AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 30, 1998.
FILE NO. 33-8982
ICA NO. 811-4852
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. _____ [_]
POST-EFFECTIVE AMENDMENT NO. 38 [X]
AND
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 39
THE VICTORY PORTFOLIOS
(EXACT NAME OF REGISTRANT AS SPECIFIED IN TRUST INSTRUMENT)
3435 STELZER ROAD
COLUMBUS, OHIO 43219
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
(800) 362-5365
(AREA CODE AND TELEPHONE NUMBER)
COPY TO:
MICHAEL SULLIVAN CARL FRISCHLING, ESQ.
BISYS FUND SERVICES KRAMER, LEVIN, NAFTALIS & FRANKEL
3435 STELZER ROAD 919 THIRD AVENUE
COLUMBUS, OHIO 43219 NEW YORK,NEW YORK 10022
(NAME AND ADDRESS OF AGENT FOR SERVICE)
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE:
[ ] IMMEDIATELY UPON FILING PURSUANT TO [ ] ON (DATE) PURSUANT
PARAGRAPH (b) TO PARAGRAPH (b)
[ ] 60 DAYS AFTER FILING PURSUANT TO [X] ON JUNE 1, 1998 PURSUANT TO
PARAGRAPH (a)(1) PARAGRAPH (a)(1)
[ ] 75 DAYS AFTER FILING PURSUANT TO [ ] ON (DATE) PURSUANT TO
PARAGRAPH (a)(2) PARAGRAPH (a)(2) OF RULE 485.
IF APPROPRIATE, CHECK THE FOLLOWING BOX:
[ ] THIS POST-EFFECTIVE AMENDMENT DESIGNATES A NEW EFFECTIVE DATE FOR A
PREVIOUSLY FILED POST- EFFECTIVE AMENDMENT.
<PAGE>
THE VICTORY PORTFOLIOS
CROSS-REFERENCE SHEET
THE VICTORY PORTFOLIOS
<TABLE>
<CAPTION>
Item Number
Form N-1A
Part A Prospectus Caption
------ ------------------
The Registrant has filed the information required in the prospectus of the
Balanced Fund, Diversified Stock Fund, Value Fund, Stock Index Fund, Ohio
Regional Stock Fund, Growth Fund, Special Value Fund, Special Growth Fund,
International Growth Fund, and Real Estate Investment Fund in the definitive
filing of the combined prospectus pursuant to Rule 497(c) of the Securities Act
of 1933 on March 9, 1998 (accession number 0000922423-98-000292) and such
prospectus is hereby incorporated by reference.
<S> <C>
1. Cover Page Cover Page; Introduction
2. Synopsis Fund Expenses
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant Introduction; Investment Objective, Policies and
Strategies; Risk Factors; Investment Limitations;
Additional Information
5. Management of the Fund Organization and Management of the Fund
5.A. Management's Discussion of Fund Investment Performance
Performance
6. Capital Stock and Other Securities INVESTING WITH VICTORY; How to Purchase
Shares; How to Exchange Shares; How to Redeem
Shares; Dividends, Distributions and Taxes;
Organization and Management of the Funds;
Additional Information; Other Securities and
Investment Practices
7. Purchase of Securities Being Offered How to Purchase Shares; How to Exchange Shares
8. Redemption or Repurchase How to Exchange Shares; How to Redeem Shares
9. Pending Legal Proceedings Inapplicable
</TABLE>
<PAGE>
THE VICTORY PORTFOLIOS
CROSS REFERENCE SHEET
THE VICTORY PORTFOLIOS
<TABLE>
<CAPTION>
Item Number
Form N-1A Statement of Additional
Part B Information Caption
------ -------------------
The Registrant has filed the information required in the statement of additional
information in the definitive filing of the combined Statement of Additional
Information pursuant to Rule 497(c) of the Securities Act of 1933 on March 9,
1998 (accession number 0000922423-98-000292) and such Statement of Additional
Information is hereby incorporated by reference.
<S> <C>
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Additional Information
13. Investment Objectives and Policies Investment Objectives and Investment Policies and
Limitations
14. Management of the Fund Trustees and Officers
15. Control Persons and Principal Additional Information
Holders of Securities
16. Investment Advisory and Other Advisory and Other Contracts
Services
17. Brokerage Allocation and Other Practices Advisory and Other Contracts
18. Capital Stock and Other Securities Valuation of Portfolio Securities for the Money
Market Funds; Valuation of Portfolio Securities for
the Taxable Bond Funds and the Tax-Free Bond
Funds; Additional Purchase, Exchange and
Redemption Information; Additional Information
19. Purchase, Redemption and Pricing Valuation of Portfolio Securities for the Money
of Securities Being Offered Market Funds; Valuation of Portfolio Securities
for the Taxable Bond Funds and the Tax-Free
Bond Funds; Additional Purchase, Exchange and
Redemption Information; Performance of the
Money Market Funds; Performance of the Non-
Money Market Funds; Additional Information
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE VICTORY PORTFOLIOS
<S> <C>
20. Tax Status Dividends and Distributions; Taxes
21. Underwriters Advisory and Other Contracts
21. Calculation of Performance Data Performance of the Money Market Funds;
Performance of the Non-Money Market Funds;
Additional Information
22. Financial Statements
</TABLE>
Part C
Information required to be included in Part C is set forth under the appropriate
Item, so numbered, in Part C of the Registration Statement.
<PAGE>
THE VICTORY PORTFOLIOS
BALANCED FUND
DIVERSIFIED STOCK FUND
VALUE FUND
STOCK INDEX FUND
OHIO REGIONAL STOCK FUND
GROWTH FUND
SPECIAL VALUE FUND
SPECIAL GROWTH FUND
INTERNATIONAL GROWTH FUND
REAL ESTATE INVESTMENT FUND
SUPPLEMENT TO PROSPECTUS DATED MARCH 1, 1998
The Prospectus is supplemented as follows:
1. The date of the Prospectus is June 1, 1998
2. INTERNATIONAL GROWTH FUND:
PORTFOLIO MANAGEMENT
Manager of Managers. Key Asset Management Inc. ("KAM"), the investment
adviser, serves as a Manager of Managers of the Victory International Growth
Fund ("International Growth Fund"). That is, KAM may select one or more
subadvisers to manage the International Growth Fund's assets. KAM evaluates each
subadviser's skills, investment styles and strategies in light of KAM's analysis
of the international securities markets. Under its Advisory Agreement with the
Victory Portfolios, KAM oversees the investment advisory services that a
subadviser provides to the International Growth Fund. If KAM engages more than
one subadviser, KAM may reallocate assets among subadvisers when it believes it
is appropriate. KAM provides investment advice with respect to short-term debt
securities. KAM has the ultimate responsibility for the International Growth
Fund's investment performance because it is responsible for overseeing all
subadvisers and recommending to the Fund's Board of Trustees that it hire,
terminate or replace a particular subadviser.
The Victory Portfolios and KAM have obtained an order from the
Securities and Exchange Commission that allows KAM to serve as a Manager of
Managers. The order lets KAM, subject to certain conditions, select new
subadvisers with the approval of the Victory Portfolios' Board of Trustees,
without obtaining shareholder approval. The order also allows KAM to change the
terms of agreements with the subadvisers or to keep a subadviser even if certain
events would otherwise require that a subadvisory agreement terminate. The
Victory Portfolios will notify shareholders of any subadviser change.
Shareholders, however, also have the right to terminate an agreement with a
particular subadviser. If KAM hires more than one
<PAGE>
subadviser, the order also allows the International Growth Fund to disclose only
the aggregate amount of fees paid to all subadvisers.
Indocam International Investment Services, S.A. ("IIIS"), KAM has
entered into a Portfolio Management Agreement with Indocam International
Investment Services, S.A. a French corporation located in Paris, France. IIIS
serves as subadviser for all of the International Growth Fund's assets (other
than short-term debt instruments). IIIS is the global asset management component
of the Credit Agricole banking and financial services group. As of December 31,
1997, Indocam managed approximately $124 billion for its clients.
