July
1, 2024
Prospectus
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Victory
Government Securities Fund | |||||
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Fund
Shares |
Institutional
Shares |
Class
A |
Class
C |
Class
R6 |
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USGNX |
UIGSX |
— |
— |
URGSX |
The Securities and
Exchange Commission has not approved or disapproved these securities or
determined whether this Prospectus is accurate or complete. Any representation
to the contrary is a criminal offense.
vcm.com
(800) 235-8396
(800) 235-8396
(paid directly from your investment)
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Fund
Shares |
Institutional
Shares |
Class
R6 |
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Maximum
Sales Charge (Load) Imposed on Purchases
(as
a percentage of offering price) |
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Maximum
Deferred Sales Charge (Load)
(as
a percentage of the lower of purchase or sale price) |
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(expenses that you pay each year as a percentage of the value of your investment)
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Management
Fees1
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Distribution
and/or Service (12b-1) Fees |
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Other
Expenses |
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Total
Annual Fund Operating Expenses |
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Fee
Waiver/Expense Reimbursement2
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( |
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Total
Annual Fund Operating Expenses After Fee Waiver and/or
Expense
Reimbursement2
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1
2
1
Victory
Government Securities Fund Summary
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1
Year |
3
Years |
5
Years |
10
Years |
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Fund
Shares |
$ |
$ |
$ |
$ |
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Institutional
Shares |
$ |
$ |
$ |
$ |
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Class
R6 |
$ |
$ |
$ |
$ |
2
Victory
Government Securities Fund Summary
3
Victory
Government Securities Fund Summary
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4
Victory
Government Securities Fund Summary
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1
Year |
5
Years |
10
Years
(or
Life
of
Class) |
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FUND
SHARES Before Taxes |
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FUND
SHARES After Taxes on Distributions |
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FUND
SHARES After Taxes on Distributions and Sale of Fund
Shares |
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INSTITUTIONAL
SHARES Before Taxes |
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CLASS
R6 Before Taxes |
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Indices | |||
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Bloomberg
U.S. Aggregate Bond Index
reflects
no deduction for fees, expenses, or taxes1
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Bloomberg
U.S. Aggregate Government Intermediate & MBS Index
reflects
no deduction for fees, expenses, or taxes |
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Lipper
Intermediate U.S. Government Funds Index
reflects
no deduction for taxes |
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1
2
3
Management
of the Fund
Investment
Adviser
Victory
Capital Management Inc. (the “Adviser”) serves as the Fund’s investment
adviser.
The
Adviser is a diversified global asset manager comprised of multiple investment
teams, referred to as investment franchises, each of which utilizes an
independent approach to investment. The portfolio managers primarily responsible
for the day-to-day management of the Fund are members of the Adviser’s Victory
Income Investors investment franchise.
Portfolio
Management
|
|
Title |
Tenure
with the Fund |
|
James
F. Jackson
Jr.,
CFA |
Senior
Portfolio Manager, Head of
Fixed Income
Portfolio
Management,
and co-Chief
Investment
Officer |
Since
2019 |
|
R.
Neal Graves, CFA, CPA |
Senior
Portfolio Manager |
Since
2013 |
|
Zach
Winters |
Portfolio
Manager and Senior
Fixed Income
Research Analyst |
Since July
2023 |
5
Victory
Government Securities Fund Summary
Purchase
and Sale of Fund Shares
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Investment
Minimums |
Fund
Shares |
Institutional
Shares |
Class
R6 |
|
Minimum
Initial Investment |
$3,000 |
$1,000,000 |
None |
|
Minimum
Subsequent Investments |
$50 |
None |
None |
You may
purchase or sell Fund Shares on any business day through vcm.com or by telephone
at (800) 235-8396. You also may purchase or sell Fund Shares through certain
other financial intermediaries. If you have opened an account directly with the
Fund, you also may purchase and sell Fund Shares by mail at P.O. Box 182593,
Columbus, OH 43218-2593. The Fund reserves the right to waive or lower purchase
minimums in certain circumstances.
Institutional
Shares are not offered for sale directly to the general public. The Fund
reserves the right to waive or lower purchase minimums in certain
circumstances.
Certain
broker-dealers and other financial intermediaries (such as a bank) may establish
higher or lower minimum initial and subsequent investment amounts to which you
may be subject if you invest through them.
Class R6
shares generally are available only through employer-sponsored retirement plans
where a financial intermediary provides retirement recordkeeping services to
plan participants. Class R6 shares also are available to endowment funds and
foundations. Please contact your plan administrator or recordkeeper to purchase
or sell (redeem) shares from your retirement plan.
When you
buy and redeem shares, the Fund will price your transaction at the
next-determined net asset value (“NAV”) after the Fund receives your request in
good order, which means that your request contains all the required
documentation, and that all documents contain required signatures or signature
guarantees from a financial institution.
Tax
Information
The Fund
intends to make distributions that generally will be taxed to you as ordinary
income or long-term capital gains, unless you are a tax-exempt investor or you
invest through an IRA, 401(k) plan, or other tax-deferred account (in which case
you may be taxed later, upon withdrawal of your investment from such
account).
Payments
to Broker-Dealers and Other Financial Intermediaries
If you
purchase shares of the Fund through a broker-dealer or other financial
intermediary (such as a bank), the Fund and its related companies may pay the
intermediary for the sale of such shares and certain servicing and
administrative functions for investments in all share classes except
the Class R6 shares. These payments may create a conflict of interest by
influencing the broker-dealer or other intermediary and your financial adviser
to recommend the Fund over another investment. Ask your financial adviser or
visit your financial intermediary’s website for more
information.
6
Additional Fund
Information
|
Victory
Capital Management Inc., which we refer to as the “Adviser”
throughout
the Prospectus, manages the
Fund. |
The Fund
is managed by the Adviser, who also manages other funds, each having distinct
investment management objectives, strategies, risks, and policies. Together,
these funds are referred to in this Prospectus as the “Victory Funds” or, more
simply, the “Funds.”
The Fund
provides investors a high level of current income consistent with preservation
of principal. The Fund’s Board of Trustees (the “Board”) may change this
investment objective without shareholder approval. The Fund will provide
shareholders notice of any such change.
The Fund
normally invests at least 80% of its net assets in government securities,
including U.S. Treasury bills, notes, and bonds; Treasury Inflation Protected
Securities (“TIPS”); mortgage-backed securities (“MBS”) backed by the Government
National Mortgage Association (“Ginnie Mae”), the Federal National Mortgage
Association (“Fannie Mae”), and the Federal Home Loan Mortgage Corporation
(“Freddie Mac”); U.S. government agency collateralized mortgage obligations;
securities issued by U.S. government agencies and instrumentalities; and
repurchase agreements collateralized by such investments. This 80% policy may be
changed upon at least 60 days’ prior written notice to shareholders. The
securities issued by U.S. government agencies and instrumentalities are
supported by the credit of the issuing agency, instrumentality, or corporation
(which neither are issued nor guaranteed by the U.S. Treasury), including, but
not limited to, Fannie Mae, Freddie Mac, the Federal Agricultural Mortgage
Corporation (“Farmer Mac”), Federal Farm Credit Bank, Federal Home Loan Bank,
Private Export Funding Corp (“Pefco”), and the Small Business Administration.
The effective duration of the Fund is generally within two years of the
Bloomberg U.S. Aggregate Government Intermediate & MSB Index.
Securities
that are backed by the full faith and credit of the U.S. government are
considered to be of the highest credit quality available. These securities are
guaranteed only as to the timely payment of interest and principal when held to
maturity, and the market prices for such securities will fluctuate. U.S.
Treasuries and Ginnie Mae securities are backed by the full faith and credit of
the U.S. government. Other U.S. government securities are backed by the issuing
agencies and supported by the right of the issuer to borrow from the U.S.
Treasury.
The Fund
may, from time to time, take temporary defensive positions that are inconsistent
with the Fund's principal investment strategies in attempting to respond to
adverse market, economic, political, or other conditions. The effect of taking
such a temporary defensive position is that the Fund may not achieve its
investment objective.
Victory
Income Investors
We manage
the Fund to generate a level of current income consistent with preservation of
principal. Of particular importance for mortgage securities is prepayment risk.
We generally try to diversify this risk by buying different kinds of mortgage
securities, which should have different prepayment characteristics. When
weighing our decision to buy or sell a security, we strive to balance the value
of the level of income, the prepayment risk, and the price volatility, both for
the individual security and its relationship with the rest of the
portfolio.
7
Investments
The
following describes the types of securities the Fund may purchase under normal
market conditions to achieve its principal investment strategy.
U.S.
Government Securities
Negotiable
debt obligations of the U.S. government secured by its full faith and credit and
issued at various schedules and maturities. U.S. Treasury bills are short-term
securities with maturities of one year or less issued at a discount from face
value; U.S. Treasury notes are intermediate securities with maturities of one to
10 years; and U.S. Treasury bonds are long-term debt instruments with maturities
greater than 10 years. The interest income from U.S. Treasury securities is
exempt from state and local, but not federal, taxes. TIPS are inflation-indexed
bonds issued by the U.S. Treasury. The principal is adjusted to reflect changes
in the Consumer Price Index (“CPI”), the commonly used measure of inflation.
When the CPI rises, the principal adjusts upward. If the index falls, the
principal adjusts downward. The coupon rate is constant but generates a
different amount of interest when multiplied by the inflation-adjusted
principal, thus protecting the holder against inflation.
Agency
Mortgage-Backed Securities “MBS”
Agency MBS
are backed by one of the federal housing agencies, such as Ginnie Mae, Fannie
Mae, or Freddie Mac. Ginnie Mae securities represent ownership in a pool of
mortgage loans or a single mortgage loan. These loans are individually insured
or guaranteed by the federal agencies with which Ginnie Mae partners. Ginnie
Mae’s partners include the Federal Housing Administration, the Veterans
Administration, the Rural Housing Service, and the Office of Public and Indian
Housing. Once approved by Ginnie Mae, each mortgage or pool of mortgages is
additionally guaranteed by Ginnie Mae as to the timely payment of principal and
interest (regardless of whether the mortgagors actually make their payments).
The guarantee represents a general obligation of the U.S. Treasury. Therefore,
Ginnie Mae securities are backed by the full faith and credit of the U.S.
government.
Fannie Mae
and Freddie Mac securities also represent pools of mortgage loans or a single
mortgage loan, but these are insured by the respective agencies.
MBS
securities differ from conventional bonds in that principal is paid back to the
certificate holders over the life of the loan rather than at maturity. As a
result, the Fund will receive monthly scheduled payments of principal and
interest. Additionally, the Fund may receive unscheduled principal payments,
which represent prepayments on the underlying mortgages. Because the Fund will
reinvest these scheduled and unscheduled principal payments at a time when the
current interest rate may be higher or lower than the Fund’s current yield, an
investment in the Fund may not be an effective means of “locking in” long-term
interest rates.
MBS
securities evidence interest in a pool of underlying mortgages (or a single
mortgage), which generally have maximum lives of either 10, 15, 20, 30, or 40
years. However, due to both scheduled and unscheduled principal payments, MBS
securities generally have a shorter average life and, therefore, have less
principal volatility than a bond of comparable maturity.
Since the
prepayment rates will vary widely, it is not possible to predict accurately the
average life of a particular MBS pool, though it will be shorter than the stated
final maturity. Because the expected average life is a better indicator of the
maturity characteristics of MBS securities, principal volatility and yield may
be more comparable to 5-year or 10-year U.S. Treasury bonds.
8
Investments
Additional
Fund Strategies.
The Adviser may use other types of investment strategies in pursuing the Fund's
overall investment objective. The following describes the types of securities or
techniques that the Adviser may purchase or investment techniques the Adviser
may employ that are not considered to be a part of the Fund's principal
investment strategies. Additional securities and techniques are described in the
Fund's SAI.
Securities
Lending
To enhance
the return on its portfolio, the Fund may lend portfolio securities to brokers,
dealers, and financial institutions to realize additional income under
guidelines adopted by the Board. Each loan will be secured continuously by
collateral in the form of cash, securities issued by the U.S. government or its
agencies or instrumentalities.
