 | 28.06 | % | 1.20 | % | (0.67 | )% | 1.35 | % | $ | 82,888 | 86 | % | ||||||||||||||||||||
Year Ended 12/31/18 | (3.88 | ) | $ | 19.96 | (7.37 | )% | 1.20 | % | (0.53 | )% | 1.34 | % | $ | 75,451 | 126 | % | |||||||||||||||||||
Year Ended 12/31/17 | — | $ | 25.77 | 20.87 | % | 1.20 | % | (0.44 | )% | 1.29 | % | $ | 108,271 | 86 | % | ||||||||||||||||||||
Year Ended 12/31/16 | — | $ | 21.32 | 5.08 | % | 1.20 | % | (0.35 | )% | 1.27 | % | $ | 231,056 | 138 | % | ||||||||||||||||||||
Year Ended 12/31/15 | — | $ | 20.29 | 0.74 | % | 1.23 | % | (0.39 | )% | 1.31 | % | $ | 196,437 | 120 | % | ||||||||||||||||||||
Class C | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | — | $ | 22.08 | 26.90 | % | 2.11 | % | (1.58 | )% | 2.12 | % | $ | 20,266 | 86 | % | ||||||||||||||||||||
Year Ended 12/31/18 | (3.88 | ) | $ | 17.40 | (8.23 | )% | 2.11 | % | (1.44 | )% | 2.12 | % | $ | 18,072 | 126 | % | |||||||||||||||||||
Year Ended 12/31/17 | — | $ | 23.22 | 19.81 | % | 2.10 | % | (1.33 | )% | 2.10 | % | $ | 23,264 | 86 | % | ||||||||||||||||||||
Year Ended 12/31/16 | — | $ | 19.38 | 4.14 | % | 2.11 | % | (1.25 | )% | 2.11 | % | $ | 24,618 | 138 | % | ||||||||||||||||||||
Year Ended 12/31/15 | — | $ | 18.61 | (0.16 | )% | 2.11 | % | (1.30 | )% | 2.11 | % | $ | 26,793 | 120 | % | ||||||||||||||||||||
Class R | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | — | $ | 23.32 | 27.36 | % | 1.80 | % | (1.26 | )% | 3.41 | % | $ | 927 | 86 | % | ||||||||||||||||||||
Year Ended 12/31/18 | (3.88 | ) | $ | 18.31 | (7.99 | )% | 1.80 | % | (1.13 | )% | 2.68 | % | $ | 1,144 | 126 | % | |||||||||||||||||||
Year Ended 12/31/17 | — | $ | 24.14 | 20.21 | % | 1.80 | % | (1.03 | )% | 2.43 | % | $ | 1,685 | 86 | % | ||||||||||||||||||||
Year Ended 12/31/16 | — | $ | 20.09 | 4.53 | % | 1.69 | % | (0.84 | )% | 1.69 | % | $ | 1,486 | 138 | % | ||||||||||||||||||||
Year Ended 12/31/15 | — | $ | 19.22 | 0.21 | % | 1.74 | % | (0.93 | )% | 1.74 | % | $ | 1,740 | 120 | % | ||||||||||||||||||||
Class R6 | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | — | $ | 26.63 | 28.40 | % | 0.94 | % | (0.44 | )% | 1.05 | % | $ | 20,321 | 86 | % | ||||||||||||||||||||
Year Ended 12/31/18 | (3.88 | ) | $ | 20.74 | (7.15 | )% | 0.94 | % | (0.26 | )% | 1.32 | % | $ | 3,793 | 126 | % | |||||||||||||||||||
Year Ended 12/31/17 | — | $ | 26.55 | 21.23 | % | 0.94 | % | (0.17 | )% | 2.26 | % | $ | 2,132 | 86 | % | ||||||||||||||||||||
11/15/16(c) through 12/31/16 | — | $ | 21.90 | 2.82 | %(e) | 0.94 | %(f) | (0.02 | )%(f) | 25.90 | %(f) | $ | 60 | 138 | %(e) | ||||||||||||||||||||
Class Y | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | — | $ | 26.61 | 28.36 | % | 0.95 | % | (0.43 | )% | 1.10 | % | $ | 395,586 | 86 | % | ||||||||||||||||||||
Year Ended 12/31/18 | (3.88 | ) | $ | 20.73 | (7.15 | )% | 0.95 | % | (0.27 | )% | 1.05 | % | $ | 243,009 | 126 | % | |||||||||||||||||||
Year Ended 12/31/17 | — | $ | 26.54 | 21.19 | % | 0.95 | % | (0.18 | )% | 1.06 | % | $ | 310,050 | 86 | % | ||||||||||||||||||||
Year Ended 12/31/16 | — | $ | 21.90 | 5.34 | % | 0.95 | % | (0.10 | )% | 1.05 | % | $ | 168,936 | 138 | % | ||||||||||||||||||||
Year Ended 12/31/15 | — | $ | 20.79 | 1.02 | % | 0.97 | % | (0.15 | )% | 1.08 | % | $ | 173,629 | 120 | % |
See notes to financial statements.
63
Victory Portfolios | Financial Highlights |
For a Share Outstanding Throughout Each Period
Investment Activities | Distributions to Shareholders From | ||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(a) | Net Realized and Unrealized Gains (Losses) on Investments | Total from Investment Activities | Net Realized Gains from Investments | Total Distributions | ||||||||||||||||||||||
Victory RS Growth Fund | |||||||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 16.40 | (0.03 | ) | 4.90 | 4.87 | (2.05 | ) | (2.05 | ) | |||||||||||||||||
Year Ended 12/31/18 | $ | 20.60 | (0.06 | ) | (1.36 | ) | (1.42 | ) | (2.78 | ) | (2.78 | ) | |||||||||||||||
Year Ended 12/31/17 | $ | 16.44 | (0.02 | ) | 5.24 | 5.22 | (1.06 | ) | (1.06 | ) | |||||||||||||||||
Year Ended 12/31/16 | $ | 17.49 | (0.02 | ) | 0.36 | 0.34 | (1.39 | ) | (1.39 | ) | |||||||||||||||||
Year Ended 12/31/15 | $ | 18.01 | (0.03 | ) | 0.74 | 0.71 | (1.23 | ) | (1.23 | ) | |||||||||||||||||
Class C | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 13.75 | (0.16 | ) | 4.09 | 3.93 | (2.05 | ) | (2.05 | ) | |||||||||||||||||
Year Ended 12/31/18 | $ | 17.90 | (0.21 | ) | (1.16 | ) | (1.37 | ) | (2.78 | ) | (2.78 | ) | |||||||||||||||
Year Ended 12/31/17 | $ | 14.51 | (0.15 | ) | 4.60 | 4.45 | (1.06 | ) | (1.06 | ) | |||||||||||||||||
Year Ended 12/31/16 | $ | 15.73 | (0.14 | ) | 0.31 | 0.17 | (1.39 | ) | (1.39 | ) | |||||||||||||||||
Year Ended 12/31/15 | $ | 16.45 | (0.17 | ) | 0.68 | 0.51 | (1.23 | ) | (1.23 | ) | |||||||||||||||||
Class R | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 15.00 | (0.14 | ) | 4.48 | 4.34 | (2.05 | ) | (2.05 | ) | |||||||||||||||||
Year Ended 12/31/18 | $ | 19.22 | (0.18 | ) | (1.26 | ) | (1.44 | ) | (2.78 | ) | (2.78 | ) | |||||||||||||||
Year Ended 12/31/17 | $ | 15.49 | (0.13 | ) | 4.92 | 4.79 | (1.06 | ) | (1.06 | ) | |||||||||||||||||
Year Ended 12/31/16 | $ | 16.65 | (0.11 | ) | 0.34 | 0.23 | (1.39 | ) | (1.39 | ) | |||||||||||||||||
Year Ended 12/31/15 | $ | 17.31 | (0.14 | ) | 0.71 | 0.57 | (1.23 | ) | (1.23 | ) | |||||||||||||||||
Class Y | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 17.04 | 0.02 | 5.10 | 5.12 | (2.05 | ) | (2.05 | ) | ||||||||||||||||||
Year Ended 12/31/18 | $ | 21.23 | — | (c) | (1.41 | ) | (1.41 | ) | (2.78 | ) | (2.78 | ) | |||||||||||||||
Year Ended 12/31/17 | $ | 16.88 | 0.03 | 5.38 | 5.41 | (1.06 | ) | (1.06 | ) | ||||||||||||||||||
Year Ended 12/31/16 | $ | 17.87 | 0.03 | 0.37 | 0.40 | (1.39 | ) | (1.39 | ) | ||||||||||||||||||
Year Ended 12/31/15 | $ | 18.33 | 0.02 | 0.75 | 0.77 | (1.23 | ) | (1.23 | ) |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
(c) Amount is less than $0.005 per share.
See notes to financial statements.
64
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Ratios to Average Net Assets | Supplemental Data | ||||||||||||||||||||||||||||||
Net Asset Value, End of Period | Total Return (Excludes Sales Charge) | Net Expenses | Net Investment Income (Loss) | Gross Expenses | Net Assets, End of Period (000's) | Portfolio Turnover(b) | |||||||||||||||||||||||||
Victory RS Growth Fund | |||||||||||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 19.22 | 29.83 | % | 1.10 | % | (0.16 | )% | 1.19 | % | $ | 223,503 | 95 | % | |||||||||||||||||
Year Ended 12/31/18 | $ | 16.40 | (6.81 | )% | 1.10 | % | (0.28 | )% | 1.19 | % | $ | 188,220 | 87 | % | |||||||||||||||||
Year Ended 12/31/17 | $ | 20.60 | 31.75 | % | 1.10 | % | (0.09 | )% | 1.20 | % | $ | 218,238 | 74 | % | |||||||||||||||||
Year Ended 12/31/16 | $ | 16.44 | 1.86 | % | 1.10 | % | (0.09 | )% | 1.20 | % | $ | 189,921 | 123 | % | |||||||||||||||||
Year Ended 12/31/15 | $ | 17.49 | 3.94 | % | 1.10 | % | (0.18 | )% | 1.19 | % | $ | 204,027 | 105 | % | |||||||||||||||||
Class C | |||||||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 15.63 | 28.74 | % | 1.93 | % | (0.99 | )% | 2.33 | % | $ | 4,240 | 95 | % | |||||||||||||||||
Year Ended 12/31/18 | $ | 13.75 | (7.56 | )% | 1.93 | % | (1.10 | )% | 2.20 | % | $ | 4,409 | 87 | % | |||||||||||||||||
Year Ended 12/31/17 | $ | 17.90 | 30.57 | % | 1.93 | % | (0.92 | )% | 2.10 | % | $ | 6,974 | 74 | % | |||||||||||||||||
Year Ended 12/31/16 | $ | 14.51 | 1.05 | % | 1.93 | % | (0.93 | )% | 2.06 | % | $ | 8,487 | 123 | % | |||||||||||||||||
Year Ended 12/31/15 | $ | 15.73 | 3.09 | % | 1.93 | % | (1.02 | )% | 2.02 | % | $ | 11,553 | 105 | % | |||||||||||||||||
Class R | |||||||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 17.29 | 29.08 | % | 1.71 | % | (0.77 | )% | 5.41 | % | $ | 438 | 95 | % | |||||||||||||||||
Year Ended 12/31/18 | $ | 15.00 | (7.41 | )% | 1.71 | % | (0.88 | )% | 3.49 | % | $ | 516 | 87 | % | |||||||||||||||||
Year Ended 12/31/17 | $ | 19.22 | 30.92 | % | 1.71 | % | (0.70 | )% | 2.72 | % | $ | 830 | 74 | % | |||||||||||||||||
Year Ended 12/31/16 | $ | 15.49 | 1.29 | % | 1.71 | % | (0.69 | )% | 1.77 | % | $ | 1,054 | 123 | % | |||||||||||||||||
Year Ended 12/31/15 | $ | 16.65 | 3.28 | % | 1.71 | % | (0.80 | )% | 1.79 | % | $ | 979 | 105 | % | |||||||||||||||||
Class Y | |||||||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 20.11 | 30.18 | % | 0.83 | % | 0.11 | % | 0.98 | % | $ | 31,473 | 95 | % | |||||||||||||||||
Year Ended 12/31/18 | $ | 17.04 | (6.56 | )% | 0.83 | % | (0.01 | )% | 0.97 | % | $ | 26,457 | 87 | % | |||||||||||||||||
Year Ended 12/31/17 | $ | 21.23 | 32.05 | % | 0.83 | % | 0.17 | % | 0.97 | % | $ | 30,309 | 74 | % | |||||||||||||||||
Year Ended 12/31/16 | $ | 16.88 | 2.16 | % | 0.83 | % | 0.17 | % | 0.95 | % | $ | 25,107 | 123 | % | |||||||||||||||||
Year Ended 12/31/15 | $ | 17.87 | 4.20 | % | 0.83 | % | 0.10 | % | 0.95 | % | $ | 38,301 | 105 | % |
See notes to financial statements.
65
Victory Portfolios | Financial Highlights |
For a Share Outstanding Throughout Each Period
Investment Activities | Distributions to Shareholders From | ||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(a) | Net Realized and Unrealized Gains (Losses) on Investments | Total from Investment Activities | Net Realized Gains from Investments | Total Distributions | ||||||||||||||||||||||
Victory RS Science and Technology Fund | |||||||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 18.34 | (0.26 | ) | 7.43 | 7.17 | (2.14 | ) | (2.14 | ) | |||||||||||||||||
Year Ended 12/31/18 | $ | 21.56 | (0.27 | ) | 0.06 | (c) | (0.21 | ) | (3.01 | ) | (3.01 | ) | |||||||||||||||
Year Ended 12/31/17 | $ | 17.49 | (0.25 | ) | 8.04 | 7.79 | (3.72 | ) | (3.72 | ) | |||||||||||||||||
Year Ended 12/31/16 | $ | 17.35 | (0.22 | ) | 2.64 | 2.42 | (2.28 | ) | (2.28 | ) | |||||||||||||||||
Year Ended 12/31/15 | $ | 18.13 | (0.19 | ) | 1.26 | 1.07 | (1.85 | ) | (1.85 | ) | |||||||||||||||||
Class C | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 14.40 | (0.35 | ) | 5.82 | 5.47 | (2.14 | ) | (2.14 | ) | |||||||||||||||||
Year Ended 12/31/18 | $ | 17.73 | (0.38 | ) | 0.06 | (c) | (0.32 | ) | (3.01 | ) | (3.01 | ) | |||||||||||||||
Year Ended 12/31/17 | $ | 14.96 | (0.36 | ) | 6.85 | 6.49 | (3.72 | ) | (3.72 | ) | |||||||||||||||||
Year Ended 12/31/16 | $ | 15.25 | (0.31 | ) | 2.30 | 1.99 | (2.28 | ) | (2.28 | ) | |||||||||||||||||
Year Ended 12/31/15 | $ | 16.27 | (0.29 | ) | 1.12 | 0.83 | (1.85 | ) | (1.85 | ) | |||||||||||||||||
Class R | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 15.70 | (0.31 | ) | 6.35 | 6.04 | (2.14 | ) | (2.14 | ) | |||||||||||||||||
Year Ended 12/31/18 | $ | 18.99 | (0.33 | ) | 0.05 | (c) | (0.28 | ) | (3.01 | ) | (3.01 | ) | |||||||||||||||
Year Ended 12/31/17 | $ | 15.78 | (0.31 | ) | 7.24 | 6.93 | (3.72 | ) | (3.72 | ) | |||||||||||||||||
Year Ended 12/31/16 | $ | 15.91 | (0.26 | ) | 2.41 | 2.15 | (2.28 | ) | (2.28 | ) | |||||||||||||||||
Year Ended 12/31/15 | $ | 16.85 | (0.25 | ) | 1.16 | 0.91 | (1.85 | ) | (1.85 | ) | |||||||||||||||||
Class Y | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 19.72 | (0.22 | ) | 8.00 | 7.78 | (2.14 | ) | (2.14 | ) | |||||||||||||||||
Year Ended 12/31/18 | $ | 22.90 | (0.22 | ) | 0.05 | (c) | (0.17 | ) | (3.01 | ) | (3.01 | ) | |||||||||||||||
Year Ended 12/31/17 | $ | 18.37 | (0.21 | ) | 8.46 | 8.25 | (3.72 | ) | (3.72 | ) | |||||||||||||||||
Year Ended 12/31/16 | $ | 18.08 | (0.18 | ) | 2.75 | 2.57 | (2.28 | ) | (2.28 | ) | |||||||||||||||||
Year Ended 12/31/15 | $ | 18.78 | (0.14 | ) | 1.29 | 1.15 | (1.85 | ) | (1.85 | ) |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
(c) 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.
(d) Amount is less than $0.005 per share.
(e) 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)
See notes to financial statements.
66
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Ratios to Average Net Assets | Supplemental Data | ||||||||||||||||||||||||||||||||||
Capital Contribution from Prior Custodian, Net (See Note 8) | Net Asset Value, End of Period | Total Return (Excludes Sales Charge) | Net Expenses | Net Investment Income (Loss) | Gross Expenses | Net Assets, End of Period (000's) | Portfolio Turnover(b) | ||||||||||||||||||||||||||||
Victory RS Science and Technology Fund | |||||||||||||||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | — | $ | 23.37 | 39.32 | % | 1.48 | % | (1.14 | )% | 1.48 | % | $ | 199,591 | 88 | % | ||||||||||||||||||||
Year Ended 12/31/18 | — | $ | 18.34 | (0.73 | )% | 1.47 | % | (1.10 | )% | 1.47 | % | $ | 140,389 | 83 | % | ||||||||||||||||||||
Year Ended 12/31/17 | — | $ | 21.56 | 44.74 | % | 1.49 | % | (1.18 | )% | 1.49 | % | $ | 146,002 | 89 | % | ||||||||||||||||||||
Year Ended 12/31/16 | — | (d) | $ | 17.49 | 13.80 | %(e) | 1.51 | % | (1.24 | )% | 1.52 | % | $ | 105,041 | 114 | % | |||||||||||||||||||
Year Ended 12/31/15 | — | $ | 17.35 | 5.89 | % | 1.49 | % | (1.01 | )% | 1.49 | % | $ | 109,201 | 119 | % | ||||||||||||||||||||
Class C | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | — | $ | 17.73 | 38.27 | % | 2.28 | % | (1.94 | )% | 2.34 | % | $ | 14,054 | 88 | % | ||||||||||||||||||||
Year Ended 12/31/18 | — | $ | 14.40 | (1.58 | )% | 2.28 | % | (1.91 | )% | 2.31 | % | $ | 11,857 | 83 | % | ||||||||||||||||||||
Year Ended 12/31/17 | — | $ | 17.73 | 43.70 | % | 2.28 | % | (1.97 | )% | 2.31 | % | $ | 11,831 | 89 | % | ||||||||||||||||||||
Year Ended 12/31/16 | — | (d) | $ | 14.96 | 12.87 | %(e) | 2.32 | % | (2.05 | )% | 2.32 | % | $ | 10,332 | 114 | % | |||||||||||||||||||
Year Ended 12/31/15 | — | $ | 15.25 | 5.08 | % | 2.28 | % | (1.79 | )% | 2.28 | % | $ | 11,160 | 119 | % | ||||||||||||||||||||
Class R | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | — | $ | 19.60 | 38.73 | % | 1.93 | % | (1.59 | )% | 4.28 | % | $ | 681 | 88 | % | ||||||||||||||||||||
Year Ended 12/31/18 | — | $ | 15.70 | (1.20 | )% | 1.93 | % | (1.56 | )% | 2.75 | % | $ | 707 | 83 | % | ||||||||||||||||||||
Year Ended 12/31/17 | — | $ | 18.99 | 44.05 | % | 1.93 | % | (1.62 | )% | 2.54 | % | $ | 1,705 | 89 | % | ||||||||||||||||||||
Year Ended 12/31/16 | — | (d) | $ | 15.78 | 13.41 | %(e) | 1.91 | % | (1.63 | )% | 1.91 | % | $ | 1,394 | 114 | % | |||||||||||||||||||
Year Ended 12/31/15 | — | $ | 15.91 | 5.38 | % | 1.93 | % | (1.45 | )% | 1.93 | % | $ | 1,281 | 119 | % | ||||||||||||||||||||
Class Y | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | — | $ | 25.36 | 39.66 | % | 1.24 | % | (0.89 | )% | 1.26 | % | $ | 77,998 | 88 | % | ||||||||||||||||||||
Year Ended 12/31/18 | — | $ | 19.72 | (0.51 | )% | 1.24 | % | (0.85 | )% | 1.25 | % | $ | 53,395 | 83 | % | ||||||||||||||||||||
Year Ended 12/31/17 | — | $ | 22.90 | 45.11 | % | 1.24 | % | (0.92 | )% | 1.26 | % | $ | 32,047 | 89 | % | ||||||||||||||||||||
Year Ended 12/31/16 | — | (d) | $ | 18.37 | 14.07 | %(e) | 1.28 | % | (1.01 | )% | 1.29 | % | $ | 19,335 | 114 | % | |||||||||||||||||||
Year Ended 12/31/15 | — | $ | 18.08 | 6.11 | % | 1.24 | % | (0.74 | )% | 1.24 | % | $ | 27,416 | 119 | % |
See notes to financial statements.
67
Victory Portfolios | Financial Highlights |
For a Share Outstanding Throughout Each Period
Investment Activities | Distributions to Shareholders From | ||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(a) | Net Realized and Unrealized Gains (Losses) on Investments | Total from Investment Activities | Net Realized Gains from Investments | Total Distributions | ||||||||||||||||||||||
Victory RS Small Cap Equity Fund | |||||||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 12.97 | (0.15 | ) | 5.11 | 4.96 | (1.88 | ) | (1.88 | ) | |||||||||||||||||
Year Ended 12/31/18 | $ | 18.88 | (0.16 | ) | (1.47 | ) | (1.63 | ) | (4.28 | ) | (4.28 | ) | |||||||||||||||
Year Ended 12/31/17 | $ | 14.41 | (0.14 | ) | 5.55 | 5.41 | (0.94 | ) | (0.94 | ) | |||||||||||||||||
Year Ended 12/31/16 | $ | 14.24 | (0.12 | ) | 0.28 | 0.16 | — | — | |||||||||||||||||||
Year Ended 12/31/15 | $ | 19.81 | (0.20 | ) | 0.38 | 0.18 | (5.75 | ) | (5.75 | ) | |||||||||||||||||
Class C | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 4.40 | (0.09 | ) | 1.70 | 1.61 | (1.88 | ) | (1.88 | ) | |||||||||||||||||
Year Ended 12/31/18 | $ | 9.61 | (0.17 | ) | (0.76 | ) | (0.93 | ) | (4.28 | ) | (4.28 | ) | |||||||||||||||
Year Ended 12/31/17 | $ | 7.74 | (0.15 | ) | 2.96 | 2.81 | (0.94 | ) | (0.94 | ) | |||||||||||||||||
Year Ended 12/31/16 | $ | 7.71 | (0.12 | ) | 0.14 | 0.02 | — | — | |||||||||||||||||||
Year Ended 12/31/15 | $ | 13.42 | (0.25 | ) | 0.29 | 0.04 | (5.75 | ) | (5.75 | ) | |||||||||||||||||
Class R | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 10.32 | (0.18 | ) | 4.06 | 3.88 | (1.88 | ) | (1.88 | ) | |||||||||||||||||
Year Ended 12/31/18 | $ | 16.08 | (0.23 | ) | (1.25 | ) | (1.48 | ) | (4.28 | ) | (4.28 | ) | |||||||||||||||
Year Ended 12/31/17 | $ | 12.44 | (0.20 | ) | 4.78 | 4.58 | (0.94 | ) | (0.94 | ) | |||||||||||||||||
Year Ended 12/31/16 | $ | 12.33 | (0.14 | ) | 0.24 | 0.10 | — | — | |||||||||||||||||||
Year Ended 12/31/15 | $ | 17.99 | (0.26 | ) | 0.35 | 0.09 | (5.75 | ) | (5.75 | ) | |||||||||||||||||
Class Y | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 13.29 | (0.13 | ) | 5.24 | 5.11 | (1.88 | ) | (1.88 | ) | |||||||||||||||||
Year Ended 12/31/18 | $ | 19.20 | (0.14 | ) | (1.49 | ) | (1.63 | ) | (4.28 | ) | (4.28 | ) | |||||||||||||||
Year Ended 12/31/17 | $ | 14.62 | (0.14 | ) | 5.66 | 5.52 | (0.94 | ) | (0.94 | ) | |||||||||||||||||
Year Ended 12/31/16 | $ | 14.39 | (0.08 | ) | 0.30 | 0.22 | — | — | |||||||||||||||||||
Year Ended 12/31/15 | $ | 20.04 | (0.16 | ) | 0.26 | 0.10 | (5.75 | ) | (5.75 | ) |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
(c) 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)
See notes to financial statements.
68
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Ratios to Average Net Assets | Supplemental Data | ||||||||||||||||||||||||||||||||||
Capital Contribution from Prior Custodian, Net (See Note 8) | Net Asset Value, End of Period | Total Return (Excludes Sales Charge) | Net Expenses | Net Investment Income (Loss) | Gross Expenses | Net Assets, End of Period (000's) | Portfolio Turnover(b) | ||||||||||||||||||||||||||||
Victory RS Small Cap Equity Fund | |||||||||||||||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | — | $ | 16.05 | 38.49 | % | 1.26 | % | (0.93 | )% | 1.26 | % | $ | 63,247 | 89 | % | ||||||||||||||||||||
Year Ended 12/31/18 | — | $ | 12.97 | (8.39 | )% | 1.22 | % | (0.78 | )% | 1.22 | % | $ | 51,619 | 77 | % | ||||||||||||||||||||
Year Ended 12/31/17 | — | $ | 18.88 | 37.57 | % | 1.25 | % | (0.84 | )% | 1.25 | % | $ | 65,514 | 79 | % | ||||||||||||||||||||
Year Ended 12/31/16 | 0.01 | $ | 14.41 | 1.19 | %(c) | 1.35 | % | (0.88 | )% | 1.36 | % | $ | 52,075 | 86 | % | ||||||||||||||||||||
Year Ended 12/31/15 | — | $ | 14.24 | 0.61 | % | 1.30 | % | 0.97 | % | 1.30 | % | $ | 65 | 98 | % | ||||||||||||||||||||
Class C | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | — | $ | 4.13 | 37.26 | % | 2.10 | % | (1.76 | )% | 3.86 | % | $ | 478 | 89 | % | ||||||||||||||||||||
Year Ended 12/31/18 | — | $ | 4.40 | (9.23 | )% | 2.10 | % | (1.71 | )% | 4.24 | % | $ | 616 | 77 | % | ||||||||||||||||||||
Year Ended 12/31/17 | — | $ | 9.61 | 36.34 | % | 2.10 | % | (1.69 | )% | 3.87 | % | $ | 533 | 79 | % | ||||||||||||||||||||
Year Ended 12/31/16 | 0.01 | $ | 7.74 | 0.39 | %(c) | 2.10 | % | (1.64 | )% | 3.14 | % | $ | 410 | 86 | % | ||||||||||||||||||||
Year Ended 12/31/15 | — | $ | 7.71 | (0.17 | )% | 2.10 | % | 1.77 | % | 2.39 | % | $ | 1 | 98 | % | ||||||||||||||||||||
Class R | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | — | $ | 12.32 | 37.91 | % | 1.75 | % | (1.42 | )% | 2.05 | % | $ | 2,874 | 89 | % | ||||||||||||||||||||
Year Ended 12/31/18 | — | $ | 10.32 | (8.92 | )% | 1.75 | % | (1.30 | )% | 1.88 | % | $ | 2,303 | 77 | % | ||||||||||||||||||||
Year Ended 12/31/17 | — | $ | 16.08 | 36.84 | % | 1.75 | % | (1.34 | )% | 1.97 | % | $ | 3,381 | 79 | % | ||||||||||||||||||||
Year Ended 12/31/16 | 0.01 | $ | 12.44 | 0.89 | %(c) | 1.70 | % | (1.24 | )% | 1.70 | % | $ | 2,954 | 86 | % | ||||||||||||||||||||
Year Ended 12/31/15 | — | $ | 12.33 | 0.16 | % | 1.71 | % | (1.39 | )% | 1.71 | % | $ | 3,662 | 98 | % | ||||||||||||||||||||
Class Y | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | — | $ | 16.52 | 38.69 | % | 1.10 | % | (0.77 | )% | 1.43 | % | $ | 3,275 | 89 | % | ||||||||||||||||||||
Year Ended 12/31/18 | — | $ | 13.29 | (8.23 | )% | 1.10 | % | (0.69 | )% | 1.68 | % | $ | 2,750 | 77 | % | ||||||||||||||||||||
Year Ended 12/31/17 | — | $ | 19.20 | 37.78 | % | 1.10 | % | (0.78 | )% | 1.34 | % | $ | 6,398 | 79 | % | ||||||||||||||||||||
Year Ended 12/31/16 | 0.01 | $ | 14.62 | 1.60 | %(c) | 1.10 | % | (0.64 | )% | 1.24 | % | $ | 1,834 | 86 | % | ||||||||||||||||||||
Year Ended 12/31/15 | — | $ | 14.39 | 0.18 | % | 1.07 | % | (0.76 | )% | 1.07 | % | $ | 3,804 | 98 | % |
See notes to financial statements.
69
Victory Portfolios | Notes to Financial Statements December 31, 2019 |
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
70
Victory Portfolios | Notes to Financial Statements — continued December 31, 2019 |
• Level 2 — other significant observable inputs (including quoted prices for similar securities or interest rates applicable to those securities, etc.)
• Level 3 — significant unobservable inputs (including the Funds' own assumptions in determining the fair value of investments)
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The inputs or methodologies used for valuation techniques are not necessarily an indication of the risk associated with entering into those investments.
Portfolio securities listed or traded on securities exchanges, including 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, 2019, 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 | LEVEL 2 | Total | |||||||||||||
RS Small Cap Growth Fund | |||||||||||||||
Common Stocks | $ | 2,246,624,436 | $ | — | $ | 2,246,624,436 | |||||||||
Collateral for Securities Loaned | 287,452,889 | — | 287,452,889 | ||||||||||||
Total | 2,534,077,325 | — | 2,534,077,325 | ||||||||||||
RS Select Growth Fund | |||||||||||||||
Common Stocks | 218,761,527 | — | 218,761,527 | ||||||||||||
Collateral for Securities Loaned | 18,203,302 | — | 18,203,302 | ||||||||||||
Total | 236,964,829 | — | 236,964,829 | ||||||||||||
RS Mid Cap Growth Fund | |||||||||||||||
Common Stocks | 515,767,371 | — | 515,767,371 | ||||||||||||
Collateral for Securities Loaned | 41,820,057 | — | 41,820,057 | ||||||||||||
Total | 557,587,428 | — | 557,587,428 | ||||||||||||
RS Growth Fund | |||||||||||||||
Common Stocks | 259,534,248 | — | 259,534,248 | ||||||||||||
Collateral for Securities Loaned | 8,710,213 | — | 8,710,213 | ||||||||||||
Total | 268,244,461 | — | 268,244,461 | ||||||||||||
RS Science and Technology Fund | |||||||||||||||
Common Stocks | 285,572,981 | 3,720,002 | 289,292,983 | ||||||||||||
Collateral for Securities Loaned | 43,783,380 | — | 43,783,380 | ||||||||||||
Total | 329,356,361 | 3,720,002 | 333,076,363 | ||||||||||||
RS Small Cap Equity Fund | |||||||||||||||
Common Stocks | 68,484,020 | — | 68,484,020 | ||||||||||||
Collateral for Securities Loaned | 6,701,932 | — | 6,701,932 | ||||||||||||
Total | 75,185,952 | — | 75,185,952 |
71
Victory Portfolios | Notes to Financial Statements — continued December 31, 2019 |
For the year ended December 31, 2019, there were no Level 3 investments for which significant observable 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.
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 determined on the basis of coupon interest accrued using the effective interest method which adjusts, 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, primarily open-end investment companies, 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. During the time portfolio securities are on loan, the borrower will pay the Funds any dividends or interest paid on such securities plus any fee negotiated between the parties to the lending agreement. The Funds also earn a return from the collateral. The Funds pay the Agent various fees in connection with the investment of cash collateral and fees based on the investment income received from securities lending activities. Securities lending income (net of these fees) 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, 2019. These transactions are accounted for as secured
72
Victory Portfolios | Notes to Financial Statements — continued December 31, 2019 |
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 | $ | 282,651,462 | $ | 282,651,462 | $ | — | $ | — | $ | — | $ | — | |||||||||||||||
RS Select Growth Fund | 17,892,270 | 17,892,270 | — | — | — | — | |||||||||||||||||||||
RS Mid Cap Growth Fund | 41,104,262 | 41,104,262 | — | — | — | — | |||||||||||||||||||||
RS Growth Fund | 8,542,261 | 8,542,261 | — | — | — | — | |||||||||||||||||||||
RS Science and Technology Fund | 42,842,734 | 42,842,734 | — | — | — | — | |||||||||||||||||||||
RS Small Cap Equity | 6,595,967 | 6,595,967 | — | — | — | — |
* Collateral received in excess of the fair value of securities on loan is not presented in this table. The total cash collateral received by each Fund is disclosed in the Statements of Assets and Liabilities.
Distributions 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.
Dividends from net investment income, if any, are declared and paid quarterly for each 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 (collectively distributions to shareholders) 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 and distribution reclassification), 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, 2019, 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 | $ | (10,357,963 | ) | $ | 10,357,963 | ||||||
RS Select Growth Fund | (6,207,174 | ) | 6,207,174 | ||||||||
RS Mid Cap Growth Fund | 2,531,152 | (2,531,152 | ) | ||||||||
RS Growth Fund | (1,209,398 | ) | 1,209,398 | ||||||||
RS Science and Technology Fund | (5,633,151 | ) | 5,633,151 | ||||||||
RS Small Cap Equity Fund | (629,134 | ) | 629,134 |
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.
73
Victory Portfolios | Notes to Financial Statements — continued December 31, 2019 |
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., all open tax years 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.
Cross-Trade Transactions:
Pursuant to Rule 17a-7 under the 1940 Act, the Funds may engage in cross-trades, which are 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, 2019, 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 fiscal year ended December 31, 2019 were as follows:
Purchases (excluding U.S. Government Securities) | Sales (excluding U.S. Government Securities) | ||||||||||
RS Small Cap Growth Fund | $ | 2,046,379,502 | $ | 2,030,376,156 | |||||||
RS Select Growth Fund | 180,113,586 | 287,849,015 | |||||||||
RS Mid Cap Growth Fund | 469,532,637 | 394,952,351 | |||||||||
RS Growth Fund | 235,399,239 | 257,343,774 | |||||||||
RS Science and Technology Fund | 225,159,954 | 228,508,008 | |||||||||
RS Small Cap Equity Fund | 58,548,661 | 68,806,678 |
For the year ended December 31, 2019, 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 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, 2019 |
Flat 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 "Victory Funds Complex"), 0.05% of the average daily net assets above $15 billion to $30 billion of the Victory Funds Complex and 0.04% of the average daily net assets over $30 billion of the Victory Funds Complex.
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. The Funds in the Victory Funds Complex, in 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 the Class A Shares of the Funds. For the fiscal year ended December 31, 2019, the Distributor received approximately $35,330 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 amounts 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
75
Victory Portfolios | Notes to Financial Statements — continued December 31, 2019 |
from the expense limits. As of December 31, 2019, the expense limits (excluding voluntary waivers) are as follows:
In effect January 1, 2019 until April 30, 2020 | |||||||||||||||||||||||
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, 2019, the following amounts are available to be repaid to the Adviser.
Expires December 31, 2020 | Expires December 31, 2021 | Expires December 31, 2022 | Total | ||||||||||||||||
RS Small Cap Growth Fund | $ | 745,744 | $ | 578,670 | $ | 506,151 | $ | 1,830,565 | |||||||||||
RS Select Growth Fund | 384,612 | 334,454 | 285,457 | 1,004,523 | |||||||||||||||
RS Mid Cap Growth Fund | 419,215 | 394,372 | 681,628 | 1,495,215 | |||||||||||||||
RS Growth Fund | 278,667 | 283,325 | 288,176 | 850,168 | |||||||||||||||
RS Science and Technology Fund | 18,803 | 25,649 | 41,114 | 85,566 | |||||||||||||||
RS Small Cap Equity Fund | 22,386 | 28,246 | 30,362 | 80,994 |
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, 2019.
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 Counsel.
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
76
Victory Portfolios | Notes to Financial Statements — continued December 31, 2019 |
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:
For the year ended December 31, 2019, the Victory Funds Complex participated in a short-term, demand note "Line of Credit" with Citibank. Under the agreements with Citibank, for the period January 1, 2019 to June 30, 2019, the Victory Funds Complex could borrow up to $250 million, of which $100 million was committed and $150 million was uncommitted. Effective July 1, 2019, the agreement was amended to include the USAA Mutual Funds Complex (another series of mutual funds managed by the Adviser) and has a new termination date of June 29, 2020. Under this amended agreement, the Victory Funds Complex and USAA Mutual Funds Complex, combined, may borrow up to $600 million, of which $300 million is committed and $300 million is uncommitted. $40 million of the Line of Credit is reserved for use by the Victory Floating Rate Fund (herein, the "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. With the agreement in effect for the period January 1, 2019 to June 30, 2019, Citibank received an annual commitment fee of 0.15% on $100 million for providing the Line of Credit. For the period July 1, 2019 to December 31, 2019, Citibank received an annual commitment fee of 0.15% on $300 million for providing the Line of Credit. For the year ended December 31, 2019, Citibank earned approximately $300 thousand in commitment fees from the combined Victory Funds Complex and USAA Mutual Funds Complex. Each fund in the Victory Funds Complex and the USAA Mutual Funds Complex pays a pro-rata portion of the commitment fees plus any interest (one month LIBOR plus one percent) on amounts borrowed. Interest charged to the Fund during the period, if applicable, is presented on the Statement of Operations under Line of credit fees.
The average borrowing for the days outstanding and average interest rate for the following Fund during the year ended December 31, 2019 were as follows:
Amount Outstanding at December 31, 2019 | Average Borrowings* | Days Outstanding | Average Rate* | Maximum Borrowing During the Period | |||||||||||||||||||
RS Science and Technology Fund | $ | — | $ | 6,400,000 | 1 | 2.89 | % | $ | 6,400,000 |
* For the Year ended December 31, 2019, 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. As a Borrower, interest charged to each Fund during the period, if applicable, is presented on the Statements of Operations under Interfund lending fees. As a Lender, interest earned by each Fund during the period, if applicable, is presented on the Statements of Operations under Income on interfund lending.
77
Victory Portfolios | Notes to Financial Statements — continued December 31, 2019 |
The average borrowing and lending for the days outstanding and average interest rate for each Fund during the year ended December 31, 2019 were as follows:
Borrower or Lender | Amount Outstanding at December 31, 2019 | Average Borrowing* | Days Borrowing Outstanding | Average Interest Rate* | Maximum Borrowing During the Period | ||||||||||||||||||||||
RS Select Growth Fund | Borrower | $ | — | $ | 1,813,933 | 15 | 2.72 | % | $ | 4,725,000 | |||||||||||||||||
RS Growth Fund | Borrower | — | 556,000 | 2 | 2.58 | % | 747,000 |
* For the year ended December 31, 2019, 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, 2019 | |||||||||||||||||||
Distributions paid from | |||||||||||||||||||
Ordinary Income | Net Long-Term Capital Gains | Total Taxable Distributions | Total Distributions Paid | ||||||||||||||||
RS Small Cap Growth Fund | $ | — | $ | 187,283,238 | $ | 187,283,238 | $ | 187,283,238 | |||||||||||
RS Select Growth Fund | — | 26,547,194 | 26,547,194 | 26,547,194 | |||||||||||||||
RS Growth Fund | 671,178 | 24,492,995 | 25,164,173 | 25,164,173 | |||||||||||||||
RS Science and Technology Fund | 2,573,472 | 21,865,163 | 24,438,635 | 24,438,635 | |||||||||||||||
RS Small Cap Equity Fund | — | 7,591,954 | 7,591,954 | 7,591,954 |
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 |
As of the tax year ended December 31, 2019, 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 Small Cap Growth Fund | $ | — | $ | 154,497,020 | $ | 154,497,020 | $ | — | $ | 380,792,557 | $ | 535,289,577 | |||||||||||||||
RS Select Growth Fund | 1,762,288 | 34,870,163 | 36,632,451 | — | 57,456,258 | 94,088,709 | |||||||||||||||||||||
RS Mid Cap Growth Fund | — | — | — | (2,653,428 | ) | 91,577,967 | 88,924,539 | ||||||||||||||||||||
RS Growth Fund | 735,560 | 4,692,298 | 5,427,858 | — | 77,346,296 | 82,774,154 |
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Victory Portfolios | Notes to Financial Statements — continued December 31, 2019 |
Undistributed Ordinary Income | Undistributed Long-Term Capital Gains | Accumulated Earnings | Accumulated Capital and Other Losses | Unrealized Appreciation (Depreciation)* | Total Accumulated Earnings (Deficit) | ||||||||||||||||||||||
RS Science and Technology Fund | $ | 1,369,369 | $ | 2,470,916 | $ | 3,840,285 | $ | — | $ | 77,655,223 | $ | 81,495,508 | |||||||||||||||
RS Small Cap Equity Fund | 125,322 | 8,004,822 | 8,130,144 | — | 10,133,439 | 18,263,583 |
* 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, 2019, the following Fund had net capital loss carryforwards (no expiration) as summarized in the table below:
Short-Term Amount | Long-Term Amount | Total | |||||||||||||
RS Mid Cap Growth Fund | $ | 2,653,428 | $ | — | $ | 2,653,428 |
As of December 31, 2019, 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 | $ | 2,153,284,768 | $ | 464,673,812 | $ | (83,881,255 | ) | $ | 380,792,557 | ||||||||||
RS Select Growth Fund | 179,508,571 | 66,614,225 | (9,157,967 | ) | 57,456,258 | ||||||||||||||
RS Mid Cap Growth Fund | 466,009,461 | 109,924,117 | (18,346,150 | ) | 91,577,967 | ||||||||||||||
RS Growth Fund | 190,898,165 | 82,095,987 | (4,749,691 | ) | 77,346,296 | ||||||||||||||
RS Science and Technology Fund | 255,421,140 | 100,273,914 | (22,618,691 | ) | 77,655,223 | ||||||||||||||
RS Small Cap Equity Fund | 65,052,513 | 12,903,630 | (2,770,191 | ) | 10,133,439 |
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, 2019, the shareholder listed below held more than 25% of the shares outstanding of the following Fund and may be deemed to control the Fund.
Shareholder | Percent | ||||||||||
RS Mid Cap Growth Fund | Pershing LLC | 53.9 | % |
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Victory Portfolios | Notes to Financial Statements — continued December 31, 2019 |
10. Subsequent Events:
The Funds have evaluated the need for additional disclosures or adjustments resulting from subsequent events through the date these financial statements were issued. Based on this evaluation, there were no subsequent events to report that would have a material impact on the Funds' financial statements.
80
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Trustees of Victory Portfolios
Opinion on the Financial Statements
We have audited the accompanying statements of assets and liabilities, including the schedules of portfolio investments, 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 (the "Funds"), each a series of Victory Portfolios, as of December 31, 2019, the related statements of operations and changes in net assets, including the related notes, and the financial highlights for the year then ended (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 as of December 31, 2019, the results of their operations, the changes in their net assets, and their financial highlights for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
The Funds' financial statements and financial highlights for the three years ended December 31, 2018, were audited by other auditors whose report dated February 26, 2019 and the Funds' financial highlights for the year ended December 31, 2015, were audited by other auditors whose report dated February 22, 2016, expressed unqualified opinions on those financial statements and financial highlights.
Basis for Opinion
These financial statements are the responsibility of the Funds' management. Our responsibility is to express an opinion on the Funds' financial statements based on our audit. 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 Funds 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 audit 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.
Our audit 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, 2019, by correspondence with the custodian, transfer agent and brokers or by other appropriate auditing procedures where replies from brokers were not received. Our audit 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 audit provides a reasonable basis for our opinion.
We have served as the auditor of one or more of the investment companies advised by Victory Capital Management, Inc. since 2015.
COHEN & COMPANY, LTD.
Cleveland, Ohio
February 25, 2020
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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 and 26 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, 68 | Trustee | May 2005 | Consultant (since 2006). | Chair and Trustee, Turner Funds (December 2016-December 2017). | |||||||||||||||
Nigel D. T. Andrews, 72 | 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, 68* | Trustee | May 2005 | Retired (since 2015); Consultant, The Henlee Group, LLC (consulting) (2005-2015). | None. | |||||||||||||||
Dennis M. Bushe, 76 | 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, 65 | Trustee | February 2011 | Chief Investment Officer, Tufts University (since 2002). | None. | |||||||||||||||
John L. Kelly, 66 | Trustee | February 2015 | Partner, McCarvill Capital Partners (September 2016- September 2017); Advisor, Endgate Commodities LLC (January 2016-April 2016); Managing Partner, Endgate Commodities LLC (August 2014-January 2016); Chief Operating Officer, Liquidnet Holdings, Inc. (December 2011-July 2014). | Director, Caledonia Mining Corporation (since May 2012). | |||||||||||||||
David L. Meyer, 62* | Trustee | December 2008 | Retired. | None. | |||||||||||||||
Gloria S. Nelund, 58 | 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, 75 | Chair and Trustee | November 1994 | Private Investor. | Chair (since 2013), Caledonia Mining Corporation. | |||||||||||||||
Interested Trustee. | |||||||||||||||||||
David C. Brown, 47** | 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). | USAA Mutual Funds Trust. |
* 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, 58 | President | February 2006* | Director of Mutual Fund Administration, the Adviser. | ||||||||||||
Scott A. Stahorsky, 50 | Vice President | December 2014 | Manager, Fund Administration, the Adviser (since 2015); Senior Analyst, Fund Administration, the Adviser (prior to 2015). | ||||||||||||
Erin G. Wagner, 46 | Secretary | December 2014 | Associate General Counsel, the Adviser (since 2013). | ||||||||||||
Allan Shaer, 54 | 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, 35 | 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, 46 | Chief Compliance Officer | July 2017 | Chief Compliance Officer (since 2013) and Chief Risk Officer (2009-2017), the Adviser. | ||||||||||||
Chuck Booth, 59 | 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, 66 | Assistant Secretary | December 1997 | Partner, Shearman & Sterling LLP (since 2018); Partner, Morrison & Foerster LLP (2011-January 2018). |
* 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 Portfolio Holdings Information
Proxy Voting:
Information regarding the policies and procedures 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 files 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. Prior to the implementation of Form N-PORT, the Trust 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, 2019 through December 31, 2019.