Eric Taze-Bernard, Ayaz Ebrahim, Didier Le Conte, and Jean-Claude
Kaltenbach will be directly responsible for the management of the Fund assuming
the New Agreement is approved by shareholderes. Mr. Taze-Bernard, the lead
portfolio manager, has been employed by IIIS (or its affiliates) since 1987 and
curerntly is the Head of Strategy of Asset Allocation of IIIS. Mr. Ebrahim in
the Director and Portfolio Manager of IIIS, Hong Kong. Mr. Ebrahim has been
employed by IIIS (or its affiliates) since 1991. Mr. Le Conte is the Senior
Portfolio Manager responsible for Eurpean Equities at IIIS and has been employed
by IIIS (or its affilaites) since 1966. Mr. Kaltenbach is the Head of Equity
Mangement at IIIS and has been employed by IIIS (or its affiliates) since 1994.
Prior to his employment by IIIS, Mr. Kaltenbach was the Head of Asset Management
at Union Europeenne de CIC since 1988.
KAM, and not the International Growth Fund, pays IIIS a subadvisory
fee equal, on an annual basis, to .55% of the International Growth Fund's
average daily net assets.
<PAGE>
THE VICTORY PORTFOLIOS
THE VICTORY BALANCED FUND
THE VICTORY DIVERSIFIED STOCK FUND
THE VICTORY FINANCIAL RESERVES FUND
THE VICTORY FUND FOR INCOME
THE VICTORY GOVERNMENT MORTGAGE FUND
THE VICTORY GROWTH FUND
THE VICTORY INSTITUTIONAL MONEY MARKET FUND
THE VICTORY INTERMEDIATE INCOME FUND
THE VICTORY INTERNATIONAL GROWTH FUND
THE VICTORY INVESTMENT QUALITY BOND FUND
THE VICTORY LAKEFRONT FUND
THE VICTORY LIMITED TERM INCOME FUND
THE VICTORY NATIONAL MUNICIPAL BOND FUND
THE VICTORY NEW YORK TAX-FREE FUND
THE VICTORY OHIO MUNICIPAL BOND FUND
THE VICTORY OHIO MUNICIPAL MONEY MARKET FUND
THE VICTORY OHIO REGIONAL STOCK FUND
THE VICTORY PRIME OBLIGATIONS FUND
THE VICTORY REAL ESTATE INVESTMENT FUND
THE VICTORY SPECIAL GROWTH FUND
THE VICTORY SPECIAL VALUE FUND
THE VICTORY STOCK INDEX FUND
THE VICTORY TAX-FREE MONEY MARKET FUND
THE VICTORY U.S. GOVERNMENT OBLIGATIONS FUND
THE VICTORY VALUE FUND
SUPPLEMENT TO STATEMENT OF ADDITIONAL INFORMATION DATED MARCH 1, 1998
The Statement of Additional Information is supplemented as follows:
1. The date of the Statement of Additional Information is June 1, 1998.
2. INTERNATIONAL GROWTH FUND:
Indocam International Investment Services, S.A. ("IIIS") acts as
subadviser to the International Growth Portfolio under a Portfolio Management
Agreement with KAM dated ___________, 1998. The Board of Trustees of the Victory
Portfolios, including a majority of the Trustees who are not interested persons
of KAM of IIIS, approved the Portfolio Management Agreement on February 20,
1998. The Portfolio Management Agreement will terminate automatically in the
event of its assignment. In addition, the Portfolio Management Agreement is
terminable at any time, without penalty, by the Board of Trustees, by KAM or by
vote of a majority of the International Growth Fund's outstanding voting
securities on 60 days' written notice to KAM. Unless sooner terminated, the
Portfolio
<PAGE>
Management Agreement shall continue in effect from year to year if approved at
least annually by the Board of Trustees, including a majority of the Trustees
who are not interested persons of KAM or IIIS, cast in person at a meeting
called for the purpose of voting on the Portfolio Management Agreement.
IIIS is a registered investment adviser with the Securities and
Exchange Commission. As of December 31, 1997, IIIS and its affiliates managed
approximately $124 billion for its clients. IIIS also serves as investment
adviser to the France Growth Fund and subadviser to the BNY Hamilton
International Equity Fund and the John Hancock European Equity Fund.
<PAGE>
THE VICTORY PORTFOLIOS
Registration Statement
of
THE VICTORY PORTFOLIOS
on
Form N-1A
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Included in Part A:
Condensed Financial Information.
Included in Part B:
Financial Statements and the Reports thereon for The Victory
Portfolios for the fiscal year ended October 31, 1997, included in
the Annual Report to Shareholders and Financial Statements and the
Reports thereon for the Victory Portfolios, with respect to
Institutional Money Market Fund, for the fiscal year ended October
31, 1997, included in the Annual Report to Shareholders are
incorporated herein by reference in the Statement of Additional
Information from the Rule 30-D filing made by the Registrant on
December 24, 1997 (accession number 0000906197-97- 000068) and on
December 29, 1997 (accession number 0000906197-97-000074),
respectively.
(b) Exhibits:
EX-99.B1 Delaware Trust Instrument dated December 6, 1995, as amended. (10)
EX-99.B2 By-Laws adopted December 6, 1995. (1)
EX-99.B3 None.
EX-99.B4 None.
EX-99.B5 (a) Investment Advisory Agreement dated as of March 1, 1997, between
the Registrant and Key Asset Management Inc. (7)
(b) Investment Advisory Agreement between the Registrant and
Management Inc. regarding Lakefront Fund and Real Estate
Investment Fund. (7)
(c) Investment Sub-Advisory Agreement between Key Asset Management
Inc. and Lakefront Capital Investors, Inc. regarding the
Lakefront Fund. (7)
<PAGE>
THE VICTORY PORTFOLIOS
(d) Form of Investment Advisory Agreement between the Registrant and
Key Asset Mangement Inc. regarding The Victory International
Growth Fund. (11)
EX-99.B6 (a) Distribution Agreement dated June 1, 1996 between the Registrant
and BISYS Fund Services Limited Partnership. (4)
(b) Form of Broker-Dealer Agreement. (2)
EX-99.B7 None.
EX-99.B8 (a) Amended and Restated Mutual Fund Custody Agreement dated May 24,
1995 by and between the Registrant and Key Trust Company of Ohio,
N.A. is incorporated herein by reference to Exhibit 8(a) to
Post-Effective Amendment No. 22 to the Registrant's Registration
Statement on Form N-1A filed on August 28, 1995.
(b) Custody Agreement dated May 31, 1996 between Morgan Stanley Trust
Company and Key Trust Company of Ohio. (4)
EX-99.B9 (a) Administration Agreement dated October 1, 1997 between the
Registrant and BISYS Fund Services Limited Partnership. (10)
(b) Sub-Administration Agreement dated October 1, 1997 between BISYS
Fund Services Limited Partnership d/b/a BISYS Fund Services and
Key Asset Management Inc. (10)
(c) Transfer Agency and Service Agreement dated July 12, 1996 between
the Registrant and State Street Bank and Trust Company. (4)
(d) Fund Accounting Agreement dated May 31, 1995 between the
Registrant and BISYS Fund Services Ohio, Inc., and Schedule A
thereto, are incorporated herein by reference to Exhibit (d) to
Post-Effective Amendment No. 22 to the Registrant's Registration
Statement on Form N-1A filed on August 28, 1995.
(e) Shareholder Servicing Plan dated June 5, 1995 with an amended
Schedule I dated March 1, 1997. (5)
(f) Form of Shareholder Servicing Agreement. (1)
EX-99.B10 (a) Opinion of Counsel was filed with Registrant's Rule 24f-2 Notice
in respect of the period ending October 31, 1996, submitted
electronically on December 23, 1996, accession number
0000950152-96-006841.
C-2
<PAGE>
THE VICTORY PORTFOLIOS
EX-99.B11 (a) Consent of Kramer, Levin, Naftalis & Frankel . (11)
(b) Consent of Coopers & Lybrand L.L.P. (11)
EX-99.B12 None.
