FORM OF
INVESTMENT ADVISORY AGREEMENT
BETWEEN
THE VICTORY PORTFOLIOS
AND
KEY ASSET MANAGEMENT, INC.
AGREEMENT made as of the ___ day of _____, 199_, by and between The Victory
Portfolios, a Delaware business trust which may issue one or more series of
shares of beneficial interest (the "Company"), and Key Asset Management, Inc.,
an Ohio corporation (the "Adviser").
WHEREAS, the Company is registered as an open-end, management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Company desires to retain the Adviser to furnish investment
advisory services to the funds listed on Schedule A (each, a "Fund" and
collectively, the "Funds"), and the Adviser represents that it is willing and
possesses legal authority to so furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT.
(a) General. The Company hereby appoints the Adviser to act as investment
adviser to the Funds for the period and on the terms set forth in this
Agreement. The Adviser accepts such appointment and agrees to furnish
the services herein set forth for the compensation herein provided.
(b) Employees of Affiliates. The Adviser may, in its discretion, provide
such services through its own employees or the employees of one or
more affiliated companies that are qualified to act as an investment
adviser to the Company under applicable laws and are under the control
of KeyCorp, the indirect parent of the Adviser; provided that (i) all
persons, when providing services hereunder, are functioning as part of
an organized group of persons, and (ii) such organized group of
persons is managed at all times by authorized officers of the Adviser.
(c) Sub-Advisers. It is understood and agreed that the Adviser may from
time to time employ or associate with such other entities or persons
as the Adviser believes appropriate to assist in the performance of
this Agreement with respect to a particular Fund or Funds (each a
"Sub-Adviser"), and that any such Sub-Adviser shall have all of the
rights and powers of the Adviser set forth in this Agreement; provided
that a Fund shall not pay any additional compensation for any Sub-
Adviser and the Adviser shall be as fully responsible to the Company
for the acts and omissions of the Sub-Adviser as it is for its own
acts and omissions; and
provided further that the retention of any Sub-Adviser shall be
approved in advance by (i) the Board of Trustees of the Company and
(ii) the shareholders of the relevant Fund if required under any
applicable provisions of the 1940 Act or any exemptive relief granted
thereunder. The Adviser will review, monitor and report to the
Company's Board of Trustees regarding the performance and investment
procedures of any Sub-Adviser. In the event that the services of any
Sub-Adviser are terminated, the Adviser may provide investment
advisory services pursuant to this Agreement to the Fund without a
Sub-Adviser or employ another Sub-Adviser without further shareholder
approval, to the extent consistent with the 1940 Act or any exemptive
relief granted thereunder. A Sub-Adviser may be an affiliate of the
Adviser.
2. DELIVERY OF DOCUMENTS. The Company has delivered to the Adviser copies
of each of the following documents along with all amendments thereto through the
date hereof, and will promptly deliver to it all future amendments and
supplements thereto, if any:
(a) the Company's Trust Instrument;
(b) the By-Laws of the Company;
(c) resolutions of the Board of Trustees of the Company authorizing the
execution and delivery of this Agreement;
(d) the most recent Post-Effective Amendment to the Company's Registration
Statement under the Securities Act of 1933, as amended (the "1933
Act"), and the 1940 Act, on Form N-1A as filed with the Securities and
Exchange Commission (the "Commission");
(e) Notification of Registration of the Company under the 1940 Act on Form
N-8A as filed with the Commission; and
(f) the currently effective Prospectuses and Statements of Additional
Information of the Funds.
3. INVESTMENT ADVISORY SERVICES.
(a) Management of the Funds. The Adviser hereby undertakes to act as
investment adviser to the Funds. The Adviser shall regularly provide
investment advice to the Funds and continuously supervise the
investment and reinvestment of cash, securities and other property
composing the assets of the Funds and, in furtherance thereof, shall:
(i) supervise all aspects of the operations of the Company and each
Fund;
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(ii) obtain and evaluate pertinent economic, statistical and financial
data, as well as other significant events and developments, which
affect the economy generally, the Funds' investment programs, and
the issuers of securities included in the Funds' portfolios and
the industries in which they engage, or which may relate to
securities or other investments which the Adviser may deem
desirable for inclusion in a Fund's portfolio;
(iii)determine which issuers and securities shall be included in the
portfolio of each Fund;
(iv) furnish a continuous investment program for each Fund;
(v) in its discretion and without prior consultation with the
Company, buy, sell, lend and otherwise trade any stocks, bonds
and other securities and investment instruments on behalf of each
Fund; and
(vi) take, on behalf of each Fund, all actions the Adviser may deem
necessary in order to carry into effect such investment program
and the Adviser's functions as provided above, including the
making of appropriate periodic reports to the Company's Board of
Trustees.
