PORTFOLIO MANAGEMENT AGREEMENT
between
VICTORY CAPITAL MANAGEMENT INC.
and
XXXXXXXXX INVESTMENT COUNSEL, INC.
AGREEMENT made as of the 1st day of July, 2002 by and between Victory
Capital Management Inc., a New York corporation (the "Adviser"), and Xxxxxxxxx
Investment Counsel, LLC, a limited liability company organized under the laws of
Delaware (the "Sub-Adviser").
WHEREAS, the Adviser is a registered investment adviser under the
Investment Advisers Act of 1940, as amended (the "Advisers Act"); and
WHEREAS, the Adviser provides investment advisory services to the series
of The Victory Portfolios, a Delaware business trust (the "Company"), which is
registered as an open-end, management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"), pursuant to an Investment
Advisory Agreement dated June 1, 1998 (the "Advisory Agreement"); and
WHEREAS, the Sub-Adviser is a registered investment adviser under the
Advisers Act; and
WHEREAS, the Adviser desires to retain the Sub-Adviser to furnish
investment sub-advisory services in connection with the International Growth
Fund (the "Fund"), a series of the Company, and the Sub-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. The Adviser hereby appoints the Sub-Adviser to act as
a non-exclusive investment sub-adviser to the Fund for the period and on the
terms set forth in this Agreement. The Sub-Adviser accepts such appointment and
agrees to furnish the services herein set forth for the compensation herein
provided.
2. Delivery of Documents.
(a) The Adviser has delivered to the Sub-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:
(i) the Company's Trust Instrument;
(ii) the By-Laws of the Company;
(iii) resolutions of the Board of Trustees of the Company (the
"Board") authorizing the execution and delivery of the
Advisory Agreement and this Agreement;
(iv) 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");
(v) Notification of Registration of the Company under the 1940
Act on Form N-8A as filed with the Commission;
(vi) the currently effective Prospectus and Statement of
Additional Information of the Fund; and
(vii) 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").
(b) The Sub-Adviser 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:
(i) Parts I and II of the Sub-Adviser's Form ADV;
(ii) Any written supervisory and operating policies and
procedures of the Sub-Adviser that the Adviser or the Board
may reasonably request;
(iii) The Sub-Adviser's Codes of Ethics and related policies and
procedures; and
(iv) Any other documents that the Adviser or the Board may
reasonably request.
3. Investment Advisory Services.
(a) Management of the Fund. The Sub-Adviser hereby undertakes to act as
investment sub-adviser to the Fund. The Sub-Adviser shall regularly
provide investment advice to the Fund and continuously supervise
the investment and reinvestment of cash, securities and other
property composing the assets of the Fund and, in furtherance
thereof, shall:
(i) obtain and evaluate pertinent economic, statistical and
financial data, as well as other significant events and
developments, which affect the
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economy generally, the Fund's investment programs, and the
issuers of securities included in the Fund's portfolios and
the industries in which they engage, or which may relate to
securities or other investments which the Sub-Adviser may
deem desirable for inclusion in a Fund's portfolio;
(ii) determine which issuers and securities shall be included in
the portfolio of the Fund;
(iii) furnish a continuous investment program for the Fund;
(iv) in its discretion, and without prior consultation, buy,
sell, lend and otherwise trade any stocks, bonds and other
securities and investment instruments on behalf of the Fund;
and
(v) take, on behalf of the Fund, all actions the Sub-Adviser may
deem necessary in order to carry into effect such investment
program and the Sub-Adviser's functions as provided above,
including the making of appropriate periodic reports to the
Adviser and the Board.
(b) Covenants. The Sub-Adviser shall carry out its investment
sub-advisory responsibilities in a manner consistent with the
investment objectives, policies, and restrictions provided in: (i)
the 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 or the Adviser with respect to the
Fund and provided to the Sub-Adviser in writing. The Sub-Adviser
agrees to use reasonable efforts to manage the Fund so that it will
qualify, and continue to qualify, as a regulated investment company
under Sub-chapter 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 Board. The management of
the Fund by the Sub-Adviser shall at all times be subject to the
review of the Adviser and the Board
(c) Books and Records. Pursuant to applicable law, the Sub-Adviser
shall keep the books and records required to be maintained by, or
on behalf of, the Fund with respect to sub-advisory services
rendered hereunder. The Sub-Adviser agrees to provide access to or
copies of all records that it maintains for the Fund upon the
Fund's reasonable request. The Sub-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. The Sub-Adviser shall grant the Adviser reasonable access to
its personnel, books and records relating to the management of the
Fund.
