July
1, 2024
Prospectus
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Victory
California Bond Fund | |||||
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Fund
Shares |
Institutional
Shares |
Class
A |
Class
C |
Class
R6 |
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USCBX |
UCBIX |
UXABX |
— |
— |
Shares of the Fund
are offered only to California residents. The delivery of this prospectus is not
an offer in any state where shares of the Fund may not lawfully be
made.
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
A |
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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
Fees2
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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 Reimbursement3
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( |
( |
( |
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Total
Annual Fund Operating Expenses After Fee Waiver and/or
Expense
Reimbursement3
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1
2
3
1
Victory
California Bond 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 |
$ |
$ |
$ |
$ |
|
Class
A |
$ |
$ |
$ |
$ |
2
Victory
California Bond Fund Summary
3
Victory
California Bond Fund Summary
4
Victory
California Bond Fund Summary
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1
Year |
5
Years
(or
Life
of
Class) |
10
Years |
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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
A Before Taxes |
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Indices | |||
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Bloomberg
Municipal Bond Index
reflects
no deduction for fees, expenses, or taxes |
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Lipper
California Municipal Debt Funds Index
reflects
no deduction for taxes |
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1
5
Victory
California Bond Fund Summary
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 |
|
Andrew
Hattman, CFA, CAIA |
Senior
Portfolio Manager, Head of
Municipal
Bond Portfolio
Management |
Since
2019 |
|
Lauren
Spalten |
Portfolio
Manager |
Since
2021 |
Purchase
and Sale of Fund Shares
|
Investment
Minimums |
Fund
Shares |
Institutional
Shares |
Class
A |
|
Minimum
Initial Investment |
$3,000 |
$1,000,000 |
$2,500 |
|
Minimum
Subsequent Investments |
$50 |
None |
$50 |
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 43210-2593. Only California residents may purchase into the Victory
California Bond Fund. The Fund is not recommended for tax-deferred arrangements,
such as IRAs or 401(k) plans. 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.
For Class
A shares, a $1,000 minimum initial purchase amount and a $50 minimum subsequent
purchase amount apply for IRAs, gift/transfer to minor accounts, and purchases
through automatic investment plans.
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.
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.
6
Victory
California Bond Fund Summary
Tax
Information
While the
Fund is managed so that at least 80% of its annual interest income will be tax
exempt, it may invest up to 20% of its assets in securities that generate income
that is not tax exempt. The exemption of income for federal and California
income tax purposes does not necessarily mean that income is exempt under the
income or other tax laws of any other state or local taxing authority.
Distributions of part of the Fund’s tax-exempt interest income also may be a tax
preference item for purposes of the AMT. Net capital gains distributed by or
reinvested in the Fund will be taxable. In addition, gains, if any, on the
redemption of the Fund’s shares will be taxable.
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. 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.
7
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
has an investment objective of providing California investors with a high level
of current interest income that is excludable from gross income for federal and
California state income tax purposes (“tax-exempt”). The Fund’s Board of
Trustees (the “Board”) may change the Fund’s investment objective without
shareholder approval. The Fund will provide shareholders notice of any such
change.
The Fund
will pursue its objective by investing its assets in securities issued by the
state of California, its political subdivisions and instrumentalities, and by
other government entities if, in the opinion of counsel to the issuer, the
income from such obligations is excludable from gross income for federal income
tax purposes and is exempt from California state income taxes.
We refer
to these securities, which include municipal debt obligations that have been
issued by California and its political subdivisions and duly constituted state
and local authorities and corporations, as California tax-exempt securities.
California tax-exempt securities generally are issued to fund public
infrastructure projects such as streets and highways, schools, water and sewer
systems, hospitals, and airports. They also may be issued to refinance
outstanding obligations as well as to obtain funds for general operating
expenses and for loans to other public institutions and facilities. Under the
Tax Cuts and Jobs Act, interest paid on a bond issued after December 31, 2017,
to advance refund another bond is subject to federal income tax.
During
normal market conditions, at least 80% of the Fund’s net assets will consist of
California tax-exempt securities and at least 80% of the Fund’s annual net
investment income dividends will be excluded from a shareholder’s gross income
for federal income tax purposes (exempt-interest dividends) and will be
exempt from California state income taxes. Furthermore, it is our intention
generally to purchase only securities that pay interest income exempt from
federal income tax. In addition, at least 80% of the Fund’s annual income (and,
therefore, its net investment income dividends) will not be a tax preference
item for puproses of the federal AMT (“Tax Preference Item”). However, of
course, changes in federal tax laws or other unforeseen circumstances could
result in the Fund earning income that is a Tax Preference Item. These policies
may be changed only by a shareholder vote.
However,
gains and losses realized from trading securities, including tax-exempt
securities, that occur during the normal course of managing the Fund may result
in net realized capital gain distributions. The Internal Revenue Code of 1986,
as amended (the “Code”), treats these distributions differently than
exempt-interest dividends in the following ways:
◼
Distributions
of the excess of net short-term capital gain over net long-term capital loss are
taxable as ordinary income.
◼
Distributions
of the excess of net long-term capital gain over net short-term capital loss are
taxable as long-term capital gains, regardless of the length of time you have
held your shares in the Fund.
◼
Distributions
of both short-term and long-term net realized capital gains are taxable whether
received in cash or reinvested in additional shares.
In
addition to California tax-exempt securities, the Fund may invest up to 20% of
its assets in securities issued by certain U.S. territories and possessions such
as Puerto Rico, the Virgin Islands, or Guam that are exempt from federal and
state personal income taxes.
8
Additional Fund
Information
While the
Fund’s portfolio-weighted average maturity is not restricted, it is expected to
be greater than 10 years. To determine a security’s maturity for purposes of
calculating the Fund’s portfolio-weighted average maturity, we may estimate the
expected time in which the security’s principal is to be paid in full. This can
be substantially shorter than its stated final maturity. For more information on
the method of calculating the Fund’s portfolio-weighted average maturity, see
Investment
Objectives, Practices, Policies, and Risks in the
Statement of Additional Information (“SAI”).
The Fund
is considered diversified under the federal securities laws, which generally
means that the Fund must comply with certain limitations on the amount that it
may invest in any single issuer. The Fund, of course, is concentrated
geographically through the purchase of California tax-exempt securities. For
further discussion of diversification, see Investment
Objectives, Practices, Policies, and Risks in the
Fund’s SAI.
The Fund
also may not invest more than 25% of its assets in securities issued in
connection with the financing of projects with similar characteristics, such as
toll road revenue bonds, housing revenue bonds, electric power project revenue
bonds, or in industrial development revenue bonds that are based, directly or
indirectly, on the credit of private entities of any one industry. However, the
Fund may invest more than 25% of its assets in tax-exempt industrial development
revenue bonds. The 25% industry limitation does not apply to U.S. government
securities, general obligation bonds, or bonds that are escrowed.
Some of
the bonds purchased for the Fund are secured by bond insurance that guarantees
scheduled principal and interest payments. In addition, we may purchase bond
insurance for individual uninsured securities when we believe it will provide an
anticipated benefit to the Fund. However, this insurance may not eliminate the
risk of investing in the issuer.
Credit and
interest rate risks, as described further herein, could be magnified by the
Fund’s concentration in California issuers. California tax-exempt securities may
be affected by political, economic, regulatory, or other developments that limit
the ability of California issuers to pay interest or repay principal in a timely
manner. Therefore, the Fund is affected by events within California to a much
greater degree than a more geographically diversified fund.
A
particular development may not directly relate to the Fund’s investments but
nevertheless might depress the entire market for the state’s tax-exempt
securities and, therefore, adversely impact the Fund’s performance. The
lingering impact of COVID-19 may exacerbate some or all of these
risks.
An
investment in the Fund may be riskier than an investment in other types of
tax-exempt funds because of this concentration.
The
following are examples of just some of the events that may depress valuations
for California tax-exempt securities for an extended period of
time:
◼
Changes in
state laws.
◼
Court
decisions that affect a category of municipal bonds, such as municipal lease
obligations or electric utilities.
◼
Natural
disasters such as floods, storms, hurricanes, droughts, wildfires, or
earthquakes and public health crises (such as pandemics and epidemics), and
governments’ reactions to such events.
◼
Bankruptcy,
financial distress, or a downgrade in the credit quality of a prominent
municipal issuer within the state.
◼
Economic
issues that affect critical industries or large employers or that weaken real
estate prices.
◼
Changes
in revenue due to personal income tax collection, especially with respect
to a drop in capital gains revenue.
9
Additional Fund
Information
◼
Reductions
in federal or state spending.
◼
Imbalance
in the supply and demand for municipal securities.
◼
Developments
that may change the tax treatment of California tax-exempt
securities.
In
addition, because the Fund invests in securities that possess a demand feature
and, thus, are dependent on banks and other financial institutions, changes in
the credit quality of these institutions could cause losses to the Fund and
affect its share price.
Other
considerations affecting the Fund’s investments in California tax-exempt
securities are summarized in the SAI under Special
Risk Considerations.
Under
normal market conditions, the Fund’s assets will be invested so that at least
50% of the total market value of the tax-exempt securities are rated within the
three highest long-term rating categories (A or higher) or in the highest
short-term rating category by such rating agencies as Moody’s Investors Service,
Inc. (“Moody’s”) and S&P Global Ratings (“S&P”).
Investment-grade
securities include securities issued or guaranteed by the U.S. government, its
agencies and instrumentalities, as well as securities rated or subject to a
guarantee of an obligor that is rated within the categories listed by at least
one of the Nationally Recognized Statistical Rating Organizations (“NRSROs”).
Below are investment-grade ratings for two of the current NRSROs approved by the
SEC:
|
Rating
Agency |
Long-Term
Debt Securities |
Short-Term
Debt Securities |
|
Moody’s |
At least
Baa3 |
At least
Prime–3 or MIG 3 |
|
S&P |
At least
BBB– |
At least A–3
or SP–2 |
If a
security does not meet the requirements set forth above or is unrated, the
Fund’s Adviser will make a determination that the unrated security is of
equivalent investment quality to a comparable security of the same issuer that
is rated by a NRSRO.
On
occasion, we may pay a rating agency to rate a particular security when we
believe it will provide an anticipated benefit to the Fund. On securities
possessing a third-party guarantor, we reserve the right to place such security
in the rating category of the underlying issuer (or if unrated in the comparable
rating category as determined by us), if the third-party guarantor is no longer
relied upon for ratings eligibility.