EX-99.B13 (a) Purchase Agreement dated November 12, 1986 between Registrant and
Physicians Insurance Company of Ohio is incorporated herein by
reference to Exhibit 13 to Pre-Effective Amendment No. 1 to the
Registrant's Registration Statement on Form N-1A filed on
November 13, 1986.
(b) Purchase Agreement dated October 15, 1989 is incorporated herein
by reference to Exhibit 13(b) to Post-Effective Amendment No. 7
to the Registrant's Registration Statement on Form N-1A filed on
December 1, 1989.
(c) Purchase Agreement is incorporated herein by reference to Exhibit
13(c) to Post- Effective Amendment No. 7 to the Registrant's
Registration Statement on Form N-1A filed on December 1, 1989.
EX-99.B14 None.
EX-99.B15 (a) Distribution and Service Plan dated June 5, 1995 for The Victory
Portfolios Class A Shares of Government Bond Fund, National
Municipal Bond Fund, New York Tax-Free Fund, Fund for Income,
Financial Reserves Fund, Institutional Money Market Fund, Ohio
Municipal Money Market Fund Lakefront Fund and Real Estate
Investment Fund with amended Schedule I dated March 1, 1997. (5)
(b) Distribution Plan dated June 5, 1995 for Class B Shares of
National Municipal Bond Fund, Government Bond Fund and New York
Tax-Free Fund and adopted December 6, 1995 for Class B Shares of
Balanced Fund, Diversified Stock Fund, International Growth Fund,
Ohio Regional Stock Fund, Special Value Fund, Institutional Money
Market Fund and U.S. Government Obligations Fund. (2)
EX-99.B16 (a) Forms of computation of performance quotation are incorporated
herein by reference to Exhibit 16 to Post-Effective Amendment No.
19 to the Registrant's Registration Statement on Form N-1A filed
on December 23, 1994.
(b) Forms of computation of performance quotation for the Balanced
Fund, Diversified Stock Fund, International Growth Fund, Ohio
Regional Stock Fund and Special Value Fund. (4)
C-3
<PAGE>
THE VICTORY PORTFOLIOS
(c) Forms of computation of performance quotation for the Lakefront
Fund and U. S. Government Obligations Fund - Investor Class. (6)
(d) Computation of performance quotation for the Real Estate
Investment Fund. (8)
(e) Computation of performance quotation for U.S. Government
Obligations Fund -Investor Shares. (10)
EX-99.B17 See EX-27.
EX-99.B18 Amended and Restated Rule 18f-3 Multi-Class Plan effective as of
December 3, 1997. (10)
EX-99.B19 (a) Powers of Attorney of Roger Noall and Frank A. Weil. (9)
(b) Powers of Attorney of Leigh A. Wilson, Robert G. Brown, Edward P.
Campbell, Harry Gazelle, Thomas F. Morrissey, H. Patrick Swygert
and Eugene J. McDonald. (10)
EX-27 None
- --------------------------------
(1) Filed as an Exhibit to Post-Effective Amendment No. 26 to the Registrant's
Registration Statement on Form N-1A filed electronically on December 28,
1995, accession number 0000950152-95-003085.
(2) Filed as an Exhibit to Post-Effective Amendment No. 27 to the Registrant's
Registration Statement on Form N-1A filed electronically on January 31,
1996, accession number 0000922423-96-000047.
(3) Filed as an Exhibit to Post-Effective Amendment No. 28 to the Registrant's
Registration Statement on Form N-1A filed electronically on February 28,
1996, accession number 0000922423-96- 0000106.
(4) Filed as an Exhibit to Post-Effective Amendment No. 30 to the Registrant's
Registration Statement on Form N-1A filed electronically on July 30, 1996,
accession number 0000922423-96-000344.
(5) Filed as an Exhibit to Post-Effective Amendment No. 31 to the Registrant's
Registration Statement on Form N-1A filed electronically on February 7,
1997, accession number 0000922423- 97-000066.
(6) Filed as an Exhibit to Post-Effective Amendment No. 32 to the Registrant's
Registration Statement on Form N-1A filed electronically on June 27, 1997,
accession number 0000922423-97-000530.
(7) Filed as an Exhibit to Post-Effective Amendment No. 34 to the Registrant's
Registration Statement on Form N-1A filed electronically on December 12,
1997, accession number 0000922423-97-001015.
(8) Filed as an Exhibit to Post-Effective Amendment No. 35 to the Registrant's
Registration Statement on Form N-1A filed electronically on December 17,
1997, accession number 0000922423-98-001022.
(9) Filed as an Exhibit to Pre-Effective Amendment No. 2 to the Registrant's
Registration Statement on Form N-14 filed electronically on February 3,
1998, accession number 0000922423-98-000095.
(10) Filed as an Exhibit to Post-Effective Amendment No. 36 to Registrant's
Registration Statement on Form N-1A filed electronically on February 27,
1998, accession number 0000922423-98-000264.
(11) Filed herewith.
C-4
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THE VICTORY PORTFOLIOS
Item 25. Persons Controlled by or under Common Control with Registrant.
None.
Item 26. Number of Holders of Securities.
As of January 30, 1998 the number of record holders of each Fund of the
Registrant were as follows:
Number of
Title of Fund Record Holders
------------- --------------
Balanced Fund
Class A Shares 1,399
Class B Shares 322
Diversified Stock Fund
Class A Shares 13,420
Class B Shares 3,433
Financial Reserves Fund 138
Fund For Income 1,652
Government Mortgage Fund 324
Growth Fund 529
Intermediate Income Fund 338
International Growth Fund
Class A Shares 1,375
Class B Shares 65
Institutional Money Market Fund
Select Class Shares 27
Investor Class Shares 45
Investment Quality Bond Fund 2,429
Lakefront Fund 69
C-5
<PAGE>
THE VICTORY PORTFOLIOS
Limited Term Income Fund 608
National Municipal Bond Fund
Class A Shares 1,538
Class B Shares 75
New York Tax-Free Fund
Class A Shares 564
Class B Shares 107
Ohio Municipal Bond Fund 390
Ohio Municipal Money Market Fund 148
Ohio Regional Stock Fund
Class A Shares 1,234
Class B Shares 119
Prime Obligations Fund 1,274
Real Estate Investment Fund 172
Special Growth Fund 404
Special Value Fund
Class A Shares 4,847
Class B Shares 226
Stock Index Fund 864
Tax Free Money Market Fund 91
U.S. Government Obligations Fund
Select Class Shares 378
Investor Class Shares 122
Value Fund 251
Federal Money Market Fund 0
Convertible Securities Fund 0
C-6
<PAGE>
THE VICTORY PORTFOLIOS
LifeChoice Conservative Investor Fund 0
LifeChoice Moderate Investor Fund 0
LifeChoice Growth Investor Fund 0
Item 27. Indemnification
Article X, Section 10.02 of the Registrant's Delaware Trust
Instrument, as amended, incorporated herein as Exhibit 99.B1
hereto, provides for the indemnification of Registrant's Trustees
and officers, as follows:
"SECTION 10.02 INDEMNIFICATION.
(a) Subject to the exceptions and limitations contained in Subsection
10.02(b):
(i) every person who is, or has been, a Trustee or officer of the
Trust (hereinafter referred to as a "Covered Person") shall be indemnified
by the Trust to the fullest extent permitted by law against liability and
against all expenses reasonably incurred or paid by him in connection with
any claim, action, suit or proceeding in which he becomes involved as a
party or otherwise by virtue of his being or having been a Trustee or
officer and against amounts paid or incurred by him in the settlement
thereof;
(ii) the words "claim," "action," "suit," or "proceeding" shall apply
to all claims, actions, suits or proceedings (civil, criminal or other,
including appeals), actual or threatened while in office or thereafter, and
the words "liability" and "expenses" shall include, without limitation,
attorneys' fees, costs, judgments, amounts paid in settlement, fines,
penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Covered Person:
(i) who shall have been adjudicated by a court or body before which
the proceeding was brought (A) to be liable to the Trust or its
Shareholders by reason of willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of his
office or (B) not to have acted in good faith in the reasonable belief that
his action was in the best interest of the Trust; or
(ii) in the event of a settlement, unless there has been a
determination that such Trustee or officer did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office, (A) by the court or other
body approving the settlement; (B) by at least a majority of those Trustees
who are neither Interested Persons of the
C-7
<PAGE>
Trust nor are parties to the matter based upon a review of readily
available facts (as opposed to a full trial-type inquiry); or (C) by
written opinion of independent legal counsel based upon a review of
readily available facts (as opposed to a full trial-type inquiry).