(d) Reports, Evaluations and other Services. The Sub-Adviser shall
furnish reports, evaluations, information or analyses to the
Adviser and the Company with respect
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to the Fund and in connection with the Sub-Adviser's services
hereunder as the Adviser and/or the Board may reasonably request
from time to time or as the Sub-Adviser may otherwise deem to be
reasonably necessary. The Sub-Adviser shall provide prompt notice
(in advance, if practicable) to the Adviser of any changes in the
Sub-Adviser's personnel who are responsible for the day-to-day
management of the Fund's portfolio. The Sub-Adviser may make
recommendations to the Adviser and the Board with respect to the
Fund's policies, and shall carry out such policies as are adopted
by the Board. The Sub-Adviser may, subject to review by the
Adviser, furnish such other services as the Sub-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 Sub-Adviser shall place all
orders for the purchase and sale of portfolio securities for the
Fund with brokers or dealers selected by the Sub-Adviser, which may
include brokers or dealers affiliated with the Adviser or the
Sub-Adviser to the extent permitted by the 1940 Act and the
Company's policies and procedures applicable to the Fund and
provided to the Sub-Adviser. The Sub-Adviser shall, except as
contemplated below, use its best efforts to seek to execute
portfolio transactions at prices which, under the circumstances,
result in total costs, proceeds and execution being the most
favorable to the Fund. In assessing the best overall terms
available for any transaction, the Sub-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 Sub-Adviser, and the reasonableness of the
commission, if any, both for the specific transaction and on a
continuing basis. In no event shall the Sub-Adviser be under any
duty to obtain the lowest commission or the best net price for the
Fund on any particular transaction, nor shall the Sub-Adviser be
under any duty to execute any order in a fashion either
preferential to the Fund relative to other accounts managed by the
Sub-Adviser or otherwise materially adverse to such other accounts.
(f) 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 Sub-Adviser and/or the other accounts
over which the Sub-Adviser exercises investment discretion. The
Sub-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 Sub-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 Sub-Adviser with
respect to accounts over which it exercises investment discretion.
The Sub-Adviser shall report to the Board regarding overall
commissions paid by the Fund and their reasonableness in relation
to their benefits to the Fund. Any
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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.
(g) Aggregation of Securities Transactions. In executing portfolio
transactions for the Fund, the Sub-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 Sub-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 Sub-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 Sub-Adviser hereby represents and warrants to the Adviser as
follows:
(i) The Sub-Adviser is a limited liability company duly organized
and in good standing under the laws of the State of Delaware and is
fully authorized to enter into this Agreement and carry out its
duties and obligations hereunder.
(ii) The Sub-Adviser is registered as an investment adviser with
the Commission under the Advisers Act and is registered or licensed
as an investment adviser under the laws of all applicable
jurisdictions. The Sub-Adviser shall maintain such registrations or
licenses in effect at all times during the term of this Agreement.
(iii) The Sub-Adviser at all times shall provide its best judgment
and efforts in carrying out the Sub-Adviser's obligations
hereunder.
(b) The Adviser hereby represents and warrants to the Sub-Adviser 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 Advisers Act, and is registered or
licensed as an investment
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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 Company has been duly organized as a business trust
under the laws of the State of Delaware.
(iv) The Company is registered as an investment company with the
Commission under the 1940 Act, and shares of the 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
Sub-Adviser is to provide or cause to be provided pursuant to Paragraph 3, the
Adviser shall pay to the Sub-Adviser (or cause to be paid by the Company
directly to the Sub-Adviser) an annual fee based on a percentage, as set forth
in the attached Schedule A (as such Schedule may be amended from time to time),
of the Fund's average daily net assets during the preceding month (computed in
the manner set forth in the Fund's most recent Prospectus and Statement of
Additional Information), which shall be accrued daily and paid in arrears on the
first business day of the subsequent month. Average daily net assets shall be
based upon determinations of net assets made as of the close of business on each
business day throughout such month. The fee for any partial month under this
Agreement shall be calculated on a proportionate basis, based upon average daily
net assets for such partial month. The Sub-Adviser shall have the right, but not
the obligation, to voluntarily waive any portion of the sub-advisory fee from
time to time. Any such voluntary waiver shall be in writing and signed by the
parties hereto.
6. Interested Persons. It is understood that, to the extent consistent
with applicable laws, the Trustees, officers and shareholders of the Company or
the Adviser are or may be or become interested in the Sub-Adviser as directors,
officers or otherwise and that directors, officers and shareholders of the
Sub-Adviser are or may be or become similarly interested in the Company or the
Adviser.
7. Expenses. The Sub-Adviser will pay all expenses incurred by it in
connection with the performance of its services under this Agreement. The
Sub-Adviser shall not be required to pay any expenses that this Agreement does
not expressly state shall be payable by the Sub-Adviser. Without limiting the
generality of the foregoing, the Sub-Adviser shall not pay any Fund expenses or
reimburse the Adviser for any expense the Adviser is required to pay.