The Fund
may invest up to 10% of its net assets in securities that at the time of
purchase are below-investment-grade securities (also known as “junk”
bonds).
You will
find a further description of tax-exempt ratings in the SAI.
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. To the extent that these temporary investments produce
taxable income, that income may result in the Fund not fully achieving its
investment objective during the time it is in the temporary defensive
posture.
Victory
Income Investors
We manage
the Fund based on the common sense premise that our investors value tax-exempt
income over taxable capital gain distributions. When weighing the decision to
buy or sell a security, we strive to balance the amount of the tax-exempt
income, the credit risk of the issuer, and the price volatility of the bond. We
generally intend to hold investments until maturity, resulting in lower
portfolio turnover in the Fund, although these intentions may be adjusted in
response to the market or other events.
10
Investments
The
following describes the types of securities the Fund may purchase under normal
market conditions to achieve its principal investment strategy. The Fund’s
assets may be invested in, among other things, any of the following tax-exempt
securities, except as otherwise noted:
Below-Investment-Grade
Securities
Below-investment-grade
securities, sometimes referred to as high-yield or “junk” bonds, are considered
speculative and are subject to significant credit risk because they are believed
to represent a greater risk of default than more creditworthy investment-grade
securities. These lower-quality securities generally have less interest rate
risk and higher credit risk than higher-quality securities. At the same time,
the volatility of below-investment-grade securities historically has been less
than that of the equity market as a whole. Below-investment-grade securities
also may be less liquid than investment-grade securities.
General
Obligation Bonds
Secured by
the issuer’s pledge of its full faith, credit, and taxing power for the payment
of principal and interest.
Revenue
Bonds
Payable
from the revenue derived from a particular facility or class of facilities or,
in some cases, from the proceeds of a special excise tax or other specific
revenue source, but not from the general taxing power.
Municipal
Lease Obligations
Backed by
the municipality’s covenant to budget for the payments due under the lease
obligation.
Industrial
Development Revenue Bonds
Issued by
or on behalf of public authorities to obtain funds for privately operated
facilities, such as pollution control revenue bonds.
Inverse
Floating Rate Securities
Securities
with coupons that vary inversely with changes in short-term tax-exempt interest
rates and, thus, are considered leveraged investments in an underlying municipal
bond. Up to 10% of the Fund's net assets may be invested in inverse floating
rate securities (or securities with similar economic characteristics). These
securities present special risks for two reasons: (1) if short-term interest
rates rise (fall), the income the Fund earns on the inverse floating rate
security will fall (rise); and (2) if long-term interest rates rise (fall) the
value of the inverse floating rate security will fall (rise) more than the value
of the underlying bond because of the leveraged nature of the investment. The
Fund may seek to buy these securities at attractive values and yields that over
time more than compensate the Fund for the securities’ price
volatility.
Securities
Offered on a When-Issued or Delayed-Delivery Basis
Delivery
and payment take place after the date of the commitment to purchase, normally
within 35 days, both price and interest rate are fixed at the time of
commitment, the Fund does not earn interest on the securities until settlement,
and the market value of the securities may fluctuate between purchase and
settlement. Such securities can be sold before settlement date. Securities that
require more than 35 days to settle are considered senior securities and are
treated as a derivative.
11
Investments
Synthetic
Instruments
Combine a
municipality’s obligation to pay interest and principal with the obligation of a
third party to repurchase the instrument on short notice.
Variable-Rate
Demand Notes (“VRDNs”)
Provide
the right to sell the security at face value on either that day or within the
rate-reset period. The interest rate is adjusted at a stipulated daily, weekly,
monthly, quarterly, or other specified time interval to reflect current market
conditions. VRDNs normally trade as if the maturity is the earlier put date,
even though stated maturity is longer.
Illiquid
Securities
Up to 15%
of the Fund’s net assets may be invested in illiquid securities, which are
securities that the Fund reasonable expects cannot be sold or disposed of in
current market conditions in seven calendar days or less without the sale or
disposition significantly changing the market value of the
securities.
12
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.
Call
Risk: Many
municipal bonds may be “called,” or redeemed, by the issuer before the stated
maturity. During a period of declining interest rates, an issuer might call, or
refinance, a higher-yielding bond for the same reason that a homeowner would
refinance a home mortgage.
◼
Intermediate-
and long-term municipal bonds have the greatest call risk because most municipal
bonds may not be called until after 10 years from the date of issue. The period
of “call protection” may be longer or shorter than 10 years; but regardless,
bonds purchased closest to the date of issue will have the most call protection.
Typically, bonds with original maturities of 10 years or less are not
callable.
◼
Although
bond prices rise when interest rates drop, falling interest rates create the
environment necessary to “call” the higher-yielding bonds from the Fund. When
bonds are called, the Fund is affected in several ways. Most likely, we must
reinvest the bond-call proceeds at lower interest rates. The Fund’s income may
drop as a result. The Fund also may realize a taxable capital gain (or
loss).
Changes
in Tax Law Risk: In order
to attempt to pay interest that is exempt from federal or state and local income
tax, tax-exempt securities must meet certain legal requirements. Failure to meet
such requirements may cause the interest earned and distributed to shareholders
by the Fund to be taxable. In addition, interest from one or more municipal
bonds held by the Fund could be declared taxable because of unfavorable changes
in tax or other laws, adverse interpretations by the Internal Revenue Service
(“IRS”) or state tax authorities, or noncompliant conduct of a bond issuer.
Changes or proposed changes in federal or state income tax or other laws also
may cause the prices of tax-exempt securities to fall. A portion of the Fund’s
otherwise exempt-interest dividends may be taxable to shareholders subject to
the federal AMT due to federal tax law changes or other unforeseen
circumstances.
Credit
Risk: Credit
risk is the possibility that an issuer of a fixed-income security will fail to
make timely interest and/or 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. All fixed-income securities,
varying from the highest quality to the very speculative, have some degree of
credit risk and may apply to certain other securities in which the Fund may
invest. The Fund accepts some credit risk as a recognized means to enhance
investors’ return. Market events may affect the creditworthiness of the issuer
of a fixed-income security and may impair an issuer’s ability to timely meet its
debt obligations as they come due.
When
evaluating potential investments for the Fund, our analysts independently assess
credit risk and its potential impact on the Fund’s portfolio. In addition,
credit rating agencies may provide estimates of the credit quality of the
potential investment. The ratings may not take into account every risk that
interest and/or principal will be repaid on a timely basis. Lower credit ratings
typically correspond to higher perceived credit risk and higher credit ratings
typically correspond to lower perceived credit risk. Securities in the
lowest-rated investment-grade category have speculative characteristics. Credit
ratings do not provide assurance against default or other loss of money.
Nevertheless, even investment-grade securities typically are subject to some
credit risk. We also attempt to minimize the Fund’s overall credit risk by
diversifying the Fund’s investments across many securities with slightly
different risk characteristics and across different economic sectors and
geographic regions. Thus, if a random credit event should occur, such as a
default, the Fund generally would suffer a smaller loss than if the Fund were
concentrated in relatively large holdings with highly correlated risks. If a
security has not received a rating, the Fund must rely entirely upon the
Adviser’s credit assessment.
13
Risk
Factors
Securities
rated below investment grade (“junk” or high-yield bonds) should be regarded as
speculative because their issuers are more susceptible to financial setbacks and
recession than more creditworthy companies. If the Fund invests in securities
whose issuers develop unexpected credit problems, the Fund’s net asset value
(“NAV”) could decline. Changes in economic conditions or other circumstances are
more likely to lead to a weakened capability to make principal and interest
payments on these securities than on higher-rated securities.
Debt
Securities Risk: The value
of a debt security or other income-producing security changes in response to
various factors, including, for example, market-related factors (such as changes
in interest rates or changes in the risk appetite of investors generally) and
changes in the actual or perceived ability of the issuer (or of issuers
generally) to meet its (or their) obligations.
Other
factors that may affect the value of debt securities, include, among others,
public health crises and responses by governments and companies to such crises.
These and other events may affect the creditworthiness of the issuer of a debt
security and may impair an issuer’s ability to timely meet its debt obligations
as they come due.
Interest
Rate Risk: As a
mutual fund investing in bonds, the Fund is subject to the risk that the market
value of the bonds in the Fund’s portfolio will fluctuate because of changes in
interest rates, changes in supply and demand for tax-exempt securities, or other
market factors. Bond prices are linked to the prevailing market interest rates.
In general, when interest rates rise, bond prices fall; and when interest rates
fall, bond prices rise. The price volatility of a bond also depends on its
duration. Duration is a measure that 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. 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. 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.
Decisions
by the Fed regarding interest rate and monetary policy can have a significant
effect on the value of debt securities as well as the overall strength of the
U.S. economy. Precise interest rate predictions are difficult to make, and
interest rates may change unexpectedly and dramatically in
14
Risk
Factors
response
to extreme changes in market or economic conditions. In light of current market
conditions, the Fed has raised interest rates from historically low levels in a
short time period. Changes to interest rates may not work as intended, and the
impact on various markets that interest rate or other significant policy changes
may have is unknown.
The credit
and interest rate risks may be magnified because the Fund concentrates its
investments in California tax-exempt securities.
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.
Liquidity
Risk: Liquidity
in the tax-exempt bond market may be reduced for a number of reasons including
as a result of overall economic conditions and credit tightening. During times
of reduced market liquidity, there may be little trading in the secondary market
for particular bonds and other debt securities, which may make them more
difficult to value or sell at the time desired.
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.
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.
State-Specific
Risk: Because
the Fund invests in California tax-exempt securities, the Fund is more
susceptible to adverse economic, political, and regulatory changes affecting
tax-exempt securities
issuers in
that state. For more information, see the SAI.
15
Risk
Factors
Structural
Risk: VRDNs
generally are long-term municipal bonds with a demand feature that is used to
shorten the maturity. The demand feature represents the right to sell the
security back to the remarketer or liquidity provider for repurchase on short
notice, normally one day or seven days. Usually, the demand feature is backed by
a letter of credit or similar guarantee from a bank. Since we are relying on the
demand feature to shorten maturity, the ability to exercise the demand feature
would be dependent upon the bank. We would only purchase VRDNs where we were
comfortable that the banks would be able to honor their obligation on the demand
feature.
Some
VRDNs, sometimes referred to as “structured instruments” or “synthetic
instruments,” are created by combining an intermediate- or long-term municipal
bond with a right to sell the instrument back to the remarketer or liquidity
provider for repurchase on short notice, referred to as a “tender option.”
