FORM OF
INVESTMENT ADVISORY AGREEMENT
BETWEEN
THE VICTORY PORTFOLIOS
AND
KEY ASSET MANAGEMENT INC.
AGREEMENT made as of the ___ day of _______, 1998, 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.,
a New York 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. 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:
(1) the Company's Trust Instrument;
(2) the By-Laws of the Company;
(3) resolutions of the Board of Trustees of the Company
authorizing the execution and delivery of this Agreement;
(4) 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");
(5) Notification of Registration of the Company under the 1940 Act
on Form N-8A as filed with the Commission;
(6) the currently effective Prospectuses and Statements of
Additional Information of the Funds; and
(7) a copy of all applicable orders granted to the Company by the
Commission or any no-action letter or similar correspondence
concerning the Company or any of its Funds including an order
under section 6(c) of the 1940 Act dated December 31, 1996
granting the Fund an exemption from (1) the shareholder voting
requirements of Section 15(a) and Rule 18f-2; and (2) the
disclosure requirements under various rules and forms (the
"Manager of Managers Order").
2. 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) Subadvisers. 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 "Subadviser"), and that any such
Subadviser 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 Subadviser
and the Adviser shall be as fully responsible to the Company
for the acts and omissions of the Subadviser as it is for its
own acts and omissions. The Adviser will review, monitor and
report to the Company's Board of Trustees regarding the
performance and investment procedures of any Subadviser. In
the event that the services of any Subadviser are terminated,
the Adviser may provide investment advisory services pursuant
to this Agreement to the Fund without a Subadviser or employ
another Subadviser. The Adviser may select another Subadviser
without further shareholder approval to the extent consistent
with the Manager of Managers Order. A Subadviser may be an
affiliate of the Adviser.
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;
(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) Manager of Managers Structure. To the extent a Fund has
adopted adopts a "manager of managers" structure in reliance
on the Manager of Manager Order, subject to the review of the
Board of Trustees, the Adviser shall:
(i) provide general management and administrative services
to such Fund;
(ii) set each Fund's overall investment strategies;
(iii) recommend Subadvisers;
(iv) allocate and, when appropriate, reallocate each Fund's
assets among Subadvisers;
(v) monitor and evaluate Subadviser performance; and
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(vi) oversee Subadviser compliance with each Fund's
investment objective, policies and restrictions.
(c) 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.
(d) 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.
(e) Reports, Evaluations and other Services. The Adviser shall
furnish reports, evaluations, information or analyses to the
Company with respect to the Funds and 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.
(f) 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.
(g) 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
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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 thereunder, including Rule 11a2-2(T).
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.
(h) 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 New York 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.
(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 Subadviser. 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
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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 who 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 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 the date of its execution, 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.
(a) The Agreement shall continue in force for a period of two
years from the date of its execution. 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 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
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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:
(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.
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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: Xxxxxxx X.
Xxxxxxxx; with a copy to Kramer, Levin, Naftalis & 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: Xxxxxxx X.
Xxxxxx, with a copy to Xxxxxxx X. 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.
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.
on behalf of the Funds listed on
Schedule A, individually and not
jointly
By:_________________________ By:______________________________
Name: Xxxxxxx X. Xxxxxxxx Name: Xxxxxxxx X. Xxxxxx
Title: Secretary Title: Senior Managing Director
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Schedule A
Name of Fund Fee*
1. The Xxxxxxx Xxxxxxxxxxxxx Growth Fund 1.10%
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* 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.
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