INVESTMENT SUBADVISORY AGREEMENT
BETWEEN
KEY ASSET MANAGEMENT INC.
AND
LAKEFRONT CAPITAL INVESTORS, INC.
AGREEMENT made as of the 1st day of March, 1997 by and between Key
Asset Management Inc., a New York corporation (the "Adviser"), and Lakefront
Capital Investors, Inc., an Ohio corporation (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 March 1, 1997 (the "Advisory Agreement");
and
WHEREAS, the Adviser desires to retain the Sub-Adviser to furnish
investment subadvisory services in connection with the Victory Lakefront 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
investment subadviser 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. 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:
(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 the Advisory
Agreement and 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 Prospectus and Statement of Additional
Information of the Fund.
3. INVESTMENT ADVISORY SERVICES.
(a) Management of the Fund. The Sub-Adviser hereby undertakes to
act as investment subadviser 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 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
Company's Board of Trustees.
(b) Covenants. The Sub-Adviser shall carry out its investment
subadvisory 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
-2-
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 a Fund and provided to the Sub-Adviser in writing. The
Sub-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 Fund by the Sub-Adviser shall at all times
be subject to the review of the Adviser and the Company's
Board of Trustees.
(c) Books and Records. Pursuant to applicable law, the Sub-Adviser
shall keep the Fund's books and records required to be
maintained by, or on behalf of, the Fund with respect to
subadvisory services rendered hereunder. The Sub-Adviser
agrees that all records which it maintains for the 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
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.
(d) Reports, Evaluations and other Services. The Sub-Adviser shall
furnish reports, evaluations, information or analyses to the
Adviser and the Company with respect to the Fund and in
connection with the Sub-Adviser's services hereunder as the
Adviser and/or the Company's Board of Trustees may request
from time to time or as the Sub-Adviser may otherwise deem to
be reasonably necessary. The Sub- Adviser shall make
recommendations to the Adviser and the Company's Board of
Trustees with respect to the Company's policies, and shall
carry out such policies as are adopted by the Board of
Trustees. 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. The Sub-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 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
-3-
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 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.
(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-
4. REPRESENTATIONS AND WARRANTIES.
(a) The Sub-Adviser hereby represents and warrants to the Adviser
as follows:
(i) The Sub-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 Sub-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 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 effort to the Adviser 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 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
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 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 equal to .50% 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),
-5-
which shall be accrued daily and paid in arrears on the first business day of
each 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. In the event that the total expenses of the 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 Sub-Adviser will bear such excess in an amount which bears the same
ratio to the amount of such excess that the Adviser bears as the amount of
subadvisory fees payable pursuant hereto bears to the amount of advisory fees
payable to the Adviser by the Company under the Advisory Agreement, except: (i)
the Sub-Adviser shall not be required to bear such excess to an extent greater
than the compensation due to the Sub-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 Sub- 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 the Code. 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 will be irrevocable and determined in advance
of rendering sub-investment advisory services by the Sub-Adviser, and 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 its activities under this Agreement other than the cost of
securities (including brokerage commissions) purchased for or sold by the Fund.
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 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 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.
-6-
9. EFFECTIVE DATE; MODIFICATIONS; TERMINATION. This Agreement shall
become effective on March 1, 1997, 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 February 28,
1999. 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 securities 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 as to any
Fund at any time on sixty (60) days' prior written notice to
the other, without payment of any penalty. A termination of
the Sub-Adviser may be effected as to any particular Fund by
the Adviser, by a 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
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
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
-7-
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 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 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 Ohio, 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, Xxxx 00000-0000,
Attention: W. Xxxxxxxxxxx Xxxxxxx; with a copy to Xxxxxxx 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 The Xxxxx Building, 0000 Xxxxxx Xxxxxx, Xxxxx
000, Xxxxxxxxx, Xxxx 00000, Attention: Xxxx Xxxxxx, 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.
-8-
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.
LAKEFRONT CAPITAL INVESTORS, INC. KEY ASSET MANAGEMENT INC.
By: /s/Xxxxxxxxx Xxxxxx By: /s/W. Xxxxxxxxxxx Xxxxxxx
-------------------------------- -------------------------------
Name: Xxxxxxxxx Xxxxxx Name: W. Xxxxxxxxxxx Xxxxxxx
Title: President and Title: Senior Managing Director
Chief Investment Officer
-9-