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 7/1/19 | Actual Ending Account Value 12/31/19 | Hypothetical Ending Account Value 12/31/19 | Actual Expenses Paid During Period 7/1/19- 12/31/19* | Hypothetical Expenses Paid During Period 7/1/19- 12/31/19* | Annualized Expense Ratio During Period 7/1/19- 12/31/19 | ||||||||||||||||||||||
RS Small Cap Growth Fund | |||||||||||||||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 1,050.10 | $ | 1,018.15 | $ | 7.23 | $ | 7.12 | 1.40 | % | |||||||||||||||
Class C Shares | 1,000.00 | 1,046.20 | 1,014.32 | 11.14 | 10.97 | 2.16 | % | ||||||||||||||||||||
Class R Shares | 1,000.00 | 1,047.60 | 1,015.83 | 9.60 | 9.45 | 1.86 | % | ||||||||||||||||||||
Class R6 Shares | 1,000.00 | 1,051.90 | 1,019.86 | 5.48 | 5.40 | 1.06 | % | ||||||||||||||||||||
Class Y Shares | 1,000.00 | 1,051.60 | 1,019.51 | 5.84 | 5.75 | 1.13 | % |
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Beginning Account Value 7/1/19 | Actual Ending Account Value 12/31/19 | Hypothetical Ending Account Value 12/31/19 | Actual Expenses Paid During Period 7/1/19- 12/31/19* | Hypothetical Expenses Paid During Period 7/1/19- 12/31/19* | Annualized Expense Ratio During Period 7/1/19- 12/31/19 | ||||||||||||||||||||||
RS Select Growth Fund | |||||||||||||||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 1,050.20 | $ | 1,018.15 | $ | 7.23 | $ | 7.12 | 1.40 | % | |||||||||||||||
Class C Shares | 1,000.00 | 1,046.20 | 1,014.22 | 11.24 | 11.07 | 2.18 | % | ||||||||||||||||||||
Class R Shares | 1,000.00 | 1,047.50 | 1,015.58 | 9.86 | 9.70 | 1.91 | % | ||||||||||||||||||||
Class R6 Shares | 1,000.00 | 1,052.30 | 1,019.86 | 5.48 | 5.40 | 1.06 | % | ||||||||||||||||||||
Class Y Shares | 1,000.00 | 1,051.70 | 1,019.46 | 5.90 | 5.80 | 1.14 | % | ||||||||||||||||||||
RS Mid Cap Growth Fund | |||||||||||||||||||||||||||
Class A Shares | 1,000.00 | 983.50 | 1,019.16 | 6.00 | 6.11 | 1.20 | % | ||||||||||||||||||||
Class C Shares | 1,000.00 | 978.70 | 1,014.57 | 10.52 | 10.71 | 2.11 | % | ||||||||||||||||||||
Class R Shares | 1,000.00 | 980.70 | 1,016.13 | 8.99 | 9.15 | 1.80 | % | ||||||||||||||||||||
Class R6 Shares | 1,000.00 | 984.50 | 1,020.47 | 4.70 | 4.79 | 0.94 | % | ||||||||||||||||||||
Class Y Shares | 1,000.00 | 984.50 | 1,020.42 | 4.75 | 4.84 | 0.95 | % | ||||||||||||||||||||
RS Growth Fund | |||||||||||||||||||||||||||
Class A Shares | 1,000.00 | 1,047.30 | 1,019.66 | 5.68 | 5.60 | 1.10 | % | ||||||||||||||||||||
Class C Shares | 1,000.00 | 1,043.10 | 1,015.48 | 9.94 | 9.80 | 1.93 | % | ||||||||||||||||||||
Class R Shares | 1,000.00 | 1,044.30 | 1,016.59 | 8.81 | 8.69 | 1.71 | % | ||||||||||||||||||||
Class Y Shares | 1,000.00 | 1,048.80 | 1,021.02 | 4.29 | 4.23 | 0.83 | % | ||||||||||||||||||||
RS Science and Technology Fund | |||||||||||||||||||||||||||
Class A Shares | 1,000.00 | 1,075.80 | 1,017.64 | 7.85 | 7.63 | 1.50 | % | ||||||||||||||||||||
Class C Shares | 1,000.00 | 1,072.20 | 1,013.71 | 11.91 | 11.57 | 2.28 | % | ||||||||||||||||||||
Class R Shares | 1,000.00 | 1,073.50 | 1,015.48 | 10.09 | 9.80 | 1.93 | % | ||||||||||||||||||||
Class Y Shares | 1,000.00 | 1,077.50 | 1,018.95 | 6.49 | 6.31 | 1.24 | % | ||||||||||||||||||||
RS Small Cap Equity Fund | |||||||||||||||||||||||||||
Class A Shares | 1,000.00 | 1,051.00 | 1,018.80 | 6.57 | 6.46 | 1.27 | % | ||||||||||||||||||||
Class C Shares | 1,000.00 | 1,044.90 | 1,014.62 | 10.82 | 10.66 | 2.10 | % | ||||||||||||||||||||
Class R Shares | 1,000.00 | 1,048.80 | 1,016.38 | 9.04 | 8.89 | 1.75 | % | ||||||||||||||||||||
Class Y Shares | 1,000.00 | 1,052.00 | 1,019.66 | 5.69 | 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, 2019, the Funds paid qualified dividend income for the purposes of reduced individual federal income tax rates of:
Amount | |||||||
RS Growth Fund | 100 | % | |||||
RS Science and Technology Fund | 10 | % |
Dividends qualified for corporate diviends received deductions of:
Amount | |||||||
RS Growth Fund | 100 | % | |||||
RS Science and Technology Fund | 9 | % |
For the year ended December 31, 2019, the following Fund designated short-term capital gain distributions:
Amount | |||||||
RS Growth Fund | $ | 671,178 | |||||
RS Science and Technology Fund | 3,140,264 |
For the year ended December 31, 2019, the following Funds designated long-term capital gain distributions:
Amount | |||||||
RS Small Cap Growth Fund | $ | 206,284,799 | |||||
RS Select Growth Fund | 35,334,678 | ||||||
RS Growth Fund | 25,702,393 | ||||||
RS Science and Technology Fund | 25,363,522 | ||||||
RS Small Cap Equity Fund | 8,221,938 |
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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 an in-person meeting, which was called for that purpose, on December 4, 2019. The Board also considered information relating to the Funds and the Agreement provided throughout the year and, more specifically, at a meeting on October 22, 2019. 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, which also serves as 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;
• The 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;
• The 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 with respect to 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, and a peer group of funds with similar investment strategies selected by that independent consultant from the universe. The Board reviewed the factors and methodology used by the independent consultant in the selection of each Fund's peer group, including the independent consultant's selection of a broad universe of funds, 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
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changes to the independent consultant's methodology as compared to the prior year, including those resulting from the Adviser's input, 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 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, and would consider breakpoints at a future time if a Fund's assets were to grow significantly.
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 reflects 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, 2019, 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 median 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, 2019, 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 the peer group median for the ten-year period, underperformed the benchmark index for the three-, five- and ten-year periods, and underperformed the peer group median for the one-, three- and five-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 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, 2019, to that of the median performance of the peer group and benchmark index for the same periods and considered the fact that the Fund matched the peer group median for the one-year period, outperformed the peer group median for the ten-year period, underperformed the peer group median for the three- and five-year periods, and underperformed the benchmark index for all of the 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 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, 2019, 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 median for the three- and ten-year periods, and underperformed the peer group median for the one- and five-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 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, 2019, 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 three- and five-year periods, underperformed the benchmark index for the one- and ten-year periods, and outperformed the peer group median 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, 2019, 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 median 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.
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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.
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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 (12/19)
December 31, 2019
Annual Report
Victory RS International Fund
Victory RS Global Fund
Victory Sophus Emerging Markets Fund
Victory Sophus Emerging Markets Small Cap Fund
Beginning 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) | 5 | ||||||
Financial Statements | |||||||
The Victory International Funds | |||||||
Victory RS International Fund | |||||||
Schedule of Portfolio Investments | 18 | ||||||
Statements of Assets and Liabilities | 44 | ||||||
Statements of Operations | 47 | ||||||
Statements of Changes in Net Assets | 49-51 | ||||||
Financial Highlights | 56-57 | ||||||
Victory RS Global Fund | |||||||
Schedule of Portfolio Investments | 23 | ||||||
Statements of Assets and Liabilities | 44 | ||||||
Statements of Operations | 47 | ||||||
Statements of Changes in Net Assets | 49-51 | ||||||
Financial Highlights | 58-59 | ||||||
Victory Sophus Emerging Markets Fund | |||||||
Schedule of Portfolio Investments | 29 | ||||||
Statements of Assets and Liabilities | 45-46 | ||||||
Statements of Operations | 48 | ||||||
Statements of Changes in Net Assets | 52-54 | ||||||
Financial Highlights | 60-61 | ||||||
Victory Sophus Emerging Markets Small Cap Fund | |||||||
Schedule of Portfolio Investments | 36 | ||||||
Statements of Assets and Liabilities | 45-46 | ||||||
Statements of Operations | 48 | ||||||
Statements of Changes in Net Assets | 52-54 | ||||||
Financial Highlights | 62-63 | ||||||
Notes to Financial Statements | 64 | ||||||
Report of Independent Registered Public Accounting Firm | 76 | ||||||
Supplemental Information (unaudited) | 77 | ||||||
Trustee and Officer Information | 77 | ||||||
Proxy Voting and Portfolio Holdings Information | 80 | ||||||
Expense Examples | 80 | ||||||
Additional Federal Income Tax Information | 82 | ||||||
Advisory Contract Approval | 83 |
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
(Unaudited)
Dear Shareholder,
As we turn the page into a new decade, it's hard not to reflect on the fact that we have been enjoying the longest-ever bull market in U.S. equities. The run has been impressive, and despite periods of tumult and plenty of negative news, the bull market endured throughout 2019.
For the annual reporting period ended December 31, 2019, the S&P 500® Index posted impressive gains of 31.49%. This represents the greatest one-year gain since 2013 and also illustrates a swift bounce-back after a precipitous drop late in 2018. The move higher supports the notion that underlying fundamentals of U.S. companies drive performance, rather than the political rancor and headline fears that often capture the attention of investors.
Perhaps we shouldn't be surprised at the impressive performance of equities. The U.S. economy — the world's largest — remains on solid footing and has been a key driver of both domestic and international stocks. Robust job creation, near-record low unemployment, and steady consumer spending continue and offer reasons for further optimism. Meanwhile, inflation remains muted, and the Federal Reserve (the Fed) and other major global central banks have taken an accommodative stance. In fact, the Fed has cut interest rates by a total of 0.75% over three meetings last July, September and October.
The risk-on attitudes of investors, coupled with the accommodative monetary policy, had an expected impact on U.S. Treasury yields. The 10-year Treasury yield declined significantly over the course of 2019, falling from 2.66% to 1.92% at year-end. More interesting, however, was the fact that, the yield on 10-year Treasurys fell below shorter-term yields for the first time since before the 2007-2008 Global Financial Crisis. This inverted yield curve spooked investors for a spell, only to revert back to a traditional upward sloping yield curve by the end of the year.
The robust domestic economy, low interest rates, and ample liquidity from central banks provided a potent tonic for the stock market in 2019. In fact, at year-end 2019, the S&P 500® Index was approaching its highest valuation level since 1999. This reminds all of us to retain some historical context on the bull market. Many of us remember the Global Financial Crisis and, before that, the collapse of the dot-com bubble. Although those are now but a distant memory (and we are not forecasting such tumult), we should not forget that stocks don't always go up and cycles don't last forever. In other words, valuations still matter.
The key point is not to discount the risks. In addition to lofty valuations, investors need to keep apprised of trade disputes, geopolitical hotspots, a contentious U.S. election, and a host of other potential headwinds. Yet it is these very risks — these cross-currents — that may create pricing dislocations. This is an environment in which we believe our Victory Capital independent investment franchises can thrive.
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
3
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
4
Victory RS International Funds (Unaudited)
Portfolio Holdings
As a Percentage of Total Investments
Victory RS International Fund
Performance Update
The Victory RS International Fund (the "Fund") seeks to provide long-term capital appreciation. For the year ended December 31, 2019, the MSCI EAFE Index (the "Index") rose 22.01% while the Fund was outperformed by the benchmark Index, returning 21.72% (Class A Shares at net asset value).
Portfolio Review
Relative performance was aided by positive stock selection in a number of economic sectors, including Financials, Consumer Discretionary, and Utilities. Negative stock selection in the Real Estate, and Communication Services sectors detracted from relative performance. From a regional perspective, Fund investments in Sweden, Japan, Italy, and the United Kingdom benefitted relative results, while stock selection was negative in Spain and the Netherlands.
Key individual contributors for the year included Atlas Copco AB, a Swedish supplier of industrial equipment, and Next PLC, a multinational retailer of clothing and home wares based in the United Kingdom. Enel SpA, an Italian distributor of gas and electricity, also aided relative returns.
Telefonica, S.A., a telecommunications provider based in Spain, was the largest detractor from relative performance for the year. Australian shopping center developer and operator, Scentre Group, also detracted from relative results, as did United Arrows Ltd., a clothing and accessories retailer based in Japan.
Market Review
Fears of an end to the historic bull run were once again proven overdone as international markets, as measured by the Index, soared 22% during 2019 and posted a financial crisis high in late December. Despite a steady drumbeat of negative news flow, the Index recorded one of its best performances of the decade. However, you would have struggled to reach that conclusion based on the macroeconomic picture alone.
Starting in the United Kingdom, with the decisive election of Prime Minister Boris Johnson in December, the country finally may achieve some resolution three years on from its initial vote to leave the European Union. However, much of the year was spent under a shroud of uncertainty making the local market performance, +21%, and currency strength, +4% against the U.S. dollar, all the more surprising.
Meanwhile, on the Continent, the European Manufacturing PMI continued to grind lower finishing December at a dismal 46.3, driven by Germany where exports continued to slow. France and Spain were less of a drag but not enough to keep the Eurozone from heading towards its lowest growth rate since 2012. But like the United Kingdom, European equity securities not only shook it off but managed to thrive by soaring almost 25%.
5
Victory RS International Funds (Unaudited)
Victory RS International Fund (continued)
China appears to have taken the brunt of the trade war impact. Both imports and exports are likely to finish the year in the red as consumer confidence waned and tariffs took their toll. Market observers had expected a recovery in the second half but were left disappointed as the growth in auto sales remained negative despite easy comparisons to 2018. Asia ex Japan, where exports to China are important, took collateral damage. Notably, GDP in South Korea and Taiwan slowed for the third consecutive year. As for Japan, exports plunged over 2%, but the domestic economy remained resilient. When it comes to equity securities though, the story was positive with stocks in most Asian countries posting high-teen returns.
One common thread, which may explain at least some of the disconnect between the stellar performance of equity securities and the more decidedly mixed economic outlook, is global monetary policy. From the U.S. Federal Reserve cutting rates by 75 basis points to the European Central Bank cutting the deposit rate to -.5% to the Bank of China slashing the reserve requirement ratio, central banks with few exceptions were in easing mode. The extent to which global easing buoyed stock prices is up for debate, but it does appear it had some positive impact.
QVS Factor Performance
In this section, we offer insight into the factors driving market performance from a quantitative point of view. The RS Global Markets team's proprietary QVS (Quality, Value, and Sentiment) Model (the "Model") scours the globe, screening over 10,000 companies while 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.
Last year, all factors contributed positively to composite Model performance led by Quality and Sentiment. By region, the Model performed best in Asia ex Japan and had negative performance only in Japan. Within Japan, negative Value and Sentiment factor performance both contributed to negative overall Model performance.
Out of favor for the better part of the decade, Value as a factor was a hot topic in 2019, showing signs of leadership at different points during the year. Alas, it was not to be, as our Value factor, though positive in absolute terms, underperformed the Quality and Sentiment components of the overall Model. That said, Value was the strongest factor in Emerging Markets, and had negative performance only in Japan.
Outlook
We expect market volatility to increase and will continue to be vigilant when constructing the Fund's portfolio, remaining sector- and region-neutral, as we believe that strong risk management should be at the forefront of any strategy. Making correct macro allocation calls can be immensely challenging; therefore, we do not forecast regional performance. In our view, stock selection can be far more impactful to fund performance than allocation.
6
Victory RS International Funds (Unaudited)
Victory RS International Fund (continued)
Average Annual Total Return
Year Ended December 31, 2019
Class A | Class C | Class R | Class R6 | Class Y | |||||||||||||||||||||||||||||||
INCEPTION DATE | 2/16/93 | 8/7/00 | 5/15/01 | 5/2/19 | 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 EAFE Index1 | ||||||||||||||||||||||||||||
One Year | 21.72 | % | 14.70 | % | 20.70 | % | 19.70 | % | 21.37 | % | N/A | 21.94 | % | 22.01 | % | ||||||||||||||||||||
Three Year | 10.85 | % | 8.69 | % | 10.00 | % | 10.00 | % | 10.55 | % | N/A | 11.12 | % | 9.56 | % | ||||||||||||||||||||
Five Year | 7.02 | % | 5.77 | % | 6.20 | % | 6.20 | % | 6.68 | % | N/A | 7.29 | % | 5.67 | % | ||||||||||||||||||||
Ten Year | 6.07 | % | 5.44 | % | 5.18 | % | 5.18 | % | 5.64 | % | N/A | 6.31 | % | 5.50 | % | ||||||||||||||||||||
Since Inception | 5.97 | % | 5.74 | % | 2.31 | % | 2.31 | % | 4.19 | % | 7.24 | % | 11.28 | % | N/A | ||||||||||||||||||||
Expense Ratios | |||||||||||||||||||||||||||||||||||
Gross | 1.61% | 3.52% | 2.31% | 1.48% | 1.62% | ||||||||||||||||||||||||||||||
With Applicable Waivers | 1.13% | 1.88% | 1.38% | 0.83% | 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, 2019. Additional information pertaining to the Fund's expense ratios as of December 31, 2019 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 (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.
The graph reflects investment of growth of a hypothetical $10,000 investment in Class A Shares of the Fund. 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)
Portfolio Holdings
As a Percentage of Total Investments
Victory RS Global Fund
Performance Update
The Victory RS Global Fund (the "Fund") seeks to provide long-term capital appreciation. The Fund returned 30.36% (Class A Shares at net asset value) in 2019, outperforming its benchmark, the MSCI All Country World Index (the "Index"), which returned 26.60%.
Portfolio Review
The Fund's performance relative to the Index was aided by positive stock selection in a number of economic sectors, including Financials, Health Care, and Consumer Staples. Negative stock selection in the Industrials and Materials sectors detracted from relative performance, and being underweight to an otherwise strong Information Technology sector hampered relative performance in that group. From a regional perspective, Fund investments in the United States, Japan, and Sweden benefitted relative results, while negative stock selection in Taiwan and Hong Kong, as well as an underweight to Canada, hurt relative performance.
MSCI, Inc., a U.S. company that provides investment tools and data, was the Fund's top contributor to relative performance for the year. Other key contributors included payments technology provider Mastercard Incorporated and software and services leader Microsoft Corporation, both also U.S. companies.
U.S. multi-segment manufacturer 3M Company was the largest detractor from relative performance for the year. Other significant detractors included Japanese financial services provider Resona Holdings, Inc., as well as U.S. energy company ConocoPhillips Company
Market Review
Fears of an end to the historic bull run were once again proven overdone as global markets, as measured by the Index, soared over 26% during 2019 and posted a financial crisis high in late December. Indeed all regions enjoyed strong performance ranging from emerging markets up 18% to North America up 31%. Despite a steady drumbeat of negative news flow, the Index recorded one of its best performances of the decade. However, you would have struggled to reach that conclusion based on the macroeconomic picture alone.
Starting in the United Kingdom, with the decisive election of Prime Minister Boris Johnson in December, the country finally may achieve some resolution three years on from its initial vote to leave the European Union. However, much of the year was spent under a shroud of uncertainty making the local market performance, +21%, and currency strength, +4% against the U.S. dollar, all the more surprising.
Meanwhile, on the Continent, the European Manufacturing PMI continued to grind lower finishing December at a dismal 46.3, driven by Germany where exports continued to slow. France and Spain were less of a drag but not enough to keep the Eurozone from heading towards its lowest growth rate since 2012. But like the United Kingdom, European equity securities not only shook it off but managed to thrive by soaring almost 25%.
8
Victory RS International Funds (Unaudited)
Victory RS Global Fund (continued)
Perhaps the one market where the economic data actually could be viewed as supportive was North America, which, yet again, came in first for equity securities' performance by region. Though final data has not been reported as of this writing, we would expect U.S. gross domestic product ("GDP") to remain above trend in the low 2%-range with unemployment at its best level in many decades, while inflation remains subdued. All this makes for a very benign backdrop for stocks and fueled the recent stellar performance.
China, on the other hand, appears to have taken the brunt of the trade war impact. Both imports and exports are likely to finish the year in the red as consumer confidence waned and tariffs took their toll. Market observers had expected a recovery in the second half but were left disappointed as the growth in auto sales remained negative despite easy comparisons to 2018. Asia ex Japan, where exports to China are important, took collateral damage. Notably, GDP in South Korea and Taiwan slowed for the third consecutive year. As for Japan, exports plunged over 2%, but the domestic economy remained resilient. When it comes to equity securities though, the story was positive with stocks in most Asian countries posting high-teen returns.
One common thread, which may explain at least some of the disconnect between the stellar performance of equity securities and the more decidedly mixed economic outlook, is global monetary policy. From the U.S. Federal Reserve cutting rates by 75 basis points to the European Central Bank cutting the deposit rate to -.5% to the Bank of China slashing the reserve requirement ratio, central banks with few exceptions were in in easing mode. The extent to which global easing buoyed stock prices is up for debate, but it does appear it had some positive impact.
QVS Factor Performance
In this section, we offer insight into the factors driving market performance from a quantitative point of view. The RS Global Markets team's proprietary QVS (Quality, Value, and Sentiment) Model (the "Model") scours the globe, screening over 10,000 companies while 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.
Last year, all factors contributed positively to composite Model performance led by Quality and Sentiment. By region, the Model performed best in Asia ex Japan and had negative performance only in Japan. Within Japan, negative Value and Sentiment factor performance both contributed to negative overall Model performance.
Out of favor for the better part of the decade, Value as a factor was a hot topic in 2019, showing signs of leadership at different points during the year. Alas, it was not to be, as our Value factor, though positive in absolute terms, underperformed the Quality and Sentiment components of the overall Model. That said, Value was the strongest factor in Emerging Markets and had negative performance only in Japan.
Outlook
We expect market volatility to increase and will continue to be vigilant when constructing the Fund's portfolio, remaining sector- and region-neutral, as we believe that strong risk management should be at the forefront of any strategy. Making correct macro allocation calls can be immensely challenging; therefore, we do not forecast regional performance. In our view, stock selection can be far more impactful to fund performance than allocation.
9
Victory RS International Funds (Unaudited)
Victory RS Global Fund (continued)
Average Annual Total Return
Year Ended December 31, 2019
Class A | Class C | Class R | Class R6 | Class Y | |||||||||||||||||||||||||||||||
INCEPTION DATE | 5/16/11 | 5/16/11 | 5/16/11 | 5/2/19 | 5/16/11 | ||||||||||||||||||||||||||||||
Net Asset Value | Maximum Offering Price | Net Asset Value | Contingent Deferred Charges | Net Asset Value | Net Asset Value | Net Asset Value | MSCI All Country World Index1 | ||||||||||||||||||||||||||||
One Year | 30.36 | % | 22.90 | % | 29.52 | % | 28.52 | % | 30.10 | % | N/A | 30.69 | % | 26.60 | % | ||||||||||||||||||||
Three Year | 15.34 | % | 13.08 | % | 14.47 | % | 14.47 | % | 15.04 | % | N/A | 15.63 | % | 12.44 | % | ||||||||||||||||||||
Five Year | 11.15 | % | 9.84 | % | 10.32 | % | 10.32 | % | 15.47 | % | N/A | 11.46 | % | 8.41 | % | ||||||||||||||||||||
Since Inception | 10.54 | % | 9.78 | % | 9.72 | % | 9.72 | % | 12.83 | % | 12.47 | % | 10.89 | % | N/A | ||||||||||||||||||||
Expense Ratios | |||||||||||||||||||||||||||||||||||
Gross | 1.75% | 2.59% | 2.34% | 1.40% | 1.20% | ||||||||||||||||||||||||||||||
With Applicable Waivers | 0.85% | 1.60% | 1.10% | 0.55% | 0.60% |
Past performance is not indicative of future results. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month's end, please visit www.vcm.com.
The above expense ratios are from the Fund's prospectus supplement dated May 1, 2019. Additional information pertaining to the Fund's expense ratios as of December 31, 2019 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.
10
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 All Country World Index (ACWI) 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.
11
Victory RS International Funds (Unaudited)
Portfolio Holdings
As a Percentage of Total Investments
Victory Sophus Emerging Markets Fund
Performance Update
The Victory Sophus Emerging Markets Fund (the "Fund") seeks to provide long-term capital appreciation. For the year ended December 31, 2019, the Fund returned 22.96% (Class A shares at net asset value) versus the Fund's benchmark, the MSCI Emerging Markets Index (the "Index"), which had a return of 18.42%.
Market Overview
Emerging markets rose strongly in the first quarter, scaling 9.6%, but lost track subsequently, declining over the next two quarters as investor risk appetite was marred by the escalation of trade tensions. However, emerging markets sprung back to life in the last quarter over positive developments on the trade front along with global monetary easing. In a risk-on sentiment fueled by a more dovish U.S. Federal Reserve (the "Fed"), emerging markets rallied 8.76% in January 2019. The rally was similar to that seen a year prior in January of 2018, but the reasons were quite dissimilar as markets were giddy last year from a synchronized growth narrative. At the beginning of the second quarter, investor sentiment remained upbeat on signs of a global growth recovery, building on the momentum seen in the first quarter. The U.S. dollar rose against all the major currencies, encouraged by renewed economic divergence. Commodities saw strong gains, led by a rally on oil as supply concerns intensified following the United States' decision to end waivers on Iranian oil imports. However, the re-escalation of the U.S./China trade war put investors in a risk-off mode which, along with soft economic data in both China and the United States, heightened concerns of a global growth slowdown, raising uncertainty across global markets. Adding to the skittishness of the markets, mid-quarter, President Trump threatened to raise tariffs on Mexico as the administration sought Mexico's attention to help constrain the flood of illegal migrants into the United States. Fortunately, this was short-lived as an agreement between Mexico and the United States was reached shortly thereafter. Emerging markets ended the second quarter on a strong note, led by a more dovish Fed and optimism for fresh trade talks between the United States and China. The interest rate cut expectations in the United States pushed the U.S. dollar lower and the yield on the 10-year U.S. Treasury bond to 2.00%, its lowest level since November of 2016.
At mid-year, the situation would soon change as these conditions could not quell investor fears of a slowdown in global growth, helping to push the U.S. dollar higher and weighing on emerging markets equity securities. During the third quarter of 2019, emerging markets declined as markets responded to a re-escalation of the trade war. Furthermore, the United States designated China as a currency manipulator. This back-and-forth between the United States and China fueled global growth concerns leading to a risk-off sentiment in the markets. Mid-quarter, sentiment improved a bit as the United States agreed to delay tariffs on certain products and both countries agreed to go back to the table.
Emerging markets continued to advance during the beginning of the fourth quarter, and on October 11, 2019, it was announced that "Phase 1" of a trade deal was agreed to in principle. Mid-October, the Fed cut rates by 25 basis points, as expected, and announced they would expand their balance sheet. This all helped push the U.S. dollar down. A growing optimism
12
Victory RS International Funds (Unaudited)
Victory Sophus Emerging Markets Fund (continued)
on the Phase 1 trade deal and steepening U.S. yield curve provided fuel to the risk-on trade and pushed out fears of a recession. The year finished on a high note with market "giddiness" fueled by the "finalization" of a Phase 1 U.S./China trade agreement, and the United States indefinitely delaying new tariffs that were set to go into effect on December 15, 2019. Furthermore, elections in the United Kingdom appeared to put Brexit on a more certain path, while global macro indicators provided a rosier outlook for global growth.
Portfolio Review
By sectors, the largest contributor to performance was stock selection in Communication Services. The largest detractor from relative performance was stock selection in Consumer Staples. By country, the largest contributor was stock selection in China. The largest detractor was stock selection in Russia.
Outlook
The continued strength of the mighty U.S. dollar is now in question, thanks to the regionalization of trade, economic growth, and in all likelihood political influence. We believe that the weaker U.S. dollar will benefit emerging markets economies and markets in 2020. Further, we see the growth differential between emerging markets and the developed markets widening again, and we believe emerging markets' earnings likely will grow at twice the rate of developed markets' earnings.
The global economy is expected to grow by 3.4%, according to the World Bank. Emerging economies are forecast to grow by 4.6% versus 1.7% for developed economies — the main contributors being China, India, and Brazil. Trade volume is expected to pick up again to 3.2% globally (from 1.2% in 2019), led by emerging market economies. Emerging markets have suffered from a perception that its growth is mostly commodity driven. While this has been true at times in the past, the emerging markets today is more technology and communication services driven, as it was at the turn of the century. Consumption and financial intermediation (credit growth) also are poorly understood elements, but are expected to be major contributors to growth.
Consensus estimates are for 15-17% earnings growth in emerging markets in 2020, driven by 1) Technology, 2) Financials, and 3) Consumer Discretionary. Within Technology, the memory cycle has turned, and we see DRAM and NAND flash memory prices recouping lost ground. Processing capacity — thanks to the Internet of Things, artificial intelligence, and machine learning — is expected to push the hardware cycle to new heights. While interest rates remain low and bank appetite for lending has been subdued, the extended growth cycle requires capital investment, in lagging economies like Brazil, Poland, Turkey, and parts of the Persian Gulf. Consumption is now a global theme, and the combination of cheap credit, worldwide campaigns, and coordinated technological shifts (5G, for example) are pushing ever more activity into services and purchasing across the emerging markets space.
Growth and quality investment styles outperformed in 2019, while value styles lagged. We do not see any changes in 2020, as the world remains starved for growth in the post-financial-crisis economy. We look to capture sustainable growth with positive catalysts. The emerging markets universe is dynamic, exciting, and differentiated. We invest across all market caps, knowing that the inefficiencies, which are inherent in this asset class, are most powerful in smaller countries, companies, or out-of-favor segments.
In anticipation of a weaker U.S. dollar, accelerating emerging markets growth, rising earnings, and attractive valuations, we expect another positive year for emerging markets equity securities.
13
Victory RS International Funds (Unaudited)
Victory Sophus Emerging Markets Fund (continued)
Average Annual Total Return
Year Ended December 31, 2019
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 Index1 | ||||||||||||||||||||||||||||
One Year | 22.96 | % | 15.92 | % | 22.05 | % | 21.05 | % | 22.64 | % | 23.55 | % | 23.40 | % | 18.42 | % | |||||||||||||||||||
Three Year | 12.23 | % | 10.05 | % | 11.35 | % | 11.35 | % | 11.96 | % | 12.76 | % | 12.65 | % | 11.57 | % | |||||||||||||||||||
Five Year | 6.34 | % | 5.09 | % | 5.49 | % | 5.49 | % | 6.07 | % | N/A | 6.70 | % | 5.61 | % | ||||||||||||||||||||
Ten Year | 2.83 | % | 2.22 | % | 2.02 | % | 2.02 | % | 2.53 | % | N/A | 3.16 | % | 3.68 | % | ||||||||||||||||||||
Since Inception | 7.16 | % | 6.89 | % | 7.23 | % | 7.23 | % | 9.32 | % | 12.85 | % | 10.51 | % | N/A | ||||||||||||||||||||
Expense Ratios | |||||||||||||||||||||||||||||||||||
Gross | 1.61% | 2.40% | 1.91% | 1.24% | 1.30% | ||||||||||||||||||||||||||||||
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, 2019. Additional information pertaining to the Fund's expense ratios as of December 31, 2019 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 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.
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.
14
Victory RS International Funds (Unaudited)
Portfolio Holdings
As a Percentage of Total Investments
Victory Sophus Emerging Markets Small Cap Fund
Performance Update
The Victory Sophus Emerging Markets Small Cap Fund (the "Fund") seeks to provide long-term capital appreciation. For the year ended December 31, 2019, the Fund returned 21.44% (Class A shares at net asset value) versus the Fund's benchmark, the MSCI Emerging Markets Small Cap Index (the "Index"), which had a return of 11.50%.
Market Overview
Emerging markets rose strongly in the first quarter, scaling 9.6%, but lost track subsequently, declining over the next two quarters as investor risk appetite was marred by the escalation of trade tensions. However, emerging markets sprung back to life in the last quarter over positive developments on the trade front along with global monetary easing. In a risk-on sentiment fueled by a more dovish U.S. Federal Reserve (the "Fed"), emerging markets rallied 8.76% in January 2019. The rally was similar to that seen a year prior in January of 2018, but the reasons were quite dissimilar as markets were giddy last year from a synchronized growth narrative. At the beginning of the second quarter, investor sentiment remained upbeat on signs of a global growth recovery, building on the momentum seen in the first quarter. The U.S. dollar rose against all the major currencies, encouraged by renewed economic divergence. Commodities saw strong gains, led by a rally on oil as supply concerns intensified following the United States' decision to end waivers on Iranian oil imports. However, the re-escalation of the U.S./China trade war put investors in a risk-off mode which, along with soft economic data in both China and the United States, heightened concerns of a global growth slowdown, raising uncertainty across global markets. Adding to the skittishness of the markets, mid-quarter, President Trump threatened to raise tariffs on Mexico as the administration sought Mexico's attention to help constrain the flood of illegal migrants into the United States. Fortunately, this was short-lived as an agreement between Mexico and the United States was reached shortly thereafter. Emerging markets ended the second quarter on a strong note, led by a more dovish Fed and optimism for fresh trade talks between the United States and China. The interest rate cut expectations in the United States pushed the U.S. dollar lower and the yield on the 10-year U.S. Treasury bond to 2.00%, its lowest level since November of 2016.
At mid-year, the situation would soon change as these conditions could not quell investor fears of a slowdown in global growth, helping to push the U.S. dollar higher and weighing on emerging markets small-cap equity securities. During the third quarter of 2019, emerging markets declined as markets responded to a re-escalation of the trade war. Furthermore, the United States designated China as a currency manipulator. This back-and-forth between the United States and China fueled global growth concerns leading to a risk-off sentiment in the markets. Mid-quarter, sentiment improved a bit as the United States agreed to delay tariffs on certain products and both countries agreed to go back to the table.
Emerging markets small-caps continued to advance during the beginning of the fourth quarter, and on October 11, 2019, it was announced that "Phase 1" of a trade deal was agreed to in principle. Mid-October, the Fed cut rates by 25 basis points, as expected, and announced they
15
Victory RS International Funds (Unaudited)
Victory Sophus Emerging Markets Small Cap Fund (continued)
would expand their balance sheet. This all helped push the U.S. dollar down. A growing optimism on the Phase 1 trade deal and steepening U.S. yield curve provided fuel to the risk-on trade and pushed out fears of a recession. The year finished on a high note with market "giddiness" fueled by the "finalization" of a Phase 1 U.S./China trade agreement, and the United States indefinitely delaying new tariffs that were set to go into effect on December 15, 2019. Furthermore, elections in the United Kingdom appeared to put Brexit on a more certain path, while global macro indicators provided a rosier outlook for global growth.
Portfolio Review
By sectors, the largest contributor to performance was stock selection in Financials. The largest detractor from relative performance was stock selection in Materials. By country, the largest contributor was stock selection in China. The largest detractor was stock selection in Russia.
Outlook
The continued strength of the mighty U.S. dollar is now in question, thanks to the regionalization of trade, economic growth, and in all likelihood political influence. We believe that the weaker U.S. dollar will benefit emerging markets economies and markets in 2020. Further, we see the growth differential between emerging markets and the developed markets widening again, and we believe emerging markets' earnings likely will grow at twice the rate of developed markets' earnings.
The global economy is expected to grow by 3.4%, according to the World Bank. Emerging economies are forecast to grow by 4.6% versus 1.7% for developed economies — the main contributors being China, India, and Brazil. Trade volume is expected to pick up again to 3.2% globally (from 1.2% in 2019), led by emerging market economies. Emerging markets have suffered from a perception that its growth is mostly commodity driven. While this has been true at times in the past, the emerging markets today is more technology and communication services driven, as it was at the turn of the century. Consumption and financial intermediation (credit growth) also are poorly understood elements, but are expected to be major contributors to growth.
Consensus estimates are for 15-17% earnings growth in emerging markets in 2020, driven by 1) Technology, 2) Financials, and 3) Consumer Discretionary. Within Technology, the memory cycle has turned, and we see DRAM and NAND flash memory prices recouping lost ground. Processing capacity — thanks to the Internet of Things, artificial intelligence, and machine learning — is expected to push the hardware cycle to new heights. While interest rates remain low and bank appetite for lending has been subdued, the extended growth cycle requires capital investment, in lagging economies like Brazil, Poland, Turkey, and parts of the Persian Gulf. Consumption is now a global theme, and the combination of cheap credit, worldwide campaigns, and coordinated technological shifts (5G, for example) are pushing ever more activity into services and purchasing across the emerging markets space.
Growth and quality investment styles outperformed in 2019, while value styles lagged. We do not see any changes in 2020, as the world remains starved for growth in the post-financial-crisis economy. We look to capture sustainable growth with positive catalysts. The emerging markets universe is dynamic, exciting, and differentiated. We invest across all small market caps, knowing that the inefficiencies, which are inherent in this asset class, are most powerful in smaller countries, companies, or out-of-favor segments.
In anticipation of a weaker U.S. dollar, accelerating emerging markets growth, rising earnings, and attractive valuations, we expect another positive year for emerging markets equity securities.
16
Victory RS International Funds (Unaudited)
Victory Sophus Emerging Markets Small Cap Fund (continued)
Average Annual Total Return
Year Ended December 31, 2019
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 | Contingent Deferred Charges | Net Asset Value | MSCI Emerging Markets Small Cap Index1 | ||||||||||||||||||||||
One Year | 21.44 | % | 14.47 | % | 20.53 | % | 19.53 | % | 21.76 | % | 11.50 | % | |||||||||||||||
Three Year | 10.64 | % | 8.50 | % | 9.88 | % | 9.88 | % | 10.95 | % | 6.70 | % | |||||||||||||||
Five Year | 5.08 | % | 3.84 | % | 3.91 | % | 3.91 | % | 5.37 | % | 2.97 | % | |||||||||||||||
Since Inception | 4.81 | % | 3.77 | % | 3.69 | % | 3.69 | % | 5.13 | % | N/A | ||||||||||||||||
Expense Ratios | |||||||||||||||||||||||||||
Gross | 5.81% | 14.00% | 3.86% | ||||||||||||||||||||||||
With Applicable Waivers | 1.79% | 2.54% | 1.54% |
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, 2019. Additional information pertaining to the Fund's expense ratios as of December 31, 2019 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 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.
17
Victory Portfolios Victory RS International Fund | Schedule of Portfolio Investments December 31, 2019 |
Security Description | Shares | Value | |||||||||
Common Stocks (94.6%) | |||||||||||
Australia (5.9%): | |||||||||||
Financials (1.4%): | |||||||||||
Macquarie Group Ltd. | 41,640 | $ | 4,031,744 | ||||||||
Health Care (1.7%): | |||||||||||
CSL Ltd. | 23,989 | 4,650,055 | |||||||||
Materials (1.7%): | |||||||||||
BHP Group Ltd. | 178,822 | 4,895,525 | |||||||||
Real Estate (1.1%): | |||||||||||
Scentre Group | 1,104,764 | 2,972,575 | |||||||||
16,549,899 | |||||||||||
Belgium (0.5%): | |||||||||||
Information Technology (0.5%): | |||||||||||
Melexis NV | 18,729 | 1,412,659 | |||||||||
China (2.1%): | |||||||||||
Communication Services (1.1%): | |||||||||||
Tencent Holdings Ltd. | 65,000 | 3,131,651 | |||||||||
Financials (1.0%): | |||||||||||
China Merchants Bank Co. Ltd., Class H | 533,000 | 2,740,398 | |||||||||
5,872,049 | |||||||||||
Denmark (1.2%): | |||||||||||
Consumer Staples (1.2%): | |||||||||||
Royal Unibrew | 38,508 | 3,527,789 | |||||||||
France (9.6%): | |||||||||||
Consumer Discretionary (4.2%): | |||||||||||
Cie Generale des Etablissements Michelin SCA | 17,876 | 2,199,617 | |||||||||
Faurecia SE | 54,150 | 2,939,425 | |||||||||
LVMH Moet Hennessy Louis Vuitton SE | 14,749 | 6,871,768 | |||||||||
12,010,810 | |||||||||||
Energy (1.8%): | |||||||||||
Total SA | 90,526 | 5,022,906 | |||||||||
Financials (1.1%): | |||||||||||
AXA SA | 107,195 | 3,028,670 | |||||||||
Information Technology (1.3%): | |||||||||||
Capgemini SE | 30,269 | 3,701,731 | |||||||||
Materials (1.2%): | |||||||||||
Arkema SA | 31,247 | 3,340,880 | |||||||||
27,104,997 | |||||||||||
Germany (7.4%): | |||||||||||
Financials (1.8%): | |||||||||||
Allianz SE | 20,187 | 4,945,954 |
See notes to financial statements.
18
Victory Portfolios Victory RS International Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Shares | Value | |||||||||
Health Care (0.6%): | |||||||||||
Bayer AG, Registered Shares | 21,257 | $ | 1,727,976 | ||||||||
Industrials (2.0%): | |||||||||||
Siemens AG | 32,445 | 4,236,682 | |||||||||
Washtec AG | 20,842 | 1,253,460 | |||||||||
5,490,142 | |||||||||||
Information Technology (1.9%): | |||||||||||
SAP SE | 39,873 | 5,366,379 | |||||||||
Real Estate (1.1%): | |||||||||||
Vonovia SE | 60,238 | 3,235,069 | |||||||||
20,765,520 | |||||||||||
Hong Kong (2.1%): | |||||||||||
Financials (1.0%): | |||||||||||
AIA Group Ltd. | 255,800 | 2,690,669 | |||||||||
Real Estate (1.1%): | |||||||||||
CK Asset Holdings Ltd. | 440,500 | 3,178,951 | |||||||||
5,869,620 | |||||||||||
Ireland (1.0%): | |||||||||||
Industrials (1.0%): | |||||||||||
Experian PLC | 81,287 | 2,755,167 | |||||||||
Italy (4.0%): | |||||||||||
Financials (0.8%): | |||||||||||
Banca Generali SpA | 72,241 | 2,348,268 | |||||||||
Health Care (0.9%): | |||||||||||
Recordati SpA | 56,363 | 2,375,765 | |||||||||
Utilities (2.3%): | |||||||||||
Enel SpA | 826,811 | 6,567,482 | |||||||||
11,291,515 | |||||||||||
Japan (22.7%): | |||||||||||
Communication Services (1.3%): | |||||||||||
Nippon Telegraph & Telephone Corp. | 141,000 | 3,564,083 | |||||||||
Consumer Discretionary (4.4%): | |||||||||||
Hikari Tsushin, Inc. | 9,300 | 2,337,393 | |||||||||
Toyota Motor Corp. | 113,500 | 7,998,486 | |||||||||
United Arrows Ltd. | 72,000 | 2,039,311 | |||||||||
12,375,190 | |||||||||||
Consumer Staples (0.9%): | |||||||||||
Matsumotokiyoshi Holdings Co. Ltd. | 63,400 | 2,454,868 | |||||||||
Financials (3.0%): | |||||||||||
Jafco Co. Ltd. | 35,400 | 1,387,867 | |||||||||
Mitsubishi UFJ Financial Group, Inc. | 734,800 | 3,973,125 | |||||||||
Tokio Marine Holdings, Inc. | 55,500 | 3,107,809 | |||||||||
8,468,801 |
See notes to financial statements.
19
Victory Portfolios Victory RS International Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Shares | Value | |||||||||
Health Care (2.6%): | |||||||||||
Hoya Corp. | 43,800 | $ | 4,181,815 | ||||||||
Shionogi & Co. Ltd. | 52,300 | 3,235,804 | |||||||||
7,417,619 | |||||||||||
Industrials (6.4%): | |||||||||||
En-Japan, Inc. | 75,200 | 3,268,924 | |||||||||
Fuji Electric Co. Ltd. | 112,400 | 3,414,880 | |||||||||
Hitachi Construction Machinery Co. Ltd. | 120,900 | 3,601,786 | |||||||||
ITOCHU Corp. | 111,100 | 2,575,285 | |||||||||
Kyowa Exeo Corp. | 29,000 | 733,696 | |||||||||
OKUMA Corp. | 38,800 | 2,040,953 | |||||||||
Sanwa Holdings Corp. | 218,800 | 2,452,154 | |||||||||
18,087,678 | |||||||||||
Information Technology (2.4%): | |||||||||||
Fujitsu Ltd. | 27,300 | 2,568,079 | |||||||||
Oracle Corp. Japan | 24,700 | 2,242,051 | |||||||||
Ulvac, Inc. | 44,900 | 1,772,183 | |||||||||
6,582,313 | |||||||||||
Materials (0.1%): | |||||||||||
DIC Corp. | 14,100 | 389,191 | |||||||||
Real Estate (0.6%): | |||||||||||
Sumitomo Realty & Development Co. Ltd. | 51,200 | 1,786,589 | |||||||||
Utilities (1.0%): | |||||||||||
Chubu Electric Power Co., Inc. | 194,900 | 2,755,457 | |||||||||
63,881,789 | |||||||||||
Macau (1.2%): | |||||||||||
Consumer Discretionary (1.2%): | |||||||||||
Wynn Macau Ltd. | 1,388,800 | 3,422,397 | |||||||||
Netherlands (4.2%): | |||||||||||
Communication Services (1.1%): | |||||||||||
Koninklijke KPN NV | 1,017,641 | 3,011,326 | |||||||||
Financials (1.6%): | |||||||||||
ING Groep NV | 379,613 | 4,563,475 | |||||||||
Industrials (1.5%): | |||||||||||
Wolters Kluwer NV | 58,640 | 4,281,265 | |||||||||
11,856,066 | |||||||||||
Norway (1.5%): | |||||||||||
Energy (0.6%): | |||||||||||
Aker BP ASA | 53,445 | 1,754,686 | |||||||||
Financials (0.9%): | |||||||||||
SpareBank 1 SMN | 209,691 | 2,395,672 | |||||||||
4,150,358 |
See notes to financial statements.
20
Victory Portfolios Victory RS International Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Shares | Value | |||||||||
Russian Federation (0.5%): | |||||||||||
Materials (0.5%): | |||||||||||
Evraz PLC | 248,133 | $ | 1,328,505 | ||||||||
Spain (2.7%): | |||||||||||
Communication Services (1.6%): | |||||||||||
Telefonica SA | 629,706 | 4,403,225 | |||||||||
Financials (1.1%): | |||||||||||
Banco Santander SA (a) | 737,652 | 3,092,525 | |||||||||
7,495,750 | |||||||||||
Sweden (2.8%): | |||||||||||
Industrials (2.8%): | |||||||||||
Atlas Copco AB, Class B | 180,426 | 6,266,552 | |||||||||
Epiroc AB, Class B | 126,407 | 1,502,784 | |||||||||
7,769,336 | |||||||||||
Switzerland (10.8%): | |||||||||||
Consumer Staples (3.3%): | |||||||||||
Nestle SA, Registered Shares | 85,800 | 9,291,080 | |||||||||
Financials (1.9%): | |||||||||||
Cembra Money Bank AG | 20,960 | 2,293,687 | |||||||||
UBS Group AG, Registered Shares | 249,522 | 3,149,466 | |||||||||
5,443,153 | |||||||||||
Health Care (5.6%): | |||||||||||
Novartis AG | 74,061 | 7,014,257 | |||||||||
Roche Holding AG | 26,281 | 8,543,164 | |||||||||
15,557,421 | |||||||||||
30,291,654 | |||||||||||
United Kingdom (14.4%): | |||||||||||
Consumer Discretionary (1.2%): | |||||||||||
Next PLC | 35,255 | 3,284,656 | |||||||||
Consumer Staples (3.6%): | |||||||||||
Britvic PLC | 207,790 | 2,489,902 | |||||||||
Diageo PLC | 105,563 | 4,447,398 | |||||||||
Unilever PLC | 53,191 | 3,044,330 | |||||||||
9,981,630 | |||||||||||
Energy (2.6%): | |||||||||||
BP PLC | 386,219 | 2,429,259 | |||||||||
Royal Dutch Shell PLC, Class A | 166,331 | 4,925,013 | |||||||||
7,354,272 | |||||||||||
Financials (3.2%): | |||||||||||
Close Brothers Group PLC | 72,280 | 1,530,659 | |||||||||
HSBC Holdings PLC | 457,690 | 3,582,454 | |||||||||
Legal & General Group PLC | 964,506 | 3,873,886 | |||||||||
8,986,999 |
See notes to financial statements.
21
Victory Portfolios Victory RS International Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Shares | Value | |||||||||
Health Care (0.8%): | |||||||||||
Smith & Nephew PLC | 92,285 | $ | 2,223,798 | ||||||||
Industrials (0.9%): | |||||||||||
RELX PLC | 105,875 | 2,672,233 | |||||||||
Materials (2.1%): | |||||||||||
Croda International PLC | 25,983 | 1,764,721 | |||||||||
Rio Tinto PLC | 70,991 | 4,201,670 | |||||||||
5,966,391 | |||||||||||
40,469,979 | |||||||||||
Total Common Stocks (Cost $245,952,875) | 265,815,049 | ||||||||||
Preferred Stocks (0.3%) | |||||||||||
Japan (0.3%): | |||||||||||
Consumer Staples (0.3%): | |||||||||||
Ito En Ltd. | 36,900 | 790,154 | |||||||||
Total Preferred Stocks (Cost $791,529) | 790,154 | ||||||||||
Exchange-Traded Funds (1.6%) | |||||||||||
United States (1.6%): | |||||||||||
iShares MSCI EAFE ETF | 64,442 | 4,474,852 | |||||||||
Total Exchange-Traded Funds (Cost $4,372,871) | 4,474,852 | ||||||||||
Collateral for Securities Loaned^ (0.0%) (b) | |||||||||||
United States (0.0%): | |||||||||||
BlackRock Liquidity Funds TempFund Portfolio, Institutional Class, 1.75% (c) | 1,060 | 1,060 | |||||||||
Fidelity Investments Money Market Government Portfolio, Class I, 1.54% (c) | 5,841 | 5,841 | |||||||||
Fidelity Investments Prime Money Market Portfolio, Class I, 1.75% (c) | 177 | 177 | |||||||||
Goldman Sachs Financial Square Prime Obligations Fund, Institutional Class, 1.80% (c) | 3,529 | 3,529 | |||||||||
JPMorgan Prime Money Market Fund, Capital Class, 1.73% (c) | 3,882 | 3,882 | |||||||||
Morgan Stanley Institutional Liquidity Prime Portfolio, Institutional Class, 1.76% (c) | 7,764 | 7,764 | |||||||||
Total Collateral for Securities Loaned (Cost $22,253) | 22,253 | ||||||||||
Total Investments (Cost $251,139,528) — 96.5% | 271,102,308 | ||||||||||
Other assets in excess of liabilities — 3.5% | 9,710,907 | ||||||||||
NET ASSETS — 100.00% | $ | 280,813,215 |
^ Purchased with cash collateral from securities on loan.
(a) All or a portion of this security is on loan.
(b) Amount represents less than 0.05% of net assets.
(c) Rate disclosed is the daily yield on December 31, 2019.
ETF — Exchange-Traded Fund
PLC — Public Limited Company
See notes to financial statements.
22
Victory Portfolios Victory RS Global Fund | Schedule of Portfolio Investments December 31, 2019 |
Security Description | Shares | Value | |||||||||
Common Stocks (96.8%) | |||||||||||
Australia (2.2%): | |||||||||||
Financials (0.7%): | |||||||||||
Macquarie Group Ltd. | 6,238 | $ | 603,987 | ||||||||
Health Care (1.5%): | |||||||||||
CSL Ltd. | 6,292 | 1,219,648 | |||||||||
1,823,635 | |||||||||||
Belgium (0.5%): | |||||||||||
Information Technology (0.5%): | |||||||||||
Melexis NV | 5,417 | 408,584 | |||||||||
Bermuda (0.9%): | |||||||||||
Industrials (0.9%): | |||||||||||
Triton International Ltd. | 18,538 | 745,228 | |||||||||
Canada (2.3%): | |||||||||||
Energy (0.6%): | |||||||||||
Parex Resources, Inc. (a) | 27,214 | 506,175 | |||||||||
Industrials (1.0%): | |||||||||||
Canadian Pacific Railway Ltd. | 3,323 | 847,206 | |||||||||
Materials (0.7%): | |||||||||||
Kirkland Lake Gold Ltd. | 13,840 | 610,137 | |||||||||
1,963,518 | |||||||||||
China (2.9%): | |||||||||||
Communication Services (1.3%): | |||||||||||
Tencent Holdings Ltd. | 23,100 | 1,112,941 | |||||||||
Consumer Staples (0.6%): | |||||||||||
Foshan Haitan Flavouring | 32,341 | 500,025 | |||||||||
Financials (1.0%): | |||||||||||
Industrial & Commercial Bank of China Ltd., Class H | 1,078,000 | 831,762 | |||||||||
2,444,728 | |||||||||||
Denmark (1.1%): | |||||||||||
Consumer Staples (1.1%): | |||||||||||
Royal Unibrew | 10,111 | 926,287 | |||||||||
France (5.0%): | |||||||||||
Consumer Discretionary (1.6%): | |||||||||||
Faurecia SE | 9,486 | 514,928 | |||||||||
LVMH Moet Hennessy Louis Vuitton SE | 1,831 | 853,089 | |||||||||
1,368,017 | |||||||||||
Energy (0.9%): | |||||||||||
Total SA | 13,944 | 773,694 | |||||||||
Financials (1.6%): | |||||||||||
BNP Paribas SA | 22,173 | 1,317,809 |
See notes to financial statements.