9
Risk
Factors
The
following provides additional information about the Fund’s principal risks and
supplements those risks discussed in the Fund Summary section of this
Prospectus.
Credit
Risk: Credit
risk typically is expected to be low for securities that are considered to be
high quality. However, it remains possible that a borrower cannot make timely
interest and principal payments on its securities or that negative market
perceptions of the issuer’s ability to make such payments will cause the price
of that security to decline.
Political
and diplomatic events within the United States, including a contentious domestic
political environment, changes in political party control of one or more
branches of the U.S. government, the U.S. government’s inability at times to
agree on a long-term budget and deficit reduction plan, the threat of a U.S.
government shutdown, and disagreements over, or threats not to increase, the
U.S. government’s borrowing limit (or “debt ceiling”), as well as political and
diplomatic events abroad, may affect investor and consumer confidence and may
adversely impact financial markets and the broader economy, perhaps suddenly and
to a significant degree. A downgrade of the ratings of U.S. government debt
obligations, or concerns about the U.S. government’s credit quality in general,
could have a substantial negative effect on the U.S. and global economies.
Moreover, although the U.S. government has honored its credit obligations, there
remains a possibility that the United States could default on its obligations.
The consequences of such an unprecedented event are impossible to predict, but
it is likely that a default by the United States would be highly disruptive to
the U.S. and global securities markets and could significantly impair the value
of the Fund’s investments.
Geopolitical/Natural
Disaster Risk: Political
and diplomatic events within the United States, including a contentious domestic
political environment, changes in political party control of one or more
branches of the U.S. government, the U.S. government’s inability at times to
agree on a long-term budget and deficit reduction plan, the threat of a U.S.
government shutdown, and disagreements over, or threats not to increase, the
U.S. government’s borrowing limit (or “debt ceiling”), as well as political and
diplomatic events abroad, may affect investor and consumer confidence and may
adversely impact financial markets and the broader economy, perhaps suddenly and
to a significant degree. A downgrade of the ratings of U.S. government debt
obligations, or concerns about the U.S. government’s credit quality in general,
could have a substantial negative effect on the U.S. and global economies.
Moreover, although the U.S. government has honored its credit obligations, there
remains a possibility that the United States could default on its obligations.
The consequences of such an unprecedented event are impossible to predict, but
it is likely that a default by the United States would be highly disruptive to
the U.S. and global securities markets and could significantly impair the value
of the Fund’s investments.
Information
Technology and Operations Risk: Markets
and market participants are increasingly reliant upon both publicly available
and proprietary information data systems. Data imprecision, software or other
technology malfunctions, programming inaccuracies, unauthorized use or access,
and similar circumstances may impair the performance of these systems and may
have an adverse impact upon a single issuer, a group of issuers, or the market
at large. The information technology and other operational systems upon which a
Fund’s service providers rely may be subject to cyber attack or other
technological disruptions, and could otherwise disrupt the ability of these
service providers to perform essential tasks for the Fund. In certain cases, an
exchange or market may close or issue trading halts on either specific
securities or even the entire market, which may result in the Fund being, among
other things, unable to buy or sell certain securities or financial instruments
or accurately price its investments.
Interest
Rate Risk: The Fund
is subject to the risk that the market value of the bonds in its portfolio will
fluctuate because of changes in interest rates, changes in supply of and demand
for investment securities, or other market factors. Bond prices generally are
linked to the prevailing market interest rates. In general, when interest rates
rise, bond prices fall; and conversely, when interest rates fall, bond prices
rise. The price volatility of a bond also depends on its duration. Duration is a
measure that
10
Risk
Factors
relates
the expected price volatility of a bond to changes in interest rates. The
duration of a bond may be shorter than or equal to the full maturity of a bond.
Generally, the longer the duration of a bond, the greater is its sensitivity to
interest rates. Bonds with longer durations have more risk and will decrease in
price as interest rates rise. For example, a bond with a duration of three years
will decrease in value by approximately 3% if interest rates increase by 1%. To
compensate investors for this higher interest rate risk, bonds with longer
durations generally offer higher yields than bonds with shorter
durations.
◼
If
interest rates increase, the
yield of the Fund may increase and the market value of the Fund’s securities may
decline, adversely affecting the Fund’s NAV and total return.
◼
If
interest rates decrease, the yield
of the Fund may decrease and the market value of the Fund’s securities may
increase, which may increase the Fund’s NAV and total return.
Changes in
government monetary policy, including changes in a central bank’s (e.g., the
U.S. Federal Reserve (the “Fed”)) implementation of specific policy goals, may
have a substantial impact on interest rates, which in turn can significantly
impact the value of the Fund’s investments. There can be no assurance that a
central bank’s policy will be continued, discontinued or changed, or that any
such policy will have the desired effect. A central bank’s policy changes and
related market speculation as to the timing of potential interest rate changes
may expose fixed-income markets to heightened volatility and may reduce
liquidity for certain Fund investments, causing the value of the Fund’s
investments and share price to decline. For example, market developments and
other factors, including a general rise in interest rates, have the potential to
cause investors to move out of fixed-income securities on a large scale, which
may increase redemptions from funds that hold large amounts of fixed-income
securities. Such a move, coupled with a reduction in the ability or willingness
of dealers and other institutional investors to buy or hold fixed-income
securities, may result in decreased liquidity and increased volatility in the
fixed-income markets. Heavy redemptions of fixed-income mutual funds and
decreased liquidity of fixed-income securities could hurt the Fund’s
performance.
Large
Shareholder Risk: The Fund,
like all mutual funds, pools the investments of many investors. Actions by one
shareholder or multiple shareholders may have an impact on the Fund and,
therefore, indirectly on other shareholders. For example, significant levels of
new investments in the Fund by shareholders may cause the Fund to have more cash
than would otherwise be the case, which might have a positive or negative impact
on Fund performance. Similarly, redemption activity might cause the Fund to sell
portfolio securities, which may increase transaction costs and might generate a
capital gain or loss, or cause it to borrow funds on a short-term basis to cover
redemptions, which would cause the Fund to incur costs that, in effect, would be
borne by all shareholders, not just the redeeming shareholders. Shareholder
purchase and redemption activity also may affect the per share amount of the
Fund’s distributions of its net investment income and net realized capital
gains, if any, thereby affecting the tax burden on the Fund’s shareholders
subject to federal income tax. To the extent a larger shareholder is permitted
to invest in the Fund, the Fund may experience large inflows or outflows of cash
from time to time. This activity could magnify these adverse effects on the
Fund.
Legislative
Risk: The Fund
is subject to legislative risk, which is the risk that new government policies
may affect the value of the investments held by the Fund in ways we cannot
anticipate and that such policies will have an adverse impact on the value of
the Fund’s investments and the Fund’s NAV.
Liquidity
Risk: Certain
securities held by the Fund may be difficult (or impossible) to sell at the time
and at the price the Fund would like due to a variety of factors, including
general market conditions, the perceived financial strength of the issuer, or
specific restrictions on resale of the securities. Consequently, the Fund may
have to hold these securities longer than it would like and may forgo other
investment opportunities. It also is possible that the Fund could be prevented
from realizing capital gains or could be forced to incur capital losses if the
Adviser is unable to sell a position at the time or price of the Adviser’s
choosing. Lack of liquidity may impact valuation of such securities and
11
Risk
Factors
the Fund’s
NAV adversely, especially during times of financial distress. In addition, the
Fund may not be able to raise cash when needed or may be forced to sell other
investments to raise cash, which could impact the Fund’s performance negatively.
Infrequent trading of securities also may lead to an increase in price
volatility. Liquidity is a general investment risk that potentially could impact
any security, but funds that invest in privately placed securities, certain
small-company securities, high-yield bonds, mortgage-backed or asset-backed
securities, foreign or emerging-market securities, derivatives, or other
structured investments, which all have experienced periods of illiquidity,
generally are subject to greater liquidity risk than funds that do not invest in
these types of securities.
Management
Risk: The Fund
is subject to management risk, which is the possibility that the investment
techniques and risk analyses used in managing the Fund's portfolio will not
produce the desired results.
Prepayment
Risk: There is a
risk that prepayments of mortgage-backed securities in the Fund’s portfolio will
require reinvestment at lower interest rates, resulting in less interest income
to the Fund. Mortgagors generally may pay off mortgages without penalty before
the due date. When mortgaged property is sold, which can occur at any time for a
variety of reasons, the old mortgage usually is prepaid. Also, when mortgage
interest rates fall far enough to make refinancing attractive, prepayments tend
to accelerate. Prepayments require the Fund to reinvest principal at
then-current interest rates, which often are lower than when the mortgages
originally were issued. Reinvestment at lower rates tends to reduce the interest
payments received by the Fund and, therefore, dividend payments available to
shareholders. If reinvestment occurs at a higher level of interest rates, the
opposite effect is true.
Redemption
Risk: The Fund
may experience periods of heavy redemptions that could cause the Fund to sell
assets at inopportune times or at a loss or depressed value. Redemption risk is
heightened during periods of declining or illiquid markets. Heavy redemptions
could hurt the Fund's performance. Market developments and other factors,
including a general rise in interest rates, have the potential to cause
investors to move out of fixed-income securities on a large scale, which may
increase redemptions from mutual funds that hold large amounts of fixed-income
securities. The market making capacity of dealers has been reduced in recent
years, in part as a result of structural changes, such as fewer proprietary
trading desks at broker-dealers and increased regulatory capital requirements.
In addition, significant securities market disruptions may lead to dislocation
in the market for a variety of fixed-income securities (including, without
limitation, commercial paper, corporate debt securities, certificates of
deposit, asset-backed debt securities, and municipal obligations), which can
decrease liquidity and sharply reduced returns. Increased redemptions from
mutual funds that hold large amounts of fixed-income securities, coupled with a
reduction in the ability or willingness of dealers and other institutional
investors to buy or hold fixed-income securities, may result in decreased
liquidity and increased volatility in the fixed-income markets.
Repurchase
Agreement Risk: Repurchase
agreements carry several risks. Although transactions must be fully
collateralized at all times, they generally create leverage and involve some
counterparty risk to the Fund, in that a defaulting counterparty could delay or
prevent the Fund’s recovery of collateral. For example, if the other party to a
repurchase agreement defaults on its obligation under the agreement, the Fund
may suffer delays and incur costs or lose money in exercising its rights under
the agreement. If the seller fails to repurchase the security and the market
value of the security declines, the Fund may suffer a loss to the extent that
the proceeds from the sale of the underlying securities and other collateral
held by the Fund are less than the repurchase price.
U.S.
Government Sponsored Enterprises (“GSEs”) Risk: Securities
issued by certain GSEs, such as MBS issued by the Government National Mortgage
Association (“Ginnie Mae”), are backed by the full faith and credit of the U.S.
government. Securities issued by other GSEs, such as the Federal Home Loan
Mortgage Corporation (“Freddie Mac”) and the Federal National Mortgage
Association (“Fannie Mae”), are neither issued nor guaranteed by the U.S.
Treasury. Rather, they are supported by the
12
Risk
Factors
credit of
the issuing agency, instrumentality or corporation. However, these securities
typically have indirect support from the U.S. government through an ability to
borrow from the U.S. Treasury, and the U.S. government is authorized to purchase
the GSE's obligations. If a GSE defaults on its obligations, the Fund might not
be able to recover its investment. While these arrangements are intended to
ensure that Fannie Mae and Freddie Mac can continue to meet their obligations,
it is possible that actions by the U.S. Treasury or others could adversely
impact the value of a Fund’s investments in securities issued by Fannie Mae and
Freddie Mac.
Additional
Risk Factors.
The Adviser may use several types of investment strategies in pursuing the
Fund's overall investment objective. The following risks are those that the
Adviser does not consider to be principal risks of the Fund. The statement of
additional information (“SAI”) provides more detail about these risks and other
risks that a Fund may be subject to that are not considered to be principal
risks. You may request a copy of the Fund's SAI for more
information.