(b) Covenants. The Adviser shall carry out its investment advisory and
supervisory responsibilities in a manner consistent with the
investment objectives, policies, and restrictions provided in: (i)
each Fund's Prospectus and Statement of Additional Information as
revised and in effect from time to time; (ii) the Company's Trust
Instrument, By-Laws or other governing instruments, as amended from
time to time; (iii) the 1940 Act; (iv) other applicable laws; and (v)
such other investment policies, procedures and/or limitations as may
be adopted by the Company with respect to a Fund and provided to the
Adviser in writing. The Adviser agrees to use reasonable efforts to
manage each Fund so that it will qualify, and continue to qualify, as
a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended, and regulations issued thereunder
(the "Code"), except as may be authorized to the contrary by the
Company's Board of Trustees. The management of the Funds by the
Adviser shall at all times be subject to the review of the Company's
Board of Trustees.
(c) Books and Records. Pursuant to applicable law, the Adviser shall keep
each Fund's books and records required to be maintained by, or on
behalf of, the Funds with respect to advisory services rendered
hereunder. The Adviser agrees that all records which it maintains for
a Fund are the property of the Fund and it will promptly surrender any
of such records to the Fund upon the Fund's request. The Adviser
further agrees to preserve for the periods prescribed by Rule 31a-2
under the 1940 Act any such records of the Fund required to be
preserved by such Rule.
(d) Reports, Evaluations and other Services. The Adviser shall furnish
reports, evaluations, information or analyses to the Company with
respect to the Funds and
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in connection with the Adviser's services hereunder as the Company's
Board of Trustees may request from time to time or as the Adviser may
otherwise deem to be desirable. The Adviser shall make recommendations
to the Company's Board of Trustees with respect to Company policies,
and shall carry out such policies as are adopted by the Board of
Trustees. The Adviser shall, subject to review by the Board of
Trustees, furnish such other services as the Adviser shall from time
to time determine to be necessary or useful to perform its obligations
under this Agreement.
(e) Purchase and Sale of Securities. The Adviser shall place all orders
for the purchase and sale of portfolio securities for each Fund with
brokers or dealers selected by the Adviser, which may include brokers
or dealers affiliated with the Adviser to the extent permitted by the
1940 Act and the Company's policies and procedures applicable to the
Funds. The Adviser shall use its best efforts to seek to execute
portfolio transactions at prices which, under the circumstances,
result in total costs or proceeds being the most favorable to the
Funds. In assessing the best overall terms available for any
transaction, the Adviser shall consider all factors it deems relevant,
including the breadth of the market in the security, the price of the
security, the financial condition and execution capability of the
broker or dealer, research services provided to the Adviser, and the
reasonableness of the commission, if any, both for the specific
transaction and on a continuing basis. In no event shall the Adviser
be under any duty to obtain the lowest commission or the best net
price for any Fund on any particular transaction, nor shall the
Adviser be under any duty to execute any order in a fashion either
preferential to any Fund relative to other accounts managed by the
Adviser or otherwise materially adverse to such other accounts.
(f) Selection of Brokers or Dealers. Selection of Brokers or Dealers. In
selecting brokers or dealers qualified to execute a particular
transaction, brokers or dealers may be selected who also provide
brokerage and research services (as those terms are defined in Section
28(e) of the Securities Exchange Act of 1934) to the Adviser and/or
the other accounts over which the Adviser exercises investment
discretion. The Adviser is authorized to pay a broker or dealer who
provides such brokerage and research services a commission for
executing a portfolio transaction for the Fund which is in excess of
the amount of commission another broker or dealer would have charged
for effecting that transaction if the Adviser determines in good faith
that the total commission is reasonable in relation to the value of
the brokerage and research services provided by such broker or dealer,
viewed in terms of either that particular transaction or the overall
responsibilities of the Adviser with respect to accounts over which it
exercises investment discretion. The Adviser shall report to the Board
of Trustees of the Company regarding overall commissions paid by the
Fund and their reasonableness in relation to their benefits to the
Fund. Any transactions for the Fund that are effected through an
affiliated broker-dealer on a national securities exchange of which
such broker- dealer is a member will be effected in accordance with
Section 11(a) of the Securities Exchange Act of 1934, as amended, and
the regulations promulgated
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thereunder. The Fund hereby authorizes any such broker or dealer to
retain commissions for effecting such transactions and to pay out of
such retained commissions any compensation due to others in connection
with effectuating those transactions.