23
Victory Portfolios Victory RS Global Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Shares | Value | |||||||||
Materials (0.9%): | |||||||||||
Arkema SA | 7,084 | $ | 757,410 | ||||||||
4,216,930 | |||||||||||
Germany (0.5%): | |||||||||||
Industrials (0.5%): | |||||||||||
Washtec AG | 6,633 | 398,916 | |||||||||
Hong Kong (0.7%): | |||||||||||
Energy (0.7%): | |||||||||||
CNOOC Ltd. | 339,957 | 565,327 | |||||||||
India (0.8%): | |||||||||||
Consumer Staples (0.8%): | |||||||||||
Nestle India Ltd. | 3,253 | 673,924 | |||||||||
Indonesia (0.6%): | |||||||||||
Communication Services (0.6%): | |||||||||||
Telekomunikasi Indonesia Persero Tbk PT | 1,914,500 | 548,560 | |||||||||
Ireland (1.3%): | |||||||||||
Industrials (1.3%): | |||||||||||
Eaton Corp. PLC | 11,276 | 1,068,063 | |||||||||
Italy (2.7%): | |||||||||||
Financials (0.5%): | |||||||||||
Banca Generali SpA | 12,815 | 416,565 | |||||||||
Health Care (0.8%): | |||||||||||
Recordati SpA | 14,795 | 623,626 | |||||||||
Utilities (1.4%): | |||||||||||
Enel SpA | 151,734 | 1,205,245 | |||||||||
2,245,436 | |||||||||||
Japan (8.3%): | |||||||||||
Consumer Discretionary (2.3%): | |||||||||||
Hikari Tsushin, Inc. | 2,900 | 728,865 | |||||||||
Toyota Motor Corp. | 12,600 | 887,937 | |||||||||
United Arrows Ltd. | 11,100 | 314,394 | |||||||||
1,931,196 | |||||||||||
Financials (1.2%): | |||||||||||
Jafco Co. Ltd. | 8,100 | 317,563 | |||||||||
Resona Holdings, Inc. | 156,496 | 682,187 | |||||||||
999,750 | |||||||||||
Health Care (1.7%): | |||||||||||
As One Corp. | 6,879 | 643,073 | |||||||||
Hoya Corp. | 8,500 | 811,540 | |||||||||
1,454,613 |
See notes to financial statements.
24
Victory Portfolios Victory RS Global Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Shares | Value | |||||||||
Industrials (2.2%): | |||||||||||
En-Japan, Inc. | 11,000 | $ | 478,167 | ||||||||
Hitachi Construction Machinery Co. Ltd. | 27,600 | 822,244 | |||||||||
Kyowa Exeo Corp. | 6,000 | 151,799 | |||||||||
OKUMA Corp. | 8,000 | 420,815 | |||||||||
1,873,025 | |||||||||||
Information Technology (0.5%): | |||||||||||
Ulvac, Inc. | 10,300 | 406,536 | |||||||||
Materials (0.4%): | |||||||||||
DIC Corp. | 13,000 | 358,829 | |||||||||
7,023,949 | |||||||||||
Korea, Republic Of (1.1%): | |||||||||||
Information Technology (1.1%): | |||||||||||
Samsung Electronics Co. Ltd. | 19,665 | 947,718 | |||||||||
Macau (0.6%): | |||||||||||
Consumer Discretionary (0.6%): | |||||||||||
Wynn Macau Ltd. (b) | 210,400 | 518,485 | |||||||||
Mexico (0.3%): | |||||||||||
Industrials (0.3%): | |||||||||||
Promotora y Operadora de Infraestructura SAB de CV | 25,041 | 256,382 | |||||||||
Netherlands (0.9%): | |||||||||||
Industrials (0.9%): | |||||||||||
Wolters Kluwer NV | 10,634 | 776,381 | |||||||||
Norway (1.2%): | |||||||||||
Energy (0.5%): | |||||||||||
Aker BP ASA | 13,746 | 451,303 | |||||||||
Financials (0.7%): | |||||||||||
SpareBank 1 SMN | 51,417 | 587,428 | |||||||||
1,038,731 | |||||||||||
Russian Federation (0.4%): | |||||||||||
Materials (0.4%): | |||||||||||
Evraz PLC | 68,064 | 364,415 | |||||||||
Singapore (1.3%): | |||||||||||
Financials (1.3%): | |||||||||||
Singapore Exchange Ltd. | 172,500 | 1,136,404 | |||||||||
Sweden (1.8%): | |||||||||||
Industrials (1.8%): | |||||||||||
Atlas Copco AB, Class B | 32,972 | 1,145,183 | |||||||||
Nolato AB, Class B | 6,957 | 408,570 | |||||||||
1,553,753 |
See notes to financial statements.
25
Victory Portfolios Victory RS Global Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Shares | Value | |||||||||
Switzerland (2.1%): | |||||||||||
Health Care (2.1%): | |||||||||||
Roche Holding AG | 5,441 | $ | 1,768,706 | ||||||||
Taiwan (0.7%): | |||||||||||
Financials (0.7%): | |||||||||||
Cathay Financial Holding Co. Ltd. | 397,000 | 563,727 | |||||||||
United Kingdom (5.4%): | |||||||||||
Consumer Discretionary (0.7%): | |||||||||||
Next PLC | 6,825 | 635,875 | |||||||||
Consumer Staples (1.5%): | |||||||||||
Britvic PLC | 30,389 | 364,145 | |||||||||
Diageo PLC | 12,086 | 509,186 | |||||||||
Unilever PLC | 6,951 | 397,833 | |||||||||
1,271,164 | |||||||||||
Financials (1.0%): | |||||||||||
Close Brothers Group PLC | 19,904 | 421,503 | |||||||||
HSBC Holdings PLC | 54,600 | 427,368 | |||||||||
848,871 | |||||||||||
Industrials (0.7%): | |||||||||||
RELX PLC | 23,041 | 581,543 | |||||||||
Materials (1.5%): | |||||||||||
Croda International PLC | 3,923 | 266,444 | |||||||||
Rio Tinto PLC | 16,317 | 965,737 | |||||||||
1,232,181 | |||||||||||
4,569,634 | |||||||||||
United States (51.2%): | |||||||||||
Communication Services (5.4%): | |||||||||||
Alphabet, Inc., Class C (a) | 1,160 | 1,550,943 | |||||||||
Facebook, Inc., Class A (a) | 7,715 | 1,583,504 | |||||||||
Verizon Communications, Inc. | 22,708 | 1,394,271 | |||||||||
4,528,718 | |||||||||||
Consumer Discretionary (5.9%): | |||||||||||
Amazon.com, Inc. (a) | 803 | 1,483,815 | |||||||||
McDonald's Corp. | 4,331 | 855,849 | |||||||||
Ross Stores, Inc. | 10,463 | 1,218,102 | |||||||||
The TJX Cos., Inc. | 23,610 | 1,441,627 | |||||||||
4,999,393 | |||||||||||
Consumer Staples (4.7%): | |||||||||||
Colgate-Palmolive Co. | 15,305 | 1,053,596 | |||||||||
PepsiCo, Inc. | 11,772 | 1,608,879 | |||||||||
The Estee Lauder Cos., Inc., Class A | 6,266 | 1,294,180 | |||||||||
3,956,655 |
See notes to financial statements.
26
Victory Portfolios Victory RS Global Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Shares | Value | |||||||||
Energy (1.9%): | |||||||||||
ConocoPhillips | 9,269 | $ | 602,763 | ||||||||
Phillips 66 | 8,901 | 991,660 | |||||||||
1,594,423 | |||||||||||
Financials (8.5%): | |||||||||||
Bank of America Corp. | 47,644 | 1,678,022 | |||||||||
CME Group, Inc. | 2,125 | 426,530 | |||||||||
JPMorgan Chase & Co. | 15,900 | 2,216,460 | |||||||||
MSCI, Inc. | 4,509 | 1,164,134 | |||||||||
The PNC Financial Services Group, Inc. | 6,032 | 962,888 | |||||||||
The Progressive Corp. | 10,119 | 732,514 | |||||||||
7,180,548 | |||||||||||
Health Care (6.6%): | |||||||||||
Amedisys, Inc. (a) | 5,628 | 939,426 | |||||||||
Amgen, Inc. | 4,982 | 1,201,010 | |||||||||
CVS Health Corp. | 14,680 | 1,090,577 | |||||||||
Eli Lilly & Co. | 6,842 | 899,244 | |||||||||
Johnson & Johnson | 10,017 | 1,461,180 | |||||||||
5,591,437 | |||||||||||
Industrials (3.0%): | |||||||||||
3M Co. | 4,763 | 840,288 | |||||||||
HD Supply Holdings, Inc. (a) | 12,757 | 513,087 | |||||||||
Honeywell International, Inc. | 6,921 | 1,225,017 | |||||||||
2,578,392 | |||||||||||
Information Technology (12.9%): | |||||||||||
Apple, Inc. | 10,458 | 3,070,992 | |||||||||
Cisco Systems, Inc. | 18,699 | 896,804 | |||||||||
Mastercard, Inc., Class A | 7,452 | 2,225,093 | |||||||||
Microsoft Corp. | 21,710 | 3,423,667 | |||||||||
Texas Instruments, Inc. | 10,194 | 1,307,788 | |||||||||
10,924,344 | |||||||||||
Real Estate (1.2%): | |||||||||||
Liberty Property Trust | 16,551 | 993,888 | |||||||||
Utilities (1.1%): | |||||||||||
MGE Energy, Inc. | 12,280 | 967,910 | |||||||||
43,315,708 | |||||||||||
Total Common Stocks (Cost $63,526,942) | 81,863,129 | ||||||||||
Preferred Stocks (0.7%) | |||||||||||
Brazil (0.7%): | |||||||||||
Financials (0.7%): | |||||||||||
Itau Unibanco Holding SA | 62,215 | 576,332 | |||||||||
Total Preferred Stocks (Cost $467,417) | 576,332 |
See notes to financial statements.
27
Victory Portfolios Victory RS Global Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Shares | Value | |||||||||
Exchange-Traded Funds (0.8%) | |||||||||||
United States (0.8%): | |||||||||||
iShares MSCI ACWI ETF | 8,502 | $ | 673,784 | ||||||||
Total Exchange-Traded Funds (Cost $651,291) | 673,784 | ||||||||||
Collateral for Securities Loaned^ (0.1%) | |||||||||||
United States (0.1%): | |||||||||||
BlackRock Liquidity Funds TempFund Portfolio, Institutional Class, 1.75% (c) | 5,430 | 5,430 | |||||||||
Fidelity Investments Money Market Government Portfolio, Class I, 1.54% (c) | 29,918 | 29,918 | |||||||||
Fidelity Investments Prime Money Market Portfolio, Class I, 1.75% (c) | 907 | 907 | |||||||||
Goldman Sachs Financial Square Prime Obligations Fund, Institutional Class, 1.80% (c) | 18,074 | 18,074 | |||||||||
JPMorgan Prime Money Market Fund, Capital Class, 1.73% (c) | 19,882 | 19,882 | |||||||||
Morgan Stanley Institutional Liquidity Prime Portfolio, Institutional Class, 1.76% (c) | 39,764 | 39,764 | |||||||||
Total Collateral for Securities Loaned (Cost $113,975) | 113,975 | ||||||||||
Total Investments (Cost $64,759,625) — 98.4% | 83,227,220 | ||||||||||
Other assets in excess of liabilities — 1.6% | 1,374,468 | ||||||||||
NET ASSETS — 100.00% | $ | 84,601,688 |
^ 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, 2019.
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, 2019 |
Security Description | Shares | Value | |||||||||
Common Stocks (97.6%) | |||||||||||
Brazil (9.1%): | |||||||||||
Consumer Discretionary (1.5%): | |||||||||||
Cyrela Brazil Realty SA Empreendimentos e Participacoes | 346,600 | $ | 2,577,658 | ||||||||
Grupo SBF SA (a) | 383,400 | 3,368,209 | |||||||||
5,945,867 | |||||||||||
Energy (1.3%): | |||||||||||
Petroleo Brasileiro SA, ADR | 330,844 | 5,273,654 | |||||||||
Financials (2.8%): | |||||||||||
Banco Bradesco SA, ADR | 690,900 | 6,183,555 | |||||||||
Banco do Brasil SA | 406,400 | 5,364,810 | |||||||||
11,548,365 | |||||||||||
Health Care (0.9%): | |||||||||||
Qualicorp Consultoria e Corretora de Seguros SA | 394,600 | 3,653,280 | |||||||||
Industrials (0.9%): | |||||||||||
Companhia de Locacao das Americas | 536,400 | 3,038,983 | |||||||||
JSL SA | 70,200 | 469,313 | |||||||||
3,508,296 | |||||||||||
Real Estate (1.0%): | |||||||||||
Aliansce Sonae Shopping Centers SA | 332,021 | 4,149,210 | |||||||||
Utilities (0.7%): | |||||||||||
Neoenergia SA | 485,700 | 3,014,244 | |||||||||
37,092,916 | |||||||||||
Chile (0.1%): | |||||||||||
Financials (0.1%): | |||||||||||
Banco de Credito e Inversiones SA | 10,438 | 473,432 | |||||||||
China (30.5%): | |||||||||||
Communication Services (6.2%): | |||||||||||
Momo, Inc., ADR | 61,866 | 2,072,511 | |||||||||
Tencent Holdings Ltd. | 439,015 | 21,151,413 | |||||||||
Wuhu Sanqi Interactive Entertainment Network Technology Group Co. Ltd., Class A | 543,800 | 2,105,389 | |||||||||
25,329,313 | |||||||||||
Consumer Discretionary (10.3%): | |||||||||||
Alibaba Group Holding Ltd., ADR (a) | 124,794 | 26,468,807 | |||||||||
Gree Electric Appliances, Inc. of Zhuhai, Class A | 261,800 | 2,468,970 | |||||||||
Huayu Automotive Systems Co. Ltd., Class A | 541,500 | 2,022,214 | |||||||||
JD.com, Inc., ADR (a) | 122,151 | 4,303,380 | |||||||||
New Oriental Education & Technology Group, Inc., ADR (a) | 21,906 | 2,656,102 | |||||||||
Tongcheng-Elong Holdings Ltd. (a) | 1,292,000 | 2,319,121 | |||||||||
Topsports International Holdings Ltd. (b) | 1,474,287 | 1,782,359 | |||||||||
42,020,953 |
See notes to financial statements.
29
Victory Portfolios Victory Sophus Emerging Markets Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Shares | Value | |||||||||
Consumer Staples (1.5%): | |||||||||||
China Mengniu Dairy Co. Ltd. (c) | 826,000 | $ | 3,341,462 | ||||||||
Wuliangye Yibin Co. Ltd., Class A | 143,350 | 2,743,358 | |||||||||
6,084,820 | |||||||||||
Energy (1.2%): | |||||||||||
China Oilfield Services Ltd., Class H | 3,096,000 | 4,861,085 | |||||||||
Financials (5.8%): | |||||||||||
China Construction Bank Corp., Class H | 9,538,857 | 8,271,121 | |||||||||
China Galaxy Securities Co. Ltd. (c) | 6,438,000 | 3,792,875 | |||||||||
China Merchants Bank Co. Ltd., Class H | 671,500 | 3,452,489 | |||||||||
Ping An Insurance Group Co. of China Ltd. | 712,500 | 8,431,887 | |||||||||
23,948,372 | |||||||||||
Industrials (0.9%): | |||||||||||
Zoomlion Heavy Industry Science and Technology Co. Ltd., Class H | 4,430,000 | 3,713,659 | |||||||||
Information Technology (1.6%): | |||||||||||
Beijing Sinnet Technology Co. Ltd., Class A | 915,600 | 2,640,728 | |||||||||
Kingdee International Software Group Co. Ltd. | 1,434,000 | 1,434,723 | |||||||||
Venustech Group, Inc., Class A | 516,800 | 2,510,800 | |||||||||
6,586,251 | |||||||||||
Materials (1.6%): | |||||||||||
Anhui Conch Cement Co. Ltd., Class H | 546,000 | 3,978,483 | |||||||||
Hengli Petrochemical Co. Ltd., Class A | 1,116,900 | 2,584,205 | |||||||||
6,562,688 | |||||||||||
Real Estate (1.4%): | |||||||||||
China SCE Group Holdings Ltd. | 3,894,000 | 2,268,344 | |||||||||
Sunac China Holdings Ltd. | 591,000 | 3,528,515 | |||||||||
5,796,859 | |||||||||||
124,904,000 | |||||||||||
Cyprus (0.6%): | |||||||||||
Financials (0.6%): | |||||||||||
TCS Group Holding PLC, GDR | 112,142 | 2,414,367 | |||||||||
Greece (1.0%): | |||||||||||
Communication Services (0.7%): | |||||||||||
Hellenic Telecommunications Organization SA | 171,144 | 2,739,207 | |||||||||
Industrials (0.3%): | |||||||||||
Mytilineos Holdings SA | 131,782 | 1,447,243 | |||||||||
4,186,450 | |||||||||||
Hong Kong (3.5%): | |||||||||||
Energy (0.7%): | |||||||||||
Kunlun Energy Co. Ltd. | 3,424,000 | 3,025,091 | |||||||||
Health Care (1.0%): | |||||||||||
CSPC Pharmaceutical Group Ltd. | 1,674,000 | 3,995,087 | |||||||||
Information Technology (0.7%): | |||||||||||
Kingboard Laminates Holdings Ltd. | 2,289,500 | 2,838,165 |
See notes to financial statements.
30
Victory Portfolios Victory Sophus Emerging Markets Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Shares | Value | |||||||||
Real Estate (1.1%): | |||||||||||
Shimao Property Holdings Ltd. | 1,162,000 | $ | 4,503,488 | ||||||||
14,361,831 | |||||||||||
India (7.7%): | |||||||||||
Consumer Discretionary (0.7%): | |||||||||||
Aditya Birla Fashion and Retail Ltd. (a) | 454,953 | 1,477,702 | |||||||||
The Indian Hotels Co. Ltd. | 598,202 | 1,215,675 | |||||||||
2,693,377 | |||||||||||
Energy (2.0%): | |||||||||||
Petronet LNG Ltd. | 537,435 | 2,018,401 | |||||||||
Reliance Industries Ltd. | 300,183 | 6,368,190 | |||||||||
8,386,591 | |||||||||||
Financials (2.5%): | |||||||||||
Axis Bank Ltd. | 284,699 | 3,009,841 | |||||||||
Cholamandalam Investment and Finance Co. Ltd. | 480,235 | 2,055,933 | |||||||||
Housing Development Finance Corp. Ltd. | 152,153 | 5,145,211 | |||||||||
10,210,985 | |||||||||||
Information Technology (1.1%): | |||||||||||
HCL Technologies Ltd. | 278,858 | 2,220,119 | |||||||||
Infosys Technologies Ltd., ADR | 205,954 | 2,125,445 | |||||||||
4,345,564 | |||||||||||
Materials (1.4%): | |||||||||||
Berger Paints India Ltd. | 289,990 | 2,095,230 | |||||||||
UltraTech Cement Ltd. | 38,542 | 2,185,739 | |||||||||
UPL Ltd. | 203,765 | 1,668,526 | |||||||||
5,949,495 | |||||||||||
31,586,012 | |||||||||||
Indonesia (1.8%): | |||||||||||
Financials (0.8%): | |||||||||||
PT Bank Negara Indonesia (Persero) Tbk | 5,875,200 | 3,317,246 | |||||||||
Industrials (0.5%): | |||||||||||
PT Wijaya Karya (Persero) Tbk | 13,688,000 | 1,957,597 | |||||||||
Materials (0.5%): | |||||||||||
PT Indocement Tunggal Prakarsa Tbk | 1,455,900 | 1,991,634 | |||||||||
7,266,477 | |||||||||||
Korea, Republic Of (13.6%): | |||||||||||
Communication Services (0.3%): | |||||||||||
Innocean Worldwide, Inc. | 23,902 | 1,466,663 | |||||||||
Consumer Discretionary (1.7%): | |||||||||||
Fila Korea Ltd. | 31,028 | 1,417,969 | |||||||||
Hyundai Mobis Co. Ltd. | 18,035 | 3,990,592 | |||||||||
Kia Motors Corp. | 39,230 | 1,498,408 | |||||||||
6,906,969 |
See notes to financial statements.
31
Victory Portfolios Victory Sophus Emerging Markets Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Shares | Value | |||||||||
Consumer Staples (0.4%): | |||||||||||
NeoPharm Co. Ltd. | 39,714 | $ | 1,659,275 | ||||||||
Energy (0.7%): | |||||||||||
SK Innovation Co. Ltd. | 22,551 | 2,918,870 | |||||||||
Financials (0.6%): | |||||||||||
Hana Financial Group, Inc. | 76,601 | 2,436,841 | |||||||||
Health Care (0.7%): | |||||||||||
Hanmi Pharm Co. Ltd. (a) | 11,248 | 2,875,369 | |||||||||
Industrials (0.6%): | |||||||||||
Samsung Engineering Co. Ltd. (a) | 140,004 | 2,314,038 | |||||||||
Information Technology (8.0%): | |||||||||||
Douzone Bizon Co. Ltd. | 32,196 | 2,250,980 | |||||||||
Samsung Electro-Mechanics Co. Ltd. | 56,341 | 6,060,890 | |||||||||
Samsung Electronics Co. Ltd. | 353,861 | 17,053,670 | |||||||||
SK Hynix, Inc. | 89,350 | 7,268,471 | |||||||||
32,634,011 | |||||||||||
Materials (0.6%): | |||||||||||
Ssangyong Cement Industrial Co. Ltd. | 473,113 | 2,317,809 | |||||||||
55,529,845 | |||||||||||
Mexico (1.9%): | |||||||||||
Consumer Discretionary (0.5%): | |||||||||||
Alsea SAB de CV (a) | 711,353 | 1,875,170 | |||||||||
Financials (0.5%): | |||||||||||
Gentera SAB de CV | 1,980,392 | 2,039,773 | |||||||||
Industrials (0.4%): | |||||||||||
Controladora Vuela Cia de Aviacion SAB de CV, ADR (a) | 161,069 | 1,678,339 | |||||||||
Real Estate (0.5%): | |||||||||||
Corp Inmobiliaria Vesta SAB de CV | 1,217,878 | 2,190,521 | |||||||||
7,783,803 | |||||||||||
Peru (1.0%): | |||||||||||
Financials (1.0%): | |||||||||||
Credicorp Ltd. | 19,044 | 4,058,848 | |||||||||
Philippines (1.4%): | |||||||||||
Financials (1.4%): | |||||||||||
BDO Unibank, Inc. | 1,222,650 | 3,812,107 | |||||||||
Metropolitan Bank & Trust Co. | 1,454,070 | 1,902,836 | |||||||||
5,714,943 | |||||||||||
Poland (1.2%): | |||||||||||
Communication Services (0.8%): | |||||||||||
CD Projekt SA | 42,729 | 3,152,073 | |||||||||
Energy (0.4%): | |||||||||||
Grupa Lotos SA | 81,786 | 1,804,806 | |||||||||
4,956,879 |
See notes to financial statements.
32
Victory Portfolios Victory Sophus Emerging Markets Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Shares | Value | |||||||||
Russian Federation (3.3%): | |||||||||||
Energy (1.7%): | |||||||||||
LUKOIL PJSC, ADR | 34,292 | $ | 3,384,963 | ||||||||
LUKOIL PJSC | 38,221 | 3,807,065 | |||||||||
7,192,028 | |||||||||||
Financials (0.9%): | |||||||||||
Sberbank of Russia PJSC | 222,856 | 3,671,433 | |||||||||
Materials (0.7%): | |||||||||||
MMC Norilsk Nickel PJSC, ADR | 94,612 | 2,884,720 | |||||||||
13,748,181 | |||||||||||
Saudi Arabia (1.3%): | |||||||||||
Consumer Discretionary (0.7%): | |||||||||||
Jarir Marketing Co. | 35,221 | 1,555,127 | |||||||||
Leejam Sports Co. JSC | 55,699 | 1,203,643 | |||||||||
2,758,770 | |||||||||||
Financials (0.6%): | |||||||||||
Arab National Bank | 350,419 | 2,558,336 | |||||||||
5,317,106 | |||||||||||
South Africa (4.1%): | |||||||||||
Communication Services (1.0%): | |||||||||||
Naspers Ltd. | 24,211 | 3,964,181 | |||||||||
Consumer Staples (0.7%): | |||||||||||
The SPAR Group Ltd. | 207,340 | 2,930,667 | |||||||||
Financials (1.5%): | |||||||||||
Liberty Holdings Ltd. | 476,559 | 3,769,831 | |||||||||
Nedbank Group Ltd. | 162,871 | 2,495,181 | |||||||||
6,265,012 | |||||||||||
Materials (0.9%): | |||||||||||
AngloGold Ashanti Ltd. | 152,469 | 3,465,318 | |||||||||
16,625,178 | |||||||||||
Taiwan (10.5%): | |||||||||||
Consumer Discretionary (0.6%): | |||||||||||
Giant Manufacturing Co. Ltd. | 316,000 | 2,249,662 | |||||||||
Financials (2.3%): | |||||||||||
Chailease Holding Co. Ltd. | 556,200 | 2,564,163 | |||||||||
Fubon Financial Holding Co. Ltd. | 1,722,000 | 2,666,926 | |||||||||
Yuanta Financial Holding Co. Ltd. | 6,013,000 | 4,053,917 | |||||||||
9,285,006 | |||||||||||
Industrials (0.6%): | |||||||||||
Far Eastern New Century Corp. | 2,669,000 | 2,658,397 | |||||||||
Information Technology (7.0%): | |||||||||||
Globalwafers Co. Ltd. | 462,000 | 5,916,951 | |||||||||
Taiwan Semiconductor Manufacturing Co. Ltd. | 1,696,998 | 18,783,338 |
See notes to financial statements.
33
Victory Portfolios Victory Sophus Emerging Markets Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Shares | Value | |||||||||
Walsin Technology Corp. | 509,000 | $ | 4,063,190 | ||||||||
28,763,479 | |||||||||||
42,956,544 | |||||||||||
Thailand (3.1%): | |||||||||||
Communication Services (1.0%): | |||||||||||
Advanced Info Service PCL | 248,200 | 1,762,632 | |||||||||
Plan B Media PCL | 9,599,700 | 2,433,065 | |||||||||
4,195,697 | |||||||||||
Consumer Discretionary (0.2%): | |||||||||||
Com7 PCL (c) | 1,154,800 | 1,020,594 | |||||||||
Consumer Staples (0.3%): | |||||||||||
CP ALL PCL | 515,600 | 1,242,518 | |||||||||
Financials (0.6%): | |||||||||||
Siam Commercial Bank PCL | 560,800 | 2,280,732 | |||||||||
Industrials (0.5%): | |||||||||||
Gunkul Engineering PCL | 19,056,400 | 1,894,600 | |||||||||
Materials (0.5%): | |||||||||||
Tipco Asphalt PCL | 3,169,200 | 2,240,424 | |||||||||
12,874,565 | |||||||||||
Turkey (0.9%): | |||||||||||
Consumer Discretionary (0.5%): | |||||||||||
Tofas Turk Otomobil Fabrikasi AS | 438,561 | 1,982,038 | |||||||||
Energy (0.4%): | |||||||||||
Tupras Turkiye Petrol Rafinerileri AS | 78,129 | 1,667,514 | |||||||||
3,649,552 | |||||||||||
United Kingdom (1.0%): | |||||||||||
Materials (1.0%): | |||||||||||
Anglo American PLC | 61,435 | 1,764,632 | |||||||||
Antofagasta PLC | 198,141 | 2,398,674 | |||||||||
4,163,306 | |||||||||||
Total Common Stocks (Cost $333,346,744) | 399,664,235 | ||||||||||
Preferred Stocks (0.7%) | |||||||||||
Brazil (0.7%): | |||||||||||
Industrials (0.7%): | |||||||||||
Randon SA Implementos e Participacoes | 855,100 | 2,859,147 | |||||||||
Total Preferred Stocks (Cost $1,853,592) | 2,859,147 | ||||||||||
Collateral for Securities Loaned^ (0.6%) | |||||||||||
United States (0.6%): | |||||||||||
BlackRock Liquidity Funds TempFund Portfolio, Institutional Class, 1.75% (d) | 111,877 | 111,877 | |||||||||
Fidelity Investments Money Market Government Portfolio, Class I, 1.54% (d) | 616,359 | 616,359 | |||||||||
Fidelity Investments Prime Money Market Portfolio, Class I, 1.75% (d) | 18,686 | 18,686 |
See notes to financial statements.
34
Victory Portfolios Victory Sophus Emerging Markets Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Shares | Value | |||||||||
Goldman Sachs Financial Square Prime Obligations Fund, Institutional Class, 1.80% (d) | 372,345 | $ | 372,345 | ||||||||
JPMorgan Prime Money Market Fund, Capital Class, 1.73% (d) | 409,608 | 409,608 | |||||||||
Morgan Stanley Institutional Liquidity Prime Portfolio, Institutional Class, 1.76% (d) | 819,188 | 819,189 | |||||||||
Total Collateral for Securities Loaned (Cost $2,348,063) | 2,348,064 | ||||||||||
Total Investments (Cost $337,548,399) — 98.9% | 404,871,446 | ||||||||||
Other assets in excess of liabilities — 1.1% | 4,697,297 | ||||||||||
NET ASSETS — 100.00% | $ | 409,568,743 |
^ Purchased with cash collateral from securities on loan.
(a) Non-income producing security.
(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, 2019, the fair value of these securities was $1,782,359 and amounted to 0.4% of net assets.
(c) All or a portion of this security is on loan.
(d) Rate disclosed is the daily yield on December 31, 2019.
ADR — American Depositary Receipt
GDR — Global 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, 2019 |
Security Description | Shares | Value | |||||||||
Common Stocks (96.2%) | |||||||||||
Brazil (6.1%): | |||||||||||
Consumer Discretionary (2.4%): | |||||||||||
Even Construtora E Incorporadora SA (a) | 13,600 | $ | 52,910 | ||||||||
Grupo SBF SA (a) | 8,300 | 72,916 | |||||||||
125,826 | |||||||||||
Financials (0.8%): | |||||||||||
Banco ABC Brasil SA | 8,408 | 42,323 | |||||||||
Health Care (0.9%): | |||||||||||
Qualicorp Consultoria e Corretora de Seguros SA | 5,300 | 49,068 | |||||||||
Industrials (1.1%): | |||||||||||
Companhia de Locacao das Americas | 7,200 | 40,792 | |||||||||
JSL SA | 2,300 | 15,376 | |||||||||
56,168 | |||||||||||
Real Estate (0.9%): | |||||||||||
Aliansce Sonae Shopping Centers SA | 3,890 | 48,613 | |||||||||
321,998 | |||||||||||
Canada (0.8%): | |||||||||||
Energy (0.8%): | |||||||||||
Parex Resources, Inc. (a) | 2,187 | 40,678 | |||||||||
China (11.7%): | |||||||||||
Communication Services (0.8%): | |||||||||||
Wuhu Sanqi Interactive Entertainment Network Technology Group Co. Ltd., Class A | 11,594 | 44,888 | |||||||||
Consumer Discretionary (0.6%): | |||||||||||
Tongcheng-Elong Holdings Ltd. (a) | 17,200 | 30,874 | |||||||||
Consumer Staples (1.2%): | |||||||||||
Anhui Kouzi Distillery Co. Ltd., Class A | 4,100 | 32,365 | |||||||||
Ausnutria Dairy Corp. Ltd. | 23,000 | 33,144 | |||||||||
65,509 | |||||||||||
Energy (0.8%): | |||||||||||
China Suntien Green Energy Corp. Ltd., Class H | 141,000 | 40,726 | |||||||||
Health Care (0.7%): | |||||||||||
Luye Pharma Group Ltd. (b)(c) | 46,000 | 34,490 | |||||||||
Industrials (1.3%): | |||||||||||
Shenzhen Expressway Co. Ltd., Class H (b) | 24,000 | 34,441 | |||||||||
Zoomlion Heavy Industry Science and Technology Co. Ltd., Class H | 43,200 | 36,215 | |||||||||
70,656 | |||||||||||
Information Technology (3.2%): | |||||||||||
Beijing Sinnet Technology Co. Ltd., Class A | 13,700 | 39,513 | |||||||||
Chinasoft International Ltd. | 82,000 | 46,290 |
See notes to financial statements.
36
Victory Portfolios Victory Sophus Emerging Markets Small Cap Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Shares | Value | |||||||||
Kingdee International Software Group Co. Ltd. | 42,000 | $ | 42,021 | ||||||||
Venustech Group, Inc., Class A | 8,100 | 39,353 | |||||||||
167,177 | |||||||||||
Materials (0.7%): | |||||||||||
West China Cement Ltd. | 242,000 | 39,775 | |||||||||
Real Estate (2.4%): | |||||||||||
China SCE Group Holdings Ltd. | 90,000 | 52,427 | |||||||||
Times Property Holdings Ltd. | 20,000 | 39,857 | |||||||||
Yuzhou Properties Co. Ltd. | 63,000 | 34,662 | |||||||||
126,946 | |||||||||||
621,041 | |||||||||||
Cyprus (1.0%): | |||||||||||
Financials (1.0%): | |||||||||||
TCS Group Holding PLC, GDR | 2,468 | 53,135 | |||||||||
Egypt (0.8%): | |||||||||||
Health Care (0.8%): | |||||||||||
Cleopatra Hospital (a) | 109,599 | 41,314 | |||||||||
Greece (2.0%): | |||||||||||
Industrials (1.1%): | |||||||||||
Mytilineos Holdings SA | 5,393 | 59,226 | |||||||||
Utilities (0.9%): | |||||||||||
Terna Energy SA | 5,311 | 45,647 | |||||||||
104,873 | |||||||||||
Hong Kong (1.7%): | |||||||||||
Communication Services (0.6%): | |||||||||||
CITIC Telecom International Holdings Ltd. | 87,000 | 31,711 | |||||||||
Information Technology (1.0%): | |||||||||||
Kingboard Laminates Holdings Ltd. (b) | 41,500 | 51,445 | |||||||||
Real Estate (0.1%): | |||||||||||
Times Neighborhood Holdings Ltd. (a) | 7,692 | 4,788 | |||||||||
87,944 | |||||||||||
India (11.0%): | |||||||||||
Consumer Discretionary (2.2%): | |||||||||||
Aditya Birla Fashion and Retail Ltd. (a) | 18,739 | 60,865 | �� | ||||||||
The Indian Hotels Co. Ltd. | 28,036 | 56,975 | |||||||||
117,840 | |||||||||||
Energy (1.0%): | |||||||||||
Petronet LNG Ltd. | 13,893 | 52,177 | |||||||||
Financials (2.2%): | |||||||||||
Cholamandalam Investment and Finance Co. Ltd. | 10,115 | 43,303 |
See notes to financial statements.
37
Victory Portfolios Victory Sophus Emerging Markets Small Cap Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Shares | Value | |||||||||
Federal Bank Ltd. | 23,013 | $ | 28,368 | ||||||||
Manappuram Finance Ltd. | 18,425 | 45,820 | |||||||||
117,491 | |||||||||||
Health Care (1.0%): | |||||||||||
Alkem Laboratories Ltd. | 1,966 | 55,498 | |||||||||
Industrials (2.1%): | |||||||||||
Engineers India Ltd. | 38,150 | 52,928 | |||||||||
PNC Infratech Ltd. | 21,258 | 57,092 | |||||||||
110,020 | |||||||||||
Materials (1.5%): | |||||||||||
Berger Paints India Ltd. | 7,546 | 54,521 | |||||||||
JK Lakshmi Cement Ltd. | 6,835 | 26,815 | |||||||||
81,336 | |||||||||||
Utilities (1.0%): | |||||||||||
CESC Ltd. | 5,041 | 52,056 | |||||||||
586,418 | |||||||||||
Indonesia (3.6%): | |||||||||||
Consumer Discretionary (0.9%): | |||||||||||
PT Mitra Adiperkasa Tbk | 645,600 | 49,061 | |||||||||
Industrials (0.7%): | |||||||||||
PT Wijaya Karya (Persero) Tbk | 245,200 | 35,067 | |||||||||
Materials (1.4%): | |||||||||||
PT Indocement Tunggal Prakarsa Tbk | 26,700 | 36,525 | |||||||||
PT Merdeka Copper Gold Tbk (a) | 485,000 | 37,379 | |||||||||
73,904 | |||||||||||
Real Estate (0.6%): | |||||||||||
PT Bekasi Fajar Industrial Estate Tbk | 2,031,400 | 31,613 | |||||||||
189,645 | |||||||||||
Korea, Republic Of (16.4%): | |||||||||||
Communication Services (1.8%): | |||||||||||
AfreecaTV Co. Ltd. | 807 | 48,036 | |||||||||
Innocean Worldwide, Inc. | 784 | 48,107 | |||||||||
96,143 | |||||||||||
Consumer Discretionary (1.5%): | |||||||||||
Fila Korea Ltd. | 749 | 34,229 | |||||||||
Hyosung TNC Co. Ltd. | 329 | 43,790 | |||||||||
78,019 | |||||||||||
Consumer Staples (1.3%): | |||||||||||
BGF Retail Co. Ltd. | 250 | 36,584 | |||||||||
NeoPharm Co. Ltd. | 858 | 35,848 | |||||||||
72,432 |
See notes to financial statements.
38
Victory Portfolios Victory Sophus Emerging Markets Small Cap Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Shares | Value | |||||||||
Health Care (3.8%): | |||||||||||
Caregen Co. Ltd. (a)(d)(e) | 571 | $ | 33,999 | ||||||||
Dong-A ST Co. Ltd. | 459 | 47,150 | |||||||||
Hanall Biopharma Co. Ltd. (a) | 1,347 | 42,035 | |||||||||
Il Dong Pharmaceutical Co. Ltd. (a) | 2,570 | 37,086 | |||||||||
I-Sens, Inc. | 1,876 | 41,617 | |||||||||
201,887 | |||||||||||
Industrials (0.8%): | |||||||||||
Samsung Engineering Co. Ltd. (a) | 2,510 | 41,486 | |||||||||
Information Technology (5.3%): | |||||||||||
Douzone Bizon Co. Ltd. | 813 | 56,841 | |||||||||
HyVision System, Inc. (a) | 4,986 | 53,702 | |||||||||
LG Innotek Co. Ltd. | 361 | 43,517 | |||||||||
SFA Engineering Corp. | 1,084 | 43,301 | |||||||||
Tokai Carbon Korea Co. Ltd. | 584 | 33,240 | |||||||||
Unitest, Inc. | 4,026 | 49,844 | |||||||||
280,445 | |||||||||||
Materials (1.9%): | |||||||||||
Hansol Chemical Co. Ltd. | 616 | 56,380 | |||||||||
Ssangyong Cement Industrial Co. Ltd. | 8,767 | 42,950 | |||||||||
99,330 | |||||||||||
869,742 | |||||||||||
Malaysia (1.0%): | |||||||||||
Financials (1.0%): | |||||||||||
RHB Capital Berhad | 36,400 | 51,445 | |||||||||
Mexico (2.7%): | |||||||||||
Consumer Discretionary (0.7%): | |||||||||||
Alsea SAB de CV (a) | 13,897 | 36,634 | |||||||||
Financials (1.1%): | |||||||||||
Gentera SAB de CV | 58,326 | 60,075 | |||||||||
Industrials (0.9%): | |||||||||||
Controladora Vuela Cia de Aviacion SAB de CV, ADR (a) | 4,684 | 48,807 | |||||||||
145,516 | |||||||||||
Peru (1.3%): | |||||||||||
Financials (0.7%): | |||||||||||
Intercorp Financial Services, Inc. | 882 | 36,074 | |||||||||
Industrials (0.6%): | |||||||||||
Ferreycorp SAA | 51,229 | 33,889 | |||||||||
69,963 | |||||||||||
Philippines (2.4%): | |||||||||||
Consumer Discretionary (0.9%): | |||||||||||
Bloomberry Resorts Corp. | 220,500 | 49,179 |
See notes to financial statements.
39
Victory Portfolios Victory Sophus Emerging Markets Small Cap Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Shares | Value | |||||||||
Financials (0.7%): | |||||||||||
Metropolitan Bank & Trust Co. | 27,960 | $ | 36,589 | ||||||||
Industrials (0.8%): | |||||||||||
Cebu Air, Inc. | 25,220 | 44,532 | |||||||||
130,300 | |||||||||||
Poland (1.6%): | |||||||||||
Communication Services (0.9%): | |||||||||||
CD Projekt SA | 692 | 51,048 | |||||||||
Energy (0.7%): | |||||||||||
Grupa Lotos SA | 1,666 | 36,764 | |||||||||
87,812 | |||||||||||
Saudi Arabia (2.1%): | |||||||||||
Consumer Discretionary (1.5%): | |||||||||||
Jarir Marketing Co. | 857 | 37,839 | |||||||||
Leejam Sports Co. JSC | 1,979 | 42,766 | |||||||||
80,605 | |||||||||||
Financials (0.6%): | |||||||||||
Bupa Arabia for Cooperative Insurance Co. | 1,231 | 33,632 | |||||||||
114,237 | |||||||||||
South Africa (3.3%): | |||||||||||
Consumer Staples (0.8%): | |||||||||||
The SPAR Group Ltd. | 3,206 | 45,316 | |||||||||
Financials (0.7%): | |||||||||||
Liberty Holdings Ltd. | 4,862 | 38,461 | |||||||||
Materials (1.8%): | |||||||||||
AngloGold Ashanti Ltd. | 1,799 | 40,888 | |||||||||
Impala Platinum Holdings Ltd. (a) | 5,195 | 53,107 | |||||||||
93,995 | |||||||||||
177,772 | |||||||||||
Taiwan (15.6%): | |||||||||||
Consumer Discretionary (3.9%): | |||||||||||
Giant Manufacturing Co. Ltd. | 5,000 | 35,596 | |||||||||
Power Wind Health Industry, Inc. | 6,692 | 44,760 | |||||||||
Poya International Co. Ltd. | 4,000 | 56,245 | |||||||||
Tong Yang Industry Co. Ltd. | 23,000 | 35,787 | |||||||||
Topkey Corp. | 7,000 | 32,550 | |||||||||
204,938 | |||||||||||
Financials (2.0%): | |||||||||||
Chailease Holding Co. Ltd. | 11,330 | 52,233 | |||||||||
China Life Insurance Co. Ltd. (a) | 62,000 | 52,936 | |||||||||
105,169 |
See notes to financial statements.
40
Victory Portfolios Victory Sophus Emerging Markets Small Cap Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Shares | Value | |||||||||
Health Care (0.7%): | |||||||||||
Bioteque Corp. | 9,000 | $ | 39,166 | ||||||||
Industrials (1.0%): | |||||||||||
Taiwan Secom Co. Ltd. | 18,000 | 53,319 | |||||||||
Information Technology (7.0%): | |||||||||||
Flexium Interconnect, Inc. | 17,000 | 65,036 | |||||||||
Formosa Sumco Technology Corp. | 12,000 | 46,855 | |||||||||
Global Unichip Corp. | 5,000 | 40,249 | |||||||||
Micro-Star International Co. Ltd. | 17,000 | 49,156 | |||||||||
Sino-American Silicon Products, Inc. | 17,000 | 56,468 | |||||||||
Walsin Technology Corp. | 8,000 | 63,862 | |||||||||
Wistron Corp. | 53,000 | 50,180 | |||||||||
371,806 | |||||||||||
Materials (1.0%): | |||||||||||
Shinkong Synthetic Fibers Corp. | 130,000 | 52,220 | |||||||||
826,618 | |||||||||||
Taiwan, Province Of China (3.3%): | |||||||||||
Consumer Discretionary (0.8%): | |||||||||||
La Kaffa International Co. Ltd. | 7,000 | 39,629 | |||||||||
Information Technology (2.5%): | |||||||||||
Holy Stone Enterprise Co. Ltd. | 12,000 | 46,491 | |||||||||
Lelon Electronics Corp. | 31,000 | 45,422 | |||||||||
Supreme Electronics Co. Ltd. | 41,000 | 41,238 | |||||||||
133,151 | |||||||||||
172,780 | |||||||||||
Thailand (4.9%): | |||||||||||
Communication Services (1.3%): | |||||||||||
Major Cineplex Group PCL | 37,200 | 31,339 | |||||||||
Plan B Media PCL | 160,100 | 40,578 | |||||||||
71,917 | |||||||||||
Consumer Discretionary (1.0%): | |||||||||||
Com7 PCL | 17,600 | 15,555 | |||||||||
Somboon Advance Technology PCL | 68,100 | 35,459 | |||||||||
51,014 | |||||||||||
Financials (1.0%): | |||||||||||
Kiatnakin Bank PCL | 24,000 | 52,842 | |||||||||
Industrials (0.8%): | |||||||||||
Gunkul Engineering PCL | 415,800 | 41,339 | |||||||||
Materials (0.8%): | |||||||||||
Tipco Asphalt PCL | 58,700 | 41,497 | |||||||||
258,609 |
See notes to financial statements.
41
Victory Portfolios Victory Sophus Emerging Markets Small Cap Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Shares | Value | |||||||||
Turkey (2.9%): | |||||||||||
Consumer Discretionary (1.5%): | |||||||||||
Kordsa Teknik Tekstil AS | 19,545 | $ | 43,023 | ||||||||
Tofas Turk Otomobil Fabrikasi AS | 8,224 | 37,168 | |||||||||
Yatas Yatak ve Yorgan Sanayi ve Ticaret AS (a) | — | — | (f) | ||||||||
80,191 | |||||||||||
Consumer Staples (0.8%): | |||||||||||
BIM Birlesik Magazalar AS | 5,110 | 40,135 | |||||||||
Energy (0.6%): | |||||||||||
Tupras Turkiye Petrol Rafinerileri AS | 1,531 | 32,677 | |||||||||
153,003 | |||||||||||
Total Common Stocks (Cost $4,540,571) | 5,104,843 | ||||||||||
Preferred Stocks (2.1%) | |||||||||||
Brazil (2.1%): | |||||||||||
Financials (1.0%): | |||||||||||
Banco do Estado do Rio Grande do Sul SA, Class B | 9,700 | 52,442 | |||||||||
Industrials (1.1%): | |||||||||||
Randon SA Implementos e Participacoes | 17,400 | 58,179 | |||||||||
110,621 | |||||||||||
Total Preferred Stocks (Cost $82,964) | 110,621 | ||||||||||
Collateral for Securities Loaned^ (2.1%) | |||||||||||
United States (2.1%): | |||||||||||
BlackRock Liquidity Funds TempFund Portfolio, Institutional Class, 1.75% (g) | 5,444 | 5,444 | |||||||||
Fidelity Investments Money Market Government Portfolio, Class I, 1.54% (g) | 29,994 | 29,994 | |||||||||
Fidelity Investments Prime Money Market Portfolio, Class I, 1.75% (g) | 909 | 909 | |||||||||
Goldman Sachs Financial Square Prime Obligations Fund, Institutional Class, 1.80% (g) | 18,120 | 18,120 | |||||||||
JPMorgan Prime Money Market Fund, Capital Class, 1.73% (g) | 19,933 | 19,933 | |||||||||
Morgan Stanley Institutional Liquidity Prime Portfolio, Institutional Class, 1.76% (g) | 39,865 | 39,865 | |||||||||
Total Collateral for Securities Loaned (Cost $114,265) | 114,265 | ||||||||||
Total Investments (Cost $4,737,800) — 100.3% | 5,329,729 | ||||||||||
Liabilities in excess of other assets — (0.3)% | (14,390 | ) | |||||||||
NET ASSETS — 100.00% | $ | 5,315,339 |
^ 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) 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, 2019, the fair value of these securities was $34,490 and amounted to 0.6% of net assets.
See notes to financial statements.
42
Victory Portfolios Victory Sophus Emerging Markets Small Cap Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
(d) Security was fair valued based upon procedures approved by the Board of Trustees and represents 0.6% of the Fund's net assets as of December 31, 2019. This security is classified as Level 3 within the fair value hierarchy. (See Note 2)
(e) The Fund's Adviser has deemed this security to be illiquid based upon procedures approved by the Board of Trustees. As of December 31, 2019, illiquid securities were 0.6% of the Fund's net assets.
(f) Rounds to less than $1.
(g) Rate disclosed is the daily yield on December 31, 2019.
ADR — American Depositary Receipt
GDR — Global Depositary Receipt
PCL — Public Company Limited
PLC — Public Limited Company
See notes to financial statements.