Securities
Lending Risk: The Fund
may lend portfolio securities to broker-dealers or other institutions on a fully
collateralized basis. There is a risk of delay in recovering a loaned security
and/or risk of loss in collateral if the borrower becomes insolvent. There also
is risk of loss if the borrower defaults and fails to return the loaned
securities. The Fund could incur losses on the reinvestment of cash collateral
from the loan, if the value of the short-term investments acquired with the cash
collateral is less than the amount of cash collateral required to be returned to
the borrower.
13
Organization and
Management of the Fund
The Fund's
Board has the overall responsibility for overseeing the management of the
Fund.
The
Investment Adviser
Victory
Capital Management Inc. (the “Adviser”), a New York corporation that is
registered as an investment adviser with the Securities and Exchange Commission
(“SEC”), serves as the investment adviser to the Fund pursuant to an investment
advisory agreement. Subject to the authority of the Board, the Adviser is
responsible for the overall management and administration of the Fund's business
affairs. The Adviser is responsible for selecting the Fund's investments
according to its investment objective, policies, and restrictions. As of May 31,
2024, the Adviser managed and advised assets totaling in excess of $168.5
billion for individual and institutional clients. The Adviser’s principal
address is 15935 La Cantera Pkwy, San Antonio, Texas 78256.
A
discussion regarding the basis of the Board’s approval of the Fund's Advisory
Agreement is available in the Fund's annual report to shareholders for the
period ended February 29.
The
Adviser is a diversified global asset manager comprised of multiple investment
teams, referred to as investment franchises, each of which utilizes an
independent approach to investment. Victory Income Investors, A Victory Capital
investment franchise, is responsible for the day-to day investment management of
the Fund.
The Fund’s
investment management fee is comprised of a base investment management fee and a
performance adjustment. The base investment management fee, which is accrued
daily and paid monthly, is equal to an annualized rate of 0.125% of the Fund’s
average daily net assets.
The
performance adjustment is calculated separately for each share class on a
monthly basis and will be added to or subtracted from the base investment
management fee depending upon the performance of the respective share class
relative to the performance of the Lipper Intermediate U.S. Government Funds
Index over the performance period. The performance adjustment for each share
class is calculated monthly by comparing the Fund’s performance to that of the
Lipper Intermediate U.S. Government Funds Index, which measures the total return
performance of funds tracked by Lipper that invest at least 65% of fund assets
in securities issued or guaranteed by the U.S. government, its agencies, or its
instrumentalities, with dollar-weighted average maturities of five to 10 years.
The performance period for each share class consists of the current month plus
the previous 35 months (or number of months since the date of the investment
advisory agreement, if shorter). The adjustment rate is determined as referenced
in the following chart:
|
Over/Under
Performance
Relative
to Index
(in
basis points)1
|
Annual
Adjustment Rate
(in
basis points as a percentage
of
the Fund’s average daily net assets) |
|
+/–
20 to 50 |
+/–
4 |
|
+/–
51 to 100 |
+/–
5 |
|
+/–
101 and greater |
+/–
6 |
1 Based on the
difference between the average annual performance of the relevant share class of
the Fund and its relevant Lipper index, rounded to the nearest basis
point.
To
determine the amount of the performance adjustment, the annual performance
adjustment rate is multiplied by the average daily net assets of each respective
share class over the entire performance period, which then is multiplied by a
fraction, the numerator of which is the number of days in the month and the
denominator of which is 365 (366 in leap years). The resulting amount then is
added to (in the case of overperformance) or subtracted from (in the case of
underperformance) the base investment management fee.
14
Organization and
Management of the Fund
Under the
performance fee arrangement, the Fund will pay a positive performance fee
adjustment for a performance period whenever the Fund outperforms the Lipper
Intermediate U.S. Government Funds Index over that period, even if the Fund had
overall negative returns during the performance period.
A
performance adjustment may have a disproportionate impact on the performance of
a share class with a smaller level of assets compared to a Fund’s other share
classes with larger asset levels.
For the
fiscal year ended February 29, 2024, performance adjustments were 0.07%, 0.06%,
and 0.02% for Fund Shares, Institutional Shares, and Class R6,
respectively.
See
Fund
Fees and Expenses for
information about any contractual agreement agreed to by the Adviser to waive
fees and/or reimburse expenses with respect to the Fund. From time to time, the
Adviser also may voluntarily waive fees and/or reimburse expenses in amounts
exceeding those required to be waived or reimbursed under any contractual
agreement that may be in place with respect to the Fund.
The Fund
is authorized, although the Adviser has no present intention of using such
authority, to use a “manager-of-managers” structure. The Adviser could select
(with approval of the Board and without shareholder approval) one or more
subadvisers to manage the day-to-day investment of the Fund's assets. The
Adviser would monitor each subadviser’s performance through quantitative and
qualitative analysis and periodically report to the Board as to whether a
subadviser’s agreement should be renewed, terminated, or modified. The Adviser
also would be responsible for determining how the Fund's assets should be
allocated to the subadvisers. The allocation for a subadviser could range from
0% to 100% of the Fund's assets, and the Adviser could change the allocations
without shareholder approval.
Portfolio
Management
James
F. Jackson Jr., CFA,
Senior Portfolio Manager, co-Chief Investment Officer, and Head of Fixed Income
Portfolio Management with Victory Income Investors, a Victory Capital investment
franchise, has co-managed the Fund since 2019. Mr. Jackson has 24 years of
investment management experience including 10 years with USAA Asset Management
Company (“AMCO”), which was acquired by the Adviser’s parent company in 2019.
Education: M.B.A. with High Distinction, Ross School of Business, University of
Michigan and a B.S., United States Naval Academy. He holds the Chartered
Financial Analyst (“CFA”) designation and is a member of the CFA Institute and
the CFA Society of San Antonio.
R.
Neal Graves, CFA,
CPA, Senior Portfolio Manager with Victory Income Investors, a Victory Capital
investment franchise, has co-managed the Fund since 2013. Mr. Graves has 27
years of finance related experience including 19 years of investment management
experience with AMCO, which was acquired by the Adviser’s parent company in
2019. Education: Master’s in professional accounting, University of Texas at
Austin and a B.B.A., University of Texas at Austin. He holds the CFA designation
and is a member of the CFA Institute and the CFA Society of San
Antonio.
Zach
Winters, CFA,
Portfolio Manager and Senior Fixed Income Research Analyst, Victory Income
Investors, a Victory Capital investment franchise, has co-managed the Fund since
2023. Mr. Winters has 17 years of investment management experience, including 12
years with AMCO, which was acquired by the Adviser’s parent company in 2019.
Along with his role as portfolio manager, Mr. Winters is also an analyst
covering the commercial mortgage backed securities, cell tower, and lodging
sectors. Prior to joining the fixed income team, he was on the equity research
and asset allocation teams at AMCO. Education: B.B.A in finance, Texas State
University; M.B.A., St. Mary’s University. He holds the CFA
designation.
The
statement of additional information (“SAI”) provides additional information
about the portfolio managers' compensation, other accounts managed, and
ownership of Fund securities.
15
Investing with the
Victory Funds
If you are
looking for a convenient way to open an account or to add money to an existing
account, we can help. The sections that follow will serve as a guide to your
investment with the Victory Funds. These sections describe many of the share
classes currently offered by the Victory Funds. Choosing
a Share Class will help
you decide which share class may be to your advantage to buy.
Keep in
mind that Institutional Shares and Class R6 shares are available for purchase
only by eligible shareholders. In addition, not all Victory Funds offer each
class of shares described below; and therefore, certain classes may be discussed
that are not necessarily offered by a Fund. The classes of shares that are
offered by a Fund are those listed on the cover page designated with a ticker
symbol. A Fund also may offer other share classes in different
prospectuses.
This
section of the prospectus also describes how to open an account, how to access
information about your account, and how to buy, exchange, and sell shares of a
Fund. Note, this information may vary if you invest through a third party such
as a brokerage firm and will be dependent on that firm’s policies and practices.
Consult your Investment Professional for specific details.
We want to
make it simple for you to do business with us. If you have questions about any
of this information, please call your investment professional or one of our
customer service representatives at (800) 235-8396. They will be happy to assist
you.
|
An
Investment Professional is an investment consultant, salesperson,
financial planner,
investment
adviser, or trust officer who provides you with investment
information.
Your
Investment Professional also can help you decide which share class is best
for you.
Investment
Professionals and other financial intermediaries may charge fees
for their services. |
Choosing
a Share Class
Fund
Shares
◼
No
front-end sales charge or contingent deferred sales charge (“CDSC”). All your
money goes to work for you right away.
◼
Fund
Shares do not pay any ongoing distribution and/or service (12b-1)
fees.
◼
Typically,
lower annual expenses than all classes except Institutional and Class R6
shares.
Institutional
Shares
◼
No
front-end sales charge or CDSC. All your money goes to work for you right
away.
◼
Institutional
Shares do not pay any ongoing distribution and/or service (12b-1)
fees.
◼
Institutional
Shares are only available to certain investors.
◼
Typically,
lower annual expenses than all classes except Class R6
shares.
Class
A
◼
Front-end
sales charge, as described in this section. There are several ways to reduce or
eliminate this charge as discussed under Sales
Charge Reductions and Waivers for Class A Shares.
◼
A CDSC may
be imposed if you sell your shares within 18 months of their purchase. The CDSC
may be waived or reduced in certain circumstances as discussed under
CDSC
Reductions for Class A and Class C Shares.
◼
Class A
shares also pay ongoing distribution and/or service (12b-1)
fees.
◼
Lower
annual expenses than Class C shares.
Class
C
◼
No
front-end sales charge. All your money goes to work for you right
away.
16
Investing with
the Victory Funds
◼
A CDSC may
be imposed if you sell your shares within 12 months of purchase. The CDSC may be
waived or reduced in certain circumstances as discussed under CDSC
Reductions for Class A and Class C Shares.
◼
Class C
shares also pay ongoing distribution and/or service (12b-1)
fees.
◼
Higher
annual expenses than all other classes of shares.
Class
R6
◼
No
front-end sales charge or CDSC. All your money goes to work for you right
away.
◼
Class R6
shares do not pay any ongoing distribution and/or service (12b-1)
fees.
◼
Class R6
shares are only available to certain investors.
◼
Typically,
lower annual expenses than all other classes of shares.
Share
Classes
When you
purchase shares of the Fund, you must choose a share class. The Fund offers the
share classes listed on the prospectus cover designated with their ticker
symbol. Each share class represents an interest in the same portfolio of
securities and is not a separate mutual fund. The classes differ in the sales
charges, if any, and expenses that apply to your investment, allowing you and
your Investment Professional to choose the class that best suits your investment
needs. The Fund may offer additional classes of shares in the
future.
Deciding
which share class best suits your investment needs depends on a number of
factors that you should discuss with your Investment Professional, including:
whether you are eligible to invest in a particular class, how long you expect to
hold your investment, how much you intend to invest in the Fund, and the total
expenses associated with each share class.
The Fund
reserves the right, without notice, to change the eligibility criteria for
purchasing a particular share class. For example, a class of shares may be
available to purchase only by retirement plans or by institutional investors.
The Fund also may waive any applicable eligibility criteria or investment
minimums at its discretion.
The Fund
or any class may be closed at any time for failure to achieve an economical
level of assets or for other reasons. Certain financial intermediaries who hold
shares on behalf of their customers impose fees when the amount of shares of a
particular class falls below a minimum threshold. To the extent that the amount
of shares falls below that threshold, the Fund reserves the right to liquidate
the shares held in accounts maintained by the financial
intermediary.
Shares of
the Fund are only available for sale in the United States and certain other
areas subject to U.S. jurisdiction and may not be offered for sale in non-U.S.
jurisdictions, except as approved by the Adviser. Investors residing outside of
the United States (except those with Air/Army Post Office (“APO”), Fleet Post
Office (“FPO”), or Diplomatic Post Office (“DPO”) addresses) generally may not
purchase shares of the Fund, even if they are U.S. citizens or lawful permanent
residents.