Usually, the tender option is backed by a letter of credit or similar guarantee
from a bank. The guarantee, however, typically is conditional, which means that
the bank is not required to pay under the guarantee if there is a default by the
municipality or if certain other events occur. We will not purchase a synthetic
instrument unless counsel for the issuer has issued an opinion that interest
paid on the instrument is entitled to tax-exempt treatment. We will not purchase
a synthetic instrument unless we believe there is only minimal risk that we will
not be able to exercise our tender option.
16
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 most recent 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 Fund’s base investment management fee, which is
accrued daily and paid monthly, is computed as a percentage of the average daily
net assets of the Fund, and is equal on an annual basis to 0.50% of the first
$50 million of average daily net assets, 0.40% of that portion of average daily
net assets over $50 million but not over $100 million, and 0.30% for that
portion of average daily net assets over $100 million. The fee is allocated
monthly to each share class of the Fund based on average daily net
assets.
The
performance adjustment for the Fund 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 California Municipal Debt Funds
Index over the performance period. The performance adjustment for each class is
calculated monthly by comparing the Fund’s performance to that of the Lipper
California Municipal Debt Funds Index, which tracks the total return performance
of the largest funds within the Lipper California Municipal Debt Funds category.
This category includes funds that limit their assets to those securities that
are exempt from taxation in the state of California. The performance period for
each share class consists of the current month plus the previous 35 months (or
the 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
17
Organization and
Management of the Fund
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.
For the
fiscal year ended February 29, 2024, performance adjustments were 0.03%, 0.02%,
and (0.02)% for Fund Shares, Institutional Shares, and Class A, respectively.
The performance adjustment rate included in the investment advisory fee may
differ from the maximum over/under Annual Adjustment Rate due to differences in
average net assets for the reporting period and rolling 36-month performance
period.
Under the
performance fee arrangement, each share class of the Fund pays a positive
performance fee adjustment for a performance period whenever the share class
outperforms the Lipper California Municipal Debt Funds Index over that period,
even if the share class 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 the
Fund’s other share classes with larger asset levels.
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
Andrew
Hattman, CFA,
CAIA, Senior Portfolio Manager and Head of Municipal Bond Portfolio Management
with Victory Income Investors, a Victory Capital investment franchise, has
co-managed the Fund since 2019. Mr. Hattman has 13 years of investment
management experience, eight years of which were with USAA Asset Management
Company (“AMCO”), which was acquired by the Adviser’s parent company in 2019.
Mr. Hattman holds CFA and CAIA designations.
Lauren
Spalten,
Portfolio Manager with Victory Income Investors Investments, a Victory Capital
investment franchise, has co-managed the Funds since 2021. In 2018, Ms. Spalten
joined USAA Investments, which was acquired by the Adviser’s parent company in
2019, as a Municipal Analyst covering the Southeast region. Prior to joining
AMCO, Ms. Spalten was an Associate Director at Standard & Poor’s (now
S&P Global Ratings), where she specialized in evaluating creditworthiness of
state and local governments across the Southwest United States. Ms. Spalten has
additional experience in commercial real estate development and business plan
development, primarily for medical and non-profit entities.
The
SAI provides additional information about the portfolio managers' compensation,
other accounts managed, and ownership of Fund securities.
18
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.
19
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. Only California residents may purchase into the
Fund.
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.
20
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 described
below.
Calculation
of Sales Charges for Class A Shares
|
For
historical expense information, see the “Financial
Highlights”
at the end of
this Prospectus. |
Class A
shares are sold at their public offering price, which is the NAV plus any
applicable initial sales charge, also referred to as the “front-end sales load.”
The sales charge may be reduced or eliminated for larger purchases, as detailed
below or as described under Sales
Charge Reductions and Waivers for Class A Shares. The
investment levels required to obtain a reduced sales charge are commonly
referred to as “breakpoints.”
All Class
A purchases are subject to the terms described herein except for those purchases
made through an intermediary specified in Appendix
A – Variations in Sales Charge Reductions and Waivers Available Through Certain
Intermediaries.
In order
to obtain a breakpoint discount, you must inform the Victory Funds or your
investment professional at the time you purchase shares of the existence of the
other Victory accounts or purchases of Victory Funds that are eligible to be
linked for the purpose of calculating the initial sales charge. The Fund or your
investment professional may ask you for records or other information about other
Victory Funds held in your Victory accounts and any linked accounts, such as
accounts opened with a different financial intermediary.
21
Investing with
the Victory Funds
The
current sales charge rates and breakpoint levels for Class A shares of the Fund
are listed below:
|
Your
Investment in the Fund |
Sales
Charge
as
a %
of
Offering
Price |
Sales
Charge
as
a %
of
Your
Investment |
|
Up
to $99,999 |
2.25% |
2.30% |
|
$100,000
up to $249,999 |
1.75% |
1.78% |
|
Over
$250,0001
|
0.00% |
0.00% |
1
A contingent
deferred sales charge (“CDSC”) of 0.75% may be imposed on certain redemptions of
Class A shares purchased without an initial sales charge if any of those shares
are redeemed within 18 months of purchase. This charge will be based on either
the cost of the shares or NAV at the time of redemption, whichever is lower. No
CDSC is imposed on shares representing reinvested distributions. You may be
eligible for a reduction or waiver of this CDSC under certain circumstances. See
CDSC
Reductions and Waivers for Class A Shares and Appendix A - Variations in Sales
Charge Reductions and Waivers Available Through Certain Intermediaries for
details.
Sales
Charge Reductions and Waivers for Class A Shares
|
There
are several ways you can combine multiple purchases of Class A shares of
the Victory
Funds to take
advantage of reduced sales charges or, in some cases, eliminate sales
charges. |
There are
a number of ways you can reduce your sales charges, which we describe below. In
order to obtain a Class A sales charge reduction or waiver, you must provide
your financial intermediary or the Funds, at the time of purchase, with current
information regarding shares of any Victory Funds held in other accounts. This
information must include account statements or other records (including written
representations from the intermediary holding the shares) that indicate any
accounts (e.g., retirement accounts) established (i) with the Victory Funds and
your investment professional; (ii) with other financial intermediaries; and
(iii) in the name of immediate family household members (spouse or domestic
partner and children under 21) with regard to Rights of
Accumulation.
The
availability of a sales charge reduction or waiver discussed below will depend
upon whether you purchase your shares directly from the Fund or through a
financial intermediary. If you are eligible for a sales charge reduction because
you own shares of other Victory Funds, you must notify the Fund or your
financial intermediary at the time of purchase of any relationship or other
facts qualifying you for sales charge reductions or waivers. Some intermediaries
impose different policies for sales charge waivers and reductions. These
variations are described in Appendix
A — Variations in Sales Charge Reductions and Waivers Available Through Certain
Intermediaries. Except
as described with respect to the intermediaries specified in Appendix A, all
Class A shares are subject to the terms stated below. In order to obtain waivers
and discounts that are not available through your intermediary, you must
purchase Fund shares directly from the Fund or through another
intermediary.
You can
find additional information regarding sales charges and their reductions, free
of charge, at vcm.com/policies, by clicking on Victory
Funds Pricing Policies.
You may
reduce or eliminate the sales charge applicable to Class A shares in a number
of ways:
◼
Breakpoint –
Purchase a sufficient amount to reach a breakpoint (see Calculation
of Sales Charges for Class A Shares
above);
◼
Letter
of Intent – If you
anticipate purchasing $50,000 or more of Class A shares of the Fund, including
any purchase of other Victory Funds of any share class (except money market
funds and assets held in group retirement plans) within a 13-month period, you
may qualify for a sales charge breakpoint as though you were investing the total
amount in one lump sum. In order to qualify for the reduced sales charge, you
must submit a non-binding Letter of Intent (the “Letter”) within 90 days of the
start of the purchases. Each investment you make after signing the Letter
22
Investing with
the Victory Funds
will be
entitled to the sales charge applicable to the total investment indicated in the
Letter. You must start with a minimum initial investment of at least 5.00% of
the total amount you intend to purchase. A portion of the shares purchased under
the Letter will be held in escrow until the total investment has been completed.
In the event you do not complete your commitment set forth in the Letter in the
time period specified, sufficient escrowed shares will be redeemed to pay any
applicable front-end sales charges;
◼
Right
of Accumulation – Whereas
a Letter of Intent allows you to qualify for a discount by combining your
current purchase amount with purchases you intend to make in the near future, a
Right of Accumulation allows you to reduce the initial sales charge on a Class A
investment by combining the amount of your current purchase with the current
market value of prior investments made by you, your spouse (including domestic
partner), and your children under age 21 in any class of shares of any Victory
Funds (except money market funds and any assets held in group retirement plans).
The value of eligible existing holdings will be calculated by using the greater
of the current value or the original investment amount. To ensure that you
receive a reduced price using the Fund’s Right of Accumulation, you or your
Investment Professional must inform the Funds that the Right applies each time
shares are purchased and provide sufficient information to permit confirmation
of qualification;
◼
Reinstatement
Privilege – You may
reinvest at NAV all or part of your redemption proceeds within 90 days of a
redemption of Class A shares of the Fund;
◼
Waiver – The
Victory Funds will completely waive the sales charge for Class A shares in the
following cases:
◼
Purchases
of $250,000 or more;
◼
Purchases
by certain individuals associated with the Victory Funds or service providers
(see Eligibility
of Individuals Associated with the Victory Funds and Fund Service
Providers);
◼
Purchases
by registered broker-dealers, financial intermediaries or their agents, or
affiliates who have agreements with the Fund’s distributor (the “Distributor”),
if the shares are purchased for their own account, purchased for retirement
plans of their employees, or sold to registered representatives or full-time
employees (or their immediate families), provided that such purchase is for one
of the foregoing types of accounts;
◼
Purchases
for trust or other advisory accounts established with a financial institution
and fee-based investment products or accounts;
◼
Reinvestment
of proceeds from a liquidation distribution of Class A shares of Victory Funds
held in a deferred compensation plan, agency, trust, or custody
account;
◼
Purchases
by retirement plans, including Section 401 and 457 plans sponsored by a Section
501(c)(3) organization and certain non-qualified deferred compensation
arrangements that operate in a similar manner to qualified plans. Investors
nonetheless may be charged a fee if they effect transactions in Class A shares
through a broker or agent;
◼
Purchases
by participants in no transaction fee programs offered by certain broker-dealers
(sometimes referred to as “supermarkets”);
◼
Purchases
by certain financial intermediaries who offer shares to self-directed investment
brokerage accounts that may or may not charge a transaction fee to its
customers;
◼
Investors
that have an investment account with the Adviser; and
◼
Individuals
who reinvest the proceeds of redemptions from Institutional Shares or Class R6
shares of Victory Funds within 60 days of redemption.