(c) The rights of indemnification herein provided may be insured against by
policies maintained by the Trust, shall be severable, shall not be
exclusive of or affect any other rights to which any Covered Person may now
or hereafter be entitled, shall continue as to a person who has ceased to
be a Covered Person and shall inure to the benefit of the heirs, executors
and administrators of such a person. Nothing contained herein shall affect
any rights to indemnification to which Trust personnel, other than Covered
Persons, and other persons may be entitled by contract or otherwise under
law.
(d) Expenses in connection with the preparation and presentation of a
defense to any claim, action, suit or proceeding of the character described
in Subsection (a) of this Section 10.02 may be paid by the Trust or Series
from time to time prior to final disposition thereof upon receipt of an
undertaking by or on behalf of such Covered Person that such amount will be
paid over by him to the Trust or Series if it is ultimately determined that
he is not entitled to indemnification under this Section 10.02; provided,
however, that either (i) such Covered Person shall have provided
appropriate security for such undertaking, (ii) the Trust is insured
against losses arising out of any such advance payments or (iii) either a
majority of the Trustees who are neither Interested Persons of the Trust
nor parties to the matter, or independent legal counsel in a written
opinion, shall have determined, based upon a review of readily available
facts (as opposed to a trial-type inquiry or full investigation), that
there is reason to believe that such Covered Person will be found entitled
to indemnification under this Section 10.02."
Indemnification of the Fund's principal underwriter, custodian, fund
accountant, and transfer agent is provided for, respectively, in Section V
of the Distribution Agreement incorporated by reference as Exhibit 6(a)
hereto, Section 28 of the Custody Agreement incorporated by reference as
Exhibit 8(a) hereto, Section 5 of the Fund Accounting Agreement
incorporated by reference as Exhibit 9(c) hereto, and Section 7 of the
Transfer Agency Agreement incorporated by reference as Exhibit 9(b) hereto.
Registrant has obtained from a major insurance carrier a trustees' and
officers' liability policy covering certain types of errors and omissions.
In no event will Registrant indemnify any of its trustees, officers,
employees or agents against any liability to which such person would
otherwise be subject by reason of his willful misfeasance, bad faith, or
gross negligence in the performance of his duties, or by reason of his
reckless disregard of the duties involved in the conduct of his office or
under his agreement with Registrant. Registrant will comply with Rule 484
under the Securities Act of 1933 and Release 11330 under the Investment
Company Act of 1940 in connection with any indemnification.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to trustees, officers, and controlling persons or
Registrant pursuant to the foregoing provisions, or
C-8
<PAGE>
THE VICTORY PORTFOLIOS
otherwise, Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Investment Company Act of 1940, as amended, and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by Registrant of expenses
incurred or paid by a trustee, officer, or controlling person of Registrant
in the successful defense of any action, suit, or proceeding) is asserted
by such trustee, officer, or controlling person in connection with the
securities being registered, Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
Key Asset Management Inc. ("KAM") is the investment adviser to each fund of
the Victory Portfolios. KAM is a wholly-owned indirect subsidiary of
KeyCorp, a bank holding company which had total assets of approximately $74
billion as of December 31, 1997. KeyCorp is a leading financial institution
doing business in 26 states from Maine to Alaska, providing a full array of
trust, commercial, and retail banking services. Its non-bank subsidiaries
include investment advisory, securities brokerage, insurance, bank credit
card processing, mortgage and leasing companies. KAM and its affiliates
have over $60 billion in assets under management, and provides a full range
of investment management services to personal and corporate clients.
Lakefront Capital Investors, Inc. ("Lakefront"), sub-adviser of the
Lakefront Fund, 127 Public Square, 15th Floor, Cleveland, Ohio 44114, was
incorporated in 1991.
As of June 1, 1998, subject to Shareholder approval, Indocam International
Investment Services, S.A. ("IIIS"), will be the sub-adviser to the
International Growth Fund. IIIS and its advisory affiliates ("Indocam") are
the global asset management component of the Credit Agricole banking and
financial services group. Indocam specializes in global asset management
and offers its clients a full range of asset management services from
offices located in Paris, Hong Kong, Singapore, and Tokyo. As of December
31, 1997, Indocam managed approximately $124 billion for its clients. IIIS
is a registered investment adviser with the SEC and also serves as the
investment adviser to the France Growth Fund and as subadviser for the BNY
Hamilton International Equity Fund and the John Hancock European Equity
Fund. Indocam has affiliates which are engaged in the brokerage business.
The principal office of IIIS is 9, rue Louis Murat, Paris, France 75008.
To the knowledge of Registrant, none of the directors or officers of KAM,
Lakefront, or IIIS, except those set forth below, is or has been at any
time during the past two calendar years engaged in any other business,
profession, vocation or employment of a substantial nature, except that
certain directors and officers of KAM also hold positions with KeyCorp or
its subsidiaries.
C-9
<PAGE>
THE VICTORY PORTFOLIOS
The principal executive officers and directors of KAM are as follows:
Directors:
William G. Spears, Senior Managing Director, Chairman and Chief Executive
Officer.
Richard J. Buoncore, Senior Managing Director, President and Chief
Operating Officer .
Anthony Aveni, Senior Managing Director, Also Chief Investment Officer of
Society Asset Management Division.
Vincent DeP. Farrell, Senior Managing Director. Also Chief Investment
Officer of Spears, Benzak, Salomon & Farrell Division ("SBSF").
Richard E. Salomon, Senior Managing Director. Also Director of Wealth
Management, SBSF.
Gary R. Martzolf, Senior Managing Director.
Other Officers:
Charles G. Crane, Senior Managing Director and Chief Market Strategist.
James D. Kacic, Chief Financial Officer, Chief Administrative Officer, and
Managing Director.
Michael Foisel, Assistant Treasurer.
Michael Stearns, Chief Compliance Officer.
William J. Blake, Secretary.
Steven N. Bulloch, Assistant Secretary. Also, Senior Vice President and
Senior Counsel of KMC.
Louis R. Benzak, Senior Managing Director.
Judith A. Jones, Senior Managing Director.
Lisa A. Tuckerman, Senior Managing Director.
C-10
<PAGE>
Dennis M. Grapo, Senior Managing Director
Richard A. Janus, Senior Managing Director.
Kathleen A. Dennis, Senior Managing Director.
James T. Kitson, Senior Managing Director.
Timothy R. Ringler, Senior Managing Director.
The business address of each of the foregoing individuals is 127 Public
Square, Cleveland, Ohio 44114.
The principal executive officers and directors of Lakefront are as
follows:
Nathaniel E. Carter, President. Also Chief Investment Officer of Lakefront.
Kenneth A. Louard, Chief Operating Officer.
The business address of each of the foregoing individuals is 127
Public Square, Cleveland, Ohio 44114.
The principal executive officers and directors of IIIS are as
follows:
Jean-Claude Kaltenbach, Chairman and CEO.
Ian Gerald McEvatt, Director.
Claude Doumic, Director.
Didier Guyot de la Pommeraye, Director.
Charles Vergnot, Director.
Eric Jostrom, Director.
Gerard Sutterlin, Secretary General.
The business address of each of the foregoing individuals is 9, rue
Louis Murat, Paris, France 75008.
C-11
<PAGE>
THE VICTORY PORTFOLIOS
Item 29. Principal Underwriter
(a) BISYS Fund Services, the Registrant's administrator, also acts as the
distributor for the following investment companies:
American Performance Funds
AmSouth Mutual Funds
The ARCH Fund, Inc.