Eligibility
Requirements to Purchase Fund Shares
You may
open an account directly with the Fund and purchase Fund Shares on the Internet,
by telephone, or by mail. Fund Shares also are available through certain
financial intermediaries.
If Fund
Shares are purchased through a retirement account or an Investment Professional
(i.e., financial intermediary), the policies and procedures relating to these
purchases may differ from those discussed in this prospectus. Additional fees
also may apply to your investment in the Fund, including a transaction fee, if
you buy or sell shares of the Fund through a broker or other Investment
Professional. For more information on these fees, check with your Investment
Professional.
17
Investing with
the Victory Funds
Eligibility
Requirements to Purchase Institutional Shares
The
Institutional Shares may be purchased by or through:
◼
Institutional
and individual investors with a minimum investment in Institutional Shares of
$1,000,000 who purchase through certain broker-dealers or directly from the
transfer agent;
◼
Investors
who purchase through advisory programs with an approved financial intermediary
in which the financial intermediary typically charges the investor a fee based
upon the value of the account (“Advisory Programs”). Such transactions may be
subject to additional rules or requirements of the applicable Advisory
Program;
◼
Brokerage
platforms of firms that have agreements with the Distributor to offer such
shares solely when acting as an agent for the investor and the investor may be
required to pay a commission and/or other forms of compensation to the broker;
or
◼
Institutional
investors, which include retirement plans, endowments, foundations, and bank
trusts, as well as Affiliated Funds, and other persons or legal entities that
the Fund may approve from time to time.
A Fund may
allow a lower initial investment if, in the opinion of the Distributor, the
investor has the adequate intent and availability of assets to reach a future
level of investment of $1,000,000.
Eligibility
Requirements to Purchase Class A and Class C Shares
Class A
and Class C shares generally are made available through broker-dealers and other
financial intermediaries and are subject to certain sales charges.
Eligibility
Requirements to Purchase Class R6 Shares
Class R6
shares may only be purchased by or through:
◼
Endowments
and foundations;
◼
Retirement
plans, including Section 401 and 457 plans, section 403 plans sponsored by a
section 501(c)(3) organization, employer sponsored benefit plans (including
health savings accounts) and certain non-qualified deferred compensation
arrangements that operate in a similar manner to qualified plans;
◼
Advisory
Programs with an approved financial intermediary in which the financial
intermediary typically charges the investor a fee based upon the value of the
account; or
◼
Registered
investment companies.
Such
investments may be subject to additional rules or requirements of the applicable
Advisory Program.
The Class
R6 shares are not available to retail accounts, traditional or Roth IRAs, SEPs,
SARSEPs, SIMPLE IRAs, or 529 Education Savings Plans.
Eligibility
of Individuals Associated with the Funds and Fund Service Providers
Current
and retired trustees of Victory-advised funds and the officers, directors,
trustees, employees, and family members of employees of the Adviser or
Affiliated Providers are eligible to purchase the lowest expense share class
offered by the Fund. In the case of Class A shares, such purchases are not
subject to a front-end sales charge. “Affiliated Providers” are affiliates of
the Adviser and organizations that provide services to Victory Portfolios III
(the “Trust”).
|
The Fund
reserves the right to change the criteria for eligible
investors
and the
investment minimums. |
18
Investing with
the Victory Funds
Additional
Information Regarding Financial Intermediaries
Your
ability to purchase, exchange, redeem, and transfer shares will be affected by
the policies of the financial intermediary through which you do business. Some
policy differences may include: minimum investment requirements, exchange
policies, fund choices, cutoff time for investments, and trading
restrictions.
In
addition, your financial intermediary may charge a transaction or other fee for
the purchase or sale of shares of the Fund. Those charges are retained by the
financial intermediary and are not shared with us. Please contact your financial
intermediary or plan sponsor for a complete description of its
policies.
Copies of
the Fund's annual report, semi annual report, and SAI are available from your
financial intermediary or plan sponsor.
19
How to Buy
Shares
Opening
an Account With the Fund
You may
purchase shares directly from the Fund or through certain investment
professionals (e.g., financial intermediaries) as described below. If you
already have an account with us, you will not need to fill out another
application to invest in another fund, including other funds managed by the
Adviser (together with the Fund, we refer to these as the “Affiliated Funds” or
so simply as the “Funds”), unless the registration is different or we need
further information to verify your identity.
As
required by federal law, we must obtain certain information from you prior to
opening an account with us. If we are unable to verify your identity, we may
refuse to open your account, or we may open your account and take certain
actions without prior notice to you, including restricting account transactions
pending verification of your identity. You may be asked for a copy of your
driver’s license, passport, or other identifying documents as part of this
process which may be cross-referenced against a consumer report or other
electronic database. Additional information may be required to open accounts for
corporations and other entities. If we subsequently are unable to verify your
identity within a reasonable time, we may close your account or take other
appropriate action. If your account is closed for this reason, your shares will
be redeemed at the next calculated NAV. We prohibit opening accounts for certain
investors, including but not limited to, foreign financial institutions, shell
banks, correspondent accounts for foreign shell banks, and correspondent
accounts for foreign financial institutions. A “foreign shell bank” is a foreign
bank without a physical presence in any country. A “correspondent account” is an
account established for a foreign bank to receive deposits from, or to make
payments or other disbursements on behalf of, the foreign bank, or to handle
other financial transactions related to such foreign bank.
Each
shareholder named on an account with us must provide a Social Security number or
other taxpayer identification number to avoid “backup” tax withholding required
by the Internal Revenue Code of 1986, as amended (the “Code”).
Effective
Date of Purchase
Purchase,
exchange, and redemption requests are not processed until received in proper
form. “Proper form” means actual receipt of the order along with all information
and supporting documentation necessary to effect the transaction. Complete
information may include any verification or confirmation of identity that the
Fund's transfer agent or other authorized Fund agent may request. For purchase
requests, “proper form” also generally includes receipt of sufficient funds to
effect the purchase. The Fund, its transfer agent, or any authorized Fund agent
may, in its sole discretion, determine whether any particular transaction
request is in good order and reserve the right to change or waive any good order
requirement at any time. Financial intermediaries may have their own
requirements for recognizing a transaction in proper form or good order. If you
hold your shares through a financial intermediary, please contact them for
specific proper form or good order requirements.
When you
make a purchase, your purchase price will be the NAV per share next calculated
after we or the financial intermediary receive your request in “proper form.”
The Fund’s NAV per share is calculated as of the close of the regular trading
session (generally 4 p.m. Eastern time) of the New York Stock Exchange (“NYSE”)
each day it is open for trading. If we or the financial intermediary receive
your purchase request in proper form prior to that time, your purchase price
will be the NAV per share calculated for that day. If we or the financial
intermediary receive your purchase request in proper form after that time, the
purchase price will be the NAV per share calculated as of the close of the next
regular trading session of the NYSE.
20
How to Buy
Shares
The Fund
or the Fund's Distributor or transfer agent may enter into agreements with
Servicing Agents (such as financial intermediaries or plan sponsors), which hold
shares of the Fund in omnibus accounts for their customers, under which the
Servicing Agents are authorized to receive orders for shares of the Fund on the
Fund’s behalf. Under these arrangements, the Fund will be deemed to have
received an order when an authorized Servicing Agent receives the order.
Accordingly, customer orders will be priced at the Fund’s NAV per share next
calculated after they are received by an authorized Servicing Agent even though
the orders may be transmitted to the Fund by the Servicing Agent after the time
the Fund calculates its NAV.
Paying
for Your Purchase
If you
hold an account directly with the Fund and you plan to purchase shares from us
with a check, the instrument must be written in U.S. dollars and drawn on a U.S.
bank. If unclear or no instructions are provided with your check as to which
fund the purchase was intended, we will make every effort to contact you to
receive proper instructions. However, if we are unable to reach you within three
business days of receipt of your check, we will deposit the funds in an existing
or new Victory Treasury Money Market Trust account matching your existing
registration. If we cannot locate an existing account matching your
registration, the check will be returned within three business days. Initial
purchases into an account by electronic funds transfer or check may be held for
up to 30 days before any redemptions may be processed. We do not accept the
following foreign instruments: checks, money orders, traveler’s checks, or other
similar instruments. In addition, we do not accept cash or coins. If you plan to
purchase shares through a financial intermediary, please check with that
financial intermediary regarding acceptable forms of payment.
Minimum
Investments
Fund
Shares:
$3,000.
However, financial intermediaries may set different investment minimums, and the
Fund reserves the right to waive or lower purchase minimums in certain
circumstances.
Institutional
Shares:
$1
million. However, the Fund reserves the right to waive or lower purchase
minimums in certain circumstances.
Class
A and Class C Shares:
$2,500
minimum ($1,000 for IRA accounts, gift/transfer to minor accounts, and
purchases through automatic investment plans). However, financial intermediaries
may set different investment minimums, and the Fund reserves the right to waive
or lower purchase minimums in certain circumstances.
If your
account falls below the minimum investment amount, we may ask you to reestablish
the minimum investment. If you do not do so within 60 days, we may close your
account and send you the value of your account.
The
minimum investment required to open an account may be waived or lowered for
employees and immediate family members of the employee of the Adviser, the
Administrator, and their affiliates. In addition, the minimum investment
required may be waived when the Fund is purchased through an Advisory Program or
within qualified retirement plans or in other similar
circumstances.
Class
R6 Shares:
There is
no minimum initial investment amount for Class R6 shares. However, financial
intermediaries or plan recordkeepers may require plans to meet different
investment minimums.
21
How to Buy
Shares
Purchasing
Additional Shares
Fund
Shares:
$50
minimum per transaction, per account. The Fund reserves the right to waive or
lower purchase minimums in certain circumstances.
Institutional
Shares:
There is
no subsequent purchase minimum for investments in Institutional
Shares.
Class
A and Class C Shares:
$50
minimum per transaction, per account.
Class
R6 Shares:
There is
no subsequent purchase minimum for investments in Class R6 shares. However,
financial intermediaries or plan recordkeepers may require participants to meet
different subsequent purchase requirements.
Contacting
the Victory Funds
The
following features may be available to you to purchase, exchange, and redeem
shares of the Fund you hold in an account opened directly with the Fund. Once
you have an existing account, you can make additional investments at any time in
any amount (subject to any minimums) in the following ways. All website
transactions should be placed online at vcm.com.
◼
Internet
Access
Review
account information and make most account transactions. This includes making
purchases, exchanges, and redemptions; reviewing account activity; checking
balances; and more.
◼
Mobile
Access
Review
account information and make most account transactions.
◼
Telephone
Access
To access
account information and make account transactions, call toll free (800) 235-8396
during normal business hours to speak with a member service
representative.
◼
Mail
If you
would like to make a purchase or request a redemption by mail, send your written
instructions to:
Regular
Mail:
Victory Funds
P.O. Box 182593
Columbus, OH 43218-2593
Victory Funds
P.O. Box 182593
Columbus, OH 43218-2593
Overnight
Mail:
Use the following address ONLY for overnight packages:
Victory Funds
c/o FIS TA Operations
4249 Easton Way, Suite 400
Columbus, OH 43219
PHONE: (800) 235-8396
Use the following address ONLY for overnight packages:
Victory Funds
c/o FIS TA Operations
4249 Easton Way, Suite 400
Columbus, OH 43219
PHONE: (800) 235-8396
22
How to Buy
Shares
◼
Bank
Wire
To add to
your account or request a redemption by bank wire, visit the vcm.com website or
call (800) 235-8396 for instructions. This helps to ensure that your account
will be credited or debited promptly and correctly. Any commercial bank can
transfer same-day funds by wire.
Although
the transfer agent currently does not charge you for receiving same-day funds,
it reserves the right to charge for this service in the future. Your bank may
charge you for wiring same-day funds.
◼
Electronic
Funds Transfer
Additional
purchases on a regular basis may be deducted electronically from a bank account.