You should
inform the Fund or your investment professional at the time of purchase of the
sales charge waiver category that you believe applies.
23
Investing with
the Victory Funds
CDSC
for Class A Shares
A
contingent deferred sales charge (“CDSC”) of 0.75% may be imposed on certain
redemptions of Class A shares purchased without an initial sales charge if any
of those shares are redeemed within 18 months of purchase. This charge will be
based on either the cost of the shares or NAV at the time of redemption,
whichever is lower. No CDSC is imposed on shares representing reinvested
distributions.
More
information is available in CDSC
Reductions and Waivers for Class A and Class C Shares and
Appendix
A – Variations in Sales Charge Reductions and Waivers Available Through Certain
Intermediaries. All
Class A purchases are subject to the terms described herein except for those
purchases made through the intermediaries specified in Appendix A.
CDSC
for Class C Shares
You will
pay a 1.00% CDSC on any Class C shares you sell within 12 months of purchase.
The CDSC is based on the current value of the shares being sold or their NAV
when purchased, whichever is less. There is no CDSC on shares you acquire by
reinvesting your dividends or capital gains distributions. You may be eligible
for reduction or waiver of this CDSC under certain circumstances. There is no
CDSC imposed when you exchange your shares for Class C shares of another Victory
Fund; however, your exchange is subject to the same CDSC schedule that applied
to your original purchase.
An
investor may, within 90 days of a redemption of Class C shares, reinvest all or
part of the redemption proceeds in the Class C shares of any Victory Fund at the
NAV next computed after receipt by the transfer agent of the reinvestment order.
Class C share proceeds reinvested do not result in a refund of any CDSC paid by
the shareholder, but the reinvested shares will be treated as CDSC-exempt upon
reinvestment. The shareholder must ask the Distributor for such privilege at the
time of reinvestment.
To keep
your CDSC as low as possible, each time you sell shares we will first sell any
shares in your account that are not subject to a CDSC. If there are not enough
of these to meet your sale, we will sell the shares in the order they were
purchased.
More
information is available in CDSC
Reductions and Waivers for Class A and Class C Shares and
Appendix
A – Variations in Sales Charge Reductions and Waivers Available Through Certain
Intermediaries.
CDSC
Reductions and Waivers for Class A and Class C Shares
No CDSC is
imposed on redemptions of Class A and Class C shares in the following
circumstances:
◼
To the
extent that the shares redeemed:
◼
are no
longer subject to the holding period for such shares;
◼
resulted
from reinvestment of distributions; or
◼
were
exchanged for shares of another Victory Fund as allowed by the prospectus,
provided that the shares acquired in such exchange or subsequent exchanges will
continue to remain subject to the CDSC, if applicable, calculated from the
original date of purchase until the applicable holding period expires. In
determining whether the CDSC applies to each redemption, shares not subject to a
CDSC are redeemed first;
◼
Following
the death or post-purchase disability of:
◼
a
registered shareholder on an account; or
◼
a settlor
of a living trust, of shares held in the account at the time of death or initial
determination of post-purchase disability;
◼
Distributions
from individual retirement accounts, Section 403(b), Section 457, and Section
401 qualified plans, where redemptions result from:
24
Investing with
the Victory Funds
◼
required
minimum distributions with respect to that portion of such contributions that
does not exceed 12% annually;
◼
tax free
returns of excess contributions or returns of excess deferral
amounts;
◼
distributions
on the death or disability of the account holder;
◼
distributions
for the purpose of a loan or hardship withdrawal from a participant plan
balance; or
◼
distributions
as a result of separation of service;
◼
Distributions
as a result of a Qualified Domestic Relations Order or Domestic Relations Order
required by a court settlement;
◼
In
instances where the investor’s dealer or institution waived its commission in
connection with the purchase and notifies the Distributor prior to the time of
investment;
◼
When the
redemption is made as part of a Systematic Withdrawal Plan (including
dividends), up to an annual amount of 12% of the account value on a per fund
basis, at the time the withdrawal plan is established; or
◼
Participant-initiated
distributions from employee benefit plans or participant-initiated exchanges
among investment choices in employee benefit plans.
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. |
25
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.
26
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 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.
27
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.
28
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
29
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.
30
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.
31
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.
32
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).
33
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.
34
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. 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.
Distribution
and Service Plans
In
accordance with Rule 12b-1 under the Investment Company Act of 1940, the Trust
has adopted a Distribution and Service Plan for Class A shares of the
Fund.
Under the
Class A Distribution and Service Plan, the Fund will pay to the Distributor a
monthly fee at an annual rate of up to 0.25% of its average daily net assets of
its Class A shares. The fee is paid for general distribution services and for
providing personal services to shareholders. Distribution and selling services
are provided by the Distributor or by agents of the Distributor and include
those services intended to result in the sale of the Fund’s shares.
Personal
services to shareholders generally are provided by broker-dealers or other
financial intermediaries and consist of responding to inquiries, providing
information to shareholders about their Fund accounts, establishing and
maintaining accounts and records, providing dividend and distribution payments,
arranging for bank wires, assisting in transactions, and changing account
information.
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.
35
Information About
Fees
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.
36
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.
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.
37
Distributions and
Taxes
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.
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)
taxable 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.
Shareholder
Taxation
◼
If the
Fund satisfies the requirement that, at the close of each quarter of its taxable
year, at least 50% of the value of its total assets consists of securities the
interest on which is excludable from gross income under section 103(a) of the
Code, it will be able to pay “exempt-interest dividends” to its shareholders.
Those dividends constitute the portion of its aggregate dividends (excluding
capital gain distributions) equal to the excess of its excludable interest over
certain amounts disallowed as deductions. Exempt-interest dividends are
excludable from a shareholder’s gross income for federal income tax purposes,
although the amount of those dividends must be reported on the recipient’s
federal income tax return. Accordingly, the amount of exempt-interest
dividends—and, to the extent determination thereof is possible after reasonable
effort, the part thereof constituting interest that is a Tax Preference
Item—that the Fund pays to its shareholders will be reported to them annually on
Forms 1099-DIV (or substitutes therefor). Shareholders’ treatment of dividends
from the Fund under state and local income tax laws may differ from the
38
Distributions and
Taxes
treatment
thereof under the Code. Investors should consult their tax advisers concerning
this matter.
◼
Distributions
of the Fund’s net short-term gain are taxable as ordinary income, and
distributions of the Fund’s net capital gain are taxable as long-term capital
gains, in each case regardless of the length of time you have held your shares
in the Fund. Distributions of both net short-term gain and net capital gain are
taxable whether received in cash or reinvested in additional shares of the
Fund.
◼
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 or certain other non-corporate shareholder (each,
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 be
subject to federal income tax at 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 individual shareholders with taxable income exceeding those
respective amounts (which are effective for 2024 and will be adjusted for
inflation annually, thereafter). If shares of the Fund that are sold at a
loss have been held six months or less, the loss will be disallowed to the
extent of any exempt-interest dividends received on such
shares.
◼
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 VictoryFunds.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.
39
Distributions and
Taxes
California
Taxation
The
following is only a summary of some of the important California personal income
tax considerations generally affecting the Fund and its shareholders. This
discussion is not intended as a substitute for careful planning. As a potential
investor in the Fund, you should consult your tax adviser with specific
reference to your own tax situation.
California
law relating to the taxation of regulated investment companies generally has
been conformed to federal law effective January 1, 2015, with some
modifications. Any portion of the dividends paid by the Fund and derived from
interest on obligations that pay interest (when such obligations are held by an
individual) which is excludable from California personal income under California
or federal law including obligations of certain territories and possessions of
the United States such as Puerto Rico, the Virgin Islands, or Guam (“Tax-Exempt
Obligations”) will be exempt from California personal income tax (although not
from the California franchise tax) if, as of the close of each quarter, at least
50% of the value of the Fund’s assets consists of Tax-Exempt Obligations and the
Fund reports the Tax-Exempt Obligations as exempt-interest dividends in a
written statement furnished to the shareholders. The portion of the Fund’s
dividends reported as California exempt-interest dividends may not exceed the
amount of interest the Fund receives during its taxable years on obligations the
interest on which, if held by an individual, is exempt from taxation by
California, reduced by certain nondeductible expenses. To the extent a portion
of the dividends is derived from interest on debt obligations other than those
described directly above, such portion will be subject to the California
personal income tax (including AMT) and corporate income tax even though it may
be excludable from gross income for federal income tax purposes. In addition,
distributions of short-term capital gains realized by the Fund will be taxable
to the shareholders as ordinary income.
With
respect to non-corporate shareholders, California does not treat tax-exempt
interest as a tax preference item for purposes of its AMT. Corporations subject
to the California franchise tax that invest in the Fund will not be entitled to
exclude California exempt-interest dividends from gross income for franchise tax
purposes. Interest on indebtedness incurred to purchase or carry shares of an
investment company paying exempt-interest dividends, such as the Fund, will not
be deductible by the shareholder for California personal income tax
purposes.
40
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 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.
In
addition, securities purchased with original or remaining maturities of 60 days
or less may be valued at amortized cost, provided that it approximates market
value as determined by the Board.
Repurchase
agreements are valued at cost.
Investments
in open-end investment companies, commingled, or other funds, other than ETFs,
are valued at their NAV at the end of each business day.
Futures
contracts are valued at the settlement price at the close of market on the
principal exchange on which they are traded or, in the absence of any
transactions that day, the values are based upon the settlement price on the
prior trading date.
Options
contracts are valued at the mean of the last bid and ask prices. Options on
futures are valued at the settlement price determined by the applicable
exchange.
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
41
Important Fund
Policies and Other Information
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.
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, including the
portion of the dividends, if any, constituting a Tax Preference Item and
the percentage and source (by state) of interest income earned during the
preceding year on tax-exempt securities held by that Fund. In addition, the Fund
(or its administrative agent) must report to the IRS and furnish to its
shareholders the basis information
42
Important Fund
Policies and Other 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.
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; and (4) any account whose registered owner
has an aggregate balance of $50,000 or more invested in Affiliated Funds. 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
43
Important Fund
Policies and Other Information
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 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
44
Important Fund
Policies and Other Information
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 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.