43
Victory Portfolios | Statements of Assets and Liabilities December 31, 2019 |
Victory RS International Fund | Victory RS Global Fund | ||||||||||
ASSETS: | |||||||||||
Investments, at value (Cost $251,139,528 and $64,759,625) | $ | 271,102,308 | (a) | $ | 83,227,220 | (b) | |||||
Foreign currency, at value (Cost $— and $8,212) | — | 8,263 | |||||||||
Cash and cash equivalents | 9,021,906 | 1,468,851 | |||||||||
Interest and dividends receivable | 117,881 | 54,198 | |||||||||
Receivable for capital shares issued | 629,350 | 8,244 | |||||||||
Reclaims receivable | 122,806 | 49,468 | |||||||||
Receivable from Adviser | 84,949 | 89,276 | |||||||||
Prepaid expenses | 24,970 | 25,865 | |||||||||
Total Assets | 281,104,170 | 84,931,385 | |||||||||
LIABILITIES: | |||||||||||
Payables: | |||||||||||
Collateral received on loaned securities | 22,253 | 113,975 | |||||||||
Capital shares redeemed | 11,637 | 82,064 | |||||||||
Accrued foreign capital gains taxes | — | 24,555 | |||||||||
Accrued expenses and other payables: | |||||||||||
Investment advisory fees | 183,287 | 56,301 | |||||||||
Administration fees | 13,446 | 4,060 | |||||||||
Custodian fees | 10,379 | 5,588 | |||||||||
Transfer agent fees | 19,174 | 15,244 | |||||||||
Compliance fees | 193 | 64 | |||||||||
Trustees' fees | 246 | 84 | |||||||||
12b-1 fees | 3,684 | 4,708 | |||||||||
Other accrued expenses | 26,656 | 23,054 | |||||||||
Total Liabilities | 290,955 | 329,697 | |||||||||
NET ASSETS: | |||||||||||
Capital | 259,971,310 | 67,201,219 | |||||||||
Total distributable earnings/(loss) | 20,841,905 | 17,400,469 | |||||||||
Net Assets | $ | 280,813,215 | $ | 84,601,688 | |||||||
Net Assets | |||||||||||
Class A Shares | $ | 22,619,937 | $ | 26,471,375 | |||||||
Class C Shares | 1,479,759 | 3,100,604 | |||||||||
Class R Shares | 2,652,250 | 2,365,182 | |||||||||
Class R6 Shares | 178,695,422 | 123,523 | |||||||||
Class Y Shares | 75,365,847 | 52,541,004 | |||||||||
Total | $ | 280,813,215 | $ | 84,601,688 | |||||||
Shares (unlimited number of shares authorized with a par value of $0.001 per share): | |||||||||||
Class A Shares | 1,749,583 | 1,780,930 | |||||||||
Class C Shares | 158,076 | 215,649 | |||||||||
Class R Shares | 219,795 | 127,474 | |||||||||
Class R6 Shares | 16,700,345 | 11,158 | |||||||||
Class Y Shares | 5,915,552 | 3,568,608 | |||||||||
Total | 24,743,351 | 5,703,819 | |||||||||
Net asset value, offering (except Class A Shares) and redemption price per share: | |||||||||||
Class A Shares | $ | 12.93 | $ | 14.86 | |||||||
Class C Shares (c) | $ | 9.36 | $ | 14.38 | |||||||
Class R Shares | $ | 12.07 | $ | 18.55 | |||||||
Class R6 Shares | $ | 10.70 | $ | 11.07 | |||||||
Class Y Shares | $ | 12.74 | $ | 14.72 | |||||||
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 | $ | 13.72 | $ | 15.77 |
(a) Includes $20,962 of securities on loan.
(b) Includes $108,428 of securities on loan.
(c) 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, 2019 |
Victory Sophus Emerging Markets Fund | Victory Sophus Emerging Markets Small Cap Fund | ||||||||||
ASSETS: | |||||||||||
Investments, at value (Cost $337,548,399 and $4,737,800) | $ | 404,871,446 | (a) | $ | 5,329,729 | (b) | |||||
Foreign currency, at value (Cost $613,608 and $16,538) | 615,331 | 16,582 | |||||||||
Cash and cash equivalents | 5,959,614 | 60,655 | |||||||||
Interest and dividends receivable | 1,091,450 | 6,872 | |||||||||
Receivable for capital shares issued | 415,983 | — | |||||||||
Receivable for investments sold | 516,427 | 4,624 | |||||||||
Reclaims receivable | 5,123 | 626 | |||||||||
Receivable from Adviser | 203,968 | 27,310 | |||||||||
Prepaid expenses | 18,646 | 29,703 | |||||||||
Total Assets | 413,697,988 | 5,476,101 | |||||||||
LIABILITIES: | |||||||||||
Payables: | |||||||||||
Collateral received on loaned securities | 2,348,064 | 114,265 | |||||||||
Investments purchased | 188,943 | 5,069 | |||||||||
Capital shares redeemed | 951,027 | — | |||||||||
Accrued foreign capital gains taxes | 110,426 | 2,305 | |||||||||
Accrued expenses and other payables: | |||||||||||
Investment advisory fees | 333,585 | 5,498 | |||||||||
Administration fees | 19,089 | 252 | |||||||||
Custodian fees | 39,167 | 6,998 | |||||||||
Transfer agent fees | 65,134 | 586 | |||||||||
Compliance fees | 253 | 3 | |||||||||
Trustees' fees | 371 | 5 | |||||||||
12b-1 fees | 12,336 | 96 | |||||||||
Other accrued expenses | 60,850 | 25,685 | |||||||||
Total Liabilities | 4,129,245 | 160,762 | |||||||||
NET ASSETS: | |||||||||||
Capital | 358,355,172 | 4,785,441 | |||||||||
Total distributable earnings/(loss) | 51,213,571 | 529,898 | |||||||||
Net Assets | $ | 409,568,743 | $ | 5,315,339 | |||||||
Net Assets | |||||||||||
Class A Shares | $ | 62,346,075 | $ | 336,117 | |||||||
Class C Shares | 5,787,369 | 139,880 | |||||||||
Class R Shares | 13,816,277 | — | |||||||||
Class R6 Shares | 72,196,074 | — | |||||||||
Class Y Shares | 255,422,948 | 4,839,342 | |||||||||
Total | $ | 409,568,743 | $ | 5,315,339 | |||||||
Shares (unlimited number of shares authorized with a par value of $0.001 per share): | |||||||||||
Class A Shares | 2,917,252 | 45,887 | |||||||||
Class C Shares | 362,978 | 21,016 | |||||||||
Class R Shares | 689,728 | — | |||||||||
Class R6 Shares | 3,330,016 | — | |||||||||
Class Y Shares | 11,888,863 | 663,512 | |||||||||
Total | 19,188,837 | 730,415 |
(continues on next page)
See notes to financial statements.
45
Victory Portfolios | Statements of Assets and Liabilities December 31, 2019 |
(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 | $ | 21.37 | $ | 7.32 | |||||||
Class C Shares (c) | $ | 15.94 | $ | 6.66 | |||||||
Class R Shares | $ | 20.03 | $ | — | |||||||
Class R6 Shares | $ | 21.68 | $ | — | |||||||
Class Y Shares | $ | 21.48 | $ | 7.29 | |||||||
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 | $ | 22.67 | $ | 7.77 |
(a) Includes $2,231,350 of securities on loan.
(b) Includes $108,339 of securities on loan.
(c) Redemption price per share varies by the length of time shares are held.
See notes to financial statements.
46
Victory Portfolios | Statements of Operations For the Year Ended December 31, 2019 |
Victory RS International Fund | Victory RS Global Fund | ||||||||||
Investment Income: | |||||||||||
Dividends | $ | 2,546,176 | $ | 1,449,690 | |||||||
Interest | 67,329 | 22,063 | |||||||||
Securities lending (net of fees) | 6,582 | 3,802 | |||||||||
Foreign tax withholding | (271,036 | ) | (83,015 | ) | |||||||
Total Income | 2,349,051 | 1,392,540 | |||||||||
Expenses: | |||||||||||
Investment advisory fees | 770,705 | 440,299 | |||||||||
Administration fees | 57,617 | 33,407 | |||||||||
12b-1 fees — Class A Shares | 46,383 | 25,849 | |||||||||
12b-1 fees — Class C Shares | 12,079 | 26,974 | |||||||||
12b-1 fees — Class R Shares | 11,111 | 10,214 | |||||||||
Custodian fees | 49,822 | 23,811 | |||||||||
Transfer agent fees | 1,616 | 1,889 | |||||||||
Transfer agent fees — Class A Shares | 34,579 | 13,799 | |||||||||
Transfer agent fees — Class C Shares | 1,801 | 3,127 | |||||||||
Transfer agent fees — Class R Shares | 4,403 | 5,085 | |||||||||
Transfer agent fees — Class R6 Shares (a) | 71 | 41 | |||||||||
Transfer agent fees — Class Y Shares | 34,510 | 40,551 | |||||||||
Trustees' fees | 5,366 | 5,042 | |||||||||
Compliance fees | 646 | 421 | |||||||||
Legal and audit fees | 19,571 | 16,868 | |||||||||
State registration and filing fees | 73,214 | 71,746 | |||||||||
Other expenses | 45,886 | 34,917 | |||||||||
Total Expenses | 1,169,380 | 754,040 | |||||||||
Expenses waived/reimbursed by Adviser | (266,869 | ) | (359,812 | ) | |||||||
Net Expenses | 902,511 | 394,228 | |||||||||
Net Investment Income (Loss) | 1,446,540 | 998,312 | |||||||||
Realized/Unrealized Gains (Losses) from Investments: | |||||||||||
Net realized gains (losses) from investment securities and foreign currency translations | (113,975 | ) | (631,233 | ) | |||||||
Foreign refunds (taxes) on realized gains | — | 4,492 | |||||||||
Net change in unrealized appreciation/depreciation on investment securities and foreign currency translations | 19,916,509 | 14,003,091 | |||||||||
Net change in accrued foreign taxes on unrealized gains | — | (14,260 | ) | ||||||||
Net realized/unrealized gains (losses) on investments | 19,802,534 | 13,362,090 | |||||||||
Change in net assets resulting from operations | $ | 21,249,074 | $ | 14,360,402 |
(a) Victory RS International Fund and Victory RS Global Fund Class R6 Shares commenced operations on May 2, 2019.
See notes to financial statements.
47
Victory Portfolios | Statements of Operations For the Year Ended December 31, 2019 |
Victory Sophus Emerging Markets Fund | Victory Sophus Emerging Markets Small Cap Fund | ||||||||||
Investment Income: | |||||||||||
Cash dividends | $ | 10,660,335 | $ | 156,569 | |||||||
Non-cash dividends | 2,201,220 | — | |||||||||
Interest | 108,019 | 1,332 | |||||||||
Securities lending (net of fees) | 106,868 | 1,234 | |||||||||
Foreign tax withholding | (1,007,324 | ) | (18,652 | ) | |||||||
Total Income | 12,069,118 | 140,483 | |||||||||
Expenses: | |||||||||||
Investment advisory fees | 3,610,821 | 63,853 | |||||||||
Administration fees | 220,457 | 3,120 | |||||||||
12b-1 fees — Class A Shares | 149,334 | 764 | |||||||||
12b-1 fees — Class C Shares | 77,691 | 1,382 | |||||||||
12b-1 fees — Class R Shares | 65,879 | — | |||||||||
Custodian fees | 236,806 | 54,601 | |||||||||
Transfer agent fees | 11,313 | 1,415 | |||||||||
Transfer agent fees — Class A Shares | 91,900 | 589 | |||||||||
Transfer agent fees — Class C Shares | 10,200 | 178 | |||||||||
Transfer agent fees — Class R Shares | 21,981 | — | |||||||||
Transfer agent fees — Class R6 Shares | 1,452 | — | |||||||||
Transfer agent fees — Class Y Shares | 238,165 | 1,746 | |||||||||
Trustees' fees | 29,229 | 1,670 | |||||||||
Compliance fees | 2,807 | 40 | |||||||||
Legal and audit fees | 56,251 | 26,442 | |||||||||
State registration and filing fees | 95,949 | 41,818 | |||||||||
Line of credit fees | — | 119 | |||||||||
Interfund lending fees | 1,166 | 10 | |||||||||
Other expenses | 107,545 | 32,649 | |||||||||
Total Expenses | 5,028,946 | 230,396 | |||||||||
Expenses waived/reimbursed by Adviser | (1,124,230 | ) | (151,458 | ) | |||||||
Net Expenses | 3,904,716 | 78,938 | |||||||||
Net Investment Income (Loss) | 8,164,402 | 61,545 | |||||||||
Realized/Unrealized Gains (Losses) from Investments: | |||||||||||
Net realized gains (losses) from investment securities and foreign currency translations | (6,722,276 | ) | 112,327 | ||||||||
Foreign refunds (taxes) on realized gains | (54,657 | ) | 6,291 | ||||||||
Net change in unrealized appreciation/depreciation on investment securities and foreign currency translations | 72,571,401 | 788,244 | |||||||||
Net change in accrued foreign taxes on unrealized gains | (15,750 | ) | (2,303 | ) | |||||||
Net realized/unrealized gains (losses) on investments | 65,778,718 | 904,559 | |||||||||
Change in net assets resulting from operations | $ | 73,943,120 | $ | 966,104 |
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, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2019 | Year Ended December 31, 2018 | ||||||||||||||||
From Investment Activities: | |||||||||||||||||||
Operations: | |||||||||||||||||||
Net investment income (loss) | $ | 1,446,540 | $ | 477,399 | $ | 998,312 | $ | 570,635 | |||||||||||
Net realized gains (losses) from investments | (113,975 | ) | 1,177,830 | (626,741 | ) | 860,931 | |||||||||||||
Net change in unrealized appreciation/depreciation on investments | 19,916,509 | (4,529,981 | ) | 13,988,831 | (3,474,816 | ) | |||||||||||||
Change in net assets resulting from operations | 21,249,074 | (2,874,752 | ) | 14,360,402 | (2,043,250 | ) | |||||||||||||
Distributions to Shareholders: | |||||||||||||||||||
Class A Shares | (14,432 | ) | (284,566 | ) | (298,099 | ) | (235,004 | ) | |||||||||||
Class C Shares | (963 | ) | (11,666 | ) | (18,415 | ) | (90,683 | ) | |||||||||||
Class R Shares | (1,332 | ) | (31,806 | ) | (18,008 | ) | (63,429 | ) | |||||||||||
Class R6 Shares (a) | (400,310 | ) | — | (1,870 | ) | — | |||||||||||||
Class Y Shares | (155,010 | ) | (123,500 | ) | (719,354 | ) | (1,171,457 | ) | |||||||||||
Change in net assets resulting from distributions to shareholders | (572,047 | ) | (451,538 | ) | (1,055,746 | ) | (1,560,573 | ) | |||||||||||
Change in net assets resulting from capital transactions | 235,953,255 | 2,287,100 | 35,779,871 | 6,560,242 | |||||||||||||||
Change in net assets | 256,630,282 | (1,039,190 | ) | 49,084,527 | 2,956,419 | ||||||||||||||
Net Assets: | |||||||||||||||||||
Beginning of period | 24,182,933 | 25,222,123 | 35,517,161 | 32,560,742 | |||||||||||||||
End of period | $ | 280,813,215 | $ | 24,182,933 | $ | 84,601,688 | $ | 35,517,161 |
(a) Victory RS International Fund and Victory RS Global Fund Class R6 Shares commenced operations on May 2, 2019.
(continues on next page)
See notes to financial statements.
49
Victory Portfolios | Statements of Changes in Net Assets |
(continued)
Victory RS International Fund | Victory RS Global Fund | ||||||||||||||||||
Year Ended December 31, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2019 | Year Ended December 31, 2018 | ||||||||||||||||
Capital Transactions: | |||||||||||||||||||
Class A Shares | |||||||||||||||||||
Proceeds from shares issued | $ | 6,373,842 | $ | 2,288,447 | $ | 20,850,831 | $ | 3,860,237 | |||||||||||
Distributions reinvested | 14,244 | 281,572 | 297,840 | 234,677 | |||||||||||||||
Cost of shares redeemed | (3,048,817 | ) | (3,237,246 | ) | (2,936,045 | ) | (1,373,547 | ) | |||||||||||
Total Class A Shares | $ | 3,339,269 | $ | (667,227 | ) | $ | 18,212,626 | $ | 2,721,367 | ||||||||||
Class C Shares | |||||||||||||||||||
Proceeds from shares issued | $ | 819,811 | $ | 194,402 | $ | 795,903 | $ | 971,122 | |||||||||||
Distributions reinvested | 960 | 11,611 | 17,374 | 85,530 | |||||||||||||||
Cost of shares redeemed | (247,174 | ) | (465,668 | ) | (737,389 | ) | (594,065 | ) | |||||||||||
Total Class C Shares | $ | 573,597 | $ | (259,655 | ) | $ | 75,888 | $ | 462,587 | ||||||||||
Class R Shares | |||||||||||||||||||
Proceeds from shares issued | $ | 927,579 | $ | 223,517 | $ | 771,536 | $ | 1,047,820 | |||||||||||
Distributions reinvested | 1,332 | 31,806 | 18,002 | 63,412 | |||||||||||||||
Cost of shares redeemed | (477,688 | ) | (706,064 | ) | (869,410 | ) | (1,274,358 | ) | |||||||||||
Total Class R Shares | $ | 451,223 | $ | (450,741 | ) | $ | (79,872 | ) | $ | (163,126 | ) | ||||||||
Class R6 Shares (a) | |||||||||||||||||||
Proceeds from shares issued | $ | 173,919,837 | $ | — | $ | 116,672 | $ | — | |||||||||||
Distributions reinvested | 397,374 | — | 1,870 | — | |||||||||||||||
Cost of shares redeemed | (6,233,457 | ) | — | — | — | ||||||||||||||
Total Class R6 Shares | $ | 168,083,754 | $ | — | $ | 118,542 | $ | — | |||||||||||
Class Y Shares | |||||||||||||||||||
Proceeds from shares issued | $ | 67,946,711 | $ | 4,390,231 | $ | 28,548,290 | $ | 9,260,102 | |||||||||||
Distributions reinvested | 154,814 | 120,168 | 711,835 | 1,155,690 | |||||||||||||||
Cost of shares redeemed | (4,596,113 | ) | (845,676 | ) | (11,807,438 | ) | (6,876,378 | ) | |||||||||||
Total Class Y Shares | $ | 63,505,412 | $ | 3,664,723 | $ | 17,452,687 | $ | 3,539,414 | |||||||||||
Change in net assets resulting from capital transactions | $ | 235,953,255 | $ | 2,287,100 | $ | 35,779,871 | $ | 6,560,242 |
(a) Victory RS International Fund and Victory RS Global Fund Class R6 Shares commenced operations on May 2, 2019.
(continues on next page)
See notes to financial statements.
50
Victory Portfolios | Statements of Changes in Net Assets |
(continued)
Victory RS International Fund | Victory RS Global Fund | ||||||||||||||||||
Year Ended December 31, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2019 | Year Ended December 31, 2018 | ||||||||||||||||
Share Transactions: | |||||||||||||||||||
Class A Shares | |||||||||||||||||||
Issued | 523,906 | 195,662 | 1,487,189 | 307,527 | |||||||||||||||
Reinvested | 1,104 | 26,639 | 20,145 | 20,347 | |||||||||||||||
Redeemed | (253,679 | ) | (271,037 | ) | (220,393 | ) | (105,006 | ) | |||||||||||
Total Class A Shares | 271,331 | (48,736 | ) | 1,286,941 | 222,868 | ||||||||||||||
Class C Shares | |||||||||||||||||||
Issued | 95,902 | 23,020 | 59,708 | 76,188 | |||||||||||||||
Reinvested | 103 | 1,506 | 1,215 | 7,669 | |||||||||||||||
Redeemed | (28,453 | ) | (53,829 | ) | (56,283 | ) | (47,913 | ) | |||||||||||
Total Class C Shares | 67,552 | (29,303 | ) | 4,640 | 35,944 | ||||||||||||||
Class R Shares | |||||||||||||||||||
Issued | 83,638 | 20,065 | 45,802 | 63,257 | |||||||||||||||
Reinvested | 111 | 3,216 | 976 | 4,422 | |||||||||||||||
Redeemed | (43,472 | ) | (65,948 | ) | (52,905 | ) | (78,778 | ) | |||||||||||
Total Class R Shares | 40,277 | (42,667 | ) | (6,127 | ) | (11,099 | ) | ||||||||||||
Class R6 Shares (a) | |||||||||||||||||||
Issued | 17,284,970 | — | 10,988 | — | |||||||||||||||
Reinvested | 37,199 | — | 170 | — | |||||||||||||||
Redeemed | (621,824 | ) | — | — | — | ||||||||||||||
Total Class R6 Shares | 16,700,345 | — | 11,158 | — | |||||||||||||||
Class Y Shares | |||||||||||||||||||
Issued | 5,719,982 | 373,965 | 2,167,090 | 722,761 | |||||||||||||||
Reinvested | 12,169 | 11,555 | 48,603 | 101,047 | |||||||||||||||
Redeemed | (387,903 | ) | (75,831 | ) | (884,579 | ) | (538,364 | ) | |||||||||||
Total Class Y Shares | 5,344,248 | 309,689 | 1,331,114 | 285,444 | |||||||||||||||
Change in Shares | 22,423,753 | 188,983 | 2,627,726 | 533,157 |
(a) Victory RS International Fund and Victory RS Global Fund Class R6 Shares commenced operations on May 2, 2019.
See notes to financial statements.
51
Victory Portfolios | Statements of Changes in Net Assets |
Victory Sophus Emerging Markets Fund | Victory Sophus Emerging Markets Small Cap Fund | ||||||||||||||||||
Year Ended December 31, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2019 | Year Ended December 31, 2018 | ||||||||||||||||
From Investment Activities: | |||||||||||||||||||
Operations: | |||||||||||||||||||
Net investment income (loss) | $ | 8,164,402 | $ | 4,102,037 | $ | 61,545 | $ | 45,674 | |||||||||||
Net realized gains (losses) from investments | (6,776,933 | ) | (14,816,850 | ) | 118,618 | 206,641 | |||||||||||||
Net change in unrealized appreciation/depreciation on investments | 72,555,651 | (57,042,614 | ) | 785,941 | (1,413,651 | ) | |||||||||||||
Change in net assets resulting from operations | 73,943,120 | (67,757,427 | ) | 966,104 | (1,161,336 | ) | |||||||||||||
Distributions to Shareholders: | |||||||||||||||||||
Class A Shares | (277,823 | ) | (2,404,521 | ) | (2,782 | ) | (77,275 | ) | |||||||||||
Class C Shares | — | (487,115 | ) | (314 | ) | (28,802 | ) | ||||||||||||
Class R Shares | (39,217 | ) | (557,638 | ) | — | — | |||||||||||||
Class R6 Shares | (562,165 | ) | (1,290,095 | ) | — | — | |||||||||||||
Class Y Shares | (1,923,302 | ) | (7,886,236 | ) | (56,360 | ) | (697,233 | ) | |||||||||||
Change in net assets resulting from distributions to shareholders | (2,802,507 | ) | (12,625,605 | ) | (59,456 | ) | (803,310 | ) | |||||||||||
Change in net assets resulting from capital transactions | 51,599,325 | 137,334,265 | 72,811 | (938,856 | ) | ||||||||||||||
Change in net assets | 122,739,938 | 56,951,233 | 979,459 | (2,903,502 | ) | ||||||||||||||
Net Assets: | |||||||||||||||||||
Beginning of period | 286,828,805 | 229,877,572 | 4,335,880 | 7,239,382 | |||||||||||||||
End of period | $ | 409,568,743 | $ | 286,828,805 | $ | 5,315,339 | $ | 4,335,880 |
(continues on next page)
See notes to financial statements.
52
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, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2019 | Year Ended December 31, 2018 | ||||||||||||||||
Capital Transactions: | |||||||||||||||||||
Class A Shares | |||||||||||||||||||
Proceeds from shares issued | $ | 9,482,029 | $ | 33,865,822 | $ | 32,131 | $ | 292,487 | |||||||||||
Distributions reinvested | 271,641 | 2,332,176 | 2,782 | 77,275 | |||||||||||||||
Cost of shares redeemed | (16,188,808 | ) | (39,120,936 | ) | (93,194 | ) | (1,300,280 | ) | |||||||||||
Total Class A Shares | $ | (6,435,138 | ) | $ | (2,922,938 | ) | $ | (58,281 | ) | $ | (930,518 | ) | |||||||
Class C Shares | |||||||||||||||||||
Proceeds from shares issued | $ | 530,542 | $ | 2,799,033 | $ | 18,900 | $ | 115,563 | |||||||||||
Distributions reinvested | — | 472,508 | 314 | 24,961 | |||||||||||||||
Cost of shares redeemed | (6,342,404 | ) | (5,728,052 | ) | (16,359 | ) | (64,924 | ) | |||||||||||
Total Class C Shares | $ | (5,811,862 | ) | $ | (2,456,511 | ) | $ | 2,855 | $ | 75,600 | |||||||||
Class R Shares | |||||||||||||||||||
Proceeds from shares issued | $ | 1,606,429 | $ | 3,155,291 | $ | — | $ | — | |||||||||||
Distributions reinvested | 39,076 | 555,098 | — | — | |||||||||||||||
Cost of shares redeemed | (3,009,268 | ) | (5,171,495 | ) | — | — | |||||||||||||
Total Class R Shares | $ | (1,363,763 | ) | $ | (1,461,106 | ) | $ | — | $ | — | |||||||||
Class R6 Shares | |||||||||||||||||||
Proceeds from shares issued | $ | 44,467,648 | $ | 19,872,256 | $ | — | $ | — | |||||||||||
Distributions reinvested | 562,165 | 1,290,095 | — | — | |||||||||||||||
Cost of shares redeemed | (12,538,852 | ) | (4,453,645 | ) | — | — | |||||||||||||
Total Class R6 Shares | $ | 32,490,961 | $ | 16,708,706 | $ | — | $ | — | |||||||||||
Class Y Shares | |||||||||||||||||||
Proceeds from shares issued | $ | 111,480,099 | $ | 220,978,809 | $ | 944,047 | $ | 5,720,498 | |||||||||||
Distributions reinvested | 1,893,634 | 7,831,210 | 56,360 | 697,233 | |||||||||||||||
Cost of shares redeemed | (80,654,606 | ) | (101,343,905 | ) | (872,170 | ) | (6,501,669 | ) | |||||||||||
Total Class Y Shares | $ | 32,719,127 | $ | 127,466,114 | $ | 128,237 | $ | (83,938 | ) | ||||||||||
Change in net assets resulting from capital transactions | $ | 51,599,325 | $ | 137,334,265 | $ | 72,811 | $ | (938,856 | ) |
(continues on next page)
See notes to financial statements.
53
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, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2019 | Year Ended December 31, 2018 | ||||||||||||||||
Share Transactions: | |||||||||||||||||||
Class A Shares | |||||||||||||||||||
Issued | 497,792 | 1,521,048 | 4,925 | 28,462 | |||||||||||||||
Reinvested | 12,862 | 134,716 | 384 | 12,922 | |||||||||||||||
Redeemed | (849,774 | ) | (1,795,173 | ) | (14,442 | ) | (130,028 | ) | |||||||||||
Total Class A Shares | (339,120 | ) | (139,409 | ) | (9,133 | ) | (88,644 | ) | |||||||||||
Class C Shares | |||||||||||||||||||
Issued | 37,273 | 165,816 | 3,242 | 12,466 | |||||||||||||||
Reinvested | — | 36,742 | 48 | 4,588 | |||||||||||||||
Redeemed | (450,593 | ) | (354,786 | ) | (2,616 | ) | (7,100 | ) | |||||||||||
Total Class C Shares | (413,320 | ) | (152,228 | ) | 674 | 9,954 | |||||||||||||
Class R Shares | |||||||||||||||||||
Issued | 89,819 | 152,588 | — | — | |||||||||||||||
Reinvested | 1,974 | 34,252 | — | — | |||||||||||||||
Redeemed | (166,112 | ) | (266,765 | ) | — | — | |||||||||||||
Total Class R Shares | (74,319 | ) | (79,925 | ) | — | — | |||||||||||||
Class R6 Shares | |||||||||||||||||||
Issued | 2,305,144 | 957,135 | — | — | |||||||||||||||
Reinvested | 26,252 | 73,315 | — | — | |||||||||||||||
Redeemed | (654,118 | ) | (200,408 | ) | — | — | |||||||||||||
Total Class R6 Shares | 1,677,278 | 830,042 | — | — | |||||||||||||||
Class Y Shares | |||||||||||||||||||
Issued | 5,878,564 | 10,283,738 | 142,497 | 632,138 | |||||||||||||||
Reinvested | 89,198 | 448,845 | 7,798 | 116,985 | |||||||||||||||
Redeemed | (4,237,322 | ) | (5,031,804 | ) | (129,332 | ) | (670,562 | ) | |||||||||||
Total Class Y Shares | 1,730,440 | 5,700,779 | 20,963 | 78,561 | |||||||||||||||
Change in Shares | 2,580,959 | 6,159,259 | 12,504 | (129 | ) |
See notes to financial statements.
54
This page is intentionally left blank.
55
Victory Portfolios | Financial Highlights |
For a Share Outstanding Throughout Each Period
Investment Activities | Distributions to Shareholders From | ||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(a) | Net Realized and Unrealized Gains (Losses) on Investments | Total from Investment Activities | Net Investment Income | Net Realized Gains from Investments | Total Distributions | |||||||||||||||||||||||||
Victory RS International Fund | |||||||||||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 10.63 | 0.26 | 2.05 | 2.31 | — | (e) | (0.01 | ) | (0.01 | ) | ||||||||||||||||||||
Year Ended 12/31/18 | $ | 12.12 | 0.23 | (1.52 | ) | (1.29 | ) | (0.20 | ) | — | (0.20 | ) | |||||||||||||||||||
Year Ended 12/31/17 | $ | 9.84 | 0.19 | 2.29 | 2.48 | (0.20 | ) | — | (0.20 | ) | |||||||||||||||||||||
Year Ended 12/31/16 | $ | 9.78 | 0.16 | (0.07 | ) | 0.09 | (0.17 | ) | — | (0.17 | ) | ||||||||||||||||||||
Year Ended 12/31/15 | $ | 9.87 | 0.15 | (0.09 | ) | 0.06 | (0.15 | ) | — | (0.15 | ) | ||||||||||||||||||||
Class C | |||||||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 7.76 | 0.12 | 1.49 | 1.61 | — | (0.01 | ) | (0.01 | ) | |||||||||||||||||||||
Year Ended 12/31/18 | $ | 8.89 | 0.11 | (1.11 | ) | (1.00 | ) | (0.13 | ) | — | (0.13 | ) | |||||||||||||||||||
Year Ended 12/31/17 | $ | 7.26 | 0.08 | 1.68 | 1.76 | (0.13 | ) | — | (0.13 | ) | |||||||||||||||||||||
Year Ended 12/31/16 | $ | 7.26 | 0.07 | (0.08 | ) | (0.01 | ) | (0.13 | ) | — | (0.13 | ) | |||||||||||||||||||
Year Ended 12/31/15 | $ | 7.36 | 0.05 | (0.07 | ) | (0.02 | ) | (0.08 | ) | — | (0.08 | ) | |||||||||||||||||||
Class R | |||||||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 9.95 | 0.21 | 1.92 | 2.13 | — | (0.01 | ) | (0.01 | ) | |||||||||||||||||||||
Year Ended 12/31/18 | $ | 11.35 | 0.19 | (1.42 | ) | (1.23 | ) | (0.17 | ) | — | (0.17 | ) | |||||||||||||||||||
Year Ended 12/31/17 | $ | 9.23 | 0.15 | 2.14 | 2.29 | (0.17 | ) | — | (0.17 | ) | |||||||||||||||||||||
Year Ended 12/31/16 | $ | 9.18 | 0.11 | (0.06 | ) | 0.05 | (0.14 | ) | — | (0.14 | ) | ||||||||||||||||||||
Year Ended 12/31/15 | $ | 9.27 | 0.11 | (0.09 | ) | 0.02 | (0.11 | ) | — | (0.11 | ) | ||||||||||||||||||||
Class R6 | |||||||||||||||||||||||||||||||
5/2/2019(g) through 12/31/19 | $ | 10.00 | 0.06 | 0.67 | 0.73 | (0.02 | ) | (0.01 | ) | (0.03 | ) | ||||||||||||||||||||
Class Y | |||||||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 10.47 | 0.22 | 2.08 | 2.30 | (0.02 | ) | (0.01 | ) | (0.03 | ) | ||||||||||||||||||||
Year Ended 12/31/18 | $ | 11.93 | 0.23 | (1.47 | ) | (1.24 | ) | (0.22 | ) | — | (0.22 | ) | |||||||||||||||||||
Year Ended 12/31/17 | $ | 9.69 | 0.22 | 2.26 | 2.48 | (0.24 | ) | — | (0.24 | ) | |||||||||||||||||||||
Year Ended 12/31/16 | $ | 9.62 | 0.18 | (0.06 | ) | 0.12 | (0.19 | ) | — | (0.19 | ) | ||||||||||||||||||||
Year Ended 12/31/15 | $ | 9.70 | 0.18 | (0.09 | ) | 0.09 | (0.17 | ) | — | (0.17 | ) |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) Not annualized for periods less than one year.
(c) Annualized for periods less than one year.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
(e) Amount is less than $0.005 per share.
(f) 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)
(g) Commencement of operations.
See notes to financial statements.
56
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Ratios to Average Net Assets | Supplemental Data | ||||||||||||||||||||||||||||||||||
Capital Contribution from Prior Custodian, Net (See Note 8) | Net Asset Value, End of Period | Total Return (Excludes Sales Charge)(b) | Net Expenses(c) | Net Investment Income (Loss)(c) | Gross Expenses(c) | Net Assets, End of Period (000's) | Portfolio Turnover(b)(d) | ||||||||||||||||||||||||||||
Victory RS International Fund | |||||||||||||||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | — | $ | 12.93 | 21.72 | % | 1.13 | % | 2.18 | % | 1.55 | % | $ | 22,620 | 20 | % | ||||||||||||||||||||
Year Ended 12/31/18 | — | $ | 10.63 | (10.65 | )% | 1.13 | % | 1.97 | % | 1.61 | % | $ | 15,716 | 52 | % | ||||||||||||||||||||
Year Ended 12/31/17 | — | $ | 12.12 | 25.26 | % | 1.20 | % | 1.66 | % | 1.81 | % | $ | 18,512 | 60 | % | ||||||||||||||||||||
Year Ended 12/31/16 | 0.14 | $ | 9.84 | 2.41 | %(f) | 1.40 | % | 1.64 | % | 1.95 | % | $ | 16,799 | 103 | % | ||||||||||||||||||||
Year Ended 12/31/15 | — | $ | 9.78 | 0.64 | % | 1.40 | % | 1.49 | % | 1.89 | % | $ | 19,416 | 117 | % | ||||||||||||||||||||
Class C | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | — | $ | 9.36 | 20.70 | % | 1.88 | % | 1.39 | % | 3.14 | % | $ | 1,480 | 20 | % | ||||||||||||||||||||
Year Ended 12/31/18 | — | $ | 7.76 | (11.24 | )% | 1.88 | % | 1.23 | % | 3.52 | % | $ | 702 | 52 | % | ||||||||||||||||||||
Year Ended 12/31/17 | — | $ | 8.89 | 24.25 | % | 1.95 | % | 0.92 | % | 3.26 | % | $ | 1,066 | 60 | % | ||||||||||||||||||||
Year Ended 12/31/16 | 0.14 | $ | 7.26 | 1.77 | %(f) | 2.15 | % | 0.97 | % | 3.05 | % | $ | 1,228 | 103 | % | ||||||||||||||||||||
Year Ended 12/31/15 | — | $ | 7.26 | (0.27 | )% | 2.27 | % | 0.65 | % | 2.82 | % | $ | 1,969 | 117 | % | ||||||||||||||||||||
Class R | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | — | $ | 12.07 | 21.37 | % | 1.38 | % | 1.87 | % | 2.32 | % | $ | 2,652 | 20 | % | ||||||||||||||||||||
Year Ended 12/31/18 | — | $ | 9.95 | (10.85 | )% | 1.38 | % | 1.73 | % | 2.31 | % | $ | 1,786 | 52 | % | ||||||||||||||||||||
Year Ended 12/31/17 | — | $ | 11.35 | 24.85 | % | 1.48 | % | 1.39 | % | 2.48 | % | $ | 2,522 | 60 | % | ||||||||||||||||||||
Year Ended 12/31/16 | 0.14 | $ | 9.23 | 2.06 | %(f) | 1.80 | % | 1.26 | % | 2.29 | % | $ | 2,279 | 103 | % | ||||||||||||||||||||
Year Ended 12/31/15 | — | $ | 9.18 | 0.22 | % | 1.86 | % | 1.10 | % | 2.28 | % | $ | 2,707 | 117 | % | ||||||||||||||||||||
Class R6 | |||||||||||||||||||||||||||||||||||
5/2/2019(g) through 12/31/19 | — | $ | 10.70 | 7.24 | % | 0.83 | % | 0.92 | % | 0.97 | % | $ | 178,695 | 20 | % | ||||||||||||||||||||
Class Y | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | — | $ | 12.74 | 21.94 | % | 0.88 | % | 1.80 | % | 1.16 | % | $ | 75,366 | 20 | % | ||||||||||||||||||||
Year Ended 12/31/18 | — | $ | 10.47 | (10.38 | )% | 0.88 | % | 1.97 | % | 1.62 | % | $ | 5,979 | 52 | % | ||||||||||||||||||||
Year Ended 12/31/17 | — | $ | 11.93 | 25.56 | % | 0.94 | % | 1.98 | % | 1.85 | % | $ | 3,122 | 60 | % | ||||||||||||||||||||
Year Ended 12/31/16 | 0.14 | $ | 9.69 | 2.69 | %(f) | 1.15 | % | 1.93 | % | 1.80 | % | $ | 2,626 | 103 | % | ||||||||||||||||||||
Year Ended 12/31/15 | — | $ | 9.62 | 0.92 | % | 1.15 | % | 1.76 | % | 1.75 | % | $ | 3,904 | 117 | % |
See notes to financial statements.
57
Victory Portfolios | Financial Highlights |
For a Share Outstanding Throughout Each Period
Investment Activities | Distributions to Shareholders From | ||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(a) | Net Realized and Unrealized Gains (Losses) on Investments | Total from Investment Activities | Net Investment Income | Net Realized Gains from Investments | Return of Capital | |||||||||||||||||||||||||
Victory RS Global Fund | |||||||||||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 11.53 | 0.21 | 3.29 | 3.50 | (0.16 | ) | (0.01 | ) | — | |||||||||||||||||||||
Year Ended 12/31/18 | $ | 12.75 | 0.20 | (0.90 | ) | (0.70 | ) | (0.16 | ) | (0.36 | ) | — | |||||||||||||||||||
Year Ended 12/31/17 | $ | 11.16 | 0.15 | 2.53 | 2.68 | — | (1.00 | ) | (0.09 | ) | |||||||||||||||||||||
Year Ended 12/31/16 | $ | 11.56 | 0.13 | 0.65 | 0.78 | (0.03 | ) | (1.15 | ) | — | |||||||||||||||||||||
Year Ended 12/31/15 | $ | 11.56 | 0.11 | 0.32 | 0.43 | (0.11 | ) | (0.32 | ) | — | |||||||||||||||||||||
Class C | |||||||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 11.17 | 0.14 | 3.16 | 3.30 | (0.08 | ) | (0.01 | ) | — | |||||||||||||||||||||
Year Ended 12/31/18 | $ | 12.38 | 0.10 | (0.87 | ) | (0.77 | ) | (0.08 | ) | (0.36 | ) | — | |||||||||||||||||||
Year Ended 12/31/17 | $ | 10.95 | 0.05 | 2.47 | 2.52 | — | (1.00 | ) | (0.09 | ) | |||||||||||||||||||||
Year Ended 12/31/16 | $ | 11.42 | 0.05 | 0.63 | 0.68 | — | (1.15 | ) | — | ||||||||||||||||||||||
Year Ended 12/31/15 | $ | 11.43 | 0.01 | 0.32 | 0.33 | (0.02 | ) | (0.32 | ) | — | |||||||||||||||||||||
Class R | |||||||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 14.37 | 0.25 | 4.07 | 4.32 | (0.13 | ) | (0.01 | ) | — | |||||||||||||||||||||
Year Ended 12/31/18 | $ | 15.76 | 0.20 | (1.10 | ) | (0.90 | ) | (0.13 | ) | (0.36 | ) | — | |||||||||||||||||||
Year Ended 12/31/17 | $ | 13.62 | 0.05 | 3.18 | 3.23 | — | (1.00 | ) | (0.09 | ) | |||||||||||||||||||||
Year Ended 12/31/16 | $ | 11.50 | 0.09 | 3.43 | 3.52 | (0.25 | ) | (1.15 | ) | — | |||||||||||||||||||||
Year Ended 12/31/15 | $ | 11.50 | 0.06 | 0.32 | 0.38 | (0.06 | ) | (0.32 | ) | — | |||||||||||||||||||||
Class R6 | |||||||||||||||||||||||||||||||
5/2/19(f) through 12/31/19 | $ | 10.00 | 0.13 | 1.12 | 1.25 | (0.17 | ) | (0.01 | ) | — | |||||||||||||||||||||
Class Y | |||||||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 11.42 | 0.26 | 3.24 | 3.50 | (0.19 | ) | (0.01 | ) | — | |||||||||||||||||||||
Year Ended 12/31/18 | $ | 12.63 | 0.23 | (0.89 | ) | (0.66 | ) | (0.19 | ) | (0.36 | ) | — | |||||||||||||||||||
Year Ended 12/31/17 | $ | 11.04 | 0.18 | 2.50 | 2.68 | — | (1.00 | ) | (0.09 | ) | |||||||||||||||||||||
Year Ended 12/31/16 | $ | 11.60 | 0.15 | 0.67 | 0.82 | (0.23 | ) | (1.15 | ) | — | |||||||||||||||||||||
Year Ended 12/31/15 | $ | 11.59 | 0.15 | 0.31 | 0.46 | (0.13 | ) | (0.32 | ) | — |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) Not annualized for periods less than one year.
(c) Annualized for periods less than one year.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
(e) 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.
(f) Commencement of operations.
See notes to financial statements.
58
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Ratios to Average Net Assets | Supplemental Data | ||||||||||||||||||||||||||||||||||
Total Distributions | Net Asset Value, End of Period | Total Return (Excludes Sales Charge)(b) | Net Expenses(c) | Net Investment Income (Loss)(c) | Gross Expenses(c) | Net Assets, End of Period (000's) | Portfolio Turnover(b)(d) | ||||||||||||||||||||||||||||
Victory RS Global Fund | |||||||||||||||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | (0.17 | ) | $ | 14.86 | 30.36 | % | 0.85 | % | 1.51 | % | 1.53 | % | $ | 26,471 | 46 | % | |||||||||||||||||||
Year Ended 12/31/18 | (0.52 | ) | $ | 11.53 | (5.45 | )% | 0.94 | % | 1.51 | % | 1.75 | % | $ | 5,695 | 58 | % | |||||||||||||||||||
Year Ended 12/31/17 | (1.09 | ) | $ | 12.75 | 24.48 | % | 1.17 | % | 1.24 | % | 1.90 | % | $ | 3,456 | 187 | % | |||||||||||||||||||
Year Ended 12/31/16 | (1.18 | ) | $ | 11.16 | 6.67 | % | 1.40 | % | 1.12 | % | 1.71 | % | $ | 5,366 | 184 | % | |||||||||||||||||||
Year Ended 12/31/15 | (0.43 | ) | $ | 11.56 | 3.68 | % | 1.36 | % | 0.90 | % | 1.57 | % | $ | 13,857 | 90 | % | |||||||||||||||||||
Class C | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | (0.09 | ) | $ | 14.38 | 29.52 | % | 1.60 | % | 1.07 | % | 2.59 | % | $ | 3,101 | 46 | % | |||||||||||||||||||
Year Ended 12/31/18 | (0.44 | ) | $ | 11.17 | (6.20 | )% | 1.70 | % | 0.79 | % | 2.59 | % | $ | 2,358 | 58 | % | |||||||||||||||||||
Year Ended 12/31/17 | (1.09 | ) | $ | 12.38 | 23.47 | % | 1.91 | % | 0.41 | % | 3.00 | % | $ | 2,167 | 187 | % | |||||||||||||||||||
Year Ended 12/31/16 | (1.15 | ) | $ | 10.95 | 5.92 | % | 2.16 | % | 0.41 | % | 2.44 | % | $ | 1,270 | 184 | % | |||||||||||||||||||
Year Ended 12/31/15 | (0.34 | ) | $ | 11.42 | 2.85 | % | 2.17 | % | 0.11 | % | 2.38 | % | $ | 7,367 | 90 | % | |||||||||||||||||||
Class R | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | (0.14 | ) | $ | 18.55 | 30.10 | % | 1.10 | % | 1.53 | % | 2.34 | % | $ | 2,365 | 46 | % | |||||||||||||||||||
Year Ended 12/31/18 | (0.49 | ) | $ | 14.37 | (5.68 | )% | 1.20 | % | 1.25 | % | 2.34 | % | $ | 1,920 | 58 | % | |||||||||||||||||||
Year Ended 12/31/17 | (1.09 | ) | $ | 15.76 | 24.09 | % | 1.61 | % | 0.38 | % | 2.76 | % | $ | 2,281 | 187 | % | |||||||||||||||||||
Year Ended 12/31/16 | (1.40 | ) | $ | 13.62 | 30.57 | %(e) | 1.68 | % | 0.74 | % | 1.81 | % | $ | 9,213 | 184 | % | |||||||||||||||||||
Year Ended 12/31/15 | (0.38 | ) | $ | 11.50 | 3.23 | % | 1.78 | % | 0.50 | % | 2.00 | % | $ | 5,265 | 90 | % | |||||||||||||||||||
Class R6 | |||||||||||||||||||||||||||||||||||
5/2/19(f) through 12/31/19 | (0.18 | ) | $ | 11.07 | 12.47 | % | 0.55 | % | 1.85 | % | 28.85 | % | $ | 124 | 46 | % | |||||||||||||||||||
Class Y | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | (0.20 | ) | $ | 14.72 | 30.69 | % | 0.60 | % | 1.95 | % | 1.17 | % | $ | 52,541 | 46 | % | |||||||||||||||||||
Year Ended 12/31/18 | (0.55 | ) | $ | 11.42 | (5.17 | )% | 0.70 | % | 1.80 | % | 1.20 | % | $ | 25,544 | 58 | % | |||||||||||||||||||
Year Ended 12/31/17 | (1.09 | ) | $ | 12.63 | 24.75 | % | 0.88 | % | 1.44 | % | 1.32 | % | $ | 24,657 | 187 | % | |||||||||||||||||||
Year Ended 12/31/16 | (1.38 | ) | $ | 11.04 | 7.01 | % | 1.09 | % | 1.30 | % | 1.36 | % | $ | 13,430 | 184 | % | |||||||||||||||||||
Year Ended 12/31/15 | (0.45 | ) | $ | 11.60 | 3.96 | % | 1.09 | % | 1.21 | % | 1.36 | % | $ | 15,871 | 90 | % |
See notes to financial statements.
59
Victory Portfolios | Financial Highlights |
For a Share Outstanding Throughout Each Period
Investment Activities | Distributions to Shareholders From | ||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(a) | Net Realized and Unrealized Gains (Losses) on Investments | Total from Investment Activities | Net Investment Income | Net Realized Gains From Investments | Total Distributions | |||||||||||||||||||||||||
Victory Sophus Emerging Markets Fund | |||||||||||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 17.45 | 0.37 | 3.65 | 4.02 | (0.10 | ) | — | (0.10 | ) | |||||||||||||||||||||
Year Ended 12/31/18 | $ | 22.52 | 0.24 | (4.54 | ) | (4.30 | ) | (0.13 | ) | (0.64 | ) | (0.77 | ) | ||||||||||||||||||
Year Ended 12/31/17 | $ | 15.98 | 0.16 | 6.55 | 6.71 | (0.17 | ) | — | (0.17 | ) | |||||||||||||||||||||
Year Ended 12/31/16 | $ | 14.60 | 0.11 | 1.38 | 1.49 | (0.15 | ) | — | (0.15 | ) | |||||||||||||||||||||
Year Ended 12/31/15 | $ | 17.22 | 0.10 | (2.33 | ) | (2.23 | ) | — | (0.39 | ) | (0.39 | ) | |||||||||||||||||||
Class C | |||||||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 13.06 | 0.14 | 2.74 | 2.88 | — | — | — | |||||||||||||||||||||||
Year Ended 12/31/18 | $ | 17.07 | 0.05 | (3.42 | ) | (3.37 | ) | — | (f) | (0.64 | ) | (0.64 | ) | ||||||||||||||||||
Year Ended 12/31/17 | $ | 12.17 | — | (f) | 4.97 | 4.97 | (0.07 | ) | — | (0.07 | ) | ||||||||||||||||||||
Year Ended 12/31/16 | $ | 11.20 | (0.01 | ) | 1.05 | 1.04 | (0.11 | ) | — | (0.11 | ) | ||||||||||||||||||||
Year Ended 12/31/15 | $ | 13.43 | (0.02 | ) | (1.82 | ) | (1.84 | ) | — | (0.39 | ) | (0.39 | ) | ||||||||||||||||||
Class R | |||||||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 16.37 | 0.31 | 3.41 | 3.72 | (0.06 | ) | — | (0.06 | ) | |||||||||||||||||||||
Year Ended 12/31/18 | $ | 21.18 | 0.18 | (4.26 | ) | (4.08 | ) | (0.09 | ) | (0.64 | ) | (0.73 | ) | ||||||||||||||||||
Year Ended 12/31/17 | $ | 15.03 | 0.09 | 6.17 | 6.26 | (0.11 | ) | — | (0.11 | ) | |||||||||||||||||||||
Year Ended 12/31/16 | $ | 13.76 | 0.07 | 1.30 | 1.37 | (0.14 | ) | — | (0.14 | ) | |||||||||||||||||||||
Year Ended 12/31/15 | $ | 16.31 | 0.05 | (2.21 | ) | (2.16 | ) | — | (0.39 | ) | (0.39 | ) | |||||||||||||||||||
Class R6 | |||||||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 17.68 | 0.52 | 3.65 | 4.17 | (0.17 | ) | — | (0.17 | ) | |||||||||||||||||||||
Year Ended 12/31/18 | $ | 22.81 | 0.34 | (4.62 | ) | (4.28 | ) | (0.21 | ) | (0.64 | ) | (0.85 | ) | ||||||||||||||||||
Year Ended 12/31/17 | $ | 16.16 | 0.34 | 6.57 | 6.91 | (0.26 | ) | — | (0.26 | ) | |||||||||||||||||||||
11/15/16(h) through 12/31/16 | $ | 15.91 | 0.04 | 0.25 | 0.29 | (0.04 | ) | — | (0.04 | ) | |||||||||||||||||||||
Class Y | |||||||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 17.54 | 0.45 | 3.65 | 4.10 | (0.16 | ) | — | (0.16 | ) | |||||||||||||||||||||
Year Ended 12/31/18 | $ | 22.64 | 0.35 | (4.61 | ) | (4.26 | ) | (0.20 | ) | (0.64 | ) | (0.84 | ) | ||||||||||||||||||
Year Ended 12/31/17 | $ | 16.05 | 0.21 | 6.62 | 6.83 | (0.24 | ) | — | (0.24 | ) | |||||||||||||||||||||
Year Ended 12/31/16 | $ | 14.61 | 0.18 | 1.37 | 1.55 | (0.15 | ) | — | (0.15 | ) | |||||||||||||||||||||
Year Ended 12/31/15 | $ | 17.22 | 0.15 | (2.34 | ) | (2.19 | ) | (0.03 | ) | (0.39 | ) | (0.42 | ) |
* Includes adjustments in accordance with U.S. generally accepted accounting principals.