8. Non-Exclusive Services; Limitation of Sub-Adviser's Liability. The
services of the Sub-Adviser hereunder are not to be deemed exclusive, and the
Sub-Adviser may render similar services to others and engage in other
activities. The Adviser understands that the Sub-Adviser may give advice and
take action with respect to its other clients or for its own account that may
differ from the timing or nature of action taken by the Sub-Adviser with respect
to the Fund. Nothing in this Agreement shall impose upon the Sub-Adviser any
obligation to purchase or sell or to recommend for purchase or sale with respect
to the Fund any security that the Sub-Adviser, or its directors, officers,
employees or affiliates, may purchase or sell for its or their
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own account(s) or for the account of any other client. The Sub-Adviser and its
affiliates may enter into other agreements with the Fund, the Company or the
Adviser for providing additional services to the Fund, the Company or the
Adviser which are not covered by this Agreement, and to receive additional
compensation for such services. In addition, it is understood by the
Sub-Adviser, that the Adviser may retain one or more additional Sub-Advisers
with respect to portions of the Fund's assets. In the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of obligations or
duties hereunder on the part of the Sub-Adviser, or a breach of fiduciary duty
with respect to receipt of compensation, neither the Sub-Adviser nor any of its
directors, officers, shareholders, agents, or employees shall be liable or
responsible to the Adviser, the Company, the Fund or to any shareholder of the
Fund 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 Adviser, the Company, the Fund, or any shareholder of the Fund
in connection with the performance of this Agreement.
9. Effective Date; Modifications; Termination. This Agreement shall
become effective as of the date of execution hereof in accordance with the
Manager of Managers Order. The Sub-Adviser understands and agrees that its
receipt of compensation hereunder shall be without the protection accorded by
shareholder approval under Section 36(b) of the 1940 Act.
(a) This initial term of this Agreement shall be for two years.
Thereafter, this Agreement shall continue in effect 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 or a majority of the outstanding voting securities of the
Fund.
(b) The modification of any of the 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 may terminate this Agreement at any time on 60 days'
prior written notice to the other party, without payment of any
penalty. A termination of the Sub-Adviser may be effected by the
Adviser, by a vote of the Board, 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 or in the
event of an assignment of the Adviser's Agreement with the Fund.
10. Limitation of Liability of Trustees and Shareholders. The
Sub-Adviser acknowledges the following limitation of liability:
The terms "The Victory Portfolios" and "Trustees of The Victory
Portfolios" 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
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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. 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.
12. Independent Contractor. The Sub-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 from time to time, have no
authority to act for or represent the Fund in any way or otherwise be deemed an
agent of the Fund.
13. Structure of Agreement. This Agreement is intended to govern only
the relationship between the Adviser, on the one hand, and the Sub-Adviser, on
the other hand, and is not intended to and shall not govern (i) the relationship
between the Adviser or Sub-Adviser and the Fund or any series of the Company, or
(ii) the relationships among the respective series of the Company.
14. Governing Law. This Agreement shall be governed by the laws of the
State of New York, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act or the Advisers Act.
15. 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.
16. Notices. Notices of any kind to be given to the Adviser hereunder
by the Sub-Adviser shall be in writing and shall be duly given if mailed or
delivered to the Adviser at 000 Xxxxxx Xxxxxx, Xxxxxxxxx, XX 00000-0000,
Attention: Xxxxxxxx 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 Sub-Adviser. Notices of any kind to be given to the Sub-Adviser hereunder by
the Adviser shall be in writing and shall be duly given if mailed or delivered
to the Sub-Adviser at 000 X. Xxxxxxx Xxxx., Xxxxx 0000, Xx. Xxxxxxxxxx, XX
00000, Attention: Xxxxx Xxxx, with a copy to Franklin Xxxxxxxxx Investments, Xxx
Xxxxxxxx Xxxxxxx, Xxx Xxxxx, XX 00000-0000, Attention: General Counsel, or at
such other address or to such individual as shall be so specified by the
Sub-Adviser to the Adviser. 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.
VICTORY CAPITAL MANAGEMENT INC. XXXXXXXXX INVESTMENT COUNSEL, LLC
By: /s/ Xxxxxxxx X. Xxxxxx By: /s/ Xxxx X. Xxxxx
---------------------- -------------------
Xxxxxxxx X. Xxxxxx Name: Xxxx X. Xxxxx
Senior Managing Director Title: President
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Schedule A
to the Portfolio Management Agreement dated July 1, 2002 between Victory
Capital Management Inc. and Xxxxxxxxx Investment Counsel, LLC with respect to
the International Growth Fund of The Victory Portfolios
Fee Schedule
For the services described in the Portfolio Management Agreement, the
Adviser agrees to pay to the Sub-Adviser an annual fee, determined by
multiplying the Effective Rate by the Fund's average daily net assets. The
Effective Rate shall mean the blended rate determined by applying the following
rates to all Managed Accounts (as defined below):
o 0.625% on the first $50 million of assets of Managed Accounts;
o 0.465% on the next $150 million of assets of Managed Accounts; and
o 0.35% on assets over $200 million of assets of Managed Accounts.
As used in this Schedule, "Managed Accounts" means the aggregate of the
net assets of all accounts managed by the Sub-Adviser under this Portfolio
Management Agreement, the Sub-advisory Agreement, of even date herewith, between
the Adviser and the Sub-Adviser, and any other similar agreement that the
Sub-Adviser and the Adviser from time to time designate as being subject to this
Schedule.
Dated: July 1, 2002