To sign up for these services when opening an account, visit the vcm.com website
or call (800) 235-8396 for assistance. Currently, the Fund does not charge a fee
for electronic transfers, but it reserves the right to charge for this service
in the future. Your originating bank may charge a fee for electronic
transfers.
23
How to Exchange
Shares and Class Conversions
|
There may be
limits on the ability to exchange between certain Victory
Funds.
You can
obtain a list of Victory Funds available for exchange by
calling
(800)
235-8396 or by visiting
VictoryFunds.com |
The shares
of any class of a Fund may be exchanged for the shares of any other class
offered by the Fund or the same class, or any other class, of any other Victory
Funds, either through your investment professional or directly through the Fund,
subject to the conditions described below:
◼
Exchanges
are subject to any CDSC, minimum investment limitation, or eligibility
requirements described in the applicable prospectus and SAI. You may be required
to provide sufficient information to establish eligibility to exchange into a
new share class.
◼
To
exchange between Victory Funds, the other Victory Fund you wish to exchange into
must be eligible for exchange with your Fund.
◼
Shares of
the Victory Fund selected for exchange must be available for sale in your state
of residence.
If you
have questions about these, or any of the Fund’s other exchange policies, please
consult your customer service representative or your Investment Professional
before requesting an exchange.
Before
exchanging, you should read the prospectus of the Fund you wish to exchange
into, which may be subject to different risks, fees, and expenses.
Other
Exchange Rules You Should Know
If you
have opened an account directly with the Fund, you may make exchanges on
vcm.com. After we receive the exchange orders, the Fund’s transfer agent will
simultaneously process exchange redemptions and purchases at the share prices
next calculated pursuant to the procedures set forth herein. See Effective
Date of Purchase for
additional information. The investment minimums applicable to share purchases
also apply to exchanges.
If you
hold shares of the Fund in an account with a financial intermediary or plan
sponsor, the policies and procedures on an exchange may differ from those
discussed in this prospectus. Additional fees also may apply to your investment
in the Fund, including a transaction fee, if you buy, sell, or exchange shares
of the Fund through a broker or other Investment Professional. For more
information on these fees, check with your Investment Professional.
An
exchange of Fund shares for shares of another Victory Fund constitutes a sale
for tax purposes unless the exchange is made within an IRA or other tax-deferred
account.
The Fund
may refuse any exchange purchase request if the Adviser determines that the
request is associated with a market timing strategy. The Fund may terminate or
modify the exchange privilege at any time upon 60 days’ notice to
shareholders.
For
information on how to exchange shares of a Fund that were purchased through your
employer’s retirement plan, including any restrictions and charges that the plan
may impose, please consult your employer.
Class
C Share Conversion
Class C
shares of the Fund will automatically convert to Class A shares in the month
following the eight-year anniversary date of the purchase of the Class C shares.
Your financial intermediary may have a conversion schedule that is shorter than
eight years. Class C conversions will be effected at the relative NAV of each
such class without the imposition of any sales charge, fee or other
charge.
24
How to Exchange
Shares and Class Conversions
You may be
able to voluntarily convert your Class C shares before the stated anniversary to
a different share class of the same Fund that has a lower total annual operating
expense ratio provided certain conditions are met. This voluntary conversion
feature is intended for shares held through a financial intermediary offering a
fee-based or wrap fee program that has an agreement with the Adviser or the
Distributor specific for this purpose. Generally, Class C shares are not
eligible for conversion until the applicable CDSC period has expired. Please
contact your financial intermediary for additional information.
Other
Conversions
Under
certain circumstances, we may convert your (i) Institutional Shares to Fund
Shares and (ii) Class A shares to Fund Shares or Institutional Shares, as
applicable. The Fund will notify you before any such conversion
occurs.
The Fund
also may provide for other conversion privileges from time to time under which a
shareholder of the Fund may convert shares into another class of shares of the
same Fund under certain circumstances, subject to approval by the Fund’s
officers. For example, subject to approval by the Fund’s officers, a shareholder
may convert shares of one class of the Fund held through an eligible advisory
program into shares of another class of the Fund (if available) with a lower
expense ratio, provided that following the conversion the shareholder meets
applicable eligibility requirements for the class into which the shareholder
seeks to convert (as described in this prospectus).
Pricing
When a
conversion occurs, you receive shares of one class of a fund for shares of
another class of the same fund. At the time of conversion, the dollar value of
the “new” shares you receive equals the dollar value of the “old” shares that
were converted. In other words, the conversion has no effect on the value of
your investment in the fund at the time of the conversion. However, the number
of shares you own after the conversion may be greater than or less than the
number of shares you owned before the conversion, depending on the NAVs per
share of the two share classes. A conversion between share classes of the same
fund is a non-taxable event.
Conversions
are not subject to the Fund's restrictions on short-term trading activity
discussed under Excessive
Short-Term Trading.
25
How to Sell
Shares
Shareholders
will receive a redemption price of the NAV per share next calculated after we
receive the redemption request in “proper form” as provided under Effective
Date of Purchase. If we
receive the redemption request in proper form prior to the close of the NYSE’s
regular trading session (generally 4 p.m. Eastern time), the redemption price
will be the NAV per share calculated for that day. If we receive the redemption
request after that time, the redemption price will be the NAV per share
calculated as of the close of the next regular trading session of the
NYSE.
Under
certain circumstances and when deemed to be in the Fund’s best interests,
proceeds may not be sent to intermediaries for up to seven days after receipt of
the redemption order.
|
There are a
number of convenient ways to sell your
shares. |
If you
have a direct account with the Fund, you may redeem Fund Shares on the Internet,
by telephone, or by mail on any day the NAV per share is calculated. You can use
the same mailing addresses listed under the section titled How
to Buy Shares.
◼
By
Internet
Log on to
your account using vcm.com and place your redemption request.
◼
By
Telephone
Call toll
free (800) 235-8396 during normal business hours. You have the following options
for receiving your redemption proceeds:
◼
Mail a
check to the address of record;
◼
Wire funds
to a previously designated domestic financial institutional;
◼
Mail a
check to a previously designated alternate address; or
◼
Electronically
transfer your redemption via EFT to a previously designated domestic financial
institution.
The Fund
has undertaken certain authentication procedures regarding telephone
transactions and will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. Before any discussion regarding your
account, we will obtain certain information from you to verify your identity.
Additionally, your telephone calls may be recorded or monitored, and
confirmations of account transactions are sent to the address of record or by
electronic delivery to your designated e-mail address.
◼
By
Mail
Use the
regular U.S. mail or overnight mail address to redeem shares. Send us a letter
of instruction indicating your Fund account number, amount of redemption, and
where to send the proceeds.
◼
By
Wire
If you
want to receive your proceeds by wire, you must establish a Fund account that
will accommodate wire transactions. If you call before the close of trading on
the NYE, your funds will be wired on the next business day.
◼
By
Electronic Funds Transfer (“EFT”)
Normally,
your redemptions will be processed on the same day, but will be processed on the
next day if received after close of trading on the NYSE. It will be transferred
by EFT as long as the transfer is to a domestic bank.
Additional
Information About Redemptions
The Fund
may elect to suspend the redemption of shares or postpone the date of payment in
limited circumstances (e.g., if the NYSE is closed or when permitted by order of
the SEC).
26
How to Sell
Shares
Under
normal market conditions, the Fund typically expects to meet redemption requests
by paying out proceeds from cash or cash equivalent portfolio holdings, or by
selling portfolio holdings. Under deteriorating market conditions or market
stress, the Fund also may borrow to meet redemption requests. The Fund and the
other Affiliated Funds are limited as to the amount that each may individually
and collectively borrow in these circumstances. As a result, borrowings
available to the Fund may be insufficient to satisfy Fund redemption requests.
In addition, the Fund reserves the right to honor redemption orders wholly or
partly with in-kind distributions of Fund portfolio securities instead of
cash.
Fund
Shares:
If you
hold Fund Shares through an account directly with the Fund, the Fund typically
expects to pay out redemption proceeds on the next business day after your order
is received in proper form; however, it may take up to seven days to send your
proceeds.
Payment
for redemption of shares purchased by electronic funds transfer (“EFT”) or check
will be sent after the EFT or check has cleared, which could take up to 30 days
from the initial purchase date into the Fund and, for any subsequent purchases
into the Fund, seven business days from the purchase date.
If you
choose to have your redemption proceeds mailed to you and either the U.S. Postal
Service is unable to deliver the distribution check to you or the check remains
outstanding for more than six months, the Fund reserves the right to reinvest
the check in shares of the Fund at its then current NAV until you give the Fund
different instructions. No interest will accrue on amounts represented by
uncashed redemption checks.
If you
hold Fund Shares with a financial intermediary, please contact your financial
intermediary regarding redemption policies. Normally, the Fund transmits
proceeds to intermediaries for redemption orders that are received in proper
form on the next business day after receipt.
Institutional
Shares:
Institutional
Shares typically expect to pay out redemption proceeds on the next business day
after your order is received in proper form; however, it may take up to seven
days to send your proceeds.
Class
A and Class C Shares:
Check with
your financial intermediary for its policies on redemptions. Class A and Class C
shares purchased through a financial intermediary should be redeemed through the
financial intermediary. The Fund typically expects to transmit proceeds to
intermediaries for redemption orders received in proper form on the next
business day after receipt.
Class
R6 Shares:
Class R6
shares may be purchased or redeemed through employer-sponsored retirement plans
where a financial intermediary provides retirement recordkeeping services to
plan participants. Check with your financial intermediary or plan sponsor for
its policies on redemptions. Normally, the Fund transmits proceeds to
intermediaries and eligible institutional investors (foundations and endowments)
for redemption orders received in proper form on the next business day after
receipt.
For
federal income tax purposes, a redemption of shares of the Fund is a taxable
event, upon which you may recognize a capital gain or loss (unless you hold the
shares of the Fund in a tax-deferred account or are a tax-exempt investor). A
capital gain or loss is based on the difference between your basis in the
redeemed shares and the proceeds you receive upon their redemption. See
Important
Information About Taxes for
information regarding basis election and reporting.
27
Information About
Fees
The Fund
is comprised of multiple classes of shares. Each class shares the Fund's
investment objective and investment portfolio. The classes have different fees,
expenses, and/or minimum investment requirements. The difference in the fee
structures between the classes is primarily the result of their separate
arrangements for shareholder and distribution services and performance fee
arrangements. It is not the result of any difference in the base investment
management, custodial fee rate schedules, or other expenses related to the
management of the Fund's assets, which do not vary by class. Shareholders of R6
Shares do not require the same level of shareholder services from the Fund as
shareholders of the other classes. As a result, the R6 shares pay lower fees.
Different fees and expenses will affect performance. Different fees and expenses
will affect performance.
Except as
described below, the share classes have identical voting, dividend, liquidation,
and other rights, preferences, terms, and conditions. The primary differences
between the classes are: (a) each class may be subject to different expenses
specific to that class; (b) each class has a different identifying designation
or name; (c) each class has exclusive voting rights with respect to matters
solely affecting that class; and (d) each class may have different purchase,
exchange, and redemption privileges.
Because
Rule 12b-1 fees are paid out of the Fund’s assets and on an ongoing basis, over
time these fees will increase the cost of your investment and may cost you more
than paying other types of sales charges. For additional information about the
Rule 12b-1 Plan and its terms, see Distribution
and Service Plans in the
SAI.
Payments
to Financial Intermediaries
Certain
financial intermediaries perform recordkeeping, networking, administrative,
sub-transfer agency, and shareholder services for their clients with respect to
their investments in the Fund that otherwise would be performed by the Fund’s
transfer agent or administrator and shareholder servicing agent.
In some
circumstances, we, or one of our affiliates, will pay a financial intermediary
for these services out of our own resources, including any profits from the
advisory fees the Adviser receives from the Funds. In other circumstances, the
Fund will pay a fee to the financial intermediary for performing those services.