(g) Aggregation of Securities Transactions. In executing portfolio
transactions for a Fund, the Adviser may, to the extent permitted by
applicable laws and regulations, but shall not be obligated to,
aggregate the securities to be sold or purchased with those of other
Funds or its other clients if, in the Adviser's reasonable judgment,
such aggregation (i) will result in an overall economic benefit to the
Fund, taking into consideration the advantageous selling or purchase
price, brokerage commission and other expenses, and trading
requirements, and (ii) is not inconsistent with the policies set forth
in the Company's registration statement and the Fund's Prospectus and
Statement of Additional Information. In such event, the Adviser will
allocate the securities so purchased or sold, and the expenses
incurred in the transaction, in an equitable manner, consistent with
its fiduciary obligations to the Fund and such other clients.
4. REPRESENTATIONS AND WARRANTIES.
(a) The Adviser hereby represents and warrants to the Company as follows:
(i) The Adviser is a corporation duly organized and in good standing
under the laws of the State of Ohio and is fully authorized to
enter into this Agreement and carry out its duties and
obligations hereunder.
(ii) The Adviser is registered as an investment adviser with the
Commission under the Investment Advisers Act of 1940, as amended
(the "Advisers Act"), and is registered or licensed as an
investment adviser under the laws of all applicable
jurisdictions. The Adviser shall maintain such registrations or
licenses in effect at all times during the term of this
Agreement.
(iii)The Adviser at all times shall provide its best judgment and
effort to the Company in carrying out the Adviser's obligations
hereunder.
(b) The Company hereby represents and warrants to the Adviser as follows:
(i) The Company has been duly organized as a business trust under the
laws of the State of Delaware and is authorized to enter into
this Agreement and carry out its terms.
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(ii) The Company is registered as an investment company with the
Commission under the 1940 Act and shares of each Fund are
registered for offer and sale to the public under the 1933 Act
and all applicable state securities laws where currently sold.
Such registrations will be kept in effect during the term of this
Agreement.
5. COMPENSATION. As compensation for the services which the Adviser is to
provide or cause to be provided pursuant to Paragraph 3, each Fund shall pay to
the Adviser out of Fund assets an annual fee, computed and accrued daily and
paid in arrears on the first business day of every month, at the rate set forth
opposite each Fund's name on Schedule A, which shall be a percentage of the
average daily net assets of the Fund (computed in the manner set forth in the
Fund's most recent Prospectus and Statement of Additional Information)
determined as of the close of business on each business day throughout the
month. At the request of the Adviser, some or all of such fee shall be paid
directly to a Sub-Adviser. The fee for any partial month under this Agreement
shall be calculated on a proportionate basis. In the event that the total
expenses of a Fund exceed the limits on investment company expenses imposed by
any statute or any regulatory authority of any jurisdiction in which shares of
such Fund are qualified for offer and sale, the Adviser will bear the amount of
such excess, except: (i) the Adviser shall not be required to bear such excess
to an extent greater than the compensation due to the Adviser for the period for
which such expense limitation is required to be calculated unless such statute
or regulatory authority shall so require, and (ii) the Adviser shall not be
required to bear the expenses of the Fund to an extent which would result in the
Fund's or Company's inability to qualify as a regulated investment company under
the provisions of Subchapter M of the Code.
6. INTERESTED PERSONS. It is understood that, to the extent consistent with
applicable laws, the Trustees, officers and shareholders of the Company are or
may be or become interested in the Adviser as directors, officers or otherwise
and that directors, officers and shareholders of the Adviser are or may be or
become similarly interested in the Company.