The BB&T Mutual Funds Group
The Coventry Group
The Empire Builder Tax Free Bond Fund
ESC Strategic Funds, Inc.
The Eureka Funds
Fountain Square Funds
Hirtle Callaghan Trust
HSBC Family of Funds
The Infinity Mutual Funds, Inc.
INTRUST Funds Trust
The Kent Funds
Magna Funds
Meyers Investment Trust
MMA Praxis Mutual Funds
M.S.D. & T. Funds
Pacific Capital Funds
Parkstone Group of Funds
The Parkstone Advantage Fund
Pegasus Funds
The Republic Funds Trust
The Republic Advisor Funds Trust
The Riverfront Funds, Inc.
SBSF Funds, Inc. dba Key Mutual Funds
Sefton Funds
The Sessions Group
Summit Investment Trust
Variable Insurance Funds
The Victory Variable Funds
Vintage Mutual Funds, Inc.
C-12
<PAGE>
(b) Directors, officers and partners of BISYS Fund Services, Inc., the
General Partner of BISYS Fund Services, as of February 28, 1998 were
as follows:
Lynn J. Mangum, Chairman and CEO.
Dennis Sheehan, Director, EVP, and Treasurer.
J. David Huber, President.
Kevin J. Dell, Vice President and Secretary.
Mark J. Rybarczyk, Senior Vice President.
William Tomko, Senior Vice President.
Michael D. Burns, Vice President.
David Blackmore, Vice President.
Steve Ludwig, Compliance Officer.
Mark Telfer, Compliance Officer.
Robert Tuch, Assistant Secretary.
The business address of each of the foregoing individuals is BISYS
Fund Services, Inc., 3435 Stelzer Road, Columbus, Ohio 43215.
Item 30. Location of Accounts and Records
(1) Key Asset Management Inc., 127 Public Square, Cleveland, Ohio
44114-1306 (records relating to its functions as investment adviser
and sub-administrator).
(2) Lakefront Capital Investors, Inc., 127 Public Square, Cleveland, Ohio
44114-1306 (records relating to its functions as investment
sub-adviser for the Lakefront Fund only).
(3) Indocam International Investment Services, S.A., 9, rue Louis Murat,
Paris, France 75008 (records relating to its functions as investment
sub-adviser for the International Growth Fund only).
(4) KeyBank National Association, 127 Public Square, Cleveland, Ohio
44114-1306 (records relating to its functions as shareholder
servicing agent).
C-13
<PAGE>
THE VICTORY PORTFOLIOS
(5) BISYS Fund Services, 3435 Stelzer Road, Columbus, Ohio 43219 (records
relating to its functions as administrator, distributor and fund
accountant).
(6) State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110-3875 (records relating to its functions as
transfer agent).
(7) Boston Financial Data Services, Inc. Two Heritage Drive, Quincy,
Massachusetts 02171 (records relating to its functions as dividend
disbursing agent and shareholder servicing agent).
(8) Key Trust Company of Ohio, N.A., 127 Public Square, Cleveland, Ohio
44114-1306 (records relating to its functions as custodian and
securities lending agent).
(9) Morgan Stanley Trust Company, 1585 Broadway, New York, New York 10036
(records relating to its functions as sub-custodian of the Balanced
Fund, International Growth Fund, Lakefront Fund, Real Estate
Investment Fund, and Convertible Securities Fund).
Item 31. Management Services
None.
Item 32. Undertakings
(a) Registrant undertakes to call a meeting of shareholders, at the
request of holders of 10% of the Registrant's outstanding shares, for
the purpose of voting upon the question of removal of a trustee or
trustees and undertakes to assist in communications with other
shareholders as required by Section 16(c) of the Investment Company
Act of 1940.
(b) Not applicable.
(c) Registrant undertakes to furnish to each person to whom a prospectus
is delivered a copy of the Registrant's latest Annual Report to
Shareholders upon request and without charge.
NOTICE
A copy of the Delaware Trust Instrument of The Victory Portfolios is on file
with the Secretary of State of Delaware and notice is hereby given that this
Post-Effective Amendment to the Registrant's Registration Statement has been
executed on behalf of the Registrant by officers of, and Trustees of, the
Registrant as officers and as Trustees, respectively, and not individually, and
that the obligations of or arising out of this instrument are not binding upon
any of the Trustees, officers or shareholders of The Victory Portfolios
individually but are binding only upon the assets and property of the
Registrant.
C-14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Post-Effective
Amendment to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York and State of New
York, on the 31st day of March, 1998.
THE VICTORY PORTFOLIOS
By: /s/Leigh A. Wilson
---------------------------------------
Leigh A. Wilson, President and Trustee
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities
indicated on the 31st day of March, 1998.
/s/ Roger Noall Chairman of the Board and Trustee
- ----------------------
Roger Noall
/s/ Leigh A. Wilson President and Trustee
- ----------------------
Leigh A. Wilson
/s/Thomas E. Line Treasurer
- ----------------------
Thomas E. Line
* Trustee
- ----------------------
Robert G. Brown
* Trustee
- ----------------------
Edward P. Campbell
* Trustee
- ----------------------
Harry Gazelle
* Trustee
- ----------------------
Thomas F. Morrissey
* Trustee
- ----------------------
H. Patrick Swygert
* Trustee
- ----------------------
Frank A. Weil
* Trustee
- ----------------------
Eugene J. McDonald
*By: /s/ Carl Frischling
- ------------------------
Carl Frischling
Attorney-in-Fact
Attorney-in-Fact pursuant to powers of attorney filed with Post-Effective
Amendment No. 36 to Registrant's Registration Statement on Form N-1A on
February 26, 1998 and Pre-Effective Amendment No. 2 to Registrant's
Registration Statement on Form N-14 on February 3, 1998.
C-15
<PAGE>
THE VICTORY PORTFOLIO
THE VICTORY PORTFOLIOS
INDEX TO EXHIBITS
Exhibit Number
EX-99.B5(d) Form of Investment Advisory Agreement between the Registrant and
Key Asset Mangement Inc. regarding The Victory International
Growth Fund.
EX-99.B11(a) Consent of Kramer, Levin, Naftalis & Frankel
EX-99.B11(b) Consent of Coopers & Lybrand L.L.P.
FORM OF
INVESTMENT ADVISORY AGREEMENT
BETWEEN
THE VICTORY PORTFOLIOS
AND
KEY ASSET MANAGEMENT INC.
AGREEMENT made as of the ___ day of _______, 1998, by and between The
Victory Portfolios, a Delaware business trust which may issue one or more series
of shares of beneficial interest (the "Company"), and Key Asset Management Inc.,
a New York corporation (the "Adviser").
WHEREAS, the Company is registered as an open-end, management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Company desires to retain the Adviser to furnish
investment advisory services to the funds listed on Schedule A (each, a "Fund"
and collectively, the "Funds"), and the Adviser represents that it is willing
and possesses legal authority to so furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Delivery of Documents. The Company has delivered to the Adviser
copies of each of the following documents along with all amendments thereto
through the date hereof, and will promptly deliver to it all future amendments
and supplements thereto, if any:
(1) the Company's Trust Instrument;
(2) the By-Laws of the Company;
(3) resolutions of the Board of Trustees of the Company
authorizing the execution and delivery of this Agreement;
(4) the most recent Post-Effective Amendment to the Company's
Registration Statement under the Securities Act of 1933, as
amended (the "1933 Act"), and the 1940 Act, on Form N-1A as
filed with the Securities and Exchange Commission (the
"Commission");
(5) Notification of Registration of the Company under the 1940 Act
on Form N-8A as filed with the Commission;
(6) the currently effective Prospectuses and Statements of
Additional Information of the Funds; and
(7) a copy of all applicable orders granted to the Company by the
Commission or any no-action letter or similar correspondence
concerning the Company or any of its Funds including an order
under section 6(c) of the 1940 Act dated December 31, 1996
granting the Fund an exemption from (1) the shareholder voting
requirements of Section 15(a) and Rule 18f-2; and (2) the
disclosure requirements under various rules and forms (the
"Manager of Managers Order").