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) Not annualized for periods less than one year.
(c) Annualized for periods less than one year.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
See notes to financial statements.
60
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Ratios to Average Net Assets | Supplemental Data | ||||||||||||||||||||||||||||||||||
Capital Contribution from Prior Custodian, Net (See Note 8) | Net Asset Value, End of Period | Total Return (Excludes Sales Charge)(b)* | Net Expenses(c) | Net Investment Income (Loss)(c) | Gross Expenses(c) | Net Assets, End of Period (000's) | Portfolio Turnover(b)(d) | ||||||||||||||||||||||||||||
Victory Sophus Emerging Markets Fund | |||||||||||||||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | — | $ | 21.37 | 22.96 | % | 1.34 | % | 1.95 | % | 1.62 | % | $ | 62,346 | 96 | % | ||||||||||||||||||||
Year Ended 12/31/18 | — | $ | 17.45 | (19.08 | )% | 1.34 | % | 1.11 | % | 1.61 | % | $ | 56,823 | 118 | % | ||||||||||||||||||||
Year Ended 12/31/17 | — | $ | 22.52 | 42.08 | % | 1.54 | % | 0.80 | % | 1.66 | % | $ | 76,485 | 113 | % | ||||||||||||||||||||
Year Ended 12/31/16 | 0.04 | $ | 15.98 | 10.50 | %(e) | 1.65 | % | 0.73 | % | 1.67 | % | $ | 61,767 | 120 | % | ||||||||||||||||||||
Year Ended 12/31/15 | — | $ | 14.60 | (12.94 | )% | 1.57 | % | 0.60 | % | 1.57 | % | $ | 74,837 | 111 | % | ||||||||||||||||||||
Class C | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | — | $ | 15.94 | 22.05 | % | 2.14 | % | 0.99 | % | 2.48 | % | $ | 5,787 | 96 | % | ||||||||||||||||||||
Year Ended 12/31/18 | — | $ | 13.06 | (19.75 | )% | 2.14 | % | 0.31 | % | 2.40 | % | $ | 10,141 | 118 | % | ||||||||||||||||||||
Year Ended 12/31/17 | — | $ | 17.07 | 40.96 | % | 2.34 | % | — | %(g) | 2.46 | % | $ | 15,854 | 113 | % | ||||||||||||||||||||
Year Ended 12/31/16 | 0.04 | $ | 12.17 | 9.62 | %(e) | 2.45 | % | (0.09 | )% | 2.48 | % | $ | 12,273 | 120 | % | ||||||||||||||||||||
Year Ended 12/31/15 | — | $ | 11.20 | (13.68 | )% | 2.38 | % | (0.19 | )% | 2.38 | % | $ | 15,096 | 111 | % | ||||||||||||||||||||
Class R | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | — | $ | 20.03 | 22.64 | % | 1.58 | % | 1.71 | % | 1.94 | % | $ | 13,817 | 96 | % | ||||||||||||||||||||
Year Ended 12/31/18 | — | $ | 16.37 | (19.24 | )% | 1.58 | % | 0.89 | % | 1.91 | % | $ | 12,505 | 118 | % | ||||||||||||||||||||
Year Ended 12/31/17 | — | $ | 21.18 | 41.69 | % | 1.83 | % | 0.50 | % | 2.00 | % | $ | 17,875 | 113 | % | ||||||||||||||||||||
Year Ended 12/31/16 | 0.04 | $ | 15.03 | 10.26 | %(e) | 1.87 | % | 0.50 | % | 1.87 | % | $ | 15,923 | 120 | % | ||||||||||||||||||||
Year Ended 12/31/15 | — | $ | 13.76 | (13.23 | )% | 1.87 | % | 0.33 | % | 1.87 | % | $ | 18,648 | 111 | % | ||||||||||||||||||||
Class R6 | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | — | $ | 21.68 | 23.55 | % | 0.89 | % | 2.69 | % | 1.22 | % | $ | 72,196 | 96 | % | ||||||||||||||||||||
Year Ended 12/31/18 | — | $ | 17.68 | (18.73 | )% | 0.89 | % | 1.59 | % | 1.24 | % | $ | 29,228 | 118 | % | ||||||||||||||||||||
Year Ended 12/31/17 | — | $ | 22.81 | 42.77 | % | 1.03 | % | 1.66 | % | 1.39 | % | $ | 18,762 | 113 | % | ||||||||||||||||||||
11/15/16(h) through 12/31/16 | — | $ | 16.16 | 1.81 | % | 1.16 | % | 1.79 | % | 21.70 | % | $ | 64 | 120 | % | ||||||||||||||||||||
Class Y | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | — | $ | 21.48 | 23.40 | % | 0.99 | % | 2.32 | % | 1.30 | % | $ | 255,423 | 96 | % | ||||||||||||||||||||
Year Ended 12/31/18 | — | $ | 17.54 | (18.77 | )% | 0.99 | % | 1.64 | % | 1.30 | % | $ | 178,132 | 118 | % | ||||||||||||||||||||
Year Ended 12/31/17 | — | $ | 22.64 | 42.59 | % | 1.18 | % | 1.07 | % | 1.33 | % | $ | 100,902 | 113 | % | ||||||||||||||||||||
Year Ended 12/31/16 | 0.04 | $ | 16.05 | 10.86 | %(e) | 1.32 | % | 1.17 | % | 1.38 | % | $ | 60,277 | 120 | % | ||||||||||||||||||||
Year Ended 12/31/15 | — | $ | 14.61 | (12.73 | )% | 1.30 | % | 0.89 | % | 1.30 | % | $ | 98,634 | 111 | % |
(e) 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)
(f) Amount is less than $0.005 per share.
(g) Amount is less than 0.005%.
(h) Commencement of operations.
See notes to financial statements.
61
Victory Portfolios | Financial Highlights |
For a Share Outstanding Throughout Each Period
Investment Activities | Distributions to Shareholders From | ||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(a) | Net Realized and Unrealized Gains (Losses) on Investments | Total from Investment Activities | Net Investment Income | Net Realized Gains From Investments | ||||||||||||||||||||||
Victory Sophus Emerging Markets Small Cap Fund | |||||||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 6.07 | 0.06 | 1.25 | 1.31 | (0.05 | ) | (0.01 | ) | ||||||||||||||||||
Year Ended 12/31/18 | $ | 10.13 | 0.04 | (2.27 | ) | (2.23 | ) | — | (1.83 | ) | |||||||||||||||||
Year Ended 12/31/17 | $ | 9.75 | 0.12 | 3.86 | 3.98 | (0.12 | ) | (3.48 | ) | ||||||||||||||||||
Year Ended 12/31/16 | $ | 9.69 | 0.04 | 0.02 | 0.06 | — | — | ||||||||||||||||||||
Year Ended 12/31/15 | $ | 10.31 | 0.01 | (0.63 | ) | (0.62 | ) | — | — | ||||||||||||||||||
Class C | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 5.53 | 0.02 | 1.12 | 1.14 | — | (0.01 | ) | |||||||||||||||||||
Year Ended 12/31/18 | $ | 9.51 | 0.01 | (2.16 | ) | (2.15 | ) | — | (1.83 | ) | |||||||||||||||||
Year Ended 12/31/17 | $ | 9.34 | (0.02 | ) | 3.75 | 3.73 | (0.08 | ) | (3.48 | ) | |||||||||||||||||
Year Ended 12/31/16 | $ | 9.56 | (0.02 | ) | (0.20 | ) | (0.22 | ) | — | — | |||||||||||||||||
Year Ended 12/31/15 | $ | 10.23 | (0.05 | ) | (0.62 | ) | (0.67 | ) | — | — | |||||||||||||||||
Class Y | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 6.05 | 0.08 | 1.24 | 1.32 | (0.07 | ) | (0.01 | ) | ||||||||||||||||||
Year Ended 12/31/18 | $ | 10.08 | 0.09 | (2.29 | ) | (2.20 | ) | — | (1.83 | ) | |||||||||||||||||
Year Ended 12/31/17 | $ | 9.75 | 0.15 | 3.87 | 4.02 | (0.21 | ) | (3.48 | ) | ||||||||||||||||||
Year Ended 12/31/16 | $ | 9.74 | 0.06 | 0.02 | 0.08 | (0.07 | ) | — | |||||||||||||||||||
Year Ended 12/31/15 | $ | 10.32 | 0.06 | (0.64 | ) | (0.58 | ) | — | — |
* Includes adjustments in accordance with U.S. generally accepted accounting principals.
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
(c) Portfolio turnover increased due to change within portfolio holdings during the year.
See notes to financial statements.
62
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Ratios to Average Net Assets | Supplemental Data | ||||||||||||||||||||||||||||||||||
Total Distributions | Net Asset Value, End of Period | Total Return (Excludes Sales Charge)* | Net Expenses | Net Investment Income (Loss) | Gross Expenses | Net Assets, End of Period (000's) | Portfolio Turnover(b) | ||||||||||||||||||||||||||||
Victory Sophus Emerging Markets Small Cap Fund | |||||||||||||||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | (0.06 | ) | $ | 7.32 | 21.44 | % | 1.75 | % | 0.94 | % | 8.02 | % | $ | 336 | 112 | % | |||||||||||||||||||
Year Ended 12/31/18 | (1.83 | ) | $ | 6.07 | (21.76 | )% | 1.75 | % | 0.39 | % | 5.77 | % | $ | 334 | 200 | % | |||||||||||||||||||
Year Ended 12/31/17 | (3.60 | ) | $ | 10.13 | 42.55 | % | 1.75 | % | 1.07 | % | 2.94 | % | $ | 1,456 | 227 | %(c) | |||||||||||||||||||
Year Ended 12/31/16 | — | $ | 9.75 | 0.62 | % | 1.75 | % | 0.44 | % | 2.29 | % | $ | 2,552 | 141 | % | ||||||||||||||||||||
Year Ended 12/31/15 | — | $ | 9.69 | (6.01 | )% | 1.92 | % | 0.08 | % | 2.44 | % | $ | 5,083 | 107 | % | ||||||||||||||||||||
Class C | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | (0.01 | ) | $ | 6.66 | 20.53 | % | 2.50 | % | 0.25 | % | 13.26 | % | $ | 140 | 112 | % | |||||||||||||||||||
Year Ended 12/31/18 | (1.83 | ) | $ | 5.53 | (22.31 | )% | 2.51 | % | 0.11 | % | 13.96 | % | $ | 112 | 200 | % | |||||||||||||||||||
Year Ended 12/31/17 | (3.56 | ) | $ | 9.51 | 41.68 | % | 2.50 | % | (0.21 | )% | 32.34 | % | $ | 99 | 227 | %(c) | |||||||||||||||||||
Year Ended 12/31/16 | — | $ | 9.34 | (2.30 | )% | 2.50 | % | (0.18 | )% | 3.12 | % | $ | 24 | 141 | % | ||||||||||||||||||||
Year Ended 12/31/15 | — | $ | 9.56 | (6.55 | )% | 2.54 | % | (0.50 | )% | 3.05 | % | $ | 2,617 | 107 | % | ||||||||||||||||||||
Class Y | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | (0.08 | ) | $ | 7.29 | 21.76 | % | 1.50 | % | 1.25 | % | 4.02 | % | $ | 4,839 | 112 | % | |||||||||||||||||||
Year Ended 12/31/18 | (1.83 | ) | $ | 6.05 | (21.57 | )% | 1.51 | % | 0.94 | % | 3.82 | % | $ | 3,890 | 200 | % | |||||||||||||||||||
Year Ended 12/31/17 | (3.69 | ) | $ | 10.08 | 43.02 | % | 1.50 | % | 1.32 | % | 2.13 | % | $ | 5,685 | 227 | %(c) | |||||||||||||||||||
Year Ended 12/31/16 | (0.07 | ) | $ | 9.75 | 0.79 | % | 1.50 | % | 0.62 | % | 1.98 | % | $ | 17,261 | 141 | % | |||||||||||||||||||
Year Ended 12/31/15 | — | $ | 9.74 | (5.62 | )% | 1.50 | % | 0.53 | % | 2.01 | % | $ | 17,581 | 107 | % |
See notes to financial statements.
63
Victory Portfolios | Notes to Financial Statements December 31, 2019 |
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, R6* and Y | |||||||||
Victory RS Global Fund | RS Global Fund | Classes A, C, R, R6* and Y | |||||||||
Victory Sophus Emerging Markets Fund | Sophus Emerging Market Funds | 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 |
* RS International Fund and RS Global Fund Class R6 Shares commenced operations on May 2, 2019.
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)
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Victory Portfolios | Notes to Financial Statements — continued December 31, 2019 |
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 ("ETF"), 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. To the extent this model is utilized, these valuations are considered as Level 2 in the fair value hierarchy.
A summary of the valuations as of December 31, 2019, 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 | LEVEL 2 | LEVEL 3 | TOTAL | ||||||||||||||||
RS International Fund | |||||||||||||||||||
Common Stocks | $ | — | $ | 265,815,049 | $ | — | $ | 265,815,049 | |||||||||||
Preferred Stocks | — | 790,154 | — | 790,154 | |||||||||||||||
Exchange-Traded Funds | 4,474,852 | — | — | 4,474,852 | |||||||||||||||
Collateral for Securities Loaned | 22,253 | — | — | 22,253 | |||||||||||||||
Total | $ | 4,497,105 | $ | 266,605,203 | $ | — | $ | 271,102,308 | |||||||||||
RS Global Fund | |||||||||||||||||||
Common Stocks | $ | 47,348,899 | $ | 34,514,230 | $ | — | $ | 81,863,129 | |||||||||||
Preferred Stocks | — | 576,332 | — | 576,332 | |||||||||||||||
Exchange-Traded Funds | 673,784 | — | — | 673,784 | |||||||||||||||
Collateral for Securities Loaned | 113,975 | — | — | 113,975 | |||||||||||||||
Total | $ | 48,136,658 | $ | 35,090,562 | $ | — | $ | 83,227,220 | |||||||||||
Sophus Emerging Markets Fund | |||||||||||||||||||
Common Stocks | $ | 68,978,147 | $ | 330,686,088 | $ | — | $ | 399,664,235 | |||||||||||
Preferred Stocks | — | 2,859,147 | — | 2,859,147 | |||||||||||||||
Collateral for Securities Loaned | 2,348,064 | — | — | 2,348,064 | |||||||||||||||
Total | $ | 71,326,211 | $ | 333,545,235 | $ | — | $ | 404,871,446 | |||||||||||
Sophus Emerging Markets Small Cap Fund | |||||||||||||||||||
Common Stocks | $ | 260,945 | $ | 4,809,899 | $ | 33,999 | $ | 5,104,843 | |||||||||||
Preferred Stocks | — | 110,621 | — | 110,621 | |||||||||||||||
Collateral for Securities Loaned | 114,265 | — | — | 114,265 | |||||||||||||||
Total | $ | 375,210 | $ | 4,920,520 | $ | 33,999 | $ | 5,329,729 |
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Victory Portfolios | Notes to Financial Statements — continued December 31, 2019 |
The following is a reconciliation of assets in which significant unobservable inputs (Level 3) were used in determining fair value:
Investment in Securities | Sophus Emerging Markets Small Cap Fund | ||||||
Balance as of December 31, 2018 | $ | — | |||||
Accrued discount (premium) | — | ||||||
Realized Gain (Loss) | — | ||||||
Change in Unrealized Appreciation/Depreciation | — | ||||||
Purchases | — | ||||||
Sales Proceeds | — | ||||||
Transfers into Level 3 | 33,999 | ||||||
Transfers out of Level 3 | — | ||||||
Balance as of December 31, 2019 | $ | 33,999 |
The following is a summary of quantitative information about Level 3 fair value measurements:
Sophus Emerging Markets Small Cap Fund | Fair Value as of 12/31/19 | Valuation Techniques | Unobservable Input | Input Values | Impact to valuation from an increase to input | ||||||||||||||||||
Common Stock | $ | 33,999 | 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 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
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Victory Portfolios | Notes to Financial Statements — continued December 31, 2019 |
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. During the year ended December 31, 2019, 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 determined on the basis of coupon interest accrued using the effective interest method which adjusts, where applicable, the amortization of premiums or accretion of discounts. Dividend income is recorded on the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. 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, primarily open-end investment companies, 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. During the time portfolio securities are on loan, the borrower will pay the Funds any dividends or interest paid on such securities plus any fee negotiated between the parties to the lending agreement. The Funds also earn a return from the collateral. The Funds pay the Agent various fees in connection with the investment of cash collateral and fees based on the investment income received from securities lending activities. Securities lending income (net of these fees) 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, 2019. These transactions are accounted for as secured
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Victory Portfolios | Notes to Financial Statements — continued December 31, 2019 |
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 | $ | 20,962 | $ | 20,962 | $ | — | $ | — | $ | — | $ | — | |||||||||||||||
RS Global Fund | 108,428 | 108,428 | — | — | — | — | |||||||||||||||||||||
Sophus Emerging Markets Fund | 2,231,350 | 2,231,350 | — | — | — | — | |||||||||||||||||||||
Sophus Emerging Markets Small Cap Fund | 108,339 | 108,339 | — | — | — | — |
* Collateral received in excess of the market value of securities on loan is not presented in this table. The total cash collateral received by each Fund is disclosed in the Statements of Assets and Liabilities.
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 investment securities and foreign currency translations on the Statements of Operations. Any realized gains or losses from these fluctuations are disclosed as Net realized gains (losses) from investment securities 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.
Distributions to Shareholders:
Dividends from net investment income, if any, are declared and paid quarterly for each 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 (collectively distributions to shareholders) 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 and distribution reclassification), 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.
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Victory Portfolios | Notes to Financial Statements — continued December 31, 2019 |
As of December 31, 2019, 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 Global Fund | $ | 2,123 | $ | (2,123 | ) |
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., all open tax years 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.
Cross-Trade Transactions:
Pursuant to Rule 17a-7 under the 1940 Act, the Funds may engage in cross-trades, which are 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, 2019, 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, 2019 were as follows:
Purchases (excluding U.S. Government Securities) | Sales (excluding U.S. Government Securities) | ||||||||||
RS International Fund | $ | 247,267,031 | $ | 19,726,699 | |||||||
RS Global Fund | 60,305,455 | 24,846,313 | |||||||||
Sophus Emerging Markets Fund | 396,358,491 | 339,763,357 | |||||||||
Sophus Emerging Markets Small Cap Fund | 5,559,910 | 5,636,035 |
For the year ended December 31, 2019, there were no purchases or sales of U.S. Government Securities.
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Victory Portfolios | Notes to Financial Statements — continued December 31, 2019 |
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 "Victory Funds Complex"), 0.05% of the average daily net assets above $15 billion to $30 billion of the Victory Funds Complex and 0.04% of the average daily net assets over $30 billion of the Victory Funds Complex.
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. The Funds in the Victory Funds Complex, in 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.
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Victory Portfolios | Notes to Financial Statements — continued December 31, 2019 |
In addition, the Distributor is entitled to receive commissions on sales of the Class A Shares of the Funds. For the year ended December 31, 2019, the Distributor received approximately $10,665 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 amounts 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, 2019, the expense limits (excluding voluntary waivers) are as follows:
In effect January 1, 2019 until April 30, 2020 | |||||||||||||||||||||||
Class A Shares | Class C Shares | Class R Shares | Class R6 Shares | Class Y Shares | |||||||||||||||||||
RS International Fund | 1.13 | % | 1.88 | % | 1.38 | % | 0.83 | %(a) | 0.88 | % | |||||||||||||
RS Global Fund | 0.85 | % | 1.60 | % | 1.10 | % | 0.55 | %(a) | 0.60 | % | |||||||||||||
Sophus Emerging Markets Fund | 1.34 | % | 2.14 | % | 1.58 | % | 0.89 | % | 0.99 | % | |||||||||||||
Sophus Emerging Markets Small Cap Fund | 1.75 | % | 2.50 | % | N/A | N/A | 1.50 | % |
(a) In effect from May 2, 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, 2019, the following amounts are available to be repaid to the Adviser:
Expires December 31, 2020 | Expires December 31, 2021 | Expires December 31, 2022 | Total | ||||||||||||||||
RS International Fund | $ | 178,334 | $ | 152,046 | $ | 266,869 | $ | 597,249 | |||||||||||
RS Global Fund | 181,379 | 205,996 | 359,812 | 747,187 | |||||||||||||||
Sophus Emerging Markets Fund | 287,244 | 879,454 | 1,124,230 | 2,290,928 | |||||||||||||||
Sophus Emerging Markets Small Cap Fund | 157,277 | 143,951 | 151,458 | 452,686 |
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, 2019.
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 Counsel.
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 fair value of the securities in which the Funds invest, like other market investments, may move up or down, sometimes rapidly and unpredictably. The fair 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, 2019 |
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:
For the year ended December 31, 2019, the Victory Funds Complex participated in a short-term, demand note "Line of Credit" with Citibank. Under the agreements with Citibank, for the period January 1, 2019 to June 30, 2019, the Victory Funds Complex could borrow up to $250 million, of which $100 million was committed and $150 million was uncommitted. Effective July 1, 2019, the agreement was amended to include the USAA Mutual Funds Complex (another series of mutual funds managed by the Adviser) and has a new termination date of June 29, 2020. Under this amended agreement, the Victory Funds Complex and USAA Mutual Funds Complex, combined, may borrow up to $600 million, of which $300 million is committed and $300 million is uncommitted. $40 million of the Line of Credit is reserved for use by the Victory Floating Rate Fund (herein, the "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. With the agreement in effect for the period January 1, 2019 to June 30, 2019, Citibank received an annual commitment fee of 0.15% on $100 million for providing the Line of Credit. For the period July 1, 2019 to December 31, 2019, Citibank received an annual commitment fee of 0.15% on $300 million for providing the Line of Credit. For the year ended December 31, 2019, Citibank earned approximately $300 thousand in commitment fees from the combined Victory Funds Complex and USAA Mutual Funds Complex. Each fund in the Victory Funds Complex and the USAA Mutual Funds Complex pays a pro-rata portion of the commitment fees plus any interest (one month LIBOR plus one percent) on amounts borrowed. Interest charged to the Fund during the period, if applicable, is presented on the Statement of Operations under Line of credit fees.
The average loans for the days outstanding and average interest rate for the Fund below during the year ended December 31, 2019 were as follows:
Amount Outstanding at December 31, 2019 | Average Borrowing* | Days Outstanding | Average Rate* | Maximum Borrowing During the Period | |||||||||||||||||||
Sophus Emerging Markets Fund | $ | — | $ | 3,900,000 | 3 | 3.06 | % | $ | 3,900,000 |
* For the year ended December 31, 2019, 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. As a Borrower, interest charged to each Fund during the period, if applicable, is presented on the Statements of Operations under Interfund
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Victory Portfolios | Notes to Financial Statements — continued December 31, 2019 |
lending fees. As a Lender, interest earned by each Fund during the period, if applicable, is presented on the Statements of Operations under Income 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, 2019 were as follows:
Borrower or Lender | Amount Outstanding at December 31, 2019 | Average Borrowing* | Days Borrowing Outstanding | Average Interest Rate* | Maximum Borrowing During the Period | ||||||||||||||||||||||
Sophus Emerging Markets Fund | Borrower | $ | — | $ | 2,168,286 | 7 | 2.76 | % | $ | 4,263,000 | |||||||||||||||||
Sophus Emerging Markets Small Cap Fund | Borrower | — | 115,000 | 1 | 3.22 | % | 115,000 |
* For the year ended December 31, 2019, 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, 2019 | |||||||||||||||||||
Distributions paid from | |||||||||||||||||||
Ordinary Income | Net Long-Term Capital Gains | Total Taxable Distributions | Total Distributions Paid | ||||||||||||||||
RS International Fund | $ | 422,976 | $ | 149,071 | $ | 572,047 | $ | 572,047 | |||||||||||
RS Global Fund | 997,875 | 57,871 | 1,055,746 | 1,055,746 | |||||||||||||||
Sophus Emerging Markets Fund | 2,802,507 | — | 2,802,507 | 2,802,507 | |||||||||||||||
Sophus Emerging Markets Small Cap Fund | 48,442 | 11,014 | 59,456 | 59,456 | |||||||||||||||
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 |
73
Victory Portfolios | Notes to Financial Statements — continued December 31, 2019 |
As of the tax year ended December 31, 2019, 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 | Qualified Late-Year Losses* | Unrealized Appreciation (Depreciation)** | Total Accumulated Earnings (Deficit) | |||||||||||||||||||||||||
RS International Fund | $ | 1,449,951 | $ | 909,323 | $ | 2,359,274 | $ | — | $ | — | $ | 18,482,631 | $ | 20,841,905 | |||||||||||||||||
RS Global Fund | 15,968 | 101,028 | 116,996 | — | — | 17,283,473 | 17,400,469 | ||||||||||||||||||||||||
Sophus Emerging Markets Fund | 5,284,353 | — | 5,284,353 | (18,004,380 | ) | — | 63,933,598 | 51,213,571 | |||||||||||||||||||||||
Sophus Emerging Markets Small Cap Fund | 7,946 | — | 7,946 | (54,327 | ) | (801 | ) | 577,080 | 529,898 |
* Qualified late-year losses are comprised of post-October capital losses incurred after October 31 and certain late-year ordinary losses. Late-year ordinary losses represent ordinary losses incurred after December 31 and specified losses incurred after October 31. 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, 2019, the following funds had net capital loss carryforwards (no expiration) as summarized in the table below:
Short-Term Amount | Long-Term Amount | Total | |||||||||||||
Sophus Emerging Markets Fund | $ | 16,782,597 | $ | 1,221,783 | $ | 18,004,380 | |||||||||
Sophus Emerging Markets Small Cap Fund | 54,327 | — | 54,327 |
As of December 31, 2019, 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 | $ | 252,619,054 | $ | 21,284,830 | $ | (2,801,576 | ) | $ | 18,483,254 | ||||||||||
RS Global Fund | 65,918,395 | 18,649,423 | (1,340,598 | ) | 17,308,825 | ||||||||||||||
Sophus Emerging Markets Fund | 340,878,448 | 72,816,647 | (8,823,649 | ) | 63,992,998 | ||||||||||||||
Sophus Emerging Markets Small Cap Fund | 4,751,551 | 702,739 | (124,561 | ) | 578,178 |
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."
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Victory Portfolios | Notes to Financial Statements — continued December 31, 2019 |
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, 2019, 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 International Fund | Gerlach Company | 58.6 | % | ||||||||
Sophus Emerging Markets Fund | National Financial Services | 25.1 | % | ||||||||
Sophus Emerging Markets Small Cap Fund | Gerlach Company | 39.7 | % | ||||||||
Sophus Emerging Markets Small Cap Fund | UBS Financial Services | 34.7 | % |
10. Subsequent Events:
The Funds have evaluated the need for additional disclosures or adjustments resulting from subsequent events through the date these financial statements were issued. Based on this evaluation, there were no subsequent events to report that would have a material impact on the Funds' financial statements.
75
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Trustees of Victory Portfolios
Opinion on the Financial Statements
We have audited the accompanying statements of assets and liabilities, including the schedules of portfolio investments, of Victory RS International Fund, Victory RS Global Fund, Victory Sophus Emerging Markets Fund and Victory Sophus Emerging Markets Small Cap Fund (the "Funds"), each a series of Victory Portfolios, as of December 31, 2019, the related statements of operations and changes in net assets, including the related notes, and the financial highlights for the year then ended (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 as of December 31, 2019, the results of their operations, the changes in their net assets, and their financial highlights for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
The Funds' financial statements and financial highlights for the three years ended December 31, 2018, were audited by other auditors whose report dated February 26, 2019 and the Funds' financial highlights for the year ended December 31, 2015, were audited by other auditors whose report dated February 22, 2016, expressed unqualified opinions on those financial statements and financial highlights.
Basis for Opinion
These financial statements are the responsibility of the Funds' management. Our responsibility is to express an opinion on the Funds' financial statements based on our audit. 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 Funds 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 audit 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.
Our audit 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, 2019, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. Our audit 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 audit provides a reasonable basis for our opinion.
We have served as the auditor of one or more of the investment companies advised by Victory Capital Management, Inc. since 2015.
COHEN & COMPANY, LTD.
Cleveland, Ohio
February 25, 2020
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Victory Portfolios | Supplemental Information December 31, 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 and 26 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, 68 | Trustee | May 2005 | Consultant (since 2006). | Chair and Trustee, Turner Funds (December 2016-December 2017). | |||||||||||||||
Nigel D. T. Andrews, 72 | 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, 68* | Trustee | May 2005 | Retired (since 2015); Consultant, The Henlee Group, LLC (consulting) (2005-2015). | None. | |||||||||||||||
Dennis M. Bushe, 76 | 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, 65 | Trustee | February 2011 | Chief Investment Officer, Tufts University (since 2002). | None. | |||||||||||||||
John L. Kelly, 66 | Trustee | February 2015 | Partner, McCarvill Capital Partners (September 2016- September 2017); Advisor, Endgate Commodities LLC (January 2016-April 2016); Managing Partner, Endgate Commodities LLC (August 2014-January 2016); Chief Operating Officer, Liquidnet Holdings, Inc. (December 2011-July 2014). | Director, Caledonia Mining Corporation (since May 2012). | |||||||||||||||
David L. Meyer, 62* | Trustee | December 2008 | Retired. | None. | |||||||||||||||
Gloria S. Nelund, 58 | 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, 75 | Chair and Trustee | November 1994 | Private Investor. | Chair (since 2013), Caledonia Mining Corporation. | |||||||||||||||
Interested Trustee. | |||||||||||||||||||
David C. Brown, 47** | 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). | USAA Mutual Funds Trust. |
* 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, 58 | President | February 2006* | Director of Mutual Fund Administration, the Adviser. | ||||||||||||
Scott A. Stahorsky, 50 | Vice President | December 2014 | Manager, Fund Administration, the Adviser (since 2015); Senior Analyst, Fund Administration, the Adviser (prior to 2015). | ||||||||||||
Erin G. Wagner, 46 | Secretary | December 2014 | Associate General Counsel, the Adviser (since 2013). | ||||||||||||
Allan Shaer, 54 | 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, 35 | 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, 46 | Chief Compliance Officer | July 2017 | Chief Compliance Officer (since 2013) and Chief Risk Officer (2009-2017), the Adviser. | ||||||||||||
Chuck Booth, 59 | 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, 66 | Assistant Secretary | December 1997 | Partner, Shearman & Sterling LLP (since 2018); Partner, Morrison & Foerster LLP (2011-January 2018). |
* 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 Portfolio Holdings Information
Proxy Voting:
Information regarding the policies and procedures 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 files 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. Prior to the implementation of Form N-PORT, the Trust 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, 2019 through December 31, 2019.
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 7/1/19 | Actual Ending Account Value 12/31/19 | Hypothetical Ending Account Value 12/31/19 | Actual Expenses Paid During Period 7/1/19- 12/31/19* | Hypothetical Expenses Paid During Period 7/1/19- 12/31/19* | Annualized Expense Ratio During Period 7/1/19- 12/31/19 | ||||||||||||||||||||||
RS International Fund | |||||||||||||||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 1,055.30 | $ | 1,019.51 | $ | 5.85 | $ | 5.75 | 1.13 | % | |||||||||||||||
Class C Shares | 1,000.00 | 1,051.20 | 1,015.73 | 9.72 | 9.55 | 1.88 | % | ||||||||||||||||||||
Class R Shares | 1,000.00 | 1,053.80 | 1,018.25 | 7.14 | 7.02 | 1.38 | % | ||||||||||||||||||||
Class R6 Shares | 1,000.00 | 1,057.60 | 1,021.02 | 4.30 | 4.23 | 0.83 | % | ||||||||||||||||||||
Class Y Shares | 1,000.00 | 1,056.80 | 1,020.77 | 4.56 | 4.48 | 0.88 | % |
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Beginning Account Value 7/1/19 | Actual Ending Account Value 12/31/19 | Hypothetical Ending Account Value 12/31/19 | Actual Expenses Paid During Period 7/1/19- 12/31/19* | Hypothetical Expenses Paid During Period 7/1/19- 12/31/19* | Annualized Expense Ratio During Period 7/1/19- 12/31/19 | ||||||||||||||||||||||
RS Global Fund | |||||||||||||||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 1,106.00 | $ | 1,020.92 | $ | 4.51 | $ | 4.33 | 0.85 | % | |||||||||||||||
Class C Shares | 1,000.00 | 1,102.70 | 1,017.14 | 8.48 | 8.13 | 1.60 | % | ||||||||||||||||||||
Class R Shares | 1,000.00 | 1,104.90 | 1,019.66 | 5.84 | 5.60 | 1.10 | % | ||||||||||||||||||||
Class R6 Shares | 1,000.00 | 1,108.00 | 1,022.43 | 2.92 | 2.80 | 0.55 | % | ||||||||||||||||||||
Class Y Shares | 1,000.00 | 1,108.00 | 1,022.18 | 3.19 | 3.06 | 0.60 | % | ||||||||||||||||||||
Sophus Emerging Markets Fund | |||||||||||||||||||||||||||
Class A Shares | 1,000.00 | 1,107.10 | 1,018.45 | 7.12 | 6.82 | 1.34 | % | ||||||||||||||||||||
Class C Shares | 1,000.00 | 1,102.40 | 1,014.42 | 11.34 | 10.87 | 2.14 | % | ||||||||||||||||||||
Class R Shares | 1,000.00 | 1,105.50 | 1,017.24 | 8.39 | 8.03 | 1.58 | % | ||||||||||||||||||||
Class R6 Shares | 1,000.00 | 1,109.90 | 1,020.72 | 4.73 | 4.53 | 0.89 | % | ||||||||||||||||||||
Class Y Shares | 1,000.00 | 1,108.90 | 1,020.21 | 5.26 | 5.04 | 0.99 | % | ||||||||||||||||||||
Sophus Emerging Markets Small Cap Fund | |||||||||||||||||||||||||||
Class A Shares | 1,000.00 | 1,069.80 | 1,016.38 | 9.13 | 8.89 | 1.75 | % | ||||||||||||||||||||
Class C Shares | 1,000.00 | 1,066.40 | 1,012.60 | 13.02 | 12.68 | 2.50 | % | ||||||||||||||||||||
Class Y Shares | 1,000.00 | 1,070.60 | 1,017.64 | 7.83 | 7.63 | 1.50 | % |
* 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, 2019, the Funds paid qualified dividend income for the purposes of reduced individual federal income tax rates of:
Amount | |||||||
RS International Fund | 100 | % | |||||
RS Global Fund | 100 | % | |||||
Sophus Emerging Markets Fund | 93 | % | |||||
Sophus Emerging Markets Small Cap Fund | 89 | % |
Dividends qualified for corporate dividends received deductions of:
Amount | |||||||
RS Global Fund | 52 | % |
For the year ended December 31, 2019, the following Funds designated long-term capital gain distributions in the amount of:
Amount | |||||||
RS International Fund | $ | 149,071 | |||||
RS Global Fund | 57,871 | ||||||
Sophus Emerging Markets Small Cap Fund | 11,014 |
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, 2019 were as follows:
Foreign Source Income | Foreign Tax Expense | ||||||||||
RS International Fund | 0.09 | 0.04 | |||||||||
Sophus Emerging Markets Fund | 0.65 | 0.20 | |||||||||
Sophus Emerging Markets Small Cap Fund | 0.21 | 0.11 |
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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 an in-person meeting, which was called for that purpose, on December 4, 2019. The Board also considered information relating to the Funds and the Agreement provided throughout the year and, more specifically, at a meeting on October 22, 2019. 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, which also serves as 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;
• The 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;
• The 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 with respect to 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 and a peer group of funds with similar investment strategies selected by that independent consultant from the universe. The Board reviewed the factors and methodology used by the independent consultant in the selection of each Fund's peer group, including the independent consultant's selection of a broad universe of funds, 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
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to the independent consultant's methodology as compared to the prior year, including those resulting from the Adviser's input, 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 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, and would consider breakpoints at a future time if a Fund's assets were to grow significantly.
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 reflects 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, 2019, 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 median 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 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, 2019, 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 median for all of the 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, 2019, 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, with
84
Victory Portfolios | Supplemental Information — continued December 31, 2019 |
(Unaudited)
the exception of the five-year period, underperformed the peer group median for the one-year period, outperformed the peer group median for the three- and five-year periods, and matched the peer group median 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.
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-, three- and five-year periods ended June 30, 2019, 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 median for the one-year period, outperformed both the benchmark index and the peer group median for the three-year period, and outperformed the peer group median for the five-year period (benchmark index data was not available for the five-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.
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.
85
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 (12/19)
December 31, 2019
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 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.
Table of Contents
Shareholder Letter (unaudited) | 3 | ||||||
Fund Review and Commentary (unaudited) | 5 | ||||||
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 | 44-45 | ||||||
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 | 46-47 | ||||||
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 | 48-49 | ||||||
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 | 50-51 | ||||||
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 | 52-53 | ||||||
Notes to Financial Statements | 54 | ||||||
Report of Independent Registered Public Accounting Firm | 64 | ||||||
Supplemental Information (unaudited) | 65 | ||||||
Trustee and Officer Information | 65 | ||||||
Proxy Voting and Portfolio Holdings Information | 68 | ||||||
Expense Examples | 68 | ||||||
Additional Federal Income Tax Information | 70 | ||||||
Advisory Contract Approval | 71 |
Victory Portfolios
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
(Unaudited)
Dear Shareholder,
As we turn the page into a new decade, it's hard not to reflect on the fact that we have been enjoying the longest-ever bull market in U.S. equities. The run has been impressive, and despite periods of tumult and plenty of negative news, the bull market endured throughout 2019.
For the annual reporting period ended December 31, 2019, the S&P 500® Index posted impressive gains of 31.49%. This represents the greatest one-year gain since 2013 and also illustrates a swift bounce-back after a precipitous drop late in 2018. The move higher supports the notion that underlying fundamentals of U.S. companies drive performance, rather than the political rancor and headline fears that often capture the attention of investors.
Perhaps we shouldn't be surprised at the impressive performance of equities. The U.S. economy — the world's largest — remains on solid footing and has been a key driver of both domestic and international stocks. Robust job creation, near-record low unemployment, and steady consumer spending continue and offer reasons for further optimism. Meanwhile, inflation remains muted, and the Federal Reserve (the Fed) and other major global central banks have taken an accommodative stance. In fact, the Fed has cut interest rates by a total of 0.75% over three meetings last July, September and October.
The risk-on attitudes of investors, coupled with the accommodative monetary policy, had an expected impact on U.S. Treasury yields. The 10-year Treasury yield declined significantly over the course of 2019, falling from 2.66% to 1.92% at year-end. More interesting, however, was the fact that, the yield on 10-year Treasurys fell below shorter-term yields for the first time since before the 2007-2008 Global Financial Crisis. This inverted yield curve spooked investors for a spell, only to revert back to a traditional upward sloping yield curve by the end of the year.
The robust domestic economy, low interest rates, and ample liquidity from central banks provided a potent tonic for the stock market in 2019. In fact, at year-end 2019, the S&P 500® Index was approaching its highest valuation level since 1999. This reminds all of us to retain some historical context on the bull market. Many of us remember the Global Financial Crisis and, before that, the collapse of the dot-com bubble. Although those are now but a distant memory (and we are not forecasting such tumult), we should not forget that stocks don't always go up and cycles don't last forever. In other words, valuations still matter.
The key point is not to discount the risks. In addition to lofty valuations, investors need to keep apprised of trade disputes, geopolitical hotspots, a contentious U.S. election, and a host of other potential headwinds. Yet it is these very risks — these cross-currents — that may create pricing dislocations. This is an environment in which we believe our Victory Capital independent investment franchises can thrive.
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.
3
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
4
Victory RS Value Funds (Unaudited)
Victory RS Partners Fund
Portfolio Holdings
As a Percentage of Total Investments
Performance Update and Review
The Victory RS Partners Fund (the "Fund") seeks to provide long-term capital appreciation. For the year ended December 31, 2019, the Fund (Class A shares at net asset value) delivered a 30.69% absolute return, outperforming the Fund's benchmark, the Russell 2000® Value Index (the "Index"), which returned 22.39%. The Fund beat the Index through strong stock selection in almost all sectors. The only negative contributor to stock selection was Energy; however, positive allocation more than offset the negative selection. Several of our Information Technology and more cyclical investments paid off in 2019. Euronet Worldwide, Inc. and Cray, Inc. were significant positive contributors to performance. On the more cyclical side, Summit Materials, Inc., a manufacturer of cement and concrete products, as well as Atkore International Group Inc., a manufacturer of electrical conduits, performed extremely well. Where we struggled was in a couple of our energy positions; despite rising commodity prices, oil and natural gas equity securities lagged. Two of our positions, SRC Energy Inc. ("SRCI") and RPC, Inc. were negative contributors because of company-specific events. However, in the case of SRCI, they are now merging with PDC Energy, Inc., making for a much stronger entity. In the end, the Fund outperformed its Index in 2019.
Market Overview
The U.S. equity market's performance was impressive in 2019, with the broad-based Russell 3000® Index registering a gain of 31.02%. The move higher after last year's decline was driven by a significant reversal in monetary policy at global central banks. The United States went from tightening in December 2018, to easing by 75 bps in 2019. Other major central banks around the world took aggressive action during 2019, flooding the markets with liquidity. Value-oriented stocks, as measured by the Russell 3000® Value Index, increased 26.26% during the year.
Although gains were broad across the capitalization spectrum, small-cap value stocks underperformed their mid- and large-cap counterparts during 2019, as measured by the Russell family of indices. This is the third year in a row that small-cap value stocks have underperformed their mid- and large-cap peers. Small-cap stocks, as measured by the Index, returned 22.39%, while the Russell Midcap® Value Index and Russell 1000® Value Index returned 27.06% and 26.54%, respectively. However, since the end of August (the month that saw a full inversion in the yield curve), small-cap value stocks have started to outperform.
Perhaps this reflects a shift in leadership of smaller-cap value companies. It also may indicate that investors are repositioning to take advantage of the attractive relative valuations of small versus large companies. Even after the strong year-end performance of small-cap stocks, their relative attractiveness continues as the new year begins with near-decade-wide valuation spreads relative to large-cap stocks, as measured by forward price-to-earnings.
5
Victory RS Value Funds (Unaudited)
Victory RS Partners Fund (continued)
Moreover, consensus expectations for small-caps are for higher earnings-per-share growth versus large-cap stocks over the next three to five years.
Overall, we expect the market to continue to benefit from a dovish monetary policy, a very strong consumer, and negative real interest rates across the globe. However, we do not believe there will be any material trade deal with China prior to the presidential election. The relative strength in both the U.S. economy and labor market, as well as a U.S. Federal Reserve (the "Fed") that seems content allowing the economy to run hot, should continue to be positive for asset prices. It is our view that the U.S. equity market can continue to rise given steady U.S. economic growth and may even see higher nominal growth and a continued recovery in cyclical businesses. Looking ahead to 2020, economic growth looks to continue and, coupled with the continuation of the longest job growth streak in history, supports our constructive outlook for domestic stocks and value-oriented strategies in particular.
Outlook
As we enter our 11th year of economic expansion, a period of consistent underlying factors for equity investing, conditions have shifted. Interest rate policy in 2019 changed course dramatically, with the Fed cutting rates 75 bps as a covert quantitative easing was initiated as an "insurance policy" against any fallout from the trade war and overall global economic slowing. The rate reduction provided further liquidity to the global economy after major central banks from around the world had already instituted similar policies and has flooded the global economy with liquidity yet again, helping to boost asset prices. In addition, it appears that many of the larger developed economies have either started or are now looking to start fiscal stimulus to boost economic growth. With negative real interest rates across the globe, this is a very positive environment for equity securities.
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 United States and for non-oil-producing countries abroad. In the United States, we enjoy the competitive advantage of a long-term supply of abundant cheap natural gas. However, we are watchful of rising commodity prices and how this may affect the economy.
Interest rates have fallen materially, but it is now more questionable as to where they move from here. Based on the Fed's commentary and the fact that it is a presidential election year, we wouldn't expect the Fed to take any action in 2020 unless some sort of exogenous event occurs. In fact, based on the Fed's language, we would need to see a material increase in inflation before we might see the Fed increase interest rates again. This is somewhat perplexing, as the Fed lowered interest rates 75 bps largely in response to the U.S./China trade war, and with the trade war seeming to de-escalate, one would think those rate increases might come back.
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 decline in interest rates and tightening credit spreads will help to offset some of this growth but may very well fuel even further growth. The U.S. Treasury 10-year/2-year rate spread has widened from 16 bps 12 months ago to 30 bps today but remains well below the 10-year average of 176 bps. With the world awash with liquidity and a dovish Fed, it seems like there is a low probability of an inverted yield curve in the near term, but this situation remains very data dependent.
6
Victory RS Value Funds (Unaudited)
Victory RS Partners Fund (continued)
Despite all of the media coverage surrounding the 2020 presidential election, it is still very early in the election cycle, and much can change. No matter what your political preference may be, it's important to understand how each candidate is viewed by the market, what likelihood the market is assigning to each candidate's chance of winning, and how changes to that likelihood may impact equity markets. We are somewhat concerned that the market is already factoring in the winner of the presidential election when it is still 10 months away.
In our estimation, equity valuations remain at historically high levels (at a level not seen since the dot-com era on trailing operating earnings). We feel we are in the later stages of a bull market, although nothing is certain. Equity securities look most reasonable compared to U.S. Treasury and corporate bond yields. In any case, we believe equity securities are the superior asset allocation alternative to bonds over the longer term.
7
Victory RS Value Funds (Unaudited)
Victory RS Partners Fund (continued)
Average Annual Total Return
Year Ended December 31, 2019
Class A | Class R | Class Y | |||||||||||||||||||||
INCEPTION DATE | 7/12/95 | 10/13/06 | 5/1/07 | ||||||||||||||||||||
Net Asset Value | Maximum Offering Price | Net Asset Value | Net Asset Value | Russell 2000® Value Index1 | |||||||||||||||||||
One Year | 30.69 | % | 23.18 | % | 30.26 | % | 31.18 | % | 22.39 | % | |||||||||||||
Three Year | 9.50 | % | 7.36 | % | 9.11 | % | 9.87 | % | 4.77 | % | |||||||||||||
Five Year | 7.77 | % | 6.50 | % | 7.38 | % | 8.12 | % | 6.99 | % | |||||||||||||
Ten Year | 10.86 | % | 10.21 | % | 10.43 | % | 11.22 | % | 10.56 | % | |||||||||||||
Since Inception | 11.15 | % | 10.88 | % | 6.75 | % | 6.78 | % | N/A | ||||||||||||||
Expense Ratios | |||||||||||||||||||||||
Gross | 1.52% | 2.37% | 1.19% | ||||||||||||||||||||
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, 2019. Additional information pertaining to the Fund's expense ratios as of December 31, 2019 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.
8
Victory RS Value Funds (Unaudited)
Victory RS Value Fund
Portfolio Holdings
As a Percentage of Total Investments
Performance Update and Review
The Victory RS Value Fund (the "Fund") seeks to provide long-term capital appreciation. For the year ended December 31, 2019, the Fund (Class A shares at net asset value) delivered a 31.35% absolute return, outperforming the Fund's benchmark, the Russell Midcap® Value Index (the "Index"), which returned 27.06%. The relative outperformance was primarily driven by stock selection, aided by positive allocation in the Information Technology and Real Estate sectors. Stock selection was strong across most of the sectors, led by Materials, Technology, and Real Estate. Euronet Worldwide, Inc., a payment processing company, was the largest positive contributor in the technology sector. In the materials sector, Crown Holdings, Inc., a manufacturer of steel and aluminum cans, benefited from the secular shift away from plastic to aluminum. In real estate, Invitation Homes Inc., a REIT that owns single-family homes across the United States, benefited from the market's recognition of acquisition synergies. On a less positive note, we did have negative stock selection from energy as well as a negative allocation effect from our underweight in industrials. Our two biggest negative contributors were EQT Corporation, a natural gas business that experienced a hostile takeover, and RPC, Inc., where the thesis was broken due to management execution. In the end, the Fund outperformed its Index in 2019.