45
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 or, if shorter, the period of operations. 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 or share class (assuming reinvestment of all income dividends
and capital gain distributions). Information shown for the Class A shares for
the periods ended on or before March 31, 2020, reflect that of the Fund’s
Adviser Shares, which were redesignated Class A shares on June 29,
2020.
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.
46
Victory
California Bond Fund
|
|
Fund
Shares | |||||
|
|
Year
Ended
2/29/24 |
11
Months
Ended
2/28/23(a) |
Year
Ended
3/31/22 |
Year
Ended
3/31/21 |
Year
Ended
3/31/20 |
Year
Ended
3/31/19 |
|
Net
Asset Value, Beginning of
Period |
$10.16 |
$10.81 |
$11.49 |
$11.17 |
$11.07 |
$10.92 |
|
Investment
Activities: |
|
|
|
|
|
|
|
Net
investment income (loss) |
0.33(b) |
0.29(b) |
0.27(b) |
0.27(b) |
0.30(b) |
0.34 |
|
Net
realized and unrealized
gains
(losses) |
0.25 |
(0.66) |
(0.68) |
0.32 |
0.10 |
0.15 |
|
Total
from Investment
Activities |
0.58 |
(0.37) |
(0.41) |
0.59 |
0.40 |
0.49 |
|
Distributions
to Shareholders
from: |
|
|
|
|
|
|
|
Net
investment income |
(0.33) |
(0.28) |
(0.27) |
(0.27) |
(0.30) |
(0.34) |
|
Total
Distributions |
(0.33) |
(0.28) |
(0.27) |
(0.27) |
(0.30) |
(0.34) |
|
Net
Asset Value, End of Period |
$10.41 |
$10.16 |
$10.81 |
$11.49 |
$11.17 |
$11.07 |
|
Total
Return(c),(d) |
5.87% |
(3.43)% |
(3.64)% |
5.36% |
3.62% |
4.61% |
|
Ratios
to Average Net Assets: |
|
|
|
|
|
|
|
Net
Expenses(e),(f),(g),(h) |
0.57%(i) |
0.59% |
0.55% |
0.56% |
0.53% |
0.52% |
|
Net
Investment Income
(Loss)(e) |
3.18% |
3.04% |
2.39% |
2.40% |
2.66% |
3.15% |
|
Gross
Expenses(e),(h) |
0.58%(i) |
0.59% |
0.55% |
0.56% |
0.53% |
0.52% |
|
Supplemental
Data: |
|
|
|
|
|
|
|
Net
Assets at end of period
(000's) |
$495,521 |
$516,046 |
$606,474 |
$655,948 |
$677,785 |
$691,391 |
|
Portfolio
Turnover(c),(j) |
2% |
19% |
11% |
32% |
33% |
18% |
(a)
Effective February
28, 2023, the Fund’s fiscal year-end changed from March 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)
Reflects total
annual operating expenses before reductions of any expenses paid indirectly. The
Fund's expenses paid indirectly decreased the expense ratios by less than
0.01%.
(j)
Portfolio turnover
is calculated on the basis of the Fund as a whole without distinguishing between
the classes of shares.
47
Victory
California Bond Fund
|
|
Institutional
Shares | |||
|
|
Year
Ended
2/29/24 |
11
Months
Ended
2/28/23(a) |
Year
Ended
3/31/22 |
6/29/20(b)
through
3/31/21 |
|
Net
Asset Value, Beginning of Period |
$10.16 |
$10.81 |
$11.48 |
$11.35 |
|
Investment
Activities: |
|
|
|
|
|
Net
investment income (loss)(c) |
0.33 |
0.30 |
0.28 |
0.21 |
|
Net
realized and unrealized gains (losses) |
0.26 |
(0.67) |
(0.67) |
0.13 |
|
Total
from Investment Activities |
0.59 |
(0.37) |
(0.39) |
0.34 |
|
Distributions
to Shareholders from: |
|
|
|
|
|
Net
investment income |
(0.34) |
(0.28) |
(0.28) |
(0.21) |
|
Total
Distributions |
(0.34) |
(0.28) |
(0.28) |
(0.21) |
|
Net
Asset Value, End of Period |
$10.41 |
$10.16 |
$10.81 |
$11.48 |
|
Total
Return(d),(e) |
5.92% |
(3.36)% |
(3.50)% |
3.01% |
|
Ratios
to Average Net Assets: |
|
|
|
|
|
Net
Expenses(f),(g),(h),(i) |
0.52%(j) |
0.51% |
0.51% |
0.50% |
|
Net
Investment Income (Loss)(f) |
3.22% |
3.17% |
2.43% |
2.44% |
|
Gross
Expenses(f),(i) |
0.60%(j) |
0.59% |
0.58% |
0.94% |
|
Supplemental
Data: |
|
|
|
|
|
Net
Assets at end of period (000's) |
$2,721 |
$1,515 |
$592 |
$911 |
|
Portfolio
Turnover(d),(k) |
2% |
19% |
11% |
32% |
(a)
Effective February
28, 2023, the Fund’s fiscal year-end changed from March 31 to February
28.
(b)
Commencement of
operations.
(c)
Per share net
investment income (loss) has been calculated using the average daily shares
method.
(d)
Not annualized for
periods less than one year.
(e)
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.
(f)
Annualized for
periods less than one year.
(g)
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 June 29, 2020, and in effect through June 30, 2024, instead of
coinciding with the Fund's fiscal year end.
(h)
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.
(i)
Does not include
acquired fund fees and expenses, if any.
(j)
Reflects total
annual operating expenses before reductions of any expenses paid indirectly. The
Fund's expenses paid indirectly decreased the expense ratios by less than
0.01%.
(k)
Portfolio turnover
is calculated on the basis of the Fund as a whole without distinguishing between
the classes of shares.
48
Victory
California Bond Fund
|
|
Class
A | |||||
|
|
Year
Ended
2/29/24 |
11
Months
Ended
2/28/23(a) |
Year
Ended
3/31/22 |
Year
Ended
3/31/21 |
Year
Ended
3/31/20 |
Year
Ended
3/31/19 |
|
Net
Asset Value, Beginning of
Period |
$10.15 |
$10.80 |
$11.47 |
$11.16 |
$11.06 |
$10.91 |
|
Investment
Activities: |
|
|
|
|
|
|
|
Net
investment income (loss) |
0.30(b) |
0.26(b) |
0.25(b) |
0.25(b) |
0.27(b) |
0.32 |
|
Net
realized and unrealized gains
(losses) |
0.26 |
(0.66) |
(0.67) |
0.31 |
0.10 |
0.15 |
|
Total
from Investment
Activities |
0.56 |
(0.40) |
(0.42) |
0.56 |
0.37 |
0.47 |
|
Distributions
to Shareholders from: |
|
|
|
|
|
|
|
Net
investment income |
(0.31) |
(0.25) |
(0.25) |
(0.25) |
(0.27) |
(0.32) |
|
Total
Distributions |
(0.31) |
(0.25) |
(0.25) |
(0.25) |
(0.27) |
(0.32) |
|
Net
Asset Value, End of Period |
$10.40 |
$10.15 |
$10.80 |
$11.47 |
$11.16 |
$11.06 |
|
Total
Return (excludes sales
charge)(c),(d) |
5.66% |
(3.69)% |
(3.78)% |
5.01% |
3.36% |
4.37% |
|
Ratios
to Average Net Assets: |
|
|
|
|
|
|
|
Net
Expenses(e),(f),(g),(h) |
0.78%(i) |
0.89% |
0.79% |
0.81% |
0.78% |
0.76% |
|
Net
Investment Income (Loss)(e) |
2.99% |
2.73% |
2.15% |
2.15% |
2.41% |
2.92% |
|
Gross
Expenses(e),(h) |
0.86%(i) |
0.97% |
0.85% |
0.88% |
0.78% |
0.76% |
|
Supplemental
Data: |
|
|
|
|
|
|
|
Net
Assets at end of period (000's) |
$432 |
$533 |
$1,098 |
$6,783 |
$6,381 |
$7,005 |
|
Portfolio
Turnover(c),(j) |
2% |
19% |
11% |
32% |
33% |
18% |
(a)
Effective February
28, 2023, the Fund’s fiscal year-end changed from March 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)
Reflects total
annual operating expenses before reductions of any expenses paid indirectly. The
Fund's expenses paid indirectly decreased the expense ratios by less than
0.01%.
(j)
Portfolio turnover
is calculated on the basis of the Fund as a whole without distinguishing between
the classes of shares.
49
Appendix A —
Variations in Sales Charge Reductions and Waivers Available Through Certain
Intermediaries
The
availability of certain initial and contingent deferred sales charge reductions
and waivers may depend on the particular financial intermediary or type of
account through which you purchase or hold Fund shares. The following
information about variations in sales charge reductions and waivers is
applicable only to investors who purchase Fund shares through a Merrill Lynch,
Ameriprise Financial, Morgan Stanley Wealth Management, Raymond James, Janney
Montgomery Scott, Edward D. Jones & Co., L.P., or Robert W. Baird & Co.
platform or account.
In all
instances, it is your responsibility to notify the Fund or your financial
intermediary at the time of purchase of any relationship or other facts
qualifying you for sales charge reductions or waivers. For reductions and
waivers not available through a particular intermediary, shareholders will have
to purchase Fund shares directly from the Fund or through another intermediary
to receive those reductions and waivers.
Merrill
Lynch (“Merrill”)
Purchases
or sales of front-end (i.e., Class A) or level-load (i.e., Class C) mutual fund
shares through a Merrill platform or account will be eligible only for the
following sales load waivers (front-end, contingent deferred, or back-end
waivers) and discounts, which differ from those disclosed elsewhere in this
Fund’s prospectus. Purchasers will have to buy mutual fund shares directly from
the mutual fund company or through another intermediary to be eligible for
waivers or discounts not listed below.
It is the
client’s responsibility to notify Merrill at the time of purchase or sale of any
relationship or other facts that qualify the transaction for a waiver or
discount. A Merrill representative may ask for reasonable documentation of such
facts and Merrill may condition the granting of a waiver or discount on the
timely receipt of such documentation.
Additional
information on waivers and discounts is available in the Merrill Sales Load
Waiver and Discounts Supplement (the “Merrill SLWD Supplement”) and in the
Mutual Fund Investing at Merrill pamphlet at ml.com/funds. Clients are
encouraged to review these documents and speak with their financial advisor to
determine whether a transaction is eligible for a waiver or
discount.