7. EXPENSES. As between the Adviser and the Funds, the Funds will pay for
all their expenses other than those expressly stated to be payable by the
Adviser hereunder, which expenses payable by the Funds shall include, without
limitation, (i) interest and taxes; (ii) brokerage commissions and other costs
in connection with the purchase or sale of securities and other investment
instruments, which the parties acknowledge might be higher than other brokers
would charge when a Fund utilizes a broker which provides brokerage and research
services to the Adviser as contemplated under Paragraph 3 above; (iii) fees and
expenses of the Company's Trustees that are not employees of the Adviser; (iv)
legal and audit expenses; (v) administrator, custodian, pricing and bookkeeping,
registrar and transfer agent fees and expenses; (vi) fees and expenses related
to the registration and qualification of the Funds' shares for distribution
under state and federal securities laws; (vii) expenses of printing and mailing
reports and notices and proxy material to shareholders, unless otherwise
required; (viii) all other expenses incidental to holding meetings of
shareholders, including proxy solicitations therefor, unless otherwise required;
(ix) expenses of typesetting for printing Prospectuses and Statements of
Additional Information and supplements thereto; (x) expenses of printing and
mailing Prospectuses and Statements of
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Additional Information and supplements thereto sent to existing shareholders;
(xi) insurance premiums for fidelity bonds and other coverage to the extent
approved by the Company's Board of Trustees; (xii) association membership dues
authorized by the Company's Board of Trustees; and (xiii) such non-recurring or
extraordinary expenses as may arise, including those relating to actions, suits
or proceedings to which the Company is a party (or to which the Funds' assets
are subject) and any legal obligation for which the Company may have to provide
indemnification to the Company's Trustees and officers.
8. NON-EXCLUSIVE SERVICES; LIMITATION OF ADVISER'S LIABILITY. The services
of the Adviser to the Funds are not to be deemed exclusive and the Adviser may
render similar services to others and engage in other activities. The Adviser
and its affiliates may enter into other agreements with the Funds and the
Company for providing additional services to the Funds and the Company which are
not covered by this Agreement, and to receive additional compensation for such
services. In the absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of obligations or duties hereunder on the part of the
Adviser, or a breach of fiduciary duty with respect to receipt of compensation,
neither the Adviser nor any of its directors, officers, shareholders, agents, or
employees shall be liable or responsible to the Company, the Funds or to any
shareholder of the Funds for any error of judgment or mistake of law or for any
act or omission in the course of, or connected with, rendering services
hereunder or for any loss suffered by the Company, a Fund or any shareholder of
a Fund in connection with the performance of this Agreement.
9. EFFECTIVE DATE; MODIFICATIONS; TERMINATION. This Agreement shall become
effective on ___________, 199_, provided that it shall have been approved by a
majority of the outstanding voting securities of each Fund, in accordance with
the requirements of the 1940 Act, or such later date as may be agreed by the
parties following such shareholder approval.
(a) This Agreement shall continue in force until _________, 199_.
Thereafter, this Agreement shall continue in effect as to each Fund
for successive annual periods, provided such continuance is
specifically approved at least annually (i) by a vote of the majority
of the Trustees of the Company who are not parties to this Agreement
or interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such approval and (ii) by a vote
of the Board of Trustees of the Company or a majority of the
outstanding voting shares of the Fund.
(b) The modification of any of the non-material terms of this Agreement
may be approved by a vote of a majority of those Trustees of the
Company who are not interested persons of any party to this Agreement,
cast in person at a meeting called for the purpose of voting on such
approval.
(c) Notwithstanding the foregoing provisions of this Paragraph 9, either
party hereto may terminate this Agreement at any time on sixty (60)
days' prior written notice to the other, without payment of any
penalty. Such a termination by the Company
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may be effected severally as to any particular Fund, and shall be
effected as to any Fund by vote of the Company's Board of Trustees or
by vote of a majority of the outstanding voting securities of the
Fund. This Agreement shall terminate automatically in the event of its
assignment.
10. LIMITATION OF LIABILITY OF TRUSTEES AND SHAREHOLDERS. The Adviser
acknowledges the following limitation of liability:
The terms "The Victory Portfolios" and "Trustees" refer, respectively, to
the trust created and the Trustees, as trustees but not individually or
personally, acting from time to time under the Trust Instrument, to which
reference is hereby made and a copy of which is on file at the office of the
Secretary of State of the State of Delaware, such reference being inclusive of
any and all amendments thereto so filed or hereafter filed. The obligations of
"The Victory Portfolios" entered into in the name or on behalf thereof by any of
the Trustees, representatives or agents are made not individually, but in such
capacities and are not binding upon any of the Trustees, shareholders or
representatives of the Company personally, but bind only the assets of the
Company, and all persons dealing with the Company or a Fund must look solely to
the assets of the Company or Fund for the enforcement of any claims against the
Company or Fund.