Market Overview
The U.S. equity market's performance was impressive in 2019, with the broad-based Russell 3000® Index registering a gain of 31.02%. The move higher after last year's decline was driven by a significant reversal in monetary policy at global central banks. The United States went from tightening in December 2018, to easing by 75 bps in 2019. Other major central banks around the world took aggressive action during 2019, flooding the markets with liquidity. Value-oriented stocks, as measured by the Russell 3000® Value Index, increased 26.26% during the year.
Although gains were broad across the capitalization spectrum, small-cap value stocks underperformed their mid- and large-cap counterparts during 2019, as measured by the Russell family of indices. This is the third year in a row that small-cap value stocks have underperformed their mid- and large-cap peers. Small-cap stocks, as measured by the Russell 2000® Value Index, returned 22.39%, while the Index and Russell 1000® Value Index returned 27.06% and 26.54%, respectively. However, since the end of August (the month that saw a full inversion in the yield curve), small-cap value stocks have started to outperform.
Perhaps this reflects a shift in leadership of smaller-cap value companies. It also may indicate that investors are repositioning to take advantage of the attractive relative valuations of small versus large companies. Even after the strong year-end performance of small-cap stocks, their relative attractiveness continues as the new year begins with near-decade-wide
9
Victory RS Value Funds (Unaudited)
Victory RS Value Fund (continued)
valuation spreads relative to large-cap stocks, as measured by forward price-to-earnings. Moreover, consensus expectations for small-caps are for higher earnings-per-share growth versus large-cap stocks over the next three to five years.
Overall, we expect the market to continue to benefit from a dovish monetary policy, a very strong consumer, and negative real interest rates across the globe. However, we do not believe there will be any material trade deal with China prior to the presidential election. The relative strength in both the U.S. economy and labor market, as well as a U.S. Federal Reserve (the "Fed") that seems content allowing the economy to run hot, should continue to be positive for asset prices. It is our view that the U.S. equity market can continue to rise given steady U.S. economic growth and may even see higher nominal growth and a continued recovery in cyclical businesses. Looking ahead to 2020, economic growth looks to continue and, coupled with the continuation of the longest job growth streak in history, supports our constructive outlook for domestic stocks and value-oriented strategies in particular.
Outlook
As we enter our 11th year of economic expansion, a period of consistent underlying factors for equity investing, conditions have shifted. Interest rate policy in 2019 changed course dramatically, with the Fed cutting rates 75 bps as a covert quantitative easing was initiated as an "insurance policy" against any fallout from the trade war and overall global economic slowing. The rate reduction provided further liquidity to the global economy after major central banks from around the world had already instituted similar policies and has flooded the global economy with liquidity yet again, helping to boost asset prices. In addition, it appears that many of the larger developed economies have either started or are now looking to start fiscal stimulus to boost economic growth. With negative real interest rates across the globe, this is a very positive environment for equity securities.
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 United States and for non-oil-producing countries abroad. In the United States, we enjoy the competitive advantage of a long-term supply of abundant cheap natural gas. However, we are watchful of rising commodity prices and how this may affect the economy.
Interest rates have fallen materially, but it is now more questionable as to where they move from here. Based on the Fed's commentary and the fact that it is a presidential election year, we wouldn't expect the Fed to take any action in 2020 unless some sort of exogenous event occurs. In fact, based on the Fed's language, we would need to see a material increase in inflation before we might see the Fed increase interest rates again. This is somewhat perplexing, as the Fed lowered interest rates 75 bps largely in response to the U.S./China trade war, and with the trade war seeming to de-escalate, one would think those rate increases might come back.
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 decline in interest rates and tightening credit spreads will help to offset some of this growth but may very well fuel even further growth. The U.S. Treasury 10-year/2-year rate spread has widened from 16 bps 12 months ago to 30 bps today but remains well below the 10-year average of 176 bps. With
10
Victory RS Value Funds (Unaudited)
Victory RS Value Fund (continued)
the world awash with liquidity and a dovish Fed, it seems like there is a low probability of an inverted yield curve in the near term, but this situation remains very data dependent.
Despite all of the media coverage surrounding the 2020 presidential election, it is still very early in the election cycle, and much can change. No matter what your political preference may be, it's important to understand how each candidate is viewed by the market, what likelihood the market is assigning to each candidate's chance of winning, and how changes to that likelihood may impact equity markets. We are somewhat concerned that the market is already factoring in the winner of the presidential election when it is still 10 months away.
In our estimation, equity valuations remain at historically high levels (at a level not seen since the dot-com era on trailing operating earnings). We believe we are in the later stages of a bull market, although nothing is certain. Equity securities look most reasonable compared to U.S. Treasury and corporate bond yields. In any case, we believe equity securities are the superior asset allocation alternative to bonds over the longer term.
11
Victory RS Value Funds (Unaudited)
Victory RS Value Fund (continued)
Average Annual Total Return
Year Ended December 31, 2019
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 | 31.35 | % | 23.78 | % | 30.32 | % | 29.32 | % | 30.89 | % | 31.69 | % | 27.06 | % | |||||||||||||||||
Three Year | 11.24 | % | 9.07 | % | 10.40 | % | 10.40 | % | 10.81 | % | 11.51 | % | 8.10 | % | |||||||||||||||||
Five Year | 7.45 | % | 6.18 | % | 6.62 | % | 6.62 | % | 7.03 | % | 7.70 | % | 7.62 | % | |||||||||||||||||
Ten Year | 10.83 | % | 10.17 | % | 9.99 | % | 9.99 | % | 10.39 | % | 11.10 | % | 12.41 | % | |||||||||||||||||
Since Inception | 7.83 | % | 7.59 | % | 5.33 | % | 5.33 | % | 6.28 | % | 6.42 | % | N/A | ||||||||||||||||||
Expense Ratios | |||||||||||||||||||||||||||||||
Gross | 1.34% | 2.14% | 2.82% | 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, 2019. Additional information pertaining to the Fund's expense ratios as of December 31, 2019 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.
12
Victory RS Value Funds (Unaudited)
Victory RS Large Cap Alpha Fund
Portfolio Holdings
As a Percentage of Total Investments
Performance Update and Review
The Victory RS Large Cap Alpha Fund (the "Fund") seeks to provide long-term capital appreciation. For the year ended December 31, 2019, the Fund (Class A shares at net asset value) delivered a 30.73% absolute return, outperforming the Fund's benchmark, the Russell 1000® Value Index (the "Index"), which returned 26.54%. Stock selection drove all of the outperformance, with the allocation effect being largely neutral. The largest positive sector contributors to performance in 2019 were Financials and Communication Services. Within Communication Services, social media company Facebook, Inc. continued to generate exceptional returns and recover some lost valuation after media criticism of the company earlier in the year. In Financials, Citigroup Inc. continued to execute despite a slowing global economic environment, proving to some skeptics the resilience of its business model. On a less positive note, the Utilities and Energy sectors were a drag on Fund performance. Stock-specific negative contributions for the year were EQT Corporation, a natural gas business that experienced a hostile takeover, and the online travel business Expedia Group, Inc., which faced additional competitive pressures. In the end, the Fund outperformed its Index in 2019.
Market Overview
The U.S. equity market's performance was impressive in 2019, with the broad-based Russell 3000® Index registering a gain of 31.02%. The move higher after last year's decline was driven by a significant reversal in monetary policy at global central banks. The United States went from tightening in December 2018, to easing by 75 bps in 2019. Other major central banks around the world took aggressive action during 2019, flooding the markets with liquidity. Value-oriented stocks, as measured by the Russell 3000® Value Index, increased 26.26% during the year.
Although gains were broad across the capitalization spectrum, small-cap value stocks underperformed their mid- and large-cap counterparts during 2019, as measured by the Russell family of indices. This is the third year in a row that small-cap value stocks have underperformed their mid- and large-cap peers. Small-cap stocks, as measured by the Russell 2000® Value Index, returned 22.39%, while the Russell Midcap® Value Index and the Index returned 27.06% and 26.54%, respectively. However, since the end of August (the month that saw a full inversion in the yield curve), small-cap value stocks have started to outperform.
Perhaps this reflects a shift in leadership of smaller-cap value companies. It also may indicate that investors are repositioning to take advantage of the attractive relative valuations of small versus large companies. Even after the strong year-end performance of small-cap stocks, their relative attractiveness continues as the new year begins with near-decade-wide valuation spreads relative to large-cap stocks, as measured by forward price-to-earnings.
13
Victory RS Value Funds (Unaudited)
Victory RS Large Cap Alpha Fund (continued)
Moreover, consensus expectations for small-cap stocks are for higher earnings-per-share growth versus large-cap stocks over the next three to five years.
Overall, we expect the market to continue to benefit from a dovish monetary policy, a very strong consumer, and negative real interest rates across the globe. However, we do not believe there will be any material trade deal with China prior to the presidential election. The relative strength in both the U.S. economy and labor market, as well as a U.S. Federal Reserve (the "Fed") that seems content allowing the economy to run hot, should continue to be positive for asset prices. It is our view that the U.S. equity market can continue to rise given steady U.S. economic growth and may even see higher nominal growth and a continued recovery in cyclical businesses. Looking ahead to 2020, economic growth looks to continue and, coupled with the continuation of the longest job growth streak in history, supports our constructive outlook for domestic stocks and value-oriented strategies in particular.
Outlook
As we enter our 11th year of economic expansion, a period of consistent underlying factors for equity investing, conditions have shifted. Interest rate policy in 2019 changed course dramatically, with the Fed cutting rates 75 bps as a covert quantitative easing was initiated as an "insurance policy" against any fallout from the trade war and overall global economic slowing. The rate reduction provided further liquidity to the global economy after major central banks from around the world had already instituted similar policies and has flooded the global economy with liquidity yet again, helping to boost asset prices. In addition, it appears that many of the larger developed economies have either started or are now looking to start fiscal stimulus to boost economic growth. With negative real interest rates across the globe, this is a very positive environment for equity securities.
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 United States and for non-oil-producing countries abroad. In the United States, we enjoy the competitive advantage of a long-term supply of abundant cheap natural gas. However, we are watchful of rising commodity prices and how this may affect the economy.
Interest rates have fallen materially, but it is now more questionable as to where they move from here. Based on the Fed's commentary and the fact that it is a presidential election year, we wouldn't expect the Fed to take any action in 2020 unless some sort of exogenous event occurs. In fact, based on the Fed's language, we would need to see a material increase in inflation before we might see the Fed increase interest rates again. This is somewhat perplexing, as the Fed lowered interest rates 75 bps largely in response to the U.S./China trade war, and with the trade war seeming to de-escalate, one would think those rate increases might come back.
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 decline in interest rates and tightening credit spreads will help to offset some of this growth but may very well fuel even further growth. The U.S. Treasury 10-year/2-year rate spread has widened from 16 bps 12 months ago to 30 bps today but remains well below the 10-year average of 176 bps. With the world awash with liquidity and a dovish Fed, it seems like there is a low probability of an inverted yield curve in the near term, but this situation remains very data dependent.
14
Victory RS Value Funds (Unaudited)
Victory RS Large Cap Alpha Fund (continued)
Despite all of the media coverage surrounding the 2020 presidential election, it is still very early in the election cycle, and much can change. No matter what your political preference may be, it's important to understand how each candidate is viewed by the market, what likelihood the market is assigning to each candidate's chance of winning, and how changes to that likelihood may impact equity markets. We are somewhat concerned that the market is already factoring in the winner of the presidential election when it is still 10 months away.
In our estimation, equity valuations remain at historically high levels (at a level not seen since the dot-com era on trailing operating earnings). We believe we are in the later stages of a bull market, although nothing is certain. Equity securities look most reasonable compared to U.S. Treasury and corporate bond yields. In any case, we believe equity securities are the superior asset allocation alternative to bonds over the longer term.
15
Victory RS Value Funds (Unaudited)
Victory RS Large Cap Alpha Fund (continued)
Average Annual Total Return
Year Ended December 31, 2019
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 | Contingent Deferred Charges | Net Asset Value | Net Asset Value | Russell 1000® Value Index1 | S&P 500® Index2 | ||||||||||||||||||||||||||||
One Year | 30.73 | % | 23.22 | % | 29.70 | % | 28.70 | % | 30.23 | % | 30.99 | % | 26.54 | % | 31.49 | % | |||||||||||||||||||
Three Year | 11.94 | % | 9.76 | % | 11.05 | % | 11.05 | % | 11.53 | % | 12.17 | % | 9.68 | % | 15.27 | % | |||||||||||||||||||
Five Year | 8.35 | % | 7.08 | % | 7.49 | % | 7.49 | % | 7.96 | % | 8.58 | % | 8.29 | % | 11.70 | % | |||||||||||||||||||
Ten Year | 11.16 | % | 10.51 | % | 10.28 | % | 10.28 | % | 10.75 | % | 11.44 | % | 11.80 | % | 13.56 | % | |||||||||||||||||||
Since Inception | 11.69 | % | 11.55 | % | 3.17 | % | 3.17 | % | 5.94 | % | 8.41 | % | N/A | N/A | |||||||||||||||||||||
Expense Ratios | |||||||||||||||||||||||||||||||||||
Gross | 0.93% | 1.75% | 1.40% | 0.75% | |||||||||||||||||||||||||||||||
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, 2019. Additional information pertaining to the Fund's expense ratios as of December 31, 2019 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.
16
Victory RS Value Funds (Unaudited)
Victory RS Investors Fund
Portfolio Holdings
As a Percentage of Total Investments
Performance Update and Review
The Victory RS Investors Fund (the "Fund") seeks to provide long-term capital appreciation. For the year ended December 31, 2019, the Fund (Class A shares at net asset value) delivered a 28.01% absolute return, modestly outperforming the Fund's benchmark, the Russell 3000® Value Index (the "Index"), which returned 26.26%. Outperformance in 2019 was driven entirely by stock selection, as positive allocation from Technology was offset by our underweight in industrials, which led to a negative allocation effect in that sector. The most positive sectors contributing to outperformance were Communication Services and Materials. Specifically, Facebook, Inc., the social media company, continued to perform well even after media criticism depressed its valuation. In addition, LKQ Corporation, a maker of after-market auto parts, was a significant contributor as management's plan to improve returns began to take hold. On a less positive note, we did have negative performance from both the Energy and Utilities sectors in 2019, which suppressed some of our outperformance. In addition, two of our largest underperformers of the year were EQT Corporation, a natural gas business that experienced a hostile takeover, and the online travel business Expedia Group, Inc., which faced additional competitive pressures. In the end, the Fund outperformed its Index in 2019.
Market Overview
The U.S. equity market's performance was impressive in 2019, with the broad-based Russell 3000® Index registering a gain of 31.02%. The move higher after last year's decline was driven by a significant reversal in monetary policy at global central banks. The United States went from tightening in December 2018, to easing by 75 bps in 2019. Other major central banks around the world took aggressive action during 2019, flooding the markets with liquidity. Value-oriented stocks, as measured by the Index, increased 26.26% during the year.
Although gains were broad across the capitalization spectrum, small-cap value stocks underperformed their mid- and large-cap counterparts during 2019, as measured by the Russell family of indices. This is the third year in a row that small-cap value stocks have underperformed their mid- and large-cap peers. Small-cap stocks, as measured by the Russell 2000® Value Index, returned 22.39%, while the Russell Midcap® Value Index and Russell 1000® Value Index returned 27.06% and 26.54%, respectively. However, since the end of August (the month that saw a full inversion in the yield curve), small-cap value stocks have started to outperform.
Perhaps this reflects a shift in leadership of smaller-cap value companies. It also may indicate that investors are repositioning to take advantage of the attractive relative valuations of small versus large companies. Even after the strong year-end performance of small-cap stocks, their relative attractiveness continues as the new year begins with near-decade-wide valuation spreads relative to large-cap stocks, as measured by forward price-to-earnings.
17
Victory RS Value Funds (Unaudited)
Victory RS Investors Fund (continued)
Moreover, consensus expectations for small-caps are for higher earnings-per-share growth versus large-cap stocks over the next three to five years.
Overall, we expect the market to continue to benefit from a dovish monetary policy, a very strong consumer, and negative real interest rates across the globe. However, we do not believe there will be any material trade deal with China prior to the presidential election. The relative strength in both the U.S. economy and labor market, as well as a U.S. Federal Reserve (the "Fed") that seems content allowing the economy to run hot, should continue to be positive for asset prices. It is our view that the U.S. equity market can continue to rise given steady U.S. economic growth and may even see higher nominal growth and a continued recovery in cyclical businesses. Looking ahead to 2020, economic growth looks to continue and, coupled with the continuation of the longest job growth streak in history, supports our constructive outlook for domestic stocks and value-oriented strategies in particular.
Outlook
As we enter our 11th year of economic expansion, a period of consistent underlying factors for equity investing, conditions have shifted. Interest rate policy in 2019 changed course dramatically, with the Fed cutting rates 75 bps as a covert quantitative easing was initiated as an "insurance policy" against any fallout from the trade war and overall global economic slowing. The rate reduction provided further liquidity to the global economy after major central banks from around the world had already instituted similar policies and has flooded the global economy with liquidity yet again, helping to boost asset prices. In addition, it appears that many of the larger developed economies have either started or are now looking to start fiscal stimulus to boost economic growth. With negative real interest rates across the globe, this is a very positive environment for equity securities.
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 United States and for non-oil-producing countries abroad. In the United States, we enjoy the competitive advantage of a long-term supply of abundant cheap natural gas. However, we are watchful of rising commodity prices and how this may affect the economy.
Interest rates have fallen materially, but it is now more questionable as to where they move from here. Based on the Fed's commentary and the fact that it is a presidential election year, we wouldn't expect the Fed to take any action in 2020 unless some sort of exogenous event occurs. In fact, based on the Fed's language, we would need to see a material increase in inflation before we might see the Fed increase interest rates again. This is somewhat perplexing, as the Fed lowered interest rates 75 bps largely in response to the U.S./China trade war, and with the trade war seeming to de-escalate, one would think those rate increases might come back.
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 decline in interest rates and tightening credit spreads will help to offset some of this growth but may very well fuel even further growth. The U.S. Treasury 10-year/2-year rate spread has widened from 16 bps 12 months ago to 30 bps today but remains well below the 10-year average of 176 bps. With the world awash with liquidity and a dovish Fed, it seems like there is a low probability of an inverted yield curve in the near term, but this situation remains very data dependent.
18
Victory RS Value Funds (Unaudited)
Victory RS Investors Fund (continued)
Despite all of the media coverage surrounding the 2020 presidential election, it is still very early in the election cycle, and much can change. No matter what your political preference may be, it's important to understand how each candidate is viewed by the market, what likelihood the market is assigning to each candidate's chance of winning, and how changes to that likelihood may impact equity markets. We are somewhat concerned that the market is already factoring in the winner of the presidential election when it is still 10 months away.
In our estimation, equity valuations remain at historically high levels (at a level not seen since the dot-com era on trailing operating earnings). We believe we are in the later stages of a bull market, although nothing is certain. Equity securities look most reasonable compared to U.S. Treasury and corporate bond yields. In any case, we believe equity securities are the superior asset allocation alternative to bonds over the longer term.
19
Victory RS Value Funds (Unaudited)
Victory RS Investors Fund (continued)
Average Annual Total Return
Year Ended December 31, 2019
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 | Contingent Deferred Charges | Net Asset Value | Net Asset Value | Russell 3000® Value Index1 | |||||||||||||||||||||||||
One Year | 28.01 | % | 20.67 | % | 27.08 | % | 26.08 | % | 27.24 | % | 28.35 | % | 26.26 | % | |||||||||||||||||
Three Year | 10.50 | % | 8.34 | % | 9.69 | % | 9.69 | % | 9.81 | % | 10.82 | % | 9.32 | % | |||||||||||||||||
Five Year | 7.30 | % | 6.03 | % | 6.50 | % | 6.50 | % | 6.67 | % | 7.59 | % | 8.20 | % | |||||||||||||||||
Ten Year | 12.06 | % | 11.39 | % | 11.30 | % | 11.30 | % | 11.54 | % | 12.30 | % | 11.71 | % | |||||||||||||||||
Since Inception | 7.84 | % | 7.39 | % | 5.72 | % | 5.72 | % | 6.23 | % | 6.71 | % | N/A | ||||||||||||||||||
Expense Ratios | |||||||||||||||||||||||||||||||
Gross | 1.58% | 2.44% | 3.15% | 1.37% | |||||||||||||||||||||||||||
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, 2019. Additional information pertaining to the Fund's expense ratios as of December 31, 2019 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.
20
Victory RS Value Funds (Unaudited)
Portfolio Holdings
As a Percentage of Total Investments
Victory Global Natural Resources Fund
The Victory Global Natural Resources Fund (the "Fund") seeks to provide long-term capital appreciation. For the year ended December 31, 2019, the Fund (Class A Shares at net asset value) had a total return of -24.49%, well underperforming its primary index, the MSCI World Commodity Producers Index (the "Index") returning 11.64%, largely due to the significant weight in North American natural gas and, to a lesser extent, base metals. Over the course of the year, lower natural gas prices weighed heavily on all producers. This was exacerbated by weak natural gas liquids pricing that particularly impacted southwest Marcellus producers, the largest single basin/asset exposure in the portfolio. Offsetting the commodity price pressures, the Fund's portfolio holdings moved aggressively to reduce operating costs, improve capital efficiency, and address market concerns regarding their balance sheets. Heading into 2020, the securities held in the Fund's portfolio are generating free cash flow, which is being returned to shareholders even at relatively depressed commodity prices, a significant improvement in company fundamentals. The other major detractor from Fund performance was its investments in copper producers, which faced macro headwinds as U.S./China trade tensions, undermined global economic activity, and where large projects either being developed or coming on stream gave investors pause, particularly during the second and third quarters. However, as the market received clarity on project execution, and as those macro concerns began to dissipate as investors are forced to acknowledge the relatively tight supply/demand balances in copper, the Fund's portfolio holdings generated strong returns in the fourth quarter, which contributed to improved performance.
In our opinion, the last few years have been a challenging time to invest in the natural resource space. Too much capital was made available for too many projects, undermining returns and depressing commodity prices. We believe many companies will not survive, and many projects will be laid back to rest. However, low-cost, capital efficient assets will continue to operate and should continue to generate attractive cash-on-cash returns.
The equity markets overshot fundamentals at cyclical extremes. This downcycle is no different, although it is much more akin to the capital cleansing that we witnessed at the end of the 1990s than the momentary liquidity freeze that occurred in 2008. As the securities held in the Fund's portfolio continue to execute on their corporate plans, and as realized results continue to compare favorably versus our underwriting assumptions, we remain highly confident that the intrinsic value of your investment is compounding. Perhaps more importantly, we believe that the conditions necessary to have that value reflected in stock prices are moving into place: limited capital availability and a commitment to ongoing capital discipline, minimal surplus inventory, and depressed valuations at a period of improving fundamentals.
We thank you, as always, for your patience and support.
21
Victory RS Value Funds (Unaudited)
Victory Global Natural Resources Fund (continued)
Average Annual Total Return
Year Ended December 31, 2019
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 | MCSI World Commodity Producers Index1 | S&P North American Natural Resources Sector IndexTM 2 | S&P 500® Index3 | |||||||||||||||||||||||||||||||
One Year | –24.49 | % | –28.81 | % | –25.11 | % | –25.86 | % | –24.79 | % | –24.32 | % | 11.64 | % | 17.63 | % | 31.49 | % | |||||||||||||||||||||
Three Year | –25.51 | % | –26.96 | % | –26.11 | % | –26.11 | % | –25.80 | % | –25.29 | % | 2.64 | % | –2.05 | % | 15.27 | % | |||||||||||||||||||||
Five Year | –17.11 | % | –18.08 | % | –17.77 | % | –17.77 | % | –17.40 | % | –16.85 | % | 0.98 | % | –1.41 | % | 11.70 | % | |||||||||||||||||||||
Ten Year | –9.45 | % | –9.99 | % | –10.15 | % | –10.15 | % | –9.79 | % | –9.16 | % | 0.39 | % | 1.39 | % | 13.56 | % | |||||||||||||||||||||
Since Inception | 1.99 | % | 1.74 | % | –8.88 | % | –8.88 | % | –7.69 | % | –7.85 | % | N/A | N/A | N/A | ||||||||||||||||||||||||
Expense Ratios | |||||||||||||||||||||||||||||||||||||||
Gross | 1.54% | 2.38% | 2.50% | 1.20% | |||||||||||||||||||||||||||||||||||
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, 2019. Additional information pertaining to the Fund's expense ratios as of December 31, 2019 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 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, 2019 |
Security Description | Shares | Value | |||||||||
Common Stocks (96.6%) | |||||||||||
Banks (11.9%): | |||||||||||
Associated Bancorp, Class A | 237,927 | $ | 5,243,911 | ||||||||
Atlantic Union Bankshares Corp. | 134,180 | 5,038,459 | |||||||||
Columbia Banking System, Inc. | 151,606 | 6,168,090 | |||||||||
First Hawaiian, Inc. | 438,710 | 12,656,783 | |||||||||
Synovus Financial Corp. | 89,969 | 3,526,785 | |||||||||
TCF Financial Corp. | 193,565 | 9,058,841 | |||||||||
UMB Financial Corp. | 88,142 | 6,050,067 | |||||||||
Veritex Holdings, Inc. | 107,330 | 3,126,523 | |||||||||
50,869,459 | |||||||||||
Capital Markets (1.4%): | |||||||||||
PJT Partners, Inc. | 131,320 | 5,926,472 | |||||||||
Communication Services (0.6%): | |||||||||||
World Wrestling Entertainment, Inc., Class A (a) | 37,770 | 2,450,140 | |||||||||
Consumer Discretionary (4.3%): | |||||||||||
Penske Automotive Group, Inc. (a) | 225,411 | 11,320,140 | |||||||||
Wolverine World Wide, Inc. | 209,420 | 7,065,831 | |||||||||
18,385,971 | |||||||||||
Consumer Staples (7.9%): | |||||||||||
Hostess Brands, Inc. (a) (b) | 972,481 | 14,139,874 | |||||||||
Nomad Foods Ltd. (b) | 317,180 | 7,095,317 | |||||||||
Primo Water Corp. (a) (b) | 161,350 | 1,811,154 | |||||||||
TreeHouse Foods, Inc. (a) (b) | 223,900 | 10,859,150 | |||||||||
33,905,495 | |||||||||||
Energy (4.8%): | |||||||||||
Delek US Holdings, Inc. (a) | 87,640 | 2,938,569 | |||||||||
Kosmos Energy Ltd. | 1,187,357 | 6,767,935 | |||||||||
Magnolia Oil & Gas Corp. (a) (b) | 554,620 | 6,977,120 | |||||||||
PDC Energy, Inc. (a) (b) | 152,020 | 3,978,363 | |||||||||
20,661,987 | |||||||||||
Industrials (11.7%): | |||||||||||
American Woodmark Corp. (a) (b) | 41,870 | 4,375,834 | |||||||||
Atkore International Group, Inc. (b) | 157,230 | 6,361,526 | |||||||||
Crane Co. | 40,420 | 3,491,480 | |||||||||
Finning International, Inc. | 192,000 | 3,741,220 | |||||||||
Regal Beloit Corp. | 46,818 | 4,008,089 | |||||||||
Rexnord Corp. (b) | 54,510 | 1,778,116 | |||||||||
Rush Enterprises, Inc., Class A | 141,270 | 6,569,055 | |||||||||
SkyWest, Inc. | 176,720 | 11,421,414 | |||||||||
The Timken Co. | 87,750 | 4,941,202 | |||||||||
Willscot Corp. (a) (b) | 180,610 | 3,339,479 | |||||||||
50,027,415 |
See notes to financial statements.
23
Victory Portfolios Victory RS Partners Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Shares | Value | |||||||||
Information Technology (11.1%): | |||||||||||
Euronet Worldwide, Inc. (b) | 91,940 | $ | 14,486,066 | ||||||||
NCR Corp. (b) | 219,130 | 7,704,611 | |||||||||
Talend SA, ADR (b) | 174,740 | 6,834,081 | |||||||||
Verint Systems, Inc. (b) | 329,410 | 18,236,138 | |||||||||
47,260,896 | |||||||||||
Insurance (18.4%): | |||||||||||
Argo Group International Holdings Ltd. | 47,100 | 3,096,825 | |||||||||
Axis Capital Holdings Ltd. | 295,860 | 17,585,919 | |||||||||
Globe Life, Inc. | 120,860 | 12,720,515 | |||||||||
Mercury General Corp. | 88,080 | 4,292,138 | |||||||||
Primerica, Inc. | 62,773 | 8,195,643 | |||||||||
ProAssurance Corp. (a) | 178,320 | 6,444,485 | |||||||||
Stewart Information Services Corp. | 157,310 | 6,416,675 | |||||||||
The Hanover Insurance Group, Inc. | 46,140 | 6,305,954 | |||||||||
White Mountains Insurance Group Ltd. | 12,310 | 13,731,928 | |||||||||
78,790,082 | |||||||||||
Materials (4.6%): | |||||||||||
Constellium SE (b) | 125,060 | 1,675,804 | |||||||||
Graphic Packaging Holding Co. | 803,990 | 13,386,434 | |||||||||
Summit Materials, Inc., Class A (b) | 190,087 | 4,543,079 | |||||||||
19,605,317 | |||||||||||
Mortgage Real Estate Investment Trusts (1.0%): | |||||||||||
Redwood Trust, Inc. (a) | 249,930 | 4,133,842 | |||||||||
Real Estate (9.8%): | |||||||||||
American Assets Trust, Inc. | 148,840 | 6,831,756 | |||||||||
Equity Commonwealth | 487,411 | 16,001,703 | |||||||||
Kennedy-Wilson Holdings, Inc. (a) | 371,370 | 8,281,551 | |||||||||
Spirit Realty Capital, Inc. | 129,306 | 6,359,269 | |||||||||
Washington Real Estate Investment Trust | 153,940 | 4,491,969 | |||||||||
41,966,248 | |||||||||||
Thrifts & Mortgage Finance (5.8%): | |||||||||||
Kearny Financial Corp. | 643,110 | 8,894,211 | |||||||||
PCSB Financial Corp. | 153,380 | 3,105,945 | |||||||||
TFS Financial Corp. (a) | 659,850 | 12,985,848 | |||||||||
24,986,004 | |||||||||||
Utilities (3.3%): | |||||||||||
Black Hills Corp. | 71,325 | 5,601,865 | |||||||||
NorthWestern Corp. | 42,540 | 3,048,842 | |||||||||
South Jersey Industries, Inc. | 165,530 | 5,459,179 | |||||||||
14,109,886 | |||||||||||
Total Common Stocks (Cost $330,966,686) | 413,079,214 |
See notes to financial statements.
24
Victory Portfolios Victory RS Partners Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Shares | Value | |||||||||
Preferred Stocks (0.1%) | |||||||||||
Health Care (0.1%): | |||||||||||
WellDoc, Inc. (c) (d) | 1,587,483 | $ | 587,369 | ||||||||
Total Preferred Stock (Cost $1,942,920) | 587,369 | ||||||||||
Collateral for Securities Loaned^ (2.0%) | |||||||||||
BlackRock Liquidity Funds TempFund Portfolio, Institutional Class, 1.75% (e) | 400,753 | 400,753 | |||||||||
Fidelity Investments Money Market Government Portfolio, Class I, 1.54% (e) | 2,207,860 | 2,207,860 | |||||||||
Fidelity Investments Prime Money Market Portfolio, Class I, 1.75% (e) | 66,935 | 66,935 | |||||||||
Goldman Sachs Financial Square Prime Obligations Fund, Institutional Class, 1.80% (e) | 1,333,776 | 1,333,776 | |||||||||
JPMorgan Prime Money Market Fund, Capital Class, 1.73% (e) | 1,467,257 | 1,467,257 | |||||||||
Morgan Stanley Institutional Liquidity Prime Portfolio, Institutional Class, 1.76% (e) | 2,934,414 | 2,934,414 | |||||||||
Total Collateral for Securities Loaned (Cost $8,410,995) | 8,410,995 | ||||||||||
Total Investments (Cost $341,320,601) — 98.7% | 422,077,578 | ||||||||||
Other assets in excess of liabilities — 1.3% | 5,494,298 | ||||||||||
NET ASSETS — 100.00% | $ | 427,571,876 |
^ 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, 2019, illiquid securities were 0.1% of the Fund's net assets.
(d) Security was fair valued based upon procedures approved by the Board of Trustees and represents 0.1% of the Fund's net assets as of December 31, 2019. 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, 2019.
ADR — American Depositary Receipt
See notes to financial statements.
25
Victory Portfolios Victory RS Value Fund | Schedule of Portfolio Investments December 31, 2019 |
Security Description | Shares | Value | |||||||||
Common Stocks (95.8%) | |||||||||||
Communication Services (0.6%): | |||||||||||
World Wrestling Entertainment, Inc., Class A (a) | 34,240 | $ | 2,221,149 | ||||||||
Consumer Discretionary (5.8%): | |||||||||||
Aramark | 86,195 | 3,740,863 | |||||||||
LKQ Corp. (b) | 434,480 | 15,510,936 | |||||||||
Penske Automotive Group, Inc. (a) | 64,760 | 3,252,247 | |||||||||
22,504,046 | |||||||||||
Consumer Staples (8.2%): | |||||||||||
Hostess Brands, Inc. (a) (b) | 633,230 | 9,207,165 | |||||||||
Nomad Foods Ltd. (b) | 300,770 | 6,728,225 | |||||||||
Post Holdings, Inc. (b) | 73,410 | 8,009,031 | |||||||||
TreeHouse Foods, Inc. (a) (b) | 166,420 | 8,071,370 | |||||||||
32,015,791 | |||||||||||
Energy (5.2%): | |||||||||||
Diamondback Energy, Inc. | 84,750 | 7,869,885 | |||||||||
Magnolia Oil & Gas Corp. (a) (b) | 402,160 | 5,059,173 | |||||||||
Noble Energy, Inc. | 303,085 | 7,528,631 | |||||||||
20,457,689 | |||||||||||
Financials (24.8%): | |||||||||||
Aflac, Inc. | 256,220 | 13,554,038 | |||||||||
Axis Capital Holdings Ltd. | 100,860 | 5,995,118 | |||||||||
Brown & Brown, Inc. | 265,460 | 10,480,361 | |||||||||
Cboe Global Markets, Inc. | 97,070 | 11,648,400 | |||||||||
E*TRADE Financial Corp. | 260,840 | 11,834,311 | |||||||||
First American Financial Corp. | 76,030 | 4,434,070 | |||||||||
First Hawaiian, Inc. | 372,740 | 10,753,549 | |||||||||
Kearny Financial Corp. (a) | 419,000 | 5,794,770 | |||||||||
RenaissanceRe Holdings Ltd. | 36,120 | 7,080,243 | |||||||||
Truist Financial Corp. | 77,376 | 4,357,816 | |||||||||
Voya Financial, Inc. | 173,930 | 10,606,251 | |||||||||
96,538,927 | |||||||||||
Health Care (5.8%): | |||||||||||
Bio-Rad Laboratories, Inc., Class A (b) | 6,690 | 2,475,501 | |||||||||
Humana, Inc. | 16,990 | 6,227,175 | |||||||||
QIAGEN NV (b) | 62,730 | 2,120,274 | |||||||||
Zimmer Biomet Holdings, Inc. | 81,930 | 12,263,282 | |||||||||
23,086,232 | |||||||||||
Industrials (8.4%): | |||||||||||
Crane Co. | 124,560 | 10,759,493 | |||||||||
GrafTech International, Ltd. (a) | 202,490 | 2,352,934 | |||||||||
Huntington Ingalls Industries, Inc. | 18,320 | 4,596,122 |
See notes to financial statements.
26
Victory Portfolios Victory RS Value Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Shares | Value | |||||||||
Sensata Technologies Holding PLC (b) | 58,840 | $ | 3,169,711 | ||||||||
SkyWest, Inc. | 60,840 | 3,932,089 | |||||||||
The Timken Co. | 143,010 | 8,052,893 | |||||||||
32,863,242 | |||||||||||
Information Technology (10.0%): | |||||||||||
Euronet Worldwide, Inc. (b) | 86,933 | 13,697,163 | |||||||||
NCR Corp. (b) | 172,050 | 6,049,278 | |||||||||
Talend SA, ADR (a) (b) | 75,740 | 2,962,191 | |||||||||
Verint Systems, Inc. (b) | 292,730 | 16,205,533 | |||||||||
38,914,165 | |||||||||||
Materials (9.1%): | |||||||||||
Crown Holdings, Inc. (b) | 38,035 | 2,759,059 | |||||||||
Freeport-McMoRan, Inc. | 554,470 | 7,274,646 | |||||||||
Graphic Packaging Holding Co. | 708,390 | 11,794,693 | |||||||||
Sealed Air Corp. | 257,100 | 10,240,293 | |||||||||
Summit Materials, Inc., Class A (b) | 123,170 | 2,943,763 | |||||||||
35,012,454 | |||||||||||
Real Estate (9.7%): | |||||||||||
Equity Commonwealth | 283,323 | 9,301,494 | |||||||||
Healthcare Trust of America, Inc., Class A | 202,210 | 6,122,919 | |||||||||
Invitation Homes, Inc. | 192,960 | 5,783,011 | |||||||||
MGM Growth Properties LLC, Series A | 306,130 | 9,480,847 | |||||||||
Spirit Realty Capital, Inc. | 143,688 | 7,066,576 | |||||||||
37,754,847 | |||||||||||
Utilities (8.2%): | |||||||||||
AES Corp. | 327,210 | 6,511,479 | |||||||||
Atmos Energy Corp. | 27,949 | 3,126,375 | |||||||||
FirstEnergy Corp. | 174,270 | 8,469,522 | |||||||||
Vistra Energy Corp. | 601,260 | 13,822,966 | |||||||||
31,930,342 | |||||||||||
Total Common Stocks (Cost $310,699,703) | 373,298,884 |
See notes to financial statements.
27
Victory Portfolios Victory RS Value Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Shares | Value | |||||||||
Collateral for Securities Loaned^ (2.2%) | |||||||||||
BlackRock Liquidity Funds TempFund Portfolio, Institutional Class, 1.75% (c) | 415,149 | $ | 415,149 | ||||||||
Fidelity Investments Money Market Government Portfolio, Class I, 1.54% (c) | 2,287,170 | 2,287,170 | |||||||||
Fidelity Investments Prime Money Market Portfolio, Class I, 1.75% (c) | 69,340 | 69,340 | |||||||||
Goldman Sachs Financial Square Prime Obligations Fund, Institutional Class, 1.80% (c) | 1,381,687 | 1,381,687 | |||||||||
JPMorgan Prime Money Market Fund, Capital Class, 1.73% (c) | 1,519,963 | 1,519,963 | |||||||||
Morgan Stanley Institutional Liquidity Prime Portfolio, Institutional Class, 1.76% (c) | 3,039,823 | 3,039,823 | |||||||||
Total Collateral for Securities Loaned (Cost $8,713,132) | 8,713,132 | ||||||||||
Total Investments (Cost $319,412,835) — 98.0% | 382,012,016 | ||||||||||
Other assets in excess of liabilities — 2.0% | 7,831,768 | ||||||||||
NET ASSETS — 100.00% | $ | 389,843,784 |
^ Purchased with cash collateral from securities on loan.
(a) All or a portion of this security is on loan.
(b) Non-income producing security.
(c) Rate disclosed is the daily yield on December 31, 2019.
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, 2019 |
Security Description | Shares | Value | |||||||||
Common Stocks (96.4%) | |||||||||||
Banks (12.4%): | |||||||||||
Citigroup, Inc. | 219,530 | $ | 17,538,251 | ||||||||
JPMorgan Chase & Co. | 102,940 | 14,349,836 | |||||||||
The PNC Financial Services Group, Inc. | 88,390 | 14,109,696 | |||||||||
U.S. Bancorp | 232,290 | 13,772,474 | |||||||||
Wells Fargo & Co. | 201,230 | 10,826,174 | |||||||||
70,596,431 | |||||||||||
Capital Markets (6.3%): | |||||||||||
Cboe Global Markets, Inc. | 204,158 | 24,498,960 | |||||||||
E*TRADE Financial Corp. | 245,230 | 11,126,085 | |||||||||
35,625,045 | |||||||||||
Communication Services (7.9%): | |||||||||||
Alphabet, Inc., Class A (a) | 15,430 | 20,666,787 | |||||||||
Facebook, Inc., Class A (a) | 116,410 | 23,893,152 | |||||||||
44,559,939 | |||||||||||
Consumer Discretionary (4.1%): | |||||||||||
Aramark | 157,740 | 6,845,916 | |||||||||
LKQ Corp. (a) | 309,220 | 11,039,154 | |||||||||
McDonald's Corp. | 24,200 | 4,782,162 | |||||||||
22,667,232 | |||||||||||
Consumer Staples (5.0%): | |||||||||||
Keurig Dr Pepper, Inc. (b) | 225,890 | 6,539,516 | |||||||||
Mondelez International, Inc., Class A | 331,270 | 18,246,352 | |||||||||
Post Holdings, Inc. (a) | 31,640 | 3,451,924 | |||||||||
28,237,792 | |||||||||||
Energy (10.1%): | |||||||||||
Chevron Corp. | 107,585 | 12,965,068 | |||||||||
Diamondback Energy, Inc. | 143,680 | 13,342,125 | |||||||||
Enterprise Products Partners LP (b) | 479,890 | 13,513,702 | |||||||||
Noble Energy, Inc. | 474,324 | 11,782,208 | |||||||||
Suncor Energy, Inc. | 175,150 | 5,744,920 | |||||||||
57,348,023 | |||||||||||
Health Care (11.1%): | |||||||||||
Cigna Corp. | 24,730 | 5,057,038 | |||||||||
CVS Health Corp. | 110,325 | 8,196,044 | |||||||||
Humana, Inc. | 22,980 | 8,422,630 | |||||||||
Johnson & Johnson | 78,550 | 11,458,089 | |||||||||
Pfizer, Inc. | 203,030 | 7,954,715 | |||||||||
UnitedHealth Group, Inc. | 27,035 | 7,947,749 | |||||||||
Zimmer Biomet Holdings, Inc. | 92,570 | 13,855,878 | |||||||||
62,892,143 | |||||||||||
Industrials (8.4%): | |||||||||||
Air Canada (a) | 235,140 | 8,785,152 | |||||||||
Eaton Corp. PLC | 160,850 | 15,235,712 | |||||||||
Parker-Hannifin Corp. | 51,640 | 10,628,545 |
See notes to financial statements.
29
Victory Portfolios Victory RS Large Cap Alpha Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Shares | Value | |||||||||
Raytheon Co. | 38,990 | $ | 8,567,663 | ||||||||
Union Pacific Corp. | 23,210 | 4,196,136 | |||||||||
47,413,208 | |||||||||||
Information Technology (2.4%): | |||||||||||
Visa, Inc., Class A | 70,630 | 13,271,377 | |||||||||
Insurance (11.5%): | |||||||||||
Aflac, Inc. | 424,740 | 22,468,745 | |||||||||
Brown & Brown, Inc. | 431,050 | 17,017,854 | |||||||||
RenaissanceRe Holdings Ltd. | 41,080 | 8,052,502 | |||||||||
The Progressive Corp. | 239,390 | 17,329,442 | |||||||||
64,868,543 | |||||||||||
Materials (4.7%): | |||||||||||
Freeport-McMoRan, Inc. (b) | 923,630 | 12,118,026 | |||||||||
Sealed Air Corp. | 364,460 | 14,516,442 | |||||||||
26,634,468 | |||||||||||
Real Estate (4.9%): | |||||||||||
Equity Commonwealth | 364,700 | 11,973,101 | |||||||||
Invitation Homes, Inc. | 518,280 | 15,532,852 | |||||||||
27,505,953 | |||||||||||
Utilities (7.6%): | |||||||||||
Exelon Corp. | 235,490 | 10,735,989 | |||||||||
FirstEnergy Corp. | 271,870 | 13,212,882 | |||||||||
Vistra Energy Corp. | 823,800 | 18,939,162 | |||||||||
42,888,033 | |||||||||||
Total Common Stocks (Cost $430,184,969) | 544,508,187 | ||||||||||
Collateral for Securities Loaned^ (1.2%) | |||||||||||
BlackRock Liquidity Funds TempFund Portfolio, Institutional Class, 1.75% (c) | 317,222 | 317,222 | |||||||||
Fidelity Investments Money Market Government Portfolio, Class I, 1.54% (c) | 1,747,666 | 1,747,666 | |||||||||
Fidelity Investments Prime Money Market Portfolio, Class I , 1.75% (c) | 52,984 | 52,984 | |||||||||
Goldman Sachs Financial Square Prime Obligations Fund, Institutional Class, 1.80% (c) | 1,055,771 | 1,055,771 | |||||||||
JPMorgan Prime Money Market Fund, Capital Class, 1.73% (c) | 1,161,429 | 1,161,429 | |||||||||
Morgan Stanley Institutional Liquidity Prime Portfolio, Institutional Class, 1.76% (c) | 2,322,780 | 2,322,780 | |||||||||
Total Collateral for Securities Loaned (Cost $6,657,852) | 6,657,852 | ||||||||||
Total Investments (Cost $436,842,821) — 97.6% | 551,166,039 | ||||||||||
Other assets in excess of liabilities — 2.4% | 13,274,171 | ||||||||||
NET ASSETS — 100.00% | $ | 564,440,210 |
^ 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, 2019.
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, 2019 |
Security Description | Shares | Value | |||||||||
Common Stocks (96.7%) | |||||||||||
Banks (5.3%): | |||||||||||
Citigroup, Inc. | 11,500 | $ | 918,735 | ||||||||
First Hawaiian, Inc. | 49,040 | 1,414,804 | |||||||||
2,333,539 | |||||||||||
Capital Markets (7.1%): | |||||||||||
Cboe Global Markets, Inc. | 15,000 | 1,800,000 | |||||||||
E*TRADE Financial Corp. | 28,615 | 1,298,263 | |||||||||
3,098,263 | |||||||||||
Communication Services (9.3%): | |||||||||||
Alphabet, Inc., Class A (a) | 1,462 | 1,958,188 | |||||||||
Facebook, Inc., Class A (a) | 10,240 | 2,101,760 | |||||||||
4,059,948 | |||||||||||
Consumer Discretionary (4.7%): | |||||||||||
LKQ Corp. (a) | 57,140 | 2,039,898 | |||||||||
Consumer Staples (11.4%): | |||||||||||
Hostess Brands, Inc. (a) | 114,330 | 1,662,357 | |||||||||
Mondelez International, Inc., Class A | 16,320 | 898,906 | |||||||||
Post Holdings, Inc. (a) | 8,710 | 950,261 | |||||||||
TreeHouse Foods, Inc. (a) (b) | 30,440 | 1,476,340 | |||||||||
4,987,864 | |||||||||||
Energy (8.2%): | |||||||||||
Diamondback Energy, Inc. | 14,941 | 1,387,421 | |||||||||
Kosmos Energy Ltd. | 161,120 | 918,384 | |||||||||
Noble Energy, Inc. | 51,962 | 1,290,736 | |||||||||
3,596,541 | |||||||||||
Health Care (1.9%): | |||||||||||
Zimmer Biomet Holdings, Inc. | 5,500 | 823,240 | |||||||||
Industrials (3.2%): | |||||||||||
SkyWest, Inc. | 21,610 | 1,396,654 | |||||||||
Information Technology (11.2%): | |||||||||||
Euronet Worldwide, Inc. (a) | 11,800 | 1,859,208 | |||||||||
NCR Corp. (a) | 19,780 | 695,465 | |||||||||
Verint Systems, Inc. (a) | 43,100 | 2,386,016 | |||||||||
4,940,689 | |||||||||||
Insurance (13.7%): | |||||||||||
Aflac, Inc. | 34,000 | 1,798,600 | |||||||||
Axis Capital Holdings Ltd. | 11,000 | 653,840 | |||||||||
Brown & Brown, Inc. | 45,250 | 1,786,470 | |||||||||
Mercury General Corp. | 18,960 | 923,921 | |||||||||
RenaissanceRe Holdings Ltd. | 4,330 | 848,767 | |||||||||
6,011,598 |
See notes to financial statements.
31
Victory Portfolios Victory RS Investors Fund | Schedule of Portfolio Investments — continued December 31, 2019 |
Security Description | Shares | Value | |||||||||
Materials (9.2%): | |||||||||||
Freeport-McMoRan, Inc. | 65,940 | $ | 865,133 | ||||||||
Graphic Packaging Holding Co. | 97,690 | 1,626,538 | |||||||||
Sealed Air Corp. | 38,760 | 1,543,811 | |||||||||
4,035,482 | |||||||||||
Real Estate (3.2%): | |||||||||||
Equity Commonwealth | 42,120 | 1,382,800 | |||||||||
Thrifts & Mortgage Finance (3.0%): | |||||||||||
Kearny Financial Corp. | 95,100 | 1,315,233 | |||||||||
Utilities (5.3%): | |||||||||||
Vistra Energy Corp. | 101,420 | 2,331,646 | |||||||||
Total Common Stocks (Cost $35,154,474) | 42,353,395 | ||||||||||
Collateral for Securities Loaned^ (0.4%) | |||||||||||
BlackRock Liquidity Funds TempFund Portfolio, Institutional Class, 1.75% (c) | 8,577 | 8,577 | |||||||||
Fidelity Investments Money Market Government Portfolio, Class I, 1.54% (c) | 47,256 | 47,256 | |||||||||
Fidelity Investments Prime Money Market Portfolio, Class I, 1.75% (c) | 1,433 | 1,433 | |||||||||
Goldman Sachs Financial Square Prime Obligations Fund, Institutional Class, 1.80% (c) | 28,547 | 28,547 | |||||||||
JPMorgan Prime Money Market Fund, Capital Class, 1.73% (c) | 31,404 | 31,404 | |||||||||
Morgan Stanley Institutional Liquidity Prime Portfolio, Institutional Class, 1.76% (c) | 62,806 | 62,806 | |||||||||
Total Collateral for Securities Loaned (Cost $180,023) | 180,023 | ||||||||||
Total Investments (Cost $35,334,497) — 97.1% | 42,533,418 | ||||||||||
Other assets in excess of liabilities — 2.9% | 1,259,895 | ||||||||||
NET ASSETS — 100.00% | $ | 43,793,313 |
^ 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, 2019.