The Fund will not pay financial intermediaries more than it would pay its direct
service providers for transfer agency, administration, and/or shareholder
services. In cases where intermediary fees are higher due to differences in the
services being provided or other factors, the additional amounts will be paid by
us and/or the Distributor. In addition, these payments generally are based on
either (1) a percentage of the average daily net assets of Fund shareholders’
accounts serviced by a financial intermediary or (2) a fixed dollar amount for
each account serviced by a financial intermediary. The aggregate amount of these
payments may be substantial.
In
addition, we and the Fund's Distributor may make payments to intermediaries for
various additional services, other expenses, and/or the financial
intermediaries’ distribution of shares of the Fund. Such payments are sometimes
referred to as “revenue sharing” and generally are negotiated with a financial
intermediary on the basis of such factors as the number or value of shares of
the Fund that the financial intermediary sells or may sell; the value of client
assets invested; or the type and nature of services or support furnished by the
financial intermediary.
We (and
our affiliates) also may pay fixed fees for the listing of a Fund on a
broker-dealer’s or financial intermediary’s system. Such payments are not
considered to be revenue sharing payments.
The Fund
does not pay any service, distribution, or administrative fees to financial
intermediaries on R6 Shares.
28
Distributions and
Taxes
Dividends
and Other Distributions
As a
shareholder, you are entitled to your share of net income and capital gains on
the Fund’s investments. The Fund passes its earnings along to investors in the
form of dividends. Dividends paid by the Fund represent the net income from
dividends and interest earned on investments after expenses. The Fund will
distribute short-term gains, as necessary; and if the Fund makes a long-term
capital gain distribution, it normally is paid once a year in
December.
|
Buying
a dividend. You should
check the Fund's distribution schedule before you invest.
If you buy
shares of the Fund shortly before it makes a distribution,
some of your
investment may come back to you as a taxable
distribution. |
Distributions
from net investment income (“dividends”) are accrued daily and distributed on
the last business day of each month. Dividends begin accruing on shares on the
day payment is received and continue to accrue through either the settlement
date or the day after the settlement date of a redemption, depending on the type
of account.
The Fund
may make additional distributions to shareholders, or may not make a
distribution, when considered appropriate or necessary. For example, the Fund
could make one or more additional distributions to avoid the imposition of any
federal income or excise taxes, or it may not make a distribution to limit
returns of capital.
Any
capital gain distributions made by the Fund will reduce the NAV per share of the
class by the amount of the distribution on the ex-distribution date. You should
consider carefully the effects of purchasing shares of the Fund shortly before
any distribution (as explained below under Important
Information About Taxes). Some or
all distributions may be subject to taxes.
Distributions
can be received in one of the following ways. Please check with your Investment
Professional if you are unsure of which option is right for you.
Reinvestment
Option
The Fund
automatically reinvests all income dividends and capital gain distributions, if
any, on a share class in additional shares of that class unless you request to
receive those distributions in cash by way of check or by way of electronic
funds transfer.
Directed
Bank Account Option
When you
choose to receive cash dividends by way of electronic funds transfer to your
bank checking or savings account, we will send them to you after the
distribution date each month. The share price will be the NAV per share of the
class computed on the ex-distribution date. Any distribution made by the Fund
will reduce the NAV per share of the class by the amount of the distribution on
the ex-distribution date.
29
Distributions and
Taxes
Cash
Option
If you
elect to receive your distributions by check, and the distribution amount is $25
or less, the amount will automatically be reinvested in the Fund. Otherwise, a
check will be mailed to you no later than seven days after the dividend payment
date. If you choose to have your distribution proceeds mailed to you and either
the U.S. Postal Service is unable to deliver the distribution check to you or
the check remains outstanding for at least six months, the distribution option
on your account will default to the reinvestment option as described above. The
Fund reserves the right to reinvest the check in shares of the Fund at its then
current NAV until you give the Fund different instructions. No interest will
accrue on amounts represented by uncashed distribution checks. The Fund will
invest in your account any dividend or other distribution payment returned to
the Fund by your financial institution at the current NAV per
share.
Income
Earned Option
You can
automatically reinvest your dividends in additional Fund shares and have your
capital gains paid in cash, or reinvest capital gains and have your dividends
paid in cash.
Directed
Distributions Option
If you own
shares in more than one Victory Mutual Fund, you may direct that dividends
and/or capital gain distributions received from one Victory Mutual Fund be used
to purchase shares automatically in the same class of another Victory Mutual
Fund.
Important
Information About Taxes
|
The
tax information in this Prospectus is provided as general information.
You
should review
the more detailed discussion of federal income tax
considerations
in the SAI
and consult your tax adviser regarding the federal, state, local,
or
foreign tax
consequences resulting from your investment in the
Fund. |
Treatment
of the Fund
The Fund,
which is treated as a separate corporation for federal tax purposes, has
qualified for each past taxable year, and intends to continue to qualify, for
treatment as a “regulated investment company” under the Internal Revenue Code of
1986, as amended (the “Code”). By doing so, the Fund (but not its shareholders)
is relieved of federal income tax on the part of its investment company taxable
income and net capital gain if any, that it distributes to its
shareholders.
Shareholder
Taxation
◼
Distributions
that shareholders receive from the Fund generally are subject to federal income
tax and may be subject to state and/or local taxes.
◼
Dividends
and distributions of net short-term gains are taxable to you as ordinary income,
whether received in cash or reinvested in additional shares of the Fund or
another Victory Mutual Fund.
◼
A portion
of the Fund’s dividends (which is not expected to be substantial) may qualify
for (1) the 50% dividends-received deduction available to corporations, and (2)
the lower maximum federal income tax rates applicable to “qualified dividend
income” of individuals and certain other non-corporate shareholders (each, an
“individual shareholder”) who satisfy certain holding period and other
restrictions with respect to their shares of the Fund—a maximum of 15% for a
single shareholder with taxable income not exceeding $518,900 ($583,750 for
married shareholders filing jointly) and 20% for those individual shareholders
with taxable income exceeding those respective amounts (which are effective for
2024 and will be adjusted for inflation annually thereafter).
30
Distributions and
Taxes
◼
Regardless
of the length of time you have held shares of the Fund, distributions of net
capital gains that the Fund realizes are taxable to you as long-term capital
gains, whether received in cash or reinvested in additional shares of the Fund,
and are taxed to individual shareholders at the 15% and 20% tax rates described
above.
◼
You may
realize a capital gain or loss for federal income tax purposes on a redemption
or an exchange (which is treated like a redemption for those purposes) of shares
of the Fund. Your gain or loss is based on the difference, if any, between your
basis in the redeemed (or exchanged) shares and the redemption proceeds (or the
aggregate NAV of the shares of the fund into which you exchange) you receive.
Any capital gain an individual shareholder recognizes on a redemption or
exchange of his or her shares of the Fund that have been held for more than one
year will qualify for the 15% and 20% tax rates.
◼
An
individual shareholder is subject to a 3.8% federal tax on the lesser of (1) the
individual’s “net investment income,” which generally includes taxable
distributions the Fund pays and net gains realized on the redemption or exchange
of shares of the Fund, or (2) the excess of his or her “modified adjusted gross
income” over $200,000 (or $250,000 if married and filing jointly). This tax is
in addition to any other taxes due on that income.
◼
Your basis
in shares of the Fund that you acquired after December 31, 2011, (“Covered
Shares”) will be determined in accordance with the Fund’s default method, which
is average basis, unless you affirmatively elect in writing (which may be
electronic) to use a different acceptable basis determination method, such as a
specific identification method. The basis determination method you elect (or the
default method) may not be changed with respect to a redemption of Covered
Shares after the settlement date of the redemption.
◼
You should
consult with your tax adviser to determine the best IRS-accepted basis
determination method.
◼
The Fund
may provide estimated capital gain distribution information through the website
at vcm.com.
◼
Tax
statements will be mailed from the Fund by mid-February showing the amounts and
tax status of distributions made to you in the prior calendar
year.
◼
Because
your tax treatment depends on your purchase price and tax position, you should
keep your regular account statements for use in determining your
tax.
◼
You should
review the more detailed discussion of federal income tax considerations in the
SAI and consult your tax adviser regarding the federal, state, local, or foreign
tax consequences resulting from your investment in the Fund.
Taxpayer
Identification and Backup Withholding
◼
Each
shareholder named on an account with us must provide a Social Security number or
other taxpayer identification number to avoid “backup” tax withholding required
by the Code.
◼
Federal
law requires the Fund to withhold and remit to the U.S. Treasury 24% of (1)
dividends, capital gain distributions, and proceeds of redemptions, regardless
of the extent to which gain or loss may be realized, otherwise payable to any
individual shareholder who fails to furnish the Fund with a correct taxpayer
identification number and (2) those dividends and distributions otherwise
payable to any individual shareholder who underreports dividend or interest
income or fails to certify that he or she is not subject to backup
withholding.
◼
Backup
withholding is not an additional tax, and any amounts so withheld may be
credited against a shareholder’s federal income tax liability or refunded. To
avoid this withholding, you must certify on your application, or on a separate
IRS Form W-9 supplied by the Fund's transfer agent, that your taxpayer
identification number is correct and you currently are not subject to backup
withholding.
31
Important Fund
Policies and Other Information
Share
Price Calculation
The price
at which you purchase and redeem shares of the Fund is equal to the NAV per
share calculated on the effective date of the purchase or redemption. The NAV
per share is calculated by adding the value of the Fund’s assets (i.e., the
value of its investments and other assets), deducting liabilities, and dividing
by the number of shares outstanding. Shares of the Fund may be purchased and
sold at the NAV per share without a sales charge. The Fund’s NAV per share is
calculated as of the close of the NYSE (generally 4 p.m. Eastern time) each day
that the NYSE is open for regular trading. The NYSE is closed on most national
holidays and Good Friday.
|
NAV= |
Total
Assets - Liabilities |
|
Number of
Shares Outstanding |
Valuation
of Securities
The
Adviser, acting as the Valuation Designee, has established a Pricing and
Liquidity Committee (the “Committee”); and subject to the Board’s oversight, the
Committee administers and oversees the Fund's valuation policies and procedures,
which are approved by the Board. Among other things, these policies and
procedures allow the Fund to utilize independent pricing services, quotations
from securities dealers, and a wide variety of sources and information to
establish and adjust the fair value of securities as events occur and
circumstances warrant.
Debt
securities are valued each business day by a pricing service (the “Service”)
approved by the Adviser as Valuation Designee. The Service uses an evaluated bid
or the last sales price to price securities when, in the Service’s judgment,
these prices are readily available and are representative of the securities’
market values. For many securities, such prices are not readily available. The
Service generally prices these securities based on methods that include
consideration of yields or prices of securities of comparable quality, coupon,
maturity, and type; indications as to values from dealers in securities; and
general market conditions.
Short-term
debt securities with original or remaining maturities of 60 days or less
generally may be valued at amortized cost, provided that amortized cost
represents the fair value of such securities.
Repurchase
agreements are valued at cost.
In the
event that price quotations or valuations are not readily available, are not
reflective of market value, or a significant event has been recognized in
relation to a security or class of securities, the securities are valued in good
faith, at fair value, by the Committee in accordance with valuation procedures
approved by the Adviser as Valuation Designee. The effect of fair value pricing
is that securities may not be priced on the basis of quotations from the primary
market in which they are traded, and the actual price realized from the sale of
a security may differ materially from the fair value price. Valuing these
securities at fair value is intended to cause the Fund’s NAV to be more reliable
than it otherwise would be.
Fair value
methods used by the Fund include, but are not limited to, obtaining market
quotations from secondary pricing services, broker-dealers, other pricing
services, or widely used quotation systems. General factors considered in
determining the fair value of securities include fundamental analytical data,
the nature and duration of any restrictions on disposition of the securities,
evaluation of credit quality, and an evaluation of the forces that influenced
the market in which the securities are purchased and sold.
For
additional information on how securities are valued, see Valuation
of Securities in the
Fund's SAI.
32
Important Fund
Policies and Other Information
Customer
Identification Program
To help
the government fight the funding of terrorism and money laundering activities,
federal law requires all financial institutions to obtain, verify, and record
information that identifies each person who opens a new account, and to
determine whether such person’s name appears on government lists of known or
suspected terrorists and terrorist organizations.