11. SERVICE XXXX. The service xxxx of the Company and the name "Victory"
(and derivatives thereof) have been licensed to the Company by KeyCorp, through
its subsidiary Key Trust Company ("Key Trust"), an affiliate of the Adviser,
pursuant to a License Agreement dated June 21, 1993, and their continued use is
subject to the right of Key Trust to withdraw this permission under the License
Agreement in the event the Adviser or another subsidiary of KeyCorp is not the
investment adviser to the Company.
12. CERTAIN DEFINITIONS. The terms "vote of a majority of the outstanding
voting securities," "assignment," "control," and "interested persons," when used
herein, shall have the respective meanings specified in the 1940 Act. References
in this Agreement to the 1940 Act and the Advisers Act shall be construed as
references to such laws as now in effect or as hereafter amended, and shall be
understood as inclusive of any applicable rules, interpretations and/or orders
adopted or issued thereunder by the Commission.
13. INDEPENDENT CONTRACTOR. The Adviser shall for all purposes herein be
deemed to be an independent contractor and shall, unless otherwise expressly
provided herein or authorized by the Board of Trustees of the Company from time
to time, have no authority to act for or represent a Fund in any way or
otherwise be deemed an agent of a Fund.
14. STRUCTURE OF AGREEMENT. The Company is entering into this Agreement on
behalf of the respective Funds severally and not jointly. The responsibilities
and benefits set forth in this Agreement shall refer to each Fund severally and
not jointly. No Fund shall have any responsibility for any obligation of any
other Fund arising out of this Agreement. Without otherwise limiting the
generality of the foregoing:
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(a) any breach of any term of this Agreement regarding the Company with
respect to any one Fund shall not create a right or obligation with
respect to any other Fund;
(b) under no circumstances shall the Adviser have the right to set off
claims relating to a Fund by applying property of any other Fund; and
(c) the business and contractual relationships created by this Agreement,
consideration for entering into this Agreement, and the consequences
of such relationship and consideration relate solely to the Company
and the particular Fund to which such relationship and consideration
applies.
This Agreement is intended to govern only the relationships between the
Adviser, on the one hand, and the Company and the Funds, on the other hand, and
(except as specifically provided above in this Paragraph 14) is not intended to
and shall not govern (i) the relationship between the Company and any Fund or
(ii) the relationships among the respective Funds.
15. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Ohio, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act or the Advisers Act.
16. SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby and, to this extent, the provisions of
this Agreement shall be deemed to be severable.
17. NOTICES. Notices of any kind to be given to the Company hereunder by
the Adviser shall be in writing and shall be duly given if mailed or delivered
to 0000 Xxxxxxx Xxxx, Xxxxxxxx, Xxxx 00000-0000, Attention: Xxxxxx X. Xxxxxxxx,
Esq.; with a copy to Kramer, Levin, Naftalis, Nessen, Xxxxx & Xxxxxxx, 000 Xxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx, 00000, Attention: Xxxx Xxxxxxxxxx, Esq., or at such
other address or to such individual as shall be so specified by the Company to
the Adviser. Notices of any kind to be given to the Adviser hereunder by the
Company shall be in writing and shall be duly given if mailed or delivered to
the Adviser at 000 Xxxxxx Xxxxxx, Xxxxxxxxx, Xxxx 00000-0000, Attention: W.
Xxxxxxxxxxx Xxxxxxx with a copy to Xxx Xxxxx Xxxxx, Esq., or at such other
address or to such individual as shall be so specified by the Adviser to the
Company. Notices shall be effective upon delivery.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective officers thereunto duly authorized as of the date written
above.
THE VICTORY PORTFOLIOS KEY ASSET MANAGEMENT, INC.
By: By:
------------------------------- ------------------------------------
Name: Xxxxx X. Xxxxxxxxx Name:Xxxxxxxxxxx X. Xxxxxxx
Title: Secretary Title: CEA and Chairman of the Board
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Schedule A
Name of Fund Fee*
------------ ------
1. The Victory Lakefront Fund 1.00%
2. The Victory Real Estate Investment Fund .65%
--------------
* As a percentage of average daily net assets. Note, however, that the
Adviser shall have the right, but not the obligation, to voluntarily waive
any portion of the advisory fee from time to time. Any such voluntary
waiver will be irrevocable and determined in advance of rendering
investment advisory services by the Adviser, and shall be in writing and
signed by the parties hereto.