2. Appointment.
(a) General. The Company hereby appoints the Adviser to act as
investment adviser to the Funds for the period and on the
terms set forth in this Agreement. The Adviser accepts such
appointment and agrees to furnish the services herein set
forth for the compensation herein provided.
(b) Employees of Affiliates. The Adviser may, in its discretion,
provide such services through its own employees or the
employees of one or more affiliated companies that are
qualified to act as an investment adviser to the Company under
applicable laws and are under the control of KeyCorp, the
indirect parent of the Adviser; provided that (i) all persons,
when providing
<PAGE>
services hereunder, are functioning as part of an organized
group of persons, and (ii) such organized group of persons is
managed at all times by authorized officers of the Adviser.
(c) Subadvisers. It is understood and agreed that the Adviser may
from time to time employ or associate with such other entities
or persons as the Adviser believes appropriate to assist in
the performance of this Agreement with respect to a particular
Fund or Funds (each a "Subadviser"), and that any such
Subadviser shall have all of the rights and powers of the
Adviser set forth in this Agreement; provided that a Fund
shall not pay any additional compensation for any Subadviser
and the Adviser shall be as fully responsible to the Company
for the acts and omissions of the Subadviser as it is for its
own acts and omissions. The Adviser will review, monitor and
report to the Company's Board of Trustees regarding the
performance and investment procedures of any Subadviser. In
the event that the services of any Subadviser are terminated,
the Adviser may provide investment advisory services pursuant
to this Agreement to the Fund without a Subadviser or employ
another Subadviser. The Adviser may select another Subadviser
without further shareholder approval to the extent consistent
with the Manager of Managers Order. A Subadviser may be an
affiliate of the Adviser.
3. Investment Advisory Services.
(a) Management of the Funds. The Adviser hereby undertakes to act
as investment adviser to the Funds. The Adviser shall
regularly provide investment advice to the Funds and
continuously supervise the investment and reinvestment of
cash, securities and other property composing the assets of
the Funds and, in furtherance thereof, shall:
(i) supervise all aspects of the operations of the Company
and each Fund;
(ii) obtain and evaluate pertinent economic, statistical and
financial data, as well as other significant events and
developments, which affect the economy generally, the
Funds' investment programs, and the issuers of
securities included in the Funds' portfolios and the
industries in which they engage, or which may relate to
securities or other investments which the Adviser may
deem desirable for inclusion in a Fund's portfolio;
(iii) determine which issuers and securities shall be included
in the portfolio of each Fund;
(iv) furnish a continuous investment program for each Fund;
(v) in its discretion and without prior consultation with
the Company, buy, sell, lend and otherwise trade any
stocks, bonds and other securities and investment
instruments on behalf of each Fund; and
(vi) take, on behalf of each Fund, all actions the Adviser
may deem necessary in order to carry into effect such
investment program and the Adviser's functions as
provided above, including the making of appropriate
periodic reports to the Company's Board of Trustees.
(b) Manager of Managers Structure. To the extent a Fund has
adopted adopts a "manager of managers" structure in reliance
on the Manager of Manager Order, subject to the review of the
Board of Trustees, the Adviser shall:
(i) provide general management and administrative services
to such Fund;
(ii) set each Fund's overall investment strategies;
(iii) recommend Subadvisers;
(iv) allocate and, when appropriate, reallocate each Fund's
assets among Subadvisers;
(v) monitor and evaluate Subadviser performance; and
2
<PAGE>
(vi) oversee Subadviser compliance with each Fund's
investment objective, policies and restrictions.
(c) Covenants. The Adviser shall carry out its investment advisory
and supervisory responsibilities in a manner consistent with
the investment objectives, policies, and restrictions provided
in: (i) each Fund's Prospectus and Statement of Additional
Information as revised and in effect from time to time; (ii)
the Company's Trust Instrument, By-Laws or other governing
instruments, as amended from time to time; (iii) the 1940 Act;
(iv) other applicable laws; and (v) such other investment
policies, procedures and/or limitations as may be adopted by
the Company with respect to a Fund and provided to the Adviser
in writing. The Adviser agrees to use reasonable efforts to
manage each Fund so that it will qualify, and continue to
qualify, as a regulated investment company under Subchapter M
of the Internal Revenue Code of 1986, as amended, and
regulations issued thereunder (the "Code"), except as may be
authorized to the contrary by the Company's Board of Trustees.
The management of the Funds by the Adviser shall at all times
be subject to the review of the Company's Board of Trustees.
(d) Books and Records. Pursuant to applicable law, the Adviser
shall keep each Fund's books and records required to be
maintained by, or on behalf of, the Funds with respect to
advisory services rendered hereunder. The Adviser agrees that
all records which it maintains for a Fund are the property of
the Fund and it will promptly surrender any of such records to
the Fund upon the Fund's request. The Adviser further agrees
to preserve for the periods prescribed by Rule 31a-2 under the
1940 Act any such records of the Fund required to be preserved
by such Rule.
(e) Reports, Evaluations and other Services. The Adviser shall
furnish reports, evaluations, information or analyses to the
Company with respect to the Funds and in connection with the
Adviser's services hereunder as the Company's Board of
Trustees may request from time to time or as the Adviser may
otherwise deem to be desirable. The Adviser shall make
recommendations to the Company's Board of Trustees with
respect to Company policies, and shall carry out such policies
as are adopted by the Board of Trustees. The Adviser shall,
subject to review by the Board of Trustees, furnish such other
services as the Adviser shall from time to time determine to
be necessary or useful to perform its obligations under this
Agreement.
(f) Purchase and Sale of Securities. The Adviser shall place all
orders for the purchase and sale of portfolio securities for
each Fund with brokers or dealers selected by the Adviser,
which may include brokers or dealers affiliated with the
Adviser to the extent permitted by the 1940 Act and the
Company's policies and procedures applicable to the Funds. The
Adviser shall use its best efforts to seek to execute
portfolio transactions at prices which, under the
circumstances, result in total costs or proceeds being the
most favorable to the Funds. In assessing the best overall
terms available for any transaction, the Adviser shall
consider all factors it deems relevant, including the breadth
of the market in the security, the price of the security, the
financial condition and execution capability of the broker or
dealer, research services provided to the Adviser, and the
reasonableness of the commission, if any, both for the
specific transaction and on a continuing basis. In no event
shall the Adviser be under any duty to obtain the lowest
commission or the best net price for any Fund on any
particular transaction, nor shall the Adviser be under any
duty to execute any order in a fashion either preferential to
any Fund relative to other accounts managed by the Adviser or
otherwise materially adverse to such other accounts.
(g) Selection of Brokers or Dealers. In selecting brokers or
dealers qualified to execute a particular transaction, brokers
or dealers may be selected who also provide brokerage and
research services (as those terms are defined in Section 28(e)
of the Securities Exchange Act of 1934) to the Adviser and/or
the other accounts over which the Adviser exercises investment
discretion. The Adviser is authorized to pay a broker or
dealer who provides such brokerage and research services a
commission for executing a portfolio transaction for the Fund
which is in excess of the amount of commission another broker
or dealer would have charged for effecting that transaction if
the Adviser determines in good faith that the total commission
is reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer, viewed in
terms of either that particular transaction or the overall
responsibilities of the Adviser with respect to accounts over
which it exercises investment discretion. The Adviser shall
report
3
<PAGE>
to the Board of Trustees of the Company regarding overall
commissions paid by the Fund and their reasonableness in
relation to their benefits to the Fund. Any transactions for
the Fund that are effected through an affiliated broker-dealer
on a national securities exchange of which such broker-dealer
is a member will be effected in accordance with Section 11(a)
of the Securities Exchange Act of 1934, as amended, and the
regulations promulgated thereunder, including Rule 11a2-2(T).
The Fund hereby authorizes any such broker or dealer to retain
commissions for effecting such transactions and to pay out of
such retained commissions any compensation due to others in
connection with effectuating those transactions.