As a
result, the Fund must obtain the following information for each person who opens
a new account:
◼
Name;
◼
Date of
birth (for individuals);
◼
Residential
or business street address (although post office boxes are still permitted for
mailing); and
◼
Social
security number, taxpayer identification number, or other identifying
number.
You may
also be asked for a copy of your driver’s license, passport, or other
identifying document in order to verify your identity. In addition, it may be
necessary to verify your identity by cross-referencing your identification
information with a consumer report or other electronic database. Additional
information may be required to open accounts for corporations and other
entities. Federal law prohibits the Fund and other financial institutions from
opening a new account unless they receive the minimum identifying information
listed above. After an account is opened, the Fund may restrict your ability to
purchase additional shares until your identity is verified. The Fund may close
your account or take other appropriate action if it is unable to verify your
identity within a reasonable time. If your account is closed for this reason,
your shares will be redeemed at the NAV next calculated after the account is
closed.
Statements
and Reports
You will
receive a periodic statement reflecting any transactions that affect the balance
or registration of Fund shares in your account. You will receive a confirmation
after any purchase, exchange, or redemption. If your account has been set up by
an Investment Professional, Fund activity will be detailed in that account’s
statements. Share certificates are not issued. Twice a year, you will receive a
financial report of the Fund. By February 15th of each
year, you will be mailed an IRS form reporting distributions for the previous
year, which also will be filed with the IRS.
The Fund
will report information to you annually concerning the tax status of your
dividends and other distributions for federal income tax purposes. In addition,
the Fund (or its administrative agent) must report to the IRS and furnish to its
shareholders the basis information for Covered Shares and indicate whether they
had a short-term (one year or less) or long-term (more than one year) holding
period. You should consult with your tax adviser to obtain more information
about how the basis reporting law applies to you.
Shareholder
Communications
In order
to eliminate duplicate mailings to an address at which two or more shareholders
with the same last name reside, each household will receive a single copy of the
Fund’s most recent shareholder reports, proxy statements, prospectuses, and
their supplements, unless you have instructed us to the contrary. This
eliminates duplicate copies and saves paper and postage costs for the Fund.
However, if you would like to receive individual copies, please contact us; and
they will be delivered promptly.
33
Important Fund
Policies and Other Information
Portfolio
Holdings Disclosure
A
description of the Fund's policies and procedures with respect to the disclosure
of the Fund's portfolio securities is available in the Fund's SAI, which is
available upon request and on the Fund’s website at
VictoryFunds.com.
IRA
Distribution Fee
The Fund
may apply a distribution fee to all full IRA distributions, except for those due
to death, disability, or divorce. Partial IRA distributions are not charged a
distribution fee.
Account
Balance
Victory
Capital Transfer Agency, Inc., the Fund's transfer agent, may assess annually a
small balance account fee of $12 to each shareholder account with a balance of
less than $2,000 at the time of assessment. Accounts exempt from the fee
include: (1) any account regularly purchasing additional shares each month
through an automatic investment plan; (2) any UGMA/UTMA account; (3) all
(non-IRA) money market fund accounts; (4) any account whose registered owner has
an aggregate balance of $50,000 or more invested in Affiliated Funds; and (5)
all IRAs (for the first year the account is open). The fee is not currently
being assessed. The Fund will provide advance notice in the event it is assessed
in the future.
Excessive
Short-Term Trading
The Funds
generally are not intended as short-term investment vehicles (except for the
money market funds, Victory Short-Term Bond Fund, Victory Ultra Short-Term Bond
Fund, and Victory Tax Exempt Short-Term Fund). Some investors try to profit by
using excessive short-term trading practices involving mutual fund shares,
frequently referred to as “market timing.”
Excessive
short-term trading activity can disrupt the efficient management of a fund and
raise its transaction costs by forcing portfolio managers to first buy and then
sell portfolio securities in response to a large investment or redemption by
short-term traders. While there is no assurance that the Funds can deter all
excessive and short-term trading, the Board has adopted the following policies
(except for the money market funds, Victory Short-Term Bond Fund, Victory Ultra
Short-Term Bond Fund, and Victory Tax Exempt Short-Term Fund). These policies
are designed to deter disruptive, excessive short-term trading without
needlessly penalizing bona fide investors.
To deter
such trading activities, the Funds’ policies and procedures state
that:
◼
Each Fund
reserves the right to reject any purchase order, including an exchange, that it
regards as disruptive to the efficient management of the particular
fund.
◼
Each Fund
may use a fair value pricing service or other model to assist in establishing
the current value of foreign securities held by the Fund. Fair value pricing is
used to adjust for “stale pricing” that may occur between the close of certain
foreign exchanges or markets and the time when the Fund calculates its NAV per
share. The use of fair value pricing is intended to deter investors who may be
trying to take advantage of time-zone differences in the valuation of foreign
securities and to prevent dilution to long-term investors. Fair value pricing of
a foreign security can result in a Fund using a price that is higher or lower
than the closing price of a foreign security for purposes of calculating a
Fund’s NAV.
The
Funds’ Right to Reject Purchase and Exchange Orders and Limit Trading in
Accounts
The Funds’
main safeguard against excessive short-term trading is their right to reject
purchase or exchange orders if in the best interest of the affected fund. In
exercising this discretion to reject purchase and exchange orders, the Funds
deem that certain excessive short-term trading activities
34
Important Fund
Policies and Other Information
are not in
the best interest of the fund because such activities can hamper the efficient
management of the fund. Generally, persons with a history of three short-term
transactions within 90 days or less are suspected of market timing and the
shareholder’s trading privileges (other than redemption of Fund shares) will be
suspended. The Funds also reserve the right to restrict future purchases or
exchanges if an investor is classified as engaged in other patterns of excessive
short-term trading, including after one large disruptive purchase and redemption
or exchange. Finally, each Fund reserves the right to reject any other purchase
or exchange order in other situations that do not involve excessive short-term
trading activities if in the best interest of the Fund. For this purpose, a
short-term transaction is a purchase or redemption of a Fund and, as applicable,
a subsequent redemption or purchase of the same Fund, or an exchange of all or
part of that same Fund.
The
following transactions are exempt from the excessive short-term trading activity
policies described above:
◼
Transactions
in the money market funds, Victory Short-Term Bond Fund, Victory Ultra
Short-Term Bond Fund, and Victory Tax Exempt Short-Term Fund;
◼
Purchases
and sales pursuant to automatic investment or withdrawal
plans;
◼
Purchases
and sales made through USAA 529 Education Savings Plan;
◼
Purchases
and sales made in certain separately managed accounts in wrap fee
programs;
◼
Purchases
and sales by the Victory Target Retirement Funds, Victory Cornerstone
Conservative Fund, and/or Victory Cornerstone Equity Fund;
and
◼
Other
transactions that are not motivated by short-term trading considerations if they
are approved by transfer agent management personnel and are not disruptive to a
fund.
If a
person is classified as having engaged in excessive short-term trading, the
remedy will depend upon the trading activities of the investor in the account
and related accounts and its disruptive effect, and can include warnings to
cease such activity and/or restrictions or termination of trading privileges in
a particular Fund or all of the Funds.
The Funds
rely on the transfer agent to review trading activity for excessive short-term
trading. There can be no assurance, however, that its monitoring activities will
successfully detect or prevent all excessive short-term trading. The Funds or
the transfer agent may exclude transactions below a certain dollar amount from
monitoring and may change that dollar amount from time to time.
The Funds
seek to apply these policies and procedures uniformly to all investors; however,
some investors purchase shares of a Fund through financial intermediaries that
establish omnibus accounts to invest in the Funds for their clients and submit
net orders to purchase or redeem shares after combining their client orders. The
Funds subject to the short-term trading policies generally treat these omnibus
accounts as an individual investor and will apply the short-term trading
policies to the net purchases and sales submitted by the omnibus account unless
the Funds or their transfer agent have entered into an agreement requiring the
omnibus account to submit the underlying trading information for their clients
upon our request and/or monitor for excessive trading. For those omnibus
accounts for which we have entered into agreements to monitor excessive trading
or provide underlying trade information, the financial intermediary or Funds
will review net activity in these omnibus accounts for activity that indicates
potential, excessive short-term trading activity. If we detect suspicious
trading activity at the omnibus account level, we will request underlying
trading information and review the underlying trading activity to identify
individual accounts engaged in excessive short-term trading activity. We will
instruct the omnibus account to restrict, limit, or terminate trading privileges
in a particular fund for individual accounts identified as engaging in excessive
short-term trading through these omnibus accounts.
We also
may rely on the financial intermediary to review for and identify underlying
trading activity for individual accounts engaged in excessive short-term trading
activity, and to restrict, limit, or terminate trading privileges if the
financial intermediary’s policies are determined by us to be at least
35
Important Fund
Policies and Other Information
as
stringent as the Funds’ policy. For shares purchased through financial
intermediaries there may be additional or more restrictive policies. You may
wish to contact your financial intermediary to determine the policies applicable
to your account.
Because of
the increased costs to review underlying trading information, the Funds will not
enter into agreements with every financial intermediary that operates an omnibus
account. The Funds or their transfer agent could decide to enter into such
contracts with financial intermediaries for all funds or particular funds and
can terminate such agreements at any time.
Other
Fund Rights
The Fund
reserves the right to:
◼
Reject or
restrict purchase or exchange orders when in the best interest of the
Fund;
◼
Limit or
discontinue the offering of shares of the Fund without notice to the
shareholders;
◼
Calculate
the NAV per share and accept purchase, exchange, and redemption orders on a
business day that the NYSE is closed;
◼
Redeem
some or all of its shares in kind when in the best interest of the
Fund;
◼
Require a
signature guarantee for transactions or changes in account information in those
instances where the appropriateness of a signature authorization is in question
(the SAI contains information on acceptable guarantors);
◼
Redeem an
account with less than $500, with certain limitations;
◼
Restrict
or liquidate an account when necessary or appropriate to comply with federal
law; and
◼
Discontinue
or otherwise limit the opening of accounts with us.
Additional
Information
The Trust
enters into contractual arrangements with various parties, including, among
others, the Fund's adviser, transfer agent, and distributor, who provide
services to the Fund. Shareholders are not parties to, or intended (or
“third-party”) beneficiaries of, any of those contractual arrangements, and
those contractual arrangements are not intended to create in any individual
shareholder or group of shareholders any right to enforce them against the
service providers or to seek any remedy under them against the service
providers, either directly or on behalf of the Trust or the Fund.
This
prospectus provides information concerning the Trust and the Fund that you
should consider in determining whether to purchase shares of the Fund. Neither
this prospectus nor the related SAI is intended to be, or should be read to give
rise to, an agreement or contract between the Trust or the Fund and any
investor, or to give rise to any rights in any shareholder or other person other
than any rights under federal or state law that may not be
waived.
36
Financial
Highlights
The
following financial highlights tables are intended to help you understand the
Fund's and relevant share classes' financial performance for the past five
years. Certain information reflects financial results for a single share. The
total returns in the tables represent the rate that an investor would have
earned (or lost) on an investment in the Fund Shares, Institutional Shares,
and R6 Shares (assuming reinvestment of all income dividends and capital gain
distributions).
The
information has been derived from financial statements audited by Ernst &
Young LLP, an independent registered public accounting firm, whose report, along
with the Fund's financial statements, are included in the Fund’s annual report
to shareholders, which is available upon request.