Front-end
Load Waivers Available at Merrill
◼
Shares of
mutual funds available for purchase by employer-sponsored retirement, deferred
compensation, and employee benefit plans (including health savings accounts) and
trusts used to fund those plans provided the shares are not held in a
commission-based brokerage account and shares are held for the benefit of the
plan. For purposes of this provision, employer-sponsored retirement plans do not
include SEP IRAs, Simple IRAs, SAR-SEPs or Keogh plans
◼
Shares
purchased through a Merrill investment advisory program
◼
Brokerage
class shares exchanged from advisory class shares due to the holdings moving
from a Merrill investment advisory program to a Merrill brokerage
account
◼
Shares
purchased through the Merrill Edge Self-Directed platform
◼
Shares
purchased through the systematic reinvestment of capital gains distributions and
dividend reinvestment when purchasing shares of the same mutual fund in the same
account
◼
Shares
exchanged from level-load shares to front-end load shares of the same mutual
fund in accordance with the description in the Merrill SLWD
Supplement
◼
Shares
purchased by eligible employees of Merrill or its affiliates and their family
members who
50
Appendix
A — Variations in Sales Charge Reductions and Waivers Available
Through Certain Intermediaries
purchase
shares in accounts within the employee’s Merrill Household (as defined in the
Merrill SLWD Supplement)
◼
Shares
purchased by eligible persons associated with the fund as defined in this
prospectus (e.g., the fund’s officers or trustees)
◼
Shares
purchased from the proceeds of a mutual fund redemption in front-end load shares
provided (1) the repurchase is in a mutual fund within the same fund
family; (2) the repurchase occurs within 90 calendar days from the redemption
trade date, and (3) the redemption and purchase occur in the same account
(known as Rights of Reinstatement). Automated transactions (i.e., systematic
purchases and withdrawals) and purchases made after shares are automatically
sold to pay Merrill’s account maintenance fees are not eligible for Rights of
Reinstatement
Contingent
Deferred Sales Charge (“CDSC”) Waivers on Front-end, Back-end, and Level Load
Shares Available at Merrill
◼
Shares
sold due to the client’s death or disability (as defined by Internal Revenue
Code Section 22I(3))
◼
Shares
sold pursuant to a systematic withdrawal program subject to Merrill’s maximum
systematic withdrawal limits as described in the Merrill SLWD
Supplement
◼
Shares
sold due to return of excess contributions from an IRA
account
◼
Shares
sold as part of a required minimum distribution for IRA and retirement accounts
due to the investor reaching the qualified age based on applicable IRS
regulation
◼
Front-end
or level-load shares held in commission-based, non-taxable retirement brokerage
accounts (e.g., traditional, Roth, rollover, SEP IRAs, Simple IRAs, SAR-SEPs or
Keogh plans) that are transferred to fee-based accounts or platforms and
exchanged for a lower cost share class of the same mutual
fund
Front-end
Load Discounts Available at Merrill: Breakpoints, Rights of Accumulation &
Letters of Intent
◼
Breakpoint
discounts, as described in this prospectus, where the sales load is at or below
the maximum sales load that Merrill permits to be assessed to a front-end load
purchase, as described in the Merrill SLWD Supplement
◼
Rights of
Accumulation (ROA), as described in the Merrill SLWD Supplement, which entitle
clients to breakpoint discounts based on the aggregated holdings of mutual fund
family assets held in accounts in their Merrill Household
◼
Letters of
Intent (LOI), which allow for breakpoint discounts on eligible new purchases
based on anticipated future eligible purchases within a fund family at Merrill,
in accounts within your Merrill Household, as further described in the Merrill
SLWD Supplement
Ameriprise
Financial
Class
A Shares Front-End Sales Charge Waivers Available at Ameriprise
Financial
Shareholders
purchasing Fund shares through an Ameriprise Financial brokerage account are
eligible for the following front-end sales charge waivers, which may differ from
those disclosed elsewhere in this Fund’s prospectus or SAI:
◼
Employer-sponsored
retirement plans (e.g., 401(k) plans, 457 plans, employer-sponsored 403(b)
plans, profit sharing and money purchase pension plans and defined benefit
plans). For purposes of this provision, employer-sponsored retirement plans do
not include SEP IRAs, Simple IRAs or SAR-SEPs.
◼
Shares
purchased through reinvestment of capital gains distributions and dividend
reinvestment
51
Appendix
A — Variations in Sales Charge Reductions and Waivers Available
Through Certain Intermediaries
when
purchasing shares of the same Fund (but not any other fund within the same fund
family).
◼
Shares
exchanged from Class C shares of the same fund in the month of or following the
7-year anniversary of the purchase date. To the extent that this prospectus
elsewhere provides for a waiver with respect to exchanges of Class C shares or
conversion of Class C shares following a shorter holding period, that waiver
will apply.
◼
Employees
and registered representatives of Ameriprise Financial or its affiliates and
their immediate family members.
◼
Shares
purchased by or through qualified accounts (including IRAs, Coverdell Education
Savings Accounts, 401(k)s, 403(b) TSCAs subject to ERISA and defined benefit
plans) that are held by a covered family member, defined as an Ameriprise
financial advisor and/or the advisor’s spouse, advisor’s lineal ascendant
(mother, father, grandmother, grandfather, great grandmother, great
grandfather), advisor’s lineal descendant (son, step-son, daughter,
step-daughter, grandson, granddaughter, great grandson, great granddaughter) or
any spouse of a covered family member who is a lineal descendant.
◼
Shares
purchased from the proceeds of redemptions within the same fund family, provided
(1) the repurchase occurs within 90 days following the redemption, (2) the
redemption and purchase occur in the same account, and (3) redeemed shares were
subject to a front-end or deferred sales load (i.e. Rights of
Reinstatement).
Morgan
Stanley Wealth Management
Shareholders
purchasing Fund shares through a Morgan Stanley Wealth Management transactional
brokerage account are eligible only for the following front-end sales charge
waivers with respect to Class A shares, which may differ from and may be more
limited than those disclosed elsewhere in the Fund's Prospectus or
SAI.
Front-end
Sales Charge Waivers on Class A Shares available at Morgan
Stanley
◼
Employer-sponsored
retirement plans (e.g., 401(k) plans, 457 plans, employer-sponsored 403(b)
plans, profit sharing and money purchase pension plans and defined benefit
plans). For purposes of this provision, employer-sponsored retirement plans do
not include SEP IRAs, Simple IRAs, SAR-SEPs or Keogh
plans
◼
Morgan
Stanley employee and employee-related accounts according to Morgan Stanley's
account linking rules
◼
Shares
purchased through reinvestment of dividends and capital gains distributions when
purchasing shares of the same fund
◼
Shares
purchased through a Morgan Stanley self-directed brokerage
account
◼
Class C
(i.e., level-load) shares that are no longer subject to a contingent deferred
sales charge and are converted to Class A shares of the same fund pursuant to
Morgan Stanley Wealth Management’s share class conversion
program
◼
Shares
purchased from the proceeds of redemptions within the same fund family, provided
(i) the repurchase occurs within 90 days following the redemption, (ii) the
redemption and purchase occur in the same account, and (iii) redeemed shares
were subject to a front-end or deferred sales charge
52
Appendix
A — Variations in Sales Charge Reductions and Waivers Available
Through Certain Intermediaries
Raymond
James & Associates, Inc., Raymond James Financial Services, Inc. and each
entity’s affiliates (“Raymond James”)
Shareholders
purchasing fund shares through a Raymond James platform or account, or through
an introducing broker-dealer or independent registered investment adviser for
which Raymond James provides trade execution, clearance, and/or custody
services, will be eligible only for the following load waivers (front-end sales
charge waivers and contingent deferred, or back-end, sales charge waivers) and
discounts, which may differ from those disclosed elsewhere in this Fund's
Prospectus or SAI.
Front-End
Sales Charge Waivers on Class A Shares available at Raymond
James
◼
Shares
purchased in an investment advisory program
◼
Shares
purchased within the same fund family through a systematic reinvestment of
capital gains and dividend distributions
◼
Employees
and registered representatives of Raymond James or its affiliates and their
family members as designated by Raymond James
◼
Shares
purchased from the proceeds of redemptions within the same fund family, provided
(1) the repurchase occurs within 90 days following the redemption, (2) the
redemption and purchase occur in the same account, and (3) redeemed shares were
subject to a front-end or deferred sales load (known as Rights of
Reinstatement)
◼
A
shareholder in the Fund's Class C shares will have their shares converted at net
asset value to Class A shares (or the appropriate share class) of the Fund if
the shares are no longer subject to a CDSC and the conversion is in line with
the policies and procedures of Raymond James
CDSC
Waivers on Classes A and C Shares available at Raymond James
◼
Death or
disability of the shareholder
◼
Shares
sold as part of a systematic withdrawal plan as described in the Fund's
Prospectus
◼
Return of
excess contributions from an IRA Account
◼
Shares
sold as part of a required minimum distribution for IRA and retirement accounts
due to the shareholder reaching the qualified age based on applicable IRS
regulations as described in the fund's prospectus
◼
Shares
sold to pay Raymond James fees but only if the transaction is initiated by
Raymond James
◼
Shares
acquired through a right of reinstatement
Front-End
Load Discounts Available at Raymond James: Breakpoints, Rights of Accumulation,
and/or Letters of Intent
◼
Breakpoints
as described in this Prospectus
◼
Rights of
Accumulation which entitle shareholders to breakpoint discounts will be
automatically calculated based on the aggregated holding of fund family assets
held by accounts within the purchaser's household at Raymond James. Eligible
fund family assets not held at Raymond James may be included in the calculation
of rights of accumulation only if the shareholder notifies his or her financial
advisor about such assets
◼
Letters of
intent which allow for breakpoint discounts based on anticipated purchases
within a fund family, over a 13-month time period. Eligible fund family assets
not held at Raymond James may be included in the calculation of letters of
intent only if the shareholder notifies his or her financial advisor about such
assets
53
Appendix
A — Variations in Sales Charge Reductions and Waivers Available
Through Certain Intermediaries
Janney
Montgomery Scott LLC (“Janney”)
Shareholders
purchasing fund shares through a Janney brokerage account will be eligible only
for the following load waivers (front-end sales charge waivers and contingent
deferred sales charge (“CDSC”), or back-end, sales charge waivers) and
discounts, which may differ from those disclosed elsewhere in this Fund's
Prospectus or SAI.