(h) Aggregation of Securities Transactions. In executing portfolio
transactions for a Fund, the Adviser may, to the extent
permitted by applicable laws and regulations, but shall not be
obligated to, aggregate the securities to be sold or purchased
with those of other Funds or its other clients if, in the
Adviser's reasonable judgment, such aggregation (i) will
result in an overall economic benefit to the Fund, taking into
consideration the advantageous selling or purchase price,
brokerage commission and other expenses, and trading
requirements, and (ii) is not inconsistent with the policies
set forth in the Company's Registration Statement and the
Fund's Prospectus and Statement of Additional Information. In
such event, the Adviser will allocate the securities so
purchased or sold, and the expenses incurred in the
transaction, in an equitable manner, consistent with its
fiduciary obligations to the Fund and such other clients.
4. Representations and Warranties.
(a) The Adviser hereby represents and warrants to the Company as
follows:
(i) The Adviser is a corporation duly organized and in good
standing under the laws of the State of New York and is
fully authorized to enter into this Agreement and carry
out its duties and obligations hereunder.
(ii) The Adviser is registered as an investment adviser with
the Commission under the Investment Advisers Act of
1940, as amended (the "Advisers Act"), and is registered
or licensed as an investment adviser under the laws of
all applicable jurisdictions. The Adviser shall maintain
such registrations or licenses in effect at all times
during the term of this Agreement.
(iii) The Adviser at all times shall provide its best judgment
and effort to the Company in carrying out the Adviser's
obligations hereunder.
(b) The Company hereby represents and warrants to the Adviser as
follows:
(i) The Company has been duly organized as a business trust
under the laws of the State of Delaware and is
authorized to enter into this Agreement and carry out
its terms.
(ii) The Company is registered as an investment company with
the Commission under the 1940 Act and shares of each
Fund are registered for offer and sale to the public
under the 1933 Act and all applicable state securities
laws where currently sold. Such registrations will be
kept in effect during the term of this Agreement.
5. Compensation. As compensation for the services which the Adviser is
to provide or cause to be provided pursuant to Paragraph 3, each Fund shall pay
to the Adviser out of Fund assets an annual fee, computed and accrued daily and
paid in arrears on the first business day of every month, at the rate set forth
opposite each Fund's name on Schedule A, which shall be a percentage of the
average daily net assets of the Fund (computed in the manner set forth in the
Fund's most recent Prospectus and Statement of Additional Information)
determined as of the close of business on each business day throughout the
month. At the request of the Adviser, some or all of such fee shall be paid
directly to a Subadviser. The fee for any partial month under this Agreement
shall be calculated on a proportionate basis. In the event that the total
expenses of a Fund exceed the limits on investment company expenses imposed by
any statute or any regulatory authority of any jurisdiction in which shares of
such Fund are qualified for offer and sale, the Adviser will bear the amount of
such excess, except: (i) the Adviser shall not be required to bear such excess
to an extent greater than the compensation due to the Adviser for the period for
which such expense limitation is required to be calculated unless such statute
or regulatory authority shall so require, and (ii) the Adviser shall not be
required to bear the
4
<PAGE>
expenses of the Fund to an extent which would result in the Fund's or Company's
inability to qualify as a regulated investment company under the provisions of
Subchapter M of the Code.
6. Interested Persons. It is understood that, to the extent consistent
with applicable laws, the Trustees, officers and shareholders of the Company are
or may be or become interested in the Adviser as directors, officers or
otherwise and that directors, officers and shareholders of the Adviser are or
may be or become similarly interested in the Company.
7. Expenses. As between the Adviser and the Funds, the Funds will pay
for all their expenses other than those expressly stated to be payable by the
Adviser hereunder, which expenses payable by the Funds shall include, without
limitation, (i) interest and taxes; (ii) brokerage commissions and other costs
in connection with the purchase or sale of securities and other investment
instruments, which the parties acknowledge might be higher than other brokers
would charge when a Fund utilizes a broker which provides brokerage and research
services to the Adviser as contemplated under Paragraph 3 above; (iii) fees and
expenses of the Company's Trustees who are not employees of the Adviser; (iv)
legal and audit expenses; (v) administrator, custodian, pricing and bookkeeping,
registrar and transfer agent fees and expenses; (vi) fees and expenses related
to the registration and qualification of the Funds' shares for distribution
under state and federal securities laws; (vii) expenses of printing and mailing
reports and notices and proxy material to shareholders, unless otherwise
required; (viii) all other expenses incidental to holding meetings of
shareholders, including proxy solicitations therefor, unless otherwise required;
(ix) expenses of typesetting for printing Prospectuses and Statements of
Additional Information and supplements thereto; (x) expenses of printing and
mailing Prospectuses and Statements of Additional Information and supplements
thereto sent to existing shareholders; (xi) insurance premiums for fidelity
bonds and other coverage to the extent approved by the Company's Board of
Trustees; (xii) association membership dues authorized by the Company's Board of
Trustees; and (xiii) such non-recurring or extraordinary expenses as may arise,
including those relating to actions, suits or proceedings to which the Company
is a party (or to which the Funds' assets are subject) and any legal obligation
for which the Company may have to provide indemnification to the Company's
Trustees and officers.
8. Non-Exclusive Services; Limitation of Adviser's Liability. The
services of the Adviser to the Funds are not to be deemed exclusive and the
Adviser may render similar services to others and engage in other activities.
The Adviser and its affiliates may enter into other agreements with the Funds
and the Company for providing additional services to the Funds and the Company
which are not covered by this Agreement, and to receive additional compensation
for such services. In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties hereunder on the part
of the Adviser, or a breach of fiduciary duty with respect to receipt of
compensation, neither the Adviser nor any of its directors, officers,
shareholders, agents, or employees shall be liable or responsible to the
Company, the Funds or to any shareholder of the Funds for any error of judgment
or mistake of law or for any act or omission in the course of, or connected
with, rendering services hereunder or for any loss suffered by the Company, a
Fund or any shareholder of a Fund in connection with the performance of this
Agreement.
9. Effective Date; Modifications; Termination. This Agreement shall
become effective on the date of its execution, provided that it shall have been
approved by a majority of the outstanding voting securities of each Fund, in
accordance with the requirements of the 1940 Act.
(a) The Agreement shall continue in force for a period of two
years from the date of its execution. Thereafter, this
Agreement shall continue in effect as to each Fund for
successive annual periods, provided such continuance is
specifically approved at least annually (i) by a vote of the
majority of the Trustees of the Company who are not parties to
this Agreement or interested persons of any such party, cast
in person at a meeting called for the purpose of voting on
such approval and (ii) by a vote of the Board of Trustees of
the Company or a majority of the outstanding voting shares of
the Fund.
(b) The modification of any of the non-material terms of this
Agreement may be approved by a vote of a majority of those
Trustees of the Company who are not interested persons of any
party to this Agreement, cast in person at a meeting called
for the purpose of voting on such approval.
(c) Notwithstanding the foregoing provisions of this Paragraph 9,
either party hereto may terminate this Agreement at any time
on sixty (60) days' prior written notice to the other, without
payment of any penalty. Such a termination by the Company may
be effected severally as to any particular Fund, and shall be
effected as to any Fund by vote of the Company's Board of
5
<PAGE>
Trustees or by vote of a majority of the outstanding voting
securities of the Fund. This Agreement shall terminate
automatically in the event of its assignment.
10. Limitation of Liability of Trustees and Shareholders. The Adviser
acknowledges the following limitation of liability:
The terms "The Victory Portfolios" and "Trustees" refer, respectively,
to the trust created and the Trustees, as trustees but not individually or
personally, acting from time to time under the Trust Instrument, to which
reference is hereby made and a copy of which is on file at the office of the
Secretary of State of the State of Delaware, such reference being inclusive of
any and all amendments thereto so filed or hereafter filed. The obligations of
"The Victory Portfolios" entered into in the name or on behalf thereof by any of
the Trustees, representatives or agents are made not individually, but in such
capacities and are not binding upon any of the Trustees, shareholders or
representatives of the Company personally, but bind only the assets of the
Company, and all persons dealing with the Company or a Fund must look solely to
the assets of the Company or Fund for the enforcement of any claims against the
Company or Fund.
