INVESTMENT ADVISORY AGREEMENT
between
THE VICTORY VARIABLE INSURANCE FUNDS
and
KEY ASSET MANAGEMENT INC.
This INVESTMENT ADVISORY AGREEMENT made as of the 16th day of October,
1998, by and between The Victory Variable Insurance Funds (the "Trust"), on
behalf of the Funds listed in Schedule A (each a "Fund" and collectively, the
"Funds"), a Delaware business trust which may issue one or more series of shares
of beneficial interest, and Key Asset Management Inc., a New York corporation
(the "Adviser").
WHEREAS, the Trust is registered as an open-end, management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Trust desires to retain the Adviser to furnish investment
advisory services to 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 Trust 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 Trust 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.
2. Delivery of Documents. The Trust 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 Trust's Trust Instrument;
(b) the Bylaws of the Trust;
(c) resolutions of the Board of Trustees of the Trust (the "Board")
authorizing the execution and delivery of this Agreement;
(d) Notification of Registration of the Trust under the 1940 Act on Form
N-8A as filed with the Securities and Exchange Commission (the
"Commission"); and
(e) the currently effective Prospectus and Statement of Additional
Information of the Trust.
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 Trust and the
Funds;
(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' investment 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 the Funds' investment portfolios;
(iii) determine which issuers and securities shall be included in
each of the Funds;
(iv) furnish a continuous investment program for the Funds;
(v) in its discretion and without prior consultation with the
Trust, buy, sell, lend and otherwise trade any stocks, bonds
and other securities and investment instruments on behalf of
the Funds; and
(vi) take, on behalf of the Funds, 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
Board.
(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)
the Funds' Prospectus and Statement of Additional Information in
effect from time to time; (ii) the Trust's Trust
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Instrument, Bylaws 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 Trust with respect to the Funds and provided
to the Adviser in writing. The Adviser agrees to use reasonable
efforts to manage the Funds so that it will qualify, and continue to
qualify, as a regulated investment company under Subchapters L and 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 Funds by the Adviser
shall at all times be subject to the review of the Board.
(c) Books and Records. Pursuant to applicable law, the Adviser shall
keep the Funds' 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 the Funds are the property of the Funds and it will promptly
surrender any of such records to the Funds upon the Funds' request.
The Adviser further agrees to preserve for the periods prescribed by
Rule 31a-2 under the 1940 Act any such records of the Funds required
to be preserved by such Rule.
(d) Reports, Evaluations and other Services. The Adviser shall furnish
reports, evaluations, information or analyses to the Trust with
respect to the Funds and in connection with the Adviser's services
hereunder as the Board may request from time to time or as the
Adviser may otherwise deem to be desirable. The Adviser shall make
recommendations to the Board with respect to Trust policies, and
shall carry out such policies as are adopted by the Board. The
Adviser shall, subject to review by the Board, 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 Fund securities for the Funds 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 Trust's policies and procedures
applicable to the Funds. The Adviser shall use its best efforts to
seek to execute Fund 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 the Funds on any particular
transaction, nor shall the Adviser be under any duty to execute any
order in a fashion either preferential to the Funds relative to
other accounts managed by the Adviser or otherwise materially
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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 Adviser, the Funds 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 Fund transaction
for the Funds 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 the
Trust regarding overall commissions paid by the Funds and their
reasonableness in relation to the benefits to the Funds.
(g) Aggregation of Securities Transactions. In executing Fund
transactions for the Funds, 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 Funds, 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 Trust's registration statement and the Funds'
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 Funds and such
other clients.
4. Representations and Warranties.
(a) The Adviser hereby represents and warrants to the Trust 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.
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(iii) The Adviser at all times shall provide its best judgment and
effort to the Trust in carrying out the Adviser's obligations
hereunder.
(b) The Trust hereby represents and warrants to the Adviser as follows:
(i) The Trust 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 Trust is registered as an investment company with the
Commission under the 1940 Act and shares of the Funds are
registered for offer and sale to the public under the
Securities Act of 1933 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, the Funds shall pay to
the Adviser out of Funds 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 the Funds' name on Schedule A, which shall be a percentage of the
average daily net assets of the Funds (computed in the manner set forth in the
Funds' most recent Prospectus and Statement of Additional Information)
determined as of the close of business on each business day throughout the
month. The fee for any partial month under this Agreement shall be calculated on
a proportionate basis. In the event that the total expenses of the Funds exceed
the limits on investment company expenses imposed by any statute or any
regulatory authority of any jurisdiction in which shares of such Funds 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 Funds to an extent which would result in
the Funds' or Trust'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 Trust 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 Trust.
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 the Funds utilize a broker which provides brokerage and
research services to the Adviser as contemplated under Paragraph 3 above; (iii)
fees and expenses of the Trust'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
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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 Board; (xii) association
membership dues authorized by the Board; and (xiii) such non-recurring or
extraordinary expenses as may arise, including those relating to actions, suits
or proceedings to which the Trust is a party (or to which the Funds' assets are
subject) and any legal obligation for which the Trust may have to provide
indemnification to the Trust'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 Trust
for providing additional services to the Funds and the Trust 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 Trust, 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 Trust, the Funds or any shareholder of
the Funds 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, provided that it shall have been
approved by a majority of the outstanding voting securities of the Funds, 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) The initial term of this Agreement shall be for two years.
Thereafter, this Agreement shall continue in effect as to the Funds
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 Trust 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
shares of the Funds.
(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
Trust 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.
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(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 Trust shall be effected to the
Funds by vote of the Board or by vote of a majority of the
outstanding voting securities of the Funds. 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 Variable Insurance Funds" 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 Variable Insurance Funds" 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 Trust personally, but bind only
the assets of the Trust, and all persons dealing with the Trust or the Funds
must look solely to the assets of the Trust or Funds for the enforcement of any
claims against the Trust or Funds.
11. Service Xxxx. The service xxxx of the Trust and the name "The Victory
Variable Insurance Funds" (and derivatives thereof) have been licensed to the
Trust by KeyCorp, an affiliate of the Adviser, pursuant to a License Agreement,
and their continued use is subject to the right of KeyCorp 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 Trust.
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 from time to time, have no authority
to act for or represent the Funds in any way or otherwise be deemed an agent of
the Funds.
14. Structure of Agreement. The Trust 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 the Funds 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 Trust 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 the Funds 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 Trust 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 Trust 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 Trust 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 Trust 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 Trust to the Adviser. Notices
of any kind to be given to the Adviser hereunder by the Trust 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 Trust. 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 VARIABLE INSURANCE FUNDS KEY ASSET MANAGEMENT INC.
By: /s/ Xxxxxxx X. Xxxxxxxx By: /s/ Xxxxxxxx X. Xxxxxx
-------------------------------- -----------------------------
Xxxxxxx X. Xxxxxxxx Xxxxxxxx X. Xxxxxx
Secretary Senior Managing Director
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Schedule A
Name of Fund Fee*
------------ --------
1. Diversified Stock Fund 0.30%
2. Small Company Opportunity Fund 0.30%
____________________
* 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.
Revised: April 27, 2000