37
Victory
Government Securities Fund
|
|
Fund
Shares | |||||
|
|
Year
Ended
2/29/24 |
9
Months
Ended
2/28/23(a) |
Year
Ended
5/31/22 |
Year
Ended
5/31/21 |
Year
Ended
5/31/20 |
Year
Ended
5/31/19 |
|
Net
Asset Value, Beginning of
Period |
$8.76 |
$9.19 |
$10.03 |
$10.23 |
$9.84 |
$9.55 |
|
Investment
Activities: |
|
|
|
|
|
|
|
Net
investment income (loss) |
0.28(b) |
0.15(b) |
0.15(b) |
0.21(b) |
0.24(b) |
0.23 |
|
Net
realized and unrealized
gains
(losses) |
(0.02) |
(0.42) |
(0.71) |
(0.15) |
0.39 |
0.29 |
|
Total
from Investment
Activities |
0.26 |
(0.27) |
(0.56) |
0.06 |
0.63 |
0.52 |
|
Distributions
to Shareholders
from: |
|
|
|
|
|
|
|
Net
investment income |
(0.29) |
(0.16) |
(0.17) |
(0.22) |
(0.24) |
(0.23) |
|
Net
realized gains |
— |
— |
(0.11) |
(0.04) |
— |
— |
|
Total
Distributions |
(0.29) |
(0.16) |
(0.28) |
(0.26) |
(0.24) |
(0.23) |
|
Net
Asset Value, End of Period |
$8.73 |
$8.76 |
$9.19 |
$10.03 |
$10.23 |
$9.84 |
|
Total
Return(c),(d) |
2.96% |
(3.00)% |
(5.71)% |
0.56% |
6.49% |
5.56% |
|
Ratios
to Average Net Assets: |
|
|
|
|
|
|
|
Net
Expenses(e),(f),(g),(h) |
0.53% |
0.53% |
0.42% |
0.41% |
0.43% |
0.47% |
|
Net
Investment Income
(Loss)(e) |
3.17% |
2.20% |
1.56% |
2.04% |
2.36% |
2.42% |
|
Gross
Expenses(e),(h) |
0.53% |
0.53% |
0.42% |
0.41% |
0.43% |
0.47% |
|
Supplemental
Data: |
|
|
|
|
|
|
|
Net
Assets at end of period
(000's) |
$241,030 |
$255,105 |
$272,233 |
$327,111 |
$364,077 |
$328,123 |
|
Portfolio
Turnover(c),(i) |
36% |
27% |
34% |
15% |
11% |
9% |
(a)
Effective February
28, 2023, the Fund’s fiscal year-end changed from May 31 to February
28.
(b)
Per share net
investment income (loss) has been calculated using the average daily shares
method.
(c)
Not annualized for
periods less than one year.
(d)
Assumes
reinvestment of all net investment income and realized capital gain
distributions, if any, during the period. Includes adjustments in accordance
with U.S. Generally Accepted Accounting Principles and could differ from the
reported return.
(e)
Annualized for
periods less than one year.
(f)
The net expense
ratio may not correlate to the applicable expense limits in place during the
period since the current contractual expense limitation is applied for a period
beginning July 1, 2019, and in effect through June 30, 2024, instead of
coinciding with the Fund's fiscal year end.
(g)
From the period
beginning July 1, 2019, the amount of any waivers or reimbursements and the
amount of any recoupment are calculated without regard to the impact of any
performance adjustment to the Fund’s management fee.
(h)
Does not include
acquired fund fees and expenses, if any.
(i)
Portfolio turnover
is calculated on the basis of the Fund as a whole without distinguishing between
the classes of shares.
38
Victory
Government Securities Fund
|
|
Institutional
Shares | |||||
|
|
Year
Ended
2/29/24 |
9
Months
Ended
2/28/23(a) |
Year
Ended
5/31/22 |
Year
Ended
5/31/21 |
Year
Ended
5/31/20 |
Year
Ended
5/31/19 |
|
Net
Asset Value, Beginning of
Period |
$8.76 |
$9.20 |
$10.04 |
$10.23 |
$9.85 |
$9.55 |
|
Investment
Activities: |
|
|
|
|
|
|
|
Net
investment income (loss) |
0.29(b) |
0.15(b) |
0.16(b) |
0.22(b) |
0.24(b) |
0.24 |
|
Net
realized and unrealized
gains
(losses) |
(0.02) |
(0.43) |
(0.71) |
(0.14) |
0.39 |
0.30 |
|
Total
from Investment
Activities |
0.27 |
(0.28) |
(0.55) |
0.08 |
0.63 |
0.54 |
|
Distributions
to Shareholders
from: |
|
|
|
|
|
|
|
Net
investment income |
(0.30) |
(0.16) |
(0.18) |
(0.23) |
(0.25) |
(0.24) |
|
Net
realized gains |
— |
— |
(0.11) |
(0.04) |
— |
— |
|
Total
Distributions |
(0.30) |
(0.16) |
(0.29) |
(0.27) |
(0.25) |
(0.24) |
|
Net
Asset Value, End of Period |
$8.73 |
$8.76 |
$9.20 |
$10.04 |
$10.23 |
$9.85 |
|
Total
Return(c),(d) |
3.08% |
(3.03)% |
(5.64)% |
0.75% |
6.45% |
5.76% |
|
Ratios
to Average Net Assets: |
|
|
|
|
|
|
|
Net
Expenses(e),(f),(g),(h) |
0.42% |
0.42% |
0.35% |
0.32% |
0.36% |
0.38% |
|
Net
Investment Income
(Loss)(e) |
3.29% |
2.31% |
1.61% |
2.12% |
2.43% |
2.55% |
|
Gross
Expenses(e),(h) |
0.42% |
0.42% |
0.35% |
0.32% |
0.36% |
0.38% |
|
Supplemental
Data: |
|
|
|
|
|
|
|
Net
Assets at end of period
(000's) |
$754,424 |
$691,136 |
$771,104 |
$545,930 |
$638,299 |
$742,233 |
|
Portfolio
Turnover(c),(i) |
36% |
27% |
34% |
15% |
11% |
9% |
(a)
Effective February
28, 2023, the Fund’s fiscal year-end changed from May 31 to February
28.
(b)
Per share net
investment income (loss) has been calculated using the average daily shares
method.
(c)
Not annualized for
periods less than one year.
(d)
Assumes
reinvestment of all net investment income and realized capital gain
distributions, if any, during the period. Includes adjustments in accordance
with U.S. Generally Accepted Accounting Principles and could differ from the
reported return.
(e)
Annualized for
periods less than one year.
(f)
The net expense
ratio may not correlate to the applicable expense limits in place during the
period since the current contractual expense limitation is applied for a period
beginning July 1, 2019, and in effect through June 30, 2024, instead of
coinciding with the Fund's fiscal year end.
(g)
From the period
beginning July 1, 2019, the amount of any waivers or reimbursements and the
amount of any recoupment are calculated without regard to the impact of any
performance adjustment to the Fund’s management fee.
(h)
Does not include
acquired fund fees and expenses, if any.
(i)
Portfolio turnover
is calculated on the basis of the Fund as a whole without distinguishing between
the classes of shares.
39
Victory
Government Securities Fund
|
|
Class
R6 | |||||
|
|
Year
Ended
2/29/24 |
9
Months
Ended
2/28/23(a) |
Year
Ended
5/31/22 |
Year
Ended
5/31/21 |
Year
Ended
5/31/20 |
Year
Ended
5/31/19 |
|
Net
Asset Value, Beginning of
Period |
$8.76 |
$9.20 |
$10.01 |
$10.22 |
$9.84 |
$9.55 |
|
Investment
Activities: |
|
|
|
|
|
|
|
Net
investment income (loss) |
0.30(b) |
0.17(b) |
0.16(b) |
0.23(b) |
0.24(b) |
0.24 |
|
Net
realized and unrealized gains
(losses) |
(0.03) |
(0.44) |
(0.67) |
(0.15) |
0.39 |
0.29 |
|
Total
from Investment
Activities |
0.27 |
(0.27) |
(0.51) |
0.08 |
0.63 |
0.53 |
|
Distributions
to Shareholders
from: |
|
|
|
|
|
|
|
Net
investment income |
(0.30) |
(0.17) |
(0.19) |
(0.25) |
(0.25) |
(0.24) |
|
Net
realized gains |
— |
— |
(0.11) |
(0.04) |
— |
— |
|
Total
Distributions |
(0.30) |
(0.17) |
(0.30) |
(0.29) |
(0.25) |
(0.24) |
|
Net
Asset Value, End of Period |
$8.73 |
$8.76 |
$9.20 |
$10.01 |
$10.22 |
$9.84 |
|
Total
Return(c),(d) |
3.14% |
(2.96)% |
(5.26)% |
0.75% |
6.46% |
5.68% |
|
Ratios
to Average Net Assets: |
|
|
|
|
|
|
|
Net
Expenses(e),(f),(g),(h) |
0.37%(i) |
0.34%(i) |
0.26%(i) |
0.31% |
0.35% |
0.35% |
|
Net
Investment Income (Loss)(e) |
3.49% |
2.55% |
1.65% |
2.30% |
2.43% |
2.54% |
|
Gross
Expenses(e),(h) |
0.44% |
1.81% |
3.55% |
0.46% |
0.39% |
0.51% |
|
Supplemental
Data: |
|
|
|
|
|
|
|
Net
Assets at end of period (000's) |
$17,551 |
$4,016 |
$531 |
$167 |
$7,903 |
$6,425 |
|
Portfolio
Turnover(c),(j) |
36% |
27% |
34% |
15% |
11% |
9% |
(a)
Effective February
28, 2023, the Fund’s fiscal year-end changed from May 31 to February
28.
(b)
Per share net
investment income (loss) has been calculated using the average daily shares
method.
(c)
Not annualized for
periods less than one year.
(d)
Assumes
reinvestment of all net investment income and realized capital gain
distributions, if any, during the period. Includes adjustments in accordance
with U.S. Generally Accepted Accounting Principles and could differ from the
reported return.
(e)
Annualized for
periods less than one year.
(f)
The net expense
ratio may not correlate to the applicable expense limits in place during the
period since the current contractual expense limitation is applied for a period
beginning July 1, 2019, and in effect through June 30, 2024, instead of
coinciding with the Fund's fiscal year end.
(g)
From the period
beginning July 1, 2019, the amount of any waivers or reimbursements and the
amount of any recoupment are calculated without regard to the impact of any
performance adjustment to the Fund’s management fee.
(h)
Does not include
acquired fund fees and expenses, if any.
(i)
Includes impact of
voluntary waiver. Without this voluntary waiver, the net expense ratio for the
year ended May 31, 2022, nine months ended February 28, 2023, and year ended
February 29, 2024, would have been 0.22%, 0.15%, and less than 0.01% higher,
respectively.
(j)
Portfolio turnover
is calculated on the basis of the Fund as a whole without distinguishing between
the classes of shares.
40
23449-0724
By
mail:
Victory Funds
P.O. Box 182593
Columbus, OH 43218-2593
Victory Funds
P.O. Box 182593
Columbus, OH 43218-2593
P.O. Box 182593
Columbus, OH 43218-2593
Columbus, OH 43218-2593
Statement
of Additional Information (“SAI”): A complete
description of the Fund's policies and procedures with respect to the disclosure
of the Fund's portfolio securities is available in the Fund's SAI. The SAI has
been filed with the Securities and Exchange Commission (“SEC”) and is
incorporated by reference into this prospectus, which means it is legally part
of the prospectus.
Annual
and Semi Annual Reports: Annual and semi
annual reports and Form N-CSR contain more information about the Fund's
investments. In the Fund's annual report, you will find a discussion of the
market conditions and investment strategies that significantly affected the
Fund's performance during the last fiscal year. In Form N-CSR, you will find the
Fund’s annual and semi annual financial statements.
How
to Obtain Information: You may obtain a
free copy of the SAI, annual or semi annual reports, Form N-CSR or to ask other
questions about the Fund or your accounts, online at VictoryFunds.com, by
contacting the Victory Funds at the address or telephone number below, or by
contacting your financial intermediary.
By
telephone:
Call Victory Funds at
(800) 235-8396
Call Victory Funds at
(800) 235-8396
You also can obtain
information about the Fund (including the SAI and other reports) from the SEC on
the SEC’s EDGAR database at sec.gov or, after payment of a duplicating fee, by
electronic request at the following e-mail address:
[email protected]
Investment Company
Act File No. 811-7852