11. Service Mark. The service mark of the Company and the name
"Victory" (and derivatives thereof) have been licensed to the Company by
KeyCorp, through its subsidiary Key Trust Company ("Key Trust"), an affiliate of
the Adviser, pursuant to a License Agreement dated June 21, 1993, and their
continued use is subject to the right of Key Trust to withdraw this permission
under the License Agreement in the event the Adviser or another subsidiary of
KeyCorp is not the investment adviser to the Company.
12. Certain Definitions. The terms "vote of a majority of the
outstanding voting securities," "assignment," "control," and "interested
persons," when used herein, shall have the respective meanings specified in the
1940 Act. References in this Agreement to the 1940 Act and the Advisers Act
shall be construed as references to such laws as now in effect or as hereafter
amended, and shall be understood as inclusive of any applicable rules,
interpretations and/or orders adopted or issued thereunder by the Commission.
13. Independent Contractor. The Adviser shall for all purposes herein
be deemed to be an independent contractor and shall, unless otherwise expressly
provided herein or authorized by the Board of Trustees of the Company from time
to time, have no authority to act for or represent a Fund in any way or
otherwise be deemed an agent of a Fund.
14. Structure of Agreement. The Company is entering into this Agreement
on behalf of the respective Funds severally and not jointly. The
responsibilities and benefits set forth in this Agreement shall refer to each
Fund severally and not jointly. No Fund shall have any responsibility for any
obligation of any other Fund arising out of this Agreement. Without otherwise
limiting the generality of the foregoing:
(a) any breach of any term of this Agreement regarding the Company
with respect to any one Fund shall not create a right or
obligation with respect to any other Fund;
(b) under no circumstances shall the Adviser have the right to set
off claims relating to a Fund by applying property of any
other Fund; and
(c) the business and contractual relationships created by this
Agreement, consideration for entering into this Agreement, and
the consequences of such relationship and consideration relate
solely to the Company and the particular Fund to which such
relationship and consideration applies.
This Agreement is intended to govern only the relationships between the
Adviser, on the one hand, and the Company and the Funds, on the other hand, and
(except as specifically provided above in this Paragraph 14) is not intended to
and shall not govern (i) the relationship between the Company and any Fund or
(ii) the relationships among the respective Funds.
15. Governing Law. This Agreement shall be governed by the laws of the
State of Ohio, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act or the Advisers Act.
16. Severability. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby and, to this extent, the provisions
of this Agreement shall be deemed to be severable.
6
<PAGE>
17. Notices. Notices of any kind to be given to the Company hereunder
by the Adviser shall be in writing and shall be duly given if mailed or
delivered to 3435 Stelzer Road, Columbus, Ohio 43219-3035, Attention: Michael J.
Sullivan; with a copy to Kramer, Levin, Naftalis & Frankel, 919 Third Avenue,
New York, New York, 10022, Attention: Carl Frischling, Esq., or at such other
address or to such individual as shall be so specified by the Company to the
Adviser. Notices of any kind to be given to the Adviser hereunder by the Company
shall be in writing and shall be duly given if mailed or delivered to the
Adviser at 127 Public Square, Cleveland, Ohio 44114-1306, Attention: William G.
Spears, with a copy to William J. Blake, Esq., or at such other address or to
such individual as shall be so specified by the Adviser to the Company. Notices
shall be effective upon delivery.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
written above.
THE VICTORY PORTFOLIOS KEY ASSET MANAGEMENT INC.
on behalf of the Funds listed on
Schedule A, individually and not
jointly
By:_________________________ By:______________________________
Name: Michael J. Sullivan Name: Kathleen A. Dennis
Title: Secretary Title: Senior Managing Director
7
<PAGE>
Schedule A
Name of Fund Fee*
1. The Victory International Growth Fund 1.10%
- --------------
* 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.
8
Kramer, Levin, Naftalis & Frankel
919 THIRD AVENUE
NEW YORK, N.Y. 10022 - 3852
(212) 715 - 9100
Arthur H. Aufses III Monica C. Lord Sherwin Kamin
Thomas D. Balliett Richard Marlin Arthur B. Kramer
Jay G. Baris Thomas Moers Mayer Maurice N. Nessen
Philip Bentley Thomas E. Molner Founding Partners
Saul E. Burian Thomas H. Moreland Counsel
Barry Michael Cass Ellen R. Nadler _____
Thomas E. Constance Gary P. Naftalis
Michael J. Dell Michael J. Nassau Martin Balsam
Kenneth H. Eckstein Michael S. Nelson Joshua M. Berman
Charlotte M. Fischman Jay A. Neveloff Jules Buchwald
David S. Frankel Michael S. Oberman Rudolph de Winter
Marvin E. Frankel Paul S. Pearlman Meyer Eisenberg
Alan R. Friedman Susan J. Penry-Williams Arthur D. Emil
Carl Frischling Bruce Rabb Maria T. Jones
Mark J. Headley Allan E. Reznick Maxwell M. Rabb
Robert M. Heller Scott S. Rosenblum James Schreiber
Philip S. Kaufman Michele D. Ross Counsel
Peter S. Kolevzon Howard J. Rothman _____
Kenneth P. Kopelman Max J. Schwartz
Michael Paul Korotkin Mark B. Segall M. Frances Buchinsky
Shari K. Krouner Judith Singer Abbe L. Dienstag
Kevin B. Leblang Howard A. Sobel Ronald S. Greenberg
David P. Levin Jeffrey S. Trachtman Debora K. Grobman
Ezra G. Levin Jonathan M. Wagner Christian S. Herzeca
Randy Lipsitz Harold P. Weinberger Jane Lee
Larry M. Loeb E. Lisk Wyckoff, Jr. Pinchas Mendelson
Lynn R. Saidenberg
Special Counsel
-----
FAX
(212) 715-8000
---
WRITER'S DIRECT NUMBER
(212)715-9100
-------------
March 31s 1998
The Victory Portfolios
3435 Stelzer Road
Columbus, Ohio 43219
Re: The Victory Portfolios
File No. 33-8982
Post-Effective Amendment
to Registration Statement on Form N-1A
--------------------------------------
Dear Gentlemen:
We hereby consent to the reference of our firm as counsel in
Post-Effective Amendment No. 38 to the Registration Statement on Form N-1A.
Very truly yours,
/s/Kramer, Levin, Naftalis & Frankel
------------------------------------
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Post-Effective Amendment
No. 38 to the Registration Statement of The Victory Portfolios on Form N-1A
(File No. 33-8982) of our reports dated December 15, 1997 on our audits of the
financial statements and financial highlights of The Victory Portfolios
(comprising, respectively, the Institutional Money Market Fund, U.S. Government
Obligations Fund, Prime Obligations Fund, Financial Reserves Fund, Tax-Free
Money Market Fund, Ohio Municipal Money Market Fund, Limited Term Income Fund,
Intermediate Income Fund, Investment Quality Bond Fund, Government Mortgage
Fund, Fund for Income, National Municipal Bond Fund , New York Tax-Free Fund,
Ohio Municipal Bond Fund, Balanced Fund, Stock Index Fund, Diversified Stock
Fund, Value Fund, Growth Fund, Special Value Fund, Special Growth Fund, Ohio
Regional Stock Fund, International Growth Fund, Lakefront Fund, and Real Estate
Investment Fund) which reports are included in the Annual Reports to
Shareholders for the year ended October 31, 1997 which are incorporated by
reference in Post-Effective Amendment No. 38 to the Registration Statement. We
also consent to the reference to our Firm under the captions "Financial
Highlights" and "Independent Accountants" in the Prospectus and "Independent
Accountants" in the Statement of Additional Information which are incorporated
by reference in this Post-Effective Amendment No. 38 to the Registration
Statement of The Victory Portfolio on Form N-1A (File No. 33-8982).
/s/COOPERS & LYBRAND L.L.P.
Columbus, Ohio
March 27, 1998
