FORM OF
INVESTMENT SUBADVISORY AGREEMENT
BETWEEN
KEY ASSET MANAGEMENT, INC.
AND
LAKEFRONT CAPITAL INVESTORS, INC.
AGREEMENT made as of the ___ day of _____, 199_ by and between Key Asset
Management, Inc., an Ohio 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 _______, 199_ (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. 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 Ohio and is fully authorized to
enter into this Agreement and carry out its duties and
obligations hereunder.
(ii) The Adviser is registered as an investment adviser with the
Commission under the 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 XX% 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-
up to XXXX ($XX) and XX% of the Fund's average daily net assets in excess of
such amount, 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 ______________, 199_, provided that it shall have been approved by
a majority of the outstanding voting securities of each Fund, in accordance with
the requirements of the 1940 Act, or such later date as may be agreed by the
parties following such shareholder approval.
(a) This Agreement shall continue in force until _____________, 199_.
Thereafter, this Agreement shall continue in effect as to each Fund
for successive annual periods, provided such continuance is
specifically approved at least annually (i) by a vote of the majority
of the Trustees of the Company who are not parties to this Agreement
or interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such approval, and (ii) by a vote
of the Board of Trustees of the Company or a majority of the
outstanding voting 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 ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇,
Attention: W. ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇; with a copy to ▇▇▇▇▇▇▇ ▇▇▇▇▇, 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 ▇▇▇▇▇ Building, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇ ▇▇▇▇▇▇, 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: By:
---------------------------------- -----------------------------------
Name: Name: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Title: CEO and Chairman of the Board
-9-