Front-End
Sales Charge Waivers on Class A shares available at Janney1
◼
Shares
purchased through reinvestment of capital gains distributions and dividend
reinvestment when purchasing shares of the same fund (but not any other fund
within the fund family)
◼
Shares
purchased by employees and registered representatives of Janney or its
affiliates and their family members as designated by
Janney
◼
Shares
purchased from the proceeds of redemptions within the same fund family, provided
(1) the repurchase occurs within ninety (90) days following the redemption, (2)
the redemption and purchase occur in the same account, and (3) redeemed shares
were subject to a front-end or deferred sales load (i.e., right of
reinstatement)
◼
Employer-sponsored
retirement plans (e.g., 401(k) plans, 457 plans, employer-sponsored 403(b)
plans, profit sharing and money purchase pension plans and defined benefit
plans). For purposes of this provision, employer-sponsored retirement plans do
not include SEP IRAs, Simple IRAs, SAR-SEPs or Keogh
plans
◼
Shares
acquired through a right of reinstatement
◼
Class C
shares that are no longer subject to a contingent deferred sales charge and are
converted to Class A shares of the same fund pursuant to Janney’s policies and
procedures
CDSC
Waivers on Class A and C shares available at Janney
◼
Shares
sold upon the death or disability of the shareholder
◼
Shares
sold as part of a systematic withdrawal plan as described in the fund’s
Prospectus
◼
Shares
purchased in connection with a return of excess contributions from an IRA
account
◼
Shares
sold as part of a required minimum distribution for IRA and other retirement
accounts due to the shareholder reaching the qualified age based on applicable
Internal Revenue Service regulations as described in the fund’s
Prospectus.
◼
Shares
sold to pay Janney fees but only if the transaction is initiated by
Janney
◼
Shares
acquired through a right of reinstatement
◼
Shares
exchanged into the same share class of a different fund.
Front-End
Load Discounts available at Janney: Breakpoints, Rights of Accumulation and/or
letters of intent1
◼
Breakpoints
as described in this Prospectus
◼
Rights of
accumulation (“ROA”), which entitle shareholders to breakpoint discounts, will
be automatically calculated based on the aggregated holding of fund family
assets held by accounts within the purchaser’s household at Janney. Eligible
fund family assets not held at Janney may be included in the ROA calculation
only if the shareholder notifies his or her financial advisor about such
assets
◼
Letters of
intent which allow for breakpoint discounts based on anticipated purchases
within a fund family, over a 13-month time period. Eligible fund family assets
not held at Janney may be included in the calculation of letters of intent only
if the shareholder notifies his or her financial advisor about such
assets
1 Also
referred to as an “initial sales charge.”
54
Appendix
A — Variations in Sales Charge Reductions and Waivers Available
Through Certain Intermediaries
Edward
D. Jones & Co., L.P. (“Edward Jones”)
The
following information supersedes prior information with respect to transactions
and positions held in fund shares through an Edward Jones systems. Clients of
Edward Jones (also referred to as “shareholders”) purchasing fund shares on the
Edward Jones commission and fee-based platforms are eligible only for the
following sales charge discounts (also referred to as “breakpoints”) and
waivers, which can differ from discounts and waivers described elsewhere in the
Fund’s Prospectus or SAI or through another broker-dealer. In all instances, it
is the shareholder’s responsibility to inform Edward Jones at the time of
purchase of any relationship, holdings of the Victory Funds, or other facts
qualifying the purchaser for discounts or waivers. Edward Jones can ask for
documentation of such circumstance. Shareholders should contact Edward Jones if
they have questions regarding their eligibility for these discounts and
waivers.
Breakpoints
◼
Breakpoint
pricing, otherwise known as volume pricing, at dollar thresholds as described in
the prospectus.
Rights
of Accumulation (“ROA”)
◼
The
applicable sales charge on a purchase of Class A shares is determined by taking
into account all share classes (except certain money market funds and any assets
held in group retirement plans) of the Victory Funds held by the shareholder or
in an account grouped by Edward Jones with other accounts for the purpose of
providing certain pricing considerations (“pricing groups”). If grouping assets
as a shareholder, this includes all share classes held on the Edward Jones
platform and/or held on another platform. The inclusion of eligible fund family
assets in the ROA calculation is dependent on the shareholder notifying Edward
Jones of such assets at the time of calculation. Money market funds are included
only if such shares were sold with a sales charge at the time of purchase or
acquired in exchange for shares purchased with a sales
charge.
◼
The
employer maintaining a SEP IRA plan and/or SIMPLE IRA plan may elect to
establish or change ROA for the IRA accounts associated with the plan to a
plan-level grouping as opposed to including all share classes at a shareholder
or pricing group level.
◼
ROA is
determined by calculating the higher of cost minus redemptions or market value
(current shares x NAV).
Letter
of Intent (“LOI”)
◼
Through a
LOI, shareholders can receive the sales charge and breakpoint discounts for
purchases shareholders intend to make over a 13-month period from the date
Edward Jones receives the LOI. The LOI is determined by calculating the higher
of cost or market value of qualifying holdings at LOI initiation in combination
with the value that the shareholder intends to buy over a 13-month period to
calculate the front-end sales charge and any breakpoint discounts. Each purchase
the shareholder makes during that 13-month period will receive the sales charge
and breakpoint discount that applies to the total amount. The inclusion of
eligible fund family assets in the LOI calculation is dependent on the
shareholder notifying Edward Jones of such assets at the time of calculation.
Purchases made before the LOI is received by Edward Jones are not adjusted under
the LOI and will not reduce the sales charge previously paid. Sales charges will
be adjusted if the LOI is not met.
◼
If the
employer maintaining a SEP IRA plan and/or SIMPLE IRA plan has elected to
establish or change ROA for the IRA accounts associated with the plan to a
plan-level grouping, LOIs will also be at the plan-level and may only be
established by the employer.
55
Appendix
A — Variations in Sales Charge Reductions and Waivers Available
Through Certain Intermediaries
Sales
Charge Waivers
Sales
charges are waived for the following shareholders and in the following
situations:
◼
Associates
of Edward Jones and its affiliates and other accounts in the same pricing group
(as determined by Edward Jones under its policies and procedures) as the
associate. This waiver will continue for the remainder of the associate's life
if the associate retires from Edward Jones in good-standing and remains in good
standing pursuant to Edward Jones' policies and procedures.
◼
Shares
purchased in an Edward Jones fee-based program.
◼
Shares
purchased through reinvestment of capital gains distributions and dividend
reinvestment.
◼
Shares
purchased from the proceeds of redeemed shares of the same fund family so long
as the following conditions are met: the proceeds are from the sale of shares
within 60 days of the purchase, the sale and purchase are made from a share
class that charges a front load and one of the following:
◼
The
redemption and repurchase occur in the same account.
◼
The
redemption proceeds are used to process an: IRA contribution, excess
contributions, conversion, recharacterizing of contributions, or distribution,
and the repurchase is done in an account within the same Edward Jones grouping
for ROA.
◼
Shares
exchanged into Class A shares from another share class so long as the exchange
is into the same fund and was initiated at the discretion of Edward Jones.
Edward Jones is responsible for any remaining CDSC due to the fund company, if
applicable. Any future purchases are subject to the applicable sales charge as
disclosed in the prospectus.
◼
Exchanges
from Class C shares to Class A shares of the same fund, generally, in the 84th
month following the anniversary of the purchase date or earlier at the
discretion of Edward Jones.
◼
Purchases
of Class 529-A shares through a rollover from either another education savings
plan or a security used for qualified distributions.
◼
Purchases
of Class 529 shares made for recontribution of refunded
amounts.
Contingent
Deferred Sales Charge (“CDSC”) Waivers
If the
shareholder purchases shares that are subject to a CDSC and those shares are
redeemed before the CDSC is expired, the shareholder is responsible to pay the
CDSC except in the following conditions:
◼
The death
or disability of the shareholder.
◼
Systematic
withdrawals with up to 10% per year of account value.
◼
Return of
excess contributions from an Individual Retirement Account
(IRA).
◼
Shares
redeemed as part of a required minimum distribution for IRA and retirement
accounts if the redemption is taken in or after the year the shareholder reaches
qualified age based on applicable IRS regulations.
◼
Shares
redeemed to pay Edward Jones fees or costs in such cases where the transaction
is initiated by Edward Jones.
◼
Shares
exchanged in an Edward Jones fee-based program.
◼
Shares
acquired through NAV reinstatement.
◼
Shares
redeemed at the discretion of Edward Jones for Minimum Balances, as described
below.
Other
Important Information Regarding Transactions Through Edward Jones
Minimum
Purchase Amounts
◼
Initial
purchase minimum: $250
◼
Subsequent
purchase minimum: none
56
Appendix
A — Variations in Sales Charge Reductions and Waivers Available
Through Certain Intermediaries
Minimum
Balances
◼
Edward
Jones has the right to redeem at its discretion fund holdings with a balance of
$250 or less. The following are examples of accounts that are not included in
this policy:
◼
A
fee-based account held on an Edward Jones platform
◼
A 529
account held on an Edward Jones platform
◼
An account
with an active systematic investment plan or LOI
Exchanging
Share Classes
◼
At any
time it deems necessary, Edward Jones has the authority to exchange at NAV a
shareholder's holdings in a fund to Class A shares of the same
fund.
Oppenheimer
& Co. Inc. (“OPCO”)
Shareholders
purchasing Fund shares through an Oppenheimer & Co. Inc. platform or account
are eligible only for the following load waivers (front-end sales charge waivers
and contingent deferred, or back-end, sales charge waivers) and discounts, which
may differ from those disclosed elsewhere in this Fund’s prospectus or
SAI.