See notes to financial statements.
32
Victory Portfolios Victory Global Natural Resources Fund | Schedule of Portfolio Investments December 31, 2019 |
Security Description | Shares | Value | |||||||||
Common Stocks (95.8%) | |||||||||||
Energy Equipment & Services (2.5%): | |||||||||||
Covia Holdings Corp. (a) (b) | 1,836,803 | $ | 3,747,078 | ||||||||
Metals & Mining (34.0%): | |||||||||||
Antofagasta PLC | 304,201 | 3,693,633 | |||||||||
First Quantum Minerals Ltd. | 1,385,429 | 14,052,757 | |||||||||
Newmont Goldcorp Corp. | 98,334 | 4,272,612 | |||||||||
Rio Tinto PLC, ADR (b) | 65,859 | 3,909,391 | |||||||||
Turquoise Hill Resources Ltd. (a) (b) | 34,670,952 | 25,524,751 | |||||||||
51,453,144 | |||||||||||
Oil, Gas & Consumable Fuels (59.3%): | |||||||||||
Antero Resources Corp. (a) | 2,309,278 | 6,581,442 | |||||||||
ARC Resources Ltd. (b) | 819,970 | 5,165,862 | |||||||||
Berry Petroleum Corp. | 381,078 | 3,593,566 | |||||||||
Centennial Resource Development, Inc., Class A (a) (b) | 1,568,051 | 7,244,396 | |||||||||
Cheniere Energy, Inc. (a) | 56,852 | 3,471,952 | |||||||||
Concho Resources, Inc. | 52,177 | 4,569,140 | |||||||||
EOG Resources, Inc. | 36,358 | 3,045,346 | |||||||||
Laredo Petroleum, Inc. (a) | 797,690 | 2,289,370 | |||||||||
Noble Energy, Inc. | 125,551 | 3,118,687 | |||||||||
Peyto Exploration & Development Corp. | 1,657,515 | 4,851,014 | |||||||||
Range Resources Corp. | 4,628,554 | 22,448,487 | |||||||||
SRC Energy, Inc. (a) | 1,715,980 | 7,069,839 | |||||||||
Tourmaline Oil Corp. | 398,615 | 4,672,614 | |||||||||
Whitecap Resources, Inc. | 2,655,525 | 11,351,019 | |||||||||
89,472,734 | |||||||||||
Total Common Stocks (Cost $345,397,272) | 144,672,956 | ||||||||||
Collateral for Securities Loaned^ (6.7%) | |||||||||||
BlackRock Liquidity Funds TempFund Portfolio, Institutional Class, 1.75% (c) | 485,209 | 485,209 | |||||||||
Fidelity Investments Money Market Government Portfolio, Class I, 1.54% (c) | 2,673,153 | 2,673,153 | |||||||||
Fidelity Investments Prime Money Market Portfolio, Class I, 1.75% (c) | 81,042 | 81,042 | |||||||||
Goldman Sachs Financial Square Prime Obligations Fund, Institutional Class, 1.80% (c) | 1,614,861 | 1,614,861 | |||||||||
JPMorgan Prime Money Market Fund, Capital Class, 1.73% (c) | 1,776,472 | 1,776,472 | |||||||||
Morgan Stanley Institutional Liquidity Prime Portfolio, Institutional Class, 1.76% (c) | 3,552,823 | 3,552,823 | |||||||||
Total Collateral for Securities Loaned (Cost $10,183,560) | 10,183,560 | ||||||||||
Total Investments (Cost $355,580,832) — 102.5% | 154,856,516 | ||||||||||
Liabilities in excess of other assets — (2.5)% | (3,684,663 | ) | |||||||||
NET ASSETS — 100.00% | $ | 151,171,853 |
^ 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, 2019.
ADR — American Depositary Receipt
PLC — Public Limited Company
See notes to financial statements.
33
Victory Portfolios | Statements of Assets and Liabilities December 31, 2019 |
Victory RS Partners Fund | Victory RS Value Fund | Victory RS Large Cap Alpha Fund | |||||||||||||
ASSETS: | |||||||||||||||
Investments, at value (Cost $341,320,601, $319,412,835 and $436,842,821) | $ | 422,077,578 | (a) | $ | 382,012,016 | (b) | $ | 551,166,039 | (c) | ||||||
Cash and cash equivalents | 14,961,672 | 17,016,632 | 20,328,384 | ||||||||||||
Interest and dividends receivable | 574,366 | 452,676 | 251,395 | ||||||||||||
Receivable for capital shares issued | 499,243 | 148,522 | 81,258 | ||||||||||||
Receivable from Adviser | 52,942 | 18,679 | 45,546 | ||||||||||||
Prepaid expenses | 18,165 | 3,664 | 17,925 | ||||||||||||
Total Assets | 438,183,966 | 399,652,189 | 571,890,547 | ||||||||||||
LIABILITIES: | |||||||||||||||
Payables: | |||||||||||||||
Collateral received on loaned securities | 8,410,995 | 8,713,132 | 6,657,852 | ||||||||||||
Capital shares redeemed | 1,684,334 | 662,032 | 346,364 | ||||||||||||
Accrued expenses and other payables: | |||||||||||||||
Investment advisory fees | 363,118 | 280,627 | 237,575 | ||||||||||||
Administration fees | 20,487 | 18,642 | 26,920 | ||||||||||||
Custodian fees | 3,236 | 2,876 | 4,008 | ||||||||||||
Transfer agent fees | 81,545 | 79,266 | 79,999 | ||||||||||||
Compliance fees | 289 | 258 | 372 | ||||||||||||
Trustees' fees | 422 | 383 | 590 | ||||||||||||
12b-1 fees | 21,565 | 24,913 | 65,782 | ||||||||||||
Other accrued expenses | 26,099 | 26,276 | 30,875 | ||||||||||||
Total Liabilities | 10,612,090 | 9,808,405 | 7,450,337 | ||||||||||||
NET ASSETS: | |||||||||||||||
Capital | 342,256,221 | 321,544,033 | 429,740,027 | ||||||||||||
Total distributable earnings/(loss) | 85,315,655 | 68,299,751 | 134,700,183 | ||||||||||||
Net Assets | $ | 427,571,876 | $ | 389,843,784 | $ | 564,440,210 | |||||||||
Net Assets | |||||||||||||||
Class A Shares | $ | 193,629,562 | $ | 207,200,439 | $ | 520,159,481 | |||||||||
Class C Shares | — | 4,872,393 | 17,028,056 | ||||||||||||
Class R Shares | 1,509,939 | 1,021,587 | 7,232,024 | ||||||||||||
Class Y Shares | 232,432,375 | 176,749,365 | 20,020,649 | ||||||||||||
Total | $ | 427,571,876 | $ | 389,843,784 | $ | 564,440,210 | |||||||||
Shares (unlimited number of shares authorized with a par value of $0.001 per share): | |||||||||||||||
Class A Shares | 7,912,765 | 8,356,552 | 9,793,760 | ||||||||||||
Class C Shares | — | 222,972 | 380,982 | ||||||||||||
Class R Shares | 68,617 | 43,579 | 136,899 | ||||||||||||
Class Y Shares | 8,883,269 | 6,945,335 | 378,654 | ||||||||||||
Total | 16,864,651 | 15,568,438 | 10,690,295 | ||||||||||||
Net asset value, offering (except Class A Shares) and redemption price per share: | |||||||||||||||
Class A Shares | $ | 24.47 | $ | 24.79 | $ | 53.11 | |||||||||
Class C Shares (d) | $ | — | $ | 21.85 | $ | 44.70 | |||||||||
Class R Shares | $ | 22.01 | $ | 23.44 | $ | 52.83 | |||||||||
Class Y Shares | $ | 26.17 | $ | 25.45 | $ | 52.87 | |||||||||
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 | $ | 25.96 | $ | 26.30 | $ | 56.35 |
(a) Includes $8,210,823 of securities on loan.
(b) Includes $8,516,639 of securities on loan.
(c) Includes $6,477,980 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, 2019 |
Victory RS Investors Fund | Victory Global Natural Resources Fund | ||||||||||
ASSETS: | |||||||||||
Investments, at value (Cost $35,334,497 and $355,580,832) | $ | 42,533,418 | (a) | $ | 154,856,516 | (b) | |||||
Foreign currency, at value (Cost $— and $31,315) | — | 30,272 | |||||||||
Cash and cash equivalents | 1,827,104 | 5,206,386 | |||||||||
Interest and dividends receivable | 23,825 | 153,259 | |||||||||
Receivable for capital shares issued | 10,774 | 278,144 | |||||||||
Receivable for investments sold | — | 1,313,275 | |||||||||
Receivable from Adviser | 28,760 | — | |||||||||
Prepaid expenses | 366 | 1,252 | |||||||||
Total Assets | 44,424,247 | 161,839,104 | |||||||||
LIABILITIES: | |||||||||||
Payables: | |||||||||||
Collateral received on loaned securities | 180,023 | 10,183,560 | |||||||||
Capital shares redeemed | 376,599 | 214,279 | |||||||||
Accrued expenses and other payables: | |||||||||||
Investment advisory fees | 36,210 | 146,739 | |||||||||
Administration fees | 2,046 | 6,448 | |||||||||
Custodian fees | 467 | 2,138 | |||||||||
Transfer agent fees | 10,261 | 65,445 | |||||||||
Compliance fees | 26 | 80 | |||||||||
Trustees' fees | 39 | 130 | |||||||||
12b-1 fees | 5,105 | 4,982 | |||||||||
Other accrued expenses | 20,158 | 43,450 | |||||||||
Total Liabilities | 630,934 | 10,667,251 | |||||||||
NET ASSETS: | |||||||||||
Capital | 36,649,187 | 2,104,581,480 | |||||||||
Total distributable earnings/(loss) | 7,144,126 | (1,953,409,627 | ) | ||||||||
Net Assets | $ | 43,793,313 | $ | 151,171,853 | |||||||
Net Assets | |||||||||||
Class A Shares | $ | 16,905,792 | $ | 32,630,159 | |||||||
Class C Shares | 6,898,078 | 2,948,743 | |||||||||
Class R Shares | 843,626 | 621,114 | |||||||||
Class Y Shares | 19,145,817 | 114,971,837 | |||||||||
Total | $ | 43,793,313 | $ | 151,171,853 | |||||||
Shares (unlimited number of shares authorized with a par value of $0.001 per share): | |||||||||||
Class A Shares | 1,290,981 | 3,359,578 | |||||||||
Class C Shares | 597,939 | 338,380 | |||||||||
Class R Shares | 72,010 | 67,773 | |||||||||
Class Y Shares | 1,421,879 | 11,370,856 | |||||||||
Total | 3,382,809 | 15,136,587 | |||||||||
Net asset value, offering (except Class A Shares) and redemption price per share: | |||||||||||
Class A Shares | $ | 13.10 | $ | 9.71 | |||||||
Class C Shares (c) | $ | 11.54 | $ | 8.71 | |||||||
Class R Shares | $ | 11.72 | $ | 9.16 | |||||||
Class Y Shares | $ | 13.47 | $ | 10.11 | |||||||
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 | $ | 13.90 | $ | 10.30 |
(a) Includes $174,600 of securities on loan.
(b) Includes $9,744,481 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, 2019 |
Victory RS Partners Fund | Victory RS Value Fund | Victory RS Large Cap Alpha Fund | |||||||||||||
Investment Income: | |||||||||||||||
Dividends | $ | 8,061,550 | $ | 5,818,219 | $ | 9,975,694 | |||||||||
Interest | 307,031 | 288,260 | 373,377 | ||||||||||||
Securities lending (net of fees) | 41,890 | 30,765 | 10,826 | ||||||||||||
Foreign tax withholding | (13,014 | ) | — | — | |||||||||||
Total Income | 8,397,457 | 6,137,244 | 10,359,897 | ||||||||||||
Expenses: | |||||||||||||||
Investment advisory fees | 4,317,967 | 3,308,138 | 2,698,005 | ||||||||||||
Administration fees | 264,271 | 237,987 | 329,707 | ||||||||||||
12b-1 fees — Class A Shares | 478,214 | 505,106 | 1,234,921 | ||||||||||||
12b-1 fees — Class C Shares | — | 69,178 | 178,214 | ||||||||||||
12b-1 fees — Class R Shares | 7,159 | 5,245 | 34,548 | ||||||||||||
Custodian fees | 16,130 | 12,619 | 25,637 | ||||||||||||
Transfer agent fees | 52,224 | 38,518 | 38,388 | ||||||||||||
Transfer agent fees — Class A Shares | 264,278 | 257,979 | 447,879 | ||||||||||||
Transfer agent fees — Class C Shares | — | 7,759 | 12,836 | ||||||||||||
Transfer agent fees — Class R Shares | 2,737 | 3,992 | 12,931 | ||||||||||||
Transfer agent fees — Class Y Shares | 180,877 | 160,403 | 18,918 | ||||||||||||
Trustees' fees | 38,666 | 34,233 | 45,838 | ||||||||||||
Compliance fees | 3,488 | 3,117 | 4,285 | ||||||||||||
Legal and audit fees | 39,952 | 37,286 | 48,619 | ||||||||||||
State registration and filing fees | 57,805 | 78,193 | 68,897 | ||||||||||||
Other expenses | 97,776 | 82,545 | 56,595 | ||||||||||||
Total Expenses | 5,821,544 | 4,842,298 | 5,256,218 | ||||||||||||
Expenses waived/reimbursed by Adviser | (344,191 | ) | (154,554 | ) | (327,684 | ) | |||||||||
Net Expenses | 5,477,353 | 4,687,744 | 4,928,534 | ||||||||||||
Net Investment Income (Loss) | 2,920,104 | 1,449,500 | 5,431,363 | ||||||||||||
Realized/Unrealized Gains (Losses) from Investments: | |||||||||||||||
Net realized gains (losses) from investment securities and foreign currency translations | 40,883,294 | 34,077,370 | 27,752,926 | ||||||||||||
Net change in unrealized appreciation/depreciation on investment securities | 74,331,906 | 69,785,270 | 109,044,824 | ||||||||||||
Net realized/unrealized gains (losses) on investments | 115,215,200 | 103,862,640 | 136,797,750 | ||||||||||||
Change in net assets resulting from operations | $ | 118,135,304 | $ | 105,312,140 | $ | 142,229,113 |
See notes to financial statements.
36
Victory Portfolios | Statements of Operations For the Year Ended December 31, 2019 |
Victory RS Investors Fund | Victory Global Natural Resources Fund | ||||||||||
Investment Income: | |||||||||||
Dividends | $ | 524,760 | $ | 4,612,163 | |||||||
Interest | 26,227 | 312,654 | |||||||||
Securities lending (net of fees) | 1,656 | 44,071 | |||||||||
Foreign tax withholding | — | (335,813 | ) | ||||||||
Total Income | 552,643 | 4,633,075 | |||||||||
Expenses: | |||||||||||
Investment advisory fees | 412,370 | 3,242,960 | |||||||||
Administration fees | 25,213 | 201,270 | |||||||||
12b-1 fees — Class A Shares | 42,829 | 119,902 | |||||||||
12b-1 fees — Class C Shares | 74,735 | 46,085 | |||||||||
12b-1 fees — Class R Shares | 4,401 | 3,617 | |||||||||
Custodian fees | 3,263 | 17,341 | |||||||||
Transfer agent fees | 6,413 | 122,845 | |||||||||
Transfer agent fees — Class A Shares | 20,200 | 111,506 | |||||||||
Transfer agent fees — Class C Shares | 8,811 | 11,097 | |||||||||
Transfer agent fees — Class R Shares | 1,954 | 2,061 | |||||||||
Transfer agent fees — Class Y Shares | 21,051 | 249,574 | |||||||||
Trustees' fees | 4,767 | 39,708 | |||||||||
Compliance fees | 329 | 2,968 | |||||||||
Legal and audit fees | 10,419 | 25,976 | |||||||||
State registration and filing fees | 70,352 | 93,990 | |||||||||
Other expenses | 20,457 | 72,915 | |||||||||
Total Expenses | 727,564 | 4,363,815 | |||||||||
Expenses waived/reimbursed by Adviser | (162,310 | ) | (429,505 | ) | |||||||
Net Expenses | 565,254 | 3,934,310 | |||||||||
Net Investment Income (Loss) | (12,611 | ) | 698,765 | ||||||||
Realized/Unrealized Gains (Losses) from Investments: | |||||||||||
Net realized gains (losses) from investment securities and foreign currency translations | 1,944,737 | (302,104,028 | ) | ||||||||
Net change in unrealized appreciation/depreciation on investment securities and foreign currency translations | 8,148,148 | 187,635,480 | |||||||||
Net realized/unrealized gains (losses) on investments | 10,092,885 | (114,468,548 | ) | ||||||||
Change in net assets resulting from operations | $ | 10,080,274 | $ | (113,769,783 | ) |
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, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2019 | Year Ended December 31, 2018 | ||||||||||||||||||||||
From Investment Activities: | |||||||||||||||||||||||||||
Operations: | |||||||||||||||||||||||||||
Net investment income (loss) | $ | 2,920,104 | $ | 1,833,237 | $ | 1,449,500 | $ | 1,554,498 | $ | 5,431,363 | $ | 4,308,297 | |||||||||||||||
Net realized gains (losses) from investments | 40,883,294 | 86,121,266 | 34,077,370 | 47,724,006 | 27,752,926 | 81,827,397 | |||||||||||||||||||||
Net change in unrealized appreciation/ depreciation on investments | 74,331,906 | (147,254,191 | ) | 69,785,270 | (93,914,909 | ) | 109,044,824 | (135,809,861 | ) | ||||||||||||||||||
Change in net assets resulting from operations | 118,135,304 | (59,299,688 | ) | 105,312,140 | (44,636,405 | ) | 142,229,113 | (49,674,167 | ) | ||||||||||||||||||
Distributions to Shareholders: | |||||||||||||||||||||||||||
Class A Shares | (18,545,144 | ) | (35,773,137 | ) | (14,419,529 | ) | (24,922,768 | ) | (19,425,553 | ) | (80,490,381 | ) | |||||||||||||||
Class C Shares | — | — | (350,766 | ) | (1,375,886 | ) | (621,209 | ) | (3,700,952 | ) | |||||||||||||||||
Class R Shares | (152,466 | ) | (270,891 | ) | (70,532 | ) | (162,838 | ) | (249,827 | ) | (1,216,665 | ) | |||||||||||||||
Class Y Shares | (23,073,509 | ) | (49,823,881 | ) | (12,497,492 | ) | (24,215,948 | ) | (786,292 | ) | (4,333,722 | ) | |||||||||||||||
Change in net assets resulting from distributions to shareholders | (41,771,119 | ) | (85,867,909 | ) | (27,338,319 | ) | (50,677,440 | ) | (21,082,881 | ) | (89,741,720 | ) | |||||||||||||||
Change in net assets resulting from capital transactions | (76,430,849 | ) | (37,433,612 | ) | (44,649,999 | ) | (54,228,953 | ) | (42,142,778 | ) | 10,452,685 | ||||||||||||||||
Change in net assets | (66,664 | ) | (182,601,209 | ) | 33,323,822 | (149,542,798 | ) | 79,003,454 | (128,963,202 | ) | |||||||||||||||||
Net Assets: | |||||||||||||||||||||||||||
Beginning of period | 427,638,540 | 610,239,749 | 356,519,962 | 506,062,760 | 485,436,756 | 614,399,958 | |||||||||||||||||||||
End of period | $ | 427,571,876 | $ | 427,638,540 | $ | 389,843,784 | $ | 356,519,962 | $ | 564,440,210 | $ | 485,436,756 |
(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, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2019 | Year Ended December 31, 2018 | ||||||||||||||||||||||
Capital Transactions: | |||||||||||||||||||||||||||
Class A Shares | |||||||||||||||||||||||||||
Proceeds from shares issued | $ | 16,579,793 | $ | 10,542,694 | $ | 13,105,632 | $ | 14,150,821 | $ | 17,052,317 | $ | 20,740,364 | |||||||||||||||
Distributions reinvested | 18,238,219 | 35,117,192 | 14,014,003 | 24,219,793 | 18,921,963 | 77,994,848 | |||||||||||||||||||||
Cost of shares redeemed | (48,748,054 | ) | (68,463,235 | ) | (38,839,092 | ) | (51,805,118 | ) | (65,297,079 | ) | (75,131,993 | ) | |||||||||||||||
Total Class A Shares | $ | (13,930,042 | ) | $ | (22,803,349 | ) | $ | (11,719,457 | ) | $ | (13,434,504 | ) | $ | (29,322,799 | ) | $ | 23,603,219 | ||||||||||
Class C Shares | |||||||||||||||||||||||||||
Proceeds from shares issued | $ | — | $ | — | $ | 576,327 | $ | 1,342,072 | $ | 612,718 | $ | 2,049,875 | |||||||||||||||
Distributions reinvested | — | — | 332,779 | 1,333,779 | 578,811 | 3,453,415 | |||||||||||||||||||||
Cost of shares redeemed | — | — | (7,244,004 | ) | (7,541,603 | ) | (6,481,288 | ) | (11,400,448 | ) | |||||||||||||||||
Total Class C Shares | $ | — | $ | — | $ | (6,334,898 | ) | $ | (4,865,752 | ) | $ | (5,289,759 | ) | $ | (5,897,158 | ) | |||||||||||
Class R Shares | |||||||||||||||||||||||||||
Proceeds from shares issued | $ | 150,948 | $ | 250,543 | $ | 97,915 | $ | 214,961 | $ | 546,882 | $ | 1,047,801 | |||||||||||||||
Distributions reinvested | 152,466 | 270,891 | 70,532 | 162,838 | 247,948 | 1,210,626 | |||||||||||||||||||||
Cost of shares redeemed | (207,402 | ) | (1,018,596 | ) | (380,522 | ) | (669,866 | ) | (1,453,937 | ) | (4,210,175 | ) | |||||||||||||||
Total Class R Shares | $ | 96,012 | $ | (497,162 | ) | $ | (212,075 | ) | $ | (292,067 | ) | $ | (659,107 | ) | $ | (1,951,748 | ) | ||||||||||
Class Y Shares | |||||||||||||||||||||||||||
Proceeds from shares issued | $ | 42,480,816 | $ | 33,627,569 | $ | 17,702,861 | $ | 17,137,847 | $ | 4,219,718 | $ | 6,642,092 | |||||||||||||||
Distributions reinvested | 22,957,985 | 49,499,526 | 12,251,365 | 23,672,512 | 759,111 | 4,119,726 | |||||||||||||||||||||
Cost of shares redeemed | (128,035,620 | ) | (97,260,196 | ) | (56,337,795 | ) | (76,446,989 | ) | (11,849,942 | ) | (16,063,446 | ) | |||||||||||||||
Total Class Y Shares | $ | (62,596,819 | ) | $ | (14,133,101 | ) | $ | (26,383,569 | ) | $ | (35,636,630 | ) | $ | (6,871,113 | ) | $ | (5,301,628 | ) | |||||||||
Change in net assets resulting from capital transactions | $ | (76,430,849 | ) | $ | (37,433,612 | ) | $ | (44,649,999 | ) | $ | (54,228,953 | ) | $ | (42,142,778 | ) | $ | 10,452,685 |
(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, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2019 | Year Ended December 31, 2018 | ||||||||||||||||||||||
Share Transactions: | |||||||||||||||||||||||||||
Class A Shares | |||||||||||||||||||||||||||
Issued | 691,105 | 370,388 | 542,728 | 539,942 | 343,113 | 364,209 | |||||||||||||||||||||
Reinvested | 758,032 | 1,683,464 | 567,685 | 1,176,725 | 357,509 | 1,825,583 | |||||||||||||||||||||
Redeemed | (2,042,889 | ) | (2,415,797 | ) | (1,607,052 | ) | (2,021,000 | ) | (1,309,527 | ) | (1,340,333 | ) | |||||||||||||||
Total Class A Shares | (593,752 | ) | (361,945 | ) | (496,639 | ) | (304,333 | ) | (608,905 | ) | 849,459 | ||||||||||||||||
Class C Shares | |||||||||||||||||||||||||||
Issued | — | — | 27,312 | 60,727 | 14,939 | 43,140 | |||||||||||||||||||||
Reinvested | — | — | 15,378 | 73,124 | 13,077 | 96,062 | |||||||||||||||||||||
Redeemed | — | — | (341,331 | ) | (324,233 | ) | (156,432 | ) | (231,269 | ) | |||||||||||||||||
Total Class C Shares | — | — | (298,641 | ) | (190,382 | ) | (128,416 | ) | (92,067 | ) | |||||||||||||||||
Class R Shares | |||||||||||||||||||||||||||
Issued | 6,910 | 9,314 | 4,276 | 8,571 | 11,149 | 18,584 | |||||||||||||||||||||
Reinvested | 7,039 | 14,325 | 3,033 | 8,359 | 4,724 | 28,596 | |||||||||||||||||||||
Redeemed | (9,594 | ) | (39,384 | ) | (16,629 | ) | (28,882 | ) | (30,091 | ) | (77,609 | ) | |||||||||||||||
Total Class R Shares | 4,355 | (15,745 | ) | (9,320 | ) | (11,952 | ) | (14,218 | ) | (30,429 | ) | ||||||||||||||||
Class Y Shares | |||||||||||||||||||||||||||
Issued | 1,651,373 | 1,142,322 | 717,334 | 656,480 | 84,116 | 115,708 | |||||||||||||||||||||
Reinvested | 895,516 | 2,227,155 | 482,657 | 1,119,999 | 14,386 | 96,691 | |||||||||||||||||||||
Redeemed | (5,089,360 | ) | (3,323,588 | ) | (2,273,518 | ) | (3,005,028 | ) | (239,430 | ) | (289,399 | ) | |||||||||||||||
Total Class Y Shares | (2,542,471 | ) | 45,889 | (1,073,527 | ) | (1,228,549 | ) | (140,928 | ) | (77,000 | ) | ||||||||||||||||
Change in Shares | (3,131,868 | ) | (331,801 | ) | (1,878,127 | ) | (1,735,216 | ) | (892,467 | ) | 649,963 |
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, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2019 | Year Ended December 31, 2018 | ||||||||||||||||
From Investment Activities: | |||||||||||||||||||
Operations: | |||||||||||||||||||
Net investment income (loss) | $ | (12,611 | ) | $ | (54,803 | ) | $ | 698,765 | $ | (4,077,976 | ) | ||||||||
Net realized gains (losses) from investments | 1,944,737 | 5,799,863 | (302,104,028 | ) | (193,930,232 | ) | |||||||||||||
Net change in unrealized appreciation/depreciation on investments | 8,148,148 | (9,808,027 | ) | 187,635,480 | (289,417,818 | ) | |||||||||||||
Change in net assets resulting from operations | 10,080,274 | (4,062,967 | ) | (113,769,783 | ) | (487,426,026 | ) | ||||||||||||
Distributions to Shareholders: | |||||||||||||||||||
Class A Shares | (721,644 | ) | (2,453,812 | ) | — | — | |||||||||||||
Class C Shares | (330,965 | ) | (1,248,830 | ) | — | — | |||||||||||||
Class R Shares | (38,858 | ) | (139,602 | ) | — | — | |||||||||||||
Class Y Shares | (779,678 | ) | (2,365,022 | ) | (294,977 | ) | — | ||||||||||||
Change in net assets resulting from distributions to shareholders | (1,871,145 | ) | (6,207,266 | ) | (294,977 | ) | — | ||||||||||||
Change in net assets resulting from capital transactions | (2,879,723 | ) | (11,344,224 | ) | (200,204,338 | ) | (458,989,878 | ) | |||||||||||
Change in net assets | 5,329,406 | (21,614,457 | ) | (314,269,098 | ) | (946,415,904 | ) | ||||||||||||
Net Assets: | |||||||||||||||||||
Beginning of period | 38,463,907 | 60,078,364 | 465,440,951 | 1,411,856,855 | |||||||||||||||
End of period | $ | 43,793,313 | $ | 38,463,907 | $ | 151,171,853 | $ | 465,440,951 |
(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, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2019 | Year Ended December 31, 2018 | ||||||||||||||||
Capital Transactions: | |||||||||||||||||||
Class A Shares | |||||||||||||||||||
Proceeds from shares issued | $ | 1,270,985 | $ | 1,692,860 | $ | 9,391,402 | $ | 41,141,199 | |||||||||||
Distributions reinvested | 698,892 | 2,382,350 | — | — | |||||||||||||||
Cost of shares redeemed | (4,140,546 | ) | (4,704,359 | ) | (26,068,909 | ) | (168,408,240 | ) | |||||||||||
Total Class A Shares | $ | (2,170,669 | ) | $ | (629,149 | ) | $ | (16,677,507 | ) | $ | (127,267,041 | ) | |||||||
Class C Shares | |||||||||||||||||||
Proceeds from shares issued | $ | 400,138 | $ | 474,091 | $ | 177,189 | $ | 577,051 | |||||||||||
Distributions reinvested | 279,002 | 1,055,957 | — | — | |||||||||||||||
Cost of shares redeemed | (2,558,469 | ) | (3,353,594 | ) | (2,812,027 | ) | (7,085,345 | ) | |||||||||||
Total Class C Shares | $ | (1,879,329 | ) | $ | (1,823,546 | ) | $ | (2,634,838 | ) | $ | (6,508,294 | ) | |||||||
Class R Shares | |||||||||||||||||||
Proceeds from shares issued | $ | 47,252 | $ | 110,635 | $ | 264,804 | $ | 562,850 | |||||||||||
Distributions reinvested | 38,858 | 139,602 | — | — | |||||||||||||||
Cost of shares redeemed | (243,184 | ) | (577,298 | ) | (350,859 | ) | (1,061,738 | ) | |||||||||||
Total Class R Shares | $ | (157,074 | ) | $ | (327,061 | ) | $ | (86,055 | ) | $ | (498,888 | ) | |||||||
Class Y Shares | |||||||||||||||||||
Proceeds from shares issued | $ | 7,332,552 | $ | 2,756,651 | $ | 106,594,493 | $ | 264,889,815 | |||||||||||
Distributions reinvested | 760,887 | 2,290,072 | 250,255 | — | |||||||||||||||
Cost of shares redeemed | (6,766,090 | ) | (13,611,191 | ) | (287,650,686 | ) | (526,709,948 | ) | |||||||||||
Cost of shares redeemed in-kind | — | — | — | (62,895,522 | ) | ||||||||||||||
Total Class Y Shares | $ | 1,327,349 | $ | (8,564,468 | ) | $ | (180,805,938 | ) | $ | (324,715,655 | ) | ||||||||
Change in net assets resulting from capital transactions | $ | (2,879,723 | ) | $ | (11,344,224 | ) | $ | (200,204,338 | ) | $ | (458,989,878 | ) |
(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, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2019 | Year Ended December 31, 2018 | ||||||||||||||||
Share Transactions: | |||||||||||||||||||
Class A Shares | |||||||||||||||||||
Issued | 99,510 | 121,865 | 851,433 | 1,809,584 | |||||||||||||||
Reinvested | 53,885 | 219,774 | — | — | |||||||||||||||
Redeemed | (331,114 | ) | (346,502 | ) | (2,468,125 | ) | (7,892,823 | ) | |||||||||||
Total Class A Shares | (177,719 | ) | (4,863 | ) | (1,616,692 | ) | (6,083,239 | ) | |||||||||||
Class C Shares | |||||||||||||||||||
Issued | 35,207 | 42,948 | 16,952 | 30,147 | |||||||||||||||
Reinvested | 24,409 | 109,086 | — | — | |||||||||||||||
Redeemed | (225,759 | ) | (266,960 | ) | (275,087 | ) | (377,893 | ) | |||||||||||
Total Class C Shares | (166,143 | ) | (114,926 | ) | (258,135 | ) | (347,746 | ) | |||||||||||
Class R Shares | |||||||||||||||||||
Issued | 4,134 | 8,825 | 28,305 | 28,741 | |||||||||||||||
Reinvested | 3,347 | 14,231 | — | — | |||||||||||||||
Redeemed | (21,490 | ) | (44,650 | ) | (36,060 | ) | (61,437 | ) | |||||||||||
Total Class R Shares | (14,009 | ) | (21,594 | ) | (7,755 | ) | (32,696 | ) | |||||||||||
Class Y Shares | |||||||||||||||||||
Issued | 550,472 | 202,137 | 8,945,033 | 11,961,924 | |||||||||||||||
Reinvested | 57,038 | 206,346 | 25,407 | — | |||||||||||||||
Redeemed | (526,955 | ) | (991,078 | ) | (27,015,945 | ) | (25,719,904 | ) | |||||||||||
Redeemed in-kind | — | — | — | (2,611,940 | ) | ||||||||||||||
Total Class Y Shares | 80,555 | (582,595 | ) | (18,045,505 | ) | (16,369,920 | ) | ||||||||||||
Change in Shares | (277,316 | ) | (723,978 | ) | (19,928,087 | ) | (22,833,601 | ) |
See notes to financial statements.
43
Victory Portfolios | Financial Highlights |
For a Share Outstanding Throughout Each Period
Investment Activities | Distributions to Shareholders From | ||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(a) | Net Realized and Unrealized Gains (Losses) on Investments | Total from Investment Activities | Net Investment Income | Net Realized Gains From Investments | ||||||||||||||||||||||
Victory RS Partners Fund | |||||||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 20.66 | 0.12 | 6.12 | 6.24 | (0.21 | ) | (2.22 | ) | ||||||||||||||||||
Year Ended 12/31/18 | $ | 29.21 | 0.04 | (3.52 | ) | (3.48 | ) | (0.08 | ) | (4.99 | ) | ||||||||||||||||
Year Ended 12/31/17 | $ | 31.58 | (0.25 | ) | 4.78 | 4.53 | — | (6.90 | ) | ||||||||||||||||||
Year Ended 12/31/16 | $ | 26.89 | (0.12 | ) | 6.59 | 6.47 | — | (1.78 | ) | ||||||||||||||||||
Year Ended 12/31/15 | $ | 31.08 | (0.11 | ) | (3.22 | ) | (3.33 | ) | — | (0.86 | ) | ||||||||||||||||
Class R | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 18.79 | 0.03 | 5.55 | 5.58 | (0.14 | ) | (2.22 | ) | ||||||||||||||||||
Year Ended 12/31/18 | $ | 27.09 | (0.04 | ) | (3.27 | ) | (3.31 | ) | — | (4.99 | ) | ||||||||||||||||
Year Ended 12/31/17 | $ | 29.84 | (0.44 | ) | 4.59 | 4.15 | — | (6.90 | ) | ||||||||||||||||||
Year Ended 12/31/16 | $ | 25.57 | (0.21 | ) | 6.26 | 6.05 | — | (1.78 | ) | ||||||||||||||||||
Year Ended 12/31/15 | $ | 29.72 | (0.21 | ) | (3.08 | ) | (3.29 | ) | — | (0.86 | ) | ||||||||||||||||
Class Y | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 21.94 | 0.21 | 6.52 | 6.73 | (0.28 | ) | (2.22 | ) | ||||||||||||||||||
Year Ended 12/31/18 | $ | 30.67 | 0.14 | (3.71 | ) | (3.57 | ) | (0.17 | ) | (4.99 | ) | ||||||||||||||||
Year Ended 12/31/17 | $ | 32.75 | (0.04 | ) | 4.86 | 4.82 | — | (6.90 | ) | ||||||||||||||||||
Year Ended 12/31/16 | $ | 27.75 | (0.03 | ) | 6.81 | 6.78 | — | (1.78 | ) | ||||||||||||||||||
Year Ended 12/31/15 | $ | 31.95 | (0.02 | ) | (3.32 | ) | (3.34 | ) | — | (0.86 | ) |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
See notes to financial statements.
44
For a Share Outstanding Throughout Each Period
Victory Portfolios | Financial Highlights — continued |
Ratios to Average Net Assets | Supplemental Data | ||||||||||||||||||||||||||||||||||
Total Distributions | Net Asset Value, End of Period | Total Return (Excludes Sales Charge) | Net Expenses | Net Investment Income (Loss) | Gross Expenses | Net Assets, End of Period (000's) | Portfolio Turnover(b) | ||||||||||||||||||||||||||||
Victory RS Partners Fund | |||||||||||||||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | (2.43 | ) | $ | 24.47 | 30.69 | % | 1.45 | % | 0.49 | % | 1.52 | % | $ | 193,630 | 57 | % | |||||||||||||||||||
Year Ended 12/31/18 | (5.07 | ) | $ | 20.66 | (12.04 | )% | 1.45 | % | 0.14 | % | 1.52 | % | $ | 175,723 | 62 | % | |||||||||||||||||||
Year Ended 12/31/17 | (6.90 | ) | $ | 29.21 | 14.21 | % | 1.45 | % | (0.75 | )% | 1.50 | % | $ | 259,050 | 38 | % | |||||||||||||||||||
Year Ended 12/31/16 | (1.78 | ) | $ | 31.58 | 24.04 | % | 1.45 | % | (0.44 | )% | 1.53 | % | $ | 378,695 | 60 | % | |||||||||||||||||||
Year Ended 12/31/15 | (0.86 | ) | $ | 26.89 | (10.74 | )% | 1.42 | % | (0.35 | )% | 1.42 | % | $ | 475,722 | 42 | % | |||||||||||||||||||
Class R | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | (2.36 | ) | $ | 22.01 | 30.26 | % | 1.81 | % | 0.12 | % | 2.63 | % | $ | 1,510 | 57 | % | |||||||||||||||||||
Year Ended 12/31/18 | (4.99 | ) | $ | 18.79 | (12.39 | )% | 1.81 | % | (0.16 | )% | 2.37 | % | $ | 1,207 | 62 | % | |||||||||||||||||||
Year Ended 12/31/17 | (6.90 | ) | $ | 27.09 | 13.81 | % | 1.81 | % | (1.40 | )% | 2.28 | % | $ | 2,168 | 38 | % | |||||||||||||||||||
Year Ended 12/31/16 | (1.78 | ) | $ | 29.84 | 23.64 | % | 1.81 | % | (0.78 | )% | 1.81 | % | $ | 2,452 | 60 | % | |||||||||||||||||||
Year Ended 12/31/15 | (0.86 | ) | $ | 25.57 | (11.09 | )% | 1.81 | % | (0.74 | )% | 1.81 | % | $ | 2,365 | 42 | % | |||||||||||||||||||
Class Y | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | (2.50 | ) | $ | 26.17 | 31.18 | % | 1.12 | % | 0.82 | % | 1.21 | % | $ | 232,432 | 57 | % | |||||||||||||||||||
Year Ended 12/31/18 | (5.16 | ) | $ | 21.94 | (11.77 | )% | 1.12 | % | 0.48 | % | 1.19 | % | $ | 250,709 | 62 | % | |||||||||||||||||||
Year Ended 12/31/17 | (6.90 | ) | $ | 30.67 | 14.59 | % | 1.12 | % | (0.11 | )% | 1.21 | % | $ | 349,022 | 38 | % | |||||||||||||||||||
Year Ended 12/31/16 | (1.78 | ) | $ | 32.75 | 24.41 | % | 1.12 | % | (0.11 | )% | 1.22 | % | $ | 378,271 | 60 | % | |||||||||||||||||||
Year Ended 12/31/15 | (0.86 | ) | $ | 27.75 | (10.47 | )% | 1.12 | % | (0.05 | )% | 1.18 | % | $ | 542,595 | 42 | % |
See notes to financial statements.
45
Victory Portfolios | Financial Highlights |
For a Share Outstanding Throughout Each Period
Investment Activities | Distributions to Shareholders From | ||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(a) | Net Realized and Unrealized Gains (Losses) on Investments | Total from Investment Activities | Net Investment Income | Net Realized Gains From Investments | Total Distributions | |||||||||||||||||||||||||
Victory RS Value Fund | |||||||||||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 20.28 | 0.07 | 6.28 | 6.35 | (0.14 | ) | (1.70 | ) | (1.84 | ) | ||||||||||||||||||||
Year Ended 12/31/18 | $ | 26.21 | 0.06 | (2.85 | ) | (2.79 | ) | (0.14 | ) | (3.00 | ) | (3.14 | ) | ||||||||||||||||||
Year Ended 12/31/17 | $ | 27.94 | 0.03 | 4.80 | 4.83 | (0.04 | ) | (6.52 | ) | (6.56 | ) | ||||||||||||||||||||
Year Ended 12/31/16 | $ | 28.33 | — | (c) | 3.09 | 3.09 | (0.13 | ) | (3.35 | ) | (3.48 | ) | |||||||||||||||||||
Year Ended 12/31/15 | $ | 33.04 | (0.08 | ) | (1.98 | ) | (2.06 | ) | — | (c) | (2.65 | ) | (2.65 | ) | |||||||||||||||||
Class C | |||||||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 18.08 | (0.11 | ) | 5.58 | 5.47 | — | (1.70 | ) | (1.70 | ) | ||||||||||||||||||||
Year Ended 12/31/18 | $ | 23.76 | (0.13 | ) | (2.55 | ) | (2.68 | ) | — | (3.00 | ) | (3.00 | ) | ||||||||||||||||||
Year Ended 12/31/17 | $ | 26.01 | (0.08 | ) | 4.35 | 4.27 | — | (6.52 | ) | (6.52 | ) | ||||||||||||||||||||
Year Ended 12/31/16 | $ | 26.69 | (0.21 | ) | 2.88 | 2.67 | — | (3.35 | ) | (3.35 | ) | ||||||||||||||||||||
Year Ended 12/31/15 | $ | 31.54 | (0.32 | ) | (1.88 | ) | (2.20 | ) | — | (2.65 | ) | (2.65 | ) | ||||||||||||||||||
Class R | |||||||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 19.26 | (0.03 | ) | 5.95 | 5.92 | (0.04 | ) | (1.70 | ) | (1.74 | ) | |||||||||||||||||||
Year Ended 12/31/18 | $ | 25.06 | (0.03 | ) | (2.72 | ) | (2.75 | ) | (0.05 | ) | (3.00 | ) | (3.05 | ) | |||||||||||||||||
Year Ended 12/31/17 | $ | 27.03 | (0.03 | ) | 4.58 | 4.55 | — | (6.52 | ) | (6.52 | ) | ||||||||||||||||||||
Year Ended 12/31/16 | $ | 27.51 | (0.09 | ) | 2.96 | 2.87 | — | (3.35 | ) | (3.35 | ) | ||||||||||||||||||||
Year Ended 12/31/15 | $ | 32.29 | (0.21 | ) | (1.92 | ) | (2.13 | ) | — | (2.65 | ) | (2.65 | ) | ||||||||||||||||||
Class Y | |||||||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 20.77 | 0.13 | 6.44 | 6.57 | (0.19 | ) | (1.70 | ) | (1.89 | ) | ||||||||||||||||||||
Year Ended 12/31/18 | $ | 26.77 | 0.13 | (2.92 | ) | (2.79 | ) | (0.21 | ) | (3.00 | ) | (3.21 | ) | ||||||||||||||||||
Year Ended 12/31/17 | $ | 28.40 | 0.06 | 4.94 | 5.00 | (0.11 | ) | (6.52 | ) | (6.63 | ) | ||||||||||||||||||||
Year Ended 12/31/16 | $ | 28.57 | 0.08 | 3.10 | 3.18 | — | (3.35 | ) | (3.35 | ) | |||||||||||||||||||||
Year Ended 12/31/15 | $ | 33.23 | (0.02 | ) | (1.99 | ) | (2.01 | ) | — | (2.65 | ) | (2.65 | ) |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
See notes to financial statements.
46
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Ratios to Average Net Assets | Supplemental Data | ||||||||||||||||||||||||||||||||||
Capital Contribution from Prior Custodian, Net (See Note 8) | Net Asset Value, End of Period | Total Return (Excludes Sales Charge) | Net Expenses | Net Investment Income (Loss) | Gross Expenses | Net Assets, End of Period (000's) | Portfolio Turnover(b) | ||||||||||||||||||||||||||||
Victory RS Value Fund | |||||||||||||||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | — | $ | 24.79 | 31.35 | % | 1.30 | % | 0.28 | % | 1.35 | % | $ | 207,200 | 54 | % | ||||||||||||||||||||
Year Ended 12/31/18 | — | $ | 20.28 | (10.75 | )% | 1.30 | % | 0.24 | % | 1.34 | % | $ | 179,535 | 65 | % | ||||||||||||||||||||
Year Ended 12/31/17 | — | $ | 26.21 | 17.41 | % | 1.30 | % | 0.09 | % | 1.33 | % | $ | 239,994 | 64 | % | ||||||||||||||||||||
Year Ended 12/31/16 | — | (c) | $ | 27.94 | 10.92 | %(d) | 1.30 | % | (0.01 | )% | 1.35 | % | $ | 268,979 | 67 | % | |||||||||||||||||||
Year Ended 12/31/15 | — | $ | 28.33 | (6.18 | )% | 1.26 | % | (0.24 | )% | 1.26 | % | $ | 352,205 | 55 | % | ||||||||||||||||||||
Class C | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | — | $ | 21.85 | 30.32 | % | 2.07 | % | (0.50 | )% | 2.29 | % | $ | 4,872 | 54 | % | ||||||||||||||||||||
Year Ended 12/31/18 | — | $ | 18.08 | (11.41 | )% | 2.07 | % | (0.54 | )% | 2.14 | % | $ | 9,428 | 65 | % | ||||||||||||||||||||
Year Ended 12/31/17 | — | $ | 23.76 | 16.53 | % | 2.07 | % | (0.30 | )% | 2.08 | % | $ | 16,916 | 64 | % | ||||||||||||||||||||
Year Ended 12/31/16 | — | (c) | $ | 26.01 | 10.01 | %(d) | 2.07 | % | (0.78 | )% | 2.13 | % | $ | 19,943 | 67 | % | |||||||||||||||||||
Year Ended 12/31/15 | — | $ | 26.69 | (6.92 | )% | 2.04 | % | (1.03 | )% | 2.04 | % | $ | 24,714 | 55 | % | ||||||||||||||||||||
Class R | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | — | $ | 23.44 | 30.89 | % | 1.69 | % | (0.13 | )% | 3.47 | % | $ | 1,022 | 54 | % | ||||||||||||||||||||
Year Ended 12/31/18 | — | $ | 19.26 | (11.12 | )% | 1.69 | % | (0.11 | )% | 2.82 | % | $ | 1,019 | 65 | % | ||||||||||||||||||||
Year Ended 12/31/17 | — | $ | 25.06 | 16.95 | % | 1.69 | % | (0.11 | )% | 2.29 | % | $ | 1,625 | 64 | % | ||||||||||||||||||||
Year Ended 12/31/16 | — | (c) | $ | 27.03 | 10.45 | %(d) | 1.69 | % | (0.34 | )% | 1.80 | % | $ | 1,670 | 67 | % | |||||||||||||||||||
Year Ended 12/31/15 | — | $ | 27.51 | (6.54 | )% | 1.65 | % | (0.64 | )% | 1.65 | % | $ | 3,456 | 55 | % | ||||||||||||||||||||
Class Y | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | — | $ | 25.45 | 31.69 | % | 1.06 | % | 0.51 | % | 1.07 | % | $ | 176,749 | 54 | % | ||||||||||||||||||||
Year Ended 12/31/18 | — | $ | 20.77 | (10.54 | )% | 1.06 | % | 0.49 | % | 1.06 | % | $ | 166,538 | 65 | % | ||||||||||||||||||||
Year Ended 12/31/17 | — | $ | 26.77 | 17.71 | % | 1.06 | % | 0.20 | % | 1.06 | % | $ | 247,528 | 64 | % | ||||||||||||||||||||
Year Ended 12/31/16 | — | (c) | $ | 28.40 | 11.14 | %(d) | 1.06 | % | 0.26 | % | 1.19 | % | $ | 260,818 | 67 | % | |||||||||||||||||||
Year Ended 12/31/15 | — | $ | 28.57 | (5.99 | )% | 1.06 | % | (0.05 | )% | 1.11 | % | $ | 724,715 | 55 | % |
(c) Amount is less than $0.005 per share.
(d) The Fund received monies related to 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)
See notes to financial statements.
47
Victory Portfolios | Financial Highlights |
For a Share Outstanding Throughout Each Period
Investment Activities | Distributions to Shareholders From | ||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(a) | Net Realized and Unrealized Gains (Losses) on Investments | Total from Investment Activities | Net Investment Income | Net Realized Gains From Investments | Total Distributions | |||||||||||||||||||||||||
Victory RS Large Cap Alpha Fund | |||||||||||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 42.20 | 0.51 | 12.44 | 12.95 | (0.37 | ) | (1.67 | ) | (2.04 | ) | ||||||||||||||||||||
Year Ended 12/31/18 | $ | 56.61 | 0.44 | (5.67 | ) | (5.23 | ) | (0.38 | ) | (8.80 | ) | (9.18 | ) | ||||||||||||||||||
Year Ended 12/31/17 | $ | 51.86 | 0.38 | 9.10 | 9.48 | — | (c) | (4.73 | ) | (4.73 | ) | ||||||||||||||||||||
Year Ended 12/31/16 | $ | 50.98 | 0.40 | 4.01 | 4.41 | (0.42 | ) | (3.12 | ) | (3.54 | ) | ||||||||||||||||||||
Year Ended 12/31/15 | $ | 59.25 | 0.50 | (1.74 | ) | (1.24 | ) | (0.57 | ) | (6.46 | ) | (7.03 | ) | ||||||||||||||||||
Class C | |||||||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 35.78 | 0.10 | 10.50 | 10.60 | (0.01 | ) | (1.67 | ) | (1.68 | ) | ||||||||||||||||||||
Year Ended 12/31/18 | $ | 49.50 | (0.03 | ) | (4.89 | ) | (4.92 | ) | — | (c) | (8.80 | ) | (8.80 | ) | |||||||||||||||||
Year Ended 12/31/17 | $ | 46.22 | (0.04 | ) | 8.05 | 8.01 | — | (4.73 | ) | (4.73 | ) | ||||||||||||||||||||
Year Ended 12/31/16 | $ | 45.80 | — | (c) | 3.57 | 3.57 | (0.04 | ) | (3.12 | ) | (3.16 | ) | |||||||||||||||||||
Year Ended 12/31/15 | $ | 53.96 | 0.03 | (1.58 | ) | (1.55 | ) | (0.15 | ) | (6.46 | ) | (6.61 | ) | ||||||||||||||||||
Class R | |||||||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 42.01 | 0.32 | 12.36 | 12.68 | (0.19 | ) | (1.67 | ) | (1.86 | ) | ||||||||||||||||||||
Year Ended 12/31/18 | $ | 56.35 | 0.22 | (5.61 | ) | (5.39 | ) | (0.15 | ) | (8.80 | ) | (8.95 | ) | ||||||||||||||||||
Year Ended 12/31/17 | $ | 51.83 | 0.18 | 9.07 | 9.25 | — | (4.73 | ) | (4.73 | ) | |||||||||||||||||||||
Year Ended 12/31/16 | $ | 50.93 | 0.23 | 3.99 | 4.22 | (0.21 | ) | (3.12 | ) | (3.33 | ) | ||||||||||||||||||||
Year Ended 12/31/15 | $ | 59.15 | 0.29 | (1.74 | ) | (1.45 | ) | (0.31 | ) | (6.46 | ) | (6.77 | ) | ||||||||||||||||||
Class Y | |||||||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 42.01 | 0.61 | 12.38 | 12.99 | (0.46 | ) | (1.67 | ) | (2.13 | ) | ||||||||||||||||||||
Year Ended 12/31/18 | $ | 56.38 | 0.55 | (5.64 | ) | (5.09 | ) | (0.48 | ) | (8.80 | ) | (9.28 | ) | ||||||||||||||||||
Year Ended 12/31/17 | $ | 51.66 | 0.49 | 9.07 | 9.56 | (0.11 | ) | (4.73 | ) | (4.84 | ) | ||||||||||||||||||||
Year Ended 12/31/16 | $ | 50.82 | 0.51 | 4.00 | 4.51 | (0.56 | ) | (3.12 | ) | (3.68 | ) | ||||||||||||||||||||
Year Ended 12/31/15 | $ | 59.08 | 0.62 | (1.74 | ) | (1.12 | ) | (0.68 | ) | (6.46 | ) | (7.14 | ) |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
See notes to financial statements.
48
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Ratios to Average Net Assets | Supplemental Data | ||||||||||||||||||||||||||||||||||
Capital Contribution from Prior Custodian, Net (See Note 8) | Net Asset Value, End of Period | Total Return (Excludes Sales Charge) | Net Expenses | Net Investment Income (Loss) | Gross Expenses | Net Assets, End of Period (000's) | Portfolio Turnover(b) | ||||||||||||||||||||||||||||
Victory RS Large Cap Alpha Fund | |||||||||||||||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | — | $ | 53.11 | 30.73 | % | 0.89 | % | 1.03 | % | 0.95 | % | $ | 520,159 | 51 | % | ||||||||||||||||||||
Year Ended 12/31/18 | — | $ | 42.20 | (9.31 | )% | 0.89 | % | 0.77 | % | 0.93 | % | $ | 439,035 | 59 | % | ||||||||||||||||||||
Year Ended 12/31/17 | — | $ | 56.61 | 18.32 | % | 0.89 | % | 0.68 | % | 0.94 | % | $ | 540,762 | 55 | % | ||||||||||||||||||||
Year Ended 12/31/16 | 0.01 | $ | 51.86 | 8.67 | %(d) | 0.89 | % | 0.79 | % | 0.92 | % | $ | 522,593 | 79 | % | ||||||||||||||||||||
Year Ended 12/31/15 | — | $ | 50.98 | (2.03 | )% | 0.89 | % | 0.86 | % | 0.89 | % | $ | 556,204 | 39 | % | ||||||||||||||||||||
Class C | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | — | $ | 44.70 | 29.70 | % | 1.69 | % | 0.24 | % | 1.74 | % | $ | 17,028 | 51 | % | ||||||||||||||||||||
Year Ended 12/31/18 | — | $ | 35.78 | (10.03 | )% | 1.69 | % | (0.06 | )% | 1.75 | % | $ | 18,227 | 59 | % | ||||||||||||||||||||
Year Ended 12/31/17 | — | $ | 49.50 | 17.36 | % | 1.69 | % | (0.08 | )% | 1.71 | % | $ | 29,771 | 55 | % | ||||||||||||||||||||
Year Ended 12/31/16 | 0.01 | $ | 46.22 | 7.80 | %(d) | 1.69 | % | (0.01 | )% | 1.71 | % | $ | 28,801 | 79 | % | ||||||||||||||||||||
Year Ended 12/31/15 | — | $ | 45.80 | (2.80 | )% | 1.69 | % | 0.06 | % | 1.69 | % | $ | 33,608 | 39 | % | ||||||||||||||||||||
Class R | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | — | $ | 52.83 | 30.23 | % | 1.26 | % | 0.66 | % | 1.48 | % | $ | 7,232 | 51 | % | ||||||||||||||||||||
Year Ended 12/31/18 | — | $ | 42.01 | (9.63 | )% | 1.26 | % | 0.38 | % | 1.40 | % | $ | 6,348 | 59 | % | ||||||||||||||||||||
Year Ended 12/31/17 | — | $ | 56.35 | 17.87 | % | 1.26 | % | 0.33 | % | 1.42 | % | $ | 10,229 | 55 | % | ||||||||||||||||||||
Year Ended 12/31/16 | 0.01 | $ | 51.83 | 8.30 | %(d) | 1.23 | % | 0.45 | % | 1.23 | % | $ | 10,631 | 79 | % | ||||||||||||||||||||
Year Ended 12/31/15 | — | $ | 50.93 | (2.38 | )% | 1.26 | % | 0.49 | % | 1.26 | % | $ | 12,402 | 39 | % | ||||||||||||||||||||
Class Y | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | — | $ | 52.87 | 30.99 | % | 0.68 | % | 1.24 | % | 0.78 | % | $ | 20,021 | 51 | % | ||||||||||||||||||||
Year Ended 12/31/18 | — | $ | 42.01 | (9.11 | )% | 0.68 | % | 0.96 | % | 0.75 | % | $ | 21,827 | 59 | % | ||||||||||||||||||||
Year Ended 12/31/17 | — | $ | 56.38 | 18.56 | % | 0.68 | % | 0.88 | % | 0.72 | % | $ | 33,638 | 55 | % | ||||||||||||||||||||
Year Ended 12/31/16 | 0.01 | $ | 51.66 | 8.89 | %(d) | 0.68 | % | 1.00 | % | 0.69 | % | $ | 31,840 | 79 | % | ||||||||||||||||||||
Year Ended 12/31/15 | — | $ | 50.82 | (1.82 | )% | 0.68 | % | 1.05 | % | 0.68 | % | $ | 31,662 | 39 | % |
(c) Amounts is less than $0.005.
(d) The Fund received monies related to a nonrecurring refund from the prior Custodian. The corresponding impact to the total return was less than 0.01% for the period shown. (See Note 8)
See notes to financial statements.
49
Victory Portfolios | Financial Highlights |
For a Share Outstanding Throughout Each Period
Investment Activities | Distributions to Shareholders From | ||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(a) | Net Realized and Unrealized Gains (Losses) on Investments | Total from Investment Activities | Net Investment Income | Net Realized Gains From Investments | ||||||||||||||||||||||
Victory RS Investors Fund | |||||||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 10.68 | — | (c) | 2.99 | 2.99 | — | (0.57 | ) | ||||||||||||||||||
Year Ended 12/31/18 | $ | 13.86 | — | (c) | (1.27 | ) | (1.27 | ) | — | (1.91 | ) | ||||||||||||||||
Year Ended 12/31/17 | $ | 13.65 | (0.03 | ) | 2.23 | 2.20 | — | (1.99 | ) | ||||||||||||||||||
Year Ended 12/31/16 | $ | 12.42 | — | (c) | 1.23 | 1.23 | — | — | |||||||||||||||||||
Year Ended 12/31/15 | $ | 12.95 | (0.04 | ) | (0.49 | ) | (0.53 | ) | — | — | |||||||||||||||||
Class C | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 9.53 | (0.08 | ) | 2.66 | 2.58 | — | (0.57 | ) | ||||||||||||||||||
Year Ended 12/31/18 | $ | 12.68 | (0.10 | ) | (1.14 | ) | (1.24 | ) | — | (1.91 | ) | ||||||||||||||||
Year Ended 12/31/17 | $ | 12.73 | (0.19 | ) | 2.13 | 1.94 | — | (1.99 | ) | ||||||||||||||||||
Year Ended 12/31/16 | $ | 11.67 | (0.09 | ) | 1.15 | 1.06 | — | — | |||||||||||||||||||
Year Ended 12/31/15 | $ | 12.26 | (0.12 | ) | (0.47 | ) | (0.59 | ) | — | — | |||||||||||||||||
Class R | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 9.66 | (0.07 | ) | 2.70 | 2.63 | — | (0.57 | ) | ||||||||||||||||||
Year Ended 12/31/18 | $ | 12.81 | (0.08 | ) | (1.16 | ) | (1.24 | ) | — | (1.91 | ) | ||||||||||||||||
Year Ended 12/31/17 | $ | 12.83 | (0.17 | ) | 2.14 | 1.97 | — | (1.99 | ) | ||||||||||||||||||
Year Ended 12/31/16 | $ | 11.73 | (0.06 | ) | 1.16 | 1.10 | — | — | |||||||||||||||||||
Year Ended 12/31/15 | $ | 12.30 | (0.09 | ) | (0.48 | ) | (0.57 | ) | — | — | |||||||||||||||||
Class Y | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 10.94 | 0.03 | 3.07 | 3.10 | — | (0.57 | ) | |||||||||||||||||||
Year Ended 12/31/18 | $ | 14.10 | 0.03 | (1.28 | ) | (1.25 | ) | — | (1.91 | ) | |||||||||||||||||
Year Ended 12/31/17 | $ | 13.82 | 0.03 | 2.24 | 2.27 | — | (1.99 | ) | |||||||||||||||||||
Year Ended 12/31/16 | $ | 12.55 | 0.04 | 1.24 | 1.28 | (0.01 | ) | — | |||||||||||||||||||
Year Ended 12/31/15 | $ | 13.05 | — | (0.50 | ) | (0.50 | ) | — | — |
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
(c) Amount is less than $0.005 per share.
See notes to financial statements.
50
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Ratios to Average Net Assets | Supplemental Data | ||||||||||||||||||||||||||||||||||
Total Distributions | Net Asset Value, End of Period | Total Return (Excludes Sales Charge) | Net Expenses | Net Investment Income (Loss) | Gross Expenses | Net Assets, End of Period (000's) | Portfolio Turnover(b) | ||||||||||||||||||||||||||||
Victory RS Investors Fund | |||||||||||||||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | (0.57 | ) | $ | 13.10 | 28.01 | % | 1.33 | % | 0.03 | % | 1.62 | % | $ | 16,906 | 64 | % | |||||||||||||||||||
Year Ended 12/31/18 | (1.91 | ) | $ | 10.68 | (9.36 | )% | 1.33 | % | (0.03 | )% | 1.58 | % | $ | 15,682 | 56 | % | |||||||||||||||||||
Year Ended 12/31/17 | (1.99 | ) | $ | 13.86 | 16.28 | % | 1.33 | % | (0.24 | )% | 1.54 | % | $ | 20,419 | 80 | % | |||||||||||||||||||
Year Ended 12/31/16 | — | $ | 13.65 | 9.90 | % | 1.33 | % | 0.02 | % | 1.56 | % | $ | 28,022 | 92 | % | ||||||||||||||||||||
Year Ended 12/31/15 | — | $ | 12.42 | (4.09 | )% | 1.33 | % | (0.28 | )% | 1.51 | % | $ | 41,556 | 50 | % | ||||||||||||||||||||
Class C | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | (0.57 | ) | $ | 11.54 | 27.08 | % | 2.07 | % | (0.73 | )% | 2.54 | % | $ | 6,898 | 64 | % | |||||||||||||||||||
Year Ended 12/31/18 | (1.91 | ) | $ | 9.53 | (10.08 | )% | 2.07 | % | (0.82 | )% | 2.44 | % | $ | 7,282 | 56 | % | |||||||||||||||||||
Year Ended 12/31/17 | (1.99 | ) | $ | 12.68 | 15.48 | % | 2.07 | % | (1.42 | )% | 2.35 | % | $ | 11,149 | 80 | % | |||||||||||||||||||
Year Ended 12/31/16 | — | $ | 12.73 | 9.08 | % | 2.07 | % | (0.72 | )% | 2.35 | % | $ | 14,517 | 92 | % | ||||||||||||||||||||
Year Ended 12/31/15 | — | $ | 11.67 | (4.81 | )% | 2.07 | % | (1.01 | )% | 2.29 | % | $ | 21,654 | 50 | % | ||||||||||||||||||||
Class R | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | (0.57 | ) | $ | 11.72 | 27.24 | % | 1.95 | % | (0.59 | )% | 3.85 | % | $ | 844 | 64 | % | |||||||||||||||||||
Year Ended 12/31/18 | (1.91 | ) | $ | 9.66 | (9.91 | )% | 1.95 | % | (0.64 | )% | 3.15 | % | $ | 831 | 56 | % | |||||||||||||||||||
Year Ended 12/31/17 | (1.99 | ) | $ | 12.81 | 15.50 | % | 1.95 | % | (1.27 | )% | 2.72 | % | $ | 1,379 | 80 | % | |||||||||||||||||||
Year Ended 12/31/16 | — | $ | 12.83 | 9.38 | % | 1.92 | % | (0.50 | )% | 1.92 | % | $ | 1,314 | 92 | % | ||||||||||||||||||||
Year Ended 12/31/15 | — | $ | 11.73 | (4.63 | )% | 1.84 | % | (0.78 | )% | 1.90 | % | $ | 1,771 | 50 | % | ||||||||||||||||||||
Class Y | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | (0.57 | ) | $ | 13.47 | 28.35 | % | 1.05 | % | 0.27 | % | 1.43 | % | $ | 19,146 | 64 | % | |||||||||||||||||||
Year Ended 12/31/18 | (1.91 | ) | $ | 10.94 | (9.06 | )% | 1.05 | % | 0.18 | % | 1.37 | % | $ | 14,669 | 56 | % | |||||||||||||||||||
Year Ended 12/31/17 | (1.99 | ) | $ | 14.10 | 16.59 | % | 1.05 | % | 0.19 | % | 1.25 | % | $ | 27,131 | 80 | % | |||||||||||||||||||
Year Ended 12/31/16 | (0.01 | ) | $ | 13.82 | 10.17 | % | 1.05 | % | 0.28 | % | 1.24 | % | $ | 50,013 | 92 | % | |||||||||||||||||||
Year Ended 12/31/15 | — | $ | 12.55 | (3.83 | )% | 1.05 | % | (0.01 | )% | 1.21 | % | $ | 80,290 | 50 | % |
See notes to financial statements.
51
Victory Portfolios | Financial Highlights |
For a Share Outstanding Throughout Each Period
Investment Activities | Distributions to Shareholders From | ||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(a) | Net Realized and Unrealized Gains (Losses) on Investments | Total from Investment Activities | Net Investment Income | Total Distributions | ||||||||||||||||||||||
Victory Global Natural Resources Fund | |||||||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 12.86 | — | (c) | (3.15 | ) | (3.15 | ) | — | — | |||||||||||||||||
Year Ended 12/31/18 | $ | 23.73 | (0.14 | ) | (10.73 | ) | (10.87 | ) | — | — | |||||||||||||||||
Year Ended 12/31/17 | $ | 23.49 | (0.22 | ) | 0.46 | 0.24 | — | — | |||||||||||||||||||
Year Ended 12/31/16 | $ | 15.34 | (0.10 | ) | 8.25 | 8.15 | — | — | |||||||||||||||||||
Year Ended 12/31/15 | $ | 24.81 | (0.11 | ) | (9.36 | ) | (9.47 | ) | — | — | |||||||||||||||||
Class C | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 11.63 | (0.08 | ) | (2.84 | ) | (2.92 | ) | — | — | |||||||||||||||||
Year Ended 12/31/18 | $ | 21.63 | (0.28 | ) | (9.72 | ) | (10.00 | ) | — | — | |||||||||||||||||
Year Ended 12/31/17 | $ | 21.59 | (0.36 | ) | 0.40 | 0.04 | — | — | |||||||||||||||||||
Year Ended 12/31/16 | $ | 14.21 | (0.24 | ) | 7.62 | 7.38 | — | — | |||||||||||||||||||
Year Ended 12/31/15 | $ | 23.17 | (0.27 | ) | (8.69 | ) | (8.96 | ) | — | — | |||||||||||||||||
Class R | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 12.18 | (0.04 | ) | (2.98 | ) | (3.02 | ) | — | — | |||||||||||||||||
Year Ended 12/31/18 | $ | 22.56 | (0.20 | ) | (10.18 | ) | (10.38 | ) | — | — | |||||||||||||||||
Year Ended 12/31/17 | $ | 22.42 | (0.29 | ) | 0.43 | 0.14 | — | — | |||||||||||||||||||
Year Ended 12/31/16 | $ | 14.68 | (0.15 | ) | 7.89 | 7.74 | — | — | |||||||||||||||||||
Year Ended 12/31/15 | $ | 23.82 | (0.18 | ) | (8.96 | ) | (9.14 | ) | — | — | |||||||||||||||||
Class Y | |||||||||||||||||||||||||||
Year Ended 12/31/19 | $ | 13.38 | 0.03 | (3.27 | ) | (3.24 | ) | (0.03 | ) | (0.03 | ) | ||||||||||||||||
Year Ended 12/31/18 | $ | 24.60 | (0.06 | ) | (11.16 | ) | (11.22 | ) | — | — | |||||||||||||||||
Year Ended 12/31/17 | $ | 24.28 | (0.14 | ) | 0.46 | 0.32 | — | — | |||||||||||||||||||
Year Ended 12/31/16 | $ | 15.80 | (0.04 | ) | 8.52 | 8.48 | — | — | |||||||||||||||||||
Year Ended 12/31/15 | $ | 25.48 | (0.05 | ) | (9.63 | ) | (9.68 | ) | — | — |
* Includes adjustments in accordance with U.S. generally accepted accounting principals.
(a) Per share net investment income (loss) has been calculated using the average daily shares method.
(b) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
(c) Amount is less than $0.005 per share.
(d) Amount is less than 0.005%.
(e) Portfolio turnover increased due to change within the portfolio holdings during the year.
(f) 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)
See notes to financial statements.
52
Victory Portfolios | Financial Highlights — continued |
For a Share Outstanding Throughout Each Period
Ratios to Average Net Assets | Supplemental Data | ||||||||||||||||||||||||||||||||||
Capital Contribution from Prior Custodian, Net (See Note 8) | Net Asset Value, End of Period | Total Return (Excludes Sales Charge)* | Net Expenses | Net Investment Income | Gross Expenses | Net Assets, End of Period (000's) | Portfolio Turnover(b) | ||||||||||||||||||||||||||||
Victory Global Natural Resources Fund | |||||||||||||||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | — | $ | 9.71 | (24.49 | )% | 1.48 | % | — | %(d) | 1.69 | % | $ | 32,630 | 24 | % | ||||||||||||||||||||
Year Ended 12/31/18 | — | $ | 12.86 | (45.81 | )% | 1.48 | % | (0.65 | )% | 1.54 | % | $ | 64,001 | 26 | % | ||||||||||||||||||||
Year Ended 12/31/17 | — | $ | 23.73 | 1.02 | % | 1.48 | % | (0.93 | )% | 1.55 | % | $ | 262,455 | 57 | %(e) | ||||||||||||||||||||
Year Ended 12/31/16 | — | (c) | $ | 23.49 | 53.13 | %(f) | 1.48 | % | (0.51 | )% | 1.48 | % | $ | 545,778 | 29 | % | |||||||||||||||||||
Year Ended 12/31/15 | — | $ | 15.34 | (38.17 | )% | 1.45 | % | (0.52 | )% | 1.45 | % | $ | 332,598 | 33 | % | ||||||||||||||||||||
Class C | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | — | $ | 8.71 | (25.11 | )% | 2.28 | % | (0.81 | )% | 2.75 | % | $ | 2,949 | 24 | % | ||||||||||||||||||||
Year Ended 12/31/18 | — | $ | 11.63 | (46.26 | )% | 2.28 | % | (1.42 | )% | 2.38 | % | $ | 6,939 | 26 | % | ||||||||||||||||||||
Year Ended 12/31/17 | — | $ | 21.63 | 0.23 | % | 2.28 | % | (1.72 | )% | 2.35 | % | $ | 20,428 | 57 | %(e) | ||||||||||||||||||||
Year Ended 12/31/16 | — | (c) | $ | 21.59 | 51.94 | %(f) | 2.28 | % | (1.32 | )% | 2.31 | % | $ | 30,789 | 29 | % | |||||||||||||||||||
Year Ended 12/31/15 | — | $ | 14.21 | (38.67 | )% | 2.25 | % | (1.33 | )% | 2.25 | % | $ | 26,501 | 33 | % | ||||||||||||||||||||
Class R | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | — | $ | 9.16 | (24.79 | )% | 1.86 | % | (0.37 | )% | 4.31 | % | $ | 621 | 24 | % | ||||||||||||||||||||
Year Ended 12/31/18 | — | $ | 12.18 | (46.01 | )% | 1.86 | % | (0.99 | )% | 2.50 | % | $ | 920 | 26 | % | ||||||||||||||||||||
Year Ended 12/31/17 | — | $ | 22.56 | 0.62 | % | 1.86 | % | (1.31 | )% | 2.20 | % | $ | 2,442 | 57 | %(e) | ||||||||||||||||||||
Year Ended 12/31/16 | — | (c) | $ | 22.42 | 52.72 | %(f) | 1.74 | % | (0.80 | )% | 1.74 | % | $ | 4,611 | 29 | % | |||||||||||||||||||
Year Ended 12/31/15 | — | $ | 14.68 | (38.37 | )% | 1.78 | % | (0.85 | )% | 1.78 | % | $ | 3,427 | 33 | % | ||||||||||||||||||||
Class Y | |||||||||||||||||||||||||||||||||||
Year Ended 12/31/19 | — | $ | 10.11 | (24.25 | )% | 1.15 | % | 0.27 | % | 1.26 | % | $ | 114,972 | 24 | % | ||||||||||||||||||||
Year Ended 12/31/18 | — | $ | 13.38 | (45.63 | )% | 1.15 | % | (0.29 | )% | 1.20 | % | $ | 393,581 | 26 | % | ||||||||||||||||||||
Year Ended 12/31/17 | — | $ | 24.60 | 1.36 | % | 1.15 | % | (0.58 | )% | 1.19 | % | $ | 1,126,533 | 57 | %(e) | ||||||||||||||||||||
Year Ended 12/31/16 | — | (c) | $ | 24.28 | 53.67 | %(f) | 1.15 | % | (0.19 | )% | 1.17 | % | $ | 1,300,024 | 29 | % | |||||||||||||||||||
Year Ended 12/31/15 | — | $ | 15.80 | (37.99 | )% | 1.14 | % | (0.21 | )% | 1.14 | % | $ | 1,174,590 | 33 | % |
See notes to financial statements.
53
Victory Portfolios | Notes to Financial Statements December 31, 2019 |
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)
54
Victory Portfolios | Notes to Financial Statements — continued December 31, 2019 |
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 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, 2019, 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 | LEVEL 3 | Total | |||||||||||||
RS Partners Fund | |||||||||||||||
Common Stocks | $ | 413,079,214 | $ | — | $ | 413,079,214 | |||||||||
Preferred Stocks | — | 587,369 | 587,369 | ||||||||||||
Collateral for Securities Loaned | 8,410,995 | — | 8,410,995 | ||||||||||||
Total | 421,490,209 | 587,369 | 422,077,578 | ||||||||||||
RS Value Fund | |||||||||||||||
Common Stocks | 373,298,884 | — | 373,298,884 | ||||||||||||
Collateral for Securities Loaned | 8,713,132 | — | 8,713,132 | ||||||||||||
Total | 382,012,016 | — | 382,012,016 | ||||||||||||
RS Large Cap Alpha Fund | |||||||||||||||
Common Stocks | 544,508,187 | — | 544,508,187 | ||||||||||||
Collateral for Securities Loaned | 6,657,852 | — | 6,657,852 | ||||||||||||
Total | 551,166,039 | — | 551,166,039 | ||||||||||||
RS Investors Fund | |||||||||||||||
Common Stocks | 42,353,395 | — | 42,353,395 | ||||||||||||
Collateral for Securities Loaned | 180,023 | — | 180,023 | ||||||||||||
Total | 42,533,418 | — | 42,533,418 | ||||||||||||
Global Natural Resources Fund | |||||||||||||||
Common Stocks | 144,672,956 | — | 144,672,956 | ||||||||||||
Collateral for Securities Loaned | 10,183,560 | — | 10,183,560 | ||||||||||||
Total | 154,856,516 | — | 154,856,516 |
For the year ended December 31, 2019, there were no Level 3 investments for which significant observable 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.
55
Victory Portfolios | Notes to Financial Statements — continued December 31, 2019 |
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 determined on the basis of coupon interest accrued using the effective interest method which adjusts, 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, primarily open-end investment companies, 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. During the time portfolio securities are on loan, the borrower will pay the Funds any dividends or interest paid on such securities plus any fee negotiated between the parties to the lending agreement. The Funds also earn a return from the collateral. The Funds pay the Agent various fees in connection with the investment of cash collateral and fees based on the investment income received from securities lending activities. Securities lending income (net of these fees) 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, 2019. 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 Partners Fund | $ | 8,210,823 | �� | $ | 8,210,823 | $ | — | $ | — | $ | — | $ | — | ||||||||||||||
RS Value Fund | 8,516,639 | 8,516,639 | — | — | — | — | |||||||||||||||||||||
RS Large Cap Alpha Fund | 6,477,980 | 6,477,980 | — | — | — | — | |||||||||||||||||||||
RS Investors Fund | 174,600 | 174,600 | — | — | — | — | |||||||||||||||||||||
Global Natural Resources Fund | 9,744,481 | 9,744,481 | — | — | — | — |
* Collateral received in excess of the fair value of securities on loan is not presented in this table. The total cash collateral received by each Fund is disclosed in the Statements of Assets and Liabilities.
56
Victory Portfolios | Notes to Financial Statements — continued December 31, 2019 |
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 investment securities and foreign currency translations on the Statements of Operations. Any realized gains or losses from these fluctuations are disclosed as Net realized gains (losses) from investment securities and foreign currency translations on the Statements of Operations.
Distributions 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 (collectively distributions to shareholders) 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 and distribution reclassification), 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, 2019, 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 | $ | (3,343,566 | ) | $ | 3,343,566 | ||||||
RS Value Fund | (3,327,454 | ) | 3,327,454 | ||||||||
RS Large Cap Alpha Fund | 242 | (242 | ) | ||||||||
RS Investors Fund | 12,612 | (12,612 | ) | ||||||||
Global Natural Resources Fund | (31,216 | ) | 31,216 |
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., all open tax years 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.
57
Victory Portfolios | Notes to Financial Statements — continued December 31, 2019 |
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.
Cross-Trade Transactions:
Pursuant to Rule 17a-7 under the 1940 Act, the Funds may engage in cross-trades, which are 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, 2019, 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 fiscal year ended December 31, 2019 were as follows:
Purchases (excluding U.S. Government Securities) | Sales (excluding U.S. Government Securities) | ||||||||||
RS Partners Fund | $ | 238,410,539 | $ | 361,943,419 | |||||||
RS Value Fund | 203,119,610 | 289,019,722 | |||||||||
RS Large Cap Alpha Fund | 263,831,906 | 337,359,720 | |||||||||
RS Investors Fund | 25,604,490 | 31,801,502 | |||||||||
Global Natural Resources Fund | 73,454,181 | 259,847,358 |
For the year ended December 31, 2019, 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 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.
Flat 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 | % |
58
Victory Portfolios | Notes to Financial Statements — continued December 31, 2019 |
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 "Victory Funds Complex"), 0.05% of the average daily net assets above $15 billion to $30 billion of the Victory Funds Complex and 0.04% of the average daily net assets over $30 billion of the Victory Funds Complex.
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. The Funds in the Victory Funds Complex, in 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 the Class A Shares of the Funds. For the fiscal year ended December 31, 2019, the Distributor received approximately $18,637 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 amounts 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
59
Victory Portfolios | Notes to Financial Statements — continued December 31, 2019 |
from the expense limits. As of December 31, 2019, the expense limits (excluding voluntary waivers) are as follows:
In effect January 1, 2019 until April 30, 2020 | |||||||||||||||||||
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, 2019, the following amounts are available to be repaid to the Adviser:
Expires December 31, 2020 | Expires December 31, 2021 | Expires December 31, 2022 | Total | ||||||||||||||||
RS Partners Fund | $ | 487,905 | $ | 386,406 | �� | $ | 344,191 | $ | 1,218,502 | ||||||||||
RS Value Fund | 94,907 | 116,096 | 154,554 | 365,557 | |||||||||||||||
RS Large Cap Alpha Fund | 283,005 | 236,137 | 327,684 | 846,826 | |||||||||||||||
RS Investors Fund | 179,335 | 163,946 | 162,310 | 505,591 | |||||||||||||||
Global Natural Resources Fund | 697,524 | 577,205 | 429,505 | 1,704,234 |
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, 2019.
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 Counsel.
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.
60
Victory Portfolios | Notes to Financial Statements — continued December 31, 2019 |
For the Global Natural Resources Fund (herein, the "Fund"), concentrating investments in the natural resources sector increases the risk of loss because the stocks of many or all of the companies in the sector may decline in value due to developments adversely affecting the sector. In addition, investors may buy or sell substantial amounts of the Fund's shares in response to factors affecting or expected to affect the natural resources sector, resulting in extreme inflows and outflows of cash into and out of the Fund. Such inflows or outflows might affect management of the Fund adversely to the extent they cause the Fund's cash position or cash requirements to exceed normal levels.
6. Borrowing and Interfund Lending:
Line of Credit:
For the year ended December 31, 2019, the Victory Funds Complex participated in a short-term, demand note "Line of Credit" with Citibank. Under the agreements with Citibank, for the period January 1, 2019 to June 30, 2019, the Victory Funds Complex could borrow up to $250 million, of which $100 million was committed and $150 million was uncommitted. Effective July 1, 2019, the agreement was amended to include the USAA Mutual Funds Complex (another series of mutual funds managed by the Adviser) and has a new termination date of June 29, 2020. Under this amended agreement, the Victory Funds Complex and USAA Mutual Funds Complex, combined, may borrow up to $600 million, of which $300 million is committed and $300 million is uncommitted. $40 million of the Line of Credit is reserved for use by the Victory Floating Rate Fund (herein, the "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. With the agreement in effect for the period January 1, 2019 to June 30, 2019, Citibank received an annual commitment fee of 0.15% on $100 million for providing the Line of Credit. For the period July 1, 2019 to December 31, 2019, Citibank received an annual commitment fee of 0.15% on $300 million for providing the Line of Credit. For the year ended December 31, 2019, Citibank earned approximately $300 thousand in commitment fees from the combined Victory Funds Complex and USAA Mutual Funds Complex. Each fund in the Victory Funds Complex and the USAA Mutual Funds Complex pays a pro-rata portion of the commitment fees plus any interest (one month LIBOR plus one percent) on amounts borrowed. Interest charged to the Fund during the period, if applicable, is presented on the Statement of Operations under Line of credit fees.
The Funds did not utilize the Line of Credit during the year ended December 31, 2019.
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. As a Borrower, interest charged to each Fund during the period, if applicable, is presented on the Statements of Operations under Interfund lending fees. As a Lender, interest earned by each Fund during the period, if applicable, is presented on the Statements of Operations under Income on interfund lending.
The Funds did not utilize Interfund lending during the year ended December 31, 2019.
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Victory Portfolios | Notes to Financial Statements — continued December 31, 2019 |
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, 2019 | |||||||||||||||||||
Distributions paid from | |||||||||||||||||||
Ordinary Income | Net Long-Term Capital Gains | Total Taxable Distributions | Total Distributions Paid | ||||||||||||||||
RS Partners Fund | $ | 2,917,501 | $ | 38,853,618 | $ | 41,771,119 | $ | 41,771,119 | |||||||||||
RS Value Fund | 3,088,482 | 24,249,837 | 27,338,319 | 27,338,319 | |||||||||||||||
RS Large Cap Alpha Fund | 3,767,453 | 17,315,428 | 21,082,881 | 21,082,881 | |||||||||||||||
RS Investors Fund | — | 1,871,145 | 1,871,145 | 1,871,145 | |||||||||||||||
Global Natural Resources Fund | 294,977 | — | 294,977 | 294,977 | |||||||||||||||
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 | |||||||||||||||
Global Natural Resources Fund | — | — | — | — |
As of the tax year ended December 31, 2019, 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 | $ | — | $ | 4,799,756 | $ | 4,799,756 | $ | — | $ | 80,515,899 | $ | 85,315,655 | |||||||||||||||
RS Value Fund | — | 5,817,804 | 5,817,804 | — | 62,481,947 | 68,299,751 | |||||||||||||||||||||
RS Large Cap Alpha Fund | 2,772,546 | 16,152,410 | 18,924,956 | — | 115,775,227 | 134,700,183 | |||||||||||||||||||||
RS Investors Fund | — | 86,176 | 86,176 | — | 7,057,950 | 7,144,126 | |||||||||||||||||||||
Global Natural Resources Fund | 325,261 | — | 325,261 | (1,664,990,521 | ) | (288,744,367 | ) | (1,953,409,627 | ) |
* 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, 2019, the following fund had net capital loss carryforwards (no expiration) as summarized in the table below:
Short-Term Amount | Long-Term Amount | Total | |||||||||||||
Global Natural Resources Fund | $ | 11,399,572 | $ | 1,653,590,949 | $ | 1,664,990,521 |
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Victory Portfolios | Notes to Financial Statements — continued December 31, 2019 |
As of December 31, 2019, 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 | $ | 341,561,679 | $ | 83,800,860 | $ | (3,284,961 | ) | $ | 80,515,899 | ||||||||||
RS Value Fund | 319,530,069 | 64,277,114 | (1,795,167 | ) | 62,481,947 | ||||||||||||||
RS Large Cap Alpha Fund | 435,390,812 | 116,388,180 | (612,953 | ) | 115,775,227 | ||||||||||||||
RS Investors Fund | 35,475,468 | 7,480,319 | (422,369 | ) | 7,057,950 | ||||||||||||||
Global Natural Resources Fund | 443,601,120 | 13,435,128 | (302,179,732 | ) | (288,744,604 | ) |
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, 2019, 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 | 33.3 | % | ||||||||
Global Natural Resources Fund | Charles Schwab and Co., LLC | 31.8 | % |
10. Subsequent Events:
The Funds have evaluated the need for additional disclosures or adjustments resulting from subsequent events through the date these financial statements were issued. Based on this evaluation, there were no subsequent events to report that would have a material impact on the Funds' financial statements.
63
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Trustees of Victory Portfolios
Opinion on the Financial Statements
We have audited the accompanying statements of assets and liabilities, including the schedules of portfolio investments, 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 (the "Funds"), each a series of Victory Portfolios, as of December 31, 2019, the related statements of operations and changes in net assets, including the related notes, and the financial highlights for the year then ended (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 as of December 31, 2019, the results of their operations, the changes in their net assets, and their financial highlights for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
The Funds' financial statements and financial highlights for the three years ended December 31, 2018, were audited by other auditors whose report dated February 26, 2019 and the Funds' financial highlights for the year ended December 31, 2015, were audited by other auditors whose report dated February 22, 2016, expressed unqualified opinions on those financial statements and financial highlights.
Basis for Opinion
These financial statements are the responsibility of the Funds' management. Our responsibility is to express an opinion on the Funds' financial statements based on our audit. 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 Funds 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 audit 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.
Our audit 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, 2019, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. Our audit 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 audit provides a reasonable basis for our opinion.
We have served as the auditor of one or more of the investment companies advised by Victory Capital Management, Inc. since 2015.
COHEN & COMPANY, LTD.
Cleveland, Ohio
February 25, 2020
64
Victory Portfolios | Supplemental Information December 31, 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 and 26 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, 68 | Trustee | May 2005 | Consultant (since 2006). | Chair and Trustee, Turner Funds (December 2016-December 2017). | |||||||||||||||
Nigel D. T. Andrews, 72 | 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, 68* | Trustee | May 2005 | Retired (since 2015); Consultant, The Henlee Group, LLC (consulting) (2005-2015). | None. | |||||||||||||||
Dennis M. Bushe, 76 | 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, 2019 |
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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, 65 | Trustee | February 2011 | Chief Investment Officer, Tufts University (since 2002). | None. | |||||||||||||||
John L. Kelly, 66 | Trustee | February 2015 | Partner, McCarvill Capital Partners (September 2016- September 2017); Advisor, Endgate Commodities LLC (January 2016-April 2016); Managing Partner, Endgate Commodities LLC (August 2014-January 2016); Chief Operating Officer, Liquidnet Holdings, Inc. (December 2011-July 2014). | Director, Caledonia Mining Corporation (since May 2012). | |||||||||||||||
David L. Meyer, 62* | Trustee | December 2008 | Retired. | None. | |||||||||||||||
Gloria S. Nelund, 58 | 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, 75 | Chair and Trustee | November 1994 | Private Investor. | Chair (since 2013), Caledonia Mining Corporation. | |||||||||||||||
Interested Trustee. | |||||||||||||||||||
David C. Brown, 47** | 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). | USAA Mutual Funds Trust. |
* 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, 2019 |
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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, 58 | President | February 2006* | Director of Mutual Fund Administration, the Adviser. | ||||||||||||
Scott A. Stahorsky, 50 | Vice President | December 2014 | Manager, Fund Administration, the Adviser (since 2015); Senior Analyst, Fund Administration, the Adviser (prior to 2015). | ||||||||||||
Erin G. Wagner, 46 | Secretary | December 2014 | Associate General Counsel, the Adviser (since 2013). | ||||||||||||
Allan Shaer, 54 | 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, 35 | 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, 46 | Chief Compliance Officer | July 2017 | Chief Compliance Officer (since 2013) and Chief Risk Officer (2009-2017), the Adviser. | ||||||||||||
Chuck Booth, 59 | 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, 66 | 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, 2019 |
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Proxy Voting and Portfolio Holdings Information
Proxy Voting:
Information regarding the policies and procedures 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 files 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. Prior to the implementation of Form N-PORT, the Trust 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, 2019 through December 31, 2019.
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 7/1/19 | Actual Ending Account Value 12/31/19 | Hypothetical Ending Account Value 12/31/19 | Actual Expenses Paid During Period 7/1/19- 12/31/19* | Hypothetical Expenses Paid During Period 7/1/19- 12/31/19* | Annualized Expense Ratio During Period 7/1/19- 12/31/19 | ||||||||||||||||||||||
RS Partners Fund | |||||||||||||||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 1,067.30 | $ | 1,017.90 | $ | 7.56 | $ | 7.38 | 1.45 | % | |||||||||||||||
Class R Shares | 1,000.00 | 1,065.80 | 1,016.08 | 9.42 | 9.20 | 1.81 | % | ||||||||||||||||||||
Class Y Shares | 1,000.00 | 1,069.60 | 1,019.56 | 5.84 | 5.70 | 1.12 | % |
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Beginning Account Value 7/1/19 | Actual Ending Account Value 12/31/19 | Hypothetical Ending Account Value 12/31/19 | Actual Expenses Paid During Period 7/1/19- 12/31/19* | Hypothetical Expenses Paid During Period 7/1/19- 12/31/19* | Annualized Expense Ratio During Period 7/1/19- 12/31/19 | ||||||||||||||||||||||
RS Value Fund | |||||||||||||||||||||||||||
Class A Shares | $ | 1,000.00 | $ | 1,077.60 | $ | 1,018.65 | $ | 6.81 | $ | 6.61 | 1.30 | % | |||||||||||||||
Class C Shares | 1,000.00 | 1,073.40 | 1,014.77 | 10.82 | 10.51 | 2.07 | % | ||||||||||||||||||||
Class R Shares | 1,000.00 | 1,075.90 | 1,016.69 | 8.84 | 8.59 | 1.69 | % | ||||||||||||||||||||
Class Y Shares | 1,000.00 | 1,079.40 | 1,019.86 | 5.56 | 5.40 | 1.06 | % | ||||||||||||||||||||
RS Large Cap Alpha Fund | |||||||||||||||||||||||||||
Class A Shares | 1,000.00 | 1,101.20 | 1,020.72 | 4.71 | 4.53 | 0.89 | % | ||||||||||||||||||||
Class C Shares | 1,000.00 | 1,096.80 | 1,016.69 | 8.93 | 8.59 | 1.69 | % | ||||||||||||||||||||
Class R Shares | 1,000.00 | 1,099.30 | 1,018.85 | 6.67 | 6.41 | 1.26 | % | ||||||||||||||||||||
Class Y Shares | 1,000.00 | 1,102.30 | 1,021.78 | 3.60 | 3.47 | 0.68 | % | ||||||||||||||||||||
RS Investors Fund | |||||||||||||||||||||||||||
Class A Shares | 1,000.00 | 1,050.00 | 1,018.50 | 6.87 | 6.77 | 1.33 | % | ||||||||||||||||||||
Class C Shares | 1,000.00 | 1,045.90 | 1,014.77 | 10.67 | 10.51 | 2.07 | % | ||||||||||||||||||||
Class R Shares | 1,000.00 | 1,046.90 | 1,015.38 | 10.06 | 9.91 | 1.95 | % | ||||||||||||||||||||
Class Y Shares | 1,000.00 | 1,051.80 | 1,019.91 | 5.43 | 5.35 | 1.05 | % | ||||||||||||||||||||
Global Natural Resources Fund | |||||||||||||||||||||||||||
Class A Shares | 1,000.00 | 878.70 | 1,017.74 | 7.01 | 7.53 | 1.48 | % | ||||||||||||||||||||
Class C Shares | 1,000.00 | 875.40 | 1,013.71 | 10.78 | 11.57 | 2.28 | % | ||||||||||||||||||||
Class R Shares | 1,000.00 | 877.40 | 1,015.83 | 8.80 | 9.45 | 1.86 | % | ||||||||||||||||||||
Class Y Shares | 1,000.00 | 880.60 | 1,019.41 | 5.45 | 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, 2019, the Funds paid qualified dividend income for the purposes of reduced individual federal income tax rates of:
Amount | |||||||
RS Partners Fund | 100 | % | |||||
RS Value Fund | 100 | % | |||||
RS Large Cap Alpha Fund | 100 | % | |||||
Global Natural Resources Fund | 100 | % |
Dividends qualified for corporate dividends received deductions of:
Amount | |||||||
RS Partners Fund | 100 | % | |||||
RS Value Fund | 100 | % | |||||
RS Large Cap Alpha Fund | 100 | % | |||||
Global Natural Resources Fund | 100 | % |
For the year ended December 31, 2019, the following Fund designated short-term capital gain distributions in the amount of:
Amount | |||||||
RS Value Fund | $ | 1,638,983 |
For the year ended December 31, 2019, the Funds designated long-term capital gain distributions in the amount of:
Amount | |||||||
RS Partners Fund | $ | 42,210,344 | |||||
RS Value Fund | 27,555,408 | ||||||
RS Large Cap Alpha Fund | 17,315,428 | ||||||
RS Investors Fund | 1,871,145 |
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(Unaudited)
Considerations of the Board in Continuing the Investment Advisory Agreements
The Board approved the advisory agreement with the Adviser, on behalf of each of the Funds (the "Agreement"), and the sub-advisory agreement between SailingStone Capital Partners LLC (the "Sub-Adviser") and the Adviser, on behalf of the Global Natural Resources Fund (the "Sub-Advisory Agreement"), and at an in-person meeting, which was called for that purpose, on December 4, 2019. The Board also considered information relating to the Funds and both the Agreement and the Sub-Advisory Agreement provided throughout the year and, more specifically, at a meeting on October 22, 2019. 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 the Global Natural Resources Fund was sub-advised by the Sub-Adviser. In considering whether to approve the Agreement, the Board requested, and the Adviser or 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, which also serves as 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 and the Sub-Advisory Agreement should be continued. The Board reviewed numbers factors with respect to each Fund, including the Sub-Adviser's history as the sub-adviser for the predecessor fund of the Global Natural Resources Fund and the services to be provided by the Sub-Adviser. 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;
• The 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;
• The 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.
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;
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(Unaudited)
• 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.
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 with respect to 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, and a peer group of funds with similar investment strategies selected by that independent consultant from the universe. The Board reviewed the factors and methodology used by the independent consultant in the selection of each Fund's peer group, including the independent consultant's selection of a broad universe of funds, 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 the independent consultant'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 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 recognized that because the sub-advisory fees are paid by the Adviser, any arrangement by the Sub-Adviser to reduce its fees as the Fund grows would have no impact on the Fund or its shareholders. The Board also considered the Adviser's commitment to limit expenses as discussed in more detail below, and would consider breakpoints at a future time if a Fund's assets were to grow significantly.
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 reflects gross returns. The Board considered the additional resources that the Adviser has committed to enhance portfolio analysis, compliance and trading systems.
With respect to the Global Natural Resources Fund, the Board considered the relative roles and responsibilities of the Adviser and the 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 also considered 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.
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Victory Portfolios | Supplemental Information — continued December 31, 2019 |
(Unaudited)
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, 2019, 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 median for the one- and three-year periods, underperformed both the benchmark index and the peer group median for the five-year period, outperformed the benchmark index for the ten-year period, and underperformed the peer group median 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 Value Fund
The Board compared the Fund's Class A performance for the one-, three-, five- and ten-year periods ended June 30, 2019, 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 and the peer group median for the one- and three-year periods, outperformed the peer group median for the five-year period, underperformed the benchmark index for the five-year period, and underperformed both the benchmark index and the peer group median 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 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, 2019, 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, with the exception of the three-year period, and underperformed the peer group median for all of the periods reviewed, with the exception of the one-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 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, 2019, 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, with the exception of the five-year period, outperformed the peer group median for the one- and ten-year periods, and underperformed the peer group median for the three- and five-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 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.
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Victory Portfolios | Supplemental Information — continued December 31, 2019 |
(Unaudited)
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, 2019, 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 median for all of the periods reviewed. The Board discussed the Fund's investment strategy, the Adviser's and Sub-Adviser's implementation of the strategy, and related market conditions, together with relevant fee and expense considerations. The Board also discussed the steps taken by the Adviser and the Sub-Adviser to enhance performance in the future, and the Board's continued monitoring of the Fund's performance.
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.
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 Global Natural Resources 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.
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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 (12/19)
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.
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| 2019 |
| 2018 |
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(a) Audit Fees (1) |
| $ | 297,500 |
| $ | 391,472 |
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(b) Audit-Related Fees (2) |
| 0 |
| 0 |
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(c) Tax Fees (3) |
| 87,750 |
| 106,480 |
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(d) All Other Fees (4) |
| 0 |
| 0 |
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(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 The Funds’ independent registered public accounting firm for audit compliance, audit advice and audit planning.
(2) Represents the fee for assurance and related services by The Funds’ independent registered public accounting firm 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 The Funds’ independent registered public accounting firm 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, 2019 and December 31, 2018, there were no fees billed for professional services rendered by The Funds’ independent registered public accounting firm to the Registrant, other than the services reported in (a) through (c) of this item.
Tax fees for 2019 and 2018 are for recurring tax fees for the preparation of the federal and state tax returns and procedures performed relating to the Registrant’s analysis of complex securities.
(e)(1) The Registrant’s Audit Committee must pre-approve non-audit services to be provided by the principal accountant and the fees charged with these services. The Committee may delegate authority to one or more Committee members to pre-approve these services, subject to subsequent review and approval by the Committee.
(e)(2) There were no services performed under Rule 2.01 (c)(7)(i)(C).
(f) Not applicable.
(g)
2019 |
| $ | 0 |
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2018 |
| $ | 133,280 |
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(h) The Registrant’s Audit Committee has evaluated the non-audit services that the principal accountant provided to the Registrant’s investment adviser (and the adviser’s relevant affiliated), which services the Committee did not pre-approve, and has concluded that the provision of those services was compatible with maintaining the accountant’s independence.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Investments.
(a) Not applicable.
(b) Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 11. Controls and Procedures.
(a)The registrant’s principal executive officer and principal financial officer have concluded, based on their evaluation of the registrant’s disclosure controls and procedures as conducted within 90 days of the filing date of this report, that these disclosure controls and procedures are adequately designed and are operating effectively to ensure that information required to be disclosed by the registrant on Form N-CSR is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.
(b)There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940 (17 CFR 270.30a-3(d)) that occurred during the period covered by this report that have materially affected or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
(a)(1) Not applicable.
(a)(2) Not applicable.
(a)(3) Not applicable.
(a)(4) Not applicable.
(b) Not applicable.
Item 13. Exhibits.
(a)(1) The code of ethics that is the subject of the disclosure required by Item 2 is attached hereto.
(a)(2) Certifications pursuant to Rule 30a-2(a) are attached hereto.
(a)(3) Not applicable.
(b) Certifications pursuant to Rule 30a-2(b) are furnished herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) | Victory Portfolios |
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By (Signature and Title)* | /s/ Allan Shaer |
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| Allan Shaer, Principal Financial Officer |
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Date | February 27, 2020 |
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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 |
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| Christopher K. Dyer, Principal Executive Officer |
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Date | February 27, 2020 |
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By (Signature and Title)* | /s/ Allan Shaer |
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| Allan Shaer, Principal Financial Officer |
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Date | February 27, 2020 |
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