Front-End
Sales Charge Waivers on Class A Shares available at OPCO
◼
Employer-sponsored
retirement, deferred compensation and employee benefit plans (including health
savings accounts) and trusts used to fund those plans, provided that the shares
are not held in a commission-based brokerage account and shares are held for the
benefit of the plan
◼
Shares
purchased by or through a 529 Plan
◼
Shares
purchased through an OPCO affiliated investment advisory
program
◼
Shares
purchased through reinvestment of capital gains distributions and dividend
reinvestment when purchasing shares of the same fund (but not any other fund
within the fund family)
◼
Shares
purchased from the proceeds of redemptions within the same fund family, provided
(1) the repurchase occurs within 90 days following the redemption, (2) the
redemption and purchase occur in the same account, and (3) redeemed shares were
subject to a front-end or deferred sales load (known as Rights of
Restatement)
◼
A
shareholder in the Fund’s Class C shares will have their shares converted at net
asset value to Class A shares (or the appropriate share class) of the Fund if
the shares are no longer subject to a CDSC and the conversion is in line with
the policies and procedures of OPCO
◼
Employees
and registered representatives of OPCO or its affiliates and their family
members
◼
Directors
or Trustees of the Fund, and employees of the Fund’s investment adviser or any
of its affiliates, as described in this prospectus
CDSC
Waivers on A and C Shares available at OPCO
◼
Death or
disability of the shareholder
◼
Shares
sold as part of a systematic withdrawal plan as described in the Fund's
Prospectus
◼
Return of
excess contributions from an IRA Account
◼
Shares
sold as part of a required minimum distribution for IRA and retirement accounts
due to the shareholder reaching the qualified age based on applicable IRS
regulations as described in the prospectus
◼
Shares
sold to pay OPCO fees but only if the transaction is initiated by
OPCO
◼
Shares
acquired through a right of reinstatement
57
Appendix
A — Variations in Sales Charge Reductions and Waivers Available
Through Certain Intermediaries
Front-end
load Discounts Available at OPCO: Breakpoints, Rights of Accumulation &
Letters of Intent
◼
Breakpoints
as described in this Prospectus
◼
Rights of
Accumulation (ROA) which entitle shareholders to breakpoint discounts will be
automatically calculated based on the aggregated holding of fund family assets
held by accounts within the purchaser’s household at OPCO. Eligible fund family
assets not held at OPCO may be included in the ROA calculation only if the
shareholder notifies his or her financial advisor about such
assets
Waivers
Specific to Stifel, Nicolaus & Company, Incorporated (“Stifel”)
Shareholders
purchasing Fund shares through a Stifel platform or account or who own shares
for which Stifel or an affiliate is the broker-dealer of record are eligible for
the following additional sales charge waiver.
Front-end
Sales Load Waiver on Class A Shares
◼
Class C
shares that have been held for more than seven (7) years will be converted to
Class A shares of the same Fund pursuant to Stifel’s policies and
procedures
All other
sales charge waivers and reductions described elsewhere in the Fund’s Prospectus
or SAI still apply.
Robert
W. Baird & Co. (“Baird”)
Shareholders
purchasing fund shares through a Baird platform or account will only be eligible
for the following sales charge waivers (front-end sales charge waivers and CDSC
waivers) and discounts, which may differ from those disclosed elsewhere in this
prospectus or the SAI
Front-End
Sales Charge Waivers on Investors A-shares Available at Baird
◼
Shares
purchased through reinvestment of capital gains distributions and dividend
reinvestment when purchasing shares of the same fund
◼
Shares
purchase by employees and registers representatives of Baird or its affiliate
and their family members as designated by Baird
◼
Shares
purchased using the proceeds of redemptions from a Victory Fund, provided (1)
the repurchase occurs within 90 days following the redemption, (2) the
redemption and purchase occur in the same accounts, and (3) redeemed shares were
subject to a front-end or deferred sales charge (known as rights of
reinstatement)
◼
A
shareholder in the Funds Investor C Shares will have their share converted at
net asset value to Investor A shares of the same fund if the shares are no
longer subject to CDSC and the conversion is in line with the policies and
procedures of Baird
◼
Employer-sponsored
retirement plans or charitable accounts in a transactional brokerage account at
Baird, including 401(k) plans, 457 plans, employer-sponsored 403(b) plans,
profit sharing and money purchase pension plans and defined benefit plans. For
purposes of this provision, employer-sponsored retirement plans do not include
SEP IRAs, Simple IRAs or SAR-SEPs
CDSC
Waivers on Investor A and C shares Available at Baird
◼
Shares
sold due to death or disability of the shareholder
◼
Shares
sold as part of a systematic withdrawal plan as described in the Fund’s
Prospectus
◼
Shares
bought due to returns of excess contributions from an IRA
Account
58
Appendix
A — Variations in Sales Charge Reductions and Waivers Available
Through Certain Intermediaries
◼
Shares
sold as part of a required minimum distribution for IRA and retirement accounts
due to the shareholder reaching the qualified age based on applicable Internal
Revenue Service regulations as described in the Fund’s
prospectus
◼
Shares
sold to pay Baird fees but only if the transaction is initiated by
Baird
◼
Shares
acquired through a right of reinstatement
Front-End
Sales Charge Discounts Available at Baird: Breakpoints and/or Rights of
Accumulations
◼
Breakpoints
as described in this prospectus
◼
Rights of
accumulations which entitles shareholders to breakpoint discounts will be
automatically calculated based on the aggregated holding of Victory Funds assets
held by accounts within the purchaser’s household at Baird. Eligible Victory
Funds assets not held at Baird may be included in the rights of accumulations
calculation only if the shareholder notifies his or her financial advisor about
such assets
◼
Letters of
Intent (“LOI”) allow for breakpoint discounts based on anticipated purchases of
Victory Funds through Baird, over a 13-month period of time
J.P.
Morgan Securities LLC
If you
purchase or hold fund shares through an applicable J.P. Morgan Securities LLC
brokerage account, you will be eligible for the following sales charge waivers
(front-end sales charge waivers and contingent deferred sales charge (“CDSC”),
or back-end sales charge, waivers), share class conversion policy and discounts,
which may differ from those disclosed elsewhere in this fund’s prospectus or
Statement of Additional Information.
Front-end
sales charge waivers on Class A shares available at J.P. Morgan Securities
LLC
◼
Shares
exchanged from Class C (i.e. level-load) shares that are no longer subject to a
CDSC and are exchanged into Class A shares of the same fund pursuant to J.P.
Morgan Securities LLC’s share class exchange policy.
◼
Qualified
employer-sponsored defined contribution and defined benefit retirement plans,
nonqualified deferred compensation plans, other employee benefit plans and
trusts used to fund those plans. For purposes of this provision, such
plans do not include SEP IRAs, SIMPLE IRAs, SAR-SEPs or 501(c)(3)
accounts.
◼
Shares of
funds purchased through J.P. Morgan Securities LLC Self-Directed Investing
accounts.
◼
Shares
purchased through rights of reinstatement.
◼
Shares
purchased through reinvestment of capital gains distributions and dividend
reinvestment when purchasing shares of the same fund (but not any other fund
within the fund family).
◼
Shares
purchased by employees and registered representatives of J.P. Morgan Securities
LLC or its affiliates and their spouse or financial dependent as defined by J.P.
Morgan Securities LLC.
Class
C to Class A share conversion
◼
A
shareholder in the fund’s Class C shares will have their shares converted to
Class A shares (or the appropriate share class) of the same fund if the shares
are no longer subject to a CDSC and the conversion is consistent with J.P.
Morgan Securities LLC’s policies and procedures.
CDSC
waivers on Class A and C shares available at J.P. Morgan Securities
LLC
◼
Shares
sold upon the death or disability of the shareholder.
◼
Shares
sold as part of a systematic withdrawal plan as described in the fund’s
prospectus.
◼
Shares
purchased in connection with a return of excess contributions from an IRA
account.
59
Appendix
A — Variations in Sales Charge Reductions and Waivers Available
Through Certain Intermediaries
◼
Shares
sold as part of a required minimum distribution for IRA and retirement accounts
pursuant to the Internal Revenue Code.
◼
Shares
acquired through a right of reinstatement.
Front-end
load discounts available at J.P. Morgan Securities LLC: breakpoints, rights of
accumulation & letters of intent
◼
Breakpoints
as described in the prospectus.
◼
Rights of
Accumulation (“ROA”) which entitle shareholders to breakpoint discounts as
described in the fund’s prospectus will be automatically calculated based on the
aggregated holding of fund family assets held by accounts within the purchaser’s
household at J.P. Morgan Securities LLC. Eligible fund family assets not held at
J.P. Morgan Securities LLC (including 529 program holdings, where applicable)
may be included in the ROA calculation only if the shareholder notifies their
financial advisor about such assets.
Letters
of Intent (“LOI”), which allow for breakpoint discounts based on anticipated
purchases within a fund family, through J.P. Morgan Securities LLC, over a
13-month period of time (if applicable).
60
Appendix B —
Taxable-Equivalent Yield Table for 2024
Combined
2024 Federal and California State Income Tax Rates
|
Assuming
a Federal Marginal Tax Rate of: |
24.00% |
35.80%* |
38.80%* |
40.80%* |
|
and
a State Rate of: |
9.30% |
9.30% |
10.30% |
12.30% |
|
The
Effective Marginal Tax Rate Would be: |
31.07% |
41.77% |
45.10% |
48.08% |
|
To
Match a Double Tax-Free Yield of: |
A
Fully Taxable Investment Would Have to Pay You: | |||
|
1.00% |
1.45% |
1.72% |
1.82% |
1.93% |
|
1.50% |
2.18% |
2.58% |
2.73% |
2.89% |
|
2.00% |
2.90% |
3.43% |
3.64% |
3.85% |
|
2.50% |
3.63% |
4.29% |
4.55% |
4.82% |
|
3.00% |
4.35% |
5.15% |
5.46% |
5.78% |
|
3.50% |
5.08% |
6.01% |
6.38% |
6.74% |
|
4.00% |
5.80% |
6.87% |
7.29% |
7.70% |
|
4.50% |
6.53% |
7.73% |
8.20% |
8.67% |
|
5.00% |
7.25% |
8.59% |
9.11% |
9.63% |
|
5.50% |
7.98% |
9.45% |
10.02% |
10.59% |
|
6.00% |
8.70% |
10.30% |
10.93% |
11.56% |
|
6.50% |
9.43% |
11.16% |
11.84% |
12.52% |
|
7.00% |
10.16% |
12.02% |
12.75% |
13.48% |
* The
above marginal rates reflect the 3.8% additional tax on “net investment income”
of individuals, estates, and trusts that exceeds certain thresholds. See
Shareholder
Taxation under
Distribution
and Taxes in this
prospectus.
Where
applicable, the table assumes the highest state rates corresponding to the
federal marginal tax rate.
A fully
taxable investment is a bond that pays taxable interest or shares of a mutual
fund that does not pay exempt-interest dividends.
This table
is a hypothetical illustration and should not be considered an indication of
Fund performance of any of the Victory Tax Exempt Funds.
These
rates were selected as examples that would be relevant to most
taxpayers.
61
14254-0724
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